Answer:
7.38%
Explanation:
Calculation to determine what would be AJC's new WACC and total value
Using this formula
WACC and total value=(Equity)(Required rate of return on equity)+(Debt)(1-Tax rate)(Required rate of return on debt)
Let plug in the formula
WACC and total value=(0.6)(0.095)+(0.4)(1-0.4)(0.07)
WACC and total value=0.057+0.0168
WACC and total value=0.0738*100
WACC and total value=7.38%
Therefore would be AJC's new WACC and total value is 7.38%
If a firm buys a building so as to have office space for its workers, the monthly opportunity cost of the building is best measured as
Answer:
A. the rent the firm could earn if it rented the building to another firm
Explanation:
O A. the rent the firm could earn if it rented the building to another firm O B. the price the firm paid divided by twelve O C. the monthly mortgage payment the firm must pay O D. zero. Click to select your ans e here to search
There are two types of costs
1. Implicit cost or opportunity cost : Implicit cost is the cost of the next best option forgone when one alternative is chosen over other alternatives. It is used in calculating economic profit
By using the office space for workers, the firm is forgoing the opportunity to rent out the space to another firm. The rent the firm could have earned is the opportunity cost
2. Explicit cost : It includes the amount expended in running the business. It is used in calculating accounting profit
They are : the monthly mortgage payment the firm
total amount expended in building
Priyanka is a branch manager at a bank in town. She hires Hudson, who comes with strong references and several years' experience, as a bank teller. Several months later, Priyanka is surprised to be personally named in a lawsuit alleging that Hudson misrepresented the bank's products by promising new account holders $1,000 for starting a savings account. Is Priyanka, as Hudson's manager, personally liable for the tort
Answer: Yes. because Priyanka is Hudson's manager and so his liability extends to her.
Explanation:
Based on the information given, it should be noted that Priyanka, as Hudson's manager, personally liable for the tort.
In this case, Priyanka is Hudson's manager and so his liability extends to her. Priyanka will be liable based on the employee-employer ground and will be liable since she hired Hudson.
True or false:
SOX compliance law now holds CEOs and CFOs of publicly traded companies accountable for their actions as officers in a publicly traded company.
Summit Apparel has the following accounts at December 31: Common Stock, $1 par value, 1,800,000 shares issued; Additional Paid-in Capital, $17.80 million; Retained Earnings, $10.80 million; and Treasury Stock, 58,000 shares, $1.276 million. Prepare the stockholders’ equity section of the balance sheet. (Amounts to be deducted should be indicated by a min
Answer:
$29,124,000
Explanation:
Preparation of the stockholders’ equity section of the balance sheet.
SUMMIT APPAREL Balance Sheet
(Stockholder's Equity Section)Dec-31
Stockholder's equity:
Common stock $1,800,000
Additional paid-in capital $17,800,000
Total paid-in capital $19,600,000
($1,800,000+$17,800,000)
Retained earnings $10,800,000
Less Treasury stock ($1,276,000)
Total stockholder's equity $29,124,000
($19,600,000+$10,800,000-$1,276,000)
Therefore the stockholders’ equity section of the balance sheet is $29,124,000.
Suppose that the risk-free rates in the United States and in Canada are 5% and 3%, respectively. The spot exchange rate between the dollar and the Canadian dollar (C$) is $0.80/C$. What should the futures price of the C$ for a one-year contract be to prevent arbitrage opportunities, ignoring transactions costs.
Answer:
The futures price of the C$ should be 0.82/C$.
Explanation:
Let:
rUS = Risk-free rates in the United States = 5%
rC = Risk-free rates in Canada = 3%
S = Spot exchange rate = $0.80/C$
Since the rUS is greater than rC, we have:
Future price of C$ = S + ((rUS -rC) * S) = 0.80 + ((5% - 3%) * 0.80) = 0.80 + (2% * 0.80) = 0.80 + 0.016 = 0.816, or 0.82
Therefore, the futures price of the C$ should be 0.82/C$.
