Answer:
Instructions are below.
Explanation:
Giving the following information:
Highest cost= $2,400 when the machines worked 1,000 machine hours.
Lowest cost= $2,200 when the machines worked 500 machine hours.
To calculate the variable cost per unit and total fixed costs, we need to use the following formulas:
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (2,400 - 2,200) / (1,000 - 500)
Variable cost per unit= $0.4 per hour
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
Fixed costs= 2,400 - (0.4*1,000)= $2,000
Fixed costs= LAC - (Variable cost per unit* LAU)
Fixed costs= 2,200 - (0.4*500)= $2,000
Total cost= 2,000 + 0.4x
x= machine hour
Finally, the total cost for 1,200 machine hours:
Total cost= 2,000 + 0.4*1,200
Total cost= $2,480
Corporation has the following data as of December 31, 2018:
Total Current Liabilities $38,420 Total Stockholders' Equity$ ?
Total Current Assets 62,100 Other Assets 36,800
Long-term Liabilities 179,530 Property, Plant, and Equipment, Net 264,350
Compute the debt to equity ratio at December 31, 2018. (Round your answer to two decimal places, X XX)
Total liabilities Total stockholders' equity Debt to equity ratio
Answer: 1.5
Explanation:
The debt to equity ratio will be calculated as total liabilities divided by the total equities.
The total liabilities is the sum of the total current liabilities and the long term liabilities. This will be:
= 38420 + 179,530
= $217950
Total equities will be the difference between the total assets and total liabilities. This will be:
Total asset = 264,350 + 36,800 + 62,100
= $363,250
Total equity = total asset - total liability
= $363,250 - $217,950
= $145,300
Debt to equity ratio = total liabilities/total equity
= 217950/145,300
= 1.5
Suppose 1-year T-bills currently yield 7.00% and the future inflation rate is expected to be constant at 4.70% per year. What is the real risk-free rate of return, r*
Answer:
2.30%
Explanation:
Data has given as:
Yield for 1 year T-bill = 7.00%
Future inflation rate = 4.7%
In order to find the risk-free rate of return we need to deduct future inflation rate from the yield for the year
Risk-free Rate of return = 1 year T-bill yield - inflation
Risk-free Rate of return = 7.00% - 4.70%
Risk-free Rate of return = 2.30%
Two solutions are investigated for a safety program Soution 1 First cost ---25,000 annual maintenance cost 4,000 Life -- 2years Solution 2 First cost ---88,000 annual maint 1400 Life 6 years Neither project has a salvage value Compare the two solutions using present value using 15% interest- what is present cost of solution 2
Answer:
Present value for solution 2 = $93,298.28
Solution 1 has a lower cost compared to solution 2. Solution 1 would be more desirable based on the lower cost
Explanation:
Present value is the sum of discounted cashflows
Solution 1
Cash flow in year 0 = 25,000
Cash flow in year 1 and 2 = 4,000
I = 15%
Present value = $31,502.84
Solution 2
Cash flow in year 0 = 88,000
Cash flow in year 1 and 6 = 1,400
I = 15%
Present value = $93,298.28
Solution 1 has a lower cost compared to solution 2. Solution 1 would be more desirable based on the lower cost
To find the PV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
Westchester Corp. is considering two equally risky, mutually exclusive projects, both of which have normal cash flows. Project A has an IRR of 11%, while Project B's IRR is 14%. When the WACC is 8%, the projects have the same NPV. Given this information, which of the following statements is CORRECT?a. If the WACC is 9%, Project A's NPV will be higher than Project B's. b. If the WACC is greater than 14%, Project A's IRR will exceed Project B's. c. If the WACC is 13%, Project A's NPV will be higher than Project B's. d. If the WACC is 9%, Project B's NPV will be higher than Project A's. e. If the WACC is 6%, Project B's NPV will be higher than Project A's.
Answer:
d. If the WACC is 9%, Project B's NPV will be higher than Project A's.
Explanation:
The internal rate of return is the return in which the NPV is zero i.e cash inflows equal to the initial investment
While the WACC refers to the cost of capital by considering the capital structure i.e cost of equity, cost of preferred stock and cost of debt by taking their weightage
Now if the WACC is 9% so project B NPV would be higher as compared to project A as we can see that project B IRR is greater than the project A IRR
Therefore option d is correct
Identify the accounts below that would be classified as current liabilities on a classified balance sheet. (Check all that apply.)
a) Notes payable (due in three months)
b) Unearned rent
c) Accounts payable
d) Taxes payable
Answer:
a) Notes payable = current liabilities
b) Unearned rent = current liabilities
c) Accounts payable = current liabilities
d) Taxes payable = current liabilities
Explanation:
Current Liabilities are Company`s Obligations that are due for settlement within a period of 12 months.
