Answer:
$1,290,000
Explanation:
Goo:
Ordering and Receiving = 400 / 2,000 = 20%
Mixing = 20,000 / 50,000 = 40%
Testing = 500 / 1,500 = 33.33%
allocated overhead costs:
Ordering and Receiving = 20% x $1,200,000 = $240,000
Mixing = 40% x $1,500,000 = $600,000
Testing = 33.33% x $1,350,000 = $450,000
total allocated overhead costs = $1,290,000
Used Car Problems. Marcy purchased a used car from ABC Motors. Six months later, the police seized the car from Marcy because it was a stolen vehicle. Marcy asked for her money back from ABC Motors. The manager there told her that the car was not stolen; that even if it were stolen, ABC Motors acted in good faith with no knowledge of a theft; therefore, no refund was legally required. ABC Motors had also sold a used car to Frank, who wrote a bad check for the car and left town but not before he sold the car to Betty, who paid a fair price for the car believing that Frank had all rights to sell it. ABC Motors asked Betty to return the car, but she told ABC to forget it. Assuming that ABC Motors was an innocent purchaser from the thief, which of the following is true regarding the manager's statement that Marcy is not due a refund?
A. The manager is correct, but only if ABC Motors can prove that it had never been charged with dealing in stolen merchandise.
B. The manager is correct, but only if ABC Motors can prove that none of its representatives were negligent in disregarding evidence of the theft at any time prior to its resale to Marcy.
C. The manager is correct.
D. The manager is incorrect, but only if Marcy can prove that she specifically asked if there was any problem with the car prior to her purchase and was affirmatively told that the title was good.
E. The manager is incorrect.
Answer:
E. The manager is incorrect.
Explanation:
Since the car was stolen, ABC Motors never had good title of it. A car comes with a title and before ABC bought it from someone it should have verified that the title was good. They are merchants and their normal job is to deal with this kind of things. A car dealership cannot sell cars without a good title, and if they do, they will get in legals problems for doing so.Their problems will not only involve the buyer, but they will also be investigated to check if they were involved in the theft.
The following table lists all costs of quality incurred by Sam's Surf Shop last year. Annual inspection costs Annual cost of scrap materials Annual rework cost Annual cost of quality training Annual warranty cost Annual testing cost $ 172,000 356,000 104,679 526,000 1,686,000 535,000 What was Sam's appraisal cost for quality last year?
Answer:
$707,000
Explanation:
Calculation for Sam's appraisal cost for quality last year
Using this formula
Appraisal cost = Annual inspection costs + Annual testing cost
Where,
Annual inspection costs =$172,000
Annual testing cost=$535,000
Let plug in the formula
Appraisal cost = $172,000 + $535,000
Appraisal cost = $707,000
Therefore Sam's appraisal cost for quality last year will be $707,000.
Velocity Company estimates the following for the next year, when common stock is expected to trade at a price-earnings ratio of 7. Earnings before interest and taxes $45 million Interest expense $5 million Effective income tax rate 30% Preferred stock dividends $10 million Common shares outstanding 2 million Common stock payout ratio 25% What is Velocity's approximate expected common stock market price per share next year?
Answer:
$63
Explanation:
The computation of the expected common stock market price per share for the next year is shown below:
Price earning ratio = Share price ÷ earning per share
where
Price earning ratio is 7
Earning per share is
= (Net income - preference dividend) ÷ number of common shares outstanding
= {($45 million - $5 million) × (1 - 0.30) - $10 million)} ÷ 2 million shares
= $9
Now placing these values to the above formula
So, the expected common stock market price is
= 7 × $9
= $63
A registered representative is notified verbally by the nephew of a client that his uncle has passed away. Which statements are TRUE regarding the actions that the registered representative can take based on this information?
I The account should be immediately marked as "deceased"
II The account should be marked deceased only when instructions are received from the executor of the deceased's estate
III All open orders should be canceled immediately
IV All open orders should be canceled only when instructions are received from the executor of the deceased's estate
a. I and III
b. I and IV
c. II and III
d. II and IV
Answer: a. I and III
Explanation:
As soon as word comes through that a client has passed on, the immediate thing to do is to note the date of death and then mark the account as deceased.
