Answer and Explanation:
a. The computation of the equity cost of capital is shown below:
As we know that
Expected rate of return = Risk free rate + Risk Premium × Beta
= 5.20% + 4.90% × 1.30
= 11.57%
b. Now the rate at which the dividend should be grow is
Value of the stock = Expected dividend ÷ (cost of equity - growth rate)
$38 = $2 ÷ (11.57% - growth rate)
so, the growth rate is 6.31%
A movie theater company obtains the following estimated elasticity of demand.
The absolute value of the short run price elasticity of demand for movie tickets is 0.85.
The absolute value of of the long run price elasticity of demand for movie tickets is 3.2.
The cross price elasticity of demand for good X, another product sold by the theater, with respect to the price of movie tickets is - 0.26
The income elasticity of demand for movie tickets is 0.75.
Answer each of the following by referring to the given elasticities.
a. If the theater raises movie ticket prices by 10 percent, by what percentage and in what direction will the quantity demanded for movie tickets change in the short run?
b. Explain why the short-run price elasticity of demand for movie tickets differs from the long-run price elasticity of demand for movie tickets.
c. What will happen to total revenue from movie ticket sales in the long run if movie ticket prices increase? Explain using the relative percentage changes in price and quantity.
d. Are movie tickets a normal good or an inferior good? Explain. (e) Given the increase in the price of movie tickets in part (a), what would be the impact on the demand for good X? Use the appropriate graph for good X to illustrate your answer.
Answer:
Explanation:
Given:
Short-run price elasticity = - 0.85
Long-run price elasticity = - 3.2
Cross-price elasticity = - 0.26
Income elasticity = 0.75
a. If the theater raises movie ticket prices by 10 percent it means that percentage of price change is 10%.
[tex]Elasticity = \frac{Percentage change in Quantity demanded}{Percentage change in price} \\\\-0.85 = \frac{Percent change in Quantity demanded\\}{10} \\\\Percent change in Quantity demanded = -0.85*10\\ \\ = -8.5[/tex]
Thus, quantity demanded falls by 8.5 percent.
b. Short-run price elasticity is different from long-run elasticity due to the time horizon. When individuals have more time they can switch to cheaper alternatives. While, it takes time to adjust in the short-run as the time horizon is not much. So short-run elasticity is less elastic than in the long-run.
c.
In the long-run demand for movie tickets is very elastic. So as price rises in the long-run, quantity demanded falls by a greater proportion. This will cause total revenue to fall in the long-run.
d. Normal goods are goods which have a positive income elasticity. This means for normal goods demand increases as income increases. But in case of inferior goods, demand is inversely related to income. As income rises demand for inferior goods decreases.
Since in this case, income elasticity is 0.75 (positive) it can be concluded that movie tickets are normal goods.
e. Good X is the related good to movie tickets. As cross price elasticity is -0.26 it means that as price of movie tickets rises by 1 percent demand for good X will fall by 0.26 percent.
Thus, as demand for good X and price of movie tickets are inversely related to each other it can be said that they are complementary goods.
If the price of movie tickets are increased by 10%, quantity demanded would increase by 8.5%.
b. The short run elasticity of demand differs from the long run elasticity of demand because in the short run there is limited time to search for suitable suitable alternatives for movies.
c. If the price of movie tickets are increased revenue would decline because demand is elastic.
d. Movie tickets are a normal good. This is because its coefficient of elasticity is greater than zero.
e. If the price of movie tickets are increased, the demand for good X would decline. This is because the two goods are complements.
What is the price elasticity of demand?
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
Price elasticity of demand = percentage change in quantity demanded / percentage change in price
If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.
Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one.
What are normal and inferior goods?
Normal goods are goods that are goods whose demand increases when income increases and falls when income falls. Inferior goods are goods whose demand falls when income rises and increases when income falls.
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Portions of the financial statements for Alliance Technologies are provided below. ALLIANCE TECHNOLOGIES Income Statement For the year ended December 31, 2021 Net sales $ 335,000 Expenses: Cost of goods sold $ 200,000 Operating expenses 63,000 Depreciation expense 16,300 Income tax expense 23,500 Total expenses 302,800 Net income $ 32,200 ALLIANCE TECHNOLOGIES Selected Balance Sheet Data December 31, 2021, compared to December 31, 2020 Decrease in accounts receivable $ 6,300 Increase in inventory 13,300 Decrease in prepaid rent 9,300 Increase in salaries payable 5,300 Decrease in accounts payable 8,300 Increase in income tax payable 21,200 Required: Prepare the operating activities section of the statement of cash flows for Alliance Technologies using the indirect method. (List cash outflows and any decrease in cash as negative amounts.)
