Answer:
The Present Value of the bond at the market rate = $90,438.36
Explanation:
The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).
Value of Bond = PV of interest + PV of RV
The value of bond can be worked out as follows:
Step 1
PV of interest payments
Semi annul interest payment
= 10% × 81000 × 1/2 = 4050
Semi-annual yield = 8%/2= 4 % per six months
Total period to maturity (in months)
= (2 × 8) = 16 periods (Note the bond term is 8 yeras)
PV of interest = 4050 × (1-1.04^(-16))/0.04 = 47,191.79
Step 2
PV of Redemption Value
Assuming a redemption value equals to the nominal value =
PV of RV = 81,000 × 1.04^-16 = 43,246.56
Step 3 :Total Present Value
Total prent value = 43,246.56 + 47,191.79721 = 90,438.36
The Present Value of the bond at the market rate = $90,438.36
Assume you have a margin account with a 50% initial margin. You purchase 100 shares of stock at $80 per share. The price increases to $100 per share. What is the net value of your investment (margin) now
Answer:
Net value of the investment (margin) is $6,000
Explanation:
The initial margin = (100 shares * $80) * 50%
The initial margin = $4,000
Increase in the Margin value = 100 shares* ($100-$80)
Increase in the Margin value = 100 shares * $20
Increase in the Margin value =$2,000
Net value of the investment (margin) = $4,000 + $2,000
Net value of the investment (margin) = $6,000
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
Bank's Balance Sheet Assets Liabilities and Owners' Equity $1,600 $250 Securities $1,000 Capital (owners' equity) $150 Reserves$200 Deposits Loans $800 Debt Suppose the owners of the bank borrow $100 to supplement their existing reserves.
This would increase the reserves account and ______ the ______ account.
This would also bring the leverage ratio from its initial value of __________ to a new value of_______
Which of the following is true of the capital requirement?
a. The higher the percentage of assets a bank holds as loans, the higher the capital requirement.
b. A minimum leverage ratio for all banks.
c. Its intended goal is to protect the interests of those who hold equity in the bank.
Answer:
1. This would increase the reserves account and increase the debt account.
Borrowing refers to debt and so it will increase the debt account.
2. This would also bring the leverage ratio from its initial value of 13.33 to a new value of 14.
The bank leverage ratio refers to its Assets divided by Capital (Owners equity).
Before the $100 was borrowed, the leverage ratio was;
= (Reserves + loans + securities)/Capital
= ( 200 + 800 + 1,000) / 150
= 13.33
After the $100 was borrowed
= ( 200 + 800 + 1,000 + 100) /150
= 14.
3. a. The higher the percentage of assets a bank holds as loans, the higher the capital requirement.
The capital requirement is meant to protect depositors in case the loans are defaulted on as the loans are created from the funds depositors bring in. Should the loans be defaulted on, they will be paid from the capital therefore if the bank holds more loans, it will have to hold more capital to ensure it can cover those loans.
The credit terms 2/10, n/30 are interpreted as: Multiple Choice 2% cash discount if the amount is paid within 10 days, or the balance due in 30 days. 30% discount if paid within 2 days. 2% discount if paid within 30 days. 30% discount if paid within 10 days. 10% cash discount if the amount is paid within 2 days, or the balance due in 30 days.
Answer:
The credit terms 2/10, n/30 are interpreted as:
2% cash discount if the amount is paid within 10 days, or the balance due in 30 days.Explanation:
I will explain using an example:
On January 2, the company sells $1,000 worth of goods with credit terms 2/10, n/30.
January 2
Dr Accounts receivable 1,000
Cr Sales revenue
If the client pays within the discount period:
January 11
Dr Cash 980
Dr Sales discounts 20
Cr Accounts receivable 1,000
If the client pays after the discount period but before 30 days:
January 31
Dr Cash 1,000
Cr Accounts receivable 1,000
The credit terms 2/10, and n/30 are interpreted as a 2% cash discount if the amount is paid within 10 days, or the balance is due in 30 days. Thus, option A is the correct option.
