Answer:
12.13%
Explanation:
Calculation to determine what the market believe that 2-year securities will be yielding 4 years from now using a geometric average
Yield=((1+6 year rate)^6/(1+4 year rate)^4)^(1/2)-1
Yield =((1+7.7%)^6/(1+5.55%)^4)^(1/2)-1
Yield =0.1213*100
Yield =12.13%
Therefore what the market believe that 2-year securities will be yielding 4 years from now
using a geometric average will be 12.13%
Suppose you know a company's stock currently sells for $90 per share and the required return on the stock is 15 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share
Answer:
$ 3.87
Explanation:
It is given that :
Cost of the company's stock per share = $ 90
The required return on the stock is = 15 %
Therefore, the dividend yield = [tex]$\frac{9}{2}=4.5$[/tex]
We known that
[tex]$\frac{\text{dividend in one year}}{\text{current price}}=0.045$[/tex]
[tex]$D_1=0.045 \times 90$[/tex]
= 4.05
The current dividend is,
[tex]$D_0= \frac{4.05}{1.045}$[/tex]
= $ 3.87
Jane currently has $5,300 in her savings account and $2,000 in her checking account at the local bank. Instructions:
A. If Jane withdraws $500 in cash from her savings account, by what dollar amount will the country's money supply (M1 and M2) change as a result of Jane's actions?
B. Suppose that after Jane withdraws $500 from her checking account, she uses $180 of this money to pay her federal income tax. After paying her taxes, Jane uses $160 to buy a set of used golf clubs from her neighbor, who then deposits the money into his checking account. Jane deposits the remaining cash from the $500 withdrawal into her savings account. By what dollar amount will the country's money supply change as a result of Jane's actions?
Answer:
A
M1 change = $500M2 change = $0B
M1 change = -$340M2 change = -$180Explanation:
A. M1 includes actual liquid cash in hand as well as cash in checking deposits.
M2 includes M1 as well as savings deposits and time deposits amongst others.
M1 change = +$500
$500 went from the Savings account which was not part of M1 to M1.
M2 change = $0
The money went from Savings to Checking which are both part of M2.
B.
M1 change = -$-180 - ( 500 - 180 -160 ) = -$340
Tax of $180 went out of the supply as tax. Jane deposits the remaining cash after paying $160 for goods into the savings account which is not part of M1. That remaining cash is = 500 - 180 - 160 = $160.
M2 change = -500 + 160 + 160 = -$180
For M2, only taxes will reduce money from it because the rest goes to checking deposits and savings accounts both of which are part of M2
The PPP theory fails in reality for all of the following reasons EXCEPT Group of answer choices monopolistic or oligopolistic practices in goods markets. restrictions on trade. inflation rates are unrelated to money supply growth. transport costs. the inflation data reported in different countries are based on different commodity baskets.
Answer:
inflation rates are unrelated to money supply growth.
Explanation:
purchasing power parity which is regarded as (PPP) is a macroeconomic analysis metric which gives comparison between economic productivity aas well as standards of living existing between countries. It can be regarded as economic theory which gives comparison of currencies of different countries using an approach of "basket of goods". The PPP theory can hold in reality for instance, when inflation rates are unrelated to money supply growth.
EXCEPT Group of answer choices monopolistic or oligopolistic practices in goods markets. restrictions on trade. the inflation data reported in different countries are based on different commodity baskets.
Buzz Lightyear has been offered an investment in which he expects to receive payments of $4,000 at the end of each of the next 10 years in return for an initial investment of $10,000 now. a. What is the IRR of the proposed investment
Answer:
IRR= 21.86%
Explanation:
Giving the following information:
Initial investment (PV)= $10,000
Cash flows (PMT)= $4,000 per year
Number or years (n)= 4
It is extremely difficult to calculate the IRR using the formula. We will use the financial calculator.
Function: CMPD
n= 4
I%= SOLVE = 21.86%
PV= 10,000
PMT= -4,000
IRR= 21.86%
The air pollution could be reduced if the company spent $10,000 on upgraded ventilators. The company agrees to install the ventilators if the affected families contribute the $10,000. However, because individuals will benefit from the reduction in air pollution whether they contribute or not, most people will not contribute and the firm will not install the ventilators. This outcome is an example of the
Answer:
free rider problem
Explanation:
The air pollution constitutes a negative externality
A good has negative externality if the costs to third parties not involved in production is greater than the benefits. an example of an activity that generates negative externality is pollution. Pollution can be generated at little or no cost, so they are usually overproduced. Government can discourage the production of activities that generate negative externality by taxation. Taxation increases the cost of production and therefore discourages overproduction. Tax levied on externality is known as Pigouvian tax.
