Answer: B. No, this is not part of the Fed's dual mandate of price stability and high employment.
Explanation:
For any economy to grow there needs to be price stability in the economy as it helps investors plan their future spending amongst other things. This is why the Fed has the mandate to keep prices stable.
The Fed however, does not have to maintain the stability of prices in the stock market which can be a very volatile market where the volatility is one of the very ways to make gains.
Most Company has an opportunity to invest in one of two new projects. Project Y requires a $350,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $350,000 investment for new machinery with a three-year life and no salvage value. The two projects yield the following predicted annual results. The company uses straight-line depreciation, and cash flows occur evenly throughout each year.
Project Y Project Z
Sales $390,000 $312,000
Expenses
Direct materials 54,600 39,000
Direct labor 78,000 46,800
Overhead including depreciation 140,400 140,400
Selling and administrative
expenses 28,000 28,000
Total expenses 301,000 254,200
Pretax income 89,000 57,800
Income taxes (40%) 35,600 23,120
Net income $53,400 $34,680
Required:
1. Compute each project's annual expected net cash flows.
2. Determine each project's payback period.
3. Compute each project's accounting rate of return.
4. Determine each project's net present value using 9% as the discount rate. Assume that cash flows occur at each year-end.
Answer:
Most Company
Project Y Project Z
1. Annual expected net cash flows $140,500 $151,347
2. Payback period 2.5 years 2.3 years
3. Accounting rate of return 15.3% 9.9%
4. Net present value, using 9% $105,220 $33,059
Explanation:
a) Data and Calculations:
Project Y Project Z
Initial investment costs $350,000 $350,000
Useful life of project 4 years 3 years
Salvage value $0 $0
Annual depreciation $87,500 $116,667
Sales $390,000 $312,000
Expenses
Direct materials 54,600 39,000
Direct labor 78,000 46,800
Overhead including depreciation 140,400 140,400
Selling and administrative expenses 28,000 28,000
Total expenses 301,000 254,200
Pretax income 89,000 57,800
Income taxes (40%) 35,600 23,120
Net income $53,400 $34,680
Accounting rate of return 15.3% 9.9%
= Net income/Initial investment cost * 100
Annual Cash inflows:
Net income $53,400 $34,680
Annual depreciation 87,500 116,667
Annual expected net cash flows $140,500 $151,347
PV annuity factor at 9% for 4 years 3.240 2.531
PV of annual cash inflows $455,220 $383,059
Net Present Value = (Initial investment - PV of annual cash flows)
NPV = $105,220 $33,059
Payback period = Initial investment cost/Annual cash inflow
A company's Cash account shows an ending balance of $4,600. Reconciling items included a bookkeeper error of $105 (a $525 check recorded as $630), two outstanding checks totaling $830, a service charge of $20, a deposit in transit of $260, and interest revenue of $33. What is the adjusted book balance
Answer:
$5,275
Explanation:
Bank Reconciliation Statement
Balance as per Cash Book $4,600
Add check error $105
Add unpresented checks $830
Less Lodgments not yet credited ($260)
Balance as per Bank Statement $5,275
therefore,
The adjusted Cash book balance is $5,275
On December 31, 2020, the Bennett Company had 100,000 shares of common stock issued and outstanding. On July 1, 2021, the company sold 18,000 additional shares for cash. Bennett's net income for the year ended December 31, 2021, was $650,000. During 2021, Bennett declared and paid $71,000 in cash dividends on its nonconvertible preferred stock. What is the 2021 basic earnings per share
Answer:
$5.31
Explanation:
Earnings per share = Earnings Attributable to Holders of Common Stock ÷ Weighted Average Number of Common Stocks Outstanding
where,
Earnings Attributable to Holders of Common Stock is :
Net Income $650,000
Less Preference Stock dividend ($71,000)
Earnings Attributable to Holders of Common Stock $579,000
and
Weighted Average Number of Common Stocks Outstanding :
Common Stocks at Beginning outstanding 100,000
Stocks Sold at Weighted Average (18,000 / 2) 9,000
Weighted Average Number of Common Stocks Outstanding 109,000
therefore,
Earnings per share = $579,000 ÷ 109,000
= $5.31
The 2021 basic earnings per share is $5.31.
Prepare a Pareto chart of the possible causes for a student to fail a final examination in a university course.
