Answer:
The correct answer is Option A.
Explanation:
Treasury stocks are simply company's own stock repurchased by the company. When this happens, there is cash outflow in order to increase the stock.
When GE bought back 300,000 shares of its stock from investors at $45 a share, the value of the treasury stock was 300,000 shares x $45 = $13.5m. However, the stock was reissued for $65 a share, translating to 300,000 shares x $65 = $19.5m cash receipt.
The appropriate entries to raise would be a debit to cash for $19.5 million, a credit to Treasury Stock for $13.5 million, and a credit to Additional Paid-in Capital for $6 million.
Blossom Co. leased machinery from Young, Inc. on January 1, 2020. The lease term was for 8 years, with equal annual rental payments of $5,800 at the beginning of each year. In addition, the lease provides an option to purchase the machinery at the end of the lease term for $1,500, which Blossom is reasonably certain it will exercise as it believes the fair value of the machinery will be at least $5,000. The machinery has a useful life of 10 years and a fair value of $43,000. The implicit rate of the lease is not known to Blossom. Blossom’s incremental borrowing rate is 9%. Prepare Blossom’s 2020 journal entries
Answer and Explanation:
The Journal entry is shown below:-
1. Right of use Dr, $35,743.93
To lease liability $35,743.93
(Being lease assets and lease liability is recorded)
Working note as attached using spreadsheet
Here we debited the right of use as it increased the assets and we credited the lease liability as it also increased the liability
2. Lease liability Dr, $5,800
To Cash $5,800
(Being payment on lease liability is recorded)
Here, we debited the lease liability as it decrease the liability and we credited the cash as it decreased the asset
3. Interest expenses Dr, $2,694.95
To Lease liability $2,694.95
(Being interest expenses is recorded)
Here we debited the interest expense as it increased the expenses and we credited the leased liability as it increased the liability
4. Amortization expenses Dr, $3,574.39 ($35,743.93 ÷ 10 )
To Right of use $3,574.39
(Being amortization expenses is recorded)
Here we debited the amortization expenses as it increase the expenses and we credited the right of use as it reduced the assets
Working Note
Interest expenses = (Lease liability - First lease payment) × Incremental borrowing rate
= ($35,743.93 - $5,800) × 9%
= $2,694.95
Southern Alliance Company needs to raise $70 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 60 percent common stock, 15 percent preferred stock, and 25 percent debt. Flotation costs for issuing new common stock are 12 percent, for new preferred stock, 9 percent, and for new debt, 2 percent. What is the true initial cost figure the company should use when evaluating its project ?
Answer:
$88,832,487.31
Explanation:
According to the scenario, computation of the given data are as follow:-
FT = flotation cost of new debt percent × target capital debt percent + flotation cost of new common stock percent × target capital common stock percent + flotation cost of new preferred stock percent × target capital preferred stock percent
= 0.02 × 0.25+ 0.12 × 0.60 + 0.09 × 0.15
= 0.005 + 0.072 + 0.135
= 0.212
Now
True initial cost
= $70 million ÷ ( 1 - 0.212)
= $70 million ÷ 0.788
= $88,832,487.31
Ratios are generally calculated from historical data. Of what use are they in assessing
the firm’s future financial condition?
I would say by the firm calculating their reports from before it usually shows where the company should stand for tears to come
Explanation:
Medallion Cooling Systems, Inc., has total assets of $10,000,000, EBIT of $2,000,000, and preferred dividends of $200,000 and is taxed at a rate of 40%. In an effort to determine the optimal capital structure, the firm has assembled data on the cost of debt, the number of shares of common stock for various levels of indebtedness, and the overall required return on investment:,
a. Calculate earnings per share for each level of indebtedness.,
b. Use Equation 13.12 and the earnings per share calculated in part a to calculate a price per share for each level of indebtedness.,
c. Choose the optimal capital structure. Justify your choice
Answer:
Explanation:
The two attached pictures shows the explanation for this problem. I hope it help you. Thank you
Suppose Mr. Lane just bought a share of BlueWind Co., a renewable energy startup. BlueWind promises to pay Mr. Lane $18 in dividends for one year and then the firm will shut down. Suppose that the liquidation value of the share is $3, and the rate of time preference is 5%. Then, according to the single-period dividend discount model, the present value of the cash payment received by Mr. Lane in one year would be
Answer:
The present value of the cash payment is $20
Explanation:
The present value of cash payment receivable by Mr Lane in one year's time is the today's equivalent amount of the dividend of $18 as well as the liquidation value of $3.
