Answer: $18,848
Explanation:
The Net Present Value of a project is the difference between the present values of the cash outflows and inflows.
Present Values of the Cash flows;
Year 1
= 150,000 * 0.893
= $133,950
Year 2
= 130,000 * 0.797
= $103,610
Year 3
=104,000 * 0.712
= $74,048
Year 4
= 90,000 * 0.636
= $57,240
Net Present Value = Cash inflows - Outflow
= 133,950 +103,610 + 74,048 + 57,240 - 350,000
= $18,848
As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting, or sustainable, growth model helps a firm assess how rapidly it can grow, while maintaining a balance between its cash outflows (increases in noncash assets) and inflows (funds resulting from increases in liabilities or equity). Consider the following case of Bohemian Manufacturing Company: Bohemian Manufacturing Company has no debt in its capital structure and has $300,000,000 in assets. Its sales revenues last year were $120,000,000 with a net income of $2,000,000. The company distributed $180,000 as dividends to its shareholders last year. Given the information above, what is Bohemian Manufacturing Company’s sustainable growth rate? 0.0601562% 0.5181384% 0.61% 4.1464268% Which of the following are assumptions of the sustainable (self-supporting) growth model? Check all that apply. The firm maintains a constant net profit margin. The firm’s liabilities and equity must increase at the same rate. The firm pays no dividends. The firm maintains a constant ratio of liabilities to equity.
Answer:
Sustainable growth rate = 0.67148%
The firm maintains a constant ratio of liabilities to equity.
Explanation:
Sustainable growth rate = ROE *Plow back Ratio / (1-ROE * Plow back Ratio)
When ROE = Net Income / Total Assets
= $2,000,000/$300,000,000
= 0.00667
Plow back Ratio = 1 - (Dividend / Net Income)
= 1 - ($180,000/$2,000,000)
= 1 - 0.09
=0.91
Sustainable growth rate = ROE * Plow back Ratio / (1-ROE * Plow back Ratio)
= 0.00667 * 0.91 / (1 - 0.00667 * 0.91)
= 0.0060697 / 0.9039303
=0.0067148
= 0.67148%
Therefore, the sustainable growth rate is 0.67148%
The firm maintains a constant ratio of liabilities to equity is the correct assumption for the sustainable growth model.
What is the beta for a company with a 12% expected return, while treasury bills are yielding 5% and the market risk premium is 7%
Answer:
The beta for the company is 1.
Explanation:
A beta is the measure of systematic risk associated to a stock or the portfolio. Systematic risk is the market risk that affects all the stocks in the market due to factors that are uncontrollable. Such a risk is what the companies compensate the investors for. Using the CAPM equation, we calculate the expected rate of return of a stock. The equation is,
r = rRF + Beta * rpM
Where,
rRF is the risk free raterpM is the risk premium on marketWe already have the values for r, rRF and rpM. Plugging them in the formula, we calculate the beta to be,
0.12 = 0.05 + Beta * 0.07
0.12 - 0.05 = Beta * 0.07
0.07/ 0.07 = Beta
Beta = 1
Following are the accounts and balances from the adjusted trial balance of stark company
Notes payable $11,000 Accumulated depreciation building $15,000
Prepaid insurance 2,500 Accounts receivable 4,000
Interest expense 500 Utilities expense 1,300
Accounts payable 1,500 Interest payable 100
Wages payable 400 Unearned revenue 800
Cash 10,000 Supplies expense 200
Wages expense 7,500 Buildings 40,000
Insurance expense 1,800 Dividends 3,000
Common stock 10,000 Depreciation expense—Buildings 2,000
Retained earnings 14,800 Supplies 800
Services revenue 20,000
Prepare the (1) income statement and (2) statement of retained earnings for the year ended December 31 and (3) balance sheet at December 31. The Retained Earnings account balance was $35,600 on December 31 of the prior year.
