Florence is a highly paid fashion consultant who earns $100 per hour. She has 16 hours per day that she can allocate to work or leisure, and she decides to work for 12 hours. Now suppose one of Florence's clients is featured on the front page of Vague, an influential fashion magazine. As a result, Florence's consulting fee now rises to $500 per hour. Florence decides to work only 10 hours per day. Draw Florence's new time allocation budget line, with income on the vertical axis and hours of leisure on the horizontal axis, and illustrate the indifference curve at her optimal choice. Choose the correct statement.
Answers
Answer:
Please see attachment
Explanation:
Please see attachment
The budget line represents Florence's possible combinations of income and leisure given her wage rate and available hours. After her wage increase, her budget line shifts upward as she earns more for the same hours worked. Her indifference curve shows the combinations of income and leisure she is indifferent to, and her optimal choice is where it meets her new budget line.
Explanation:To answer your question, let's firstly recall what a budget line and an indifference curve represent. In this context, the budget line represents all possible combinations of income and leisure that Florence can achieve given her hourly wage and total time available. The indifference curve represents all combinations of income and leisure that provide Florence with the same level of satisfaction or utility.
Initially, Florence was earning $100 per hour and decided to work 12 hours each day. Therefore, she had 4 hours of leisure and earned $1,200 (12 hours * $100 per hour) per day. Her initial budget line would be a downward sloping line starting from the point (16, 0) representing no leisure and maximum income (i.e., working all 16 hours), to the point (0, 1,600) representing all leisure and no income. The slope of this line would be negative, representing the trade-off between leisure and income.
However, with Florence's fee increasing to $500 per hour and her deciding to work only 10 hours, her income increases to $5,000 (10 hours * $500 per hour) and her leisure time increases to 6 hours. The new budget line starts from the point (16, 0) and ends at (0, 8,000). As her income has increased, the new budget line shifts upward. On the other hand, her indifference curve, which is steeper to the left and flatter to the right, will be tangent to the new budget line at her optimal point of choice (10, 5,000).
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Related Questions
Fulkron, Inc. provides the following data taken from its third quarter budget: Jul Aug Sep Cash collections 67,000 $33,000 $42,000 Cash payments: Purchases of direct materials 33,000 34,000 30,000Operating expenses 12,000 20,000 24,000Capital expenditures 0 33,000 6,000The cash balance on June 30 is projected to be $12,000.Based on the above data, calculate the shortfall the company is projected to have at the end of August.
Answers
Answer:
-$20,000 short fall
Explanation:
July:
Total cash available:
= Cash balance + Cash collections
= $12,000 + $67,000
= $79,000
End cash:
= Total cash available - Cash payments
= $79,000 - (33,000 + 12,000)
= $79,000 - $45,000
= $34,000
August:
Total cash available:
= Cash balance + Cash collections
= $34,000 + $33,000
= $67,000
End cash:
= Total cash available - Cash payments
= $67,000 - (34,000 + 20,000 + 33,000)
= $67,000 - $87,000
= -$20,000 (Short fall)
A factor which distinguishes the corporate form of organization from a sole proprietorship or partnership is that a corporation is organized for the purpose of making a profit. corporation is subject to more federal and state government regulations. corporation is an accounting economic entity. corporation's temporary accounts are closed at the end of the accounting period.
Answers
Answer:
Option B - A corporation is subject to more federal and state government regulations
Explanation:
Option A is incorrect because not only corporation is organized to make profits but also sole proprietorship business or partnership businesses want to make profits. Perhaps, all types of businesses want to make a profit.
Option C is also wrong because all types of entities are accounting economic entities as they have profits and losses.
Option D is incorrect as in each types of organizations, temporary accounts should be closed.
Option B is correct because corporation needs more regulations while sole proprietorship businesses are easy to form. Although partnership businesses are slightly hard to establish, those businesses do not require complicated federal and state authorization.
A corporation is distinct from a sole proprietorship or a partnership due to its legal setup, financial structure, stricter government regulations it has to follow, and the procedure of closing temporary accounts at the end of each accounting period.
