Answer:
$61,200
Explanation:
Maintenance expenses allocated to assembly department
Allocation base = Square footage
= $102,000 * $55,200 / ($55,200 + $36,800)
= $102,000 * $55,200 / $92,000
= $61,200
A seller has accepted another offer, but your client doesn't want to give up. Even now, she can submit an offer to the seller, called a:
Answer: b. backup offer
Explanation:
A backup offer is one that is made when an offer has already been made by another. With a backup offer, the person offering it is acknowledging that someone else has made another offer that was accepted but they still offer this in case the accepted offer falls through for whatever reason.
If the seller accepts this offer, they will have a contract with the person offering that legally obliges them to sell the good in question to the person offering if the current offer is not honored.
The maximum tax rate on estates and gifts: Question 7 options: is gradually increasing. has remained constant. is gradually declining. has increased sharply.
Is gradually declining.
Norwood, Inc. signs a , %, sixmonth note dated November 1, 2018. The interest expense recorded for this note in 2018 will be ________. (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)
Answer:
Norwood Company
Norwood Company signs a $11,000, 8.5%, six-month note dated November 1, 2018. The interest expense recorded for this note in 2018 will be ___$156_____. (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)
Explanation:
a) Data and Calculations:
Note Payable = $11,000
Interest rate = 8.5%
Interest expense for a year = 8.5% of $11,000 = $935
Interest expense for 2 months (from November to December) = $935/12 * 2 = $156
b) Interest expense represents the annual expense that must be incurred for the use of resources which the Norwood, Inc. obtained through the signing of the six month note. Interest on notes are computed based on an annual basis unless otherwise stated. The 8.5% is per annum. So, when the interest and principal are being repaid in six month's time, Norwood, Inc. should have accrued interest for six months, which will amount to $467.
Wilson Tech’s production cost data for the current period is: Beginning work in process inventory: 19,000 units Units transferred out: 9,800 units Ending work in process inventory: 6,200 units All materials are entered at the beginning of the process and conversion costs are incurred uniformly throughout the process. The ending work in process units are 40% complete as to conversion costs. What are the equivalent units of production for conversion costs?
Answer:
the equivalent units of production for conversion costs is 12,280.
Explanation:
Calculation of the equivalent units of production for conversion costs.
Units transferred out (9,800 × 100 %) = 9,800
Units of ending work in process (6,200 × 40%) = 2,480
Equivalent units of production for conversion costs =12,280
Suppose annual inflation rates in the U.S. and Mexico are expected to be 6% and 80%, respectively, over the next several years. If the current spot rate for the Mexican peso is $.005, then the best estimate of the peso's spot value in 3 years is Group of answer choices $.00276 $.01190 $.00321 $.00102
Answer:
$.00102
Explanation:
The forward peso's spot value in 3 years can be computed using the below formula:
forward exchange rate=current spot rate*(1+US inflation)^3/(1+Mexican inflation)^3
current spot rate=$.005,
US inflation rate is 6%
Mexican inflation rate is 80%
forward exchange rate=$.005,*(1+6%)^3/(1+80%)^3
forward exchange rate(in 3 years)=$0.00102
Blossom, Inc., manufactures golf clubs in three models. For the year, the Big Bart line has a net loss of $4,700 from sales $201,000, variable costs $175,000, and fixed costs $30,700. If the Big Bart line is eliminated, $19,800 of fixed costs will remain. Prepare an analysis showing whether the Big Bart line should be eliminated. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) g
Answer:
Analysis of the Big Bart line discontinuity
Opportunity Costs :
Sales ($201,000)
Savings :
Variable Costs $175,000
Fixed Costs ($30,700 - $19,800) $10,900
Financial Advantage / (Disadvantage) ($15,100)
Conclusion :
Do not eliminate / discontinue Big Bart line.
Explanation:
The results show that closing Big Bart line results in a contribution towards fixed cost being lost to the amount of $15,100. Therefore leaving the entire company in a worse off position.
Assume that you are an intern with the Brayton Company, and you have collected the following data: The yield on the company's outstanding bonds is 7.75%; its tax rate is 40%; the next expected dividend is $0.65 a share; the dividend is expected to grow at a constant rate of 6.00% a year; the price of the stock is $15.00 per share; the flotation cost for selling new shares is F = 10%; and the target capital structure is 45% debt and 55% common equity. What is the firm's WACC, assuming it must issue new stock to finance its capital budget?
Answer:
8.038%
Explanation:
For the computation of the firm's WACC first we need to find out the cost of equity which is shown below:-
Cost of equity = Expected dividend ÷ (Price of the stock × (1 - Flotation cost)) + Growth rate
= $0.65 ÷ ($15.00 × (1 - 10%)) + 6.00%
= 10.81%
Now
WACC = Weight debt × (Cost of debt) × (1 - Tax rate) + Weight of equity × Cost of equity
= 45% × 7.75% × (1 - 40%) + 55% × 10.81%
= 8.038%
Sometimes airlines raise ticket prices as the flight departure date approaches in the hope of increasing revenue. The airlines raise their prices on the assumption that:
Answer:
B) less price-elastic as departure time approaches.
Explanation:
Here are the options to this question :
A) steady in its price elasticity as departure time approaches.
B) less price-elastic as departure time approaches.
C) always unit elastic.
D) very sensitive to price changes as the time of departure approaches.
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
Price elasticity of demand = percentage change in quantity demanded / percentage change in price
If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.
Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one
Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.
As the departure date arrives, there would be less available flights and less time for travellers to make alternative travelling arrangements. As a result, they would be willing to pay any price. At this point, travellers would have a less elastic demand. that is they are less sensitive to price.
Which of the following demonstrates a way that an organization can maximize profits?
a. Decreasing the quality of care
b. Reducing the cost of delivering care
c. Reducing the costs charged for services
d. All of the above
Answer:
b. Reducing the cost of delivering care
Explanation:
Not a lot of information is included, but some things apply to all types of businesses:
you can maximize profits by minimizing costs (this is a valid option).you cannot maximize your profits by lowering the quality of your products or services, since that will result in lost customers.reducing the costs charged for services will increase your profits only if it results in a larger increase in the quantity demanded, so this doesn't always apply.Elaine takes out a $100,000 mortgage on December 1, 1997. Elaine will repay the mortgage over 20 years with level monthly payments at an effective annual interest rate of 8%. The first payment is due January 1, 1998. After making her 120th payment, Elaine does not make any new payments for the entire next year. Elaine starts making revised monthly payments, of amount P, beginning January 1, 2009. The amount P is such that Elaine will pay off the loan in the original, 20-year term—that is to say, her last payment will be due December 1, 2017. Determine P.
Answer:
I prepared an amortization schedule using an excel spreadsheet. The original monthly payment was $836.44. After the 120th payment, the remaining principal balance was $68,940.64. Since she didn't pay anything for 1 year, the new principal balance will be $68,940.64 x (1 + 8%) = $74,455.89
I prepared another amortization schedule for the remaining 9 years, and the monthly payment is $969.32. She will pay off the loan in 108 months.
Suppose that in 2011, per-person GDP in Singapore was $53,591, and in Egypt, it was $5,547, as measured in 2005 purchasing power parity U.S. dollars.
It is accurate to say that the income level in Singapore is higher / lower than in Egypt. Why is this comparison accurate?
a. There are significant differences in incomes between high- and low-income countries.
b. Egypt is characterized by a higher share of industrial production in total output than Singapore is.
c. Singapore is characterized by a larger share of household production in total output than Egypt is.
d. Egypt is characterized by a larger share of household production in total output than Singapore is.
Answer:
a. There are significant differences in incomes between high- and low-income countries.
Explanation:
Data provided in the question
Per person GDP in Singapore = $53,591
Per person GDP in Egypt = $5,547
Based on the above information
As we can see that the level of income in Singapore is higher than Egypt also when there is an important difference in the high income and low income countries the same is shown accurately
hence, the correct option is a.
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of ? 1000, 25 years to maturity, and a coupon rate of 6.4 percent paid annually. If the yield to maturity is 7.5 percent, what is the current price of the bond?
Answer:
Bond Price = $877.3835955 rounded off to $877.380
Explanation:
To calculate the price of the bond, we need to first calculate the coupon payment per period. We assume that the interest rate provided is stated in annual terms. As the bond is an annual bond, the coupon payment, number of periods and r or YTM will be,
Coupon Payment (C) = 0.064 * 1000 = $64
Total periods (n)= 25
r or YTM = 7.5% or 0.075
The formula to calculate the price of the bonds today is attached.
Bond Price = 64 * [( 1 - (1+0.075)^-25) / 0.075] + 1000 / (1+0.075)^25
Bond Price = $877.3835955 rounded off to $877.380
The current price of the bond is $877.38.
Given that,
The par value of $1,000.The NPER is 25 years.The coupon rate is 6.4%, PMT = 6.4% of $1,000 = $64.The RATE is 7.5%.Based on the above information, the calculation is to be shown in the attachment.
Therefore we can conclude that The current price of the bond is $877.38.
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At the beginning of June, Bezco Toy Company budgeted 5,000 toy action figures to be manufactured in June at standard direct materials and direct labor costs as follows: Direct materials $50,000 Direct labor 36,000 Total $86,000 The standard materials price is $4.00 per pound. The standard direct labor rate is $18.00 per hour. At the end of June, the actual direct materials and direct labor costs were as follows: Actual direct materials $49,600 Actual direct labor 34,020 Total $83,620There were no direct materials price or direct labor rate variances for June. In addition, assume no changes in the direct materials inventory balances in June. Bezco Toy Company actually produced 4,850 units during June.Required:Determine the direct materials quantity and direct labor time variances.
Answer:
Instructions are below.
Explanation:
Giving the following information:
Standard quantity:
Direct materials (pounds)= 50,000/4= 12,500 pounds
Direct materials (pounds)= 12,500/5,000= 2.5 pounds per unit
Direct labor (hours)= 36,000/18= 2,000 hours
Direct labor (hours)= 2,000/5,000= 0.4 hours
Actual quantity:
Actual direct materials= (49,600/4)= 9,920 pounds
Actual direct labor= 34,020/18= 1,890 hours
Production= 4,850
To calculate the direct labor quantity variance, we need to use the following formula:
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Standard quantity= 2.5*4,850= 12,125
Direct material quantity variance= (12,125 - 9,920)*4
Direct material quantity variance= $8,820 favorable
To calculate the direct labor time variance, we need to use the following formula:
Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate
Standard quantity= 0.4*4,850= 1,940
Direct labor time (efficiency) variance= (1,940 - 1,890)*18
Direct labor time (efficiency) variance= $900 favorable
How much does real GDP per capita need to increase in South Korea in 2011 to achieve a growth rate consistent with its 60-year average (1950-2010)
Answer: $1,820
Explanation:
From the snapshot it is shown that for the period 1950 to 2010, South Korea had achieved a growth rate of 5.54% per annum.
In 2010, South Korea had a Real GDP of $32,855.
To maintain the 5.54% rate, the GDP pr capita would have to increase by;
= $32,855 * 5.54%
= $1,820.167
= $1,820
Your firm has estimated the following cash flows for two mutually exclusive capital investment projects. The firm's required rate of return is 13%.
Year Project A Cash Flow Project B Cash Flow
0 -$100,000 -$100,000
1 28,900 48,000
2 28,900 40,000
3 28,900 40,000
4 28,900 5 28,900
Which of the following statements best describes projects A and B?
a) Project A should be accepted because it has the highest NPV.
b) Project A should be accepted because it has the highest EAA.
c) Project B should be accepted because it has the highest EAA.
d) Both projects should be accepted because they have positive NPVs and EAAs.
e) Neither project is acceptable.
Answer:
c) Project B should be accepted because it has the highest EAA.
Explanation:
EAA is the annuity payment that is equal to the value of the NPV
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
NPV for project A
Cash flow in year 0 = -$100,000
Cash flow each year from year 1 to 5 = $28,900
I = 13%
NPV = $1647.98
Please find attached the formula used i calculating EAA = $468.54
NPV for project B
Cash flow in year 0 = -$100,000
Cash flow in year 1 = $48,000
Cash flow in year 2 = $40,000
Cash flow in year 3 = $40,000
I = 13%
NPV = $1,525.75
EAA = $646.19
When comparing projects with unequal lives, choose the project with the higher EAA. This is project B. Only project B can be chosen because the projects are mutually exclusive.
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
Answer:
c) Project B should be accepted because it has the highest EAA.
Explanation:
First determine the Net Present Value of Project A and Project B.
Using a Financial Calculator the Net Present Values will be
Project A
-$100,000 CFj
$28,900 CFj
$28,900 CFj
$28,900 CFj
$28,900 CFj
13% I/YR
Shift NPV - $14,037.78
Project B
-$100,000 CFj
$48,000 CFj
$40,000 CFj
$40,000 CFj
$28,900 CFj
13% I/YR
Shift NPV $19250.66
The only correct statement is that Project B should be accepted because it has the highest EAA.
g A company's most recent balance sheet reported total assets of $1.9 million, total liabilities of $0.8 million, and total equity of $1.1 million. Its Debt to equity ratio is: Group of answer choices
Answer:
0.73
Explanation:
Debt to equity ratio is calculated as Total debt / Total equity
= $0.8 million / $1.1 million
= 0.73
Therefore, debt to equity ratio is 0.73
A firm pays a current dividend of $1.00 which is expected to grow at a rate of 5% indefinitely. If current value of the firm’s shares is $35.00, what is the required return based on the constant growth dividend discount model (DDM)?
Answer:
8%
Explanation:
A firm pays a current dividend of $1
The growth rate is 5%
= 5/100
= 0.05
The current value of the firm's share is $35
Therefore, the required return using the constant growth discount dividend model can be calculated as follows
K = 1×(1+0.05)/35 + 0.05
K= 1×1.05/35 + 0.05
= 1×0.03 + 0.05
= 0.03 + 0.05
= 0.08×100
= 8%
Hence the required return is 8%
Kalanick’s attributes include focus and perseverance. These attributes are most closely related to which of the following?
a. high extroversion
b. low emotional stability
c. high agreeableness
d. high openess to experience
e. proactive personality
Answer: proactive personality
Explanation:
Proactive personality has to do with the individuals who identify opportunities, and also show perseverance and initiative and wait till there's a meaningful change regarding a particular situation.
Since Kalanick’s attributes include focus and perseverance. The attributes are most closely related to proactive personality.
Suppose that in a competitive output market, firms hire labor from a competitive labor market (so that the profit maximization conditions for hiring labor are as we discussed in class). If the supply of this kind of labor increases, we would expect a(n) _____________.
A. increase in equilibrium wage, W, and increase in equilibrium quantity of labor, L, employed.
B. an increase in W and a decrease in L.
C. A decrease in W and a decrease in L.
D. A decrease in W and no change in L.
E. None of the above.
Answer:
e
Explanation:
When supply of labour increases, the supply curve shifts outward. As a result there would be an increase in equilibrium quantity but a decrease in wages
Carlos and Deborah are farmers. Each one owns a 12-acre plot of land. The following table shows the amount of rye and corn each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing rye or corn or to produce rye on some of the land and corn on the rest.
Rye Corn
(Bushels per acre) (Bushels per acre)
Carlos 18 6
Deborah 28 7
___________ has an absolute advantage in the production of rye, and _________ has an absolute advantage in the production of corn. Carlos's opportunity cost of producing 1 bushel of corn is___________ bushels of rye, whereas Deborah's opportunity cost of producing 1 bushel of corn is ___________ bushels of rye. Because Carlos has a ___________ opportunity cost of producing corn than Deborah,____________ has a comparative advantage in the production of corn, and____________ has a comparative advantage in the production of rye.
Answer:
Deborah
Deborah
3
4
lower
Carlos
Deborah
Explanation:
a person has comparative advantage in production if he / she produces at a lower opportunity cost when compared to other people
for carlos
the opportunity cost of producing rye = 6 / 18 = 0.33
the opportunity cost of producing corn = 18 / 6 = 3
for Deborah,
the opportunity cost of producing rye = 7 / 28 = 0.25
the opportunity cost of producing corn = 28 /7 =4
Carlos has a comparative advantage in the production of corn because he produces at a lower opportunity cost when compared with Deborah
Deborah has a comparative advantage in the production of rye because he produces at a lower opportunity cost when compared with Carlos
A person has absolute advantage in production if he produces more quantity of the product when compared to other people.
Deborah has absolute advantage in the production of both rye and corn
The correct statements will be that
1. Carlos has an absolute advantage in the production of Rye
2. Deborah has an absolute advantage over the production of Corn.
3. Carlos' opportunity cost of producing 1 bushel of rye is 3 bushels of rye
4. Deborah's opportunity cost of producing 1 bushel of corn is 4 bushels of rye.
5. Carlos has a lower opportunity cost of producing corn than Deborah.
6. Deborah has a competitive advantage in the production of Corn.
7. Carlos has a competitive advantage in the production of Rye.
The production outputs of Carlos and Deborah suggests that Deborah is a more efficient farmer.
Production outputThe production output refers to the total outcome derived from the use of resources available at a given period of time, such that the two different outputs are comparable. Here, as the production output of Deborah is more in both the cases of production of rye and corn, it can be said that the production output of Deborah is more than Carlos.Hence, the correct statements regrading the production outputs of Carlos and Deborah are as aforementioned.
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Burpee Company sells seeds to garden stores. Sales are expected to be $2,038,635 in January, $2,581,891 in February and $2,913,307 in March. Burpee sets their prices so that they earn an average 32% gross profit on sales revenue. What is budgeted cost of goods sold for the first quarter (January, February and March)?
Answer:
Total COGS= $5,123,006.44
Explanation:
Giving the following information:
Sales:
January= $2,038,635
February= $2,581,891
March= $2,913,307
Burpee sets their prices so that they earn an average 32% gross profit on sales revenue.
We need to calculate the cost of goods sold:
January= 2,038,635*0.68= 1,386,271.8
February= 2,581,891*0.68= 1,755,685.88
March= 2,913,307*0.68= 1,981,048.76
Total COGS= $5,123,006.44
You short-sell 200 shares of Rock Creek Fly Fishing Co., now selling for $50 per share. You are required to post a 50% margin on the short sale. If your broker requires a 30% maintenance margin, at what price will you get a margin call? (Ignore interests and dividends)
a. $62.50
b. 57.69
c. 56.25
d. 37.50
Answer:
b. 57.69
Explanation:
Calculation for what price that you will get a margin call
First step
200 shares *$25 per share=$10,000
Second step
Based on the information given we are required to post a 50% margin on the short sale.
Now let find the 50% margin
50% margin =50%*$10,000
50% margin=$5,000
Hence,
$10,000+$5,000=$15,000
Third step
Based on the information given we were told that the broker requires a 30% maintenance margin.
.30=($10,000-200p)/200p
60p=$15,000-200p
260p= $15,000
Hence
$15,000/260
Price= $57.69
Therefore the price that you will get a margin call will be $57.69
What is the difference between full absorption costing and variable costing?A. In full absorption costing, all of the non-manufacturing costs are expensed. In variable costing, all of the non-manufacturing expenses are included in the cost of the product.B. In full absorption costing, fixed manufacturing overhead is expensed. In variable costing, fixed manufacturing overhead is included in the cost of the product.C. In full absorption costing, fixed manufacturing overhead is included in the cost of the product. In variable costing, fixed manufacturing overhead is expensed.D. Variable costing must be used for external financial reports while full absorption costing can only be used for internal reporting.
Answer: C. In full absorption costing, fixed manufacturing overhead is included in the cost of the product. In variable costing, fixed manufacturing overhead is expensed.
Explanation:
Full absorption costing accounts for all the costs involved in making a product including the indirect and the direct costs. That means both variable costs like direct materials and direct labor as well as fixed costs like rent, and insurance are included in the cost of the product.
Variable costing on the other hand expenses fixed manufacturing overhead separately. As a result, Full absorption has a higher cost of inventory than does Variable costing.
According to Bradly, Pratt, Byrd, and Simmons, enterprise architecture strategically positions an organization to leverage its current IT capabilities and also provides a dynamic roadmap to the future.
a. true
b. false
If there is a market with the below noted market segmentation, what would the four firm market concentration ratio be?
Distribution of sales: 30%, 3%,10%, 5%,15%, 2%, 35%
a. 10
b. 90
c. 50
d. 40
Answer:
The correct answer is:
90 (b.)
Explanation:
A concentration ratio is the ratio of the combined market shares percentage held by the largest specified number of firms, compared to the given market size. The concentration ratio ranges from 0% to 100%. If the concentration ratio of an industry ranges from 0% to 50%, that industry is said to be perfectly competitive if the top 5 firms have a concentration ratio of 60% or more, oligopoly is said to occur, and if the competition ratio of one company is 100% it shows monopoly.
In our example, the concentration of the largest four market segments are:
35%, 30%, 15% and 10%
Therefore, the four firm market concentration ratio = 35 + 30 + 15 + 10 = 90
Answer:
b. 90
Explanation:
The concentration ratio is a term in business that is measured as the total summation of the market share percentage carried by the largest specified number of companies in an industry. The concentration ratio varies between 0% to 100%, and an industry's concentration ratio is considered to demonstrates the extent of competition in the industry.
However, the four-firm concentration ratio is calculated by summing the market shares—that is, the percentage of total sales—of the four largest companies in the given market.
Hence, in this case, we have 35%, 30%, 15% and 10% as the top four largest market share. There by, summation equals => 35+30+15+10 = 90.
A company's normal operating activity is to produce 500 units per month. During its first two months of operaetion, it produced 100 units per month. Following a great article about the product, product spiked to 1,000 units per month, but the spike only lasted for one month. Which of the following best approximates the company's relevant range?
a. 450-510 units.
b. 100-1,000 units.
c. 500-1,000 units.
d. 100, 500, or 1,000 units.
Answer:
a. 450-510
Explanation:
450-510 units which best approximates the company's relevant range. The correct option is A.
What is an operating activity?All of a company's continuing marketing efforts for its goods and services are referred to as operating activities. Non-operating activities are one-time occurrences that could have an impact on the company's regular, core business but also on sales, costs, or cash flow.
Given,
Normal Producing Units = 500 units per month
Last month produced = 1000 units
Production for first 2 months = 100 units per month
Calculate the range of company produce units =?
Total units produce = 2 x 100 + 9 x 500 + 1 x 1000/12
Total units produce = 5700/12 = 475 units
The relevant range for the company producing the units is 450-510 units because 475 units is lies between in such range.
Thus, the ideal selection is option A.
