Answer:
Net value of the investment (margin) is $6,000
Explanation:
The initial margin = (100 shares * $80) * 50%
The initial margin = $4,000
Increase in the Margin value = 100 shares* ($100-$80)
Increase in the Margin value = 100 shares * $20
Increase in the Margin value =$2,000
Net value of the investment (margin) = $4,000 + $2,000
Net value of the investment (margin) = $6,000
New Morning Bakery is in the process of closing its operations. It sold its two-year-old bakery ovens to Great Harvest Bakery for $580,000. The ovens originally cost $778,000, had an estimated service life of 10 years, and an estimated residual value of $48,000. New Morning Bakery uses the straight-line depreciation method for all equipment. Required: 1. Calculate the balance in the accumulated depreciation account at the end of the second year.
Answer:
The balance in the accumulated depreciation account at the end of the second year is $146,000.
Explanation:
Straight line method charges a fixed depreciation charge on the asset during its period of use.
Depreciation Expense (Straight line) = Cost - Residual Amount ÷ Estimated Useful life
= $778,000 - $48,000 ÷ 10
= $73,000
Therefore, for each year, a depreciation expense of $73,000 is charged to profit an loss.
Accumulated Depreciation Calculation :
Depreciation Expense : Year 1 $73,000
Depreciation Expense : Year 2 $73,000
Total Expense $146,000
Most Company has an opportunity to invest in one of two new projects. Project Y requires a $345,000 investment for new machinery with a six-year life and no salvage value. Project Z requires a $345,000 investment for new machinery with a five-year life and no salvage value. The two projects yield the following predicted annual results. The company uses straight-line depreciation, and cash flows occur evenly throughout each year.
Project Y Project Z
Sales 360,000 288,000
Expenses
Direct materials 50,400 36,000
Direct labor 72,000 43,200
Overhead including depreciation 129,600 129,600
Selling and administrative expenses 26,000 26,000
Total expenses 278,000 234,800
Pretax income 82,000 53,200
Income taxes (38%) 31,160 20,216
Net income 50,840 32,984
Required:
a. Compute each project’s annual expected net cash flows.
b. Compute each project’s accounting rate of return.
c. Determine each project’s net present value using 6% as the discount rate. Assume that cash flows occur at each year-end.
Answer:
Most Company
a. Annual expected net cash flows:
Project Y Project Z
Net cash flows before tax 139,500 122,200
Expected net cash flows:
Income taxes (38%) 31,160 20,216
Net cash flows after tax 108,340 101,984
b. Accounting rate of return:
= Annual Net Income/Average Investment
Project Y:
= $50,840/$278,000 * 100
= 18.29%
Project Z:
= $32,984/$234,800 * 100
= 14.05%
c. Net Present Value, using 6% discount rate:
Annuity PV Project Y Project Z
Annuity factor = 4.212
Annuity of operating outflows 929,746 698,350
Initial Investments 345,000 345,000
Total PV of investments $1,274,746 $1,043,350
Annuity of cash inflows $1,516,320 $1,213,056
Net present value $241,574 $169,706
Explanation:
a) Data and Calculations:
1. Investments in Projects:
Project Y Project Z
Investments $345,000 $345,000
Project's life 6 years 5 years
Salvage value 0 0
Depreciation method = straight-line method
Annual Depreciation expenses $57,500 $69,000
2. Cash Inflows:
Sales 360,000 288,000
3. Cash Outflows:
Direct materials 50,400 36,000
Direct labor 72,000 43,200
Overhead 72,100 60,600
Selling & Admin. expenses 26,000 26,000
Total Operating Outflows 220,500 165,800
Net cash flows before tax 139,500 122,200
Expected net cash flows:
Income taxes (38%) 31,160 20,216
Net cash flows after tax 108,340 101,984
4. Accounting rate of returns calculations:
Project Y Project Z
Annual Net income $50,840 $32,984
Project's life 6 years 5 years
Initial Investments 345,000 345,000
Annual Cash Outflows 220,500 165,800
Total Cash Outflows 1,323,000 829,000
Total Investments 1,668,000 1,174,000
Average Investments $278,000 $234,800
Average investments = total investments/number of project's years.
5. Most Company's accounting rate of return measures the average annual net income as a percentage of the average investments, without considering the time value of money.