Answer and Explanation:
The preparation of the cash flow from operating activities is presented below:
Cash flow from operating activities
Net income $32,200
Add: Decrease in accounts receivable $ 6,300
Less: Increase in inventory -$13,300
Add: Decrease in prepaid rent $9,300
Add: Increase in salaries payable $5,300
Less: Decrease in accounts payable -$8,300
Add Increase in income tax payable $21,200
Net cash flow provided by operating activities $52,800
Your and your business partner bake bread to be sold at the Madison Farmer's Market every Saturday. You calculate the underage cost to be $2.50 per loaf and the overage cost to be $0.75 per loaf. If you are baking the profit maximizing amount of bread that balances the overage and underage cost, how often should you expect to run out of bread at the farmer's market
Answer:
23%
Explanation:
Overage cost(Co) = $0.75
Underage cost(Cu) = $2.50
Service level = Cu/(Co + Cu)
Service level = $2.50 / ($0.75+$2.50)
Service level = $2.50 / $3.25
Service level = 0.76923077
Service level = 76.92%
So the optimal service level is 77%
Risk of stock-out = 100% - Service level
Risk of stock-out = 100% - 77%
Risk of stock-out = 23%
PrimeTime Sportswear is a custom imprinter that began operations six months ago. Sales have exceeded management's most optimistic projections. Sales are made on account and collected as follows: 49% in the month after the sale is made and 44% in the second month after sale. Merchandise purchases and operating expenses are paid as follows:
In the month during which the merchandise is purchased or the cost is incurred 75 %
In the subsequent month 25 %
PrimeTime Sportswear's income statement budget for each of the next four months, newly revised to reflect the success of the firm, follows:
September October November December
Sales $ 41,800 $ 53,700 $ 68,100 $ 58,900
Cost of goods sold:
Beginning inventory $ 5,530 $ 14,600 $ 20,310 $ 22,050
Purchases 37,800 43,700 49,000 32,600
Cost of goods available for sale $ 43,330 $ 58,300 $ 69,310 $ 54,650
Less: Ending inventory (14,600 ) (20,310 ) (22,050 ) (20,360 )
Cost of goods sold $ 28,730 $ 37,990 $ 47,260 $ 34,290
Gross profit $ 13,070 $ 15,710 $ 20,840 $ 24,610
Operating expenses 10,400 13,100 14,300 16,000
Operating income $ 2,670 $ 2,610 $ 6,540 $ 8,610
Cash on hand August 31 is estimated to be $40,240. Collections of August 31 accounts receivable were estimated to be $19,820 in September and $15,330 in October. Payments of August 31 accounts payable and accrued expenses in September were estimated to be $23,840.
Question Completion:
Prepare the cash budget for the months of October and November.
Answer:
PrimeTime Sportswear
Cash Budget:
October November
Beginning cash balance $40,420 $34,007
Cash collections 35,812 44,705
Total cash in hand $76,232 $78,712
Total payments $42,225 $47,675
Cash balance $34,007 $31,037
Explanation:
a) Data and Calculations:
Income Statement Budgets
September October November December
Sales $ 41,800 $ 53,700 $ 68,100 $ 58,900
Cost of goods sold:
Beginning inventory $ 5,530 $ 14,600 $ 20,310 $ 22,050
Purchases 37,800 43,700 49,000 32,600
Cost of goods available $ 43,330 $ 58,300 $ 69,310 $ 54,650
Less: Ending inventory (14,600 ) (20,310 ) (22,050 ) (20,360 )
Cost of goods sold $ 28,730 $ 37,990 $ 47,260 $ 34,290
Gross profit $ 13,070 $ 15,710 $ 20,840 $ 24,610
Operating expenses 10,400 13,100 14,300 16,000
Operating income $ 2,670 $ 2,610 $ 6,540 $ 8,610
Cash on hand August 31 = $40,420
Collections of August accounts receivable:
September $19,820
October $15,330
Payments of August 31 accounts payable:
September $23,840
Sales collections:
49% in month after sale
44% second month after
7% uncollectible
Purchases and operating expenses payments:
75% in the month
25% following month
September October November December
Sales $ 41,800 $ 53,700 $ 68,100 $ 58,900
Cash collections:
49% in month after sale 19,820 20,482 26,313 33,369
44% second month after 15,330 18,392 23,628
Total cash collections $35,812 $44,705 $56,997
Purchases 37,800 43,700 49,000 32,600
Operating expenses 10,400 13,100 14,300 16,000
Total purchase & operating $48,200 $56,800 $63,300 $48,600
Payments:
75% in the month 36,150 42,600 47,475 36,450
25% following month 23,840 12,050 14,200 15,825
Total payments $52,190 $42,225 $47,675 $36,700
Question 10 (5 points)
Company policy for internal control should include all of the following except for
which one?
Employees will be rotated.
Monthly bank statements should be sent to and reconciled by the same
employees who authorize payments and write checks.
At time of payment, all supporting invoices or documents will be stamped "paid."
The owner (or responsible employee) signs all checks after receiving
authorization to pay from the departments concerned.
