According to the CAPM, what is the market risk premium given an expected return on a security of 15.8%, a stock beta of 1.1, and a risk-free interest rate of 7%? Multiple Choice 7.70% 6.05% 7.00% 8.00%

Answers

Answer 1

Answer:

The risk premium on market is 8%

Explanation:

The CAPM or Capital Asset Pricing Model is used to calculate the required rate of return on a stock which is the minimum return that is expected or required by the investors to invest in a stock based on its systematic risk as measured by the beta of the stock.

The formula to calculate r under the CAPM is,

r = rRF + Beta * rpM

Where,

rRF is the risk free raterpM is the risk premium on market

To calculate the risk premium on market, we will input the available values for r, rRF and beta in the equation above.

0.158 = 0.07 + 1.1 * rpM

0.158 - 0.07 = 1.1 * rpM

0.088 / 1.1 = rpM

rpM = 0.08 or 8%

So, the risk premium on market is 8%


Related Questions

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 marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on account):
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Budgeted unit
sales 12,200 13,200 15,200 14,200
The selling price of the company’s product is $21 per unit. Management expects to collect 65% of sales in the quarter in which the sales are made, 30% in the following quarter, and 5% of sales are expected to be uncollectible. The beginning balance of accounts receivable, all of which is expected to be collected in the first quarter, is $72,600.
The company expects to start the first quarter with 2,440 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 20% of the next quarter’s budgeted sales. The desired ending finished goods inventory for the fourth quarter is 2,640 units.
Required
1-A. Complete the company's sales budget.
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Budgeted Units Sales
Selling Price Per Unit
Total Sales
1-B. Complete the schedule of expected cash collections.
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Beginning Accts Receivable
1st Quarter Sales
2nd Quarter Sales
3rd Quarter Sales
4th Quarter Sales
Total Cash Collections
2. Prepare the company’s production budget for the upcoming fiscal year.
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Budgeted Unit Sales
Total Needs
Required Production in Units

Answers

Answer:

1-A. Sales budget

                                   1st             2nd             3rd             4th

                             Quarter     Quarter       Quarter       Quarter        Year

Sales units              12,200      13,200        15,200         14,200    54,800

Price per unit           $21             $21             $21             $21           $21

Total sales          $256,200  $277,200   $319,200   $298,200   $1,150,800

1-B. Cash collections budget

                                   1st             2nd             3rd             4th

                             Quarter     Quarter       Quarter       Quarter        Year

Collections from  $72,600    $76,860     $83,160      $95,760   $72,600

previous quarter  

Collections from $166,530  $180,180  $207,480  $193,830  $1,003,900

current quarter  

Total                    $239,130  $257,040  $290,640 $289,690  $1,076,500

2. Productions budget

                                   1st             2nd             3rd             4th

                             Quarter     Quarter       Quarter       Quarter        Year

Sales units              12,200      13,200        15,200         14,200    54,800

Planned ending       2,640       3,040          2,840          2,640       2,640

inventory

Total production     14,840      16,240        18,040         16,840    65,960

required

- Beginning              2,440        2,640         3,040           2,840       2,440

inventory

Units to be              12,400      13,600        15,000         14,000     63,520

produced

Answer:

sells budget

Explanation:

Treasury bonds paying an 8% coupon rate with semiannual payments currently sell at par value. What coupon rate would they have to pay in order to sell at par if they paid their coupons annually? (Hint: What is the effective annual yield on the bond?)

Answers

Answer:

8.16%

Explanation:

current yield = bond's value x (1 + semiannual interest rate)ⁿ

in this case:

bond's value = $1,000 (we choose the value)semiannual interest rate = 8% / 2 = 4%n = 2 semiannual coupons

current yield = $1,000 x (1 + 4%)² = $1,000 x 1.0816 = $1,081.60

in order for a bond that pays an annual coupon to be sold at the same value, it must yield the same return = ($1,081.60 - $1,000) / $1,000 = 8.16%

Technology helps managers to monitor and control business activities and includes each of the following except:

a. Reduced processing errors
b. Less extensive testing of records
c. New evidence of processing
d. Separation of duties

Answers

Answer:

Correct Answer:

b. Less extensive testing of records

Explanation:

Technology which is the use of machines or electronical devices to make work easier is applied in most organizations by organizational managers. Unfortunately, less extensive testing of records is not one of its uses but rather detailed and extensive testing in order to check if there is any error in the records.

