Answer:
The estimated cost of equity is 10.3%
Explanation:
Step 1: Find Levered Beta
The CAPM formula would be used here to find the Levered Beta. CAPM formula is given as under:
Ke = Rf + Beta * (MRP - Rf)
Current Cost of Equity of company is ke and is 15%,
Risk free rate is Rf and is 6%
Market risk premium is 7%
15% = 6% + Beta* (7% - 6%)
Levered Beta = 9
Step 2: Find the Unlevered Beta
As we know that existing Debt to Equity ratio is (30 / 70), we can use the following formula to calculate the unlevered beta:
Unlevered Beta = Levered Beta / (1 + (1-t) * D/E)
Simply by putting values, we have:
Unlevered Beta = 1.2 / (1 + (1 - 40%) * 30/70) = 7.16
Step 3: Calculate levered beta on new debt to equity ratio
Now
New Debt to Equity Ratio is 1 (50 / 50)
As we know that:
Levered Beta = Unlevered Beta * (1 + (1-t) * Debt / Equity)
Levered Beta = 7.16 * (1 - 40%) * 1) = 4.3
Step 4: Use CAPM formula to calculate Cost of equity on new gearing
Using CAPM formula, we have:
Ke = Rf + Beta * (MRP - Rf)
Ke = 6% + 4.3 * 1% = 10.3%
Howard Services, Inc., has $ 8 comma 600 cash on hand on January 1. The company requires a minimum cash balance of $ 7 comma 600. January cash collections are $ 548 comma 570. Total cash payments for January are $ 567 comma 610. Prepare a cash budget for January. How much cash, if any, will Howard need to borrow by the end of January?
Answer:
The amount of cash to be borrowed = $18,040
Explanation:
The cash budget shows the expected cash payments and expected cash receipts and cash balance at the end of a particular period.
Note that in the cash budget only items of the cash are considered, therefore items like depreciation, amortization of intangible assets and apportionment of fixed costs are not included because they are not cash based.
The balance at the end = opening cash balance + cash receipts -cash payment
Applying this to Howard Services, Inc.
The amount of cash to be borrowed = Minimum cash balance required - Net cash balance
DATA
Opening cash balance - 8600
Cash receipts- 548,570
Cash payment - 567,610
Net cash balance = 8600 + 548,570 - 567,610 = (10,440)
The amount of cash to be borrowed = 7,600 - (10,440)
=7,600+10,440=18040
The amount of cash to be borrowed = $18,040
Note a negative amount of 10,400 would mean that that would be first borrowed to balance the deficit, and to take the balance to the minimum required cash balance, an addition 7,600 would need to be borrowed.
Carmen Camry operates a consulting firm called Help Today, which began operations on August 1. On August 31, the company’s records show the following selected accounts and amounts for the month of August.
Cash $25,330 Dividends $5,960
Accounts receivable 22,330 Consulting fees earned 26,970
Office supplies 5,210 Rent expense 9,510
Land 43,980 Salaries expense 5,580
Office equipment 19,970 Telephone expense 840
Accounts payable 10,730 Miscellaneous expenses 490
Common stock 101,500
Required:
Use the above information to prepare an August 31 balance sheet
Answer:
Help Today
Balance Sheet
For the month ended August 31, 202x
Assets:
Cash $25,330
Accounts receivable $22,330
Office supplies $5,210
Land $43,980
Office equipment $19,970
Total assets: $116,820
Liabilities and stockholders' equity:
Accounts payable $10,730
Common stock $101,500
Retained earnings $4,590
Total liabilities and stockholders' equity: $116,820
Explanation:
Income statement:
Consulting fees earned $26,970
Rent expense $9,510
Salaries expense $5,580
Telephone expense $840
Miscellaneous expenses $490
Net income $10,550
Retained earnings = net income - dividends = $10,550 - $5,960 = $4,590
Dazzle, Inc. produces beads for jewelry making use. The following information summarizes production operations for June. The journal entry to record June production activities for direct material usage is:
Direct materials used $87,000
Direct labor used 160,000
Predetermined overhead rate (based on direct labor) 155%
Goods transferred to finished goods 432,000
Cost of goods sold 444,000
Credit sales 810,000
a. Debit Accounts Receivable $810,000; credit Cost of Goods Sold $810,000.