Government can regulate the amount of externality produced by placing an upper limit on the amount of negative externality permissible
Free rider is when some people benefit from the solution proffered but do not pay to enjoy these benefits
What macroeconomic goal is Real GDP used to measure for?
Answer: Economic growth
Explanation:
Some of the macroeconomic goals that we've include economic growth, low inflation, low unemployment, improvement on standard of living, balance of payment equilibrium etc.
Real gross domestic product refers to the measure of the output in an economy with the inflation in the economy taken into consideration and it has been adjusted with respect to the inflation. The real gross domestic product measures the economic growth rate.
Molo Oil Company produces gasoline, home heating oil, and jet fuel from crude oil in a joint processing operation. Joint processing costs up to the split-off point total $385,000 per month. For financial reporting purposes, the company allocates these costs to the joint products on the basis of their relative sales value at the split-off point. Unit selling prices and total output at the split-off point are as follows: Product Selling Price Monthly Output Gasoline $ 27.00 per gallon 14,400 gallons Heating Oil $ 21.00 per gallon 22,400 gallons Jet Fuel $ 33.00 per gallon 5,600 gallons Each product can be processed further after the split-off point. Additional processing requires no special facilities. The additional processing costs (per quarter) and unit selling prices after further processing are given below: Product Additional Processing Costs Selling Price Gasoline $ 89,220 $ 32.80 per gallon Heating Oil $ 129,170 $ 27.80 per gallon Jet Fuel $ 60,160 $ 41.80 per gallon Required: 1. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point
Answer:
Molo Oil Company
The financial advantage of further processing of each of the three products beyond the split-off point is:
= $182,430
(which is the additional profit gained from the further processing).
Explanation:
Joint processing costs = $385,000 per month
Product Selling Price Monthly Output Sales Value
Gasoline $ 27.00 per gallon 14,400 gallons $388,800 ($27*14,100)
Heating Oil $ 21.00 per gallon 22,400 gallons 470,400 ($21*22,400)
Jet Fuel $ 33.00 per gallon 5,600 gallons 184,800 ($33*5,600)
Total sales value = $1,044,000
Joint costs = 385,000
Profit = $659,000
Allocation of joint processing costs of $385,000
Gasoline = $143,379 ($388,800/$1,044,000 * $385,000)
Heating Oil 173,471 ($470,400/$1,044,000 * $385,000)
Jet Fuel 68,150 ($184,800/$1,044,000 * $385,000)
Total cost $385,000
Total costs:
Additional
Joint Cost Monthly Cost Total Costs
Gasoline $143,379 $29,740 $173,119
Heating Oil 173,471 43,057 216,528
Jet Fuel 68,150 20,053 88,203
Total costs $385,000 $92,850 $477,850
Product Additional Processing Selling Price
Costs (per quarter)
Gasoline $ 89,220 $ 32.80 per gallon
Heating Oil $ 129,170 $ 27.80 per gallon
Jet Fuel $ 60,160 $ 41.80 per gallon
Product Additional Processing Selling Price
Costs (per month)
Gasoline $ 29,740 $ 32.80 per gallon
Heating Oil $ 43,057 $ 27.80 per gallon
Jet Fuel $ 20,053 $ 41.80 per gallon
Determination of profit after further processing:
Product Selling Price Monthly Output Sales Value
Gasoline $ 32.80 per gallon 14,400 gallons $462,480 ($32.80*14,100)
Heating Oil $ 27.80 per gallon 22,400 gallons 622,720 $27.80*22,400)
Jet Fuel $ 41.80 per gallon 5,600 gallons 234,080 ($41.80*5,600)
Total sales revenue = $1,319,280
Total costs = 477,850
Profit = $841,430
Financial advantage
Profit after further processing = $841,430
Profit with Joint processing = 659,000
Financial advantage = $182,430
Prepare journal entries to record the following four separate issuances of stock.
1. A corporation issued 4,000 shares of $30 par value common stock for $144,000 cash.
2. A corporation issued 2,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $39,000. The stock has a $2 per share stated value.
