"A $10,000 municipal bond with 10 years to maturity is purchased in the primary market at 105. The bond is sold after 4 years at 105. The taxable gain or loss is a:"

Answers

Answer 1

Answer:

2 point capital gain

Explanation:

Every municipal bond that is purchased at premium is subject to straight line depreciation, whether the premium be trading premium or original issue premium.

Here the premium is 5 points = 105 - 100

Which shall be amortised over its useful life of 10 years.

Thus, for each year 1/2 point is amortised without allowing any tax deduction.

Thus, after 4 years total amortisation = [tex]\frac{1}{2} \times 4years = 2[/tex]

Thus, value at end of year 4 = 105 - 2 = 103 basis point.

Further the selling amount = 105 basis point.

Thus, 105 - 103 = 2 basis point shall be taxable.


Related Questions

A company stocks an SKU with a weekly demand of 600 units and a lead time of 4 weeks. There are 52 weeks in a year. Management will tolerate 1 stock out per year. If sigma for the lead time is 100 and the order quantity is 2500 units, what is:

Answers

A company stocks an SKU with a weekly demand of 600 units and a lead time of 4 weeks. There are 52 weeks in a year. Management will tolerate 1 stock out per year. If sigma for the lead time is 100 and the order quantity is 2500 units, what is:  the safety stock, the average inventory, and the order point?

Answer:

The safety stock = 142 units

The average inventory = 1392 units

The order point = 2542 units

Explanation:

Given that:

the weekly demand = 600 units

lead time = 4 weeks

sigma for the lead time (i.e the standard deviation [tex]\sigma[/tex] ) = 100 units

Order quantity = 2500 units

The objective is to calculate :

the safety stock, the average inventory, and the order point?

To start with the number of order per year.

The number of order per year = Annual demand/Order quantity

The number of order per year =  (Weekly demand × 52)/ Order quantity

The number of order per year =  (600 × 52)/2500

The number of order per year =  31200/2500

The number of order per year = 12.48 times /year

Also, the service level for the safety factor = (Number of order per year - 1)/ number of order per year

the service level for the safety factor = ( 12.48 - 1)/12.48

the service level for the safety factor = 11.48/12.48

the service level for the safety factor = 0.9199

the service level for the safety factor = 91.99%

∴ the safety factor at 91.99% service level = (safety factor at (90% +94%))÷2

the safety factor at 91.99% service level = (1.28 +1.56) ÷2

the safety factor at 91.99% service level = 2.84 ÷2

the safety factor at 91.99% service level = 1.42

Now,

the safety stock = 100 × safety factor at 91.99% service level

the safety stock = 100 × 1.42

the safety stock = 142 units

The order point = safety factor +  demand during lead time

where;

The demand during lead time = weekly demand × 4

The demand during lead time = 600  × 4

The demand during lead time = 2400 units

The order point = safety factor +  demand during lead time

The order point = 142 +  2400

The order point = 2542 units

Finally,

The average inventory = (order quantity ÷ 2) + safety stock

The average inventory = (2500 ÷ 2) + 142

The average inventory =1250 +142

The average inventory = 1392 units

A process of making decisions by constructing simplified models that extract the essential features from problems without capturing all their complexity is known as

Answers

Answer:

Bounded rationality.

Explanation:

This is explained to be a model that is been used in making choices between alternatives. Models of this kind brings about use of logic, analysis and objectivity always which appear over subjectivity and insight. In this particular model, approaches like Formulating of goal, decision making, identification of criteria for decision making, performing analysis etc are seen to make this model a better type of its kind. Here individuals who are seen to posses high cognitive ability are seen handling of decisions and making quality arrangements towards its actualization.

In a lot of cases, it is seen to not consider factors that cannot be quantified, such as ethical concerns or the value of altruism.

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as: Multiple Choice Financing activities. Investing activities.

