Long-Term Solvency Ratios Summary data from year-end financial statements of Palm Springs Company for 2017 follow.
Summary Income Statement Data
Sales $11,692,900
Cost of goods sold 5,135,000
Selling expenses 938,000
Administrative expenses 780,000
Interest expense 2,210,000
Income tax expense 905,000 9,968,000
Net income $1,724,900
Summary Balance Sheet Data
Cash $117,000
Total liabilities $900,000
Noncash assets 1,183,000
Stockholders' equity 400,000
Total assets $1,300,000
Total liabilities and equity $1,300,000
Round answers to two decimal places.
a. Compute the ratio of times-interest-earned.
b. Compute the debt-to-equity ratio.

Answer:

the price of Bond A will change by 4.21% and the price of Bond B will change by 7.36%.

Explanation:

Bonds A and B

current bond price $1,000

interest rate 7%

Bond A matures in 5 years, annual payments

Bond B matures in 10 years, annual payments

if market interest decreases to 6%

Bond A:

$1,000 / (1 + 6%)⁵ = $747.26

$70 x 4.2124 (annuity factor, 6%, 5 periods) = $294.87

market price = $1,042.13

% change = 4.21%

Bond B:

$1,000 / (1 + 6%)¹⁰ = $558.39

$70 x 7.3601 (annuity factor, 6%, 10 periods) = $515.21

market price = $1,073.60

% change = 7.36%

Answer:

this question is confusing me

Answer:

Explanation:

The coupon rate is defined as the interest rate paid on a bond by its issuer for the term of the security.

Hence,

Par Value = $800

Face Value = $1,000

N = 5 x 2 = 10

Since the interest is semi annual

i = 8% / 2 = 4%

CF = $15.34

Coupon = $30.68 per year or 3.068%

Answer:

a customized risky portfolio to each client based on their risk aversion

Explanation:

It is always believed that when it comes to investment analysis or issue, there are higher returns for higher risk portfolios and lower returns for lower risk portfolios.

Therefore, in order to make a better decision, it is pertinent to note that, the level of risk aversion varies according to each or individual investor.

Hence, when constructing a risky portfolio consisting only of risky assets, an investment manager should offer a customized risky portfolio to each client based on their risk aversion.

Answer:

1) in 25 years, the pension fund should equal:

future value = present value x (1 + interest rate)ⁿ

FV = $20,000,000 x (1 + 8.5%)²⁵ = $153,735,247

2) the value in 12 years = $20,000,000 x (1 - 30%) = $14,000,000

future value = present value x (1 + interest rate)ⁿ

$153,735,247 = $14,000,000 x (1 + interest rate)¹³

(1 + interest rate)¹³ = $153,735,247 / $14,000,000 = 10.981

¹³√(1 + interest rate)¹³ = ¹³√10.981

1 + interest rate = 1.2024

interest rate = 1.2024 - 1 = 20.24%

3) if the fund only earns 6%, in 13 years it will be worth:

FV = $14,000,000 (1 + 6%)¹³ = $29,860,996

so you need $153,735,247 - $29,860,996 = $123,874,251 more

we need to use the future value of an annuity formula:

FV of an annuity = annuity payment x annuity factor

annuity payment = $123,874,251 / 18.882 = $6,560,441

Answer:

Expected market return = 17%

Explanation:

Given the Jump master’s beta = 1.50

Risk free rate = 2%

Market risk premium  = 10%

To find the expected return we have to use the below formula.

Expected market return = Riskfree rate + Beta × Market risk premium

Now insert all the values in order to get the expected market return.