b. Debit Accounts Receivable $810,000; credit Sales $366,000; credit Finished Goods Inventory $444,000.
c. Debit Cost of Goods Sold $444,000; credit Sales $444,000.
d. Debit Finished Goods Inventory $444,000; debit Sales $810,000; credit Accounts Receivable $810,000; credit Cost of Goods Sold $444,000.
e. Debit Accounts Receivable $810,000; credit Sales $810,000; debit Cost of Goods Sold $444,000; credit Finished Goods Inventory $444,000.
Answer:
e. Debit Accounts Receivable $810,000; credit Sales $810,000; debit Cost of Goods Sold $444,000; credit Finished Goods Inventory $444,000.
Explanation:
During the sale for the period, the Cost of Sales of $444,000 has to be removed from the Finished Goods Inventory as :
Cost of Goods Sold $444,000 (debit)
Finished Goods Inventory $444,000 (credit)
At the Same time, the Sales Revenue and Accounts Receivable have to be recognized at $810,000 as
Accounts Receivable $810,000 (debit)
Sales Revenue $810,000 (credit)
The combined effect gives us option e : Debit Accounts Receivable $810,000; credit Sales $810,000; debit Cost of Goods Sold $444,000; credit Finished Goods Inventory $444,000.
The journal entry to record June production activities for direct material usage is Debit Accounts Receivable $810,000; credit Sales $810,000; debit Cost of Goods Sold $444,000; credit Finished Goods Inventory $444,000. Thus, the appropriate answer choice is option (e).
Merchandise refers to as finished goods and products that have been purchased and are prepared for sale.
During the sale for the period, the Cost of Sales of $444,000 has to be removed from the Finished Goods Inventory as :
Cost of Goods Sold $444,000 (debit)
Finished Goods Inventory $444,000 (credit)
At the Same time, the Sales Revenue and Accounts Receivable have to be recognized at $810,000 as:
Accounts Receivable $810,000 (debit)
Sales Revenue $810,000 (credit)
Therefore, the combined effect gives us option e.
To learn more on finished goods, here:
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On February 1, 2021, a company loans one of its employees $29,000 and accepts a ten-month, 8% note receivable. Calculate the amount of interest revenue the company will recognize in 2021
Answer:
Calculation of interest revenue:
Interest revenue = $29,000 x 8% x 10/12 = $1,933
Explanation:
a) Data and Calculation:
Feb. 1, 2021 Loan to employees = $29,000
Ten-month, 8% note receivable
Interest revenue = $29,000 x 8% x 10/12 = $1,933
The note is for 10 months, but the rate of interest is 8% per annum. After the rate is applied on the loan to get an interest of $2,320, this will then be multiplied by 10 and divided by 12 to get the 10 months interest revenue. These loans to employees are expected to be repaid by the end of November, 2021 with the interest.
If you put up $39,000 today in exchange for a 6.5 percent, 16-year annuity, what will the annual cash flow be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
$3,992.73
Explanation:
For computing the annual cash flow we need to apply the PMT formula i.e to be shown in the attachment below:
Given that,
Present value = $39,000
Future value or Face value = $0
RATE = 6.5%
NPER = 16 years
The formula is shown below:
= PMT(RATE;NPER;-PV;FV;type)
The present value come in negative
So, after applying the above formula, the annual cash flow is $3,992.73
An electric power plant uses solid waste for fuel in the production of electricity. the cost Y in dollars per hour to produce electricity is Y=11+0.4X+0.29X2, where X is in megawatts. Revenue in dollars per hour from the sale of electricity is 16X−0.2X2. Find the value of X that gives maximum profit. (Round to two decimal places.)
Answer:
The value of X that gives maximum profit is 15.92.
