The Value οf firm = 83.757 milliοn
Tοtal current debt = D = $20 milliοn
How to calculate Value οf firm?To calculate the value of firm, us the following steps
Tοtal Equity = E = nο οf shares x price per share = 2 milliοn share x $40 per share = $80 milliοn
Debt/Tοtal Equity = D/E = 20miiliοn / 80 milliοn = 0.25
Current Beta = Current Levered Beta = 1.2, Tax rate = 30%
Unlevered Beta befοre restructuring = (Levered Beta) / [1 + (D/E)(1-tax rate)] = (1.2) / [1 + (0.25)(1-30%)] = (1.2) / [1 + 0.25 x 70%] = 1.2 / (1 + 0.175) = 1.2 / 1.175 = 1.0212 = 1.02 (rοunded tο twο decimal places)
Unlevered Beta = 1.02
b. Since after restructuring capital structure cοnsists οf 45% debt,
Percentage οf debt = 45% , percentage οf equity = 1 - debt percentage = 1 - 45% = 55%
New debt tο equity ratiο = D/E = 45%/55%
BEA's new Beta after releveraging = Levered Beta with 45% debt = Unlevered Beta [ 1 + (1-tax rate) (D/E)]
Levered Beta with 45% debt = 1.02 [ 1 + (1-30%) (45%/55%)] = 1.02 [ 1 + (70%) (45%/55%)] = 1.02 (1 + 0.572727) = 1.02 x 1.572727 = 1.6041 = 1.60 (rοunded tο twο decimal places)
Hence BEA's New beta after releveraging = 1.60
Accοrding tο CAPM
Cοst οf Equity with 45% debt = Risk free rate + BEA's new Beta x market risk premium
= 5% + 1.60 x 6% = 5% + 9.60% = 14.60%
c. Cοmpany retires οld debt and then issues new debt tο repurchase shares such that
Debt/Tοtal Capital = D/T = 45%
Equity/Tοtal capital = E/T = (1 - D/T) = (1-35%) = 55%
Cοst οf new debt = rd = 12% and Cοst οf Equity when debt is 45% = re = 14.60%
WACC = rd (D/T)(1-tax rate) + re (E/T)
WACC = 12%(45%)(1-30%) + 14.60%(55%)
WACC = 12% x 45% x 70% + 14.60% x 55%
WACC = 3.78% + 8.03% = 11.81%
Hence WACC = 11.81%
Since BEA is a nο grοwth firm and pays all its earnings as dividends, therefοre after tax οperating prοfit i.e. EBIT(1-tax rate) will distributed between debt hοlders and sharehοlders
Hence EBIT(1-tax rate) can be used tο find Value οf the firm
EBIT = $14.131 milliοn = $14.131 x 1000000 = $14131000
Let V = Value οf BEA with 45% debt
V = [EBIT(1-tax rate)] / (WACC) = [14131000(1-30%)] / (11.81%) = 9891700 / 11.81% = 83756985.6054
Value οf firm with 45% debt (in milliοns) = 83756985.6054 / 1000000 = 83.7569856054 milliοn = 83.757 milliοn (rοunded tο three places οf decimal)
Hence Value οf firm = 83.757 milliοn
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A company just issued $497000 of perpetual 6% debt and used the proceeds to repurchase stock. The company expects to generate 127000 of EBIT in perpetuity. The company distributes all its earnings as dividends at the end of each year. The firm’s unlevered cost of capital is 15% and the tax rate is 40%. Use APV method to calculate the value of the company with leverage.
Given Information: Amount of perpetual 6% debt = $497,000EBIT in perpetuity = $127,000Unlevered cost of capital = 15%Tax rate = 40%Using APV method to calculate the value of the company with leverage Solution: APV Method APV method stands for Adjusted Present Value method.
APV method is a financial approach that calculates the net present value (NPV) of an investment as the sum of the NPVs of all related cash flows, including the impact of financing. It takes into account the value of debt tax shields and other financing side effects. In APV method, the following steps are involved:
1. Calculate the present value of free cash flows to the firm (FCFF) for each year of explicit forecast period.
2. Calculate the present value of tax shield (PVTS).
3. Add the present value of the tax shield to the present value of free cash flows to the firm (PVFCFF) to find the value of the firm.Calculations1. PV of FCFF The formula to calculate PV of FCFF is: PVFCFF = FCFF / (1 + k) where k = unlevered cost of capital FCFF = EBIT (1 - tax rate) + Depreciation - Capital expenditure - change in working capital The calculations are as follows: Year EBIT(1- tax rate)Depreciation Capital expenditure Change in working capitalFCFF$127,000(1 - 0.4)$0$0$0$76,200PVFCFFYear 1PVFCFF= $76,200 / (1+0.15) = $66,086.96(Note: The FCFF value remains constant throughout all years, hence we don't need to calculate for year 2 onwards)2. PV of Tax Shield PV of tax shield is the present value of the tax shield generated by interest tax-deductible payment on debt. The formula to calculate PV of tax shield is: PVTS = Tax shield / (1 + k) where k = unlevered cost of capital Tax shield = Interest payment x Tax rate Year Debt balance Interest payment Tax shield$497,000$29,820$11,928PVTSYear 1PVTS = $11,928 / (1+0.15) = $10,365.22(Note: The interest payment remains constant throughout all years, hence we don't need to calculate for year 2 onwards)
4. Value of the Firm The formula to calculate the value of the firm is: Value of the firm = PVFCFF + PVTS Value of the firm = $66,086.96 + $10,365.22Value of the firm = $76,452.18Therefore, the value of the company with leverage using APV method is $76,452.18.
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Q1. The local Toyota dealer from problem 2 is considering installing either a Q or P system for inventory control. The past standard deviation of demand has been 2.5 units per month, and the replenishment lead time is two months. A 95 percent service level is desired.
a. If a continuous review system is used, what is the value of Q and R that should be used? (5 Marks)
b. If a periodic review system is used, what is that mean? (5 Marks)
If a continuous review system is used, the value of Q and R is 71 units and 150 units respectively.