All the above Accounts are would be classified as current liabilities as settlement in cash or service (when in comes to unearned rent) is due within 12 months.
Indirect labor includes: (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
Complete Question:
Options:
a) labor of employees working directly on the product
b) labor of the maintenance employees
c) labor of the clerical staff
Answer:
Indirect labor includes:
b) labor of the maintenance employees
c) labor of the clerical staff (factory)
Explanation:
Indirect labor is the cost of labor for all those who contribute to the production of a product, but indirectly. These include the labor costs of equipment and factory maintenance employees, factory clerical staff, supervisors, and managers, product inspectors and quality controllers, etc. The determining factor is the level of involvement: direct or indirect or outside production. If it is direct or outside production, it is not part of indirect labor.
Promoters of an LLC are Select one: a. are never personally liable on pre-formation debt. b. always liable on pre-formation debt. c. only liable on pre-formation debt until a novation occurs.
Answer:
The answer is C. only liable on pre-formation debt until a novation occurs.
Explanation:
The corporation and the third-party agree to release the promoter from liability and to substitute the corporation in place of the promoter as the party liable on the contract. May be express or implied.
Firm Y has issued 500 million shares of stock at $1 par value and $200 millino in additional paid in capital. Retained earnings are $5.6 billion. What is the return on equity if net income if net income is $1.1 billion?
Answer:
Return on equity = 17.46%
Explanation:
DATA:
Issued share capital = $500m
Additional Paid-in capital = $200 million
Retained Earnings = $5.6 billion
Net Income = $1.1 billion
Return on Equity = ?
Solution
Return on equity can be calculated by dividing net income in total shareholder's equity
NOTE: ALL THE WORKINGS ARE IN 1000's
Return on equity = Net Income / Shareholder's Equity
Return on equity = 1,100,000 / (500,000 + 200,000 +5,600,000)
Return on equity = $1,100,000/6,300,000
Return on equity = 17.46%
Targaryen Corporation has a target capital structure of 70 percent common stock, 5 percent preferred stock, and 25 percent debt. Its cost of equity is 10 percent, the cost of preferred stock is 5 percent, and the pretax cost of debt is 6 percent. The relevant tax rate is 23 percent.1. What is the company's WACC?2. What is the aftertax cost of debt?
Answer:
1. 8.41 %
2.4.62 %
Explanation:
Weighted Average Cost of Capital (WACC) is the cost of capital for all company projects.It shows the risk of the company.
WACC = Ke×(E/V) + Kp×(P/V) + Kd×(D/V)
= 0.10 × 70% + 0.05 × 5% + 0.06 × 77%× 25%
= 8.405 or 8.41 %
After tax cost of debt = Market Interest × ( 1 - tax rate)
= 0.06 × (1 - 0.23)
= 4.62 %
Cost centers are evaluated primarily on the basis of their ability to control costs and:_______.
A) Their return on assets.
B) Residual income.
C) The quantity and quality of the services they provide.
D) Their contribution margin ratio.
Answer:
C.
The quality and quantity of the services they provide
Explanation:
When we talk of cost centers in an organization, we refer to such as departments that does not contribute to the overall profitability of the organization but still cost the organization some amount to operate.
What this means is that although, they give no profit to the organization, they add to the total bill of the organization.
So how do we evaluate them?
Since they are not here for profitability, the measure of how they are relevant to the company is measured on two basis.
They are evaluated on their ability to control costs and also the quality and quantity of the services these centers provide
On January 1, 2018,MechanicsCredit Union (MCU)issued 8 %,20-yearbonds payable with face value of $ 200 comma 000.These bonds pay interest on June 30 and December 31. The issue price of the bonds is 106.Journalize the following bond transactions:
A. Issuance of the bonds on January 1, 2018.
B. Payment of interest and amortization on June 30, 2018.
C. Payment of interest and amortization on December 31, 2018.
D. Retirement of the bond at maturity on December 31, 2037, assuming the last interest payment has already been recorded.
