Answer:
cross-price elasticity formula = % change in quantity demanded of good X / % change in price of good Y
cross-price elasticity of demand between splishy splashies and frizzles (or is it flopsicles?) = 4% / -5% = -0.8, complement goods. When the cross price elasticity is negative, then the goods complement each other.
cross-price elasticity of demand between splishy splashies and cannies (or is it kippies?) = -5% / -5% = 1, substitute goods. When the cross price elasticity is positive, then the goods substitute each other.
If you are about to launch a marketing campaign for splishy splashies, then you should include frizzles in it.
On August 20th, one of your employees comes to you with a vacation request. The employee’s available vacation time expires on September 1st, however she wants to take her vacation between September 20th through the 25th.
She asks you to submit her vacation request to the corporate office for the week prior to September 1st, and wants you to not schedule her for the days between the 20th and 25th, and she wants her "vacation" pay for those days.
Would you do it? Why? or Why Not?
Answer:
No
Explanation:
Her vacation is expired and therefore invalid. Also she is requesting for a pay during this period which counters Amy form of sympathy for this employee. However, depending on the relationship the employee has with her employer, there might be a compromise especially if the employee really does need the vacation as she may be burned out or may have postponed vacation till expiration for the interest of the company
Sheridan Company sells radios for $50 per unit. The fixed costs are $445000 and the variable costs are 60% of the selling price. As a result of new automated equipment, it is anticipated that fixed costs will increase by $65000 and variable costs will be 50% of the selling price. The new break-even point in units is:
Answer:
Break-even point in units= 2,600
Explanation:
To calculate the break-even point in units, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Fixed costs= $65,000
Contribution margin per unit= 50*0.5= $25
Break-even point in units= 65,000/25
Break-even point in units= 2,600
At the local banking institution the branch manager doubles as the IT "go-to" by handling printer setups, resettingLAN passwords, and periodically monitoring the branch’s server health. Last week she noted that a handful of herbranch’s customers complained about suspicious activity in their checking accounts. She knew that the main branchwould handle it and repair any fraudulent charges. She also knew better than to bother the main branch with these customer complaints because the main branch is always ahead of things like this and quickly reminds her that they seewhat she does. Her only response, therefore, was to assure her customers that their accounts would be repaired withinten business days.The most likely law or regulation that becomes an issue upon her discovery i:__________.
a. The Gramm-Leach-Bliley Act’s Safeguards Rule
b. The Good Samaritan Law
c. Section 404 of the Sarbanes-Oxley Act
d. The FTC’s Red Flags Rule
Answer: d. The FTC’s Red Flags Rule
Explanation:
The Federal Trade Commission has a Red Flags Rules that requires that financial institutions like Banks should implement a program that is capable of flagging instances of suspicious activity that could point to identity theft in the covered accounts that it holds.
This bank's customers are seeing some suspicious activity in their checking accounts which could point to a case of identity theft. The Red Flags rule could therefore be the most relevant rule to the manager's discovery.
Consider the following scenario:
Cold Goose Metal Works Inc.’s income statement reports data for its first year of operation. The firm’s CEO would like sales to increase by 25% next year.
1. Cold Goose is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of earnings before interest and taxes (EBIT).
2. The company’s operating costs (excluding depreciation and amortization) remain at 70.00% of net sales, and its depreciation and amortization expenses remain constant from year to year.
3. The company’s tax rate remains constant at 40% of its pre-tax income or earnings before taxes (EBT).
4. In Year 2, Cold Goose expects to pay $300,000 and $2,306,475 of preferred and common stock dividends, respectively.
Complete the Year 2 income statement data for Cold Goose, then answer the questions that follow. Round each dollar value to the nearest whole dollar.
Cold Goose Metal Works Inc.
Income Statement for Year Ending December 31
Year 1 $30,000,000 21,000,000 1,200,000 $7,800,000$
Year 2 (Forecasted)
Net sales Less: Operating costs, except depreciation and amortization Less: Depreciation and amortization expenses Operating income (or EBIT) Less: Interest expense Pre-tax income (or EBT) Less: Taxes (40%) Earnings after taxes Less: Preferred stock dividends Earnings available to common shareholders Less: Common stock dividends Contribution to retained earnings 1,200,000 780,000 $7,020,000 2,808,000 $4,212,000s 300,000 $3,912,000 1,895,400 $1,605,525 $2,519,025
Given the results of the previous income statement calculations, complete the following statements:
In Year 2, if Cold Goose has 25,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive____________ ▼ in annual dividends
If Cold Goose has 200,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change from __________ in Year 1 to in ________ Year 2
Cold Goose's before interest, taxes, depreciation and amortization (EBITDA) value changed from _______ in Year 1 to in ______ Year 2
It is __________▼ to say that Cold Goose's net inflows and outflows of cash at the end of Years 1 and 2 are equal to the company's annual contribution to retained earnings, $1,605,525 and $2,519,025, respectively. This is because ▼ of the items reported in the income statement involve payments and receipts of cash
Answer:
Cold Goose Metal Works Inc.
1. Completion of the Year 2 Income Statement for Cold Goose:
Cold Goose Metal Works Inc.
