The Murdock Corporation reported the following balance sheet data for 2016 and 2015:
2016 2015
Cash $ 96,245 $ 33,155
Available-for-sale securities (not cash equivalents) 24,000 102,000
Accounts receivable 97,000 83,550
Inventory 182,000 160,300
Prepaid insurance 3,030 3,700
Land, buildings, and equipment 1,284,000 1,142,000
Accumulated depreciation (627,000) (589,000)
Total assets $ 1,059,275 $ 935,705
Accounts payable $ 91,640 $ 165,670
Salaries payable 26,800 33,000
Notes payable (current) 40,300 92,000
Bonds payable 217,000 0
Common stock 300,000 300,000
Retained earnings 383,535 345,035
Total liabilities and shareholders' equity $ 1,059,275 $ 935,705
Additional information for 2016:
Sold available-for-sale securities costing $78,000 for $84,200.
Equipment costing $20,000 with a book value of $6,700 was sold for $8,550.
Issued 6% bonds payable at face value, $217,000.
Purchased new equipment for $162,000 cash.
Paid cash dividends of $28,500.
Net income was $67,000.
Required:
Prepare a statement of cash flows for 2016 in good form using the indirect method for cash flows from operating activities. (Amounts to be deducted should be indicated with a minus sign.)

Answers

Answer 1

Answer:

The Murdock Corporation

Statement of Cash Flows for the year ended December 31, 2016, using the indirect method:

Operating Activities:

Net Income                          $67,000

Add depreciation                   38,000

Accounts receivable           -$13,450

Inventory                             -$21,700

Accounts payable              -$74,030

Salaries payable                  -$6,200

Notes payable (current)     -$51,700

Net cash from operations                  -$62,080

Investing Activities:

Sale of securities             $84,200

Sale of Equipment             $8,550

New Equipment            -$162,000

Net cash from investing activities     -$69,250

Financing Activities:

Issue of bonds               $217,000

Dividends                       -$28,500

Net cash from financing activities     $188,500

Net cash flows                                      $57,170

Explanation:

a) Data and Calculations:

Balance Sheet for 2016 and 2015:

                                                          2016                  2015

Cash                                               $ 96,245          $ 33,155

Available-for-sale securities

 (not cash equivalents)                   24,000           102,000

Accounts receivable                        97,000            83,550

Inventory                                         182,000          160,300

Prepaid insurance                              3,030              3,700

Land, buildings, and equipment 1,284,000       1,142,000

Accumulated depreciation          (627,000)       (589,000)

Total assets                             $ 1,059,275       $ 935,705

Accounts payable                        $ 91,640        $ 165,670

Salaries payable                            26,800             33,000

Notes payable (current)                40,300             92,000

Bonds payable                             217,000               0

Common stock                           300,000          300,000

Retained earnings                      383,535           345,035

Total liabilities and shareholders'

 equity                                  $ 1,059,275        $ 935,705

Additional information for 2016:

Proceeds from sale of securities = $84,200

Proceeds from sale of Equipment = $8,550

Proceeds from issue of bonds = $217,000

Cash Payments:

New Equipment = $162,000

Dividends = $28,500

Net Income for the year = $67,000

Depreciation:

2016 accumulated depreciation = $627,000

2015 accumulated depreciation =   589,000

Depreciation charge for 2016 =      $38,000

Net Increases/decreases in working capital:

                                               2016             2015       Cash Effect

Accounts receivable             97,000          83,550     ($13,450)

Inventory                             182,000         160,300     ($21,700)

Accounts payable                 91,640         165,670     ($74,030)

Salaries payable                  26,800           33,000      ($6,200)

Notes payable (current)      40,300           92,000     ($51,700)

The Murdock Corporation's Statement of Cash Flows is one of the financial statements that are prepared at the end of the accounting period to show the inflow and outflow of cash during the period.  It shows the cash flows from operating, investing, and financing activities of the corporation.  There are two methods for preparing this statement: the direct method and the indirect method.  The direct method shows the actual inflows and outflows for operating activities while the indirect method starts with the net income to reconcile the accrual basis of accounting to the cash basis.


Related Questions

Harry Company sells 20,000 units at $42 per unit. Variable costs are $26.88 per unit, and fixed costs are $105,800. Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) income from operations.

Answers

Answer:

Instructions are below.

