Answer:
a. Total profit without recycling is $3,700, while Total profit with recycling is $41,000.
b. Total economic profit is highest when the recycling production method is: implemented or utilized.
Explanation:
a. Complete the following table by computing the total profit (the chemical plant's economic profit and the hiking lodge's economic profit combined) with and without recycling.
These can be computed by adding the profit under the two scenario as follows:
Total profit without recycling = Chemical plant's economic profit without recycling + Hiking lodge's economic profit without recycling = $2,200 + $1,500 = $3,700
Total profit with recycling = Chemical plant's economic profit with recycling + Hiking lodge's economic profit with recycling = $1,400 + $2,700 = $4,100
The table can therefore be reproduced as follows:
Action Chemical Plant Hiking Lodge Total
No recycling $2,200 $1,500 $3,700
Recycling $1,400 $2,700 $4,100
b. Total economic profit is highest when the recycling production method is:________
From part a. above, total economic profit is highest when the recycling production method is: implemented or utilized.
The reason is that total profit with recycling of $4,100 is greater than total profit without recycling of $3,700.
Based on the table, the Center Barnstead Town receives more economic benefit when the Fish Cannery recycles the industrial waste.
Though, Cannery's revenue drops by $800 ($2,200 - $1,400), the Hiking Lodge's revenue increases by $1,200 ($2,700 - $1,500). These results cause the net total revenue for the town to increase by $400 ($1,200 - $800) plus the cleaner ecosystem.
Data and Calculations:
Action Chemical Plant Hiking Lodge Total
No recycling $2,200 $1,500 $3,700 ($2,200 + $1,500)
Recycling $1,400 $2,700 $4,100 ($1,400 + $2,700)
Total increase in Revenue with recycling = $400 ($4,100 - $3,700)
Thus, it is in the best economic interest of the town to ensure that the Cannery recycles the waste.
Learn more: https://brainly.com/question/11641030
Similar to stock prices, bond values are derived as the discounted value of all cash flows received from bond ownership in exchange for the bond's price. The two main cash flows an investor receives in exchange for purchasing a bond are:
Answer: b. Interest or Coupon Payments (PMT) throughout the bond's life expand and the repayment of the principal or Face Value at the bond's maturity (FV).
Explanation:
For most bonds, a bond holder receives interest payments from the bond issuer in terms of coupon payments for the duration of the life of the bond. The coupon payment is a steady payment based on the par value of the bond.
When the bond matures, the bond holder receives the Principal/Face Value of the bond back. This value of usually the Par value of the bond regardless of how much the bond holder bought the bond for.
Bill Phillips is developing a Monte Carlo simulation to value a complex and thinly traded security. Phillips wants to model one input variable to have negative skewness and a second input variable to have positive excess kurtosis. In a Monte Carlo simulation, Phillips can appropriately use:_________
Answer: Both of them
Explanation:
The Monte Carlo Simulation is a forecasting technique that allows one to find out the probability of occurence of different outcomes which may be difficult to come up with because there are multiple random variables involved.
Monte Carlo simulations are used in many diverse fields such as Finance, Engineering and Science.
As earlier mentioned, this simulation allows for multiple random variables so Phillips can use it to model both the variables to have different characteristics.
Chloe makes $500 per week and spends all her income on books and tea. Books cost $25 each, and Chloe buys 16 each week. Tea costs $5 per cup, and Chloe buys 20 cups. When Chloeâs income falls to $450 per week, she cuts her consumption of books by 3 books and purchases 5 more cups of tea. Based on these figures, indicate whether each of the following statements is true or false.
a. Books are an inferior good.
1. True
2. False
b. Tea is a necessity.
1. True
2. False
c. Books are a luxury good, and tea is an inferior good.
