Answer:
$500 million
Explanation:
The solution of the money supply and its effect is here below:-
Decrease in money supply = $50 million ÷ reserve ratio
= $50 million ÷ 10%
= $500 million
If $50 million were used to repay loans, that will have raised money supply. Thus, buying $50 million in government securities from the fed reduces the supply of capital.
Big Wheel, Inc. collects 25% of its sales on account in the month of the sale and 75% in the month following the sale. Sales on account are budgeted to be $16,300 for March and $32,600 for April. What are the budgeted cash receipts from sales on account for April
Answer:
Total cash collection= $20,375
Explanation:
Giving the following information:
Big Wheel, Inc. collects 25% of its sales on account in the month of the sale and 75% in the month following the sale.
Sales:
March= $16,300
April= $32,600
Cash collection April:
Sales on account from April= 32,600*0.25= 8,150
Sales on account from March= 16,300*0.75= 12,225
Total cash collection= $20,375
Reporting Net Sales with Credit Sales, Sales Discounts, and Credit Card Sales
The following transactions were selected from the records of Ocean View Company:
July 12 Sold merchandise to Customer R, who charge d the $3,000 purchase on his
Visa creditCard. Visa charges OceanView a 2 percent credit card fee.
15. Sold merchandise to Customer S at an invoice price of $9,000; terms 3/10, n/30.
20. Sold merchandise to Customer T at an invoice price of $4,000; terms 3/10, n/30.
23 Collected payment from Customer S from July 15sale.
Aug. 25 Collected payment from Customer T from July 20 sale.
Required:
Assuming that Sales Discounts und Credit Card Discount s arc treated as contra-
revenues. compute net sales for the two months ended August 31.
Answer:
Net sales $15,670
Explanation:
Computation of thenet sales for the two months ended August 31.
Sales revenue:
Sales Revenue
July 12 Merchandise Sold to Customer R $3,000
July 20 Merchandise Sold to Customer S $4,000
July 15 Merchandise Sold to Customer T $9,000
Total ($3,000+$4,000+$9,000) $16,000
Less:Sales discounts (270)
($9,000 collected from S x 3%)
Credit card fee ($60)
($3,000 from R x 2%)
Net sales $15,670
Therefore the net sales for the two months ended August 31 will be $15,670
Formaggio Vecchio announced its regular quarterly cash dividend of $0.20 per share. Currently there are one million shares outstanding.
Declaration date: October 24, 2006
Ex-dividend date: November 20, 2006
Record date: November 22, 2006
Payment date: December 15, 2006
On ____ will the stock price change to reflect the value of the dividend;
Formaggioâs stock price at the end of November is expected to be $20. The dividend yield is ____;
Suppose that the marginal tax rate on dividend is 15% and the marginal tax rate on capital gain is 10%, the stock price will fall by _____ after the ex-dividend date;
Suppose that the company decides to use the same amount of cash to buy back shares rather than to issue cash dividends. The company will buy back shares at the market price at the end of November. You currently hold 10000 shares, and you decide to sell 1000 shares during the repurchase. The percentage ownership after the repurchase is ____ ;
Suppose that the company decides to issue a 10% stock dividend instead of a cash dividend. The stock price will fall by ___ due to the dilution
Answer:
A.On Ex-dividend date: November 20, 2006
B.1%
C.$0.19
D. $1.82
Explanation:
1.On Ex-dividend date: November 20, 2006
will the stock price change to reflect the value of the dividend
b. Calculation for Formaggio’s dividend yield
Using this formula
Dividend yield = dividend/share price
Let plug in the formula
= .20/20 = 1%
c. Calculation of how much the stock price is likely to fall
0.20*(1 – 15%) = P*(1 – 10%)
Solve for P = $0.19
d. Calculation of How much is the stock price likely to fall Suppose that the company decides to issue a 10% stock dividend instead of a cash dividend.
$1,000,000 + (1,000,000 * 10%)
$1,000,00+$100,000
= 1,100,000 total shares
Hence,
$20,000,000 / 1,100,000 = $18.18 per share
$20 – 18.18 = $1.82 fall
Consider the Northern California territory of Nova generates a sales revenue of $320,000 with four salespeople. The territory accounts for 10% of the total instrument rental market of $64 million. Thus, the market share and productivity of salespeople in this territory are __________ respectively.
Answer: e)5% and $80,000
Explanation:
$320,000 was generated by the salespeople in this territory.
This territory comprises 10% of a $64 million market.
Territory comprises of = 10% * 64,000,000 = $6,400,000
Their market share is therefore;
= [tex]\frac{320,000}{6,400,000}[/tex] * 100%
= 5%
Four people made sales of $320,000.
Their productivity = [tex]\frac{320,000}{4}[/tex]
= $80,000
On December 31, Strike Company has decided to discard one of its batting cages. The equipment had an initial cost of $310,000 and has accumulated depreciation of $260,000. Depreciation has been recorded up to the end of the year. Which of the following will be included in the entry to record the disposal?
a. Accumulated Depreciation, debit, $310,000
b. Gain on Disposal of Asset, credit, $50,000
c. Equipment, credit, $310,000
d. Loss on Disposal of Asset, debit, $260,000
Answer:
c. Equipment, credit, $310,000
Explanation:
Whenever an asset is sold, the whole asset will be excluded from the balance sheet because it is no longer part of the assets of the business, hence the balance sheets linked to that asset will be reversed.
