Answer:
The answer is "12.7"
Explanation:
In the question the correct choice is missing so, its correct solution can be defined as follows:
Following are the formula for calculating the "Average Inventory":
Formula:
[tex]\therefore \text{Inventory Turnover} = \frac{ \text{Cost of Goods Sold}} { \text{Average Inventory}}\\\\\\\because \text{Average Inventory} = \frac{ \text{Cost of Goods Sold}} {\text{Inventory Turnover}}[/tex]
[tex]=\frac{\$ \ 77}{ 6.05}\\\\=12.7\\[/tex]
Blankenship Company operates a factory with two departments, X and Y. The utilities to heat and light the manufacturing facility would most likely be allocated to departments X and Y on the basis of:a. Square Footage occupiedb. Machine Hoursc. Direct labor hoursd. Units sold
Answer:
a. Square Footage occupied
Explanation:
Machine hours is the cost drive of utilities (cost object); it is not the basis of allocation. Direct labor hours is the cost drive of utilities (cost object); it is not the basis of allocation. Unit sold is the basis of allocation of advertising; it is not the allocation bases of utilities.
Utilities expenses such as heat, water, and lighting are generally allocated based area occupied by the department. Hence, the option “square footage occupied” is the correct answer.
You decide to invest $20,500 in Bank of America and $14,500 in Twitter. What is the portfolioâs beta? Bank of America beta: 1.27 Twitter beta: 1.96
Answer:
Portfolio Beta = 1.555857143 rounded off to 1.56
Explanation:
The portfolio beta is the function of the weighted average of the individual stock betas that form up the portfolio. The formula to calculate the beta of a portfolio containing two stock is as follows,
Portfolio Beta = wA * Beta of A + wB * Beta of B
Where,
w is the weight of each stock
As the investment in Stock of Bank of America is 20500 and the investment in stock of Twitter is 14500, the total investment in the portfolio will be,
Total investment = 20500 + 14500 = 35000
Portfolio Beta = 20500 / 35000 * 1.27 + 14500 / 35000 * 1.96
Portfolio Beta = 1.555857143 rounded off to 1.56
Steve Colburn's portable sawmill used 100% for business, was completely destroyed by fire. The sawmill had an adjusted basis of $35,000 and a fair market value of $50,000 before the fire. The sawmill was uninsured. Steve's casualty loss is:________.1) $49,900.
2) $50,000.
3) $35,000.
4) $34,900.
Answer: $35,000
Explanation:
A casualty loss is simply a loss that an individual or business incurs when a property is damaged, or destroyed due to an unexpected or sudden event like fire, volcanic eruption, flood etc.
Here, Steve's casualty loss will be gotten when we compare both his adjusted basis and the fair market value and then we choose the lesser one. Since $35000 is lesser than $50000, therefore the answer will be $35000.
A private not-for-profit entity is working to create a cure for a disease. The charity starts the year with one asset, cash of $700,000. Net assets without donor restrictions are $400,000. Net assets with donor restrictions are $300,000. Of the restricted net assets, $160,000 is to be held and used to buy equipment, $40,000 is to be used for salaries, and the remaining $100,000 must be held permanently. The permanently held amount must be invested with 70 percent of any subsequent income used to cover advertising for fundraising purposes. The rest of the income is unrestricted.
During the current year, this health care entity has the following transactions:
1. Receives unrestricted cash gifts of $210,000.
2. Pays salaries of $80,000, with $20,000 of that amount coming from purpose-restricted donated funds. Of the total salaries, 40 percent is for administrative personnel. The remainder is divided evenly among individuals working on research to cure the disease and individuals employed for fundraising purposes.
3. Buys equipment for $300,000 by signing a long-term note for $250,000 and using restricted funds for the remainder. Of this equipment, 80 percent is used in research. The remainder is split evenly between administrative activities and fundraising. The donor of the restricted funds made no stipulation about the reporting of the equipment purchase.
4. Collects membership dues of $30,000 in cash. Members receive a reasonable amount of value in exchange for these dues including a monthly newsletter that describes research activities. By the end of the year, 112/112 of this money had been earned.
5. Receives $10,000 in cash from a donor. The money must be conveyed to a separate charity doing work on a related disease.
6. Receives investment income of $13,000 from the permanently restricted net assets.
Pays $2,000 for advertising. The money comes from the income earned in (f).