Explanation:The primary distinction between a corporation, a sole proprietorship, or a partnership lies in their legal and financial structures. A corporation is a separate legal entity from its owners and is subject to more federal and state government regulations. It allows for liability protection for its owners, meaning the owners' personal assets are not at risk if the corporation fails or incurs debts. This is not the case with a sole proprietorship or a partnership.
In the case of a corporation, the business's temporary accounts are closed at the end of each accounting period to summarize a period's revenues, expenses, gains, and losses. This is not typically a characteristic found with a sole proprietorship or a partnership. Therefore, their operations are considerably different from each other.
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A statement of an employee's biweekly earnings is given below.
What is the employee's gross pay?a.$703.86b.$714.40c.$716.26d.$726.80
Answers
Answer:
$ 726.80
Explanation:
Gross payment means the total amount of money made by an employee or received by an employee before any deductions such as taxes, insurance, social security and others is removed.
Total amount received by the by employee = $ 62 + $ 45.06 + $ 10.54 + $ 12.40 + $ 596.80 = $ 726.80
Answer:
The answer is in fact D. $726.80
Explanation:
I took the test on EDG
The existence of high exit barriers such as ownership of specialized assets such as tower cranes for building very large crude oil carriers in the shipbuilding industry indicates thatSelect one:a. buyers are relatively weak because of the high switching costs created by tower cranesb. the competitive rivalry in the industry is severe.c. the economic segment of the external environment has shifted, but shipbuilders’ strategies have not changed.d. the industry is moving toward differentiation of shipbuilding process.
Answers
Answer:
a. Buyers are relatively weak because of the high switching costs created by tower cranes .
Explanation:
Buyers have lower bargaining power because of higher switching costs.
Bargaining power is a scope of the ability of buyers to influence another. It is an important issue in negotiation because buyers with higher bargaining power are able to conditionate their circumstances to obtain more profitable agreements with others.
Ben bought a local artist's painting for $2,100. Several years later. Ben sold it for $2,700. The year Ben sold the painting. He was in the 15% tax bracket. Ben's gain on the picture will be taxed at:
A-15%
B-25%
C_28%
D-33%
Answers
to solve you have to subtract the amount of change, so 2700-2100= 600
then you take 600 divide by the original number which is 2100. so your equation is change divided by original, or in this case 600/2100, when you divide the equation you get an answer of 0.28, you then have to move the decimal 2 places to the right, to get an answer of 28%
hope this helped! :)
A price ceiling above $25 per box will not prevent the market from reaching equilibrium.
A. True
B. False
Answers
try it! 7-1 Zenefit Corporation sold laser pointers for $11 each in 2017. Its budgeted selling price was $12 per unit. Other information related to its performance is given below: Units made and sold Variable costs Fixed costs Actual 28,000 $90,000 $55,000 Budgeted 27,500 $ 3 per unit $58,000 Calculate Zenefit’s static-budget variance for (a) revenues, (b) variable costs, (c) fixed costs, and (d) operating income.
Answers
Answer:
I have provided the answer in the attachment below.
To find the static budget variance, you simply substract the actual money spent from the budgeted money.
Remember that operating income = sales revenue - operating costs (variable costs - fixed costs).
Final answer:
Zenefit Corporation's static-budget variance is calculated by comparing actual financial performance with budgeted figures, resulting in unfavorable variances for revenues, variable costs, and operating income, and a favorable variance for fixed costs.