3. A corporation issued 2,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $39,000. The stock has no stated value.
4. A corporation issued 1,000 shares of $50 par value preferred stock for $89,000 cash.
Answer:
Item 1
Debit : Cash $144,000
Credit : Common Stock $120,000
Credit : Common Stock Paid in Excess of Par $24,000
Item 2
Debit : Cash $39,000
Credit : Common Stock $39,000
Item 3
Debit : Cash $39,000
Credit : Common Stock $39,000
Item 4
Debit : Cash $89,000
Credit : Preferred Stock $50,000
Credit : Preferred Stock paid in excess of par $39,000
Explanation:
Take a careful note on Par value Stocks and No Par Value Stocks. A reserve is created whenever Stocks are issued above their Par Value.
Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following
Machine A could be purchased for $69,000. It will last 10 years with annual maintenance costs of $2,200 per year. After 10 years the machine can be sold for $7,245.
Machine B could be purchased for $57,500. It also will last 10 years and will require maintenance costs of $8,800 in year three, $11,000 in year six, and $13,200 in year eight. After 10 years, the machine will have no salvage value.
Required:
Assume an interest rate of 8% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year. Calculate the present value of Machine A & Machine B. Which machine Esquire should purchase?
Answer:
Esquire should purchase Machine B
Explanation:
Below is the calculation of the present values of Machine A & Machine B.
Machine A Period Amount Present Value Factor Present Value
Purchase Cost 0 ($69,000) 1 ($69,000)
Maintenance Cost 1 - 10 ($2,200) 6.71008 ($14,762)
Salvage Value 10 $7,245 0.46319 $3,356
Present Value of A ($80,406)
Machine B Period Amount Present Value Factor Present Value
Purchase Cost 0 ($57,500) 1 ($57,500)
Maintenance Cost
Year 3 3 ($8,800) 0.79383 ($6,986)
Year 6 6 ($11,000) 0.63017 ($6.932)
Year 8 8 ($13,200) 0.54027 ($7,132)
Present Value of B ($78,550)
Note the Following:
The Net Present Value of B is lower than the Value of Machine A. So, Machine B should be opted.For the Present Value Factor of Machine A's Maintenance Cost, the 10 year annuity value of 8% was calculated.Machine B has no salvage value after the 10th year period.Crane Company offered detachable 5-year warrants to buy one share of common stock (par value $5) at $20 (at a time when the stock was selling for $30). The price paid for 700, $1,000 bonds with the warrants attached was $810000. The market price of the Crane bonds without the warrants was $710000, and the market price of the warrants without the bonds was $71800. What amount should be allocated to the warrants
Answer:
$ 74,389.87
Explanation:
It is given that :
The cost of 700, $1000 bonds with warrant attached to the bond = $810,000
The cost of Crane bonds with warrant = $710,000
The cost of market price of the warrants without bonds = $71,800
Therefore, the amount should be allocated to the warrants :
[tex]$=\frac{\$71,800}{\$71,800+\$710,000}\times \$ 810,000$[/tex]
[tex]$=\frac{\$71,800}{\$781,800}\times \$ 810,000$[/tex]
= $ 74,389.87
Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay one-third of the sales price of a jet ski when they initially purchase the ski, and then pay another one-third each year for the next two years. Because Lake has little information about the ability to collect these receivables, it uses the cost recovery method to recognize revenue on these installment sales. In 2020, Lake began operations and sold jet skis with a total price of $690,000 that cost Lake $345,000. Lake collected $230,000 in 2020, $230,000 in 2021, and $230,000 in 2022 associated with those sales. In 2021, Lake sold jet skis with a total price of $1,860,000 that cost Lake $1,116,000. Lake collected $620,000 in 2021, $430,000 in 2022, and $430,000 in 2023 associated with those sales. In 2023, Lake also repossessed $380,000 of jet skis that were sold in 2021. Those jet skis had a fair value of $142,500 at the time they were repossessed. In 2020, Lake would recognize realized gross profit of:
Answer:
$115,000
Explanation:
Calculation to determine what Lake would recognize realized gross profit
First step is to calculate the Gross profit percentage
Gross profit percentage = [($690,000 − $345,000)/$690,000]
Gross profit percentage =$345,000/$690,000
Gross profit percentage =0.5*100
Gross profit percentage = 50%
Now let calculate the realized gross profit
Realized gross profit=50% × $230,000
Realized gross profit = $115,000
Therefore Lake would recognize realized gross profit of:$115,000
Fraud is encouraged when a notary does what?
