Answer:
M1 is a measure of money that includes the most liquid of cash instruments such as physical cash, checkable deposits, and traveler's checks.
M2 is the next level in the money hierarchy and includes M1 along with less liquid instruments such as savings deposits, certificates of deposits, as well as money market funds.
a. Barry writes his plumber a check for $200. The plumber takes the check to the bank, keeps $50 in cash, and deposits the remainder in his savings account.
M1 declines by $150.
Barry's Checkable deposit was reduced by $200 and only $50 remained as cash with the plumber with the rest going to a savings account. that $50 is the only M1 measure left as savings do not fall under M1.
M2 does not change
Both M1 and savings fall under M2 so this does not change.
b. Maureen deposits the $1,000 from her CD in a money market mutual fund.
Both M1 and M2 do not change.
Neither CDs nor Money Market Mutual funds fall under M1 so it is not affected.
Both CDs and Money Market Mutual funds fall under M2 so it is not affected as well.
c. Sylvia withdraws $50 in cash from her savings account.
M1 rises by $50
Cash increased by $50 and cash is an M1 measure so M1 will increase by $50.
M2 does not change.
Both the Savings Account and M1 are part of M2 so M2 does not change.
McHale Company does business in two customer segments, Retail and Wholesale. The following annual revenue information was determined from the accounting system's invoice information:
20Y5
Retail $249,570
Wholesale $366,685
Total Revenue $616,255
20Y4
Retail $265,500
Wholesale $324,500
Total Revenue $590,000
Prepare a horizontal analysis of the segments. Round percentages to one decimal place. Enter negative values as negative numbers
Answer:
McHale Company
Horizontal Analysis of the segments
For the years 20Y4 and 20Y5
20Y5 20Y4 Difference amount Difference Percent
Retail $249,570 $265,500 $15,930 6.0%
Wholesale $366,685 $324,500 $42,185 13.0%
Total revenue $616,255 $590,000 $58,115 3.85%
Difference Percent Working
Retail= $15,930 / $265,500 * 100 = 6%
Wholesales = $42,185 / $324,500 * 100 = 13%
Total revenue = $58,115 / $590,000 * 100 = 3.85%
E6-23 (similar to) Aunt Betty Bakery reported net sales revenue of $ 59 comma 000 and cost of goods sold of $ 17 comma 000. Compute Aunt Betty's correct gross profit if the company made either of the following independent accounting errors. a. Ending merchandise inventory is overstated by $ 4 comma 000. b. Ending merchandise inventory is understated by $ 4 comma 000.
Answer:
a. Ending merchandise inventory is overstated by $4,000.
net sales revenue of $59,000
cost of goods sold of $17,000 + $4,000 = $21,000
gross profit = $38,000
Since ending inventory was overstated, it means that COGS were understated.
b. Ending merchandise inventory is understated by $4,000.
net sales revenue of $59,000
cost of goods sold of $17,000 - $4,000 = $13,000
gross profit = $46,000
Since ending inventory was understated, it means that COGS were overstated.
The bid-ask spread exists because of _______________. A. market inefficiencies B. discontinuities in the markets C. the need for dealers to cover expenses and make a profit D. lack of trading in thin markets
Answer:
C. the need for dealers to cover expenses and make a profit
Explanation:
In the market for securities there are two pricing of securities.
The ask price is the price at which the buyer is willing to purchase a security.
The ask price or the offer price is price at which the seller of a security is willing to sell it. Ask price can be firm or negotiable.
Bid ask spread is the difference between the highest amount a buyer is willing to buy a security and the lowest price at which a seller is willing to sell it.
This spread exists because dealers need to cover expenses and make a profit
Suppose the world price of cotton falls substantially. The demand for labor among cotton-producing firms in Texas will . The demand for labor among textile-producing firms in South Carolina, for which cotton is an input, will . The temporary unemployment resulting from such sectoral shifts in the economy is best described as unemployment.
