Answer:
B. 2,274
Explanation:
The operating cash flow is shown below:
= EBIT + Depreciation - Income tax expense
where,
EBIT = Sales - cost of good sold - depreciation expense
= $5,436 - $2,245 - $448
= $2,743
Income tax expense would be
= (Sales - cost of good sold - depreciation expense - interest expense) × tax rate
= ($5,436 - $2,245 - $448 - $123) × 35%
= $917
And all other items would remain same
Now put these values to the above formula
So, the value would equal to
= $2,743 + $448 - $917
= $2,274
Answer:
the correct answer is "b"
Explanation:
For the quarter ended March 31, 2014, Maris Company accumulates the following sales data for its product, Garden-Tools: $334,300 budget; $305,700 actual. In the second quarter, budgeted sales were $382,300, and actual sales were $387,600. Prepare a static budget report for the second quarter and for the year to date.
Answer:
Explanation:
The preparation of ta static budget report for the second quarter is shown below:
Maris Company
Sales Budget Report
For the Quarter Ended June 30, 2017
Second Quarter Year to date
Product Line Budget Actual Difference Budget Actual Difference
Garden Tools $334,300 $382,300 $48,000 $716,600 $693,300 $23,300
Favorable Unfavorable
The year to date balances are computed below:
For Budget:
= $334,300 + $382,300
= $716,600
For Actual:
= $305,700 + $387,600
= $693,300
The Maris Company had higher actual sales than budgeted for the second quarter but is still behind the budget year to date. A static budget report shows they are $5,300 over budget for Q2 but $23,300 under budget when combining Q1 and Q2 figures.
Static Budget Report for Maris Company
For the quarter ended March 31, 2014, Maris Company had a budgeted sales amount for Garden-Tools of $334,300 and actual sales came in at $305,700. In the second quarter, the budgeted sales were set at $382,300, while the actual sales achieved were $387,600. Therefore, for the second quarter, Maris Company exceeded its sales budget by $5,300. When preparing a static budget report, we compare the budgeted amounts against the actual results without adjusting them throughout the period.
To generate a static budget report for the second quarter, we'd tabulate the budgeted and actual sales, and then calculate the variance between them. For a yearly report, we'd combine the first and second quarter figures, providing a comparison between the total budgeted sales for the half-year and the actual sales.
Second Quarter Static Budget Report
Budgeted Sales: $382,300
Actual Sales: $387,600
Variance: Actual sales are higher by $5,300
Year to Date Static Budget Report
Budgeted Sales Year to Date: $716,600 ($334,300 from Q1 + $382,300 from Q2)
Actual Sales Year to Date: $693,300 ($305,700 from Q1 + $387,600 from Q2)
Variance Year to Date: Actual sales are lower by $23,300
Even though the sales exceeded the budget in the second quarter, year to date actual sales are still below the budgeted amount. This provides useful insight into the company's sales performance and can help to inform future budgeting decisions.
Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $105 per share. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $105 to $110.00, and the stock has paid a dividend of $17.00 per share. a. What is the remaining margin in the account? b-1.What is the margin on the short position? (Round your answer to 2 decimal places.) b-2.If the maintenance margin requirement is 30%, will Old Economy receive a margin call? c. What is the rate of return on the investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)
Answer:
Consider the following calculation
Explanation:
Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $105 per share. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $105 to $110.00, and the stock has paid a dividend of $17.00 per share.
a. What is the remaining margin in the account?
P0 = $ 105; P1 = 110; N = 1,000; Dividend per share , D = 17
Initial margin required = 50% x N x P0 = 50% x 1,000 x 105 = $ 52,500
Remaining margin = Initial margin + Payoff from the short position
Payoff from the short position = (P0 - P1 - D) x N = (105 - 110 - 17) x 1,000 = - $ 22,000
Hence, Remaining margin = $ 52,500 - $ 22,000 = $ 30,500
Please enter 30,500 as your answer in the answer box.
b-1. What is the margin on the short position? (Round your answer to 2 decimal places.)
Short margin = Remaining margin / Value of short shares today = $ 30,500 / (N x P1) = 30,5000 / (1,000 x 110) = 27.73%
Please enter 27.73 as your answer in the answer box.
b-2. If the maintenance margin requirement is 30%, will Old Economy receive a margin call?
Short margin = 27.73% < margin requirement of 30%, Hence, there will be a margin call.
Please choose "Yes" as your answer.
c. What is the rate of return on the investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)
Rate of return = Payoff from short position / Initial margin = -22,000 / 52,500 = - 41.90%
Hence, please enter -41.90 as your answer in the answer box.
Information concerning the stock of a corporation must be outlined in the articles of incorporation.