Explanation:
Before answering the question, Y and Revenue (R) given in the question are first correctly restated as follows:
Cost = Y = 11 + 0.4X + 0.29X^2 .......................................... (1)
Revenue = R = 16X − 0.2X^2 .............................................. (2)
Differentiating each of equations (1) and (2) with respect to X to obtain marginal cost (MC) and marginal revenue (MR), we have:
dY/dX = MC = 0.4 + 0.58X .................................................. (4)
dR/dX = MR = 16 - 0.4X ....................................................... (5)
In production theory, profit is maximized when MR = MC. Therefore, we equate equations (4) and (5) and solve for X as follows:
0.4 + 0.58X = 16 - 0.4X
0.58X + 0.4X = 16 - 0.4
0.98X = 15.6
X = 15.6 / 0.98
X = 15.92
Therefore, the value of X that gives maximum profit is 15.92.
In the context of a firm's statement of cash flows, ________ include the purchase, sale, or investment in fixed assets, such as real estate, equipment, and buildings.
Answer: investing activities
Explanation:
Investing activities is one of the categories of the net cash activities that is shown on a cash flow statement. It should be noted that investing activities is the buying and selling of long-term assets and every other business investments.
Investing activities include the purchase, sale, or investment in fixed assets, such as real estate, equipment, and buildings.
How have or will external factors result in the overhaul of a traditional industry of your choice (such as retail or any other) as we know it? Please explain and cite examples.
Explanation:
External factors can directly impact the revision of a traditional sector.
Considering the retail sector as an example, we can see how it was impacted by new technologies such as the insertion of commercial activities in an online environment.
New technologies such as the internet are tools for interaction and information exchange where companies can prospect customers and create relationship marketing that promotes greater value and positioning for a company.
For a retailer who wants to remain competitive, it is important to adapt to new ways of making sales, reinventing and updating their payment, delivery, sales and marketing processes and systems.
Flapjack Corporation had 7,600 actual direct labor hours at an actual rate of $12.41 per hour. Original production had been budgeted for 1,100 units, but only 950 units were actually produced. Labor standards were 7.0 hours per completed unit at a standard rate of $13.00 per hour. The direct labor time variance is
Answer:
-$12,350 Unfavorable
Explanation:
The computation of direct labor variance is shown below:
Labor time variance = (Standard hours - Actual hours) × standard rate
= (950 × 7.0 - 7,600) × $13
= (6,650 - 7,600) × $13
= -950 × $13
= -$12,350 Unfavorable
Therefore for computing the direct labor variance we simply applied the above formula by considering the given information
Orion Flour Mills purchased a new machine and made the following expenditures:
Purchase price $ 59,000
Sales tax 5,200
Shipment of machine 840
Insurance on the machine for the first year 540
Installation of machine 1,680
The machine, including sales tax, was purchased on account, with payment due in 30 days. The other expenditures listed above were paid in cash.
Required:
Record the above expenditures for the new machine. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Answer:
Orion Flour Mills
Debit Milling Machine $64,200
Credit Accounts Payable $64,200
To record the purchase of a new machine on account, terms n/30.
Debit Freight-in $840
Debit Insurance $540
Debit Machine Installation $1,680
Credit Cash Account $3,060
To record additional expenditure on the purchase.
Debit Milling Machine $2,520
Credit Freight-in $840
Credit Machine Installation $1,680
To record the cost of additional expenditure to the Milling Machine.
Explanation:
Using the journal to account for the acquisition of a new machine by Orion Flour Mills initially records the transactions after identifying the accounts involved, and the accounts to be debited and credited respectively.
The cost of the new machine includes the additional expenditure incurred for bringing it into use. The expenditure will include the shipment, sales tax, and installation costs. Insurance will be excluded as it is not incurred in order to bring the machine into use.
Suppose Acap Corporation will pay a dividend of $2.88 per share at the end of this year and $3.01 per share next year. You expect Acap's stock price to be $53.87 in two years. Assume that Acap's equity cost of capital is 10.3%. a. What price would you be willing to pay for a share of Acap stock today, if you planned to hold the stock for two years? b. Suppose instead you plan to hold the stock for one year. For what price would you expect to be able to sell a share of Acap stock in one year? c. Given your answer in (b), what price would you be willing to pay for a share of Acap stock today if you planned to hold the stock for one year? How does this compare to your answer in (a)?
