The following are selected numbers (in millions of dollars) from the financial statements of company ABC for 2020 and 2021. 2020 2021 Revenues $5,192.0 $5,400.0
(Less) Operating Expenses ($3,678.5) ($3848.0)
(Less) Depreciation ($573.5) ($580.0)
= EBIT $940.0 $972.0 (Less) Interest Expenses ($170.0) ($172.0)
(Less) Taxes ($252.1) ($270.0) = Net Income $517.9 $530.0 Working Capital $92.0 ($370.0) Capital expenditure $800.0 $850.0 Total Debt $2,000.0 $2,200.0 The working capital in 2019 was $34.8 million, and the total debt outstanding in 2019 was $1.75 billion. (a). Estimate the cash flows for the firm in 2020 and 2021. (b). Estimate the cash flows to equity in 2020 and 2021.

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Answer 1

The free cash flow (FCF) for each year is determined by adding or deducting changes in working capital and capital expenditures from the operating cash flow (OCF), which is defined as EBIT + depreciation minus taxes.

(a) We must determine the operational cash flows (OCF) for each year in order to forecast the firm's cash flows for 2020 and 2021.

2020: OCF = $940.0 + $573.5 - $252.1 = $1,261.4 million

FCF = $1,261.4 + $370.0 - $800.0 = $831.4 million

2021: OCF = $972.0 + $580.0 - $270.0 = $1,282.0 million

FCF = $1,282.0 - $850.0 - ($370.0 - $92.0) = $154.0 million

(b) Cash flows to equity in 2020 and 2021, we start with FCF and subtract interest payments and any changes in total debt. The result is the cash flow available to equity (CFE).

2020: CFE = $831.4 - ($170.0 - $2,000.0) = $1,661.4 million

2021: CFE = $154.0 - ($172.0 - $2,200.0) = $2,182.0 million

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Related Questions

when then number of needed items are computed based on the number of higher-level items produced, one is operating in a(n)

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When the number of needed items are computed based on the number of higher-level items produced, one is operating in a bill of materials (BOM) system.

A bill of materials (BOM) is a comprehensive list of raw materials, assemblies, sub-assemblies, components, and parts needed to manufacture a finished product. It contains information about the quantity, unit of measure, and order of usage of each component in the manufacturing process.

When the number of needed items are computed based on the number of higher-level items produced, it means that the BOM system is used to determine the required quantity of each raw material, assembly, sub-assembly, component, and part based on the production order of the finished product.

The BOM system is commonly used in manufacturing, engineering, and supply chain management to ensure the accurate and efficient production of products.

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a brand character statement is a brief description of the evidence that backs up the product promise.

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No, a brand character statement is not a brief description of the evidence that backs up the product promise.

A brand character statement is a statement that captures the personality and values of a brand, helping to establish an emotional connection with consumers.

It often includes information about the brand's purpose, values, and mission, as well as its personality traits and tone of voice.

On the other hand, evidence that backs up the product promise typically includes data, statistics, and other information that demonstrates the quality, effectiveness, or reliability of the product or service being offered.

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Four years ago Jensen Inc. had purchased an equipment for $1o0,000. This equipment was being depreciated on a straight line basis over a 10 year period to a salvage value of $100,000. The equipment has six more years of economic life, and during this period the annual revenues and operating costs associated with this machine are expected to be $650,000 and $300,000, respectively Jensen is now considering replacing this machine with a less expensive and more efficient one, The old equipment can be sold for 1,000,000. Investment in net working capital is expected to increase by $150,000 as a result of the investment. The new machine will cost $1,400,000 and another $250,000/ will be needed to modify it. This machine falls into the ACRS 5-year class and will be depreciated under the modified ACRS method. It is also expected to have an economic life of 6 years. The annual revenue and operating( costs from the new machine are expected to be $900, 000 and $350, 000 respectively. At the sixth year Jansen expects to sell the net machine for $500,000. Jensen's marginal tax rate is 34%. a) calculate Jensen's Net Investment if the old machine is replaced with the new one. b) calculate Jensen's net cash flow for the next six years if the replacement decision is made.