Mason Corporation had $1,150,000 in invested assets, sales of $1,228,000, income from operations amounting to $226,000, and a desired minimum rate of return of 12%. Round your answer to two decimal places. The investment turnover for Mason Corporation is a.0.85 b.1.07 c.1.28 d.1.60

Answers

Answer:

b.1.07

Explanation:

Investment turnover ratio determines the times when the portfolio of investment is sold during a particular period of time e.g Monthly, Annually, etc. The higher turnover results in more commission earned by the broker who is selling the portfolio.

Investment Turnover = Sales / Invested Assets

Investment Turnover = $1,228,000, / $1,150,000

Investment Turnover = 1.067826

Investment Turnover = 1.07 ( Rounded off to 2 decimals places )

Joe-Bob wants to buy a car and will need to take out a loan in order to make the purchase. His current monthly income is $3,500 per month. His mortgage payment is $900 per month, and his student loan payment is $350 per month. Note: You do not need to take taxes into consideration for this journal.

a. According to the affordability formulas given, can he afford to take out another loan?
b. When should he follow the affordability formulas?
c. In what cases should he not?
d. How could taking out the car loan impact his other priorities?

Answers

Answer:

A) according to the affordability formula Joe-Bob can take out another loan because his DTI is 36%

B) He should follow the affordability formula when he wants to take out  loans

C) He should not follow DTI if he isn't taking out loans  

D) Taking out a loan will negatively impact his other priorities if his DTI is very high or greater than 100%

Explanation:

using the affordability formula

The debt to income ratio = [tex]\frac{total debt}{gross income}[/tex]

total debt = mortgage payment + loan repayment = $900 + $350

= $1250

gross income = $3500

hence debt to income ratio =  1250 / 3500 = 0.3571 = 35.7%

A) according to the affordability formula Joe-Bob can take out another loan because his DTI is 36%

B) He should follow the affordability formula when he wants to take out  loans

C) He should not follow DTI if he isn't taking out loans  

D) Taking out a loan will negatively impact his other priorities if his DTI is very high or greater than 100%

a. According to the affordability formulas, Joe-Bob cannot afford to take out a car loan.  His current DTI without the auto loan is almost 36%.

b. Joe-Bob should follow the affordability formulas to guide his decisions in taking a new loan.

c. Joe-Bob does not need to follow the affordability formulas when his debt to income ratio (DTI) is far below 36%.  He can also avoid the affordability formulas when he has the prospect of increasing his monthly income.

d. If Joe-Bob takes out the car loan despite his poor rating on the affordability formulas, he may not afford to pay his bills for necessities.

Thus, Joe-Bob should not take on more loans now until he improves his income.  An automobile will require routine maintenance and some repairs, including fuelling.

Data and Calculations:

Current monthly income = $3,500

Monthly mortgage payment = $900

Monthly student loan payment = $350

Total current debts = $1,250 ($900 + $350)

The Affordability Formula (Current Debt Payment to Income Ratio) =

35.7% ($1,250/$3,500 x 100)

The Affordability Rule states that Joe-Bob should not spend more than 36% of his monthly income repaying loans.

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The Department of Homeland Security has asked the Internal Revenue Service for the tax retums of U.S. citizens who have been identified as having ties to terrorist organizations. The IRS has declined to turn over the tax retums. Which of the following rights relating to the individuals and the authority of the two agencies is correct?
a. The IRS must festseek permission from the individuals.
b. The Department of Homeland Security cannot obtain this information, as they may be used only for investigating tax fraud.
c. The Department of Homeland Security must submit a freedom of Information act request.
d. The Department of Homeland Security can obtain the information because it is engaged in law enforcement activity

Answers

Answer: The Department of Homeland Security can obtain the information because it is engaged in law enforcement activity

Explanation:

With regards to the question above, it should be noted that exchanging information is not allowed only in cases whereby the Department if Homeland Security needs it for law enforcement activities.

Therefore, option D i.e. The Department of Homeland Security can obtain the information because it is engaged in law enforcement activity is correct.

