Answer: C) is so small that it might be disregarded and may be considered as a nearly neutral comparison between the two methods.
Explanation:
In this chapter reading from the textbook Health Care Finance, it is shown that the Present Value of owning for Southside Clinic is $46,595 and the Present Value cost of leasing is $47,271 which brings the difference to $676.
This figure is considered so small it might be disregarded and may be considered as a nearly neutral comparison between the two methods because it is significantly smaller than the costs associated with either leasing or owning with it being less than 2% of both. It is therefore inconsequential.
Increased Efficiency, Inc. is looking for ways to shorten its cash conversion cycle. It has annual sales of $36,500,000, or $100,000 a day on a 365-day basis. The firm's cost of goods sold is 65% of sales. On average, the company has $9,000,000 in inventory and $8,000,000 in accounts receivable. Its CFO has proposed new policies that would result in a 20% reduction in both average inventories and accounts receivable. She also anticipates that these policies would reduce sales by 10%, while the payables deferral period would remain unchanged at 40 days. What effect would these policies have on the company's cash conversion cycle
Answer and Explanation:
The cash conversion cycle refers to the cycle which includes the days inventory outstanding and days sales outstanding and deduct the days payable outstanding
The cash cycle = Days inventory outstanding + days sale outstanding - days payable outstanding
The computation is shown in the attachment below:
As we can see in the attachment the new proposed policy i.e 234.19 days would decrease the cash conversion cycle by 24.27 days as compared with the current proposal policy i.e 258.46 days
Zappos' product selection includes performance athletic shoes, outdoor coats, contemporary shirts, couture accessories, and more. This selection best illustrates the firm's:
Answer:
Product mix breadth
Explanation:
Product mix breadth refers to varieties of products offer for sale by a store. In a product mix breadth, all products being produced by a brand or company are sold.
Although, product mix breadth comprises varieties of product line, yet it is made up of all products produced and distributed by a company. For example, a store will little space or limited finance may opt to sell fewer product lines but would also make more choices available from the product lines being sold.
Perry Investments bought 2,000 shares of Able, Inc. common stock on January 1, 2017, for $20,000 and 2,000 shares of Baker, Inc. common stock on July 1, 2017 for $24,000. Baker paid $2,400 of previously declared dividends to Perry on December 31, 2017. At the end of 2017, the fair value of the Able stock was $18,000 and the fair value of the Baker stock was $28,000. The stocks were purchased for short-term speculation prior to the effective date of the change in accounting rules for equity investments. Perry owns 10% of each company. Perry should record the receipt of the Baker dividend as:_______.
A. DR Cash 2,400 CR Investment in Baker 2,400.
B. DR Cash 240 CR Dividend income 240.
C. DR Cash 2,400 CR Dividends receivable 2,400.
D. DR Dividends receivable 2,400 CR Dividend income 2,400.
Answer:
D. DR Dividends receivable 2,400 CR Dividend income 2,400.
Explanation:
The journal entry is shown below:
Dividend receivable Dr $2,400
To Dividend income $2,400
(Being the receipt of the baker dividend is recorded)
For recording this we debited the dividend receivable as it increased the balance of dividend and credited the dividend income as it also increased the income
Therefore option D is correct
On July 16, 2017, Logan acquires land and a building for $500,000 to use in his sole proprietorship. Of the purchase price, $400,000 is allocated to the building, and $100,000 is allocated to the land. Cost recovery of $4,708 is deducted in 2017 for the building (nonresidential real estate).a. What is the adjusted basis for the land and the building at the acquisition date?b. What is the adjusted basis for the land and the building at the end of 2017?
Answer:
A.Land $100,000
Building 400,000
B.Land $100,000
Building 395,292
Explanation:
a. Logan's adjusted basis at acquisition date will be the cost of the land and that of the building which is:
Land $100,000
Building 400,000
b. What will be Logan adjusted basis at the end of 2017 :
Land will be: $100,000
Building will be :395,292
($400,000 − $4,708)
Thus the Depreciation is a capital recovery.
Inventory by Three Methods The units of an item available for sale during the year were as follows: Jan.1 Inventory 26 units at $400 per unit Feb. 19 Purchase 57 units at $460 per unit June 8 Purchase 62 units at $540 per unit Oct. 7 Purchase 60 units at $550 per unit There are 48 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost under each of the following methods. a. Determine the inventory cost by the first-in, first-out method. $ 28,187 b. Determine the inventory cost by the last-in, first-out method. $ c. Determine the inventory cost by the average cost method. Do not round intermediate calculation and round final answer to the nearest whole value.
