Answer:
first we must determine taxable income = due income taxes / tax rate = $297,000 / 0.4 = $742,500
interest received on municipal bonds $9,300
unearned rent revenue = $42,800
deferred tax asset = $42,800 x 0.4 = $17,120
total pretax financial income = $742,500 + $9,300 + $124,000 - $42,800 = $833,000
deferred tax liability = $124,000 x .4 = $49,600
Income tax expense section
For the year ended December 31, 2020
Total pretax financial income $833,000
Income tax expense:
Income taxes $297,000Deferred tax liability $49,600Deferred tax asset -$17,120 -$329,480Net income $503,520
2. Using semiannual compounding, what is the value to you of a 9% coupon bond with a par value of $10,000 that matures in 10 years if you require a 7% return
Answer:
The Value of the Bond, PV is $10.962.65
Explanation:
The Value of the Bond (PV) can be determined as follows :
PMT = ($10,000 × 9%) ÷ 2 = $450
P/YR = 2
N = 10
Required Return (YTM) = 7 %
FV = $10,000
PV = ?
Using a Financial Calculator, the Value of the Bond, PV is $10.962.65
"A broker-dealer who acted as financial advisor to a municipality in structuring a new issue now wishes to act as underwriter in a negotiated offering. Which statement is TRUE?"
Answer:
B. The financial advisor is prohibited from acting as the underwriter
Explanation:
As per the rule of the Municipal Securities Rulemaking Board, the financial advisor cannot be the underwriter.
The financial advisor for a municipality is paying the advisory fee for assisting the structure of the municipality in order to the issuance of the new bond so that the less interest cost to be paid.
But in the case of the underwriter, it contains high rate of interest as it is very easiest way for selling
So through this, the conflict arises between these two parties
Therefore option B is correct
The Securities and Exchange Commission requires companies listing on the New York Stock Exchange and the Nasdaq Stock Market to have codes of ethics. A code of ethics is
Answer:
A Code of Ethics are a set of guidelines that helps the member in distinguishing right and wrong and always following the guidelines that protects the interest of profession and stakeholders.
Explanation:
Basically these Ethical codes are set of guidelines that helps the entities and professionals to acknowledge what is expected from them and what are their responsibilities. Usually every reputable profession and organizations adopt code of ethics to encourage and enforce ethical practices in decision making process.
Answer:
Answer:
A Code of Ethics are a set of guidelines that helps the member in distinguishing right and wrong and always following the guidelines that protects the interest of profession and stakeholders.
Explanation:
Basically these Ethical codes are set of guidelines that helps the entities and professionals to acknowledge what is expected from them and what are their responsibilities. Usually every reputable profession and organizations adopt code of ethics to encourage and enforce ethical practices in decision making process.
Explanation:
Choose the best scenario for refinancing.
a. You have a current mortgage at 5% and have been approved for a new mortgage at 3.75%. You’ll break even on the closing costs in two years, and you don’t plan to move for at least five.
b. You intend to move in about nine months, but you have been approved for a mortgage with an interest rate two whole points lower than your current rate.
Answer:
Correct Answer: The best scenario for refinancing is:
a. You have a current mortgage at 5% and have been approved for a new mortgage at 3.75%. You’ll break even on the closing costs in two years, and you don’t plan to move for at least five.
Explanation:
This is because, being aware that you will break even on the closing cost in 2 years which is quite better when compared to no of years to stay (atleast five years) gives the person a competitive advantage.
The following information pertains to J Company's outstanding stock for 2021:
Common stock, $1 par
Shares outstanding, 1/1/2021 10,000
2 for 1 stock split, 4/1/2021 10,000
Shares issued, 7/1/2021 5,000
Preferred stock, $100 par, 7% cumulative
Shares outstanding, 1/1/2021 4,000
What is the number of shares J should use to calculate 2018 basic earnings per share?
a. 20,000.
b. 22,500.
c. 25,000 .
d. 27,000.
Answer: b. 22,500
Explanation:
J should use the total number of outstanding common stock at end of year to calculate 2018 basic earnings.
As a result of the Stock-split, the shares are split into 2 for 1.