A. True
B. False
Answer:
A. True
Explanation:
The company's incorporation article is a series of official documents submitted to a government agency to legitimize the establishment of a company. The articles of incorporation must contain the relevant information, such as company name, street address, representative of the operation service and the number and type of shares, stocks to be issued. The article of incorporation is sometimes called "charter of the company", "charter of the association" or "constituent document". The charter of the association is the documentation required for a company to be registered with the government and acts as an arrangement to recognize the establishment of a company. The document summarizes the basic information required to set up a company, the institutional rules of the state in which the management of a company and the charter of the association are submitted.
Misty Company reported the following before-tax items during the current year:Sales revenue $ 600Selling and administrative expenses 250Restructuring charges 20Loss on discontinued operations 50Misty's effective tax rate is 40%.What is Misty's income from continuing operations?
(A) $198
(B) $330.(C) $210.(D) $360.
Answer:
$
Sales revenue 600
Selling and administrative expenses (250)
Restructuring charges (20)
Profit before tax 330
Tax @ 40% 132
Income from continuing operations 198
The correct answer is A
Explanation:
Income from continuing operation is the excess of sales revenue over selling and administrative expenses, restructuring charges and tax.
Tax is 40% of profit before tax.
Penny Lane and Associates purchased a generator on January 1, 2015, for $6,300. The generator was estimated to have a five-year life and a salvage value of $600. At the beginning of 2017, the company revised the expected life of the asset to six years and revised the salvage value to $300. Using straight-line depreciation, the depreciation expense recorded in 2017 would
Answer:
The depreciation expense recorded in 2017 will be $930
Explanation:
Cost of the generator = $6,300
Initial useful life = 5 years
initial salvage value = $600
Revised useful life = 6 years
Revised salvage value = $300
Now,
Initial Annual depreciation = [ Cost - Initial salvage value ] ÷ Initial useful life
= [ $6,300 - $600 ] ÷ 5
= $1,140
Therefore,
accumulated depreciation till the end of 2016
= 2 × $1,140
= $2,280
Therefore,
Book value for the year 2017
= Cost - accumulated depreciation till the end of 2016
= $6,300 - $2,280
= $4,020
Therefore,
The revised annual depreciation
= [ Book value for 2017 - Revised salvage value ] ÷ Remaining useful life
= [ $4,020 - $300 ] ÷ (6 - 2)
= $930
Hence,
the depreciation expense recorded in 2017 will be $930
On September 1, 2012, Daylight Donuts signed a $200,000, 8%, six-month note payable with the amount borrowed plus accrued interest due six months later on March 1, 2013. Daylight Donuts records the appropriate adjusting entry for the note on December 31, 2012. In recording the payment of the note plus accrued interest at maturity on March 1, 2013, Daylight Donuts would
a. Debit interest expense, $5,333.
b. Debit interest payable, $2,667.
c. Debit interest expense, $2,667.
d. Debit interest expense, $8,000.
Answer:
c. Debit interest expense, $2,667.
Explanation:
The adjusted journal entry is shown below:
Interest expense A/c Dr $2,667
To Interest payable A/c $2,667
(Being accrued interest adjusted)
The interest expense is computed below:
= Principal × rate of interest × number of months ÷ (total number of months in a year)
= $200,000 × 8% × (2 months ÷ 12 months)
= $2,667
The 2 months is calculated from December 31, 2012 to March 1, 2013
You notice that Coca-Cola has a stock price of $ 40.47 and EPS of $ 1.87. Its competitor PepsiCo has EPS of $ 4.17. But, Jones Soda, a small batch Seattle-based soda producer has a P/E ratio of 34.3. Based on this information, what is one estimate of the value of a share of PepsiCo stock? One share of PepsiCo stock is valued at $ nothing.
Answer:
Value of share of Pepsi Co stock will be $90.2388
Explanation:
We have given stock price of coca-cola = $40.47
And EPS = $1.87
So [tex]\frac{P}{E}[/tex] ratio [tex]=\frac{40.47}{1.87}=$21.64[/tex]
Pepsi Co stock EPS = $4.17
We have to find the share of Pepsi Co stock
Pepsi Co stock will be given by
Value of share of Pepsi Co stock = [tex]EPS\times \frac{P}{E}ratio[/tex]
[tex]=21.64\times 4.17=$90.2388[/tex]
The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $ 2,058,300 with depreciation to date of $ 914,800 as of December 31, 2014. On December 31, 2014, management projected its future net cash flows from this equipment to be $ 686,100 and its fair value to be $ 526,010 .The company intends to use this equipment in the future.Prepare the journal entry (if any) to record the impairment at December 31, 2014.At December 31, 2015, the equipment
Answer:
Debit Fixed Asset account $ 457,400
Credit Impairment account (p/l) $ 457,400
Being entries to recognize impairment of asset.
Explanation:
According to IAS 36 impairment of assets, an asset is impaired when the carry amount is lower that the recoverable amount. The recoverable amount is the higher of the value in use or the fair value less cost to sell. The value in use is the present value of the future cash inflows expected from the use of the asset.