4. There is a direct link between good ethics, market share and profitability. Explain how businesses that demonstrate a
high level of ethics experience an increase in their profits as a result. (2 marks)
Answer:
Yes
Explanation:
Managers' ethical behaviour benefits all of the organization's directors, which boosts a company's goodwill and, as a result, profits. Customers and clients are more likely to trust a company that demonstrates its commitment to a good
The principles that form an ethical workplace culture have an impact on the customer connections that a firm maintains. Customers should be treated with respect and dignity, and staff should be truthful and equitable with them, according to an established brand. long-term effect.
1. Suppose that 10 years ago you bought a home for $150,000, paying 10% as a down payment, and financing the rest at 8% interest for 30 years. How much money did you pay as your down payment?
2. How much money was your existing mortgage (loan) for?
3. What is your current monthly payment on your existing mortgage? Note: Carry at least 4 decimal places during calculations, but round your final answer to the nearest cent.
4. How much total interest will you pay over the life of the existing loan?
5. This year (10 years after you first took out the loan), you check your loan balance. Only part of your payments have been going to pay down the loan; the rest has been going towards interest. You see that you still have $112,681 left to pay on your loan. Your house is now valued at $180,000.
6. How much of the original loan have you paid off (i.e, how much have you reduced the loan balance by?
7. How much money have you paid to the loan company so far (over the last 10 years)?
8. How much interest have you paid so far (over the last 10 years)?
9. How much equity do you have in your home (equity is value minus remaining debt)?
10. Since interest rates have dropped, you consider refinancing your mortgage at a lower 6% rate. If you took out a new 30 year mortgage at 6% for your remaining loan balance, what would your new monthly payments be?
11. Notice that if you refinance, you are going to be making payments on your home for another 30 years. In addition to the 10 years you’ve already been paying, that’s 40 years total. How much will you save each month because of the lower monthly payment?
12. How much total interest will you be paying (consider the interest you paid over the first 10 years of your original loan as well as interest on your refinanced loan)?
13. Now the non-computational question: Does it make sense to refinance?
Answer:
1. Down payment = $15,000
2. The existing mortgage (loan) was for $135,000
3. The current monthly payment on the existing mortgage is $990.58
4. The total interest over the life of the existing loan = $221,609.58
6. The amount of the original loan paid off is $22,319.
7. Total amount paid to the loan company over the last 10 years is $258,928.58 ($243,928.58 + $15,000)
8. Total interest paid over the last 10 years is $221,609.58
9. The equity in the home is $67,319 ($180,000 - $112,681)
10. The new monthly payments will be $675.58
11. Saving each month because of the lower monthly payment is $315 ($990.58 - $675.58)
12. Total Interest = $352,137.21 ($221,609.58 + $130,527.63)
13. It does not make sense to refinance because what is saved per month cannot compare with the additional interest expense to be incurred for prolonging the payments.
Explanation:
a) Data and Calculations:
1. Cost of a home = $150,000
10% down payment = $15,000
Existing Mortgage = $135,000 ($150,000 - $15,000)
Home Price 150000
Down Payment 10 %
Loan Term 30 years
Interest Rate 8%
House Price $150,000.00
Loan Amount $135,000.00
Down Payment $15,000.00
Total of 360 (30 years * 12)
Mortgage Payments $356,609.58
Total Interest $221,609.58
Ten years after, the loan balance has been reduced by $22,319 ($135,000 - $112,682)
Refinancing calculations:
Home Price 112681
Down Payment 0 %
Loan Term 30 years
Interest Rate 6
Monthly Pay: $675.58 Monthly
Total Mortgage Payment $243,208.63
Total Out-of-Pocket $243,208.63
Total of 360 Mortgage Payments $243,208.63
Total Interest $130,527.63
A company is considering dropping a product line. What costs would be relevant to the decision? What costs would be irrelevant? Why? (MO 2)'
Answer:
Relevant cost : Avoidable cost
Irrelevant cost : Sunk costs and future costs
Explanation:
Dropping or retaining a product line by a company depends on the effect of the product line on the net operating income of the company i.e. if the net income is decreased because of a product line then the product line should be dropped and vice versa.
Relevant costs to the dropping of a product line
Avoidable costs is a relevant cost that should be considered when dropping a product line
Irrelevant costs
Sunk costs ( i.e. past operational costs )
and future costs
Does an organization/job exist if there are no people present?
Answer:
yes an organization/ job will always exist even if no one wanted the job or no one presented because its part of a buissness requirement
hope this helps!