Answer:
STARK COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31
PARTICULARS AMOUNT $
Service Revenue 20,000
Expenses
Supplies expense 200
Interest expense 500
Insurance expense 1,800
Utilities expense 1,300
Depreciation expense 2,000
Wages expense 7,500
Total expenses 13,300
Net profit 6,700
STARK COMPANY
STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31
Amount $
Retained earnings December 31 prior year end 14,800
Add- Net income 6,700
Less- Dividends 3,000 3,700
Retained earnings, December 31 Current year end 18,500
3. STARK COMPANY
BALANCE SHEET FOR THE YEAR ENDED DECEMBER 31
Current Assets
Cash 10,000
Accounts receivable 4,000
Office supplies 800
Prepaid insurance 2,500
Total current asset 17,300
Non Current Assets
Buildings 40,000
Less- Accumulated dep. 15,000
Total Non Current Assets 25,000
Total Assets 42,300
Liabilities
Current liabilities
Accounts payable 1,500
Interest payable 100
Notes payable 11,000
Unearned revenue 800
Wages payable 400
Total Current liabilities 13,800
Long term liabilities
Common stock 10,000
Retained earnings 18,500 28,500
Total liabilities and capital 42,300
Financial statements are statements that keep a record of the various transactions of the firm. It keeps the records of the inflow and outflow of cash in the company and also maintains the sound wealth in the firm.
The income statement, balance sheet, and calculations have been attached below.
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What best explains why a firm's ratio of long-term debt/total capital is lower than the industry average, while the ratio of income before interest and taxes/debt interest charges is higher than the industry average
Answer:
The lower ratio of long-term debt to total capital is explained by the fact that the company is not highly geared or leveraged in comparison to the industry average firm.
This also explains why the ratio of income before interest and taxes to the debt interest charges is higher than the industry average because the firm does not pay so much in interest expense as the average firm in its industry.
Explanation:
Company X's leverage determines its ratio of long-term debts to total capital. If Company X has large long-term debts it will have a higher long-term debts to total capital ratio and vice versa. In that situation, Company X will also pay more in interest, causing its ratio of income before interest and taxes to the interest charges to be higher than the industry average, and vice versa.
Pressure tactics lead the other party to realize that the status quo is acceptable, and they make explicit the costs of not negotiating.
a. True
b. Fasle
Answer: b. False
Explanation:
Pressure tactics is described as to pressurize the other party to realize that the status quo is unacceptable, and they make the costs of not negotiating very explicit.
Pressure tactic is one of the influence tactics which focuses on using power by demanding compliance or using threats.
Hence, the given statement is false.
On January 1, 2017, Crane Company decided to begin accumulating a fund for asset replacement five years later. The company plans to make five annual deposits of $64000 at 10% each January 1 beginning in 2017. What will be the balance in the fund, on January 1, 2022 (one year after the last deposit)
Answer:
Balance in the account on January 1, 2022 =$820,525.44
Explanation:
Ordinary annuity is that in which the annual cash flow occurs at the end of each year for certain number of years.
Where the cash flow occurs at the beginning of the period, it is known as annuity due. The deposit scheme decided by Crane Company is annuity due, so we would need to work out the future value of an annuity due as follows:
Future Value of Annuity Due (FVAD): This represents the total sum that would accrue where the annual cash flow( each occurring at the beginning of the year) is compounded at a particular rate. It can be determined as
FV = A×( (1+r)^n - 1)/r)× (1+r)
This is the same formula as the ordinary annuity but with an additional provision for the the first cash flow to earn interest. This is effected by multiplying the ordinary annuity formula with (1+r)
Now, we can apply this formula to our question:
DATA
A-cash flow- 64,000
r- discount rate-10%
n-number of years- 5
FV = 64,000 × ( 1.1^5 - 1)/0.05 × 1.05 = 820,525.44
FV = 820,525.44
Balance in the account on January 1, 2022 =820,525.44
How is one product determined to specialize in between the two
Answer:
Specialization is a method of production whereby an entity focuses on the production of a limited scope of goods to gain a greater degree of efficiency. Many countries, for example, specialize in producing the goods and services that are native to their part of the world, and they trade them for other goods and services.
