Answer:
4 years
Explanation:
The computation of the payback period is shown below:
Payback period is
= Cost of a Machine ÷ Annual cash flow
where,
Cost of a machine = $24,000
And, the annual cash flow is
= Net Income + Depreciation expense
= $2,000 + $4,000
= $6,000
Now placing these values to the above formula
So, the payback period is
= $24,000 ÷ $6,000
= 4 years
Club Med Inc. talks to its present and potential customers to assess their needs for its products. Then it develops products to satisfy those needs. The firm is thus applying the ____ concept.
Answer:
marketing concept.
Explanation:
The above is marketing concept because it involves all actions taken to draw the attention of people towards the product offered by a business. The product so offered can be a physical good such as sale of home appliances or services to be rendered. Example of marketing concept are advertising a product either in the television or radio or on bill boards.
Marketing concept makes use of data to concentrate on the desires of consumers by developing products that would suit those need and also accomplish the organization goals of satisfying their customers needs.
Tailoring goods or services to the tastes of individual customers on a high-volume scale is a segmentation strategy known as _____.
Answer:
Segments of one.
Explanation:
Market segmentation can be defined as the process of aggregating potential consumers (buyers) into a collective groups having common or related needs and are most likely to respond similarly to marketing techniques. A good market segmentation base are the behavioral, demographic, psychographic and geographical variables to determine its strategy or techniques.
Tailoring goods or services to the tastes of individual customers on a high-volume scale is a segmentation strategy known as segments of one.
Under the segment of one, service providers or business entities are typically focused on a single customer and as such they track and understand the preferences or behavior of this customer. This is to enable the service provider an ability to tailor their products or services to meet the tastes, or preferences of such customer.
If Highway 55 Studios can reduce fixed expenses by , by how much can variable expenses per unit increase and still allow the company to maintain the original break even sales in units
Answer:
$2.25
Explanation:
Please check the attached image for the full question used in answering this question
Breakeven sales is the quantity sold at which net income is equal to zero.
Breakeven sales = fixed cost / (price per unit - variable cost per unit )
$1,215,000 / ($80 - $35) = 27,000
If Highway 55 Studios can reduce fixed expenses by $60,750, variable cost =
27,000 = ($1,215,000 - $60,750) / ($80 - V)
27,000 = 1,154,250 / ($80 - V)
V = $37.25
Variable cost would increase by : $37.25 - $35 = 2.25
Job 910 was recently completed. The following data have been recorded on its job cost sheet: Direct materials $ 2,429 Direct labor-hours 74 labor-hours Direct labor wage rate $ 17 per labor-hour Machine-hours 135 machine-hours The Corporation applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $18 per machine-hour. The total cost that would be recorded on the job cost sheet for Job 910 would be:
Answer:
Total Job Cost is $6,117
Explanation:
The total cost of the Job 910 is as under:
Direct Material Cost $2,429
Direct Labor Cost (74 Labor Hrs * $17 per Labor Hour) $1,258
Applied overhead (135 Machine Hrs * $18 per Machine Hr) $2,430
Total Job Cost $6,117
Galaxy Corp. is considering opening a new division to make iToys that it expects to sell at a price of $15,250 each in the first year of the project. The company expects the cost of producing each iToy to be $6,700 in the first year; however, it expects the selling price and cost per iToy to increase by 3.00% each year.
Based on the preceding information and rounding dollar amounts to the nearest whole dollars, the company expects the selling price in the fourth year of the project to be_______ , and it expects the cost per unit in the fourth year of the project to be _______.
Answer:
Selling price= $17,164
Unitary variable cost= $7,541
Explanation:
Giving the following information:
Selling price in the first year= $15,250
Unitary variable cost on the first year= $6,700
Increase rate= 3%
To calculate the selling price and variable cost per unit in the fourth year, we need to use the following formula:
FV= PV*(1+i)^n
PV= current value
i= increase rate
n= number of years
Selling price= 15,250*(1.03^4)= $17,164
Unitary variable cost= 6,700*(1.03^4)= $7,541
Q 9.26: Crawford Trucking plans to dispose of two trucks in 2018. They sell the first truck on January 2 and the second truck on July 9. If the end of their fiscal year is December 31, how will the calculation of book value differ for these two vehicles
Answer:
Crawford Trucking
Calculation of book value for disposal of two vehicles:
a) The Truck sold on January 2 would not have depreciation expenses computed for it. The book value on January 1 would be the same on January 2. It is not practical to compute depreciation expense for 1 day.
b) The Truck sold on July 9 would have depreciation computed for the year 2018 pro rated for six months. The book value would be less than the Truck sold on January 2.
Explanation:
Depreciation expense may be pro rated depending on the prevailing circumstances. This becomes necessary because the sold unit may not be fully utilized for the period under review. Under the matching principle of generally accepted accounting principles, it is imperative to match revenue to the period they were incurred.
Like a good economist, you calculated the opportunity cost of getting your college degree. Suppose that at your university, you will pay $10,000 each year for tuition, $2,500 each year for textbooks, and $12,000 per year for room and board. Before you left for college, your boss at your high-school job offered you a job paying $20,000 per year.
Assume that if you decided not to go to college, your parents would not let you live at home.
What is your opportunity cost for four years of college? $_______
Answer:
$130,000
Explanation:
Calculation for the opportunity cost for four years of college
The first step is to calculate for the cost of education per year
Using this formula
Cost of education per year =Tuition+Text book +Room and board
Let plug in the formula
Cost of education per year =$10,000+$2,500+$12,000
=$24,500
Second step is to calculate the return in a situation were we decided not to go to college
$20,000-$12,000=$8,000
The last step is to calculate for the opportunity cost for 4 years of college:
Using this formula
Opportunity cost =Cost of education per year+ Return * Numbers of year
Where,
Cost of education per year=$24,500
Return =$8,000
Numbers of years =4
Let plug in the Formula
Opportunity cost =($24,500+$8,000)*4
Opportunity cost =$32,500*4
Opportunity cost =$130,000
Therefore the opportunity cost for four years of college will be $130,000
Deferred expenses that benefit a relatively short period of time are listed on the balance sheet as current assets. a. True b. False
Answer:
True
Explanation:
The deferred expense is an expense that is not realized in the near future. In this the one account is debited the other account is credited. Like prepaid insurance account is debited and the cash is credited. Both the accounts are current assets
Therefore in the given case, the benefit that arises for a short period of time is listed on the current asset side of the balance sheet
Hence, the given statement is true
The United Auto Workers went on strike support the employees of the Detroit News, Detroit Free Press, and USA Today. This is an example of a(n) ________ strike.
a. unfair labor practice
b. wildcat
c. sympathy
d. yellow dog
e. economic
Answer:
Sympathy
Explanation:
A sympathy strike is one in which a group of workers go on strike in support of another group that has a dispute.
This can occur even when the group going on sympathy strike do not have a dispute to settle with their employer.
Sympathy strike is not viewed as a violation of no strike clause in an employee's contract.
In the given scenario United Auto Workers went on strike support the employees of the Detroit News, Detroit Free Press, and USA Today.
On January 1, you sold short one round lot (that is, 100 shares) of Four Sisters stock at $21 per share. On March 1, a dividend of $2 per share was paid. On April 1, you covered the short sale by buying the stock at a price of $15 per share. You paid 50 cents per share in commissions for each transaction. What is the value of your account on April 1?
Answer:
The value of your account on April 1 is $300
Explanation:
Proceed from short sales
Sales proceed = $2,100 ($21 * 100 shares)
Less Commission= $50 ($0.50 * 100 shares)
Proceeds = $2,050
Dividend payment
= 100 shares * $2
=$200
Total Cost of buy back
Buy back= $1,500 ($15 * 100 shares)
Add commission= $50 ($0.50 * 100 shares)
Total cost = $1,550
Value of Account on April 1
Proceed = $2,050
Less Dividend payment = $200
Less Total cost of buy back= $1,550
Value of Account = $300
Therefore, the value of your account on April 1 is $300
You own a portfolio that is 23 percent invested in Stock X, 38 percent in Stock Y, and 39 percent in Stock Z. The expected returns on these three stocks are 11 percent, 14 percent, and 16 percent, respectively. What is the expected return on the portfolio
Answer:
The expected return on the portfolio is 14.09%.
Explanation:
Expected return on a portfolio refers to addition of the mu;ti[licatiom of weight in the portfolio and expected return of all the investment in the same portfolio.
Therefore, the expected return on this portfolio can be calculated using the following formula:
PER = (rX * wX) + (rY * wY) + (rZ * wZ) ....................... (1)
Where,
PER = Portfolio expected return = ?
rX = Expected returns on stock X = 11%
wX = Weight of amount invested in stock X = 23%
rY = Expected returns on stock Y = 14%
wY = Weight of amount invested in stock Y = 38%
rZ = Expected returns on stock Z = 16%
wZ = Weight of amount invested in stock Z = 39%
Substituting the values into equation (1), we have:
PER = (11% * 23%) + (14% * 38%) + (16% * 39%) = 14.09%
Therefore, the expected return on the portfolio is 14.09%.
Decreasing the discount rate is Group of answer choices a contractionary policy because it reduces banks' profit margins by lowering the return on lending. g
Complete Question:
Decreasing the discount rate is:
Group of answer choices:
a) an expansionary policy stance because consumers and businesses can now borrow funds directly from the Fed at a lower cost, thereby encouraging private spending.
b) a contractionary policy stance because the cost of borrowing funds falls, thereby encouraging consumption
and investment spending.
c) a contractionary policy because it reduces banks' profit margins by lowering the return on lending.
d) an expansionary policy stance because it will be less costly for banks to borrow funds and this puts
downward pressure on interest rates in the economy.
Answer:
d) an expansionary policy stance because it will be less costly for banks to borrow funds and this puts
downward pressure on interest rates in the economy.
Explanation:
Decreasing the discount rate is an expansionary policy stance because it will be less costly for banks to borrow funds and this puts downward pressure on interest rates in the economy.
An expansionary monetary policy can be defined as a strategic policy or actions of Central Bank such as "The Fed" that expand or increases the money supply so as to stimulate the economy. The expansionary monetary policies could also be adopted to lower short-term interest rates. Consequently, the effect of the expansionary policy would be to shift the aggregate demand curve to the right, therefore causing economic growth within the country.
Additionally, the interest rate charged on money supply or currencies to banks by the central bank is known as the discount rate.
In conclusion, when banks are charged lowered discount rates, it will cost them less to borrow money from the central bank and as a result there would be an increase in money supply; thus, availing them the opportunity to give out more loans to their customers.
Flexible Budget for Selling and Administrative Expenses for a Service Company Digital Solutions Inc. uses flexible budgets that are based on the following data:
Sales commissions 14% of sales
Advertising expense 20% of sales
Miscellaneous administrative expense $6,000 per month plus 12% of sales
Office salaries expense $29,000 per month
Customer support expenses $14,000 per month plus 20% of sales
Research and development expense $32,000 per month
Required:
Prepare a flexible selling and administrative expenses budget for October for sales volumes of $400,000, $500,000, and $600,000. (Use Exhibit 5 as a model.)
Answer:
Flexible selling and administrative expenses budget for October for sales volumes of $400,000, $500,000, and $600,000
$400,000, $500,000, $600,000
Sales commissions $56,000 $70,000 $84,000
Advertising expense $80,000 $100,000 $120,000
Miscellaneous administrative expense $54,000 $66,000 $78,000
Office salaries expense $29,000 $29,000 $29,000
Customer support expenses $94,000 $114,000 $134,000
Research and development expense $32,000 $32,000 $32,000
Total Expense $345,000 $411,000 $477,000
Explanation:
A Flexible Budget is a Master Budget that has been adjusted to the Actual level of Activity instead of estimated level of Activity.
A company is evaluating a new 4-year project. The equipment necessary for the project will cost $3,250,000 and can be sold for $645,000 at the end of the project. The asset is in the 5-year MACRS class. The depreciation percentage each year is 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, and 11.52 percent, respectively. The company's tax rate is 35 percent. What is the aftertax salvage value of the equipment
Answer: $615,810
Explanation:
The Book Value of the Asset at the end of 4 years will be;
= Cost of equipment - Accumulated Depreciation
= 3,250,000 - ( 3,250,000 * ( 20% + 32% + 19.20% + 11.52%))
= 3,250,000 - 2,688,400
= $561,600
The Equipment will be sold at $645,000 meaning a gain is made
= 645,000 - 561,600
= $83,400
Tax to be paid is;
= 83,400 * 0.35
= $29,190
After-tax salvage value of the equipment = Sales Price - Tax
= 645,000 - 29,190
= $615,810
Rapier Woodworking Corporation produces fine cabinets. The company uses a job-order costing system in which its predetermined overhead rate is based on capacity. The capacity of the factory is determined by the capacity of its constraint, which is an automated jointer. Additional information is provided below for the most recent month: Estimates at the beginning of the month: Estimated total fixed manufacturing overhead $ 3,819 Capacity of the jointer 190 hours Actual results: Actual total fixed manufacturing overhead $ 3,819 Actual hours of jointer use 160 hours The predetermined overhead rate based on hours at capacity is closest to:
Answer:
The predetermined overhead rate based on hours at capacity is closest to: $20.10 per hour.
Explanation:
Predetermined Rate = Budgeted Fixed Overheads / Budgeted Activity
= $ 3,819 / 190 hours
= $20.10 per hour
Determine how many of each plant stand Bobby needs to sell to breakeven. Begin by computing the weighted-average contribution margin per unit. First identify the formula labels, then complete the calculations step by step.
Answer:
For twig stands= 24 units.
For oak stand = 6 units.
Explanation:
From the question above we are given that the Sale price for Twig and Oak plant stand are 15.00 and 42.00. We are also given that the Variable cost for Twig and Oak plant stand are 2.00 and 19.00 per unit. Thus, the value for the Contribution Margin per unit can be calculated by just subtracting Variable cost for Twig and Oak plant stand from Sale price for Twig and Oak plant stand, that is;
Contribution Margin per unit = (Sale price for Twig and Oak plant) - (Variable cost for Twig and Oak plant stand).
Contribution Margin per unit for Twig = 15.00 - 2.00 = 13.00 and the Contribution Margin per unit for oak = 42.00 - 19.00 = 23.00.
From the question, we are given that the Sales mix in units is 4(twig) and 1(oak) = 4 + 1 = 5.
Thus, the contribution margin for twig = sales mix for twig × Contribution Margin per unit for Twig = 4 × 13 = 52.
Also, the contribution margin for oak = sales mix for oak × Contribution Margin per unit for oak = 1 × 23 = 23.
Total = 52 + 23 = 75.
Hence, the Weighted Average Contribution per unit = 75 / 5 = 15.
Total Break even Sales = 450/15 = 30 units.
Thus, for twig stand; 30 × 4/5 = 24 units.
For oak = 30 × 1/5 = 6 units.
Horizon Financial Inc. was organized on February 28. Projected selling and administrative expenses for each of the first three months of operations are as follows: March $173,900 April 163,500 May 148,800 Depreciation, insurance, and property taxes represent $37,000 of the estimated monthly expenses. The annual insurance premium was paid on February 28, and property taxes for the year will be paid in June. 70% of the remainder of the expenses are expected to be paid in the month in which they are incurred, with the balance to be paid in the following month. Required:Prepare a schedule of cash payments for selling and administrative expenses for March, April, and May. Horizon Financial Inc.
Answer:
Total Cash Payments are as follows:
For March = $95,830
For April = $129,620
For May = $116,210
Explanation:
Note: See the attached Excel file for the schedule of cash payments
The expenses paid in each month can be calculated as follows:
a. March Expenses
Paid in March = (Total projected selling and administrative expenses for March - Depreciation, insurance, and property taxes for March) * Percentage of reminder paid = ($173,900 - $37,000) * 70% = $95,830
Paid in April = (Total projected selling and administrative expenses for March - Depreciation, insurance, and property taxes for March) * Percentage of balance paid = ($173,900 - $37,000) * (100% - 70%) = $41,070
b. April Expenses
Paid in April = (Total projected selling and administrative expenses for April - Depreciation, insurance, and property taxes for April) * Percentage of reminder paid = ($163,500 - $37,000) * 70% = $88,550
Paid in May = (Total projected selling and administrative expenses for April - Depreciation, insurance, and property taxes for April) * Percentage of balance paid = ($173,900 - $37,000) * (100% - 70%) = $37,950
c. May Expenses
Paid in May = (Total projected selling and administrative expenses for May - Depreciation, insurance, and property taxes for May) * Percentage of reminder paid = ($148,800 - $37,000) * 70% = $78,260
Consider four different stocks, all of which have a required return of 12 percent and a most recent dividend of $3.00 per share. Stocks W, X, and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 10 percent, 0 percent, and –4 percent per year, respectively. Stock Z is a growth stock that will increase its dividend by 20 percent for the next two years and then maintain a constant 10 percent growth rate thereafter. What is the dividend yield and capital gains yield for each of these four stocks? (Leave no cells blank - be certain to enter "0" wherever required. A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 1 decimal place, e.g., 32.1.)
Answer:
we must first determine the current price of the stocks:
W = $3.30 / (12% - 10%) = $165
X = $3 / 12% = $25
Y = $2.88 / (12% + 4%) = $18
Z = $3.60/1.12 + $4.32/1.12² + $237.60/1.12² (terminal value at year 2) = $3.21 + $3.44 + $189.41 = $196.06
current year's dividend yield:
W = $3 / $165 = 1.8%X = $3 / $25 = 12%Y = $3 / $18 = 16.7%Z = $3 / $196.06 = 1.5%now we must determine the price of the stocks in one year:
W = $3.63 / (12% - 10%) = $181.50
X = $3 / 12% = $25
Y = $2.7648 / (12% + 4%) = $17.28
Z = $4.32/1.12 + $237.60/1.12 = $3.86 + $212.14 = $216
capital gains yield:
W = ($181.50 - $165) / $165 = 10%X = ($25 - $25) / $25 = 0Y = ($17.28 - $18) / $18 = -4%Z = ($216 - $196.06) / $196.06 = 10.2%The inflation rate over the past year was 3.8 percent. If an investment had a real return of 6.9 percent, what was the nominal return on the investment?
Answer:
Nominal rate of return= 10.96%
Explanation:
Inflation is the increase in the price level.It erodes the value of money.rise in the price of money
Nominal interest is that quoted for investment or loan transactions. It has not been been adjusted for inflation.
Real interest rate is the amount of interest in terms of the the quantity of good and services that can be purchased. It is the nominal interest rate adjusted for inflation.
The relationship between inflation, real interest and nominal interest rate is given using the Fishers Effect;
N = ( (1+R) × (1+F)) - 1
N- nominal rate, R-real rate, F- inflation
Nominal rate of return =(1.038)× (1.069) - 1 = 0.109622
Nominal rate of return = 0.109622 × 100 = 10.96%
Nominal rate of return= 10.96%
Jason Mathews purchased 300 shares of the Hodge & Mattox Energy Fund. Each share cost $15.15. Fifteen months later, he decided to sell his shares when the share value reached $18.10. a. What is the amount of his total initial investment? b. What was the total amount Jason received when he sold his shares in the Hodge & Mattox fund? c. How much profit did he make on his investment?
Answer:
A.) $4,545 b) $5,430 c) $885
Explanation:
Given the following :
Number of shares purchased = 300
Cost per share = $15.15
Total initial investment :
Number of shares purchased * cost per share
300 * $15.15 = $4,545
B)
Total amount received when he sold his shares :
Amount at which shares was sold = $18.10 per share
Therefore,
Total amount received :
$18.10 * 300 = $5,430
C.)
Profit made on investment :
Amount received when shares was sold - total initial investment
$5,430 - $4,545
= $885
A bakery famous for its cupcakes opens its doors at 9 a.m. and allows each customer to purchase up to 2 cupcakes until the day's supply of cupcakes runs out. Customers begin lining up around 8 a.m. each day and the cupcakes usually run out around 9:30, leaving dozens of unserved customers disappointed. Which of the following statements about this market are true? Select all that apply.
1) The cupcakes are being sold below their equilibrium price.
2) The bakery is maximizing its short-run producer surplus.
3) The customers who receive cupcakes are the customers with the highest willingness to pay for cupcakes.
4) The bakery is not using price as the only means of allocating cupcakes to its customers.
5) Consumer surplus is being maximized.
Answer:
1) The cupcakes are being sold below their equilibrium price
3) The customers who receive cupcakes are the customers with the highest willingness to pay for cupcakes.
4) The bakery is not using price as the only means of allocating cupcakes to its customers.
.Explanation:
at equilibrium price, quantity demanded equals quantity supplied and there would be no excess demand as in the case of the bakery.
The customers who receive cupcakes are the customers with the highest willingness to pay for cupcakes because these consumers are willing to lineup for these cupcakes.
the bakery also allocates the cupcakes by time. the cupcakes are usually only available within a specific time
Toyota will bring hybrid electric automobiles to market next year priced at $27 comma 000 (this includes a $6 comma 750 federal tax credit). At $1.89 per gallon of gasoline, it will take 11 years to recoup the difference in price between a base model Toyota Camry and its four-cylinder gasoline-only counterpart. The price difference is $4 comma 180. If the hybrid vehicle is driven for 15 years, what is the internal rate of return on the extra investment in the hybrid?
Answer:
4.15%
Explanation:
In order to determine the annual saving we must divide the extra cost of the hybrid by the amount of years it takes to recoup our investment.
annual savings = $4,180 / 11 years = $380 per year
our initial investment = -$4,180
since we are going to use the car during 15 years, then we have 15 positive cash flows of $380
using a financial calculator or excel spreadsheet, the internal rate of return (IRR) on our investment = 4.15%
Which statement best reflects the Fed's approach to expansionary monetary policy before the mortgage debt crisis
Complete Question:
Which statement best reflects the Fed's approach to expansionary monetary policy before the mortgage debt crisis? Multiple Choice The Fed would announce a lower target for the federal funds rate, then increase the supply of reserves through a balanced combination of the monetary policy tools. The Fed would quietly begin using open-market operations to increase the supply of reserves, with secrecy critical to not alarming securities markets The Fed would announce a lower target for the federal funds rate, then rely primarily on open market operations to increase the supply of reserves The Fed would itself lower the federal funds rate and then use a varied combination of monetary policy tools to increase the supply of reserves
Answer:
The Fed would announce a lower target for the federal funds rate, then increase the supply of reserves through a balanced combination of the monetary policy tools.
Explanation:
The Federal Reserve achieves expansionary monetary policy by announcing lower targets for the federal funds rate, increasing the supply of reserves using a mix of monetary policy tools, including the discount rate, reserve requirements, open market operations, and interest on reserves The federal funds rate is the interest rate at which banks with excess reserves lend to other banks in need. By lowering this rate, many banks are encouraged to borrow. This monetary expansion increases the supply of money in the economy which leads to increased productivity, more employment, etc.
Bonds payable—record issuance and discount amortization Coley Co. issued 515 million face amount of 9%, 10-year bonds on June 1, 2013. The bonds pay interest on an annual basis on May 31 each year.
Required:
a. Assume that the market interest rates were slightly higher than 9% when the bonds were sold. Would the proceeds from the bond issue have been more than, less than, or equal to the face amount? Explain.
b. Independent of your answer to part a, assume that the proceeds were 514,820,000. Use the horizontal model (or write the journal entry) to show the effect of issuing the bonds.
c. Calculate the interest expense that Coley Co. will show with respect to these bonds in its income statement for the fiscal year ended September 30, 2013, assuming that the discount of 5180,000 is amortized on a straight-line basis.
Answer:
a. Assume that the market interest rates were slightly higher than 9% when the bonds were sold. Would the proceeds from the bond issue have been more than, less than, or equal to the face amount? Explain.
If the market interest is higher than the coupon interest, then the bonds will sell at a discount. This means that the amount of cash received will be less than the $515 million face valueb. Independent of your answer to part a, assume that the proceeds were 514,820,000. Use the horizontal model (or write the journal entry) to show the effect of issuing the bonds.
Dr Cash 514,820,000Dr Discount on bonds payable 180,000 Cr Bonds payable 515,000,000c. Calculate the interest expense that Coley Co. will show with respect to these bonds in its income statement for the fiscal year ended September 30, 2013, assuming that the discount of 5180,000 is amortized on a straight-line basis.
amortization of bond discount = $180,000 / 10 = $18,000 per annual coupon payment
4 months from June 1 to September 30, so discount amortization = $18,000 x 4/12 = $6,000
the journal entry to adjust accrued interest expense:
September 30, 2013, accrued interest expense:
Dr Interest expense 15,456,000
Cr Interest payable 15,450,000
Cr Discount on bonds payable 6,000
Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $70,000 or $200,000 with equal probabilities of .5. The alternative risk-free investment in T-bills pays 6% per year. a. If you require a risk premium of 8%, how much will you be willing to pay for the portfolio?
Answer:
$118,421
Explanation:
first we must calculate the expected value of the risky portfolio = ($70,000 x 0.5) + ($200,000 x 0.5) = $135,000
since your risk premium is 8% and the risk free rate is 6%m then you should discount the expected value by 8% + 6% = 14% to determine its current market price
= $135,000 / (1 + 14%) = $118,421
A group of 10 people have the following annual incomes:_______.
$24,000, $18,000, $50,000, $100,000, $12,000, $36,000, $80,000, $10,000, $24,000, $16,000.
Calculate the share of total income that each quintile receives from this income distribution. Do the top and bottom quintiles in this distribution have a greater or larger share of total income than the top and bottom quintiles of the U.S. income distribution?
To reduce income inequality, should the marginal tax rates on the top 1% be increased?
Answer:
The answer to this question can be defined as follows:
Explanation:
The very first useful step is to specify homeowners as decreased to increases in revenues. Its bottom quintile will be the lower two homeowners, its second quintile it's third and fourth, and so on to its top quintile, like a total number of homeowners exists.
In the quintiles as well as the percentage of the total revenue and for information compiled. Throughout contrast of 2005, its peak quintile is the US earnings allocation. Its example would be lower than for the allocation in the U.S. as well as the bottom quintile will have a greater proportion of total income. Throughout this model, its distribution of income from this example is generally higher than the US allocation.Patton Company purchased $400,000 of 10% bonds of Scott Co. on January 1, 2011, paying $376,100. The bonds mature January 1, 2021; interest is payable each July 1 and January 1. The discount of $23,900 provides an effective yield of 11%. Patton Company uses the effectiveinterest method and plans to hold these bonds to maturity. 5. On July 1, 2011, Patton Company should increase its Held-to-Maturity Debt Securities account for the Scott Co. bonds by
Answer:
$685.55
Explanation:
Patton company ;
Bond payments $376,100 × 0.055
= $20,685.55
Less face amount $400,000 × 0.05
= $20,000
Held-to-maturity debt securities $685.55
($20,685.55 - $20,000)
Note:
Effective yield(market rate)
= 11% ÷ 2
= 5.5%
Bonds
= 10% ÷ 2
= 5%
Lifemaster produces two types of exercise treadmills: regular and deluxe. The exercise craze is such that Lifemaste could use all its available machine hours to produce either model. The two models are processed through the same production departments. Data for both models is as follows:
Per Unit
Deluxe Regular
Sale Price $ 1,020 $ 560
Costs:
Direct Material 300 90
Direct Labor 88 188
Variable Manufacturing Overhead 264 88
Fixed Manufacturing Overhead* 138 46
Variable Operating Expenses 111 65
Total Costs 901 477
Operating Income $ 119 $ 83
*allocated on the basis of machine hours
Requirements
1. What is the constraint?
2. Which model should Lifemaster produce? (Hint: Use the allocation of fixed manufacturing overhead to determine the proportion of machine hours used by each product.)
3. If Lifemaster should produce both models, compute the mix that will maximize operating income.
Answer:
1. Machine hours is the Constraints in the given case.
2. Evaluation of Products
Deluxe Regular
Sales Price $1,020 $560
Less: Direct Material $300 $90
Less: Direct Labor $88 $188
Less: Variable Manufacturing $264 $88
Overhead
Less: Variable Operating $111 $65
Expenses
Contribution Margin $257 $129
Contribution Margin as % 292.05% 68.62%
of Direct Labor cost
Conclusion: Hence it is better to produce Deluxe as it gives higher contribution margin as a % of direct labor cost
Workings
Contribution Margin as % of Direct Labor cost
Deluxe = 257/88% = 292.05%
Regular = 129 /188% = 68.62%
As companies started to seek scale economies and efficiency, their goal was to take advantage of ____________ in functional areas? a. ABC classification b. Deep skills c. Activity Based Costing d. Common costs e. Both b & d f. All of the above
Answer: e. Both b & d
Explanation:
Economies and Efficiency can be achieved by managing costs better. This can be done by training employees more so that they may use deep skills gained to be able to keep costs low by being more efficient on the job.
A good place to reduce costs would be the common costs. The business can target these costs by optimising them which means to reduce costs while still maximizing output and value. Reducing the costs here would lead to better efficiency.
A company has the following transactions during the year related to stockholders’ equity.
February 1 Issues 5,000 shares of no-par common stock for $15 per share.
May 15 Issues 500 shares of $10 par value, 7.5% preferred stock for $12 per share.
October 1 Declares a cash dividend of $0.75 per share to all stockholders of record (both common and preferred) on October 15.
October 15 Date of record.
October 31 Pays the cash dividend declared on October 1.
Required:
Record each of these transactions.( omit account numbers and descriptions)
Date Discription Debit Credit
Answer:
Journal entries are given below
Explanation:
February 1
(Issues 5,000 shares of no-par common stock for $15 per share)
DEBIT CREDIT
Cash(5000 x $15) $75,000
Common stock $75,000
May 15
(Issues 500 shares of $10 par value, 7.5% preferred stock for $12 per share)
DEBIT CREDIT
Cash (500x$12) $6,000
Preferred stock (500x$10) $5,000
Additional paid in capital $1,000
October 1
Declares a cash dividend of $0.75 per share
DEBIT CREDIT
Retained Earnings (5500x$0.75) $4,125
Dividend Payable $4,125
October 15 Date of Record
No Entry Required
October 31 Pays the cash dividend
DEBIT CREDIT
Dividend Payable $4,125
Cash $4,125