Answer:
Dunne Co.
Schedule of Cost of Goods Sold
FIFO Method
For the Three Months Ended June 30
Purchases Cost of Goods Sold Inventory
Date Description Quantity Unit Cost Total Cost Sales
Apr. 3 Inventory 48 $150 $7,200
Apr. 8 Purchase 96 180 17,280
Apr. 11 Sale 64 500 32,000
Apr. 30 Sale 40 500 20,000
May 8 Purchase 80 200 16,000
May 10 Sale 48 500 24,000
May 19 Sale 24 500 12,000
May 28 Purchase 80 220 17,600
June 5 Sale 48 525 25,200
June 16 Sale 64 525 33,600
June 21 Purchase 144 240 34,560
June 28 Sale 72 525 37,800
June 30 Total 448 360 $92,640 $184,600
June 30 Balances 88 $240 $21,120
2. Determination of total sales and cost of goods sold and Journal Entries:
Debit Accounts Receivable $184,600
Credit Sales Revenue $184,600
To record the sales of goods on account for the period.
Debit Cost of Goods Sold $92,640
Credit Inventory $92,640
To record the cost of goods sold for the period.
3. Income Statement for determining the gross profit:
Sales Revenue $184,600
Cost of goods sold $92,640
Gross profit $91,960
4. Determination of the ending inventory cost of June 30:
Ending Inventory units = 88
Cost per unit (FIFO) = $240
Total = $21,120
5. The ending inventory would be lower if the ending inventory was valued using the Last-in, First-out (LIFO) method. The purchase price was increasing instead. Using LIFO means that ending inventory would be valued at the cost of the purchases in earlier months because of the assumption with LIFO that goods sold are from the last purchases instead of the earlier purchases.
Explanation:
If it is determined that your procurement scenario will not be conducted using full and open competition you are prohibited from purchasing a non-domestic product.
A. True
B. False
Answer:
Correct answer:
A. True
Explanation:
When procurement of goods and services is to be made from another country, it is expected that, it should be open and done in full view showing other competitors. This is to prevent fraud, such as the marking up of the price of goods or outright false declaration of the procurement prices.
Cash Payback Method Lily Products Company is considering an investment in one of two new product lines. The investment required for either product line is $540,000. The net cash flows associated with each product are as follows:
Year Liquid Soap Body Lotion
1 $170,000 $90,000
2 150,000 90,000
3 120,000 90,000
4 100,000 90,000
5 70,000 90,000
6 40,000 90,000
7 40,000 90,000
8 30,000 90,000
Total $720,000 $720,000
A. Recommend a product offering to Lily Products Company, based on the cash payback period for each product line.
Payback period for liquid soap
Payback period for body lotion
B. The project with the_____net cash flows in the early years of the project life will be favored over the one with the______net cash flows in the initial years.
Answer:
1a. Payback period for LIQUID SOAP =4 years
Payback period for BODY LOTION =6 years
1b. GREATEST; LESS
Explanation:
1a.Calculation for the Payback period for liquid soap
LIQUID SOAP
Year Cash flow Cumulative Cash flow
1 $170,000 $170,000
2 (150,000+170,000) =320,000
3 (120,000+320,000)=440,000
4 (100,000+440,000)=540,000
5 (70,000+540,000)= 610,000
6 (40,000+610,000)= 650,000
7 (40,000+650,000)= 690,000
8 (30,000+690,000)= 720,000
The Payback period for LIQUID SOAP will be 4 years
Calculation for the Payback period of body lotion
BODY LOTIO
Year Cash flow Cumulative Cash flow
1 $90,000 $90,000
2 (90,000+90,000)=180,000
3 (90,000+180,000)=270,000
4 (90,000+270,000)=360,000
5 (90,000+360,000)=450,000
6 (90,000+450,000)=540,000
7 (90,000+540,000)=630,000
8 (90,000+630,000)=720,000
The Payback period for BODY LOTION will be 6 years
Based on the calculation above for both liquid soap and body lotion the product offering i will recommend to Lily Products Company, based on the cash payback period for each product line will be LIQUID SOAP because it has a 4 years payback period.
B. The project with the GREATEST net cash flows in the early years of the project life will be favored over the one with the LESS net cash flows in the initial years.
