Answer:
$52,521
Explanation:
As per Given Data
Project Y
Costs $120,000
Cash Inflows
Year 1 $64,000
Year 2 $67,000
Year 3 $56,000
Year 4 $45,000
Required rate of return = 16%
Weighted Average cost of Capital = 13%
Net Present Value
As we know Net Present value is calculated by discounting each years cash flows using using the Weighted Average cost of Capital.
Costs $120,000
Year Cash Inflows Discount factor 13% Present values
Year 0 $(120,000) (1+13%)^-0 $(120,000)
Year 1 $64,000 (1+13%)^-1 $56,640
Year 2 $67,000 (1+13%)^-2 $52,471
Year 3 $56,000 (1+13%)^-3 $38,811
Year 4 $45,000 (1+13%)^-4 $27,599
Net present value $52,521
Lance Chips granted restricted stock units (RSUs) representing 42 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within four years. After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the shares. The common shares had a market price of $6 per share on the grant date. The total compensation cost pertaining to the restricted stock units is:
Answer:
Explanation:
Total compensation cost pertaining to the restricted stock units
= RUSs granted * market price per share
= 42 million * 6
= 252 million
The United States has a large trade deficit. It has a trade deficit with each of its major trading partners, but the deficit is much larger with some countries (e.g., China) than with others. Suppose the United States eliminates its overall trade deficit (with the world as a whole). Do you expect the United States to have a zero trade balance with every one of its trading partners?
Answer:
Many policymakers as well as trade analysts, do not assume that trading deficits harm the country, and caution against attempting to "protect" the trading partnership with specific countries which are crucial for the domestic industries.
Others, nevertheless, think that persistent budget deficits due to trade problems are always a concern, and there is already is considerable debate about how much of the trade deficit is triggered by foreign governments, as well as what strategies should be implemented to minimise it, if any at all.
If you were shopping for a new TV, would you prefer to buy one (a) under perfectly competitive market conditions, (b) from a regulated monopoly, (c) from an oligopoly or (d) under monopolistic competition market conditions? Explain your reasoning. What market structure would result in the lowest price? If you choose a market structure that doesn't offer the best price, why did you choose it? In your answer, also be sure to explain the characteristics of each of these four market structures. Do this to explain the market structure you chose, and the three you did not.
Answer:
One is buying a brand new T.V. then one can purchase the T.V. beneath the monopolistic market situation. this can be as a result of T.Vs are oversubscribed as differentiated product by diverse brands with diverse options in several brands of T.V. conjointly promotion and marketing also shows a vital part in T.V. market. though utterly viable variety of markets lead to lowest worth, however the market construction of noncompetitive kind are going to be chosen during this case as request for T'V is comparatively elastic and not utterly flexible as is that the circumstance in perfectly competitive markets and other people conform to pay higher costs for a lot of options and conditions.
It is not wise to shop for T.V. beneath monopoly because the worth are going to be terribly high and shopper additional will be low. Also, in oligopoly market arrangement the costs are going to be high and solely few companies will be marketing the merchandise with not a lot of selections accessible within the market.
Thus, the most effective sort of market arrangement to shop for T.V.is monopolistic competition.
Geno's Body Shop had sales revenues and operating costs in 2020 of $740,000 and $570,000, respectively. In 2021, Geno plans to expand the services it provides to customers to include detailing services. Revenues are expected to increase by $103,000 and operating costs by $59,000 as a result of this expansion.
Required:
1. Assuming that there are no changes to the existing body shop business, operating profits would be expected to increase during 2021 by __________.
Answer:
$214,000
Explanation:
Total Revenues ($740,000 + $103,000) =$843,000
−Total Operating costs ($570,000 + $59,000)
=$629,000
= Total operating profit = $214,000
Therefore Assuming that there are no changes to the existing body shop business, operating profits would be expected to increase during 2021 by $214,000
Answer:
$97,100
Explanation:
Increase in revenue $103,000
Less: Increase in operating cost $59,000
Increase in operating profit $97,100
Dermody Snow Removal's cost formula for its vehicle operating cost is $3,000 per month plus $330 per snow-day. For the month of December, the company planned for activity of 24 snow-days, but the actual level of activity was 26 snow-days. The actual vehicle operating cost for the month was $11,190. The spending variance for vehicle operating cost in December would be closest to:
Answer:
390 F
Explanation:
Spending variance is defined as the difference between the actual expenses and planned expenses. It is favorable when the actual expenses is less than planned and vice versa.
