Answers
Answer:
First option - $2067
second option - $340
third option - $62
not acceptable - ($615)
Explanation:
Please find attached the question used in answering this question.
Net present value is the present value of after tax cash flows from an investment less the amount invested.
Only projects with a positive NPV should be accepted. A project with a negative NPV should not be chosen because it isn't profitable.
When choosing between positive NPV projects, choose the project with the highest NPV first because it is the most profitable.
Related Questions
Consider the following: Year Population (Millions) Real GDP ($ Billions) GDP Deflator 2018 121 2019 125 Calculate the percentage change in per capita real GDP between 2018 and 2019: nothing%. (Enter your response as a percentage rounded to two decimal places.)
Answers
Answer: 3.59%
Explanation:
Real GDP per capita is the Real GDP divided by the population of the country.
Real GDP per Capita 2018
= 1,150,000,000/ 10,080,000
= 114.0873
= $114.0873
Real GDP per Capita 2019
= 1,430,000,000/ 12,100,000
= $118.1818
Percentage Change
= [tex]\frac{118.1818 - 114.0873}{114.0873}[/tex]
= 3.59%
Lake Incorporated purchased all of the outstanding stock of Huron Company, paying $1,000,000 cash. Lake assumed all of the liabilities. Book values and fair values of acquired assets and liabilities were: Book Value Fair Value Current assets (net) $ 190,000 $ 125,000 Property, plant, equip. (net) 650,000 765,000 Liabilities 255,000 255,000 Lake would record goodwill of
Answers
Answer:
Lake would record goodwill of $365,000
Explanation:
Fair value of net assets = Fair value of current asset + Fair value of property, plant and equipment
Fair value of net assets = $125,000 + $765,000
Fair value of net assets = $890,000
Fair market value = Fair value of net assets - Liabilities assumed
Fair market value = $890,000 - 255,000
Fair market value = $635,000
Goodwill = Consideration - Fair market value
= $1,000,000 - $635,000
= $365,000
Hence, the amount of goodwill is $365,000.
Uchdorf Company invested $9,000,000 in a new product line. The life cycle of the product is projected to be 7 years with the following net income stream: $360,000, $360,000, $600,000, $1,080,000, $1,200,000, $2,520,000, and $1,444,000.
Required:
Calculate the ARR.
Answers
Answer:
Accounting rate of return = 24.10%
Explanation:
The accounting rate of return is the average annual income expressed as a percentage of the average investment.
The simple rate of return can be calculated using the two formula below:
Accounting rate of return
= Annual operating income/Average investment × 100
Average investment = (Initial cost + scrap value)/2
Average profit = Total profit over investment period / Number of years
Total profit = 360,000 + 360,000 + 600,000 +1,080,000, + 1,200,000 + 2,520,000 + 1,444,000 = 7,564,000.00
Average annual profit = 7,564,000/7 = 1,080,571.43
Average Investment = 9,000,000/2= 4500000
Accounting rate of return = 1,080,571.43 /4,500,000 × 100 = 24.10%
Accounting rate of return = 24.10%
Suppose Real GDP is $700 billion and Natural Real GDP is $620 billion. To eliminate this ________________gap, Keynesian theory indicates that government should ______________________.
Answers
Answer: d. inflationary; decrease government purchases or increase taxes
Explanation:
Suppose Real GDP is $700 billion and Natural Real GDP is $620 billion. To eliminate this inflationary gap, Keynesian theory indicates that government should decrease government purchases or increase taxes.
The Real GDP is greater than the Natural real GDP which is the potential GDP. When that happens the Economy is said to be overheated and producing above its limits as Aggregate Demand is above Aggregate Supply.
To combat this the Government according to Keynes should embark on policy that will reduce economic activity. The Government can use Contractionary Fiscal Policy that will see it reduce its spending and/or increase taxes. Both of these will have the effect of reducing the amount of money in the economy left for both investment and consumption and cause a fall in the Aggregate Demand.