Read the scenario, and answer the question. Your friend Lorenzo is trying to decide on a career path. He has narrowed down his search to two choices. Before he selects a major, he wants to know more about the two careers and the skills needed for each profession. What advice would you give Lorenzo?
a. Volunteer at a nonprofit organization.
b. Monitor the classified ads.
c. Interview someone in each of your chosen fields.
Answer: Interview someone in each of your chosen fields.
Explanation:
From the question, we are informed that Lorenzo is trying to decide on a career path and that he has narrowed down his search to two choices but that before he selects a major, he wants to know more about the two careers and the skills needed for each profession.
The best advice is for him to interview someone in each of your chosen fields. By doing this, he'll be able to understand the options available to him and have better knowledge on both career paths and hence make a better decision.
Which section under Dispute Resolution in a CAR Buyer Representation Agreement states that a buyer and broker agree to mediate any dispute or claim arising before using court action or arbitration?
The answer to the question is Section 22A of Residential Purchase Agreement.
Dispute Resolution refers to the process by which the conflicts that takes place between two or more parties can be resolved.
Dispute Resolution can be done through negotiation, mediation, arbitration, e.t.c. C.A.R.
It should be noted that the buyer Representation Agreement refers to the document that indicates the terms and the conditions of an agreement that takes place between a buyer and the broker.
Lastly, the section that states that a buyer and broker agree to mediate any dispute or claim arising before using court action or arbitration is Section 22A of the Residential Purchase Agreement under the C.A.R. Buyer Representation Agreement.
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Which strategy is considered a timeout? captive company rebirth pause/proceed-with-caution contraction concentration
Answer: Pause/Proceed-with-caution
Explanation:
A timeout strategy refers to when a company decides to scale down a certain or certain operations for a time to effectively rest. The Pause/Proceed with caution strategy is a timeout strategy because it involves the company pausing operations to enable it assess the market before it can launch a bigger grand strategy.
This strategy is also employed when a company has gone through changes such as a serious expansion. They take a pause to enable the changes brought by the expansion to seep through the organization to give employees the chance to get acquainted with the changes so that moving forward, everyone is more or less on the same page.
Given the following cash flows for two mutually exclusive projects, and a required rate of return of 12%, what is the EAA for Project A? Year Project A Project B 0 -300,000 -300,000 1 150,000 70,000 2 150,000 70,000 3 80,000 120,000 4 80,000 120,000 5 120,000 6 60,000
Answer:
Explanation:
Required rate of return r = 12 % .
Cash flow of project A = 300000 , 150000 , 150000 , 80000 , 80000 , 120000.
NPV of project A
300000 + 150000 / 1.12 + 150000 / 1.12² + 80000 / 1.12³ + 80000 / 1.12⁴ +
120000 / 1.12⁵
= 300000 + 133928 +119579 + 56942 +50841 + 68091
= 729381 .
Equivalent annual annuity of Project A at the rate of 12 % .
729381 = NPVA of 1 at 12 %
729381 = A x 3.60478
A = 202337
EAA of project A is 202337 .
Barron, Inc. sold goods for on account. The company operates in a state that imposes a % sales tax. What is the amount of the sales tax payable to the state
Answer: A. $96,855
Explanation:
Sales taxes are a form of revenue for Government and are paid on certain goods and services.
The formula is;
Sales tax payable = Goods sold * Sales Tax rate
= 880,500 * 0.11
= $96,855
You have tickets to go to Jamaica over spring break. Just this week your best friend informs you that he (she) is getting married over spring break. Your friend would like you to stay back in the city and be the wedding attendant. The tickets to Jamaica are nonrefundable. Which of the following is a sunk cost relating to your decision of attending the wedding or going on the trip to Jamaica?
a. The cost of wedding gift.
b. The cost of the airline tickets to Jamaica.
c. The cost of the clothing you will have to buy/rent to be in the wedding.
d. The cost of the rent on your apartment for the month
Kendra, Cogley, and Mei share income and loss in a 3:2:1 ratio. The partners have decided to liquidate their partnership. On the day of liquidation their balance sheet appears as follows.
KENDRA, COGLEY, AND MEI
Balance Sheet
May 31
Assets Liabilities and Equity
Cash $ 103,900 Accounts payable $ 258,000
Inventory 537,600 Kendra, Capital 76,700
Cogley, Capital 172,575
Mei, Capital 134,225
Total assets $641,500 Total liabilities and equity $641,500
Required:
For each of the following scenarios, complete the schedule allocating the gain or loss on the sale of inventory. Prepare journal entries to record the below transactions. (Do not round intermediate calculations. Amounts to be deducted or Losses should be entered with a minus sign. Round your final answers to the nearest whole dollar.)