The continuous review system is used to monitor the inventory of the product continuously. In this method, the reorder point and order quantity are determined so that a minimum inventory level is maintained between the times when the order is placed and when the product is received. The maximum inventory level is also determined in this system.
The formula for finding the optimal order quantity in the continuous review system is:
Q* = √ (2DS / H)
Where Q* is the optimal order quantity, D is the annual demand, S is the setup cost per order, and H is the holding cost per unit per year.
The formula for the reorder point in the continuous review system is:
R = D * L
Where R is the reorder point, D is the daily demand, and L is the lead time.
If a continuous review system is used, the value of Q and R that should be used are:
Q* = √(2DS / H)
= √(2 * 2.5 * 24 / 0.2)
= 70.7 units (rounded to 71 units)
R = D * L
= 2.5 * 60
= 150 units
Note: The question is incomplete. The complete question probably is: The local Toyota dealer from problem 2 is considering installing either a Q or P system for inventory control. The past standard deviation of demand has been 2.5 units per month, and the replenishment lead time is two months. A 95 percent service level is desired. If a continuous review system is used, what is the value of Q and R that should be used?
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The following data relates to the operations of Lancelot plc: The company uses between 5000 units and 25000 units of material A and between 4000 units and 15000 units of material B. suppliers can supply material A within 1 to 3 months after ordering whiles material B may be supplied within 1 to 2 months. The company decides to keep a maximum stock level of 80000 units and 60000 units of materials A and B respectively. Which of the following statement is correct?A. The reorder level of material A is 75000 units and the reorder quantity of material B is 30000 unitsB. The reorder level of material B is 30000 units whiles the reorder quantity of material A is 15000 unitsC. The reorder level of material A is 75000 units whiles the reorder quantity of material A is 34000 unitsD. The reorder level of material B is 30000 units whiles the reorder quantity of material A is 10000 units*
The correct statement is D. The reorder level of material B is 30000 units while the reorder quantity of material A is 10000 units.
The reorder level is the level at which you should place an order to the supplier to replenish your stock. This is calculated by adding the maximum stock level to the lead time (in this case, the time it takes to receive the order from the supplier).
For material A, the maximum stock level is 80000 units and the lead time is 3 months, giving a reorder level of 80000 + (3 x 5000) = 95000 units. The reorder quantity for material A is the difference between the maximum stock level and the reorder level, which is 80000 - 95000 = 15000 units.
For material B, the maximum stock level is 60000 units and the lead time is 2 months, giving a reorder level of 60000 + (2 x 4000) = 30000 units. The reorder quantity for material B is the difference between the maximum stock level and the reorder level, which is 60000 - 30000 = 10000 units.
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Entrepreneurship is in Alyssa Stuart's blood. Alyssa has been starting businesses since she was 10 years old, and she finally has the perfect business of custom-made furniture. Customers who visit Alyssa's shop can choose from a number of different fabrics and 50 different styles of couch and chair designs to create their custom-made furniture. Once the customer decides on a fabric pattern and furniture design, the information is sent to China where the furniture is built and shipped to the customer via the West Coast. Alyssa is excited about her business; all of her hard work has finally paid off as she has more than 17,000 customers and 875 orders currently in the pipe. Alyssa's business is booming. Her high-quality products and outstanding customer service have created an excellent reputation for her business.
In order to expand the business, Alyssa Stuart has hired you as an external financial consultant. You are expected to provide her with advice on financial management issues, business strategy and future development.
Alyssa Stuart is thinking of starting a store that specializes in handmade Viennese style bentwood chairs. Before opening her store, Alyssa is curious about how her profit, revenue, and variable costs will change depending on the amount she charges for the chairs. Alyssa would like you to perform the work required for this analysis and has given you the data. Here are a few things to consider while you perform your analysis:
• Current competitive prices for Viennese style bentwood chairs are between $225 and $275 a chair.
• Variable costs will be either $100 or $150 a chair depending on the types of material Alyssa chooses to use.
• Fixed costs are $10,000 a month.
1. Excel file containing the information in the next page:
Alyssa's chairs - Price One
Alyssa's chairs - Price Two
Chair Price
$ 225 Chair Price
$ 275 Variable Cost per chair
$ 125 Variable Cost per chair
$ 150 Fixed Cost
$ 10,000 Fixed Cost
$ 10,000 Number of chairs to sell
Number of chairs to sell
Total revenue
Total revenue
Note: Define the names for the cells with numbers (select the cell(s) to be named, click in the Name box (to the left of the formula bar), valid one-word name for the list, e.g. Chair_Price_One, and press the Enter key).
Calculate the break-even point for Alyssa's shop (the quantity of chairs and total revenue) for both scenarios of pricing. In your opinion, which of the pricing strategies is preferable? Why? For your answer, make sure that your Excel table contains calculations so the Instructor can see the formula in the formula bar for the populated cells.
How can Alyssa boost her profits by cost cutting or increase sales? Provide at least three recommendations that you consider the most important.
1. Break-even Point for Chair Price One: For the first scenario, the break-even point is when Alyssa needs to sell 92 chairs to break even, with a total revenue of $20,700.
What is scenario?Scenario is a term used to describe the narrative of a story, plan, or situation. It is usually used in the context of a business plan, where it outlines the various causes and effects of a particular action or set of actions. A scenario typically describes a sequence of events, potential outcomes, and potential responses to those outcomes.
Break-even Point for Chair Price Two: For the second scenario, the break-even point is when Alyssa needs to sell 71 chairs to break even, with a total revenue of $20,025.
In my opinion, the first scenario is preferable. This is because the first scenario has a lower break-even point of 92 chairs, compared to the second scenario which has a break-even point of 71 chairs. Additionally, the total revenue of the first scenario is $20,700, which is higher than the total revenue of the second scenario, which is $20,025. Therefore, the first scenario is more likely to generate more profit for Alyssa's business.
How can Alyssa boost her profits by cost cutting or increase sales?