Operating cost $3000
Maintenance per snow day - $330
Budgeted snow day - 24
Actual snow day - 26
Actual operating cost - $11,190
Variance
((330*26)+3000 =11580
Actual operating cost = 11,190
Variance = 11580-11190= 390 F
Answer: 390F
Explanation:
Given Data;
Vehicle operating cost = $11,190
Vehicle operating cost ( removal monthly) = $3,000
Actual days = 26
Snow per day = $330
Therefore:
Spending variance for vehicles operation = flexible budget - actual
= $ ( 330 * 26 + 3000 ) - $11,190
= $11,580 - $11,190
= 390F
The spending variance for vehicle operating cost would be closer to 390F in December.
In a two good economy, only burritos and t-shirts are sold. In 2014, the base year, the price of a burrito was $7.50 and 200 burritos were sold. Meanwhile, in 2014, the price of a t-shirt was $5.00, and 1000 were sold. In 2015, the price of a burrito was $9.00 and 150 burritos were sold, and the price of a t-shirt was $6.00 and 900 t-shirts were sold. What was the GDP for 2014? Please include the dollar sign in your answer.
Answer:
The GDP for 2014 was $6500
Explanation:
GDP or Gross Domestic Product is the total value in monetary terms of all the finished goods and services produced in a country within a specific period of time. It is a measure of the valuation of the size of an economy and its growth rate. The GDP of an economy with only two goods can be calculated as follows,
GDP 2014 = 7.5 * 200 + 5 * 1000
GDP 2014 = $6500
Final answer:
The Gross Domestic Product (GDP) for 2014 in this two good economy is calculated by multiplying the price of burritos and t-shirts by the quantity sold. The total GDP for 2014 is $6500.
Explanation:
To calculate the Gross Domestic Product (GDP) for 2014 in a two good economy where only burritos and t-shirts are sold, we must multiply the quantity of each good sold by its price for that year. The GDP formula for a year is GDP = (Price of Good 1 * Quantity of Good 1) + (Price of Good 2 * Quantity of Good 2). In 2014, burritos and t-shirts were sold at $7.50 and $5.00 respectively. The number of burritos sold was 200, and the number of t-shirts was 1000.
Thus, the calculation for each good is as follows:
Burritos: $7.50 * 200 = $1500T-shirts: $5.00 * 1000 = $5000Adding these together yields the total GDP for 2014.
The GDP for 2014 is $1500 for burritos plus $5000 for t-shirts, totaling $6500.
Financial information is presented below: Operating Expenses$ 90,000 Sales Returns and Allowances18,000 Sales Discounts12,000 Sales Revenue320,000 Cost of Goods Sold174,000 The amount of net sales on the income statement would be
a.$290,000.
b.$302,000.
c.$308,000.
d.$320,000.
Answer:
a. $290,000
Explanation:
The relevant data provided in the question for computing the net sales is here below:-
Sales revenue = $320,000
Sales discounts = $12,000
Sales returns and allowances = $18,000
The computation of net sales on the income statement is shown below:-
The amount of net sales = Sales revenue - Sales discounts - Sales returns and allowances
= $320,000 - $12,000 - $18,000
= $320,000 - $30,000
= $290,000
Therefore for computing the amount of net sales we simply applied the above formula.
A cell phone company offers two different plans. Plan A costs $96 per month for unlimited talk and text. Plan B costs $0.20 per minute plus $0.10 per text message sent. You need to purchase a plan for your 14-year-old sister. Your sister currently uses 1,800 minutes and sends 1,650 texts each month. (1) What is your sister’s total cost under each of the two plans? (2) Suppose your sister doubles her monthly usage to 3,600 minutes and sends 3,300 texts. What is your sister’s total cost under each of the two plans?
Answer:
1.
Plan A - Total Cost per month = $96
Plan B - Total Cost per month = $525
2.
Plan A - Total Cost per month = $96
Plan B - Total Cost per month = $1050
Explanation:
The total cost under Plan A is fixed. Thus it will not change whatever the number of texts and talk are for the month.
The total cost for Plan B is variable and will vary with change in number of talk and texts for the month. The total cost can be calculated by multiplying the cost per talk with the number of minutes per months plus the cost per text by the number of texts per month.
Plan A - Total Cost per month = $96
Plan B - Total Cost per month = 0.2 * talk minutes per month + 0.1 * texts per month
1.
Plan A - Total Cost per month = $96
Plan B - Total Cost per month = 0.2 * 1800 + 0.1 * 1650 = $525
2.
Plan A - Total Cost per month = $96
Plan B - Total Cost per month = 0.2 * 3600 + 0.1 * 3300 = $1050
Evergreen Corporation manufactures circuit boards and is in the process of preparing next year's budget. The pro forma income statement for the current year is presented below.Sales $ 3,500,000Cost of sales: Direct Material $ 500,000 Direct labor 250,000 Variable Overhead 275,000 Fixed Overhead 600,000 1,625,000Gross Profit $ 1,875,000Selling and General & Admin. Exp. Variable 750,000 Fixed 250,000 1,000,000Operating Income $ 875,000The contribution margin ratio for the current year is:____________.a.) 53.6%.b.) 49.3%.c.) 46.4%d.) 25%.
