Answer:
D.
Explanation:
Strategic Business unit is also popularly known as SBU. It is an independent entity of a large company. This entity have its own aims and visions, and operates individually but report its working to the headquarter. The aim of this entity is target market.
An example of SBU is Samsung. The company have different categories of product under one name. It is an electron company that makes phones, televisions, refrigators, camera, etc. All these sub-categories or divison of Samsung are SBU.
From the given options the correct one is D.
Which of the following is a manufacturing cost?
A. Indirect materials
B. Advertising expense
C. Depreciation of the office equipment used by the sales staff
D. Salary of clerical workers
Answer:
A and C
Explanation:
A manufacturing cost is the depreciation of the office supplies utilized by the sales team and indirect materials. As a result, choices (A) and (C) are the correct stuff.
What is manufacturing cost?The cost of all the resources used to produce a product, collectively referred to as the manufacturing cost, is what is considered. Direct labor, direct material costs, and manufacturing overhead make up the three areas that make up the cost of production. The whole cost of delivery is affected by it.
The raw materials known as "direct materials" are those that are included into the finished good. Applying a chain of processes to maintain a deliverable product provides value to raw materials in manufacturing. For example, welding, cutting, and painting are just a few of the many processes that can be used on raw materials. The difference between direct and indirect materials must be understood.
Hence, option (C) is accurate.
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Scranton, Inc. reports net income of $232,000 for the year ended December 31. It also reports $88,600 depreciation expense and a $5,100 gain on the sale of equipment. Its comparative balance sheet reveals a $35,900 decrease in accounts receivable, a $15,950 increase in accounts payable, and a $12,650 decrease in wages payable. Calculate the cash provided (used) in operating activities using the indirect method.
Answer:
Cash flow form operating activities $359,800
Explanation:
$
Net income 232,000
Add depreciation expense 88,600
Add Decrease in receivable 35,900
Increase in account payable 15,950
Decrease in wages ( 12,650)
Cash flow form operating activities 359,800
Increase in payable and decrease in receivable represent cash inflow while decrease in payable and increase in receivables represent cash outflow
Pronghorn Appliances provides a 3-year warranty with one of its products which was first sold in 2017. Pronghorn sold $1,840,000 of products subject to the warranty. Pronghorn expects $202,000 of warranty costs over the next 3 years. In 2017, Pronghorn spent $106,000 servicing warranty claims. Prepare Pronghorn’s journal entries to record the sales (ignore cost of goods sold) and the December 31 adjusting entry, assuming the expenditures are inventory costs; Pronghorn now expects future warranty costs of $115,000
Answer:
See the explanation below.
Explanation:
Balance in the warranty liability account after claim = $202,000 - $106,000 = $96,000
Amount needed to reduce expected warranty to $115,000 = $155,00 - $96,000 = $19,000
The journal entries will be as follows:
Details Dr ($) Cr ($) .
Cash 1,840,000
Sales revenue 1,840,000
To record the sales of products .
Warranty expenses 202,000
Estimated warranty liability 202,000
To record the expected warranty expenses .
Warranty liability account 106,000
Inventory 106,000
To record the warranty claim .
Warranty expenses 19,000
Estimated warranty liability 19,000
To record the reduction of expected warranty expenses to $115,000.
Use the following information for Problems 35 through 40 A potential investor is seeking to invest $1,000,000 in a venture, which currently has 2 million shares held by its founders, and is targeting a 50% return five years from now. The venture is expected to produce 1 million dollars in income per year at year 5. It is known that a similar venture recently produced $2,000,000 in income and sold shares to the public for $20,000,000. What is the percent ownership of our venture that must be sold in order to provide the venture investor’s target return?
Answer:
0.3797 or 37.97%
Explanation:
According to the scenario, computation of the given data are as follow:-
Wants Rate on return on investment = 50%
Expected value of return on investment = invested amount × (1+g)^t
= $1,000,000 × (1+50%)^5
= $1,000,000 × 7.59375
= $7,593,750
Similar venture would achieve valuation of $20,000,000 for $2,000,000. We can expect that company would achieve similar valuation of $20,000,000 in 5 years from now.
