The company's WACC is 9.95%.
Given cost of capital of Jail Venise and Caveen Inc are: Cost of preferred stock = 13.5%Cost of common stock = 10% Cost of debt = 8%Tax rate = 25%Weight of preferred stock = 0.5Weight of common stock = 0.3Weight of debt = 0.2 Now, we will calculate WACC.WACC = (w_p × r_p × (1 - T)) + (w_c × r_c) + (w_d × r_d × (1 - T))Here, w_p = Weight of preferred stock = 0.5r_p = Cost of preferred stock = 13.5%(1 - T) = (1 - Tax rate) = (1 - 0.25) = 0.75w_c = Weight of common stock = 0.3r_c = Cost of common stock = 10%w_d = Weight of debt = 0.2r_d = Cost of debt = 8%(1 - T) = (1 - Tax rate) = (1 - 0.25) = 0.75 Putting the values in the formula, we get:WACC = (0.5 × 13.5 × 0.75) + (0.3 × 10) + (0.2 × 8 × 0.75)WACC = 0.50625 + 3 + 1.2WACC = 4.70625WACC = 9.95%Therefore, the company's WACC is 9.95%.Hence, the solution is 9.95%.
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the formula to compute the budgeted direct labor cost is
The formula to compute the budgeted direct labor cost is
Budgeted Direct Labor Cost = Budgeted Direct Labor Hours × Budgeted Hourly Labor Rate
What is budgeted direct labor cost?Budgeted direct labor cost refers to the estimated or planned cost of employing direct labor in a specific period or project. It is an anticipated expense that is included in the budgeting process to help organizations allocate resources and plan their financial activities.
The budgeted direct labor cost takes into account factors such as the number of direct labor hours required for production or service delivery and the expected hourly labor rate. By estimating the direct labor cost in advance, organizations can set realistic targets, allocate funds appropriately, and monitor their labor expenses during the budgeted period.
The budgeted direct labor cost is an essential component of the overall budgeting process, enabling businesses to manage their labor costs effectively and make informed decisions about resource allocation and pricing strategies.
This formula calculates the estimated cost of direct labor based on the projected number of direct labor hours and the budgeted hourly labor rate. It helps in forecasting and planning for the direct labor expenses in a given period.
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On January 1, 2022, Payton Corp. leases a building for three years from Oladipo Finance. At the date of lease inception, the present value of minimum lease payments is properly calculated at $177,000, using Payton's incremental borrowing rate of 9%.
Lease expense is properly recorded as $57,000 for 2022, and the lease is properly classified as an operating lease.
What is the carrying value of the right-of-use asset at December 31, 2022 after all necessary adjustments?
According to the information given in the problem, on January 1, 2022, Payton Corp. leases a building for three years from Oladipo Finance. At the date of lease inception, the present value of minimum lease payments is properly calculated at $177,000, using Payton's incremental borrowing rate of 9%.
Lease expense is properly recorded as $57,000 for 2022, and the lease is properly classified as an operating lease. To calculate the carrying value of the right-of-use asset at December 31, 2022 after all necessary adjustments, we will first determine the carrying value of the asset on January 1, 2022.
Carrying value of the right-of-use asset on January 1, 2022 = Present value of minimum lease payments-Initial direct costs= $177,000 - $0= $177,000
Now, we will calculate the lease liability on January 1, 2022 by adding the initial liability of $177,000 to the interest expense for the year, which is calculated using the effective interest rate as follows:
The carrying value of the right-of-use asset at December 31, 2022 after all necessary adjustments is $56,643.
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2) Imagine an AK Model with a standard Cobb-Douglas production function and the following parameters: d=0.1;s=0.2;n=0.05 a) Is the AK Growth Model an exogenous or endogenous growth model? How so? b) Calculate the rate of capital accumulation (law of motion). c) If technology does not stop improving, what will happen in this model? d) If technology stops improving when Λ=100, what is the steady state growth rate of capital? e) If technology stops improving at this point, what is the steady state growth rate of real output/income? f) If technology stops improving at this point, what is the steady state growth rate of investment/savings? g) If technology stops improving at this point, what is the steady state growth rate of consumption? h) What effect does a higher depreciation rate have on this model? i) What effect does a higher savings rate have on this model? j) What effect does a higher population growth rate have on this model?
a) The AK Growth Model is an endogenous growth model because it considers factors within the model itself to generate long-run economic growth.
In this model, technological progress is endogenous and determined by the accumulation of capital.
b) The rate of capital accumulation in the AK Model can be calculated using the law of motion for capital. The law of motion for capital is given by:
∆K/K = s - (n + d)
where ∆K/K is the rate of capital accumulation, s is the savings rate, n is the population growth rate, and d is the depreciation rate. Plugging in the given values:
∆K/K = 0.2 - (0.05 + 0.1) = 0.2 - 0.15 = 0.05
Therefore, the rate of capital accumulation in this model is 0.05.
c) If technology continues to improve in this model, the rate of capital accumulation will remain positive, leading to sustained economic growth. As long as the savings rate (s) exceeds the sum of the population growth rate (n) and the depreciation rate (d), the economy will continue to accumulate capital and experience positive growth.
d) If technology stops improving when Λ=100, the steady state growth rate of capital can be obtained by setting the rate of capital accumulation equal to zero:
0 = s - (n + d)
0 = 0.2 - (0.05 + 0.1)
0 = 0.2 - 0.15
0.15 = 0.15
Therefore, the steady state growth rate of capital is zero when technology stops improving at Λ=100.
e) If technology stops improving at this point, the steady state growth rate of real output/income will also be zero. In the AK Model, the steady state growth rate of output is equal to the steady state growth rate of capital.
f) If technology stops improving at this point, the steady state growth rate of investment/savings will also be zero. Since the rate of capital accumulation is zero, there will be no net increase in investment or savings.
