Answer: The price that would be expected for Coolibah's stock to sell for at the end of three years is $28.87
Explanation: It should be noted that to calculate a price that would be expected in Coolibah's stock to sell for at the end of three years can be calculated using financial calculator:
A) Using a financial calculator, PV = -$22.60 , PMT = $1.20, n = 6, I = 18% / 2;
calculate FV = $28.87 .
Paul Hyatt owns and operates DeepClean, a Florida-based company that cleans up mold and mildew in homes and businesses. As the sole proprietor of the business, he has unlimited liability, which means:
Answer:
Paul Hyatt is fully liable for all business debts
Explanation:
Unlimited liability in this scenario, means that Paul Hyatt is fully liable for all business debts. That is because unlimited liability is defined as the full legal responsibility that business owners and partners assume for all business debts, and since Paul Hyatt is a sole proprietor which means that he both owns and runs DeepCleans and there is no legal distinction between him and the business entity, then he is fully liable for debts and profits of DeepClean.
Mr. White contracts with his wife Ms. White to watch their kids, Joe and Jimmy, one night for $50. What is the status of the contract between Mr. White and Ms. White?
Answer:
There is no any form of contract between Mr. Smith and Ms. White
Explanation:
Based on the information given there is no contract between Mr. Smith and Ms. White reason been that Ms. White gave inadequate consideration .
Based on this inadequate consideration is not void because it can tend to make a contract between two parties unenforceable because of lack procedure defect when bargaining between two parties .
Indus Corporation pays $100,000 for the trademark rights to a line of soda equipment. After several years, sales for this line of soda equipment are disappointing, and the company estimates the total future cash flows from sales will be only $110,000. The estimated fair value of the trademark is now $60,000. What is the amount of the impairment loss to be recorded
Answer:
impairment loss = $40,000
Explanation:
In accounting, impairment loss refers to the decrease of an asset's carrying value. In order to calculate the impairment loss, you need to subtract the current market value of the asset from its original carrying value.
impairment loss = carrying value - current market value = $100,000 - $60,000 = $40,000
Tempo Company's fixed budget (based on sales of 14,000 units) for the first quarter of calendar year 2017 reveals the following.
Fixed Budget
Sales (14,000 units) $3,024,000
Cost of goods sold
Direct materials $336,000
Direct labor 588,000
Production supplies 364,000
Plant manager salary 136,000 1,424,000
Gross profit 1,600,000
Selling expenses
Sales commissions 98,000
Packaging 224,000
Advertising 100,000 422,000
Administrative expenses
Administrative salaries 186,000
Depreciation—office equip. 156,000
Insurance 126,000
Office rent 136,000 604,000
Income from operations $574,000
Complete the following flexible budgets for sales volumes of 12,000, 14,000, and 16,000 units. (Round cost per unit to 2 decimal places.)
"An economy is based on three sectorsdashagriculture, manufacturing, and services. For each unit of output, agriculture requires inputs of 0.20 unit from agriculture, 0.40 unit from manufacturing, and 0.20 unit from services. For each unit of output, manufacturing requires inputs of 0.30 unit from agriculture, 0.20 unit from manufacturing, and 0.20 unit from services. For each unit of output, services requires 0.20 unit from agriculture, 0.30 unit from manufacturing, and 0.30 unit from services. Determine the production levels needed to satisfy a final demand of 0 units for agriculture, 40 units for manufacturing, and 0 units for services. The production level needed from the agricultural sector is 40.00 units."
Answer:
Required Production to fullfil a Demand for 40 industry units
Agriculture 54.4
Industry 83.2
Services 51.2
Explanation:
Input Agricuilture Industrial Service
Agriculture 0.2 0.3 0.2
Industrial 0.4 0.2 0.3
Service 0.2 0.2 0.3
We require X input to generate a demand of 0 agriculture 40 industry and 0 services
The previous matrix will be the input we solve for the output
Output Agricuilture Industrial Service
Agriculture 0.8 -0.7 -0.8
Industrial -0.6 0.8 -0.7
Service -0.8 -0.8 0.7
We now reverse the matrix using excel:
Output Agricuilture Industrial Service
Agriculture 2 1.36 0.96
Industrial 1 2.08 0.88
Service 1 1.28 2.08
Now we multiply this by our desired outcome of
0
40
0
Agriculture 54.4
Industry 83.2
Services 51.2
If people lost confidence in the government what kind of money would have the least value?