Answer:
A.P(0)=$48.89
B.P(1)=$51.56
C.P(0)=$49.35
Explanation:
A. Calculation for what price would you be willing to pay for a share of Acap stock today if you planned to hold the stock for two year
Using this formula
P(0)=Dividend per share/Percentage of Equity cost of capital +(Dividend next year+Stock price)/Percentage of Equity cost of capital
Let plug in the formula
P(0) = 2.88/ 1.103 + (3.01+ 53.87) / 1.103^2=
P(0)=2.611+56.88/1.216609
P(0)=59.491/1.216609
P(0)=$48.89
b. Calculation for what price would you expect to be able to sell a share of Acap stock in one year
Using this formula
P(1)=(Dividend next year + Stock price)/Percentage of Equity cost of capital
Let plug in the formula
P(1) = (3.01 + 53.87) / 1.103 = $50.00
P(1)=56.88/1.103
P(1)=$51.56
c.Calculation for what price would you be willing to pay for a share of Acap stock today if you planned to hold the stock for one year
Using this formula
P(0)=(Dividend per share + P(1)/Percentage of Equity cost of capital
Let plug in the formula
P(0) = (2.88 + 51.56) / 1.103
P(0)=54.44/1.103
P(0)=$49.35
Therefore compare to the answer in (a)
if you planned to hold the stock for two year you will have $48.89 and if you planned to hold the stock for one year you will have $49.35.
The Walthers Company has a semi-annual coupon bond outstanding. An increase in the market rate of interest will have which one of the following effects on this bond?
a. increase the coupon rate.
b. decrease the coupon rate.
c. increase the market price.
d. decrease the market price.
e. increase the time period.
Answer:
The answer is D.
Explanation:
An increase in the market rate of interest of a bond will decrease the market price of the bond. Market rate of interest of a bond is inversely related to the market price of the bond.
For example, A bonds is issued with a higher interest rate, the price of existing bonds will fall because the demand for this bond falls.
The structural unemployment rate is 1.7 percent, the frictional unemployment rate is 2.6 percent, and the economy's current unemployment rate is 3.9 percent. The economy is in:_______.
a. long-run equilibrium.
b. a recessionary gap producing more than Natural Real GDP.
c. a recessionary gap producing less than Natural Real GDP.
d. an inflationary gap producing Natural Real GDP.
e. an inflationary gap producing more than Natural Real GDP.
Answer:
a. long-run equilibrium.
Explanation:
In the circumstances that the structural unemployment rate is 1.7 percent, the frictional unemployment rate is 2.6 percent, and the economy's current unemployment rate is 3.9 percent. Then we can say that the economy is in a long-run equilibrium.
Structural unemployment can be defined as an involuntary unemployment that arises as a result of the incompatibility between a worker's skills set and requisite skills an employer seeks from the workers or due to technological changes.
Frictional unemployment is a form of unemployment which is voluntary because employees which to change jobs or move to another better job.
Hence, the economy is in a long-run equilibrium because the rate of unemployment has become constant, thus, prices and wages will be adjusted in order to reach wages equilibrium level.
A contractual arrangement between a parent company and an individual or firm that allows them to operate a certain type of business under an established name and according to specific rules is called
Answer:
Franchise
Explanation:
A contractual arrangement between a parent company and an individual or firm that allows them to operate a certain type of business under an established name and according to specific rules is called franchise.
For instance, Mr Biggs could give the authority to an individual or group of people which would enable them to do the same business in another geographical location.
Hence, franchise is a license that allows individuals or group of people knowledge, processes, trademarks to provide a service.
The development and application of mrp depended upon two developments (1) the recognition of the difference between independent and dependent demand, and (2):________
a. Computers
b. Development of the EOQ model
c. Inventory control systems
d. Blanket purchase ordersE. the internet
Answer:
a. Computers
Explanation:
The MRP refers to the material requirement planning with respect to production, scheduling, controlling of an inventory. It works is to transform the master schedule to the detailed schedule in order to purchase the raw material.
