Answer:
Purple Panda Pharmaceuticals
Annual Free Cash Flow (FCF):
FCF = Sales Revenue - (Operating costs + Taxes) - Required investments in operating capital or net operating profit after taxes - net investment in operating capital =
Net Income = $1,400,000
additional NOWC = 35,000
Capital expenditures = 500,000
FCF = $865,000
Explanation:
a) Data and Calculations:
EBIT = $2,000,000
Tax = 30% or $600,000
Net Income = $1,400,000
additional NOWC = 35,000
Capital expenditures = 500,000
FCF = $865,000
Purple Panda Pharmaceuticals' Free Cash Flow shows what is available for distribution to security holders after the payment of taxes. Purple Panda will use the information from its Free Cash Flow to judge if a project will pay off and generate enough cash flow so that shareholders' value will be enhanced.
1. While FF was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historical returns for FF for 2012 to 2016 are:
Answer:
hello some details/parts of your question are missing attached below is the missing part
answer : A ) = 24.13%
B ) = 0.1084, The preceding data series represents a SAMPLE
C ) = 0.4494
Explanation:
A) The average realized return on FF stock can be calculated as
= 24% + 16.15% + 29% +39.9% + 12.35% / 5
= 24.13%
B) The preceding data series represents a SAMPLE standard deviation BECAUSE RETURNS WERE MADE ONLY FOR FIVE YEARS
and the sample standard deviation is calculated as
[tex]s^2 = \frac{summation ( x - mean vale)^2}{N-1}[/tex]
[tex]S^2 = \frac{0.0470383}{ 5 -1 }[/tex] = 0.01175056
s = [tex]\sqrt{0.01175056}[/tex] = 0.1084
C) coefficient of variation
coefficient of variation = standard deviation / mean
= 0.1084 / 0.2413 = 0.4494
A stock is bought for $24.00 and sold for $26.00 one year later, immediately after it has paid a dividend of $1.50. What is the capital gain rate for this transaction?
Answer:
8.33%
Explanation:
A stock is bought for $23.00
The stock is sold for $26 after one year
The dividend paid is $1.50
Therefore, the capital gain rate can be calculated as follows
Capital gain= P1-Po/Po
= 26-24/24
= 2/24
= 0.0833 ×100
= 8.33%
Hence the capital gain rate for this transaction is 8.33%
ICOT Industries issued 28 million of its $1 par common shares for $492 million on April 11. Legal, promotional, and accounting services necessary to effect the sale cost $3 million. Required: 1. Prepare the journal entry to record the issuance of the shares. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)
Answer:
Dr Cash $492
Cr Common stock $28
Cr PIC in excess of par 464
Dr PIC in excess of par $3
Cr Cash $3
Explanation:
Preparation of the Journal entry to record the issuance of the shares
Based on the information given we were told that the Industries issued 28 million of its $1 par common shares for the amount of $492 million on April 11 which means that the Journal entry will be:
Dr Cash $492
Cr Common stock $28
(28 million x $1)
Cr PIC in excess of par 464
($492-$28)
(To record the sale of the stock)
Based on the information given we were told that the Industries had Legal, promotional, and accounting services necessary to effect the sale cost of the amount of $3 million which means that the Journal entry will be:
Dr PIC in excess of par $3
Cr Cash $3
(To record the stock issue costs)
All of the following are considered process innovation EXCEPT A. organizational innovation. B. nonneutral technical progress. C. neutral technical progress. D. labor saving technical progress.
Answer:
B. nonneutral technical progress.
Explanation:
Which of the following enables employees to deliver valuable results more quickly, improve their productivity, and get products and new ideas to market faster?a. Adhering to time-tested methods and conceptsb. Preventing the dissemination of explicit knowledgec. Avoiding collaboration among contractors, suppliers, and other business partnersd. Sharing experience and expertise of employees across an organization
Answer:
d. Sharing experience and expertise of employees across an organization
Explanation:
It is important for an organization to allow its employees to share and build experience and expertise. Workers reap the moment more quickly when there is no office and what it does and when new employees or employees moving to new positions are able to share ideas and experiences. It allows employees to deliver more valuable results faster, improve productivity and deliver market products and new ideas faster.Krystal is 47 years old and single. She is a high school principal, making $75,000 a year. She currently owns a 401(k) valued at $85,000. Krystal would like to retire at age 65 with $1.2 million in her retirement nest egg. She plans to contribute $12,000 a year to her retirement fund, growing at 10%.Required:a. Will Krystal reach her goal? Justify your answer by using the Investment Calculator on Foundations U b. If she won't reach her goal, what needs to change in order for her to reach it? c. Is it really possible to get 10% growth in an investment fund? How?
