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.
A corporate bond currently yields 8.5%. Municipal bonds with the same risk, maturity, and liquidity currently yield 5.5%. At what tax rate would investors be indifferent between the two bonds?
Answer: 35.29%
Explanation:
Municipal Bonds are attractive in that they give the tax benefit of being tax exempt whereas a corporate bond is liable for taxation. The tax rate that will therefore make an investor indifferent between the two bonds is the one that will equate the Corporate bond's yield net of tax to the yield on the Municipal bond.
5.5% = 8.5% * ( 1 - x)
5.5% = 8.5% - 0.085x
0.085x = 8.5% - 5.5%
0.085x = 3%
x = 35.29%
A comparative balance sheet and income statement is shown for Cruz, Inc.
CRUZ, INC. Comparative
Balance Sheets December 31, 2015 2014
Assets
Cash $ 94,800 $ 24,000
Accounts receivable, net 41,000 51,000
Inventory 85,800 95,800
Prepaid expenses 5,400 4,200
Total current assets 227,000 175,000
Furniture 109,000 119,000
Accum. depreciation—Furniture (17,000) (9,000)
Total assets $ 319,000 $ 285,000
Liabilities and Equity
Accounts payable $ 15,000 $ 21,000
Wages payable 9,000 5,000
Income taxes payable 1,400 2,600
Total current liabilities 25,400 28,600
Notes payable (long-term) 29,000 69,000
Total liabilities 54,400 97,600
Equity Common stock, $5 par value 229,000 179,000
Retained earnings 35,600 8,400
Total liabilities and equity $ 319,000 $ 285,000
CRUZ, INC.
Income Statement
For Year Ended December 31, 2015
Sales $ 488,000
Cost of goods sold 314,000
Gross profit 174,000
Operating expenses
Depreciation expense $ 37,600
Other expenses 89,100 126,700
Income before taxes 47,300
Income taxes expense 17,300
Net income $ 30,000
1. Assume that all common stock is issued for cash. What amount of cash dividends is paid during 2015?
2. Assume that no additional notes payable are issued in 2015. What cash amount is paid to reduce the notes payable balance in 2015?
Answer:
1. $2,800
2. $40,000
Explanation:
1. The computation of cash dividends is paid during 2015 is shown below:-
Retained earnings
Dividend paid $2,800 Beginning balance $8,400
($8,400 + $30,000
- $35,600) Net income $30,000
Total $2,800 $38,400
Ending balance $35,600
Therefore cash dividends is paid during 2015 is 2,800
2. The computation of cash amount is paid to reduce the notes payable balance in 2015 is shown below:-
Notes payable
Cash paid $40,000 Beginning balance $69,000
($69,000 - $29,000)
Total $40,000 $69,000
Ending balance $29,000
Therefore cash amount is paid to reduce the notes payable balance
in 2015 is $40,000
B MC Qu. 7-200 Krepps Corporation produces ... Krepps Corporation produces a single product. Last year, Krepps manufactured 29,010 units and sold 23,900 units. Production costs for the year were as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $214,674 $121,842 $243,684 $319, 110 Sales totaled $1,159,150 for the year, variable selling and administrative expenses totaled $126,670, and fixed selling and administrative expenses totaled $205,971. There was no beginning Inventory. Assume that direct labor is a variable cost. Under absorption costing, the ending Inventory for the year would be valued at:_________ (Round your Intermediate calculations to 2 decimal places.)
a) $158.410
b) $228.410
c) $219.910
d) $185.910
Answer:
a) $158.41
Explanation:
Unit product cost under absorption costing = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead / Total manufactured units
= (214,674 + 121,842 + 243,684 + 319,110) /29,010
= $899,310 / 29,010 unit
= $31 per unit
Ending inventory = $29,010 - $23,900 / $31
= $5110 * 31 per unit
= $158,410
The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 8 years. The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 9.6%, then this bond will trade at
Answer:
this bond will trade at $912.05.
Explanation:
There is an Inverse relationship between the yield and the price of bond.
As the yield goes up, the price of bond goes down, that is trade at discount.Whereas, as the yield goes down, the price of bond goes up, that is trade at a premium.The Bond investment in Sisyphean Company is trading at a discount.
