Answer:
The correct answer is D)
The aggregate demand curve will shift left.
Aggregate supply is stimulated only by labour, capital, and technology.
Equilibrium refers to the price point where demand or supply intersect.
Cheers!
Mobility Partners makes wheelchairs and other assistive devices. For years it has made the rear wheel assembly for its wheelchairs. A local bicycle manufacturing firm, Trailblazers, Inc., offered to sell these rear wheel assemblies to Mobility. If Mobility makes the assembly, its cost per rear wheel assembly is as follows (based on annual production of 2,000 units): Direct materials $ 26 Direct labor 53 Variable overhead 21 Fixed overhead 49 Total $ 149 Trailblazers has offered to sell the assembly to Mobility for $110 each. The total order would amount to 2,000 rear wheel assemblies per year, which Mobility's management will buy instead of make if Mobility can save at least $20,000 per year. Accepting Trailblazers's offer would eliminate annual fixed overhead of $38,500. Required: a. Prepare a schedule that shows the total differential costs. (Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.)
Answer and Explanation:
The preparation of the total differential cost schedule is presented below
Schedule showing statement of total differential cost
Particulars Make the wheels Buy from trailblazers Differential cost
Offer of trailblazer $220,000 $220,000 Higher
(2000 × $110)
Material cost $52,000 $52,000 Lower
($26 × 2000)
Labor cost $106,000 $106,000 Lower
($53 × 2000)
Variable overhead $42000 $42,000 Lower
($21 × 2000)
Fixed overhead $98000 $59,500 $38,500 Lower
($49 × 2000) ($98,000 -$38,500)
Total cost $298,000 $279,500 ($18,500) Lower
By adding the total cost we can get the making cost, buying cost and differential cost
Zoum Corporation had the following transactions during the year: Issued $250,000 of par value common stock for cash. Recorded and paid wages expense of $120,000. Acquired land by issuing common stock of par value $100,000. Declared and paid a cash dividend of $20,000. Sold a long-term investment (cost $8,000) for cash of $6,000. Recorded cash sales of $800,000. Bought inventory for cash of $320,000. Acquired an investment in Zynga stock for cash of $42,000. Converted bonds payable to common stock in the amount of $1,000,000. Repaid a 6-year note payable in the amount of $440,000. What is the net cash provided by financing activities?
Answer:
-$210,000
Explanation:
Issued Common Stock at par for Cash $250,000
Less:
Declared and paid a cash dividend $20,000
Repayment of 6-year note payable $440,000
Net Cash provided by Financing Activities ($210,000)
Poe Company is considering the purchase of new equipment costing $80,000. The projected net cash flows are $35,000 for the first two years and $30,000 for years three and four. The revenue is to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Poe requires a 10% return on its investments. The present value of $1 and present value of an annuity of $1 for different periods is presented below. Compute the net present value of the machine.Periods Present Valueof $1 at 10% Present Value of anAnnuity of $1 at 10%1 0.9091 0.90912 0.8264 1.73553 0.7514 2.48694 0.6830 3.1699
Answer:
NPV = $23,773.65
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 = $-80,000
Cash flow each year for 1 and 2 = $35,000
Cash flow each year for 3 and 4 = $30,000
I = 10%
NPV = $23,773.65
To find the NPV using a financial calacutor:
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
I hope my answer helps you
Stahlmaere Inc. is a start-up company that manufactures simple machines. It is interested in analyzing the profit from a new machine using Monte Carlo simulation. It wants to investigate the profit resulting from a selling price of $150 per unit. The setup and advertising costs are known to total $75,000. They assume that the demand for the product is normally distributed with a mean of 1500 units and a standard deviation of 100 units. The company estimates that the raw material cost per unit is uniformly distributed between $5 and $6. The labor cost per unit is assumed to follow a discrete uniform distribution from $12 to $16. A junior analyst has devised the following Excel spreadsheet that simulates a single scenario using the information given above: Selling price per unit = 150 Set up and advertising cost = 75000 Demand = =NORM.INV(RAND(),1500,100) Raw material cost per unit = =5+(6-5)*RAND() Labor cost per unit = =RANDBETWEEN(12,16) Profit = =(B1*B4)-B2-((B5+B6)*B4) Copy-and-paste the above information into cells A1:B8 of an Excel spreadsheet. Then use a data table to repeat the simulation 1000 times. From the simulation results, estimate Stahlmaere's expected mean profit. Understanding that simulation is random in nature and that your estimate is unlikely to match any of the answer choices exactly, choose the answer choice that is closest to the estimated mean profit.
