Answer:
Baymont Corporation
Journal Entries:
March 3, 2017: Debit Inventory $50,000
Credit Accounts payable $50,000
To record the purchase of goods on account.
March 10, 2017: Debit Inventory $140,000
Credit Accounts payable $140,000
To record the purchase of goods on account.
March 20, 2017: Debit Accounts payable $140,000
Credit Cash $140,000
To record the payment for goods purchased on account.
April 25, 2017: Debit Accounts payable $50,000
Credit Cash $50,000
To record the payment for goods purchased on account.
Explanation:
a) Data and Analysis:
March 3, 2017: Inventory $50,000 Accounts payable $50,000
March 10, 2017: Inventory $140,000 Accounts payable $140,000
March 20, 2017: Accounts payable $140,000 Cash $140,000
April 25, 2017: Accounts payable $50,000 Cash $50,000
Janes, Inc., is considering the purchase of a machine that would cost $410,000 and would last for 5 years, at the end of which, the machine would have a salvage value of $41,000. The machine would reduce labor and other costs by $101,000 per year. Additional working capital of $3,000 would be needed immediately, all of which would be recovered at the end of 5 years. The company requires a minimum pretax return of 13% on all investment projects.
Required:
Determine the net present value of the project. (Negative amount should be indicated by a minus sign.)
Answer:
- $33,678.21
Explanation:
Cash flow Summary of the Project will be as follows
Year 0 = $410,000 + $3,000 = - $413,000
Year 1 = $101,000
Year 2 = $101,000
Year 3 = $101,000
Year 4 = $101,000
Year 5 = $101,000 + $41,000 + 3,000 = $145,000
So the Net Present Value can now be calculated using the CFj function of a Financial calculator as follows :
- $413,000 CF 0
$101,000 CF 1
$101,000 CF 2
$101,000 CF 3
$101,000 CF 4
$145,000 CF 5
i/yr = 13%
Shift NPV = - $33,678.21
Joel is the sole shareholder of Manatee Corporation, a C corporation. Because Manatee’s sales have increased significantly over the last several years, Joel has determined that the corporation needs a new distribution warehouse. Joel has asked your advice as to whether (1) Manatee should purchase the warehouse or (2) he should purchase the warehouse and lease it to Manatee. What relevant tax issues will you discuss with Joel?
Answer:
If Joel purchases the warehouse, he can rent it to the corporation and charge the highest possible rent within reasonable terms. Joel can avoid double taxation and the corporation will be able to deduct rent expense.
Joel is also able to deduct depreciation expenses, real estate taxes, and other costs from his passive income.
As an individual, Joel is taxed differently for capital gains in case he sells the warehouse, and that rate is generally lower than corporate tax rates.
Wilson sells software during the recruiting seasons. During the current year, 10,000 software packages were sold resulting in $470,000 of sales revenue, $130,000 of variable costs, and $48,000 of fixed costs. If sales increase by $80,000, operating income will increase by ________. (Round interim calculations to two decimal places and the final answer to the nearest whole dollar.) Group of answer choices $48,000 $57,872 $32,000
Answer:
$57,872
Explanation:
Calculation to determine what the operating income will increase by
Price = $470,000 / 10,000
Price= $47.00
Sales in software packages = $80,000 / $47.00 Sales in software packages= 1,702.13 software packages
Operating income increase = 1,702.13 × $34.00 per
Operating income increase = $57,872
Therefore the operating income will increase by
$57,872
Do It! Review 11-3a Skysong, Inc. has 2,600 shares of 7%, $130 par value preferred stock outstanding at December 31, 2019. At December 31, 2019, the company declared a $132,000 cash dividend. Determine the dividend paid to preferred stockholders and common stockholders under each of the following scenarios.
Answer:
1. We have:
Dividend paid to preferred stockholders = $23,660
Dividend paid to common stockholders = $108,340
2. We have:
Dividend paid to preferred stockholders = $23,660
Dividend paid to common stockholders = $108,340
3. We have:
Dividend paid to preferred stockholders = $70,980
Dividend paid to common stockholders = $61,020
Explanation:
1. The preferred stock is noncumulative, and the company has not missed any dividends in previous years.
Dividend paid to preferred stockholders = Number of preferred stock outstanding * Preferred stock par value * Preferred stock = 2,600 * $130 * 7% = $23,660
Dividend paid to common stockholders = Dividend declared - Dividend paid to preferred stockholders = $132,000 - $23,660 = $108,340
2. The preferred stock is noncumulative, and the company did not pay a dividend in each of the two previous years.
Since the preferred stock is noncumulative, the answers are the as in part 1 as follows:
Dividend paid to preferred stockholders = Number of preferred stock outstanding * Preferred stock par value * Preferred stock = 2,600 * $130 * 7% = $23,660
Dividend paid to common stockholders = Dividend declared - Dividend paid to preferred stockholders = $132,000 - $23,660 = $108,340