There were 10,000 shares split so;
= 10,000 * 2
= 20,000
On the 1st of July, 5,000 shares were issued. This means that up till December 2021, the stock was outstanding for 6 months.
This will reflected by;
= 5,000 * 6/12
= 2,500 shares
Total shares = 20,000 + 2,500
= 22,500 shares
Product V72 sells for $20 per unit as is, but if enhanced it can be sold for $25 per unit. The enhancement process will cost $52,000 for 12,000 units. If the 12,000 units of Product V72 are sold as is without further processing, the company:
Answer:
It will incur an Opportunity cost of $8,000.
Explanation:
It will incur the opportunity cost of $8000 because the additional unit produces by the company then the additional revenue that is generated will be equal to the amount (25 - 20) x 12,000 = 60,000. Since the additional cost, that incurs for the production of 12000 units is 52000. Therefore the profit earned is $8000.
So if the company does not produce it then it will lose the profit of $8000.
You purchased a stock at a price of $46.55. The stock paid a dividend of $1.79 per share and the stock price at the end of the year is $52.45. What was the dividend yield
Answer:
3.84%
Explanation:
Calculation for dividend yield
Using this formula
Dividend Yield(%) = D / P0
Where,
D=$1.79
P0=$46.55
Let plug in the formula
Dividend Yield(%) =$1.79/$46.55
Dividend Yield(%) =0.0384*100
Dividend Yield(%) =3.84%
Therefore the dividend yield will be 3.84%
A Missouri job shop has four departments machining (M), dipping in a chemical bath (D), finishing (F), and plating (P) assigned to four work areas. The operations manager, Mary Marrs, has gathered the following data for the movement of material. The number of workpieces moved yearly between work areas are:
M D F P
M - 800 2,000 200
D - - 400 400
F - - - 2,000
P - - - -
It costs $0.75 to move 1 workpiece 1 foot in the job shop. For the layout design of the job shop,
LAYOUT PLAN A:
Distance between work areas (departments) in feet:
M D F P
M - 21 12 8
D - - 5 10
F - - - 4
P - - - -
The yearly total material handling cost of the current layout presented in PLAN A_____________.
Answer: Find the answer in the attached file
Explanation:
A sole proprietor owned an office building with a cost of $300,000 and accumulated depreciation of $40,000, using modified accelerated cost recovery system (MACRS) straight-line depreciation. In the current year, she sold the building for $320,000. What is the unrecaptured Section 1250 gain from this sale, if any
Answer:
The Correct Answer:
$40,000
Explanation:
IRC Section 1250 requires that excess depreciation (actual depreciation in excess of straight-line depreciation) be recaptured as ordinary income. Since the property has sold for more than the adjusted basis ($300,000 − $40,000 = $260,000 adjusted basis), the initial gains are recaptured based on the original purchase price of $300,000.
This makes the first $40,000 of the profit subject to the unrecaptured Section 1250 gain while the remaining $20,000 is considered regular long-term capital gains.
MicroTech Corporation maintains a capital structure of 40 percent debt and 60 percent common equity. To finance its capital budget for next year, the firm will sell 11% coupon bonds at par value (assume no flotation costs). The firm will finance the rest of its capital expenditures with retained earnings. MicroTech expects next year's dividend to be $1.30 per share. Dividends are expected to grow at 7% per year for the foreseeable future. The current market value of MicroTech's common stock is $30 per share. If the firm has a corporate tax rate of 21%, what is its weighted cost of capital for next year?
Answer:
weighted cost of capital for next year is 10.27 %.
Explanation:
Weighted cost of capital = Ke × (E/V) + Kd × (D/V)
Ke = Cost of Equity
= Dividend Yield + Expected growth rate
= $1.30 / $30.00 + 0.07
= 0.11333 or 11.33 %
Kd = Cost of Debt
= Interest × (1 - tax rate)
= 11% × ( 1 - 0.21)
= 8.69 %
Weighted cost of capital = 11.33 % × 60% + 8.69 % × 40%
= 10.27 %
The management of Mecca Copy, a photocopying center located on University Avenue, has compiled the following data to use in preparing its budgeted balance sheet for next year: Ending Balances Cash ? Accounts receivable $ 8,900 Supplies inventory $ 5,500 Equipment $ 38,000 Accumulated depreciation $ 15,400 Accounts payable $ 2,600 Common stock $ 5,000 Retained earnings ? The beginning balance of retained earnings was $25,000, net income is budgeted to be $21,100, and dividends are budgeted to be $3,500.