A. $180,000
B. $50,000
C. $150,000
D. $90,000
E. $120,000
Answer:
$ 120,000
Explanation:
Formulas:
Cell Formula
B4 =NORMINV(RAND(),1500,100)
B5 =5+(6-5)*RAND()
B6 =RANDBETWEEN(12,16)
B8 =(B1*B4)-B2-((B5+B6)*B4)
B12 =AVERAGE(F3:F1002)
Enter formula = B8 in cell E2
and =RANDBETWEEN(12,16) in E3 copy down to E1002 (this represents labor cost)
To create the data table, select range E2:F1002
click Data tab > What-If Analysis in Data Tools group > Data Table > In the resulting dialogue box, enter B6 in the Column Input cell, and B1 in the Row Input cell.
Estimated mean profit = $ 121,445 this is closest to $ 120,000
THE ANSWER IS $ 120,000
Gratuities: A customer has a large sailing yacht on a vessel that your company will be discharging. The customer is present and is watching the off-loading operation. The five stevedores you manage pull off a very tricky maneuver, safely transferring the yacht to the trailer. The customer is elated, and reaches into his pocket, pulling out a big wad of $50 bills. What do you do?
Answer:
The answer is "Shifting".
Explanation:
Some information, that is choices is missing in the question so that the correct option can be identified as follows:
We assume, that the company is doing, as per the given scenario, it set out from the Query, the Market of Packers, and adjusting operation involving shifts to one position of industrial vehicles.
Which of the following statements is correct with respect to inventories? The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold. It is generally good business management to sell the most recently acquired goods first "Under FIFO, the ending inventory is based on the latest units purchased." FIFO seldom coincides with the actual physical flow of inventory.
Answer:
Under FIFO, the ending inventory is based on the latest units purchased.
Explanation:
First in, first out inventory (FIFO) method values cost of goods sold using the purchase price of the "oldest" units in inventory. This means that the cost of the first units sold will be used to determine COGS.
On the other hand, last in, first out (LIFO) method uses the price of the most recently purchased units to determine the cost of goods sold.
A company determined that the budgeted cost of producing a product is $30 per unit. On June 1, there were 86000 units on hand, the sales department budgeted sales of 370000 units in June, and the company desires to have 160000 units on hand on June 30. The budgeted cost of goods sold for June would be
Answer:
The budgeted cost of goods sold for June would be $ 13,320,000
Explanation:
Budgeted cost per unit = $30
Sales budget = 370,000 units
Less: Beginning inventory = 86,000 units
Add: Ending inventory = 160,000 units
Therefore budgeted cost of goods sold for June = (370,000 - 86,000 + 160,000) × $30
= 444,000 × $30
= $13,320,000
g On the first day of its fiscal year, Chin Company issued $10,000,000 of five-year, 7% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 8%, resulting in Chin receiving cash of $9,594,415. a. Journalize the entries to record the following: Issuance of the bonds. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) Second semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) If an amount box does not require an entry, leave it blank. 1. 2. 3. b. Determine the amount of the bond interest expense for the first year. $ c. Why was the company able to issue the bonds for only $9,594,415 rather than for the face amount of $10,000,000? The market rate of interest is the contract rate of interest. Therefore, inventors wi
Answer and Explanation:
According to the scenario, computation of the given data are as follow:-
Total Years = 5, semiannually = 5 × 2 = 10
Rate = 7% yearly, semiannually rate = 7 ÷ 2 = 3.5%
Journal Entries
On Jan 1
Cash A/c Dr. $9,594,415
Discount on bonds payable A/c Dr. $405,585
To Bonds payable A/c $10,000,000
(Being the issuance of bond payable is recorded)
Discount value of issued bonds = $10,000,000 - $9,594,415 = $405,585
2).
