Answer:
Short-selling long-term bonds and taking long position on short-term assets
Explanation:
When the yield curve ascends, the long-term bond's price will go down. Hence, do short-sell the long-term bonds. On the other hand, short-term asset's price will be depreciated because Fed tightens credit and raise short-term rate, which is the chance to purchase and make profits from capital gains.
Which of the following provisions, if included in a mandatory arbitration agreement, would not likely render it unenforceable?
A. A provision that the employee pay the costs of the arbitrator’s services.
B. A provision that gives the employer the right to choose any arbitrator.
C. A provision that requires the employee to prove his case.
D. All of the above.
Answer:
C. a provision that requires the employee to prove his case.
Explanation:
Arbitration is a form of resolving dispute outside of the court system. Here, the parties involved agrees to have their dispute settled through a third party other than a judge. Mandatory arbitration is a provision that is included in a contract , which requires concerned parties to resolve their contract dispute before an arbitrator instead of the normal court system.
In a situation where one of the parties to a contractual agreement feels cheated or the other party has not performed his term of the agreement, such may seek redress through an arbitrator. For a mandatory arbitration to be enforceable, there must be a provision that the employee pay the cost of the arbitrator's service and also a provision that the employer has the right to choose any arbitrator.
In a recent year Sunland Company had net income of $360000, interest expense of $72000, and a times interest earned of 10. What was Sunland Company’s income before taxes for the year? $792000 $720000 $648000 None of these answer choices are correct.
Answer:
$648,000
Explanation:
Given that;
Net income = $360,000
Interest expense = $72,000
Times interest earned = 10
Net Income + Interest expense + Tax expense ÷ Interest expense = Times interest earned.
($360,000 + $72,000 + Tax expense) /$72,000 = 10
Tax expense = $288,000
Therefore;
Sunderland's income before taxes for the year
= Net income + Tax expense
= $360,000 + $288,000
= $648,000
Great Cruiseline offers nightly dinner cruises departing from several cities on the eastern coast of the United States including Charleston, Baltimore, and Alexandria. Dinner cruise tickets sell for $80 per passenger. Great Cruiseline's variable cost of providing the dinner is $40 per passenger, and the fixed cost of operating the vessels (depreciation, salaries, docking fees, and other expenses) is $240,000 per month. The company's relevant range extends to 13,000 monthly passengers. Use this information to compute the following:
A. What is the contribution margin per passenger?
B. What is the contribution margin ratio?
C. Use the unit contribution margin to project operating income if monthly sales total 10,000 passengers.
D. Use the contribution margin ratio to project operating income if monthly sales revenue totals $515,000.
Answer:
Instructions are below.
Explanation:
Giving the following information:
Selling price= $80
Unitary variable cost= $40
Fixed costs= $240,000
First, we need to calculate the unitary contribution margin and the contribution margin ratio:
Contribution margin= 80 - 40= $40
Contribution margin ratio= contribution margin/selling price
Contribution margin ratio= 40/80= 0.5
Now, we can calculate the operating income for 10,000 units:
Total contribution margin= 40*10,000= 400,000
Fixed costs= (240,000)
Net operating income= 160,000
Finally, the operating income for $515,000:
Net operating income= (contribution margin ratio*sales) - fixed costs
Net operating income= 515,000*0.5 - 240,000
Net operating income= 17,500
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement as shown: Total Company North South Sales $ 675,000 $ 450,000 $ 225,000 Variable expenses 405,000 315,000 90,000 Contribution margin 270,000 135,000 135,000 Traceable fixed expenses 150,000 75,000 75,000 Segment margin 120,000 $ 60,000 $ 60,000 Common fixed expenses 65,000 Net operating income $ 55,000 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in dollar sales for the North region. 3. Compute the break-even point in dollar sales for the South region.
Answer:
Piedmont Company
1. Computation of the Companywide break-even point:
Break-even point = Fixed Cost/Contribution per margin
= $215,000/$27 = 7,963 units
2. Computation of the break-even point in dollar sales for the North region:
Break-even point in dollar sales = Fixed Costs/Contribution margin percentage
= $107,500/30% = $358,333
3. Computation of the break-even point in dollar sales for the South region:
= $107,500/60% = $179,1667
Explanation:
a) Data
Piedmont Company Contribution format segmented income statement as shown:
Total Company North South
Sales $ 675,000 $ 450,000 $ 225,000
Variable expenses 405,000 315,000 90,000
Contribution margin 270,000 135,000 135,000
Traceable fixed expenses 150,000 75,000 75,000
Segment margin 120,000 $ 60,000 $ 60,000
Common fixed expenses 65,000 32,500 32,500
Net operating income $ 55,000 $27,500 $27,500
NB: The common fixed expenses must be shared in some way to calculate the break-even points.
b) Total fixed costs:
Company-wide = $215,000 ($150,000 + 65,000)
North = $107,500 ($75,000 + 32,500)
South = $107,500 ($75,000 + 32,500)
c) We assume that the sales unit of 5,000 each for the two regions. Total units = 10,000
d) Contribution per margin:
Company-wide = $270,000/10,000 = $27
North = $135,000/5,000 = $27
South = $135,000/5,000 = $27
e) Contribution margin percentage:
= Contribution/Sales x 100
Company-wide = $270,000/$675,000 x 100 = 40%
North = $135,000/$450,000 x 100 = 30%
South = $135,000/$225,000 x 100 = 60%
f) The break-even point is the quantity of sales that must be achieved for the fixed costs to be fully covered and no profit or loss is recorded. It is the point at which fixed costs are equal to the contribution. The contribution is the difference between the sales value and the variable costs.
On January 1, 20X9, Gulliver Corporation acquired 80 percent of Sea-Gull Company's common stock for $160,000 cash. The fair value of the noncontrolling interest at that date was determined to be $40,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition:
Gulliver Corp. Sea-Gull Corp.
Cash $ 60,000 $ 20,000
Accounts Receivable 80,000 30,000
Inventory 90,000 40,000
Land 100,000 40,000
Buildings and Equipment 200,000 150,000
Less: Accumulated Depreciation (80,000) (50,000)
Investment in Sea-Gull Corp. 160,000
Total Assets $ 610,000 $ 230,000
Accounts Payable $ 110,000 $ 30,000
Bonds Payable 95,000 40,000
Common Stock 200,000 40,000
Retained Earnings 205,000 120,000
Total Liabilities and Equity $ 610,000 $ 230,000
At the date of the business combination, the book values of Sea-Gull's net assets and liabilities approximated fair value except for inventory, which had a fair value of $45,000, and land, which had a fair value of $60,000.
1. Based on the preceding information, what amount of total inventory will be reported in the consolidated balance sheet prepared immediately after the business combination?
A. $130,000
B. $135,000
C. $90,000
D. $45,000
2. Based on the preceding information, what amount of goodwill will be reported in the consolidated balance sheet prepared immediately after the business combination?
A. $0
B. $40,000
C. $20,000
D. $15,000
3. Based on the preceding information, what amount of total assets will be reported in the consolidated balance sheet prepared immediately after the business combination?
A. $720,000
B. $840,000
C. $825,000
D. $865,000
4. Based on the preceding information, what amount of total liabilities will be reported in the consolidated balance sheet prepared immediately after the business combination?
A. $395,000
B. $280,000
C. $275,000
D. $195,000
5. Based on the preceding information, what amount will be reported as noncontrolling interest in the consolidated balance sheet prepared immediately after the business combination?
A. $0
B. $15,000
C. $40,000
D. $46,000
6. Based on the preceding information, what amount of consolidated retained earnings will be reported immediately after the business combination?
A. $205,000
B. $120,000
C. $325,000
D. $310,000
7. Based on the preceding information, what amount will be reported as total stockholders' equity in the consolidated balance sheet prepared immediately after the business combination?
A. $445,000
B. $205,000
C. $565,000
D. $550,000
Answer:
1. Amount of inventory:
D. $45,000
2. Amount of Goodwill:
A. $0
3. Total assets:
A. $720,000
4. Total liabilities:
C. $275,000
5. Non-controlling interest:
C. $40,000
6. Consolidated Retained Earnings
A. $205,000
7. Stockholders' Equity:
$405,000
Explanation:
a) Data:
1. Balance Sheets
Gulliver Corp. Sea-Gull Corp.
Book value Fair value
Cash $ 60,000 $ 20,000 $20,000
Accounts Receivable 80,000 30,000 30,000
Inventory 90,000 40,000 45,000
Land 100,000 40,000 60,000
Buildings and Equipment 200,000 150,000 150,000
Less: Acc. Depreciation (80,000) (50,000) (50,000)
Investment in Sea-Gull Corp.160,000
Total Assets $ 610,000 $ 230,000 $255,000
Accounts Payable $ 110,000 $ 30,000 $30,000
Bonds Payable 95,000 40,000 40,000
Unrealized gain on fair value 25,000
Common Stock 200,000 40,000 0
Retained Earnings 205,000 120,000 0
Total Liabilities & Equity $ 610,000 $ 230,000
You are thinking of building a new machine that will sve you 2,000 in the first year the machine will then begin to wear out so that the savings decline at a rate of 4% per year forever. What is the present value of the savings if the interest rate is 5% per year? (Hint: this is a growing perpetuity.)
Answer:
The present value of the savings is $22222.22
Explanation:
A perpetuity is an indefinite series of equal payments made after equal intervals of time and for an unlimited period. A growing perpetuity is a kind of perpetuity whose period payments are not equal and they grow(or decline) at a constant rate each period for an indefinite period of time.
The formula for the present value of a growing perpetuity is attached.
The present value of the savings can be calculated as follows,
Present value = 2000 / (0.05 - (-0.04)
Present value = 2000 / (0.05 + 0.04)
Present value = 2000 / 0.09
Present value = $22222.22
The following cost behavior patterns describe anticipated manufacturing costs for 2013: raw material, $8.20/unit; direct labor, $11.20/unit; and manufacturing overhead, $386,400 + $9.20/unit. Required: If anticipated production for 2013 is 42,000 units, calculate the u
Answer:
Note: The missing part of the question is "using variable costing and absorption costing. Explain the difference"
Solution
According to variable costing, the unit cost based was
= $8.20 + $11.20 + $9.20
= $28.6
According to absorption costing,
Total Manufacturing costs= Direct material + Direct labor + Overhead
= $8.20 + $11.20 + ($386,400/42,000 units) + $9.20
= $8.20 + $11.20 + $9.2 + $9.2
= $37.8
The difference between the variable costing and the absorption cost is because the product costing using variable costing method only includes variable costs.
Coolibah Holdings is expected to pay dividends of $ 1.10 every six months for the next three years. If the current price of Coolibah stock is $ 22.00, and Coolibah's equity cost of capital is 14%, what price would you expect Coolibah's stock to sell for at the end of three years?
Answer:
$25.15
Explanation:
The price the stock would be sold at the end of the three-year holding period can be computed using excel FV formula stated below:
=fv(rate,nper,pmt,-pv)
rate is the semiannual cost of capital i.e 14%/2=7%
nper is the number of dividend payments over three-year period which is 6
pmt is the amount of semiannual dividend payment
pv is the current stock price
=fv(7%,6,1.1,-22)=$25.15
1. Name several business etiquette guidelines that promote positive workplace conversations, in the office and at work-related social functions.
2. How can you ensure that your telephone calls on the job are productive? Name at least six suggestions.
3. List at least three guidelines that courteous cell phone users follow to avoid offending others.
Answer:
Please see explanations below
Explanation:
1.
• Ignore or avoid negative remarks when interacting with people either at work or anywhere.
• Give sincere and specific praise to people when they surpass your expectation.
• Always use correct names and titles when addressing people.
• Always choose appropriate topics when sending mails or when communicating.
• Recognize people for good work
• listen to learn in order to be better
2.
• Be smart, cheerful and accurate at all times
• One has to be professional and courteous at all times
• Avoid small or irrelevant talk that can waste too many time hence causes delay in hitting the point of making the call
• Always end the call with a tactful cue without the receiver being offended
• Summarize the points of the call in order to be sure everyone is satisfied with the discussion.
• Plan an agenda to handle calls in-order to know what one has to discuss
3.
• When in a face to face conversation, be sure you pay utmost attention or avoid having divided attention
• One should learn how to lower his or her voice when making calls openly
• Receiving calls when you are already engaged in a face to face conversation is disrespectful hence should not be imbibed.
you need to have $31,750 in 11 years. You can earn an annual interest rate of 6 percent for the first 6 years, and 6.6 percent for the next 5 years. How much do you have to deposit today?
Answer:
Initial deposit= $16,260.08
Explanation:
Giving the following information:
Future value= $31,750 in 11 years.
You can earn an annual interest rate of 6 percent for the first 6 years, and 6.6 percent for the next 5 years.
To calculate the initial deposit, we need to use the following formula for each interest rate:
PV= FV/(1+i)^n
Last 5 years:
PV= 31,750/(1.066^5)= 23,065.23
First 6 years:
PV= 23,065.23/1.06^6= $16,260.08
Marshland Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: Cash dividends declared for the year $ 40,000 Cash dividends payable at the beginning of the year 17,000 Cash dividends payable at the end of the year 13,000 The amount of cash paid for dividends was: A. $36,000. B. $53,000. C. $40,000. D. $44,000. E. $57,000.
Answer: $44,000
Explanation:
The following information can be gotten from the question:
Cash dividends declared for the year = $40,000
Cash dividends payable at the beginning of the year = $17,000
Cash dividends payable at the end of the year = $13,000
Therefore, the amount of cash paid for dividends was:
= $40,000 + $17,000 - $13,000
= $57,000 - $13,000
= $44,000
Hampton Corporation has a beta of 1.3 and a marginal tax rate of 34%. The expected return on the market is 11% and the risk-free interest rate is 4%. Estimate the firm’s cost of internal equity.
Answer: 13.1%
Explanation:
Using the Capital Asset Pricing Model, the expected return is;
Expected Return = Risk Free rate + beta(expected return - risk free rate)
= 4% + 1.3( 11% - 4%)
= 4% + 9.1%
Expected Return = 13.1%
Q 9.28: Prepare the journal entry if Bench Company purchases a delivery van for $22,175 with related expenditures of sales taxes $443, painting $225, vehicle license $210, and accident insurance $875.
Answer:
Dr Equipment $22,843
Dr Licence expenses $210
Dr Prepaid Insurance $875
Cr Cash $23,928
Explanation:
Preparation of the journal entry for Bench Company
Based on the information given we were told that Company made the following transaction:
Purchase of delivery van for tha amount of $22,175
Sales taxes for the amount of $443
Painting for the amount of $225
Vehicle license for the amount of $210
Accident insurance for the amount of $875
Therefore based on the above Bench Company Journal entry will be recorded as:
Dr Equipment $22,843
($22,175+$443+$225)
Dr Licence expenses $210
Dr Prepaid Insurance $875
Cr Cash $23,928
WinterDreams operates a Rocky Mountain ski resort. The company is planning its lift ticket pricing for the coming ski season. Investors would like to earn a 16 % return on the company's $ 115 million of assets. The company incurs primarily fixed costs to groom the runs and operate the lifts. WinterDreams projects fixed costs to be $ 35 comma 600 comma 000 for the ski season. The resort serves 800 comma 000 skiers and snowboarders each season. Variable costs are $ 8 per guest. Currently, the resort has such a favorable reputation among skiers and snowboarders that it has some control over the lift ticket prices.
Required:
a. Would Mountain Point emphasize target pricing or cost-plus pricing? Why?
b. If other resorts in the area charge $66 per day, what price should Mount Snow charge?
Answer:
a. Would Mountain Point emphasize target pricing or cost-plus pricing? Why?
They emphasize cost plus pricing because the investors are seeking a desired rate of return on their investment and they do it by adding the desired profit margin to their costs.b. If other resorts in the area charge $66 per day, what price should Mount Snow charge?
$75.50 in order for them to generate the required ROI. Since the resort has a very good reputation, it can charge a higher price than its competitors.Explanation:
company's assets = $115,000,000
expected return on investment = 16%
fixed costs = $35,600,000
number of customers = 800,000
variable costs = $8 per customer x 800,000 = $6,400,000
total costs = $42,000,000
total cost per client = $42,000,000 / 800,000 = $52.50
desired profit = $115,000,000 x 16% = $18,400,000
desired profit per client = $18,400,000 / 800,000 = $23
price per ticket = $75.50
For this discussion, you are to pretend that you're on a team project that's running behind schedule. Let's say you and your project team are three months into an eight-month project and you realize that you're already 2.5 weeks behind schedule and 15% over budget. What would you do?
Answer:
Explanation:
The discussion or focus is on PROJECT MANAGEMENT.
You are on a team project that is running behind schedule. You and your project team are 3 months into an 8-month project.
There is a deficiency in both time management and money management.
For the project to be 3 months old, out of 8 months, then it's already in the execution stage.
Being behind schedule by 2.5 weeks implies that you have spent 2.5 weeks extra, achieving what you ought to achieve without or before the extra time. Discuss with your project team and make them more active in delivering their tasks. Time is crucial. Time is money also.
You're 15% over budget, hence you've spent 15% more than you should. Check the vendors of items and tools used in the project. You might have to change them if their products are too costly. Ensure proper accounting also. Do not disburse funds without the consultation and approval of team members who are finance experts.
In all, not more than 2 days or thereabout should be used in making these adjustments because time and money are equally pertinent!
A bond has a $1,000 par value, 20 years to maturity, and pays a coupon of 5.5% per year, annually. The bond is callable in ten years at $1,075. If the bond’s yield to maturity is 5.89% per year, what is its yield to call? Question 13 options: A) 5.87% B) 6.57% C) 6.11% D) 6.43% E) 6.68%
Answer:
6.68% , option E is correct
Explanation:
The price of the bond can be computed using the below formula for bond price calculation:
bond price=face value/(1+r)^n+coupon*(1-(1+r)^-n)/r
face value is $1000
r is the yield to maturity which is 5.89%
coupon=face value*coupon rate=1000*5.5%=55
n is the number of coupons the bond would pay which is 11 coupons over 20 years
bond price=1000/(1+5.89%)^20+55*(1-(1+5.89%)^-20)/5.89%
bond price=$ 954.87
The yield on the call can be determined using excel rate function as further explained below:
=rate(nper,pmt,-pv,fv)
nper is the number of coupons the bond would pay before being called in ten years' time i.e 10 coupons
pmt is the is the amount of annual coupon=$1000*5.5%=$55
pv is the current price of $954.87
fv is the call price which is $1,075
=rate(10,55,-954.87,1075)=6.68%
Use the information for the question(s) below. Project A Project B Time 0 −10,000 −10,000 Time 1 5,000 4,000 Time 2 4,000 3,000 Time 3 3,000 10,000 If WiseGuy Inc. uses IRR rule to choose projects, which of the projects (Project A or Project B) will rank highest?
Answer:
PROJECT B
Explanation:
Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.
IRR can be calculated using a financial calculator
For project A,
Cash flow in year 0 = -10,000
cash flow in year 1 = 5,000
cash flow i year 2 - 4,000
cash flow in year 3 = 3,000
IRR = 10.65%
For project B,
Cash flow in year 0 = -10,000
cash flow in year 1 = 4,000
cash flow i year 2 - 3,000
cash flow in year 3 = 10,000
IRR = 26.37%
Project B would be ranked higher because it has a higher IRR
To find the IRR using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the IRR button and then press the compute button
When calculating a project’s net present value, which type of cash flows should be considered? Question 2 options: A) Free cash flows B) Net operating profit cash flows C) Operating cash flows D) External cash flows E) Alternative cash flows
Answer:
Operating cash flows
Explanation:
Net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV is a capital budgeting method used to determine profitable investments
2. [5 pts] Consider the following events: Scientists reveal that eating oranges decreases the risk of diabetes, and at the same time, farmers use a new fertilizer that makes orange trees produce more oranges. Illustrate and explain what effect these changes have on the equilibrium price and quantity of oranges.
Answer:
there would be a rise in equilibrium quantity and an indeterminate effect on equilibrium price
Explanation:
as a result of the scientists revelation, the demand for oranges would increase and so would the price.
as a result of the new fertilisers been used, the supply of oranges would rise and price would fall.
taking these two occurrences together, there would be a rise in equilibrium quantity and an indeterminate effect on equilibrium price
At the beginning of June, Bezco Toy Company budgeted 24,000 toy action figures to be manufactured in June at standard direct materials and direct labor costs as follows: Direct materials $36,000 Direct labor 8,640 Total $44,640 The standard materials price is $0.6 per pound. The standard direct labor rate is $9 per hour. At the end of June, the actual direct materials and direct labor costs were as follows: Actual direct materials $33,400 Actual direct labor 8,000 Total $41,400 There were no direct materials price or direct labor rate variances for June. In addition, assume no changes in the direct materials inventory balances in June. Bezco Toy Company actually produced 21,600 units during June. Determine the direct materials quantity and direct labor time variances. Round your per unit computations to two decimal places, if required. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Direct materials quantity variance $ -3,600 Unfavorable Direct labor time variance $ -864 Unfavorable Feedback
Answer:
Direct material quantity variance = $1,000
Direct labor time variance = $224
Explanation:
Calculation of the direct materials quantity
Direct material quantity variance = Actual quantity at standard price - Standard Quantity at standard price
Direct material quantity variance = $33,400 - (($36,000/24,000) * 21,600
Direct material quantity variance = $$33,400 - ($1.5 * $21,600)
Direct material quantity variance = $33,400 - $32,400
Direct material quantity variance = $1,000
Calculation of direct labor time variances
Direct labor time variance = Actual labor time at standard cost - Standard labor time at standard cost
Direct labor time variance = $8,000- (($8,640/24,000) * $21,600
Direct labor time variance = $8,000 - (0.36) * $21,600
Direct labor time variance = $8,000 - $7,776
Direct labor time variance = $224
"Pine Street Inc. makes unfinished bookcases that it sells for $57.10. Production costs are $37.94 variable and $10.50 fixed. Because it has unused capacity, Pine Street is considering finishing the bookcases and selling them for $72.02. Variable finishing costs are expected to be $7.14 per unit with no increase in fixed costs. Prepare an analysis on a per unit basis showing whether Pine Street should sell unfinished or finished bookcases. (Round answers to 2 decimal places, e.g. 15.25. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)"
Answer and Explanation:
The Preparation of analysis on a per unit basis showing whether Pine Street should sell unfinished or finished bookcases is prepared below:-
Particulars Sell unfinished Process further Net income
(loss)
Sales per unit $57.10 $72.02 $14.92
Cost per unit
Variable $37.94 $45.08 -$7.14
($37.94 + 7.14)
Fixed $10.5 $10.5
Total $48.4 $55.58 $7.78
Net income per
unit $8.66 $16.44 $7.78
From the above calculation The bookcases to be sold and process further.
If the marginal propensity to consume (mpc) is 0.9, the spending multiplier is _____, the tax multiplier is ______, and the balanced budget multiplier is _______, respectively.
Answer:
If the marginal propensity to consume (mpc) is 0.9, the spending multiplier is 10, the tax multiplier is -9, and the balanced budget multiplier is 1, respectively.
Explanation:
These can be calculated as follows:
a) Calculation of spending multiplier
To calculate this, we use the formula for calculating the spending multiplier as follows:
Spending multiplier = 1 / (1 - mpc)
Since mpc = 0.9, we have:
Spending multiplier = 1 / (1 - mpc) = 1 / (1 - 0.9) = 1 / 0.1 = 10
b) Calculation of tax multiplier
To calculate this, we use the formula for calculating the tax multiplier as follows:
Tax multiplier = -mpc / mps
Note that the tax multiplier as given above is negative because increase in tax by the government makes the multiplier to work in reverse since the money is leaving the circular flow.
Since what is not consumed is saved, we have:
mps = 1 - mpc = 1 - 0.9 = 0.1
Therefore,
Tax multiplier = -0.9 / 0.1 = -9
c) Calculation of balanced budget multiplier
To calculate this, we use the formula for calculating the balanced budget multiplier as follows:
Balanced budget multiplier = Spending multiplier + Tax multiplier = 10 + (-9) = 10 - 9 = 1
Note that balanced budget multiplier is always equal to 1 as obtained above.
Conclusion
Therefore, if the marginal propensity to consume (mpc) is 0.9, the spending multiplier is 10, the tax multiplier is -9, and the balanced budget multiplier is 1, respectively.
Where can Costco improve? Should it offer more products or advertise more? Why or why not?
Answer:
Costco should advertise more.
Explanation:
Costco is following traditional ways to advertise its products. Most of the organizations prefer to spend huge sums of money on advertising its products. Costco should advertise its products and reach out to its customers and potential customers through marketing. It spends no budget on advertising. It only sends targeted emails to its existing customers. This strategy will not enhance its customer portfolio and new customers might not reach out the company.
Answer:
where can Costco improve
xplanation:
Moraine, Inc., has an issue of preferred stock outstanding that pays a 3.50 dividend in perpetuity. If this issue currently sells for 85 per share, what is the required return
Answer:
4.12%
Explanation:
Given that:
Payment of dividend per year = $3.50
Issue price of preferred stock = $85
(Note: Assumed that $85 is the face value of the preferred stock)
Hence, the formula for Required return = Dividend per year/ face value of the stock
= $3.5/ $85 = 0.0411764705
Then converting the answer to percentage, we have
0.0411764705 * 100% = 4.1764705
Therefore, the required return is = 4.12% (approximately)
Trudy is Jocelyn's friend. Trudy looks after Jocelyn's four-year-old son during the day so Jocelyn can go to work. During the year, Jocelyn paid Trudy $4,090 to care for her son. What is the amount of Jocelyn's child and dependent care credit if her AGI for the year was $30,900
Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $487,000 cost with an expected four-year life and a $23,000 salvage value. All sales are for cash, and all costs are out-of-pocket, except for depreciation on the new machine. Additional information includes the following:
Expected annual sales of new product $1,910,000
Expected annual costs of new product:
Direct materials 495,000
Direct labor 674,000
Overhead (excluding straight-line depreciation on new machine) 335,000
Selling and administrative expenses 159,000
Income taxes 38%
Required:
1. Compute straight-line depreciation for each year of this new machine's life.
2. Determine expected net income and net cash flow for each year of this machine's life.
3. Compute this machine's payback period, assuming cash flows occur evenly throughout each year.
4. Compute this machine's accounting rate of return, assuming income is earned evenly throughout each year.
5. Compute net present value, using a discount rate of 6% and that assuming that cash flows occur at each year-end.
Answer:
1. $116,000
2. Net Income = $81,220 and Net Cash flow = $247,000
3. The payback period is 1 year and 11 months .
4. 31.85 %
5. $368,881.09
Explanation:
Straight Line Method charges a fixed amount of depreciation expense over the life of an asset.
Depreciation Expense = (Cost - Residual Value) / Estimated Useful Life
= ($487,000 - $23,000) / 4
= $116,000
Net Income = Sales - Expenses
Sales $1,910,000
Less Expenses :
Direct materials ($495,000)
Direct labor ($674,000)
Overhead ( $335,000 + $116,000) ($451,000)
Selling and administrative expenses ($159,000)
Operating Income before tax $131,000
Income tax at 38% ($49,780)
Net Income $81,220
Net Cash Flow Calculation :
Operating Income before tax $131,000
Add Depreciation Expense $116,000
Net Cash flow $247,000
Payback period
Payback period = Year 1 + Year 2
$487,000 = $247,000 + $240,000 / $247,000 × 12
= 1 year, 11 months
Therefore, the payback period is 1 year and 11 months .
Accounting Rate of Return = Average Profits / Average Investment × 100
Where, Average Profits = Sum of Profits ÷ Number of Years
= ($81,220 × 4) ÷ 4
= $81,220
and Average Investment = (Initial Investment + Scrape Value) ÷ 2
= ($487,000 + $23,000) ÷ 2
= $255,000
Therefore, Accounting Rate of Return = $81,220 / $255,000 × 100
= 31.85 %
NET PRESENT VALUE (NPV)
Calculation of NPV of Project A using a Financial Calculator :
($487,000) Cfj
$247,000 Cfj
$247,000 Cfj
$247,000 Cfj
$247,000 Cfj
6 I/Yr
Shift NPV $368,881.09
Talk to your mentor, family members, or relatives between the ages of 25-30 and who are employed to see what their budgets look like. Develop a sample budget for someone aged 25 to 30 years old
Answer:
Household budget for someone aged 25 to 30 is given below.
Explanation:
Income $1,200
Particulars Budget Amount Actual Expense Difference
House Rent $300 $300 0
Utility Bills $85 $93 -8
Groceries $195 $175 20
Clothing expense $50 $78 -28
Entertainment $20 $55 -35
Laundry $5 $6 -1
Study material $10 $25 -15
Customer-Level Planning Circle K operates a number of convenience stores worldwide. Assume that an analysis of operating costs, customer sales, and customer patronage reveals the following:Fixed costs per store ............................................$80,000.00/year
Variable cost ratio...............................................0.80
Average sale per customer visit....................................$15.00
Average customer visits per week..................................1.75
Customers as portion of city population .............................0.04
Determine the city population required for a single Circle K to earn an annual profit of $40,000
Answer:
11,000 people
Explanation:
fixed costs per store $80,000
variable cost ratio 0.80
average sale per customer $15
average customer sales per week 1.75
customers as portion of population 4%
each customer shops 1.75 x 52 = 91 times per year
contribution margin per visit = $15 - ($15 x 0.8) = $3
contribution margin per client per year = $3 x 91 = $273
in order to make $40,000 in profits, you need at least:
($80,000 + $40,000) / $273 = 439.56 ≈ 440 customers
to determine the city's total population = 440 / 0.04 = 11,000
Rita Gonzales won the $53 million lottery. She is to receive $2.2 million a year for the next 20 years plus an additional lump sum payment of $9 million after 20 years. The discount rate is 12 percent. What is the current value of her winnings
Answer:
PV= $17,365,776.86
Explanation:
Giving the following information:
Cf= 2,200,000
Number of years= 20
Discount rate= 12%
Additional lump sum= 9,000,000
First, we need to calculate the future value using the following formula:
FV= {A*[(1+i)^n-1]}/i
A= annual cash flow
FV= {2,200,000*[(1.12^20) - 1]} / 0.12 + 9,000,000
FV= $167,515,373.4
Now, the present value:
PV= FV/(1+i)^n
PV= 167,515,373.4/1.12^20
PV= $17,365,776.86
Larry Nelson holds 1,000 shares of General Electric (GE) common stock. As a stockholder, he has the right to be involved in the election of its directors, who are responsible for managing the company and achieving the company’s objectives. True or False: The preemptive right allows Larry to purchase any additional shares sold by the company. This right will protect Larry from dilution in the value of the stocks he holds.
Answer:
The statement is true.
Explanation:
The reason is that the preemptive right allows all the stockholder to receive an equal benefit from the rights issues which is the issue of the companies shares to current stockholders to avoid any dilution in stocks value and also for not effecting the stock percentage holding of the company. This right is also referred to as preemptive right of the stockholders.