Answer:
Mecca Copy
Budgeted Balance Sheet
Assets
Current assets:
Cash 13200
Accounts receivable 8900
Supplies inventory 5500
Total current assets 27600
Plant and equipment:
Equipment 38000
Accumulated depreciation (15400)
Plant and equipment, net 22600
Total assets 50200
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 2600
Stockholders' equity:
Common stock 5000
Retained earnings 42600
Total stockholders' equity 47600
Total liabilities and stockholders' equity 50200
Note: Retained earnings = beginning balance of retained earnings + Net income - Dividend
= 25,000 + 21100 - 3500
= 42,600
Choose the statement that is incorrect.
A. In the long run, a rise in the foreign price level brings dollar appreciation and a rise in the U.S. price level brings dollar depreciation.
B. In the long run, a change in the nominal exchange rate brings an equivalent change in the real exchange rate.
C. In the long run, the nominal exchange rate is a monetary phenomenon.
D. In the long run, the nominal exchange rate is determined by the quantities of money in two countries.
Answer:
B. In the long run, a change in the nominal exchange rate brings an equivalent change in the real exchange rate.
Explanation:
As we know that in the short run there is a decline in the nominal exchange that results in a decrease of real exchange rate due to which there is a reduction of the import and the export is risen.
But in the case of the long run, if there is a change in the nominal exchange rate so the real exchange rate would remain the same
This results that if there is a change in the nominal exchange rate so it would not bring the equal change in the real exchange rate
Hence, option B is incorrect
Tyler Company applies manufacturing overhead to production at the rate of $4.9 per direct labor hour and ended August with $12,900 underapplied overhead. Actual manufacturing overhead incurred for August amounted to $110,410.
How many direct labor hours did Tyler Company incur during August?
Answer: 19,900 hours
Explanation:
Direct Labor hours = Applied Manufacturing Overhead/ Applied Overhead rate per hour
Applied Manufacturing Overhead
When the overhead is said to be under-applied, the Applied overhead is less than the Actual Overhead.
To find the Applied overhead therefore;
= Actual Overhead - Under-applied amount
= 110,410 - 12,900
= $97,510
Direct Labor hours = Applied Manufacturing Overhead/ Applied Overhead rate per hour
= 97,510/4.9
= 19,900 hours
George Bailey purchased equipment from M. Potter for $450,000, paying $35,000 cash as a down payment and financing the remainder. The correct journal entry to record this event is:
Answer:
Equipment $450,000 (debit)
Cash $35,000 (credit)
Suppliers Loan $415,000 (credit)
Explanation:
George Bailey must recognize the Asset of Equipment, de-recognize the Assets of Cash and recognize the Suppliers Loan as above.
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%
Sue Helms Appliances wants to establish an assembly line to manufacture its new product, the Micro Popcorn Popper. The goal is to produce five poppers per hour. The tasks, task times, and immediate predecessors for producing one Micro Popcorn Popper are as follows:
Task Performance time(minutes) Predecessor
A 8 -
B 10 A
C 8 A,B
D 10 B,C
E 8 C
F 4 D,E
a. The theoretical minimum number of workstations is:___________
b. The assignment of tasks to workstations should be:________
Were you able to assign all the activities to workstations equivalent to the theoretical minimum workstation ?
c. The efficiency of the assembly line is:________
Answer:
Please see explanation below.
Explanation:
a. Cycle time = Production time available per hour / Units required per hour
= 60 / 5
= 12minutes
Minimum number of workstations = Sum of the task time / Cycle time
Sum of task time
= 8 + 10 + 8 + 10 + 8 + 4
= 48
The theoretical minimum number of work stations is
= 48 / 12
= 4
b. In order to assign the tasks to the work station, events that precede the task must be considered together with the time taken to complete each task.
°Task A This task is assigned to work station 1 and no task would further be assigned to work station 1, otherwise it will exceed the cycle time.