Bronn and Jaime make a written contract where Jaime will sell Bronn his armor and sword for $1,200.
Which of the following is not a defense to the formation of the contract?
Group of answer choices
A. fraud
B. illegality
C. incapacity
D. unconscionability
E. mirror image rule

Answers

Answer: Mirror image rule

Explanation:

It should be noted that the contract formation defenses are fraud, illegality, incapacity, unconscionability, duress and statute of Frauds.

The mirror image rule is not among the defense to the formation of w contract. It implies that an offer should be accepted with no changes made to the offer.

"A registered representative is a 15% participant in an investment club formed by members of the local Elks Club. The Elks Club investment club has opened a securities account at ABC Brokerage. The account wishes to buy an IPO being offered by an underwriter. Which statement is TRUE?"

Answers

Answer: D. The account is prohibited from buying the new issue

Explanation:

The options to the question are:

A. The account can buy the issue without restriction

B. The account can buy the issue if the branch manager approves

C. The account can buy the issue if the registered representative agrees not to share in the profit on the position

D. The account is prohibited from buying the new issue.

From the question, we are informed that a registered representative is a 15% participant in an investment club formed by members of the local Elks Club and that the Elks Club investment club has opened a securities account at ABC Brokerage.

We are further told that the account wishes to buy an IPO being offered by an underwriter, out of the options that were given, the correct option is that account is prohibited from buying the new issue.

The manager of Synergy Company's Stock Division projects the following for next year: Sales $195,000 Operating income 70,000 Operating assets 385,000 The manager can invest in an additional project that would require $50,000 investment in additional assets and would generate $9,000 of additional income. The company's minimum rate of return is 15%. What is the residual income for the Stock Division with the additional project

Answers

Answer:

13,750

Explanation:

Residual income can be calculated by deducting required return from the  Net Operating income

DATA

Operating income = 70,000

Operating assets = 385000

Additional income = 9000

Additional investment = 50,000

Residual income =?

Solution

Residual income = Net Operating income - Required return

Residual income = (70,000+9,000) - ((385,000+50,000)x15%)

Residual income = 79,000 - 65250

Residual income = 13,750

The owner of a leased property conveys possession of the property to the tenant providing them with uninterrupted us of the property without interference from the owner. This is known as

Answers

Answer:

Quiet enjoyment

Explanation:

Quiet enjoyment is a clause in lease agreement that provides a guarantee that the tenant will occupy the property in peace without interference from any other claimants or the landlord.

For example this clause protects a tenant from being removed from a property by someone of higher rank or authority like an agent.

The law recognises quiet enjoyment even when it is not stated explicitly in a lease agreement. It is assumed that every tenant has a right to quiet enjoyment

Jeff has the opportunity to receive​ lump-sum payments either now or in the future. Which of the following opportunities is the​ best, given that the interest rate is ​4% per​ year?

a. one that pays $ 900 now
b. one that pays $ 1080 in two years
c. one that pays $ 1350 in five years
d. one that pays $ 1620 in ten years

Answers

Answer:

c. one that pays $ 1350 in five years

Explanation:

we have to calculate the present value of each option:

option a, $900 (that is the present value)option b, $1,080 in 2 years. PV = $1,080 / (1 + 4%)² = $998.52option c, $1,350 in 5 years. PV = $1,350 / (1 + 4%)⁵ = $1,109.60option d, $1,620 in 10 years. PV = $1,620 / (1 + 4%)¹⁰ = $1,094.41

Option c yields the highest present value = $1,109.60

Murray Motor Company wants you to calculate its cost of common stock. During the next 12 months, the company expects to pay dividends (D1) of $3.00 per share, and the current price of its common stock is $60 per share. The expected growth rate is 8 percent.
a. Compute the cost of retained earnings (Ke). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Cost of retained earnings___%
b. If a $5 flotation cost is involved, compute the cost of new common stock (Kn). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
Cost of new common stock ____%

Answers

Answer:

a. Compute the cost of retained earnings (Ke)

$60 = $3 / (Ke - 8%)

Ke - 8% = $3 / $60 = 5%

Ke = 13%

b. If a $5 flotation cost is involved, compute the cost of new common stock (Kn).

