Answer:
($66,000)
Explanation:
Financing activities: It measures those transactions which are related to the long term liabilities and stockholder equity. The issuance of shares is an inflow of cash whereas redemption, the retirement of bond and dividend paid is a cash outflow in which the cash balance is reduced.
Since in the given question, the bond is retired for $66,000 cash which represents the cash outflow for $66,000 only as it includes the transaction of cash
Spade Agency separates its accounts receivable into three age groups for purposes of estimating the percentage of uncollectible accounts. In addition, the balance of Allowance for Uncollectible Accounts before adjustment is $6,500 (credit).Accounts not yet due = $36,000; estimated uncollectible = 4%.Accounts 1–60 days past due = $21,000; estimated uncollectible = 25%.Accounts more than 60 days past due = $16,000; estimated uncollectible = 50%.Required:a. Compute the total estimated un-collectible accounts.b. Record the year-end adjustment for estmated un-collectable accounts.
Answer:
a. total estimated uncollectible accounts is $21,190
b. to entry the adjustment, we have to debit bad debt expense and credit allowance for doubtful accounts in the amount of $14,690
Explanation:
a. to compute the estimated uncollectible accounts, we have to multiply the specific % to the accounts receivable plus the beginning balance;
•Accounts not due
$36,000 x 4% = $1,440
•Accounts 1 - 60 days past due
$21,000 x 25% = $5,250
•Accounts more than 60 days past due
$16,000 x 50% = $8,000
So the total uncollectible accounts would be; $6,500 + $1,440 + $5,250 + $8,000 = $21,190
b. to record the year-end adjustment of the uncollectible accounts, we have to debit bad debt expense and credit allowance for doubtful accounts in the amount of $14,690. This figure is the uncollectible amount we computed earlier based on the aging.
Andre Candess manages an office supply store. One product in the store is computer paper. Andre knows that 10,000 boxes will be sold this year at a constant rate throughout the year. There are 250 working days per year and the lead-time is 3 days. The cost of placing an order is $30, while the holding cost is $15 per box per year. How many units should Andre order each time to minimize his annual inventory cost?
Answer:
Annual demand (D) = 10,000 boxes
Ordering cost (Co) = $30
Holding cost (H) = $15
EOQ = √2DCo
H
EOQ = √2 x 10,000 x $30
$15
EOQ = 200 units
Explanation:
EOQ is a function of square root of 2 multiplied by annual demand and ordering cost per order divided by holding cost per item per annum. EOQ is the quantity of stock that minimises the total inventory cost. In this case, EOQ equals 200 units
Andre should order approximately 632 boxes each time to minimize his annual inventory cost.
Explanation:To minimize his annual inventory cost, Andre should order a quantity that balances the cost of placing an order and the holding cost. The Economic Order Quantity (EOQ) formula can be used to calculate the optimal order quantity. EOQ formula is:
EOQ = √(2DS/H)
Where:
D is the annual demand (10,000 boxes)S is the cost of placing an order ($30)H is the holding cost per box per year ($15)Plugging in the values:
EOQ = √(2 x 10,000 * $30 / $15) = √400,000 = 632.45
Therefore, Andre should order approximately 632 boxes each time to minimize his annual inventory cost.
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Atlas Company plans to sell 145,000 units in November and 190,000 units in December. Atlas's policy is that 15% of the following month's sales must be in ending inventory. On November 1, there were 21,750 units in inventory. It takes 35 minutes of direct labor time to make one unit. Direct labor wages average $19 per hour. Variable overhead is applied at the rate of $7 per direct labor hour. Fixed overhead is budgeted at $60,500 per month. What is the budgeted production in units for November?
a. 121,000 units
b. 151,750 units
c. 100,000 units
d. 125,600 units
e. 140,000 units
Answer:
Option (b) is correct.
Explanation:
Given that,
Sales = 145,000 units
Desired ending inventory = 28,500 units
Beginning inventory = 21,750
Budgeted production in units for November:
= Sales + desired ending inventory - Beginning inventory
= 145,000 units + (190,000 × 15%) - 21,750
= 145,000 units + 28,500 - 21,750
= 151,750 units
At the beginning of 2019, Robotics Inc. acquired a manufacturing facility for $13.5 million. $10.5 million of the purchase price was allocated to the building. Depreciation for 2019 and 2020 was calculated using the straight-line method, a 25-year useful life, and a $2.5 million residual value. In 2021, the estimates of useful life and residual value were changed to 20 total years and $650,000, respectively. What is depreciation on the building for 2021
Answer:
$511,667
Explanation:
The computation of the depreciation expense for 2019 and 2020 is shown below:
= (Purchase price - residual value) ÷ (useful life)
= ($10,500,000 - $2,500,000) ÷ (25 years)
= ($8,000,000) ÷ (25 years)
= $320,000
The depreciation in this method is the same for the rest of the useful life
Now the book value for 2021 would be
= Purchase price - depreciation for 2 years
= $10,500,000 - $320,000 × 2
= $9,860,000
Now the depreciation for 2021 would be
= ($9,860,000 - $650,000) ÷ 18 years
= $511,667
The depreciation on the building for 2021, following the change in estimates of useful life and residual value, would be $513,333.33. This is calculated using the book value at the beginning of 2021, subtracting the new residual value, and dividing by the remaining useful life.