Answer:
Overcharging for notary public services. Notarizing a document without the signer being in the notary's presence. Notarizing the notary's own signature. Issuing identification cards.
Explanation:
Excessive fees for notarial services, signing a document without the signer being present and notarizing it. the notary's signature is notarized. making identity cards available.
What is notary fraud?If a Notary Public violates the law while carrying out their responsibilities, they are held personally accountable. A Notary Public must post a bond in order to protect the injured party's right to recover up to $10,000. Despite this, the Notary Public is still personally responsible for any damages they may have caused, and they risk criminal prosecution as well as the revocation or suspension of their notary public commission.
A few examples of notary fraud include:
ignoring your documents' acknowledgmentcounterfeit stampsletting a signer sign a document without the presence of a notary publicA Notary Public who has been paid off to falsely recognize a document is the starting point of many fraud cases, particularly those involving real estate fraud. Due to the fact that practically all papers submitted in the county records require a notary stamp, this scenario occasionally occurs.
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Assume today is December 31, 2019. Imagine Works Inc. just paid a dividend of $1.25 per share at the end of 2019. The dividend is expected to grow at 15% per year for 3 years, after which time it is expected to grow at a constant rate of 6% annually. The company's cost of equity (rs) is 9.5%. Using the dividend growth model (allowing for nonconstant growth), what should be the price of the company's stock today (December 31, 2019)
Answer:
Value of stock = $47.99
Explanation:
The price of a stock using the dividend valuation model is the present value of the the future dividend expected from the stock discounted at the required rate of return.
Year Present Value
1 1.25× 1.15^1 × 1.095^(-1) =1.31
2 1.25× 1.15^2 × 1.095^(-2) = 1.38
3. 1.25× 1.15^3 × 1.095^(-3)= 1.45
Present value of Dividend in Year 4 and beyond
This will be done in two steps
Step 1
PV in year 3 terms
= Dividend in year 4× (1.06)/(0.095-0.06)
1.25× 1.15^3 × 1.06/(0.095-0.06)=57.57
PV in year 0 terms =
PV in year 3 × 1.095^(-3)
=57.5759 × 1.095^(-3)= 43.852
Value of stock = 1.3 + 1.38 + 1.45 + 43.852= $47.99
Value of stock = $47.99
Private producers have no incentive to provide public goods because A. the government subsidy granted is usually insufficient to enable private producers to make a profit. B. production of huge quantities of public goods entails huge fixed costs.
Answer:
Private producers have no incentive to provide public goods because
B. production of huge quantities of public goods entails huge fixed costs.
Explanation:
There is rivalry in the production and consumption of private goods. This rivalry is generally described as competition. Most public goods are produced naturally or provided by the government to her citizens. Since they are made available for the welfare of the people, there is usually no cost recovery or exclusion of persons based on financial affordability. But private goods are manufactured and sold by private companies or individuals for a profit motive.
Bushard Company (buyer) and Schmidt, Inc. (seller) engaged in the following transactions during February 2019:
Bushard Company
DATE TRANSACTIONS
2019
Feb. 10 Purchased merchandise for $5,000 from Schmidt, Inc., Invoice 1980, terms 1/10, n/30.
13 Received Credit Memorandum 230 from Schmidt, Inc., for damaged merchandise totaling $200 that was returned; the goods were purchased on Invoice 1980, dated February 10.
19 Paid amount due to Schmidt, Inc., for Invoice 1980 of February 10, less the return of February 13 and less the cash discount, Check 2010. Schmidt, Inc.
DATE TRANSACTIONS
2019
Feb. 10 Sold merchandise for $5,000 on account to Bushard Company, Invoice 1980, terms 1/10, n/30.
13 Issued Credit Memorandum 230 to Bushard Company for damaged merchandise totaling $200 that was returned; the goods were purchased on Invoice 1980, dated February 10.
19 Received payment from Bushard Company for Invoice 1980 of February 10, less the return of February 13 and less the cash discount, Check 2010.
Required:
Journalize the transactions above in a general journal for both Bushard Company and Schmidt, Inc.
