Answer:
20 million
Explanation:
Calculation to determine the deferred tax asset or liability to be reported in the balance sheet
Using this formula
Deferred tax asset or liability=cumulative temporary difference as of the end of 2021 *tax rate
Let plug in the formula
Deferred tax asset or liability= $80 million *25%
Deferred tax asset or liability=20 million
Therefore the deferred tax asset or liability to be reported in the balance sheet is $20 million
On March 31, 2021, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $17,000,000 in cash. The book values and fair values of Barney’s assets and liabilities were as follows:
Book Value FairValue
Current assets $ 6,000,000 $7,500,000
Property, plant, and equipment 11,000,000 14,000,000
Other assets 1,000,000 1,500,000
Current liabilities 4,000,000 4,000,000
Long-term liabilities 6,000,000 5,500,000
Required:
Calculate the amount paid for goodwill.
Answer:
the amount paid for goodwill is $3,500,000
Explanation:
The computation of the amount paid for goodwill is given below
But before that the net fair value of assets would be determined
Net fair value of assets purchased is
= ($7,500,000 + $14,000,000 + $1,500,000) - ($4,000,000 + $5,500,000)
= $13,500,000
Now Amount paid for goodwill is
= $17,000,000 - $13,500,000
= $3,500,000
Hence the amount paid for goodwill is $3,500,000
Shannon, who has a job and no dependents, has two credit cards she uses for food and entertainment. All card balances are close to the limit. What could be the best action for Shannon to take next?
Request an extension of credit to her credit card company.
Pay off all her balances within the payment cycle.
Apply for a new credit card to increase her credit limit.
Cancel all her credit cards.
Pay off all her balances is my answer for your question.
On November 1, Year One, a company is paid $12,000 in advance to do a job for a customer. The job has ten separate steps. The first four steps were completed in Year One and the remaining six steps were completed in Year Two. The accountant mistakenly believed that this was just one big job and recorded it in that fashion. However, each of the ten steps was really an individual job and should have been accounted for in that way. Which of the following statements is true?
a. At the end of Year One, the company's liabilities are understated.
b. At the end of Year Two, the company's assets are overstated.
c. At the end of Year Two, the company's retained earnings are overstated.
d. At the end of Year One, the company's retained earnings are understated.
e. At the end of Year Two, the company's net income is understated.
Answer: a. At the end of Year One, the company's liabilities are understated.
Explanation:
Under the Accrual basis of Accounting, revenue should be recorded for only jobs that have been completed. In other words, only earned revenue should be recorded. Revenue that has not been earned but yet received, is to be termed Deferred revenue and should be treated as a current liability.
In this scenario, there are steps that have not been completed so some of the revenue received should be termed deferred revenue. These should therefore be in current liabilities and because they were not, the liabilities for the end of year 1 will be understated.
Define four functions of managenet
Answer:
The answer is below
Explanation:
The Four functions of management are:
1. Planning: this is the process of setting out a plan by the management team that involves the goals and the template or means to achieve those goals.
2. Organizing: this is a process of organizing the resources; both human and material resources, that are deemed essential to the realization of the set out plans or goals.
3. Leading: this is a process of ensuring all the team members work together to achieve the main goals or set out plans.
4. Controlling: this is a process that involves constant checking, evaluation, and monitoring activities to ensure the ongoing performance meets the actual plans and will eventually yield to the goal.
Soprano Corporation allocates administrative costs on the basis of staff hours. Short-run monthly usage and anticipated long-run monthly usage of staff hours for Operating Departments 1 and 2 follow. Department 1 Department 2 Total Short-run usage (hours) 80,000 120,000 200,000 Long-run usage (hours) 90,000 110,000 200,000 If Soprano uses dual-cost accounting procedures and fixed administrative costs total $1,000,000, the amount of fixed administrative costs to allocate to Department 1 would be:
Answer:
$850,000
Explanation:
Total Hours of Department 1=$80,000+$90,000
=$170,000/$200,000*1000,0000
Discounting Cash Flows and Earnings. Under the residual income approach and the discounted cash flow approach to firm valuation, carnings and cash flows, respectively, are discounted using a firm's cost of equity. Discuss why the cost of equity is the appropriate discount rate to use to discount a firm's camings and cash flows. Why is the cost of debt inappropriate to use to discount a firm's earnings or cash flows
Answer:
Cost of debt is used for external source of finance whereas cost of equity is used for internal source of finance.