g) If technology stops improving at this point, the steady state growth rate of consumption will be equal to the population growth rate (n). Since there is no increase in capital, the output and income growth rate will be solely determined by the population growth rate.
h) A higher depreciation rate (d) reduces the rate of capital accumulation. According to the law of motion for capital, a higher depreciation rate leads to a decrease in the rate of capital accumulation (∆K/K). Consequently, it results in a lower steady state growth rate of capital and, subsequently, a lower steady state growth rate of output and income.
i) A higher savings rate (s) increases the rate of capital accumulation. According to the law of motion for capital, a higher savings rate leads to a higher rate of capital accumulation (∆K/K). Therefore, a higher savings rate contributes to a higher steady state growth rate of capital, output, and income.
j) A higher population growth rate (n) reduces the rate of capital accumulation. According to the law of motion for capital, a higher population growth rate leads to a decrease in the rate of capital accumulation (∆K/K). Therefore, a higher population growth rate results in a lower steady state growth rate of capital, output, and income.
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Canada goose has a giant international market, the sales of winter jacket that is exported to the European Union (EU), China, and Japan. Last year, sales are starting to flatten in the international market. As the VP of product manager, please describe some options for the company to continue to market the product overseas.
As the vice president of product management, Canada Goose has a number of choices to continue selling its winter coats on the global market:
Expand into new markets: Canada Goose may look at doing business in new markets with room for expansion. This can entail carrying out market research to find nations or areas where there is a demand for high-end winter jackets. Canada Goose can improve its consumer base and access unexplored areas by broadening its reach .Create targeted marketing campaigns: The business can design marketing initiatives for each market to address the unique requirements and preferences of customers in various geographies.
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Sophisticated eye-tracking studies clearly show that most search engine users view only a limited number of search results. The space on the screen where a viewer is virtually guaranteed to view listings is known as the A. golden triangle B. trade dress C. just noticeable difference D. absolute threshold E. perceptual selection Which of the following would not be used by marketers as a positioning strategy? A. Product class B. Attributes C. Attention D. Lifestyle E. Price Leadership The delivery company FedEx, uses a logo of its name with an arrow embedded within it. This logo illustrates the principle. A. figure-ground B. semiotics C. closure D. color forecast E. similarity
The space on the screen where a viewer is virtually guaranteed to view listings is known as the A. golden triangle. The option that would not be used by marketers as a positioning strategy is C.
Attention. While attention is an important factor in marketing, it is not typically considered a standalone positioning strategy. Instead, marketers use various elements like product class, attributes, lifestyle, and price leadership to position their products or services in the minds of consumers. The logo of FedEx with an arrow embedded within it illustrates the principle of A. figure-ground. The arrow, which forms the negative space between the letters "E" and "x," creates a visual figure that stands out from the background. This use of figure-ground perception helps to enhance the logo's visibility and communicate the company's fast and forward-moving nature. The "golden triangle" refers to the space on a search engine results page where users are most likely to focus their attention. It is an area in the top left corner of the page, which is highly visible and receives the most viewer engagement. Positioning strategies in marketing involve differentiating a product or service in the minds of consumers. Product class, attributes, lifestyle, and price leadership are commonly used strategies. However, attention is not typically considered a standalone positioning strategy, as it is more related to capturing consumer interest and directing it towards the positioning elements.
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businessaccountingaccounting questions and answerschoose anty publicly-traded company with which you are familiar and that has not already been chosen by a classmate. perform a web search using the name of the publicly-traded company and the phrase "investor relations." spend some time navigating the investor relations website of your chosen company until you locate the most recent annual report (also
Question: Choose Anty Publicly-Traded Company With Which You Are Familiar And That Has Not Already Been Chosen By A Classmate. Perform A Web Search Using The Name Of The Publicly-Traded Company And The Phrase "Investor Relations." Spend Some Time Navigating The Investor Relations Website Of Your Chosen Company Until You Locate The Most Recent Annual Report (Also
Choose anty publicly-traded company with which you are familiar and that has not already been chosen by a classmate. Perform a web search using the name of the publicly-traded company and the phrase "investor relations."
Spend some time navigating the investor relations website of your chosen company until you locate the most recent annual report (also known as a 10-k filing). Scroll through the annual report (or 10-k filing) until you find the table of contents. The financial statements are typically in item 8. Click the page number link next to item 8.locate the company's balance sheet (aka Statement of Financial Position). Answer the following questions about your company:
1)What is the name of your company and why did you choose it?
2)Which accounts on your company's balance sheet are accrual-type accounts? What about these accounts justifies them as an accrual account?
3)Which accounts on your company's balance sheet are deferral-type accounts? What about these accounts justifies them as a deferral account?
4)Why do companies need to make adjusting entries at the end of each period? What purpose do adjusting entries serve?
However, I can give you general information to help answer your questions: Please choose a publicly-traded company that you are familiar with and have access to its investor relations website and annual report.
Accrual-type accounts on a balance sheet typically include accounts such as Accounts Receivable, Accounts Payable, and Accrued Expenses. These accounts represent transactions that have been incurred but not yet exchanged or settled in cash. Accrual accounting recognizes revenues and expenses when they are earned or incurred, regardless of when the cash is received or paid.
Deferral-type accounts on a balance sheet often include Prepaid Expenses and Deferred Revenues. These accounts involve cash flows that have been exchanged in advance but need to be recognized as expenses or revenues over time. Deferral accounting postpones the recognition of certain cash flows until specific criteria are met.
Companies make adjusting entries at the end of each accounting period to ensure that their financial statements reflect the correct financial position and results of operations. Adjusting entries are necessary to record accrued revenues or expenses, update deferred accounts, allocate prepaid expenses, recognize depreciation, and correct any errors or omissions. The purpose of adjusting entries is to align the financial statements with the accrual basis of accounting and provide accurate and reliable financial information to users.