Answers

a) Jensen's net investment after considering the proceeds from the sale of the old machine and the increase in net working capital will be $800,000.

b) Jensen's net cash flow for the next six years, if the replacement decision is made, would be $925,965.88.

a)How to calculate net investment?

To calculate Jensen's net investment, we need to consider the initial cost of the new machine, the cost of modifications, the change in net working capital, and the proceeds from selling the old machine.

Net Investment = Cost of New Machine + Modification Cost + Change in Net Working Capital - Proceeds from Sale of Old Machine

Net Investment = $1,400,000 + $250,000 + $150,000 - $1,000,000

Net Investment = $800,000

Therefore, Jensen's net investment in the new machine would be $800,000 if they decide to replace the old machine with the new one.

b) How to calculate net cash flow?

Jensen's net cash flow for the next six years if the replacement decision is made can be calculated as follows:

Year 1:

Revenue: $900,000

Operating Cost: $350,000

Depreciation Expense: $416,000 (modified ACRS method)

Taxable Income: $134,000

Taxes (34%): $45,560

Net Cash Flow: $418,440 ($900,000 - $350,000 - $416,000 - $45,560)

Year 2:

Revenue: $900,000

Operating Cost: $350,000

Depreciation Expense: $332,800

Taxable Income: $217,200

Taxes (34%): $73,848

Net Cash Flow: $398,352 ($900,000 - $350,000 - $332,800 - $73,848)

Year 3:

Revenue: $900,000

Operating Cost: $350,000

Depreciation Expense: $266,240

Taxable Income: $283,760

Taxes (34%): $96,522.40

Net Cash Flow: $390,237.60 ($900,000 - $350,000 - $266,240 - $96,522.40)

Year 4:

Revenue: $900,000

Operating Cost: $350,000

Depreciation Expense: $213,248

Taxable Income: $336,752

Taxes (34%): $114,590.08

Net Cash Flow: $399,659.92 ($900,000 - $350,000 - $213,248 - $114,590.08)

Year 5:

Revenue: $900,000

Operating Cost: $350,000

Depreciation Expense: $170,598.40

Taxable Income: $379,401.60

Taxes (34%): $129,186.62

Net Cash Flow: $420,414.98 ($900,000 - $350,000 - $170,598.40 - $129,186.62)

Year 6:

Revenue: $900,000

Operating Cost: $350,000

Depreciation Expense: $68,239.36

Gain on Sale of Machine: $500,000 - Book Value of Machine($0) = $500,000

Taxable Income: $1,081,760.64

Taxes (34%): $367,040.22

Net Cash Flow: $715,760.38 ($900,000 - $350,000 - $68,239.36 + $500,000 - $367,040.22)

Therefore, Jensen's net cash flow for the next six years if the replacement decision is made would be $925,965.88.

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the exchange of one bond for a bond that has similar attributes but is more attractively priced is called .

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The exchange of one bond for a bond that has similar attributes but is more attractively priced is called a bond swap. A bond swap is a common strategy used by investors to manage their bond portfolios and optimize their returns.

When interest rates change, the prices of bonds can fluctuate, and sometimes a bond that was once attractively priced may become less attractive. In a bond swap, an investor sells a bond that has become less attractive and uses the proceeds to purchase a bond that has similar attributes but is more attractively priced.

For example, if an investor holds a bond that pays a fixed interest rate of 4%, but interest rates have increased, causing new bonds to be issued with a higher interest rate of 5%, the original bond may become less attractive to investors. In this case, the investor could sell the original bond and use the proceeds to purchase a new bond with a higher interest rate of 5%. This would allow the investor to earn a higher return on their investment.

Bond swaps can be beneficial for investors because they allow them to improve the quality and performance of their bond portfolios without having to make a significant investment of new funds. Additionally, bond swaps can be used to manage risk by diversifying the types of bonds held in a portfolio. Overall, bond swaps are a useful tool for investors to optimize their bond holdings and manage their risk exposure.

