Answer:
Anne Traylor Inc.
Calculating Lower-of-Cost-or-Net Realizable Value
The inventory cost to report on the balance sheet on June 30, 2020, assuming that the company applies the lower-of-cost-or-net realizable value rule to each individual inventory item is:
= $8,990.
Explanation:
a) Data and Calculations:
Inventory Quantity Selling Cost NRV Inventory Lower-of-Cost-or-
Item Price to Sell Cost Net Realizable Value
#100 70 $24 $5 $19 $16 $1,120 ($16 * 70)
#101 100 22 4 18 17 1,700 ($17 * 100)
#115 50 35 6 29 31 1,450 ($29 * 50)
#118 120 40 6 35 29 3,480 ($29 * 120)
#120 25 18 4 14 10 250 ($10 * 25)
#128 45 30 8 22 26 990 ($22 * 45)
Total $8,990
Wahoo Inc., a calendar year taxpayer, leases equipment to a customer for $4,500 monthly rent. On November 27, 2020, Wahoo received a $36,000 rent payment for the eight-month period beginning on December 1. Required: How much of the payment must Wahoo recognize as 2020 taxable income assuming that Wahoo uses the cash method of accounting for tax purposes
Answer:
A. Cash method of accounting $36,000
B. Accrual method of accounting $36,000
Explanation:
A Based on the information given we were told that the Wahoo have to recognize the whole prepayment amount of $36,000 as 2019 income which means that UNDER CASH METHOD OF ACCOUNTING How much of the payment must Wahoo recognize as 2020 taxable income is the whole prepayment amount of $36,000.
B.Based on the information given we were told that the Wahoo have to recognize the whole prepayment amount of $36,000 as 2019 income which means that UNDER ACCRUAL METHOD OF ACCOUNTING How much of the payment must Wahoo recognize as 2020 taxable income is the same whole prepayment amount of $36,000.
Where must food handlers dispose of waste water?
Answer:
Must be dispose in a sanitary sewer
Explanation:
Can not be in a storm drain or on surface ground
The food handlers dispose of waste water must be disposed into a sanitary sewer and never on the surface of the ground or in a storm drain.
Food that is safe to eat does not have any negative health effects after consumption. Consumers believe that the food they buy is safe and of the highest quality. The proper construction, maintenance, and operation of a food establishment protects the general public from unsafe food.
Queensland's food regulatory framework is in place to ensure that all food businesses address these issues, and there are severe penalties for food businesses that do not comply with the law.
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_is any place where goods are produced or distributed or services areproduced
Department B had 3,000 units in Work in Process that were 25% completed at the beginning of the period at a cost of $12,500. 13,700 units of direct materials were added during the period at a cost of $28,700. 15,000 units were completed during the period, and 1,700 units were 95% completed at the end of the period. All materials are added at the beginning of the process. Direct labor was $32,450, and factory overhead was $18,710. The number of equivalent units of production for the period for materials if the first-in, first-out method is used to cost inventories was a.13,700
Answer:
Number of equivalent units= 13,700
Explanation:
All materials are added at the beginning of the process.
To calculate the equivalent units using the FIFO method, we need to use the following structure:
Beginning work in process = beginning inventory* %incompleted
Units started and completed = units completed - beginning WIP
Ending work in process completed= Ending WIP* %completed
=Number of equivalent units
Replacing:
Beginning work in process = 3,000*0%= 0
Units started and completed = 15,000 - 3,000= 12,000
Ending work in process completed= 1,700*100%= 1,700
Number of equivalent units= 13,700
A 4-year project has an annual operating cash flow of $57,000. At the beginning of the project, $4,800 in net working capital was required, which will be recovered at the end of the project. The firm also spent $23,500 on equipment to start the project. This equipment will have a book value of $5,100 at the end of the project, but can be sold for $6,000. The tax rate is 40 percent. What is the Year 4 cash flow
Answer:
$67,440
Explanation:
Year 4 cash flow = operating cash flow + terminal year cash flow
terminal year cash flow = sales price of the machine + net working capital - tax(sales price - book value)
6000 + 4800 - 0.4(6000 - 5100) = $10,400
Year 4 cash flow = $10,400 + $57,000 = $67,400
As you employ people, you are responsible for paying the employer's share of certain taxes, such as Social Security
(6.2% of wages) and Medicare (2.45% of wages). If your payroll is $250,000 for the year, how much will you owe in these two taxes?