Trade credits like 2/10 net 30 are frequently provided by suppliers to purchasers. It stands for an agreement that if payment is made within 10 days, the buyer would get a 2% reduction on the net invoice amount. Otherwise, you have 30 days to pay the entire invoice amount.
It's a common way to express an early payment discount. In accounting, the discount amount and the window of availability are typically represented using a formula like 2/10, n/30. This implies that if the invoice is paid in full within ten days, a 2% reduction is applied; otherwise, the full amount is owed.
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Microsoft online. Which of the following price customization tool is Microson using?
a. Controlling availability
b. Setting prices based upon transaction characteristics
c. Managing product-line offerings
d. Setting prices based upon buyer characteristic
Answer:
Setting prices based upon buyer characteristic
Explanation:
Microson is setting prices based on buyer characteristics. The question says it is giving educational discounts of 10 percent to parents and students. This is value pricing and it mainly involves setting prices with your customers or consumers in focus. Microson based their prices on the worth as perceived by the parents and students. It's discount is characteristic of the people buying it.
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%
You find a zero coupon bond with a par value of $10,000 and 14 years to maturity. The yield to maturity on this bond is 5.1 percent. Assume semiannual compounding periods. What is the price of the bond
Answer:
Bond Price = $4940.8468 rounded off to $4940.85
Explanation:
The price of a zero coupon bond is simply calculated by calculating the present value of the face value of the bond that the bond pays at maturity. The formula for the price of a zero coupon bond is,
Bond Price = Face Value / ( 1 + r )^n
Where,
r is the rate or YTM n is the number of periods left to maturityAssuming that the r or YTM is always stated in annual terms, the semi annual YTM will be 5.1% / 2 = 2.55%
Assuming semi annual compounding periods, the total number of periods or n will be,
n = 14 * 2 = 28
Bond Price = 10000 / (1 + 0.0255)^28
Bond Price = $4940.8468 rounded off to $4940.85
Q3) Creative Sports Design (CSD) manufactures a standard-size racket and an oversize racket. The firm’s rackets are extremely light due to the use of a magnesium-graphite alloy that was invented by the firm’s founder. Each standard-size racket uses 0.125 kilograms of the alloy and each oversize racket uses 0.4 kilograms; over the next two-week production period only 80 kilograms of the alloy are available. Each standard-size racket uses 10 minutes of manufacturing time and each oversize racket uses 12 minutes. The profit contributions are $10 for each standard-size racket and $15 for each oversize racket, and 40 hours of manufacturing time are available each week. Management specified that at least 20% of the total production must be the standard-size racket. How many rackets of each type should CSD manufacture over the next two weeks to maximize the total profit contribution? Assume that because of the unique nature of their products, CSD can sell as many rackets as they can produce.
Answer:
165 oversize rackets = 32 machine hours (79.71% of total production)
42 standard size rackets = 7 machine hours (20.29% of total production)
total profit contribution = (165 x $15) + (42 x $10) = $2,895
Explanation:
materials machine hours profit
standard size 0.125 kg 1/6 $10
oversize 0.4 kg 1/5 $15
constraints 80 kilograms of materials
40 hours of manufacturing
profit per machine hour:
standard size $10 x 6 = $60 x 40 hours = $2,400 (total possible production = 240 rackets)
oversize $15 x 5 = $75 x 40 hours = $3,000 (total possible production = 200 rackets)
profit per kilogram of alloy:
standard size $10 / 0.125 = $80 x 80 kgs = $6,400 (total possible production = 480 rackets)
oversize $15 / .4 = $37.50 x 80 hours = $3,000 (total possible production = 200 rackets)
since the most important constraint is the manufacturing hours available, the company should try to produce the products that yield the highest contribution margin per machine hour. In this case, at least 20% of total production must be standard size rackets, so the remaining 80% should be oversize rackets that yield a higher profit.
165 oversize rackets = 32 machine hours (79.71% of total production)
42 standard size rackets = 7 machine hours (20.29% of total production)
total manufacturing time = 40 hours
if we produce 166 oversize rackets and 41 standard size rackets, total manufacturing time will exceed 40 hours (40.03 hours exactly).
