In the consensus case, what is Amazon's enterprise value on the valuation date using the exit multiple terminal value

Answers

Answer 1

Answer:

The exit multiple expect that the market different premise is a reasonable strategy for esteeming a business. The estimation of the business is gotten by duplicating money related measurements, for example, EBITDA or EBIT by a factor that is basic to practically identical organizations that were as of late procured. A fitting scope of products can be created by taking a gander at late equivalent acquisitions in the open market.  

The various acquired is then increased by the anticipated EBIT or EBITDA in year N (last year of projection period) to give the future incentive toward the finish of year N. The future value (otherwise called terminal value) is then limited by a factor equivalent to the quantity of years in the projection time frame.  

The worth got is then added to the current estimation of the free incomes to acquire the suggested venture esteem. For repetitive organizations where profit vacillate as per varieties in the economy, we utilize the normal EBITDA or EBIT over the span of the particular recurrent as opposed to the sum in year N in the projection time frame.  

This implies an industry different is applied as opposed to applying a current numerous to consider the recurrent varieties of profit. On the off chance that investigators utilized a current numerous, the valuation would be influenced by financial cycles.

A Enterprise Value (EV) to Revenue Multiple is used to value a business by dividing its enterprise value by its annual revenue. The formula to calculate the Enterprise Value (EV) to Revenue Multiple is EV/Revenue

EV = Enterprise Value

EV can be denoted as (Equity Value + All Debt + Preferred Shares) – (Cash and Equivalents)

While Revenue = Total Annual Revenue

This can be calculated when we have a share price, shares outstanding, debt, and cash or its equivalence.


Related Questions

Assume the annual retention rate for a cell phone subscriber is 70 percent and the customer generates $300 per year in profit. Assuming an annual discount rate of 8 percent, compute the value of a customer.

Answers

Answer:

The value of a customer is $193.2.

Explanation:

The value of the customer can be calculated by considering the profit they generate, retention rate, and the discount.

Value of a customer = Profit per year * Retention rate * (1 - discount)

Value of a customer = 300 * 0.7 * (1 - 0.08)

Value of a customer = 300 * 0.7 * 0.92

Value of a customer = 193.2

Thus, the value of a customer is $193.2.

Aakash has a liability of 6000 due in four years. This liability will be met with payments of A in two years and B in six years. Aakash is employing a full immunization strategy using an annual effective interest rate of 5%. Calculate ∣∣A−B∣∣.

Answers

Answer:

∣A−B∣ = 586.411

Explanation:

The effective interest rate is 0.05 so at the end of a year total amount will be 1.05 multiplied by principal

Liability = 6,000 ÷ 1.05^4 = Asset

Therefore

6,000 ÷ 1.05^4 = (A ÷ 1.05^2) + (B ÷ 1.05^6) (equation 1)

Multiply through by 1.05^6

6000(1.05^2) = A(1.05^4) + B

B = 6000(1.05^2) - A(1.05^4) (equation 2)

Finding differential from equation 1

4= 2((A ÷ 1.05^2) ÷ (6000 ÷ 1.05^4)) + 6(B ÷ 1.05^6) ÷ (6000 ÷ 1.05^4))

4(6000 ÷ 1.05^4) = 2(A ÷ 1.05^2) +6 (B ÷ 1.05^6)

Multiply through by 1.05^6

4(6000 ÷ 1.05^2) = 2(A ÷ 1.05^4) + 6B

Substitute value of B from equation 2

4(6000 ÷ 1.05^2) = 2(A ÷ 1.05^4) + 6 *6000(1.05^2) - 6*A(1.05^4)

A= 2721.0884

Substitute A in equation 2

B = 6000(1.05^2) - 2721.0884(1.05^4)

