Answer: Has the same basis to the donee as the donor's adjusted basis if the donee disposes of the property at a gain.
Explanation:
For a gifted property, it should be noted that the tax basis for a donee that is, the person who gets the gift will be identical to that of the donor, this is, the person that donates the gift in cases whereby the property is gotten as a gift.
Therefore, a gift property disregarding any adjustment for gift tax paid by the donor will have the same basis to the donee as the donor's adjusted basis if the donee disposes of the property at a gain.
BPR is part of the larger discipline of ________, which consists of methods, tools, and technology to support and continuously improve business processes.
Answer:
Business process management.
Explanation:
Business process re-engineering (BPR) is part of the larger discipline of business model optimization, which consists of methods, tools, and technology to support and continuously improve business processes.
The main purpose of business process re-engineering (BPR) is to remove any unnecessary process which does not add value to a business, then to simplify and automate other processes left so as to reduce costs, cycle time, and labor.
Hence, this would ensure that the business is running smoothly without any downtime, backlogs or inefficiency.
A cafeteria serving line has a coffee urn from which customers serve themselves. Arrivals at the urn follow a Poisson distribution at the rate of 3.0 per minute. In serving themselves, customers take about 14 seconds, exponentially distributed. a. How many customers would you expect to see, on average, at the coffee urn? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Answer: 3 customers.
Explanation:
Given the following :
Arrival rate of customers = 3 customers per minute
Service time = 14 seconds
Then if service time is 14 seconds, the service rate per minute will be 60/14 = 4.29 = 4 (nearest whole number)
Service rate = 4 customers per minute.
Number of customers at coffee urn(Nc) :
Nc = (arrival rate) /(service rate - arrival rate)
Nc = (3) / (4 - 3)
Nc = 3 / 1
Nc = 3
Therefore, average number of customers expected at coffee urn = 3
Neutrino Industries stock trades at $49 per share and there are 120 million shares outstanding. The management would like to raise $400 million in an SEO. If the underwriter charges 6% of gross proceeds, how many shares must it sell?
Answer:
Neutrino Industries must sell 8.68 million shares to raise $400 million.
Explanation:
To calculate this, let B represents the number of shares Neutrino Industries must sell. Therefore, we have:
Gross proceeds = $49 * B, or $49B
Underwriter charges = 6% * $49B = $2.94B
To raise $400 million, we deduct the underwriter charges from gross proceeds and solve for B as follows:
$49B – $2.94B = $400,000,000
$46.06B = 400,000,000
B = 400,000,000 / 46.06
B = 8,684,324.79 shares, or 8.68 million shares.
Therefore, Neutrino Industries must sell 8.68 million shares to raise $400 million.
You place an order for 1,600 units of Good X at a unit price of $53. The supplier offers terms of 2/30, net 50. a-1. How long do you have to pay before the account is overdue? a-2. If you take the full period, how much should you remit? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b-1. What is the discount being offered? (Enter your answer as a percent.) b-2. How quickly must you pay to get the discount? b-3. If you do take the discount, how much should you remit? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c-1. If you don’t take the discount, how much interest are you paying implicitly? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c-2. How many days’ credit are you receiving? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
Answer:
a-1. How long do you have to pay before the account is overdue?
50 daysa-2. If you take the full period, how much should you remit?
if you pay after the discount period (first 30 days) but before the 50th day, you must pay $84,800b-1. What is the discount being offered?
2% if you pay within 30 daysb-2. How quickly must you pay to get the discount?
you have up to 30 days to pay the invoice and still get the discountb-3. If you do take the discount, how much should you remit?
$83,104c-1. If you don’t take the discount, how much interest are you paying implicitly?
$1,696c-2. How many days’ credit are you receiving?
the total credit period is 50 daysAnnual Worth and Capital Recovery Calculations U S. Steel is considering a plant expansion to produce austenitic, precipitation hardened, duplex, and martensitic stainless steel round bars that is expected to cost $13 million now and another $10 million 1 year from now. If total operating costs will be $1.2 million per year starting 1 year from now, and the estimated salvage value of the plant is virtually zero, how much must the company make annually in years 1 through 10 to recover its investment plus a return of 15% per year?
Answer:
$5,601,632
Explanation:
we must first calculate the present value of the required investments and the annual costs:
initial investment = $13,000,000 + $10,000,000/1.1 = $22,090,909
annual costs = $1,200,000 x 5.0188 (PV annuity factor, 15%, 10 periods) = $6,022,560
present value of initial investment + annual costs = $28,113,469
we must calculate an annuity that has a present value = $28,113,469 with a 15% discount rate and 10 years:
annuity = $28,113,469 / 5.0188 = $5,601,631.67 ≈ $5,601,632
Which type of data is represented in the following statement? 42% of customers who purchase a warranty plan use the warranty services before the warranty expires
A. Secondary research data
B. Qualitative data
C. Quantitive data
D. Primary research data
The kind of data is represented in the statement mentioned above is Secondary research data. Thus, option A is correct,
What is research?Research is defined as the creation of new knowledge and/or the creative use of pre-existing knowledge to develop original ideas, methods, and comprehensions. This might entail combining and evaluating previous research to develop novel and creative discoveries.
Research questions must be open-ended and not have simple yes-or-no responses or be settled by readily available facts. They should instead demand the writer's investigation and analysis.
Secondary research include summarizing, collating, and/or synthesizing prior findings. Secondary research differs from primary research in that primary research involves data generation, whereas secondary research analyzes data from primary research sources. Therefore, it can be concluded that option (A) is correct.
Learn more about research here:
https://brainly.com/question/8343832
#SPJ5
Answer:
C: Quantitative
Explanation: I say so
Your client, Bo Regard, holds a complete portfolio that consists of a portfolio of risky assets (P) and T-Bills. The information below refers to these assets. What is the expected return on Bo's complete portfolio?
Answer:
The expected return on Bo's complete portfolio will be "10.32%".
Explanation:
The given question is incomplete. Please find attachment of the complete question.
According to the question, the given values are:
Port's expected return,
[tex]R_p=12 \ percent[/tex]
T-bill's expected return,
[tex]R_t=3.6 \ percent[/tex]
Port's weight,
[tex]W_p=80 \ percent \ i.e.,\ 0.80[/tex]
T-bill's weight,
[tex]W_t=20 \ percent \ i.e., \ 0.20[/tex]
Now,
The Bo's complete portfolio's expected return will be:
⇒ [tex]W_p\times R_p+W_t\times R_t[/tex]
On substituting the given values, we get
⇒ [tex]0.80\times 12 \ percent+0.20\times 3.6 \ percent[/tex]
⇒ [tex]10.32 \ percent[/tex]
Note: percent = %
Alonso T. Corporation uses the weighted-average method in its process costing system. In their first processing department, the company worked on 1,050 equivalent units of production with respect to conversion costs in April. Additional information for April is: Beginning inventory 230 units 40% complete Started 1,345 units Completed and transferred out 700 units Q: The % of completion of the ending inventory in work-in-process with respect to conversion cost is: A: % (enter % amount, not decimal; ex. 22, not 0.22)
Answer:
The % of completion of the ending inventory in work-in-process with respect to conversion cost is: 40%.
Explanation:
First determine the Physical Units of Closing Work In Process
Physical Units of Closing Work In Process Calculation
Physical Units of Closing Work In Process = 230 + 1,345 - 700
= 875
Calculation of Equivalent Units of Production
(To determine Equivalent units of Closing Work In Process)
Conversion Cost
Units Completed and Transferred (700 × 100%) = 700
Units in Closing Work In Process (Balancing figure) = 350
Equivalent Units of Production = 1,050
Percentage Completion = Equivalent Units of Closing Work In Process / Physical Units of Closing Work In Process × 100
= 350 / 875 × 100
= 40%
The % of completion of the ending inventory in work-in-process with respect to conversion cost is: 40%.
uppose Boyson Corporation's projected free cash flow for next year is FCF 1 = $150,000, and FCF is expected to grow at a constant rate of 6.5%. If the company's weighted average cost of capital is 11.5%, what is the value of its operations?
Answer:
Firm's corporate value is $3,000,000
Explanation:
Future cash flow = $150,000
Expected growth rate 6.5%
Weighted average cost of capital = 11.5%
Therefore, Firm's total corporate value = Future cash flow / Cost of capital - Growth rate
= $150,000 / 11.5% - 6.5%
= $3,000,000
Ted failed to disaffirm a contract during his minority or within a reasonable time after reaching majority. The contract was automatically:
Answer:
Ratified
Explanation:
A pension plan that promises employees a fixed annual pension benefit, based on years of service and compensation, is called a(n)The journal entry a company uses to record accrued vacation privileges for its employees at the end of the year is
Answer:
1. Defined Benefit Plan
2. debit Vacation Pay Expense; credit Vacation Pay Payable
Explanation:
1. With a Defined Benefit Plan, employers promise to pay employees a pension based on factors like years of service and salary. The plan will be sponsored by the employer and will be managed by the company.
2. As the Vacation is an expense, it will need to be debited to an expense account being the Vacation Pay Expense account. It will also be credited to the Vacation Pay Payable to reflect that this is a liability that the company must fulfil.
Clarissa wants to fund a growing perpetuity that will pay $ 9 comma 000 per year to a local museum, starting next year. She wants the annual amount paid to the museum to grow by 6% per year. Given that the interest rate is 9%, how much does she need to fund this perpetuity?
Answer:
$300,000.00
Explanation:
The present value of a growing perpetuity can be computed using the below present value formula specifically meant for growing annuity:
Present value=cash flow/interest rate-growth rate
cash flow is the initial amount per year which is $9000
interest rate is 9%
growth rate of the annuity payment is 6%
present value=$9000/(9%-6%)=$300,000.00
Assignment Content Potential risk factors are found in every project. Although individual projects have different risks, there are several common risk factors. Create either a list or chart of 5 common potential risks. In 1 to 2 sentences, briefly explain why each of these risks are so common. How are they measured? Why are these important to consider when evaluating an organization’s strategic plan? Submit your list or chart.
Answer and Explanation:
The common risk factors into the project are shown below :-
a. Most of the projects are at risk from the budget. In which the organisation estimates the budget is inaccurate or less for the project.
b. One of the important risk organizations that the project faces is that there is a conflict between the parties concerned. That could affect the project.
c. Technology risks one of the threats, too. Where service outrage interferes with or affects a project.
d. We face the threat of schedule even during the project. Where it's not finishing the project on time. That will improve the company's costs.
e. In the project health and safety is a common threat that each organisation or initiative has to face and make the threat a priority.
All those risks are normal, Since expense, technology, and manpower are important in any project period. That allows us to finish the tasks and how that affects other factors. It can represent a risk to the project.
There are plenty of risks in the project which are normal to some of them. Measuring all of those threats. We need to audit the project in a timely manner by analyzing the project situation and that we can also do a project performance management to evaluate all the project risks.
Understanding these risks can be a powerful and significant consideration for the company in the strategic preparation of the organisation.
Through taking those risks into account. Organization can accurately foresee the potential problems, the project situations.
It should help the company overcome the problem as quickly as possible. That helps save the business time and costs.
True or False: Your friend thinks that the stock price of KnowItAll Corp. will decline. He decides to write and sell an option without buying the stock. He says that he will buy the stock when his option buyer exercises the option. This is an example of a naked option. This statement is
Answer:
True
Explanation:
In the case of naked options, the seller does not own any stock which is underlying Also the payoff related call option shows the difference between the price of the stock and the strike price
Therefore in the given situation, since he decides to write and sell without purchasing the stock but the purchased could be done when the option is exercised
So by the above explanation, the given statement is true
n investor has $100,000 invested in an account that earns 5% annually. The investor wishes to withdraw $12,000 per year. If the investor withdraws $12,000 annually, the account will be fully depleted in:
Answer:
11 years
Explanation:
For computing, the number of years or the account will be fully depleted we need to apply the NPER formula i.e to be shown in the attachment below:
Given that,
Present value = $100,000
Future value = $0
PMT = $12,000
Rate of interest = 5%
The formula is shown below:
= NPER(Rate;PMT;-PV;FV;type)
The present value come in negative
So, after applying the above formula, the number of years in which the account is depleted is 11 years
Pecan Corporation’s controller has just finished preparing a consolidated balance sheet, income statement, and statement of changes in retained earnings for the year ended December 31, 20X4. Pecan owns 60 percent of Sandy Corporation’s stock, which it acquired at underlying book value on May 7, 20X1. At that date, the fair value of the noncontrolling interest was equal to 40 percent of Sandy Corporation’s book value. You have been provided the following information:
Consolidated net income for 20X4 was $271,000.
Sandy reported net income of $70,000 for 20X4.
Pecan paid dividends of $25,000 in 20X4.
Sandy paid dividends of $15,000 in 20X4.
Pecan issued common stock on April 7, 20X4, for a total of $150,000.
Consolidated wages payable increased by $7,000 in 20X4.
Consolidated depreciation expense for the year was $21,000.
Consolidated accounts receivable decreased by $32,000 in 20X4.
Bonds payable of Pecan with a book value of $204,000 were retired for $200,000 on December 31, 20X4.
Consolidated amortization expense on patents was $13,000 for 20X4.
Pecan sold land that it had purchased for $142,000 to a nonaffiliate for $134,000 on June 10, 20X4.
Consolidated accounts payable decreased by $12,000 during 20X4.
Total purchases of equipment by Pecan and Sandy during 20X4 were $295,000.
Consolidated inventory increased by $16,000 during 20X4.
There were no intercompany transfers between Pecan and Sandy in 20X4 or prior years except for Sandy’s payment of dividends. Pecan uses the indirect method in preparing its cash flow statement.
Pecan uses the indirect method in preparing its cash flow statement.
Required:
A. What amount of dividends was paid to the noncontrolling interest during 20X4?
B. What amount will be reported as net cash provided by operating activities for 20X4?
C. What amount will be reported as net cash used in investing activities for 20X4?
D. What amount will be reported as net cash used in financing activities for 20X4?
E. What was the change in cash balance for the consolidated entity for 20X4?
What must be the first cost of Alternative B to make the two alternatives equally attractive economically at an interest rate of 8% per year
Answer:
The answer is "21,622.98".
Explanation:
In the given question some information is missing, which can be defined in the given attachment.
To calculate the first cost we first subtract B cost is to X.
NPV = Cash Flow of the sum of PV amount
[tex]PV = \frac{Flow of cash} {(1+i)^n} \\\\ \ Calculating \ the \ NPV \ of \ option \ A: \\\\[/tex]
[tex]= \frac{-16600}{(1 + 0.08)^0}-\frac{2400}{(1 + 0.08)^1}-\frac{2400}{(1 + 0.08)^2} -\frac{2400}{(1 + 0.08)^3}-\frac{2400}{(1 + 0.08)^4}[/tex]
[tex]= \frac{-16600}{1}-\frac{2400}{1.08}-\frac{2400}{1.16}-\frac{2400}{1.25}-\frac{2400}{1.36}[/tex]
[tex]=-16600-2222.22-2068.96-1920-1764.70\\\\=-24,575.88[/tex]
The value of Option A or NPV = -24,575.88
The value of Option B or NPV:
[tex]=-\frac{X}{(1 + 0.80)^0}-\frac{1000}{(1 + 0.08)^1} -\frac{1000}{(1 + 0.08)^2}-\frac{1000}{(1 + 0.08)^3}-\frac{1000}{(1 + 0.08)^4} \\\\ =-\frac{X}{(1.80)^0}-\frac{1000}{(1.08)^1} -\frac{1000}{(1.08)^2}-\frac{1000}{(1.08)^3}-\frac{1000}{(1.08)^4}[/tex]
[tex]= -\frac{X}{1}-\frac{1000}{1.08}-\frac{1000}{1.16}-\frac{1000}{1.25}-\frac{1000}{1.36}\\\\= -X -555.55-862.06-800-735.29\\\\=-X -2952.9[/tex]
The value of Option B or NPV = -X -2952.9
As demanded
In Option B the value of NPV = In Option A the value of NPV
[tex]-X -2952.9= -24,575.88\\\\-X= -21,622.98\\\\X=21,622.98\\[/tex]
You founded your own firm three years ago. You initially contributed $200,000 of your own money and in return you received 2 million shares of stock. Since then, you have sold an additional 1 million shares of stock to angel investors. You are now considering raising capital froma venture capital firm. This venture capital firm would invest $6 million and would receive 3 million newly issued shares in return.
Suppose you sold the 1 million shares to the angel investor for $500,000. What was the post-money valuation of your shares immediately following the angel investor's investment?
A. 1.0$ million
B. 500,000$
C. 2.5$ million
D. 2.0$ million
Answer:
A. $1.0 million
Explanation:
total shares outstanding immediately after you sold stocks to the angel investors = 2 million (your own) + 1 million (angel investors) = 3 million
the angel investors paid $500,000 for 1 million stocks, that means that your 2 million shares are worth twice as much = $500,000 x 2 = $1,000,000
the company's total value = $1,000,000 + $500,000 = $1,500,000
Assume that Denis Savard Inc. has the following accounts at the end of the current year. 1.Common Stock14.Accumulated Depreciation-Buildings. 2.Discount on Bonds Payable.15.Cash Restricted for Plant Expansion. 3.Treasury Stock (at cost).16.Land Held for Future Plant Site. 4.Notes Payable (short-term).17.Allowance for Doubtful Accounts. 5.Raw Materials18.Retained Earnings. 6.Preferred Stock (Equity) Investments (long-term).19.Paid-in Capital in Excess of Par-Common Stock. 7.Unearned Rent Revenue.20.Unearned Subscriptions Revenue. 8.Work in Process.21.Receivables-Officers (due in one year). 9.Copyrights.22.Inventory (finished goods). 10.Buildings.23.Accounts Receivable. 11.Notes Receivable (short-term).24.Bonds Payable (due in 4 years). 12.Cash.25.Noncontrolling Interest. 13.Salaries and Wages Payable. Prepare a classified balance sheet in good form
Answer:
Denis Savard Inc
Classified Balance sheet
Amount$ Amount$ Amount$
Assets
Current Assets
Cash xxx
Less Cash Restricted for Plant xxx xxx
Expansion
Accounts Receivable xxx
Less Allowance for Doubtful debt xxx xxx
Notes Receivable xxx
Receivables-Officers xxx
Inventory
Finished goods xxx
Work in Process. xxx
Raw Materials xxx xxx
Total Current Assets xxx
Stockholders Equity
Common Stock xxx
Add Paid-in Capital in Excess of xxx
Par-Common Stock.
Total paid in capital xxx
Add Retained Earnings. xxx
Total paid in capital and retained earnings xxx
Less Treasury Stock (at cost) xxx
Total Stockholders Equity xxx
Total Liability and Stockholders Equity xxx
Liability and Stockholders Equity
Current Liability
Salaries and Wages Payable. xxx
Unearned Subscriptions Revenue. xxx
Unearned Rent Revenue. xxx
Total Current Liability. xxx
Long term liabilities
Bonds Payable (due in 4 years) xxx
Less Discount on Bonds Payable xxx xxx
Total Long term liabilities. . xxx
Long term Investment
Preferred Stock (Equity) Investments. xxx
Land Held for Future Plant Site.. xxx
Cash Restricted for Plant Expansion. xxx
Total Long term Investment. xxx
Property, Plants and Equipment
Building. xxx
Less Accumulated Depreciation xxx xxx
- Buildings
Total Property, Plants and . xxx
Equipment
Intangible Assets
Copyrights. . xxx
Total Intangible Assets. . xxx
Total Assets. . xxx
Bundy Car Mechanic Inc. uses a job-order costing system. The company applies all of its overhead costs to jobs using a predetermined overhead rate based on direct labor-hours. At the beginning of the year, it made the following estimates:
Direct labor-hours required to support estimated output 46,000
Fixed overhead cost $805,000
Variable overhead cost per direct labor-hour $1.00
During the year, a customer brought in her car for repairs. The following information was available with respect to the car's repairs:
Direct materials $719
Direct labor cost $177
Direct labor—hours used 7
If Bundy sets its selling prices by adding a markup percentage of 30% of its total job cost, then how much would Bundy have charged this customer for her car's repairs?
Answer:
Selling price= $1,336
Explanation:
Giving the following information:
Direct labor-hours required to support estimated output 46,000
Fixed overhead cost $805,000
Variable overhead cost per direct labor-hour $1.00
First, we need to calculate the predetermined overhead rate:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= (805,000/46,000) + 1
Predetermined manufacturing overhead rate= $18.5 per direct labor hour
Now, we can calculate the total cost:
Direct materials $719
Direct labor cost $177
Direct labor—hours used 7
Total cost= 719 + 177 + 18.5*7= $1,027.7
Finally, the selling price:
Selling price= 1,027.7*1.3= $1,336
Identify the number of fims present, the type of product, and the appropriate market model in the following scenario.
In a small town, there are four providers of broadband Internet access: a cable company the phone company, and two satellite companies. The Internet access offered by all four providers is of the same speed. Almost everyone in the city already has broadband, so any potential new company would have to engage in a price war with the existing companies and would be unlikely to cover its costs for years, if ever.
Answer:
No of Firms Present - 4 firms / few firms
Type of Product - Standadized Product
All the companies are offering a standadized product of broadband Internet access of the same speed.
Appropriate Market Model - Oligopoly
An Oligopoly is a concentrated market structure where a few firms dominate the market and offer the same products. Gaining entrance into this type of market is considered hard as the existing firms are already very entrenched and dislodging them will require a huge cash outlay. The Broadband internet market in this town is therefore an Oligopoly.
Tan Corporation issued $600,000,000 of 7% bonds on November 1, 2015, for $644,636,000. The bonds were dated November 1, 2015, and mature in 10 years, with interest payable each May 1 and November 1. The effective-interest rate is 6%. Prepare Tan’s December 31, 2015, adjusting entry. Use effective rate method of amortization
Answer:
Interest Expense $6,446,360
Interest Payable $7,000,000
Explanation:
Interest Expense for the year =
Issued amount * Effective interest rate * [tex]\frac{Remaining months in the year}{Total months in the year}[/tex]
$644,636,000 * 0.06 * 2/12 = $6,446,360
Interest Payable =
Face Value of the bond * Interest rate * [tex]\frac{Remaining months in the year}{Total months in the year}[/tex]
$600,000,000 * 0.07 * 2/12 = 7,000,000
Baseball Corporation is preparing its cash budget for January. The budgeted beginning cash balance is $19,100. Budgeted cash receipts total $188,500 and budgeted cash disbursements total $190,200. The desired ending cash balance is $31,100. To attain its desired ending cash balance for January, the company should borro
Answer: $13,700
Explanation:
From the question, we are informed that Baseball Corporation is preparing its cash budget for January. The budgeted beginning cash balance is $19,100. Budgeted cash receipts total $188,500 and budgeted cash disbursements total $190,200. The desired ending cash balance is $31,100.
To attain its desired ending cash balance for January, the company should borrow $13,700.
The solution has been attached.
Situational Software Co. (SSC) is trying to establish its optimal capital structure. Its current capital structure consists of 30% debt and 70% equity; however, the CEO believes that the firm should use more debt. The risk-free rate, rRF, is 6%; the market risk premium, RPM, is 7%; and the firm's tax rate is 40%. Currently, SSC's cost of equity is 15%, which is determined by the CAPM. What would be SSC's estimated cost of equity if it changed its capital structure to 50% debt and 50% equity? Round your answer to two decimal places. Do not round intermediate steps. %
Answer:
The estimated cost of equity is 10.3%
Explanation:
Step 1: Find Levered Beta
The CAPM formula would be used here to find the Levered Beta. CAPM formula is given as under:
Ke = Rf + Beta * (MRP - Rf)
Current Cost of Equity of company is ke and is 15%,
Risk free rate is Rf and is 6%
Market risk premium is 7%
15% = 6% + Beta* (7% - 6%)
Levered Beta = 9
Step 2: Find the Unlevered Beta
As we know that existing Debt to Equity ratio is (30 / 70), we can use the following formula to calculate the unlevered beta:
Unlevered Beta = Levered Beta / (1 + (1-t) * D/E)
Simply by putting values, we have:
Unlevered Beta = 1.2 / (1 + (1 - 40%) * 30/70) = 7.16
Step 3: Calculate levered beta on new debt to equity ratio
Now
New Debt to Equity Ratio is 1 (50 / 50)
As we know that:
Levered Beta = Unlevered Beta * (1 + (1-t) * Debt / Equity)
Levered Beta = 7.16 * (1 - 40%) * 1) = 4.3
Step 4: Use CAPM formula to calculate Cost of equity on new gearing
Using CAPM formula, we have:
Ke = Rf + Beta * (MRP - Rf)
Ke = 6% + 4.3 * 1% = 10.3%
The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information:
September October November
Sales $250,000 $300,000 $315,000
Manufacturing costs 150,000 180,000 185,000
Selling and administrative expenses 42,000 48,000 51,000
Capital expenditures _ _ 200,000
The company expects to sell about 10% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month following the sale and the remainder the following month (second month following sale). Depreciation, insurance, and property tax expense represent $50,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in January, and the annual property taxes are paid in December. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month.
Current assets as of September 1 include cash of $40,000, marketable securities of $75,000, and accounts receivable of $300,000 ($60,000 from July sales and $240,000 from August sales). Sales on account for July and August were $200,000 and $240,000, respectively. Current liabilities as of September 1 include $40,000 of accounts payable incurred in August for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of $55,000 will be made in October. Bridgeport’s regular quarterly dividend of $25,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of $50,000.
Required:
1. Prepare a monthly cash budget and supporting schedules for September, October, and November. Enter all amounts as positive values except for overall cash decrease and deficiency which should be indicated with a minus sign.
Bridgeport Housewares Inc.
Cash Budget
For the Three Months Ending November 30
September October November
Estimated cash receipts from:
Cash sales $ $ $
Total cash receipts $ $ $
Less estimated cash payments for:
Manufacturing costs $ $ $
Selling and administrative expenses
Capital expenditures
Other purposes:
Income tax
Dividends
Total cash payments $ $ $
$ $ $
Less cash balance at beginning of month
Cash balance at end of month $ $ $
Plus minimum cash balance
Excess or (deficiency) $ $ $
2. The budget indicates that the minimum cash balance (will or will not) be maintained in November. This situation can be corrected by (inevesting or borrwing) and/or by the (purchase or sale) of the marketable securities, if they are held for such purposes. At the end of September and October, the cash balance will (exceed or be sort of) the minimum desired balance.
Answer:
Bridgeport Housewares Inc.
1. Monthly Cash Budget with supporting schedules for September, October, and November:
a. Cash Budget for September, October, and November:
September October November
Beginning balance $40,000 $111,0000 $137,500
Cash receipts 253,000 259,500 288,000
Total cash available $293,000 $370,500 $425,500
Cash Payments:
Payment for manufacturing costs 140,000 130,000 135,000
Income tax 55,000
Dividend 25,000
Selling & administrative expenses 42,000 48,000 51,000
Capital expenditures _ _ 200,000
Total cash payment $182,000 $233,000 $411,000
Balance $111,000 $137,500 $14,500
Minimum Cash Balance 50,000 50,000 50,000
Cash to invest or borrow $61,000 $87,500 -$35,500
b. Supporting Schedules:
i) Cash Collections:
September October November
10% Cash Sales, month of sales $25,000 $30,000 $31,500
Sales on account: 90%
70% following month of sales 157,500 189,000
30% 2nd month following sale 67,500
30% of July Sales 60,000
70% of August 168,000
30% of August 72,000
Total cash receipts $253,000 $259,500 $288,000
2. The budget indicates that the minimum cash balance (will or will not) be maintained in November. This situation can be corrected by (investing or borrowing) and/or by the (purchase or sale) of the marketable securities, if they are held for such purposes. At the end of September and October, the cash balance will (exceed or be sort of) the minimum desired balance.
Explanation:
a) Data and Calculations:
1. Budget Information:
September October November
Sales $250,000 $300,000 $315,000
Manufacturing costs 150,000 180,000 185,000
Selling and administrative expenses 42,000 48,000 51,000
Capital expenditures _ _ 200,000
2. Cash Collections:
September October November
10% Cash Sales, month of sales $25,000 $30,000 $31,500
Sales on account: 90%
70% following month of sales 157,500 189,000
30% 2nd month following sale 67,500
30% of July Sales 60,000
70% of August 168,000
30% of August 72,000
Total cash receipts $253,000 $259,500 $288,000
3. Manufacturing Costs:
Manufacturing costs 150,000 180,000 185,000
less Depreciation, insurance, &
property tax expenses 50,000 50,000 50,000
Remainder 100,000 130,000 135,000
4. Remainder of Manufacturing costs:
80% paid in the month incurred 80,000 104,000 108,000
Remainder 20%, month following 20,000 26,000 27,000
August manufacturing cost: 40,000
Payment for manufacturing costs $140,000 $130,000 $135,000
5. Cash Payments:
Payment for manufacturing costs 140,000 130,000 135,000
Income tax 55,000
Dividend 25,000
Selling & administrative expenses 42,000 48,000 51,000
Capital expenditures _ _ 200,000
Total cash payment $182,000 $233,000 $411,000
Other relevant information:
Current assets as of September 1:
Cash of $40,000
Marketable securities of $75,000
Accounts receivable of $300,000 ($60,000 from July sales and $240,000 from August sales). Sales on account for July and August were $200,000 and $240,000, respectively
Current Liabilities:
September 1 Accounts payable = $40,000 incurred in August for manufacturing costs.
Selling and administrative expenses are paid in cash in the period they are incurred.
Income tax = $55,000 October
Quarterly Dividend of $25,000 in November
Minimum cash balance of $50,000 monthly
b) When Bridgeport Housewares Inc prepares budgeted monthly cash budgets, important highlights are indicated. For instance, it becomes easier for the management of Bridgeport to know when to borrow cash to meet the minimum cash balance or in the alternative sell off some marketable securities. It is also easier for Bridgeport to understand that it can be having excess cash which should not be allowed to sit idle, but can be invested in marketable securities. The cash budgets and their preparation also help Bridgeport to be better prepared to exert the required efforts to generate sales revenue in order not to jeopardize its liquidity position. It can also help Bridgeport to understand that the capital expenditure could have been paid for instalmentally starting from September or so instead of lumping the sum in November. There are many other insights garnered from the cash budgets and their preparation.
A firm always has a competitive disadvantage when its return on invested capital is:_________
A. 2 percent or lower in a declining industry.
B. declining steadily over two or more years.
C. about the same as its closest competitor.
D. below the industry average.
Answer:
A firm always has a competitive disadvantage when its return on invested capital is:_________
D. below the industry average.
Explanation:
A firm's competitive disadvantage shows when the return on investment is below the industry average. For instance, let us assume that Niposte, Inc. operates in the paper milling industry and that its return on investment of 10% falls below the industry average of 15%, then one can conclude that Niposte, Inc. is not favored in this industry. The cause of such a situation for Niposte, Inc. may be that the ability of its management to turn revenue into profits for stockholders is hampered with excessive costs. This is because the return on investment is a profitability ratio that shows how Niposte, Inc. and its competitors are performing in terms of generating profit from revenue through efficient management of operating costs.
The income from operations and the amount of invested assets in each division of Beck Industries are as follows: Income from Operations Invested Assets Retail Division $138,000 $690,000 Commercial Division 138,600 770,000 Internet Division 64,500 430,000 Assume that management has established a 10% minimum acceptable return for invested assets. a. Determine the residual income for each division. Retail Division Commercial Division Internet Division Income from operations $138,000 $138,600 $64,500 Minimum acceptable income from operations as a percent of invested assets Residual income $ $ $ b. Which division has the most residual income
Answer:
a. Minimum acceptable income from operations as of 10% of invested assets
Retail Division = $690,000 * 10% = $69,000
Commercial Division = $770,000 * 10% = $77,000
Internet Division = $430,000 * 10% = $43,000
Residual Income = Income from Operation - Minimum acceptable income from operations as of 10 percent of invested assets
Retail Division Residual Income = $138,000 - $69,000
= $69,000
Commercial Division Residual Income = $138,600 - $77,000
= $61,600
Internet Division Residual Income = $64,500 - $43,000
= $21,500
b. Retail Division has the most Residual Income with the amount of $69,000
you texpect to receive a payout from a trust fund in 3 years. The payout will be for $11000. You plan to invest the money at an annual rate of 6.5 percent until the account is worth $19000. how many years do you have to wait from today?
Answer:
11.68 years
Explanation:
For computing the number of years first we have to applied the NPER formula i.e to be shown in the attachment below:
Given that,
Present value = $11,000
Future value = $19,000
Rate of interest = 6.5%
PMT = $0
The formula is shown below:
= NPER(Rate;PMT;-PV;FV;type)
The present value come in negative
So, after applying the above formula, the number of years is 8.68
Now after 3 years, it would be
= 8.68 + 3
= 11.68 years
Schedule of Cash Collections of Accounts Receivable OfficeMart Inc. has "cash and carry" customers and credit customers. OfficeMart estimates that 30% of monthly sales are to cash customers, while the remaining sales are to credit customers. Of the credit customers, 25% pay their accounts in the month of sale, while the remaining 75% pay their accounts in the month following the month of sale. Projected sales for the next three months are as follows: October $133,000 November 166,000 December 243,000 The Accounts Receivable balance on September 30 was $89,000. Prepare a schedule of cash collections from sales for October, November, and December. Round all calculations to the nearest whole dollar.
Answer:
Instructions are below.
Explanation:
Giving the following information:
Sales:
30% on cash
70% on account
Sales on account:
25% in the month of the sale
75% in the following month
October $133,000
November 166,000
December 243,000
The Accounts Receivable balance on September 30 was $89,000.
Cash collection October:
Sales on cash= 133,000*0.30= 39,900
Sales on account from October= (133,000*0.7)*0.25= 23,275
Sales on account September= 89,000
Total cash collection= $152,175
Cash collection November:
Sales on cash= 166,000*0.30= 49,800
Sales on account from October= (166,000*0.7)*0.25= 29,050
Sales on account October= (133,000*0.7)*0.75= 69,825
Total cash collection= $148,675
Cash collection December:
Sales on cash= 243,000*0.30= 72,900
Sales on account from October= (243,000*0.7)*0.25= 42,525
Sales on account October= (166,000*0.7)*0.75= 87,150
Total cash collection= $202,575
The payroll clerk and the purchasing agent working for a factory are not technically part of the manufacturing industry. True False
Answer:False
Explanation:
It wouldn’t run with out them