Answer:
$39,720
Explanation:
Total fixed costs that represent current cash flows = $35,760 - $4,100
Total fixed costs that represent current cash flows = $31,660
Variable costs = 2,600 units * $3.10
Variable costs = $8,060
The cash disbursements for selling and administrative expenses on the March selling and administrative expense budget will be
= $31,660 + $8,060
= $39,720
Ball Bearings, Inc., faces costs of production as follows:Quantity Total Fixed Costs (Dollars) Total Variable Costs (Dollars)0 100 01 100 502 100 703 100 904 100 1405 100 2006 100 360(a.) Complete the following table by calculating the company's total cost, marginal cost, average fixed cost, average variable cost, and average total cost at each level of production.
(b.) The price of a case of ball bearings is $50. Seeing that he can't make a profit, the company's chief executive officer (CEO) decides to shut down operations.The firm's profit in this case is...(c.) True or False: This was a wise decision.(d.) Vaguely remembering his introductory economics course, the company's chief financial officer tells the CEO it is better to produce 1 case of ball bearings, because marginal revenue equals marginal cost at that quantity.At this level of production, the firm's profit is...True or False: This is the best decision the firm can make.
Answer:
Ball Bearings, Inc.
a) Calculations of Costs of Production:
Qty Total Fixed Total Total Marginal Average Average Average
Costs ($) Variable Costs ($) Costs ($) Fixed Variable Total
Costs ($) Costs ($) Costs ($) Costs ($)
0 100 0 100 100 100 0 100
1 100 50 150 50 100 50 150
2 100 70 170 20 50 35 85
3 100 90 190 20 33 30 63
4 100 140 240 50 25 35 60
5 100 200 300 60 20 40 60
6 100 360 460 160 17 60 77
b) For the first ball bearings, the profit in this case is a loss of $100 (Revenue - Total costs; $150 - 50).
c) False
d) At this level of production, the firm's profit, is a loss of $100. This is the best decision the firm can make: False.
Explanation:
a) Data:
Costs of production as follows:
Quantity Total Fixed Costs ($) Total Variable Costs ($)
0 100 0
1 100 50
2 100 70
3 100 90
4 100 140
5 100 200
6 100 360
a) Ball Bearings, Inc. can become profitable when the total revenue exceeds the total costs (variable and fixed). Ball's marginal cost is the additional cost that the corporation incurs for producing one additional unit of ball bearings. Its average fixed, variable, and total costs are computed by dividing the total fixed, variable, and total costs by the number of ball bearings produced.
The production budget shows expected unit sales of 40000. Beginning finished goods units are 3800. Required production units are 41600. What are the desired ending finished goods units
Answer:
desired ending inventory= 5,400 units
Explanation:
Giving the following information:
Sales= 40,000 units
Beginning finished goods= 3,800 units
Production= 41,600 units
To calculate the desired ending inventory, we need to use the following formula:
Production= sales + desired ending inventory - beginning inventory
41,600= 40,000 + desired ending inventory - 3,800
41,600 + 3,800 - 40,000= desired ending inventory
desired ending inventory= 5,400 units
In what way did Henry Ford’s use of the assembly-line method of production represent an advance in technology in automobile manufacturing?
Answer: a. It allowed workers to specialize on specific tasks and become more productive.
Explanation:
The Assembly line method of production that Henry Ford initiated at his plant was a technological game changer as it enabled workers to assemble cars faster and this mass produce Ford cars at a cheaper rate for the masses.
The Assembly line worked by putting workers at various stages of the assembly line where they would focus on installing only one or a few parts into the prospective vehicle. This way they were able to focus on that specific task, become more adept at it and thus become more productive.