Answer:
a) Krystal's account balance when she is 65:
$75,000 x (1 + 10%)¹⁸ = $416,993.80
$12,000 x 45.599 (FV annuity factor, 10%, 18 periods) = $547,188
total account balance = $964,181.80
Krystal will not reach her goal.
b) she need to save $1,200,000 - $964,181.80 = $235,818.20
she will need to save an extra $235,818.20 / 45.599 = $5,171.57 per year
her total contributions per year = $12,000 + $5,171.57 = $17,171.57
c) The historical growth rate of the S&P 500 is 12%, so it is really possible to earn at least 10%. Maybe the stock market is not going well right now, but you must remember that retirement accounts are long term accounts and last for many years. The market will have time to bounce back.
an investment under consideration has a payback of six years and a cost of 876000. Assume the cash flows are conventional. If the required return is 12 percent, what is the worst-case NPV?
Answer:
-43291.14
Explanation:
Npv = net present value
Payback = 6 years
Required return = 12 percent
Cost = 876000
When we talk about last case npv we mean that cash flow has gotten to its last future. The entire cost of 876000 will have to be paid after 6 years and after that future cash flows would exist.
Npv = -876000 +(876000/1.12)⁶
= -876000+443808.86
= = -43291.14
Kelley Company reports $1,250,000 of net income for 2017 and declares $175,000 of cash dividends on its preferred stock for 2017. At the end of 2017, the company had 380,000 weighted-average shares of common stock. 1. What amount of net income is available to common stockholders for 2017
Answer:
Net income available to common stockholders is $1,075,000
Explanation:
Net Income $1,250,000
To Preferred Shareholders $175,000
Net income available to $1,075,000
common stockholders
Basic earnings per share = Net income available to common stockholders / weighted average shares of common stock
Basic earnings per share = $1,075,000 / 380,000
Basic earnings per share = $2.8290 per share.
The minimum desired rate of return for net present value analysis is 12%. The present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is 0.893, 0.797, 0.712, and 0.636, respectively. Determine the net present value. $
Answer: $18,848
Explanation:
The Net Present Value of a project is the difference between the present values of the cash outflows and inflows.
Present Values of the Cash flows;
Year 1
= 150,000 * 0.893
= $133,950
Year 2
= 130,000 * 0.797
= $103,610
Year 3
=104,000 * 0.712
= $74,048
Year 4
= 90,000 * 0.636
= $57,240
Net Present Value = Cash inflows - Outflow
= 133,950 +103,610 + 74,048 + 57,240 - 350,000
= $18,848
Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows:
Sales in Units
April 54,000
May 75,000
June 94,000
July 82,000
The company is now in the process of preparing a production budget for the second quarter. Past experience has shown that end-of-month inventory levels must equal 20% of the following month’s sales. The inventory at the end of March was 10,800 units. Required: Prepare a production budget for the second quarter; in your budget, show the number of units to be produced each month and for the quarter in total.
down under products Ltd.
prodcution budget
april may june other
budgeted unit sales
total needs
required production in units
Answer:
Results are below.
Explanation:
Giving the following information:
Sales in Units
April 54,000
May 75,000
June 94,000
July 82,000
Desired ending inventory= 20% of the following month’s sales.
The inventory at the end of March was 10,800 units.
To calculate the production for each month, we need to use the following formula:
Production= sales + desired ending inventory - beginning inventory
April:
Sales= 54,000
Ending inventory= 75,000*0.2= 15,000
Beginning inventory= (10,800)
Total= 58,200 units
May:
Sales= 75,000
Ending inventory= 94,000*0.2= 18,800
Beginning inventory= (15,000)
Total= 78,800 units
June:
Sales= 94,000
Ending inventory= 82,000*0.2= 16,400
Beginning inventory= (18,800)
Total= 91,600 units
Total for the quarter= 228,600 units
In the above case, Sales in Units in the month of April is 54,000, in the month of May is 75,000, in the month of June is 94,000 and in the month of July is 82,000.
