Answer:
1) $240 warranty expense
2) $240 warranty liaiblity
3) zero as decreases the warranty laibility
4) 240 beginning - 209 used = 31 ending
5)
cash 6,000 debit
sales revenues 6,000 credit
--to record sale--
warranty expense 240 debit
warranty liability 240 credit
--to record prevision for warranty expenses--
warranty liability 209 debit
inventory 209 credit
--to record use of the warranty from the customer--
Explanation:
1) sales x expected warranty = 6,000 x 0.04 = 240
2) it will be for the 240 as the accounting works with double-entry
1. In 2018, the company reports $240 as warranty expense for this copier. , 2. The estimated warranty liability for this copier as of December 31, 2018, is also $240. , 3. In 2019, the company reports $240 as warranty expense for this copier., 4. The estimated warranty liability for this copier as of December 31, 2019, is $480.
Explanation:1. The warranty expense that the company reports in 2018 for this copier is calculated by multiplying the dollar sales by the expected warranty cost percentage. In this case, the dollar sales is $6,000 and the expected warranty cost percentage is 4%. So, the warranty expense would be $6,000 x 4% = $240.
2. The estimated warranty liability for this copier as of December 31, 2018, is the warranty expense recognized in 2018. So, the estimated warranty liability would be $240.
3. The warranty expense that the company reports in 2019 for this copier is calculated in the same way as in 2018. The dollar sales is still $6,000 and the expected warranty cost percentage is still 4%. So, the warranty expense would be $6,000 x 4% = $240.
4. The estimated warranty liability for this copier as of December 31, 2019, would be the sum of the warranty expense recognized in 2018 ($240) and the warranty expense recognized in 2019 ($240). So, the estimated warranty liability would be $240 + $240 = $480.
5. Journal Entries:
(a) Copier Sale:Debit Cash $6,000
Credit Sales Revenue $6,000
(b) Adjustment on December 31, 2018:Debit Warranty Expense $240
Credit Estimated Warranty Liability $240
(c) Repairs in November 2019:Debit Warranty Expense $209
Debit Estimated Warranty Liability $209
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Collins Little Company has a staff of 4 employees, each working 8 hours per day at a rate of $20/hour. Their overhead expenses are $200/day. Collins processes and closes on 12 titles each day. They are considering purchasing a computerized title search system that will allow the processing of 20 titles per day. With the new system, they could cut their staff to 2 employees working the same hours at the same pay, but their overhead expenses would double to $400 per day.
a. Compute the labor productivity with the old system (in titles / hour).
b. Compute the labor productivity with the new system (in titles / hour).
c. Compute the multifactor productivity with the old system (in titles / dollar).
d. Compute the multifactor productivity with the new system (in titles / dollar).
Answer:
A. Labor productivity = 12 titles /(4*8)
= 12 /32
0.375 hrs per unit
b. labor productivity = 20 / 16
= 1.25 hrs per unit
c. multi-factor productivity = output/ input
= 12 /( 640 +200)
= 0.0143
d. multi-factor productivity = output/ input
= 20/ (320+400)
= 0.2778
Explanation:
labour =640 = 4*8*20
labour = 320 = 2*8*20
a. Labor productivity with the old system is approximately 0.375 titles per hour, while with the new system, it's approximately 1.25 titles per hour. b. Multifactor productivity with the old system is around 0.015 titles per dollar, and with the new system, it's about 0.03125 titles per dollar.
a. To compute labor productivity with the old system (in titles per hour), you can use the following formula:
Labor Productivity (with old system) = Total Titles Processed / Total Labor Hours
Total Titles Processed = 12 titles per day
Total Labor Hours = 4 employees * 8 hours per day = 32 hours per day
Labor Productivity (with old system) = 12 titles / 32 hours ≈ 0.375 titles per hour
b. To compute labor productivity with the new system (in titles per hour), you can use the same formula:
Labor Productivity (with new system) = Total Titles Processed / Total Labor Hours
Total Titles Processed (with new system) = 20 titles per day
Total Labor Hours (with new system) = 2 employees * 8 hours per day = 16 hours per day
Labor Productivity (with new system) = 20 titles / 16 hours = 1.25 titles per hour
c. To compute multifactor productivity with the old system (in titles per dollar), you can use the following formula:
Multifactor Productivity (with old system) = Total Titles Processed / (Total Labor Cost + Total Overhead Cost)
Total Labor Cost (with old system) = 4 employees * 8 hours per day * $20/hour = $640 per day
Total Overhead Cost (with old system) = $200 per day
Multifactor Productivity (with old system) = 12 titles / ($640 + $200) = 0.015 titles per dollar
d. To compute multifactor productivity with the new system (in titles per dollar), you can use the same formula:
Multifactor Productivity (with new system) = Total Titles Processed / (Total Labor Cost + Total Overhead Cost)
Total Labor Cost (with new system) = 2 employees * 8 hours per day * $20/hour = $320 per day
Total Overhead Cost (with new system) = $400 per day
Multifactor Productivity (with new system) = 20 titles / ($320 + $400) = 0.03125 titles per dollar
So, the labor productivity with the old system is approximately 0.375 titles per hour, and with the new system, it's approximately 1.25 titles per hour. The multifactor productivity with the old system is approximately 0.015 titles per dollar, and with the new system, it's approximately 0.03125 titles per dollar.
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Muhammad, a 21-year old computer engineer, is opening an individual retirement account (IRA) at a bank. His goal is to accumulate $2.5 million in the IRA by the time he retires in 46 years. Muhammad expects his IRA to receive 8% nominal annual interest, compounded semiannually, throughout the 46 years. As a computer engineer, Muhammad believes his salary will increase at a constant 4% annual rate during his career. Muhammad wishes to make annual deposits into his IRA account over the 46 years. He wishes to start his IRA with the lowest possible deposit and then increase his deposit amount at a constant 4% rate each year.
Assuming end-of-year deposits, how much should she deposit the first year?
Answer:
The first annual depoisit will be of 3,373.49 dollars
Explanation:
Given the formula for future growing annuity
we need to solve for the yearly payment:
grow rate: 0.04
annual effective rate: 8% compounding semiannually:
[tex](/1+0.08/2)^2-1 = r_e\\[/tex]
r= 0.0816
FV 2,500,000
n 46
Formula for future value fo an ordinary annuity:
[tex]C_0 \times \frac{(1+r)^n-(1+g)^n}{r-g} = FV[/tex]
[tex]C_0 \times \frac{(1+0.0816)^{46}-(1+0.04)^{46}}{0.0816-0.04} = 2,500,000\\C_0 = $3,373.4855[/tex]
The first annual depoisit will be of 3,373.49 dollars
Which of the following is NOT true about an ATM? A. ATM stands for "Access or Transfer Money". B. An ATM is available virtually 24 hours a day. C. You can make a deposit at your bank's ATM. D. You can transfer money between your own accounts.
Answer: A. ATM stands for "Access or Transfer Money"
Explanation:
An ATM stands does not stand for Access or Transfer Money, even though it offers those services.
Nay, it stands for Automated Teller Machine which is to say that it can do the job of a bank Teller, only it can do more and can do it Automatically and outside a bank.
Option A is therefore correct.
Answer:
A. ATM stands for "Access or Transfer Money".
Explanation:
ATM stands for Automated Teller Machine, not "Access or Transfer Money".
ATM is a specialized computer that ease the process of managing money by an individual that an account with a bank.
It is always available 24 hours daily to allow withdrawal of money, transfer of money between different accounts, and many ATMs allow deposits of money.
Suppose that due to a poor economy, 1 million workers lost their jobs, causing the unemployment rate to increase to 10%. After a few months of searching, 300,000 of these unemployed workers give up looking for work. How would the decision by these 300,000 people affect the unemployment rate, all else equal
Answer:
The unemployment rate would decrease.
Explanation:
The unemployment rate only takes into account economically active people, that is, people who are actively searching for a job. This means that if 300,000 people give up looking for work, they are not considered unemployed anymore and only 700,000 of the original 1 million workers who lost their job will be counted towards the unemployment rate. Consequently, the unemployment rate would decrease.
In the process of reconciling its bank statement for January, Maxi's Clothing's accountant compiles the following information:
Cash balance per company books on January 30 $ 6,125
Deposits in transit at month-end $ 2,080
Outstanding checks at month-end $ 660
Bank service charges $ 39
EFT automatically deducted monthly, not yet recorded by Maxi $ 660
An NSF check returned on a customer account $ 405
Required:
1. The adjusted cash balance per the books on January 31 is _______________.
Answer:
$5,021
Explanation:
The computation of the adjusted cash balance is shown below:
= Cash balance as per company books - bank service charges - EFT automatically deducted monthly, not yet recorded - NSF check returned on a customer account
= $6,125 - $39 - $660 - $405
= $5,021
All the above items should be deducted from the company books cash balance so that the adjusted cash balance could come
Williams & Sons last year reported sales of $20 million, cost of goods sold (COGS) of $16 million, and an inventory turnover ratio of 4. The company is now adopting a new inventory system. If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 8 while maintaining the same level of sales and COGS, how much cash will be freed up? Do not round intermediate calculations. Enter your answer in dollars. For example, an answer of $1.23 million should be entered as 1,230,000,000. Round your answer to the nearest dollar.
Answer:
Cash will be freed up: $2,000,000
Explanation:
Inventory turnover ratio is calculated by using following formula:
Inventory turnover ratio = Cost of Goods Sold/Average Inventory
Average Inventory = Cost of Goods Sold/Inventory turnover ratio
Last year, Williams & Sons had sales of $20 million, cost of goods sold (COGS) of $16 million, and an inventory turnover ratio of 4.
Average Inventory = $16,000,000/4 = $4,000,000
For the new inventory system, inventory turnover ratio is 8 while maintaining the same level of sales and COGS.
Average Inventory = $16,000,000/8 = $2,000,000
Cash will be freed up = $4,000,000 - $2,000,000 = $2,000,000
Final answer:
The amount of cash freed up can be calculated by finding the difference in the inventory turnover ratios, and multiplying it by the cost of goods sold. In this case, there would be a decrease of $64,000,000 in cash freed up.
Explanation:
The amount of cash freed up can be calculated by finding the difference in the inventory turnover ratios. the old inventory turnover ratio was 4 and the new ratio is 8, which means the new system is able to sell inventory twice as fast. Since the sales and COGS remain the same, the decrease in inventory is equal to the increase in inventory turnover ratio. Therefore, the amount of cash freed up would be the decrease in inventory multiplied by the COGS.
Formula: Cash Freed Up = (Decrease in Inventory) x COGS
Amount of Cash Freed Up = (4 - 8) x $16,000,000 = $-64,000,000
Therefore, there would be a decrease of $64,000,000 in cash freed up.
Find at least three implicit modelling assumptions or other qualitative factors which are relevant but not covered by the model. (e.g., all workers are assumed to have the same efficiency – Do not reuse this!)
Home Improvement Store (ACME)
Employee
Scheduling Problem
(
Answer and Explanation:
For Home Improvement Store (Acme) following are the implicit modelling assumptions or other qualitative factors which are relevant but not covered by the model:
1)Average customer footfall is considered at all times.
2)Seasonal effects are not considered. For example, boost in sales during festival times.
3)Employee absenteeism is not considered. i.e. all employees are expected to be present always.
4)Location is not considered to affect the change in scheduling activity.
5)Wages are considered to be uniform throughout and not affect employee performance.
According to the concept of organizational demography, if team members have dissimilar experiences, it will lead to ________. higher team efficacy higher employee turnover increased employee satisfaction decreased level of conflicts higher employee motivation
Answer: Higher employee turnover
Explanation:
There are different aspect of organizations. According to the concept of organizational demography, if team members have dissimilar experiences, it will lead to higher employee turnover.
Organizational demography is simply known to be the study of the makeup of a social entity when looking at its members' attributes.
This demography means the act or method which one measures the employee of the organization shares of a common place of work not looking at their caste, sex, religion, etc.
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"A cross-hedging strategy is most effective with currencies that are _____; currency diversification is most effective with currencies that are ______."
"A cross-hedging strategy is most effective with currencies that are highly positively correlated; currency diversification is most effective with currencies that are not highly correlated."
Explanation:
Cross hedging is a idea that is used to mange risk. This is done by investing in two securities. Those two securities are correlated and that too positively. Which means their prices goes in the identical direction. It helps in minimizing the risks associated.
So,A cross hedging strategy is most efficient when currencies are positively correlated,
Currency diversification is a strategy where more than one currency is used in investment. It leads to less exchange rate risk. This strategy is most effective with currencies that are not highly correlated. Which means increase in one currency causes no increase in other currency.
While the examples in this chapter have focused on a single-employer plan, many states operate statewide plans, referred to as Public Employee Retirement Systems (PERS), to which multiple employers contribute. One of the largest PERS plans in the nation is operated in the State of California. Required To answer the following questions, use the website found at www.calpers.ca.gov . The answers to the questions can be found in CalPERS's annual report and by using the "about," "organization." and "facts at a glance" sections Page 348 provided on the site. a. When was CalPERS established? b. How many employers contribute to CalPERS? c. How many members are served by CalPERS? d. What types of programs are administered by CalPERS? e. For the most recent reporting period, what is the value of total net position as listed in the statement of net position? f For the most recent reporting period, what was the total change in pension fund net position as reported in the statement of changes in net position? &.For the most recent reporting period, what was the funded status of pension programs PERF B and PERF C?
Answer:
a. 1932
b. 2,945 employers
c. Over 1.9 million members
d. They include Health Program, Long Term Care Plan, Deferred Compensation Plan and California Employers' Retiree Benefits Trust Fund for Post Retirement Program.
e. Value of total net position as of 30th June 2017 is $588.868 million
f. The total change in pension fund net position for most recent reporting period 30 June, 2017 is $27,984,457 thousands
g. PERF B is Schools and PERF C is Public Agency
Explanation:
a. CalPERS was established in 1932 as the "State Employees' Retirement System" and this name was changed as California Public Employees' Retirement System" (CalPERS) in the year 1992.
B) 2,945 Employers contribute to CalPERS. It includes 1,578 public agencies, 1,366 school districts and 1 the state of california.
C) 1.9 million members are served by CalPERS.
D) Two types of programs are administered by CalPERS:
1) Health Program
2) Other Programs: It includes-Long terms care plan,Deferred Compensation plan and California Employers' Retiree Benefits Trust Fund for post retirement program.
E) Value of total net position as on 30 June 2017 is $588.868 million (588,868,000) and as of June 30 June 2016 it is USD 572.292 million.
F) The total change in pension fund net position for most recent reporting period 30 June, 2017 is $27,984,457 thousands as added $(20,171,011+ 5,085,422 + 2,538,563 + 8,481+183,146 - 2,166).
G) For Most recent reporting period 30 June, 2017 the funded status of pension programs PERF B is Schools and PERF C is Public agency.
An incentive compensation scheme includes a. a performance evaluation system b. a disciplinary action committee c. a reward system linked to performance d. Both A&C
Answer:
The correct answer is letter "D": Both A&C.
Explanation:
Incentive compensation schemes are established provided by employers based on the performance of employees. Employers set a reward system that could take the form of bonuses, prizes or recognition, and goals workers should reach or pass so those rewards can be provided.
Incentives are given at work aiming to motivate employees to work efficiently and effectively.
Blue Seas Cruiseline offers two types of dinner cruises: Regular and Executive. The contribution margin per ticket sold is $30 for the regular cruise, and $90 for the executive. Fixed costs are $210,000. It expects to sell four regular dinner cruises for every one executive dinner cruise. What is the total number of regular cruises Blue Seas must sell in order to breakeven? A. 1,750 B. 5,000 C. 4,000 D. 1,000
Answer: A - 1,750
Explanation:From the above question, The contribution margin per ticket sold is $30 for the regular cruise and $90 for the executive. Fixed costs are $210,000.
What is the total number of regular cruises Blue Seas must sell in order to breakeven?
BEP in units = fixed cost/ contribution margin.
= $210,000/($30 * 4) = 1,750
Answer:
C. 4,000 regular cruises
Explanation:
The Break-even point is where the operating income is zero that is, the firm pay theri variable and fixed cost related to opperations.
[tex]\frac{Fixed\:Cost}{Contribution \:Margin} = Break\: Even\: Point_{units}[/tex]
Where:
[tex]Sales \: Revenue - Variable \: Cost = Contribution \: Margin[/tex]
As the company has multple product we must solve for the contribution of the mix:
regular: 30
executive: 90
the ratio of sales is 4:1
Thus 30 x 4/5 + 90 x 1/5 = contribution mix
contribution mix:42
At the current sales ratio we expect to make 42 dollar per seat
Now we calcualte for the BEP of the mix:
[tex]\frac{210,000}{42} = Break\: Even\: Point_{units}[/tex]
BEP 5000
Now, we solve for the ratio of sales wich is 4/5 for regular cruises:
5,000 x 4/5 = 4,000
National Distributors has $1,000 face value bonds outstanding with a market price of $1,013. The bonds pay interest semiannually, mature in 11 years, and have a yield to maturity of 6.87 percent. What is the current yield
Answer:
Current Yield is 6.94%
Explanation:
Current yield is the ratio of coupon payment of a bond to its current market price.
First we need to calculate the coupon payment by using following formula
YTM = [ C + ( F - P ) / n ] / [ ( F + P ) / 2 ]
6.87% = [ C + ( $1,000 - $1,013 ) / 11 ] / [ ( $1,000 + $1,013 ) / 2 ]
6.87% = [ C + ( $1,000 - $1,013 ) / 11 ] / [ ( $1,000 + $1,013 ) / 2 ]
6.87% = [ C - $1.18 ] / 1006.5
1,006.5 x 6.87% = C - $1.18
69.15 = C - 1.18
C = 69.15 + 1.18 = $70.3 annually
Current Yield = Annual Coupon payment / Current market price
Current Yield = $70.3 / $1,013 = 0.0694 = 6.94%
On October 1, 2019, Priscilla purchased a business. Of the purchase price, $92,000 is allocated to a patent and $552,000 to goodwill. If required, round your intermediate values to nearest dollar and use in subsequent computations. Calculate Priscilla’s 2019 § 197 amortization deduction. $
Answer:
$10,730
Explanation:
1. Patent: $92,000/15 years = $6,133
$6,133 × 3/12 = $1,533
2.Goodwill: $552,000/15 years= $36,800
$36,800 × 3/12 = $9,200
Total: $1,533 + $9,200= $10,733
Approximately $10,730
Find the principal needed now to get the given amount; that is, find the present value.To get $ 90 after 2 and three fourths years at 6% compounded continuouslyThe present value of $ 90 is $ nothing .(Round to the nearest cent as needed.)
Explanation:
For continuous compounding, we use the following formula
[tex]FV_{N} = PVe^{i N}[/tex]
Scenario 1 :
FV = $ 90
N = 2 years
I = 6%
PV= ?
[tex]FV_{N} = PVe^{i N}[/tex]
[tex]90 = PVe^{(0.06) (2)}[/tex]
[tex]\frac{90}{e^{(0.06) (2)}} = PV[/tex]
[tex]PV = 79.8228[/tex]
PV = $ 79.82
Scenario 2:
[tex]FV_{N} = PVe^{i N}[/tex]
[tex]90 = PVe^{(0.06) (3)}[/tex]
PV = $ 75.17
Scenario 3:
[tex]FV_{N} = PVe^{i N}[/tex]
[tex]90 = PVe^{(0.06) (4)}[/tex]
PV = $ 70.80
Which of the following includes managing the movement of raw materials and parts from their sources to production sites; managing the movement of materials, semi-finished, and finished products within and among plants, warehouses, and distribution centers; and the planning and coordinating of the physical distribution of finished goods to intermediaries and final buyers?
a. intermodal transportation
b. contract logistics
c. logistics
d. materials handling
Answer: c. Logistics
Explanation: management of the movement of raw materials and parts from their sources to production sites; the movement of materials, semi-finished, and finished products within and among plants, warehouses, and distribution centers; planning and coordinating of the physical distribution of finished goods to intermediaries and final buyers are all contained in logistics.
Logistics is a part of operations and is defined as the process of planning, implementing, and controlling the efficient, effective flow and storage of raw materials, goods (finished, semi-finished etc), services and related information from their point of origin to point of consumption for the purpose of satisfying customer requirements.
The logistics department is responsible for managing the movement of raw materials from their sources to production sites and other stated functions.
Logistics refers to the process of planning, implementing, and controlling the flow and storage of raw materials, goods and services.
The logistics department is responsible for
managing the movement of raw materials and parts from their sources to production sites.managing the movement of materials, semi-finished, and finished products within and among plants, warehouses, and distribution centers.planning and coordinating of the physical distribution of finished goods to intermediaries and final buyers.Hence, the Option C is correct.
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A friend wants to borrow money from you. He states that he will pay you $3,900 every 6 months for 7 years with the first payment exactly 7 years and six months from today. The interest rate is an APR of 6.2 percent with semiannual compounding. What is the value of the payments today
The present value of the annuity payments is determined using the present value formula for an ordinary annuity, adjusted for the delay and the semiannual compounding. The payments are $3,900 every six months, with the first payment starting 7.5 years from today and a semiannual interest rate of 3.1%.
Explanation:The value of the payments today, also known as the present value, can be calculated using the formula for the present value of an ordinary annuity. The formula includes the payment amount, the interest rate per period, and the number of periods.
First, let's determine the number of periods (n) and the interest rate per period (r). Since payments are made every 6 months, and the first payment starts 7 years and 6 months from today, the payments will continue for 7 years after the first payment, resulting in n = 14 periods. The semiannual interest rate is half the APR, so r = 6.2% / 2 = 3.1% per period.
Because the payments start 7.5 years from today, we must also discount the value of the annuity an additional half-year to today's value. To find the present value (PV) we use the formula:
PV of annuity due = PV ordinary annuity × (1 + r)
The formula for the PV of an ordinary annuity is:
PV = PMT × [(1 - (1 + r)^-n) / r]
Where PMT is the payment amount ($3,900). The present value can then be found by substituting the values into the formula and solving for PV. Once obtained, it is multiplied by (1 + r) to adjust for the first payment occurring in 7.5 years rather than 7 years.
Which of the following is a nonmanufacturing business where process costing would most likely be used? An auto body shop. A furniture repair shop. A laboratory that tests water samples for lead A tailoring shop. A beauty shop.
All of them are the non-manufacturing business where process costing would most likely be used.
Explanation:
All are non-manufacturing business which are as follows, An auto body shop. A furniture repair shop. A laboratory that tests water samples for lead A tailoring shop. A beauty shop.Non-manufacturing business costs refers to those business where it is incurred outside the factory or production unitNon-manufacturing costs includes,selling expenses general expenses Selling Expenses It is also called as selling and distribution expenses.Non-manufacturing expenses have no impact on the production cost of the company due to their period costs.
Final answer:
Among the nonmanufacturing businesses listed, a laboratory that tests water samples for lead would be the most likely to use process costing because it produces homogeneous outputs in a continuous flow, similar to chemical plants.
Explanation:
Process costing is a method used in manufacturing and nonmanufacturing businesses where products or services are homogeneous and produced in a continuous flow. This makes it suitable for industries like chemical production or water treatment where many units of a similar product are created. Amongst the nonmanufacturing businesses listed such as an auto body shop, a furniture repair shop, a laboratory that tests water samples for lead, a tailoring shop, and a beauty shop, a laboratory that tests water samples for lead is the most likely to use process costing. This is because, similar to the examples of chemical plants and chemistry labs, the laboratory conducts standardized processing experiments and runs, which result in homogeneous outputs allowing for a more accurate product cost determination.
Process costing enables the calculation of the costs per unit of the product by tracking and averaging the direct and indirect costs involved in the production process. This includes both fixed operating costs, such as the cost of maintaining the facility, and variable costs that change with the level of production - all of which are key to understanding and managing costs effectively in businesses with a significant degree of operating leverage or those pursuing economies of scale.
A company is 40% financed by risk-free debt. The interest rate is 10%, the expected market risk premium is 8%, and the beta of the company’s common stock is .5. What is the company cost of capital? What is the after-tax WACC, assuming that the company pays tax at a 35% rate?
Answer:
12.4% ; 11%
Explanation:
The computation is shown below:
Cost of capital = (Weightage of debt × cost of debt) + (Weightage of common stock) × (cost of common stock)
= 0.40 × 0.10 + 0.60 × 0.14
= 0.04 + 0.084
= 12.4%
Now the After tax WACC is
= Weightage of debt × cost of debt × ( 1 - tax rate) + (Weightage of common stock) × (cost of common stock)
= {0.40 × 0.10 × (1 - 0.35)} + {0.60 × 0.14}
= 0.026 + 0.084
= 11%
The weightage of equity is
= 100 - 40%
= 0.60
Answer:
12.4%, 11%
Explanation:
Weighed average cost of capital (WACC) represents total cost of capital which is the summation of individual cost of capital of different sources, calculated as the proportion (weights) in total capital structure multiplied by the respective cost of capital.
Risk free rate of interest = 10%
Market risk premium = 8%
Cost of debt = [tex]I\ (1\ -\ t)[/tex] = 10 (1 - .35) = 6.5%
Cost of Equity = [tex]R_{f}\ +\ B\ (Risk\ Premium)[/tex]
where, [tex]R_{f} =[/tex] Risk Free Rate Of Interest
Risk Premium = [tex]R_{m}\ -\ R_{f}[/tex] = 8%
B = Beta or degree of sensitivity of security return with respect to market return
Cost Of Equity = 10 + 0.5 × 8 = 14%
Cost of capital before considering taxes = 10 × 0.4 + 14 × 0.6 = 4 + 8.4 = 12.4%
(1) (2)
Source Weights Cost of Capital (1) × (2)
Debt 0.4 6.5 2.6%
Equity 0.6 14 8.4%
Weighted Average Cost Of Capital 11 %
Discounting refers directly to a. calculations that ignore the phenomenon of compounding for the sake of ease and simplicity. b. decreases in interest rates over time, while compounding refers to increases in interest rates over time. c. finding the future value of a present sum of money. d. finding the present value of a future sum of money.
Answer:
The correct answer is letter "D": finding the present value of a future sum of money.
Explanation:
The Discount Rate is the interest rate that you need to earn on a given amount of money today to eventually end up with a given amount of money in a certain period in the future. The concept is associated with the present value of money that estates having a dollar today will be worth more than having a dollar tomorrow.
In investing, typically the higher the interest rate, the higher the risk involved with the investment and its future cash flows.
Final answer:
Discounting refers to the computation of the present value of a future sum of money, which is option d. It plays a vital role in financial and investment decisions, reflecting the preference of current consumption over future benefits.
Explanation:
The concept of discounting pertains to the technique of determining the present value of a future sum of money. The option that correctly defines discounting is d. finding the present value of a future sum of money. In financial decision-making, the discount rate is a crucial factor because it reflects how much value is placed on future benefits today. The higher the discount rate, the smaller the present value of future amounts, indicating a preference for immediate consumption over future benefits. This notion underpins various economic decisions, including investment in stocks and bonds, where future earnings and interest payments are factored into their present valuation. Two aspects to remember about discounting include the following: First, a high-interest rate results in a lower present value for future sums compared to a lower interest rate. Second, amounts to be received in the distant future are significantly discounted and thus have a much lower present value than amounts to be received sooner.
In your initial post, discuss whether you think a contract existed in this situation. Make sure to include the contract elements that are present. Also, state whether Staley has any recourse in this case. Provide rationale for your answer.
In your initial post, discuss whether you think a contract existed in this situation. Make sure to include the contract elements that are present is given below
Explanation:
Most contracts only need to contain two elements to be legally valid: All parties must be in agreement (after an offer has been made by one party and accepted by the other). Something of value must be exchanged -- such as cash, services, or goods (or a promise to exchange such an item) -- for something else of value.
The requisite elements that must be established to demonstrate the formation of a legally binding contract are (1) offer; (2) acceptance; (3) consideration; (4) mutuality of obligation; (5) competency and capacity; and, in certain circumstances, (6) a written instrument.
A contract is much more than an agreement between two people. There must be an offer and acceptance, intention to create a legally binding agreement, a price paid (not necessarily money), a legal capacity to enter a contract of your own free will, and proper understanding and consent of what is involved.
Identify an offer, acceptance, and consideration.
For a contract to be valid, it must have these three basic elements: a specific offer, acceptance of the terms of the offer, and consideration, which is the agreed-upon exchange of goods or services. A valid offer must be sufficiently definite.
Identify an offer, acceptance, and consideration.
For a contract to be valid, it must have these three basic elements: a specific offer, acceptance of the terms of the offer, and consideration, which is the agreed-upon exchange of goods or services. A valid offer must be sufficiently definite.
Fast Rocket, Inc. generated a net loss of $5,000 in its first year (2018) and taxable income of $15,000 in its second (2019). Assuming a tax rate of 21%, what is Fast Rocket's total tax for both years
Answer:
$2100
Explanation:
Net loss = $5000
Taxable income = $15000
Tax rate = 21%
Fast Rocket's total tax for both years is determined by
Taxable income minus net loss multiplied by tax rate
= $(15000-5000) × 21%
= $10000 × 0.21
= $2,100
Fast Rocket's total tax for both years = $2100
An assembly line has 6 work stations with cycle time of 6 minutes.There are 10 tasks with total work content of 12 minutes. What is approximate efficiency of this line
Approximate efficinecy of line = 33 percent
Explanation:
Given Data:
number of work stations = 6, cycle time = 6 minutes, number of tasks = 10, total work content given = 12 minutes
In order to calculate the efficiency of work line, the following formula will be used
Efficiency of the lines = total work content divide by ( number of work station multiply with cycle time)
putting the figures in the given formula, we get,
efficiency of lines = [tex]12 /(6 * 6)[/tex] = 12 divide by 36
= 0.3333
= 33 percent
At one point, certain U.S. Treasury bonds were callable. Consider the prices in the following three Treasury issues as of May 15, 2017: 05/15/2020 6.50 108.71875 108.78125 − .31250 3.400 05/15/2020 7.55 109.25000 109.31250 − .09375 4.210 05/15/2020 8.05 114.31250 114.50000 − .46875 2.960 The bond in the middle is callable in February 2018. What is the implied value of the call feature? Assume a par value of $1,000. (Hint: Is there a way to combine the two noncallable issues to create an issue that has the same coupon as the callable bond?) (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
The implied value of called feature is $111.49 approx
Explanation:
Detailed step wise solution is given below:
The implied value of the call feature on a callable bond can be estimated by creating a synthetic bond from non-callable issues that mimics the callable bond's cash flows. The value is determined by the price difference between the synthetic bond and the callable bond. However, the calculation requires detailed information not fully provided in the question.
To calculate the implied value of the call feature on a callable bond, we can use the information from non-callable bonds to create a synthetic bond that matches the coupon rate of the callable bond.
The key is to find the correct combination of the two non-callable issues that would replicate the coupon payments of the callable bond. Each non-callable bond has different coupon rates and prices. By creating a portfolio of these bonds that mimics the cash flows of the callable bond, we can infer the value of the call feature by comparing the price of this synthetic bond to the price of the actual callable bond.
However, since the detailed question does not provide the full necessary data and information, such as market interest rates and the exact cash flows of each bond, a definitive calculation cannot be performed. To generally approach such a problem, the following steps are required:
Determine the coupon payments and final par value payment of the callable bond.Create a portfolio of the other two bonds that reproduces these cash flows.Calculate the cost of this portfolio.The difference between the callable bond price and the synthetic bond portfolio price represents the value of the call feature.In practice, the problem requires complex calculations, including interpolation between the prices and cash flows of the non-callable bonds to match the coupon rate of the callable bond.
Deana, a light-complexioned African American is the manager of the cosmetics department at a large retail store. She does not promote Indigo, a brown-complexioned African American who is otherwise eligible for the promotion because she believes that customers prefer lighter skinned cosmetic consultants. Thus, Indigo:
a. Does not have a color discrimination claim under Title VII of the Civil Rights Act of 1964 because Deana was only trying to improve sales of the retail store.
b. Has a discrimination claim under Title VII of the Civil Rights Act of 1964 because color discriminate can occur between members of the same race
c. Does not have a color discrimination claim under Title VII of the Civil Rights Act of 1964 because Deana did not show any pervasive racial discrimination against Indigo
d. Has a discrimination claim under the Title VII of the Civil Rights Act of 1964 because of the BFOQ defense
Answer:
b. Has a discrimination claim under Title VII of the Civil Rights Act of 1964 because color discriminate can occur between members of the same race.
Explanation:
Discrimination is prohibited under the Civil Rights Act of 1964 which states that it is illegal to discriminate against a party based on the color of their skin, country of origin, or racial composition.
Same race discrimination is when the perpetrator is also from the Sam race as the victim.
For example on September 11, 2000, Zeke Wilson a black boxing promoter brought racism charges against a chairman of the state sports commission who was also black. For failing to provide promoter protection when William Pender a white boxing commisioner performed discriminatory acts against Zeke.
Dena is performing same race discrimination by passing over Indigo because of her skin colour.
Final answer:
Color discrimination can occur b. between members of the same race, making Indigo eligible to file a claim under Title VII.
Explanation:
The answer to this question is has a discrimination claim under Title VII of the Civil Rights Act of 1964 because color discrimination can occur between members of the same race. Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on race, including color discrimination. Even though Deana is also African American, her preference for lighter-skinned cosmetic consultants can still be considered color discrimination.
Thus, the Civil Rights Act of 1964 forbids discrimination, stating that it is unlawful to treat a person unfairly on the basis of their race, national origin, or skin colour. Same-race discrimination occurs when the victim and the offender are members of the same racial group.
Which strategy uses subsidiaries, franchises, or joint ventures with substantial independence? (a) multidomestic strategy (b) international strategy (c) transnational strategy (d) maquiladora system in Europe (e) global strategy
Answer:
The correct answer is letter "A": multidomestic strategy.
Explanation:
A multidomestic strategy is developed by a country with an international presence when the commercial and marketing focus is based on domestic trends. Under this approach, the firm's goods are shaped differently in every region to meet local needs and cultures. This practice demands more investment in professionals with vast knowledge in each market.
Final answer:
The correct answer is (a) multidomestic strategy. This strategy is used by companies that allow their subsidiaries or franchises to operate with a high degree of local autonomy, adapting their operations to the specific needs of each market they serve.
Explanation:
The strategy that uses subsidiaries, franchises, or joint ventures with substantial independence is known as a multidomestic strategy. This approach allows individual subsidiaries in different countries to operate independently, tailoring their operations, products, and services to fit local market conditions. This contrasts with global strategies where standardization across all markets is the norm, or international strategies which involve exporting products for global markets, but without significant local customization.
Franchises like McDonald's, which offers similar products or services in many locations, have also adopted aspects of the multidomestic strategy by allowing for some degree of local adaptation to cater to the tastes and preferences of different cultures. The multidomestic strategy allows multinational corporations (MNCs) to take full advantage of economies of scale and to benefit from competition, while specializing in certain services or industries and achieving comparative advantages.
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $455,000 is estimated to result in $187,000 in annual pretax cost savings. The press falls in the 5-year MACRS class, and it will have a salvage value at the end of the project of $75,000. The press also requires an initial investment in spare parts inventory of $34,000, along with an additional $3,800 in inventory for each succeeding year of the project. The shop’s tax rate is 24 percent and its discount rate is 9 percent. (MACRS schedule)
NPV:
Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Should the company buy and install the machine press?
a. Yes
b. No
Answer:
NPV: $11,238
a. Yes
Explanation:
Total Investment (PV) = a new machine press for $455,000 + initial investment in spare parts inventory of $34,000 = $489000
Pretax cost saving $187,000 -> After tax saving = $187,000 * (1- tax rate 24%)= $142,120
Cash flow of every year = After tax saving $142,120 - additional $3,800 in inventory for each succeeding year = $138,320
a salvage value at the end of the project of $75,000 is in year 5 => Cash flow of year 5 = $138,320 + $75,000 = $213,320
Discount rate: 9%Cash flow year 1: - 489,000Cash flow year 2: 138,320 Cash flow year 3: 138,320 Cash flow year 4: 138,320 Cash flow year 5: 213,320We use excel to calculate the Net Present Value of Project
= NPB(rate, cash flow of year 1 - year 5)
= NPV(9%, -489000,138320, 138,320, 138,320 , 213,320)
= $11,238
Yes, the company should buy and install the machine because NPV is positive
(Please see excel calculation attached)
Final answer:
The NPV calculation for the machine press includes considering the initial investment, annual savings, depreciation benefits, taxes, additional inventory costs, and the present value of the salvage value. These are all discounted at the shop's rate of 9 percent to determine if the investment is worthwhile.
Explanation:
To calculate the net present value (NPV) of the machine press for Starset Machine Shop, we need to consider the initial investment, the annual pretax cost savings, the salvage value, additional investments in inventory, depreciation from the MACRS schedule, taxes, and the discount rate. The key steps include:
Calculating the after-tax savings each year by subtracting taxes from the pretax cost savings.Adding the tax shield from depreciation by applying the MACRS depreciation rates to the cost of the machine press.Considering the increasing inventory costs each year.Discounting these cash flows at the company's discount rate of 9 percent.Adding the present value of the salvage value at the end of year 4.The calculation will result in the NPV of the investment. If the NPV is positive, it suggests that the investment would add value to the company, implying a recommendation to purchase the machine press. If the NPV is negative, the investment would not be financially beneficial, suggesting the machine press should not be purchased.
Which type of ad agency is most likely to offer its clients an extensive range of marketing, communications, and promotions services, including planning, creating, and producing the advertising; performing research; and selecting media? A. A creative boutiqueB. A full-service agencyC. A media buying serviceD. A collateral agencyE. A switch marketing agency
Answer: B. Full Service Agency
Explanation: The above agency would provide all the necessary services to its clients -an extensive range of marketing, communications, and promotions services, including planning, creating, and producing the advertising; performing research; and selecting media?
Jupiter Satellite Corporation earned $18 million for the fiscal year ending yesterday. The firm also paid out 30 percent of its earnings as dividends yesterday. The firm will continue to pay out 30 percent of its earnings as annual, end-of-year dividends. The remaining 70 percent of earnings is retained by the company for use in projects. The company has 2 million shares of common stock outstanding. The current stock price is $91. The historical return on equity (ROE) of 16 percent is expected to continue in the future.
What is the required rate of return on the stock?
Answer:
Rate of Reeturn is 14.5%
Explanation:T
The question is to calculate the required rate of return on the stock and this will be done as follows
Formula for rate = Ke = (D1 + P0) + g
In this formula, We need to first determine what our g or Growth rate is as follows:
Growth rate= Return on Equity x The Retention Ration
= 16% x 70% = 0.112 or 11.2%
D1 in the formula is the Expected Dividend per share
=Current dividend x (1+g)
= $18 million x 30% /2 million) x (1+0.112)
= 2.7 x 1.112 = 3.0024
P0 in the formula represents the current price of the stock = $91
Therefore based on the formula above
Ke = (D1 + P0) + g
= (3.004 /91) + 0.112
= 0.1450 x 100
= 14.5%
Suppose the September Eurodollar futures contract has a price of 96.4. You plan to borrow $50m for 3 months in September at LIBOR, and you intend to use the Eurodollar contract to hedge your borrowing rate.
a.What rate can you secure?
b.Will you be long or short the Eurodollar contract?
c.How many contracts will you enter into?
d.Assuming the true 3-month LIBOR is 1% in September, what is the settlement in dollars at expiration of the futures contract? (For purposes of this question, ignore daily marking-to-market on the futures contract.)
Answer:
Explanation:
Definition of simple terminologies ;
A contractual agreement is an agreement which is made on future exchanges in order to buy or sell goods at a fixed price at a specified time period. LIBOR stands for London interbank offered rate which is the rate at which banks borrow money from other banks in london market. this rate is a fixed term by the british bankers association.a) The implied LIBOR of the September Eurodollar futures of 96.4 is = 100 96.4 /400-=0.9%
(b) As we want to borrow money, it implies buying protection against high interest rates, which means low Eurodollar future prices. We will short the Eurodollar contract.
c) Number of contact to be entered into = One Eurodollar contract which is based on a $1 million 3-month deposit. As such, entering into hedge a loan of $50M, will automatically implies entering into 50 short contracts.
d) A true 3-month LIBOR of 1% means an annualized position (annualized by market conventions) of 1% x 4 = 4%. Therefore, our 50 short contracts will pay: [96.4 − (100 − 4) × 100 × $25] × 50 = $50,000.
The increased interest rate has made the loan more expensive as such, the loss to exposure will be compensated hence we have to pay the following amount ; ($50,000,000 x 0.01) - $50,000
= $450,000
The implied interest rate secured is 3.6%, and a short position in the Eurodollar futures contract is required. For a $50 million loan, this would equate to entering into 50 contracts. If the actual LIBOR is 1% come September, the settlement would be $1,300,000 in favor of the borrower.
Hedging with Eurodollar Futures Contract
If the September Eurodollar futures contract has a price of 96.4, the implied interest rate can be calculated by subtracting the contract price from 100, which would yield 3.6% (100 - 96.4).
This is the rate that can be secured via the hedge.
Since a plan is in place to borrow money, one would take a short position in the Eurodollar contract to hedge against rising interest rates.
To determine the number of contracts to enter into, the calculation would be the amount intended to borrow divided by the contract size. If the contract size is $1 million (standard for Eurodollar contracts), then for borrowing $50 million, one would require 50 contracts.
Assuming the true 3-month LIBOR is 1% in September, the calculation for the settlement would involve the difference between the hedged rate (3.6%) and the actual LIBOR rate (1%).
The payout would be this difference times the contract size times the number of contracts. If LIBOR is lower than the hedged rate, you profit from the short futures position.
In this scenario, for 50 contracts, the settlement in dollars at expiration would be (3.6% - 1%)× $1,000,000 × 50 = $1,300,000.