Predatory pricing is considered an anti-competitive practice, and is considered illegal under competition laws. Which of the following best describes predatory pricing?
A. Predatory pricing requires one company to aquire the assets of another.
B. One business chooses to put another out of business by pricing its product below the level another competing business must be at to make a profit.
C. Predatory pricing occurs when a firm colludes with one or more firms to fix prices or output.
D. Predatory pricing is when a business sends someone out to change the price of another company's product so it is higher than its own.

Answers

Answer 1

Answer:

B

Explanation:

Predatory pricing is when a company sets the price of its goods or services too low with the aim of eliminating the competition. Predatory pricing is illegal and it violates antitrust law.

Predatory pricing occurs when a firm colludes with one or more firms to fix prices or output. This is an example of collusion and they usually occur in an oligopoly


Related Questions

A single-channel queuing system has an average service time of eight minutes and an average time between arrivals of 10 minutes. The arrival rate is: Group of answer choices 10 per hour. 12.5 per hour. 6 per hour. 7.5 per hour. 8 per hour.

Answers

The correct answer is B. 6 per hour

Explanation:

The term "arrival rate" refers to the number of customers that arrive at a business during a specific time such as an hour or a day. This is determined by how often customers arrive or the time between arrivals. This concept complements the service rate, which refers to the customers that receive a service during a period of time.

In the case presented, it is known the time between arrivals is 10 minutes, this means it is expected every 10 minutes a new customer arrives. Based on this, each hour the business can expect a total of 6 customers as 60 minutes divided by 10 (time between arrivals) = 6 customers. Thus, the rate of arrival is 6 per hour.

​The government is looking to double the living standards of its population in 18 years, what rate of GDP growth would it need to achieve that? Group of answer choices

Answers

Answer:

4%

Explanation:

The rule of 72 is used to calculate the number of years it takes for GDP to double

72 / growth rate =  number of years

18 = 72 / growth rate

growth rate = 72 / 18 = 4%

Sheffield Auto Supply does not segregate sales and sales taxes at the time of sale. The register total for March 16 is $19,902. All sales are subject to a 7% sales tax. Compute sales taxes payable. Sales taxes payable

Answers

Answer:

Sales tax = Total sales / 100 + Sales Tax rate * Sales Tax rate

Sales tax = {$19,902 / (100 + 7)} * 7

Sales tax = ($19,902 / 107) * 7

Sales tax = $1,302

Date   Account Title and Explanation     Debit       Credit

           Cash                                               $19,902

                Sales Tax payable                                      $1,302

                 Sales revenue                                            $18,600

                 ($19,902 / 107 * 100)

           (To record sales and sales taxes payable)

Answer:

1,302

Explanation:

Sales without tax x (100%+sales tax rate) = sales with tax

sales without tax x 1.07 (100%+7%) = 19902

sales without tax = 19902/1.07

sales without tax = 18600

sales with tax - sales without tax = sales tax payable

19902 - 18600 = 1302

Niles believes that the reports are true and does not intend to deceive Prime Business, but does not check the reports before certifying them. Can Niles be held liable to Prime Business

Answers

The complete question is:

Niles, an accountant, certifies several audit reports on Optimal Operational Processes, Inc., Nile's client, knowing that the company intends to use the reports to borrow money from Prime Business Lending Company to buy new equipment. Niles believes that the reports are true and does not intend to deceive Prime Business, but does not check the reports before certifying them. Can Niles be held liable to Prime Business?

Answer:

Yes can be held liable

Explanation:

An accountant that certifies audits of a company is expected.to do his due diligence. In this scenario Niles believed that the reports are true without checking them.

This is an act of negligence on Nile's part and he can be held liable for damages resulting from the oversight.

