Answer:
The seller must be informed when the offer is presented that the depositis a promissory note
Explanation:
A good faith deposit is one that is done by a buyer in which conditions are stated that could result in the loss of deposit by the buyer.
It is a deposit made by the buyer to show he intends to complete the payment later.
In this instance if there is a Goodwill deposit in form of a promissory note, the broker needs to be aware.
So that when he is bringing in a client he will consider the already existing deposit.
Deals that offer more deposit or full payment will be considered and the original buyer discarded.
A firm recently reported EBITDA of $3.95 million, depreciation of $1.20 million, and had a tax rate of 40%. The firm's expenditures on fixed assets and net operating working capital totaled $1.2 million. How much was its free cash flow, in millions
Answer:
Free cash flow=$2.37
Explanation:
Calculation for how much was its free cash flow, in millions
Using this formula
Free cash flow =[ (Operating income * (1- tax rate) + Depreciation- Expenditures on fixed assets and net operating working capital]
Where,
Operating income =$3.95
(1- tax rate) = (1 - .40)
Depreciation=$1.20
Expenditures on fixed assets and net operating working capital=$1.2
Let plug in the formula
Free cash flow = [($3.95 * (1 - .40) + $1.20 - $1.2]
Free cash flow=$3.95*0.60+$1.20-$1.2
Free cash flow=$2.37+$1.20-$1.2
Free cash flow=$3.57-$1.2
Free cash flow=$2.37
Therefore the amount of its free cash flow, in millions will be $2.37
Morgan Company issues 10%, 20-year bonds with a par value of $720,000 that pay interest semiannually. The current market rate is 9%. The amount paid to the bondholders for each semiannual interest payment is:
Answer:
$36,000
Explanation:
Calculation for the amount to be paid to the bondholders for each semiannual interest payment
Using this formula
Semiannual interest payment = Face value Amount*Interest Rate*Time
Let plug in the formula
Semiannual interest payment = $720,000*0.10*0.50
Semiannual interest payment = $36,000
The amount paid to the bondholders for each semiannual interest payment is $36,000
If the effective annual rate of interest is known to be 16.08% on a debt that has quarterly payments, what is the annual percentage rate?
Answer:
15.19%
Explanation:
According to the given situation, the computation of the annual percentage rate is shown below:-
Annual percentage rate = (1 + APR ÷ n^n) -1)
Now we will put the values into the above formula to reach the annual percentage rate
= ((1.1608) × 0.25 - 1) × 4
= 0.1519
or
= 15.19%
Therefore for computing the annual percentage rate we simply applied the above formula.
3. There a number of market entry strategies that businesses use in entering into markets outside their countries. a) Distinguish between the use of Franchising and Joint Venture as modes of entry into other countries by global businesses. b) What are the respective advantages and disadvantages of both strategies?
Answer:
a) Distinguish between the use of Franchising and Joint Venture as modes of entry into other countries by global businesses.
Franchising consists in the licensing of aspects of production and intellectual property to a another party: the franchise.
A Joint Venture is a business union between two or more parties, in which they split profit as well as costs and responsabilities.
b) What are the respective advantages and disadvantages of both strategies?
Franchising can be a quicker way to expand into foreign markets. The flexibility of the method, and the lower capital requirements are the reason why. This can be seen in the success that American fast-food brands have had using this method to expand in global markets.
A Joint-Venture can be more difficult to use for market expansion, however, it can be more profitable, because the profit will not be split among as many parties as in franchising, and more importantly, the firm maintains a higher control of the operation.
uring December, Rainey Equipment made a $676,000 credit sale. The state sales tax rate is 6% and the local sales tax rate is 1.5%. Prepare the appropriate journal entry
Answer:
Please refer to the below for the appropriate journal entry
Explanation:
Accounts receivable Dr $726,700
($676,000 + $50,700)
Sales revenue account Cr $676,000
Sale taxes payable account Cr $50,700
{(6% + 1.5%) × $676,000
7 pounds of raw material are required to make 1 finished unit. The company desires an ending raw materials inventory for each month equal to 29% of the following months production (in units of raw material) . How many pounds of raw material should be purchased in May?