Explanation:

Giving the following information:

Harry Company sells 20,000 units at $42 per unit. Variable costs are $26.88 per unit, and fixed costs are $105,800.

To calculate the contribution margin ratio, we need to use the following formula:

contribution margin ratio= contribution margin / selling price

contribution margin ratio= (42 - 26.88) / 42

contribution margin ratio= 0.36

Now, the contribution margin:

Contribution margin= 42 - 26.88= $15.12

Finally, income from operations:

Contribution margin= 20,000*15.12= 302,400

Fixed costs= (105,800)

Net operating income= 196,600

Bond X is a premium bond making semiannual payments. The bond pays a coupon rate of 9 percent, has a YTM of 7 percent, and has 15 years to maturity. Bond Y is a discount bond making semiannual payments. This bond pays a coupon rate of 7 percent, has a YTM of 9 percent, and also has 15 years to maturity. The bonds have a $1,000 par value. What is the price of each bond today

Answers

Answer:

Bond Price today

Bond X = $1183.920454 rounded off to $1183.92

Bond Y = $837.1111146 rounded off to $837.11

Explanation:

To calculate the price of the bond, we need to first calculate the coupon payment per period. We assume that the interest rate provided is stated in annual terms. As the bond is a semi annual bond, the coupon payment, number of periods and semi annual YTM will be,

For Bond X

Coupon Payment (C) = 0.09 * 1/2 * 1000 = $45

Total periods (n)= 15 * 2 = 30

r or YTM = 7% * 1/2 = 3.5% or 0.035

The formula to calculate the price of the bonds today is attached.

Bond Price = 45 * [( 1 - (1+0.035)^-30) / 0.035]  +  1000 / (1+0.035)^30

Bond Price = $1183.920454 rounded off to $1183.92

For Bond Y

Coupon Payment (C) = 0.07 * 1/2 * 1000 = $35

Total periods (n)= 15 * 2 = 30

r or YTM = 9% * 1/2 = 4.5% or 0.045

Bond Price = 35 * [( 1 - (1+0.045)^-30) / 0.045]  +  1000 / (1+0.045)^30

Bond Price = $837.1111146 rounded off to $837.11

Assume that the following are independent situations recently reported in the Wall Street Journal.

a. General Electric (GE) 7% bonds, maturing January 28, 2018, were issued at 110.30.
b. Boeing 7% bonds, maturing September 24, 2032, were issued at 98.15.

Required:
a. Were GE and Boeing bonds issued at a premium or a discount?
b. The General Electric bonds were issued at a___________ and the Boeing bonds were issued at a__________

Answers

Answer:

a. Were GE and Boeing bonds issued at a premium or a discount?

GE bonds were issued at a premium, at 110.3%, while Boeing bonds were issued at a discount, at 98.15%

b. The General Electric bonds were issued at a premium (at $1,103) and the Boeing bonds were issued at a discount (at $981.50).

When bonds are issued at a value higher than face value, they are issued at a premium. When bonds are issued at a value lower than face value, they are issued at a discount.

On January 1, Year 1, St. Clair Corporation issues 7%, 11-year bonds with a face amount of $90,000 for $83,497. The market interest rate is 8%. Interest is paid semiannually on June 30 and December 31. Complete the necessary journal entry for the issuance of the bonds by selecting the account names from the drop-down menus and entering the associated dollar amounts.

Answers

Answer:

Cash $83,497 (debit)

Investment in Bonds $83,497 (credit)

Explanation:

On Issuance of Bond, the Bond Issuer must recognize the Assets of Cash at the amount of consideration paid by the Bond Holder (Investor).

Also, the Financial Liability : Investment in Bonds must also be recognized by the Issuer at the same amount that the cash has been recognized at.

