Answer:
always involve the acquisition of long-lived assets
Explanation:
Capital expenditures can be regarded as the investments that is made by
companies in order to grow or maintain their business operations.
It can as well be regarded as capital expense and it's explained as money that is been spent by an organization or corporate entity in buying, maintaining as well as improving its fixed assets, these asset could be buildings, equipment, vehicles or land.
It should be noted that Capital expenditure decisions always involve the acquisition of long-lived assets
The forecasted sales pertain to Arrow Corporation: Month Sales September $400,000 October 320,000 Finished Goods Inventory (August 31): 28,000 Arrow Corporation has a selling price of $5 on all units and expects to maintain ending inventories equal to 25 percent of the next month's sales. How many units does Arrow expect to produce in September
Answer:
68,000 units
Explanation:
The computation of the number of units that produced in september is given below;
The sales units at September is
= $400,000 ÷ 5
= 80,000 units
And, the october sales units is
= $320,000 ÷ 5
= 64,000 units
So, the production should be
= Ending finished units + sales units - beginning finished units
= (25% of 64,000 units) + 80,000 units - 28,000 units
= 16,000 units + 80,000 units - 28,000 units
= 68,000 units
The SRT partnership agreement specifies that partnership net income be allocated as follows in the following order: Partner S Partner R Partner TSalary allowance $20,000 $25,000 $15,000Interest on avg. capital balance 10% 10% 10%Remainder 30% 30% 40%Average capital balances for the current year were $60,000 for S, $50,000 for R, and $40,000 for T.Refer to the information given. Assuming no restrictions and current year net income of $45,000, what amount should be allocated to each partner? Partner S Partner R Partner TA) $17,000 $21,000 $7,000B) ($9,000) ($9,000) ($12,000)C) $13,500 $13,500 $18,000D) $22,500 $22,500 $0
Solution :
Note 1
calculation of remaining income after distribution of salary and interest on capital.
Total Net Income $ 45,000
Less : Salary allowance $ 60,000
($20,000 + $25,000 + $15,00)
Less : Interest on capital $ 15,000
($ 6,000 + $ 5,000 + $ 4,000)
Remaining income / (loss) to be allocated $ 30,000
Since the remaining income is negative, i.e. it loss to the SR partnership, so such Loss will also be allocated to the partners. Since in a partnership, Partners are required to share profits as well as losses. Hence, such loss will be deducted from the other shares.
Scheduled of amount allocated to each partner
Partners S Partner R Partner T
a). Salary allowance allocated $ 20,000 $ 25,000 $ 15,000
b). Interest on average capital $ 6000 $ 5000 $ 4000
balance allocated.
c). Remaining income allocated $ 9000 $ 9000 $ 12,000
Total allocation (a + b - c) : $ 17,000 $ 21,000 $ 7,000
Delta Screen Corporation is currently operating at 60% of capacity and producing 6,000 screens annually. The normal selling price is $750 per screen. They recently received an offer from a company in Germany to purchase 2,000 screens for $500 per unit. Delta has not previously sold products in Germany. Budgeted production costs for 6,000 and 8,000 screens follow:Units Produced 6,000 8,000 Direct Materials Cost $ 750,000 $ 1,000,000Direct Labor Cost 750,000 1,000,000Variable Overhead 900,000 1,200,000 Fixed Overhead 1,200,000 1,200,00 Total Cost 3,600,000 4,400,000Full Cost per Unit 600 550Delta’s marketing manager believes that although the price offered by the German customer is lower than current price, the order should be accepted to gain a foothold in the German market. The production manager, however, believes that the order should be rejected because the unit cost is higher than the price offered.If the president of Delta were to call on you to resolve the difference in opinion, what would you recommend? Explain.What is the minimum price for the special order if Delta is operating at full capacity?
Answer:
a. I would recommend the the special order should be accepted.
b. The minimum price for the special order is the current selling price of $750.
Explanation:
a. If the president of Delta were to call on you to resolve the difference in opinion, what would you recommend?
Because the existing data's format and findings are deceiving, I would suggest to the president to let us perform a differential analysis before making a recommendation.
Note: See the attached excel file for a analysis of accepting the order.