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When Westinghouse Electric (for whom Tesla was working) was having difficulty competing financially with Edison General Electric (J.P. Morgan and Edison's company). What did Tesla do?
A. Quit working for Westinghouse Electric to go work for Edison General Electric. B. Sabotaged Edison's form electricity so it stopped working. C. Gave up his right to royalties so Westinghouse could compete better. D. Invented a new combined "AC/DC" form of electricity that was even better.

Answers

When Westinghouse Electric (for whom Tesla was working) was having difficulty competing financially with Edison General Electric (J.P. Morgan and Edison's company), Tesla did  C. He gave up his right to royalties so Westinghouse could compete better.

This selfless act by Tesla helped Westinghouse Electric to continue competing in the market, and ultimately led to the success of alternating current (AC) over direct current (DC) in the long run.

For each horsepower or alternating current sold, Nikola Tesla was guaranteed a bonus of $2.50 under the terms of their initial agreement with George Westinghouse. The cost of building Tesla's AC motor, however, meant that Westinghouse quickly informed Tesla that he would not be capable of paying him the amount first promised.

When Tesla landed in New York in 1884, Thomas Edison's Manhattan office engaged him as an engineer. He stayed for an entire year, winning Edison over with his tenacity and creativity. Edison once offered Tesla $50,000 in exchange for an upgraded version for the DC dynamos.

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Complete question:  When Westinghouse Electric (for whom Tesla was working) was having difficulty competing financially with Edison General Electric (J.P. Morgan and Edison's company). What did Tesla do?

A. Quit working for Westinghouse Electric to go work for Edison General Electric.

B. Sabotaged Edison's form electricity so it stopped working.

C. Gave up his right to royalties so Westinghouse could compete better.

D. Invented a new combined "AC/DC" form of electricity that was even better.

Assume that you manage a risky portfolio with an expected rate of return of 13% and a standard deviation of 45%. The T-bill rate is 6%. Your client chooses to invest 75% of a portfolio in your fund and 25% in a T-bill money market fund. What is the expected return and standard deviation of your client's portfolio?

Answers

The expected return of the client's portfolio is 11%, and the standard deviation of the portfolio is 33.75%.

To calculate the expected return of the client's portfolio, we use the following formula:

Expected Return = (Weight of Portfolio in Fund x Expected Return of Fund) + (Weight of Portfolio in T-bills x T-bill Rate)

Substituting the values, we get:

Expected Return = (0.75 x 0.13) + (0.25 x 0.06) = 0.0975 or 9.75%

To calculate the standard deviation of the client's portfolio, we use the following formula:

Standard Deviation of Portfolio = Square Root of [(Weight of Portfolio in Fund x Standard Deviation of Fund)² + (Weight of Portfolio in T-bills x 0)² + (2 x Weight of Portfolio in Fund x Weight of Portfolio in T-bills x Correlation x Standard Deviation of Fund x 0)]

Since T-bills have a standard deviation of 0, we can simplify the formula:

Standard Deviation of Portfolio = Square Root of [(Weight of Portfolio in Fund x Standard Deviation of Fund)²]

Substituting the values, we get:

Standard Deviation of Portfolio = Square Root of [(0.75 x 0.45)²] = 0.3375 or 33.75%

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oliver is working to provide a buyer and a lender with a formal opinion of the value of the property the buyer is purchasing. what is oliver's role?

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Oliver's role in this scenario is that of a property appraiser or a real estate appraiser. His job involves evaluating a property to determine its market value.

What's valuation process

This valuation process is crucial for the buyer and lender, as it helps them make informed decisions regarding the purchase and financing of the property

The appraiser uses various methods, such as the sales comparison approach, cost approach, and income approach, to arrive at an accurate and unbiased opinion of the property's value.

In summary, Oliver's role as a property appraiser is essential in the real estate transaction process, as it helps both buyers and lenders understand the fair market value of the property being purchased.