Income Statement for Year Ending December 31
Year 1 Year 2
(Forecasted)
Net sales $30,000,000 $37,500,000
Less: Operating costs, except depreciation
and amortization 21,000,000 28,125,000
Less: Depreciation & amortization expenses 1,200,000 1,200,000
Operating income (or EBIT) $7,800,000 $8,175,000
Less: Interest expense 780,000 1,226,250
Pre-tax income (or EBT) $7,020,000 $6,948,750
Less: Taxes (40%) 2,808,000 2,779,500
Earnings after taxes $4,212,000 $4,169,250
Less: Preferred stock dividends 300,000 300,000
Earnings for common shareholders $3,912,000 $3,869,250
Less: Common stock dividends 1,895,400 2,306,475
Contribution to retained earnings $1,605,525 $1,562,775
2. Given the results of the previous income statement calculations, complete the following statements:
In Year 2, if Cold Goose has 25,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive____$12________ ▼ in annual dividends .
If Cold Goose has 200,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change from ____$19.56______ in Year 1 to in ___$19.35_____ Year 2 .
Cold Goose's before interest, taxes, depreciation and amortization (EBITDA) value changed from _$21,000,000______ in Year 1 to in _$28,125,000_____ Year 2 .
It is __wrong________▼ to say that Cold Goose's net inflows and outflows of cash at the end of Years 1 and 2 are equal to the company's annual contribution to retained earnings, $1,605,525 and $1,562,775 ($2,519,025), respectively. This is because not all ▼ of the items reported in the income statement involve payments and receipts of cash
Explanation:
a) Data and Calculations:
Cold Goose Metal Works Inc.
Income Statement for Year Ending December 31
Year 1 Year 2
(Forecasted)
Net sales $30,000,000 $37,500,000
Less: Operating costs, except depreciation
and amortization 21,000,000 28,125,000
Less: Depreciation & amortization expenses 1,200,000 1,200,000
Operating income (or EBIT) $7,800,000 $8,175,000
Less: Interest expense 780,000 1,226,250
Pre-tax income (or EBT) $7,020,000 $6,948,750
Less: Taxes (40%) 2,808,000 2,779,500
Earnings after taxes $4,212,000 $4,169,250
Less: Preferred stock dividends 300,000 300,000
Earnings for common shareholders $3,912,000 $3,869,250
Less: Common stock dividends 1,895,400 2,306,475
Contribution to retained earnings $1,605,525 $1,562,775
b) Forecasts:
1. Sales = $30 million * 1.25 = $37.5 million
2. Operating costs = 75% of sales = $28,125,000 (0.75 * $37.5 million)
3. Interest expense = 15% of EBIT = $1,226,250 (15% * $8,175,000)
4. Taxes = 40% of EBT = $2,779,500 (40% * $6,948,750)
5. Preferred dividend per share = $12 ($300,000/25,000)
6. Earnings per share = $19.56 ($3,912,000/200,000) Year 1 and $19.35 ($3,869,250/200,000) in Year 2
Brief Exercise 14-08 Ziegler Corporation reports net income of $380,000 and a weighted-average of 200,000 shares of common stock outstanding for the year. Compute the earnings per share of common stock.
Answer:
$1.9
Explanation:
The computation of the earning per share is shown below:
Earning per share is
= Net income ÷ Weighted number of oustanding shares
= $380,000 ÷ 200,000 shares
= $1.9
By simply divide the net income from the Weighted number of oustanding shares, the earning per share could be determined
Hence, the earning per share is $1.9
If national income is $5,000 billion, compensation of employees is $1,105 billion, proprietors’ income is $1,520 billion, corporate profits are $490 billion, and net interest is $128 billion, then rental income is equal to
Answer:
Rental income = $1,757 billion
Explanation:
National income is defined as the value of goods and services that a nation produces within a financial year.
Therefore it is made up of all economic actives that the nation is involved in.
The gross domestic product is a measure of the national income.
The formula for national income is given below
National income = employees compensation + proprietors' income + corporate profits + rental income +net interest
5,000 billion = 1,105 billion + 1,520 billion + 490 billion + rental income + 128 billion
Rental income = 5,000 billion - 3,243 billion
Rental income = $1,757 billion
In 2013, Space Technology Company modified its model Z2 satellite to incorporate a new communication device. The company made the following expenditures:
Basic research to develop the technology $ 2,000,000
Engineering design work 680,000
Development of a prototype device 300,000
Acquisition of equipment 60,000
Testing and modification of the prototype 200,000
Legal and other fees for patent application on the new
communication system 40,000
Legal fees for successful defense of the new patent 20,000
Total $ 3,300,000
The equipment will be used on this and other research projects. Depreciation on the equipment for 2013 is $10,000.
During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all of the above as costs of the patent. Management contends that the device simply represents an improvement of the existing communication system of the satellite and, therefore, should be capitalized.
Required:
Prepare correcting entries that reflect the appropriate treatment of the expenditures.