In this scenario, the carrying cost of $310,000 will be reversed and $310,000 will be credited to equipment
And, The accumulated depreciation with a credit balance will now be reversed and the debit of accumulated depreciation = $260,000 should be included.
Hence, the option c is correct
For February, sales revenue is $900,000; sales commissions are 5% of sales; the sales manager's salary is $96,000; advertising expenses are $80,000; shipping expenses total 2% of sales; and miscellaneous selling expenses are $2,100 plus 1/2 of 1% of sales. Total selling expenses for the month of February are a.$245,600. b.$241,100. c.$243,500. d.$227,600.
Answer:
Option A
Total selling expenses for the month of February=$245,600
Explanation:
The selling expenses include all the expenditure incurred in respect of activities revolving around the marketing and distribution of goods to the final consumer.
These expenditures may be fixed or variable in nature
DATA
Sales revenue - $900,000;
Sales commission - 5%× 900,000 = 45000
Sales manager salaries - 96,000
Advertising expenses - 80,000
Shipping expenses - 2% × 900,000 = 18000
Miscellaneous selling expenses = 2100 + (1/2× 1%× 900,000) =6600
Total selling expenses for the month of February
= 45000 + 96,000 + 80,000+ 18000 + 6600 = $245,600
Total selling expenses for the month of February=$245,600
Determine the missing 2022 change percentages for (a) Intangible assets and (b) Total assets in the horizontal analysis for Mort Company
Answer:
The information that the question is referring to is this:
Assets 2017 2016 Amount Percent
Current Assets $900,000 $800,000 $100,000 12.50%
Plant Assets $475,000 $550,000 ($75,000) (13.6%)
Intangible Assets $300,000 $225,000 $75,000
Total Assets $1,675,000 $1,575,000 $100,000
Explanation:
Change in intangible assets
75,000 x 100 / 225,000 = 33.3%
Change in total assets
100,000 x 100 / 1,575,000 = 6.3%
Suppose a company will issue new 20-year debt with a par value of $1,000 and a coupon rate of 9%, paid annually. The issue price will be $1,000. The tax rate is 25%. If the flotation cost is 2% of the issue proceeds, then what is the after-tax cost of debt
Answer:
After cost of debt for a floatation cost of 2% is 6.62%
Explanation:
After tax cost of debt = Market interest × (1- tax rate)
We will get the cost of debt using the time value of money principle.
PV = -$1,000
Pmt = $1,000 × 9%
=$90
P/yr = 1
N = 20
FV =1,000
Tax rate = 25%
YTM
The market interest rate is 9% using financial calculator hence;
After-tax cost of debt = Market interest × (1-tax rate)
= 0.09 × (1 - 0.25)
= 0.0675 or 6.75%
If floatation cost is 2%, then
Net receipts after floatation cost = Cost × (1 - floatation rate)
= 0.0675 × (1- 0.02)
= 0.06615 or 6.62%
Firm L has debt with a market value of $200,000 and a yield of 9%. The firm's equity has a market value of $300,000, its earnings are growing at a rate of 5%, and its tax rate is 40%. A similar firm with no debt has a cost of equity of 12%. Under the MM extension with growth, what is Firm L's cost of equity?
Answer:
Firm L's cost of equity is 13.2%
Explanation:
In order to calculate Firm L's cost of equity we would have to calculate the following formula:
Firm L's cost of equity=Unlevered cost of equity+D/E*( Unlevered cost of equity-cost of debt)*(1-tax rate)
D/E = debt/equity
D/E = $200,000/$300,000
D/E=0.6666
Therefore, Firm L's cost of equity= 12%+0.6666*(12%-9%)*(1-0.4)
Firm L's cost of equity=13.2%
Firm L's cost of equity is 13.2%
In 1947, the largest brewer in the U.S., Schlitz, had a 4.57 percent share of the domestic market. (Anheuser-Busch was number four in those days). The top ten brewers, including the number one brewer, had 29.29 percent of the domestic market. Over 70 percent of the domestic market was controlled by "all other" brewers. By the year 2001 the largest brewer was Anheuser-Busch, with a 54.76 share of the domestic market. The top ten brewers held 97.04 percent share of the domestic market in 2001. Thus, the brewing industry in the U.S. became a(n) _____ market structure.
Answer:
oligopoly
Explanation:
In an oligopoly market structure, a small number of companies control all or most of the market. In this case, the top 10 brewers in the US control 97.04% of the total beer market. In an oligopoly, no single company controls the market. in this case, even though Anheuser-Busch has a 54.76% share of the market, competition still exists with the other companies.