In the attached excel file, the following calculation is done:
Special order revenue = Difference revenue = Units of special order * Special order price per unit = 2,000 * $500 = $1,000,000
Revenue with the special order = Revenue without the special order + Special order revenue = $4,500,000 + $1,000,000 = $4,500,000
From the differential analysis in the attached excel, it can be observed that accepting the order will increase profit by $200,000.
Therefore, I would recommend the the special order should be accepted.
b. What is the minimum price for the special order if Delta is operating at full capacity?
Since other sales opportunities has be forgone if the special order is accepted if Delta is operating at full capacity, the minimum price for the special order must be or is the current selling price of $750.
Viviano Corporation issued a new bond, and hired your bank as its underwriter. In an upcoming talk with its CFO, you are expected to explain the effect of market interest rate. An increase in the market rate of interest will have which one of the following effects on this bond?
a. increase the coupon rate
b. decrease the coupon rate
c. increase the market price
d. decrease the market price
e. increase the time period
Answer: d. decrease the market price
Explanation:
Interest rates and the prices of bonds are negatively correlated as one increasing means that the other is decreasing.
The reason is this: when market interest rates rise, investors will move away from bonds to other investments because bonds offer a fixed payment and so will be less attractive than other investments which would be offering higher returns based on the higher market rates.
The drop in demand for bonds will lead to their prices falling as per the rules of demand and supply.
Rocky Guide Service provides guided 1–5 day hiking tours throughout the Rocky Mountains. Wilderness Tours hires Rocky to lead various tours that Wilderness sells. Rocky receives $1,600 per tour day, and shortly after the end of each month Rocky learns whether it will receive a $160 bonus per tour day it guided during the previous month if its service during that month received an average evaluation of "excellent" by Wilderness customers. The $1,600 per day and any bonus due are paid in one lump payment shortly after the end of each month.
On July 1, based on prior experience, Rocky estimated there is a 40% chance it will earn the bonus for July tours. It guided a total of 10 days from July 1–July 15.
On July 16, based on Rocky’s view that it had provided excellent service during the first part of the month, Rocky revised its estimate to an 90% chance it would earn the bonus for July tours. Rocky also guided customers for 15 days from July 16–July 31.
On August 5 Rocky learned it did not receive an average evaluation of "excellent" for its July tours, so it would not receive any bonus for July, and received all payment due for the July tours.
Rocky bases estimates of variable consideration on the expected value it expects to receive.
Required:
Prepare the journal entries to record the transactions above.
Answer:
Please find the complete question in the attached file.
Explanation:
Rocky believed there would be a [tex]30\%[/tex] possibility of a July bonus for touring, i.e [tex]< 50\%[/tex], from July 1-July 15 (10 days)-. Therefore no bonus can be calculated as [tex]\$2,400[/tex] / day trip \times 10 days =[tex]\$2,400[/tex] throughout this duration.
The expected 15-day revenues from 16th July – 31st July may well be calculated as [tex]\$2,400 \times 15 \ days = \$36.000.[/tex] Rocky calculated that it would get the bonus [tex]80\%[/tex] of the time. Estimates a [tex]\$240/day\ bonus \times (10\ days + 15\ days) = \$6,000[/tex]
Miscavage Corporation has two divisions: the Beta Division and the Alpha Division. The Beta Division has sales of $325,000, variable expenses of $159,600, and traceable fixed expenses of $72,800. The Alpha Division has sales of $635,000, variable expenses of $345,800, and traceable fixed expenses of $135,900. The total amount of common fixed expenses not traceable to the individual divisions is $138,200. What is the company's net operating income?
Answer:
Net operating income= $107,700
Explanation:
Giving the following information:
Beta Division:
Sales= $325,000
Variable expense= $159,600
Traceable fixed expense= $72,800
Alpha Division:
Sales= $635,000
Variable expense= $345,800
Traceable fixed expense= $135,900
We need to calculate the net operating income:
Beta division partial income= 325,000 - 159,600 - 72,800= 92,600
Alpha division partial income= 635,000 - 345,800 - 135,900= 153,300
Common fixed expense= (138,200)
Net operating income= $107,700
Since graduating from college years ago, Dr. Nick Riviera has made deposits into his retirement fund on a basis in the amount of $. If his retirement fund has earned % interest compounded , how much has Nick accumulated in his retirement account?
