Answer:
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The market value of the equity of Hudgins, Inc., is $582,000. The balance sheet shows $21,000 in cash and $192,000 in debt, while the income statement has EBIT of $93,000 and a total of $137,000 in depreciation and amortization. What is the enterprise value-EBITDA multiple for this company
Answer:
3.27
Explanation:
Calculation to determine the enterprise value-EBITDA multiple for this company
First step is to calculate the
Enterprise value
Using this formula
Enterprise value = Market Capitalization + Total Debt - Cash and equivalents
Let plug in the formula
Enterprise value=$582000 + $192000 - $21000
Enterprise value=$753000
Second step is calculate EBITDA using this formula
EBITDA = EBIT + Depreciation and Amortization
Let plug in the formula
EBITDA= $93000 + $137000
EBITDA=$230,000
Now let determine the EBITDA multiple using this formula
EBITDA multiple = Enterprise Value / EBITDA
Let plug in the formula
EBITDA multiple=$753000 / $230000
EBITDA multiple= 3.27
Therefore enterprise value-EBITDA multiple for this company is 3.27
Cost of debt with fees. Kenny Enterprises will issue a bond with a par value of $1,000, a maturity of twenty years, and a coupon rate of 7.5 % with semiannual payments, and will use an investment bank that charges $25 per bond for its services. What is the cost of debt for Kenny Enterprises at the following market prices?
a. $982.48
b. $1,004.93
c. $1,068.15
d. $1,171.91
Answer:
Kenny Enterprises
Cost of Debt with fees:
Market Prices $982.48 $1,004.93 $1,068.15 $1,171.91
Cost of debt (b- a) $48.59 $26.14 ($37.08) ($140.84)
Cost of debt in percentage 4.86% 2.61% -3.71% -14.08%
Explanation:
a) Data and Calculations:
Market Prices $982.48 $1,004.93 $1,068.15 $1,171.91
Investment bank charges 25.00 25.00 25.00 25.00
a) Net bonds proceeds $957.48 $979.93 $1,043.15 $1,146.91
b) Repayments:
PV of interest payments $770.66 $770.66 $770.66 $770.66
PV of principal ($1,000) 235.41 235.41 235.41 235.41
Total repayments $1,006.07 $1,006.07 $1,006.07 $1,006.07
Cost of debt (b- a) $48.59 $26.14 ($37.08) ($140.84)
Cost of debt in percentage 4.86% 2.61% -3.71% -14.08%
Present values of interest payments:
N (# of periods) 40
I/Y (Interest per year) 7.5
PMT (Periodic Payment) 37.5
FV (Future Value) 0
Results
PV = $770.66
Sum of all periodic payments $1,500.00
Total Interest $729.34
Present value of principal repayment:
N (# of periods) 20
I/Y (Interest per year) 7.5
PMT (Periodic Payment) 0
FV (Future Value) 1000
Results
PV = $235.41
Total Interest $764.5
Siam Traders had Net Income for 2020 of $9,500,000. The firm invested $1,000,000 in manufacturing equipment during 2019 but made no additional capital investments in 2020. The equipment is being depreciated over five years using straight-line depreciation, starting in 2019. Assuming no other adjustments to cash flow than those mentioned here, create a statement of cash flows for 2020 with amounts in thousands.
Required:
What is the Net Cash Flow in 2020?