A.) $20,000
B.) $20.625
C.) $21,625
D.) $22,785
Answer: c $21,625. I just took it
$21,625 will you owe in these two taxes. The correct option is C.
Why is it important to have social security?Compulsory payments made to the general government known as social security contributions give recipients the right to receive a (probable) social benefit in the future. The elderly, disabled workers, injured soldiers, and families who have lost a spouse or parent are all helped by Social Security. At present, over 65 million people receive monthly Social Security benefits while approximately 179 million people are employed and contributing to Social Security.
Given
Payroll = $250,000
Medicare Tax Rate = 2.45%
Social Security Tax Rate = 6.2%
Required to Calculate the sum of these two taxes =?
= 250,000 x 8.65(2.45 + 6.2)/ 100
= $21,625
Medicare tax is not deducted from your paycheck if you work for yourself. Typically, you would submit your estimated tax payments on a quarterly basis and use them to pay your self-employment taxes, including Social Security and Medicare taxes.
Thus, the ideal selection is option C.
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You’ve had a good run as manager for a leading brand of leave-in conditioner. The product performs better than competition in taming frizzy hair, and has long commanded a premium price based on an attribute-based positioning. But now you’re nervous. There’s been a gradual but steady decline in sales over the past three quarters. Denise, a new member on the marketing research team, has presented you with information that suggests two possible causes. - First, beauty magazines and salon publications wrote repeatedly last year about a shift to free-flowing, natural styles. These styles work best with products that don’t leave residue on hair. You know that secondary data isn’t always ideal, but these stories were consistent and voluminous. - Second, recent focus groups run by Denise complained that your price is too high. Like all focus groups, these included only a small number of people, but the participants were loyal customers. Neither source is perfect, and the information you have is far from conclusive. But there’s nothing else to go on for now. Top management is under pressure from investors and anxious to take action, but wants to make sure the company is set up for long-term success. You can’t effectively address both issues at once, so you must decide which one is more likely to be causing the sales decrease.
A) Styling change.
B) Price.
Answer:
The issue that is more likely to be causing the sales decrease is:
Styling change.
This is the issue that should be addressed immediately. In addressing this issue, consideration should be paid to the price issue since any production shift to meet customers' styling change will reduce the production of the leave-in conditioner.
Explanation:
Identified Problem:
Steady declining sales
Causes;
Styling change
High price
Bulluck Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Direct materials 3.90 grams $ 1.40 per gram Direct labor 0.40 hours $ 15.00 per hour Variable overhead 0.40 hours $ 2.40 per hour The company reported the following results concerning this product in July. Actual output 3,400 units Raw materials used in production 11,770 grams Actual direct labor-hours 1,190 hours Purchases of raw materials 12,500 grams Actual price of raw materials purchased $ 1.60 per gram Actual direct labor rate $ 11.80 per hour Actual variable overhead rate $ 2.50 per hour The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead efficiency variance for July is:
Answer:
Variable overhead efficiency variance = $408 Favorable
Explanation:
Variable overhead efficiency variance: Variable overhead efficiency variance aims to determine whether or not their exist savings or extra cost incurred on variable overhead as a result of workers being faster or slower that expected.
Since the variable overhead is charged using labour hours, any amount by which the actual labour hours differ from the standard allowable hours would result in a variance
Hours
3,400 units should have taken (3,400×0.4 hours) 1,360
but did take 1,190
Labour hours variance 170 favorable
Standard variable overhead rate × $ 2.40 per hour
Variable overhead efficiency variance $408Favorable
Variable overhead efficiency variance = $408 Favorable
. It is important to conserve fossil fuels because
Answer:
Non-renewable resources (energy).
Explanation:
Renewable energy is also known as clean energy and it can be defined as a type of energy that are generated through natural sources or technology-based processes that are replenished constantly. Some examples of these natural sources are water (hydropower), wind (wind energy), sun (solar power), geothermal, biomass, waves etc.
Basically, a renewable energy source is sustainable and as such can not be exhausted.
On the other hand, a non-renewable energy refers to an energy source such as fossil fuels that takes a very long time to be created or their creation happened long ago and isn't likely to happen again e.g uranium. Fossil fuels, such as coal, oil, and natural gas, come from deep inside the Earth where they formed over millions of years ago.
Hence, it is very important to conserve fossil fuels because they are non-renewable resources (energy), unstainable and can be exhausted.