Answer:
A. Issuance of the bonds on January 1, 2018.
Dr Cash 212,000
Cr Bonds payable 200,000
Cr Premium on bonds payable 12,000
B. Payment of interest and amortization on June 30, 2018.
premium on bonds payable = $12,000 / 40 coupons = $300 per coupon
Dr Interest expense 7,700
Dr Premium on bonds payable 300
Cr Cash 8,000
C. Payment of interest and amortization on December 31, 2018.
Dr Interest expense 7,700
Dr Premium on bonds payable 300
Cr Cash 8,000
D. Retirement of the bond at maturity on December 31, 2037, assuming the last interest payment has already been recorded.
Dr Bonds payable 200,000
Cr cash 200,000
Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1, 2020. During 2020, Harbor had revenues of $2,500,000 and expenses of $2,000,000. The amortization of fair value allocations totaled $60,000 in 2020. Not including its investment in Harbor, Femur Co. had its own revenues of $4,500,000 and expenses of $3,000,000 for the year 2020. The noncontrolling interest's share of the earnings of Harbor Corp. for 2020 is calculated to be
Answer:
The answer is $132,000
Explanation:
Solution
Given that:
Harbor revenues = $2,500,000
Expenses = $2,000,000
The amortization of fair value allocations = $60,000
Femur corporation revenues =$4,500,000
expenses = $3,000,000
Now,w e have to compute for the non controlling interest's share of the earnings of Harbor Corp which is given below:
=[revenue of harbor - expenses of harbor - amortization of fair value allocations] 30%
= [$2,500,000 - $2,000,000- $60,000] * 30%
=[$500000 - $60000]* 30%
=$132,000
Therefore the non controlling interest's share of the earnings of Harbor Corp is $132,000
"Smokers are more likely to be murdered than nonsmokers." This statement is an example of: Select one: a. the fallacy of unintended consequences:. b. a positive economic statement. c. a normative economic statement. d. a value judgment.
Answer:
positive economic statement
Explanation:
positive economic statement are statements based on facts. they are objective, descriptive and measurable.
The information that smokers are liable to die young is based on extensive research on the effects of smoking on smokers
An analysis in which all the components of an income statement are expressed as a percentage of net sales is called blank___________ .
Answer:
Common Size Income Statement
Explanation:
In a common size income statement, each line item of the Income statement is expressed as a percentage of the sales amount for that period.
This helps in comparing performance of companies in different sectors or industries.
A company issued 8%, 15-year bonds with a par value of $550,000 that pay interest semiannually. The market rate on the date of issuance was 8%. The journal entry to record each semiannual interest payment is:
Answer:
Debit Credit
Bond Interest Expense $22,000
Cash $22,000
Being semi-annual interest payment on bonds
Explanation:
The semi-interest payment on the bonds equals
Coupon rate × par Value × 1/2
Semi-annual interest payment = 8%× 550,000 × 1/2=22,000
Semi- annual payment = $22,000
The accounting entry to record the interest payment each time payment is made would be:
Debit Credit
Bond Interest Expense $22,000
Cash $22,000
Being semi-annual interest payment on bonds
Note that interest payment is an expense, hence to increase an expense the expense account is debit. On the other hand. the interest payment is a cash outflow, which reduces the cash asset, hence the cash account is credited.
XYZ stock is trading at $25.75 and XYZ Jul 25 calls are trading at a premium of $2. What is the time value of the Jul 25 calls
Answer:
$125
Explanation:
Time value = Premium - Intrinsic value
Premium. = 2 or $200 i.e 2×100
Intrinsic value = 75
= $200 - $75
= $125
The time value of the Jul 25 calls will be $125.
It should be noted that the time value is simply the difference that exist between the premium and the intrinsic value. In this case, the time value will be:
= $200 - $75
= $125
The premium is gotten as 2 × 100 = $200.
Therefore, the time value of the Jul 25 calls will be $125.
Read related link on:
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Use the following information to determine this company's cash flows from financing activities.
A. Net income was $473,000.
B. Issued common stock for $74,000 cash.
C. Paid cash dividend of $13,000.
D. Paid $125,000 cash to settle a note payable at its $125,000 maturity value.
E. Paid $119,000 cash to acquire its treasury stock.
F. Purchased equipment for $86,000 cash.
Use the above information to determine this company's cash flows from financing activities.