1. Record the correcting entry to expense R&D costs incorrectly capitalized
2. Record the correcting entry to capitalize the cost of equipment incorrectly capitalized as a patent.
3. Record the correcting entry to record depreciation on equipment used in R&D projects.
Answer:
1. Dec 31
Dr Research and Development Expense $3,180,000
Cr 2013 Patent $3,180,000
2. Dec 31
Dr Equipment $60,000
Cr 2013 Patent $60,000
3. Dec 31
Dr Research and Development Expense $10,000
Cr 2013 Accumulated Depreciation - Equipment $10,000
Explanation:
1. Preparation of the Journal entry to Record the correcting entry to expense
Dec 31
Dr Research and Development Expense $3,180,000
Cr 2013 Patent $3,180,000
(Being To record research and development expense )
Calculation for the Total amount of theresearch and development expense
Basic research to develop the technology $2,000,000
Engineering design work $680,000
Development of a prototype device $300,000
Testing and modification of the prototype $200,000
TOTAL research and development expense $3,180,000
2. Preparation of the journal entry to Record the correcting entry to capitalize the cost of equipment
Dec 31
Dr Equipment $60,000
Cr 2013 Patent $60,000
(Being To correct cost of equipment capitalized to patent)
3. Preparation of the Journal entry to Record the correcting entry to record depreciation on equipment
Dec 31
Dr Research and Development Expense $10,000
Cr 2013 Accumulated Depreciation - Equipment $10,000
(Being To record research and development expens
ogan Products computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 40,000 direct labor-hours would be required for the period's estimated level of production. The company also estimated $466,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $3.00 per direct labor-hour. Logan's actual manufacturing overhead for the year was $713,400 and its actual total direct labor was 41,000 hours.
Required:
Compute the company's pre-determined overhead rate for the year.
Answer:
Predetermined manufacturing overhead rate= $14.65 per direct labor hour
Explanation:
Giving the following information:
Estimated direct labor hour= 40,000
Estimated fixed overhead= $466,000
Variable manufacturing overhead of $3.00 per direct labor-hour.
To calculate the predetermined manufacturing overhead rate we need to use the following formula:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= (466,000/40,000) + 3
Predetermined manufacturing overhead rate= $14.65 per direct labor hour
provide an example of two companies that have built an effective co-operation.briefly explain the relationship of it g
Answer:
An example of two companies that have built an effective co-operation is discussed below in details.
Explanation:
Louis Vuitton & BMW
Co-operation Operations: The Art of Travel
Designer Louis Vuitton and Carmaker BMW may not be the usual simple pairings. But if you believe about it, they have some significant things in general. If you concentrate on Louis Vuitton's trademark baggage lines, they're both in the industry of journey. They both value leisure. And finally, they're both well-known, fabulous brands that are recognized for high-quality craftsmanship.
Which action taken by a central bank would reflect expansionary monetary policy?
The action taken by a central bank which would reflect the expansionary monetary policy is the sale of treasury securities to banks and the lowering down of reserve requirements.
Options A and C are correct.
What is a central bank?A central bank is referring to the largest bank that controls the regional and subordinate banks. It is the bank in which the commercial banks keep the needed reserve ratio. There are various policies being made by the central bank to monitor the monetary system like fiscal policy, monetary policy, economic policy, etc.
The central bank of the US country is the Federal Reserve that applied the expansionary monetary policy. The three ways that are made by Federal Reserve in respect of this policy are by making the discount rates to be fallen down for every bank, by acquiring the securities being sold by the government in the market and by keeping the reserve ratio to the lowest so that commercial banks can easily maintain them.
Therefore, the explanations written in option A and C are correct.
Learn more about the expansionary monetary policy in the related link:
https://brainly.com/question/28038989
#SPJ5
Question's missing part:
The options are given as follows:
A) Selling treasury securities to banks to reduce the money supply
B) Raising the discount rate to provide less in loans to banks
C) Lowering the reserve requirements for all banks
D) Raising the interest that it pays to banks on the balance of their
reserves
Townsend Industries Inc. manufactures recreational vehicles. Townsend uses a job order cost system. The time tickets from November jobs are summarized as follows:
Job 201 $4,280
Job 202 2,140
Job 203 1,690
Job 204 3,140
Factory supervision 1,460 Factory overhead is applied to jobs on the basis of a predetermined overhead rate of $22 per direct labor hour. The direct labor rate is $15 per hour. If required, round final answers to the nearest dollar.
Required:
a. Journalize the entry to record the factory labor costs.
b. Journalize the entry to apply factory overhead to production for November.
Answer:
Part a.
Work In Process : Job 201 $64,200 (debit)
Work In Process : Job 202 $32,100 (debit)
Work In Process : Job 203 $25,350 (debit)
Work In Process : Job 204 $47,100 (debit)
Salaries Payable $168,750 (credit)
Part b.
Work In Process : Job 201 $94,160 (debit)
Work In Process : Job 202 $47,080 (debit)
Work In Process : Job 203 $37,180 (debit)
Work In Process : Job 204 $69,080 (debit)
Overheads $168,750 (credit)
Explanation:
Calculation of Labor Cost :
Job 201 = 4,280 hours × $15 = $64,200
Job 202 = 2,140 hours × $15 = $32,100
Job 203 = 1,690 hours × $15 = $25,350
Job 204 = 3,140 hours × $15 = $47,100
Application of overhead to jobs :
Job 201 = 4,280 hours × $22 = $94,160
Job 202 = 2,140 hours × $22 = $47,080
Job 203 = 1,690 hours × $22 = $37,180
Job 204 = 3,140 hours × $22 = $69,080
Explain how allocating the profits evenly between the partners would work. Consider the fairness to each of the partners in your response.