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You purchased a stock at a price of $48.98. The stock paid a dividend of $1.63 per share and the stock price at the end of the year was $54.12. What was the total return for the year? Multiple Choice 13.82% 10.49% 13.17% 12.51% 3.33%
Answer:
13.82%
Explanation:
The computation of total return for the year is shown below:-
Total return = (End value - Beginning value + Dividend) ÷ Beginning value
= ($54.12 - $48.98 + $1.63) ÷ $48.98
= 6.77 ÷ $48.98
= 0.13821
or
= 13.82%
Therefore for computing the total return we simply applied the above formula by considering all the information given in the question
Selected data concerning operations of Cascade Manufacturing Company for the past fiscal year follow:
Raw materials used ..... $300,000
Total manufacturing costs charged to production during the year (includes raw materials, direct labor, and manufacturing overhead applied at a rate of 60 percent of direct labor costs) ..... 681,000
Cost of goods available for sale ...... 826,000
Selling and general expenses ...... 30,000
Beginning Inventories
Raw materials ...... $70,000
Work-in-process...... 85,000
Finished goods ...... 90,000
Ending Inventories
Raw materials ...... $80,000
Work-in-process ...... 30,000
Finished goods ....... 110,000
Determine each of the following:
a. Cost of raw materials purchased
b. Direct labor costs charged to production
c. Cost of goods manufactured
d. Cost of goods sold
Answer:
a. Purchases $310,000
b. Direct labor $ 238,125
c. Cost of goods manufactured $ 736,000
d. Cost of goods sold $ 716,000
Explanation:
Cascade Manufacturing Company
Raw materials used ..... $300,000
Add Raw materials Ending ...... $80,000
Less Raw materials Beginning...... $70,000
a. Purchases $310,000
Add Raw materials Ending to Raw materials used and subtract Raw materials Beginning to get Raw materials Purchases.
Total manufacturing costs $ 681,000
Less Raw materials used ..... $300,000
Conversion Costs $ 381,000
Conversion Costs = Direct Labor + Factory Overhead
$ 381,000= x + 0.6 x
$ 381,000= 1.6x
b. x= Direct labor = $ 381,000/1.6= $ 238,125
Factory Overhead= 0.6 *$ 238,125= $ 142875
Find Conversion Costs and then apply the ratio to get the direct labor costs.
c.
Cascade Manufacturing Company
Cost of goods manufactured
Raw materials Beginning...... $70,000
Add Purchases $310,000
Less Raw materials Ending ...... $80,000
Raw materials used ..... $300,000
Add Direct labor $ 238,125
Factory Overhead $ 142875
Total manufacturing costs $ 681,000
Add Work-in-process Beginning...... 85,000
Cost of goods available for manufacture $ 766,000
Less Work-in-process Ending...... 30,000
Cost of goods manufactured $ 736,000
Add and subtract as above to get the Cost of goods manufactured.
d. Cascade Manufacturing Company
Cost of goods sold
Raw materials Beginning...... $70,000
Add Purchases $310,000
Less Raw materials Ending ...... $80,000
Raw materials used ..... $300,000
Add Direct labor $ 238,125
Factory Overhead $ 142875
Total manufacturing costs $ 681,000
Add Work-in-process Beginning...... 85,000
Cost of goods available for manufacture $ 766,000
Less Work-in-process Ending...... 30,000
Cost of goods manufactured $ 736,000
Add Finished goods Beginning...... 90,000
Cost of goods available for sale $ 826,000
Less Finished goods Ending....... 110,000
Cost of goods sold $ 716,000
Add and subtract as above to get the Cost of goods sold.
Norris Co. has developed an improved version of its most popular product. To get this improvement to the market, will cost $48 million and will return an additional $13.5 million for 5 years in net cash flows. The firm's debt-equity ratio is .25, the cost of equity is 13 percent, the pretax cost of debt is 9 percent, and the tax rate is 30 percent. What is the net present value of this proposed project?
Answer:
NPV = $1.49 million
Explanation:
The NPV is the difference between the PV of cash inflows and the PV of cash outflows. A positive NPV implies a good investment decision and a negative figure implies the opposite.