What is the yield to maturity of a bond that pays a 6% coupon rate with semiannual coupon payments, has a par value of $1,000, matures in 15 years, and is currently selling for $803
Answer:
Yield to Maturity = 8.11 %
Explanation:
The Yield to maturity is the discount rate that equates then price of the bonds to the present of cash inflows expected from the bond
The yield on the bond can be determined as follows using the formula below:
YTM = C + F-P/n) ÷ 1/2 (F+P)
YTM-Yield to maturity-
C- annual coupon
F- Face Value
P- Current Price
n- years to maturity
YTM-?, C- 6%× 1000 =60, Face Value - 1,000, P-803, n- 15
YTM = (60 + (1000-803)/15) ÷ ( 1/2× (1000 + 803) )
YTM = 0.0811 × 100 = 8.11 %
Yield to Maturity = 8.11 %
Jamie has worked for ABC Printing for 5 years. During this period ABC Printing has contributed $25,000 to her non-contributory retirement plan. Assuming ABC uses graded schedule vesting, how much will Jamie be able to roll into an IRA if she left ABC Printing after 5 years?
Answer:
$20,000
Explanation:
Generally a graded vesting schedule lasts 6 years. After the first 2 years, the employee is entitled to 20% of accrued benefits (in this case contributions to her retirement plan). Then, the employee will be vested an additional 20% of the contribution benefits per year until the sixth year when 100% of the benefits are vested.
In this case, Jamie would be able to roll out $25,000 x 80% = $20,000
End of year % vested
2 20%
3 40%
4 60%
5 80%
6 100%
A project will reduce costs by $37,000 but increase depreciation by $17,300. What is the operating cash flow if the tax rate is 40 percent?
Answer:
The operating cash flow is $29,120.
Explanation:
Operating cash flow (OCF) can be described as the amount of cash that is generated by a firm from its regular operating activities during a specified period of time.
Operating cash flow (OCF) can be calculated using the following formula:
OCF = ATCS + DTS .......................... (1)
Where;
OCF = Operating cash flow = ?
ATCS = After Tax Cost Savings = Reduce costs * (1-tax rate) = $37,000 * (1 - 40%) = $22,200
DTS = Depreciation Tax Shield = Depreciation * Tax rate = $17,300 * 40% = $6,920
Substituting the values into equation (1), we have:
OCF = $22,200 + $6,920 = $29,120
Therefore, the operating cash flow is $29,120.
The classical dichotomy is the separation of real and nominal variables. The following questions test your understanding of this distinction. Eleanor spends all of her money on paperback novels and mandarins. In 2012, she earned $27.00 per hour, the price of a paperback novel was $9.00, and the price of a mandarin was $3.00. Which of the following give the nominal value of a variable? Check all that apply. The price of a mandarin is 0.33 paperback novels in 2012. Eleanor's wage is 3 paperback novels per hour in 2012. The price of a mandarin is $3.00 in 2012. Which of the following give the real value of a variable? Check all that apply. The price of a paperback novel is $9.00 in 2012. Eleanor's wage is $27.00 per hour in 2012. The price of a paperback novel is 3 mandarins in 2012. Suppose that the Fed sharply increases the money supply between 2012 and 2017. In 2017, Eleanor's wage has risen to $54.00 per hour. The price of a paperback novel is $18.00 and the price of a mandarin is $6.00. In 2017, the relative price of a paperback novel is . Between 2012 and 2017, the nominal value of Eleanor's wage , and the real value of her wage . Monetary neutrality is the proposition that a change in the money supply nominal variables and real variables.
Answer:
In 2012, she earned $27.00 per hour, the price of a paperback novel was $9.00, and the price of a mandarin was $3.00. Which of the following give the nominal value of a variable? Check all that apply.
The price of a mandarin is $3.00 in 2012.Nominal values are expressed in terms of current money. real variables are represented in terms of other goods or services.
Which of the following give the real value of a variable? Check all that apply.
The price of a paperback novel is 3 mandarins in 2012.Nominal values are expressed in terms of current money. real variables are represented in terms of other goods or services.
Suppose that the Fed sharply increases the money supply between 2012 and 2017. In 2017, Eleanor's wage has risen to $54.00 per hour. The price of a paperback novel is $18.00 and the price of a mandarin is $6.00. In 2017, the relative price of a paperback novel is still 3 mandarins.
Between 2012 and 2017, the nominal value of Eleanor's wage doubled, and the real value of her wage remained constant.
