a. What were HCA's liabilities-to-assets ratios and times-interest-earned ratios in the years 2005 through 2009?
b. What percentage decline in EBIT could HCA have suffered each year between 2005 and 2009 before the company would have been unable to make interest payments out of operating earnings, where operating earnings is defined as EBIT?
c. How volatile have HCA's cash flows been over the period 2005 - 2009?
d. Calculate HCA's return on invested capital (ROIC) in the years 2005 - 2009.
HCA INC
ANNUAL INCOME STATEMENT
($ MILLIONS, EXCEPT PER SHARE)
Dec09 Dec08 Dec07 Dec06 Dec05
Sales $ 30,052 $ 28,374 $ 26,858 $ 25,477 $ 24,455
Cost of Goods Sold 24,826 24,023 22,480 21,448 20,391
Gross Profit 5,226 4,351 4,378 4,029 4,064
Depreciation 1,425 1,416 1,426 1,391 1,374
Operating Profit 3,801 2,935 2,952 2,638 2,690
Interest Expense 1,987 2,021 2,215 955 655
Non-Operating Income/Expense 188 256 661 179 412
Pretax Income 2,002 1,170 1,398 1,862 2,327
Total Income Taxes 627 268 316 625 725
Minority Interest 321 229 208 201 178
Net Income $ 1,054 $ 673 $ 874 $ 1,036 $ 1,424
ANNUAL BALANCE SHEET
ASSETS Dec09 Dec08 Dec07 Dec06 Dec05
Cash & Equivalents $ 312 $ 465 $ 393 $ 634 $ 336
Net Receivables 3,692 3,780 3,895 3,705 3,332
Inventories 802 737 710 669 616
Other Current Assets 1,771 1,319 1,207 1,070 931
Total Current Assets 6,577 6,301 6,205 6,078 5,215
Gross Plant, Property & Equipment 24,669 23,714 22,579 21,907 20,818
Accumulated Depreciation 13,242 12,185 11,137 10,238 9,439
Net Plant, Property & Equipment 11,427 11,529 11,442 11,669 11,379
Investments at Equity 853 842 688 679 627
Other Investments 1,166 1,422 1,669 1,886 2,134
Intangibles 2,577 2,580 2,629 2,601 2,626
Deferred Charges 418 458 539 614 85
Other Assets 1,113 1,148 853 148 159
TOTAL ASSETS 24,131 24,280 24,025 23,675 22,225
LIABILITIES
Long Term Debt Due In One Year 846 404 308 293 586
Accounts Payable 1,460 1,370 1,370 1,415 1,484
Taxes Payable - 224 190 - -
Accrued Expenses 2,007 1,912 1,981 1,868 1,825
Total Current Liabilities 4,313 3,910 3,849 3,576 3,895
Long Term Debt 24,824 26,585 27,000 28,115 9,889
Deferred Taxes - - - 390 830
Minority Interest 1,008 995 938 907 828
Other Liabilities 2,825 2,890 2,612 1,936 1,920
TOTAL LIABILITIES 32,970 34,380 34,399 34,924 17,362
Preferred Stock 147 155 164 125 -
Common Stock 1 1 1 1 4
Capital Surplus 226 165 112 - -
Retained Earnings (9,213) (10,421) (10,651) (11,375) 4,859
Common Equity (8,986) (10,255) (10,538) (11,374) 4,863
TOTAL EQUITY (8,839) (10,100) (10,374) (11,249) 4,863
TOTAL LIABILITIES & EQUITY $ 24,131 $ 24,280 $ 24,025 $ 23,675 $ 22,225

Answers

Answer 1

Answer:

HCA

a. HCA's Liabilities-to-assets ratios and times-interest-earned ratios in the years 2005 through 2009:

1. Liabilities-to-assets ratios = Total liabilities/Total Assets

                  Dec. 09     Dec. 08    Dec. 07     Dec. 06     Dec. 05

                 136.63%     141.60%    143.18%     147.51%     78.12%

2. Times-interest-earned ratios = EBIT/Interest Expense

                  Dec. 09     Dec. 08      Dec. 07       Dec. 06       Dec. 05

                 1.91 times  1.45 times   1.33 times    2.76 times   4.11 times

b. The percentage decline in EBIT that HCA could have suffered each year between 2005 and 2009 to make it unable to make interest payments out its operating earnings, where operating earnings is defined as EBIT:

                  Dec. 09     Dec. 08      Dec. 07       Dec. 06       Dec. 05

                 191%            145%           133%            276%         411%

c. The volatility of HCA's cash flows over the period 2005 to 2009:

The standard deviation of the cash flows (cash and cash equivalents) is 115, showing that there is so much volatility in the cash flows.

d. HCA's return on invested capital (ROIC) in the years 2005 - 2009:

= Net Income - Dividend / Total Liabilities + Equity x 100

ROIC =                        4.37%      2.77%      3.64%        4.38%     6.41%

Explanation:

a) Data and Calculations:

HCA INC

ANNUAL INCOME STATEMENT

($ MILLIONS, EXCEPT PER SHARE)

                                  Dec. 09    Dec. 08     Dec. 07     Dec. 06     Dec. 05

Sales                         $ 30,052  $ 28,374  $ 26,858   $ 25,477  $ 24,455

Cost of Goods Sold     24,826     24,023     22,480       21,448      20,391

Gross Profit                   5,226         4,351        4,378        4,029       4,064