The certified audit report is not only being used by Prime business but other third parties like investors and other stakeholders. Any of these can hold Mike's liable for any misleading information in the audit reports

Kosher Pickle Company acquires all the outstanding stock of Midwest Produce for $12.5 million. The fair value of Midwest's assets is $8.5 million. The fair value of Midwest's liabilities is $1.3 million. Calculate the amount paid for goodwill

Answers

Answer:

$5.3 million

Explanation:

Kosher pickle company acquires outstanding stock of Midwest produce for $12.5 million

Fair value of Midwest assets is $8.5 million

Fair value of Midwest liabilities is $1.3 million

The first step is to calculate the fair value of net identifiable assets

= $8.5 million-$1.3 million

=7.2 million

Therefore, the amount paid for goodwill can be calculated as follows

= $12.5 million-$7.2 million

= $5.3 million

Hence the amount paid for goodwill is $5.3 million

​Handbags, Inc. had 200 units of inventory on hand at the end of the year. These were recorded at a cost of $18 each using the last−​in, first−out ​(LIFO) method. The current replacement cost is $16 per unit. The selling price charged by​ Handbags, Inc. for each finished product is $27. In order to record the adjusting entry needed under the lower−of−cost−or−market ​rule, the Cost of Goods Sold will be​ ________.

Answers

Answer:

debited by $400

Explanation:

Inventory on hand at the beginning × each inventory cost

= 200 units × $18

= $3,600

Inventory on hand at the beginning × Current replacement cost

= 200 units × $16 per unit

= $3,200

Therefore;

$3,600 - $3,200 = $400 increase of cost of goods sold which is debit.

Click to review the online content. Then answer the question(s) below, using complete sentences. Scroll down to view additional questions. Career Connection: Shin-fong How does Shin-fong keep track of his finances?

Answers

Answer:

By means of a budget he prepared.

Explanation:

According to the information available, Shing-fong has a carefully thought out strategy. Here's some of what he does;

he keeps tracks of his finances by means of a budget plan.he views all his transactions also checking his debit or credit cards to keep track of how much he spendsShing-Fong avoids eating out as much as he used to and preparing cheaper food at home.he also avoids unnecessarily spending with friends whenever he is invited.

Expenses that are not easily associated with a specific department, and which are incurred for the joint benefit of more than one department, are:

Answers

Answer:Indirect Expenses

Explanation:  Indirect Expenses are those expenses which are not directly related to the product manufactured or service rendered by  a  company but are generally incurred in the operating and running of a business and cannot be traced to a particular department because the benefits are enjoyed collectively-The reason why its expenses are usually shared among departments or sectors.

Examples of indirect expenses include Rent, salaries to employees, legal charges, insurance of building, depreciation, printing charges, office expenses, telephone bills, advertising, marketing, stationery etc.

"It can be difficult to understand the nature of competition between firms in a market which is driven by change factors like technology, and capital driven mergers. Because of this the Federal Trade Commission has begun to look less at market share and more at the data on actual ______________________________.

Answers

Answer: competition between the businesses.

Explanation:

The Federal Trade Commission was put in place to protect the consumers in the marketplace. This was done by stopping deceptive, fraudulent and unfair practices that exist in the marketplace.

Based on the above analysis in the question, the Federal Trade Commission has begun to look less at market share and more at the data on actual competition between businesses.

Michael Company reports Total Assets of $254,000, Common Stock of $50,000, and Retained Earnings of $94,000. What are total liabilities at the end of the first year

Answers

Answer:

$110,000

Explanation:

Accounting equation : Assets - liabilities = Shareholder's equity

Liabilities = Assets -  Shareholder's equity

Equity = $50,000 + $94,000 = $144,000

$254,000 - $144,000 = $110,000

Webster Corporation's monthly projected general and administrative expenses include $5,600 administrative salaries, $3,000 of other cash administrative expenses, $1,650 of depreciation expense on the administrative equipment, and .5% monthly interest on an outstanding bank loan of $16,000. Compute the total general and administrative expenses to be reported on the general and administrative expense budget per month.

