Answer:
$1,680,000
Explanation:
Based on the information given we were told that the fair value of the building was the amount of $1,680,000 which means that the amount that the company would record the building is the fair value amount of $1,680,000.
Therefore the amount that the company would record the building is $1,680,000.
August 1 M. Harris, the owner, invested $8,000 cash and $34,400 of photography equipment in the company. August 2 The company paid $3,300 cash for an insurance policy covering the next 24 months. August 5 The company purchased supplies for $1,520 cash. August 20 The company received $2,100 cash from taking photos for customers. August 31 The company paid $881 cash for August utilities. Analyze each transaction above by showing its effects on the accounting equation—specifically, identify the accounts and amounts (including + or −) for each transaction. Use the following partial chart of accounts: Cash; Supplies; Prepaid Insurance; Equipment; M. Harris, Capital; Services Revenue; and Utilities Expense.
Answer:
Date : August 1
Assets (Cash $8,000 and Equipment $34,400) = Increase $42,400
Liabilities = No Effect
Equity (Capital $42,400) = Increase $42,400
Date : August 2
Assets (Cash and Equipment) = $3,300 decrease -cash and $3,300 increase - equipment
Liabilities = No effect
Equity = No Effect
Date : August 5
Assets (Cash and Supplies) = $1,520 decrease -cash and $1,520 increase - equipment
Liabilities = No effect
Equity = No Effect
Date : August 20
Assets (Cash ) = Increase $2,100
Liabilities = No Effect
Equity (Services Revenue) = Increase $2,100
Date : August 31
Assets (Cash = Decrease $881
Liabilities = No Effect
Equity (Utilities Expense) = Decrease $881
Explanation:
The accounting equation is stated as : Assets = Equity + Liabilities
Each and every transaction first identify the Accounts affected, then determine which accounts fall within the Asset, Equity or Liabilities category and the effect thereof to the category.
Employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem is an example of:_______.
a. an implicit cost.
b. a transaction cost.
c. a sunk cost.
d. an opportunity cost.
Answer:
b. a transaction cost.
Explanation:
Transaction costs can be regarded as expenses which is been incurred during the buying or selling of a good/ service.Transaction costs gives representation of the labor which is required in bringing a particular good/ service to the market,. They are cost required to make any economic trade in regards to participation in a market.
example of transaction cost is
Employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem.
Absorption and Variable Costing Comparisons: Production Equals Sales Assume that Smuckers manufactures and sells 30,000 cases of peanut butter each quarter.
The following data are available for the third quarter of 2017.
Total fixed manufacturing overhead.......................................................90,000
Fixed selling and administrative expenses........... .. . .. . .. . . . . .. . . . . . 20,000
Sale price per case..................................................................................32
Direct materials per case .......................................................................15
Direct labor per case ........................................................................6
Variable manufacturing overhead per case ..........................................3
a. Compute the cost per case under both absorption costing and variable costing.
b. Reconcile any differences in income. Explain.
c. Compute te net income under both absorption costing and variable costing.
Answer:
a. Cost per case under Absorption costing:
= Direct materials per case + Direct labor per case + Variable manufacturing overhead per case + Fixed manufacturing overhead per case
= 15 + 6 + 3 + 90,000/ 30,000 cases
= $27
Cost per case under Variable costing:
= Direct materials per case + Direct labor per case + Variable manufacturing overhead per case
= 15 + 6 + 3
= $24
b. First we need to calculate income under both methods:
Under Absorption costing:
= Sales - Cost of goods sold - Selling and Admin expenses
= (30,000 cases * 32) - (30,000 * 27) - 20,000
= $130,000
Under Variable Costing:
= Sales - Cost of Goods sold - Fixed manufacturing overhead - Selling and Admin expenses
= (30,000 * 32) - (30,000 * 24) - 90,000 - 20,000
= $130,000
There is no difference in income because the cases manufactured equals the cases sold.