Answer:
b. 49.3%
Explanation:
The computation of contribution margin ratio is shown below:-
For computing the contribution margin ratio first we need to find out the total contribution which is here below:-
Total Contribution = Sales - Direct Material - Direct labor - Variable Overhead - Variable
= $3,500,000 - $500,000 - $250,000 - $275,000 - $750,000
= $1,725,000
Contribution margin Ratio = Contribution ÷ Sales
= $1,725,000 ÷ $3,500,000
= 49.3%
So, for calculating the contribution margin ratio we simply divide total contribution by sales.
A 7-year bond of a firm in severe financial distress has a coupon rate of 12% and sells for $960. The firm is currently renegotiating the debt, and it appears that the lenders will allow the firm to reduce coupon payments on the bond to one-half the originally contracted amount. The firm can handle these lower payments. What are the stated and expected yields to maturity of the bonds? The bond makes its coupon payments annually. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Answer:
State Yield 12.9%
Expected Yield 8.8%
Explanation:
Yield to maturity is the annual rate of return that an investor receives if a bond bond is held until the maturity. It is the long term yield which is expressed in annual term.
Use Following Formula to calculate YTM
P = C×(1 + r) -1 + C×(1 + r) -2 + . . . + C×(1 + r) -Y + B×(1 + r) -Y
As per given data
Face value = B = $1,000
Coupon payment = C = $1,000 x 12% = $120
Selling price = P = $960
Number of periods = Y = 7 years
Stated Yield
$960 = $120 × (1 + r) -1 + $120 × (1 + r) -2 + $120 × (1 + r) -3 + $120 × (1 + r) -4 + $120 × (1 + r) -5 + $120 × (1 + r) -6 + $120 × (1 + r) -7 + $1,000 × (1 + r) -7
$950,39 = [ $120 ( × (1 + r) -28 ] + [ $1,000 × (1 + r) -7]
r = 12.9%
Expected Yield
Revised Coupon Rate = 12% / 1.5 = 8%
Coupon Payment = $1,000 x 8% = $80
P = C×(1 + r) -1 + C×(1 + r) -2 + . . . + C×(1 + r) -Y + B×(1 + r) -Y
$960 = $80 × (1 + r) -1 + $80 × (1 + r) -2 + $80 × (1 + r) -3 + $80 × (1 + r) -4 + $80 × (1 + r)-5 + $80 × (1 + r) -6 + $80 × (1 + r) -7 + $1,000 × (1 + r) -7
$950,39 = [ $80 ( × (1 + r) -28 ] + [ $1,000 × (1 + r) -7]
r = 8.79%
Textbooks, transportation and room and board are all...
a. included in the price of attending a college or university.
b. additional costs for attending a college or university.
c. included in a school's tuition.
d. usually offered to students who stay on campus.
Answer:
b. additional costs for attending a college or university.
Explanation:
Textbooks, transportation and room and board are additional costs for attending a college or university.
They aren't included as part of tuition costs.
They are the real costs of attending college.
These costs needs to be considered when choosing a college.
I hope my answer helps you
Answer:
addition costs for attending a college or university
Explanation:
thanks me later
QS 18-12 Contribution margin income statement LO P2 Zhao Co. has fixed costs of $286,200. Its single product sells for $163 per unit, and variable costs are $110 per unit. The company expects sales of 10,000 units. Prepare a contribution margin income statement for the year ended December 31, 2017.
Answer:
Instructions are below.
Explanation:
Giving the following information:
Total fixed costs of $286,200.
Its single product sells for $163 per unit.
Unitary variable cost= $110 per unit. The company expects sales of 10,000 units.
Contribution margin income statement:
Sales= (10,000*163)= 1,630,000
Variable costs= (10,000*110)= (1,100,000)
Contribution margin= 530,000
Fixed costs= (286,200)
Net operating income= 243,800
Martinez Corp. has 7,900 shares of common stock outstanding. It declares a $5 per share cash dividend on November 1 to stockholders of record on December 1. The dividend is paid on December 31. Prepare the entries on the appropriate dates to record the declaration and payment of the cash dividend. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Answer:
Nov. 1
Dr Cash Dividend 39,500
Cr Dividends Payable 39,500
Dec. 31
Dr Dividends Payable 39,500
Cr Cash 39,500
Explanation:
Martinez Corp Journal entries
Nov. 1
Dr Cash Dividend 39,500
(7,900 shares of common stock ×5 per shares)
Cr Dividends Payable 39,500
Dec. 31
Dr Dividends Payable 39,500
Cr Cash 39,500
he condensed product-line income statement for Dish N' Dat Company for the month of March is as follows: Dish N' Dat Company Product-Line Income Statement For the Month Ended March 31 Bowls Plates Cups Sales $71,000 $105,700 $31,300 Cost of goods sold 32,600 42,300 16,800 Gross profit $38,400 $63,400 $14,500 Selling and administrative expenses 27,400 42,800 16,700 Income from operations $11,000 $20,600 $(2,200) Fixed costs are 15% of the cost of goods sold and 40% of the selling and administrative expenses. Dish N' Dat assumes that fixed costs would not be materially affected if the Cups line were discontinued. a. Prepare a differential analysis dated March 31 to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate a loss.