The Price of the Bond, PV can be determined as follows..
PV = ?
FV = $1,000
PMT = ($1,000 × 8%) ÷ 2 = $40
P/yr = 2
YTM = 9.6%
n = 8 × 2 = 16
Using a Financial Calculator, the Price of the Bond, PV is $912.05.
A customer buys 1,000 shares of XYZ at $60 in a margin account, regular way settlement. Two days after the trade, XYZ has dropped to $40. The minimum maintenance margin requirement is:
Answer:
$10,000
Explanation:
A customer buys 1,000 shares of XYZ
The shares are bought at $60 in a margin account
Two days after the price of XYZ drops to $40
The first step is to calculate the current market value
= 1,000 shares×$40
= $40,000
Therefore, the minimum maintenance margin requirement can be calculated as follows
= 25/100 × current market value
= 25/100 × 40,000
= 0.25×40,000
= $10,000
Hence the minimum maintenance margin requirement is $10,000
The beta of company Myers’s stock is 2. The annual risk-free rate is 2% and the annual market premium is 8%. What is the expected return for Myers’ stock? A. 14% B. 25% C. 20% D. 18
Answer:
18%
Explanation:
Myers's stock has a beta of 2
The annual risk free rate is 2%
The annual market premium is 8%
Therefore, the expected return for Myers's stock can be calculated as follows
= 2% + (2×8%)
= 2% + 16%
= 18%
Hence the expected return for Myers's stock is 18%
"DEF Corporation, after many profitable years, declares a one-time special cash dividend of $5.00 per share. After the announcement, the stock is trading at $50 per share. Your customer holds 1 DEF Jan 55 Call. As of the ex date, the customer will have:"
Answer: B. 1 DEF Jan 50 Call
Explanation:
The Options Clearing Corporation (OCC) acting under its mandate of being an issuer and guarantor for options and futures contracts can alter options prices but does not do so for prices based on normal dividends as they are more regular and their effects are already accounted for in the price of the call.
When a company calls a one-time special cash dividend, this is new to the market which would not have incorporated it into the price of the call. The OCC will then adjust the price to account for this.
In this case it will do so by subtracting the dividend from the call;
= 55 - 5
= $50
The customer will then have 1 DEF Jan 50 Call .
You are in the business of making kombucha tea. Your variable costs to produce each bottle is $1. Your fixed costs are $100,000/year and you expect to sell 300,000 bottles in your first year. How many bottles must you sell at $3/bottle to cover your fixed costs and earn your target profit of $100,000
Answer:
Break-even point in units= 100,000 units
Explanation:
Giving the following information:
Your variable costs to produce each bottle is $1.
Your fixed costs are $100,000/year.
How many bottles must you sell at $3/bottle to cover your fixed costs and earn your target profit of $100,000
To calculate the number of units to be sold, we need to use the following formula:
Break-even point in units= (fixed costs + desired profit)/ contribution margin per unit
Break-even point in units= (200,000) / (3 - 1)
Break-even point in units= 100,000 units
The number of bottles that must be sold at $3 per bottle to earn a target profit of $100,000 is 200,000 bottles.
Data and Calculations:
Variable cost per bottle = $1
Fixed cost per year = $100,000
Expected sales units in the first year = 300,000 bottles
Selling price per bottle = $3
Target profit = $300,000
Contribution margin per unit = $2 ($3 - $1)
Contribution margin ratio = 67% ($2/$3 x 100)
Sales units to achieve target profit = (Fixed Costs + Profit)/$2
= ($100,000 + $300,000)/$2
= 200,000 bottles
Learn more: https://brainly.com/question/18155783
One year ago, you purchased a stock at a price of $55.20 per share. Today, you sold your stock at a loss of 18.63 percent. Your capital loss was $12.62 per share. What was the total dividends per share paid on this stock over the year
Answer:
Dividend = $2.34
Explanation:
Purchase Price = $55.20
Loss on stock = 18.63% of $55.20 = $10.28
Capital Loss = $12.62
Dividend = Capital Loss - Total Loss
Dividend = $12.62 - $10.28
Dividend = $2.34
Disclosure of interest and income tax paid if the indirect method is used. Primary objectives of a statement of cash flows. Disclosure of noncash investing and financing activities.