Depreciation                  1,425          1,416        1,426          1,391         1,374

Operating Profit            3,801         2,935       2,952        2,638       2,690

Interest Expense           1,987         2,021        2,215           955          655

Non-Operating

 Income/Expense           188            256           661             179           412

Pretax Income             2,002           1,170        1,398         1,862       2,327

Total Income Taxes       627            268            316           625          725

Minority Interest            321             229           208           201           178

Net Income             $ 1,054           $ 673       $ 874      $ 1,036    $ 1,424

ANNUAL BALANCE SHEET

ASSETS                   Dec. 09    Dec. 08     Dec. 07     Dec. 06     Dec. 05

Cash & Equivalents  $ 312        $ 465       $ 393       $ 634       $ 336

Net Receivables      3,692         3,780       3,895        3,705       3,332

Inventories                 802            737            710           669          616

Other Current

 Assets                     1,771           1,319        1,207          1,070          931

Total Current

 Assets                   6,577         6,301       6,205         6,078       5,215

Gross Plant, Property

 & Equipment      24,669       23,714     22,579       21,907     20,818

Accumulated

 Depreciation       13,242       12,185        11,137       10,238       9,439

Net Plant, Property

 & Equipment       11,427        11,529      11,442        11,669      11,379

Investments

 at Equity                 853            842         688            679         627

Other Investments 1,166         1,422       1,669         1,886       2,134

Intangibles            2,577        2,580      2,629         2,601      2,626

Deferred Charges   418           458          539             614           85

Other Assets          1,113          1,148          853             148          159

TOTAL ASSETS  24,131      24,280     24,025       23,675    22,225

LIABILITIES

Long Term Debt Due

In One Year          846          404           308             293         586

Accounts

 Payable            1,460         1,370         1,370            1,415       1,484

Taxes Payable      -               224            190                -              -

Accrued

 Expenses      2,007           1,912          1,981           1,868       1,825

Total Current

 Liabilities       4,313           3,910        3,849          3,576      3,895

Long Term

 Debt          24,824        26,585      27,000         28,115      9,889

Deferred Taxes -                  -                -                  390         830

Minority

 Interest       1,008              995          938             907          828

Other

Liabilities    2,825           2,890        2,612          1,936        1,920

TOTAL LIA-

 BILITIES   32,970         34,380     34,399       34,924       17,362

Preferred

 Stock            147                155           164             125                -

Common

 Stock               1                     1                1                 1                4

Capital

 Surplus      226                 165            112                 -                -

Retained

 Earnings (9,213)          (10,421)     (10,651)       (11,375)       4,859

Common

 Equity     (8,986)        (10,255)     (10,538)      (11,374)       4,863

TOTAL

 EQUITY  (8,839)         (10,100)     (10,374)      (11,249)       4,863

TOTAL LIABILITIES &

EQUITY $24,131      $ 24,280  $ 24,025   $ 23,675  $ 22,225

ii) Liabilities-to-assets ratio:

                                  Dec. 09    Dec. 08     Dec. 07     Dec. 06     Dec. 05

Liabilities                    32,970      34,380     34,399       34,924       17,362

Assets                         24,131      24,280     24,025       23,675     22,225

                                 136.63%     141.60%    143.18%     147.51%     78.12%

iii) Times Interest Earned:

Operating Profit           3,801         2,935       2,952        2,638       2,690

Interest Expense          1,987         2,021        2,215           955          655

                                1.91 times   1.45 times 1.33 times  2.76 times 4.11 times

iv) Volatility:  This is the degree of change of the cash flows, showing its tendency to change from one period to the other.  As calculated, the volatility is very high, showing that the cash flows have higher risk of change.  See below:

                                  Dec. 09    Dec. 08     Dec. 07     Dec. 06     Dec. 05

Cash & Equivalents     $ 312      $ 465        $ 393         $ 634       $ 336

Mean = $428

Deviation from mean     -116            37            -35             206          -92

Squared deviation      13,456       1,369         1,225       42,436      8,464

Sum of squared deviation = 66,950

Mean = 13,390

Square root of mean or Standard Deviation = 115

v) Return on Invested Capital = Net Income/Total liabilities + Equity

                               Dec. 09    Dec. 08     Dec. 07     Dec. 06     Dec. 05

Net Income             $ 1,054        $ 673       $ 874      $ 1,036    $ 1,424

TOTAL LIABILITIES &

EQUITY                  $24,131  $ 24,280  $ 24,025   $ 23,675  $ 22,225

ROIC =                        4.37%      2.77%      3.64%        4.38%     6.41%


Related Questions

The calculation of WACC involves calculating the weighted average of the required rates of return on debt and equity, where the weights equal the percentage of each type of financing in the firm's overall capital structure.
_________ is the symbol that represents the cost of preferred stock in the weighted average cost of capital (WACC) equation.
Bryant Co. has $2.3 million of debt, $1.5 million of preferred stock, and $1.8 million of common equity. What would be its weight on common equity?
A. 0.32
B. 0.24
C. 0.22
D. 0.30

Answers

Answer:

Option A is the correct answer

Weight of equity =0.32

Explanation:

Weighted average cost of capital is the average cost of all of the long-term types of finance used by a company weighted according to the that amount of finance used in relation to the total pool of fund.

