Answer:
$87,750
Explanation:
Calculation to determine How much interest will Boston pay (in cash) to the bondholders every six months
Using this formula
Semiannual cash interest paymen=Par maturity value*Semi-annual rate
Let plug in the formula
Semiannual cash interest payment=$1,950,000*9%/2
Semiannual cash interest payment=$87,750
Therefore The cash paid every six months would be $87,750
In July, 2013 the consulting firm Mercer released results from a survey where workers in the U.S. expected a 2.9% increase in pay in 2014. Assuming this occurs and it was the only development in the labor market that year, how would this affect the AS curve
Answer:
A 2.9% pay increase in 2014 for U.S. workers will cause the AS (aggregate supply) curve to shift inward in the short-run, signaling a decline in the quantity supplied.
Explanation:
The supply quantity declines because a pay increase increases suppliers' cost of production and reduces their ability to produce more goods and services. On the contrary, a fall in workers' pay causes the aggregate supply curve to shift outward, thereby increasing the quantity supplied. In the long-run, the pay increase will increase aggregate demand, thereby pushing prices to increase, while, at the same, suppliers try to increase the quantity supplied to meet with increased prices and demand.
Stonewall Corporation issued $52,000 of 5%, 10-year convertible bonds. Each $1,000 bond is convertible to 10 shares of common stock (par $50) of Stonewall Corporation. The bonds were sold at 105 on January 1, 2020. Required a. Provide the entry for Stonewall Corporation on January 1, 2020, for the bond issuance. b. Provide entries for Stonewall Corporation assuming that the conversion privilege is subsequently exercised immediately after the end of the third year. Assume that at the date of conversion, 30% of any premium or discount has been amortized and the common stock was selling at $325 per share. Use the book value method. Note: List multiple debits or credits (when applicable) in alphabetical order.
Answer:
A January 1, 2020
Dr Cash $54,600
Cr Bonds payable $52,000
Cr Premium on bonds payable $2,600
B. December 21 2022
Dr Bonds payable $52,000
Dr Premium on bonds payable $1,820
Cr Common stock $26,000
Cr Paid in capital in excess of Par $27,820
Explanation:
Preparation of the entry for Stonewall Corporation
A January 1, 2020
Dr Cash $54,600
($52,000+$2,600)
Cr Bonds payable $52,000
Cr Premium on bonds payable $2,600
(5%*$52,000)
(To record issue of bonds for premium)
B. December 21 2022
Dr Bonds payable $52,000
Dr Premium on bonds payable $1,820
(100%-30%*$2,600)
Cr Common stock $26,000
(52*10*50)
Cr Paid in capital in excess of Par $27,820
($52,000+$1,820-$26,000)
(To record conversion of bonds into Common Stock)
Crypton Electronics has a capital structure consisting of percent common stock and percent debt. A debt issue of $ par value, percent bonds that mature in years and pay annual interest will sell for $. Common stock of the firm is currently selling for $ per share and the firm expects to pay a $ dividend next year. Dividends have grown at the rate of percent per year and are expected to continue to do so for the foreseeable future. What is Crypton's cost of capital where the firm's tax rate is percent?
Answer:
A. After-cost of debt 4.20%
B. Cost of common equity 12.15%
C. Cost of capital 7.02%
Explanation:.
A. Calculation to determine the After-cost of debt
After-cost of debt =RATE(15,5.8%*1000,-980,1000)*(1-30%)
After-cost of debt =4.20%
Therefore After-cost of debt is 4.20%
b) Calculation to determine cost of common equity
Cost of common equity=2.17/29.12+4.7%
Cost of common equity=12.15%
Therefore Cost of common equity is 12.15%
c) Calculation to determine cost of capital
Cost of capital=(4.20%*63%)+(12.15%*36%)
Cost of capital=7.02%
Therefore Cost of capital is 7.02%
Corning Company has a decentralized organization with a divisional structure. Two of these divisions are the Appliance Division and the Manufactured Housing Division. Each divisional manager is evaluated on the basis of ROI. The Appliance Division produces a small automatic dishwasher that the Manufactured Housing Division can use in one of its models. Appliance can produce up to 20,000 of these dishwashers per year. The variable costs of manufacturing the dishwashers are $98. The Manufactured Housing Division inserts the dishwasher into the model house and then sells the manufactured house to outside customers for $73,000 each. The division's capacity is 4,000 units. The variable costs of the manufactured house (in addition to the cost of the dishwasher itself) are $42,600.
Required:
Assume that all of the dishwashers produced can be sold to external customers for $328 each. The Manufactured Housing Division wants to buy 5,400 dishwashers per year. What should the transfer price be?
Answer:
$328
Explanation:
The best transfer price is within the range of the Minimum and Maximum transfer price.
