Wayne, Inc., wishes to expand its facilities. The company currently has 5 million shares outstanding and no debt. The stock sells for $40 per share, but the book value per share is $10. Net income is currently $4 million. The new facility will cost $50 million, and it will increase net income by $820,000. Assume a constant price-earnings ratio.
a-1. Calculate the new book value per share. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
a-2. Calculate the new EPS. (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)
a-3. Calculate the new stock price. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
a-4. Calculate the new market-to-book ratio. (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)
b. What would the new net income for the company have to be for the stock price to remain unchanged? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar amount, e.g., 1,234,567.)

Answers

Answer 1

Answer:

a-1. Calculate the new book value per share.

current book value = stocks outstanding x book value = 5,000,000 x $10 = $50,000,000

new book value = $50,000,000 + $50,000,000 = $100,000,000

new stocks issued = $50,000,000 / $40 = 1,250,000

total stocks outstanding = 5,000,000 + 1,250,000 = 6,250,000

new book value per stock = $100,000,000 / 6,250,000 = $16

a-2. Calculate the new EPS.

old EPS = $4,000,000 / 5,000,000 = $0.80 per stock

new EPS = $4,850,000 / 6,250,000 = $0.776 per stock

a-3. Calculate the new stock price.

price to earnings ratio = $40 / $0.80 = 50

new stock price:

50 = new stock price / $0.776

new stock price = 50 x $0.776 = $38.80

a-4. Calculate the new market-to-book ratio.

market to book ratio = market capitalization / book value = $242,500,000 / $100,000,000 = 2.425

b. What would the new net income for the company have to be for the stock price to remain unchanged?

0.8 = net income / 6,250,000

net income = 6,250,000 x 0.8 = $5,000,000


Related Questions

A stock had returns of 15.51 percent, 22.47 percent, −8.68 percent, and 9.43 percent over four of the past five years. The arithmetic average return over the five years was 12.71 percent. What was the stock return for the missing year?

Answers

Answer:

24.82%

Explanation:

Arithmetic average = sum of observations / number of observations

Let x = the stock return for year 5

12.71 % = (15.51% + 22.47%  −8.68% + 9.43 + x) /5

Multiply both sides by 5

63.55% =  (5.51% + 22.47%  −8.68% + 9.43 + x)

63.55% = 38.73% + x

x =  63.55% - 38.73% = 24.82%

If someone has a power of attorney to sign the purchase agreement on behalf of the seller, which of the following would be the proper way to sign?

a. Philip Adams, seller
b. Philip Adams, by Alice Jackson, his attorney in fact
c. Alice Jackson, attorney in fact for the seller
d. Philip Adams, by his attorney in fact

Answers

Answer:

b. Philip Adams, by Alice Jackson, his attorney in fact

Explanation:

A power of attorney is the legal document in which it allows someone to act on behalf of you. In this, the person has the authority to act on behalf of the other person with respect to the legal, financial matters, etc

Here the proper way to sign is the option B

Philip Adams, by Alice Jackson, his attorney in fact

Therefore all the other options are wrong

The government wants to set the socially optimal level of nitrogen runoff, and government regulators believe that the actual marginal benefit of pollution (MBP) is given by the estimated MBP curve. The deadweight loss associated with a quota is _____, w

Answers

Answer:

Hello your question is incomplete attached below is the complete question

Explanation:

Dead weight loss = 0.5 [( Δp ) * ( ΔD ) ]

D = DEMAND

P = PRICE

DWL with quota = 0.5 [ ( $10 -$6 ) * (12 - 8 ) ]

                           = 0.5 ( 4*4 ) = $8

DWL with pigouvian tax  = 0.5 [ ($10- $6 )*(9 - 8 ) ]

                                         = 0.5 [ 4 * 1 ] = $2

The owner of a large machine shop has just finished its financial analysis from the prior fiscal year. Following an excerpt from the final report:
Net revenue $375000
Cost of goods sold 322000
Value of production materials on hand 42500
Value of work-in-progress inventory 37000
Value of finished goods on hand 12500
a. Compute the inventory turnover ratio (ITR). (Round your answer to 1 decimal place.)
Inventory turnover ratio ......... per year
b. Compute the weeks of supply (WS). (Do not round intermediate calculations. Round to 1 decimal place.)
Weeks of supply ........