Suppose the government wants to reduce this type of unemployment. Which of the following policies would help achieve this goal? Check all that apply.
a. Extending the number of weeks for which unemployed workers are eligible for unemployment insurance benefits from the government
b. Taxing the price of placing a resume or posting a job opening on job-search website
c. Establishing government-run employment agencies to connect unemployed workers to job vacancies
Answer:
Suppose the world price of cotton falls substantially. The demand for labor among cotton-producing firms in Texas will DECREASE. The demand for labor among textile-producing firms in South Carolina, for which cotton is an input, will INCREASE. The temporary unemployment resulting from such sectoral shifts in the economy is best described as STRUCTURAL unemployment.
Structural unemployment is a non voluntary type of unemployment and it occurs because the skills of the workers are not the ones needed by the employers. In this case, labor that was used for producing cotton in Texas is no longer needed due to shifts in the world price of cotton.
Suppose the government wants to reduce this type of unemployment. Which of the following policies would help achieve this goal? Check all that apply.
c. Establishing government-run employment agencies to connect unemployed workers to job vacancies
Classical economists contend that official measures of unemployment: Multiple Choice understate the problem due to the existence of discouraged workers. overstate the problem because most unemployment is voluntary. understate the problem due to involuntary part-time employment. overstate the problem because most unemployment is cyclical.
Answer: overstate the problem because most unemployment is voluntary.
Explanation:
Unemployment is a term that is used to refer to individuals who are looking for job but can not find a job.
Classical economists contend that official measures of unemployment
overstate the problem because most unemployment is voluntary.
According to the Classical economists, there is increase in employment because those seeking employment do not want to work for lower wages but will rather wait for high paying jobs and this therefore leads to overstating of the unemployment rate.
Cindy's current year adjusted gross income (AGI) is $300,000 and her current year total tax liability is $60,000. Her immediate prior year AGI is $200,000 with a total tax liability of $40,000. To avoid an underpayment interest penalty, what is Cindy's minimum required total tax payment amount for the current year
Answer:
The answer is $44,000
Explanation:
Solution
Given that
Now
Present/current year AGI = $300000
Present /current year tax liability = $60000
Prior year AGI = $200000
Prior year tax liability = $40000
Thus
As per Tax rule or applying the Tax rule
If Adjusted gross income(AGI) of prior year is below $250000 then the minimum required tax payment in the current year in order to avoid interest penalty is lower of
(1) 90% of present /current year tax (liability) or
(2) 110% of prior year tax liability
So
Because the prior year AGI is $200000 which is lower than $250000, in order to avoid interest penalty, the minimum required payment amount of tax liability in current/present year is lower of
(1) 90% of current year tax liability of $60000
Then
$60000 *90% = $54000
Or
(2)110% of prior year tax liability of $40000
$40000 ×110% = $44000
Hence, minimum required total tax payment amount for the current year is $44,000
PWD Incorporated is an Illinois corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year: Item Amount Federal Treatment Illinois income taxes $ 33,361 Deducted on federal return Indiana income taxes $ 18,480 Deducted on federal return Ohio Commercial Activity Tax $ 3,992 Deducted on federal return Illinois municipal bond interest $ 9,984 Excluded from federal return Indiana municipal bond interest $ 15,100 Excluded from federal return Federal T-note interest $ 2,492 Included on federal return PWD's federal taxable income was $104,000. Calculate PWD's Illinois state tax base.
Answer:
PWD's Illinois state tax base = $168,449
Explanation:
DATA
Illinois income taxes = $33,361
indiana income taxes = $18,480
Illinois municipal bond interest = $9,984
Indiana municipal bond interest = $15,100
Federal T-note interest = $2,492
Federal taxable income = $104,000
PWD's Tax Base = ?
Solution
PWD's Illinois Tax base can be calculated as follows
Formula
Illinois state tax base = Federal taxable income+Indiana income taxes+Illinois income taxes+Indiana municipal bond interest – federal t-note interest
Illinois state tax base = $104,000 + $18,480 + $33,361 + $15,100 - $2,492
PWD's Illinois state tax base = $168,449
Select the appropriate reporting method for each of the items listed below.