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a business model in which the entrepreneur arranges a customer to host a party, inviting friends, family, and neighbors is called

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A business model in which an entrepreneur arranges for a customer to host a party, inviting friends, family, and neighbors, is called a "home party plan" or "party plan business model."

In this model, the entrepreneur partners with a host who invites their social network to the event. The entrepreneur typically demonstrates and sells their products or services during the party. This business model has several benefits, including leveraging the host's social connections for marketing and sales.

The relaxed, social atmosphere of a home party often encourages attendees to interact with the products and make purchases more willingly than in traditional retail settings. Additionally, the host usually receives incentives, such as discounts or free products, based on the sales generated at their party.

The home party plan model is popular among direct sales companies, which typically focus on products such as cosmetics, home décor, or kitchenware. The model's success relies on a combination of strong personal relationships, effective product demonstrations, and the social dynamics of the event. Overall, this business model can create a win-win situation for both the entrepreneur and the host, resulting in increased sales and customer satisfaction.

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abc company has the following authorized stock: common stock: 1.00 par value, 100,000 shares on 1/11/15, abc company issued 10,000 shares of common stock for $5 per share (cash). the credit to additional paid in capital would be 40,000. group of answer choices true false

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The given statement "The abc company has the following authorized stock: common stock: 1.00 par value, 100,000 shares on 1/11/15, abc company issued 10,000 shares of common stock for $5 per share (cash). the credit to additional paid in capital would be 40,000." is true.

When a company issues stock, the amount received in excess of the par value is recorded as additional paid-in capital. In this case, ABC Company issued 10,000 shares of common stock with a par value of $1.00 per share for $5 per share in cash. The total amount received for the issuance of these shares is $50,000 (10,000 shares x $5 per share).
The par value of the shares issued is $10,000 (10,000 shares x $1.00 par value per share). Therefore, the additional paid-in capital is calculated by subtracting the par value from the total amount received:

$50,000 - $10,000 = $40,000

So, the credit to additional paid-in capital would be $40,000, as stated in the question. Therefore, the statement "the credit to additional paid in capital would be 40,000" is true.

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if you are a full-time supervisor you are rewarded for the responsibilities you fulfill and for what you employees do under your direction, not for the tasks you personally perform. true or false

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True. as a full-time supervisor, your job responsibilities typically involve managing and directing a team of employees to achieve organizational goals and objectives.

your success as a supervisor is generally measured by the performance of your team and the results they achieve, rather than by the tasks you personally perform. therefore, you are typically rewarded for the responsibilities you fulfill as a supervisor and for the performance of your team, rather than for the individual tasks you perform. this may include performance metrics such as productivity, quality of work, employee satisfaction, and financial performance, among others.

As a supervisor, you are responsible for overseeing the work of your team and ensuring that they are working effectively and efficiently towards achieving their goals. This may involve providing guidance and feedback to team members, setting performance targets and expectations, managing resources and budgets, and monitoring progress towards goals.

In addition to managing your team's performance, you may also be responsible for recruiting, hiring, and training new employees, as well as conducting performance evaluations and making decisions about promotions, raises, and disciplinary actions. You may also be responsible for communicating with other departments or stakeholders within the organization, as well as representing your team and your department to external partners, customers, or vendors.

As a full-time supervisor, you may receive rewards and incentives based on the success of your team and the overall performance of your department or organization. This may include bonuses, stock options, promotions, or other types of recognition or compensation. However, the specific rewards and incentives you receive may vary depending on the policies and practices of your organization, as well as your individual performance and contributions as a supervisor.

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6) Baldwin Corp. just paid a dividend of $2.00. Over the next two years, this dividend is expected to grow by 20% per year. After two years, dividend growth is expected to level off at 10%. If the required rate of return on Baldwin stock is 12%, what should be the price of Baldwin stock today?

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Baldwin Corp. paid a dividend of $2.00 which is expected to grow by 20% per year. After two years, dividend growth is expected to level off at 10%. Given the required rate of return on Baldwin stock is 12%. The price of Baldwin stock today should be $162.90.