Kohl Co. provides warranties for many of its products. The January 1, 2019, balance of the Estimated Warranty Liability account was $55,726. Based on an analysis of warranty claims during the past several years, this year's warranty provision was established at 0.84% of sales. During 2019, the actual cost of servicing products under warranty was $16,290, and sales were $5,870,500.
Required:
a. What amount of Warranty Expense will appear on Kohl Co.'s income statement for the year ended December 31, 2019? Warranty Expense Actual warranty expense Estimated warranty expense Warranty Expense
b. What amount will be reported in the Estimated Warranty Liability account on the December 31, 2019, balance sheet?
(Amounts to be deducted should be indicated by minus sign.) Estimated Warranty Liability, 1/1/19 balance Estimated Warranty Liability 12/31/19 balance
Answer:
a. Warranty Expense = Sales * Estimated Warranty Percentage
Warranty Expense = $5,870,500 * 0.84%
Warranty Expense = $49,312.20
b. Beg. Bal. of Estimated Warranty Liability Jan. 1, 2019 $55,726
Less: Actual warranty costs in 2019 ($16,290)
Add: Warranty expense accrued in 2019 $49,312.20
Ending Balance of Estimated Warranty Liability Dec. 31, 2019 $88,748.20
Suppose that at 500 units of output marginal revenue is equal to marginal cost. The firm is selling its output at $5 per unit and average total cost at the 500 units of output is $6. Its total fixed cost id $2000. On the basis of this information we:
A) can say that the firm should close down in the short run
B) can say that the firm is maximizing profit in the short run
C) cannot determine whether the firm should produce or shut down in the short run
D) can assume the firm is not using the most efficient technology
Answer: D) can assume the firm is not using the most efficient technology
Explanation:
The profit maximizing point of production for a company is the point where the marginal cost of production equals the marginal revenue. At this point, resources are being fully utilized efficiently to produce goods and any increase in production quantity would result in a loss.
In this case however, the company is at the profit maximizing quantity and still making a loss (selling price is less than average total cost). This can only mean that the company is not utilizing resources efficiently and this can be due to a lack of efficient technology.
In the market for tomatoes, assume the market demand is perfectly inelastic and the market supply is inelastic. If a tax is placed on the suppliers in this market, how will the tax burden be distributed
Answer:
Consumers will bear all the tax
Explanation:
O Consumers will bear a greater burden of the tax, but not all the tax. O Consumers and producers will bear the tax burden equally O Producers will bear all the tax Consumers will bear all the tax O Producers will bear a greater burden of the tax, but not all of the tax.
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
Price elasticity of demand = percentage change in quantity demanded / percentage change in price
If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.
Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one
Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.
Infinitely elastic demand is perfectly elastic demand. Demand falls to zero when price increases
Perfectly inelastic demand is demand where there is no change in the quantity demanded regardless of changes in price.
The party with the less elastic demand bears the tax burden
Networks are proven to be relevant in the context of innovation and entrepreneurship. Explain
the main features of an entrepreneurial network including the role of personal contact networks
and how they are developed over time by explaining at least three approaches that can be used to
manage network relationships. Support your answer with examples
Answer:
Accommodation
Engagement Refinement
Explanation:
In the entrepreneurial ecosystem, networks still remain a popular and important aspect which is often thought and seen as a stepping stone to achieving entrepreneurial greatness. This network simply entails the creation of a circle or set of skilled individuals usually in different strategic areas of specialization relevant to a certain business line or sector. This way embarking on projects tends to be much easier as these networks of people can offer help, tips or together engage in to proffer solution on time. Networks are created usually through meetups and good interpersonal relationships. Having professionals around can speed up processes and. However, networks has to be properly managed usy be being accommodating and warm when approcached; frequent engagement topics and trending issues, including the desire to learn more and measure up to new trends.