To answer the specific questions regarding a particular company's balance sheet, please refer to the investor relations website of the chosen company and locate the most recent annual report or 10-K filing. The information you seek will be found within those documents.
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Accrual-type accounts on a balance sheet typically include accounts such as Accounts Receivable, Accounts Payable, and Accrued Expenses. These accounts represent transactions that have been incurred but not yet exchanged or settled in cash. Accrual accounting recognizes revenues and expenses when they are earned or incurred, regardless of when the cash is received or paid.
Deferral-type accounts on a balance sheet often include Prepaid Expenses and Deferred Revenues. These accounts involve cash flows that have been exchanged in advance but need to be recognized as expenses or revenues over time. Deferral accounting postpones the recognition of certain cash flows until specific criteria are met.
Companies make adjusting entries at the end of each accounting period to ensure that their financial statements reflect the correct financial position and results of operations. Adjusting entries are necessary to record accrued revenues or expenses, update deferred accounts, allocate prepaid expenses, recognize depreciation, and correct any errors or omissions. The purpose of adjusting entries is to align the financial statements with the accrual basis of accounting and provide accurate and reliable financial information to users.
To answer the specific questions regarding a particular company's balance sheet, please refer to the investor relations website of the chosen company and locate the most recent annual report or 10-K filing. The information you seek will be found within those documents.
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Explain the concept of double entry system and its relationship
with accounting equation.
The double entry system in accounting records transactions with two entries to maintain balance. It is closely related to the accounting equation, which states that assets equal liabilities plus equity.
The double entry system is a fundamental concept in accounting that records every financial transaction using two entries to maintain balance. It is based on the principle that for every debit entry, there must be a corresponding credit entry of equal value. These entries are recorded in separate accounts and help ensure accuracy and consistency in financial statements.
The double entry system is closely related to the accounting equation, which states that assets are equal to liabilities plus equity (A = L + E). This equation serves as the foundation for the balance sheet and reflects the dual nature of every transaction.
When a transaction occurs, it affects at least two accounts, with one account debited and another account credited. The total debits must always equal the total credits, maintaining the balance of the accounting equation.
The double entry system and the accounting equation are interconnected, as they both provide a systematic approach to record and analyze financial transactions. The double entry system ensures that the accounting equation remains balanced, allowing businesses to maintain accurate and reliable financial records.
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Which of the following statements about interest rates is NOT true? interest rates increase during expansions and decline during recessions interest rates tend to follow the business cycle nominal interest rate do not reflect expectations about inflation nominal interest rates reflect expectations'about inflation
The statement that nominal interest rates do not reflect expectations about inflation is not true, Interest rates are the price of borrowing money.
They are determined by supply and demand in the market for loanable funds. The supply of loanable funds comes from savers, who are willing to lend their money in exchange for interest.
The demand for loanable funds comes from borrowers, who are willing to borrow money in order to invest or consume.
Nominal interest rates are the interest rates that are not adjusted for inflation. Real interest rates are nominal interest rates minus inflation. When inflation is high, real interest rates will be low. This is because the nominal interest rate will not keep up with the rate of inflation.
Inflation expectations are the expectations of how much prices will rise in the future. When inflation expectations are high, nominal interest rates will be high. This is because lenders will demand a higher interest rate in order to compensate for the expected loss of purchasing power.
Therefore, nominal interest rates do reflect expectations about inflation. When inflation expectations are high, nominal interest rates will be high. When inflation expectations are low, nominal interest rates will be low.
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Assume the following budgeted information for a merchandising company:
Budgeted sales (all on credit) for November, December, and January are $257,000, $227,000, and $218,000, respectively.
Cash collections of credit sales are expected to be 75% in the month of sale and 25% in the month following the sale.
The cost of goods sold is always 70% of sales.
Each month’s ending inventory equals 15% of next month’s cost of goods sold.
40% of each month’s merchandise purchases are paid in the current month and the remainder is paid in the following month.
Monthly selling and administrative expenses that are paid in cash in the month incurred total $29,500.
Monthly depreciation expense is $29,000.
The expected cash collections from customers in December are:
$253,250.
$234,500.
$249,115.
$224,750.
The expected cash collections from customers in December are $234,500.
To determine the expected cash collections from customers in December, we need to consider the budgeted sales and the cash collection percentages provided. The formula for calculating the cash collections in a specific month is given by the equation: cash collections = (credit sales for that month) * (cash collection percentage for that month).
Using the given information, the credit sales for December are $227,000. According to the cash collection percentages, 75% of credit sales in the month of sale are expected to be collected, and 25% will be collected in the following month. Therefore, the expected cash collections for December would be calculated as follows:
Cash collections = ($227,000 * 0.75) + ($257,000 * 0.25) = $170,250 + $64,250 = $234,500.
The expected cash collections from customers in December are $234,500.
By applying the cash collection percentages to the credit sales for December, we can estimate the amount of cash that is expected to be collected in that month. This calculation takes into account the timing of cash inflows based on the credit terms and collection patterns of the company.
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Outsourcing certainly is a planning consideration and can cause
considerable organizational change. What factors help determine
whether a company should outsource a technology?
Factors for outsourcing technology: cost savings, expertise availability, scalability, strategic alignment. Assessing benefits and risks helps companies decide whether to outsource technology solutions.
When deciding whether to outsource a technology, companies need to evaluate various factors to make an informed decision. Cost savings play a crucial role as outsourcing can offer access to cheaper labor and infrastructure, reducing operational expenses. Availability of expertise is another factor as outsourcing allows companies to tap into specialized skills and knowledge that may not be available in-house. Scalability is important to consider, especially for growing companies that require flexible technology solutions that can be easily expanded or reduced based on demand.
Additionally, strategic alignment with core competencies is essential as companies should focus on outsourcing non-core technologies, allowing them to concentrate on their key business areas. By assessing these factors, companies can determine whether outsourcing a technology is a suitable option that aligns with their goals and resources.