Monetary neutrality is the proposition that a change in the money supply affects nominal variables and does not affect real variables.
Suppose you invested in the Ishares High Yield Fund (HYG) a month ago. It paid a dividend of today and then you sold it for . What was your dividend yield and capital gains yield on the investment?
Complete Question:
Suppose you invested $100 in the Ishares High Yield Fund HYG your dividend yield and capital gains yield on the investment?
It paid a dividend of $2 today and then you sold it for $95. What was Dividend Yield and Capital Gains Yield on the investment?
Answer:
Dividend Yield is 2%
Capital Gains Yield is -5%
Explanation:
Dividend Yield:
We can calculate the Dividend Yield using the following formula:
Dividend Yield = D0 / Initial Stock Price
Here
D1 was Dividend paid just now and is $2 per share
Initial Stock Price before the dividend payment was $100 per share
By putting values, we have:
Dividend Yield = $2 per share / $100 per share = 2%
Capital Gains Yield:
We can find capital gains yield by using following formula:
Capital Gains Yield = (P1 - P0) / P0
Here
P1 is $95
P0 is $100
By putting values we have:
Capital Gains Yield = ($95 - $100) / $100 = -5%
Craig's Car Wash Inc. is considering a project that has the following cash flow and WACC data. What is the project's discounted payback?
WACC: 10.00%
Year : Cash flows
0 : -$900
1 : $500
2 : $500
3 : $500
Answer:
Discounted payback period= 2 years 1 month
Explanation:
The discounted payback period is the estimated length of time in years it takes the present value of net cash inflow from a project to equate the net cash the initial cost
To work out the discounted payback period, we will compute present value of the cash inflow and then determine how long it will take for the sum to be equal to the initial cost. This is done as follows:
Year Cash flow DF Present value
0 900 × 1 = 900
1 500 × 1.1^(-1) = 454.55
2 500 × 1.1^(-2) = 413.22
2 500 × 1.1^(-3) = 375.66
Total PV for 2 years = 454.55 + 413.22 = 867.77
Balance of cash flow remaining to equal 900 = 900 -867.77 = 32.23
Discounted payback period = 32.23 /375.66 × 12 months
= 2 years 1 month
Discounted payback period= 2 years 1 month
Mr. Fred Mitchell is requesting the birth record for Amy, his birth daughter. Mr. and Mrs. Mitchell gave Amy up for adoption four years ago. Should you release the records to him? Why or why not?
Answer: No you should not
Explanation:
Mr. and Mrs. Mitchell gave Amy up for adoption four years ago and in effect legally voided their guardianship of her. As far as the law is concerned, they are no longer Amy's parents. As such, Mr Fred Mitchell requesting for information on the girl is akin to a stranger doing the same and so cannot be honored, at least not without the consent of the new parents.
Nature's Garden, a new restaurant situated on a busy highway in Pomona, California, specializes in a chef's salad selling for $7. Daily fixed costs are $1,710, and variable costs are $4 per meal. With a capacity of 950 meals per day, the restaurant serves an average of 900 meals each day.Requried:a. Determine the current average cost per meal.b. A busload of 30 Girl Scouts stops on its way home from the San Bernardino National Forest. The leader offers to bring them in if the scouts can all be served a meal for a total of $150. The owner refuses, saying he would lose $0.60 per meal if he accepted this offer. How do you think the owner arrived at the $0.60 figure? Comment on the owner's reasoning.c. A local businessman on a break overhears the conversation with the leader and offers the owner a one-year contract to feed 300 of the businessman's employees one meal each day at a special price of $4.50 per meal. Should the restaurant owner accept this offer? Why or why not?