Suppose the 2020 adidas financial statements contain the following selected data (in millions). Current assets $4,575 Interest expense $200 Total assets 9,000 Income taxes 178 Current liabilities 3,050 Net income 236 Total liabilities 5,670 Cash 800 Compute the following values. (a) Working capital. $ millions (b) Current ratio. (Round to 2 decimal places, e.g. 6.25:1.) :1 (c) Debt to assets ratio. (Round to 0 decimal places, e.g. 62%.) % (d) Times interest earned.
Answers
Answer:
a. $1,525 million
b. 1.50 times
c. 29 %
Explanation:
Working capital = Current Assets - Current Liabilities
= $4,575 million - $3,050 million
= $1,525 million
Current Ratio = Current Assets ÷ Current Liabilities
= $4,575 million ÷ $3,050 million
= 1.50 times
Debt to Asset ratio = Interest bearing Debt / Total Assets × 100
= ($ 5,670 - $3,050) / $9,000 × 100
= 29 %
The strategic appeal of related diversification is that it Multiple Choice allows a firm to reap the competitive advantage benefits of skills transfer, lower costs (due to economies of scope), cross-business use of a powerful brand name, and/or cross-business collaboration in creating stronger competitive capabilities. is less capital intensive than unrelated diversification because related diversification emphasizes getting into cash cow businesses (as opposed to cash hog businesses). involves diversifying into industries having the same kinds of key success factors. is less risky than unrelated diversification because it avoids the acquisition of cash hog businesses. facilitates the achievement of greater economies of scale since the company only enters those businesses that serve the same types of buyer groups and/or buyer needs.
Answers
Answer: allows a firm to reap the competitive advantage benefits of skills transfer, lower costs (due to economies of scope), cross-business use of a powerful brand name, and/or cross-business collaboration in creating stronger competitive capabilities.
Explanation:
Related diversification is when an organization expands its business by producing products which are similar to what it currently produces. In related diversification, there's identical product lines. An example is a computer manufacturer producing calculators.
Organizations that go into related diversification enjoys lower costs and competitive advantage over their counterparts.
How would you respond to the argument that it is impossible to judge how successful a project like this one would have been unless you actually do it
Answers
Answer:
Explain forecasting
Explanation:
This implies that I will have to let the other person know that it possible to judge how successful a project would be by doing what is called forecasting.
Forecasting allows one to project to a reasonable extent what the success level of a project would be, especially in terms of it's revenue, overall expenses before the project is carried out. A good forecasting tool is Forecast web application which provides future estimates of budget and task duration.
The face value is $81,000, the stated rate is 10%, and the term of the bond is eight years. The bond pays interest semiannually. At the time of issue, the market rate is 8%. What is the present value of the bond at the market rate?
Present value of $1:
4% 5% 6% 7% 8%
15 0.555 0.481 0.417 0.362 0.315
16 0.534 0.458 0.394 0.339 0.292
17 0.513 0.436 0.371 0.317 0.270
18 0.494 0.416 0.350 0.296 0.250
19 0.475 0.396 0.331 0.277 0.232
a. $91,561
b. $47,773
c. $43,673
d. $84,788
Answers
Answer:
The Present Value of the bond at the market rate = $90,438.36
Explanation:
The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).
Value of Bond = PV of interest + PV of RV
The value of bond can be worked out as follows:
Step 1
PV of interest payments
Semi annul interest payment
= 10% × 81000 × 1/2 = 4050
Semi-annual yield = 8%/2= 4 % per six months
Total period to maturity (in months)
= (2 × 8) = 16 periods (Note the bond term is 8 yeras)
PV of interest = 4050 × (1-1.04^(-16))/0.04 = 47,191.79
Step 2
PV of Redemption Value
Assuming a redemption value equals to the nominal value =
PV of RV = 81,000 × 1.04^-16 = 43,246.56
Step 3 :Total Present Value
Total prent value = 43,246.56 + 47,191.79721 = 90,438.36
The Present Value of the bond at the market rate = $90,438.36
Disclosure of interest and income tax paid if the indirect method is used. Primary objectives of a statement of cash flows. Disclosure of noncash investing and financing activities.
