Answer:
494.00
Explanation:
The computation of the cost assigned to ending inventory using the FIFO method is shown below:
Particulars Units Unit Cost Amount
Purchase on January 9 50 3.20 160.00
Purchase on January 25 100 3.34 334.00
Cost of Ending Inventory 150.00 494.00
Since there are 150 units in the ending inventory so we take 50 units at $3.20 and the rest 100 units at 3.34 so that the cost assigned to the ending inventory could come
You have $6,600 to deposit. Regency Bank offers 12 percent per year compounded monthly (1.0 percent per month), while King Bank offers 12 percent but will only compound annually. How much will your investment be worth in 17 years at each bank
Answer:
Instructions are below.
Explanation:
Giving the following information:
Deposit= $6,600
Regency Bank:
12 percent per year compounded monthly (1.0 percent per month)
King Bank:
12 percent but will only compound annually.
Number of years= 17
To calculate the final value, we need to use the following formula for each bank:
FV= PV*(1+i)^n
Regency Bank:
n=17*12= 204
FV= 6,600*(1.01^204)
FV= $50,246.3
King Bank:
FV= 6,600*(1.12^17)
FV= $45,315.87
During January 2018, the first month of operations, a consulting firm had following transactions: Issued common stock to owners in exchange for $20,000 cash. Purchased $5,000 of equipment, paying $1,000 cash and signing a promissory note for $4,000. Received $9,000 in cash for consulting services performed in January. Purchased $1,500 of supplies on account; all of the supplies were used in January. Provided consulting services on account in the amount of $16,000. Paid $750 on account. Paid $3,000 to employees for work performed during January. Received a bill for utilities for January of $3,400; the bill remains unpaid. What is the amount of total revenue to be reported on the income statement for the month of January?
Answer:
The total or gross revenue for this company on the income statement would be the sum of:
$9,000 received in cash for consulting services performed in January$16,000 worth of consulting services that will be paid on account.So the total revenue will be $25,000.
This is because revenue is different from cash: as long as the sales are made, they are counted as revenue even if they are on account, and no cash payment has been made.
If the Fed carries out an open market operation and sells U.S. government securities, as long as the federal funds interest rate remains within the corridor the federal funds rate ________ and the quantity of reserves ________. Group of answer choices rises; decreases falls; increases falls; decreases rises; increases
Answer:
rises; decreases
Explanation:
When the Fed sells US securities, it is engaging in a contractionary monetary policy. This means that they are trying to cool down the economy and lower inflation rate by reducing the money supply. This will lead to an increase in the federal funds rate and the whole economy's interest rates.
Since the Fed absorbs money from the banks and other investors, the quantity of banks' reserves decreases, which leads to less loans and higher interest rates charged.
Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November. Sales (5,700 units) $ 319,200 Variable expenses 188,100 Contribution margin 131,100 Fixed expenses 106,500 Net operating income $ 24,600 If the company sells 5,300 units, its net operating income should be closest to:
Answer:
Net operating income is $ 15,400.00
Explanation:
The company's operating income if it sells 5,300 units is calculated thus:
sales (5,300*$319,200/5,700) $296,800.00
variable expenses($188,100/5700*5300) ($174,900.00)
Contribution $ 121,900.00
Fixed expenses ($106,500.00)
Net operating expenses $ 15,400.00
The net operating expenses dropped when 5,300 units were sold because the higher the volume, the more the contribution towards covering fixed expenses
Answer:
Net operating income= $15,400
Explanation:
Giving the following information:
Sales (5,700 units) $319,200
Variable expenses 188,100
Contribution margin 131,100
Fixed expenses 106,500
Net operating income $ 24,600
Sales now= 5,300 units
First, we need to calculate the unitary contribution margin:
Unitary contribution margin= 131,100/5,700= $23
Contribution margin for 5,300:
Total contribution margin= 23*5,300= $121,900
Fixed costs= 106,500
Net operating income= $15,400
Which of the following factors has not contributed to the trend towards outsourcing in recent decades: Group of answer choices
a. Increasing turbulence of the business environment.
b. Increasing emphasis on cost efficiency.
c. Increasing emphases on the need for competitive advantage based upon superior capabilities Increasing transaction costs
Like a good economist, you calculated the opportunity cost of getting your college degree. Suppose that at your university, you will pay $10,000 each year for tuition, $2,500 each year for textbooks, and $10,000 per year for room and board. Before you left for college, your boss at your high-school job offered you a job paying $20,000 per year. Assume that if you decided not to go to college, your parents would not let you live at home. What is your opportunity cost for four years of college?
Answer:
The opportunity cost is $130,000 for the four year duration.
