Answer:
a.
Cash $59,500 (debit)
Deferred Revenue $59,500 (credit)
Being Fees Earned But not Billed to Customers
b.
Yes adjusting entry would be necessary. Because there has been movement of cash
Explanation:
The Accrual Principle states that transactions are recorded as they occur not as they are paid.
The Effect of the transaction in the question is to Increase the Assets of Cash while Recognizing the Liability that the company has to the customer in Deferred Revenue.
At the later date when the Company Bills the Clients, the Deferred Revenue would be Eliminated and the Revenue Account be Recognized.
What were the company's cumulative earnings over these four quarters? What were its cumulative cash flows from operating activities? b. What fraction of the cash from operating activities was used for investment over the four quarters? c. What fraction of the cash from operating activities was used for financing activities over the four quarters?
Answer: The answers are given below
Explanation:
A diagram relating to the question was gotten and the answers are provided below.
a. Cumulative earnings over four quarters will be:
= 276625 + 229066 + 194168 + 218413 = $918,272 (in $000)
Cumulative cash flow from the operating activities will be:
= 227333 + 13837 + 717808 + 254475
= $1,185,779 (in $000)
b. Total cash flows from the investing activities will be:
= 196,746 + 35,305 + 251,178 + 96,973 = $580,202 (in $000)
The fraction used in the investment of cash flow from the operating activities will be:
= (580202 ÷ 1185779) × 100
= 48.93%
c. Total cash flows from the financing activities will be:
= 462948 + 13401 + 526169 + 96143
= $172,768 (in $000)
The fraction used in the financing of cash flow from the operating activities will be:
= (172768/1185779) × 100
= 14.57%
Mr. Pine, a self-employed engineer in Boston, traveled to Chicago in order to attend a course on new engineering techniques. He spent 2 weeks attending the course and remained in Chicago for an additional 6 weeks on personal matters. The air flight cost $200, hotel $600, meals $320, and the tuition for the course $500. How much of these expenses may Mr. Pine deduct on his return
Answer:
$930
Explanation:
Kindly check attached picture for explanation
Meson Productions is a price taker. Meson produces large spools of electrical wire in a highly competitive market; thus, the company uses target pricing. The current market price of the electric wire is $770 per unit. The company has $3,000,000 in average assets, and the desired profit is a return of 5% on assets. Assume all products produced are sold. The company provides the following information:
Sales volume 110,000 units per year
Variable costs $660 per unit
Fixed costs $14,000,000 per year
If variable costs cannot be reduced, how much reduction in fixed costs will be needed to achieve the profit target?
A. $7,750,000
B. $7,600,000
C. $12,150,000
D. $12,000,000
Answer:
Instructions are below
Explanation:
Giving the following information:
The current market price of the electric wire is $770 per unit.
The company has $3,000,000 in average assets, and the desired profit is a return of 5% on assets.
Sales volume 110,000 units per year
Variable costs $660 per unit
Fixed costs $14,000,000 per year
The company's objective is 5% of average assets. In this case, $150,000.
Total contribution margin= 110,000*110= 12,100,000
Fixed costs= (14,000,000)
Net operating profit= (1,900,000)
Target profit= 150,000
Target fixed costs= Contribution margin - target profit
Target fixed costs= 12,100,000 - 150,000= 11,950,000
Prove:
Total contribution margin= 110,000*110= 12,100,000
Fixed costs= (11,950,000)
Net operating profit= 150,000
Miscavage Corporation has two divisions: the Beta Division and the Alpha Division. The Beta Division has sales of $580,000, variable expenses of $301,600, and traceable fixed expenses of $186,500. The Alpha Division has sales of $510,000, variable expenses of $178,500, and traceable fixed expenses of $222,100. The total amount of common fixed expenses not traceable to the individual divisions is $235,500. What is the company's net operating income? Select one: a. $374,400 b. $201,300 c. $609,900 d. ($34,200)
Answer:
Net income= -$34,200
Explanation:
Giving the following information:
Beta Division:
Sales= $580,000
Variable expenses= $301,600
Traceable fixed expenses of $186,500.
Income= 91,900
Alpha Division:
Sales of $510,000
Variable expenses of $178,500
Traceable fixed expenses of $222,100.
Income= 109,400
The total amount of common fixed expenses not traceable to the individual divisions is $235,500.
We need to deduct from the income of each division the not traceable fixed costs.
Net income= 91,900 + 109,400 - 235,500
Net income= -$34,200
Carroll Corporation has two products, Q and P. During June, the company's net operating income was $19,500, and the common fixed expenses were $43,000. The contribution margin ratio for Product Q was 40%, its sales were $128,000, and its segment margin was $35,000. If the contribution margin for Product P was $33,000, the segment margin for Product P was:
Answer:
Segment margin of product P-$27,500.00
Explanation:
The total company's segment margin is net income plus common fixed expenses.
Total segment margin=$19,500+$43,000=$62,500.00
Total segment margin can be determined as the segment margin of products Q and P
Segment margin of product Q is $35,000
segment margin of product P=$62,500-$35,000=$ 27,500.00
Hence ,the segment margin of product P is $ 27,500.00
A recent medical study reports new benefits of cycling. Simultaneously, the price of the parts needed to make bikes falls. The demand curve would _________ and the supply curve would__________
Answer:
The demand curve would shift to the right and the supply curve would shift to the right
Explanation:
There will be a right shift in demand curve when there is an increase in demand, while there will be a right shift in supy curve when there is an increase in number of sellers or suppliers.
Here, a new medical study reports the benefits of cycling, and the price of parts needed to make bikes fall simultaneously, it is believed that the demand for bikes would increase.
Also, considering the fact that parts needed to produce bikes fall, there would likely be more producers of bike and this will also increase the supply of bikes.
Therefore, since there would be an increase in demand and supply of bikes, the demand curve for bikes would shift to the right and the supply curve would also shift to the right.
The following costs result from the production and sale of 1,000 drum sets manufactured by Tight Drums Company for the year ended December 31. 2019. The drum sets sell for $500 each. The company has a 25% income tax rate. For each dollar of sales, how much is left to cover fixed costs and contribute to operating income.
Answer:
$0.72
Explanation:
total direct materials = $125,000
total variable selling costs = $15,000
total variable costs = $140,000
variable cost per unit = $140,000 / 1,000 units = $140 per unit
contribution margin ratio = (sales price - variable cost) / sales price = ($500 - $140) / $500 = 72%
this means that per dollar of sales, $0.72 are left to cover fixed costs and contribute to operating income
Based on the following data and using a 365-day year:
12/31/Year 1 accounts receivable $100,000
12/31/Year 2 accounts receivable 70,000
For the year ended 12/31/Year 1, sales 1,050,000
For the year ended 12/31/Year 2, sales 1,200,000
A. Compute the accounts receivable turnover.
B. Compute the number of days' sales in receivables for year.
C. The industry average turnover is 20 times during the year, and the number of days' sales in receivables averages 25. How does this situation compare to the industry average?
D. Is it slightly better or slightly worse than the average?
Answer:
A. 14 times
B. 21 days
C. For accounts receivable turnover, the computed 14 days is less than the industry average of 20. For the the number of days' sales in receivables, the computed 21 days is less than the industry average of 25.
D. It is slightly better than the average
Explanation:
Note that the relevant year this question is related is Year 2 which is the latest year. The questions are therefore answer as follows:
A. Compute the accounts receivable turnover.
Average accounts receivable = (12/31/Year 1 accounts receivable + 12/31/Year 2 accounts receivable) / 2 = $100,000 + $70,000 = $85,000
Accounts receivable turnover = Year 2 Sales / Average accounts receivable = $1,200,000 / $85,000 = 14.12, or approximately 14 times
B. Compute the number of days' sales in receivables for year.
Number of days' sales in receivables for year 2 = (Year 2 accounts receivable / Year 2 Sales) * 365 = ($70,000 / $1,200,000) * 365 = 21.29, or approximately 21 days
C. The industry average turnover is 20 times during the year, and the number of days' sales in receivables averages 25. How does this situation compare to the industry average?
The computed accounts receivable turnover of 14 times is less than the industry average turnover of 20 times.
Also, the computed number of days' sales in receivables for year 2 of 21 days is less than the industry average number of days' sales in receivables of 25 days.
D. Is it slightly better or slightly worse than the average?
For accounts receivable turnover, it is slightly better than average as the computed one indicates that the business can 14 times turn its accounts receivable into cash during the year as against 20 times industry average which is higher.
Also for the number of days' sales in receivables for year, it is slightly better than average as the computed one indicates that it takes the business just 21 days to collect cash from his customers on average as against the 25 days industry average which is higher.
Both therefore indicates that It is slightly better than the average.
Managers use a predetermined overhead rate for which of the following reasons?
A. To estimate total job costs before the job is completed.
B. To assist in setting prices for jobs
C. Predetermined costs are more accurate than using actual costs
D. Total job costs are not needed until the end of the accounting period, so predetermined rates are not needed.
Answer:
Option A and B
Explanation:
The company desires to estimate the cost of the job so that it can minimize it by emphasizing control. This is one of the major reasons why the companies estimate cost of the job, product or service. So option A is correct.
Option B is also correct because the companies have to form contracts with its customers and for that reason predetermined overhead rates helps a lot estimating the price of the product which the company and customer can agree upon.
Option C is incorrect because predetermined costs are estimates and estimates are not always accurate.
Option D is false because daily recording of overheads requires predetermined overhead rates which is adjusted at the month end or quarter end or year end. So its not useless at all.
Comparing marginal revenue to marginal cost (i) reveals the contribution of the last unit of production to total profit. (ii) is helpful in making profit-maximizing production decisions. (iii) tells a firm whether its fixed costs are too high. a. (i) only b. (i) and (ii) only c. (ii) and (iii) only d. (i) and (iii) only
Answer:
B
Explanation:
Marginal revenue is defined as an incremental revenue generated from the sales of an additional unit of a product and services while a a marginal cost is an incremental cost incurred from the production of additional unit of a goods and services
Looking at these definitions , it can be inferred that marginal revenue reveals the contribution of the last unit of production to the total unit as well as helping in making profit maximizing decision in a production process
A sewage treatment revenue bond issue is being underwritten on a negotiated basis. The offering consists of $50,000,000 par value of term bonds. The underwriter has agreed to a spread of $45.00 for each $5,000 bond. The manager has set the additional takedown at $20.00 per bond and the selling concession at $22.00 per bond. If a selling group member sells a $5,000 par value bond directly to the public, the selling group member earns:____________
Answer:
The multiple choices are :
a.$8
b.$20
c.$22
d.$45
The correct option is C.$22
Explanation:
The earnings accruing to the selling group is the selling concession of $22 per $5,000 per bond.
Option A is obviously wrong as there is nothing in the questions that suggest earnings of $8 per bond for the selling group.
Option D is wrong as well because $45 per bond is the spread which is the extra yield to bondholders when compared to investment in government securities
Based on this case study, what issues with China-based suppliers require Numi’s managers to use influence and persuasion tactics? 4marks- 150 words How does Numi get suppliers to comply with its policies? 6 marks - 250 words
Answer and Explanation:
The key issues with either the distributor region of China being spiritual and societal differences. The difference comes with both the wages as well as, consequently, with both the market value including its provisions requiring Numi to also be adversely affected.Numi has always been making its providers adapt towards its policy initiatives by building intentional, significant linkage with agricultural partner organizations verify the accuracy and reliability including its product, truthful treatment of workers, strengthened operating or housing environment as well as, conclude, improvement in the quality of life besides parents and the community. Group members explore the country to visit our agricultural relationships many magnitudes a year.Numi intends to also include 3rd parties credentials throughout the entire line with Numi Organic Tea products. Numi deals in contact with some of its suppliers which helps everyone to locate the best employees and assists them with shared resources only whether they can adapt to such operations.So that the above seems to be the right answer.
Part X requires machining on a milling machine (operations A and B are required).
Find the number of machines required to produce 3000 parts per week. Assume the company will be operating five days per week, 18 hours per day. The following infor- mation is known:
Operation Standard Time Efficiency Reliability Scrap
A 3 min 95% 95% 2%
B 5 min 95% 90% 5%
Note: The milling machine requires tool changes and preventive maintenance after every lot of 500 parts. These changes require 30 minutes.
Answer:atleast 5 machines
Explanation:
Quantity required (Q) = 3000
Maintainace due = 500 parts
3000 / 500 = 5 = 6 Maintainace
Repair time = 6 × 30 minutes = 300 minutes = 5 hours.
operation time = 5 × 18 × 60 = 5400 minutes
Total operation time = Total operation hours - repair time
5400 - 300 = 5100 hours
For A:
(Standard time × Q) / (reliability × time efficiency × scrap × total working hours)
(3 × 3000) / (. 95×.95×5100)
9000/4602.75 = 1.96
For B:
(Standard time × Q) / (reliability × time efficiency × scrap × total working hours)
(5 × 3000) / (.95×.9×5100)
15000/4360.5 = 3.44
(1.96 + 3.44) = 166.56
=5. 4
On January 1, 2020, Crane Corporation issued $660,000, 6%, 10-year bonds at face value. Interest is payable annually on January 1. Crane Corporation has a calendar year end.Prepare all entries related to the bond issue for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)2020Account Titles and ExplanationDebitCreditenter an account title for the journal entry on January 1enter a debit amount enter a credit amount enter an account title for the journal entry on January 1enter a debit amount enter a credit amount enter an account title for the journal entry on December 31enter a debit amount enter a credit amount enter an account title for the journal entry on December 31enter a debit amount enter a credit amount
Answer:
Dr cash $660,000
Cr bonds payable $660,000
Dr interest expense $ 39,600.00
Cr interest payable $39,600.00
Explanation:
The issue of the bonds at face value implies that cash proceeds equal the face value of $660,000 which is then debited to cash account and credited to bonds payable.
The interest due on the bonds on 31st December payable on 1st January 2021 =face value*coupon rate
face value is $660,000
coupon rate is 6%
interest=$660,000*6%=$39,600.00
Assume the following information for Teal Mountain Corp.
Accounts receivable (beginning balance) $143,000
Allowance for doubtful accounts (beginning balance) 11,340
Net credit sales 930,000 Collections 912,000
Write-offs of accounts receivable 6,400
Collections of accounts previously written off 2,200
Uncollectible accounts are expected to be 6% of the ending balance in accounts receivable.
1. Prepare the entries to record sales and collections during the period.
2. Prepare the entries to record the recovery of the uncollectible account during the period.
3. Determine the ending balance in Accounts Receivable and the unadjusted balance in Allowance for Doubtful Account.
4. Prepare the entry to record bad debt expense for the period.
5. Determine the ending (adjusted) balance in Allowance for Doubtful Accounts.
Answer:
Teal Mountain Corp.
1. Entries to record sales and collections during the period:
Debit Accounts Receivable $930,000
Credit Sales Revenue $930,000
To record credit sales.
Debit Cash Account $912,000
Credit Accounts Receivable $912,000
To record cash collections.
2. Entries to record recovery of the uncollectible account:
Debit Cash Account $2,200
Credit Allowance for doubtful accounts $2,200
To record uncollectible previously written off
3. Ending balance in Accounts Receivable and unadjusted balance in Allowance for Doubtful Account:
Accounts Receivable
Beginning balance $143,000
Credit Sales 930,000
Collections -912,000
Write-offs - 6,400
Balance $154,600
Allowance for Doubtful Accounts (Unadjusted)
Beginning balance $11,340
Uncollectible written off -6,400
Uncollectible collections 2,200
Balance (unadjusted) $2,740
4. Entry to record bad debt expense for the period:
Debit Bad Expense $6,536
Credit Allowance for Doubtful Accounts $6,536
To bring the balance to $9,276.
5. Adjusted ending balance in Allowance for Doubtful Accounts = $9,276
Explanation:
6% of accounts receivable = $154,600 x 6% = $9,276
rene’s Dairy is deciding whether or not to enter the market for ice cream, currently monopolized by Mattie’s Ice-cream. If it enters the market, Mattie’s can either accommodate him and share his 10million in profits equally with Irene or fight him and cause a 5million loss for each in a price war. What would the Nash equilibrium be in this sequential game?
Answer:
Enter, accommodate
Explanation:
Nash equilibrium is a concept of game theory that stated that the optimal outcome for an entity is that they have no incentive to deviate from their original strategy after considering their opponent's choice.
It is a logical and mathematical way by which an entity determines the best outcome for themselves.
In this scenario the best option is to Enter and accommodate.
For Irene if they enter and accommodate the most optimal outcome is that they will get $5 million in profits. If they fight they will lose $5 million. They will enter because they know Mattie will lose $5 million is they fight.
For Mattie if they fight Irene they will lose $5million which is worse that sharing their profit.
So the best option after considering beach other's strategy is to accommodate and share the profits
A municipal power plant uses natural gas from an existing, leaky, pipeline at an annual cost of $40,000 per year. A new pipeline would initially cost $100,000, but it would reduce the annual cost of natural gas to $10,000 per year. Assume an analysis period of 25 years and no salvage value for either pipeline. The interest rate is 6%. Using annual equivalent cost (AEC), should the new pipeline be built?
Answer:
Yes
Explanation:
According to the scenario, computation of the given data are as follow:-
We can calculate the annual equivalent cost by using following formula:-
Annual Equivalent Cost (AEC) = Initial Cost × [Interest Rate × (1 + Interest Rate)^Number of years ÷ (1 + Interest Rate)^Number of years - 1} + Annual Cost Per Year
= $100,000 × [0.06 × (1 + 0.06)^25 ÷ (1 + 0.06)^25 - 1] + $10,000
= $100,000 × [0.06 × 4.291871 ÷ 4.291871 - 1] + $10,000
= $100,000 × [0.2575123 ÷ 3.291871] + $10,000
= $100,000 × 0.07823 + $10,000
= $7,823 + $10,000
= $17,823
According to the analysis, the annual cost of new pipeline $17,823 is less than 40,000. So the new pipeline should built.
Direct Materials Variances Silicone Engine Inc. produces wrist-worn tablet computers. The company uses Thin Film Crystal (TFC) LCD displays for its products. Each tablet uses one display. The company produced 580 tablets during December. However, due to LCD defects, the company actually used 600 LCD displays during December. Each display has a standard cost of $15.00. Six hundred LCD displays were purchased for December production at a cost of $8,550. Determine the price variance, quantity variance, and total direct materials cost variance for December. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Price variance $ Quantity variance $ Total direct materials cost variance $
Answer:
The price variance is -$450 favorable
The quantity variance is $300 unfavorable
The Total direct materials cost variance is -$150 favorable
Explanation:
According to given data we have the following:
standard price=$15
Actual price=$8,550/600=$14.25
standard quantity=580
Actual quantity=600
To calculate the price variance, quantity variance, and total direct materials cost variance for December we would have to make the following calculations:
price variance=(Actual price-standard price)*Actual quantity
price variance=($14.25-$15)*600
price variance=-$450 favourable
quantity variance=(Actual quantity-standard quantity)*standard price
quantity variance=(600-580)*$15
quantity variance=$300 unfavorable
total direct materials cost variance=materials price variance+material quantity variance
total direct materials cost variance=-$450+$300
total direct materials cost variance=-$150
Determine whether each of the following topics would more likely be studied in microeconomics or microeconomics.1. The effect of a large government budget deficit on the economy's price levela. microeconomicsb. macroeconomics2. The effect of an increase in the money supply on the rate of inflationa. microeconomicsb. macroeconomics3. The effect of government regulation on a monopolist's production decisionsa. microeconomicsb. macroeconomics
Answer:
1. B
2. B
3. A
Explanation:
1. The effect of a large government budget deficit on the economy's price level: is Macroeconomics.
2. The effect of an increase in the money supply on the rate of inflation: is Macroeconomics.
3. The effect of government regulation on a monopolist's production decisions: is Microeconomics.
Generally, Economics can be classified into two (2) categories, namely;
1. Macroeconomics can be defined as the study of behaviors, performance and factors that affect the entire economy. Hence, it focuses on aggregate phenomena such as price level, economic growth, Gross Domestic Product (GDP), inflation, unemployment and national income levels with respect to the central bank, demand or supply shocks, government policies, aggregate spending and savings.
2. Microeconomics can be defined as the study of the effect of price and quantity levels through interactions between individual buyers and sellers in various markets.
Hence, it is focuses on analyzing or evaluating the decisions of consumers (buyers) and those of firms (sellers) such as methods of production, pricing; and the manner in which government policies affect those decisions.
Discuss the statement: 'Silence is golden' in approximately a hundred words in relation to ethics in communication at the workplace
Answer:
Silence is golden is the business strategy used by many organizations in relation to communication ethics. The business communication is effective when that precise and correct information is circulated. When there is culture of unnecessary talks in business there can be unhealthy arguments and excessive criticisms which may ruin business strategies. Business ethics is implementing strategies which are to be followed by all employees. The strategies are formed after keeping in mind concerns of all stakeholders including how to treat employees. The silence can be a business ethics strategy to avoid gossips, as it may lead to negative consequences at the workplace.
Explanation:
Silence is golden is the business strategy used by many organizations in relation to communication ethics. The business communication is effective when that precise and correct information is circulated. When there is culture of unnecessary talks in business there can be unhealthy arguments and excessive criticisms which may ruin business strategies. Business ethics is implementing strategies which are to be followed by all employees. The strategies are formed after keeping in mind concerns of all stakeholders including how to treat employees. The silence can be a business ethics strategy to avoid gossips, as it may lead to negative consequences at the workplace.
When domestic firms enter other countries, they must typically deal with a number of issues related to their advertising. These include all of the following except: language barriers limited media available high-priced media markets lack of accurate media information
Answer: limited media available
Explanation:
When domestic firms enter into another country, they typically deal with a number of issues that are related to their advertising. One of the issue is language barrier. From example, if a firm that come from an English speaking country moves to another country like France which is French speaking, this can bring about a language barrier due to the language difference.
Other challenges are high-priced media markets and the lack of accurate media information. Dur to th fact that they're just moving into a different country, they may be charged higher than the normal price and may not have the accurate media information that are needed.
Therefore, limited media available is the right option because this is not a challenge. Media availability is usually available for everyone.
Kayak Co. budgeted the following cash receipts (excluding cash receipts from loans received) and cash payments (excluding cash payments for loan principal and interest payments) for the first three months of next year. CashReceipts CashpaymentsJanuary$525,000 $475,000 February 400,000 350,000 March 450,000 525,000 According to a credit agreement with its bank, Kayak requires a minimum cash balance of $30,000 at each month-end. In return, the bank has agreed that the company can borrow up to $150,000 at a monthly interest rate of 1%, paid on the last day of each month. The interest is computed based on the beginning balance of the loan for the month. The company repays loan principal with any cash in excess of $30,000 on the last day of each month. The company has a cash balance of $30,000 and a loan balance of $60,000 at January 1.
Prepare monthly cash budgets for each of the first three months of next year.
Answer:
Kayak Co.
Cash Budgets for three months:
January February March
Beginning Balance $30,000 $30,000 $58,694
Loan Balance -60,000 -10,600 0
Cash Receipts 525,000 400,000 450,000
Cash Payments -475,000 -350,000 -525,000
Interest on Loan -600 -106 0
Loan Receipt (Payment) 10,600 -10,600 46,306
Ending Balance 30,000 58,694 30,000
Explanation:
A cash budget is an estimate of the cash payments and cash receipts. It helps management to know when to borrow funds to meet required minimum cash balance and when to repay borrowed funds. It is an important managerial tool for making decisions on the management of the company's cash flows.
A company establishes a petty cash fund for $470. By the end of the month, employees had made the following expenditures from the fund: supplies, $139; fuel for deliveries, $123; postage, $76; miscellaneous, $40. Record the entry to recognize expenditures from the petty cash fund.
Answer:
A petty cash fund is created by debiting the petty cash account and credited to the cash account
The expenses made is debited to the respective expenses account and then credited to the cash account
Explanation:
petty cash = $470
Expenditures made by employees :
supplies = $139
Fuel for deliveries = $123
postage = $76
Miscellaneous = $40
NOTE : A petty cash fund is created by debiting the petty cash account and credited to the cash account
The expenses made is debited to the respective expenses account and then credited to the cash account
ATTACHED IS THE JOURNAL ENTRY
Powell Plastics, Inc. (PP) currently has zero debt. Its earnings before interest and taxes (EBIT) are $80,000, and it is a zero growth company. PP’s current cost of equity is 10%, and its tax rate is 40%. The firm has 10,000 shares of common stock outstanding selling at a price per share of $48.00. Assume that PP is considering changing from its original capital structure to a new capital structure with 35% debt and 65% equity. This results in a weighted average cost of capital equal to 9.4% and a new value of operations of $510,638. Assume PP raises $178,723 in new debt and purchases T-bills to hold until it makes the stock repurchase. PP then sells the T-bills and uses the proceeds to repurchase stock. How many shares remain after the repurchase, and what is the stock price per share immediately after the repurchase?
Answer:
How many shares remain after the repurchase, and what is the stock price per share immediately after the repurchase?
6,500 stocks remaining at $64.33 each stockExplanation:
EBIT $80,000
zero growth rate
Cost of equity (Re) 10%
tax rate 40%
10,000 common stocks outstanding at $48
they want to change from 100% equity to 35% debt and 65% equity
WACC = 9.4%
new value of operations $510,638
PP's value of operations = {$80,000 x (1 - 40%)} / WACC = $510,638
the new stock price should = $510,638 / 10,000 stocks = $51.06
Stock price will be $51.06
approximately $178,723 / $51.06 = 3,500 stocks should be repurchased
9.4% = ($480,000/$658,723 x 10%) + ($178,723/$658,723 x cost of debt x (1 - 40%)
9.4% = 7.29% + ($178,723/$658,723 x cost of debt x (1 - 40%)
2.11% = 0.2713 x cost of debt x 0.6
2.11% = 0.1628 x cost of debt
cost of debt = 2.11%/0.1628 = 12.96%
new WACC = ($178,710/$357,433 x 10%) + ($178,723/$357,433 x 12.96% x 0.6) = 5% + 6.48% = 11.48%
PP's value of operations = {$80,000 x 0.6} / 11.48% = $418,118
the new stock price should = $418,118 / 6,500 stocks = $64.33
Lily Products Company is considering an investment in one of two new product lines. The investment required for either product line is $540,000. The net cash flows associated with each product are as follows:Year Liquid Soap Body Lotion 1 $170,000 $90,000 2 150,000 90,000 3 120,000 90,000 4 100,000 90,000 5 70,000 90,000 6 40,000 90,000 7 40,000 90,000 8 30,000 90,000Total $720,000 $720,000a. Recommend a product offering to Lily Products Company, based on the cash payback period for each product line. b. Why is one product line preferred over the other, even though they both have the same total net cash flows through eight periods?
Answer:
Liquid soap
B. The liquid soap would be chosen because its pay back period is shorter than that of the body lotion.
even though both projects have the same total cash flows, the liquid soap project has greater cash flows in the ealier years compared to the other project. This makes the amount invested to be recovered more quickly and this makes it more desirable.
Explanation:
Cash payback period measures how long it takes for the amount invested in a project to be recovered from the cumulative cash flow.
Cash payback for the liquid soap.
Amount invested = $-540,000
In the first year , the amount recovered = $- 540,000 + $170,000 = $-370,000
In the second year , the amount recovered = $-370,000 + 150,000 = $-220,000
In the third year , the amount recovered = $- 220,000 + 120,000 =$ -100,000
In the 4th year, the amount recovered = $ -100,000 + $100,000 =0
The total amount invested is recovered In the 4th year
Cash payback period for the body option =
Amount invested / net cash flows
$540,000 / $90,000 = 6 years
The amount invested is recovered In the 6th year
The liquid soap would be chosen because its pay back period is shorter than that of the body lotion.
even though both projects have the same total cash flows, the liquid soap project has greater cash flows in the ealier years compared to the other project. This makes the amount invested to be recovered more quickly and this makes it more desirable.
I hope my answer helps you
Iron Works International is considering a project that will produce annual cash flows of $37,200, $45,900, $56,600, and $22,100 over the next four years, respectively. What is the internal rate of return if the project has an initial cost of $113,800
Answer:
IRR is 16.38%
Explanation:
The formula for the internal rate of return (IRR) is very useful in this case.
=IRR(values)
The values , in this case, are the cash flows which consist of cash outflow of $113,800 at the inception followed by cash inflows in the succeeding years as shown in the attached.
A manager is considering purchasing data from an outside vendor to get a better understanding of the target market for his firms services. What factors should the manager consider when evaluating the data’s usefulness for his needs?
Answer: Relevance, Quality, timelessness and Completeness.
Explanation:
Relevance: This helps show the importance of the data gotten. And how this relevant data if applied can change or alter the solutions or problems of the target market.
Quality: This helps determine that the data gotten actually reflects the reality or happenings in the target market.
Completeness: this means the data gotten by the manager has the right informations needed or which are relevant to the target market.
Timelessness: this helps determine that the data gotten are not out of date or obsolete but rather useful to manager in studying the target market
Rebecca Department Stores reported the following amounts in its adjusted trial balance prepared as of its December 31 year-end: Interest Revenue, $966 Sales Revenue, $28,656 Administrative Expenses, $596 Cost of Goods Sold, $11,213 Delivery (freight-out) Expense, $689 Income Tax Expense, $1,189 Interest Expense, $1,492 General Expenses, $1,311 Sales Discounts, $2,318 Sales Returns and Allowances, $932 .Rebecca’s operating expenses are $
Answer:
operating expenses $2,596
Explanation:
Rebecca Department Stores
Income Statement
For the Year Ended December 31, 202x
Sales revenue:
Sales Revenue $28,656Sales Discounts -$2,318Sales Returns and Allowances -$932Net sales revenue $25,406Cost of goods sold -$11,213
Gross profit $14,193
Operating expenses:
Delivery (freight-out) Expense -$689 Administrative Expenses, -$596 General Expenses -$1,311 -$2,596Income from operations $11,597
Non-operating revenues and expenses
Interest Revenue $966 Interest Expense -$1,492 -$526Net income before taxes $11,071
Income Tax Expense -$1,189
Net income after taxes $9,882
What are five foundations of economics?
Answer:
incentives, trade-offs, opportunity cost, marginal thinking, and the principle that trade creates value.
Explanation:
Manitowoc Crane (U.S.) exports heavy crane equipment to several Chinese dock facilities. Sales are currently 16.000 units per year at the yuan equivalent of $25.000 each. the Chinese yuan (renminbi) has been trading at Yuan8.40/$, but a Hong Kong advisory service predicts the renminbi will drop in value next week to Yuan9.10/$, after which it will remain unchanged for at least a decade. Accepting this forecast as given, Manitowoc Crane faces a pricing decision in the face of the impending devaluation. It may either (1) maintain the same yuan price and in effect sell for fewer dollars, in which case Chinese volume will not change; or (2) maintain the same dollar price, raise the yuan price in China to offset the devaluation, and experience a 10% drop in unit volume Direct costs are 75% of the U.S. sales price. a. What would be the short-run (one-year) impact of each pricing strategy? Which do you recommend? If Manitowoc Crane maintains the same yuan price and same unit volume, what will be the firm's gross profits? (Round to the nearest dollar.) b. If Manitowoc Crane maintains the same dollar price, raises the yuan price in China to offset the devaluation, and experiences a 10% drop in unit volume, what will be the firm's gross profits? (Round to the nearest dollar.) Which do you recommend?
Answer:
Explanation:
a) Yuan price before devaluation = 25000 × 8.4 = Y210,000
Dollar price after devaluation = 210000/9.1 = $23,076.92
Total sales = 16000 × 23076 = 369230720
COGS = 16000 × 25000 × 75% = 300000000
Gross profit 69230720
Dollar price after devaluation = $25000
Total sales = 16000 × 90% × 25000 = 360000000
COGS = 16000*90%× 25000 ×75% = 270000000
Gross profit 90000000
b) Maintaining the same dollar price is better because it yields higher profits.