Answers
Answer with Explanation:
The disclosure of interest and income tax paid if the indirect method is used is cited at FASB ACS 230-10-50-2 under the title "Statement of Cashflows-Overall Disclosure-Interest and Income Taxes Paid".The primary objectives of a statement of cash flows is cited at FASB ACS 230-10-10-1 under the title "Statement of Cashflows-Overall Objective".The disclosure of noncash investing and financing activities is cited at FASB ACS 230-10-50-3 under the title "Statement of Cashflows-Overall Disclosure-Noncash Investing and Financing Activities".Gideon Company uses the direct write-off method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. The entry or entries Gideon makes to record the write off of the account on May 3 is
Answers
Answer and Explanation:
The Journal entry is shown below:-
Bad debts expense Dr, $2,000
To Accounts receivable-Hopkins $2,000
(Being write off is recorded)
Here we debited the bad debt expenses as it increased the expenses and we credited the accounts receivable as it reduced the assets so that the proper posting could be done
Firms with high capital intensity ratios have found ways to lower this ratio permitting them to achieve a given level of growth with fewer assets and consequently less external capital. For example, just-in-time inventory systems, multiple shifts for labor, and outsourcing production are all feasible ways for firms to reduce their capital intensity ratios. True or False
Answers
Answer: True
Explanation:
The capital intensity ratio of a company
is used to measure the amount of capital that is required per dollar of revenue. The capital intensity ratio is calculated when the total assets that a company has is divided by its sales.
It should be noted that firms that has high capital intensity ratios have found ways to lower this ratio which allows them to achieve a given level of growth with fewer assets and consequently less external capital.
A stock has had returns of 12 percent, 19 percent, 21 percent, −12 percent, 26 percent, and −5 percent over the last six years. What are the arithmetic and geometric average returns for the stock? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Answers
Answer:
Average rate of return= 10.17 %
Geometric return = 9.23%
Explanation:
Geometric average return
This is compounded annual rate of return which is used to measure the performance of an asset over a certain number of years. It helps to measure the return generated by an investment taking into account the volatility .
Unlike the arithmetic average the geometric average gives an idea of the real rate taking into account of volatility
The formula below
Geometric Return =(1+r1) (1+r2) ...... (1+rn)^1/n
Geometric Average return =
(1.12× 1.19× 1.21× 0.88× 1.26× 0.95)^(1/6) - 1 =0.09233168
Geometric return =0.0923 × 100= 9.23%
Geometric return = 9.23%
Average rate of return
The average return is the sum of the returns over the years dividend by the Numbers of returns
Average return = sum of return / No of returns
(12% + 19% + 21% + (12%) + 26% + (5%))/6 =10.17 %
Average rate of return= 10.17 %
Geometric return = 9.23%
A decline in the domestic real interest rate would cause a ________ in net exports and a ________ in the exchange rate.
Answers
Answer: fall; rise
Explanation:
The real interest rate is the rate of interest that is received by an investor, lender or after inflation has been taken into consideration.
The real interest rate is when the inflation rate is deducted from the nominal interest rate. A reduction in the domestic real interest rate would cause a fall in net exports and a rise in the exchange rate.
U.S. net capital outflow Group of answer choices is a source of the supply of loanable funds, and the source of the supply of dollars in the foreign exchange market. is a source of the supply of loanable funds, and a source of the demand for dollars in the foreign exchange market. is a part of the demand for loanable funds, and the source of the supply of dollars in the foreign exchange market. is a part of the demand for loanable funds, and a source of the demand for dollars in the foreign exchange market.
Answers
Answer:
Option D would be the correct choice.
Explanation:
The net capital outflow has been the discrepancy among purchasing foreign assets from a region, as well as selling domestic currency worldwide. Find a basket of products similar across both the United States or even just Taiwan. Such net capital outflows allude to something like the disparity between households and businesses acquiring overseas investments versus non-residents acquiring domestic currency.The other options in question aren't relevant to the particular context. So choice D is perhaps the right one.
Which of the following is not one of the benefits of outsourcing, whether domestically or internationally, value chain activities presently performed in-house? A. Preventing a company from hollowing out its technical know-how, competencies, or capabilities. B. Streamlining company operations in ways that improve organizational flexibility and cut the time it takes to get new products into the marketplace. C. Allowing a company to concentrate on its core business, leverage its key resources, and do even better what it already does best. D. Helping a company assemble diverse kinds of expertise easily and efficiently. E. Improving a company’s ability to innovate.