Answers

Answer:Total general and administrative expenses budget per month  =$10,250

Explanation:

Total general and administrative expenses are  the compulsory costs to ensure that a company's day to day  operations is  maintained  whether or not the company is making profit.

General and administrative expenses includes Rent, Utility bills,  insurance  wages and benefits, depreciation of office furnitures, Office supplies and  are regarded as  operating expenses and therefore  interest paid on a bank loan is not an operating expenses but a  financing activities and will not be considered as an administrative expense.

Administrative expenses= administrative Salaries+Other cash administrative expenses+Depreciation

=$5,600+$3,000+$1,650

=$10,250

The Bathtub Division of Kirk Plumbing Corporation has recently approached the Faucet Division with a proposal. The Bathtub Division would like to make a special "ivory" tub with gold-plated fixtures for the company's 50-year anniversary. It would make only 5,000 of these units. It would like the Faucet Division to make the fixtures and provide them to the Bathtub Division at a transfer price of $160. If sold externally, the estimated variable cost per unit would be $140. However, by selling internally, the Faucet Division would save $6 per unit on variable selling expenses. The Faucet Division is currently operating at full capacity. Its standard unit sells for $43 per unit and has variable costs of $25.

Required:
Compute the minimum transfer price that the Faucet Division should be willing to accept, and discuss whether it should accept this offer.

Answers

Answer:

Minimum transfer price = $152

Explanation:

The minimum transfer price can be calculated by Adding variable cost and the contribution margin lost

Minimum transfer price = Variable cost + Contribution margin lost

Minimum transfer price = $134 + $18

Minimum transfer price = $152

Working

Variable cost  = $140 -$6(saving) = $134

Contribution margin lost = Selling price - variable cost per unit

Contribution margin lost = $43 - $25

Contribution margin lost = $18

Decision: The offer should be accepted because the minimum transfer price of $152 is less than $160

Which of the following is not a factor that a manager should bear in mind when estimating a​ project's revenues and​ costs?
A) Sales of a product will typically accelerate, stabilize, and then decline as the product becomes outdated or faces increased competition.
B) A new product typically has its highest sales immediately after release as customers are attracted by the novelty of the product.
C) The prices of technology products tend to fall over time as newer, superior technologies emerge and production costs decline.
D) Prices and costs tend to rise with the general level of inflation in the economy.

Answers

Answer:

B) A new product typically has its highest sales immediately after release as customers are attracted by the novelty of the product.

Explanation:

When a manager is implementing and executing a project, there are certain factors to be considered for revenue and costs associated with the project.

For instance, that a new product typically has its highest sales immediately after release as customers are attracted by the novelty of the product is not a factor that a manager should bear in mind when estimating a​ project's revenues and​ costs. This is simply because it is not guaranteed that all new products introduced to the market would be accepted or attractive to customers due to economical factors such scale of preference and opportunity costs.

Ideally, the factors to be considered by a manager when estimating a​ project's revenues and​ costs are;

1. Sales of a product will typically accelerate, stabilize, and then decline as the product becomes outdated or faces increased competition.

2. The prices of technology products tend to fall over time as newer, superior technologies emerge and production costs decline.

3. Prices and costs tend to rise with the general level of inflation in the economy.

The minimum desired rate of return for net present value analysis is 12%. The present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is 0.893, 0.797, 0.712, and 0.636, respectively. Determine the net present value. $

Answers

Answer: $18,848

Explanation:

The Net Present Value of a project is the difference between the present values of the cash outflows and inflows.

Present Values of the Cash flows;

Year 1

= 150,000 * 0.893

= $133,950

Year 2

= 130,000 * 0.797

= $103,610

Year 3

=104,000 * 0.712

= $74,048

Year 4

= 90,000 * 0.636

= $57,240

Net Present Value = Cash inflows - Outflow

= 133,950 +103,610 + 74,048 + 57,240 - 350,000

= $18,848

The ________ is the pipeline through which products, their ownership, communication, financing and payment, and risk flow to the consumer.

