Answer:
a-1. Calculate the new book value per share.
current book value = stocks outstanding x book value = 5,000,000 x $10 = $50,000,000
new book value = $50,000,000 + $50,000,000 = $100,000,000
new stocks issued = $50,000,000 / $40 = 1,250,000
total stocks outstanding = 5,000,000 + 1,250,000 = 6,250,000
new book value per stock = $100,000,000 / 6,250,000 = $16
a-2. Calculate the new EPS.
old EPS = $4,000,000 / 5,000,000 = $0.80 per stock
new EPS = $4,850,000 / 6,250,000 = $0.776 per stock
a-3. Calculate the new stock price.
price to earnings ratio = $40 / $0.80 = 50
new stock price:
50 = new stock price / $0.776
new stock price = 50 x $0.776 = $38.80
a-4. Calculate the new market-to-book ratio.
market to book ratio = market capitalization / book value = $242,500,000 / $100,000,000 = 2.425
b. What would the new net income for the company have to be for the stock price to remain unchanged?
0.8 = net income / 6,250,000
net income = 6,250,000 x 0.8 = $5,000,000
The earliest time that an activity can be completed is equal to the latest time it can begin minus the time to perform the activity. Group of answer choices True False
Answer: False
Explanation:
The earliest time of an activity os necessary in order to reduce the duration of a project. The earliest start time of an activity is the time that is earliest where an activity can begin.
The earliest finish time is the addition of the early time with the completion time of the activity.
Red Sun Rising just paid a dividend of $2.43 per share. The company said that it will increase the dividend by 15 percent and 10 percent over the next two years, respectively. After that, the company is expected to increase its annual dividend at 4.1 percent. If the required return is 11.5 percent, what is the stock price today
Answer:
P0 = $39.76
Explanation:
The dividend discount model or DDM can be used to calculate the price of the share today. The DDM values a stock based on the present value of the expected future dividends from the stock. The price of this stock under this model can be calculated as follows,
P0 = D0 * (1+g1) / (1+r) + D0 * (1+g1) * (1+g2) / (1+r)^2 +
[ (D0 * (1+g1) * (1+g2) * (1+g3) / (r - g3)) / (1+r)^2 ]
Where,
g1 is the growth rate in the first year which is 15% g2 is the growth rate in the second year which is 10% g3 is the constant growth rate which is 4.1% r is the required rate of return P0 is the stock price today
P0 = 2.43 * (1+0.15) / (1+0.115) + 2.43 * (1+0.15) * (1+0.1) / (1+0.115)^2 +
[ (2.43 * (1+0.15) * (1+0.1) * (1+0.041) / (0.115 - 0.041)) / (1+0.115)^2 ]
P0 = $39.76
A $5,000 bond with a coupon rate of 5.1% paid semiannually has eight years to maturity and a yield to maturity of 8.9%. If interest rates rise and the yield to maturity increases to 9.2%, what will happen to the price of the bond?
Answer:
The bond's market price will decrease by $72.08 (1.83%) from $3,928.89 to $3,856.81.
Explanation:
bond's current market price:
$5,000 / (1 + 4.45%)¹⁶ = $2,491.35
$127.50 x 11.27483 (PV annuity factor, 4.45%, 16 periods) = $1,437.54
current market price = $3,928.89
if interests rise and YTM increases to 9.2%, then new market price:
$5,000 / (1 + 4.6%)¹⁶ = $2,434.80
$127.50 x 11.15305 (PV annuity factor, 4.45%, 16 periods) = $1,422.01
current market price = $3,856.81
When selecting the best alternative in a cost-benefit analysis, what are the issues to be considered?
Answer: Analyse cost, risk with impacts and project benefits.
Explanation:
The best alternative in a cost-benefit analysis situation are the following;
•The cost types should be analyzed
•Potential risk and their impacts should be looking into
•It is recommended to weigh all the risk even when there is a lot of project benefits.
A proposed new investment has projected sales of $543,000. Variable costs are 46 percent of sales, and fixed costs are $129,500; depreciation is $50,250. Prepare a pro forma income statement assuming a tax rate of 21 percent. What is the projected net income? (Input all amounts as positive values. Do not round intermediate calculations.)