Answer:
Monthly bank statements should be sent to and reconciled by the same employees who authorize payments and write checks
Explanation:
Differential Analysis for a Lease or Buy Decision
Laredo Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $120,000. The freight and installation costs for the equipment are $1,500. If purchased, annual repairs and maintenance are estimated to be $2,200 per year over the six-year useful life of the equipment. Alternatively, Laredo Corporation can lease the equipment from a domestic supplier for $25,000 per year for six years, with no additional costs.
Prepare a differential analysis dated March 15 to determine whether Laredo Corporation should lease (Alternative 1) or purchase (Alternative 2) the equipment. (Hint: This is a "lease or buy" decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner). If an amount is zero, enter "0".
Differential Analysis
Lease (Alt. 1) or Buy (Alt. 2) Equipment
March 15
Lease
Equipment
(Alternative 1) Buy
Equipment
(Alternative 2) Differential
Effects
(Alternative 2)
Costs:
Purchase price $ $ $
Freight and installation
Repair and maintenance (6 years)
Lease (6 years)
Total costs $ $ $
Answer:
Lease Equipment $150,000
BUY EQUIPMENT$134,700
Differential Effects-$15,300
The company should choose BUY EQUIPMENT which is Alternative 2
Explanation:
Preparation of the differential analysis dated March 15 to determine whether Laredo Corporation should lease (Alternative 1) or purchase (Alternative 2) the equipment
Differential Analysis
Lease (Alt. 1) or Buy (Alt. 2) Equipment
March 15
Lease Equipment (Alternative 1); Buy Equipment
(Alternative 2); Differential Effects (Alternative 2)
Costs:
Purchase price $0 $120,000 $120,000
Freight and installation $0 $1,500 $1,500
Repair and maintenance (6 years) $0 $13,200.$13,200
($2,200*6=$13,200)
Lease (6 years) $150,000 $0 -$150,000
($25,000*6)
Total costs $150,000 $134,700 -$15,300
Based on the above calculation the company should choose BUY EQUIPMENT which is Alternative 2
Adding expectancy theory to the model of motivation and performance illustrates how the interaction of valence, expectancy, and instrumentality contribute to motivation_______. Highlights how employees are motivated to put actual effort into their jobs when they believe their performance will result in ___________ .
Management at Work
Matt is a manager at Starbucks. He recently received a special motivation report, but he isn't sure how to use the information it contains. Can you help? Knowing that you are studying expectancy theory, Matt wants you to read the motivation report and help him write an e-mail that will motivate his employee Jayden. Review what motivates employees at Starbucks by reading the "Motivation Report."
Motivation Report
In general, motivation at Starbucks is high. However, different employees are motivated by different things. In Matt's department, Jayden is motivated by learning new things, Peter is motivated by money, and Adrian is motivated by interesting work.
Explanation:
The expectancy theory is an interesting theory of motivation. This theory believes that people, in general, behave the way they do in a certain way because they are motivated to achieve a common objective.
Since the main focus here is to read the motivation report and help Matt write an e-mail that will motivate Jayden. Remember, we are told he is motivated by learning new things, hence a sample email could read;
Hi, Jayden I would like to commend you for the work you do here at the company, you are truly one of our best employees. I would assign you to a new role at the company, and there is a possibility of reassigning you to better roles in the future.
Garcia Co. sells snowboards. Each snowboard requires direct materials of $119, direct labor of $49, and variable overhead of $64. The company expects fixed overhead costs of $673,000 and fixed selling and administrative costs of $160,000 for the next year. It expects to produce and sell 11,900 snowboards in the next year. What will be the selling price per unit if Garcia uses a markup of 15% of total cost
Answer:
$70 per units
Explanation:
Calculation to determine What will be the selling price per unit if Garcia uses a markup of 15% of total cost
First step is to calculate total cost per unit.
Using this formula
Total Cost per unit = Unit Direct materials cost + Unit Direct labor costs + Unit Variable Costs + Unit Fixed Costs
Let plug in the formula
Total Cost per unit = $119 + 49 + 64 + 70
Total Cost per unit = $302
.
Second step is to calculate the Selling Price Per Unit
Selling Price Per Unit = $302 +( 15%*$302)
Selling Price Per Unit = 302 + 45.30
Selling Price Per Unit = $347.30
Third step is to calculate the Total Fixed Costs using this formula
Total Fixed Costs = fixed overhead costs + Fixed selling and administrative costs
Let plug in the formula
Total Fixed Costs=$673,000+$160,000
Total Fixed Costs= $833,000
Now let calculate the Fixed Cost per unit using this formula
Fixed Cost per unit = Total Fixed Costs / Total Units
Let plug in the formula
Fixed Cost per unit =$833,000/11,900
Fixed Cost per unit = $70 per unit
Therefore What will be the selling price per unit if Garcia uses a markup of 15% of total cost is $70 per unit
Based on market values, Gubler's Gym has an equity multiplier of 1.46 times. Shareholders require a return of 10.91 percent on the company's stock and a pretax return of 4.84 percent on the company's debt. The company is evaluating a new project that has the same risk as the company itself. The project will generate annual aftertax cash flows of $277,000 per year for 7 years. The tax rate is 39 percent. What is the most the company would be willing to spend today on the project
Answer:
The answer is "5.4% and 15,23,500".