Answers
Answer: A. Preventing a company from hollowing out its technical know-how, competencies, or capabilities.
Explanation:
Outsourcing is the practice whereby organizations hire an outside party to help do certain functions wguvg could have been done by the workers in the organization but outsourced in order to focus on other production areas.
Out of the options given in the question, the one which is not a benefits of outsourcing, whether domestically or internationally, value chain activities presently performed in-house is that "preventing a company from hollowing out its technical know-how, competencies, or capabilities".
Preventing a company from hollowing out its technical know-how, competencies, or capabilities is not benefits of outsourcing, hence option A is correct.
Outsourcing is the process of hiring an outside party to assist with some duties that might have been performed by employees within the firm but were outsourced in order to focus on other areas of production.
"Preventing a company from hollowing out its technical know-how, competencies, or capabilities" is not a benefit of outsourcing, whether domestically or internationally, value chain tasks now conducted in-house.
Thus, the option A is correct.
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A list of financial statement items for Splish Brothers Inc. includes the following: accounts receivable $30,100, prepaid insurance $5,590, cash $22,360, supplies $8,170, and debt investments (short-term) $17,630.
Prepare the current assets section of the balance sheet listing the items in the proper sequence.
(List current assets in order of liquidity.)
Answers
Answer: Please find answers below
Explanation:
The Order of liquidity shows how assets of a company are presented in a balance sheet in an order that shows the faster the time taken for an asset to be converted to Cash.
The order in which Current accounts are represented as as follows
--- Cash (including currency, checking accounts, and petty cash),
----Short-term investments ,
----Accounts receivable,
---- Inventory,
-----Supplies,
----- Pre-paid expenses.
Current Assets of Splish Brothers Inc. in order of liquidity
Current Assets Amount
Cash $22,360
Debt investments(short term) $17,630
Accounts receivables $30,100
Supplies $8,170
Prepaid Insurance $5,590
Total Current Accounts $83,850
An investor has a $1,000,000 portfolio that is split evenly between "blue chip" stocks and Treasury securities. The current economic environment is characterized by low interest rates and flat stock prices - and this is expected to remain unchanged for a number of years. However, the residential and commercial real estate market is expected to be strong. The investor would like to diversify the portfolio and enhance returns without adding much additional risk. Which of the following investment purchase recommendations would help achieve this objective?A. Mortgage REITsB. Mortgage BondsC. Equity REITsD. Fannie Mae Pass-Through Certificates
Answers
Answer:
Correct Answer:
B. Mortgage Bonds
Explanation:
Since residential and commercial real estate market is expected to be strong for a number of years, the best investment would be a mortage bond.
A mortgage bond is a bond in which holders have a claim on the real estate assets put up as its collateral. The lender might sell a collection of mortgage bonds to an investor, who then collects the interest payments on each mortgage until it's paid off. If the mortgage owner defaults, the bondholder gets her house.
Webcom. Inc. had the following current assets and current liabilities at the end of two recent years:
Current Year (in millions) Previous Year (in millions)
Cash and cash equivalents $8,297 $4,067
Short-term investments, at cost 422 458
Accounts and notes receivable, net 7,041 6,912
Inventories 3,581 3,827
Prepaid expenses and other current assets 1,479 2,377
Short-term obligations 4,815 6,205
Accounts payable 12,774 11,949
Requried:
a. What is the Current Ratio for the current year?
b. What is the Current Ratio for the preceding year?
c. What is the Quick Ratio for the current year?
d. What is the Quick Ratio for the preceding year?
e. What is the Working Capital for the current year?
f. What is the Working Capital for the preceding year?
Answers
Answer:
a. Current Ratio for the current year = 1.18
b. Current Ratio for the preceding year = 0.97
c. Quick Ratio for the current year = 0.98
d. Quick Ratio for the preceding year = 0.76
e. Working Capital for the current year = $3,231
f. Working Capital for the preceding year = –$513
Explanation:
Based on the information provided in the question, we first state the following formula to be used before answering the question:
Current asset = Cash and cash equivalents + Short-term investments, at cost + Accounts and notes receivable, net + Inventories + Prepaid expenses and other current assets ................... (1)
Current liabilities = Short-term obligations + Accounts payable ................. (2)
Current ratio = Current assets / Current liabilities ............................ (3)
Quick Ratio = (Current assets - Inventory) / Current liabilities ............... (4)
Working capital = Current assets - Current Liabilities ........................... (5)
We now calculate the answers as follows:
a. What is the Current Ratio for the current year?