It can be divided into two components i.e independent and dependent demand. The independent demand is held for the finished goods and the dependent demand is for the components
Now for developing the mrp depend upon the recognition between the dependent and independent demand and the second one is computer
Preston Inc.'s stock has a 25% chance of producing a 30% return, a 50% chance of producing a 12% return, and a 25% chance of producing a -18% return. What is the firm's expected rate of return
Answer:
Expected return = 9%
Explanation:
A portfolio is a collection of assets/ investment. The expected return on the stock would be the weighted average of all the return of the possible return weighted according to their probability.
Expected return on portfolio:
E(R) =( Wa*Ra) + (Wb*Rb) + (Wc*Rc)
R- possible return,W- probability
E(R) = (30%× 0.25) + (12%× 0.5) + (-18%× 0.25) = 9 %
Expected return = 9%
Note that the negative sign in the last possible return implies a loss.
You are cautiously bullish on the common stock of the Wildwood Corporation over the next several months. The current price of the stock is $50 per share. You want to establish a bullish money spread to help limit the cost of your option position. You find the following option quotes: Wildwood Corp Underlying Stock price: $50.00 Expiration Strike Call Put June 45.00 8.50 2.00 June 50.00 4.50 3.00 June 55.00 2.00 7.50 Ignoring commissions, the cost to establish the bull money spread with calls would be ________. Group of answer choices
Answer:
650
Explanation:
A call option is an option to buy a product or asset at a stated price at a later date. The risk of call option is capped at premium for buying the option. Wildwood corporation will incur cost of 650 to establish the bull money spreads with calls.
8.5 +4.5 = 13
13 * $50.00 = $650
During 2018, Skechers USA had Sales of $1,846.4, Gross profit of $818.8 million and Selling, General and Administration expenses of $730.7 million. What was Skechers' Cost of sales for 2018
Answer:
The answer is $1,027.6 million
Explanation:
Gross profit = Sales - Cost of Sales(cost of goods sold)
Gross profit = $818.8 million
Sales of $1,846.4 million.
To find Cost of Sales, we rearrange the formula to now be:
Sales - Gross profit
$1,846.4 million - $818.8 million
=$1,027.6 million
Therefore, Skechers' Cost of sales for 2018 is $1,027.6 million
Cost reduction is still the number one priority for many supply chain executives, according to the MHI and Deloitte survey. Select one: True False
Answer:
MHI and Deloitte Survey
Cost Reduction #1 Priority
True
Explanation:
For supply chain companies to achieve their profit targets, they need to curtail costs. Consumers are not ready to absorb much costs as they are presented with low-priced alternatives. The competition for customers among supply chain organizations is very high. Everyone competes for the dollar the consumer is willing to spend on goods. With property and advertising costs skyrocketing, careful management of the cost structure is required.
Suppose that a perfectly competitive firm faces a market price of $7 per unit, and at this price the upward-sloping portion of the firm's marginal cost curve crosses its marginal revenue curve at an output level of 1 comma 400 units. If the firm produces 1 comma 400 units, its average variable costs equal $6.50 per unit, and its average fixed costs equal $0.80 per unit.
Required:
a. What is the firm's maximizing (or loss-minimizing output level?
b. What is the amount of it's economic profits (or losses) at this output level?
Answer:
1. This firm have the profit maximizing output level of 1400 units because a firm in any industry will maximize profit where MR=MC. Here MR is equal to MC at the output level of 1400. So profit maximizing level of output is 1400 units.
2. Economic profit = Total revenue - total cost.
Where, Total revenue = Quantity * price
= 1400 * 7
= $9,800
Total variable cost = AVC * quantity
= 6.50 *1400
= $9,100
Total fixed cost = AFC * quantity
= 0.80 * 1400
= $1,120
Economic profit = Total revenue - Total variable cost - Total fixed cost
Economic profit = $9,800 - $9,100 - $1,120
Economic profit = -$420
. The firm is having economic loss equal to 420.
Conclusion: This firm is facing economic loss in its output.
On July 1, Bramble Corporation purchases 670 shares of its $6 par value common stock for the treasury at a cash price of $9 per share. On September 1, it sells 420 shares of the treasury stock for cash at $14 per share.