Answer:
Cash flows from operating activities:
Net income $9,500,000
Adjustments
Depreciation Expense [$1,000,000/5 years] $200,000
Net cash flows from Operating activities $9,700
Cash flows from investing activities $0
Cash flows from investing activities $0
Net cash flow $9,700
Company xyz made the following transactions 6 marks
Borrowed loan of ksh 50000 to start a business
Obtained Ksh 150,000 in cash from proceeds of sales
Paid out ksh 240000 in form of salaries
Purchased Ksh 600000 worth of machinery in cash
Purchased a track valued at Ksh 1, 500 000 by paying Ksh 300000 in cash and getting a
loan for the reminder
Paid rent of rent of Ksh 80000 and advertising of ksh 50,000 in cash each
Determine the value of the company’s assets, liability and equity
Answer:
Company XYZ
Total assets ksh 1,030,000
Total liabilities ksh 1,250,000
Total equity ksh (220,000)
Explanation:
a) Data and Analysis:
Cash ksh 50,000 Loan payable ksh 50,000
Cash ksh 150,000 Sales revenue ksh 150,000
Salaries expense ksh 240,000 Cash ksh 240,000
Equipment ksh 600,000 Cash ksh 600,000
Track ksh 1,500,000 Cash ksh 300,000 Loan payable ksh 1,200,000
Rent Expense ksh 80,000 Advertising Expense ksh 50,000 Cash ksh 130,000
Assets:
Cash ksh 50,000
Cash ksh 150,000
Cash ksh (240,000)
Equipment ksh 600,000
Cash ksh (600,000)
Track ksh 1,500,000
Cash ksh (300,000)
Cash ksh (130,000)
Total assets ksh 1,030,000
Liabilities:
Loan payable ksh 50,000
Loan payable ksh 1,200,000
Total liabilities ksh 1,250,000
Equity:
Sales revenue ksh 150,000
Salaries expense ksh (240,000)
Rent Expense ksh (80,000)
Advertising Expense ksh (50,000)
Total equity ksh (220,000)
Database Systems is considering expansion into a new product line. Assets to support expansion will cost $500,000. It is estimated that Database can generate $1,990,000 in annual sales, with an 7 percent profit margin. What would net income and return on assets (investment) be for the year
Answer:
Net income= 139,300
ROA= 27.86%
Explanation:
The assets to support the expansion is $500,000
It is estimated the entire database can generate $1,990,000
The profit is 7%
The net income can be calculated as follows
= 1,990,000×7/100
= 1,990,000×0.07
= $139,300
The ROA can be calculated as follows
= 139,300÷500,000
= 27.86%
Current Forecast is 2500 units, current 1st shift capacity is 1300 units. Market growth rate is 10%. How much capacity do you need to buy for next round (answer rounded up to next 50 units)
Answer:
250 units
Explanation:
Calculation to determine How much capacity do you need to buy for next round
Using this formula
Next round capacity needed=Current Forecast*Market growth rate
Let plug in the formula
Next round capacity needed=2500 units*10%
Next round capacity needed=250 units
Therefore How much capacity do you need to buy for next round is 250 units
You estimate that your cattle farm will generate $0.10 million of profits on sales of $2 million under normal economic conditions and that the degree of operating leverage is 5.a. What will profits be if sales turn out to be $1.6 million
Answer:
Profit would decrease to $0.0 million
Explanation:
The degree of operating leverage is the change in profit as a result of the change in sales revenue
DOL=% change in profit/% change in sales
DOL=5
% change in profit=unknown
% change in sales=($1.6m-$2.0m)/$2.0m
% change in sales=-20%
5=% change in profit/-20%
% change in profit=5*-20%
% change in profit=-100%
the new amount of profit=current amount of profit*(1-% change in profit)
current amount of profit=$0.10 million
the new amount of profit=$0.10 million*(1-100%)
the new amount of profit=$0.0 million
Internal information: A. attempts to describe something that is unknown. B. describes the environment surrounding the organization. C. describes specific operational aspects of an organization. D. quantifiably describes something that is known.
Answer:
Option c: Describes specific operational aspects of an organization
Explanation:
Management information systems (MIS)
This is commonly used in planning for, development, management, and use of information technology tools to help individuals carry out all tasks related to information processing and management
Internal Information
This are simply refered to as a form of information that is gotten or developed from activities that occur within the organization. Example is sales
External Information
This simply gives a reason or an understanding of factors outside of the organization.
Internal data sources
They are said to be sources that are available within the organization. Examples of internal data sources includes: Customer profiles, Sales analysis reports, inventory analysis, production reports etc.
Suppose a company is considering the following 5 independent projects:
Project
A
B
C
D
E
initial Investment
$100
$300
$400
$500
-$200
NPV
$20
$30
$40
$45
$15
What projects, if any, should be selected if the capital budget is $500?
Answer:
A & C
Explanation:
NPV, The Net Present Value of an investment is used in finance to calculate the profitability of a projected investment.