Item Reporting Method
1. Accounts payable.
2. Current portion of long-term debt.
3. Sales tax collected from customers.
4. Notes payable due next year.
5. Notes payable due in two years.
6. Advance payments from customers.
7. Commercial paper.
8. Unused line of credit.
9. A contingent liability with a probable likelihood of
occurring within the next year and can be estimated.
10. A contingent liability with a reasonably possible likelihood
of occurring within the next year and can be estimated.
Answer:
Items --- Reporting Method
1 . Accounts payable - Current liability
2 . Current portion of long-term debt - Current liability
3 . Sales tax collected from customers - Current liability
4 . Notes payable due next year - Current liability
5 . Notes payable due in two years - Long-term liability
6 . Advance payments from customers - Current liability
7 . Commercial paper - Current liability
8 . Unused line of credit - Disclosure note only
9 . A contingent liability that is probable likelihood of occurring within the next year and can be estimated - Current liability
10 . A contingent liability that is reasonably possible likelihood of occurring within the next year and can be estimated - Disclosure note only
. Business Source Premier (EBSCO) and Lexis Nexis Academic are examples of research ________. a. periodicals b. indexes c. databases d. reports
Answer:
C.
Explanation:
These are all research databases
Costs that remain constant in total dollar amount as the level of activity changes are called Group of answer choices
Answer: Fixed Costs
Explanation:
Raven Corporation owns three machines that it uses in its business. It no longer needs two of these machines and is considering distributing them to its two shareholders as a property dividend. All three machines have a fair market value of $20,000 each. Their basis is as follows: Machine A, $27,000; Machine B, $20,000; and Machine C, $12,000. The corporation has asked you for advice.
A. If Raven distributes Machine A, the result will be a_______loss of $_______.
B. If Raven distributes Machine B, the result will be_______of $______.
C. If Raven distributes Machine C, the result will be a______of $______.
D. Therefore, to________on Machine A, Raven should consider______Machine A. Raven should consider distributing Machine B because there will be______on the distribution. To______on Machine C, Raven should consider_______Machine C.
Answer:
A.If Raven distributes Machine A, the result will be a NONDEDUCTIBLE LOSS of $7,000
B. If Raven distributes Machine B, the result will be NO GAIN OR LOSS OF $0
C. If Raven distributes Machine C, the result will be a TAXABLE GAIN of $8,000
D.Therefore to PRESERVE THE LOSS on Machine A, Raven should consider SELLING Machine A. Raven should consider distributing Machine B because there will be NO RECOGNIZED GAIN OR LOSS on the distribution. To AVOID RECOGNIZING THE GAIN on Machine C, Raven should consider NEITHER SELLING NOR DISTRIBUTING Machine C
Explanation:
A. If Raven distributes Machine A, the result will be a NONDEDUCTIBLE LOSS of $7,000
Calculation as
(20,000 – 27,000) =-$7,000
B. If Raven distributes Machine B, the result will be NO GAIN OR LOSS OF $0
Calculated as :
(20,000-20,000)=$0
C. If Raven distributes Machine C, the result will be a TAXABLE GAIN of $8,000
Calculated as:
(20,000-12,000)=$8,000
D.Therefore to PRESERVE THE LOSS on Machine A, Raven should consider SELLING Machine A. Raven should consider distributing Machine B because there will be NO RECOGNIZED GAIN OR LOSS on the distribution. To AVOID RECOGNIZING THE GAIN on Machine C, Raven should consider NEITHER SELLING NOR DISTRIBUTING Machine C
Specter Co. has identified an investment project with the following cash flows. Year Cash Flow 1 $ 820 2 1,130 3 1,390 4 1,525 a. If the discount rate is 10 percent, what is the present value of these cash flows
Answer:
$3,765.26
Explanation:
Present value is the sum of discounted cash flows.