6. Most Company's NPV or net present value of a project calculates the difference between the present values of the inflows and the outflows of a project over its life.
Many gas stations with convenience stores sell gas at, or close to, cost. In these organizations, profit comes from the convenience store's products and gas is priced to
Answer: build traffic.
Explanation:
The pricing model employed by such gas stations is built in a way to drive traffic. traffic is important and has an impact in many ways 1. low traffic can bog your business down at some level.
2. When you increase your traffic along with the quality of the visitors, the better you will be able to increase your sales.
traffic in this context refers to customers the more you are able to pull customers over the more sales you make.
Kemp Corporation manufactures a variety of parts for use in its product. The company has always produced all of the necessary parts for its product, including all of the electronic circuits. The company sells 18,000 units of its product per year. An outside supplier has offered to sell electronic circuits to the company for a cost of $40 per unit. To evaluate this offer, the company has gathered the following information relating to its own cost of producing the electronic circuits internally: Per Unit 18,000 Units per Year Direct materials $ 18 $ 324,000 Direct labor 9 162,000 Variable manufacturing overhead 2 36,000 Fixed manufacturing overhead, traceable 9 * 162,000 Fixed manufacturing overhead, allocated 12 216,000 Total cost $ 50 $ 900,000 *One-third supervisory salary; two-thirds depreciation of special equipment (no resale value). Suppose that if the electronic circuits were purchased, the division supervisor position could be eliminated. Fixed manufacturing overhead will be allocated to other products made by the company. Also, the company could use the freed production capacity to launch a new product. The segment margin of the new product would be $180,000 per year. Given this new assumption, how much would be the financial advantage of buying 18,000 electronic circuits from the outside supplier
Answer:
financial advantage of purchasing from outside vendor = $36,000
Explanation:
outside vendor offers 18,000 units at $40 per unit = $720,000
current production costs (for 18,000 units):
Direct materials $324,000 Direct labor $162,000 Variable manufacturing overhead $36,000 Fixed manufacturing overhead, traceable $162,000 ($54,000 avoidable)Fixed manufacturing overhead, allocated $216,000 (not avoidable)Total cost $900,000total avoidable costs = $576,000
additional revenue generated by freed facilities = $180,000
financial advantage of purchasing from outside vendor = ($576,000 + $180,000) - $720,000 = $36,000
The bargaining power of suppliers is low when Review Later Few substitute inputs are available Suppliers are large or concentrated There are many alternative suppliers Switching costs are high
Answer:
There are many alternative suppliers
Explanation:
Bargaining power of suppliers is one of Porters Five Forces. It refers to the extent to which a supplier can exert influence over buyers.
If there are many suppliers and a supplier raises price, consumer can easily change suppliers. But if the cost of changing suppliers is high (Switching costs), consumers would have less incentive to change suppliers. Thus, the bargaining power of suppliers would be high.
If there are few substitutes, there are few alternatives to the product offered by the supplier. so, the bargaining power of the supplier is high because consumers have little alternatives to the suppliers product.
our parents have made you two offers. The first offer includes annual gifts of $5,000, $6,000, and $8,000 at the end of each of the next three years, respectively. The other offer is the payment of one lump sum amount today. You are trying to decide which offer to accept given the fact that your discount rate is 6.2 percent. What is the minimum amount that you will accept today if you are to select the lump sum offer? D) $17,709.48 C) $16,360.42 B) $16,407.78 E) $17,856.42 A) $16,707.06
Answer:
A) $16,707.06
Explanation:
The computation of the minimum amount is shown below:
Here we find the present value which is shown below:
(in dollars) (in dollars)
Year Cash flows Discount factor Present value
1 5000 0.9416195857 4708.098
2 6000 0.8866474442 5319.885
3 8000 0.834884599 6679.077
Total 16707.059
The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on account):
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Budgeted unit
sales 12,200 13,200 15,200 14,200
The selling price of the company’s product is $21 per unit. Management expects to collect 65% of sales in the quarter in which the sales are made, 30% in the following quarter, and 5% of sales are expected to be uncollectible. The beginning balance of accounts receivable, all of which is expected to be collected in the first quarter, is $72,600.
The company expects to start the first quarter with 2,440 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 20% of the next quarter’s budgeted sales. The desired ending finished goods inventory for the fourth quarter is 2,640 units.
Required
1-A. Complete the company's sales budget.
