The Freeman Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated below. The corporate tax rate is 34 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project.
a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.)
b. Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)
c. Suppose the appropriate discount rate is 12 percent. What is the NPV of the project?
Answers
Complete question is given at the end of the question.
Answer with Explanation:
Requirement 1:
Net Income is an accounting profits which includes both cash flow items and non cash flow items. It can be calculated as under:
Net Income = (Sales - Cost - Depreciation) - (Income Before Tax * Tax Rate)
The computation is given in the Second excel sheet attached.
Requirement 2:
According to relevant costing principles if the cost is relevant then it must satisfy following conditions:
Must be cash flow in nature.Must be Future related (no past commitments).Differential or must be incrementalSo this means that the depreciation would not be taken into account as it is not a relevant cost and thus must not be included as an incremental cost.
Incremental Cash flow can be calculated using the following formula:
Incremental Cash Flow = Net Income + Depreciation (Removing its impact) - Working Capital Injection + Working Capital Withdrawal
The calculation for each year is shown in the second attachment.
Requirement 3:
The NPV can be calculated by discounting each year cash flow by the rate of return which in this case is 12%.
The formula for calculating the NPV is as under:
NPV = Investment in year zero - Net Cash Flow of Y1 / (1 + r)^1 - Net Cash Flow of Y2 / (1 + r)^2 - Net Cash Flow of Y3 / (1 + r)^3 - Net Cash Flow of Y4 / (1 + r)^4
The computation of NPV is given in the second attachment given below:
Related Questions
A buyer and a seller enter into a real estate sales contract. Under the contract's terms, the buyer will pay the seller $500 a month for 10 years. The seller will continue to hold legal title, while the buyer will live in the home and pay all real estate taxes, insurance premiums, and regular upkeep costs. What kind of contract do the buyer and seller have
Answers
Answer: Land Sales Contract
Explanation:
Land Sales contract are a way to buy a property for people who would otherwise be unable to buy one because they were unable to get a mortgage or are running low in funds.
It works by the buyer paying the seller a certain amount of money for a period of time according to an agreement. During this period of payment, the seller continues to hold the legal rights to the property and then passes it to the buyer when they are finished paying. In this scenario therefore, the seller effectively plays the role of a mortgage bank.
1. Select the correct statement regarding relevant costs and revenues.
A. Sunk costs are relevant for decision-making purposes.
B. Relevant costs are frequently called unavoidable costs.
C. Direct labor is an example of a unit-level cost.
D. Only variable costs are relevant for decision making.
2. Expected future revenues that differ among the alternatives under consideration are often referred to as:_______.
A. Alternative revenues.
B. Preferential revenues.
C. Relative revenues.
D. Differential revenues.
3. The benefits sacrificed when one alternative is chosen over another are referred to as:______.
A. Avoidable costs.
B. Opportunity costs.
C. Sacrificial costs.
D. Beneficial costs.
Answers
Complete Question:
1. Select the correct statement regarding relevant costs and revenues.
A. Sunk costs are not relevant for decision-making purposes.
B. Relevant costs are frequently called unavoidable costs.
C. Direct labor is an example of a unit-level cost.
D. Only variable costs are relevant for decision making.
Answer:
1. A
2. D
3. B
Explanation:
1. The correct statement regarding relevant costs and revenues is that sunk costs are not relevant for decision-making purposes. Sunk costs are the opposite of relevant costs because they can't be changed or recovered, as they've been spent or contracted in the past already. Hence, relevant cost are relevant for decision-making purposes but not sunk costs.
2. Expected future revenues that differ among the alternatives under consideration are often referred to as differential revenues. It is the difference in revenues among two (2) alternatives, which would influence decision making.
3. The benefits sacrificed when one alternative is chosen over another are referred to as opportunity costs. It is also referred to as alternative forgone.
For example, Tony gives up going to see a new movie at the cinema in order to prepare for an examination, so as to get a good grade.
After all of the transactions for the year ended December 31, 2018 had been posted including the transactions recorded in part (1) and all adjusting entries, the data that follow were taken from the records of Equinox Products Inc.
a. Prepare a multiple-step income statement for the year ended December 31, 2018. Enter all amounts as positive numbers EXCEPT in the Other revenue and expense section. In that section only, enter amounts that represent other expenses as negative numbers using a minus sign.
b. Prepare a retained earnings statement for the year ended December 31, 2018.
c. Prepare a balance sheet in the report form as of December 31, 2018.