Answers

Answer: Marketing channel

Explanation: The marketing channel is simply the pipeline through which products, their ownership, communication, financing and payment, and risk flow to the consumer. It is defined as a set of interdependent organizations that help ease the transfer of ownership as products move from producer to business user or consumer thereby creating a continuous and seamless supply chain. They help facilitate the physical flow of goods through the supply chain,and in the marketing mix represents "place" or "distribution".

The Government Accounting Office (GAO) announces deep cuts to social security, Medicare, and welfare programs. Which determinant of aggregate demand causes the change

Answers

Answer:

Consumer spending

Explanation:

Consumer spending is the amount that individuals and families spend on final goods and services for personal use and enjoyment in the economy. Contemporary measures of consumer spending include all private purchases of durable goods, durable goods and services. Consumer spending can be thought of as a combination of personal savings, investment cost, and output in the economy.so correct answer is Consumer spending

3. There a number of market entry strategies that businesses use in entering into markets outside their countries. a) Distinguish between the use of Franchising and Joint Venture as modes of entry into other countries by global businesses. b) What are the respective advantages and disadvantages of both strategies?

Answers

Answer:

a) Distinguish between the use of Franchising and Joint Venture as modes of entry into other countries by global businesses.

Franchising consists in the licensing of aspects of production and intellectual property to a another party: the franchise.

A Joint Venture is a business union between two or more parties, in which they split profit as well as costs and responsabilities.

b) What are the respective advantages and disadvantages of both strategies?

Franchising can be a quicker way to expand into foreign markets. The flexibility of the method, and the lower capital requirements are the reason why. This can be seen in the success that American fast-food brands have had using this method to expand in global markets.

A Joint-Venture can be more difficult to use for market expansion, however, it can be more profitable, because the profit will not be split among as many parties as in franchising, and more importantly, the firm maintains a higher control of the operation.

The internal rate of return method is used to analyze a $831,500 capital investment proposal with annual net cash flows of $250,000 for each of the six years of its useful life. a. Determine a present value factor for an annuity of $1, which can be used in determining the internal rate of return. Carry your answer out to three decimal places.

Answers

Answer:

annuity factor for 20% and 6 periods = 3.326

Explanation:

the IRR represents the discount rate at which a project's NPV = 0

NPV = initial outlay + PV of future cash flows

NPV = 0

initial outlay = -$831,500

PV of future cash flows = $831,500 = cash flow x annuity factor

annuity factor = $831,500 / $250,000 = 3.326

using an annuity table and looking for the annuity factors for 6 periods, we find that the annuity factor for 20% and 6 periods = 3.326.

So our IRR = 20%

Miss. Asma works as a sales executive at HBL Bank, is upset at the way her manager, Sadaf, always calls her in for one-on-one meetings to discuss her underperformance. Though Asma makes a higher number of sales calls and works longer hours than last year, her sales figures are still low. She knows that the main reason behind her underperformance is the recent economic meltdown in the country. However, her manager feels that Asma's underperformance is the result of her laid-back attitude and has nothing to do with external factors. In this situation, what kind of behavior/Attitude Sadaf is showing and how it can be replicate

Answers

Answer:

Sadaf's behavior exemplifies Fundamental attribution error.

It can be replicated if Sadaf does not try to understand Asma's point of view of her underperformance.

Explanation:

The Fundamental Attribution Error is a type of error by the people of over-emphasizing the characteristics of a person while ignoring the situational factors. In such type of cognitive bias, people tend to instil the personal trait of other or judging them for their laid-back behavior based on their personal trait rather than thinking of any possibility of external situation that may have caused it.

In the given situation, Sadaf is showing fundamental attribution error behavior by instilling to Asma's underperformance with her laid-back behavior instead of asking her the real problem.