Investor’s share value at 5 years = $7,593,750 ÷ $20,000,000
= 0.3797 or 37.97%
We learned in class that Starbucks uses its baristas as front line “brand ambassadors”. This is an example of ________________?
A.
top management not doing their jobs
B.
Inverted Organization Structure
C.
Management by Objectives MBO
D.
Giving uneducated employees too much responsibility
Answer:
Inverted Organization Structure
Explanation:
An Inverted Organization Structure is a structure where the employees are given more autonomy. Employees are given more prominent and important roles in the business.
I hope my answer helps you
Option B is correct because it is an example of inverted organization structure.
An Inverted Organization Structure is a organizational structure where employees are given more autonomy in their operation, that is, they are given more prominent and important roles in the company.
This type of structure is beneficial because the top hierarchy have lesser work and employee get more experience because of decision-makings.
In conclusion, the Option B is correct because it is an example of inverted organization structure
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Net income was $469,000. Issued common stock for $76,000 cash. Paid cash dividend of $14,000. Paid $115,000 cash to settle a note payable at its $115,000 maturity value. Paid $124,000 cash to acquire its treasury stock. Purchased equipment for $90,000 cash. Use the above information to determine this company's cash flows from financing activities. (Amounts to be deducted should be indicated with a minus sign.)
Answer:
The company's cash flows from financing activities is ($177,000).
Explanation:
The company
Statement of cash flows (extract)
Proceed from issue of common stock $76,000
Dividends paid ($14,000)
Repayment of note payable ($115,000)
Purchase of treasury stock ($124,000)
Net cash flows from financing activities ($177,000)
Dinklage Corp. has 9 million shares of common stock outstanding. The current share price is $69, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $70 million, a coupon rate of 6 percent, and sells for 94 percent of par. The second issue has a face value of $55 million, a coupon rate of 5 percent, and sells for 106 percent of par. The first issue matures in 24 years, the second in 9 years.Suppose the most recent dividend was $4.25 and the dividend growth rate is 4.4 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 25 percent. What is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer:
10.83%
Explanation:
The simplest way to determine the if we use the Gordon growth model for determining the company's stock price:
stock price = [dividend x (1 + growth rate)] / (WACC - growth rate)
dividend = $4.25g = 4.4%stock price = $69WACC - g = [dividend x (1 + g] / price
WACC = {[dividend x (1 + g] / price} + g
WACC = {[$4.25 x (1 + 4.4%] / $69} + 4.4% = 0.1083 or 10.83%
Imagine that your goal is to retire 34 years from today with \$1,000,000$1,000,000 in savings. Assuming that you currently (i.e., today) have \$5,000$5,000 in savings, what rate of return must you earn on that savings to hit your goal? (Hint: Solve your future value formula for the discount rate, RR) *Make sure to input all percentage answers as numeric values without symbols, and use four decimal places of precision. For example, if the answer is 6%, then enter 0.0600.
Answer:
Present value after 34years = 1000000
Cash flow at present= 5000
Using
PV= CF(1+R)^t
1000000=5000(1+R)^34
R=1.169-1
R=0.168(16.8%)
Rate of return must you earn on that savings to hit your goal is 0.168, at the present value of $1000000, this can be calculated as follows
formula for calculating rate of return =
PV= CF(1+R) ^t
Wherein,
PV is Present value after 34years = 1000000
CF is Cash flow at present= 5000
R (rate of return) =?
T, that is time is 34 years
Therefore, with the help of given numbers the rate of return can be calculated as follows:
1000000=5000(1+R) ^34
R=1.169-1
R=0.168(16.8%)
Therefore, an individual with the present value of $1000000 and present cash flow of $5000 can earn a rate of return at 0.168 after 34 years
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The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $74,000. The machine would replace an old piece of equipment that costs $19,000 per year to operate. The new machine would cost $9,000 per year to operate. The old machine currently in use could be sold now for a salvage value of $31,000. The new machine would have a useful life of 10 years with no salvage value. Required: 1. What is the annual depreciation expense associated with the new bottling machine
Answer:
$7,400 per year
Explanation:
Data provided for computing the annual depreciation expense is here below:-
Automated bottling machine = $74,000
Useful life = 10 years
The calculation of annual depreciation expense is given below:-
Annual depreciation expense = Automated bottling machine ÷ Useful life
= $74,000 ÷ 10
= $7,400 per year
Therefore for computing the annual depreciation expense we simply divide the automated bottling machine by useful life.