The weight is the market value of nominal value of the source of fund as a proportion of the total capital funds.

Total capital funds = Debt funds + Preferred Funds + Equity funds

                              = ($2.3 + $1.5 + $1.8 ) million  = $5.6  million

Weight of equity = Equity capital/Total capital funds

                           = 1.8/5.6 =0.32

Weight of equity =0.32

Idaho Industries Inc. is considering a project that has an initial aftertax outlay or aftertax cost of​ $450,000. The respective future cash inflows from its fiveyear project for years 1 through 5 are​ $95,000 each year. Idaho expects an additional cash flow of​ $60,000 in the fifth year. The firm uses the IRR method and has a hurdle rate of​ 10%. Will Idaho accept the​ project? A. Idaho accepts the project because it has an IRR greater than​ 10%. B. Idaho accepts the project because it has an IRR greater than​ 5%. C. Idaho rejects the project because it has an IRR less than​ 10%. D. There is not enough information to answer this question.

Answers

Answer:

c

Explanation:

Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested

IRR can be calculated using a financial calculator

Cash flow in year 0 =  $-450,000

Cash flow each year from year 1 to 4 = $95,000

Cash flow in year 5 = $95,000 + $60,000 = $155,000

IRR = 5.62%

Idaho would reject the project because the IRR is less than the hurdle rate

To find the IRR using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.  

Firm M has a margin of 7%, turnover of 2.0, sales of $910,000, and average stockholders' equity of $490,000. Required: Calculate Firm M’s average total assets, net income, return on investment (ROI), and return on equity (ROE

Answers

Answer:

1. Average total asset = $455,000

2. Net income = $63,700

3. Return on investment = 14%

4. Return on equity (ROE) = 13%

Explanation:

These can be calculated as follows:

1. Average total asset

To calculate this, we use the formula for calculating the Asset turnover ratio as follows:

Asset turnover ratio = Sales / Average total asset ……………………………… (1)

Where;

Turnover = asset turnover ratio = 2

Sales = $910,000

Average total asset = ?

Substituting the values into equation (1) and solve for average total asset, we have:

2 = $910,000 / Average total asset

Average total asset = $910,000 / 2

Average total asset = $455,000

2. Net income

To calculate this, we use the formula for calculating net income margin as follows:

Net income margin = Net income / Sales ……………………………………. (2)

Where,

Margin = Net income margin = 7%, or 0.07

Net income = ?

Sales = $910,000

Substituting the values into equation (2) and solve for net income, we have:

7% = Net income / $910,000

Net income = $910,000 * 7%

Net income = $63,700

3. Return on investment

To calculate this, we use the formula for calculating the return on investment as follows:

Return on investment = Net income / Average total assets ……………… (3)

Where;

Net income = $63,700

Average total asset = $455,000

Substituting the values into equation (3), we have:

Return on investment = $63,700 / $455,000

Return on investment = 0.14, or 14%

4. Return on equity (ROE)

To calculate this, we use the formula for calculating the return on equity (ROE) as follows:

Return on equity (ROE) = Net income / Average stockholders' equity…….. (4)

Net income = $63,700

Average stockholders' equity = $490,000

Substituting the values into equation (4), we have:

Return on equity (ROE) = $63,700 / $490,000

Return on equity (ROE) = 0.13, or 13%

Duerr company makes a $73,000, 90-day, 10% cash loan to Ryan Co. The maturity value of the loan is: (Use 360 days a year.)

Answers

Answer: $74,825

Explanation:

Maturity value is the amount that a borrower will pay to the lender when the loan matures.

Based on the above analysis, the interest will be:

= $73,000 × 10% × 90/360

= $73,000 × 0.1 × 0.25

= $1825

Maturity value will now be the addition of the principal and the interest. This will be:

= $73,000 + $1825

= $74,825

"Which of the following are covered under the Securities Exchange Act of 1934? I Registration of new issues II Stabilization of new issues III Registration of exchanges IV Registration of broker/dealers"

Answers

Answer: II. stabilization of new issues

III. registration of exchanges

IV. registration of broker-dealers

Explanation:

The Securities Exchange Act of 1934 was put in place in order to be in charge of security trading.

From the options, those that are covered under the Securities Exchange Act of 1934 include the stabilization of new issues, the registration of exchanges and the registration of broker/dealers.

It should be noted that the Securities Exchange Act of 1934 does not cover the registration of new issues.

When gasoline gallons are priced in terms of number of seashells, seashells serve as: Group of answer choices

Answers

Answer:

Unit of account

Explanation:

Money serves three functions :

1. Unit of account : money serves the function of determining the value of a good or service. It is usually assumed that goods that are more highly priced are more valuable that goods that have lower prices

2. Medium of exchange : goods and services can be exchanged for money. For example, if I want to buy a gallon of gasoline and pay 4 seashells, money has served as a medium of exchange.

3. store of value: money can be saved, retrieved and exchanged sometimes in the future

Analyze the following scenarios to determine who can appropriately access health information.

