Answer:
$56.52
Explanation:
Using dividend discount model; the formula for finding the price of a stock is ;
[tex]\frac{D0(1+g)}{(r-g)}[/tex]
r= required return = 10.8%
D0 = Recently paid dividend = 3.35
g = growth rate
Price = [tex]\frac{3.35(1.046)}{0.108-0.046} \\ \\ = \frac{3.5041}{0.062} \\ \\ =56.5177[/tex]
Price per share is therefore $56.52
Using the Gordon Growth Model, with a dividend growth rate of 4.6 percent and a required return of 10.8 percent, the price per share of Canyon Echo's stock is calculated to be approximately $56.45.
Explanation:You are considering purchasing stock in Canyon Echo and want to know the price per share of the company's stock given a dividend growth rate of 4.6 percent and a required return of 10.8 percent. The company just paid a dividend of $3.35. To find the price per share, you can use the Gordon Growth Model (also known as the Dividend Discount Model for a perpetuity) which calculates the price of a stock by dividing the dividend per share expected to be received next year by the difference between the required return and the growth rate in dividends.
Price per share = D1 / (k - g)
Where:
D1 = next year's dividend = $3.35 * (1 + 0.046) = $3.50 approximatelyk = required return = 10.8%g = growth rate = 4.6%Substituting the values:
Price per share = $3.50 / (0.108 - 0.046) = $3.50 / 0.062 = approximately $56.45
Therefore, the price per share of Canyon Echo's stock, based on these assumptions, is approximately $56.45.
Quanti Co., a calendar-year taxpayer, purchased small tools for $5,000 on December 21, Year 1, representing the company’s only purchase of tangible personal property that took place during Year 1. Assume Quanti Co. does not want to take §179 or bonus depreciation on the tools. On its Year 1 tax return, how many months of MACRS depreciation may Quanti Co. claim on the tools?
1. one month
2. none
3. one and a half month
4. six months.
Answer: Option A is the right answer
Explanation: Evidences in most cases has shown that MACRS is all about applying convention for one and a half year on assets. So when an entities owns 35-40% of an asset in forth quarter, Mid quarter convention will be applied for only one half of the last quarter, logically one and half month in the last quarter.
Roxy operates a dress shop in Arlington, Virginia. Lisa, a Maryland resident, comes in for a measurement and purchases a $2,700 dress. Lisa returns to Virginia a few weeks later to pick up the dress and drive it back to her Maryland residence where she will use the property. Assuming that Virginia's sales tax rate is 5 percent and that Maryland's sales tax rate is 6 percent, what is Roxy's sales tax liability?
A. $0.
B. $135 to Virginia.
C. $135 sales tax to Virginia and $27 use tax to Maryland.
D. $162 to Maryland.
E. $135 sales tax to Virginia and $27 use tax to Maryland is Incorrect
Answer:
B. $135 to Virginia
Explanation:
The computation of the Roxy tax liability is shown below:
Roxy tax liability = Purchase value of tax rate × Virginia's sales tax rate
= $2,700 × 5%
= $135
The tax is paid by the individual and not the company. So, so company owes only sales tax
All other information which is given is not relevant. Hence, ignored it
Which of the following is NOT a benefit of budgeting. (Select all the answers that apply) Group of answer choices The budget provided the foundation for preparing financial statements included in the 10K report to the SEC. Requires all levels of management to plan ahead Facilitates coordination of activities within the business It motivates personnel throughout organization to meet planned objectives Provides definite objectives for evaluating performance
Answer:
The budget provided the foundation for preparing financial statements included in the 10K report to the SEC.
Explanation:
The foundation for preparing financial statements is not budgeting but accounting. Financial statements such as a balance sheet or an income statement are reports that must be according to generally accepted accounting principles Accounting helps to prepare a budget or management plan providing financial data.
Only the statement 'The budget provides the foundation for preparing financial statements included in the 10K report to the SEC' seems not directly related to the benefits of budgeting, as preparation for the 10K SEC report requires additional data not always included in a budget. Budgeting focuses on planning, coordination, motivated personnel, and performance evaluation. The budget constraint framework also considers future decisions and consumption, not past 'sunk costs'.
Explanation:The benefit that seems not to fit with the concept of budgeting is: 'The budget provides the foundation for preparing financial statements included in the 10K report to the SEC.'
While the budget can provide details about expected income and expenditures and can feed into the financial statements, it is not directly responsible for preparing the 10K SEC report - this involves additional information not necessarily in a budget like corporate governance. All the other benefits listed here are characteristic for budgeting in the sense that they involve planning, coordination, motivation of personnel, and evaluation of performance.
The budget constraint framework involves decisions about what will happen next and does not consider past 'sunk costs'. It is focused on income, what you will consume, and the relationship between these two variables. Therefore, budgeting cannot undo past financial actions, but it can help for proper planning of future activities and resources, aligning them with business strategy, and forecasting possible situations.