°Task B. This next task will be assigned to work station 2, no additional task will be assigned to station 2.
Task C is assigned to workstation 3, hence can no longer accept any other assigned task.
°Task D is the next task and will be assigned to work station 4, and we cannot assign any more task to work station 4.
°Task E and F will not be assigned as there are no more available stations.
Task Time Workstation
A. 8 1
B. 10 2
C. 8 3
D. 10 4
E. 8 -
F. 4 -
Please note that due to the theoretical minimum number of work station, which is 4, it will not be possible to assign task to all the workstations hence task E and F remains unassigned.
C. Efficiency of the assembly line
Efficiency ;
= Sum of task times / Actual number of work stations × cycle time
Although the actual number of required workstation is 5 but we cannot assign task E and F due to the theoretical minimum number of workstation. Therefore, additional work station will be required and there are 5 work stations in total.
= 48 ÷ (5 × 12) × 100
= 80%
The theoretical minimum should be = 4
The efficiency of the assembly line should be 80 percent
The production time = 60
The units that are required per hour = 5
[tex]cycle time = \frac{minutes in one hour}{units needed in a day} \\\\cycle time=\frac{60}{5}[/tex]
= 12
The workstation = 8+10+8+10+8+4
= 48
[tex]The minimum number = \frac{48}{12} \\\\= 4[/tex]
The efficiency of the assembly line
[tex]\frac{48}{5*60} \\\\= 0.8\\\\0.8*100 = \\\\80percent[/tex]
Read more on https://brainly.com/question/15558413?referrer=searchResults
According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.8 percent between January and December 2016. Let's see whether these changes are reflected in the income statement of Computer Tycoon Inc. for the year ended December 31, 2016.
2016 2015
Sales Revenue $ 109,000 $ 133,500
Cost of Goods Sold 64,500 75,100
Gross Profit 44,500 58,400
Selling, General, and Administrative Expenses 36,900 38,800
Interest Expense 590 520
Income before Income Tax Expense 7,010 19,080
Income Tax Expense 1,500 5,900
Net Income $ 5,510 $ 13,180
Required:
1. Compute the times interest earned ratios for 2016 and 2015. (Round your answers to 1 decimal place.) Times Interest Earned 2015 2016
2. Does Computer Tycoon generate sufficient net income in both years before taxes and interest) to cover the cost of debt financing?
a. Yes
b. No
Answer:
A.
2015 37.7
2016 12.9
B. Yes
Explanation:
Computation of the times interest earned ratios for 2016 and 2015
First step is to find the EBIT
EBIT: 2016 $ 2015 $
Gross profit 44,500 58,400
Less Selling, General and Administrative expenses (36,900) (38,800)
EBIT 7,600 19,600
Second step is to compute the times interest earned ratios for 2016 and 2015 using this formula
Time interest earned = EBIT / Interest expense
Let plug in the formula
Time interest earned 2016 2015
EBIT $7,600 $19,600
÷Interest expense $590 $520
=Time interest earned 12.9 37.7
Therefore the Time interest earned will be :
2015 37.7
2016 12.9
2. Yes Computer Tycoon generate sufficient net income in both 2015 and 2016 before taxes and interest in order to cover the cost of debt financing.
"ABC corporation is trading in the market for $51. The corporation declares a 25% stock dividend. After the ex date, the holder of 1 ABC Jan 50 Call will have:"
Answer:
1 ABC Jan 50 call
Explanation:
Based on the information given we were told that the Corporation was trading for the amount of $51 with a declare stock dividend of 25 percent, this means that After the ex date which is the day in which the stock will begin to trade without the monetary worth of the following dividend payment , which means that the holder of the 1 ABC Jan 50 call will have still have 1 ABC Jan 50 call.
All-Mart Discount Stores Corporation contracts to buy ten acres from Suburban Enterprises, Inc., as a site for a new store. The contract calls for a "warranty deed." According to a survey that All-Mart commissions, one corner of an adjacent, enclosed parking lot is on part of the property that Suburban is attempting to convey. Can All-Mart avoid the contract? If so, on what basis? If not, why not?
Answer:
All-Mart can avoid the contract since it didn't meet their specification for the siting of their new store which they planned for. The warranty deed which they called for was to ensure that, all land purchased has guarantee that it would not become an issue for them in the future.