A company had total liabilities of $275,000 and the owner’s equity was $1,722,000. According to the fundamental accounting equation, total assets must be:
Answer:
1,997,000
Explanation:
Assets = Liabilities + Owners Equity
Assets=275,0000 + 1,722,000
Assets = 1,997,000
Kennedy Inc. has the following data for its operation in August: Increase in direct materials inventory 100 Sets Direct materials purchased (AQ) 1,600 Sets Finished goods manufactured 700 units Direct materials purchase-price variance $ 400 Favorable Budgeted Finished goods to manufacture 800 Units Direct materials purchases 2,000 Sets Direct materials per unit of finished goods 2 Sets Direct materials price per set (SP) $ 3.60 What was the actual purchase price (AP) per set of direct materials purchased (to two decimal places)
Answer:
Actual price= $1.6 per unit
Actual price= $3.2 per set
Explanation:
To calculate the actual price, we need to use the following formula:
Direct material price variance= (standard price - actual price)*actual quantity
400= (1.8 - actual price)*2,000
400= 3,600 - 2,000actual price
2,000actual price = 3,200
actual price= $1.6 per unit
Most Company has an opportunity to invest in one of two new projects. Project Y requires a $310,000 investment for new machinery with a five-year life and no salvage value. Project Z requires a $310,000 investment for new machinery with a four-year life and no salvage value. The two projects yield the following predicted annual results. The company uses straight-line depreciation, and cash flows occur evenly throughout each year. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
Project Y Project Z
Sales $370,000 $296,000
Expenses :
Direct materials 51,800 37,000
Direct labor 74,000 44,400
Overhead including depreciation 133,200 133,200
Selling and administrative expenses 26,000 26,000
Total expenses 285,000 240,600
Pretax income 85,000 55,400
Income taxes (34%) 28,900 18,836
Net income $56,100 $36,564
Required:
Determine each project's net present value using 7% as the discount rate. Assume that cash flows occur at each year-end. (Round your intermediate calculations.)
Answer:
Project Y = $174,233.32
Project Z = $76,358.86
Explanation:
Net present value is the present value of after-tax cash flows from an investment less the amount invested.
Cash flow = net income + depreciation
Straight line depreciation expense = (Cost of asset - Salvage value) / useful life
Project Y =
Depreciation = $310,000 / 5 = 62,000
62,000 + $56,100 = $118,100
Project Z
Depreciation = $310,000 / 4 = $77,500
$77,500 + $36,564 = $114,064
NPV can be calculated using a financial calculator
Project Y
cash flow in year 0 = $-310,000
Cash flow each year from year 1 to 5 = $118,100
I = 7%
NPV =
Project Z
cash flow in year 0 = $-310,000
Cash flow each year from year 1 to 4 = $114,064
I = 7%
NPV = $76,358.86
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
118100
114064
When determining her distribution strategy in the United Kingdom, Sondra of Plymouth Products found that the British retail sector was very concentrated. How should her company respond to this
Answer: a. They should deal directly with retailers, cutting out wholesalers.
Explanation:
When an industry is said to be concentrated, it means that there aren't a lot of competitors in the market. This means that relatively, only a few firms are in control of the sector.
Wholesalers offer then advantage of providing a bridge with the producer and businesses when the number of businesses is too high for the producer to go to each one individually. As this is not the case here, Sondra's company should deal directly with the retailers because there are few of them.
The mission of a company lays out some desired future state and articulates that the company would like to achieve
true false
Answer:
False
Explanation:
It is the Vision Statement that "lays out an entity's desired future state and articulates that the company would like to achieve it." On the other hand, the Mission Statement defines the company's business, its goals, and its strategy to achieve the goals. Simply, the mission conveys the purpose and reason for an entity's existence. A Vision Statement clearly describes the desired future state or position of the company. The vision guides the organization to make decisions that align with its philosophy and declared goals, as stated in the Mission Statement.