Answer:
Bushard Company (buyer) and Schmidt, Inc. (seller)
Journal Entries:
Bushard Company
Feb. 10 Debit Inventory $5,000
Credit Accounts payable (Schmidt, Inc.) $5,000
To record the purchase of goods on account, via Invoice 1980, terms 1/10, n/30.
13 Debit Accounts payable (Schmidt, Inc.) $200
Credit Inventory $200
To record the return of damaged goods and received Credit Memorandum 230.
19 Debit Accounts payable (Schmidt, Inc.) $4,800
Credit Cash $4,752
Credit Cash Discounts $48
To record the payment on account and discounts.
Schmidt, Inc.
Feb. 10 Debit Accounts receivable (Bushard Company) $5,000
Credit Sales revenue $5,000
To record the sale of goods on account, Invoice 1980, terms 1/10, n/30.
13 Debit Sales returns $200
Credit Accounts receivable (Bushard Company) $200
To record the return of damaged, issuing Credit Memorandum 230.
19 Debit Cash $4,752
Debit Cash Discounts $48
Credit Accounts receivable (Bushard Company) $4,800
To record the receipt of cash from customer, including discounts.
Explanation:
a) Data and Analysis:
Bushard Company
Feb. 10 Inventory $5,000 Accounts payable (Schmidt, Inc.) $5,000, Invoice 1980, terms 1/10, n/30.
13 Accounts payable (Schmidt, Inc.) $200 Inventory $200 Credit Memorandum 230, damaged merchandise.
19 Accounts payable (Schmidt, Inc.) $4,800 Cash $4,752 Cash Discounts $48
Schmidt, Inc.
Feb. 10 Accounts receivable (Bushard Company) $5,000 Sales revenue $5,000, Invoice 1980, terms 1/10, n/30.
13 Sales returns $200 Accounts receivable (Bushard Company) $200 Credit Memorandum 230, damaged merchandise.
19 Cash $4,752 Cash Discounts $48 Accounts receivable (Bushard Company) $4,800
Department A had no Work-in-Process at the beginning of the period, 4,400 units were completed during the period, 540 units were 50% completed at the end of the period, and the following manufacturing costs were debited to the departmental Work-in-Process account during the period: Direct materials (1,540 at $10) $ 15,400 Direct labor 32,173 Factory overhead 25,735 Assuming that all direct materials are added at the beginning of production and Department A uses weighted-average process costing, what is the total cost of the departmental Work-in-Process Inventory at the end of the period
Answer:
the ending inventory is $8,748
Explanation:
The computation of the total cost of the departmental Work-in-Process Inventory at the end of the period is shown below:
Materials is $10 per unit
And, the conversion cost is
= ($32,173 + $25,735) ÷ (4,400 units + 540 units ÷ 2)
= $57,908 ÷ 4,670
= $12.4
Now the ending inventory is
= 540 units × $10 per unit + 270 units × $12.4
= $8,748
Hence, the ending inventory is $8,748
The manufacturing overhead budget at Polich Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,400 direct labor-hours will be required in February. The variable overhead rate is $8.50 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $108,780 per month, which includes depreciation of $18,080. All other fixed manufacturing overhead costs represent current cash flows.The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for February should be:_____.
a. $193.690.
b. $211,850.
c. $112,940.
d. $80,750.
Answer:
See below
Explanation:
The computation of overhead rate for February is seen below
First, we need to determine the fixed manufacturing overhead per labor hour
Fixed manufacturing overhead per direct labor hour = Total manufacturing overhead ÷ Total direct labor hours
= $108,780 ÷ 7,400
= $14.7
Predetermined overhead rate = Variable overhead rate + Fixed manufacturing overhead rate
= $8.50 + $14.70
= $23.2 per direct labor hour
Advantages of supermarkets?
Answer:
you can buy and get stuff in physical form.
Explanation:
Answer:
You get to see what your buying
Explanation:
:>
Cabinaire Inc. is one of the largest manufacturers of office furniture in the United States. In Grand Rapids, Michigan, it assembles filing cabinets in an Assembly Department. Assume the following information for the Assembly Department:
Direct labor per filing cabinet 20 minutes
Supervisor salaries $117,000 per month
Depreciation $21,000 per month
Direct labor rate $15 per hour
Required:
Prepare a flexible budget for 12,000, 15,000, and 18,000 filing cabinets for the month of March
Answer:
Results are below.