Explanation:
The analysis of Zenefit Corporation's static-budget variances involves comparing the actual results with the budgeted expectations. The static-budget variance for each category is calculated as follows:
Revenues: Actual revenues minus budgeted revenues equals ($11 × 28,000) - ($12 × 27,500) = $308,000 - $330,000 = -$22,000 (unfavorable).Variable Costs: Actual variable costs minus budgeted variable costs equals $90,000 - ($3 × 27,500) = $90,000 - $82,500 = $7,500 (unfavorable).Fixed Costs: Actual fixed costs minus budgeted fixed costs equals $55,000 - $58,000 = -$3,000 (favorable).Operating Income: The actual operating income is actual revenues minus total actual costs (variable and fixed). The budgeted operating income is budgeted revenues minus total budgeted costs (variable and fixed). Thus, the variance for operating income is ($308,000 - $90,000 - $55,000) - ($330,000 - $82,500 - $58,000) = $163,000 - $189,500 = -$26,500 (unfavorable).How does a project charter support the project manager in getting things for the project from other people?
Answers
Answer: A project charter contains:
Project manager assigned, his responsibility and authorization level. Project Objectives Project justification. Project general description. High level requirements High level risks. Summary of the most important milestones in the schedule. Budget Summary List of Stakeholders or stakeholders of the Project. Requirements for project approval. Name and level of authorization of the Sponsor or the person authorizing the Project Charter.The important thing with the generation of this document is that there is a formal record of the initiation, limits and completion of the project being of great importance for its success.
In this way, with all this information established with security, it allows the manager to obtain funds from third parties for the realization of the project.
Answer:
by communicating the project manager's authority for the project
1. Suppose banks keep no excess reserves and no individuals or firms decide to hold more cash during the deposit expansion process. If someone suddenly discovers $50 million in buried treasure, explain what would happen to the money supply if the required reserve ratio is 10 percent. How would your answer change in the required reserve ratio was 20 percent?
Answers
Answer:
Increase by $500 m
Increase by $250 m instead of $500 m
Explanation:
Since all the deposits over and above the reserve requirements are loaned out by the banks,
We can calculate the Credit multiplier and see how a new 50 m deposit will affect the money supply.
Credit multiplier @ 10% reserve = 1 / 0.10 = 10 times
So a new deposit of 50 m will create new money of 10 * 50 = 500 m thus increasing the money supply by this amount.
For a 20% reserve ratio, Credit multiplier changes a,
Credit Multiplier = 1 / 0.2 = 5 times
This will change the money supply by = 5 * 50 = 250 m. This is the amount of new money that will be created with reserve ratio of 20%.
Hope that helps.
A newsvendor orders the quantity that maximizes expected profit for two products, X and Y. The critical ratio for both products is .8. The demand forecast for both products is 9000 units and both are normally distributed. Product X has more uncertain demand in the sense that it has the larger standard deviation. Of which of the two products does the newsvendor order more? ______________
A. Product X because it has less certain demand.
B. Product Y because it has more certain demand.
C. The order quantities are the same because they have the same critical ratio.
D. More information is needed to determine which has the higher order quantity.
Answers
Answer:
Correct answer is (A)
Explanation:
Product X because it has less certain demand.
Product X has a higher standard deviation of demand, its optimal order quantity is greater given the same mean and critical ratio.
Novak Co. uses the net method to account for cash discounts. On June 1, 2020, it made sales of $52,500 with terms 3/15, n/45. On June 12, 2020, Novak received full payment for the June 1 sale. Prepare the required journal entries for Novak Co. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)
Answers
Answer:
Explanation:
The journal entries are shown below:
On 1 June 2020
Accounts receivable A/c Dr $50,925
To Sales revenue $50,925
(Being goods are sold on credit)
On July 12 2020
Cash A/c Dr $50,925
To Accounts receivable A/c $50,925
(Being cash received is recorded)
The computation is shown below:
= Sales amount - discount
= $52,500 - $1,575
= $50,925
And, The discount = Sales amount × discount rate
= $52,500 × 3%
= $1,575
The inflation rate is 12 percent, and the central bank is considering slowing the rate of money growth to reduce inflation to 8 percent. Economist Eric believes that expectations are very sluggish, whereas economist Kenji believes that expectations of inflation change quickly in response to new policies. True or False: Economist Eric is more likely to favor using contractionary policy to reduce inflation than economist Kenji. True False
Answers
Answer:
False
Explanation:
economist Kenji supports contractionary monetary policy because he believes that expectations adjust quickly in response to changes in policy and the efforts made by fed( an decrease in government spending and/or an increase in taxes) will be worth and the costs of reducing inflation will be less.