Explanation:
Debt is the fund borrowed from lender at a standard rate of interest. Equity is fund acquired by the investors and shareholders. The required rate of return for equity is higher than the rate of return to the debt holders. This is because debt holders are safe and they are paid first in case of a bankruptcy and liquidity situation of a company. Debt is considered as cheap source of finance but acquiring higher debt will increase company gearing. It is not suitable to use cost of debt as discount factor for the cash flows of the company. The best and ideal discount factor is WACC which is derived by the combination of debt and equity.
Indicate whether each of the following costs associated with productionwould be classified as direct materials, direct labor, or manufacturing overhead.
a. Salaried supervisor responsible for several product lines
b. Maintenance personnel
c. Hourly workers assembling goods
d. Nails used to assemble cabinets
e. Bike frame used to build a racing bike
f. Factory utilities
g. Glue used to assemble toys
Answer and Explanation:
The classification is as follows
a. Manufacturing overhead as it is an indirect cost
b. Manufacturing overhead as it is related to factory
c. Direct labor as it represent the hours
d. Manufacturing overhead as it is an indirect material cost
e. Direct material as it represent the material cost
f. Manufacturing overhead as it is an indirect cost
g. Manufacturing overhead as it is an indirect material cost
In this way it could be categorized
Ingraham Inc. currently has $820,000 in accounts receivable, and its days sales outstanding (DSO) is 54 days. It wants to reduce its DSO to 35 days by pressuring more of its customers to pay their bills on time. If this policy is adopted, the company's average sales will fall by 15%. What will be the level of accounts receivable following the change? Assume a 365-day year.
Answer: 451759.29
Explanation:
To solve the question, we need to calculate the current sales. This will be calculated by using the formula:
DSO = (Account receivable × 365) / Sales
54 = 820000 × 365 / Sales
Sales = 820000 × 365 / 54
Sales = 5542593
After the new policy, the expected sales will be:
= 5542593 × (1 - 15%)
= 5542593 × (1 - 0.15)
= 5542593 × 0.85
= 4711204.5
The level of accounts receivable following the change will be:
DSO = (Account receivable × 365) / Sales
35 = Account receivable × 365 / 4711204.5
Account receivable = 35 × 4711204.5 / 365
Account receivable = 451759.29
Assume a division of Hewlett-Packard currently makes 12,000 circuit boards per year used in producing diagnostic electronic instruments at a cost of $34 per board, consisting of variable costs per unit of $24 and fixed costs per unit of $10.
Further assume Sanmina-SCI offers to sell Hewlett-Packard the 12,000 circuit boards for $34 each.
If Hewlett-Packard accepts this offer, the facilities currently used to make the boards could be rented to one of Hewlett-Packard's suppliers for $46,000 per year.
In addition, $6 per unit of the fixed overhead applied to the circuit boards would be totally eliminated.
Calculate the net benefit (cost) to HP of outsourcing the component from Samina-SCI.
(Use a negative sign with your answer, if appropriate.)
Answer:
The net benefit is -$26,000
Explanation:
Given the above information,
The total cost of manufacturing 12,000 circuit boards
= 12,000 × $34
= $408,000
Total purchase price
= 12,000 × $34
= $408,000
Fixed overhead cost applied
= 12,000 × $6
= $72,000
The rental income = $46,000
Outsourcing cost
= Total purchase price + Fixed overhead cost applied - Rental income
= $408,000 + $72,000 - $46,000
= $434,000
Therefore, Net benefit
= Total cost of manufacturing - Outsourcing cost
=$408,000 - $434,000
= -$26,000
Which Finance jobs can someone pursue with only a high school diploma? Check all that apply.
