Answer:
a. The answers are as follows:
(i) Expected of Return of Portfolio = 4%; and Beta of Portfolio = 0
(ii) Expected of Return of Portfolio = 6.25%; and Beta of Portfolio = 0.25
(iii) Expected of Return of Portfolio = 8.50%; and Beta of Portfolio = 0.50
(iv) Expected of Return of Portfolio = 10.75%; and Beta of Portfolio = 0.75
(v) Expected of Return of Portfolio = 13%; and Beta of Portfolio = 1.0
b. Change in expected return = 9% increase
Explanation:
Note: This question is not complete as part b of it is omitted. The complete question is therefore provided before answering the question as follows:
Suppose that the S&P 500, with a beta of 1.0, has an expected return of 13% and T-bills provide a risk-free return of 4%.
a. What would be the expected return and beta of portfolios constructed from these two assets with weights in the S&P 500 of (i) 0; (ii) 0.25; (iii) 0.50; (iv) 0.75; (v) 1.0
b. How does expected return vary with beta? (Do not round intermediate calculations.)
The explanation to the answers are now provided as follows:
a. What would be the expected return and beta of portfolios constructed from these two assets with weights in the S&P 500 of (i) 0; (ii) 0.25; (iii) 0.50; (iv) 0.75; (v) 1.0
To calculate these, we use the following formula:
Expected of Return of Portfolio = (WS&P * RS&P) + (WT * RT) ………… (1)
Beta of Portfolio = (WS&P * BS&P) + (WT * BT) ………………..………………. (2)
Where;
WS&P = Weight of S&P = (1) – (1v)
RS&P = Return of S&P = 13%, or 0.13
WT = Weight of T-bills = 1 – WS&P
RT = Return of T-bills = 4%, or 0.04
BS&P = 1.0
BT = 0
After substituting the values into equation (1) & (2), we therefore have:
(i) Expected return and beta of portfolios with weights in the S&P 500 of 0 (i.e. WS&P = 0)
Using equation (1), we have:
Expected of Return of Portfolio = (0 * 0.13) + ((1 - 0) * 0.04) = 0.04, or 4%
Using equation (2), we have:
Beta of Portfolio = (0 * 1.0) + ((1 - 0) * 0) = 0
(ii) Expected return and beta of portfolios with weights in the S&P 500 of 0.25 (i.e. WS&P = 0.25)
Using equation (1), we have:
Expected of Return of Portfolio = (0.25 * 0.13) + ((1 - 0.25) * 0.04) = 0.0625, or 6.25%
Using equation (2), we have:
Beta of Portfolio = (0.25 * 1.0) + ((1 - 0.25) * 0) = 0.25
(iii) Expected return and beta of portfolios with weights in the S&P 500 of 0.50 (i.e. WS&P = 0.50)
Using equation (1), we have:
Expected of Return of Portfolio = (0.50 * 0.13) + ((1 - 0.50) * 0.04) = 0.0850, or 8.50%
Using equation (2), we have:
Beta of Portfolio = (0.50 * 1.0) + ((1 - 0.50) * 0) = 0.50
(iv) Expected return and beta of portfolios with weights in the S&P 500 of 0.75 (i.e. WS&P = 0.75)
Using equation (1), we have:
Expected of Return of Portfolio = (0.75 * 0.13) + ((1 - 0.75) * 0.04) = 0.1075, or 10.75%
Using equation (2), we have:
Beta of Portfolio = (0.75 * 1.0) + ((1 - 0.75) * 0) = 0.75
(v) Expected return and beta of portfolios with weights in the S&P 500 of 1.0 (i.e. WS&P = 1.0)
Using equation (1), we have:
Expected of Return of Portfolio = (1.0 * 0.13) + ((1 – 1.0) * 0.04) = 0.13, or 13%
Using equation (2), we have:
Beta of Portfolio = (1.0 * 1.0) + (1 – 1.0) * 0) = 1.0
b. How does expected return vary with beta? (Do not round intermediate calculations.)
There expected return will increase by the percentage of the difference between Expected Return and Risk free rate. That is;
Change in expected return = Expected Return - Risk free rate = 13% - 4% = 9% increase
Polly Khan is trying to calculate the current market rate given the following information: Investor’s have been requiring a 12% annual return on Builtrite’s stock which has a beta of 2.0 and the current risk-free rate is 4%. What is the current market rate?