Answer with Explanation:
The disclosure of interest and income tax paid if the indirect method is used is cited at FASB ACS 230-10-50-2 under the title "Statement of Cashflows-Overall Disclosure-Interest and Income Taxes Paid".The primary objectives of a statement of cash flows is cited at FASB ACS 230-10-10-1 under the title "Statement of Cashflows-Overall Objective".The disclosure of noncash investing and financing activities is cited at FASB ACS 230-10-50-3 under the title "Statement of Cashflows-Overall Disclosure-Noncash Investing and Financing Activities".Putting an X in the appropriate spot, classify the costs highlighted in yellow as: Direct Material, Direct Labor, Overhead, or Period Costs. Other costs have been provided for you.
The fixed and variable cost classifications have been provided for you.
Item/ Direct Direct Manufacturing Period Fixed Variable
Cost Material Labor Overhead Costs
Groomer x X
Day care attendant x X
Receptionist x X
Kennel attendant x
Food and water bowls x X
Fencing for day care area x
Installation of fencing x
Dog grooming arm (attaches to table)
12 kennels cost
Depreciation on kennels
Rent X
Utilties and insurance X
Grooming table x X
Grooming tub 48" x X
Heating system x X
Depreciation on heating system X
Clippers x
Shampoo (Crystal Clear:
five-gallon pail) x X
Cage bank (set of five)
Salon Tuff Capri mobile carry cart
Towels x
Scissors (7-inch straight,
ear & nose) x
Toys (used in day care only) x X
Cleaning products (used
throughout) x X
Dryer x
Rubberized flooring (day care) X
Loan X
Draw X
Answer:
The following costs are classified appropriately under the following heading:
Direct Material:
Food and water bowls
Dog grooming arm
12 kennels cost
Grooming table
Grooming tub 48"
Shampoo (Crystal Clear: five-gallon pail)
Cage bank (set of five)
Salon Tuff Capri mobile carry cart
Towels
Scissors (7-inch straight, ear & nose)
Toys (used in day care only)
Cleaning products (used throughout)
Dryer
Direct Labour:
Groomer
Day care attendant
Receptionist
Kennel attendant
Rubberized flooring (day care)
Overhead:
Fencing for day care area
Installation of fencing
Utilties and insurance
Heating system
Draw
Period Cost:
Depreciation on kennels
Rent
Depreciation on heating system X
Clippers
Loan
Explanation:
After reading it write about whether or not you agree with the academic economic consensus that independent officials running the Federal Reserve are able to properly balance their dual mandate in a fair and balanced fashion with the needs of workers in one hand and the financial industry on the other. If you agree with the consensus view explain your reasons; or if you disagree and think that the officials are biased in favor of the financial industry explain your reasoning with some possible solutions to the problem. Write at least two paragraphs articulating your views.
Answer:
The Federal Reserve has been at times biased in favor of the financial industry, because they have often put inflation targeting above the need to reduce unemployment when executing monetary policy. Besides, the financial industry has often been rescued by massive loans from the Fed.
However, the Federal Reserve has also acted in favor of reducing unemployment, specially during recessions, by expanding the money supply through a policy known as quantitative easing.
In conclusion, we can say that the Fed tends to be biased in favor of the financial industry, but not at all times.
f the nominal interest rate is 7 percent and the real interest rate "is -2.5" percent, then the inflation rate is
Answer:
9.7%
Explanation:
(1 + nominal interest rate) = (1 + real rate) x (1 + inflation rate)
1.07 = 0.975 x (1 + inflation rate)
(1 + inflation rate) = 1.07 / 0.975
(1 + inflation rate) = 1.097
Inflation rate = 1.097 - 1 = 0.097 = 9.7%
Which of the following is true about the Fed?