Tax Preparer
Treasurer
Actuary
Teller
Loan Officer
Quantitative Analyst
Answer:
Actuary, Tax Preparer and Loan Officer
Answer:
A, C, and E
Explanation:
Actuary, Tax Preparer and Loan Officer
C Corporation is investigating automating a process by purchasing a machine for $808,200 that would have a 9 year useful life and no salvage value. By automating the process, the company would save $141,000 per year in cash operating costs. The new machine would replace some old equipment that would be sold for scrap now, yielding $22,800. The annual depreciation on the new machine would be $89,800. The simple rate of return on the investment is closest to (Ignore income taxes.): Multiple Choice 11.28% 5.28% 6.52% 16.88%
Answer:
6.52%
Explanation:
According to the scenario, computation of the given data are as follows,
New machine cost = $808,200
Scrap sold = $22,800
Cost of investment = $808,200 - $22,800 = $785,400
Saving from new machine = $141,000
Annual depreciation of machine = $89,800
Net operating income = $141,000 - $89,800 = $51,200
Now we can calculate the rate of return by using following formula,
Simple rate of return = Net operating income ÷ Cost of Investment
= $51,200 ÷ $785,400
= 6.52%
what is the role of the prosecutor in a civil case
A prosecutor is a legal representative of the prosecution in countries with either the civil case inquisitorial system, they represents the government in the case brought against the accused person
Answer:
same as the answer of her/him
Explanation:
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Which of the following statements regarding SPT and WSPT is INCORRECT?
a. SPT always assigns the highest priority to the job to lowest processing time.
b. SPT does not consider the weight differences among different jobs.
c. WSPT may not assign the highest priority to the job with the highest weight because it also considers the processing time information.
d. WSPT assigns the highest priority to the job with the LOWEST weight/processing time ratio.
Answer:
D
Explanation:
WSPT assigns the highest priority to the job with the LOWEST weight/processing time ratio.
Required: 1. Determine the carrying value of inventory at year-end, assuming the lower of cost or net realizable value (LCNRV) rule is applied to (a) individual products, (b) product categories, and (c) total inventory. 2. Assuming inventory write-downs are common for Almaden, record any necessary year-end adjustment amount for each of the LCNRV applications in requirement 1.
Question Completion:
Almaden Hardware Store sells two product categories, tools and paint products. Information pertaining to its 2018 year-end inventory is as follows:
Inventory, by Per Unit Net Realizable
Product Category Quantity Cost Value
Tools:
Hammers 100 $5.00 $5.50
Saw 200 10.00 9.00
Screwdrivers 300 2.00 2.60
Paint products:
1-gallon cans 500 6.00 5.00
Paint brushes 100 4.00 4.50
Required:
1. Determine the carrying value of inventory at year-end, assuming the lower of cost or net realizable value (LCNRV) rule is applied to (a) individual products, (b) product categories, and (c) total inventory.
2. Assuming inventory write-downs are common for Almaden, record any necessary year-end adjustment amount for each of the LCNRV applications in requirement 1.
Answer:
Almaden Hardware Store1. The carrying value of inventory at year-end, assuming the lower of cost or net realizable value (LCNRV) rule is applied to
(a) individual products:
= $5,800
(b) product categories:
= $6,050
(c) total inventory:
= $6,080
2. Inventory write-down as a line item in the income statement, for each of the LCNRV applications for:
(a) individual products:
Debit Cost of goods sold $700
Credit Inventory $700
To record the inventory write down based on LCNRV.
(b) product categories:
Debit Cost of goods sold $450
Credit Inventory $450
To record the inventory write down based on LCNRV.
(c) total inventory:
Debit Cost of goods sold $420
Credit Inventory $420
To record the inventory write down based on LCNRV.