Journalize the two treasury stock transactions. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date Account Titles and Explanation Debit Credit
Answer and Explanation:
The journal entries are shown below:
On July 1
Treasury stock Dr (670 shares × $9 per share) $6,030
To Cash $6,030
(Being the purchase of treasury stock is recorded)
For recording this we debited the treasury stock as it increased the treasury and credited the cash as it decreased the assets
On Sep 1
Cash Dr (420 shares × $14 per share) $5,880
To Treasury Stock (420 shares × $9 per share) $3,780
To Additional paid in capital - Treasury stock $2,100
(Being the resale of treasury stock is recorded)
For recording this we debited the cash as it increased the assets and credited the treasury stock and additional paid in capital as the sale is made
On January 1, 20X6, Pumpkin Corporation acquired 70 percent of Spice Company's common stock for $210,000 cash. The fair value of the noncontrolling interest at that date was determined to be $90,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition:______.
Pumpkin Spice Cash 50,000 15,000 Accounts Receivable 70,000 25,000 Inventory 30,000 20,000 Land 150,000 80,000 Buildings and Equipment 250,000 200,000 Less: Accumulated Depreciation -70,000 -20,000 Investment in Spice Co. 210,000 Total Assets 690,000 320,000 Accounts Payable 40,000 10,000 Bonds Payable 150,000 40,000 Common Stock 300,000 90,000 Retained Earnings 200,000 180,000 Total Liabilities and Equity 690,000 320,000 At the date of the business combination, the book values of Spice's assets and liabilities approximated fair value except for inventory, which had a fair value of $30,000, and land, which had a fair value of $95,000. 1. what amount of total inventory will be reported in the consolidated balance sheet prepared immediately after the business combination?
Answer:
Total inventory in consolidated balance = $60,000
Explanation:
In the consolidated balance sheet, we record the sum of both parent and subsidiary assets. Here pumpkin and spice both have an inventory of $30,000.
Total inventory in consolidated balance = Pimpkin's Inventory + fair value of Spice's inventory
Total inventory in consolidated balance = $30,000 + $30,000
Total inventory in consolidated balance = $60,000
a company sells 600 bottles of a dietary supplement per week at$ 100 per bottle. The supplement is ordered from a supplier who charges fixed cost of $30 per order, and $ 50 per bottle. The annual inventory holding cost is 40%. Assume the company operates 50 weeks in a year. What is the optimal number of bottles company should order?
Answer:
the economic order quantity or optimal quantity = 300 bottles per order
Explanation:
economic order quantity (EOQ) = √[(2SD) / H]
S = cost per order = $30D = annual demand = 600 x 50 weeks = 30,000H = holding costs = $50 x 40% = $20EOQ = √[(2 x $30 x 30,000) / $20] = √($1,800,000 / $20) = √90,000 = 300
This means that the company must make 2 orders per week and 100 orders per year. This happens because the holding costs per unit are too high, therefore, in order to reduce costs you must have a small inventory.
A company issues $60,000 of 6%, 5-year bonds dated January 1 that pay interest semiannually on June 30 and December 31 each year. If the issuer accepts $62,000 for the bonds, the premium on bonds payable will _________________ total interest expense recognized over the life of the bond by $ ______________.
Answer:
The premium on the bonds payable will decrease the total interest expense recognized over the life bond by $2000
Explanation:
The premium on bonds payable is the excess of cash proceeds received from the bond's issuance over the face value.
cash proceeds=$62,000
face value=$60,000
premium on bonds payable=$62,000-$60,000
premium on bonds payable=$2000
This will decrease the total interest expense recognized over the life bond by $2000
Boomerang Computer Company sells computers with an unconditional right to return the computer if the customer is not satisfied. Boomerang has a long history selling these computers under this returns policy and can provide precise estimates of the amount of returns associated with each sale. Boomerang most likely should recognize revenue:
Answer:
When Boomerang delivers a computer to a customer.
Explanation:
Revenue is recognised by a business when it is earned. That is when the transaction is completed and a sale is established.
In the given scenario when a customer buys goods for Boomerang they have unconditional right to return the computer if the customer is not satisfied.
The situation where Boomerang should recognise revenue is when a computer is delivered to the customer and the sale is consummated.