1. True
2. False
Answer:
hi i reallly tried but dont want to give an answer that is wrong
plz forgive me
god bless u
Explanation:
E-Eyes just issued some new preferred stock. The issue will pay an annual dividend of $14 in perpetuity, beginning 19 years from now. If the market requires a return of 4.4 percent on this investment, how much does a share of preferred stock cost today
Answer:
Price of stock = $181.78
Explanation:
PV of dividend in year 13
PV =A×(1- (1+r)^(-n)/r )
PV of dividend in (year 13) = 14/(0.044=318.18
PV of dividend in year 0
PV = Div× (1+r)^(-n)
Dividend in year 13, r-interest rate, n- number of years
PV in year 0 = 318.1818182 × 1.044^(-13)= 181.78
Price of stock = $181.78
Van Frank Telecommunications has a patent on a cellular transmission process. The company has amortized the patent on a straight-line basis since 2017, when it was acquired at a cost of $10.8 million at the beginning of that year. Due to rapid technological advances in the industry, management decided that the patent would benefit the company over a total of six years rather than the nine-year life being used to amortize its cost. The decision was made at the beginning of 2021.Required:
Prepare the appropriate adjusting entry for patent amortization in 2021 to reflect the revised estimate.
Answer:
The appropriate adjusting entry for patent amortization in 2021 to reflect the revised estimate would be as follows:
Amortization Expense Dr. 3 million
Patent Cr. 3 million
Explanation:
In order to Prepare the appropriate adjusting entry for patent amortization in 2021 to reflect the revised estimate we would have to make the following calculations:
Calculation after the Change:
Original Cost =$10.8 million
Annual Amortization (Old) =$10.8 million/9 = $1.2 million
Amortization till Date (2017 - 2021) = 1.2*4 = 4.8 million
Unamortized Value = 10.8 - 4.8 = 6 million
Remaining Life = 6 - 4 = 2 Years
New Amortization = Unamortized Value/Remaining Life = 6/2 = 3 million
Therefore, the appropriate adjusting entry for patent amortization in 2021 to reflect the revised estimate would be as follows:
Amortization Expense Dr. 3 million
Patent Cr. 3 million
Botox Facial Care had earnings after taxes of $350,000 in 20X1 with 200,000 shares of stock outstanding. The stock price was $72.50. In 20X2, earnings after taxes increased to $420,000 with the same 200,000 shares outstanding. The stock price was $83.00. a. Compute earnings per share and the P/E ratio for 20X1. (The P/E ratio equals the stock price divided by earnings per share.) (Do not round intermediate calculations. Round your final answers to 2 decimal places.) b. Compute earnings per share and the P/E ratio for 20X2. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) c. Why did the P/E ratio change
Answer:
a. Compute earnings per share and the P/E ratio for 20X1.
EPS = $1.75 per stock
P/E ratio = 41.43
b. Compute earnings per share and the P/E ratio for 20X2.
EPS = $2.10 per stock
P/E ratio = 39.52
Explanation:
after taxes net income $350,000 in 20x1
200,000 outstanding common stocks
stock price $72.50
after taxes net income $420,000 in 20x2
200,000 outstanding common stocks
stock price $83.00
EPS = net income / outstanding stocks
20x1 = $350,000 / 200,000 = $1.75 per stock
20x2 = $420,000 / 200,000 = $2.10 per stock
P/E ratio = stock price / EPS
20x1 = $72.50 / $1.75 = 41.43
20x2 = $83.00 / $2.10 = 39.52
Ms. Parker would like to have $99.000 buy a new car in 8 yearsTo accumulate $99,000 in years, how much should she invest monthly in a sinking tund with 3% Interest compounded monthly?
Answer:
$1,161.23
Explanation:
For computing the monthly payment we need to apply the PMT formula i.e to be shown in the attachment below:
Given that,
Present value = $99,000
Future value or Face value = $0
RATE = 3% ÷ 12 months = 0.25
NPER = 8 years × 12 months = 96 months
The formula is shown below:
= PMT(RATE;NPER;-PV;FV;type)
The present value come in negative
So, after applying the above formula, the monthly payment is $1,161.23
The Hudson Corporation makes an investment of $24,000 that provides the following cash flow: Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.Year Cash Flow
1 $ 13,000
2 13,000
3 4,000a. What is the net present value at an 8 percent discount rate? (Do not round intermediate calculations and round your answer to 2 decimal places.)b. What is the internal rate of return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Answer:
NPV = $2,357.77
IRR = 14.31%
Explanation:
Net present value is the present value of after tax cash flows from an investment less the amount invested.
Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.
NPV and IRR can be calculated using a financial calculator.
Cash flow in year 0 = $-24,000
Cash flow each year in year 1 and 2 = $13,000
Cash flow in year 3 = 4,000
I = 8%
NPV = $2,357.77
IRR = 14.31%
To find the NPV using a financial calacutor:
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
To find the IRR using a financial calacutor:
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 IRR button and then press the compute button.