The present value is the total cash inflows multiplied by the discount factor
discount factor=1/(1+r)^n
where is the rate of time preference of 5%'
n is 1 i.e in one year's time
total cash inflows=$18+$3=$21
discount factor =1/(1+5%)^1=0.95238
present value of cash payment=0.95238*$21=$20
Stiller Corporation incurred fixed manufacturing costs of $24,000 during 2015. Other information for 2015 includes: The budgeted denominator level is 2,000 units. Units produced total 1,500 units. Units sold total 1,200 units. Beginning inventory was zero. The company uses absorption costing and the fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold. Operating income using absorption costing will be ________ than operating income if using variable costing.
Answer:
Operating profit using absorption costing will be higher by $3,600 than operating income if using variable costing.
Explanation:
The difference between profit under variable costing and under absorption costing is simply the value of the change in inventory.
Usually, a decrease in inventory would cause profit under absorption costing to be lower . This is so because cost of goods sold would become higher leading to a lower profit . And vice versa
Difference in profit = POAR × change inventory
Predetermined Overhead absorption rate(POAR)
= Estimated overhead/ estimated production unit
= $24,000/2,000 units = $12 per unit
Change in inventory = 1500 - 1200= 300 units
Difference in profit = 300 × $12 per unit = $3,600
Operating profit using absorption costing will be higher by $3,600 than operating income if using variable costing.
Week 5 Rachel is a financial investor who actively buys and sells in the securities market. Now she has a portfolio of all blue chips, including: $13,500 of Share A, $7,600 of Share B, $14,700 of Share C, and $5,500 of Share D. Required:
a) Compute the weights of the assets in Rachel’s portfolio? (2 marks)
b) If Rachel’s portfolio has provided her with returns of 9.7%, 12.4%, -5.5% and 17.2% over the past four years, respectively, calculate the geometric average return of the portfolio for this period. (2 marks)
c) Assume that expected return of the stock A in Rachel’s portfolio is 13.6% this year. The risk premium on the stocks of the same industry are 4.8%, betas of these stocks is 1.5 and the inflation rate was 2.7%. Calculate the risk-free rate of return using Capital Market Asset Pricing Model (CAPM). (2 marks)
i need onlu part d)
d) Following is forecast for economic situation and Rachel’s portfolio returns next year, calculate the expected return, variance, and standard deviation of the portfolio. (4 marks)
Required: step by step explanation with formula please
Answer: The answer is provided below
Explanation:
The weights of assest in Rachel's portfolio: = amount in each stock ÷ sum of the amounts invested in all stocks.
Share Amount Weight
A. 13500. 0.33
B. 7600. 0.18
C. 14700. 0.36
D. 5500. 0.13
Total 41300
Note that weight = amount/total
Geometric average return of a portfolio:
((1+R1)×(1+R2)×(1+R3)....×(1+Rn))^(1/n) - 1
where,
R1= return of period 1
Rn= return in nth period
Hence, the geometric average return of Rachel's portfolio will be:
((1+9.7%)×(1+12.4%)×(1-5.5%)×(1+17.2%))^(1/4) - 1
= 8.10 % (approximately) per year.
Using the nominal rate of return which includes inflation:
CAPM: Required return will be:
= Risk free return + (Risk premium × Beta)
13.6 = Risk free return + (4.8 × 1.5)
13.6 = Risk free return + 7.2
Risk free return = 13.6 - 7.2
= 6.4% which is not inflation adjusted)
The inflation adjusted rate of return will be:
= (1+return)/(1+inflation rate))-1
= ((1+13.6%)/(1+2.7%))-1
= 10.61%
Using CAPM:
10.61= Risk free return + (4.8 × 1.5)
10.61 = Risk free return + 7.2
Risk free return = 10.61 - 7.2
Risk free return = 3.41% (at real rates)
In practice, the use of inflation adjusted return i.e the real rate of return which is 10.61% is better as it puts forth a long term perspective on how a stock is performing.