Answer:
The current market rate is 8%
Explanation:
The market rate is the return on market or the market portfolio. To calculate the market rate (rM) we will use the CAPM equation which is used to calculate the required rate of return on a stock or portfolio. The formula for required rate of return under CAPM is,
r = rRF + Beta * (rM - rRF)
Where,
rRF is the risk free raterM is the market rateWe already know the value of r, rRF and Beta. We will input these values in the above equation to calculate the market rate.
0.12 = 0.04 + 2 * (rM - 0.04)
0.12 - 0.04 = 2 * rM - 0.08
0.08 + 0.08 = 2 * rM
0.16 / 2 = rM
rM = 0.08 or 8%
You are the manager of a firm that produces goods X and Y. Your rm receives revenues of $40,000 per year from product X and $90,000 per year from product Y. The price elasticity of demand for product X is |-0.75| and the cross price elasticity of demand between product Y and X is -1.7.
Required:
How much will your firm's total revenues (revenues from both products) change if you increase the price of good X by 2 percent?
Answer:
price elasticity of demand = % change in quantity / % change in price
-0.75 = % change in quantity / 2%
-1.5 = % change in quantity
lets assume that 1,000 units of X were sold at $40 each, total revenue = $40,000
new total revenue = 985 x $40.80 = $40,188
revenue generated by good X will increase by 0.47%, from $40,000 to $40,188
price elasticity of demand = % change in quantity of Y / % change in price of X
-1.7 = % change quantity of Y / 2%
-3.4% = % change quantity of Y
lets assume that 1,000 units of Y were sold at $90 each, total revenue = $90,000
new total revenue = 966 x $91.80 = $88,678.80
revenue generated by good Y will decrease by -1.47%, from $90,000 to $88,678.80
A one-year insurance policy was purchased on June 1 for $2,400. The adjusting entry on December 31 would be:
Answer:
Adjusting Journal Entry:
Debit Insurance Expense $1,400
Credit Prepaid Insurance $1,400
To record the insurance expense for the year (7 months).
Explanation:
This adjustment will cause the Prepaid Insurance account to remain $1,000. This balance represents the insurance cost for 5 months having deducted the insurance cost for 7 months from June 1 to December 31. So, in line with the accrual concept and the matching principle of generally accepted accounting principles, only $1,400 Insurance was incurred for the current year. The balance will be charged to the account when the service is consumed.
Outside the flight experience itself, airlines are generating revenue by charging fees for credit cards, frequent-flyer programs, and access to airport lounges. This serves to
Complete Question:
Outside the flight experience itself, airlines are generating revenue by charging fees for credit cards, frequent-flyer programs, and access to airport lounges. This serves to
Group of answer choices:
A. increase competition.
B. expand the profit pool.
C. provide better customer service.
D. satisfy regulators
Answer:
B. expand the profit pool.
Explanation:
Outside the flight experience itself, airlines are generating revenue by charging fees for credit cards, frequent-flyer programs, and access to airport lounges. This serves to expand the profit pool.
Generally, all business entities are typically set up to generate revenues by engaging or increasing the number of services being offered to potential customers and as a result of this, make more money or profits.
In this scenario, the airline company has diversified its portfolios through the provision of services centered around the transport or logistics business such as use of credit cards as a means of payment by the customers, use of airport lounges as relaxation spot, waiting area and use of frequent-flyer programs as a form of advert in the airport or on board.
Firm A has set an MSRP of MXN 25 for its product, and the average discount to distributors is 30%. What is revenue on 40 million units
Answer: 700 million
Explanation:
From the question, we are informed that Firm A has set an MSRP of MXN 25 for its product, and the average discount to distributors is 30%.
The revenue on 40 million units will be calculated as:
= (40,000,000 × 25) × (100% - 30%)
= 1,000,000,000 × 70%
= 1,000,000,000 × 0.7
= 700,000,000
The answer is 700 million.
The revenue on 40 million units is 700,000,000.
The calculation is as follows:
= (40,000,000 × 25) × (100% - 30%)
= 1,000,000,000 × 70%
= 1,000,000,000 × 0.7
= 700,000,000
Therefore we can conclude that The revenue on 40 million units is 700,000,000.
Learn more; brainly.com/question/6201432
The central problem in product-oriented layout planning is?
