Answer:
Reserves= $52,500
Required reserves= $15,000
Excess reserves= $37,500
Explanation:
The Second republic bank has $150,000 in demand deposits
They also have $97,500 in outstanding loans
The reserves can be calculated as follows
Reserves= deposits-loans
= $150,000-$97,500
= $52,500
The required reserves can be calculated as follows
Required reserves= deposits × reserve ratio
= $150,000×10/100
= $150,000×0.1
= $15,000
The excess reserves can be calculated as follows
Excess reserves= reserves-required reserves
= $52,500-$15,000
= $37,500
Hence the reserves, required reserves and excess reserves are $52,500, $15,000 and $37,500 respectively
Consider a potential merger between two hypothetical beer companies. Prior to the merger, the first, Ann Hy, is worth $150 billion and the second, Czar Bosch, is worth $100 billion. If they merge, they will gain $30 billion in increased value from reduced costs and additional sales (in present discounted value). Thus the combined value of the new entity (called Ann Hy-Czar Bosch) would be $280 billion. How much more could Czar Bosch hope to get by using the theory of the pie instead of proportional division
Answer:
$3 billion more
Explanation:
Calculation of the amount that Czar Bosch could hope to get by using the theory of the pie instead of proportional division
If we are to use the theory of the pie instead of the proportional division this means that when using the proportional division, their would be likelihood that Czar Bosch would get an amount that is proportional to their market cap, 40% of the $30 billion, or $12 billion and in a situation where the they decide to split the pie this means that Czar Bosch would either get$15 billion or $3 billion more
.
Money can be many things, but it is NOT Group of answer choices a financial liability liguid illiguid a financial asset
Answer:
illiquid
Explanation:
Liquidity refers to how fast an asset can be converted to cash. Money is already cash, so it is the most liquid financial asset
ABC Company manufactures a contraption meant to enable a rider to fly behind a ski boat. After a few months, ABC begins to hear of injuries when riders crash into water or boats. In hopes of escaping liability, the president of ABC Company decides to discontinue business and sell all assets to XYZ Company. The president of XYZ Company is excited to purchase the assets at a bargain price and help ABC avoid liability based upon the assertion of the president of ABC that XYZ cannot legally be held liable for the flying accidents. Which of the following is true in a majority of states applying the traditional successor liability rule?
a. XYZ Company will not be held liable for the accidents so long as there is no contractual agreement by which it agrees to accept liability.
b. XYZ Company will only be held liable if it continues to manufacture the same product lines as ABC.
c. XYZ Company will only be held liable if it keeps the same tax number as ABC Company.
d. XYZ Company will likely be held liable for the accidents based upon the transaction being entered into wrongfully in order for ABC Company to escape successor liability.
Answer:
d. XYZ Company will likely be held liable for the accidents based upon the transaction being entered into wrongfully in order for ABC Company to escape successor liability.
Explanation:
Successor liability basically means that any creditor or plaintiff can recover from the company or individual that purchases an asset or a business (in this case ABC company) from any liabilities that may have been originated before the exchange transaction was finished, even if the firm or individual that purchases the asset or company did not assume or will not want to assume any liabilities as part of the exchange deal.
In other words, XYZ is liable for any lawsuits regarding the contraption device previously manufactured by ABC.
Wine and Roses, Inc. offers a 7% coupon bond with semiannual payments and a yield to maturity of 7.73%. The bonds mature in 9 years. Blank 1. Fill in the blank, read surrounding text. is the market price of a $1,000 face value bond
Answer:
current market price = $953.29
Explanation:
the market price of the bond = present value of the face value + present value of coupon payments
PV of face value = $1,000 / (1 + 3.865%)¹⁸ = $505.31
PV of coupon payments = $35 x 12.79935 (PV annuity factor, 3.865%, 18 periods) = $447.98
current market price = $505.31 + $447.98 = $953.29
3. When Blackstone investment company borrowed funds to buy out the stockholders of Busch Entertainment, it was participating in a(n)
Answer: c. Leveraged Buyout
Explanation:
A Leveraged buyout as the term suggests, is when a buyout is sponsored mainly by the use of debt. In Business Leveraged Buyouts usually occur when either the management, employees or private investors buys out or attempts to buy out the Shareholders of a company by using debt funding so that they can then own the company. The debt is acquired by using both assets of the company being bought and that of the company buying (unless they do not have any) as collateral.