Answer and Explanation:
As per the data given in the question,
Differential analysis
Continue cup(Alt. 1) Discontinue cups(Alt 2)
Particulars Alt 1 Alt 2 Differential
Effect on income
Revenues $31,300 $0 $31,300
Costs:
Variable cost of goods sold $14,280 $0 $14,280
($16,800×(100%-15%)
Variable selling and admin expenses $10,020 $0 $10,020
($16,700(100%-40%)
Fixed cost $9,200 $9,200 $0
($16,800×15%+$16,700×40%)
Net income ($2,200) ( $9,200) ($7,000)
g The Sharpe Ratio measures: Select one: The risk of an investment The expected return of an investment The unexpected return; how much an investment over- or under-performed The extra return above the risk-free rate adjusted for systematic risk The extra return above the risk-free rate adjusted for total risk The extra return above the risk-free rate adjusted for unsystematic risk The raw return adjusted for the return on the market
Answer:
The extra return above the risk-free rate adjusted for total risk
Explanation:
The Sharpe Ratio was developed by William Sharpe, and it is used by investors to guage the return in an investment against risk.
To calculate it we find the excess return above risk free rate And divide it by the total risk.
This isolates the returns that are attributed to risk taking activity.
A risk free transaction for example is the yield on government treasury bills.
We use only returns associated with risk to get a better picture of risk adjusted return. The higher the ratio the better.
Accounts Payable: $19,207
Accounts Receivable: 81,336
Cash: 98,324
Discount on Bonds Payable: 7,000
Sales Tax Payable: 3,512
Inventory: 95,816
Treasury Stock: 30,000
Stock Investments: 3,700
FICA Tax Payable: 3,200
Bonds Payable: 100,000
Accumulated Depreciation: 2,000
Note: Payable, due in two years 1,709 Equipment 54,128 Common Stock 100,000 Retained Earnings 102,808 Unearned Service Revenue 30,500 Supplies 10,512 Salaries and Wages Payable 17,880 Use the information above to answer the following question. What is the amount of Total Liabilities to be reported on the December 31, 2019?
Answer:
total liabilities = $169,008
Explanation:
total liabilities:
Accounts Payable: $19,207Discount on Bonds Payable: ($7,000) ⇒ contra liability accountSales Tax Payable: 3,512FICA Tax Payable: 3,200 Bonds Payable: 100,000Note Payable, due in two years 1,709Unearned Service Revenue 30,500 ⇒ must be reported as a liabilitySalaries and Wages Payable 17,880to determine the total liabilities we just have to add both current and long term liabilities, and subtract any contra liability accounts = $176,008 - $7,000 = $169,008
Corona Co. is expecting to receive 100,000 British pounds in one year. Corona expects the spot rate of British pound to be $1.49 in a year, so it decides to avoid exchange rate risk by hedging its receivables. The spot rate of the pound is quoted at $1.51. The strike price of put and call options are $1.54 and $1.53 respectively. The premium on both options is $.03. The one-year forward rate exhibits a 2.65% premium. Assume there are no transaction costs. What is the best possible hedging strategy and how many U.S. dollars Corona Co. will receive under this strategy
Answer:
Explanation:
1st strategy : Selling pound forward
The spot rate of the pound is quoted at $1.51.
The one-year forward rate exhibits a 2.65% premium.
The one-year forward rate = 1.51 ( 1+ 0.0265)
= $ 1.55
Dollars received = 100000 * 1.55 = $155000
2nd strategy : Buying put option
The strike price of put = $1.54
premium on option is $.03
Amount received per option = $ 1.54 - $ 0.03 =$1.51
Total Dollars received = 100000* 1.51 = $ 151000
the best possible hedging strategy is Selling pound forward and receiving $155000
Sandhill Chemicals Company acquires a delivery truck at a cost of $30,800 on January 1, 2022. The truck is expected to have a salvage value of $3,700 at the end of its 4-year useful life. Compute annual depreciation for the first and second years using the straight-line method.
Final answer:
Using the straight-line method, the annual depreciation for the first and second years for Sandhill Chemicals Company's delivery truck, which costs $30,800 and has a salvage value of $3,700 after 4 years, is calculated to be $6,775 per year.