A developer is proposing to build and operate an 8 store strip mall. Each unit would rent for $3,500 per month. It is expected that vacancy would run at 15% and that the expenses would be 17.5%. The loan is to be 75% of the capitalized value. The developer has an MARR of 12.5%, the bank is charging 8.5% interest, and the Long Term Debt Service is a constant 9%. To assess the financial worth of this endeavor, determine the following:

a. CAP Rate
b. Capitalized value
c. Loan amount
d. Debt Service Coverage Ratio
e. Loan per unit

Answers

Answer:

Requirement A: CAP Rate is 12.5%

Requirement B: Capitalized Value of the Property is $1,884,960

Requirement C: Loan Amount is $1,413,720

Requirement D: Debt Service Coverage Ratio is 1.85

Requirement E: Loan per unit is $176,715 Per Unit

Explanation:

Requirement A: Find the CAP Rate

The CAP Rate will be calculated using the following formula:

CAP Rate = Annual Net Operating Income (NOI) (Step1) / Property Capitalized Value (Step2)

Here

Operating Income is $235,620 (Step1)

Property Capitalized Value (Step2)

Now, by putting values we have:

CAP Rate = $235,620 / $1,884,960 = 12.5%

Step1: Find Annual Net Operating Income (NOI)

As we know that:

Operating Income = Expected Revenue - Operating Expense

Here

Expected Revenue from 8 Strip Malls = Rent / Month * 12 Months * (1 - Vacancy Ratio) * 8 Strips Malls

= $3,500 * 12 * (1 - 15%) * 8

= $285,600

Operating Expenses = Expected Revenue * 17.5%

= $285,600 * 17.5% = $49,980

Now by putting value in the above Operating Income equation, we have:

Annual Operating Income = $285,600 - $49,980 = $235,620

Step2: Find Property Capitalized Value (It is also Requirement B)

Property Capitalized Value = Annual Operating Income / Minimum Accepted Rate of Return (MARR)

Here

Annual Operating Income is $235,620 from Step1

MARR is 12.5%

By putting values, we have:

Capitalized Value of the Property = $235,620 / 12.5% = $1,884,960

Requirement C. Find Loan Amount

It is given in the question that the Loan Amount is 75% of Property Capitalized Cost. This implies:

Loan Amount = $1,884,960 * 75% = $1,413,720

Requirement D. Debt Service Coverage Ratio

Debt Service Coverage Ratio (DSCR) = Annual Net Operating Income / Total Debt Service for the Year

Here

Annual Net Operating Income is $235,620 from Step1

Total Debt Service for the Year $127,235 (See Step3 below)

By putting values, we have:

Debt Service Coverage Ratio = $235,620 / $127,235 = 1.85

Step3: Total Debt Service for the year

Total Debt Service for the year = Loan Amount * Debt Service Rate

Here

Loan Amount is $1,413,720

Debt Service Rate is 9%

By putting values, we have:

Total Debt Service for the year = $1,413,720 * 9% = $127,235

Requirement E. Find Loan Amount

We can find loan per unit by simply dividing the loan amount by number of strip mall. Here total number of strip mall are 8. This implies that:

Loan Per Unit = $1,413,720 / 8 Units = $176,715 Per Unit

Capitalism is an economic system in which private property, markets, and firms play an important role. Based on this definition, which of the following statements is correct?
A. An economic system is a way of organising the production and distribution of goods and services in an entire economy.
B. The knowledge you attain from the CORE program is a private property.
C. Forced labor where the workers receive some daily allowance is a market.
D. Employee owned cooperatives are not firms.

Answers

Answer:

Correct Answer:

A. An economic system is a way of organizing the production and distribution of goods and services in an entire economy.

Explanation:

Capitalism, which is an economic system  in which a country's trade and industry are controlled by private owners for profit, rather than by the state helps in ensuring the adequate running of the country. It is a method whereby goods and services are organized in an entire economy through private investments and firms.

In the Vaughn Manufacturing, indirect labor is budgeted for $108000 and factory supervision is budgeted for $36000 at normal capacity of 160000 direct labor hours. If 170000 direct labor hours are worked, flexible budget total for these costs is:

Answers

Answer:Flexible budget =$ 150,750

Explanation:

Variable overhead rate = $108,000 / 160000 = $ 0.675 per hour

(budgeted supervision cost) Fixed overhead = $ 36,000

Flexible budget =  Variable over head rate x  direct labour  + budgeted supervision cost (fixed overhead)

                        0.675 x 170,000+ 36,000

                      = 114,750+36,000

                         =$ 150,750

Which one of the following conditions is not a requirement for an item to be recorded as a liability on a company's balance sheet?
a) It involves a probable future sacrifice of economic resources by the company.
b) It reduces the market value of the company.
c) It involves a probable future sacrifice to another entity.
d) It a present obligation, arising from a past transaction or event.