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3. Project Manager John Boy has a policy of only using experienced, dependable, and proven sellers instead of selecting sellers through open competition as a means to manage procurement risk. What risk management technique is John Boy using? A. Risk Acceptance. B. Risk Mitigation. C. Risk Transfer D. Risk Avoidance.
Answer: Risk mitigation
Explanation: In simple words, risk mitigation refers to the strategy in which the management of an organisation tries to reduce the threat that may occur to the business in future by taking suitable risk in present.
Usually the threats it reduces related to the problems affecting the continuity of the business.
In the given case, The manager of the company is employing highly qualified personnel instead of less qualified to manage procurement risk. Hence he is taking actions to reduce risk that may arise in future. Thus, the correct option is B.
A number of years ago, Lee acquired a 20% interest in the BlueSky Partnership for $60,000. The partnership was profitable through 2018, and Lee's amount at risk in the partnership interest was $120,000 at the beginning of 2019. BlueSky incurred a loss of $400,000 in 2019 and reported income of $200,000 in 2020. Assuming that Lee is not a material participant, how much of his loss from BlueSky Partnership is deductible in 2019 and 2020? Consider the at-risk and passive activity loss rules, and assume that Lee owns no other passive investments.
Answer:
Please see attachment
Explanation:
Please see attachment
Consider this simplified balance sheet for Geomorph Trading: Current assets $ 275 Current liabilities $ 210 Long-term assets 650 Long-term debt 205 Other liabilities 120 Equity 390 $ 925 $ 925 a. What is the company’s debt-equity ratio?
Answer:
1.37
Explanation:
Total Debts (D) = Current liabilities + Long-term debt + Other liabilities
Total Debts (D) = $210 + $205 + $120 = $535
Owner's Equity (E) = $390
The debt-equity ratio (DER) is given by:
[tex]DER = \frac{D}{E} =\frac{535}{390}\\DER=1.37[/tex]
Geomorph Trading’s debt-equity ratio is 1.37
You observe that the inflation rate in the United States is 1.4 percent per year and that T-bills currently yield 1.9 percent annually. Use the approximate international Fisher effect to answer the following questions.
a. What do you estimate the inflation rate to be in Australia, if short-term Australian government securities yield 9 percent per year? (Enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.)
Inflation rate_____________ %
b. What do you estimate the inflation rate to be in Canada, if short-term Canadian government securities yield 12 percent per year? (Enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.)
Inflation rate___________ %
c. What do you estimate the inflation rate to be in Taiwan, if short-term Taiwanese government securities yield 10 percent per year? (Enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.)
Inflation rate_________ %
Answer:
(a) 8.47%
(b) 11.45%
(c) 9.46%
Explanation:
International Fisher effect is as follows:
[tex]\frac{1+ih}{1+if}=\frac{1+ph}{1+pf}[/tex]
where,
ih = Nominal interest rate of home country
if = Nominal interest rate of foreign country
ph = Inflation rate of home country
pf = Inflation rate of foreign country
(a) Inflation rate to be in Australia, if the short-term Australian government securities yield 9% per year,
[tex]\frac{1+ih}{1+if}=\frac{1+ph}{1+pf}[/tex]
[tex]\frac{1.019}{1.09}=\frac{1.014}{1+pf}[/tex]
1 + pf = 1.0847
pf = 1.0847 - 1
= 0.0847 or 8.47%
Therefore, the inflation rate in Australia is 8.47%.
(b) Inflation rate to be in Canada, if short-term Canadian government securities yield 12 percent per year,
[tex]\frac{1+ih}{1+if}=\frac{1+ph}{1+pf}[/tex]
[tex]\frac{1.019}{1.12}=\frac{1.014}{1+pf}[/tex]
1 + pf = 1.1145
pf = 1.1145 - 1
= 0.1145 or 11.45%
Therefore, the inflation rate in Canada is 11.45%.
(c) Inflation rate to be in Taiwan, if short-term Taiwanese government securities yield 10 percent per year,
[tex]\frac{1+ih}{1+if}=\frac{1+ph}{1+pf}[/tex]
[tex]\frac{1.019}{1.1}=\frac{1.014}{1+pf}[/tex]
1 + pf = 1.0946
pf = 1.0946 - 1
= 0.0946 or 9.46%
Therefore, the inflation rate in Taiwan is 9.46%.
Which of the following statements are consistent with how inflation affects the three functions of money? Check all that apply.
a. As a medium of exchange, money will be less in demand as prices rise because more money will be required to function from day to day.
b. As a unit of account, money might become less useful as rising prices make comparisons of data from one point in time to another more difficult
c. Money is more useful as a store of value when inflation makes each dollar worth less.
d. As a medium of exchange, money will be more in demand as prices rise because more money will be required to function from day to day
e. Money is less useful as a store of value when inflation makes each dollar worth less.
f. As a unit of account, money will remain equally useful, regardless of inflation
Answer:
B,C, D, E
Explanation:
B. Rising prices (inflation) makes comparism of financial data less reliable. This is one of the major drawbacks of historic financial information because such information does not take into account the impact of inflation.