Explanation:
The Sandhill Chemicals Company's delivery truck, which has a cost of $30,800 and a salvage value of $3,700 at the end of its 4-year useful life, requires an annual depreciation calculation using the straight-line method. To compute this, we first find the total depreciable amount by subtracting the salvage value from the cost of the truck:
Total depreciable amount = Cost - Salvage ValueTotal depreciable amount = $30,800 - $3,700Total depreciable amount = $27,100Then we divide this total depreciable amount by the useful life of the truck to find the annual depreciation:
Annual Depreciation = Total depreciable amount / Useful LifeAnnual Depreciation = $27,100 / 4 yearsAnnual Depreciation = $6,775Therefore, the annual depreciation for the first and second years using the straight-line method is $6,775 per year.
For a recent 2-year period, the balance sheet of Blue Company showed the following stockholders’ equity data at December 31 (in millions). 2020 2019 Additional paid-in capital $ 970 $ 827 Common stock 560 555 Retained earnings 7,250 5,280 Treasury stock 1,620 868 Total stockholders’ equity $7,160 $5,794 Common stock shares issued 224 222 Common stock shares authorized 500 500 Treasury stock shares 36 28 (a) Answer the following questions. (1) What is the par value of the common stock? (Round par value to 2 decimal places, e.g. $3.15.) Par value of common stock $enter the par value of the common stock rounded to 2 decimal places
Final answer:
To find the par value of a common stock, subtract additional paid-in capital and common stock from total stockholders' equity, then divide the result by common stock shares issued.
Explanation:
The par value of the common stock is a nominal value per share set by the company. In this case, we can calculate it by subtracting the additional paid-in capital and the common stock from the total stockholders' equity and dividing the result by the common stock shares issued.
Calculate: $7,160 (Total stockholders' equity) - $970 (Additional paid-in capital) - $560 (Common stock) = $5,630Then, divide $5,630 by 224 (Common stock shares issued).The par value of the common stock is $25.09 rounded to 2 decimal places.Judd Company uses standard costs for its manufacturing division. Standards specify 0.1 direct labor hours per unit of product. The allocation base for variable overhead costs is direct labor hours. At the beginning of the year, the static budget for variable overhead costs included the following data: Production volume 6 comma 100 units Budgeted variable overhead costs $ 15 comma 000 Budgeted direct labor hours 610 hours At the end of the year, actual data were as follows: Production volume 4 comma 000 units Actual variable overhead costs $ 15 comma 300 Actual direct labor hours 490 hours What is the variable overhead cost variance? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)
Answer:
Variable overhead cost variance = $2,949.80
Explanation:
As per the data given in the question,
Actual overhead cost = $15,000
Actual hours = 490
Actual cost = $30.61 per hour
Standard overhead cost = $15,000
Standard hours = 610
Budgeted cost = $24.59 per hour
Variable overhead cost variance = Actual hours × (Actual cost per hour - Standard cost per hour)
= 490 × ( $30.61 - $24.59 )
= $2,949.80
The risk-free rate is 6% and the expected rate of return on the market portfolio is 13%. a. Calculate the required rate of return on a security with a beta of 1.25. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Required return 22.25 % b. If the security is expected to return 16%, is it overpriced or underpriced
Answer:
a. 14.75%
b. Under priced
Explanation:
The computation for the required rate of return is shown below:
a. Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)
= 6% + 1.25 × (13% - 6%)
= 6% + 1.25 × 7%
= 6% + 8.75%
= 14.75%
b. As the required rate of return comes 14.75% and the required return is 16% so it is under priced as expected return is more than the required return
The required rate of return on a security with a beta of 1.25 is 14.75%. If the security is expected to return 16%, it is considered underpriced.
Explanation:To calculate the required rate of return on a security with a beta of 1.25, we can use the Capital Asset Pricing Model (CAPM) formula:
Required return = Risk-free rate + Beta × (Expected market return - Risk-free rate)
Given that the risk-free rate is 6% and the expected rate of return on the market portfolio is 13%, we can substitute the values into the formula:
Required return = 6% + 1.25 × (13% - 6%)
Required return = 6% + 1.25 × 7%
Required return = 6% + 8.75%
Required return = 14.75%
Therefore, the required rate of return on a security with a beta of 1.25 is 14.75%.
To determine if the security is overpriced or underpriced, we compare the expected rate of return of 16% to the required rate of return of 14.75%. If the expected rate of return is higher than the required rate of return, the security is considered underpriced. If the expected rate of return is lower than the required rate of return, the security is considered overpriced.
In this case, the expected rate of return of 16% is higher than the required rate of return of 14.75%, so the security is considered underpriced.
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Banderas corporation is considering the purchase of a machine that would cost $330,000 and would last for 9 years, the machine would have a salvage value of $79,000.By reducing labor and other operatin costs, the machine would provide annual cost savings of $59,000. The company requires a minimum pretax return of 12% on allinvestment project. The net value of the proposed project is closest to:___________.