Vehicles are identified by RFID tags in order to collect bridge tolls. The project manager is considering two different technologies for RFID readers. By sampling two different options, the following data are collected about the accuracy of the readers:
Option 1: 99, 98, 99, 94, 92, 99, 98, 99, 94, 90 Option 2: 98, 97, 97, 97, 98, 98, 97, 97, 98
Calculate the mean, mode, and standard deviation of the two options.
Answer:
Option 1
[tex]\bar x_1 = 96.2[/tex]
[tex]Mode = 99[/tex]
[tex]\sigma_1 = 3.22[/tex]
Option 2
[tex]\bar x_2 = 97.4[/tex]
[tex]Mode = 97[/tex]
[tex]\sigma_2 = 0.499[/tex]
Explanation:
Given
[tex]Option\ 1: 99, 98, 99, 94, 92, 99, 98, 99, 94, 90[/tex]
[tex]Option\ 2: 98, 97, 97, 97, 98, 98, 97, 97, 98[/tex]
Required
The mean, mode and standard deviation of both options
Option 1
Calculate mean
[tex]\bar x = \frac{\sum x}{n}[/tex]
[tex]\bar x_1 = \frac{99+ 98+ 99+ 94+ 92+ 99+ 98+ 99+ 94+ 90}{10}[/tex]
[tex]\bar x_1 = \frac{962}{10}[/tex]
[tex]\bar x_1 = 96.2[/tex]
Calculate mode
[tex]Mode = 99[/tex]
Because it has a frequency of 4 (more than other element of the dataset)
Calculate standard deviation
[tex]\sigma = \sqrt{\frac{\sum(x - \bar x)^2}{n}}[/tex]
[tex]\sigma_1 = \sqrt{\frac{(99-96.2)^2 +.............+(90-96.2)^2}{10}}[/tex]
[tex]\sigma_1 = \sqrt{\frac{103.6}{10}}[/tex]
[tex]\sigma_1 = \sqrt{10.36}[/tex]
[tex]\sigma_1 = 3.22[/tex]
Option 2
Calculate mean
[tex]\bar x = \frac{\sum x}{n}[/tex]
[tex]\bar x_2 = \frac{98+ 97+ 97+ 97+ 98+ 98+ 97+ 97+ 98}{9}[/tex]
[tex]\bar x_2 = \frac{877}{9}[/tex]
[tex]\bar x_2 = 97.4[/tex]
Calculate mode
[tex]Mode = 97[/tex]
Because it has a frequency of 5 (more than other element of the dataset)
Calculate standard deviation
[tex]\sigma_2 = \sqrt{\frac{(98-97.4)^2+..............+ (98-97.4)^2}{9}}[/tex]
[tex]\sigma_2 = \sqrt{\frac{2.24}{9}}[/tex]
[tex]\sigma_2 = \sqrt{0.2489}[/tex]
[tex]\sigma_2 = 0.499[/tex]
Identify information that would be included in a printed, hand-delivered résumé and not an online résumé.
Answer: Your High School/College diploma. Copy of your educational degree. Liesence, Contact information, and employment history.
Explanation:
Off-shoring Money allows
companies and individuals to
invest money into
accounts to stall taxation.
A. temporarily
B. indefinitely
C. permanently
Hirons Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $57,740 per month plus $3,006 per flight plus $17 per passenger. The company expected its activity in November to be 85 flights and 257 passengers, but the actual activity was 88 flights and 259 passengers. The actual cost for plane operating costs in November was $315,650. The spending variance for plane operating costs in November would be closest to:
Answer:
$10,721
Explanation:
Particulars Amount
Flexible budget ($57,440+($3,006*88)+($17*259)] $326,371
Actual results $315,650
Spending variance $10,721
Thus, the spending variance for plane operating costs in November would be $10,721.
BugLess Inc, a calendar year, accrual basis corporation, provides pest extermination services to its customers. In October 2020, BugLess contracted with Mr. Cass to provide monthly service calls for 24 months. Each service call costs $60, and Mr. Cass prepaid $1,440 when he signed the contract. BugLess made three service calls to Mr. Cass' home in 2017. As a result of the contract, BugLess should report: Group of answer choices $1,440 taxable income in 2020. $180 taxable income in 2020, and $1,260 taxable income in 2021. $180 taxable income in 2020, $720 taxable income in 2021, and $540 taxable income in 2022. None of the above
Answer:
$180 taxable income in 2020, and $1,260 taxable income in 2021.