On Jun
Interest expenses A/c Dr. $390,559
Discount on bonds payable A/c($405,585 ÷10) Dr.40,559
To Cash A/c($10,000,0000 × 3.5%) $350,000
(Being the payment of first semiannual interest is recorded)
3).
On Dec 31
Interest expenses A/c Dr. $390,559
Discount on bonds payable A/c($405,585*10/100) Dr.$40,559
To Cash A/c($10,000,000*3.5/100) $350,000
(Being the payment of second semiannual interest is recorded)
b). Bond Interest Expense Amount for First Year
= Interest Expenses + Amortized Discount
= $700,000 + $81,117
= $781,117
Interest expenses = $350,000 + $350,000 = $700,000
Amortized Discount = $40,559 + $40,559 = $81,117
c).The Company issued the bonds at $9,594,415 for the face amount of $10,000,000 because bonds issued at discount for $405,585 as the coupon rate is less than the market interest.
Early in 2021, the Excalibur Company began developing a new software package to be marketed. The project was completed in December 2021 at a cost of $36 million. Of this amount, $24 million was spent before technological feasibility was established. Excalibur expects a useful life of five years for the new product with total revenues of $60 million. During 2022, revenue of $18 million was recognized. Required: 1. Prepare a journal entry to record the 2021 development costs. 2. Calculate the required amortization for 2022. 3. Determine the amount to report for the computer software costs in the December 31, 2022, balance sheet.
Answer:
Dr research and development expense $24,000,000
Dr computer software costs $12,000,000
Cr Cash $36,000,000
Amortization is $3,600,000
Balance sheet balance in 2022 is $8,400,000
Explanation:
The cash of $36 million spent would be credited to cash account as an outflow of cash while $24 million would be debited to research and development expense account with the balance of $12 debited to computer software costs as asset
amortization for 2022=cost of software*revenue in 2022/total estimated revenue=$12,000,000*$18,000,000/$60,000,000=$3,600,00
Amount of computer software at 31 December 2022=$12,000,000-$3,600,000=$ 8,400,000
Royal Dutch Shell(RDS) acquires ethanol fuel from Brazilian Cosan energy company. The Ethanol costs 500 million Brazilian Real(BRL) to grow the corn and convert it to ethanol. RDS doesn't have BRL, so they must use the futures market to acquire the currency. If 1 BRL/USD futures contract is for 100,000 reals What is the optimal number of BRL/USD futures contracts for Shell to take to receive the entire amount of Real at delivery.
Answer:
The answer is 5000 future contracts
Explanation:
Solution
Given that:
Royal Dutch buys ethanol fuel from Brazilian energy company
Nowm,
The Required coverage = 500,000,000
The BRL/USD futures contract size = 100,000
Number of contracts required = 500,000,000/100,000
So,
= 500,000,000/100,000 = 5000
Therefore, the optimal number of BRL/USD futures contracts for Shell to take to receive the entire amount of Real at delivery is 5000
Job 397 was recently completed. The following data have been recorded on its job cost sheet. Direct materials $59,400 Direct labor-hours 1,254 DLHs Direct labor wage rate $11 per DLH Number of units completed 3,300 units The company applies manufacturing overhead on the basis of direct labor-hours. The predetermined overhead rate is $37 per direct labor-hour. Required: What's the unit product cost that would appear on the job cost sheet for this job
Answer:
$36.24
Explanation:
The computation of unit product cost is shown below:-
Unit product cost = Direct material + Direct labor + Manufacturing overhead) ÷ Unit completed
= ($59,400 + (1254 × $11) + (1254 × $37)) ÷ 3,300
= ($59,400 + $13,794 + $46,398) ÷ 3,300
= $119,592 ÷ 3,300
= $36.24
Therefore for computing the units product cost we simply applied the above formula.