C. Money loses its attributes as a store of value in inflationary period. This is because the nominal value of money increase through an increase in Consumer Price Index (CPI) while the real value of money drops as the unit amount of purchasing power decrease from increase in prices.
D. The demand for money increases in inflationary period as more money chases few goods. This reduces purchasing power of individuals and leads to rise in prices.
E. This has the potential of reducing purchasing power as money loses its value in periods of inflation.
Inflation can increase the demand for money as a medium of exchange, make it less useful as a store of value, and complicate its usage as a unit of account.
Explanation:The effects of inflation on the three functions of money - a medium of exchange, a unit of account, and a store of value - can be understood as follows:
a and d: Money, as a medium of exchange, will be more in demand as prices rise, because more money will be required to function day to day.
b: As a unit of account, money might become less useful during inflation, as rising prices make comparisons of data from different points in time more difficult.
e: Money becomes less useful as a store of value when inflation makes each dollar worth less – not more (c).
f: Although inflation can affect how we view money as a medium of exchange or a store of value, it does not necessarily make money less useful as a unit of account. However, it can make it challenging to compare the value of goods and services over time.
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Phil takes out a loan of $100,000 to be repaid in 360 monthly installments. You are given that the first payment will be one month after the inception of the loan and that the e↵ective annual rate of interest is 10%. Determine which payment will be the first where the amount of principal paid is more than two-thirds the amount of the interest paid.
Answer:
246
Explanation:
Please see attachment .
Final answer:
To find when the principal exceeds two-thirds of the interest on Phil's $100,000 loan, an amortization schedule must be created. Initially, more of the monthly payment goes to interest, but the principal portion grows over time. The schedule reveals when the principal paid first exceeds two-thirds of the interest for a monthly payment of approximately $599.55.
Explanation:
When Phil takes out a loan of $100,000 to be repaid in 360 monthly installments with an effective annual interest rate of 10%, we need to determine which payment will be the first where the amount of principal paid exceeds two-thirds of the interest paid that month. To find this, we must understand how the monthly payments are calculated and how each payment is split between principal and interest over time.
Firstly, the monthly payment is calculated using the formula for the present value of an annuity:
M = P [i / [tex](1 - (1 + i)^{(-n))[/tex]] where P is the principal amount, i is the monthly interest rate, and n is the total number of payments. With an effective annual rate of 10%, the monthly rate i is 0.1/12, since interest is compounded monthly.
For the given scenario, the monthly payment amount is calculated as follows:
$100,000 ×[0.1/12 / (1 - [tex](1 + 0.1/12)^{(-360))[/tex]] which simplifies to approximately $599.55 per month.
Over the tenure of the loan, initially, more of the monthly payment goes towards the interest than the principal. As time goes on, the principal portion increases while the interest portion decreases. The payment schedule needs to be examined to find the first payment where the principal is more than two-thirds of the interest.
This involves creating an amortization schedule that shows the distribution of each payment into interest and principal components. The search through this schedule will reveal the exact payment where the principal exceeds two-thirds of the interest for the first time.
Suppose the average return on an asset is 11.8 percent and the standard deviation is 21.4 percent. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel® to determine the probability that in any given year you will lose money by investing in this asset.
While attending a convention, Noah spoke with Amy, a sales representative from an alternative energy company, who insisted that fuel cell technology is the solution to the world's energy problems. At home, Noah read through the literature she gave him, and acknowledged that the material was interesting. However, he still wasn't certain that she was right about fuel cells. What should Noah do to decide whether he agrees with Amy's argument?
Answer:
This question lacks answers, here they are:
a. Go with his gut feeling
b. Accept that Amy knows more about the topic than he does
c. Keep looking for more evidence
d. Dismiss Amy's argument because she is trying to sell something
The answer is c.
Explanation:
In this kind of argument-fueled debate, it is essential to constantly have arguments up to your sleeve.
In this example, Amy has a robust base for her point of view (the literature). Since Noah acknowledged that, he has to provide his own argument basis (evidence). Otherwise, stating his point of view without it cannot be taken seriously in this kind of conversation.
With every side delivering a new amount of arguments, the other side should have appropriate arguments to defend a particular point of view, as it both feeds the debate and protects one's image at industry events like conventions, meetups...
The outcome of the argument-intensive debate is always a strong opinion, reflecting the pluses and minuses of the topic at hand.
On November 19, Nicholson Company receives a $24,600, 60-day, 10% note from a customer as payment on account. What adjusting entry should be made on the December 31 year-end? (Use 360 days a year.)