Receives an unrestricted pledge of $100,000 that will be collected in three years. The entity expects to collect the entire amount. The pledge has a present value of $78,000. Related interest (considered contribution revenue) of $5,000 is earned prior to the end of the year.
7. Computes depreciation on the equipment bought in (c) as $20,000.
8. Spends $93,000 on research supplies that are used up during the year.
9. Owes salaries of $5,000 at the end of the year. None of this amount will be paid from restricted net assets. Half of the salaries are for individuals doing fundraising, and half for individuals doing research.
10. Receives a donated painting that qualifies as a museum piece being added to the entity’s collection of art work that is being preserved and displayed to the public. The entity has a policy that the proceeds from any sold piece will be used to buy replacement art. Officials do not want to record this gift if possible..
A. Prepare a statement of financial position for this not-for-profit entity for the end of the current year.
B. Prepare a statement of activities for this not-for-profit entity for this year.
Answer and Explanation:
Net assets:
Donor without restrictions $488400
Donor with restrictions. $320100
Liabilities:
Notes payable. $250000
Salaries payable. $5000
Deferred revenue $27500
Donated amount in separate entity $10000.
$1101000
Assets:
Cash $738000
Equipment $280000
Receivables $83000
$1101000
Notes:
1. Cash.
Beginning cash $700,000
contributions $210,000
less salaries $80,000
less equipment purchase $50,000
Membership dues $30,000
Add contribution $10,000
Add investment income $13,000
less advertisement pay $2,000
less pay for supplies $93,000
2.Pledges receivable:
$78,000 plus the $5,000 in interest for period
3. Equipment. acquired equipment at $300,000 during the year.
4. Accumulated Depreciation: depreciation amounted to $20,000 for the equipment purchased till date.
5. Deferred Revenue: deferred revenue amounts to 27500 in membership dues since they've only earned 1/12 of the $30000 in exchange transactions.
6. Notes Payable: amount accrued for equipment
7. Salaries Payable: salaries owed employees as at end of the year
9. Donated Amount in Separate Entity. The organization does not hold variance powers for the amount contributed by a donor and so it's a liability
Luther Industries has 25 million shares outstanding trading at $18 per share. In addition, Luther has $150 million in outstanding debt. Suppose Luther's equity cost of capital is 13%, its debt cost of capital is 7%, and the corporate tax rate is 40%. Luther's unlevered cost of capital is closest to:_______A) 11.5%B) 10.8%C) 9.8%D) 13.0%
Answer:
B. 10.8%
Explanation:
To get the Market value of equity = 25m x $18 = $450 million
The Market value of debt is given to be = $150 million
To get the weight of equity= 450/600
To get the weight of debt = 150/600
we have Ke as cost of equity= 13%
Such that after tax cost of debt = 7%(1-0.40) = 4.2%
Then the Weighted average cost of capital = We(Ke) + Wd(Kd)
= 450/600 x 13% + 150/600 x 4.2%
This gives us
= 9.75% + 1.05%
Therefore the answer is
= 10.80%
So the option B is correct
Luther's unlevered cost of capital is closest to 10.8%. Therefore, correct response here is option B.
What is the term cost of capital about?
A cost of capital refers to as a return that a company needs to earn in order to achieve the cost of capital of particular project.
Solution:
To get the Market value of equity = 25m x $18 = $450 million
The Market value of debt is given to be = $150 million
To get the weight of equity= 450/600
To get the weight of debt = 150/600
Ke as cost of equity= 13%
Such that after tax cost of debt = 7%(1-0.40) = 4.2%
Then, the Weighted average cost of capital = We(Ke) + Wd(Kd)
Weighted average cost of capital= 450/600 x 13% + 150/600 x 4.2%
Weighted average cost of capital= 9.75% + 1.05%
Weighted average cost of capital=10.80%
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What are closing entries and why are they important in accounting?
Answer:7
Explanation:14
Answer:
The purpose of the closing entry is to reset the temporary account balances to zero on the general ledger, the record-keeping system for a company's financial data. Temporary accounts are used to record accounting activity during a specific period.
Explanation:
The human resources department at a major high tech company recently conducted an employee satisfaction survey of 100 of its 3000 employees.Data were collected on such variables as age,gender,marital status,current salary,level of overall satisfaction on a scale from 1 to 5,number of years with the company,and job title.Which of the variables listed are considered to be ratio level data?A) Age and years with the companyB) Gender and marital statusC) Job titleD) None of the variables is ratio level.
