Answer:
Price of bond=$1,753.96
Explanation:
The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).
Value of Bond = PV of interest + PV of RV
The value of bond for Gugenheim, Inc can be worked out as follows:
Step 1
Calculate the PV of interest payments
Annual interest payment
= 6.5%% × 2000 = 130
PV of interest payment
PV = A× (1- 1+r)^(-n)
A- 130, r- 7.7, n- 21
= 130 × (1-(1.077)^(-21)/0.077) = 1,332.743
Step 2
PV of redemption Value
PV = RV × (1+r)^(-n)
RV - 2000, r- 7.7%, n- 21
PV = 2000 × (1.077)^(-21) = 421.2115063
Step 3
Price of bond
= 1,332.743 + 421.211
=$1753.955
Price of bond=$1,753.96
Future deductible amounts would be caused by Select one: a. Estimated Expenses and Prepaid Expenses b. Estimated Expenses, but not Prepaid Expenses c. Prepaid Expenses, but not Estimated Expenses d. Neither Estimated Expenses nor Prepaid Expenses
Answer:
The correct answer is:
Estimated Expenses, but not Prepaid Expenses (b.)
Explanation:
An estimated expense is a forecast of the amount of costs that will be incurred in future, to fulfil a transaction. An example might be an amount forecasted to cover a warranty cost for a purchased product under warranty in case a fault develops. Estimated expenses are not debited at the time of projection, but at a certain time in the future, hence they are called Future deductible amounts. On the other hand, Prepaid Expense is a type of expenditure that has not been recorded yet by a company as an expense, but the amount has been paid in advance for the good or service, even though the product has not been consumed at the time of payment.
Craigmont Company's direct materials costs are $3,700,000, its direct labor costs total $7,630,000, and its factory overhead costs total $5,630,000. Its conversion costs total:
Answer:
$13,260,000
Explanation:
Craigmont's company has a direct material cost of $3,700,000
Its direct labor cost is $7,630,000
Its factory overhead cost is $5,630,000
Therefore, the conversion costs can be calculated as follows
Conversion costs= Direct labor+Factory overhead
= $7,630,000+$5,630,000
= $13,260,000
Hence the conversion costs total is $13,260,000
ower Drive Corporation designs and produces a line of golf equipment and golf apparel. Power Drive has 100,000 shares of common stock outstanding as of the beginning of 2021. Power Drive has the following transactions affecting stockholders' equity in 2021. March 1 Issues 52,000 additional shares of $1 par value common stock for $49 per share. May 10 Purchases 4,700 shares of treasury stock for $52 per share. June 1 Declares a cash dividend of $1.35 per share to all stockholders of record on June 15. (Hint: Dividends are not paid on treasury stock.) July 1 Pays the cash dividend declared on June 1. October 21 Resells 2,350 shares of treasury stock purchased on May 10 for $57 per share. Power Drive Corporation has the following beginning balances in its stockholders' equity accounts on January 1, 2021: Common Stock, $100,000; Additional Paid-in Capital, $4,200,000; and Retained Earnings, $1,700,000. Net income for the year ended December 31, 2021, is $570,000. Required: Prepare the stockholders' equity section of the balance sheet for Power Drive Corporation as of December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)
Answer and Explanation:
The preparation of the statement of stockholder equity is presented below:
Power Drive Corporation
Balance sheet
(Stockholder's Equity Section)
At December 31, 2021
Stockholder's Equity:
Common stock $1,52,000
Additional Paid - in - Capital $67,07,750
Total Paid - in Capital $68,59,750
Retained earnings $20,71,145
Treasury Stock -$1,22,200
Total Stockholder's Equity $88,08,695
Workings note
Paid in capital in excess of par value, Common stock $24,96,000
(52000 × $48)
Paid in capital in from sale of treasury stock $11,750
[2350 × ($57-$52)]
Total Additional Paid - in - Capital $25,07,750 Now
Dividend declared [(152000 - 4700) × $1.35] $1,98,855
Treasury Stock [(4700 - 2350) × $52] $1,22,200
Particulars Beg. Balance Additions Deductions End. Bal
Common stock $100,000 $52,000 $152,000
Additional Paid - $42,00,000 $25,07,750 $67,07,750
in - Capital
Retained earnings $1,700,000 $570,000 $1,98,855 $20,71,145
Project x has cash flows of $8000, $7500 and $7000 for years 1 to 4, respectively. Project y has cash flows of 7000,7500, 8000, and 8500 for years 1 to 4 respectivel. which one of the following statements is true concerning these two project given a positive discount rate?
a. Both projects have the same future value at the end of Year 4.
b. Both projects have the same value at Time 0.
c. Both projects are ordinary annuities.
d. Project Y has a higher present value than Project X.
e. Project X has both a higher present and a higher future value than Project Y.
Answer:
e. Project X has both a higher present and a higher future value than Project Y.
Explanation:
year project X project Y
1 8,500 7,000
2 8,000 7,500
3 7,500 8,000
4 7,000 8,500
One of the basic principles in economics and finance is the time value of money. One dollar today is worth more than one dollar tomorrow. In this case, the more money you receive during the first years, the higher the value of the money. E.g. if you receive $1,000 today, you can invest it and earn interests and it will be worth more than $1,000 that you receive in a couple of years.
Norred Corporation has provided the following information: Cost per Unit Cost per Period Direct materials $ 7.05 Direct labor $ 3.70 Variable manufacturing overhead $ 1.60 Fixed manufacturing overhead $ 121,500 Sales commissions $ 1.50 Variable administrative expense $ 0.45 Fixed selling and administrative expense $ 44,550 If 8,000 units are produced, the total amount of indirect manufacturing cost incurred is closest to:
Answer:
$134,300
Explanation:
From the question above, we are required to total amount of indirect manufacturing costs that was incurred by Norred corporation with the information that was provided
The first step is to calculate the total variable manufacturing overhead costs
= Variable manufacturing overhead × Units produced
= $1.60 per unit × 8,000 units
= $12,800
Therefore, the total amount of indirect manufacturing costs can be calculated as follows
= Total variable manufacturing costs + Fixed manufacturing overhead
= $12,800 + $121,500
= $134,300
Hence the total amount of indirect manufacturing costs is closest to $134,300
Singing Fish Fine Foods has a current annual cash dividend policy of $2.25. The price of the stock is set to yield a return of 14 %. What is the price of this stock if the dividend will be paid a. for 12 years? b. for 16 years? c. for 40 years? d. for 60 years? e. for 100 years? f. forever? a. What is the price of this stock if the dividend will be paid for 12 years?
Answer:
Price = $12.73
Explanation:
DATA:
Dividend = 2,25
Yield / r = 14%
n (number of years) = 12 years
Price = ?
Price of the stock can be calculated by the following formula
Formula: Price = Dividend x [tex]1-\frac{\frac{1}{(1+r)^{n} } }{r}[/tex]
Price = Dividend x [tex]1-\frac{\frac{1}{(1+0.14)^{12} } }{0.14}[/tex]
Price = $2.25 x 5.66
Price = $12.73
The price of this stock if the dividend will be paid for 12 years will be $12.73
Requirement 2. How will Bargain Central Furniture, Inc. report treasury stock on its balance sheet as of December 31, 2016? Bargain Central Furniture, Inc. will report treasury stock ▼ on the balance sheet as ▼ to total stockholders' equity.
Answer:
Treasury stock is a contra equity account that decreases stockholders' equity. It is generally reported at the end of the stockholders' equity section on the balance sheet with a negative amount (treasury stock has a debit balance and it is reported in the credit side). In this case, the balance of treasury stock = ($3,600)
Explanation:
Some information was missing and I decided to look it up. Hopefully it will be the same exact question, but if not, you can use it as an example and just adjust the numbers.
Bargain Central Furniture, Inc., completed the following treasury stock transactions:
a. purchased 1,300 shares of the company's $1 par common stock as treasury stock, paying cash or $6 per share.
b. sold 700 shares of the treasury stock for cash of $9 per share.
The journal entries should be:
Dr Treasury stock 7,800
Cr Cash 7,800
Dr Cash 6,300
Cr Treasury stock 4,200
Cr Additional paid in capital 2,100
Treasury stock balance $3,600
Barry Cuda currently has $35,000 in his Roth IRA which has been earning 7%. Barry is planning on depositing $5500 annually for the next 40 years into this IRA. Assuming Barry's IRA continues earning 7% annually, what will Barry's IRA be worth at the end of 40 years?
Answer:
Total worth of worth of investment= $1,622,099.14
Explanation:
The total amount available in his account would be determined as follows:
The value of the existing current amount in 40 years time
FV = PV × (1+r)^ n
FV- future value
PV- current amount in account
r- interest rate
n- number of years
FV = 35,000 × (1.07)^(40=
FV= 524,106.02
The value of the new annual deposit of 5,500 in 40 years time
This represents an annuity. An annuity is series of constant but equal amount occurring for a certain number of years .
FV= A×( (1+r) -1)/r
FV - future value
R - interests rate
n- number of years
A- annual deposit
FV = 5,500 × ((1+0.07)^40 -1)/0.07
FV= 1,097,993.12
Total worth of worth of investment
= 524,106.02 + 1,097,993.12 = 1,622,099.14
Total worth of worth of investment= $1,622,099.14
Required: 1. Prepare the journal entries to record the sale on November 17 (ignore cost of goods) and collection on November 26, 2021, assuming that the gross method of accounting for cash discounts is used. 2. Prepare the journal entries to record the sale on November 17 (ignore cost of goods) and collection on December 15, 2021, assuming that the gross method of accounting for cash discounts is used.
Answer:
Check Explanation section.
Explanation:
(1). The Gross method: in this kind of method, the sales and the cash are separately recorded.
Date: November 17, 2021.
Account titles and Explanation:
• Account receivable:
Lf = 0, Debit ($) = 42,000(100 units × 600 × 70% = 42,000). Credit ($). = 0.
• Sales revenue:
Lf = 0, Debit($) = 0, Credit ($) = 42,000(100 units × 600 × 70% = 42,000).
NB: the account receivable is debited in order to record sales.
Date: November 26, 2021.
Account titles and Explanation:
• cash:
Lf = 0, debit($) = 41,160( 42,000 × 98%), Credit ($) = 0.
• Sales discount:
Lf = 0, debit($) = 840( 42,000 × 2%). Credit ($) = 0.
• Account receivable:
Lf = 0, Debit($) = 0, credit ($) = 42,000.
(2). Date: November 17, 2021.
Account titles and Explanation:
• Account receivable:
Lf = 0, Debit ($) = 42,000(100 units × 600 × 70% = 42,000). Credit ($). = 0.
• Sales revenue:
Lf = 0, Debit($) = 0, Credit ($) = 42,000.
Date: December 15, 2021.
Account titles and Explanation:
• cash:
Lf = 0, debit($) = 42,000, Credit ($) = 0.
• Sales discount:
Lf = 0, debit($) = 42,000, Credit ($) = 0.
• Account receivable:
Lf = 0, Debit($) = 0, credit ($) = 42,000.
A $20,000 loan with interest at 3.5% is being repaid by 35 level annual payments. The first payment is due one year after the loan is issued. Beginning with the seventeenth payment, the borrower is permitted to pay only one-third the normal annual payment. After the twelfth reduced payment, the loan is renegotiated. The revised level payment P will yield the lender 4% per year over the remaining seven years. Find P.
Answer:
To find EMI (P) we know that the yearly EMI for the loan of $20000 for 35 years at an interest of 3.5% is $992 per year.
Therefore upon calculating the loan after the seventeenth year we have $19252
The EMI calculated after the one-third permitted on the seventeenth payment is, therefore: $992*1/3= 992/3=$330
Therefore, the balance calculated after the twenty-seventh instalment = $6150
Therefore the yearly EMI (P) for the loan of $6150 at 4% for the remaining eight years is $900 per year.
Explanation:
To find EMI (P) we know that the yearly EMI for the loan of $20000 for 35 years at an interest of 3.5% is $992 per year.
Therefore upon calculating the loan after the seventeenth year we have $19252
The EMI calculated after the one-third permitted on the seventeenth payment is, therefore: $992*1/3= 992/3=$330
Therefore, the balance calculated after the twenty-seventh instalment = $6150
Therefore the yearly EMI (P) for the loan of $6150 at 4% for the remaining eight years is $900 per year.
An online-only bank currently offers a 7-year CD (certificate of deposit) paying simple interest rate of 4% per quarter. If you want to get $4,240 from this CD 7 years later, how much do you have to purchase today?
Answer:
The answer is $1,413.94
Explanation:
Number of periods(N) = 28 periods (7 years x 4 quarters)
Interest rate(I/Y) = 4% per quarter. Therefore, interest rate per year is 16% per year(4% x 4 quarters)
Future value(FV) = $4,240
Present Value (PV) = ?
Let's use a financial calculator:
N = 28; I/Y = 4, FV = 4,240; CPT PV= -1,413.94
Therefore, the present value is $1,413.94
Lena plans to invest 7,200 dollars in 6 year(s) and 7,500 dollars in 5 year(s). She expects to earn 15.6 percent, compounded quarterly. How much money does Lena expect to have in 11 years
Answer:
The expected amount is $34154.83
Explanation:
Lena invested the amount = $7200
$7200 invested for time period = 6 years
Second amount invested = $7500
$7500 invested for the time period = 5 years.
The expected interest rate = 15.6 %
Total amount = A=P(1+r/400)^4n
A=future value
P=present value
r=rate of interest
n=time period.
Hence
A=7200(1+15.6/400)^(4*6) + 7500(1+15.6/400)^(4*5)
= 18034.5636 + 16120.2664
= $34154.83
10. Security X has expected return of 12% and standard deviation of 20%. Security Y has expected return of 15% and standard deviation of 27%. If the two securities have a correlation coefficient of 0.7, what is their covariance
Answer: 0.0378
Explanation:
The Covariance of securities refer to the relationship between two securities in terms of their movement together. A postie covariance means that securities usually move in the same direction while a negative means that they move in opposite directions. It can therefore be useful in portfolio diversification.
The formula is;
= Standard deviation of X * Standard deviation of Y * Correlation Coefficeint
= 20% * 27 * 0.7
= 0.0378
A company requisitioned $40,000 of materials during the year and incurred direct labor charges of $50,000. If the company began the year with a work-in-process inventory balance of $15,000 and applied overhead of $60,000, what is the ending balance of work-in-process inventory assuming no goods were moved to finished goods inventory for the year? g
Answer:
$165,000
Explanation:
The computation of the ending balance of work-in-process inventory is shown below:-
Ending balance of work-in-process inventory = Beginning + Direct material + Direct labor + Overhead applied
= $15,000 + $40,000 + $50,000 + $60,000
= $165,000
Therefore for computing the ending balance of work-in-process inventory we simply applied the above formula.
g The aggregate supply curve shifts A. rightward if the money wage rate falls. B. leftward if the aggregate demand curve shifts leftward. C. rightward if potential GDP decreases. D. leftward if potential GDP increases. E. rightward if the money wage rate rises.
Answer:
The correct option to the question above is option A "rightward if the money wage rate falls."
Explanation:
The aggregate supply curve is a graphical illustration of how the total quantity of goods and services is available for a given price and time.
When the aggregate supply curve shifts to the right, it increases. While, when the aggregate supply curve shifts to the left, it decreases.
An increase in the aggregate supply curve shows a fall in price, which makes a high price level resulting in a greater supply of real GDP.
Money wages is the amount of money paid in wages. Money wages is indirectly proportional to real wages. The aggregate supply curve decreases if the money wage rate increases and the aggregate supply curve increases when the money wage rate falls.
Aggregate supply is affected by GDP. When A GDP decreases, it also decreases aggregate supply.
What information is needed to set up sales tax in QuickBooks Online for a client who only does business in their home state? Select the 4 options you think apply.
Answer:
The answer is below
Explanation:
While different state has different requirements and rates for reporting sales tax. Sales tax items are simply used to know specific rates charged to your customers and the tax authority vendor to which you remit the sales tax.
Hence the information that is needed to set up sales tax in QuickBooks Online for a client who only does business in their home state includes the following: information that is needed to set up sales tax in QuickBooks Online for a client who only does business in their home state includes the following:
1. The company's address
2. Start date of the current tax period.
3. Estimated periodic time to file a tax return
4. Start date of collecting sales tax for the agency
5. Tax rates authority charges.
6. Sales tax item.
7. Sales tax name for the sales tax item
The burn down chart for a team showed a peculiar trend. It started dropping rapidly at the beginning of the Sprint and then seemed to plateau in the middle. A day before the Sprint, the line dipped rapidly and reached the horizontal axis. Whiat is the most likely reason for this trend?
Answer:
Explanation:
In the scenario being described, it is the most likely that the team encountered a major blocking issue in the middle of the Sprint which was resolved only toward the end. This can be deduced from the graph due to it plateauing in the middle, which usually happens when tasks are not finishing, which ultimately causes a blocking issue and since the chart went back to normal afterwards, they most likely resolved the blocking issue.
you have just deposited $11000 in to an account that promises to pay you an annual interest rate of 6.5 percent each year for the next 6 years. You will leave the money invested in the account and 10 years from today. you need to have $26300 in the account. What annual interest rate must you earn over the last 4 years to accomplish this goal
Answer:
Over the last 4 years to accomplish this goal the annual interest rate must be 13.14 %.
Explanation:
First find the Future value (FV) of $11,000 at the end of the 6th year as follows :
PV = -$11,000
r = 6.50%
p/yr = 1
n = 6
Pmt = $0
FV = ?
Using a financial calculator, the Future Value (FV) is $16,050.57
Therefore, the amount invested will amount to $16,050.57 in 6 year.
Next we then calculate the interest rate that will give us $26300 in the next four years (remainder of the 10 years)
PV = -$16,050.57
FV = $26,300
P/yr = 1
n = 4
Pmt = $0
r = ?
Using a financial calculator, the Interest rate (r) is 13.14 %
Conclusion :
Over the last 4 years to accomplish this goal the annual interest rate must be 13.14 %.
Factory Overhead Rates, Entries, and Account Balance Eclipse Solar Company operates two factories. The company applies factory overhead to jobs on the basis of machine hours in Factory 1 and on the basis of direct labor hours in Factory 2. Estimated factory overhead costs, direct labor hours, and machine hours are as follows: Factory 1 Factory 2 Estimated factory overhead cost for fiscal year beginning August 1 $18,500,000 $44,000,000 Estimated direct labor hours for year 800,000 Estimated machine hours for year 1,250,000 Actual factory overhead costs for August $1,515,800 $3,606,300 Actual direct labor hours for August 64,500 Actual machine hours for August 105,000 a. Determine the factory overhead rate for Factory 1. Round your answer to two decimal places.
Answer:
Predetermined manufacturing overhead rate= $14.8 per machine hour
Explanation:
Giving the following information:
Factory 1
Estimated factory overhead= $18,500,000
Estimated machine hours for year 1,250,000
To calculate the predetermined manufacturing overhead rate we need to use the following formula:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 18,500,000/1,250,000
Predetermined manufacturing overhead rate= $14.8 per machine hour
Giannitti Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. Data for the upcoming year appear below: Estimated machine-hours 72,700 Estimated variable manufacturing overhead $ 3.30 per machine-hour Estimated total fixed manufacturing overhead $ 838,730 The predetermined overhead rate for the recently completed year was closest to:
Answer:
The predetermined overhead rate for the recently completed year was closest to: $11.54 per machine-hour
Explanation:
Predetermined Overheads = Budgeted Fixed Overheads / Budgeted Activity
= $ 838,730 / 72,700
= $11.536864 or $11.54 per machine-hour.
How can there ever exist negative real interest rates in the economy?
Answer:
Negative real interest rates occur in "high inflation environments".
Explanation:
Rates of interest can sometimes be unfavorable, as can completely accurate rates. Under high-inflation environments, declining real expectations appear especially when inflation continues rising rapidly, that is, quicker than prices.If prices are 5 percent, however, unemployment is 7 percent, so the actual rate becomes 2 percent negative.Tracy Company, a manufacturer of air conditioners, sold 200 units to Thomas Company on November 17, 2021. The units have a list price of $450 each, but Thomas was given a 30% trade discount. The terms of the sale were 3/10, n/30. Required: 1. Prepare the journal entries to record the sale on November 17 (ignore cost of goods) and collection on November 26, 2021, assuming that the gross method of accounting for cash discounts is used. 2. Prepare the journal entries to record the sale on November 17 (ignore cost of goods) and collection on December 15, 2021, assuming that the gross method of accounting for cash discounts is used.
Answer and Explanation:
The Journal entries is shown below:-
1. a. Tracy Company Dr, $63,000 ($450 × 70% × 200)
To Sales $63,000
(Being sales is recorded)
b. Cash Dr, $61,110 ($63,000 - ($63,000 × 3%)
Sales discount $1,890 Dr, ($63,000 × 3%)
To Tracy Company $63,000
(Being cash and sales discount is recorded)
2. a Tracy Company Dr, $63,000 ($450 × 70% × 200)
To Sales $63,000
(Being sales is recorded)
b. No Journal entry is required
c. Cash Dr, $63000
To Tracy Company $63,000
(Being cash is recorded)
After significant market research Dan is evaluating his business compared another local business offering a similar service. His observations tell him that the other business offers lower prices but that his own services are higher quality and result in greater customer satisfaction. What activity is Dan engaging in with his market research?
A. Qualitative analysis
B. Forecasting
C. Competitive analysis
D. Secondary research
Competitive analysis is an activity is Dan engaging in with his market research. Hence, option C is correct.
A comparative analysis contrasts the advantages and disadvantages of your business with those of your rivals' products, services, and marketing plans.
A competitive analysis is a strategy that involves looking into your primary competitors to find out more about their products, sales, and marketing plans. A competitive market study can help businesses create stronger corporate strategies, fend off competitors, and increase market share, among other benefits.
A company's competitive position can be evaluated using the SWOT analysis, which is also used to develop strategic planning. It represents advantages, dangers, opportunities, and weaknesses. The SWOT analysis analyzes both internal and external factors as well as the current condition and any predicted future events.
Thus, option C is correct.
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The following information pertains to Carla Vista Company.
1. Cash balance per bank, July 31, $7,738.
2. July bank service charge not recorded by the depositor $48.
3. Cash balance per books, July 31, $7,774.
4. Deposits in transit, July 31, $3,110.
5. $2,426 collected for Carla Vista Company in July by the bank through electronic funds transfer. The collection has not been recorded by Carla Vista Company.
6. Outstanding checks, July 31, $696.
Prepare a bank reconcilliation at July 31 2017.
Journalize the adusting entries at July 31 on the books of Carla Vista company.
Answer:
Bank account reconciliation:
Bank account balance $7,738
+ Deposits in transit $3,110
- Outstanding checks $696
Reconciled bank account $10,152
Cash account reconciliation:
Cash account balance $7,774
+ Note (or account) collected $2,426
- Bank fees $48
Reconciled cash account $10,152
Adjusting journal entries:
July 31, 202x, bank fees expense
Dr Bank fees expense 48
Cr Cash 48
July 31, 202x, bank fees expense
Dr Cash 2,426
Cr Notes (or accounts) receivable 2,426
Categorize each transaction according to the U.S. account to which it belongs and the direction the money flows.
Account
Direction of flow
An Australian company buys steel from a U.S. firm.
The Federal Reserve buys $2$2 billion worth of euros.
Profits are earned by a U.S. based mining company operating
in Mexico.
An English company purchases a U.S.
confectionary manufacturer.
Financial account
Payment from foreigners
Factor income
Payment to foreigners
Payment from foreigners
Current account
Financial account
Current account
Answer:
1. An Australian company buys steel from a US Firm
Account: Current Account
Direction of Flow: Payment to foreigners
2. The federal reserve buys $252 billion worth euros
Account: Financial Account
Direction of Flow: Payment to foreigner
3. Profit earned by a US based mining company operating in Mexico
Account: Current account
Direction of Flow: Payment from foreigners
4. An English company buy a US confectionary manufacturer
Account: Financial Account
Direction of Flow: Payment from Foreigners
Stock Y has a beta of .9 and an expected return of 11.2 percent. Stock Z has a beta of .5 and an expected return of 7.2 percent. What would the risk-free rate have to be for the two stocks to be correctly priced
Answer:
Required risk free rate for two stocks to be correctly priced would be 2.20%.
Explanation:
In order to determine this, the Capital Asset Pricing Model (CAPM) formula is used as follows:
Rs = Rf + (Beta * MR) .................................... (1)
Where;
For Stock Y:
Rs = Expected return on stock = 11.2%, or 0.112
Rf = Risk free return = ?
Beta = 0.9
MR = Market risk premium = ?
Substituting the values into equation (1), we have:
0.112 = Rf + (0.9 * MR) ................................. (2)
For Stock Z:
Rs = Expected return on stock = 7.2%, or 0.072
Rf = Risk free return = ?
Beta = 0.5
MR = Market risk premium = ?
Substituting the values into equation (1), we have:
0.072 = Rf + (0.5 * MR) ................................. (3)
If we deduct equation (3) from equation (2) and solve for MR, we have:
(0.112 - 0.072) = (Rf - Rf) + (0.9MR - 0.5MR)
0.04 = 0 + 0.4MR
MR = 0.04 / 0.4
MR = 0.10, or 10%
Substituting MR = 0.01 into equation (2) and solve for Rf, we have:
0.112 = Rf + (0.9 * 0.10)
0.112 = Rf + 0.09
Rf = 0.112 - 0.09
Rf = 0.022, or 2.20%
Therefore, required risk free rate for two stocks to be correctly priced would be 2.20%.