A financier plans to invest up to $500,000 in two projects. Project A yields a return of 9% on the investment of x dollars, whereas Project B yields a return of 17% on the investment of y dollars. Because the investment in Project B is riskier than the investment in Project A, she has decided that the investment in Project B should not exceed 40% of the total investment. How much should the financier invest in each project in order to maximize the return on her investment
Answer:
She should invest $300,000 in Project A, and $200,000 in Project B.
Explanation:
Solution
Since Project B yields a higher return, she should invest as much money as possible in it, which is 40% of the total investment or
or (0.40)($500,000) = $200,000
so
The remaining $500,000 - $200,000 = $300,000 should be invested in Project A.
Therefore, she should invest $300,000 in Project A, and $200,000 in Project B.
Piedmont Hotels is an all-equity company. Its stock has a beta of .94. The market risk premium is 7.5 percent and the risk-free rate is 3.3 percent. The company is considering a project that it considers riskier than its current operations so it wants to apply an adjustment of 2.5 percent to the project's discount rate. What should the firm set as the required rate of return for the project
Answer:
Required rate of return for the project = 9.7%
Explanation:
The risk-adjusted discount factor = cost of equity + the adjustment
Cost of equity can be calculated using the capital asset pricing model CAPM
Using the CAPM , the rate of return on equity can be determined as follows:
E(r)= Rf +β(Rm-Rf)
E(r) =? , Rf- 3.3%, Rm- 7.5%, β- 0.94
Cost of equity = Rf + β (Rm -Rf)
Cost of equity = 3.3% + 0.94×(7.5-3.3)= 7.248
The risk-adjusted discount factor= 7.248 + 2.5= 9.748
Required rate of return for the project = 9.7%
Which of the following is a true statement?
a. Meals, lodging, and incidental expenditures are deductible if the taxpayer is away from home overnight while traveling.
b. Meals are deductible for an employee who is forced to work during the lunch hour.
c. When a taxpayer travels solely for business purposes, only half of the costs of travel are deductible.
d. If travel has both business and personal aspects, the cost of transportation is always deductible but the deductibility of lodging depends upon whether business is conducted that day.
e. None of the choices are true because business travel is not deductible.
Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 2.50 ounces $ 22.00 per ounce $ 55.00 Direct labor 0.90 hours $ 16.00 per hour 14.40 Variable manufacturing overhead 0.90 hours $ 2.00 per hour 1.80 Total standard cost per unit $ 71.20 During November, the following activity was recorded related to the production of Fludex: Materials purchased, 14,000 ounces at a cost of $289,800. There was no beginning inventory of materials; however, at the end of the month, 4,050 ounces of material remained in ending inventory. The company employs 26 lab technicians to work on the production of Fludex. During November, they each worked an average of 150 hours at an average pay rate of $15.00 per hour. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $5,000. During November, the company produced 3,900 units of Fludex. Required: 1. For direct materials: a. Compute the price and quantity variances. b. The materials were purchased from a new supplier who is anxious to enter into a long-term purchase contract. Would you recommend that the company sign the contract
Answer and Explanation:
a. The computation is shown below:
Material price variance
= Actual Quantity × (Standard Price - Actual Price)
= 14,000 × ($22 - $289,800 ÷ 14,000)
= 14,000 × ($22 - $20.70)
= 14,000 × $1.30
= $18,200 favorable
Material quantity variance
= Standard Price × (Standard Quantity - Actual Quantity)
= $22 × (3,900 units × 2.5 - 14,000 ounces - 4,050 ounces)
= $22 × (9,750 - 9,950)
= $22 × 200
= $4,400 unfavorable
b. Yes the contract should be signed as it is the actual price i.e $20.70 is less than the standard price $22
Leach Inc. experienced the following events for the first two years of its operations:
Year 1:
1. Issued $10,000 of common stock for cash.
2. Provided $70,000 of services on account.
3. Provided $33,000 of services and received cash.
4. Collected $37,000 cash from accounts receivable.
5. Paid $12,000 of salaries expense for the year.
6. Adjusted the accounting records to reflect uncollectible accounts expense for the year. Leach estimates that 9 percent of the ending accounts receivable balance will be uncollectible.