Expected market return = 2 + 1.50 × 10

Expected market return = 17%

Answer:

20

Explanation:

The formula for Economic order quantity ( EOQ ) = √2DS/H,

Where,

D annual demand = 40 units

S Ordering cost = $5

H Holding cost = $1

Hence ,

EOQ = √ 2 × 40 units × $5 / 1$

= √ $400 / $1

= 20

Answer:

Total standard cost per unit will be $19.7

Explanation:

The standard cost card of the product will be,

                                                $

Material (0.3 * 31)                   9.3

Direct Labor (0.4 * 10)            4

Overheads (0.4 * 16)             6.4

Total cost per unit                 19.7

Thus, the standard cost per unit will be $19.7

Answer:

A 'third party', is any entity that a company does business with. This may include suppliers, vendors, contract manufacturers, business partners and affiliates, brokers, distributors, resellers, and agents.

Answer: $4.58

Explanation:

The required return is said to be evenly divided between a capital gains yield and a dividend yield.

That means that Dividend Yield = 7%

Capital gains yield = 7%

The Dividend Yield is based on the next dividend and given the expected return the dividend is;

Expected Return = Dividend Yield + Capital gains yield

Expected Return = Dividend(1 + g)/stock price + Capital gains yield

0.14 = Dividend ( 1 + 0.07)/70 + 0.07

70 * (0.14 - 0.07 ) = Dividend ( 1.07)

4.9 =  Dividend ( 1.07)

Dividend = 4.9/1.07

Dividend = $4.58

Answer:

The adjusting journal will be :

Loss on write down of Inventory $50,000 (debit)

Inventory $50,000 (credit)

Explanation:

The inventory must be presented at the Lower of Cost and Market Value.

The adjusting journal will be :

Loss on write down of Inventory $50,000 (debit)

Inventory $50,000 (credit)

The Loss on write down of Inventory is an expense in the trading account.

Answer:

See journal below

Explanation:

The journal entries below will be recorded in the books of account in order to report the merchandise inventory at the correct amount.

The cost of goods sold account Dr $50,000

($250,000 - $200,000)

To merchandise inventory account Cr $50,000

(Being record of inventory on LCM)

The cost of goods sold was debited with $50,000 while same amount was credited to merchandise inventory account.

Answer:

Current Liabilities

Federal Income Taxes Payable $336,000

Advances on Magazine Subscriptions $1,593,750

Total Current Liabilities $1,929,750

Explanation:

Federal Income Taxes Payable

This is a current Liability as it falls under a period of a year. As March ends the first quarter, the quarterly tax is;

= 840,000 x 40%

= $336,000

Advances on Magazine Subscriptions

They are to deliver monthly subscriptions for 12 months to the tune of 25,000 copies which they have already been paid for. Under the Accrual system they cannot recognize this as revenue until they have fulfilled their obligation to deliver the magazines and until then, they are current Liabilities. As of end of March, they have fulfilled their obligations for 3 months leaving 9 in the year.

= 25,000 x $85 x 9/12

=$1,593,750

Answer:

The geometric average return for this stock was 8.64%.

Explanation:

Geometric average return refers to the return which will result in the correct compounded dollars at the end of the time period.

Geometric average return can be computed using the following formula:

Geometric average return = {[(1 + r1)(1 + r2) ... (1 + rn)]^(1/n)} - 1 ......... (1)

Where r is returns from year 1 to year n.

For the stock in the question, we have:

r1 = 9.62%, 0.0962

r2 = -14.65%, or -0.1465

r3 = 19.85%, or 0.1985

r4 = 25.35%, or 0.2535

r5 = 7.65%, or 0.0765

n = 5

Substituting the values into equation (1), we have:

Geometric average return = {[(1 + 0.0962)(1 - 0.1465)(1 + 0.1985)(1 + 0.2535)(1 + 0.0765)]^(1/5)} - 1

Geometric average return = {1.51310732605096^0.20} - 1

Geometric average return = 0.0864, or 8.64%

Therefore, the geometric average return for this stock was 8.64%.

Answer:

Instructions are below.

Explanation:

Giving the following information:

Fabrication, $645,000

Assembly, $393,750.

Speedboats:

Fabrication Direct labor hours= 4

Assembly Direct labor hours= 3

Bassboats:

Fabrication Direct labor hours= 2

Assembly Direct labor hours= 4

Each product is budgeted for 5,000 units of production for the year.