What is sales?A sale is defined as a transaction between the parties in which the purchaser acquires goods, services, or assets in return for money. In some cases, other assets are pay off to a seller.
Computation of production:
According to the available information,
Desirable closing inventory= 20% of the following month’s sales.
The inventory at the end of March was 10,800 units.
To calculate the production in each month, the formula is:
[tex]\text{Production= Sales + Desired Ending Inventory - Beginning Inventory}[/tex]
Production in the month of April:
According to the given information,
Sales= 54,000
Ending inventory:
[tex]=75,000\times \dfrac{20}{100}\\= 15,000[/tex]
Beginning inventory= 10,800
Now, apply the given values in the above formula:
[tex]\text{Production= Sales + Desired Ending Inventory - Beginning Inventory}\\\\\text{Production} =54,000+15,000-10,800\\\\\text{Production}=58,200\text{Units}[/tex]
Production in the month of May:
Sales= 75,000
Ending inventory:
[tex]=94,000\times \frac{20}{100}\\\\= 18,800[/tex]
Beginning inventory= 15,000
Now, apply the given values in the above formula:
[tex]\text{Production= Sales + Desired Ending Inventory - Beginning Inventory}\\\\\text{Production} =75,000+18,800-15,000\\\\\text{Production}=78,800\text{Units}[/tex]
Production in the month of June:
Sales= 94,000
Ending inventory:
[tex]872,000\times\dfrac{20}{100}= 16,400[/tex]
Beginning inventory= 18,800
Now, apply the given values in the above formula:
[tex]\text{Production= Sales + Desired Ending Inventory - Beginning Inventory}\\\\\text{Production} =94,000+16,400-18,800\\\\\text{Production}=91,600\text{Units}[/tex]
Therefore, the Total for the quarter :
[tex]=\text{May's Production + June's Production+Juily's Production}\\\\=58,200+78,800+91,600 \text{Units}\\= 228,600 \text{Units}[/tex]
Learn more about sales, refer to:
https://brainly.com/question/16911495
A computer maintenance company wants to 'capture' the knowledge that employees carry around in their heads by creating a database where employees document their solutions to unusual maintenance problems. This practice tries to:
Answer: Transfer human capital to structural capital
Explanation:
From the question, we are informed that computer maintenance company wants to 'capture' the knowledge that employees carry around in their heads by creating a database where employees document their solutions to unusual maintenance problems.
This shows that the company is transferring human capital to structural capital. Human capital has to do with the skills and experiences that workers have.
"A $10,000 municipal bond with 10 years to maturity is purchased in the primary market at 105. The bond is sold after 4 years at 105. The taxable gain or loss is a:"
Answer:
2 point capital gain
Explanation:
Every municipal bond that is purchased at premium is subject to straight line depreciation, whether the premium be trading premium or original issue premium.
Here the premium is 5 points = 105 - 100
Which shall be amortised over its useful life of 10 years.
Thus, for each year 1/2 point is amortised without allowing any tax deduction.
Thus, after 4 years total amortisation = [tex]\frac{1}{2} \times 4years = 2[/tex]
Thus, value at end of year 4 = 105 - 2 = 103 basis point.
Further the selling amount = 105 basis point.
Thus, 105 - 103 = 2 basis point shall be taxable.
good is excludable if: a. it is Wi-Fi or a similar service. b. people who do not pay cannot be easily prevented from using the good. c. one person's use of the good does not reduce the ability of another person to use the same good. d. people who do not pay can be easily prevented from using the good.
Answer:
The correct answer is:
people who do not pay can be easily prevented from using the good. (d)
Explanation:
Excludable goods or services are those to which the consumer cannot have access unless payment of some form is made. By contrast, a non-excludable good or service is one to which the consumer cannot be prevented from using even without payment. Excludable goods can be further divided into rivalrous and non-rivalrous.
