Answer:
$24,000 Gain
Explanation:
Given that,
Bonds issued = 3,000
Par value = $1,000
Value of issued bonds = $3,120,000
Goll's gain in 2018 on this early extinguishment of debt:
= Issue price of bonds - Premium amortized - Callable value
= $3,120,000 - [($3,120,000 - $3,000,000) × 11/20] - (3,000 × $1,000 × 1.01)
= $3,120,000 - $66,000 - $3,030,000
= $24,000 Gain
A risk-averse person has a. a utility function whose slope gets flatter as wealth rises. This means they have increasing marginal utility of wealth. b. a utility function whose slope gets flatter as wealth rises. This means they have diminishing marginal utility of wealth. c. a utility function whose slope gets steeper as wealth rises. This means they have increasing marginal utility of wealth. d. a utility function whose slope gets steeper as wealth rises. This means they have diminishing utility of wealth.
Answer:
B
Explanation:
A risk-averse person is one who would rather spend or invest in a business with known risks and expect lower profits than a business with unknown or high risks but has higher returns.
Hence, as the wealth of the person increases, his marginal utility decreases as the utility at smaller wealth is relatively higher than that utility at large wealth.
This fulfills the law of diminishing marginal utility which states that as income or wealth increases, the marginal utility or satisfaction decreases.
As the change in utility or marginal utility is decreasing, hence the slope of utility flattens out as its rate decreases.
In its first month of operation, Kingbird, Inc. purchased 320 units of inventory for $9, then 420 units for $10, and finally 360 units for $11. At the end of the month, 400 units remained. The company uses the periodic method. Compute the amount of phantom profit that would result if the company used FIFO rather than LIFO.
Answer:
$680
Explanation:
Using the FIFO method
Closing Stock = [ 360 × $11 ] + [ ( 400 - 360 ) × $10 ]
= $3,960 + $400
= $4,360
Using the LIFO method
Closing Stock = [ 320 × $9 ] + [ ( 400 - 320 ) × $10 ]
= $2,880 + $800
= $3,680
Therefore,
The amount of Phantom Profit
= Closing Stock using the FIFO method - Closing Stock using the LIFO method
= $4,360 - $3,680
= $680
The Arndt Company repurchased 50,000 shares of its own common stock on the stock exchange during 2019. At the end of 2018, Arndt had 750,000 shares of its common stock outstanding, During 2019, no preferred dividends were paid but $350,000 of dividends were paid on common stock. Net income for 2019 was $3,300,000. Which of the following is NOT true for 2019 based only on the above information? a. Earnings per share would be calculated using 350,000/750,000. b. Stockholders equity would decrease because of the dividends paid. c. Earnings per share for 2019 is higher because of the stock repurchase than if the purchase had not been made. d. The purchase of treasury stock will reduce cash during 2019.
Answer:
The answer is a. Earnings per share would be calculated using 350,000/750,000.
Explanation:
Please find the below for explanations:
The EPS is calculated as Net income for 2019 / Average stock outstanding or 3,300,000/ [( 750,000 + 700,000) /2] = 3,300,000/725,000 = $4.55. Thus, (a) is not a correct statement.
b is correct because once dividend paid out, retained earnings account will decrease causing Stockholder equity to decrease.
c is correct because stock repurchase will lower the Average Stock Outstanding which will rise the EPS in comparison to the scenario where stock repurchase is not made.
d is correct because repurchase are usually made by cash.
The American Trucking Association anticipates a shortage of trucker drivers in coming years as the number of retirees exceeds the number of new drivers who enter the profession. The number of train boxcars is also expected to fall by over 40 percent in coming years because federal regulations limit boxcars to 50 years of service and many currently in use will reach that limit by 2020. Lumber and paper producers that depend on boxcars for their shipments fear that they will have to depend more on trucks for transportation, which will cost as much as 20 percent more than shipping by rail. Sources: Lindsay Ellis and Laura Stevens, "International Paper Focuses on Improving Shipment Planning, Wall Street Journal, July 30, 2015; and Bob Tita, "Why Railroads Can't Keep Enough Boxcars in Service," Wall Street Journal, June 21, 2015. The reduction in the number of trucks and boxcars will _____
(A) likely increase transportation costs and shift the short-run aggregate supply curve to the left.
(B) likely affect the short-run aggregate supply curve because of the anticipated shortage of truck drivers.
(C) not likely affect the short-run aggregate supply curve because the change is related to prices, not wages.
(D) not likely affect the short-run aggregate supply curve because the change is related to regulations, not prices.
Answer:
(A) likely increase transportation costs and shift the short-run aggregate supply curve to the left.
Explanation:
Short run AS of trucks and boxcars will fall as the number of truck drivers will reduce owing to ageing population and regulation of quantity used of boxcars.
Coming to long run, fall in supply of truck drivers will affect long run AS curve because less number of truck drivers will be available over time in the long run as more drivers are retiring than entering the market. Thus LRAS will fall as it is difficult to increase number of truck drivers in the market in the long run and thus the LRAS will shift to the left.
LRAS of Boxcars will not be affected because new boxcars will be demanded over time and such new boxcars will keep on getting produced by producers owing to increasing demand. The LRAS will not be affected since supply can be increased overtime.
Final answer:
The anticipated shortage of truck drivers and reduction in the number of boxcars due to federal regulations is expected to increase transportation costs, likely causing a leftward shift in the short-run aggregate supply curve.
Explanation:
The reduction in the number of trucks and boxcars, due to a shortage of trucker drivers and federal regulations on the age of train boxcars, will likely increase transportation costs and shift the short-run aggregate supply curve to the left. This scenario is similar to other circumstances where a reduction in supply of key inputs, including labor supply, leads to increased costs and potentially reduced output in the short term. As transportation is a critical component in the supply chain, higher transportation costs due to these shortages will likely make it more expensive for producers to distribute goods, which could translate into higher overall costs and less output, causing the short-run aggregate supply curve to shift to the left.
The XYZ Company expects stock prices to increase. The current stock price is $37. The company purchases a call option, with an exercise price of $40 and a premium of $2 per share. Just before the expiration, stock price rises to $44. Should the investor exercise the call option or not? What will the total payoff per share be?
Answer:
Payoff per share = $4
Profot pershare = $2
Explanation:
In a call option, the long (the party that buy the put) will have gain on the option when the underlying asset price is higher than the excercise price of that asset (imagine the advantage that you can buy an apple at $10 when its market price is $12). Because the stock price is $44, higher than exercise price of 40, so the company should exercise the call. Total payoff per share is 44 - 40 = $4 (and profit per share = 4 - 2 = $2) .
Note: We dont include premium to buy the call here because the question asking about payoff. We on include premium in calculations when the question is about profit.
Northwest Magazine sells subscriptions for $36 for 12 issues. The company collects cash in advance and then mails out the magazines to subscribers each month. 1. Apply the revenue recognition principle to determine a. when Northwest Magazine should record revenue for this situation. b. the amount of revenue Northwest Magazine should record for three issues.
Answer:
Please see attachment
Explanation:
Please see attachment
The Mixing Department of Tasty Foods has 50,000 equivalent units of materials and 36,000 equivalent units of conversion costs for October. The Mixing Department of Tasty Foods has direct materials costs of $52,000 and conversion costs of $21,600 for October. Compute the cost per equivalent unit of production for direct materials and for conversion costs. (Round to the nearest cent.) Begin by determining the formula to compute cost per equivalent unit.Cost of completed units/Equivalent units =__________ Cost per equivalent unitThe direct materials cost per equivalent unit =___________ $The conversion cost per equivalent unit =__________ $
Answer:
Direct material cost for each equivalent unit =$1.04
Conversion cost for each equivalent unit = $0.40
Explanation:
Given data:
direct material cost = $52000
units of material = 50000
Equivalent units for october = 36000
conversion cost for october = $21600
direct material cost for each equivalent unit = direct material cost/ equivalent conversion units
direct material cost for each equivalent unit = 52000/50000 = $1.04
conversion cost for each equivalent unit = conversion cost/ equivalent cost
conversion cost for each equivalent unit =21600/36000 = $0.40
To compute the cost per equivalent unit of production for direct materials and conversion costs, use the formula: Cost of completed units / Equivalent units = Cost per equivalent unit. The direct materials cost per equivalent unit is $1.04 and the conversion cost per equivalent unit is $0.60.
Explanation:To compute the cost per equivalent unit of production for direct materials and conversion costs, you can use the following formula:
Cost of completed units / Equivalent units = Cost per equivalent unit
First, determine the cost of completed units. For direct materials, it is $52,000 and for conversion costs, it is $21,600. Next, find the equivalent units. For direct materials, it is 50,000 and for conversion costs, it is 36,000.
Finally, plug in the values into the formula:
Direct materials cost per equivalent unit = $52,000 / 50,000 = $1.04
Conversion cost per equivalent unit = $21,600 / 36,000 = $0.60
Virtually all organizations have at least some information system infrastructure. Share at least five risks to accounting information systems, either from your work experience, the textbook, or from research the internet.
Listed below are five (5) risks to accounting information systems:
1. Authentication risk - when you are working with systems, it is really important to keep authentications and log in materials in safety. Just make sure that nobody will know your log in credentials. You cannot trust anybody either no matter how close you are. Accounting systems holds confidential information thus, you cannot rely on trust alone.
2. Security risk - You must also sure that all the person or authorized personnel doesn't leave a copy of the system files anywhere in their personal storages like phones, flash drives, emails etc. Data in the system should be remained in the system.
3. Connectivity risk - system that has multiple users need communication and connections. System cannot work if connection has been interrupted and terminated. You should ensure that all hardware related to connections are working from time to time.
4. Data privacy risk and concerns - customers are sometimes asking where are their information are stored and how do the company used these information. Companies must be ready to provide privacy documents to make the customer understand on what is happening on their stored information.
5. Compatibility risk - system doesn't always work with all platforms, devices, media and software. Organizations must be aware on what is best the version of phones, desktops, operating systems to use in able for their system to run smoothly.
Accounting information systems face risks such as cyber-attacks, data breaches, system outages, non-compliance, and outdated infrastructure. Organizations must proactively address these vulnerabilities to ensure the protection and effectiveness of their systems.
Accounting information systems within organizations are exposed to various risks that can threaten the confidentiality, integrity, and availability of data. Some common risks include cyber-attacks, data breaches, system outages, outdated infrastructure, and compliance failures. Here are five risks to accounting information systems:
Cyber-attacks: As organizations increasingly rely on interconnected computer networks, they become more vulnerable to attacks that can result in data theft or system disruption.Data breaches: Unauthorized access to sensitive accounting information can lead to the exposure of financial data, harming the organization’s reputation and financial standing.System outages: Outdated or poorly maintained information systems can result in crash-prone environments, causing lost productivity and potential financial losses.Compliance issues: Failure to comply with industry regulations can result in penalties, legal action, and loss of certifications critical for business operations.Outdated infrastructure: An outdated accounting information system can inhibit efficient decision-making and lead to economic inefficiencies that conflict with sustainable practices.It's important for organizations to continuously monitor and upgrade their security infrastructure to mitigate these risks and protect their critical accounting information systems.
Oscar's Flower Shop maximizes profits by hiring four workers in a perfectly competitive labor market. The workers and their value of the marginal product of labor are Noe, $40; Barbara, $35; Calvin, $27; and Diana, $15. According to the marginal productivity theoryof income distribution, which of the following statements is TRUE?
A)In equilibrium, each worker is paid his or her value of the marginal product of labor.
B)Each worker is paid a wage equal to the highest value of the marginal product of labor(i.e., $40).
C)Each worker is paid $15.
D)We need to know the product price before we can figure out the wage rate.
Answer: A. In equilibrium, each worker is paid is or her value of marginal product of labour.
Explanation:
Marginal productivity of income distribution refers to the additional revenue derived from the marginal unit of product produced and that wages should be equal to the marginal revenue derived from the production of additional or marginal product and this is achieved at equilibrium.
The theory also implies that workers should not be paid below or above the marginal revenue derivable from marginal product which implies they cannot be paid $15 or $40, moreover the product price is not a determinant of wages rate.
In equilibrium, each worker is paid his or her value of the marginal product of labor.
Explanation:According to the marginal productivity theory of income distribution, wages are determined by the marginal product of labor. Therefore, the correct answer to your question is option A: In equilibrium, each worker is paid his or her value of the marginal product of labor. In the context of your question, this means Noe is paid $40, Barbara $35, Calvin $27, and Diana $15, reflecting each's respective marginal productivity.
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What is the government's policy on collusion in the United States? Explain the rationale for this policy. In the United States
A. the government makes collusion legal with antitrust laws because monopolies create no deadweight loss.
B. the government makes collusion unnecessary with government-imposed barriers to entry because monopolies enhance economic efficiency.
C. the government encourages collusion with subsidies because resulting profits can be used to develop new products.
D. the government promotes collusion with the Federal Trade Commission because perfectly competitive markets enhance economic efficiency.
E. the government makes collusion illegal with antitrust laws because monopolies reduce economic efficiency.
Answer:
The correct answer is letter "E": the government makes collusion illegal with antitrust laws because monopolies reduce economic efficiency.
Explanation:
Antitrust laws regulate competition between companies. To protect consumers from price manipulation and unfair competition by making sure trade remains unrestrained. When businesses conspire to turn competition to their favor, they violate antitrust laws.
Those regulations prohibit business practices such us monopolies since those types of organizations take control over a certain market, making almost impossible the entry of competitors and consumers have fewer choices and higher prices.
Flint Suppliers reported cost of goods sold for 2017 of $880,000 and retained earnings of $1,230,000 at December 31, 2017. Flint later discovered that its ending inventories at December 31, 2016 and 2017, were overstated by $34,500 and $71,000, respectively. Determine the corrected amounts for 2017 cost of goods sold and December 31, 2017, retained earnings.
Answer:
corrected amounts cost of goods sold = $916500
corrected amounts Retained Earnings = $1159000
Explanation:
given data
cost of goods sold = $880,000
retained earnings = $1,230,000
ending inventories 2016 = $34,500
ending inventories 2017 = $71,000
to find out
corrected amounts cost of goods sold and retained earnings
solution
we get here first corrected amounts for 2017 cost of goods sold will be here as
corrected amounts cost of goods sold = cost of goods sold - ending inventories 2016 + ending inventories 2017 .........1
corrected amounts cost of goods sold = $880,000 - $34,500 + $71,000
corrected amounts cost of goods sold = $916500
and now we get corrected amounts Retained Earnings that will be as
corrected amounts Retained Earnings = retained earnings - ending inventories 2017
corrected amounts Retained Earnings = $1,230,000 - $71,000
corrected amounts Retained Earnings = $1159000
Amdahl, Inc. leases a piece of equipment from BFF on January 1, 2018. The lease agreement calls for 5 annual payments of $33,000 to be paid by Amdahl at the beginning of the year (starting with 2018). Ownership of the equipment will transfer to Amdahl at the end of the fifth year. The explicit rate on this lease is 8%.
1. Prepare Amdhal's journal entries on January 1, 2018.
Answer:
See explainations below
Explanation:
There will be changes in both balance sheet and income statement:
1. Balance sheet:
At, January 1, 2018 both asset and liability will increase by the amount equal to present value of all lease payments:
Present value of all lease payments = 33,000 + 33,000/(1 + 8%) + ... + 33,000/(1 + 8%)^4 = 142,300.19
2. Profit and loss statement:
At, January 1, 2018 interest expense will increase by the amount equal to present value of all lease payments multiplied by the interest rate, or: 142,300.19 x 8% = 11,384.01
Champs Sports Bar, State College, PA, has decided to perform a total cost analysis on its vodka supplier in order to cut costs. Consumption is currently 6,000 bottles per year. This demand is predicted to stay at this level for the next few years. The current source, Byron's, charges $9.25 per bottle and can pack 500 bottles in a crate. The cost to ship the crate is $5. Another potential source of vodka is Pancho. Pancho charges $9.20 per bottle and can ship 100 bottles in a crate. Assume that a partial crate may be purchased. Champs Sports Bar will incur equal total costs if Pancho can hold annual shipping price per crate at _____.
Answer:
Champs Sports Bar will incur equal total costs if Pancho can hold annual shipping price per crate at $6
Explanation:
Current consumption = 6000 per year
Byron's Charge
Cost of 1 bottle = $9.25
1 crate contains 500 bottles
6000 bottles would be contained in 12 crates (6000 ÷ 500 = 12)
Cost of 1 crate = $9.25 × 500 = $4625
Shipping price per crate = $5
Cost of 1 crate + shipping price per crate = $4625 + $5 = $4630
Total cost to ship 12 crates (6000 bottles) = 12 × $4630 = $55560
Pancho's charge
Cost of 1 bottle = $9.20
I crate contains 100 bottles
6000 bottles would be contained in 60 crates (6000 ÷ 100 = 60)
Cost of 1 crate = $9.20 × 100 = $920
Let the shipping price per crate be y
Cost of 1 crate + shipping price per crate = ($920 + y)
Total cost to ship 60 crates = 60($920 + y)
To solve for y, equate the two total costs
60($920 + y) = $55560
Divide both sides by 60
$920 + y = $926
y = $926 - $920 = $6
Champs Sports Bar will incur equal total costs if Pancho can hold annual shipping price per crate at $6.
Which of the following costs is relevant to a make-or-buy decision of a particular part of a product? a.The depreciation on the plant used to manufacture the part b.The fixed annual rent paid for the office building c.The direct labor costs used to manufacture the part d.The salary of the sales manager who sells the product
Answer:
Correct answer is C
Explanation:
Direct labor cost is a relevant expense that is to be considered in a make or buy decision making process. It is important that the manager will know the alternative that will give lower relevant cost which will cause an increment to the company’s net profit. Direct labor cost is a variable cost that will vary on the production that is about to produce if the company will consider to make the product.
Sodium Inc. borrowed $280,000 on April 1. The note requires interest at 12% and principal to be paid in one year.
How much interest is recognized for the period from April 1 to December 31?
a. $0.
b. $33,600.
c. $8,400.
d. $25,200.
Answer:
option (d) $25,200
Explanation:
Data provided in the question:
Amount borrowed = $280,000
Annual interest rate = 12% = 0.12
Interest period = April 1 to December 31 i.e 9 months
or
= 9 ÷ 12 = 0.75 year
Therefore,
Interest for the period from April 1 to December 31
= Amount borrowed × Interest rate × Time period
= $280,000 × 0.12 × 0.75
= $25,200
Hence,
The answer is option (d) $25,200
Camellia, a merchandising company, has provided the following extracts from their budget for the first quarter of the forthcoming year: 500,000
Hi, the question is incomplete, here is the complete exercise:
Camellia, a merchandising company, has provided the following extracts from their budget for the first quarter of the forthcoming year:
Jan Feb March
Sales (20% cash) $500,000 $750,000 $1,000,000
The company collects 70% of credit sales in the same month and the balance in the next month. Calculate the collections from the customers for the month of February.
A) $570,000
B) $540,000
C) $690,000
D) $750,000
Answer:
C) $690,000
Explanation:
Budget for cash sales in february:
$750,000 x 20% = $150,000
Budget for credit sales:
For february sales:
$750,000 x 80% x 70% = $420,000
For January sales:
$500,000x 80% x 30% = $120.000
Total Cash budget = $690,000
A merchandising company like Camellia's budget involves various possible aspects such as sales, inventory purchases, operational costs, and net income. The provided amount, 500,000, could potentially relate to any of these factors but without specific context or a clear question, it becomes difficult to provide a precise answer.
Explanation:The provided question doesn't specify clear queries about Camellia's budget. However, when we're talking about a company's budget, particularly a merchandising company like Camellia, it typically involves various aspects such as sales, inventory purchases, operational expenses, and net income for a specific period. The given value, 500,000, could relate to any of these attributes and without further context, it's challenging to provide a specific answer. In budgeting, a merchandising company would go through a process of estimating sales, determining required inventory levels, highlighting operational costs, and the likes to form a complete budgetary picture for the business.
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Select a large U.S. public corporation you are familiar with or which interests you. It should be on the Fortune 500 list. Using the company's most recent annual report (or Form 10-K) from the company's Investor Relations web page and other credible internet sources, develop a short (1.5 to 2 page) profile of the corporation. Obtain and attach a PDF version of the most recent annual report (or Form 10-K) from the company's web site. Include the following information.
Answer:
Consider the following answers
Explanation:
Solution. (1) The name of a large U.S. public corporation is Walmart - Stores
(2) Website.
(3) A short profile of the Walmart coperation is given below: American multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores. Headquartered in Bentonville, Arkansas, the company was founded by Sam Walton in 1962 and incorporatedon October 31, 1969. It also owns and operates Sam's Club retail warehouses. As of January 31, 2018, Walmart has 11,718 stores and clubs in 28 countries, operating under 59 different names. The company operates under the name Walmart in the United States and Canada, as Walmart de México y Centroamérica in Mexico and Central America, as Asda in the United Kingdom, as the Seiyu Group in Japan, and as Best Price in India. It has wholly owned operations in Argentina, Chile, Brazil, and Canada.
(4) The fiscal year end date of the annual report you used is 2017
(5) Total assets on the balance sheet are $198,825 millions
(6) Total revenues on the recent income statement is $485,873 millions
(7) Net income on the income statement is $ 13,643 millions
(8) The basic earnings per share reported on the recent income statement is $4.38
(9) The depreciation method used by the corporation is straight-line method
(10) The inventory method used by the walamrt is first-in, first-out (“FIFO”) method.
(11) There is only one class of stock i.e common stock)
the number of shares outstanding - 3.05
On January 1, 2019, Sheffield Corp. had the following stockholders' equity accounts. Common Stock ($12 par value, 81,300 shares issued and outstanding) $975,600 Paid-in Capital in Excess of Par Value-Common Stock 188,000 Retained Earnings 503,000 During the year, the following transactions occurred. Jan. 15 Declared a $1.00 cash dividend per share to stockholders of record on January 31, payable February 15. Feb. 15 Paid the dividend declared in January. Apr. 15 Declared a 10% stock dividend to stockholders of record on April 30, distributable May 15. On April 15, the market price of the stock was $16 per share. May 15 Issued the shares for the stock dividend. July 1 Announced a 2-for-1 stock split. The market price per share prior to the announcement was $14. (The new par value is $6.) Dec. 1 Declared a $0.70 per share cash dividend to stockholders of record on December 15, payable January 10, 2020. Dec. 31 Determined that net income for the year was $220,000.
Answer:
In attachment.
Explanation:
In attachment.
Final answer:
The student's question pertains to the effects of corporate actions like cash dividends, stock dividends, and stock splits on Sheffield Corp's stockholders' equity in 2019. Such actions change both balances within the equity section of the balance sheet and the per-share values.
Explanation:
The question involves calculating the effects of various corporate actions on stockholders' equity, including cash dividends, stock dividends, and stock splits for Sheffield Corp throughout 2019. Each of these actions alter the composition of the equity accounts and the per-share values and need to be accounted for properly.
Cash Dividend on Jan 15 and Feb 15
The company declared and paid a $1.00 cash dividend on 81,300 shares, resulting in a total reduction of $81,300 in retained earnings.
Stock Dividend on Apr 15 and May 15
A 10% stock dividend when the share price was $16 means 8,130 new shares were distributed. The value of these shares ($16 * 8,130) is $130,080, which increases the common stock account by the par value of the new shares ($12 * 8,130 = $97,560) and the remaining $32,520 ($130,080 - $97,560) is transferred from retained earnings to the paid-in capital in excess of par value.
Stock Split on July 1
A 2-for-1 stock split doubles the number of shares to 162,600 and halves the par value to $6. It does not affect the overall value of the stockholders' equity, but it does change the per-share amounts listed in the equity accounts.
Year-end Activities
The declaration of a $0.70 per share cash dividend in December further reduces retained earnings by $56,910 (81,300 shares according to the question, but this is likely intended to be 162,600 shares post-split). Finally, the addition of the net income of $220,000 for the year increases the retained earnings.
Fast Corporation recently borrowed $600,000 from its bank at a simple interest rate of 14 percent. The loan is for 10 months. The loan agreement requires interest to be added to the amount borrowed and the total amount to be repaid in monthly installments. What is the loan's monthly payment?
Answer:
$67,000
Explanation:
For computing the loan monthly payment, first we have to determine the interest payment by using the simple interest formula which is shown below:
= Principal × rate of interest × number of months ÷ (total number of months in a year)
= $600,000 × 14% × (10 months ÷ 12 months)
= $70,000
Now the monthly payment would be
= (Interest payment + principal) ÷ number of months
= ($70,000 + $600,000) ÷ 10 months
= $670,000 ÷ 10 months
= $67,000
a company's capital structure is as follow: debt 39%; preferred stock 12%; common equity 49%. the after-tax cost of debt is 7.5%; the cost of preferred stock is 9%; and the cost of common equity is 12.5%. calculate the company's weighted average cost of capital
Answer:
WACC = 10.13%
Explanation:
Lets first understand what WACC is. WACC or weighted average cost of capital represents the total cost of financing. Now there are two main sources of long-term finance available to an entity, DEBT and EQUITY. Each source of finance has a different cost which highly depends upon the RISK PROFILE and RISK APPETITE of an entity. Some entities prefer debt financing over equity while some consider equity as more reliable source of finance.
When an entity takes finance from each source, it finds itself with a pool of funds which are then allocated based on priorities. WACC is the cost of the 'POOL OF FUNDS' (i.e an average cost of both debt and equity).
The formula of WACC is as follows:
WACC= ke×(E/V)+ Kp× (p/V) + kd×(d/V)
ke= cost of equity
E= market value of equity
kp= cost of preferred stock
V= combined value of debt and equity
kd= cost of debt
WACC = (7.5%×39÷100) + (12.5%×49÷100) + (9%× 12÷100)
WACC = 2.925 + 6.125 + 1.08
WACC = 10.13%
Bond refunding is generally advantageous to the investor because they get a higher future interest rate.
A. True
B. False
Answer:
B. False
Explanation:
Refunding of bonds occurs when an entity that has issued reimbursable bonds asks for the security of debtors' debts for the express purpose of reissuing a new debt at a lower payment rate. It is in essence, the issuance of a new, low interest debt, which allows the company to prematurely repay the oldest and highest interest debt. On the contrary, non-refundable bonds may be enforceable but cannot be reissued with a lower payment rate. That is, they cannot be refunded. The process of withdrawing or rescuing an issue of outstanding bonds at maturity using the product of a new debt issue. The new issue is almost always issued at an interest rate lower than that of the reimbursed issue, which guarantees a significant reduction in the issuer's interest expense.
To summarize, it is false because their investment with a higher interest rate is withdrawn, and they should strive to replace this investment with a comparable liability, which probably will not return as much as the old obligation.
Company X was expected to have earnings per share of the results, the company reported earnings per share of $0.52. What happened to the share price when the stock market opened?
Answer:
There is not enough information given in the question to decide what happened to the share price when the stock market opened.
Explanation:
Using P/E ratio, the ratio which is decided by market price per share/ earning per share, is one of the quick and simple ways to estimate share price.
P/E ratio of a stock is usually expected by an investor by deriving the ratio from similar firm ( similar risk firm, operating in the same industry, having similar growth prospects...). Once investor develop their expectation on P/E ratio, share price is determined by: P/E ratio x EPS.
As there is no information given on P/E ration, there is not enough information given to develop and expectation on what stock price will be given there is only information regarding EPS is available.
If you borrow capital to start a business and the money is provided interest-free, then your cost of capital is zero.
a. True
b. False
Answer:
If you borrow capital to start a business and the money is provided interest-free, then your cost of capital is zero.
True
Explanation:
Reason being that it does not take any cost to secure such capital i.e no interest, then there is no cost for such capital
Based only on the knowledge that the premerger market share of two firms proposing to merge was 30 percent each, an economist working for the Justice Department was able to determine that, if approved, the postmerger HHI would increase by 1,800. Which of the following equations is a general rule explaining how the Herfindahl-Hirschman index is affected when exactly two firms (Firm i and Firm j) in the market merge, where Si is the market share of firm i and Sj. is the market share of firm j? (Hint: Compare a2 + b2 with (a + b)2.)
The general rule for how the Herfindahl-Hirschman Index (HHI) is affected when two firms merge is calculated using the formula HHI Change = 2 * Si * Sj, where Si and Sj are the market shares of the merging firms.
Explanation:The equation that explains how the Herfindahl-Hirschman Index (HHI) is affected when two firms in the market merge, using their market shares Si and Sj, is:
HHI Change = 2 * Si * Sj
Considering that the premerger market share of each firm was 30%, and Si equals Sj, the equation becomes:
HHI Change = 2 * Si * Si
Given that we know the HHI will increase by 1800, we have:
1800 = 2 * Si * Si
1800 = 2 * (30)^2
1800 = 2 * 900
1800 = 1800
This confirms that the formula for the change in HHI due to a merger of two firms with market shares Si and Sj is 2 * Si * Sj, since it accurately predicts the change in HHI in this case.
In an oligopoly, the total output produced in the market is
a. lower than the total output that would be produced if the market were a monopoly but higher than the total output that would be produced if the market were perfectly competitive.
b. higher than the total output that would be produced if the market were a monopoly and higher than the total output that would be produced if the market were perfectly competitive.
c. higher than the total output that would be produced if the market were a monopoly but lower than the total output that would be produced if the market were perfectly competitive.
d. lower than the total output that would be produced if the market were a monopoly and lower than the total output that would be produced if the market were perfectly competitive.
Answer:
Letter c is correct. Higher than the total output that would be produced if the market were a monopoly but lower than the total output that would be produced if the market were perfectly competitive.
Explanation:
An oligopoly is a market situation that occurs when there are a small number of companies that dominate the supply of a particular product or service in a sector of the economy. It can occur naturally or structurally, and the purpose of this market configuration is to have greater competition and price control, so that there is greater profitability.
This scenario is characterized by imperfect competition, which is similar to the monopoly market, but in oligopoly production is higher than in monopoly, because there is more than one supplier of the same product. And production in an oligopoly is lower than in a perfectly competitive scenario where there are many suppliers and none have the ability to affect market price.
The total output produced in an oligopolistic market is higher than that in a monopoly but lower than in perfect competition, due to the competitive behavior among oligopolists.
Explanation:In an oligopoly, firms can be tempted to act competitively to increase their profit, potentially leading to a market output similar to that of perfect competition.
This scenario presents a strategic dilemma, known as the Prisoner's Dilemma, where oligopolists face a temptation to increase production and lower prices, rather than acting collectively as a monopoly would.
Hence, the total output produced in an oligopolistic market is higher than that of a monopoly because of increased competition among firms, but it is lower than that of a perfectly competitive market because they do not produce where price equals marginal cost.
The correct answer to the question is c: higher than the total output that would be produced if the market were a monopoly but lower than the total output that would be produced if the market were perfectly competitive.
A company reported that its bonds with a par value of $50,000 and a carrying value of $62,000 are retired for $66,000 cash, resulting in a loss of $4,000. The amount to be reported under cash flows from financing activities is: Multiple Choice $12,000. $(12,000). $(62,000). $(66,000). $(4,000).
Answer:
($66,000)
Explanation:
Financing activities: It measures those transactions which are related to the long term liabilities and stockholder equity. The issuance of shares is an inflow of cash whereas redemption, the retirement of bond and dividend paid is a cash outflow in which the cash balance is reduced.
Since in the given question, the bond is retired for $66,000 cash which represents the cash outflow for $66,000 only as it includes the transaction of cash
If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 10 percent receives a deposit of $400 it has a a. $400 increase in excess reserves and no increase in required reserves. b. $400 increase in required reserves and no increase in excess reserves. c. $360 increase in excess reserves and a $40 increase in required reserves. d. $40 increase in excess reserves and a $360 increase in required reserves.
Answer:
c. $360 increase in excess reserves and a $40 increase in required reserves
Explanation:
Required reserves is the amount of reserves that is required by the Central bank that banks should keep.
Required reserve = reserve ratio × deposit
= 0.1 × $400 = $40
Excess reserve is the amount of reserves kept in excess of the required reserves.
Excess reserve = Deposit - Required reserve = $400 - $40 = $360
I hope my answer helps you
Suppose that Rearden Metal currently has no debt and has an equity cost of capital of 12%. Rearden is considering borrowing funds at a cost of 6% and using these funds to repurchase existing shares of stock. Assume perfect capital markets. If Taggart borrows until they achieved a debt -to-equity ratio of 50%, then Rearden's levered cost of equity would be closest to:A) 10.0%B) 12.0%C) 15.0%D) 16.0%
Answer:
Option (C) is correct.
Explanation:
We have to use MM proposition that cost of equity will change itself in such a manner so that it can take care of its debt.
Cost of equity:
= WACC of all equity firm + (WACC of all equity - Cost of debt ) × (Debt -to-equity ratio)
At the beginning, when there was no debt,
WACC = cost of equity = 12 %
Levered cost of equity:
= 12% + ( 12% - 6%) × 0.5
= 15%
Therefore, Rearden's levered cost of equity would be closest to 15%.
The levered cost of equity for Rearden Metal would be 18%.
Explanation:The levered cost of equity is the rate of return required by an investor to hold shares in a company that has taken on debt or has financial leverage. It accounts for the additional risk associated with a leveraged capital structure compared to an unleveraged one. The levered cost of equity is calculated using the formula:
Levered Cost of Equity
= Cost of Equity x (1 + (1 - Tax Rate) x Debt-to-Equity Ratio)
In this case, Rearden Metal currently has no debt and an equity cost of capital of 12%. If they borrow funds at a cost of 6% and achieve a debt-to-equity ratio of 50%, the levered cost of equity would be:
Levered Cost of Equity
= 0.12 x (1 + (1-0) x 0.5)
= 0.12 x (1 + 0.5)
= 0.12 x 1.5
= 0.18
= 18%
Learn more about Rearden Metal's levered cost of equity here:https://brainly.com/question/34881727
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Prepare entries to record the following transactions and events related to Mason County property taxes for the year beginning January 1, 2015.a) To raise property tax revenues of $940,000, the County sends bills to property owners totaling $945,000. This will provide a $5,000 allowance for uncollectible taxes. The County makes no provision for possible tax refunds.b) Shortly after receiving his $5,000 tax bill, Harry appeals his assessment. His tax bill is reduced by $1,000. He then pays the remaining $4,000 that is due.c) Mason County receives $900,000 in cash from taxpayers who make timely payment on their taxes.d) Brown's home is destroyed by a fire; he declares bankruptcy and the County writes off his $3,000 tax bill as uncollectible.e) Smith and Wesson, who received bill totaling $8,000 are unable to pay on time. The County bills them $300 for interest. They subsequently pay the taxes plus interest.f) At year end, the County declares all unpaid property taxes to be delinquent. Interest and penalties amounting to $1,500 is assessed against the delinquent taxpayers.g) The County decides to increase its Allowance for Uncollectible Taxes by $3,000
Answer:
Please see attachment
Explanation:
Please see attachment
Detailed explanation of recording transactions related to property taxes for Mason County in 2015.
Property Taxes Transactions:
a) To raise property tax revenues of $940,000, the County sends bills totaling $945,000 with a provision of $5,000 for uncollectible taxes. b) Harry's tax bill is reduced by $1,000 due to an appeal, and he pays the remaining $4,000. c) $900,000 in cash is received from taxpayers. d) Brown's $3,000 tax bill is written off as uncollectible. e) Smith and Wesson pay $8,000 in taxes plus $300 interest. f) $1,500 in interest and penalties assessed on delinquent taxpayers. g) Allowance for Uncollectible Taxes is increased by $3,000.
Hayden Company is considering the acquisition of a machine that costs $324,000. The machine is expected to have a useful life of six years, a negligible residual value, an annual net cash flow of $100,000, and annual operating income of $85,000. What is the estimated cash payback period for the machine (round to one decimal points)?
Answer:
Cash payback period= 3.2 years.
Explanation:
Lets first understand what a cash payback period is. As the name suggest, payback period is the time duration within which a business recovers it's investment and/or capital investment and the payback period is expressed in number of years. The formula for payback period is as follows:
Payback period= initial investment ÷ annual cash-flows
In the question annual operating income is given just for distraction.
payback period = $324000 ÷ 100000
payback period= 3.2 years.
This means if Hayden company decides to invest in the machine, it would recover the cost of machine (i.e it's investment) in approximately three and half years.