After this, all open orders should be immediately cancelled. It is also best to inform a superior of the development. Any other actions would from there henceforth regarding the account is to be determined by the executor of the estate.
Answer:
d. II and IV
Explanation:
The nephew cannot freeze or cause the account to be freezed because he is not considered an immediate family of the deceased or an executor for the deceased. The account cannot be marked as deceased and all open orders cannot be cancelled yet until the executor who was appointed to administer the deceased estate gives the instruction or announces to the representative of the person's death. The representative must therefore endeavor to make enquiries or call the right people to get needed information
Sheffield Corp. determines that 53000 pounds of direct materials are needed for production in July. There are 3100 pounds of direct materials on hand at July 1 and the desired ending inventory is 2700 pounds. If the cost per unit of direct materials is $3, what is the budgeted total cost of direct materials purchases
Answer:
Budgeted total cost of Direct Material purchases ($) =$ 157,800
Explanation:
Raw material purchase budget is determined by adjusting the raw material usage budget for opening and closing inventory of materials.
Purchase budget = usage budgeted + closing inventory - Opening inventory
Material purchase budget = 53,000 + 2,700 - 3,100= 52,600 pounds
Note the closing inventory represents the stock of materials needed to be kept, hence it will increase the purchase budget. So we added.
On the other hand hands, the opening inventory represented what already existed , hence we subtracted it as it will reduce what will be required.
Material purchase budget ($) = purchase budget in quantity × standard price per quantity
Material purchase budget = 52,600 × $3 = $ 157,800
Budgeted total cost of Direct Material purchases ($) =$ 157,800
You are calculating the performance of your project. If the actual cost is $80,000, the planned value is $70,000 and the earned value is $65,000, what is the cost performance index?
Answer:
Cost performance index is 81.25%
Explanation:
Actual cost = $80,000
Planned value = $70,000
Earned value = $65,000
Cost performance index (CPI) is the ratio of earned value to actual cost and can be used to estimate the projected cost of completing the project.
CPI = EV / AC
= $65,000 / $80,000
= 0.8125
= 0.8125 x 100
= 81.25%
A comparative balance sheet and income statement is shown for Cruz, Inc.
CRUZ, INC. Comparative
Balance Sheets December 31, 2015 2014
Assets
Cash $ 94,800 $ 24,000
Accounts receivable, net 41,000 51,000
Inventory 85,800 95,800
Prepaid expenses 5,400 4,200
Total current assets 227,000 175,000
Furniture 109,000 119,000
Accum. depreciation—Furniture (17,000) (9,000)
Total assets $ 319,000 $ 285,000
Liabilities and Equity
Accounts payable $ 15,000 $ 21,000
Wages payable 9,000 5,000
Income taxes payable 1,400 2,600
Total current liabilities 25,400 28,600
Notes payable (long-term) 29,000 69,000
Total liabilities 54,400 97,600
Equity Common stock, $5 par value 229,000 179,000
Retained earnings 35,600 8,400
Total liabilities and equity $ 319,000 $ 285,000
CRUZ, INC.
Income Statement
For Year Ended December 31, 2015
Sales $ 488,000
Cost of goods sold 314,000
Gross profit 174,000
Operating expenses
Depreciation expense $ 37,600
Other expenses 89,100 126,700
Income before taxes 47,300
Income taxes expense 17,300
Net income $ 30,000
1. Assume that all common stock is issued for cash. What amount of cash dividends is paid during 2015?
2. Assume that no additional notes payable are issued in 2015. What cash amount is paid to reduce the notes payable balance in 2015?
Answer:
1. $2,800
2. $40,000
Explanation:
1. The computation of cash dividends is paid during 2015 is shown below:-
Retained earnings
Dividend paid $2,800 Beginning balance $8,400
($8,400 + $30,000
- $35,600) Net income $30,000
Total $2,800 $38,400
Ending balance $35,600
Therefore cash dividends is paid during 2015 is 2,800
2. The computation of cash amount is paid to reduce the notes payable balance in 2015 is shown below:-
Notes payable
Cash paid $40,000 Beginning balance $69,000
($69,000 - $29,000)
Total $40,000 $69,000
Ending balance $29,000
Therefore cash amount is paid to reduce the notes payable balance
in 2015 is $40,000
The Whistling Straits Corporation needs to raise $74 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. The offer price is $45 per share and the company's underwriters charge a spread of 6 percent. If the SEC filing fee and associated administrative expenses of the offering are $825,000, how many shares need to be sold? (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole number, e.g., 1,234,567.)