B= 3307.5

∣A−B∣ = |2721.0884 - 3307.5|

∣A−B∣ = 586.411

On January 4, 2021, Runyan Bakery paid $344 million for 10 million shares of Lavery Labeling Company common stock. The investment represents a 30% interest in the net assets of Lavery and gave Runyan the ability to exercise significant influence over Lavery's operations. Runyan received dividends of $4.50 per share on December 15, 2021, and Lavery reported net income of $250 million for the year ended December 31, 2021. The market value of Lavery's common stock at December 31, 2021, was $32 per share. On the purchase date, the book value of Lavery's identifiable net assets was $900 million and: The fair value of Lavery's depreciable assets, with an average remaining useful life of seven years, exceeded their book value by $70 million. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill. Required: 1. Prepare all appropriate journal entries related to the investment during 2021, assuming Runyan accounts for this investment by the equity method. 2. Prepare the journal entries required by Runyan, assuming that the 10 million shares represent a 10% interest in the net assets of Lavery rather than a 30% interest.

Answers

Answer:

1. Dr Investment in LL $344

Cr Cash $344

Dr Investment in LL $75

Cr Investment Revenue $75

Dr Cash $45

Cr Investment in LL $45

2. Dr Investment in LL $344

Cr Cash $344

Dr Cash $45

Cr Investment in LL $45

Dr Net Unrealized loss -OC1 $24

Cr Fair value adjustment $24

Explanation:

1.

Preparation of the Journal entry to record the invoice made from 10million shares

Dr Investment in LL $344

Cr Cash $344

(To record the invoice made from 10million shares)

Preparation of the Journal entry to record the share in net income

Dr Investment in LL $75

($250×30%)

Cr Investment Revenue $75

(To record the share in net income)

Preparation of the Journal entry to record the dividend income

Dr Cash $45

(10×$4.50 per share)

Cr Investment in LL $45

(To record the dividend income)

2.

Preparation of the Journal entry to record the invoice made from 10million shares

Dr Investment in LL $344

Cr Cash $344

(To record the invoice made from 10million shares)

Preparation of the Journal entry to record the dividend income

Dr Cash $45

(10×$4.50 per share)

Cr Investment in LL $45

(To record the dividend income)

Preparation of the Journal entry to record the adjusting entry

Dr Net Unrealized loss -OC1 $24

(10×$32 per share)-$344

(320-344=-$24)

Cr Fair value adjustment $24

(To record the adjusting entry)

Richard Redden, the sole stockholder, contributed $71,000 in cash and land worth $132,000 in exchange for common stock to open a new business, RR Consulting. Which of the following general journal entries will RR Consulting make to record this transaction?
A. Debit Assets $203,000; credit Common Stock $203,000.
B. Debit Cash and Land, $203,000; credit Common Stock $203,000.
C. Debit cash $71,000; debit land $132,000; credit Common Stock $203,000.
D. Debit Common Stock $203,000; credit cash $71,000; credit Land $132,000.
E. Debit Common Stock $203,000; credit Assets $203,000.

Answers

Answer: C. Debit cash $71,000; debit land $132,000; credit Common Stock $203,000.

Explanation:

From the question, we are informed that Richard Redden, the sole stockholder, contributed $71,000 in cash and land worth $132,000 in exchange for common stock to open a new business, RR Consulting.

The journal entries will RR Consulting make to record this transaction will be:

Debit cash $71,000; debit land $132,000; credit Common Stock $203,000.

Answer:

C. Debit cash $71,000; debit land $132,000; credit Common Stock $203,000.

Explanation:

Recognize the Assets of Cash at $71,000, the Assets of Land at $132,000 and an Equity element - Common Stock at $203,000.

The journal entry will be as follows :

Cash $71,000 (debit)

Land $132,000 (debit)

Common Stock $203,000 (credit)

An investment adviser with no place of business in the State is exempt from registration if it renders advice solely to employee benefit plans with assets of at least:

Answers

Answer:

$1,000,000

Explanation:

The investment adviser who doesn't have any place of business in the state and offers his services to only employee benefit plans with assets of assets at least $1,000,000 are exempt from registration. If the asset value exceeds this limit then the investment adviser will be required to register itself.