Ellie (a single taxpayer) is the owner of ABC, LLC. The LLC (a sole proprietorship) reports QBI of $900,000 and is not a specified services business. ABC paid total W-2 wages of $300,000, and the total unadjusted basis of property held by ABC is $30,000. Ellie's taxable income before the QBI deduction is $740,000 (this is also her modified taxable income). What is Ellie's QBI deduction for 2019
Answer:
QBI deduction for 2019 is $148,000
Explanation:
Description Amount
Taxable income before QBI deduction
exceed $207,500 threshold.
Capital investment limit is considered
QBI deduction is lesser of:
1) 20% of qualified business income $180,000
($900,00 × 20%)
or Greater of
2) 50% 0f W-2 wages $150,000
($300,000 × 50%)
or
25% 0f W-2 wages + 2.5% of unadjustment
basis pf qualified property
($300,000 × 25%) + ($300,000 × 2.5%) $75,750
3)Not more than 20% of modified taxable income
($740,000 × 20%) $148,000
Therefore, QBI deduction for 2019 is $148,000
Peggy sells pistachios and almonds at the farmer’s market. She currently prices pistachios at $7 per bag and almonds at $4 per bag. She observes that every hour, 4 people each buy one bag of pistachios and 2 people each buy one bag of almonds. Having surveyed them, she learns that 2 of the pistachio buyers would be willing to pay $2 for the bag of almonds while the other two would only be willing to pay $1. Both almond buyers would be willing pay $5 for the bag of pistachios. Suppose Peggy decides to sell a bundle containing one bag of pistachios and one bag of almonds in addition to selling them separately. What price should she charge for the bundle in order to maximize revenue?
Answer:
The price she should charge for the bundle in order to maximize profit is 9
Explanation:
Solution
The total pistachios sold = 7 * 2 =14
The total almonds sold is = 4*1 = 4
So,
The total of both pistachios and almonds = 14 + 4 + 18
Thus,
we solve for getting average of the two which is:
Getting the average of the two in the bundle = 18/2
=9
Therefore p =9
A financier plans to invest up to $500,000 in two projects. Project A yields a return of 9% on the investment of x dollars, whereas Project B yields a return of 17% on the investment of y dollars. Because the investment in Project B is riskier than the investment in Project A, she has decided that the investment in Project B should not exceed 40% of the total investment. How much should the financier invest in each project in order to maximize the return on her investment
Answer:
She should invest $300,000 in Project A, and $200,000 in Project B.
Explanation:
Solution
Since Project B yields a higher return, she should invest as much money as possible in it, which is 40% of the total investment or
or (0.40)($500,000) = $200,000
so
The remaining $500,000 - $200,000 = $300,000 should be invested in Project A.
Therefore, she should invest $300,000 in Project A, and $200,000 in Project B.
A well-known financial writer argues that he can earn 148 percent per year buying wine by the case. Specifically, he assumes that he will consume one $12 bottle of fine Bordeaux per week for the next 12 weeks. He can either pay $12 per week or buy a case of 12 bottles today. If he buys the case, he receives a 9 percent discount and, by doing so, earns the 148 percent. Assume he buys the wine and consumes the first bottle today. Calculate the EAR.