On October 1, 2018, Holt Company places a new asset into service. The cost of the asset is $120000 with an estimated 5-year life and $30000 salvage value at the end of its useful life. What is the book value of the plant asset on the December 31, 2018, balance sheet assuming that Holt Company uses the double-declining-balance method of depreciation
Answer:
$108,000
Explanation:
For computing the book value first we have to determine the depreciation expense using the double declining method which is shown below:
First we have to find the depreciation rate which is shown below:
= One ÷ useful life
= 1 ÷ 5
= 20%
Now the rate is double So, 40%
In year 1, the original cost is $120,000, so the depreciation is $48,000 after applying the 40% depreciation rate
Now the 3 months depreciation i,e (Oct 1 to Dec 31)
= $48,000 × 3 months ÷ 12 months
= $12,000
So, the book value is
= Purchase cost - depreciation expense
= $120,000 - $12,000
= $108,000
You run a medium-sized farming equipment repair firm in North Dakota. Your busiest season is the late fall through winter months when area farmers need repairs done to their equipment. Because you have limited cash flow, keeping extra people on your payroll is expensive and undesirable. You have determined that each worker must work 120 hours per month and you can repair an average of 42 machines each month. If their labor productivity rate is 0.52 how many workers can you employ at your company
Answer:
0.67
Explanation:
Let x be the number of labors we need to employ at our company
If 120 hours of labor prepare 42 machines and productivity rate is 0.52 then the equation would be like
x*0.52*120hours = 42 machines
x = 42/(0.52x120)
x = 0.67
Firm X is considering the replacement of an old machine with one that has a purchase price of $70,000. The current market value of the old machine is $18,000 but the book value is $32,000. The firm's tax rate is 30%. What is the net cash outflow for the new machine after considering the sale of the old machine? Disregard the effect of depreciation of the new machine if acquired.
Answer:
$47,800
Explanation:
net cash outflow for the new machine = Cost of new machine - salvage value of old machine + tax ( salvage value of old machine - book value of old machine)
$70,000 - $18,000 + 0.3($18,000 - $32,000)
$70,000 - $18,000 + (0.3 × $-14,000) = $47,800
I hope my answer helps you
Donald invests the $10,000 today. Donald’s interest rate is 10% and interest is compounded and paid at the end of each year. At the end of two years, Donald’s investment is worth $12,100. What is the present value of Donald’s investment?
Answer:
The present value of Donald's investment is $10,000.
When the investment's worth of $12,100 is discounted by the discount factor of 10% in two years, the resulting figure is $10,000 ($12,100)/1.21.
Explanation:
Present value (PV) is the current value of a future sum of money or stream of cash flows given a specified rate of return. To calculate the present value of an investment, the future cash flows are discounted at the discount rate. The calculation of the present value is a consideration of the time value of money. This means that money received today is worth more than the same amount received in the future. So, to compensate for inflation, which alters the value of money due to time, it is expected that some interest be paid. Any interest received above the inflation rate can be regarded as profit.
The Present Value Formula is given as C/(1 + i)ⁿ, where
C = Future sum
i = Interest rate (with '1' equal to 100%)
n = number of periods.
Year 1 $ 28,000 $ 112,000 $ 196,000 Year 2 124,000 112,000 76,000 Year 3 184,000 112,000 64,000 Totals $ 336,000 $ 336,000 $ 336,000 1. Assume that the company requires a 9% return from its investments. Using net present value, determine which projects, if any, should be acquired. 2. Using the answer from part 1, is the internal rate of return higher or lower than 9% for Project C2?
Answer:
Project c3 should be acquired
The IRR of c2 is greater than 9%
Explanation:
Here is the beginning part of the question:
Phoenix Company can invest in each of three cheese-making projects: C1, C2, and C3. Each project requires an initial investment of $276,000 and would yield the following annual cash flows. (PV of $1, FV of $1, PVA of $1 and FVA of $1) (Use appropriate factor(s) from the tables provided.)
The net present value is the present value of after tax cash flows from an investment less the amount invested.
The internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.
IRR and NPV can be calculated using a financial calculator:
NPV
For project C 1
Cash flow in year 0 = $-276,000
Cash flow in year 1 = $ 28,000
Cash flow in year 2 = $124,000
Cash flow in year 3 = 184,000
I = 9%
NPV = $-3861.85
For project C2
Cash flow in year 0 = $-276,000
Cash flow in year 1 = $ 112,000
Cash flow in year 2 = $ 112,000
Cash flow in year 3 = $ 112,000
I = 9%
NPV = $7,505
IRR = 10.52 %
For project C 3
Cash flow in year 0 = $-276,000
Cash flow in year 1 = $ 196,000
Cash flow in year 2 = 76,000
Cash flow in year 3 = 64,000
I = 9%
NPV = 17,203.94
Project c3 should be acquired because it has the highest NPV.
To find the NPV 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
To find the IRR 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 IRR button and then press the compute button.