Answer:
Pro forma Income Statement
Projected Sales $543,000
Variable costs 249,780
Contribution $293,220
Sales /Fixed costs 129,500
Depreciation 50,250
Pre-tax Income $113,470
Income Tax (21%) 23,828.70
After-tax Income $89,641.30
Explanation:
This company's pro forma income statement shows the contribution to be made by a project and the projected after-tax income. With it management can decide whether to accept the project or not. Preparing this pro forma income statement also enables management to know the impact on profits that the project will make. When the project is complete, this pro forma income statement becomes a basis for reviewing the actual income statement to understand variances.
A stock had returns of 15.51 percent, 22.47 percent, −8.68 percent, and 9.43 percent over four of the past five years. The arithmetic average return over the five years was 12.71 percent. What was the stock return for the missing year?
Answer:
24.82%
Explanation:
Arithmetic average = sum of observations / number of observations
Let x = the stock return for year 5
12.71 % = (15.51% + 22.47% −8.68% + 9.43 + x) /5
Multiply both sides by 5
63.55% = (5.51% + 22.47% −8.68% + 9.43 + x)
63.55% = 38.73% + x
x = 63.55% - 38.73% = 24.82%
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 %
The government wants to set the socially optimal level of nitrogen runoff, and government regulators believe that the actual marginal benefit of pollution (MBP) is given by the estimated MBP curve. The deadweight loss associated with a quota is _____, w
Answer:
Hello your question is incomplete attached below is the complete question
Explanation:
Dead weight loss = 0.5 [( Δp ) * ( ΔD ) ]
D = DEMAND
P = PRICE
DWL with quota = 0.5 [ ( $10 -$6 ) * (12 - 8 ) ]
= 0.5 ( 4*4 ) = $8
DWL with pigouvian tax = 0.5 [ ($10- $6 )*(9 - 8 ) ]
= 0.5 [ 4 * 1 ] = $2
Which method of evaluating capital investment proposals uses present value concepts to compute the rate of return from the net cash flows
Answer:
Internal rate of return
Explanation:
The internal rate of return is that return in which the net present value equivalent to zero
i.e.
Net present value = 0
That means
Initial investment = Present value of cash inflows after charging the discounting factor like 10% 12% etc
So as per the given situation, the internal rate of return is the correct answer
Pacific Cruise Lines is a defendant in litigation involving a swimming accident on one of its three cruise ships.Required:a. The likelihood of a payment occurring is probable, and the estimated amount is $1.17 million. b. The likelihood of a payment occurring is probable, and the amount is estimated to be in the range of $0.97 to $1.17 million. c. The likelihood of a payment occurring is reasonably possible, and the estimated amount is $1.17 million. d. The likelihood of a payment occurring is remote, while the estimated potential amount is $1.17 million.
Answer:
a. The likelihood of a payment occurring is probable, and the estimated amount is $1.17 million.
THE CONTINGENT LIABILITY NEEDS TO BE RECORDED SINCE IT IS PROBABLE THAT IT WILL OCCUR AND THE AMOUNT CAN BE ESTIMATED.
b. The likelihood of a payment occurring is probable, and the amount is estimated to be in the range of $0.97 to $1.17 million.
YOU ONLY HAVE TO DISCLOSE THE LIABILITY IN THE NOTES OF THE FINANCIAL STATEMENTS SINCE THE AMOUNT CANNOT BE DETERMINED.
c. The likelihood of a payment occurring is reasonably possible, and the estimated amount is $1.17 million.
YOU ONLY HAVE TO DISCLOSE THE LIABILITY IN THE NOTES OF THE FINANCIAL STATEMENTS SINCE THE EVENT IS ONLY REASONABLY POSSIBLE AND NOT PROBABLE.
d. The likelihood of a payment occurring is remote, while the estimated potential amount is $1.17 million.
NO RECORDING NOR DISCLOSING IS REQUIRED SINCE THE POSSIBILITY OF OCCURRING IS REMOTE.
The owner of a large machine shop has just finished its financial analysis from the prior fiscal year. Following an excerpt from the final report:
Net revenue $375000
Cost of goods sold 322000
Value of production materials on hand 42500
Value of work-in-progress inventory 37000
Value of finished goods on hand 12500
a. Compute the inventory turnover ratio (ITR). (Round your answer to 1 decimal place.)