First, we will start with annual depreciation. We will always use straight-line depreciation in this course Consider a firm that purchased an equipment for $165,891 and incurred an additional $42,172 for shipping and installation. What will be the annual depreciation expense if the equipment is expected to last 13 years and have a salvage value of $4,018 (using straight-line depreciation)
Answer:
Annual Depreciation expense = $15695.7692 rounded off to $15695.77
Explanation:
We first need to calculate the cost of the equipment. The cost at which an equipment or asset should be recorded should include all the costs incurred to bring the asset into the place and condition necessary for its use as intended by the management. Thus the cost of the equipment will be,
Cost = 165891 + 42172
Cost = $208063
Now we can calculate the depreciation expense per year based on the straight line depreciation method using the following formula,
Annual Depreciation expense = (Cost - Salvage Value) / Estimated useful life
Annual Depreciation expense = (208063 - 4018) / 13
Annual Depreciation expense = $15695.7692 rounded off to $15695.77
Consider a market with two firms, Kellogg and Post, that sell breakfast cereals. Both companies must choose whether to charge a high price ($) or a low price ($) for their cereals. These price strategies, with corresponding profits, are depicted in the payoff matrix to the right. Kellogg's profits are in red and Post's are in blue. What is the cooperative equilibrium for this game?
Answer:
Both the two companies to choose a price of $4.50
Explanation:
Based on the information given we were told that the two companies have to choose whether they will charge either a price that is high or a price that is low for their cereals which means that the two companies COOPERATIVE EQUILILBRIUM for this game is that both the two companies have to choose a price of the amount of $4.50 which represent the high price.
When production is greater than sales ______ affected. Multiple choice question. only the fixed production cost variance is only the variable production cost variance is both the fixed production cost and variable production cost variances are neither the fixed production cost or variable production cost variances are
variable costing will show higher net income than the absorption costing
Suppose the following transactions occur during 2018. 1. Waddah, a liquor store owner in the United States, buys 80 bottles of wine from a French vineyard at a price of $30 per bottle. 2. Autozone, a U.S. company, sells 200 spark plugs to a South Korean car company at $3.50 per spark plug. 3. Taylor, a U.S. citizen, pays $350 for a snowboard he orders from Arrieta White Mountain Supplies (a U.S. company). Based on these transactions, U.S. net exports (NX) in 2018 is $ ____ . [Note: If your answer is negative don't forget to enter a minus sign]
Answer: -$1,700
Explanation:
The Net exports are to be calculated by deducting imports into the U.S. from Exports to other countries from the U.S.
Exports:
2. Autozone, a U.S. company, sells 200 spark plugs to a South Korean car company at $3.50 per spark plug.
Imports
1. Waddah, a liquor store owner in the United States, buys 80 bottles of wine from a French vineyard at a price of $30 per bottle.
= Exports - Imports
= (200 * 3.50) - [80 * 30]
= -$1,700
The third transaction is neither an import nor an export as it was conducted entirely in the U.S.
Using the liquidity-preference model, when the Federal Reserve decreases the money supply, a. the equilibrium interest rate increases. b. the aggregate-demand curve shifts to the right. c. the quantity of goods and services demanded is unchanged for a given price level. d. the short-run aggregate-supply curve shifts to the left.
Answer:
A
Explanation:
When the fed increases money supply it is known as expansionary monetary policy. the excess of supply over demand leads to a fall interest rate
Coronado Industries received proceeds of $122200 on 10-year, 6% bonds issued on January 1, 2020. The bonds had a face value of $130000, pay interest annually on December 31, and have a call price of 101. Coronado uses the straight-line method of amortization. What is the amount of interest Coronado must pay the bondholders in 2020
Answer:
$7,800
Explanation:
Calculation to determine the amount of interest Coronado must pay the bondholders in 2020
Using this formula
Interest=Bonds issued percentage*Bonds face value
Let plug in the formula
Interest=6%*$130,000
Interest=$7,800
Therefore the amount of interest Coronado must pay the bondholders in 2020 is $7,800
The financial statements for Highland Corporation included the following selected information:
Common stock $465,000
Retained earnings $830,000
Net income $1,120,000
Shares issued 93,000
Shares outstanding 65,000
Dividends declared and paid $720,000
The common stock was sold at a price of $33 per share.