Explanation:To calculate the depreciation on the building for 2021 under the straight-line method, we need to consider the revised useful life and residual value. Initially, Robotics Inc. had a depreciation expense of ($10.5 million - $2.5 million) / 25 years = $320,000 per year. However, in 2021, the estimates for useful life and residual value were changed to 20 years and $650,000 respectively.
We need to determine how much of the building's cost has already been depreciated in 2019 and 2020, which is $320,000 * 2 years = $640,000. So, the book value at the beginning of 2021 is $10.5 million - $640,000 = $9.86 million.
Then to compute depreciation for 2021, we subtract the new residual value from the book value, and divide by the remaining useful life. Our new annual depreciation becomes: ($9.86 million - $650,000) / (20 years - 2 years) = $513,333.33.
So, the depreciation on the building for 2021 would be $513,333.33.
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Metaline Corp. uses the weighted average method for inventory costs and had the following information available for the year. Equivalent units of production for the year are:
Beginning inventory of Work in Process (40% complete, $1,100) 200 units
Ending inventory of Work in Process (80% complete) 400 units
Total units started during the year 3,200 units
A. 3,200 units.
B. 3,320 units.
C. 3,240 units.
D. 3,520 units.
E. 3,800 units.
Answer:
Equivalent units of production for the year will be 3320
So option (b) will be correct answer
Explanation:
We have given beginning inventory = 200 units
Total unit started during the year = 3200 units
Ending inventory = 400 units
Calculation of units transferred during the year = Beginning inventory + Total units started during the year - Ending inventory
= 200 + 3200 - 400
= 3000 units
Calculation of Equivalent units of production for the year = Unit transferred + closing inventory × percentage of completion = 3000 + 0.8 ×400 = 3000 + 320 = 3320 units
So option (b) will be correct answer
What type of good is often provided by the government because it is hard to get people to voluntarily contribute their fair share of the expense?
a. private goodsb. club goodsc. common-resource goodsd. public goodse. government goods
Answer:
Option (D) is the right answer.
Explanation:
According to the scenario, the most appropriate answer is option (D) because public goods are given by the government and It can be used by everyone at a time and without any cost.
While the other options are incorrect because of the following reasons:
Private goods are not given by the government. Club goods can be given by the government but at a cost. Common resource goods are of government and can not be used by everyone. Government goods can be used by the government only.You have entered into a long forward contract on a dividend-paying stock some time ago, and this will expire in six months. It has a delivery price of $40 and the current stock price is $35. The stock provides a fixed dividend yield of 8% with semi-annual compounding. If the risk-free rate is 12% per annum with continuous compounding, what is the value of this long forward contract?
A. $6.72
B. -$4.02
C. $4.02
D. -$6.72
Answer:
correct option is B. -$4.02
Explanation:
given data
delivery price = $40
current stock price = $35
fixed dividend yield = 8% = 0.08
risk free rate = 12% = 0.12
solution
as we know that forward contract is a agreement that is made between 2 parties ( seller or buyer ) asset in future at today fix price in specified time,
we get here long forward contract value that is express as
long forward contract = [tex]\frac{stock\ price}{(1+dividend\ rate)^t} -\frac{forward\ rate}{e^{r*t}}[/tex] ...................1
put here value we get
long forward contract = [tex]\frac{35}{(1+0.08)^{6/12}} -\frac{40}{e^{0.12*6/12}}[/tex]
solve it we get
long forward contract = -$4.02
so correct option is B. -$4.02
Financial statement analysis involves all of the following except:
Multiple Choice
The application of analytical tools to general-purpose financial statements and related data for making business decisions.
Transforming accounting data into useful information for decision-making.
Helping users to make better decisions.
Helping to reduce uncertainty in decision-making.
Assuring that the company will be more profitable in the future.
Answer:
The correct answer is does not assure the company that it will be more profitable in the future.
Explanation:
Financial statements is the one of the most important statements for the company which is prepared or made by the management of the company, it represents the financial position and the performance for a particular period.
It involves the income statements, statement of cash flows, balance sheet and statement of owner's equity.
It analysis the profit, transform the data so that can be used in decision making. But does not assure the company that it will be more profitable in the future.
Financial statement analysis involves using analytical tools to transform accounting data into useful information for decision-making.
Explanation:Financial statement analysis is the process of evaluating a company's financial statements, such as the balance sheet, income statement, and cash flow statement, to assess its financial health, and performance, and make investment or business decisions. Financial statement analysis involves the application of analytical tools to general-purpose financial statements and related data for making business decisions.
It transforms accounting data into useful information to help users make better decisions and reduce uncertainty in decision-making. While financial statement analysis helps users gain insights into a company's financial performance, it does not assure that the company will be more profitable in the future as it depends on various factors.