If people lost confidence in the government which would have the least value?
a) fiat money
b) representative money
c) commodity money
d) gold standard
Answer:
Fiat money
Explanation:
Fiat money is a type of money or currency that is used as money because it is issued and backed by the government but it does not have any intrinsic value.
It has no intrinsic value which means that it does not have any value of its own and it is maintained by the government. Therefore, If people lost confidence in the government the kind of money that would have the least value is fiat money
Lok Co. reports net sales of $5,856,480 for 2016 and $8,679,690 for 2017. End-of-year balances for total assets are 2015, $1,686,000; 2016, $1,800,000; and 2017, $1,982,000. (a) Compute Lok's total asset turnover for 2016 and 2017.
Answer:
2016 = $3.36
2017 = $4.59
Explanation:
The solution of total assets turnover is shown below:-
Particulars 2016 2017
Total assets in the beginning $1,686,000 $1,800,000
Total assets at the end $1,800,000 $1,982,000
Average assets $1,743,000 $1,891,000
(Assets in the beginning + Assets at end) ÷ 2
Sales revenue $5,856,480 $8,679,690
Total assets turnover $3.36 $4.59
(Sales revenue ÷ Average Total assets)
Jack and Jill need to save $6100 toward a new car. How long will it take them if they save $200 a month earning interest at 4.7% per year
Answer:
2 years 5 months.
Explanation:
Use the Time Value of Money techniques to find n (period it takes to save for required amount)
Using a financial calculator enter the following data
Fv = $6,100
Pmt = - $ 200 × 12 = - $2,400
P/y = 1
r = 4.7 %
Pv = 0
n = 2.4569
Thus it takes 2 years 5 months to save $6100 toward a new car under the given circumstances.
The potential benefits lost by taking a specific action when two or more alternative choices are available is known as a(n):
Answer:
Opportunity costs
Explanation:
The potential benefits lost by taking a specific action when two or more alternative choices are available is known as opportunity costs.
Opportunity cost has to do with losing other alternatives by chosing to go with one alternative. Hence it is also called foregone alternative. It has to do with making a decision or choice to give up something in order to get something else which may be of more value.
O'NeillO'Neill's Products manufactures a single product. Cost, sales, and production information for the company and its single product is as follows:
Selling price per unit is $54
Variable manufacturing costs per unit manufactured includes direct materials DM, direct labor DL, and variable MOH $27.
Variable operating expenses per unit sold $4
Fixed manufacturing overhead (MOH) in total for the year $120,000
Fixed operating expenses in total for the year $92,000
Units manufactured and sold for the year 12,000 units
Required:
a. Prepare an income statement for the upcoming year using variable costing.
b. Prepare an income statement for the upcoming year using absorption costing.
Answer:
Instructions are below.
Explanation:
The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.
The variable costing method incorporates all variable production costs (direct material, direct labor, and variable overhead).
