The stock price for Halliford Corporation during years 0, 1, and 2 would take into account the retained earnings during these years and their investment return. Dividends aren't paid out for these years as the company retains all its earnings. The future dividends are discounted back to their present value using the equity cost of capital.
Explanation:The question requires an estimate of the price of Halliford Corporation’s stock for the first three years considering the company's earnings retention and reinvestment strategy. First, we need to calculate the dividend payments made by the firm. For the first two years, Halliford Corporation retains all its earnings indicating there are no dividends paid during these years. Afterwards, the company retains 50% and 20%, meaning it pays out as dividends 50% and 80% of the earnings respectively.
The stock price at any given time is the present value of all its future dividends. If there are no dividends paid out in the first two years, the price in years 0, 1, and 2 can simply accumulate the retained earnings from those years times their respective investment returns. To get the price, we also need to discount the dividends paid in year 3 and 4 back to their present values using the equity cost of capital.
Please take note, this calculation only takes into account the given information and assumes that the earnings per share remain constant for all the years. The actual stock price might vary due to a plethora of other factors in real-world scenarios, including market demand and supply, overall economic conditions, and investor sentiment.
Learn more about Stock Price Calculation here:https://brainly.com/question/39250976
#SPJ11
Convertible preferred stock Valerian Corp. convertible preferred stock has a fixed conversion ratio of 5 common shares per 1 share of preferred stock. The preferred stock pays a dividend of $10.00 per share per year. The common stock currently sells for $20 per share and pays a dividend of $1.00 per share per year.
a. On the basis of the conversion ratio and the price of the common shares, what is the current conversion value of each preferred share? b. If the preferred shares are selling at $9696 each, should an investor convert the preferred shares to common shares?
c. What factors might cause an investor not to convert from preferred to common stock?
Answer:
Explanation:
a. On the basis of the conversion ratio and the price of the common shares, what is the current conversion value of each preferred share?
Conversion Value = No of Common Shares × Market Price Per Share
= 5 × $20
= $100
b. If the preferred shares are selling at $9696 each, should an investor convert the preferred shares to common shares?
Total Value of preferred Share = Share Price + Dividend Payment Per Share
= $9696 + $10
= $ 9706
Total Value of 5 Common Stock = ((Market Price of 1 Share + Dividend per Share) × 5)
= ((20 + 1) × 5)
= $ 105
No. The investor should not convert the preferred shares to common shares. This is because, the value of one preferred share exceeds the value of the converted common shares by $9601. Thus, based on the value of the converted and non-converted preferred share, the non-converted preferred share is more valuable than the converted one. Thus, the investor should not convert the preferred shares.
c. What factors might cause an investor not to convert from preferred to common stock?
If the value of the converted shares is lower than that of the original preferred share, it makes the conversion devalue an investor's overall investment value.
Additionally, if the investor is unwilling to have residual claim on profits. This is because common stockholders receive their dividends after debt and preference shareholders get their claims. Therefore, the preferred shareholder could see it best to retain their holdings as Preferred and not Common.
Final answer:
This answer explains the calculation of current conversion value, advises on whether to convert preferred shares, and discusses factors affecting an investor's decision not to convert.
Explanation:
a. Current Conversion Value: The current conversion value of each preferred share can be calculated by multiplying the price of the common shares by the conversion ratio. In this case, $20 (price of common shares) x 5 (conversion ratio) = $100.
b. Convert or Not: If the preferred shares are selling at $96.96 each and the conversion value is $100, the investor should not convert as they would lose $3.04 per share.
c. Reasons against Conversion: Factors that might deter an investor from converting from preferred to common stock include potential loss due to conversion price being higher than the current price, unfavorable market conditions, or preference for stable dividend income.
Griffin and Rhodes formed a partnership on January 1, 2009. Griffin contributed cash of $120,000 and Rhodes contributed land with a fair value of $160,000. The partnership assumed the mortgage on the land which amounted to $40,000 on January 1. Rhodes originally paid $90,000 for the land. On July 31, 2009, the partnership sold the land for $190,000. Assuming Griffin and Rhodes share profits and losses equally, how much of the gain from sale of land should be credited to Griffin for financial accounting purposes?