1. Mrs. John Smith is requesting the emergency room records from last week of her daughter, Katy. Mrs. Smith is the noncustodial parent of Katy, who lives with her dad. Should you release the records to her? Why or why not?
2. Mr. Fred Mitchell is requesting the birth record for Amy, his birth daughter. Mr. and Mrs. Mitchell gave Amy up for adoption four years ago. Should you release the records to him? Why or why not?
3. Mrs. Lynn Olsen is requesting the lab results of her husband, Tim. She has a note. signed by him, giving his permission for her to have the records. Should you release the records to her? Why or Why not?
4. An investigator from the Health and Human Services department is conducting an audit of patient records and has provided a list of records that they want to review. Should you release the information to the investigator? Why or why not?
5. Dr. Rex Harrisson is requesting the medical records of Martha Flynn. He states he is a family friend and has been asked by Mrs. Flynn's son to review her last inpatient admission for appropriateness of care. Should you release the records to Dr. Harrison? Why or why not?

Answers

Answer:

4. because they are government officials

4. You should  release the information to the investigator from the Health and Human Services department because they are government officials.

What is Human Services department ?

A Department of Human Services (DHS) or Ministry of Human Services (MHS) is a national or subnational umbrella agency in charge of delivering public assistance programmes to the people they serve. Social security, social affairs, human resources, and welfare are some of the various aspects or alternate names.

Human Service with Multiple Purposes Organizations encourage volunteerism and offer a variety of direct services in the communities they serve, across the country, and around the world. Among these organisations are YMCAs, YWCAs, and the Red Cross, among others.

Answer to questions :

1. Mrs. Smith cannot get the records because non-custodials parent have no right to get any medicalrecord. She can only visit.

2. The Original Birth certificate will be Sealed and no longer available once the child is been adopted

3. No, even though her husband has signed a note, the lab results should not be released.

4. You should  release the information to the investigator.

To learn more about Human Services department refer :

https://brainly.com/question/2093822

#SPJ2

Wyckam Manufacturing Inc. has provided the following information concerning its manufacturing costs:
Fixed Cost per Month Cost per Machine-Hour
Direct materials $ 5.40
Direct labor $ 42,400
Supplies $ 0.30
Utilities $ 1,700 $ 0.25
Depreciation $ 15,200
Insurance $ 11,600
For example, utilities should be $1,700 per month plus $0.25 per machine-hour. The company expects to work 4,200 machine-hours in June. Note that the company’s direct labor is a fixed cost.
Required:
Prepare the company's planning budget for manufacturing costs for June.

Answers

Answer:

Total Manufacturing Costs is $95,680

Explanation:

                        Wyckam Manufacturing Inc.

              Planning Budget for Manufacturing costs

                       For the month Ended June 30

Direct Materials      (4,200 hours *$5.40)                    $22,680

Direct Labor                  Fixed                                        $42,400

Supplies                  (4,200 hours * $0.25 )                   $1,050

Utilities                   ($1,700+ 4,200 Hours * $0.25)      $2,750

Depreciation                  Fixed                                        $15,200

Insurance                       Fixed                                        $11,600

Total Manufacturing Costs                                         $95,680

Oriole Company purchased equipment for $41600. Sales tax on the purchase was $2496. Other costs incurred were freight charges of $624, repairs of $364 for damage during installation, and installation costs of $696. What is the cost of the equipment

Answers

Answer:

The cost of the equipment is $45,416.

Explanation:

The cost of a newly purchased equipment is the addition of all relevant costs uncured in order to make the equipment ready for use.

The cost of the equipment includes costs such as purchase price, tax paid on the purchase, installation costs, etc.

However, any cost incurred to repair any damage to an equipment during installation is not part of equipment cost. Such repair costs are just ordinary expenses that are charged to the income statement during the period.

Based on the explanation above, the cost of the equipment by Oriole Company can be calculated as follows:

Equipment cost = Purchase price + Sales tax + Freight charges + Installation costs ..................... (1)

Since,

Purchase price = $41,600

Sales tax on the purchase = $2.496.

Freight charges = $624

Installation costs = $696.

Substituting the values into equation (1), we have:

Equipment cost = $41,600 + $2,496 + $624 + $696 = $45,416

Therefore, the cost of the equipment is $45,416.

The offer curve describes Group of answer choices different wage offers a firm will make to workers of different education levels. different wage-and-risk level offers made by different firms. different wage-and-risk levels available to one firm. different risk levels associated with the same wage level.

Answers

Answer: different wage-and-risk level offers made by different firms.

Explanation:

The offer curve show the different wage-and-risk level offers made by different firms.

When firms make different wages and risk level offers, the offer curve can be used to show the comparison and relationship between the offers by the firms that are involved.

A customer has purchased 10,000 shares of Fromage stock, a Swiss cheese company. The stock is not traded in the United States. Fromage declares and pays a dividend of 15,000 Swiss Francs, which, when converted to dollars, equals $10,000. Switzerland imposes a 20% withholding tax on dividends repatriated outside its borders. How is the dividend reported on this investor's U.S. tax return

Answers

Answer:

$10,000 of dividends are reported, along with a $2,000 tax credit for monies withheld in Switzerland

Explanation:

As we know that if there is a direct investment in a foreign security, so the foreign country having a tax on dividend send an individual his home country against his will now if this condition arise so the same i.e tax credit should be levy on the same person while filing the U.S tax return

Since $10,000 dividend is received along with it $2,000 would be the tax credit  

A stock had returns of 17.88 percent, −5.16 percent, and 20.39 percent for the past three years. What is the variance of the returns?