Answer:
1,768,913 new stocks
Explanation:
the company needs to raise amount needed to finance expansion plus SEC's filing and administrative fees = $74,000,000 + $825,000 = $74,825,000
net amount received per stock issued = stock price x (1 - underwriting fee) = $45 x (1 - 6%) = $42.30 per stock
the company needs to issue = $74,825,000 / $42.30 per stock = 1,768,912.53 = 1,768,913 new stocks
] A firm is producing 1,000 units at a total cost of $5,000. If it were to increase production to 1,001 units, its total cost would rise to $5,008. What does this information tell you about the firm?
Answer:
The question is not complete, below is an example of the completely stated question:
A firm is producing 1,000 units at a total cost of $5,000. If it were to increase production to 1,001 units, its total cost would rise to $5,008. What does this information tell you about the firm?
a. Marginal cost is $5, and average variable cost is $8.
b. Marginal cost is $8, and average variable cost is $5.
c. Marginal cost is $5, and average total cost is $8.
d. Marginal cost is $8, and average total cost is $5.
Answer:
d. Marginal cost is $8, and average total cost is $5.
Explanation:
Marginal cost of production is the change in cost, arising from the production of an additional unit of output. it is the cost of manufacturing one more unit of product. Mathematically, marginal cost is represented as:
[tex]Marginal\ cost = \frac{change\ in\ cost}{change\ in\ quantity\ produced} \\[/tex]
change in cost (ΔC) = C₂ - C₁ = 5,008 - 5,000 = 8
change in quantity produced = Q₂ - Q₁ = 1,001 - 1,000 = 1
[tex]Marginal\ cost = \frac{8}{1} = \$8[/tex]
∴Marginal Cost = $8
Average Total Cost (ATC) or average cost or unit cost is the total cost divided by the number of units produced. It is represented as
[tex]ATC =\frac{TC}{Q} \\where\\ATC = Average\ total\ cost\\\TC = Total\ cost\ = \$5,000\\Q = units\ of\ goods\ produced = 1,000\\[/tex]
∴ ATC = 5,000 ÷ 1,000 = $5
An individual is planning to set-up an education fund for her daughter. She plans to invest $7,700 annually at the end of each year. She expects to withdraw money from the fund at the end of 9 years and expects to earn an annual return of 8%. What will be the total value of the fund at the end of 9 years
Answer:
$96,154.20
Explanation:
We are to find the future value of the annuity
The formula for calculating future value = A (B / r)
B = [(1 + r)^n] - 1
A = Amount
R = interest rate
N = number of years
[(1.08)^9 - 1 ] / 0.08 = 12.487558
12.487558 x $7,700 = $96,154.20
The following data is given for the Bahia Company: Budgeted production 1,049 units Actual production 971 units Materials: Standard price per pound $1.971 Standard pounds per completed unit 12 Actual pounds purchased and used in production 11,302 Actual price paid for materials $23,169 Labor: Standard hourly labor rate $15.00 per hour Standard hours allowed per completed unit 4.3 Actual labor hours worked 5,000.65 Actual total labor costs $76,260 Overhead: Actual and budgeted fixed overhead $1,014,000 Standard variable overhead rate $27.00 per standard labor hour Actual variable overhead costs $140,018 Overhead is applied on standard labor hours. The variable factory overhead controllable variance is a.$75,397.52 unfavorable b.$75,397.52 favorable c.$27,284.90 unfavorable d.$27,284.90 favorable
Answer:
c.$27,284.90 unfavorable
Explanation:
Standard variable overhead rate =$27.00
Standard hours allowed per completed unit =4.3
Actual production unit =971
Actual variable overhead costs =$140,018
Variable factory overhead controllable variance = (Standard variable overhead rate * Standard hours allowed per completed unit * Actual production unit) - Actual variable overhead costs
Variable factory overhead controllable variance = ($27 * 4.3 * 971) - $140,018
Variable factory overhead controllable variance = $112,733.1 - $140,018
Variable factory overhead controllable variance = $27,284.9 (Unfavorable)
The open systems anchor of organizational behavior states that: 1 point A. organizations affect and are affected by their external environments. B. organizations can operate efficiently by ignoring changes in the external environment. C. people are the most important organizational input needed for effectiveness. D. organizations should avoid internal conflicts to achieve efficiency. E. organizations should be open to internal competition to be able to obtain a sustainable competitive advantage.
