Answer:
(a) A bond that will mature in 4 years was bought 1 month ago when the price dropped. As soon as the value increases, which is expected next month, it will be sold. - Trading Debt Securities
Trading debt securities such as these are held only for a short time before they are sold with the goal being short term profit.
(b) 10% of the outstanding stock of Farm-Co was purchased. The company is planning on eventually getting a total of 30% of its outstanding stock. - None of the Above
This is an Equity Investment.
(c) Bonds were purchased in December of this year. The bonds are expected to be sold in January of next year. - Trading Debt Securities
Like the bond in (a), this is being held for a short while only and then it will be sold so it is a Trading debt security.
(d) Bonds that will mature in 5 years are purchased. The company would like to hold them until they mature, but money has been tight recently and they may need to be sold. - Available-for-sale debt securities
Available for sale debt securities are to be sold before maturity and therefore have no certain selling time. The bond above has no selling time as it might be sold at any point so it is an Available-for-sale debt security.
(e) Preferred stock was purchased for its constant dividend. The company is planning to hold the preferred stock for a long time. - None of the above.
This is an Equity investment as well.
(f) A bond that matures in 10 years was purchased. The company is investing money set aside for an expansion project planned 10 years from now. - Held-to-maturity debt securities.
Held to Maturity bonds are bought with no intention of selling and the company hopes to hold them till they mature like this bond which will be held for 10 years.
On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $37,258. What amount of interest expense will be included in the first annual payment
Answer:
Interest expense = $20,000
Explanation:
Loan Amortization: A loan repayment method structured such that a series of equal periodic installments will be paid for certain number of periods to offset both the loan principal amount and the accrued interest.
The annual installment is computed as follows:
Annual installment= Loan amount/annuity factor
Annual installment is already given as = 37,258 (already given)
Interest payment = interest rate × Loan balance at the beginning of the year
DATA
Interest rate = 8%
Loan balance at the beginning of the year = $250,000
Interest expense = 8%× 250,000 = $20000
Principal paid = Annual installment - Interest = 37,258-20,000 = 17,258 (this is not required but to explain the concept)
Interest expense = $20,000
Which of the following is NOT one of the four levels of culture? A. Profit B. artifacts C. espoused values D. enacted values
Answer:
A. Profit
Explanation:
Culture is the shared characteristics and knowledge of a group of people that affects different aspects of their lives like language, religion, social traits, arts, and music.
Levels of culture are:
- Artefacts: these are physical manifestation of a culture like dress code, office allocation, awards, and ceremonies.
- Assumptions: are unconscious alignment with expected behaviour.
- Espoused value: these are stated values to be adhered to
- Enacted values: behaviours that are exhibited as a guide to others in a group
Some towns limit the number of hours that liquor stores can sell alcohol on Sundays. This restriction could actually help liquor stores by
Answer: decreasing sales and increasing prices.
Explanation:
From the question, we are informed that some towns limit the number of hours that liquor stores can sell alcohol on Sundays. This restriction could actually help liquor stores reduce their sales and thereby lead to the increment of prices.
Since there has been a reduction I the number of hours, it means lesser alcohol will be sold and this can invariably lead to price increase.
Break-even EBIT (with and without taxes). Alpha Company is looking at two different capital structures, one an all-equity firm and the other a levered firm with $ million of debt financing at % interest. The all-equity firm will have a value of $ million and shares outstanding. The levered firm will have shares outstanding. a. Find the break-even EBIT for Alpha Company using EPS if there are no corporate taxes. b. Find the break-even EBIT for Alpha Company using EPS if the corporate tax rate is %. c. What do you notice about these two break-even EBITs for Alpha Company? a. What is the break-even EBIT for Alpha Company using EPS if there are no corporate taxes?
Complete Question:
Alpha company is looking at two different capital structures, one an all-equity firm and the other a leverages firm with $2 million of debt financing at 8% interest. The all-equity firm will have a value of $4 million and 400,000 shares outstanding. The leveraged firm will have 200,000 shares outstanding.
a. Find the break even EBIT for Alpha company using EPS if there are no corporate taxes.
b.Find the break even EBIT for Alpha company using EPS if the corporate tax rate is 30%
c. What do you notice about these two break-even EBITs for Alpha company?