Explanation:
Calculation to determine what BugLess should report As a result of the contract
Calculation for the TAXABLE INCOME IN 2020
Using this formula
2020 Taxable income=Service call costs*Numbers of service calls
Let plug in the formula
2020 Taxable income=$60*3
2020 Taxable income=$180
Calculation for the TAXABLE INCOME IN 2021
Using this formula
2021 Taxable income=Prepaid Amount-(Service call costs*Numbers of service calls)
Let plug in the formula
2021 Taxable income=$1,440-($60*3)
2021 Taxable income=$1,440-$180
2021 Taxable income=$1,260
Therefore As a result of the contract, BugLess should report:$180 taxable income in 2020, and $1,260 taxable income in 2021.
After comparing the manufacturing costs in the United States and in offshore locations, Alpha Manufacturing has decided to move its operations offshore to increase its profits by reducing manufacturing costs. In the given scenario, Alpha Manufacturing has most likely conducted a ______, a form of utilitarianism commonly applied by firms and government.
Answer:
Cost-benefit analysis.
Explanation:
Cost-benefit analysis is used to examine and compare the cost associated with a project or task and the benefits derived from it.
In the given scenario, Alpha Manufacturing has most likely conducted a cost-benefit analysis, a form of utilitarianism commonly applied by firms and government. Also, it is essentially used by various organizations or business firms in the decision-making process, as all the cost incurred are determined.
Additionally, it may be used to determine how changes in differing levels of activities such as costs and volume affect a company's operating income and net income.
Fixed costs can be defined as predetermined expenses in a business that remain constant for a specific period of time regardless of the quantity of production or level of outputs. Some examples of fixed costs in business are loan payments, employee salary, depreciation, rent, insurance, lease, utilities etc.
discuss whethet or not a merger between two book publishing firms will benefits consumers
Answer: See explanation
Explanation:
A merger simply means when two companies come together and becomes one.
A merger between two book publishing firms will benefits the consumers as it may bring about the improvement in the product quality.
Also, the merger can result in the reduction in the price of the books as the company enjoys economies of scale due to its expansion. Furthermore, there can be an expansion of the business into new geographical areas and therefore more customers will be reached.
On Thursday, Justin flies from Baltimore (where the office for his sole proprietorship is located) to Cadiz (Spain). He conducts business on Friday and Tuesday; vacations on Saturday, Sunday, and Monday (a legal holiday in Spain); and returns to Baltimore on Thursday. Justin is scheduled to return home on Wednesday, but all flights were canceled due to bad weather. As a result, he spends Wednesday watching floor shows at a local casino. Days where travel is attempted/cancelled is counted as a travel day under tax law. Justin is self-employed.
Required:
a. For tax purposes, what portion of Justin's trip regarded as being for business?
b. Suppose Monday was not a legal holiday. Would this change your answer in part (a) ? Explain?
c. Under either part (a) or (b), how much of Justin's airfare qualifies as a deducible business expense?
Answer:
a) 100%
b) Yes
c) Total airfare
Explanation:
A) For tax purposes the portion of Justin's trip that is regarded as being for business is 100% and this is because we can consider weekends and Holidays as business days if they are preceded by a business day and also succeeded by a business day(s) also considering that Justin's flight was delayed from Wednesday to Thursday
B) Yes it will affect my answer because it would mean that Saturday, Sunday and Monday will become Non-business days
C) The total cost of the Airfare qualifies as deductible business expense in both A and B
Roberto has received various gifts over the years and has decided to dispose of the following assets he received as gifts:
What is the recognized gain or loss from the following transactions, assuming that no gift tax was paid when the gifts were made.
If an answer is zero, select "neither a gain nor a loss" and enter "0" as the amount.
a. In 1981, he received land worth $32,000. The donor's adjusted basis was $35,000. Roberto sells the land for $95,000 in 2018.
(neither a gain or a loss/ a gain/ a loss) of $__________ is recognized.
b. In 1986, he received stock in Gold Company. The donor's adjusted basis was $19,000. The fair market value on the date of the gift was $34,000. Roberto sells the stock for $40,000 in 2018.
(neither a gain or a loss/ a gain/ a loss) of $__________ is recognized.
c. In 1992, he received land worth $15,000. The donor's adjusted basis was $20,000. Roberto sells the land for $9,000 in 2018.
(neither a gain or a loss/ a gain/ a loss) of $__________ is recognized.
d. In 2013, he received stock worth $30,000. The donor's adjusted basis was $42,000. Roberto sells the stock for $38,000 in 2018.
(neither a gain or a loss/ a gain/ a loss) of $__________ is recognized.