Answer: The minimizing the imbalance in the workloads among workstations.
Explanation:
Workspace can inspire informal and productive encounters if it balances what three physical and social aspects.
Using the tables above, what is the present value of $6,000 to be received at the end of each of the next four years, assuming an earnings rate of 10%?
a. $20,790
b. $19,020
c. $14,412
d. $25,272
1. Option A
2. Option B
3. Option C
Answer:
b. $19,020
Explanation:
Note: This question is not complete. The complete question is therefore provided in the attached pdf file before answering the question. Please, see the attached file for the full question.
Also note that the "1. Option A 2. Option B 3. Option C" are not actually part of the question.
The explanation to the answer is now provided as follows:
Note: This is an example of annuity. An annuity can be described as a series of payments made or income received at equal intervals.
Therefore, the relevant table in the question is the second table, i.e. table for the present value of an annuity of $1 at compound interest.
To calculate the present value (PV), the following for formula is used:
PV = ACI * PVA10% ............................ (1)
PV = Present value = ?
ACI = Annual cash inflows = $6,000
PVA = Present value of annuity of $1 at 10% for 4 years = 3.170
Note that the PVA is obtained for year 4 at 10% from the second table as already explained above.
Substituting the values into equation (1), we have:
PV = $6,000 * 3.170
PV = $19,020
Therefore, the correct option is option b. $19,020.
3. At an oral auction for a lamp, half of all bidders have a value of $50 and half have a value of $70. What is the expected winning bid if there are four bidders
Answer: $60
Explanation:
From the question, we are informed that At an oral auction for a lamp, half of all bidders have a value of $50 and half have a value of $70.
The expected winning bid if there are four bidders goes thus:
Since there are four bidders, the probability that the winning bid is $50 is 1/2 and for $70, it's 1/2 as well based on the question.
The expected winning bid will now be:
= ($50 × 1/2) + ($70 × 1/2)
= ($50 × 0.5) + ($70 × 0.5)
= $25 + $35
= $60
According to the two-factor theory, ________. A) there exists a hierarchy of needs within every human being, and as each need is satisfied, the next one becomes dominant B) most employees inherently dislike work and must therefore be directed or even coerced into performing it C) employees view work as being as natural as rest or play, and therefore learn to accept, and even seek, responsibility D) the aspects that lead to job satisfaction are separate and distinct from those that lead to job dissatisfaction E) achievement, power, and affiliation are three important needs that help explain motivatio
Answer: D. ) the aspects that lead to job satisfaction are separate and distinct from those that lead to job dissatisfaction
Explanation:
According to the two-factor theory, it is stated that some factors in an organization or company results in job satisfaction while another group of factors results in dissatisfaction of the workers and that both of these factors doesn't depend on one another.
Therefore, the two factor theory the aspects that lead to job satisfaction are separate and distinct from those that lead to job dissatisfaction.
Option d is the right answer.
valdes corporation had a credit balance in the allowance for doubtful accounts of $62,000 at 1/1/19 during 2019, it wrote off $21,400 of accounts and collected $7,800 on accounts previously written off, the amount of bad debt expense recoginzed in 2019 is $11,000. if valdes estimates at the year end that 6% accounts receivable will prove to be uncollectible what is the account receivable balance at 12/21/2019
Answer:
The account receivable balance at 12/31/2019 is $990,000
Explanation:
Ending balance of allowance account = Beginning allowance + Bad debt expense - Doubtful accounts written off + Amount collected on written off doubtful account
Ending balance of allowance account = $62,000 + $11,000 - $21,400 + $7,800
Ending balance of allowance account = $59,400
Accounts receivable balance at 12/31/2019 = $59,400 / 6%
=$990,000
Vincent operates a scenic tour business in Boston. He has one bus which can fit 50 people per tour and each tour lasts 2 hours. His total cost of operating one tour is fixed at $450. Vincent’s cost is not reduced if he runs a tour with a partially full bus. While his cost is the same for all tours, Vincent charges each passenger his/her willingness to pay (reservation value): adults $18 per trip, children $10 per trip, and senior citizens $12 per trip. At those rates, on a typical day Vincent’s demand is:
Answer:
There is some information missing, and when I looked for it I found similar questions but the demand was already given and the question was about Vincent's total daily income.