A. $0
B. $15,000
C. $35,000
D. $45,000
Answer:
correct option is B. $15,000
Explanation:
given data
contributed cash = $120,000
Fair Value of land = $160,000
originally paid = $90,000
Sale value of land = $190,000
to find out
how much of the gain from sale of land should be credited to Griffin for financial accounting purposes
solution
gain on sale is here as
gain on sale = Sale value of land - Fair Value of land -
Gain on sale of land = $190,000 - $160,000
Gain on sale of land = $30000
split the $30000 between the equal partners for a total gain credited to Griffin
total gain credited to Griffin = $15000
so correct option is B. $15,000
James Sales Company uses the retail inventory method to value its merchandise inventory. The following information is available for the current year: Cost Retail Beginning inventory$ 30,000$ 45,000 Purchases175,000240,000 Freight-in2,500- Net markups-9,500 Net markdowns-10,000 Sales revenue-205,000 If the ending inventory is to be valued at the lower-of-cost-or-market, what is the cost-to-retail ratio?
a. $207,500 ÷ $285,000
b. $207,500 ÷ $293,500
c. $207,500 ÷ $295,000
d. $207,500 ÷ $294,500
e. 205,000 ÷ $293,500
Answer:
Option (D) is correct.
Explanation:
Given that,
Cost = Beginning inventory + Purchases + Freight in
= 30,000 + 175,000 + 2,500
= $207,500
Retail = Beginning inventory + Purchases + Net markups
= 45,000 + 240,000 + 9,500
= $294,500
Cost to retail ratio:
= $207,500 ÷ $294,500
= 0.7046
Therefore, the cost to retail ratio is 0.7046.
Which of the following is NOT an example of a conflict of interest? Group of answer choices
a. Advising two clients at the same time who are competing to acquire the same company when the advice might be relevant to the parties' competitive positions
b. Accepting commissions in a financial planning engagement for a nonaudit client
c. Advising a client to invest in a business in which, for example, the immediate family member of the CPA has a financial interest in the business
d. Providing tax or personal financial planning services for several members of a family whom the CPA knows to have opposing interests
Answer:
Only b. Accepting commissions in a financial planning engagement for a nonaudit client.
Explanation:
This option is correct only if there is no evidence that this nonaudit client has CPA members interest. The other 3 options show evident connections with current clients or CPA members, which make a potential conflict of interest high probable. To avoid situations stated in options a, c and d is always the best things to do
Final answer:
Accepting commissions in a financial planning engagement for a non-audit client is not automatically a conflict of interest and is the correct answer to the question, which seeks to identify the option that is NOT an example of a conflict. ( Option B)
Explanation:
The concept of a conflict of interest arises when an individual or entity has multiple interests and serving one interest could involve working against another, typically in situations of professional or financial gain. Among the provided options, the one that is NOT an example of a conflict of interest is b. Accepting commissions in a financial planning engagement for a non-audit client. This situation does not automatically imply a conflict; it becomes a conflict only if the commissions could influence professional judgement or create bias.
In contrast, a, c, and d are direct examples of conflicts of interest since they involve situations where personal or overlapping professional interests could potentially compromise impartiality or create bias in judgment.
The Montauk Company has a dividend reinvestment plan in which shareholders owning 27% of its common stock participate. Last year the firm's EPS was $4.20, and its payout ratio was 60%. There are 2 million shares of common stock outstanding. How much new capital did Montauk raise through the reinvestment program?
Answer:
Total capital gain will be $1360800
Explanation:
We have given EPS = $4.20
Total number of shares = 2000000
So total Net Income = EPS x No. of shares = $4.20 x 2000000 = $8,400,000
Dividend = 60% x 8,400,000 = $5040000
25% shareholder participated in dividend reinvestment
So Capital raised = 27% x $5040000 = $1360800
So total capital gain will be $1360800
A comprehensive or overall formal plan for a business that includes specific plans for expected sales, the units of product to be produced, the merchandise or materials to be purchased, the expenses to be incurred, the long-term assets to be purchased, and the amounts of cash to be borrowed or loans to be repaid, as well as a budgeted income statement and balance sheet, is called a________________.
Answer: Master Budget
Explanation:
Master budget is basically refers to the business budget strategy in which the organization preparing all the financial plans and include all the financial related statement.
The master budget is one of the most expensive business strategy which include various types of promotional levels, expected sales in the future and the capital investment.
The main purpose of the master budget is that it provide specific details about the costs and the production target. Therefore, Master budget is the correct answer.
A manager wants to determine the number of containers to use for incoming parts for a kanban system to be installed next month. The process will have a usage rate of 70 pieces per hour. Because the process is new, the manager has assigned an inefficiency factor of .15. Each container holds 40 pieces and it takes an average of 45 minutes to complete a cycle.
a-1. How many containers should be used? (Round up your answer to the next whole number.) Number of containers __________a-2. As the system improves, will more or fewer containers be required?*Fewer*More
Final answer:
The manager should use 2 containers for the kanban system based on the increased usage rate due to inefficiency. As the process improves and becomes more efficient, fewer containers will be needed.
Explanation:
To calculate the number of containers needed for the kanban system, we first need to determine the demand during each cycle. The usage rate is 70 pieces per hour, but with an inefficiency factor of 0.15, this increases the usage rate to 70× (1 + 0.15) = 80.5 pieces per hour. Since each cycle takes 45 minutes, we need to find the number of pieces used per cycle, which is (80.5 pieces/hour) * (45/60 hour) = 60.375 pieces per cycle. Given that each container holds 40 pieces, we divide the total pieces per cycle by the container capacity: 60.375 pieces / 40 pieces/container = 1.509. Since we cannot have a fraction of a container, we round up to the next whole number, which gives us 2 containers required.
As the system improves, we can anticipate that the inefficiency factor will decrease, meaning fewer pieces will be needed to account for inefficiencies, and consequently, fewer containers may be required in the future.
In 2017, Coronado Industries, issued for $103 per share, 95000 shares of $100 par value convertible preferred stock. One share of preferred stock can be converted into three shares of Coronado's $20 par value common stock at the option of the preferred stockholder. In August 2018, all of the preferred stock was converted into common stock. The market value of the common stock at the date of the conversion was $25 per share. What total amount should be credited to additional paid-in capital from common stock as a result of the conversion of the preferred stock into common stock?
Answer:
$4,085,000
Explanation:
Given that,
Coronado Industries, issued for $103 per share, 95000 shares of $100 par value convertible preferred stock.
1 share of preferred stock = 3 shares of common stock ($20 par value)
Additional paid in capital:
= Preferred stock - Common stock
= [95,000 shares × $103] - [(95,000 shares × 3 shares) × $20]
= $9,785,000 - (285,000 shares × $20)
= $9,785,000 - $5,700,000
= $4,085,000
In 2019, Pine Corporation had losses of $20,000 from operations. It received $180,000 in dividends from a 25%-owned domestic corporation. Pine’s taxable income is $160,000 before the dividends-received deduction. What is the amount of Pine’s dividends-received deduction?
Answer:
Consider the following calculations
Explanation:
Net income per books $65,000
Add back:
Federal income taxes 9,700
Excess contributions 3,000
Life insurance premiums 10,000
$87,700
Subtract:
Tax-exempt interest (1,500)
Excess depreciation (4,500)
Taxable income $81,700
Dividend received deduction = 160000 x 80% = 128000 (full DRD doesn't create loss).
DRD will be 80% of taxable inome because percent partnership is 25% which is between 20 to 80%.
High school football is arguably more popular in West Texas than in any other region of the country. During football season, small towns seem to shut down on Friday nights as local high school teams take to the field, and for the following week the results of the games are the talk of each town.
Taking into consideration that many of these towns are one hundred or more miles away from any medium-sized or large cities, what might be an economic explanation for the extreme popularity of high school football in these small West Texastowns?
A.Opportunity costs are relatively low.
B.Only a small share of household budgets are expended on the games.
C.Few entertainment substitutes are available.
D.All of the above are plausible.
E.A and B only.
Answer:
The answer is D. All of the above are plausible
Explanation:
A. Opportunity costs are relatively low is reasonable because as football game is taking place, most of the local people will go to the field to enjoy the field rather than spending their time at local shops/restaurants. Moreover, there are not many people from other towns visiting these facilities because of far distance.
B. is reasonable because it is high school football not professional football so the expenses spent on watching the game is low.
C. is is plausible because these towns are quite remote so watching their young neighbors/relatives playing may be one of the few entertainment choices available to them in weekend.
=> So, the answer is D.
Final answer:
High school football's popularity in small West Texas towns can be attributed to low opportunity costs, minimal impact on household budgets, and a lack of entertainment substitutes.
Explanation:
The extreme popularity of high school football in small West Texas towns can be economically explained by considering a few key factors. First, the opportunity costs for attending these games are relatively low since there are fewer entertainment options available, making football games a primary social event. Also, attending these games typically represents only a small share of household budgets, particularly in these smaller towns where there may be fewer demands on discretionary spending and where entertainment options are limited. Moreover, the lack of entertainment substitutes plays a significant role. With limited access to the broader entertainment amenities found in larger cities, local high school football games become a focal point for the community, providing entertainment as well as a sense of local pride and community identity. Thus, one could argue that all the factors mentioned contribute to the high school football's popularity, making 'D. All of the above are plausible' the most comprehensive answer.