Answer: See explanation
Explanation:
a. The recognized gain or loss from the transaction will be:
= Amount realized - Adjusted basis
= $95000 - $35000
= $60000
Gain of $60000 will be recognized
b. The recognized gain or loss from the transaction will be:
= Amount realized - Adjusted basis
= $40000 - $19000
= $21000
Gain of $21000 is recognized
c. The recognized gain or loss from the transaction will be:
= Amount realized - Adjusted basis
= $9000 - $15000
= -$6000
Loss of $6000 is recognized
d. In this case, no gain or loss will be recognized.
Gaetana is the new marketing director for a local theater. One of her major responsibilities is to monitor and manage aspects of the theater's immediate environment. Discuss, in detail, (1) what and (2) how will Gaetana monitor and manage the four factors in her environment?
Answer:
Market
Explanation:
She is a marketing director she directs markets
Locke Inc has a machine that installs tires. The machine is now in need of repair. The machine originally cost $10,000 and the repair will cost $1,000, but the machine will then last two years. The labor cost of operating the machine is $0.50 per tire. Instead of repairing the old machine, Locke could buy a new machine at a cost of $5,000 that would also last 2 years; the labor cost would then be reduced to $0.25 per tire.
Required:
Should Williams repair or replace the machine if it is installing 10,000 tires in the next two years?
Answer: William should replace the machine with a new one because over that 2 year span he will be losing less money, if he were to repair he would lose more money.
Explanation:
The currency in Macroland is called econs. In Macroland, the public holds 2,000 econs in currency; commercial bank reserves are 300 econs; and the desired reserve-to-deposit ratio of the commercial banks is 10%. If the Central Bank of Macroland prints an additional 200 econs and uses this new currency to buy government bonds from the public, the money supply in Macroland will ____, assuming that the public does not wish to change the amount of currency it holds from before.
Answer:
D)5,000; 7,000
Explanation:
The computation is shown below:
The total bank deposit would be
= (300 ÷ 0.10) + 2,000
= 3,000 + 2,000
= 5,000
In the case when the reserve ratio is 10% so the money multiplier would be 10
Since there is extra inflow of currency so by having the multiplier effect it would be 2000 econs
Now first it is 5,000 econ than it would become 7,000 econ
If there is an additional inflow of currency because of printing 200 econs by central bank then because of multiplier effect it will be 2000 econs.
Money supply from earlier 5000 econs will become 7000 econs.
Waldo Company has been approached about providing a new service to its clients. The company will bill clients $160 per hour; the related hourly variable and fixed operating costs will be $70 and $24, respectively. If all employees are currently working at full capacity on other client matters, the per-hour opportunity cost of being unable to provide this new service is:
Answer:
$90 per hour
Explanation:
Opportunity cost means the benefit one have forgone, for choosing another alternative. Opportunity cost of being unable to provide new service = Billing price - Variable cost per hour. Here, fixed cost is not considered because it will be incurred irrespective of the capacity of working.
So, Opportunity cost = $160 - $70 = $90 per hour
Suppose that Ava withdraws $300 from her savings account at Second Bank. The reserve requirement facing Second Bank is 10%. Assume the bank does not wish to hold any excess reserves of new deposits. Use this information to complete the balance sheet below to show how Second Bank's assets and liabilities change when Ava withdraws the $300 from the bank. Instructions:
Write your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers.
A Simple Bank Balance Sheet
Assets Liabilities
Change in Reserves: Change in Deposits:
Change in Loans:
Answer:
simple bank balance sheet
Explanation:
hope you get it
Coordination refers to ________. a. identifying the span of control within an organization b. portioning the performance of specific tasks c. assigning tasks to qualified managers d. linking various value activities within an organization
Answer:
d. linking various value activities within an organization.
Explanation:
A functional (departmental) organizational structure is a type of structure used to organize staffs by dividing them into various departments based on their skill set, roles or functions and knowledge.
These departments which are vertically structured may include, finance, IT, sales and marketing, research and development, customer service etc. Also, the various departments are headed by a functional manager who are saddled with the responsibility of overseeing, managing and reporting to the executive management.
The employees in companies engaged in a single line of business are generally referred to as silos because they work independently, collaborate and communicate with their colleagues in a vertical style i.e exclusively with each other.
A manager can be defined as an individual who is saddled with the responsibility of providing guidance, support, supervision, administrative control, as well as acting as a role model or example to the employees working in an organization by being morally upright.
Generally, managers are typically involved in taking up leadership roles and as such are expected to be build a strong relationship between their employees or subordinates by creating a fair ground for effective communication and sharing of resources and information. Also, they are required to engage their staff members (entire workforce) in the most efficient and effective manner.