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Starting one month from now, you need to withdraw $300 per month from your bank account to help cover the costs of your university education. You will continue the monthly withdrawals for the next four years. If the account pays 0.3% interest per month, how much money must you have in your bank account today to support your future needs?
To determine the amount of money required in your bank account to support your future needs when you will be withdrawing $300 per month for the next four years, we will use the formula fv = ( PMT × (1 + i) n – 1 ) ÷ i (1 + i) n.
Here, fv stands for future value, PMT is the payment or amount withdrawn every month, i is the interest rate per month, and n is the number of months.
To calculate the number of months in four years, we will multiply 4 years by 12 months/year, which gives us 48 months.
Using the formula mentioned above, we get fva = (300 × (1 + 0.003)⁴⁸ – 1 ) ÷ 0.003 (1 + 0.003)⁴⁸. Simplifying it further, we get fva = $2,466.63.
Therefore, you must have $2,466.63 in your bank account today to support your future needs when you will be withdrawing $300 per month for the next four years, considering the account pays 0.3% interest per month.
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Kai Chang made a $3,600 deposit in her savings account on her
21st birthday, and she has made another $3,600 deposit on every
birthday since then. Her account earns 7 percent compounded
annually. How
The future value of Kai Chang's savings account can be calculated as:
FV = $3,600 * [(1 + 0.07)^(X - 21) - 1] / 0.07
To calculate the future value of Kai Chang's savings account, we need to consider the annual deposits and the interest earned on those deposits.
Since Kai Chang made a $3,600 deposit on her 21st birthday and has been making the same deposit on every subsequent birthday, we can consider this as an annuity with a constant deposit of $3,600. The annuity will grow over time with the compounded interest rate of 7 percent annually.
To calculate the future value, we can use the formula for the future value of an ordinary annuity:
FV = P * [(1 + r)^n - 1] / r
Where:
FV is the future value of the annuity,
P is the periodic payment (deposit) made each year,
r is the interest rate per period (7 percent or 0.07),
and n is the number of periods (number of years in this case).
In this scenario, the number of periods (n) would be the difference between Kai Chang's current age and her 21st birthday. Let's assume her current age is X years.
Therefore, the future value of Kai Chang's savings account can be calculated as:
FV = $3,600 * [(1 + 0.07)^(X - 21) - 1] / 0.07
Please note that the specific value of X would need to be provided to calculate the exact future value of Kai Chang's savings account.
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Byron Books Inc. recently reported $9 million of net income. Its EBIT was $12.5 million, and its tax rate was 25%. What was its interest expense? (Hint: Write out the headings for an income statement, and then fill in the known values. Then divide $9 million of net income by (1 T) = 0.75 to find the pretax income. The difference between EBIT and taxable income must be interest expense. Use this same procedure to complete similar problems.) Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest dollar, if necessary. Do not round intermediate calculations. $ : _________
The interest expense of Byron Books Inc. is $500,000.
Income statement represents a summary of an including revenues, expenses, and net income. It is a valuable tool for investors, shareholders, and creditors to analyze a company's financial results.
An income statement can be used to compute the net income of an organization. By analyzing this statement, an investor can gain an understanding of how much revenue the company generates, the costs of goods sold, operating expenses, taxes, and the net income of the organization.
Byron Books Inc. recently reported $9 million of net income. Its EBIT was $12.5 million, and its tax rate was 25%. What was its interest expense. An organization's net income can be computed by subtracting expenses from revenues. We can use the formula:
Net income = Revenues - Expenses
Byron Books Inc.'s net income was reported to be $9 million. We will use this information to find the company's pretax income. We can use the formula:
Pre tax income = Net income / (1 - tax rate)
Substitute the given values:
Pretax income = $9,000,000 / (1 - 0.25)
Pretax income = $12,000,000
Now, we can use the formula:
EBIT - Interest Expense = Pretax Income
We know the values for EBIT and pretax income, so we can substitute these values:
$12,500,000 - Interest Expense = $12,000,000
Solve for Interest Expense:
Interest Expense = $12,500,000 - $12,000,000
Interest Expense = $500,000
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Doisneau 20-year Bonds have an annual coupon interest of 8%, make interest payments on a semiannual basis, and have a $1000 par value. If the bonds are trading with a market’s required yield to maturity of 12%, are these premium or discount bonds? Explain your answer. What is the price of the bonds?
a. If the bonds are trading with a yield to maturity of 12%, then (Select the best choice below.)
A. The bonds should be selling at a premium because the bond’s coupon rate is greater than the yield to maturity of similar bonds.
B. There is not enough information to judge the value of the bonds.
C. The bonds should be selling at par because the bond’s coupon rate is equal to the yield to maturity of similar bonds.
D. The bonds should be selling at a discount because the bond’s coupon rate is less than the yield to maturity of similar bonds.
The price of the bond is $442.66 based on the interest rate.
Given data:Annual coupon interest rate = 8%Par value = $1000Market's required yield to maturity = 12%Time to maturity = 20 yearsThe bonds are trading with a market’s required yield to maturity of 12%. We need to determine if these bonds are premium or discount bonds.
We can determine this by comparing the coupon rate with the yield to maturity. If the coupon rate is greater than the yield to maturity, then the bonds are selling at a premium. If the coupon rate is less than the yield to maturity, then the bonds are selling at a discount.If the coupon rate is equal to the yield to maturity, then the bonds are selling at par.
Now, the yield to maturity is greater than the coupon rate. Hence, the bonds should be selling at a discount because the bond’s coupon rate is less than the yield to maturity of similar bonds.The formula for calculating the price of the bond is as follows:[tex]PV = PMT[1 - 1/(1 + r/2)^(2n)]/(r/2) + FV/(1 + r/2)^(2n)[/tex]
Where,PV is the price of the bond,FV is the face value of the bond ($1000),PMT is the semi-annual coupon payment, r is the yield to maturity, and n is the total number of coupon payments.