Since the capital budgeted for any investment is $500 ; hence the total initial investment the company can make should not exceed $500 ;
The company will be looking indulge in the most profitable investment, this we can judge Yung the NPV of each investment :
Therefore, the total NPV on investment A and Investment C is the highest while maintaining the $500 capital budget value.
Investment : ___ NPV
$100 - - - - - - - - > $20
$400 - - - - - - - - > 40
$500 - - - - - - - - > $60
Between 1995 and 1997, American Airlines competed in the Dallas/Ft WorthAirport against several other low-cost carriers. In response to these low-cost carriers, American Airlines reduced its price and increased service on selectedroutes. As a result, one of the low-cost carriers stopped service, which led Ameri-can Airlines to increase its price. Why do you think a lawsuit was filed againstAmerican Airlines? Why do you think American Airlines prevailed at trial?
Answer:
1. Why do you think a lawsuit was filed against American Airlines?
Because they engaged in predatory practices.
The United States is a free market economy that encourages competitive behavior which is why there are certain practices that are not tolerated such as predatory practices.
Predatory practices occur when a company reduces its cost to a price below that of its competitors till they are forced out of business because their costs would be larger than the revenue they make from the reduced prices. The former company would then increase its cost after the competitors are gone. This is usually done by large companies that can afford to take losses.
American Airlines did this and was the reason they were sued.
2. Why do you think American Airlines prevailed at trial?
Difficulty in proving marginal cost.
Generally, it is difficult to prove the marginal costs incurred by airline companies so American Airlines argued that their marginal costs had reduced when there were more competitors but increased when the other competitors left and that this was why they had to reduce prices when the competitors were there and increase when they were not.
MC Qu. 78 A firm expects to sell... A firm expects to sell 25,400 units of its product at $11.40 per unit and to incur variable costs per unit of $6.40. Total fixed costs are $74,000. The total contribution margin is:__________
Answer:
$127000
Explanation:
Calculation to determine what The total contribution margin is
Using this formula
Total CM = Sales - VC
Let plug in the formula
Total CM=(25,400* 11.40) - (25,400 *6.40)
Total CM=$289,560-$162,560
Total CM= $127000
Therefore The total contribution margin is $127,000
Phelps, Inc. had assets of $87,938, liabilities of $19,174, and 13,190 shares of outstanding common stock at December 31, 2017. Net income for 2017 was $9,761. The company had assets of $103,319, liabilities of $23,003, 11,527 shares of outstanding common stock, and its stock was trading at a price of $10 per share at December 31, 2018. Net income for 2018 was $10,719. Required: Calculate EPS for 2018. Calculate ROE for 2018. Calculate the Price/Earnings Ratio for 2018.
Answer:
Phelps, Inc.
EPS for 2018 $0.93
ROE for 2018 13.3%
Price/Earnings Ratio for 2018 10.75
Explanation:
a) Data and Calculations:
December 31, 2017 December 31, 2018
Assets $87,938 $103,319
Liabilities 19,174 23,003
Equity $68,764 $80,316
Outstanding common
stock 13,190 11,527
Stock price per share $10
Net income $9,761 $10,719
EPS for 2018 $0.93 ($10,719/11,527)
ROE for 2018 13.3% ($10,719/$80,316*100)
Price/Earnings Ratio for 2018 10.75 ($10/$0.93)
EPS (Earnings Per Share) = Net income/Number of outstanding shares
ROE (Return on Equity) = Net income/Equity * 100
Price/Earnings Ratio = Stock price/EPS
A tyre manufacturer wants to set a minimum mileage guarantee on its new MX100 tyre. Tests reveal the mean mileage is 47,900 with a standard deviation of 2,050 miles and the distribution is a normal distribution. The manufacturer wants to set the minimum guaranteed mileage so that no more than 4% of the tyres will have to be replaced. What minimum guaranteed mileage should the manufacturer announce
Answer:
51,487.5
Explanation:
Calculation to determine the minimum guaranteed mileage should the manufacturer announce
Sinces no more than 4% of the tires will have to be replaced First step will be to determine the InvNorm(.96) using normal distribution table
InvNorm(100%-4%)
InvNorm(.96) = 1.75
Now let determine the minimum guaranteed mileage
Let x represent the Minimum guaranteed mileage
(2050*1.75)+47,900=x
x=3,587.5+47,900
x = 51,487.5
Therefore the minimum guaranteed mileage that the manufacturer should announce is 51,487
2. Through stores that employ a team-based management approach and that offer an appealing shopping environment / experience, Whole Foods can charge higher prices because they offer the highest quality natural and organic foods available with customer service superior to their competitors. This explanation is best described as Whole Foods' ______.