Answer:
Explanation:
The adjusting entry is shown below:
Interest expense A/c Dr $287
To Interest payable A/c $287
(Being accrued interest adjusted)
The computation is shown below:
Principal × rate of interest × number of days ÷ (total number of days in a year)
= $24,600 × 10% × (42 days ÷ 360 days)
= $287
( 11 days in November + 31 Days in December)
To make the correct adjusting entry for Nicholson Company's year-end on December 31 for a $24,600, 60-day, 10% note, calculate the interest accrued from November 19 to December 31 at a daily rate derived from the annual rate. The interest amount is $287.54, which is recorded as debit to Interest Receivable and credit to Interest Revenue.
Explanation:On November 19, Nicholson Company receives a $24,600, 60-day, 10% note from a customer as payment on account. To calculate the adjusting entry for the year-end on December 31, we need to recognize the interest that has accrued on the note from the date of receipt until the year-end. Given that the year is considered to have 360 days for simplicity in interest calculations, we prorate the annual interest rate to find the interest for the period in question.
To find the interest accrued:
First, calculate the daily interest rate: 10% per year = 0.10 / 360 days = 0.00027778 per dayThen, calculate the number of days from November 19 to December 31. This is 42 days (assuming November has 30 days).Finally, the interest accrued: $24,600 * 0.00027778 * 42 days = $287.54The adjusting entry on December 31 will be:
Debit Interest Receivable for $287.54Credit Interest Revenue for $287.54This entry reflects the interest income earned by Nicholson Company during the year that has not been received in cash, thus adhering to the accrual basis of accounting.
Thomas Kratzer is the purchasing manager for the headquarters of a large insurance company chain with a central inventory operation. Thomas’s fastest moving inventory item has a demand of 6000 units per year. The cost of each unit is $100.00, and the inventory carrying cost is $10.00 per unit per year. The average ordering cost is $30.00 per order. It takes about 5 days for an order to arrive, and demand for 1 week is 120 units (this is a corporate operation, there are 250 working days per year). a. What is the EOQ? b. What is the average inventory if the EOQ is used? c. What is the optimal number of orders per year? d. What is the optimal number of days in between any two orders? e. What is the annual cost of ordering and holding and holding inventory? f. What is the total annual inventory cost, including cost of the 6,000 units?
Answer:
a. 190 Units
b.95 Units
c. 31.6
d.7.9 Units
e.$1.898
f.$601.898
Explanation:
Please see attachment
Monsanto just came out with a new genetically modified seed that it believes will increase crop yields. The seed has been modified to withstand drought, and it kills insects that frequently feed on it. This is important especially because insects have begun developing a tolerance for many of Monsanto's genetically modified seeds already out on the market.
Because these seeds are new to the market, Monsanto wants to engage in a major integrated marketing communications campaign. It knows that it will have to convince farmers about the advantages of its new seeds and invites some of its major customers to its laboratory to see how the seeds are created. The scientists inform the farmers during the visit about how the seeds will increase their crop yields. This is most likely an example of__________.
If Monsanto just came out with a new genetically modified seed that it believes will increase crop yields. Is most likely an example of a sales promotion activity.
What is sales promotion activity?
The goal of sales promotion campaigns is to persuade consumers to buy a good or service. In this instance, Monsanto is trying to convince farmers of the advantages of its new genetically modified seeds by utilizing the laboratory visit as a marketing tool.
The farmers and Monsanto's experts can directly communicate during the lab visit, which allows them to talk about the benefits of the seeds and answer any queries or worries. Using a customized strategy can be a good method to gain credibility, inspire trust, and sway farmers' purchasing decisions.
Therefore this is an example of a sales promotion activity.
A start-up will not pay any dividends for 3 years. At the end of the third year, it is expected to pay a dividend of $0.30. This dividend should then grow at a rate of 12% for 6 years, and at a reduced rate of 6% thereafter. The market required rate of return for similar high growth start-up companies is 16%. Estimate the price of the company's shares today.
Answer:
The price of share at today is $1.724.
Explanation:
- First, calculate the present value of the estimated value of the dividend stream from end of Y3 to end of Y9 using growing annuity formula:
[0.3/ ( 0.16 -0.12)] x [ 1 - [ (1+0.12)/(1+0.16) ] ^6 ] x (1/1.16^2) = $1.058
- Second, calculate the Dividend receipt at the end of year 10 which is 0.3 x 1.12^6 x 0.94 = $0.557
- Calculate the present value of the dividend stream after Y9 which is a perpetuity:
[ 0.557/ ( 0.16 - (-0.06) ] x (1/1.16^9) = $0.666
- The stock price is equal to the sum of the present value of the two dividend streams calculated above = 1.058 + 0.666 = $1.724.
Good credit: The Fair Isaac Corporation (FICO) credit score is used by banks and other lenders to determine whether someone is a good credit risk. Scores range from 300 to 850, with a score of 720 or more indicating that a person is a very good credit risk. An economist wants to determine whether the mean FICO score is more than the cutoff of 720. She finds that a random sample of 100 people had a mean FICO score of 737 with a standard deviation of 92. Can the economist conclude that the mean FICO score is greater than 720? Use the =α0.01 level of significance and the critical value method.