1. Minimum Transfer Price
Minimum Transfer Price is the price that is acceptable to the transferring division and out of a range of acceptable prices, it is that which would be the best for the company
Minimum Transfer Price = Variable Cost - Internal Savings + Opportunity Cost
thus,
given the following data on the Transferring Division - Appliance Division and Receiving Division,
Appliance Division :
Total Capacity = 20,000 dishwashers
Total Variable Costs = $98
Sale Price to External Market = $328
Manufactured Housing Division :
Demand = 5,400 dishwashers
House Sale Price = $73,000
Total Capacity = 4,000 houses
Variable Costs = $42,600
there will be an opportunity costs on the external market for 5,400 dishwashers supplied internal to Manufactured Housing Division
Opportunity costs = Contribution per unit
= $328 - $98
= $230
therefore,
Minimum Transfer Price = $98 + $230 = $328
2. Maximum Transfer Price
It is the maximum price that causes the receiving division to break even. The Maximum Transfer Price can never be more than what the receiving division can purchase externally and also can never be more than the selling price of transferring division
thus,
Maximum Transfer Price = $328
Conclusion :
The transfer price should be $328
Suppose 70% of all companies are classified as small companies and the rest as large companies. Suppose further, 82% of large companies provide training to employees, but only 18% of small companies provide training. A company is randomly selected without knowing if it is a large or small company; however, it is determined that the company provides training to employees.
What are the prior probabilities that the company is a large company or a small company? (Round the answers to 2 decimal place.)
p(small) =
p(large) =
What are the revised probabilities that the company is large or small? (Round your answers to 4 decimal places.) p(small) =
p(large) =
Based on your analysis, what is the overall percentage of companies that offer training? (Round your answer to 1 decimal place.)
Percentage = %
Answer:
a) p(small) = 0.126
p(large) = 0.246
b) p(small) = 0.6613
p(large) = 0.3387
c) 37.2%
Explanation:
A) determine that the company picked is a large company or small company
condition : the company provides training to its employees
Given data:
p( small ) = 0.7, p( large ) = 0.3, p( training ∩ small ) = 0.18, p( training ∩ large ) = 0.82 , p( No-training ∩ small ) = 0.82 , p( no-training ∩ large ) = 0.18
A) hence the probability of picking a small company that provides training
P( small | training ) = P(Training ∩ Small)* P(Small) = 0.18 * 0.7 = 0.126
Probability of picking a large company that provides training
P( large | training ) = P(training ∩ Large) *P(Large) = 0.82 * 0.3 = 0.246
B) Determine the revised probabilities that company picked is large or small
Revised probability for a large company; P( large | training )
P(Large | training) = P(Large ∩ training) / P(training)
= 0.246 / ( 0.126 + 0.246 ) = 0.6613
P( small | training ) = P( small ∩ training ) / P(training )
= 0.126 / ( 0.126 + 0.246 ) = 0.3387
C) Overall percentage of companies that offer training
p( training ) = 0.126 + 0.246 = 0.372 = 37.2%
James, Inc., has purchased a brand new machine to produce its High Flight line of shoes. The machine has an economic life of 6 years. The depreciation schedule for the machine is straight-line with no salvage value. The machine costs $594,000. The sales price per pair of shoes is $87, while the variable cost is $37. Fixed costs of $295,000 per year are attributed to the machine. The corporate tax rate is 22 percent and the appropriate discount rate is 10 percent.
What is the financial break-even point?
Answer:
James, Inc.
The financial break-even point in:
Sales unit = 8,322
Sales dollars = $724,014
Explanation:
a) Data and Calculations:
Cost of machine purchased = $594,000
Estimated economic life = 6 years
Salvage value = $0
Sales price per pair of shoes = $87
Variable cost per pair of shoes = 37
Contribution margin per pair = $50
Discounted contribution = $50 * 0.909 = $45.45
After-tax contribution = $35.45 ($45.45 * 0.78)
After-tax contribution margin ratio = $35.45/$87 * 100 = 41%
Fixed cost per year = $295,000
Corporate tax rate = 22%
Discount rate = 10%
Break-even point = Fixed cost/After-tax contribution
= $295,000/$35.45
= 8,322 units
= $724,014 ($87 * 8,322)
During the month of March, Munster Company's employees earned wages of $64,000. Withholdings related to these wages were $4,896 for FICA, $7,500 for federal income tax, $3,100 for state income tax, and $400 for union dues. The company incurred no cost related to these earnings for federal unemployment tax but incurred $700 for state unemployment tax. Journalize payroll entries.