The following units of an inventory item were available for sale during the year. Beginning inventory 10 units at $55 First purchase 25 units at $60 Second purchase 30 units at $65 Third purchase 15 units at $70 The firm uses the periodic inventory system. During the year, 60 units of the item were sold. The ending inventory cost using FIFO is
Answer:
$1,375
Explanation:
Given the information above, the Ending inventory = Units available - Units sold
Units available = 10 + 25 + 30 + 70 = 80
Units sold = 60
Ending inventory = 80 - 60
Ending inventory = 20
Cost of ending inventory under FIFO
= (15 × $70) + (20 - 15) × $65
= $1,050 + $325
= $1,375
Therefore, the ending inventory cost using FIFO is $1,375
Your firm has the responsibility to review transactions and activities occurring after the year-end to determine whether anything occurred that might affect the statements being audited. The procedures required to verify these transactions are commonly referred to as the review for _______ Group of answer choices contingent liabilities. subsequent events. late unusual occurrences. subsequent year's transactions.
Answer: Subsequent events
Explanation:
Reviewing transactions is what gives accountability in organization, without this organizations would not know when they are running at a loss or making gains. The best time to do this is at the end of yearly transactions, the procedure required to verify this transactions are referred to as subsequent events, meaning events that happened as time went on.
This act is carried out most times by auditors
The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its assembly shop and retail sales store are housed in a single facility in a Redmond, Washington, industrial park. Listed below are some of the costs that are incurred at the company.
For each cost, indicate whether it would most likely be classified as direct labor, direct materials, manufacturing overhead, selling, or an administrative cost.
1. The wages of the assembly shop's supervisor.
a. Direct labor cost
b. Direct materials cost
c. Manufacturing overhead cost
d. Marketing and selling cost
e. Administrative cost
2. The wages of the company's accountant.
a. Direct labor cost
b. Direct materials cost
c. Manufacturing overhead cost
d. Marketing and selling cost
e. Administrative cost
3. Depreciation on equipment used to test assembled computers before release to customers.
a. Direct labor cost
b. Direct materials cost
c. Manufacturing overhead cost
d. Marketing and selling cost
e. Administrative cost
4. Rent on the facility in the industrial park.
a. Direct labor cost
b. Direct materials cost
c. Manufacturing overhead cost
d. Marketing and selling cost
e. Administrative cost
Answer and Explanation:
The classification is as follows;
1. Since the wages are to paid for supervising the assembling process so the same is related to the factory operations therefore considered to be the manufacturing overhead cost
2. The wages paid to the accountant so classified as the administration cost
3. The depreciation is the manufacturing overhead cost as it is the indirect cost.
4. The rent facility should be classified as the manufacturing overhead cost and distributed as per the cost drivers.
You need a 30-year, fixed-rate mortgage to buy a new home for $210,000. Your mortgage bank will lend you the money at a 7.1 percent APR for this 360-month loan. However, you can afford monthly payments of only $950, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. How large will this balloon payment have to be for you to keep your monthly payments at $950
Answer:
$573,963
Explanation:
First, calculate the present value of the loan payments using the following formula
PVA = PMT x [ ( 1 + r )^n - 1 ] / [ r ( 1 + r )^n)
PVA = $950 x [ ( 1 + 7.1%/12 )^360 - 1] / [ 7.1%/12 ( 1 + 7.1%/12 )^360)
PVA = $141,362.32
Now calculate the difference of Value of loan and the present value of loan payment
Difference = Loan value - PV of loan payment = $210,000 - $141,362.32 = $68,637.68
This te Ballon payment in present value term, We need to determine the value at the end of the loan term.
Hence we need to calculate the future value of this payment as follow
Future value = Present vale x ( 1 + Monthly Interest rate )^numbers of months
Future value = $68,637.68 x ( 1 + 7.1%/12 )^360
Future value = $573,963.09
Future value = $573,963
Hence the ballon Payment will be $573,963
Bond J has a coupon rate of 3 percent and Bond K has a coupon rate of 9 percent. Both bonds have 13 years to maturity, make semiannual payments, and have a YTM of 6 percent. a. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds
Solution :
Given :
Coupon rate for Bond J = 3%
Coupon rate for Bond K = 9%
YTM = 6 %
Therefore,
The current price for Bond J = $ 718.54 =PV(6%/2,13x2,30/2,1000)x -1
The current price for Bond K = $ 1281.46 =PV(6%/2,13x2,90/2,1000)x -1
If the interest rate by 2%,
Bond J = $ 583.42 = -18.80% (change in bond price)
Bond K = $ 1083.32 = -15.46% (change in bond price)
AutoEdge hires a new economic analyst who decides to compute marginal profit for each product line. What might cause AutoEdge to stop producing a certain auto part erroneously?