Cost of asset = $2,058,300
Depreciation to date = $ 914,800
Carrying amount = $2,058,300 - $ 914,800
= $ 1,143,500
Fair value = $526,010
Expected future net cash flows from the equipment = $686,100
The recoverable amount equals expected future net cash flows from the equipment since this is higher than fair value. This is $686,100.
Since this is lower than the carrying amount, the asset is impaired said to be impaired and will be written down to it's recoverable amount.
Hence
Amount to be written down = $ 1,143,500 - $ 686,100
= $ 457,400
To make the adjustment,
Debit Fixed Asset account $ 457,400
Credit Impairment account (p/l) $ 457,400
Being entries to recognize impairment of asset.
You are given the following information for Lightning Power Co. Assume the company’s tax rate is 22 percent. Debt: 12,000 6.1 percent coupon bonds outstanding, $1,000 par value, 27 years to maturity, selling for 109 percent of par; the bonds make semiannual payments. Common stock: 450,000 shares outstanding, selling for $63 per share; beta is 1.14. Preferred stock: 19,500 shares of 3.9 percent preferred stock outstanding, currently selling for $84 per share. The par value is $100 per share. Market: 5 percent market risk premium and 4.9 percent risk-free rate. What is the company's WACC?
Answer
The answer and procedures of the exercise are attached in the following archives.
Step-by-step explanation:
You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.
The Weighted Average Cost of Capital (WACC) measures the average rate of return a company must earn to cover its financing costs. To calculate WACC, we need to determine the percentage of each source of financing (debt, common stock, preferred stock) to the total capital structure of the company. We then multiply the cost of each source by its weight and sum the results.
Explanation:The Weighted Average Cost of Capital (WACC) measures the average rate of return a company must earn to cover its financing costs. To calculate WACC, we need to determine the percentage of each source of financing (debt, common stock, preferred stock) to the total capital structure of the company. We then multiply the cost of each source by its weight and sum the results. In this case, we have 3 sources of financing: debt, common stock, and preferred stock.
Debt: We have 12,000 bonds outstanding with a 6.1% coupon rate. The current market price is 109% of the par value. We can calculate the cost of debt using the formula (Coupon Rate x Bond Price) / Bond Price. In this case, the cost of debt is (6.1% x 109%) / 100% = 6.661%.Common Stock: We have 450,000 shares outstanding with a market price of $63 per share. To calculate the cost of common stock, we need the company's beta, market risk premium, and risk-free rate. With a beta of 1.14, a market risk premium of 5%, and a risk-free rate of 4.9%, we can use the formula Cost of Common Stock = Risk-Free Rate + (Beta x Market Risk Premium). In this case, the cost of common stock is 4.9% + (1.14 x 5%) = 10.9%.Preferred Stock: We have 19,500 shares of preferred stock outstanding with a market price of $84 per share and a par value of $100 per share. To calculate the cost of preferred stock, we use the formula (Preferred Dividend / Preferred Stock Price). In this case, the cost of preferred stock is (3.9% x $100) / $84 = 4.64%.
Next, we need to determine the weights of each source of financing. The weight of debt is Debt Value / Total Capital Value, the weight of common stock is Common Stock Value / Total Capital Value, and the weight of preferred stock is Preferred Stock Value / Total Capital Value. Finally, we multiply the cost of each source by its weight and sum the results to get the WACC.
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A company is considering the purchase of a new machine for $66,000. Management predicts that the machine can produce sales of $22,000 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $10,400 per year including depreciation of $5,800 per year. The company's tax rate is 40%. What is the payback period for the new machine?a. 3.00 years.b. 6.73 years.c. 5.17 years.d. 11.38 years.e. 17.19 years.
Answer:
After Tax Cashflow: $
Annual sales 22,000
Less: Annual expenses 10,400
Profit before tax 11,600
Less: Tax @ 40% 4,640
Profit after tax 6,960
Add: Depreciation 5,800
After-tax net cashflow 12,760
Payback period = Initial outlay
After-tax net cashflow
= $66,000
$12,760
= 5.17 years
Explanation:
In this question, there is need to calculate after-tax net cashflow, which is sales minus expenses - tax plus depreciation. Tax is calculated at 40% of profit before tax. Payback period is the ratio of initial outlay to after-tax net cashflow.
Elliot and Conrad (a two-member LLC) operated a consulting firm (a "specified services" business). The business is equally owned and the two are not related. The business generates net income of $280,000, pays W–2 wages of $170,000, and has qualified business property of $140,000. Elliot's wife, Julie, is an attorney who works for a local law firm and receives wages of $90,000. They will file a joint tax return and use the standard deduction of $24,000. Conrad's wife, Jessica, earned wages during the year of $350,000, and Conrad and Jessica have itemized deductions of $62,000 and will file a joint return.
a. What is Elliot's qualified business income deduction?