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Sheridan Company acquired a plant asset at the beginning of Year 1. The asset has an estimated service life of 5 years. An employee has prepared depreciation schedules for this asset using three different methods to compare the results of using one method with the results of using other methods. You are to assume that the following schedules have been correctly prepared for this asset using (1) the straight-line method, (2) the sum-of-the-years'-digits method, and (3) the double-declining-balance method.
Year Straight-Line Sum-of-the- Years'-Digits Double-Declining- Balance
1 $10,260 $17,100 $22,800
2 10,260 13,680 13,680
3 10,260 10,260 8,208
4 10,260 6,840 4,925
5 10,260 3,420 1,687
Total $51,300 $51,300 $51,300
Answer the following questions.Part A: What is the cost of the asset being depreciated? Part B: What amount, if any, was used in the depreciation calculations for the salvage value for this asset?
Answer:
A. The cost of asset being depreciated is $57,000
B.The amount of salvage value is $5,700
Explanation:
Among the above-mentioned methods of depreciation, the only method that never consider salvage value on its computation of depreciation expense is the double declining method. So let’s use this method to work back the exact amount depreciable amount of an asset.
Formula : 100% / life of an asset x 2
100% / 5 x 2 = 40%
Y1 = $22,800/40 = 57,000
so to check if the amount is correct, let’s do the computation of 5-year depreciation.
Y1 57,000 x 40% = 22,800 (same as the given data)
Y2 (57,000 - 22,800) x 40% =13,680
Y3 (57,000 - 22,800 - 13,680) x 40% = 8,208
Y4 (57,000-22,800 - 13,680 - 8,208) x 40% = 4,925
Y5 (57,000 -22,800 - 13,680 - 8,208 - 4,925) x 40% = 1,687* (adjusted based on the depreciable amount)
B. To compute the salvage value, we simply deduct the total depreciation from the cost of an asset.
57,000 - 51,300 = 5,700
To check:
(57,000 - 5,700) / 5 years = 10,260
Do you think it is possible for an outsider to accurately discern about the underlying cultural values of an organization by analyzing symbols, ceremonies, dress, or other observable aspects of culture in comparison to an insider with several years of work experience? Select a percentage (e.g., 10%, 70%, etc.) and explain your reasoning.
Answer:
From the given variables, an outsider might be able to understand roughly 35% of the organization's culture.
Explanation:
Culture is ultimately a state of mind, a mode of perception and a collective conscious.
Symbols, Ceremonies, dress and other observable aspects of culture reflects a certain degree of the internal culture, yet to understand it full, it is vital to observe the human behavior and the inter relationships within the organization.
Moreover, the power distance between ranks, distribution of authority and responsibilities, reward systems, means of communication and organizational goals also influences the culture within a company. These aspects are difficult for an outsider to see as they do not stay inside and get exposed to the internal environment of the organization.
Final answer:
Outsiders can discern about 60% of underlying cultural values through observable aspects compared to insiders.
Explanation:
Cultural Understanding and Analysis:
When analyzing an organization's cultural values using symbols, ceremonies, dress, or other observable aspects, an outsider may be able to discern about 60% of the underlying cultural values compared to an insider. This is because while observable aspects provide valuable insights, the deeper values and assumptions guiding the culture may require insider knowledge to fully grasp.
Example: An outsider may notice that employees dress casually, indicating a more relaxed culture, but an insider with work experience may understand that work-life balance and family values are paramount, influencing this dress code.
Heels, a shoe manufacturer, is evaluating the costs and benefits of new equipment that would custom fit each pair of athletic shoes. The customer would have his or her foot scanned by digital computer equipment; this information would be used to cut the raw materials to provide the customer a perfect fit. The new equipment costs $117,000 and is expected to generate an additional $45,000 in cash flows for five years. A bank will make a $117,000 loan to the company at a 12% interest rate for this equipment’s purchase. Compute the recovery time for both the payback period and break-even time. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
Answer:
* Payback period: 2.6 years;
* Break-even time: 3.3 years.
Explanation:
Please find the below for detailed explanation and calculation:
* Payback period calculation:
Payback period = Initial investment outlay/ annual additional cash flow = 117,000/45,000 = 2.6 yeas;
* Break-even time calculation:
We have the net present value of the project after 3 years is:
-117,000 + (45,000/12%) x ( 1 + 1.12^-3) = $(8,917.6)
Present value of year 4 additional cash flow = 45,000 / 1.12^4 = 28,598
=> Break even time ( years) = 3 + (8,917.6/28,598) = 3.3 years.
Final answer:
The payback period is approximately 2.6 years based on simple division of cost by annual cash flow, without accounting for the time value of money. The break-even time would require calculating the present value of the cash inflows at a 12% discount rate, which cannot be accurately done without the PVA table values.
Explanation:
To compute the recovery time for both the payback period and break-even time, we first need to understand the costs and additional cash flows associated with the new equipment by Heels shoe manufacturer. The equipment costs $117,000 and will generate an additional $45,000 in cash flows each year for five years. Given that the interest rate for the loan to purchase this equipment is 12%, this will impact the calculations related to the present value of future cash flows.