Answers

Answer:

Variance of the return = 0.01983

Explanation:

[tex]S^{2}[/tex]= Σ[tex](X-X)^{2}[/tex]/ N - 1

Mean return = 17.88% + -5.16% + 20.39% = 11.0367%  

Variance = [(17.88% - 11.0367%)2 + (-5.16% - 11.0367%)2 + (20.39% - 11.0367%)2] /(3 - 1)

Variance = [0.004683 + 0.026233 + 0.008748]/2

Variance = 0.01983

Which of the following statements is not true about self-awareness?

a. Self-awareness involves a capacity to monitor and control biases that potentially affect your decision making.
b. Managers who have low self-awareness are superior performers.
c. Self-awareness can be increased by acquiring multiple experiences in diverse situations and with diverse others.
d. Self-awareness is best described as the capacity for introspection and the ability to reconcile oneself as an individual separates from the environment and other individuals.

Answers

Answer:

b. Managers who have low self-awareness are superior performers.

Explanation:

Self-awareness can be defined as a mental process, which occurs when an individual has knowledge about himself, about his knowledge, his actions and attitudes.

Therefore, in the workplace, having self-awareness is essential for a manager to achieve high performance, as this is a skill that includes knowing your skills, values, internal resources that ensure that there is the possibility of better monitoring of environments and oneself, control of emotions and improved perception of oneself and others.

This is a characteristic that adds to a manager 's assertive ability to establish communication focused on ethics, mutual respect, cordiality, etc.

The statement that is not true about self awareness from the list is B. "Managers who have low self-awareness are superior performers."

Self awareness refers to the ability of one to understand their thoughts, feelings, impulses and actions. Being self aware is a very important leadership attribute.

Therefore the statement that 'managers who have low self awareness are superior performers' is wrong.

A manager that lacks self awareness will definitely not perform their job effectively.

Self awareness helps one to become better at making decisions, it helps control biases, communicate more effectively and build good relationships in the work place or other places.

Thus, we can conclude that managers who have low self awareness are not superior performers.

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Trevor Company discloses supplementary operating segment information for its three reportable segments. Data for 20X8 are available as follows:
Segment A Segment B Segment C
Sales $500,000 $300,000 $200,000
Traceable operating
expenses 250,000 120,000 90,000
Allocable costs for the year was $180,000. Allocable costs are assigned based on the ratio of a segment's income before allocable costs to total income before allocable costs. The 20X8 operating profit for Segment B was:_______.
A) $180,000.
B) $120,000.
C) $126,000.
D) $110,000.

Answers

Answer:

The correct answer is B.

Explanation:

Giving the following information:

Segment A Segment B Segment C

Sales $500,000 $300,000 $200,000

Traceable operating expenses 250,000 120,000 90,000

Profit= 250,000  180,000  110,000  = 540,000

Allocable costs for the year was $180,000.

First, we need to allocate costs to Segment B:

Segment B= 180,000/540,000= 0.33

Allocate= 0.33*180,000= 60,000

Now, we can calculate the profit:

Segment B profit= 180,000 - 60,000= 120,000

An investor holds a 10 year bond pays a coupon rate of 9%. The yeid to maturity of the bond is 10% . The bond is trading:

Answers

Answer:

the bond is trading at a discount

Explanation:

There is an inverse relationship between the yield and the price of the bond.

As the yield goes up, the price of the bond goes down and as the yield goes down, the price of the bond goes up.

The yield - 10%, is greater than the coupon rate - 9%, the price will be less than the par value, and we say that the bond is trading at a discount.

Seven Manufacturing Corporation uses both standards and budgets. The company estimates that production for the year will be 100,000 units of Product Fast. To produce these units of Product Fast, the company expects to spend $600,000 for materials and $800,000 for labor.

Required:
Compute the estimates for a standard cost.

Answers

Answer:

Unitary cost= $14

Explanation:

Giving the following information:

Production= 100,000

To produce these units of Product Fast, the company expects to spend $600,000 for materials and $800,000 for labor.

First, we need to calculate the total cost and then the unitary cost:

Total cost= 600,000 + 800,000= $1,400,000

Unitary cost= 1,400,000/100,000= $14

4. Suppose you hold a PUT option on Israeli shekels with a strike price of 3.4207s/$. If the spot rate on the final day of the option is 3.4329s/$, how much profit would you make trading $1,000,000? Should you do it?

Answers

Answer:

Profit $3,567

I would exercise my option by buying the shares before the expiration .

Explanation:

Calculation of how much profit would you make trading $1,000,000

First step is to multiply the spot rate on the final day by the trading amount

3.4329s*$1,000,000

=$3,432,900

Second step is to divide the spot rate option by the strike price

3,432,900/3.4207

=$1,003,567

Last Step is to find the profit

Profit =$1,003,567-$1,000,000

Profit=$3,567

Therefore the amount of PROFIT you would make trading $1,000,000 will be $3,567

Based on the above calculation I would exercise my option by buying the shares before the expiration .