Absorption costing income statement:
Sales= 12,000*54= 648,000
COGS= (12,000*27) + 120,000= (444,000)
Gross profit= 204,000
Total operating expenses= (12,000*4) + 92,000= (140,000)
Net operating income= 64,000
Variable costing income statement:
Sales= 648,000
Total variable cost= 12,000*(27 + 4)= (372,000)
Total contribution margin= 276,000
Fixed manufacturing overhead= (120,000)
Fixed operating expenses= (92,000)
Net operating income= 64,000
Gilchrist Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. At the beginning of the most recently completed year, the Corporation estimated the machine-hours for the upcoming year at 37,600 machine-hours. The estimated variable manufacturing overhead was $4.38 per machine-hour and the estimated total fixed manufacturing overhead was $1,026,856. The predetermined overhead rate for the recently completed year was closest to:
Answer:
Predetermined OH rate = $ 31.69 per machine hour
Explanation:
Predetermined Fixed OH rate = Estimated Fixed Overhead / Estimated machine hours = $1,026,856 / 37,600
Predetermined Fixed OH rate = $27.31 per machine hour
Predetermined OH rate = Predetermined Fixed OH rate + Predetermined variable OH rate = $ 27.31 + $ 4.38
Predetermined OH rate = $ 31.69 per machine hour
At the beginning of year 1, Looby Corp. purchases equipment for $100,000. The equipment has a residual value of $20,000 and an expected useful life of 10 years. What is accumulated depreciation at the end of year 2 using straight-line depreciation
Answer:
Accumulated Depreciation at the end of year = $16,000
Explanation:
Under the straight line method of depreciation, the cost of an asset less the salvage value is spread equally over the expected useful life.
An equal amount is charged as annual depreciation over the life of the asset. The annual depreciation is calculated as follows:
Annual depreciation:
= (cost of assets - salvage value)/ Estimated useful life
Cost - 100,000
Residual value = 20,000
Estimated useful life = 10 years
Annual depreciation = (100,000- 20,000)/10 =8,000
Annual depreciation = 8,000
Accumulated Depreciation for 2 years = Annual depreciation× number of years
= 8,000× 2 = 16,000
Accumulated Depreciation for 2 years = $16,000
The relationship between financial leverage and profitability Pelican Paper, Inc., and Timberland Forest, Inc., are rivals in the manufacture of craft papers. Some financial statement values for each company follow .
Item Pelican Paper, Inc. Timberland Forest, Inc.
Total assets $10,900,000 $10,900,000
Total equity (all common) 9900000 5400000
Total debt 1000000 5500000
Annual interest 100000 550000
Total sales 23000000 23000000
EBIT 5750000 5750000
Earnings available for
common stockholders 3394800 3174000
Use them in a ratio analysis that compares the firms' financial leverage and profitability.
The debt ratio for Pelican is %.
(Round to one decimal place.)
The debt ratio for Timberland is %.
(Round to one decimal place.)
The times interest earned ratio for Pelican is.
(Round to one decimal place.)
The times interest earned ratio for Timberland is.
(Round to one decimal place.)
Discuss their financial risk and ability to cover the costs in relation to each other. (Select all the answers that apply.)
A. Pelican has a much higher degree of financial leverage than does Timberland. As a result, Pelican's earnings will be morevolatile, causing the common stock owners to face greater risk.
B. Pelican's earnings will be more volatile. This additional risk is supported by the significantly lower times interest earned ratio of Pelican. Timberland can face a very large reduction in net income and still be able to cover its interest expense.
C. Timberland's earnings will be more volatile. This additional risk is supported by the significantly lower times interest earned ratio of Timberland. Pelican can face a very large reduction in net income and still be able to cover its interest expense.
D. Timberland has a much higher degree of financial leverage than does Pelican. As a result, Timberland's earnings will be morevolatile, causing the common stock owners to face greater risk.
Answer:
Pelican Paper, Inc., and Timberland Forest, Inc.
Financial leverage and profitability ratios:
a) Debt Ratio = Total liabilities divided by Total assets x 100
Pelican = $1,000,000/$10,900,000 x 100
= 9.2%
Timberland = $5,500,000/$10,900,000 x 100
= 50%
Times Interest Earned Ratio = EBIT/Interest Expense
Pelican = $5,750,000/$100,000
= 57.5 times
Timberland = $5,750,000/$550,000
= 10.4 times
A discussion of their financial risk and ability to cover the costs in relation to each other:
C. Timberland's earnings will be more volatile. This additional risk is supported by the significantly lower times interest earned ratio of Timberland. Pelican can face a very large reduction in net income and still be able to cover its interest expense.