Present value can be calculated using a financial calculator
Cash Flow in year 1 = $ 820
Cash Flow in year 2 = 1,130
Cash Flow in year 3 = 1,390
Cash Flow in year 4 = 1,525
I = 10
PV = $3,765.26
To find the PV using a financial calacutor:
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
I hope my answer helps you
Absorption and Variable Costing Comparisons: Production Equals Sales Assume that Smuckers manufactures and sells 30,000 cases of peanut butter each quarter. The following data are available for the third quarter of 2017. Total fixed manufacturing overhead $120,000 Fixed selling and administrative 20,000 Sales price per case 34 Direct materials per case 16 Direct labor per case 7 Variable manufacturing overhead per case 3 Required a. Compute the cost per case under both absorption costing and variable costing. Absorption $Answer Variable $Answer b. Compute net income under both absorption costing and variable costing. Do not use a negative sign with your answers. SMUCKERS Absorption Costing Income Statement For the Third Quarter of 2017 Sales Answer Answer Answer Answer Answer Answer Answer Net income Answer SMUCKERS Variable Costing Income Statement For the Third Quarter of 2017 Sales Answer Answer Answer Answer Answer Fixed expenses: Answer Answer Selling and administrative Answer Answer Net income Answer
Answer:
a:Total Variable Costs $26
a:Total Manufacturing Costs = $ 30
b:Net Income Variable Costing $100,000
b: Net Income Absorption Costing $ 100,000
Explanation:
Smuckers Manufacturers
Costs per case under Variable Costing
Direct materials per case 16
Direct labor per case 7
Variable manufacturing overhead per case 3
Total Variable Costs $26
Costs per case under Absorption Costing
Direct materials (30,000*16) 480,000
Direct labor (30,000*7) 210,000
Variable manufacturing overhead (30,000*3) 90,000
Total Variable Costs 780,000
Total fixed manufacturing overhead $120,000
Total Manufacturing Costs $ 900,000
Total Manufacturing Costs per Case= $ 900,000/ 30,000= $ 30
The difference between the variable and absorption costing is that the product costs include variable and fixed costs in absorption costing. But in variable costing the product costs include only variable costs.
SMUCKERS
Variable Costing Income Statement
For the Third Quarter of 2017
Sales (30,000*34) 1020,000
Direct materials (30,000*16) 480,000
Direct labor (30,000*7) 210,000
Variable manufacturing overhead (30,000*3) 90,000
Total Variable Costs 780,000
Contribution Margin 240,000
Fixed Expenses 140,000
Total fixed manufacturing overhead $120,000
Fixed selling and administrative 20,000
Net Income 100,000
In this case the net income under both variable and absorption costing does not change because the units produced are units sold. No cost is charged to ending inventory under absorption costing.
SMUCKERS
Absorption Costing Income Statement
For the Third Quarter of 2017
Sales (30,000*34) 1020,000
Direct materials (30,000*16) 480,000
Direct labor (30,000*7) 210,000
Variable manufacturing overhead (30,000*3) 90,000
Total fixed manufacturing overhead $120,000
Total Manufacturing Costs 900,000
Gross Profit 120,000
Fixed Expenses 20,000
Fixed selling and administrative 20,000
Net Income 100,000
There are two techniques of egg production: free range (where hens roam around the farm) or factory (where hens are fed and watered in wire cages). The free range technique has a much more elastic supply curve than the factory technique. When the demand for eggs falls:________.
a. egg production falls by a smaller percentage in the factory technique than in the free range technique.
b. egg production falls by a larger percentage in the factory technique than in the free range technique.
c. the production using both techniques falls by the same percentage.
d. the factory egg producers supply curve shifts inward.
e. the free range egg producers supply curve shifts inward.
Answer:
a. egg production falls by a smaller percentage in the factory technique than in the free range technique.
Explanation:
Elasticity of supply is defined as the degree of responsiveness of supply to changes in price. Highly elastic supply responds more to change in price than low elastic supply.