Using equation (1), we have:
Current asset for the current year (in millions) = $8,297 + $422 + $7,041 + $3,581 + $1,479 = $20,820
Using equation (2), we have:
Current liabilities for the current year (in millions) = $4,815 + $12,774 = $17,589
Using equation (3), we have:
Current ratio for the current year = $20,820 / $17,589 = 1.18
b. What is the Current Ratio for the preceding year?
Using equation (1), we have:
Current asset for the preceding year (in millions) = $4,067 + $458 + $6,912 + $3,827 + $2,377 = $17,641
Using equation (2), we have:
Current liabilities for the preceding year (in millions) = $6,205 + $11,949 = $18,154
Using equation (3), we have:
Current ratio for the preceding year = $17,641 / 18,154 = 0.97
c. What is the Quick Ratio for the current year?
Using equation (4) and calculations from part a, we have:
Quick Ratio for the current year = ($20,820 - 3,581) / $17,589 = 0.98
d. What is the Quick Ratio for the preceding year?
Using equation (4) and calculations from part b, we have:
Quick Ratio for the preceding year = ($17,641 - 3,827) / $18,154 = 0.76
e. What is the Working Capital for the current year?
Using equation (5) and calculations from part a, we have:
Working Capital for the current year = $20,820 - $17,589 =$3,231
f. What is the Working Capital for the preceding year?
Using equation (5) and calculations from part b, we have:
Working Capital for the preceding year = $17,641 - $18,154 = –$513
In the Assembly Department of Hannon Company, budgeted and actual manufacturing overhead costs for the month of April 2017 were as follows.
Budget Actual
Indirect materials $14,200 $13,700
Indirect labor 19,100 19,900
Utilities 11,400 12,100
Supervision 4,600 4,600
All costs are controllable by the department manager.
Prepare a responsibility report for April for the cost center.
Answers
Answer:
HANNON COMPANY
Assembly Department
Manufacturing Overhead Cost Responsibility Report
For the Month Ended April 30,2017
Controllable Cost Budget$ Actual$ Difference$ Remark
Indirect materials 14,200 13,700 500 Favourable
Indirect Labor 19,100 19,900 -800 Unfavourable
Utilities 11,400 12,100 -700 Unfavourable
Supervision 4,600 4,600 0 None
Total 49,300 50,300 -1,000 Unfavourable
The "TAO" approach to digital marketing analytics stands for.
Answers
Answer:
The "TAO" approach to digital marketing stands for the way through which digital marketers can make themselves heard in the digital world in the midst of all the digital noise. He believed that, apprenticeships is the best way.
This offers the person a great way to gain both knowledge and experience while getting paid at the same time. For example,there are more and more apprenticeship bodies someone can engage with like The Juice Academy and Arch Apprentices.
Explanation:
Eastern Corporation has $1,000 par value bonds with 4 years to maturity. The bonds pay an 8% coupon rate with semi-annual coupon interest payments. The bond's closing price is quoted at 101.25. Suppose you purchase the bond for the closing price. What is the bond's yield to maturity?
