Answer: Please find answers in explanation column
Explanation:
Double declining depreciation rate = 1/n x 2
= 1/5 x 2= 2/5 = 0.4 x 100 = 40 %
Carrying value = if depreciation rate = 40 % , then begining value = 100-40=60%
Depreciation expense for 2019 = Carrying value x depreciation nrate x period(jan- oct) = $8,100 x 60% x 40% x 10/12 = $1,620
Journal entry to record Depreciation expense
Accounts Debit Credit
Depreciation expense $1,620
Accumulated depreciation--Display shelving $1,620
Carrying value / Ending balance of shelving at October, 2019= cost - depreciation
8,100 - 8,100 x 40% + 1620 = 8,100 - 4,860= $3240
Gain/ Loss = Sale - the ending balance of the carrying value of the asset
$2700 - $3240= -540= $540 loss
Journal to record shelving for and its sale in .
Accounts Debit Credit
Cash $2700
Accumulated depreciation--
Display shelving (3240 +1620) $4860
loss on sale of asset $540
Shelving $8,100
The Rhaegel Corporation’s common stock has a beta of 1.2. If the risk-free rate is 4.3 percent and the expected return on the market is 13 percent, what is the company’s cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer:
Cost of equity = 14.74%
Explanation:
The capital asset pricing model is a risk-based model for estimating the return on a stock..
Here, the return on equity is dependent on the level of reaction of the the equity to changes in the return on a market portfolio. These changes are captured as systematic risk.
Systematic risks are those which affect all economic actors in the market, they include factors like changes in interest rate, inflation, etc. The magnitude by which a stock is affected by systematic risk is measured by beta.
Under CAPM,
E(r)= Rf + β(Rm-Rf)
E(r)- cost of equity , Rf-risk-free rate , β= Beta, Rm= Return on market.
Using this model, we can work out the value of beta as follows:
β-1.2 Rf- 4.3%, Rm = 13%
E(r) = 4.3% + 1.2 × (13 - 4.3)%=14.74 %
Expected return = 14.74 %
Cost of equity = 14.74%
Harvey’s Hardware is thinking about starting a line of lawnmowers to serve its customer base in the summer. The lawnmowers would be priced at $100 and Harvey the manager believes that they would sell 3 units. They have the following estimated costs.
Units Produced Labor Cost Total cost
0 0 100
1 50 150
2 100 200
3 200 300
4 350 450
What is the marginal cost of producing the third unit?
a. $400
b. $300
c. $200
d. $100
Answer:
Harvey's Hardware
Marginal cost of producing the third lawnmowers:
d. $100
Explanation:
Harvey's marginal cost for producing the third unit of lawnmowers is the additional cost that resulted when the total cost increased from $200 to $300. However, it can be deciphered from the case that the marginal cost for Harvey, which it is supposed to be a variable cost, is traceable to the direct labor costs. This implies that the fixed cost element for Harvey in the production of the lawnmowers has been relatively fixed at $100. It does not vary with the volume of production, while the direct labor costs vary with the volume of lawnmowers produced by Harvey.
As a long-term investment at the beginning of the 2018 fiscal year, Florists International purchased 30% of Nursery Supplies Inc.'s 10 million shares for $58 million. The fair value and book value of the shares were the same at that time. During the year, Nursery Supplies earned net income of $30 million and distributed cash dividends of $3.00 per share. At the end of the year, the fair value of the shares is $54 million.
Required:
Prepare the appropriate journal entries from the purchase through the end of the year.
Answer and Explanation:
The Journal entry is shown below:-
1. Investment in Nursery supplies shares Dr, $58 million
To Cash $58 million
(Being purchase of shares is recorded)
2. Investment in Nursery supplies shares Dr, $9 million
To Investment revenue $9 million ($30 million × 30%)
(Being investment revenue is recorded)
3. Cash Dr, $9 million
To Investment in Nursery supplies shares $9 million
(30% × 10 million × $3.00)
(Being a cash dividend is recorded)
4. No Journal entry is required
The_______hypothesis postulates that top managers typicalljy overstate their ability to create value from acquisition primarily because rising to the top of a corporation has given then an exaggerated sense of the own capabilities.
a. recognition.
b. optimistic.
c. hybrid.
d. hubris.
Answer:
Option D
Hubris hypothesis
Explanation:
The hubris hypothesis attempts to explain the effect of overconfidence at a managerial level, and how it affects business practices negatively. It can lead to several actions like rash decisions, expensive company acquisitions, and buy-outs e.t.c.