Answer:
Alpha Company
a. Break-even EBIT, using EPS without taxes:
= (EBIT - Interest 1) * (1 - taxes)/No. of shares = (EBIT - Interest 2) * (1 - taxes)/No. of shares
With alternative 1, there are no taxes, so:
= (EBIT - Interest 1)/No. of shares = EBIT - Interest 2)/No. of shares
= (EBIT - 0)/400,000 = EBIT - ($2,000,000 x 8%)/200,000
= (EBIT/400,000( = (EBIT - $160,000)/200,000
cross-multiplying:
EBIT200,000 = EBIT$64,000,000,000
dividing by 200,000:
EBIT = $64,000,000,000/200,000
EBIT = $320,000
b. Break-even EBIT, using EPS with taxes:
= (EBIT - Interest 1) * (1 - taxes)/No. of shares = (EBIT - Interest 2) * (1 - taxes)/No. of shares
= {(EBIT - $0) * (1 - 0.30)}/400,000 = {(EBIT - $160,000) * (1 - 0.30)}/200,000
= EBIT/400,000 = (EBIT - $112,000)/200,000
cross-multiplying:
= EBIT 200,000 = EBIT $44,800,000,000
EBIT = $44,800,000,000/200,000
= $224,000
c. The two break-even EBITs are not the same. When there are taxes, the break-even EBIT is $224,000, less by $96,000.
Explanation:
a) Data:
Alternative 1: All Equity:
No. of shares = 400,000
Value of shares = $4,000,000
Debt = $0
Interest on Debt = $0
Alternative 2: Equity + Debt:
No. of shares = 200,000
Value of shares = $2,000,000
Debt = $2,000,000
Interest on Debt = 8% or $160,000
b) Alpha's break-even EBIT is the point when the EBIT under alternative 1 are equal to the EBIT under alternative 2. This implies that under these given alternative financing options, the earnings before interest and taxes are before no matter the alternative chosen.
The following accounts are from last year's books of Sharp Manufacturing: Raw Materials Bal 0 (b) 154,800 (a) 166,000 11,200 Work In Process Bal 0 (f) 513,200 (b) 132,400 (c) 168,800 (e) 212,000 0 Finished Goods Bal 0 (g) 464,000 (f) 513,200 49,200 Manufacturing Overhead (b) 22,400 (e) 212,000 (c) 26,400 (d) 156,800 6,400 Cost of Goods Sold (g) 464,000 Sharp uses job-order costing and applies manufacturing overhead to jobs based on direct labor costs. What is the amount of direct materials used for the year
Answer:
$132,400
Explanation:
Based on the information given we were told that Sharp make use of job order costing as well as applies manufacturing overhead to jobs which are often based on the direct labor costs, which simply means the amount of direct materials that is been used for the year will be a debit amount of $132,400 in the work in process .
Therefore the amount of direct materials used for the year will be $132,400
The owner of a large machine shop has just finished its financial analysis from the prior fiscal year. Following is an excerpt from the final report: Net revenue $ 375,000 Cost of goods sold 322,000 Value of production materials on hand 42,500 Value of work-in-process inventory 37,000 Value of finished goods on hand 12,500 What is the inventory turnover ratio (ITR) ?
Answer:
The answer is 3.5
Explanation:
Inventory turnover ratio is:
Cost of goods sold / Total or average inventory
Cost of goods sold is $322,000
Total Inventory in this question comprises work-in- process, finished goods and even raw materials.
So total inventory equals:
Production materials on hand $42,500 Work-in-process inventory $37,000
Finished goods on hand $12,500
Total inventory. $92,000
Therefore, inventory turnover ratio is
$322,000 / $92,000
= 3.5
If the government wants to minimize the deadweight loss of taxation, which of the following items are good candidates for an excise tax? (select all that apply)A. emergency plumber servicesB. Coca-ColaC. insulinD. food at restaurants
Answer:
A. emergency plumber services and C.insulin.
Explanation:
From the list provided the best candidates for this would be emergency plumber services and insulin. That is because these are items or services that have a high supply but low demand due to the population of customers being a minority. This, therefore, causes market inefficiency which leads to deadweight loss. Other items like Coca-Cola and food mostly stay in equilibrium because products are made depending on the current demand and the customer population is the vast majority.
Hawley company makes decorative wedding cakes. The company is considering buying the cakes rather than baking them, which will allow it to concentrate on decorating. The company averages 100 wedding cakes per year and incurs the following costs from baking wedding cakes.