I hope my answer helps you
As the Toronto-based Four Seasons hotel chain remodels an existing hotel in Mumbai to bring it to the five-star hotels exacting standards, it is building a magnificent revolving restaurant overlooking the Arabian Sea at World. The restaurant structure is an example of a(n):
Answer:
Horizontal expansion model
Explanation:
Renovation in Horizontal expansion model is one in which current business is upgraded with some new features to add value and another branch is opened to serve its customers. The customers needs are kept in mind before going for a renovation process.
Exercise 9-6 Percent of sales method; write-off LO P3 At year-end (December 31), Chan Company estimates its bad debts as 0.30% of its annual credit sales of $931,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $466 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off. Prepare Chan's journal entries for the transactions.
Answer:
Refer to the below for explanation.
Explanation:
December 31,
Amount estimated = Annual credit sales × 0.30.%
= $931,000 × 0.30%
= $2,793
Please see journal entries below;
December 31, Bad debts expense A/c ....................Dr. $2,793
To allowance for doubtful accounts .......Cr $2,793
February 1, Allowance for doubtful A/c........ Dr. $466
To accounts receivable P.Park..........Cr $466
June 5, Accounts receivable P. Park account......... Dr $466
To allowance for doubtful accounts......... Cr $466
June 5,. Cash A/c..... Dr $466
To accounts receivable P.Park.............Cr $466
A company has net credit sales of $ 1 comma 300 comma 000, beginning net accounts receivable of $ 270 comma 000, and ending net accounts receivable of $ 202 comma 000. What is the days' sales in accounts receivable? (Use 365 days in calculations as needed. Round any intermediate calculations to two decimal places, and your final answer to the nearest whole day.)
Answer:
66.36 days
Explanation:
Calculation of the days' sales in accounts receivable .
Using this formula
Accounts Receivable Turnover Ratio = [Net credit sales (Beginning net account receivable +Ending net account receivable)/2)]
Let plug in the formula
[$1,300,000/($270,000 + $202,000)/2)]
$1,300,000/($472,000/2)
=$1,300,000/236,000
=$5.50 Days' sales in receivables
= 365/5.5
= 66.36 days
Therefore the days' sales in accounts receivable will be 66.36 days
Hancock Medical Supply Co., earned $85,000 of revenue on account during Year 1, its first year of operation. During Year 1, Hancock collected $67,600 of cash from its receivables accounts. The company did not write-off any uncollectible accounts. It estimates that it will be unable to collect 1% of revenue on account. What is the net realizable value of receivables that will be reported on the balance sheet at December 31, Year 1
Answer:
realizable value of the receivable = $16,550
Explanation:
First of all let us lay out the important information to be used in calculation clearly:
earnings = $85,000
receivables collected = $67,600
uncollectible amount = 1% of $85,000 = 0.01 × 85,000 = $850
Net realizable value of receivables is the total amount to be received, but that has not yet been received, and is not classified as uncollectible amount. This is calculated thus:
Net value of receivable = earnings - uncollectible amount - receivable collected.
= 85,000 - 850 - 67,600 = $16,550.
Note that the receivable collected is subtracted from the total earnings because it is no longer classified as receivable, once it has been received, hence whatever remains of the total earnings that has not bee received make up receivables.
Jane, Joseph and John are supporting their father who lives in a separate apartment. Their contribution towards his support is 10%, 35% and 55%, respectively. In a multiple support agreement, who would be entitled to claim the father as a dependent?
Answer:
Joseph or John
Explanation:
In order to claim a person as a dependent in order to be eligible for tax benefits, one must contribute with more than 10% of the person's support.
In this case, only Joseph and John contribute with more than 10% and therefore only Joseph or John would be entitled to claim their father as a dependent.
You own a portfolio equally invested in a risk-free asset and two stocks (If one of the stocks has a beta of 0.66 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? (Hint: Remember that the market has a Beta=1; also remember that equally invested means that each asset has the same weight- since there are 3 assets, each asset's weight is 1/3 or 0.3333). Enter the answer with 4 decimals (e.g. 1.1234)
Answer:
The beta of the other stock or stock B is 2.34
Explanation:
The beta of the portfolio is the weighted average of the individual stock betas that form up the portfolio. To calculate the beta for the portfolio, we use the following formula,
Portfolio beta = wA * Beta of A + wB * Beta of B + ... + wN * Beta of N
Where,
w represents the weight of each stock in the portfolioAs the portfolio is equally as risky as the market, the portfolio beta is assumed to be the same as that of the market and the beta is 1.