Explanation:
Calculating the capital cost:
[tex]=(1-\frac{1}{1.46})\times 10.91\% \times (1-39\%)+(\frac{1}{1.46})\times 4.84\% \\\\=(\frac{1.46-1}{1.46})\times \frac{10.91}{100} \times (\frac{100-39}{100})+(\frac{1}{1.46})\times \frac{4.84}{100} \\\\ =(\frac{0.46}{1.46})\times \frac{10.91}{100} \times (\frac{61}{100})+(\frac{1}{1.46})\times \frac{4.84}{100} \\\\=\frac{306.1346}{14600}+\frac{4.84}{146} \\\\= 0.021+0.033 \\\\ =0.054\\\\= 5.4\%[/tex]
Maximum amount to be spent
[tex]=\frac{277,000\times 100 }{5.4} \times (1-\frac{1}{(1.054)^7})\\\\=\frac{277,000\times 100 }{5.4} \times (1-\frac{1}{1.44})\\\\=\frac{277,000\times 100 }{5.4} \times (1-0.7)\\\\=277,000 \times 100\times 0.055\\\\=\$15,23,500\\[/tex]
Which of these investments may be long term? Choose four answers.
savings accounts
mutual funds
bonds
retirement funds
commodities
These long-term investments are the asset size of company balance sheets i.e shown by a company's investments it including stocks, bonds, and real estate these are long-term as they are kept for one than one year.
The long-term investment includes mutual funds, bonds, retirement funds, commodities. These are investments that are made for the long term periods and may be for long-term goals of the individual or the organization.
Thus the options B, C, D, and E are correct.
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The investments may be long term is bonds and retirement funds.
What is long term investment?A long-term investment is an investment owned by an individual or company for more than three year.
This could be a company or an individual asset such as real estate and bonds that takes a long time to mature because they do not generate income immediately.
Therefore, The investments may be long term is bonds and retirement funds
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Den-Tex Company is evaluating a proposal to replace its HID (high intensity discharge) lighting with LED (light emitting diode) lighting throughout its warehouse. LED lighting consumes less power and lasts longer than HID lighting for similar performance. The following information was developed: HID watt hour consumption per fixture 500 watts per hr. LED watt hour consumption per fixture 300 watts per hr. Number of fixtures 700 Lifetime investment cost (in present value terms) to replace each HID fixture with LED $500 Operating hours per day 10 Operating days per year 300 Metered utility rate per kilowatt-hour (kwh)* $0.11
*Note: A kilowatt-hour is equal to 1,000 watts per hour.
a. Determine the investment cost for replacing the 700 fixtures.
$?
b. Determine the annual utility cost savings from employing the new energy solution.
$?
c. Evaluate the proposal using net present value, assuming a 15-year life and 8% minimum rate of return. (Click here to view Present Value of Ordinary Annuity.)
$?
Answer:
a. Investment cost of replacing one fixture = $500
Number of fixtures = 700
Investment cost of replacing 700 fixtures = $500 * 700
Investment cost of replacing 700 fixtures = $350,000
b. Total Hours annually = Operating hours per day 8 Operating days per year = 10 * 300 = 3000 hours
Utility cost per kilowatt hour = $0.11
Savings in consumption per hour per fixture = 500 watts - 300 watts = 0.2 kilowatt per hour
Annual Savings in utility cost = Savings in consumption per hour * Total Hours * Utility cost * Number of fixtures
Annual Savings in utility cost = 0.2 * 3000 * 0.11 * 700
Annual Savings in utility cost = $46,200
c. Net present Value = PV of Annual Savings - Initial Investment
When Annual Savings = $46,200, Initial Investment = $350,000, Cumulative discounting factor of 8% for 15 years = 8.5595
Net present Value = ($46,200 * 8.5595) - $350,000
Net present Value = $395,448.90 - $350,000
Net present Value = $45,448.90
Labeau Products, Ltd., of Perth, Australia, has $21,000 to invest. The company is trying to decide between two alternative uses for the funds as follows:
Invest in Invest in
Project X Project Y
Investment required $ 21,000 $ 21,000
Annual cash inflows $ 8,000
Single cash inflow at the end of 6 years $50,000
Life of the project 6 years 6 years
The company’s discount rate is 18%.
Required:
Determine the net present values. (Any cash outflows should be indicated by a minus sign.