Answers

Answer:

Operating activities

Explanation:

The operating activities in the cash flow statement using the direct method derive that the cash receipts and the cash payment should be recorded under this activity.

Cash payment would be recorded when the purchase of merchandise is held

And cash received would be recorded when the sale of goods and services made to customers

And, the purchase of goods, sales of goods and services show in the income statement along with the expenditure to arrive at the net income i.e. shown in the operating activities

After reading it write about whether or not you agree with the academic economic consensus that independent officials running the Federal Reserve are able to properly balance their dual mandate in a fair and balanced fashion with the needs of workers in one hand and the financial industry on the other. If you agree with the consensus view explain your reasons; or if you disagree and think that the officials are biased in favor of the financial industry explain your reasoning with some possible solutions to the problem. Write at least two paragraphs articulating your views.

Answers

Answer:

The Federal Reserve has been at times biased in favor of the financial industry, because they have often put inflation targeting above the need to reduce unemployment when executing monetary policy. Besides, the financial industry has often been rescued by massive loans from the Fed.

However, the Federal Reserve has also acted in favor of reducing unemployment, specially during recessions, by expanding the money supply through a policy known as quantitative easing.

In conclusion, we can say that the Fed tends to be biased in favor of the financial industry, but not at all times.

Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company’s planning budget for May appears below: Puget Sound Divers Planning Budget For the Month Ended May 31 Budgeted diving-hours (q) 300 Revenue ($430.00q) $129,000 Expenses: Wages and salaries ($11,300 + $128.00q) 49,700 Supplies ($4.00q) 1,200 Equipment rental ($2,400 + $25.00q) 9,900 Insurance ($3,900) 3,900 Miscellaneous ($510 + $1.44q) 942 Total expense 65,642 Net operating income $63,358 During May, the company’s actual activity was 290 diving-hours. Complete the following flexible budget for that level of activity.Revenue Expenses: Wages and salaries Supplies Equipment rental Insurance Miscellaneous Total expense Net operating income

Answers

Answer:

Revenue $124,700

Expenses:

Wages and salaries 48,420

Supplies 1,160

Equipment rental 9,650

Insurance 3,900

Miscellaneous 928

Total expense$64,058

Net Operating income $60,642

Explanation:

Calculation to Complete the flexible budget for that level of activity

FLEXIBLE BUDGET

Actual diving hours 290

Revenue (290*$430) $124,700

Expenses:

Wages and salaries (11,300+290*128) 48,420

Supplies (290*4) 1,160

Equipment rental (2,400+290*25) 9,650

Insurance 3,900

Miscellaneous (510+290*1.44) 928

Total expense $64,058

Net Operating income $60,642

($124,700-$64,058)

The Year 1 selling expense budget for Apple Corporation is as follows:
Budgeted sales $275,000
Selling costs:
Delivery expenses $ 2,750
Commission expenses 5,500
Advertising expenses 2,500
Office expenses 1,500
Miscellaneous expenses 5,300
Total $17,550
Delivery and commission expenses vary proportionally with budgeted sales in dollars. Advertising and office expenses are fixed. Miscellaneous expenses include $2,000 of fixed costs. The rest varies with budgeted sales in dollars. The budgeted sales for Year 2 are $330,000.
What will be the value of miscellaneous expenses in the Year 2 selling expense budget?
A. $6,200
B. $4,200
C. $3,600
D. $3,960

Answers

Answer:

$5,960

Explanation:

Fixed portion of Miscellaneous expenses = $2,000

Variable portion of Miscellaneous expenses = ($5,300 - $2,000) / $275,000

= $3,300 / $275,000

= $0.012 of sales

Miscellaneous expenses in the Year 2 selling expense budget = (Budgeted sales * Variable portion) + Fixed portion

= ($330,000 * $0.012) + $2,000

=  $3,960 + $2,000

= $5,960

"What is the payback period for a $20,000 project that is expected to return $6,000 for the first two years and $3,000 for years three through five?"