Answers
Question Completion:
Income Statement data:
Advertising expense $ 150,000
Cost of goods sold 3,700,000
Delivery expense 30,000
Depreciation expense-office buildings and equipment 30,000
Depreciation expense-store buildings and equipment 100,000
Income tax expense 140,500
Interest expense 21,000
Interest revenue 30,000
Miscellaneous administrative expense 7,500
Miscellaneous selling expense 14,000
Office rent expense 50,000
Office salaries expense 170,000
Office supplies expense 10,000
Sales 5,313,000
Sales commissions 185,000
Sales salaries expense 385,000
Store supplies expense 21,000
Retained earnings and balance sheet data:
Accounts payable $ 194,300
Accounts receivable 545,000
Accumulated depreciation—office buildings and equipment 1,580,000
Accumulated depreciation—store buildings and equipment 4,126,000
Allowance for doubtful accounts 8,450
Bonds payable, 5%, due in 10 years 500,000
Cash 282,850
Common stock, $20 par
(400,000 shares authorized; 100,000 shares issued, 94,600 outstanding) 2,000,000
Dividends:
Cash dividends for common stock 155,120
Cash dividends for preferred stock 100,000
Goodwill 700,000
Income tax payable 44,000
Interest receivable 1,200
Inventory (December 31, 20Y8),
at lower of cost (FIFO) or market 778,000
Office buildings and equipment 4,320,000
Paid-in capital from sale of treasury stock 13,000
Excess of issue price over par:
-Common 886,800
-Preferred 150,000
Preferred 5% stock, $80 par
(30,000 shares authorized; 20,000 shares issued) 1,600,000
Premium on bonds payable 19,000
Prepaid expenses 27,400
Retained earnings, January 1, 20Y8 8,197,220
Store buildings and equipment 12,560,000
Treasury stock
(5,400 shares of common stock at cost of $33 per share) 178,200
Answer:
Equinox Products Inc.Income Statement for the year ended December 31, 2018:
Sales Revenue $5,313,000
Cost of goods sold 3,700,000
Gross profit $1,613,000
Other Expenses:
Advertising expense $ 150,000
Sales commissions 185,000
Sales salaries expense 385,000
Delivery expense 30,000
Miscellaneous selling expense 14,000
Store supplies expense 21,000
Depreciation expense-
Store buildings & equipment 100,000
Depreciation expense-
Office buildings & equipment 30,000
Misc. administrative expense 7,500
Office rent expense 50,000
Office salaries expense 170,000
Office supplies expense 10,000 1,152,500
Operating Income $460,500
Other Revenue and Expense:
Interest revenue 30,000
Interest expense -21,000
Pretax Income $469,500
Income tax expense 140,500
Net Income $329,000
b. Equinox Products Inc.
Statement of Retained EArnings for the year ended December 31, 2018:
Retained earnings, January 1, 2018 $8,197,220
Net Income for the year 329,000
Cash Dividends: Common Stock -155,120
Cash Dividends: Preferred Stock -100,000
Retained Earnings, Dec. 31, 2018 $8,271,100
c. Equinox Products Inc.
Balance Sheet as of December 31, 2018:
Cash 282,850
Accounts receivable 545,000
Allowance for doubtful accounts 8,450 536,550
Interest receivable 1,200
Inventory (December 31, 20Y8), at lower of
cost (FIFO) or market 778,000
Prepaid expenses 27,400
Total Current Assets $1,626,000 $1,626,000
Office buildings and equipment 4,320,000
less accumulated depreciation 1,580,000 2,740,000
Store buildings and equipment 12,560,000
less accumulated depreciation 4,126,000 8,434,000
Goodwill 700,000
Total non-current assets $11,874,000 11,874,000
Total Assets $13,500,000
Liabilities + Equity:
Current Liabilities:
Accounts payable $ 194,300
Income tax payable 44,000
Premium on bonds payable 19,000
Total Current Liabilities $257,300
Non-current Liabilities:
Bonds payable, 5%, due in 10 years 500,000
Shareholders' Equity:
Common stock, $20 par (400,000 shares authorized;
100,000 shares issued, 94,600 outstanding) 2,000,000
Preferred 5% stock, $80 par (30,000 shares
authorized; 20,000 shares issued) 1,600,000
Paid-in In Excess of par: Common 886,800
Paid-in In Excess of par: Preferred 150,000
Retained earnings, December 31, 2018 8,271,100
Treasury stock (5,400 shares of common
stock at cost of $33 per share) 178,200
Paid-in capital from sale of
treasury stock 13,000 (165,200) 12,742,700
Total Liabilities and Equity $13,500,000
Explanation:
The Income Statement shows the financial performance of Equinox Products Inc. for the year ended December 31, 2018. Therein, the gross profit is stated as the excess of sales revenue over cost of goods sold. The operating income represents the income from the normal business of the company. Other revenue and expense, like interest are added to get the pretax income. After income tax expense is deducted, we arrive at the net income.