A rivalrous excludable good or service is one in which usage by a consumer or usage by one party prevents or reduces significantly, its use by another consumer or party examples are goods such as clothes, food, cars etc, while non-rivalrous excludable goods/services include tv subscriptions, cinemas, etc.
Ray's Satellite Emporium wishes to determine the best order size for its best-selling satellite dish (model TS111). Ray has estimated the annual demand for this model at 1,500 units. His cost to carry one unit is $80 per year per unit, and he has estimated that each order costs $22 to place.
Using the EOQ model, how many should Ray order each time?
Answer:
28.72 units
Explanation:
Calculation of how many should Ray order each time using EOQ model
Using this formula
EOQ= √2DS/H
Where,
D=Annual demand 1,500 units
S=Order costs $22
H=Holding Costs $80 per unit
Let plug in the formula
EOQ=√2*1,500*$22/$80
EOQ=√66,000/$80
EOQ=√825
EOQ=28.72 units
Therefore Using the EOQ model, Ray should order 28.72 units each time.
Dextra Computing sells merchandise for $9,000 cash on September 30 (cost of merchandise is $7,200). Dextra collects 7% sales tax. Record the entry for the $9,000 sale and its sales tax. Also record the entry that shows Dextra sending the sales tax on this sale to the government on October 15.
View transaction list
Journal entry worksheet
Record the cash sales and 9% sales tax.
Note: Enter debits before credits.
Date General Journal Debit Credit
Sep 30
Record entry Clear entry View general journal
Answer:
Sept 30
DR Cash ........................... $9,630
CR Sales ..........................................$9,000
CR Sales Tax Payable...................$630
(To record Sales and Sales taxes)
Working
Cash = 9,000 + (9,000 * 7%)
= $9,630
Sales tax = 9,630 - 9,000
= $630
Sept 30
DR Cost of Goods Sold .....................$7,200
CR Merchandise Inventory ...................................$7,200
(To record cost of goods sold)
Oct 15
DR Sales Tax Payable...........................$630
CR Cash...............................................................$630
(To record remittance of Sales Tax)
Cameroon Corp. manufactures and sells electric staplers for $15.30 each. If 10,000 units were sold in December, and management forecasts 3.3% growth in sales each month, the number of electric stapler sales budgeted for March should be:
Answer:
Electric stapler sales budgeted for March should be: 11,023 units.
Explanation:
Apply the growth of 3.30% to each month starting December as follows :
December Sales = 10,000 units
January Sales = 10,000 × (1.033)^1 = 10,330 units
February Sales = 10,000 × (1.033)^2 = 10,671 units
March Sales = 10,000 × (1.033)^3 = 11,023 units
if the fixed cost for the Job Shop were changed to $305,000, what would the new break-even point in numbers of units
Answer:
The question you have provided is missing important information needed for the calculation of break even point.
However step by step approach for the calculation of the break even point is given below :
Understand what break even point is :
Break even point is the level of operation where a Company neither makes a profit nor a loss.
Break even point in units calculation :
Break even point in units calculation = Fixed Costs for the Period ÷ Contribution per unit
Where, Contribution per unit = Selling Price per Unit less Variable Cost (Manufacturing and Non Manufacturing) per unit
Conclusion :
At Break Even Point level,Total Contribution will equal Total Fixed Cost (thus no profit nor loss)
The only data the question provided is :
Fixec Cost - $305,000
Simon Corporation manufactures hydraulic valves. The product life of a valve is 4 years. Target average profit margin for Simon 20.00% The company does not expect the manufacturing cost to vary over the next 4 years. Estimated sales volume and the unit selling price of the valve for the next 4 years is given below: Year Sales volume (units) Unit selling price Year 1 40,000 $80.00 Year 2 50,000 $75.00 Year 3 35,000 $50.00 Year 4 25,000 $45.00 What is the allowable unit cost of a hydraulic valve using the target costing model
Answer:
Allowable unit cost of a hydraulic valve using the target costing model = 52.4
Explanation:
Given that:
Simon Corporation manufactures hydraulic valves. The product life of a valve is 4 years.