In summary, it tries to explain the effect of pride on clear reasoning and progress at a managerial level in companies.
Therefore, it fits perfectly into the sentence in the question above, as the question is explaining the effect of pride on the performance of newly promoted managers.
Option D is the correct answer
Neelon Corporation has two divisions: Southern Division and Northern Division. The following data are for the most recent operating period: Total Company Southern Division Northern Division Sales $ 418,000 $ 193,000 $ 225,000 Variable expenses $ 130,880 $ 79,130 $ 51,750 Traceable fixed expenses $ 186,000 $ 77,000 $ 109,000 Common fixed expense $ 79,420 $ 36,670 $ 42,750 The common fixed expenses have been allocated to the divisions on the basis of sales. What is the company's overall net operating income if it operates at the break-even points for its two divisions?
Answer:
Neelon Corporation
Total Company Southern Northern
Division Division
Sales $ 418,000 $ 193,000 $ 225,000
Variable expenses $ 130,880 $ 79,130 $ 51,750
Traceable fixed expenses $ 186,000 $ 77,000 $ 109,000
Common fixed expense $ 79,420 $ 36,670 $ 42,750
Net operating income $ 21,700 $200 $21,500
Explanation:
a) Data and Calculations:
Total Company Southern Northern
Division Division
Sales $ 418,000 $ 193,000 $ 225,000
Variable expenses $ 130,880 $ 79,130 $ 51,750
Traceable fixed expenses $ 186,000 $ 77,000 $ 109,000
Common fixed expense $ 79,420 $ 36,670 $ 42,750
Net operating income $ 21,700 $200 $21,500
Neelon Corporation reaches break-even point when it will make no profit or loss. This implies that its break-even point is reached when sales revenue equals both variable and fixed costs. The excess that Neelon Corporation generates from sales revenue over total costs is regarded as operating income.
Old Tired Professor Mullen, Inc. has $20,000 of ending (EI) finished goods inventory. If beginning (BI) finished goods inventory was $10,000 and Cost of Goods Sold (CGS) (OUT) was $40,000, how much would the Old Tired Professor report for Cost of Goods Manufactured (CGM) (IN)
Difference between beginning and ending CoG: 20,000-10,000 = 10,000
Difference + sold:
10,000 + 40,000 = 50,000
Answer: $50,000
I am buying a firm with an expected perpetual cash flow of $700 but am unsure of its risk. If I think the beta of the firm is 0, when the beta is really 1, how much more will I offer for the firm than it is truly worth? Assume the risk-free rate is 7% and the expected rate of return on the market is 14%. (Input the amount as a positive value.)
Answer:
$50
Explanation:
using the CAPM,
The expected rate of return = risk free rate + beta(market rate of return - risk free rate)
if beta is 0,
7% + 0 X(14% - 7%) = 7%
If beta is 1,
7% + 1 X(14% - 7%) = 14%
Present value of a perpetuity = amount / expected rate of return
if beta is 0, present value = $700 / 7% = $100
if beta is 1, present value = $700 / 14% = $50
the amount offered will differ by $100 - $50 = $50
Northwest Fur Co. started 2021 with $105,000 of merchandise inventory on hand. During 2021, $510,000 in merchandise was purchased on account with credit terms of 3/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $8,900. Merchandise with an invoice amount of $3,700 was returned for credit. Cost of goods sold for the year was $362,000. Northwest uses a perpetual inventory system. What is ending inventory assuming Northwest uses the gross method to record purchases
Answer:
The ending inventory by using the gross method is $243,011
Explanation:
Purchases = Net purchases + Freight inwards
Purchases = 491,111 + 8,900
Purchases = 500,011
When Net purchase = Gross Purchase - Purchase return - Discount
Net purchase = 510,000 - 3,700- 15,189
Net purchase = 491,111
Working
Discount = (Purchases - Purchase return) × Discount rate
Discount = (510,000 - 3,700) * 3%
Discount = 15,189
Ending inventory = Beginning inventory + Purchases− Cost of good sold
Ending inventory = (105,000 + 500,011) - 362,000
Ending inventory = $243,011
Thus, the ending inventory by using the gross method is $243,011.
Organizational learning works best when there is integrated thinking and acting at all levels of the organization, according to Peter Senge.
a) true
b) false
Answer: True
Explanation:
According to Peter Senge, he described team learning as a team skill which is required to be practiced by the team members that are involved so that they will all be able to develop their learning skills collectively.