(1) Inventory is sold for $608,400.
(2) Inventory is sold for $469,200.
(3) Inventory is sold for $358,800 and any partners with capital deficits pay in the amount of their deficits.
(4) Inventory is sold for $298,800 and the partners have no assets other than those invested in the partnership.
Complete this question by entering your answers in the tabs below.
Required:
Inventory
Complete the schedule allocating the gain or loss on the sale of inventory is $608,400.
1. Record the sale of inventory.
2. Allocate the gain(loss) on the sale of inventory to the partners.
3. Record the payment of the liabilities.
4. Record the disbursement of the remaining cash to the partners.
Answer
1)a
Dr Cash 608,400
Cr Inventory 537,600
Cr Gain on Sale of Inventory 70,800
b.
Dr Gain on Sale of Inventory 70,800
Cr Kendra' Capital 35,400
Cr Cogley's Capital 23,600
Cr Mei' Capital 11,800
c.
Dr Accounts Payable 258,000
Cr Cash 258,000
d.
Dr Kendra' Capital 112,100
Dr Cogley's Capital 196,175
Dr Mei, Capital 146,025
Cr Cash 454,300
2a.
Dr Cash 469,200
Dr Loss on Sale of Inventory 68,400
Cr Inventory 537,600
b.
Dr Kendra' Capital 34,200
Dr Cogley's Capital 22,800
Dr Mei' Capital 11,400
Cr Loss on sale of Inventory 68,400
c.
Dr Accounts Payable 258,000
Cr Cash 258,000
d.
Dr Kendra' Capital 42,500
Dr Cogley's Capital 149,775
Dr Mei' Capital 122,825
Cr Cash 315,100
3a.
Dr Cash 358,800
Dr Loss on Sale of Inventory 178,800
Cr Inventory 537,600
b.
Dr Kendra' Capital 89,400
Dr Cogley's Capital 59,600
Dr Mei' Capital 29,800
Cr Loss on sale of Inventory 178,800
c.
Dr Cash 12,700
Cr Kendra' Capital 12,700
d.
Dr Accounts Payable 258,000
Cr Cash 258,000
e.
Dr Cogley's Capital 17,100
Dr Mei' Capital 104,425
Cr Cash 121,525
4a.
Dr Cash 298,800
Dr Loss on Sale of Inventory 238,800
Cr Inventory 537,600
b.
Dr Kendra' Capital 119,400
Dr Cogley's Capital 79,600
Dr Mei' Capital 39,800
Cr Loss on sale of Inventory 238,800
c.
Dr Cogley's Capital 28,466
Dr Mei' Capital 14,234
Cr Kendra' Capital 42,700
d.
Dr Accounts Payable 258,000
Cr Cash 258,000
e.
Dr Cogley's Capital 64,509
Dr Mei' Capital 80,191
Cr Cash 144,700
Explanation:
Preparation of the Prepare journal entries to record the sales of inventory
1)a
Dr Cash 608,400
Cr Inventory 537,600
Cr Gain on Sale of Inventory 70,800
(608,000-536,600)
b
Dr Gain on Sale of Inventory 70,800
(608,000-536,600)
Cr Kendra' Capital 35,400
(3/6×70,800)
Cr Cogley's Capital 23,600
(2/6×70,800)
Cr Mei' Capital 11,800
(1/6×70,800)
c.
Dr Accounts Payable 258,000
Cr Cash 258,000
d.
Dr Kendra' Capital 112,100
(76,700+35,400)
Dr Cogley's Capital 196,175
(172,575+23,600)
Dr Mei, Capital 146,025
(134,225+11,800)
Cr Cash 454,300
(112,100+196,175+146,025)
2)Preparation of the Journal entries to Allocate the gain(loss) on the sale of inventory to the partners.
a.
Dr Cash 469,200
Dr Loss on Sale of Inventory 68,400
(469,200-537,600)
Cr Inventory 537,600
b.
Dr Kendra' Capital 34,200
(3/6×68,400)
Dr Cogley's Capital 22,800
(2/6×68,400)
Dr Mei' Capital 11,400
(1/6×68,400)
Cr Loss on sale of Inventory 68,400
c.
Dr Accounts Payable 258,000
Cr Cash 258,000
d.