Answer: Gender and marital status and Job title.
Explanation:
Ratio scale simply refers to a form of quantitative variable measurement scale whereby differences can be compared by the researcher.
Of the options given among variables listed are considered to be ratio level data are gender, marital status and Job title.
According to the video, what do Financial Analysts analyze? Check all that apply.
financial records
travel distances
insurance claims
a company's competitors
fraud
A-D
-financial records
-a company’s competitors
Answer:
Financial Records
A Company’s Competitors
Explanation:
I got it right on edge 2020 hope this helps!
Selected transactions for Sheridan Company are presented below in journal form (without explanations).
Date Account Title Debit Credit
May 5 Accounts Receivable 4,400
Service Revenue 4,400
12 Cash 1,930
Accounts Receivable 1,930
15 Cash 2,190
Service Revenue 2,190
Post the transactions to T-accounts. (Post entries in the order of journal entries presented in the question.)
Cash
5/55/125/15 5/55/125/15
5/55/125/15 5/55/125/15
Accounts Receivable
5/55/125/15
5+55+125+15=555555555....
________ is the process of training and educating employees to become good managers and then developing their managerial skills over time.A) Management development
B) Vestibule training
C) Pre-mentoring
D) Self-actualization training
Answer:
A) Management development
Explanation:
Management development is the process of training and educating employees to become good managers and then developing their managerial skills over time.
Personnel management can be defined as an administrative task or function which primarily involves the process of hiring employees and developing or training them to become beneficial and valuable for the growth and development of the company.
Hence, the main purpose and focus of personnel management is to provide a quality workforce necessary to successfully achieve the organizational set goals and objectives.
This ultimately implies that, the main purpose of a training focuses is to improve an employee's performance in his or her place of work while development is focused on preparing an employee for higher positions available in an organization.
What is the rate of return on an investment of $124,090 if the company expects to receive $10,000 per year for the next 30 years? A. 5.5 percent B. 4 percent C. 7 percent D. 6 percent
Answer:
C. 7 percent
Explanation:
The computation of the rate of return on the investment is shown below:
Given that
PV = $124,090
FV = $0
PMT = $10,000
NPER = 30
The formula is shown below:
=RATE(NPER;PMT;-PV;FV;TYPE)
The present value comes in negative
After applying the above formula, the rate of return is 7%
Hence, the rate of return on the investment is 7%
The correct option is c. 7%
Analyze how Nintendo recreated the home video game business following the Atari-era boom and bust. How was Nintendo able to capture value in the home video game business?
Answer: Cost leadership and differenciation in quality
Explanation:
Cost leadership; Nitendo was able to reduce production cost by subcontracting most of it's production, while the rest of it's production were done within(in-house), with this effect in cost of production reduced, Nitendo was able to reduce selling price and beat the competition in the market.
Differentiation in quality; Nintendo came with quality, their graphics and sounds were top-notch, despite that, they still invested more in main them better with better technology innovation.
Michelle Duncan wants to know her affordable home purchase price. Her annual gross income is $49,800. She has $820 per month of other debt and expects her property taxes and homeowners insurance to cost $270 per month. She knows she can get a 8.50%, 30-year mortgage so that her mortgage payment factor is $7.69. She expects to make a 25% down payment. What is Michelle's affordable home purchase price? (Round your answer to the nearest dollar amount.)
a) $21,110
b) $253,316
c) $63,329
d) $84,439
e) $48,710
Answer:
d) $84,439
Explanation:
We can use the rule of 28/36 to calculate Michelle's affordable home purchase. She should only spend up to 28% of her monthly income on housing expenses and up to 36% of her monthly income paying for debt service.
monthly salary = $49,800 / 12 = $4,150
her total monthly amount to pay for debt service = $4,150 x 36% = $1,494
she is already paying $820 per month for other debts, so her monthly payment should be less than: $1,494 - $820 = $674
her total monthly amount to pay for housing expense = $4,150 x 28% = $1,162
she is planning on paying $270 in related house expenses, so her monthly payment should be less than: $1,162 - $270 = $892
out of the five options, Michelle cannot afford to buy the $253,316 house, but she can afford to buy the $84,439 house.
