Last year Swensen Corp. had sales of $303,225, operating costs of $267,500, and year-end assets of $195,000. The debt-to-total-assets ratio was 27%, the interest rate on the debt was 8.2%, and the firm's tax rate was 25%. The new CFO wants to see how the ROE would have been affected if the firm had used a 45% debt ratio. Assume that sales and total assets would not be affected, and that the interest rate and tax rate would both remain constant. By how much would the ROE change in response to the change in the capital structure
Answers
Answer:
The correct option is D
There is increase in ROE by 2.86%
d. 2.86%
EXPLANATION:
THIS IS THE COMPLETE QUESTION BELOW;
Last year Swensen Corp. had sales of $303,225, operating costs of $267,500, and year-end assets of $195,000. The debt-to-total-assets ratio was 27%, the interest rate on the debt was 8.2%, and the firm's tax rate was 37%. The new CFO wants to see how the ROE would have been affected if the firm had used a 45% debt ratio. Assume that sales and total assets would not be affected, and that the interest rate and tax rate would both remain constant. By how much would the ROE change in response to the change in the capital structure?
a. 2.08%
b. 2.32%
c. 2.57%
d. 2.86%
e. 3.14%
CHECK THE ATTACHMENT BELOW FOR DETAILED EXPLANATION
Related Questions
Trew Company plans to issue bonds with a face value of $902,000 and a coupon rate of 6 percent. The bonds will mature in 10 years and pay interest semiannually every June 30 and December 31. All of the bonds are sold on January 1 of this year. (FV of $1, PV of $1, FVA of $1, and PVA of $1). Determine the issuance price of the bonds assuming an annual market rate of interest of 7.5 percent.
Answers
Answer:
$807,992
Explanation:
issue $902,000 with a 6% semiannual coupon and 10 year maturity. coupon payment = $27,060
if the annual market interest rate = 7.5%, the bonds should be sold at a discount:
issue price = present value of face value + present value of interest payments
present value of face value = $902,000 / (1 + 3.75%)²⁰ = $431,961present value of annuity = $27,060 x {1 - [1 / (1 + 3.75%)²⁰]} / 3.75% = $376,031issue price = $431,961 + $376,031 = $807,992
the journal entry should be:
Dr Cash 807,992
Dr Discount on bonds payable 94,008
Cr Bonds payable 902,000
The issuance price of the bonds is $807,992.
The calculation is as follows:Issue price = present value of face value + present value of interest payments
Here
Present value of face value is
= $902,000 ÷ (1 + 3.75%)^20
= $431,961
And,
The present value of annuity is
= $27,060 × {1 - [1 ÷ (1 + 3.75%)^20]} ÷ 3.75%
= $376,031
So, the issue price is
= $431,961 + $376,031
= $807,992
Therefore we can conclude that The issuance price of the bonds is $807,992.
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A bank in Austin, Texas, has allowed its state banking license, under which it had been regulated by the Federal Deposit Insurance Corporation, a U.S. bank regulator, to expire. It has switched to a federal banking license, under which it is now regulated by the Office of the Comptroller of the Currency, another bank regulator. Do these regulators subject the bank to social or economic regulation?
Answers
Answer: c. economic regulation because they regulate only the activities of banks.
Explanation:
Economic Regulation refers to rules, regulations and policies that are established by a Governmental or Independent Adminstrative agency with the aim being to monitor the entrance of new firms as well as the activities of existing firms in an industry including the financial industry. They help protect the industry through their actions and are thus very important.
A very important example of such an organization is the Office of the Comptroller of the Currency. They have the mandate of regulating all national Banks including foreign Banks as well. As the regulator of such an industry and going by the definition of an Economic regulation, the regulation they apply is Economic in nature to ensure that the banks behave in such a way that will not be detrimental to the industry and the Economy.
The capitalist economy comprises two forms of economic organization, the market mechanism operated by prices and the administrative mechanism of firms. a. The market mechanism is referred to as the "visible hand" while the administrative mechanism of firms is referred to as the "invisible hand". b. The market mechanism is referred to as the "invisible hand" while the administrative mechanism of firms is referred to as the "visible hand". c. The simultaneous operation of both "hands" means that the capitalist system is often referred to as an "ambidextrous organization". d. The notion of the capitalist economy as governed by market processes is a myth. In reality the global capitalist economy is controlled by large corporations.
Answers
Answer:
Option B: The market mechanism is referred to as the "invisible hand" while the administrative mechanism of firms is referred to as the "visible hand"
Explanation:
The invisible hand of the market mechanism is simply the known first form of the market as it is the point in which individuals and firms make independent decisions and well guided by market prices. Deliberate and conscious global planning is not needed in invisible hand market mechanism.
The visible hand market mechanism is also called administrative mechanism as it involves active planning in coordinating players.
Economic decisions are usually in the hierarchy that is the firm by managers and imposed through a hierarchy.
Bill's Grill is a popular college restaurant that is famous for its hamburgers. The owner of the restaurant, Bill, mixes fresh ground beef and pork with a secret ingredient to make delicious quarter-pound hamburgers that are advertised as having no more than 25% fat. Bill can buy beef containing 80% meat and 20% fat at $0.85 per pound. He can buy pork containing 70% meat and 30% fat at $0.65 per pound. Bill wants to determine the minimum cost way to blend the beef and pork to make hamburgers that have no more than 25% fat.
Required:
1. What is objective function for the mathematical formulation, in words?
Answers
Answer:
Explanation:
Given that:
Bill can buy containing 80% meat and 20 % pound at $0.85 per pound
Also; He can buy pork containing 70% meat and 30% fat at $0.65 per pound.
Bill, mixes fresh ground beef and pork with a secret ingredient to make delicious quarter-pound hamburgers that are advertised as having no more than 25% fat.
From the information given:
The Objective is that Bill wants to determine the minimum cost way to blend the beef and pork to make hamburgers that have no more than 25% fat.
Also: Required is to find the objective function for the mathematical formulation, in words.
Assumptions:
Let assume that [tex]\mathbf{Z_1}[/tex] should be the percentage of the beef.
Let assume that [tex]\mathbf{Z_2}[/tex] should be the percentage of the beef.
The buying cost of beef is $0.85 and the buying cost of pork is $0.65
Hence; the Minimum Objective cost function for this model will be :
[tex]\mathbf{Min:0.85Z_1 + 0.65Z_2}[/tex]
Also; from above:
We know that the fat in beef and pork is 20% and 30% respectively ( 0.2 and 0.3).
And Bill decided to make hamburgers that have fat not more than 25% (0.25)
Equally ; we can formulate a decision that the sum of the beef and pork should be less than or equal to 0.25
So:
[tex]\mathbf{0.85Z_1 + 0.65Z_2 \leq 0.25}[/tex]
Since Bill is using both beef and pork for the production; there is need to add both entity together because He does not have to use either beef or pork alone;
So;
[tex]\mathbf{Z_1+Z_2 =1}[/tex]
Of course , we know that the percentage of this aftermath result can't be zero. i.e it is definitely greater than 1.
So; [tex]\mathbf{Z_1,Z_2 > 1}[/tex]
Thus; the Objective function of this model is :
[tex]\mathbf{Min:0.85Z_1 + 0.65Z_2}[/tex] which is subjected to [tex]\mathbf{0.85Z_1 + 0.65Z_2 \leq 0.25} \\ \\ \mathbf{Z_1+Z_2 =1} \\ \\ \mathbf{Z_1,Z_2 > 1}[/tex]
Tallow, Inc. had reported the following balances: LOADING...(Click the icon to view the 2018 and 2019 balances.) 11. Compute Tallow's earnings per share for 2019. 12. Compute Tallow's price/earnings ratio for 2019, assuming the market price is $ 35 per share. 13. Compute Tallow's rate of return on common stockholders' equity for 2019. 11. Compute Tallow's earnings per share for 2019.
Answers
Answer:
Explanation:
Rate of return on common stockholder's equity for 2019:
= (Net Income - Preferred Dividend) / Av. common stockholder's equity
= ($94,000 - $26,000) / $312,000
= $68,000 / $312,000
= 0.2179 or 21.79%
Av. common stockholder's equity 2019 :
Total stockholder's equity 2018 ( Common) = Total stockholder's equity - Stockholder's Equity attributable to preferred
= $318,000 - $22,000
= $296,000
Total stockholder's equity 2019 ( Common) = Total stockholder's equity - Stockholder's Equity attributable to preferred
= $350,000 - $22,000
= $328,000
Av. common stockholder's equity 2019 = ($296,000 + $328,000) / 2 = $312,000
On January 1, 2014, Ridge Road Company acquired 25 percent of the voting shares of Sauk Trail, Inc. for $3,800,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail's board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail's board which gave it the ability to significantly influence Sauk Trail's operating and investing activities.January 1, 2014, carrying amounts and corresponding fair values for Sauk Trail's assets and liabilities follow: Carrying Amount Fair ValueCash and receivables $ 165,000 $ 165,000Computing equipment 5,495,000 6,580,000Patented technology 155,000 4,110,000Trademark 205,000 2,110,000Liabilities (240,000 ) (240,000 )Also as of January 1, 2014, Sauk Trail's computing equipment had a remaining estimated useful life of seven years. The patented technology was estimated to have a five-year remaining useful life. The trademark's useful life was considered indefinite. Ridge Road attributed to goodwill any unidentified excess cost.During the next two years, Sauk Trail reported the following net income and dividends: Net Income Dividends Declared:2014 $ 1,910,000 $ 205,0002015 2,095,000 215,000a. How much of Ridge Road's $3,800,000 payment for Sauk Trail is attributable to goodwill?b. What amount should Ridge Road report for its equity in Sauk Trail's earnings on its income statements for 2014 and 2015?c. What amount should Ridge Road report for its investment in Sauk Trail on its balance sheets at the end of 2014 and 2015?
Answers
Answer: a. $236,500 b. $287,250 c. $4269500
Explanation:
The balance sheet also called the statement of financial position or a statement of financial condition is the summary of financial balances of an individual or an organization.
The calculations for a-c has been attached
A)
Acquisition Price $3,800,000
Book Val Acquired $1,445,000
Excess PMT $2,355,000
Excess fair value: Computer equip 271,250
Excess fair value: Patented Tech 988,750
Excess fair value: Trademark 476,250
1,736,250
Goodwill $618,750
Amortization
Computer equip $38,750
Patented Tech 197,750
$236,500
B)
Basic Equity accual 477500
Less: Amortization $236,500
$241,000
Basic Equity accrual 523750
Less: annual amortization $236,500
$287,250
C)
Acquisition Price $3,800,000
Add Equity $241,000
Less div -51250
Invest in ST1 $3,989,750
Add Equity $287,250
Less div -53750
Invest in ST2 $4,223,250
An investor has $19,000 to invest and believes that the IBM stock price is going to increase in the following 12 months from the current stock price of $200. Call options on IBM stock expiring in 12 months have a strike price of $207 and sell at a premium of $20 each. Assume that the stock price will be $268 per share after 12 months.
a. What will be the investor's rate of return if they buy 450 call options?
b. What will be the investor's rate of return if they buy 45 shares?
Answers
Answer:
a.305%
b.34%
Explanation:
If 450 options were bought,the investor would have invested just the amount paid for the options which is $9,000 ($20*450).
On exercising the option,the investor would gain per share the excess of market price over the option exercise price i.e 450*($268-$207)=$27,450.00
return on investment= 27,450/9000=305%
If the investor had bought the shares he would invested $9000 ($200*45)
By selling the shares for $268 return would $3,060 ($268-$200)*45
return on investment=$3,060/$9,000=34%
Analysis of an income statement, balance sheet, and additional information from the accounting records of Gadgets, Inc., reveals the following items.
Required: Select the section of the statement of cash flows in which each of these items would be reported: operating activities (indirect method), investing activities, financing activities, or a separate noncash activities note.
1. Purchase of a patent. 2. Depreciation expense. 3. Decrease in accounts receivable. 4. Issuance of a note payable. 5. Increase in inventory. 6. Collection of notes receivable. 7. Purchase of equipment. 8. Exchange of long-term assets. 9. Decrease in accounts payable. 10. Payment of dividends.
Answers
Answer and Explanation:
The categorization is shown below:
1 Purchase of a patent = Investing activities as it represents in a negative sign because it is a cash outflow
2 Depreciation expense Operating activities as it is added to the net income
3 Decrease in accounts receivable = Operating activities as it is added to the change in adjustments column
4 Issuance of a note payable = Financing activities as it represents in a a positive sign because it is a cash inflow
5 Increase in inventory = Operating activities as it is deducted from the change in adjustments column
6 Collection of note receivable = Investing activities as it represents in a positive sign because it is a cash inflow
7 Purchase of equipment = Investing activities as it represents in a negative sign because it is a cash outflow
8 Exchange of long term assets = Separate non cash activities note as it does not involved any cash transactions
9 Decrease in accounts payable = Operating activities as it is deducted from the change in adjustments column
10 Payments of dividend = Financing activities as it represents in a negative sign because it is a cash outflow
The following transactions are for Kingbird Company.
1. On December 3, Kingbird Company sold $450,000 of merchandise to Blossom Co., on account, terms 1/10, n/30. The cost of the merchandise sold was $310,000.
2. On December 8, Blossom Co. was granted an allowance of $22,000 for merchandise purchased on December 3.
3. On December 13, Kingbird Company received the balance due from Blossom Co.
Instruction:
Prepare the journal entries to record these transactions on the books of Mack Company. Mack uses a perpetual inventory system.
Answers
Answer and Explanation:
The Journal entries are shown below:-
1. Account Receivable Dr, $450,000
To Sales revenue $450,000
(Being credit sales is recorded)
here we debited the accounts receivable as it increased the assets and we credited the sales revenue as it also increased the sales.
Cost of goods sold Dr, $310,000
To Inventory $310,000
(Being Cost of goods sold is recorded)
here we debited the cost of goods sold as it increased the expenses and we credited the inventory as it decreased the assets
2. Sales return and allowances Dr, $ 22,000
To Account Receivable $22,000
(Being sales return is recorded)
here we debited the sales return and allowances as it increased the sales return and we credited the accounts receivable as it decreased the assets
3. Cash Dr, $423,720
Sales discount Dr, $4,280 ($428,000 × 1%)
To Account Receivable $428,000 ($450,000 - $22,000)
(Being cash and sales discount is recorded)
Here we debited the cash and sales discount as it increased the assets and sales discount and we credited the accounts receivable as it decreased the assets
Venetian Company has two production departments, Fabricating and Assembling. At a department managers meeting, the controller uses flexible budget graphs to explain total budgeted costs. Separate graphs based on direct labor hours are used for each department. The graphs show the following.
1. At zero direct labor hours, the total budgeted cost line and the fixed cost line intersect the vertical axis at $ 53,000 in the Fabricating Department and $ 43,000 in the Assembling Department.
2. At normal capacity of 46,100 direct labor hours, the line drawn from the total budgeted cost line intersects the vertical axis at $ 131,370 in the Fabricating Department, and $ 93,710 in the Assembling Department.
State the total budgeted cost formula for each department, round to 2 decimal place.
Fabricating Department = $_____ _____ +total _____ of $_____ per direct labor hours
Assembling Department = $_____ _____ +total _____ of $_____ per direct labor hours
Compute the total budgeted cost for each department, assuming actual direct labor hours worked were 49,100 and 43,100, in the Fabricating and Assembling Departments, respectively.
Fabricating Department Assembling Department
The total budgeted cost $__________________ $__________________
Answers
Answer:
Fabricating Department = $136470= 53000 +total 49100 of $1.7 per direct labor hours
Assembling Department = $$ 90,410= 43000 +total 43100 of $ 1.10 per direct labor hours
Explanation:
When a fixed line intersects a vertical axis at the point of total budgeted cost line represents total cost of the activity . From this we can calculate the following.
Fabricating Assembling
Total Cost for 46100 DLH $131,370 $93,710
Fixed Costs (53000) (43,000)
Variable Costs 78370 50,710
Variable Cost Per hour 78370 / 46100 50,710 / 46100
= $ 1.7 = $1.10
Fabricating Assembling
Total DLH 49100 43100
Variable Cost Per hour $ 1.7 $1.10
Variable Costs $ 83470 $ 47410
Fixed Costs 53000 43,000
Total Budgeted Cost 136470 $ 90,410
Larkspur, Inc. uses a periodic inventory system. Its records show the following for the month of May, in which 80 units were sold.
Date Explanation Units Unit Cost Total Cost
May 1 Inventory 28 $9 $252
15 Purchase 26 10 260
24 Purchase 39 11 429
Total 93 $941
Required:
1. Calculate the weighted-average unit cost. (Round answer to 3 decimal places, e.g. 5.125.)
2. Calculate the ending inventory at May 31 using the FIFO, LIFO and average-cost methods. (Round answers to 0 decimal places, e.g. 125.)
Answers
Answer:
Explanation:
Date Unit Unit cost Total Goods sold Cost Total
May 1 28 9 252 28 9 252
May 15 26 10 260 26 10 260
May 24 39 11 429 26 11 286
Total 93 941 80
1) Weighted average unit cost = 941/93 = $10.118
FIFO method
2)Ending inventory (93-80)*11 =$ 143
FIFO method assumes that the first set of inventory are the first to be sold
LIFO method
LIFO assumes that the last set of inventory are the first to be sold
Goods Sold Cost Total
39 11 429
26 10 260
15 9 135
Ending Inventory = (93-80)*9 = $117
Average Cost Method
Ending Inventory = 13 * 10.118 =$131.534
The following data apply to Grullon-Ikenberry Inc. (GII): Value of operations $1,000, Short-term investments $100, Debt $300, Number of shares 100; The company plans on distributing $50 million as dividend payments. What will the intrinsic per share stock price be immediately after the distribution?pital-budget-850-000-wants-maintain-target-capital-structure-35-debt-65--q3670174
Answers
Answer:
1) $6.32
2) $7.50
3) $6.65
4) $7.35
The correct option is the second one ,$7.50
Explanation:
The value of operations is $1,000
If dividends of $50 million is paid,such cash would be paid would be gotten from short-term investments of $100 million since it is easily convertible to cash without losing a significant portion of its value,hence the short term investments reduce to $50 million
$ million
Value of operations $1000
plus value of non-operating assets $50
Value of firm $1050
less value of debt ($300)
Intrinsic value of the firm $750
Intrinsic value of share=$750/100=$7.5
The intrinsic value per share is the total value attributable to common stock divided by the number of common stock in issue.
Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2014.
Costs and Production Data
Actual
Standard
Raw materials unit cost $2.25 $2.10
Raw materials units used 10,600 10,000
Direct labor payroll $120,960 $120,000
Direct labor hours worked 14,400 15,000
Manufacturing overhead incurred $189,500
Manufacturing overhead applied $193,500
Machine hours expected to be used at normal capacity 42,500
Budgeted fixed overhead for June $55,250
Variable overhead rate per machine hour $3.00
Fixed overhead rate per machine hour $1.30
Overhead is applied on the basis of standard machine hours. Three hours of machine time are required for each direct labor hour. The jobs were sold for $400,000. Selling and administrative expenses were $40,000. Assume that the amount of raw materials purchased equaled the amount used.
Instructions
(a)
Compute all of the variances for (1) direct materials and (2) direct labor.
LQV $4,800 F
(b)
Compute the total overhead variance.
(c) Prepare an income statement for management. (Ignore income taxes.)
Answers
Answer: The answer is provided below
Explanation:
a) Variances for Direct materials =
( actual rate - standard rate) × actual quantity
= ($2.25 - $2.10) × 10,600
= 1590
Variance for Direct material quantity
= (10,600 - 10,000) × 2.1
= 1260
Variance for labor rate
= (8.4 - 8) × 14,400
= 0.4 × 14400
= 5760
b. Total overhead variace = Actual overhead - ovehead applied
= $189,500 - $193,500
= 4000(F)
c. Sale revenue $400,000
COGS at standard $334,500
Gross profit At standard $65,500
Variances:
Material price. 1590(U)
Material qty variance 1260(U)
Labor price varaince 5760(U)
Labor qty variance 4800(F)
Overhead variance 4000(F)
Total vairiance 190(F)
Gross profit ( Actual) 65,690
Selling and admin expense 40,000
Net income $25,64
Consumer _____ refers to the personal, social, and economic significance of a purchase. Group of answer choices acculturative response aspiration involvement selective perception motivation
Answers
Answer:
Consumer Involvement
Explanation:
Consumer Involvement refers to the level of importance a consumer places on a purchase. The consumer factors in the personal, social and economic significance of the product before going ahead to make the purchase. The levels of consumer involvement could be of three types, namely; low, medium and high involvement.
A low involvement purchase is one in which the consumer does not give so much thought to before making the purchase. Example is household products like detergents. Medium Involvement purchase are those in which the consumer puts in some thought before acquisition. An example could be new clothes. High Involvement purchase require considerable thought and research before the purchase is made. An example could be a new car.
Frank and Bob are equal members in Soxy Socks, LLC. When forming the LLC, Frank contributed $57,000 in cash and $57,000 worth of equipment. Frank's adjusted basis in the equipment was $42,000. Bob contributed $57,000 in cash and $57,000 worth of land. Bob's adjusted basis in the land was $23,000. On 3/15/X4, Soxy Socks sells the land Bob contributed for $65,000. How much gain (loss) related to this transaction will Bob report on his X4 return
Answers
Answer:
The gain (loss) related to this transaction will Bob report on his X4 return is $38,000
Explanation:
Solution
Given that
The value of land = 57,000
Less: Bob's Adjusted Basis in the land is = -$23,000
The Built in Gain allocated to BOB = $34,000
Now,
The consideration in sales = $65,000
Less: Land Value is = -57000
Both members gain to be allocated= 8000
Hence,
The Total Gain Allocated to BOB is = 34000+(8000*50%) =
34000 = 4000
= 38,000
Note: The original $34000 of built-in gain on the contributed land must be given to the contributing partner which is Bob.
The remaining $8000 of gain must be shared equally between Bob and Frank.
So, Bob will report $38000 gain ($34,000 + (50% × $8,000)) from this transaction on his returns
Perpetual Inventory Using LIFOBeginning inventory, purchases, and sales data for prepaid cell phones for May are as follows:Inventory Purchases Sales May 1 1,550 units at $44 May 10 720 units at $45 May 12 1,200 units May 20 1,200 units at $48 May 14 830 units May 31 1,000 unitsAssuming that the perpetual inventory system is used, costing by the LIFO method, determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 5. Under LIFO, if units are in inventory at two different costs, enter the units with the HIGHER unit cost first in the Cost of Merchandise Sold Unit Cost column and LOWER unit cost first in the Inventory Unit Cost column.
Answers
Answer:
Date Purchases Sales
May 1 1,550 units at $44
May 10 720 units at $45
May 12 1,200 units
COGS (720 x $45 = $32,400)
COGS (480 x $44 = $21,120)
TOTAL COGS FOR MAY 12 SALE = $53,520
Inventory after sale 1,070 units at $44
May 20 1,200 units at $48
May 14 830 units
COGS (830 x $48 = $39,840)
TOTAL COGS FOR MAY 14 SALE = $39,840
Inventory after sale 1,070 units at $44
370 units at $48
May 31 1,000 units
COGS (370 x $48 = $17,760)
COGS (630 x $44 = $27,720)
TOTAL COGS FOR MAY 12 SALE = $45,480
Inventory after sale 440 units at $44
Under LIFO (last in, first out), the cost of goods sold is determined using the price of the last units purchased, which means that the most recent (or updated) price is used to calculate COGS.
Stealth bank holds deposits of $200 million. It holds reserves of $15 million. It has purchased government bonds worth $75 million. The current value of its loans, if sold at market value, is $130 million. What is the value of Stealth bank's liabilities?
Answers
Answer:
$220 million
Explanation:
Stealth bank total value of liabilities will be:
Reserves $15 million
Government bonds purchased $75 million
Market value (loan) $130 million
Value of bank liabilities $220 million
MOSS COMPANY
Selected Balance Sheet Information
December 31, 2019 and 2018
2019 2018
Current assets Cash $ 90,150 $ 32,300
Accounts receivable 30,500 43,000
Inventory 65,500 55,200
Current liabilities Accounts payable 41,400 31,200
Income taxes payable 2,600 3,300
MOSS COMPANY
Income Statement
For Year Ended December 31, 2019
Sales $ 539,000
Cost of goods sold 353,600
Gross profit 185,400
Operating expenses Depreciation expense $ 47,000
Other expenses 127,500 174,500
Income before taxes 10,900
Income taxes expense 6,600
Net income $ 4,300
Use the information above to calculate cash flows from operating activities using the indirect method. (Amounts to be deducted should be indicated by a minus sign.)
Answers
Answer:
cash flows from operating activities is $63,000
Explanation:
Cash flow from Operating Activities
Net income before taxes 10,900
Adjustments for Non - Cash Items
Depreciation expense 47,000
Adjustments for Changes in Working Capital
Decrease in Accounts receivable 12,500
Increase in Inventory -10,300
Increase in Accounts payable 10,200
Cash Generated From Operations 70,300
Income tax Paid (3,300+6,600- 2,600) -7,300
Net Cash from Operating Activities 63,000
Therefore, cash flows from operating activities is $63,000
a semiannual interest of 3.5%. Any money he invests would have to be left in the fund for at least five years if he wanted to withdraw it without penalty. a) What is the nominal interest rate on this investment? b) What is the annual effective interest rate? c) If James deposits $8,000 in the fund now, how much will it be worth in five years?
Answers
Answer:
Results are below.
Explanation:
Giving the following information:
The semiannual interest of 3.5%.
A) We need to calculate the nominal interest rate:
Nominal interest rate= 0.035/2= 0.0175
B) Real interest rate:
Real interest rate= (1.0175^2) - 1= 0.03531
It compounds interest twice a year. Therefore, is higher
C) Investment= $8,000
We will use the following formula:
FV= PV*(1+i)^n
n= 10
i= 0.175
PV= 8,000
FV= 8,000*(1.0175^10)
FV= $9,515.56
Cellular Access Inc., is a cellular telephone service provider that reported net operating profit after tax (NOPAT) of $ 250$250 million for the most recent fiscal year. The firm had depreciation expenses of $ 100$100 million, capital expenditures of $ 200$200 million, and no interest expenses. Working capital increased by $ 10$10 million. Calculate the free cash flow for Cellular Access for the most recent fiscal year.
Answers
Answer:
Therefore, the free cash flow for Cellular Access for the most recent fiscal year is $ 140 million
Explanation:
Given;
Net operating profit after tax (NOPAT) = $ 250
Depreciation expenses = $100 million
Capital expenditures = $200 million
Net working capital increment = $10 million
Free Cash Flows = net operating profit after tax + Depreciation - capital expenditure - Increase in net working capital
Free Cash Flows = ($250 + $100 - $200 - $10) million Free Cash Flows = $ 140 million
The Cheyenne Hotel in Big Sky, Montana, has accumulated records of the total electrical costs of the hotel and the number of occupancy-days over the last year. An occupancy-day represents a room rented out for one day. The hotel's business is highly seasonal, with peaks occurring during the ski season and in the summer. Month Occupancy- Days Electrical Costs January 3,250 $ 9,660 February 3,470 $ 10,185 March 3,660 $ 10,360 April 1,760 $ 6,160 May 1,350 $ 4,725 June 4,350 $ 11,575 July 3,280 $ 9,765 August 1,610 $ 5,635 September 700 $ 2,450 October 1,300 $ 4,550 November 1,640 $ 5,740 December 2,220 $ 7,770 Required:
1. Using the high-low method, estimate the fixed cost of electricity per month and the variable cost of electricity per occupancy-day. (Do not round your intermediate calculations. Round your Variable cost answer to 2 decimal places and Fixed cost element answer to nearest whole dollar amount)
2. What other factors other than occupancy-days are likely to affect the variation in electrical costs from month to month? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)
Number of days present in a month.
Income taxes paid on hotel income.
Seasonal factors like winter or summer.
Systematic factors like guests, switching off fans and light
Answers
Answer and Explanation:
The computation of the fixed cost and the variable cost of electricity per occupancy-day by using high low method is shown below:
The Variable cost of electricity per occupancy-day = (High electrical cost - low electrical cost) ÷ (High month occupancy days - low month occupancy days)
= ($11,575 - $2,450) ÷ (4,350 - 700)
= $9,125 ÷ 3,650
= $2.50 per occupancy days
Now the fixed cost equal to
= High electrical cost - (High month occupancy days × Variable cost per occupancy days)
= $11,575 - (4,350 × $2.50)
= $11,575 - $10,875
= $700
The other factors other than the occupancy days affect the variation in electrical costs from month to month is the number of days present in a month as it remains fixed with respect to the occupancy , seasonal factors like winter or summer as in the summer the electrical cost is high as compared in the winter season , and the Systematic factors like guests, switching off fans and light depend on their wish or as per usage.
Mueller Company sold merchandise costing $120,000 for $240,000. Mueller estimates that merchandise costing $5,000 will be returned for a refund of $10,000. Mueller should report net sales of:
Answers
Answer:
The answer is $230,000
Explanation:
Net sales is the sum of a company's gross(total) sales minus any returned goods, sales allowances and/or discounts. The total amount of revenue on a company's income statement is the net sales.
Gross sales - $240,000
Merchandise returned - $10,000
Net sales = Gross sales - goods returned
$240,000 - $10,000
= $230,000
Lanni Products is a start-up computer software development firm. It currently owns computer equipment worth $30,000 and has cash on hand of $20,000 contributed by Lanni’s owners. Lanni takes out a bank loan. It receives $50,000 in cash and signs a note promising to pay back the loan over 3 years.
a-1. Prepare the balance sheet just after it gets the bank loan. (Omit the "$" sign in your response.)
Assets Liabilities & Shareholders' Equity
Cash $ Bank loan $
Computers Shareholders' equity
Total $ Total $
a-2. What is the ratio of real assets to total assets? (Round your answer to 2 decimal places.)
Ratio of real assets to total assets
b-1. Prepare the balance sheet after Lanni spends the $70,000 to develop its software product. (Omit the "$" sign in your response.)Assets Liabilities & Shareholders' Equity Software product $ Bank loan $ Computers Shareholders' equity Total $ Total $ b-2. What is the ratio of real assets to total assets?Ratio of real assets to total assets c-1. Lanni sells the software product to Microsoft, which will market it to the public under the Microsoft name. Lanni accepts payment in the form of 1,500 shares for $80 per share. Prepare the balance sheet after Lanni accepts the payment of shares from Microsoft. (Omit the "$" sign in your response.)Assets Liabilities & Shareholders' Equity Microsoft shares $ Bank loan $ Computers Shareholders' equity Total $ Total $ c-2. What is the ratio of real assets to total assets? (Round your answer to 2 decimal places.)
Ratio of real assets to total assets
Answers
Answer:
A-2 Ratio of real Assets to Total Assets = 0.3
B-2 Ratio of real Assets to Total Assets= 1
C-2 Ratio of real Assets to Total Assets= 0.2
The company has low ratio at the start , increases to full when producing and then again decreases.
Explanation:
The balance sheet after Lanni accepts the Bank Loan. The cash increases and so does the liability increases.
Lanni Products
Balance Sheet
Assets Liabilities & Shareholders' Equity
Cash $ 70,000 Bank loan $ 50,000
Computers $30,000 Shareholders' equity 50,000
Total $ 100,000 Total $ 100,000
A-2 Ratio of real Assets to Total Assets
Real Assets = $ 30,000
Total Assets = $ 100,000
Ratio = 30,000/100,000 = 0.3
B-1
Lanni Products
Balance Sheet
Assets Liabilities & Shareholders' Equity
Software $ 70,000 Bank loan $ 50,000
Computers $30,000 Shareholders' equity 50,000
Total $ 100,000 Total $ 100,000
The software costs $ 70,000. The Balance sheet is as given above and the cash will be replaced by the software.
B-2 Ratio of real Assets to Total Assets
Real Assets = $ 100,000
Total Assets = $ 100,000
Ratio = 100,000/100,000 = 1.0
C-1 The share given are calculated ( 1500 *80= $ 120,000) . And after it accepts the payment the share holder's equity increases and the assets as well.
Lanni Products
Balance Sheet
Assets Liabilities & Shareholders' Equity
Shares $ 120,000 Bank loan $ 50,000
( 1500 *80)
Computers $30,000 Shareholders' equity 100,000
Total $ 150,000 Total $ 150,000
C-2 Ratio of real Assets to Total Assets
Real Assets = $ 30,000
Total Assets = $ 150,000
Ratio = 30,000/150,000 = 0.2
You must estimate the intrinsic value of Noe Technologies' stock. The end-of-year free cash flow (FCF1) is expected to be $24.50 million, and it is expected to grow at a constant rate of 7.0% a year thereafter. The company's WACC is 10.0%, it has $125.0 million of long-term debt plus preferred stock outstanding, and there are 15.0 million shares of common stock outstanding. What is the firm's estimated intrinsic value per share of common stock
Answers
Answer:
Intrinsic value per share of common stock is $46.11
Explanation:
To calculate the intrinsic value per share, we first need to calculate the value of firm using FCF and then calculate the value of equity by deducting the market value of debt and preferred stock from the value of firm. Then we will divide the value of equity by the number of common stock shares.
Value of firm will be calculated using the constant growth model discounted cash flow approach. The formula for value of firm is,
Value of firm = FCF1 / WACC - g
Value of firm = 24.5 / (0.1 - 0.07)
Value of firm = $816.6666667 rounded off to $816.67
Value of equity = 816.67 - 125 = $691.67
Value per share = 691.67 / 15
Value per share = $46.11
Nevertire Ltd purchased a delivery van costing $52,000. It is expected to have a residual value of $12,000 at the end of its useful life of 4 years or 200,000 kilometers. Ignore GST.
Required:
a) Assume the van was purchased on 1 July 2019 and that the accounting period ends on 30 June. Calculate the depreciation expense for the year 2019–20 using each of the following depreciation methods
straight-line.
diminishing balance (depreciation rate has been calculated as 31%).
units of production (assume the van was driven 78,000 kilometers during the financial year).
b) Record the adjusting entries for the depreciation on 30 June 2021 using a diminishing balance method.
c) Show how the van would appear in the balance sheet prepared at the end of year 2 using the Straightline method.
Answers
Answer:
a.
Straight line method
This method gives a uniform depreciation figure over the lifetime of the asset. Formula is,
= ( Cost - Residual Value) / Useful life
= (52,000 - 12,000) / 4
= $10,000
Diminishing Balance Method
This method applies depreciation at a faster rate so that the assets depreciates faster in it's earlier years.
Formula is,
= Cost * Depreciation rate
= 52,000 * 31%
= $16,120
Units of Production
This method depreciates based on the usage of the asset vs the total capacity of the asset. Assuming the van was driven 78,000 kilometers during the financial year
Formula is,
= (( Cost - Residual value) * units for the year) / Estimated production capacity
= ((52,000 - 12,000)*78,000)/200,000
= 3,120,000 / 200,000
= $15,600
b.
Date
June 30 2021
DR Depreciation $11,123
CR Accumulated Depreciation $11,123
Working
June 30 2021 Depreciation
= ( Cost - 2020 Depreciation ) * 31%
= (52,000 - 16,120 ) * 31%
= 35,880 * 31%
= $11,123
c. Straight line depreciation is constant so Value at the second year using Straight line will be,
= Cost - 2020 Depreciation - 2021 Depreciation
= 52,000 - 10,000 - 10,000
= $32,000
Balance sheet excerpt,
Particulars Amount
Assets
Fixed assets
Vechicles $32,000
Wilturner Company incurs $85,000 of labor related directly to the product in the Assembly Department, and $34,000 of labor related to the Assembly Department as a whole, and $21,000 of labor for services that help production in both the Assembly and Finishing departments. The amount of direct labor and factory overhead respectively are:
Answers
Answer:
Direct labor= $85,000
Manufacturing overhead= $55,000
Explanation:
Giving the following information:
Wilturner Company incurs $85,000 of labor related directly to the product in the Assembly Department, and $34,000 of labor related to the Assembly Department as a whole, and $21,000 of labor for services that help production in both the Assembly and Finishing departments.
Manufacturing overhead is the number of production costs that can't be directly linked toa specific product. It includes indirect labor.
Direct labor= $85,000
Manufacturing overhead= 34,000 + 21,000= $55,000
Ace Industries prepares its statement of cash flows using the direct method. Ace sold equipment with a book value of $6,400.00 at a loss of $800.00. The amount to be reported on the statement of cash flows under operating activities is A. $0.00. B. $800.00.
Answers
Answer:
Option B,$800 is correct
Explanation:
The operating activities need to be adjusted for loss made on sale of equipment which is not a cash flow in actual sense by adding back the loss to the net income and showing the cash received from the disposal as an inflow under investing activities.
As a result ,the correct option is B,$800,which should be added back to net income in order to show the impact of non-cash items in the statement of cash flows Ace industries
The MoMi Corporation’s cash flow from operations before interest and taxes was $5.6 million in the year just ended, and it expects that this will grow by 5% per year forever. To make this happen, the firm will have to invest an amount equal to 16% of pretax cash flow each year. The tax rate is 35%. Depreciation was $380,000 in the year just ended and is expected to grow at the same rate as the operating cash flow. The appropriate market capitalization rate for the unleveraged cash flow is 12% per year, and the firm currently has debt of $7.3 million outstanding. Use the free cash flow approach to value the firm’s equity. (Round answer to nearest whole number. Enter your answer in dollars not in millions.)
Answers
Answer:
Value of the firm = $ 43155000
Value of the firm's equity = $ 35855000
Explanation:
The objective of this question is to determine the value of the firm and the value of the firm's equity
Cash flow from operations =( 5.6 million + 5% of 5.6 million ) = 5880000
Depreciation = ( 380000 + 5% of 380,000 ) = 399000
Taxable income = 5880000 - 399000 = 5481000
Net income (after tax) = ( 5481000 - 35% of 5481000 ) = 3562650
Cash flow from operations (after tax) = 3562650 + 399000 = 3961650 ( which is the depreciation, being non-cash expense)
However, The Free cash flow available = Cash flow from operations (after tax) - Income from investment
= 3961650 - ( 5600000 × 16% × 1.05)
= 3961650 - 940800
= 3020850
Value of the firm = Free cash flow available / (Capitalization rate - Growth rate)
Value of the firm = 3020850 / 0.12 - 0. 05
Value of the firm = 3020850 / 0.07
Value of the firm = $ 43155000
Value of the firm's equity = Total value of firm - Value of debt of firm
Value of the firm's equity = $ 43155000 - $ 7300000
Value of the firm's equity = $ 35855000
A local unemployment office keeps track of the number of new claims filed each day. Based on data collected, it determines that the expected number of new claims filed per day is 2.4 with a standard deviation of 0.8688. Suppose that the office is open five days per week. The expected number of new claims filed per week at this office is ________________________ . A. 4.344 B. 10 C. 12 D. 7.4 E. 5.25
Answers
Answer:
C. 12
Explanation:
As the expected number of new claims filed per day is 2.4 and the office is open 5 days per week, to be able to find the expected number of new claims filed per week, you have to multiply the expected number of claims per day for the number of days that the office is open in a week:
Expected number of new claims filed per week= 2.4*5= 12
According to this, the answer is that the expected number of new claims filed per week at this office is 12.
The expected number of new claims filed per week at this office is option C. 12
Calculation of the expected number of new claimed:Since the expected number of new claims filed per day is 2.4 with a standard deviation of 0.8688.
So per week, there is 5 days
So, here the expected number should be
= 2.4*5
= 12
hence, option c is correct.
learn more about claims here: https://brainly.com/question/22076057
Jameson's Manufacturing Inc.'s debits to Work in Process-Assembly Department for July, together with data concerning production, are as follows:
July 1, work in process:
Materials cost, 3,000 units $ 8,000
Conversion costs, 3,000 units, 66.7% completed 6,000
Materials added during July, 10,000 units 30,000
Conversion costs during July 31,000
Goods finished during July, 11,500 units 0
July 31 work in process, 1,500 units, 50% completed 0
All direct materials are placed in process at the beginning of the process and the first-in, first-out method is used to cost inventories. The materials cost per equivalent unit for July is:__________.
A. $3.00
B. $3.80
C. $2.92
D. $2.31
Answers
Answer:
Option A is correct
Cost per equivalent unit for material - $3
Explanation:
Cost per equivalent unit = Total direct material cost / Total equivalent unit
Equivalent units of materials
Item Equivalent unit
Opening inventory 3000×0% = 0
Fully worked 8,500× 100% = 8,500
Closing inventory 1,500 ×100%= 1,500
Total equivalent units 10,000
Notes:
Fully worked represent the units started and completed in July
Fully worked = newly introduced units in July - Closing inventory in July
Fully worked = 10,000 -1500 = 8,500
Cost per equivalent unit = Total direct material cost / Total equivalent unit
= 30,000/10,000=$3
Cost per equivalent unit for material =$3