Explanation:
Here, it is clear that I will not go to the job, so going to university is the only option left. Now, the loss of the job income is also an opportunity cost with an amount $20,000 which will aggregated with the University specific costs.
University Specific cost for 4 Years = 4 * (Tuition Cost + Textbooks + Job Opportunity loss)
The room and board cost is common between college and the university so it must not be considered for the decision making.
By putting values, we have:
University Specific cost for 4 Years = 4 * ($10,000 + $2,500 + $20,000)
University Specific cost for 4 Years = $130,000 for the four years
The opportunity cost is $130,000 for the four year duration.
For better understanding of relevant costing (Opportunity cost analysis), consider the following question:
https://brainly.com/question/14423321
Hillsdale is considering two options for comparable computer software. Option A will cost $31,000 plus annual license renewals of $1,800 for three years, which includes technical support. Option B will cost $12,000 with technical support being an add-on charge. The estimated cost of technical support is $4,700 the first year, $3,700 the second year, and $2,700 the third year. Assume the software is purchased and paid for at the beginning of year one, but that technical support is paid for at the end of each year. The discount rate is 10%. Ignore income taxes.Required: Determine which option should be chosen based on present value considerations
Answer:
Option B
Explanation:
The computation of the present value is shown below:
For Option A
Year Cash flows Discount factor at 10% Present value
0 -$31,000 1.0000 -$31,000.00
1 -$1,800 0.9091 -$1,636.36
2 -$1,800 0.8264 -$1,487.60
3 -$1,800 0.7513 -$1,352.37
Total -$35,476.33
For Option B
Year Cash flows Discount factor at 10% Present value
0 -$12,000 1.0000 -$12,000.00
1 -$4,700 0.9091 -$4,272.73
2 -$3,700 0.8264 -$3,057.85
3 -$2,700 0.7513 -$2,028.55
Total -$21,359.13
As we can see that the present value for option B is less than the option A so the option B should be selected
Victor Rumsfeld Inc.'s dividend policy is under review by its board. Its projected capital budget is $2,000,000, its target capital structure is 60% debt and 40% equity, and its forecasted net income is $300,000. If the company follows a residual dividend policy, what total dividends, if any, will it pay out? Select the correct answer.
Answer:
The multiple choices are
a. $240,000
b. $228,000
c. $216,600
d.$205,770
e. $0
The correct option is E,$0
Explanation:
The funding required from equity is 40% of the projected capital budget of $2000,000 which is expected to be from the profit attributable to stockholders since new issue of shares is not contemplated.
In other words, dividends payable to shareholders is the net income less their counter funding of the project which is computed below:
residual dividends=net income-(equity%*capital outlay)
residual dividends=$300,000-(40%*$2000,000)
=$300,000-$800,000=$0
In essence the $300,000 is not even enough as funds expected from equity less alone paying excess as dividend
Lolita, a Mexican business woman, came to Redmond Washington to negotiate a business deal with Microsoft. Lolita, assuming business was formal, dressed in a formal suit, nylons, and high heels. She met with the Vice President of Worldwide Sales at Microsoft, Kevin Johnson, and greeted him with, "Good morning Vice President Johnson." Kevin was dressed in jeans and sneakers and addressed Lolita with, "Hello Lolita, nice to finally meet you in person." Lolita was offended by this greeting. This example illustrates which assumption about intercultural communication?
Answer:
b) all of these are true.
Explanation:
The scenario described in the question illustrates differences in communication rules that suffer from different cultural influences, this is what we perceive when Mexican Lolita may have been surprised that the American Kevin Johnson communicated with her in a more informal way at a formal work meeting. , and therefore felt offended, as he took into account the type of cultural communication in his country of origin, disregarding the intercultural differences in communication that occur in different countries.
So the ideal is that in a case like the one described in the question, where there are negotiations for business deal with international companies, employees are prepared to relate professionally with different types of people, observing the type of communication context, understanding that there are differences intercultural experiences that imply in the way people relate to each other even in the work environment, and above all, maintain ethics and respect for each and every culture different from yours.
Listed below are a few events and transactions of Kodax Company.
Jan. 2 Purchased 92,000 shares of Grecco Co. common stock for $526,000 cash. Grecco has 276,000 shares of common stock outstanding, and its activities will be significantly influenced by Kodax.
Sept. 1 Grecco declared and paid a cash dividend of $1.50 per share.
Dec. 31 Grecco announced that net income for the year is $507,900. Year 2
June 1 Grecco declared and paid a cash dividend of $3.80 per share.
Dec. 31 Grecco announced that net income for the year is $735,400.
Dec. 31 Kodax sold 13,000 shares of Grecco for $96,500 cash.
Required:
Prepare journal to record the above transactions and events of kodax Company.