Allegheny Company ended Year 1 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $58,000 and $2,700, respectively. During Year 2, Allegheny wrote off $4,800 of Uncollectible Accounts. Using the percent of receivables method, Allegheny estimates that the ending Allowance for Doubtful Accounts balance should be $4,400. What amount will Allegheny report as Uncollectible Accounts Expense on its Year 2 income statement
Answer:
The amount of the allowance for the year to be reported in income statement is $6,500.
Explanation:
The amount of the allowance for the year to be reported in income statement can be calculated as follows:
Allowance for the year to be reported in income statement = Ending ending Allowance for Doubtful Accounts balance + Uncollectible written off during the year - Opening Allowance for Doubtful Accounts balance = $4,400 + $4,800 - $2,700 = $6,500
Therefore, the amount of the allowance for the year to be reported in income statement is $6,500.
What are the steps to create a new estimate in QuickBooks Online?
Answer:
Sales>all sales>New Transaction>Estimate
Explanation:
from the quiz
On October 1, 2021, Cullumber Company purchased to hold to maturity, 4100, $1000, 10% bonds for $4010000 which includes $61000 accrued interest. The bonds, which mature on February 1, 2030, pay interest semiannually on February 1 and August 1. Cullumber uses the straight-line method of amortization. The bonds should be reported in the December 31, 2021 balance sheet at a carrying value of $3949000. $3953530. $4010000. $4100000.
Answer:
Cullumber Company
The bonds should be reported in the December 31, 2021 balance sheet at a carrying value of:
= $3,949,000
Explanation:
a) Data and Calculations:
October 1, 2021:
Face value of bonds = $4,100,000
Cash payment for bonds = $4,010,000
Accrued interest on bonds = $61,000
Unamortized Bonds Discount = $151,000 ($4,100,000 - $4,010,000 + $61,000)
Carrying value = Face Value - Unamortized discounts
= $3,949,000 ($4,100,000 - $151,000) or ($4,010,000 - $61,000)
Amortization of discount using the straight-line method on March 31:
Interest Revenue = $205,000
Semi-annual amortized discount = $7,550 ($151,000/20)
Morris is a software engineer for a manufacturer. He wrote a program for the accounting department. During the testing phase, he noticed that the software would occasionally return an erroneous result, but he decided not to make modifications to the program because there were concerns about the project going over budget. He decided that it was better for him to be seen as someone who could stay within budget, and rationalized that the error was minor, and would not affect financial performance.Which principle of the Software Engineering Code of Ethics has Morris violated
Answer:
The principle of the Software Engineering Code of Ethics that Morris has violated is:
the Product principle.
Explanation:
The Product principle requires that Morris' program (product and related modifications) should meet the highest professional standards. Staying within budget and rationalizing an error as minor are not requirements of the Software Engineering Code of Ethics that Morris subscribed to.
Other requirements of the code include acting in the best interest of the public, client, and employer; maintaining high product standards; integrity and independence in professional judgment; using an ethical approach; maintaining professional integrity and independence; being fair and supportive to colleagues; and ensuring participation in lifelong learning.
The principle of the Software Engineering Code of Ethics which Morris has violated is:
The Product principle.
Based on the given scenario, we can see that Morris who is a software engineer was running a program which he had written for the accounting department when he discovered that there was a bug.
However, he decided not to report this bug which was discovered and decided to keep the app, as he was already over budget and thought it would not be a huge hindrance.
This type of negligence goes against the principle of the product principle which entails that any given program must be of the highest standard available.
Therefore, the correct answer is product principle.
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5) Mutti company produces two joint products: tomato paste and tomato sauce. From the common process emerge the joint cost of $200,000 which yields 2,000 units of tomato paste and 1,000 units of tomato sauce. Tomato paste can be sold for $100 per unit. Tomato sauce can be sold for $120 per unit. How much of the joint cost will be assigned to the tomato paste if joint costs are allocated on the basis of relative market values
$2,00,000 which yields 2,000 units of tomato paste
Joint costs are allocated based on relative market values and total $2,000,000, yielding 2,000 units of tomato paste.
What is market values?The market value, or OMV, of an asset is the price at which it would trade in a competitive auction setting. Although these terms have different definitions in different standards and differ in some circumstances, market value is frequently used interchangeably with open market value, fair value, or fair market value. Market value (also known as OMV or "open market valuation") is the price an asset would fetch in the marketplace, or the value assigned by the investment community to a specific equity or business.Market value is calculated by multiplying a company's outstanding shares by the current market price. If XYZ Company trades at $25 per share and has 1 million shares outstanding, its market value is $25 million.To learn more bout market values, refer to:
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A tire manufacturer has three different models that it sells. The anticipated payoff is dependent on the type sold and the level of demand.