A NASDAQ security is bid at $30.25 and offered at $30.75. An over-the-counter trader effects a trade at $30.75 and charges a commission of $.50 to the customer. The price that will show on the tape is:

Answers

Answer:

$30.75

Explanation:

Given that

Security bidding = $30.25

Offered price = $30.75

over the counter trading = $30.75

Commission charged = $0.50

based on the above information, the price that shows on the tape is equivalent to the over the counter trading price i.e $30.75 also it does not include the commission charged i.e $0.50

Hence, the price is $30.75

The open interest on silver futures at a particular time is the Group of answer choices number of all long or short silver futures contracts outstanding. number of silver futures contracts traded during the day. number of silver futures contracts traded the previous day. number of outstanding silver futures contracts for delivery within the next month.

Answers

Answer:

number of all long or short silver futures contracts outstanding.

Explanation:

The open interest on silver futures at a particular time is the number of all long or short silver futures contracts outstanding. Open interest can be defined as the total or overall number of contracts (open long and short positions) outstanding in a futures market.

In stocks exchange, when a contract begins trading it has an open interest that is equal to zero and in future dates, more contracts are entered into as time passes by.

Additionally, majority of the contracts are liquidated before their maturity date.

Brik Products, located in Atlanta, Georgia, produces two lines of electric toothbrushes, Deluxe and Standard. Because Brik can sell all the toothbrushes it produces, the owners are expanding the plant. They are deciding which product line to emphasize. To make the decision, they assemble the following data.
Per Unit
Deluxe Toothbrush Standard Toothbrush
Sales price $94 $54
Variable expenses 22 16
Contribtion margin $72 $36
Contribution margin ratio 75.5% 70.4%
Requirements:
1) Identify the constraining factor for Brik products.
2) Prepare an analysis to show which product line to em

Answers

Complete Question:

Brik Products, located in Atlanta, Georgia, produces two lines of electric toothbrushes: Deluxe and Standard. Because Brik can sell all the toothbrushes it produces, the owners are expanding the plant. They are deciding which product line to emphasize. To make this decision, they assemble the following data:

Per Unit

Deluxe Toothbrush Standard Toothbrush

Sales price $94 $54

Variable expenses 22 16

Contribution margin $72 $36

Contribution margin ratio 75.5% 70.4%

After expansion, the factory will have a production capacity of 4.200 machine hours per month. The plant can manufacture either 68 Standard electric toothbrushes or 26 Deluxe electric toothbrushes per machine hour.

Requirements:

1. Identify the constraining factor for Brik Products.

2. Prepare an analysis to show which product line to emphasize.

Answer:

Brik Products

1. The constraining factor for Brik Products is the 4,200 machine hours.

2. Analysis to show which product line to emphasize:

Product Mix Analysis  

                                                                   Deluxe      Standard

Sale price                                               $94             $54

Variable expense                                         22                16

Contribution margin per unit               $72             $38

Number of toothbrushes per hour               26            68

Total contribution margin per hour        $1,872       $2,584

Decision: Brik Products should emphasize the production and sale of the Standard electric toothbrushes as this rakes in more contribution per the constraining factor, i.e. machine hours.

Explanation:

a) Data and Calculations:

                                                                   Deluxe      Standard

Sale price                                               $94          $54

Variable expense                                         22             16

Contribution margin per unit                 72             38  (not $36)

Contribution margin ratio         76.6% (not 75.5%)   70.4%

Number of toothbrushes per hour               26          68

Machine hours available = 4,200 hours

b) Analysis:

For Brik Products, the contribution margin per machine hour = contribution per unit x units per hour.  Brik will generate a total contribution margin per product line without producing the other that is equal to the contribution margin per machine hour multiplied by total machine hours.

Assuming that Brik Products concentrates on the production of the standard electric toothbrushes alone, it will generate a total contribution margin of $10,852,800 ($2,584 x 4,200) as against the total contribution margin of $7,862,400 ($1,872 x 4,200) to be generated if only Deluxe electric toothbrushes are produced.

Based on your case knowledge, to what extent do you agree or disagree with the following statement - "Kay Whitmore - Kodak CEO, had an understanding of Kodak's potential in the PC market. This was illustrated by her strong engagement with Bill Gates and Microsoft."
1. Strongly Agree
2. Mildly Agree
3. Neither Agree nor Disagree
4. MIldly Disagree
5. Strongly Disagree
6. Not Applicable

Answers

Answer:

3. Neither Agree nor Disagree

Explanation:

The reason was that the Kay Whitmore's engagement with Bill Gates and Microsoft has not much impacts on the potential of Kodak's products to exploit additional opportunities in Microsoft hence statement in consideration is not a one side argument as it is doubtful position.

So I am neither agreeing nor disagreeing with the statement hence the option 3 is correct here.

You own 150 shares of Western Feed Mills stock valued at $41.20 per share. What is the dividend yield if your annual dividend income is $372

Answers

Answer:

6.01%

Explanation:

Calculation for the dividend yield

Using this formula

Dividend yield=(Annual dividend income/Numbers of shares)/Amount per shares

Let plug in the formula

Dividend yield =($372/150 shares)/$41.20 per share

Dividend yield =$2.48/$41.20

Dividend yield =0.0601*100

Dividend yield =6.01%

Therefore Dividend yield will be 6.01%

You are aware that your neighbor trades stocks based on confidential information he overhears at his workplace. This information is not available to the general public. This neighbor continually brags to you about the profits he earns on these trades. Given this, you would tend to argue that the financial markets are at best _____ form efficient.

Answers

Answer:

Semi-strong Form Efficient.