Answer and Explanation:
Allocation of profit to partners is all dependent on partnership agreement also called partnership deed where sharing ratio as well as role and participation of partners are stated clearly. The sharing ratio states how profits or losses in the partnership is shared amongst partners. If there is ratio to share profit equally or higher and lower for certain partners, it is made and stated clear in partnership deed before business commences, this ensures there is fairness in partners' dealings and everyone gets his share according to agreement
Sara purchased a life insurance policy as an investment from her neighbor, Angela. Angela, the original policy holder had paid premiums of $12,000 before the sale. Sara paid Angela $16,500 to acquire the life insurance policy. Sara made additional payments of $5,000. When Angela died, Sara collected $50,000. How much of the policy proceeds is taxable to Sara
Answer:
$16,500
Explanation:
She invested = $12,000
Total money spent to acquire the policy = ($16,500 + $5000) = $21,500
Total money invested on policy = $21500 + $12000
Total money invested on policy = $33500
Money that sara got after angela died = $50,000
Therefore, the taxable proceed will be = $50,000 - $33,500 = $16,500
Label the following hypothetical demand scenarios. Use the midpoint method.
Contain Yourself!, a plastic container company, raises the price of its signature "lunchbox" container from $3.00 to $4.00. As a result, the quantity sold drops from 20,000 to 15,000. ..........
Economists working for the United States have determined that the elasticity of demand for gasoline is 0.5. ..................
CapCityMetro decides to increase bus fare rates from $2.00 to $2.21. Consequently, the number of passengers who decide to take the bus in Austin drops from an average of 70,000 riders a day to an average of 61,000 riders a day. ...............
Inelastic unit-elastic Elastic perfectly elastic
Answer:
Contain Yourself!, a plastic container company, raises the price of its signature "lunchbox" container from $3.00 to $4.00. As a result, the quantity sold drops from 20,000 to 15,000.
UNIT ELASTIC ⇒ when the price elasticity of demand is unit elastic, a change in price will result in a proportionally equal change in the quantity demanded.
PED = % change in quantity / % change in price = {(15 - 20) / [(15 + 20)/2]} / {($4 - $3) / [($4 + $3)/2]} = -0.2857 / 0.2857 = -1 or |1| in absolute terms
Economists working for the United States have determined that the elasticity of demand for gasoline is 0.5.
INELASTIC DEMAND ⇒ when the price elasticity of demand is inelastic, a change in price will result in a proportionally lower change in the quantity demanded.
CapCityMetro decides to increase bus fare rates from $2.00 to $2.21. Consequently, the number of passengers who decide to take the bus in Austin drops from an average of 70,000 riders a day to an average of 61,000 riders a day.
ELASTIC DEMAND ⇒ when the demand for a good is elastic, a change in price will result in a proportionally higher change in quantity demanded.
PED = % change in quantity / % change in price = {(61,000 - 70,000) / [(61,000 + 70,000)/2]} / {($2.21 - $2) / [($2.21 + $2)/2]} = -0.1374 / 0.1 = -1.374 or |1.374| in absolute terms
Tommy is from a small town and quit high school to get married. He and his wife have five kids, and his wife stays home with the children. Tommy is a hard worker and strives to provide for his family, although his skills are limited. Tommy has been a butcher for his entire career. He has been with his present company, a large retail grocer, for the past six years performing the same job. There are twelve people in the meat department, and each one specializes in cutting certain types of meat. Tommy's job is to cut ribeye steaks. Cutting ribeye steaks is very precise and requires holding and using a knife in the same way every day. This requirement has started to cause Tommy pain in his right hand. Although Tommy still likes his work, he is getting a little bored of the repetition and is bothered by the pain.
The quality of Tommy’s work has not suffered, but the store managers can tell that he is getting bored. What could they do to keep him better engaged?
a. Purchase special ergonomic mats to help with the pain associated with standing on the hard floor every day.
b. Motivate Tommy by giving him feedback about how skilled he is in cutting ribeye and explain that customers visit the store for his custom steaks.
c. Offer Tommy more money because he is so good at cutting meat.
d. Cross train the employees in the meat department, so beef cutters can learn how to cut pork and vice versa.
e. Administer a work personality quiz to Tommy to see if there is another area in the store where he could move to, such as the produce department.
Answer: d. Cross train the employees in the meat department, so beef cutters can learn how to cut pork and vice versa.
Explanation:
Since the quality of Tommy’s work has not suffered, but the store managers can tell that he is getting bored, the thing that could be done to keep him better engaged is to cross train the employees in the meat department, so beef cutters can learn how to cut pork and vice versa. Cross training helps the workers in the company appreciate the workers of others in other department and shows workers flexibility.
The adjusted trial balance of Norton Company contained the following information. Assume the tax rate is 25%:
Debit Credit
Sales revenue $390,000
Sales returns and allowances $10,000
Sales discounts 5,000
Cost of goods sold 200,000
Operating expenses 110,000
Interest revenue 8,000
Interest expense 3,000
Required:
Compute income from operations.
a. $175,000
b. $65,000
c. $50,000
d. $70,000
Answer:
b. $65,000
Explanation:
Particulars Amount
Revenues
Service Revenue $390,000
Less: Sales Return and allowance $10,000
Less: Sales Discount $5,000
Net Sales Revenue $375,000
Less: Cost of Goods Sold $200,000
Gross Profit $175,000
Less: Operating Expenses $110,000
Operating Income $65,000
Thus, income from operation is $65,000
"Ayres Services acquired an asset for $80 million in 2021." The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). Ayers deducted 100% of the asset's cost for income tax reporting in 2021. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2021, 2022, 2023, and 2024 are as follows: ($ in millions)
2021 2022 2023 2024
Pretax accounting income $330 $350 $365 $400
Depreciation on the income statement 20 20 20 20
Depreciation on the tax return (80 ) (0 ) (0 ) (0 )
Taxable income $270 $370 $385 $420
For December 31 of each year, determine:
a. The cumulative temporary book-tax difference for the depreciable asset.
b. The balance to be reported in the deferred tax liability account.