Answer:
AutoEdge will stop producing a certain auto part when its marginal profit becomes zero.
Explanation:
Marginal profit is the difference between the marginal cost of production and marginal revenue earned from the sale of the same. Marginal profit is supposed to occur when an additional unit of product or auto part is sold.
When these increment in profit stops, then the economic analyst at AutoEdge knows that it is time to stop producing additional units of the auto part. This is because increasing output no longer tends towards profit.
The new economic analyst at AutoEdge will advise management to stop increasing production when its marginal cost is equal to its marginal revenue because at that point the profit is maximized. This point where MC=MR is also the point where Marginal Profit equals zero.
This is called Shut Down point. Beyond this point, the marginal profit of the firm becomes negative. Hence any production activity carried out at this point will be termed erroneous.
Cheers
All of the following are examples of qualitative information that should be collected by the financial planner EXCEPT: Group of answer choices General attitudes towards spending. Risk tolerance. Client age and number of children. Education goals.
Answer:
Client age and number of children.
Explanation:
A budget is a financial plan used for the estimation of revenue and expenditures of an individual, organization or government for a specified period of time, often one year. Budgets are usually compiled, analyzed and re-evaluated on a periodic basis.
A financial planner refers to an individual who is an expert in the planning of a financial budget for another.
A client age and number of children aren't examples of qualitative information that should be collected by the financial planner.
Consider a model in which two products, x and y, are produced. There are 30 pounds of material and 60 hours of labor available. It requires 9 pounds of material and 12 hours of labor to produce a unit of x, and 5 pounds of material and 15 hours of labor to produce a unit of y. The profit for x is $300 per unit, and the profit for y is $250 per unit.
Required:
How many units of x and y to produce to maximize profit, the model is
Answer:
2 units of x and 2 units of y
Explanation:
The model can be represented as:
[tex]\begin{array}{cccc} & {x} & {y} & {} & {Materials} & {9} & {5} & {30} & {Labor} & {12} & {15} & {60} & {} & {300} & {250} \ \end{array}[/tex]
So, we have:
Max [tex]z = 300x + 250y[/tex] --- the objective function
Subject to:
[tex]9x + 5y \le 30[/tex]
[tex]12x + 15y \le 60[/tex]
[tex]x,y > 0[/tex]
Multiply the first equation by 3
[tex]9x + 5y \le 30[/tex] becomes
[tex]27x + 15y \le 90[/tex]
Subtract [tex]12x + 15y \le 60[/tex] from [tex]27x + 15y \le 90[/tex]
[tex]27x - 12x + 15y - 15y \le 90 - 60[/tex]
[tex]15x \le 30[/tex]
Divide by 15
[tex]x \le 2[/tex]
Substitute 2 for x in [tex]9x + 5y \le 30[/tex]
[tex]9 * 2 + 5y \le 30[/tex]
[tex]18 + 5y \le 30[/tex]
Collect like terms
[tex]5y \le 30 - 18[/tex]
[tex]5y \le 12[/tex]
Divide by 5
[tex]y \le 2.4[/tex]
y must be an integer;
So:
[tex]y \le 2[/tex]
So, we have:
[tex](x,y) \le (2,2)[/tex]
Hence, the company must product 2 units of x and 2 units of y
Which of the following statements concerning the effects of fluctuating exchange rates on companies competing in foreign markets is true?
A. Exchange rate shifts can produce sometimes favorable and sometimes unfavorable effects on a company's competitiveness.
B. Domestic companies under pressure from lower-cost imports are hurt even more when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made.
C. Exporters win when the currency of the country from which the goods are being exported grows weaker relative to the currencies of the countries that the goods are being exported to.
D. Fluctuating exchange rates pose significant risks to a company's competitiveness in foreign markets.
E. Domestic companies under pressure from lower-cost imports are benefited when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made.
Answer: B. Domestic companies under pressure from lower-cost imports are hurt even more when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made.
Explanation:
Question meant to ask which statement is not true.
Domestic countries that are under pressure as a result of imports being cheaper are actually benefitted when their local currency becomes weaker than that of the country where the imported goods are acquired.