Explanation:
a) Data and Calculations:
Inventory, by Per Unit Net Realizable LCNRV Inventory
Product Category Quantity Cost Value Value
Tools:
Hammers 100 $5.00 $5.50 $5.00 $500
Saw 200 10.00 9.00 9.00 1,800
Screwdrivers 300 2.00 2.60 2.00 600
Paint products:
1-gallon cans 500 6.00 5.00 5.00 2,500
Paint brushes 100 4.00 4.50 4.00 400
Inventory amount (LCNRV rule applied to individual products) $5,800
Inventory amount (LCNRV rule applied to product categories)
Tools: Cost value = (100 * $5) + (200 * $10) + (300 * $2) = $3,100
NRV value = (100 * $5.50) + (200 * $9) + (300 * $2.60) = $3,130
LCNRV = $3,100 for tools
Paint products: Cost value = (500 * $6) + (100 * $4) = $3,400
NRV value = (500 * $5) + (100 * $4.50) = $2,950
LCNRV = $2,950 for paint products
Total LCNRV = $6,050 ($3,100 + $2,950)
Inventory amount (LCNRV rule applied to total inventory):
Cost value = (100 * $5) + (200 * $10) + (300 * $2) + (500 * $6) + (100 * $4)
= $6,500
NRV value = (100 * $5.50) + (200 * $9) + (300 * $2.60) + (500 * $5) + (100 * $4.50) = $6,080
Year-end Adjustments for each of the LCNRV applications in requirement 1:
(a) individual products:
Cost of Inventory = $6,500
LCNRV = 5,800
Inventory write down $700
(b) product categories:
Cost of Inventory = $6,500
LCNRV = 6,050
Inventory write down $450
(c) total inventory:
Cost of Inventory = $6,500
LCNRV = 6,080
Inventory write down $420
An investor deposits 50 in an investment account on January 1. The following summarizes the activity in the account during the year: DateValue Immediately Before DepositDeposit March 154020 June 18080 October 117575 On June 30, the value of the account is 157.50. On December 31, the value of the account is X. Using the time-weighted method, the equivalent annual effective yield during the first 6 months is equal to the (time-weighted) annual effective yield during the entire 1-year period. Calculate X.
Answer:
236.25
Explanation:
Calculation to determine X
First step is to calculate the 6 months Yield
6 month Yield=(40/40+20) (80/40+20) (157.60/80+80)+1)
6 month Yield=(40/60) (80/60) (157.60/160)-1
6 month Yield=5%
Second step is to calculate the Annual equivalent
Annual equivalent=(1.05)^2-1
Annual equivalent=10.25%
Third step is to calculate the 1 year yield
1 year yield=(40/50) (80/40+20) (175/80+80) (x/175+75)
1 year yield=(40/50) (80/60) (175/160) (x/250)-1
1 year yield=0.1025
Now Let calculate X
x(0.004667)=1+.1025
x(0.004667)=1.1025
x=1.1025/0.004667
x=236.25
Therefore X is 236.25
Calculate the annual cash dividends required to be paid for each of the following preferred stock issues:
Required:
a. $3.30 cumulative preferred, no par value; 210,000 shares authorized, 146,000 shares issued. (The treasury stock caption of the stockholders' equity section of the balance sheet indicates that 40,653 shares of this preferred stock issue are owned by the company.) (Round your answer to 2 decimal places.)
b. 5%, $40 par value preferred, 293,000 shares authorized, 165,000 shares issued, and 72,725 shares outstanding. (Round your answer to 2 decimal places.)
c. 12.2% cumulative preferred, $100 stated value, $108 liquidating value; 81,000 shares authorized, 42,000 shares issued, 26,000 shares outstanding.
Answer:
Annual Cash Dividends
a. = $347,645.10
b. = $145,450
c. = $317,200
Explanation:
a) Data and Calculations:
1. $3.30 Cumulative Preferred Stock:
Authorized shares = 210,000
Issued shares = 146,000
Treasury shares = 40,653
Outstanding shares 105,347
Cash dividend = $347,645.10 ($3.30 * 105,347)
2. 5% Preferred Stock, $40 par value:
Authorized shares = 293,000
Issued shares = 165,000
Outstanding shares 72,725 * $40 = $2,909,000
Cash dividend = $145,450 ($2,909,000 * 5%)
3. 12.2% cumulative preferred, $100 stated value, $108 liquidating value:
Authorized shares = 81,000
Issued shares = 42,000
Outstanding shares 26,000 * $100 = $2,600,000
Cash dividend = $317,200 ($2,600,000 * 12.2%)
The Duerr Company manufactures a single product. All raw materials used are traceable to specific units of product. Current information for the Duerr Company follows:
Beginning raw materials inventory $27,000
Ending raw materials inventory 30,000
Raw material purchases 104,000
Beginning work in process inventory 39,000
Ending work in process inventory 49,000
Direct labor 129,000
Total factory overhead 104,000
Beginning finished goods inventory 79,000
Ending finished goods inventory 59,000
The company's cost of raw materials used, cost of goods manufactured and cost of goods sold is:________
Answer:
Results are below.