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Budgeted Units Sales
Selling Price Per Unit
Total Sales
1-B. Complete the schedule of expected cash collections.
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Beginning Accts Receivable
1st Quarter Sales
2nd Quarter Sales
3rd Quarter Sales
4th Quarter Sales
Total Cash Collections
2. Prepare the company’s production budget for the upcoming fiscal year.
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Budgeted Unit Sales
Total Needs
Required Production in Units
Answer:
1-A. Sales budget
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Year
Sales units 12,200 13,200 15,200 14,200 54,800
Price per unit $21 $21 $21 $21 $21
Total sales $256,200 $277,200 $319,200 $298,200 $1,150,800
1-B. Cash collections budget
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Year
Collections from $72,600 $76,860 $83,160 $95,760 $72,600
previous quarter
Collections from $166,530 $180,180 $207,480 $193,830 $1,003,900
current quarter
Total $239,130 $257,040 $290,640 $289,690 $1,076,500
2. Productions budget
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Year
Sales units 12,200 13,200 15,200 14,200 54,800
Planned ending 2,640 3,040 2,840 2,640 2,640
inventory
Total production 14,840 16,240 18,040 16,840 65,960
required
- Beginning 2,440 2,640 3,040 2,840 2,440
inventory
Units to be 12,400 13,600 15,000 14,000 63,520
produced
Answer:
sells budget
Explanation:
On January 1, Power House Co. prepaid the annual rent of $10,140. Prepare the journal entry to record this transaction.
Answer and Explanation:
The journal entry to record the given transaction is shown below:
Prepaid rent Dr $10,140
To Cash $10,140
(Being the prepaid annual rent paid in cash is recorded)
For recording this we debited the prepaid rent as it increased the assets and credited the cash as it reduced the cash so that the proper posting could be done
Suppose your yearly demand for renting DVDs is Q = 20 − 4P. If there is a rental club that charges $2 per rental plus an annual membership fee, what is the most that you would be willing to pay for the annual membership fee?
Answer:
$12
Explanation:
If P = $2 then the Q will be;
Q = 20 - 4 * 2
Q = 20 - 8
Q = 12
The maximum annual membership fee will be equal to the amount of demand. The annual membership fee cannot be greater than the demand function if so there will be decline in the demand.
Using the tables above, if an investment is made now for $17,550 that will generate a cash inflow of $5,850 a year for the next four years, what would be the net present value (rounded to the nearest dollar) of the investment, assuming an earnings rate of 10%
Answer:
$993.71
Explanation:
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
Cash flow in year 0 = $-17,550
Cash flow each year from year 1 to 4 = $5,850
I = 10%
NPV = $993.71
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
Seven Manufacturing Corporation uses both standards and budgets. The company estimates that production for the year will be 100,000 units of Product Fast. To produce these units of Product Fast, the company expects to spend $600,000 for materials and $800,000 for labor.
Required:
Compute the estimates for a standard cost.
Answer:
Unitary cost= $14
Explanation:
Giving the following information:
Production= 100,000
To produce these units of Product Fast, the company expects to spend $600,000 for materials and $800,000 for labor.
First, we need to calculate the total cost and then the unitary cost:
Total cost= 600,000 + 800,000= $1,400,000
Unitary cost= 1,400,000/100,000= $14
Because of the ability to override internal controls, it is usually most difficult to prevent which type of fraud?
Answer: The fraud that is committed by a company president
Explanation:
Because of the ability to override internal controls, it is difficult to prevent the fraud that is committed by a company president.
Overiding the existing rules and policies guiding the organization makes it hard for the president Frau to be prevented.
2. Roth retirement funds require you to pay taxes on your investment dollars up-front, while
traditional IRAs allow you to pay taxes only when you withdraw your investment at age 59.5 or
older. What are the pros and cons of each option?
(10 points: 5 for at least one pro and 5 for at least con)
Answer:
The Pros and Cons of Roth IRA and the Traditional IRA or 401(K):
Roth IRA is not advantageous to those, who are starting to save late in their career. It favors the younger worker, who is starting out with low-paying jobs at lower-paying tax rates, who will later be earning more.
With Roth IRA, you suffer the tax burden upfront when you are active and while making your contributions, so that you can enjoy your retirement benefits tax-free. This is why the younger worker benefits more. In the prime of life with little responsibilities, you can settle the taxman so that you can be free of him later in older age. But, if you are in the high tax bracket, this category is not funny for you, anyway. The IRS has an income limit for this category, therefore, you must go for the traditional IRA.