Answer:
The answer is ($183,000)
Explanation:
This section deals with cash flows used to fund(e.g borrowing and repayment of loans) the business
Statement of cash flow(Partial)
Issued common stock for cash----------------------------------------------------------$74,000
Paid cash dividend-------------- ($13,000)
Paid cash to settle a note payable -----------------------------------------------($125,000)
Paid cash to acquire its treasury stock----------------------------------------($119,000)
Net cash flow from financing activities-----------------------------------------($183,000)
The calculated cost of trade credit for a firm that buys on terms of 2/10, net 30, is lower (other things held constant) if the firm plans to pay in 40 days than in 30 days.
A. True
B. False
Answer:
A. True
Explanation:
The terms of 2/10, net 30 implies that the firm is entitled to receive a 2 percent discount if it makes payment within 10 days for the goods it bought on term but the seller expects to pay full amount of the amount due in 30 days if it fails to pay within 10 days.
However, since there will be no more discount after the discount period, the cost of trade credit will continue to fall longer the payment is extended. For this question this can be demonstrated using the formula for calculating the cost of trade discount as follows:
Cost of trade discount = {[1 + (discount rate / (1 - discount rate))]^(365/days after discount)} - 1 ................... (1)
We can now applying equation (1) as follows:
For payment in 40 days
Cost of trade credit (payment in 40 days)= {[1 + (0.02 / (1 - 0.02))]^(365/40)} - 1 = 0.202436246672765, or 20%
For payment in 30 days
Cost of trade credit (payment in 30 days) = {[1 + (0.02 / (1 - 0.02))]^(365/30)} - 1 = 0.278643315029666, or 28%
Conclusion
Since the 20% calculated cost of trade credit for payment in 40 days is lower than 28% calculated cost of trade credit for payment in 30 days, the correct option is A. True. That is, the calculated cost of trade credit for a firm that buys on terms of 2/10, net 30, is lower (other things held constant) if the firm plans to pay in 40 days than in 30 days.
Question 3 (2 points)
Which of the following is NOT a way to balance a project?
..
O At the Enterprise Level
At the Business Case Level
.
O At the Program Level
At the Project Level
Answer:
1
Explanation:
at the bisiness casel level
A stock has an expected return of 12.6 percent, the risk-free rate is 7 percent, and the market risk premium is 10 percent. What must the beta of this stock be
Answer:
0.56
Explanation:
In this question we used the Capital Asset Pricing Model formula i.e shown below:
As we know that
Expected rate of return = Risk free rate of return + Beta × market risk premium
12.6% = 7% + Beta × 10%
12.6% - 7% = Beta × 10%
5.6% = Beta × 10%
So, the beta is
= 5.6% ÷ 10%
= 0.56
Hence, the beta of the stock is 0.56
Storico Co. just paid a dividend of $2.05 per share. The company will increase its dividend by 24 percent next year and then reduce its dividend growth rate by 6 percentage points per year until it reaches the industry average of 6 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on the company's stock is 10 percent, what will a share of stock sell for today
Answer:
A share of stock sell for $74.21 today.
Explanation:
This can be calculated as follows:
Dividend per share in year 1 = Year 0 dividend * (1 + growth rate of year 1 dividend) = $2.05 * (1 + 24%) = $2.5420
PV of year 1 dividend per share = Year 1 dividend / (1 + rate of return)^1 = $2.5420 * / (1 + 10%)^1 = $2.31090909090909
Dividend per share in year 2 = Year 1 dividend * (1 + growth rate of year 1 dividend) = $2.5420 * (1 + (24% -6%)) = $2.5420 * (1 + 18%) =$3.00
PV of year 2 dividend per share = Year 2 dividend / (1 + rate of return)^2 = $3.00 / (1 + 10%)^2 = $2.47933884297521
Dividend per share in year 3 = Year 2 dividend * (1 + growth rate of year 2 dividend) = $3.00 * (1 + (18% -6%)) = $3.00 * (1 + 12%) =$3.36
PV of year 3 dividend per share = Year 3 dividend / (1 + rate of return)^3 = $3.36 / (1 + 10%)^3 = $2.5244177310293
Dividend per share in year 4 = Year 3 dividend * (1 + growth rate of year 3 dividend) = $3.36 * (1 + (12% -6%)) = $3.36 * (1 + 6%) =$3.5616
PV of year 4 dividend per share = Year 4 dividend / (1 + rate of return)^4 = $3.5616 / (1 + 10%)^4 = $2.43262072262824
Dividend per share in year 5 = Year 4 dividend * (1 + growth rate of year 4 dividend) = $3.5616 * (1 + 6%) = $3.775296
Price at year 4 = Year 5 dividend / (Rate of return – growth rate) = $3.775296 / (10% - 6%) = $94.3824
PV of price at year 4 = Price at year 4 / (1 + rate of return)^4 = $94.3824 / (1 + 10%)^4 = $64.4644491496482
Share price to day = PV of year 1 dividend per share + PV of year 2 dividend per share + PV of year 4 dividend per share + PV of year 4 dividend per share + PV of price at year 4 = $2.31090909090909 + $2.47933884297521 + $2.5244177310293 + $2.43262072262824 + $64.4644491496482 = $74.21
Landers Flynn Inc. has 1,000 shares of $5 cumulative preferred stock outstanding. Dividends were not paid last year. The corporation also has 5,000 shares of common stock outstanding. Landers Flynn declared a $14,000 cash dividend to be paid in the current year.