Answer:
EAR = 148%
Explanation:
calculating the EAR ( applying the formula for present value of annuity )
cost of case = 12 * 12 * ( 1 - 0.09 ) = 131.04
Pv = 131.04
cost per case = $12
no of weeks = 12 weeks
rate of the wine per ( IRR ) = IRR(57;56;55;;;;1)= 1.76319
rate of the wine per week = 1.76319%
therefore EAR = ( 1 + 0.0176319) ^52 - 1 = 148.15% ≈ 148%
Which of the following are considered to be benefits of international trade? Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click the option twice to empty the box. Higher prices for domestic firms in industries with the highest level of imports unanswered More jobs in industries with a significant number of imports unanswered The ability to purchase goods produced abroad at lower prices than the domestic good unanswered Access to new resources that are not available domestically unanswered The ability to purchase new products that are not produced domestically
Answer:
1. Access to new resources that are not available domestically.
2. The ability to purchase new products that are not produced domestically.
3. The ability to purchase goods produced abroad at lower prices than the domestic good.
Explanation:
International trade involves the economic exchange or transactions of capital, goods and services between countries, mainly over international boundaries as a result of want or need by the consumers.
Examples of such goods are crude oil, clothing, electronic gadgets etc.
International trade can be classified into three categories namely;
- Import trade.
- Export trade.
- Entrepot trade.
The International Trade Organization now known as the World Trade Organization which was founded in 1994 is focused on efficiently lowering the cost of alternatives, creating access to resources and increased diversity of choice for consumers.
A domestic manufacturer of watches purchases quartz crystals from a Swiss firm. The crystals are shipped in lots of . The acceptance sampling procedure uses randomly selected crystals. a. Construct operating characteristic curves for acceptance criteria of , , and (to 4 decimals). b. If is and , what are the producer's and consumer's risks for each sampling plan in part (a) (to 4 decimals)? c At Producer's Risk At Consumer's Risk
Answer:
The curve and calculation are attached below
Never Forget Bakery purchased a lot in Oil City six years ago at a cost of $278,000. Today, that lot has a market value of $320,000. At the time of the purchase, the company spent $6,000 to level the lot and another $8,000 to install storm drains. The company now wants to build a new facility on that site. The building cost is estimated at $1.03 million. What amount should be used as the initial cash flow for this project?
Answer:
The amount that should be used as the initial cash flow for this project is $1,350,000
Explanation:
The amount to be used as the initial cash flow for the project comprises of estimated building cost of $1.03 million and the market worth of the lot now.
The cost six years ago of $278,000,the cost of leveling as well as the cost of installing the storm drains were long ago time and are not relevant now.
In a nutshell the cost of the new project is $1,350,000($1,030,000+$320,0000)
(Ignore income taxes in this problem.) James just received an $8,000 inheritance check from the estate of his deceased uncle. James wants to set aside enough money to pay for a trip in five years. If the trip is expected to cost $5,000 and the rate of return is 12 percent per year, how much of the $8,000 must James deposit now to have the $5,000 in five years
Answer:
$2837.13
Explanation:
The account value is multiplied by 1 +12% = 1.12 each year, so at the end of 5 years, it will have been multiplied by 1.12^5. For some investment P, we want ...
5000 = P×1.12^5
5000/1.12^5 = P ≈ $2837.13
James must deposit about $2837.13 now to have the required amount in 5 years.
niversal Studios sold the Mamma Mia! DVD around the world. Universal charged $21.40 in Canada and $32 in Japanlong dashmore than the $20 it charged in the United States. Assume Universal's marginal cost of production (m) is $1.20. Determine what the elasticities of demand must be in Canada and in Japan if Universal is profit maximizingLOADING.... The elasticity of demand in Canada must be epsilon Subscript Upper Cequals nothing. (Enter a numeric response using a real
Answer:
Explanation:
Lerner Index = -1 / Elasticity of demand = (P - MC) / P
(1) Canada:
- 1 / Ec = (21.4 - 1.20) / 21.4
- 1 / Ec = 20.2 / 21.4
- 1 / Ec = 0.9344
Ec = -1 / 0.9344
Ec = - 1.059
(2) Japan:
Lerner Index = -1 / Elasticity of demand = (P - MC) / P
- 1 / Ej = (32 - 1.2) / 32
- 1 / Ej = 30.8 / 32
- 1 / Ej = 0.9625
Ej = -1 / 0.9625
Ej = - 1.039
In January 2020, Sunland Company, a newly formed company, issued 10300 shares of its $8 par common stock for $13 per share. On July 1, 2020, Sunland Company reacquired 1030 shares of its outstanding stock for $10 per share. The acquisition of these treasury shares decreased total stockholders' equity. increased total stockholders' equity. did not change total stockholders' equity. decreased the number of issued shares.