Explanation:

There are three levels of market efficiency as weak, semi-strong and strong.

In a semi-strong form efficient market, the stock prices change independently of the previous return points and the current information so it is not possible to predict the future stock prices.

The example given in the question, which states that the neighbor has non-public information, can be classified as a semi-strong form efficient market.

I hope this answer helps.

The break-even point is a.the maximum possible operating loss. b.where the total sales line intersects the total costs line on a cost-volume-profit chart. c.the total fixed costs. d.the maximum possible operating income.

Answers

Answer:

The answer is B.

Explanation:

To a layman, break-even point is the point where an entity neither make profit nor loss. It is the point where total revenue equals total cost(where the total sales line intersects the total costs line on a cost-volume-profit chart).

Points greater or above this intersection or point mean the firm is making profit and points lesser or below this intersection or point mean the firm is making loss.

The unfavorable volume variance may be due to all of the following factors except:_______

a. failure to maintain an even flow of work
b. machine breakdowns
c. failure to obtain enough sales orders
d. unexpected increases in the cost of utilities

Answers

Answer:

d. unexpected increases in the cost of utilities

Explanation:

there are several volume variances:

direct materials volume variancedirect labor volume variancemanufacturing overhead volume variance sales volume variance

Utilities are part of manufacturing overhead, but volume variances using the standard rates, so an unexpected increase in the cost of utilities will not affect the overhead volume variance.

The unfavorable volume variance can not be due because of unexpected Increases in the cost of utilities

Unfavorable volume variance means that the amount of applied fixed manufacturing overhead costs is less than the budgeted fixed manufacturing overhead costs

The machine breakdowns will affect production levels, thus, resulting to unfavorable volume variance.

The failure to maintain even flow of work will impact the production quantities, thus, resulting to unfavorable volume variances

The failure to obtain enough sales order will limit production quantities, thus, resulting to unfavorable volume variances.

Thus, the Option D is correct because unfavorable volume variance can not be due because of unexpected Increases in the cost of utilities

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of a portfolio. The beta of four stocks​G, ​H, I, and Jare ​, ​, ​, and ​, respectively. What is the beta of a portfolio with the following weights in each​ asset: LOADING...​? What is the beta of portfolio​ 1?

Answers

Answer: 1.02

Explanation:

The Portfolio Beta will be the weighted average of the betas of the individual stocks in Portfolio 1.

Portfolio Beta = (weight in G * beta of G) + (weight in H * beta of H) + (weight in I * beta of I) + (weight in J * beta of J)

= (0.25 * 0.45) + ( 0.25 * 0.82) + ( 0.25 * 1.14) + ( 0.25 * 1.66)

= 0.1125 + 0.205 + 0.285 + 0.415

= 1.0175‬

= 1.02

Nautical has two classes of stock authorized: $10 par preferred, and $1 par value common. As of the beginning of 2015, 125 shares of preferred stock and 2,700 shares of common stock have been issued. The following transactions affect stockholders� equity during 2015:
March 1 Issue 2,700 additional shares of common stock for $13 per share.
April 1 Issue 175 additional shares of preferred stock for $37 per share.
June 1
Declare a cash dividend on both common and preferred stock of $0.40 per share to all stockholders of record on June 15.
June 30 Pay the cash dividends declared on June 1.
August 1 Repurchase 175 shares of common treasury stock for $10 per share.
October 1 Reissue 125 shares of treasury stock purchased on August 1 for $12 per share.
Nautical has the following beginning balances in its stockholders� equity accounts on January 1, 2015: Preferred Stock, $1,250; Common Stock, $2,700; Paid-in Capital, $19,200; and Retained Earnings, $11,200. Net income for the year ended December 31, 2015, is $7,500.
Required:
1. Record each of these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
2. Select whether each of these transactions would increase (+), decrease (?), on total assets, total liabilities, and total stockholders� equity by completing the following table. (If none of the categories apply for a particular item, leave the cell blank.)
Transaction Total Assets Total Liabilities Total Stockholders Equity
Issue common stock
Issue preferred stock
Declare cash divedens
Pay cash divedens
Repurchase treasury stock
Reissue treasury stock

Answers

Answer:

Nautical

1. Journal Entries:

March 1:

Debit Cash Account $35,100

Credit Common Stock $35,100

To record the issue of 2,700 shares of common stock for $13 per share.

April 1:

Debit Cash Account $6,475

Credit Preferred STock $6,475

To record the issue of 175 shares of preferred stock for $37 per share.

June 1:

Debit Dividends $2,280

Credit Dividends Payable $2,280

To record dividends of $0.40 per share to all stockholders of record.

June 30:

Debit Dividends Payable $2,280

Credit Cash Account $2,280

To record the payment of cash dividends.

August 1:

Debit Treasury Stock $1,750

Credit Cash Account $1,750

To record the repurchase of 175 shares of common stock for $10 per share.

October 1:

Debit Cash Account $1,500

Credit Treasury Stock Account $1,500

To record the reissue of 125 shares of treasury stock for $12 per share.