The statement of the Retained Earnings shows the movement that has occurred in the retained earnings during the period with net income added and dividends subtracted.
The balance sheet of Equinox Products Inc. shows the financial position with assets in their classes and the liabilities and equity sections which ensure that the accounting equation is achieved at the end of the period.
To reduce product development time, Caterpillar connected its engineering and manufacturing divisions with its active suppliers, distributors, overseas factories, and customers, through ________.
Answers
Answer: an extranet
Explanation:
An extranet is a private network that is controlled that gives access to vendors, suppliers, partners, vendors or a group of customers that are authorized.
Therefore, to reduce product development time, Caterpillar connected its engineering and manufacturing divisions with its active suppliers, distributors, overseas factories, and customers, through an extranet.
In recent years, the U.S. labor market has experienced a __________ in the earnings gap between men and women. One of the main factors behind this is ____________________ .
Answers
Answer:
In recent years, the U.S. labor market has experienced a __decline__ in the earnings gap between men and women. One of the main factors behind this is ___discrimination in labour market.___ .
Explanation:
A decline with women’s careers have been experienced with the rewards associated with or gained with top level job expertise, this has led to a discrimination in the labour market which is majorly influenced by gender. With many recruiters preferring their male counterparts for most job roles or positions.
In early January, Burger Mania acquired 100% of the common stock of the Crispy Taco restaurant chain. The purchase price allocation included the following items: $7 million, patent; $5 million, trademark considered to have an indefinite useful life; and $9 million, goodwill. Burger Mania's policy is to amortize intangible assets with finite useful lives using the straight-line method, no residual value, and a five-year service life.
Required:
What is the total amount of amortization expense that would appear in Burger Mania's income statement for the first year ended December 31 related to these items?
Answers
Answer:
$1,400,000 per year
Explanation:
DATA
Patent = 7 million with 5years useful life
Trademark = 5 million with an indefinite life
Goodwill = 9million
Amortization =?
Solution
Amortization of patent = Patent Value/ Useful life
Amortization of patent = $7,000,000/5
Amortization of patent = $1,400,000 per year
NOTE: Trademark and goodwill will not be amortized as they have an indefinite useful life. Both Intangible assets will be tested for impairment instead.
A security held in a well-diversified portfolio that has a beta of zero in a one-factor model will have an expected return of:
Answers
Answer:
The answer is risk free rate.
Explanation:
Beta is a risk arising from systematic risk or market risk.
A portfolio with a beta of zero would have the same expected return as the risk-free rate. Such a portfolio would have zero correlation with market movements.
Market risk cannot be diversified. Examples of zero beta assets are cash and US treasury bill.
The refractive index of a rarer medium with respect to a denser medium is.....
A)Greater than 1
B) Smaller Than 1
C) Negative
D)-1
Answers
Answer:
B) Smaller Than 1
Explanation:
Snell's Law states that the ratio of the sines of incidence and refraction is equal to the ratio of the phase of velocities in the two phases. When light travels from a rarer medium like air to a denser medium like water, the light would be refracted towards the normal line. For example, the refractive index of air with respect to glass is represented as;
sin i / sin r
If light rays travel from glass which is a denser medium to a rarer medium which is air, the light rays would bend away from the normal line, and then the angle of refraction would be greater than the angle of incidence. So, the refractive index of the rarer medium which is air with respect to the denser medium which is glass will be smaller than 1.
Select one of the government functions and describe in a brief summary whether it has seen an increase or decrease in government spending over the past 10 to 15 years. For the function you have selected, is it related to the problem of addressing externalities, providing public goods or dealing with other market failures. Does it appear to be related to political functions instead of economic functions?
Answers
Answer:
The government function selected is protection and regulation of the enviroment.
This government function is mainly carried out by the Enviromental Protection Agency (EPA).
Over the past fifteen years, the EPA annual budget has averaged at around 8 billion dollars. In this time frame, it had its highest budget in 2010, with over 10 billion dollars.
The EPA essentially deals with market failures. Externalities like pollution or over exploitation of natural resources (tragedy of the commons) are some of the most commonly issues that the EPA has to solve.
Peyton sells an office building and the associated land on May 1 of the current year. Under the terms of the sales contract, Peyton is to receive $1,763,800 in cash. The purchaser is to assume Peyton's mortgage of $1,058,280 on the property. To enable the purchaser to obtain adequate financing, Peyton is to pay the $105,828 in points charged by the lender. The broker's commission on the sale is $70,552. What is Peyton's amount realized? The amount realized by Peyton is $ .