Answer:
$280,971.79
Explanation:
Calculation to determine How much has Nick accumulated in his retirement account
Using Financial calculator
Amount Nick accumulated in his retirement account = FV(rate, nper, pmt, pv, type)
Where,
Monthly deposit = $130
Number of months = 40 * 12
Number of months= 480
Monthly interest rate = 6.3% /12
Let plug in the formula
Amount Nick accumulated in his retirement account = FV (6.3%/12, 480, -130, 0, 0)
Amount Nick accumulated in his retirement account = $280,971.79
Therefore the Amount Nick accumulated in his retirement account is $280,971.79
For each of the following scenarios, identify the number of firms present, the type of product, and the appropriate market model.
a. A large city has lots of small shops where people can buy sweaters. Each store's sweaters reflect the style of that particular store. Additionally, some stores use higher-quality yarn than others, which is reflected in their price.
b. There are hundreds of high school students in need of algebra tutoring services. Dozens of companies offer tutoring services; parents view the quality of the tutoring at the different companies to be largely the same.
c. Only three airlines fly from San Francisco to Medford, Oregon. No new airline will enter this market, because there are not enough customers to share among four or more airlines without each one experiencing substantially higher average costs. Consumers view all airlines as providing basically the same service and will shop around for the lowest price.
d. The government has granted a patent to a drug company for an experimental AIDS drug. That company is the only firm permitted to sell the drug.
Answer:
a. large number of firms, they have differentiated products, and this is a monopolistic market model
b. large number of firms, they have standardized products, and this is a perfectly competitive market model
c. few number of firms, they have standardized products, and this is an oligopolistic market model
d. one number of firms, they have a single products, and this is a monopoly
Explanation:
a. This first question is a monopolistic competition. this is because it has the following characteristics:
It has large number of firms, the products here are differentiated, there is no entry cost and also no exit cost in the long run. Entereing the market is challenging
b. this is a perfect competition, the characteristics are large number of firms, the products are identical and the entry and exit in the market is easy
c. this market is an oligopoly. it has a few firms, the products can be identical or they can be differntiated, and it has barriers to entry from what we have seen here.
d. this market is a monopoly. the firm is a single one, and due to the patent there are no new entries for any other firm.
QS 5-1 Inventory ownership LO C1 Homestead Crafts, a distributor of handmade gifts, operates out of owner Emma Finn’s house. At the end of the current period, Emma looks over her inventory and finds that she has 1,800 units (products) in her basement, 27 of which were damaged by water and cannot be sold. 100 units in her van, ready to deliver per a customer order, terms FOB destination. 120 units out on consignment to a friend who owns a retail store. How many units should Emma include in her company’s period-end inventory?
Answer:
1,993 units
Explanation:
Calculation to determine How many units should Emma include in her company's period-end inventory
Units in Ending Inventory:
Units of Product on hand: 1,800 units
Add Units in transit 100
Add Units on consignment 120
Less:Damaged units (27)
Total units in period-end inventory 1,993 units
Therefore How many units should Emma include in her company's period-end inventory is 1,993 units
Profit margin is calculated by dividing Group of answer choices sales by cost of goods sold. gross profit by net sales. net income by stockholders' equity. net income by net sales. Flag question: Question 19
Answer:
net income by net sales.
Explanation:
Price can be defined as the amount of money that is required to be paid by a buyer (customer) to a seller (producer) in order to acquire goods and services. Thus, it refers to the amount of money a customer or consumer buying goods and services are willing to pay for the goods and services being offered. Also, the price of goods and services are primarily being set by the seller or service provider and it eventually determines the profit margin of a business firm.
In Financial accounting, profit margin can be defined as a measure of the profitability of a business over a specific period of time. Thus, it is simply the amount of money by which revenue generated through sales exceed the costs of a product.
Hence, profit margin is calculated by dividing net income by net sales or net profits by net sales over a specific period of time.
Small businesses make up the majority of the competitive landscape for most businesses. There are approximately __________ small businesses in the United States.
Answer:
29 million
Explanation:
The Small Business Administration (SBA) is an agency of the federal government that is saddled with the responsibility of providing both managerial and financial assistance to small businesses in the United States of America. SBA was established in 1953 as an autonomous or independent agency of the government of the United States of America. Generally, it is saddled with the responsibility of providing both managerial and financial assistance and counseling to small businesses in order to bolster the American economy.