2. Selection of  whether each of these transactions would increase (+), decrease (?), on total assets, total liabilities, and total stockholders' equity:

                                        Transaction   Assets   Liabilities    Stockholders

                                            Total          Total          Total              Equity

Issue common stock         $35,100       +$35,100                    +$35,000

Issue preferred stock         $6,475        +$6,475                       +$6,475

Declare cash dividends      $2,280                        +$2,280      ?$2,280      

Pay cash dividends             $2,280       ?$2,280   ?$2,280

Repurchase treasury stock  $1,750       ?$1,750                        ?$1,750

Reissue treasury stock       $1,500       +$1,500                        +$1,500

Explanation:

a) Data and Calculations:

Authorized share capital:

$10 par preferred

$1 par value common

Issued, beginning of 2015:

Preferred = 125 shares

Common = 2,700 shares

b) The issue of 2,700 additional shares of common stock for $13 per share totalled $35,100.  This amount is credited to the Common Stock and the receipt of cash debited to the Cash Account.  The same is applicable with respect to the 175 additional shares issued at $37 per share.

c) When a cash dividend is declared, the stockholders of record on the record date of June 15 are noted, since they are the only ones that will participate in the dividends.  The accounting records are debit to the dividend account and a credit to the Dividends Payable account, establishing the liability.  The payment for the declared dividend is recorded with a debit to the Dividends Payable account to close the liability and a credit to the Cash Account.

d) Treasury stock is a stock of common stock repurchased by the company.  The issue and reissue of treasury stock are treated in the treasury stock account if the costing method is used, otherwise, the par-value method would be operational.

A retail operation has an average gross margin of 35%. If the average monthly sales for the store is $200,000.00, what is the cost of goods sold?

Answers

Answer:

COGS= $130,000

Explanation:

Giving the following information:

A retail operation has an average gross margin of 35%.

Sales= $200,000.00

To calculate the cost of goods sold, we need to use the following formula:

Gross margin= sales - COGS

COGS= sales - gross margin

COGS= 200,000 - (200,000*0.35)

COGS= $130,000

Titan Mining Corporation has 7.6 million shares of common stock outstanding, 280,000 shares of 4.5% preferred stock outstanding, and 165,000 bonds with a semi-annual coupon rate of 5.9% outstanding, par value $2,000 each. The common stock currently sells for $61 per share and has a beta of 1.15, the preferred stock has a par value of $100 and currently sells for $95 per share, and the bonds have 19 years to maturity and sell for 109% of par. The market risk premium is 7.1%, T-bills are yielding 3.5%, and the company’s tax rate is 25%.
A. What is the firm’s market value capital structure?
B. If the company is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should the firm use to discount the project’s cash flows?

Answers

Answer:

A. The Capital structure is : 4.23 % - Equity, 6.59 % - Preferred Shares and 89.17 % - Debt

B. The  firm should discount the project’s cash flows at 4.45 %.

Explanation:

Total Market Value = Market Value of Equity + Market Value of Debt + Market Value of Preferred Shares

Market Value of Equity =  280,000 shares × $61

                                      =   $17,080,000

Market Value of Preferred Shares = 280,000 shares × $95

                                                        = $26,600,000

Market Value of Debt = 165,000 bonds × $2,000 × 109%

                                    = $359,700,000

Total Market Value = $403,380,000

Capital Structure :

Weight of Equity = $17,080,000 / $403,380,000 × 100

                            = 4.23 %

Weight of Preferred Shares = $26,600,000 / $403,380,000 × 100

                                              = 6.59 %

Weight of Debt = $359,700,000 / $403,380,000 × 100

                          = 89.17 %

Thus, the market value capital structure is : 4.23 % - Equity, 6.59 % - Preferred Shares and 89.17 % - Debt

Firms use the Weighted Average Cost of Capital (WACC) to discount the project’s cash flows.

Cost of Debt, r

PV = $2000 × 109 % = - $2,100

PMT = ($2,000 × 5.9%) ÷ 2 = $59

n = 19 × 2 = 38

P/YR = 2

FV = $2,000

r = ?

Using a Financial Calculator, Pretax cost of debt, r is 5,47 %

After tax cost of debt = Interest × ( 1 - tax rate)

                                   = 5,47 % × ( 1 - 0.25)

                                   = 4.10 %

Cost of Equity

Cost of Equity = Return on Risk Free Security + Beta × Return on Risk Premium Portfolio

                       = 3.5 % + 1.15 × 7.1%

                       = 11.67 %            

Cost of Preference Stock            

Cost of Preference Stocks = 4.5%

WACC = ke(W/V) + kd(D/V) + kp(P/V)

           =  11.67 % × 4.23 % + 4.10 % × 89.17 % + 4.5% × 6.59 %

           =  4.45 %

Central to agency theory is the concern with problems that can arise between the principals who are the owners of the firm and the agents who are the people who are paid by outside consultants to perform a job on their behalf.

a. True
b. False

Answers

Answer:

Correct Answer:

a. True

Explanation:

Agency theory is a principle that is used to explain and resolve issues in the relationship between business principals and their agents in any given company's establishment. In addition, the relationship could be one that is between shareholders, as principals on one hand, and company executives, as agents.

Agency problem is that many authors have found that include separations of ownership from control, conflict of interest and risk adverseness etc.

What is the term agency theory about?

Agency theory is a principle that is used to explain and resolve issues in the relationship between business principals and their agents in any given company's establishment.

In addition, the relationship could be one that is between shareholders, as principals on one hand, and company executives, as agents.

Therefore, correct option is True.

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