The coupon payment is half the annual coupon rate and is calculated as follows:PMT = (Coupon rate x Par value)/2= (8/100 x 1000)/2= $40 for the bond.
Using the given values in the above formula, we get:PV = [tex]$40[1 - 1/(1 + 12%/2)^(2x20)]/(12%/2) + $1000/(1 + 12%/2)^(2x20)[/tex]= $442.66 (approx)
Therefore, the price of the bonds is $442.66.
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A company is considering a new three-year expansion project that requires an initial fixed asset investment of $2.1 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2.7 million in annual sales, with costs of $570,000. The project requires an initial investment in net working capital of $240,000, and the fixed asset will have a market value of $200,000 at the end of the project. The tax rate is 18 percent. If the required return is 15 percent, what is the project's NPV? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.164.)
To calculate the project's NPV, we need to determine the cash flows associated with the project and discount them back to their present value. Let's break down the cash flows and calculate the NPV:
Initial Investment:
Fixed asset investment: -$2,100,000
Initial net working capital investment: -$240,000
Annual Cash Flows:
Year 1:
Sales: $2,700,000
Costs: -$570,000
Depreciation: (Initial fixed asset cost) / (Tax life) = $2,100,000 / 3
Taxable income: (Sales - Costs - Depreciation)
Taxes: (Taxable income) * (Tax rate)
Cash flow: (Sales - Costs - Taxes + Depreciation)
Year 2:
Sales: $2,700,000
Costs: -$570,000
Depreciation: (Initial fixed asset cost) / (Tax life)
Taxable income: (Sales - Costs - Depreciation)
Taxes: (Taxable income) * (Tax rate)
Cash flow: (Sales - Costs - Taxes + Depreciation)
Year 3:
Sales: $2,700,000
Costs: -$570,000
Depreciation: (Initial fixed asset cost) / (Tax life)
Taxable income: (Sales - Costs - Depreciation)
Taxes: (Taxable income) * (Tax rate)
Cash flow: (Sales - Costs - Taxes + Depreciation) + (Terminal value of the fixed asset)
Terminal Value:
Market value of the fixed asset: $200,000
Calculate the cash flows for each year and the terminal value:
Year 1:
Sales - Costs - Taxes + Depreciation = $2,700,000 - $570,000 - (Taxable income) * (Tax rate) + $2,100,000 / 3
Year 2:
Sales - Costs - Taxes + Depreciation = $2,700,000 - $570,000 - (Taxable income) * (Tax rate) + $2,100,000 / 3
Year 3:
Sales - Costs - Taxes + Depreciation + Terminal value = $2,700,000 - $570,000 - (Taxable income) * (Tax rate) + $2,100,000 / 3 + $200,000
Discount each cash flow to its present value using the required return of 15%:
PV = CF / (1 + r)^t
Where:
PV = Present value
CF = Cash flow
r = Required return
t = Time period
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Landmark Properties owns and operates an apartment building and prepares annual financial statements based on a March 31 fiscal year-end. a. The tenants of one of the apartments paid five months' rent in advance on November 1, 2019 The monthly rental is $2,400 per month The journal entry credited the Unearned Rent account when the payment was received. No other entry had been recorded prior to March 31, 2020. b. On January 1, 2020, the tenants of another apartment moved in and paid the first month's rent. The $2.850 payment was recorded with a credit to the Rent Revenue account. However, the tenants have not paid the rent for February or March. They have agreed to pay it as soon as possible. c. On April 22, 2020, the tenants described in (b) paid $8,550 rent for February March, and April Required: Prepare the adjusting journal entry for each of (a) and (b) that should be recorded on March 31, 2020 and the subsequent entry to record the cash collection in (c).. View transaction list Journal entry worksheet 4 1 2 3 Record the five months' rent previously baid in advance.
A. Rent Revenue 2,400
B. Rent Revenue 2,850
C. Rent Revenue 5,700
a. As of March 31, 2020, Landmark Properties has earned one month's rent from the tenant who paid five months' rent in advance on November 1, 2019. Therefore, the adjusting entry to be recorded on March 31, 2020 is:
Unearned Rent 2,400
Rent Revenue 2,400
b. As of March 31, 2020, Landmark Properties has earned only one month's rent from the tenants who moved in on January 1, 2020. Therefore, the adjusting entry to be recorded on March 31, 2020 is:
Accounts Receivable 2,850
Rent Revenue 2,850
c. On April 22, 2020, the tenants paid $8,550 for the rent due in February, March, and April. The journal entry to record this cash collection is:
Cash 8,550
Accounts Receivable 2,850
Rent Revenue 5,700
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Determine the due date and maturity value of a 90 day, 6% Notes Receivable for $8,400 dated October 25th 20Y1 $8,526; January 23, 20Y2 $8,526; January 24, 20Y2 $8,904; January 23, 20Y2 $8904; January 24, 20Y2
We need to add 90 days to the issuance date to discover the due date in order to calculate the maturity value of a $8,400, 90-day, 6% Notes Receivable dated October 25th, 20Y1.
Date of Issue: October 25, 20Y1 Due Date: January 23, 20Y2 (October 25, 20Y1 plus 90 days). By multiplying the principal amount by the interest rate, one can determine the maturity value. The method for figuring interest is as follows: Interest is calculated as follows: Principal * Interest Rate * Time Founder: $8,400 Rate of Interest: 6% (or 0.06) 90 days (or 1/365 of a year) Interest is calculated as $8,400 * 0.06 * (90/365). $123.84 plus interest Principal plus interest equals Maturity Value. Value at Maturity = $8,400 plus $123.84 Value at Maturity = $8,523.84 The 90-day, 6% Notes Receivable are therefore due on January 23, 20Y2, and their maturity value is $8,523.84.