I hope my answer helps you
3. Problems and Applications Q3 This chapter discusses companies that are oligopolists in the market for the goods they sell. Many of the same ideas apply to companies that are oligopolists in the market for the inputs they buy. If sellers who are oligopolists try to increase the price of goods they sell, the goal of buyers who are oligopolists is to try to decrease the prices of goods they buy. Major league baseball team owners have an oligopoly in the market for baseball players. The owners' goal is to keep players' salaries . True or False: This goal is difficult to achieve because teams can attract better players with higher salaries. True False Baseball players went on strike in 1994 because they would not accept the salary cap that the owners wanted to impose. True or False: The owners felt the need for a salary cap to dissolve collusive behavior over salaries. True False
Answer:
Oligopolistic Companies:
a) The owners' goal is to keep players' salaries capped. TRUE
b) Goal is difficult to achieve: TRUE
c) 1994 Baseball players' strike: TRUE
d) Owners needed salary cap to dissolve collusive behavior over salaries: TRUE.
Explanation:
a) According to the Economist, Oligopoly is "a market situation in which each of a few producers affects but does not control the market. Each producer must consider the effect of a price change on the actions of the other producers." There is little competition among the players as each tries to control the market with price cuts and quantity reductions. For example, a cut in price by one may lead to an equal reduction by the others, with the result that each firm will retain approximately the same share of the market as before but at a lowered profit level.
b) According to wikipedia.com, "The 1994–95 Major League Baseball strike was the eighth work stoppage in baseball history, as well as the fourth in-season work stoppage in 22 years. Due to the strike, both the 1994 and 1995 seasons were not played to a complete 162 games; the strike was called after most teams had played at least 113 games in 1994." The strike ended the next April, after 232 days, when the players had successfully resisted the salary cap.
The movie E.T. the Extraterrestrial grossed $435,110,554 in box office receipts in 1982. The movie Titanic grossed $659,363,944 in 1997. The Consumer Price Index was 96.5 in 1982, 160.5 in 1997 and 255.657 in 2019. What is the value of the E.T. box office receipts adjusted for inflation in 1997
Answer:
E.T. the Extraterrestrial
Adjustment for inflation in 1997
Value of E.T. box office receipts = $723,681,284.11 ($435,110,554/96.5 x 160.5)
Explanation:
To adjust a 1982 receipts for inflation in 1997, the 1982 receipts is divided by the 1982 price index and multiplied by the 1997 price index. This results to an inflation-reflected receipts in 1997.
The adjustment helps to put a value that is equivalent to the current price (assessed period's current price) having factored in inflation.
A Consumer Price Index is a statistical estimate that measures the changes in the price level of a weighted average market basket of consumer goods and services purchased by households. It is measured periodically to reflect inflation.
Inflation is the general rise in the prices where a unit of currency yesterperiod buys less today than it did. It is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over some period of time.
Eva received $60,000 in compensation payments from JAZZ Corp. during 2018. Eva incurred $5,000 in business expenses relating to her work for JAZZ Corp. JAZZ did not reimburse Eva for any of these expenses. Eva is single and she deducts a standard deduction of $12,000. Based on these facts answer the following questions:
Use Tax Rate Schedule for reference. (Round your final answer to the nearest whole dollar amount.)
a. Assume that Eva is considered to be an employee. What is her regular income tax liability for the year? (Round your answer to 2 decimal places.)
Regular tax liability: $____________________
b. Assume that Eva is considered to be a self-employed contractor. What is her self-employment tax liability for the year?
Self-employment tax liability: $___________________
c. Assume that Eva is considered to be a self-employed contractor. What is her regular tax liability for the year? (Round your answer to 2 decimal places.)
Regular tax liability: $____________________
Answer:
A.Regular income tax liability
$8,181.25
B.Self-employment tax liability $6,870.84
C.Regular tax liability $7,538.50
Explanation:
a.The computation of Eva's regular income tax liability
(1) Salary $60,000
(2) Standard deduction(12,000)
Itemized deductions less than standard deduction.
(4) Taxable income (60,000-12,000)$48,000
(48,000 – 34,000) × 25% + 4,681.25 [see tax rate schedule for Single individuals]
Therefore Eva's regular income tax liability is $8,181.25.
b. Calculation for Eva self-employment tax liability for the year
The self-employment tax rate is 12.4% of the Social Security tax
Hence, Self-employment tax applies to net earnings
92.35% of the net earnings from self-employment is been often subjected to self-employment tax.
Hence,
Net Earnings = $.60,000 x 92.35% = $ 55,410
Therefore,
Eva Self-employment tax liability will be:
= $ 55,410 x 12.4% = $6,870.84
c.Calculation for Eva regular tax liability for the year
Eva received compensation for the Year = $60,000
Standard deduction = $12,200
Taxable Income for the Year = $47,800
Tax Brackets and Rates, 2018
Rate For Unmarried Individuals, Taxable
Income Over
10 $0
12 $9,700
22 $39,475
24 $84,200
32 $160,725
35 $204,100
37 $510,300
Hence
Eva's Regular Tax liability for the Year 2019 will be calculated as:
- 9,700 10 970.00
9,700 39,475 12 4,737.00
39,475 8,325 22 1,831.50
Total 7,538.50
970.00+4,737.00+1,831.50=7,538.50
Therefore Eva's Regular Tax liability for the Year 2018 will be $7,538.50
They want to make a profit of $55,498 Unit Variable costs = $11 Unit selling price is = $37 Fixed costs = $18,470 How many units do they need to sell to make the desired profit?