Answer:
A. Dr salaries and wages expense for 64,000
Cr to FICA taxes payable for 4,896
Cr Federal Income Tax Payable for 7,500
Cr State Income Tax Payable for 3,100
Cr Union Dues Payable for 400
Cr Salaries and Wages Payable for 48,104
B. Dr payroll tax expense for 5,596
Cr FICA tax payable for 4,896
Cr State Unemployment for 700
Explanation:
Preparation to Journalize the payroll entries
A. Dr salaries and wages expense for 64,000
Cr to FICA taxes payable for 4,896
Cr Federal Income Tax Payable for 7,500
Cr State Income Tax Payable for 3,100
Cr Union Dues Payable for 400
Cr Salaries and Wages Payable for 48,104
(64,000-4,896-7,500-3,100-400)
B. Dr payroll tax expense for 5,596
(4,896+700)
Cr FICA tax payable for 4,896
Cr State Unemployment for 700
Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $5.5 million on TV, radio, and print advertising this year for the campaign. The ads are expected to boost sales of the Mini Mochi Munch by $8.2 million this year and $6.2 million next year. In addition, the company expects that new consumers who try the Mini Mochi Munch will be more likely to try Kokomochi's other products. As a result, sales of other products are expected to rise by $1.8 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 37%, and its gross profit margin averages 22% for all other products. The company's marginal corporate tax rate is 25% both this year and next year. Question 3a HomeworkAnswered What are the incremental earnings associated with the advertising campaign in its first year
Answer:
Kokomochi
The incremental earnings associated with the advertising campaign in its first year is:
= $0.3 million.
Explanation:
a) Data and Calculations:
Advertising campaign cost = $5.5 million
Mini Mochi Other Products Total
Much
Incremental sales revenue $8.2 million 1.8 million $10 million
Incremental cost of goods sold 5.2 million 1.4 million 6.6 million
Incremental gross profit $3.0 million 0.4 million 3.4 million
Advertising cost 3.1 million
Incremental earnings associated with the advertising campaign = $0.3 million
Advertising cost apportioned to:
This year = $8.2/$14.4 * $5.5 million = $3.1 million
Next year = $6.2/$14.4 * $5.5 million = $2.4 million
Masse Corporation uses part G18 in one of its products.
The company's Accounting Department reports the following costs of producing the 17,100 units of the part that are needed every year:
Per Unit
Direct materials $4.30
Direct labor 5.00
Variable overhead 8.00
Supervisor's salary 8.70
Depreciation of special equipment 9.30
Allocated general overhead 6.30
An outside supplier has offered to make the part and sell it to the company for $32.00 each.
If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided.
The special equipment used to make the part was purchased many years ago and has no salvage value or other use.
The allocated general overhead represents fixed costs of the entire company.
If the outside supplier's offer were accepted, only $23,100 of these allocated general overhead costs would be avoided.
In addition, the space used to produce part G18 could be used to make more of one of the company's other products, generating an additional segment margin of $33,000 per year for that product.
Required:
1. Calculate the effect on the company's total net operating income of buying part G18 from the supplier rather than continuing to make it inside the company.
2. Which alternative should the company choose?
Buy or Make
Answer:
Masse Corporation
1. The effect on the company's total net operating income of buying part G18 from the supplier rather than continuing to make it inside the company is an additional cost of $47,100.
2. Masse Corporation should continue to produce the part in-house. The "Make" alternative is better.
Explanation:
a) Data and Calculations:
Units of part G18 needed yearly = 17,100
Costs of production:
Direct materials $4.30
Direct labor 5.00
Variable overhead 8.00
Supervisor's salary 8.70
Total variable costs= $26 * 17,100 = $444,600
Avoidable general overhead cost = $23,100
Total avoidable costs = $467,100
Outside supplier's offered price for the part = $32 each
Total cost for the outside supply = $547,200 ($32 * 17,100)
Unavoidable fixed costs:
Depreciation of special equipment 9.30
Allocated general overhead 6.30 * 17,100 = $107,730
Unavoidable cost = $84,630 ($107,730 - $23,100)
b) The effect on the company's total net operating income of buying part G18 from the supplier rather than continuing to make it inside the company is an additional cost of $47,100 ($547,200 - $467,100 - $33,000).
The following options it gives me are
There would be a shortage of 2,000 bags of popcorn and consumers would be happy with the quality
There would be a shortage of 2,000 bags and consumers would be unhappy with the quality
There would be a surplus of 2,000 bags and consumers would be happy with the quality
There would be a shortage of 2,000 bags and producers would be happy with the law
There would be a surplus of 2,000 bags and producers would be happy with the law
Answer:
There would be a surplus of 2,000 bags, and producers would be happy with the law.
Explanation:
Unlike a price floor that prevents the price of movie theater popcorn from falling below the equilibrium price level of $15, a price ceiling of $5 prevents the price of movie theater popcorn from rising above $20. When a price ceiling is set above the equilibrium price, the quantity supplied exceeds the quantity demanded by 2,000 packets of popcorn, and there will be a surplus supply.
“It’s great to listen to the customer when you are designing your product, but it’s just not practical in pricing. All the customers have to say is that they want lower prices. If you want me to increase profits, I can’t very well listen to that!”
a. What should the marketing director make of this response?