NPV of an investment:
NPV = PV of Cash inflows - PV of cash outflow
But we will need to work out the discount rate to be used for discounting the cash flows. Hence, we need to determine the cost of capital as follows:
Step 1: After-tax cost of debt
After tax cost of debt = pre-tax cost of debt × (1-tax rate rate)
= 9%× (1--0.3)=6.3%
Step 2 : Weighted Average cost of capital (WACC)
WACC=( 0.25×6.3%) + (0.75× 13%) =11.325 %
Step 3:Net Present Value (NPV)
PV of cash inflow= (1- (1.11325^-5)/0.11325)× 13.5 = 49.49 million
Initial cost = $48 million
NPV = 49.49 million - $48 million =$1.49 million
NPV = $1.49 million
Luther Corporation
Consolidated Income Statement
Year ended December 31 (in $millions)
2006 2005
Total sales 610.1 578.8
Cost of sales (500.2) (355.3)
Gross profit 109.9 223.5
Selling, general, and
administrative expenses (40.5) (38.7)
Research and development (24.6) (21.8)
Depreciation and amortization (3.6) (3.9)
Operating income 41.2 159.1
Other income −− −−
Earnings before interest and taxes (EBIT) 41.2 159.1
Interest income (expense) (25.1) (15.3)
Pretax income 16.1 143.8
Taxes (5.5) (50.33)
Net income 10.6 93.47
Price per share $16 $15
Sharing outstanding (millions) 10.2 8.0
Stock options outstanding (millions) 0.3 0.2
Stockholders' Equity 126.6 63.6
Total Liabilities and Stockholders' Equity 533.1 386.7
Refer to the income statement above. Luther's operating margin for the year ending December 31, 2005 is closest to:_________.
A. 13.7413.74%
B. 21.9921.99%
C. 27.4927.49%
D. 32.9932.99%
Answer:
27.48%
Explanation:
Calculation for Luther's operating margin for the year ending December 31, 2005
Using this formula
Operating margin = Operating income / Sales
Let plug in the formula
Operating margin= 159.1/578.8
Operating margin=0.2748*100
Operating margin=27.48%
Therefore Luther's operating margin for the year ending December 31, 2005 is 27.48%
The firm is an all-equity firm with assets worth $350 million and 100 million shares outstanding. It plans to borrow $100 million and use these funds to repurchase shares. The firm’s marginal corporate tax is 21%, and it plans to keep its outstanding debt equal to $100 million permanently. If the firm manages to repurchase shares at $4 per share, what is the per share value of equity for the leveraged firm? A) $2.71 per share B) $3.5 per share C) $3.61 per share D) $3.71 per share E) $4 per share
Answer:
B) $3.5 per share
Explanation:
Assets = Existing assets + Tax shield
= $350 million + 21% * $100 million
= $371 million
Equity = Asset - Debt
= $371 million - $100 million
= $271 million
The Shares are repurchase at $4
At this price, the firm would have 100 - 100/4 = 75 million shares outstanding .
Worth of shares outstanding = Equity / Outstanding shares
Worth of shares outstanding = ($271 million / 75 million shares)
Worth of shares outstanding = $3.61 per shares
An increase in taxes when the economy is above full employment ______ aggregate demand and real GDP, and the price level ______.
Question options :
A. increases; falls
B. decreases; falls
C. does not change; does not change
D. increases; rises
Answer:
B. decreases; falls
Explanation:
let us understand this by looking at the logic behind it. First when the economy is at full employment, there is high demand since there will be increase in money supply through increased circulation from salaries and wages. If government increases taxes, this will reduce purchasing power as money supply will be reduced and therefore demand will be reduced. Also price will fall since according to the Law of demand and supply, if demand is more than supply, price will increase
Steady Company's stock has a beta of . If the risk-free rate is and the market risk premium is , what is an estimate of Steady Company's cost of equity?
The question is incomplete as it misses the figures. The following is the complete question.
Steady Company's stock has a beta of 0.21. If the risk-free rate is 6.2% and the market risk premium is 6.9%, what is an estimate of Steady Company's cost of equity?
Answer:
The cost of equity is 0.07649 or 7.649%
Explanation:
The required rate of return or cost of equity capital is the rate required by the investors to invest in a stock based on the systematic risk of the stock as measure by the beta. The required rate of return or cost of equity can be calculated using the CAPM equation. The CAPM equation is,
r = rRF + Beta * rpM
Where,
rRf is the risk free raterpM is the risk premium on marketr = 0.062 + 0.21 * 0.069
r = 0.07649 or 7.649%
The monetary value of a homemaker's time CANNOT be estimated by
A. comparing the value of the services to the spouse's wage rate.
B. measuring the marginal value of the services by the homemaker's wage rate received in a part-time job.
C. measuring the services in terms of current market prices.
D. measuring the value of the services by looking at the homemaker's opportunity costs.
Answer: measuring the services in terms of current market prices
Explanation:
Based on the information that has been provided in the question, it should be noted that the monetary value of a homemaker's time can be estimated by
comparing the value of the services to the spouse's wage rate, measuring the marginal value of the services by the homemaker's wage rate received in a part-time job and also measuring the value of the services by looking at the homemaker's opportunity costs.