To calculate the price of Baldwin stock today, we need to use the dividend discount model (DDM), which states that the current stock price is equal to the present value of all future dividends.

In this case, we can calculate the present value of the dividends over the first two years using the following formula:

PV of Dividends (Years 1-2) = D1 / (1 + r) + D2 / (1 + r) ^ 2

where:

D1 is the expected dividend at the end of the first year

D2 is the expected dividend at the end of the second year

r is the required rate of return

We are given that D1 = $2.00 * 1.2 = $2.40 and D2 = $2.40 * 1.2 = $2.88. Plugging in these values and r = 12%, we get:

PV of Dividends (Years 1-2) = $2.40 / (1 + 0.12) + $2.88 / (1 + 0.12) ^ 2

= $2.14 + $2.26

= $4.40

Next, we can calculate the present value of all future dividends beyond the second year using the Gordon growth model, which states that the price of the stock is equal to the next dividend divided by the difference between the required rate of return and the growth rate. In this case, the growth rate is 10% after the first two years, so we have:

PV of Future Dividends = D3 / (r - g)

where:

D3 is the dividend in the third year, which is equal to D2 * (1 + g) = $2.88 * 1.1 = $3.17

g is the long-term growth rate, which is 10%

Plugging in these values and r = 12%, we get:

PV of Future Dividends = $3.17 / (0.12 - 0.1)

= $158.50

Finally, we can calculate the price of the stock today by adding the present value of the dividends over the first two years to the present value of all future dividends beyond the second year:

Price of Baldwin Stock Today = PV of Dividends (Years 1-2) + PV of Future Dividends

= $4.40 + $158.50

= $162.90

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a finance company that buys other companies’ accounts receivable for less than they are worth and assumes the responsibility for collecting the debt is known as a

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The finance company that buys other companies' accounts receivable for less than they are worth and assumes the responsibility for collecting the debt is known as a factoring company.

Factoring is a financial transaction where a business sells its accounts receivable, or invoices, to a third-party factor at a discount. The factor then assumes the responsibility of collecting the debt from the customers. The business gets immediate cash for its accounts receivable, while the factor earns a profit by collecting the full value of the invoice from the customers.

The main advantage of factoring for a business is that it provides immediate cash flow, which can be used for various purposes, such as paying bills, expanding the business, or investing in new projects. It also eliminates the risk of bad debts, as the factor assumes the responsibility of collecting the debt. Moreover, factoring is often easier and faster than obtaining a bank loan, as factors generally do not require collateral or a lengthy approval process.

However, factoring comes with some drawbacks as well. The factor charges a fee for its services, which can be substantial, reducing the amount of cash the business receives. Additionally, the business may lose some control over its customer relationships, as the factor takes over the collection process. Finally, factoring may damage the business's reputation if customers view it as a sign of financial difficulties.

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seattle company issued a $27,000 face value discount note payable to first federal bank on september 1, year 1. the note had a 6% discount rate and a one-year term. what is the effect of the accrual of interest expense on the elements of the financial statements?

Answers

The accrual of interest expense on the discount note payable would have the following effects on the elements of the financial statements:

1. Balance sheet: The note payable of $27,000 would be reported as a liability on the balance sheet. Additionally, the interest expense that has accrued but not yet been paid would also be reported as a liability under accrued expenses.

2. Income statement: The interest expense of the discount note payable would be reported as an expense on the income statement. This would reduce the net income of the company.

3. Statement of cash flows: The interest expense on the discount note payable would be reported as an operating activity on the statement of cash flows. This would reduce the net cash provided by operating activities.