When Blackstone investment company borrowed funds to buy out the stockholders of Busch Entertainment, it was participating in a Leveraged Buyout.
Assume that Denis Savard Inc. has the following accounts at the end of the current year. 1.Common Stock14.Accumulated Depreciation-Buildings. 2.Discount on Bonds Payable.15.Cash Restricted for Plant Expansion. 3.Treasury Stock (at cost).16.Land Held for Future Plant Site. 4.Notes Payable (short-term).17.Allowance for Doubtful Accounts. 5.Raw Materials18.Retained Earnings. 6.Preferred Stock (Equity) Investments (long-term).19.Paid-in Capital in Excess of Par-Common Stock. 7.Unearned Rent Revenue.20.Unearned Subscriptions Revenue. 8.Work in Process.21.Receivables-Officers (due in one year). 9.Copyrights.22.Inventory (finished goods). 10.Buildings.23.Accounts Receivable. 11.Notes Receivable (short-term).24.Bonds Payable (due in 4 years). 12.Cash.25.Noncontrolling Interest. 13.Salaries and Wages Payable. Prepare a classified balance sheet in good form
Answer:
Denis Savard Inc
Classified Balance sheet
Amount$ Amount$ Amount$
Assets
Current Assets
Cash xxx
Less Cash Restricted for Plant xxx xxx
Expansion
Accounts Receivable xxx
Less Allowance for Doubtful debt xxx xxx
Notes Receivable xxx
Receivables-Officers xxx
Inventory
Finished goods xxx
Work in Process. xxx
Raw Materials xxx xxx
Total Current Assets xxx
Stockholders Equity
Common Stock xxx
Add Paid-in Capital in Excess of xxx
Par-Common Stock.
Total paid in capital xxx
Add Retained Earnings. xxx
Total paid in capital and retained earnings xxx
Less Treasury Stock (at cost) xxx
Total Stockholders Equity xxx
Total Liability and Stockholders Equity xxx
Liability and Stockholders Equity
Current Liability
Salaries and Wages Payable. xxx
Unearned Subscriptions Revenue. xxx
Unearned Rent Revenue. xxx
Total Current Liability. xxx
Long term liabilities
Bonds Payable (due in 4 years) xxx
Less Discount on Bonds Payable xxx xxx
Total Long term liabilities. . xxx
Long term Investment
Preferred Stock (Equity) Investments. xxx
Land Held for Future Plant Site.. xxx
Cash Restricted for Plant Expansion. xxx
Total Long term Investment. xxx
Property, Plants and Equipment
Building. xxx
Less Accumulated Depreciation xxx xxx
- Buildings
Total Property, Plants and . xxx
Equipment
Intangible Assets
Copyrights. . xxx
Total Intangible Assets. . xxx
Total Assets. . xxx
a) While excavating, the Contractor hits a rock layer. Since the plans and soil report did not mention such rock, the contractor files a claim under: i. Force majeure. ii. Differing site conditions. iii. Design errors/omissions. iv. Unusual weather conditions. v. Changes in owner’s requirements.
Answer:
Differing site conditions
Explanation:
A differing site condition is a condition that has been changed. Since the plan did not mention this rock, the contractor can file a claim under this.
It is a hidden physical condition that is discovered at a site which is actually different from what was expected. It can also be regarded as unforeseen site condition.
A researcher who has no concern for issues of control or ability to generalize, instead choosing focus on providing rich descriptions would be following the _________ approach.