Answer:
NPV = $ 12,854.93
Explanation:
Net Present Value (NPV) : This is one of the techniques available to evaluate the feasibility of an investment project. The NPV of a project is the difference between the present value of the cash inflows and the cash outflows of the project.
Net Present Value of the proposed project
Present Value (PV) of annual cash inflow = A× (1- (1+r)^(-n) )/r
A- annual cash inflow - 59,000, r-12%, n- 9
PV of cash inflow = 59,000× ((1- (1.012)^(-9))/0.12
= 314366.7377
PV of Scrap value = F× (1+r)^(-n)
F- scrap value - 79,000
= 79,000 × (1.12)^(-9)
= 28,488.19
NPV = 314,366.7377 + 28,488.19 - 330,000 =
NPV = $ 12,854.93
The master budget at Western Company last period called for sales of 235,000 units at $9.30 each. The costs were estimated to be $4.00 variable per unit and $270,000 fixed. During the period, actual production and actual sales were 240,000 units. The selling price was $9.40 per unit. Variable costs were $4.75 per unit. Actual fixed costs were $270,000. Prepare a flexible budget for Western.
Answer:
Please see the budget preparation below
Explanation:
Calculation:
Sales revenue = $2,232,000 (240,000 x $9.30)
Variable cost = $960,000(240,000 x $4)
WESTERN COMPANY
FLEXIBLE BUDGET
Sales revenue $2,232,000
Variable cost ($960,000)
Contribution margin $1,272,000
Fixed cost. ($270,000)
Operating profit. $1,002,000
Stock Y has a beta of 1.2 and an expected return of 11.1 percent. Stock Z has a beta of .80 and an expected return of 7.85 percent. If the risk-free rate is 2.4 percent and the market risk premium is 7.2 percent, the reward-to-risk ratios for stocks Y and Z are and percent, respectively. Since the SML reward-to-risk is percent, Stock Y is and Stock Z is (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer and Explanation:
As we know that
Reward to risk ratio = (Expected return of stock - Risk free rate of return) ÷ Beta of stock
For stock Y, it is
Reward to Risk ratio
= (11.1% - 2.4%) ÷ 1.2
= 7.25 %
For stock Z, it is
Reward to Risk ratio
= (7.85% - 2.4%) ÷ 0.80
= 6.8125%
And,
SML reward to Risk ratio should always market Risk premium i.e 7.20%
As we can see that
Stock Y has higher reward to Risk ratio i.e 7.25% than SML i.e 7.20% , so it is underpriced or undervalued.
And,
Stock Z has lower reward to Risk ratio i.e 6.8125% than SML i.e 7.20%, so it is overpriced or overvalued.
Stock Y is undervalued.
Stock Z is overvalued.
The computation is as follows:Reward to risk ratio = (Expected return of stock - Risk free rate of return) ÷ Beta of stock
For stock Y, it is
Reward to Risk ratio
= (11.1% - 2.4%) ÷ 1.2
= 7.25 %
For stock Z, it isReward to Risk ratio
= (7.85% - 2.4%) ÷ 0.80
= 6.8125%
Also,
SML reward to Risk ratio should always be equivalent to the market Risk premium i.e 7.20%
Stock Y has higher reward to Risk ratio i.e 7.25% compared to SML i.e 7.20% , because it is underpriced or undervalued. Stock Z has a lower reward to Risk ratio i.e 6.8125% compared to SML i.e 7.20%, because it is overpriced or overvalued.
Therefore we can conclude Stock Y is undervalued. and Stock Z is overvalued.
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Rubium Micro Devices currently manufactures a subassembly for its main product. The costs per unit are as follows:Direct materials$ 53Direct labor40Variable overhead36Fixed overhead31Total costs$ 160Crayola Technologies Inc. has contacted Rubium with an offer to sell 7 comma 000 of the subassemblies for $ 145 each. Rubium will eliminate $ 85 comma 000 of fixed overhead if it accepts the proposal. Should Rubium make or buy the subassemblies? What is the difference between the two alternatives?
Answer and Explanation:
According to the scenario, computation of the given data are as follow:-
Total Unit Cost of Making Product = Direct Material + Direct Labor + Variable Overhead + Fixed Overhead
= $53 + $40 + $36 + $31
= $160
Total Unit Cost of Buying Product = Fixed Cost + Purchase Cost
= $31 + $145
= $176
Particular Make product($) Buy product($)
Direct material(7,000 × $53) 371,000 -
Direct labor(7,000 × $40) 280,000 -
Variable overhead(7,000 ×$36) 252,000 -
Fixed overhead(7,000 × $31) 217,000 132,000
(217,000 - 85,000)
Purchase cost 7,000 × $145 = 1,015,000
Total cost 1,120,000 1,147,000
Difference between two alternatives
= $1,147,000 - $1,120,000
= $27,000
According to the analysis, rubium make the product because buying product cost is more than making the product.