Target average profit margin for Simon 20.00%
The company does not expect the manufacturing cost to vary over the next 4 years
Estimated sales volume and the unit selling price of the valve for the next 4 years is given below:
Year Sales volume (units) Unit selling price
Year 1 40,000 $80.00
Year 2 50,000 $75.00
Year 3 35,000 $50.00
Year 4 25,000 $45.00
The objective is to determine the allowable unit cost of a hydraulic valve using the target costing model.
The Cost for each unit selling price can be calculated as:
= unit selling price - (Target average profit margin × unit selling price)
For Year 1
= $80.00- (0.2 × $80.00)
= $80.00 - $16.00
= $64.00
For Year 2
= $75.00 - ( 0.2 × $75.00)
= $75.00 - ( $15.00)
= $60.00
Year 3
= $50.00 - (0.2× $50.00)
= $50.00 - $10.00
= $40.00
Year 4
= $45.00 - (0.2 × $45.00)
=$45.00 - $9.00
= $36.00
Year Sales volume Unit Cost Cost per Unit
(units) selling price
Year 1 40,000 $80.00 $64.00 $2560000
Year 2 50,000 $75.00 $60.00 $3000000
Year 3 35,000 $50.00 $40.00 $1400000
Year 4 25,000 $45.00 $36.00 $900000
Total: 150000 $7860000
Allowable unit cost = Total cost/Total number of unit cost
Allowable unit cost = $7860000/150000
Allowable unit cost = 52.4
The risk-free rate is 6% and the expected rate of return on the market portfolio is 13%. a. Calculate the required rate of return on a security with a beta of 1.25.
Answer:
The required rate of return is r = 0.1475 or 14.75%
Explanation:
The required rate of return is the minimum return that investors demand/expect on a stock based on the systematic risk of the stock as given by the beta. The expected or required rate of return on a stock can be calculated using the CAPM equation.
The equation is,
r = rRF + Beta * (rM - rRF)
Where,
rRF is the risk free raterM is the return on marketr = 0.06 + 1.25 * (0.13 - 0.06)
r = 0.1475 or 14.75%
Sheridan Company issues 3600 shares of its $10 par value common stock having a fair value of $20 per share and 5600 shares of its $10 par value preferred stock having a fair value of $20 per share for a lump sum of $205400. What amount of the proceeds should be allocated to the preferred stock
Answer:
$125,026
Explanation:
Common Shares 3,600
Fair value $20
Total market value of common stock $72,000
Preferred shares 5,600
Fair value $20
Total market value of preferred stock $112,000
Lump Sum amount $205,400
Amount of proceeds should be allocated to the preferred stock = 205,400 * (112,000 / (72,000 + 112,000) ) = $125,026
Item9 2 points Time Remaining 2 hours 55 minutes 49 seconds02:55:49 eBookItem 9Item 9 2 points Time Remaining 2 hours 55 minutes 49 seconds02:55:49 TB MC Qu. 6-143 Keyser Corporation, which has... Keyser Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $ 118 Units in beginning inventory 400 Units produced 2,100 Units sold 2,300 Units in ending inventory 200 Variable costs per unit: Direct materials $ 37 Direct labor $ 23 Variable manufacturing overhead $ 3 Variable selling and administrative expense $ 5 Fixed costs: Fixed manufacturing overhead $ 73,500 Fixed selling and administrative expense $ 29,900 The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. What is the net operating income for the month under variable costing?
Answer:
Results are below.
Explanation:
Giving the following information:
Selling price $118
Units sold 2,300
Variable costs per unit:
Direct materials $37
Direct labor $23
Variable manufacturing overhead $3
Variable selling and administrative expense $5
First, we need to determine the total unitary variable cost:
Unitary variable cost= 37 + 23 + 3 + 5=$68
Variable cost income statement:
Sales= 2,300*118= 271,400
Total variable cost= 68*2,300= (156,400)
Total contribution margin= 115,000
Fixed manufacturing overhead= (73,500)
Fixed selling and administrative expense= (29,900)
Net operating income= 11,600
Digby's balance sheet has $99,131,000 in equity. Further, the company is expecting net income of 3,000,000 next year, and also expecting to issue $4,000,000 in new stock. If there are no dividends paid what will beDigby's book value
Answer:
Book Value = $106,131,000
Explanation:
DATA
Equity = $99,131,000
Expected Net Income = $3,000,000
New stock issued = $4,000,000
Solution:
We can calculate Digby's Book value by adding Equity, Expected Net Income and New Stock issued.