1. Alyssa can use digital marketing to increase sales. Digital marketing platforms such as social media, search engine optimization, and email campaigns can help Alyssa reach a wider customer base and increase sales.
2. Alyssa can focus on customer loyalty programs or discounts. This will encourage customers to come back and buy more chairs.
3. Alyssa can look for alternative suppliers that offer cheaper materials. This will help reduce the variable cost per chair and increase profits.
4. Alyssa can also look into bulk buying materials to reduce costs. Buying in bulk will enable Alyssa to get a lower price for the materials she needs for her chairs.
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Break-even Point for Chair Price One: In the first case, Alyssa must offer 92 chairs for a total of $20,700 in sales in order to break even.
What is Break-even Point?Break-even Point for Chair Price Two:
In the second situation, Alyssa must sell 71 chairs for a total of $20,025 in sales before she breaks even.
I think the first possibility is better. This is so that the first scenario's break-even point, which is 92 chairs, is lower than the second scenario's break-even position, which is 71 chairs. Additionally, the first scenario's total revenue, which is $20,700, is greater than the second scenario's total revenue, which is $20,025. As a result, Alyssa's company is more likely to make more money under the first situation.
To boost sales, Alyssa can use internet marketing. Alyssa can expand her customer base and boost revenue by using digital marketing tools like email campaigns, social media, and search engine optimization.Alyssa can concentrate on promotions or client loyalty programs. This will entice clients to return and purchase additional seats.Alyssa can search for different vendors who provide less expensive materials. Profits will rise and the variable expense per chair will be decreased as a result.To cut expenses, Alyssa can also consider buying supplies in bulk. Alyssa will be able to get the supplies she needs for her chairs for less money by purchasing in quantity.To know more about Break-even Point, visit:
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The complete question attached below,
5.12 On 1 April 2013, the first day of the financial year, T Young paid $9,500 cash for a computer to be used in his business. He also paid $500 for installation and $1,000 for annual maintenance charges. The computer was to be depreciated by the straight-line method at an annual rate of 20%, ignoring salvage value. On 31 March 2016, the computer was sold for $4,250 cash.
Required:
Show the entries in the following accounts and statements during the period of ownership:
a Computers account
b Computers accumulated depreciation account
c Computers disposal account
d Income statement (extract)
e Statement of financial position (extract)
a. Computers Account: 1 April 2013: Debit $10,500 (cash paid for computer, installation and maintenance) 31 March 2016: Credit $4,250 (cash received from sale of computer)
What is installation?Installation is the process of setting up a device or program in order to make it operational and ready for use. It involves configuring the settings, downloading and installing the necessary software and hardware components, and testing the system to make sure it works properly.
b. Computers Accumulated Depreciation Account
1 April 2013: Debit $2,100 (calculated depreciation based on 20% of cost of $10,500)
31 March 2016: Credit $2,100 (accumulated depreciation to be reversed)
c. Computers Disposal Account
31 March 2016:
Debit $4,250 (cash received from sale of computer)
Credit $2,100 (accumulated depreciation to be reversed)
Credit $2,150 (gain on sale of computer)
d. Income Statement (Extract)
31 March 2016:
Debit $2,100 (accumulated depreciation to be reversed)
Credit $2,150 (gain on sale of computer)
e. Statement of Financial Position (Extract)
31 March 2016:
Debit $4,250 (cash received from sale of computer)
Credit $2,100 (accumulated depreciation to be reversed)
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4. A product engineer has developed the following equation for the cost of a system component: C=(10P)2, where C is the cost in dollars and P is the probability that the component will operate as expected. The system is composed of two identical components, both of which must operate for the system to operate. The engineer ean spend $173 for the two components. To the nearest two decimal places, what is the largest component probability that ean be achieved?
Two components cost $173 to the engineer. • The cost of two components is equal to two (10P). • Component cost Equals component selling price.
What is an illustration of a component?
A single button in a graphical user interface, a little interest calculator, and an interface to a database management are all examples of user interface elements. Components of a network can be placed on various servers and communicate with one another to provide required services. The subject, predicate, punctuation, and capitalization are the key components of a sentence. The subject of the phrase performs the action or verb, while the direct object receives the action. The predicate of a sentence is formed by the verb and its objects.
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The statement of cash flows classifies cash receipts and cash
payments into three different activities: operating, investing, and
financing.
Group of answer choices
True
False
The statement of cash flows classifies cash receipts and cash payments into three different activities: operating, investing, and financing. The statement is true.
The statement of cash flows is a financial statement that provides information about a company's cash receipts and cash payments during a particular period. It classifies these cash flows into three activities: operating, investing, and financing.
Operating activities are the cash flows that are related to the company's primary business activities, such as sales and purchases of goods and services. Investing activities are the cash flows that are related to the acquisition and disposal of long-term assets, such as property, plant, and equipment. Financing activities are the cash flows that are related to the company's capital structure, such as issuance or repayment of debt, and issuance or repurchase of equity shares.
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1) (10 pts). If you invest$1,000in an account that pays2%every 6 months, approximately how many years will it take to have$2,000?. 2) (10 pts.) If you gave a bank$12,000and got back$12,300at the end of 6 months, what was the nominal AND effective interest rates that your investment earned?. 3) (15 pts.) The maintenance cost for the car you just bought will be $350 the first year, the cost is expected to increase by $250 a year after that, and you plan to keep the car for 15 years. A company offers you maintenance insurance for a lump sum to be paid now. What is the maximum amount you should be willing to pay for it, if i=6%?
To calculate the time required to turn $1,000 into $2,000 with 2% interest every 6 months, we can use the formula for compound interest:
[tex]FV = PV * (1 + r)^n[/tex]
where FV is the future value, PV is the present value, r is the interest rate, and n is the number of periods.
In this case, FV = $2,000, PV = $1,000, and r = 2%/2 = 1% per 6 months. We want to find n in years. We can rearrange the formula to solve for n:
[tex]n = log(FV/PV) / (2 * log(1 + r))[/tex]
Substituting in the values, we get:
[tex]n = log(2) / (2 * log(1 + 0.01)) = 35.001[/tex]
Therefore, it will take approximately 35 years to turn $1,000 into $2,000 with 2% interest every 6 months.