Inventory turnover ratio ......... per year
b. Compute the weeks of supply (WS). (Do not round intermediate calculations. Round to 1 decimal place.)
Weeks of supply ........
Answer:
a. Inventory turnover ratio = Cost of goods sold / Average Aggregate Inventory Value
Inventory turnover ratio = $322,000 / $42,500 + $37,000 + $12,500
Inventory turnover ratio = $322,000 / $92,000
Inventory turnover ratio = 3.5
Therefore, the inventory turnover ratio is 3.5
b. Weeks of supply = Average Aggregate Inventory Value / Cost of Goods Sold * 52 (weeks)
Weeks of supply = $42,500 + $37,000 + $12,500 / $322,000 * 52
Weeks of supply = $92,000 / $322,000 * 52 weeks
Weeks of supply = 14.85 weeks
Therefore, the weeks of supply is 14.85 weeks
The health care workforce during the current market-driven changes is experiencing: A. Significant expansion at professional levels B. Experimentation and variation in staffing C. Continued stability in numbers and staffing patterns D. Substantial reductions
Answer:
A. Significant expansion at professional level.
Explanation:
The hospitals provide health care facilities to the public. It is crucial place where one mistake by a doctor or other staff could lead to death of a patient. The patients coming in he hospital need to be treated carefully and timely. The professional and experience will have the skills and expertise to treat the patient carefully and diagnose the problem quickly. There are increased number of professional today than in the previous years. The education has now become more common and people understand the importance of gaining technical education before practical experiments.
In the past year, TVG had revenues of $3 million, cost of goods sold of $2.5 million, and depreciation expense of $200,000. The firm has a single issue of debt outstanding with book value of $1 million on which it pays an interest rate of 8%. What is the firm’s times interest earned ratio?
Answer:
TVG
Times Interest Earned Ratio (TIER) = Earnings Before Interest & Taxes divided by Interest Expense
= $300,000/$$80,000 = 3.75 times
Explanation:
a) TVG Income Statement:
Revenue $3,000,000
Cost of goods sold 2,500,000
Gross profit $500,000
Depreciation 200,000
EBIT $300,000
Interest Expense 80,000
Pre-tax Income $220,000
b) TVG's TIER shows the number of times that its earnings before interest and taxes covers the interest expense. It shows the ability of the TVG to settle its maturing debt obligations from current earnings. It is an important financial performance measure which potential investors in TVG will use to gauge the ability of TVG to meet financial obligations from the earnings it generates.
To be registered as a broker-dealer, the Administrator typically requires the posting of a surety bond in the amount of:
Answer:
$10,000
Explanation:
Most of the time the Administrator requires a posting of a $10,000 surety bond to be registered as a broker-dealer, due to the Uniform Securities act but each separate state administrator can change this amount to what they seem fit. A surety bond makes sure that the individual assumes responsibility for that amount of debt obligation if the borrower defaults on the payment.
In March, Coronado Company completes Jobs 10 and 11. Job 10 cost $29,900 and Job 11 $40,300. On March 31, Job 10 is sold to the customer for $40,300 in cash. Journalize the entries for the completion of the two jobs and the sale of Job 10. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Answer:
Mar. 31
Dr Finished Goods Inventory 70,200
Cr Work in Process 70,200
Mar. 31
Dr Cash 40,300
Cr Sales 40,300
Mar. 31
Dr Cost of Goods Sold 29,900
Cr Finish Goods in Inventory 29,900
Explanation:
Preparation of the Journal entries for the completion of the two jobs and the sale of Job 10
1.Based on the information given we were told that Job 10 cost the amount of $29,900 while Job 11 cost the amount of $40,300 , this means that the Journal entry will be:
Mar. 31
Dr Finished Goods Inventory 70,200
Cr Work in Process 70,200
($29,900 + 40,300)
(To record completion of jobs.)
2. Based on the information given we were told that On March 31, Job 10 was sold to the customer for the amount of $40,300 in cash, this means that the Journal entry will be
Mar. 31
Dr Cash 40,300
Cr Sales 40,300
(To record sale of job.)
3. Based on the information given we were told that the sales of Job 10 cost the amount of $29,900, this means that the transaction will be recorded as:
Mar. 31
Dr Cost of Goods Sold 29,900
Cr Finish Goods in Inventory 29,900
(To record cost of job.)