First, we need to calculate the budgeted direct labor hours:

Fabrication= 4*5,000 + 2*5,000= 30,000

Assembly= 3*5,000 + 4*5,000= 35,000

Now, we can determine the predetermined overhead rate using the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Fabrication= 645,000/30,000= $21.5 per direct labor hour

Assembly= 393,750/35,000= $11.25 per direct labor hour

Finally, we can allocate overhead to each product:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Speedboat= 4*21.5 + 3*11.25= $119.75

Bassboat= 2*21.5 + 4*11.25= $88

Answer:

I prepared an excel spreadsheet because there is not enough space here.

C) total savings =  previous materials costs - total cost per year after retrofitting - cost of retrofitting the molding machine = $137,105.10 - $102,168.00  - $22,112 = $12,825.10

Answer:

Results are below.

Explanation:

Giving the following information:

Fixed costs= $20,000

Unitary variable cost= $17

Selling price= $28 per unit.

To calculate the break-even point in units, we need to use the following formula:

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 20,000 / (28 - 17)

Break-even point in units= 1,818 units

Now, the profit for 1,500 units:

Loss= 1,500*11 - 20,000= -$3,500

Answer: 0.8; 5

Explanation:

From the question, we are informed that people decide to save 20 percent of their incomes. We should note that the addition of the marginal prospensity to consume(MPC) and the marginal prospensity to save(MPS) will be equal to 1.

Therefore, the value of the marginal propensity to consume will be:

= 1 - 20%

= 1 - 0.2

= 0.8

The value of the spending multiplier will be calculated as:

= 1/MPS

= 1/0.2

= 5

Answer:

Monopolistic Competition:

4. a firm that faces a downward sloping demand curve.

Perfect Competition:

1. a firm that produces with excess capacity in

3. a firm that may earn in an economy profit or loss in the short run

5. a firm that that maximizes profits profit in the long by producing where MR = MC

Both:

2. a firm that has a firm that sets price greater than marginal cost.

Explanation:

Answer:

Annual demand(D) = 1,210

Ordering cost(S) = $26

Annual holding cost (H) = $24

With the order quantity(Q) = 25,

Total cost = Holding cost + ordering cost

= [(Q/2)H] + [(D/Q)S]

= [(25/2)24] + [(1210/25)26]

= $300 + $1258.4

= $1558.4

With the order quantity(Q) = 40,

Total cost = Holding cost + ordering cost

= [(Q/2)H] + [(D/Q)S]

= [(40/2)24] + [(1210/40)26]

= $480 + $786.5

= $1266.5

With the order quantity(Q) = 50,

Total cost = Holding cost + ordering cost

= [(Q/2)H] + [(D/Q)S]

= [(50/2)24] + [(1210/50)26]

= $600 + $605

= $1205

With the order quantity(Q) = 60,

Total cost = Holding cost + ordering cost

= [(Q/2)H] + [(D/Q)S]

= [(60/2)24] + [(1210/60)26]

= $720 + $524.33

= $1244.33

With the order quantity(Q) = 100,

Total cost = Holding cost + ordering cost

= [(Q/2)H] + [(D/Q)S]

= [(100/2)24] + [(1210/100)26]

= $1200 + $314.6

= $1514.6

Answer:Arithmetic average return =10.326%

Explanation:

Year Returns      

1      12.05%      

2    - 16.76%      

3      21.64%      

4      25.41%

5           9.29%      

Total returns = 51.63%

Arithmetic average is The sum of all of the numbers in a considered list divided by the number of items of the list.

Therefore,      

Arithmetic average return = Sum of  year 1 to year 5 returns / number of items(year)

= 51.63% /  5

= 10.326%

Answer:

Explanation:

Given that:

A mail-order house uses 18,000 boxes a year.

Carrying costs are 60 cents per box a year =$0.60

and ordering costs are $96.