Answer:
Jan. 2
Investment in Associate $526,000 (debit)
Cash $526,000 (credit)
Sept. 1
Cash $138,000 (debit)
Dividend Received $138,000 (credit)
June 1
Cash $349,600 (debit)
Dividend Received $349,600 (credit)
Dec. 31
Cash $96,500 (debit)
Investment in Associate $96,500 (credit)
Explanation:
When Kodax Company purchased 92,000 shares of Grecco Co she had significant influence (more than 20% of shareholding in Grecco Co). We call this an Investment in an Associate.
The Investment in Associate is a Financial Asset to the Holder (Kodax Company) and an Equity Element to the Investee (Grecco Co) and should be recorded appropriately as above.
XYZ began operations in 2018. The company reported $128,000 of depreciation expense on its income statement in 2018 and $84,000 in 2019. On its tax returns, the company deducted $192,000 for depreciation in 2018 and $112,000 in 2019. The 2019 tax return shows a tax obligation (liability) of $132,000 based on a 25% tax rate.
Calculate the income tax expense for 2019.
Answer:
The income tax expense for 2019 is $128,000
Explanation:
Income tax payable for 2019 is $132,000
Deferred tax asset for 2018 will be:
(128,000-112,000) * 25%
=16000 x 25%
=$4,000
Income Tax Expenses for 2019 will be:
Income tax payable - Deferred Tax asset
=$132,000 - $4,000
=$128,000
g A firm buys on terms of 3/15, net 45. It does not take the discount, and it generally pays after 85 days. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year? The firm's APR of not taking the trade credit is ____. (If you use percent, then do not use the percent sign. Go two places to the right of the decimal point (XX.XX). If you use decimal places, then go four places to the right of the decimal place. 0.XXXX).
Answer: 0.1613
Explanation:
From the question, a firm buys on terms of 3/15, net 45. This implies that a discount rate of 3% will be provided I payment is made within 15 days. If it's not made within 15 days, then full payment will be due on 85 days.
The nominal annual percentage cost is 0.1613. The calculation has been attached
You order a $40 Andy Warhol print online for a Christmas gift. There’s a standard shipping charge of $10, but you see that orders of $45 or more ship for free. You could also order a $5 pair of socks, but you’re not sure the gift recipient would like them. Nonetheless, you decide to order the socks. Your decision is an example of:________.
a. marginal thinking.
b. trade-offs.
c. opportunity costs.
d. incentives.
Answer: C
Explanation:
You're seeing an opportunity in savings the cost is $40 + $10 for shipping = $50 versus $45 with free shipping. You get an extra item for less and it includes free shipping. So its a deal to actually buy the extra item.
Answer:
c. opportunity costs.
Explanation:
Opportunity cost is the cost that a person face for choosing an alternative and loosing benefit from other options. The benefit foregone for choosing an alternative is opportunity cost.
in this question there is an opportunity cost of $5 if it order the stock because it involves the options of $45 or $50 ($40+$10).
Income Statement The revenues and expenses of Paradise Travel Service for the year ended May 31, 2018, follow: Fees earned $900,000 Office expense 300,000 Miscellaneous expense 15,000 Wages expense 450,000 Prepare an income statement for the year ended May 31, 2018. Paradise Travel Service Income Statement For the Year Ended May 31, 2018
Answer:
Net income is $135,00 from the income statement.
Explanation:
In the Income Statement for a particular year, all expenses all expenses for the year are deducted from the income to arrive at net income for that year. Based this, we have:
Paradise Travel Service Income Statement For the Year Ended May 31, 2018
Details ($)
Fees earned 900,000
Office expense (300,000)
Miscellaneous expense (15,000)
Wages expense (450,000)
Net income 135,000
Therefore, net income is $135,00 from the income statement.
Listed below are a few events and transactions of Kim Company. Year 1 Jan. 2 Purchased 95,000 shares of Grey Co. common stock for $501,000 cash. Grey has 285,000 shares of common stock outstanding, and its activities will be significantly influenced by Kim. Sept. 1 Grey declared and paid a cash dividend of $2.00 per share. Dec. 31 Grey announced that net income for the year is $500,400. Year 2 June 1 Grey declared and paid a cash dividend of $2.00 per share. Dec. 31 Grey announced that net income for the year is $722,900. Dec. 31 Kim sold 10,000 shares of Grey for $126,500 cash. Prepare journal entries to record the above transactions and events of Kim Company. (Do not round intermediate calculations and round your final answers to the nearest dollar amount.)