Explanation:
Giving the following information:
Supervisor salaries $117,000 per month
Depreciation $21,000 per month
Direct labor rate $15 per hour
Cabinets per hour= 60/20= 3
We need to determine the flexible budget for different production levels:
12,000 units:
Total direct labor hours= (12,000 / 3)= 4,000 hours
Total variable cost= 4,000*15= 60,000
Total fixed costs= 21,000 + 117,000= 138,00
Total cost= $198,000
15,000 units:
Total direct labor hours= (15,000 / 3)= 5,000 hours
Total variable cost= 5,000*15= 75,000
Total fixed costs= 21,000 + 117,000= 138,00
Total cost= $213,000
18,000 units:
Total direct labor hours= (18,000 / 3)= 6,000 hours
Total variable cost= 6,000*15= 90,000
Total fixed costs= 21,000 + 117,000= 138,00
Total cost= $228,000
An asset falling under the MACRS five-year class was purchased three years ago for $200,000 (its original depreciation basis). Calculate the cash flows if the asset is sold now at a) $60,000 and b) $80,000. Assume the applicable tax rate is 40 percent.
Answer:
(a) The cash flows is $59,040.
(b) The cash flows is $71,040.
Explanation:
From the Modified Accelerated Cost Recovery System (MACRS) Tables, the depreciation rates for the first 3 years for an asset falling under the MACRS five-year class are 20%, 32% and 19.2%. Therefore, we have:
Accumulated depreciation rate = 20% + 32% + 19.2% = 71.20%
Accumulated depreciation = Cost of the asset * Accumulated depreciation rate = $200,000 * 71.20% = $142,400
Net book value of the asset = Cost of the asset - Accumulated depreciation = $200,000 - $142,400 = $57,600
We can now proceed as follows:
(a) Calculate the cash flows if the asset is sold now at $60,000
Capital gains = Sales proceeds - Net book value = $60,000 - $57,600 = $2,400
Capital gains tax = Capital gains * Tax rate = $2,400 * 40% = $960
Net sales proceeds = Sales proceeds - Capital gains tax = $60,000 - $960 = $59,040
Therefore, the cash flows is $59,040 net sales proceeds.
(b) Calculate the cash flows if the asset is sold now at $80,000
Capital gains = Sales proceeds - Net book value = $80,000 - $57,600 = $22,400
Capital gains tax = Capital gains * Tax rate = $22,400 * 40% = $8,960
Net sales proceeds = Sales proceeds - Capital gains tax = $80,000 - $8,960 = $71,040
Therefore, the cash flows is $71,040 net sales proceeds.
The cash flows is $59,040 and $71,040 when asset are sold at $60,000 and $80,000.
What is MACRS depreciation?MACRS stands for modified accelerated cost recovery system is the depreciation system in the U.S. where the cost of the asset is recovered in a specific period through deduction.
Given:
Asset=$200,000
The depreciation rate for 5 year asset are:20%, 32%, 19.2%, 11.52%, 11.52% and 5.76%
Accumulated depreciation for 3 years=20% + 32% + 19.2% = 71.20%
=asset cost X depreciation rate for 3 years
=$200,000 X 71.20% = $142,400
Net Book value=Asset Cost - Accumulated depreciation
=$200,000 - $142,400
= $57,600
(a)Cash flows if assets sold at $60,000
Capital gains = Sales - Net book value
=$60,000 - $57,600
= $2,400
Capital gains tax = Capital gains X Tax rate
= $2,400 * 40% = $960
Net sales proceeds = Sales proceeds - Capital gains tax
= $60,000 - $960 = $59,040
(b)Cash flows if assets sold at $80,000
Capital gains = Sales - Net book value
= $80,000 - $57,600
= $22,400
Capital gains tax = Capital gains X Tax rate
= $22,400 * 40% = $8,960
Net sales proceeds = Sales proceeds - Capital gains tax
= $80,000 - $8,960 = $71,040
Therefore the above calculation aptly gives the solution.
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A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 23%, while stock B has a standard deviation of return of 29%. Stock A comprises 70% of the portfolio, while stock B comprises 30% of the portfolio. If the variance of return on the portfolio is 0.042, the correlation coefficient between the returns on A and B is _________. Multiple Choice 0.088 0.304 0.213 0.091
Answer:
0.304
Explanation:
The calculation has been done step by step in order to understand the final result. Note that (p) in the below working refers to the correlation coefficient between Stock A and B.