Lexington Company sells product 1976NLC for $50 per unit. The cost of one unit of 1976NLC is $45, and the replacement cost is $43. The estimated cost to dispose of a unit is $10, and the normal profit is 40%.
At what amount per unit should product 1976NLC be reported, applying lower-of-cost-or-market?
a. $20.
b. $40.
c. $43.
d. $45.
Answer:
b. $40.
Explanation:
We select the lower of each of the following for reporting purposes.
Cost = $45
Replacement cost = $43
Neat realizable value = Selling price - disposal and completion costs
NRV = 50 - 10 = $40
We use lower of the values to take into account obsolete inventory or deterioration of inventory and as such the lowest of NRV is used for recording purposes.
Hope that helps.
Select the best statement about the use of Technical Reviews in the current acquisition environment. [Relate the different types of program unique specifications to their appropriate configuration baselines and technical review requirements.]
a. Technical Reviews should be tailored to assess development maturity and risk and to determine readiness to proceed to the next phase.
b. Technical Reviews waste valuable Government and contractor time and should be eliminated to allow more focus on program execution.
c. The same standard set of Technical Reviews should always be conducted on every program to ensure the PM has complete data to support decisions.
d. Technical Reviews are essential since they are vehicles for program problem solving and training new people on the details of the program.
Option A , Technical Reviews should be tailored to assess development maturity and risk and to determine readiness to proceed to the next phase.
Explanation:
By funding from the United States EPS has planned and executed the regional collaborative effort with CA Trade Agreement (CAFTA-DR) clients for Central America and the Dominican Republic to create environmental impact evaluation rules for three fields identified as priorities of our regional allies: energy, mining, and hospitality.
EPA has also coordinated the regional collaborative project. Agency for Global health.
Volume 1 provides guidance which follows globally understand elements of environmental impact assessment through the use of a glossary and references. Each EIA Technical Review Guideline consists of these components.
For various types of mining, energy and/or tourism projects for the use by t, Volume 1, Part 2 includes examples of Terms of Reference linked to Volumes 1 and 2.
Technical Reviews in the acquisition environment should be tailored to assess development maturity and risk and are essential for ensuring technical accuracy and proceeding to the next phase. They are not a waste of valuable time but rather a necessary component for quality control and informed decision-making in product development.
The use of Technical Reviews in the current acquisition environment is critical for assessing development maturity and risk, and determining readiness to proceed to the next phase. Technical Reviews should be considered as a crucial tool for quality control and validation that ensures the use of appropriate technology, and aids in effective project and requirements management. These reviews should be tailored to match the characteristics of the specific project, such as its complexity, length, and cost, rather than following a one-size-fits-all approach or being disregarded as a waste of time. They play a pivotal role not only in solving program problems but also in validating technical solutions and contributing to the knowledge base of stakeholders involved in product development.
Considering the rapid pace of product development, specifications may not always keep up, which makes subject matter experts' reviews even more important. These experts can review working models or prototypes and provide critical feedback to ensure technical accuracy and completeness. Moreover, by involving technical writers and experts in product meetings, live demonstrations, and feasibility testing, a comprehensive understanding is fostered, allowing for informed decision-making. Therefore, it is clear that the evaluations of Technical Reviews should be thoughtfully planned and executed to be both useful and practical, aligning with the unique demands of each project.
For the current year, Klay Corporation reports the following information:
Net cash inflows from investing activities: $ 40,000
Net cash inflows from financing activities: $ 45,000
Cash at the beginning of the year: $ 340,000
Cash at the end of the year: $ 420,000
What was the company’s cash flows from operating activities?
A cash inflow of $5,000
A cash inflow of $15,000
A cash outflow of $5,000
A cash outflow of $15,000
Answer:
A cash outflow of $5,000
Explanation:
the sum of cash flows from the operating, investing and financing activities must equal the net change in cash during the period
The company’s cash outflows from operating activities is $5,000.
Particulars Amount
Cash at the end of the year $420,000
Less: Net cash inflows from investing activities ($40,000)
Less: Net cash inflows from financing activities ($45,000)
Less: Cash at the beginning of the year ($340,000)
Cash outflows from operating activities $5,000
In conclusion, the Correct Option is C. because the company’s cash outflows from operating activities is $5,000.
See similar solution here
brainly.com/question/14036748
If firms in a monopolistically competitive industry are earning economic profits, then in the long run:
a. these firms can continue earning economic profits because entry into the industry is blocked.
b. new firms producing close substitutes will continue to enter the market until economic profit is zero.
c. new firms producing the exact same product will enter the industry and this entry will continue until economic profit is zero.
d. the government will most likely regulate firms in this industry to reduce the economic profits.
Answer:
The correct answer is (C)
Explanation:
If a firm in a monopolistic market is earning an economic profit, it allows other new firms producing the same product to enter the market. So, in long-run new firms will enter the market and create a competitive environment. The firms will keep on entering until every firm achieves normal profits, and till the economic profit is zero.
A corporation has 24 comma 000 shares of 10%, $ 60.00 par cumulative preferred stock outstanding and 37 comma 000 shares of nominuspar common stock outstanding. Preferred dividends of $ 13 comma 000 are in arrears. At the end of the current year, the corporation declares a dividend of $ 222 comma 000. How is the dividend allocated between preferred and common stockholders?
Answer:
See below.
Explanation:
Lets summarize the information first.
Cumulative preferred stock @ 10% = 24,000 * 60 = $1,440,000
Common Stock = 37,000 shares
Preferred dividend arrears = $13,000
Total Declared dividend = $222,000
Total Payable for preferred stock this year = 1,440,000*0.10 = $144,000
So total share payable to preferred stock = $144,000 + $13,000 = $157,000
Total payable to common stock holders = $222,000 - $157,000 = $65,000
Hope that helps.
Wozniacki and Wilcox form Jewel LLC, with Wozniacki receiving a one-half interest in the capital and Wilcox receiving a one-half interest in the capital of the LLC. (Ignore any profits interest for this problem.) Wozniacki receives his one-half interest as compensation for tax planning services he rendered prior to the formation of the LLC. Wilcox contributes $50,000 cash. The value of a one-half capital interest in the LLC (for each member) is $50,000.
a. How much income does Wozniacki recognize as a result of this transaction, and what is the character of the income?
b. How much is Wozniacki’s basis in the LLC interest?
c. How will Jewel treat this amount?
Answer and Explanation:
a. $50,000 compensation income (As it is already mentioned that Wozniacki receives the money for tax planning service prior to the formation of the LLC as compensation.
b. $50,000 (For each member it is $50,000. Therefore, for Wozniacki it will be also be $50,000)
c. As a business deduction (due to partnership) Wozniacki and Wilcox have formed Jewel LLC, therefore, distribution is a business deduction in the form of payments to both the partners.
Your boss leaves you a note, asking you to determine the present value of a $1,200,000 payment to be made in six years assuming a discount rate of 18%. However, you misread her handwriting, and mistakenly thought the discount rate you were supposed to use was 8%. What is the dollar value of the mistake in your answer because you used the wrong discount rate?
Answer:
so value of the mistake is $311685.71
Explanation:
given data
present value = $1,200,000
time = 6 year
discount rate = 18%
discount rate = 8%
to find out
What is the dollar value of the mistake
solution
we get here present value that is express as for both rate that is
present value = [tex]\frac{FV}{(1+r)^t}[/tex]
put here value
present value = [tex]\frac{1200000}{(1+0.18)^6}[/tex]
present value 1 = $444517.85
and
present value = [tex]\frac{1200000}{(1+0.08)^6}[/tex]
present value 2 = $756203.55
so
difference is $756203.55 - $444517.85
difference is = $311685.71
so value of the mistake is $311685.71
A company earned net income of $ 80 comma 000 during the year ended December 31, 2016. On December 15, the company declared the regular dividend on its 2% preferred stock (13 comma 000 shares with total par value of $ 130 comma 000) and a $ 0.75 per share dividend on its common stock (65 comma 000 shares with total par value of $ 650 comma 000). The company paid the dividends on January 4, 2017. Did Retained Earnings increase or decrease during 2016? By how much?
Answer:
Retained Earnings increased $28,650 in 2016.
Explanation:
The total increase in Retained Earnings account = Net income = $80,000;
The total decrease in Retained Earnings account = Dividend paid to common shares + Dividend paid to preferred shares = Dividend per common share x Number of common share outstanding + % dividend on preferred stock x par value of preferred stock x number of preferred stock outstanding = 0.75 x 65,000 + 2% x (130,000 / 13,000) x 13,000 = $51,350;
So, Net effect on Retained Earnings Account = $80,000 - $51,350 = $28,650 ( increase).
Deb and Rusty know that buying a house will save them money on taxes because they get to deduct the interest they pay to the bank each year and the property taxes they pay each year. First create a separate worksheet from the amortization schedule. Title this worksheet Analysis. In this worksheet, create a column titled Income starting at $90,000 and increasing at 3% for 20 years. What is their income after 20 years
Answer:
Their income after 20 years would be 72,550 dollars.
Explanation:
The income after 20 years can easily de determin by using compounding
formula
Future Value = Present Value (1 + I)^ 20
= 90,000 (1 + 0.03)^ 20
= 162,550 dollars
Income can be determing by subtracting Pv from Fv i.e
Income = 162,550 - 90,000 = 72,550
Calculation on excel sheet
A B C D
1 90,000 1.03 = A1 * 1.03 = C1-A1
2 = D1 1.03 = A2 * 1.03 = C2-A2
20 = D19 1.03 = A20 * 1.03 = A20 - C20
* In work sheet colunm D will show income on investment.
The idea of Manifest Destiny included all of the following beliefs EXCEPT:
a. Commerce and industry would decline as the nation expanded its agricultural base.
b. The use of land for settled agriculture was preferable to its use for nomadic hunting.
c. Westward expansion was both inevitable and beneficial.
d. God had selected America as a chosen land and people.
e. The ultimate extent of the American domain was to be from the tropics to the Arctic.
Answer:
(A). Commerce and industry would decline as the nation expanded its agricultural base.
Explanation:
"Manifest destiny" (coined by John Sullivan in 1845) is an idea that God has destined the United States to expand its territories and dominate the whole North American continent from the Atlantic to the Pacific.
Expansion of territory led to availability of more lands for farming and as such, agricultural expansion and increase in food supply. It also brought about an increase in commerce and industry.
Final answer:
The belief that commerce and industry would decline with national expansion is not a part of Manifest Destiny; rather, Manifest Destiny encompassed the expansion of American democratic institutions and commerce from coast to coast, the Americanization of new territories, and the divine right to expand.
Explanation:
The idea of Manifest Destiny included several core beliefs but did not suggest that commerce and industry would decline as the nation expanded its agricultural base. This notion contradicts the widely-held beliefs of the time that American expansion was about spreading and enhancing commerce and industry, not diminishing it. According to the beliefs intrinsic to Manifest Destiny, the nation's domain was to extend "from sea to shining sea", expanding democratic institutions and American values across the continent. It was believed that God had conferred upon America the right and destiny to expand its territory and influence, Americanizing the diverse populations encountered. Moreover, this expansion was seen as a way to spread freedom, with the idea that the settled agricultural use of the land was superior to nomadic hunting.
If a tax is imposed on a good where both supply and demand are somewhat elastic, but demand is more elastic than supply, the burden of the tax will be borne
A. by producers alone.
B. by consumers and producers equally.
C. by consumers alone.
D. mostly by producers but partially by consumers.
E. mostly by consumers but partially by producers.
Answer:
The answer is D - mostly by producers but partially by consumers.
Explanation:
Tax incidence depends on the relative price elasticity of demand and supply. When supply is more elastic than demand, buyers bear most of the tax burden but when demand is more elastic than supply, producers bear most of the cost of tax and consumers bear less.
Suppose the reserve requirement is 10%.
a. If the Federal Reserve decreases the reserve requirement, banks can lend out:
A. fewer reserves, thus decreasing the money multiplier and decreasing the money supply.
B. more reserves, thus increasing the money multiplier and increasing the money supply.
C. fewer reserves, thus increasing the money multiplier and increasing the money supply.
D. more reserves, thus decreasing the money multiplier and decreasing the money supply.
b. The Federal Reserve:
A. rarely changes the reserve requirement and does not use the reserve requirement as a major monetary policy tool.
B. needs permission from the president before making changes to the reserve requirement.
C. does not have the ability to change the reserve requirement since banks determine the amount of reserves to lend.
D. changes the reserve requirement frequently in order to make adjustments to the money supply.
Answer:
1)
B. more reserves, thus increasing the money multiplier and increasing the money supply.
In a fractional-reserve banking system, banks create money when they make loans. The more money they have available to make loans, the more money they create.
If the Fed reduces the reserve-requirements, banks will have more reserves available to loan out, increasing the money multiplier, and thus, the money supply.
2)
A. rarely changes the reserve requirement and does not use the reserve requirement as a major monetary policy tool.
The Fed rarely uses this monetary policy tool because it is the most powerful one. Changing the reserve requirements effectively reduce or increase the money supply like no other monetary policy tool, therefore, the effects can be dramatic, and its use is a sign that all other tools have been exhausted (open-market operations, and discount window mainly).
Explanation:
If the accountant forgets to adjust the Prepaid Expenses account, there will be_____________.
Answer:
There will be an overstatement in income and an overstatement in current assets
Explanation:
In case an accountant forgets to adjust the prepaid expenses account for the period, the recognized expenses is understated because to adjust prepaid expenses we have to debit expenses (which will lead to an increase in recognized expenses) and credit prepaid expense account (a deduction to current asset). Failure to do so, income recognized for the period is overstated and prepaid expenses account is overstated as well.
How do organizations calculate various costs, and what do these calculations mean to business?
Answer:
See the explanation section
Explanation:
Organizations calculate various costs with the help of the weighted average cost of capital. It is a significant cost measurement system through which organizations can calculate the cost of debt after tax, cost of new equities, cost of existing equities, and cost of preferred shares. WACC can be a benchmark for the organization. A firm needs to know those costs because it can make sure that whether those projects are running smoothly to continue or running worse to reject.
Another significant cost measurement method is the net present value. With the help of NPV, a business can make sure about a project to accept it or reject it.
Martha and Lew are married taxpayers with $400 of foreign tax withholding from dividends in a mutual fund. They have enough foreign income from the mutual fund to claim the full $400 as a foreign tax credit. Their tax bracket is 24 percent and they itemize deductions. Should they claim the foreign tax credit or a deduction for foreign taxes on their Schedule A?
Martha and Lew should claim the foreign tax credit instead of the deduction, as it would provide a greater tax benefit given their 24 percent tax bracket.
Explanation:Martha and Lew need to decide between taking the foreign tax credit or claiming a deduction for foreign taxes paid on their Schedule A. Given that they are in the 24 percent tax bracket and itemize deductions, the better choice would usually be to claim the foreign tax credit. This is because a credit reduces their tax liability dollar-for-dollar, making it more valuable than a deduction which only reduces the amount of income subject to tax. Therefore, if they have enough foreign income to claim the full $400 as a credit, it would typically provide a greater tax benefit than a deduction.
Firms HD and LD are identical except for their level of debt and the interest rates they pay on debt. HD has more debt and pays a higher interest rate on that debt. Based on the data given below, what is the difference between the two firms' ROEs?Applicable to Both Firms Firm HD Firm LDAssets $200: EBIT $40: Debt Ratio: 50% 30%Interest Rate: 12% 10%Tax Rate 35%:
Answer:
Firms HD has higher ROE than firm LD.
In details, LD's ROE = 15.79%; HD's ROE = 18.20%. So the difference between LD's ROE and HD's ROE is (2.41%) with LD has lower ratio.
Explanation:
*For firm HD:
Value of debt = 200 * 50% = 100; Value of equity = 200 - 100 = 100.
Interest expenses = 100 * 12% = $12 => EBT = 40 -12 = $28
Net income = EBT*(1 - tax rate) = 28 * (1-35%) = $18.2
ROE = net income / equity = 18.2 / 100 = 18.2% .
*For firm LD:
Value of debt = 200 * 30% = 60; Value of equity = 200 - 60 = 140.
Interest expenses = 60 * 10% = $6 => EBT = 40 -6 = $34
Net income = EBT*(1 - tax rate) = 34 * (1-35%) = $22.1
ROE = net income / equity = 22.1 / 140 = 15.79%
The difference between Firm HD's and Firm LD's ROE is 2.41%, which is calculated by first determining each firm's net income, then their equity, and finally, their ROE based on the given levels of debt and interest expense.
Explanation:The student's question is related to the calculation of the Return on Equity (ROE) for two firms with different debt structures and interest rates. To determine the difference between the two firms' ROE, one must first calculate the net income for each firm and then divide it by the firm's equity. Given the EBIT is $40, the tax rate is 35%, and the debt ratio and interest rates differ (HD: 50% at 12%, LD: 30% at 10%), we can find the interest expense for each firm and subsequently calculate the net income after taxes. Then, equity is determined as the total assets minus total debt. Finally, ROE is computed and the difference between the two firms' ROE can be determined.
Step 1: Calculate Interest Expense and Net IncomeThe difference in ROE between Firm HD and Firm LD is 18.2% - 15.79% = 2.41%.
Explain the ways in which Fiscal Policy and Monetary Policy interact by using Keynesian IS and LM curves. Discuss the impact of an expansionary Fiscal Policy and Monetary Policy on the overall level of economic activity. Include the conditions in which Monetary Policy would have a greater influence on GDP growth and the conditions in which Fiscal Policy would have a greater influence on GDP growth.
Answer and Explanation:
If demand is greater than supply, then there is inflation. Hence, the government has to devaluate its currency on net borrowings from abroad. Supply increases and price becomes stable.
The banks have to lower their bank rate and decrease CRR. When prices rise, consumption decreases and investment increases. When the interest rate is made high consumption and investment both become stable. Hence, there is full employment. Government has a fiscal policy to increase taxes and borrowings and increase the export and income rises and price becomes stable.
LeMay Frosted Flakes Company offers its customers a pottery cereal bowl if they send in 4 boxtops from LeMay Frosted Flakes boxes and $1.
The company estimates that 60% of the boxtops will be redeemed. In 2012, the company sold 500,000 boxes of Frosted Flakes and customers redeemed 220,000 boxtops receiving 55,000 bowls.
If the bowls cost LeMay Company $3 each, how much liability for outstanding premiums should be recorded at the end of 2012?
a. $150,000
b. $40,000
c. $60,000
d. $84,000
Answer:
The correct anwer is C. 60.000
Explanation:
First, you have to calculate tthe total expected bowls that LeMay has to buy. In this case is 500.000 * 60% / 4 = 75.000. Then, subtract the expected bowls against the already delivered. In this case 75.000 * 55.000 = 20.000. Finally, multiply by the cost per bowl, to get the outstanding premiums to record: 20.000 * 3 = 60.000
The quantity theory of money is based upon the equation of exchange and assumes that V and Q are both ________ over time..
Answer:
stable
Explanation:
The quantitative theory of money is an economic theory that aims to explain the causes of inflation, that is, the variations in prices and the value of money in a country. To explain inflation, the quantitative theory of money relates the money supply to the general price level.
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 127,000 $ 135,000 Accounts receivable 334,000 485,000 Inventory 562,000 490,000 Plant and equipment, net 827,000 780,000 Investment in Buisson, S.A. 407,000 428,000 Land (undeveloped) 245,000 252,000 Total assets $ 2,502,000 $ 2,570,000 Liabilities and Stockholders' Equity Accounts payable $ 386,000 $ 341,000 Long-term debt 1,024,000 1,024,000 Stockholders' equity 1,092,000 1,205,000 Total liabilities and stockholders' equity $ 2,502,000 $ 2,570,000 Joel de Paris, Inc. Income Statement Sales $ 4,114,000 Operating expenses 3,579,180 Net operating income 534,820 Interest and taxes: Interest expense $ 122,000 Tax expense 203,000 325,000 Net income $ 209,820 The company paid dividends of $96,820 last year. The "Investment in Buisson, S.A.," on the balance sheet represents an investment in the stock of another company. The company's minimum required rate of return of 15%. Required: 1. Compute the company's average operating assets for last year. 2. Compute the company’s margin, turnover, and return on investment (ROI) for last year. (Round "Margin", "Turnover" and "ROI" to 2 decimal places.) 3. What was the company’s residual income last year?
Answer:
See Explanation.
Explanation:
1.
Lets compute the average operating assets first.
Avg Operating assets
= Opening Operating Assets + Closing Operating assets / 2
We assume that Investment in Buisson and undeveloped land did not contribute in operating income and thus are omitted from our calculations.
Opening Operating Assets = 127000+334000+562000+827000=$1,850,000
Closing Operating Assets=135000+485000+490000+780000=$1,890,000
Avg operating assets = 1850000 + 1890000 / 2 = $1,870,000
2.
Margin = Net operating Income / Total Turnover
Margin = 534,820 / 4,114,000 = 0.13 or 13%
Turnover on assets = Sales / Average operating assets
Turnover on assets = 4,114,000 / 1,870,000 = 2.2
ROI = NP after Interest and Tax / Avg Total investment
Avg total investment = (Op+Cl/2)
ROI = 209,820 / (2502,000+2570,000/2) = 0.0827 or 8.27%
3.
Residual Income = Net income - ( Minimum ROR * Common equity value)
For Common equity value we take the closing value.
Residual Income = 209,820 - (0.15 * 1,205,000)
Residual Income = 209820 - 180750 = $29,070
Note: Sometimes there are slight variations in formula elements used for calculation.
Hope that helps.