The debt-to-equity ratio for your small business was 1.40 at the end of last year and 1.25 at the end of this year. Your debt-to-equity ratio is:_________

Answers

Answer:

debt-to-equity ratio is 1.33 .

Explanation:

Given the debt equity ratio at the beginning and at end of the year, we can estimate the debt equity ratio of a company as the average of the two.

Average debt-to-equity ratio = (1.40 + 1.25) ÷ 2

                                                = 1.325 or 1.33

TB MC Qu. 9-291 Kartman Corporation makes a product with ... Kartman Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 8.2 pounds $ 8.70 per pound $ 71.34 Direct labor 0.3 hours $ 41.00 per hour $ 12.30 Variable overhead 0.3 hours $ 5.70 per hour $ 1.71 In June the company's budgeted production was 5,100 units but the actual production was 5,200 units. The company used 23,850 pounds of the direct material and 2,460 direct labor-hours to produce this output. During the month, the company purchased 27,100 pounds of the direct material at a cost of $187,180. The actual direct labor cost was $58,721 and the actual variable overhead cost was $13,331. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead rate variance for June is:

Answers

Answer:

Variable manufacturing overhead rate variance= $688.8 favorable

Explanation:

Giving the following information:

Variable overhead 0.3 hours $5.70 per hour

The company used 2,460 direct labor-hours to produce this output. The actual variable overhead cost was $13,331.

To calculate the variable overhead rate variance, we need to use the following formula:

Variable manufacturing overhead rate variance= (standard rate - actual rate)* actual quantity

Actual rate= 13,331/2,460= $5.42

Variable manufacturing overhead rate variance= (5.7 - 5.42)*2,460

Variable manufacturing overhead rate variance= $688.8 favorable

If a company from Country A decides to sell merchandise to a company from Country B, then the company from Country A ________.

Answers

Answer: C) can denominate the sale in either currency and use the foreign exchange market to convert currency

Explanation:

The options to the question are:

A) will denominate the sale in its own currency since it is too hard to convert foreign currency

B) will denominate the sale in the currency of the buyer since it is too hard for them toconvert foreign currency

C) can denominate the sale in either currency and use the foreign exchange market to convert currency

D) can use the OTC market to convert receipts in the future and the exchange markets to convert receipts in the spot market.

Since the company from Country A I the one selling merchandise to the company from Country B, it means that the company from Country A can denominate the sale in either currency and use the foreign exchange market to convert currency.

A company factored $45,000 of its accounts receivable and was charged a 4% factoring fee. The journal entry to record this transaction would include a:

Answers

The question is incomplete as it is missing the options. The complete question is,

A company factored $45,000 of its accounts receivable and was charged a 4% factoring fee. The journal entry to record this transaction would include a:

a. Debit to Cash of $45,000 and a Credit to Account Receivable of $45,000

b. Debit to Cash of $46,800 and a Credit to Account Receivable of $46,800

c. Debit to Cash of $45,000 and a Credit to Notes Payable of $45,000

d. Debit to Cash of $45,000, a Debit to Factoring Fee Expense of $1800, and Credit to Account Receivable of $43,200

e. Debit to Cash of $43,2000, a Debit to Factoring Fee Expense of $1,800, and Credit to Account Receivable of $45,000

Answer:

The correct answer is option e.

Explanation:

Factoring accounts receivables means selling the claims on accounts receivables to a third party in exchange of cash. Such factoring is done to receive payment for these accounts receivables instantly and selling the claims to some other company. The factoring company charges a certain portion of accounts receivable as fee and only provides cash after deducting this percentage. This fee is an expense for a company using factoring service and is debited.