In the given scenario where eggs are produced using factory and free range techniques, as demand falls price consumers are willing to pay also falls.
Since factory technique has a lower elasticity of supply, the fall in supply as a result of fall in price will be small.
However the fall in supply of free range will be higher because of its higher elasticity
Jay received the following fair market value amounts during the current year: Interest on Montgomery County bonds (used to build a bridge) $100 Interest on U.S. Treasury notes $200 Gain on sale of Montgomery County bonds $300 Common stock dividend in IBM Corporation common stock (no cash option) $400 What amount of taxable income should Jay report from these amounts
Answer:
$300
Explanation:
Given that :
Jay received the following fair market value amounts during the current year:
Interest on Montgomery County bonds
(used to build a bridge) $100
Interest on U.S. Treasury notes $200
Gain on sale of Montgomery County bonds $300
Common stock dividend in IBM Corporation
- common stock (no cash option) $400
From the above amounts that Jay received during the current year;
The following are free from an obligation and liability imposed as a result of tax.
1. Interest on Montgomery County bonds (used to build a bridge)
2. Interest on U.S. Treasury notes
3. Common stock dividend in IBM Corporation common stock (no cash option)
So; we can say they are not taxable
BUT only Gain on sale of Montgomery County bonds which is $300 only taxable
Thus, The amount of taxable income Jay should report from the above amounts is $300
On December 20, the company paid cash for equipment, $272,300, subject to a 2% cash discount, and freight on equipment of $11,410. Prepare entries on the books of Concord Company for these transactions. (Round intermediate calculations to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places e.g. 58,971. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Answer:
Dr equipment $ 278,264.00
Cr cash $278,264.00
Explanation:
The amount of cash paid for equipment=$272,300*(1-2%)=$266,854.00
The cash paid for freight on equipment is $11,410
The cash paid on freight would also be debited to the equipment's account since the cost of an asset includes the amount spent bringing it to its present location and condition .
Total cost of equipment =$266,854.00+$11,410.00
railway cabooses just paid its annual dividend of 1.70 per share. The company has been reducing the dividends by 11.3 percent each year. How much are you willing to pay today to purchase stock in this company if your required rate of return is 12 percent?
Answer:
8.24
Explanation:
According to the given situation, the computation of purchase stock is shown below:-
Purchase price = Dividend in paid in next year ÷ (required rate of return - Growth rate)
= (1.70 ÷ (1 - 0.113)) ÷ (0.12 - (-0.113))
= 1.92 ÷ 0.233
= 8.24
Therefore for computing the purchase price we simply applied the above formula.
On January 1, the Matthews Band pays $65,800 for sound equipment. The band estimates it will use this equipment for four years and perform 200 concerts. It estimates that after four years it can sell the equipment for $2,000. During the first year, the band performs 45 concerts. Compute the first-year depreciation using the units-of-production method. g
Answer:
Annual depreciation= $14,355
Explanation:
Giving the following information:
Original cost= $65,800
Number of units= 200
Salvage value= $2,000
During the first year, the band performs 45 concerts.
To calculate the annual depreciation under the units-of- production method, we need to use the following formula:
Annual depreciation= [(original cost - salvage value)/useful life of production in units]*units operated
Annual depreciation= [(65,800 - 2,000)/200]*45
Annual depreciation= $14,355
Trak Corporation incurred the following costs while manufacturing its bicycles.
Bicycle components $100,000
Advertising expense $45,000
Depreciation on plant 60,000
Property taxes on plant 14,000
Property taxes on store 7,500
Delivery expense 21,000
Labor costs of assembly-line workers 110,000
Sales commissions 35,000
Factory supplies used 13,000
Salaries paid to sales clerks 50,000
Required:
Identify each of the above costs as direct materials, direct labor, manufacturing overhead, or period costs.
Please find the answer below.