Required:
a. What is the amount of additional paid-in capital?
b. What was the amount of retained earnings at the beginning of the year?
c. How many shares are in treasury stock?
Answer:
a. Additional paid-in capital:
= Amount received from shares issued - Common stock
= (33 per share * 93,000) - 465,000
= $2,604,000
b. Beginning retained earnings:
Ending retained earnings = Beginning retained earnings + Net income - Dividend
830,000 = Beginning retained earnings + 1,120,000 - 720,000
Beginning retained earnings = 830,000 - 1,120,000 + 720,000
= $430,000
c. Treasury stock:
= Shares issued - Shares outstanding
= 93,000 - 65,000
= 28,000 shares
Imagine that you are holding 5,300 shares of stock, currently selling at $40 per share. You are ready to sell the shares but would prefer to put off the sale until next year due to tax reasons. If you continue to hold the shares until January, however, you face the risk that the stock will drop in value before year-end. You decide to use a collar to limit downside risk without laying out a good deal of additional funds. January call options with a strike price of $45 are selling at $3, and January puts with a strike price of $35 are selling at $4. What will be the value of your portfolio in January (net of the proceeds from the options) if the stock price ends up at $28, $40, $48
Answer:
A. $180,200
$148,400
B.$206,700
$212,000
C. $233,200
$254,400
Explanation:
A. Calculation to determine the value of your portfolio in January and the value of your portfolio if you simply continued to hold the shares
STOCK PRICE $28
First step is to calculate the Value at expiration Using this formula
Value at expiration = Value of call + Value of put + Value of stock
Let plug in the formula
Value at expiration= $0 + ($35 - $28) + $28
Value at expiration= $35
Now let calculate the total net proceeds
Using this formula
Total net proceeds=(Final value - Original investment) × numbers of shares
Total net proceeds= ($35 - $1) × 5,300
Total net proceeds= $180,200
Calculation to determine the Net proceeds without using collar
Using this formula
Net proceeds without using collar = Stock price × Number of shares
Let plug in the formula
Net proceeds without using collar= $28 × 5,300 Net proceeds without using collar= $148,400
Therefore the value of your portfolio in January is $180,200 and the value of your portfolio if you simply continued to hold the shares is $148,400
B. STOCK PRICE= $40
First step is to calculate the Value at expiration using this formula
Value at expiration = Value of call + Value of put + Value of stock
Let plug in the formula
Value at expiration= 0 + 0 + $40
Value at expiration= $40
Now let calculate the total net proceeds
Using this formula
Total net proceeds=(Final value - Original investment) × numbers of shares
Total net proceeds= ($40 - $1) × 5,300
Total net proceeds= $206,700
Calculation to determine the Net proceeds without using collar
Using this formula
Net proceeds without using collar = Stock price × number of shares
Let plug in the formula
Net proceeds without = $40 × 5,300
Net proceeds without= $212,000
Therefore the value of your portfolio in January is $206,700 and the value of your portfolio if you simply continued to hold the shares is $212,000
C. STOCK PRICE $48:
First step is to calculate the Value at expiration using this formula
Value at expiration = Value of call + Value of put + Value of stock
Let plug in the formula
Value at expiration= ($45 - $48) + 0 + $48
Value at expiration = $45
Now let calculate the total net proceeds
Using this formula
Total net proceeds=(Final value - Original investment) × Numbers of shares
Total net proceeds= ($45 - $1) × 5,300
Total net proceeds= $233,200
Calculation to determine the Net proceeds without using collar
Using this formula
Net proceeds without using collar= Stock price × Number of shares
Let plug in the formula
Net proceeds without using collar= $48 × 5,300
Net proceeds without using collar= $254,400
Therefore the value of your portfolio in January is $233,200 and the value of your portfolio if you simply continued to hold the shares is $254,400
Indicate what components of GDP (if any) each of the following transactions would affect.