Direct materials $550
Direct labor 950
Variable manufacturing overhead 150
Fixed manufacturing overhead 1,125
Total manufacturing cost $2,775
Number of cakes / 100
Cost per cake $28
Fixed costs are primarily the depreciation on kitchen equipment such as ovens and mixers. Hawley expects to retain the equipment. Hawley can buy the cakes for 28$.
1. Should Hawley make the cakes or buy them? Why?
2. If Hawley decides to buy the cakes, what are some qualitative factors that Hawley should also consider?
1. Should Hawley make the cakes or buy them? Why? (For the Difference column, use a minus sign or parentheses only when the cost of outsourcing exceeds the cost of making the cakes in-house.)
Make Outsource Difference
Cake costs cakes cakes (make—outsource)
Variable costs:
Direct materials
Direct labor
Variable manufacturing overhead
Purchase cost
Total differential cost of cakes
Hawley (should, should not) continue to make the cakes. Outsourcing will (decrease, increase) profits.
2. If Hawley decides to buy the cakes, what are some qualitative factors that Hawley should also consider?
A. Qualitative factors include considering sunk costs andmanager's opinions.
B. Qualitative factors include separating fixed and variable costs.
C. Qualitative factors include quality and on-time delivery.
D. Qualitative factors include contribution margins of the various products produced.
Answer:
1. Continue to Make the Cakes. Because the Cost of Outsourcing is greater that the cost of making by $1,150.
2. C. Qualitative factors include quality and on-time delivery.
Explanation:
Analysis of the Make or Buy Decision
Make Outsource Difference
Cake costs cakes cakes
Variable costs:
Direct materials $550 $0 $550
Direct labor $950 $0 $950
Variable manufacturing overhead $150 $0 $150
Fixed manufacturing overhead $1,125 $1,125 $0
Purchase cost $0 $2,800 ($2,800)
Total differential cost of cakes $2,275 $3,925 ($1,150)
Qualitative Factors.
Are non-monetary factors that need to be considered in decision making.
Apply the integration-responsiveness framework to describe which global strategy Hollywood studios followed originally, and how their strategic positioning has changed over time. Explain how and why.
Answer is given below :
Explanation:
Global integration refers to the coordination of the organization’s value chain operations within countries, achieving efficiency, synergy and cross-fertilization between countries so that equality between countries is maximized. Between global integration and local accountability, the integration-accountability framework is called to help managers develop a deeper understanding of the business. We can say at the outset or at the outset that an export strategy that applies to Hollywood is used when a company focuses primarily on its domestic operations. It is not intended to expand globally, but to export certain products to take advantage of international opportunities. It does not seek to adapt its products to international markets. It is not interested in responding to specific situations in other countries or formulating a unified world strategy. Hollywood not only produced films and shows that catered to the needs of its native business aimed at American Western culture, but as the industry began to expand it began to adopt a multi-national strategy. Multi dimensional strategy follows products or processes for specific situations in each country. In the initial example, Lincoln should use a multi-year strategy to adapt its manufacturing methods to the conditions of each country where electric factories are built. Retailers often use multicultural strategies because they must cater to local customer tastes. Hollywood has started producing Indian films like Kung Fu Panda, Karate Kids, Oscar Winning Slumdog Millionaire.The global strategy that Hollywood studios followed at first was the international strategy.
It should be noted that the global strategy that Hollywood studios followed originally was the international strategy where identical movies were showed in foreign countries.
This has changed now as there are different movies that are filmed and in different versions. Also, it isn't in the control of the government to edit out any part.
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Aggregate income in an economy in 2017 is $100 billion. Saving is $30 billion and imports are $35 billion. What is aggregate expenditure in the economy in 2017?
Answer: $100 billion
Explanation:
In Economics, Aggregate Income is assumed to be the same as Aggregate Expenditure. The assumption behind this is that every dollar spent is a dollar in income from someone else so every income is just a dollar that will be spent.
With that logic in a country that has Aggregate income of $100 billion, the Aggregate Expenditure will be $100 billion as well.