Year 2:
1. Wrote off an uncollectible account for $680.
2. Provided $90,000 of services on account.
3. Provided $20,000 of services and collected cash.
4. Collected $72,000 cash from accounts receivable.
5. Paid $26,000 of salaries expense for the year.
6. Adjusted the accounts to reflect uncollectible accounts expense for the year. Leach estimates that 9 percent of the ending accounts receivable balance will be uncollectible.
Required:
a. Prepare the income statement, statement of changes in stockholders' equity, balance sheet, and statement of cash flows for Year1 .
b. Organize the transaction data in accounts under an accounting equation.
Answer:
Explanation:
1 events in general journal form and post them to Taccounts.(If no entry is required for a transaction/event, select "No journalentry required" in the first account field.)NoTransactionGeneral Journal Debit CreditA1 Cash ............10,000 Common stock.
........... 10,000 B2A ccounts receivable ..............78,000. Service revenue...........78,000 C3. Cash ............36,000. Service revenue ..........
36,000 D4 Cash ............69,000 Accounts receivable.............69,000 E5 Salaries expense...............38,000 Cash.............38,000 F6 Uncollectible accounts expense .........450. Allowance for doubtful accounts .....450 G7 Service revenue............114,000 Retained earnings..........114,000 H8Retained earnings............38,450 Uncollectible accounts expense............450 Salaries expense.......38,000
Stahlmaere Inc. is a start-up company that manufactures simple machines. It is interested in analyzing the profit from a new machine using Monte Carlo simulation. It wants to investigate the profit resulting from a selling price of $150 per unit. The setup and advertising costs are known to total $75,000. They assume that the demand for the product is normally distributed with a mean of 1500 units and a standard deviation of 100 units. The company estimates that the raw material cost per unit is uniformly distributed between $5 and $6. The labor cost per unit is assumed to follow a discrete uniform distribution from $12 to $16. A junior analyst has devised the following Excel spreadsheet that simulates a single scenario using the information given above: Selling price per unit = 150 Set up and advertising cost = 75000 Demand = =NORM.INV(RAND(),1500,100) Raw material cost per unit = =5+(6-5)*RAND() Labor cost per unit = =RANDBETWEEN(12,16) Profit = =(B1*B4)-B2-((B5+B6)*B4) Copy-and-paste the above information into cells A1:B8 of an Excel spreadsheet. Then use a data table to repeat the simulation 1000 times. From the simulation results, estimate Stahlmaere's expected mean profit. Understanding that simulation is random in nature and that your estimate is unlikely to match any of the answer choices exactly, choose the answer choice that is closest to the estimated mean profit.
A. $180,000
B. $50,000
C. $150,000
D. $90,000
E. $120,000
Answer:
$ 120,000
Explanation:
Formulas:
Cell Formula
B4 =NORMINV(RAND(),1500,100)
B5 =5+(6-5)*RAND()
B6 =RANDBETWEEN(12,16)
B8 =(B1*B4)-B2-((B5+B6)*B4)
B12 =AVERAGE(F3:F1002)
Enter formula = B8 in cell E2
and =RANDBETWEEN(12,16) in E3 copy down to E1002 (this represents labor cost)
To create the data table, select range E2:F1002
click Data tab > What-If Analysis in Data Tools group > Data Table > In the resulting dialogue box, enter B6 in the Column Input cell, and B1 in the Row Input cell.
Estimated mean profit = $ 121,445 this is closest to $ 120,000
THE ANSWER IS $ 120,000
Merone Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company bases its predetermined overhead rate on 2,800 machine-hours. The company's total budgeted fixed manufacturing overhead is $7,560. In the most recent month, the total actual fixed manufacturing overhead was $6,640. The company actually worked 2,700 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,820 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month? (Round your intermediate calculations to 2 decimal places.)
Answer:
Fixed Overhead Volume Variance $ 54 Favorable
Explanation:
Fixed Overhead Volume variance is the difference between the budgeted fixed overhead and applied fixed overhead.