Explanation:
Bicycle components $100,000 - Direct materials
Advertising Expense $45,000 - Period costs
Depreciation on plant $14,000 - manufacturing overhead
Property taxes on plant $14,000 - manufacturing overhead
Property taxes on store $7,500 - manufacturing overhead
Delivery expense $21,000 - period costs
Labor costs of assembly-line workers $110,000 - Direct labor
Sales commissions $35,000 - Period costs
Factory supplies used $13,000 - Period costs
Salaries paid to sales clerks $50,000 - period costs
Cheers.
Exercise 7-3A Allocate costs in a basket purchase (LO7-1) Red Rock Bakery purchases land, building, and equipment for a single purchase price of $360,000. However, the estimated fair values of the land, building, and equipment are $115,000, $253,000, and $92,000, respectively, for a total estimated fair value of $460,000. Required: Determine the amounts Red Rock should record in the separate accounts for the land, the building, and the equipment
Answer:
Land = $90,000
Building = $198,000
Land = $72,000
Explanation:
The Fair Values of Land, Building and Equipment are used to apportion the single purchase price to the respective asset accounts as follows :
Land = $115,000/ $460,000 × $360,000
= $90,000
Building = $253,000/ $460,000 × $360,000
= $198,000
Land = $92,000/ $460,000 × $360,000
= $72,000
Dora Inc. reported the following on the company's cash flow statement: Sales $3,500,000 Net cash flow from operating activities 350,000 Net cash flow used for investing activities (100,000) Net cash flow used for financing activities (200,000) Free cash flow 290,000 What is the ratio of free cash flow to sales
Answer:
8.3%
Explanation:
Dora Inc. reported a sales of $3,500,000
The net cash flow from operating activities is $350,000
The net cash flow used for investing activities is $100,000
The net cash flow used for financial activities is $200,000
The free cash flow is $290,000
Therefore, the free cash flow to sales ratio can be calculated as follows
Free cash flow to sales ratio= Free cash flow/Sales × 100%
= $290,000/$3,500,000 × 100
= 0.0828×100
= 8.3%
Hence the ratio of the free cash flow to sales is 8.3%
We have the following data for a hypothetical open economy: GNP = $12 comma 00012,000 Consumption (C) = $7 comma 2007,200 Investment (I) = $1 comma 0001,000 Government Purchases (G) = $1 comma 6001,600 Tax Collections (T) = $1 comma 2001,200 What is the value of private savings plus public savings? $nothing (Enter your answer as an integer. Include a minus sign if necessary.) What is the value of the current account balance CA? $nothing (Enter your answer as an integer. Include a minus sign if necessary.)
Answer:
The value of private savings plus public savings is $3,200
The value of the current account balance CA is $2,200
Explanation:
In order to calculate the value of private savings plus public savings we would have to make the following calculation:
Total saving = private saving+public saving
Total saving =GNP-Tax Collections-Consumption+Tax Collections-Government Purchases
Total saving =$12,000-$1,200-$7,200+$1,200-$1,600
Total saving =$3,200
To calculate the value of the current account balance CA we would have to make the following calculation:
value of the current account balance CA=GNP-Consumption-Investment-Government Purchases
value of the current account balance CA= $12,000 - $7,200 -$1,000-$1,600
value of the current account balance CA= $2,200
Angus Company agreed to sell goods for Longhorn Company on consignment, but wasn't willing to take ownership of the goods in case they were difficult to sell. Which of the following statements is true?
A. Angus owns the inventory and should report It on its balance snoot.
B. Long hum owns the inventory but should not report it on its balance sheet because Angus actually holds the inventory
C. Angus owns the inventory since possession is nineteenths of the law. but should not report it on its balance sheet.
D. Longhorn owns the inventory and should report it on its balance sheet.
Answer: D. Longhorn owns the inventory and should report it on its balance sheet.
Explanation:
Goods to be sold on consignment for a company means a company is selling goods for another company and will be paid for their services.
In that case, the company being sold for will retain the ownership of the goods because the company that is selling it for them is simply providing a service.