0.042 = (0.70^2)(0.23^2) + (0.30^2)(0.29^2) + 2(0.70)(0.30)(0.23)(0.29)p
0.042 = 0.0259 + 0.0076 + 0.028p
0.042 = 0.0335 + 0.028p
0.042 - 0.0335 = 0.028p
0.0085 = 0.028p
p = 0.0085 / 0.028
p = 0.304
Cincinnati t-shirts prints custom t-shirts. The cost to produce one shirt is: direct materials, $10; direct labor, $1.20; and manufacturing overhead $4.50. Cincinnati Children’s Hospital asked Cincinnati t-shirt to sell them custom t-shirts for $12 each for a local charity event. Direct material and direct labor are required for each t-shirt. Of the manufacturing overhead, $1.50 is variable and would be incurred on each additional unit. The remaining $3 in overhead is allocated fixed overhead that would not be increased or decreased by this order. What would be the effect on net income if they accept this special order and sell 200 shirts to Cincinnati Children’s Hospital for $12 each?
Answer:
Effect on income= $140 decrease
Explanation:
Giving the following formula:
Production costs:
Direct material= 10
Direct labor= 1.2
Variable overhead= $1.5
Selling price= $12
Number of units= 200
Because it is a special offer and there is unused capacity, we will not take into account the fixed costs.
Effect on income= Units sold*unitary contribution margin
Effect on income= 200*(12 - 10 - 1.2 - 1.5)
Effect on income= $140 decrease
You plan to visit Geneva, Switzerland in three months to attend an international business conference. You expect to incur the total cost of SF 5,000 for lodging, meals and transportation during your stay. As of today, the spot exchange rate is $0.60/SF and the three-month forward rate is $0.63/SF. You can buy the three-month call option on SF with the exercise rate of $0.64/SF for the premium of $0.05 per SF. Assume that your expected future spot exchange rate is the same as the forward rate. The three-month interest rate is 6 percent per annum in the United States and 4 percent per annum in Switzerland.
Required:
a. Calculate your expected dollar cost of buying $F5,000 if you choose to hedge by a call option on SF.
b. Calculate the future dollar cost of meeting this SF obligation if you decide to hedge using a forward contract.
c. At what future spot exchange rate will you be indifferent between the forward and option market hedges?
d. Illustrate the future dollar cost of meeting the SF payable against the future spot exchange rate under both the options and forward market hedges.
Answer:
A. 3403.75 dollars
B. 3150
C. 0.579
D. Is an attachment
Explanation:
A. We first find the premium cost
= 0.05x5000 x 1+0.06/4
= 250x1.015
= 253.75
From here we find expected dollar cost
= Exchange rate x units + premium
= 0.63x5000+253.75
= 3,403.75 dollars
B. Forward rate = 0.63
Total cost of dollar
= 0.63x5000
= 3150
C. The investor would be indifferent at 0.579
Forward rate = unit * future + premium
3150 = 5000 * future + 253.75
3150-253.75 = 5000*future
We solve and divide through by 5000
Future = 0.579
D is in the attachment
The expected dollar cost of buying $F5,000 through the call option is $3403.75.
The first thing to do is to calculate the premium cost. This will be:
= (5% × 5000) × (1 + 6%/4)
= (0.05 × 5000) × (1 + 0.06/4)
= 250 × 1.015
= 253.75
The expected dollar cost will be:
= Exchange rate × Number of units + Call premium cost
= 0.63 × 5000 + 253.75
= 3403.75
The future dollar cost of meeting this SF obligation will be calculated thus:
= Forward rate × Number of units
= 0.63 × 5000
= $3150
The future spot exchange rate that the person will be indifferent will be:
= (3150 - 253.75) / 5000
= $0.579
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how can an injection benefit the South African economy
On September 30, 2016, the Esquire Company sold some merchandise to Callxpress Company. In payment, Esquire agreed to accept a note maturing on June 30, 2017. The note is a $50,000, 9-month, 8% interest-bearing note requiring the payment of principal and interest on June 30, 2017. The 6% rate is appropriate in this situation. The adjusting entry that the Callxpress Company should prepare on December 31, 2016 includes a:
Answer:
Book value of note receivable = $50,000 (same as face value since the note earns interest)
Interest revenue = $50,000 face value x 8% per year x 3/12 months = $1,000
Adjusting entry:
December 31, 2016, interest receivable
Dr Interest receivable 1,000
Cr Interest revenue 1,000
Which of the following is true of the informal structure in an organization?