Budgeted Fixed Overhead = $7,560
Applied Fixed Overhead = Standard Rate * Standard Hours
Standard Rate for Fixed Overhead = $7,560/2,800 = $ 2.7
Applied Fixed Overhead = $ 2.7*2,820= $ 7614
Fixed Overhead Volume Variance=Budgeted Fixed Overhead-Applied Fixed Overhead
Fixed Overhead Volume Variance= $7,560-$ 7614= $ 54 Favorable
If applied overhead is more than budgeted overhead it is favorable because it indicates that the budgeted overhead is within in the standard range.
Xerox Corporation is using a predetermined overhead rate of $22.30 per machine-hour that was based on estimated total fixed manufacturing overhead of $446,000 and 20,000 machine-hours for the period. The company incurred actual total fixed manufacturing overhead of $409,000 and 18,200 total machine-hours during the period. The amount of manufacturing overhead that would have been applied to all jobs during the period is closest to:
Answer:
$405,860
Explanation:
Data given
Predetermined overhead rate = $22.30
Actual machine hours = $18,200
The computation of manufacturing overhead applied is shown below:-
Manufacturing overhead applied = Predetermined overhead rate × Actual machine hours
= $22.30 × 182,00
= $405,860
Therefore for computing the manufacturing overhead applied we simply multiplied the predetermined overhead rate with actual machine hours.
Poe Company is considering the purchase of new equipment costing $80,000. The projected net cash flows are $35,000 for the first two years and $30,000 for years three and four. The revenue is to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Poe requires a 10% return on its investments. The present value of $1 and present value of an annuity of $1 for different periods is presented below. Compute the net present value of the machine.Periods Present Valueof $1 at 10% Present Value of anAnnuity of $1 at 10%1 0.9091 0.90912 0.8264 1.73553 0.7514 2.48694 0.6830 3.1699
Answer:
NPV = $23,773.65
Explanation:
Net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator:
Cash flow in year 0 = $-80,000
Cash flow each year for 1 and 2 = $35,000
Cash flow each year for 3 and 4 = $30,000
I = 10%
NPV = $23,773.65
To find the NPV using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
I hope my answer helps you
The accounting records of Kesswil Company provided the data below. Net loss ($40,000) Depreciation expense 12,000 Increase in salaries payable 11,000 Increase in accounts receivable 4,000 Decrease in inventory 4,800 Amortization of patent 700 Decrease in premium on bonds payable 500 Requirements: Determine the following: (1) Increase (decrease) in operating assets (net): (2) Increase (decrease) in operating liabilities (net): (3) Net cash flows from operating activities:
Answer:
Increase (decrease) in operating assets (net)* $800
Increase (decrease) in operating liabilities** $10,500
Net cash flows from operating activities ($16,000)
Explanation:
Kesswil Company
Statement of cash flows (extract)
Net loss ($40,000)
Add: Depreciation expense 12,000
Amortization of patent 700
Increase (decrease) in operating assets (net)* 800
**Increase (decrease) in operating liabilities** 10,500
Net cash flows from operating activities ($16,000)
Note:
Increase in accounts receivable (4,000)
Decrease in inventory 4,800
*Increase (decrease) in operating assets (net): 800
Increase in salaries payable 11,000
Decrease in premium on bonds payable (500)
**Increase (decrease) in operating liabilities 10,500
University Car Wash built a deluxe car wash across the street from campus. The new machines cost $267,000 including installation. The company estimates that the equipment will have a residual value of $24,000. University Car Wash also estimates it will use the machine for six years or about 12,000 total hours. Actual use per year was as follows: Year Hours Used 1 3,000 2 1,200 3 1,300 4 2,700 5 2,500 6 1,300 Required: 1. Prepare a depreciation schedule for six years using the straight-line method. (Do not round your intermediate calculations.)