Angus in this scenario are simply holding the goods to sell it and so do not own the goods. Longhorn should therefore record it in their own books as inventory.
On December 31, 2014, Flint Corporation sold for $100,000 an old machine having an original cost of $180,000 and a book value of $80,000. The terms of the sale were as follows:
$20,000 down payment
$40,000 payable on December 31 each of the next two years
The agreement of sale made no mention of interest; however, 9% would be a fair rate for this type of transaction. What should be the amount of the notes receivable net of the unamortized discount on December 31, 2012 rounded to the nearest dollar? (The present value of an ordinary annuity of 1 at 9% for 2 years is 1.75911.)
a. $70,364
b. $90,364.
c. $80,000.
d. $140,728.
Answer:
a. $70,364
Explanation:
We must determine the present value of the notes receivable using the 9% discount rate.
PV of accounts receivable = $40,000 / 1.09 + $40,000 / 1.09² = $36,697.25 + $33,667.20 = $70,364.45
When a notes receivable is issued and carries no interests, you have to record the present value of the notes receivable in order to determine the amount that should be recorded as interest income in the future. In this case, interest income = $80,000 - $70,364 = $9,636
Keidis Industries will pay a dividend of $5.15, $6.25, and $7.45 per share for each of the next three years, respectively. In four years, you believe that the company will be acquired for $69.00 per share. The return on similar stocks is 11.4 percent. What is the current stock price
Answer:
The answer is $59.85
Explanation:
This question will be solved using the Dividend Discount Model. It is one of the valuation methods used in valuing price of Equity/stock.
Po = D1 + (1 + r)^n + D2 + (1 + r)^n + D2 + (1 + r)^n + CF4 /(1 + r)^n
Po is the current worth of stocks
D1, D2, D3 is the dividend paid in year 1, 2 and 3
CF4 is the price of the company in year 4
r is the discount rate
n is the number of years
$5.15 /1.114^1 + $6.25 /1.114^2 +$7.45/1.114^3 + $69/1.114^4
$4.62 + $5.04 + $5.39 + $44.80
Current price of the stock = $59.85
EVA/MVA The financial statements reflect historical data, but managers' performance must be evaluated on the basis of values. To provide this information, financial analysts have developed two measures: Market Value Added (MVA) and Economic Value Added (EVA). Market Value Added represents the difference between the money stockholders have invested in the firm versus the cash they could receive if the firm were sold. The equation for MVA is:
Answer:
MVA = (Shares outstanding * Stock price) - Total common equity
Explanation:
Market value added is the excess of equity over its book value. It is the difference between money invested by stockholders and the cash they will receive if the company is sold. The higher MVA of a company means performance of the company management is good and is in the favor of stockholders.
Tom and Suri decide to take a worldwide cruise. To do so, they need to save $15,000. They plan to invest $2,500 at the end of each year for the next six years to earn 9% compounded annually. Calculate the future value of the investment. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answer to 2 decimal places.)
Answer: $18,808.25
Explanation:
There is a constant cashflow of $2,500 making this an annuity.
The future value of the $2,500 paid every year for 6 years at 9% will be;
Future value of Annuity = 2,500 * Future Value of Annuity factor, 6 periods, 9%) (refer to attached table)
= 2,500 * 7.5233
= $18,808.25
The future value of the amount is more than the amount they would require.
Webby Inc. is a web development company. Webby’s monthly production function for developing websites is given in the table below. Webby pays $4,000 a month in rent for office space and equipment. It pays each programmer $3,000 a month. There are no other production costs. Fill in the table of production costs.
Answer and Explanation:
The computation of the filling of the given table for the production cost is shown in the attachment below:
As we know that
Total cost = Fixed cost + variable cost
Average fixed cost = fixed cost ÷ websites
Average Variable cost = Variable cost ÷ websites
Therefore the average total cost is
= Average fixed cost + average variable cost
The marginal cost is
= Change in total cost ÷ change in quantity
These formulas are used to complete the table as given below.