A. it cannot directly affect the economy but it can influence institutions that can affect the economy
B. it has no real power since in the long run, money is neutral
C. it has more power to affect the economy than any other institution
D. it has a lot of power to affect the inflation rate, but not the unemployment rate
Answer:
C. it has more power to affect the economy than any other institution
Explanation:
The FED manages the monetary policy affecting the economy's money supply. This in turn affects interest rates directly. It also has an enormous indirect influence on economic growth (it can stimulate it or cool it), currency value, value of stock markets, unemployment (directly related to economic growth), etc.
The FED is probably the institution that influences the economy the most.
The Rhaegel Corporation’s common stock has a beta of 1.2. If the risk-free rate is 4.3 percent and the expected return on the market is 13 percent, what is the company’s cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer:
Cost of equity = 14.74%
Explanation:
The capital asset pricing model is a risk-based model for estimating the return on a stock..
Here, the return on equity is dependent on the level of reaction of the the equity to changes in the return on a market portfolio. These changes are captured as systematic risk.
Systematic risks are those which affect all economic actors in the market, they include factors like changes in interest rate, inflation, etc. The magnitude by which a stock is affected by systematic risk is measured by beta.
Under CAPM,
E(r)= Rf + β(Rm-Rf)
E(r)- cost of equity , Rf-risk-free rate , β= Beta, Rm= Return on market.
Using this model, we can work out the value of beta as follows:
β-1.2 Rf- 4.3%, Rm = 13%
E(r) = 4.3% + 1.2 × (13 - 4.3)%=14.74 %
Expected return = 14.74 %
Cost of equity = 14.74%
A 60-year old retiree is in a very low tax bracket. He has a low risk tolerance and wishes to make an investment that will provide income. Which is the BEST recommendation
Complete Question:
A 60-year old retiree is in a very low tax bracket. He has a low risk tolerance and wishes to make an investment that will provide income. Which is the BEST recommendation?
Group of answer choices.
A. Mid-cap common stock
B. Municipal bond
C. Bank CD
D. Treasure STRIPS
Answer:
C. Bank CD
Explanation:
In this scenario, a 60-year old retiree is in a very low tax bracket. He has a low risk tolerance and wishes to make an investment that will provide income. A Bank certificate of deposit (CD) is the best recommendation.
A bank certificate of deposit (CD) can be defined as a secured form of time-bound deposit and a special low-risk savings account, wherein money (lump-sum) are left with the bank for a specific period of time in exchange for an interest rate premium.
Generally, a certificate of deposit pays a higher interest rate to its holder than the regular savings account because the banks invest the money in a business.
Additionally, the bank certificate of deposit is protected and insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000.
Too Young, Inc., has a bond outstanding with a coupon rate of 7 percent and semiannual payments. The bond currently sells for $951 and matures in 23 years. The par value is $1,000. What is the company's pretax cost of debt?
Answer:
The company's pretax cost of debt is 7.45 %.
Explanation:
When it comes to bonds, the cost of debt is the required return on the bond known as the Yield to Maturity (YTM) of the bond.
The Yield to Maturity (YTM) of the bond can be determined as follows :
N = 23 × 2 = 46
PV = $951
Pmt = ($1,000 × 7 %) ÷ 2 = - $35
P/YR = 2
FV = - $1,000
YTM = ?
Using a Financial Calculator, the Yield to Maturity (YTM) of the bond is 7.4484 or 7.45 %
Therefore,
The company's pretax cost of debt is 7.45 %.
The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output 5.2 hours Standard variable overhead rate $11.60 per hour The following data pertain to operations for the last month: Actual hours 2,500 hours Actual total variable manufacturing overhead cost $29,590 Actual output 150 units What is the variable overhead efficiency variance for the month?
Answer:
Variable overhead efficiency variance= $19,952 unfavorable
Explanation:
Giving the following information:
Standard hours per unit of output 5.2 hours
Standard variable overhead rate $11.60 per hour
Actual hours 2,500 hours
Actual output of 150 units
To calculate the variable overhead efficiency variance, we need to use the following formula:
Variable overhead efficiency variance= (Standard Quantity - Actual Quantity)*Standard rate
Standard quantity= 5.2*150= 780
Variable overhead efficiency variance= (780 - 2,500)*11.6
Variable overhead efficiency variance= $19,952 unfavorable
Torque corporation is expected to pay a dividend of $1 in the upcoming year. dividends are expected to grow at a rate of 6% per year. the risk free rate of return is 5% and the expected return on the market portfolio is 13%. the stock of torque corporation has a beta of 1.2. what is the return you should require on torque stock?a) 12%,
b) 14.6%,
c) 15.6%,
d) 20%
Answer:
The required rate of return on stock is 14.6% and option b is the correct answer.
Explanation:
The required rate of return is the minimum return that investors demand/expect on a stock based on the systematic risk of the stock as given by the beta. The expected or required rate of return on a stock can be calculated using the CAPM equation.
The equation is,
r = rRF + Beta * (rM - rRF)
Where,
rRF is the risk free rate rM is the return on market
r = 0.05 + 1.2 * (0.13 - 0.05)
r = 0.146 or 14.6%
Consider Kodak's core competency before Fisher's arrival. As the market shifted from film to digital did the company's historical core competency still quality as a core competency? Did it pass the core competency test question(s)? If so, which one(s)?
a. Test 1
b. Test 2
c. Test 3
Answer: None of the three tests were passed as the market transitioned.
Explanation: one of the core competencies of Kodak were
1. Film was the basics of their critics products and services. As the market transitioned from the use of films for camera and devices to digital, Kodak refused or was reluctant to take the necessary risk to expand and forge beyond it current market and product to the digitalized market as a result suffered the consequence.
Pace Company purchased 20,000 of the 25,000 shares of Saddler Corporation for $533,300. On January 3, 2014, the acquisition date, Saddler Corporation’s capital stock and retained earnings account balances were $508,500 and $101,800, respectively
The following values were determined for Saddler Corporation on the date of purchase:
Book Value Fair Value
Inventory $50,600 $68,800
Other current assets 197,800 197,800
Marketable securities 100,100 125,300
Plant and equipment 305,900 330,200
Required:
Prepare a Computation and Allocation Schedule for the difference between book value and the value implied by the purchase price in the consolidated statements workpaper.
Answer:
Pace Company
Computation and Allocation Schedule for the difference between book value and the value implied by the purchase price in the consolidated statements workpaper:
Book Value Fair Value Differential
Inventory $50,600 $68,800 $18,200
Other current assets 197,800 197,800 0
Marketable securities 100,100 125,300 25,200
Plant and equipment 305,900 330,200 24,300
Goodwill 9,300
Total $654,400 $722,100 $77,000
Before Goodwill:
Total $654,400 $722,100 $67,700
Explanation:
a) Data and Calculations:
Purchase of 20,000 of the 25,000 shares = 80% equity
Saddler Corporation’s:
Capital stock = $508,500
Retained earnings = $101,800
Total equity = $610,300
Purchase price = $533,300
Differential = $77,000
Saddler Corporation's Assets:
Book Value Fair Value Differential
Inventory $50,600 $68,800 $18,200
Other current assets 197,800 197,800 0
Marketable securities 100,100 125,300 25,200
Plant and equipment 305,900 330,200 24,300
Goodwill 9,300
Total $654,400 $722,100 $77,000
b) The Differential between the fair value of the net assets and the purchase price is allocated to Goodwill on acquisition.
"A small business owner of a firm that has 25 employees wants to establish a retirement plan and make contributions for her employees. What type of plan can the employer establish?"
Answer:
SEP IRA
Explanation:
For this type of company, the best type of plan would be a SEP IRA. This refers to a Simplified Employee Pension Plan and is a plan that is set up by an employer, with deductible contributions made by the employer themselves. The employer sets the actual contribution rate when creating the plan, and provides all employees the same contribution rate. The annual contribution of such an account is capped at $56,000 in 2019 and the individuals may withdraw the total amount of the account tax-free when they turn 59 1/2 years old.
A proposed new investment has projected sales of $543,000. Variable costs are 46 percent of sales, and fixed costs are $129,500; depreciation is $50,250. Prepare a pro forma income statement assuming a tax rate of 21 percent. What is the projected net income? (Input all amounts as positive values. Do not round intermediate calculations.)
Answer:
Pro forma Income Statement
Projected Sales $543,000
Variable costs 249,780
Contribution $293,220
Sales /Fixed costs 129,500
Depreciation 50,250
Pre-tax Income $113,470
Income Tax (21%) 23,828.70
After-tax Income $89,641.30
Explanation:
This company's pro forma income statement shows the contribution to be made by a project and the projected after-tax income. With it management can decide whether to accept the project or not. Preparing this pro forma income statement also enables management to know the impact on profits that the project will make. When the project is complete, this pro forma income statement becomes a basis for reviewing the actual income statement to understand variances.
You decide to invest in a portfolio consisting of 30 percent Stock A, 30 percent Stock B, and the remainder in Stock C. Based on the following information, what is the expected return of your portfolio? State of Economy Probability of State Return if State Occurs of Economy Stock A Stock B Stock C Recession .17 - 18.8 % - 3.9 % - 22.8 % Normal .45 10.2 % 8.5 % 17.1 % Boom .38 28.6 % 15.8 % 31.7 %
Answer:
Portfolio return = 0.127744 or 12.7744% rounded off to 12.77%
Explanation:
The portfolio return is a function of the weighted average of the individual stocks returns' that form up the portfolio. The formula for portfolio return is,
Portfolio return = wA * rA + wB * rB + ... + wN * rN
Where,
w represents the weight of each stockr represents the return of each stockTo calculate the expected return of portfolio, we first need to calculate the individual stock returns.
The expected rate of return of individual stocks 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 to occur rA, rB and so on are the return in different events
For Stock A
rA = 0.17 * -0.188 + 0.45 * 0.102 + 0.38 * 0.286
rA = 0.12262 or 12.262%
For Stock B
rB = 0.17 * -0.039 + 0.45 * 0.085 + 0.38 * 0.158
rB = 0.09166 or 9.166%
For Stock C
rC = 0.17 * -0.228 + 0.45 * 0.171 + 0.38 * 0.317
rC = 0.15865 or 15.865%
Portfolio return = 0.3 * 0.12262 + 0.3 * 0.09166 + 0.4 * 0.15865
Portfolio return = 0.127744 or 12.7744% rounded off to 12.77%
Problem 14-13 Calculating the WACC [LO3] Dinklage Corp. has 4 million shares of common stock outstanding. The current share price is $70, and the book value per share is $9. The company also has two bond issues outstanding. The first bond issue has a face value of $75 million, a coupon rate of 7 percent, and sells for 95 percent of par. The second issue has a face value of $60 million, a coupon rate of 6 percent, and sells for 107 percent of par. The first issue matures in 25 years, the second in 8 years. Suppose the most recent dividend was $4.30 and the dividend growth rate is 4.5 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 21 percent. What is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer:
WACC = 8.97%
Explanation:
total value of equity = $70 x 4,000,000 = $280,000,000
cost of equity:
$70 = $4.4935 / (Re - 4.5%)
Re - 4.5% = 6.42%
Re = 10.92%
total value of debt:
$75 million x 0.95 = $71,250,000
YTM = {70 + [(1,000 - 950)/25]} / [(1,000 + 950)/2] = 72 / 975 = 7.3846%
$60 million x 1.07 = $64,200,000
YTM = {60 + [(1,000 - 1,070)/8]} / [(1,000 + 1,070)/2] = 51.25 / 1,035 = 4.9517%
weighted cost of debt = ($71,250,000 / $135,450,000 x 7.3846%) + ($64,200,000 / $135,450,000 x 4.9517%) = 3.8845% + 2.347% = 6.2315%
total value of the firm = $280,000,000 + $135,450,000 = $415,450,000
equity weight = $280,000,000 / $415,450,000 = 0.674
debt weight = 1 - 0.674 = 0.326
WACC = (0.674 x 10.92%) + (0.326 x 6.2315% x 0.79) = 7.36% + 1.605% = 8.965% = 8.97%
The following information pertains to Hopson Co.'s pension plan: Actuarial estimate of projected benefit obligation at 1/1/13 $72,000 Assumed discount rate 10% Service costs for 2013 $28,000 Pension benefits paid during 2013 $15,000 If no change in actuarial estimates occurred during 2013, Hopson's projected benefit obligation at December 31, 2013 was
Answer:
$92,200
Explanation:
Calculation for Hopson's projected benefit obligation at December 31, 2015
Using this formula
Projected benefit obligation=Actuarial estimate of projected benefit obligation + Service costs +(Actuarial estimate of projected benefit obligation × Discount rate)- Pension benefit
Let plug in the formula
Projected benefit obligation= $72,000 + $28,000 + ($72,000 × .10) -$15,000
Projected benefit obligation=$72,000 + $28,000 + $7,200-$15,000
Projected benefit obligation= $107,200-$15,000
Projected benefit obligation=$92,200
Therefore Hopson's projected benefit obligation at December 31, 2015 will be $92,200
The following data were taken from the financial statements of Gates Inc. for the current fiscal year. Property, plant, and equipment (net) $971,600 Liabilities: Current liabilities $140,000 Note payable, 6%, due in 15 years 694,000 Total liabilities $834,000 Stockholders' equity: Preferred $4 stock, $100 par (no change during year) $834,000 Common stock, $10 par (no change during year) 834,000 Retained earnings: Balance, beginning of year $890,000 Net income 386,000 $1,276,000 Preferred dividends $33,360 Common dividends 130,640 164,000 Balance, end of year 1,112,000 Total stockholders' equity $2,780,000 Sales $21,141,000 Interest expense $41,640 Assuming that total assets were $3,433,000 at the beginning of the current fiscal year, determine the following. When required, round to one decimal place.
Answer:
Ratio of fixed assets to long-term liabilities = fixed assets / long term liabilities = $971,600 / $694,000 = 1.4
Ratio of liabilities to stockholders' equity = total liabilities / stockholders' equity = $834,000 / $2,780,000 = 0.3
Asset turnover = net sales / average total assets = $21,141,000 / [($3,614,000 + $3,433,000)/2] = 6
Return on total assets = (net income + interest expense) / average total assets = ($386,000 + $41,640) / [($3,614,000 + $3,433,000)/2] = 12.14%
Return on stockholders’ equity = net income / average stockholders' equity = $386,000 / [($2,780,000 + $2,558,000) = 14.46%
Return on common stockholders' equity = net income / average common stockholders' equity = $386,000 / [($1,946,000 + $1,724,000) = 21.04%
hich of the following is NOT one of the ways companies are using mobile apps? Group of answer choices track behavior across tablets and mobile devices utilize cookies to track mobile activity utilize GPS data to provide location-based offers track loyalty program participation add social value and entertainment to consumers' lives
Answer: Add social value and entertainment to consumers' lives
Explanation:
In this age of technology, companies have found that being able to offer their customers relevant products can be greatly helped by gathering information about them and offering it to them directly on their phones. A great way to do so is through the use of mobile apps.
With mobile apps a company can track behavior on the device as well as track mobile activity. They could even use the GPS capabilities of the phone through the app to offer relevant location based content.
However, as much as companies would like their customers to have enjoyable lives, this is not an aim with mobile apps. The apps are there to boost the companies sales not to add social value and entertainment to consumers' lives unless of course, that is the company's main business.
Answer:
Which features are created by wave erosion?
Your answer is:
- arches
- cliffs
- stacks
Explanation:
Which of the following is not a global economic forum of nations?
G-8
O G650
+ 5
G-20
Answer:
c
Explanation:
answer is c
During 2021, Deluxe Leather Goods issued 797,000 coupons which entitles the customer to a $4.50 cash refund when the coupon is submitted at the time of any future purchase. Deluxe estimates that 75% of the coupons will be redeemed. 420,000 coupons had been processed during 2021. Deluxe recognizes coupon expense in the period coupons are issued. At December 31, 2021, Deluxe should report a liability for unredeemed coupons of:
Answer:
Deluxe should report a liability for un-redeemed coupons of 799,875
Explanation:
Estimated coupons to be redeemed 597,750
(797,000 * 75%)
Less: Coupons redeemed 420,000
Coupons un-redeemed 177,750
X Cost per Coupon 4.50
Liability for un-redeemed Coupons 799,875