Answer:
Instructions are below.
Explanation:
We weren't provided with enough information to answer the request. But, I will give an example and formulas to guide an answer.
For example:
Production in units:
May=20,000
June= 22,000
Beginning inventory of direct materials= 8,000
To calculate the purchase for May, we need to use the following formula:
Purchases= production + desired ending inventory - beginning inventory
Purchases= 20,000*7 + (22,000*7)*0.29 - 8,000
Purchases= 176,660 pounds
Brian Hickey uses his credit card in August to purchase the following college supplies: books for $425, your long bus pass for $175, food service meal ticket for $450, and season tickets to the basketball games for $125,. On September 1, he uses 650 of his financial aid check to reduce the balance. The issuing bank charges 1.2% interest per month and requires full payment within 36 months. Brian had a previous balance is zero and he makes no other purchases with his card. What is the minimum payment due September 1, and what is the balance due on October 1?
Answer:
Brian Hickey
a. Minimum due on September 1 is:
$510.90
b. Balance due on October 1 is:
$516.13
Explanation:
a) Data and Calculations:
Purchases in August:
Books = $425
Long bus pass = 175
Meal ticket = 450
Basketball games = 125
Total purchases = $1,175
Interest rate = 1.2% per month
Interest accrued 14.10
Total in debt $1,160.90
September 1:
b) Debt reduction 650.00
Balance = $510.90
Interest accrued 6.13
Ending Balance $516.13
c) The credit card interest is calculated on the remaining debt after each transaction. This interest is then added back to the debt to obtain the balance due. If Brian Hickey does not carry out any other transaction with his credit card, the debt will continue to increase by 1.2% compounded monthly until the expiration of the 36-months period.
The major components of a time series are all of the following EXCEPT: trend. cycles. random variations. seasonality. inflation.
Answer: Inflation
Explanation:
Time series data are refer to those taken over a period of years with a minimum of four years being satisfactory. The data shown will have variations that fall under four major components being;
Trend - Data that moves in a predictable fashion and so can be used to predict future behavior.Cycles - The variation here follows the business cycle or its own. Random Variables - Cannot be predicted. Seasonal - These follow a chronological pattern.Only Inflation does not fall here.
Now that you have studied monopolistic competition, let's see how well you can distinguish a firm in a monopolistically competitive market from a firm in a perfectly competitive market. Given the description of the firm below, decide whether it applies to monopolistic competition, perfect competition, or both. You may have to adjust the scroll bar to see the complete list.
1. a firm that produces with excess capacity in
2. a firm that has a firm that sets price greater than marginal cost
3. a firm that may earn an econom profit or loss in the short run
4. a firm that faces a downward sloping demand curve.
5. a firm that that maximizes profits profit in the long by producing where MR = MC
Answer:
Monopolistic Competition:
4. a firm that faces a downward sloping demand curve.
Perfect Competition:
1. a firm that produces with excess capacity in
3. a firm that may earn in an economy profit or loss in the short run
5. a firm that that maximizes profits profit in the long by producing where MR = MC
Both:
2. a firm that has a firm that sets price greater than marginal cost.
Explanation:
A management control system is a logical integration of techniques to gather and use data and to evaluate performance.
a. True
b. False
Answer:
The correct answer is the option A: True.
Explanation:
To begin with, a management control system is understood as an ensemble of different subsystems that work with each other in order to cooperate to do the task and obtain the objectives that the user is looking for. In this case in particular, this type of system focus primarily in the objective of gathering data with the purpose of using it to evaluate the performances of the members of the organization so that would help the manager to take decisions when he has to. That is why that this system is a logical integration of techniques that would ensemble data to be used.