D. Timberland has a much higher degree of financial leverage than does Pelican. As a result, Timberland's earnings will be morevolatile, causing the common stock owners to face greater risk.
Explanation:
a) Data
Financial Statement Values:
Item Pelican Paper, Inc. Timberland Forest, Inc.
Total assets $10,900,000 $10,900,000
Total equity (all common) 9,900.000 5,400,000
Total debt 1,000,000 5,500,000
Annual interest 100,000 550,000
Total sales 23,000,000 23,000,000
EBIT 5,750,000 5,750,000
Earnings available for
common stockholders 3,394,800 3,174,000
b) Creditors provide half of the finances and effectively own 50% of Timberland. This contrasts with the debt ratio of Pelican, where creditors can lay claim to only 9.2% of the assets of the firm. Furthermore, Pelican can settle its debts with current earnings 57.5 times, compared to Timberland's interest coverage of 10.4 times.
In terms of the global value system, when Kodak shifted manufacturing to China, what position did China then take in the system, relative to the U.S.
Answer: b. Upstream
Explanation:
The Upstream part of a company's value chain is the part closest to the suppliers and the raw materials they supply to the firm while the downstream relates to how the goods are distributed and sold after produced.
As such, the firm's manufacturing plants are closer to its Upstream value chain portion. When Kodak therefore shifted manufacturing to China, it made China more upstream than the United States as China now dealt more with Kodak suppliers and inputs than the US, who were now more downstream as the consumers.
How could managers use increased worker flexibility and diligence to increase the competitiveness of their manufacturing sites
Explanation:
In order to increase the flexibility and diligence of workers in order to increase the competitiveness of their manufacturing sites, it is ideal for management to offer working conditions that allow employees greater benefits, such as greater mobility, with a layout that includes the correct flow between people, products and materials.
It is also ideal to implement technologies that reduce the bureaucracy both at work and facilitate communication and carrying out tasks.
Mobility also includes remote work using technology.
These are strategies that help to make work more flexible and, consequently, increase innovation in work and worker motivation.
The correct way in which the flexibility of the workers in an organization can be increased is by adapting to suitable principles of business management as per the size and scale of the business.
This will also help the manager to increase the competitiveness in the market and also beat the need for optimum level of production in the organization.
Principles of Business Management. The principles of business management as given by economist Henry Fayol are a great source for how the business can be run efficiently and effectively using the resources available.There can be chain level management that can be followed to achieve specialization of work and bring in additional capital or workforce to divide the work uniformly. Manufacturing can also be increased by doing departmentalization in management to save up costs and achieve optimum utilization of resources.Hence, a manager may adapt to different principles of management to increase competitiveness and effectiveness in the level of manufacturing.
Learn more about Principles of Management here :
https://brainly.com/question/14493167
During the ____________step in activity-based costing, overhead costs in each activity cost pool are assigned to products.
a. first
b. second
c. third
d. fourth
Answer:
d. fourth
Explanation:
Activity-based costing involves the following steps:
-First step: establish the activities that use resources and assign the costs to them.
-Second step: identify what causes the costs in each activity and this would be the allocation base.
-Third step: find an activity rate.
-Fourth step: assign costs to the products according to the activity usage by the product.
According to this, the answer is that during the fourth step in activity-based costing, overhead costs in each activity cost pool are assigned to products.
a. Equipment with a book value of $79500 and an original cost of $169000 was sold at a loss of $33000.
b. Paid $106000 cash for a new truck.
c. Sold land costing $310000 for $420000 cash yielding a gainof $11000.
d. Long term investments in stock were sold for $95600 cash yielding a gain of $17000.
Required:
Use the above information to determine this company's cash flows from investing activities.
Answer:
Cash flow from Investing activities refers to cash transactions related to Fixed Assets as well as transactions related to the ownership of other company securities.