The Association of Organic Food Growers, which does not include all organic farmers and ranchers, refuses to deal with any parties who do not carry the products of its members. This group boycott is Group of answer choices a situation that neither restrains trade nor harms competition. not within the scope of the Sherman Act. a per se violation of antitrust law. subject to analysis under the rule of reason.
Answer:
a per se violation of antitrust law.
Explanation:
The antitrust laws can be defined as those laws that are created by the US government to protect consumers from unfair means of competition in market. The aim of creating such laws is to ensure the protection of customers from corruptive business practices and also to ensure safe healthy competitive environment among same business companies.
In the given scenario, the Association of Organic Food Growers is violating the antitrust law by boycotting farmers, ranchers, etc. The antitrust laws are violated by companies in several ways among them is by boycotting.
Boycotting can be defined as an agreement between several companies that excludes a group of customers or market to avert them from buying aanyy goods or products.
This boycotting agreement is a per se violation of antitrust law.
1. Name one practice that is prohibited under Section 8 of RESPA.
2. List at least three categories under ECOA on which creditors may not base credit decisions.
3. Define rescission as it relates to a mortgage loan transaction.
4. List at least two practices that are not prohibited with regard to appraisers.
Answer:
The answer is below
Explanation:
1. Pactice that is prohibited under Section 8 of RESPA includes the following:
i. Payment or Receive of "things of value" for business referrals
ii. Fee splitting when the job or work is yet to be done, to earn a part of the fee
iii. Excessive charges such as mark-ups, double billing, etc.
iv. Void agreement or understanding with regard to referrals and settlement services
2. Categories under ECOA on which creditors may not base credit decisions are:
Race, Color, Religion, Nationality, Sex, Marital status, Age, Receipt of public assistance and Exercise of rights under the Consumer Credit Protection Act
3. Rescission is a term that describes a form of legal remedy that voids an agreement between two parties and take back both parties to the initial state before the transaction.
Recission right is however applicable to specific loan transactions, for example refinances and home equity lines of credit.
4. Practices that are not prohibited with regard to appraisers.
i. Payment or Receive of "things of value" for business referrals
ii. Fee splitting when the job or work is yet to be done, to earn a part of the fee
iii. Excessive charges such as mark-ups, double billing, etc.
iv. Void agreement or understanding with regard to referrals and settlement services.
The answer to the queries given above are stated as follows:-
1. Cash or other 'things of value' as defined under section 8 of the Act are stated to be not to be used by any such firm for the purpose of business referrals.
2. A banking or financial institutions providing credit facilities may not base their credit decisions on factors like race, sex, religion, nationality, beliefs, etc which are irrelevant to the credibility of a borrower in the market.
3. Rescission relates to the revoking, calling back, reversing the judgement passed by the law and make necessary amendments to the law as may be deemed fit.
4. An appraiser may not try to influence the property through the way of wrongful behavior like fraud,coercion or impersonation. And any other such act which relates to criminal conduct must be avoided by the appraiser.
Things of value refer to such assets or class of assets that are easily liquidated and their values are easily realizable due their liquidity and acceptability in the market.There shall be no discrimination for providing credit facilities on the bases of unrelated phenomenon such as sex, religion, race, castes of a person and shall be purely based on credibility of such person.Rescission relates to the mortgage loan transaction in a way that it is available to the parties of such transaction in cases where there is refinancing or a home mortgage against finance facility.Any such agreements which are void ab initio, void during the contract or voidable at the end of any party are not allowed for appraisers so it can be concluded that only legally bound contracts are allowed.There shall be no acts of impersonation, frauds leading to coercion are also prohibited in case of appraisers of a property so only genuine appraisal of a property is allowed.Hence, the correct statements are mentioned above for all the queries as asked under the headings of 1, 2, 3 and 4 and hold true.