The nominal interest rate is the stated rate of interest, while the effective interest rate is the actual rate of interest earned or paid, taking into account compounding. To calculate the nominal interest rate, we can use the simple interest formula:
SI = P * r * t
where SI is the interest earned, P is the principal amount, r is the interest rate per time period, and t is the time period in years.
In this case, SI = $300, P = $12,000, and t = 6/12 = 0.5 years. Solving for r, we get:
[tex]r = SI / (P * t) = 300 / (12,000 * 0.5) = 0.025 or 2.5%[/tex]
To calculate the effective interest rate, we can use the formula:
[tex]FV = PV * (1 + i)^n[/tex]
where FV is the future value, PV is the present value, i is the effective interest rate, and n is the number of periods.
In this case, PV = $12,000, FV = $12,300, and n = 1 since the investment was for 6 months. Solving for i, we get:
[tex]i = (FV / PV)^(1/n) - 1 = (12,300 / 12,000)^(1/1) - 1 = 0.025 or 2[/tex]
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lumen, a manufacturer of theatre lighting, strives to improve the longevity and brightness of its lights by continuously changing designs and trying different combinations of component parts during manufacturing. this is an example of
Research on LED lighting is still going on, and it supports a number of goals for the American public. Products have resulted from LED illumination.
What does Six Sigma aim to do to better the business?Omega Six. Thanks to the Six Sigma methodology, businesses have the resources necessary to increase the capacity of their operational activities. Less errors are produced as a result of the increased efficiency and decreased process variance, which also boosts sales, employee satisfaction, and the quality of the finished good or service.
What are the aims of Lean manufacturing and Six Sigma?Reducing waste is the lean methodology's primary goal. According to Six Sigma, lower variation is preferred for the highest level of quality control. These two approaches are combined under the umbrella of the Lean Six Sigma (LSS) discipline.
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Propose a new product, service, or feature. Come up with 2 potential ideas—no matter what they are—for a product, service, or feature that you think will provide value or solve a need in your customers’ lives.
There are a multitude of potential products, services, or features that can provide value or solve a need in customers' lives and two ideas are Smart Grocery List App , Virtual Interior Designer.
Smart Grocery List App: This app would automatically track the items that you buy on a regular basis and create a grocery list for you based on your previous purchases.
It could also suggest new items that you might like based on your buying habits and provide coupons for the items on your list. This would save customers time and money while grocery shopping.
Virtual Interior Designer: This service would allow customers to upload pictures of their home and virtually try out different furniture, paint colors, and decor. It would also provide recommendations for products based on the customer's style and budget.
This would make it easier for customers to plan and visualize their home decor without having to physically move furniture or paint walls.
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Both of these ideas have the potential to provide value and solve a need in customers' lives by making everyday tasks easier and more efficient.
the customer value proposition lays out the company's approach to multiple choice meeting profitability guidelines without the risk of losing customers. operating efficiently given the current level of customers. embracing rival company approaches to gaining customers. satisfying customer wants and needs at a price that customers will consider a good value. assuring that the company makes enough profits based on its per-unit cost.
The customer value proposition lays out the company's approach to satisfying customer wants and needs at a price that customers will consider a good value. A customer value proposition is a promise of value that a company intends to provide its customers in exchange for payment.
A company's customer value proposition should describe the key customer segments the company aims to serve, the value offered to each customer segment, and the company's plan to achieve this value. Discuss the given options: Option 1: Meeting profitability guidelines without the risk of losing customers is a company's goal rather than a customer value proposition.
Option 2: Operating efficiently given the current level of customers is a company's goal rather than a customer value proposition.
Option 3: Embracing rival company approaches to gaining customers is a company's goal rather than a customer value proposition.
Option 4: Satisfying customer wants and needs at a price that customers will consider a good value is a customer value proposition.
Option 5: Assuring that the company makes enough profits based on its per-unit cost is a company's goal rather than a customer value proposition.
In light of the above discussion, it is apparent that satisfying customer wants and needs at a price that customers will consider a good value is the correct option.
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A Treasury bill has a face value of $250,000, matures in 32 days, has a bid yield of 2.50 percent and an asked yield of 2.02 percent. What is the selling price of this Treasury bill in the market? (Enter the answer accurate to two decimal places. Just enter a number - do not add a $ symbol or any other punctuation.)
A Treasury bill with a face value of $250,000 will have a selling price of the Treasury bill in the market is 249,098.92.
How to calculate the the selling price of this Treasury bill in the marketA Treasury bill, also known as a T-bill, is a short-term debt security issued by the U.S. government. Treasury bills have maturities of one year or less, and are sold in denominations ranging from $1,000 to $5,000,000.
Treasury bills are typically sold at a discount to face value, and pay no interest until maturity, at which point the holder receives the full face value of the bill.
We can use the following formula to calculate the price of the Treasury bill:
Price = Face Value / (1 + Yield x Days to Maturity / 360)
Plugging in the given values:
Price = 250000 / (1 + 0.0202 x 32 / 360) = 249098.92
Therefore, the selling price of the Treasury bill in the market is $249,098.92.
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If npv is conceptually the best tool for capital budgeting, why do you think multiple measures are used in practice? what is the relationship between the profitability index and the npv? are there any situations in which you might prefer one method over the other?
Although NPV is thought to be the most reliable and theoretically sound way for analysing capital budgeting choices, managers may employ several metrics based on the particular scenario or decision being made
The process of preparing a budget defines how a company will distribute its financial resources over a specific time period. It include forecasting future income and spending, deciding on priorities, and establishing performance goals. A crucial component of financial management is budgeting, which enables businesses to keep expenditures in check, allocate resources efficiently, and make long term plans. Accurate financial data, communication across departments and stakeholders, and a clear grasp of the organization's goals and objectives are necessary for effective budgeting. Budgeting helps companies to make educated decisions, adjust to changing conditions, and maintain long-term sustainability by defining clear financial goals and tracking performance against them.budgeting
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you invest $3,000 annually in a mutual fund that earns 10 percent annually, and you reinvest all distributions. how much will you have in the account at the end of 20 years?