Determine:

A. The optimal order quantity.

The optimal order quantity can be calculated by using the formula:

[tex]Q_o = \sqrt{\dfrac{2DS}{H}}[/tex]

[tex]Q_o = \sqrt{\dfrac{2*18000*96}{0.60}}[/tex]

[tex]Q_o = \sqrt{\dfrac{3456000}{0.60}}[/tex]

[tex]Q_o = \sqrt{5760000}[/tex]

[tex]Q_o = 2400 \ boxes[/tex]

B. The number of orders per year.

of boxes: 1,000-1,999 Price per box: $1.25

of boxes: 2,000- 4,999 Price per box: $1.20

of boxes: 5,000- 9,999 Price per box : $1.15

of boxes: 10,000 or more Price per box : $1.10

SInce 2400 boxes lies within ''of boxes: 2,000- 4,999 Price per box: $1.20 ''

Total cost = Carrying cost + ordering cost + Purchasing cost

[tex]Total \ cost =(\dfrac{Q}{2} )H +(\dfrac{D}{Q}) S+PD[/tex]

[tex]Total \ cost =(\dfrac{2400}{2} )0.60 +(\dfrac{18000}{2400}) 96+1.20*18000[/tex]

Total cost  = ( 1200) 0.60 + 7.5(96) + 1.20(18000)

Total cost  = 720 + 720 + 21600

Total cost  =  $ 23040

If the order size is 5000, the price per box will be 1.15

[tex]Total \ cost =(\dfrac{Q}{2} )H +(\dfrac{D}{Q}) S+PD[/tex]

[tex]Total \ cost =(\dfrac{5000}{2} )0.60 +(\dfrac{18000}{5000}) 96+1.15*18000[/tex]

Total cost = 2500 (0.60) + 3.6 (96) + 20700

Total cost = 1500 + 345.6 + 20700

Total cost = $22545.6

If the order size is 10000 , the price per box will be 1.10

[tex]Total \ cost =(\dfrac{Q}{2} )H +(\dfrac{D}{Q}) S+PD[/tex]

[tex]Total \ cost =(\dfrac{10000}{2} )0.60 +(\dfrac{18000}{10000}) 96+1.10*18000[/tex]

Total cost = 5000 (0.60) + 1.8(96)  + 19800

Total cost =  3000 + 172.8 + 19800

Total cost = $22972.8

From the three total cost, the least minimum cost of ordering is: 5000

So; the number of orders per year = total number of boxes per year/ boxes per order

the number of orders per year = 18000/5000

the number of orders per year = 3.6 orders per year

Answer:Indirect Expenses

Explanation:  Indirect Expenses are those expenses which are not directly related to the product manufactured or service rendered by  a  company but are generally incurred in the operating and running of a business and cannot be traced to a particular department because the benefits are enjoyed collectively-The reason why its expenses are usually shared among departments or sectors.

Examples of indirect expenses include Rent, salaries to employees, legal charges, insurance of building, depreciation, printing charges, office expenses, telephone bills, advertising, marketing, stationery etc.

Answer:

1) 25%

Dept.         Sales        COGS         Direct Expenses      Indirect Expenses

1            1,080,000    708,000         102,000                   88,000

2             480,000     158,000           48,000                 108,000

3             780,000    308,000          158,000                  28,000

total     2,340,000   1,174,000         308,000               224,000

contribution to overhead = sales - COGS - direct expenses = $1,080,000 - $708,000 - $102,000 = $270,000

contribution to overhead as percentage of sales = $270,000 / $1,080,000 = 0.25 = 25%

2) A. $9,280.

overhead:

direct labor, NOT INCLUDED

indirect labor, $7,100

direct materials, NOT INCLUDED

property taxes on production facility, $860

factory heat, lights and power, $1,060

insurance on plant and equipment, $260

total overhead = $9,280

Answer:

A.Residential 34%

Professional 42%

B.Residential 8%

Professional 14%

C.Residential 4.25%

Professional 3%

D.Residential 34%

Professional 42%

E.Residential $18,000.00

Professional $62,050.00

Explanation:

A.Calculation for  each division’s ROI

Using this formula

Return on Investment

=Net Income / Average Invested Assets

Let plug in the formula  

Residential $68,000.00/$200,000.00 = 34.00%

Professional $153,300.00/$365,000.00 = 42.00%

B.Calculation for  each division’s sales margin. Interpret your results

Using this formula

Sales Margin= Operating income/Sales

Let plug in the formula

Residential $68,000.00/$850,000.00 = 8.00%

Professional  $153,300.00/$1,095,000.00 = 14.00%

C.Calculation for each division’s capital turnover

Using this formula

Capital Turnover=Sales/Average operating assets

Let plug in the formula

Residential $850,000.00 /$200,000.00 = 4.25

Professional $1,095,000.00/$365,000.00 = 3.00

D.Using  the expanded ROI formula to confirm the results from Requirement a.

Using this formula

Return on Investment=Profit Margin * Investment Turnover

Let plug in the formula  

Residential 8.00% * 4.25%  34.0%

Professional 14.00% * 3.00%  42.0%

E.Calculation for  each division’s residual income (RI)

Residential Professional

Average investment

$200,000.00 $365,000.00

×Target return 25%   25%

=Target income

$50,000.00 $91,250.00

Hence,

Operating income $68,000.00 $153,300.00

Less:Target income$50,000.00 $91,250.00

Residual income $18,000.00 $62,050.00

Answer:

$6,666.67

Explanation:

According to the given situation, the computation of the value of a perpetuity is shown below:-

Value of Perpetuity = Quarterly Payment ÷ Quarterly Interest Rate

Now, we will put the values into the above formula to reach the value of a perpetuity

= $100 ÷ (6% ÷ 4)

= $100 ÷ 0.0150

= $6,666.67

Therefore for computing the value of perpetuity we simply applied the above formula.

Answer:

c) Project B should be accepted because it has the highest EAA.

Explanation:

EAA is the annuity payment that is equal to the value of the NPV

Net present value is the present value of after tax cash flows from an investment less the amount invested.  

NPV can be calculated using a financial calculator  

NPV for project A

Cash flow in year 0 = -$100,000

Cash flow each year from year 1 to 5 = $28,900

I = 13%

NPV = $1647.98

Please find attached the formula used i calculating EAA = $468.54

NPV for project B

Cash flow in year 0 = -$100,000

Cash flow in year 1 = $48,000

Cash flow in year 2 = $40,000

Cash flow in year 3 = $40,000

I = 13%

NPV = $1,525.75

EAA = $646.19

When comparing projects with unequal lives, choose the project with the higher EAA. This is project B. Only project B can be chosen because the projects are mutually exclusive.

To find the NPV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.  

3. Press compute  

Answer:

c) Project B should be accepted because it has the highest EAA.

Explanation:

First determine the Net Present Value of Project A and Project B.

Using a Financial Calculator the Net Present Values will be

Project A

-$100,000     CFj

$28,900        CFj

$28,900        CFj

$28,900        CFj

$28,900        CFj

13%                 I/YR

Shift NPV    - $14,037.78

Project B

-$100,000     CFj

$48,000        CFj

$40,000        CFj

$40,000        CFj

$28,900        CFj

13%                 I/YR

Shift NPV      $19250.66

The only correct statement is that  Project B should be accepted because it has the highest EAA.