This attribution error can be replicated if Sadaf did not ask Asam for the reason behind her underperformance.

A stock has an expected return of 13.5 percent, its beta is 1.40, and the expected return on the market is 11.5 percent. What must the risk-free rate be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answers

Answer:

The risk free rate is 6.50%

Explanation:

The required rate of return is the minimum return that investors demand/expect on a stock based on the systematic risk of the stock as given by the beta. The expected or required rate of return on a stock can be calculated using the CAPM equation.

The equation is,

r = rRF + Beta * (rM - rRF)

Where,

rRF is the risk free rate rM is the return on market

As we know the figures for r, Beta and rM, we will input these figures in the equation to calculate risk free rate.

Let risk free rate be x.

0.135 = x + 1.4 * (0.115 - x)

0.135 = x + 0.161 - 1.4x

0.135 - 0.161  =  x - 1.4x

-0.026  =  -0.4x

-0.026 / -0.4 = x

x =  0.065 or 6.50%

r = 0.1475 or 14.75%

Cullumber Industries incurs unit costs of $7 ($5 variable and $2 fixed) in making an assembly part for its finished product. A supplier offers to make 14,700 of the assembly part at $6 per unit. If the offer is accepted, Cullumber will save all variable costs but no fixed costs. Prepare an analysis showing the total cost saving, if any, Cullumber will realize by buying the part. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Answers

Answer and Explanation:

The preparation of the analysis that depicts the total cost saving is presented below:

Particulars                               Make          Buy      Net Income or decrease

Variable

Manufacturing Cost             $73,500           -          $73,500

                                             (14,700 × $5)

Fixed

Manufacturing cost              $29,400      $29,400    -

                                             (14,700 × $2)

Purchase price

(14,700 × $6)                            -                  $88,200     ($88,200)

Total annual cost                 $102,900      $117,600    ($14,700)

Based on the total annual cost the company should make the product as it saves the cost by $14,700

A stock had returns of 9.62 percent, −14.65 percent, 19.85 percent, 25.35 percent, and 7.65 percent over the past five years. What was the geometric average return for this stock?

Answers

Answer:

The geometric average return for this stock was 8.64%.

Explanation:

Geometric average return refers to the return which will result in the correct compounded dollars at the end of the time period.

Geometric average return can be computed using the following formula:

Geometric average return = {[(1 + r1)(1 + r2) ... (1 + rn)]^(1/n)} - 1 ......... (1)

Where r is returns from year 1 to year n.

For the stock in the question, we have:

r1 = 9.62%, 0.0962

r2 = -14.65%, or -0.1465

r3 = 19.85%, or 0.1985

r4 = 25.35%, or 0.2535

r5 = 7.65%, or 0.0765

n = 5

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

Geometric average return = {[(1 + 0.0962)(1 - 0.1465)(1 + 0.1985)(1 + 0.2535)(1 + 0.0765)]^(1/5)} - 1

Geometric average return = {1.51310732605096^0.20} - 1

Geometric average return = 0.0864, or 8.64%

Therefore, the geometric average return for this stock was 8.64%.

Florian just graduated from law school and wants to start his own law firm. It is best for Florian to use a _____ organizational structure.

Answers

Answer:

Given that Florian is just starting out and the firm is new, the best organisational structure he can use is the Simple organisational structure.

Explanation:

A simple organisational structure features the CEO in all decision making process. Any new staff would only an extension of his authority.

As the company grow in size, it can become more functional and even adopt a matrix organisational structure. This helps it keep it's size small while making full use of the capabilities of the staff on adhoc projects.

Cheers!

Financial capital markets bridge the gap between savers and investors: that is, they find ways to take the inflow of funds from many separate financial capital suppliers and transform it into the funds of financial capital demanders desire. Such financial markets include:_______

Answers

Answer: stocks, bank loans, bonds, and other financial investments.