Cash-flow from Investing Activities
Sale of equipment (79,500 - 33,000).......................... $46,500
Purchase of New Truck ................................................... ($106,000)
Sale of Land.........................................................................$420,000
Sale of Long-term investments.......................................$95,600
Net cash provided by investing activities ...................$456,100
Portfolio managers pick stocks for their clients’ portfolios based on the investment objective of the portfolio and several other factors. One key consideration is each stock’s contribution to portfolio risk and its statistical relationship with the portfolio’s other stocks. Based on your understanding of portfolio risk, identify whether each statement is true or false.
Answer:
False True True FalseExplanation:
First one is false because diversification reduces risk because it divides the risk amongst different securities. The portfolio risk will therefore be lower than the average of all stocks' standard deviations.
Second one is true because unsystematic risk is risk that will come with the type of stock or security purchased. It is usually referred to as diversifiable risk because using negatively correlated stocks can help diversify this risk.
Third one is True because the portfolio's risk when diversified is indeed likely to be smaller than the average of all stocks' standard deviation.
Fourth one is false because portfolio risk is reduced if stock that are negatively correlated are put into a portfolio because it means that when one stock is not doing so well, the other being negatively correlated, will be doing fine.
Suppose you deposit your paycheck, drawn on another bank. The total money supply in the banking system will ___________ because:
a. Assets of your bank would increase by more than the amount withdrawn from the other bank.
b. An increase in the assets of your bank by the amount of your paycheck would simply decrease the assets of another bank by the same amount.
c. Assets of the other bank would decrease by a fraction of the amount deposited at your bank.
Answer:
Option B, An increase in the assets of your bank by the amount of your paycheck would simply decrease the assets of another bank by the same amount, is correct.
Explanation:
The total money supply in the banking system will remain the “same” because it is given that paycheck is drawn from another bank. So, if a person withdraws money from another bank it implies that there is a decrease in money supply in the banking system and when the cheque is deposited in the other bank so again the money supply will increase in the banking system. However, the amount of money supply will remain the same. Therefore, option B is the right answer.
Cooley Company's stock has a beta of 1.40, the risk-free rate is 25%, and the market risk premium is 5.50%. What is the firm's required rate of return
Answer: 12.2%
Explanation:
Given the variables available, the required rate of return can be computed using the Capital Asset Pricing Model with the formula;
Required Return = Risk-free rate + beta ( Market risk premium)
Required return = 4.25% + 1.4 * 5.5%
Required return = 4.25% + 7.7%
Required return = 12.2%
Note; The actual question says the Risk-free rate is 4.25%.
Break-even point Currently, the unit selling price of a product is $160, the unit variable cost is $120, and the total fixed costs are $725,000. A proposal is being evaluated to increase the unit selling price to $170.
A. Compute the current break-even sales (units).
B. Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant.
Answer:
A. 18,125 units
B. 14,500 units
Explanation:
Break -even is the level of activity where a firm neither makes a profit nor a loss.
Break-even sales (units) = Fixed Cost ÷ Contribution per unit
= $725,000 ÷ ( $160 - $120)
= 18,125 units
New Break-even sales (units) = Fixed Cost ÷ Contribution per unit
= $725,000 ÷ ( $170- $120)
= 14,500 units
you have just deposited $11000 in to an account that promises to pay you an annual interest rate of 6.5 percent each year for the next 6 years. You will leave the money invested in the account and 10 years from today. you need to have $26300 in the account. What annual interest rate must you earn over the last 4 years to accomplish this goal
Answer:
Over the last 4 years to accomplish this goal the annual interest rate must be 13.14 %.
Explanation:
First find the Future value (FV) of $11,000 at the end of the 6th year as follows :
PV = -$11,000
r = 6.50%
p/yr = 1
n = 6
Pmt = $0
FV = ?
Using a financial calculator, the Future Value (FV) is $16,050.57
Therefore, the amount invested will amount to $16,050.57 in 6 year.
Next we then calculate the interest rate that will give us $26300 in the next four years (remainder of the 10 years)
PV = -$16,050.57
FV = $26,300
P/yr = 1
n = 4
Pmt = $0
r = ?