So the general entry to record factoring would be,

Cash                                       43200 Dr

Factoring fee                         1800 Dr

       Accounts receivables                 45000    Cr

Cash = 0.96 * 45000 = 43200

Factoring fee = 45000 * 0.04 = 1800

2. What is your class or form?
A. 1st Year (Form 1)
B. 2nd Year (Form 2)
C. 3rd Year (Form 3)​

Answers

Answer:

2 nd year ( FORM 2)

Explanation:

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Prepare journal entries to record each of the following four separate issuances of stock. A corporation issued 10,000 shares of $20 par value common stock for $240,000 cash. A corporation issued 5,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $45,500. The stock has a $1 per share stated value. A corporation issued 5,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $45,500. The stock has no stated value. A corporation issued 2,500 shares of $50 par value preferred stock for $170,500 cash.

Answers

Answer:

1.

DR Cash.................................................$240,000  

CR Common Stock................................................... $200,000

Paid in Excess of Par- Common Stock.....................$40,000

Working

Common Stock = $20 * 10,000 = $200,000

Paid in Excess of Par- Common Stock = 240,000 - 200,000 = $40,000

 

2.

DR Promotion Expenses................................$45,500  

CR Common Stock.........................................................$5,000

Paid in Excess of Par- Common Stock ........................$40,500

Working

Common stock = 5,000 * 1 = $5,000

Paid in Excess of Par- Common Stock = 45,500 - 5,000 = $40,500

 

3

DR Promotion Expenses..........................$45,500  

CR Common Stock....................................................$45,500

 

4

DR Cash  ...................................................$170,500

CR Preferred Stock .....................................................$125,000

CR Paid in Excess of Par - Preferred Stock ..............$45,500

Working

Preferred Stock = 50 * 2,500 = $125,000

Paid in Excess of Par - Preferred Stock = 170,500 - 125,000 = $45,500

Problem 9-18 Comprehensive Variance Analysis [LO9-4, LO9-5, LO9-6]

Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems as shown by its June contribution format income statement below:

Flexible Budget Actual
Sales (3,000 pools) $ 179,000 $ 179,000
Variable expenses:
Variable cost of goods sold* 33,390 44,540
Variable selling expenses
11,000

11,000
Total variable expenses
44,390

55,540
Contribution margin
134,610

123,460
Fixed expenses:
Manufacturing overhead 50,000 50,000
Selling and administrative 75,000 75,000
Total fixed expenses
125,000

125,000
Net operating income (loss) $ 9,610 $
(1,540

)
*Contains direct materials, direct labor, and variable manufacturing overhead.

Janet Dunn, who has just been appointed general manager of the Westwood Plant, has been given instructions to "get things under control." Upon reviewing the plant’s income statement, Ms. Dunn has concluded that the major problem lies in the variable cost of goods sold. She has been provided with the following standard cost per swimming pool:

Standard Quantity or Hours Standard Price
or Rate Standard Cost
Direct materials 3.6 pounds $
2.00

per pound $ 7.20
Direct labor 0.5 hours $
6.60

per hour 3.30
Variable manufacturing overhead 0.3 hours* $
2.10

per hour
0.63

Total standard cost per unit $ 11.13
*Based on machine-hours.

During June the plant produced 3,000 pools and incurred the following costs:

Purchased 15,800 pounds of materials at a cost of $2.45 per pound.

Used 10,600 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)

Worked 2,100 direct labor-hours at a cost of $6.30 per hour.

Incurred variable manufacturing overhead cost totaling $3,000 for the month. A total of 1,200 machine-hours was recorded.

It is the company’s policy to close all variances to cost of goods sold on a monthly basis.

Required:

1. Compute the following variances for June:

a. Materials price and quantity variances.

b. Labor rate and efficiency variances.

c. Variable overhead rate and efficiency variances.

2. Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month.

Answers

Answer:

1 a. Materials price and quantity variances.

Material price variance = (Actual price - Standard price) * Actual Quantity purchased

= ($2.45 - $2) * 15,800

= $0.45 * 15,800

= $7110 (Unfavorable)

Materials Quantity variance = (Actual Quantity used - Standard Quantity allowed) * Standard price  

(10600 - 3000 * 3.6) * $2

= (10,600 -  10,800) * $2

= 200 * $2

= 400 (Favorable)

b. Labor rate and efficiency variances.