Answer:
The correct option is the acquisition of these treasury shares decreased total stockholders' equity.
Explanation:
Initially the total stockholders' equity is $133,900 ($13*10,300) which comprised of $82,400 common stock ($8*10,300) $51,500 paid in capital in capital in excess of par value.
By repurchasing 1,030 treasury stock at $10,the total stockholders' equity decrease by $10,300,which leaves a balance of $123,600 ($133,900-$10,300).
In other words,the first option is the correct choice of answer
Bonnie Jo purchased a used camera (five-year property) for use in her sole proprietorship. The basis of the camera was $3,000. Bonnie Jo used the camera in her business 60 percent of the time and used it for personal purposes the rest of the time during the first year. Calculate Bonnie Jo's depreciation deduction during the first year, assuming the sole proprietorship had a loss during the year. (Bonnie did not place the property in service in the last quarter.)
Answer:
$360
Explanation:
The computation of the depreciation deduction during the first year is shown below:
= Basis of the camera × given percentage × weightage
= $3,000 × 60% × 20%
= $360
Since the 60% is used for business and 40% used for personal
And there is a recovery period of assets of 5 years so half year convention period applies
Proper payroll accounting methods are important for a business for all of the following reasons except a.payroll is subject to various federal and state regulations b.good employee morale requires timely and accurate payroll payments c.to help a business with cash flow problems by delayed payments of payroll taxes to federal and state agencies d.payroll and related payroll taxes have a significant effect on the net income of most businesses
Answer:
Option C
Explanation:
In simple words, Payroll Accounting refers to the task of estimating and delivering to workers and other organizations pay , bonuses and allowances. That is usually achieved by various papers, including time sheets, earnings, as well as an accounting register.
Payroll management actually tracks an enterprise's payroll costs through accounting records. Payroll planning covers both cost and liability reports which including FICA Payable Payments, fed and provincial taxes Payable, Life Care Contributions Payable, etc.
A perfectly competitive firm is a: Group of answer choices price taker, because it must accept the market equilibrium price. price participant, because it can coordinate its pricing decisions with other firms. price maker, because it has the freedom to set the selling price. price leader; it can change its price and other firms will adjust.
Answer:
A. price taker, because it must accept the market equilibrium price.
Explanation:
A perfectly competitive firm is an ideal firm in which different firms sell products that are homogeneous or similar in nature. They are price takers because the prices of goods are determined by changes in demand and supply, therefore they must accept the market equilibrium price. They do not attempt to fix the prices of commodities. The opposite of this type of firm is a monopoly where a firm has complete control of a market, having the ability to change prices as it wills.
An example can be found among businesses that sell similar kinds of products. It could be in the form of grocery stores that sell similar wares. When any of the sellers leave the market, it does not affect the other sellers as their prices are at equilibrium. Therefore, anyone can enter or exit this type of market.
Whitmer Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.07 direct labor-hours. The direct labor rate is $9.00 per direct labor-hour. The production budget calls for producing 4,200 units in February and 4,700 units in March. Required: Prepare the direct labor budget for the next two months, assuming that the direct labor work force is fully adjusted to the total direct labor-hours needed each month. (Round "labor-hours per unit"
Answer:
Results are below.
Explanation:
Giving the following information:
Each unit of output requires 0.07 direct labor-hours. The direct labor rate is $9.00 per direct labor-hour. The production budget calls for producing 4,200 units in February and 4,700 units in March.