Answer:
2,845 units
Explanation:
To find the answer you need to consider that the profit is equal to the sales minus the costs.
Let's consider that x is the number of units sold
Sales= Price per unit*number of units sold
Sales= 37x
Variable cost= Cost per unit*number of units sold
Variable cost= 11x
Fixed cost= 18,470
55,498=37x-11x-18,470
55,498+18,470=26x
73,968=26x
x=73,968/26= 2,845
According to this, the answer is that they need to sell 2,845 units to make the desired profit.
The economic situation of Rutenia is characterized by the following facts: GDP. Strong economic growth, of about 4%. Unemployment. Moderate unemployment of around 5% Inflation is very high, around 10% High public deficit.
Answer:
See below
Explanation:
Although a great GDP of 4% gives the impression of a strong economy, as is the case here, the inflation rate is much higher than desired. So, economic policies need to be reviewed in order to determine where the problem lies and what steps can be taken to remedy this situation.
Consider 2 scenarios: Boom Economy and Normal Economy. The Boom economy has 30% chance of happening, while Normal economy has 70% chance of happening. For each scenario (Boom and Normal), stock ABC has a return of 25%, and 4%, respectively; stock XYZ has a return of 10% and 6.5%, respectively; the market portfolio has a return of 12% and 5% respectively.
Requried:
a. Calculate Expected return, Variance and Standard deviation for stock ABC and XYZ.
b. Based on your results in part (1), can you decide which stock to invest?
c. Calculate Beta for stock ABC and XYZ.
Answer:
A) Expected Return of Stock ABC = Probability of Boom * Return of ABC in boom+Probability of Normal * Return of ABC in norma
ER = 30% * 25% + 70% * 4% = 10.30%
Expected Return of Stock XYZ = Probability of Boom * Return of XYZ in boom+Probability of Normal*Return of XYZ in norma
ER = 30% * 10% + 70% * 6.5% = 7.55%
Variance of Stock ABC = 30% * (25%-10.30%)^2 + 70% * (4%-10.30%)^2 = 0.9261%
Variance of Stock XYZ = 30% * (10%-7.55%)^2 + 70% * (6.5%-7.55%)^2 = 0.02573%
Standard Deviation of ABC =0.9261%^0.5 = 9.62%
Standard Deviation of XYZ =0.02573%^0.5 = 1.60%
B) Coefficient of Variation of ABC=Standard Deviation of ABC/Expected Return of ABC =9.62%/10.30%=0.93
Coefficient of Variation of XYZ=Standard Deviation of XYZ/Expected Return of XYZ =1.60%/7.55%=0.21
Stock with less Coefficient of variation to be chosen as lower Coefficient of variation show lower risk in relation to the return.
Hence stock XYZ is best for investment.
C) Expected Return of Market =30% *12% + 70% * 5% = 7.1%
Variance of Market =30% * (12% - 7.1%)^2 + 70% * (5%-7.1%)^2 = 0.1029%
Covariance of Stock ABC and Market = 30% * (12% - 7.1%) * (25% - 10.30%) + 70%*(5% - 7.1%) * (4% - 10.30% )= 0.0030870
Beta of ABC = Covariance of Stock ABC and Market / Variance of Market
Beta ABC = (0.0030870 / 0.1029%) = 3.00
Covariance of Stock XYZ and Market =30% * ( 12% - 7.1%) * (10% - 7.55%) + 70% * (5% - 7.1%) * (6.50% - 7.55%) = 0.000515
Beta of Stock XYZ = Covariance of Stock XYZ and Market /
Variance of MarkeT
Beta XYZ = (0.000515 / 0.1029%) = 0.5
Your firm (an Australian firm) makes a sale to a Japanese customer. The sale price is 200 million Japanese Yen payable in exactly three months from today. The current exchange rate is AUD/JPY = 90 (i.e., 1 Australian Dollar (AUD) is worth 90 Japanese Yen (JPY)). The current interest rates in Australia and Japan are 3% p.a. and 0.5% p.a., respectively.Given this information, please answer the following questions. Please label your answers according to parts.(a) Given that Australian Dollar is the domestic currency, what is the direct quote of the exchange rate between Australian Dollar and Japanese Yen ? Please round the final answer to five decimal places.(b) What is the theoretical current forward exchange rate quoted directly in terms of Australian Dollar (i.e. JPY/AUD) for delivery three months from today ? Show your input to the formula to arrive at the final answer. Please round the final answer to five decimal places.(c) How can the firm take advantage of any decreases in the exchange rate and also ensure that it receives at least Australian $2 million ? (Hint: Which derivative instrument can be used to achieve this objective?(d) Ignoring the cost of the derivative instrument to be used in part (c), what would be the outcome from hedging if the spot exchange rate in 3 month’s time is (i) AUD/JPY=150 and (ii) AUD/JPY = 50?
Answer:
An Australian Firm Selling to a Japanese Customer
a) Direct Quote of the Exchange Rate between Australian Dollar and Japanese Yen:
A$ 1 = ¥90
Meaning 1 Australian Dollar = 90 Japanese Yen.