Answer:
Project X = $6,980.82
Project Y = - $2,478.42
Explanation:
The Present value is the price today of future cash flows and is calculated as follows :
Project X
($21,000) CF 0
$8,000 CF 1
$8,000 CF 2
$8,000 CF 3
$8,000 CF 4
$8,000 CF 5
$8,000 CF 6
I/YR = 18%
Therefore, NPV is $6,980.82
Project Y
($21,000) CF 0
$0 CF 1
$0 CF 2
$0 CF 3
$0 CF 4
$0 CF 5
$50,000 CF 6
I/YR = 18%
Therefore, NPV is - $2,478.42
Game Theory and Strategic Choices -- End of Chapter Problem You have developed a new computer operating system and are considering whether you should enter the market and compete with Microsoft. Microsoft has the option of offering their operating system for a high price or a low price. Once Microsoft selects a price, you will decide whether you want to enter the market or not enter the market. If Microsoft charges a high price and you enter, Microsoft will earn $30 million and you will earn $10 million. If Microsoft charges a high price and you do not enter, Microsoft will earn $60 million and you will earn $0. If Microsoft charges a low price and you enter, Microsoft will earn $20 million and you will lose $5 million. If Microsoft charges a low price and you do not enter, Microsoft will earn $50 million and you will earn $0. Construct a payoff table and find the Nash equilibrium if you and Microsoft both make your decisions simultaneously.
In a simultaneous move game, Microsoft will and you will:___________
Answer:
Microsoft will choses High price and you will choose to enter the market .
Explanation:
The Nash equilibrium
You
enter Don't enter
Microsoft high price ( $30 , $10 ) ( $60 , $0 )
Microsoft low price ( $20, -$5 ) ( $50, $0 )
From the Nash equilibrium the best time for you to enter the market is when Microsoft Charges a high price
While the best time for Microsoft is when it charges a high price and you do not enter the market
But considering Simultaneous Move game : Microsoft will choses High price and you will choose to enter the market .
Here is the payoff table:
Enter Don't enter
High 30, 10 60,0
Low 20, -5 50, 0
In a simultaneous move game, Microsoft will charge a high price and you will enter the market.
Game theory studies how participants in a competitive market make the best choice for themselves.
Nash equilibrium is the best outcome for participants in a competitive market where no player has an incentive to change their decisions.
If I enter the market, I can either earn $10 million or lose $5 million. If I don't enter the market, I would earn nothing. The best strategy for me is to enter the market because $5 million is greater than 0.
If Microsoft charges a high price, it can either earn $30 million or $60 million. If the firm charges a low price, it would earn either $20 or $50 million. The best strategy is to charge a high price.
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Quartz Corporation is a relatively new firm. Quartz has experienced enough losses during its early years to provide it with at least eight years of tax loss carryforwards. Thus, Quartz’s effective tax rate is zero. Quartz plans to lease equipment from New Leasing Company. The term of the lease is four years. The purchase cost of the equipment is $970,000. New Leasing Company is in the 30 percent tax bracket. There are no transaction costs to the lease. Each firm can borrow at 10 percent.
a. What is Quartz’s reservation price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Reservation price $
b. What is New Leasing Company’s reservation price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Reservation price $
Answer:
a. Quartz’s reservation price = $306,006.68
b. New Leasing Company’s reservation price = $234,034.25
Explanation:
Given:
Cost = Cost of the equipment = $970,000
n = number of years of lease term = 4
r = cost of borrowing rate = 10%, or 0.10
t = tax rate = 30%, or 0.30
DF = Discounting factor or PV of $1 = ((1-(1/(1 + r))^n)/r) = ((1-(1/(1 + 0.10))^5)/0.10) = 3.16986544634929
a. What is Quartz’s reservation price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
The implication of the zero effective tax rate is that depreciation tax shield foregone does not exist. In addition, there is no difference between the after-tax lease payment and the pre-tax payment, and there is also no difference between the pre-tax cost of debt and the after-tax cost.
Quartz’s reservation price can therefore be calculated by setting net advantage to leasing (NAL) equal to zero and solve as follows:
NAL = 0 = Cost – (PMT * DF) ………… (1)
Substituting the relevant values into equation (1), we have:
0 = $970,000 – (PMT * 3.16986544634929)
$970,000 = PMT * 3.16986544634929
PMT = $970,000 / 3.16986544634929
PMT = $306,006.68
Quartz’s reservation price = PMT = $306,006.68
b. What is New Leasing Company’s reservation price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Depreciation tax shield = (Cost / n) * t = ($970,000 / 4) * 30% = $72,750
New r = After-tax debt cost = r * (1 - t) = 0.10 * (1 - 0.30) = 0.07
New DF = ((1-(1/(1 + New r))^n)/New r) = ((1-(1/(1 + 0.07))^5)/0.07) = 4.10019743594759
The New Leasing Company’s reservation price can therefore be calculated by setting NPV to zero as follows:
NPV = 0 = -Cost + (PMT * (1 – t) * New DF) + (Depreciation tax shield * New DF)
0 = -$970,000 + (PMT * (1-0.30) * 04.10019743594759) + ($72,750 * 4.10019743594759)
$970,000 - ($72,750 * 4.10019743594759) = PMT * (1-0.30) * 04.10019743594759
$671,710.636534813 = PMT * 2.87013820516331
PMT = $671,710.636534813 / 2.87013820516331
PMT = $234,034.25
New Leasing Company’s reservation price = PMT = $234,034.25
Net present value LO P3
A new operating system for an existing machine is expected to cost $820,000 and have a useful life of six years. The system yields an incremental after-tax income of $240,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $100,000.