Answer and Explanation:
According to the scenario, computation of the given data are as follow:-
Straight Line Depreciation = (Cost - Residual Value) ÷ Useful Life
= ($267,000 - $24,000) ÷ 6
= $40,500
Year Opening book value Dep. Accumulated dep. Closing book value
1 $267,000 $40,500 $40,500 $226,500
2 $226,500 $40,500 $81,000 $186,000
3 $186,000 $40,500 $121,500 $145,500
4 $145,500 $40,500 $162,000 $105,000
5 $105,000 $40,500 $202,500 $64,500
6 $64,500 $40,500 $243,000 $24,000
Northfield Casino is considering converting the Polsky Building at University of Akron into a state-of-the-art gaming parlor. This expansion project will require an initial outlay of $75,000,000 with a project life of five years. Cash flows from operating the new parlor are expected to be $25,000,000 every year for the next five years. The parlor will be sold for $50,000,000 at the end of five years. The project's required rate of return, or discount rate is 18%. Based on this information: The project's payback period is:______.
a. 2.25 Years.
b. 2.5 Years.
c. 2.75 Years.
d. 3 Years.
e. 3.2 Years.
Answer:
d. 3 Years.
Explanation:
Payback period calculates the amount of time it takes to recover the amount invested in a project from its cumulative cash flows.
Payback period = amount invested / cash flow
$75,000,000 / $25,000,000 = 3 years
I hope my answer helps you
Marquis Company estimates that annual manufacturing overhead costs will be $900,000. Estimated annual operating activity bases are direct labor cost $500,000, direct labor hours 50,000, and machine hours 100,000. Compute the predetermined overhead rate for each activity base. (Round answers to 2 decimal places, e.g. 10.50% or 10.50.) Overhead rate per direct labor cost enter percentages rounded to 2 decimal places % Overhead rate per direct labor hour $enter a dollar amount rounded to 2 decimal places Overhead rate per machine hour $enter a dollar amount rounded to 2 decimal places
Answer:
Basis Rate
Labour hour $18 per direct labour
Machine hour $9 per machine hour
Budgeted labour cost 180% of labour cost
Explanation:
Predetermined overhead absorption rate=
Estimated Overhead for the period/Estimated activity level
Labour hour basis
Estimated Overhead for the period/Estimated labour hours
= $900,000/50,000
=$18 per direct labour
Machine hour basis
Estimated Overhead for the period/Estimated machine hours
Overhead rate per machine hour = $900,000/100,000 hours
=$9 per machine hour
Direct labour cost basis
Pre-determined overhead rate = Estimated Overhead for the period/Estimated labour cost
=$900,000/($500,000)×100
=180 % of labour cost
Basis Rate
Labour hour =$18 per direct labour
Machine hour =$9 per machine hour
Budgeted labour cost 180% of labour cost
The MoMi Corporation’s income before interest, depreciation and taxes, was $2.7 million in the year just ended, and it expects that this will grow by 5% per year forever. To make this happen, the firm will have to invest an amount equal to 15% of pre tax cash flow each year. The tax rate is 30%. Depreciation was $330,000 in the year just ended and is expected to grow at the same rate as the operating cash flow. The appropriate market capitalization rate for the unlevered cash flow is 12% per year, and the firm currently has debt of $5 million outstanding. Use the free cash flow approach to calculate the value of the firm and the firm’s equity. (Enter your answer in dollars not in millions.)
Answer:
1. The value of the firm is $23,760,000
2. The value of the equity is $18.76m
Explanation:
In order to calculate the value of the firm we would have to use the following formula:
Value of firm = FCF1 / (r - g) = FCF0 x (1 + g) / (r - g)
Operating Cash Flows (OCF) = (EBITDA - Depreciation) x (1 - tax) + Depreciation
= (2,700,000 - 330,000) x (1 - 30%) + 330,000
= $1,989,000
Free Cash Flow (FCF) = OCF - Investment
We know that investment = 15% of EBITDA = 15% x 2,700,000 = 405,000
Current FCF = 1,989,000 - 405,000 = 1,584,000
Therefore, Value of the firm = 1,584,000 x (1 + 5%) / (12% - 5%) = $23,760,000
To calculate the value of equity we would have to use the following formula:
Value of equity = Value of Firm - Value of Debt = 23.76 - 5 = $18.76m
Answer:
Value of the firm $ 14550000.
Value of the firm's equity $ 11550000.
Explanation:
Cash flow from operations = $ 1785000 (1700000 + 5 % of 1700000).
Depreciation = $ 241500. (230000 + 5 % of 230000).
Taxable income = $ 1543500 (1785000 - 241500)
Net income (after tax) = 1543500 - 30 % of 1543500 = $ 1080450.