Whereas economist Eric, thinks that change in money supply is not a good idea to reduce inflation as it will work very slowly.
Final answer:
The statement is false; Eric, who believes in sluggish inflation expectations, would be less likely to favor aggressive contractionary policy to reduce inflation compared to Kenji, who expects quick adjustments to new policy. Inflation expectations play a crucial role in the effectiveness of monetary policy.
Explanation:
The question deals with the beliefs of two economists, Eric, who thinks that inflation expectations are sluggish, and Kenji, who believes they adjust quickly. Given this context, the statement is false. Economist Eric, believing that expectations adjust slowly, would likely be more cautious about using contractionary policy to reduce inflation, as such expectations can lead to a slower response in the economy and potentially higher costs of reducing inflation. On the other hand, Economist Kenji, who believes in quick adjustments, would favor the use of contractionary policy as he would expect a faster economic response to new policies, thus reducing the costs associated with slowing the economy.
Understanding inflation expectations is crucial for policymakers. From the history of the Federal Reserve's actions and current research, it seems evident that when inflation expectations and actual inflation align, economic outcomes are more predictable, and monetary policies tend to be more effective. The effectiveness of contractionary monetary policy in reducing inflation depends largely on how quickly the public adjusts its expectations in response to policy changes.
The company budgeted for production of 6,400 units in October, but actual production was 6,500 units. The company used 610 direct labor-hours to produce this output. The actual direct labor rate was $21.80 per hour. The labor efficiency variance for October is:
Answers
Answer:
Labor efficiency variance = $218 favorable.
Explanation:
We know,
Labor efficiency variance = (Standard Hour - Actual hour) × Standard rate
Given,
Standard labor hour = (Actual labor hour ÷ actual production) × budgeted production
Standard labor hour = (610 hours ÷ 6,500 units) × 6,400 units
Standard labor hour = 600 hours
Actual hour = 610 hours
Standard rate = $21.80 per hour
Therefore, Labor efficiency variance = (610 - 600) hours × $21.80
Labor efficiency variance = $218 favorable.
An interior solution to a consumer's utility maximization problem implies which of the following:A. consuming optimal amounts of all goodsB. consuming a positive amount of one good and a negative amount of the other good.C. consuming less than an optimal amount of at least one good.D. consuming negative amounts of all goods.
Answers
Answer:
The correct answer is A
Explanation:
Interior solution is the solution or a choice which is to be made through an agent and that could be characterized as an optimum which is located or situated at the tangency of two curves on the graph.
The utility maximization of the consumer states or defines that the consumer decide or take decision to allocate the incomes so that the last dollar amount which is spent on each and every product bought yields the same amount of the additional marginal utility.
Therefore, the interior solution to the utility maximization of the consumer problem states that the consumer consuming the optimal amounts of all the goods.
uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $200,000 ($300,000), purchases during the current year at cost (retail) were $2,000,000 ($2,800,000). Sales during the current year totaled $2,500,000, and net markups were $200,000. What is the ending inventory value at cost?