Answers

Answer:

4.67 years.

Explanation:

PB = Years before cost recovery + (Remaining cost to recover ÷ Cash flow during the year)

= 4 + ($2,000 / $3,000)

= 4.67 years.

Edna is a leading brain surgeon in the United States. She enters into a contract to perform a complicated brain surgery on Ben. However, since Edna is very busy, she wants to assign this contract to a less experienced surgeon, Charles. This would be Charles's first operation of this type. Ben can object to this assignment and prevent it because the contract between Ben and Edna is a(n):

Answers

Complete Question:

Edna is a leading brain surgeon in the United States. She enters into a contract to perform a complicated brain surgery on Ben. However, since Edna is very busy, she wants to assign this contract to a less experienced surgeon, Charles. This would be Charles's first operation of this type. Ben can object to this assignment and prevent it because the contract between Ben and Edna is a(n):

Group of answer choices.

A. contract for services to be performed in the future.

B. contract involving personal skill.

C. services contract.

D. employment contract.

Answer:

B. contract involving personal skill.

Explanation:

In this scenario, Edna a leading brain surgeon in the United States enters into a contract to perform a complicated brain surgery on Ben. However, Edna is very busy and wants to assign this contract to a less experienced surgeon, Charles which would be his first operation of this type. Hence, Ben can object to this assignment (brain surgery) and prevent it because the contract between Ben and Edna is a contract involving personal skill.

Apparently, it can be deduced that Edna has competent and professional skills which is the reason why she's the leading brain surgeon in USA. Ben having this information at his disposal chose to go into the contract with Edna, who is an experienced brain surgeon. Therefore, the contract between the two (2) parties is solely based on Edna's personal skill.

A firm issues $300 million in straight bonds at an original issue discount of 0.50% and a coupon rate of 7%. The firm pays fees of 2.0% on the face value of the bonds. The net amount of funds that the debt issue will provide for the firm is closest to which of the following?
A)$248,625,000
B)$263,250,000
C)$277,875,000
D)$292,500,000

Answers

Answer: $292,500,000

Explanation:

The following information can be derived from the question:

Issued bond = $300

Issue discount = 0.50%

Coupon rate = 7%.

Fees paid = 2.0%

The net amount of funds that the debt issue will provide for the firm will be:

= Issued bond price - Discount - Fees paid

= $300m - ($300m × 0.50%) - ($300m × 2.0%)

= $300m - $1.5m - $6m

= $300m - $7.5m

= $292.5 Million

TB MC Qu. 6-101 Data concerning Bedwell Enterprises ... Data concerning Bedwell Enterprises Corporation's single product appear below: Selling price per unit $ 160.00 Variable expense per unit $ 91.50 Fixed expense per month $ 429,490 The unit sales to attain the company's monthly target profit of $19,000 is closest to: (Do not round intermediate calculations.) Brewer 8e Rechecks 2018-06-19

Answers

Answer:

Break-even point in units= 6,547 units

Explanation:

Giving the following information:

Selling price per unit $160

Variable expense per unit $91.50

Fixed expense per month $429,490

Desired profit= $19,000

To calculate the number of units to be sold, we need to use the break-even point formula:

Break-even point in units= (fixed costs + desired profit) / contribution margin per unit

Break-even point in units= (429,490 + 19,000) / (160 - 91.5)

Break-even point in units= 6,547 units

Interest rates can be measured more accurately and quickly than reserve aggregates; hence an interest rate is preferred to the reserve aggregates as a policy instrument.

a. True
b. False

Answers

Answer:

False

Explanation:

This is false.

In reporting reserves aggregate there are lags interest rate such as the federal interest rate are quite easy to measure and easily observable. Such short term interest rate are nominal values and they do not measure the real cost of borrowing well. It does not show accurately what happens to Gross domestic product. Real interest rate equals nominal interest rate as a ratio of reduced inflation gives a representation of true cost of borrowing.

