Answer:
A.
Explanation:
In the context of business, Drum buffers are Extra safety that is applied to a project immediately before the use of the constrained resource. This term is a planning and scheduling solution that is taken from the Theory of Constraints, which revolved around the idea that there is a limited number of scarce resources that control the overall output that can be obtained and planning accordingly is needed for safety.
Which of these employees is facing an ethical dilemma?
A. The manager at Almas Inc. has to make a vendor choice between his underqualified cousin and a highly-experienced, trusted supplier.
B. Lars has to decide whether the annual profits of the company should be distributed to the employees as a salary hike or in the form of non-monetary benefits.
C. Javier has felt unsure about a car he purchased and has been reading only good reviews about the car to console himself.
D. After seeing a whole new collection of phones at a store, Max is regretting the purchase of an outdated phone he made last month.
E. Salena is responsible for deciding whether she should upgrade the manufacturing unit with new machines and reduce costs or retain the impoverished manual labor force.
Answer:
The employee facing ethical dilemmas is SELENA because Salena is responsible for deciding whether she should upgrade the manufacturing unit with new machines and reduce costs or retain the impoverished manual labor force
Explanation:
Ethical dilemma can be seen as the way in which a person or an individual is finding it hard to make a decision between two alternatives due to the difficulty in deciding on the one to accept or reject ,Which is why ETHICAL DILEMMAS may lead to arising of complexity out of the situational conflict in which choosing one alternative may result in transgressing another.
Although no matter the difficulty on deciding on which one to go for a choice has to be made between the two equally undesirable alternatives.
Therefore a person or an individual often faces ethical dilemmas on their day to day activities , because knowing how to do the right thing as well as knowing the difference between the one that is right and wrong can be difficult and often times subjective which is what Salena was facing by finding it hard to decide on the two alternatives which is either she should upgrade the manufacturing unit with new machines and reduce costs or retain the impoverished manual labor force.
(Appendix 11.1) Depreciation for Financial Statements and Income Tax Purposes Dinkle Company purchased equipment for $50,000. The equipment has an estimated residual value of $5,000 and an expected useful life of 10 years. Dinkle uses straight-line depreciation for its financial statements. Required: What is the difference between the company's income before taxes reported on its financial statements and the taxable income reported on its tax return in each of the first 2 years of the asset's life if the asset was purchased on January 2, 2016, and its MACRS life is 5 years?
Answer and Explanation:
The computation is shown below:
For year 1
According to the Company's Books Depreciation
= (Orginal Cost - Salvage value) ÷ useful Life
= ($50,000 - $5,000) ÷ 10 years
= $4,500
According to the Income Tax Depreciation
= Cost × MACRS Rate for Year 1
= $50,000 × 20%
= $10,000
So, the difference in year 1 is
= $10,000 - $4,500
= $5,500
For year 2
According to the Company's Books Depreciation
= (Orginal Cost - Salvage value) ÷ useful Life
= ($50,000 - $5,000) ÷ 10 years
= $4,500
According to the Income Tax Depreciation
= Cost × MACRS Rate for Year 2
= $50,000 × 32%
= $16,000
So, the difference in year 1 is
= $16,000 - $4,500
= $11,500
A firm in a purely competitive industry has a typical cost structure. The normal rate of profit in the economy is 5 percent. This firm is earning $5.50 on every $50 invested by its founders.
a. What is its percentage rate of return? 11 percent.
b. Is the firm earning an economic profit? Yes If so, how large? 6 percent.
c. Will this industry see entry or exit? Entry
d. What will be the rate of return earned by firms in this industry once the industry reaches long-run equilibrium?
Answer: The answers are given below
Explanation:
a. What is its percentage rate of return?
From the question, we are told that the firm is earning $5.50 on every $50 invested by its founders. The percentage of return will now be:
= $5.50/$50 × 100%
= 0.11 × 100%
= 11%
b. Is the firm earning an economic profit? If so, how large?
The economic profit will be the difference that exists between the percentage of return which is 11% and the normal rate of profit which is 5%. This will be:
= 11% - 5%
= 6%
The firm is earning economic profit of 6%.
c. Will this industry see entry or exit?
There will be entry into the industry. This is because the percentage of return which is 11% is greater than the normal rate of profit which is 5%.
d. What will be the rate of return earned by firms in this industry once the industry reaches long-run equilibrium?
The rate of return earned by firms in this industry once the industry reaches long-run equilibrium will be 5% which is the normal rate of profit in the economy.
Ski West, Inc., operates a downhill ski area near Lake Tahoe, California. An all-day adult lift ticket can be purchased for $85. Adulit customers also can purchase a season pass that entitles the pass holder to ski any day during the season, which typically runs from December 1 through April 30. Ski West expects its season pass holders to use their passes equally throughout the season. The company's fiscal year ends on December 31. On November 6, 2018, Jake Lawson purchased a season pass for $450.1. What will be included in the Ski West 2018 Income statement and balance sheet related to the sale of the season pass to Jake Lawson? Complete this question by entering your answers in the tabs below. 2. When should Ski West recognize revenue from the sale of its season passes?3. Prepare the appropriate ournal enteries that Sky West would record on November 6 and December 31.
Answer:
Ski West, Inc.
1. What Ski West 2018 should include in its Income statement and balance sheet related to the sale of the season pass to Jake Lawson?
a) Income Statement:
Season Passes Revenue = $90 ($450/5). This represents December season pass by Jake Lawson.
b) Balance Sheet:
Unearned Season Passes Revenue $360 as a current liability.
2. When Ski West should recognize revenue from the sale of its season passes:
Revenue should be recognized on December 31.
3. Journal Entries on November 6 and December 31:
November 6:
Debit Cash Account $450
Credit Unearned Season Passes Revenue $450
To record the receipt from Jake Lawson.
If this sale was on account, then the Accounts Receivable is debited instead.
December 31:
Debit Unearned Season Passes Revenue $90
Credit Season Passes Revenue $90
To record the earned revenue from Jake Lawson's.
Explanation:
Unearned revenue is not recognized in the income statement. It is taken to the Balance Sheet as a current liability. It is not recognized because it does not belong to the current period, as specified by the accrual concept and matching principle.
Prepare the journal entry to record Autumn Company’s issuance of 78,000 shares of no-par value common stock assuming the shares:
a. Sell for $32 cash per share.
b. Are exchanged for land valued at $2,496,000.
Answer:
A Journal entry was recorded for Autumn Company which is given below.
Explanation:
Solution
(A) Journal Entry:
No Account and Explanation Debit Credit
a Cash (78000*32) 2496000
Common Stock 2496000
(To record issued common stock)
(B) Journal Entry:
No Account and Explanation Debit Credit
b Land 2496000
Common Stock 2496000
(To record issued common stock)
Which of the following is long-term debt instrument that requires t5he issuer to repay the lender in regular interest payments until the loan is repaid on or before the specified maturity rate?
A. A bond
B. Trade credit
C. A Treasury bill
D. Commercial paper
E. A certificate of deposit
Answer:
The answer is option (a) Bond
Explanation:
Solution
A Bond : It refers to as an investment securities where an investor borrows money to an organization or a government for a an amount of time, in exchange for consistent interest payments.
Once the bond approaches maturity, the issuer of the bond returns the investor’s money.
Another term used in describing bonds are fixed income. since your investment gains fixed payments over the life of the bond.
Bond is the long-term debt instrument that requires the issuer to repay the lender in regular interest payments until the loan is repaid.
A bond is a debt instrument of issued by bond investor to the interested party (like private investors, government etc)
Hence, the long-term debt instrument that requires the issuer to repay the lender in regular interest payments until the loan is fully repaid is called Bond..
Therefore, the Option A is correct.
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Merit Consulting Company regularly performs services for its clients on credit but does not offer discount terms. Because the company was concerned about the credit-worthiness of a new client, that client paid $2,500 in cash at the time that the consulting services were performed. This transaction is recorded into Merit's cash receipts journal by entering __________
A. 2,500 in the Cash Dr. column
B. 2,500 in the Accounts Receivable Cr. column and 2,500 in the Other Accounts Cr. column
C. 2,500 in the Cash Dr. column and 2,500 in the Accounts Receivable Cr. column
D. 2,500 in the Cash Dr. column and 2,500 in the Other Accounts Cr. column
Answer:
Merit Consulting Company
When a client paid $2,500 in cash at the time that the consulting services were performed, the transaction is recorded into Merit's Cash Receipts Journal by entering.
A. 2,500 in the Cash Dr. column.
Explanation:
There is usually a single column for subsidiary or special journals like the Cash Receipts Journal. The journal simply accumulates the total per the period before posting this total to the controlling account.
A special journal records transactions of a particular type. Examples are Purchases, Sales, Returns Outwards and Inwards, Cash Receipts, and Cash Payment Journals.
In its first year of operations, Roma Company reports the following. Earned revenues of $47,000 ($39,000 cash received from customers). Incurred expenses of $26,500 ($20,950 cash paid toward them). Prepaid $7,250 cash for costs that will not be expensed until next year. Compute the company’s first-year net income under both the cash basis and the accrual basis of accounting.
Answer:
Net Income
Cash basis $10,800
Accrual basis $20,500
Explanation:
Computation of Roma company’s first-year net income under both the cash basis and the accrual basis of accounting will be:
Cash basis Accrual basis
Revenue $39,000 $47,000
Expenses $28,200 $26,500
Net Income $10,800 $20,500
Cash paid $20,950
Add Prepaid cash $7,250
=$28,200
Therefore first-year net income cash basis will e $10,800 and accrual basis will be $20,500
Joe has just moved to a small town with only one golf course, the Northlands Golf Club. His inverse demand function is pequals 160minus2 q, where q is the number of rounds of golf that he plays per year. The manager of the Northlands Club negotiates separately with each person who joins the club and can therefore charge individual prices. This manager has a good idea of what Joe's demand curve is and offers Joe a special deal, where Joe pays an annual membership fee and can play as many rounds as he wants at $20 , which is the marginal cost his round imposes on the Club. What membership fee would maximize profit for the Club? The manager could have charged Joe a single price per round. How much extra profit does the Club earn by using two-part pricing? The profit-maximizing membership fee (F) is $nothing . (Enter your response as a whole number.)
Answer:
Club membership fee of $60 would maximize profit.
If the club charges tow part pricing the maximum revenue can be $3500.
Explanation:
Joe has entered into a monopoly because he is owner of single golf course in the Northlands.
Demand function for Joe's golf course is:
P = 160 - 2q
P = $20 , q = 50
160 - 2 (50) = 60
Consumer surplus = 0.5 * equilibrium quantity
Consumer Surplus for Joe is ; 0.5 * 50 (160 - 20) = $3500
If MR = MC then demand function will become :
160 - 4q
If q = 25 then
160 - 4 * 25 = 60
Aging Class (Number Receivables Estimated Percent of
of Days Past Due) Balance on December Uncollectible Accounts
0-30 days $715,000 1%
31-60 days 310,000 2
61-90 days 102,000 15
91-120 days 76,000 30
More than 120 days 97,000 60
Total receivables $1,300,000
A. Journalize the write-offs under the direct write-off method. If an amount box does not require an entry, leave it blank.
B. Journalize the write-offs and the year-end adjusting entry under the allowance method, assuming that the allowance account had a beginning balance of $95,000 and the company uses the analysis of receivables method.
Answer and Explanation:
The journal entries are shown below:
a Bad debt expense $102,500
To Accounts Receivable-Kim Abel $21,550
To Accounts Receivable-Lee Drake $33,925
To Accounts Receivable-Jenny Green $27,565
To Accounts Receivable-Mike Lamb $19,460
(Being the bad debt expense is recorded)
b Allowance for Doubtful accounts $102,500
, To Accounts Receivable-Kim Abel $21,550
To Accounts Receivable-Lee Drake $33,925
To Accounts Receivable-Jenny Green $27,565
To Accounts Receivable-Mike Lamb $19,460
(Being the written- off amount is recorded)
Bad debt expense $117,150
Allowance for Doubtful accounts $117,150
(Being the bad debt expense is recorded)
Working notes:
(in $) (in $)
Days Receivables Balance % Uncollectible Allowance
0-30 days 715000 1% 7150
31-60 days 310000 2% 6200
61-90 days 102000 15% 15300
91-120 days 76000 30% 22800
More
than 120 days 97000 60% 58200
Total 1300000 109650
Now the adjustment balance is
= $109,650 - ($95,000 - $102,500)
= $109,650
When your father was born 46 years ago, his grandparents deposited $450 in an account for him. Today, that account is worth $25,000. What was the annual rate of return on this account
Answer:
9.1%
Explanation:
To calculate the annual rate of return on this account you can use the following formula:
r = ( FV / PV )^1/n - 1, where
r= rate of return
FV= future value= 25,000
PV= present value= 450
n= number of periods of time= 46
r=(25,000/450)^(1/46)-1
r=55.56^0.0217-1
r=1.091-1
r=0.091 → 9.1%
According to this, the annual rate of return on this account was 9.1%.
Arnell Industries has $35 million in permanent debt outstanding. The firm will pay interest only on this debt. Arnell’s marginal tax rate is expected to be 21% for the foreseeable future. a) Suppose Arnell pays interest of 7% per year on its debt. What is its annual interest tax shield? b) What is the present value of the interest tax shield, assuming its risk is the same as the loan?
Answer:
a) $0.5145 million
b) $7.35 million
Explanation:
Given:
Permanent debt outstanding = $35,000,000
Expected marginal tax rate = 21%
a) Suppose they pay an interest of 7% per year on debt. Find the annual interest tax shield.
To find annual interes tax shield use the formula below:
Annual interest tax shield =Total par value of Debt × interest rate × tax rate
= $35,000,000 × 7% × 21%
= $35,000,000 × 0.07 × 0.21
= $514,500
Annual interest tax shield = $0.5145 million
b) What is the present value of the interest tax shield, assuming its risk is the same as the loan?
Use the formula:
Present value of the interest tax shield = Annual interest tax shield /loan interest rate
= $514,500 / 7%
= $7,350,000
present value of the interest tax shield = $7.35 million
Grand Canal Incorporated issued 10-year bonds six years ago with an annual coupon rate of 9.625% APR. The bonds have a face value of $1,000.00 each and were issued at par value. Today, investors want a 5.99% return for bonds of similar risk and maturity. What is the current market price of Grand Canal bonds
Answer:
$1,125.98
Explanation:
market price of the bonds = present value of face value + present value of coupons
PV of face value = $1,000 / (1 + 0.0599)⁴ = $792.39
PV of coupons = coupon x {1 - [1/(1 + r)ⁿ]} / r = 96.25 x {1 - [1/(1 + 0.0599)⁴]} / 0.0599 = 96.25 x 3.34659 = $333.59
market value = $792.39 + $333.59 = $1,125.98
Do some Internet research to identify businesses who have suffered because of cloud security weaknesses or failures. What can companies who are contemplating cloud computing services learn from the negative experiences of these businesses
Answer:
The biggest lesson with the use of cloud computing services is that one should act as if unsecured even after purchasing the best and most "technologically advanced "
Many Cloud Computing Service provider always secure their layers. However, many users fo the services don't secure their systems. Some leave default passwords as it, weak passwords and or no advanced firewalls but those preinstalled with their systems using default settings.
Those contemplating cloud services must ensure that:
they change default passwords into very strong passwords;users must at the very least configure firewalls to prevent easy access. There are specialized software for this;users must thoroughly research the cloud service provider before making a purchase;Regular cybersecurity training will also help users take the best steps in protecting themselves.Cheers!
ix months ago, you purchased 2,900 shares of ABC stock for $32.58 a share. You have received dividend payments equal to $.70 a share. Today, you sold all of your shares for $35.26 a share. What is your total dollar return on this i
Answer:
$9802
Explanation:
The total return is the sum of the dividend value and the increase in share value:
return per share = $0.70 +($35.26 -32.58) = $3.38
Then the return on 2900 shares is . . .
2900 × $3.38 = $9802
Which of the following statements is most correct? Many large firms operate different divisions in different industries, and this makes it hard to develop a meaningful set of industry benchmarks for these types of firms. Financial ratios should be interpreted with caution because there exist seasonal and accounting differences that can reduce their comparability. Financial ratios should be interpreted with caution because it may be difficult to say with certainty what is a "good" value is neither high nor low. Ratio analysis facilitates comparisons by standardizing numbers. All of the statements above are correct.
Answer:
All of the statements above are correct.
Explanation:
All of the following statements listed below are correct and true about business management;
1. Many large firms operate different divisions in different industries, and this makes it hard to develop a meaningful set of industry benchmarks for these types of firms.
Hence, industry average or benchmarks are more applicable to a small and medium enterprise than it's to large enterprises. The industry benchmark is a process that is focused on comparing an industry with other successful industries.
2. Financial ratios should be interpreted with caution because there exist seasonal and accounting differences that can reduce their comparability.
Hence, it is important to interpret financial ratios with care and reasonable logic as factors such as inflation and depreciation.
3. Financial ratios should be interpreted with caution because it may be difficult to say with certainty what is a "good" value is neither high nor low.
4. Ratio analysis facilitates comparisons by standardizing numbers.
Ratio analysis can be defined as the analysis and comparison of various line items in the financial statements of a business such as the income statement or balance sheet, in order to gain insight into its operational efficiency, profitability and liquidity. Types of ratio analysis are liquidity, efficiency, solvency, market value, and profitability ratio.
please discuss the similarities and differences between transformational and charismatic leadership. Choose an individual that qualifies as a charismatic or transformational leader and explain why. Also, in your analysis, what are some of the unique characteristics of this individuals followers that might identify him/her as charismatic or transformational
Answer:
The transformational leaders are bureaucratic and charismatic are people oriented in nature.
Explanation:
The charismatic leaders are also called as the transformational leaders and shares various things. Charismatic leaders make their status better and transformational leaders focus on the transformation of the organization's vision. The main difference is the focus and the audience. The charismatic leaders are committed and have engaging personalities like martin Luther king as his speeches were often more tangible than other leaders and used to have a huge influence on the people he met. The charismatic leaders are more emotionally attached to their audience. They work towards an emphasis on the greater good. More people-oriented.
McGovern Enterprises is interested in issuing bonds with warrants attached. The bonds will have a 30-year maturity and annual interest payments. Each bond will come with 20 warrants that give the holder the right to purchase one share of stock per warrant. The investment bankers estimate that each warrant will have a value of $10.00. A similar straight-debt issue would require a 10% coupon. What coupon rate should be set on the bonds-with-warrants so that the package would sell for $1,000?
Answer:
The multiple choices are:
6.64%
7.11%
7.48%
7.88%
8.27%
coupon rate is 7.88%
Explanation:
In determining the coupon rate to set on the bond,we need to calculate the annual coupon of the debt using the pmt formula in excel
=pmt(rate,nper,-pv,fv)
rate is the coupon on similar straight debt issue
nper is number of coupons the bond would pay which is 30
pv =$1000-(value of 20 warrants)
pv=$1000-(20*$10)
pv=$800
fv id the face value of $1000
=pmt(10%,30,-800,1000)= 78.78
coupon rate=coupon amount/face value=$78.78/$1000=7.88%
The due diligence process of analyzing and evaluating an existing business ________. Group of answer choices may be just as time consuming as the development of a comprehensive business plan for a start-up helps to determine if the company will generate sufficient cash to pay for itself and leave you with a suitable rate of return on your investment helps to determine what the company's potential for success is All of these
Answer:
All of these.
Explanation:
The due diligence process of analyzing and evaluating an existing business, is the process responsible for revealing the positive and negative aspects of a business.
This process aims to satisfy the buyer and seller by examining the main details of a transaction and ensuring its legality and evaluating most of the facts of the deal.
The agreement must then satisfy the due diligence aspects, so that the two parties involved can price and finalize the transaction effectively.
Therefore, all answer options are correct.
StarZinc Company produced 200 defective units last month at a unit manufacturing cost of $50. The defective units were discovered before leaving the plant. StarZinc can sell them as is for $35 or can rework them at a cost of $25 and sell them at the regular price of $100. The total relevant cost of reworking the defective units is:
Answer:
Star Zinc should rework the defective units as it will produce a net cash flow of $15,000
Explanation:
The cost of producing the defective units is Irrelevant to the decision as to rework or to sell the defective units.
Option 1
Rework: $
Sales revenue from sale = (100×200) = 20,000
Relevant cost (25× 200) = 5000
Net cash flow 15,000
Option 2: Outright sale
Revenue from outright sales = 35× 200 = 7,000
Star Zinc should rework the defective units as it will produce a net cash flow of $15,000.
A customer is considering to Fire Sprinkler a building to lower his insurances premium: Two choices were presented to him : (Hint: Alternates with unequal economic lives may be compared by assuming replacement in kind at the end of the shorter life, thus maintaining the same level of uniform payment) i=10%
Question:
A customer is considering to Fire Sprinkler a building to lower his insurances premium: Two choices were presented to him:
(Hint: Alternates with unequal economic lives may be compared by assuming replacement in kind at the end of the shorter life, thus maintaining the same level of uniform payment) i=10%
Partial System: Initial Cost 8,000.00, Insurance Cost $1,000.00/Year Life N=15 year
Full System $ 15,000, Insurance Cost $250/Year Life N=20 year
A) Full System $8,100
B) Full System $1,694.50
C) Partial System $8,540.00
D) Partial System $1,770.40
Answer:
The correct answer is B)
Explanation:
To chose the partial system means to incur a total sprinkler cost of $16,000 at the end of 30 years. With an added Insurance cost of $30,000. Total cost of protecting assets comes to $46,000.
The full system, however, entails a total sprinkler cost of $15,000 and an added insurance cost of $5,000. Total cost of protecting assets here comes to $20,000 over a 20 year period.
Prorated valued show B to be the least cost appliable.
Cheers!
Assignment: Capital Budgeting Decisions
Your company is considering undertaking a project to expand an existing product line. The required rate of return on the project is 8% and the maximum allowable payback period is 3 years.
time
0
1
2
3
4
5
6
Cash flow
$ 10,000
2,400
4,800
3,200
3,200
2,800
2,400
Evaluate the project using each of the following methods. For each method, should the project be accepted or rejected? Justify your answer based on the method used to evaluate the project’s cash flows.
Payback period
Internal Rate of Return (IRR)
Simple Rate of Return
Net Present Value
Answer:
NPV 4,648
Payback period 2.88
IRR 22.69%
Simple rate of return 31.33%
Explanation:
Payback period = 2 year + (10,000 – cash in year 1 – cash in year 2)/ cash in year 3 = 2.88 years
Net Present Value = -10000 + 2400/(1+8%) + 4800/(1+8%)^2+ 3,200/(1+8%)^3 + 3,200/(1+8%)^4 + 2,800/(1+8%)^5 + 2,400/(1+8%)^6 = 4,648
Simple Rate of Return = average cash inflow/ investment = ((2,400+4,800+3,200+3,200+2,800+2,400)/6)/10,000 = 31.33%
Internal Rate of Return (IRR): we can use excel to calculate
Please see excel attached
The Casings Plant of Wyoming Machines makes plastics shells for the company’s calculators. (Each calculator requires one shell.) For each of the next two years, Wyoming expects to sell 160,000 calculators. The beginning finished goods inventory of shells at the Casings Plant is 20,000 units. However, the target ending finished goods inventory for each year is 5,000 units. Each unit (shell) requires 6 ounces of plastic. At the beginning of the year, 60,000 ounces of plastic are in inventory. Management has set a target to have plastic on hand equal to two months’ sales requirements. Sales and production take place evenly throughout the year. Required: a. Compute the total targeted production of the finished product for the coming year. b. Compute the required amount of plastic to be purchased for the coming year. (Do not round intermediate calculations.)
Answer and Explanation:
a. The computation of the targeted production of the finished product is shown below:
= Expected sales units - beginning finished goods + ending finished goods
= 160,000 - 20,000 + 5,000
= 145,000 shells
b. The required amount of plastic purchased is
Plastic to be purchased = Consumed plastic + closing inventory - opening inventory
where,
Consumed plastic is
= 145,000 × 6 ounces
= 870,000 ounces
Opening inventory is 60,000 ounces
And, the closing inventory is
= 160,000 ÷ 12 months × 2 months × 6 ounces
= 160,000
So, the purchased plastic is
= 870,000 + 160,000 - 60000
= 970,000 ounces
The total targeted production of the finished product for the coming year is $145,000shells. The required amount of plastic to be purchased is 970,000 ounces.
What is inventory?All the raw materials available for production plus all the goods produced that are intended for sale are known as inventory.
A. Computing total targeted production of the finished product-
[tex]=Expected sales units - beginning finished goods + ending finished goods\\=160,000-20,000+5,000\\=145,000 shells[/tex]
B. Computing required amount of plastic to be purchased
[tex]=Consumed plastic+ closing inventory-inventory at end\\=870,000+160,000-60,000\\=970,000[/tex]
Working note-
Consumed plastic is calculated as 145,000 x 6 ounces.Closing inventory is calculated as 160,000/12 x 2 x 6.Therefore, the required amount of plastic to be purchased is 970,000.
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Chester Company plans to introduce a new product. A market research specialist claims that 20,000 units can be sold at a $100 selling price. Assuming the company desires a profit margin of 22% of sales, what is the target cost per unit
Answer:
$78
Explanation:
Profit margin is the ratio of profit to sales while the profit is the difference between the sales and the cost.
As such, profit margin is the ratio of the difference between the sales and the cost to the sales.
Given that margin is 22%, it means that
22% = profit/(20,000 * $100)
Profit = $440,000
Total cost = $2,000,000 - $440,000
= $1,560,000
Target cost per unit = $1,560,000/20,000
= $78
Ganado's Cost of Capital. Maria Gonzalez, Ganado's Chief Financial Officer, estimates the risk-free rate to be 3.70 %, the company's credit risk premium is 4.10%, the domestic beta is estimated at 1.13, the international beta is estimated at 0.96, and the company's capital structure is now 65% debt. The expected rate of return on the market portfolio held by a well-diversified domestic investor is 9.10% and the expected return on a larger globally integrated equity market portfolio is 8.20 %. The before-tax cost of debt estimated by observing the current yield on Ganado's outstanding bonds combined with bank debt is 8.10% and the company's effective tax rate is 35%. For both the domestic CAPM and ICAPM, calculate the following: a. Ganado's cost of equity b. Ganado's after-tax cost of debt
Answer:
a. Ganado's cost of equity for the domestic CAPM is 9.802% and ICAPM is 8.02%
b. Ganado's after-tax cost of debt for the domestic CAPM is 5.265% and ICAPM is 5.265%
Explanation:
a. In order to calculate for both, the domestic CAPM and ICAPM Ganado's cost of equity we would have to make the following calculation:
for the domestic CAPM
cost of equity=risk free+domestic beat(domestic market rate-risk free rate)
cost of equity=3.70%+1.13(9.10%-3.70%)
cost of equity=3.70%+6.102%
cost of equity=9.802%
for ICAPM
cost of equity=risk free+international beat(international market rate-risk free rate)
cost of equity=3.70%+0.96(8.20%-3.70%)
cost of equity=3.70%+4.32%
cost of equity=8.02%
b. In order to calculate for both, the domestic CAPM and ICAPM Ganado's after-tax cost of debt we would have to make the following calculation:
for the domestic CAPM
after-tax cost of debt=8.10%(1-35%)
after-tax cost of debt=5.265%
for ICAPM
after-tax cost of debt=8.10%(1-35%)
after-tax cost of debt=5.265%
Weighted Average Cost Flow Method Under Perpetual Inventory System
The following units of a particular item were available for sale during the calendar year:
Jan. 1 Inventory 30,000 units at $30.00
Mar. 18 Sale 24,000 units
May 2 Purchase 54,000 units at $31.00
Aug. 9 Sale 45,000 units
Oct. 20 Purchase 21,000 units at $32.10
The firm uses the weighted average cost method with a perpetual inventory system. Determine the cost of merchandise sold for each sale and the inventory balance after each sale. Present the data in the form illustrated in Exhibit 5. Round unit cost to two decimal places, if necessary.
Schedule of Cost of Merchandise Sold
Weighted Average Cost Flow Method
Purchases Cost of Merchandise Sold Inventory
Date Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost
Jan. 1 $ $
Mar. 18 $ $
May 2 $ $
Aug. 9
Oct. 20
Dec. 31 Balances $ $ $
Answer and Explanation:
The computation of the cost od merchandised sold for each sale and the inventory balance after each sale is presented in the attachment below;
The perpetual inventory is the system which updated the inventory as on a regular basis
While on the other hand, the weighted average cost method is the method in which the average cost is calculated after each every purchase is made
In the calculation below:
1. The weighted average cost of $30.90 come from
= (Total inventory cost) ÷ (Total quantity)
= ($180,000 + $1,674,000) ÷ (60,000 units)
= $30.90
1. The weighted average cost of $31.60 come from
= (Total inventory cost) ÷ (Total quantity)
= ($463,500 + $674,100) ÷ (36,000 units)
= $31.60
Given that annual deposit rates for Dollars and Euros are 6% and 4% respectively for the next 5 years. If the current spot rate of the Euro is $1.4015, obtain the implied rate for the Euro five years from now if International Fisher Equation holds exactly.
a. $1.5415
b. $1.2742
c. $1.4284
d. $1.3750
e. None of the above.
Answer:
The correct answer is (a) $1.5415
Explanation:
Solution
Given that:
Annual deposit rate for dollar =6%
Annual deposit rate for Euro = 4%
n = 5 years
The present spot rate of Euro =$1,4015
The next step is to obtain the implied rate for the Euro.
Thus
Implied rate = $1,4015[(1.06)/(1.04)]^5
= $1,4015 * 1.019230769^5
=$1,4015* 1.099923877
=$1.5415
Hence the implied rate for Euro 5 years from now is $1.5415
A delivery company is considering adding another vehicle to its delivery fleet; each vehicle is rented for $100 per day. Assume that the additional vehicle would be capable of delivering 1,500 packages per day and that each package that is delivered brings in ten cents in revenue. Also assume that adding the delivery vehicle would not affect any other costs.
Required:
a. What is the MRP? What is the MRC? Should the firm add this delivery vehicle?
b. Now suppose that the cost of renting a vehicle doubles to S200 per day. What are the MRP and MRC? Should the firm add a delivery vehicle under these circumstances?
c. Next suppose that the cost of renting a vehicle falls back down to SIOO per day but, due to extremely congested freeways, an additional vehicle would only be able to deliver 750 packages per day. What are the MRP and MRC in this situation? Would adding a vehicle under these circumstances increase the firm's profits?
Answer:
a. What is the MRP? What is the MRC? Should the firm add this delivery vehicle?
marginal revenue product = marginal product of labor x marginal revenue per output unit
MRP = 1,500 packages x $0.10 per package = $150
marginal resource cost (MRC) = $100 (the cost of renting the delivery truck)
The company should add the delivery truck because MRP is higher than MRC.
b. Now suppose that the cost of renting a vehicle doubles to $200 per day. What are the MRP and MRC in this situation?
MRP = $150 (doesn't change from question a)
MRC = $200 (the cost of renting the delivery truck)
The company should not add the delivery truck because MRP is less than MRC.
c. Next suppose that the cost of renting a vehicle falls back down to $100 per day, but, due to extremely congested freeways, an additional vehicle would only be able to deliver 750 packages per day. What are the MRP and MRC in this situation? Would adding a vehicle under these circumstances increase the firm's profits?
MRP = 750 packages x $0.10 per package = $75
MRC = $100
The company should not add the delivery truck because MRP is less than MRC.
Assume that you are an intern with the Brayton Company, and you have collected the following data: The yield on the company's outstanding bonds is 7.75%; its tax rate is 25%; the next expected dividend is $0.65 a share; the dividend is expected to grow at a constant rate of 6.00% a year; the price of the stock is $15.00 per share; the flotation cost for selling new shares is F= 5%; and the target capital structure is 25% debt and 75% common equity. What is the firm's WACC, assuming it must issue new stock to finance its capital budget?
a. 6.89%
b. 7.24%
c. 7.64%
d. 8.55%
e. 8.44%
Answer:
WACC is 9.37%
Explanation:
After tax cost of debt=yield to maturity*(1-t)
where t is the tax rate of 25% or 0.25
after tax cost of debt=7.75%*(1-0.25)=5.81%
Using stock price formula,the cost of equity can be determined as below:
stock price=Di/k-g
Di is the next dividend of $0.65
k is the cost of equity which is unknown
g is the constant growth rate of 6.00%
stock price=$15*(1-f)
f is the flotation cost percentage
stock price=$15*(1-5%)=$14.25
14.25=0.65/k-6%
14.25(k-6%)=0.65
k-6%=0.65/14.25
k=(0.65/14.25)+6%=10.56%
WACC=Ke*We+Kd*Wd
ke is 10.56%
We is the weight of equity which is 75%
Kd is 5.81%
We is the weight of debt which is 25%
WACC==(10.56%*75%)+(5.81%*25%)=9.37%
Summit Systems has an equity cost of capital of 11.0 %, will pay a dividend of $1.50 in one year, and its dividends had been expected to grow by 6.0 % per year. You read in the paper that Summit Systems has revised its growth prospects and now expects its dividends to grow at a rate of 3.0 % per year forever.
A. What is the new value of a share of Summit Systems stock based on this information?
B. If you tried to sell your Summit Systems stock after reading this news, what price would you be likely to get? Why?
Answer:
A) The new value of a share of Summit Systems stock based on this information is $17.65
B) $17.65. This is due to the fact that If the information about Summit Systems has reached the capital market, the revised growth rate has already been applied.
Explanation:
Given:
Equity cost of capital = 11.0 %
Dividend in one year = $1.50
Dividends growth per year = 6.0 %
A) If expected growth rate is 6.0%:
Value of share = Expected dividend ÷ (Cost of capital - Growth rate)
Value of share = $1.50 ÷ (0.1150 - 0.060)
Value of share = $27.27
If expected growth rate is 3.0%:
New_Value of share = Expected dividend ÷ (Cost of capital - Growth rate)
New_Value of share = $1.50 ÷ (0.1150 - 0.030)
New_Value of share = $17.65