Passenger Price Daily demand
Adults $18 70
Children $10 25
Senior citizens $12 55
total 150
total revenue per day = ($18 x 70) + ($10 x 25) + ($12 x 55) = $1,260 + $250 + $660 = $2,170
total operating costs per day = (150 / 50) x $450 = $1,350
operating income per day = $2,170 - $1,350 = $820
A perpetuity provides for continuous payments. The annual rate of payment at time t is { 1, 0 <= t <10 (1.03)^t-10, t >=10 Using an annual effective interest rate of 6%, the present value at time t = 0 of this perpetuity is x. Calculate X. a. 27.03 b. 30.29 c. 34.83 d. 38.64 e. 42.41
Answer:
b. 30.29
Explanation:
Perpetuity is the state that lasts forever. In statistics the benefit that last for an indefinite period of time is calculated through perpetuity method.
1/1.06 + 1/1.06^2 +1/1.06^3 + 1/1.06^4 + 1/1.06^5 + 1/1.06^6 + 1/1.06^7 + 1/1.06^8 + 1/1.06^9 =
0.942 + 0.893 + 0.87 + 0.821 + 0.791 + 0.752 + 0.691 + 0.652 + 0.604
= 7.017
7.017 / 0.23 = 30.29
Sandhill corporation manufactures a single product. montlhly production costs incurred in the manufacturing process are show below for the production of 3900 maintanance costs are mixed costs. the fixed portions of these costs are 387 and 258, respectively.
Production in units 3900
Production cost
Direct materials 9675
Direct labor 27420
Utilities 3702
Property taxes 1290
Indirect labor 5805
Supervisor salaries 2451
Maintanance 1233
Depreciation 3096
Required:
Calculate variable costs per unit, variable cost per unit for utilities and variable cost per unit for maintenance.
Answer:
variable costs per unit = $10.57
variable cost per unit for utilities = $0.85
variable cost per unit for maintenance = $0.25
Explanation:
I believe that the question is incomplete: the missing part is that both utilities and maintenance costs are mixed.
Production in units 3,900
Variable production cost s:
Direct materials $9,675 / 3,900 = $2.4808 per unit
Direct labor $27,420 / 3,900 = $6.9846 per unit
Utilities ($3,702 - $387) / 3,900 = $0.85 per unit
Maintenance ($1,233 - $258) / 3,900 = $0.25 per unit
total variable costs per unit = $10.5654 ≈ $10.57
The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output 5.2 hours Standard variable overhead rate $11.60 per hour The following data pertain to operations for the last month: Actual hours 2,500 hours Actual total variable manufacturing overhead cost $29,590 Actual output 150 units What is the variable overhead efficiency variance for the month?
Answer:
Variable overhead efficiency variance= $19,952 unfavorable
Explanation:
Giving the following information:
Standard hours per unit of output 5.2 hours
Standard variable overhead rate $11.60 per hour
Actual hours 2,500 hours
Actual output of 150 units
To calculate the variable overhead efficiency variance, we need to use the following formula:
Variable overhead efficiency variance= (Standard Quantity - Actual Quantity)*Standard rate
Standard quantity= 5.2*150= 780
Variable overhead efficiency variance= (780 - 2,500)*11.6
Variable overhead efficiency variance= $19,952 unfavorable
Willow Corporation had three employees. Two of the employees worked full-time and earned salaries of $25,000 each. The third employee worked only part-time and earned $3,000. The employer timely paid state unemployment tax equal to 5.4 percent of each employee's wages up to $7,000. How much FUTA tax is due from Willow Corporation for 2019, after the credit for state unemployment taxes?
Answer:
$102
Explanation:
FUTA tax due from Willow Corporation for 2019, after the credit for state unemployment taxes, can be calculated by deducting the Paid state unemployment tax by the FUTA tax.
DATA
Paid State Unemployment Tax = (7,000+7,000+3,000) x 5.4%
Paid State Unemployment Tax = $918
FUTA tax rate in 2019 = 6%
Solution
FUTA tax (6% x $17,000) = $1,020
FUTA tax due = $1,020 - $918
FUTA tax due = $102
In an international communication process carried out by a company, the sales force of the company that conveys the encoded message to the intended receiver acts as a(n)
Answer: message channel
Explanation:
In an international communication process carried out by a company, the sales force of the company that conveys the encoded message to the intended receiver acts as a message channel.