Dr Kendra' Capital 42,500
(76,700-34,200)
Dr Cogley's Capital 149,775
(172,575-22,800)
Dr Mei' Capital 122,825
(134,225-11,400)
Cr Cash 315100
(42,400+149,775+122,825)
3)Preparation of the Journal entries to Record the payment of the liabilities
a.
Dr Cash 358,800
Dr Loss on Sale of Inventory 178,800
(358,800-537,500)
Cr Inventory 537,600
b.
Dr Kendra' Capital 89,400
(3/6×178,800)
Dr Cogley's Capital 59,600
(2/6×178,800)
Dr Mei' Capital 29,800
(1/6×178,800)
Cr Loss on sale of Inventory 178,800
(89,400+59,600+29,800)
c.
Dr Cash 12,700
Cr Kendra' Capital 12,700
(76,700 - 89,400)
d.
Dr Accounts Payable 258,000
Cr Cash 258,000
e.
Dr Cogley's Capital 17,100
(76,700-59,600)
Dr Mei' Capital 104,425
(134,225-29,800)
Cr Cash 121,525
(17,100+104,425)
4) Preparation of the Journal entries to Record the disbursement of the remaining cash to the partners
a.
Dr Cash 298,800
Dr Loss on Sale of Inventory 238,800
(298,800-537,600)
Cr Inventory 537,600
b.
Dr Kendra' Capital 119,400
(3/6×238,800)
Dr Cogley's Capital 79,600
(2/6×238,800)
Dr Mei' Capital 39,800
(1/6×238,800)
Cr Loss on sale of Inventory 238,800
(119,400+79,600+39,800)
c.
Dr Cogley's Capital 28,466
(2/3×42,700)
Dr Mei' Capital 14,234
(1/3×42,700)
Cr Kendra' Capital 42,700
(76,700 - 119,400)
d.
Dr Accounts Payable 258,000
Cr Cash 258,000
e.
Dr Cogley's Capital 64,509
(172,575 - 79,600 - 28,466)
Dr Mei' Capital 80,191
(134,225 - 39,800 - 14,234)
Cr Cash 144,700
(80,191+64,509)
Mauro Products distributes a single product, a woven basket whose selling price is $20 per unit and whose variable expense is $17 per unit. The company’s monthly fixed expense is $8,100. Required: If the company's fixed expenses increase by $600, what would become the new break-even point in dollar sales?
Answer:
the new break-even point in dollar sales is $29,000.
Explanation:
Break even point is the level of activity where a firm makes neither a profit nor a loss.
Break even point (dollar sales) = Fixed Cost ÷ Contribution Margin Ratio
Where, Contribution Margin Ratio = Contribution ÷ Sales
= ($20 - $17) ÷ $20
= 0.30
New Break even point (dollar sales) = ($8,100 + $600) ÷ 0.30
= $29,000
Best Buy’s new CEO and CFO will need to function as catalysts in helping the organization to deal with old problems in new ways. They would then be known as
Answer: change agent
Explanation:
A change agent is a person who dies something new in a company by utilizing anew process, adoption of new management structure or using an old model in a new way.
Since Best Buy’s new CEO and CFO will need to function as catalysts in helping the organization to deal with old problems in new ways. They will be known as change agents.
The CEO is termed as the person that is accountable for the overall company's performance. The role of the CEO is determined as the board of directors. Whereas, CFO is the person who manages the financial part of the company, and is accountable for the finance of the organization.
The correct answer is Change agent
A change agent is a person who dies something new in a company by utilizing a new process, adopting of new management structure, or using an old model in a new way. This is the person who acts as the agent of the company.
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A company had the following cash flows for the year: (a) Purchased inventory, $60,000 (b) Sold goods to customers, $90,000 (c) Received loan from a local bank, $150,000 (d) Purchased land, $180,000 (e) Purchased treasury stock, $40,000 (f) Paid dividends, $10,000 (g) Sold delivery truck, $30,000 What amount would be reported for net investing cash flows on the Statement of Cash Flows (for a negative number put a minus in front of the number)?
Answer:
The amount would be reported for net investing cash flows on the Statement of Cash Flows is –$190,000, that is, minus $190,000.
Explanation:
Cash flow from investing activities refers to the section of the cash flow statement that provides amount of cash that is generated or spent on investing activities.