Answers
Answer:
The ending inventory value at cost is ($100,000)
Explanation:
To calculate the cost of ending inventory using the retail inventory method, we need to know:
The cost-to-retail percentage = COGS/ sales during current year = (sales – net markup)/sales = ($2,500,000-$200,000)/$2,500,000 = 92% The cost of goods available for sale= Cost of beginning inventory + Cost of purchases = $200,000 + $2,000,000 = $2,200,000 The cost of sales during the period = Sales × cost-to-retail percentage = $2,500,000 x 92% = $2,300,000 The ending inventory = Cost of goods available for sale - Cost of sales during the period = $2,200,000 - $2,300,000 = ($100,000)Suppose Intel stock has a beta of 1.6, whereas Boeing stock has a beta of 1. If the risk-free interest rate is 4% and the expected return of the market portfolio is 10%, according to the CAPM, a. What is the expected return of Intel stock? b. What is the expected return of Boeing stock? Stock Price/Share ($) Number of Shares Outstanding (millions) Golden Seas 13 1.00 Jacobs and Jacobs 22 1.25 MAG 43 30 PDJB 5 10 M12_BERK5561_04_SE_C12.indd 400 12/10/16 12:03 AM Chapter 12 Systematic Risk and the Equity Risk Premium 401 c. What is the beta of a portfolio that consists of 60% Intel stock and 40% Boeing stock? d. What is the expected return of a portfolio that consists of 60% Intel stock and 40% Boeing stock? (Show both ways to solve this.)
Answers
Answer: see affixed, a document containing the solution
Explanation:
Wildhorse Beverage Company reported the following items in the most recent year. Net income $43,400 Dividends paid 5,210 Increase in accounts receivable 11,440 Increase in accounts payable 8,490 Purchase of equipment (capital expenditure) 8,720 Depreciation expense 5,490 Issue of notes payable 24,020 Compute net cash provided by operating activities, the net change in cash during the year.
Answers
Answer:
Net cash provided by operating activities is $45,940
Net change in cash during the year is $56,030
Explanation:
Net cash provided by operating activities = Net income $43,400 + Depreciation expense 5,490 - Increase in accounts receivable 11,440 + Increase in accounts payable 8,490 = $45,940
Net change in cash during the year = Net cash provided by operating activities $45,940 - Dividends paid 5,210 - Purchase of equipment (capital expenditure) 8,720 + Issue of notes payable 24,020 = $56,030
At the beginning of 2019, Patriots, Inc. has the following account balances: Accounts Receivable $45,000 (Debit) Allowance for Bad Debts $8,000 (Credit) Bad Debts Expense $0 During the year, credit sales amounted to $810,000. Cash collected on credit sales amounted to $770,000, and $18,000 has been written off. At the end of the year, the company adjusted for bad debts expense using the percent-of-sales method and applied a rate, based on past history, of 3.5%. The amount of bad debts expense for 2019 is ________.
A. $28,350
B. $18,350
C. $18,000
D. $56,875
Answers
Answer:
Option (A) $28,350
Explanation:
Data provided in the question:
Accounts Receivable = $45,000 (Debit)
Allowance for Bad Debts = $8,000 (Credit)
Bad Debts Expense = $0
During the year, credit sales = $810,000
Cash collected on credit sales = $770,000
Amount written off = $18,000
Percent of Bad debts expense = 3.5%
Therefore,
Bad debt expenses = credit sales × Percent of bad debts expense
= $810,000 × 3.5%
= $28,350
Hence,
Option (A) $28,350
Kate has a 20-square-foot plot of land in her backyard that she uses to grow tomatoes and lettuce. Every square foot of land can produce either 5 tomatoes or 3 heads of lettuce each summer. Her neighbor, Jim, has a 30- square-foot plot of land that has a lot more shade than Kate's, which is better for lettuce but worse for tomatoes. Every square foot of Jim's land can produce either 3 tomatoes or 6 heads of lettuce.
a) How many tomatoes and heads of lettuce will Kate produce?
b) How many tomatoes and heads of lettuce will Jim produce?
Answers
Answer:
a) Kate will produce 100 tomatoes and 0 heads of lettuce.
b) Jim will produce 0 tomatoes and 180 heads of lettuce.
Explanation:
As climatic conditions are better for tomatoes at Kate's plot of land, she should choose to grow those because of better quality. Also, production of lettuce per square-foot is lower at Kate's land compared to Jim's (3 heads vs 6 heads of lettuce). So on 20-squire-foot Kate could produce 60 heads and Jim - 120 heads of lettuce (2x more). So Kate should avoid production of lettuce due to quality and quantity.
