Answer: $7400 ; $260
Explanation:
From the question, we are given the information that Remsco has taxable income of $64,000 and a charitable contribution limit modified taxable income of $74,000 and that its charitable contributions for the year were $7,660.
It should be noted that the charitable contribution is 10% of $74,000 which is the charitable contribution limit modified taxable income given in the question. So, this will be:
= 10% of $74,000
= 10/100 × $74,000
= 0.1 × $74,000
= $7400
Therefore, Remsco's current-year charitable contribution deduction is $7400.
Remsco's contribution carryover will be the difference between his charitable contributions for the year which is $7,660 and his current-year charitable contribution deduction is $7400. This will be:
= $7660 - $7400
= $260
A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. If 150,000 tons of ore are mined during the first year, the journal entry to record the depletion is:
Answer: Please see below
Explanation:
Depletion expense = Initial price Purchase - Residual value / Total number of units.
$1,500,000 - $250,000/ 2,000,000 = 0.0625 per ton
if 150,000 tons of ore are mined,
Depletion expense = depletion per ton x units mined
0.625 x 150,000=$93,750
journal entry to record the depletion is:
Account Debit Credit
Depletion expense $93,750
Accumulated Depreciation $93,750
An investor with an investment objective of tax-exempt income will need access to the funds in four months. An RR should not recommend which of the following municipal securities?
A. A variable-rate demand obligation (VRDO)B. An auction-rate security (ARS)C. A tax-anticipation note (TAN)D. A bond anticipation note (BAN)
Answer:
B. An auction-rate security (ARS)
Explanation:
An auction-rate security (ARS) is a debt security (either municipal or corporate securities) with long-term maturities usually between 20 to 30 years and has its interest rates reset periodically through dutch auctions, such as every 7, 14, 28, 35, 49, or 91 days.
Also, an auction-rate security (ARS) is typically structured as preferred equity securities, which are issued by closed-end funds.
An auction-rate security (ARS) and a variable rate demand obligation (VRDO) are both long-term securities having short-term trading features.
Generally, an auction rate security (ARS) doesn't have a put feature that would permit the holder to sell the securities to a third party or back to the issuer of the securities. Thus, if the dutch auction fails, the investor in question wouldn't have an immediate access to his funds.
Hence, RR should NOT recommend an auction-rate security (ARS) since investor will need access to the funds in four months.
Lastly, tax-anticipation note (TAN) and bond anticipation note (BAN) are both short-term municipal notes and can easily be sold in the secondary market if their maturities is above four (4) months in duration.
Ownership of retail outlets may be necessary if: a. products are expended in consumption. b. products are inexpensive. c. the products produced by the manufacturer are not complex. d. products are intended for one-time use. e. the required standards of after-sales service for complex products are to be maintained.
Answer:
E. The required standards of after-sales service for complex products are to be maintained.
Explanation:
The standard of after sale service is necessary in a case like this because after sales service is said to be all you need to know regarding or concerning the product you bought or the services that has been rendered to you.
In as much as a market can be any arrangement where buying and selling is been done and the online platform or medium is pulling through in a lot of sales in recent times, retail outlets show not to be always necessary but sometimes can be necessary in a critical case such as the above scenario. Here, the required standards of after sales services for some products which are complex is to be maintained, retail outlets are said to be possibly necessary.
The folowing information apples to the questions displayed bełow The financial statements for Highland Corporation included the folowing selected information: Common stock Retained earnings Net income Shares issued Shares outstanding Dividends declared and paid $1,600,000 $ 900,000 1,000,000 90,000 80,000 $ 800,000 The common stock was sold at a price of $30 per share.
Required: 1. What is the amount of additional paid-in capital?