The beta is the measure of systematic risk and a risk free asset does not have risk and has a beta of 0.
To calculate the Beta of stock B in the portfolio, we simply put the available values in the formula for the portfolio beta,
1 = 1/3 * 0 + 1/3 * 0.66 + 1/3 * Beta of B
1 = 0 + 0.22 + 1/3 * Beta of B
1 - 0.22 = 1/3 * Beta of B
0.78 * 3 = 1 * Beta of B
2.34 = Beta of B
Thus, the beta of the other stock or stock B is 2.34
Thornton, Inc., had taxable income of $128,267 for the year. The company's marginal tax rate was 35 percent and its average tax rate was 24 percent. How much did the company have to pay in taxes for the year?
Answer:
$30784.08
Explanation:
Taxable income can be refer to as the amount of income used to calculate how much tax an organisation owes to the government in a particular tax year.
Thornton Inc. had taxable income of $128,267 for the year
The company's marginal tax rate is 35 percent
The company's average tax rate is 24 percent
To know how much did the company have to pay in taxes for the year, we multiply the Taxable income by the Company Average tax rate for the year.
=$128,267 * 24%
=$128,267 * 0.24
=$30784.08
Thornton Inc will pay $30784.08 for the year.
The company has 15 employees, who earn a total of $1,960 in salaries each working day. They are paid each Monday for their work in the five-day workweek ending on the previous Friday. Assume that December 31, 2015, is a Tuesday, and all 15 employees worked the first two days of that week. Because New Year's Day is a paid holiday, they will be paid salaries for five full days on Monday, January 6, 2016. Use the information to prepare adjusting entries as of December 31, 2015.
Answer:
Preparation of the adjusting entries as of December 31, 2015.
Dr Salaries Expense 3,920
Cr Salaries Payable 3,920
Explanation:
Since we were been told in the question that all the 15 employees worked the first 2 days of that week, the Adjustment we therefore be $3,920( 1,960×2) . And the transaction will be recorded as:
Dr Salaries Expense 3,920
Cr Salaries Payable 3,920
The Adjustment will be :
1,960 x 2 = 3,920
Therefore the pay that occured in New Year's Day will not be used because it falls in the next year.
On January 1, a company has 700,000 shares of issued and outstanding common stock. On March 1, the company repurchases 60,000 shares. On June 1, it effects a 2-for-1 stock split. On November 1, it issues 240,000 shares. The company has a net income for the year of $2,720,000.
Required:
What is the basic earnings per share of common stock for the year (rounded to the nearest cent)?
Answer:
Basic EPS = 1.8
Explanation:
March 1 outstanding shares = 700,000 - 60,000= 640,000
June 1 outstanding shares = 640,000 × 2 = 1,280,000
November 1 outstanding shares = 1,280,000 + 240,000 =1,520,000
Net income = $2,720,000.
Basic earnings per shares (EPS) =
income available to ordinary shareholders/Number of shares outstanding
=$2,720,000/1,520,000 units = 1.789
Basic EPS = 1.8
Suppose your friend is a music major who sings at weddings. She has no fixed or marginal costs for singing and has two types of customers: 20 customers think it is worth paying $200 to have her sing at their wedding, whereas 10 customers think her singing services are worth only $100. Il earn S if she can charge only one price to:________.
(a) If your friend is able to sing at each wedding and maximizes profits all customers.
(b) She will earn S If she can perfectly price discriminate.
Answer: a. $4,000
b. $5,000
Explanation:
a. If she can sing at each wedding but decides to maximise profits, she will only sing at the weddings of those paying her $200 as it is the higher of the two payment options.
Should she sing at the $200 customer weddings, she would make;
= 20 people * $200
= $4,000
b. Price Discrimination is the charging of different types of customers different prices for the same or similar goods.
