Answer:
a. 4.94%
b. 11.48%
Explanation:
Here in this question, we are interested in calculating the pretax cost of debt and cost of equity.
We proceed as follows;
a. From the question;
The debt equity ratio = 1.15
since Equity = 1 ; Then
Total debt + Total equity = 1 + 1.15 = 2.15
Mathematically ;
WACC = Cost of equity x Weight of equity + Pretax Cost of debt x Weight of debt x (1-Tax rate)
Where WACC = 8.6%
Cost of equity = 14%
Weight of equity = 1/(total debt + total equity) = 1/(1+1.15) = 1/2.15
Pretax cost of debt = ?
Weight of debt = debt equity ratio/total cost of debt = 1.15/2.15
Tax rate = 21% = 0.21
Substituting these values, we have;
8.6% = 14% x 1/2.15 + Pretax cost of debt x 1.15/2.15 x (1-21%)
8.6% = 14% x 1/2.15 + Pretax cost of debt x 1.15/2.15 x (1-21%)
Pretax cost debt = (8.6%-6.511628%)/(1.15/2.15 x (1-21%))
Pretax cost of debt = 4.94%
b. WACC = Cost of equity x Weight of equity + After tax Cost of debt x Weight of debt
8.6% = Cost of equity x 1/2.15 + 6.1% x 1.15/2.15
Cost of equity = (8.6%-3.26279%)/(1/2.15)
Cost of equity = 11.48%
An 85-year old risk averse investor is not happy about the minimal return she is earning on her current investments. She is stressed about having enough income because her cost of living has been increasing by more than 10% annually. Her current portfolio composition consists of:
40% Money Market Fund
50% Bonds
10% Equities
What changes should you suggest to her portfolio?
A. Reduce the Money Market Fund allocation by 10% (to 30%) and put the released funds in commodities such as gold
B. Reduce the Money Market Fund allocation by 30% (to 10%) and put the released funds in AAA-rated corporate bonds
C. Liquidate the entire Money Market Fund allocation and put the released funds in Equities, bringing that allocation up to 50%
D. Liquidate the entire Money Market Fund allocation and put the released funds in U.S. Treasury securities
Answer:
B. Reduce the Money Market Fund allocation by 30% (to 10%) and put the released funds in AAA-rated corporate bonds
Explanation:
First of all, since the investor is risk averse and cannot afford to lose money on any risky investment, she should change the mix of her investment portfolio but without increasing risks. Corporate bonds that are AAA-rated carry a very low risk and pay a little higher than money market funds. So a small decrease in money market fund assets and an increase in AAA-rated bonds should yield a slightly higher return.
Investing in equities would be too risky and US Treasuries pay even less interests than money market funds.
risk-free assets have a beta of 0 and the market portfolio has a beta of 1. true or false true false
Answer: true
Explanation:
The term risk free assets are the assets that are secure because they are expected to bring about a return while the Beta is used to know the volatility of a portfolio when it is compared to the entire market.
Risk-free assets typically have zero beta since they're risk free. Therefore, risk-free assets have a beta of 0 and the market portfolio has a beta of 1 is true.
A firm has current assets of $36,000, cash of $5,000, current liabilities of $20,000, total assets of $80,000 and total liabilities of $45,000. What is its net working capital?
a. $16,000
b. $28,000
c. $35,000
d. $44,000
Answer:
Option A, $16000, is the right answer.
Explanation:
The current assets = $36000
Cash = $5000
Current liabilities = $20000
Total assets = $80000
Total liabilities = $45000
Use the below formula to find the net working capial.
Net working capital = Current assets - Current Liabilities
Net working capital = 36000 – 20000
Net working capital = 16000
Therefore, option A, $16000 is correct.
Identify the type of cash flow activity for each of the following events (operating, investing, or financing): a. Redeemed bonds be. Issued preferred stock c. Paid cash dividends d. Net income e. Sold equipment f. Purchased treasury stock go. Purchased patents h. Purchased buildings i. Sold long-term investments j. Issued bonds k. Issued common stock
Answer is given below
Explanation:
type of cash flow activity
a. Redeemed bonds ---------------Fiancing
b Issued preferred stock -----------Fiancing
c. Paid cash dividends --------------Fiancing
d. Net income --------------------------Operating
e. Sold equipment --------------------Investing
f. Purchased treasury stock -------Fiancing
g. Purchased patents ----------------Investing
h. Purchased buildings -------------Investing
i. Sold long-term investments ----Investing
j. Issued bonds ------------------------Fiancing
k. Issued common stock -----------Fiancing
Explain some of the basic principles of cost management, such as profits, life cycle cost, tangible and intangible costs and benefits, direct and indirect costs, and Reserves.
Answer:
Profits - These refer to the revenues accrued from a project less the costs of the project.
Life Cycle Cost - Life Cycle Cost is a concept in Cost management where the cost of a project throughout it's entire life is assessed. Costs assessed therefore include; initial capital costs, maintenance costs and operating costs.
Tangible and Intangible Costs - When costs are tangible, quantifying them.is easy as the cost can be stated and directly attributable to a cost object eg, cost of a fixed asset. Intangible cost on the other hand is not easy to quantify and is not easily attributable. For instance, the experience that a Project Manager leaves with if they resign.
Tangible and Intangible Benefits - Like tangible costs, tangible benefits are easily quantifiable and noticeable such as trade discounts from buying in bulk. Intangible benefits on the other hand are not easily quantifiable. An example would be Employee motivation from a safer working Environment.
Direct and Indirect Costs - Direct costs are costs that can be easily traced to a cost object. In other words, the reason for the cost is known e.g labor cost for assembling a product. Indirect Costs are harder to trace to a cost object even though they are related to production. An example would be the Electricity used for production.
Reserves - Cost reserves are monies held for any emergency expenses that may come up. This way the company can deal with them speedily.
Which of these conditions helped establish the foundation for a market revolution in the United States
Question Completion:
Choices: Rapid improvements in transportation and communication; the production of goods for a cash market; and the use of inventions and innovations to produce goods for a mass market.
Answer:
The condition that helped to establish the foundation for a market revolution in the United States is:
Rapid improvements in transportation and communication
Explanation:
Rapid improvements in transportation and communication spurred innovations. With innovations, capitalism was born. Innovations needed factories for mass production. In turn, according to American History, "factories and mass production increasingly displaced individual artisans and farmers," who survived at subsistent levels. Large farms grew and produced crops for distant markets, no longer only for family and local markets. Most of the crops were further processed, packaged, preserved, and shipped through cheap transportation systems like the Erie Canal, using steamboats. And the rest, they say, is history.
Media selection problems can maximize exposure quality and use number of customers reached as a constraint, or maximize the number of customers reached and use exposure quality as a constraint.
A. True
B. False
Media selection problems can maximize exposure quality and use the number of customers reached as a constraint, or maximize the number of customers reached and use exposure quality as a constraint. Thus the statement is True.
What is Media?Media is referred to as a medium of communication used to exchange information about events happening in the world. This provides information about the issues and challenges rising in the world and creates awareness among the public.
These issues can utilize the number of customers reached as a limitation and can enhance exposure quality by determining how commonly to use each media source. The value of the objective function will be modified by the dual price sum of the restrictions.
Therefore, the statement is True.
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Dewyco has preferred stock trading at per share. The next preferred dividend of is due in one year. What is Dewyco's cost of capital for preferred stock?
Answer:
6%
Explanation:
some information is missing:
market price of preferred stock = $50
preferred stock dividend = $3
preferred stocks' cost of capital = preferred stock dividend / market price of preferred stock = $3 / $50 = 0.06 = 6%
Preferred stocks' cost of capital is not affected by any corporate tax rates, since preferred dividends are considered paid in capital and cannot be deducted as interests in the income statement.
Many gas stations with convenience stores sell gas at, or close to, cost. In these organizations, profit comes from the convenience store's products and gas is priced to
Answer: build traffic.
Explanation:
The pricing model employed by such gas stations is built in a way to drive traffic. traffic is important and has an impact in many ways 1. low traffic can bog your business down at some level.
2. When you increase your traffic along with the quality of the visitors, the better you will be able to increase your sales.
traffic in this context refers to customers the more you are able to pull customers over the more sales you make.
Attributes of a company's competitive advantage, including land, capital, technological knowhow, and physical infrastructure, are known as:
Answer: Factor endowments
Explanation:
Factor endowment is amount of land, capital, labor, and entrepreneurship that is possessed by a country and which the country can use for production purpose.
Therefore, Attributes of a company's competitive advantage, including land, capital, technological knowhow, and physical infrastructure, are factor endowments.
The following data is given for the Bahia Company: Budgeted production 1,049 units Actual production 971 units Materials: Standard price per pound $1.971 Standard pounds per completed unit 12 Actual pounds purchased and used in production 11,302 Actual price paid for materials $23,169 Labor: Standard hourly labor rate $15.00 per hour Standard hours allowed per completed unit 4.3 Actual labor hours worked 5,000.65 Actual total labor costs $76,260 Overhead: Actual and budgeted fixed overhead $1,014,000 Standard variable overhead rate $27.00 per standard labor hour Actual variable overhead costs $140,018 Overhead is applied on standard labor hours. The variable factory overhead controllable variance is a.$75,397.52 unfavorable b.$75,397.52 favorable c.$27,284.90 unfavorable d.$27,284.90 favorable
Answer:
c.$27,284.90 unfavorable
Explanation:
Standard variable overhead rate =$27.00
Standard hours allowed per completed unit =4.3
Actual production unit =971
Actual variable overhead costs =$140,018
Variable factory overhead controllable variance = (Standard variable overhead rate * Standard hours allowed per completed unit * Actual production unit) - Actual variable overhead costs
Variable factory overhead controllable variance = ($27 * 4.3 * 971) - $140,018
Variable factory overhead controllable variance = $112,733.1 - $140,018
Variable factory overhead controllable variance = $27,284.9 (Unfavorable)
Peter Parker is evaluating two different methods for manufacturing spiderwebs. The first option is manufacturing them in his home lab. This will entail purchasing an industrial-grade chemical reactor that costs $450,000. He will have to hire a lab assistant who will initially receive a salary of $60,000 a year, but that salary must be adjusted for inflation every year at an inflation rate of 2.5%. After ten years, the chemical reactor can be sold for $30,000. This lab setup can produce 10,000 cubic meters of spiderwebs per year.
The second option is outsourcing all the manufacturing process to a biotech company recently set up by Bruce Banner. In this case, the price of the spiderwebs will be $14 per cubic meter over the next ten years.
Since Peter Parker is a broke student, all of this project is being financed by a superhero fund set up by his late friend and mentor Tony Stark. This fund returns 11% annually. Since this is not a commercial endeavor, there are no taxes nor depreciation to consider. Given these data, calculate the unit price of manufacturing spiderwebs in the lab and decide which of the two options makes the most economic sense. Justify your answers with calculations.
Answer:
Option B makes the most economic sense.
Explanation:
Option A:
The total Initial investment amount - $450,000 + $60,000 = $510,000 total Initial investment cost excluding the adjustment for inflation every year of the staff.
Per unit manufacturing cost= $510,000 ÷ 10, 000 (cubic meters of spiderwebs per year) = $51 (implying the selling price per unit will be higher than this).
Option B:
Initial total investment cost = $0 (he only outsourced)
Per unit manufacturing cost= less than $14 (because the price of the spiderwebs will be $14 per cubic meter over the next ten years).
By outsourcing following option B, Peter would avoid the massive initial investment cost of buying the industrial-grade chemical reactor that costs $450,000. Also, since this is not a commercial endeavor he needs to be wary of the lower cost per unit of the spiderwebs he stands to gain with option B.
Careco Company and Audaco Inc are identical in size and capital structure. However, the riskiness of their assets and cash flows are somewhat different, resulting in Careco having a WACC of 10% and Audaco a WACC of 12%. Careco is considering Project X, which has an IRR of 10.5% and is of the same risk as a typical Careco project. Audaco is considering Project Y, which has an IRR of 11.5% and is of the same risk as a typical Audaco project. Now assume that the two companies merge and form a new company, Careco/Audaco Inc. Moreover, the new company's market risk is an average of the pre-merger companies' market risks, and the merger has no impact on either the cash flows or the risks of Projects X and Y. Which of the following statements is correct?
A) if evaluated using the correct post-merger wacc, project x would have a negative npv.
B) after the merger, careco/audaco would have a corporate wacc of 11%. therefore, it should reject project x but accept project y.
C) careco/audaco's wacc, as a result of the merger, would be 10%.
D) after the merger, careco/audaco should select project y but reject project x. if the firm does this, its corporate wacc will fall to 10.5%.
E) if the firm evaluates these projects and all other projects at the new overall corporate wacc, it will probably become riskier over time.
Answer:
E) if the firm evaluates these projects and all other projects at the new overall corporate wacc, it will probably become riskier over time.
Explanation:
Before the merger, Audaco would have rejected any project with an IRR of less than 12% (more risky investments) while Careco only required a 10% IRR (less risky projects). But after the merger the combined WACC will be lower than Audaco's, but higher than Careco's. Therefore, the new merged company will start accepting more risky projects and that tendency will continue over time. Eventually, the company's WACC will have to adjust and increase, and the cycle will continue.
Miss. Asma works as a sales executive at HBL Bank, is upset at the way her manager, Sadaf, always calls her in for one-on-one meetings to discuss her underperformance. Though Asma makes a higher number of sales calls and works longer hours than last year, her sales figures are still low. She knows that the main reason behind her underperformance is the recent economic meltdown in the country. However, her manager feels that Asma's underperformance is the result of her laid-back attitude and has nothing to do with external factors. In this situation, what kind of behavior/Attitude Sadaf is showing and how it can be replicate
Answer:
Sadaf's behavior exemplifies Fundamental attribution error.
It can be replicated if Sadaf does not try to understand Asma's point of view of her underperformance.
Explanation:
The Fundamental Attribution Error is a type of error by the people of over-emphasizing the characteristics of a person while ignoring the situational factors. In such type of cognitive bias, people tend to instil the personal trait of other or judging them for their laid-back behavior based on their personal trait rather than thinking of any possibility of external situation that may have caused it.
In the given situation, Sadaf is showing fundamental attribution error behavior by instilling to Asma's underperformance with her laid-back behavior instead of asking her the real problem.
This attribution error can be replicated if Sadaf did not ask Asam for the reason behind her underperformance.
g If Warren Buffet can beat the market using value investing, then... Group of answer choices the market is semi-strong form efficient the market is weak form efficient the market cannot be efficient the market is strong form efficient
Answer: The market is weak form efficient
Explanation:
Weak form markets are markets in which stocks are said to incorporate all past information in their prices. Investors who believe that the market is at weak form efficiency believe that since the stock contains past information, using the current information in the company's books to determine if the company is overvalued or undervalued is possible (fundamental analysis).
Warren Buffet's Value Investing means that he invests in stocks that he believes to be undervalued and sells them for higher or holds them when they appreciate. This is consistent with fundamental analysis. If Warren Buffet is beating the market by investing in undervalued stock then the market is indeed weak form efficient.
you decided to get a summer job since you were 14 as a lifeguard. you have made 2000 each summer. you placed all your earning in your savings account each year. It's 5 years later and you want to determine how much interest you have made. use the calculator to determine this
Answer:
Determine of interest made by placing $2,000 earnings each summer in savings account each year:
Total Interest $1,265.95
at 4% interest per annum.
Explanation:
a) Data and Calculations:
1. Data:
Earnings each summer = $2,000
Period = 5 years
Interest Rate = 4%
2. Using online calculator:
V (Future Value) $11,265.95
PV (Present Value) $9,259.79
N (Number of Periods) 5.000
I/Y (Interest Rate) 4.000%
PMT (Periodic Payment) $2,000.00
Starting Investment $0.00
Total Principal $10,000.00
Total Interest $1,265.95
3. By placing all your earning in your savings account each year after 5 years, you will get an interest of $1,265.95 and a total future value of $11,265.95, having deposited $10,000 ($2,000 each for 5 years).
Identify whether the following paragraph uses a direct, indirect, or semi-indirect organizational pattern.
Due to budgetary restraints, departmental charge cards will no longer be valid for purchasing supplies. Departments will now order all supplies through central purchasing in Accounting. The new procedure for ordering supplies will be effective March 1. Improved company intranet functionality will make this process easy and effective. The electronic Supply Request Form can be found on the intranet in the "Orders" folder. Supply requests submitted via the intranet will be processed within 24 hours.
Put the sentences in order for a paragraph using an indirect organizational pattern.
After considering cost-saving proposals, such as eliminating the internal Parts Shipping division and tertiary quality control measures, the executive team determined that staff furloughs would have the least impact on company morale.
Due to projected second quarter revenue short falls, the CEO has decided to take precautionary measures to protect the long-term viability of the company.
A mandatory staff furlough will be instituted July 1–6 of this year.
Due to projected second quarter revenue short falls, the CEO has decided to take precautionary measures to protect the long-term viability of the company.
After considering cost-saving proposals, such as eliminating the internal Parts Shipping division and tertiary quality control measures, the executive team determined that staff furloughs would have the least impact on company morale.
A mandatory staff furlough will be instituted July 1–6 of this year.
Due to projected second quarter revenue short falls, the CEO has decided to take precautionary measures to protect the long-term viability of the company.
A mandatory staff furlough will be instituted July 1–6 of this year.
After considering cost-saving proposals, such as eliminating the internal Parts Shipping division and tertiary quality control measures, the executive team determined that staff furloughs would have the least impact on company morale.
Answer:
a. Identification as direct, indirect, or semi-indirect organizational patterns:
Direct organizational pattern
b. Putting sentences in order for a paragraph using an indirect organizational pattern:
Due to projected second quarter revenue shortfalls, the CEO has decided to take precautionary measures to protect the long-term viability of the company.
A mandatory staff furlough will be instituted July 1–6 of this year.
After considering cost-saving proposals, such as eliminating the internal Parts Shipping division and tertiary quality control measures, the executive team determined that staff furloughs would have the least impact on company morale.
Explanation:
Organizational paragraph patterns refer to how paragraphs are organized in order to deliver intended messages. The direct organizational pattern delivers the bad news first before giving reasons, and then closes on a positive note. The indirect pattern starts with a buffer, the reasons, then delivers the bad news, before finally closing on a positive note. The semi-indirect pattern is a mixture of the two.
At Jacobson Company, indirect labor is a variable cost that varies with direct labor-hours. Last month’s performance report showed that actual indirect labor cost totaled $5,780 for the month and that the associated spending variance was $245 Favorable. If 24,100 direct labor-hours were actually worked last month, then the flexible budget cost formula for indirect labor must be (per direct labor-hour):
Answer:
Flexible budget cost formula for indirect labor is $0.25 per DL hours
Explanation:
Flexible budget cost for indirect labor = Actual indirect labor cost + Associated spending variance
= $5,780 + $245
= $6,025
Flexible budget cost formula for indirect labor= Flexible budget cost for indirect labor / Direct labor-hours
= $6,025 / 24,100 DL hours
= $0.25 per DL hours
At the beginning of the school year, Craig Kovar decided to prepare a cash budget for the months of September, October, November, and December. The budget must plan for enough cash on December 31 to pay the spring semester tuition, which is the same as the fall tuition. The following information relates to the budget: Cash balance, September 1 (from a summer job) $9,250 Purchase season football tickets in September 160 Additional entertainment for each month 250 Pay fall semester tuition in September 4,800 Pay rent at the beginning of each month 600 Pay for food each month 550 Pay apartment deposit on September 2 (to be returned December 15) 600 Part-time job earnings each month (net of taxes) 950Required:a. Prepare a cash budget for September, October, November, and December. b. Are the four monthly budgets that are presented prepared as static budgets or flexible budgets?c. What are the budget implications for Craig Kovar?
Answer:
a) Craig Novar's
Cash budget
Months
Sept. Oct. Nov. Dec.
beginning balance 9,250 2,640 2,190 1,740
football tickets -160
other entertainment -250 -250 -250 -250
semester tuition -4,800
rent -600 -600 -600 -600
food -550 -550 -550 -550
apartment deposit -600 600
part time jobs earnings 950 950 950 950
ending balance 2,640 2,190 1,740 1,890
b) This is a static budget because it is being prepared in advance. A flexible budget adjusts a static budget to the real cash outflows and inflows.
c) Since Craig is spending more money than what he earns, his cash balance is decreasing month by month. This tendency changes in December because Craig gets his apartment's deposit back, but he still will not have enough money to pay for Spring tuition.
A firm is currently producing 3,000 units of output daily by employing 20 units of labor at a price of $100 per unit and 40 units of capital at a price of $40 per unit. The marginal product of the last unit of labor employed is 50, and the marginal product of the last unit of capital employed is 30. In order to minimize its production costs, the firm should do which of the following?
a. Employ more labor and less capital because the marginal product of labor is greater than the marginal product of capital.
b. Employ less labor and more capital because the firm is currently spending $2,000 on labor and only $1,600 on capital.
c. Employ more labor and less capital because the firm already employs 40 units of capital and only 20 units of labor.
d. Employ less labor and more capital because the marginal product per dollar spent on labor is less than the marginal product per dollar spent on capital.
e. Employ less labor and more capital because a unit of labor costs $100 while a unit of capital costs only $40.
Answer:
e. Employ less labor and more capital because a unit of labor costs $100 while a unit of capital costs only $40.
Explanation:
By employing less labor and more capital, the firm can produce the 3,000 units of daily output at lower production costs since 40 units of capital cost $40 per unit, than it can with 20 units of labor priced $100 per unit. Capital can, therefore, minimize the total production costs, as less labor is used. Capital resources are often in the form of equipment and technological advancement that make work easier, faster, and more efficient with the highest quality possible.
Based on the marginal products of labor and capital, the company should d. Employ less labor and more capital because the marginal product per dollar spent on labor is less than the marginal product per dollar spent on capital.
The company should invest more in the method of production that gives it more marginal product per unit.
Marginal product per unit of labor:
= Marginal product of labor / cost of labor
= 50 / 100
= 0.5 per unit
Marginal product per unit of capital:
= 30 / 40
= 0.75 per unit
Capital has more marginal product per unit and so should be invested in more than labor.
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Discuss why Measuring relationship is relevant to outsourcing
Explanation:
Outsourcing initiatives are complex undertakings requiring careful management of the client/vendor relationship. While monitoring the vendor’s performance is a common practice, insight into the status of the ‘soft’ aspects of the relationship, such as trust, is often not available, although research highlights the social aspects as a critical success factor. However, monitoring the softer facets’ quality is difficult: Vendor managers track the status of the soft aspects, if at all, using survey tools among involved staff. This has shortcomings because it does not only capture subjective perceptions, but also interrupts the daily business of the participants. To develop a more objective instrument that collects data without interfering daily business, we draw on social network analysis. We suggest an approach that will eventually allow managers to monitor relationship quality in an efficient and objective way. The results suggest metrics to measure the soft factors of a relationship, such as trust and commitment.
Gabriele Enterprises has bonds on the market making annual payments, with eleven years to maturity, a par value of $1,000, and selling for $982. At this price, the bonds yield 7.6 percent.
Required:
What must the coupon rate be on the bonds?
Answer:
The answer is 7.35 percent
Explanation:
N(Number of periods) = 11years
I/Y(Yield to maturity) = 7.6 percent
PV(present value or market price) = $982
PMT( coupon payment) = ?
FV( Future value or par value) = $1,000.
We are using a Financial calculator for this.
N= 11; I/Y = 7.6; PV = -$982; FV= $1,000; CPT PV= $73.52
Therefore, coupon rate is ($73.52/$1,000) x 100 percent
=7.35 percent
g A decrease in the basis will __________ a long hedge and __________ a short hedger. Group of answer choices hurt; hurt hurt; benefit benefit; have no effect upon benefit; benefit benefit; hurt
Answer:
1. hurt
2. benefit
Explanation:
Given that a contract and an asset are to be converted in cash early, this implies that, basis risk exists and futures price and spot price should not move in lockstep before delivery date. However, a reduction in the basis will then hurt the long hedger and benefit the short hedger.
Hence, considering the nature of the hypothetical situation, a decrease in the basis will HURT a long hedge and BENEFIT a short hedge.
Expected return and standard deviation. Use the following information to answer the questions: LOADING.... a. What is the expected return of each asset? b. What is the variance of each asset? c. What is the standard deviation of each asset? Hint: Make sure to round all intermediate calculations to at least seven (7) decimal places. The input instructions, phrases in parenthesis after each answer box, only apply for the answers you will type. a. What is the expected return of asset A?
Answer and Explanation:
a. The computation of expected return of each assets is shown below:-
Expected Return on Asset A in state is
= 0.39 × 0.02 + 0.45 × 0.02 + 0.16 × 0.02
= 0.02
Expected Return on Asset B in state is
= 0.39 × 0.25 + 0.45 × 0.06 + 0.16 × -0.04
= 0.1181
Expected Return on Asset C in state is
= 0.39 × 0.35 + 0.45 × 0.19 + 0.16 × -0.22
= 0.1868
b. The computation of variance of each asset is shown below:-
Variance of Assets A is
= 0.39 × (0.02 - 0.020)^2 + 0.45 × (0.02 - 0.020)^2 + 0.16 × (0.02 - 0.020)^2
= 0
Variance of Assets B is
= 0.39 × (0.25 - 0.1181)^2 + 0.45 × (0.06 - 0.1181)^2 + 0.16 × (-0.04 - 0.1181)^2
= 0.0123
Variance of Assets C is
= 0.39 × (0.35 - 0.1868)^2 + 0.45 × (0.19 - 0.1868)^2 + 0.16 × (-0.22 - 0.1868)^2
= 0.0369
c. The computation of standard deviation of each asset is shown below:-
Standard Deviation of A is
= (0.39 × (0.02 - 0.020)^2 + 0.45 × (0.02 - 0.020)^2 + 0.16 × (0.02 - 0.020)^2)^0.5
= 0
Standard Deviation of B is
= (0.39 × (0.25 - 0.1181)^2 + 0.45 × (0.06 - 0.1181)^2 + 0.16 × (-0.04 - 0.1181)^2)^0.5
= 0.1109
Standard Deviation of C is
= (0.39 × (0.35 - 0.1868)^2 + 0.45 × (0.19 - 0.1868)^2 + 0.16 × (-0.22 - 0.1868)^2)^0.5
= 0.1920
If the IRS intends to close a Taxpayer Assistance Center, they must notify the public at least _____ days in advance of the closure date.
Answer: 90 days
Explanation:
The Internal Revenue Service is typically known as the revenue service of the federal government as it is in charge of tax collection and enforcing tax laws.
If the IRS intends to close a Taxpayer Assistance Center, they must notify the public at least 90 days in advance of the closure date.
Emira wants to buy a classic drawing from an art centre in Kuala Lumpur. She managed to secure a painting by a renowned Malaysian artist that costs her RM99,800. Currently, she only has RM12,650 in her savings account and she intends to use 70% of her saving to fund the purchase. If she borrows the remaining amount from Bank Atlantis that levies 4.77% of interest rates, determine the total interest payment that she will pay if the agreement takes 10 years of settlement.
Answer:
RM23,617.80
Explanation:
cost of the painting RM99,800
she has RM12,650 on her bank account and she will use 70% = RM8,855 as down payment. She will borrow the rest = RM99,800 - RM8,855 = RM90,945
interest charged on the loan 4.77% / 12 = 0.3975%
120 monthly periods (10 years)
using the present value formula to determine the monthly payment:
PV = monthly payment x annuity factor
monthly payment = PV / annuity factor
PV = 90,945
annuity factor (120 periods, 0.3975%) = 95.26168
monthly payment = 90,945 / 95.26168 = 954.69
total payments = 120 x 954.69 = RM114,562.80
interests paid = RM114,562.80 - RM90,945 = RM23,617.80
"Rihanna Company is considering purchasing new equipment for $379,200. It is expected that the equipment will produce net annual cash flows of $48,000 over its 10-year useful life. Annual depreciation will be $37,920. Compute the cash payback period. (Round answer to 1 decimal place, e.g. 10.5.)"
Answer:
Cash payback period is 7.9 years
Explanation:
Payback period = Initial investment / Cash inflow per period
=$379,200 / $48,000
=7.9 years
Thus, the cash payback period is 7.9 years.
Note: It is assumed that the net annual cash flows are after considering the annual depreciation.
To develop an effective control system, it must be related to the organizational strategy. Yes or no.
Answer:
yes
Explanation:
because in order for everything to be organized you need to know how the system is running
Most Company has an opportunity to invest in one of two new projects. Project Y requires a $345,000 investment for new machinery with a six-year life and no salvage value. Project Z requires a $345,000 investment for new machinery with a five-year life and no salvage value. The two projects yield the following predicted annual results. The company uses straight-line depreciation, and cash flows occur evenly throughout each year.
Project Y Project Z
Sales 360,000 288,000
Expenses
Direct materials 50,400 36,000
Direct labor 72,000 43,200
Overhead including depreciation 129,600 129,600
Selling and administrative expenses 26,000 26,000
Total expenses 278,000 234,800
Pretax income 82,000 53,200
Income taxes (38%) 31,160 20,216
Net income 50,840 32,984
Required:
a. Compute each project’s annual expected net cash flows.
b. Compute each project’s accounting rate of return.
c. Determine each project’s net present value using 6% as the discount rate. Assume that cash flows occur at each year-end.
Answer:
Most Company
a. Annual expected net cash flows:
Project Y Project Z
Net cash flows before tax 139,500 122,200
Expected net cash flows:
Income taxes (38%) 31,160 20,216
Net cash flows after tax 108,340 101,984
b. Accounting rate of return:
= Annual Net Income/Average Investment
Project Y:
= $50,840/$278,000 * 100
= 18.29%
Project Z:
= $32,984/$234,800 * 100
= 14.05%
c. Net Present Value, using 6% discount rate:
Annuity PV Project Y Project Z
Annuity factor = 4.212
Annuity of operating outflows 929,746 698,350
Initial Investments 345,000 345,000
Total PV of investments $1,274,746 $1,043,350
Annuity of cash inflows $1,516,320 $1,213,056
Net present value $241,574 $169,706
Explanation:
a) Data and Calculations:
1. Investments in Projects:
Project Y Project Z
Investments $345,000 $345,000
Project's life 6 years 5 years
Salvage value 0 0
Depreciation method = straight-line method
Annual Depreciation expenses $57,500 $69,000
2. Cash Inflows:
Sales 360,000 288,000
3. Cash Outflows:
Direct materials 50,400 36,000
Direct labor 72,000 43,200
Overhead 72,100 60,600
Selling & Admin. expenses 26,000 26,000
Total Operating Outflows 220,500 165,800
Net cash flows before tax 139,500 122,200
Expected net cash flows:
Income taxes (38%) 31,160 20,216
Net cash flows after tax 108,340 101,984
4. Accounting rate of returns calculations:
Project Y Project Z
Annual Net income $50,840 $32,984
Project's life 6 years 5 years
Initial Investments 345,000 345,000
Annual Cash Outflows 220,500 165,800
Total Cash Outflows 1,323,000 829,000
Total Investments 1,668,000 1,174,000
Average Investments $278,000 $234,800
Average investments = total investments/number of project's years.
5. Most Company's accounting rate of return measures the average annual net income as a percentage of the average investments, without considering the time value of money.
6. Most Company's NPV or net present value of a project calculates the difference between the present values of the inflows and the outflows of a project over its life.
Seven Manufacturing Corporation uses both standards and budgets. The company estimates that production for the year will be 100,000 units of Product Fast. To produce these units of Product Fast, the company expects to spend $600,000 for materials and $800,000 for labor.
Required:
Compute the estimates for a standard cost.
Answer:
Unitary cost= $14
Explanation:
Giving the following information:
Production= 100,000
To produce these units of Product Fast, the company expects to spend $600,000 for materials and $800,000 for labor.
First, we need to calculate the total cost and then the unitary cost:
Total cost= 600,000 + 800,000= $1,400,000
Unitary cost= 1,400,000/100,000= $14