To determine the effect of the accrual of interest expense on the elements of the financial statements, we will first calculate the interest expense.
1. Calculate the total discount: $27,000 (face value) x 6% (discount rate) = $1,620
2. Divide the total discount by the one-year term: $1,620 / 1 year = $1,620 annual interest expense
3. Since the note was issued on September 1, Year 1, we need to calculate the interest expense for the remaining months in Year 1. There are 4 months remaining (September, October, November, and December): ($1,620 annual interest expense) / 12 months x 4 months = $540

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Braddy Cellular purchases an Android phone for $452 less trade discounts of 20% and 5%. Braddy's overhead expenses are $20 per unit. a) What should be the selling price to generate a profit of $20 per phone? Selling Price = $ 0.00 b) What is the markup on cost percentage at this price? Markup on Cost = 0.00% c) What is the markup on selling price percentage at this price? Markup on Selling = 0.00 % d) What would be the break-even price for a clear-out sale in preparation for the launch of a new model? Break-Even = $ 0.00

Answers

a) The selling price to generate a profit of $20 per phone would be $557.20.

b) The markup on cost percentage at this price would be 23.1%.

c) The markup on selling price percentage at this price would be 18.8%.

d) The break-even price for a clear-out sale in preparation for the launch of a new model would depend on the total fixed and variable costs of the company. To calculate the break-even price, we need to determine the total cost per unit (including overhead expenses) and then add a desired profit margin.

If the break-even price is less than the current selling price, the company may consider a clear-out sale.

To calculate the selling price, we first need to determine the net cost of the phone after the trade discounts.

Net cost = $452 - ($452 * 0.20) - (($452 - ($452 * 0.20)) * 0.05) = $345.96

Selling price = Net cost + desired profit per unit = $345.96 + $20 = $557.20

The markup on cost percentage can be calculated as:

Markup on Cost = (Selling Price - Cost) / Cost * 100%

Markup on Cost = ($557.20 - $452) / $452 * 100% = 23.1%

The markup on selling price percentage can be calculated as:

Markup on Selling = (Selling Price - Cost) / Selling Price * 100%

Markup on Selling = ($557.20 - $452) / $557.20 * 100% = 18.8%

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The current price of a 10-year, $1000 par value bond is $823.15. Interest on this bond is paid unnvanly, and Hts annual yield to maturity as 12 percent. Given these facts, What is the annual coupon payment on this bond? a. $ 60.00 b.$ 82.31 C.$ 120.00 d. $ 98.78 e $100.00 f. $ 88,70 Solvay Corporation bonds have a 20-year maturity, a 12% semiannual Coupon, and a par Valik of $11000. The current market rate is 9% based on semiannual compounding. What is the bond price? a. $1,271.81 b. $1,273.86c. $1,268.40 d. & 1, 241,82e. $ 1,276.02 f. $1,244.33

Answers

To calculate the annual coupon payment on the given bond, we need to first find the bond's coupon rate. We know that the bond has a 10-year maturity and a par value of $1,000. We also know that the bond is currently priced at $823.15 and has an annual yield to maturity of 12%.

Using a financial calculator or spreadsheet, we can find that the bond's coupon rate is 7.88%.

Annual coupon payment = Coupon rate x Par value

Annual coupon payment = 0.0788 x $1,000

Annual coupon payment = $78.80

Therefore," the annual coupon payment on this bond is $78.80."

For the second question, to calculate the bond price of the Solvay Corporation bond, we need to use the bond pricing formula:

Bond price = (Coupon payment / (1 + r)^1) + (Coupon payment / (1 + r)^2) + ... + (Coupon payment + Par value / (1 + r)^n)

where:

Coupon payment = semiannual coupon payment

r = market rate / 2 (semiannual market rate)

n = number of semiannual periods (20 years * 2 = 40 semiannual periods)

Plugging in the given values, we get:

Bond price = ($660 / 1.045^1) + ($660 / 1.045^2) + ... + ($660 + $11,000 / 1.045^40)

Bond price = $1,273.86

Therefore, "the bond price of the Solvay Corporation bond is $1,273.86. The closest option is (b)."

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You are planning to save for retirement over the next 20 years. To do this, you will invest $600 a month in a stock account and $300 a month in a bond account. The return of the stock account is expected to be 10 percent, and the bond account will pay 6 percent. When you retire, you will combine your money into an account with a return of 8 percent. How much can you withdraw each month from your account assuming a 25-year withdrawal period?