Answer:
189038¥$
Explanatio
first play attention in class
The candidate hasn't fully understood the marketing strategy of the company
What is marketing?Marketing refers to the actions of a company in order to promote buying or selling of the company’s product, as well as creating a brand image of its product. Marketing has become a vital part of total’s world, where everything is connected via the internet and social media. New fields like Digital Marketing, Social Media Marketing have propped up for the marketing of the products.
The marketing director while appreciating this response should know the person responding hasn't been fully aware of the marketing strategy. He should make the candidate understand how much vital it is to take the opinion of the customers. Even, the company's main focus is on customers' responses and needs.
In today’s economy, a couple of viral videos against the company by genuine customers can ruin the whole image of the company. Also, customers might not necessarily want a lower-priced product in today’s age of show-offs. The customers might be wanting a product of distinction among his/her peers to stand out.
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Midwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $132,000 with a $16,000 residual value and a 10-year life. The equipment will replace one employee who has an average wage of $34,000 per year. In addition, the equipment will have operating and energy costs of $5,380 per year. Determine the average rate
Answer:
23%
Explanation:
The computation of the average rate is shown below:
But before that following calculations to be done
Annual Depreciation is
= ($132,000 - $16,000) ÷ 10
= $11,600
The Annual Net Income would increase by
= $34,000 - $5,380 - $11,600
= $17,020
Now Average Investment is
= ($132,000 + $16,000) ÷ 2
= $74000
The Average rate of return is
= Increase in Annual Net Income ÷ Average Investment
= $17,020 ÷ $74,000
= 23%
Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division’s return on investment (ROI), which has been above 20% each of the last three years. Casey is considering a capital budgeting project that would require a $3,500,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company’s discount rate is 16%. The project would provide net operating income each year for five years as follows: Sales $ 3,400,000 Variable expenses 1,600,000 Contribution margin 1,800,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 700,000 Depreciation 700,000 Total fixed expenses 1,400,000 Net operating income $ 400,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What is the project’s net present value? 2. What is the project’s internal rate of return? 3. What is the project’s simple rate of return? 4-a. Would the company want Casey to pursue this investment opportunity? 4-b. Would Casey be inclined to pursue this investment opportunity?
Answer:
1. What is the project’s net present value?
NPV = $101,7232. What is the project’s internal rate of return?
IRR = 17.24%3. What is the project’s simple rate of return?
simple rate of return = 11.43%4-a. Would the company want Casey to pursue this investment opportunity?
Yes, since the NPV is positive4-b. Would Casey be inclined to pursue this investment opportunity?
No, since it will decrease the average ROIExplanation:
initial outlay = -$3,500,000
cash flow years 1-5 = $400,000 + $700,000 = $1,100,000
discount rate = 16%
using a financial calculator:
NPV = $101,723
IRR = 17.24%
simple rate of return = $400,000 / $3,500,000 = 11.43%
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 4.3%. The probability distribution of the risky funds is as follows: Expected Return Standard Deviation Stock fund (S) 13% 34% Bond fund (B) 6 27
Question Completion:
What is the Sharpe ratio of the best feasible CAL? (Round your answer to 4 decimal places.)
Answer:
The best feasible CAL (Capital Allocation Line):
The calculated Sharpe Ratio of the Stock Fund (S) is higher than the Sharpe Ratio of the Bond Fund (B). Therefore, the better option is for the pension fund manager to choose the stock.
Explanation:
a) Data and Calculations:
T-bill money market fund yield rate = 4.3% (This is the Risk Free Rate)
Probability Distribution of the risky funds:
Expected Standard
Return Deviation
Stock fund (S) 13% 34%
Bond fund (B) 6 27
Sharpe Ratio = (Expected Return of Investment - Risk Free Rate) / Standard Deviation of excess return of investment
Sharpe Ratio For Stock Fund (S) = (13% - 4.3%) / 34% = 0.2559
Sharpe Ratio For Bond Fund (B) = (6% - 4.3%) / 27% = 0.0630
b) The Sharpe Ratio is an important investment decision-making tool. It creates an understanding of the additional risk of an investment above the comparable risk-free investment by showing the excess return accruable to an investor if she chooses the riskier asset over the risk-free investment. The Sharpe Ratio formula is given as the difference between the expected return on an investment and the risk-free return, which is then discounted by its volatility. Volatility is the standard deviation of the expected return of the stock fund or the bond fund.