Answer:
The amount of additional paid-in capital is $800,000
Explanation:
1. In order to calculate the amount of additional paid-in capital we would have to make the following calculation:
additional paid-in capital=Total stock price-Common stock
Total stock price=Shares outstanding*sold price common stock
Total stock price=80,000*$30
Total stock price=$2,400,000
Therefore, additional paid-in capital=$2,400,000-$1,600,000
additional paid-in capital=$800,000
The amount of additional paid-in capital is $800,000
Determine the maturity date and compute interest for each note. (Use 360 days a year. Do not round intermediate calculations.) Note Contract Date Principal Interest Rate Period of Note (Term) 1. March 1 $ 10,000 6 % 60 days 2. May 15 15,000 8 90 days 3. October 20 8,000 4 45 days
Answer:
See explanation below
Explanation:
Required:
Determine the maturity date and compute interest
1) Given:
Contract date : March 1
Interest :$10,000
Rate: 6%
Period of note: 60 days
The maturity date for this will be 2 months(60 days) from March 1. Therefore maturity date is May 2.
Interest will be calculated as:
[tex] 10000 * 0.06 * \frac{60}{360} = 100[/tex]
Therefore, interest = $100
2) Given:
Contract date : May 15
Interest :$15,000
Rate: 8%
Period of note: 90 days
The maturity date for this will be 3 months(90 days) from May 15. Therefore maturity date is August 13.
Interest will be calculated as:
[tex] 15000 * 0.08 * \frac{90}{360} = 300[/tex]
Therefore, interest = $300
3) Given:
Contract date : October 20
Interest :$8,000
Rate: 4%
Period of note: 45 days
The maturity date for this will be 45 days from October 20. Therefore maturity date is December 4.
Interest will be calculated as:
[tex] 8000 * 0.04 * \frac{45}{360} = 40[/tex]
Therefore, interest = $40
Compute the values:
_________________________
Contract date: March 1.
Maturity month: May
Maturity date: May 2.
Interest Expenses: $100
_____________________________
Contract date: May 15.
Maturity month: August
Maturity date: August 13.
Interest Expenses: $300
______________________________
Contract date: October 20.
Maturity month: December
Maturity date: December 4.
Interest Expenses: $40
______________________________
art E14 is used by M Corporation to make one of its products. A total of 20,000 units of this part are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity: Per Unit Direct materials $ 4.30 Direct labor $ 8.90 Variable manufacturing overhead $ 9.40 Supervisor's salary $ 4.80 Depreciation of special equipment $ 3.20 Allocated general overhead $ 8.40 An outside supplier has offered to make the part and sell it to the company for $30.30 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including the direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company, none of which would be avoided if the part were purchased instead of produced internally. In addition, the space used to make part E14 could be used to make more of one of the company's other products, generating an additional segment margin of $32,000 per year for that product. The annual financial advantage (disadvantage) for the company as a result of buying part E14 from the outside supplier should be:
Answer:
It is more profitable to continue making the product. On this level of production, the company saves $26,000 if it makes the product in-house.
Explanation:
Giving the following information:
Units= 20,000
Per Unit Cost:
Direct materials $4.30
Direct labor $8.90
Variable manufacturing overhead $9.40
Supervisor's salary $4.80
An outside supplier has offered to make the part and sell it to the company for $30.30 each.
Rent space= $32,000 per year
We will take into account only the differential costs.
Make in-house:
Total cost= 20,000* (4.3 + 8.9 + 9.4 + 4.8)= $548,000
Buy:
Total cost= 20,000*30.3 - 32,000= $574,000
It is more profitable to continue making the product. On this level of production, the company saves $26,000 if it makes the product in-house.
Davis and Thompson have earnings of $814 each. The social security tax rate is 6.0%, and the Medicare tax rate is 1.5%. Assuming that the payroll will be paid on December 29, what will be the employer's total FICA tax for this payroll period
Answer:
$122.10
Explanation:
814 × 6% = 48.84
814 × 1.5% = 12.21
48.84 + 48.84 = 97.68
12.21 + 12.21 = 24.42
97.68 + 4.42 = 122.10
Two-Asset Portfolio Stock A has an expected return of 12% and a standard deviation of 45%. Stock B has an expected return of 18% and a standard deviation of 65%. The correlation coefficient between Stocks A and B is 0.2. What is the expected return of a portfolio invested 40% in Stock A and 60% in Stock B
Answer:
Portfolio return = 0.156 or 15.6%
Explanation:
The expected return of a portfolio is the weighted average of the individual stocks returns' that form up the portfolio. For a two stock portfolio, the expected return is calculated as follows,
Portfolio return = wA * rA + wB * rB
Where,
w is the weight of each stockr is the expected return of each stockPortfolio return = 0.4 * 0.12 + 0.6 * 0.18
Portfolio return = 0.156 or 15.6%
Complete the following table by indicating whether or not each scenario is an example of price discrimination.