Answers
Answer:
$2,645,700
Explanation:
realized amount = cash received + assumed mortgage - points paid by seller - broker's commission = $1,763,800 + $1,058,280 - $105,828 - $70,552 = $2,645,700
The amount realized includes all the money received and any debts assumed by the buyer, minus any expenses paid by the seller that are related to the transaction.
Nana Kay Ltd is a multiproduct firm. The revenues of a single product, Germ-D, are GH¢200,000 when 10,000 units are sold. Variable costs are GH¢16 per unit. Direct fixed expenses of GH¢25,000 consists primarily of depreciation on equipment specialised to the product. By what amount will Nana Kay Ltd' cash flow change if the product is dropped? Would you advise Nana Kay Ltd to drop Germ-D
Answers
Answer:
Nana Kay Ltd' cash flow will change by GH¢160,000 if the product is dropped.
Explanation:
Variable costs are cost that change as the level of output change. Therefore, no variable cost will be incurred when there is no sales or production. The variable cost of Nana Kay Ltd can be calculate as follows:
Total variable costs = Units sold * Variable cost per unit = 10,000 * GH¢16 = GH¢160,000
Fixed expenses are expenses that remains the same when there is a change in the level of output. Therefore, fixed expenses will still be incurred whether or not there is a sale or production. The direct fixed expenses of Nana Kay Ltd is GH¢25,000.
From the explanation above, it can be seen that only the variable cost will change, will not be incurred or will become zero when Nana Kay Ltd dropped the product. Therefore, Nana Kay Ltd' cash flow will change by GH¢160,000 if the product is dropped.
Money can be many things, but it is NOT Group of answer choices a financial liability liguid illiguid a financial asset
Answers
Answer:
illiquid
Explanation:
Liquidity refers to how fast an asset can be converted to cash. Money is already cash, so it is the most liquid financial asset
Lassen Corporation sold a machine to a machine dealer for $37,250. Lassen bought the machine for $68,000 and has claimed $22,500 of depreciation expense on the machine. What gain or loss does Lassen realize on the transaction
Answers
Answer:
Loss of $8,250
Explanation:
Lassen corporation sold a machine to a machine dealer at a price of $37,250
Lassen bought the machine for $68,000
He claimed $22,500 of depreciated expenses on the machine
Therefore, the gain or loss realized on the transaction can be calculated as follows
Gain/loss= Cash received-book value
Book value= Original basis-accumulated depreciation
= $68,000-$22,500
= $45,500
Gain/loss= $37,250-$45,500
= $8,250
Hence Lassen realized a loss of $8,250 on the transaction
Mike Flannery holds the following portfolio: Stock Investment Beta A $150,000 1.40 B 50,000 0.80 C 100,000 1.00 D 75,000 1.20 Total $375,000 What is the portfolio's beta?
Answers
Answer: 1.174
Explanation:
Portfolio beta is the weighted-average of the beta coefficient of all the individual stocks in a portfolio.
As per given , we have
Stock Investment Weight (W) Beta(B) (W) x (B)
[tex]\text{(Investment}/\text{Total investnment})[/tex]
A 150,000 0.40 1.40 0.56
B 50,000 0.13 0.80 0.104
C 100,000 0.27 1.00 0.27
D 75,000 0.20 1.20 0.24
Total 375,000 1.00 1.174
Hence, the portfolio's beta = 1.174
Evaluate the following statement using economic reasoning “a monopolist can charge whatever she wants because she is the only source available”
Answers
Answer:
The question is kind of self explanatory. The monopolist controls a monopoly. A monopoly is the exclusive control of supplies or trade for services. If the monopolist is the only source for a product, she can charge whatever she wants. There is a demand for the product and she is the only source, therefore she will charge what she wants.
Explanation:
The statement "a monopolist could charge whatever she wants as she is the only available source" should be evaluated below:
The following information related to the monopoly is to be considered:
It is a single seller marketOnly one seller is available in the market.Substitutes of the goods are not available in the market.Having strong barriers to entry.Do not enter other firms.Therefore we can conclude that as a monopolist they have full control over the price as they are price maker.
Learn more about the monopolist here: brainly.com/question/5992626
Aggregate supply is best described as the
total output of all products and services.
point of equilibrium.
nation’s real gross national product.
excess supply in the market.
Answers
Answer:
Total output of all products and services.
Explanation:
Aggregate supply is defined as the total amount of goods and services that firms are willing to sell, at a specific price, within a particular economy.
Aggregate supply is a macroeconomic concept, an aggregate variable, that is used in Keynesian and Neoclassical economics, often in models that put it together with aggregate demand, in what is known as the Aggregate Supply-Aggregate Demand model (AS-AD model).