We cannot say with certainty that interests rate is a better policy instrument based on the ground of measurability.

Computer Corp. just paid a dividend of $0.75. If the firm's growth in dividends is expected to remain at a flat 3 percent forever, then what is the cost of equity capital for Computer Corp. if the price of its common shares is currently $12.00

Answers

Answer:

9.44%

Explanation:

According to the given situation, the computation of the cost of equity capital is shown below:-

Cost of equity capital = Dividend × (1 + Expected rate of return) ÷ Common shares + Expected rate of return

Now, we will put the values into the above formula.

= ($0.75 × (1.03) ÷ $12) + 0.03

= 0.0944

or

= 9.44%

Therefore for computing the cost of equity we simply applied the above formula.

Mr. Dow bought 100 shares of stock at $17 per share. Three years later, he sold the stock for $23 per share. What is his annual rate of return

Answers

Answer:

10.60%

Explanation:

The compound annual growth rate formula stated below can be used to determine the annual rate of return on the stock investment.

CAGR=(future value/present value)^(1/n)-1

future value is the future worth of the stock after three years i.e100*$23=$2300

Present value is the initial cost of the stock which is 100*$17=$1700

n is the number of years the stocks have been owned

CAGR=($2300/$1700)^(1/3)-1=10.60%

Potential output: $8 trillion Actual output: $6 trillion Actual Deficit: $ 400 billion Tax Rate: 15% What is the structural deficit in 2010

Answers

Answer:

The structural budget in 2010 is $100 billion

Explanation:

Actual deficit = Government spending - Tax Revenue Collection  

i.e Actual deficit = G-T

T = (Tax rate) (Actual output)

$400 billion = G - (0.15)($6000 billion)

$400 billion = G - $900 billion

G =  $400 billion + $900 billion

G =  $1300 billion

Thus, Government spending is $1300 billion

Structural deficit = G - T'

T' = (Tax rate)(Potential output)

T' = (0.15)(8000 billion)

T' = $1200 billion

Structural deficit = G - T'

Structural deficit = $1300 billion - $1200 billion

Structural deficit = $100 billion

Thus, the structural budget in 2010 is $100 billion

In an emergency situation, such as a life-threatening trauma in an emergency room, a supervisor must be:_______.
a. sensitive to employees' feelings.b. an empathetic communicator.c. an apprehensive communicator.d. direct and assertive.

Answers

Answer:

d. direct and assertive.

Explanation:

In an emergency situation, such as a life-threatening trauma in an emergency room, a supervisor must be direct and assertive.

When there's an emergency situation, this ultimately implies a life and death situation which is typically characterized by having someone being in a very critical and dangerous condition. In order to be able to save such an individual or situations, it is very important and essential to have a direct and assertive supervisor who is in charge or control of the emergency situation and capable of making quick decisions that would most likely salvage the situation.

A supervisor who is assertive is confident, bold and positive about his or her instructions in any situation, which is a prerequisite quality to overcome emergencies.

The budget philosophy that ignores budget outcomes and focuses on whatever is necessary to achieve economic goals and stabilize the economy is: g

Answers

Answer:

functional finance.

Explanation:

The budget philosophy of functional finance implies that the government should do all that is necessary in order to make the economy operate at full potential. The outcomes of whatever budget preparations are ignored in philosophy of functional finance. What is most paramount is to focus on whatever that would bring growth and stability to the economy.

In the philosophy of functional finance, what is most important about balancing the federal budget is its use to promote an economy so that it can operate at full potential.

An assembly line with 17 tasks is to be balanced. The longest task is 2.4 minutes, and the total time for all tasks is 18 minutes. The line will operate for 450 minutes per day.Required:a. What are the minimum and maximum cycle times? b. What range of daily output is theoretically possible for the line? c. What is the minimum number of workstations needed if the maximum output rate is to be sought?d. What cycle time will provide an output rate of 125 units per day?