Answers
Answer:
7.64%
Explanation:
For computing the yield to maturity we have to applied the RATE formula i.e to be shown in the attachment
Given that,
Present value = $1,000 × 101.25 = $1,012.50
Future value or Face value = $1,000
PMT = 1,000 × 8% ÷ 2 = $40
NPER = 4 years × 2 = 8 years
The formula is shown below:
= Rate(NPER;PMT;-PV;FV;type)
The present value come in negative
So, after applying the above formula,
The yield to maturity is
= 3.82% × 2
= 7.64%
The bond's yield to maturity:
Given Information,
Present value = $1,000 × 101.25 = $1,012.50 Future value or Face value = $1,000 PMT = 1,000 × 8% ÷ 2 = $40 NPER = 4 years × 2 = 8 years
Yield to maturity = 3.82% × 2
Yield to maturity= 7.64%
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Denver Company, a calendar year corporation, had the following actual income before income tax expense and estimated effective annual income tax rates for the first two quarters in year x8: quarter income before tax estimated tax rate first $100k 30% second $140k 24% Denver's income tax expense in its interim income statement for the second quarter should be:
Answers
Answer:
Denver Company
Income Tax Expense for the second quarter:
Pre-tax quarter income = $140,000
Estimated tax rate = 24%
Tax Expense = $140,000 x 24%
= $33,600
Explanation:
a) Data:
Quarter income before tax estimated tax rate
first $100k 30%
second $140k 24%
b) Denver's quarter second income tax expense is the product of the pretax income for the second quarter and the estimated income tax rate for the quarter. The resulting calculation shows the estimated income tax expense that has to be settled by Denver. If it is not settled in the quarter second period, it has to be carried forward to the next quarter as a liability under the heading, Income Tax Payable.
Rent expense of $3,000 is allocated to Department A and Department B based on square footage. Department A has 5,000 square feet and Department B has 2,500 square feet.
The dollar amount of rent expense allocated to Department B is:_______
Answers
Answer:
$1,000
Explanation:
Calculation for the Dollar amount of rent expense allocated to department B
Using this formula
Expense allocated to Department B= Rent expense allocated to Department A and B* Department B square feet/Department A and Department B Square foot
Let plug in the formula
Expense allocated to department B =$3,000*2,500/5,000+2,500
Expense allocated to department B= $3,000 * 2,500 / 7,500
Expense allocated to department B =$7,500,000/7,500
Expense allocated to department B= $1,000
Therefore the Dollar amount of rent expense allocated to department B will be $1,000
The smartest thing a firm involved in an oligopoly market could do is to cut their prices and capture more of the market share from their competitors.
a) We learned in class that the best move would be to raise prices.
b) We also learned that cutting prices on an elastic demand curve will be a smart way of getting more revenues.
c) Cutting prices is no gaurantee of success. Indeed if the firm does capture more market share and customers, then their costs will go up and it will be harder for them because they will have lower profit margins - if they can earn any profit at all.
d) Both A and C are correct.
Answers
Answer:
Correct Answer:
c) Cutting prices is no gaurantee of success. Indeed if the firm does capture more market share and customers, then their costs will go up and it will be harder for them because they will have lower profit margins - if they can earn any profit at all.
Explanation:
An oligopoly market is a market form wherein a market or industry is dominated by a small group of large sellers. A pure monopoly maximizes profits by producing that quantity where marginal revenue = marginal cost. however, it is much more difficult for an oligopoly to determine at what output it can maximize its profit.
Skyline Corp. will invest $210,000 in a project that will not begin to produce returns until the end of the 3rd year. From the end of the 3rd year until the end of the 12th year (10 periods), the annual cash flow will be $46,000. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Calculate the net present value if the cost of capital is 12 percent.
Answers
Answer:
$-2,801.13
Explanation:
Net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
Cash flow in year 0 = $-210,000
Cash flow each year from year 1 to 2 = 0
Cash flow each year from year 3 to 12 = $46,000.
I = 12%
NPV = $-2,801.13
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
The simple rate of return is also called all of the following except ________. annual rate of return unadjusted rate of return accounting rate of return
Answers
Answer: annual rate of return
Explanation:
The simple rate of return is also called the unadjusted rate of return or the accounting rate of return.
The simple rate of return is calculated when the incremental net operating income for the year is taken and then divided by the initial investment.
It should be noted that it's not called the annual rate of return.
Suspect Corp. issued a bond with a maturity of 30 years and a semiannual coupon rate of 6 percent 4 years ago. The bond currently sells for 95 percent of its face value. The book value of the debt issue is $45 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 15 years left to maturity; the book value of this issue is $50 million and the bonds sell for 54 percent of par. The company’s tax rate is 40 percent.Required:a. What is the company’s total book value of debt?b. What is the company’s total market value of debt? c. What is your best estimate of the aftertax cost of debt?