A machine costs $560,000, has a $56,000 salvage value, is expected to last eight years, and will generate an after-tax income of $150,000 per year after straight-line depreciation.
Assume the company requires a 12% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
a. A new operating system for an existing machine is expected to cost $820,000 and have a useful life of six years. The system yields an incremental after-tax income of $240,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $100,000. (Round your answers to the nearest whole dollar.)
b. A machine costs $560,000, has a $56,000 salvage value, is expected to last eight years, and will generate an after-tax income of $150,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar.)
Answer:
a. initial outlay = -$820,000
net cash flows years 1 - 5 = $240,000
net cash flow year 6 = $340,000
discount rate = 12%
using a financial calculator:
NPV = $217,400.87
IRR = 20.55%
b. initial outlay = -$560,000
net cash flows years 1 - 7 = $150,000
net cash flow year 8 = $206,000
discount rate = 12%
using a financial calculator:
NPV = $207,763.43
IRR = 21.65%
Match the title of the employment-related law to its description. Each label is used only once.
a. This law protects the workers from physical dangers while performing their jobs.
b. This law states that pensions need to be funded properly and directs that employees be kept informed about their pensions.
c. This law placed limits on child labor and set a minimum wage in the United States.
d. This law gives workers the right to take up to 12 weeks of unpaid leave per year for family reasons.
1. Pension Protection Act of 2006
2. Family and Medical Leave Act of 1993
3. Occupational Health and Safety Act of 1970
4. Fair Labor Standards Act of 1938
Answer:
a. This law protects the workers from physical dangers while performing their jobs. = Occupational Health and Safety Act of 1970
b. This law states that pensions need to be funded properly and directs that employees be kept informed about their pensions. = Pension Protection Act of 2006.
c. This law placed limits on child labor and set a minimum wage in the United States. = Fair Labor Standards Act of 1938.
d. This law gives workers the right to take up to 12 weeks of unpaid leave per year for family reasons. = Family and Medical Leave Act of 1993.
Help! (Also ignore my mouse)
Answer:
License: legal permission to work granted by the government
Associated degree: general two-year college-level degree
Career college: a one or two-year program ending with a certificate
Bachelor's degree: four-year college level degree
Apprenticeship: an on-the-job training experience
Explanation:
License: legal permission to work granted by the government
Associated degree: general two-year college-level degree
Career college also called vocational school: a one or two-year program ending with a certificate
Bachelor's degree: four-year college level degree
Apprenticeship: an on-the-job training experience
Suppose Nike, Inc. reported the following plant assets and intangible assets for the year ended May 31, 2022 (in millions): other plant assets $935.0, land $220.0, patents and trademarks (at cost) $510.0, machinery and equipment $2,160.0, buildings $980.0, goodwill (at cost) $210.0, accumulated amortization $50.0, and accumulated depreciation $2,200. Prepare a partial balance sheet for Nike for these items.
Answer:
NIKE, INC.
Partial Balance Sheet as of May 31, 2022
(in millions)
Property, Plant and Equipment
Land $220.0
Buildings $980.0
Machinery and Equipment $2160.0
Other Plant Assets $935.0
Less: Accumulated Depreciation $2200.0 $1875.0
Total Property, Plant and Equipment $2095.0
Intangible Assets:
Goodwill $210.0
Patents and Trademarks $510.0
Less: Accumulated Amortization $50.0 $460.0
Total Intangible Assets $670.0
Well-managed companies set aside money to pay for emergencies that inevitably arise in the course of doing business. A commercial solid-waste recycling and disposal company in Mexico City puts 0.5% of its after-tax income into such an account. (a) How much will the company have after 7 years if after-tax income averages $15.2 million and inflation and market interest rates are 5% per year and 9% per year, respectively
Answer:
$699,200
Explanation:
According to the scenario, computation of the given data are as follows,
After tax income = $15,200,000
Amount in account = 0.5% × $15,200,000 = $76,000
Time period = 7 years
inflation = 5%
Interest rate = 9%
So, Total amount after 7 years = $76,000 × (F/A, 9%, 7)
= $76,000 ×[ [tex]((1+.09)^{7}-1 )[/tex] ÷ .09]
= $76,000 × [.82803912082 ÷ .09]
= $76,000 × 9.2
= $699,200
Brushy Mountain Mining Company's ore reserves are being depleted, so its sales are falling. Also, its pit is getting deeper each year, so its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 6% per year. What is the value of Brushy Mountain's stock (in dollars) if the company is expected to pay $4.40/share in dividend at t
The question is incomplete. The complete Question is,
Brushy Mountain Mining Company's coal reserves are being depleted, so its sales are falling. Also, environmental costs increase each year, so its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 4% per year. If D0 = $2 and rs = 17%, what is the estimated value of Brushy Mountain's stock?