3. The preferred stock is cumulative, and the company did not pay a dividend in each of the two previous years.
Since the preferred stock is cumulative, this means that the accrued fixed dividends for the two previous years have to be paid together with the current year’s dividend making 3 fixed dividends as follows:
Dividend paid to preferred stockholders = (Number of preferred stock outstanding * Preferred stock par value * Preferred stock) * 3 = (2,600 * $130 * 7%) * 3 = $70,980
Dividend paid to common stockholders = Dividend declared - Dividend paid to preferred stockholders = $132,000 - $70,980 = $61,020
In a town with exactly 1,000 residents, 60 percent of the residents make healthy choices and 40 percent of the residents consistently make unhealthy choices. The health insurance company in town cannot tell, in advance, who is healthy and who is unhealthy. A healthy person has an average of $600 in medical expenses each year and is willing to pay $800 for insurance. An unhealthy person has an average of $2,100 in medical expenses each year and is willing to pay $2,400 for insurance. The health insurance provider can offer insurance at only one price.
Required:
In equilibrium, the price of insurance will be at least what?
At the equilibrium, the price of insurance should be equal to at least $2,100.
What is equilibrium?Equilibrium is the scenario where the economic factors are in an equal position. There is no factor that rises above the equilibrium point or falls below the equilibrium point.
Given information:
The average expense of a healthy person is $600 and the average expense of an unhealthy person is $2,100. Every person is interested to buy insurance are from $0 to $800, the unhealthy people would buy the insurance from $800 to $2,400, and lastly, No one would take up the insurance lies over and above $2,400
Computation of expected payment received to the company:
[tex]\rm\ Expected \rm\ payout \rm\ received = \rm\ Average \rm\ expense \rm\ of \rm\ a \rm\ healthy \rm\ person \times\ 60 \% \\+ \rm\ Average \rm\ expense \rm\ of \rm\ an \rm\ unhealthy \rm\ person \times\ 40 \%\\\rm\ Expected \rm\ payout \rm\ received =\$ 600 \times\ 60 \% + \$ 2,100 \times\ 40 \%\\\rm\ Expected \rm\ payout \rm\ received =\$ 360 + \$ $840\\\rm\ Expected \rm\ payout \rm\ received = \$1,200[/tex]
Now if an insurance company charges less than $1,200, it will incur a loss to the company, if it charges $1,200, then no one will acquire the insurance, and more than $1,200, cannot be charged by the company.
Therefore, the price of insurance at equilibrium is $2,100 equivalent to the last amount of expense paid to the person for the insurance.
Learn more about insurance prices at equilibrium in the mentioned link:
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The following budget information is available for the Arch Company for January Year 2: Sales $ 860,000 Cost of goods sold 540,000 Utilities expense 2,800 Administrative salaries 100,000 Sales commissions 5 % of sales Advertising 20,000 Depreciation on store equipment 50,000 Rent on administration building 60,000 Miscellaneous administrative expenses 10,000 All operating expenses are paid in cash in the month incurred. Compute the total budgeted selling and administrative expenses (excluding interest) amount for January Year 2.
Answer and Explanation:
The computation of the total budgeted selling and administrative expenses is shown below;
Utilities expense $2,800
Administrative salaries $100,000
Sales commissions 5 % of sales i.e. 5% of $860,000 $43,000
Advertising $20,000
Depreciation on store equipment $50,000
Rent on administration building $60,000
Miscellaneous administrative expenses $10,000
total budgeted selling and administrative expenses $285,800
The master budget of Marigold Corp. shows that the planned activity level for next year is expected to be 50000 machine hours. At this level of activity, the following manufacturing overhead costs are expected:
Indirect labor $800000
Machine supplies 250000
Indirect materials 250000
Depreciation on factory building 70000
Total manufacturing overhead $1370000
A flexible budget for a level of activity of 60000 machine hours would show total manufacturing overhead costs of :_________.
a. $1630000
b. $1370000.
c. $1644000.
d. $1574000.
Answer:
The correct answer is A.
Explanation:
First, we need to separate the fixed costs and calculate the unitary variable costs:
Fixed costs:
Depreciation on factory building= 70,000
Total unitary varaible cost:
Total cost= 800,000 + 250,000 + 250,000= $1,300,000
Unitary cost per hour= 1,300,000 / 50,000= $26
Now, the total cost for 60,000 hours:
Total cost= 26*60,000 + 70,000
Total cost= $1,630,000
Take a Load Off Hotels is considering the construction of a new hotel for $22,400,000. The expected life of the hotel is 8 years with no residual value. The hotel is expected to earn revenues of $16,688,000 per year. Total expenses, including straight-line depreciation, are expected to be $14,000,000 per year. Take a Load Off's management has set a minimum acceptable rate of return of 12%. Assume straight-line depreciation.
a. Determine the equal annual net cash flows from operating the hotel.