Direct labor budget of February:
Direct labor hours= 4,200*0.07= 294
Direct labor cost= 294*9= $2,646
Direct labor budget of March:
Direct labor hours= 4,700*0.07= 329
Direct labor cost= 329*9= $2,961
The MoMi Corporation’s income before interest, depreciation and taxes, was $2.7 million in the year just ended, and it expects that this will grow by 5% per year forever. To make this happen, the firm will have to invest an amount equal to 15% of pre tax cash flow each year. The tax rate is 30%. Depreciation was $330,000 in the year just ended and is expected to grow at the same rate as the operating cash flow. The appropriate market capitalization rate for the unlevered cash flow is 12% per year, and the firm currently has debt of $5 million outstanding. Use the free cash flow approach to calculate the value of the firm and the firm’s equity. (Enter your answer in dollars not in millions.)
Answer:
1. The value of the firm is $23,760,000
2. The value of the equity is $18.76m
Explanation:
In order to calculate the value of the firm we would have to use the following formula:
Value of firm = FCF1 / (r - g) = FCF0 x (1 + g) / (r - g)
Operating Cash Flows (OCF) = (EBITDA - Depreciation) x (1 - tax) + Depreciation
= (2,700,000 - 330,000) x (1 - 30%) + 330,000
= $1,989,000
Free Cash Flow (FCF) = OCF - Investment
We know that investment = 15% of EBITDA = 15% x 2,700,000 = 405,000
Current FCF = 1,989,000 - 405,000 = 1,584,000
Therefore, Value of the firm = 1,584,000 x (1 + 5%) / (12% - 5%) = $23,760,000
To calculate the value of equity we would have to use the following formula:
Value of equity = Value of Firm - Value of Debt = 23.76 - 5 = $18.76m
Answer:
Value of the firm $ 14550000.
Value of the firm's equity $ 11550000.
Explanation:
Cash flow from operations = $ 1785000 (1700000 + 5 % of 1700000).
Depreciation = $ 241500. (230000 + 5 % of 230000).
Taxable income = $ 1543500 (1785000 - 241500)
Net income (after tax) = 1543500 - 30 % of 1543500 = $ 1080450.
Cash flow from operations (after tax) = 1080450 + 241500 (Depreciation, being non cash expense). = $ 1321950.
Free cash flow available = Cash flow from operations (after tax) - Income from investment.
= 1321950 - (1700000 * 17 % * 1.05)
= 1321950 - 303450.
= $ 1018500.
Value of the firm = Free cash flow available / (Capitalization rate - Growth rate)
= 1018500 / (0.12 - 0.05)
= 1018500 / 0.07
= $ 14550000.
Value of the firm's equity = Total value of firm - Value of debt of firm
= 14550000 - 3000000
= $ 11550000.
Conclusion :-
Value of the firm $ 14550000.
Value of the firm's equity $ 11550000.
Barbara's Bakery purchased three new 7-year assets during the current year. She chose NOT to use Section 179 immediate expensing or take bonus depreciation. The furnishings were purchased for $15,000 in April, the equipment for $6,000 in July, and the appliances for $40,000 in November. What amount of depreciation expense is allowable in the current year
Answer:
Depreciation in Current year is $14,939
Explanation:
Answer:
I think it is 4748. If it asks second year, it will be 16072.
Explanation:
Furnishings...in April, second quarter:
15,000x17.85%=2677.5
Equipment...in July, third quarter:
6,000x10.71%=642.6
Appliances...in November, fourth quarter
40,000x3.57%=1428
Total: 2677.5+642.6+1428=4748
Company A sells paper coffee cups to all Caribou Coffee locations in the US. Company B sells dinner plates to Applebee’s. Company A charges $1 for a pack of 100 cups and Company B charges $3 for 1 dinner plate. Tell us exactly what information you would need to determine whether Company A or Company B has higher annual revenue and explain how you would calculate these two figures.