Same explanation can be applied to Jim's production of tomatoes. If Jim produce tomatoes, he will only have quantity of 60 tomatoes at 20-square-foot plot, compare to Kate's 100 tomatoes. So he should avoid production of tomatoes.
Answer: dedserwgergeeq
Explanation:
When the cross price elasticity between good X and other related goods is positive and very low firm X can be assumed to have?
a. minimal market power
b. moderate market power
c. a significant amount of market power
d. virtually no market power.
Answers
Answer:
c. a significant amount of market power
Explanation:
Cross price elasticity measures the responsiveness of quantity demanded of a good to the changes in price of another good.
If the cross price elascitiy is postive, the goods are subsituites.
If the cross price elasticity is negative, the goods are complementary goods.
If the cross price elasticitiy is low the firm has market power. It means that it's consumers do not change the quantity demanded when the price of the good changes
If the cross price elasticitiy is high, the market has low market power.
I hope my answer helps you.
Applying the time-period concept
Consider the following situations:
a. Business receives $2,000 on January 1 for 10-month service contract for the period January 1 through October 31.
b. Total salary for all employees is $3,000 per month. Employees are paid on the 1st and 15th of the month.
c. Work performed but not yet billed to customers for the month is $900.
d. The company pays interest on its $10,000, 6% note payable of $50 on the first day of each month.
Requirement
1. Assume the company records adjusting entries monthly. Calculate the amount of each adjustment
Answers
Answer:
a) $200
b) $3,000
c) $900
d) $50
Explanation:
The amount of each adjustment will be as follows
a) Business receives $2,000 on January 1 for 10-month service contract for the period January 1 through October 31.
Thus,
Monthly amount
= Total amount ÷ Duration from January 1 through October 31.
= $2,000 ÷ 10
= $200
b) Total salary for all employees is $3,000 per month. Employees are paid on the 1st and 15th of the month.
since the salary is paid per month it will be remain $3,000 after adjusting
c) The bill for the customer for the month is $900
d) The interest payable will remain same as $50 is paid each month
Final answer:
The monthly adjustments for each situation are: (a) $200 in revenue for the service contract, (b) no adjustment if salary payments align with the statement period, (c) $900 in revenue for unbilled services, and (d) no adjustment if interest payments align with the statement period.
Explanation:
Applying the time-period concept in accounting involves recognizing revenue and expenses in the period they are incurred, regardless of when the cash transactions occur. Let's calculate the monthly adjustment amounts for each situation:
a. For the 10-month service contract received in advance, the revenue is earned evenly over the contract period (January 1 through October 31). Therefore, the monthly adjusted revenue is $2,000 / 10 months = $200 per month.b. Salary expenses accrue daily, but since employees are paid twice a month, no adjustment is necessary if financial statements are prepared after the payments on the 1st and 15th. If statements are prepared at a different time, adjustment for accrued salaries would be necessary for the days since the last payment.c. Work performed but not yet billed is $900. This amount should be recorded as revenue in the current period since the service has been provided, even though the cash hasn't been received yet.d. The interest on the note payable amounts to $10,000 * 6% annually. Monthly interest is ($10,000 * 0.06) / 12 = $50. This interest expense is already paid on the first day of each month, so no adjustment is required unless statements are prepared on a different date.Onyx Company has prepared a static budget at the beginning of the month. At the end of the month, the following information has been retrieved from the records.
Static budget:
Sales volume: 1,000 units: Prices: $70 per unit
Variable expense: $32 per units:
Fixed expenses: $37,500 per month
Operating income: $500
Actual results:
Sales volume: 990 units: Price $74 per unit
variable expenses:$35 per unit: Fixed expenses:$33,000 per month
Operating income: $5,610
Calculate the flexible budget variance for fixed expenses.
a.$4,500U
b. $4,500F
c. $0
d. $5,490
Answers
Debt service funds may be sued to account for all of the following except:
A) Repayment of debt principal
B) Lease payments under capital leases
C) Amortization of premiums on bonds payable
D) The proceeds of refunding bond issues
Answers
Answer: C) Amortization of premiums on bonds payable
Explanation:
A debt service fund is a cash reserve that is used to pay for interest and principal payments on some types of debt. Debt service funds may be sued to account for repayment of debts, the proceeds of refunding bond issues and also lease payment under capital leases but may not account for amortization of premiums on bond payable.