Organizational learning works best when there is integrated thinking and acting at all levels of the organization.
2. Whom would you choose as a referent on this job? What steps would your manager take to make you feel that you were being equitably treated? What would you do if, after a year on the job, you experienced underpayment equity?
Answer is given below
Explanation:
The comparison is an indication to determine if the treatment is the same. Mentioned may be another person or a group of people similar to them. The Reference Canal may be a person with a previous job or anyone has guesses as to what the result/input ratio will be. Employees are treated equally when they feel that their result / input ratio is equal to the output or input ratio mentioned. Equity is related to the fairness of the results relative to the inputs. Managers help treat employees equally by ensuring that those who provide multiple inputs are rewarded with more results than those who provide less input. If a person changes one aspect of his ratio, the manager must ensure that the other side of the ratio also changes. As the input increases, so does the outcomhold. If the input decreases, the results also decrease. Equity is present when an individual's own result / input ratio is less than the forecast. This happens when an employee compares him or her to a reference and does not want to achieve the results he or his investment has achieved. Equity can be restored by trying to increase growth (by inputs, bonuses or allocating time) or by removing inputs (being late or falling short, doing less work) and turning it into a more accurate indication. If these methods fail, a planned company will choose to departDivision ABC has $750,000 invested in assets and earned $200,000 in income. Division XYZ has $800,000 invested in assets and earned $210,000 in income. The company's target rate is 10%. Which division has the highest residual income
The division that has the highest residual income is:.Division XYZ.
Residual incomeResidual income for ABC
Residual income=200,000-(0.10×750,000)
Residual income=200,000-75,000
Residual income=$125,000
Residual income for XYZ
Residual income=210,000 -(0.10×80,000)
Residual income=210,000-80,000
Residual income=$130,000
Inconclusion the division that has the highest residual income is:.Division XYZ.
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Identify whether each of the following items would appear on the bank side or the book side of a bank reconciliation. Outstanding checks Answer 1 Choose... Deposits in transit Answer 2 Choose... Bank service charges Answer 3 Choose... NSF Check
Answer:
Outstanding checks - Book side
Deposits in transit - Book side
Bank service charges - Bank side
NSF Check - Book side
Explanation:
The bank reconciliation helps identify the transactions that have been recorded in the cash book but omitted from the bank statement and vice versa.
Considering the given items
Outstanding checks - These are checks that have been written and deducted from the cash balance in the book but yet to be recognized or cleared in the bank statement.
Deposits in transit - The amount would appear on the book side as it represents amounts that have been collected but yet to be deposited and subsequently recognized in the bank statement.
Bank service charges - These are charges that have been recognized in the bank but yet to be recorded or deducted from the cash balance in the books.
NSF Check - This represents customer's debt settlement via check that has not been honoured by the bank. Hence this will have to be deducted from the cash balance in the books
What is the standard deviation of a portfolio's returns if the mean return is 15%, and the variance of returns is 184
Answer:
Standard deviation =13.6
Explanation:
Standard deviation is measure of the total risks of an investment. It measures the volatility in return of an investment as a result of both systematic and non-systematic risks.
Non-systematic risk includes risk that are unique to a company like poor management, legal suit against the company .
Standard deviation is the sum of the squared deviation of the individual return from the mean return under different scenarios .
Further more, it can be calculated as the square root of the variance of the portfolio.
Standard deviation = √ variance
DATA
Variance = 184
Standard deviation = √184 = 13.6
Standard deviation =13.6
Compromising is most likely the best approach to conflict management when opponents with equal power are committed to mutually exclusive goals.
a. True
b. False
Answer:
true
Explanation:
when two opponents with equal power are committed to mutually exclusive goals then they have to reach a compromise.in a compromise, either of these two parties having a conflict would be willing to give up something to reach an agreement. The needs of both sides would be balanced, as both sides would have to make sacrifices. This makes it a lose-lose approach to conflict resolution for either parties involved. A compromise has to be reached for important goals to be achieved.
Income Statement Debit and Credit columns of an end-of-period spreadsheet are $27,000 and $29,000, respectively, after all account balances have been extended, the amount of the net loss is $2,000.
a. True
b. False
Answer: False
Explanation:
Revenues are an equity entry and as such are credited when they increase therefore the credit side of an income statement contains revenue. Expenses on the other hand are debited to remove them from revenue.