The one-sample t-test can be used to test if the mean FICO score is more than 720. We calculate a t statistic and compare it to a critical value at a 0.01 significance level. We reject H0 if our statistic is greater than the critical value, concluding that the mean score is greater than 720.
Explanation:In this case, the economist can use a one-sample t-test to determine if the mean FICO score of the population is greater than 720. The null hypothesis (H0) is that the population mean is 720, and the alternative hypothesis (Ha) is that the population mean is greater than 720.
First, we need to calculate the t statistic using the formula: t = (Xbar - μ) / (s/√n), where Xbar is the sample mean (737), μ is the population mean under the null hypothesis (720), s is the sample standard deviation (92), and n is the sample size (100).
After calculating, we would compare this t statistic with the t critical value at α = 0.01 level of significance. If the calculated t is greater than the critical value, then we would reject H0 and conclude that the mean FICO score is greater than 720. If it's less than or equal to the critical value, we would fail to reject H0, meaning we would have insufficient evidence to conclude that the mean score is more than 720.
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Final answer:
To determine if the mean FICO score is greater than 720, a hypothesis test is conducted using the critical value method. The test statistic is calculated and compared to the critical value at the α = 0.01 level of significance. Based on the calculations, the economist cannot conclude that the mean FICO score is greater than 720.
Explanation:
To determine whether the mean FICO score is greater than 720, we can perform a hypothesis test using the critical value method. The null hypothesis (H0) is that the mean FICO score is equal to or less than 720, while the alternative hypothesis (Ha) is that the mean FICO score is greater than 720. Using the given information, we calculate the test statistic as follows:
test statistic = (sample mean - hypothesized mean) / (standard deviation/sqrt (sample size))
Plugging in the values, we get: test statistic = (737 - 720) / (92 / sqrt(100)) = 1.847
Next, we find the critical value at the α = 0.01 level of significance. Since this is a one-tailed test and the sample size is large (n ≥ 30), we can use the normal distribution. The critical value for α = 0.01 is Z = 2.33.
Since the test statistic (1.847) is less than the critical value (2.33), we fail to reject the null hypothesis. Therefore, the economist cannot conclude that the mean FICO score is greater than 720 at the α = 0.01 level of significance.
Evaluate the following statement: "Tests of sales and cash receipts transactions are such an essential part of every audit that I like to perform them as near the end of the audit as possible. By that time I have a fairly good understanding of the client's business and its internal controls because confirmations, cutoff tests, and other procedures have already been completed." (Select all answers that apply.) A. As long as the auditor has performed sufficient analytical procedures to evaluate the financial information through analysis of plausible relationships among financial and nonfinancial data, it is acceptable to perform tests of sales and cash receipts transactions as near the end of the audit as possible. B. The auditor should attempt to understand the entity and its environment, including internal controls, as early as practical through the analysis of the accounting system, tests of controls, and substantive tests of transactions. C. The primary purpose of testing sales and cash receipts transactions is to evaluate the internal controls so that the scope of the substantive tests of the account balances may be set. If the auditor performs the tests of details of balances prior to testing internal controls, no benefit will be derived from the tests of controls. D. None of the above.
Answer:B. The Auditor should attempt to understand the entity and it's environment, Including Internal controls as early as practical through the analysis of the accounting system, test of controls and substantive test of transaction.
Explanation:
The first major duty of the Auditor is to understand the entity and it's environment to determine it's inherent risks, to evaluate the existing Internal controls to determine it's workability which invariably determines the level of substantive test to be carried out.
The test of sales and cash receipt thus not hereald an audit work but are carry out to confirm the strength or weakness of the internal control already documented.
For an effective audit, understanding the client's internal controls early (Option B) and evaluating them to set the scope of substantive tests (Option C) is crucial. Performing these tests late might omit critical insights gained from early evaluations.
The statement to evaluate suggests performing tests of sales and cash receipts transactions near the end of the audit. While there is some practicality in understanding the client’s business and internal controls by this time, the timing and sequence of audit procedures play a crucial role. Here, selecting the right options is important:
B: The auditor should attempt to understand the entity and its environment, including internal controls, as early as practical through the analysis of the accounting system, tests of controls, and substantive tests of transactions. Performing this understanding early helps in planning and executing further audit procedures effectively.C: The primary purpose of testing sales and cash receipts transactions is to evaluate the internal controls so that the scope of the substantive tests of the account balances may be set. If the auditor performs tests of details balances before testing internal controls, the benefits of such tests may be underutilized.Option A is less relevant because, while analytical procedures are useful, they are not a replacement for early testing of internal controls.
Following are financial statement numbers and ratios for Snap-On Incorporated for the year ended December 28, 2016 (in millions).
If we expected revenue growth of 5% in the next year, what would projected revenue be for the year ended December 30, 2017?