Hint: In order to determine if a scenario is an example of price discrimination, think about if the market can be segmented into two groups that pay different prices for the same good.
Scenario
Price Discrimination
Yes
No
Last-minute "rush" tickets can be purchased for most Broadway theater shows at a discounted price. They are typically distributed via lottery or on a first-come, first-served basis a few hours before the show. Assume that the theater in question does not hold seats in reserve for this purpose, but rather offers rush tickets only for seats not sold before the day of the performance. A local boutique is having a sale on sweaters, but customers are not aware of the sale until they are already in the store. In other words, there is no advertising of the sale other than signs in the back of the store that cannot be seen from the outside. All sweaters are marked as 55% off.
Answer:
a. Yes
b. No
Explanation:
Price discrimination refers that selling the products the same product to different customers at different prices so that they can increase their sales and profits.
A. According to the given situation, the correct answer is yes as the discounted tickets are awarded on the basis of lottery or first come on the basis of first served.
b. Now, according to the second situation, the correct answer is no as it is not an advertising item as is it within the store and has no information outside the store.
Oscar owns a building that is destroyed in a hurricane. His adjusted basis in the building before the hurricane is $130,000. His insurance company pays him $140,000 and he immediately invests in a new building at a cost of $142,000. What is Oscar's basis on his new building?
Answer: $132,000
Explanation:
Oscar's new basis on the building will be the basis of the old building plus any additional investment he added.
This is the because there is no gain on the $140,000 he received because it was an Involuntary Conversion amount and he reinvested it into another building within a period of 2 years.
As there is no gain, the building will retain it's original basis but will add any amount outside the involuntary replacement cost of the building.
The Additional basis will be,
= Cost of building - Insurance
= 142,000 - 140,000
= $2,000
The Basis for the new building is,
= 130,000 + 2,000
= $132,000
Question 2 (10 Marks)
In Andalusia Ltd, wages are paid on a weekly basis (40 hours per week) at a guaranteed hourly rate
of RM2.80. It is estimated that the time required to manufacture a particular product was 12 minutes.
However, the time allowed of 25% is to be added (for normal idle time, setting up time, etc.). During
the first week of June 2020, Roslan produced 250 units of the product.
Required:
Compute Roslan's wages for the particular week using the following methods of wage payment:
a. time rate.
[2 marks]
b. piece rate with a guaranteed weekly wage.
[3 marks]
c. Halsey's premium bonus scheme.
[5 marks]
Answer:
Andalusia LtdWages based on:a. Time rate = RM 2.80 x 40 hours = RM 112
b. Piece Rate = RM 0.70 x 250 units = RM 175
c. Halsey premium bonus scheme:
Pay per hour = RM 2.80,
Therefore Wages = Normal Wages + Bonus
= (RM 2.80 x 40) + 50% (RM 2.80 x 22.5)
= RM 112 + 31.5 = RM 143.50
Explanation:
a) Time for each product unit = 12
Piece rate = RM 2.80/60 x 15 = RM 0.70 per unit
b) Under Halsey Premium Bonus Scheme:
Hours used in production = 40 hours
Hours for producing 250 units = 62.5 hours
Gain in hours = 22.5 hours (62.5 - 40)
c) Time rates are wages based on the amount of time spent at work. The usual form of time rate is the weekly wage or monthly salary. Usually the time rate is fixed in relation to a standard working week (e.g. 40 hours per week).
d) Wages based on piece rate (also known as piecework) is a pay based on number of units or pieces created rather than the number of hours worked. In other words, the more “pieces” an employee produces, the more the employee is paid.
e) Under Halsey Plan, the standard time for the completion of a job is fixed and the rate per hour is then determined. The usual bonus share paid to the worker is 50% of the time saved multiplied by the rate per hour (time-rate).