Answer:
Company A and Company B
Determination of annual revenue:
a) The information needed to determine which company has higher annual revenue include:
i) The annual quantities of packs of paper coffee cups sold to the Caribou Coffee locations in the US for a number of years.
ii) The annual quantities of dinner plates sold to Applebee's for the same years as above.
b) The annual revenues can be calculated by multiplying the price for a pack of 100 cups by the annual quantity sold.
Explanation:
Revenue is a function of price and quantity sold. The price is unit selling price and the quantity depends on the period for which revenue is being computed.
Revenue is the earnings from the sale of goods and services. The excess of revenue over cost of sales gives the gross profit, from which expenses would be deducted to arrive at net income after adding other incomes from non-operational activities.
2021 2020 Income Statement Information Sales revenue $ 8,400,000 $ 7,900,000 Cost of goods sold 5,535,600 5,400,000 Net income 332,500 198,000 Balance Sheet Information Current assets $ 1,550,000 $ 1,450,000 Long-term assets 2,150,000 1,850,000 Total assets $ 3,700,000 $ 3,300,000 Current liabilities $ 1,150,000 $ 850,000 Long-term liabilities 1,550,000 1,550,000 Common stock 750,000 750,000 Retained earnings 250,000 150,000 Total liabilities and stockholders' equity $ 3,700,000 $ 3,300,000 Required: 1. Calculate the following profitability ratios for 2021: (Round your answers to 1 decimal place.) 2. Determine the amount of dividends paid to shareholders in 2021.
Answer:
2021 2020 Income Statement Information
Sales revenue $ 8,400,000 $ 7,900,000
Cost of goods sold 5,535,600 5,400,000
Net income 332,500 198,000
Balance Sheet Information
Current assets $ 1,550,000 $ 1,450,000
Long-term assets 2,150,000 1,850,000
Total assets $ 3,700,000 $ 3,300,000
Current liabilities $ 1,150,000 $ 850,000
Long-term liabilities 1,550,000 1,550,000
Common stock 750,000 750,000
Retained earnings 250,000 150,000
Total liabilities and stockholders' equity $ 3,700,000 $ 3,300,000
1.Calculate the following profitability ratios for 2021: (Round your answers to 1 decimal place.)
The four main profitability ratios are:
gross profit margin = (revenue - COGS) / revenue = ($8,400,000 - $5,535,600) / $8,400,000 = 0.341 or 34.1%net profit margin = net profit / revenue = $332,500 / $8,400,000 = 0.03958 or 3.96%return on assets = net income / average total assets = $332,500 / [($3,700,000 + $3,300,000)/2] = $332,500 / $3,500,000 = 0.095 or 9.5%return on equity = net income / shareholders equity = $332,500 / $1,000,000 = 0.3325 or 33.25%2.Determine the amount of dividends paid to shareholders in 2021.
retained earnings 2021 - retained earnings 2020 = net income - dividends
$250,000 - $150,000 = $332,500 - dividends
$100,000 + dividends = $332,500
dividends = $332,500 - $100,000 = $232,500
Suppose Mr. Lane just bought a share of BlueWind Co., a renewable energy startup. BlueWind promises to pay Mr. Lane $18 in dividends for one year and then the firm will shut down. Suppose that the liquidation value of the share is $3, and the rate of time preference is 5%. Then, according to the single-period dividend discount model, the present value of the cash payment received by Mr. Lane in one year would be
Answer:
The present value of the cash payment is $20
Explanation:
The present value of cash payment receivable by Mr Lane in one year's time is the today's equivalent amount of the dividend of $18 as well as the liquidation value of $3.
The present value is the total cash inflows multiplied by the discount factor
discount factor=1/(1+r)^n
where is the rate of time preference of 5%'
n is 1 i.e in one year's time
total cash inflows=$18+$3=$21
discount factor =1/(1+5%)^1=0.95238
present value of cash payment=0.95238*$21=$20