Using a financial calculator, the Interest rate (r) is 13.14 %
Conclusion :
Over the last 4 years to accomplish this goal the annual interest rate must be 13.14 %.
Purple Corporation acquired 75 percent of Socks Corporation’s common stock on January 1, 20X8, for $435,000. At that date, Socks reported common stock outstanding of $300,000 and retained earnings of $200,000, and the fair value of the noncontrolling interest was $145,000. The book values and fair values of Socks's assets and liabilities were equal, except for other intangible assets, which had a fair value $80,000 more than book value and a 10-year remaining life. Purple and Socks reported the following data for 20X8 and 20X9
Socks Corporation Purple Corporation
Year Net Income Comprehensive income Dividends paid Operating income Dividens paid
20X8 $40,000 50,000 15,000 $120,000 $70,000
20X9 60,000 65,000 30,000 140,000 70,000
Required:
Compute consolidated comprehensive income for 20X8 and 20X9.
20X8 20X9
Consolidated comprehensive income
Answer:
20X8 = 162,000
20X9 = $197,000
Explanation:
The calculation of the consolidated comprehensive income for the year 2008 and 2009 is shown below:
Consolidated comprehensive income
Particulars 20X8 20X9
Purple Corporation
Operating Income $120,000 $140,000
Add: Net Income
from Socks Corporation $40,000 $60,000
Less: Amortization of differential
($80,000 ÷ 10 Years) ($8,000) (8,000)
Consolidated net income $152,000 $192,000
Add: Comprehensive income
reported by Socks Corporation $10,000 $5,000
Consolidated
comprehensive income $162,000 $197,000
Baseball Corporation is preparing its cash budget for January. The budgeted beginning cash balance is $19,100. Budgeted cash receipts total $188,500 and budgeted cash disbursements total $190,200. The desired ending cash balance is $31,100. To attain its desired ending cash balance for January, the company should borro
Answer: $13,700
Explanation:
From the question, we are informed that Baseball Corporation is preparing its cash budget for January. The budgeted beginning cash balance is $19,100. Budgeted cash receipts total $188,500 and budgeted cash disbursements total $190,200. The desired ending cash balance is $31,100.
To attain its desired ending cash balance for January, the company should borrow $13,700.
The solution has been attached.
Garfield Inc. manufactures entry and dining room lighting fixtures. Five activities are used in manufacturing the fixtures. These activities and their associated budgeted activity costs and activity bases are as follows: Activity Budgeted Activity Cost Activity Base Casting $282,600 Machine hours Assembly 150,360 Direct labor hours Inspecting 20,790 Number of inspections Setup 52,150 Number of setups Materials handling 42,770 Number of loads Corporate records were obtained to estimate the amount of activity to be used by the two products. The estimated activity-base usage quantities and units produced follow: Activity Base Entry Dining Total Machine hours 4,990 4,430 9,420 Direct labor hours 4,300 6,440 10,740 Number of inspections 1,440 450 1,890 Number of setups 280 70 350 Number of loads 720 190 910 Units produced 10,000 5,000 15,000 a. Determine the activity rate for each activity. If required, round the rate to the nearest dollar.
Answer:
Casting = $ 30 per machine hour
Assembly = $ 14 per labor hour
Inspecting = $ 11 per inspection
Setup = $ 149 per setup
Materials handling = $ 47per load
Explanation:
Garfield Inc. Manufacturers
Activity Budgeted Activity Cost Activity Base
Casting $282,600 Machine hours
Assembly 150,360 Direct labor hours
Inspecting 20,790 Number of inspections
Setup 52,150 Number of setups
Materials handling 42,770 Number of loads
Activity Base Entry Dining Total
Machine hours 4,990 4,430 9,420
Direct labor hours 4,300 6,440 10,740
Number of inspections 1,440 450 1,890
Number of setups 280 70 350
Number of loads 720 190 910
Units produced 10,000 5,000 15,000
Activity Budgeted Activity Cost Activity Rate
Casting $282,600 $282,600/9420= $ 30 per machine hour
Assembly 150,360 150,360 / 10,740 = $ 14 per labor hour
Inspecting 20,790 20,790/1890= $ 11 per inspection
Setup 52,150 52,150 /350= $ 149 per setup
Materials handling 42,770 42,770/910= $ 47per load
The formula for Activity rate = Activity Cost/ Activity Base Cost
In 2008, the United States began to witness one of the worst recessions since the 1930s. The collapse of the housing bubble in 2006 led to a massive decline in real estate prices, affecting consumers and institutions, especially banking and financial entities. Severe liquidity shortfalls in the United States as well as other global markets led to a serious credit crisis. During the credit crisis of 2008–2009, several banks and other businesses went through a reorganization process or were forced to liquidate. Consider the following example:________.