The payback period is the time required for the cash inflows from an investment to repay the initial capital outlay. In this case, without factoring in interest, the payback period would be the equipment cost divided by the annual cash flow (i.e., $117,000 / $45,000), which is approximately 2.6 years. However, the payback period does not consider the value of money over time.
On the other hand, the break-even time would be calculated using the present value of the cash inflows to find when the equipment generates enough cash to cover the $117,000 at a 12% discount rate. This would involve using the present value annuity (PVA) factor from the tables provided. Unfortunately, without the actual PVA table values, we cannot provide a precise figure for the break-even time in this answer.
You want to buy a car, and a local bank will lend you $25,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 10% with interest paid monthly. What will be the monthly loan payment? What will be the loan's EAR? Do not round intermediate calculations. Round your answer for the monthly loan payment to the nearest cent and for EAR to two decimal places.
Answer:
Monthy payment will be of $536.99. The loan's EAR is 8.72%.
Explanation:
To solve this exercise, you first has to convert the nominal rate to real rate with this formula: i=(1+r/m)^m−1
i=(1+0.1/12)^12−1
i=0.104713
I=i×100=10.4713%
To calculate the loan monthly payment, you need to calcualte the monthy rate (10.41/12)=8.72
With this, yu calculate the discount factor D, using the number of periodic payments (60) and the rate:
D=((1+r)^n-1)/(r*[(1+r)^n]
D=(((1+0.008726)^60)-1)/(0.008726*(1+0.008726)^60)=46.56
Finally, yo calculate the loan payment by: A/D=25,000/46.56=536.99
The monthly loan payment for a $25,000 loan over 5 years at a nominal interest rate of 10% compounded monthly is approximately $531.18, and the loan's Effective Annual Rate (EAR) is approximately 10.47%.
To determine your monthly loan payment for a $25,000 loan over 5 years with a 10% nominal interest rate paid monthly, we need to use the formula for fully amortizing loans:
M = P * [i(1+i)ⁿ] / [(1+i)ⁿ⁻¹
Where:
M = monthly payment
P = principal amount ($25,000)
i = monthly interest rate (10% nominal annual rate / 12 months = 0.1/12)
n = total number of payments (5 years * 12 months/year = 60)
Plugging in the numbers:
M = $25,000 * [0.008333(1+0.008333)⁶⁰ / [(1+0.008333)⁶⁰⁻¹
After calculating, you get M ≈ $531.18.
To find the loan's Effective Annual Rate (EAR), we use the formula for EAR when interest is compounded monthly:
EAR = (1 + i)ⁿ⁻¹
Plugging in the values:
EAR = (1 + 0.008333)¹²⁻¹
EAR ≈ 0.1047 or 10.47% when rounded to two decimal places.
A company has the following transactions during the year related to stockholders’ equity.
February 1 Issues 5,600 shares of no-par common stock for $15 per share.
May 15 Issues 400 shares of $10 par value, 10.5% preferred stock for $12 per share.
October 1 Declares a cash dividend of $1.05 per share to all stockholders of record (both common and preferred) on October 15.
October 15 Date of record.
October 31 Pays the cash dividend declared on October 1.
Required:
1. Record each of these transactions.
Answer:
a- Cash/bank Dr $84000
common stock Cr $84000
b- Cash/bank Dr $4800
Preferred stock Cr $4000
paid-in capital Cr $800.
c- Retained earnings Dr $6300 ($1.05×6000)
Dividend Payable Cr $6300
d- Dividend Payable Dr $6300
Cash/Bank Cr $6300
Explanation:
A- Common stock with no par value are stock issued without discount or premium so the total amount received is debited to cash/bank account and credited to common/equity stock account. The entry is as follows:
Cash/bank $84000
common stock $84000
B- The issuance of preferred stock at a premium results in an entry for paid in capital which is the excess of par value. The entry is as follows;
Cash/bank $4800
Preferred stock $4000
paid-in capital $800.
C- Once a dividend is declared, the company becomes liable to pay which creates a liability until it's settled/paid off to shareholders. The entry is:
Retained earnings $6300 ($1.05×6000)
Dividend Payable $6300
D- Once we settle Payment of dividend we decrease our liability and decrease our cash/bank depending upon mode of payment. The entry is:
Dividend Payable $6300
Cash/Bank $6300
Answer:
1 February
Dr Cash 84,000
Cr Common shares 84,000
(to record the issuance of 5,600 common share at $15 per share)
May 15th
Dr Cash 4,800
Cr Preferred shares 4,000
Cr Paid-in capital - preferred shares 800
(to record issuance of 400 preferred shares at with par value at $10 and issuing price at $12)
October 1st
Dr Retained Earnings 6,300
Cr Dividend Payable - Common and Preferred shares 6,300
(to record the dividend declaration paid to 6,000 preferred and common stocks outstanding).