Answer:
P0 = $9.1428 rounded off to 9.14
This answer is for the question above. Change the values and use the same formula if the values differ
Explanation:
The constant growth model of dividend discount model (DDM) can be used to calculate the price of the stock today. DDM calculates the price of a stock based on the present value of the expected future dividends from the stock. The formula for price today under constant growth DDM is,
P0 = D0 * (1+g) / (r - g)
Where,
D0 * (1+g) is the dividend expected in Year 1 or next year
g is the constant growth rate in dividends
r is the discount rate or required rate of return
P0 = 2 * (1-0.04) / (0.17 + 0.04)
P0 = $9.1428 rounded off to 9.14
Aslam wants to create multiple worksheet containing common formatting styles for his team members. Which file extension helps him to save these worksheets?
(Templates),(Workbooks),(Files) help Aslam to create multiple worksheets with common styles.
He needs to save them with the (xlsb),(xltx),(xls),(xlsm).
Answer:
1. Excel file extensions, using XLS or XLSX, help him to save worksheets.
2. (Files) help Aslam to create multiple worksheets with common styles.
3. He needs to save them with the (xls).
Explanation:
The file extension (also called the filename extension) is the ending of a file that identifies the type of file in an operating system, for example, Microsoft Windows. The filename extension starts with a period, followed by one, two, three, or four characters, especially in Microsoft Windows. The filename extension helps the computer to open the correct program whenever one wants to use the file.
White, Gray, and Greene enter into a contract to form a partnership, but the contract says nothing about the sharing of profits and losses. Which of the following will take place? A. Profits and losses will be shared in a ratio based on the dollar amount of their capital investments. B. Profits will be shared equally; losses will be absorbed based on dollar amount of capital investment. C. Profits will be based on amount of time each partner spends working for the firm; losses will be shared equally. D. Profits and losses will be shared equally.
Answer:
D. Profits and losses will be shared equally.
On January 1, Year 1, Parker Company issued bonds with a face value of $77,000, a stated rate of interest of 8 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 10 percent at the time the bonds were issued. The bonds sold for $71,162. Parker used the effective interest rate method to amortize the bond discount. (Round your intermediate calculations and final answers to the nearest whole dollar amount.)
Required
a. Prepare an amortization table. Date Cash Payment Interest Expense Discount Amortization Carrying Value 71,162 72,118 6,1607 ,116 January 1, Year 1 December 31, Year 1 December 31, Year 2 December 31, Year 3 December 31, Year 4 December 31, Year 5 Totals 6,1607 ,116
b. What is the carrying value that would appear on the Year 4 balance sheet?
c. What is the interest expense that would appear on the Year 4 income statement?
d. What is the amount of cash outflow for interest that would appear in the operating activities section of the Year 4 statement of cash flows? b. Carrying value
c. Interest expense
d. Cash outflow for interest
Answer: See explanation
Explanation:
a. Prepare an amortization table.
The ammortization table has been prepared and attached.
Note that:
Cash paid = $77000 × 7%
Interest expense was calculated as:
= Last year’s Bond Carrying value × 10%
Discount ammortization = Interest Expense - Cash Paid
b. What is the carrying value that would appear on the Year 4 balance sheet?
The carrying value will be $75600.
c. What is the interest expense that would appear on the Year 4 income statement?
The interest expense will be $7433.
d. What is the amount of cash outflow for interest that would appear in the operating activities section of the Year 4 statement of cash flows?
The cash outflow for interest be $6160.
Carrying Value = $75600
Interest Expense = $7433
Cash Outflow for Interest = $6160
Suppose that the residents of Colgateville play golf incessantly. In fact, golf is the only thing they spend their money on. They buy golf balls, clubs, and tees. In 2019, they bought 1,000 golf balls for $2.00 each, 100 clubs for $50.00 each, and 500 tees for $0.10 each. In 2020, they bought 1,000 golf balls for $2.50 each, 100 clubs for $75.00 each, and 500 tees for $0.12 each. Using 2010 as the base year, answer the following questions.
a. What was the CPI for 2019?
b. What was the CPI for 2020?
c. What was the inflation rate in 2020?