Answer:
A. organizations affect and are affected by their external environments.
Explanation:
An organizational behavior can be defined as the study of people's opinions, feelings, actions and how people perceive an organization.
The open systems anchor of organizational behavior states that organizations affect and are affected by their external environments. The external environment comprises of factors such as;
1. Criteria set by the regulatory agencies where the organization is operating.
2. The state of the economy, either recessionary or inflationary.
3. The policies adopted by the government.
4. The investor's needs or requirements.
5. The culture of the business environment.
Suppose the demand curve for a monopolistic competitor becomes steeper, but its average total costs do not change. What is likely to be an effect?
Answer:
The demand curve is less elastic.
Explanation:
The steeper demand curve shows that the demand had become less elastic because the steeper demand curve represents the less elastic demand while the flatter demand curve shows the more elastic demand. therefore, if the demand curve for a monopolistic competitor becomes steeper that means people are less responsive towards the quantity. So if the price increases or decreases, then people will not change their quantity more than the change in price.
Companies collect a wide variety of information about their foreign markets to decide in which countries to conduct business and which market segments in these markets they should target. What are the three major markets that exist in all foreign markets
Answer:
Consumer MarketsIndustrial MarketsGovernment MarketExplanation:
Consumer markets are where trade happens with consumption as the final aim. This means that in such markets, the end users are households as well as individual consumers who buy goods and services for their own use. Example; selling cars to people.
The Industrial Market is where trade happens between producers and manufacturers who want to turn the goods bought into finished goods or further processable goods. This is why it is also called the Business market.
In the Government market, the consumers or end users is the Government through it's various arms and levels such as state agencies at the Federal, state or municipal level.
Poseidon Marine Stores Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Poseidon uses standard costs to prepare its flexible budget. For the first quarter of the year, direct materials and direct labor standards for one of their popular products were as follows:
Direct materials: pounds per unit; per pound
Direct labor: hours per unit; per hour
Poseidon produced units during the quarter. At the end of the quarter, an examination of the labor costs records showed that the direct labor cost variance was F. Which of the following is a logical explanation for this variance?
A. The company paid a lower cost for the direct materials than allowed by the standards.
B. The company used a lower quantity of direct materials than allowed by the standards.
C. The company paid a lower cost per hour for labor than allowed by the standards.
D. The company used fewer labor hours than allowed by the standards,
Answer:
The company paid a lower cost per hour for labor than allowed by the standards.
Explanation:
The labour cost variance is the difference between the standard labour cost allowed for the actual hours worked and the actual labor cost for the same hours
The labour cost variance compares the actual cost and the standard cost for the actual labour hours paid for.
Hence , Poseidon Marine Stores Company would have paid a sum for labour cost which is lower than the standard cost.
The company paid a lower cost per hour for labor than allowed by the standards.
You are feeling overwhelmed by the number of potential goals you could set for your business unit. You ask your colleague Dan for advice on the process he uses to set goals. Which of the following suggestions from Dan is wrong? He suggests that you
Answer:
prioritize goals according to their value to the organization
Explanation:
Goal setting is an action plan that is set to motivate someone towards achieving a goal. Individuals, organizations set goals as part of their personal development plans hence must be Specific, Measurable, Action oriented, Realistic and Timely(SMART).
With regards to the above scenario, prioritizing goals according to their value to the organization is wrong. While it is important to prioritize goals, such must however be made to align with the business's strategic objectives.
It is also important to stick to goals already set instead of constantly changing them. Sometimes too, customers put pressure on business owners to consider certain goals which might be beneficial; such should also be looked into after considering their pros and cons.
The Bob Buckham Senior Center, a not-for-profit entity, serves a hot meal to senior citizens every Friday evening. All the food is donated by a local supermarket. All the food preparation and serving is done by local volunteers. If the Center had to pay for the food, it would need to spend $10,000 a year. If it had to pay for the food preparation and service, it would need to spend $12,000 a year. How should it report these contributions in its financial statements?