If your friend knows how to perfectly charge the two different groups the different prices that they value her at then she will be able to attend and sing at both weddings making her revenue;
= (10* $100) + (20 * $200)
= 1,000 + 4,000
= $5,000
On April 2 a corporation purchased for cash 5,000 shares of its own $11 par common stock at $28 per share. It sold 3,000 of the treasury shares at $31 per share on June 10. The remaining 2000 shares were sold on November 10 for $24 per share. a. Journalize the entries to record the purchase (treasury stock is recorded at cost). Apr. 2 b. Journalize the entries to record the sale of the stock. If an amount box does not require an entry, leave it blank. Jun. 10 Nov. 10
Answer:
April 2
Treasury Stock $140,000 (debit)
Cash $140,000 (credit)
June 10
Cash $93,000 (debit)
Treasury Stock $93,000 (credit)
Nov 10
Cash $48,000 (debit)
Treasury Stock $48,000 (credit)
Explanation:
When the Company purchases its own shares
De-recognize the equity item : Treasury Stock and also de-recognize the assets of Cash.
When the Company sales its own shares.
Recognize the Equity item : Treasury Stock and also recognize the asset Cash.
Change all of the numbers in the data area of your worksheet so that it looks like this:
Data
4 Unit sales 10,000 units
5 Selling price per unit $20 per unit
6 Variable expenses per unit $8 per unit
7 Fixed expenses $90,000
A) What is the break-even in dollar sales?
B) What is the margin of safety percentage?
C) What is the degree of operating leverage?
1. Using the degree of operating leverage and without changing anything in your worksheet, calculate the percentage change in net operating income if unit sales increase by 20%.
2. Confirm your calculations in Requirement 3 above by increasing the unit sales in your worksheet by 20% so that the Data area looks like this:
Data
4 Unit sales 12,000 units
5 Selling price per unit $20 per unit
6 Variable expenses per unit $8 per unit
7 Fixed expenses $90,000
1. Using the degree of operating leverage and without changing anything in your worksheet, calculate the percentage change in net operating income if unit sales increase by 20%.
2. Confirm your calculations in Requirement 3 above by increasing the unit sales in your worksheet by 20% so that the Data area looks like this:
A. What is net operating income?
B. By what percentage did the net operating income increase?
Answer:
A) What is the break-even in dollar sales?
$150,000B) What is the margin of safety percentage?
25%C) What is the degree of operating leverage?
41. Using the degree of operating leverage and without changing anything in your worksheet, calculate the percentage change in net operating income if unit sales increase by 20%.
if unit sales increase by 20%, then profits should increase by 80%2. Confirm your calculations in Requirement 3 above by increasing the unit sales in your worksheet by 20%
A. What is net operating income?
(10,000 x 1.2 x $20) - (10,000 x 1.2 x $8) - $90,000 = $240,000 - $96,000 - $90,000 = $54,000B. By what percentage did the net operating income increase?
net operating income increased from $30,000 to $54,000 (an 80% increase)Explanation:
selling price $20
variable costs $8
contribution margin $12
break even point = $90,000 / $12 = 7,500 x $20 = $150,000
margin of safety = (current sales - break even) / current sales = $50,000 / $200,000 = 25%
degree of operating leverage = (quantity x contribution margin) / [(quantity x contribution margin) - fixed costs] = (10,000 x $12) / ($120,000 - $90,000) = $120,000 / $30,000 = 4
or contribution margin / net profits = $120,000 / $30,00 = 4
When a bank has excess reserves, it can choose to turn its reserves into loans for consumers and businesses. Generally speaking, when banks increase the number of loans available, interest rates will
Answer:
reduce
Explanation:
Note that the bank has excess funds and thus wants to increase the number of available loans which in turn increases investment in the economy. For this strategy to work, the bank will reduce the interest rate it places on loans in order to entice its customers to procure the loans it offers.
For example, a bank that usually gives out 150 loans at 15% Interest rate may because of new banking policy and excess reserve decide to increase its loan capacity to around 300 loans per annum at an interest rate of 10%.
Small business owners' unique selling points (also known as benefits) that customers can expect from your goods or services, including benefits that differentiate your offering from those of the competition is known as:
Answer: Value proposition
Explanation: Value proposition in business is that service, innovation, or uniqueness about your business that attracts customers. A value proposition also helps answers the question 'why' someone should do business with you. It hells to convince potential customer why they should patronize you, and why your service or product would be of more value to them than what your competitors offering same service would be able to offer them.
Tony saved enough money to place $125,500 in an investment generating 10% compounded monthly. He wants to collect a monthly income of $1,350, at the beginning of each month, for as long as the money lasts. How many months will Tony have this income coming to him?