Investing activities comprises of purchases or sales property plant, and equipment (PP&E), marketable securities (i.e., stocks, bonds, etc.), and among others.
From the question, the amount of net investing cash flows can be computed as follows:
Particulars Amount ($)
Purchased land –180,000
Purchased treasury stock –40,000
Sold delivery truck 30,000
Net cash flow from investing activities –190,000
Therefore, the amount would be reported for net investing cash flows on the Statement of Cash Flows is –$190,000, that is, minus $190,000.
On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $71,000 and $2,900, respectively. During the year Kincaid reported $190,000 of credit sales. Kincaid wrote off $1,750 of receivables as uncollectible in Year 2. Cash collections of receivables amounted to $227,700. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales.
The net realizable value of receivables appearing on Kincaid's Year 2 balance sheet will amount to:
a) $29,650.
b) $28,500.
c) $33,300.
d) $31,550.
Answer:
b) $28,500.
Explanation:
The computation of the net realizable value of receivables is shown below:
As we know that
Net realizable value = Gross account receivable - allowance for doubtful debts
where,
Gross account receivable is
= Beginning balance of the account receivable + credit sales - written off amount - collections
= $71,000 + $190,000 - $1,750 - $227,700
= $31,550
And, the allowance for doubtful debts is
= Beginning balance of allowance for doubtful debts - written off + allowance needed
= $2,900 - $1,750 + $190,000 × 1%
= $3,050
So, the net realizable value is
= $31,550 - $3,050
= $28,500
hence, the correct option is b. $28,500
In Macroland autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, planned investment is fixed at 50, government purchases are fixed at 150, and net exports are fixed at 20. Planned aggregate expenditure equals:________a.1,000. b.1,160. c.1,280. d.1,440.
Answer:
b) $1,160
Explanation:
From the above information,
I=Investment = 50
G=Government expenditure = 150
X=Net export = 20
a=autonomous consumption = 100
b=Marginal propensity to consume = 0.75
Y=Equilibrium GDP
C = consumption ;
C = 100 + 0.75Y (Y income - 40 taxes)
Planned aggregate expenditure (PAE)
PAE = C + l +G +X
Substituting for C in the above equation,
PAE = 100 + 0.75 (Y - 40) + 50 + 150+ 20
= 100 + 0.75Y -30 + 50 + 150 + 20
= 290 + 0.75Y
Since short run exists when Y = PAE
Therefore,
Y = 290 + 0.75Y
Collect like terms
Y - 0.75Y = 290
0.25Y =290
Y = 290/0.25
Y = 1,160
Could I Industries just paid a dividend of $1.15 per share. The dividends are expected to grow at a rate of 18 percent for the next six years and then level off to a growth rate of 7 percent indefinitely. If the required return is 15 percent, what is the value of the stock today
Answer: $26.56
Explanation:
Present value of stock = Dividend in year 1 / (1 + required rate of return) + Dividend in year 2 / (1 + required rate of return)² + Dividend in year 3 / (1 + required rate of return)³ + Dividend in year 4 / (1 + required rate of return)⁴ + Dividend in year 5 / (1 + required rate of return)⁵ + Dividend in year 6 / (1 + required rate of return)⁶ + Terminal value / (1 + required rate of return)⁶
Terminal value = ( Dividend in year 6 * (1 + growth rate) / ( required rate of return - growth rate)
= (1.15 * (1 + 18%)⁶ * (1 + 7%) ) / (15% - 7%)
= $41.5225
Present value of stock:
= (1.15 * 1.18) / (1 + 15%) + (1.15 * 1.18²) / (1 + 15%)² + (1.15 * 1.18³) / (1 + 15%)³ + (1.15 * 1.18⁴) / (1 + 15%)⁴ + (1.15 * 1.18⁵) / (1 + 15%)⁵ + (1.15 * 1.18⁶) / (1 + 15%)⁶ + (41.5225) / (1 + 15%)⁶
= $26.55585976
= $26.56
In a production bottleneck situation, the product with the highest contribution margin per unit should be given priority over a product that has the highest contribution margin per bottleneck hour.
a. True
b. False
Answer:
b. false
Explanation:
A bottleneck is a point at which there is the stoppage in the system of production. The inefficiencies that are generated through the bottleneck developed the delays and leads to the high cost of production
Here in the given situation, since there is the highest contribution margin per unit that gives more priority as compared with the contribution margin per bottleneck hour i.e. totally wrong as it should give the priority to the contribution margin per bottleneck hour
Therefore the given statement is false
This year, Herb Partnership generated $740,000 ordinary business income. Herb has two equal partners: Savory LLC and Sweet Corp., an S corporation. Savory LLC has three members: Mr. Parsley, an individual who owns a 40 percent interest; Mrs. Rosemary, an individual who owns a 35 percent interest; and Sage Inc., a C Corporation which owns a 25 percent interest. Sweet Corp. has 100 shares of outstanding stock, all of which are owned by Ms. Mint, an individual.