Answers
Answer and Explanation:
The computation of each point is shown below:-
But before that we need to do the following calculations
First Issue of Bonds:
Face Value = $45,000,000
Market Value = 95% × $45,000,000
= $42,750,000
Annual Coupon Rate = 6%
Semiannual Coupon Rate = 3%
= 3% × $45,000,000
= $1,350,000
Time to Maturity = 26 years
Semiannual Period to Maturity = 52
Let semiannual YTM be i%
$42,750,000 = $1,350,000 × PVIFA(i%, 52) + $45,000,000 × PVIF(i%, 52)
N = 52
PV = -42750000
PMT = 1350000
FV = 45000000
I = 3.20%
Semiannual YTM = 3.20%
Annual YTM = 2 × 3.20%
Annual YTM = 6.40%
Before-tax Cost of Debt = 6.40%
After-tax Cost of Debt = 6.40% × (1 - 0.40)
= 3.84%
Second Issue of Bonds:
Face Value = $50,000,000
Market Value = 54% × $50,000,000
= $27,000,000
Time to Maturity = 15 years
Semiannual Period to Maturity = 30
Let semiannual YTM be i%
$27,000,000 = $50,000,000 × PVIF(i%, 30)
Using a financial calculator:
N = 30
PV = -27000000
PMT = 0
FV = 50000000
I = 2.075%
Semiannual YTM = 2.075%
Annual YTM = 2 × 2.075%
= 4.15%
Before-tax Cost of Debt = 4.15%
After-tax Cost of Debt = 4.15% × (1 - 0.40)
= 2.49%
a. The total book value of debt is
Total Book Value of Debt = $45,000,000 + $50,000,000
= $95,000,000
b. The total market value of debt is
Total Market Value of Debt = $42,750,000 + $27,000,000
= $69,750,000
c. The estimate of the aftertax cost of debt is
Weight of first Issue of Debt is
= $42,750,000 ÷ $69,750,000
= 0.6129
Weight of second issue of Debt
= $27,000,000 ÷ $69,750,000
= 0.3871
So,
Estimated After-tax Cost of Debt is
= 0.6129 × 3.84% + 0.3871 × 2.49%
= 3.32%
If a perfectly competitive firm and a monopolistic competitor in long-run equilibrium face the same demand and cost curves, then the competitive firm will produce a
Answers
Answer: a. the former will earn zero economic profits, but the latter will earn positive economic profits.
Explanation:
In the long-run, conditions are different for Monopolies and Perfectly competitive firms.
In the long -run, a Perfectly competitive firm would see no economic profits due to the low barriers to entry in the market which will see companies coming into the market and increasing competition to a point where no single firm can make an economic profit.
With a Monopoly though, they are the single supplier in the market and as such will make economic profits in the long run from charging consumers are a rate higher than their marginal cost. As they are the only or major ones in the market, the price will not be challenged leading to an economic profit.
If a perfectly competitive firm and a Monopoly had the same demand and cost curves, the Perfect competition firm would make less as their cost curves would be close or at the same level with the demand but the cost curves would be less than demand for the Monopoly leading to economic profits.
Carpenter Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 2,400 units. The costs and percentage completion of these units in beginning inventory were: 2 points Percent Complete 60% 55% Cost $ 7,000 $10,300 Materials costs Conversion costs 01:53:47 A total of 10,500 units were started and 8.900 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month: eBook Materials costs Conversion costs $ 96,800 $171,000 References The ending inventory was 85% complete with respect to materials and 70% complete with respect to conversion costs.
How many units are in ending work in process inventory in the first processing department at the end of the month?
a. 4,000
b. 1,800
c. 8.100
d. 1,600
Answers
Answer:
a. 4,000
Explanation:
Units in ending inventory
= Units in beginning work in process + Units started into production - Units transferred to the next department
= 2,400 + 10,500 - 8,900
= 4,000 units
If network externalities exist in an industry, the ________ firm to enter the market is often the one that succeeds in dominating the industry.
Answers
Answer: first
Explanation:
Network externality simply has to with how the demand for a product by other consumers influences ones decision to buy that particular product or service.
When network externalities exist in an industry, it should be noted that the first firm to enter the market is often the one that succeeds in dominating the industry. This is because it is from this particular firm that the consumers will make purchases from .