Answer:

The Murdock Corporation

Statement of Cash Flows for the year ended December 31, 2016, using the indirect method:

Operating Activities:

Net Income                          $67,000

Add depreciation                   38,000

Accounts receivable           -$13,450

Inventory                             -$21,700

Accounts payable              -$74,030

Salaries payable                  -$6,200

Notes payable (current)     -$51,700

Net cash from operations                  -$62,080

Investing Activities:

Sale of securities             $84,200

Sale of Equipment             $8,550

New Equipment            -$162,000

Net cash from investing activities     -$69,250

Financing Activities:

Issue of bonds               $217,000

Dividends                       -$28,500

Net cash from financing activities     $188,500

Net cash flows                                      $57,170

Explanation:

a) Data and Calculations:

Balance Sheet for 2016 and 2015:

                                                          2016                  2015

Cash                                               $ 96,245          $ 33,155

Available-for-sale securities

 (not cash equivalents)                   24,000           102,000

Accounts receivable                        97,000            83,550

Inventory                                         182,000          160,300

Prepaid insurance                              3,030              3,700

Land, buildings, and equipment 1,284,000       1,142,000

Accumulated depreciation          (627,000)       (589,000)

Total assets                             $ 1,059,275       $ 935,705

Accounts payable                        $ 91,640        $ 165,670

Salaries payable                            26,800             33,000

Notes payable (current)                40,300             92,000

Bonds payable                             217,000               0

Common stock                           300,000          300,000

Retained earnings                      383,535           345,035

Total liabilities and shareholders'

 equity                                  $ 1,059,275        $ 935,705

Additional information for 2016:

Proceeds from sale of securities = $84,200

Proceeds from sale of Equipment = $8,550

Proceeds from issue of bonds = $217,000

Cash Payments:

New Equipment = $162,000

Dividends = $28,500

Net Income for the year = $67,000

Depreciation:

2016 accumulated depreciation = $627,000

2015 accumulated depreciation =   589,000

Depreciation charge for 2016 =      $38,000

Net Increases/decreases in working capital:

                                               2016             2015       Cash Effect

Accounts receivable             97,000          83,550     ($13,450)

Inventory                             182,000         160,300     ($21,700)

Accounts payable                 91,640         165,670     ($74,030)

Salaries payable                  26,800           33,000      ($6,200)

Notes payable (current)      40,300           92,000     ($51,700)

The Murdock Corporation's Statement of Cash Flows is one of the financial statements that are prepared at the end of the accounting period to show the inflow and outflow of cash during the period.  It shows the cash flows from operating, investing, and financing activities of the corporation.  There are two methods for preparing this statement: the direct method and the indirect method.  The direct method shows the actual inflows and outflows for operating activities while the indirect method starts with the net income to reconcile the accrual basis of accounting to the cash basis.

Answer:

1693.25

Explanation:

The computation of the current price of the item and the price 9 years from today is shown below:-

p(t) = 1,200 × (1.039)^t

Now, the current price can be found by putting t = 0

p(0) is

[tex]1,200\times (1.039)^0 = $1,200[/tex]

The price 10 years from today

p(9) is

[tex]1,200\times (1.039)^9[/tex]

Now we will solve the above equation

= 1,200 × 1.411041958

= 1693.25035

or

= 1693.25

Answer:

The growth rate in earnings per share (EPS) is 15.97%

Explanation:

Assuming annual growth rate is r%, hence

$0.5 x (1 + r)^10 = $2.20

(1 + r)10 = $2.20 / $0.5

(1 + r)10 = $4.4

Taking 10th root at each side,

(1 + r)10 = $4.4  

[tex]\sqrt[10]{1 + r}[/tex] = [tex]\sqrt[10]{4.4}[/tex]

1+r = 1.1597

r = 1.1597 -  1

r = 0.1597

r= 15.97%

Answer:

Cash flow from Operating Activities

Net income                                                         $513,864

Adjustment for Non-cash items :

Depreciation expense                                        $39,528

Amortization expenses—Patents                          $4,941

Adjustment for Changes in Working Capital :

Increase in Accounts receivable                      ($29,000)

Decrease in Accounts payable                          ($14,925)

Increase in Inventory                                          ($23,425)

Decrease in Salaries payable                             ($5,000)

Net Cash flow from Operating Activities          $485,983

Explanation:

The Indirect method, reconciles the Operating Profit to the Operating Cash Flow by adjusting for the following items :