Answers

Answer

a)Minumum cycle time = 2.4 Minutes And Maximum cycle time = 18 Minutes

b)=187.5 units per day and 25 units per day

c) 8 workstation

d)2.6min/cycle

Explanation:

Given:

output rate = 125 units per day

Operating time= 450 minutes per day

What are the minimum and maximum cycle times?

Minimum Cycle time = duration of the longest task

Therefore,Minimum cycle time = 2.4 minutes

Maximum cycle time = addition of the task

Maximum Cycle Time = 18 minutes

Therefore, Minumum cycle time = 2.4 Minutes And Maximum cycle time = 18 Minutes

B)B)What range of daily output is theoretically possible for the line?

Range of daily output = Operating time / minimum Cycle time

At 2.4 minutes Cycletime

= 450/2.4

=187.5 units per day

At Cycle time 18 Minutes

= 450/18

Cycle time 18 minutes = 25 units per day

C)What is the minimum number of workstations needed if the maximum output rate is to be sought?

number of workstation=(D× summation of all task)/Operating time

number of workstation=(187.5*18)/450

= 7.5= 8 workstation

D)What cycle time will provide an output rate of 125 units per day?

cycle time= Operating time/output rate

=450/125

= 2.6min/cycle

"Net income for the period was $200,000. The retained earnings account had a beginning balance of $25,000. If the company paid dividends of $20,000 during the year, what is the ending balance in retained earnings?"

Answers

Answer:

Retained earning balance at the end would be = $205,000

Explanation:

Retained earnings at the end = Retained earning at the beginning + Net income - Dividend paid

The net income would increase the balance of the retained earnings hence it is added to it.

The Dividend paid would be a cash outflow which would reduce the balance of the retained earnings, hence it is deducted from it.

So applying this to the question, we have

Retained earning balance at the end would be:

25,000 + 200,000 - 20,000 = $205,000

Retained earning balance at the end would be = $205,000

At the beginning of 2021, Angel Corporation began offering a two-year warranty on its products. The warranty program was expected to cost Angel 8% of net sales. Net sales made under warranty in 2021 were $212 million. Fifteen percent of the units sold were returned in 2021 and repaired or replaced at a cost of $5.20 million. The amount of warranty expense on Angel's 2021 income statement is:

Answers

Answer:

$16.96 million

Explanation:

The computation of the amount of warranty expense is shown below:

= Net sales made under warranty in year 2021 × expected cost percentage to net sales

= $212 million × 0.08

= $16.96 million

We simply multiplied the net sales with the expected cost percentage so that the amount of warranty expense could come and the same is to be considered

Explain how growth in the demand for​ Australia's natural resources would affect the demand for Australian dollars in the foreign exchange market. Explain how the supply of Australian dollars would change.

Answers

Answer:

The question here is that of the balance of trade and the principles of demand and supply.  

According to the Economics principles of demand and supply, when demand is high, prices follow in the same direction and the currency appreciates in value.

So, on one hand, when the demand for Australia's natural resources increases, because the legal tender recognised within Australia's borders is its own currency, trading partners are forced to convert from their currency into the Australian dollars thus creating an increased demand for the currency.

On the other hand, if the value of a countrys imports is more than the value of its export transactions, the opposite would happen, that is, its currency depreciates or loses value.

Cheers!

Schwab’s customers can assemble their own investment portfolios with its mutual fund evaluator tool, an example of

Answers

Answer:

A choiceboard.

Explanation:

This is generally described to be a graphical view or a teaching pattern where a tutor allows the said students to use these graphical knowledge to learn and understand a concept been impacted to them at their own pace. This choiceboard is been set up for so many reasons which may include; the encouraging of communication by giving the children means to request a particular object, also giving children certain visual prompt to say the correct words, it is also seen to streamline the selection of choice down there which could be a selection of choices.