To determine the total amount of money that will be available in the account after 20 years of an annual investment of $3,000 at a 10% annual interest rate, the future value of an annuity equation is applied.
The formula is expressed as follows:
FV = P [(1 + r)n - 1] / r
Where: P = periodic payment or investment ($3,000); r = annual interest rate (10%); and n = number of periods (20 years).
We can now substitute the values:
FV = $3,000 [(1 + 0.10)^20 - 1] / 0.10FV = $3,000 [(6.72750) - 1] / 0.10FV = $3,000 (5.72750) / 0.10FV = $172,725
Therefore, the total amount of money that will be available in the account after 20 years of an annual investment of $3,000 at a 10% annual interest rate is $172,725.
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Before the offer, Microsoft created the following discounted cash flow valuation of LinkedIn.
Why did the analysts add back stock expenses to get to free cash flows?
in US $ Thousands FY 16E FY 17E FY 18E FY 19E FY 20E FY 21E FY 22E FY 23E Terminal Value
Net Revenue 3,742,464 4,570,391 5,385,685 6,272,014 7,225,381 8,241,160 9,307,119 10,423,675 Cost of Revenue (500,860) (599,430) (671,042) (742,402) (812,487) (880,375) (974,363) (1,069,430) Gross Profit 3,241,604 3,970,961 4,714,643 5,529,612 6,412,894 7,360,785 8,332,756 9,354,245 Sales and Marketing (1,276,256) (1,535,216) (1,781,941) (2,044,070) (2,319,453) (2,605,850) (2,898,763) (3,197,823) Product Development (1,004,897) (1,178,117) (1,332,746) (1,489,994) (1,647,819) (1,785,504) (1,915,629) (2,038,170) General and Administrative (542,094) (612,367) (667,484) (719,033) (766,204) (808,377) (844,466) (874,842) Depreciation and Amortization (550,640) (587,919) (595,995) (612,094) (637,107) (664,393) (691,351) (717,171) Operating Income (132,283) 57,342 336,477 664,421 1,042,311 1,496,661 1,982,547 2,526,239 Free Cash Flow (FCF) EBIT (132,283) 57,342 336,477 664,421 1,042,311 1,496,661 1,982,547 2,526,239 Less Taxes (35% tax rate) 46,299 (20,070) (117,767) (232,547) (364,808) (523,831) (693,892) (884,183) Add Depreciation & Amortization 550,640 587,919 595,995 612,094 637,107 664,393 691,351 717,171 Add Stock Expense 580,398 594,908 609,781 625,025 640,651 656,667 673,084 689,911 Less Capital Expenditures (709,920) (727,668) (654,901) (671,274) (688,056) (705,257) (722,888) (740,961) Less Intangibles (8,308) - - - - - - - Unlevered Free Cash Flow 326,826 492,431 769,585 997,719 1,267,205 1,588,633 1,930,202 2,308,177 Present Value (WACC of 10%) 326,826 447,665 636,020 749,601 865,517 986,416 1,089,549 1,184,459 20,898,681
Total PV of Unlevered Free Cash Flow 27,184,735 Terminal Value Assumptions:
Growth: 4.6%
WACC: 10%
The analysts added back stock expenses to get to free cash flows because stock expenses, are a non-cash expense that does not affect a company's actual cash flow.
Why are stock expenses not include in cash flow ?Stock expenses are not included in the company's net cash flow from operating activities (cash flows from operations) as reported on the cash flow statement.
However, because stock expenses do represent a cost to the company, they are often subtracted from a company's net income when calculating its earnings per share (EPS). This can make the company's net income look lower than it actually is, which can affect how investors perceive the company's profitability.
To account for this discrepancy and get a more accurate picture of a company's actual cash flow, analysts often add back stock expenses to the net income when calculating free cash flow.
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Roberta Santos, age 41, is single and lives at 120 Sanborne Avenue, Springfield, IL 60781. Her Social Security number is 123-45-6789. Roberta has been divorced from her former husband, Wayne, for three years. She has a son, Jason, who is 17, and a daughter, June, who is 18. Jason’s Social Security number is 111-11-1111, and June’s is 123-45-6788. Roberta does not want to contribute $3 to the Presidential Election Campaign Fund.
Roberta, an advertising executive, earned a salary of $80,000 in 2014. Her employer withheld $9,000 in Federal income tax and $3,100 in state income tax.
Roberta has legal custody of Jason and June. The divorce decree provides that Roberta is to receive the dependency deductions for the children. Jason lives with his father during summer vacation. Wayne indicates that his expenses for Jason are $10,500. Roberta can document that she spent $6,500 for Jason’s support during 2014. In prior years, Roberta gave a signed Form 8332 to Wayne regarding Jason. For 2014, she has decided not to do so. Robertaprovides all of June’s support.
Roberta’s mother died on January 7, 2014. Roberta inherited assets worth $625,000 from her mother. As the sole beneficiary of her mother’s life insurance policy, Roberta received insurance proceeds of $300,000. Her mother’s cost basis for the life insurance policy was $120,000. Roberta’s favorite aunt gave her $13,000 for her birthday in October.
On November 8, 2014, Roberta sells for $22,000 Amber stock that she had purchased for $24,000 from her first cousin, Walt, on December 5, 2009. Walt’s cost basis for the stock was $26,000, and the stock was worth $23,000 on December 5, 6-416-422009. On December 1, 2014, Roberta sold Falcon stock for $13,500. She had acquired the stock on July 2, 2011, for $8,000.
An examination of Roberta’s records reveals that she received the following:
-Interest income of $2,500 from First Savings Bank.
-Groceries valued at $750 from a local grocery store for being the 100,000th customer
-Qualified dividend income of $1,800 from Amber
-Interest income of $3,750 on City of Springfield school bonds.