Wanda Sotheby purchased 120 shares of Home Depot stock at $148 a share. One year later, she sold the stock for $140 a share. She paid her broker a commision of $34 when she purchased the stock and a commision of $39 when she sold it. During the 12 months she owned the stock, she received $427 in dividends. Calculate Wanda’s total return on this investment. (A loss should be indicated with a minus sign.)
Answer:
Return on investment = -0.71%
Explanation:
The return on investment is the sum of the dividends earned and capital gains made during the holding period of the investment.
Dividend is the proportion of the profit made by a company which is paid to shareholders.
Capital gains is another type of the return made on an equity investment as a result of increase in the value of the shares. It is difference between the cost of the share and the value at the time of disposal.
Therefore, we can can compute the return on the investment as follows:
Total Return on investment =
(Capital gain/ loss + dividend )/purchase price × 100
Capital loss = (184 -140) × 120 = - 480
Dividend = 427
Commission = 34 + 39 =-73
Net loss on investment = - 480 - 73 + 427= -126
Return on investment = -126 /(148× 120) = -0.71%
Return on investment = -0.71%
Ivanhoe provides environmentally friendly lawn services for homeowners. Its operating costs are as follows. Depreciation $1,500 per month Advertising $350 per month Insurance $2,770 per month Weed and feed materials $17 per lawn Direct labor $9 per lawn Fuel $2 per lawn Ivanhoe charges $70 per treatment for the average single-family lawn. Correct answer. Your answer is correct. Determine the company’s break-even point in number of lawns serviced per month. Break-even point Entry field with correct answer 110 lawns LINK TO TEXT LINK TO TEXT Incorrect answer. Your answer is incorrect. Try again. Determine the company’s break-even point in dollars.
Answer:
Explanation:
To start with, we need to get the value for total fixed cost and total variable cost
Total fixed costs = Depreciation + Advertising + Insurance
= $1,500 + $350 + $2,770
= $4,620
Total variable costs per unit = Weed and feed materials + Direct labor + Lawn Fuel
= $17 + $9 + $2
= $28 per lawn
We also need to compute the contribution margin ratio
= Sales per unit - Variable cost per unit / Sales per unit
= (70 - 28) / 70
= 0.6
= 60%
Therefore;
1. Break even sales
The original cost of the machine was $1,800,000. The machine has a class life of 15 years, but after 13 years, the firm has decided to sell the machine for $320,000. If Monster Potato has a marginal tax rate of 21%, what is the tax effect associated with the decision?
Answer: $16,800 tax payment.
Explanation:
Annual depreciation on machine = [tex]\frac{1,800,000}{15}[/tex]
= $120,000
Accumulated Depreciation in 13 years;
= 120,000*13
= $1,560,000
Book Value at 13 years
= 1,800,000 - 1,560,000
= $240,000
Company sold it at a higher price than its book value so there will be a capital gain of;
= 320,000 - 240,000
= $80,000
Tax is charged on the marginal gain;
= 80,000 * 21%
= $16,800
The city of New Orleans has 200 advertising companies, 199 of which employ designers of normal ability at a salary of $100,000 a year. The companies that employ normal designers each collect $500,000 in revenue a year, which is just enough to ensure that each earns exactly a normal profit. The 200th company, however, employs Janus Jacobs, an unusually talented designer. Because of Jacobs's talent, this company collects $1,000,000 in revenue a year.
Required:
a. How much will Jacobs earn?
b. What proportion of his annual salary will be economic rent?
c. Will the advertising company for which Jacobs works be able to earn an economic profit?
Answer:
a. Jacob should earn= $100,000 + ($1,000,000 - $500,000)
= $100,000 + $500,000
=$600,000
Hence, Jacob earns $600,000
b. The economic rent is the amount by which payment of Jacob(600,000) exceed the reservation price of the supplier(100,000)
Thus, the economic rent = 600,000 - 100,000 = $500,000
Proportion of Economic rent = Economy rent / Salary of jacob
= $500,000 / $600,000
= 5/6
Hence, the proportion of the economic rent of Jacob is salary is 5/6
c. The advertising company will not be able to make an economic profit because if they withhold some additional revenue made because of hiring Jacob, then he will switch to another advertising company at a higher salary and that company keep on making profit. The company should bid for Jacob until firm are indifferent on paying $600,000 or hiring someone else for $100,000 . Thus, the bidding of Jacob will continue until the salary of Jacob has bid up to a level where no company can make economic profits