Portia Grant is an employee who is paid monthly. For the month of January of the current year, she earned a total of 8,588. The FICA tax for social security is 6.2% of the first $118,500 of employee earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The FUTA tax rate of 0.6% and the SUTA tax rate of 5.4% are applied to the first $7,000 of an employee's pay. The amount of federal income tax withheld from her earnings was $1,424.97. Her net pay for the month is: (Round your intermediate calculations to two decimal places.)
a) $7,038.50
b) $5,141.03
c) $6,072.04
d) $6,566.00
e) $6,506.04
Answer: e) $6,506.04
Explanation:
Employees do not pay FUTA or SUTA. Employers pay those.
Ms. Grant's net pay for the month therefore is;
= Gross earnings - FICA Social Security - FICA Medicare - Federal Income tax withheld
= 8,588 - (6.2% * 8,588) - ( 1.45% * 8,588) - 1,424.97
= 8,588 - 532.46 - 124.53 - 1,424.97
= $6,506.04
A firm recently issued $1,000 par value, 15-year bonds with a coupon rate of 9%. Coupon interest payments will be paid semi-annually. The bonds sold at par value, but the firm paid flotation costs amounting to 5% of par value. The firm has a corporate tax rate of 21%. What is the firm's after-tax cost of debt for these bonds?
Answer:
The firm's after cost of debt is 7.48%
Explanation:
Floatation cost increases the cost because a diminished portion of the whole amount was received.
Given that;
r = 9%
t = 21%
f = 5%
After tax cost of debt = r ( 1 - t ) / ( 1 - f )
0.09 ( 1 - 0.21 ) / 1 - 0.05 )
= 0.0711 / 0.95
=0.0748421053
= 7.48%
TB MC Qu. 9-251 Turrubiates Corporation makes a product that ... Turrubiates Corporation makes a product that uses a material with the following standards: Standard quantity 6.7 liters per unit Standard price $ 1.20 per liter Standard cost $ 8.04 per unit The company budgeted for production of 2,500 units in April, but actual production was 2,600 units. The company used 18,000 liters of direct material to produce this output. The company purchased 18,800 liters of the direct material at $1.30 per liter. The direct materials purchases variance is computed when the materials are purchased. The materials quantity variance for April is:
Answer:
Direct material quantity variance= $696 unfavorable
Explanation:
Giving the following information:
Standard quantity 6.7 liters per unit
Standard price $ 1.20 per liter
Actual production was 2,600 units.
The company used 18,000 liters of direct material to produce this output.
To calculate the direct material quantity variance, we need to use the following formula:
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Standard quantity= 6.7*2,600= 17,420
Direct material quantity variance= (17,420 - 18,000)*1.2
Direct material quantity variance= $696 unfavorable
Suppose the price level and value of the U.S. Dollar in year 1 are 1 and $1, respectively. Instructions: Round your answers to 2 decimal places. a. If the price level rises to 1.35 in year 2, what is the new value of the dollar?
Answer:
0.74
Explanation:
Data provided in the question
Price level = 1.35
According to the given situation, the computation of the new value of the dollar is shown below:-
The New value of the dollar = 1 ÷ Price level
= 1 ÷ 1.35
= 0.74074
or
= 0.74
Therefore for computing the new value of the dollar we simply applied the above formula.
Financial capital markets bridge the gap between savers and investors: that is, they find ways to take the inflow of funds from many separate financial capital suppliers and transform it into the funds of financial capital demanders desire. Such financial markets include:_______
Answer: stocks, bank loans, bonds, and other financial investments.
Explanation:
A capital market is a financial market whereby lequity-backed securities are purchased by individuals or firms and also sold.
Financial capital markets bridge the gap between savers and investors: that is, they find ways to take the inflow of funds from many separate financial capital suppliers and transform it into the funds of financial capital demanders desire.
Such financial markets consists of stocks, bank loans, bonds, and other financial investments.