Present Value of an Annuity of $1 at Compound Interest
Periods 8% 9% 10% 11% 12% 13% 14%
1 0.92593 0.91743 0.90909 0.90090 0.89286 0.88496 0.87719
2 1.78326 1.75911 1.73554 1.71252 1.69005 1.66810 1.64666
3 2.57710 2.53129 2.48685 2.44371 2.40183 2.36115 2.32163
4 3.31213 3.23972 3.16987 3.10245 3.03735 2.97447 2.91371
5 3.99271 3.88965 3.79079 3.69590 3.60478 3.51723 3.43308
6 4.62288 4.48592 4.35526 4.23054 4.11141 3.99755 3.88867
7 5.20637 5.03295 4.86842 4.71220 4.56376 4.42261 4.28830
8 5.74664 5.53482 5.33493 5.14612 4.96764 4.79677 4.63886
9 6.24689 5.99525 5.75902 5.53705 5.32825 5.13166 4.94637
10 6.71008 6.41766 6.14457 5.88923 5.65022 5.42624 5.21612
b. Calculate the net present value of the new hotel using the present value of an annuity of $1 table above.
c. Does your analysis support the purchase of the new hotel?
Answer:
a. Net cash flows
Depreciation has to be added back to income because it is a non-cash expense.
Depreciation = (Cost - Residual value)/ Useful life
= 22,400,000 / 8
= $2,800,000
Net cash flows = Revenue - Expenses + Depreciation
= 16,688,000 - 14,000,000 + 2,800,000
= $5,488,000
b. Net Present Value
= Present value of cash inflows - Construction cost
= (Net cash flows * Present value interest factor of annuity, 8 years, 12%) - 22,400,000
= (5,488,000 * 4.96764) - 22,400,000
= $4,862,408.32
c. Analysis SUPPORTS PURCHASE of hotel because it results in a positive Net Present Value.
In early April 2020, an amendment to the annual budget for 2020 was approved by the city council for inflows and outflows in the Street Improvement Bond Debt Service Fund related to the bond issue. The debt service fund budget amendment provides for estimated other financing sources of $20,000 for the premium on bonds sold and estimated revenues of $12,500 for accrued interest on bonds sold; and appropriations in the amount of the one interest payment of $25,000 to be made during 2020. (The payment that is due on July 1, 2020.)
Required:
Record the budget for the Street Improvement Bond Debt Service Fund for year 2020.
Answer:
attached below
Explanation:
Given data :
Year : 2020
estimated other financing sources = $20,000 ( premium on bonds sold )
estimated revenues = $12500 ( accrued interest on bonds sold )
approximations in amount of one interest payment = $25,000 ( to be made during 2020 )
attached below is the Budget for the street improvement Bond debt service fund for year 2020
After-Tax Profit Targets Olivian Company wants to earn $300,000 in net (after-tax) income next year. Its product is priced at $300 per unit. Product costs include: Direct materials $90.00 Direct labor $66.00 Variable overhead $15.00 Total fixed factory overhead $405,000 Variable selling expense is $12 per unit; fixed selling and administrative expense totals $255,000. Olivian has a tax rate of 40 percent. Required: 1. Calculate the before-tax profit needed to achieve an after-tax target of $300,000. $fill in the blank 9853e801101c04e_1 2. Calculate the number of units that will yield operating income calculated in Requirement 1 above. If required, round your answer to the nearest whole unit. fill in the blank 9853e801101c04e_2 units Feedback
Answer:
1. Before-tax profit = $500,000
2. Number of units that will yield the operating income = 9,915 units
Explanation:
1. Calculate the before-tax profit needed to achieve an after-tax target of $300,000.
This can be calculated as follows:
After-tax target = Before-tax profit * (100% - Tax rate) ……………….. (1)
Substituting the relevant values into equation (1) and solve for Before-tax profit, we have:
$300,000 = Before-tax profit * (100% - 40%)
$300,000 = Before-tax profit * 60%
Before-tax profit = $300,000 / 60%
Before-tax profit = $500,000
2. Calculate the number of units that will yield operating income calculated in Requirement 1 above. If required, round your answer to the nearest whole unit.
This can be calculated as follows:
Contribution margin = Selling price per unit - Direct materials per unit - Direct labor per unit - Variable overhead per unit - Variable selling expense per unit = $300 - $90 - $66 - $15 - $12 = $117
Before-tax profit = (Contribution margin * Number of units that will yield the operating income) - Total fixed factory overhead - Fixed selling and administrative expense ………………. (2)
Substituting the relevant values into equation (2) and solve for Number of units that will yield the operating income, we have:
$500,000 = ($117 * Number of units that will yield the operating income) - $405,000 - $255,000
$500,000 + $405,000 + $255,000 = $117 * Number of units that will yield the operating income
$1,160,000 = $117 * Number of units that will yield the operating income
Number of units that will yield the operating income = $1,160,000 / $117 = 9,914.52991452991
Rounding to the nearest whole unit, we have:
Number of units that will yield the operating income = 9,915 units
Second-degree price discrimination: Multiple Choice results in transfer pricing. None of the answers are correct. is the practice of posting a discrete schedule of declining prices for different ranges of quantities. eliminates the problem of double marginalization.