Answer:
a. The cumulative temporary book-tax difference for the depreciable asset are as follows:
December 31, 2021 = $60 million
December 31, 2022 = $40 million
December 31, 2023 = $20 million
December 31, 2024 = $0
b. The balance to be reported in the deferred tax liability account are as follows.
December 31, 2021 = $15 million
December 31, 2022 = $10 million
December 31, 2023 = $5 million
December 31, 2024 = $0
Explanation:
Note: See the attached excel file for the calculation of cumulative temporary book-tax difference for the depreciable asset and the balance to be reported in the deferred tax liability account for December 31 of years 2021, 2022, 2023 and 2024 in bold red color.
In the attached excel file, the following formula are used:
Cumulative Temporary differences at December 31 of the current year = Cumulative Temporary differences at December 31 of the previous year + (Depreciation on the tax return at December 31 of the current year - Depreciation on the income statement at December 31 of the current year)
Balance to be reported in deferred tax liability account at December 31 of the current year = Cumulative Temporary differences at December 31 of the current year * Tax rate
Daily demand for a certain product is normally distributed with a mean of 138 and a standard deviation of 13. The supplier is reliable and maintains a constant lead time of 7 days. The cost of placing an order is $17 and the cost of holding inventory is $0.40 per unit per year. There are no stock-out costs, and unfilled orders are filled as soon as the order arrives. Assume sales occur over 358 days of the year.
Your goal here is to find the order quantity and reorder point to satisfy a 73 percent probability of not stocking out during the lead time.
a. To manage inventory, the company is using
Continuous review system
Periodic review system
b. Find the order quantity. (Round your answer to the nearest whole number.)
Order quantity books
c. Find the reorder point. (Use Excel's NORMSINV() function to find the correct critical value for the given α-level. Do not round intermediate calculations. Round "z" value to 2 decimal places and final answer to the nearest whole number.)
Reorder point
Answer:
A. Continuous review system
B. Order quantity = 2,049 Books
C. Reorder point=987
Explanation:
a. In order To manage inventory, the company is using what is called Continuous review system
b. Calculation to find the order quality
Using this formula
Order quantity = √((2DS)/H)
Let plug in the morning
Order quantity=√ ((2 x 49,404 x 17)/0.40)
Order quantity = 2,049 Books
(138*358=49,404)
C. Calculation for reorder point
First step is to find the σL
73 % S.L. - z = 0.613
Using this formula to find the σL
σL = (Lσ^2)
Let plug in the formula
σL=√(7(13)^2)
σL= 34.39
Second step is to find the Reorder point using this formula
R = d bar(L) + zσL
Let plug in the formula
Reorder point = (138)(7) + 0.613(34.39)
Reorder point = 966+21
Reorder point=987
Masterson, Inc., has 4.1 million shares of common stock outstanding. The current share price is $84, and the book value per share is $11. The company also has two bond issues outstanding. The first bond issue has a face value of $70 million, has a coupon rate of 5.1%, and sells for 98% of par. The second issue has a face value of $50 million, has a coupon rate of 5.60%, and sells for 108% of par. The first issue matures in 20 years, the second in 12 years. The most recent dividend was $3.95 and the dividend growth rate is 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?
Answer:
The answer is "8.37%".
Explanation:
[tex]\text{MV of equity} = \text{equity price} \times \text{number of outstanding shares}[/tex]
[tex]=84 \times 4100000\\\\=344400000[/tex]
[tex]\text{MV of Bond1}=\text{Par value} \times \text{bonds outstanding} \times \text{age of percentage}[/tex]
[tex]=1000 \times 70000 \times 0.98 \\\\=68600000[/tex]
[tex]\text{MV of Bond2}=\text{Par value} \times \text{bonds outstanding} \times \text{age of percentage}[/tex]
[tex]=1000 \times 50000 \times 1.08 \\\\=54000000[/tex]
[tex]\text{MV of firm} = \text{MV of Equity} + \text{MV of Bond1}+ \text{MV of Bond 2}[/tex]
[tex]=344400000+68600000+54000000\\\\=467000000[/tex]
[tex]\text{Weight of equity W(E)} = \frac{\text{MV of Equity}}{\text{MV of firm}}[/tex]
[tex]= \frac{344400000}{467000000}\\\\=0.7375[/tex]
[tex]\text{Weight of debt W(D)}= \frac{\text{MV of Bond}}{\text{MV of firm}}[/tex]
[tex]= \frac{122600000}{467000000}\\\\=0.2625[/tex]
Equity charges
By DDM.