The sales force are said to act as a.mesage channel because they are the ones that pass the message across to the intended receiver.
White Lion Homebuilders is considering investing in a one-year project that requires an initial investment of $475,000. To do so, it will have to issue new common stock and will incur a flotation cost of 2.00%. At the end of the year, the project is expected to produce a cash inflow of $595,000. The rate of return that White Lion expects to earn on its project (net of its flotation costs) is:___________.
Answer:
22.81%
Explanation:
The computation of the rate of return is shown below:
= (cash inflow ÷ total cost) - 1
where,
Cash inflow is $595,000
And, the total cost is
= $475,000 + $475,000 × 2%
= $475,000 + $9,500
= $484,500
So, the rate of return is
= ($595,000 ÷ $484,500) - 1
= 22.81%
Hence, the rate of return is 22.81%
Basically we applied the above formulas
In 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.
Rahman stock just paid a dividend of $3.00 per share. Future dividends are expected to grow at a constant rate of 6% per year. What is the value of the stock if the required return is 12%
Answer:value of stock for the required return of 12 % = $53
Explanation:
Given
current dividend just paid = $3.00
dividend to grow at constant rate of 6%
required rate of return =12%
to calculate the value of stock for the requitred return of 12 % , we use the dividend growth model which is
Current price = dividend ( 1 + growth rate )/ (required rate -growth rate )
= 3 x (1+6%) / 12-6 = 3 x 1.06 /6% =3.18/0.06= $53
Therefore value of stock for the requitred return of 12 % ,= $53
During the year, Wright Company sells 500 remote-control airplanes for $110 each. The company has the following inventory purchase transactions for the year. Date Transaction
Number of Units Unit Cost Total Cost
Jan. 1 Beginning inventory 60 $66 $3,960
May. 5 Purchase 280 69 19,320
Nov. 3 Purchase 230 74 17,020
570 $40,300
Calculate ending inventory and cost of goods sold for the year, assuming the company uses FIFO.
Answer:
$5,180 and $35,120
Explanation:
The computation of the cost of goods sold and the ending inventory is shown below:
There are 500 unit sold so according to that the cost of goods sold is
Jan 1 60 units $66 $3,960
May 5 280 units $69 $19,320
Nov 3 160 units $74 $11,840
Cost of goods sold $35,120
Now the ending inventory is
Since there is a 70 ending inventory units i.e comes from
= 570 units - 500 units
= 70 units
So this should be at $74
i.e $5,180
If a municipality is expecting to receive federal funding for mass-transit programs, it could borrow against the expected funds to be received by issuing:_____.
A. BANs.
B. TANs.
C. GANs.
D. CLNs.
Answer:
Option C (GANs) is the correct answer.
Explanation:
GAN refers to "Grant Anticipation Notice". This can indeed be distributed by a municipality or community to "move forward" as well as make the proper use of another government grant extra funds expected future economic in the years ahead. Those other state grant monies are being used for investments in mass transportation, energy efficiency, including environmental regulations.The other three alternatives are not related to the given instance. So that the above would be the appropriate one.
Suppose the following items are taken from the 2017 balance sheet of Yahoo! Inc. (All dollars are in millions.)
Goodwill ............................................................. $3,927
Common stock ........................................................ 6,283
Equipment .............................................................. 1,737
Accounts payable ...................................................... 152
Patents ................................................................... 234
Stock investments (long-term) ...................................... 3,247
Accounts receivable .................................................. 1,061
Prepaid rent .............................................................. 233
Debt investments (short-term) ...................................... 1,160
Retained earnings .................................................... 6,108
Cash ................................................................... 2,292
Notes payable (long-term) ............................................ 734
Unearned sales revenue ............................................... 413
Accumulated depreciation-equipment 201
Instructions
Prepare a classified balance sheet for Yahoo! Inc. as of December 31, 2017.