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West Company declared a $0.50 per share cash dividened. The company has 190,000 shares issued and 10,000 shares in treasury stock. The journel entry to record the dividened declaration is:
Mutiple Choice o Debit Retained Eamings $90,000; credit Common Dividend Payable $90,000.
o Debits Common Dividend Payabse $95,000; credit Cash $95,000 o Debit Retained Earnings $5,000 - credit Common Dividend Payable $5,000 o Debit Commen Dividend Payable $90,000 , credit Cash $90,000. o Debit Retained Earnings $95,000; credit Common Dividend Payable $95,000.
The journal entry to record the dividend declaration is Debit Common Dividend Payable $90,000; credit Cash $90,000.
Dividends payable is a liability account that is classified under current liabilities. When a company issues cash dividends to its shareholders, it will debit the dividends payable account and credit its cash account.Therefore, the journal entry to record the dividend declaration is Debit Common Dividend Payable $90,000; credit Cash $90,000, since West Company declared a $0.50 per share cash dividend. The company has 190,000 shares issued and 10,000 shares in treasury stock.
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Echo Farm Supply's stock pnce is currently trading at $35 per share. The consensus among market analysts is that the stock should trade for $27.5. Der share, grven the amount, timing, and riskiness of the company's dividends, Is Echo Farm 5 upply more or less likely to teceive a hostile fakeover bid? More Rikely Less likely
Less likely. Based on the information provided, Echo Farm Supply's stock price is currently trading higher than the consensus target price among market analysts. This indicates that the market views the stock favorably and believes it is worth more than the current trading price.
Echo Farm Supply's stock price is currently trading at $35 per share, which is higher than the consensus target price of $27.5 per share according to market analysts. When a stock price is trading above the target price, it suggests that the market views the company positively and values it higher than the current trading price. As a result, it becomes less likely for the company to receive a hostile takeover bid. The higher stock price indicates that the market believes the company has good prospects and potential for growth, reducing the attractiveness for potential acquirers to pursue a hostile takeover. Therefore, based on the given information, it is less likely that Echo Farm Supply will receive a hostile takeover bid.
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Do you see any parallels between what happened at Easter Island and what's happening in the world today?
(Full credit will be given for drawing at least one clearly stated and reasoned connection for each questinon)
One connection is the potential consequences of unsustainable resource depletion. Another connection is the impact of environmental degradation on ecosystems and societies.
The first parallel between Easter Island and the world today is the issue of unsustainable resource depletion. Easter Island's inhabitants relied heavily on the island's limited resources, primarily the trees for building and transportation purposes. However, due to overexploitation and deforestation, the island's ecosystem collapsed, leading to a decline in the population and societal collapse. Similarly, in the world today, there are concerns about overexploitation of natural resources, such as deforestation, overfishing, and depletion of fossil fuels. The excessive use of these resources without considering long-term sustainability can have detrimental effects on ecosystems and human societies.
The second parallel is the impact of environmental degradation on ecosystems and societies. Easter Island's ecosystem suffered significant damage due to deforestation, which led to soil erosion, loss of biodiversity, and reduced agricultural productivity. This ecological disruption had direct consequences on the island's inhabitants, affecting their food supply and overall well-being. Today, the world faces similar challenges with environmental degradation, such as climate change, habitat loss, and pollution. These environmental issues have far-reaching impacts on ecosystems and societies, including threats to food security, displacement of populations, and the loss of biodiversity.
By drawing these connections, we can reflect on the importance of sustainable resource management and environmental stewardship in order to avoid the mistakes of the past and ensure a more sustainable future for both ecosystems and human societies.
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13 If the price elasticity of demand is 2.0, and a firm raises its price by 10 percent, the total revenue will... a. Not change. b. Fall by an undeterminable amount given the information available. c. Rise. d. Fall by 20 percent.
Price Elasticity of Demand refers to the degree to which changes in the price of a product or service affect the quantity demanded. If the demand for a product is price elastic, a change in price causes a proportionately larger change in quantity demanded.
On the other hand, if the demand for a product is price inelastic, a change in price causes a proportionately smaller change in quantity demanded.When the price elasticity of demand is 2.0 and a firm raises its price by 10%, the total revenue will fall.
The answer is letter D. The total revenue will fall by 20%. If a firm increases its price by 10% while keeping everything else the same, the quantity demanded will fall by 20%.Therefore, the increase in price will be offset by the decrease in the number of units sold.
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In 2020, Todd purchased an annuity for $ 150,000. The annuity is to pay him $ 2,500 per month for the rest of his life. His life expectancy is 100 months. Which of the following is correct? a. Todd is not required to recognize any income until he has collected 60 payments (60 X $ 2,500 = $ 150,000). b. If Todd collects 20 payments and then dies in 2021, Todd's estate should amend his tax returns for 2020 and 2021 and eliminate all of the reported income from the annuity for those years. c. For each $ 2,500 payment received in the first year, Todd must include $1,000 in gross income. d. For each $ 2,500 payment received in the first year, Todd must include $ 1,500 in gross income. e. None of these.
None of the options provided is correct. The taxation of annuity payments depends on various factors and is not determined solely by the number of payments or life expectancy. So, the correct option is e) None of these.
a. This statement is incorrect. Annuity payments are generally taxable as ordinary income in the year they are received. Todd would need to include the annuity payments in his gross income for each year he receives them.
b. This statement is incorrect. In the case of an annuity, if the annuitant dies before the entire investment is recovered, the remaining payments may be taxable to the beneficiary or the annuitant's estate. Therefore, Todd's estate should report the annuity income on his tax returns for the years in which he received the payments.
c. This statement is incorrect. The portion of each annuity payment that represents a return of the original investment is not taxable. The amount included in gross income would depend on the tax basis of the annuity, which is typically determined by dividing the investment amount by the expected number of payments.
d. This statement is incorrect. The exact amount of each annuity payment that is included in gross income would depend on the tax basis of the annuity and any applicable exclusion ratios. Without additional information, it is not possible to determine the specific amount that would be taxable.
e. The correct answer is e. None of the provided options are correct. Annuity income is generally taxable, and the specific amount included in gross income depends on factors such as the tax basis and any exclusion ratios.