Take a real business activity example and relate with the concept of commission depreciation and simple and compound interest rate?
Answer & Explanation: Commission: This is a percentage earned on total sales. Using a health insurance company as an example, brokers earn commission on premium received by the company.
Depreciation: This relates to the wear and tear of an asset. The health insurance company fixed assets such as motor vehicle, furniture and equipments will be depreciated and expensed periodically.
Simple and compound interest rates: Simple interest rate is a rate charged directly on the principal amount deposited. If the health insurance company decides to invest in fixed income or call deposits with a bank for a period of 1 year. The bank can put a specific rate that will be paid to the company as an interest earned.
Compound interest rate on the other hand is beneficial to the financier. It is a rate charged on both the principal amount and the interest earned. For instance if the company decides to take a loan with the bank, the bank can charge a compound interest rate.
A project with an initial cost of $27,250 is expected to generate cash flows of $6,600, $8,700, $9,100, $8,000, and $7,400 over each of the next five years, respectively. What is the project's payback period?
Answer:
It will take 4 years and 130 days to recover for the initial investment.
Explanation:
Giving the following information:
A project with an initial cost of $27,250 is expected to generate cash flows of $6,600, $8,700, $9,100, $8,000, and $7,400
The payback period is the time required to recover for the initial investment:
Year 1= 6,600 - 27,250= -20,650
Year 2= 8,700 - 20,650= -11,950
Year 3= 9,100 - 11,950= -2,850
Year 4= 8,000 - 2,850= 5,150
To be more accurate:
(2,850/8,000)*365= 130
It will take 4 years and 130 days to recover for the initial investment.
Lott Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2020, Job 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $21,200, direct labor $12,720, and manufacturing overhead $16,960. As of January 1, Job 49 had been completed at a cost of $95,400 and was part of finished goods inventory. There was a $15,900 balance in the Raw Materials Inventory account.
During the month of January, Lott Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $129,320 and $167,480, respectively. The following additional events occurred during the month.
1. Purchased additional raw materials of $95,400 on account.
2. Incurred factory labor costs of $74,200. Of this amount $16,960 related to employer payroll taxes.
3. Incurred manufacturing overhead costs as follows:
Indirect materials $18,020
Indirect labor $21,200
Depreciation expense on equipment $12,720
Various other manufacturing overhead costs on account $16,960.
4. Assigned direct materials and direct labor to jobs as follows.
Job No. Direct Materials Direct Labor
50 $10,600 $5,300
51 41,340 26,500
52 31,800 21,200
Calculate the predetermined overhead rate for 2020, assuming Lott Company estimates total manufacturing overhead costs of $ 882,000, direct labor costs of $735,000, and direct labor hours of 21,000 for the year.
Answer:
Predetermined manufacturing overhead rate= $1.2 per direct labor dollar
Explanation:
Giving the following information:
Company estimates total manufacturing overhead costs of $882,000 and, direct labor costs of $735,000
To calculate the predetermined overhead rate, we need to use the following formula:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 882,000/735,000
Predetermined manufacturing overhead rate= $1.2 per direct labor dollar
Which of these is true about entrepreneurs? . A. Entrepreneurs are born not made . B. Anyone can start a business . C. Entrepreneurs are gamblers. D. Age is no barrier in entrepreneurship
Answer:
i think it is D
Explanation:
no matter how old you are one can bring up a new business
If someone has a power of attorney to sign the purchase agreement on behalf of the seller, which of the following would be the proper way to sign?