Oct 15: No entries needed
October 31st
Dr Dividend Payable - Common and Preferred shares 6,300
Cr Cash 6,300
(to record cash dividend payment)
Explanation:
All entries has the explanation part below. Calculations are shown as below:
1 Feb: Because the stock has no par, Common stock account is recorded as much as the actual cash receipt: 5,600 x 15 = $84,000
May 15: Cash receipt is 400 x 12 = 4,800. Preferred shares account is credited at No of shares issued x par-value =400 x 10 =$4,000. The surplus of $800 due to issuing price is higher than par is credited into Paid-in capital account.
Oct 1st: Dividend payment obligations is calculated as 1.05 x shares outstanding = 1.05 x (5,600 + 400) = $6,300.
A sporting goods store purchased $7,600 of ski boots in October. The store had $3,600 of ski boots in inventory at the beginning of October, and expects to have $2,600 of ski boots in inventory at the end of October to cover part of anticipated November sales. What is the budgeted cost of goods sold for October?
a. $7,600.
b. $8,600.
c. $11,200.
d. $10,200.
e. $6,200.
Answer:
The budgeted cost of goods sold for October is b. $8,600
Explanation:
The budgeted cost of goods sold for October = The amount of goods sold in October = Inventory at the beginning of October + The amount of goods purchased in October - Inventory at the end of October
The store had $3,600 of ski boots in inventory at the beginning of October, and expects to have $2,600 of ski boots in inventory at the end of October. The store purchased $7,600 of ski boots in October.
The budgeted cost of goods sold for October = $3,600 + $7,600 - $2,600 = $8,600
Which of the following categories in the portfolio matrix is a market leader and growing fast?
a.Star
b.Meteor
c.Cash cow
d.Shiner
e.Top dog
Answer:
It is Star (B)
Explanation:
Option (a) True. Star is a product with high relative market share in a high growing market . This product is full of potential but require more investment and spending in the areas of advertising,innovation and market research in order to maintain its market leadership position. Hence, it might be cash neutral at this stage.
In the long-run, it will eventually turns to cash cow in the portfolio if we can sustain its position.
Option(b) Meteor. False. This does not exist in product portfolio matrix.
Option (c) Cash cow. False.
This product has a large relative market share in a stagnating (mature) market, profits and cash flows are expected to be high. Because of the lower growth rate, investments needed should also be low.
Hence, they typically generate cash in excess of the amount of cash needed to maintain the business and this ‘excess cash’ is supposed to be ‘milked’ from the Cash Cow for investments in other business units (Stars and Question Marks). Cash Cows ultimately bring balance and stability to a portfolio.
Option (d) Shiner. False .It does not exist
Option (e) Top dog. It is a product with low relative market share in a stagnant market.
Engineer Brown has been engaged in providing consulting engineering services for a number of years as a sole proprietor. Because his practice was growing, he recently hired another engineer and decided to commence offering professional services under the name of Brown and Associates. In order to comply with the rules he must:
O Obtain a new engineering seal.
O Notify the Board office of the name change.
O Obtain a Certificate of Authorization.
O No action by Engineer Brown is necessary.
Answer:
Engineer Brown has been engaged in providing consulting engineering services for a number of years as a sole proprietor. Because his practice was growing, he recently hired another engineer and decided to commence offering professional services under the name of Brown and Associates. In order to comply with the rules he must
Notify the Board office of the name change
Explanation:
Since it is the same company but just with change of name changes, notification to the company he render services for is only needed to avoid confusion about the authenticity of the company
Answer:
Obtain a Certificate of Authorization
Explanation:
Suppose the S&P 500 Index has an average return of 11.2% with a standard deviation of 23.7%, and the average return on Wells Fargo stock is 16.3% with a standard deviation of 42.3%. What is the beta for Wells Fargo is the correlation coefficient between Wells Fargo stock return and the S&P 500 Index return is 0.82?
Answer:
Beta = 1.46
Explanation:
Firstly, we need to calculate covariance of S&P 500 return and Well Fargo stock return, using below formula:
Correlation coefficient between Wells Fargo stock return and the S&P 500 Index return = Covariance of S&P 500 return and Well Fargo stock return/(Standard deviation of S&P 500 return x Standard deviation of Well Fargo stock return), or
0.82 = Covariance of S&P 500 return and Well Fargo stock return/(0.237 x 0.423). Solve the equation we get Covariance of S&P 500 return and Well Fargo stock return = 0.082.
Secondly, we calculate beta of S&P 500 return and Well Fargo stock return, using below formula:
Beta = Covariance of S&P 500 return and Well Fargo stock return/Variance of S&P 500 return
= 0.082/(0.237)^2 = 1.46
Final answer:
Using the provided statistics, the beta for Wells Fargo, with a correlation coefficient to the S&P 500 of 0.82, is calculated to be 1.44, indicating it is more volatile than the market.
