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Pearson Motors has a target capital structure of 45% debt and 55% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 12%, and its tax rate is 25%. Pearson's CFO estimates that the company's WACC is 10.30%. What is Pearson's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places.
Answer:
11.36%
Explanation:
According to the scenario, computation of the given data are as follows,
Debt = 45%
Common equity = 55%
YTM = 12%
Tax rate = 25%
WACC = 10.30%
So, we can calculate the cost of equity by using following formula,
WACC = Debt × YTM (1 - Tax rate) + Common Equity × Cost of Equity
By putting the value, we get
10.30% = 45% × 12% × (1 - 25%) + 55% × Cost of Equity
0.103 = 0.45 × 0.12 ( 0.75) + 0.55 × Cost of Equity
0.103 = 0.0405 + 0.55 × cost of equity
0.103 - 0.0405 = 0.55 × cost of equity
Cost of equity = 0.0625 ÷ 0.55
So, Cost of equity = 0.1136 or 11.36%
On April 30, the end of the first month of operations, Joplin Company prepared the following income statement, based on the absorption costing concept: Joplin Company Absorption Costing Income Statement For the Month Ended April 30 Sales (5,600 units) $145,600 Cost of goods sold: Cost of goods manufactured (6,400 units) $115,200 Inventory, April 30 (900 units) (16,200) Total cost of goods sold (99,000) Gross profit $46,600 Selling and administrative expenses (24,740) Operating income $21,860 If the fixed manufacturing costs were $23,040 and the fixed selling and administrative expenses were $12,120, prepare an income statement according to the variable costing concept. Round all final answers to whole dollars.
Answer:
See below
Explanation:
Preparation of variable costing income statement
Sales $145,600
Variable cost of goods sold
$92,160
Less:
Inventory, April 30
($12,960)
Total variable cost of goods sold
$79,200
Manufacturing margin
$66,400
Variable selling and administrative expenses ($12,620)
Contribution margin $66,580
Less:
Fixed costs $23,040
Fixed selling and administrative expenses $12,120
Total fixed costs ($35,160)
Income from operations $31,420
Workings
•Variable cost of goods manufactured
= Total manufacturing cost - Fixed manufacturing cost
= $115,200 - $23,040
= $92,160
• Inventory at April 30
Calculate first, manufacturing cost per unit
= Variable cost of goods manufactured / Units manufactured
= $92,160/6,400 units
= $14.4
Therefore, Inventory at April 30
= $14.4 × 900 units
= $12,960
• Variable selling and administrative cost = Total selling and administrative cost - Fixed selling and administrative costs
= $24,740 - $12,120
= $12,620
Answer the following questions about the tax multiplier: Instructions: In parts a and b, round your answer to 2 decimal places. In part c, enter your answers as a whole number. If you are entering a negative number include a minus sign. a. Suppose the marginal propensity to consume (MPC) for a nation is 0.9. What is the tax multiplier for this nation
Answer: -9
Explanation:
The Tax multiplier of a nation shows how much the aggregate demand of an economy will change if there is a change in taxes.
It is calculated by the formula:
= -MPC / ( 1 - MPC)
= -0.9 / (1 - 0.9)
= -9
If taxes are reduced, aggregate demand would increase by 9 times.
Brief Exercise 12-8 Partially correct answer. Your answer is partially correct. Try again. Sheffield, Inc., manufactures golf clubs in three models. For the year, the Big Bart line has a net loss of $4,000 from sales $201,000, variable costs $176,000, and fixed costs $29,000. If the Big Bart line is eliminated, $20,100 of fixed costs will remain. Prepare an analysis showing whether the Big Bart line should be eliminated. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Answer:
The Big Bart line should NOT be eliminated.
Explanation:
The analysis can be prepared as follows:
Sheffield, Inc.
An Analysis showing whether the Big Bart line should be eliminated.
Details Continue Eliminate
$ $
Sales 201,000 0
Variable costs (176,000) 0
Contribution margin 25,000 0
Fixed costs (29,000) (20,100)
Net profit (loss) (4,000) (20,100)
From the analysis above, it can be seen that eliminating the Big Bart line would increase the net loss by $16,100 (i.e. $20,100 - $4,000 = $16,100) from $4,000 to $20,100. Therefore, the Big Bart line should NOT be eliminated.
If the direct materials price variance is $500 favorable, and the direct materials quantity variance is $250 unfavorable, the journal entry will include a: (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. Any boxes left with a question mark will be automatically graded as incorrect.)
Answer:
Credit to direct materials price variance
Debit to direct materials quantity variance
Explanation:
Based on the information given in a situation where the direct materials price variance of the amount of $500 is FAVORABLE, and the direct materials quantity variance of the amount of $250 is UNFAVORABLE, the journal entry will include: CREDIT TO DIRECT MATERIALS PRICE VARIANCE and DEBIT TO DIRECT MATERIALS QUANTITY VARIANCE reason been that a variance that is FAVOURABLE are CREDITED while UNFAVORABLE Variance on the other hand are DEBITED.
Therefore The journal entry will include:
Credit to direct materials price variance
Debit to direct materials quantity variance
Fred leases a taco store in the shopping center. In order to prepare his tacos, Fred installs a large, old stove to cook the meat. The lease runs out and Fred does not want to renew the lease. He leaves town and leaves the stove in the landlord's property. The lease contract did not mention the stove and the landlord is very unhappy. What is the legal situation now?
Answer:
The stove is a trade fixture, but Fred did not take it with him upon the expiration of the lease. Now it is the property of the landlord.
Explanation:
Since in the given situation it is mentioned that that lease would run out and he does not want to renew the lease also he leaves the stove in the property of the landlord. Due to this the landlord is very sad
So here the legal situation is that the stove would be classify as a trade fixture also he did not take it with him so now it would be the property of the landlord
The same would be considered
Tangen Corporation is considering the purchase of a machine that would cost $380,000 and would last for 6 years. At the end of 6 years, the machine would have a salvage value of $80,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $104,000. The company requires a minimum pretax return of 14% on all investment projects. The net present value of the proposed project is closest to:
Answer: $60,872
Explanation:
First calculate the present value of the cash benefits of this investment:
= Present value of cost savings + present value of salvage value
= (104,000 * Present value interest factor of Annuity,6 years, 14%) + [80,000 / (1 + 14%)⁶]
= (104,000 * 3.8887) + 36,446.92381
= $440,872
Net Present value = Present value of cash benefits - Investment cost
= 440,872 - 380,000
= $60,872
Abbott, Inc., plans to issue $500,000 of ten percent bonds that will pay interest semiannually and mature in five years. Assume that the effective interest rate is 12 percent per year compounded semiannually. Calculate the selling price of the bonds. Round answers to the nearest whole number.
Answer:
$463,202.25
Explanation:
The calculation of the selling price of the bond is given below:
The selling price of the bonds is
= Present value of interest + Present value of maturity
where,
In semi-annually basis , the rate of interest would be divided by 2 and the time period would be double
So, The Present value of interest equals to
= $500,000 × 5% × 7.36009
= $184,002.25
The 7.36009 represent PVIFA factor. Refer to the PVIFA table for the same
And, the Present value of maturity is
= $500,000 × 0.5584
= $279,200
So, the selling price of the bond is
= $184,002.25 + $279,200
= $463,202.25
Bramble Corp. makes and sells umbrellas. The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year. The following budget data are available: Variable Cost Per Unit Sold Monthly Fixed Cost Sales commissions $0.60 $ 6000 Shipping 1.20 Advertising 0.30 Executive salaries 39000 Depreciation on office equipment 7200 Other 0.35 24000 Expenses are paid in the month incurred. If the company has budgeted to sell 6000 umbrellas in October, how much is the total budgeted variable selling and administrative expenses for October
Answer:
$93,840
Explanation:
Calculation to determine how much is the total budgeted variable selling and administrative expenses for October
October Total budgeted variable selling and administrative expenses=
(0.6 + 1.2 + 0.3 + 0.35) x 7200 +6000 + 39,000 + 7,200 + 24,000
October Total budgeted variable selling and administrative expenses=2.45x 7200 +6000 + 39,000 + 7,200 + 24,000
October Total budgeted variable selling and administrative expenses=$17,640+6000 + 39,000 + 7,200 + 24,000
October Total budgeted variable selling and administrative expenses=$93,840
Therefore the total budgeted variable selling and administrative expenses for October is $93,840
On December 31, 2016, Krug Company reported pretax income of $300,000 prior to the following adjusting entries: Depreciation expense: $38,000; Accrued sales revenue: $36,000; Accrued expenses: $17,000; Used insurance: $4,000; the insurance was initially recorded as prepaid. Rent revenue earned: $2,000; the rent was initially prepaid by the tenant and credited to unearned rent revenue. How much is Krug's pretax income after the adjusting entries
Answer: $279,000
Explanation:
Accrued revenue and expenses should be accounted for because they have been realized and incurred in the current period.
Used insurance and depreciation should be accounted for as the expenses they are and rent revenue earned should be treated as revenue.
Pretax income after adjustments:
= Pretax income + Accrued sales revenue + rent revenue - Depreciation - Accrued expenses - Insurance
= 300,000 + 36,000 + 2,000 - 38,000 - 17,000 - 4,000
= $279,000
The higher prices charged by monopolists: Group of answer choices are like a private tax that redistributes income from consumers to monopoly sellers. are socially optimal because they better reflect how much society values the good relative to the resources used to produce it. have no effect on the distribution of income. return to consumers through the public goods provided by monopolies.
Answer:
are like a private tax that redistributes income from consumers to monopoly sellers.
Explanation:
A monopoly is a market structure which is typically characterized by a single-seller who sells a unique product in the market by dominance. This ultimately implies that, it is a market structure wherein the seller has no competitor because he is solely responsible for the sale of unique products without close substitutes. Any individual that deals with the sales of unique products in a monopolistic market is generally referred to as a monopolist.
For example, a public power company is an example of a monopoly because they serve as the only source of power utility provider to the general public in a society.
The higher prices charged by monopolists are like a private tax that redistributes income from consumers to monopoly sellers because the consumers are left with no choice than to patronize these monopolists for essential goods and services since they are the only seller.
Planning goals is a large part of self-management.
Please select the best answer from the choices provided
OT
OF
Answer:
True.
Explanation:
Planning can be defined as the process of developing individual or organizational aims, goals and objectives and translating them into action plans or courses of action.
Goals generally refers to the outcome statements that describe what an individual is hoping to achieve (accomplish), where he or she hopes to be in the nearest future, and the purpose for an action plan.
Planning goals is a large part of self-management because it sets the direction an individual should follow to achieve his or her objectives, mission or plans.
The capital expenditures budget should be integrated with all of the following except
Sujito Electronix makes headphones for $22 and sells them for $32. Sujito has sold at least 50 headphones on average per week in the past, though the actual demand is unknown. Sujito has also often run short of supply in the past. After three months of release, the headphones are sold at 40 percent discount. The spreadsheet below shows Sujito's sales and demand for the headphones. We take demand at 51, and quantity produced at 55. Newsvendor model for Sujito's headphones Data Selling Price $32 Cost $22 Discount Price $19.2 Model Demand 51 Produced Quantity 55 Quantity Sold Surplus Quantity What is the net profit for the headphones
Answer:
The net profit for the headphones is $498.80.
Explanation:
Quantity produced = 55
Quantity sold at normal selling price of $32 = Demand = 51
Quantity sold at discount price of $19.20 = Quantity produced - Demand = 55 - 51 = 4
Total revenue = (Demand * $32) + (Quantity sold at discount price of $19.20 * $19.20) = (51 * $32) + (4 * $19.20) = $1,708.80
Total cost = Cost * Quantity produced = $22 * 55 = $1,210
Net profit = Total revenue - Total cost = $1,708.80 - $1,210 = $498.80
Therefore, the net profit for the headphones is $498.80.
A company wants to set up operations in a country with the following corporate tax rate structure: Taxable Income Tax Rate <$50,000 15% $50,000 - $75,000 25% $75,000 - $100,000 34% >$100,000 39% Therefore, a taxable income of $60,000 would result in taxes due of $50,000*0.15 + ($60,000-$50,000)*0.25 = $50,000*0.15 + $10,000*0.25 = $10,000 If the compay expects gross revenues of $300,000, $150,000 in total costs, $20,000 in allowable tax deductions and $6,000 in a one-time business start-up credit, how much should the company expect to pay in taxes?
Answer:
$183,950
Explanation:
The computation is shown below:
Total taxable income is
= $300,000 - $150,000 - $20,000
= $130,000
Now tax is
= 15% of $50,000 + 25% of ($75,000 - $50,000) + 34% of ($100,000 - $75,000) + 39% of ($530,000 - $100,000)
= 0.15 of $50,000 + 0.25 of $25,000 + 0.34 of $25,000 + 0.39 of $430,000
= $189,950
Now Tax owed is
= $189,950 - $6,000
= $183,950
an Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Osaka Yokohama Sales $ 9,100,000 $ 21,000,000 Net operating income $ 455,000 $ 1,470,000 Average operating assets $ 2,275,000 $ 10,500,000 Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 12%. Compute the residual income for each division.
Answer:
Part 1 - ROI
In terms of Margin :
Division Osaka = 20 %
Division Yokohama = 14 %
In terms of Turnover :
Division Osaka = 400 %
Division Yokohama = 200 %
Part 2 - Residual Income
Division Osaka = $182,000
Division Yokohama = $210,000
Explanation:
Return on investment (ROI) = Divisional Profit Contribution / Assets Employed in the division x 100
In terms of Margin :
Division Osaka = $ 455,000 / $ 2,275,000 x 100 = 20 %
Division Yokohama = $ 1,470,000/ $ 10,500,000 x 100 = 14 %
In terms of Turnover :
Division Osaka = $ 9,100,000 / $ 2,275,000 x 100 = 400 %
Division Yokohama = $ 21,000,000/ $ 10,500,000 x 100 = 200 %
Residual income = Controllable Profit - Cost of Capital Charge on Controllable Investment
Therefore,
Division Osaka = $ 455,000 - $ 2,275,000 x 12 % = $182,000
Division Yokohama = $ 1,470,000 - $ 10,500,000 x 12 % = $210,000
Sauer Food Company has decided to buy a new computer system with an expected life of three years. The cost is $330,000. The company can borrow $330,000 for three years at 11 percent annual interest or for one year at 9 percent annual interest. Assume interest is paid in full at the end of each year. a. How much would Sauer Food Company save in interest over the three-year life of the computer system if the one-year loan is utilized and the loan is rolled over (reborrowed) each year at the same 9 percent rate
Answer:
the save in interest over the 3 years in the case of 9% rate of interest is $89,100
Explanation:
a. The computation of the save in interest over the 3 years in the case of 9% rate of interest is given below:
= $330,000 × 9% × 3 years
= $89,100
Hence, the save in interest over the 3 years in the case of 9% rate of interest is $89,100
The same would be considered and relevant too
7. Gold Company has budgeted the following costs for the production of its only product: Direct Materials $75,000 Direct Labor 50,000 Variable indirect production costs 25,000 Fixed indirect production costs 27,500 Variable selling and administrative costs 7,500 Fixed selling and administrative costs 15,000 Total Costs $200,000 Gold Company wants a profit of $100,000, and expects to produce 2,500 units. The market price is $125 per unit. What is the target cost per unit of the product
Answer:
$68 = unitary variable cost
Explanation:
Giving the following formula:
Gold Company wants a profit of $100,000
Production= 2,500 units
Selling price= $125
Fixed indirect production costs 27,500
Fixed selling and administrative costs 15,000
To calculate the target total unitary variable cost, we need to use the following formula:
number of units sold= (desired profit + fixed costs) / (selling price - unitary variable cost)
2,500= (100,000 + 27,500 + 15,000) / (125 - unitary variable cost)
312,500 - 2,500unitary variable cost = 142,500
170,000 = 2,500unitary variable cost
$68=unitary variable cost
What can result from a failure to provide accurate financial statements to a
bank?
A. The bank may experience an increase in defaulted loans.
B. The bank may lose trust in the government.
Ο Ο
C. The bank may appear more attractive than it should.
O
D. The bank may fail due to poor planning.
Answer:
(A) The bank may experience an increase in defaulted loans
Kumar Inc. uses a perpetual inventory system. At January 1, 2020, inventory was $214,000,000 at both cost and realizable value. At December 31, 2020, the inventory was $286,000,000 at cost and $265,000,000 at realizable value. Prepare the necessary December 31 entry under (a) the cost-of-goods-sold method (b) Loss method. g
Answer:
A. Dr Cost of Goods Sold $21,000,000
Cr Allowance to Reduce Inventory to Market $21,000,000
B. Dr Loss Due to Market Decline of Inventory $21,000,000
Cr Allowance to Reduce Inventory to Market $21,000,000
Explanation:
A.Preparation of the necessary December 31 entry under the cost-of-goods-sold method
COST-OF-GOODS-SOLD METHOD
Dr Cost of Goods Sold $21,000,000
Cr Allowance to Reduce Inventory to Market $21,000,000
($286,000,000 - $265,000,000)
B.Preparation of the necessary December 31 entry under the Loss method
LOSS METHOD
Dr Loss Due to Market Decline of Inventory $21,000,000
Cr Allowance to Reduce Inventory to Market $21,000,000
($286,000,000 - $265,000,000)
An accountant's ability to audit a company's records is an example of what type of skills?
Answer:
technical skills
An accountant's ability to audit a company's records is an example of what type of skills? technical skills. Camille Graham is a manager who works well with people and makes them feel excited about their work.
Explanation:
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Georgia Movie Company has a capital structure with 50.00% debt and 50.00% equity. The cost of debt for the firm is 9.00%, while the cost of equity is 15.00%. The tax rate facing the firm is 36.00%. The firm is considering opening a new theater chain in a local college town. The project is expected to cost $12.00 million to initiate in year 0. Georgia Movie expects cash flows in the first year to be $3.10 million, and it also expects cash flows from the movie operation to increase by 4.00% each year going forward. The company wants to examine the project over a 13.00-year period. What is the WACC for this project
Answer:
10.38%
Explanation:
The computation of the WACC is given below:
WACC = Weight of debt × After tax Cost of debt + Weight of Equity × Cost of Equity
Here After tax cost of debt is
= Cost of debt × (1 - tax rate)
= 9% × (1 - 36%)
= 5.76%
Now
WACC = 50% × 5.76% + 50% × 15%
= 10.38%
Pozzi Company, a cash basis business, received $16,930 cash as payment on a loan Pozzi made to a business associate two years ago. The payment consisted of a $15,000 principal payment and $1,930 interest. On receipt of the cash, Pozzi recognizes: Group of answer choices $1,930 taxable income. $16,930 taxable income. No taxable income. $15,000 taxable income.
Answer:
$1,930 taxable income
Explanation:
Based on the information given On receipt of the cash, Pozzi recognizes the amount of $1,930 TAXABLE INCOME which is the INTEREST amount ($16,930-$15,000) reason been that we were told that the Company received the amount of $16,930 cash payment in which the payment consisted principal payment amount of $15,000 as well as an interest amount of $1,930 interest.
Therefore On receipt of the cash, Pozzi recognizes $1,930 taxable income.
Suppose Robina Bank receives a deposit of $53,589 and the reserve requirement is 3%. Answer the questions using this information. Round your answers to two decimal places. What is the amount that Robina Bank must keep on hand as required by the Federal Reserve (Fed)? keep on hand: $ What is the amount that Robina Bank must have in excess reserves from this initial deposit? excess reserves: $ What is the total change in the M1 money supply from this one deposit? total change: $
Which company does not issue credit reports? O A. TransUnion B. Experian C. Equifax D. Expedia
Answer:
Expedia
Explanation:
any ideas on a gum? and what type would you create if you were selling gum
Answer:
spicy chicken noodles flavoured gum
Why is defining the parameters of the project the first step?
Nie choice
Remedies available to a patent owner whose patent rights have been infringed include all of the following except
- an injunction
- attorney fees
- maximum monetary damages
- minimum monetary damages
Answer: maximum monetary damages
Explanation:
Answer: attorney fees
Explanation:
edge 2021
Bombeck Inc. has the following transactions during August of the current year. Indicate (a) the effect on the accounting equation and (b) the debit-credit analysis. Aug. 1 Opens an office as a financial advisor, investing $5,000 in cash in exchange for common stock. 4 Pays insurance in advance for 6 months, $1,800 cash. 16 Receives $1,900 from clients for services performed. 27 Pays secretary $1,000 salary.
Answer: Please see answers in explanation column
Explanation:
Date Accounts titles and explanation Debit Credit
Aug 1 Cash $5000
Common Stock $5000
--Since this is an investment by the owner of the business . When the business is gaining cash, it is being debited as it is an asset which is always debited with increase. Also there will be an increase in the owner's Equity Account leading to crediting the Common stock (equity) account.
Date Accounts titles and explanation Debit Credit
Aug 4 Prepaid Insurance $1800
Cash $1800
--The insurance paid in 6 months advance is an asset for the business. As stated above when asset increases, it is debited in the account journal So, prepaid insurance account is being debited . Also,since cash is being reduced as it is used for payment for insurance, it is credited in the accounts journal.
Date Accounts titles and explanation Debit Credit
Aug 16 Cash $1,900
Service Revenue $1,900
--The amount of $1,800 is the revenue for service rendered and since it is an equity account which increased revenue, we credit it. Also, since cash is being received, because it is an asset, debit is recorded on the cash account.
Date Accounts titles and explanation Debit Credit
Aug 27 Salary Expense $1000
Cash $1000
--Payment of salary is an expense to any business and paid from the business Cash Account causing a decrease in the Cash, since Cash is referred to an asset , because of its decrease, we credit the Cash Account. Also, the salary expense account is debited because it is increasing
he management of Green Energy Manufacturing is analyzing variable overhead variances for the fiscal period just ended. The flexible budget called for $176,000 in variable overhead but actual variable overhead was $100,000. In computing the overhead variances, Green's management discovered that it had used 40,000 pounds of direct material, rather than the budgeted amount of 44,000 pounds. (Pounds of direct material is the single overhead driver of variable overhead). The standard variable overhead rate per pound of direct material is $2.00. What is Green's variable overhead spending variance
Answer:
See below
Explanation:
With regards to the above, Green's variable overhead spending variance is computed as
= Flexible budget - Actual variable overhead.
Given that
Flexible budget in variable overhead = $176,000
Actual variable overhead = $100,000
Therefore,
Variable overhead spending variance
= $176,000 - $100,000
= $76,000 F