An increase in personal income tax will ________ the amount of money consumers have to spend for food. a. increase c. replace b. reduce d. not change
Answer
I think it is
Explanation:
Marginal Cost of Bikes $70 This graph shows the marginal costs of each bike, along with the market price. Select the correct answer from the options available. Based on this graph, at which level of production does the producer's profit stop increasing? $60 Market Price $50 $40 Marginal Cost O bike 4 O bike 5 O bike 6 $30 $20 O bike 7 $10 0 Bike 1 Bike 2 Bike 3 Bike 4 Bike 5 Bike 6 Bike 7
Answer:D) Bike 7
Explanation:
Answer:
D, bike 7
Explanation:
Kaelea, Inc., has no debt outstanding and a total market value of $81,000. Earnings before interest and taxes, EBIT, are projected to be $9,800 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 23 percent higher. If there is a recession, then EBIT will be 32 percent lower. The company is considering a $23,100 debt issue with an interest rate of 8 percent. The proceeds will be used to repurchase shares of stock. There are currently 5,400 shares outstanding. Assume Kaelea has a tax rate of 40 percent.
Required:
a. Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued.
b. Calculate the percentage changes in EPS when the economy expands or enters a recession.
c. Calculate earnings per share, EPS, under each of the three economic scenarios after the recapitalization.
d. Calculate the percentage changes in EPS when the economy expands or enters a recession.
Answer:
a. We have:
EPS under normal = $1.09 per share
EPS under expansion = $1.34 per share
EPS under recession = $0.74 per share
b. We have:
Percentage changes in EPS when the economy expands = 23%
Percentage changes in EPS when the economy enters recession = –32%
c. We have:
EPS under normal after recapitalization = $1.24
EPS under expansion after recapitalization = $1.59 per share
EPS under recession after recapitalization = $0.75 per share
d. We have:
Percentage changes in EPS after recapitalization when the economy expands = 28.23%
Percentage changes in EPS when the economy enters recession = –39.52%
Explanation:
a. Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued.
Shares outstanding = 5,400
Net income under normal = EBIT under normal - (EBIT under normal * Tax rate) = $9,800 - ($9,800 * 40%) = $5,880
EPS under normal = Net income under normal / Shares outstanding = $5,880 / 5,400 = $1.09 per share
Net income under expansion = (EBIT under normal * (100% + Percentage increase in EBIT)) - ((EBIT under normal * (100% + Percentage increase in EBIT)) * Tax rate) = ($9,800 * (100% + 23%)) – (($9,800 * (100% + 23%))* 40%) = $7,232.40
EPS under expansion = Net income under expansion / Shares outstanding = $7,232.40 / 5,400 = $1.34 per share
Net income under recession = (EBIT under normal * (100% - Percentage decrease in EBIT)) - ((EBIT under normal * (100% - Percentage decrease in EBIT)) * Tax rate) = ($9,800 * (100% - 32%)) – (($9,800 * (100% - 32%))* 40%) = $3,998.40
EPS under recession = Net income under recession / Shares outstanding = $3,998.40 / 5,400 = $0.74 per share
b. Calculate the percentage changes in EPS when the economy expands or enters a recession.
Percentage changes in EPS when the economy expands = ((EPS under expansion - EPS under normal) / EPS under normal) * 100 = (($1.34 - $1.09) / $1.09) * 100 = 23%
Percentage changes in EPS when the economy enters recession = ((EPS under recession - EPS under normal) / EPS under normal) * 100 = (($0.74 - $1.09) / $1.09) * 100 = –32%
c. Calculate earnings per share, EPS, under each of the three economic scenarios after the recapitalization.
Market price per share = Total market value / Shares outstanding before recapitalization = $81,000 / 5,400 = $15
Number of shares to repurchase = Debt amount / Market price per share = $23,100 / $15 = 1,540
Shares outstanding after recapitalization = Shares outstanding before recapitalization - Number of shares to repurchase = 5,400 – 1,540 = 3,860
Interest on debt = Debt amount * Interest rate = $23,100 * 8% = $1,848
Net income under normal after recapitalization = EBIT under normal – Interest on debt - ((EBIT under normal – Interest on debt) * Tax rate) = $9,800 - $1,848 - (($9,800 - $1,848) * 40%) = $4,771.20
EPS under normal after recapitalization = Net income under normal after recapitalization / Shares outstanding after recapitalization = $4,771.20 / 3,860 = $1.24
EBIT under expansion = EBIT under normal * (100% + Percentage increase in EBIT) = ($9,800 * (100% + 23%)) = $12,054
Net income under expansion after recapitalization = EBIT under expansion – Interest on debt – ((EBIT under expansion – Interest on debt) * Tax rate) = $12,054 - $1,848 - (($12,054 - $1,848) * 40%) = $6,123.60
EPS under expansion after recapitalization = Net income under expansion after recapitalization / Shares outstanding after recapitalization = $6,123.60 / 3,860 = $1.59 per share
EBIT under recession = EBIT under normal * (100% - Percentage decrease in EBIT) = ($9,800 * (100% - 32%)) = $6,664
Net income under recession after recapitalization = EBIT under recession – Interest on debt – ((EBIT under recession – Interest on debt) * Tax rate) = $6,664 - $1,848 - (($6,664 - $1,848) * 40%) = $2,889.60
EPS under recession after recapitalization = Net income under recession after recapitalization / Shares outstanding after recapitalization = $2,889.60 / 3,860 = $0.75 per share
d. Calculate the percentage changes in EPS when the economy expands or enters a recession.