Explanation:
First, we need to calculate the direct material used:
Direct material used= beginning inventory + purchases - ending inventory
Direct material used= 27,000 + 104,000 - 30,000
Direct material used= $101,000
Now, the cost of goods manufactured:
cost of goods manufactured= beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP
cost of goods manufactured= 39,000 + 101,000 + 129,000 + 104,000 - 49,000
cost of goods manufactured= $324,000
Finally, the cost of goods sold:
COGS= beginning finished inventory + cost of goods manufactured - ending finished inventory
COGS= 79,000 + 324,000 - 59,000
COGS= $344,000
The following data relate to Ramesh Company’s defined benefit pension plan: ($ in millions) Plan assets at fair value, January 1 $ 780 Expected return on plan assets 78 Actual return on plan assets 62 Contributions to the pension fund (end of year) 136 Amortization of net loss 16 Pension benefits paid (end of year) 23 Pension expense 108 Required: Determine the amount of pension plan assets at fair value on December 31. (Enter your answers in millions. Amounts to be deducted should be indicated with a minus sign.
Answer:
$955 million
Explanation:
Calculation to Determine the amount of pension plan assets at fair value on December 31
(millions)
Plan Assets Beginning of the year $780
Actual return $62
Cash contributions $136
Less: Retiree benefits($23)
End of the year pension plan assets $955
Therefore the amount of pension plan assets at fair value on December 31 is $955 million
Company A owns a 40% equity method investment in Company B. Subsequently, Company A acquires a controlling interest in a Company B and now must prepare consolidated financial statements. If the date Company A obtains control occurs midyear, how are subsidiary revenues and expenses reported in consolidated income statement in the year of the business combination
Answer:
Pre acquisition subsidiary revenues and expenses are excluded from consolidated revenue and expenses. Post acquisition subsidiary revenues and expenses are included in consolidated revenues and expenses.
Explanation:
Company A has acquired control over company B. When accounting for the consolidated financial statement the pre acquisition revenues and expenses will not be included, only post acquisition revenues and expenses will be included in the consolidated statement and they will be accounted for according to controlling percentage.
Joyce works hard and puts in many extra hours. For this, she can anticipate a pay raise, a promotion, or an expanded sales territory. However, getting a promotion is most important to Joyce. According to the useful guidelines of the ____ theory, Jim, her manager, must recognize that (1) she is putting in hard work and long hours to obtain a promotion, (2) what motivates Joyce will change over time, and (3) he must clearly show Joyce how to attain the desirable reward.
Answer:
Expectancy theory
Explanation:
Expectancy theory states that when an individual is faced with different choices they will be motivated in a certain way in choosing a particular option based on what they expect to be the result of the choice.
So behaviour is affected by perceived result or consequence of a particular choice.
In the given scenario Joyce works hard and puts in many extra hours, and getting a promotion is most important to Joyce.
So because of her expectations that manager must recognise that:
(1) she is putting in hard work and long hours to obtain a promotion,
(2) what motivates Joyce will change over time (if she does not get the promotion), and
(3) he must clearly show Joyce how to attain the desirable reward.
Tops Co. purchases equipment for $12,000 and has been using straight-line depreciation, estimating a 5-year life and $500 salvage value. At the beginning of the third year, Tops decides to use the equipment for a total of 6-years with no salvage value. Compute the revised depreciation for the third year. Multiple choice question. $2,875 $1,850 $1,250 $2,375
Answer:
Annual depreciation= $1,850
Explanation:
Giving the following formula:
Purchase price= $12,000
Salvage value= $500
Useful life= 5 years
First, we need to calculate the annual depreciation and accumulated depreciation:
Annual depreciation= (original cost - salvage value)/estimated life (years)
Annual depreciation= (12,000 - 500) / 5
Annual depreciation= 2,300
Accumulated depreciation (2 years)= 2,300*1= 4,600
Now, we can determine the annual depreciation with a 4 more years of useful life:
Book value= 12,000 - 4,600= 7,400
useful life= 4 years more
Annual depreciation= 7,400/4
Annual depreciation= $1,850
You are given the following information concerning Parrothead Enterprises:
Debt: 9,300 6.5% coupon bonds outstanding, with 22 years to maturity and a quoted price of 104.75. These bonds have a par value of $1,000 and pay interest semi-annually.
Common stock: 240,000 shares of common stock selling for $64.80 per share. The stock has a beta of .93 and will pay a dividend of $3.00 next year. The dividend is expected to grow by 5.3 percent per year indefinitely.
Preferred stock: 8,300 shares of 4.65 percent preferred stock selling at $94.30 per share.
Market: 11.7% expected return, a risk-free rate of 3.75%, and a 23% tax rate.
Calculate the company's WACC.
Answer:
WACC is 8.19%
Explanation:
WACC (Weighted Average Cost of Capital is determined by multiplying capital source cost of both equity and debt by their relevant weight and then summing the results to identify the value using the formulae given below:
WACC = (E/V x Re) + [D/V x Rd x (1 - Tc)]
where:
E = Market Value of the firm's equity
D = Market Value of the firm's debt
V = E + D
Re = Cost of Equity
Rd = Cost of Debt
Tc = Tax Rate
In the given question, we will first determine the cost of equity. As shown below:
Cost of Equity = Average of CAPM and Dividend Capitalisation Model
CAPM = Risk free rate of return + Beta x (market rate of return - risk free rate of return)
CAPM = 3.75 + 0.93 x (11.7 - 3.75)
CAPM = 11.14%
Dividend Capitalisation Model = Expected dividend net year / Current Price + Growth Rate
Dividend Capitalisation Model = 3 / 64.8 * 100 + 5.3
Dividend Capitalisation Model = 9.93%
Cost of Equity = 9.93 + 11.14 = 10.54%
Next is the cost of debt which would be calculated using YTM (Yield to maturity)
where:
Par Value = 1047.5
Face Value = 1000
Coupon rate = 6.5
Years to maturity = 22 years
Coupon Payment Frequency is semi annually.
The Cost of debt = 6.1%
After Tax it would be 4.7% [6.1% * (1 - 23%)]
Next, we will determine the rate of preferred stock before calculating the WACC.
Rate of preferred stock = Annual dividend / Current Price * 100
Rate of preferred stock = 4.65 / 94.3 * 100
Rate of preferred stock = 4.93%
Finally, we will calculate the Market Value (MV) of equity, debt and preferred stock. As shown below:
MV Equity = 240,000 x 64.8 = 15,552,000
MV Debt = 1047.5 x 9300 = 9,741,750
MV preferred stock = 8,300 x 94.3 = 782,690
Total = 26,076,440
WACC = (15,552,000 / 26,076,440 * 10.54%) + (9,741,750 / 26,076,440 * 4.7%) + (782,690 / 26,076,440 * 4.93%)
WACC = 6.28% + 1.76% + 0.15%
WACC = 8.19%
Prepare journal entries to record the following transactions for Sherman Systems. Purchased 6,000 shares of its own common stock at $35 per share on October 11. Sold 1,250 treasury shares on November 1 for $41 cash per share. Sold all remaining treasury shares on November 25 for $30 cash per share. 2. Prepare the stockholders' equity section after the October 11 treasury stock purchase.
Answer:
Revised Equity Section of Balance Sheet After October 11
Common Stock at par $820,000
Paid-in capital in excess of Par $266,000
Total Contributed Capital $1,086,000
Retained earnings $ 944,000
Total $2,030,000
Less: Treasury Stock ($ 210,000)
Total Stockholder's Equity $1,820,000
Treasury stock = 6,000 * 35
= $210,000
Resources do not limit the number of needs and wants people
can
satisfy.
True or False
Answer:
False
Explanation:
Resources absolutely limit what can be accomplished and done. Just think of the timber industry. They want to cut down all trees they can to make a profit, but society needs to preserve natural forests so their cutting is limited.
Answer:
false
Explanation:
resources is a source that is generate form nature. the resources satisfy the wants because is the will no resource like - chair , table, food( that we cook) etc. we can't survive in this world. some examples for reading in school tables, chair are made form wood, which is a source .