The small business administration (SBA) serves as an intermediary between entrepreneurs and investors or creditors, in order to provide them with the necessary funds required to plan, start and grow their business.
Basically, SBA provides services such as entrepreneurial development, access to funds, advocacy and contracting to small businesses (entrepreneurs) in the United States of America.
In the United States of America, majority of the competitive landscape or business environment is made up of small business enterprise.
According to the small business administration (SBA), there are approximately 29 million small businesses in the United States.
Before reconciling its bank statement, Lauren Cosmetics Corporation's general ledger had a month-end balance in the cash account of $8,250. The bank reconciliation for the month contained the following items:Deposits in transit $870Outstanding checks 645Interest earned 20NSF check returned to bank 220Bank service charge 70Given the above information, what up-to-date ending cash balance should Lauren report at month-end?A. $7,380.B. $8,530.C. $7,980.D. $7,700.
Answer:
a. $7,380
Explanation:
Ending cash balance = Cash balance + Interest earned - NSF check returned to bank - Bank service charge
Ending cash balance = $8,250 + $20 - $220 - $70
Ending cash balance = $7,980
So, $7,380 is the up-to-date ending cash balance should Lauren report at month-end.
Scottie Adams Bird Supplies issued 15% bonds, dated January 1, with a face amount of $310,000 on January 1, 2021. The bonds mature in 2031 (10 years). For bonds of similar risk and maturity the market yield is 14%. Interest is paid semiannually on June 30 and December 31. What is the price of the bonds at January 1, 2021
Answer:
a. $326,421.
Explanation:
Missing word "Some relevant and irrelevant present value factors:
* PV of annuity due of $1: n = 20; i = 7% is 11.33559
* PV of ordinary annuity of $1: n = 20; i = 7% is 10.59401
**PV of $1: n = 20; i = 7% is 0.25842
Multiple Choice $326,421. $361,100. $572,732. $292,814."
Semi annual cash interest = 23250 (310,000*15%*6/12)
n = 20
I =7%
Cashflows Amount PVF Present value
Semi annual cash interest 23250 10.59401 246,310.70
Maturity value 310,000 0.25842 80,110.20
Price of bonds $326,420.90
Universal Travel Inc. borrowed $498,000 on November 1, 2021, and signed a 12-month note bearing interest at 7%. Interest is payable in full at maturity on October 31, 2022. In connection with this note, Universal Travel Inc. should report interest payable at December 31, 2021, in the amount of
Answer: $2,905
Explanation:
The total interest that will be paid on the note is:
= 498,000 * 7%
= $34,860
This interest will have to be apportioned monthly over the year. The monthly interest (which will also be the December interest) is:
= 34,860 / 12 months
= $2,905
The ending Retained Earnings balance of Lambert Inc. increased by $1.7 million from the beginning of the year. The company's net income earned during the year is $5.1 million. What is the amount of dividends Lambert Inc. declared and paid
Answer: $3.4 million
Explanation:
The increase in Retained earnings is the net earnings for the year.
Net earnings are calculated by deducting dividends from the Net income.
Net earnings = Net income - Dividends
1,700,000 = 5,100,000 - Dividends
Dividends = 5,100,000 - 1,700,000
= $3,400,000
= $3.4 million
Caber corporation applies manufacturing overhead on the basis of machine-hours. at the begining of the most recent year, the company based it predetermined overhead rate on total estimated overhead of $60,600. Actual manufacturing overhead for the year amounted to $59,000 and actual machine-hours were 5,900. The company's predetermined overhead rate for the year was $10.10 per machine-hour.
a. The pre-determined overhead rate was based on how many estimated machine-hours?
A. 5,783.
B. 6,000.
C. 5,900.
D. 5,842 24.
b. The applied manufacturing overhead for the year was closest to:_____.
A. $58,017.
B. $59,590.
C. $60,600.
D. $58,597.
c. The overhead for the year was:_____.