Dvorak Company produces a product that requires 5 standard pounds per unit. The standard price is $2.50 per pound. If 1,000 units required 4,500 pounds, which were purchased at $3.00 per pound, what is the direct materials (a) price variance, (b) quantity variance, and (c) total direct materials cost variance
Answer:
Direct material price variance= $2,250 unfavorable
Direct material quantity variance= $1,250 favorable
Total variance= $1,000 unfavorable
Explanation:
To calculate the direct material price and quantity variance, we need to use the following formulas:
Direct material price variance= (standard price - actual price)*actual quantity
Direct material price variance= (2.5 - 3)*4,500
Direct material price variance= $2,250 unfavorable
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Standard quantity= 5*1,000= 5,000
Direct material quantity variance= (5,000 - 4,500)*2.5
Direct material quantity variance= $1,250 favorable
Total variance= 1,250 - 2,250= $1,000 unfavorable
Coca-Cola, a company that does business in almost every national market, can most accurately be classified as: a. a multinational company. b. a leveraged company. c. a franchisee. d. a wholly owned subsidiary.
Answer:
A. a multinational company
Division A had ROI of 15% last year. The manager of Division A is considering an additional investment for the coming year. What step will the manager likely choose to take
Answer: c.Reject the investment if it returns less than 15% ROI.
Explanation:
Additional investments should yield incremental returns if they are to be accepted. In the previous year, Division A had an Return on Investment of 15%, when an additional investment is being considered, it must bring in more than that 15% if it is to be accepted.
Therefore, if an investment is to give a less than 15% ROI, it should be rejected as it is not bringing additional returns for the Division.
On November 1, Alan Company signed a 120-day, 10% note payable, with a face value of $11,700. What is the adjusting entry for the accrued interest at December 31 on the note
Answer:
Debit interest expense, $195; Credit interest payable, $195
Explanation:
The adjusting entry for the accrued interest at December 31 on the note is:
General Journal Debit Credit
Interest expense $195
($11,700 * 10% * 60/360)
Interest payable $195
Jackson Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Jackson has established the following standards for one unit of product: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 6 pounds $4.30 per pound $25.80 Direct labor 2.40 hours $5.00 per hour $12.00 During May, Jackson purchased 145,600 pounds of direct material at a total cost of $655,200. The total factory wages for May were $258,800, 90 percent of which were for direct labor. Jackson manufactured 21,000 units of product during May using 122,800 pounds of direct material and 50,900 direct labor-hours. The price variance for the direct material acquired by Jackson Industries during May is:
Answer:
Direct material price variance= $29,120 unfavorable
Explanation:
Giving the following information:
Standard: Direct materials 6 pounds $4.30 per pound $25.80
Actual= Jackson purchased 145,600 pounds of direct material at a total cost of $655,200.
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= 655,200/145,600= $4.5
Direct material price variance= (4.3 - 4.5)*145,600
Direct material price variance= $29,120 unfavorable
n January 1, 1987, three 100 par value bonds with 6% annual coupons will mature at the end of 1, 2, and 3 years, respectively. The redemption value of each bond is 100. You are given that the prices for these bonds on January 1, 1987 are: Maturity Date Price December 31, 1987 101.92 December 31, 1988 102.84 December 31, 1989 105.51 These prices are based on an interest rate of i in 1987, j in 1988, and k in 1989. Determine j.
Answer:
j = 4.52%
Explanation:
face value = $100, with 6% annual coupons
bond₁ matures in 1 year (December 31, 1987), market price $101.92
bond₂ matures in 2 years (December 31, 1988), market price $102.84
bond₃ matures in 3 years (December 31, 1989), market price $105.51
we must determine the market interest rate (j) for bond₂, and to do this we will use the approximate yield to maturity formula:
YTM = {coupon + [(face value - market price)/n]} / [(face value + market price)/2]
YTM = {6 + [(100 - 102.84)/2]} / [(100 + 102.84)/2] = 4.58 / 101.42 = 0.045158 = 4.52%
Since the bonds are sold at a premium, it means that the coupon rate is higher than the market rate.
On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000. What is the maturity value (principal plus interest) of the note on March 1
Answer:
$9,240
Explanation:
Computation of Maturity Value of the note
First step is to find the interest amount using this formula
Interest amount=(Face value *Note payable)*Numbers of days to signed/Numbers of days in a year
Let plug in the formula
Interest Amount = ($9,000*8%)*120/365
Interest amount = $720 * 120 / 360
Interest amount=720*0.33333
$240
Next step is to calculate for the Maturity value using this formula
Maturity Value = Face value +Interest amount
Let plug in the formula
Maturity value =$9,000 + $240
Maturity value = $9,240
Therefore the maturity value of the note on March 1 will be $9,240
The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is not expected to for the next five years. Its latest EPS was $10, all of which was reinvested in the company. The firm’s expected ROE for the next five years is 20% per year, and during this time it is expected to continue to reinvest all of its earnings. Starting in year 6, the firm’s ROE on new investments is expected to fall to 15%, and the company is expected to start paying out 40% of its earnings in cash dividends, which it will continue to do forever after. DEQS’s market capitalization rate is 15% per year. a. What is your estimate of DEQS’s intrinsic value per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year? (Round your dollar value to 2 decimal places.) Because there is (Click to select) , the entire return must be in (Click to select) . c. What do you expect to happen to price in the following year? (Round your dollar value to 2 decimal places.)