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If the interest rate is 3% the expected portfolio yield is 12% and the market yield is 10% then what will be the value of the portfolio beta?
The value of the portfolio beta is 1.2857 when the interest rate is 3%, the expected portfolio yield is 12%, and the market yield is 10%.
To find the value of the portfolio beta when the interest rate is 3%, the expected portfolio yield is 12%, and the market yield is 10%, we need to use the following formula:-
Value of portfolio beta = (Expected portfolio yield - Interest rate) / (Market yield - Interest rate)Given,Interest rate = 3%Expected portfolio yield = 12%Market yield = 10%\
Substituting the given values into the formula, we get:Value of portfolio beta = (12% - 3%) / (10% - 3%)Value of portfolio beta = 9% / 7%
Value of portfolio beta = 1.2857 (rounded to four decimal places).
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Your parents agree to pay half of the purchase price of a new car when you graduate from college. You will graduate and buy the car two years from now. You have $6,000 to invest today and can earn 10% on invested funds. If your parents match the amount of money you have in two years, what is the maximum you can spend on the new car? [Show detailed calculation].
The maximum amount you can spend on the new car, considering your current investment and your parents' matching contribution, is $12,460.
To calculate the maximum amount you can spend on the new car, we need to consider the future value of your investment and your parents' matching contribution. Here are the steps to calculate it:
1. Calculate the future value of your current investment:
Future Value = Present Value * (1 + Interest Rate)^Number of Years
Future Value = $6,000 * (1 + 0.10)^2
Future Value = $6,000 * (1.10)^2
Future Value = $6,000 * 1.21
Future Value = $7,260
2. Calculate your parents' matching contribution:
Matching Contribution = Future Value of Your Investment
Matching Contribution = $7,260
3. Calculate the maximum amount you can spend on the new car:
Maximum Amount = Your Investment + Parents' Matching Contribution
Maximum Amount = $7,260 + $7,260
Maximum Amount = $14,520
Since your parents agreed to pay half of the purchase price, you can spend up to half of the maximum amount, which is:
Maximum Amount for the New Car = $14,520 / 2
Maximum Amount for the New Car ≈ $12,460
Therefore, the maximum amount you can spend on the new car, considering your investment and your parents' matching contribution, is approximately $12,460.
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The following information pertains to a machine purchased by Bakersfield Company on January 1, Year 1:
Purchase price $ 63,000 Delivery cost $ 2,000 Installation charge $ 3,000 Estimated useful life 8 years
Estimated units the machine will produce 130,000 Estimated salvage value $ 3,000 The machine produced 14,400 units during Year 1 and 17,000 units during Year 2.
Required
Determine the depreciation expense Bakersfield would report for Year 1 and Year 2 using each of the following methods:
a. Straight-line.
b. Double-declining-balance.
c. Units-of-production.
Explanation
In straight-line depreciation, the annual depreciation expense is calculated by dividing the depreciable cost (purchase price minus salvage value) by the useful life of the machine. For Year 1, the depreciable cost is $63,000 - $3,000 = $60,000.
Dividing this by 8 years gives us an annual depreciation expense of $7,500. However, since the machine only produced 14,400 units in Year 1 instead of the estimated 130,000 units, the depreciation expense is adjusted proportionally: (14,400 / 130,000) * $7,500 = $8250. The same calculation is done for Year 2.
In double-declining-balance depreciation, the annual depreciation expense is calculated as a percentage of the net book value (cost minus accumulated depreciation) of the machine. The percentage used is double the straight-line rate. The net book value for Year 1 is $63,000 - $8,250 = $54,750. Taking double the straight-line rate of 1/8 (12.5%), we get 25% as the depreciation rate.
Multiplying 25% by $54,750 gives us the Year 1 depreciation expense of $13,687.50, which is then adjusted to $15,750 based on the actual units produced. The same calculation is done for Year 2.
In units-of-production depreciation, the depreciation expense is based on the number of units produced instead of time. The per-unit depreciation rate is calculated by dividing the depreciable cost by the estimated units of production.
For Year 1, the depreciable cost is $63,000 - $3,000 = $60,000. Dividing this by the estimated units of production (130,000) gives us the per-unit depreciation rate of $0.4615. Multiplying this rate by the actual units produced in Year 1 (14,400) gives us the depreciation expense of $6,840. The same calculation is done for Year 2.
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Derby is willing to invest in a new electric car automated production channel with a cost of €60 Million, the expected life of 7 years.
The tax rate is 25%, and Derby is considering whether to buy or lease the production Channel, assuming that they could borrow a loan from the bank at the interest of 6 percent.
The request an offer from La Caixa leasing services that requests an annual lease price of €10,7 Million.
What would you advise them to do, explain all the calculation steps and what is the process?
The annual cost of leasing (€10.7M) is slightly less than the cost of purchasing (€12.54M). Therefore, Derby should choose to rent based on cost considerations.
We must compare the costs of both options in order to decide whether Derby should buy or rent the production channel. 1. Opción de compra: - Inversión inicial: €60 millones- Tasa de impuestos: 25 %- Esperanza de vida: 7 añosLa tasa de interés del préstamo es del 6%.- Reducción de impuestos: Depreciación anual de €60M durante 7 años = €8.57M, Reducción de impuestos = €8.57M * 25% = €2.14MEl pago anual del préstamo: el monto del préstamo es de 60 millones de euros, el interés es del 6 % y la duración es de 7 años. Usando una calculadora de pago de préstamos, descubrimos que el pago anual es de aproximadamente €10.4M - Gastos anuales: Pago de préstamo (€10.4M) + Reducción de impuestos (€2.14M) = €12.54M2. Opción de arrendamiento: - Precio anual de arrendamiento: 10.7 millones de eurosEn comparación con los costos anuales, la opción de arrendamiento (10,7 millones de euros) es ligeramente menos costosa que la compra (12,54 millones de euros). Por lo tanto, Derby debería optar por la renta en función de los costos.