Answer:
is the practice of posting a discrete schedule of declining prices for different ranges of quantities
Explanation:
In the case of the second degree price discrimination, the firm should chares the different kinds of the prices as per the quantity demanded i.e. if the large quantities are ordered so it should be charged at the less price and if the small quantities are ordered so it should be charged at the high prices. The motive behind this is to motivate the bulk sales that means when the buyer purchased the products in bulk so he will get the high discounts
Therefore the third option is correct
Based on the above financial statements, calculate the following ratios for 2021: income statement Sales 480,000 cost of goods sold 243,200 salaries expense 55,200 depreciation expense 24,000 interest expense 4,500 rent expense 36,000 gain on equipment 0 loss on equipment disposal 1,400 364,300 net income 115,700 Statement of Retained Earnings Beginning Balance - Retained Earnings $ 36,300 Plus - Net Income 115,700 Less - Dividends (18,000) Ending Balance - Retained Earnings $ 134,000 Balance sheets 2020 2021 change Assets: Cash 27,500 72,600 45,100 Accounts Receivable 32,600 47,600 15,000 Inventory 48,000 54,800 6,800 prepaid expenses 7,200 5,200 (2,000) Equipment 56,000 77,000 21,000 Accum. Depr - Equipment (26,500) (32,500) (6,000) total assets 144,800 224,700 Liabilities: Accounts Payable 12,700 25,700 13,000 accrued Liabilities 3,800 5,000 1,200 Bonds Payable 72,000 40,000 (32,000) total liabilities 88,500 70,700 shareholders Equity: Common Stock 20,000 20,000 0 Retained Earnings 36,300 134,000 97,700 total equity 56,300 154,000 total liabilities and shareholder equity 144,800 224,700 A. Current Ratio B. Gross Profit Percentage C. Debt Ratio D. Debt to Equity Ratio
Answer:
A. Current Ratio = 5.87
B. Gross Profit Percentage = 49.33%
C. Debt Ratio = 0.31
D. Debt to Equity Ratio = 0.46
Explanation:
The ratios can be calculated for 2021 as follows:
A. Current Ratio
Current ratio = Current assets / Current liabilities ………………… (1)
Where:
Current assets = Current assets in 2021 = Cash in 2021 + Accounts Receivable in 2021 + Inventory in 2021 + Prepaid expenses in 2021 = $72,600 + $47,600 + 54,800 + $5,200 = $180,200
Current liabilities = Current liabilities in 2021 = Accounts Payable in 2021 + accrued Liabilities in 2021 = $25,700 + $5,000 = $30,700
Substituting the values into equation (1), we have:
Current ratio = 180,200 / 30,700 = 5.87
B. Gross Profit Percentage
Gross Profit Percentage = (Gross profit / Sales) * 100 ………………….. (2)
Where:
Gross profit = Sales – Cost of goods sold = $480,000 - $243,200 = $236,800
Sales = $480,000
Substituting the values into equation (2), we have:
Gross Profit Percentage = ($236,800 / $480,000) * 100 = 49.33%
C. Debt Ratio
Debt ratio = Total debts / Total assets …………………………….. (3)
Where:
Total debts = Total liabilities in 2021 = $70,700
Total assets = total assets in 2021 = $224,700
Substituting the values into equation (3), we have:
Debt ratio = $70,700 / $224,700 = 0.31
D. Debt to Equity Ratio
Debt to Equity Ratio = Total debts / Total equity …………………………….. (4)
Total debts = Total liabilities in 2021 = $70,700
Total equity = total equity in 2021 = $154,000
Substituting the values into equation (4), we have:
Debt to Equity Ratio = $70,700 / $154,000 = 0.46
Burget Clinic uses client-visits as its measure of activity. During July, the clinic budgeted for 2,100 client-visits, but its actual level of activity was 2,110 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for July:
Data used in budgeting:
Fixed element per month Variable element per client-visit
Revenue - $47.10
Personnel expenses $22,700 $16.90
Medical supplies 1,600 6.50
Occupancy expenses 6,900 1.50
Administrative expenses 3,400 0.40
Total expenses $34,600 $25.30
Actual results for July:
Revenue $101,491
Personnel expenses 55,699
Medical supplies 15,895
Occupancy expenses 9,785
Administrative expenses 4,424
The revenue variance for July would be closest to: __________
a. $2,581 F
b. $2,110 U
c. $2,110 F
d. $2,581 U
Answer:
Burget Clinic
The revenue variance for July would be closest to: __________
a. $2,581 F
Explanation:
a) Data and Calculations:
Budgeted client-visits for July = 2,100
Actual client-visits for July = 2,110
Fixed element Variable element
per month per client-visit
Revenue - $47.10
Personnel expenses $22,700 $16.90
Medical supplies 1,600 6.50
Occupancy expenses 6,900 1.50
Administrative expenses 3,400 0.40
Total expenses $34,600 $25.30
Actual results for July:
Revenue $101,491
Personnel expenses 55,699
Medical supplies 15,895
Occupancy expenses 9,785
Administrative expenses 4,424
Budgeted Revenue = $98,910 ($47.10 * 2,100)
Think of a business concept that would be appropriate for each of the following:
1) a sole proprietorship
2) a corporation
3) a limited liability company
In your answer address the pros and cons of the business type (sole proprietorship, Corporation, LLC) and why you the believe the business concept you choose best suits that business type. You must list at least 3 pros and 3 cons for each business type.