[tex]\text{Price = new dividend} \times \frac{(1 + \text{rate of growth})}{( \text{Equity expense-rate of growth)}}[/tex]
[tex]84 = 3.95 \times \frac{(1+0.05)}{(\text{Cost of equity}- 0.05)}\\\\84 = 3.95 \times \frac{(1.05)}{(\text{Cost of equity} - 0.05)}\\\\84 = \frac{4.1475}{ (\text{Cost of equity} - 0.05)}\\\\\text{Cost of equity} -0.05 = \frac{4.1475}{84}\\\\\text{Cost of equity} -0.05 = 0.049375\\\\\text{Cost of equity} = 0.049375 + 0.05\\\\\text{Cost of equity} = 0.099375 \\\\\text{Cost of equity} \% = 9.9375 \% \ \ \ or \ \ \ 9.94 \% \\\\[/tex]
Debt expenses
Bond1
[tex]K = N \times 2 \\\\[/tex]
[tex]Bond \ Price = \sum [ \frac{\text{(Semi Annual Coupon)}}{(1 + \frac{YTM}{2})^k}] + \frac{Par\ value}{(1 + \frac{YTM}{2})^{N \times 2}}[/tex]
[tex]k=1\\\\K =20 \times 2\\\\980 = \sum [ \frac {(5.1 \times \frac{1000}{200})}{(1 + \frac{YTM}{200})^k}] + \frac{1000}{(1 + \frac{YTM}{200})}^{20 \times 2}\\\\k=1\\\\\ YTM1 = 5.2628923903\\\\Bond2\\[/tex]
[tex]K = N \times 2[/tex]
[tex]Bond \ Price = \sum [ \frac{\text{(Semi Annual Coupon)}}{(1 + \frac{YTM}{2})^k}] + \frac{Par\ value}{(1 + \frac{YTM}{2})^{N \times 2}}[/tex]
[tex]k=1\\\\K =12 \times 2\\\\[/tex]
[tex]1080 =\sum [\frac{(5.6 \times \frac{1000}{200})}{(1 + \frac{YTM}{200})^k}] +\frac{1000}{(1 +\frac{YTM}{200})^{12 \times 2}} \\\\k=1\\\\YTM2 = 4.72\\\\[/tex]
[tex]\text{Company debt costs} = YTM1 times \frac{(MV \ bond1)}{(MV \ bond1+MV \ bond2)}+YTM2 \times \frac{(MV \ bond2)}{(MV \ bond2)}\\\\[/tex]
The cost of the debt for the company:
[tex]= 5.2628923903 \times \frac{(68600000)}{(68600000+54000000)}+4.72 \times \frac{(68600000)}{(68600000+54000000)}\\\\[/tex]
Business debt cost=[tex]5.02 \% \\\\[/tex]
after taxation cost of debt:
[tex]= \text{cost of debt} \times (1- tax \ rate)\\\\= 5.02 \times (1-0.21)\\\\= 3.9658\\\\[/tex]
[tex]WACC= \text{after debt charges} \times W(D)+equity cost \times W(E) \\\\[/tex]
[tex]=3.97 \times 0.2625+9.94 \times 0.7375 \\\\ =8.37 \% \\\\[/tex]
Del Gato Clinic's cash account shows a $11,589 debit balance and its bank statement shows $10,555 on deposit at the close of business on June 30. Outstanding checks as of June 30 total $1,829. The June 30 bank statement lists a $16 bank service charge. Check No. 919, listed with the canceled checks, was correctly drawn for $467 in payment of a utility bill on June 15. Del Gato Clinic mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $476. The June 30 cash receipts of $2,856 were placed in the bank's night depository after banking hours and were not recorded on the June 30 bank statement.
Prepare its bank reconciliation using the above information.
DEL GATO CLINIC
Bank Reconciliation
June 30
Book balance
Add: Bank statement balance
Add:
Deduct: Deduct:
Adjusted bank balance Adjusted book balance
Answer:
Bank Reconciliation
Bank Statement Balance 10,555
Add: June 30 Deposit 2,856
13,411
Less: Outstanding Checks (1,829)
Adjusted bank balance $11,582
Bank Reconciliation
Book Balance 11,589
Add: Error in Check 919 (479 - 467) 9
11,598
Less: Bank service charge ( 16)
Adjusted book balance 11,582
How can you enable your sales team to perform better?
A. by enforcing stringent rules
B. by providing them with training and other supporting material
C. by permitting them the freedom to do whatever they think is right
D. by increasing their pay more often than the rest of the workforce
Answer: i think its B because it makes the most sense out of them all
Explanation:
A company looking to expand internationally with little risk would choose?
Answer:
LicensingFranchisingExplanation:
There are no options but Licensing as well as Franchising are some of the least riskiest ways to expand internationally.
With Licensing, the company looking to expand simply sells licenses to various companies in different countries giving them the right to use their image. Basically, the company the license is sold to gets access to the seller's intellectual property but then can run their business with a significant degree of autonomy.
Franchising represents another way to expand with little risk. It involves a company giving a license to another company to sell and sometimes produce their products as well as image rights. The company will give the franchisee (company that gets the license) the knowledge and training required to maintain the franchise and in exchange, franchisee pays a fee.
Both of these methods ensure that the name and brand of a company spread internationally whilst making money from it. Risk is minimized because the investment in other countries is low to nothing.
Use the information about Billy's Burgers to answer the following question(s):
Billy's Burgers
Figures in $ millions
Income Statement 2010 Balance Sheet 2010
Net Sales 246.0 Assets
Costs exc. Dep. 187.0 Cash 8.0
EBITDA 59.0 Accts. Rec. 21.0
Depreciation 17.2 Inventories 23.0
EBIT 41.8 Total Current Assets 52.0
Interest 12.0 Net PP&E 145.0
Pretax Income 29.8 Total Assets 197.0
Taxes 10.4
Net Income 19.4 Liabilities and Equity Accts.