Assume that Parker Company will receive SF200,000 in 360 days. Assume the following interest rates: the 360-day borrowing rate in U.S. is 7% while the 360-day borrowing rate in Switzerland is 5%. The 360-day deposit rate in U.S. is 5% while the 360-day deposit rate in Switzerland is 4%. Assume the forward rate of the Swiss franc is $0.50 and the spot rate of the Swiss franc is $0.48. If Parker Company uses a money market hedge, it will receive ____ in 360 days.
Answer:
Company will receive = $96,000
Explanation:
As per the data given in the question,
Corresponding SF liability equals to pay SF200,000 including interest
= 200,000÷1.05 = SF190476.19
Now Convert the SF into $US at the current spot rate = $0.48×190476.19
= $91428.57
Now deposit the $ US at 5% and withdraw after 360 days =
= $91428.57 + $91428.57×5%
= $95999.99
This way the liability of SF 190476.19 + 190476.19×5% interest will be paid off when Parker company receives $200,000, Parker company will receive = $96,000 in 360 days.
The SP Corporation makes 42,000 motors to be used in the production of its sewing machines. The average cost per motor at this level of activity is: Direct materials $ 10.10 Direct labor $ 9.10 Variable manufacturing overhead $ 3.75 Fixed manufacturing overhead $ 4.70 An outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to SP Corporation for this motor is $25.75. If SP Corporation decides not to make the motors, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. Direct labor is a variable cost in this company. The annual financial advantage (disadvantage) for the company as a result of making the motors rather than buying them from the outside supplier would be:
Answer:
annual financial advantage, $837,600
Explanation:
Analysis of the Make or Buy Decision - Making
Making Costs
Direct materials $ 10.10×42,000 424,200
Direct labor $ 9.10×42,000 382,200
Variable manufacturing overhead $ 3.75×42,000 157,500
Fixed manufacturing overhead $ 4.70×42,000 197,400
Total 1,161,300
Buying Costs
Purchase Price $25.75×42,000 1,801,500
Fixed manufacturing overhead $ 4.70×42,000 197,400
Total 1,998,900
It costs $837,600 more to Buy than to make.
Hence the annual financial advantage for the company as a result of making the motors rather than buying them from the outside supplier would be $837,600.
Crowl Corporation is investigating automating a process by purchasing a machine for $793,800 that would have a 9-year useful life and no salvage value. By automating the process, the company would save $133,000 per year in cash operating costs. The new machine would replace some old equipment that would be sold for scrap now, yielding $21,200. The annual depreciation on the new machine would be $88,200. The simple rate of return on the investment is closest to
a. 5.80%
b. 11.12%
c. 16.72%
d. 5.12%
Answer:
Simple rate of return is 5.8%
Therefore option (a) is correct option.
Explanation:
It is given that purchase cost = $793800
Company saving per year = $133000
Yielding = $21200
Annual depreciation = $88200
Annual profit = $133000 - $88200 = $44800
Net investment is equal to = $793800 - $21200 = $772600
Simple rate of return [tex]=\frac{44800}{772600}=0.0579[/tex]
= 5.8%
Therefore simple rate of return is 5.8 %
So option (a) is correct.
Selected information from Arbon Corporation's accounting records and financial statements for 2021 is as follows ($ in millions): Cash paid to acquire machinery $ 36 Reacquired Arbon common stock 50 Proceeds from sale of land 90 Gain from the sale of land 52 Investment revenue received 66 Cash paid to acquire office equipment 80 In its statement of cash flows, Arbon should report net cash outflows from investing activities of:
Answer:
Arbon should report net cash outflows from investing activities of: ($26)
Explanation:
Arbon Corporation
Statement of cash flows (extract)
Purchase of machinery ($36)
Proceeds from sale of land 90
Cash paid to acquire office equipment (80)
Net cash outflows from investing activities ($26)
Therefore, Arbon should report net cash outflows from investing activities of ($26).