-Alimony of $16,000 from Wayne.
-Distribution of $4,800 from ST Partnership. Her distributive share of the partnership passive taxable income was $5,300. She had no prior passive losses.
From her checkbook records, she determines that she made the following payments during 2014:
-Charitable contributions of $4,500 to First Presbyterian Church and $1,500 to the American Red Cross (proper receipts obtained).
-Mortgage interest on her residence of $7,800
-Property taxes of $3,200 on her residence and $1,100 (ad valorem) on her car.
-Estimated Federal income taxes of $3,800 and estimated state income taxes of $1,000.
-Medical expenses of $5,000 for her and $800 for Jason. In December, her medical insurance policy reimbursed $1,500 of her medical expenses.
-A $1,000 ticket for parking in a handicapped space.
-Attorney’s fees of $500 associated with unsuccessfully contesting the parking ticket
-Contribution of $250 to the campaign of a candidate for governor.
-Because she did not maintain records of the sales tax she paid, she calculates the amount from the sales tax table to be $994.
Calculate Roberta’s net tax payable or refund due for 2014. Use the appropriate forms and schedules. Complete cumulative tax problem, You will prepare the manual tax return utilizing – Form 1040 and Schedules A, B, D & E.
Tax Planning Response: Roberta is asking for your advice regarding her 2014 tax situation. She paid off the mortgage on her home in April 2013 with the insurance proceeds she received. June her daughter, is getting married in September and will file a joint tax return with her spouse. Roberta will be receiving a $30,000 bonus in May and is concerned that she have enough tax withheld given these changes. She would like you to project her taxable income and tax liability for 2014. She will not sell any stocks this year and will not receive any prizes, otherwise all other income items and itemized deductions will be the same except as noted above.
First, let's calculate Roberta's taxable income for 2014 Salary $80,000 Interest income from First Savings Bank $2,500 Qualified dividend income from Amber $1,800 Alimony received $16,000 Distribution from ST Partnership $4,800 Total Income $105,100.
What is an Income ?Income refers to the money that an individual or entity receives from various sources, such as employment, investments, business activities, and government benefits. It is generally considered as the inflow of economic resources, such as wages, salaries, interest, dividends, capital gains, and rental income. Income can be earned or unearned and may be subject to taxes or other types of deductions. It is a crucial factor in determining an individual's financial well-being and is used to calculate various tax liabilities and government benefits.
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What are some specific laws that protect all employees? What type of guidelines do employers have to follow? How are employees to learn about these policies and know what is right and wrong?
Employers must adhere to both state and federal laws to protect their employees.
These laws include: the Fair Labor Standards Act (FLSA) which sets minimum wage, overtime, and recordkeeping requirements;
the Equal Pay Act which requires employers to provide equal pay to men and women doing the same job;
Employers must also have a set of policies and procedures in place to ensure compliance with the law. These policies should outline acceptable and unacceptable behaviors, employee rights and responsibilities, and disciplinary procedures.
Employees should be made aware of these policies, either through company handbooks or individual training sessions, so that they can understand what is expected of them and what actions are prohibited.
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which of the following situations will result in recognizing a gain on sale of a plant asset? multiple choice question. an asset that cost $5,000 with accumulated depreciation of $3,000 is sold for $1,500. a fully depreciated asset is sold for $1,000. an asset with book value of $2,000 is sold for $2,000. an asset with a book value of $2,000 is sold for $1,500. a fully depreciated asset is discarded.
The situation that will result in recognizing a gain on the sale of a plant asset is: An asset with a book value of $2,000 is sold for $2,000. Therefore, option C is correct.
A plant asset is also known as a fixed asset or property, plant, and equipment (PPE). It refers to long-term real assets that are used in the operations of a business.
These assets are not intended for sale as part of the company's normal course of business. They are typically expected to provide economic benefits to the company over a long period of time, usually more than one accounting period.
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Once signed a lease cannot be changed, even if conditions change
dramatically True or False
Answer:
False
Explanation:
If you have a reasonable lawyer they can change any lease depending on your circumstance. also depends on the lease
Explanation:
True. A landlord cannot make changes to a lease after either party signs it
When a company develops a product and then attempts to sell it through normal distribution channels in a number of test-market cities, it is engaged in ______.
When a company develops a product and then attempts to sell it through normal distribution channels in a number of test-market cities, it is engaged in test marketing.
Test marketing is the process of introducing a new product or service to a limited geographical area in order to assess consumer response to the product or service. The goal of test marketing is to give a business the opportunity to observe the market's response to the product or service and make necessary adjustments to the marketing strategy.
Test marketing is used by businesses to gather information about consumer behavior, which they use to make strategic decisions. This data may be used to determine how a product will perform when it is released to the public, or to identify ways to improve the product before its release.Test marketing helps companies identify the strengths and weaknesses of a product or service, as well as potential problems that may arise in the future. By identifying these issues early on, a company can make the necessary changes to ensure that the product is successful in the long term.
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If you can’t pay immediately, what is one course of action you can take? what are the criteria?
There are two main ways to make a tax payment. You can either set it up to have your bank account automatically debited.
Or you can pay the tax in person by mailing a check or calling us to arrange the payment of the outstanding tax.
Another way to pay our taxes is to send our refunds directly to them until your balance is paid in full.
If you are unable to pay your taxes immediately, one option is to send your refund directly to our office. Failure to pay by a certain date is punishable and the state can charge additional interest.
A tax is an amount of money that a government collects from people based on their income, the value of their property, and other factors, and is used to pay for government services.
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Complete question:
What are the two primary ways you can make tax payments? What is one other way you can pay? If you can’t pay immediately, what is one course of action you can take? What are the criteria?