A. $1,010 underapplied.
B. $590 overapplied.
C. $590 underapplied.
D. $1,010 overapplied.
Answer and Explanation:
The calculation of each part is given below:
a. The estimated machine hours is
= $60,600 ÷ 10.10
= 6,000 machine hours
b. The applied manufacturing overhead is
= 5,900 × $10.10
= $59,590
c. The overhead should be
= $60,600 - $59,590
= $1,010 underapplied
In this way each and every part should be determined
So the same should be considered and relevant
An investor currently holds stock in Giggle Corporation and is considering buying stock in either Macrosoft Corporation or Faceplant Corporation. All three stocks have the same expected return and risk. The correlation between Giggle & Macrosoft is 0.25. The correlation between Giggle and Faceplant is -0.10. Portfolio risk is expected to:
a. Increase regardless of whether she buys Macrosoft or Faceplant since they are equally risky
b. Decline more when the investor buys Faceplant
c. Cannot tell from information provided – need to know risk, return and proportion of each stock in the portfolio
d. Stay the same regardless of whether Macrosoft or Faceplant is added since all three have the same risk
e. Decrease more when the investor buys Macrosoft
Answer:
b
Explanation:
Portfolio diversification is the process of holding different asset and security classes in order to minimise the non systemic risk of the portfolio
Correlation is a statistical measure used to measure the relationship that exists between two variables.
1. Positive correlation : it mean that the two variables move in the same direction. If one variable increases, the other variable also increases. It increases the risk of the portfolio
For example, there should be a positive correlation between quantity supplied and price
When there is a positive correlation, the graph of the variables is upward sloping
2. Negative correlation : it mean that the two variables move in different direction. If one variable increases, the other variable decreases. It decreases the risk of the portfolio
For example, there should be a negative correlation between quantity demanded and price
When there is a negative correlation, the graph of the variables is downward sloping
3. Zero correlation : there is no relationship between the variables. It decreases the risk of the portfolio
Baxter Co. wants to issue new 20-year bonds for some much-needed expansion projects. The company currently has 5.6 percent coupon bonds on the market that sell for $1,094.30,page 160 make semiannual payments, and mature in 20 years. What coupon rate should the company set on its new bonds if it wants them to sell at par
Answer:
The coupon rate the company should set on its new bonds if it wants them to sell at par is 4.86%.
Explanation:
The coupon rate can be determined by calculating the yield to maturity (YTM) using the following RATE function in Excel:
YTM = RATE(nper,pmt,-pv,fv) * Number of semiannuals in a year = RATE(nper,pmt,-pv,fv)*2 .............(1)
Where;
YTM = yield to maturity = ?
nper = number of periods = number of years to maturity * number of semiannuals in a year = 20 * 2 = 40
pmt = semiannual coupon payment = face value * (annual coupon rate / number of semiannuals in a year) = 1000 * (5.6% / 2) = 28
pv = present value = current bond price = $1,094.30 = 1094.30
fv = face value of the bond = 1000
Substituting the values into equation (1), we have:
YTM = RATE(40,28,-1094.30,1000)*2
Inputting =RATE(40,28,-1094.30,1000)*2 into excel (Note: as done in the attached excel file), we have
YTM = 4.86%
Therefore, the coupon rate the company should set on its new bonds if it wants them to sell at par is 4.86%.
A company had net sales of $600,000, total sales of $750,000, and an average accounts receivable of $75,000. Its accounts receivable turnover equals:
Answer: 8 times
Explanation:
The Accounts receivable turnover measures how efficiently a company collects the debt that is owed to it. It is calculated by the formula:
Accounts receivable turnover = Net Credit sales / Average accounts receivable
= 600,000 / 75,000
= 8 times
Uniform Supply accepted a $6,300, 90-day, 8% note from Tracy Janitorial on October 17. If the note is dishonored, but Uniform Supply intends to continue collection efforts, what entry should Uniform Supply make on January 15 of the next year? (Assume no reversing entries are made.) (Use 360 days a year.)
Answer:
Debit Cash $6,426; credit Interest Revenue $21; credit Interest Receivable $105, redit Notes Receivable $6,300.
Explanation:
Based on the information given the appropriate journal entry that Uniform Supply should make on January 15 of the next year will be:
Debit Cash $6,426
($6300+$105+$21)
Credit Interest Revenue $21
($6300*8%*15/360)
Credit Interest Receivable $105
(6300*8%*75/360)
Credit Notes Receivable $6,300
Stock Rit Rmt ai Beta
A 10.6 15Â Â Â 0 0.8
Z Â 9.8 8 0 1.1
Rit = return for stock i during period t
Rmt = return for the aggregate market during period t
What is the abnormal rate of return for Stock Z during period t using only the aggregate market return (ignore differential systematic risk)?
a. 3.40
b. 4.40
c. 1.80
d. -4.40
E.