Therefore, the option that measuring the services in terms of current market prices is not estimated.
Presented below are selected transactions at Windsor, Inc. for 2019. Jan. 1 Retired a piece of machinery that was purchased on January 1, 2009. The machine cost $60,600 on that date. It had a useful life of 10 years with no salvage value. June 30 Sold a computer that was purchased on January 1, 2016. The computer cost $40,200. It had a useful life of 5 years with no salvage value. The computer was sold for $13,800. Dec. 31 Discarded a delivery truck that was purchased on January 1, 2015. The truck cost $41,160. It was depreciated based on a 6-year useful life with a $3,000 salvage value. Required:Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on assets disposed of. Windsor, Inc. uses straight-line depreciation. (Assume depreciation is up to date as of December 31, 2018.)
Answer:
All journal entries are given below
Explanation:
A. Retired a piece of machinery
Entry DEBIT CREDIT
Accumulated depreciation $60,600
Machinery $60,600
B. Depreciation for expense for computer sold
Entry DEBIT CREDIT
Depreciation expense $4,020
Accumulated depreciation $4,020
Working
Depreciation = (40,200/5year) x6/12
Depreciation = $4,020
C. Disposal of computer
Entry DEBIT CREDIT
Cash $13,800
Accumulated depreciation(w) $28,140
Gain on disposal $1,740
Computer $40,200
Workings;-
Accumulated depreciation = depreciation expense per year x number of years
Accumulated depreciation = $8040 x 3.5years = $28,140
D. depreciation of delivery truck
Entry DEBIT CREDIT
Depreciation expense $6,360
Accumulated depreciation $6,360
E. Dicarded delivery truck
Entry DEBIT CREDIT
Accumulated depreciation(w) $31,180
Loss on discarded truck $9,360
Delivery truck $41,160
Workings;-
Accumulated depreciation = depreciation expense per year x number of years
Accumulated depreciation = $6,360 x 5
Accumulated depreciation = $31,180
Fiedler's contingency model of leadership has made an important and lasting contribution to the study of leadership because it: Group of answer choices suggests that organizations need to engineer the situation to fit the leader's preferred style. is the only theory to adopt the implicit leadership perspective. was the first theory to recognize the existence of leadership substitutes. discovered that effective leaders do not have a common set of competencies. is the only leadership theory to adopt a contingency approach.
Answer:
suggests that organizations need to engineer the situation to fit the leader's preferred style.
Explanation:
Fiedler is of the view that a person's leadership style is a product of experiences throughout their lifetime. So it is difficult to change it.
He suggested that instead of teaching a particular leadership style and forcing people to align with them, it is better to adjust the situation to an individual's leadership style.
The weakness of this is that the leader may be more effective in a particular situation and weak in another one
Listed below are transactions that might be reported as investing and/or financing activities on a statement of cash flows. Possible reporting classifications of those transactions are provided also.
Required:
Indicate the reporting classification of each transaction by entering the appropriate classification code. (The first item is provided as an example.)
Classifications
+ I Investing activity (cash inflow)
– I Investing activity (cash outflow)
+ F Financing activity (cash inflow)
– F Financing activity (cash outflow)
N Noncash investing and financing activity
X Not reported as an investing and/or a financing activity
Classifications Transactions
+I 1. Sale of land.
2. Issuance of common stock for cash.
3. Purchase of treasury stock.
4. Conversion of bonds payable to common stock.
5. Lease of equipment.
6. Sale of patent.
7. Acquisition of building for cash.
8. Issuance of common stock for land.
9. Collection of note receivable (principal amount).
10. Issuance of bonds.
11. Issuance of stock dividend.
12. Payment of property dividend.
13. Payment of cash dividends.
14. Issuance of short-term note payable for cash.
15. Issuance of long-term note payable for cash.
16. Purchase of marketable securities ("available for sale").
17. Payment of note payable.
18. Cash payment for five-year insurance policy.
19. Sale of equipment.
20. Issuance of note payable for equipment.
21. Acquisition of common stock of another corporation.
22. Repayment of long-term debt by issuing common stock.
23. Payment of semiannual interest on bonds payable.
24. Retirement of preferred stock.
25. Loan to another firm.
26. Sale of inventory to customers.
27. Purchase of marketable securities (cash equivalents).
Answer:
Investing Activities refer to cashflow activities that have to do with Fixed assets as well as the ownership of the securities of other companies.
Financing Activities refer to cashflow activities that have to do with how the company sources funds for the company so this includes Equity related activities and long term liabilities.
1. Sale of land. +I
2. Issuance of common stock for cash. +F
3. Purchase of treasury stock. -F
4. Conversion of bonds payable to common stock. N
5. Lease of equipment. N
6. Sale of patent. +I
7. Acquisition of building for cash. -I
8. Issuance of common stock for land. N
9. Collection of note receivable (principal amount). +I
10. Issuance of bonds. +F
11. Issuance of stock dividend. X
12. Payment of property dividend. X
13. Payment of cash dividends. -F
14. Issuance of short-term note payable for cash. +F
15. Issuance of long-term note payable for cash. +F
16. Purchase of marketable securities ("available for sale"). -I
17. Payment of note payable. -F
18. Cash payment for five-year insurance policy. X
19. Sale of equipment. +I
20. Issuance of note payable for equipment. N
21. Acquisition of common stock of another corporation. -I
22. Repayment of long-term debt by issuing common stock. N
23. Payment of semiannual interest on bonds payable. X
24. Retirement of preferred stock. -F
25. Loan to another firm. -I
26. Sale of inventory to customers. X
27. Purchase of marketable securities (cash equivalents). X
Please see appropriate classification below.
+ I Investing activity (cash inflow)
1. Sale of land. +I
6. Sale of patent. +I
9. Collection of note receivable (principal amount). +I
19. Sale of equipment. +I
– I Investing activity (cash outflow)
7. Acquisition of building for cash. -I
16. Purchase of marketable securities ("available for sale"). -I
21. Acquisition of common stock of another corporation. -I
25. Loan to another firm. -I
+ F Financing activity (cash inflow)
2. Issuance of common stock for cash. +F
10. Issuance of bonds. +F
14. Issuance of short-term note payable for cash. +F
15. Issuance of long-term note payable for cash. +F
– F Financing activity (cash outflow)
3. Purchase of treasury stock. -F
13. Payment of cash dividends. -F
17. Payment of note payable. -F
24. Retirement of preferred stock. -F
N Noncash investing and financing activity
4. Conversion of bonds payable to common stock. N
5. Lease of equipment. N
8. Issuance of common stock for land. N
20. Issuance of note payable for equipment. N
22. Repayment of long-term debt by issuing common stock. N
X Not reported as an investing and/or a financing activity
11. Issuance of stock dividend. X
12. Payment of property dividend. X
18. Cash payment for five-year insurance policy. X
23. Payment of semi-annual interest on bonds payable. X
26. Sale of inventory to customers. X
27. Purchase of marketable securities (cash equivalents). X
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"A customer owns 200 shares of ABC, purchased 2 years ago at $50 per share. The current market value of ABC stock is $60 per share. If the customer gifts the stock to his son, the result is the:"
Answer: The donor may incur a gift tax liability. Also, the cost basis will be $50 per share to the recipient of the gift.
Explanation:
From the question, we are informed that a customer owns 200 shares of ABC, that were bought 2 years ago at $50 per share and that the current market value of ABC stock is $60 per share.
If the customer gifts the stock to his son, the result is the donor may incur a gift tax liability. Also, the cost basis will be $50 per share to the recipient of the gift.
Oligopoly firms will seldom change prices but if one firm increases their price, others may follow if costs have ____________ .
Answer:
decreased
Explanation:
if firms have decreased then it would be likely to follow other firms to increase popularity
Oligopoly firms will seldom change prices but if one firm increases its price, others may follow if costs have Decreased.
What is Oligopoly?A market structure known as an oligopoly has a limited number of enterprises, none of which can prevent the others from having a large impact. The market share of the major companies is calculated using the concentration ratio.
A market with a monopoly has only one producer, a duopoly has two businesses, and an oligopoly has three or more businesses. The maximum number of firms in an oligopoly is unknown, but it must be low enough so that each firm's actions have a significant impact on the others.
In the past, oligopolies have existed in the steel industry, the oil industry, the railroad industry, the tire industry, grocery store chains, and the wireless industry. An oligopoly can prevent new competitors from entering the market, stifle innovation, and raise prices, all of which are detrimental to consumers.
