Answer:
The operating cash flow of year 1 for the company is $368,500
Explanation:
In order to calculate the operating cash flow of year 1 for the company first we need to calculate the Cashflow before tax and depreciation as follows:
Cashflow before tax=Sales-Variable cost-fixed cost
Cashflow before tax=$1,100,000-$450,000-$180,000
Cashflow before tax=$470,000
Depreciation = Original cost - Salvage / fixed Cost
Depreciation= $1,200,000 - $300,000 / 5
= $180,000
Therefore, to calculate the operating cash flow of year 1 for the company we would have to make the following calculation:
Operating Cash Flow=(CFBT×65%)+Depreciation×35%
Operating Cash Flow=($470,000×65%)+($180,000×35%)
Operating Cash Flow=$368,500
The operating cash flow of year 1 for the company is $368,500
In 2020, Antle Inc. had acquired Demski Co. and recorded goodwill of $275 million as a result. The net assets (including goodwill) from Antle's acquisition of Demski Co. had a 2021 year-end book value of $610 million. Antle assessed the fair value of the Demski reporting unit at this date to be $730 million, while the fair value of all of Demski's identifiable tangible and intangible assets (excluding goodwill) was $583 million. The amount of the impairment loss that Antle would record for goodwill at the end of 2021 is: Multiple Choice $147 million. $128 million. $0. $120 million.
Final answer:
Antle Inc. would record a goodwill impairment loss of $128 million for Antle's acquisition of Demski Co., as the carrying value of the goodwill ($275 million) exceeds its implied fair value ($147 million) determined by the fair value of the reporting unit ($730 million) minus the fair value of identifiable assets ($583 million).
Explanation:
To determine the amount of goodwill impairment, we must assess the carrying value of the reporting unit against its fair value. According to the information provided, Antle Inc. recorded goodwill for the acquisition of Demski Co. at $275 million. The fair value of the reporting unit, which includes Demski Co., is $730 million, and the fair value of its identifiable tangible and intangible assets (excluding goodwill) is $583 million.
Initially, we calculate the implied fair value of goodwill by subtracting the fair value of identifiable assets from the fair value of the reporting unit:
Fair value of the reporting unit: $730 millionFair value of identifiable assets: $583 millionImplied fair value of goodwill: $730 million - $583 million = $147 millionNow, compare the carrying value of the goodwill with the implied fair value. The carrying value of goodwill is $275 million and the implied fair value is $147 million. Therefore, Antle must record an impairment loss to write down the carrying value of goodwill to the lower implied fair value.
Goodwill impairment loss = Carrying value of goodwill - Implied fair value of goodwill = $275 million - $147 million = $128 million.
Cobe Company has already manufactured 17,000 units of Product A at a cost of $10 per unit. The 17,000 units can be sold at this stage for $470,000. Alternatively, the units can be further processed at a $280,000 total additional cost and be converted into 5,200 units of Product B and 11,300 units of Product C. Per unit selling price for Product B is $104 and for Product C is $52. 1. Prepare an analysis that shows whether the 17,000 units of Product A should be processed further or not?
Answer:
Company should be processed further of product A.
Explanation:
According to the scenario, computation of the given data are as follows:-
Particular Sales Amount Further Process
Sales $4,70,000 $11,28,400
For Further process additional cost $2,80,000
Income/Loss $4,70,000 $8,48,400
Further Processed Total Additional Sales = Sale Units of Product B × Price Per Unit of Product B + Sale Units of Product C × Price Per Unit of Product C
= (5200 × $104) + (11,300 × $52)
= $540,800 + $587,600 =$1,128,400
If Processed Further Incremental Net Income = Income -Sales
= $848,400 - $470,000
= $378,400.
According to the Analysis, Company should be processed further of product A.
11.1. One reason why firms might want to pursue a strategic alliance strategy is to exploit economies of scale. Exploiting economies of scale should reduce a firm’s costs. Why would this mean that a firm pursuing an alliance strategy to exploit economies of scale is actually pursuing a cost leadership strategy?
Answer:
In simple words, economies of scale refers to the method of reducing cost of production by producing any commodity at a very high level. By doing strategic alliance two companies can combine their operations to work more efficiently.
Thus, strategic alliance will help the combining group in two ways, first they can target more customers without effective competition and also they can reduce their cost from economies of scale. The further effect of economies of scale would be lesser priced products, that is, cost leadership in the market.
Final answer:
Firms exploit economies of scale through strategic alliances to become cost leaders by reducing per-unit costs and increasing production efficiency. This cost-saving aligns with the cost leadership strategy as firms aim to offer goods or services at a lower price than their competitors while maintaining profitability.
Explanation:
A firm pursuing a strategic alliance strategy to exploit economies of scale is effectively implementing a cost leadership strategy because economies of scale result in reduced costs per unit by spreading fixed costs over a larger number of units and utilizing more efficient production methods. This cost reduction is a hallmark of cost leadership strategies where firms aim to become the lowest-cost producers in their industry. According to Michael Porter, firms should either pursue cost leadership or product differentiation to delay the effects of perfect competition and maintain sustainable profits.
Engaging in strategic alliances allows firms to merge their resources and capabilities, thus achieving cost efficiencies and higher volumes which lead to economies of scale. This not only helps firms lower their costs but also hinders new competitors due to the larger scale needed to compete effectively. Horizontal integration is one such example where firms expand or merge to achieve cost efficiencies.
Thus, when a firm forms an alliance to gain economies of scale, it is essentially focusing on minimizing costs to gain a competitive price advantage, which underpins the cost leadership approach. Being a cost leader can also potentially lead to market dominance by setting prices that are difficult for smaller or less efficient competitors to match, which can result in higher market shares for the cost-leading firms.
Desert Company purchased land to be used as a factory site for $1,350,000. Desert paid $100,000 to tear down two buildings on the land. Salvage was sold for $8,500. Legal fees of $5,250 were paid for title investigation and making the land purchase. Architect’s fees were $46,600. Title insurance cost $3,600 and liability insurance during construction cost $3,900. Excavation cost $16,720. The contractor was paid $4,200,000. Landscaping cost $9,800. Interest costs during construction were $225,000. What is the historical cost of the land that should be recorded by Desert, Co.?
Answer:
historical cost is $1,460,150
Explanation:
Computation of Cost of Land
Cost $1,350,000
Tear down $100,000
Salvage -$8,500
Legal fees $5,250
Title insurance $3,600
pavement $9,800
Total $1,460,150
Answer:
Desert Company
Historical cost of Land:
Purchase price = $1,350,000
Tearing down Buildings = $91,500 $(100,000 - 8,500)
Title Investigation = $5,250
Title Insurance = $3,600
Total = $1,450,350
Explanation:
The historical cost of land is the initial price paid to purchase the land and any other costs incurred in order to put the land to use, except building costs.
The other costs, including Architect's fee, Liability Insurance during construction, excavation cost, contractor fee, and landscaping cost are costs incurred for the building and not for the land.
Department S had 500 units 70% completed in process at the beginning of the period, 7,600 units completed during the period, and 900 units 53% completed at the end of the period. What was the number of equivalent units of production for the period for conversion if the first-in, first-out method is used to cost inventories? Assume the completion percentage applies to both direct materials and conversion cost.
Answer:
7,727 units
Explanation:
According to the scenario, computation of the given data are as follows:
Department S beginning = 500 units
Completed % in process = 70%
Total completed during period = 7,600 units
End of period = 900 units 53 % completed
So, we can calculate the units of production using FIFO method.
Check attachment for the Solution.
The attachment is attached below.
Under the last-in, first-out (LIFO) inventory valuation method, a price index for inventory must be established for tax purposes. The quantity weights are based on year-ending inventory levels. Unit Price ($) Product Ending Inventory Beginning Ending A 500 0.17 0.21 B 50 1.40 1.80 C 100 4.50 4.20 D 40 12.00 13.20 Use the beginning-of-the-year price per unit as the base-period price and develop a weighted aggregate index for the total inventory value at the end of the year. (Round your answer to the nearest integer.) I
Answer:
105.35
Explanation:
The computation of Laspeyres Index is shown below:-
Laspeyres Index = 100 × (Sum(Ending × Ending Inventory) ÷ Sum(Beginning × Ending Inventory))
= 100 × ((500 × 0.21) + (50 × 1.80) + (100 × 4.20) + (40 × 13.20)) ÷ ((500 × 0.17) + (50 × 1.40) + (100 × 4.50) + (40 × 12)
= 100 × (105 + 90 + 420 + 528) ÷ (85 + 70 + 450 + 480)
= 100 × 1,143 ÷ 1,085
= 100 × 1.053
= 105.35
So, for computing the Laspeyres Index we simply applied the above formula.
Gator Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $480,000, variable expenses of $360,000, and fixed expenses of $140,000. Therefore, the gloves and mittens line had a net loss of $20,000. If Gator eliminates the line, $35,000 of fixed costs will remain. Prepare an analysis showing whether the company should eliminate the gloves and mittens line. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Answer:
The company will lose $85,000 if the product line is discontinued
Explanation:
Giving the following information:
Sales= 480,000
variable expenses= (360,000)
Contribution margin= 120,000
fixed expenses= (140,000)
Net operating income= (20,000)
If Gator eliminates the line, $35,000 of fixed costs will remain.
We need to determine the effect on income if the product line is discontinued.
Effect on income= fixed costs - net operating income
Effect on income= -105,000 - (-20,000)
Effect on income= -85,000
The company will lose $85,000 if the product line is discontinued
Crane Company purchases Cullumber Company for $2390000 cash on January 1, 2021. The book value of Cullumber Company’s net assets, as reflected on its December 31, 2020 balance sheet is $1851000. An analysis by Crane on December 31, 2020 indicates that the fair value of Cullumber’s tangible assets exceeded the book value by $178500, and the fair value of identifiable intangible assets exceeded book value by $134000. How much goodwill should be recognized by Crane Company when recording the purchase of Cullumber Company? $539000 $360500 $226500 $0
Answer:
$226,500
Explanation:
The computation of the goodwill is shown below:
Goodwill = cash paid - book value of net assets - tangible assets exceeded the book value - fair value of identifiable intangible assets exceeded book value
= $2,390,000 - $1,851,000 - $178,500 - $134,000
= $226,500
We simply applied the above formula so that the goodwill amount could arrive
Hunt Company purchased factory equipment with an invoice price of $90,000. Other costs incurred were freight costs, $1,100; installation wiring and foundation, $2,200; material and labor costs in testing equipment, $700; oil lubricants and supplies to be used with equipment, $500; fire insurance policy covering equipment, $1,400. The equipment is estimated to have a $5,000 salvage value at the end of its 8-year useful service life. Compute the acquisition cost of the equipment. Acquisition cost of the equipment $ If the double-declining-balance method of depreciation was used, the constant percentage applied to a declining book value would be
Answer:
Acquisition cost of the Equipment = $94,000
Double declining depreciation rate = 25%
Explanation:
a. The computation of the acquisition cost of the equipment is shown below:-
Acquisition cost of the Equipment = Invoice cost + Freight costs + Installation wiring and foundation + Material and labor costs used in testing
= $90,000 + $1,100 + $2,200 + $700
= $94,000
b. The computation of double declining depreciation rate is here below:-
Double declining depreciation rate = 1 ÷ Depreciation life × Times
= 1 ÷ 8 × 2
= 0.125 × 2
= 0.25
or
= 25%
An outside supplier has offered to sell motors to RGM for $52 per motor. If RGM stops making the motors, 1/4 of the fixed manufacturing overhead would be avoidable. In addition, the facilities being used to make motors could be rented to another company for $40,000 per year. If RGM purchases the motors from the supplier, by how much will net income change?
Answer:
net income will decrease by $60,000
Explanation:
current costs:
direct materials = $20direct labor = $18variable manufacturing overhead = $10fixed manufacturing overhead = $8total cost per unit = $56total production costs = $56 x 50,000 = $2,800,000relevant costs if product is purchased form external supplier:
purchase price per unit = $52 x 50,000 = $2,600,000fixed manufacturing overhead = $8 x 3/4 x 50,000 = $300,000- lease of facilities = ($40,000)total relevant costs if product is purchased = $2,860,000Since the relevant costs of purchasing the product are $60,000 higher, net income would decrease by that amount.
1. Izzy Company sells a television that carries a 90-day unconditional warranty against product failure. From prior years’ experience, Izzy estimates that 4% of units sold each period will require repair at an average cost of $150 per unit. During the current period, Izzy sold 22,000 units and repaired 200 units.How much warranty expense must Izzy report in its current period income statement? 138,000 132,000 102,000 30,000 1
Answer:
$132,000
Explanation:
The computation of the warranty expense is shown below:
Warranty expense = Units sold × repaired cost × estimated percentage
= 22,000 units × $150 × 4%
= $132,000
We simply multiplied the unit sold with the repaired cost and the estimated percentage so that the amount of warranty expense could come
All other things that are mentioned in the question is not relevant. Hence, ignored it
On 4/1/Y9, Petal Corp. began offering a new product for sale under a 1-year warranty. Petal had 5,000 units in inventory on 4/1/Y9. By 6/30/Y9, 3,000 of these units had been sold. Based on its experience with similar products, Petal estimated that the average warranty cost per unit sold would be $8. Actual warranty costs incurred from April 1 through June 30, Year 9, were $7,000.
Required:
1. What amount should Petal report as estimated warranty liability at June 30, Year 9?
Answer:
$17,000
Explanation:
Units sold = 3,000 units
Expected warranty = 3,000 * $8 = $24,000
Actual warranty costs = $7,000
Estimated warranty liability = $24,000 - $7,000 = $17,000
Therefore, Petal should report $17,000 as estimated warranty liability at June 30, Year 9.
At Hodgson Corporation, direct materials are added at the beginning of the process and conversions costs are uniformly applied. Other details include: Beginning WIP direct materials $32,000 Beginning WIP conversion costs $20,250 Costs of materials added $384,100 Costs of conversion added $271,125 WIP beginning (50% for conversion) 19,200 units Units started 119,500 units Units completed and transferred out 115,700 units WIP ending (60% for conversion) 23,000 units What is the cost per equivalent unit for conversion costs
Answer:
$2.25 per unit
Explanation:
The computation of the cost per equivalent is shown below:
= Total conversion cost ÷ total units completed
where,
Total conversion cost is
= Beginning work in process conversion cost + cost of conversion added
= $20,250 + 271,125
= 291,375
And, the number of units is
= Units completed + work in process ending inventory units × completion percentage
= 115,700 units + 23,000 units × 60%
= 115,700 + 13,800
= 129,500 units
So, the cost per equivalent unit for conversion cost is
= $291,375 ÷ 129,500 units
= $2.25 per unit
Prepare journal entries to record the following transactions for Sherman Systems. Purchased 6,800 shares of its own common stock at $43 per share on October 11. Sold 1,450 treasury shares on November 1 for $49 cash per share. Sold all remaining treasury shares on November 25 for $38 cash per share. 2. Prepare the stockholders' equity section after the October 11 treasury stock purchase.
Explanation
I think your question missed of key information for question 2, so I just answer question at my best for helping you.
Debit Credit
11-Oct
Treasury 292400
Cash 292400
Being own shares repurchased
1-Nov
Cash (1,450 × 49) 71,050
Treasury Stock (1,450 × 43) 62,350
Paid-in Capital from Sale of Treasury Stock 9,700
To record the sale of treasury stock.
November 25
Cash (5350 × 38) 203,300
Paid-in Capital from Sale of Treasury Stock 9,700
Retained Earnings 17,050
Treasury Stock (5350 × 43) 230,050
To record the sale of the remaining treasury shares
Final answer:
To record transactions involving treasury stock, journal entries must reflect the purchase and sale of these shares, affecting cash and equity accounts. After purchasing its own stock, the company's equity decreases by the purchase price of the treasury stock.
Explanation:
Journal Entries for Treasury Stock Transactions
To record the various treasury stock transactions for Sherman Systems, we would make the following journal entries on the respective dates:
On October 11, purchase of 6,800 treasury shares at $43 per share:After the October 11 purchase of treasury stock, the stockholders' equity section would reflect a decrease in total equity by the cost of the treasury shares purchased.
You want to have $1,200,000 when you retire and you are in a defined contribution plan. You can earn 9 percent per year on the money invested and you will retire in 25 years. Your employer also contributes to your plan. The employer will contribute 4 percent of what you put into the plan each year. How much do you have to contribute per year to meet your goal
Answer:
Annual deposit= $13,600.8
Explanation:
Giving the following information:
You want to have $1,200,000 when you retire and you are in a defined contribution plan.
Interest rate= 9%
Number of years= 25 years.
The employer will contribute 4 percent of what you put into the plan each year.
First, we need to calculate the total annual contribution:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
Isolating A:
A= (FV*i)/{[(1+i)^n]-1}
A=(1,200,000*0.09) / [(1.09^25)-1]
A= $14,167.50
Now, your annual deposit:
Annual deposit= 14,167.5*0.96= $13,600.8
Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Chin Company issued $18,600,000 of five-year, 10% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Chin Company receiving cash of $17,230,938.
(a) Journalize the entries to record the following:
1. Issuance of the bonds.
2. First semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. Round your answer to the nearest dollar.
3. Second semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. Round your answer to the nearest dollar.
(b) Determine the amount of the bond interest expense for the first year.
(c) Explain why the company was able to issue the bonds for only $9,594,415 rather than for the face amount of $10,000,000.
Answer and Explanation:
a. The Journal entry is shown below:-
1. Cash Dr, $17,230,938
Bond payable discount Dr, $1,369,062
To Payable bond $18,600,000
(Being issuance of bonds is recorded)
2. Interest expenses Dr, $793,094
To discount on bonds payable $136,906 ($1,369,062 ÷ 10)
To Cash $930,000 ($18,600,000 × 10% ÷ 2)
(Being first semi annual interest is recorded)
3. Interest expense Dr, $793,094
To Bond payable discount $136,906
To Cash $930,000
(Being second semi annual interest is recorded)
b. Interest expenses for the first year = Interest expenses + Discount amortized
= ($930,000 + $930,000) + ($136,906 + $136,906)
= $1,860,000 + $273,812
= $2,133,812
c. The company issued the bond with a maximum interest of $10,000,000, for $9,594,415. That is the bonds are issued at a $1,369,062 discount. The bonds are issued at a discount because the bond market interest is higher than the coupon rate for the debt.
Final answer:
The detailed answer explains journal entries for issuing bonds, bond interest expense calculation, and reasons for issuing bonds below face value.
Explanation:
Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method
a) Journal entries:
Issuance of bonds: Debit Cash $17,230,938, Credit Bonds Payable $18,600,000, Credit Discount on Bonds Payable $1,369,062
First semiannual interest payment: Debit Interest Expense $930,136, Debit Discount on Bonds Payable $4,801, Credit Cash $935,938
Second semiannual interest payment: Debit Interest Expense $915,487, Debit Discount on Bonds Payable $4,249, Credit Cash $919,736
b) Bond interest expense for the first year is $1,845,623.
c) The company issued the bonds for less than face amount due to the market interest rate being higher than the bond's stated interest rate, making the bonds less attractive to investors at face value.
During the year ended December 31, 2018, Kelly’s Camera Shop had sales revenue of $180,000, of which $90,000 was on credit. At the start of 2018, Accounts Receivable showed a $12,000 debit balance and the Allowance for Doubtful Accounts showed a $620 credit balance. Collections of accounts receivable during 2018 amounted to $70,000.
Data during 2018 follow:
On December 10, a customer balance of $1,600 from a prior year was determined to be uncollectible, so it was written off.
On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year.
Required:
Give the required journal entries for the two events in December.
Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the balance sheet and income statement for 2018.
On the basis of the data available, does the 2 percent rate appear to be reasonable?
Answer:
(a) On December 10, a customer balance of $1,400 from a prior year was determined to be uncollectible
Dr Sales Returns and Allowances $ 1,400
Cr Accounts Receivable $ 1,400
(b) On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year.
Dr Bad Debt Expense $ 752
Cr Allowance for Uncollectible Accounts $ 752
Explanation:
Initial Balance
Dr Accounts Receivable $ 12,000
Cr Allowance for Uncollectible Accounts $ 500
Kelly’s Camera Shop had sales revenue, of which $60,000 was on credit
Dr Accounts Receivable $ 60,000
Cr Sales $ 60,000
Collections of accounts receivable during 2018 amounted to $58,000.
Dr Cash $ 58,000
Cr Accounts Receivable $ 58,000
(a) On December 10, a customer balance of $1,400 from a prior year was
determined to be uncollectible, so it was written off.
Dr Allowance for Uncollectible Accounts $ 1,400
Cr Accounts Receivable $ 1,400
(b) On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year.
Dr Bad Debt Expense $ 752
Cr Allowance for Uncollectible Accounts $ 752
At December 31, 2021, Bonita Industries had 508000 shares of common stock issued and outstanding, 396000 of which had been issued and outstanding throughout the year and 112000 of which were issued on October 1, 2021. Net income for the year ended December 31, 2021, was $1705000. What should be Bonita's 2021 earnings per common share, rounded to the nearest penny? $4.02 $4.31 $3.77 $36.18
Answer:
$4.02 per share
Explanation:
The computation of the earning per share is shown below:
Earning per share = (Net income) ÷ (weighted average number of outstanding shares)
where,
Net income is $1,705,000
And, the weighted average number of shares is
= (396,000 shares + 112,000 × 3 months ÷ 12 months)
= 424,000 shares
So, the earning per share is
= ($1,705,000) ÷ (424,000 shares)
= $4.02 per share
A new bank offers you a 0% Intro APR on balance transfers. All transfers must be completed in first 4 months. After that the variable APR will be 24%, based on your credit score remaining above 650. If you transfer a balance with this offer, after your 0% Intro purchase APR expires, both new purchases and unpaid purchase balances will automatically accrue interest until all balances, including your transferred balance, are paid in full. You have transferred $600 to this account and paid half before the fourth month. You then charge $350 in the fifth month. What is your balance at the end of the fifth month if you have made no additional charges, payments or transfers?
Answer:
$663
Explanation:
Answer:663
Explanation:
Exercise 11-28 (LO. 3) Lucy sells her partnership interest, a passive activity, with an adjusted basis of $305,000 for $330,000. In addition, she has current and suspended losses of $28,000 associated with the partnership and has no other passive activities. a. Calculate Lucy's total gain and her current deductible loss. Her total gain is $ and her deductible loss is $ . b. What type of income can the deductible loss offset? Lucy's deductible loss is offset against
Answer and Explanation:
The actual gain or loss from the investment, including any suspended losses, should be determined when the tax payer disposes of his or her interest in a passive activity. According to the passive activity law, any gain realized on passive activity transition is viewed as passive and is initially compensated by suspended passive active losses from that activity.
If latest and suspended losses of passive activity exceed the gain accomplished, any loss from the activity for the tax year exceeding the net gain for the tax year from all passive activities shall be allowed to treat as a loss not arising from passive activity.
The computation of total gain and current deductible is shown below:-
Total gain = Net sales price - Adjusted basis amount
= $330,000 - 305,000
= $25,000
And Current deductible amount is
= Total gain earned - Suspended losses suffered
= $25,000 - $28,000
= $3,000
This amount represents the non passive amount
b. Deductible loss that may offset profit from passive investment that is realized in passive activity on the selling of partnership interest. The benefit realized in passive activity on selling of interest is regarded as passive.
Factor Co. can produce a unit of product for the following costs: Direct material $ 7.70 Direct labor 23.70 Overhead 38.50 Total product cost per unit $ 69.90 An outside supplier offers to provide Factor with all the units it needs at $40.95 per unit. If Factor buys from the supplier, the company will still incur 70% of its overhead. Factor should choose to:
Ginger, Inc., has declared a $5.40 per share dividend. Suppose capital gains are not taxed, but dividends are taxed at 20 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. The company's stock sells for $94.00 per share, and the stock is about to go ex dividend. What do you think the ex-dividend price will be
Answer: $89.68
Explanation:
The Ex-dividend measures how much a stock price drops as a result of the disbursement of dividends. It is calculated by subtracting the dividend from the current stock price.
In the above question the IRS require that taxes be withheld at the time that the dividend is paid.
This means that taxes have to be accounted for first before ex - dividend is calculated.
After tax dividend = 5.40 * ( 1 - 0.2)
After tax dividend = $4.32
Solving for Ex-dividend gives,
= 94.00 - 4.32
= $89.68
The ex-dividend price will be $89.68
Chester currently has $17,334 (000) in cash and management has decided to issue stocks and bonds worth an additional $8,000 (000). Assuming that cash from operations will be the same for each of the following activities, which activity exposes this company to the most risk of being issued an emergency loan? Select: 1 A $5 dividend Liquidate the entire inventory Purchasing $18,000 (000) worth of plant and equipment Retiring the oldest bond
Answer:
Purchasing $18,000 (000) worth of plant and equipment
Explanation:
The purpose of an emergency loan is to help a company pay its current liabilities and obligations because they temporarily o not have enough cash. A company might be economically very healthy, but financially unstable. E.g. a company increased its total sales by handing out more credit to its customers, but it cannot collect its accounts receivables fast enough to pay for its current obligations.
In this case, since we do not know the number of outstanding stocks nor the value of the oldest bonds, we cannot choose these options. While liquidating the inventory would increase the cash balance, not decrease it. The only action that we know for sure would severely affect the cash position of the company is purchasing a lot of equipment in cash.
Allure Company manufactures and distributes two products, M and XY. Overhead costs are currently allocated using the number of units produced as the allocation base. The controller has recommended changing to an activity-based costing (ABC) system. She has collected the following information: Activity Cost Driver Amount M XY Production setups Number of setups $ 82,000 8 12 Material handling Number of parts 48,000 56 24 Packaging costs Number of units 130,000 80,000 50,000 $ 260,000 What is the total overhead allocated to Product XY using the current system
Answer:
$113,600
Explanation:
According to the scenario, computation of the given data are as follows:-
Particular Activity cost driver Amount Product M Product XY Total
Production setup No. of prod. $82,000 8 12 20
Material handling No. of parts $48,000 56 24 80
Packaging costs No. of units $1,30,000 80,000 50,000 130,000
$2,60,000
Allocation to Product XY
Production Set up = Production Set up Amount ÷ Number of Total Production Set up × Number of Product XY Setup
= $82,000 ÷ 20 × 12
= $49,200
Material Handling = $48,000 ÷ 80 × 24 = $14,400
Packaging Costs = $130,000 ÷ 130,000 × 50,000 = $50,000
Total overhead = Production Set up + Material Handling + Packaging Costs
= $49,200 + $14,400 + $50,000
= $113,600
A full-time worker aged 2525 invests $250250 a month in a fund which has an average yearly return of 7.27.2% compounded monthmonthly. (a) The worker wants to estimate what they will have for retirement when they are 6060 years old if the rate stays constant. Assume monthmonthly compounding. (b) If the worker makes no further deposits and makes no withdrawals after age 6060, how much will they have for retirement at age 6666?
Answer:
Instructions are below.
Explanation:
Giving the following information:
The number of years/months= 60 - 25= 35*12= 420
Interest rate= 0.072/12= 0.006 compounded monthly
Monthly investment= $250
(a) We need to use the following formula:
FV= {A*[(1+i)^n-1]}/i
A= monthly deposit
FV= {250*[(1.006^420)-1]} / 0.006
FV= $472,306.75
(b) I assume that the monthly compounded continues.
Number of months= 6*12= 72
We need to use the following formula:
FV= PV*(1+i)^n
FV= 472,306.75* (1.006^72)
FV= $726,572.28
A quality improvement team is best described as a: A. Group of employees coming together for a specific, unplanned purpose B. Group of selected employees that must be prepared to convene quickly in response to an emergency C. Group of individuals working together to address a particular problem or process D. Team in the storming phase of development E. Formally established and defined group of individuals who work together over time
Answer:
Group of individuals working together to address a particular problem or process.
Explanation:
Quality improvement team can be be described as a group of employees whose task is the ensure the quality of a particular product. This team is in charge of an entire production process, they also have the right to make alterations to the design of a product to ensure that there is more demand for the product in the market.
The quality improvement team also take part in decision making by bringing up new policies and ideas capable of boosting the amount of profit incurred by the organisation.
You bought a stock one year ago for $51.41 per share and sold it today for $59.82 per share. It paid a $1.03 per share dividend today. How much of the return came from dividend yield and how much came from capital gain? The return that came from dividend yield is ________ (Round to one decima %. l place.) The return that came from capital gain is _______.
Answer:
Return from dividend yield= 2.0%
Capital gain = 16.4%
Explanation:
The return on a stock is the sum of the capital gains(loss) plus the dividends earned.
Capital gain is the difference between the value of the stocks when sold and the cost of the shares when purchased.
Total shareholders Return =
(Capital gain/ loss + dividend )/purchase price × 100
The total return can be broken down into
Dividend yield = Dividend/price × 100
= 1.03/51.41 × 100
=2.0%
Capital gain = capital gain/ price × 100
= (59.82 - 51.41)/51.41 × 100 = 16.4%
Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 6% preferred stock with a stated value of $5. Dividends have been paid in every year except the past two years and the current year. Assuming that $234,000 will be distributed, and the preferred stock is cumulative and participating, how much will the common stockholders receive
Answer :
Common stockholder will receive = $126,000
Explanation :
As per the data given in the question,
Preferred stock capital = $600,000
Rate of preferred dividend = 6%
Annual preferred dividend = $600,000*6%
=$36,000
Cumulative preferred dividend = $36,000 × 2 = $72,000
Total amount of dividend paid = $234,000
Arrears cumulative dividend = $72,000
Current year preferred dividend = $36,000
Amount of common stock is
= $234,000 - $72,000 - $36,000
= $126,000
Michael's, Inc., just paid $1.90 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 4.2 percent. If you require a rate of return of 8.5 percent, how much are you willing to pay today to purchase one share of the company's stock?
Final answer:
To find the value one would pay for a share of Michael's, Inc. stock with an initial dividend of $1.90, growing at 4.2%, with a required return of 8.5%, the Gordon Growth Model is used. The dividend next year is estimated at $1.98, leading to a stock value of approximately $46.05 today.
Explanation:
The value one is willing to pay today for a share of Michael's, Inc. stock, given that it has an annual dividend growth rate and a required rate of return, can be determined using the Gordon Growth Model (also known as the Dividend Discount Model). The model takes into account the most recent dividend payment, anticipated growth in dividends, and the investor's required rate of return to calculate the present value of the stock.
As per the question, the initial dividend (D0) is $1.90, with future dividends expected to grow at a rate of 4.2 percent (g). The required rate of return (r) is 8.5 percent. The formula to calculate the price one would pay for the stock today (P0) is:
P0 = D1 / (r - g), where D1 is the dividend expected next year.
First, we must calculate D1, which is the dividend expected next year: D1 = D0 x (1 + g), so we have D1 = $1.90 x (1 + 0.042) = $1.98 approximately. Then we plug D1 into our P0 calculation:
P0 = $1.98 / (0.085 - 0.042) = $1.98 / 0.043 = $46.05 approximately.
Therefore, based on the given requirements, one would be willing to pay approximately $46.05 to purchase a share of Michael's, Inc. stock today.
ou are valuing a company that is projected to generate a free cash flow of $10 million next year, growing at a stable 3.0% rate in perpetuity thereafter. The company has $22 million of debt and $8.5 million of cash. Cost of capital is 10.0%. There are 50 million shares outstanding. How much is each share worth according to your valuation analysis
Answer:
Each share worth is $2.59
Explanation:
According to the given data we have the following:
D1 = Cash Flow at the end of year 1 = $ 10 million
r = Cost of Capital = 10% = 0.1
g = perpetual growth of cash flows
Hence, The present value of Cash Flows = D1/(r-g)
= 10/(0.1-0.03)
=10/0.07
= $ 142.8571428571 million
= $ 142.86 million
To find the equity value we need to remove the net debt from cash flows
Net Debt = Debt - Cash
= 22 - 8.5
= $ 13.5 million
Now net cash flows = Cash Flows - Net Debt
= 142.86 - 13.5
= $ 129.36 million
Therefore, each share worth = Present Value of Cash Flow / No of Outstanding Shares
= 129.36 / 50 (Both values are in millions so the zeros are ignored)
= 2.5872
= $2.59
Each share worth is $2.59