Percentage changes in EPS after recapitalization when the economy expands = ((EPS under expansion after recapitalization - EPS under normal after recapitalization) / EPS under normal after recapitalization) * 100 = (($1.59 - $1.24) / $1.24) * 100 = 28.2%
Percentage changes in EPS when the economy enters recession = ((EPS under recession - EPS under normal) / EPS under expansion) * 100 = (($0.75 - $1.24) / $1.24) * 100 = –39.52%
IBM stock currently sells for 64 dollars per share. The implied volatility equals 40.0. The risk-free rate of interest is 5.5 percent continuously compounded. If you shorted an option on 100 shares of IBM stock with strike price 69 and maturity 9 months, how many shares of stock would you have to buy (sell) to create a delta-neutral hedge
Answer:
53.19
Explanation:
$64 per share
Implied volatility = 40.0
risk-free rate of interest = 5.5%
number of shares shorted ( N ) = 100
strike price = 69
with maturity = 9 months
Calculate number of shares of stocks you have to be buy(sell) to create a delta-neutral hedge
we will apply the Black Scholes Formula
= N [ (ln(64/69) + (5.5%+(40%)^2 / 2) * (9/12)) / (40%* √(9/12)) ]
= N [ (ln(64/69) + (0.055+(0.40)^2 / 2) * (9/12)) / (0.40* √(9/12)) ]
= N * 0.5319
Number of shares to create a delta neutral hedge = 100 * 0.5319 = 53.19
The number of shares of stock that the person would have to buy in order to be able to create a delta-neutral hedge will be 53.19.
The following can be depicted from the question:
Implied volatility = 40.0Risk-free rate of interest = 5.5%Strike price = 69Number of shares shorted = 100Therefore, the number of shares to create a delta-neutral hedge will be:
= N[(In64/69) + (5.5% + (40%)² / 2) × (9/12) / (40% × ✓0.75)]
= N[(In0.9275) + (0.055 + 0.40)² / 2) × 0.75 / (0.40 × ✓0.75)
= N × 0.5319
= 100 × 0.5319
= 53.19
Therefore, the number of shares of stock is 53.19.
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Lilly's team had trouble keeping up with all the changes being made to the specifications for the website. They would have greatly benefited from the concept of
A) transparency in the work process
B) outsourcing
C) shared calendars and task bars
D) personal productivity
Answer:
c
Explanation:
that way they all know what to do
Shared calendars and task bars could have greatly benefited Lilly's team to keep up with all the changes being made to the specifications for the website. Therefore, option B is correct.
What is an website?A website is a collection of related web pages that are accessible via the internet using a web browser. Websites are typically created and maintained by individuals, organizations, or businesses to provide information, sell products or services, or engage with their audience.
Websites can be static or dynamic, with static websites containing fixed content that rarely changes, and dynamic websites featuring interactive content that is updated regularly.
Websites can be accessed using a unique URL or web address and can include a variety of multimedia elements, such as images, videos, and audio. Websites can be designed using a range of technologies, including HTML, CSS, JavaScript, and server-side scripting languages, among others.
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Golden Eagle Company prepares monthly financial statements for its bank. The November 30 adjusted trial balance includes the following account information:
November 30 December
Debit Credit Debit Credit
Supplies $1,550 $3,050
Prepaid Insurance 6,200 $4,650
Salaries Payable $10,100 $15,100
Deferred Revenue 2,100 $1.050
The following information is known for the month of December:
A. Purchases of supplies during December total $3,600.
B. Supplies on hand at the end of December equal $3,050.
C. No insurance payments are made in December.
D. Insurance cost is $1,550 per month.
E. November salaries payable of $10,100 were paid to employees in December. Additional salaries for December owed at the end of the year are $15,100.
F. On November 1, a tenant paid Golden Eagle $3,150 in advance rent for the period November through January, and Deferred Revenue was credited for the entire amount.
Required:
Show the adjusting entries that were made for supplies, prepaid insurance, salaries payable, and deferred revenue on December 31.
Answer:
December 31
Dr Supplies expense $2100
Cr Supplies $2100
December 31
Dr Insurance expense $1,550
Cr Prepaid insurance $1,550
December 31
Dr Salaries expense $15,100
Cr Salaries payable $15,100
December 31
Dr Deferred revenue $1,050
Cr Rent revenue $1,050
Explanation:
Preparation of the adjusting entries that were made for supplies, prepaid insurance, salaries payable, and deferred revenue on December 31.