$60 (1 - $5/$60) = $3 / (Kn - 8%)

$55 = $3 / (Kn - 8%)

Kn - 8% = $3 / $55 = 5.45%

Kn = 13.45%

Flotation costs reduce the amount of money that the company receives for every new stock that it issues, therefore, it increases the cost of new stocks.

At the beginning of the year, Custom Mfg. established its predetermined overhead rate by using the following cost predictions: overhead costs, $840,000, and direct materials costs, $400,000. At year-end, the company’s records show that actual overhead costs for the year are $1,041,000. Actual direct materials cost had been assigned to jobs as follows.Jobs completed and sold $390,000 Jobs in finished goods inventory 83,000 Jobs in work in process inventory 55,000 Total actual direct materials cost $528,000Required:a. Determine the predetermined overhead rate.b. Write the overhead costs incurred and the amounts applied to jobs during the year using the predetermined overhead rate and determine whether overhead is overapplied or underapplied.c. Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold.

Answers

Answer:

a. Determine the predetermined overhead rate.

the predetermined overhead rate = total budgeted overheard costs / total budgeted direct materials used = $840,000 / $400,000 = 2.1 = 210%

b. Write the overhead costs incurred and the amounts applied to jobs during the year using the predetermined overhead rate and determine whether overhead is overapplied or underapplied.

applied overhead costs = actual direct materials x overhead rate = $528,000 x 210% = $1,108,800

over applied overhead = actual overhead - standard overhead = $1,041,000 - $1,108,800 = -$67,800 favorable variance

c. Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold.

Dr Manufacturing overhead 67,800

    Cr Cost of goods sold 67,800

Explanation:

budget:

overhead costs, $840,000

direct materials costs, $400,000

actual:

overhead costs, $1,041,000

direct materials costs, $528,000

g On July 1, Shady Creek Resort borrowed $320,000 cash by signing a 10-year, 11.5% installment note requiring equal payments each June 30 of $55,480. What amount of interest expense will be included in the first annual payment

Answers

Answer:

Interest portion for one year = $320,000 * 11.5% =  $36,800

Total installment paid = $55,480

So, principal portion repaid = $55,480 -  $36,800 = $18,680

                               Journal entry

Date    General journal      Debit          Credit

           Interest expense    $36,800

           Notes payable        $18,680

                 To Cash                              $55,480

In the liquidation of a partnership, any gain or loss on the realization of non-cash assets should be allocated:_____.
a. first to creditors and the remainder to partners.
b. to the partners on the basis of their capital balances.
c. only after all creditors have been paid.
d. to the partners on the basis of their income-sharing ratio.

Answers

Answer:

D. To the partners on the basis of their income-sharing ratio.

Explanation:

Partnership liquidation can be easily seen to come into existence indefinitely through periodic changes within the ownership, they are seen to occur by circumstances which are totally uncommon occurrence.

The form of the dissolution is irrelevant, whether by absenting by personal decision of individual member or wholesale departure and formal liquidation. The end result will be the same. The primary dream of these harmonious and synchronical growth of the firm will be seen to come to an end.

This is why it is best shared to the partners on the basis of their income sharing ratio.

The current account is best defined as:______.
a. the national income account that tracks all purchases made by businesses within the last six months.
b. the account that includes transactions like imports and exports, income earned by Americans abroad, and net transfers to other countries.
c. the account that tracks the flow of domestic money into and out of foreign assets and the flow of foreign money into and out of domestic assets.

Answers

Answer: The account that includes transactions like imports and exports, income earned by Americans abroad, and net transfers to other countries.

Explanation:

A current account can be defined as an account that record the different transactions a country carries out with another country. A current account comprises of net primary income, earnings from foreign investors that have occurred within a particular period of time.

Almost all countries are involved in trading of goods and services with another country, a current account helps to evaluate the manner in which a particular country traded their different goods with foreign markets.There tends to be a postive balance of a country exports more goods than it imports.

Explanation:

In material requirement planning calculations, gross requirements for finished products are taken from ________________________.

Answers

Answer:

Forecasted sales

Explanation:

In the production process amount of inventory purchased for producing goods must be carefully calculated.

This avoids waste incurred from buying excess of materials needed for operation. Also when there is shortage of materials time and resources are wasted getting more materials.