Aaron's Rentals has 58,000 shares of common stock outstanding at a market price of $36 a share. The common stock just paid a $1.64 annual dividend and has a dividend growth rate of 2.8 %. There are 12,000 shares of 6 % preferred stock outstanding at a market price of $51 a share. Preferred stock pays a dividend of $6 a year The outstanding bonds mature in 17 years, have a total face value of $750,000, a face value per bond of $1,000, and a market price of $1,011 each. The bonds pay 8 % interest, semiannually. The tax rate is 34 %. What is the firm's weighted average cost of capital
Answer:
The firm's weighted average cost of capital (WACC) is 7.76%.
Explanation:
Note: Par value of the preferred stock is $100 but it is omitted in the question.
Market price share = (Dividend just paid (1 + Dividend growth rate)) / (Cost of equity – Dividend growth rate) ………………………………….. (1)
Substituting the relevant values into equation and solve for cost of equity, we have:
36 = (1.64 * (1 + 0.028)) / (Cost of equity – 0.028)
36 = 1.68592/ (Cost of equity – 0.028)
36(Cost of equity – 0.028) = 1.68592
36Cost of equity - 1.008 = 1.68592
36Cost of equity = 11.68592 + 1.008
Cost of equity = (1.68592 + 1.008) / 36
Cost of equity = 0.0748, or 7.48%
Cost of preferred stock = (Par value * Dividend rate) / Current price = (100 * 6%) / 51 = 0.1176, or 11.76%
Cost of debt = Coupon rate * (100% - tax rate) = 8% * (100% - 34%) = 0.0528, or 5.28%
Common stock market value = 58,000 * $36 = $2,088,000
Preferred market value = 12,000 * $51 = $612,000
Bond market value = $750,000 * ($1,011 / $1,000) = $758,250
Total market value of the company = Common stock market value + Preferred market value + Bond market value = $2,088,000 + $612,000 + $758,250 = $3,458,250
WACC = (7.48% * ($2,088,000 / $3,458,250)) + (11.76% * (612,000 / $3,458,250)) + (5.28% * ($758,250/ $3,458,250)) = 0.0776, or 7.76%
A NOW account requires a minimum balance of $750 for interest to be earned at an annual rate of 4 percent. An account holder has maintained an average balance of $500 for the first six months and $1,000 for the remaining six months. The account holder writes an average of 60 checks per month and pays $0.02 per check, although it costs the bank $0.05 to clear a check.
Required:
a. What average return does the account holder earn on the account?
b. What is the average return if the bank lowers the minimum balance to $400?
c. What is the average return if the bank pays interest only on the amount in excess of $400? Assume that the minimum required balance is $400.
d. How much should the bank increase its check fee to the account holder to ensure that the average interest it pays on this account is 5 percent? Assume that the minimum required balance is $750.
Answer:
a. Average return = 5.55%
b. Average return = 6.88%
c. Average return = 4.75%
d. Bank increase per check fees = $.0257
Explanation:
a.)
Interest earned on first $500 = $500×0×6 / 12 = $0
Interest earned on next $1000 = $1000×0.04×6 / 12= $20
Now,
Fees earned on checks = ($.05 - $.02)×60×12 = $21.6
So,
Total interest earned = $20 + $21.6 = $41.6
Given,
Average balance maintained = $750
So,
Average return = $41.6 / $750 = 5.55%
b.)
Interest earned on first $500 = $500×0.04×6 / 12 = $10
Interest earned on next $1000 = $1000×0.04×6 / 12 = $20
Now,
Fees earned on checks = ($.05 - $.02)×60×12 = $21.6
So,
Total interest earned = $10 + $20 + $21.6 = $51.6
Given that,
Average balance maintained = $750
So,
Average return = $51.6 / $750 = 6.88%
c.)
Interest earned on first $100 = $100×0.04×6 / 12 = $2
Interest earned on next $600 = $600×0.04×6 / 12 = $12
Now,
Fees earned on checks = ($.05 - $.02)×60×12 = $21.6
So,
Total interest earned = $2 + $12 + $21.6 = $35.6
Given that,
Average balance maintained = $750
So,
Average return = $35.6 / $750 = 4.75%
d.)