Required:
Identify the taxpayers who must pay tax on the partnership income, and determine how much income must be reported by each.
A share of stock is now selling for $110. It will pay a dividend of $8 per share at the end of the year. Its beta is 1. What do investors expect the stock to sell for at the end of the year? Assume the risk-free rate is 4% and the expected rate of return on the market is 15%. (Round your answer to 2 decimal places.)
Expected selling price $
Answer:
P1 = 118.5474 rounded off to $118.55
Explanation:
To calculate the price of the stock at the end of the year or P1, we first need to determine the required rate of return on the stock and the growth rate in dividends.
The required rate of return can be found using the CAPM equation. The formula for required rate of return under CAPM is,
r = rRF + Beta * (rM - rRF)
Where,
rRF is the risk free raterM is the return on marketr = 0.04 + 1 * (0.15 - 0.04)
r = 0.15 or 15%
Now we assume that the stock is a constant growth stock which means that the growth in dividends is expected to be constant throughout. The price of such a stock is found using the constant growth model of DDM. The formula for price today under the constant growth model is,
P0 = D1 / (r - g)
Where,
P0 is price todayD1 is expected dividend for the next periodg is the growth rate in dividendsPlugging in the available variables, g is,
110 = 8 / (0.15 - g)
110* (0.15 - g) = 8
16.5 - 110g = 8
g = (8 - 16.5) / -110
g = 0.077272 or 7.7272% rounded off to 7.73%
So to calculate the price at the end of the year or P1, we will use D2.
P1 = 8 * (1+0.0773) / (0.15 - 0.0773)
P1 = 118.5474 rounded off to $118.55
Founder of Vanguard, Jack Bogle, believes that all investors should buy stock indices. Group of answer choices He believes in strong form market efficiency. He believes in semi-strong form market efficiency. He believes in weak form market efficiency. He believes markets are not efficient.
Answer:
Correct Answer:
1. He believes in strong form market efficiency.
Explanation:
Jack Bogle believed that, in a situation where people simply buy an entire group of stocks as a result of investors investing money into the index fund, it will create a strong market. That is, if every investor in the world only purchased the same index fund, then the market of buyers and sellers would no longer set the fair market price of the stocks in the stock market.
Problem 14-15 Finding the WACC [LO3] You are given the following information for Watson Power Co. Assume the company’s tax rate is 21 percent. Debt: 16,000 6.5 percent coupon bonds outstanding, $1,000 par value, 27 years to maturity, selling for 105 percent of par; the bonds make semiannual payments. Common stock: 490,000 shares outstanding, selling for $67 per share; the beta is 1.18. Preferred stock: 21,500 shares of 4.3 percent preferred stock outstanding, currently selling for $88 per share. The par value is $100 per share. Market: 6 percent market risk premium and 5.4 percent risk-free rate. What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer:
The company's WACC is 9.71%.
Explanation:
Note: See the attached excel file for the computation of company's Weighted Average Cost of Capital (WACC).
The weighted average cost of capital (WACC) can be described as the rate that is expected to be paid on average by a company to all holders of its securities to finance the assets of the company.
The following formula are used in the excel file to compute the WACC of the company.
Cost of debt = Type this function that is used in the excel sheet “=Rate(Number of years * 2,((Coupon rate/2)*Par value),-Selling price),Par value)*2*(1 - Tax rate)”. That is, type “=RATE(27*2,((6.5%/2)*1000),-1080,1000)*2*(1-21%)” in the excel file and press enter. This gives 4.83420280657156%
Note: Make sure you note all the commas and signs in the cost of debt function.