Following are forecasts of sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2017 for Stellar Stores, Inc. Horizon Period (in millions) Reported 2017 2018 2019 2020 2021 Terminal Period Sales $37,006 $44,777 $54,180 $65,558 $79,325 $80,912 NOPAT 1,292 1,563 1,891 2,288 2,768 2,824 NOA 10,007 102 14,643 17,718 21,439 21,868 Assuming a terminal period growth rate of 2%, a discount rate (WACC) of 8%, common shares outstanding of 814.3 million, and net nonoperating obligations (NNO) of $1,676 million, estimate the value of a share of Stellar common stock using the discounted cash flow (DCF) model as of December 31, 2017.
The estimated value of a share of Stellar common stock using the discounted cash flow (DCF) model, as of December 31, 2017, is approximately $48,103.72 million, given a 2% terminal growth rate and an 8% weighted average cost of capital.
The value of Stellar common stock can be estimated using the discounted cash flow (DCF) model. The formula for the DCF valuation is:
[tex]\[ \text{Stock Value} = \frac{\text{NOPAT}_{\text{Terminal}} \times (1 + g)}{\text{WACC} - g} + \frac{\text{NOA}_{\text{Terminal}} + \text{NNO}}{\text{Shares Outstanding}} \][/tex]
Where:
- [tex]\(\text{NOPAT}_{\text{Terminal}}\)[/tex] is the terminal period NOPAT.
- g is the terminal period growth rate.
- WACC is the weighted average cost of capital.
- [tex]\(\text{NOA}_{\text{Terminal}}\)[/tex] is the terminal period net operating assets.
- NNO is the net nonoperating obligations.
- Shares Outstanding is the common shares outstanding.
Given the provided data:
- [tex]\(\text{NOPAT}_{\text{Terminal}} = 2,824\)[/tex] million.
- g = 2% (terminal period growth rate).
- WACC = 8%.
- [tex]\(\text{NOA}_{\text{Terminal}} = 21,868\)[/tex] million.
- NNO = 1,676 million.
- Shares Outstanding = 814.3 million.
Plug these values into the formula:
[tex]\[ \text{Stock Value} = \frac{2,824 \times (1 + 0.02)}{0.08 - 0.02} + \frac{21,868 + 1,676}{814.3} \]\[ \text{Stock Value} \approx \frac{2,824 \times 1.02}{0.06} + \frac{23,544}{814.3} \]\[ \text{Stock Value} \approx \frac{2,884.48}{0.06} + 28.92 \]\[ \text{Stock Value} \approx 48,074.8 + 28.92 \]\[ \text{Stock Value} \approx 48,103.72 \][/tex]
Therefore, the estimated value of a share of Stellar common stock using the DCF model as of December 31, 2017, is approximately $48,103.72 million.
Final answer:
Estimating the value of Stellar common stock using a DCF model requires calculating the present value of projected NOPAT for specific years and terminal period, adjusting for net nonoperating obligations, and dividing by the number of shares. However, calculation cannot occur without the actual forecasted NOPAT and terminal value data.
Explanation:
To estimate the value of a share of Stellar common stock using the discounted cash flow (DCF) model, we need to calculate the present value of the projected NOPAT (net operating profit after tax) for the years 2018-2021 and the terminal period, discounting them back to their present values as of December 31, 2017, using the weighted average cost of capital (WACC) of 8%. Then we have to calculate the present value of the terminal value which considers the perpetual growth rate of 2%. After obtaining the total present value of future cash flows, we must adjust for net nonoperating obligations (NNO) and divide by the number of common shares outstanding to find the per-share value.
Given the provided data:
- \(\text{NOPAT}_{\text{Terminal}} = 2,824\) million.
- g = 2% (terminal period growth rate).
- WACC = 8%.
- \(\text{NOA}_{\text{Terminal}} = 21,868\) million.
- NNO = 1,676 million.
- Shares Outstanding = 814.3 million.
Plug these values into the formula:
\[ \text{Stock Value} = (2,824 * (1 + 0.02))/(0.08 - 0.02) + (21,868 + 1,676)/(814.3) \]\[ \text{Stock Value} \approx (2,824 * 1.02)/(0.06) + (23,544)/(814.3) \]\[ \text{Stock Value} \approx (2,884.48)/(0.06) + 28.92 \]\[ \text{Stock Value} \approx 48,074.8 + 28.92 \]\[ \text{Stock Value} \approx 48,103.72 \]
Therefore, the estimated value of a share of Stellar common stock using the DCF model as of December 31, 2017, is approximately $48,103.72 million.