If an investment center has a $90,000 controllable margin and $1,200,000 of sales, what average operating assets are needed to have a return on investment of 10%
Answers
Answer:
Average operating assets is $900,000
Explanation:
The formula for return on investment stated below is the starting for solving this question:
return on investment= Net operating income / Average operating assets
return on investment is 10%
net operating income is the same as controllable margin of $90,000
Average operating assets is the unknown
10%=90000/average operating assets
average operating assets=90000/10%
average operating assets=$900,000
"A higher price level will increase the demand for money, but expectations of a rise in the price level will reduce the demand for money." Is this statement true or false according to the monetary approach? Why?"
Answers
Answer:
The statement is True
Explanation:
A higher price level is a term that describes an economic condition in which more money is required to purchase a given amount of goods and services, at a given period, tland this leads to inflation overtime.
However, with a higher expected price level, it implies that a decline in the real value of a constant nominal amount of money balances is expected. Thus, there is an high tendency among people to substitute away from holding money and toward holding non-liquid assets whose prices may rise with the in the foreseeable future.
Net capital outflow and net exports An open economy interacts with the rest of the world through its involvement in world markets for goods and services and world financial markets. Although it can often result in an imbalance in these markets, the following identity must remain true: In other words, If a transaction directly affects the left side of this equation, then It must also affect the right side. The following problem will help you understand why this Identity must hold. Suppose you are a fashion designer Living In the United States, and a trendy boutique in Bangkok just purchased your entire inventory for THB 80,000.
Determine the effects of this transaction on exports, imports, and net exports in the U.S. economy, and enter your results in the following table. If the direction of change is 'No change,'' enter ''0'' in the Magnitude of Change column. Hint: The magnitude of change should always be positive, regardless of the direction of change. Because of the identity equation that relates)_________ to net exports, the in U.S. net exports Is matched by _________in U.S. net capital outflow. Which of the following Is an example of how the United States might be affected in this scenario?
a. You store the Thai baht in your safety deposit box at home.
b. You purchase THB 48,000 worth of stock in a Thai corporation and THB 32,000 worth of Thai bonds.
c. You exchange the THB 80,000 for dollars at your local bank, which then uses the foreign currency to purchase stock in a Thai corporation.
Answers
Answer:
1. a. Exports will increase by THB 80,000
You live in the US and you just sold something to someone outide the US. This is an export so you increased US exports by THB 80,000.
b. Imports will be $0.
You did not import anything from outside the country.
c. Net Exports will be THB 80,000
Net Exports are Exports less imports for a given period.
= 80,000 - 0
= THB 80,000
2. Because of the identity equation that relates to net exports, increase in U.S. net exports Is matched by an increase in U.S. net capital outflow.
As a result of the US exporting goods, money from other countries come into it. This flow of capital into the US contributes to the U.S. net capital outflow.
3. a. You store the Thai baht in your safety deposit box at home.
b. You purchase THB 48,000 worth of stock in a Thai corporation and THB 32,000 worth of Thai bonds.
c. You exchange the THB 80,000 for dollars at your local bank, which then uses the foreign currency to purchase stock in a Thai corporation.
In the first scenario, the US would be affected because even though money came in, it is not being used but it rather sitting ideal at home.
In the other 2 scenarios, the money was not used to purchase thing in the US but rather went back outside the country. This means that capital flowed out of the US so negatively affects her Net Capital Outflow.
Net capital outflow refers to the amount that is credited from the country and debited to the other country. This means the country faces an outflow of funds. Exports are the activity in which the goods and services are delivered to the other parts of the country.
1. a. Exports will increase by THB 80,000
Living in the US and you just sold something to someone outside the US. This is export so you increased US exports by THB 80,000.
b. Imports will be $0.
No imports from the other country.
c. Net Exports will be THB 80,000
Net Exports are Exports fewer imports for a given period.
= 80,000 - 0
= THB 80,000
2. Because of the identity equation that relates to net exports, an increase in U.S. net exports Is matched by an increase in U.S. net capital outflow.
As a result of the US exporting goods, money from other countries comes into it. This flow of capital into the US contributes to the U.S. net capital outflow.
3. a. You store the Thai baht in your safety deposit box at home.
b. You purchase THB 48,000 worth of stock in a Thai corporation and THB 32,000 worth of Thai bonds.
c. You exchange the THB 80,000 for dollars at your local bank, which then uses the foreign currency to purchase stock in a Thai corporation.
In the first scenario, the US would be affected because even though the money came in, it is not being used but it rather sitting ideal at home.
In 2 scenarios, the money was not used to purchase things in the US but rather went back outside the country. This means that capital flowed out of the US so negatively affects her Net Capital Outflow.