Payable 18.0 LongTerm Debt 82.0
Total Liabilities 100.0 Total Stockholders' Equity 97.0
Total Liabilities and Equity 197.0
Required:
Using the percent of sales method, and assuming 20% growth in sales, estimate Billy's Burgers' Accounts Receivable for 2011.
a. $21.0 million
b. $18.0 million
c. $25.2 million
d. $21.6 million
Answer:
c. $25.2 million
Explanation:
Billy's Burgers' Accounts receivable 2011 = Accounts receivable 2010 *(1+Growth rate)
Billy's Burgers' Accounts receivable 2011 = $21,000,000 * (1+0.20)
Billy's Burgers' Accounts receivable 2011 = $21,000,000 * (1.20)
Billy's Burgers' Accounts receivable 2011 = $25,200,000.
Mickey, Mickayla, and Taylor are starting a new business (MMT). To get the business started, Mickey is contributing $200,000 for a 40% ownership interest. Mickayla is contributing a building with a value of $200,000 and a tax basis of $150,000 for a 40% ownership interest, and Taylor is contributing legal services for a 20% ownership interest. Using the research skills you learned in Week 1, access RIA Checkpoint and research what amount of gain/income each owner is required to recognize under each of the following alternative situations?
a. MMT is formed as a C corporation.
b. MMT is formed as an S corporation.
c. MMT is formed as LLC.
Answer:
a. MMT is formed as a C corporation.
Mickey and Mickayla will not recognize any gain, while Taylor must recognize $100,000 as ordinary income. Mickey and Mickayla's exchange classifies under §351, but Taylor's doesn't.
b. MMT is formed as an S corporation.
Mickey and Mickayla will not recognize any gain, while Taylor must recognize $100,000 as ordinary income. Mickey and Mickayla's exchange classifies under §351, but Taylor's doesn't.
c. MMT is formed as LLC.
Mickey and Mickayla will not recognize any gain, while Taylor must recognize $100,000 as ordinary income. Mickey and Mickayla's exchange classifies under §721, but Taylor's doesn't.
Explanation:
Basically §351 and §721 are very similar except that one applies to corporations and the other applies to partnerships and LLCs. No gain will be recognize when assets are transferred in exchange for equity, and the people involved in the exchange can control the company.
You want a seat on the board of directors of Red Cow, Inc. The company has 260,000 shares of stock outstanding and the stock sells for $51 per share. There are currently 5 seats up for election. The company uses straight voting. How much will it cost you to guarantee that you will be elected to the board
Answer:
$2,210,051
Explanation:
The computation of the cost that would be guaranteed is shown below:
first find the number of shares controlled which is
= (S x N) ÷ (D + 1) ] + 1
Where,
S = the total number of shares
N = the number of directors required
D = total number of directors i.e. elected
So,
= (260,000 × 1) ÷ (5 + 1) + 1
= 43,334
Now the cost is
= 43,334 × $51
= $2,210,051
Selected Information from Balance Sheets (As of Year End for Years 0 and 1)
Year 0 Year 1
Cash 1,000 2,000
Accounts Receivables 1,000 5,000
Inventory 5,000 4,000
Property, Plant and Equipment (net) 12,000 11,000
Accounts Payable 5,000 4,000
Unearned Revenue 2,000 1,000
Bonds Payable 5,000 6,000
Common Stock 3,000 4,000
Retained Earnings 5,000 7,000
Income Statement (Year 1)
Sales 20,000
Costs of Goods Sold (8,000)
Wage Expense (4,000)
Depreciation Expense (2,000)
Loss from PP&E Sale (1,000)
Net Income Before Tax 5,000
Tax Expense (2.000)
Net Income 3.000
In the space provided, prepare the Operating section of the statement of cash flow for Year 1, using the indirect approach.
Answer:
The Operating Activities section of the Statement of Cash Flow for Year 1:
Net Income $3,000
Add non-cash expenses:
Depreciation Expense 2,000
Loss from PP&E Sale 1,000
Operating cash flow 6,000
Changes working capital -5,000
Net cash flow from operating activities 1,000
Explanation:
Changes in working capital items:
Year 0 Year 1 Changes
Accounts Receivables 1,000 5,000 -4,000
Inventory 5,000 4,000 1,000
Accounts Payable 5,000 4,000 -1,000
Unearned Revenue 2,000 1,000 -1000
Net changes in working capital -5,000
The lease agreement specified quarterly payments of $6,500 beginning September 30, 2021, the beginning of the lease, and each quarter (December 31, March 31, and June 30) through June 30, 2024 (three-year lease term). The florist had the option to purchase the truck on September 29, 2023, for $13,000 when it was expected to have a residual value of $19,000. The estimated useful life of the truck is four years. Mid-South Auto Leasing’s quarterly interest rate for determining payments was 3% (approximately 12% annually). Mid-South paid $51,000 for the truck. Both companies use straight-line depreciation or amortization. Anything Grows’ incremental interest rate is 12%.
Required:
a. Calculate the amount of selling profit that Mid-South would recognize in this sales-type lease. (Be careful to note that, although payments occur on the last calendar day of each quarter, since the first payment was at the beginning of the lease, payments represent an annuity due.)
b. Prepare the appropriate entries for Anything Grows and Mid-South on September 30, 2021.
c. Prepare an amortization schedule(s) describing the pattern of interest expense for Anything Grows and interest revenue for Mid- South Auto Leasing over the lease term.
d. Prepare the appropriate entries for Anything Grows and Mid-South Auto Leasing on December 31, 2021.
e. Prepare the appropriate entries for Anything Grows and Mid-South on September 29, 2023, assuming the purchase option was exercised on that date.