Outstanding stock of the Blue Corporation included 50000 shares of $5 par common stock and 18000 shares of 5%, $10 par non-cumulative preferred stock. In 2019, Blue declared and paid dividends of $7500. In 2020, Blue declared and paid dividends of $25000. How much of the 2020 dividend was distributed to preferred shareholders
Answer:
The dividends to be distributed among preferred stockholders in 2020 is $9000
Explanation:
The preferred stock holders are always paid dividends before the common stock holders. The amount left after paying preferred stockholders is paid to common stockholders as dividends.
Non cumulative preferred stock does not accrue or accumulates dividends. Thus, if dividends are not paid in a particular year, the company has no obligation to pay these dividends ever in the future.
Preferred stock dividend per year = 18000 * 10 * 0.05
Preferred stock dividend per year = $9000
As the preferred stock is non cumulative, then the remaining dividends for 2019 (which are 9000 - 7500 = $1500) will not be paid in 2020.
So, the preferred stock dividends to be paid in 2020 will be $9000 as the declared dividends are more than that required to pay the preferred stockholders.
You are valuing an investment that will pay you $12,000 the first year, $14,000 the second year, $17,000 the third year, $19,000 the fourth year, $23,000 the fifth year, and $29,000 the sixth year (all payments are at the end of each year). What it the value of the investment to you now is the appropriate annual discount rate is 11.00%?
Answer:
Total present value= $76,309.62
Explanation:
Giving the following information:
Cf1= $12,000
Cf2= $14,000
Cf3= $17,000
Cf4= 19,000
Cf5= $23,000
Cf6= $29,000
Discount rate= 0.11
We need to use the following formula on each cash flow:
PV= FV/(1+i)^n
Cf1= 12,000/1.11= 10,810.81
Cf2= 14,000/1.11^2= 11,362.71
Cf3= 17,000/1.11^3= 12,430.25
Cf4= 19,000/1.11^4= 12,515.89
Cf5= 23,000/1.11^5= 13,649.38
Cf6= 29,000/1.11^6= 15,540.58
Total present value= $76,309.62
The value of the investment to you now is $76,309.62
Calculation of the present value of an investment:Here the following formulas should be used:
PV= [tex]FV\div (1+i)^n[/tex]
Cf1=[tex]12,000\div 1.11[/tex]= 10,810.81
Cf2= [tex]14,000\div 1.11^2[/tex]= 11,362.71
Cf3= [tex]17,000\div 1.11^3[/tex]= 12,430.25
Cf4= [tex]19,000\div 1.11^4[/tex]= 12,515.89
Cf5= [tex]23,000\div 1.11^5[/tex]= 13,649.38
Cf6= [tex]29,000\div 1.11^6[/tex]= 15,540.58
So,
Total present value= $76,309.62
Learn more about investment here: https://brainly.com/question/24583782
An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental Problem, but it would not be required to do so. The plant without mitigation would cost $209.71 million, and the expected cash inflows would be $70 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $75.84 million. Unemployment in the area where the plant would be built is high, and the plant would provide about 350 good jobs. The risk adjusted WACC is 17%.a) Calculate the NPV and IRR with and without mitigation.
b) How should the environment effects be dealt with when evaluating this project?
c) Should this project be undertaken? If so, should the firm do the mitigation?
Answer:
Without Mitigation:
Net Present Value $14,244,200
IRR 19.92%
With mitigation
Net Present Value: $ -7,071,600
IRR = 15.76%
The project should be started without hte mitigation effort as would decrease the return below the cost of capital of the company.
Explanation:
Present value without mitigation
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C 70.00
time 5
rate 0.17
[tex]70 \times \frac{1-(1+0.17)^{-5} }{0.17} = PV\\[/tex]
PV $223.9542
Less
cost $209.71
Net Present Value 14,2442
IRR (using excel)
we input the -209.71 in one cell
then, we enter the 70 millon five times below the cost
and use the IRR formula to get the answer:
0.1992 = 19.92%
With mitigation:
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C 75.84
time 5
rate 0.17
[tex]75.84 \times \frac{1-(1+0.17)^{-5} }{0.17} = PV\\[/tex]
PV $242.6384
Less
249.71 cost
Net present value -7,0716
IRR:
A
1 -249.71
2 +75.84
3 +75.84
4 +75.84
5 +75.84
6 +75.84
=IRR(A1:A6)
= 0.1576
Consider an assembly line with 20 stations. Each station has a 0.5% probability of making a defect. At the end of the line, an inspection step singles out the defective units. The inspection step catches 80% of all defects. From inspection, units that are deemed to be non-defective
are moved to the shipping department.