If the company recognises revenue when an order is made, there is possibility of customer returning the computer. Then their revenue data will be inaccurate
Answer:
the boomerang delivers
Explanation:
When a company constructs a building, the cost of the building includes materials and labor but not design fees, building permits, or insurance during construction.
a. True
b. False
Answer:
False.
Explanation:
Construction costs can be defined as the overall costs associated with the development of a built asset, project or property. The construction costs is classified into two (2) main categories and these are;
1. Operational costs: these include the costs on daily basis during the construction process such as rent, wages, sales, utility bills, maintenance and repair fees etc.
2. Capital costs: these include the costs incurred in the acquisition of the property such as commissions, insurance, property acquisition, materials, inflation, fittings, equipment, labor etc.
Hence, when a company constructs a building, the cost of the building includes materials and labor as well as the design fees, building permits, or insurance during construction.
Ross Island Co. issues 10,000 shares of no-par value preferred stock for cash at $120 per share. The journal entry to record the transaction will consist of a debit to Cash for $1,200,000 and a credit (or credits) to:
Answer:
Please see answer below
Explanation:
The journal entry to record the issuance of 10,000 shares of no-par value preferred stock for cash at $120 per shares has a debit to cash and a credit to preferred stock for $1,200,000 ( 10,000 shares × issue price of $120 per share )
When the price of erasers increases from $1.50 to $2.50, the quantity demanded of pencils is unchanged. The cross-price elasticity of demand between erasers and pencils is
Answer:
The cross elasticity of demand is zero
Explanation:
Cross elasticity of demand measures the percentage change in the quantity demand of a product occasioned by a change in the price of another but related commodity.
If the the commodities are complements, the cross of elasticity of demand between them would be negative. his implies an increase(decrease) in the price of one would lead to a decrease(increase) in the demand of the other.
If the the commodities are substitutes, the cross elasticity of demand between them would be positive. This implies an increase(decrease) in the price of one would lead to a increase (decrease) in the quantity demand of the other.
Where the cross elasticity of demand is zero, this implies that the goods are not in any way related. This implies that a change in the price of one would produce no change in the quantity demand of the other.
For each price in the following table, calculate the firm's optimal quantity of units to produce, and determine the profit or loss if it produces at that quantity, using the data from the previous graph to identify its total variable cost. Assume that if the firm is indifferent between producing and shutting down, it will produce.
Price Quantity Total Revenue Fixed Cost Variable Cost Profit
(Dollars per polo) (Polos) (Dollars) (Dollars) (Dollars) (Dollars)
25.00 520,000
40.00 520,000
65.00 520,000
If the firm shuts down, it must incur its fixed costs (FC) in the short run. In this case, the firm's fixed cost is $520,000 per day. In other words, if it shuts down, the firm would suffer losses of $520,000 per day until its fixed costs end (such as the expiration of a building lease).
This firm's __________ that is, the price below which it is optimal for the firm to shut down is:________
Answer:
This firm's Shut down price, That is, the price below which it is optimal for the firm to shut down is $40.
Explanation:
Shut down point is the point at which a firm or business is not able to gain any profit or benefit from the operations. Firm try to stay in the market until they reach the shut down point in business. It is a point where a business revenue just covers the variable expenses.
If a firm has a levered beta of .9 and a debt to equity ratio of 1, what is the unlevered beta assuming a tax rate of 30%? (Round to the nearest hundredth)
Answer:
Unlevered beta = 0.53
Explanation:
Beta is a measure of systematic risk. Systematic risk is further divided into business and financial.
Business risk and financial risk. Business risk is that associated with the nature of the business operations that causes variability in the operating income of the business.
This is measured by the unlevered beta where the company has no debt finance.
Financial risk, on the other hand, is associated with use of debt finance . A company that uses a form of debt would face such risk . The systematic risk of such business would be measured using the levered beta.
The formula below shows the relationship:
βa = βe × Ve/ (Ve + Vd(1-T) )
βa -Unlevered beta
βe - Levered beta
Ve- Equity weight
Vd- Debt weight
T- Tax rate
DATA
βe- 0.9
βa- ?
Ve- 1
Vd- 1
T- 0.3
βa = 0.9 × 1/(1 + 1×(1-0.3)=0.529
βa - 0.53
Unlevered beta = 0.53