Cost of Common stock/equity using CAMP = Risk-free rate + (Beta * Market risk premium) = 5.4% + (1.18 * 6%) = 12.48%
Cost of preferred stock = (Par value * Dividend rate) / Current price = ($100 * 4.3%) / 88 = 0.0488636363636364’ or 4.88636363636364%
Why might an economist favor activist policies in developed countries and laissez-faire policies in developing countries
Answer:
One of the main economic issues in developing countries is rampant corruption or extremely inefficient government institutions. This means that less government intervention is always better in developing countries.
On the other hand, in developed countries, the checks and balances system exists within government institutions and even though corruption may exist, it is not as widely spread. The most severe economic problem in developed countries is inequality and huge economic actors. This is why activist policies may be necessary in developed countries, at least in certain economic sectors.
The term crowding-out effect refers to a situation in which a government _______________ results in ______________ interest rates, causing ______________ in private spending on investment and consumer durables.
Answer: Deficit; higher; a decrease
Explanation:
The term crowding-out effect refers to a situation in which a government deficit results in higher interest rates, causing a decrease in private spending on investment and consumer durables.
The Crowding-out effect is what happens when a Government increases its spending past its revenues and gets a budget deficit. In other to balance its books therefore it will borrow heavily.
If the Government is such a large one like the American Government or the British Government, the borrowing might be so large that it will have the effect of reducing the amount of loanable funds in the market thereby increasing the interest rates due to a reduced supply of loanable funds.
As there are now increased interest rates, it will be more expensive for companies to borrow to spend on investment or for consumers to spend on durables. It will have the effect of crowding out the private sector.
You purchase a digital camera for $495.00, a case for $38.50, a zoom lens for $216.45, and a
memory card for $74.95. The sales tax is 7.15 percent.
12. What is the total price of your purchase before sales tax?
A. S824.90
B. $749.95
C. $883.88
D. $801.25
Och, Inc., is considering a project that will result in initial aftertax cash savings of $1.75 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. The firm has a target debt-equity ratio of .8, a cost of equity of 11.5 percent, and an aftertax cost of debt of 4.3 percent. The cost-saving proposal is somewhat riskier than the usual projects the firm undertakes; management uses the subjective approach and applies an adjustment factor of +3 percent to the cost of capital for such risky projects. What is the maximum initial cost the company would be willing to pay for the project?
Answer:
$18,191,268.19
Explanation:
the company's WACC = (weight of equity x Re) + (weight of debt x after tax cost of debt) = (0.6 x 11.5%) + (0.4 x 4.3%) = 6.9% + 1.72% = 8.62%
discount rate adjustment factor = 8.62% + 3% = 11.62%
to determine the value of the project:
$1,750,000 / (11.62% - 2%) = $1,750,000 / 9.62% = $18,191,268.19
If the initial outlay is $18,191,268.19, then the project's NPV = $0. This is the maximum amount that the firm should be willing to invest in this project.
Suppose that short-term municipal bonds currently offer yields of 4%, while comparable taxable bonds pay 5%. Which gives you the higher after-tax yield if your combined tax bracket is:
Answer:
1.Taxable bonds
2Taxable bonds
3.They have the same after-tax yield
4.
municipal bond
Explanation:
The missing tax brackets are zero,10%,20% and 30%
Zero % tax rate:
municipal bond pays 4%
taxable bonds after tax yield=5%*(1-0)=5%
10% tax rate
municipal bond pays 4%
taxable bond after tax yield=5%*(1-10%)=4.5%
20% tax rate
municipal bond pays 4.0%
taxable bond after tax yield=5%*(1-20%)=4.0%
30% tax rate
municipal bond pays 4.0%
taxable bond after tax yield=5%*(1-30%)=3.50%
Would activity-based costing or activity-based management be useful for the airport store? Why or why not?
Answer with Explanation:
Activity based costing will not be useful because the airport store has hundreds of items which share a indirect costs like rentals, warehouse expenses, delivery costs, electricity, maintenance costs, etc.
The reason why its use in the case of airport store is not beneficial is as under:
Time Consuming: All indirect costs can't be absorbed in hundreds of product and would take more than one month to allocate indirect costs to each product. List of Restricted Product Price: Another reason is that the airport stores are given a price schedule which restrict selling of products at higher costs. This means if the contribution arising from the product then we can't change its price as it is restricted by the airport authorities.The indirect cost remains fixed and is not changing in this case which means it is not determinable which product consumes greater share of indirect cost as sometimes shelves will be not 100% occupied hence determining cost drivers for each cost pool would be a difficult task.Purpose is Lost: The purpose of ABC is to allocate the indirect costs to each product which apportioned on a fairer basis and lower the indirect cost by lowering the usage of cost drivers. The indirect costs can't be lowered as maintenance cost is fixed, electricity consumption remains the same, rentals are also fixed, this means that the purpose of allocation and controlling of cost drivers is lost.Suitable for Manufacturers not for Stores: The manufacturer's products deal with dozens of costs that are variable if the cost driver changes. The cost driver changes are not changing the indirect cost in the case of airport store which means that if a product which occupied 1 shelve is now occupying 2 shelves is not increasing the rental cost.Hence ABC is not suitable for airport store.