-1.70
Answer:
1.8 option c
Explanation:
this question has a very simple solution
the following definitions
Rit = return for stock i during period t
Rmt = return for the aggregate market during period t
The abnormal rate of return for stock z is = Rit - Rmt
Rit = 9.8
Rmt = 8
9.8 - 8 = 1.8
therefore the abnormal rte of return for stock z is = 1.8, which is option c
Globalization of Market is taking place because of ___________.
Diversified Semiconductors sells perishable electronic components. Some must be shipped and stored in reusable protective containers. Customers pay a deposit for each container received. The deposit is equal to the container's cost. They receive a refund when the container is returned. During 2021, deposits collected on containers shipped were $890,000. Deposits are forfeited if containers are not returned within 18 months. Containers held by customers at January 1, 2021, represented deposits of $595,000. In 2021, $827,000 was refunded and deposits forfeited were $56,750. Required: 1. Prepare the appropriate journal entries for the deposits received, returned, and forfeited during 2021. 2. Determine the liability for refundable deposits to be reported on the December 31, 2021, balance sheet. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate journal entries for the deposits received, returned, and forfeited during 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet < 1 2 3 4 > Record the deposits collected. < 1 2 3 4 Record the containers returned. < 1 2 3 4 Record the deposits forfeited - record revenue. < 1 2 3 4 Record the deposits forfeited - adjust inventory. Determine the liability for refundable deposits to be reported on the December 31, 2021, balance sheet. Balance on December 31
Answer:
1. (a) Dr Cash $890,000
Cr Liability for refundable deposits $890,000
(b) Dr Liability for refundable deposits $827,000
Cr Cash $827,000
(c) Dr Liability for refundable deposits $56,750
Cr Sale of containers $56,750
(d) Dr Cost of goods sold $56,750
Cr Inventory of containers $56,750
2.$601,250
Explanation:
1.Preparationof the appropriate journal entries for the deposits received, returned, and forfeited during 2021.
(a) Dr Cash $890,000
Cr Liability for refundable deposits $890,000
(b) Dr Liability for refundable deposits $827,000
Cr Cash $827,000
(c) Dr Liability for refundable deposits $56,750
Cr Sale of containers $56,750
(d) Dr Cost of goods sold $56,750
Cr Inventory of containers $56,750
2. Calculation to determine the liability for refundable deposits to be reported on the December 31, 2021, balance sheet.
Using this formula
Ending liability for refundable deposits = Liability for refundable deposits, January 1, 2021 + Deposits received during 2021 - Deposits returned during 2018 - Deposits forfeited during 2021
Let plug in the formula
Ending liability for refundable deposits= $595,000 + $890,000 - $827,000 - $56,750
Ending liability for refundable deposits= $601,250
Therefore the liability for refundable deposits to be reported on the December 31, 2021, balance sheet is $601,250
Two employees are suspended for three days for a fight that violated the Human Resource policies of the facility. This behavior would be
Answer:
workplace misbehavior
Explanation:
In simple words, Any deliberate employee activity that is theoretically detrimental to the company or people inside the organisation is referred to as workplace misbehavior. Such misbehavior might vary from pumping noisy audio just to upset employees to verbal hostility and job sabotage, many of which can cause chaos in any workplace.
This behavior is a kind of "Workplace misbehavior".
Such deliberate employee behavior, which may hurt the corporation or organizations as well as individuals inside the company, is termed Workplace misbehavior.These conducts could maximum range from music blasting to aggravate employees, psychological hostility, and sabotage, which in any business can lead to disaster.
Thus the above response is correct.
Learn more about workplace misbehavior here:
https://brainly.com/question/14239778
Your friend was injured in an accident, and the insurance company has offered him the choice of $25,000 per year for 15 years, with the first payment being made today, or a lump sum. If a fair return is 7.5%, how large must the lump sum be to leave him as well off financially as with the annuity
Answer:
PV=$237,228.84
Explanation:
Giving the following information:
Annual payment= $25,000
Number of periods= 15 years
Interest rate= 7.5%
To calculate the value of the payments today (PV), we need to use the following formula:
PV= A*{(1/i) - 1/[i*(1 + i)^n]} * (1+i)
PV= 25,000*{(1/0.075) - 1/ [0.075*(1.075^15)]} * 1.075
PV=$237,228.84
Windhoek Mines, Ltd., of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: Cost of new equipment and timbers $ 370,000 Working capital required $ 115,000 Annual net cash receipts $ 130,000 * Cost to construct new roads in year three $ 43,000 Salvage value of equipment in four years $ 68,000 *Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth. The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company’s required rate of return is 18%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: a. What is the net present value of the proposed mining project? b. Should the project be accepted?