Coordination refers to linking various value activities within an organization.
Answer:
d. linking various value activities within an organization.
Explanation:
Coordination refers to linking various value activities within an organization.
Ramses Corporation produces a product that passes through two processes. During April, the first department transferred 19,000 units to the second department. The cost of the units transferred was $30,000. Material are added uniformly in the second process. The following information is provided about the second department's operations during October:
Units: beginning work-in-process, 4,000
Units: ending work-in-process, 5,500
A) Calculate the number of units started in the second department during April.
B) Calculate the number of units completed in the second department during April.
C) Calculate the number of units started and completed in the second department during April.
Answer: See explanation
Explanation:
A. The number of units started in the second department during April will be the number of units that is transferred in from the first department. This will be
= 19000 units
B. The number of units completed in the second department during April will be:
= Beginning units + Started Unit - Ending units
= 4000 + 19000 - 5500
= 17500 units
C. The number of units started and completed in the second department during April will be:
= Completed units - units in beginning WIP
= 17500 – 4000
= 13500 units.
Bond valuation [LO14-2] Your investment department has researched possible investments in corporate debt securities. Among the available investments are the following $100 million bond issues, each dated January 1, 2021. Prices were determined by underwriters at different times during the last few weeks. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Company Bond Price Stated Rate
1. BB Corp. $ 107 million 15 %
2. DD Corp. $ 100 million 14 %
3. GG Corp. $ 93 million 13 %
Each of the bond issues matures on December 31, 2040, and pays interest semiannually on June 30 and December 31. For bonds of similar risk and maturity, the market yield at January 1, 2021, is 14%.
Required: Other things being equal, which of the bond issues offers the most attractive investment opportunity if it can be purchased at the prices stated?
Answer:
Bond Valuation
Other things being equal, the bond issue that offers the most attractive investment opportunity if it can be purchased at the prices stated is:
= BB Corp. bonds.
Explanation:
a) Data and Calculations:
Maturity period = 20 years
Issue date = January 1, 2021
Maturity date = December 31, 2040
Company Bond Price Stated Rate Annual Interest FV
1. BB Corp. $ 107 million 15 % $15 million $3,518,371,301.23
2. DD Corp. $ 100 million 14 % $14 million 2,827,106,832.58
3. GG Corp. $ 93 million 13 % $13 million 2,260,756,079.53
From an online financial calculator, the future values of the bonds are:
N (# of periods) 20
I/Y (Interest per year) 15
PV (Present Value) 107000000
PMT (Periodic Payment) 15000000
Results
FV = $3,518,371,301.23
Sum of all periodic payments $300,000,000.00
Total Interest $3,111,371,301.2
N (# of periods) 20
I/Y (Interest per year) 14
PV (Present Value) 100000000
PMT (Periodic Payment) 14000000
Results
FV = $2,827,106,832.58
Sum of all periodic payments $280,000,000.00
Total Interest $2,447,106,832.58
N (# of periods) 20
I/Y (Interest per year) 13
PV (Present Value) 93000000
PMT (Periodic Payment) 13000000
Results
FV = $2,260,756,079.53
Sum of all periodic payments $260,000,000.00
Total Interest $1,907,756,079.53
Required information Exercise 10-11 Effects of Changes in Profits and Assets on Return on Investment (ROI) [LO10-1] Skip to question [The following information applies to the questions displayed below.]
Fitness Fanatics is a regional chain of health clubs. The managers of the clubs, who have authority to make investments as needed, are evaluated based largely on return on investment (ROI). The company's Springfield Club reported the following results for the past year:
Sales $ 780,000
Net operating income $ 17,940
Average operating assets $ 100,000
The following questions are to be considered independently.
Assume that the manager of the club is able to reduce expenses by $3,120 without any change in sales or average operating assets.
What would be the club’s return on investment (ROI)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Answer:
Fitness Fanatics
Springfield Club
The return on investment (ROI) = = 21.06%
Explanation:
a) Data and Calculations:
Sales $ 780,000
Net operating income $ 17,940
Average operating assets $ 100,000
1. Assume that the manager of the club is able to reduce expenses by $3,120 without any change in sales or average operating assets, the return on investment would be:
= Net operating income/Average operating assets * 100
= ($ 17,940 + $3,120)/$ 100,000 * 100
= 21.06%
b) The return on investment metric measures an entity's financial performance, using the annual returns and average operating assets or initial investment cost.