Scenarios
Alternatives Low demand Medium demand High demand
All season $227,656 $365,000 $170,000
All terrain $260,470 $425,000 $400,000
Winter $-183,404 $238,000 $790,000
Probability 0.35 0.40 0.25
Requied:
What is the EMV for the all season tires?
Answer:
The EMV for the all season tires is:
= $268,180.
Explanation:
a) Data and Calculations:
Scenarios
Alternatives Low demand Medium demand High demand
All season $227,656 $365,000 $170,000
All terrain $260,470 $425,000 $400,000
Winter $-183,404 $238,000 $790,000
Probability 0.35 0.40 0.25
EMV for All Season Tires:
Scenarios Payoff Probability Expected Value
Low demand $227,656 0.35 $79,680
Medium demand $365,000 0.40 146,000
High demand $170,000 0.25 42,500
Total EMV = $268,180
what is the different between book-keeping and accounting
Answer:
Bookkeeping is a transactional and administrative function that records financial transactions such as orders, refunds, sales, and transfers on a daily basis. Accounting is more subjective, offering accounting insights to company managers based on facts gleaned from their bookkeeping records.
Explanation:
Determine the original investment for the following related subsequent cash flows if the internal rate of return (IRR) is 12%.
A :
$17,438.62
B :
$19,975.40
C :
$22,767.86
D :
$21,875.00
Answer:
B : $19,975.40
Explanation:
The computation of the original investment is shown below:
Year Cash flows Discount rate at 12% Present value
1 $10,000 0.8926 $8,928.57
2 $8,500 0.79719 $6,776.15
3 $6,000 0.71178 $4,270.68
Total present value $19,975.40
In the case of IRR, the total of present value would be equivalent to the orginal investment
Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics, including plastic grocery bags, styrofoam cups, and fertilizers, to estimate the firm's weighted average cost of capital. CGT's balance sheet data are as follows.
The stock is currently selling for $15.25 per share, and its noncallable $1,000 par value, 20-year, 7.25% bonds with semiannual payments are selling for $875.00. The beta is 1.25, the yield on a 6- month Treasury bill is 3.50%, and the yield on a 20-year Treasury bond is 5.50%. The required return on the stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. The firm's tax rate is 40%. Determine the best estimate of the after-tax cost of debt.
Assets 2018
Current assets $38,000,000
Net plant, property, and equipment $101,000,000
Total assets $139,000,000
Liabilities & Equity
Accounts payable $10,000,000
Accruals $9,000,000
Current liabilities $19,000,000
Long-term debt (40,000 bonds.
$1,000 par value) $40,000,000
Total liabilities $59,000,000
Common stock (10,000,000 shares) $30,000,000
Retained earnings $50,000,000
Total shareholders' equity $80,000,000
Total liabilities and shareholders' equity $139,000,000
a. 5.40%.
b. 5.67%.
c. 4.64%.
d. 5.14%.
Answer:
d. 5.14%.
Explanation:
Calculation to determine the best estimate of the after-tax cost of debt.
First step
Based on the information given we would make use of rate formula in excel.
=rate(nper,pmt,-pv,fv)
Where,
nper= coupon every six months for 20 years = 40 coupon payments
Pmt =$1000*7.25%*6/12=$36.25
Pv = $875
Fv =$1000
Let plug in the formula
=rate(40,36.25,-875,1000)=4.28% semiannually
=4.28% *2=8.56% annually
Now let calculate the after tax cost of debt using this formula
After tax cost of debt=8.56%*(1-t)
Where,
t represent tax rate of 40%
Let plug in the formula
After tax cost of debt=8.56%*(1-0.4)
After tax cost of debt=5.14%
Therefore the best estimate of the after-tax cost of debt is 5.14%
Divisibility" refers to the fact that money is divided into denominations for ease in completing transactions
O a. True
O b. False
A construction firm can achieve a $15,000 cost savings in Year 1, increasing by $3000 each year for the next 5 years, by converting their diesel engines for biodiesel fuel. At an interest rate of 15%, what is the equivalent annual worth of the savings?