So when calculating material requirements for finished products it is important that we consider sales forecasts.

Materials purchased based on this will just adequately meet the demand for product.

This reduce cost of storage of excess materials.

Angie Pereira and Ferro Schwartz are employees of Free Star, Inc. In February 2019. Angie's gross pay was $6000, and Ferro's gross pay was $7400. All earnings are subject to FICA-OASDI Tax of 6.296 and FICA--Medicare Tax of 1.4596. Which of the following would be included in the entry to record the salaries expense for February?
A. a credit to Salaries Expense for 5830.80
B. a credit to FICA-OASDI Taxes Payable for $830.80
C. a debit to FICA-Medicare Taxes Payable for $830.80
D. a debit to Salaries Payable to employees for $830.80

Answers

Answer:

B. a credit to FICA-OASDI Taxes Payable for $830.80

Explanation:

Free Star, Inc. In February 2019.

Angie's gross pay was $6000,

Ferro's gross pay was $7400

Total gross pay $ 13400

FICA-OASDI Tax  6.296 %

$ 13400 * 6.2% = $ 830.80

The recording of the journal entry would require a debit to FICA tax and credit to FICA tax payable .

The FICa tax is 6.2 % which equals to $ 830.80 of the two gross pays.

All the other three options are incorrect.

PureFruit Inc. prices its products higher than most of its competing brands in the packaged fruit juice industry. However, it still enjoys higher returns than its competitors because it is the only brand that can rightfully claim the use of fresh fruits and no added sugar. What kind of organizational strategy based on competitive advantage does PureFruit most likely use?

Answers

Answer:

Strategy based on differentiation

Explanation:

Please find the options to this question in the attached image

In pursing a competitive advantage by differentiation, the firm strives to make its product different from that of its competition.

The differences between the product and that of competitors are identified and communicated to consumers so they find the product more attractive.

PureFruit Inc. products are different from that of its competitors because it uses fresh fruits and no added sugar

On September 12, Vander Company sold merchandise in the amount of $2,200 to Jepson Company, with credit terms of 2/10, n/30. The cost of the items sold is $1,520. Vander uses the periodic inventory system and the gross method of accounting for sales. On September 14, Jepson returns some of the merchandise. The selling price of the merchandise is $190 and the cost of the merchandise returned is $135. Jepson pays the invoice on September 18, and takes the appropriate discount. The journal entry that Vander makes on September 18 is:

Answers

Answer and Explanation:

The Journal entry is shown below:-

Cash Dr, 1969.80 (2010 × 98%)

Sales discount Dr, 40.20

            To Account receivable $2,010 ($2,200 - $190)

(Being the entry is recorded)

Here we debited the cash and sales discount as it increased the assets and we credited the accounts receivable as it reduced the assets

Widgeon Co. manufactures three products: Bales, Tales, and Wales. The selling prices are $55, $78, and $32, respectively. The variable costs for each product are $20, $50, and $15, respectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Bales take 5 hours to process; Tales, 7 hours; and Wales 1 hour. Assuming that Widgeon Co. can sell all of the products it can make, what is the maximum contribution margin it can earn per month

Answers

Answer:

$3,400

Explanation:

Particulars                                    Bales      Tales     Wales

Selling price                                   55            78         32

- Variable costs                             20           50        15

Contribution margin                       35           28         17

Required hours to process           5 hrs     7 hrs      1 hrs

Contribution margin per hours        7            4         17

Therefore, Widgeon Co. will earn maximum contribution only if it uses all its machine hours for production of wales

Maximum contribution margin = Contribution margin per hour * Number of machine hours

Maximum contribution margin = 17 * 2,000 hours

Maximum contribution margin = $3,400

Assuming that Widgeon Co. can sell all of the products it can make, the maximum contribution margin it can earn per month is $3,400. The difference between the sales price and the variable cost is the contribution margin.

A contribution margin calculates a product's profitability during production. The contribution margin of a business indicates how much income is left over after variable expenditures like raw materials and transportation are subtracted.

A product must have a higher leftover income after variable costs than the business' fixed expenses, such as salaries and insurance, in order to be profitable.