Open space arrangements in workstations increase communication and potentially decrease noise, distractions, and loss of privacy.
a. true
b. false
Answer:
false
Explanation:
while open space arrangement increases communication, it also increases noise, distractions, and loss of privacy.
Answer:
b. False
Explanation:
Although open space arrangement in a workstation increases communication , yet such communication would eventually lead to an increase noise, distractions and loss of privacy. This is the reason why modern organizations preferred the use of cubicle in demarcating spaces allocated to their employees.
The advantage of using cubicle as demarcation is that there will be less noise and distractions hence leads to increase in productivity . An employee would also have his or her privacy unlike an open space arrangement.
A cloth manufacturing firm is deciding whether or not to invest in new machinery. The machinery costs $45,000 and is expected to increase cash flows in the first year by $25,000 and in the second year by $30,000. The firm’s current fixed costs are $9,000 and current marginal cost are $15. The firm currently charges $18 per unit.
Required:
If the interest rate is 5% then. what is the present value of the cash flows?
Answer:
$51,020.40
Explanation:
We use the formula PV = FV * (1 + r)^n for finding the present value
There are two cash flows, one that occur in year 1 at $25,000 and second that occur in year 2 at $30,000.
Find the PV of this cash flow at r = 5% and n = 1 and 2 =
25000(1+5%)^-1 + 30000(1 + 5%)^-2
25,000(1+0.05)^-1 + 30,000(1 + 0.05)^-2
25,000(1.05^)-1 + 30,000(1.05)^-2
25,000(0.952381) + 30,000(0.907029)
23,809.525 + 27,210.87
=$51,020.40
Thus, the present value of the cash flows is $51,020.40
A piece of equipment (Asset class 15.0) was purchased bythe Jones Construction Company. The cost basis was $300,000. Determinethe ADS and GDS depreciation deductionfor this property each year
Answer:
Alternative depreciation system (ADS depreciation) per year:
Year % depreciation expense
1 8.32% $24,960
2 16.67% $50,010
3 16.67% $50,010
4 16.67% $50,010
5 16.67% $50,010
6 16.67% $50,010
7 8.33% $24,990
General depreciation system (GDS depreciation) or MACRS per year:
Year % depreciation expense
1 20% $60,000
2 32% $96,000
3 19.20% $57,600
4 11.52% $34,560
5 11.52% $34,560
6 5.76% $17,280
Jack, an employee of Desert Sky, Inc., has gross salary for May of . The entire amount is under the OASDI limit of $118,500 and thus subject to FICA. He is also subject to federal income tax at a rate of %. Which of the following is a part of the journal entry for accrual of the employer payroll taxes? (Assume a FICAOASDI Tax of % and FICAMedicare Tax of %.) Jack's income to date exceeds the FUTA and SUTA tax income limits
Answer:
Credit to Cash for $4,995 is correct
Explanation:
here is a complete question
has a gross salary for May of $7,000. The entire amount is under the OASDI limit of $118,500 and thus subject to FICA. He is also subject to federal income tax at a rate of 21%. Which of the following is a part of the journal entry to record the disbursement of his net pay? (Assume a FICA-OASDI Tax of 6.2 % and FICA-Medicare Tax of 1.45%. Round the final answer to the nearest dollar.) A. debit to Cash for $4,995 B. debit to FICA Tax Payable of $4,995 O C. debit to Employee Income Tax Payable of $4,995 D. credit to Cash for $4,995
The computation of the amount that becomes the part for accrual the employer payroll taxes is shown below:
Gross Pay $7,000
Less: Deductions
Federal Income tax $1,470 ($7000 × 21%)
FICA-OASDI tax $434 ($7000 × 6.2%)
FICA-Medicare tax $102 ($7,000 × 1.45%)
Total Deductions 2006
Net pay $4,995