Mars Co. purchased a machine on January 1, 2021, for $2,500,000 for the express purpose of leasing it. The machine is expected to have a five-year life, with no salvage value, and be depreciated on a straight-line monthly basis. On January 1, 2021, Mars leased the machine to Dunbar Company for $750,000 a year for a four-year period with an implicit rate of 6%. Payments are due to Mars on January 1 of each year starting in 2021. This is an operating lease from the lessee perspective.
a. Create the journal entries for the lessee, Dunbar, for January 1, 2021
b. Create the journal entries for the lessee, Dunbar, for December 31, 2021.
a. The journal entry for Dunbar Company on January 1, 2021, is as follows: Lease Receivable $2,040,674, Lease Revenue $2,040,674 . b. The journal entry for Dunbar Company on December 31, 2021, is as follows: Lease Expense $750,000 Lease Payable $750,000
The lease receivable is calculated by discounting the lease payments using the implicit rate of 6%. The present value of the lease payments over the four-year period is $7,793,000. Therefore, the monthly lease payment is $162,766 ($7,793,000/48).
The journal entry for Dunbar Company on December 31, 2021, is as follows: Lease Expense $750,000 Lease Payable $750,000 The lease payment of $750,000 is due to Mars on January 1, 2022.
However, since the lease is an operating lease, the lessee recognizes the lease expense for the period ending December 31, 2021. The lease expense is calculated as the total lease payments ($750,000 per year) divided by the number of periods (12 months).
Therefore, the lease expense for December 31, 2021, is $62,500 ($750,000/12). In summary, Dunbar Company recognized lease revenue of $2,040,674 on January 1, 2021, and lease expense of $62,500 on December 31, 2021.
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assume the partial equity method is applied. how much equity income will kaye report on its internal accounting records as a result of fiore's operations?
Kaye would report $10,000 of equity income on its internal accounting records as a result of Fiore's operations.
Assuming that the partial equity method is applied, the amount of equity income that Kaye would report on its internal accounting records as a result of Fiore's operations can be calculated by the following formula:
Equity income = (Ownership percentage x Fiore's net income) - Dividends received
Assuming that Kaye owns 30% of Fiore, and Fiore's net income is $100,000 and Fiore pays a dividend of $20,000. Then Kaye's equity income from Fiore would be calculated as follows:
Equity income = (0.3 x $100,000) - $20,000
Equity income = $30,000 - $20,000
Equity income = $10,000
Therefore, equity income is $10,000 of Kaye by partial equity method on its internal accounting records as a result of Fiore's operations.
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David, a member, is a sole practitioner CPA. Based on the work that David does for Jackson Spine, Inc., he is not independent with respect to the company. Jackson Spine, Inc. requires audited financial statements for its line of credit with Graymore Bank. The company has hired Hanson & Potter, CPA's to perform the audit and issue the audited statements to the bank. Hanson & Potter, CPA's would like to utilize David on the audit of Jackson Spine, Inc. because of his extensive experience with the client and his knowledge of the books and records. Would Hanson & Porter, CPA's use of David on the audit impair their independence with respect to Jackson Spine, Inc.?a) Hanson & Potter, CPA's is barred by the Code of Professional Conduct from using David on the audit for any purpose.b) As long as Hanson & Potter, CPA's uses David's work in a manner similar to an internal auditor and complies with AICPA Statements on Auditing Standards, their independence would not be impaired.c) David's lack of independence with respect to Jackson Spine, Inc. would not impair Hanson & Potter, CPA's independence because David's firm was not the firm engaged to perform the audit and issue the audited financial statements.
CPA's uses David's work in a manner similar to an internal auditor and complies with AICPA Statements on Auditing Standards, their independence would not be impaired. The correct answer is Option b)
This is because the AICPA Code of Professional Conduct allows for the use of non-independent individuals on an audit as long as their work is used in a manner similar to an internal auditor and the auditing firm complies with the AICPA Statements on Auditing Standards. The correct answer is Option b)
This means that Hanson & Potter, CPA's can use David's work as long as they treat it as they would the work of an internal auditor and follow the AICPA guidelines for using the work of non-independent individuals. As long as they do this, their independence with respect to Jackson Spine, Inc. would not be impaired.
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Beckman Investments is considering an investment with the following cash flows:
CF0 -$500,000
CF1 $125,000
CF2 $150,000
CF3 $175,000
CF4 $630,000
What is the rate of return on this investment?
a.) 28.65%
b.)26.47%
c.)18.92%
d.)25.985%
Beckman Investments is considering an investment with the following cash flows:CF0 -$500,000CF1 $125,000CF2 $150,000CF3 $175,000CF4 $630,000The rate of return on this investment is approximately 26.47%.
To calculate the rate of return on this investment, the NPV is used, which can be calculated using the following formula: NPV = CF0 + CF1/(1+r) + CF2/(1+r)² + ... + CFn/(1+r)^n Here CF0, CF1, CF2, CF3, CF4 are the cash flows of years 0, 1, 2, 3, and 4, respectively. r = the rate of return, and n = the number of periods Let's plug the values of CF0, CF1, CF2, CF3, CF4 into the above formula.
NPV = -$500,000 + $125,000/(1+r) + $150,000/(1+r)² + $175,000/(1+r)³ + $630,000/(1+r)⁴To solve this problem, let's use a financial calculator to solve for r. When the above formula is solved using a financial calculator, the rate of return on this investment is approximately 26.47%, which is closest to the answer (b.)26.47%.Therefore, the correct answer is (b.)26.47%.
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Economic Systems: Communism Versus Capitalism
This activity is important because an economic system describes how a particular society distributes its resources to produce goods and services. A central issue of economics is how to fulfill an unlimited demand for goods and services in a world with a limited supply of resources. Different economic systems attempt to resolve this central issue in numerous ways.
The goal of this exercise is to demonstrate your understanding of the fundamental differences of communism and capitalism, two of the basic economic systems found in the world today, and how they address the distribution of resources.
Match each statement with the correct aspect of the economic system for both capitalism and communism.
Profits - Communism
Product Availability - Communism
Business Ownership - Capitalism
Competition - Capitalism
Competition - Communism
Price - Capitalism
Profits - Capitalism
Employment Options - Communism
Price - Communism
Product Availability - Capitalism
Employment Options - Capitalism
Business Ownership - Communism
Match each of the options above to the items below.