Note that reacquired stock affects the financing section of the cash flows, while gain on sale of land and investment revenue received affect the operating section of the cash flows.
A marketing manager wants to build a strong relationship with the customers and to customize messages without high costs. He understands that relationship building and message customization would require constant updating of the database due to the reliance on CRM and he plans to hire staff to make sure the database stays up to date. Based on the manager's consideration, ________ will be the most appropriate promotion mix element.
Answer:
Direct marketing and interactive marketing.
Explanation:
In a case of direct marketing here, they do research, identify customers, select media (TV, direct mail, internet), and create a campaign. But rather than guess whether the message worked, they track the consumer's response. How many people (and of what age, ethnic group, income level) called the number in the catalog, clicked the button on the website, or went to the store for their gift with purchase. This is because direct marketers can measure the results, they can make the next campaign even better.
While in the other hand, interactive marketing explained to be the fastest growing form of marketing where sellers do chats and explanations that comes off as convincing approach of their products to their buyers, this could be physically or online.
A law firm received $1600 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause:
Answer and Explanation:
In the first situation, the journal entry is
Cash Dr $1,600
To Unearned revenue $1,600
(Being the unearned revenue is recorded)
For this we debited the cash as it increased the assets and credited the unearned revenue as it also increased the liabilities
The adjusting entry is
Unearned Service Revenue XXXXX
To Service Revenue XXXXX
(Being the adjusting entry is recorded)
If this entry is not recorded than it would leads to understated of revenue and overstated of liabilities
In 2020, Sheffield Corp., issued for $102 per share, 97000 shares of $100 par value convertible preferred stock. One share of preferred stock can be converted into three shares of Sheffield's $20 par value common stock at the option of the preferred stockholder. In August 2021, all of the preferred stock was converted into common stock. The market value of the common stock at the date of the conversion was $25 per share. What total amount should be credited to additional paid-in capital from common stock as a result of the conversion of the preferred stock into common stock
Answer:
Additional paid-in capital is $4,074,000.
Explanation:
In 2020, Sheffield issued $102 per share and there were 97,000 shares of convertible preferred stock.
Preferred stock = 97,000 shares × $102 = $9,894,000
Also we were told that one preferred stock can be converted to 3 common stock i.e. 3 × Preferred stock = Common stock
Therefore, Common stock = [(97000 shares × 3 shares) × $20] = $5,820,000
Additional paid-in capital = $9,894,000 - $5,820,000 = $4,074,000.
Consider the oil-producing countries of A, B, and C. Each has a marginal cost of zero. World demand is given by Q = 1430 - P. Suppose the three countries form a cartel, and that none of them has an incentive to deviate from the cartel. By how many units lower is the total output of oil under the cartel relative to the Cournot solution?
Answer: 357.50
Explanation:
Under Cournot model that has three firms, each firm produces at
q = (1430 – 0)/((3+1)×1)
= 1430/4
= 357.5 units
Total output = 357.5 × 3
= 1072.5 units
Under cartel, the marginal revenue equals to the marginal cost.
MR = MC = 0
1430 – 2Q = 0
Q = 1430/2
Q = 715 units
Difference= 1072.5 units - 715 units
= 357.5 units
Hence the units are 357.50 units lower in cartel compared to Cournot.
Beamish Inc., which produces a single product, has provided the following data for its most recent month of operations: Number of units produced 4,600 Variable costs per unit: Direct materials $ 91 Direct labor $ 85 Variable manufacturing overhead $ 7 Variable selling and administrative expense $ 10 Fixed costs: Fixed manufacturing overhead $ 161,000 Fixed selling and administrative expense $ 326,600 There were no beginning or ending inventories. The absorption costing unit product cost was:
Answer:
The answer is $ 218
Explanation:
Solution
Given that:
Description Amount
Direct materials $91
Direct labor $85
Variable manufacturing overhead $7
Fixed manufacturing overhead
( $ 161,000/ 4,600 units) $35
The unit product under absorption costing = $218
Therefore, the absorption costing unit product cost is $218
In preparation for developing its statement of cash flows for the year just ended, D-Rose Distributors collected the following information: ($ in millions) Purchase of treasury bills (considered a cash equivalent) 6.7 Sale of preferred stock 150.7 Gain on sale of land 4.7 Proceeds from sale of land 25.7 Issuance of bonds payable for cash 140.7 Purchase of equipment for cash 30.7 Purchase of GE stock 35.7 Declaration of cash dividends 134.7 Payment of cash dividends declared in previous year 130.7 Purchase of treasury stock 120.7 Payment for the early extinguishment of long-term notes (carrying (book) value: $100 million) 110.7 Required: 1. Prepare the investing activities section of D-Rose's statement of cash flows. 2. Prepare the financing activities section of D-Rose's statement of cash flows.