Required:
Calculate the amount of dividends received by
1. the preferred stockholders;
2. the common stockholders.
Answer:
The preferred stockholders $10,000
Common stockholders $4,000
Explanation:
The cumulative effect of the preferred stock is that the holders are entitled to arrears of dividends, in other words, they would receive this year last year's dividends in addition to current year's.
annual preferred stock dividends=dividend per share*number of preferred stock.
annual preferred stock dividends=$5*1000=$5000
dividends for 2 years=$5000*2=$10,000
common stock dividends=$14,000-$10,000=$4000
The stock of Wiley United has a beta of 1. The market risk premium is 11.5 percent and the risk-free rate is 2.3 percent. What is the expected return on this stock in percent
Answer:
9.41%
Explanation:
Wiley United has a beta of 1
The market risk premium 11.5%
= 11.5/100
=0.115
Risk free rate is 2.3%
= 2.3/100
= 0.023
Therefore the expected rate of return can be calculated as follows
Expected rate of return= Risk free rate+beta(market return-risk free rate)
= 0.023+1(0.115-0.023)
= 1.023(0.092)
= 0.0941×100
=9.41%
Hence the expected return on the stock is 9.41%
No Doubt Company includes one coupon in each box of soap powder that it packs, and 10 coupons are redeemable for a premium (a kitchen utensil). In 2020, No Doubt Company purchased 8,800 premiums at 80 cents each and sold 110,000 boxes of soap powder at $3.30 per box; 44,000 coupons were presented for redemption in 2014. It is estimated that 60% of the coupons will eventually be presented for redemption.
Instructions
Prepare all the entries that would be made relative to sales of soap powder and to the premium plan in 2014.
Answer:
Prepare all the entries that would be made relative to sales of soap powder and to the premium plan in 2014.
Explanation:
ere presented for redemption in 2014. It is estimated that 60% of the coupons will eventually be prese
You take out a loan for $4000 at an annual interest rate of 5% (compounded annually). You must pay back the loan in 3 annual installments. How much of the principal is still outstanding after you make the first payment? g
Answer: = $2,731.14
Explanation:
First find the annual payment.
The payment will be constant so is an annuity.
Present Value of an Annuity = Payment * Present Value Interest Factor of an annuity
4,000 = Payment * PVIFA( 3 periods, 5%)
4,000 = Payment * 2.7232
Payment = 4,000 / 2.7232
Payment = $1,468.86
This annual Payment is divided into an interest component and a component going towards principal repayment.
Interest component = 5% * 4,000
= $200
Amount going to principal = 1,468.86 - 200
= $1,268.86
Amount of Principal Outstanding = 4,000 - 1,268.86
= $2,731.14
The next dividend payment by Savitz, Inc., will be $2.12 per share. The dividends are anticipated to maintain a growth rate of 8 percent forever. If the stock currently sells for $43 per share, what is the required return?
Answer:
The answer is 12.9%
Explanation:
This question will be solved using the Dividend Discount Model(DDM).
Po = D1/r - g
Po is the current worth of stocks
D1 is the next dividend paid
r is the rate of return
g is the growth rate
$43 = $2.12/ r - 0.08
43r - 3.44 = 2.12
43r = 5.56
r = 5.56/43
=0.129
Expressed as a percentage:
The required return for Savitz, Inc., is therefore 12.9%
When all firms earn zero economic profits producing the output level where P=MR=MC and P=AC and there is no incentive to leave or join the market, the market is in __________.