A. positivistic/empirical
B. interpretive
C. critical
D. scientific
Answer:
B. interpretive
Explanation:
A researcher who has no concern for issues of control or ability to generalize, instead choosing focus on providing rich descriptions would be following the interpretive approach.
In an interpretive approach to research, researchers are mainly focused on deciphering detailed meaning or rich descriptions so they can have a better understanding of the subject matter.
Under interpretive study, it is assumed that the meaning associated with matters are subjective and inter-subjective depending on their perception, thus researchers attempt to understand matters through the meanings attached by individuals in the sampling population.
Hence, interpretive researchers assume that issues are not singular or objective but depends on various human experiences.
he ability to hire, motivate, and retain human capital is an example of ________ capabilities in the resource-based view of the firm.
Answer:
Organizational capabilities
Explanation:
The ability to hire, motivate, and retain human capital is an example of organizational capabilities in the resource-based view of the firm.
An organizational capability is the ability of a firm to manage resources, such as it's employees, effectively which will give them an edge over competitors. Organizational capabilities differntiates a firm from competitors.
Rediger Inc., a manufacturing Corporation, has provided the following data for the month of June. The balance in the Work in Process inventory account was $40,000 at the beginning of the month and $26,000 at the end of the month. During the month, the Corporation incurred direct materials cost of $58,600 and direct labor cost of $33,400. The actual manufacturing overhead cost incurred was $54,800. The manufacturing overhead cost applied to Work in Process was $54,600. The cost of goods manufactured for June was:
Answer:
$160,600
Explanation:
The computation of the cost of goods manufactured is shown below:
= Direct material cost + direct labor cost + manufacturing cost applied + beginning work in process - ending work in process
= $58,600 + $33,400 + $54,600 + $40,000 - $26,000
= $160,600
Hence, the cost of goods manufactured for June is $160,600
g The Federal Reserve can lower short-run output by Group of answer choices lowering the real interest rate. increasing the money supply. decreasing the money supply. lowering the nominal interest rate. None of these answers is correct
Answer: Decreasing the money supply
Explanation:
When the Fed reduces money supply, it will remove the amount of excess money that people have to spend in the economy. This will lead to prices reducing because people no longer have a lot of money to spend on products therefore they will demand less goods. This will lead to the Aggregate demand curve shifting to the left. The new intersection with the Aggregate Supply curve will be at a point where prices will be lower and less quantity will be demanded which will signify a drop in the short-run output of the economy.
Kenneth Washington's weekly gross earnings for the week ending December 18 were $3,460, and his federal income tax withholding was $726.6. Assuming the social security rate is 6% and Medicare is 1.5% of all earnings, what is Washington's net pay? If required, round your answer to two decimal places.
Answer:
$2,473.9
Explanation:
The computation of net pay is shown below:-
Net pay = Gross pay - Federal income tax withholding - Social security tax - Medicare tax
= $3,460 - $726.6 - ($3,460 × 6%) - ($3,460 - 1.5%)
= $3,460 - $726.6 - $207.6 - $51.9
= $2,473.9
Therefore for computing the net pay we simply applied the above formula i.e the three above taxes are subtracted from the gross pay to arrive net pay
A newspaper advertisement for Cashmere Closet states "This Saturday 9 a.m., 1 Red Cashmere Scarf, worth $299.95… $10.00 First Come First Served." Which of the following statements is false?
A. The ad is clear and specific about what was being offered and asked for in exchange.
B. The ad lacks intent to constitute an offer.
C. The number of people who have the power of acceptance is limited.
Answer:
Option B
Explanation:
In simple words, The seller must have intention of making the offer. These are determined first from offeree 's place that there is intention to make an bid. When a fair person in the offerer 's position assumes that the terms or acts of the offeror represent an offer, that is an bid. It is an empirical, and not a moral, criterion for deciding that there is an desire to accept an bid.
Thus, from the above we can conclude that the correct option is B .