If a defect is found at inspection, it is sent to the rework department.
Rework fixes about 95% of the defective units. Units are directly shipped from the rework department with no further inspection taking place.
1- What is the probability that a unit ends up in rework (in decimal form)?
2- What is the probability that a defective unit is shipped (in decimal form)?
Answer:
Assembly Line1. Probability that a unit ends up in rework = Probability of defect in 20 stations multiplied by the probability of catching defects = 0.8%(1% x 80%) = 0.008
2. Probability that a defective unit is shipped = Probability of defective units during inspection plus Probability of defective units during rework = 25% (20% + (100-95%)) = 0.25
Explanation:
a) Probability of defect in 20 stations = 0.5% x 20 = 1%. Each station has a 0.05%
b) Probability of defective units during inspection = 20% (100% - 80)
c) Probability of defective units during rework = 5% (100% -95)
c) Probability is the likelihood or chance of an event occurring. Divide the number of events by the number of possible outcomes. This will give us the probability of a single event occurring.
Mrs. Kwan withdrew the entire $8,000 balance from her Roth IRA this year. Her total contributions to the account were $6,070, and her marginal tax rate is 12 percent. Determine the tax cost of the withdrawal if: Mrs. Kwan is age 63 and opened the Roth IRA three years ago. Mrs. Kwan is age 63 and opened the Roth IRA seven years ago. Mrs. Kwan is age 48 and opened the Roth IRA seven years ago.
Answer:
$425
Explanation:
The computation of the tax cost of the withdrawal is shown below:-
The withdrawal will not be considered a qualifying withdrawal as Ms. Kwan is not 59 1/2 years old. Therefore, the taxable withdrawal would be subject to an additional 10 percent penalty.
Tax cost of the withdrawal = (Tax rate × (Balance amount - Total contribution) + (Penalty × (Balance amount - Total contribution)
= (12% × ($8,000 - $6,070)) + (10% × ($8,000 - $6,070))
= $231.6 + $193
= $424.6
or
= $425
On November 7, 2017, Mura Company borrows $360,000 cash by signing a 90-day, 9% note payable with a face value of $360,000. (Use 360 days a year. Do not round your intermediate calculations.) 1. Compute the accrued interest payable on December 31, 2017.
Answer:
The accrued interetst is $4860 and $3240
Explanation:
Solution
Recall that:
Mura Company borrows= $360,000
Time =90/360
rate = 9%
Face value =$360,000
The next step is to compute the accrued interest payable on December 31, 2017.
Now,
Interest = 360000*9%*90/360=8100$
year end interest accrual:
Principal =$360000
time 54/360
Interest =360000*9%*54/360 = $4860
Interest recognized on February 5
Principal =$360000
Rate= 9%
Time= 36/360
Interest 360000*9%*36/360 = $3240
Invested assets, beginning $ 2,692 $ 4,485 Invested assets, ending 2,608 4,415 Sales 2,696 3,940 Operating income 364 649 Assume that each of the company’s divisions has a required rate of return of 5%. Compute residual income for each division
Answer and Explanation:
The computation of the residual income for each division is shown below:
As we know that
Residual income = Operating income - target income
where,
Operating income is given in the question
And, the target income could be calculated by
= Average invested assets × required rate of return
Now
Particulars Beverage Cheese
Division Division
Average assets
{(Open + closing) ÷ 2} $2,650 $4,450
Required rate of return 5% 5%
Target income $132.50 $222.50
So, the residual income is
Particulars Beverage Cheese
Division Division
Operating income $364 $649
Less:
Target income -$132.50 -$222.50
Residual income $231.50 $426.50
suppose community bank offers to lend you 10000 for one year at a nominal annual rate of 17.75% but you must make interest payments at the end of each quarter and then pay off the $10,000 principal amount at the end of the year. What is the effective annual rate on the loan
Answer:
18.97%
Explanation:
Effective annual rate = (1 + periodic interest rate / m)^m - 1
M = 4
Periodic interest rate = 17.75%
17.75% / 4 = 4. 4375%
(1+0.044375) ^4 - 1 = 18.97%
I hope my answer helps you
Dynamo Corporation manufactures toasters. Each toaster comes with a 5-year assurance-type warranty. The toasters sell for $60 each. During Year 1, Dynamo sells 600 toasters, for cash. Past experience shows that the average warranty costs are $4 each or $2,400 for these toasters. In Year 1, Dynamo pays $500 cash for warranty costs on the toasters sold that year. Required: Prepare Dynamo’s journal entries related to the sales and warranty in Year 1.