Answer:
Year 1
Jan. 2
Investment in Grey $501,000 (debit)
Cash $501,000 (credit)
Sept. 1
Share of Profit of Associate : Dividend Received $190,000 (debit)
Dividend Declared $190,000 (credit)
Year 2
June 1
Share of Profit of Associate : Dividend Received $190,000 (debit)
Dividend Declared $190,000 (credit)
Dec. 31
Cash $126,500 (debit)
Investment In Grey $126,500 (credit)
Explanation:
During the first year, Kim Company purchased 33% of stocks in Grey Co. This led to Kim Company having significant influence over Grey Co. Grey Co. is known as Associate Company.
The dividend paid by an Associate is Part of Share of profit from an associate and must be presented as such in the entity books.
During the second year, when Kim Company sells 10,000 shares of Grey Co, they lost part of Investment but still have significant influence (29%) in Grey Co.The Grey Co remains an Associate of Kim Company.
Following is a partial process cost summary for Mitchell Manufacturing's Canning Department. Equivalent Units of Production Direct Materials Conversion Units Completed and transferred out 44,000 44,000 Units in Ending Work in Process: Direct Materials (9,000 * 100%) 9,000 Conversion (9,000 * 70%) 6,300 Equivalent Units of Production 53,000 50,300 Cost per Equivalent Unit Costs of beginning work in process $43,400 $63,700 Costs incurred this period 145,100 195,100 Total costs $188,500 $258,800 Cost per equivalent unit $3.56 per EUP $5.15 per EUP The total conversion costs transferred out of the Canning Department equals:_______.a. $156,640. b. $179,068. c. $188,500.
Answer:
Material Costs Transferred Out $ 156,640
Conversion Costs Transferred Out $ 226355
Explanation:
Mitchell Manufacturing
Canning Department.
Equivalent Units of Production
Direct Materials Conversion
Units Completed and transferred out 44,000 44,000
Units in Ending Work in Process:
Direct Materials (9,000 * 100%) 9,000
Conversion (9,000 * 70%) 6,300
Equivalent Units of Production 53,000 50,300
Cost per Equivalent Unit
Costs of beginning work in process $43,400 $63,700
Costs incurred this period 145,100 195,100
Total costs $188,500 $258,800
Cost per equivalent unit $3.56 per EUP $5.15 per EUP
The total conversion costs = $ 258,800
Less Conversion Costs of Ending Inventory= ( 6300 * 5.15)= 32445
Conversion Costs Transferred Out $ 226355
The Total Material Costs $188,500
Less Material Costs of Ending Inventory= ( 9000 * 3.56)= 32040
Material Costs Transferred Out $ 156,640
It can also be solved by multiplying EUP with the Units Completed and transferred out and we will get the same results.
Material Costs Transferred Out ( 44000*3.56) $ 156,640
Conversion Costs Transferred Out ( 44000*5.15) $ 226355
Liu Electronics budgeted sales of $400,000.00 for the month of November and cost of goods sold equal to 65 percent of sales. Beginning inventory was $80,000.00 and ending inventory is estimated at $72,000.00. The budgeted purchases for November are:________
Answer:
Purchases= $252,000
Explanation:
Giving the following information:
Sales= $400,000
Cost of goods sold equal to 65 percent of sales.
Beginning inventory= $80,000
Ending inventory= $72,000
To calculate the purchase required, we need to use the following formula:
Purchases= sales + desired ending inventory - beginning inventory
Purchases= (400,000*0.65) + 72,000 - 80,000
Purchases= $252,000
The following items are taken from the financial statements of the Freight Service for the year ending December 31, 2016:
Accounts payable $ 19,000
Accounts receivable 13,000
Accumulated depreciation – equipment 26,000
Advertising expense 21,200
Cash 15,000
Owner’s capital (1/1/16) 104,000
Owner’s drawings 11,000
Depreciation expense 12,000
Insurance expense 3,800
Note payable, due 6/30/17 72,000
Prepaid insurance (12-month policy) 7,200
Rent expense 16,000
Salaries and wages expense 32,000
Service revenue 135,000
Supplies 5,000
Supplies expense 6,000
Equipment 210,000
What is the company’s net income for the year ending December 31, 2016?
Answer:
Freight Service
Income Statement for the year ending December 31, 2016:
Service Service $135,000
Costs:
Advertising expense 21,200
Depreciation expense 12,000
Insurance expense 3,800
Rent expense 16,000
Salaries & Wages exp 32,000
Supplies expense 6,000
Total Expenses $91,000
Net Income $44,000
Explanation:
In calculating the net income for the year, only revenue and expenses (income statement) items are taken into account. They are also called temporary or period accounts which are closed to the income statement for the period, because they are not permanent accounts. Permanent accounts are taken to the balance sheet and carried over to the next accounting period.
A well diversified portfolio needs about 3 to 5 stocks from different categories.
True
False
Answer:
This is false.