Answer:
a. The CPI for 2019 is 100 because 2019 is the base year
b. CPI = Cost of basket of goods at current year prices/Cost of basket of goods at base year prices * 100
CPI = (1,000*$2.50) + (100*$75) + (500*$0.12) / (1,000$2.50) + (100*$50) + (500*$0.10) * 100
CPI = 10,060/7,550 * 100
CPI = 133.2450331125828
CPI = 133.25
c. Inflation rate = CPI in the current rate - CPI in previous year / CPI in previous year * 100
Inflation rate = 133.25 - 100/133.25 * 100
Inflation rate = 0.24953096 * 100
Inflation rate = 24.95%
8430000 on July 1, 2020. Ivanhoe Football Co. had a player contract with Kurtz that is recorded in its books at $11150000 on July 1, 2020. On this date, Sheffield traded Watts to Ivanhoe for Kurtz and paid a cash difference of $1115000. The fair value of the Kurtz contract was $12600000 on the exchange date. The exchange had no commercial substance. After the exchange, the Kurtz contract should be recorded in S
Answer:
$9,545,000
Explanation:
Calculation to determine the amount that Kurtz contract should be recorded in S After the exchange
First step is to calculate the deferred gain
Deferred gain=($12,600,000 – $1,115,000) – 8,430,000
Deferred gain = $3,055,000
Now let calculate the Basis which is the amount that Kurtz contract should be recorded in S After the exchange
Basis=$12600000 – $3,055,000
Basis = $9,545,000
Therefore After the exchange, the Kurtz contract should be recorded in S as $9,545,000
Forever Ready Company expects to operate at 85% of productive capacity during May. The total manufacturing costs for May for the production of 34,000 batteries are budgeted as follows:
Direct materials $330,600
Direct labor 121,600
Variable factory overhead 34,000
Fixed factory overhead 68,000
Total manufacturing costs $554,200
The company has an opportunity to submit a bid for 3,000 batteries to be delivered by May 31 to a government agency. If the contract is obtained, it is anticipated that the additional activity will not interfere with normal production during May or increase the selling or administrative expenses.
What is the unit cost below which Forever Ready Company should not go in bidding on the government contract? Round your answer to two decimal places.
Answer:
$14.3
Explanation:
Calculation to determine the unit cost which Forever Ready Company should not go in bidding on the government contract.
Direct materials $9.72
($330,600/34,000)
Direct labor $3.58
($121,600/34,000)
Variable factory overhead $1
($34,000/34,000)
Total per unit cost $14.3
($9.72 + $3.58 + $1)
Therefore, the unit cost which Forever Ready Company should not go in bidding on the government contracts is $14.3
Freedom Inc. has 40 employees within Denver City and County. All of the employees worked a predominant number of hours within the city. The employees earned $8.30 per hour and worked 160 hours each during the month. The employer must remit $4.00 per month per employee who earns more than $500 per month. Additionally, employees who earn more than $500 per month must have $5.75 withheld from their pay.
What is the employee and company Occupational Privilege Tax for these employees? (Round your answers to 2 decimal places.)
Answer:
the employee and company Occupational Privilege Tax for these employees is $92.00 and $64.00 respectively
Explanation:
The computation of the employee and company Occupational Privilege Tax for these employees is shown below:
The Total amount with held from employees is
= 16 × $5.75
= $92.00
And, the total amount to be paid by the employer is
=16 × $4.00
= $64.00
hence, the employee and company Occupational Privilege Tax for these employees is $92.00 and $64.00 respectively
The same is relevant
true or false educators are also administrators of their classrooms, but mostly outside of the classrooms
Answer:
false
Explanation:
They have to not only teach you but discipline you
EcoFabrics has budgeted overhead costs of $1,039,500. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 495,000 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers. These two cost pools are cutting (cost driver is machine hours) and design (cost driver is number of setups). Overhead allocated to the cutting cost pool is $396,000 and $643,500 is allocated to the design cost pool. Additional information related to these pools is as follows.
Wool Cotton Total
Machine hours 110,000 110,000 220,000
Number of setups 1,100 550 1,650
1. Calculate the overhead rate using activity based costing.
2. Determine the amount of overhead allocated to the wool product line and the cotton product line using activity-based costing.
3. Calculate the overhead rate using traditional approach.
4. What amount of overhead would be allocated to the wool and cotton product lines using the traditional approach, assuming direct labor hours were incurred evenly between the wool and cotton?
Answer:
1. Cutting $1.80 per machine hour
Design $390 per setup
2. Wool product line $627,000
Cotton Product line $412,500
3. Overhead rate $2.10
4. Wool Product line $519,750
Cotton Product line $519,750
Explanation:
1. Calculation to determine the overhead rate using activity based costing.
Overhead rate using the activity based costing
Cutting = Overhead / Total Machine hours
= $396,000 / 220,000
= $1.80 per machine hour
Design = Overhead / Number of setups
= $643,500 / 1,650
= $390 per setup
2. Calculation to determine the amount of overhead allocated to the wool product line and the cotton product line using activity-based costing
Overhead allocated to the wool product line and the cotton product line
Wool product line = (110,000 * $1.80) + (1,100 * $390)
Wool product line= $198,000 + $429,000
Wool product line= $627,000
Cotton Product line = (110,000 * $1.80) + (550 * $390)
Cotton Product line= $198,000 + $214,500
Cotton Product line= $412,500
3.Calculation to determine the overhead rate using traditional approach.
Overhead rate using traditional approach
Overhead rate = Total Overhead / Direct labor hours
Overhead rate= $1,039,500 / 495,000
Overhead rate= $2.10
4. Calculation to determine What amount of overhead would be allocated to the wool and cotton product lines using the traditional approach
Overhead allocated using the traditional method
Wool Product line = $1,039,500 / 2
Wool Product line= $519,750
Cotton Product line = $1,039,500 / 2
Cotton Product line= $519,750