On January 1, 2021, Crane Company sold property to Wildhorse Company. There was no established exchange price for the property, and Wildhorse gave Crane a $5400000 zero-interest-bearing note payable in 5 equal annual installments of $1080000, with the first payment due December 31, 2021. The prevailing rate of interest for a note of this type is 10%. The present value of the note at 10% was $4094064 at January 1, 2021. What should be the balance of the Discount on Notes Payable account on the books of Wildhorse at December 31, 2021 after adjusting entries are made, assuming that the effective-interest method is used?
Answers
Answer:
interest expense 409,406.4 debit
note payable 409,406.4 credit
Explanation:
We have to apply the market rate to the carrying value of the note payable:
$4,094,064 x 10% = 409,406.4 interest expense
We will increase the note payable and declare the interest expense
Then, at payment we decrease our note payable account against cash.
How to calculate the firm’s free cash flow from earnings in a levered firm?
Answers
Answer and explanation:
Levered free cash flow is said to be the cash flow remaining after the company's financial goal has been reached. It implies paying all the company's obligations such as bonds or other maturity payments. The formula for calculating the levered free cash flow is the following:
Levered free cash flow = Net Income + Depreciation + Amortization - (change in net working capital + capital expenditures + mandatory debt payments)
Final answer:
To calculate a levered firm's free cash flow from earnings, determine net income, adjust for non-cash expenses, changes in working capital, capital expenditures, and interest expenses. Then, use this figure to assess financial health or make investment valuations using DCF analysis.
Explanation:
How to Calculate Free Cash Flow from Earnings in a Levered Firm
To calculate a firm's free cash flow (FCF) from earnings, especially for a levered firm (a company that has debt), follow these general steps:
Determine the firm's net income from its income statement.Add back any non-cash expenses, such as depreciation and amortization.Subtract changes in working capital, which includes changes in accounts receivable, inventory, and accounts payable. This reflects the cash used or generated by the company's operations.Subtract any capital expenditures, which are the funds used to acquire or upgrade physical assets like property, industrial buildings, or equipment.Adjust for any interest expenses and taxes because the firm is levered and thus pays interest on its debt, which affects its cash flow. Calculating the tax shield on interest can also be relevant, as interest payments are tax-deductible.After adjusting for these items, you will arrive at the firm's free cash flow. This FCF can then be used to assess the company's financial health, make investment decisions, or value the company using discounted cash flow (DCF) analysis. In DCF, future cash flows are estimated and discounted back to the present value using a discount rate, reflecting the investment's risk and the time value of money. The discounted present value gives the firm an idea about the profitability of investments.
It is important to remember that each firm may have different financial structures, so the approach could vary based on specific circumstances. Moreover, using online calculators for Net Present Value (NPV) can assist in evaluating future cash flows, which is helpful in decision-making processes.
Regarding the decision whether a firm should make an investment that provides a 6% rate of return without borrowing money, consider the company's cost of capital. If the cost of capital is lower than the return on investment, it could be advantageous for the firm to proceed with the investment.