Answer:
Yahoo! Inc.Classified balance sheet as of December 31, 2017:Assets: ($ million)
Current Assets:
Cash $2,292
Accounts receivable 1,061
Prepaid rent 233
Debt investments (short-term) 1,160
Total Current Assets $4,746
Non-current Assets:
Stock investments (long-term) 3,247
Equipment 1,737
Accumulated depreciation 201 1,536
Patents 234
Goodwill 3,927
Total non-current assets $8,924
Total Assets $13,690
Current Liabilities:
Unearned sales revenue 413
Accounts payable 152 $565
Non-current Liabilities:
Notes payable (long-term) 734
Total Liabilities $1,299
Stockholders' Equity:
Common stock 6,283
Retained earnings 6,108 12,391
Total liabilities + equity $13,690
Explanation:
a) This Yahoo!'s 2017 classified balance sheet shows the current assets, current liabilities, non-current assets, non-current liabilities, and the stockholders' equity with their separate totals. It helps in calculating important financial ratios and in making comparisons in absolute dollar terms from one period to the other or from one company to another entity.
At the end of a particular operating period, suppose Brenda (the manager) sits down with Ethan (the employee) and they meet to determine how well Ethan's performance has met the objectives set by Brenda. Which step in the MBO process would this be?
Answer:
Evaluate performance
Explanation:
The mbo process is a time where an employee and manager work together and sets record for a particular period of time.
This step in the mbo process is evaluation of performance. Under this step, the manager reviews the work of the employee from the question, this is what Brenda is doing with Ethan. She is evaluating his performance.
Coffer Co. is analyzing two potential investments.
Project X Project Y
Cost of machine $77,000 $55,000
Net cash flow:
Year 1 28,000 2,000
Year 2 28,000 25,000
Year 3 28,000 25,000
Year 4 0 20,000
If the company is using the payback period method and it requires a payback of three years or less, which project(s) should be selected?
a. Project Y
b. Both X and Y are acceptable projects.
c. Project Y because it has a lower initial investment
d. Project X
e. Neither X nor Y is an acceptable project
Answer:
d. Project X
Explanation:
For Project X
Year Net cash outflow Net cash inflow Balance
0 -$77,000 -$77,000
1 $28,000 -$49,000
2 $28,000 -$21,000
3 $28,000 $7,000
4 0 $7,000
Payback period = 2 + $21,000 ÷ $28,000
= 2 + 0.75
= 2.75 years
For Project Y
Year Net cash outflow Net cash inflow Balance
0 -$55,000 -$55,000
1 $2,000 -$53,000
2 $25,000 -$28000
3 $25,000 -$3,000
4 $20,000 $17,000
Payback period = 3 +3,000 ÷ 20,000
= 3 + 0.15
= 3.15 years
Project X has a lesser than 3 year payback period. So, the correct option is D
has a target debt−equity ratio of 1.35. Its WACC is 8.3 percent, and the tax rate is 35 percent. If the company’s cost of equity is 14 percent, what is its pretax cost of debt? (Do not round intermediate calculations. Enter yo
Answer:
5.74%
Explanation:
WACC = weight of equity x cost of equity + weight of debt x cost of debt x (1 - tax rate)
weight of debt = D / (D + E) = 1.35/ (1.35 + 1) = 0.574468 = 57.4468%
weight of equity = 100% - 57.4468% = 42.5532%
let x represent pretax cost of debt
8.1% = 0.425532 x 14% +( 0.574468x) x 0.65
8.1% = 0.373404x + 5.957448%
solve for x
x = 5.74%
At an output level of 415,400 units, you have calculated that the degree of operating leverage is 2.00. The operating cash flow is $58,000 in this case. Ignore the essect of taxes. What will be the new degree of operating leverage for output levels of 16,400 units and 14,400 units
Answer:
the new degree of operating leverage for output levels of 16,400 units and 14,400 units will be -0.0858 and - 0.0745 respectively.
Explanation:
From the given information:
the degree of operating the leverage at 415,400 units = [tex]\mathtt{\dfrac{contribution \ \ margin}{operating \ \ income}}[/tex]
where contribution margin = 2 × 58000 =116000
If we assume that the sales price should be p and the variable cost be q per unit .