O A. It is formed through shared interests.
OB. It is easy to monitor and control.
O c. It is good at handling many routine tasks.
O D. It is slow to adapt to changing conditions.
Answer: i think A
Explanation:
Why is it difficult to maintain relations with multiple stakeholders?
A. Because different stakeholders may have conflicting goals.
B. Because not all stakeholder needs are well known.
C. Because stakeholders want to harm the organization.
D. Stakeholders don't understand the organization's goals.
Answer:
A
Explanation:
What would you expect to happen to the mix between internal financing (where companies use their own funds such as retained earnings) and external financing (where companies obtain funds through financial markets) for new investment projects in a country that experiences a large increase in financial market uncertainty
Answer:
With the large increase in financial market uncertainty, the mix between internal financing and external financing for new investment projects will tether towards internal sources of funding.
Explanation:
This means that the larger proportion of finance for new investment projects must come from internal sources rather than external sources. The companies will, therefore, experience much more pressure to generate and retain sufficient profits than it would have experienced otherwise. While this looks like the best way to go, the possibility of success depends on the chunk of the internally-generated funds that the companies already have.
Portia owns and manages a sporting apparel company. Consider the given average cost (AC), average variable cost (AVC), and marginal cost (MC) curves for track suits. All but the MC curve have been placed incorrectly. Portia knows that the minimum average cost for a track suit is $7 and the minimum of average variable cost is $5.
Required:
Draw the AC and AVC curves so that they are consistent with the marginal cost curve.
Answer:
AVC curve will be below the AC curve
Explanation:
As we know,
[tex]AC = AFC + AVC[/tex]
This means that Average cost is the sum of average fixed cost and Average variable cost. Thus it can be shown that AC curve will be above the AVC curve.
Also we know that MC curve is upward sloping.
Thus, the MC curve will cut the AVC curve first and it will be to the right of the point where the MC curve cuts the AC curve.
So the curve must look like,
Treasury Stock Coastal Corporation issued 25,000 shares of $9 par value common stock at $21 per share and 6,000 shares of $54 par value, eight percent preferred stock at $82 per share. Later, the company purchased 3,000 shares of its own common stock at $24 per share. a. Prepare the journal entries to record the share issuances and the purchase of the common shares. b. Assume that Coastal sold 2,000 shares of the treasury stock at $30 per share. Prepare the general journal entry to record the sale of this treasury stock. c. Assume that Coastal sold the remaining 1,000 shares of treasury stock at $19 per share. Prepare the journal entry to record the sale of this treasury stock.
Answer:
Treasury Stock Coastal Corporation
a. Journal Entries:
Debit Cash $525,000
Credit Common stock $225,000
Credit Additional Paid-in Capital - Common Stock $300,000
To record the issuance of 25,000 shares of $9 par value at $21.
Debit Cash $492,000
Credit 8% Preferred Stock $324,000
Credit Additional Paid-in Capital - Preferred Stock $168,000
To record the issuance of 6,000 shares of $54 par value at $82.
Debit Treasury Stock $27,000
Debit Additional Paid-in Capital - Common Stock $45,000
Credit Cash $72,000
To record the repurchase of 3,000 shares at $24.
b. Journal Entry
Debit Cash $60,000
Credit Treasury Stock $18,000
Credit Additional Paid-in Capital - Common Stock $42,000
To record the re-issuance of 2,000 treasury shares at $30.
c. Journal Entry:
Debit Cash $19,000
Credit Treasury STock $9,000
Credit Additional Paid-in Capital - Common Stock $10,000
To record the re-issuance of 1,000 treasury shares at $19.
Explanation:
a) Data and Calculations:
Cash $525,000 Common stock $225,000 Additional Paid-in Capital - Common Stock $300,000
Cash $492,000 8% Preferred Stock $324,000 Additional Paid-in Capital - Preferred Stock $168,000
Treasury Stock $27,000 Additional Paid-in Capital - Common Stock $45,000 Cash $72,000
b. Cash $60,000 Treasury Stock $18,000 Additional Paid-in Capital - Common Stock $42,000
c. Cash $19,000 Treasury STock $9,000 Additional Paid-in Capital - Common Stock $10,000