Answer:
a) sales revenue 75,760
cost of good sold 51,000
gross profit: 24,760
b)
LESSOR ENTRIES:
lease receivable 69,260 debit
cash 6,500 debit
sales revenue 75,760 credit
--to record sale on lease--
cost of good sold 51,000 debit
Inventory 51,000 credit
--to record cost--
LESEE ENTRIES:
equipment 75,760 debit
lease liability 69,260 credit
cash 6,500 credit
Lease Schedule:
[tex]\left[\begin{array}{cccccc}Time&Beg&Cuota&Interest&Amort&Ending\\0&75760&6500&&6500&69260\\1&69260&6500&2078&4422&64838\\2&64838&6500&1945&4555&60283\\3&60283&6500&1808&4692&55591\\4&55591&6500&1668&4832&50759\\5&50759&6500&1523&4977&45782\\6&45782&6500&1373&5127&40655\\7&40655&6500&1220&5280&35375\\8&35375&6500&1061&5439&29936\\9&29936&6500&898&5602&24334\\10&24334&6500&730&5770&18564\\11&18564&6500&557&5943&12621\\12&12621&13000&379&12621&0\\\end{array}\right][/tex]
December 31st, 2021 (1st payment)
LESEE ENTRIES:
lease liability 4,422 debit
interest expense 2,078 debit
cash 6,500 credit
--to record payment--
depreciation expense 3,547.5 debit
acc depreciation 3,547.5 credit
--to record depreciation--
LESSOR ENTRIES:
cash 6,500 debit
lease receivables 4,422 credit
interest revenue 2,078 credit
e) option exercised:
LESEE ENTRIES:
lease liability 12,621 debit
interest expense 379 debit
cash 13,000 credit
--to record purchase option--
LESSOR ENTRIES:
cash 13,000 debit
lease receivables 12,621 credit
interest revenue 379 credit
--to record purchase option--
Explanation:
We solve for the present value of the lease:
Present Value of Annuity-due
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C $6,500
time 12
rate 0.03
[tex]6500 \times \frac{1-(1+0.03)^{-12} }{0.03} = PV\\[/tex]
PV $66,642.0567
+ 13,000 purchase option on June 2024:
PRESENT VALUE OF LUMP SUM
[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex]
Maturity 13,000.00
time 12.00
rate 0.03
[tex]\frac{13000}{(1 + 0.03)^{12} } = PV[/tex]
PV 9,117.94
Total lease receivables: 66,642.06 + 9,117.94 = 75,760
a) sales revenue 75,760
cost of good sold 51,000
gross profit: 24,760
d) depreciation on equipment:
(75,760 - 19,000) / 4 year = 14,190 per year
we divide by four as only a quarter of the year past:
14,190 / 4 quarter = 3,547.5
It is the lesee which does the depreicaiton as the Truck possesion belong to it.
If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is:
Answer:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Explanation:
If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
For example:
Total estimated overhead= $150,000
Allocation base= direct labor hours
Estimated Total number of direct labor hours= 10,000
Predetermined manufacturing overhead rate= 150,000/10,000
Predetermined manufacturing overhead rate= $15 per direct labor hour
How is a proceeding for violation of the regulations in Circular 230 instituted against a tax practitioner
Incomplete question. The options read;
A. An aggrieved taxpayer files a petition with the United States Tax Court stating a claim against the attorney, certified public accountant, registered tax return preparer, enrolled agent, enrolled retirement plan agent, or enrolled actuary
B. The IRS representative signs a complaint naming the tax practitioner and files the complaint with the Administrative Law Judge (ALJ)
C. The Secretary of the Treasury files a complaint against the attorney, certified public accountant, registered tax return preparer, enrolled agent, enrolled retirement plan agent, or enrolled actuary in the United States District Court for the District of Columbia
D. The Commissioner of the IRS files a complaint against the attorney, certified public accountant, registered tax return preparer, enrolled agent, enrolled retirement plan agent, or enrolled actuary with the United States Tax Court
Answer:
D. The Commissioner of the IRS files a complaint against the attorney, certified public accountant, registered tax return preparer, enrolled agent, enrolled retirement plan agent, or enrolled actuary with the United States Tax Court
Explanation:
According to the information on the thetaxadviser website, when there is a violation of the regulations in Circular 230 instituted by a tax practitioner a complaint would be filed, and if found guilty, he or she "may be censured, suspended, or disbarred from practice before the IRS."
Usually, the Office of Professional Responsibility would take up the case against the tax practitioner.
3. The last dividend paid by New Technologies was an annual dividend of $1.40 a share. Dividends for the next 3 years will be increased at an annual rate of 8 percent. After that, dividends are expected to increase by 3 percent each year. The discount rate is 16 percent. What is the current value of this stock
Answer:
$12.60
Explanation:
The computation of the current value of the stock is shown below:-
= $1.40 × (1.08) ÷ 1.16 + 1.40 × (1.08)^2 ÷ (1.16)^2 + 1.40 × (1.08)^3 ÷ (1.16)^3 + 1.40 × (1.08)^3 × (1.03) ÷ (0.16 - 0.03) × (1.16)^3
= $1.3034 + $1.2136 + $1.1299 + $8.9520
= $12.60
Therefore for computing the current value of stock we simply solved the above equation.