Answers

Answer:

a. Inventory turnover ratio = Cost of goods sold / Average Aggregate Inventory Value

Inventory turnover ratio = $322,000 / $42,500 + $37,000 + $12,500

Inventory turnover ratio = $322,000 / $92,000

Inventory turnover ratio = 3.5

Therefore, the inventory turnover ratio is 3.5

b. Weeks of supply = Average Aggregate Inventory Value / Cost of Goods Sold * 52 (weeks)

Weeks of supply = $42,500 + $37,000 + $12,500 / $322,000 * 52

Weeks of supply = $92,000 / $322,000 * 52 weeks

Weeks of supply = 14.85 weeks

Therefore, the weeks of supply is 14.85 weeks

The understatement of the ending inventory balance causes: Multiple Choice Cost of goods sold to be understated and net income to be overstated. Cost of goods sold to be overstated and net income to be correct. Cost of goods sold to be overstated and net income to be understated.

Answers

Answer:

Cost of goods sold to be overstated and net income to be understated.

Explanation:

Ending Inventory are deducted from the cost of sales figure to reach the gross profit amount in the trading account.

Understatement of Inventory means that Cost of goods sold will overstated and gross profit understated, consequently, net income will be also understated.

Motorcycle Manufacturers, Inc. projected sales of 78,000 machines for the year. The estimated January 1 inventory is 6,500 units, and the desired December 31 inventory is 6,000 units. What is the budgeted production (in units) for the year

Answers

Answer:

77,500 units

Explanation:

Projected sales = 78,000 machines

Opening inventory = 6,500 units

Closing inventory = 6,000 units

We will use the formulae below to calculate Budgeted production in unit.

Closing inventory = Opening inventory + Production - Sales

6,000 = 6,500 + Production - 78,000

Production = 6,000 - 6,500 + 78,000

= 77,500 units.

Therefore, Budgeted production is 77,500 units

In the past year, TVG had revenues of $3 million, cost of goods sold of $2.5 million, and depreciation expense of $200,000. The firm has a single issue of debt outstanding with book value of $1 million on which it pays an interest rate of 8%. What is the firm’s times interest earned ratio?

Answers

Answer:

TVG

Times Interest Earned Ratio (TIER) = Earnings Before Interest & Taxes divided by Interest Expense

= $300,000/$$80,000 = 3.75 times

Explanation:

a) TVG Income Statement:

Revenue                $3,000,000

Cost of goods sold 2,500,000

Gross profit             $500,000

Depreciation             200,000

EBIT                        $300,000

Interest Expense       80,000

Pre-tax Income     $220,000

b) TVG's TIER shows the number of times that its earnings before interest and taxes covers the interest expense.  It shows the ability of the TVG to settle its maturing debt obligations from current earnings.  It is an important financial performance measure which potential investors in TVG will use to gauge the ability of TVG to meet financial obligations from the earnings it generates.

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.)

Answers

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.

The health care workforce during the current market-driven changes is experiencing: A. Significant expansion at professional levels B. Experimentation and variation in staffing C. Continued stability in numbers and staffing patterns D. Substantial reductions

Answers

Answer:

A. Significant expansion at professional level.

Explanation:

The hospitals provide health care facilities to the public. It is crucial place where one mistake by a doctor or other staff could lead to death of a patient. The patients coming in he hospital need to be treated carefully and timely. The professional and experience will have the skills and expertise to treat the patient carefully and diagnose the problem quickly. There are increased number of professional today than in the previous years. The education has now become more common and people understand the importance of gaining technical education before practical experiments.

Lindley Corp.'s stock price at the end of last year was $33.50, and its book value per share was $25.00. What was its market/book ratio

Answers

Answer:

1.34

Explanation:

Computation for the market/book ratio

Using this formula

Market/book ratio=Stock price/Book value per share

Let plug in the formula

Market/book ratio=$33.50/$25.00

Market/book ratio=1.34

Therefore the Market/book ratio will be 1.34.

The earliest time that an activity can be completed is equal to the latest time it can begin minus the time to perform the activity. Group of answer choices True False

Answers

Answer: False

Explanation:

The earliest time of an activity os necessary in order to reduce the duration of a project. The earliest start time of an activity is the time that is earliest where an activity can begin.

The earliest finish time is the addition of the early time with the completion time of the activity.