Answer:
Nature's Garden
a. Determination of the current average cost per meal:
Variable cost per meal = $3,800 ($4 x 950) based on full capacity
Fixed costs per day = $1,710
Total costs = $5,510
Average cost per meal = $5,510/950 = $5.80
b. Girl Scouts' offer of $150 for 30 girls:
Offered price per person = $5 ($150/30)
Projecting a loss of $0.60 per meal, this gives a total loss of $18 ($0.60 x 30)
Projected revenue from the offer = $150 + $18 = $168
Projected revenue per meal = $168/30 = $5.60
Actual revenue to be received per meal = $5.00
Loss of $0.60
The owner arrived at the $0.60 loss because his total costs per meal was $5.60.
c. Since the variable cost per meal is $4, the restaurant owner could accept the offer if the additional 300 meals will not increase his daily fixed costs due to lack of capacity. If the fixed costs increase with this addition, then it may not be reasonable to accept the offer. Based on this offer, the contribution to defraying fixed costs, given present capacity, is only $0.50 ($4.50 - $4) per meal.
Explanation:
Selling price of chef's salad = $7
Daily fixed costs = $1,710
Variable costs per meal = $4
Meals capacity per day = 950
Average meals = 900
Nature's Garden has a fixed cost of $1,710 based on current capacity of 950 meals per day. The fixed cost may increase with increasing capacity. This fact must be borne in mind when making decisions.
When preparing an income statement vertical analysis, each revenue and expense is expressed as a percent of net income.
A. True
B. False
Planet Company had operating income of $12,000, average operating assets of $125,000, and sales of $45,000. What is Planet's return on investment (ROI)
Answer:
36.36%
Explanation:
Return on investment is given as;
Profit / Cost of goods sold × 100%
Given that profit is $12,000 and sales is $45,000 ;
Cost of goods sold
= $45,000 - $12,000
= $33,000
Therefore, return on investment is
= 12,000 / 33,000 × 100%
= 36.36%
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.
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 itemsIn a partnership liquidation, the final cash distribution to the partners should be made in accordance with the
Answer: B) balances of the partners' capital accounts.
Explanation:
Final cash distributions should be made proportionally to partners based on what they have in their Capital Accounts.
The balance in the Capital accounts of Partners shows the level of contribution that each partner has made to the business as well as their ownership proportion. When cash is to be distributed finally, it should therefore be based on the proportion of these Capital account balances to reflect the contribution and ownership.
Two mutually exclusive projects have an initial cost of $60,000 each. Project A produces cash inflows of $30,000, $37,000, and $20,000 for Years 1 through 3, respectively. Project B produces cash inflow of $80,000 in Year 2 only. The required rate of return is 10 percent for Project A and 11 percent for Project B. Which project(s) should be accepted and why
Answer:
Project A should be accepted because the NPV is higher. this means that project A is more profitable than project B
Explanation:
Net present value van be used to determine which project should be accepted.
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
For project A :
Cash flow in year 0 = $-60,000
Cash flow in year 1 = $30,000
Cash flow in year 2 = $37,000
Cash flow in year 3 = $20,000
I = 10%
NPV = $12,877.54
For project B :
Cash flow in year 0 = $-60,000
Cash flow in year 1 = $0
Cash flow in year 2 = $80,000
Cash flow in year 3 = $0
I = 11%
NPV = $4,929.79
Project A should be accepted because the NPV is higher. this means that project A is more profitable than project B
To find the NPV using a financial calculator:
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
Bramble Corp. recorded operating data for its shoe division for the year. Sales$1300000 Contribution margin360000 Controllable fixed costs180000 Average total operating assets720000 How much is controllable margin for the year
Answer:
controllable margin for the year is $180,000.
Explanation:
The Controllable Margin is the Profit that is controllable by the divisional manager.
Calculation of Controllable Margin :
Contribution Margin $360,000
Less Controllable fixed costs ($180,000)
Division Controllable Margin $180,000
A firm has current assets of $36,000, cash of $5,000, current liabilities of $20,000, total assets of $80,000 and total liabilities of $45,000. What is its net working capital?
a. $16,000
b. $28,000
c. $35,000
d. $44,000
Answer:
Option A, $16000, is the right answer.
Explanation:
The current assets = $36000
Cash = $5000
Current liabilities = $20000
Total assets = $80000
Total liabilities = $45000
Use the below formula to find the net working capial.
Net working capital = Current assets - Current Liabilities
Net working capital = 36000 – 20000
Net working capital = 16000
Therefore, option A, $16000 is correct.