Then, 415,400p - 415,400q = 116000
p - q = [tex]\mathtt{\dfrac{116000}{415400}}[/tex]
p - q = 0.279 at 415400 unit
Contribution margin = 415400 × 0.279
Contribution margin = 115896.6
The operating income = contribution margin - fixed expense
58000 = 115896.6 - fixed expense
fixed expense = 115896.6 - 58000
fixed expense = 57896.6
However, when the output level is 16400 unit,
the contribution margin = 16400(p-q)
the contribution margin = 16400(0.279)
the contribution margin = 4575.6
The operating leverage = [tex]\mathtt{\dfrac{contribution \ \ margin}{contribution \ \ margin - fixed \ \ costs}}[/tex]
The operating leverage = [tex]\mathtt{\dfrac{4575.6}{4575.6 - 57896.6}}[/tex]
The operating leverage = [tex]\mathtt{\dfrac{4575.6}{-53321}}[/tex]
The operating leverage = -0.0858
when the output level is 14400 unit,
the contribution margin = 14400(p-q)
the contribution margin = 14400(0.279)
the contribution margin = 4017.6
The operating leverage = [tex]\mathtt{\dfrac{contribution \ \ margin}{contribution \ \ margin - fixed \ \ costs}}[/tex]
The operating leverage = [tex]\mathtt{\dfrac{4017.6}{4017.6 - 57896.6}}[/tex]
The operating leverage = [tex]\mathtt{\dfrac{4017.6}{-53879}}[/tex]
The operating leverage = - 0.0745
As an American investor, you are trying to calculate the present value of a £25 million cash flow that will occur one year in the future. You know that the spot exchange rate is S= $1.9397/ £ and one-year forward rate is F= $1.9581/ £. You also know that the appropriate dollar cost of capital for this cash flow is 6.25% and that the appropriate pound cost of capital for this cash flow is 5.25%. a) What is the present value of the £25 million cash flow from the standpoint of a British investor, and what is the dollar equivalent of this amount? b) What is the present value of the £25 million cash flow from the standpoint of a U.S. investor who first converts the £25 million into dollars and then applies the dollar discount rate?
Answer:
1. Present value in pound=$23,752,969
Dollar equivalent=$46,073,634
2.Dollar equivalent for U.S investors=$48,952,500
Present value in pound=$46,072,918
Explanation:
1a.Calculation for present value of the £25 million cash flow
Using this formula
Present value in pound =cash flow*(1/1+Cash flow cost of capital)^ One year in the future
Let plug in the formula
Present value in pound=$25,000,000*(1/1+0.0525)^1
Present value in pound=$25,000,000*(1/1.0525)^1
Present value in pound=$25,000,000*0.950119
Present value in pound=$23,752,969
1b.Calculation for the dollar equivalent of this amount
Using this formula
Dollar equivalent=Present value in pound*Spot exchange rate
Let plug in the formula
Dollar equivalent=$23,752,969*$1.9397
Dollar equivalent=$46,073,634
2a. Calculation for the Dollar equivalent for U.S investors
Using this formula
Dollar equivalent for U.S investors=Cash flow*one-year forward rate
Let plug in the formula
Dollar equivalent for U.S investors=$25,000,000*$1.9581
Dollar equivalent for U.S investors=$48,952,500
2b. Calculation for the present value of the £25 million cash flow from the standpoint of a U.S. investor .
Using this formula
Present value in pound =Cash flow*(1/1+Cash flow cost of capital)^ One year in the future
Let plug in the formula
Present value in pound=$48,952,500*(1/1.0625)^1
Present value in pound=$48,952,500*0.941176
Present value in pound=$46,072,918
Therefore the Present value in pound for question 1 is $23,752,969 while the Dollar equivalent is $46,073,634.
The Dollar equivalent for U.S investors in question 2 is $48,952,500 while the Present value in pound is $46,072,918
Jacob Corcoran bought 10,000 shares of Grebe Corporation stock two years ago for $24,000. Last year, Jacob received a nontaxable stock dividend of 2,000 shares in Grebe Corporation. In the current tax year, Jacob sold all of the stock received as a dividend for $18,000.
Required:
a. Complete the letter to Jacob describing the tax consequences of the stock sale.
b. Prepare a memo for the tax research file describing the tax consequences of the stock sale.
c.