This is because, a weaker domestic currency means that the imports will become more expensive as they are denominated in the foreign currency which is now stronger. As the imports become more expensive, people will move towards the domestic companies instead of imports.
Dexter Company uses the direct write-off method. March 11 Dexter determines that it cannot collect $9,000 of its accounts receivable from Leer Co. 29 Leer Co. unexpectedly pays its account in full to Dexter Company. Dexter records its recovery of this bad debt. Prepare journal entries to record the above transactions.
Answer and Explanation:
The journal entries are as follows:
a. Bad debt $9,000
To account receivable $9,000
(Being the bad debt expense is recorded)
b. Account receivable Dr $9,000
To bad debt $9,000
(being the reversal is recorded)
c. Cash Dr $9,000
To account receivable $9,000
(Being the recovery of the bad debt is recorded)
On July 1, 2009, Ute Corporation paid $900,000 for 90% of Cougar Company's outstanding common stock. On that date, the costs and fair values of Cougar's recorded assets and liabilities were as follows:
Cost Fair Value
Cash and Receivables 50,000 50,000
Inventory 230,000 300,000
Buildings and equipment (net) 200,000 350,000
Liabilities 80,000 120,000
Net assets 400,000 580,000
Give the information above, what is the portion of the purchase price that will be allocated to the differential?
a. $220,000
b. $400,000
c. $420,000
d. $240,000
Answer:
c. $420,000
Explanation:
The computation of the portion of the purchase price that will be allocated to the differential is shown below:
= Fair value of consideration - fair value of net asset required
= ($900,000 ÷ 0.90) - $580,000
= $1,000,000 - $580,000
= $420,000
hence, the portion of the purchase price that will be allocated to the differential is $420,000
Therefore the option c is correct
COST OF PRODUCTION (5 pts each for a total of 25 pts) a. What is the relationship between the marginal cost of production and average total cost of production? b. What is efficient scale of production? c. Why is the average total cost curve (ATC) U-shaped in the short run? d. Why is the average total cost curve (ATC) U-shaped in the long run? e. What are the shapes of the average variable cost curve (AVC) and the average fixed cost curve (AFC)?
Answer:
a. When marginal cost is above average cost, average cost is rising; but when marginal cost is below average cost, average cost is falling.
b. The lowest point at which a plant or firm can produce such that the long-run average cost of the plant or firm is at the minimum.
c. The average total cost curve (ATC) U-shaped in the short run because of diminishing returns.
d. The average total cost curve (ATC) is U-shaped in the long run because economies of scale and diseconomies of scale.
e. The shape of the average variable cost curve (AVC) is usually U-shaped or upward-sloping; while the shape of the average fixed cost curve (AFC) is a Rectangular Hyperbola.
Explanation:
a. What is the relationship between the marginal cost of production and average total cost of production?
Marginal cost refers to the change in total cost when extra unit of output is produced, while average cost is the total cost divided by the number of units produced.
The relationship between the two is that when marginal cost is above average cost, average cost is rising; but when marginal cost is below average cost, average cost is falling.
b. What is efficient scale of production?
Efficient scale of production can be described as the lowest point at which a plant or firm can produce such that the long-run average cost of the plant or firm is at the minimum.
c. Why is the average total cost curve (ATC) U-shaped in the short run?
The average total cost curve (ATC) U-shaped in the short run because of diminishing returns.
Diminishing returns occur when the amount of a single factor of production is incrementally increased while holding all other factors of production constant, the marginal output of a production process decreases.
d. Why is the average total cost curve (ATC) U-shaped in the long run?
The average total cost curve (ATC) is U-shaped in the long run because economies of scale and diseconomies of scale.
Economies of scale can be described as a situation whereby increasing output leads to lower long-run average total costs.
But, after a given level of output, scale diseconomies may be encountered by a firm.
Diseconomies of scale can be described as a situation whereby increasing output leads to higher long-run average total costs.
e. What are the shapes of the average variable cost curve (AVC) and the average fixed cost curve (AFC)?
Note: See the attached photo for the curves of the AVC and AFC showing their shapes.
The shape of the average variable cost curve (AVC) is usually U-shaped or upward-sloping.