On May 10, 2020, Crane Co. enters into a contract to deliver a product to Greig Inc. on June 15, 2020. Greig agrees to pay the full contract price of $1,840 on July 15, 2020. The cost of the goods is $1,170. Crane delivers the product to Greig on June 15, 2020, and receives payment on July 15, 2020. Prepare the journal entries for Crane related to this contract. Either party may terminate the contract without compensation until one of the parties performs.
Answer and Explanation:
The journal entries are shown below:
1. Accounts receivable a/c Dr $1,840
To Sales revenue a/c Cr $1,840
(Being the sales is recorded)
2. Cost of goods sold a/c Dr $1,170
To Inventory a/c Cr $1,170
(Being the cost of goods sold is recorded)
3. Cash a/c Dr $1,840
To Accounts receivable a/c Cr $1,840
(Being the payment received is recorded)
Only these three entries are recorded
"Trey Jackson, CFO of Jackson Exploration, Inc. is deciding how to approach a particular oil well project. If the company drills today, the project would cost $925,000 today, and would provide estimated cash flows of $600,000 per year at the end of each of the next 4 years. However, if the company waits a year before drilling, the company would have more geological information regarding the well’s possibilities. The company estimates that if it waits 2 years, the project would cost $975,000 and would have a 65 percent chance of having net cash flows of $1,000,000 per year for 4 years, and a 35 percent chance of having net cash flows of only $300,000 per year for 4 years. Assume a discount rate of 17.5 percent. What should the company do
Answer:
the NPV of drilling in two more years is $74,430 higher in current dollars than drilling today
Explanation:
we can assume that these are 2 different projects:
project A:
initial outlay -$925,000
CF 1 $600,000
CF 2 $600,000
CF 3 $600,000
CF 4 $600,000
discount rate = 17.5%
NPV = -$925,000 + $600,000/1.175 + $600,000/1.175² + $600,000/1.175³ + $600,000/1.175⁴ = $704,859
project B (in two years):
initial outlay -$975,000
CF 1 = ($1,000,000 x 65%) + ($300,000 x 35%) = $755,000
CF 2 = $755,000
CF 3 = $755,000
CF 4 = $755,000
discount rate = 17.5%
NPV = -$975,000 + $755,000/1.175 + $755,000/1.175² + $755,000/1.175³ + $755,000/1.175⁴ = $1,075,906 in two years
now we need to discount the NPV ⇒ $1,075,906/1.175² = $779,289
the NPV of drilling in two more years is $74,430 higher in current dollars than drilling today = $779,289 - $704,859 = $74,430
On September 1, Taci Company lent $ 88,000 to L. Kahil on a 90-day, 4% note.
a. Journalize for Taci Company the lending of the money on September 1.
b. Journalize the collection of the principal and interest at maturity. Specify the date. Round interest to the nearest dollar.
Answer:
(a) Taci Company lent the money on September 1:
Debit Notes receivable $88,000
Credit Cash $88,000
(To recognize notes receivable)
(b) On December 1:
Debit Cash $88,880
Credit Notes receivable $88,000
Credit Interest receivable $880
(Collection of notes principal and interest at maturity)
Explanation:
Note receivable is a promissory note with a written promise made by the borrower to the lender (payee) to pay a certain, definite sum at a specified date.
Interest revenue on the notes is calculated as: Principal x Interest Rate x Time
In this case, the total interest revenue is $88,000 x 4%/12 x 3 months = $880.
Monthly interest revenue is therefore $880 / 3 months = $293.33.
Avery Company has two divisions, Polk and Bishop. Polk produces an item that Bishop could use in its production. Bishop currently is purchasing 22,000 units from an outside supplier for $14 per unit. Polk is currently operating at less than its full capacity of 580,000 units and has variable costs of $7 per unit. The full cost to manufacture the unit is $13. Polk currently sells 450,000 units at a selling price of $17 per unit.A. What will be the effect on Avery Company’s operating profit if the transfer is made internally?
B. What is the minimum transfer price from Polk’s perspective?C. What is the maximum transfer price from Bishop’s perspective?
Answer :
a) Impact on profit increased by $154,000
b) Minimum transfer price = $7
c) Maximum transfer price from Bishop's perspective= $14
Explanation :
As per the data given in the question,
a) Effect on operating profit :
Purchase price from outside = $14 per unit
Variable cost of production internally = $7
Profit per unit = $7
Total number of units = 22,000
Total increment in operating profit is
= 22,000 units × $7
= $154,000
In this case the fixed cost is to ignored
b) Minimum transfer price :
Since, Polk has excess capacity so there will be no increment in fixed cost and Polk would recover its variable cost which is $7
Hence, Minimum transfer price = $7
c) Maximum transfer price from perspective of Bishop :
If price i.e internal is more than $14, there would be a loss For Bishop so it would be purchase from outside due to which the whole company will lose the incremental operating profit of $154,000
Hence, Maximum transfer price = $14