Therefore, the price of the goods would be A$ 2,222,222.22222 (¥200 million)/ ¥90
b)Theoretical Current Forward Exchange Rate, quoted in terms of JPY/AUD for delivery in three months:
= Spot Rate x (1 + Japanese Interest Rate) / (1 + Australian Interest Rate) x 360/90
= ¥90 x (1 +0.005) / (1 +0.03) x 360/90 = ¥90 x 1.005/1.03 x 360/90
= ¥351.26214 =A$1
c) The Australian firm can take advantage of any decreases in the exchange rate and also ensure that it receives at least Australian $2 million by entering into a Currency Forwards Contract.
d) If the spot exchange rate in 3 month's time is:
(i) AUD/JPY=150, the outcome of the hedging with a Currency Forwards Contract to get at least A$ 2 million would be the gain of:
Forward Exchange outcome in Australian Dollars = ¥200 million/ ¥150 =
A$ 1,333,333.33333
Hedging outcome minus Forward Exchange outcome
A$2 million - A$ 1,333,333.33333 = A$666,666.66667
(ii) AUD/JPY = 50, the outcome of the hedging with a Currency Forwards Contract to get at least A$ 2 million would be the loss of:
Forward Exchange outcome = in Australian Dollars = ¥200 million/ ¥50 =
A$4 million
Hedging outcome minus Forward Exchange outcome
A$2 million - $4 million = -A$2million
Explanation:
a) Currency forwards contracts and future contracts are used to hedge the currency risk. For example, a company expecting to receive ¥200 million in 90 days, can enter into a forward contract to deliver the ¥200 million and receive equivalent Australian dollars in 90 days at an exchange rate specified today.
b) If A$ 1 = ¥90
Therefore, the price of the goods would be A$ 2,222,222.22222 (¥200 million)/ ¥90 in Australian Dollars.
Consider the U.S. passenger airline industry through the lens of the Five Forces model. Suppose airline employees, who represent a significant portion of the cost of operating an airline, are strongly unionized Based on this information, supplier power is high__________.All else equal, this implies that the airline industry is attractive________ to enter.
Answer:
High;less.
Explanation:
In the book, "Competitive Strategy: Techniques for Analyzing Industries and Competitors" published by Michael E. Porter in 1980. Porter proposed a five forces model of competition which is widely used in analyzing competitions, attractiveness and profitability in businesses.
Michael E. Porter's Five Forces of competition are;
1. Threat of substitute products or services.
2. Threat of new entrants into the industry.
3. Power of customers.
4. Power of suppliers.
5. Industry competition.
Considering, the U.S. passenger airline industry through the lens of the Five Forces model. Suppose airline employees, who represent a significant portion of the cost of operating an airline, are strongly unionized. Based on this information, supplier power is high. All else equal, this implies that the airline industry is less attractive to enter.
This ultimately implies that, when the bargaining power of suppliers are high, it simply means that the airline industry is at the mercy of the employees and as such would most likely depend on them by complying with their bids all the time.
Hence, this would make the airline industry to be less attractive to potential investors because there would be an increase in input or capital costs with a lesser profit margins.
Although labor is typically viewed as a variable cost in the very short run, some labor costs may be fixed. Which of the following items represents an example of a fixed labor cost?A) An hourly employee.B) A temporary worker who is paid by the hour.C) A grad student in a NSF project.D) A salaried manager who has a three-year employment contract.
Answer:
D.
Explanation:
If he already has a fixed salary and a three-year employment then the variable is fixed
An example of a fixed labor cost is a salaried manager who has a three-year employment contract.
A VARIABLE cost is a cost that varies with the production. This is quite different from the FIXED COST that is fixed regardless of production.
In this case, since the worker has a three-year employment contract, his salary is fixed for the three years.
In conclusion, the answer is salaried manager who has a three-year employment contract.
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The following selected transactions were completed by Amsterdam Supply Co., which sells office supplies primarily to wholesalers and occasionally to retail customers. Also note that the company uses a clearing house to take care of all bank as well as non-bank credit cards used by its customers.Record on page 10 of the journalMar. 2 Sold merchandise on account to Equinox Co., $20,000, terms FOB destination, 1/10, n/30. The cost of the merchandise sold was $13,150. 3 Sold merchandise for $10,950 plus 6% sales tax to retail cash customers. The cost of merchandise sold was $7,100. 4 Sold merchandise on account to Empire Co., $51,450, terms FOB shipping point, n/eom. The cost of merchandise sold was $35,420. 5 Sold merchandise for $27,900 plus 6% sales tax to retail customers who used MasterCard. The cost of merchandise sold was $18,470. 12 Received check for amount due from Equinox Co. for sale on March 2. 14 Sold merchandise to customers who used American Express cards, $12,380. The cost of merchandise sold was $9,120. 16 Sold merchandise on account to Targhee Co., $28,500, terms FOB shipping point, 1/10, n/30. The cost of merchandise sold was $14,690. 18 Issued credit memo for $4,400 to Targhee Co. for merchandise returned from sale on March 16. The cost of the merchandise returned was $2,910. 19 Sold merchandise on account to Vista Co., $7,400, terms FOB shipping point, 2/10, n/30. The cost of merchandise sold was $4,630. In addition, Amsterdam Supply Co. immediately paid $55 in freight charges and added this to the invoice sent. 26 Received check for amount due from Targhee Co. for sale on March 16 less credit memo of March 18. 28 Received check for amount due from Vista Co. for sale of March 19. 31 Received check for amount due from Empire Co. for sale of March 4. 31 Paid Fleetwood Delivery Service $5,100 for merchandise delivered during March to customers under shipping terms of FOB destination.Apr. 3 Paid City Bank $850 for service fees for handling MasterCard and American Express sales during March. 15 Paid $6,212 to state sales tax division for taxes owed on sales.Journalize the entries to record the transactions of Amsterdam Supply Co. Refer to the Chart of Accounts for exact wording of account titles.