Calculation:
Book Value = Equity + expected net income + Bew stock issued
Book Value = $99,131,000+ $3,000,000+$4,000,000
Book Value = $106,131,000
22. On January 1, 2021, Princess Corporation leased equipment to King Company. The lease term is eight years. The first payment of $675,000 was made on January 1, 2021. The equipment cost Princess Corporation $3,600,000. The present value of the lease payments is $3,961,183. The lease is appropriately classified as a sales-type lease. Assuming the interest rate for this lease is 10%, how much interest revenue will Princess record in 2022 on this lease
Answer:
$293,980.13
Explanation:
Calculation of how much of the interest revenue Princess will record in 2022 on the lease
First Step is to find the interest for year 2021
Present Value January 1, 2021 $3,961,183
Less Payment January 1, 2021 (675,000)
=$3,286,183
Hence,
2021 Interest =$3,286,183× 10%
2021 Interest = $328,618.3
Second Step
Second Payment $675,000
Less Interest (328,618.3)
Reduced balance $346,381.7
Third Step is to find the how much interest revenue will Princess record in 2022 on the lease
2021 $3,286,183
Less Reduced balance (346,381.7)
January 1 2022 Liability = $2,939,801.3× 10%
2022 Interest Revenue =$293,980.13
Therefore the amount of interest revenue that Princess will record in 2022 on the lease will be $293,980.13
Endor Company begins the year with $110,000 of goods in inventory. At year-end, the amount in inventory has increased to $118,000. Cost of goods sold for the year is $1,300,000. Compute Endor’s inventory turnover and days’ sales in inventory. Assume that there are 365 days in the year
Answer:
11.40
32 days
Explanation:
Inventory turnover and days of sales of inventory are examples of activity ratios.
They are used to measure the efficiency of performing daily tasks
inventory turnover = Cost of goods sold/ average inventory
Average inventory = ($118,000 + $110,000) / 2 = $114,000
Inventory turnover = $1,300,000 / $114,000 = 11.40
days of sales of inventory = 365 / inventory turnover = 365 / 11.40 = 32 days
Universal Travel Inc. borrowed $497,000 on November 1, 2018, and signed a 12-month note bearing interest at 4%. Interest is payable in full at maturity on October 31, 2019. In connection with this note, Universal Travel Inc. should report interest payable at December 31, 2018, in the amount of:
Answer:
Dec 31, 2018
Interest expense 3313.33 Dr
Interest Payable 3313.33 Cr
Explanation:
The note interest is payable at an annual rate of 4%. The interest will be paid at maturity however, an adjusting entry will be made on December 31, 2018 following the accrual basis of accounting to record the interest expense that relates to the period from November to December of 2018. The interest expense will be debited and as the interest will be paid at maturity, interest payable will be credited.
Interest expense = 497000 * 0.04 * 2/12 = $3313.33
A stock had returns of 9.62 percent, −14.65 percent, 19.85 percent, 25.35 percent, and 7.65 percent over the past five years. What was the geometric average return for this stock?
Answer:
The geometric average return for this stock was 8.64%.
Explanation:
Geometric average return refers to the return which will result in the correct compounded dollars at the end of the time period.
Geometric average return can be computed using the following formula:
Geometric average return = {[(1 + r1)(1 + r2) ... (1 + rn)]^(1/n)} - 1 ......... (1)
Where r is returns from year 1 to year n.
For the stock in the question, we have:
r1 = 9.62%, 0.0962
r2 = -14.65%, or -0.1465
r3 = 19.85%, or 0.1985
r4 = 25.35%, or 0.2535
r5 = 7.65%, or 0.0765
n = 5
Substituting the values into equation (1), we have:
Geometric average return = {[(1 + 0.0962)(1 - 0.1465)(1 + 0.1985)(1 + 0.2535)(1 + 0.0765)]^(1/5)} - 1
Geometric average return = {1.51310732605096^0.20} - 1
Geometric average return = 0.0864, or 8.64%
Therefore, the geometric average return for this stock was 8.64%.