Answer:
Windhoek Mines, Ltd., of Namibia
a. The net present value (NPV) of the proposed mining project is:
= -$117,258
b. No. The project should be rejected. It has a negative NPV.
Explanation:
a) Data and Calculations:
Cost of new equipment and timbers = $370,000
Working capital required = $115,000
Cost to construct new roads in year three = $43,000
Annual net cash receipts = $130,000
Salvage value of equipment in four years = $68,000
Company's required rate of return = 18%
Mining duration = 4 years
Annuity factor for 4 years at 18% = 2.1690
Relevant discount factors at 18%:
Year 3 = 0.712
Year 4 = 0.636
Present values of Cash Flows:
Transaction Cash Flows PV Factor PV Amount
Cost of new equipment and timbers $370,000 1.000 -$370,000
Working capital required 115,000 1.000 -115,000
Cost to construct new roads in year three 43,000 0.712 -30,616
Annual net cash receipts 130,000 2.169 281,970
Salvage value of equipment in four years 68,000 0.636 43,248
Working capital released 115,000 0.636 73,140
Net present value -$117,258
Combining a protective put with a forward contract generates equivalent outcomes at expiration to those of a:
Answer:
Fiduciary call.
Explanation:
Foreign exchange market can be defined as type of market in which the currency of one country is converted into that of another country.
For example, the conversion of dollars of the United States of America can be converted into naira (Nigeria) at the foreign exchange market.
A covered interest arbitrage can be defined as trading strategy in which an investor minimizes his or her currency risk by using a forward contract to hedge against the interest rate difference between two countries i.e the exchange rate risk. Thus, it's considered to be the most common interest rate arbitrage around the world.
Generally, when a protective put is combined with a forward contract it would generate equivalent outcomes at expiration to those of a fiduciary call.
This ultimately implies that, a fiduciary call combines both a call option and a bond that's risk free and matures on the expiry date of an option.
A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 19,000 defective units that cost $5.20 per unit to manufacture. The units can be a) sold as is for $2.50 each, or b) reworked for $4.80 each and then sold for the full price of $7.70 each.
What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them? (Enter costs and losses as negative values.)
Answer:
If the company reworks the units, income will increase by $7,600 (55,100 - 47,500).
Explanation:
Giving the following information:
Number of units= 19,000
Sold as-is:
Selling price= $2.5
Rework:
Selling price= $7.7
Incremental income= $4.8
First, we will calculate the effect on income of both options:
Sold as-is:
Effect on income= 2.5*19,000= $47,500
Rework:
Effect on income= 19,000*(7.7 - 4.8)
Effect on income= $55,100
If the company reworks the units, income will increase by $7,600 (55,100 - 47,500).
Salud Company reports the following information.
Selected Annual Income Statement Data Selected Year-End Balance Sheet Data
Net income $445,000 Accounts receivable increase $46,000
Depreciation expense 93,000 Prepaid expenses decrease 16,500
Gain on sale of machinery 23,600 Accounts payable increase 7,400
Wages payable decrease 3,700
Use the indirect method to prepare the operating activities section of its statement of cash flows for the year ended December 31.
Answer:
The Cash Flow statement is attached with this answer please find that
Explanation:
In the Indirect method the following adjustments are made in the net income for the period
Non cash AdjustmentsNon operating adjustmentsWorking capital changesA complete answer is available in the attached file.
Assume the expected return on the market is 6 percent and the risk-free rate is 4 percent. What is the expected return for a stock with a beta equal to 2.00
Answer: 8%
Explanation:
This can be calculated using the Capital Asset Pricing Model. The formula of which is:
Expected return of stock = Risk free rate + Beta * (Expected return on market - Risk-free rate)
= 4% + 2 * (6% - 4%)
= 4% + 4%
= 8%