Labor rate variance = (Actual rate - standard rate) * Actual hours

= (6.30 - 6.6) * 2,100

= 0.3 * 2,100

= 630 (Favorable)

Labor Efficiency variance  = (Actual hours - standard hours allowed) *  Standard rate  

= (2100 - 3000 * 0.5) * 6.6

= (2,100 - 1,500) * 6.6

= 600 * 6.6

= 3960 (Unfavorable)

c. Variable overhead rate and efficiency variances

Variable overhead rate variance  = (Actual rate - Standard rate * Actual machine hours)

= 3000 - (2.10 * 1200)

= 3,000 - 2,520

= 480 Unfavorable

Variable overhead Efficiency variance = (Actual hours - standard hours allowed)* Standard rate

= (1200 - 3000 * 0.3) * 2.10    

= (1200 - 900) * 2.10

= 300 * 2.10

= 630 (Unfavorable)

2.    Variances                                            Amount

Material price variance                             7,110 U

Material quantity variance                         400 F

Labor rate variance                                    630 F

Labor efficiency variance                           3,960 U

Variable overhead rate variance               480 U

Variable overhead efficiency variance      630 U

Net variance                                                11,150 U

The net variance of all the variance of the month is 11,150 (Unfavorable)

You consider buying a share of stock at a price of $10. The stock is expected to pay a dividend of $1.00 next year, and your advisory service tells you that you can expect to sell the stock in 1 year for $12. The stock's beta is 1.0, rf is 16%, and E[rm] = 26%. What is the stock's abnormal return? rev: 03_30_2019_QC_CS-164617 Multiple Choice 4% 10% 6% 0%

Answers

Answer: 4%

Explanation:

Abnormal returns are the excess actual returns received over the expected return.

The actual return can be calculated as;

= [tex]\frac{New Stock price + dividends - Old Stock Price}{Old stock price}[/tex]

= [tex]\frac{12 - 10 + 1}{10}[/tex]

= 30%

The expected return according to CAPM;

Expected return = Risk free rate + beta( market return - risk free rate)

= 16% + 1 ( 26% - 16%)

= 26%

Abnormal return = 30% - 26%

= 4%

Importance of strategic planning

Answers

Huh? What are u asking

Answer:Strategic planning is the process of documenting and establishing a direction of your small business

Explanation: The strategic plan gives you a place to record your mission, vision, and values, as well as your long-term goals and the action plans you'll use to reach them.

"A broker-dealer who acted as financial advisor to a municipality in structuring a new issue now wishes to act as underwriter in a negotiated offering. Which statement is TRUE?"

Answers

Answer:

B. The financial advisor is prohibited from acting as the underwriter

Explanation:

As per the rule of the Municipal Securities Rulemaking Board, the financial advisor cannot be the underwriter.

The financial advisor for a  municipality is paying the advisory fee for assisting the structure of the municipality in order to the issuance of the new bond so that the less interest cost to be paid.

But in the case of the underwriter, it contains high rate of interest as it is very easiest way for selling

So through this, the conflict arises between these two parties

Therefore option B is correct

The term crowding-out effect refers to a situation in which a government _______________ results in ______________ interest rates, causing ______________ in private spending on investment and consumer durables.

Answers

Answer: Deficit; higher; a decrease

Explanation:

The term crowding-out effect refers to a situation in which a government deficit results in higher interest rates, causing a decrease in private spending on investment and consumer durables.

The Crowding-out effect is what happens when a Government increases its spending past its revenues and gets a budget deficit. In other to balance its books therefore it will borrow heavily.

If the Government is such a large one like the American Government or the British Government, the borrowing might be so large that it will have the effect of reducing the amount of loanable funds in the market thereby increasing the interest rates due to a reduced supply of loanable funds.