Answer:
Long-run equilibrium.
Explanation:
When all firms earn zero economic profits producing the output level where P=MR=MC and P=AC and there is no incentive to leave or join the market, the market is in long-run equilibrium.
In a perfectly competitive market in long-run equilibrium, a long-run equilibrium avails firms the opportunity to adjust all inputs and all fixed costs are maximized. Also, it's characterized by free entry and exit, as such there isn't a fixed number of firms. This simply means that, since the number of firms in a long-run equilibrium can change, a firm must exit the market as a result of losses i.e when the firm is unable to cover its fixed costs in the long-run while new firms are allowed entry into the market when it anticipates potential profits or gains.
However, the firms always strive to maximize profits by increasing their level of output, such that P = MC. Also, the firms wouldn't be willing to leave or enter into the market because they are not making any profit, such that P=AC.
In a nutshell, in the long run equilibrium P=MR=MC and P=AC.
Where, P represents the price.
Answer:
The correct answer is: long-run equilibrium.
Explanation:
To begin with, the market that is refered in the question is a perfect competitive one, you can tell by the fact that the price equals the marginal revenue(MR) and that equals the marginal costs(MC) and also the price equals the average cost and that combination only happens in the competitive market and therefore that the relationship established happen when that industry is in the long run equilibrium and there is no incentive to leave or join the market.
The nominal interest rate in Fiji is 3%, while the nominal interest rate in the U.S. is 5%. Real interest rates in both countries are 2%. According to purchasing power parity (PPP), the Fijian dollar (F$) may be expected to ________ by ________%.
Answer:
1.98%
Explanation:
The computation is shown below:-
As we know that
PPP equation i.e
Nominal Interest rate = Real interest rate + Inflation rate
Now
The Inflation rate for Fiji is
= 5% - 2%
= 3%
And, the Inflation rate for US is
= 3% - 2%
= 1%
As we can see that the inflation rate for Fiji is more than the inflation rate for US so we should be depreciated the currency by considering the inflation differential which is shown below:
= (1 + 3%) ÷ (1 + 1%) -1
= 1.98%
Government officials have hired your consulting firm to encourage more people to use the theater . In the initial meeting, you discussed several options for increasing demand. Three suggestions are listed below. Based on your knowledge of the law of demand, what is your recommendation for each suggestion?
Suggestion 1: Reduce the price of public transportation
Choose one:
a. Not recommend
b. Recommend
Suggestion 2: Increase the prices of private transportation by increasing the price of parking and gasoline
Choose one:
a. Not recommend
b. Recommend
Suggestion 3: Offer monthly and yearly passes that reduce the price per ride
Choose one:
a. Not recommend
b. Recommend
Answer:
Suggestion 1: Not Recommended
Suggestion 2: Recommended
Suggestion 3: Not Recommended
Explanation:
The law of demand says that the increase in the price of the commodity will result in decrease in the utility derived from that product and as a result the consumption of the product falls.
So by keeping the law of demand in view, we can say that the:
Reduction in price of public transportation is not recommended because every transporter will start investing in public transport and we will have higher number of buses per person.The increase in the price of parking and gasoline is recommended as the increase in parking fees and gasoline cost will discourage people to buy private transportation.Offer of monthly and yearly passes to reduce the price per ride is not recommended as it encourages the cyclists to travel via bus. Hence it is not recommended.Aspin Corporation’s charter authorizes issuance of
2,000,000 shares of common stock. Currently, 1,400,000 shares are outstand-
ing, and 100,000 shares are being held as treasury stock. The firm wishes to
raise $48,000,000 for a plant expansion. Discussions with its investment bankers
indicate that the sale of new common stock will net the firm $60 per share.
Answer and Explanation:
The calculation of the sale of new common stock is shown below:-
a. Not issued = Authorized shares - Outstanding shares - Treasury stock
= 2,000,000 - 1,400,000 + 100,000
= 500,000
Now
Maximum shares = Not issued + Treasury stock
= 500,000 + 100,000
= 600,000
b. Since if we find out the number of shares that should be issued is
= $48,000,000 ÷ $60 per share
= 800,000
But the maximum shares is 600,000 so this shares would only be issued upto this limit only
Therefore the funds should not be raised
c. Now The firm could also develop extra 200,000 shares together it get amortized also.
Hence, it can sell 800,000 shares and the amount could rise to $48,000,000