Tripp Corporation is planning to borrow $800,000 from its bank to pay one of its suppliers. The bank requires a compensating balance of 10%. Since Tripp currently holds no funds at the lending bank, it has borrowed enough to cover for the compensating balance as well. The amount that Tripp will pay its supplier is:
Answers
Answer:
$720,000
Explanation:
Data provided in the question:
Amount Tripp Corporation is planning to borrow = $800,000
Compensating balance required by the bank = 10%
Now,
Since out of the borrowed amount 10% is Compensating balance required by the bank
Therefore only 90% of the balance is available for the Tripp corporation to pay one of its suppliers
Thus,
Amount Tripp will pay its supplier will be
= 90% of the Amount Tripp Corporation is planning to borrow
= 0.90 × $800,000
= $720,000
Estimating the Implied End-of-Year Share Price Assume that a company’s beginning-of-period price is $14 per common share, its dividends are $1 per share, and its expected cost of equity capital is 10%. What is the expected end-of-period price per common share? Round answer to two decimal places. $Answer
Answers
Answer:
expected end-of-period price per share is $14.40
Explanation:
Beginning of period price = $14
Dividend per share = $1
Cost of Equity Capital = 10%
Cost of Equity Capital:
= (End of period price + Dividend per share - Beginning of period price) ÷ Beginning of period price
10% = (End of period price + $1 - $14) ÷ $14
$1.40 = End of period price - $13
End of period price = $14.40
So, expected end-of-period price per share is $14.40
You are creating a portfolio of two stocks. The first one has a standard deviation of 20% and the second one has a standard deviation of 37%. The correlation coefficient between the returns of the two is 0.1. You will invest 43% of the portfolio in the first stock and the rest in the second stock. What will be the standard deviation of this portfolio's returns? Answer in percent, rounded to two decimal places (e.g., 4.32%=4.32).
Answers
Answer:
23.56
Explanation:
Standard deviation of the first stock (σ1) = 20%
Standard deviation of the second stock (σ2) = 37%
The correlation coefficient between the returns (ρ) = 0.1.
Proportion invested in the first stock (W1) = 43%
Proportion invested in the second stock (W2) = 57%
The standard deviation of a two-stock portfolio's returns is given by
[tex]\sigma_{portfolio} = \sqrt{w_1^2\sigma_1^2+w_2^2\sigma_2^2+2w_1w_2\rho\sigma_1\sigma_2} \\\sigma_{portfolio} = \sqrt{0.43^2*0.2^2+0.57^2*0.37^2+2*0.43*0.57*0.1*0.2*0.37}\\\sigma_{portfolio} =0.2356=23.56\%[/tex]
The standard deviation of this portfolio's returns IS 23.56%
Easy monetary policy reduces the real interest rate, which ______ the demand for dollars, ______ the supply of dollars, and ______ the equilibrium value of the dollar.a. Inflation rate; unemployment rate b. Exchange rate; real interest rate c. Growth of domestic real GDP; growth of foreign real GDP d. Real interest rate; exchange rate
Answers
The question is not complete! Here is the complete question and its answer!
Q.1. Easy monetary policy reduces the real interest rate, which ______ the demand for dollars, ______ the supply of dollars, and ______ the equilibrium value of the dollar.
Answer:
Easy monetary policy reduces the real interest rate, which decreases the demand for dollars, increases the supply of dollars, and decreases the equilibrium value of the dollar.
Q.2. In an open economy with flexible exchange rates, monetary policy affects consumption and investment by changing the ________ and affects net exports by changing the ________.
a. Inflation rate; unemployment rate
b. Exchange rate; real interest rate
c. Growth of domestic real GDP; growth of foreign real GDP
d. Real interest rate; exchange rate
Answer:
In an open economy with flexible exchange rates, monetary policy affects consumption and investment by changing the real interest rate and affects net exports by changing the exchange rate.
Carlos Naturals manufactures bulk quantities of cleaning fluids. The company currently sells 700 containers a month at a sales price of $24 per unit. The addition of a new disinfectant will result in a sales price of $26 per unit for the improved product. It would cost a total of $4,000 per month to make the alteration. Operating income would ________.
Answers
Answer:
Instructions are listed below.
Explanation:
Giving the following information:
The company currently sells 700 containers a month at a sales price of $24 per unit. The addition of a new disinfectant will result in a sales price of $26 per unit for the improved product. It would cost a total of $4,000 per month to alter.
First, we need to calculate the current sales level:
Sales= 700*24= $16,800
Now, we can calculate the new income:
Sales= 700*26 - 4,000= $14,200
It is more convenient to not apply the disinfectant.