Laura, a sales manager at Dexter Inc., claims that labor and management are rivals for most organizations. Brooke, the HR manager, says she is aware of exceptions. Which statement best supports Brooke's perspective? Question 34 options: After the 1980s, most unions and organizations have acted more like adversaries. Examples of cooperation between labor and management include employee involvement in decision making and self-managing teams. Finding win-win solutions is almost impossible because unions and management have conflicting goals. Organizations often define jobs narrowly, which is a sign of cooperation. Creating a union necessarily forces employers to pay more wages, which results in loss of profits.
Answer:
Dexter Inc.
The statement that best supports Brooke's perspective is:
Examples of cooperation between labor and management include employee involvement in decision making and self-managing teams.
Explanation:
When labor and management act as rivals or adversaries, it does not benefit their organizations. They should find common grounds for cooperation. Organizations should involve their employees in more decision-making. Despite their incongruent goals, unions and management should find win-win solutions. Paying employees a living wage does not impoverish the organization. On the contrary, everybody is greatly enriched.
The Bay Street Bakery (BSB) has a respected following. When it moved the business to a famous resort area, it took a big risk; however, the owners were confident that its unique European style cookies and pastries would win customer raves. And they were right! Fortunately, one of the members of the family business was convinced that BSB needed to stay in touch with its loyal customers. When customers visited the bakery, the business collected names and addresses in order to send messages about promotions and coupons to valued customers. Marketing professionals refer to this strategy as:
Answer: c. customer relationship management.
Explanation:
Customers are the most important part of the business because they are the ones that patronize it. This is why some businesses try their best to establish a relationship with customers such that the customers keep coming back as well as recommending their business to potential customers as well.
Strategies that are related to ensuring the above fall under Customer Relationship Management. One such strategy is described in the scenario above and that is the maintenance of customer contact details in order to send them messages related to promotions and coupons so that they may keep patronizing the company.
On January 1, 2021, the Allegheny Corporation purchased equipment for $295,000. The estimated service life of the equipment is 10 years and the estimated residual value is $20,000. The equipment is expected to produce 280,000 units during its life.
Required:
Calculate depreciation for 2021 and 2022 using each of the following methods.
a. Sum-of-the-years'-digits.
b. One hundred fifty percent declining balance.
Answer:
a.
2021 = $50,000
2022 = $45,000
b.
2021 = $275,000
2022 = $0
Explanation:
a. Sum-of-the-years'-digits.
Sum of digits for the 10 years will be :
Year 1 = 10
Year 2 = 9
Year 3 = 8
Year 4 = 7
Year 5 = 6
Year 6 = 5
Year 7 = 4
Year 8 = 3
Year 9 = 2
Year 10 = 1
Sum of Digits = 55
therefore,
2021 depreciation = 10/55 x ($295,000 - $20,000)
= $50,000
2022 depreciation = 9/55 x ($295,000 - $20,000)
= $45,000
b. One hundred fifty percent declining balance.
2021 depreciation = 150% x ($295,000 - $20,000)
= $412,500
Can not be charged above book value of $275,000
2022 depreciation = 150% x ($295,000 - $20,000- $412,500)
= $0
Firm B Firm T Shares outstanding 4,800 1,800 Price per share $ 47 $ 20 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $9,100. Firm T can be acquired for $22 per share in cash or by exchange of stock wherein B offers one of its shares for every two of T's shares. Are the shareholders of Firm T better off with the cash offer or the stock offer? Cash offer is better Share offer is better At what exchange ratio of B shares to T shares would the shareholders in T be indifferent between the two offers? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)
Answer:
A. Share Offer Is Better
B. .4569
Explanation:
A. Based on the information given the shareholders of Firm T will be better off with the STOCK OFFER because cash offer is the amount of $22 per share.