A.165.
B.145.
C.192.
D.162.
Answer:
The answer is 162 months, option (D)
Explanation:
Solution
Given that:
Tony saved an amount of money =$125,500
Investment generates a =10% compounded monthly
A monthly income of =$1350
Now, we have to find How many months will Tony have this income coming to him
Thus
The current income value will be equal to = $125,500.
So,
125,500 = 1350 + 1350/1.0077 + 1350/1.0077^2 + 1350/1.0077^3 + ... + 1350/1.0077^n
125,500 = 1350 * 1.0077 / 0.0077 * ( 1 - (1/1.0077)^n )
Therefore n= 162 months
Melissa recently paid $870 for round-trip airfare to San Francisco to attend a business conference for three days. Melissa also paid the following expenses: $400 fee to register for the conference, $260 per night for three nights’ lodging, $120 for meals, and $425 for cab fare. (Leave no answers blank. Enter zero if applicable. Do not round intermediate calculations. Round your final answer to the nearest dollar amount.) b. Suppose that while Melissa was on the coast, she also spent two days sightseeing the national parks in the area. To do the sightseeing, she paid $1,010 for transportation, $1,055 for lodging, and $495 for meals during this part of her trip, which she considers personal in nature. What amount of the total costs can Melissa deduct as business expenses?
Answer:
$2,535
Explanation:
you can deduct only business related costs:
50% of the money spent on meals = $120 x 50% = $60100% of transportation expenses = $870 + $425 = $1,295100% lodging expenses = $780100% of the registration fee = $400total deductions = $2,535Expenses that are not considered business related, e.g. sightseeing, cannot be deducted as business expenses.
If a company fails to adjust for accrued revenues:______. a. assets will be understated and revenues will be understated. b. liabilities will be understated and revenues will be understated. c. liabilities will be overstated and revenues will be understated. d. assets will be overstated and revenues will be understated.
Answer:
a. assets will be understated and revenues will be understated
Explanation:
Revenue accrued is recorded as follows :
Account Receivable (debit)
Sales Revenue (credit)
Thus omission of this adjustment would result in Assets (Accounts Receivables) being understated and Revenues being understated as well.
Consider the following case of Free Spirit Industries Inc :
Suppose Free Spirit Industries Inc. is considering a project that will require $400,000 in assets:
• The company is small, so it is exempt from the interest deduction limitation under the new tax law.
• The project is expected to produce earnings before interest and taxes (EBIT) of $45,000.
• Common equity outstanding will be 10,000 shares.
• The company incurs a tax rate of 25%."
If the project is financed using 100% equity capital, then Free Spirit Industries Inc.'s return on equity (ROE) on the project will be____________. In addition, Free Spirit's earnings per share (EPs) will be____________
Alternatively, Free Spirit Industries Inc.'s CFO is also considering financing the project with 50% debt and 50% equity capital. The interest rate on the company's debt will be 12%. Because the company will finance only 50% of the project with equity, it will have only 12, 500 shares outstanding. Free Spirit Industries Inc.'s ROE and the company's EPS will be_____________ if management decides to finance the project with 50% debt and 50% equity.
Typically, the use of financial average will make the probability distribution of ROIC:__________
Answer:
Return on equity (ROE) on the project will be 8.43%. In addition, Free Spirit's earnings per share (EPs) will be $3.375 per share
ROE and the company's EPS will be 7.875% if management decides to finance the project with 50% debt and 50% equity.