As there are now increased interest rates, it will be more expensive for companies to borrow to spend on investment or for consumers to spend on durables. It will have the effect of crowding out the private sector.

Craig's Car Wash Inc. is considering a project that has the following cash flow and WACC data. What is the project's discounted payback?
WACC: 10.00%
Year : Cash flows
0 : -$900
1 : $500
2 : $500
3 : $500

Answers

Answer:

Discounted payback period= 2 years 1 month

Explanation:

The discounted payback period is the estimated length of time in years it takes  the present value of net cash inflow from a project to equate the net cash the initial cost  

To work out the discounted payback period, we will compute present value of the cash inflow and then determine how long it will take for the sum to be equal to the initial cost. This is done as follows:

Year          Cash flow    DF             Present value                

0              900    ×          1        =     900                

1               500     ×      1.1^(-1)   =     454.55

2             500     ×      1.1^(-2)    =    413.22

2             500     ×      1.1^(-3)   =      375.66

Total PV for 2 years = 454.55  +  413.22 = 867.77

Balance of cash flow remaining to equal 900 = 900 -867.77  = 32.23

Discounted payback period = 32.23 /375.66 × 12 months

                                               = 2 years 1 month

Discounted payback period= 2 years 1 month

             

All else being equal, an increased demand for U.S. products in the European Union will create a A.)supply of euros. B.)surplus of euros. C.)shortage of euros. D.)demand for euros.

Answers

Answer:

Correct Answer:

B.)surplus of euros.

Explanation:

United States of America as one of the most industrialized country with factories and firms producing goods and services engages in trade with other countries. Should their goods and services be demanded by European countries, it would create surplus of Euros due to the fact that, all the goods would be paid for by the common currency used by the European countries which is Euros.

Sheridan Company has several outdated computers that cost a total of $18200 and could be sold as scrap for $6200. They could be updated for an additional $3000 and sold. If Sheridan updates the computers and sells them, net income will increase by $9000. What amount would be considered sunk costs

Answers

Answer:

$18200

Explanation:

Sunk cost is cost that has already been incurred and cannot be recovered. It should not be considered when making future decisions.

The computers costs $18200. This amount has already been incurred and it cannot be recovered.

Which type of disclosure must be signed by the buyer and the seller in a nonresidential transaction?

Answers

Answer: Request to use designated sales associate representation.

Explanation:

The options for the question are:

a. Single agent

b. Consent to transition

c. No brokerage relationship

d. Request to use designated sales associate representation

The type of disclosure must be signed by the buyer and the seller in a nonresidential transaction is the request to use designated sales associate representation.

In this disclosure, both the buyer and the seller must sign a disclosure which will state their assets and determine if the threshold is met.

The optimum capital structure Question 4 options: a) Provides the lowest cost of capital b) Has the best mix of debt, preferred stock, and common equity c) Can change over time as market and firm conditions change d) All of these apply

Answers

Answer:

d) All of these apply.

Explanation:

An optimum capital structure can be defined as a financial instrument used by firms to determine the best mix of debt and equity financing that maximizes its market value, as well as minimizes its cost of capital such as operations and expansion. It minimizes the weighted average cost of capital (WACC) of a firm to the least most possible value.

Generally, the optimum capital structure used by a firm to maximize its market value;

a) Provides the lowest cost of capital.

b) Has the best mix of debt, preferred stock, and common equity.

c) Can change over time as market and firm conditions change.

Chaz and Dolly enter into a contract under which Chaz agrees to provide maintenance services for Dolly's Ski Resort. Duties under the contract may not be transferred if

Answers

Answer: d. any of the choices.