Answer:
a. $26,400
b. $20,520
c. $24,140.64
Explanation:
a. The computation of inventory cost by the first-in, first-out method is shown below:-
Inventory cost under first-in, first-out method = Number of units × Unit cost of 3rd purchase
= 48 × $550
= $26,400
b. The computation of inventory cost by the last-in, first-out method is shown below:-
Inventory cost by Last in first out method = (Jan 1 units × Jan 1 Inventory per unit) + (Number of units - Jan 1 units) × Feb. 19 Inventory per unit
= (26 × $400) + (48 - 26) × $460
= $10,400 + $10,120
= $20,520
c. The computation of inventory cost by the average cost method is shown below:-
Average cost per unit = (26 × $400) + (57 × $460) + (62 × $540) + (60 × $550)
= $10,400 + $26,220 + $33,480 + $33,000
= $103,100
Per unit cost = Inventory cost ÷ Total number of units
= $103,100 ÷ (26 + 57 + 62 + 60)
= $103,100 ÷ 205
= $502.93
Inventory cost under average cost method = Per unit cost × Number of units
= 48 × $502.93
= $24,140.64
Therefore we have applied the formulas.
In 2019, Willow Corporation had three employees. Two of the employees worked full-time and earned salaries of $25,000 each. The third employee worked only part-time and earned $4,000. The employer timely paid state unemployment tax equal to 5.4 percent of each employee's wages up to $7,000. How much FUTA tax is due from Willow Corporation for 2019, after the credit for state unemployment taxes
Answer:
FUTA tax due from the corporation is $108
Explanation:
The First and Second employee earned 7000 each
The Third employee earn earns 4000
Paid under State Unemployment Tax by the employer is = (7000+7000+4000) x 5.40% =$972
How much FUTA tax is due from Willow Corporation for 2019?
Credit of tax paid in State Unemployment Tax is availabe for FUTA tax of 6%, thus FUTA due will be:
=(6% of 18000) - $972
=1080-972
=$108
Darlene and her friends get together for lunch after work. While at lunch, the friends discuss what they can do to solve the problem of excessive overtime at work. Which of the following is true?
A. Darlene and her friends are not engaging in concerted activity because they don’t plan to talk to management about the problem. B. Darlene and her friends are engaging in concerted activity since they are discussing how to improve working conditions. C. Darlene and her friends are engaging in concerted activity only if they are union members. D. Darlene and her friends are not engaging in concerted activity because they are not in a union meeting.
Answer: B. Darlene and her friends are engaging in concerted activity since they are discussing how to improve working conditions.
Explanation:
Concerted Activity refers to activity that employees may engage in when they are trying to improve the conditions at their workplace without fear of Employer retaliation. Federal Law by the National Labor Relations Act protects the ability of workers to be able to meet and discuss how they can improve conditions and Employees do not even have to be in a Union to engage in such.
When engaged in a Concerted action, the employer has no right to in any way threaten your employment.
Darlene and her friends' actions are therefore considered a concerted activity as they are meeting to discuss how to improve a workplace problem.
Answer:
B. Darlene and her friends are engaging in concerted activity since they are discussing how to improve working conditions.
Explanation:
Concerted activity is defines as meeting between employees that concerns their working conditions and wages. This type of activity is protected by National Labour Relations Act, therefore it cannot be used as a basis for dismissal of an employee.
In the given scenario Darlene and her friends get together for lunch and discuss what they can do to solve the problem of excessive overtime at work.
This is a form of concerted activity on the part of Darlene and he coworkers since they are discussing working conditions.
Dogtopia sells pet supplies and food and handles all sales with a cash register. The cash register displays the amount of the sale. It also shows the cash received and any change returned to the customer. The register also produces a customer receipt but keeps no internal record of the transactions. At the end of the day, the clerk counts the cash in the register and gives it to the cashier for deposit in the company bank account.Requirements1. Identify the internal control weakness over cash receipts.2. What could you do to correct the weakness?
Explanation:
1- Identify the internal control weakness over cash receipts.
Internal control helps the organization to follow company policy and consequently to maintain the ideal standard established by the organization. Through this instrument, it is possible to obtain more efficiency and effectiveness in operations, in addition to increasing the reliability of financial statements, preventing possible fraud.
2-What could you do to correct the weakness?