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Rose Corporation, a calendar year corporation, had accumulated earnings and profits of $40,000 as of January 1, 2014. However, for the first six months of 2014 Rose Corporation had an operating loss of $36,000, and finished the year with a total net operating loss for tax year 2014 of $55,000. Rose Corporation distributed $15,000 to its shareholders on July 1, 2014. Which of the following is correct?A. The entire distribution of $15,000 is taxable as a dividend.B. The entire distribution is not taxable.C. The part of the distribution which is taxable as a dividend is $12,500.D. The part of the distribution which is taxable as a dividend is $14,000.
Answer:
C. The part of the distribution which is taxable as a dividend is $12,500.
Explanation:
Rose's total loss for the year = $55,000
we must prorate the loss: $55,000 / 12 months = $4,583.33 per month
loss allocated to the first 6 months = $4,583.33 x 6 = $27,500
retained earnings before the distribution = $40,000 - $27,500 = $12,500
since distributions must come from retained earnings to be considered dividends, then only $12,500 will be considered dividends. The remaining $2,500 will be considered a return of capital
You own a stock portfolio invested 34 percent in Stock Q, 18 percent in Stock R, 36 percent in Stock S, and 12 percent in Stock T. The betas for these four stocks are 1.03, 1.09, 1.49, and 1.94, respectively. What is the portfolio beta
Answer:
Portfolio beta = 1.3156
Explanation:
The portfolio beta is a function of the weighted average of the individual stocks betas' that form up the portfolio. To calculate the portfolio beta, we use the following formula,
Portfolio beta = wA * Beta of A + wB * Beta of B + ... + wN * Beta of N
Where,
w represents the weight of each stock in portfolioPortfolio beta = 0.34 * 1.03 + 0.18 * 1.09 + 0.36 * 1.49 + 0.12 * 1.94
Portfolio beta = 1.3156
A company was moving from one part of the city to another. During the move, a truck carrying computer equipment worth more than $250,000 was trapped in a flooded underpass, and the equipment was destroyed. Fortunately, the company was insured under several policies. The policy that would most likely cover the computer equipment during the move from one facility to another is
Answer:
Causality policy
Explanation:
This policy makes provision for an organization or individual to be insured against any damage to property as a result of negligent acts or omissions.
In this case the property–$250,000 worth of computer equipment held inside the truck was trapped in a flooded underpass, and the circumstances shows there may have likely been negligence on the part of the truck driver.
Research on women working in the corporate world indicates that one reason professional women leave their jobs is that the common corporate structure does not value:
Answer:
A. an interdependent worker.
Explanation:
Interdependent worker means the person who is handling the day to day operations of the business independently.
According to the given question, if the women are working in the corporate world than the chances of the leaving of their jobs is that the general corporate structure do not value them as an interdependent worker just because the person is a woman
Therefore the correct option is A
Sell Inc.'s stock has a 25 percent chance of producing a 30% return, a 50 percent chance of producing a12% return, and a 25 percent chance of producing a 5% return. What is the firm's expected rate of return?
Answer:
r = 0.1475 or 14.75%
Explanation:
The expected rate of return or r is the average return that is expected from the stock. It is the expected rate of profit or loss that an investor can anticipate on an investment whose returns are known or anticipated.
The expected rate of return of can be calculated as follows,
r = pA * rA + pB * rB + ... + pN * rN
Where,
pA, pB and so on represents the probability of an event or return occuringrA, rB and so on are the return in different eventsr = 0.25 * 0.3 + 0.5 * 0.12 + 0.25 * 0.05
r = 0.1475 or 14.75%
Corporation has found that % of its sales in any given month are credit sales, while the remainder are cash sales. Of the credit sales, Corporation has experienced the following collection pattern: 20% received in the month of the sale 40% received in the month after the sale 24% received two months after the sale 16% of the credit sales are never received November sales for last year were , while December sales were . Projected sales for the next three months are as follows: January sales. . . . . . . . . . . . . . . . $150,000 February sales. . . . . . . . . . . . . . . $130,000 March sales. . . . . . . . . . . . . . . . . $175,000 Requirement Prepare a cash collections budget for the first quarter, with a column for each month and for the quarter. (Round your answers to the nearest whole dollar.) Sweeney Corporation Cash Collections Budget For the Months of January through March January Cash sales Collections on credit sales: 20% Month of sale 40% Month after 24% Two months after Total cash collections Enter any number in the edit fields and then click Check An
Answer:
Some information is missing, specifically the % of credit sales. Similar questions use 80%, so I will use that %. Also, November sales were $85,000 and December sales were $115,000.
Cash collections budgetJanuary February March
Cash sales $30,000 $26,000 $35,000
Collection from Nov. sales $16,320
Collection from Dec. sales $36,800 $22,080
Collection from Jan. sales $24,000 $48,000 $28,800
Collection from Feb. sales $20,800 $41,600
Collection from March sales $28,000
Total cash collections $107,120 $116,880 $133,400
The law of comparative advantage indicates that if a group of individuals wants to maximize their joint output, then each good should be supplied by
Answer:
b. the low opportunity cost producer.
Explanation:
Here are the options to this question :
a. the person with the lowest wage rate.
b. the low opportunity cost producer.
c. the person with the most advanced technical knowledge.
d. the person that can accomplish the task most rapidly.
a country has comparative advantage in production if it produces at a lower opportunity cost when compared to other countries.
For example, country A produces 10kg of beans and 5kg of rice. Country B produces 5kg of beans and 10kg of rice.
for country A,
opportunity cost of producing beans = 5/10 = 0.5
opportunity cost of producing rice = 10/5 = 2
for country B,
opportunity cost of producing rice = 5/10 = 0.5
opportunity cost of producing beans = 10/5 = 2
Country A has a comparative advantage in the production of beans and country B has a comparative advantage in the production of rice
An 85-year old risk averse investor is not happy about the minimal return she is earning on her current investments. She is stressed about having enough income because her cost of living has been increasing by more than 10% annually. Her current portfolio composition consists of:
40% Money Market Fund
50% Bonds
10% Equities
What changes should you suggest to her portfolio?
A. Reduce the Money Market Fund allocation by 10% (to 30%) and put the released funds in commodities such as gold
B. Reduce the Money Market Fund allocation by 30% (to 10%) and put the released funds in AAA-rated corporate bonds
C. Liquidate the entire Money Market Fund allocation and put the released funds in Equities, bringing that allocation up to 50%
D. Liquidate the entire Money Market Fund allocation and put the released funds in U.S. Treasury securities
Answer:
B. Reduce the Money Market Fund allocation by 30% (to 10%) and put the released funds in AAA-rated corporate bonds
Explanation:
First of all, since the investor is risk averse and cannot afford to lose money on any risky investment, she should change the mix of her investment portfolio but without increasing risks. Corporate bonds that are AAA-rated carry a very low risk and pay a little higher than money market funds. So a small decrease in money market fund assets and an increase in AAA-rated bonds should yield a slightly higher return.
Investing in equities would be too risky and US Treasuries pay even less interests than money market funds.
Venture Capital Corporation loans Wally $15,000 to start a new business.Wally does not pay,but Venture fails to sue within the time prescribed by the applicable statute of limitations.Wally's promise to pay the debt even though recovery is barred:_________
A) needs new consideration.
B) needs no consideration.
C) is unenforceable regardless of any consideration.
D) needs legally sufficient and adequate consideration.
Answer:
B) needs no consideration.
Explanation:
In this scenario, Wally's promise to pay the debt even though recovery is barred needs no consideration. This is mainly due to the fact that the Corporation failed to sue within the statute of limitation that was set. Meaning they can no longer sue Wally in order to recover the loan that was given to him. If they were to try and sue Wally now the lawsuit would just be dismissed with no consideration given.
All of the following statements regarding convertible bonds are true except:_________.
A. Holders of convertible bonds can generally decide whether to convert to stock.
B. Holders of convertible bonds have the potential to profit from increases in stock price.
C. Holders of convertible bonds can choose when to convert to stock.
D. Holders of convertible bonds have the option to not convert and continue receiving bond interest payments and par value at maturity.
E. Holders of convertible bonds can choose how many shares of stock to receive at conversion.
Answer: Holders of convertible bonds can choose how many shares of stock to receive at conversion
Explanation:
A convertible bond is a debt security that yields the payment of interest, but can also be converted into equity shares or common stock that are predetermined.
The option that holders of convertible bonds can choose how many shares of stock to receive at conversion is wrong. This is because the number I shares that will be eventually converted will already have been fixed.