Planning, implementing and controlling the physical flow of materials, final goods and related information from points of origin to points of consumption to meet customer requirements at a profit is called
Answer:
Marketing Logistics
Explanation:
The term that is being described in the question is known as Marketing Logistics. Like mentioned, this is various aspects/processes that need to take place when moving products from producer to market all in order to meet customer demands while making a satisfactory profit at the same time. This is a big part of every business since a business with a good marketing logistics department can easily keep track of product shipments and move products or information quickly to the correct locations thus making everything much more efficient.
On Mar 3, Lyons Company paid dividends of $1,000. Use your knowledge of what a correct journal entry should look like to identify what would be included.
a. Dividends would be debited and listed first.
b. Dividends would be credited and listed second.
c. Cash would be credited and listed second.
d. Dividends expense would be debited and listed first.
e. Cash would be debited and listed first
Answer:
Cash would be credited and listed second.
Dividends would be debited and listed first.
Explanation:
The journal entry that must be passed as Cash would be credited and listed second, and Dividends would be debited and listed first. Thus, option A and C are correct.
What is Dividend?A dividend is a profit distribution made by a firm to its shareholders. When a business makes a profit or has a surplus, it can distribute a portion of the earnings to shareholders as a dividend. Any money that is not dispersed is re-invested in the company.
Dividends are typically paid out quarterly and might be either in cash or in the form of more stock reinvestment.
Cash would be credited and listed second in the journal entry, while dividends would be debited and listed first. As a result, options A and C are correct.
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The trial balance for Skysong, Inc. appears as follows: Skysong, Inc. Trial Balance December 31, 2022 Cash $280 Accounts Receivable 480 Prepaid Insurance 75 Supplies 166 Equipment 3680 Accumulated Depreciation, Equipment $550 Accounts Payable 353 Common Stock 1100 Retained Earnings 1290 Service Revenue 2768 Salaries and Wages Expense 920 Rent Expense 460 $6061 $6061 If, on December 31, 2022, the insurance still unexpired amounted to $18, the adjusting entry would contain a:
Answer:
Debit Insurance expenses for $57
Credit Prepaid insurance for $57
Explanation:
From the Trial Balance, Prepaid Insurance is $75. Since on December 31, 2022, the insurance still unexpired amounted to $18, the insurance expenses for the year can therefore be calculated as follows:
Insurance expenses = $75 - $18 = $57
The adjusting entries will therefore be as follows:
Particulars Dr ($) Cr ($)
Insurance expenses 57
Prepaid insurance 57
(To record insurance expenses for the year.)
Note that the amount of $18 unexpired insurance will now be the Prepaid insurance that will appear as an asset under the Current Asset in the balance sheet, while the $57 insurance expenses will be charged as an expense in the income statement.
You short 200 contracts of a call option on Stock XYZ. The contract multiplier is 100, i.e. each contract is on 100 shares of the stock.
In addition, you hold the following positions as of the end of previous trading day: 15,559 shares of the underlying stock; and $809,608 in debt.
The XYZ stock price is $51 right now. The risk-free interest rate is 4% per year. There are 252 trading days in a year.
Using the Black-Scholes model, you establish that the total delta of your option position is
-13,495
You adjust your hedge to bring your shareholding to match the new option delta. Which of the following is correct for your DEBT account, after you make the necessary adjustments?
a. $809,608 - (15,559 – 13,495)*51 = 704,344
b. $809,608e(0.04*1/252) + (15,559 – 13,495)*51 = 915,000
c. $809,608e(0.04*1/252) – (15,559 – 13,495)*51 = 703,932
d. $809,608 + (15,559 – 13,495)*51 = 914,872
Answer:
c. $809,608e(0.01*1/252) - (15,559 - 13,495) *51 = 703,932
Explanation:
Black Scholes Model is a mathematical model for pricing a contract of an option. It is best suited for dynamic financial market. The model determines the price of an option contract after incorporating the effects of volatility. In the given scenario there are 200 contracts of a call option. The trading days are 252 in the year and risk free interest rate is 4% prevailing in the market.