The traditional IRA saves you the tax burden initially, but you can never be free of the IRS. It must take its share later, having allowed you to enjoy tax-free contributions. When the net is filled, the IRS cuts its percentage off.
You will never feel bad then, because your tax rate will surely be reduced in comparison with when you are making the contributions. So, it is just and right to allow the IRS, who generously helped you to grow the nest in the first place to take its just and lawful cut. It does not bleed too much then, afterall you are drying up with life's responsibilities, including reduced tax bracket, and many of your children have started answering to the IRS independently. This is the better time to deal with IRS, anyway.
Explanation:
The question has the explanation: ROTH IRAs are retirement funds that allow you to pay taxes on your investments into retirement funds as you are making the contributions, so that you are free to make your withdrawals after at least 5 years without paying additional taxes.
The traditional IRAs or the 401(K) encourage you to make your retirement contributions without paying taxes on them so that you can contribute more. Then the IRS will bounce on you to pay the taxes when you are making withdrawals having grown the investments.
IRAs mean Individual Retirement Accounts which individuals use to save and accumulate their retirement funds.
The Herfindahl-Hirschman Index (HHI) is a mathematical approach to understanding market concentration that provides a single concentration indicator. What is the HHI for an industry characterized by the below noted data?
a. Firm 1 has a market share of 40%
b. Firm 2 has a market share of 20%
c. Firm 3 has a market share of 15%
d. Firm 4 has a market share of 15%
e. Firm 5 has a market share of 10%
HHI=___
Answer: 2,550
Explanation;
The Herfindahl-Hirschman Index (HHI) is used to measure market saturation to see the concentration of a market. It ranges from around 0 to 10,000 and is calculated by squaring the market share of every firm in the market and then adding the squares up.
= 40² + 20² + 15² + 15² + 10²
= 1600 + 400 + 225 + 225 + 100
= 2,550
At the beginning of the school year, Craig Kovar decided to prepare a cash budget for the months of September, October, November, and December. The budget must plan for enough cash on December 31 to pay the spring semester tuition, which is the same as the fall tuition. The following information relates to the budget: Cash balance, September 1 (from a summer job) $9,250 Purchase season football tickets in September 160 Additional entertainment for each month 250 Pay fall semester tuition in September 4,800 Pay rent at the beginning of each month 600 Pay for food each month 550 Pay apartment deposit on September 2 (to be returned December 15) 600 Part-time job earnings each month (net of taxes) 950Required:a. Prepare a cash budget for September, October, November, and December. b. Are the four monthly budgets that are presented prepared as static budgets or flexible budgets?c. What are the budget implications for Craig Kovar?
Answer:
a) Craig Novar's
Cash budget
Months
Sept. Oct. Nov. Dec.
beginning balance 9,250 2,640 2,190 1,740
football tickets -160
other entertainment -250 -250 -250 -250
semester tuition -4,800
rent -600 -600 -600 -600
food -550 -550 -550 -550
apartment deposit -600 600
part time jobs earnings 950 950 950 950
ending balance 2,640 2,190 1,740 1,890
b) This is a static budget because it is being prepared in advance. A flexible budget adjusts a static budget to the real cash outflows and inflows.
c) Since Craig is spending more money than what he earns, his cash balance is decreasing month by month. This tendency changes in December because Craig gets his apartment's deposit back, but he still will not have enough money to pay for Spring tuition.
All of the following are disadvantages of using the average rate of return except a.The average rate of return method does not consider the expected timing of the expected cash flows. b.The average rate of return method does not use present values. c.The average rate of return method does not use the expected cash flows from the proposal. d.All of these choices are disadvantages.
Answer:
D
Explanation:
average rate of return = average net income / average book value
an advantage of average rate of return is that it is easy to calculate.
its disadvantages include :
a.The average rate of return method does not consider the expected timing of the expected cash flows like the NPV and IRR method.
b.The average rate of return method does not use present values.
c.The average rate of return method does not use the expected cash flows from the proposal. it makes use of accounting values instead.
risk-free assets have a beta of 0 and the market portfolio has a beta of 1. true or false true false
Answer: true
Explanation:
The term risk free assets are the assets that are secure because they are expected to bring about a return while the Beta is used to know the volatility of a portfolio when it is compared to the entire market.