Answer and Explanation:
1. The preparation of the investing activities is presented below:
Cash flow from investing activities
Proceeds from sale of land $25.7
Purchase of equipment for cash -$30.7
Purchase of GE stock -$35.7
Net cash used by investing activities -$40.7
2. The preparation of the financing activities is presented below:
Cash flow from financing activities
Sale of preferred stock 150.7
Issuance of bonds payable for cash 140.7
Payment of cash dividends declared in previous year -130
Purchase of treasury stock -120
Payment for the early extinguishment of long-term notes (carrying (book) value: $100 million) -110.7
Net cash used by financing activities -$69.3
The minus sign shows the cash outflow and the positives sign shows the cash inflow
Fresher Foods, Inc., orally agreed to purchase one thousand bushels of corn for $1.25 per bushel from Dale Vernon, a farmer. Fresher Foods paid $125 down and agreed to pay the remainder of the purchase price on delivery, which was scheduled for one week later. When Fresher Foods tendered the balance of $1,125 on the scheduled day of delivery and requested the corn, Vernon refused to deliver it. Fresher Foods sued Vernon for damages, claiming that Vernon had breached their oral contract.
Can Fresher Foods recover? If so, to what extent?
Answer:
In the case of Fresher Goods, Inc.v. Vernon, the trial court will possibly conclude that Vernon must complete the portion of the payment which has already been compensated for as a result of partial results.
Explanation:
Vernon accepted partial payment for the sold goods. While the Law of Frauds demanded that any contract for the selling of goods at a price of $500 or more be enforceable in writing, the oral arrangement was partially compensated and agreed by all parties. That part of the deal was binding, so Vernon would supply 100 corn bushels to Fresher for $1.25 per bushel.
Farrugia Corporation produces two intermediate products, A and B, from a common input. Intermediate product A can be further processed into Product X. Intermediate product B can be further processed into Product Y. The common input is purchased in batches that cost $89 each and the cost of processing a batch to produce intermediate products A and B is $36. Intermediate product A can be sold as is for $53 or processed further for $33 to make Product X that is sold for $79. Intermediate product B can be sold as is for $113 or processed further for $66 to make Product Y that is sold for $158.
Required:
A. Assuming that no other costs are involved in processing potatoes or in selling products, how much money does the company make from processing one batch of the common input into the end products X and Y?
B. Should each of the intermediate products, A and B, be sold as is or processed further into an end product?
Answer:
Explanation:
Product A Product B Total
Incremental rev. 79 158 237
Incremental cost 33 66 99
Contribution 46 92 138
common cost (89)
Cost of Processing (36)
Net income 13
B
Financial advantage - Incremental revenue- Incremental cost -Initial revenue
Product A
79-33-53 = - 7
Product B
158-66-113 = -21.
The two products are better sold at it is without further processing.
As no other cost is involved in the processing or selling and the initial selling price is greater than the incremental contribution , it is advisable that they are sold as they are
Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp rise in the stock market, an increase in government purchases, an increase in the money supply and a decline in the value of the dollar. In the short run a. the price level and real GDP will both rise. b. the price level and real GDP will both fall. c. neither the price leave nor real GDP will change. d. All of the above are possible.
Answer:
All of the above are possible.
Explanation:
Discussions here center on equilibrium of an economy in a long run, and here after the government activities, their is a decline in dollar value; therefore in the short run, the price level and real GDP will both rise in as much as the price level and real GDP will also both fall. It is also gathered that neither the price leave nor real GDP will change.