[($21,110 x 0.75) / $1,000] x 7.69 = $121.75 monthly payment
[($253,316 x 0.75) / $1,000] x 7.69 = $1,461 monthly payment
[($63,329 x 0.75) / $1,000] x 7.69 = $365.25 monthly payment
[($84,439 x 0.75) / $1,000] x 7.69 = $487 monthly payment
[($48,710 x 0.75) / $1,000] x 7.69 = $280.93 monthly payment
The just meaningful difference (JMD) refers to: A. The process by which consumers give humanlike characteristics to inanimate objects. B. The smallest amount of change in a stimulus that would influence consumer consumption and choice. C. A situation where a stimulus is sufficiently stronger than another so that someone can actually notice that the two are not the same. D. The way in which consumers interpret information in ways that are biased by their previously held beliefs. E. The process of screening out certain stimuli and purposely exposing oneself to other stimuli.
Answer:
B. The smallest amount of change in a stimulus that would influence consumer consumption and choice.
Explanation:
The just meaningful difference (JMD) refers to the smallest amount of change in a stimulus that would influence consumer consumption and choice.
For instance, when the price of a particular product rises from $5.0 to $6.5, consumers wouldn't be motivated to buy such a product again and may choose to go for its close substitutes.
Hence, in marketing it is important to introduce a stimulus plan that will significantly increase consumer consumption and choice in order to increase sales and make profit.
Toys "R" Us has decreased its receivable turnover over the last three years: which of the following may be a possible cause of this decrease? A) the company has been more selective in choosing reliable customers. B) salesmen have granted customers an extension of credit terms. C) the accounting department has increased the allowance for doubtful accounts. D) all of the above are correct
Answer:
B) salesmen have granted customers an extension of credit terms.
Explanation:
receivables turnover ratio = net sales / average accounts receivable
A low receivables turnover ratio is usually a bad thing, since most companies sell on credit, i.e. their accounts receivable should be important. A high receivables turnover ratio means that the company is collecting its accounts receivable efficiently and its customers are good payers.
The key point here is average accounts receivable. What can result in a company having very high accounts receivable (compared to its total sales)? The answer is simple, their customers are not paying on time or the company had to extend their credit terms in order to attract more customers.
Stepsis is doing laundry today, but the machine is not working, she crawls in and sees whats wrong, she fixes it but shes stuck, she calls StepBro.
What should StepBro do?
A. Call Jamal
B. Pull her out
C. Dice Roll Dance And Bunny Hop Dance
D. I like ya cut G her
Answer:
b or d
Explanation:
because pulling her out might get the problem done faster , but I like ya cut g her could resolve in even more action . um I go with d
Answer:
B
Explanation:
Be a decent human being boys
On February 1, Tory began a service proprietorship with an initial cash investment of $2,000. The proprietorship provided $5,000 of services in February and received full payment in March. The proprietorship incurred expenses of $3,000 in February, which were paid in April. During March, Tory drew $1,000 against the capital account. In the proprietorship's financial statements for the two months ended March 31, prepared under the cash basis method of accounting, what amount should be reported as capital
The amount that should be reported as the capital is $6,000
Calculation of the capital amount:The following formula should be used.
= Initial cash investment + Investments made + Income received - Drawings
= $2,000 + $0 + $5,000 - $1,000
= $6,000
As per the cash basis accounting method, the cash revenues is more than the cash expenses so the same should be considered as an income
Hence, the amount reported as capital is $6,000.
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Question 1 of 10
What is one way banks can recover money they have loaned to someone who
has stopped making payments?
O A. Banks can require the borrower's friends and family to pay off the
loan.
B. Banks can have collection agencies seize part of the borrower's
income.
C. Banks can force the borrower's employer to fire him or her
immediately
D. Banks can make the borrower work at the bank for no salary.
Answer:
B. Banks can have collection agencies seize part of the borrower's income.
Explanation:
Hope it helps
Banks can recover money they have loaned to someone who has stopped making payments the banks can have collection agencies seize part of the borrower's income. Thus, option (b) is correct.
What is bank?
The term Bank refers to a financial institution that deals with money. For the aim of saving and investing, the individual deposits money into a personal account. Additionally, banks can offer loans and ATM services. There are two different kinds of banks, such as public and private ones.
The debtors give the loan to the bank, but as long as someone is not returned on payment, the bank can hire collection agencies. The collection agencies' main role is to collect money with interest from debtors.
Therefore, option (b) is correct.
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Which of the following is a type of liability?
Answer:
Accounts Payable
Explanation:
Accounts Payable is the amount of money owed to its investors/creditors. Thus creating debt for the company, creating a liability.
Mike Finley wishes to become a millionaire. His money market fund has a balance of $403,884 and has a guaranteed interest rate of 12%. How many years must Mike leave that balance in the fund in order to get his desired $1,000,000?
Assume that Sally Williams desires to accumulate $1 million in 15 years using her money market fund balance of $209,004. At what interest rate must Sallyâs investment compound annually? (Round answer to 0 decimal places, e.g. 5%.)
Answer:
Mike Finley
t = 7.999983133 years rounded off to 8 years
Sally Williams
r = 0.110000123 or 11.0000123% rounded off to 11.00%
Explanation:
Mike Finley
To calculate the time period it will take Mike Finley to become a millionaire, we will use the formula of future value of cash flow. The formula for future value of cash flow is as follows,
Future value = Present value * (1+r)^t
Where,
r is the interest rate or rate of returnt is the time period in yearsPlugging in the values for Future value, present value and r in the formula, we can calculate the t to be,
1000000 = 403884 * (1+0.12)^t
1000000 / 403884 = 1.12^t
2.475958444 = 1.12^t
Taking log on both sides.
ln(2.475958444) / ln(1.12) = t
t = 7.999983133 years rounded off to 8 years
Sally Williams
We will use the same formula for future value of cash flows as we used above to calculate the rate at which investment should be compounded annually to grow to $1 million.
1000000 = 209004 * (1+r)^15
1000000 / 209004 = (1+r)^15
4.784597424 = (1+r)^15
Taking root of 1 on both sides.
(4.784597424)^1/15 = (1+r)^15 * 1/15
1.110000123 = 1+r
1.110000123 - 1 = r
r = 0.110000123 or 11.0000123% rounded off to 11.00%
A share of common just paid a dividend of $1.00. If the expected long-run growth rate for this stock is 5.4%, and if investors' required rate of return is 13.9%, what is the stock price?
a) $11.04
b) $12.40
c) $13.76
d) $15.00
e) $9.42
Answer:
The correct option is b) $12.40.
Explanation:
The stock price can be calculated using the Gordon growth model (GGM) formula that assumes that dividend growth rate will be stable in the long run. The formula is given as follows:
P = d / (r - g) ……………………………………… (1)
Where;
P = Stock price = ?
d = next year dividend = Dividend just paid * (1 + Dividend growth rate) = $1.00 * (1 + 0.054) = $1.00 * 1.054 = $1.054
r = required rate of return = 13.9% = 0.139
g = dividend constant growth forever = 5.4%, or 0.054
Substituting the values into equation (1), we have:
P = $1.054 / (0.139 - 0.054)
P = $1.054 / 0.085
P = $12.40
Therefore, the stock price $12.40. That is, the correct option is b) $12.40.
The estimate an organization makes regarding the number and quality of its current employees and the availability of workers externally is called a(n):________
Answer:
Labor supply forecast
Explanation:
The estimate an organization makes regarding the number and quality of its current employees and the availability of workers externally is called a labor supply forecast. This information is very important when determining the number of workers required to meet the labor demands of an organization.
Some examples of the economic and qualitative factors that affects the external supply of labor includes transportation, availability of housing, quality of life, number of training institutes or facilities, wages, demographic trends, immigration etc.
Use the information for the question(s) below. Rosewood Industries has EBIT of $450 million, interest expense of $175 million, and a corporate tax rate of 35% If Rosewood had no interest expense, its net income would be closest to:___________ a. $430 million b. $160 million c. $290 million d. $405 million
Answer:
$180 million
Explanation:
Net income is calculated as;
= (EBIT - Interest expense)(1 - tax)
Given that;
EBIT = $450 million
Interest expense = $175 million
Tax = 35%
Net income = (450 - 175)(1 - 0.35)
Net income = (275)(0.65)
Net income = $178.75
Net income = $180 million approximated.
Rosewood's net income is closest to $180 million.
Which option, within the Word Options dialog box, allows users to add the Auto Text function to the Ribbon?
The customize ribbons option in Word Options dialog box, allows users to add the Auto Text function to the Ribbon.
What is Auto Text function ?To save portions of a Word document for later use, utilize AutoText. For example, you could retain a convenient collection of headers and footers or build a library of sentences for business letters. Everything a Word document can contain, including formatted text, images, and fields, can be stored in an AutoText entry.
You can quickly speed up document creation using AutoText by adding predetermined text to your project.