Risk-free assets typically have zero beta since they're risk free. Therefore, risk-free assets have a beta of 0 and the market portfolio has a beta of 1 is true.
Media selection problems can maximize exposure quality and use number of customers reached as a constraint, or maximize the number of customers reached and use exposure quality as a constraint.
A. True
B. False
Media selection problems can maximize exposure quality and use the number of customers reached as a constraint, or maximize the number of customers reached and use exposure quality as a constraint. Thus the statement is True.
What is Media?Media is referred to as a medium of communication used to exchange information about events happening in the world. This provides information about the issues and challenges rising in the world and creates awareness among the public.
These issues can utilize the number of customers reached as a limitation and can enhance exposure quality by determining how commonly to use each media source. The value of the objective function will be modified by the dual price sum of the restrictions.
Therefore, the statement is True.
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Standards are set by a.manufacturing engineers. b.accountants. c.other management personnel. d.All of these choices are correct
Answer: d.All of these choices are correct.
Explanation: all of the listed options all make use of standar, manufacturing engineer, accountant, and other management personnel make use of standards to estimate the acceptable production efficiency. Standards are also set by this personnel’s to motivate employees so as to achieve efficient operations and use of man power.
Suppose a monopolist's costs and revenues are as follows: ATC = $50.00; MC = $35.00; MR = $45.00; P = $55.00. The firm should
Answer:
The firm should increase output and reduce price
Explanation:
For a monopolist, there can be one of the following three scenarios at a time point in time:
Scenario one, MR = MC: For a monopolist, profit is maximized at the point where marginal revenue (MR) is equal to to marginal cost (MC), i.e. where MR = MC.
Scenario two, MR < MC: But when the MR < MC, it indicates that the monopolist is currently producing a higher quantity of output and it is not maximizing profit. In order to maximize profit, the monopolist has to reduce output until MR = MC.
Scenario three , MR > MC: But when the MR > MC, it indicates that the monopolist is currently producing a lower quantity of output and it is not maximizing profit. In order to maximize profit, the monopolist has to increase output until MR = MC. Also, the monopolist has to reduce price in order to sell the increased quantity of output.
From the question, the monopolist falls into scenerio three as MR > MC, i.e. $45 > $35. Therefore, the monopolist should increase output until MR = MC and reduce price in order to maximize profit.
Jenny Corp. needs to raise $53 million to fund a new project. The company will sell shares at a price of $29.00 in a general cash offer and the company's underwriters will charge a spread of 7.5 percent. The direct flotation costs associated with the issue are $925,000. How many shares need to be sold?
Answer:
2,010,252 Shares
Explanation:
The funds that are to be raised = $53,000,000
Spread = 7.5%
Share price = $29.00
Flotation cost with issue = 925,000
We have that:
(53000000+925000)/92.5 * 100
(539,250,000/92.5)x100
= $58297.973 x 100
= $58297297.3
The offer per share is placed at $29.00
So to get the number of shares sold:
$58297297.3 / $29.00
= 2,010,252 shares are to be sold.
When customers interact with technology and machines, the variability of the service encounter is reduced by
Answer: The standardization of equipment
its the right answer trust me !
When customers interact with technology and machines, the variability of the service encounter is reduced by the standardization of equipment. Thus, the correct option is C). the standardization of equipment
What is the importance of standardization of equipment?Standardization refers to the process of making something by implementing and developing technical standards. Standardization of equipment means improving the quality of equipment.
Standardization results in the improved clarity which makes the individual clear about about what they what they need to do and guesswork is eliminated. It offers higher quality by which employees can refine their methods and produce better results.
It also results in increased productivity as tasks become faster and easier with repetition.
Complete question is here:- When customers interact with technology and machines, the variability of the service encounter is reduced by A). societal norms B). complexity C). the standardization of equipment D). the customer's preferences
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Which of the following goals of a performance evaluation system is accomplished when the company's actual results are compared to industry standards?