To know more about the net capital flow, refer to the link below:
https://brainly.com/question/15291246
Which of the following is true about mortgage-backed securities? I) They aggregate individual home mortgages into homogeneous pools. II) The purchaser receives monthly interest and principal payments received from payments made on the pool. III) The banks that originated the mortgages maintain ownership of them. IV) The banks that originated the mortgages continue to service them.
Answers
Answer:
I ,II and IV
Explanation:
Mortgage backed securities are either a claim for equity in a pool of mortgages, or a duty secured by a pool. Such claims reflect home loan securities. Loans borrow from mortgage lenders and then sell bundles of those loans on the resale market.
Specifically, once those loans are paid off, they sell their claim to the mortgage cash inflows. The issuer of the mortgage needs to maintain the loan, receiving principal and interest payments, and transfers those payments on to the mortgage borrower.
Therefore according to the given situation the correct answer is I, II, IV
Bermuda Triangle Corporation (BTC) currently has 390,000 shares of stock outstanding that sell for $102 per share. Assume no market imperfections or tax effects exist. Determine the share price and new number of shares outstanding if: (Do not round intermediate calculations. Round your price per share answers to 2 decimal places, e.g., 32.16, and shares outstanding answers to the nearest whole number, e.g., 32.) a. BTC has a five-for-three stock split. b. BTC has a 10 percent stock dividend. c. BTC has a 37.0 percent stock dividend. d. BTC has a four-for-seven reverse stock split.
Answers
Answer and Explanation:
The computation of each points is shown below:-
a. BTC has a five-for-three stock split is
New price = Old price × Split ratio
= 102 × 3 ÷ 5
= 61.2
New shares outstanding = old shares outstanding ÷ Split ratio
= 390,000 × 5 ÷ 3
= 650,000
b. BTC has a 10 percent stock dividend is
New price = Old price ÷ (1 + Stock dividend)
= 102 ÷ (1 + 0.1)
= 92.73
New shares outstanding = Old shares outstanding × (1 + Stock dividend)
= 390,000 × (1 + 0.1)
= 429,000
c. BTC has a 37.0 percent stock dividend is
New price = Old price ÷ (1 + Stock dividend)
= 102 ÷ (1 + 0.37)
= 74.45
New shares outstanding = Old shares outstanding × (1 + Stock dividend)
= 390,000 × (1 + 0.37)
= 534,300
d. BTC has a four-for-seven reverse stock split is
New price = Old price × Split ratio
= 102 × (7 ÷ 4)
= 178.5
New shares outstanding = Old shares outstanding ÷ Split ratio
= 390,000 × (4 ÷ 7)
= 222,857.14
P10-45. Analyzing and Interpreting Effects of TCJA Tax Law Changes. Pfizer Inc. reports the following footnote disclosure in its 2018 Form 10-K. The following table provides the components of Income from continuing operations before provision (benefit) for taxes on income: Year Ended December 31, $ millions 2018 2017 2016 United States $(4,403) $(6,879) $(8,534) International 16,288 19,184 16,886 Income from continuing operations before provision of taxes… 11,885 12,305 8,351 The following table provides the components of Provision (benefit) for taxes on income based on the location of the taxing authorities: $ millions 2018 2017 2016 United States Current income taxes: Federal $668 $1,267 $342 State and Local 9 45 (52) Deferred income taxes: Federal (1,663) (2,064) (419) State and local 16 (304) (106) Total U.S. tax provision (970) (1,055) (235) TCJA Current income taxes (3,035) 13,135 - Deferred income taxes 2,439 (23,795) - Total TCJA tax provision (596) (10,660) - International Current income taxes 2,831 2,709 1,532 Deferred income taxes (558) (42) (175) Total international tax provision 2,273 2,667 1,358 a.In the fourth quarter of 2017, we recorded an estimate of certain tax effect of the TCJA, including (i) the impact of deferred tax assets and liabilities from reduction in the U.S. Federal corporate tax rate from 35% to 21%, (ii) the impact on valuation allowances and other state income tax considerations, (iii) the $15.2 billion repatriation tax liability on accumulated post-1986 foreign earnings for which we plan to elect, with the filing of our 2018 U.S. Federal Consideration Income Tax Return, payments over eight years through 2026 that is reported in Other taxes payable in our consolidated balance sheet as of December 31, 2017 and (iv) deferred taxes on basis differences expected to give rise to future taxes on global intangible low-taxed income. As a result of the TCJA, in the fourth quarter of 2017, we reversed an estimate of the deferred taxes that are no longer expected to be needed due to the change to the territorial tax system. Required. What is the amount of the income tax expense reported by Pfizer for each year? What amount is current versus deferred? What is Pfizer’s effective (average) tax rate for each year? Use the pretax information to determine the effective tax rate for U.S. operations for each year. The footnotes include amounts related to the TCJA of 2017. What was the effect on the company’s tax expense in 2017 and 2018 due to the TCJA? Pfizer lists four TCJA items that impacted their 2017 tax provision. Explain how each of the four items might have affected Pfizer’s 2017 tax expens
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Furniture costing $61,700 is sold at its book value in 2017. Acquisitions of furniture total $50,000 cash, on which no depreciation is necessary because it is acquired at year-end. What is the cash inflow related to the sale of furniture
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Answer:
cash inflow = $32,100
Explanation:
there is some information missing:
accumulated depreciation 2016 (furniture) = $9,000depreciation expense 2017 (furniture) = $37,600accumulated depreciation 2017 (furniture) = $17,000we must first determine the book value of the furniture which was sold:
total depreciation related to the sold furniture = $9,000 + $37,600 - $17,000 = $29,600
book value = $61,700 - $29,600 = $32,100
since the furniture was sold at book value, then the cash inflow = $32,100
Cash inflow refers to money being received or earned by the company, while cash outflows refer to money being paid by the company.