The use of financial average will make the probability distribution of ROIC $4.5
Explanation:
Calculation of When the company financed with 100% equity
Using this formula
ROE = (EBIT – Interest)(1-Tax Rate)/Equity
Let plug in the formula
When financed with 100% equity,
ROE = 45,000(1-25%)/400,000
ROE=45,000(0.75)/400,000
ROE=33,750/400,000
ROE=8.43
Calculation for the Free Spirit's earnings per share (EPs)
EPS = (45,000)(1-25%)/10,000
EPS=45,000*0.75/10,000
EPS=33,750/10,000
= $3.375 per share
Calculation of When the company financed with 50% Debt
50%×400,000=200,00
ROE = (45,000 – 200,000*12%)(1-25%)/200,000
ROE=21,000×0.75/200,000
ROE=15,750/200,000
ROE=
= 7.875%
EPS = Net Income/Outstanding shares
EPS=45,000/10,000
EPS.=4.5 per share
Hence,7.875 % and $4.5 respectively
A medical group practice is considering offering a new service with risk that is greater than the current risk of the business. When evaluating this investment, the decision maker should:
a. increase the internal rate of return of the project to reflect the greater risk
b. increase the net present value of the project to reflect the greater risk
c. reject the project because its acceptance would increase the risk of the business
d. ignore the risk differential if the project represents only a small fraction of the total assets of the firm
e. increase the cost of capital applied to the project to make it higher than the business's corporate cost of capital
Answer:
e. increase the cost of capital applied to the project to make it higher than the business's corporate cost of capital
Explanation:
When a project is more risky compared to the current risk of the business, the business shouldn't use the company's weighted average cost of capital but use a cost of capital higher than the company's wacc to reflect the riskiness of the project. .
Net present value is the present value of after tax cash flows from an investment less the amount invested.
Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested
NPV and IRR are determined by amount invested in the project, cost of capital and cash inflows. It cannot be randomly manipulated.
I hope my answer helps you
Sub Sandwiches of America made the following expenditures related to its restaurant.
1. Replaced the heating equipment at a cost of $250,000.
2. Covered the patio area with a clear plastic dome and enclosed it with glass for use during the winter months. The total cost of the project was $750,000.
3. Performed annual building maintenance at a cost of $24,000.
4. Paid for annual insurance for the facility at $8,800.
5. Built a new sign above the restaurant, putting the company name in bright neon lights, for 9,900.
6. Paved a gravel parking lot at a cost of $65,000.
Required:
Sub Sandwiches of America credits cash for each of these expenditures. Select the account it debits for each.
Answer:
1. Heating Equipment
2. Premises
3. Maintenance Expense
4. Prepaid Insurance
5. Intangible Asset ; Logo
6. Premises
Explanation:
1. Replacement of heating equipment is substantial hence it is capitalized to the Heating Equipment Account.
2. The project is capitalized to the Premises Account as it form part of premises.
3. Annual Building maintenance is a revenue expenditure not capitalized.
4. An Asset Insurance Prepaid for future economic benefits to be realized is recognized.
5. The new sign would result in inflow of economic benefit and is non-tangible hence Intangible Asset is recognized.
6. Work done is capitalized in the Premises Account
Stilley Corporation had earnings after taxes of $438,000 in 20X2 with 200,000 shares outstanding. The stock price was $42.10. In 20X3, earnings after taxes declined to $208,000 with the same 200,000 shares outstanding. The stock price declined to $28.30. a. Compute earnings per share and the P/E ratio for 20X2. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) b. Compute earnings per share and the P/E ratio for 20X3. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)\
Answer:
a) Earnings Per Share for 20X2 = 2.19
P/E ratio for 20X2 = 19.22
b) Earnings Per Share for 20X3 = 1.04
P/E ratio for 20X3 = 27.21
Explanation:
a) Compute earnings per share and the P/E ratio for 20X2.
The compute the earnings per share use the following:
Earnings Per Share for 20X2 = (Earnings after tax-Preference Dividend) / shares outstanding
[tex] = \frac{438,000 - 0}{200,000} = 2.19 [/tex]
Earnings Per Share for 20X2 = 2.19
Then find P/E ratio:
P/E ratio for 20X2 = Market Price per share / Earnings Per Share
[tex] \frac{42.10}{2.19} = 19.224 [/tex]
P/E ratio for 20X2 = 19.22
b) Compute earnings per share and the P/E ratio for 20X3.
The compute the earnings per share use the following:
Earnings Per Share for 20X3 =(Earnings after tax-Preference Dividend) / shares outstanding
[tex] = \frac{208,000 - 0}{200,000} = 1.04 [/tex]
Earnings Per Share for 20X3 = 1.04
Then find P/E ratio:
P/E ratio for 20X3 = Market Price per share / Earnings Per Share
[tex] \frac{28.30}{1.04} = 27.21 [/tex]
P/E ratio for 20X3 = 27.21
When a firm experiences diseconomies of scale, Group of answer choices short-run average total cost is minimized. long-run average total cost is minimized. long-run average total cost increases as output increases. long-run average total cost decreases as output increases.
Answer:
long-run average total cost decreases as output increases.
Explanation: