Answer:
The balance in the land account as of December 31, 2018 woulf be $509,100.
Explanation:
Note: The data in the question are merged together. They are therefore sorted before answering the question by representing the question as follows:
On July 1, 2018, Larkin Co. purchased a $440,000 tract of land that is intended to be the site of a new office complex. Larkin incurred additional costs and realized salvage proceeds during 2018 as follows:
Demolition of existing building on site = $65,000
Legal and other fees to close escrow = $13,500
Proceeds from sale of demolition scrap = $9,400
What would be the balance in the land account as of December 31, 2018?
The explanation to the answer is now given as follows:
The balance in the land account as of December 31, 2018 can be calculated using the following formula:
Balance in the land account as of December 31, 2018 = Purchase price + Demolition of existing building on site + Legal and other fees to close escrow - Proceeds from sale of demolition scrap ..................... (1)
Substituting the relevant values from the question into equation (1), we have:
Balance in the land account as of December 31, 2018 = $440,000 + $65,000 + $13,500 - $9,400 = $509,100
Therefore, the balance in the land account as of December 31, 2018 woulf be $509,100.
Excerpts from Sydner Corporation's most recent balance sheet appear below: Year 2Year 1 Current assets: Cash$ 142$ 161 Accounts receivable, net212232 Inventory244203 Prepaid expenses1111 Total current assets$ 609$ 607 Total current liabilities$ 364$ 335 Sales on account in Year 2 amounted to $1,415 and the cost of goods sold was $915. The current ratio at the end of Year 2 is closest to:
Answer: 1.67
Explanation:
Current ratio is calculated by dividing the Current Assets by Current liabilities and measures to what extent current assets can be used to cover current liabilities if need be.
Current Liabilities year 2= Current Assets/ Current Liabilities
= 609/364
= 1.67
A project with a zero net present value indicates that it is acceptable. unacceptable. going to have an acceptable cash payback period. profitable.
Answer:
acceptable.
Explanation:
Project management can be defined as the process of designing, planning, developing, leading and execution of a project plan or activities using a set of skills, tools, knowledge, techniques and experience to achieve the set goals and objectives of creating a unique product or service.
Generally, projects are considered to be temporary because they usually have a start-time and an end-time to complete, execute or implement the project plan.
The net present value (NPV) of a project can be defined as the difference between present value of cash-inflow into a project and that of cash-outflow over a specific period of time. Thus, it is simply the value of all cash-flows for a project with respect to its life span.
A project with a zero net present value indicates that it is acceptable.
This ultimately implies that, investors and project managers are advised to only invest in projects that are having a positive net present value that is greater than or equal to zero.
A public franchise is a right granted Group of answer choices to one firm by another firm; for example, McDonald's Corporation grants restaurant owners a franchise to make its hamburgers. to a firm by government that prevents other firms from producing the same product or service. to a cooperative of buyers that allows the group to purchase goods at wholesale prices. by government that enables a person to engage in arbitrage.
Answer: to a firm by government that prevents other firms from producing the same product or service
Explanation:
A public franchise is a right granted to a firm by government that prevents other firms from producing the same product or service.
This is done by the government in a situation whereby the government doesn't want a competition for the firm or doesn't want other firms to sell that particular good.
For example, if a particular firm comes up with a drug that can cure HIV/AIDS, the government may grant such firm a public franchise.
Respass Corporation has provided the following data concerning an investment project that it is considering: Initial investment $ 160,000 Annual cash flow $ 54,000 per year Salvage value at the end of the project $ 11,000 Expected life of the project 4 years Discount rate 15% Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the project is closest to:
Answer: $516
Explanation:
Net Present value is the present value of inflows less present value of outflows.
The project has annual inflows of $54,000 except in 4th year where it will have inflows of $65,000 because the salvage value will be added to the inflows.
Present value of inflows = 54,000/1.12 + 54,000/1.12² + 54,000/1.12³ + 65,000/1.12⁴
= $160,516
Net Present Value = 160,516 - 160,000
= $516
Which of the following statements about adjustments is correct? Multiple Choice Accrued wages are wages owed, but not yet paid, to employees; the accrued wages will need to be recorded with an adjusting entry that increases expenses. When making an adjustment to recognize supplies used in a period, total assets will not change. Deferral adjustments are used to update amounts that have been previously deferred on the income statement. Depreciation is an example of an accrual adjustment.
Answer:
The Statement that is correct about adjustments is:
Accrued wages are wages owed, but not yet paid, to employees; the accrued wages will need to be recorded with an adjusting entry that increases expenses.
Explanation:
Unpaid wages are adjusted with a debit to the Wages Expense account, which increases the account, and a credit to the Wages Payable account, which also increases the account by the same amount. The purpose of this accrual adjustment is to ensure that the amount reported as Wages Expense is the actual expense incurred for Wages, whether actually paid or not, and thus report the accurate net income and liabilities for the period.
A company purchased a weaving machine for $273,400. The machine has a useful life of 8 years and a residual value of $15,000. It is estimated that the machine could produce 760,000 bolts of woven fabric over its useful life. In the first year, 110,000 bolts were produced. In the second year, production increased to 114,000 units. Using the units-of-production method, what is the amount of depreciation expense that should be recorded for the second year
Answer:
Annual depreciation= $38,760
Explanation:
To calculate the depreciation expense, we need to use the following formula:
Annual depreciation= [(original cost - salvage value)/useful life of production in units]*units produced
Annual depreciation= [(273,400 - 15,000)/760,000]*114,000
Annual depreciation= $38,760
Doing the right task is known in management as what
Answer:
Doing the right task is known in management as performance.
Explanation:
Management ensures that the right tasks are performed by coordinating the various activities that help it to achieve goals. It also plans the right tasks to be carried out in order to achieve set goals and objectives. In doing all these, it also considers the cost and benefit to be incurred and derived respectively from executing its responsibilities. Management is always interested in minimizing costs while maximizing benefits. Management is also concerned with efficiency, by which it minimizes the wastage of resources (such as time, money, and efforts) and ensures optimum utilization of all its resources.
Ben sells stock (adjusted basis of $25,000) to his son, Ray, for its fair market value of $15,000. Ray sells the stock to his neighbor, Trish, for $26,000. Which of the following statements are most accurate?a. Ben’s recognized loss is $0 and Ray’s recognized gain is $1,000.b. Ben’s recognized loss is $10,000 and Ray’s recognized gain is $10,000.c. Ben’s recognized loss is $10,000 and Trish’s recognized gain is $1,000.d. Ray’s recognized gain is $11,000 and Trish’s basis is $26,000.e. None of the above
Answer:
Ray’s recognized gain = $11,000
Trish’s basis = $26,000.
Option "D" is the correct answer.
Explanation:
Given:
Adjusted value of stock = $25,000
Market vale = $15,000
Sales price = $26,000
Find:
Ray’s recognized gain
Trish’s basis
Computation:
Ray’s recognized gain = Sales price - Market vale
Ray’s recognized gain = $26,000 - $15,000
Ray’s recognized gain = $11,000
Trish’s basis = $26,000.
Define the three economic effects of oligopoly
Answer:
Some of the oligopoly effects are discussed as follows:
i. Restriction on output:
Implies that oligopoly results in small output and high prices as compared to other market structures, such as perfect competition.
ii. Price exceeds average costs:Implies that under oligopoly, there are restrictions on entry of new organizations. Thus, organizations charge prices more than the average costs. Therefore, consumers have to pay more in case of oligopoly market.
iii. Lower Efficiency:
Leads to non-optimum levels of output. This is because the output produced under oligopoly depends on the market share held by the organization. Thus, the oligopoly organizations fail to build the optimum scales of economies and achieve optimum output.
iv. Selling Costs:
Refer to high promotional costs. The oligopolists engage in high promotion tasks to take the share of its rivals. Thus, the resources are wasted in form of high selling costs which do not add to the satisfaction of customers.
Apart from aforementioned points, oligopoly shows the poor performance from various other angles. From the point of economic welfare, it fails to satisfy customers since the price charged is very high, even more than average costs. In addition, sometimes oligopolists may face wasteful fluctuations in output as the output is not determined optimally.
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Mini, Inc., earns pretax book net income of $1,900,000 in 2019. Mini deducted $196,400 in bad debt expense for book purposes. This expense is not yet deductible for tax purposes. Mini reports $1,995,000 of pretax book net income in 2020. Mini did not recognize any bad debt expense for book purposes in 2020 but did deduct $147,300 in bad debt expense for tax purposes. Mini reports no other temporary or permanent differences. The applicable U.S. Federal corporate income tax rate is 21%, and Mini earns an after-tax rate of return on capital of 8%. Enter below the 2020 end-of-year balance in Mini's deferred tax asset and deferred tax liability balance sheet accounts.
If an amount is zero, enter "0". If required, round your answers to the nearest dollar.
2020
a. Deferred tax asset account balance $
b. Deferred tax liability account balance $
c. In time value of money terms, what has been the cost to Mini of the deferred tax deduction for bad debts? The present value factor at 8% is 0.9259.
Answer:
a. $10,311
b. $0
c. $9,546.95
Explanation:
a. Deferred tax asset account:
= Deferred tax asset 2019 + Deferred tax asset 2020
Deferred tax asset 2019 = Bad debt for book purposes * tax rate
= 196,400 * 21%
= $41,244
Deferred tax asset 2020 = Bad debt for tax purposes * tax rate
= 147,300 * 21%
= -$30,933
Deferred tax account balance = 41,244 + (- 30,933)
= $10,311
b. Deferred tax liability account = $0
From the given details there are no tax liabilities.
c. Cost to Mini;
= Deferred tax asset * Present value factor
= 10,311 * 0.9259
= $9,546.95
The amount of income tax payable in future years or subsequent periods in respect of taxable transitory differences is referred to as the deferred tax liability. To put it another way, deferred tax (DT) is a tax that is due in the future.
The answers for questions a, b, and c are $10,311, no tax liabilities ($0), and $ 9.546.95 respectively.
a. Computation of Deferred tax asset (DT) account:
[tex]= \text{DT of 2019} + \text {DT of 2020}\\\text{DT of 2019}= \text{ Bad debts for book purchases} \text{ x } \text{Tax rate}\\\text{DT of 2019}= 196,400 \text{ x } 0.21\\\text{DT of 2019}= 41,244\\\\\text{DT of 2020}= \text{ Bad debts for book purchases} \text{ x } \text{Tax rate}\\\text{DT of 2020}= 147,300 \text{ x } 0.21\\\text{DT of 2020}= 30,933\\\\\text{ DT balance}= 41,244 + (-30,933) \\\text{ DT balance}=10,311[/tex]
b. Deferred tax liability account = $0
There are no tax liabilities based on the information provided.
c. Computation of the cost to Mini;
DT = Deferred Asset Tax
PV = Present value factor
[tex]=\text{DT} \text{ x } \text{PV}\\\= 10,311 \text{ x } 0.9259\\\=9,546.95[/tex]
Therefore, the deferred tax deduction for bad debts is $9,546.95
For more information regarding deferred tax computations, refer to the link:
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Canova Corporation adopted the dollar-value LIFO retail method on January 1, 2021. On that date, the cost of the inventory on hand was $18,000 and its retail value was $24,000. Information for 2021 and 2022 is as follows: Ending Inventory at Retail Retail Price Index Cost-to-Retail Percentage Date 12/31/2021 $ 39,000 1.30 77 % 12/31/2022 $ 50,000 1.60 80 % Required: 1. What is the cost-to-retail percentage for the inventory on hand at 1/1/2021
Answer: 75%
Explanation:
Cost to retail = Cost price/ Retail price * 100
On 1/1/2021, Cost to Retail is;
= 18,000/24,000 * 100%
= 75%
Data related to the inventories of Costco Medical Supply are presented below: Surgical Surgical Rehab Rehab Equipment Supplies Equipment Supplies Selling price $ 260 $ 100 $ 340 $ 165 Cost 170 90 250 162 Costs to sell 30 15 25 10 In applying the lower of cost or net realizable value rule on an individual item basis, the inventory of surgical equipment would be valued at: (do not include $ in your answer)
Answer:
the inventory that should be valued is $170
Explanation:
The computation of the inventory of surgical equipment is shown below:
Costs $170
Net Realizable Value:
Selling price $260
Less: Costs to sell -$30 $230
Lower of cost or net realizable value $170
As we know that the inventory should be valued at cost or net realizable value whichever is lower
So, the inventory that should be valued is $170
Why does HOSA require students join through a local chapter instead of joining as individuals?
Answer:
A
Explanation:
on edge
Dukelow Corporation has two divisions: the Governmental Products Division and the Export Products Division. The Governmental Products Division's divisional segment margin is $41,300 and the Export Products Division's divisional segment margin is $93,700. The total amount of common fixed expenses not traceable to the individual divisions is $106,800. What is the company's net operating income (loss)?Brewer 8e Rechecks 2018-06-22a) $241,800b) $135,000c) $28,200d) $135,000
Answer:
c) $28,200
Explanation:
The computation of the net operating income is as follows
Total segment margin is
= $41,300 + $93,700
= $135,000
And, the common fixed expenses is $106,800
So, the net operating income is
= Total segment margin - common fixed expenses
= $135,000 - $106,800
= $28,200
Hence, the net operating income is $28,200
Therefore the correct option is c.
If a proposed expenditure of $80,000 for a fixed asset with a 4-year life has an annual expected net cash flow and net income of $32,000 and $12,000, respectively, the cash payback period is 2.5 years.
a. true
b. false
Answer: a. true
Explanation:
Cash payback period shows the amount of time it will take for cash inflows from an investment to pay off the investment.
Cash payback period = Investment/ Cash inflow
= 80,000/32,000
= 2.5 years
Statement is proven true.
its unit.
Q.No. 3 The bottom of the ship is made heavy, why?
Answer:
Ship to have a stable equilibrium.
Explanation:
The bottom of a ship is made heavy to keep the centre of gravity of ship below the centre of buoyancy so that the ship is in stable equilibrium.
Explanation:
the bottom of the ship is made heavy because to not made the ship sink in the ocean
The airline companies often change their flight prices over time. Assume Mary is planning her trip to New York City during the Christmas holiday. When she first checked the price in September, the ticket price was $300 round trip per person. However, when she checked the price again in early December, she noticed the price increased to $600 round trip per person for the same flight. This is an example of _______________.
Answer:
Third degree price discrimination
Explanation:
Price discrimination is when the same product is sold at different prices to customers in different markets
types of price discrimination
1. first degree price discrimination : here sellers charge each consumer at their willingness to pay in order to eliminate consumer surplus.
2. second degree price discrimination : here firms offer different prices depending on the quantity purchased. e.g. giving discounts for bulk purchases.
3, third degree price discrimination : firms charge different prices to different groups of customers. e.g. having a certain price for senior citizens, students
Dozier Company produced and sold 1,000 units during its first month of operations. It reported the following costs and expenses for the month:
Direct materials $69,000
Direct labor $35,000
Variable manufacturing overhead$15,000
Fixed manufacturing overhead 28,000
Total manufacturing overhead $43,000
Variable selling expense$12,000
Fixed selling expense 18,000
Total selling expense $30,000
Variable administrative expense$4,000
Fixed administrative expense 25,000
Total administrative expense $29,000
Required:
1. With respect to cost classification s for preparing financial state ment s:
a) What is the total product cost?
b) What is the total period cost?
2. With respect to cost classifications for assigning costs to cost objects:
a) What is total direct manufacturing cost ?
b) What is the total indirec t manu facturing cost?
3. With respect to cost classifications for manu facturers :
a) What is the total manufacturing cost
b) What is the total nonmanufacturing cost?
c) What is the total conversion cost and prime cost?
4. With respect to cost classification s for predicting cost behavior:
a) What is the total variable manu factur ing cost?
b) What is the total fixed cost for the company as a whole?
c) What is the variable cost per unit produced and sold?
5. With respect to cost classification s for decision making:
a) If Dozier had produced 1 ,00 I unit s instead of 1 ,000 units, how much incrementa l manufacturing cost would it have incurred to make the additional unit ?
Answer:
Total product cost
Direct materials $69,000
Direct labor $35,000
Variable manufacturing overhead $15,000
Fixed manufacturing overhead $28,000
Total Cost $43,000
Total period cost
Variable selling expense $12,000
Fixed selling expense $18,000
Variable administrative expense $4,000
Fixed administrative expense 25,000
Total Cost $59,000
Total direct manufacturing cost
Direct materials $69,000
Direct labor $35,000
Variable manufacturing overhead $15,000
Total Cost $119,000
Total indirect manufacturing cost
Fixed manufacturing overhead $28,000
Total Cost $28,000
Total manufacturing cost
Direct materials $69,000
Direct labor $35,000
Variable manufacturing overhead $15,000
Fixed manufacturing overhead $28,000
Total Cost $43,000
Total non-manufacturing cost
Variable selling expense $12,000
Fixed selling expense $18,000
Variable administrative expense $4,000
Fixed administrative expense $25,000
Total Cost $59,000
Total Conversion Cost
Direct labor $35,000
Variable manufacturing overhead $15,000
Total Cost $50,000
Total Prime Cost
Direct materials $69,000
Direct labor $35,000
Total Cost $104,000
Total variable manufacturing cost
Direct materials $69,000
Direct labor $35,000
Variable manufacturing overhead $15,000
Total Cost $119,000
Total fixed cost for the company as a whole
Fixed manufacturing overhead $28,000
Fixed selling expense $18,000
Fixed administrative expense $25,000
Total Cost $71,000
Variable cost per unit produced and sold
Direct materials $69,000
Direct labor $35,000
Variable manufacturing overhead $15,000
Variable selling expense $12,000
Variable administrative expense $4,000
Total Variable Cost $135,000
Unit Variable Cost = Total Variable Cost ÷ Number of Units
= $135,000 ÷ $1,000
= $135
Covered interest arbitrage involves both Select one: A. the purchase of a foreign asset and a forward contract in the market for foreign exchange. B. the purchase of a domestic asset and a spot contract in the market for foreign exchange. C. the sale of a foreign asset and the purchase of a foreign contract in the market for foreign exchange. D. the sale of domestic stocks and the purchase of foreign bonds. E. none of the above.
Answer:
A. the purchase of a foreign asset and a forward contract in the market for foreign exchange.
Explanation:
The covered interest arbitrage is the commonly form of arbitrage in which the investor used the forward contract against the risk of the exchange rate
In this, the norms are agreed and set by the investors to remove the future risk
Therefore as per the given situation, the first option is correct
hence, the same is to be considered
Thus, all the other options are wrong
Vital Silence Corp. has just issued a 30-year callable, convertible bond with a coupon rate of 6.4 percent and annual coupon payments. The bond has a conversion price of $93.40. The company's stock is selling for $28.60 per share. The owner of the bond will be forced to convert if the bond's conversion value is ever greater than or equal to $1,140. The required return on an otherwise identical nonconvertible bond is 7.4 percent. Assume a par value of $1,000.
a. What is the minimum value of the bond?
b. If the stock price were to grow by 10.8 percent per year forever, how long would it take for the bond's conversion value to exceed $1,140?
Answer:
a. $880.74
b. 13 years
Explanation:
a. Conversion ratio = Current Value of bond / Conversion price = 1,000 / 93.4 = 10.71
Conversion price of bond = 10.71 × 28.60 = $306.31
Coupon = Par value of bond * Coupon rate = $1,000 * 6.4% = $64
Present value of straight debt is calculated below:
Present Value = $64 × [1-(1+7.4%)^-30 / 7.4%] + [$1,000 / (1+7.4%)^30]
= $64*11.93 + $117.46
= $763.28 + $117.46
= $880.74 .
Therefore, the minimum value of bond is $880.74
b. Conversion ratio = 10.71
Current stock price = $28.6
Suppose number of year the stock will take to reach above $1,140 is t.
Conversion value = Current stock price * Conversion ratio*(1+10.8%)^t
$1,140 = $28.6 * 10.71 * (1.108)^t
(1.108)^t = 3.7218
t = 12.8145 year.
t = 13 years
What is the trial balance used?
a. It is a financial statment.
b. It doesn't contribute to the accounting cycle.
c. It records balance of a balance sheet.
d. It records balance of accounts.
Answer:
c
Explanation:
Please choose one of following answers that are in quote
What is the opportunity cost in this scenario?
Harry has been very busy at work for the past two weeks. He has been working weekends too. Finally, he is going to get a weekend off. "Originally, he planned to paint his apartment that weekend." "He also considered going fishing for the weekend." "But then his parents called and asked him to come for dinner because it has been a while since they have seen each other."
"Later on, his friend Theo informed him about a surprise birthday party for another friend." Theo plans to reserve a room at a restaurant for the celebration, with the cost to reserve the room split between Theo, Harry, and three other friends.
Now Harry is confused about what he should do over the weekend. He decides that, for him, the most important commitments are going over to his parent's house and attending his friend's birthday party. In the end, Harry decides to see his parents.
Answer:
it would be better to go the his parents house so it would be cheaper, probably around $10
Explanation:
Assume the country of Technologia invests in an online system that efficiently matches job-seekers with employers and significantly reduces the time required for job searches.
A. Which type of unemployment will Technologia's investment affect?
B. Will unemployment increase or decrease?
C. Given the change in unemployment from part b. what will happen to the natural rate of unemployment in Technologia? Explain.