Transaction Consumption Investment Government Net
Purchases Exports
a. Dell sells a desktop computer from its
inventory to the Johnson family.
b. Your parents buy a bottle of French wine.
c. Honda expands its factory in Ohio.
d. California hires workers to repave Highway 101.
e. The federal government sends your grandmother
a Social Security check.
f. You pay a hairdresser for a haircut.
g. Your parents buy a new house from a local builder.
h. Uncle Henry buys a new refrigerator from a domestic
manufacturer.
Answer:
a. Dell sells a desktop computer from its inventory to the Johnson family.
Component of GDP to be affected: Consumption
b. Your parents buy a bottle of French wine.
Component of GDP to be affected: Consumption
c. Honda expands its factory in Ohio.
Component of GDP to be affected: Investment
d. California hires workers to repave Highway 101.
Component of GDP to be affected: Government Purchases
e. The federal government sends your grandmother a Social Security check.
Component of GDP to be affected: No impact
f. You pay a hairdresser for a haircut.
Component of GDP to be affected:
g. Your parents buy a new house from a local builder.
Component of GDP to be affected: Consumption
h. Uncle Henry buys a new refrigerator from a domestic manufacturer.
Component of GDP to be affected: Consumption
Prepare an amortization schedule for a three-year loan of $66,000. The interest rate is 11 percent per year, and the loan calls for equal annual payments. How much total interest is paid over the life of the loan?
Answer:
Interest = 15,024.18 Amortization Payment = 27008.06 per year
Explanation:
A = P * [ r(1+r)^n / ((1+r)^n - 1) ]
P = 66000
r = 11% = 0.11
n = 3
A = 66000 * [ 0.11(1.11)^3 / (1.11^3 - 1) ]
A = 27008.06
Total Payment = A * n = 27008.06 * 3
Total Payment = 81,024.18
Interest = Total Payment - P = 81024.18 - 66000
Interest = 15024.18
Explain the effect of a discretionary cut in taxes of $50 billion on the economy when the economy's marginal propensity to consume is 0.9. How does this discretionary fiscal policy differ from a discretionary increase in government spending of $40 billion dollars?
Answer:
Explanation:
Fiscal policy is the use of government spending and taxation to influence the economy. Governments use fiscal policy to influence the level of aggregate demand in the economy in an effort to achieve the economic objectives of price stability, full employment, and economic growth.
The government has two levers when setting fiscal policy:
Change the level and composition of taxation, and/or
Change the level of spending in various sectors of the economy.
There are three main types of fiscal policy:
Neutral: This type of policy is usually undertaken when an economy is in equilibrium. In this instance, government spending is fully funded by tax revenue, which has a neutral effect on the level of economic activity.
Expansionary: This type of policy is usually undertaken during recessions to increase the level of economic activity. In this instance, the government spends more money than it collects in taxes.
Contractionary: This type of policy is undertaken to pay down government debt and to cap inflation. In this case, government spending is lower than tax revenue.
Ariana has determined that she either wants to
study public relations or accounting.
Public Relations Specialist: $58,020 annual
salary
Accountant: $68, 150 annual salary
1. After working one year, how much more will
she earn as an accountant than a public
relations specialist?
Answer:
$10,130
Explanation:
Subtract the two and the remainder is your answer.
Accountant - Public Relations Specialist
$68, 150 - $58,020
Which could argue that a programmer deserves to have his/her work protected by a copyright purely as a result of his/her inalienable right to try to reap the benefits from his/her labor?