B. Calculation to determine the exchange ratio of B shares to T shares
First step is to calculate the New shares created
New shares created = 1,800(1/2)
New shares created = 900 new shares
Second step is to calculate the value of the merged firm
Value of the merged firm= 4,800($47) + 1,800($20) + $9,100
Value of the merged firm= $270,700
Third step is to calculate the price per share of the merged firm
Price= $270,700/(4,800 + 900)
Price= $270,700/5,700
Price= $47.49
Fourth step is to calculate the Equity offer value
Equity offer value = (1/2)($47.49)
Equity offer value = $23.75 per share
Fifth step is to calculate the post merger share price
Value of the merged firm= $270,700
Shares in new firm = 4,800 + 1,800x
Hence:
Post merger share price:
P= $270,700/(4,800 + 1,800x)
Sixth step
For the target firm’s shareholders to be indifferent which means they have to receive the same wealth
Hence;
1,800(x)P= 1,800($22)
Let solve this equation for P
P= $22/x
Now Let Combine the two equations
$270,700/(4,800 + 1,800x) = $22/x
x= .4569
Seventh step is to calculate the NPV
NPV = 1,800($20) + $9,100 – 1,800($22)
NPV = $5,500
Eight step is to calculate the Share price
Share price = [4,800($47) + $5,500]/4,800
Share price = $48.15
Now let calculate the Exchange ratio
Exchange ratio = $22/$48.15
Exchange ratio = .4569
Therefore the exchange ratio of B shares to T shares that the shareholders in T would be indifferent between the two offers is .4569
Hearne Company has a number of potential capital investments. Because these projects vary in nature, initial investment, and time horizon, management is finding it difficult to compare them. Assume straight line depreciation method is used. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided.)
Project 1: Retooling Manufacturing Facility This project would require an initial investment of $4,850,000. It would generate $865,000 in additional net cash flow each year. The new machinery has a useful life of eight years and a salvage value of $1,000,000.
Project 2: Purchase Patent for New Product The patent would cost $3,400,000, which would be fully amortized over five years. Production of this product would generate $425,000 additional annual net income for Hearne.
Project 3: Purchase a New Fleet of Delivery Trucks Hearne could purchase 25 new delivery trucks at a cost of $115,000 each. The fleet would have a useful life of 10 years, and each truck would have a salvage value of $5,000. Purchasing the fleet would allow Hearne to expand its customer territory resulting in $200,000 of additional net income per year.
Required:
a. Determine each project's accounting rate of return. (Round your answers to 2 decimal places.)
b. Determine each project's payback period. (Round your answers to 2 decimal places.)
c. Using a discount rate of 10 percent, calculate the net present value of each project. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round your final answersto 2 decimal places.)
d. Determine the profitability index of each project and prioritize the projects for Hearne. (Round your intermediate calculations to 2 decimal places. Round your final answers to 4 decimal places.)
Answer:
Hearne Company
Project 1 Project 2 Project 3
Initial investment cost $4,850,000 $3,400,000 $2,875,000
Annual cash inflows 865,000 1,105,000 475,000
PV annuity (5.335/3.791/6.145) 4,614,775 4,189,055 $2,918,875
Useful life 8 years 5 years 10 years
Salvage Value 1,000,000 0 125,000
PV (0.467/0/0.386 467,000 0 48,250
Depreciable/Amortization amount $3,850,000 $3,400,000 $2,750,000
Annual depreciation/amortization 481,250 680,000 275,000
Annual Returns 383,750 425,000 200,000
Average annual investment cost 606,250 680,000 287,500
a. Accounting rate of return 63.30% 62.50% 69.57%
b. Payback period 5.61 years 3.08 years 6.05 years
Total PV of cash inflows 5,081,775 4,189,055 2,967,125
c. NPV $231,775 $789,055 $92,125
d. Profitability Index 1.0478 1.2321 1.0320
Prioritization of Projects:
Project 2
Project 1
Project 3
Based on NPV, Profitability Index, and Payback Period.
Explanation:
a) Data and Calculations:
Project 1 Project 2 Project 3
Initial investment cost $4,850,000 $3,400,000 $2,875,000
Annual cash inflows 865,000 1,105,000 475,000
PV annuity (5.335/3.791/6.145) 4,614,775 4,189,055 $2,918,875
Useful life 8 years 5 years 10 years
Salvage Value 1,000,000 0 125,000
PV (0.467/0/0.386 467,000 0 48,250
Depreciable/Amortization amount $3,850,000 $3,400,000 $2,750,000
Annual depreciation/amortization 481,250 680,000 275,000
Annual Returns 383,750 425,000 200,000
Average annual investment cost 606,250 680,000 287,500
Accounting rate of return 63.30% 62.50% 69.57%
Payback period 5.61 years 3.08 years 6.05 years
Total PV of cash inflows 5,081,775 4,189,055 2,967,125
NPV $231,775 $789,055 $92,125
Profitability Index 1.0478 1.2321 1.0320
Key Calculation Formulas:
Annual cash flows = Annual Depreciation Plus Annual Net Income
Present of annual cash flows = Annuity factor * Annual cash flows
PV of Salvage value = Salvage value * Discount Factor
The Depreciable or Amortization amount = Initial investment cost Minus Salvage value
Annual Returns = Annual Cash inflow Minus Depreciation
Average annual investment cost = Initial investment cost/useful life
Accounting rate of return = average annual returns/average annual investment cost
Payback period = Initial investment/Annual cash inflows
Total PV of cash flows = PV of annual cash inflows + PV of Salvage value
NPV = Total PV of cash flows Minus Initial Investment Cost
Profitability Index = Total PV of cash flows/Initial Investment Cost
At the beginning of the current period, Sheridan Company had balances in Accounts Receivable of $203,500 and in Allowance for Doubtful Accounts of $8,620 (credit). During the period, it had net credit sales of $739,000 and collections of $813,450. It wrote off as uncollectible accounts receivable of $7,198. However, a $2,978 account previously written off as uncollectible was recovered before the end of the current period. Uncollectible accounts are estimated to total $26,810 at the end of the period. (Omit cost of goods sold entries.)