Cash flow from operations (after tax) = 1080450 + 241500 (Depreciation, being non cash expense). = $ 1321950.
Free cash flow available = Cash flow from operations (after tax) - Income from investment.
= 1321950 - (1700000 * 17 % * 1.05)
= 1321950 - 303450.
= $ 1018500.
Value of the firm = Free cash flow available / (Capitalization rate - Growth rate)
= 1018500 / (0.12 - 0.05)
= 1018500 / 0.07
= $ 14550000.
Value of the firm's equity = Total value of firm - Value of debt of firm
= 14550000 - 3000000
= $ 11550000.
Conclusion :-
Value of the firm $ 14550000.
Value of the firm's equity $ 11550000.
Suppose a hypothetical economy is currently in a situation of deficient aggregate demand of $64 billion. Four economists agree that expansionary fiscal policy can increase total spending and move the economy out of recession, but they are debating which type of expansionary policy should be used. Economist A believes that the government spending multiplier is 8 and the tax multiplier is 2. Economist B believes that the government spending multiplier is 4 and the tax multiplier is 8. Compute the amount the government would have to increase spending to close the output gap according to each economist's belief. Then, for each scenario, compute the size of the tax cut that would achieve this same effect. Spending Multiplier Tax Multiplier Policy Options for Closing Output Gap Increase in Spending Tax Cut (Billions of dollars) (Billions of dollars) Economist A 8 2 Economist B 4 8
Answer:
Government needs to fill gap of $64 billions
for economist A
Tax multipler is 2 so to fill a output gap of 64 billions, cut taxes by 64/ 2 = 32 billion
tax have to cut by $32 billions
govt spending multiplier is 8, so spendinh has to increase by 64/8=$8 billions.
for economist B
Tax multipler is 8 so to fill a output gap of 64 billions, cut taxes by 64/ 8= 8 billion
tax have to cut by $8 billions
govt spending multiplier is 4, so spending has to increase by 64/4=$16 billions.
c. This means that Economist C likely believes that:
- Tax cuts induce investment spending and improve workers incentives.This is because cutting the taxes gives an incentive to the workers to work more.
d. A rise in government spending completely crowds out private sector spending, because increased govt spending increases the interest rate, hence private spending is crowded out.
In 2020, Marigold Corp., issued for $102 per share, 86000 shares of $100 par value convertible preferred stock. One share of preferred stock can be converted into three shares of Marigold's $25 par value common stock at the option of the preferred stockholder. In August 2021, all of the preferred stock was converted into common stock. The market value of the common stock at the date of the conversion was $30 per share. What total amount should be credited to additional paid-in capital from common stock as a result of the conversion of the preferred stock into common stock?
Answer:
$2322,000
Explanation:
The computation of amount credited to additional paid-in capital is shown below:-
Amount credited to additional paid-in capital = Issued per share × Number of shares) - (Number if shares × Preferred stock shares converted into three shares × Par value of common stock
= ($102 × 86,000) - (86,000 × 3 × $25)
= $8,772,000 - $6,450,000
= $2322,000
So, for computing the amount credited to additional paid-in capital we simply applied the above formula.
Mobility Partners makes wheelchairs and other assistive devices. For years it has made the rear wheel assembly for its wheelchairs. A local bicycle manufacturing firm, Trailblazers, Inc., offered to sell these rear wheel assemblies to Mobility. If Mobility makes the assembly, its cost per rear wheel assembly is as follows (based on annual production of 2,000 units): Direct materials $ 26 Direct labor 53 Variable overhead 21 Fixed overhead 49 Total $ 149 Trailblazers has offered to sell the assembly to Mobility for $110 each. The total order would amount to 2,000 rear wheel assemblies per year, which Mobility's management will buy instead of make if Mobility can save at least $20,000 per year. Accepting Trailblazers's offer would eliminate annual fixed overhead of $38,500. Required: a. Prepare a schedule that shows the total differential costs. (Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.)