Explanation:
Diversification is An investment strategy that includes a mixture of a wide variety of investments from different categories within a portfolio.
A well diversified portfolio does not need 3 to 5 stocks from different categories instead A well-diversified portfolio needs about 20-25 stocks from various categories.
Computing materials variances:
D-List Calendar Company specializes in manufacturing calendars that depict obscure comedians. The company uses a standard cost system to control its costs. During one month of operations, the direct materials costs and the quantities of paper used showed the following:
Actual purchase price
$0175 per page
Standard quantity allowed for production
170,000 pages
Actual quantity purchased during month
200,000 pages
Actual quantity used during month
185,000 pages
Standard price per page
$0.17 per page
1. Total cost of purchases for the month
2. Materials price variance
3. Materials quantity variance
4. Net materials variance
Answer:
1. Total cost of purchases for the month
= actual purchases x actual price = 200,000 pages x $0.175 per page = $35,0002. Materials price variance
= (actual unit cost - standard unit cost) x actual quantity used = ($0.175 - $0.17) x 185,000 = $925 unfavorable3. Materials quantity variance
= (actual quantity used - standard quantity allowed) x standard price = (185,000 - 170,000) x $0.17 = $2,550 unfavorable
4. Net materials variance
= materials price variance + materials quantity variance = $925 + $2,550 = $3,475 unfavorableExplanation:
Actual purchase price $0.175 per page
Standard quantity allowed for production 170,000 pages
Actual quantity purchased during month 200,000 pages
Actual quantity used during month 185,000 pages
Standard price per page $0.17 per page
Anson Jackson Court Company (AJC) The Anson Jackson Court Company (AJC) currently has $200,000 market value (and book value) of perpetual debt outstanding carrying a coupon rate of 6%. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero growth company. AJC's current cost of equity is 8.8%, and its tax rate is 40%. The firm has 10,000 shares of common stock outstanding selling at a price per share of $60.00. Refer to the data for the Anson Jackson Court Company (AJC). Now assume that AJC is considering changing from its original capital structure to a new capital structure with 50% debt and 50% equity. If it makes this change, its resulting market value would be $820,000. What would be its new stock price per share?
Answer:
The new stock price per share would be $62
Explanation:
In order to calculate the new stock price per share we would have to calculate first the value of the firm as follows:
value of the firm=value of equity+value of debt
value of the firm=(60*10,000)+$200,000
value of the firm=$800,000
If the company makes 50% debt and 50% equity, the market value will increase to $820,000 that is value of equity=$820,000-$200,000=$620,000
Therefore, new stock price per share will be=$620,000/10,000
new stock price per share=$62
Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows: The reporting statement of revenue and expense data is shown. A table with three columns is shown. There is no heading in the first column; the second column heading in the current year; the third column heading is the previous year. The headings, Current Year and Previous Year, are set in bold. The first line (below the heading) shows Sales is $ 4,000,000 and $ 3,600,000; the second line shows Cost of goods sold is 2,280,000 and 1,872,000; the third line shows Selling expenses is 600,000 and 648,000; the fourth line shows Administrative expenses is 520,000 and 360,000;the fifth line shows Income tax expense is 240,000 and 216,000. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. Round to the nearest whole percentage. Answer Check Figure: Current year net income: $360,000; 9% of sales Pencil Comment on the significant changes disclosed by the comparative income statement.
Answer:
Innovation Quarter Inc.
Income Statement
For the Years Ended
Current Year ($) Previous Year ($)
Sales 4,000,000 100% 3,600,000 100%
Cost of goods sold 2,280,000 57% 1,872,000 52%
Gross profit 1,720,000 43% 1,728,000 48%
Expenses:
Selling expenses 600,000 15% 648,000 18%
Administrative expenses 520,000 13% 360,000 10%
Total expenses 1,120,000 28% 1,008,000 28%
Income from operations 600,000 15% 720,000 20%
Income tax expense 240,000 6% 216,000 6%
Net income 360,000 9% 504,000 14%
Explanation:
Current Year Previous Year
Sales $ 4,000,000 $ 3,600,000
Cost of goods sold $ 2,280,000 $ 1,872,000
Selling expenses $ 600,000 $ 648,000
Administrative expenses $ 520,000 $ 360,000
Income tax expense $ 240,000 $ 216,000
Some major technology companies have faced scrutiny in the past when it comes to labor and human rights on the overseas suppliers' side. What are the challenges of monitoring overseas suppliers (especially tier 3, tier 4, etc.) that are guilty of not following labor and human rights guidelines
Answer: The answer is provided below
Explanation:
With overseas factories that continue to move to new locations with a lower labour costs, the monitoring and controlling working conditions becomes a challenge. Research has shown that companies do little to monitor human rights violations in the low-cost supply chain locations.