Answer:
What
Explanation:
Coronado Industries is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6370000 on March 1, $5280000 on June 1, and $8650000 on December 31. Coronado Industries borrowed $3170000 on January 1 on a 5-year, 13% note to help finance construction of the building. In addition, the company had outstanding all year a 11%, 3-year, $6350000 note payable and an 12%, 4-year, $12350000 note payable. What are the weighted-average accumulated expenditures
Answer:
Coronado Industries
The weighted-average accumulated expenditures are:
= $8,388,333.
Explanation:
a) Data and Calculations:
Amount borrowed on June 1 = $3,170,000
Interest rate = 13%
Outstanding 11% 3-year note payable = $6,350,000
Outstanding 12% 4-year note payable = $12,350,000
Date Expenditure Weight Weighted-Average
Expenditure
March 1 $6,370,000 10/12 $5,308,333
June 1 $5,280,000 7/12 3,080,000
December 31 $8,650,000 0/12 0
Weighted-average accumulated expenditure $8,388,333
Desert Company issued $3,158,061 of 12% bonds on January 1, 2021. The market rate of interest at that time was 9%. The bonds pay interest quarterly each March 31, June 30, September 30, and December 31. What is the amount of the cash payment Desert is legally obligated to pay its creditor each quarter?
Answer:
Quarterly Interest Payment = $94741.83
Explanation:
The amount of interest payment made by coupon bonds depends on the coupon rate they carry regardless of what the interest rate in market is. Thus Desert will have to pay annual coupon rate of 12% of the face value of the bond. However, as the coupon payments are made quarterly, the quarterly interest that will be paid by Desert will be,
Quarterly Interest Payment = 3158061 * 12% * 1/4
Quarterly Interest Payment = $94741.83
Minors are liable for the reasonable value of the necessary:______.
a. actually furnished.
b. that they agreed to purchase.
c. that their parents agreed to pay for.
d. all of these.
Answer:
b. that they agreed to purchase.
Explanation:
A minor is a person who is under the age of 18 and unable to make decision on his own such as mentally impaired or incompetent persons .
A minor cannot enter a contract like adults but if under any circumstance they enter into a contract of sale purchase of daily goods like clothing etc, they are liable to pay the price which they agreed to pay.
Their parents are liable only if the contract was made according to the parent's will etc.
If the minor is unable to pay the agreed amount then the minor should return the goods or fulfill any other liability as imposed by the court of law.
Partial balance sheets and additional iformation are listed below for Sowell Company.
SOWELL COMPANY
Partial Balance Sheets
as of December 31
Assets 2011 2010
Cash $40,000 $20,000
Accounts Receivable 70,000 85,000
Inventory 40,000 35,000
Liabilities
Accounts Payable $54,000 $62,000
Additional Information:
Net income was $88,000.
Depreciation expense was $19,000.
REQUIRED: Prepare the operating activities section of the statement of cash flows for 2011 using the indirect method.
Answer and Explanation:
The preparation of the operating activities section is presented below
Cash Flows from operating activities
Net Income $88,000
Adjustment made for non cash items:
Depreciation Expense $19,000
Add: Decrease in Account Receivable $15000 ($70,000 - $85,000)
Less: Increase in Inventory $(5000) ($40,000 - $35,000)
Less: Decrease in accounts payable $(8000) ($54,000 - $62,000)
Net cash flows from operating activities $109,000
Behavioral finance is the study of:_________.
a. how investors react to accounting-based profit fluctuations.
b. how investors react to interest rates and foreign currency fluctuations.
c. how investors react to certain ways to diversify a portfolio.
d. how investors react to the amount of risk versus the amount of return in securities.
Answer:
D). how investors react to the amount of risk versus the amount of return in securities.
Explanation:
Behavioral finance can be regarded as study involving influence of psychology on investors behavior as well as financial analysts. encompass effects that comes after this on the markets. It explains that investors cannot always described as rational. It should be noted that the Behavioral finance is the study of how investors react to the amount of risk versus the amount of return in securities.