Answer: $21291.6
Explanation:
The equivalent annual worth of the savings will be calculated thus:
Annual cost savings in year 1 = $15000
Increase in annual cost savings = $3000
Project period = 6 years
Interest rate = 15%
Annual worth of savings = A + G(A/G, 15%, 6)
= 15000 + 3000(15,000/3000, 5%, 6)
= 15000 + 3000(5000, 0.15, 6)
= 15000 + 3000(2.0972)
= 15000 + 6291.6
= 21291.6
Therefore, the annual worth of savings will be $21291.6
6. A radio station that carries news, features, and editorial opinions about
your area is which type of public? *
A) financiar
O
B) media
C) citizen-action
D) local
E) government
Answer:
B
Explanation:
Al part of communication
*The best answer will receive brainliest, I will friend you, and I will like all of the questions you've asked or answered.
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Choose a developing country that is starting to participate in global trade. Describe how economic concepts are affecting the lives of people in that country. Describe both the benefits and drawbacks of the country’s global trade activities.
Answer:
Amira, a sales rep for a software company, was asked by a potential customer whether the company’s technology could perform a specific function critical to his business needs. Amira wasn’t certain the software could handle his needs, so she told him she would need to get back to him. Rather than provide potential misinformation just to make the sale, Amira checked with the development team first. After determining the product could perform the requested function, she let her customer know. Not only did Amira earn the sale, but she earned trust and respect from her client, too.
Explanation:
In a workplace setting, acting with integrity often means demonstrating your core values in all efforts. Here are a few behaviors that show integrity: Being dependable and following through on commitments, Being open and honest when communicating with others, Holding yourself accountable and owning up to your shortcomings
Employees must exercise integrity regardless of their department or career level. Integrity is critical, however, in leadership positions where people have the opportunity to set examples for others. By incorporating strong values into your behavior, you can help encourage other employees to do the same.
How to display integrity in the workplace
Whether you’re working in a small business or a large corporation, your commitment to integrity will impact the workplace. Acting with integrity not only helps show employers you are capable of handling responsibilities that can advance your career, but it also helps foster a positive company culture.
Actions to demonstrate integrity and impact your workplace
1. Show up ready to work
2. Set a positive example
3. Be respectful during the conflict
4. Practice accountability
5. Follow and enforce company policies
6. Improve your work ethic
7. Respect property
For Year 1, Nnabue Company's year-end balance sheet lists $3,286,421 in ending Retained Earnings. During Year 1, Nnabue's net income exceeded its dividend declarations by $175,819. Nnabue's dividend declarations in Year 1 were $38,602. Nnabue also sold $32,000 of stock in Year 1. Dividend payments were $14,000. How much was Nnabue's beginning retained earnings
Answer:
See below
Explanation:
Statement showing the beginning retained earnings
Ending retained earnings balance
$3,286,421
Add:
Dividend declared
$38,602
Less;.
Income during the year
($175,819 + $38,602)
($214,421)
Beginning retained earnings
$3,110,602
Therefore, Nnabue's beginning retained earnings is $3,110,602
On March 1, LGE asks to extend its past-due $6,000 account payable to Tyson. Tyson agrees to accept $1,400 cash and a 180-day, 8%, $4,600 note payable to replace the account payable. (Use 360 days a year.)(1) Prepare the March 1 entry for LGE.(2) Prepare the September 27 entry for LGE when it pays the note and interest to Tyson.
Answer: See explanation
Explanation:
1. Prepare the March 1 entry for LGE.
Debit: Account payable - Tyson = $6000
Credit: Cash = $1400
Credit: Note payable = $4600
.(2) Prepare the September 27 entry for LGE when it pays the note and interest to Tyson.
Debit: Notes Payable = $4600
Debit: Interest expense = ($4600 × 8/100 × 180/360) = $184
Credit: Cash = $4784
In your opinion, what's the best strategy
Select one:
a. E-tailing
b. Depends
O c. Both E-tailing and Bricks and Mortar
O d. Bricks and mortar
Answer:
o both e-talling and bricks and mortar
The best strategy depends on the specific business, target market and industry that is "Both E-tailing and Bricks and Mortar". The correct option is C.
Combining E-tailing (online retailing) and bricks-and-mortar (physical stores) offers a comprehensive approach to reach a broader customer base and cater to diverse shopping preferences.
The E-tailing provides convenience, global reach, and cost-effectiveness, enabling businesses to tap into the growing online market.
On the other hand, bricks-and-mortar stores offer a tactile experience, face-to-face customer interactions, and immediate fulfillment and enhancing customer engagement and brand loyalty.