Answer:
Journal entry to record sale of toasters and warranty
Dr Cash 36,000
Cr Sales revenue 36,000
Dr Warranty expense 2,400
Cr Warranty liability 2,400
Adjusting entry for actual warranty expense
Dr Warranty liability 500
Cr Cash 500
Since the warranty covers a 5 year period, the remaining warranty expense cannot be recognized as warranty revenue yet. Only after the warranty period is over, will any money left over will be recognized as revenue.
Park Co. is considering an investment that requires immediate payment of $21,705 and provides expected cash inflows of $6,700 annually for four years. Assume Park Co. requires a 7% return on its investments.
Required:
What is the net present value of this investment?
Answer:
The net present value of this investment is $989.32
Explanation:
The Net Present Value is calculated by taking the Present Day (discounted) value of all future net cash flows based on the business cost of capital and subtracting the initial cost of investment.
Input Value Cash flow
CF0 ($21,705)
CF1 $6,700
CF2 $6,700
CF3 $6,700
CF4 $6,700
Cost of Capital = 7%
Input the values in a financial calculator we get the result;
Net present value = $989.3154
= $989.32
Conclusion :
The net present value of this investment is $989.32
Heights of adult women are distributed normally with a mean of 162 centimeters and a standard deviation of 7 centimeters.
The percentage of heights less than 145 centimeters
The percentage of heights between 16t centimeters and 180 centimeters
Answer:
a) 0.75%
b) 60.9%
Explanation:
The heights of adult women are distributed normally with a mean(μ) = 162 centimetres and a standard deviation (σ) = 7 centimetres.
z score is a measure of the distance a raw score is from the mean in terms of standard deviation units. The z score is given by the equation:
[tex]z=\frac{x-\mu}{\sigma} \\[/tex].
a) The percentage of heights less than 145 centimetres. For x = 145 centimetres, the z score is:
[tex]z=\frac{x-\mu}{\sigma} =\frac{145-162}{7}=-2.43[/tex]
P(x < 145) = P(z < -2.43) = 0.0075
The percentage of heights less than 145 centimetres is 0.75%
b) The percentage of heights between 165 centimetres and 180 centimetres
For x = 165 centimetres, the z score is:
[tex]z=\frac{x-\mu}{\sigma} =\frac{160-162}{7}=-0.29[/tex]
For x = 180 centimetres, the z score is:
[tex]z=\frac{x-\mu}{\sigma} =\frac{180-162}{7}=2.57[/tex]
P(160 < x < 180) = P(-0.29 < z < 2.57) = P(z < 2.57) - P(z < -0.29) = 0.9949 - 0.3859 = 0.609
The percentage of heights between 160 centimetres and 180 centimetres is 60.9%
You would like to be holding a protective put position on the stock of XYZ Co. to lock in a guaranteed minimum value of 150 at year-end. XYZ currently sells for 150. Over the next year, the stock price will either increase by 10% or decrease by 10%. The T-bill rate is 5%. Unfortunately, no put options are traded on XYZ Co.