The shape of the average fixed cost curve (AFC) is a Rectangular Hyperbola. This occurs because the same amount of fixed cost is split by increasing output. Therefore, the AFC curve slopes downwards and is a rectangular hyperbola, meaning that the area under the curve is constant at all places.
A firm has an equity multiplier of 1.57, an unlevered cost of equity of 14 percent, a levered cost of equity of 15.6 percent, and a tax rate of 21 percent. What is the cost of debt
Answer:
10.45%
Explanation:
Calculation to determine the cost of debt
B/S = 1.57 − 1
B/S = .57
.156 = .14 + .57(1 −.21)(.14 − RB)
.156 = .14 + .57(.79)(.14 − RB)
RB = .1045*100
RB= 10.45%
Therefore the cost of debt is 10.45%
The initial investment needed is $500,000 and the expected cash flows from this project will be 70,000 for the next 10 years. Will your project be approved, (generates a return higher than 12%). What cash flow would be required to get your project approved
Answer:
first part
Initial outlay = -$500,000
10 future cash flows = $70,000
PV of 10 future cash flows = $70,000 x 5.6502 (PVIFA, 12%, 10 periods) = $395,514
NPV = -$500,000 + $395,514 = -$104,486
the project will be rejected
second part
in order to have an NPV ≥ 0
annual cash flow = $500,000 / 5.6502 = $88,492.45 or higher
2.
What is the effect on the market when suppliers under invest in their businesses?
Answer:
the profit margin will decrease and supplies won't get their promotin
Carlsberg beer has an elasticity of -0.5 and the company decided cut prices to increase the total revenues on New Year’s Eve.
itack on Titan sasageyo
Pikes Peak is a ski resort in upstate New York. The company sells lift tickets, ski lessons, and ski equipment. It operates several restaurants and rents townhouses to vacationing skiers. The following hypothetical December transactions are typical of those that occur at the resort.
Borrowed $745,000 from the bank on December 1, signing a note payable, due in six months.
1. Purchased a new snowplow for $27,500 cash on December 31.
2. Purchased ski supplies for $14,300 on account.
3. Incurred $31,800 in routine maintenance expenses for the chairlifts; paid cash.
4. Received $74,500 for season passes (beginning in the new year).
5. Daily lift passes were sold this month for a total of $84,200 cash.
6. Received a $520 deposit on a townhouse to be rented for five days in January.
7. Paid half the charges incurred on account in (c).
8. Incurred and paid $22,300 in wages to employees for the month of December.
Required:
1. Prepare accrual basis journal entries for each transaction.
2. Calculate the company’s preliminary net income.
Answer:
1. a. Dr Cash $745,000
Cr Note payable $745,000
b. Dr Equipment $27,500
Cr Cash $27,500
c Dr Supplies $14,300
Cr Accounts payable $14,300
d. Dr Repairs and maintenance expense $31,800
Cr Cash $31,800
e. Dr Cash $74,500
Cr Unearned revenue $74,500
f. Dr Cash $84,200
Cr Service revenue $84,200
g. Dr Cash $520
Cr Unearned revenue $520
h. Dr Accounts payable (14300*1/2] $7,150
Cr Cash $7,150
i. Dr Salaries and wage expense $22,300
Cr Cash $22,300
2. Net income $30,100
Explanation:
1. Preparation of the accrual basis journal entries for each transaction
a. Dr Cash $745,000
Cr Note payable $745,000
b. Dr Equipment $27,500
Cr Cash $27,500
c Dr Supplies $14,300
Cr Accounts payable $14,300
d. Dr Repairs and maintenance expense $31,800
Cr Cash $31,800
e. Dr Cash $74,500
Cr Unearned revenue $74,500
f. Dr Cash $84,200
Cr Service revenue $84,200
g. Dr Cash $520
Cr Unearned revenue $520
h. Dr Accounts payable (14300*1/2] $7,150
Cr Cash $7,150
i. Dr Salaries and wage expense $22,300
Cr Cash $22,300
2. Calculation to determine the company’s preliminary net income.
Service revenue $84,200
Less Expense :
Repairs and maintenance expense
($31,800)
Salaries and wage expense ($22,300)
Total expense (54100)
Net income $30,100
Therefore the company’s preliminary net income is $30,100