Potential output: $8 trillion Actual output: $6 trillion Actual Deficit: $ 400 billion Tax Rate: 15% What is the structural deficit in 2010
Answer:
The structural budget in 2010 is $100 billion
Explanation:
Actual deficit = Government spending - Tax Revenue Collection
i.e Actual deficit = G-T
T = (Tax rate) (Actual output)
$400 billion = G - (0.15)($6000 billion)
$400 billion = G - $900 billion
G = $400 billion + $900 billion
G = $1300 billion
Thus, Government spending is $1300 billion
Structural deficit = G - T'
T' = (Tax rate)(Potential output)
T' = (0.15)(8000 billion)
T' = $1200 billion
Structural deficit = G - T'
Structural deficit = $1300 billion - $1200 billion
Structural deficit = $100 billion
Thus, the structural budget in 2010 is $100 billion
Policy makers have changed their focus from keeping inflation from getting too high to keeping inflation from getting too low because
Options:
a. technology has changed the structural economy so much that asset inflation is no longer a concern.
b. historically there has been asset deflation and now there is asset inflation.
c. during the financial crisis of 2008 there was asset deflation which can lead to overall deflation.
d. during the financial crisis of 2008 there was asset deflation
Answer:
c. during the financial crisis of 2008 there was asset deflation which can lead to overall deflation.
Explanation:
Unexpectedly, during the 2008 financial crises that had a firm grip on the US economy. Economist observed a trend of asset deflation.
For example, the real estate sector saw a reduction in the general level of prices homes in the economy. Thus, this meant that a too low inflation would lead to overall deflation, and it was a concern for policy makers.
Earnings per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements of Tolbert Inc. for December 31 of the current fiscal year:
Common stock, $25 par value (no change during the year) $5,500,000
Preferred $5 stock, $100 par (no change during the year) 3,000,000
The net income was $502,000 and the declared dividends on the common stock were $55,000 for the current year. The market price of the common stock is $13.60 per share. For the common stock
Determine:
a. the earnings per share
b. the price-earnings ratio
c. the dividends per share
d. the dividend yield.
Answer:
a. the earnings per share is $2.28
b. the price-earnings ratio is 5.96 times
c. the dividends per share is $0.25
d. the dividend yield is 1.84%
Explanation:
a. the earnings per share
Earning per share is the net earning of the company against each outstanding share.
Earning per share = Net Income / Numbers of Outstanding shares
Earning per share = $502,000 / ($5,500,000/$25)
Earning per share = $502,000 / 220,000 = $2.28
b. the price-earnings ratio
Price earning ratio determines the impact of net income on market value of the share.
Price earning Ratio = Market Pice of stock / Earning per share
Price earning Ratio = $13.60 / $2.28
Price earning Ratio = 5.96
c. the dividends per share
Dividend per share is the value of dividend paid to each outstanding common share.
Dividend per share = Dividend declared / Numbers of outstanding shares
Dividend per share = $55,000 / 220,000 shares
Dividend per share = $0.25 per share
d. the dividend yield.
Dividend yield is the ratio of dividend per share and Market price per share.
Dividend Yield = Dividend Per share / Market price per share
Dividend Yield = $0.25 / $13.60 = 0.0184 = 1.84%
Rather than crediting the Unearned rent account for $400 of prepaid rent received from a customer, which explains an alternate recording procedure to journalize this receipt?
Answer:
Record receipt with a credit to the rent revenue account
Any unused portion of the prepayment still existing at the end of the period will be transferred to the Unearned rent account
Explanation:
Prepaid rent is an income that is to be earned at a future date. Since income is normally recorded as a revenue when it is earned, we usually credit Unearned Rent account.
However financial statements are made at end of a defined period (for example monthly, quarterly, biannually, or yearly).
The journal entry can be credited to the Rent Revenue account directly. At the end of the period the amount earned is retained in the account, and the unearned portion of the prepaid rent is transferred to the Unearned Rent account.
So financial statements will only recognise earned income when prepared.