Answer: Please see answer in the expalantion column
Explanation:
To record merchandise sold on account
Date Account Titles and Explanation Debit Credit
Mar 2 Accounts Receivable-Equinox Co $20,000
Sales $20,000.
To record cost of merchandise sold on account
Date Account Titles and Explanation Debit Credit
Mar 2 Cost of Merchandise Sold $13 150.00
Merchandise Inventory $13,150.00
To record merchandise sold for cash
Date Account Titles and Explanation Debit Credit
Mar 3 Cash(10,950 + 657) $11,607.00
Sales $10,669.00
Sales Tax Payable(10,950 x 6%) $657.00
To record cost of merchandise sold on account
Cost of Merchandise Sold $7,100.00
Merchandise Inventory $7,100.00
To record cost of merchandise sold on account
Date Account Titles and Explanation Debit Credit
Mar 4 Accounts Receivable-Empire Co $51,450.00
Sales $51,450.00
To record cost of merchandise sold on account
Cost of Merchandise Sold $35,420.00
Merchandise Inventory $35,420.00
To record merchandise sold using Master card
Mar 5 Cash(27900 +1,674) $29,574
Sales $27,900
Sales Tax Payable(27,900 x6%) $1,674
To record cost of merchandise sold using Mastercard
Cost of Merchandise Sold $18, 470.00
Merchandise Inventory $18,470.00
To record receipt of check from Equinox Co
Date Account Titles and Explanation Debit Credit
Mar 12 Cash(20,000-200) $18,000
Cost of merchandise sold (20,000 x 1%) $ 200
Account Receivable-Equinox Co $20,000
To record cost of merchandise sold using American Express
Date Account Titles and Explanation Debit Credit
Mar 14 Cash $12,380
Sales $12,380
To record cost of merchandise sold on account
Cost of Merchandise Sold $9,120
Merchandise Inventory $9,120
To record merchandise sold on Account
Date Account Titles and Explanation Debit Credit
Mar 16 Accounts Receivable-Targhee Co $28,500
Sales $28,500
To record cost of merchandise sold on account
Cost of Merchandise Sold $14,690
Merchandise Inventory $14,690
To record credit memo for returned merchandise
Date Account Titles and Explanation Debit Credit
Mar 18 Sales $4,400.00
Accounts Receivable-Targhee Co $4,400.00
To record cost of merchandise sold on account
Cost of Merchandise Sold $2,910.00
Merchandise Inventory $2,910.00
To record merchandise sold on Account
Date Account Titles and Explanation Debit Credit
Mar 19 Accounts Receivable- Vista Co $7,400
Sales $7,400
To record cost of merchandise sold on account
Cost of Merchandise Sold $4,630
Merchandise Inventory $4,630
To record freight charges on behalf of Vista Co
Accounts Receivable- Vista Co $55.00
Cash $55.00
To record transaction of receipt of check from Targhee Co(
Date Account Titles and Explanation Debit Credit
Mar 26 Cash (24,100 - 241) $23,859
Cost of merchandise sold(24,100 x1%) $241
Account Receivable-Targhee Co(28,500 -4,400) $24,100
To record transaction of receipt of check from Vista co
Date Account Titles and Explanation Debit Credit
Mar 28 Cash(7455-149.1) $7,305.00
Sales Discount (2% x $7455) $149.10
Account Receivable-Vista Co $7,400 +55) $7,455
To record transaction of receipt of check from Empire Co
Date Account Titles and Explanation Debit Credit
Mar 31 Cash $51,450.00
Account Receivable- Empire Co $51,450.00
To record payment of delivery for mechandise
Date Account Titles and Explanation Debit Credit
Mar 31 Delivery Expenses $5,100.00
Cash $5,100.00
To record p[payment of service charges to BANK
Apr 3 Credit card Expenses $850
Cash $850
To record payment of Sales Tax Division
Apr 15 Sales Tax Payable $6,212
Cash $6,212
Q2) The next dividend payment by Savitz, Inc., will be $3.21 per share. The dividends are anticipated to maintain a growth rate of 4 percent forever. If the stock currently sells for $42 per share, what is the required return
Answer:
11.64%
Explanation:
The next dividend payment for Savitz Inc. is $3.21 per share
The growth rate is 4%
= 4/100
= 0.04
The current stock price is $42 per share
Therefore, the required rate of return can be calculated as follows
R= Next dividend payment/Current stock price + growth rate
= $3.21/$42 + 0.04
= 0.0764+0.04
= 0.1164×100
= 11.64%
Hence the required rate of return is 11.64%
Beartowne Enterprises uses an activityminusbased costing system to assign costs in its autominusparts division.