NOPAT $ 590.4
NOA 3,567.8
Net operating profit margin (NOPM) 15.9%
Net operating asset turnover (NOAT) 1.04
Hint: NOPM = (NOPAT/Sales) and NOAT =(Sales/Avg. NOA)
A) $3,567.8 million
B) $3,551.0 million
C) $3,898.9 million
D) $3,713.2 million
Answer:
C) $3,898.9 million
Explanation:
Please see attachment.
Electric, Inc. was incorporated on January 1, 2016. Electric issued 4,000 shares of common stock and 1,200 shares of preferred stock on that date. The preferred stock is cumulative, $100 par, with an 12% dividend rate. Electric has not paid any dividends yet. In 2019, Electric had its first profitable year, and on November 1, 2019, Electric declared a total dividend of $63,000. What is the total amount that will be paid to preferred shareholders?
Answer:
$57,600
Explanation:
The computation of the total amount paid to preferred shareholders are shown below:
= Number of shares for preferred stock × par value × dividend rate × number of years
= 1,200 shares × $100 × 12% × 4 years
= $57,600
In case of cumulative, the number of years would be four years for dividend paid
All other information which is given is not relevant. Hence, ignored it
Novak Corp. redeemed $134,000 face value, 10% bonds on April 30, 2022, at 103. The carrying value of the bonds at the redemption date was $121,002. The bonds pay annual interest, and the interest payment due on April 30, 2022, has been made and recorded. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Answer:
bonds payable 134,000 debit
loss on redemption 17,018 debit
cash 138,020 credit
discount on bonds payabke 12,998 credit
Explanation:
redemption disbursement:
face value x redemption quote
134,000 x 103/100 = 138,020
carrying value: 121,002
loss at redemption 17,018
We are using 138,020 cash(asset) to pay a liability for 121,002
discount/premium on the bonds:
face value 134,000
carrying value 121,002
discount: 12,998
In the journal entry we must write-off the bond payable and the discount. Then, declare the loss at redemption and the cash used.
Novak Corp made a loss of $17,018 in the early redemption of the bonds due to paying out more than the carrying value. This example illustrates how bond redemption works in financial accounting, where the principles of present value and interest rate effect are significant in bond pricing calculations.
Explanation:Novak Corp. redeemed its bonds that had a face value of $134,000 at an early redemption price of 103% of the face value. This would mean that Novak paid out $138,020 (134,000 x 1.03) to redeem the bonds. However, the carrying value of the bonds at the redemption date was $121,002. Subtracting the carrying value from the redemption value, Novak incurs a loss of $17,018 due to the early redemption ($138,020-$121,002). This is an application of bond redemption, a concept in financial accounting.
Similar to the explanation in a bond value calculation, where a $3,000 bond, issued at 8% would essentially have the same value to both the borrower and lender, Novak Corp's bond redemption underscores the principles of present value and interest rate effect in bond pricing calculations.
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The Sedgwick Company estimates sales of a new product at 5,000 units and $3.00 per unit. Management feels the sales quantity is accurate within a 10 percent plus-or-minus range while the sales price is accurate within a 5 percent plus-or-minus range. What dollar amount should the company use for total sales in their worst-case scenario analysis of this product?A) $12,150B) $12,825C) $13,500D) $14,250E) $15,000
Answer:
B) $12,825
Explanation:
In order to calculate the worst case scenario of sales first we need to calculate the worst case for sales of units.
The Company estimates that 5,000 units will be sold with a 10 percent plus-or-minus range. So, let calculate the worst case for the sale of units, in this case being 90% of the 5,000 unit estimate. Calculate 90% of 5,000, and this gives us 4,500 units as the worst case scenario.
To calculate the the worst case scenario for price, lets use the $3.00 per unit estimated by the Company, and apply the same concept, however, taking into account that sales price has a 5 percent plus-or minus range. So we caclulate %95 of $3.00, and this gives us $2.85 as our worst case scenario for price.
Now, we take our worst case scenario for amount of units and price:
4,500 units x $2.85 = $12,825
$12,825 is the total dollar amount for the worst case scenario of this product.
Perpetuities Suppose that today's date is January 1,2019. You have the opportunity to make an investment that will pay you $100 on January 1 of every year, starting in 2020 and continuing forever.
Assume the relevant discount rate is 7%.
a. What would you pay now for this investment?
b. Suppose the investment's first cash flow comes immediately, on January 1,2019, P5-27 with subsequent cash payments every January 1 thereafter. Now how much would you pay? It might be helpful to draw the first few years of a timeline here and compare it to the situation in part a.
c. Suppose the investment's first cash flow is 3 years from now, on January 1, 2022. On every January 1 thereafter you will receive $100. How much is this worth to you today, January 1, 2019?