Motorcycle Manufacturers, Inc. projected sales of 78,000 machines for the year. The estimated January 1 inventory is 6,500 units, and the desired December 31 inventory is 6,000 units. What is the budgeted production (in units) for the year
Answer:
77,500 units
Explanation:
Projected sales = 78,000 machines
Opening inventory = 6,500 units
Closing inventory = 6,000 units
We will use the formulae below to calculate Budgeted production in unit.
Closing inventory = Opening inventory + Production - Sales
6,000 = 6,500 + Production - 78,000
Production = 6,000 - 6,500 + 78,000
= 77,500 units.
Therefore, Budgeted production is 77,500 units
Lucas Corp. has a debt-equity ratio of .8. The company is considering a new plant that will cost $115 million to build. When the company issues new equity, it incurs a flotation cost of 8.5 percent. The flotation cost on new debt is 4 percent.
A. What is the initial cost of the plant if the company raises all equity externally?
B. What is the initial cost of the plant if the company typically uses 55 percent retained earnings?
C. What is the initial cost of the plant if the company typically uses 100 percent retained earnings?
Answer:
$122,475,000; $119,489,600; $117,047,000
Explanation:
Given the following :
Cost of new plant = $115m
Debt to equity ratio =. 0.8
After issuing new equity:
Floatation cost incurred (equity) = 8.5%
Floatation on new debt = 4%
Calculating weighted return of debt and equity:
Debt: = [0.8/(1 + 0.8)] × 4% = 0.0178
Equity : [1 / (1+ 0.8)] * 8.5% = 0.0472
A) all equity raised externally:
Weighted average Floatation cost:
0.0178 + 0.0472 = 0.065
Initial cash flow will the be :
(1 + 0.065) * cost of new plant
1.065 * $115,000,000 = $122,475,000
B.) company uses 55% Retained earning:
Weighted return on equity will the be :
0.0472 * (1 - 55%) = 0.02124
Weighed Floatation cost = 0.02124 + 0.0178 = 0.03904
(1+0.03904) * $115,000,000 = $119,489,600
C.) Company uses 100% Retained earnings :
Equity return will be 0%
(1 + 0.0178) * 115000000
= $117,047,000
Concord Corporation has 34000 units in beginning finished goods. If sales are expected to be 140000 units for the year and Concord desires ending finished goods of 40000 units, how many units must the company produce
Answer:
146,000 units
Explanation:
The computation of units must the company produce is shown below:-
As we know that
Units sold = opening inventory + units produced - Closing inventory
So,
Units Produced = Units sold - opening inventory + Closing inventory
= 140,000 - 34,000 + 40,000
= 146,000 units
Hence, the number of units produced by the company is 146,000 units
The understatement of the ending inventory balance causes: Multiple Choice Cost of goods sold to be understated and net income to be overstated. Cost of goods sold to be overstated and net income to be correct. Cost of goods sold to be overstated and net income to be understated.
Answer:
Cost of goods sold to be overstated and net income to be understated.
Explanation:
Ending Inventory are deducted from the cost of sales figure to reach the gross profit amount in the trading account.
Understatement of Inventory means that Cost of goods sold will overstated and gross profit understated, consequently, net income will be also understated.
"A customer opens a margin account by purchasing 300 shares of XYZ stock at $80 per share and deposits the required margin. If the stock declines in value by 25%, the customer's equity in the account will:"
Answer:
Equity will increased by 50%
Explanation:
Given:
Number of stock = 300
Per share value = $80
Stock value decline = 25%
Find:
Customer's equity will ?