Particulars                                   Bales      Tales     Wales

Selling price                                   55            78         32

Less: Variable costs                       20           50        15

Contribution margin                       35           28         17

Required hours to process           5 hours     7 hours      1 hours

Contribution margin per hours        7            4         17

Widgeon Company will earn maximum contribution only if it uses all its machine hours for production of wales

Maximum contribution margin will be

= Contribution margin per hour × Number of machine hours

= $17× 2,000 hours

= $3,400

Therefore, $3400 is the maximum contribution margin for Widgeon Company.

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A proposed cost-saving device has an installed cost of $790,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $77,000, the tax rate is 21 percent, and the project discount rate is 10 percent. The device has an estimated Year 5 salvage value of $118,000. What level of pretax cost savings do we require for this project to be profitable?

Answers

Answer:

The pretax cost savings for project to be profitable will be more than $2,059,794 for the 5 years of life.

Explanation:

Installed cost = $790,000

Initial working capital = $77,000

Tax rate = 21%

Project discount rate = 10%

Estimated salvage value = $118,000

Depreciable amount :

Installed cost  $790,000

Salvage value     118,000

Net                  $672,000

Annual depreciation = $134,400 ($672,000/5)

Working capital        =   $77,000

Pretax cost savings =  $211,400 x 1.61051 x 1.21

= $2,059,794

The Fime Corporation uses a standard costing system. The following data have been assembled for December: Actual direct labor-hours worked 6,200 hours Standard direct labor rate $7 per hour Labor efficiency variance $2,100 Unfavorable The standard hours allowed for December’s production is:

Answers

Answer:

5,900= standard quantity

Explanation:

Giving the following information:

Actual direct labor-hours worked 6,200 hours

Standard direct labor rate $7 per hour

Labor efficiency variance $2,100 Unfavorable

To calculate the standard hour, we need to use the following formula:

Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate

-2,100 = (standard quantity - 6,200)*7

-2,100= 7standard quantity  - 43,400

41,300/7 = standard quantity

5,900= standard quantity

Answer:

The standard hour allowed for December production is 5,900 hours

Explanation:

We will use labor efficiency variance to solve the above.

Labor efficiency variance = Standard rate (Standard hours - Actual hours)

Substituting the values given in the question,

-$2,100 = $7(Standard hour - 6,200)

-$2,100 = 7std hr - 43,400

7 Std hr = - $2,100 + $43,400

7 std hr = $41,300

std hr = 5,900 hours

A manufacturing division has an average of $1,800,000 invested in assets and earned income of $720,000. The division's return on investment is

Answers

Answer:

ROI = 0.4

Explanation:

To find the answer, we use the following formula:

Return on Investment = Profit / Investment

Now, we simply plug the amounts into the formula:

Return on Investment = $720,000 / $1,800,000

                                    = 0.4

Answer:

40%

Explanation:

Smiley Corporation sold equipment costing with of accumulated depreciation for cash. Which of the following journal entries should be​ prepared?

a. debit Cash for $10, 000, credit Equipment for $6000 and credit Gain on Sale of Equipment for $4000
b. debit Cash for $10, 000, debit Accumulated Depreciation - Equipment for $66, 000, credit Equipment for $72000 and credit Gain on Sale of Equipment for $4000
c. debit Cash for $10, 000 and credit Gain on Sale of Equipment for $10, 000
d. debit Accumulated Depreciation - Equipment for $66, 000 and credit Equipment for $66, 000

Answers

The question is incomplete as the figures are missing. The complete question is,

Smiley Corporation sold equipment costing $72, 000 with $66, 000 of accumulated depreciation for $10, 000 cash. Which of the following journal entries should be prepared?

A. debit Cash for $10, 000, credit Equipment for $6000 and credit Gain on Sale of Equipment for $4000

B. debit Cash for $10, 000, debit Accumulated Depreciation - Equipment for $66, 000, credit Equipment for $72000 and credit Gain on Sale of Equipment for $4000

C. debit Cash for $10, 000 and credit Gain on Sale of Equipment for $10, 000

D. debit Accumulated Depreciation - Equipment for $66, 000 and credit Equipment for $66, 000

Answer:

Option B is the correct answer.

Explanation:

To calculate the gain or loss on disposal of the equipment, we first need to determine the book value of the equipment on the date of sale.