Answer:
Elliot's qualified business income deduction is $28,000.
Explanation:
total income
= share in specified service business income + wages of wife
= 280000*50% + $90000
= $230,000
taxable income before QBI = total income - standard deduction
= $230,000 - $24,000
= $206,000
QBI deduction is lesser of:
- 20% of qualified business income
= $140,000*20%
= $28,000
Therefore, Elliot's qualified business income deduction is $28,000.
Assume the reserve requirement is 10% and the MPC = 0.6 for the economy when a stock market downturn reduces aggregate demand by $100 billion. Instructions: Enter your answers as a whole number. a. Suppose the Federal Reserve wants to increase investment demand to offset the reduction in aggregate demand. To accomplish this goal, how much does investment demand need to increase? $ billion b. To increase investment demand by the desired amount, the Fed estimates that interest rates will need to by 4% and the money supply will need to by $200 billion. c. In order to achieve the $200 billion change in the money supply, the Fed will make an of $ billion.
Answer
The answer and procedures of the exercise are attached in the following archives.
Step-by-step explanation:
You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.
To offset the $100 billion reduction in aggregate demand, the Federal Reserve needs to increase investment demand by $100 billion, achieved by decreasing interest rates by 4% and increasing the money supply by $200 billion. To trigger this increase in money supply, given the 10% reserve requirement, the Federal Reserve needs to inject $20 billion into the economy.
Explanation:Assuming the Federal Reserve wants to counter the $100 billion reduction in aggregate demand caused by the stock market downturn, it needs to increase investment demand by $100 billion. This is because aggregate demand consists of consumer spending, investment demand, government spending, and net exports. Any decrease in one component should be offset by an equivalent increase in another to maintain the same level of aggregate demand.
According to the Federal Reserve's estimations, to increase investment demand by $100 billion, they have decided to decrease interest rates by 4% and increase the money supply by $200 billion. Lowering interest rates will make borrowing cheaper and more attractive, which could lead to an increase in investments. Simultaneously, increasing the money supply would put more money in circulation, further facilitating increased investment.
Finally, to increase the money supply by $200 billion, the Federal Reserve would need to infuse additional capital into the economy. Given the reserve requirement of 10%, the Fed will need to make an injection of $20 billion into the economy because when banks have more money on hand, they can increase their lending activities and thereby increase the money supply in the economy.
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Jennifer earns $17.35 per hour at her job. She works 6 hours per day, 5 days per week.
What is Jennifer's gross income for a 2 week pay period?a.$520.50
b.$694.00
c.$867.50
d.$1,041.00
Answer:
Jennifer's gross income for a 2 week pay period is d.$1,041.00
Explanation:
Jennifer works 6 hours per day, 5 days per week
The number of hours Jennifer works per week = 6 x 5 = 30 hours
The number of hours Jennifer works for 2 weeks = 30 x 2 = 60 hours
She earns $17.35 per hour and works 60 hours for 2 weeks, Jennifer's gross income for a 2 week pay period:
60 x $17.35 = $1,041
Answer:
D
Explanation:
Is there a pricing policy that would have filled the ballpark for the Phillies game?
A. The Philadelphia Phillies could raise ticket prices to imply a shortage of baseball tickets in the market, thus increasing attendance.
B. Since the quantity supplied exceeds the quantity demanded, the Philadelphia Phillies could lower ticket prices to increase attendance.
C. Since consumers of baseball tickets must prefer the San Francisco Giants to the Philadelphia Phillies, no pricing policy is likely to be successful.
D. The Philadelphia Phillies could maintain their current pricing policy and instead renovate the stadium to increase game attendance.
Answer:
The correct answer is letter "B": Since the quantity supplied exceeds the quantity demanded, the Philadelphia Phillies could lower ticket prices to increase attendance.
Explanation:
According to the context, all the attention was on the Los Angeles Dodgers and the San Francisco Giants game since both teams had chances to win the championship. It will imply the rest of the day matches were not going to have a lot of attendance. The ballpark for the Phillies game could have been filled in the case ticket prices were lowered for basic demand theory (if prices decrease, quantity demanded will increase).
The best pricing policy for the Philadelphia Phillies, given the circumstances, would be to lower ticket prices, due to the greater supply than demand. Raising prices or renovating the stadium do not relate directly to the pricing policy and assuming consumer preference is also inaccurate.
Explanation:The subject of this question lies in the field of business, specifically it pertains to the pricing decisions of an organization, in this case, the Philadelphia Phillies, a baseball team. The most effective pricing policy that could increase attendance at Phillies games would most likely be option B. Given the situation where the quantity supplied exceeds the quantity demanded, a possible strategy would be to lower ticket prices.