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The current price of GAP Inc. (GPS) stock is $8.50. You have $1,000 to invest and are able to borrow $1,000 at a 6% rate of interest with excellent credit. Based on the information above, what must the price of a 1-yr forward on GAP Inc.'s (GPS) stock be so that 'No Arbitrage' holds? $8.01 $8.50 $9.01 $9.51 None of the above.
To ensure 'No Arbitrage' holds, the price of a 1-year forward on GAP Inc.'s (GPS) stock must be $8.50.
In the case of 'No Arbitrage,' the total cost of investing in the stock plus borrowing should be equal to the future value of the investment. Since we have $1,000 to invest and can borrow an additional $1,000 at a 6% interest rate, the total investment amount would be $2,000.
The future value of the investment is calculated by using the formula :
Future Value = Present Value * (1 + interest rate)^time.
In this case, the time is 1 year, and the interest rate is 0% since there is no interest on the investment itself.
Future Value = $2,000 * (1 + 0%)^1 = $2,000.
For 'No Arbitrage' to hold, the price of the 1-year forward on GPS stock must also be $2,000.
Since the forward price represents the expected future value of the stock, and we are investing $2,000, the forward price should be $2,000 as well. Given that the current stock price is $8.50, the forward price per share would be $8.50.
Therefore, the answer is $8.50.
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ABC Corporation outstanding bonds have a par value of $1000, 8% coupon and 15 years to maturity and a 10% YTM. What is the bond's price?
The approximate price of the bond is $1,138.54. This represents the present value of all the future cash flows, discounted at the bond's yield to maturity of 10%.
To calculate the price of a bond, we need to use the present value formula, which takes into account the bond's future cash flows and the yield to maturity (YTM). In this case, we have the following information:
Par value (face value) of the bond = $1000
Coupon rate = 8%
Years to maturity = 15
Yield to maturity (YTM) = 10%
The coupon payment is 8% of the par value, which is $1000 x 8% = $80 per year. The coupon payments occur annually.
To calculate the price of the bond, we can use the present value of the bond's cash flows, which are the coupon payments and the final repayment of the par value at maturity. The formula for calculating the present value of a bond is:
Price = (Coupon Payment / (1 + YTM)^1) + (Coupon Payment / (1 + YTM)^2) + ... + (Coupon Payment / (1 + YTM)^n) + (Par Value / (1 + YTM)^n)
Using this formula, we can calculate the price of the bond:
Price = ($80 / (1 + 10%)^1) + ($80 / (1 + 10%)^2) + ... + ($80 / (1 + 10%)^15) + ($1000 / (1 + 10%)^15)
To simplify the calculation, we can use financial calculators or spreadsheet software. Plugging the values into a financial calculator or spreadsheet, the bond's price is approximately $1,138.54.
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Total costs for Watson & Company at 100,000 units are $350,000, while total fixed costs are $150,000. The total variable costs at a level of 200,000 units would be A) $700,000. B) $175,000. C) $550,000. D) $300,000. E) None of the above
The total variable costs at a level of 200,000 units would be option C) $550,000.
To determine the total variable costs at a different level of units, we can use the concept of the cost behavior pattern. In this case, we know the fixed costs are $150,000, which do not change with the level of units produced. The total costs for Watson & Company at 100,000 units are $350,000, which include both fixed and variable costs.
To find the variable costs, we subtract the fixed costs from the total costs. So, variable costs = total costs - fixed costs.
Variable costs = $350,000 - $150,000 = $200,000.
Now, we can calculate the variable costs at 200,000 units by multiplying the variable cost per unit by the number of units.
Variable cost per unit = Total variable costs / Total units = $200,000 / 100,000 units = $2 per unit.
Variable costs at 200,000 units = Variable cost per unit × Total units = $2 × 200,000 units = $400,000.
Therefore, the correct option for the total variable costs at a level of 200,000 units is C) $550,000.
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A stock currently has $2 Earnings Per Shares (EPS). Analysts estimate EPS may grow at 25% per year over the next five years. The investor thinks the stock may sell for a 15 P/ E ratio in five years. What will the stock trade for in five years (from week three)?
The stock will trade for $73.35 in five years based on given market price.
To find out the stock's value, the given formula can be used:Price/Earnings Ratio = Market Price per Share/Earnings per ShareThe given information is:Earnings Per Share (EPS) = $2Estimated EPS growth rate for next five years = 25%Stock may sell for a 15 P/E ratio in five years.
Stocks are financial tools that indicate a company's ownership. By purchasing stock, you are granted the right to a share of the company's assets and income. A forum for purchasing and selling these shares is provided by stock markets. Investors trade stocks in an effort to gain from rising stock prices or to get dividends. However, stock values can fluctuate based on a number of variables, including company performance, the state of the economy, and investor sentiment. In the changing world of stocks, it is essential for investors to undertake in-depth research, analyse financial data, and diversify their portfolios in order to manage risks and make wise investment choices.
We can find the estimated future EPS after five years:Year 1 EPS = $2Year 2 EPS = $2(1 + 0.25) = $2.50Year 3 EPS = $2.50(1 + 0.25) = $3.13Year 4 EPS = $3.13(1 + 0.25) = $3.91Year 5 EPS = $3.91(1 + 0.25) = $4.89
Now we can calculate the estimated market price per share after five years using the Price/Earnings Ratio formula:15 = Market Price per Share/4.89
Market Price per Share = 15 × 4.89
Market Price per Share = $73.35
Therefore, the stock will trade for $73.35 in five years.
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