Food | Food preparation and service
a. Disclose in the notes | Disclose in the notes
b. Disclose in the notes | Report $12,000 revenue and expense
c. Report $10,000 revenue and expense | Disclose in the notes
d. Report $10,000 revenue and expense | Report $12,000 revenue and expense
Answer:
c. Report $10,000 revenue and expense | Disclose in the notes
Explanation:
Not-for-profit entities must report the fair value of all the goods they receive as donations. in this case, they would have to report the $10,000 worth of food received from a local supermarket. But they are not required to report the value of volunteer work, they only have to disclose it on the footnotes of their financial statements.
A customer who has routinely traded securities through your firm has placed an order to buy a security that is only listed on the Malaysian Stock Exchange. To effect the transaction, your firm must use a correspondent broker-dealer located in Malaysia that charges large special handling fees to cover Malaysian securities transfer taxes. Which statement is TRUE
Answer:
the broker-dealer must notify the customer of the additional charges prior to executing the transaction
Explanation:
In such a scenario, the statement that would be completely true is that the broker-dealer must notify the customer of the additional charges prior to executing the transaction. Since the broker is acting on behalf of the customer, then the customer needs to be notified beforehand in order for him/her to be able to analyze and decide whether or not they still want to go ahead with the transaction.
Imagine that Eveready has developed solar rechargeable batteries that cost only slightly more to produce than the rechargeable batteries currently available. These solar batteries can be recharged by sunlight up to five times, after which they are to be discarded. Unfortunately, the production process cannot be patented, so competitors could enter the market within a year. Which of the following is the best description of the product life cycle of this product?
a. Long, level beginning, and rapid ascent
b. High initial sales followed by slow decline
c. High introductory sales followed by rapid decline
d. Rapid growth followed by rapid decline
e. Moderately slow introduction, followed by modest growth, gradually leveling off
Answer: Moderately slow introduction, followed by modest growth, gradually leveling off
Explanation:
The product life cycle is the time a product takes from the introduction stage to the decline stage when it's off the market.
Based on the above scenario, the product life cycle of this product will be moderately slow introduction, followed by modest growth, gradually leveling.
This is because since it's a new product, there will be a slow introduction as people will just be getting used to the product, then as customers begin to buy the product and it's brand becomes known, there'll be a modest growth before it levels off.
A small town with one hospital has two ambulances to supply ambulance service. Requests for ambulances during nonholiday weekends average .45 per hour and tend to be Poisson-distributed. Travel and assistance time averages two hours per call and follows an exponential distribution. Find:
a. System utilization.
b. The average number of customers waiting.
c. The average time customers wait for an ambulance.
d. The probability that both ambulances will be busy when a call comes in.
Explanation:
Given: -
The number of ambulances is(m) = 2.
Arrival rate = 0.45 per hour
Service time = 2 per hour
Service rate =?
service time = 2 (Travel and assistance time averages two hours per call)
Therefore, Service rate will be 1/2 = 0.5 per hour.
a). System utilization(p) = arrival rate/mean of ambulances*service time
p = 0.45/2×0.5 = 0.45.
(b) :- The average number of customer waiting or waiting time for an ambulance is equal to:-
Arrival rate divided by the service rate ( on its corresponding service time as per table value)
I.e. Arrival time = 0.45 ÷ service rate =0.5
= 0.9 ( see table value for 0.9 with service rate as 2)
It comes to 0.229.
Therefore, the average number of customers waiting. 0.229.
(c) :- The average time customers wait for an ambulance is equal to :
No. of customers waiting for ÷ arrival rate
0.229 ÷ 0.45 = 0.508
Or 0.509 (approx. )
D) probability of Both ambulances is idle is Po = 0.378 (from the table for the value of and M=2)
So Probability of both ambulance is busy = 1-Po
= 1 - 0.378
= 0.622
Which of the following is included in the entry to record the issuance of shares of par value common stock at per share for cash?
A) Cash is debited for $294,000.
B) Common Stock is debited for $98,000.
C) Common Stock is credited for $294,000.
D) Paid-In Capital in Excess of Par-Common is debited for $196,000.
Answer:
A) Cash is debited for $294,000. and,
C) Common Stock is credited for $294,000.