Explanation:

A capital market is a financial market whereby lequity-backed securities are purchased by individuals or firms and also sold.

Financial capital markets bridge the gap between savers and investors: that is, they find ways to take the inflow of funds from many separate financial capital suppliers and transform it into the funds of financial capital demanders desire.

Such financial markets consists of stocks, bank loans, bonds, and other financial investments.

Upton Co. is growing quickly. Dividends are expected to grow at 20 percent for the next three years, with the growth rate falling off to a constant 8 percent thereafter. If the required return is 11 percent and the company just paid a dividend of $1.45, what is the current share price

Answers

Answer:

$71.03

Explanation:

To find the current share price we need to find the value of future dividends first and then discount it by the given rate of return

DATA

Growth rate = g = 20%

Time period = 3 years

Required return = 11%

Current dividend = Do = $1.45

Share price =?

Solution

Future dividend = Current dividend ( 1 + growth rate)

D1 = (1.45 x 1.20) = $1.74

D2 = (1.74 x 1.20) = $2.088

D3 = (2.088 x 1.20) = $2.5056

Value after year 3 = (D3 x Growth rate) / (Required return-Growth rate)

Value after year 3 = (2.5056*1.08) / (0.11-0.08)

Value after year 3 =$90.2

current share price = Future dividends x Present value of discounting factor

current share price = (1.74/1.11)+($2.088/1.11^2)+(2.5056/1.11^3)+($90.2/1.11^3)

current share price =  1.56 + 1.69 + 1.83 + 65.95

current share price =$71.03

Faisal has in his savings account and can save an additional per year. If interest rates are​ 12%, how long will it take his savings to grow to ​?

Answers

Answer:

5 years and 4 months = 5.33 years

Explanation:

the question is incomplete and it is missing several numbers. I found the following question which I think is the complete:

"Faisal has $12,000 in his savings account and can save an additional $3600 per year. If interest rates are 12%, how long will it take his savings to grow to $47,000? "

by the end of year 1, Faisal will have:

$12,000 x (1 + 12%) = $13,440+ $3,600total = $17,040

by the end of year 2, Faisal will have:

$17,040 x (1 + 12%) = $19,084.80+ $3,600total = $22,684.80

by the end of year 3, Faisal will have:

$22,684.80 x (1 + 12%) = $25,406.98+ $3,600total = $29,066.98

by the end of year 4, Faisal will have:

$29,066.98 x (1 + 12%) = $32,487.81+ $3,600total = $36,087.81

by the end of year 5, Faisal will have:

$36,087.81 x (1 + 12%) = $40,418.35+ $3,600total = $44,018.35

Since Faisal is very close to his goal, we can calculate how much money he will have in 6 months:

in 5 years and 6 months, Faisal will have:

$44,018.35 x (1 + 6%) = $46,659.45+ $1,800total = $48,459.45

Faisal's savings are too high in 6 more months, so we can calculate in 3 more months instead:

in 5 years and 3 months, Faisal will have:

$44,018.35 x (1 + 3%) = $45,338.90+ $900total = $46,238.90

Faisal is just a little bit short:

in 5 years and 4 months, Faisal will have:

$44,018.35 x (1 + 43%) = $45,779.08+ $1,200total = $46,979.08

I guess we are close enough because in one more month he will have a significantly higher amount.

On July 1, Shady Creek Resort borrowed $400,000 cash by signing a 10-year, 9% installment note requiring equal payments each June 30 of $62,328. What is the journal entry to record the first annual payment

Answers

Answer:

                             Journal Entry

                                    Debit       Credit

Interest Expense      $36,000

Notes Payable          $26,328

Cash                                             $62,328

Workings

Interest portion for one year = 400,000 * 9% = $36,000

Total installment paid = $62,328

So, principal portion repaid = $62,328 - $36,000

 = $26,328

A company would like to evaluate two incentive schemes that take effect once the worker exceeds standard performance. In the first case the benefits are split 30% to the worker and 70% to the company up to 120% performance. If the worker exceeds 120% performance, all of the earnings go to the worker. In the second case, all earnings beyond standard performance are split 50/50 between the worker and the company.
a. Plot the earnings for each scheme.
b. Derive the equations for worker earnings and normalized unit labor costs for each scheme
c. Find the point at which the two plans break even.
d. Which do you think would the company prefer?