A) Benchmarking
B) Motivating unit managers
C) Promoting goal congruence
D) Providing feedback
Answer:
A) Benchmarking
Explanation:
Benchmarking refers to a process in which the performance of the company could be measured with respect to the product, services, processes as compared with the industry performance
Here in the given situation, when an actual result is compared with the industry standards than we called as a benchmarking and the same is to be used for the evaluation of the performance system
Emira wants to buy a classic drawing from an art centre in Kuala Lumpur. She managed to secure a painting by a renowned Malaysian artist that costs her RM99,800. Currently, she only has RM12,650 in her savings account and she intends to use 70% of her saving to fund the purchase. If she borrows the remaining amount from Bank Atlantis that levies 4.77% of interest rates, determine the total interest payment that she will pay if the agreement takes 10 years of settlement.
Answer:
RM23,617.80
Explanation:
cost of the painting RM99,800
she has RM12,650 on her bank account and she will use 70% = RM8,855 as down payment. She will borrow the rest = RM99,800 - RM8,855 = RM90,945
interest charged on the loan 4.77% / 12 = 0.3975%
120 monthly periods (10 years)
using the present value formula to determine the monthly payment:
PV = monthly payment x annuity factor
monthly payment = PV / annuity factor
PV = 90,945
annuity factor (120 periods, 0.3975%) = 95.26168
monthly payment = 90,945 / 95.26168 = 954.69
total payments = 120 x 954.69 = RM114,562.80
interests paid = RM114,562.80 - RM90,945 = RM23,617.80
Sonny's BBQ Company recently issued $85 par value preferred stock that pays an annual dividend of $9. Analysts estimate that the stock has a beta of 1.01. The current T-bill rate is 2.4%. The S&P 500's expected return is 12.1%. Assuming that CAPM holds, what is the intrinsic value of this preferred stock?
Answer:
Intrinsic value=$73.77
Explanation:
The Dividend Valuation Model(DVM) is a technique used to value the worth of an asset.
According to this model, the value of an asset is the sum of the present values of the future cash flows would that arise from the asset discounted at the required rate of return.
Price = D/Kp
D- Dividend payable
Kp- cost of preferred stock
So will need to work out the cost of equity using CAPM
The capital asset pricing model (CAPM): relates the price of a share to the market risk or systematic risk. The systematic risk is that which affects all the all the economic agents, e.g inflation, interest rate e.t.c
This model is considered superior to DVM. Hence, we will use the CAPM
Using the CAPM , the expected return on a asset is given as follows:
E(r)= Rf +β(Rm-Rf)
E(r) =? , Rf- 2.4%, Rm- 12.1% β- 1.01
E(r) = 2.4% + 1.23×(12.1- 2.4)% = 12.20 %
Cost of preferred stock= 12.20 %
Using the dividend valuation model
Intrinsic value = 9/0.1220=73.77
Intrinsic value=$73.77
Sheffield Auto Supply does not segregate sales and sales taxes at the time of sale. The register total for March 16 is $19,902. All sales are subject to a 7% sales tax. Compute sales taxes payable. Sales taxes payable
Answer:
Sales tax = Total sales / 100 + Sales Tax rate * Sales Tax rate
Sales tax = {$19,902 / (100 + 7)} * 7
Sales tax = ($19,902 / 107) * 7
Sales tax = $1,302
Date Account Title and Explanation Debit Credit
Cash $19,902
Sales Tax payable $1,302
Sales revenue $18,600
($19,902 / 107 * 100)
(To record sales and sales taxes payable)
Answer:
1,302
Explanation:
Sales without tax x (100%+sales tax rate) = sales with tax
sales without tax x 1.07 (100%+7%) = 19902
sales without tax = 19902/1.07
sales without tax = 18600
sales with tax - sales without tax = sales tax payable
19902 - 18600 = 1302
As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting, or sustainable, growth model helps a firm assess how rapidly it can grow, while maintaining a balance between its cash outflows (increases in noncash assets) and inflows (funds resulting from increases in liabilities or equity). Consider the following case of Bohemian Manufacturing Company: Bohemian Manufacturing Company has no debt in its capital structure and has $300,000,000 in assets. Its sales revenues last year were $120,000,000 with a net income of $2,000,000. The company distributed $180,000 as dividends to its shareholders last year. Given the information above, what is Bohemian Manufacturing Company’s sustainable growth rate? 0.0601562% 0.5181384% 0.61% 4.1464268% Which of the following are assumptions of the sustainable (self-supporting) growth model? Check all that apply. The firm maintains a constant net profit margin. The firm’s liabilities and equity must increase at the same rate. The firm pays no dividends. The firm maintains a constant ratio of liabilities to equity.