A credit of $29,000 and a debit of $27,000 means that there was a net income of $2,000 not a net loss. If the debits are less than the credits then that means that there are less expenses than revenue which would bring about a profit.
Your parents put $300 into an account paying 11 percent interest for you when you were ten. Ten years later they tell you that you can take the money out of the account. What is the balance to the nearest penny
Answer:
The balance in the account = $851.8
Explanation:
The future value of a lump sum is the amount expected at a future date when a sum of money is invested today at a particular rate of interest for certain number of years
.
This implies compounding the initial amount invested ($300) at the given interest rate(11%) for 10 years.This will be done as follows:
FV = PV × (1+r)^(n)
FV-Future value
r- rate of return per period
n- Number of period
PV - 300
r-11%
DATA
FV- ?
PV - 300
n- 10
FV= 300 × 1.11^10 = 851.83
The balance in the account = $851.8
A company retired $80 million of its 10% bonds at 104 ($83.2 million) before their scheduled maturity. At the time, the bonds had a remaining discount of $2 million. Prepare the journal entry to record the redemption of the bonds. (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Answer:
Dr Bonds payable 80.0
Dr Loss on early extinguishment 5.2
Cr Discount on bonds payable 2.0
Cr Cash 83.2
Explanation:
Preparation of the journal entry to record the redemptionnof the bonds
Based on the information given we were told that the company retired the amount of $80 million with a 10% bonds at 104 ($83.2 million) and as well had a remaining discount of $2 million, which means that the transaction will be recorded as:
Dr Bonds payable 80.0
Dr Loss on early extinguishment 5.2
[(83.2+2.0)-80.0]
Cr Discount on bonds payable 2.0
Cr Cash 83.2
Quantitative Problem 1: Hubbard Industries just paid a common dividend, D0, of $1.50. It expects to grow at a constant rate of 2% per year. If investors require a 8% return on equity, what is the current price of Hubbard's common stock? Do not round intermediate calculations. Round your answer to the nearest cent. $ per share
Answer:
The current price of Hubbard's common stock is $25.50.
Explanation:
This can be calculated using the Gordon growth model (GGM) formula that assumes growth is dividend will be constant as follows:
P = D1/(r - g) ............................ (1)
Where,
P = Current stock price = ?
D1 = Next dividend = D0 * (1 + g) = $1.50 * (1 + 2%) = $1.53
r = required return = 8%, or 0.08
g = growth rate = 2%, or 0.02
Substituting the values into equation (1), we have:
P = $1.53 / (0.08 - 0.02) = $25.50
Therefore, the current price of Hubbard's common stock is $25.50.
To initiate a strategic move that allows a firm to open up new and uncontested market space through value innovation, managers must address four key questions when formulating a blue ocean business strategy.
a. True
b. False
Presented below are the ending balances of accounts for the Kansas Instruments Corporation at December 31, 2021.Account Title Debits CreditsCash $40,000 Accounts receivable 170,000 Raw materials 44,000 Notes receivable 120,000 Interest receivable 23,000 Interest payable $25,000 Investment in debt securities 52,000 Land 70,000 Buildings 1,700,000 Accumulated depreciation—buildings 640,000 Work in process 62,000 Finished goods 109,000 Equipment 340,000 Accumulated depreciation—equipment 150,000 Patent (net) 140,000 Prepaid rent (for the next two years) 80,000 Deferred revenue 56,000 Accounts payable 200,000 Notes payable 600,000 Restricted cash 100,000 Allowance for uncollectible accounts 33,000 Sales revenue 1,200,000 Cost of goods sold 470,000 Rent expense 48,000 Additional Information:1. The notes receivable, along with any accrued interest, are due on November 22, 2022.2. The notes payable are due in 2025. Interest is payable annually.3. The investment in debt securities consist of treasury bills, all of which mature next year.4. Deferred revenue will be recognized as revenue equally over the next two years.Required:Determine the company’s working capital (current assets minus current liabilities) at December 31, 2021.