Answer:
a) $94.88
b) in 1 year, the intrinsic price of the stocks should increase to $109.11
Explanation:
year dividend EPS
0 0 $10
1 0 $12
2 0 $14.40
3 0 $17.28
4 0 $20.736
5 0 $24.8832
6 $11.45 $28.61568
growth rate up to year 5 = 20%
ROE growth rate starting year 6 = 15%
dividend growth rate starting year 6 = 15% x (1 - 40%) = 9%
cost of equity = 15%
horizon value at year 5 = $11.45 / (15% - 9%) = $190.83
current intrinsic value per stock = $190.83 / 1.15⁵ = $94.88
intrinsic price in 1 year = $190.83 / 1.15⁴ = $109.11
The estimate of DEQS’s intrinsic value per share is $94.88. Also, in 1 year, the intrinsic price of the stocks will increase to $109.11.
Based on the information given, the dividend and the earnings per share are given below:
year dividend EPS
0 0 $10
1 0 $12
2 0 $14.40
3 0 $17.28
4 0 $20.736
5 0 $24.88
6 $11.45 $28.616
Growth rate up to year 5 = 20%ROE growth rate starting year 6 = 15%Cost of equity = 15%Therefore, the dividend growth rate starting year 6 will be:
= 15% x (1 - 40%)
= 15% × 60%
= 9%
Therefore, the horizon value at year 5 will be:
= $11.45 / (15% - 9%)
= $11.45 / 6%
= $190.83
Then, the current intrinsic value per stock will be:
= $190.83 / 1.15⁵
= $94.88
The intrinsic price in 1 year will be:
= $190.83 / 1.15⁴
= $109.11
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Explain how growth in the demand for Australia's natural resources would affect the demand for Australian dollars in the foreign exchange market. Explain how the supply of Australian dollars would change.
Answer:
The question here is that of the balance of trade and the principles of demand and supply.
According to the Economics principles of demand and supply, when demand is high, prices follow in the same direction and the currency appreciates in value.
So, on one hand, when the demand for Australia's natural resources increases, because the legal tender recognised within Australia's borders is its own currency, trading partners are forced to convert from their currency into the Australian dollars thus creating an increased demand for the currency.
On the other hand, if the value of a countrys imports is more than the value of its export transactions, the opposite would happen, that is, its currency depreciates or loses value.
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Location Score
Factor
(100 points each) Weight A B C
Convenience .15 86 77 83
Parking facilities .20 70 88 98
Display area .18 86 90 94
Shopper traffic .27 90 88 89
Operating costs .10 86 91 96
Neighborhood .10 90 86 84
1.00
Using the above factor ratings, calculate the composite score for each location. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
Location Composite Score
A
B
C
Answer:
Location Composite Score
A 84.28
B 86.81
C 91.00
Explanation:
Calculation for the composite score for each location Using the above factor ratings
A
Factor Weight A
Convenience .15 ( .15*86 )=12.90
Parking facilities .20 (.20*70)=14.00
Display area .18 (.18*86)=15.48
Shopper traffic .27 (.27*90)=24.30
Operating costs .10 (.10*86 )=8.60
Neighborhood .10 (.10* 90 )=9.00
Total 1.00= 84.28
B
Factor Weight B
Convenience .15 (.15* 77)=11.55
Parking facilities .20 ( .20* 88)=17.60
Display area .18 (.18* 90)=16.20
Shopper traffic .27 (.27*88 )=23.76
Operating costs .10 (.10* 91)=9.10
Neighborhood .10 (.10*86 )=8.60
Total 1.00 = 86.81
C
Factor Weight C
Convenience .15 (.15* 83)=12.45
Parking facilities .20 (.20*98)=19.60
Display area .18 (.18*94)=16.92
Shopper traffic .27 (.27*89)=24.03
Operating costs .10 (.10*96)=9.60
Neighborhood .10 (.10*84)=8.40
Total 1.00 = 91.00
Therefore the composite score for each location is:
Location Composite Score
A 84.28
B 86.81
C 91.00
Based on the above calculation C is the best because it has the highest composite score of 91.00.