a. Philip Adams, seller
b. Philip Adams, by Alice Jackson, his attorney in fact
c. Alice Jackson, attorney in fact for the seller
d. Philip Adams, by his attorney in fact
Answer:
b. Philip Adams, by Alice Jackson, his attorney in fact
Explanation:
A power of attorney is the legal document in which it allows someone to act on behalf of you. In this, the person has the authority to act on behalf of the other person with respect to the legal, financial matters, etc
Here the proper way to sign is the option B
Philip Adams, by Alice Jackson, his attorney in fact
Therefore all the other options are wrong
New Harvest Bakery acquired all the outstanding common stock of Red Rock Bakery for $69,300 in cash. The book values and fair values of Red Rock's assets and liabilities were as follows: Book Value Fair Value Current assets $ 28,700 $ 22,300 Property, plant, and equipment 47,800 52,600 Other assets 3,500 5,800 Current liabilities 15,100 14,900 Long-term liabilities 29,000 21,400 Calculate the amount paid for goodwil
Answer:
Amount paid for goodwill is $24,900
Explanation:
Note: The data in the question are merged and they first sorted before answering the question as follows:
Book Value Fair Value
Current assets $ 28,700 $ 22,300
Property, plant, and equipment 47,800 52,600
Other assets 3,500 5,800
Current liabilities 15,100 14,900
Long-term liabilities 29,000 21,400
The explanation of the answer to the question are now provided as follows:
Generally, goodwill refers to an intangible asset of a company and it can be in different for such as intellectual property, brand, commercial secrets, and reputation.
Amount paid for goodwill of an acquired company can be estimated by deducting the fair value of net identifiable assets acquired from the consideration paid.
For this question, fair value of net identifiable assets can be calculated as follows:
Particular Fair Value ($)
Current assets 22,300
Property, plant, and equipment 52,600
Other assets 5,800
Current liabilities (14,900)
Long-term liabilities (21,400)
Fair value of net asset 44,400
Therefore, we have:
Amount paid for goodwill = Cash consideration paid - Fair value of net asset = $69,300 - $44,400 = $24,900
Ticket prices to a Kanye West concert increase from $40 to $60. As a result, ticket sales decrease from 50,000 to 40,000. The elasticity of demand for Kanye West tickets equals ________ and demand is ________.
Answer:
.4
Inelastic
Explanation:
Elasticity of Demand = |%Change in Demand / %Change in Price|
%Change in Demand= |(40,000 - 50,000)/50,000| = 20%
%Change in Price = |(60 - 40)/40| = 50%
Elasticity of Demand = .2/.5 = .4 or 40%
.4 < 1 so Demand is Inelastic
Ticket prices to a Kanye West concert increase from $40 to $60. As a result, ticket sales decrease from 50,000 to 40,000. The elasticity of demand for Kanye West tickets equals .40 and demand is inelastic.
What makes a product inelastic?The term "inelastic" refers to the static quantity of an item or service while its price fluctuates. Inelastic demand suggests that as prices rise, customers' purchasing habits remain relatively unchanged, and when prices fall, consumers' purchasing habits likewise remain relatively unchanged.
Given
Old Price =$40
New Price = $60
Old Quantity =50,000
New Quantity = 40,000
Required to calculate the elasticity of demand =?
the elasticity of demand = % change in Quantity divide % change in price
% change in Quantity = 50000 - 40000 / 50,0000 = 20%
% change in price = 40 - 60 / 40 = 50%
the elasticity of demand = 20 / 50 = 0.40
The percentage change in quantity demanded divided by the percentage change in price yields the price elasticity of demand. The demand is deemed elastic if the quotient is larger than or equal to one. Demand is termed inelastic if the value is less than one. The elasticity of demand for Kanye West tickets equals .40 and demand is inelastic.
Learn more about inelastic here:
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Suppose that in 1969, the U.S. economy was operating close to potential. The budget deficit experienced by the United States in 1969 was:
Answer: primarily cyclical deficit
Explanation:
Budget deficit occurs when the government expenditure for a certain year is more than the revenue the government makes.
Since the the United States economy was operating close to potential. The budget deficit experienced by the United States in 1969 was primarily cyclical deficit.