In your Office applications, you can create and organize tabs and commands in the ribbon however you choose. Show or conceal the ribbon. Select the at the ribbon's right edge to make it invisible. Choose a tab to reveal the ribbon.
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The transshipment problem: a. Is the special case of LP problem. b. Can be modeled using the transportation algorithm. c. Can be solved to optimality by manual methods. d. Is the most general type of network flow problems.
Answer:
Option "A" is the correct answer to the following question.
Explanation:
The transshipment issue is the particular case of the issue of LLP.
A special Linear Programming Problem is a transshipment problem because it approaches the premise that products can both be obtained and delivered at the very same time by both recovery and recycling.
Tech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firm's direct labor includes salaries of consultants that work at the client's job site, and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies that are consumed serving clients.
Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 90,000 direct labor-hours would be required for the period’s estimated level of client service. The company also estimated $1,080,000 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm’s actual overhead cost for the year was $1,098,900 and its actual total direct labor was 93,350 hours.
Required:
Answer:
1. Predetermined overhead rate = $12.50
2. Job Cost = $62,500
Explanation:
Note: The Requirement is attached as picture below
1. Predetermined fixed overhead rate = Estimated fixed manufacturing overhead / Estimated total amount of the allocation base
Predetermined fixed overhead rate = $1,080,000 / 90,000
Predetermined fixed overhead rate = $12 per Direct labor hour
The Predetermined variable overhead rate per Direct labor hour is $0.50
Predetermined overhead rate = Fixed overhead rate + Variable overhead rate
Predetermined overhead rate = $12 + $0.50
Predetermined overhead rate = $12.50
2. The total job cost is given below:
Job Cost = Direct material + Direct labor + Overheads
Job Cost = $38,000 + $21,000 + (280*$12.50)
Job Cost = $38,000 + $21,000 + $3,500
Job Cost = $62,500
Gomez runs a small pottery firm. He hires one helper at $14,500 per year, pays annual rent of $7,500 for his shop, and spends $18,000 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that could earn him $5,000 per year if alternatively invested. He has been offered $23,000 per year to work as a potter for a competitor. He estimates he could use his talents to earn an additional $6,000 per year in consulting fees if he were working full time as a potter. Total annual revenue from pottery sales is $86,000.
Instructions:
A. Calculate the accounting profit for Gomez’s pottery firm.
B. Now calculate Gomez's economic profit.
Answer:
Gomez
Accounting Vs. Economic Profit
Accounting profit:
Sales revenue $86,000
Business cost 40,000
Profit $46,000
Economic profit:
Accounting profit $46,000
Opportunity cost 34,000
Profit $ 12,000
Explanation:
a) Data and Calculations:
Annual Wages for helper = $14,500
Annual Rent = $7,500
Annual Direct materials = $18,000
Business cost = $40,000
Funds investment = $40,000
Opportunity cost (alternative option)
Interest on funds = $5,000
Wages 23,000
Consulting fees 6,000
Total opportunity costs = $34,000
Total annual sales revenue = $86,000
b) Gomez's economic profit equals the accounting profit minus the expenses incurred for lost opportunities (alternative uses) of resources. This means that the economic profit is always less than the accounting profit, which does not consider opportunity costs.
Assume you have a 1-year investment horizon and are trying to choose among three bonds. All have the same degree of default risk and mature in 10 years. The first is a zero-coupon bond that pays $1,000 at maturity. The second has an 6.2% coupon rate and pays the $62 coupon once per year. The third has a 7.2% coupon rate and pays the $72 coupon once per year.
a. If all three bonds are now priced to yield 7% to maturity, what are their prices?
b. If you expect their yields to maturity to be 7% at the beginning of next year, what will their prices be then? What is your before-tax holding-period return on each bond? If your tax bracket is 30% on ordinary income and 20% on capital gains income, what will your aftertax rate of return be on each?
c. If you expect their yields to maturity to be 6% at the beginning of next year, what will their prices be then? What is your before-tax holding-period return on each bond? If your tax bracket is 30% on ordinary income and 20% on capital gains income, what will your aftertax rate of return be on each?