Explanation:
The beta for Wells Fargo, given the correlation coefficient between Wells Fargo stock return and the S&P 500 Index return is 0.82 can be calculated using the formula β = (ρ × σ_{stock}) / σ_{market}). In this case, β represents the stock's sensitivity to market risk, ρ is the correlation coefficient between the stock and the market returns, σ_{stock} is the standard deviation of the stock's returns, and σ_{market} is the standard deviation of the market returns. By plugging in the values for Wells Fargo (σ_{stock} = 42.3%) and the S&P 500 (σ_{market} = 23.7%, ρ = 0.82), we can calculate Wells Fargo's beta:
β = (0.82 × 42.3%) / 23.7% = 1.44
Therefore, the beta for Wells Fargo is 1.44, indicating that it is more volatile than the market.
Lopez Information Systems management is planning on issuing 10-year bonds at a yield to matu-rity of 8.125 percent. Assume coupon payments will be made semiannually. Management is currentlydeciding between issuing a 8 percent coupon bond or a 8.5 percent coupon bond. Lopez needs to raise$1 million.(a.)What will the price of the 8 percent coupon bond be?
Answer:
Coupon (R) = 8% x $1,000 = $80
No of years to maturity = 10 years
Yield to maturity (Kd) = 8.125% = 0.08125
Po = R/2(1-(1+Kd/2)-n)/kd/2 + FV/ (1+Kd/2)n
Po = $80/2(1-(1+0.08125/2)-10 + $1,000/(1 + 0.08125)10
0.08125/2
Po = $40(1-(1+0.040625)-10 + $1,000/(1+0.040625)10
0.040625
Po = $40(8.0857) + $671.52
Po = $994.95 = $995
Explanation:
The current market price of a bond equals the present value of the semi-annual coupon and the present value of the face value. There is need to discount the coupon at the annuity factor of 8,125% for 10 years in order to obtain the present value of the coupon. We also need to discount the face value at 8,125% for 10 years to obtain the present value of the face value. The summation of the present value of coupon and the present value of face value gives the current market price of the bond.
Libby Company purchased equipment by paying $6,700 cash on the purchase date and agreed to pay $6,700 every six months during the next four years. The first payment is due six months after the purchase date. Libby's incremental borrowing rate is 6%. The equipment reported on the balance sheet as of the purchase date is closest to _________?
Answer:
The answer is $53,732.
Explanation:
The value of the equipment reported on Libby Company's balance sheet is equal to:
Cash payment at purchase + Present value of 8 equal semiannual payment, $6,700 each discounted at 3% ( because semiannual payment is made for 4 years so we have 2 x4 = 8 payments; and annual borrowing rate is 6% so we have discount rate = 6% /2 = 3%).
with:
Cash payment at purchase = $6,700;
Present value of 8 equal semiannual payment, $6,700 each discounted at 3% = (6,700/3%) x ( 1 - 1.03^(-8) ) = $47,032 ( that is, apply the formula to find present value of annuity).
we have:
The value of the equipment reported on Libby Company's balance sheet = 6,700 + 47,032 = $53,732.
From the graphs, it is evident that the United States imports about 50% more in – than it exports, but exports about 50% more in – than it imports. It is also evident, from a comparison of the vertical scales, that the United States imports almost – as much in goods as in services and that it exports a little over – as much in goods as in services.
The U.S. imports about 50% more textiles and apparel than it exports and exports more aircrafts than it imports. It mainly imports goods rather than services and records a service surplus. The U.S. experiences a trade deficit, influenced by both intra-industry trade and the theory of comparative advantage.
From the provided information, we can infer several aspects of United States trade. Firstly, it is evident that the U.S. imports about 50% more textiles and apparel than it exports. Contrarily, for goods like aircraft, the U.S. actually exports about 50% more than it imports. When considering trade in goods and services, it is apparent that the U.S. imports nearly twice as much in goods as in services and exports a little over twice as much in goods as in services.
The theory of comparative advantage explains why the U.S. engages in substantial intra-industry trade, where it produces and trades goods within the same industry, as is the case with the automotive industry. For example, in 2021, the U.S. exported $131 billion worth of autos and imported $317 billion worth of autos. Additionally, the U.S. recorded a service surplus, exporting more services than it imports from the rest of the world, with over $144 billion in 2008.
IE 11-2 ... PPF Model – If this economy is presently positioned at Point S, then two of the immediate Costs of the Inflation are _______________________ . With the corresponding Business Cycle close to Area "y", there is a major Risk in this economy of moving into _______________ .
Answer:
Instability and Insecurity.
Stagflation (Accelerating Inflation)
Explanation:
Instability/Insecurity is an economic system whereby the rate of inflation and rate of economic growth are volatile. This usually occur when there is a considerably high unemployment in the system. Furthermore, stagflation (also known as accelerating inflation) is a condition where there is a constant increase in inflation rate and unemployment rate.
Consider brand names and advertising, and then choose the correct statement.