Answer:
differentiation strategy
Explanation:
Based on the information above, it is possible to affirm that Whole Foods is a company that uses a strategy of differentiation in its products and services, as its management approach is based on a team that offers an attractive shopping environment / experience, in addition to charging higher prices for offering high quality natural and organic foods, as well as superior customer service than its competitors.
The differentiation strategy consists of actions used by companies to make their products and services attractive to their potential audience, offering added benefits and advantages that the consumer can perceive and value, making the company more competitive and well positioned in relation to its competitors .
At your new job you estimate that your average salary over your working years will be $95,000 per year. How many more years would you have to work to receive as much benefit from a flat benefit of $3,000 times years of service as you would receive from 3.75 percent of your average salary times years of service?
Answer:
1.1875 or 1.19 times
Explanation:
The calculation of the no of years is to be given below;
= 3.75 % of average salary × years of service = 3000 × years of service
So,
= 0.0375 × 95000 × years of service = 3000 × years of service
So, the years of service is
= 3562.5 ÷ 3000
= 1.1875 or 1.19 times
1. All of the following are considered phases of the management process except _____. planning directing controlling executing b 2. The process by which managers run day-to-day operations is called _____. planning directing controlling executing 3. _____ is the philosophy of continually improving employees, business processes, and products. Improvement process Continuous process improvement Quality process None of these choices are correct.
Answer:
1. Executing
2. Directing
3. Continuous process improvement
Explanation:
According to Managerial Accounting Concepts and Principles
1. All of the following are considered phases of the management process except EXECUTING
2. The process by which managers run day-to-day operations is called DIRECTING
3. CONTINUOUS PROCESS IMPROVEMENT is the philosophy of continually improving employees, business processes, and products.
A computer microphone company finished its competitive advantages exercise and needed a way to gauge its position in the market with its competitors. Which tool would be the best way for the company to display its position
Answer: Perceptual map
Explanation:
Perceptual map ref to the diagrammatic technique that is used in visually displaying the perceptions of the customers.
The perceptual map is also referred to as the visual representation with regards to the customers perception about the attributes of a company and its brand.
The perceptual map can be used by the microphone company.
Each unit requires 0.75 hours of direct labor at a cost of $6.50 per hour. What is the cost of direct labor for May?
Answer:
Direct labor cost = (units produced for May) x 0.75 x $6.50
Explanation:
Direct labor cost = units produced x direct labor hours x cost per unit
since units produced aren't given
Let units produced = 10,000 for May
Direct labor cost = 10,000 x 0.75 x $6.50 = $48,750
g Todd Foley is applying for a $210,000 mortgage. He can select either a $1,470 monthly payment with no points or a $1,323 payment with 4 points. How many months will it take Todd to cover the cost of the discount points if he takes the lower monthly payment
Answer:
57 months
Explanation:
Calculation to determine How many months will it take Todd to cover the cost of the discount points if he takes the lower monthly
payments
Number of months to cover cost=(.04 x $210,000)/($1470-$1323)
Number of months to cover cost = $8400/147
Number of months to cover cost =57 months
Therefore the number of many months it will take Todd to cover the cost of the discount points if he takes the lower monthly
payments is 57 months
How does the design demonstrate the ability to analyze, research, and explore a variety of information sources to adequately address how the target market might interpret a designmessage
Answer:
Design should be analyzed, explored and researched carefully so that it adequately targets the audience.