Answer:
a. If all three bonds are now priced to yield 7% to maturity, what are their prices?
zero coupon bond = $1,000 / (1 + 7%)¹⁰ = $508.35
6.2% coupon bond:
PV of face value = $1,000 / (1 + 7%)¹⁰ = $508.35
PV of coupon payments = $62 x 7.0236 (PV annuity factor, 7%, 10 periods) = $435.46
market price = $943.81
7.2% coupon bond:
PV of face value = $1,000 / (1 + 7%)¹⁰ = $508.35
PV of coupon payments = $72 x 7.0236 (PV annuity factor, 7%, 10 periods) = $505.70
market price = $1,014.05
b. If you expect their yields to maturity to be 7% at the beginning of next year, what will their prices be then? What is your before-tax holding-period return on each bond? If your tax bracket is 30% on ordinary income and 20% on capital gains income, what will your aftertax rate of return be on each?
zero coupon bond = $1,000 / (1 + 7%)⁹ = $543.93
before tax holding period return = ($543.93 - $508.35) / $508.35 = 7%
after tax HPR = 7% x 0.8 = 5.6%
6.2% coupon bond:
PV of face value = $1,000 / (1 + 7%)⁹ = $543.93
PV of coupon payments = $62 x 6.5152 (PV annuity factor, 7%, 10 periods) = $403.94
market price = $947.87
before tax holding period return = ($947.87 - $943.81 + $62) / $943.81 = 7%
after tax HPR:
($4.06 x 0.8) / $943.81 = 0.34%
($62 x 0.7) / $943.81 = 4.60%
total = 4.94%
7.2% coupon bond:
PV of face value = $1,000 / (1 + 7%)⁹ = $543.93
PV of coupon payments = $72 x 6.5152 (PV annuity factor, 7%, 10 periods) = $469.09
market price = $1,013.02
before tax holding period return = ($1,013.02 - $1,014.05 + $72) / $1,014.05 = 7%
after tax HPR:
(-$1.03 x 0.8) / $1,014.05 = -0.08%
($72 x 0.7) / $1,014.05 = 4.97%
total = 4.89%
c. If you expect their yields to maturity to be 6% at the beginning of next year, what will their prices be then? What is your before-tax holding-period return on each bond? If your tax bracket is 30% on ordinary income and 20% on capital gains income, what will your aftertax rate of return be on each?
zero coupon bond = $1,000 / (1 + 6%)⁹ = $591.90
before tax holding period return = ($591.90 - $508.35) / $508.35 = 16.44%
after tax HPR = 16.44% x 0.8 = 13.15%
6.2% coupon bond:
PV of face value = $1,000 / (1 + 6%)⁹ = $591.90
PV of coupon payments = $62 x 6.8017 (PV annuity factor, 6%, 10 periods) = $421.71
market price = $1,013.61
before tax holding period return = ($1,013.61 - $943.81 + $62) / $943.81 = 13.96%
after tax HPR:
($69.80 x 0.8) / $943.81 = 5.92%
($62 x 0.7) / $943.81 = 4.60%
total = 10.52%
7.2% coupon bond:
PV of face value = $1,000 / (1 + 6%)⁹ = $591.90
PV of coupon payments = $72 x 6.8017 (PV annuity factor, 6%, 10 periods) = $489.72
market price = $1,081.62
before tax holding period return = ($1,081.62 - $1,014.05 + $72) / $1,014.05 = 13.76%
after tax HPR:
($67.57 x 0.8) / $1,014.05 = 5.33%
($72 x 0.7) / $1,014.05 = 4.97%
total = 10.30%
Shawn goes to the library to pick up a copy of a common tax form used file taxes. Which of the following is MOST likely the form that Shawn got?
1099
W-2
1776
1040
Answer:
Shawn would choose form 1040 filing tax form.
Explanation:
The answer is D.) 1040
I got a picture of the answer.
Hope this helps!
Jammer Company uses a perpetual weighted average inventory system and reports the following: August 2 Purchase 17 units at $15.00 per unit. August 18 Purchase 19 units at $13.00 per unit. August 29 Sale 34 units. August 31 Purchase 22 units at $18.00 per unit. What is the per-unit value of ending inventory on August 31?
Answer:
Weighted-average ending inventory cost= $17.75
Explanation:
First, we need to calculate the total cost of ending inventory:
August 2= 17*15= 255
August 18= 19*13= 247
August 29= (19*13 + 15*15)= (472)
August 31= 22*18= 396
Total ending inventory= $426
Now, the weighted average cost per unit of ending inventory:
Ending inventory in units= 24
Weighted-average ending inventory cost= (426/24)
Weighted-average ending inventory cost= $17.75