Since one part is an enclosed parking lot which is a public property that Suburban is trying to sell to them, the best would be to avoid it.
Explanation:
Child Play Inc. manufactures electronic toys within a relevant range of 20,000 to 150,000 toys per year. Within this range, the following partially completed manufacturing cost schedule has been prepared: Complete the cost schedule. When computing the cost per unit, round to two decimal places.
Toys produced 40,000 80,000 120,000
Total costs:
Total variable costs $720,000 d. $ j. $
Total fixed costs 600,000 e. k.
Total costs $1,320,000 f. $ l. $
Cost per Unit
Variable cost per unit a. $ g. $ m. $
Fixed cost per unit b. h. n.
Total cost per unit c. $ i. $ o. $
Answer:
Toys produced 40,000 80,000 120,000
Total costs:
Total variable costs $720,000 $1,440,000 $2,160,000
Total fixed costs $600,000 $600,000 $600,000
Total costs $1,320,000 $2,040,000 $2,760,000
Cost per Unit
Variable cost $18 $18 $18
Fixed cost $15 $7.50 $5
Total cost $33 $25.50 $23
Fixed costs do not change with total output, they are the same regardless so the number of units produced. Variable costs change proportionally to any change in total output. If total output increases, variable costs will increase.
On January 1, Parson Freight Company issues 9.0%, 10-year bonds with a par value of $3,400,000. The bonds pay interest semiannually. The market rate of interest is 10.0% and the bond selling price was $3,168,967. The bond issuance should be recorded as:
Answer:
January 1
Cash $3168967 Dr
Discount on Bonds Payable $231033
Bonds Payable $3400000 Cr
Explanation:
The issuance of bond on January 1 is at a discount as the coupon rate paid by the bond is less than the market interest rate. In such case the bond is issued at a lower value than its par/face value. The discount on bonds payable is the difference between the face value and the cash received on issuance.
The entry to record the issues include a debit to cash account as cash is received, a debit to the discount on bonds payable account for the amount of discount and a credit to bonds payable account as liability is created as a result of the issuance of the bonds.
Discount = 3400000 - 3168967 = 231033
Cost recovery. Richardses' Tree Farm, Inc. purchased a new aerial tree trimmer for $. It is classified in the property class category of a single-purpose agricultural and horticultural structure. Then the company sold the tree trimmer after four years of service. If a seven-year life and MACRS, LOADING..., was used for the depreciation schedule, what is the after-tax cash flow from the sale of the trimmer (use a % tax rate) if a. the sales price was $? b. the sales price was $? c. the sales price was $? a. If the sales price is $, what is the after-tax cash flow?
Answer:
after tax cash flow = $29,512.32
Explanation:
the numbers are missing in this question:
purchase cost = $82,000
tax rate = 40%
selling price at end of year 4 = $32,000
MACRS 7 year depreciation schedule:
year % depreciation expense carrying value
1 14.29% $11,717.80 $70,282.20
2 24.29% $19,917.80 $50,364.40
3 17.49% $14,341.80 $36,022.60
4 12.49% $10,241.80 $25,780.80
after tax cash flow = $32,000 - [($32,000 - $25,780.80) x 40%] = $32,000 - $2,487.68 = $29,512.32
g An increase in taxes when the economy is above full employment ______ aggregate demand and real GDP, and the price level ______.
Answer:
C. decreases; falls
Explanation:
As we know that
The rise in taxes results in low disposable income for individuals that lowered the spending of the consumer also the consumer spending is an element of the aggregate demand so ultimately it declines that result the curve to shift leftward or downward
Due to this, the real GDP also falls, and the price level too
Hence, the correct option is c.
When recording journal entries for production costs using a standard cost accounting system, the debit to Work in Process Inventory account is for the ______ amount.
Answer: Actual amount
Explanation:
Standard Costing deviates from traditional accounting in that it is not based on historical costs of a good. In standard cost accounting, the actual costs are put in place of standard costs and then the variance between the two will be recorded and used for analysis.
The debit to the Work in Process Inventory account under a standard cost accounting system will be the actual amount.
Write a detailed note on Manufacturing Process types and Service process types in process design?
Answer:
Each of the process are used to the crosses organizational borders.
Explanation:
Process structure of manufacturing:
Job process: It is highly adaptable, scaled operation and structured around particular events. Batch process: It most common used in industries. It is small to large batches. Line process: It is the repetitive process and have modular production with large quantity. Continuous flow chart: It is product focused process. It processed only one item at a time.Process design: There are three major process of design
Professional service designMass service designService shop designAn investment adviser places large block trades for securities positions that are being purchased for its customers' accounts in order to lower its commission costs. The trades are often executed piecemeal, at different prices. The adviser, after being confirmed that the entire block has been filled, allocates the shares to its accounts. As a favor to its most valuable employees, the adviser allocates the shares purchased at the lowest prices to its employees' accounts; and then allocates the remaining shares to its customer accounts pro-rata. The adviser has disclosed its allocation method only to its employees. Which statement is TRUE
Answer: The investment adviser has breached its fiduciary duty because it has not disclosed its method of allocating shares to its customers
Explanation:
The options to the question are:
a. The investment adviser has breached its fiduciary duty to its customers because the block order must be executed at one price, not in pieces at differing prices
b. The investment adviser has breached its fiduciary duty because it has not disclosed its method of allocating shares to its customers
c. The investment adviser has not breached its fiduciary duty because it has disclosed its method of allocating shares to its employees
d. The investment adviser has not breached its fiduciary duty to customers because it has obtained trade executions for customers at lower commission costs.
Based on the scenario in the question, it should be noted that the investment adviser has breached its fiduciary duty because it has not disclosed its method of allocating shares to its customers.
Fiduciary duty is a legal obligation whereby a party has to work in the best interest of the other party and should also be trustworthy but in this situation, this isn't thw case.
Masterson, Inc., has 3.6 million shares of common stock outstanding. The current share price is $85.50, and the book value per share is $9.25. The company also has two bond issues outstanding. The first bond issue has a face value of $73 million, a coupon rate of 5.3 percent, and sells for 95.7 percent of par. The second issue has a face value of $45 million, a coupon rate of 5.9 percent, and sells for 104.9 percent of par. The first issue matures in 23 years, the second in 11 years. The most recent dividend was $4.04 and the dividend growth rate is 4.3 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 23 percent.
1. What is the company's cost of equity?
2. What is the company's aftertax cost of debt?
3. What is the company's weight of equity?
4. What is the company's weight of debt?
5. What is the company's WACC?
Answer:
1. 9.03 %
2. 7.56 %
3. 72.45 %
4. 27.55 %
5. 8.63 %
Explanation:
Cost of equity is the return that is required by holders of Common Stocks
Cost of equity = Recent year`s dividend / Current Market Price + Expected Growth Rate
= $4.04 / $85.50 + 0.043
= 0.0903 or 9.03 %
1st bond issue
PV = $69,861,000
Pmt = ($73,000,000 × 5.30%) ÷ 2 = - $1,934,500
p/y = 2
n = 23 × 2 = 46
Fv = 0
i = ?
Cost of the 1st Bond Issue, i is : 2.1571 %
After tax cost = 2.1571 % × 77 %
= 1.66%
2nd Bond Issue
PV = $47,205,000
Pmt = ($45,000,000 × 5.90%) ÷ 2 = - $1,327,500
p/y = 2
n = 11 × 2 = 22
Fv = 0
i = ?
Cost of the 2nd Bond Issue, i is : 7,6681 %
After tax cost = 7,6681 % × 77 %
= 5.90%
Total Cost of Debt = 1.66% + 5.90%
= 7.56 %
Market Values :
Market Value of Equity = 3,600,000 shares × $85.50
= $307,800,000
Market Value of Bonds
1st Issues = $69,861,000
2nd Issue = $47,205,000
Total = $117,066,000
Weight of equity = Market Value of Equity ÷ Total Market Value
= $307,800,000 ÷ ($307,800,000 + $117,066,000)
= 72.45 %
Weight of debt = Market Value of Bonds ÷ Total Market Value
= $117,066,000 ÷ ($307,800,000 + $117,066,000)
= 27.55 %
WACC = Weighted Cost of Debt + Weighted Cost of Equity
= 27.55 % × 7.56 % + 72.45 % × 9.03 %
= 8.63 %
Union Local School District has bonds outstanding with a coupon rate of 4.5 percent paid semiannually and 20 years to maturity. The yield to maturity on these bonds is 3.8 percent and the bonds have a par value of $10,000. What is the dollar price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
$10,974.45
Explanation:
coupon rate 4.5%, semiannual = 2.25%
20 years until maturity = 40 periods
market rate 3.8%, semiannual = 1.9%
par value $10,000
market price of the bonds = PV of par value + PV of coupon payments
PV of par value = $10,000 / (1 + 1.9%)⁴⁰ = $4,710.13
PV of coupon payments = $225 x 27.84144 (PV annuity factor, 1.9%, 40 periods) = $6,264.32
market value = $4,710.13 + $6,264.32 = $10,974.45
Answer:
The dollar price of the bond is $10,974.45.
Explanation:
The dollar price of the bond, PV, can be determined as follows :
N = 20 × 2 = 40
PMT = ($10,000 × 4.5%) ÷ 2 = $225
P/YR = 2
YTM = 3.80 %
FV = $10,000
PV = ?
Using a Financial Calculator, the dollar price of the bond, PV is $10,974.45.
Webb, Inc. uses a flexible budget for manufacturing overhead based on machine hours. Variable manufacturing overhead costs per machine hour are as follows: Indirect labor $5.00 Indirect materials 2.50 Maintenance .50 Utilities .30 Fixed overhead costs per month are: Supervision $1,200 Insurance 400 Property taxes 600 Depreciation 1,800 The company believes it will normally operate in a range of 4,000 to 8,000 machine hours per month. During the month of August, 2019, the company incurs the following manufacturing overhead costs: Indirect labor $28,000 Indirect materials 16,200 Maintenance 2,800 Utilities 1,900 Supervision 1,440 Insurance 400 Property taxes 600 Depreciation 1,860 Prepare a flexible budget report, assuming that the company used 6,000 machine hours during August.
Answer:
Variable overhead costs per machine hour:
Indirect labor $5.00 Indirect materials $2.50 Maintenance $0.50 Utilities $0.30Total $8.30Fixed overhead costs:
Supervision $1,200 Insurance $400 Property taxes $600 Depreciation $1,800 Total $4,000Flexible Actual Spending
budget expenses variances
Variable costs:
Indirect labor $30,000 $28,000 $2,000 FIndirect materials $15,000 $16,200 $1,200 UMaintenance $3,000 $2,800 $200 FUtilities $1,800 $1,900 $100 UTotal $49,800 $48,900 $900 FFixed costs:
Supervision $1,200 $1,440 $240 UInsurance $400 $400 $0Property taxes $600 $600 $0Depreciation $1,800 $1,860 $60 UTotal $4,000 $4,300 $300 UTotal costs $53,800 $52,300 $600 F
Your estimate of the market risk premium is %. The risk-free rate of return is %, and General Motors has a beta of . According to the Capital Asset Pricing Model (CAPM), what is its expected return?
Answer:
The correct option is option A) 16.4%.
Explanation:
Note: This question is not complete as all the important data are omitted from it. The complete question is therefore provided before answering the question as follows:
Your estimate of the market risk premium is 9%. The risk-free rate of return is 3.8% and General Motors has a beta of 1.4. According to the Capital Asset Pricing Model (CAPM), what is its expected return?
Options:
A) 16.4%
B) 17.2%
C) 14.8%
D) 15.6%
The question is now answered as followed:
Capital asset pricing model (CAPM) can be described as a model that is employed to compute a theoretical required rate of an asset in order decide whether or not to add assets a portfolio of investment that is well-diversified.
According to the Capital Asset Pricing Model (CAPM), the expected return can be calculated using the following formula:
Expected return = Risk-free rate + (Beta * Market ris premium) .......... (1)
Where;
Risk-free rate of return = 3.8%
Market risk premium = 9%
Beta = 1.4
Substitute the values into equation (1), we have:
Expected return = 3.8% + (1.4 * 9%) = 16.40%
Therefore, the correct option is option A) 16.4%.