Explanation:
A design has the ability o inclines people's decisions and allows for interpretation. The design is can be used to tell whether the product is going to stay in the market and helps in the identification of the target audience. The market can interpret the message in design in various ways such as by positive and negative. Thus design should be made keeping in mind the ethics and characteristics of the object. Design should match the traits of people.Cyberdyne Systems and Virtucon are competitors focusing on the latest technologies. Selected financial data is provided below. (Round your answers to 1 decimal place. Enter your answers in millions (i.e., $10,100,000 should be entered as 10.1).) ($ in millions)CyberdyneVirtucon Net sales$39,905 $5,684 Net income 10,375 1,194 Operating cash flows 14,865 1,334 Total assets, beginning 58,905 15,184 Total assets, ending 60,905 14,884 Required: 1. Calculate the return on assets for both companies.
Answer:
Return on assets for Cyberdyne Systems and Virtucon are 0.2 and 0.1 respectively.
Explanation:
Return on asset is a measure of the ratio of the net income to the total average assets of an entity or organization. It givens and insight into the company's ability to generate profits from the use of its assets.
For Cyberdyne Systems, given that Net income $10,375 and the assets at the beginning and end of the period are $58,905 and $60,905
Total average assets = ($58,905 + $60,905)/2
= $59,905
Return on assets = $10,375/$59,905
= 0.17319088
To one decimal place = 0.2
For Virtucon, given that Net income $1,194 and the assets at the beginning and end of the period are 15,184 and 14,884
Total average assets = ($15,184 + $14,884)/2
= $15,034
Return on assets = $1,194/$15,034
= 0.079419981
To one decimal place = 0.1
The difference between the amount received from issuing a note payable and the amount repaid at maturity is referred to as:
Answer: interest
Explanation:
Notes payable occurs when a promissory note is issued to the bearer by the firm. Notes payable can either be short term which is within a year or long term which is more than a year.
The difference between the amount received from issuing a note payable and the amount repaid at maturity is known as the interest.
Last year, Mountain Top, Inc., purchased a coal mine at a cost of $900,000. The salvage value has been estimated at $100,000. The coal mine has an estimated 200,000 tons of available coal. A total of 70,000 tons were mined and sold during the current year.
Required:
Wrie the necessary adjusting journal entry to record depletion expense.
Answer: See explanation
Explanation:
Following the information given in the question, the adjusting journal entry to record depletion expense will be:
Debit Depletion expense - Coal deposit = $280,000
Credit Accumulated Depletion - Coal Deposit = $280,000
Note that the depletion expense was calculated as:
= ($900000 - $100000) / 200000] × 70000
= $280000
If your short-term interest rate (the rate on your current debt) is 12.1%, then your bond rate (the rate on your long-term debt) is:
Answer: 13.5% (14% higher than the current debt rate)
Explanation:
Since the short-term interest rate (the rate on your current debt) is 12.1%, then it should be noted that the rate on the long term debt will be higher than the rate on the short term debt.
The long term debt have a higher duration and therefore have a higher rate when compared to the short term debt. Therefore, the correct option will be 13.5% (14% higher than the current debt rate) since it's higher than the 12.1% given as the short term rate.
Organizational learning and creativity play an important role in helping managers improve their decisions. Managers must take steps to promote organizational learning and creativity at individual as well as group levels to improve the quality of decision making. Managers can encourage and promote entrepreneurship that mobilizes resources to take advantage of an opportunity to provide customers with new or improved goods and services. The quality of managerial decision making ultimately depends on innovative responses to opportunities and threats. How can managers increase their ability to make nonprogrammed decisions that will allow them to adapt to, modify, and even drastically alter their task environments so they can continually increase organizational performance
Answer:
Organization learning is the process by which the managers seeks employees desires and ability to understand the task environment.
Explanation:
Organizational learning plays an important role in managers by raising their ability to make programmer decisions that will allow them by adapting to, modifying, and even alter their work environment. Creativity helps managers in thinking and problem solving.5) Big Corporation had the following sales over the last 4 years; Year Sales (in 000s) bgs 1 225.00 2 236.25 3 243.125 4 248.00 a) What was the growth rate in sales between years 1
Answer:
5%
Explanation:
a) What was the growth rate in sales between years 1 and 2
Growth rate measures the increase in the level of sales over a period of time
Growth rate from year 1 to 2 = (increase in sales from year 1 to 2 / sales in year 1) x 100
increase in sales from year 1 to 2 = 236.25 - 225 = 11.25
(11.25 / 225) x 100 = 5%
Coronado Company received proceeds of $209000 on 10-year, 5% bonds issued on January 1, 2016. The bonds had a face value of $220000, pay interest annually on January 1, and have a call price of 102. Coronado uses the straight-line method of amortization. Coronado Company decided to redeem the bonds on January 1, 2018. What amount of gain or loss would Coronado report on its 2018 income statement
Answer:
Coronado Company
The amount of gain or loss that Coronado would report on its 2018 income statement is:
= $13,200.