Norris Co. has developed an improved version of its most popular product. To get this improvement to the market, will cost $48 million and will return an additional $13.5 million for 5 years in net cash flows. The firm's debt-equity ratio is .25, the cost of equity is 13 percent, the pretax cost of debt is 9 percent, and the tax rate is 30 percent. What is the net present value of this proposed project?

Answers

Answer:

NPV = $1.49  million

Explanation:

The NPV is the difference between the PV of cash inflows and the PV of cash outflows. A positive NPV implies a good investment decision and a negative figure implies the opposite.  

NPV of an investment:  

NPV = PV of Cash inflows - PV of cash outflow  

But we will need to work out the discount rate to be used for discounting the cash flows. Hence, we need to determine the cost of capital as follows:

Step 1: After-tax cost of debt

After tax cost of debt = pre-tax cost of debt × (1-tax rate rate)

                                 = 9%× (1--0.3)=6.3%

Step 2 : Weighted Average cost of capital (WACC)

WACC=( 0.25×6.3%) + (0.75× 13%) =11.325 %

Step 3:Net Present Value (NPV)

PV of cash inflow= (1- (1.11325^-5)/0.11325)× 13.5 = 49.49  million

Initial cost = $48 million

NPV = 49.49  million -  $48 million  =$1.49  million

NPV = $1.49  million

Folsom Advertising, Inc. is considering an investment in a new information system. The new system requires an investment of $1,800,000 and either has

a. Even cash flows of $750,000 per year or
b. The following expected annual cash flows: $450,000, $225,000, $600,000, $600,000, and $150,000.

Required:
Calculate the payback period for each case

Answers

Answer:

Payback period=2 years 5  months

Payback period=3 years  8 months

Explanation:

The payback period is the estimated length of time in years it takes  .

It is the number of years it takes the cash project to break-even

a) Payback period

Total cash flow for two years = 750×  2 = 1500.000

Balance of cash flow required to make up= 1800000- 1500,000  300,000

Payback period = 2 years + 300,000/750,000× 12 months=  2 years 5  months

Payback period=2 years 5  months

b) Payback period

Total cash flow for 3 years = 450,000 + $225,000 +600,000=1,275 ,000

Balance o cash required to make up 1800,000 = 1,800,000 -1275,000= 525,000

Pay back period = 3 years + 525,000/750,000×  12 months

                            = 3 years  8 months

Payback period=3 years  8 months

How many years will it take for your money to double if fees are 1.5% per year (not uncommon in the mutual fund industry)?

Answers

Answer:

Doubling time: 20 years.

Explanation:

Martin Enterprises needs someone to supply it with 118,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you've decided to bid on the contract. It will cost you $785,000 to install the equipment necessary to start production costs will be $415,000 per year, and your variable production costs should be $10.05 per carton. You also need an initial investment in net working capitalof $68,000.If your tax rate is 24 percent and you require a return of 12 percent on your investment, whar bid price should you submit?

Answers

Answer:

$15.66 per carton

Explanation:

118,000 cartons of machine screws

equipment cost $785,000

depreciation per year = $785,000 / 5 = $157,000

fixed manufacturing costs $415,000 per year

variable costs per carton = $10.05 x 118,000 = $1,185,900

initial investment in net working capital $68,000

tax rate 24%

discount rate 12%

price per carton?

initial investment = -$853,000

CF₁ = [(R - $1,600,000 - $157,000) x 0.76] + $157,000 = 0.76R - $1,178,320

CF₂ = [(R - $1,600,000 - $157,000) x 0.76] + $157,000 = 0.76R - $1,178,320

CF₃ = [(R - $1,600,000 - $157,000) x 0.76] + $157,000 = 0.76R - $1,178,320

CF₄ = [(R - $1,600,000 - $157,000) x 0.76] + $157,000 = 0.76R - $1,178,320

CF₅ = [(R - $1,600,000 - $157,000) x 0.76] + $157,000 + $68,000 = 0.76R + $1,110,320