Suppose that short-term municipal bonds currently offer yields of 4%, while comparable taxable bonds pay 5%. Which gives you the higher after-tax yield if your combined tax bracket is:
Answer:
1.Taxable bonds
2Taxable bonds
3.They have the same after-tax yield
4.
municipal bond
Explanation:
The missing tax brackets are zero,10%,20% and 30%
Zero % tax rate:
municipal bond pays 4%
taxable bonds after tax yield=5%*(1-0)=5%
10% tax rate
municipal bond pays 4%
taxable bond after tax yield=5%*(1-10%)=4.5%
20% tax rate
municipal bond pays 4.0%
taxable bond after tax yield=5%*(1-20%)=4.0%
30% tax rate
municipal bond pays 4.0%
taxable bond after tax yield=5%*(1-30%)=3.50%
HSS Company provides security services to senior executives of prominent corporations when they travel outside the United States. HSS applies both fixed and variable overhead using direct labor hours. The annual budget for one if its customers is as follows: Budgeted hours 800 hours Direct labor $50.00 per hr. Variable overhead $30.00per hr. Fixed overhead $15.00 per hr. During the year, HSS had the following activity related to this customer: Actual hours were 850 at a total cost of $44,200. Actual fixed overhead was $12,750. Actual variable overhead was $22,950. What is the Variable Overhead Flexible Budget Variance?
a. U $2,550
b. U $1,050
c. F $2,550
d. F $1,050
Answer:
Variable overhead variance = $2,550 favorable
Explanation:
Flexible budget is that which is that which recognizes the cost behavior and is used for control purpose. It is prepared based on the actual level of activity achieved.
The variable overhead rate variance is the difference between the actual variable overhead cost and the actual hours multiplied by the standard variable overhead rate.
Actual hours of labour should have cost
($30× 850) 25500
but did cost 22,950
Variable overhead variance 2,550 favorable
Variable overhead rate variance = $2,550 favorable
Variable overhead deficiency variance
A vendor at a carnival sells cotton candy and caramel apples for $2.00 each. The vendor is charged $60 to set up his booth. Furthermore, the vendor’s average cost for each product he produces is approximately $0.80.
a. Write a linear cost function representing the cost C(x) (in $) to the vendor to produce x products.b. Write a linear revenue function representing the revenue R(x) (in $) for selling x products.c. Determine the number of products to be produced and sold for the vendor to break even.d. If 60 products are sold, will the vendor make money or lose money?
Answer with its Explanation:
Requirement A. The cost function is equal to variable cost for "x" units and fixed cost which remains fixed. Hence:
Cost Function = C(x) = $60 + $0.8x
Requirement B. The revenue for any units "x" sold can be calculated by simply multiplying "x" with sales price per unit. Which means that:
Revenue Function = R(x) = $2 * x = $2x
Requirement C. Now we have to find the breakeven quantity and this could be calculated using the following formula:
Breakeven Point = Fixed Cost / (Selling Price per Unit - Variable Cost Per Unit)
By putting values we have:
Breakeven Point = $60 / ($2 - $0.8) = 50 units
Requirement D. As the number of units are above breakeven point (No profit and loss position), hence making sales above 50 units will generate profit for the company.
The profit for the company would be:
Total Profit = Contribution per unit * Units above Breakeven point
Total Profit = ($2 - $0.8) * 10 Units = $12
Sally Eason put $4,000 in her deductible IRA this year. If Sally is in the 25 percent marginal tax bracket, the government actually contributed ____ of that amount for her. Group of answer choices
Answer: $1000
Explanation:
From the question, we are informed that Sally Eason put $4,000 in her deductible IRA this year and that Sally is in the 25 percent marginal tax bracket.
Based on the above information, the government contributed:
= 25% × $4,000
= 25/100 × $4,000
= 0.25 × $4,000
= $1000
A town with a small airport is served by two competing airlines. Which of the following strategies would make the airlines more likely to compete on price?
a) The airlines fly identical planes, with the same type of seat and the same amount of legroom for customers
b) One airline offers meals on board every flight while the other serves no meals but has fewer delayed flights
c) Each airline offers flights to a different set of other cities
d) The airlines offer loyalty programs, motivating existing customers to continue to fly with them
Answer:
Option A, The airlines fly identical planes, with the same type of seat and the same amount of legroom for customers.