Answer:
a) Value of a perpetuity =$1,428.57
b) Present value of perpetuity due will include extra cash flow received at start: =$1,528.57
c) Present value = 1428.57/(1.07^2)=$1,247.77
Explanation:
a) Value of a perpetuity = Cash flow/rate=100/0.07=$1,428.57
b) Present value of perpetuity due will include extra cash flow received at start:
=Cash flow/rate+Cash flow=100+(100/0.07)=$1,528.57
c) This will be equal to PV of perpetuity at end of year 2=100/0.07=$1428.57 after 2 years
Present value = 1428.57/(1.07^2)=$1,247.77
Final answer:
The present value of receiving an annual payment of $100 starting in 2020 in perpetuity at a 7% discount rate is $1,428.57. If the first payment is immediate, the value is higher at $1,528.57. Receiving the first payment in 2022 has a present value today of $1,165.96.
Explanation:
To calculate the present value of a perpetuity (an infinite series of cash flows), we use the perpetuity formula: Present Value (PV) = Payment (PMT) / Discount Rate (r). For an investment that pays $100 each year in perpetuity, starting in 2020, and with a discount rate of 7%, the present value calculation would be:
PV = $100 / 0.07 = $1,428.57
This represents the sum a rational investor would be willing to pay for receiving $100 annually, starting a year from now, indefinitely.
In the case where the first $100 payment comes immediately on January 1, 2019, we add the immediate payment to the present value of the perpetuity:
PV = $100 + ($100 / 0.07) = $100 + $1,428.57 = $1,528.57
Finally, if the investment's first cash flow is to be received in 3 years (on January 1, 2022), we have to discount the perpetuity value back 3 years using the discount rate:
PV = ($100 / 0.07) / (1 + 0.07)^3 = $1,428.57 / 1.225043 = $1,165.96
So, today's value of receiving $100 each year, starting three years from now infinitely, is approximately $1,165.96.
Hsu Company issued $100,000 of 8% bonds on January 1, 20Y8, at face value. The bonds pay interest semiannually on June 30 and December 31, 20Y8. The total interest expense related to these bonds for the year ended December 31, 20Y8, is
Answer:
$8,000
Explanation:
The computation of the total interest expense is shown below:
On June 30
= Face value × rate of interest × number of months ÷ (total number of months in a year)
= $100,000 × 8% × (6 months ÷ 12 months)
= $4,000
The 6 months is calculated from January 1 to June 30
On December 31
= Face value × rate of interest × number of months ÷ (total number of months in a year)
= $100,000 × 8% × (6 months ÷ 12 months)
= $4,000
The 6 months is calculated from June 30 to December 31
So, the total interest expense would be
= $4,000 + $4,000
= $8,000
Final answer:
The total interest expense related to Hsu Company's $100,000 of 8% bonds for the year ended December 31, 20Y8, is $8,000, as they pay semiannual interest payments of $4,000 each.
Explanation:
The question asks for the calculation of the total interest expense related to the bonds issued by Hsu Company for the year ended December 31, 20Y8. Since these are 8% bonds issued at face value, the interest expense is straightforward to calculate. The annual interest rate is 8%, but since these bonds pay interest semiannually, each payment will be 4% of the face value. Therefore, the interest payments for each period (June 30 and December 31) will be $100,000 imes 4% = $4,000. Since there are two payments per year, the total interest expense for the year is $4,000 imes 2 = $8,000.
"Alan Meer inherits a hotel from his grandmother, Mary, on February 11 of the current year. Mary bought the hotel for $730,000 three years ago. Mary deducted $27,000 of cost recovery on the hotel before her death. The fair market value of the hotel in February is $725,000. (Assume that the alternative valuation date is not used.)"
Answer
The answer and procedures of the exercise are attached in the following image.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.
In Munich, a bratwurst costs 5 euros; a hot dog cots $4 at Boston’s Fenway Park. At an exchange rate of $1.05/euro, what is the price of a bratwurst in terms of a hot dog? All else equal, how does this relative price change if the dollar deprecates to $1.25/euro? Compared with the initial situation, has a hot dog become more or less expensive relative to a bratwurst?
Answer:
Please see attachment .
Explanation:
Please see attachment .
Seashell Corporation has 25,000 shares outstanding of 8 percent, $10 par value, cumulative preferred stock. In 2009 and 2010, no dividends were declared on preferred stock. In 2011, Seashell had a profitable year and decided to pay dividends to stockholders of both preferred and common stock. If Seashell has $200,000 available for dividends in 2011, how much could it pay to the common stockholders?
Answer:
$140,000
Explanation:
For computing the dividend to the common stockholders, first we have to find out the yearly dividend which is shown below:
= Number of shares × par value per share × dividend rate
= 25,000 shares × $10 × 8%
= $20,000
Dividend paid in 2011 would be
= 2009 dividend + 2010 dividend + 2011 dividend
= $20,000 + $20,000 + $20,000
= $60,000
Out of $2000,000, the $60,000 will be paid to preference stockholders and the remaining $140,000 will be paid to equity stockholders
The Baldwin's workforce complement will grow by 10% (rounded to the nearest person) next year. Ignoring downsizing from automating, what would their total recruiting cost be? Assume Baldwin spends the same amount extra above the $1,000 recruiting base as they did last year. Relevant information: The workforce complement this year is 471, recruiting cost is 543k, recruiting spend is 5000k. Answer choices: 3.108 mil, 235k, 2.59 mil, or 282k
Answer:
3.108 mi
Explanation:
at present the workforce complement = 471 which has to grow by 10%
So, the complements after growth = 471 x 1.1 = 518 (rounded off)
Total recruiting cost = No. of complements x ($1000 + Recruiting spend)
= 518 x ($1000 + $5000)
= $3,108,000 i.e. 3.108 mi
The recruitment cost for Baldwin's workforce next year, given the same additional spend per person as the previous year and a 10% increase in the workforce, is expected to be $2.842866 Million. This isn't among the answer options given, which may suggest an error in the question or in the options.