The transition from the short run to the long run may be done by considering some short run equilibrium that is also a long run equilibrium as to supply and demand, then comparing that state against a new short run and long run equilibrium state from a change that disturbs equilibrium, say in the sales tax rate, tracing out the short run adjustment first, then the long run adjustment.
The property appraisal district for Marin County has just installed new software to track residential market values for property tax computations. The manager wants to know the total equivalent cost of all future costs incurred when the three county judges agreed to purchase the software system. The system has an installation cost of $150,000 and an additional cost of $50,000 at year 10. The annual software maintenance cost is $5,000 for the first 4 years and $8,000 thereafter. If the new system will be used for the indefinite future, find the equivalent present value at a discount rate of 5%.
Answer:
Equivalent annual cost = $16,502.89
Explanation:
Equivalent annual cost = Present Value of cost / Annuity factor
Present value of cost:
PV of additional cost =50,000 ×1.05^(-10)=30,695.66
PV of maintenance cost
First four years= 5,000× (1-1.05^(-4))/0.05=17,729.75
From year 5 to infinity = (8,000/0.05)× 1.05^(-4)=131,632.39
PV of maintenance cost = 17,729.75 + 131,632.396= 149,362.14
PV of costs = 150,000 + 30,695.66 + 149,362.14= 330,057.8112
Annuity factor = 1/r = 1/0.05= 20
Equivalent annual cost = 330,057.8112 /20=$16,502.89
Equivalent annual cost = $16,502.89
Misty and John formed the MJ Partnership. Misty contributed $50,000 of cash in exchange for her 50% interest in the partnership capital and profits. During the first year of partnership operations, the following events occurred: the partnership had a net taxable income of $20,000; Misty received a distribution of $12,000 cash from the partnership; and Misty had a 50% share in the partnership's $60,000 of recourse liabilities on the last day of the partnership year. Misty's adjusted basis for her partnership interest at year end is:
Answer:
$78,000
Explanation:
The computation of interest at year end is shown below:-
Interest at year end = Cash contribution + Income of partnership + Share of partnership liabilities - Cash from the partnership
= $50,000 + $20,000 × 50% + $60,000 × 50% - $12,000
= $90,000 + $10,000 + $30,000 - $12,000
= $78,000
Therefore for computing the partnership interest at year end we simply applied the above formula by considering all the items given in the question
. Spot rates and forward rates:Assume that the current yield curve for zero-coupon bonds (spot rates) is as follows:y1 = 0.5%, y2 = 0.75%, y3 = 1.0%, y4 = 1.25%, y5 = 1.5%a. Plot the spot rates against maturity (yield curve). Is the yield curve upward or downward sloping? Do market participants expect interest rates to increase or decrease in the future? b. What are the implied 1-year forward rates f2, f3, f4, and f5? Are interest rates expected to increase or decrease?Assume that there is no uncertainty about future short rates. This means that future 1 year interest rates will be equal to current forward rates (which you calculated in b.).c. In that situation what will be the spot curve (that is, the yields to maturity on 1, 2, 3, and 4-year zero coupon bonds) in 1 year? d. What is the price of a 5-year coupon bond making annual coupon payments of 2% and a par value of 1000 today? Is the bond trading above or below par? Why?e. What is the price of this bond next year (remember, it is then a 4-year coupon bond)? What is the rate of return on this bond over the next year?
Answer:
Check the explanation
Explanation:
As is observable in the first attached image below, the yield curve is upward sloping. According to the pure expectations hypothesis which states that current short-term interest rates are a reflection of long-term term interest rates, market participants should expect long-term interest rates to rise going forward.
(b) Implied one-year forward rate calculation:
[tex]1+f2 = [(1+y2)^(2)] / (1+y1)[/tex]
f2 = 1.0006%
[tex]f3 = [{(1+y3)^(3)} / {(1+y2)^(2)}] - 1[/tex]
f3 = 1.502% approximately
[tex]f4 = [{(1+y4)^(4)} / {(1+y3)^(3)}] - 1[/tex]
f4 = 2.004% approximately
[tex]f5 =[{(1+y5)^(5)} / {(1+y4)^(4)}] - 1[/tex]
f5 = 2.506% approximately.