Total interest earned = $750×0.05 = $37.5
So,
fees earned on checks = $37.5 - $20 = $17.5
Subsidiary per check = $17.5 / 60×12 = $.0243
So,
Bank increase per check fees = $.05 – $.0243 = $.0257
RealTurf is considering purchasing an automatic sprinkler system for its sod farm by borrowing the entire $50,000 purchase price. The loan would be repaid with four equal annual payments at an interest rate of 12%/year. It is anticipated that the sprinkler system would be used for 9 years and then sold for a salvage value of $5,000. Annual operating and maintenance expenses for the system over the 9-year life are estimated to be $10,500 per year. If the new system is purchased, cost savings of $20,500 per year will be realized over the present manual watering system. RealTurf uses a MARR of 15%/year for economic decision making.What is the internal rate of return used to reach your decision?
Answer:
savings per year = $20,500 - $10,500 = $10,000
the loan and interest are not included in the calculation
initial outlay = $50,000
cash flows 1-8 = $10,000
cash flow 9 = $15,000
discount rate = 15%
using a financial calculator, the NPV = -$862.85, and the IRR = 14.53%
The chapter explained why exporters cheer when their home currency depreciates. At the same time, domestic consumers find that they pay higher prices, so they should be disappointed when the currency becomes weaker. Why do the exporters usually win out, so that governments often seem to welcome depreciations while trying to avoid appreciations? (Hint: Think about the analogy with protective tariffs.)
Answer:
Exporters usually win out when their home currency depreciates because it increases demand for the exported products.
Explanation:
The foreign consumers find that the prices of the imports are now reduced because of the depreciation of the exporting nation's currency. The impact is reduced cost of importation for the importing consumers. When prices fall, demand tends to increase relative to supply. For any government that wants to encourage exports for earning foreign exchange, it will always work hard to avoid currency appreciation so that consumers from the importing nation are not discouraged or made to develop alternatives.
Exporters usually win out when their home currency depreciates because the depreciation increases the demand of the exported products.
When the prices fall, demand of the products and goods tend to increase. When the home currency depreciates, this will leads to higher demand of goods from other countries so the exporters produce and exports more goods and earn more money.
The government also wants to encourage exports in order to earn foreign exchange so that's why the exporters as well as the government cheers when their home currency depreciates.
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Harmon Inc, manufactures two products from a joint process, product A and product B. A standard production run incurs joint costs of $45,000 and results in 1,500 units of product A and 2,500 units of product B. Product A sells for $50.00 per unit and Product B sells for $20.00 per unit. Assuming that no further processing occurs after the split-ff point, how much of the joint costs are allocated to Product A and B using the physical measure method
Answer:
Harmon Inc.
Joint costs of $45,000 allocated to:
Product A = $16,875
Product B = $28,125
Explanation:
a) Data and Calculations:
Joint costs of a standard production run = $45,000
Joint products Product A Product B Total
Production units 1,500 2,500 4,000
Selling price per unit $50 $20
Allocation of joint costs based on physical measure method:
Product A = $16,875 (1,500/4,000 * $45,000)
Product B = $28,125 (2,500/4,000 * $45,000)
b) Joint costs of $45,000 were incurred by Product A and Product B jointly because they consumed the same resources during the production run. These costs can be allocated to the products based on established criteria, for example, units of products and sales value. The purpose is to properly account for the joint costs at split-off.
Carol and Dave each purchase 100 shares of stock of Burgundy, Inc., a publicly owned corporation, in July for $10,000 each. Carol sells her stock on December 31 for $8,000. Because Burgundy’s stock is listed on a national exchange, Dave can ascertain that his shares are worth $8,000 on December 31. Does the Federal income tax law treat the decline in value of the stock differently for Carol and Dave? Explain.
Answer:
See below
Explanation:
From the above information, we can deduce that the stock owned by Carol and Dave falls in value by $2,000 I.e ($10,000 - $8,000) ; it is to be noted that Carol solely has realised and recognized loss of $2,000.
Here, one of the cogent factors that determines whether a sale has taken place is if realization has been effected. Here, stock sold by Carol qualifies as a disposition while the decline in the value of stock sold by Dave does not qualify as disposition.
With regards to the foregoing, we can conclude that the federal income tax law treat the decline in the value of the stock differently for Carol and Dave.