If a country produces only two products, then by looking at the country's production possibilities curve (PPC), one can see that the opportunity cost of producing one of the products is the same as (equal to) the marginal cost of producing that product.
A. True
B. False
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Answer:
A. True
Explanation:
Marginal cost is the cost of the good or service is the opportunity cost of producing one or one of the units of it. It's the cost of producing one r ore unit of good. Marginal cost includes the cost included the producing of every unit. Opportunity cost is the alternative cost incurred by not using the opportunity cost of the other product.Spacefood Products will pay a dividend of $ 2.40 per share this year. It is expected that this dividend will grow by 6% per year each year in the future. What will be the current value of a single share of Spacefood's stock if the firm's equity cost of capital is 13%?
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Answer:
$34.29
Explanation:
Spacefood will pay a dividend of $2.40 per share
The dividend is expected to grow by 6%
= 6/100
= 0.06
The firm's equity cost of capital is 13%
= 13/100
= 0.13
Therefore, the current value of a single share of spacefood stock can be calculated as follows
Po= dividend/(equity cost of capital-growth rate)
= 2.4/(0.13-0.06)
= 2.4/0.07
= $34.29
Hence the Current value of a single share of Spacefoods's stock is $34.29
what is the annual percentage yield(APY) for money at an annual rate of (a)4.57% monthly (b)4.58% compunded quartelty
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Answer:
a)Annual rate of return = 4.67%
(b)Annual rate of return = 4.66%
Explanation:
Annul rate of return where compounding is done more frequenting could be worked out as follows:
Annual rate of return = (1+r)^n - 1
r - rate of return per period
n- number of periods in a year
a) Monthly rate of 4.57%
r- monthly rate = 4.57%/12 = 0.38% per month
n- 12 months
Annual rate of return = (1+ 0.003808)^12 - 1 × 100 = 4.67%
Annual rate of return = 4.67%
b) 4.58% compounded quarterly
r- quarterly rate = 4.58%/4 = 1.145 %
n- 4 quarters in a year
Annual rate of return = (1+0.01145)^4 - 1 × 100= 4.66%
a)4.57% monthly
Annual rate of return = 4.67%
(b)4.58% compounded quarterly
Annual rate of return = 4.66%
Novak Inc.’s $11 par value common stock is actively traded at a market price of $14 per share. Novak issues 5,700 shares to purchase land advertised for sale at $76,000. Journalize the issuance of the stock in acquiring the land.
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Answer:
DR Land $79,800
CR Common stock $62,700
CR Paid-in capital in excess of par $17,100
(To record land purchased by stock issuance)
Working
Land
= $14 * 5,700
= $79,800
Common Stock
= $11 par value * 5,700
= $62,700
Paid-in capital in excess of par
= $79,800 - $62,700
= $17,100
ROI and Residual Income: Basic Computations Watkins Associated Industries is a highly diversified company with three divisions: Trucking, Seafood, and Construction. Assume that the company uses return on investment and residual income as two of the evaluation tools for division managers. The company has a minimum desired rate of return on investment of 10 percent with a 30 percent tax rate. Selected operating data for three divisions of the company follow.
Trucking Division Seafood Division Construction Division
Sales $ 1,200,000 $ 750,000 $ 900,000
Operating assets 600,000 250,000 350,000
Net operating income 116,000 66,000 63,000
(a) Compute the return on investment for each division. (Round answers to three decimal places.)
Trucking ROI =
Seafood ROI =
Construction ROI =
(b) Compute the residual income for each division.