Answer and Explanation:
The preparation of the total differential cost schedule is presented below
Schedule showing statement of total differential cost
Particulars Make the wheels Buy from trailblazers Differential cost
Offer of trailblazer $220,000 $220,000 Higher
(2000 × $110)
Material cost $52,000 $52,000 Lower
($26 × 2000)
Labor cost $106,000 $106,000 Lower
($53 × 2000)
Variable overhead $42000 $42,000 Lower
($21 × 2000)
Fixed overhead $98000 $59,500 $38,500 Lower
($49 × 2000) ($98,000 -$38,500)
Total cost $298,000 $279,500 ($18,500) Lower
By adding the total cost we can get the making cost, buying cost and differential cost
ASAP HELP ME PLEASE , GIVING BRAINLIEST TO CORRECT AWNSER
Answer:
A
Explanation:
Answer:
because people would have to have good contraptions in order to be able to make free choices
Explanation:
Moates Corporation has provided the following data concerning an investment project that it is considering:
Initial investment $ 250,000
Annual cash flow $ 119,000 per year
Expected life of the project 4 years
Discount rate 8 %
Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using the tables provided.
The net present value of the project is closest to: (Round your intermediate calculations and final answer to the nearest whole dollar amount.)
Multiple Choice
$250,000
$144,128
$(131,000)
$(144,128)
Answer:
$144,128
Explanation:
The net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator:
Cash flow in year 0 = $-250,000
Cash flow each year from year 1 to 4 = $119,000
I = 8%
NPV = $144,143
To find the NPV using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
I hope my answer helps you
Relative to the Sharpe ratio, the Sortino ratio will make a portfolio’s performance look more favorable if the portfolio has experienced: Group of answer choices fewer extreme negative returns relative to extreme positive returns. fewer extreme positive returns relative to extreme negative returns. an equal number of extreme positive and extreme negative returns. virtually no extreme negative or extreme positive returns.
Answer:
fewer extreme negative returns relative to extreme positive returns.
Explanation:
In simple words, The Sortino ratio relates to the variant of the Sharpe ratio which distinguishes negative variance against total combined variance by using the investment's confidence interval of unfavorable portfolio returns, named downside variance, rather than the total confidence interval of stock return.
The Sortino equation considers the return of a security or property and removes the default free percentage and then splits that quantity by the drawback variance of the relative asset.
Whitmer Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.07 direct labor-hours. The direct labor rate is $9.00 per direct labor-hour. The production budget calls for producing 4,200 units in February and 4,700 units in March. Required: Prepare the direct labor budget for the next two months, assuming that the direct labor work force is fully adjusted to the total direct labor-hours needed each month. (Round "labor-hours per unit"
Answer:
Results are below.
Explanation:
Giving the following information:
Each unit of output requires 0.07 direct labor-hours. The direct labor rate is $9.00 per direct labor-hour. The production budget calls for producing 4,200 units in February and 4,700 units in March.
Direct labor budget of February:
Direct labor hours= 4,200*0.07= 294
Direct labor cost= 294*9= $2,646
Direct labor budget of March:
Direct labor hours= 4,700*0.07= 329
Direct labor cost= 329*9= $2,961
During its first year of operations, a company granted its employees vacation privileges and pension rights estimated at a cost of $23,125 and $15,073, respectively. The vacations are expected to be taken in the next year, and the pension rights are expected to be paid in the future 5-30 years. What is the total cost of vacation pay and pension rights to be recognized in the first year
Answer:
$38,198
Explanation:
Recognization principle state that the total amount paid in the first year will be the sum of the amounts given as a whole which will inturn be considered as paid for the employees.
Therefore for the first year, the vacation pay and the pension right will be :
$23,125 +$15,073
=$38,198
Therefore the total cost of vacation pay and pension rights to be recognized in the first year will be $38,198
On May 1, 2020, Riverbed Inc. entered into a contract to deliver one of its specialty mowers to Kickapoo Landscaping Co. The contract requires Kickapoo to pay the contract price of $990 in advance on May 15, 2020. Kickapoo pays Riverbed on May 15, 2020, and Riverbed delivers the mower (with cost of $648) on May 31, 2020. (a) Prepare the journal entry on May 1, 2020, for Riverbed. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)
Answer and Explanation:
The journal entries are shown below:
On May 1
No journal entry is required as the Riverbed Inc entered into a contract for delivering of the specialty mowers to Kickapoo Landscaping Co which do not required any kind of entry because there is no need to record the entry that contains any type of contract entered