Parwin Corporation plans to sell 40,000 units during August. If the company has 16,500 units on hand at the start of the month, and plans to have 17,500 units on hand at the end of the month, how many units must be produced during the month?
Answer:
41,000 units
Explanation:
The computation of units must be produced during the month is shown below:-
Units Produced = Units at Year End - Units at beginning + Units Sold
= 17,500 units - 16,500 units + 40,000 units
= 57,500 units - 16,500 units
= 41,000 units
Therefore for computing the units produced during the month we simply applied the above formula.
The company must produce 41000 units during the month. The entire cost of direct materials and labor as well as the total cost of manufacturing overhead may be added together to get the overall cost of the product.
Below is a calculation of the number of units that must be generated during the month:-
Units Produced = Units at Year's End - Units at Start + Units Sold
40,000 units + 17,500 units less than 16,500 units.
16,500 units less than 57,500 units
= 41,000 units
Therefore, we used the aforementioned calculation to calculate the number of units generated throughout the month.
All of the direct and indirect expenses firms incur when producing a good or rendering service are referred to as production costs. Various expenditures, including labor, raw materials, consumable manufacturing supplies, and general overhead, might be included in production costs.
Various expenditures, including labor, raw materials, consumable manufacturing supplies, and general overhead, might be included in production costs.
Learn more about the production costs here:
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If an investor buys enough stocks, he or she can, through diversification, eliminate all of the unique risk inherent in owning stocks, but as a general rule it will not be possible to eliminate all systemic risk.
A. True
B. False
Answer: True
Explanation:
Buying enough negatively correlated stock can indeed help in diversification of a Portfolio and this on its own is very important as it reduces risk. The type of risk that it reduces however is Unsystematic risk. This is the unique risk inherent in owing stocks.
Systematic risk which is also called undiversifiable risk however cannot be so easily eliminated. This risk is inherent in the Market or the Market segment in question and results from a mix of the Economic, Geo-political and Financial factors in the market. As such, it will not be possible to eliminate all systematic risk.
The ______ rate of interest is the actual rate charged by the supplier and paid by the demander of fund
Answer:
nominal
Explanation:
There is a nominal rate that is the interest rate stated on a loan without taking into account the inflation or the compounding of interests and a real rate that is the one that is adjusted to reflect the real cost of the loan to the borrower. According to this, the answer is that the nominal rate of interest is the actual rate charged by the supplier and paid by the demander of fund because this is the rate that is stated when taking a loan.
Marigold Corp. issues $220,000, 20-year, 8% bonds at 104. Prepare the journal entry to record the sale of these bonds on June 1, 2020
Answer:
Selling Price of Bonds = Value of bonds * Issue price / Face price
Selling Price of Bonds = $220,000 * 104/100
Selling Price of Bonds = $228,800
Journal Entry
Date Account Title and Explanation Debit Credit
1 June Cash $228,800
Bond payable $220,000
Premium on bond payable $8,800
(To record issuance of bond)
Working
Premium On Bonds Payable = Selling Price of Bonds - Value of Bonds
= $228,800 - $220,000
= $8,800
The maximum tax rate on estates and gifts: Question 7 options: is gradually increasing. has remained constant. is gradually declining. has increased sharply.
Is gradually declining.
Last year, you purchased a stock at a price of $78.00 a share. Over the course of the year, you received $2.70 per share in dividends and inflation averaged 3.2 percent. Today, you sold your shares for $82.20 a share. What is your approximate real rate of return on this investment?
Answer:
5.65%
Explanation:
Last year a stock of $78.00 was bought
During the period of one year $2.70 was received in dividend and inflation averaged 3.2%
Today the shares was sold for $82.20
The first step is to calculate the nominal return
= ($82.20-$78.00+$2.70)/$78.00
= 6.9/78
= 0.0885×100
= 8.85%
Therefore, the approximate real rate can be calculated as follows
= 8.85%-3.2%
= 5.65%
Hence the approximate real rate of return on this investment is 5.65%
On July 1, Wildhorse Co. purchases 560 shares of its $5 par value common stock for the treasury at a cash price of $10 per share. On September 1, it sells 370 shares of the treasury stock for cash at $11 per share. Required:Journalize the two treasury stock transactions.