Explanation:
Option “A” is correct because a firm or company compete on prices if the product offered by every firm are identical. additionally, if the product can not be differentiated then the firm can compete on the basis of price. Therefore, if two airlines fly identical planes and provide identical services like the same seat and the same amount of leg space to the customers.
In the past year, TVG had revenues of $3 million, cost of goods sold of $2.5 million, and depreciation expense of $200,000. The firm has a single issue of debt outstanding with book value of $1 million on which it pays an interest rate of 8%. What is the firm’s times interest earned ratio?
Answer:
TVG
Times Interest Earned Ratio (TIER) = Earnings Before Interest & Taxes divided by Interest Expense
= $300,000/$$80,000 = 3.75 times
Explanation:
a) TVG Income Statement:
Revenue $3,000,000
Cost of goods sold 2,500,000
Gross profit $500,000
Depreciation 200,000
EBIT $300,000
Interest Expense 80,000
Pre-tax Income $220,000
b) TVG's TIER shows the number of times that its earnings before interest and taxes covers the interest expense. It shows the ability of the TVG to settle its maturing debt obligations from current earnings. It is an important financial performance measure which potential investors in TVG will use to gauge the ability of TVG to meet financial obligations from the earnings it generates.
You find a zero coupon bond with a par value of $10,000 and 21 years to maturity. The yield to maturity on this bond is 4.3 percent. Assume semiannual compounding periods.What is the price of the bond?
Answer:
Price of bond $4,092.49
Explanation:
Computation the price of the bond
Using this formula
Price of bond=Par value*1/(1+YTM/2)^(2*time period)
Where,
Par value=$10,000
1/(1+YTM/2)=1/(1+0.043/2)
(2*time period)=(2*21 years)
Let plug in the formula
Price of bond=$10,000*1/(1+0.043/2)^(2*21)
Price of bond=$10,000*1/(1.0215)^42
Price of bond=$10,000*(0.97895252)^42
Price of bond=$10,000*0.4092497467
Price of bond=$4,092.49
Therefore the price of the bond will be $4,092.49
Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner Store is produced by the following production process: Name of Company Revenues Cost of Purchased Inputs Citrus Growers Inc. $0.75 0 Florida Jam Company $2.00 $0.75 The Corner Store $2.50 $2.00 What is the value added of Florida Jam Company
Answer:
$1.75
Explanation:
Value added is calculated by subtracting the difference of revenue and the cost of inputs.
value added of Florida Jam Company = $2.50 - $0.75 = $1.75
Northwest Fur Co. started 2021 with $105,000 of merchandise inventory on hand. During 2021, $510,000 in merchandise was purchased on account with credit terms of 3/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $8,900. Merchandise with an invoice amount of $3,700 was returned for credit. Cost of goods sold for the year was $362,000. Northwest uses a perpetual inventory system. What is ending inventory assuming Northwest uses the gross method to record purchases
Answer:
The ending inventory by using the gross method is $243,011
Explanation:
Purchases = Net purchases + Freight inwards
Purchases = 491,111 + 8,900
Purchases = 500,011
When Net purchase = Gross Purchase - Purchase return - Discount
Net purchase = 510,000 - 3,700- 15,189
Net purchase = 491,111
Working
Discount = (Purchases - Purchase return) × Discount rate
Discount = (510,000 - 3,700) * 3%
Discount = 15,189
Ending inventory = Beginning inventory + Purchases− Cost of good sold
Ending inventory = (105,000 + 500,011) - 362,000
Ending inventory = $243,011
Thus, the ending inventory by using the gross method is $243,011.
Gabriele Enterprises has bonds on the market making annual payments, with eleven years to maturity, a par value of $1,000, and selling for $982. At this price, the bonds yield 7.6 percent.
Required:
What must the coupon rate be on the bonds?
Answer:
The answer is 7.35 percent
Explanation:
N(Number of periods) = 11years
I/Y(Yield to maturity) = 7.6 percent
PV(present value or market price) = $982
PMT( coupon payment) = ?
FV( Future value or par value) = $1,000.
We are using a Financial calculator for this.
N= 11; I/Y = 7.6; PV = -$982; FV= $1,000; CPT PV= $73.52
Therefore, coupon rate is ($73.52/$1,000) x 100 percent
=7.35 percent