Answer:
Jacob purchased 10000 shares form Grebe corporation two years ago for $24000
last year Jacob received a non taxable stock dividend of 2000 shares from Grebe corporation
In the current year tax year Jacob sold all stock received as dividend that's 2000 shares for $18000
The gain of the sale of 2000 shares can be calculated by subtracting the basis in the shares from the cost price. the cost of shares = ( $24000 / 12000 ) = $2 per share
profit made from the sales of 2000 shares is calculated as follows ; selling price ( $18000 ) - cost price of 2000 shares ( $2 * 2000) , the profit is $14000 and it is in the long term because the original shares bought has been held for at least 1 year
Explanation:
Jacob purchased 10000 shares form Grebe corporation two years ago for $24000
last year Jacob received a non taxable stock dividend of 2000 shares from Grebe corporation
In the current year tax year Jacob sold all stock received as dividend that's 2000 shares for $18000
The gain of the sale of 2000 shares can be calculated by subtracting the basis in the shares from the cost price. the cost of shares = ( $24000 / 12000 ) = $2 per share
profit made from the sales of 2000 shares is calculated as follows ; selling price ( $18000 ) - cost price of 2000 shares ( $2 * 2000) , the profit is $14000 and it is in the long term because the original shares bought has been held for at least 1 year
On December 21, 2017, Novak Company provided you with the following information regarding its equity investments.
December 31, 2017
Investments (Trading)
Cost
Fair Value
Unrealized Gain (Loss)
Clemson Corp. stock $20,200 $19,300 $(900)
Colorado Co. stock 9,900 8,900 (1,000)
Buffaloes Co. stock 20,200 20,790 590
Total of portfolio $50,300 $48,990 (1,310)
Previous fair value adjustment balance 0
Fair value adjustment—Cr. $(1,310)
During 2018, Colorado Company stock was sold for $9,410. The fair value of the stock on December 31, 2018, was Clemson Corp. stock—$19,410; Buffaloes Co. stock—$20,700. None of the equity investments result in significant influence.
(a) Prepare the adjusting journal entry needed on December 31, 2017.
(b) Prepare the journal entry to record the sale of the Colorado Co. stock during 2018.
(c) Prepare the adjusting journal entry needed on December 31, 2018.
(Credit account titles are automatically indented when 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.)
No.
Account Titles and Explanation
Debit
Credit
(a) On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
(b) On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
(c) On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
Answer:
(a)
Dr Unrealized Holding Gain or Loss -Equity $1,410
Cr Fair Value Adjustment $1,410
(b)
Dr Cash $9,410
Dr Loss on Sale of Investment $590
Cr Equity Investment $10,000
(c)
Dr Fair Value Adjustment $1,120
Cr Unrealized Holding Gain or Loss-Equity $1,120
Explanation:
(a) Preparation of the adjusting journal entry needed on December 31, 2017.
Dr Unrealized Holding Gain or Loss -Equity $1,410
Cr Fair Value Adjustment $1,410
(To Adjust to Fair Value for 2017)
(b) Preparation of the journal entry to record the sale of the Colorado Co. stock during 2018.
Dr Cash $9,410
Dr Loss on Sale of Investment $590
(20,200- 20,790)
Cr Equity Investment $10,000
($9,410+$590)
(To Record Sale of Stock)
(c)Preparation of the adjusting journal entry needed on December 31, 2018.
Dr Fair Value Adjustment $1,120
Cr Unrealized Holding Gain or Loss-Equity $1,120
(To Adjust to Fair Value for 2018)
Investments Amortized Costs, Fair Value , Unrealized Gain (Loss)
Clemson Corp. stock
$20,200 $19,410 ($790)
Buffaloes Co. stock
$20,200 $20,700 $500
$40,400 $40,110 ($290)
Previous Fair Value Adjustment (Credit)
$1,410
Fair Value Adjustment (Debit)$1,120
Which of the following is one of the two fundamental issues that the recommendations of the 1947 Hutchins Commission on social responsibility in journalism were based on?a. Society's welfare is paramount. b. Morality should be a business practice. c. Corporate responsibility is essential. d. The golden rule should be written in stone.
Answer:
a. Society's welfare is paramount.
Explanation:
A commission on the freedom of press also known as "The Hutchins Commission" was formed in the United States of America (USA) during the World War II (WWII) by Robert Maynard Hutchins.
In 1947 after deliberating on the issues of press for four (4) years, the Hutchins Commission concluded that society's welfare is paramount, this is one of the two fundamental issues that the recommendations of the 1947 Hutchins Commission on social responsibility in journalism is based on. The commission stated that the development and stability of a society is influenced by the operations of the press and as such it is very important that the mass media (press) is socially responsible.
Some of the guidelines or recommendations made by the Hutchins Commission for the press are;
1. Present meaningful, reliable and accurate news to the general public; not opinions.
2. Present an overall view of what was known about society.
3. Avail the citizens an opportunity for constructive criticism and exchange of comment about the government.