Answer:
Working capital = $ 374,000
Explanation:
Calculation to Determine the company’s working capital at December 31, 2021
Formula for Working Capital
Working capital = Current assets - Current liabilities
First is to find the Current assets
Current assets =Cash $40,000 + Accounts receivable 170,000 +Raw materials 44,000+Work in process 62,000 +Finished goods 109,000 +Notes receivable 120,000 +Interest receivable 23,000 +Investment in debt securities 52,000+Prepaid rent 40,000 (80,000/2)
Current assets=$660,000
Second step is to find the Current liabilities
Current liabilities =Interest payable $25,000+Accounts payable 200,000+Deferred revenue 28,000 (56,000/2) +Allowance for uncollectible accounts 33,000
Current liabilities =$286,000
Let plug in the formula
Working capital =$660,000 - $286,000
Working capital = $ 374,000
Therefore the company’s working capital at December 31, 2021 will be $374,000
It costs your company $240 to produce pens and pencils together. To produce the same amount of pens and pencils separately costs $100 for the pens and $120 for the pencils. The production of pens and pencils exhibits:_______
a. diseconomies of scope
b. economies of scope.
c. increasing returns to scale.
d. constant returns to scale.
Answer:
b
Explanation:
To be effective, your goals must be balanced in the following areas:a. Career, Fun, Health, Relationship, Spiritualityb. Environmental, Spirituality, Organicc. Career, Financial, Health and Fitness, Relationships, Spirituality
Answer:
Career , Financial , Health and Fitness, Relationships, Spirituality
Explanation:
Goals are what one plan to achieve within a specified period of time. Goal could be short term , usually one year or long term goal, which is more than a year. People that want to succeed must set goals because setting goal gives direction. When people set goals, it gives them the opportunity to work harder towards achieving that goal and also provides benchmark for determining if one is actually succeeding or on the right path.
People set goals on daily basis. The question is; how effective are those goals. It therefore means that for a goal to be effective, it must touch or cover the following areas ; career, financial, health and fitness, relationships, spirituality.
Your client in the 25% federal income tax bracket lives in a state where his earnings place him in the 6% bracket for state income tax purposes. If he were to purchase a 4% bond issued by a political subdivision of another state, his total tax-equivalent yield would be
Answer:
Slightly more than 5.33%.
Explanation:
In case when the municipal bond owned by an individual i.e. issued is not for interest free tax rate but also it is non tax on that particular state
So here the tax-equivalent yield is
= Purchase bond percentage ÷ (1 - tax rate)
= 0.04 ÷ (1 - 0.25)
= 5.33%
Hence, his total tax-equivalent yield is 5.33% i.e. calculated by applying the above formula
In which exchange rate system is the exchange rate determined entirely by the supply of and demand for a currency
Answer: Floating exchange rate system.
Explanation:
Floating exchange rate system is one in which the exchange rate is determined entirely by the supply of and demand for a currency.
In floating exchange rate system, the value of a currency fluctuates based on the happeninge that occur in the foreign exchange market.
Answer:
Managed -> exchange rate determined by both government intervention and supply and demand
Floating -> exchange rate determined by demand and supply of foreign currency
Fixed -> exchange rate pegged to the value of another nation's currency
Explanation:
Park Co. is considering an investment that requires immediate payment of $28,245 and provides expected cash inflows of $9,300 annually for four years. Assume Park Co. requires a 7% return on its investments.
Required:
a. What is the internal rate of return?
b. Based on its internal rate of return, should Park Co. make the investment?
Answer:
a) Internal rate of return (IRR) = 12.70 %
b) Park Co should make the return because the IRR is higher than the return on investment of 7%. This implies that undertaking the investment would increase the the wealth of the shareholders
Explanation:
The IRR is the discount rate that equates the present value of cash inflows to that of cash outflows. At the IRR, the Net Present Value (NPV) of a project is equal to zero
If the IRR greater than the required rate of return , we accept the project for implementation
If the IRR is less than that the required rate , we reject the project for implementation
IRR = a% + ( NPVa/(NPVa + NPVb)× (b-a)%
NPV = PV of cash inflow - initial cost
PV of cash inflow = A× (1- (1+r)^(-n) )/r
A- cash inflow , r- rate of return, n- number of years
Step 1 :
NPVa at 7%
NPV = (9300 × (1- 1.07^(-4)/0.07 ) - 28,245 = 3,256.06
Step 2:
NPVb at 20%
NPV = (9300 × (1- 1.07^(-4)/0.07 ) - 28,245 = (4,169.77)
Step 3 :
IRR = a% + ( NPVa/(NPVa + NPVb)× (b-a)%
= 7% + (3,256.06 /(3,256.06 + 4,169.77)) × (20-7)%= 12.70
IRR = 12.70%
a) Internal rate of return (IRR) = 12.70 %
b) Park Co should make the return because the IRR (12.70%) is higher than the return on investment of 7%. This implies that undertaking the investment would increase the the wealth of the shareholders
Explain the manufacturing flow management process and the relationship among manufacturers' production capabilities and costs, suppliers, shippers, and demand for goods. Briefly define and explain the differences between lean and agile supply chain strategies.
Answer:
The difference between lean and agile is the fluidity with the response to the market. A lean supply chain focuses on cutting costs by producing high volumes of products with low variability. An agile supply chain focuses on responding to the market demand with smaller, customizable batches of items.
A lean supply chain prioritizes cost reduction by producing goods in large quantities and with little variation. An agile supply chain focuses on producing things in smaller, more individualized quantities in response to market demand.
What is a supply chain?The entire process from when a consumer places an order to when the goods or service is delivered and paid for is known as the supply chain. The value and supply chains are coordinated and optimized by the supply chain manager.
He is in charge of ensuring the flawless operation of every process, from the acquisition of raw materials to production, logistics, and client delivery.
As a result, the company, its customers, and its customers' customers are all included in the supply chain. A supply network accounts for the possibility that one of the providers is also a supplier to a customer or even the final consumer.
The monitoring of all resources, data, and finances used in the production process, from the supplier to the manufacturer to the merchant and consumer, is referred to as supply chain management (SCM) or supply chain management.
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You find a zero coupon bond with a par value of $10,000 and 21 years to maturity. The yield to maturity on this bond is 4.3 percent. Assume semiannual compounding periods.What is the price of the bond?
Answer:
Price of bond $4,092.49
Explanation:
Computation the price of the bond
Using this formula
Price of bond=Par value*1/(1+YTM/2)^(2*time period)
Where,
Par value=$10,000
1/(1+YTM/2)=1/(1+0.043/2)
(2*time period)=(2*21 years)
Let plug in the formula
Price of bond=$10,000*1/(1+0.043/2)^(2*21)
Price of bond=$10,000*1/(1.0215)^42
Price of bond=$10,000*(0.97895252)^42
Price of bond=$10,000*0.4092497467
Price of bond=$4,092.49
Therefore the price of the bond will be $4,092.49
A beta of 0.5 for a security indicates Group of answer choices the security has no market risk. the security has above average market risk. the security has above average company-unique risk. the security has below average company-unique risk. the security has below average market risk.
Answer:
the security has below average market risk.
Explanation:
As we know that the beta is the systematic risk i.e. market risk of the stock.
if we assume that the average risk in the market is 1 so the beta of the market or market beta is the average risk
Now if the beta of the stock is less than 1 i.e. 0.5 so it is below the average risk of the market
Hence, the correct option is d.
MAD’s target capital structure is 60 percent debt and 40 percent equity. The yield to maturity on the company’s new debt will be 10 percent. MAD’s beta is 1.7, the risk free rate is 4% and the required market return is 12%. If the company’s tax rate is 30 percent, then which of the projects will be accepted?
Answer: D) Projects A and C
Explanation:
The projects to be taken should have a higher IRR than the company's Weighted Average Cost of Capital.
Cost of Equity
= Risk free rate + beta( market return - risk free rate)
= 4% + 1.7 (12% - 4%)
= 17.6%
After tax cost of debt
= Yield ( 1 - tax rate)
= 10% * ( 1 - 30%)
= 7%
WACC = (Weight of debt * after tax cost of debt) + (weight of equity * cost of equity)
= (0.6 * 7% ) + ( 0.4 * 17.6%)
= 4.2% + 7.04%
= 11.24%
Projects A and C both have IRR higher than the company's WACC and so should be accepted.
Schuepfer Inc. bases its selling and administrative expense budget on budgeted unit sales. The sales budget shows 2,600 units are planned to be sold in March. The variable selling and administrative expense is $3.10 per unit. The budgeted fixed selling and administrative expense is $35,760 per month, which includes depreciation of $4,100 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the March selling and administrative expense budget should be:________.a. $40,210.b. $44,410.c. $31,570.
Answer:
$39,720
Explanation:
Total fixed costs that represent current cash flows = $35,760 - $4,100
Total fixed costs that represent current cash flows = $31,660
Variable costs = 2,600 units * $3.10
Variable costs = $8,060
The cash disbursements for selling and administrative expenses on the March selling and administrative expense budget will be
= $31,660 + $8,060
= $39,720