This could make the games more accessible to a larger audience and therefore, increase attendance. Option A would not necessarily have the desired effect because higher prices could actually deter potential attendants rather than attract them. Option C assumes consumer preference, which is not necessarily accurate or related to the pricing policy. Option D could potentially lead to higher attendance, but it’s not a direct pricing policy, which is asked in the question.
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A ten year loan of 10,000 at 8% annual effective can be repaid using any of the 4 following methods:
(I) Amortization method, with annual payments at the end of each year.
(II) Repay the principal at the end of ten years while paying the 8% annual effective interest on the loan at the end of each year. In addition, make equal annual deposits at the end of each year into a sinking fund earning 6% annual effective so that the sinking fund accumulates to 10,000 at the end of the 10th year.
(III) Same as (II), except the sinking fund earns 8% annual effective.
(IV) Same as (II), except the sinking fund earns 12% annual effective.
Rank the annual payment amounts of each method.
Answer:
(I) $ 1,490.30
(II) $ 1,558.68
(III) $ 1,490.30
(IV) $ 1,369.84
Explanation:
(I) French system:
[tex]PV \div \frac{1-(1+r)^{-time} }{rate} = C\\[/tex]
PV 10,000
time 10
rate 0.08
[tex]10000 \div \frac{1-(1+0.08)^{-10} }{0.08} = C\\[/tex]
C $ 1,490.295
American system with payment of interest on the principal
and then, to a fund to generatethe principal at maturity
(II) 800 dollar of interest plus cuota to get 10,000 in the future
[tex]FV \div \frac{(1+r)^{time} -1}{rate} = C\\[/tex]
FV 10,000
time 10
rate 0.06
[tex]10000 \div \frac{(1+0.06)^{10} -1}{0.06} = C\\[/tex]
C $ 758.680
Total: $1,558.68
[tex]FV \div \frac{(1+r)^{time} -1}{rate} = C\\[/tex]
FV 10,000
time 10
rate 0.08
[tex]10000 \div \frac{(1+0.08)^{10} -1}{0.08} = C\\[/tex]
C $ 690.295
Total $ 1,490.30
[tex]FV \div \frac{(1+r)^{time} -1}{rate} = C\\[/tex]
FV 10,000
time 10
rate 0.12
[tex]10000 \div \frac{(1+0.12)^{10} -1}{0.12} = C\\[/tex]
C $ 569.842
Total $1,369.84
An orange grower has discovered a process for producing oranges that requires two inputs. The production function is Q = min{2x1, x2}, where x1 and x2 are the amounts of inputs 1 and 2 that he uses. The prices of these two inputs are w1 = $5 and w2 = $2, respectively. The minimum cost of producing 140 units is therefore
a. $980.
b. $630.
c. $1,400.
d. $280.
e. $700.
Answer:
Option (B) is correct.
Explanation:
The prices of two inputs 1 and 2 are as follows:
w1 = $5
w2 = $2
Q = min{2x1, x2}
Cost is minimized when 2x1 = x2
140 = min{2x1, x2}
2x1 = 140
x1 = 70
x2 = 2x1 = 140
Total cost, C = w1.x1 + w2.x2
= 5x1 + 2x2
C($) = (5 × 70) + (2 × 140)
= 350 + 280
= $630
Starbucks is opening a location in China every 15 hours, and just opened its largest location in the world in Shanghai. Which method of international expansion is Starbucks utilizing?
Multiple Choice
A. exporting
B. global outsourcing
C. wholly-owned subsidiaries
D. importing
E. joint ventures
Final answer:
Starbucks is utilizing the expansion strategy of establishing wholly-owned subsidiaries in China, demonstrating its commitment to controlling its operations and maintaining its brand within the Chinese market.
Explanation:
Starbucks' method of international expansion in China, where the company is opening a new location every 15 hours and has opened its largest store in Shanghai, is an example of establishing wholly-owned subsidiaries. This approach involves the company owning 100% of the subsidiary's shares and having full control over the business operations in the foreign country. This choice is indicative of Starbucks' long-term commitment to the Chinese market, allowing them to maintain control over their brand and business practices in the rapidly growing Chinese economy.
One behavioral factor that must be considered when responsibilities are assigned to managers is
A. Managers should be held responsible for only actual revenues and actual costs and not for standard revenues or standard costs.B. Managers with responsibility for direct labor costs should compute efficiency variances based on labor used rather than labor purchased.C. Managers should not be allowed to influence the plans and standards for those activities over which they have substantial control.D. Managers should be held responsible for only those cost,revenues, or assets over which they have substantial control.E. Managers in decentralized organizations should be held responsible for the costs, revenues, and assets in all departments in the organization, whether they directly control those departments or not.
Answer:
The correct answer is letter "A": Managers should be held responsible for only actual revenues and actual costs and not for standard revenues or standard costs.
Explanation:
Standard revenues and costs in a company are those calculated after several years of operations. It measures an approximate of how much profits the organization could earn and how much is needed to keep the operations going. Managers should only be evaluated on the actual profits and costs incurred in the firm since only with them they have control.