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A company sold equipment that originally cost $290,000 for $145,000 cash. The accumulated depreciation on the equipment was $145,000. The company should recognize a:
Answer:
$0 gain/loss
Explanation:
A company sold an equipment that originally cost $290,000 for $145,000
The accumulated depreciation on the equipment was $145,000
The first step is to calculate the book value of the equipment
Book value of the equipment= Cost of equipment-accumulated depreciation
= $290,000-$145,000
= $145,000
Therefore, the gain/loss on the equipment can be calculated as follows
= Selling price-book value
= $145,000-$145,000
= 0
Hence there is no recognized gain or loss on the equipment
Answer:
Company would recognize a no loss or gain on the disposal i.e Nil
Explanation:
The gain or loss on disposal is the difference between the carrying value of an assets at the point of disposal and the the disposal value.
Gains/(Loss)= Disposal value - carrying value
The carrying value is the difference between the historical cost and the accumulated depreciation till date.
Carrying value = Historical cost - Accumulated depreciation till date
Carrying value = 290,000 - 145,000 = 145 ,000
Gains/Loss= 145,000 - 145,000 = 0.
Company would recognize a no loss or gain on the disposal i.e Nil
Emira wants to buy a classic drawing from an art centre in Kuala Lumpur. She managed to secure a painting by a renowned Malaysian artist that costs her RM99,800. Currently, she only has RM12,650 in her savings account and she intends to use 70% of her saving to fund the purchase. If she borrows the remaining amount from Bank Atlantis that levies 4.77% of interest rates, determine the total interest payment that she will pay if the agreement takes 10 years of settlement.
Answer:
RM23,617.80
Explanation:
cost of the painting RM99,800
she has RM12,650 on her bank account and she will use 70% = RM8,855 as down payment. She will borrow the rest = RM99,800 - RM8,855 = RM90,945
interest charged on the loan 4.77% / 12 = 0.3975%
120 monthly periods (10 years)
using the present value formula to determine the monthly payment:
PV = monthly payment x annuity factor
monthly payment = PV / annuity factor
PV = 90,945
annuity factor (120 periods, 0.3975%) = 95.26168
monthly payment = 90,945 / 95.26168 = 954.69
total payments = 120 x 954.69 = RM114,562.80
interests paid = RM114,562.80 - RM90,945 = RM23,617.80
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%
Abica Roast Coffee Company produces Columbian coffee in batches of 6,000 pounds. The
standard quantity of materials required in the process is 6,000 pounds, which cost $5.00per pound. Columbian coffee can be sold without further processing for $8.40 per pound.
Columbian coffee can also be processed further to yield Decaf Columbian, which can
be sold for $10.00 per pound. The processing into Decaf Columbian requires additional
processing costs of $9,450 per batch. The additional processing will also cause a 5% loss
of product due to evaporation.
Columbian coffee can be sold without further processing for $8.40 per pound.
Columbian coffee can also be processed further to yield Decaf Columbian, which can
be sold for $10.00 per pound. The processing into Decaf Columbian requires additional
processing costs of $9,450 per batch. The additional processing will also cause a 5% loss
of product due to evaporation.
a. Prepare a differential analysis dated August 28, 2012, on whether to sell regular
Columbian (Alternative 1) or process further into Decaf Columbian (Alternative 2).
b. Should Abica Roast sell Columbian coffee or process further and sell Decaf
Columbian?
c. Determine the price of Decaf Columbian that would cause neither an advantage or
disadvantage for processing further and selling Decaf Columbian.
Answer:
A)
no further further differential
processing processing amount
price per pound $8.40 $10.00 $1.60
materials $5 $5.25 ($0.25)
processing costs $0 = $9,450 / ($1.66)
5,700 = $1.66
operating profit per $3.40 $3.09 ($0.31)
pound
B)
The company should sell coffee without any further processing, just sell it as normal Colombian coffee.
C)
In order to eliminate the financial disadvantage of processing further the decaf coffee, the the price should be $10 + $0.31 = $10.31 per pound.
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.
