Answer:
They should not make the change because the price of the stocks will decrease.
Explanation:
the current price of the stocks using the perpetuity formula = dividend / required rate of return
current price with current capital structure = $5.64 / 0.123 = $45.85
if the company changes its capital structure by increasing debt, the price of the stocks will be
$5.92 / 0.136 = $43.53
since the price of the stocks would actually decrease if the capital structure changes, the change should not be made. The stockholders' wealth is measured by the price of the stocks, and if the price of the stocks decreases, then the stockholders' wealth also decreases.
yas net fixed assets as $15 million. The fixed assets could currently be sold for $21 million. Muffin’s current balance sheet shows current liabilities of $6.0 million and net working capital of $5.0 million. If all the current accounts were liquidated today, the company would receive $7.30 million cash after paying the $6.0 million in current liabilities. What is the book value of Muffin’s Masonry’s assets today and the market value of these assets?ur full-service brokerage firm charges $115 per stock trade.How much money do you receive after selling 145 shares of Nokia Corporation (NOK), which trades at $16.53? (
Answer:
Book Value = $26 million
Market value = $34.3 million
Explanation:
The computation of book value and the market value is shown below:-
For computing the book value first we need to find out the current assets
Current assets = Working capital + Current liabilities
= $5.0 million + $6.0 million
= $11.0 million
Total book value = Current assets + Fixed assets
= $11.0 million + $15 million
= $26 million
For computing the market value first we need to find out the current assets
Current assets = Cash + Current liabilities
= $7.30 million + $6.0 million
= 13.3 million
Total market value = Fixed assets + Current assets
= $21 million + 13.3 million
= $34.3 million
At December 31, Folgeys Coffee Company reports the following results for its calendar year.
Cash sales $905,000
Credit sales 305,000
Its year-end unadjusted trial balance includes the following items.
Accounts receivable $130,000 debit
Allowance for doubtful accounts 5,500 debit
Prepare the adjusting entry to record bad debts expense assuming uncollectibles are estimated to be (1) 4% of credit sales, (2) 2% of total sales, and (3) 7% of year-end accounts receivable.
Answer and Explanation:
As per the data given in the question,
a) Bad debts expense A/c Dr. $12,200 ($305,000 × 4%)
To Allowance for doubtful accounts A/c $12,200
(Being bad debt expense of 4% credit sales is recorded)
b) Bad debts expense A/c Dr. $24,200 (($905,000 + 305,000) × 2%)
To Allowance for doubtful accounts A/c $24,200
(Being bad debt expense of 2% credit sales is recorded)
c) Bad debts expense A/c Dr. $14,600 (($130,000 × 7%) + $5,500)
To Allowance for doubtful accounts A/c $14,600
(Being bad debt expense of 7% of year-end accounts receivable is recorded)
The text discusses Captain Michael Abrashoff and how he changed his traditional management style to a more "bossless" leadership style to transform the USS Benfold’s crew of demoralized sailors into confident and inspired problem solvers to take the initiative. Some of Captain Abrashoff’s methods for becoming less of a boss and more of a leader included all of the following except:______.
a. leading by example.b. creating a climate of trust.c. generating unity.d. taking both calculated and uncalculated risks.e. communicating purpose and meaning.
Answer:
d. taking both calculated and uncalculated risks.
Explanation:
Captain Michael Abrashoff became the commander of United States Ships, USS Benfold at age thirty-six (36).
Captain Michael transited from his traditional management style to a more "bossless" leadership style, so as to transform the USS Benfold’s crew of demoralized sailors into confident and inspired problem solvers to take the initiative.
Captain Abrashoff’s approach in becoming a "bossless" (less of a boss) commander and more of a leader are;
- Leading his team by example.
- Creating a climate of trust among the USS Benfold’s crew of demoralized sailors.
- Generating unity in the crew, to foster oneness and boost their morale and team spirit.
- Communicating purpose and meaning to ensure the team work hard efficiently and effectively
Final answer:
Captain Michael Abrashoff used a team-oriented and less authoritative leadership style to transform the USS Benfold’s crew but did not use uncalculated risks as part of his methods. The correct option is (d).
Explanation:
Captain Michael Abrashoff transformed the USS Benfold's crew from demoralized sailors into confident, self-reliant problem solvers by adopting a more team-oriented and bossless leadership style.
This transition away from traditional authoritative command involved several key changes except for taking both calculated and uncalculated risks. Methods he used included leading by example, creating a climate of trust, generating unity, and effectively communicating purpose and meaning to his crew.
Leadership styles play a crucial role in the effectiveness and success of management. Abrashoff's approach was quite a shift from the authoritarian style, which focuses on command and control and assigns specific tasks with precise instructions.
His strategy was to foster teamwork and discipline, in stark contrast to laissez-faire leadership that allows group members to self-manage with very minimal guidance.
Part 5: Joint Product Costs (10 points) Iaci Company makes two products from a common input. Joint processing costs up to the split-off point total $42,000 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below: Required: What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point
Question
Iaci Company makes two products from a common input. Joint processing costs up to the split-off point total $42,000 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below: Product X Product Y Total Allocated joint processing costs $22,400 $19,600 $42,000 Sales value at split-off point $32,000 $28,000 $60,000 Costs of further processing $11,600 $25,300 $36,900 Sales value after further processing $44,800 $53,200 $98,000 Required: (a) What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?
Answer:
Net monetary advantage = $11,200
Explanation:
Sales
A company should process further a product if the additional revenue from the split-off point is greater than than the further processing cost.
Also note that all costs incurred up to the split-off point are irrelevant to the decision to process further .
We can apply this principle to the question as follows:
$
Sales revenue after the split-off point 44,800
Sales revenue at the split-off point (32,000)
Additional sales revenue 12,800
Further processing cost (11,600)
Increase in Net income 11,200
Net monetary advantage = $11,200
Kindly note that the allocated joint cost of 22, 400 to product X is a sunk cost. This implies whether or not the Product X is processed further the sunk cost is irrelevant to the decision
A successful sushi chain in Hong Kong spent $500,000 to conduct a study on whether to open a location in the United States. The study showed that the best place for the company to open their first location would be in Chicago. When conducting its capital budgeting analysis, how should the company account for the cost of the study when estimating the amount of the initial investment that the new store will require
When determining the initial investment for opening a new store, the sushi chain should include the cost of the study conducted. This cost is considered a sunk cost and should be added to the total initial investment amount.
When conducting its capital budgeting analysis, the sushi chain should account for the cost of the study as part of the initial investment for the new store in Chicago.
Include the $500,000 study cost in the total initial investment amount.
This cost would be considered a sunk cost, meaning it has already been incurred and cannot be recovered.
By adding the study cost to the initial investment, the company gets a more accurate picture of the total funds needed to open the location in Chicago.
Jones Company makes 20,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: An outside supplier has offered to sell the company all of these parts it needs for $51.80 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $44,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $5.10 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products. Required: a. How much of the unit product cost of $56.70 is relevant in the decision of whether to ma
Answer:
$51.60
Explanation:
The computation of the relevant cost per unit is shown below:
= Direct material per unit + direct labor per unit + variable overhead per unit + fixed overhead per unit - applied fixed manufacturing overhead per unit
= $24.70 + $16.30 + $2.30 + $13.40 - $5.10
= $51.60
We simply added the given cost in order to find out the relevant cost per unit
Al has a tax service and accounting business in Redwood City. He decides to move to Center City, which is 150 miles away and sells his accounting practice to Able and Baker, a CPA firm. In the sales contract, he agrees that he will refrain from practicing accounting anywhere within a 20-mile radius of Redwood City for a period of two years. However, on weekends he returns to his house in Redwood City, and when clients call him, he meets with them in his home.
a. Al is in violation of the sales agreement.
b. The two-year provision is likely to be held invalid, because it is too long a period of time.
c. The agreement is invalid, because it is an illegal restraint of trade.
d. The agreement is illegal, because it is a violation of public policy.
Answer:Option(a) is correct option
Explanation:
According to the question, agreement between Al and CPA firm members suggests that Al cannot practice accounting under 20 miles of Redwood city for two years.
Even after being under contract conditions,Al tends to attend his accounting clients on weekends in his home situated in Redwood city.He is considered to be violating agreement terms because even though he is attending clients on weekends and in unofficial area ,he is still carrying out his accounting practice under 20 miles of Redwood city.Thus, sales agreement is getting breached by Al.
Other options are incorrect because two year period for refrain is not long as per agreement, agreement is not invalid and neither illegal because of public policy.Thus, the correct option is option(a).
According to the misperceptions theory of the short-run aggregate supply curve, if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent, then the firm would believe that the relative price of what it produces had a. increased, so it would decrease production. b. decreased, so it would increase production. c. decreased, so it would decrease production. d. increased, so it would increase production.
Answer:
Option C
Explanation:
In simple words, The misconceptions principle or theory in short run maintains that when a retailer sees its commodity prices fall, it makes an incorrect inference that its relative values have decreased as well. The confusion appears to cause dealers to provide the marketplace with less volume. Thus, from the above we can conclude that the correct option is C .
ortions of the financial statements for Myriad Products are provided below.
MYRIAD PRODUCTS COMPANY
Income Statement
For the Year Ended December 31, 2021
($ in millions)
Sales $ 760
Cost of goods sold 228
Gross margin 532
Salaries expense $ 115
Depreciation expense 84
Amortization expense 5
Interest expense 24
Loss on sale of land 4 232
Income before taxes 300
Income tax expense 150
Net Income $ 150
MYRIAD PRODUCTS COMPANY
Selected Accounts from Comparative Balance Sheets
December 31, 2021 and 2020
($ in millions)
Year
2021 2020 Change
Cash $ 126 $ 116 $ 10
Accounts receivable 239 256 (17)
Inventory 448 466 (18)
Accounts payable 180 166 14
Salaries payable 88 102 (14)
Interest payable 49 36 13
Income tax payable 36 26 10
Required:
Prepare the cash flows from operating activities section of the statement of cash flows for Myriad Products Company using the direct method.
Answer:
Net cash provided from Operating Activities $301
Explanation:
MYRIAD PRODUCTS COMPANY
Cash flow from Operating Activities:
Net Income $150
Adjustment for non cash effects:
Depreciation $84
Amortization $5
Loss on sale of land $4
Total $243
Changes in operating assets and liabilities :
Decrease in Accounts receivable $17
Decrease in Inventory $18
Increase in Accounts Payable $14
Decrease in Salaries Payable ($14)
Increase in Interest Payable $13
Increase in Income tax Payable $10
Net cash provided from Operating Activities $301
Audio engineers at 3XT2 have determined that an anechoic additive will increase isolation and improve signal to noise by about 20%. To prep the site for the adhesive, you have to prime it and that costs you $35K separate from the additive. You have arranged to purchase the additive with a 5-year contract at $7K per year, starting 1 year from now. The annual price will increase by 12% per year starting in the sixth year and thereafter through year 13. Evaluated at 15%, the sound improvement better result in a net present worth profit of how much to negate the costs?
Answer:
The correct answer is $83230
Explanation:
Solution
Given that:
The Present worth of geometric series is shown below
= A *[1 - (1+g)^n /(1+i)^n] / (i-g)
Now,
The present cost of worth from EOY 5 to EOY 13 at EOY 4 = 7000 *[1 - (1+0.12)^9 /(1+0.15)^9] / (0.15-0.12)
Thus,
= 7000 *[1 - (1.12)^9 /(1.15)^9] / (0.03)
Which is,
= 7000 * 7.0572647
= 49400.85
Now, The NPW of all costs = 35000 + 7000*(P/A,15%,4) + 49400.85*(P/F,15%,4)
= 35000 + 7000*2.854978 + 49400.85*0.571753
= 83229.93
Therefore the sound improvement better result in a net present worth profit of how much to negate the costs is $83229.93 or 83230
Note: EOY = End of year.
Sarah is a 50% partner in the SF Partnership and has an outside basis of $56,000 at the end of the year prior to any distributions. On December 31, Sarah receives a proportionate operating distribution of $20,000 cash. What is the amount and character of Sarah's recognized gain or loss and what is her basis in her partnership interest?
A) $0 gain, $36,000 basis.
B) $20,000 ordinary income, $56,000 basis.
C) $0 gain, $56,000 basis.
D) $20,000 ordinary income, $36,000 basis.
Answer:
A) $0 gain, $36,000 basis.
Explanation:
Any type of money that a partner receives from the partnership reduces the partner's basis in the partnership. Even when the partner receives a salary from the partnership it is called drawing, it is not considered salary expense.
Cash distributions reduce the partner's basis = basis - cash distribution = $56,000 - $20,000 = $36,000
Since the distribution is less than Sarah's basis, they are not taxable (Section 731)
The only asset Bill purchased during 2019 was a new seven-year class asset. The asset, which was listed property, was acquired on June 17 at a cost of $50,000. The asset was used 40% for business, 30% for the production of income, and the rest of the time for personal use. Bill always elects to expense the maximum amount under § 179 whenever it is applicable. The net income from the business before the § 179 deduction is $100,000. Determine Bill's maximum deduction with respect to the property for 2019. a.$26,749 b.$1,428 c.$2,499 d.$33,375
Answer:
c.$2,499
Explanation:
Asset acquired on June 17 at a cost of $50,000.
The asset was used 40% for business, 30% for the production of income(40%+30%)= 70%
Hence:
$50,000 x .70 x .0714
= $2,499
Therefore Bill's maximum deduction with respect to the property for 2019 will be $2,499
Diamond Boot Factory normally sells their specialty boots for $375 a pair. An offer to buy 100 boots for $275 per pair was made by an organization hosting a national event in Norfolk. The variable cost per boot is $250 and special stitching will add another $20 per pair to the cost.
Determine the differential income or loss per pair of boots from selling to the organization.
Answer:
$5
Explanation:
Differential revenue:
Revenue per pair of boots $275
Differential costs:
Variable manufacturing costs $(250)
Additional decoration (20) (270)
Differential profit from accepting special order($275-$270) $5
Therefore the differential income or loss per pair of boots from selling to the organization will be $5 which means Diamond Boot Factory should accept the special order.
Answer:
incremental income of $ 500 will result from the special offer.
Explanation:
Consider the incremental costs and revenues resulting from accepting the special offer.
Sales (100×$275) 27,500
Variable cost (100×$250) (25,000)
Special Stitching (100×$20) (2,000)
Net Income/Loss 500
Therefore an incremental income of $ 500 will result from the special offer.
Clancy's Motors has the following demand to meet for custom manufactured fuel injector parts. The holding cost for that item is $0.75 per month and each setup costs $150. Lead-time is 0 months. Calculate the planned order releases using: (a) the EOQ technique, and (b) the POQ technique, (c) the lot-for-lot technique. What are the costs of each plan, including the holding cost of any inventory left over after month 7? Show POM-QM results.
Answer:
a) EOQ ≈ 250
b) POQ = 1.59 ≈ 2 months
c) Cost of EOQ = 1275 USD
Cost of POQ = 937.5 USD
Explanation:
Again, the essential data is not provided in this question but I have found this question on internet and I will share the required data here in this solution:
a) EOQ = Economic Order Quantity:
FIrst of all, we have to calculate EOQ and for that we have following formula:
Holding Cost = 0.75
Setup Cost = 150
So, here's the required data which is missing in the question:
Month 1 2 3 4 5 6 7
Requirement 100 150 200 150 100 150 250
Now, we are good to go:
So, from the above data we will calculate the Demand:
Demand (D) = Sum of requirement / Total Time Period
D = 100 + 150 + 200 + 150 + 100 + 150 + 250/ 7
D = 157.14
Formula for EOQ:
EOQ = [tex]\sqrt{\frac{2SD}{H} }[/tex]
S = Setup Cost = 150
D= Demand = 157.14
H = Holding Cost = 0.75
Let's plug in the values:
EOQ = [tex]\sqrt{\frac{2*150*157.14}{0.75} }[/tex]
EOQ = 250.71
EOQ ≈ 250
So, the economic order quantity for the above given data is 250 units.
b) POQ = Periodic Order Quantity
Periodic Order Quantity = Economic Order Quantity/ Demand
POQ = 250/157.14
POQ = 1.59 ≈ 2 months
Now, as we have both POQ and EOQ at hand. Next step is to calculate the cost of each plan as mentioned in the question. For which we need MRP of each plan.
1. Cost of Economic Order Quantity:
First of all let me write down the MRP = Materials Requirement Planning Data for EOQ:
Requirement 100 150 200 150 100 150 250
Available 0 150 0 50 150 50 150
Ordered 250 0 250 250 0 250 250
End Inventory 150 0 50 150 50 150 150 700
Now, Let's Calculate the Cost of EOQ:
Setup Cost = Number of Orders x Setup Cost Given
Setup Cost = 5 x 150
Setup Cost = 750 USD
Holding Cost = Holding Cost per item given x Number of Inventory held
Holding Cost = 0.75 x 700
Holding Cost = 525 USD
Now, Calculate the Total Cost of EOQ:
Total Cost of EOQ = Setup Cost + Holding Cost
Total Cost of EOQ = 750 + 525
Totol Cost of EOQ = 1275 USD
2. Cost of POQ:
Similarly, we have to calculate the Cost of POQ. For that, we need MRP of POQ as well:
MRP for POQ:
Requirement 100 150 200 150 100 150 250
Available 0 150 0 150 0 150 0
Ordered 250 0 350 0 250 0 250
End Inventory 150 0 150 0 150 0 0 450
Setup Cost = Number of Orders x Setup Cost Given
Setup Cost = 4 x 150
Setup Cost = 600 USD
Holding Cost = Holding Cost per item given x Number of Inventory held
Holding Cost = 0.75 x 450
Holding Cost = 337.5 USD
Total Cost of EOQ = Setup Cost + Holding Cost
Total Cost of EOQ = 600 + 337.5
Totol Cost of EOQ = 937.5 USD
Final answer:
Without detailed demand figures and inventory costs for Clancy's Motors, calculating planned order releases and their associated costs using EOQ, POQ, and lot-for-lot techniques is not possible. However, each technique is explained along with how costs would generally be calculated.
Explanation:
The question asks for the calculation of planned order releases for Clancy's Motors using three techniques: EOQ (Economic Order Quantity), POQ (Periodic Order Quantity), and the lot-for-lot technique, along with the costs associated with each plan, including the holding cost after month 7. However, the specific demand figures, along with other necessary data to perform these calculations directly relevant to Clancy's Motors, are missing. Therefore, a general explanation of each technique and how costs are calculated is provided instead.
EOQ is a formula used to determine the optimal order quantity that minimizes the total inventory costs, including ordering and holding costs. The EOQ model is used when demand is constant over the year and each new order is delivered in full when inventory reaches zero.
POQ is an inventory management policy that orders at fixed intervals and varies the quantity ordered each time. The goal is to match supply closely with predictable demand while minimizing inventory costs.
The lot-for-lot technique orders exactly what is required for the next period, minimizing holding costs but potentially increasing ordering costs if the demand is frequent.
Without specific demand figures or inventory costs directly from Clancy's Motors, a detailed calculation for each method and associated costs cannot be completed. Normally, costs are derived using formulas specific to each technique, factoring in aspects like ordering costs, holding costs, demand rate, and production or purchase cost per unit.
Vaughn, Inc. has 2400 shares of 4%, $50 par value, cumulative preferred stock and 48000 shares of $1 par value common stock outstanding at December 31, 2019, and December 31, 2018. The board of directors declared and paid a $3800 dividend in 2019. In 2020, $17400 of dividends are declared and paid. What are the dividends received by the preferred and common shareholders in 2020
Answer: Preferred Shareholders will receive $5,800 and Common Shareholders will receive $11,400 in dividends.
Explanation:
With Cumulative Preferred Shares, their dividends must always be paid and if they cannot be paid, they are accrued until such a time as they can be paid.
Vaughn, Inc. has 2400 shares of 4%, $50 par value, cumulative preferred stock which means that the dividends due on them are,
= 2,400 * 50 * 4%
= $4,800
The board of directors declared and paid a $3,800 dividend in 2019 which is $1,000 less than the total amount of dividends to be paid to the preferred shareholders.
That means that the entire $3,800 in 2019 went to Preferred Shareholders and they are infact still owed $1,000.
In 2020 therefore their dividend payment should be,
= 4,800 + 1,000
= $5,800
Common Shareholders will receive,
= 17,400 - 5,800
= $11,600
Preferred Shareholders will receive $5,800 and Common Shareholders will receive $11,400 in dividends in 2020.
Hankins Corporation has 6.1 million shares of common stock outstanding, 314,000 shares of 4.5 percent preferred stock outstanding, par value of $100, and 67,000 5.5 percent semiannual bonds outstanding, par value $2,000 each. The common stock currently sells for $73.80 per share and has a beta of 1.17, the preferred stock currently sells for $105.40 per share, and the bonds have 20 years to maturity and sell for 95.5 percent of par. The market risk premium is 6.5 percent, T-bills are yielding 3.1 percent, and the firm’s tax rate is 22 percent.
What is the firm's market value capital structure?
Answer:
The firm's market value capital structure is $611,245,600.00
Explanation:
Hankins Corporation firm's market value of capital structure is the sum of the market worth of common stock,preferred stock and the debt financing.
The market value of equity is the number of common stock issued and outstanding multiplied by market price per share
The market value of the preferred stock is the number of preferred stock issued multiplied by the market value per unit of preferred stock,same applies to debt(bonds issued)
Market value of equity=6,100,000*$73.80=$ 450,180,000.00
Market of preferred stock=314,000*$105.40=$33,095,600.00
Market value of bonds=67,000*$2000*95.5%=$ 127,970,000.00
Total market value $611,245,600.00
Rusty Hardware makes only cash sales. It began 2021 with a credit balance of $33,300 in the refund liability account. Sales during 2021 were $730,000. Rusty estimates that 5% of all sales will be returned. During 2021, customers returned merchandise for credit of $30,600 to their accounts. What is the balance in the refund liability account at the end of 2021?
Answer:
$39,200
Explanation:
Sales return allowance is a contra revenue account. It is deducted from the sales to calculate the net sales value. It is an adjustment account for the returns made by the customers.
Ending Balance of Sales return Allowance = Opening Balance of Allowance + Expected Sales return - Actual Sales sales return
As per given data
Opening Balance = $33,300
expected Return = $730,000 x 5% = $36,500
Actual Return = $30,600
Placing values in the formula
Ending Balance of Sales return Allowance = $33,300 + $36,500 - $30,600 = $39,200
Consider the following methods of pollution reduction;
a. the government sets a target for maximum emissions
b. the government mandates the installation of specific pollution abatement equipment
c. the government imposes a per unit tax on the good that creates pollution
d. the government gives firms a tax rebate for every unit of pollution abated
Which of the above is an example of a command -and-control approach to reducing pollution?
A. a, b, c, and d
B. a, b, and d only
C. a and b only
D. b only
E. a only
Answer:
option c: A and B
Explanation:
Pollution is common in all environment. be it air pollution, water pollution e.t.c and it is very essential to controland reduce the effect of this pollution in our air, land and water. when we make use of our energy in all, transport and other goods and services more carefully, we can reduce harmful emissions to our air, land and water.
Comfort Ice Cream has plans to pay decreasing annual dividends of $1.75, $1.60, and $1.45 over the next three years, respectively. After that, the firm will increase the dividend by 4 percent each year. What is the value of this stock today at a discount rate of 12 percent?
Answer:
The value of this stock today at a discount rate of 12 percent is $17.24
Explanation:
According to the given data we would have to calculate first the followng:
Year 4 dividend = 1.45 * 1.04 = 1.508
Value at year 3 = D4 / required rate - growth rate
Value at year 3 = 1.508 / 0.12 - 0.040
Value at year 3 = 18.85
Therefore, Value of stock today = 1.72 / ( 1 + 0.12)∧1 + 1.60 / ( 1 + 0.12)∧2 + 1.45 / ( 1 + 0.12)∧3 + 18.85 / ( 1 + 0.12)3
=1.53+1.27+1.03+13.41
Value of stock today = $17.24
The value of this stock today at a discount rate of 12 percent is $17.24
Answer:
$15.85
Explanation:
Worth of the stock is the present value of all the cash flows associated with the stock. Dividend is the only cash flow that a stock holder receives against its investment in the stocks. We need to calculate the present values of all the dividend payments.
Formula for PV of dividend
PV of Dividend = Dividend x ( 1 + r )^-n
1st year
PV of Dividend = $1.75 x ( 1 + 12% )^-1 = $1.56
2nd year
PV of Dividend = $1.60 x ( 1 + 12% )^-2 = $1.28
3rd year
PV of Dividend = $1.45 x ( 1 + 12% )^-3 = $ 1.03
After three years the dividend will grow at a constant rate of 4%, so we will use the following formula to calculate the present value
PV of Dividend = [ $1.45 x ( 1 + 4% ) / ( 12% - 4% ) ] x [ ( 1 + 12% )^-4 ]
PV of Dividend = $11.98
Value of Stock = $1.56 + $1.28 + $1.03 + $11.98 = $15.85
Ritchie Manufacturing Company makes a product that it sells for $200 per unit. The company incurs variable manufacturing costs of $110 per unit. Variable selling expenses are $20 per unit, annual fixed manufacturing costs are $466,000, and fixed selling and administrative costs are $269,000 per year.
Required:
Determine the break-even point in units and dollars using each of the following approaches:
a. Use the equation method.
b. Use the contribution margin per unit approach.
c. Use the contribution margin ratio approach.
d. Prepare a contribution margin income statement for the break-even sales volume.
Answer :
Break even units = 10,500
Break even amount = $2,100,000
Explanation :
As per the data given in the question,
a) Break even units = Fixed expense ÷ CM per unit b ÷ (a - c)
= ($466,000 + $269,000) ÷ ($200 - $110 - $20)
= 10,500 units
b) Break even amount = b ÷ (a ÷ c)
= ($466,000 + $269,000) ÷ ($70 ÷ $200)
= $2,100,000
Contribution margin ratio = Contribution margin ÷ Selling price per unit × 100
where,
Contribution margin = Selling price per unit - variable expenses per unit
c) CM per unit Break even units = Fixed expense ÷ Cm per unit
= $735,000 ÷ $70
= 10,500 units
Break even dollars = Fixed expense ÷ Contribution margin ratio
= $735,000 ÷ 0.35
= $2,100,000
d) Contribution margin income statement:
Sales = 10,500 × $200 = $2,100,000
Less Variable expenses 10,500 × ($110+$20) = $1,365,000
Contribution margin $735,000
Less Fixed Expense $735,000
Net Operating Income = $0
Final answer:
The break-even point for Ritchie Manufacturing Company is 10,500 units or $2,100,000 in revenue. This can be calculated using the equation method, contribution margin per unit, or contribution margin ratio approaches. A contribution margin income statement at the break-even level would show $2,100,000 in sales, with total costs also amounting to $2,100,000, resulting in $0 operating income.
Explanation:
To determine the break-even point in units and dollars for Ritchie Manufacturing Company, we can use the following information: selling price per unit is $200, variable costs per unit are $110 (manufacturing) + $20 (selling), fixed manufacturing costs are $466,000, and fixed selling and administrative costs are $269,000.
a. Equation method: The break-even point in units (Q) is found by solving the equation for Q in $200Q = $110Q + $20Q + $466,000 + $269,000. Simplifying this, we get $200Q = $130Q + $735,000, which gives us Q = $735,000 / ($200 - $130) = $735,000 / $70 = 10,500 units. The break-even point in dollars is therefore 10,500 units * $200/unit = $2,100,000.
b. Contribution margin per unit approach: The contribution margin per unit is $200 (selling price) - $110 (variable manufacturing cost) - $20 (variable selling expense) = $70. Therefore, the break-even point in units is the total fixed costs divided by the contribution margin per unit, which is ($466,000 + $269,000) / $70 = $735,000 / $70 = 10,500 units. To find the break-even point in dollars, multiply the units by the selling price: 10,500 units * $200 = $2,100,000.
c. Contribution margin ratio approach: The contribution margin ratio is the contribution margin per unit divided by the selling price per unit, which is $70 / $200 = 0.35, or 35%. The break-even point in dollars can be found by dividing the total fixed costs by the contribution margin ratio $735,000 / 0.35 = $2,100,000.
d. Contribution margin income statement: At the break-even sales volume of 10,500 units, the contribution margin income statement would show $2,100,000 in sales, $1,155,000 in variable costs ($110 manufacturing + $20 selling, multiplied by 10,500 units), resulting in a contribution margin of $945,000, which exactly covers the fixed costs of $735,000 ($466,000 manufacturing + $269,000 administrative), leading to an operating income of $0.
A stock had returns of 21.70% (1 year ago), 2.40% (2 years ago), X (3 years ago), and ‑14.60% (4 years ago) in each of the past 4 years. Over the past 4 years, the geometric average annual return for the stock was 2.85%. Three years ago, inflation was 3.62% and the risk-free rate was 4.47%. What was the real return for the stock 3 years ago?
Answer:
The real return for the stock 3 years ago is 1.47
Explanation:
In order to calculate to calculate the real return for the stock 3 years ago we would have to make first the following calculation Using geometric return:
(1+0.0285) = ((1+0.217)*(1+0.024)*(1+X)*(1-0.146))^(1/4)
X = 5.14%
Therefore, to calculate the real return we have to use the following formula:
Real return = ((1+nominal return)/(1+inflation rate)-1)*100
Real return=((1+0.0514)/(1+0.0362)-1)*100
Real return = 1.47
The real return for the stock 3 years ago is 1.47
Hal and Gavin are siblings who own a mattress recycling company. Demand has been increasing for their services and the brothers are contemplating whether to open up an additional mattress drop off site in the downtown area. They estimate it would add $1 million in expenses with their profit increasing by $150 thousand each year for the next 5 years (all other things equal).
Required:
1. Hal and Gavin decide __________.
O to open a mattress drop off site downtown because the marginal cost of the new location is less than other similar projects.
O to not open a mattress drop off site downtown because the marginal costs prove to be too high.
O to open a mattress drop off site downtown because the expected marginal benefit is greater than the estimated marginal cost.
Hal and Gavin's decision against opening a new location lies in their projected financial loss. Although they could increase profits by $150,000 annually, the $1 million upfront cost would generate a net loss over five years as the anticipated profit ($750,000) is less than the estimated expenses.
Explanation:Hal and Gavin decide to not open a mattress drop off site downtown because the marginal costs prove to be too high. Here's why: they anticipate the new location would increase their expenses by $1 million, while only raising their profits by $150 thousand each year over the next five years. This means, over a five-year period, their profits would only amount to $750 thousand (5 years x $150 thousand per year), which is $250 thousand less than their estimated costs, indicating a net loss. Hence, the marginal cost to open up a new location (the additional $1 million) is greater than the marginal benefits (the added $750 thousand of profit).
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Lopez Sales Company had the following balances in its accounts on January 1, 2018: Cash$68,000 Merchandise Inventory 48,000 Land 108,000 Common Stock 88,000 Retained Earnings 136,000 Lopez experienced the following events during 2018: Sold merchandise inventory that cost $38,400 for $81,600. Sold land that cost $43,200 for $81,000. Required Determine the amount of gross margin recognized by Lopez. Determine the amount of the gain on the sale of land recognized by Lopez.
Answer:
Lopez Sales Company
1. Amount of Gross Margin recognized by Lopez:
Sales = $81,600
Less cost of sales = $38,400
Gross Margin = $43,200
2. Amount of the gain on the sale of land recognized by Lopez:
Land:
Selling price = $81,000
less Cost = $43,200
Gain on sale = $37,800
Explanation:
a) Gross margin is the difference between the selling price and the cost price of a product. It is the profit determined before business running expenses are deducted to obtain the net income or margin.
It measures the ability of the business to generate enough income to cover expenses that are normally incurred in business, like rent, utilities, and salaries and wages.
b) The Gain on sale of any capital asset is the difference between the selling price and the cost (book value). This gain is reported separately in the income statement and is the subject of capital gains tax.
Final answer:
Lopez Sales Company recognized a gross margin of $43,200 from the sale of merchandise inventory and a gain of $37,800 from the sale of land.
Explanation:
To determine the gross margin recognized by Lopez, we look at the merchandise inventory sold. Lopez sold it for $81,600, having initially cost them $38,400 to purchase. The gross margin is the sales revenue minus the cost of goods sold, which in this case is $81,600 - $38,400 = $43,200.
For the gain on the sale of the land, we calculate the difference between the selling price and the original cost of the land. Lopez sold the land for $81,000 which originally cost them $43,200. Therefore, the gain on the sale of land is $81,000 - $43,200 = $37,800.
Red Rock Bakery purchases land, building, and equipment for a single purchase price of $260,000. However, the estimated fair values of the land, building, and equipment are $126,000, $198,000, and $36,000, respectively, for a total estimated fair value of $360,000. Determine the amounts Red Rock should record in the separate accounts for the land, the building, and the equipment.
Answer:
Land ($91,000), building ($143,000) and equipment ($26,000)
Explanation:
We can allocate the fair values as follows:
Particulars Fair value Allocated amount
(a) (b) = (a)/Total*$260,000
Land $126,000 $91,000
Building 198,000 143,000
Equipment 36,000 26,000
Total $360,000 $260,000
The amount that the company would record for the individual asset is as provided above.
On December 31, 2021, when its Allowance for Doubtful Accounts had a debit balance of $1,534, Indigo Corporation estimates that 8% of its accounts receivable balance of $74,100 will become uncollectible and records the necessary adjustment to Allowance for Doubtful Accounts. On May 11, 2022, Indigo Corporation determined that B. Jared’s account was uncollectible and wrote off $1,171. On June 12, 2022, Jared paid the amount previously written off. Prepare the journal entries on December 31, 2021, May 11, 2022, and June 12, 2022.
Answer and Explanation:
The Journal Entry is shown below:-
1. Bad debts expense Dr, $7,462
To Allowance for doubtful accounts $7,462
($74,100 × 8%) + $1,534
(Being bad debts expense is recorded)
2. Allowance for doubtful account Dr, $1,171
To Accounts receivable $1,171
(Being allowance for doubtful account is recorded)
3. Accounts receivable Dr, $1,171
To Allowance for doubtful accounts $1,171
(Being accounts receivable is recorded)
Cash account Dr, $1,171
To Accounts receivable $1,171
(Being cash is recorded)
A series of journal entries are recorded by Indigo Corporation in regards to their Allowance for Doubtful Accounts and specific customer accounts. These entries account for anticipated losses, specific account write-offs, and subsequent recovering of written off amounts.
Explanation:On December 31, 2021, Indigo Corporation predicts that 8% of its accounts receivable balance will become uncollectible, this would be $5,928 (8% of $74,100). The Allowance for Doubtful Accounts originally had a debit balance of $1,534, this should be subtracted from the estimated uncollectible amount. Therefore the adjustment to the allowance for doubtful accounts is a credit of $7,462 ($5,928 plus $1,534). The journal entry would be:
Debit: Bad Debt Expense $7,462
Credit: Allowance for Doubtful Accounts $7,462
On May 11, 2022, B. Jared’s account was identified as uncollectible and so written off. The company recorded a debit to the Allowance for Doubtful Accounts and a credit to Accounts Receivable for the $1,171. The journal entry would be:
Debit: Allowance for Doubtful Accounts $1,171
Credit: Accounts Receivable $1,171
Subsequently on June 12, 2022, Jared repaid the amount that had been written off. Indigo Corporation would record a debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts for the $1,171. Afterwards, when the cash was received, they recorded a debit to Cash and a credit to Accounts Receivable for $1,171. The journal entries would be:
Debit: Accounts Receivable $1,171
Credit: Allowance for Doubtful Accounts $1,171
And
Debit: Cash $1,171
Credit: Accounts Receivable $1,171
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Ralph Lauren, a designer of fine clothing, authorized Dan River Mills to market its product line of sheets under the Ralph Lauren brand name. In this business dealing, Dan River mills is contractually obligated to pay Ralph Lauren a % of sales of all Ralph Lauren branded sheet it sells. This type of business arrangement is an example of _________________________.
Answer:
Brand licensing.
Explanation:
Brand licensing can be defined as the leasing of a brand name to a different company for a particular period of time. It is very essential for product development and it also improves the marketing efforts.
Building a new brand name can be a very tedious task because it requires a lot of capital, therefore brand licensing is very important to the licensees because it gives them access to immediate entry into the market.
Brand licensing helps to create new channels of distribution of the product, or also paves way for the product to enter into new regions.
Final answer:
The business arrangement described is known as a licensing agreement, where a licensee sells products under the brand name of a licensor for a percentage of sales.
Explanation:
The type of business arrangement where Dan River Mills is authorized to market a product line under the Ralph Lauren brand name and is contractually obligated to pay Ralph Lauren a percentage of the sales from the branded sheets they sell is an example of a licensing agreement.
In a licensing agreement, the licensee (Dan River Mills) obtains the rights to use the licensor's (Ralph Lauren's) brand name, trademark, or patented technology. In return, the licensor receives a royalty or a percentage of the sales generated by the licensee. This is a common practice in the fashion industry and other sectors where brand recognition can add significant value to a product.
Cash 42,900 Accounts Receivable 123,500 Prepaid Insurance 27,000 Equipment 300,000 Accounts Payable 52,000 Salaries Payable 4,800 Common Stock 40,000 Retained Earnings 137,200 Dividends 5,000 Service Revenue 1,216,000 Salary Expense 660,000 Advertising Expense 275,000 Miscellaneous Expense 16,600 1,801,500 1,801,500 After identifying the errors, prepare a corrected unadjusted trial balance. For those boxes in which no entry is required, leave the box blank.
Answer and Explanation:
The preparation of the corrected unadjusted trial balance is presented below:
Ensemble Co
Unadjusted Trial Balance
For the Year Ending December 31, 2018
Particulars Debit Credit
Cash $42,900
Accounts receivable $123,500
Prepaid insurance $27,000
Equipment $300,000
Accounts payable $52,000
Salaries payable $4,800
Common stock $40,000
Retained earnings $137,200
Dividends $5,000
Service revenue $1,216,000
Salary expense $660,000
Advertising expense $275,000
Miscellaneous expense $16,600
Total $,450,000 $1,450,000
We simply debited the assets, dividend and expenses account and credited the revenues, liabilities and stockholder equity account
In 2016, Raleigh sold 1,000 units at $500 each, and earned net income of $40,000. Variable expenses were $300 per unit, and fixed expenses were $160,000. The same selling price is expected for 2017. Raleigh's variable cost per unit will rise by 10% in 2017 due to increasing material costs, so they are tentatively planning to cut fixed costs by $10,000. How many units must Raleigh sell in 2017 to maintain the same income level as 2016?
The number of units that must Raleigh sell in 2017 to maintain the same income level as 2016 is 1,118 units.
Computation of number of units to be sold:
For the Year 2016
Number of Units Sold = 1,000 units
Unit selling price = $500 per unit
Total Sales = $500 × 1,000 = $500,000
Variable Costs = $300 × 1,000
= $300,000
Contribution = $500,000 - $300,000
= $200,000
Fixed Costs = $160,000
Net Income = $200,000 - $160,000
= $40,000
For the Year 2017
Unit Selling Price = $500 per unit
Unit Variable Cost = $300 × 1.10
= $330 per unit
Contribution per unit = $500 - $330 = $170 per unit
Fixed Cost = $160,000 - $10,000 = $150,000
Now, to maintain the same income of $ 40,000 the Company have a total contribution
$150,000 + $40,000
= $190,000
Number of units to be sold = Total contribution ÷ Contribution per unit
= $190,000 ÷ $170
= 1,117.64
or
1,118 units.
Hence, The number of units that must Raleigh sell in 2017 to maintain the same income level as 2016 is 1,118 units.
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Final answer:
To maintain the net income of $40,000 in 2017 with increased variable costs and reduced fixed costs, Raleigh needs to sell approximately 1118 units.
Explanation:
To calculate how many units Raleigh needs to sell in 2017 to maintain the same level of net income as in 2016, we first need to establish the contribution margin per unit for 2016 and how it will change in 2017 due to the increase in variable costs.
The contribution margin per unit in 2016 was $200 ($500 selling price - $300 variable cost). With the variable cost per unit rising by 10% in 2017, the new variable cost per unit will be $330 ($300 + 10% of $300).
The tentative plan is to lower fixed costs from $160,000 to $150,000 in 2017. The contribution margin per unit in 2017 would be $170 ($500 selling price - $330 variable cost).
To maintain a net income of $40,000, Raleigh's total contribution margin in 2017 must cover the fixed costs and net income, which totals $190,000 ($150,000 fixed costs + $40,000 net income).
Therefore, the required number of units to sell in 2017 to achieve this would be $190,000 divided by the contribution margin per unit of $170, which equals approximately 1118 units.
Nicole is a manager at Frost Inc. She is very confident and optimistic, tends to use strong expressive forms of communication, and uses personal risk and self-sacrifice to attain her visions for her organization. Nicole is said to be a(n) _______ leader.
Answer:
Charismatic.
Explanation:
Nicole being a manager at Frost Inc. She is very confident and optimistic, tends to use strong expressive forms of communication, and uses personal risk and self-sacrifice to attain her visions for her organization.
Hence, Nicole is said to be a charismatic leader.
Charismatic leaders tend to be confidence and always encourage their subordinates or followers behaviors by way of persuasion, eloquent communication and personal convictions.
Nicole is considered a charismatic leader. Her optimism, powerful presence, expressive communication skills, and willingness to take personal risks and make sacrifices are major characteristics of such leadership style.
Explanation:Nicole is known as a charismatic leader. Charismatic leaders possess an exceptional personal charisma and effective expressive communication skills that both inspire and motivate their followers. They are often willing to take personal risks or to make self-sacrifices as part of their leadership style. Their optimism and vision for the organization are key features of their ability to inspire.
This type of leadership can bring about significant changes within organizations. A charismatic leader like Nicole is capable of rallying her team towards shared goals or visions, even in challenging circumstances, due to her powerful presence and communication abilities.
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On January 1, 2020, the Sheridan Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2020. Sales units: First quarter 5,200; second quarter 6,000; third quarter 7,000. Ending raw materials inventory: 40% of the next quarter’s production requirements. Ending finished goods inventory: 25% of the next quarter’s expected sales units. Third-quarter production: 7,630 units. The ending raw materials and finished goods inventories at December 31, 2019, follow the same percentage relationships to production and sales that occur in 2020. 3 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $4 per pound. Prepare a production budget by quarters for the 6-month period ended June 30, 2020. SHERIDAN COMPANY Production Budget Quarter 1 2 Six Months : : Prepare a direct materials budget by quarters for the 6-month period ended June 30, 2020. SHERIDAN COMPANY Direct Materials Budget Quarter 1 2 Six Months : : $ $ $ $ $
Answer and Explanation:
The preparation of the production budget and direct material budget is presented below:
As per the data given in the question,
Sheridan company
Production Budget
For six months ending June 30,2020
Quarter
1 2 six months
Expected units sales 5,200 6,700
Add: units of desired ending finished goods 1,675 1,750
Total units 6,875 8,450
Less: Finished good units 1,300 1,675
Required units for production 5,575 6,775 12,350
Quarter 2 required finished goods = 25% × Unit sales of quarter 3
= 25% × 7,000
= 1,750
Sheridan company
Direct material Budget
For six months ending June 30,2020
Quarter Quarter
1 2 Six months 3
Units to be produced 5,575 6,775 7,630
Direct material per unit 3 3 3
Total need for production 16,725 20,325 22,890
Add: Required ending direct material 8,130 8,856
(20,325 × 40%) (22,890 × 40%)
Total material required 24,855 29,181
Less: Beginning direct material 6,690 8,130
(16,725 × 40%)
Direct material purchased 18,165 21,051
Cost per pound 4.00 4.00
Total cost $72,660 $84,204 $156,864