December 31
Dr Supplies expense $2100
Cr Supplies $2100
( $1,550+3,600-$3,050= $2100)
( To record supplies expense)
December 31
Dr Insurance expense $1,550
Cr Prepaid insurance $1,550
( To record insurance expense)
December 31
Dr Salaries expense $15,100
Cr Salaries payable $15,100
( To record salaries expense)
December 31
Dr Deferred revenue $1,050
Cr Rent revenue $1,050
($3,150 x 1/3= $1,050)
( To record rent revenue)
Caldwell Corporation is considering an investment proposal that will require an initial outlay of $816,000 and would yield yearly cash inflows of $212,000 for nine years. The company uses a discount rate of 10%. What is the NPV of the investment?
Present value of an ordinary annuity of $1:
8%
9%
10%
1
0.926
0.917
0.909
2
1.783
1.759
1.736
3
2.577
2.531
2.487
4
3.312
3.24
3.17
5
3.993
3.89
3.791
6
4.623
4.486
4.355
7
5.206
5.033
4.868
8
5.747
5.535
5.335
9
6.247
5.995
5.759
A.
$251,667
B.
$371,000
C.
$408,000
D.
$404,908
Answer:
623
Explanation:
because I guessed and 816,000-212,000= 604,000
Determine whether each of the following topics would more likely be studied in microeconomics or macroeconomics.
Microeconomics Macroeconomics
The effect of federal government spending on
the national unemployment rate.
The effect of government regulation on a
monopolist's production decisions.
The optimal interest rate for the Federal
Reserve to target.
Answer:
The effect of federal government spending on
the national unemployment rate. macro
The effect of government regulation on a
monopolist's production decisions. micro
The optimal interest rate for the Federal
Reserve to targets -microeconomics
The unadjusted and adjusted trial balances for American Leaf Company on October 31, 2018, follow:
American Leaf Company
Trial Balances
October 31, 2018
Debit Balances (Unadjusted) Credit Balances (Unadjusted) Debit Balances (Adjusted) Credit Balances(Adjusted)
Cash $16.00 $16.00
Accounts receivable 38.00 44.00
Supplies 10.00 7.00
Prepaid Insurance 22.00 10.00
Land 27.00 27.00
Equipment 41.00 41.00
Accumulated Depreciation-Equipment $7.00 $12.00
Accounts Payable 27.00 27.00
Wages Payable 0.00 2.00
Common Stock 22.00 22.00
Retained Earnings 74.00 74.00
Dividends 10.00 10.00
Fees Earned 70.00 76.00
Wages Expense 23.00 25.00
Rent Expense 6.00 6.00
Insurance Expense 0.00 12.00
Utilities Expense 3.00 3.00 20
Depreciation Expense 0.00 5.00
Supplies Expense 0.00 3.00
Miscellaneous Expense 4.00 4.00
$200.00 $200.00 $191.00 $191.00
Journalize the five entries that adjusted the accounts at October 31, 2018.
Answer:
1. Dr Accounts Receivable $6
Cr Fees Earned $6
2. Dr Supplies Expense $3
Cr Supplies $3
3. Dr Insurance Expense $12
Cr Prepaid Insurance $12
4. Dr Depreciation Expense $5
Cr Accumulated Depreciation—Equipment $5
5. Dr Wages Expense $2
Cr Wages Payable $2
Explanation:
Preparation of the five journal entries that adjusted the accounts at October 31, 2018.
1. Dr Accounts Receivable $6
Cr Fees Earned $6
($44-$38)
(To Accrued fees earned)
2. Dr Supplies Expense $3
Cr Supplies $3
($10-$7)
(To record Supplies used)
3. Dr Insurance Expense $12
Cr Prepaid Insurance $12
($22-$10)
(To record Insurance expired)
4. Dr Depreciation Expense $5
Cr Accumulated Depreciation—Equipment $5
($12-$7)
(To record Equipment depreciation)
5. Dr Wages Expense $2
Cr Wages Payable $2
($2-$0)
(To record Accrued wages)
Combined Communications is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 15 percent a year for the next 4 years and then decreasing the growth rate to 3.5 percent per year. The company just paid its annual dividend in the amount of $0.20 per share. What is the current value of one share of this stock if the required rate of return is 15.5 percent
Answer:
Combined Communications
The current value of one share of this stock if the required rate of return is 15.5 percent is:
= $46.00.
Explanation:
a) Data and Calculations:
Annual dividend = $0.20
Expected growth rate for the next 4 years - 15%
Expected growth rate after 4 years = 11.5% (15% - 3.5%)
Required rate of return = 15.5%
Current Price of the share = Annual Dividend * (1 + Dividend Growth Rate)/ (Required rate of return - Dividend Growth Rate)
= ($0.20 * 1 + 0.15)/ (0.155 - 0.15)
= $0.23/0.005
= $46
Future Price after 4 years = ($0.23 * 1 + 0.115)/(0.155 - 0.115)
= $0.25645/0.04
= $6.41
What is the relationship between institutions, such as private property rights, and productive resources in terms of encouraging economic growth? Group of answer choices Private property rights mean that the government will produce no goods or services Private property rights allow resources to be used by those with the most political connections. Private property rights mean that everyone has the right to equal amounts of property. Private property rights encourage resources to be used in the most productive way.