Explanation:
When Shares are Issued for Cash, recognize the Assets of Cash (Debit) and also recognize an equity element - Common Stock (Credit).
Marks Company makes one product, for which it has established the following standards for materials: Average quantity of material per unit of product: 4.5 pounds Price per pound of materials, $16 During March, Marks made 10,000 units of the product, using 50,000 pounds at a total purchase price of $825,000. What is the materials price variance
Answer:
Direct material price variance= $25,000 unfavorable
Explanation:
Giving the following information:
Standard price= $16
During March, Marks made 10,000 units of the product, using 50,000 pounds at a total purchase price of $825,000.
To calculate the direct material price variance, we need to use the following formula:
Direct material price variance= (standard price - actual price)*actual quantity
Actual price= 825,000/50,000= $16.5
Direct material price variance= (16 - 16.5)*50,000
Direct material price variance= $25,000 unfavorable
The Janjua Company had the following account balances at 1/1/18:
Common Stock $65,000
Treasury Stock (at cost) 13,400
Paid-in-Capital in Excess of Par 82,000
Investments in AFS Debt Securities 40,000
FVA (AFS) 1,500 credit
Retained Earnings 22,000
On that date, the Accumulated OCI account was at its proper balance.
There were no sales or purchases of Common Stock or Investments during 2018. Prior to any adjusting journal entries related to the investments, 2018 Net Income was $10,300. No other transactions affecting Retained Earnings occurred. Fair Value of the Investments at 12/31/2018 was $41,500.
Required:
a. Prepare the 12/31/18 journal entry to adjust the investment to fair value.
b. Prepare the complete 12/31/18 Equity section of the balance sheet.
Answer:
a. Journal Entry:
Investments in Debt securities (Dr.) $1500
Fair Value of Debt securities(Cr.) $1500
b. Equity Section:
Common Stock $65,000
Retained Earnings $22,000
Treasury Stock $13,400
Revaluation of Debt securities $1,500
Explanation:
Investments in AFS Debt securities 40,000
Fair value of the investment on 12/31/2018 is $41,500
The difference between fair value and reported value will be adjusted through journal entry. The difference is of $1500 (41,500 - 40,000) is the revaluation amount of the securities.
A company had total sales of $840,000, net sales of $821,400, and an average accounts receivable of $111,000. Its accounts receivable turnover equals:
Answer:
7.4
Explanation:
accounts receivable turnover is ratio of total net sales and average account receivable.
accounts receivable turnover = total net sales/ average account receivable
Given
net sales = $821,400,
average accounts receivable = $111,000
accounts receivable turnover =$821,400/111,000 = 7.4 Answer
The basic unit in which data are stored in an accounting system is called an __________. These storage units should be so constructed as to readily receive money measurements of the __________ or ___________ in the items for which they are established.
Answer:
it would be 3 units for the first part then second answer would be 5 then the last one would be 13
Explanation:
that's why it would be asking for how many units for each storage units
Following are financial data from year-end financial statements of Portland Company for 2017, 2016 and 2015.
2017 2016 2015
Accounts receivable $136,125 $144,576 $132,000
Cost of goods sold 1,023,750 864,000 960,000
Current assets 450,000 360,000 405,000
Current liabilities 300,000 250,000 310,000
Inventory 225,000 165,000 195,000
Sales 1,642,500 1,752,000 1,200,000
Required:
Compute the following financial ratios for 2016 and 2017.