Answers

Answer:

c) It involves a probable future sacrifice to another entity.

Explanation:

A Liability is defined by the Conceptual Framework as Present Obligation of the entity as a result of past event, the settlement of which will result in the outflow of future economic benefits from the entity.

Additionally liabilities are meant to reduce the market value of the company.

Given the following information, determine the beta coefficient for Stock G that is consistent with equilibrium: expected return for Stock G = 9.5%; risk-free rate of return = 3.5%; required return for the market = 9%.

Answers

Answer: 1.09

Explanation:

The variables given are consistent with the use of the Capital Asset Pricing Model to find out the value of the expected return for the stock. The formula is;

Expected Return = Risk free rate + beta ( Market return - risk-free rate)

9.5% = 3.5% + beta ( 9% - 3.5%)

6% = beta * 5.5%

beta = 6%/5.5%

beta = 1.09

Ornaments, Inc., is an all-equity firm with a total market value of $597,000 and 26,200 shares of stock outstanding. Management believes the earnings before interest and taxes (EBIT) will be $84,900 if the economy is normal. If there is a recession, EBIT will be 20 percent lower, and if there is a boom, EBIT will be 30 percent higher. The tax rate is 34 percent. What is the EPS in a recession

Answers

Answer:

The EPS in a recession is $1.71.

Explanation:

Earnings per share (EPS) = Earnings Attributable to holders of Common Stocks ÷ Weighted Average Number of Common Stocks

Earnings Attributable to holders of Common Stocks = ($84,900 - ($84,900 × 0.34)) × 80 %

                                                                                       = $44,827.20

Weighted Average Number of Common Stocks = 26,200 shares

Earnings per share (EPS) =  $44,827.20 ÷ 26,200 shares

                                         =   $1.71

The Project Evaluation and Review Technique (PERT) was developed as a means of scheduling and controlling projects with constant activity times. Group of answer choices False True

Answers

Answer: False

Explanation:

The Program Evaluation and Review Technique (PERT) is used to know the schedule tasks and also know the critical path variation. It is useful to know the length of time that'll be needed for the completion of every task and how it relates to others in order to know the entire time needed to complete the particular project.

The Project Evaluation and Review Technique (PERT) is not a means of scheduling and controlling projects with constant activity times. The activity time normally varies.

Stuart McFarland is sales manager for a hotel. His job entails leading, motivating, and communicating with employees. McFarland’s main management activity is:

Answers

Answer:

E. Leadership

Explanation:

Leadership refers to the concept in which the manager or a team leader motivates, leading, communicated with the employees to accomplish  common goals and objectives so that the employees could perform better next time at less wastage

Therefore the given scenario represents the leadership management activity

Desktop Computer Company would like to calculate their cash conversion cycle. What factors are included in computing this metric?

Answers

Answer:

The answer is:

1. Days inventory outstanding i.e the number of days it takes to sell its inventories

2. Days sales outstanding i.e the number of days it takes to collect it receivables

3. Days payables outstanding i.e the number of days it takes to pay its payables.

Explanation:

Cash conversion cycle is the time(number of days) it takes a business to convert its money tied in inventory to cash through sales from customers.

In computing cash conversion cycle, the following are included:

1. Days inventory outstanding i.e the number of days it takes to sell its inventories

2. Days sales outstanding i.e the number of days it takes to collect it receivables

3. Days payables outstanding i.e the number of days it takes to pay its payables.

The formula for cash conversion cycle is Days inventory outstanding + Days sales outstanding - Days payables outstanding

Provident Bank offers a 10-year CD that earns 2.15% compounded continuously. If $10,000 is invested in this CD, how much will it be worth in 10 years

Answers

Answer:

the CD will be worth $12,370.40 in 10 years time.

Explanation:

The Future Value is the term given to the amount that a dollar invested today would be worth in the future.

The Future Value of the CD can be determined as follows :

PV = - $10,000

n = 10

i = 2.15 %

Pmt = $ 0

P/yr = 1

FV = ?