Net Book Value = Cost - Accumulated depreciation

Net Book value = 72000 - 66000   = $6000

The gain/(loss) on disposal = Sales Proceeds - Net Book value

The gain/(loss) on disposal = 10000 - 6000 = $4000 Gain

The entry to record this transaction will be,

Cash                                                              $10000 Dr

Accumulated depreciation - Equipment     $66000 Dr

          Equipment                                                   $72000 Cr

          Gain on sale-Equipment                             $4000 Cr

Connie recently provided legal services to the Winterhaven LLC and received a 5 percent interest in the LLC as compensation. Winterhaven currently has $43,000 of accounts payable and no other debt. The current fair market value of Winterhaven’s capital is $270,000. (Leave no answer blank. Enter zero if applicable.)
a. If Connie receives a 5 percent capital interest only, how much income must she report and what is her tax basis in the LLC interest?
Income ______
Tax Basis ______
b. If Connie receives a 5 percent profits interest only, how much income must she report and what is her tax basis in the LLC interest?
Income ______
Tax Basis ______
c. If Connie receives a 5 percent capital and profits interest, how much income must she report and what is her tax basis in the LLC interest?
Income ______
Tax Basis ______

Answers

Answer and Explanation:

a. Connie registers $13,500 of ordinary revenue or 5% of the LLC's $270,000 property. Her LLC investment base is $13,500 as well.

b. Connie does not disclose any profits but will have an interest rate equal to her share of the LLC 's debt in the LLC. Since debt from the LLC is a non-recourse loan, it needs to be distributed to her through interest on earnings from Connie. Therefore her investment in the LLC is equivalent to $2,150 or 5% of the $43,000 accounts payable by the LLC.

c. Connie reports $13,500 of ordinary revenue or 5 percent of the $270,000 capital of the LLC. Her LLC interest base is $13,500, too. Her base in the LLC is $15,650 consists of the $13,500 benefit she accepts for earning her capital gain and her $2,150 non-recourse tax payable from the LLC.

Pauley Company needs to determine a markup for a new product. Pauley expects to sell 15,000 units and wants a target profit of $22 per unit. Additional information is as follows:

Variable product cost per unit $19
Variable administrative cost per unit 11
Total fixed overhead 13,500
Total fixed administrative 21,000

Using the variable cost method, what markup percentage to variable cost should be used?

Answers

Answer:

81%

Explanation:

Calculation for the markup percentage to variable cost that should be used

Using this formula

Markup percentage=[(Target profit + Fixed overhead costs + Fixed administrative costs) / Total variable costs

Let plug in the formula

Markup percentage=[($22*15,000 units)+$13,500+$21,000]/$30×15,000)

Markup percentage=($330,000+$13,500+$21,000)/$450,000

Markup percentage=$364,500/$450,000

Markup percentage=0.81*100

Markup percentage=81%

Calculation for Total variable costs

Variable product cost per unit $19

Variable administrative cost per unit $11

Total variable costs =$30

Therefore the markup percentage to variable cost that should be used will be 81%

Easton Co. deposits all cash receipts on the day they are received and makes all cash payments by check. At the close of business on June 30, its Cash account shows a debit balance of $61,709. Easton's June bank statement shows $59,549 on deposit in the bank. Determine the adjusted cash balance using the following information: Deposit in transit $ 4,250 Outstanding checks $ 2,075 Check printing fee, not yet recorded by company $ 18 Interest earned on account, not yet recorded by the company $ 33

Answers

Answer:

                                         ADJUSTED BOOK BALANCE

Bank balance              $59,549      Book balance         $61,709

+ Deposit in transit      $4,250        Interest earned          $33

- Outstanding checks  $2,075        Bank service fees      $18

Adjusted book             $61,724                                    $61,724

balance

Three firms are currently producing and selling in a market. When one of the three firms exits the market, economists expect that the equilibrium price will ________ and the equilibrium quantity will ________.

Answers

Answer: higher; lower

Explanation:

From the question, we are informed that three firms are currently producing and selling in a market. When one of the three firms exits the market, economists expect that there will be a rise in the equilibrium price while there will be a reduction in the equilibrium quantity.

This is because when one producer leaves, there will be less supply of the good that is sold, this will eventually lead to a rise in price.

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