a. How much would it cost to purchase if the desired put option were traded? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Cost to purchase $
b. What would be the cost of the protective put portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Cost of the protective put portfolio $
Answer:
a. $3.38
b=$153.38
a. Calculation for how much would it cost to purchase if the desired put option were traded
Calculation for Pd=10/100×150=15
Calculation for uS0=10/100×150=15+150=165
Calculation for dS0=150-15=135
Hence
X=150; uS0= 165; Pu= 0; dS0= 135; Pd= 15
Using this formula to find the Hedge ratio
Hedge ratio :Pu- Pd / uSo-dSo
Let plug in the formula
Hedge ratio=0.15/165-135
=-15/30
=-0.5or -1/2
The portfolio comprised of one share and as well as a two puts which provides a guaranteed payoff of $165
Let find the present value:
-0.5S-P= -0.5*165=-82.5
-0.5*150-P=-82.5/1.05= -78.57
P=78.38-75
P=3.38
Therefore how much that it would cost to purchase if the desired put option were traded will be$3.38
b. Calculation for what would be the cost of the protective put portfolio
The Cost of protective put portfolio with a $150 guaranteed payoff will be
$150 + $3.38 = $153.38
Therefore what would be the cost of the protective put portfolio will be $153.38
The Securities and Exchange Commission and the Federal Aviation Administration are examples of agencies engaged in A. the regulation of nonmonopolistic industries. B. health and safety regulation. C. social regulation. D. the regulation of natural monopolies.
Answer:
A. the regulation of nonmonopolistic industries.
Explanation:
The Securities and Exchange Commission and the Federal Aviation Administration are examples of agencies engaged in the regulation of nonmonopolistic industries.
A nonmonopolistic industry is one that is characterized by competition among various service providers in a country and generally there's a government agency that regulates their actions and activities in the public.
The Securities and Exchange Commission (SEC) is a governmental agency saddled with the sole responsibility of regulating the securities or capital markets, as well as protecting investors in a country.
In the U.S, the Securities and Exchange Commission (SEC) as an independent government agency was established under the Securities Act of 1933 and the Securities and Exchange Act of 1934 of the United States of America.
Hence, SEC has the power to propose securities rules and regulations, and enforce federal securities law in the securities market.
The Federal Aviation Administration (FAA) was founded on the 23rd of August, 1958 under the Federal Aviation Act of 1958 of the United States of America. It is an independent government agency with the responsibility of regulating civil aviation, commercial space transportation, construction and maintenance of airports, air traffic management and operations of navigation systems for both civil and military aircrafts, and issuance of licenses to airline operators with their personnel.
The greater the number of compounding periods within a year, then (1) the greater the future value of a lump sum investment at Time 0 and (2) the smaller the present value of a given lump sum to be received at some future date. Truie or False
Answer:
True
Explanation:
If there is a more number of compounding periods within a year so it would result into the higher price of future value for lump sum investment in year 0 but the case would be adverse with the present value i.e there is less amount in the present value with regard to lumpsum amount i.e to be recieved in the future date
Hence, the given statement is true
The journal entry to record the purchase of equipment for a $220 cash down payment and a balance of $640 due in 30 days would include Multiple Choice a debit to Equipment for $220 and a credit to Cash for $220. a debit to Equipment for $860, a credit to Cash for $220, and a credit to Accounts Payable for $640. debit to Equipment for $860 and a credit to Cash for $860. a debit to Equipment for $220 and a credit to Accounts Payable for $640.
Answer:
a debit to Equipment for $860, a credit to Cash for $220, and a credit to Accounts Payable for $640.
Explanation:
The complete journal entry to record the purchase of the equipment would be:
Dr Equipment 840
Cr Cash 200
Cr Accounts payable 640
Since the balance is due in 30 days, it will be recorded as accounts payable.
The cost of the equipment = $200 cash down payment + $640 debt = $840
Secular inflation in the United States since 1960 has been most likely be the result of persistent leftward shifts of the aggregate demand curve. persistent rightward shifts of the long-run aggregate supply curve. persistent leftward shifts of the long-run aggregate supply curve. persistent rightward shifts of the aggregate demand curve.
Answer:
Persistent leftward shifts of the aggregate demand curve.
Explanation:
The inflation results in decreasing the aggregate demand. The real spending decreases the value of money. Secular inflation is prolonged period of slight price increase. This type of inflation continues to persist over a long time. The secular inflation in the United States has been due to leftward shift of aggregate demand curve.
A machine that cost $500,000 has an estimated residual value of $25,000 and an estimated useful life of five years. The company uses straight-line depreciation. Calculate its book value at the end of year 4. (Do not round intermediate calculations.)