A. Suppliers of advertising face two interdependent supply curves.
B. Firms that produce advertising trade in a "two-sided market".
C. The advertising market produces the efficient quantity of advertising and brand names.
D. Brand names give producers an incentive to create below-standard products after customers become loyal.
Answer:
B. Firms that produce advertising trade in a "two-sided market".
Explanation:
It is a business model for economic exchange between two distinct user groups.
ossdale Co. stock currently sells for $72.65 per share and has a beta of 1.21. The market risk premium is 7.20 percent and the risk-free rate is 2.94 percent annually. The company just paid a dividend of $4.25 per share, which it has pledged to increase at an annual rate of 3.55 percent indefinitely. What is your best estimate of the company's cost of equity?
Answer:
10.63%
Explanation:
(1) Current share price = $72.65
current dividend = $4.25
Growth rate = 3.55%
Cost of equity:
= {[Current dividend (1 + Growth rate)] ÷ Price} + Growth rate
= {[$4.25(1 + 3.55%)] ÷ $72.65} + 3.55%
= 9.607639%
(2) Risk free rate = 2.94%
Market risk premium = 7.20%
Beta = 1.21
Cost of equity:
= Risk free rate + (Beta × Market risk premium)
= 2.94% + (1.21 × 7.20%)
= 11.65200%
Average cost of equity = (9.607639% + 11.65200%) ÷ 2
= 10.62982%
Therefore, the best estimate of the company's cost of equity is 10.63%.
Shunt Technology will spend $800,000 on a piece of equipment that will manufacture fine wire for the electronics industries. The shipping and installation charges will be $240,000 and net working capital will increase $48,000.The equipment will replace an existing machine that has a salvage value of $75,000 and a book value of $125,000. If Shunt has a current marginal tax rate of 34 percent, what is the net investment
Answer:
$1,180,000
Explanation:
The net initial investment will include the following components:
1. Fixed capital investment = Purchase cost of the equiment = $800,000 + $240,000 = $1,040,000
2. Increase in working capital of $48,000
3. Sales proceeds of existing machine of $75,000
4. Tax on gain/loss of sales on existing machine = (75,000 - 125,000) x 34% = $- 17,000
So, total net initial investment is $1,040,000 + $48,000 + $75,000 - (-$17,000) = $1,180,000
Final answer:
The net investment for Shunt Technology's new equipment is calculated by adding the initial cost of equipment, shipping and installation, and increase in net working capital, then subtracting the salvage value of the old machine and adding the tax savings due to the loss on disposal. The net investment comes to $1,030,000.
Explanation:
To calculate the net investment for Shunt Technology's new equipment, we consider the initial outlay plus any additional costs and adjustments for working capital, taxes from equipment disposal, and salvage value. Here is the breakdown:
Initial cost of equipment: $800,000Shipping and installation: $240,000Net working capital increase: $48,000Total initial outlay: $800,000 + $240,000 + $48,000 = $1,088,000Salvage value of old machine: $75,000Book value of old machine: $125,000Loss on disposal of old machine (book value - salvage value): $125,000 - $75,000 = $50,000Tax on disposal of old machine (loss on disposal × tax rate): $50,000 × 34% = $17,000Tax savings due to loss on disposal: $17,000The net investment is calculated as follows:
Net investment = Total initial outlay - Salvage value of old machine + Tax savings from disposal
Net investment = $1,088,000 - $75,000 + $17,000 = $1,030,000
If a single agent residential seller's broker wishes to provide limited representation to a buyer, what must the broker do?
Answer:
If a single agent residential seller's broker wishes to provide limited representation to a buyer, the broker should allow the seller to sign the consent to transition to transaction broker notice. Thereafter, the notice should be given to the buyer.
Explanation:
A single agent residential seller's broker that wishes to provide limited representation to a buyer is required to allow the seller to sign the consent to transition to transaction notice. A copy of the notice should be given to the buyer.
Kingston Company uses the dollar-value LIFO method of computing inventory. An external price index is used to convert ending inventory to base year. The company began operations on January 1, 2018, with an inventory of $150,000. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows:Year Ended Ending Inventory Cost IndexDecember 31 at Year-End Costs (Relative to Base Year)2018 $ 200,000 1.082019 245,700 1.172020 235,980 1.142021 228,800 1.10Required:
Calculate inventory amounts at the end of each year. (Round intermediate calculations and final answers to the nearest whole dollars.)
Final answer:
To calculate the Kingston Company's inventory at the end of each year using the dollar-value LIFO method and an external price index, divided the year-end inventory costs by the respective cost index for that year.
Explanation:
The Kingston Company is using the dollar-value LIFO method to compute its inventory, whereby they adjust the ending inventory value according to an external price index. To determine the inventory value for each year, we divide the ending inventory at year-end costs by the year's cost index relative to the base year. This adjusts the ending inventory to the base year's cost level.
For 2018: $200,000 / 1.08 = $185,185.19 (rounded to the nearest dollar)
For 2019: $245,700 / 1.17 = $209,914.53 (rounded to the nearest dollar)
For 2020: $235,980 / 1.14 = $207,017.54 (rounded to the nearest dollar)
For 2021: $228,800 / 1.10 = $208,000 (rounded to the nearest dollar)
We use this approach, instead of comparing raw dollar amounts, to account for changes in relative prices over time, thus mitigating effects of inflation or deflation on the cost of the inventory.