Required:
a. Prepare the entries to record sales and collections during the
b. Prepare the entry to record the write-off Of accounts the period.
c. Prepare the entries to record the recovery of the uncollectible account during the period.
d. Prepare the entry to record bad debt expense for the period.
Answer:
Sheridan Company
a. Debit Accounts receivable $739,000
Credit Sales revenue $739,000
To record sales of goods on account.
Debit Cash $813,450
Credit Accounts receivable $813,450
To record collections from customers.
b. Debit Allowance for Uncollectible Accounts $7,198
Credit Accounts receivable $7,198
To record the write-off of accounts for the period.
c. Debit Accounts receivable $2,978
Credit Allowance for Uncollectible Accounts $2,978
To record the recovery of the uncollectible account.
d. Debit Bad Debts Expense $22,410
Credit Allowance for Uncollectible Accounts $22,410
To record bad debt expense for the period.
Explanation:
a) Data and Analysis:
a. Accounts receivable $739,000 Sales revenue $739,000
b. Cash $813,450 Accounts receivable $813,450
c. Allowance for Uncollectible Accounts $7,198 Accounts receivable $7,198
d. Accounts receivable $2,978 Allowance for Uncollectible Accounts $2,978
e. Bad Debts Expense $22,410 Allowance for Uncollectible Accounts $22,410
Allowance for Uncollectible Accounts
Account Titles Debit Credit
Beginning balance $8,620
Accounts receivable $7,198
Accounts receivable 2,978
Bad debts expense 22,410
Ending balance 26,810
Totals $34,008 $34,008
Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 9.7 percent, a YTM of 7.7 percent, and has 14 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 7.7 percent, a YTM of 9.7 percent, and also has 14 years to maturity. Assume the interest rates remain unchanged and both bonds have a par value of $1,000.
1. What are the prices of these bonds today? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
2. What do you expect the prices of these bonds to be in one year? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
3. What do you expect the prices of these bonds to be in three years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
4. What do you expect the prices of these bonds to be in eight years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
5. What do you expect the prices of these bonds to be in 12 years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Answer:
I used an Excel spreadsheet and the IRR function:
1. $1,169.55
2. $1,162.47
3. $1,146.61
4. $1,094.67
5. $1,036.43
Clark's Chemical Company received refundable deposits on returnable containers in the amount of $102,000 during 2021. Thirteen percent of the containers were not returned. The deposits are based on the container cost marked up 35%. What is cost of goods sold relative to this forfeiture
Answer:
$9,822
Explanation:
Calculation to determine the cost of goods sold relative to this forfeiture
Cost of goods sold=($102,000 x 13%) ÷(100+35%)
Cost of goods sold=($102,000 x 13%) ÷ 135% =
Cost of goods sold=$13,260÷135%
Cost of goods sold=$9,822
Therefore the cost of goods sold relative to this forfeiture is $9,822
A project has a discount rate of 14 percent, an initial cost of $99,200, an inflow of $56,400 in year 1 and an inflow of $75,900 in year 2. Your boss requires that every project return a minimum of $1.10 for every $1 invested. Based on this information, what is your recommendation on this project?
Answer:
I would recommend the project because the return is greater than 10%
Explanation:
We are to determine the internal rate of return of the project
rate of return the boss requires = (1.1 /1) - 1 = 10%
Internal rate of return is the discount rate that equates the after-tax cash flows from an investment to the amount invested
IRR can be calculated with a financial calculator
Cash flow in year 0 = -99200
cash flow in year 1 and 2 = 75900
IRR = 33.7%