D. Given your answer to part b. what will happen to real GDP in Technologia? Explain.
Answer:
Technologia's online system helps to increase the employment of the people in Technologia.
Explanation:
A. Technologia's investment in the online system to help the match the job seekers with the employers will greatly affect the frictional unemployment.
B. With the help of this online system, it will help to decrease the unemployment in Technologia.
C. The natural unemployment will reduce in Technologia as the natural unemployment includes the frictional unemployment as well as the structural unemployment. Here since the frictional unemployment will decrease, the natural unemployment also decreases.
D. The real gross domestic product or the GDP will increase. Te real GDP is the country's total goods and service produces. When unemployment reduces, the production of various goods and service will increases as now people can afford to buy those goods an services. Hence the real GDP increases.
The following information should be considered:
A. Technologia's investment in the online system to help the match the job seekers with the employers will greatly affect the frictional unemployment.
B. With the help of this online system, it will help to decrease the unemployment in Technologia. Also, the job search time is reduced and job matching is easy,
C. The natural unemployment will decrease in Technologia as the natural unemployment includes the frictional unemployment as well as the structural unemployment. Here since the frictional unemployment will decrease, the natural unemployment also decreases.
D. Real GDP should increase because more workers can be employed so production is increased.
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If you have done everything correctly, you might realize that stagflation creates a dilemma for the Fed. Why? Choose one or more: A. If the Fed wants to reduce unemployment, it must be willing to accept more inflation. B. If the Fed wants to reduce inflation, it must be willing to accept higher unemployment. C. If the Fed wants to reduce unemployment, it must be willing to accept less inflation. D. If the Fed wants to reduce inflation, it must be willing to accept lower unemployment.
Answer:
A. If the Fed wants to reduce unemployment, it must be willing to accept more inflation.
B. If the Fed wants to reduce inflation, it must be willing to accept higher unemployment.
Explanation:
Stagflation is a situation in which there is a shift of the supply curve to the left that results in a high inflation due to which there is a high unemployement. Now if the fed wants to reduce the inflation so the demand would decline due to which the unemployment rises
Therefore A and B are correct
And C and D are incorrect
Answer:
The Federal Reserve seeks to control inflation by influencing interest rates. When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down.
Explanation:
LaMount works for a company in downtown Chicago. The company encourages employees to use public transportation (to save the environment) by providing them with transit passes at a cost of $275 per month.
a. If LaMont receives one pass (worth $275) each month, how much of this benefit must he include in his gross income each year?
b. If the company provides each employee with $275 per month in parking benefits, how much of the parking benefit must LaMont include in his gross income each year?
Answer:
a. $60 per year
b. $60 per year
Explanation:
The IRS decide the limit for Employee Fringe Benefit every year. As per the Latest Statutory limit, we can generally exclude the value of Transportation benefits during 2020 from the Employee's wages up to $270 per month for combined commuter highway vehicle transportation and transit passes. In this case, since no year was mentioned in the question, it has been assumed as 2020.
a. The amount of transit pass benefit to be included in gross income each year is as follows:
Benefit included in gross income = Worth of pass - Slab rate
Benefit included in gross income = $275 - $270
Benefit included in gross income = $5 * 12 month
Benefit included in gross income = $60 per year
b. The amount of parking benefit that LaMont must include in his gross income each year is as follows
Parking benefit included in gross income = Parking benefit provided by the company - Slab rate
Parking benefit included in gross income = Worth of pass - Slab rate
Parking benefit included in gross income = $275 - $270
Parking benefit included in gross income = $5 * 12 month
Parking benefit included in gross income = $60 per year.
An all-equity firm is considering the following projects: Project Beta IRR W .63 9.4 % X .76 10.5 Y 1.29 14.0 Z 1.40 17.1 The T-bill rate is 5.1 percent, and the expected return on the market is 12.1 percent. a. Which projects have a higher/lower expected return than the firm’s 12.1 percent cost of capital? b. Which projects should be accepted? c. Which projects will be incorrectly accepted/rejected or correctly accepted/rejected if the firm's overall cost of capital were used as a hurdle rate?
Answer:
Project Beta IRR project's cost of equity
W .63 9.4% = 5.1% + (0.63 x 7%) = 9.51%
X .76 10.5% = 5.1% + (0.76 x 7%) = 10.42%
Y 1.29 14.0% = 5.1% + (1.29 x 7%) = 14.13%
Z 1.40 17.1% = 5.1% + (1.40 x 7%) = 14.9%
the company's cost of capital = 12%
a. Which projects have a higher/lower expected return than the firm’s 12.1 percent cost
of capital?
higher expected return ⇒ projects Y and Z lower expected return ⇒ projects W and Xb. Which projects should be accepted?
accepted ⇒ projects X and Z (their IRR is higher than their Re) rejected ⇒ projects W and Y (their IRR is lower than their Re)c. Which projects will be incorrectly accepted/rejected or correctly accepted/rejected if the firm's overall cost of capital were used as a hurdle rate?
if the company uses its cost of capital, then it would incorrectly reject project W and incorrectly accept project YOM, Inc. was organized on January 1, 2020. The firm was authorized to issue 1,000,000 shares of $2 par value common stock. During 2020, OM had the following transactions relating to stockholders' equity: Issued 20,000 shares of common stock at $7 per share. Issued 40,000 shares of common stock at $8 per share. Reported a net income of $100,000. Paid dividends of $50,000. What is the total amount recorded in the Common Stock account at the end of 2020
Answer:
$120,000
Explanation:
It is important to identify whether the Common Stock have a stated Par Value or No Par Value from the Authorized Capital. In this case the Common Stock are stated at a $2 par value. With Par Value Stated Shares, any price paid in excess of the Par Value is Accounted for in a reserve called Paid in Excess of Par or Stock Premium.
Transaction 1
Cash $140,000 (debit)
Common Stock $40,000 (credit)
Paid In Excess of Par $100,000 (credit)
Transaction 2
Cash $320,000 (debit)
Common Stock $80,000 (credit)
Paid In Excess of Par $240,000 (credit)
Therefore,
Total Common Stock at the end of 2020 will be $120,000 ($40,000 + $80,000).
Suppose the Federal Reserve (the Fed) announces that it is raising its target interest rate by 50 basis points, or 0.50%. It would achieve this by _____________________: The sequence of events that results in a new equilibrium interest rate, after the Fed makes the change you selected, may be described as follows: Because there is ____________ in the financial system the quantity of money demanded __________.
Answer: decreasing money supply; less; decreases.
Explanation:
When the Federal Reserve wants to increase its target interest rate by 50 basis points, this can be done if the Fed reduces the money supply that is in circulation.
This will in turn, lead to a new equilibrium rate and there will also be a decrease in money in the financial system as there'll be a reduction in the quantity of money demanded.
Onofkp411 Corporation has a time contraint on one of its special machines. The company makes three products that use this machine. Data concerning those products appear below: Magnifico Bellissimo Lovely
Selling price per unit $ 335.18 $ 228.46 $ 199.21
Variable cost per unit $ 259.26 $ 173.08 $ 159.61
Minutes on the constraint 7.50 4.30 5.50
Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable product Q) Up to how much should Onofkp 411 be willing to pay to acquire more of the constrained resource (Round your intermediate calculations to 2 decimal places.)
a) $75.80 per minute
b) $14.17 per unit
c) $39.48 per unit
d) $774 per minute
Answer: $7.20 per minute
Explanation:
Find out the profitability of each product as Contribution Margin per minute.
Magnifico
Contribution margin per minute = (Selling price - Variable cost) / minutes on the constraint
= (335.18 - 259.26) / 7.5
= $10.12 per minute
Bellissimo
= (228.46 - 173.08) / 4.3
= $12.88 per minute
Lovely
= (199.21 - 159.61) / 5.5
= $7.20 per minute
Their least profitable product is $7.20 per minute.
The machine does not have sufficient time to satisfy the needs of Lovely so they will have to pay more to acquire more of the resource but they should not pay anything more than $7.20 per minute as this is their contribution margin for the product. and anything more would result in a loss.
Options are most probably for another variant of the question.
The stock of Stock M has a beta of 1.48 and an expected return of 12.50 percent. The risk-free rate of return is 5 percent. What is the expected return on the market?
Answer:
10.07%
Explanation:
Calculation for the Expected return
Using this formula
Expected return =(Expected return-Risk-free rate)/Beta+Risk-free rate
Let plug in the formula
Expected return=(0.125 –0.05)/1.48 + 0.05
Expected return=0.075/1.48+0.05
Expected return=0.05068+0.05
Expected return=0.1007*100
Expected return=10.07%
Therefore the expected return on the market will be 10.07%