Answer:
Sole Proprietorship: The business concept that would be suitable for this type of business would be a roadside Fruit Juice Processing business. This involves different blends of organic fruits being blended into one smooth syrup sometimes called a smoothie.This type of business is better registered under a Sole Proprietorship because, it is almost always carried out by those who are self-employed.
Pros:
It is easy to set up and has low operational and corporate costIt enjoys zero corporate business taxesthey are not required to submit annual filingsCons:
The liability is unlimited and unrestricted. This means if there is litigation against the business, the business owner if found culpable will have to defray all amounts due even with his or her personal assets if the business is unable to meet that obligationThis type of business structure will find it difficult to raise money due to the potential liability exposure Also the sole proprietor may be unable to take on business debt
2. A Limited Liability Corporation: The business concept that would be suitable for this type of entity is a Fast Food Franchise like Tastee Fried Chicken. This sort of business will involve processing chicken and other kinds of foods into wholesome dishes.
Tony has been sent to sales training and the final examination requires delivering an effective sales presentation. If he passes this examination, he will be placed into a sales job. If he does not pass, he will be let go from the company. In assessing Tony’s performance, the trainer remarks that although his talk was solid as far as content, he did not pass. The trainer fails to mention that the talk lacked several elements of excellence. Tony’s presentation graphics were inconsistent, he mumbled, and he failed to answer any of the follow-up questions. Tony throws the evaluation at the trainer, shouting, "Whatever, dude!" and slams the door on the way out. The trainer’s failure to discuss these aspects of Tony’s presentation performance demonstrated a lack of attention to which form of fairness or justice?
Answer: interactional
Explanation:
Based on the information given, the trainer’s failure to discuss these aspects of Tony’s presentation performance demonstrated a lack of attention to the interactional justice.
Interactional Justice involves the communication of the procedures that are used in judging the performance of a person. It focuses on the treatment that individuals get when there are implementation of certain procedures. This standard is utilized by the employees at work.
In this scenario, the trainer failed to interact with Tony as he didn't explain his flaws to him and didn't tell him the reason that he wasn't chosen. Thereby, the trainer didn't pay attention to interactional fairness.
John has a roofing business. After a hailstorm, he knows that many homeowners will have roof damage and will need roof repair or a completely new roof. John wants to be sure that his leads are real prospects who answer questions, value his time, are realistic about money, and are prepared to hire John for his roofing services. Which of the following statements is true for John's lead qualification?
a. It refers to determining the recognized need, buying power, receptivity, and accessibility of a sales prospect.
b. It refers to a process in which a salesperson approaches potential buyers without any prior knowledge of the prospects' needs or financial status.
с. It refers to a process that describes the "homework" that must be done by a salesperson before he or she contacts a prospect.
d. It refers to using friends, business contacts, coworkers, acquaintances, and fellow members in professional and civic organizations to identify potential clients.
Answer: a. It refers to determining the recognized need, buying power, receptivity, and accessibility of a sales prospect.
Explanation:
Based on the information given in the question, the statement that is true for John's lead qualification is option A "It refers to determining the recognized need, buying power, receptivity, and accessibility of a sales prospect".
From the information given, John saw the recognized need when he realized that after the hailstorm, there'll be many homeowners who will have their roof damage and will then need roof repair or a completely new roof and he also accessed the prospect for his sales.
The sales volume variance is the difference between the: A. static budget (based on planned volume) and actual revenue or cost. B. flexible budget (based on actual volume) and actual revenue or cost. C. static budget (based on actual volume) and the flexible budget (based on planned volume). D. static budget (based on planned volume) and the flexible budget (based on actual volume).
Answer:
The correct answer is the option A: static budget (based on planned volume) and actual revenue or cost.
Explanation:
To begin with, the name of "Sales volume variance" refers to a method used in the business and accounting field with the main purpose of obtaining the comparison between the planned sales and the actual sales. It does it by stating that the difference between those two multiply by the budget price of the product will result in the variance itself. The goal of this method is to measure the sales performance and to see if there are no mathces with the expected revenues then the company has to take a lead and do something about it.
Microbiotics currently sells all of its frozen dinners cash-on-delivery but believes it can increase sales by offering supermarkets 1 month of free credit. The price per carton is $100, and the cost per carton is $65. The unit sales will increase from 1,050 cartons to 1,110 per month if credit is granted. Assume all customers pay their bills and take full advantage of any credit period offered.
a. If the interest rate is 1% per month what will be the change in the firm's total monthly profits on a present value basis if credit is offered to all customers?
b. If the interest rate is 1.5% per month v/hat will be the change in the firm's total monthly profits on a present value basis if credit is offered to all customers?
c. Assume the interest rate is 1 5% per month but the firm can offer the credit only as a special deal to new customers, while existing customers will continue to pay cash on delivery. What will be the change in the firm's total monthly profits on a present value basis under these conditions?