All About Animals has two product lines: Cat food and Dog food. Contribution margin income statement data for the most recent year follow:
Total Cat Food Dog Food
Sales revenue $435,000 $350,000 $85,000
Variable expenses $61,000 $21,000 $40,000
Contribution margin $374,000 $329,000 $45,000
Fixed expenses $101.000 $49,000 $52,000
Operating income (loss) $273,000 $280,000 $(7,000)
Assuming the Dog food is discontinued, total fixed costs remain unchanged, and the space formerly used to produce the line is rented for $26,000 per year, how will operating income be affected?
A. Increase $254,000
B. Decrease $19,000
C. Increase $527,000
D. Increase $19,000
Answer:
B. Decrease $19,000
Explanation:
The computation of the amount affect the operating income is shown below
But before that first we need to find the new operating income
Total operating income for Cat Food $280,000
Less: Fixed costs for Dog Food ($52000)
Add: rented per year $26000
New net operating income $254000
Now decrease in net operating income is
= operating income - new operating income
= $273,000 - $254,000
= $19,000
The ratio of sales to invested assets, which is also a factor in the DuPont formula for determining the rate of return on investment, is called
Answer:
Investment turnover
Explanation:
Investment turnover is used to compare the revenue earned by a business to the invested assets (equity or debt). It measures how effectively the business is using investment to generate profit.
The number of times investment is converted to revenue is calculated using this method (that is the turnover).
This metric is used in the Dupont formula.
Dupont formula is a financial ratio that evaluates a company's ability to increase return on equity.
Three main components of the Dupont formula are: profit margin, total asset turnover, and financial leverage.
Blossom, Inc., manufactures golf clubs in three models. For the year, the Big Bart line has a net loss of $4,700 from sales $201,000, variable costs $175,000, and fixed costs $30,700. If the Big Bart line is eliminated, $19,800 of fixed costs will remain. Prepare an analysis showing whether the Big Bart line should be eliminated. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) g
Answer:
Analysis of the Big Bart line discontinuity
Opportunity Costs :
Sales ($201,000)
Savings :
Variable Costs $175,000
Fixed Costs ($30,700 - $19,800) $10,900
Financial Advantage / (Disadvantage) ($15,100)
Conclusion :
Do not eliminate / discontinue Big Bart line.
Explanation:
The results show that closing Big Bart line results in a contribution towards fixed cost being lost to the amount of $15,100. Therefore leaving the entire company in a worse off position.
Debra and Merina sell electronic equipment and supplies through their partnership. They wish to expand their computer lines and decide to admit Wayne to the partnership. Debra's capital is $200,000, Merina's capital is $160,000, and they share income in a ratio of 3:2, respectively.Required:Record Wayne's admission for each of the following independent situations:a. Wayne directly purchases half of Merina's investment in the partnership for $97,000.b. Wayne invests the amount needed to give him a one-third interest in the partnership's capital if no goodwill or bonus is recorded.
Answer:
a. Merina's captal is $160,000. Half would be $80,000.
Entry;
DR Merina, Capital ..................................................................$80,000
CR Wayne, Capital ....................................................................................$80,000
(To record purchase of half of Merina Capital)
b.
DR Cash......................................................................$180,000
CR Wayne, Capital.........................................................................$180,000
(To record Wayne investment)
Working
The current Capital amount is;
= 200,000 +160,000
= $360,000
If Wayne joins and adds to this such that he owns 1/3 then;
2/3x = 360,000
x = 360,000/2/3
x = $540,000
Wayne's share would be;
= 1/3 * 540,000
= $180,000
The journal entries that would take place will take effect as A- A debit in Merina's capital amount and Cash account as $17000 and a credit effect in Wayne's capital account. The amount of debit and credit will be $97000.
And for B- There will be Debit in Cash account effecting a credit in The Wayne's capital account. The amount effecting the debit and credit side will be $180,000.