Which of the following is a win-win strategy? Group of answer choices
a. Avoid arguments that might lead to anger and hurt feelings.
b. Know what you are willing to give up if the other person agrees to give up something.
c. Vote and abide by majority decision.
d. None of these answers is a win-win strategy.
Answer:
The correct answer is letter "B": Know what you are willing to give up if the other person agrees to give up something.
Explanation:
A win-win strategy implies that two parties are involved in a problematic situation and the outcome is beneficial for both of them. So, not only one of them "wins" but the two of them. In most cases, the two parties come to a midpoint giving up their individual interests.
The Rufus Corporation has 125 million shares outstanding and analysts expect Rufus to have earnings of $500 million this year. Rufus plans to pay out 40% of its earnings in dividends and they expect to use another 20% of their earnings to repurchase shares. If Rufus' equity cost of capital is 15% and Rufus' earnings are expected to grow at a rate of 3% per year, then the value of a share of Rufus stock is closest to
Answer:
$20 per share
Explanation:
WACC, k = 0.15,
Expected growth rate of earnings, g = 0.03
Dividends pay out:
= 40% of earnings
= 40% × $500,000,000
= $200 million
Shares repurchases:
= 20% of earnings
= 20% × $500,000,000
= $100 million
Value of shares:
= Present Value of future dividends and repurchases
= (Dividends + Shares repurchases) ÷ (WACC - g)
= ($200 + $100) ÷ (0.15 - 0.03)
= 300 ÷ (0.15 - 0.03)
= $2,500 million
Price per share, P0:
= Value of shares ÷ shares outstanding
= $2,500 million ÷ 125 million
= $20 per share
Final answer:
The value of a share of Rufus stock, calculated using the Gordon Growth Model with the given payout rates and growth rate, is approximately $13.33.
Explanation:
To calculate the value of a share of Rufus stock, we can use the Gordon Growth Model which assumes a perpetual growth of dividends at a constant rate. First, we'll determine the dividends per share. Rufus Corporation expects to pay out 40% of its $500 million earnings in dividends, which equals $200 million in total dividends. With 125 million shares outstanding, the dividend per share would be $1.60. Next, we consider the share repurchase. Rufus plans to use 20% of its earnings, which is $100 million, to repurchase shares. This will reduce the number of shares outstanding and therefore increase dividends per share for remaining shareholders in the future, but for simplicity, this effect is not factored into this computation.
Using the Gordon Growth Model, the value of a share of Rufus stock (P) is calculated as:
P = D / (k - g)
Where D is the dividend per share, k is the equity cost of capital, and g is the growth rate of dividends. Plugging in the values:
P = $1.60 / (0.15 - 0.03)
Therefore, P = $1.60 / 0.12 = $13.33, which is the estimated value of a share of Rufus Corporation's stock given the provided growth and payout rates.
You establish a straddle on Walmart using September call and put options with a strike price of $99. The call premium is $7.95 and the put premium is $8.70. A) What is the most you can lose on this position?
B) What will be your profit or loss if Walmart is selling for $58 in September?
C) At what stock prices will you break even on the straddle?
Answer:
(a) Maximum loss will be $16.65
(b) There will be loss of $24.35
(c) Upper break even level = $115.65
Lower break even level = $82.35
Explanation:
We have given strike price = $99
Call premium = $7.95
And put premium = $8.70
(a) Maximum loss is given by
Maximum loss = put premium + call premium = $7.95 + $8.70 = $16.65
(b) Selling price = $58
So profit/loss = $58 - $99 + $16.65 = -$24.35 ( negative sign indicates loss )
So there will be a loss of $24.35
(c) Upper break even level = $99+$16.65 = $115.65
Lower break even level = $99 - $16.65 = $82.35
A straddle on Walmart with September call and put options with a strike price of $99 has a maximum loss of $16.65. If Walmart is selling for $58 in September, you will lose the entire premium of $16.65. The break-even points for the straddle are $115.65 and $82.35.
Explanation:A straddle is an options strategy where an investor holds positions in both a call option and a put option with the same strike price and expiration date. In this case, you establish a straddle on Walmart using the September call and put options with a strike price of $99. The call premium is $7.95 and the put premium is $8.70.
A) The most you can lose on this position is the combined premiums you paid for the call and put options, which is $7.95 + $8.70 = $16.65.
B) To calculate the profit or loss if Walmart is selling for $58 in September, you need to determine if the options are in-the-money or out-of-the-money. In this case, both the call and put options are out-of-the-money because the stock price is below the strike price. Therefore, both options will expire worthless and you will lose the entire premium you paid for them, which is $16.65.
C) The break-even points for the straddle can be calculated by adding or subtracting the premiums from the strike price. In this case, the break-even points are $99 + $16.65 = $115.65 and $99 - $16.65 = $82.35.