Answer:
Following are the responses to the given question:
Explanation:
[tex]\text{Present value of profit} = ( Revenue - cost ) \times Unit\ sold[/tex]
[tex]= (\$100 - \$65 ) \times 1,050\\\\= (\$35 ) \times 1,050\\\\= \$36,750[/tex]
For point a:
[tex]\text{PV of profits} = PV(REV -COST) \times Units \ sold[/tex]
[tex]= (\frac{\$100}{ (1 + .01)} - \$65) \times 1,110\\\\= (\frac{\$100}{ (1 .01)} - \$65) \times 1,110\\\\= (99.0 -65) \times 1,110\\\\= 34\times 1,110\\\\= \$37,740\\[/tex]
Changes in monthly profits:
[tex]= \$37,740 - \$36,570 = \$1,170[/tex]
At 1%, the credit offer raises the company's earnings for one month.
For point b:
[tex]\text{PV of profits} = PV(REV -COST) \times Units \ sold[/tex]
[tex]=(\frac{\$100}{(1 + .015)} -\$65) \times 1,110\\\\=(\frac{\$100}{(1.015)} -\$65) \times 1,110\\\\=33.52\times 1,110\\\\= 37,207.2[/tex]
Changes in monthly profits:
[tex]= \$37,207.2- \$36,570 = $637.2.[/tex]
At 1.5%, the loan offering raises the company's earnings for one month.
For point c:
[tex]\text{PV of profits} = PV(REV -COST) \times Units \ sold[/tex]
[tex]= (\$100 - \$65 ) \times 60\\\\ = \$2,100[/tex]
[tex]\text{PV of profits} = PV(REV -COST) \times Units \ sold[/tex]
[tex]= (\frac{\$100}{(1 + .015)} - \$65) \times 60\\\\= (\frac{\$100}{(1.015)} - \$65) \times 60\\\\=33.52 \times 60\\\\= 2011.2[/tex]
Changes in monthly profits:
[tex]= \$2,011.2 -\$2,100 = \$88.8[/tex]
At a cost of 1.5%, the credit rates decrease the company's income for one month.
Spam Corp. is financed entirely by common stock and has a beta of .70. The firm is expected to generate a level, perpetual stream of earnings and dividends. The stock has a price-earnings ratio of 7.90 and a cost of equity of 12.66%. The company’s stock is selling for $52. Now the firm decides to repurchase half of its shares and substitute an equal value of debt. The debt is risk-free, with an interest rate of 3%. The company is exempt from corporate income taxes. Assume MM are correct.
Calculate the cost of equity after the refinancing. (Enter your answer as a percent rounded to 2 decimal places.)
Calculate the overall cost of capital (WACC) after the refinancing. (Enter your answer as a percent rounded to 2 decimal places.)
Calculate the price-earnings ratio after the refinancing. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Calculate the stock price after the refinancing.
Calculate the stock’s beta after the refinancing. (Round your answer to 1 decimal place.)
Answer:
a. Cost of equity after the refinancing = 22.31%
b. Cost of capital (WACC) after the refinancing = 12.66%
c. Price-earnings ratio after the refinancing = 4.48
d. Stock price after the refinancing = $51.99
e. Stock’s beta after the refinancing = 2.52
Explanation:
Given:
Beta = 0.70
PE ratio = Price-earnings ratio = 7.90
Ke = Cost of equity = 12.66%
MPS = Market price per share = $52
Debt rate = 3%
Let assume that the company’s total number of shares outstanding is 1,000. Therefore, we have:
Equity market value = MPS * Number of shares = $52 * 1,000 = $52,000
By repurchasing half shares and substituting an equal value of debt, we have:
Debt = Equity market value / 2 = $52,000 / 2 = $26,000
Interest on debt = Debt * Debt rate = $26,000 * 3% = $780
Old EPS = MPS / PE ratio = $52 / 7.90 = $6.58 per share
Net income = Old EPS * Number of shares = $6.58 * 1,000 = $6,580
Earnings available to shareholders = Net income – Interest on debt = $6,580 – 780 = $5,800
New number of shares = 500
New EPS = Earnings available to shareholders / New number of shares = $5,800 / 500 = $11.60 per share
Therefore, we have:
a. Calculate the cost of equity after the refinancing. (Enter your answer as a percent rounded to 2 decimal places.)
Cost of equity after the refinancing = New EPS / MPS = $11.60 / $52 = 0.2231, or 22.31%
b. Calculate the overall cost of capital (WACC) after the refinancing. (Enter your answer as a percent rounded to 2 decimal places.)
Cost of capital (WACC) after the refinancing = (Weight of debt * Cost of debt) + (Weight of equity * New cost of equity) = (50% * 3%) + (50% * 22.31%) = 12.66%
c. Calculate the price-earnings ratio after the refinancing. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Price-earnings ratio after the refinancing = 1 / Cost of equity after the refinancing = 1 / 22.31% = 4.48
d. Calculate the stock price after the refinancing.