Explanation:In this question, the Baldwin's workforce complement is expected to grow by 10% next year. The workforce complement this year is 471, meaning it would become 471×1.1=518 next year (rounded to the nearest person). We were given that the recruiting cost this year is 543k, and the additional amount spent above the $1,000 recruiting base last year is $5,000k - $543k = $4,457k.
Assuming the Baldwin spends the same additional amount as they did last year, their total recruiting cost next year can be estimated. Given: Base Recruiting cost = $1,000 , Additional Recruiting cost = $4,457/person. Hence , if they hire 518 people, The total cost of the recruiting would be (Base cost + Additional per person cost)× number of people hired = (1000+4457)× 518 = $2.842866 Million.
However the given options do not include this amount, so there might be an error in the question or in the specified options.
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Payback period computation; even cash flows LO P1 Compute the payback period for each of these two separate investments:
a. A new operating system for an existing machine is expected to cost $260,000 and have a useful life of six years. The system yields an incremental after-tax income of $75,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000.
b. A machine costs $210,000, has a $14,000 salvage value, is expected to last eleven years, and will generate an after-tax income of $41,000 per year after straight-line depreciation.
Answer:
Please see attachment
Explanation:
Please see attachment
Billy's is currently an all equity firm that has 115000 shares of stock outstanding at a market price of $36.22 a share. The firm has decided to leverage its operations by issuing $100000 of debt at an interest rate of 9.6 percent. This new debt will be used to repurchase shares of the outstanding stock. The restructuring is expected to increase the earnings per share. What is the minimum level of earnings before interest and taxes that the firm is expecting? Ignore taxes.
Answer:
So, Break-even EBIT is $265,643.45
Explanation:
Let Break-even EBIT be $x
Number of shares outstanding = 150,000
Current Price of share = $39.36
EPS = EBIT / Number of shares outstanding
EPS = $x / 150,000
Levered Plan:
Value of Debt = $100,000
Interest Rate = 9.6%
Interest Expense = 9.6% *$100,000 = $9600
Number of shares repurchased = $100,000 / $39.36
Number of shares repurchased = $2,541
Number of shares outstanding = 150,000 - 2,541
Number of shares outstanding = 147,459
EPS = (EBIT - Interest Expense) / Number of shares outstanding
EPS = ($x - $9600) / 147,459
EPS under All equity plan = EPS under levered plan
$x / 150,000 = ($x - $9600) / 147,459
147,459 * $x = 150,000 * $x - $675,000,000
$675,000,000 = 2,541 * $x
$x = $265,643.45
So, Break-even EBIT is $265,643.45
The following items appear on the balance sheet of a company with a one-year operating cycle. Identify the proper classification of each item as follows: C if it is a current liability, L if it is a long-term liability, or N if it is not a liability. Notes payable (due in 13 to 24 months). Notes payable (due in 6 to 12 months). Notes payable (mature in five years). Current portion of ling-term debt. Notes payable (due in 120 days). FUTA taxes payable. Accounts receivable. Sales taxes payable. Salaries payable. Wages payable.
Answer
The answer and procedures of the exercise are attached in a microsoft excel document.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.
Final answer:
Items on a balance sheet are classified based on when they are due. Notes payable due within one year are current liabilities, while those maturing beyond one year are long-term liabilities. Accounts receivable is not a liability, but an asset.
Explanation:
Items on a company's balance sheet are classified as either current liabilities, long-term liabilities, or not liabilities based on their nature and the duration within which they are expected to be settled. The classifications for the given items are as follows:
Notes payable (due in 13 to 24 months) - L (long-term liability)
Notes payable (due in 6 to 12 months) - C (current liability)
Notes payable (mature in five years) - L (long-term liability)
Current portion of long-term debt - C (current liability)
Notes payable (due in 120 days) - C (current liability)
FUTA taxes payable - C (current liability)
Accounts receivable - N (not a liability)
Sales taxes payable - C (current liability)
Salaries payable - C (current liability)
Wages payable - C (current liability)
It is important to note that accounts receivable represent money that is owed to the company and is therefore an asset, not a liability. Items classified as current liabilities are those expected to be paid within the company's one-year operating cycle, while long-term liabilities are obligations that are due beyond one year.