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Use the following information to determine the ending cash balance to be reported on the month ended June 30 cash budget.a. Beginning cash balance on June 1, $96,000. b. Cash receipts from sales, $423,000. c. Budgeted cash disbursements for purchases, $278,000. d. Budgeted cash disbursements for salaries, $97,000. e. Other budgeted cash expenses, $59,000. f. Cash repayment of bank loan, $34,000. g. Budgeted depreciation expense, $36,000. A) $110,000 B) $85,000 C) $51,000 D) $15,000
Answer:
$15000
Explanation:
$96,000 + $423,000 − $278,000 − $97,000
− $59,000 − $34,000 − $36,000 = $15000
Suppose that on January 1 you have a balance of $4100 on a credit card whose APR is 16%, which you want to pay off in 1 year. Assume that you make no additional charges to the card after January 1. a. Calculate your monthly payments. b. When the card is paid off, how much will you have paid since January 1? c. What percentage of your total payment from part (b) is interest?
To pay off a credit card balance of $4100 with an APR of 16% in one year, the monthly payments would be $367.86, totalling $4414.32 over the year. The total interest paid would be $314.32, which is 7.12% of the total payments.
Explanation:To calculate your monthly payments on a credit card balance of $4100 with an APR of 16% that you want to pay off in 1 year, you first have to understand how APR works. APR, or Annual Percentage Rate, represents the annualized interest that you're required to pay on your credit card balance. In this case, an APR of 16% means that you will pay $4100 * 0.16 = $656 in interest over the year if you made no payments.
However, since you will be making equal monthly payments to pay off the balance, your actual interest will be slightly less, and the remaining part of your monthly payment will go towards reducing your outstanding balance. You can find your monthly payment using the loan amortization formula, which in this case would be: Payment = [$4100 * 0.16 / 12] / [1 - (1 + 0.16 / 12)^-12] = $367.86.
a. Thus, your monthly payments will be $367.86.
b. Over the course of a year, that adds up to $367.86 * 12 = $4414.32. So, you would have paid $4414.32 by the end of the year to completely pay off your credit card balance.
c. The total interest paid would be $4414.32 - $4100 = $314.32. Therefore, the percentage of your total payments that is interest would be $314.32 / $4414.32 * 100 = 7.12%.
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The management of Bonga Corporation is considering dropping product D74F. Data from the company's accounting system for this product for last year appear below: Sales $830,000 Variable expenses $390,000 Fixed manufacturing expenses $266,000 Fixed selling and administrative expenses $232,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $111,000 of the fixed manufacturing expenses and $103,000 of the fixed selling and administrative expenses are avoidable if product D74F is discontinued. According to the company's accounting system, what is the net operating income earned by product D74F? Include all costs in this calculation—whether relevant or not. a. $58,000 b. $440,000 c. $58,000 d. $440,000
Answer:
$-58,000
Explanation:
As we are computing for operating income earned as per the company's accounting system, we will use all absorbed and allocated costs.
Sales $830,000
Less:
Variable expenses $390,000
Manufacturing expenses $266,000
Fixed Selling and Admin $232,000
Profit as per Accounting system $-58,000
According to the accounting system, there is a loss of $58,000 for D74F
Hope that helps.
Answer:
From the data given
the total sales=$830,000
variable expenses=$390000
Then the net operating income=Net sales-variable expenses
Net operating income=$440000
option D
Relative Valuation (45 min) X KNOWLEDGE CHECK On the chart below, if the earnings per share grew from 7.61 on December 31, 2018, to 7.82 on June 30, 2019, what would the implied earnings yield be? 2.2% 4.1% 24.4% 1.8% Click to open/close chart. II Search> MCD US Equity 4 Load Actions 3) Save As Graph Fundamentals YTD 10Y Max Quarterly Table R Fields/Securities 6M 1Y 3Y SY 7Y Options 8.00 Track Annotate Zoom O Reset 7.61 750 190.71 7.61 Earnings per Share (L1) Dividends per Share (L1) 4.19 180 Price per Share (R2) 190.71 7.00 6.50 160 6.00 5.50 140 5.00 120 4.50 4.19 4.00 100 3.50 02 2016 02 2017 02 Q3 2015 04 04 Q3 04 Q1 Q2 2018 03 04 2019
Answer:
The answer is the option 2=4.1%.
Explanation:
In the first instance, the question is misspelled. It seems to be a product of the transcription of an image. By googling the text, you can find the images that are attached where the problem arises.
Taking into account the above, let's work on the problem found.
First of all, the implied earnings yield is given by:
[tex]E_{year} = \frac{(earnings-per-share)}{price-per-share}[/tex]
Replacing in equation:
[tex]E_{year}=\frac{7.82}{190.71}\\[/tex]
[tex]E_{year}=0.041\\[/tex]
which we can express in percentage terms as:
[tex]E_{year}=4.1 %\\[/tex]
So, the answer is the option 2=4.1%.