Residual income Trucking Seafood Construction
Net operating income
Minimum level
Residual income
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Answer:
a) ROI = Net operating income / Operating assets
Computation of ROI of each division
Division Working ROI
Trucking ROI $116,000 / $600,000 0.1933 or 19.33 %
Seafood ROI $66,000 / $250,000 0.264 or 26.40 %
Construction ROI $63,000 / $350,000 0.18 or 18 %
b) Residual Income = Net operating Income - ( Operating Asssts * Desired ROI )
Where , Minimum level = ( Operating Asssts * Desired ROI )
Minimum level for Trucking = ($600,000*10 %) = $60,000
Minimum level for Seafood = ($250,000*10 %) = $25,000
Minimum level for Construction = ($350,000 * 10 %) = $35,000
Computation of Residual Income for each division
Details Trucking($) Seafood($) Construction($)
Net operating income 116,000 66,000 63,000
Minimum level 60,000 25,000 35,000
Residual income 56,000 41,000 28,000
Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,150,000 in 2021 for the mining site and spent an additional $630,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately four years, the company is required to restore the land to its original condition, including repaving of roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Cash flow Probability
1 $330,000 25%
2 430,000 40%
3 630,000 35%
To aid extraction, Jackpot purchased some new equipment on July 1, 2021, for $150,000. After the copper is removed from this mine, the equipment will be sold. The credit-adjusted, risk-free rate of interest is 10%.
Required:
a. Determine the cost of the copper mine.
b. Prepare the journal entries to record the acquisition costs.
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Answer:
a. Determine the cost of the copper mine.
$2,104,430b. Prepare the journal entries to record the acquisition costs.
Date X, 2021, acquisition of copper mine
Dr Copper mine 2,104,430
Cr Cash 1,780,000
Cr Asset retirement liability 324,430
July 1, 2021, acquisition of mining equipment
Dr Equipment 150,000
Cr Cash 150,000
Explanation:
estimated restoration costs = ($330,000 x .25) + ($430,000 x .4) + ($630,000 x .35) = $475,000
now we must adjust the restoration cost and determine its present value = $475,000 x 0.68301 (present value factor, 10%, 4 periods) = $324,430
total cost of copper mine = purchase cost + preparation costs + restoration costs = $1,150,000 + $630,000 + $324,430 = $2,104,430
Mighty Manny, Incorporated, manufactures ice scrapers and distributes them across the midwestern United States. Mighty Manny is incorporated and headquartered in Michigan. It has product sales to customers in Illinois, Indiana, Iowa, Michigan, Minnesota, Wisconsin, and Wyoming. It has sales personnel only in the states discussed and all these states have adopted Wayfair legislation. Determine the state in which Mighty Manny does not have sales tax nexus given the following scenarios:
A. Mighty Manny has sales personnel that visit Minnesota. These sales employees follow procedures that comply with Public Law 86-272. The orders are received and sent to Michigan for acceptance. The goods are shipped by FedEx into Minnesota.
B. Mighty Manny provides design services to another manufacturer located in Wisconsin. While the services are performed in Michigan, Mighty Manny's designers visit Wisconsin at least quarterly to deliver the new designs and receive feedback.
C. Mighty Manny receives online orders from its Illinois client. Because the orders are so large, the goods are delivered weekly on Mighty Manny's trucks.
D. Mighty Manny's trucks drive through Nebraska to deliver goods to Mighty Manny's customers in other states, but the company has no Nebraska sales.
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Answer:
Determination of the state in which Mighty Manny does not have sales tax nexus:
A. No sales tax nexus in Minnesota, under given scenario.
B. No sales tax nexus in Wisconsin, under given scenario.
C. Sales tax nexus may exist because of the large orders. It may approach the sales threshold of more than $100,000 worth.
D. No sales tax nexus in Nebraska, with trucks driving through to other sales.
Explanation:
Might Manny is incorporated and headquartered in Michigan, according to this case. So, it has sales tax nexus in Michigan for its physical presence and sales.
Sales tax nexus describes the factors that can make a state to impose sales taxes on a business. The factors that establish sales tax nexus are a) certain business activities, b) physical presence, and c) approaching a certain sales threshold of either 200 transactions or $100,000.
Some states that have adopted the Wayfair legislation determine sales tax nexus with the above mentioned sales threshold of 200 transactions or $100,000. California's sales threshold is $500,000.
However, Public Law 86-272 or Interstate Income Act of 1959 forbids states from imposing unnecessary sales tax burdens on businesses soliciting for sales in their states without physical presence, provided the orders are filled or shipped from outside the said state. But, some of them rely on the Wayfair legislation, as it allows them some leverage to impose sales tax without physical presence of the business.