Answer:
Please see the journal entries for the two treasury stock transactions.
Explanation:
• Purchase of treasury stock
Treasury stock Dr $5,600
To Cash account Cr $5,600
(Being the purchase of treasury stock that is recorded)
For recording the above, treasury stock was debited because it increased the treasury while cash credited because it decreased the assets.
• Sale of treasury stock
Cash account Dr $4,070
To Treasury stock Cr $3,700
To paid in capital- treasury stock Cr $370
Explanation
° Purchase of treasury stock
Treasury stock
= 560 shares × $10 per share
= $5,600
° Sales of treasury stock
Cash receipt
= 370 shares × $11 per share
= $4,070
Treasury stock
= 370 shares × $10 per share
= $3,700
Paid in capital treasury stock
= 370 shares × ($11-$10)
= $370
A__________produces finished-goods inventory in advance of customer demand using a forecast of sales.
Answer:
Push system.
Explanation:
A push system produces finished-goods inventory in advance of customer demand using a forecast of sales and as such it is categorized as a make to stock because the production of goods are not based on actual demand by the consumers.
Under a push system, manufacturing is strictly based on a projected production plan and the flow of information between the manufacturer and the market is in the same direction with those of raw materials used.
In working on a bid for project you have determined that $245,000 of fixed assets will be required and that they will be depreciated straight-line to zero over the 5-year life of the project, and you can get $23,200 for these fixed assets at the end of 5 years. You will also need to increase net working capital by 15,000 initially and recoup the investment in net working capital at the end of the project. You have also determined that the discount rate should be 14 percent and the tax rate will be 35 percent. In addition, the annual cash costs will be $68,500. What is the minimum amount of annual sales revenue that is required for you to make money on the project? PLEASE SHOW WORK
A. $151,627.90
B. $155,119.00
C. $162,515.75
D. $102,627.90
E. $227,012.50
Assume BGL Enterprises increases its operating efficiency by lowering its costs while holding its sales constant. As a result, given all else constant, the: A. return on assets will decrease.
B. profit margin will decline.
C. equity multiplier will decrease.
D. return on equity will increase.
E. price-earnings ratio will increase.
Answer:
Question 1:
required investment $245,000
depreciation expense per year = ($245,00 - $23,200) / 5 = $44,360
you will also require $15,000 in working capital
annual cash costs = $68,500
what is the minimum amount of cash sales for accepting the project:
net cash flow₁ = {[(sales revenue - $68,500 - $44,360) x 0.65] + $44,360} / 1.14 = (0.65SR - $28,999) / 1.14 = 0.5702SR - $25,437.72
net cash flow₂ = {[(sales revenue - $68,500 - $44,360) x 0.65] + $44,360} / 1.14² = (0.65SR - $28,999) / 1.14² = 0.5002SR - $22,313.79
net cash flow₃ = {[(sales revenue - $68,500 - $44,360) x 0.65] + $44,360} / 1.14³ = (0.65SR - $28,999) / 1.14³ = 0.4387SR - $19,573.50
net cash flow₄ = {[(sales revenue - $68,500 - $44,360) x 0.65] + $44,360} / 1.14⁴ = (0.65SR - $28,999) / 1.14⁴ = 0.3849SR - $17,169.74
net cash flow₅ = {[(sales revenue - $68,500 - $44,360) x 0.65] + $44,360 + $15,000} / 1.14⁵ = (0.65SR - $13,999) / 1.14⁵ = 0.3376SR - $7,270.64
NPV = -initial outlay + cash flows
NPV = 0
initial outlay = cash flows
$260,000 = 0.5702SR - $25,437.72 + 0.5002SR - $22,313.79 + 0.4387SR - $19,573.50 + 0.3849SR - $17,169.74 + 0.3376SR - $7,270.64
$260,000 = 2.2316SR - $91,765.39
$351,765.39 = 2.2316SR
sales revenue = $351,765.39 / 2.2316 = $157,629.23
the closest answer is B = $155,119, but its NPV will be negative.
so we have to select C = $162,515.75 that results in an NPV = $10,887.