Explanation:

Chaz is not to transfer the duties to a third party if Dolly got into the agreement with Chaz for any of the following;

If Dolly places special trust in the ability of Chaz to perform the maintenance then that trust should not be broken by transferring the duties to a third party. Dolly went into that contract because they trusted in the abilities of Chaz.If Dolly went into the contract due to the personal skills or talents of Chaz, the duties against would be non-transferable. Chaz's skills were the reason the contract was signed, if these skills are not to be used then the contract will be baseless. By signing with Chaz, Dolly expects a certain level of performance. If the performance that will be made by a third contracting party is materially different from the one that Dolly would have expected from Chez, the duties will not be transferable.

Standard rate per direct labor-hour $ 2 Standard direct labor-hours for each unit produced 3 Units manufactured 1,000 Actual direct labor-hours worked during the month 3,300 Total actual variable manufacturing overhead $ 6,600 Knowledge Check 01 Assume that direct labor-hours is used as the overhead allocation base. What is the variable overhead efficiency variance

Answers

Answer:

Variable overhead efficiency variance= $600 unfavorable

Explanation:

Giving the following information:

Standard rate per direct labor-hour $2

Standard direct labor-hours for each unit produced 3

Units manufactured 1,000

Actual direct labor-hours worked during the month 3,300

To calculate the variable overhead efficiency variance, we need to use the following formula:

Variable overhead efficiency variance= (Standard Quantity - Actual Quantity)*Standard rate

Variable overhead efficiency variance= (1,000*3 - 3,300)*2

Variable overhead efficiency variance= $600 unfavorable

Graham Motors manufactures specialty tractors. It has two divisions: a Treactor Division and a Tire Division. The Tractor Division can use the tires produced by the Tire Division. The market price per tire is $75. The Tire Division has the following costs per tire:Direct material cost per tire: $15Conversion costs per tire: $3 (Assume the $3 includes only the variable portion of conversion costs.)Fixed manufacturing overhead cost for the year is expected to total $116,000. The Tire Division expects to manufacture 58,000 tires this year. The fixed manufacturing overhead per tire is $2 ($116,000 divided by 58,000 tires).Assume that the Tire Division has excess capacity, meaning that it can produce tires for the Tractor Division without giving up any of its current tire sales to outsiders. If Graham Motors has a negotiated transfer price policy, what is the lowest acceptable transfer price? What is the highest acceptable transfer price?• The lowest acceptable transfer price is $_______, the Tire Division's ______________.• The highest acceptable transfer price is $_______, the Tire Division's _____________.

Answers

Answer:

The LOWEST acceptable transfer price is $18 the Tire Division's variable cost per tire.

The HIGHEST acceptable transfer price is $75the Tire Division's market price.

Explanation:

Calculation for the lowest acceptable transfer price and the highest acceptable transfer price

Variable Cost per tire:

Direct Material $15

Conversion cost $3

=$18 per tire

The LOWEST acceptable transfer price is $18 Tire division variable cost per tire

Based on the information we were told that the market price per tire is $75 which means that the HIGHEST transfer price is $75 tire division market price.

Therefore If Graham Motors has a negotiated transfer price policy The LOWEST acceptable transfer price is $18 the Tire Division's variable cost per tire While The HIGHEST acceptable transfer price is $75 the Tire Division's market price.

Kennywood​ Inc., a manufacturing​ firm, is able to produce 1,500 pairs of pants per​ hour, at maximum efficiency. There are three eight−hour shifts each day. Due to unavoidable operating​ interruptions, production averages 850 units per hour. The plant actually operates only 28 days per month. Based on the current​ budget, Kennywood estimates that it will be able to sell only 504,000 units due to the entry of a competitor with aggressive marketing capabilities. But the demand is unlikely to be affected in future and will be around 516,000. Assume the month has 30 days. What is the theoretical capacity for the​ month?

Answers

Answer:

1,080,000 units

Explanation:

Given the below information;

Theoretical capacity per hour = 1,500 units per hour

Hours per shift = 8 hours

Number of shift in each day = 3

Number of days per month = 30

Theoretical capacity for the month

= Theoretical capacity per hour × number of shift per day × hours per shift/day × number of days in a month

= 1,500 × 3 × 8 × 30

= 1,080,000 units

A project will reduce costs by $38,500 but increase depreciation by $18,300. What is the operating cash flow if the tax rate is 35 percent?