Answer:
Answers are calculated below
Explanation:
Financial ratios can be calculated according to their formulas. Both formulas and calculation are as follows
CURRENT RATIO
Current ratio = Current assets/current liabilities
Current ratio (2016) = $360,000/$250,000
Current ratio (2016) = 1.44
Current ratio (2017) = $450,000 / $300,000
Current ratio (2017) = 1.50
ACID RATIO
Acid ratio = (Current asset - inventory)/current liabilities
Acid ratio (2016) = (360,000 - 165,000)/250,000
Acid ratio (2016) = 0.78
Acid ratio (2017) = (450,000-225,000)/300,000
Acid ratio (2017) = 225,000/300,000
Acid ratio (2017) = 0.75
INVENTORY TURNOVER RATIO
Inventory turnover ratio = cost of good Sold / Average inventory
Inventory turnover ratio (2016) = 864,000/(360,000 ÷2)
Inventory turnover ratio (2016) = 864,000/180,000
Inventory turnover ratio (2016) = 4.80
Inventory turnover ratio (2017) = 1,023,750 / ( 390,000 ÷ 2)
Inventory turnover ratio (2017) = 1,023,750 / 195,000
Inventory turnover ratio (2017) = 5.25
DAYS SALE IN RECEIVABLE
Days sale in receivable = 365/Average receivable turnover ratio
Days sale in receivable (2016) = 365/ 12.67(w1)
Days sale in receivable (2016) = 28.81 days
Days sale in receivable (2017) =365/11.7(w1)
Days sale in receivable (2017) = 31.20 days
Working 1
Account receivable turnover ratio = Sales/ Average receivable
Account receivable turnover ratio (2016) = 1,752,000/138,288(w2)
Account receivable turnover ratio = 12.67 times
Account receivable turnover ratio (2017) = 1,642,500/140,351(w2)
Account receivable turnover ratio (2017) = 11.7 times
Working 2
Average receivable = (Opening + Closing) /2
Average receivable (2016) = (132,000 + 144,576) /2
Average receivable (2016) = 138,288
Average receivable (2017) = (144,576 +136,125 ) /2
Average receivable (2017) = 140,351
Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows:
Year Cash Flow
0 160,000
1 335,000
2 400,000
3 295,000
4 250,000
All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to Improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are "blocked" and must be reinvested with the government for one year. The reinvestment rate for these funds is 4 percent.
If Anderson uses a required return of 7 percent on this project, what are the NPV and IRR of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter your IRR as a percent.)
NPV
IRR %
Answer:
since the positive cash flows are blocked for one year, you have to adjust your cash flows:
year cash flow
0 -$160,000
1 $0
2 $348,400
3 $416,000
4 $306,800
5 $260,000
discount rate = 7%
using a financial calculator:
NPV = -$160,000 + $1,063,318.63 = $903,318.63
IRR = 102.94%
Suppose Rocky Brands has earnings per share of $2.33 and EBITDA of $29.3 million. The firm also has 5.3 million shares outstanding and debt of $125 million (net of cash). You believe Jared's Outdoor Corporation is comparable to Rocky Brands in terms of its underlying business, but Jared's has no debt. If Jared's has a P/E of 12.9 and an enterprise value to EBITDA multiple of 7.1, estimate the Enterprise Value of Rocky Brands by using both multiples. Which estimate is likely to be more accurate?
Answer:
enterprise value to EBITDA.
Explanation:
The computation of the value of the stock using P/E ratio is shown below:-
Stock value = (P/E ratio × EPS) × Number of shares outstanding
= (12.9 × $2.33) × 5.3 million
= 159.3021 million
Now, the computation of the value of the stock using EBITDA multiple is shown below:-
Stock value = (EBITDA multiple × EBITDA) - Net debt
= (7.1 × $29.3 million) - $125 million
= 208.03 - $125 million
= 83.03
There is no equivalent corporate debt. It is easier to make a comparison at the operating level and thus a better measure of valuation is the enterprise value to EBITDA.
A company issued 5-year, 7% bonds with a par value of $100,000. The market rate when the bonds were issued was 6.5%. The company received $102,105 cash for the bonds. Using the straight-line method, the amount of recorded interest expense for the first semiannual interest period is:
Answer:
$3,289.5
Explanation:
The computation of the amount of recorded interest expense for the first semiannual interest period is shown below:-
Amortization of premium = Premium amount ÷ Number of semi-annual periods
where
Premium amount = Par value - issue price
= $102,105 - $100,000
= $2,105
Number of semi-annual periods = 5 × 2
= 10 periods
Amortization of premium = $2,105 ÷ 10
= 210.5
Semi-annual interest expense = Face value × Coupon rate × (6 ÷ 12)
= $100,000 × 7% × (6 ÷ 12)
= $3,500
First semi-annual interest expense = $3,500 - 210.5
= $3,289.5
Suppose that the S&P 500, with a beta of 1.0, has an expected return of 13% and T-bills provide a risk-free return of 4%. a. What would be the expected return and beta of portfolios constructed from these two assets with weights in the S&P 500 of (i) 0; (ii) 0.25; (iii) 0.50; (iv) 0.75; (v) 1.0
Answer:
a. The answers are as follows:
(i) Expected of Return of Portfolio = 4%; and Beta of Portfolio = 0
(ii) Expected of Return of Portfolio = 6.25%; and Beta of Portfolio = 0.25
(iii) Expected of Return of Portfolio = 8.50%; and Beta of Portfolio = 0.50
(iv) Expected of Return of Portfolio = 10.75%; and Beta of Portfolio = 0.75
(v) Expected of Return of Portfolio = 13%; and Beta of Portfolio = 1.0
b. Change in expected return = 9% increase
Explanation:
Note: This question is not complete as part b of it is omitted. The complete question is therefore provided before answering the question as follows:
Suppose that the S&P 500, with a beta of 1.0, has an expected return of 13% and T-bills provide a risk-free return of 4%.