Question 2:
The correct answer is D. return on equity will increase.
If you lower your costs while your sales remain the same, your profits will increase as well as your ROE.
Quantitative Problem 1: Hubbard Industries just paid a common dividend, D0, of $1.50. It expects to grow at a constant rate of 2% per year. If investors require a 8% return on equity, what is the current price of Hubbard's common stock? Do not round intermediate calculations. Round your answer to the nearest cent. $ per share
Answer:
The current price of Hubbard's common stock is $25.50.
Explanation:
This can be calculated using the Gordon growth model (GGM) formula that assumes growth is dividend will be constant as follows:
P = D1/(r - g) ............................ (1)
Where,
P = Current stock price = ?
D1 = Next dividend = D0 * (1 + g) = $1.50 * (1 + 2%) = $1.53
r = required return = 8%, or 0.08
g = growth rate = 2%, or 0.02
Substituting the values into equation (1), we have:
P = $1.53 / (0.08 - 0.02) = $25.50
Therefore, the current price of Hubbard's common stock is $25.50.
The 7 percent bonds issued by Modern Kitchens pay interest semiannually, mature in eight years, and have a $1,000 face value. Currently, the bonds sell for $987. What is the yield to maturity? B) 6.92 percent D) 7.22 percent A) 6.97 percent C) 6.88 percent E) 7.43 percent
Answer:
The answer is D. 7.22 percent
Explanation:
Interest payments are being made semiannually, this means it is being paid twice in a year
N(Number of periods) = 16 periods ( 8 years x 2)
I/Y(Yield to maturity) = ?
PV(present value or market price) = $987
PMT( coupon payment) = $35 ( [7 percent÷ 2] x $1,000)
FV( Future value or par value) = $1,000.
We are using a Financial calculator for this.
N= 16; PV = -987 ; PMT = 35; FV= $1,000; CPT I/Y= 3.61
3.61 percent is the Yield-to-maturity for semiannual
Therefore, the Yield-to-maturity of the bond annually is 7.22 percent (3.61 percent x 2)
The following legal claims exist for Huprey Co. Identify the accounting treatment for each claim as either (a) a liability that is recorded or (b) an item described in notes to its financial statements.1. Huprey (defendant) estimates that a pending lawsuit could result in damages of $1,550,000; it is unlikely that the plaintiff will win the case.a. A liability that is recorded.b. An item described in notes to its financial statements.2. Huprey faces a loss on a pending lawsuit that it is unlikely to lose; the amount is reasonably estimable.a. An item described in notes to its financial statements.b. A liability that is recorded.3. Huprey faces a probable loss on a pending lawsuit; the amount is reasonably estimable.a. An item described in notes to its financial statements.b. A liability that is recorded.
Answer:
Huprey Co.
Identifying the accounting treatment for each claim as either (a) a liability that is recorded or (b) an item described in notes to its financial statements:
1. Huprey (defendant) estimates that a pending lawsuit could result in damages of $1,550,000; it is unlikely that the plaintiff will win the case.a. A liability that is recorded.
b. An item described in notes to its financial statements.
2. Huprey faces a loss on a pending lawsuit that it is unlikely to lose; the amount is reasonably estimable.
a. An item described in notes to its financial statements. b. A liability that is recorded.
3. Huprey faces a probable loss on a pending lawsuit; the amount is reasonably estimable.a. An item described in notes to its financial statements.
b. A liability that is recorded.
Explanation:
Huprey Co. will recognize and record contingent liabilities in its accounts when it can be reasonably established that the future event will occur and the amount of the liability can be reasonably estimated. The implication is that Huprey Co. must establish two things before a contingent liability is recognized and recorded. One is that the probability or the likelihood or the chance that the event will happen exists and can be estimated. With the probability estimate, it becomes possible for Huprey Co. to also estimate the amount that the happening of the event will cost it.