Marigold Corp. produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is 0.3 pounds and 0.1 pounds, respectively. The purchase price is $2 per pound, but a 2% discount is usually taken. Freight costs are $0.1 per pound, and receiving and handling costs are $0.07 per pound. The hourly wage rate is $8 per hour, but a raise which will average $0.30 will go into effect soon. Payroll taxes are $1.20 per hour, and fringe benefits average $2.40 per hour. Standard production time is 1 hour per unit, and the allowance for rest periods and setup is 0.2 hours and 0.1 hours, respectively. The standard direct labor rate per hour is
Answer:
$11.90
Explanation:
Standard direct labor rate per hour = Hourly wage rate + Average raise on wage + Payroll taxes + Fringe benefits
Standard direct labor rate per hour = $8 + $0.3 + $1.2 + $2.4
Standard direct labor rate per hour = $11.90.
After graduating from UCF, you plan to purchase a small condominium for $100,000. You will be required by the bank to put a down payment of 10% of the purchase price. You plan to finance the loan for 30 years. Assume monthly payments and a nominal rate (monthly compounding) of 3%. What percentage of the first 25 payments goes toward paying principal
Answer:
Percentage of the first 25 payments goes toward paying principal is 41.95%.
Explanation:
Note: See the attached excel file for the amortization schedule for the first 25 months.
In the attached excel file, the monthly is calculated using the formula for calculating the present value of an ordinary annuity as follows:
PV = P * ((1 - (1 / (1 + r))^n) / r) …………………………………. (1)
Where;
PV = Present value or the balance to pay = Cost * (100% - Percentage of down payment) = $100,000 * (100% - 10%) = $90,000
P = Monthly payment = ?
r = Monthly interest rate = Nominal rate / 12 = 3% / 12 = 0.25%, or 0.0025
n = number of months to repay = 30 years * 12 months = 360
Substitute the values into equation (1) and solve for P, we have:
$90,000 = P * ((1 - (1 / (1 + 0.0025))^360) / 0.0025)
$90,000 = P * 237.189381504283
P = $90,000 / 237.189381504283
P = $379.44
From the attached excel file, we have:
Total payment for the first 25 months = $9,486.09
Total repayment of principal for the first 25 months = $3,979.17
Therefore, we have:
Percentage of the first 25 payments goes toward paying principal = (Total repayment of principal for the first 25 months / Total payment for the first 25 months) * 100 = ($3,979.17 / $9,486.09) * 100 = 41.95%
Shoemacher has $20,000 to invest in two types of mutual funds: a High-Yield Fund and an Equity Fund. The High-Yield fund has an annual yield of 12%, while the Equity fund earns 8%. He would like to invest at least $3000 in the High-Yield fund and at least $4000 in the Equity fund. How much should he invest in each to maximize his annual yield, and what is the maximum yield?
Answer:
you have to maximize the following equation: 0.12A + 0.08B
Where A is the amount of money invested in the high yield fund
Where B is the amount of money invested in the equity fund
A + B = 20,000
A ≥ 3,000
B ≥ 4,000
Using Solver, the optimal solution is to invest $16,000 in A and $4,000 in B. Maximum annual yield = $2,240
Boenisch Corporation produces and sells a single product with the following characteristics: The company is currently selling 8,000 units per month. Fixed expenses are $406,000 per month. Management is considering using a new component that would increase the unit variable cost by $3. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 400 units. What should be the overall effect on the company's monthly net operating income of this change
Answer: Increase by $2,000
Explanation:
Current net operating income is:
= Contribution margin - Fixed costs
= (68 * 8,000) - 406,000
= $138,000
If component is added, Variable cost increases by $3 to $105. New contribution margin is:
= 170 - 105
= $65
Units sold increases by 400 to 8,400.
Net operating income becomes:
= (65 * 8,400) - 406,000
= $140,000
Net operating income increased by:
= 140,000 - 138,000
= $2,000