In January 2009, American electronics retailer Circuit City Inc. closed all of its stores and sold all of its merchandise.
The above is an example of:______.
A. Reorganization
B. Liquidation.
Answer:
B. Liquidation.
Explanation:
Liquidation is and aftermath of the inability of a company or establishment to meet up with her obligations at the required moment. Thus, the company folds-up, lay off her staff and stop operating. While reorganization is a form of restructuring in a company or establishment. It may involve change of positions and duties among capable staff.
The example in the given scenario is that of liquidation because it ceased from operation.
Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $70,000 or $200,000 with equal probabilities of .5. The alternative risk-free investment in T-bills pays 6% per year. a. If you require a risk premium of 8%, how much will you be willing to pay for the portfolio?
Answer:
$118,421
Explanation:
first we must calculate the expected value of the risky portfolio = ($70,000 x 0.5) + ($200,000 x 0.5) = $135,000
since your risk premium is 8% and the risk free rate is 6%m then you should discount the expected value by 8% + 6% = 14% to determine its current market price
= $135,000 / (1 + 14%) = $118,421
On April 2 a corporation purchased for cash 7,000 shares of its own $11 par common stock at $26 per share. It sold 4,000 of the treasury shares at $29 per share on June 10. The remaining 3000 shares were sold on November 10 for $22 per share. a. Journalize the entries to record the purchase (treasury stock is recorded at cost). Apr. 2 b. Journalize the entries to record the sale of the stock. If an amount box does not require an entry, leave it blank. Jun. 10 Nov. 10
Answer:
A.
Dr Treasury stock 182,000
Cr Cash 182,000
B.
Jun 10
Dr Cash 116,000
Cr Treasury stock 104,000
Cr Paid in capital from treasury stock 12,000
Nov 10
Dr Cash 66,000
Dr Paid in capital from treasury stock 12,000
Cr Treasury stock 78,000
Explanation:
a. Preparation of the Journal entry to record the purchase
Dr Treasury stock 182,000
Cr Cash 182,000
(7,000*26)
b. Preparation of the Journal entries to record the sale of the stock
Jun 10
Dr Cash (4000*29) 116,000
Cr Treasury stock (4000*26) 104,000
Cr Paid in capital from treasury stock 12,000(116,000-104,000)
Nov 10
Dr Cash (3000*22) 66,000
Dr Paid in capital from treasury stock 12,000
Cr Treasury stock (3000*26) 78,000
Take It All Away has a cost of equity of 10.81 percent, a pretax cost of debt of 5.45 percent, and a tax rate of 35 percent. The company's capital structure consists of 77 percent debt on a book value basis, but debt is 37 percent of the company's value on a market value basis. What is the company's WACC
Answer:
8.12%
Explanation:
The computation of the weighted average cost of capital is shown below:
= Cost of equity × weight of equity + pretax cost of debt × (1 - tax rate) × weight of debt
= 10.81% × 0.63 + 5.45% × (1 - 0.35) × 0.37
= 6.81% + 1.31%
= 8.12%
We simply applied the above formula by considerin the capital structure with its weight so that the correct percentage could come
When using the equity method, receipt of cash dividends increases the carrying (book) value of an investment in equity securities.
A. True
B. False