Computation:
Market value = 300 × $80 = $24,000
New market value = $24000 × (100% - 25%) = $18,000
Margin = $24000 × 50% = $12,000
Credit balance = $24,000 (100% / 75%)
Credit balance = $24,000 + $12,000
Credit balance = $36,000
Equity % = [Credit balance - New market value / Credit balance]100
Equity % = [($36,000 - $18,000) / $18,000]100
Equity will increased by 50%
You put up $40 at the beginning of the year for an investment. The value of the investment grows 5% and you earn a dividend of $4.50. Your HPR was ____. A. 5.0% B. 4.5% C. 11.3% D. 16.3%
Answer:
16.3%
Explanation:
$40 was put at the beginning of the year for an investment
The investment grows by 5%
= 5/100
= 0.05
The dividend is $4.50
The first step is to calculate the dividend yield
= $4.50/40
= 0.1125
Therefore, the HPR can be calculated as follows
= 0.1125+0.05
= 0.163×100
= 16.3%
Hence the HPR was 16.3%
Midwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $85,000 with a $7,000 residual value and a ten-year life. The equipment will replace one employee who has an average wage of $20,210 per year. In addition, the equipment will have operating and energy costs of $4,130 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. If required, round to the nearest whole percent. %
Answer:
17.89%
Explanation:
Calculation Determine the average rate of return on the equipment
Using this formula
Average rate of return =Avarage annual income /Average investment
Where,
Avarage annual income=Annual saving - Annual depreciation- Annual operating costs
Average investment= (Beginning costs + Residual value)÷2
Let plug in the formula
Average rate of return=$20,210 - ($85,000- $7,000)÷10 years-$4,130/($85,000+$7,000)÷2
Average rate of return=$20,210-($78,000÷10)-$4,180/($92,000)÷2
Average rate of return=$20,210-$7,800-$4,180/$46,000
Average rate of return=$8,230/$46,000
Average rate of return=0.1789*100
Average rate of return=17.89%
Therefore the average rate of return on the equipment will be 17.89%
Answer:
18%
Explanation:
This can be calculated as using the formula for calculating the average rate of return as follows:
Average rate of return = Average annual income / Average investment in equipment .................. (1)
To use equation (1), we first calculate the following:
Annual cost saving = $20,210
Annual depreciation = (Equipment cost - Residual value) / Useful number of years = ($85,000 - $7,000) / 10 = $7,800
Annual operating and energy costs = $4,130
Average annual income = Annual cost saving - Annual depreciation - Annual operating and energy costs = $20,210 - $7,800 - $4,130 = $8,280
Average investment in equipment = (Equipment cost + Residual value) / 2 = $46,000
Substituting the values for Average annual income and Average investment in equipment into equation (1), we have:
Average rate of return = $8,280 / $46,000 = 0.18, or 18%
Purvis Manufacturing, which produces a single product, has prepared the following standard cost sheet for one unit of the product. Direct materials (6 pounds at $2 per pound) $12 Direct labor (2 hours at $12 per hour) $24 During the month of April, the company manufactures 300 units and incurs the following actual costs.
Direct materials purchased and used (1,850 pounds) $4,070
Direct labor (620 hours) $7,130
Compute the total, price, and quantity variances for materials and labor. Identify whether the variance is favorable or unfavorable?
Answer:
1. Actual Quantity = 1,850 pounds
Actual materials cost = $4,070
Standard rate per pound = $2
Standard Quantity = 6 pounds per unit * 300 units
Standard Quantity = 1,800
Standard materials cost = Standard Quantity * Standard rate per pound
Standard materials cost = 1,800 * $2
Standard materials cost = $3,600
1a. Total Materials Variance = Actual materials cost - Standard materials cost
Total Materials Variance = $4,070 - $3,600
Total Materials Variance = $470 Unfavorable
1b. Materials Price Variance = Actual materials cost - Actual Quantity * Standard rate per pound
Materials Price Variance = $4,070 - 1,850 * $2
Materials Price Variance = $370 Unfavorable
1c. Materials Quantity Variance = Standard rate per pound * (Actual Quantity - Standard Quantity)
Materials Quantity Variance = $2.00 * (1,850 - 1,800)
Materials Quantity Variance = $100 Unfavorable
2. Actual labor hours = 620
Actual labor cost = $7,130
Standard rate per hour = $12
Standard labor hours = 2 hours per unit * 300 units
Standard labor hours = 600
Standard labor cost = Standard labor hours * Standard rate per hour
Standard labor cost = 600 * $12
Standard labor cost = $7,200
2a. Total Labor Variance = Actual Labor cost - Standard Labor cost
Total Labor Variance = $7,130 - $7,200
Total Labor Variance = $70 Favorable
2b. Labor Price Variance = Actual Labor cost - Actual labor hours * Standard rate per hour
Labor Price Variance = $7,130 - 620 * $12
Labor Price Variance = $310 Favorable
2c. Labor Quantity Variance = Standard rate per hour * (Actual labor hours - Standard labor hours)
Labor Quantity Variance = $12.00 * (620 - 600)
Labor Quantity Variance = $240 Unfavorable
If someone has a power of attorney to sign the purchase agreement on behalf of the seller, which of the following would be the proper way to sign?