A scandal involving Apple was reported in 2014 at a manufacturing building in China. The building which was owned by Catcher Technology Co., manufactures metal iPad covers for iPhones. Some findings included hiring discrimination, locked safety exits, excessive work hours, and also unpaid overtime each month totalling about $290,000 in owed wages. The factory was reported to have been dumping its industrial fluids and waste into nearby rivers, and also not providing proper toxic equipment for the employees.
Human rights of these people saw n those area are being abused by having them exposed to pollution, which can lead to lung diseases.
Companies like Apple have said that they are continuing to monitor situations like this, and are fixing them, but we still hear cases of more wrongdoings, therefore you have to wonder how vital these issues truly are to the firms involved.
A chain of supermarkets specializing in gourmet food, has been using the average cost method to value its inventory. During the current year, the company changed to the first-in, first-out method of inventory valuation. The president of the company reasoned that this change was appropriate since it would more closely match the flow of physical goods. This change should be reported on the financial statements as A. Change in accounting estimate. B. Affecting only future periods. C. Cumulative-effect type accounting change. D. Correction of an error.
Answer: Affecting only future periods.
Explanation:
From the question, we are informed that a chain of supermarkets specializing in gourmet food, that has been using the average cost method to value its inventory changed to the FIFO method in the current year.
This change should be reported on the financial statements as a retroactive effect type of an accounting change. This is necessary because it affects future period and in order to maintain comparability and consistency.
Shares in Brothers Grimm, Inc., manufacturers of gingerbread houses, are expected to pay a dividend of $5.00 in one year and to sell for $100 per share at that time. How much should you be willing to pay today per share of Grimm under the following circumstances?
A) If the safe rate of interest is 5 percent and you believe that investing in Grimm carries no risk?
B) If the safe rate of interest is 10 percent and you believe that investing in Grimm carries no risk?C) If the safe rate of interest is 5 percent, but your risk premium is 3 percent?
D) Repeat parts a to c, assuming that Grimm is not expected to pay a dividend, but the expected price is unchanged..
Answer:
(a) $100.00
(b) $95.45
(c) $97.22
(di) $95.24
(dii) $90.91
(diii) $92.59
Explanation:
Brothers Grimm corporation is responsible for the manufacturing of gingerbread houses. During a one year period, they are expected to pay a dividend of $5 and to sell each shares for $100. The share value for different safe interests is calculated as follows
a) If the safe interest is 5%, then the share value for today is
= ( 5+100)/( 1+5/100)
= 105/ ( 1+0.05)
= 105/1.05
= $100.00
b) If the safe interest is 10%, the share value for today would be
= (5+100)/(1+10/100)
= 105/( 1+0.1)
= 105/1.1
= 95.454
= $95.45( to 2 decimal places)
c) If the safe interest is 5% and the risk premium is 3%, then the share value for today is
= (5+100)/(1+(5+3)/100)
= 105/( 1+8/100)
= 105/(1+0.08)
= 105/1.08
= $97.222
= $97.22 (to 2 decimal places)
d) Since Grimm is not expected to pay dividend, the share values for each safe interest can be calculated as follows:
i) If the safe interest is 5% and there is no payment of dividend, then the share value for today is
= 100/( 1+5/100)
= 100/( 1+0.05)
= 100/1.05
= $95.238
= $95.24 ( to 2 decimal places)
ii) If the safe interest is 10% and there is no payment of dividend, then the share value for today is
= 100/( 1+10/100)
= 100/( 1+ 0.1)
= 100/1.1
= $90.909
= $90.91 ( to 2 decimal places)
iii) If the safe interest is 5% and the risk premium is 3% with no payment of dividend, the share value for today is calculated as
= 100/(1+8/100)
= 100/(1+0.08)
= 100/1.08
= $92.592
= $92.59 ( to 2 decimal places)
Share valuation is done based on quantitative techniques and the value of a share will vary depending on market demand and supply.
What do you mean by share value?Valuation of shares is a process of knowing the value of a company's shares. The stock price of listed companies trading publicly can be easily identified.