$853,000 = (0.76R - $1,178,320) / 1.12 + (0.76R - $1,178,320) / 1.12² + (0.76R - $1,178,320) / 1.12³ + (0.76R - $1,178,320) / 1.12⁴ + (0.76R + $1,110,320 ) / 1.12⁵ = 0.6786R - $1,052,071.43 + 0.6059R - $939,349.49 + 0.541R - $838,704.90 + 0.483R - $748,943.66 + 0.4312R + $630,025.39

$853,000 = 2.7397R - $4,209,094.87

$5,062,094.87 = 2.7397R

R = $5,062,094.87 / 2.7397 = $1,847,682.18

total revenue = $1,847,682.18

revenue per carton = $1,847,682.18 / 118,000 = $15.6583 = $15.66

perline, inc., has balance sheet equity of $6.2 million.At the same time, the income statement shows net income of $948600. The company paid dividends of $493272 and has 100000 shares of stock outstanding. If the benchmark PE ratio is 26, what is the target stock price in one year?

Answers

Answer:

The target stock price in one year is $264.75

Explanation:

We first calculate the ROE as below

ROE= Earnings / Book value of Equity

ROE= $948,600 / $6,200,000

ROE= 0.153

The payout ratio is:

b=  Dividend / Net income

b = $493,272 / $948,600

b = 0.52

So the sustainable growth rate is:

g = ROE * (1-b)

g = 0.153 * (1-0.52)

g = 0.153 * 0.48

g = 0.07344

The earning in the first year are

EPS1 = $948,600 / 100,000  * (1 + 0.07344)

EPS1 = $9.486 * 1.07344

EPS1 = $10.1827

According to the benchmark PE ratio, the target stock price in one year is

Price = EPS1 * 26

Price = $10.1827 * 26

Price = $264.75

_________________ agreements are one way to achieve the goal of swapping skills and technologies that each company in a strategic alliance covets, and ensuring a chance for equitable gain.
A. Join venture
B. Sharing
C. Cross-licensing
D. Learning
E. Contractual

Answers

Answer:

it should be C. cross-licensing

Problem 24-01 Liquidation Southwestern Wear Inc. has the following balance sheet: Current assets $1,875,000 Accounts payable $375,000 Fixed assets 1,875,000 Notes payable 750,000 Subordinated debentures 750,000 Total debt $1,875,000 Common equity 1,875,000 Total assets $3,750,000 Total liabilities and equity $3,750,000 The trustee's costs total $276,250, and the firm has no accrued taxes or wages. Southwestern has no unfunded pension liabilities. The debentures are subordinated only to the notes payable. If the firm goes bankrupt and liquidates, how much will each class of investors receive if a total of $4 million is received from sale of the assets? Distribution of proceeds on liquidation: 1. Proceeds from sale of assets $ 2. First mortgage, paid from sale of assets $ 3. Fees and expenses of administration of bankruptcy $ 4. Wages due workers earned within 3 months prior to filing of bankruptcy petition $ 5. Taxes $ 6. Unfunded pension liabilities $ 7. Available to general creditors $ Distribution to general creditors: Claims of General Creditors Claim (1) Application of 100% Distribution (2) After Subordination Adjustment (3) Percentage of Original Claims Received (4) Notes payable $ $ $ % Accounts payable $ $ $ % Subordinated debentures $ $ $ % Total $ $ $ The remaining $ will go to the common stockholders.