a. What would be the expected return and beta of portfolios constructed from these two assets with weights in the S&P 500 of (i) 0; (ii) 0.25; (iii) 0.50; (iv) 0.75; (v) 1.0
b. How does expected return vary with beta? (Do not round intermediate calculations.)
The explanation to the answers are now provided as follows:
a. What would be the expected return and beta of portfolios constructed from these two assets with weights in the S&P 500 of (i) 0; (ii) 0.25; (iii) 0.50; (iv) 0.75; (v) 1.0
To calculate these, we use the following formula:
Expected of Return of Portfolio = (WS&P * RS&P) + (WT * RT) ………… (1)
Beta of Portfolio = (WS&P * BS&P) + (WT * BT) ………………..………………. (2)
Where;
WS&P = Weight of S&P = (1) – (1v)
RS&P = Return of S&P = 13%, or 0.13
WT = Weight of T-bills = 1 – WS&P
RT = Return of T-bills = 4%, or 0.04
BS&P = 1.0
BT = 0
After substituting the values into equation (1) & (2), we therefore have:
(i) Expected return and beta of portfolios with weights in the S&P 500 of 0 (i.e. WS&P = 0)
Using equation (1), we have:
Expected of Return of Portfolio = (0 * 0.13) + ((1 - 0) * 0.04) = 0.04, or 4%
Using equation (2), we have:
Beta of Portfolio = (0 * 1.0) + ((1 - 0) * 0) = 0
(ii) Expected return and beta of portfolios with weights in the S&P 500 of 0.25 (i.e. WS&P = 0.25)
Using equation (1), we have:
Expected of Return of Portfolio = (0.25 * 0.13) + ((1 - 0.25) * 0.04) = 0.0625, or 6.25%
Using equation (2), we have:
Beta of Portfolio = (0.25 * 1.0) + ((1 - 0.25) * 0) = 0.25
(iii) Expected return and beta of portfolios with weights in the S&P 500 of 0.50 (i.e. WS&P = 0.50)
Using equation (1), we have:
Expected of Return of Portfolio = (0.50 * 0.13) + ((1 - 0.50) * 0.04) = 0.0850, or 8.50%
Using equation (2), we have:
Beta of Portfolio = (0.50 * 1.0) + ((1 - 0.50) * 0) = 0.50
(iv) Expected return and beta of portfolios with weights in the S&P 500 of 0.75 (i.e. WS&P = 0.75)
Using equation (1), we have:
Expected of Return of Portfolio = (0.75 * 0.13) + ((1 - 0.75) * 0.04) = 0.1075, or 10.75%
Using equation (2), we have:
Beta of Portfolio = (0.75 * 1.0) + ((1 - 0.75) * 0) = 0.75
(v) Expected return and beta of portfolios with weights in the S&P 500 of 1.0 (i.e. WS&P = 1.0)
Using equation (1), we have:
Expected of Return of Portfolio = (1.0 * 0.13) + ((1 – 1.0) * 0.04) = 0.13, or 13%
Using equation (2), we have:
Beta of Portfolio = (1.0 * 1.0) + (1 – 1.0) * 0) = 1.0
b. How does expected return vary with beta? (Do not round intermediate calculations.)
There expected return will increase by the percentage of the difference between Expected Return and Risk free rate. That is;
Change in expected return = Expected Return - Risk free rate = 13% - 4% = 9% increase