Poseidon Marine Stores Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Poseidon uses standard costs to prepare its flexible budget. For the first quarter of the year, direct materials and direct labor standards for one of their popular products were as follows:
Direct materials: pounds per unit; per pound
Direct labor: hours per unit; per hour
Poseidon produced units during the quarter. At the end of the quarter, an examination of the labor costs records showed that the direct labor cost variance was F. Which of the following is a logical explanation for this variance?
A. The company paid a lower cost for the direct materials than allowed by the standards.
B. The company used a lower quantity of direct materials than allowed by the standards.
C. The company paid a lower cost per hour for labor than allowed by the standards.
D. The company used fewer labor hours than allowed by the standards,
Answer:
The company paid a lower cost per hour for labor than allowed by the standards.
Explanation:
The labour cost variance is the difference between the standard labour cost allowed for the actual hours worked and the actual labor cost for the same hours
The labour cost variance compares the actual cost and the standard cost for the actual labour hours paid for.
Hence , Poseidon Marine Stores Company would have paid a sum for labour cost which is lower than the standard cost.
The company paid a lower cost per hour for labor than allowed by the standards.
What is the latest actual share count reported in the 2013 Colgate-Palmolive 10-K? Please provide your answer without comma separator or decimal.
Answer:
The latest actual share count reported in the 2013 Colgate-Palmolive 10-K:
1465706360 shares
Explanation:
Colgate-Palmolive actual share count as reported in the 2013 10-K is One Billion, Four Hundred and Sixty-Five Million, Seven Hundred and Six Thousand, Three Hundred and Sixty (1,465,706,360) shares. This figure represents the outstanding shares of the company, which are issued and fully paid, out of the 2 billion authorized shares. The outstanding shares multiplied with the market share price gives the market capitalization of Colgate-Palmolive.
Joy Manufacturing Company needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 25 percent of total sales each month. Historically, sales on account have been collected as follows: 50 percent in the month of the sale, 30 percent in the month after the sale, and the remaining 20 percent two months after the sale.
Gross sales for the quarter are projected as follows:
January $20,000
February $10,000
March $40,000
Accounts receivable on December 31 were $30,000.
Joy's expected cash collections for March would be:________.
A. $37,000
B. $32,000
C. $30,250
D. $47,200
Answer:
Total cash collection= $30,250
Explanation:
Giving the following information:
Cash sales are 25 percent of total sales each month.
Sales on account:
50 percent in the month of the sale
30 percent in the month after the sale
20 percent two months after the sale.
Sales:
January $20,000
February $10,000
March $40,000
We need to calculate the cash collection for March:
Sales on cash March= 40,000*0.25= 10,000
Sales on account March= (40,000*0.75)*0.5= 15,000
Sales on account February= (10,000*0.75)*0.3= 2,250
Sales on account January= (20,000*0.75)*0.2= 3,000
Total cash collection= $30,250
Jordan is the marketing head of Hastings Comprehensive Systems. He usually strives for long-term improvement rather than short-term profit, regardless of the economic environment. In the context of Deming's 14 points of quality, this is an example of
Answer:
Create constancy of purpose
Explanation:
Deming 14 points of quality are recommended management strategy to transform business effectiveness.
Deming postulated that by increasing quality one is able to reduce cost and increase efficiency of a business.
The first of his 14 points is to create a constancy of purpose. This is achieved by striving for long-term improvement rather than short-term profit, as is done by Jordan in the given scenario.
The 14 points of Deming are given below:
Create a constancy of purpose
Adopt the new philosophy
Stop depending on inspections
Using a single supplier for one item
Improve constantly and forever
Use training on the job
Implement leadership
Eliminate fear
Breakdown barriers between departments
Get rid of unclear slogans
Eliminate management by objectives
Remove barriers to pride of workmanship
Implement education and self improvement
Make transformation everyone's job
What are Red Bull's greatest strengths and risks as more companies (like Coca-Cola, Pepsi, and Monster) enter the energy drink category and gain market share?
Answer:
like that's Bom pom and manster also ĺine red if you need to visit a super market you can get a anergy drink and ask them for what do you need exactly.
Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows:
Year Plant Expansion Retail Store Expansion
1 $ 450,000 $ 500,000
2 450,000 400,000
3 340,000 350,000
4 280,000 250,000
5 180,000 200,000
Total $1,700,000 $1,700,000
Each project requires an investment of $900,000. A rate of 15% has been selected for the net present value analysis.
Present Value of $1 at Compound Interest
Year 6% 10% 12% 15% 20%
1 0.943 0.909 0.893 0.870 0.833
2 0.890 0.826 0.797 0.756 0.694
3 0.840 0.751 0.712 0.658 0.579
4 0.792 0.683 0.636 0.572 0.482
5 0.747 0.621 0.567 0.497 0.402
6 0.705 0.564 0.507 0.432 0.335
7 0.665 0.513 0.452 0.376 0.279
8 0.627 0.467 0.404 0.327 0.233
9 0.592 0.424 0.361 0.284 0.194
10 0.558 0.386 0.322 0.247 0.162
Required:
1a. Compute the cash payback period for each project.
Cash Payback Period
Plant Expansion < >1 year2 years3 years4 years5 years
Retail Store Expansion < >1 year2 years3 years4 years5 years
1b. Compute the net present value. Use the present value of $1 table above. If required, round to the nearest dollar.
Plant Expansion Retail Store Expansion
Present value of net cash flow total $ $
Less amount to be invested $ $
Net present value $ $
2. Because of the timing of the receipt of the net cash flows, the
plant expansion
retail store expansion
Answer:
the cash payback period for both projects is 2 years
NPV for plant expansion = $304,707.24
NPV for Retail Store Expansion = $309,744.41
retail store expansion has the greater NPV
Explanation:
Here is the full question for question 2
. Because of the timing of the receipt of the net cash flows, the
plant expansion
retail store expansion
has the higher net present value
Payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative cash flows
Please check the attached image for a calculation of how the payback period was calculated.
Net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
for Plant Expansion
Cash flow in year 0 = -900,000
Cash flow in year 1 = 450,000
Cash flow in year 2 = 450,000
Cash flow in year 3 = 340,000
Cash flow in year 4 = 280,000
Cash flow in year 5 = 180,000
I = 15%
NPV = $304,707.24
For retail store expansion
Cash flow in year 0 = -900,000
Cash flow in year 1 = 500,000
Cash flow in year 2 = 400,000
Cash flow in year 3 = 350,000
Cash flow in year 4 = 250,000
Cash flow in year 5 = 200,000
I = 15%
NPV = $309,744.41
retail store expansion has the greater NPV
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
Muckenthaler Company sells product 2005WSC for $30 per unit. The cost of one unit of 2005WSC is $27, and the replacement cost is $26. The estimated cost to dispose of a unit is $3, and the normal profit is 40% of selling price. At what amount per unit should product 2005WSC be reported, applying lower-of-cost-or-market
Answer:
The product 2005WSC should be reported at $26 per unit.
Explanation:
The lower-of-cost-or-market (LCM) method is a method of recording the inventory of a company which requires that the inventory cost of the company must recorded at whichever is lower between the inventory's original cost or current market price.
Applying lower-of-cost-or-market, the amount per unit at whcih product 2005WSC should be reported can be determined as follows:
Net realizable value (NRV) = Selling price per unit - Cost of disposal per unit = $30 - $3 = $27
Replacement cost (RC) = $26
NRV - Profit Margin = $27 - ($30 * 40%) = $15
Cost per unit = $27
Note that the market is the middle value of Net realizable value (NRV), $27; Replacement cost (RC), $26; and "NRV - Profit Margin", $15. Since the Replacement cost (RC) of $26 is the middle value, that the market value.
Since the market value of $26 per unit is lower than Cost per unit of $27, by applying lower-of-cost-or-market, the product 2005WSC should be reported at $26 per unit.