Answers

Answer:

1. Proceeds from sale of assets $ 4,000,000

2. First mortgage, paid from sale of assets 0.00

3. Fees and expenses of administration of bankruptcy 276,250

4. Wages due workers earned within 3 months prior to filing of bankruptcy petition 0.00

5. Taxes 0.0

6. Unfunded pension liabilities 0.00

7. Available to general creditors $3,723,750

Distribution to general creditors

Claim (1) =$1,875,000

Application of 100% Distribution(2)=$1,875,000

After Subordination Adjustment

(3)=$1,875,000

Percentage of Original Claims Received

(4)=$1,875,000

Explanation:

Calculation for how much will each class of investors receive if a total of $4 million is received from sale of the assets

1. Proceeds from sale of assets $ 4,000,000

2. First mortgage, paid from sale of assets 0.00

3. Fees and expenses of administration of bankruptcy 276,250

4. Wages due workers earned within 3 months prior to filing of bankruptcy petition 0.00

5. Taxes 0.00

6. Unfunded pension liabilities 0.00

7. Available to general creditors $3,723,750

Distribution to general creditors:

Claims of General Creditors

Notes payable

Claim (1) 750,000

Application of 100% Distribution

(2) 750,000

After Subordination Adjustment

(3) 750,000

Percentage of Original Claims Received

(4) 100%

Accounts payable

Claim (1) 375,000

Application of 100% Distribution

(2) 375,000

After Subordination Adjustment

(3) 375,000

Percentage of Original Claims Received

(4) 100%

Subordinated debentures

Claim (1) 750,000

Application of 100% Distribution

(2) 750,000

After Subordination Adjustment

(3) 750,000

Percentage of Original Claims Received

(4) 100%

TOTAL

Claim (1) $750,000+ 375,000+750,000=$1,875,000

Application of 100% Distribution

(2)$750,000+ 375,000+750,000=$1,875,000

After Subordination Adjustment

(3)$750,000+ 375,000+750,000=$1,875,000

Percentage of Original Claims Received

(4)$750,000+ 375,000+750,000=$1,875,000

Long-term debt ratio 0.3
Times interest earned 10.0
Current ratio 1.2
Quick ratio 1.0
Cash ratio 0.4
Inventory turnover 3.0
Average collection period 73 days

Use the above information from the tables to work out the following missing entries, and then calculate the company’s return on equity.

Net sales _____$
Cost of goods sold
Selling, general, and administrative expenses 20.00
Depreciation 30.00
Earnings before interest and taxes (EBIT) _____$
Interest expense
Income before tax _____$
Tax (35% of income before tax)
Net income _____$

Answers

12$ 18$ 35$ 14$ I think

Kiley Electronics is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the WACC (and even negative), in which case it will be rejected.

Answers

Answer:

13.31%

Explanation:

some information is missing:

Year        Cash flows

0              −$1,100

1                  $450

2                 $470

3                 $490

the easiest way to calculate the IRR is by using a financial calculator, IRR = 13.31%

but if we don't have one at hand, the IRR is the discount rate at which a project's NPV = 0

1,100 = 450/(1 + r) + 470/(1 + r)² + 490/(1 + r)³

to simplify the formula we must use trial and error:

since we already know the real IRR, I will start with a close number like 10%

1,100 = 450/(1 + 0.1) + 470/(1 + 0.1)² + 490/(1 + 0.1)³

1,100 = 409.09 + 388.43 + 368.14

1,100 ≠ 1,165.66

since the NPV is still positive, we must increase the discount rate. following the example we can use 12%

1,100 = 450/(1 + 0.12) + 470/(1 + 0.12)² + 490/(1 + 0.12)³

1,100 = 401.79 + 374.68 + 348.77

1,100 ≠ 1,125.24

we must increase the discount rate even more to 13%

1,100 = 450/(1 + 0.13) + 470/(1 + 0.13)² + 490/(1 + 0.13)³

1,100 = 398.23 + 368.08 + 339.59

1,100 ≠ 1,105.90

we keep increasing the discount rate to 14%

1,100 = 450/(1 + 0.14) + 470/(1 + 0.14)² + 490/(1 + 0.14)³

1,100 = 394.74 + 361.65 + 330.74

1,100 ≠ 1,087.13

since now the NPV is negative, the discount rate must be between 13-14%

we continue this way until we finally reach 13.31%

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