Activity Est. Indirect Activity Costs Allocation base Cost allocation rate
Materials $55,000 Material moves $3.00/move
Assembling $195,000 Machine hours $6.00/machine hour
Packaging $70,000 # of finished units $3.50/finished unit
The following units were produced in December with the following information. The company incurs no direct labor costs.
Part # # Produced Materials Costs # Moves Machine Hrs.
Part 001 1,450 $1,500 300 500
Part 002 5,500 $4,000 500 300
Part 003 3,950 $8,000 2,300 1,650
Total manufacturing costs for Part 003 is:_________
Answer:
Total manufacturing costs for Part 003 is:_________ $ 38625
Explanation:
Beartowne Enterprises
Activity Based Costing
We multiply the rate of of each activity with allocation base to get the indirect activity costs.
Total manufacturing costs for Part 003 is:_________
Materials Costs $ 8,000
Materials handling = 2,300 moves *$3.00/move= $ 6900
Assembling = 1,650 machine hours * $ 6.0= $ 9900
Packaging = 3,950 units * $3.50/finished unit = $ 13825
Total Manufacturing Costs $ 38625
Given Data
Part # # Produced Materials Costs # Moves Machine Hrs.
Part 001 1,450 $1,500 300 500
Part 002 5,500 $4,000 500 300
Part 003 3,950 $8,000 2,300 1,650
Activity . Indirect Activity Allocation Cost allocation rate
Est Costs base
Materials $55,000 Material moves $3.00/move
Assembling $195,000 Machine hours $6.00/machine hour
Packaging $70,000 # of finished units $3.50/finished unit
Altoona Corporation has two divisions, Hinges and Doors, which are both organized as profit centers; the Hinge Division produces and sells hinges to the Door Division and to outside customers. The Hinge Division has total costs of $43, $26 of which are variable. The Hinge Division is operating significantly below capacity and sells the hinges for $58.The Door Division has received an offer from an outsider vendor to supply all the hinges it needs (32,000 hinges) at a cost of $53. The manager of the Door Division is considering the offer but wants to approach the Hinge Division first.What would be the profit impact to Altoona Corporation as a whole if the Door Division purchased the 32,000 hinges it needs from the outside vendor for $53?a. No change in profit to Altoona.b. $160,000 increase in profits.c. $160,000 decrease in profits.d. $864,000 decrease in profits.
Answer:
d. $864,000 decrease in profits.
Explanation:
Hinge Division's total cost per unit:
variable $26
fixed $17
total $43
sales price $58
contribution margin $32
profit margin $15
Alternative A Alternative B Differential
intercompany outside amount
money paid to $0 $1,696,000 ($1,696,000)
outside vendor
variable costs $832,000 $0 $832,000
fixed costs $544,000 $544,000 $0
total costs $1,376,000 $2,240,000 ($864,000)
If the hinges are purchased form an outside vendor, the corporation's total profits will decrease by $864,000.
Classifying costs as materials, labor, or factory overhead
Indicate whether the following costs of Colgate-Palmolive Company would be classified as direct materials cost, direct labor cost, or factory overhead cost:
a. Bottles in which mouthwashes are sold
b. Depreciation on production machinery
c. Depreciation on the soap plant
d. Maintenance supplies
e. Packaging department employees wages
f. Plant manager salary, toothpaste plant
g. Resins for soap and shampoo products
h. Salary of process engineers
i. Scents and fragrances
j. Wages of production line employees
Answer:
The answer is:
A - direct materials cost
B - factory overhead cost
C- factory overhead cost
D - factory overhead cost
E - direct labor cost
F - factory overhead cost
G - direct material cost
H - factory overhead cost
I - material cost
J- direct labor cost
Explanation:
Material cost is the cost of materials used to produce a firm's product.
Labor cost is the total cost of all wages paid to employees
Overhead cost is the cost not directly attributed to creating a product
A - direct materials cost
B - factory overhead cost
C- factory overhead cost
D - factory overhead cost
E - direct labor cost
F - factory overhead cost
G - direct material cost
H - factory overhead cost
I - material cost
J- direct labor cost
Mason Company manufactures and sells shoelaces for $2.00 per pair. Its variable cost per unit is $1.70. Mason's total fixed costs are $10,500. How many pairs must Mason Company sell to break even
Answer:
35,000
Explanation:
The contribution margin of each pair sold is ...
$2.00 -1.70 = $0.30
In order to cover the fixed costs, ...
$10500/$0.30 = 35,000
pairs must be sold.
Mason Co. must sell 35,000 pairs of shoelaces to break even.