The earning yield made using the data given is the ratio of the change in the earning per share to the price per share which is 4.1%
The new earning per share = $7.82 Price per share = 190.71Earning yield = Earning per share / Price per share
Earning yield = $7.82 / $190.71
Earning yield = 0.0410046
This could be expressed as a percentage = 0.041 × 100% = 4.1%
Therefore, the earning yield made is 4.1%
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SME Company has a debt-equity ratio of .57. Return on assets is 7.9 percent, and total equity is $620,000. a. What is the equity multiplier.b. What is the return on equity?c. What is the net income?
The equity multiplier for SME Company is 1.56. Its Return on Equity (ROE) is 12.3%. The Net Income of the company is $76,260.
Explanation:Let's answer each part of the question step by step.
a. Equity Multiplier: The equity multiplier is an indicator of the financial leverage of a company. It can be calculated as (Total Assets / Total Equity). Since the Debt/Equity ratio is given as 0.57, this implies Debt/Total Assets = 0.57/(1+0.57) = 0.36. Therefore, Equity/Total Assets = 1 - 0.36 = 0.64. Thus, the equity multiplier is 1/0.64 = 1.56.
b. Return on Equity: Return on Equity (ROE) is calculated by Net Income/ Total Equity. However, it can also be calculated as Return on Assets (ROA) multiplied by the equity multiplier. Given that the ROA is 7.9 percent and the equity multiplier is 1.56, the ROE would be 7.9% * 1.56 = 12.3%.
c. Net Income: The Net income can be calculated by multiplying the ROE by the Total Equity. So, Net Income = ROE*Total Equity = 0.123 * $620,000 = $76,260.
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A U.S. firm sells merchandise today to a British company for £150,000. The current exchange rate is $1.55/£ , the account is payable in three months, and the firm chooses to avoid any hedging techniques designed to reduce or eliminate the risk of changes in the exchange rate. The U.S. firm is at risk today of a loss if:A) the exchange rate changes to $1.52/£.B) the exchange rate changes to $1.58/£.C) the exchange rate doesn't change.D) all of the above
Answer:
b
Explanation:
Underline all of the following costs that are included in the cost of land.
a) Removal of unwanted buildings
b) Lighting
c) Fencing and paving
d) Brokerage commission
e) Survey fees and legal fees
f) Purchase price
g) Security system
Answer:
a) Removal of unwanted buildings
d) Brokerage commission
e) Survey fees and legal fees
f) Purchase price
A company is considering two projects. Project I Project II Initial investment $120,000 $120,000 Cash inflow Year 1 $40,000 $20,000 Cash inflow Year 2 $40,000 $20,000 Cash inflow Year 3 $40,000 $32,000 Cash inflow Year 4 $40,000 $48,000 Cash inflow Year 5 $40,000 $50,000 What is the payback period for Project I?
a. 5 years
b. 2.5 years
c. 1 year
d. 3 years
e. 3.5 years
In January 2007, XM enjoyed about 58 percent of satellite radio subscribers, and Sirius had the remaining 42 percent. Both firms were suffering losses, despite their dominance in the satellite radio market. In 2008, the DOJ decided not to challenge a merger, and these two firms united to become Sirius XM. If you were an economic consultant for Sirius, which of the following would NOT be a viable economic arguments designed to persuade the DOJ not to challenge the merger?
1)Sirius and XM compete against other products such as broadcast radio and MP3s.
2)At least one of these firms is financially unstable.
3)Rapidly changing technology in the portable music industry would prevent anticompetitive behavior.
4)The merger will help to increase the companies' market power.
5)There would be significant cost savings if the merger took place.
Answer:
The correct answer is 3
good luck ❤
Explanation:
The correct option that would NOT be a viable economic argument to persuade the Department of Justice (DOJ) not to challenge the merger is Option 4: The merger will help to increase the companies' market power. This because promoting increased market power is usually a major concern for antitrust authorities, as it could lead to less competition and potential harm to consumers.
When considering the merger of two dominant players in a market, the role of the DOJ is to assess the impact on competition. Arguments that are typically made to support such mergers include the ability to compete with other forms of media (Option 1), financial instability requiring consolidation (Option 2), and the fast-changing nature of technology that prevents monopolistic behavior (Option 3). These factors suggest a competitive market would remain post-merger. However, suggesting a merger would increase market power (Option 4) is counterproductive, as the DOJ's mandate is to prevent decreased competition and increased monopoly power. Cost savings argument (Option 5) is also valid as it suggests benefits to both the company and potentially the consumers. A valid argument, like the one mentioned in Option 4, from an antitrust perspective, is that increasing market power might lead to negative outcomes such as reduced competition, higher prices, and less innovation, which is precisely what antitrust laws are designed to prevent.