A firm's optimal capital structure occurs where? Select one: a. Stock price is maximized, and EPS are maximized. b. Stock price is maximized, and WACC is maximized. c. EPS are maximized, and WACC is minimized. d. WACC is minimized, and stock price is maximized.
Answer:
A firm's optimal capital structure occurs where WACC is minimized and stock price is maximized.
The correct answer is D
Explanation:
Optimal capital structure exists where the market value of a firm is maximum and WACC is minimum. Optimal capital structure relates to net income approach to capital structure.
Suppose that a firm’s marginal production costs are given by MC = 10 + 4Q. The firm’s production process generates a toxic waste, which imposes an increasingly large cost on the residents of the town where it operates: the marginal external cost (i.e. marginal damage inflicted on the residents) associated with the Qth unit of production is given by 2Q. Hint: The social marginal cost takes into account the private cost of the firm as well the marginal damage to the society of the firm’s production activities.
(a) What is the marginal private cost associated with the 10th unit produced?
(b) What is the total marginal cost to society associated with producing the 10th unit (the marginal social cost of the 10th unit)?
Answer:
A) Marginal private cost= 50
B) Total Marginal social cost to society = 70
Explanation:
A) In order to find the marginal private cost we will use the firms production cost formula as it is the private cost that the firm is enduring and is only relevant to the firm's cost and not the society's cost.
In order to find the marginal unit cost of the 10th unit produced will will replace Q in the formula by 10 as it represents quantity.
MC= 10 + 4Q
MC= 10 + 4(10)
MC= 10 +40 = 50
B) In order to find the marginal cost to society we will add the marginal external cost of the 10th unit to its private cost. We already know the marginal private cost is 50 now we need to find the marginal external cost to it to find the total marginal cost.
Marginal external cost = 2Q
Q= 10
Marginal external cost = 2*10 =20
The total Marginal cost to society= 50 + 20= 70
The marginal private cost of producing the 10th unit is 50. The total marginal cost to society, which includes both private and external costs, for producing the 10th unit is 70.
(a) To calculate the marginal private cost (MC) for the 10th unit, we use the given function MC = 10 + 4Q, where Q is the quantity produced. Substituting Q = 10, we get:
MC = 10 + 4 × 10 = 10 + 40 = 50.Thus, the marginal private cost associated with producing the 10th unit is 50.
(b) The marginal social cost (MSC) is the sum of the marginal private cost (MC) and the marginal external cost (MEC). The marginal external cost for the 10th unit is given by the function MEC = 2Q.
Substituting Q = 10, we get:
MEC = 2 × 10 = 20.Thus, the marginal social cost (MSC) is:
MSC = MC + MEC = 50 + 20 = 70.Therefore, the total marginal cost to society associated with producing the 10th unit is 70.
On March 12, Medical Waste Services provides services on account to Grace Hospital for $9,700, terms 2/10, n/30. Grace pays for those services on March 20.
Required:
For Medical Waste Services, record the service on account on March 12 and the collection of cash on March 20.
Answer:
1. Accounts receivable A/c Dr $9,700
To Service revenue $9,700
(Being service provided is recorded)
2. Cash A/c Dr $9,506
Sales Discount A/c Dr $194 ($9,700 × 2%)
To Accounts receivable A/c $9,700
(Being cash received recorded and the remaining balance is reported to the cash account in the debit side)
Explanation:
The journal entries are shown below
On March 12
Accounts receivable A/c Dr $9,700
To Service revenue $9,700
(Being service provided is recorded)
On March 20
Cash A/c Dr $9,506
Sales Discount A/c Dr $194 ($9,700 × 2%)
To Accounts receivable A/c $9,700
(Being cash received recorded and the remaining balance is reported to the cash account in the debit side)
International Finance Problem Set on Working Capital Management1. Rossignol Co. manufactures and sells skis and snowboards in France, Switzerland and Italy, and also maintains a corporate account in Frankfurt, Germany. Rossignol has been setting separate operating cash balances in each country at a level equal to expected cash needs plus two standard deviations above those needs, based on a statistical analysis of cash flow volatility. Expected operating cash needs and one standard deviation of those needs are below.Rossignol’s Frankfurt bank suggests that the same level of safety could be maintained if all precautionary balances were combined in a central account at the Frankfurt headquarters.a. How much lower would Rossignol’s total cash balances be if all precautionary balances were combined? Assume cash needs in each country are normally distributed and are independent of each other.b. How much would the company save annually, if financing costs are 6% p.a., from centralizing its cash holdings?
Answer:
Consider the following explanation
Explanation:
Please note that if cash requirements are combined, mean requirement of combined entity can be simply summed up, but same is not true for standard deviation as it is not additive.
So first we need to calculate the variance by taking square of SD, then we sum it for all the location to get variance of combined entity and then we take square root again to get the SD of combined entity.
Keep in mind that we can take a simple summation of variance due to the fact that requirement in different locations are independent of each other and their correlation coefficient is = 0.
Solution is given through following image sheet -