The ideal would be to implement an internal sales record tape at the cash register, and at the end of the day to count the sales money and compare it to the results shown by the tape.
The registration tape would then be forwarded to the company's accounting department, so that the money and sales were recorded in the accounting diaries, which would increase internal control and guarantee the reliability of the processes.
Stockton Company Adjusted Trial Balance December 31 Cash 5,192 Accounts Receivable 2,067 Prepaid Expenses 756 Equipment 15,056 Accumulated Depreciation 3,800 Accounts Payable 1,474 Notes Payable 5,103 Common Stock 1,000 Retained Earnings 10,197 Dividends 853 Fees Earned 6,286 Wages Expense 2,497 Rent Expense 762 Utilities Expense 338 Depreciation Expense 242 Miscellaneous Expense 97 Totals 27,860 27,860 Determine the total assets. $27,860 $19,271 $23,071 $11,197
Answer:
$19,271
Explanation:
Assets are resources controlled by an entity as a result of past events, for which future economic benefits will flow to the entity.
Examples include inventory, Prepayments, Cash and Cash equivalents, account receivables, Plant, Property and Equipment etc.
Total assets
= $5,192 + $2,067 + $756 + $15,056 - $3,800
= $19,271
A building was purchased for $67,000. The asset has an expected useful life of eight years and depreciation expense each year is $6,000 using the straight-line method. What is the residual value of the building
Answer:
The residual value of the building is $19000
Explanation:
depreciation expense=cost-residual value/useful life
cost is $67,000
useful life is 8 years
residual value is unknown
$6000=$67,000-x/8 years
$6000* 8 years=$67,000-x
$48,000=$67,000-x
x=$67,000-$48,000$
x=$19,0000
The residual value of the asset is $19,000
Anderson Crossing Investments, Inc., was a family-owned property investment organization, investing in undeveloped properties when prices were low and then selling them when prices went up. Among its holdings, Anderson Crossing owned fifty acres of undeveloped land next to another fifty acres of undeveloped land owned by Kortney Branson. William Hill, property manager for Anderson Crossing, approached Branson and offered to purchase her fifty acres "for Anderson." Branson sold the property for $50,000. Within one year, Anderson Crossing sold its 100 acres, including the property bought from Branson, to a developer for $1,000,000. Richard Anderson, a 5% owner of Anderson Crossing Investments and an old high school acquaintance of Branson, saw her at the mall and told her of the recent sale. Furious that she had lost out on the income and convinced that Hill had misled her, Branson sued Richard Anderson for the acts of his agent, Hill. Branson argued that the facts were sufficient to create an agency by estoppel to impose liability on Richard Anderson.
a. The land in this case was originally owned by:______
b. At the time of sale to the mall, the land in this case was owned by:________
c. Richard Anderson was a________ owner of Anderson crossing investment Inc.
Answer:
Anderson Crossing Investments, Inc.
a. The land in this case was originally owned by:______
Kortney Branson.
b. At the time of sale to the mall, the land in this case was owned by:________
Anderson Crossing Investments, Inc.
c. Richard Anderson was a__limited liability______ owner of Anderson Crossing Investment Inc.
Explanation:
Anderson Cross Investment Inc. is a corporation in which stockholders enjoy limited liability. Moreover, Anderson Cross Investment Inc. is separate from the owner, Richard Anderson under the Entity concept and separation of ownerships. Hill is not an agent of Richard Anderson but Anderson Crossing Investments, Inc.
But specifically, limited liability describes the condition that prevails when an entity suffers loss in business. The implication is that the loss that an owner or shareholder of an entity may suffer is limited to the capital invested in the business. A stockholder's liability arising from his shareholding in the entity does not extend to his personal assets. So, the concept considers the extent to which a company shareholder or director is financially responsible for the company's debts. The owners cannot be sued for the debts of the entity unless they have given their personal guarantees or a competent court of law lifts the corporate veil under specific circumstances.
The corporate veil, according to businessdictionary.com, is "a legal concept that separates the personality of a corporation from the personalities of its shareholders, and protects them from being personally liable for the company's debts and other obligations."
If Kortney Branson is serious in making a legal issue of the matter, she should sue the company that bought the land from her. She can then join Hill and Richard Anderson if she wishes, though the two can submit "no case submissions."
QS 11-4 Interest-bearing note transactions LO P1 On November 7, Mura Company borrows $150,000 cash by signing a 90-day, 10%, $150,000 note payable. 1. Compute the accrued interest payable on December 31. 2. & 3. Prepare the journal entry to record the accrued interest expense at December 31 and payment of the note at maturity on
Answer: the complete question is 1. Compute the accrued interest payable on December 31. 2. & 3. Prepare the journal entry to record the accrued interest expense at December 31 and payment of the note at maturity date
Notes Payable _____
Interest Expense______
Interest Payable______
Cash ____________.
Please see explanatory column for answer.
Explanation:
To calculate accrued interest on December 31st
we use Interest = Principal x Rate x Time
where time = November 7 to December 31 = 54 days.
Interest = $150,000 x 10% x 54/360= 150,000 x 0.10 x 54/360= $2,250
Journal entry to record the accrued interest expense at December 31
Date Account Debit Credit
December 31 interest expense $2,250
Interest payable $2,250
b) To calculate payment of note at maturity date.
the borrowed cash will be paid in 90 days which means fromn November 7 of the previous year to Feb 5 of the next year = 90
using Interest = P XRX T
150,000 X 10% X 90/360= $3,750
Journal entry to record the payment of the note at maturity. which is on February 5th of the next year.
Date Account Debit Credit
February 5 Notes payable $150,000
Interest expense $1,500
Interest payable $2,250
Cash $153,750
Calculation: interest expense = $3,750- $2,250= $1500 This is because even though the total accrued interest was $3,750, only $2,250 was payable remaining $1,500 as the new interest expense for maturity date.
Build interest in your sales message by developing your central selling points with rational, emotional, or dual appeals. Rational appeals are appropriate when a product is, for example, important to______ . Emotional appeals are appropriate when a product is, for example,________ . Whether using rational or emotional appeals, remember to translate cold facts into_______ .
1. health-appearance-egooption
2. short-lived-expensive-essentialoption
3. scare tactics related to current events-warm feelings and reader benefits -logical arguments
Answer:
1- Health
2- Essential
3- Warm feelings and reader benefits.
Explanation:
Build interest in your sales message by developing your central selling points with rational, emotional, or dual appeals. Rational appeals are appropriate when a product is, for example, important to health. Emotional appeals are appropriate when a product is, for example, essential . Whether using rational or emotional appeals, remember to translate cold facts into warm feelings and reader benefits.
For an effective marketing message, it is necessary that rational, emotional or double appeals are correctly directed to the rational and irrational thoughts that the products arouse in the consumer.
For a health product, there must be a rational appeal, as the information contained in the sales message must be real, detailed and secure.
For an essential product, it is important that there is an emotional appeal to create feelings and expectations in the customer that make him want to obtain such a product.
Whether using rational or emotional appeals, remember to translate cold facts into warm feelings and reader benefits.
Photo Framing's cost formula for its supplies cost is $1,200 per month plus $20 per frame. For the month of November, the company planned for activity of 618 frames, but the actual level of activity was 610 frames. The actual supplies cost for the month was $13,850. The spending variance for supplies cost in November would be closest to:
Answer:
Direct material spending variance= $451.4 unfavorable
Explanation:
Giving the following information:
Photo Framing's cost formula for its supplies cost is $1,200 per month plus $20 per frame.
Actual level of activity was 610 frames. The actual supplies cost for the month was $13,850.
To calculate the spending variance, we need to use the following formula:
Direct material price variance= (standard price - actual price)*actual quantity
Actual price= (13,850 - 1,200)/610= $20.74
Direct material price variance= (20 - 20.74)*610
Direct material price variance= $451.4 unfavorable
g The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 210,000 wheels annually are: Direct materials $42,000 Direct labor $63,000 Variable manufacturing overhead $31,500 Fixed manufacturing overhead $69,000 An outside supplier has offered to sell Talbot similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $24,000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $57,900 per year. Direct labor is a variable cost. If Talbot chooses to buy the wheel from the outside supplier, then annual net operating income would
Answer:
If the part is bought, the company will save $50,400. In other terms, net income will increase by $50,400.
Explanation:
Giving the following information:
Talbot's costs to produce 210,000 wheels annually are:
Direct materials $42,000
Direct labor $63,000
Variable manufacturing overhead $31,500
Avoidable fixed manufacturing overhead= 24,000
An outside supplier has offered to sell Talbot similar wheels for $0.80 per wheel.
If the wheels are purchased from the outside supplier, $24,000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $57,900 per year.
First, we need to calculate the total cost of production:
Total cost= 42,000 + 63,000 + 31,500 + 24,000= $160,500
Now, the total cost of buying:
Total cost= 210,000*0.80 - 57,900= $110,100
If the part is bought, the company will save $50,400.
Suppose that we want to estimate the effect of several variables on annual saving and that we have a panel data set on individuals collected on January 31, 1990, and January 31, 1992. If we include a year dummy for 1992 and use first differencing, can we also include age in the original model? Explain.
Answer:
No, we cannot include age in the original model as an explanatory variable in the original model
Explanation:
No, we cannot include age in the original model because Each of the person in the panel data set is exactly two years older on January 31, 1992 than that of January 31, 1990 which means that 2=∆i age for all i.
Although the equation we would estimate will be in this form .
∆savingi β⁰+δ¹∆age i +...,
where δ will be the coefficient of the year dummy for 1992 in the original model. In a situation where we have an intercept in the model this means that we cannot include an explanatory variable which is constant across i, and since age tend to change by the same amount for everyone, it means we cannot differentiate the effect of age from that of the aggregate time effects.
The traditional tasks performed by the HR department include all of the following except Group of answer choices labor relations. personnel administration. recruiting staff. participation in business decision making.
Human resources allude to the people who make up an organization's, business sector's, industry's, or economy's employment.
Human capital is a more specific term that refers to the knowledge and abilities that individuals possess. Manpower, employment, staff, companions, or simply: people are similar phrases.
The correct option is participation in business decision-making.
This is the correct option because this is the only one that is not the function or the tasks of the Hr department. The main function of Hr is to conduct the screening and the selection of the candidates for the interviews. The options are mentioned in the context of labor relations. personnel administration. recruiting staff, are the functions of the Hr except for the correct answer.
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Your enterprising uncle opens a sandwich shop that employs 6 people. The employees are paid $12 per hour, and a sandwich sells for $4.
If your uncle is maximizing his profit, the value of the marginal product of the last worker he hired is $, and that worker's marginal product is sandwiches per hour.
Answer:
if your uncle is maximizing his profit, the value of the marginal product of the last worker he hired will be $12 while that of worker's marginal product will be $2 sandwiches per hour.
Explanation:
Marginal Revenue Product can be seen as the way in which additional revenue is been generated by additional workers.
Price =$6
Wage = $12
Since your enterprising uncle is hiring workers such that their wage is been equals the marginal revenue product.
Hence,
wage = Marginal revenue product
12 = 12
In a situation where the marginal revenue product is 12 then the marginal product will be:
Marginal Revenue Product = Price x MP
MP = Marginal Revenue Product / Price
MP = 12 / 6
MP = 2
Therefore if your uncle is maximizing his profit, the value of the marginal product of the last worker he hired will be $12 while that of worker's marginal product will be $2 sandwiches per hour.
Marginal revenue is the excess revenue gained by each product being produced over the actual production limit.
The value of the marginal product of the last hired worker is $12 while the marginal product is 2 sandwiches per hour.
Computation:
The marginal revenue product:
[tex]\text{Marginal Revenue Product} = \text{Price} \times \text{Marginal Product}\\\\=\$6\times2\\\\=\$12[/tex]
The marginal product is:
[tex]\text{Marginal Product}=\dfrac{\text{Marginal revenue product}}{\text{Price}}\\\\=\dfrac{12}{6}\\\\=2[/tex]
Therefore, for maximizing the profit the owner should have the marginal product of the last worker as $12 while the same for the worker's marginal product will be 2 sandwiches per hour.
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Costs that do not change in total over wide ranges of volume. 2. Technique that estimates profit or loss results when conditions change. 3. The sales level at which operating income is zero. 4. Drop in sales a company can absorb without incurring an operating loss. 5. Combination of products that make up total sales. 6. Net sales revenue minus variable costs. 7. Describes how a cost changes as volume changes. 8. Costs that change in total in direct proportion to changes in volume. 9. The band of volume where total fixed costs and variable cost per unit remain constant.
Complete Question:
Match the terms with the correct definitions.
Answer:
1. Fixed costs: Costs that do not change in total over wide ranges of volume.
2. Sensitivity analysis: Technique that estimates profit or loss results when conditions change.
3. Breakeven point: The sales level at which operating income is zero.
4. Margin of safety: Drop in sales a company can absorb without incurring an operating loss.
5. Sales mix: Combination of products that make up total sales.
6. Contribution margin: Net sales revenue minus variable costs.
7. Cost behavior: Describes how a cost changes as volume changes.
8. Variable costs: Costs that change in total in direct proportion to changes in volume.
9. Relevant range: The band of volume where total fixed costs and variable cost per unit remain constant.
Explanation:
It is required that each term are matched with their respective correct definitions. The terms are generally associated with business and sales management.
For instance, fixed costs are indirect costs that do not change in total over wide ranges of volume and irrespective of the level of output (goods and services) e.g rent, salaries, property tax, insurance, depreciation etc.
Also variable costs are costs that change in total in direct proportion to changes in volume of goods and services e.g sales commission, utility costs, raw materials costs, credit card fees, direct labour costs etc.
On January 1, 2016, Pearson Corp has beginning inventory of 240 surfboards. Pearson estimates it will sell 400 units during the first quarter of 2016 with a 5.00% increase in unit sales each quarter. Each surfboard is sold for $200.00. How much is budgeted sales revenue for the third quarter of 2016?
Answer:
Pearson Corp
Budgeted Sales Revenue for the third quarter of 2016:
The budgeted sales revenue = $88,200 (441 x $200)
Explanation:
If First Quarter Sales = 400 units
Second Quarter Sales = 420 units (400 x 1.05)
Therefore, Third Quarter Sales = 441 units (420 x 1.05)
Another way to work it out is to compound the rate for two years:
(1.05)ⁿ = (1.05)∧2 = 1.1025
Sales in first quarter = 400 x $200 = $80,000
Sales in third quarter = $80,000 x 1.1025 = $88,200
The compounding of the rate of increase yield a compound factor that can be applied to the value of the sales in the first quarter to arrive at a sales value for the third quarter without working out the sales value for the second quarter also.
MOSS COMPANY
Selected Balance Sheet Information
December 31, 2017 and 2016
2017 2016
Current assets
Cash $ 91,150 $ 33,300
Accounts receivable 31,500 45,000
Inventory 66,500 55,400
Current liabilities
Accounts payable 43,400 32,200
Income taxes payable 2,700 3,500
MOSS COMPANY
Income Statement
For Year Ended December 31, 2017
Sales $ 549,000
Cost of goods sold 357,600
Gross profit 191,400
Operating expenses
Depreciation expense $ 49,000
Other expenses 128,500 177,500
Income before taxes 13,900
Income taxes expense 8,100
Net income $ 5,800
Use the information above to calculate this company’s cash flows from operating activities using the indirect method. (Amounts to be deducted should be indicated by a minus sign.)
Cash flows from operating activities:
Adjustments to reconcile net income to operating cash flow
0
$0
Answer:
MOSS COMPANY
Cash Flows from Operating Activities
Net income $5,800
Adjustments to net income:
Depreciation expense $49,000Decrease in accounts receivable $13,500Increase in accounts payable $11,200Increase in inventory ($11,100)Decrease in taxes payable ($800) $61,800Net cash flow from operating activities $67,600
Depreciation expense and increase in accounts payable or taxes payable increase the cash flows from operating activities. Also, any decrease in accounts receivable, inventories or prepaid assets increase the cash flow.
Malmentier SA stock is currently priced at $85, and it does not pay dividends. The instantaneous risk-free rate of return is 5%. The instantaneous standard deviation of Malmentier SA stock is 25%. You want to purchase a put option on this stock with an exercise price of $90 and an expiration date 30 days from now. According to the Black-Scholes OPM, you should hold __________ shares of stock per 100 put options to hedge your risk.
Answer:
you should hold 76 shares of stock per 100 put options to hedge your risk.
Explanation:
Current stock price, S = $85
Risk-free rate of return, r = 5%
Standard Deviation, v = 25%
Exercise price, X = $90
expiration date, t (in years) = 30 days = 1 month = 1/12 = 0.083333 years
The option price (OP) is given by the formula:
[tex]OP = Xe^{-rt} * N(-d_{2} ) - S*N(-d_1)[/tex]
[tex]d_1 = [ln(S/X) + (r + v^{2} /2)t]/vt^{0.5}\\d_1 = [ln(85/90) + (0.05 + 0.25^{2} /2)*0.08333]/(0.25*0.08333^{0.5})\\d_1 = -0.6982[/tex]
[tex]d_2 = d_1 - (vt^{0.5})\\d_2 = -0.6982 - (0.25*0.08333^{0.5})\\d_2 = -0.7704[/tex]
Using the pro-metric calculator for the cumulative normal distribution:
N(-d1) = N(- (-0.6982)) = N(0.6982) = 0.75747
N(-d2) = N(-(-0.7704)) = N(0.7704) = 0.77947
[tex]OP = Xe^{-rt} * N(-d_{2} ) - S*N(-d_1)[/tex]
[tex]OP =[ 90e^{(-0.05*0.08333)} * 0.77947] - (85*0.75747)\\OP = 5.48[/tex]
Note that N(-d₁) = 0.76
This means that 76/100 (i.e to hedge your risk, you should hold 76 per 100 put options )
A firm is considering a replacement project which requires the initial outlay of $300,000 which includes both an after-tax salvage from the old asset of $12,000 and an additional working capital investment of $8,000. The 12-year project is expected to generate annual incremental cash flows of $54,000 and have an expected terminal value at the end of the project of $20,000. The cost of capital is 15 percent, and the firm's marginal tax rate is 40 percent. Calculate the net present value of this project.
Answer:
-3,548.43
Explanation:
DF = Discount factor
Year Cash flow DF(15%) Present Value
0 (300,000) 1 -300,000
1 54,000 0.870 46,956.52
2 54000 0.756 40,831.76
3 54000 0.658 35,505.88
4 54,000 0.572 30,874.68
5 54000 0.497 26,847.54
6 54000 0.432 23,345.69
7 54000 0.376 20,300.06
8 54000 0.327 17,652.70
9 54000 0.284 15,350.17
10 54000 0.247 13,347.97
11 54000 0.215 11,606.93
12 74000 0. 187 13,831.13
Year 12 calculation = 54000 +20000 x 0.6 + 8000
= 74000
NPV = -300,000 + 46,956.52 + 40,831.76 + 35,505.88 + 30,874.68 + 26,847.54 + 23,345.69 + 20,300.06 + 17,652.70 + 15,350.17 + 13,347.97 + 11,606.93 + 13,831.13
NPV = -3,548.43
The following information was taken from the records of Munez ​Motorsports, Inc. at November 30​, 2018​: Prepare a multi-step income statement for Clarkston Motorsports for the fiscal year ended November 30, 2018. Include earnings per share. Clarkston Motorsports, Inc. Income Statement Year Ended November 30, 2018 1Selling Expenses $130,000 Common Stock, $18 Par ValueAdministrative Expenses 120,000 12,000 shares authorized and issued $216,000Income From Discontinued Preferred Stock, $4 No-Par ValueOperations 2,400 Cost of Goods Sold 425,000 4,000 shares issued 160,000 Treasury Stock-Common Income Tax Expense: continuing Operations Income from Discontinued Operations 960
FAnswer:
Explanation:
Income Statement
Net sales Revenue 7464000
Less Cost of goods sold 4250000
Gross Profit 3214000
Operating Expenses
Selling Expenses 130000
Admin Expenses 120000 250000
Income from continuing operation 71,400
before income tax
Income tax expenses 35000
Income tax from continuing operation 36,400
Income from discontinuing operation. 1,440
Net of tax (2400-960)
Net Income. 37,840
Earning per Share
Income from continuing operation = (36400-16000)/(12000-4000)= $2.55
Income from discontinuing operations = (1440) / (12000-4000) = $0.18
Net Income = $2.55 / $0.18
Net Income = $2.71
Dividend to preferred stock = 4000 * 4 = $16,000
Ship Co. produces storage crates that require 34.0 meters of material at $0.20 per meter and 0.30 direct labor hours at $19.00 per hour. Overhead is applied at the rate of $16 per direct labor hour. What is the total standard cost for one unit of product that would appear on a standard cost card?
Answer:
Total standard cost = $103.7
Explanation:
Standard cost is the sum of the standard material cost , standard labour cost and standard overhead
Overhead = OAR × direct labour hour
= $16 × (0.30×$19.00)= 91.2
Standard cost = (34.0×$0.20) + (0.30×$19.00) + 91.2 = $103.7
Standard cost = $103.7
Collins Company borrowed $1,250,000 from BankTwo on January 1, 2016 in order to expand its mining capabilities. The five-year note required annual payments of $325,545 and carried an annual interest rate of 9.5%. What is the amount of expense Collins must recognize on its 2017 income statement
Answer:
Collins Company must recognize $118,750 (which is annual interest paid on the capital) in its 2017 income statement as an expense item if the method of computing the interest is the flat rate method.
If it is reducing balance rate, then the amount deducted will equal $ 87,823
Explanation:
According to the principles of Financial Accounting, the interest portion of any loan must be entered as an expense item. The portion of the principal being paid back is recorded as part of the liability of the company in the period under consideration. It often goes by the term Loan Payable or Notes Payable.
Hence to arrive at the answers given above, you must note that the year in question is 2017 and that the loan took effect from January 2016.
When computing for interest payable, two methods may be used:
Flat rate method: which requires that the interest rate applicable is computed on the capital and multiplied by the number of years the loan will run.That is, $1,250,000 x 9.5% x 5 = Total Interest Rate Applicable.
= $593,750 so going by this method, the interest rate to be entered is
= $593, 750/5
= $118,750
2. Reducing balance rate method: This requires the rate of interest to be applied each year succesievely having taken into account the capital which way paid in the previous year.
That is, [Initial Capital-Annual Payments] *9.5%
For year 2016, annual payment will be Zero. Given that the loan started in that year. In 2017 however, the annual payment will apply as shown below:
= [$1,250,000-$325,545] *9.5%
= $924, 455 * 9.5%
= $87,823 (approximately)
Cheers!
Current and Quick Ratios The Nelson Company has $1,250,000 in current assets and $500,000 in current liabilities. Its initial inventory level is $400,000, and it will raise funds as additional notes payable and use them to increase inventory. How much can Nelson's short-term debt (notes payable) increase without pushing its current ratio below 1.2
Answer:
Nelson's short-term debt (notes payable) can increase by $541,667 without pushing its current ratio below 1.2.
Explanation:
We know that the formula for calculating the current ratio is as follows:
Current ratio = Current Assets / Current Liabilities .................... (1)
Where;
Existing Current assets = $1,250,000
Existing current liabilities = $500,000
Existing Current ratio = $1,250,000 / $500,000 = 2.50
Since we want to keep the current assets at $1,250,000, and targeted current ratio is 1.2; we want to determine the following:
Targeted current liabilities = ?
We therefore also use and substitute into equation (1) as follows:
Targeted current ratio = Existing Current assets / Targeted current liabilities
Therefore, we have:
1.2 = $1,250,000 / Targeted current liabilities
Solving for Targeted current liabilities, we have:
Targeted current liabilities = $1,250,000 / 1.2 = $1,041,667
Therefore, we have:
Targeted increase in short-term debt = Targeted current liabilities - Existing current liabilities = $1,041,667 - $500,000 = $541,667
Therefore, Nelson's short-term debt (notes payable) can increase by $541,667 without pushing its current ratio below 1.2.
At the beginning of the year, a company predicts total overhead costs of $770,100. The company applies overhead using machine hours and estimates it will use 1,510 machine hours during the year. What amount of overhead should be applied to Job 65A if that job uses 24 machine hours during January
Answer:
$12,240
Explanation:
For the computation of the amount of overhead first we need to find out the predetermined overhead rate which is shown below:-
Predetermined overhead rate = Overhead cost ÷ Machine hours
= $770,100 ÷ 1,510
= $510
Amount of overhead should be applied to Job 65A = Predetermined overhead rate × Machine hours during January
= $510 × 24
= $12,240
We simply applied the above formula
Ethical dilemmas in business: Multiple Choice often force us to choose between equally unsatisfactory alternatives. force us to make poor choices. always end up bringing out the best in us. define us as being moral absolutists or moral situationalists.
Answer:
often force us to choose between equally unsatisfactory alternatives
Explanation:
In the presence of two possible alternatives, a problem in the decision making process could arise. Non of these alternatives are absolutely acceptable from an ethical point of view. Ethical dilemmas are very complicated and difficult to solve. In an ethical dilemma neither of these alternatives resolves the situation in an ethically acceptable fashion thereby force us to choose between equally unsatisfactory alternatives.
Landon would like to work in a private school for troubled teens. Which secondary degree should he obtain? A. a minor in education B. a minor in science C. a minor in psychology D. a minor in early childhood development
Answer: C. a minor in psychology
Explanation:
A troubled teens are those children who exhibit behavioral, emotional, and learning problems. They become habitual of risk behaviors and practices that includes the drinking, sex, violence, drug use, self-harming, and other criminal acts. These children are affected by depression, eating disorders, and anxiety.
A minor in psychology will help Landon to understand the psychology of these troubled teens. The subject emphasis over the strategies to reduce the mental stress, anxiety, and different kinds of delinquent behaviors.