The share value for different safe interests is calculated as follows
a) If the safe interest is 5%, then the share value for today is
[tex]=\frac{ ( 5+100)}{1+\frac{5}{100}}\\\\= \dfrac{105}{( 1+0.05)} \\\\=\dfrac{105}{1.05}\\\\= \$100.00[/tex]
b) If the safe interest is 10%, the share value for today would be:
[tex]=\frac{ ( 5+100)}{1+\frac{10}{100}}\\\\= \dfrac{105}{( 1+0.1)} \\\\=\dfrac{105}{1.1}\\\\= \$95.454[/tex]
c) If the safe interest is 5% and the risk premium is 3%, then the share value for today is
[tex]=\frac{ ( 5+100)}{1+\frac{(5+8)}{100}}\\\\= \dfrac{105}{( 1+0.08)} \\\\=\dfrac{105}{1.08}\\\\= \$97.222\\[/tex]
d) Since Grimm is not expected to pay a dividend, the share values for each safe interest can be calculated as follows:
i) If the safe interest is 5% and there is no payment of dividend, then the share value for today is $95.238.
ii) If the safe interest is 10% and there is no payment of dividend, then the share value for today is $90.91 ( to 2 decimal places)
iii) If the safe interest is 5% and the risk premium is 3% with no payment of dividend, the share value for today is calculated to be $92.59 ( to 2 decimal places).
Thus, the value of each share under the specified rate of dividend and risk premium is calculated.
To learn more about share value, refer to:
https://brainly.com/question/25818989
A day trader buys an option on a stock that will return $150 profit if the stock goes up today and lose $650 if it goes down. Complete parts a and b below given that the trader thinks there is a 70 % chance that the stock will go up.
a) What is her expected value of the option's profit?
b) What do you think of this option?
Answer:
A.-90
B.What I think of the option is that it will be extremely risky reason been that her expected value was a loss in (a).
Explanation:
Option on stock $150
Loss$650
Percentage 70 %
A.
150*.70= $105
100%-70%
=30%
-650*.30
= -195
$105 + (-195)
= -90
Therefore the expected value of the option's is losing 90
b.
What I think of the option is that it will be extremely risky reason been that her expected value was a loss in (a).
On January 1, 2016, Learned, Inc., issued $70 million face amount of 20-year, 14% stated rate bonds when market interest rates were 16%. The bonds pay interest semi-annually each June 30 and December 31 and mature on December 31, 2035.
REQUIRED:
A) Using the present value tables, calculate the proceeds (issue price) of Learned, Inc.’s bonds on January 1, 2016, assuming that the bonds were sold to provide a market rate of return to the investor.
B) Assume instead that the proceeds were $72,400,000. Use the horizontal model (or write the journal entry) to record the payment of semi-annual interest and the related premium amortization on June 30, 2016, assuming that the premium of $2,400,000 is amortized on a straight-line basis.
C) If the premium in PART B were amortized using the compound interest method, would interests expense for the year ended December 31, 2016 be more than, less than, or equal to the interest expense reported using the straightline method of premium amortization? Explain.
D) In reality, the difference between the stated interest rate and the market rate would be substantially less than 2% . The dramatic difference in the problem was designed so that you could use present value tables to answer PART A. What causes the stated rate to be different from the market rate, and why is the difference likely to be much less than depicted in the problem?
Answer:
A) $61,654,600
B) June 30, 2016, first coupon payment
Dr Interest expense 4,840,000
Dr Premium on bonds payable 60,000
Cr Cash 4,900,000
C) If you use the effective interest rate, the bond premium is higher, so the actual interest expense would be lower:
June 30, 2016, first coupon payment
Dr Interest expense 4,756,406
Dr Premium on bonds payable 143,594
Cr Cash 4,900,000
D) The actual difference between the coupon rate and the effective interest rate (with a $72,400,000 issue price) = 14% (coupon rate) - 13.93% = 0.07%.
The bond's issue price is generally determined by the market rate, but sometimes a company might believe that the interest rate applicable to them is actually different. A company might under estimate the riskiness of their operations, but the market doesn't. Generally the market rate is correct. So any variation in the coupon rate is due to a mistake by the firm. Usually companies do not make huge mistakes, if they miss on the coupon rate it generally is not significant.
Explanation:
issued $70 million face amount of 20-year, 14% stated rate bonds when market interest rates were 16%. The bonds pay interest semi-annually each June 30 and December 31, each coupon = $4,900,000
bonds market price = PV of maturity value + PV of coupons
PV of maturity value = $70,000,000 x 0.04603 = $3,222,100 PV of coupons = $4,900,000 x (8% annuity, 40 periods) = $4,900,000 x 11.925 = $58,432,500total issue price = $61,654,600if instead the issue price was $72,400,000 (resulting in a $2,400,000 premium), then the premium would be amortized by $2,400,000 / 40 = $60,000 during each coupon payment
if the effective interest method, (not the compound interest method), was used to amortize bond premium, then we first need to calculate the effective interest rate:
$72,400,000 - $70,000,000 = $2,400,000 / 40 = $60,000
$4,900,000 + $60,000 = $4,960,000 / {($72,400,000 + $70,000,000) / 2} = 0.0696629
bond premium discount using effective interest rate = ($72,400,000 x 0.0696629) - $4,900,000 = $5,043,594 - $4,900,000 = $143,594
In a Q system, the demand rate for strawberry ice cream is normally distributed, with an average of 305 pints per week. The lead time is 5 weeks. The standard deviation of weekly demand is 14 pints. Refer to the standard normal table for z-values.
a. The standard deviation of demand during the 5-week lead time is ______ pints. (Enter your response rounded to the nearest whole number.)
b. The average demand during the 6-week lead time is _____pints. (Enter your response as aninteger.)
c. The reorder point that results in acycle-service level of 96 percent is _____pints. (Enter your response rounded to the nearest whole number.)