a. Philip Adams, seller
b. Philip Adams, by Alice Jackson, his attorney in fact
c. Alice Jackson, attorney in fact for the seller
d. Philip Adams, by his attorney in fact
Answer:
b. Philip Adams, by Alice Jackson, his attorney in fact
Explanation:
A power of attorney is the legal document in which it allows someone to act on behalf of you. In this, the person has the authority to act on behalf of the other person with respect to the legal, financial matters, etc
Here the proper way to sign is the option B
Philip Adams, by Alice Jackson, his attorney in fact
Therefore all the other options are wrong
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.
Och, Inc., is considering a project that will result in initial aftertax cash savings of $1.75 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. The firm has a target debt-equity ratio of .8, a cost of equity of 11.5 percent, and an aftertax cost of debt of 4.3 percent. The cost-saving proposal is somewhat riskier than the usual projects the firm undertakes; management uses the subjective approach and applies an adjustment factor of +3 percent to the cost of capital for such risky projects. What is the maximum initial cost the company would be willing to pay for the project?
Answer:
$18,191,268.19
Explanation:
the company's WACC = (weight of equity x Re) + (weight of debt x after tax cost of debt) = (0.6 x 11.5%) + (0.4 x 4.3%) = 6.9% + 1.72% = 8.62%
discount rate adjustment factor = 8.62% + 3% = 11.62%
to determine the value of the project:
$1,750,000 / (11.62% - 2%) = $1,750,000 / 9.62% = $18,191,268.19
If the initial outlay is $18,191,268.19, then the project's NPV = $0. This is the maximum amount that the firm should be willing to invest in this project.
A company has 825 shares of $50 par value preferred stock outstanding, and the call price of its preferred stock is $63 per share. It also has 17,000 shares of common stock outstanding, and the total value of its stockholders' equity is $626,575. The company's book value per common share equals:
Answer:
Book Value Per Common Share = $33.80
Explanation:
Book Value Per Common Share = Stockholders' equity - Shares * Call Price per shares) / Shares of common stock outstanding
= ($626,575 - 825*63) / 17000
= ($626,575 - $51,975) / 17,000
= $574,600 / 17,000
= $33.80
Assuming that the standard fixed overhead rate is based on full capacity, the cost of available but unused productive capacity is indicated by the a.fixed factory overhead volume variance b.direct labor rate variance c.variable factory overhead controllable variance d.direct labor time variance
Answer: a.fixed factory overhead volume variance.
Explanation:
Fixed overhead costs are the costs that are incurred by an organization that doesn't change even when the lre is a change in the volume of production activity. The fixed overhead costs are vital in order for the effective operation of the company.
When the standard fixed overhead rate is based on full capacity, the cost of available but unused productive capacity is indicated by the a.fixed factory overhead volume variance.
Variance is the data analysis tool that helps in measuring the gap between the actual and budgeted or the standard data. The standards are set based on past records and performances. There are various types of variances such as cost variance, efficiency variance, rate variance, volume variance, and many more.
The cost of available but unused productivity capacity is indicated by fixed factory overhead volume variance.
When the standard fixed overhead rate or can be said as the fixed overhead cost is constant and remains at full capacity irrespective of the changes in the volume of production activity.
In this case, the cost of productive capacity can be determined by using the fixed factory overhead volume variance. This is because it determines the difference between the fixed cost based upon the budgets and the production capacity.
To know more about fixed overhead variance, refer to the link:
https://brainly.com/question/25801623
a project that costs 25500 today will generate cash flows of 8800 per year for seven years. what is the project's payback
Answer:
d
Explanation:
d on edg
Lindley Corp.'s stock price at the end of last year was $33.50, and its book value per share was $25.00. What was its market/book ratio
Answer:
1.34
Explanation:
Computation for the market/book ratio
Using this formula
Market/book ratio=Stock price/Book value per share
Let plug in the formula
Market/book ratio=$33.50/$25.00
Market/book ratio=1.34
Therefore the Market/book ratio will be 1.34.