The journal entries are added in the images attached to the answer. The entries would take place in the journal entries on the respective date of their occurrence.( Image attached below).When Wayne is introduced as partner for one third share the calculation of the amount of his capital would be shown as considering the capital as x. The capital by existing partners is $360000. (Image below).,[tex]\dfrac{2}{3}x\ = 360000[/tex]
[tex]x= \dfrac {360000}{\dfrac{2}{3}}[/tex]
Now the value of x will be calculated as
[tex]x= \dfrac{540000}{3}[/tex]
[tex]x=180000[/tex]
Therefore Wayne's capital will be calculated as $180,000, so he will be required to bring in additional $180,000 capital in the firm for getting one third share in the profits and losses of the company.Hence, the correct statements for A will be that Wayne pays $97000 which will be divided in Merina's capital and cash accounts in the proportion of $80000 and $17000 respectively.
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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)
= $370
In a concentrated network configuration:
a. firms perform a supply chain activity in one location and serve foreign locations from it
b. firms allow each site on the network to operate with full autonomy
c. firms tightly link operations and supply chain activities to one another
d. firms perform a supply chain activity in various countries
Answer:
B
Explanation:
Here, in this question, we are to select which of the options is best.
The correct answer to this question is that in a concentrated network configuration, firms allow each site on the network to operate with full autonomy.
What this means is that each site in the network operate independently of the other sites.
A site is thus an autonomous entity but still part of the concentrated network
ROI, Residual Income, and EVA with Different Bases Envision Company has a target return on capital of 12 percent. The following financial information is available for October ($ thousands):
Software Division . Consulting Division Venture Capital Division
(Value Base) (Value Base) (Value Base)
Book Current Book Current Book Current
Sales $100,000 $100,000 $200,000 $200,000 $800,000 $800,000
Income 12,250 11,700 16,400 20,020 56,730 51,920
Assets 70,000 90,000 100,000 110,000 610,000 590,000
Liabilities 10,000 10,000 14,000 14,000 40,000 40,000
Required
a. Compute the return on investment using both book and current values for each division. Round answers to three decimal places.
Book Value Current Value
Software Answer ? Answer ?
Consulting Answer ? Answer ?
Venture Capital Answer ? Answer ?
b. Compute the residual income for both book and current values for each division. Use negative signs with answers, when appropriate.
Book Value Current Value
Software $Answer 3,850 $Answer 900
Consulting Answer 4,400 . Answer 6,820
Venture Capital Answer (16,470) Answer (1,880)
c. Compute the economic value added income for both book and current values for each division if the tax rate is 30 percent and the weighted average cost of capital is 10 percent. Use negative signs with answers, when appropriate. Book Value Current Value
Software $Answer ? $Answer ?
Consulting Answer ? Answer ?
Venture Capital Answer ? Answer ?
Answer:
a. ROI = income / Assets
Book Value Current Value
Software Division 0.175 0.13
Consulting Division 0.164 0.182
Venture Capital Division 0.093 0.088
Workings:
i. Book value
Software Division = 12,250/70,000=0.175
Consulting Division = 16,400/100,000=0.164
Venture Capital Division = 56,730/610,000 =0.093
ii. Current value
Software Division = 11,700/90,000=0.13
Consulting Division = 20,020/110,000=0.182
Venture Capital Division= 51,920/ 590,000=0.088
b. Residual income = Income - {Asset x Return on capital 12% }
Book Value Current Value
Software Division 3850 900
Consulting Division 4400 6820
Venture Capital Division -16470 -18880
Workings:
i. Book value
Software Division = 12,250-(70,000*12%)=3850
Consulting Division = 16,400-(100,000*12%)=4400
Venture Capital Division = 56,730-(610,000*12%) =-16470
ii. Current value
Software Division = 11,700-(90,000*12%)=900
Consulting Division = 20,020-(110,000*12%)=6820
Venture Capital Division= 51,920-(590,000*12%)=-18880
c. Economic Value Added ( EVA ) = Net Income After Tax - ( Amount of Capital x Weighted Average Cost of Capital [WACC] )