Z 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09
0.0 0.5000 0.5040 0.5080 0.5120 0.5160 0.5199 0.5239 0.5279 0.5319 0.5359
0.1 0.5398 0.5438 0.5478 0.5517 0.5557 0.5596 0.5636 0.5675 0.5714 0.5754
0.2 0.5793 0.5832 0.5871 0.5910 0.5948 0.5987 0.6026 0.6064 0.6103 0.6141
0.3 0.6179 0.6217 0.6255 0.6293 0.6331 0.6368 0.6406 0.6443 0.6480 0.6517
0.4 0.6554 0.6591 0.6628 0.6664 0.6700 0.6736 0.6772 0.6808 0.6844 0.6879
0.5 0.6915 0.6950 0.6985 0.7019 0.7054 0.7088 0.7123 0.7157 0.7190 0.7224
0.6 0.7258 0.7291 0.7324 0.7357 0.7389 0.7422 0.7454 0.7486 0.7518 0.7549
0.7 0.7580 0.7612 0.7642 0.7673 0.7704 0.7734 0.7764 0.7794 0.7823 0.7852
0.8 0.7881 0.7910 0.7939 0.7967 0.7996 0.8023 0.8051 0.8079 0.8106 0.8133
Answer: a. 31.304. b. 1525. c. 1589.17
Explanation:
Lead time = 5 weeks
Standard deviation of weekly demand = 14 pints
a. ✓L × Standard deviation Weekly
= ✓5 × 14
= 2.236 × 14
= 31.304
b. Average demand during the 5-week lead time will be:
= Leadtime × weekly demand
= 5 × 305
= 1525
c. Note that the Z value at 96% service level is 2.05
R=dL+z*sd*sqrt(L)= (305 × 5)+ (2.05 × 14 × ✓5)
= 1525 + 64.17
= 1589.17
1. Cost Management Systems: Analyze the process of assigning and allocating costs. Discuss the development of an activity-based costing system and how activity based management is used in decision making. Compare and contrast Just-In-Time and Quality Management Systems.
Explanation:
The assigning and allocation of costs in an organization can be defined as essential processes to assist in the management of organizational budgets, being characterized as essential activities for the company's accounting department.
An activity-based costing system can be initiated according to the identification of the scope of organizational projects, and then carry out an appropriate planning so that the costs of the company in relation to all organizational systems are identified and then eliminate subjectivity and carry out a more precise cost management and greater control, which guarantees a decision making more directed to the organizational needs, focused on reducing unnecessary costs.
The relationship between the cost management system and the Just-In-Time and quality management systems is that these two systems are focused on reducing waste and maintaining quality in all organizational processes, and controlling of the organizational costs realized by a cost management system will reduce the waste of undue costs of the company, increase its efficiency and quality, as this system assists in the control and coordination of the systems, which results in an improvement of all organizational processes.
An all-equity business has 100 million shares outstanding selling for $20 a share. Management believes that interest rates are unreasonably low and decides to execute a leveraged recapitalization (a recap). It will raise $1 billion in debt and repurchase 50 million shares. a. What is the market value of the firm prior to the recap? What is the market value of equity? b. Assuming the Irrelevance Proposition holds, what is the market value of the firm after the recap? What is the market value of equity? c. Do equity shareholders appear to have gained or lost as a result of the recap? Please explain. d. Assume now that the recap increases total firm cash flows, which adds $100 million to the value of the firm. Now what is the market value of the firm? What is the market value of equity? e. Do equity shareholders appear to have gained or lost as a result of the recap in this revised scenario?
Answer:
a) Market Value = $100 million × $20 = $2,000 million = $2 billion
Market value of equity would remain same = $2 billion
b) Market value would remain same after recap. Only market capitalization would reduce to half.
Market value of equity = 1 billion
c) Buying back shares increases the stock price which demonstrates the faith of the company in its work. But creditors have capital gains.
d) After recap and cash flow firm total value has increased to $2 billion + $100 Million = $2.1 billion and market value of equity has increased from $20 to $22 . ($1000 + $100)/50 = $22.
e) Equity shareholders have gained due to increase in there share value
Explanation:
