Dorman Industries has a new project available that requires an initial investment of $6.1 million. The project will provide unlevered cash flows of $835,000 per year for the next 20 years. The company will finance the project with a debt-to-value ratio of .3. The company’s bonds have a YTM of 6.2 percent. The companies with operations comparable to this project have unlevered betas of 1.31, 1.24, 1.46, and 1.41. The risk-free rate is 3.2 percent, and the market risk premium is 6.4 percent. The company has a tax rate of 40 percent.
Required:
What is the NPV of this project?
Answers
Answer:
NPV = $ 400,115.43
Explanation:
NPV of this project = $ 400,115.43
Related Questions
Which of the following show negative cash flow?
Answers
Answer:
where are the answer choices
In its first year, Barsky Corporation made charitable contributions totaling $30,000. The corporation's taxable income before any charitable contribution deduction was $250,000. In its second year, Barsky made charitable contributions of $15,000 and earned taxable income before the contribution deduction of $300,000. Assume neither year is 2020. Required: Compute Barsky's allowable charitable contribution deduction and its final taxable income for its first year. Compute Barsky's allowable charitable contribution deduction and its final taxable income for its second year
Answers
Answer:
Year 1:
total income before charitable contributions = $250,000
limit on charitable contributions = $250,000 x 10% = $25,000
taxable income after charitable contributions = $250,000 - $25,000 = $225,000
charitable contributions carried forward = $30,000 - $25,000 = $5,000
Year 2:
total income before charitable contributions = $300,000
limit on charitable contributions = $300,000 x 10% = $30,000
taxable income after charitable contributions = $300,000 - $15,000 - $5,000 = $280,000
The stockholders’ equity section of Concord Corporation’s balance sheet at December 31 is presented here.
Concord Corporation Balance Sheet(partial)
Stockholders’ equity:
Paid-in capital
Preferred stock, cumulative, 8,000 shares authorized, 4,800 shares issued and outstanding $384,000
Common stock, no par, 870,000 shares authorized, 580,000 shares issued 2,900,000
Total paid-in capital 3,284,000
Retained earnings 1,858,000
Total paid-in capital and retained earnings 5,142,000
Less: Treasury stock (8,000 common shares) 52,800
Total stockholders’ equity $5,089,200
From a review of the stockholders’ equity section, answer the following questions.
a. How many shares of common stock are outstanding?
b. Assuming there is a stated value, what is the stated value of the common stock?
c. What is the par value of the preferred stock?
d. If the annual dividend on preferred stock is $36,000, what is the dividend rate on preferred stock?
e. If dividends of $72,000 were in arrears on preferred stock, what would be the balance reported for retained earnings?
Answers
Answer and Explanation:
The computation is shown below;
a.
No of Common Stock Outstanding = No. of stocks issued - Treasury stock
= 580,000 shares - 8,000 shares
= 572,000 shares
b. Stated Value of Common Stock = $2,900,000 ÷ 580,000 shares
= $5 per share
c. Par Value of the Preferred Stock = $384,000 ÷ 4,800 shares
= $80 per share
d. Dividend Rate = $36,000 ÷ $384,000
= 9.375%
e. The retained earning after arrears on preferred stock would remain the same i.e. $1,858,000 as they are declared
Cullumber Company incurred the following costs while manufacturing its product.
Materials used in product $121,000 Advertising expense $46,000
Depreciation on plant 61,000 Property taxes on plant 15,000
Property taxes on store 7,600 Delivery expense 22,000
Labor costs of assembly-line workers 111,000 Sales commissions 36,000
Factory supplies used 24,000 Salaries paid to sales clerks 51,000
Work in process inventory was $13,000 at January 1 and $16,600 at December 31. Finished goods inventory was $61,000 at January 1 and $45,700 at December 31.
Required:
Compute cost of goods manufactured.
Answers
Answer:
$328,400
Explanation:
Cost of Goods Manufactured is calculated in Manufacturing Account as follows :
Cost of Goods Manufactured = Beginning Work In Process Inventory + Total Manufacturing Costs - Ending Work In Process Inventory
therefore,
Cost of Goods Manufactured = $13,000 + ($121,000 + $61,000 + $15,000 + $111,000 + $24,000) - $16,600
= $328,400
Shondura Inc. focuses on both local responsiveness and standardization in global business. The company typically begins with a strong emphasis in a single strategy and then works to minimize the downsides associated with that strategy as much as possible as they begin to implement the second strategy. Which of the following is best exemplified in this case?
a. A multidomestic strategy
b. A global strategy
c. An arbitrage strategy
d. A transnational strategy
Answers
Answer:
d. A transnational strategy
Explanation:
A transnational strategy refers to a set of plans and actions that are decided by the business to perform them beyond domestic borders. The plans are set to perform the actions across the international borders. By applying this set of strategy, the connection is established among the nations dealing with the same operation.
In the give case, transnational strategy has been applied by Shondura Inc.
On January 1, 2010, Desert Company purchased a machine for $820,000. At the time, management estimated the useful life to be 20 years with a salvage value of $80,000 and will use straight-line depreciation. On January 1, 2020, the company reviewed the asset for impairment and determined that its future net cash flows totaled $420,000 and its fair value was $360,000. Desert has decided to continue to use the machine. What is the amount of depreciation expense Desert will record for this machine in 2020 after accounting for any potential impairment?
Answers
Answer:
$42,000
Explanation:
Straight line depreciation charges a fixed amount of depreciation for the period the asset is used in the business.
Depreciation Expense = Cost - Salvage Value ÷ Estimated Useful Life
January 1, 2020
Carrying Amount
Cost - Accumulated depreciation = $450,000
Recoverable Amount :
Higher of Fair Value and Future Cash Flows
Recoverable Amount = $420,000
Impairment loss incurs when Carrying Amount > Recoverable Amount
therefore,
Impairment loss = $30,000
December 31 , 2020
Depreciation expense = New Depreciable Amount ÷ Remaining useful life
= $420,000 ÷ 10
= $42,000
Jeremy Ortiz is an employee of Insulor Flooring, where his job responsibilities include selling service contracts to customers. Jeremy is single with two withholding allowances. He receives an annual salary of $36,000 and receives a 3 percent commission on all sales. During the semimonthly pay period ending September 29, 20XX, Jeremy sold $20,000 of service contracts.
Required:
Complete the payroll register for the September 29 pay period.
Answers
Answer:
Pay recorded for September 29 is $2,100
Explanation:
Jeremy Ortiz is paid based on two sources of income. The first being the annual salary of $36,000 and the second is the commission on all the service contracts sold, which is 3%.
Since the pay period is of semimonthly (15 days), the annual salary would be divided by 24 instead of the regular 12 months. This would mean that salary of $1,500 ($36,000 / 24) would be recorded in the payroll register.
For the commission, the sales done during this semimonthly period was $20,000 of service contracts. The commission at 3% of all sales would be $600 ($20,000 x 3%).
Total pay recorded in the payroll register for the September 29 period would be $2,100 ($1,500 + $600).
April is studying finance in college. She wants to enter a career that will analyze the risk of for a company. Which career pathway would be best suited for this ?
Brokerage Clerk
Risk Management Specialist
Tax Preparer
Insurance Sales Agent
Answers
Answer:
Risk Management Specialist
Explanation:
this is because this person wants to be in a career that analyzie risk for the company which is a fit for Risk Management Specialist
Answer:
Risk Management Specialist
Explanation:
Risk management specialists specialize in manage and assess financial risks in a company.
Suppose that Expresso and Beantown are the only two firms that sell coffee. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises:
Beantown
Advertise Doesn't Advertise
Expresso Advertise 8, 8 15, 2
Doesn't Advertise 2, 15 9, 9
For example, the upper right cell shows that if Expresso advertises and Beantown doesn't advertise, Expresso will make a profit of $15 million, and Beantown will make a profit of $2 million. Assume this is a simultaneous game and that Expresso and Beantown are both profit-maximizing firms.
If Expresso decides to advertise, it will earn a profit of $ ____________ million if Beantown advertises and a profit of $ _________ million if Beantown does not advertise. If Expresso decides not to advertise, it will earn a profit of $ ____________ million if Beantown advertises and a profit of $_________ million if Beantown does not advertise.
Answers
Answer:
$15 Million
$8 Million
Explanation:
Payoff Matrix is as follows: Beantown
Expresso Advertise = Advertise Doesn't Advertise
(8,8) (15,2)
Doesn't Advertise (2,15) (9,9)
If Expresso decides to advertise, it will earn a profit of $2 million if Beantown
advertises, it follows the strategy (Advertise, Advertise)
He earns a profit of $15 million if Beantown does not Advertise, here it follows the strategy (Advertise, Doesn't Advertise).
What is the economic result of too much money being in circulation?
A. Inflation
B. Deflation
C. Recession
D. Price hikes
Answers
The money is overflowing causing (inflation) to the economy.
A Quality Analyst wants to construct a sample mean chart for controlling a packaging process. He knows from past experience that whenever this process is under control, package weight is normally distributed with a mean of twenty ounces and a standard deviation of two ounces. Each day last week, he randomly selected four packages and weighed each:
Day Weight (ounces)
Monday 23 22 23 24
Tuesday 23 21 19 21
Wednesday 20 19 20 21
Thursday 18 19 20 19
Friday 18 20 22 20
What are the upper and lower control limits for these data?
a. UCL = 22.644 LCL = 18.556
b. UCL = 22.700 LCL = 18.500
c. UCL = 22.755 LCL = 18.642
d. UCL = 21.814 LCL = 19.300
Answers
Answer:
a. UCL = 22.664 LCL = 18.556
Explanation:
The sample mean for the given data is :
( 23 + 20 + 19 + 20 + 21 ) / 5 = 20.6
Upper control limit is :
Sample mean + standard deviation
20.6 + 2 = 22.6
Lower Control Limit is :
Sample mean - Standard Deviation
20.6 - 2 = 18.6
Problem 10-18 Return on Investment (ROI) and Residual Income [LO10-1, LO10-2] "I know headquarters wants us to add that new product line," said Dell Havasi, manager of Billings Company’s Office Products Division. "But I want to see the numbers before I make any move. Our division’s return on investment (ROI) has led the company for three years, and I don’t want any letdown." Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis of ROI, with year-end bonuses given to the divisional managers who have the highest ROIs. Operating results for the company’s Office Products Division for this year are given below: Sales $ 10,000,000 Variable expenses 6,000,000 Contribution margin 4,000,000 Fixed expenses 3,200,000 Net operating income $ 800,000 Divisional average operating assets $ 4,000,000 The company had an overall return on investment (ROI) of 15% this year (considering all divisions). Next year the Office Products Division has an opportunity to add a new product line that would require an additional investment that would increase average operating assets by $1,000,000. The cost and revenue characteristics of the new product line per year would be: Sales $2,000,000 Variable expenses 60% of sales Fixed expenses $640,000
Answers
Solution :
Income on new line
Contribution (2,000,00 x40%) 800,000
Less fixed expense - 640,000
Net operating income 160,000
Particulars Present New line Total
Sales 10,000,000 2,000,000 12,000,000
Net operating income 800,000 160,000 960,000
Operating assets 4,000,000 1,000,000 5,000,000
Margin 8% 8% 8%
ROI 20.00% 16.00% 19.20%
Residual income = net operating income - (average assets x minimum rate or return)
Particulars Present New line Total
Operating assets 4,000,000 1,000,000 5,000,000
Minimum required return 12 % 12 % 12 %
Min net operating income 480,000 120,000 600,000
Actual net operating income 800,000 160,000 960,000
Residual income 320,000 40,000 360,000
Return on investment is the profitability or the performance measurement tool that determines the percentage of returns being gained from total investments. It determines the efficiency of the investment and its project to generate higher returns from its operations.
The residual income is the net income in the hands of the business after the payment of all operating and nonoperating expenses and other payments.
The total return on investment inclusive of the present and the new line is 19.20%.
The total residual income is $360,000.
The computation of the return on investment is computed in the table attached below.
The formula for determining the residual income is:
[tex]\begin{aligned}\text{Residual Income}&=\text{Net Operating Income}-\left(\text{Average assets}\times\text{Minimum Rate of Return} \right ) \end{aligned}[/tex]
The entire computation of the residual income is attached in the image below.
To know more about return on investment, refer to the link:
https://brainly.com/question/13575981
Blue Point Company is formulating its marketing expense budget for the month of September. Sales in units for August amounted to 4,000; sales volume in September is expected to increase by 10%. So far for the current year, fixed marketing expense per month amounted to $5,000 of salaries and $1,500 of depreciation. Variable marketing expense amount to $.15 paid in cash in the month of sale. What is the estimated cash payment for marketing expense in the month of September
Answers
Answer:
See below
Explanation:
Computation of estimated cash payment expense is seen below
Variable expenses
Sales in unit for August 4,000
Sales in unit September 4,000 × 110% = 4,400
Total variable expense 4,400 × $0.15 = $660
Fixed expense per quarter
Salaries $5,000 × 3 = $15,000
Depreciation $1,500 × 3 = $4,500
Total = $19,500
Budget total = $20,160
Estimated cash payment = $20,160 - $4,500 = $15,660
Assume the following information for Windsor Corp.
Accounts receivable (beginning balance) $139,000
Allowance for doubtful accounts (beginning balance) 11,450
Net credit sales 940,000
Collections 917,000
Write-offs of accounts receivable 5,600
Collections of accounts previously written off 1,600
Uncollectible accounts are expected to be 9% of the ending balance in accounts receivable.
Required:
Prepare the entries to record sales and collections during the period.
Answers
Answer:
To record the Sales
Dr. Account Receivables 940,000
Cr. Sales 940,000
To record the Collection
Dr. Cash 917,000
Cr. Account Receivables 917,000
Explanation:
To record the sales we need to debit the account receivables as the sales are made on credit and credit the sale to record the sale.
To record the Collection from the customers we need to debit the cash account to record the receipt of cash ab credit the account receivables to decrease the value of account receivables by the amount of collection.
You are 25 years old and are considering full-time study for an MBA degree. Tuition and other direct costs will be $60,000 per year for two years. In addition, you will have to give up your current job that has a salary of $50,000 per year. Assume tuition is paid and salary received at the end of each year. By how much does your salary have to increase (in real terms) as a result of getting your MBA degree to justify the investment? Assume a real interest rate of 2% per year, ignore taxes, assume that the salaries for both jobs increase at the rate of inflation (i.e. they stay constant in real terms), and that you retire at 65. Note: the $1 for T periods annuity formula is (1/r)*[1-1/(1+r)^T]. g
Answers
Answer:
$8,403.73
Explanation:
The job will be started at the age of 27 ( 25 years + 2 years ) and retirement will be at the age of 65.
Hence the employment years are 38 years ( 65- 27 ).
Cost of MBA program = Direct cost + Opportunity cost = $60,000 + $50,000 = $110,000
At the age of 27, the total cost of the program will be
Total Cost of MBA program = Cost of program in first year + Cost of program in last year = $110,000 + ( $110,000 x ( 1 + 2% ) ) = $110,000 + $112,200 = $222,200
Use the following formula to calculate teh required salary
Calculate the annuity factor
Annuity factor = (1/r)*[1-1/(1+r)^T] = (1/2%)*[1-1/(1+2%)^38] = 26.440640602064
Now use the following formula to calculate the required salary
Required salary = Total cost of MBA program / Annuity factor for 38 years at 2% = $222,200 / 26.440640602064 = $8,403.73
On January 1, 2020, Commonwealth Inc. leases equipment to Tap Inc. The equipment has a fair value of $156,000, a carrying value of $80,000, an economic life of four years, and a lease term of three years. Commonwealth's incremental borrowing rate is 10% and there is a purchase option at the end of the lease of $10,000 that is reasonably expected to be executed by Tap at that time. The annual lease payment is $33,809.39, with the first payment due immediately on January 1, 2020. What is the amount of interest revenue recognized in 2020 by Commonwealth Inc.
Answers
Answer: $12,219
Explanation:
Interest revenue for 2020:
= Carrying value * Borrowing rate
Carrying value at end of 2020:
= Fair value - Lease payment
= 156,000 - 33,809.39
= $122,190.61
Interest = 10% * 122,190.61
= $12,219
Product A consists of two units of Subassembly B, two units of C, and one unit of D. B is composed of four units of E and two units of F. C is made of two units of H and three units of D. H is made of five units of E and two units of G. To produce 100 units of A, determine the numbers of units of B, C, D, E, F, G, and H required using the low-level coded product structure tree.
Level 0 100 units of A
Level 1 units of B
units of C
Level 2 units of F
units of H
units of D
Level 3 units of E
units of G
Answers
Answer:
[tex]B = 200\ units[/tex] [tex]C = 200\ units[/tex]
[tex]F = 400\ units[/tex] [tex]H = 400\ units[/tex]
[tex]D = 700\ units[/tex] [tex]E = 2800\ units[/tex]
[tex]G = 800\ units[/tex]
Explanation:
Given
[tex]A = 100\ units[/tex]
See attachment for right presentation of question
Solving (a): The low level coded product structure tree
This is plotted by considering the hierarchy or level of each product item and their corresponding units.
See attachment (2)
Solving (b): The number of units of each.
To do this, we multiply the units of the given product by the number of unit the fall under.
So, we have:
Products B and C are directly under A, so we multiply their units by units of A.
[tex]B = 2 * A = 2 * 100[/tex]
[tex]B = 200\ units[/tex]
[tex]C = 2 * A = 2 * 100[/tex]
[tex]C = 200\ units[/tex]
Product F is directly under B, so we multiply its units by units of B.
[tex]F = 2 * B = 2 * 200[/tex]
[tex]F = 400\ units[/tex]
Product H is directly under C, so
[tex]H = 2 * C = 2 * 200[/tex]
[tex]H = 400\ units[/tex]
Product D has of 3 units of C and 1 unit of A. So:
[tex]D = 3 * C + 1 * A[/tex]
[tex]D = 3 * 200 + 1 * 100[/tex]
[tex]D = 700\ units[/tex]
Product E has of 4 units of B and 5 units of H. So:
[tex]E = 4 * B + 5 * H[/tex]
[tex]E = 4 *200 + 5 * 400[/tex]
[tex]E = 2800\ units[/tex]
Product G has 2 units of H.
So:
[tex]G = 2 * H = 2 * 400[/tex]
[tex]G = 800\ units[/tex]
Tan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Osaka Yokohama Sales $ 3,000,000 $ 9,000,000 Net operating income $ 210,000 $ 720,000 Average operating assets $ 1,000,000 $ 4,000,000 Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 15%. Compute the residual income for each division.
Answers
Answer:
Return on Investment (ROI)
In terms of margin :
Division Osaka (ROI) = 21.00 %
Division Yokohama (ROI) = 18.75%
In terms of turnover :
Division Osaka (ROI) = 300%
Division Yokohama (ROI) = 225%
Residual Income
Division Osaka = $60,000
Division Yokohama = $120,000
Explanation:
Return on Investment = Divisional Profit Contribution / Assets Employed in the Division x 100
In terms of margin :
Division Osaka (ROI) = $ 210,000 / $ 1,000,000 x 100 = 21.00 %
Division Yokohama (ROI) = $ 720,000 / $ 4,000,000 x 100 = 18.75%
In terms of turnover :
Division Osaka (ROI) = $ 3,000,000 / $ 1,000,000 x 100 = 300%
Division Yokohama (ROI) = $ 9,000,000 / $ 4,000,000 x 100 = 225%
Residual Income = Controllable Profit - Cost of Capital Charge on Investment Controllable by Divisional Manager
Division Osaka = $ 210,000 - $ 1,000,000 x 15% = $60,000
Division Yokohama = $ 720,000 - $ 4,000,000 x 15% = $120,000
Evan phoned his representative when he received his most recent statement on his deferred annuity. Evan is 65 and purchased the fixed annuity seven years ago to be a conservative part of his portfolio. Evan has read and heard a lot about how the market is beginning to take off and that variable annuities have considerable growth potential. He wants to get out of the fixed annuity and purchase a variable annuity to earn a higher return. The representative should:
Answers
Answer: Review Evan's investor profile factors and other facts to determine a suitable course of action to address his concerns and needs
Explanation:
The options include:
A. Recommend that Evan consider an exchange into a variable life insurance policy because it has growth potential with a death benefit.
B. Recommend that Evan surrender the annuity and invest in bond mutual funds because they work similar and cost less.
C. Review Evan’s investor profile factors and other facts to determine a suitable course of action to address his concerns and needs.
D. Update his investor profile factors and risk tolerance, and discuss with Evan the long term focus of a variable annuity and how it will outperform the fixed annuity within the first couple of years.
Based on the information given in the question, the best thing that the representative should do will be to review Evan's investor profile factors and other facts to determine a suitable course of action to address his concerns and needs.
When Evan's investor profile factors is checked, then the representative can then inform Evans about the appropriate thing to do and if it's appropriate for him to purchase a variable annuity to earn a higher return.
Going ahead by getting out of the fixed annuity and purchasing a variable annuity without reviewing Evan's investor's profile isn't appropriate.
Last summer, Maria decided to join a bowling league with some colleagues from work. They formed a team and bowled together several times to get to know one another better. The week before the league started, the team had to come up with a name. During a meeting to discuss this, Maria and her teammate Tim got into a heated debate because Maria wanted their name to be The Lucky Strikes, whereas Tim wanted the team name to be The Pin City Pimps. While yelling at each other, it became clear that Maria thought she should be the team manager because she had formed the team. Tim was just as adamant that he should be team manager because he is the more experienced bowler.
1. As Sunita and Hubert argue about the team name, what stage of development is their bowling team in?
a. Storming
b. Norming
c. Performing
d. Forming
2. If a team leader wanted to help a team such as Sunita’s get through the storming stage of team development, he or she should take which of the following actions? Check all that apply.
a. Encourage participation by all team members.
b. Help the team discourage free riding.
c. Disband the team.
d. Watch for blocking, or disruptive, behaviors and help prevent them.
Answers
#2 is a. And d.
General Motors Corporation reported the following information in its 10-K report:
Inventories at December 31 ($ millions) 2008 2007
Productive material, work in process, and supplies $4,849 $6,267
Finished product, service parts, etc. 9,426 10,095
Total inventories at FIFO 14,275 16,362
Less LIFO allowance (1,233) (1,423)
Total automotive and other inventories, less allowances $13,042 $14,939
The company reports its inventory using the LIFO costing method during 2007 and 2008.
Required:
a. At what dollar amount are inventories reported on its 2008 balance sheet?
b. At what dollar amount would inventories have been reported in 2008 if FIFO inventory costing had been used?
Answers
Answer:
General Motors Corporation
a) Inventories are reported on its 2008 balance sheet at $13,042.
b) Inventories would have been reported on its 2008 balance sheet at $14,275 if FIFO inventory costing had been used.
Explanation:
a) Data and Analysis:
Inventories at December 31 ($ millions) 2008 2007
Productive material, work in process, and supplies $4,849 $6,267
Finished product, service parts, etc. 9,426 10,095
Total inventories at FIFO 14,275 16,362
Less LIFO allowance (1,233) (1,423)
Total automotive and other inventories, less allowances $13,042 $14,939
b) LIFO = Last-in, First-out. This inventory method assumes that items that were brought into the store last were the first to be sold. This presupposes that the cost of goods sold will be determined by the most recent items, while the ending inventory will be determined by the latter items.
c) FIFO = First-in, First-out: This is the opposite of LIFO. The inventory method assumes that items that were bought first would be the first to be sold. This method presupposes that the cost of goods sold will be determined by the first items in store, while the ending inventory will be determined by the cost of the most items.
Lens Junction sells lenses for $44 each and is estimating sales of 16,000 units in January and 17,000 in February. Each lens consists of 2 pounds of silicon costing $2.50 per pound, 3 oz of solution costing $3 per ounce, and 15 minutes of direct labor at a labor rate of $18 per hour. Desired inventory levels are: Jan. 31 Feb. 28 Mar. 31 Beginning inventory Finished goods 4,300 4,800 4,900 Direct materials: silicon 8,300 9,200 9,000 Direct materials: solution 11,000 12,200 12,900
Answers
Complete Question:
1. Prepare a sales budget. Lens Junction Sales Budget For the Two Months Ending February 28, 20XX January February Expected Sales (Units) Sales Price per Unit Total Sales Revenue Total
2. Prepare a production budget. Lens Junction Production Budget For the Two Months Ending February 28, 20XX January February Expected Sales Total Required Units Required Production Total
3. Prepare direct materials budget for silicon. Lens Junction For the Two Months Ending Fabrant Materials, Purinat for Silinn February Expected Sales Total Required Units Required Production Total
4.Prepare direct materials budget for silicon.
Answer:
Lens Junction
1. Lens Junction Sales Budget For the Two Months Ending February 28, 20XX
January February
Expected Sales (Units) 16,000 17,000
Sales Price per Unit $44 $44
Total Sales Revenue $704,000 $748,000
2. Lens Junction Production Budget For the Two Months Ending February 28, 20XX
January February
Expected Sales Total 16,000 17,000
Ending Inventory 4,800 4,900
Required Units 20,800 21,900
Beginning Inventory 4,300 4,800
Required Production Total 16,500 17,100
3 & 4. Lens Junction Direct Materials Budget For the Two Months Ending February
January February
Silicon Solution Silicon Solution
Expected Sales 32,000 48,000 34,000 51,000
Ending inventory 9,200 9,000 12,200 12,900
Total Required 41,200 57,000 46,200 63,900
Beginning inventory 8,300 11,000 9,200 12,200
Units Required 32,900 46,000 37,000 51,700
Explanation:
a) Data and Calculations:
Sales price of lenses per unit = $44
Estimated sales of lenses in January and February respectively = 16,000 and 17,000
Direct materials for each lense:
2 pounds of silicon at $2.50 per pound = $5.00
3 oz of solution at $3.00 per ounce = $9.00
Total cost of direct materials per unit = $14
15 minutes direct labor at $18 per hour = $4.50
Desired inventory levels:
Beginning inventory of finished goods:
January 4,300
February 4,800
March 4,900
Beginning inventory of direct materials:
Silicon Solution
January 8,300 11,000
February 9,200 12,200
March 9,000 12,900
We have the following information for the Valverde company. The stock pays a $1 dividend and it will grow by 12% the first year, 9% the second year and 3% forever after that. The unlevered bheta is 1, D/E is 75/25 and the tax rate is .3. Additionally, we know the treasury bond rate is 0.04 and the ROR of the S&P has been 10%.
Required:
Derive the stock price of Valverde.
Answers
Answer:
P0 = $5.99394080634 rounded off to $5.99
Explanation:
The dividend discount model (DDM) can be used to calculate the price of the stock today. DDM calculates the price of a stock based on the present value of the expected future dividends from the stock. The formula for price today under DDM is,
P0 = D1 / (1+r) + D2 / (1+r)^2 + ... + Dn / (1+r)^n + [(Dn * (1+g) / (r - g)) / (1+r)^n]
Where,
D1, D2, ... , Dn is the dividend expected in Year 1,2 and so on g is the constant growth rate in dividends r is the discount rate or required rate of return
We first need to calculate the levered beta of Valverde.
Levered Beta = Unlevered Beta * [1+ (1-tax rate) * (Debt/Equity)]
Levered Beta = 1 * [(1 + (1 - 0.3) * (75/25)]
Levered Beta = 3.1
We first need to calculate the cost of equity (r) using the CAPM equation. The equation is,
r = risk free rate + Levered Beta * (Expected return on Market - risk free rate)
We know that the risk free rate is 0.04 or 4%, the beta is 3.1 and the expected return on market is 0.1 or 10%.
r = 0.04 + 3.1 * (0.1 - 0.04)
r = 0.226 or 22.6%
Now, using the DDM equation, the price of stock will be,
P0 = 1 * (1+0.12) / (1+0.226) + 1 * (1+0.12) * (1+0.09) / (1+0.226)^2 +
[(1 * (1+0.12) * (1+0.09) * (1+0.03) / (0.226 - 0.03)) / (1+0.226)^2]
P0 = $5.99394080634 rounded off to $5.99
P0 = $99.2830 rounded off to $99.28
A company has the following unadjusted account balances at December 31, of the current year; Accounts Receivable of $185,700 and Allowance for Doubtful Accounts of $1,600 (credit balance). The company uses the aging of accounts receivable to estimate its bad debts. The following aging schedule reflects its accounts receivable at the current year-end:
Account Age Balance Estimated Uncollectible Percentage
Current (not yet due) $96,000 1.00%
1—30 days past due 64,000 2.50%
30—60 days past due 16,000 11.00%
61—90 days past due 6,500 37.00%
Over 90 days past due 3,200 70.00%
Total $185,700
Required:
a. Calculate the amount of the Allowance for Doubtful Accounts that should appear on the December 31, of the current year, balance sheet.
b. Prepare the adjusting journal entry to record bad debts expense for the current year .
Answers
Answer:
a. The amount of the Allowance for Doubtful Accounts that should appear on the December 31, Balance Sheet of the current year is:
= $8,965.
b. Adjusting Journal Entry:
Debit Bad Debts Expense $7,365
Credit Allowance for Doubtful Accounts $7,365
To record bad debts expense and bring the balance of the Allowance for Doubtful Accounts to a credit balance of $8,965.
Explanation:
a) Data and Calculations:
Accounts Receivable balance = $185,700
Allowance for Doubtful Accounts $1,600 (credit balance)
Aging Schedule:
Account Age Balance Estimated Uncollectible Amount
Percentage
Current (not yet due) $96,000 1.00% $960
1—30 days past due 64,000 2.50% 1,600
30—60 days past due 16,000 11.00% 1,760
61—90 days past due 6,500 37.00% 2,405
Over 90 days past due 3,200 70.00% 2,240
Total $185,700 $8,965
Bad Debts Expense:
Allowance for Uncollectible Accounts:
Beginning balance ($1,600)
Ending balance $8,965
Bad Debts expense = $7,365
Tucan Company manufactures a product requiring 0.5 ounces of platinum per unit. The cost of platinum is approximately $300 per ounce; the company maintains an ending platinum inventory equal to 10% of the following month's production usage. The following data were taken from the most recent quarterly production budget:
July August September
Planned production in units 1,000 11,00 980
The cost of platinum to be purchased to support August production is:_______
Answers
Answer:
$163,200
Explanation:
Tucan Company
Purchase Budget for the Month of August
Production Requirement ( 11,00 x 0.5 ) 550
Add Closing inventory ( 980 x 0.5 x 10%) 49
Total 599
Less Opening Inventory ( 11,00 x 0.5 x 10%) (55)
Materials Required 544
Cost $300
Total Cost $163,200
A guitar manufacturer is considering eliminating its electric guitar division because its $94,140 expenses are higher than its $88,420 sales. The company reports the following expenses for this division.
Avoidable Expenses Unavoidable Expenses
Cost of goods sold $66,500
Direct expenses 11,950 $2,650
Indirect expenses 860 1,850
Service department costs 8,800 1,530
Should the division be eliminated?
Answers
Answer:
Electric Division Should be Kept
Explanation:
Analysis of the decision is as follows :
Kept Eliminated
Sales $72,000
Expenses :
Direct Expenses $1,250
Indirect Expenses $1,600
Service Department Costs $1,430
Cost of Goods Sold $56,000
Total Expenses $56,000 $4,280
Net Income (Loss) $16,000 ($4,280)
Conclusion :
Electric Division Should be Kept since it is contributing tp the whole company profit than its taking from it.
Andrew is deciding whether to remain in the home he has lived in for the past ten years, which is located very near his work, or to move into a newer home that is located in the suburbs farther from his job. The old house was purchased for $160,000 and has a market value of $220,000. The new home can be purchased for $285,000. Which of the following is not relevant to Andrew's decision?
a. Driving distance to work
b. Cost of the old house
c. Market value of the old house
d. Cost of the new house
Answers
Answer:
The decision that is not relevant to Andrew is:
b. Cost of the old house.
Explanation:
a) The cost of the old house ($160,000) is not relevant to Andrew decision challenges. It is a sunk or past cost. Past costs are not relevant because they do not make a difference in the decision or the alternative to choose. Since Andrew will be impacted by the driving distance to work from his new house, the market value of the old house, and the cost of the new house, these are relevant in Andrew's decision.
Saddleback Company makes camping lanterns using a single production process. All direct materials are added at the beginning of the manufacturing process. Information for the month of March follows:
Units Costs
Beginning work in process (30% complete) 118,300
Direct materials $193,000
Conversion cost 345,000
Total cost of beginning work in process $538,000
Number of units started 244,000
Number of units completed and transferred to finished goods 334,900
Ending work in process (65% complete) ________
Direct materials $249,700
Conversion cost 332 000
Total current period costs $581,700
Required:
Using the weighted-average method of process costing, complete each of the following steps:
a. Reconcile the number of physical units worked on during the period.
b. Calculate the number of equivalent units.
c. Calculate the cost per equivalent unit.
d. Reconcile the Total cost of work in process.
Answers
Answer:
Part a
Reconciliation of the number of Physical units worked
INPUTS :
Beginning Inventory units 118,300
Add Started during the period 244,000
Total 362,300
OUTPUTS :
Completed and Transferred 334,900
Ending Work In Process 24,400
Total 362,300
Part b
Materials = 359,300 units
Conversion Costs = 350,760 units
Part c
Materials = $1.23
Conversion Costs = $1.93
Part d
Reconcile the Total cost of work in process.
Cost in Beginning Inventory $538,000
Add Costs During the Period $581,700
Total $1,119,700
Cost of Units Still in Process $60,622
Units Completed and Transferred $1,058,284
Total $1,118,506
Explanation:
Step 1 : Equivalent units
These are physical units outputs (completed and transferred and units in process) expressed in terms of percentage of work completed in terms of materials and conversion costs
Materials = 334,900 + 24,400 x 100% = 359,300
Conversion Costs = 334,900 + 24,400 x 65% = 350,760
Step 2 : Cost per Equivalent unit
Cost per Equivalent unit = Total Cost ÷ Total Equivalent Units
therefore,
Materials = ($193,000 + $249,700) ÷ 359,300 = $1.23
Conversion Costs = ($345,000 + $332 000) ÷ 350,760 = $1.93
Total Unit Cost = $1.23 + $1.93 = $3.16
Step 3 : Cost of Units Still in Process and Units Completed and Transferred
Cost of Units Still in Process = 24,400 x $1.23 + 15,860 x $1.93 = $60,622
Units Completed and Transferred = 334,900 x $3.16 = $1,058,284
The Baldwin Company has just purchased $40,900,000 of plant and equipment that has an estimated useful life of 15 years. Suppose at the end of 15 years this plant and equipment can be salvaged for $4,090,000 (1/10th of its original cost). What will be the book value of this purchase (excluding all other Plant and Equipment) after its first year of use
Answers
Answer:
$38,446,000
Explanation:
Straight line method charges a fixed amount of depreciation for the period the asset is in used in the business
Depreciation expense = (Cost - Residual Value) ÷ Estimated useful life
therefore,
Depreciation expense = $2,454,000
Book Value = Cost - Accumulated Depreciation
therefore for first year,
Book Value = $40,900,000 - $2,454,000 = $38,446,000
Conclusion
The book value of this purchase (excluding all other Plant and Equipment) after its first year of use is $38,446,000
Identify the type of bond based on each description given below:
a. These bonds are collateralized securities with first claims in the event of bankruptcy.
b. These bonds are not backed by any physical collateral.
c. They are backed by the reputation and creditworthiness of the issuing company.
d. These bonds are considered the riskiest of all corporate bonds and thus offer the highest interest rates.
Answers
Answer:
a. These bonds are collateralized securities with first claims in the event of bankruptcy. SENIOR MORTGAGE BONDS.
A senior mortgage bond is one whose collateral is one or more properties. Mortgage bonds generally have priority over other types of bonds and a senior mortgage bond has priority over other mortgage bonds.
b. These bonds are not backed by any physical collateral. They are backed by the reputation and creditworthiness of the issuing company. DEBENTURES
Debentures have no physical collateral backing them and are only back by the reputation of the company. This therefore makes them a bit high risk and so their rates are higher.
d. These bonds are considered the riskiest of all corporate bonds and thus offer the highest interest rates. SUBORDINATED DEBENTURES.
Debentures have higher than normal rates so subordinated debentures will be quite risky. They command the highest rates as a result because in the event of a default, their claim on assets is last.