Therefore, the correct option is C.
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Watson, Inc., is an all-equity firm. The cost of the company’s equity is currently 12 percent, and the risk-free rate is 4.2 percent. The company is currently considering a project that will cost $11.61 million and last six years. The company uses straight-line depreciation. The project will generate revenues minus expenses each year in the amount of $3.27 million. If the company has a tax rate of 40 percent, what is the net present value of the project? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
$-361,190
Explanation:
Net present value is the present value of after-tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
We need to determine cash flows
Cash flow = (revenue - cost - depreciation) (1 - tax rate) + depreciation
3.27 - 1.935) ( 1 - 0.4) + 1.935 = 2.736
Cash flow in year 0 = 11.61 million
Cash flow in year 1 to 6 = 2.736
I = 12
NPV = $0.36 MILLION
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
You founded your own firm three years ago. You initially contributed $200,000 of your own money and in return you received 2 million shares of stock. Since then, you have sold an additional 1 million shares of stock to angel investors. You are now considering raising capital from a venture capital firm. This venture capital firm would invest $5 million and would receive 2 million newly issued shares in return. Assuming that this is the venture capitalist's first investment in your firm, what percentage of the firm will the venture capitalist own
Answer:
40%
Explanation:
Calculation to determine what percentage of the firm will the venture capitalist own
Using this formula
% ownership = Number of shares owned/Total number of shares
Let plug in the formula
% ownership=2 million shares /(2million shares + 1 million shares + 2million shares )
% ownership= 2million shares/5million shares
% ownership=0.4*100
% ownership=40%
Therefore what percentage of the firm will the venture capitalist own is 40%
What are the sources and types of the principal agent problem?
Answer:
The three types of agency problems are stockholders v/s management, stockholders v/s bondholders/ creditors, and stockholders v/s other stakeholders like employees, customers, community groups, etc.
Explanation:
Carrie D's has 8 million shares of common stock outstanding, 6 million shares of preferred stock outstanding, and 30 thousand bonds. If the common shares are selling for $12 per share, the preferred shares are selling for $30 per share, and the bonds are selling for 110 percent of par, what would be the weight used for equity in the computation of Carrie D's WACC
Answer:
Weight of equity = 0.31067 or 31.067% or 96/309
Explanation:
WACC or weighted average cost of capital is the cost of a firm's capital structure which can comprise of debt, preferred stock and common equity. The WACC for a firm can be calculated as follows,
WACC = wD * rD * (1-tax rate) + wP * rP + wE * rE
Where,
w represents the weight of each component based on market value in the capital structure r represents the cost of each component D, P and E represents debt, preferred stock and common equity respectively
To calculate the weight of equity in WACC computation, we first need to find out the Market value(MV) of each component and the market value of the overall capital structure.
MV of common equity = 8 million shares * 12 per share
MV of common equity = $96 million
MV of Preferred stock = 6 million shares * 30 per share
MV of Preferred stock = $180 million
The bonds are usually have a par value of $1000 unless specified otherwise.
MV of debt = 30 thousand * $1000 * 110%
MV of debt = $33 million
MV of total capital Structure = 96 + 180 + 33 => $309 million
Weight of equity = 96 / 309
Weight of equity = 0.31067 or 31.067% or 96/309
Dubai Corporation is looking to purchase a building costing $830,000 by paying $265,000 cash on the purchase date, and agreeing to make payments every three months for the next five years. The first payment is due three months after the purchase date. Dubai's incremental borrowing rate is 16%. Each of the payments is closest to
Answer:
Each payment is closest to $41,573.69.
Explanation:
This can be calculated using the formula for calculating the present value of an ordinary annuity as follows:
PV = P * ((1 - (1 / (1 + r))^n) / r) …………………………………. (1)
Where;
PV = Present value or the balance to pay for the building = $830,000 - $265,000 = $565,000
P =Quarterly payment or payment after every three months = ?
r = Quarterly interest rate = Incremental borrowing rate / Number of quarters in a year = 16% / 4 = = 4%. or 0.04
n = number of quarters = Number of years * Number of quarters in a year = 5 * 4 = 20
Substitute the values into equation (1) and solve for P, we have:
$565,000 = P * ((1 - (1 / (1 + 0.04))^20) / 0.04)
$565,000 = P * 13.5903263449677
P = $565,000 / 13.5903263449677
P = $41,573.69
Therefore, each payment is closest to $41,573.69.