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Reed Company is in the process of preparing its financial statements for 2022. During 2022, Reed changed from the double-declining balance method for its building to the straight-line method. The building originally cost $900,000. It had an original useful life of 25 years and a salvage value of $60,000. Purchase date was 1/1/20. The 2022 depreciation expense for the building will be:
Answer:
$30,511.30
Explanation:
The double declining method was used for two years
Depreciation expense using the double declining method = Depreciation factor x cost of the asset
Depreciation factor = 2 x (1/useful life) = 2 /25 = 0.08
Depreciation expense in 2020 = 0.08 x $900,000 = $72,000
Book value = $900,000 - $72,000 = $828,000
Depreciation expense in 2021 = 0.08 x $828,000 = $66,240
book value = $828,000 - $66,240 = $761,760
Straight line depreciation expense = (book value - Salvage value) / useful life
useful life = 25 - 2 = 23
book value = $761,760
salvage value = $60,000.
( $761,760 - $60,000. ) / 23 = $30,511.30
The depreciation expense for the remaining useful life of the asset would $30,511.30
Wentworth's Five and Dime Store has a cost of equity of 11.4 percent. The company has an aftertax cost of debt of 5 percent, and the tax rate is 35 percent. If the company's debt–equity ratio is .74, what is the weighted average cost of capital?
Answer:
WACC = 6.66 %
Explanation:
Weighted average cost of capital is the average cost of all of the long-term types of finance used by a company weighted according to the that amount of finance used in relation to the total pool of fund
WACC = (Wd×Kd) + (We×Ke)
After-tax cost of debt = Before tax cost of debt× (1-tax rate)
Kd-After-tax cost of debt = 5%
Ke-Cost of equity = 11.4%
Wd-Weight f debt -74%
We-Weight of equity = 26%
WACC = (0.74× 5%) + (0.26 × 11.4%) = 6.66 %
WACC = 6.66 %
Which of the following is not a reason why it is important for parties to memorialize their agreements in writing?
a. A party enhances his/her chances of proving that an obligation was undertaken and makes it harder for the other party to deny making the promise.
b. Signing a writing communicates the seriousness of the occasion to the signer.
c. A person's signature on a written contract provides a basis for the contract to be authenticated.
d. Writings are subject to the danger that a person might fabricate terms.
Answer:
B. singing a writing communicates the seriousness of the occasion to the singer
The reason which is not important for parties to memorialize their agreements in writing is signing a writing communicates the seriousness of the occasion to the signer. Thus, the correct answer is C.
What is an agreement?Agreement refers to consent of individual on a particular opinion. When the both parties agree on a concept they will make it in writing. When this agreement enforceable by law it is considered as contract.
The reason it is important top memorialize the agreements in writing are it will act as proof or evidence when formulated in written to be presented in case of obligation.
An agreement will be duly signed by both the parties which shows its authenticity and reliability and avoid any false interpretation of the deal. When the agreement is in writing the violation of terms and conditions is not possible as it clearly mentions the drawbacks of circumstances if any party failed to fulfill the conditions of the agreement.
Therefore, the option C signing a writing communicates seriousness is the appropriate answer.
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Marston Manufacturing Company has two divisions, L and H. Division L is the company’s low-risk division and would have a weighted average cost of capital of 8% if it was operated as an independent company. Division H is the company’s high-risk division and would have a weighted average cost of capital of 14% if it was operated as an independent company. Because the two divisions are the same size, the company has a composite weighted average cost of capital of 11%. Division H is considering a project with an expected return of 12%. Should Marston Manufacturing Company accept or reject the project? Reject the project Accept the project On what grounds do you base your accept–reject decision? Division H’s project should be accepted, as its return is greater than the risk-based cost of capital for the division. Division H’s project should be rejected since its return is less than the risk-based cost of capital for the division.
Answer:
Should Marston Manufacturing Company accept or reject the project?
Marston C Company should reject the project because its expected return is lower than Division H's cost of capital.
Since the divisions' risk is so different, and probably their projects are also very different, the company should use different costs of capital to accept of reject the projects based on each division's cost of capital.
Imagine another situation where Division L is evaluating a project that yields 10%. If they used the company's WACC, then they should reject the project, but if they used the division's cost of capital, then they should accept the project (in this case I would recommend accepting it).
Explanation:
Division H's risk = 14%
Division L's risk = 8%
WACC = 11%