Stock price after the refinancing = Price-earnings ratio after the refinancing * New EPS = $11.60 * 4.48 = $51.99
e. Calculate the stock’s beta after the refinancing. (Round your answer to 1 decimal place.)
Stock’s beta after the refinancing = (Cost of equity after the refinancing – Cost of debt) / (WACC – Cost of debt) = (0.2231 - 0.03) / (0.1266 - 0.05) = 2.52
Why don't most tax expenditures help much if your federal tax bill is zero? You don't qualify for tax breaks if your federal tax bill is zero. Taxes are an automatic stabilizer. Most tax expenditures are specifically for high-income people. Most tax breaks reduce taxable income, but reducing taxable income below zero does not reduce the tax bill.
Answer: Most tax breaks reduce taxable income, but reducing taxable income below zero does not reduce the tax bill.
Explanation:
Tax breaks can be used to reduce your taxable income sometimes all the way to zero. This however simply means that you don't have to pay income tax but does not mean that there won't be other taxes to pay.
Because of these additional taxes left to pay, a person will still pay certain taxes even if their taxable income is below zero. Tax expenditures therefore do not help much with a federal tax bill of zero.
A portfolio manager buys $1 million of U.S. Treasury bills maturing in 90 days at a price of $990,390 and discount rate of 3.8%. The portfolio also includes the following investments: Bank commercial paper maturing in 90 days with a bond equivalent yield of 4.34% and a market value of $100,000. Bank certificates of deposit maturing in six months with a bond equivalent yield of 4.84% and a market value of $200,000. The bond-equivalent yield of a comparable benchmark portfolio is 4.0%. Including the Treasury bill purchase, the manager's portfolio is:
Answer:
A. Outperforming the benchmark
Explanation:
Calculation to determine what the manager's portfolio
First step is to calculate the Treasury bill, bond-equivalent yield for U.S.
Using this formula
Treasury bill
=(Face value − Market value) / Market value × 365 / 90
Let plug in the formula
Treasury bill= ($1,000,000 − 990,390) / 990,390 × 365 / 90
Treasury bill=0.0097 × 0.04056
Treasury bill= 3.93%.
Second step is to calculate The total market value of the portfolio
Total market value portfolio=$990,390 + $100,000 + $200,000
Total market value portfolio= $1,290,390
Now let calculate the manager's portfolio
Manager's portfolio=3.93% ($990,390 / $1,290,390) + 4.34% ($100,000 / $1,290,390) + 4.84% ($200,000 / $1,290,390)
Manager's portfolio=3.93%(76.75%)+4.34%(7.75%)+4.84%(15.50%)
Manager's portfolio=0.0410*100
Manager's portfolio= 4.10%
Therefore Based on the above calculation the manager's portfolio is 4.10% OUTPERFORMING THE BENCHMARK because the manager's portfolio of 4.10% is higher than bond-equivalent yield benchmark portfolio of 4.0%.
On the Idaho Store worksheet, in the range B9:B16, use the Fill Series feature to enter interest rates beginning with 8.50%. Decrease the amounts by .50% ending with 5.00%. Format the rates as Percent Style with two decimal places and apply bold and center.
Answer:
Kindly check explanation
Explanation:
To achieve this, a formular is entered to give a rate of 8.50% in B9 ; The formular could be :
Beginning rate - 0.50x
Where x = 1 in cell B9
The beginning rate = 8.50
Hence, the formula to be inputted :
=9.00 - 0.50*1
Kindly lock the beginning rate and decline rate by an absolute reference so it doesn't change as the fill handle is being dragged down
In cell B9 :
9.00% - 0.50%*1 = 8.50%
B10:
9.00% - 0.50%*2 = 8.00%
... B16 :
9.00% - 0.50%*8 = 5.00%
Presented below is pension information for Ceylan Inc.for the year 2019: Service cost $82,000 Interest on projected benefit obligation 56,000 Interest on vested benefits 20,000 Amortization of prior service cost due to increase in benefits 12,000 Expected return on plan assets 18,000 The amount of pension expense to be reported for 2019 is
Answer:
$132,000
Explanation:
Particulars Amount
Service cost $82,000
Add: Interest on projected benefit obligation $56,000
Add: Amortization of prior service cost $12,000
due to increase in benefits
Less: Expected return on plan assets ($18,000)
Pension expense $132,000
Darrell is a clothier whose company, 24-7 Activewear, has separate product lines for men, women, and children. He has grouped his organization into different departments such as production, marketing, and finance. Most of the employees report to two managers a departmental head and a divisional head. Darrell encourages lower-level managers to make important decisions in order to promote quick and effective decision making.