Answer:
The relationship between institutions, such as private property rights, and productive resources in terms of encouraging economic growth is:
Private property rights encourage resources to be used in the most productive way.
Explanation:
Private property rights define the rights that individual persons have to possess, control, exclude others, derive income, or dispose of property. The main characteristics of private property rights are the rights of exclusivity, transferability, and enforceability. These rights are conferred and enforced by the law. They enable the property owner to exclude others from the costs and benefits that accrue to them from owning the property. They also enable the owner to be in a position to transfer the property from herself to others.
A progressive tax is a tax that:
A. Requires you to pay less money in taxes when you have more income.
B. Requires everyone to pay the same tax rate.
c. Only applies to people who make more than $150,000 per year.
D. Requires people who make more money to pay a larger percentage of their income in taxes.
Answer:
I’m pretty sure it’s B.
Explanation:
^ I said pretty sure
Iaukea Company makes two products from a common input. Joint processing costs up to the split-off point total $47,000 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below:
Product X Product Y Total
Allocated joint processing costs $17,900 $27,200 $45,100
Sales value at split-off point $25,400 $37,000 $62,400
Costs of further processing $22,400 $16,700 $39,100
Sales value after further processing $47,000 $54,700 $101,700
Required:
a. What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?
b. What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point?
Answer:
Product Net monetary advantage
X (800)
Y 1,000
Explanation:
A company should process further a product if the additional revenue from the split-off point is greater than than the further processing cost.
Also note that all costs incurred up to the split-off point are irrelevant to the decision to process further .
Product X
$
Additional sales revenue from further processing
( 47,000-25,400) 21600
Further processing cost (22,400)
Net monetary advantage (800)
Product Y
$
Additional sales revenue from further processing
( 54,700-37,000) 17,700
Further processing cost (16,700)
Net monetary advantage 1,000
Product Net monetary advantage
X (800)
Y 1,000
Sheffield Company is working on two job orders. The job cost sheets show the following.
Job 201 Job 202
Direct materials $7,150 $9,300
Direct labor 3,850 7,800
Manufacturing overhead 5,200 9,800
Required:
Prepare the three summary entries to record the assignment of costs to Work in Process from the data on the job cost sheets.
Answer:
See below
Explanation:
A.
Work in process inventory Dr $16,450
------------- Raw material inventory
$7,150 + $9,300 Cr $16,450
B.
Work in process inventory Dr $11,650
Factory labor
-----------------$3,850 + $7,800 Cr $11,650
C.
Work in process inventory Dr $15,000
Manufacturing overhead
$5,200 + $9,800 Cr $15,000
Smart Calendars is a new business. During its first year of operations, credit sales were $40,000, and collections of credit sales were $36,000. One account, $650, was written off. Using the aging-of-receivables method, management calculates $200 as its estimate of uncollectible amounts at year end. Prepare the journal entry to record bad debts expense.
Answer:
Credit Sales = $40,000
Collections = $36,000
Initial accounts receivable = $40,000 - $36,000 = $4,000
Amount written off = $650
Account receivable after write off = $4,000 - $650 = $3,350
Un-Collectible amount = $200
Final account receivable = Account receivable after write off - Uncollectible amount = $3,350 - $200 = $3,150
So, accounts receivable at the end of the first year is $3,150
Journal entry to record bad debts expense
S/n Account Titles and Explanation Debit Credit
1. Bad debt expenses $650
Accounts receivables $650
(To write off the account amount of $650)
2. Bad debt expenses $200
Allowances fo bad debt $200
(To create provision for bad debts)
Financial information is presented below: Operating expenses $ 45000 Sales returns and allowances 3000 Sales discounts 7000 Sales revenue 160000 Cost of goods sold 96000 Gross Profit would be $64000. $54000. $61000. $67000.
Explanation:
160,000−3,000−96,000=61000
expenses are not taken into account because their not required to find the gross profit.
Financial information is presented below: Operating expenses $ 45000 Sales returns and allowances 3000 Sales discounts 7000 Sales revenue 160000 Cost of goods sold 96000 Gross Profit would be "$64000". The correct option is A.
To calculate the Gross Profit, we use the formula:
Gross Profit = Sales Revenue - Cost of Goods Sold
Given the financial information,
Sales Revenue = $160,000
Cost of Goods Sold = $96,000
Gross Profit = $160,000 - $96,000
Gross Profit = $64,000
Therefore, the correct option is A that is $64,000.
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