Concord Corporation has 34000 units in beginning finished goods. If sales are expected to be 140000 units for the year and Concord desires ending finished goods of 40000 units, how many units must the company produce

Answers

Answer:

146,000 units

Explanation:

The computation of units must the company produce is shown below:-

As we know that

Units sold = opening inventory + units produced - Closing inventory

So,

Units Produced = Units sold - opening inventory + Closing inventory

= 140,000 - 34,000 + 40,000

= 146,000 units

Hence, the number of units produced by the company is 146,000 units

a project that costs 25500 today will generate cash flows of 8800 per year for seven years. what is the project's payback

Answers

Answer:

d

Explanation:

d on edg

Masterson, Inc., has 3.6 million shares of common stock outstanding. The current share price is $85.50, and the book value per share is $9.25. The company also has two bond issues outstanding. The first bond issue has a face value of $73 million, a coupon rate of 5.3 percent, and sells for 95.7 percent of par. The second issue has a face value of $45 million, a coupon rate of 5.9 percent, and sells for 104.9 percent of par. The first issue matures in 23 years, the second in 11 years. The most recent dividend was $4.04 and the dividend growth rate is 4.3 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 23 percent.
1. What is the company's cost of equity?
2. What is the company's aftertax cost of debt?
3. What is the company's weight of equity?
4. What is the company's weight of debt?
5. What is the company's WACC?

Answers

Answer:

1. 9.03 %

2. 7.56 %

3. 72.45 %

4. 27.55 %

5. 8.63 %

Explanation:

Cost of equity is the return that is required by holders of Common Stocks

Cost of equity = Recent year`s dividend / Current Market Price + Expected Growth Rate

                       = $4.04 / $85.50 + 0.043

                       = 0.0903 or 9.03 %

1st bond issue

PV = $69,861,000

Pmt = ($73,000,000 × 5.30%) ÷ 2 = - $1,934,500

p/y = 2

n  = 23 × 2 = 46

Fv = 0

i = ?

Cost of the 1st Bond Issue, i is : 2.1571 %

After tax cost = 2.1571 % × 77 %

                      = 1.66%

2nd Bond Issue

PV = $47,205,000

Pmt = ($45,000,000 × 5.90%) ÷ 2 = - $1,327,500

p/y = 2

n  = 11 × 2 = 22

Fv = 0

i = ?

Cost of the 2nd Bond Issue, i is : 7,6681 %

After tax cost = 7,6681 % × 77 %

                      = 5.90%

Total Cost of Debt = 1.66% + 5.90%

                               = 7.56 %

Market Values :

Market Value of Equity = 3,600,000 shares × $85.50

                                      = $307,800,000

Market Value of Bonds

1st Issues  =  $69,861,000

2nd Issue  = $47,205,000

Total          = $117,066,000

Weight of equity = Market Value of Equity ÷ Total Market Value

                            = $307,800,000 ÷ ($307,800,000 + $117,066,000)

                            = 72.45 %

Weight of debt    = Market Value of Bonds ÷ Total Market Value

                            = $117,066,000 ÷ ($307,800,000 + $117,066,000)

                            = 27.55 %

WACC = Weighted Cost of Debt + Weighted Cost of Equity

           = 27.55 % × 7.56 % + 72.45 % ×  9.03 %

           = 8.63 %

Red Sun Rising just paid a dividend of $2.43 per share. The company said that it will increase the dividend by 15 percent and 10 percent over the next two years, respectively. After that, the company is expected to increase its annual dividend at 4.1 percent. If the required return is 11.5 percent, what is the stock price today

Answers

Answer:

P0 = $39.76

Explanation:

The dividend discount model or DDM can be used to calculate the price of the share today. The DDM values a stock based on the present value of the expected future dividends from the stock. The price of this stock under this model can be calculated as follows,

P0 = D0 * (1+g1) / (1+r)  + D0 * (1+g1) * (1+g2) / (1+r)^2  +  

[ (D0 * (1+g1) * (1+g2) * (1+g3) / (r - g3)) / (1+r)^2 ]

Where,

g1 is the growth rate in the first year which is 15% g2 is the growth rate in the second year which is 10%  g3 is the constant growth rate which is 4.1% r is the required rate of return P0 is the stock price today

P0 = 2.43 * (1+0.15) / (1+0.115)  +  2.43 * (1+0.15) * (1+0.1) / (1+0.115)^2  +

[ (2.43 * (1+0.15) * (1+0.1) * (1+0.041) / (0.115 - 0.041)) / (1+0.115)^2 ]

P0 = $39.76

Abica Roast Coffee Company produces Columbian coffee in batches of 6,000 pounds. The

standard quantity of materials required in the process is 6,000 pounds, which cost $5.00per pound. Columbian coffee can be sold without further processing for $8.40 per pound.

Columbian coffee can also be processed further to yield Decaf Columbian, which can

be sold for $10.00 per pound. The processing into Decaf Columbian requires additional

processing costs of $9,450 per batch. The additional processing will also cause a 5% loss

of product due to evaporation.



Columbian coffee can be sold without further processing for $8.40 per pound.

Columbian coffee can also be processed further to yield Decaf Columbian, which can

be sold for $10.00 per pound. The processing into Decaf Columbian requires additional

processing costs of $9,450 per batch. The additional processing will also cause a 5% loss

of product due to evaporation.

a. Prepare a differential analysis dated August 28, 2012, on whether to sell regular

Columbian (Alternative 1) or process further into Decaf Columbian (Alternative 2).

b. Should Abica Roast sell Columbian coffee or process further and sell Decaf

Columbian?

c. Determine the price of Decaf Columbian that would cause neither an advantage or

disadvantage for processing further and selling Decaf Columbian.

Answers

Answer:

A)

                                       no further          further                 differential

                                       processing        processing          amount

price per pound             $8.40                 $10.00                $1.60

materials                         $5                      $5.25                 ($0.25)

processing costs            $0                      = $9,450 /          ($1.66)

                                                                  5,700 = $1.66

operating profit per        $3.40                 $3.09                 ($0.31)

pound

                                     

B)

The company should sell coffee without any further processing, just sell it as normal Colombian coffee.

C)

In order to eliminate the financial disadvantage of processing further the decaf coffee, the the price should be $10 + $0.31 = $10.31 per pound.

"A customer opens a margin account by purchasing 300 shares of XYZ stock at $80 per share and deposits the required margin. If the stock declines in value by 25%, the customer's equity in the account will:"

Answers

Answer:

Equity will increased by 50%

Explanation:

Given:

Number of stock = 300

Per share value = $80

Stock value decline = 25%

Find:

Customer's equity will ?

Computation:

Market value = 300 × $80 = $24,000

New market value = $24000 × (100% - 25%) = $18,000

Margin = $24000 × 50% = $12,000

Credit balance = $24,000 (100% / 75%)

Credit balance = $24,000 + $12,000

Credit balance = $36,000

Equity % = [Credit balance - New market value / Credit balance]100

Equity % = [($36,000 - $18,000) / $18,000]100

Equity will increased by 50%

Och, Inc., is considering a project that will result in initial aftertax cash savings of $1.75 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. The firm has a target debt-equity ratio of .8, a cost of equity of 11.5 percent, and an aftertax cost of debt of 4.3 percent. The cost-saving proposal is somewhat riskier than the usual projects the firm undertakes; management uses the subjective approach and applies an adjustment factor of +3 percent to the cost of capital for such risky projects. What is the maximum initial cost the company would be willing to pay for the project?

Answers

Answer:

$18,191,268.19

Explanation:

the company's WACC = (weight of equity x Re) + (weight of debt x after tax cost of debt) = (0.6 x 11.5%) + (0.4 x 4.3%) = 6.9% + 1.72% = 8.62%

discount rate adjustment factor = 8.62% + 3% = 11.62%

to determine the value of the project:

$1,750,000 / (11.62% - 2%) = $1,750,000 / 9.62% = $18,191,268.19

If the initial outlay is $18,191,268.19, then the project's NPV = $0. This is the maximum amount that the firm should be willing to invest in this project.

In March, Coronado Company completes Jobs 10 and 11. Job 10 cost $29,900 and Job 11 $40,300. On March 31, Job 10 is sold to the customer for $40,300 in cash. Journalize the entries for the completion of the two jobs and the sale of Job 10. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answers

Answer:

Mar. 31

Dr Finished Goods Inventory 70,200

Cr Work in Process 70,200

Mar. 31

Dr Cash 40,300

Cr Sales 40,300

Mar. 31

Dr Cost of Goods Sold 29,900

Cr Finish Goods in Inventory 29,900

Explanation:

Preparation of the Journal entries for the completion of the two jobs and the sale of Job 10

1.Based on the information given we were told that Job 10 cost the amount of $29,900 while Job 11 cost the amount of $40,300 , this means that the Journal entry will be:

Mar. 31

Dr Finished Goods Inventory 70,200

Cr Work in Process 70,200

($29,900 + 40,300)

(To record completion of jobs.)

2. Based on the information given we were told that On March 31, Job 10 was sold to the customer for the amount of $40,300 in cash, this means that the Journal entry will be

Mar. 31

Dr Cash 40,300

Cr Sales 40,300

(To record sale of job.)

3. Based on the information given we were told that the sales of Job 10 cost the amount of $29,900, this means that the transaction will be recorded as:

Mar. 31

Dr Cost of Goods Sold 29,900

Cr Finish Goods in Inventory 29,900

(To record cost of job.)

When selecting the best alternative in a cost-benefit analysis, what are the issues to be considered?

Answers

Answer: Analyse cost, risk with impacts and project benefits.

Explanation:

The best alternative in a cost-benefit analysis situation are the following;

•The cost types should be analyzed

•Potential risk and their impacts should be looking into

•It is recommended to weigh all the risk even when there is a lot of project benefits.

Assuming that the standard fixed overhead rate is based on full capacity, the cost of available but unused productive capacity is indicated by the a.fixed factory overhead volume variance b.direct labor rate variance c.variable factory overhead controllable variance d.direct labor time variance

Answers

Answer: a.fixed factory overhead volume variance.

Explanation:

Fixed overhead costs are the costs that are incurred by an organization that doesn't change even when the lre is a change in the volume of production activity. The fixed overhead costs are vital in order for the effective operation of the company.

When the standard fixed overhead rate is based on full capacity, the cost of available but unused productive capacity is indicated by the a.fixed factory overhead volume variance.

Variance is the data analysis tool that helps in measuring the gap between the actual and budgeted or the standard data. The standards are set based on past records and performances. There are various types of variances such as cost variance, efficiency variance, rate variance, volume variance, and many more.

The cost of available but unused productivity capacity is indicated by fixed factory overhead volume variance.

When the standard fixed overhead rate or can be said as the fixed overhead cost is constant and remains at full capacity irrespective of the changes in the volume of production activity.

In this case, the cost of productive capacity can be determined by using the fixed factory overhead volume variance. This is because it determines the difference between the fixed cost based upon the budgets and the production capacity.

To know more about fixed overhead variance, refer to the link:

https://brainly.com/question/25801623

To be registered as a broker-dealer, the Administrator typically requires the posting of a surety bond in the amount of:

Answers

Answer:

$10,000

Explanation:

Most of the time the Administrator requires a posting of a $10,000 surety bond to be registered as a broker-dealer, due to the Uniform Securities act but each separate state administrator can change this amount to what they seem fit. A surety bond makes sure that the individual assumes responsibility for that amount of debt obligation if the borrower defaults on the payment.

Pacific Cruise Lines is a defendant in litigation involving a swimming accident on one of its three cruise ships.Required:a. The likelihood of a payment occurring is probable, and the estimated amount is $1.17 million. b. The likelihood of a payment occurring is probable, and the amount is estimated to be in the range of $0.97 to $1.17 million. c. The likelihood of a payment occurring is reasonably possible, and the estimated amount is $1.17 million. d. The likelihood of a payment occurring is remote, while the estimated potential amount is $1.17 million.

Answers

Answer:

a. The likelihood of a payment occurring is probable, and the estimated amount is $1.17 million.

THE CONTINGENT LIABILITY NEEDS TO BE RECORDED SINCE IT IS PROBABLE THAT IT WILL OCCUR AND THE AMOUNT CAN BE ESTIMATED.

b. The likelihood of a payment occurring is probable, and the amount is estimated to be in the range of $0.97 to $1.17 million.

YOU ONLY HAVE TO DISCLOSE THE LIABILITY IN THE NOTES OF THE FINANCIAL STATEMENTS SINCE THE AMOUNT CANNOT BE DETERMINED.

c. The likelihood of a payment occurring is reasonably possible, and the estimated amount is $1.17 million.

YOU ONLY HAVE TO DISCLOSE THE LIABILITY IN THE NOTES OF THE FINANCIAL STATEMENTS SINCE THE EVENT IS ONLY REASONABLY POSSIBLE AND NOT PROBABLE.

d. The likelihood of a payment occurring is remote, while the estimated potential amount is $1.17 million.

NO RECORDING NOR DISCLOSING IS REQUIRED SINCE THE POSSIBILITY OF OCCURRING IS REMOTE.

Purvis Manufacturing, which produces a single product, has prepared the following standard cost sheet for one unit of the product. Direct materials (6 pounds at $2 per pound) $12 Direct labor (2 hours at $12 per hour) $24 During the month of April, the company manufactures 300 units and incurs the following actual costs.
Direct materials purchased and used (1,850 pounds) $4,070
Direct labor (620 hours) $7,130
Compute the total, price, and quantity variances for materials and labor. Identify whether the variance is favorable or unfavorable?

Answers

Answer:

1. Actual Quantity = 1,850 pounds

Actual materials cost = $4,070

Standard rate per pound = $2

Standard Quantity = 6 pounds per unit * 300 units

Standard Quantity = 1,800

Standard materials cost = Standard Quantity * Standard rate per pound

Standard materials cost = 1,800 * $2

Standard materials cost = $3,600

1a. Total Materials Variance = Actual materials cost - Standard materials cost

Total Materials Variance = $4,070 - $3,600

Total Materials Variance = $470 Unfavorable

1b. Materials Price Variance = Actual materials cost - Actual Quantity * Standard rate per pound

Materials Price Variance = $4,070 - 1,850 * $2

Materials Price Variance = $370 Unfavorable

1c. Materials Quantity Variance = Standard rate per pound * (Actual Quantity - Standard Quantity)

Materials Quantity Variance = $2.00 * (1,850 - 1,800)

Materials Quantity Variance = $100 Unfavorable

2. Actual labor hours = 620

Actual labor cost = $7,130

Standard rate per hour = $12

Standard labor hours = 2 hours per unit * 300 units

Standard labor hours = 600

Standard labor cost = Standard labor hours * Standard rate per hour

Standard labor cost = 600 * $12

Standard labor cost = $7,200

2a. Total Labor Variance = Actual Labor cost - Standard Labor cost

Total Labor Variance = $7,130 - $7,200

Total Labor Variance = $70 Favorable

2b. Labor Price Variance = Actual Labor cost - Actual labor hours * Standard rate per hour

Labor Price Variance = $7,130 - 620 * $12

Labor Price Variance = $310 Favorable

2c. Labor Quantity Variance = Standard rate per hour * (Actual labor hours - Standard labor hours)

Labor Quantity Variance = $12.00 * (620 - 600)

Labor Quantity Variance = $240 Unfavorable

Lucas Corp. has a debt-equity ratio of .8. The company is considering a new plant that will cost $115 million to build. When the company issues new equity, it incurs a flotation cost of 8.5 percent. The flotation cost on new debt is 4 percent.
A. What is the initial cost of the plant if the company raises all equity externally?
B. What is the initial cost of the plant if the company typically uses 55 percent retained earnings?
C. What is the initial cost of the plant if the company typically uses 100 percent retained earnings?

Answers

Answer:

$122,475,000; $119,489,600; $117,047,000

Explanation:

Given the following :

Cost of new plant = $115m

Debt to equity ratio =. 0.8

After issuing new equity:

Floatation cost incurred (equity) = 8.5%

Floatation on new debt = 4%

Calculating weighted return of debt and equity:

Debt: = [0.8/(1 + 0.8)] × 4% = 0.0178

Equity : [1 / (1+ 0.8)] * 8.5% = 0.0472

A) all equity raised externally:

Weighted average Floatation cost:

0.0178 + 0.0472 = 0.065

Initial cash flow will the be :

(1 + 0.065) * cost of new plant

1.065 * $115,000,000 = $122,475,000

B.) company uses 55% Retained earning:

Weighted return on equity will the be :

0.0472 * (1 - 55%) = 0.02124

Weighed Floatation cost = 0.02124 + 0.0178 = 0.03904

(1+0.03904) * $115,000,000 = $119,489,600

C.) Company uses 100% Retained earnings :