Explanation:
a) Data and Calculations:
Bonds proceeds = $209,000
Bonds face value = 220,000
Bonds Discounts = $11,000
Period of bonds = 10 years
Straight-line amortization = $1,100 annually
Interest payment = annually
Coupon rate rate = 5%
Fair value on January 1, 2017 = $210,100 ($209,000 + $1,100)
Fair value on January 1, 2018 = $211,200 ($210,100 + $1,100)
Call price = 102
Total call value (cash payment) = $224,400 ($220,000 * 102/100)
Loss to report on its 2018 income statement = $13,200 ($224,400 - $209,000 - $2,200)
What is the reasoning behind having the seven Fed Board of Governors remain for 14 years on the Federal Reserve?
a) Participating in the Fed for the 14 year time period allows the board members to build up seniority and on-the-job understanding
b) Longer terms for board members fosters longer relationships and builds strong networks to push through financial changes to the economy.
c) The longer terms are to insulate the members from immediate political pressures and have them focus solely on economic solutions for the nation.
Answer: c) The longer terms are to insulate the members from immediate political pressures and have them focus solely on economic solutions for the nation.
Explanation:
The Fed is independent of the U.S. Government but can still face significant pressure from the U.S. Government as it is the President that nominates the Board of Governors and the Senate confirms them.
Much like Justices on the Supreme Court who get their positions the same way, these governors have to be protected from being used as political pawns so they are given long terms in office to ensure that they can pursue an independent policy without having to worry about the current administration coming after them if they go contrary to its will.
Allison bought a bond when it was issued by ABC Corporation 20 years ago. The bond, which has a $1,000 face value and a coupon rate equal to 10 percent, matures in eight years. Interest is paid every six months; the next interest payment is scheduled for six months from today. If the yield on similar risk investments is 8 percent, what should be the current market value (price) of the bond
Answer:
Current market value (price) of the bond = $ 1,081.11
Explanation:
The current market value (price) of the bond can be calculated using the following excel function:
Current market value (price) of the bond = PV(rate, NPER, -PMT, -FV) ........... (1)
Where:
rate = Semiannual yield on similar risk investments = yield on similar risk investments / 2 = 8% / 2 = 4%
NPER = Number of period = Year to maturity * Number of semiannuals in a year = 8 * 2 = 16
PMT = Payment = (FV * Coupon rate) / Number of semiannuals in a year = ($1,000 * 10%) / 2 = $50 = 50
FV = Face value = $1,000 = 1000
Substituting all the relevant value into equation (1), we have:
Current market value (price) of the bond = PV(4%, 10, -50, -1000)
Inputing =PV(4%, 10, -50, -1000) in any cell in excel sheet (Note: as done in the attached excel file), we have:
Current market value (price) of the bond = $ 1,081.11
Suppose that the firm pays its workers $46 per day. Each unit of output sells for $12. How many workers should the firm hire
Solution :
A firm hires labor till a point where the cost of hiring is equal to the value of the additional revenue it produces.
We know ,
the wage rate = cos of hiring an additional worker
the value of the additional revenue that the firm produces = price x (MPI) marginal product of the labor.
Therefore, the firm will hire when :
Wage = value of the additional revenue it generates
Thus, wage = price x (MPI) marginal product of the labor ...........(i)
Therefore, given :
wage of a worker = $ 45
Price = $ 12
So, 45 = 12 x MPI
MPI = 3.8
So the marginal product of employing three days of labor = 25-18/4-3 = 7
Marginal product of employing four days of labor = 30-25/4-3 = 5
So the 4th day produces less revenue than the cost that it generates.
So, the firm should hire 3 workers.