Answers

Answer:

B) plan 1 : worker earning  y = x - 0.14  ,  unit labor = [tex]\frac{x-(0.14)}{x}[/tex]

   plan 2 : worker earning y  = 0.5x + 0.5, unit labor = (0.5x + 0.5) / x

C) At 128%

D ) plan D IS PREFERABLE

Explanation:

In the first case Benefits are split : 30% to worker , 70% to company ( up to 120% ) performance

In the second case benefits 50% go to the worker and 50% go the company

B) The equations for worker earnings and normalized unit labor costs for each scheme

Plan 1 :

y  ( percentage earning of worker ) = 1

unit labor cost = Y / 1

y = 0 - 30

unit labor = 0.3 / x

y = x - 0.14  therefore unit labor = [tex]\frac{x-(0.14)}{x}[/tex]

plan 2 :

y  ( percentage earning of worker ) = 1,   y  = 0.5x + 0.5

unit labor cost :  Y / 1  =  (0.5x + 0.5) / x

C )  The point at which the two plans break even

0.5x + 0.5 = x - 0.14

0.5 + 0.14 = x - 0.5x

0.64 = x(1 - 0.5 )

x = 0.64 / 0.5 =  1.28 = 128%

D) The company would prefer plan 1

The following income statement and additional year-end information is provided.
SONAD COMPANY
Income Statement
For Year Ended December 31
Sales $1,647,000
Cost of goods sold 807,030
Gross profit 839,970
Operating expenses
Salaries expense $225,639
Depreciation expense 39,528
Rent expense 44,469
Amortization expenses—Patents 4,941
Utilities expense 18,117 332,694
507,276
Gain on sale of equipment 6,588
Net income $513,864
Accounts receivable $29,000 increase Accounts payable $14,925 decrease
Inventory 23,425 increase Salaries payable 5,000 decrease
Prepare the operating activities section of the statement of cash flows using the indirect method.

Answers

Answer:

Cash flow from Operating Activities

Net income                                                         $513,864

Adjustment for Non-cash items :

Depreciation expense                                        $39,528

Amortization expenses—Patents                          $4,941

Adjustment for Changes in Working Capital :

Increase in Accounts receivable                      ($29,000)

Decrease in Accounts payable                          ($14,925)

Increase in Inventory                                          ($23,425)

Decrease in Salaries payable                             ($5,000)

Net Cash flow from Operating Activities          $485,983

Explanation:

The Indirect method, reconciles the Operating Profit to the Operating Cash Flow by adjusting for the following items :

Non-cash items previously added or deducted from the Operating ProfitAdjustments for Changes in Working Capital items

David Ortiz Motors has a target capital structure of 45% debt and 55% equity. The yield to maturity on the company's outstanding bonds is 12%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 11.35%. What is the company's cost of equity capital

Answers

Answer:

the company's cost of equity capital is 14.75 %.

Explanation:

WACC = ke × (E/V) + kd × (D/V)

Where,

ke = cost of equity

    = this is unknown

E/V = Weight of Equity

      = 55%

kd = cost of debt

     = Interest × ( 1 - tax rate)

     = 12% × ( 1 - 0.40)

     = 7.20 %

D/V = Weight of Debt

       = 45%

Therefore,

WACC = ke × (E/V) + kd × (D/V)

11.35% = 55%ke + 7.20 % × 45%

11.35% = 55%ke + 3.24 %

55%ke = 8.11 %

ke = 14.75 %

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