It can be inferred that Darrell's firm utilizes the ________ approach to departmentalization.
a. geographical
b. product
c. vertical
d. matrix
e. conglomerate
Answer:
d. matrix
Explanation:
In the matrix organization structure, here the employees would have the multiple line for reporting and also they perform various kinds of roles. In this, the resources are used effectively and also it builds the motivation between the employees due to this the employee could show their skills in various fields also it improves the decision making
Therefore as per the given situation, the option d is correct
The U.S. has expected inflation of 2%, while Country A, Country B, and Country C have expected inflation of 7%. Country A engages in much international trade with the U.S. The products that are traded between Country A and the U.S. can easily be produced by either country. Country B engages in much international trade with the U.S. The products that are traded between Country B and the U.S. are important health products, and there are not substitutes for these products that are exported from the U.S. to Country B or from Country B to the U.S. Country C engages in much international financial flows with the U.S. but very little trade. If you were to use purchasing power parity (PPP) to predict the future exchange rate over the next year for the local currency of each country against the dollar, PPP would provide the most accurate forecast for the currency of: _________
Answer:
If you were to use purchasing power parity (PPP) to predict the future exchange rate over the next year for the local currency of each country against the dollar, PPP would provide the most accurate forecast for the currency of: _________
Country A.
Explanation:
The U.S. and Country A have Purchasing Power Parity (PPP) if an exchange rate can be determined between these two countries' currencies when their purchasing power is in equilibrium. This parity can only be established by comparing a basket of goods in the two countries. This basket of goods is not possible to compare with Country B or Country C that has no similar goods with the U.S.
Bramble Corp. recorded operating data for its shoe division for the year. Sales $2000000 Contribution margin 440000 Controllable fixed costs 180000 Average total operating assets 880000 How much is controllable margin for the year? 22% 50% $260000 $440000
Answer: 260000
Explanation:
The controllable margin for the year will be calculated thus:
Contribution margin = 440000
Less: Controllable Fixed Costs = 180000
Controllable margin will now be:
= 440,000 - 180,000
= 260,000
Therefore, the controllable margin will be 260000
A company is considering the purchase of new equipment for $51,000. The projected annual net cash flows are $21,200. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 10% return on investment. The present value of an annuity of $1 for various periods follows: Period Present value of an annuity of $1 at 10% 1 0.9091 2 1.7355 3 2.4869 What is the net present value of this machine assuming all cash flows occur at year-end
Answer:
$1721.26
Explanation:
Net present value is the present value of after-tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
Cash flow in year 0 = -$51,000
Cash flow in year 1 to 3 = $21,200
I = 10%
NPV = $1721.26
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
UML Foods reported $940 million in income before income taxes for 2020, its first year of operations. Tax depreciation exceeded depreciation for financial reporting purposes by $120 million. The company also had non-tax-deductible expenses of $80 million relating to permanent differences. The income tax rate for 2020 was 35%, but the enacted rate for years after 2020 is 30%. The balance in the deferred tax liability in the December 31, 2020, balance sheet is:
Answer:
$36,000,000
Explanation:
Note: Permanent differences have no impact on deferred taxes.
Deferred tax liability = $120 million * 30%
Deferred tax liability = $120 million * 0.30
Deferred tax liability = $36,000,000
So, the balance in the deferred tax liability in the December 31, 2020, balance sheet is $36,000,000.
Coronado Industries makes and sells umbrellas. The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year. The following budget data are available: Variable Cost Per Unit Sold Monthly Fixed Cost Sales commissions $0.60 $ 4500 Shipping 1.20 Advertising 0.30 Executive salaries 50000 Depreciation on office equipment 7400 Other 0.35 38000 Expenses are paid in the month incurred. If the company has budgeted to sell 8500 umbrellas in October, how much is the total budgeted variable selling and administrative expenses for October?
Answer:
$120,725
Explanation:
Calculation to determine how much is the total budgeted variable selling and administrative expenses for October
Total budgeted variable selling and administrative expenses =( 0.60+1.2 + 0.3 + 0.35) x 8,500 + 4500 + 50,000 + 7400 + 38,000
Total budgeted variable selling and administrative expenses =2.45*8500+4500 + 50,000 + 7400 + 38,000
Total budgeted variable selling and administrative expenses=$20,825+4500 + 50,000 + 7400 + 38,000
Total budgeted variable selling and administrative expenses=$120,725
Therefore the total budgeted variable selling and administrative expenses for October is $120,725
27. If your company purchases land and a building for $100,000, and it intends to tear down the existing building to allow construction of a new warehouse, the purchase price should be allocated to the following accounts: A) $100,000 to the Construction Expense account B) $100,000 to the Land account and $0 to the Building account C) Prorated to the Land account and Building account based on the appraised values of each. D) $100,000 to the Building account and $0 to the Land account
Answer:
The correct option is B) $100,000 to the Land account and $0 to the Building account.
Explanation:
Originally, the $100,000 paid is for both land and a buildling. There would have been a need to prorate the $100,000 to the Land account and Building account based on the appraised values of each if the existing building was not tore down.
However, since the existing building was tore sown, that indicates the building was of no use to the company and only land is useful. This indicates that the $100,000 is paid for the land alone.
Therefore, the correct option is B) $100,000 to the Land account and $0 to the Building account.