Several years after reengineering its production process, King Corporation hired a new controller, Christine Erickson. She developed an ABC system very similar to the one used by King's chief rival. Part of the reason Erickson developed the ABC system was because King's profits had been declining, even though the company had shifted its product mix toward the product that had appeared most profitable under the old system. Before „ adopting the new ABC system, the company had used a plantwide overhead rate, based on direct labor hours developed years ago. For the upcoming year, King's budgeted ABC manufacturing overhead allocation rates are as follows:
Activity Allocation Base Activity Cost allocation rate
Materials handling Number of parts $4.00 per part
Machine setup Number of setups $375.00 per setup
Insertion of parts Number of parts $28.00 per part
Finishing Finishing direct labor hours $54.00 per hour
The number of parts is now a feasible allocation base because King recently purchased bar-coding technology. King produces two wheel models: Standard and Deluxe Budgeted data for the upcoming year are as follows:
Standard Delux
Parts per wheel 8 10
Setups per 1,000 wheels 20 20
Finishing direct labor hours per wheel 2 3.5
Total direct labor hours per wheel 2.6 3.4
The company's managers expect to produce 1,000 units of each model during the year.
Required:
a. Compute the total budgeted manufacturing overhead cost for the upcoming year.
b. Compute the manufacturing overhead cost per wheel of each model using ABC.
c. Compute the company's traditional plantwide overhead rate. Use this rate to determine the manufacturing overhead cost per wheel under the traditional system.
Answer:
King Corporation
a. Computation of total budgeted manufacturing overhead cost:
Activities Standard Deluxe Total
Materials handling (number of parts):
Standard = 8 x $4 x 1,000 $32,000
Deluxe = 10 x $4 x 1,000 $40,000 $72,000
Machine setup (number of parts):
= 20 x $375 $7,500 $7,500 $15,000
Insertion of parts (number of parts):
Standard = 8 x $28 x 1,000 $224,000
Deluxe = 10 x $28 x 1,000 $280,000 $504,000
Finishing (direct labor hours):
Standard = 2 x $54 x 1,000 $108,000
Deluxe = 3.5 x $54 x 1,000 $189,000 $297,000
Total $371,500 $516,500 $888,000
b. Computation of the manufacturing overhead cost per wheel of each model using ABC:
Standards = $371,500/1,000 = $371.50
Deluxe = $516,500/1,000 = $516.50
c. Computation of the company's traditional plantwide overhead rate to determine manufacturing overhead cost per wheel:
Overhead rate = $888,000/6,000 = $148
Manufacturing overhead cost per wheel:
Standard = $148 x 2.6 = $384.80
Deluxe = $148 x 3.4 = $503.20
Explanation:
a) Calculations:
Total overhead cost = $888,000
Allocation based on total direct labor hours per wheel
Plantwide overhead rate:
Total labor hours:
Standard 2.6 x 1,000 = 2,600 hours
Deluxe 3.4 x 1,000 = 3,400 hours
Total labor hours = 6,000 (2,600 + 3,400)
= $888,000/6,000 = $148 per direct hour
b) According to wikipedia.com, "Activity-based costing is a costing method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each. This model assigns more indirect costs into direct costs compared to conventional costing."
CDB stock is currently priced at $80. The company will pay a dividend of $4.57 next year and investors require a return of 10.8 percent on similar stocks. What is the dividend growth rate on this stock
Answer:
The answer is 5.09%
Explanation:
The model used in this question is the Dividend Discount Model and it is one of the methods used in determining the price of stock. Here, the price of stock had already been determined. We are looking for one of the variables (growth rate) used in determining the price.
The formula for determining price of stock is:
Po = D1/r - g
Where Po is the price of stock
D1 is the dividend for next year
r is the rate of return
g is the dividend growth rate
$80 = $4.57/0.108 - g
Cross multiply:
8.64 - 80g = 4.57
80g = 8.64 - 4.57
80g = 4.07
g = 4.07/80
g =0.05088
g = 5.09%