Answer:
$120,000
Explanation:
Book value in year 1 = Cost of asset - Depreciation expense of year 1
Book value in year in subsequent years = previous book value - that year's depreciation expense
Straight line depreciation expense = (Cost of asset - Salvage value) / useful life
( $500,000 - $25,000 ) / 5 = $95,000
The depreciation expense each year would be $95,000.
Book value in year 1 = $500,000 - $95,000 = $405,000
Book value in year 2 =$405,000 - $95,000 = $310,000
Book value in year 3 = $310,000 - $95,000 = $215,000
Book value in year 4 =$215,000 - $95,000 = $120,000
I hope my answer helps you
Oscar Clemente is the manager of Forbes Division of Pitt, Inc., a manufacturer of biotech products. Forbes Division, which has $4 million in assets, manufactures a special testing device. At the beginning of the current year, Forbes invested $5 million in automated equipment for test machine assembly. The division's expected income statement at the beginning of the year was as follows:Sales revenue $ 16,000,000 Operating costs Variable 2,000,000 Fixed (all cash) 7,500,000 Depreciation New equipment 1,500,000 Other 1,250,000 Division operating profit $ 3,750,000A sales representative from LSI Machine Company approached Oscar in October. LSI has for $6.5 million a new assembly machine that offers significant improvements over the equipment Oscar bought at the beginning of the year. The new equipment would expand division output by 10 percent while reducing cash fixed costs by 5 percent. It would be depreciated for accounting purposes over a three-year life. Depreciation would be net of the $500,000 salvage value of the new machine. The new equipment meets Pitt's 20 percent cost of capital criterion. If Oscar purchases the new machine, it must be installed prior to the end of the year. For practical purposes, though, Oscar can ignore depreciation on the new machine because it will not go into operation until the start of the next year. The old machine, which has no salvage value, must be disposed of to make room for the new machine. Pitt has a performance evaluation and bonus plan based on ROI. The return includes any losses on disposal of equipment. Investment is computed based on the end-of-year balance of assets, net book value. Ignore taxes. Oscar Clemente is still assessing the problem of whether to acquire LSI’s assembly machine. He learns that the new machine could be acquired next year, but if he waits until then, it will cost 15 percent more. The salvage value would still be $500,000. Other costs or revenue estimates would be apportioned on a month-by-month basis for the time each machine (either the current machine or the machine Oscar is considering) is in use. Fractions of months may be ignored. Ignore taxes.Required: Calculate ROI for the coming year assuming that the new equipment is bought at the beginning of the year. (Do not round intermediate calculations. Round your final answer to nearest whole percentage.)
Answer:
Forbes Division of Pitt, Inc.Performance Reportby Oscar Clemente
ROI = $1,900,000/$4,500,000 x 100 = 42.222%
(Return on Investment = Operating Income/net book value of new investment x 100)
Explanation:
a) Forbes Division's Expected Income Statement at the beginning of the year: Year 1 Year 2
Sales revenue $ 16,000,000 $ 17,600,000
Operating costs:
Variable 2,000,000 2,200,000
Fixed (all cash) 7,500,000 6,750,000
Depreciation: New equipment 1,500,000 2,000,000
Other 1,250,000 1,250,000
Disposal of old equipment (loss) 3,500,000
Division operating profit $ 3,750,000 $ 1,900,000
b) Return on Investment (ROI) is a financial performance measure which evaluates the efficiency of an investment, by trying to directly measure the amount of return on a particular investment, relative to the investment's cost.
c) The Formula for ROI calculation is to subtract the initial value of the investment from the final value of the investment (which equals the net return), then dividing this new number (the net return) by the cost of the investment, and, finally, multiplying it by 100. In this Forbes Division, the operating income is taken as the difference between the initial value of the investment and the final value of the investment.
Marin Inc. has an investment in trading securities of $143000. This investment experienced an unrealized loss of $7300 during the current year. Assuming a 33% tax rate, the amount of this loss that would reported as part of other comprehensive income would be:
Answer:
This would be the loss on paper only.
Explanation:
Given investment trading securities = $143000
During the current year, the loss experienced on investment = $7300
The tax rate = 33%
However, this loss that is reported as the part of other comprehensive income would be the loss on paper only because the actual loss can be seen when the stock is sold but this unrealized loss is on paper only so there will no effect of this loss in comprehensive income.