Answers

Answer:

$31,430

Explanation:

A project will reduce costs by $38,500

The project will have an increased depreciation of $18,300

The tax rate is 35%

= 35/100

= 0.35

Therefore, the operating cash flow can be calculated as follows

Operating cash flow= reduction in project cost×(1-tax rate)+(increase in the depreciation amount ×tax rate)

= $38,500×(1-0.35)+($18,300×0.35)

= $38,500×0.65+6,405

= $25,025+$6,405

= $31,430

Hence the operating cash flow is $31,430

Fly High Co. is expanding and expects operating cash flows of $65,000 a year for four years as a result. This expansion requires $105,000 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires $7,000 of net working capital, which will be recovered at the end of the project. What is the net present value of this expansion project at a required rate of return of 15 percent

Answers

Answer:

The net present value of this expansion project is $77,575.87.

Explanation:

The Net Present Value of the Expansion can be calculated as follows

($112,000)  CFj

$65,000    CFj

$65,000    CFj

$65,000    CFj

$72,000    CFj

I/YR            15%

Shift NPV $77,575.87

. Define a primary and secondary market for securities and discuss how they differ. Discuss how the primary market is dependent on the secondary market. (

Answers

Explanation:

Primary market for securities is one that provides access to buy new new issues of stocks and bonds of a company. A good example of primary market is an Initial Public Offering (IPO), organized by a company that wants to sell it's shares for the first time to investors.

While Secondary market, are places to sell securities to a secondary (second) buyer from the current security owner who bought from the primary market.

The primary market is dependent on the secondary market since it is the demand from the secondary market that determines the asset valuation of the primary market.

Sonny's BBQ Company recently issued $85 par value preferred stock that pays an annual dividend of $9. Analysts estimate that the stock has a beta of 1.01. The current T-bill rate is 2.4%. The S&P 500's expected return is 12.1%. Assuming that CAPM holds, what is the intrinsic value of this preferred stock?

Answers

Answer:

Intrinsic value=$73.77

Explanation:

The Dividend Valuation Model(DVM) is a technique used to value the worth of an asset.

According to this model, the value of an asset is the sum of the present values of the future cash flows would that arise from the asset discounted at the required rate of return.

Price = D/Kp

D- Dividend payable

Kp- cost of preferred stock

So will need to work out the cost of equity using CAPM

The capital asset pricing model (CAPM): relates the price of a share to the market risk or systematic risk. The systematic risk is that which affects all the all the economic agents, e.g inflation, interest rate e.t.c  

This model is considered superior to DVM. Hence, we will use the CAPM

Using the CAPM , the expected return on a asset is given as follows:  

E(r)= Rf +β(Rm-Rf)  

E(r) =? , Rf- 2.4%, Rm- 12.1% β- 1.01

E(r) = 2.4% + 1.23×(12.1- 2.4)%  = 12.20 %

Cost of preferred stock= 12.20 %

Using the dividend valuation model

Intrinsic value = 9/0.1220=73.77

Intrinsic value=$73.77

Predatory pricing is considered an anti-competitive practice, and is considered illegal under competition laws. Which of the following best describes predatory pricing?
A. Predatory pricing requires one company to aquire the assets of another.
B. One business chooses to put another out of business by pricing its product below the level another competing business must be at to make a profit.
C. Predatory pricing occurs when a firm colludes with one or more firms to fix prices or output.
D. Predatory pricing is when a business sends someone out to change the price of another company's product so it is higher than its own.

Answers

Answer:

B

Explanation:

Predatory pricing is when a company sets the price of its goods or services too low with the aim of eliminating the competition. Predatory pricing is illegal and it violates antitrust law.

Predatory pricing occurs when a firm colludes with one or more firms to fix prices or output. This is an example of collusion and they usually occur in an oligopoly

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