As implied one-year forward rates are observed to be rising and there is no uncertainty about future spot rates, future interest rates are expected to rise.
(C) Kindly check the second attached image below for the solution to question c
(d) The bond's price would be calculated by summing the Present Values(PVs) of the bond's future cash flows (in the form of annual coupon payments and face value redemption). The discount rate, however, should be the spot rates from the yield curve instead of a single promised yield to maturity.
Let bond price be Pm
Therefore, Pm = 20 / 1.005 + 20 / (1.0075)^(2) + 20 / (1.01)^(3) + 20 / (1.0125)^(4) + 1020 / (1.015)^(5) = $ 1024.872 approximately.
The bond's market value is above its par value, thereby implying that the bond is selling at a premium. This happens whenever the bond's discount rate (or spot interest rates in this case) is below the bond's annual coupon rate.
g On July 1, 2019, Sheffield Corp. issued 9% bonds in the face amount of $12400000, which mature on July 1, 2025. The bonds were issued for $11859948 to yield 10%, resulting in a bond discount of $540052. Sheffield uses the effective-interest method of amortizing bond discount. Interest is payable annually on June 30. At June 30, 2021, Sheffield's unamortized bond discount should be
Answer:
$393,063
Explanation:
The bond is issued on discount when the issuance price is less than the face value of the bond. The discount is expensed over the bond period until maturity. It is added to the interest expense value to expense it.
Unamortized Discount is the discount balance which has not been expensed or discount balance for outstanding period of the bond to maturity.
Discount Balance = $540,052
Date Interest Paid Interest Expense Amortization Book Value
7/1/19 11,859,948
6/30/20 1,116,000 1,185,995 69,995 11,929,943
6/30/21 1,116,000 1,192,994 76,994 12,006,937
Unamortized Discount = Total Discount - Discount amortized
Unamortized Discount = $540,052 - ($69,995 + $76,994)
Unamortized Discount = $393,063
Drake Corporation is reviewing an investment proposal. The initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is equal to its book value. There would be no salvage value at the end of the investment's life.
Investment Proposal
Year Initial Cost and Book Value Annual Cash Flows Annual Net Income
0 $104,500
1 69,600 $44,000 $9,100
2 41,900 39,500 11,800
3 21,600 35,900 15,600
4 8,300 31,000 17,700
5 0 25,400 17,100
Drake Corporation uses an 11% target rate of return for new investment proposals.
(a) What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g. 10.50.)
Cash payback period
(b) What is the annual rate of return for the investment? (Round answer to 2 decimal places, e.g. 10.50.)
Annual rate of return for the investment %
(c) What is the net present value of the investment? (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer to 0 decimal places, e.g. 125.)
Answer:
Check the explanation
Explanation:
Kindly check the attached images below to see the step by step explanation to the question above.
Recent financial statement data for Harmony Health Foods (HHF) Inc. is shown below.
Current liabilities $ 197
Income before interest and taxes $ 116
10% Bonds, long-term 370
Interest expense 37
Total liabilities 567
Income before tax 79
Shareholders' equity
Income tax 22
Capital stock 210
Net income $ 57
Retained earnings 291
Total shareholders' equity 501
Total liabilities and equity $1,068
HHF's times interest earned ratio is (Round your answer to two decimal places.):
a. 10.00.
b. 3.14.
c. 1.54.
d. 2.14.
Current liabilities $ 180
Income before interest and taxes $ 118
10% Bonds, long-term 360
Interest expense 36
Total liabilities 540
Income before tax 82
Shareholders' equity
Income tax 20
Capital stock 201
Net income $ 62
Retained earnings 283
Total shareholders' equity 484
Total liabilities and equity $1,024
HHF's debt to equity ratio is:_____________. (Round your answer to two decimal places.):
a. 0.74.
b. 0.56.
c. 1.12.
d. 1.90.
Answer:
1. B. 3.14
2. C. 1.12
Explanation:
1. Times Interest Earned ratio
Measures how well a company is able to cover it's debt obligations using it's earnings.
The formula is simply,
= Earning before Interest and Tax / Interest Expense
Therefore,
Times Interest Earned ratio = 116/37
= 3.14
HHF's times interest earned ratio is Option B, 3.14.
2. Debt to Equity Ratio
This ratio compares the debt used to fund a company vs it's equity. It measures how much of either way used to fund the company.
The formula is,
= Total Debt / Total Equity
= 540/484
= 1.12
HHF's Debt to Equity ratio is 1.12, Option C.
Using these data from the comparative balance sheet of Sunta Fe Spice Company, perform horizontal analysis. (Round percentages to 0 decimal place, e.g. 17%.)
Increase or (Decrease)
December 31, 2017 December 31, 2016 Increase or (Decrease) Amount Percentage
Accounts receivable $ 375,000 $ 300,000 $ __________ ___________ %
Inventory 780,000 600,000 ____________ ___________ %
Total assets 3,220,000 2,800,000 __________ __________ %
Answer:
75000,25%;
18000, 30%.
420000, 15%.
Explanation:
From the question above we are given the following parameters Accounts receivable for year 2017 = $ 375,000,
Inventory for the year 2017 = 780,000 and the Total assets for the year 2017 = 3,220,000.
Accounts receivable for year 2016 = $ 300,000, inventory for the year 2016 = 600,000 and the Total assets for the year 2016 = 2,800,000.
Therefore, we have the following simple arithmetic(which is subtraction between the variables in the two years) to determine the solution to the question:
(375,000 - 300,000) = 75,000 = 25%(increase).
(780,000 - 600,000) = 180,000 = 30%(Increase).
(3,220,000 - 2,800,00) = 420,000 = 15%(increase).
Answer:
25%30%15%Explanation:
Accounts receivables
December 31 2017 = $375000
December 31 2016 = $300000
difference = $75000 ( 25%) { increase}
Inventory
December 31 2017 = 780000
December 31 2016 = 600000
difference = 180000 ( 30% ) { increase}
Total assets
December 31 2017 = 3220000
December 31 2016 = 2800000
difference = 420000 ( 15% ) { increase }
g Birch Company normally produces and sells 48,000 units of RG-6 each month. The selling price is $26 per unit, variable costs are $17 per unit, fixed manufacturing overhead costs total $180,000 per month, and fixed selling costs total $40,000 per month. Employment-contract strikes in the companies that purchase the bulk of the RG-6 units have caused Birch Company’s sales to temporarily drop to only 9,000 units per month. Birch Company estimates that the strikes will last for two months, after which time sales of RG-6 should return to normal. Due to the current low level of sales, Birch Company is thinking about closing down its own plant during the strike, which would reduce its fixed manufacturing overhead costs by $43,000 per month and its fixed selling costs by 11%. Start-up costs at the end of the shutdown period would total $13,000. Because Birch Company uses Lean Production methods, no inventories are on hand. Required: 1. What is the financial advantage (disadvantage) if Birch closes its own plant for two months? 2. Should Birch close the plant for two months? 3. At what level of unit sales for the two-month period would Birch Company be indifferent between closing the plant or keeping it open?
Answer:
Check the explanation
Explanation:
(1) Product RG-6 yields a contribution margin of $10 per unit ($20 - $10 = $10). If the plant closes, this contribution margin will be lost on the 18,000 units (9,000 units per month * 2 months) that could have been sold during the two-month period. However, the company will be able to avoid certain fixed costs as a result of closing down. The analysis is:
Amount ($) Amount ($)
Contribution margin lost by closing the
plant for two months ($10 * 18,000 units) (180,000)
Costs avoided by closing the plant for two months:
Fixed manufacturing overhead cost ($41,000 * 2 months)82,000
Fixed selling costs ($48,000 * 10% * 2months) 9,600 91,600
Net disadvantage of closing, before start-up cost (88,400)
Add start-up costs 13,000
Disadvantage of closing the plant 101,400
(2) No, the company should not close the plant; it should continue to operate at the reduced level of 9,000 units produced and sold each month. Closing will result in a $101,400 greater loss over the two-month period than if the company continues to operate.
(3)
Amount ($)
Cost avoided by closing the plant for two months 91,600
Less: start-up costs (13,000)
Net avoidable costs 78,600
Units = Net avoidable cost / Contribution margin per unit
= $78,600 / $10 = 7,860 units