Using a financial calculator,the future value (FV) of the CD in 10 years time will be : $12,370.40

Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 7,100 pounds of oysters in August. The company’s flexible budget for August appears below: Quilcene Oysteria Flexible Budget For the Month Ended August 31 Actual pounds (q) 7,100 Revenue ($4.10q) $ 29,110 Expenses: Packing supplies ($0.25q) 1,775 Oyster bed maintenance ($3,500) 3,500 Wages and salaries ($2,600 + $0.45q) 5,795 Shipping ($0.55q) 3,905 Utilities ($1,270) 1,270 Other ($450 + $0.01q) 521 Total expense 16,766 Net operating income $ 12,344 The actual results for August appear below: Quilcene Oysteria Income Statement For the Month Ended August 31 Actual pounds 7,100 Revenue $ 27,500 Expenses: Packing supplies 1,945 Oyster bed maintenance 3,360 Wages and salaries 6,205 Shipping 3,635 Utilities 1,080 Other 1,141 Total expense 17,366 Net operating income $ 10,134 Required: Calculate the company’s revenue and spending variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Answers

Answer:

revenue variance = (standard quantity x standard price) - (actual quantity x actual price) = (7,100 x $4.10) - (7,100 x $3.8732) = $29,110 - $27,500 = $1,610 unfavorable (actual revenue was lower than budgeted revenue due to a decrease in sales price).

spending variances:

oyster bed maintenance variance = $3,360 - $3,500 = -$140 favorable

packing supplies variance = $1,945 - $1,775 = $170 unfavorable

wages and salaries variance = $6,205 - $5,795 = $410 unfavorable

shipping costs variance = $3,635 - $3,905 = -$270 favorable

utilities cost variance = $1,080 - $1,270 = -$190 favorable

other expenses variance = $1,141 - $521 = $620 unfavorable

total spending variance = $17,366 - $16,766 = $600 unfavorable (actual expenses were higher than budgeted)

Sheridan Company prepared a 2019 budget for 150000 units of product. Actual production in 2019 was 175000 units. To be most useful, what amounts should a performance report for this company compare

Answers

Answer:

The actual results for 175,000 units with a new budget for 175,000 units.

Explanation:

To be more useful, actual results should be compared with budgeted amounts of actual production.

The actual results for 175,000 units should be compare with a new budget for 175,000 units

As a result of a decrease in the demand for U.S. dollars, there has been depreciation in the value of the U.S. dollar relative to Jamaican dollars. The depreciation in the U.S. dollar has benefitted some groups but harmed others. Indicate which of the groups are winners and which are losers from the standpoint of the depreciation of the U.S. dollar.
A. Todd, an American, going to visit Jamaica for spring break.
B. An investment bank in Jamaica that is interested in purchasing U.S. government bonds.
C. Goodyear, a U.S. based firm, selling car tires in Jamaica.
D. A family from Jamaica visiting relatives in the U.S. E. A firm from Jamaica selling handbags in the U.S.
F. U.S. based Hewlett-Packard, which is purchasing a high tech company in Jamaica.

Answers

Answer;

A. Todd, an American, going to visit Jamaica for spring break. - Loser

The US dollar depreciating means that it now takes more US dollars to buy Jamaican dollars. Todd will afford less Jamaican dollars when he goes to Jamaica.

B. An investment bank in Jamaica that is interested in purchasing U.S. government bonds. - Winner

The Investment bank will see that their domestic currency is stronger than it was therefore they can buy more US dollars. As a result it will be cheaper for the Investment bank to buy U.S. Government bonds.

C. Goodyear, a U.S. based firm, selling car tires in Jamaica. - Winners.

Goodyear will be winners because when they sell their tires in Jamaican dollars and then convert it to USD, they will.get more dollars from the transaction than before.

D. A family from Jamaica visiting relatives in the U.S. - Winners

As the Jamaican family will be able to buy more US dollars than before, they are winners.

E. A firm from Jamaica selling handbags in the U.S. - Losers.

As the firm sells in the US, they sell in US dollars. When they try to convert their sales to Jamaican dollars, they will get less than before.

F. U.S. based Hewlett-Packard, which is purchasing a high tech company in Jamaica. - Losers.

The depreciation of the US dollar means than HP will have to spend more dollars purchasing the company than before because the purchase price of the company will be stated in Jamaican dollars.

If a firm's projects differ in risk, then one way of handling this problem is to evaluate each project with the appropriate risk-adjusted discount rate.
A. True
B. False

Answers

Answer:

True

Explanation:

the discount rate used for a project should reflect the risk of the project so as to make accurate predictions. if the discount rate used for a project is the same as that of the firm and the risks of the project differs, the predictions made with this project would be inaccurate. the risk adjusted discount rate has to be calculated.

Calculate the inventory turns when Sales is $200,000,000, Cost of sales is $160,000,000, Average inventory is $ 40,000,000 and Carrying cost is 12%

Answers

68646868855764566799%%$^€$^__

Answer:

68646868857764564566799

True or False: A tax cut is less likely to change the composition of labor demand than a government spending increase.

Answers

Answer:

True

Explanation:

This is the case because tax cuts and government spending are instruments that could be used in expansionary fiscal policy.

Note that reduced taxes usually have a direct impact on the disposable income of a economy not the composition of labor demand. Tax cuts leads directly to consumption and savings increase, resulting from increase in disposable income in the economy.

Identify five HRM criteria or components that can be used to measure organizational effectiveness or ineffectiveness. "Grievance rate" is an example.

Answers

Answer:

They include;

1. Customer Satisfaction

2. Absenteeism

3. Legal Compliance

4. Performance

5. Training

Explanation:

The Human Resource Management criteria that are used to measure the effectiveness or ineffectiveness of an organization, are a list that gives an idea of how an organization is performing, and this list can serve as a basis of comparison with other organizations. These options include;

1. Satisfaction: If the employees are treated fairly and so, feel satisfied with the organization, then they can be said to be effective.

2. Absenteeism: When workers are always absent from work it does not present the organization as an effective one.

3. Legal Compliance: The organization must be able to comply to government rules and regulations guiding the business to be rated as effective.

4. Performance: High or low-performance which is reflected in the turnover rates would be an indication of how effective or ineffective an organization is.

5. Training: The organization should be able to provide regular standard training for its workers to be rated as effective.

The McDonald's fast-food restaurant on campus sells an average of 4,000 quarter-pound hamburgers each week. Hamburger patties are resupplied twice a week, and on average the store has 350 pounds of hamburger in stock. Assume that the hamburger patties cost $1.00 a pound.

Required:
a. What is the inventory turnover for the hamburger patties?
b. On average, how many days of supply are on hand?

Answers

Answer:

a. 148.57 for the year.

b. 2.45 days

Explanation:

a. Each  hamburger patties cost $1.00 a pound and 4,000 quater pounds are supplied per week. 4 quater pounds make up 1 pound so;

= 4,000/4

= 1,000 pounds are supplied per week.

Inventory turnover = Cost of goods sold for the year/ Average Inventory

= ( Pounds per week * cost per pound * number of weeks in year)/ Average inventory

= ( 1,000 * 1 * 52) / 350

= 148.57 for the year.

b. Average Days of Supply = Average Inventory/cost of goods sold

= 350/( 1,000 * 1 * 52)

= 0.00673 per year

To convert to days multiply by;

= 0.006730 * 52 weeks * 7 days

= ‭2.44972‬

= 2.45 days

Carter & Carter is considering setting up a regional lockbox system to speed up collections. The company sells to customers all over the U.S., and all receipts come in to its headquarters in San Francisco. The firm's average accounts receivable balance is $2.5 million, and they are financed by a bank loan at an 11% annual interest rate. The firm believes this new lockbox system would reduce receivables by 20%. If the annual cost of the system is $15,000, what pre-tax net annual savings would be realized? a. $32,400 b. $29,160 c. $40,000 d. $44,000 e. $36,000

Answers

Answer:

c. $40,000

Explanation:

Reduction in Account Receivables          $500,000

($2,500,000 * 20%)

* Interest rate                                               11%          

Annual saving                                             $55,000

Less: Annual cost of system                     -$15,000

Pretax Net annual savings                         $40,000

Question 59 of 83 Project M requires an initial investment of $25 million. The project is expected to generate $2.25 million in after-tax cash flow each year forever. Calculate the IRR for the project. 10% 9% 8% 7%

Answers

Answer:

9%

Explanation:

In order to calculate the internal rate of return (IRR) for a project that yields cash flows perpetually, we need to divide the yearly cash flow by the project's initial outlay:

IRR = $2,250,000 / $25,000,000 = 0.09 = 9%

The IRR represents the discount rate at which the project's net present value (NPV) equals 0.

Windhoek Mines, Ltd., of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area:
Cost of new equipment and timbers $ 380,000
Working capital required $ 120,000
Annual net cash receipts $ 135,000
Cost to construct new roads in year three $ 44,000
Salvage value of equipment in four years $ 69,000
Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth.
The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company’s required rate of return is 18%.
Required:
Determine the net present value of the proposed mining project. (Any cash outflows should be indicated by a minus sign.

Answers

Answer:

The net present value of the proposed mining project is - $163,621.41.

Explanation:

The Summary of Cash flows is as follows :

Year 0 : - ($ 380,000 + $ 120,000) = - $500,000

Year 1 : $ 135,000

Year 2: $ 135,000

Year 3: $ 135,000 - $ 44,000 = $91,000

Year 4: $ 135,000 + $ 69,000 + $ 120,000 = $324,000

Determine the Net Present Value of the mining project as follows :

Using a Financial Calculator, entries will be as follows

- $500,000     CFj

$ 135,000        CFj

$ 135,000        CFj

  $91,000        CFj

$ 135,000        CFj

18 %                 I/YR

SHIFT NPV   - $163,621.41

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?

Answers

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 %

Moorcroft’s assistant controller suggested that Moorcroft hire a part time collector to encourage customers to pay more promptly and to reduce the amount of uncollectible accounts. Sales are still 40% cash and 60% credit but the assistant controller predicted that this would cause credit sales to be collected 30% in the month of the sale, 50% in the month following sale, and 18% in the second month following sale; 2% are uncollectible.Prepare a schedule of expected collections from customers for June. How did these changes impact cash collections?

Answers

Answer:

The budgeted sales are missing, so I looked for them. I found the following question, hopefully it will be similar:

Month        Sales

April           $300,000

May            $320,000

June           $370,000

Schedule of expected collections

For the month of June, 202x

Cash sales during June = $370,000 x 40% = $148,000

Collection from June's credit sales = $222,000 x 30% = $66,600

Collection from May's credit sales = $192,000 x 50% = $96,000

Collection from April's credit sales = $180,000 x 18% = $32,400

Total cash collections during June = $343,000

Since the cost of the part time collector is $1,000 per month, and the total uncollectible accounts reduce from 4% to 2%, which represents $7,400 for June's sales, I would recommend hiring the collector.

How are the three economic conditions (Growing, Stable, and Declining) called in the Decision Table?


Decision Alternatives


States of Nature


Pay-off


None of the above

Answers

Answer:

The anwer for your question is decision alternatives

2016 2017 2018 Net Income $1,200 ($500) $2,300 Net Cash Flows $500 $300 $2,800 Dividends $200 $0 $200 Issuance of Stock $2,000 $0 $0 The above amounts represent totals from the first three years of operations. Calculate the balance of Retained Earnings at the end of 2018.

Answers

Answer:

$2,600

Explanation:

We will have to focus on the annual result and the dividends that were paid because these dividends decreases the retained earnings. There is no impact of can flow while insurance of stock falls withing result for the year.

In 2016, income was $1,200 minus dividends allocated $200

= $1,200 - $200

Retained earnings= $1,000

2017 result of ($500) without dividend distribution;

Retained earnings = ($500)

2018, result of $2,300 and distribution dividends of $200

= $2,300 - $200

Retained earnings= $2,100

Total retained earnings =$1,000 + (500) + $2,100

= $2,600

Suppose selected comparative statement data for the giant bookseller Barnes & Noble are presented here. All balance sheet data are as of the end of the fiscal year (in millions).

2020 2019
Net sales $5,200 $5,500
Cost of goods sold 3,484 3,830
Net income 78 123
Accounts receivable 82 103
Inventory 1,146 1,262
Total assets 2,990 3,510
Total common stockholders’ equity 992 1,031

Required:
Compute the following ratios for 2020.

Answers

Answer:

Profit margin = net profit / total sales = $78 / $5,200 = 1.5%  

Asset turnover = total sales / average total assets = $5,200 / ($2,990 + $3,510) = 1.6

Return on assets = net income / average total assets = $78 / $3,250 = 2.4%  

Return on common stockholders’ equity =  net income / average stockholders' equity = $78 / ($992 + $1,031) = 7.71%  

Gross profit rate = gross profit / total sales = $1,716 / $5,200 = 33%

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