LSM subcontracted with Henry Isaacs Home Remodeling and Repair (Isaacs) to perform the roofing work on the project. Isaacs in turn subcontracted with Hal Brewster Home Improvements (Brewster), to conduct the roofing work on Isaacs' behalf. When Brewster performed work on the roof, he "botched the job" and caused extensive leaking inside the house. LSM and Issacs attempted to correct the problems, but eventually abandoned the project, leaving Logan-Baldwin to hire others to complete the renovations. Logan-Baldwin sued LSM, Isaacs, and Baldwin for breach of contract. Isaacs sought to dismiss Logan-Baldwin's claim against it, arguing no privity of contract existed between themselves and Logan-Baldwin, and therefore Isaacs should not be liable for any damages.
Required:
Does Logan-Baldwin have contract rights over Isaacs as an intended third-party beneficiary?
1. Because Henry Isaacs delegated its duty to repair the roof to Brewster, Henry Isaacs remains responsible for Brewster's failure to install the new roof on the residence properly.
a. True
b. False
2. Logan-Baldwin is entitled to compensatory damages (covering the cost of hiring other contractors to fix the roof) caused by the breach of contract by LSM and Henry Isaacs.
a. True
b. False
3. Logan-Baldwin qualified as a third party creditor beneficiary of the contract between LSM and Henry Isaacs and the contract between Henry Isaacs and Brewster, even if Logan-Baldwin is not named in those contracts.
a. True
b. False
4. Palisades Plaza is not entitled to damages for breach contract by LSM, Henry Isaacs, and Brewster unless Palisades Plaza has clean hands and has tendered performance under the contract.
a. True
b. False
5. If the agreement between Henry Isaacs and Brewster to install a new roof is a novation, Henry Isaacs is not liable for breach of contract for the failure to install the new roof properly.
a. True
b. False
Answer:
1. true
2. true
3. false
4. true
5. false
Fernando Designs is considering a project that has the following cash flows and WACC data. What is the project's discounted payback period? (6 points) What is the project’s modified internal rate of return?
Answer:
Discounted Payback period 3 years
Modified Internal rate of return 4.833%
Explanation:
Fernando Designs has following cash flows ,
year 1 : -$900
Year 2 : $500
Year 3 : $500
Year 4 : $500
Using 10% discount factor the cashflows will be,
discounted values
Year 1 : -900
Year 2 : 454.54
Year 3 : 445.45
Year 4 : 4132231
Payback period is -900 + 454.54 +445.45 = 3 years.
Modified Internal rate of return; [tex]\sqrt[n]{\frac{FV of cash inflows}{PV of cash outflow} }[/tex]
[tex]\sqrt[4]{\frac{1314}{900} }[/tex] = 4.833%
Intense rivalry involving actions and responses among similar competitors vying for the same customers in a marketplace is known as _____________.
Answer:
competitive dynamics
Explanation:
The term that is being described in this question is known as competitive dynamics. Like mentioned, this is the study of the rivalry between various firms that is made up of their competitive actions/responses, their micro/macro level context, and even their antecedents and consequences. Which all-in-all add up to their effort on acquiring the same customers as their client.
A new operating system for an existing maching is expected to cost $786000 and have a useful life of six years. The system yields an incremental after-tax income of $230000 each year after deducting its straight line depreciation. The predicted salvage value of the system is $90000. Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment.
Answer:
NPV is $771,739
Explanation:
As we know that:
Net Present Value = Present Value of Cash inflow (STEP 1) - Present Value of Cash outflow
STEP 1. Present Value of Cash Inflow
Here
Present Value of Cash Inflow = Annuity of Annual Cash flow - PV of Scrap Value
Annual Cash flow is $346,000 ($230,000 + ($786,000 - $90,000)/6)
So
Annuity of annual cash inflow = $346,000 * Annuity Factor
Here
Annuity Factor for 6 years is 4.3553
Now this means that:
Annuity of annual cash Inflow = $346,000 * 4.3553 = $1,506,934
Present Value of Residual Value ($90,000 * 0.5645) = $50,805
Present Value of cash inflows $1,557,739
Now putting values in the above equation, we have:
Net Present Value = $1,557,739 - $786,000
Net Present Value = $771,739
Determine the incremental rate of return (ROR) value of the two alternatives below. Hint: Convert RoR value to a percentage. If the answer is 10%, enter 10. Do not enter 0.01. A B First Cost, $ 135,000 185,000 Operating Cost, $/year 9,000 5,200 Salvage value, $ 9,000 10,000 Life, n [infinity] [infinity]
Answer:m Incremental rate of return (ROR) = 0.076 ≈7.6%
Explanation:
Given that;
A B
First Cost $ 135,000 185,000
Operating Cost $/year 9,000 5,200
Salvage value $ 9,000 10,000
Life, n [infinity ∞] [infinity ∞]
As alternatives have infinite life, salvage value will have no effect on calculations
Therefore;
Incremental initial cost (B-A) = 185000 - 135000 = 50000
Incremental annual cost (B-A) = 5200 - 9000 = -3800 (Annual savings)
Present worth of infinite annuity = A / i
Incremental rate of return ROR = 3800 / 50000 = 0.076 ≈7.6%
One implication of the bird-in-the-hand theory of dividends is that a given reduction in dividend yield must be offset by a more than proportionate increase in growth in order to keep a firm's required return constant, other things held constant.
a. True
b. False
Answer:
False ANSWER: True o One implication of the bird-in-the-hand theory of dividends is that a given reduction in dividend yield must be ...
Explanation:
follow mw
Consider the following $1,000 par value zero-coupon bonds: Bond Years to Maturity Yield to Maturity A 1 6.00 % B 2 7.00 % C 3 7.99 % D 4 9.41 % E 5 10.70 % The expected 1-year interest rate 4 years from now should be _________.
Answer:
16.01%
Explanation:
The expected 1-year interest rate 4 years from now is determined using the below formula:
The expected 1-year interest rate 4 years=(1+YTM5)^5/(1+YTM4)^4-1
YTM5 is the yield to maturity in year 5 i.e 10.70%
YTM4 is the yield to maturity in year 4 i.e 9.41%
The expected 1-year interest rate 4 years=(1+10.70%)^5/(1+9.41%)^4-1
The expected 1-year interest rate 4 years=16.01%
Ms. White lost her puppy. She advertises a reward of $50 for the return of her puppy. What is the contractual nature of Ms. White's advertisement? g
Answer:
unilateral contract
Explanation:
In this scenario, it seems that Ms. White's advertisement is for a unilateral contract. This is a contract agreement in which an individual (the offeror) promises to pay after the occurrence of a specific action or behavior. Which is what Ms. White is doing by offering money if someone brings her dog back safe and sound. Thus benefiting both parties.
Tony, a hateful, disgruntled, business law teacher notices that a student, Peter, who is past the age of majority, has a nice motorcycle that is for sale. Peter has struggled through school, is in his last semester, and needs to pass business law in order to graduate. Tony tells Peter that he would like to see Peter pass and, in the next sentence, says that he wants to buy the motorcycle for $100, a price far below the value of the motorcycle. Peter asks if Tony is serious about the price, and Tony replies, "I have the power here! Take it or leave it!" Tony proceeds to draw up a contract for the sale of the motorcycle for $100 which Peter signs. Peter does some research and finds that Tony has had several arrests for driving under the influence in a nearby town. As an act of revenge, Peter tells Tony that unless Tony sells Peter his new Mustang convertible for $50, he is publishing the facts about the arrests in the school newspaper. Tony reluctantly agreed to the deal. Which of the following is true if Tony seeks to rescind the contract for the sale of the Mustang?
A. Tony may rescind the contract on grounds of duress.
B. Tony may rescind the contract on grounds of misappropriation of name or likeness.
C. Tony may rescind the contract on grounds of fraud.
D. Tony may not rescind the contract because truth is involved.
E. Tony may rescind the contract on grounds of defamation.
Answer: A. Tony may rescind the contract on grounds of duress.
Explanation:
For contracts to be considered enforceable, a key factor is that the parties involved must have entered into the agreement of their own accord and free will. Therefore Duress, which denies a person of that free will, becomes a reason why a contract can be voided.
Tony sold Peter the Mustang convertible because Peter had threatened to release details that Tony would rather were kept private so Tony capitulated and sold the Mustang. Had Peter not threatened him, Tony would not have sold the car. This shows that Tony only sold the car under duress and as such can void the contract.
"A market maker enters a quote of $20.50 Bid; $21.00 Ask; with a size of "5 x 5" into the NASDAQ System. If a market order to buy is entered into the system for 1,500 shares, and this dealer's quote is matched, the market maker will be obligated to sell:"
Answer: 500 shares at $21.00
Explanation:
A market maker is one who buys and then sells security from which the stated market is made into, and using the account of the the firm. It should be noted that a market order to buy will have to be matched in sequence.
Therefore, if a market order to buy is entered into the system for 1,500 shares, and this dealer's quote is matched, the market maker will be obligated to sell 500 shares at $21.00.
Average costs _______initially due to the presence of fixed costs and then rise due to _________ a. rise; increasing fixed costs b. fall; decreasing marginal costs c. fall ; increasing marginal costs d. rise; decreasing fixed costs
Answer:
C. fall; increasing marginal costs.
Explanation:
Option C is the correct answer because initially, the average costs fall due to increasing return or production of more units. When output increases, the average fixed cost slopes downwards. Moreover, when the average cost falls, marginal cost also falls and it starts rising as the marginal cost cuts the average cost at its minimum point. However, after cutting at the minimum point, marginal cost increases, and due to which average cost also increases.
What is the difference in operating income between processing the cat bowls further versus selling them off at the split-off point?
Answer: -$1,920
Explanation:
Operating Income if processed further would be;
= (Sales * Price) - Incremental Cost
= (1,000 * $14) - 4,920
= 14,000 - 4,920
= $9,080
Operating Income if sold off at split-off point;
= Sales * Price
= 1,000 * $11
= $11,000
Difference
= Processed Further - Sold at split-off
= 9,080 - 11,000
= -$1,920
Difference would be an Operating (loss) of $1,920.
Great Lakes Packing has two bond issues outstanding. The first issue has a coupon rate of 3.82 percent, a par value of $1,000 per bond, matures in 6 years, has a total face value of $5.2 million, and is quoted at 103 percent of face value. The second issue has a coupon rate of 6.59 percent, a par value of $1,000 per bond, matures in 14 years, has a total face value of $9.5 million, and is quoted at 107 percent of face value. Both bonds pay interest semiannually. The company's tax rate is 35 percent. What is the firm's weighted average aftertax cost of debt
Answer:
3.22%
Explanation:
we must first determine the yield to maturity of both bonds in order to determine their before tax cost of debt:
YTM = {coupon + [(face value - market value)/n]} / [(face value + market value)/2]
YTM Bond₁ = {19.10 + [(1,000 - 1,030)/12]} / [(1,000 + 1,030)/2] = 16.6 / 1,015 = 0.01635 x 2 = 3.27%
YTM Bond₂ = {32.95 + [(1,000 - 1,070)/28]} / [(1,000 + 1,070)/2] = 0.0294 x 2 = 5.88%
firm's weighted after tax cost of debt = {[($5.2 / $14.7) x 3.27%] x (1 - 0.35)} + {[($9.5 / $14.7) x 5.88%] x (1 - 0.35)} = 0.75% + 2.47% = 3.22%