Equity return will be 0%

(1 + 0.0178) * 115000000

= $117,047,000

Midwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $85,000 with a $7,000 residual value and a ten-year life. The equipment will replace one employee who has an average wage of $20,210 per year. In addition, the equipment will have operating and energy costs of $4,130 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. If required, round to the nearest whole percent. %

Answers

Answer:

17.89%

Explanation:

Calculation Determine the average rate of return on the equipment

Using this formula

Average rate of return =Avarage annual income /Average investment

Where,

Avarage annual income=Annual saving - Annual depreciation- Annual operating costs

Average investment= (Beginning costs + Residual value)÷2

Let plug in the formula

Average rate of return=$20,210 - ($85,000- $7,000)÷10 years-$4,130/($85,000+$7,000)÷2

Average rate of return=$20,210-($78,000÷10)-$4,180/($92,000)÷2

Average rate of return=$20,210-$7,800-$4,180/$46,000

Average rate of return=$8,230/$46,000

Average rate of return=0.1789*100

Average rate of return=17.89%

Therefore the average rate of return on the equipment will be 17.89%

Answer:

18%

Explanation:

This can be calculated as using the formula for calculating the average rate of return as follows:

Average rate of return = Average annual income / Average investment in equipment .................. (1)

To use equation (1), we first calculate the following:

Annual cost saving = $20,210

Annual depreciation = (Equipment cost - Residual value) / Useful number of years = ($85,000 - $7,000) / 10 = $7,800

Annual operating and energy costs = $4,130

Average annual income = Annual cost saving - Annual depreciation - Annual operating and energy costs = $20,210 - $7,800 - $4,130 = $8,280

Average investment in equipment = (Equipment cost + Residual value) / 2 = $46,000

Substituting the values for Average annual income and Average investment in equipment into equation (1), we have:

Average rate of return = $8,280 / $46,000 = 0.18, or 18%

A company has 825 shares of $50 par value preferred stock outstanding, and the call price of its preferred stock is $63 per share. It also has 17,000 shares of common stock outstanding, and the total value of its stockholders' equity is $626,575. The company's book value per common share equals:

Answers

Answer:

Book Value Per Common Share = $33.80

Explanation:

Book Value Per Common Share = Stockholders' equity - Shares * Call Price per shares) / Shares of common stock outstanding

= ($626,575 - 825*63) / 17000

= ($626,575 - $51,975) / 17,000

= $574,600 / 17,000

= $33.80

A $5,000 bond with a coupon rate of 5.1​% paid semiannually has eight years to maturity and a yield to maturity of 8.9​%. If interest rates rise and the yield to maturity increases to 9.2​%, what will happen to the price of the​ bond?

Answers

Answer:

The bond's market price will decrease by $72.08 (1.83%) from $3,928.89 to $3,856.81.

Explanation:

bond's current market price:

$5,000 / (1 + 4.45%)¹⁶ = $2,491.35

$127.50 x 11.27483 (PV annuity factor, 4.45%, 16 periods) = $1,437.54

current market price = $3,928.89

if interests rise and YTM increases to 9.2%, then new market price:

$5,000 / (1 + 4.6%)¹⁶ = $2,434.80

$127.50 x 11.15305 (PV annuity factor, 4.45%, 16 periods) = $1,422.01

current market price = $3,856.81

Which method of evaluating capital investment proposals uses present value concepts to compute the rate of return from the net cash flows

Answers

Answer:

Internal rate of return

Explanation:

The internal rate of return is that return in which the net present value equivalent to zero

i.e.

Net present value = 0

That means

Initial investment = Present value of cash inflows after charging the discounting factor like 10% 12% etc

So as per the given situation, the internal rate of return is the correct answer

You put up $40 at the beginning of the year for an investment. The value of the investment grows 5% and you earn a dividend of $4.50. Your HPR was ____. A. 5.0% B. 4.5% C. 11.3% D. 16.3%

Answers

Answer:

16.3%

Explanation:

$40 was put at the beginning of the year for an investment

The investment grows by 5%

= 5/100

= 0.05

The dividend is $4.50

The first step is to calculate the dividend yield

= $4.50/40

= 0.1125

Therefore, the HPR can be calculated as follows

= 0.1125+0.05

= 0.163×100

= 16.3%

Hence the HPR was 16.3%

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