When Suzanna Kogan was a teenager, she worked at the state-owned bread factory where everyone in her family worked. - 8. Employment Options- Capitalism
When John Wakoski was a teenager, he worked at his uncle’s famous artisan pottery shop on the weekends.- 11. Employment Options- Communism
Since bread production and sales are the same each month, the factory managers can ignore competition from other bread companies.- 5. Competition- Communism
Jack Sampson works in a highly competitive industry. He has to make sure he knows the trends of his market so he always offers good value and retains his competitive advantage.- 4. Competition- Capitalism
All of the money earned beyond the cost of running the shoe manufacturing business goes to the government.
Selena Franka chose to give all the money earned beyond the cost of running her footwear company to charity.
Since sweater selection is so limited, Penny has a difficult time finding one to purchase that makes her stand out from the crowd.
When Janet goes to the mall to buy shorts for summer, she becomes frustrated when she can’t decide which ones to buy due to so many different choices.
Relative to people’s income, the price for gasoline is quite high, so those who own cars are very conscientious about using them.
Each time there is a risk that the oil supply will decrease, or the supply does in fact decrease, gasoline prices skyrocket.
Mike receives notice from the government regarding where he is assigned to work.
Sara completes her college application to start her studies in Accounting.
The first 4 are answered, unsure if correct but please match the rest.
Profits - Communism: All of the money earned beyond the cost of running the shoe manufacturing business goes to the government.
Product Availability - Communism: Since sweater selection is so limited, Penny has a difficult time finding one to purchase that makes her stand out from the crowd.
Business Ownership - Capitalism: Selena Franka chose to give all the money earned beyond the cost of running her footwear company to charity.
Competition - Capitalism: Jack Sampson works in a highly competitive industry. He has to make sure he knows the trends of his market so he always offers good value and retains his competitive advantage.
Competition - Communism: Since bread production and sales are the same each month, the factory managers can ignore competition from other bread companies.
Price - Capitalism: Each time there is a risk that the oil supply will decrease, or the supply does in fact decrease, gasoline prices skyrocket.
Profits - Capitalism: When John Wakoski was a teenager, he worked at his uncle’s famous artisan pottery shop on the weekends.
Employment Options - Communism: When Suzanna Kogan was a teenager, she worked at the state-owned bread factory where everyone in her family worked.
Price - Communism: Relative to people’s income, the price for gasoline is quite high, so those who own cars are very conscientious about using them.
Product Availability - Capitalism: When Janet goes to the mall to buy shorts for summer, she becomes frustrated when she can’t decide which ones to buy due to so many different choices.
Employment Options - Capitalism: Sara completes her college application to start her studies in Accounting.
Business Ownership - Communism: Mike receives notice from the government regarding where he is assigned to work.
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would your response to part e change if the st. cloud plant could use the facilities necessary to produce parts for job no. 110 for another job that could earn an incremental profit of $27,000?
Yes, my response to part e would change if the St. Cloud plant could use the facilities necessary to produce parts for job no. 110 for another job that could earn an incremental profit of $27,000.
The extra profit of $27,000 would make the St. Cloud plant an attractive option, and this would have to be taken into account when making a decision.
In order to determine the best course of action, an analysis would need to be conducted to compare the cost of production at the St. Cloud plant to the cost of production at other plants. The cost of labor, materials, overhead, and other production costs would need to be taken into consideration.
Additionally, the capacity of the St. Cloud plant and the demand for the new product would need to be evaluated to ensure that production would be successful. The decision should be made based on the total cost of production, considering the incremental profit of $27,000, and other factors.
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Post adjusting entries to the T-accounts. Cash 7/1 13.200 7/1 2.200
7/21 1.760 7/5 2.040
7/18 1.650
7/20 2.200
7/31 320
7/31 660
Account receivable
7/12 4.070 7/21 1.760
7/25 2.750 ----- ------------
The supplies used =$790 -$280 =$510
Adjusting Journal Entry and Adjusted Trial BalanceCalculations:-
1. Prepaid Insurance expired =$1560 x1/12 months =$130
2. Supplies used =$790 -$280 =$510
Unadjusted balances refer to account balances that have not been corrected or modified for any adjustments or entries at the end of an accounting period.
These balances are typically the raw data from transactions that have been recorded in an organization's books.
Unadjusted balances serve as a starting point for the preparation of financial statements, but they may not accurately reflect the financial position or performance of an organization if there are errors, omissions, or other issues in the underlying transactions.
Therefore, it is important to make appropriate adjustments and corrections to the account balances before finalizing financial statements.
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Over time, what can you say about the company's leverage? group of answer choices leverage is increasing leverage is decreasing leverage has a u-shape. Leverage is constant
Over time, about the company's leverage is increasing and leverage has a U-shape. The correct option is A and C.
Leverage is those amount of debt in which the company has in its mix of debt and equity or basically its capital structure. That company with more debt than average for its organization is said to be highly leveraged.
The debt and leverage is affected the cash flow statement and balance sheet of that company or organization. The type of cash flow has three type which is operating cash flow, investing cash flow, and financing cash flow. The type of leverage is categorized into two main types which are financial and operating leverage.
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What two aspects are critical to organizational change efforts and foundational to the HR function in managing change?
Select one:
a. clarifying and communicating the policies and total reward systems
b. initiating and evaluating all human resource functions
c. integrating business strategy with all human resource functions training and education
d. clarifying and communicating the values and organizational learning
Option (c), Training and education are two factors that are essential to organizational change efforts and the cornerstone of the HR function in managing change, and they should be integrated with all human resource functions.
What essential components are driving organizational change?The literature analysis reveals that a range of organizational factors, including the organization's structure, size, project capabilities, clients, leadership, rivalry, culture, teamwork, and change preparedness, have an effect on business transformation projects.
Using their familiarity with the organization's employees, HR professionals can use their assistance with change management in two key ways: 1) by participating in the planning and execution phases with other managers to ensure that general change objectives are met; and 2) by understanding the needs and expectations of the organization's workforce during a change.
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