C. Software Division
(Value Base)
Book Current
Sales 100,000 100,000
Income 12,250 11,700
Assets 70,000 90,000
Liabilities 10,000 10,000
Capital invested 60,000 80,000
(Asset - Liabilities)
Tax on Income(30%) 3675 3510
Income after Tax 8,575 8,190
(Income - Tax on
income) (A)
Capital invested 6,000 8,000
* WACC - 10% ) (B)
EVA (C)=(A)-(B) 2,575 190
Consulting Division
(Value Base)
Book Current
Sales 200,000 200,000
Income 16,400 20,020
Assets 100,000 110,000
Liabilities 14,000 14,000
Capital invested 86,000 96,000
(Asset - Liabilities)
Tax on Income(30%) 4920 6006
Income after Tax 11,480 14,014
(Income - Tax on
income) (A)
Capital invested 8,600 9,600
* WACC - 10% ) (B)
EVA (C)=(A)-(B) 2,880 4,414
Venture Capital Division
(Value Base)
Book Current
Sales 800,000 800,000
Income 56,730 51,920
Assets 610,000 590,000
Liabilities 40,000 40,000
Capital invested 570,000 550,000
(Asset - Liabilities)
Tax on Income(30%) 17019 15576
Income after Tax 39,711 36,344
(Income - Tax on
income) (A)
Capital invested 57,000 55,000
* WACC - 10% ) (B)
EVA (C)=(A)-(B) -17,289 -18,656
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
Find the operating cash flow for the year for Harper Brothers, Inc. if it had sales revenue of , cost of goods sold of , sales and administrative costs of , depreciation expense of , and a tax rate of .
Answer:
$101,960,000
Explanation:
For the computation of operating cash flow first we need to follow some steps which are shown below:-
Step 1
EBIT = Sales - Cost of goods sold - Sales and administrative costs - Depreciation
= $302,100,000 - $135,900,000 - $39,600,000 - $65,000,000
= $61,600,000
Step 2
Net income = EBIT - Tax
= $61,600,000 - ($61,600,000 × 40%)
= $61,600,000 - $24,640,000
= $36,960,000
and finally
Operating cash flow = EBIT - Taxes + Depreciation
= $61,600,000 - $24,640,000 + $65,000,000
= $101,960,000
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.
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.
Refer to the following scenario to answer the following questions.
Five fishermen live in a village and have no other employment or income-earning possibilities besides fishing. They each own a boat that is suitable for fishing but does not have any resale value. Fish are worth $5 per pound, and the marginal cost of operating the boat is $500 per month. They all fish a river next to the village. According to the following schedule, they have determined that when there are more of them out on the river fishing, they each catch fewer fish per month.
Boats Fish Caught per
Boat (pounds)
1 200
2 190
3 175
4 155
5 130
How many fishermen will choose to operate their boats?
Answer:
5 fishermen will choose to operate their boats as each of them will earn a profit of $150
Explanation:
Per boat operating cost = $500 per month.
Price of fish = $5 per pound.
There are 5 fishermen and each fishermen has 1 boat.
For 1 boat
Total revenue = Price * quantity = $5 * 200 = $1,000
Cost = $500
Profit = Total revenue - Cost = 1000 - 500
Profit = $500.
For 2 boats
Total Revenue of each boat = $5 * 190 = $950
Cost of each boat = $500
Profit of each boat = Total revenue - Cost = 950 - 500
Profit of each boat = $450.
For 3 boats
Total Revenue of each boat = 5 * 175 = $875
Cost of each boat = $500
Profit of each boat = TR - Cost = 875 - 500
Profit of each boat = $375
For 4 boats
Total Revenue of each boat = 5 * 155 = $775
Cost of each boat = $500
Profit of each boat = TR - Cost = 775 - 500
Profit of each boat = $275
For 5 boats
Total Revenue of each boat = 5 * 130 = $650
Cost of each boat = $500
Profit of each boat = TR - Cost = 650 - 500
Profit of each boat = $150.
Conclusion: As there are 5 fishermen and if all of them out on the river at the same time then each fisherman earns profit of $150. As all fishermen earns profit hence all of them will choose to operate their boats. Therefore, 5 fishermen will be ready to operate their boats.
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.
Which of the following methods is appropriate for a business whose inventory consists of a relatively small number of unique, high-cost items?
a. FIFO
b. average
c. LIFO
d. specific identification
Answer: Specific identification
Hope it is correct
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.