Answer:
Sustainable growth rate = 0.67148%
The firm maintains a constant ratio of liabilities to equity.
Explanation:
Sustainable growth rate = ROE *Plow back Ratio / (1-ROE * Plow back Ratio)
When ROE = Net Income / Total Assets
= $2,000,000/$300,000,000
= 0.00667
Plow back Ratio = 1 - (Dividend / Net Income)
= 1 - ($180,000/$2,000,000)
= 1 - 0.09
=0.91
Sustainable growth rate = ROE * Plow back Ratio / (1-ROE * Plow back Ratio)
= 0.00667 * 0.91 / (1 - 0.00667 * 0.91)
= 0.0060697 / 0.9039303
=0.0067148
= 0.67148%
Therefore, the sustainable growth rate is 0.67148%
The firm maintains a constant ratio of liabilities to equity is the correct assumption for the sustainable growth model.
Jamie has worked for ABC Printing for 5 years. During this period ABC Printing has contributed $25,000 to her non-contributory retirement plan. Assuming ABC uses graded schedule vesting, how much will Jamie be able to roll into an IRA if she left ABC Printing after 5 years?
Answer:
$20,000
Explanation:
Generally a graded vesting schedule lasts 6 years. After the first 2 years, the employee is entitled to 20% of accrued benefits (in this case contributions to her retirement plan). Then, the employee will be vested an additional 20% of the contribution benefits per year until the sixth year when 100% of the benefits are vested.
In this case, Jamie would be able to roll out $25,000 x 80% = $20,000
End of year % vested
2 20%
3 40%
4 60%
5 80%
6 100%
In your own words, assess the process of international strategy, competencies, planning, and international competitive advantage.
Explanation:
An international strategy can be understood as the set of processes and action plans that a company will implement to achieve its objectives in an external market.
An organization decides to internationalize its activities with the objective of conquering a different market that can bring different competitive and financial benefits to the company.
To be successful, the organizational strategy must comprise the set of requirements that must be followed to include itself in a different market, such as, for example, the set of policies that will guide the operation of the business.
In addition, it is necessary to plan its activities in such a way that they are in line with the fundamental requirements of the country, such as multicultural norms, values, tastes, preferences, etc.
Companies generally use internationalization as a competitive strategy, since this can be an effective means of reducing costs, due to the cheaper labor and the less bureaucratic process. A well-positioned brand also guarantees a differential that adds to the ease of an organization being successful in the process of conquering new markets.
Peter Parker is evaluating two different methods for manufacturing spiderwebs. The first option is manufacturing them in his home lab. This will entail purchasing an industrial-grade chemical reactor that costs $450,000. He will have to hire a lab assistant who will initially receive a salary of $60,000 a year, but that salary must be adjusted for inflation every year at an inflation rate of 2.5%. After ten years, the chemical reactor can be sold for $30,000. This lab setup can produce 10,000 cubic meters of spiderwebs per year.
The second option is outsourcing all the manufacturing process to a biotech company recently set up by Bruce Banner. In this case, the price of the spiderwebs will be $14 per cubic meter over the next ten years.
Since Peter Parker is a broke student, all of this project is being financed by a superhero fund set up by his late friend and mentor Tony Stark. This fund returns 11% annually. Since this is not a commercial endeavor, there are no taxes nor depreciation to consider. Given these data, calculate the unit price of manufacturing spiderwebs in the lab and decide which of the two options makes the most economic sense. Justify your answers with calculations.
Answer:
Option B makes the most economic sense.
Explanation:
Option A:
The total Initial investment amount - $450,000 + $60,000 = $510,000 total Initial investment cost excluding the adjustment for inflation every year of the staff.
Per unit manufacturing cost= $510,000 ÷ 10, 000 (cubic meters of spiderwebs per year) = $51 (implying the selling price per unit will be higher than this).
Option B:
Initial total investment cost = $0 (he only outsourced)
Per unit manufacturing cost= less than $14 (because the price of the spiderwebs will be $14 per cubic meter over the next ten years).
By outsourcing following option B, Peter would avoid the massive initial investment cost of buying the industrial-grade chemical reactor that costs $450,000. Also, since this is not a commercial endeavor he needs to be wary of the lower cost per unit of the spiderwebs he stands to gain with option B.