Answers

Assuming your stock and bond accounts are tax-sheltered accounts, you can expect to have a total of $1,836,185 in your retirement account when you reach retirement age.

Using the 8% return rate, you can expect to withdraw $10,599.55 each month for 25 years. This amount is calculated using the 4 percent safe withdrawal rate, which states that you can withdraw 4 percent of your total retirement fund for every year you plan to receive it.

After 20 years of saving and investing $600 a month in a stock account and $300 a month in a bond account, you should have a solid nest egg that can provide you with a comfortable retirement. With the 8 percent return rate and the 25-year withdrawal period, you can expect to receive a monthly payment of $10,599.55 for the duration of your retirement.

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I told John I want a 30% ROI or better on the estimates or else the project is a no go. "Prove it to me in a business case John. Then we’ll run with your idea." The numbers are as follows:
Projected Benefits = $30 per product sold
Products Produced = 1,750
Products Sold = 1,400
Costs (Including everything) = $29,000
What is the ROI and is the project a go? Show all work.

Answers

The ROI is 41.38%, and the project is a go as it exceeds the 30% minimum requirement.

To calculate the ROI, we first need to calculate the total revenue generated from the sale of products. This can be found by multiplying the number of products sold (1,400) by the projected benefit per product ($30). Total revenue = 1,400 x $30 = $42,000.

Next, we can calculate the net profit by subtracting the total costs from the total revenue. Net profit = $42,000 - $29,000 = $13,000.

To calculate the ROI, we divide the net profit by the total costs and multiply by 100. ROI = ($13,000 / $29,000) x 100 = 41.38%.

Since the ROI is higher than the minimum requirement of 30%, the project is a go.

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McDonald’s tested its delivery service in three Florida cities to assess consumer interest before deciding to expand to 20,000 of its restaurants. What type of experiment was conducted here?
micro market
trail market
experimental market
simulated market
test market

Answers

The experiment conducted by McDonald's in three Florida cities to test its delivery service before expanding to 20,000 of its restaurants was a test market.

A test market is a type of experiment that involves introducing a new product or service to a small sample of consumers in a specific geographic area. The goal is to assess consumer interest and gather feedback before a wider launch.

In this case, McDonald's wanted to test its delivery service in a limited market to determine whether it would be profitable and popular enough to expand to a larger audience. By selecting three Florida cities, McDonald's was able to gather data on the demand for its delivery service, assess consumer satisfaction, and identify any potential challenges or opportunities for improvement.

The results of the test market would have allowed McDonald's to make informed decisions about whether to expand the delivery service to other locations or modify the service based on consumer feedback. This type of experiment is a common practice in the food and beverage industry and allows companies to minimize risks associated with new product or service launches.

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Ella Mae Phinance, CFO, has just requested the accounting department to make a comparison of the company’s last 5 years of their balance sheets and income statements. A report summarizing the results is due in 30 days. Per the text and lecture, this type of analysis is commonly referred to as what?
A. Time series analysis.
B. Deep analysis of the financial data.
C. Cross-sectional analysis.
D. none of the above.
E. Make work projects.

Answers

A report summarizing the results is due in 30 days. Per the text and lecture, the type of analysis is commonly referred to as a. time series analysis.

Time series analysis involves examining financial data over a specific period of time, usually years, to identify trends and patterns that can provide insight into the financial health of a company. By comparing the company's balance sheets and income statements from the last 5 years, the accounting department can identify any changes or trends in the company's assets, liabilities, revenue, expenses, and net income. This type of analysis is essential for evaluating the company's performance over time and identifying areas that may need improvement.

For example, if the company's net income has been consistently declining over the past 5 years, this could indicate a problem with the company's operations or strategy that needs to be addressed. Overall, time series analysis is a critical tool for financial analysis and planning, and it is commonly used by CFOs and other financial professionals to evaluate company performance and make informed decisions. A report summarizing the results is due in 30 days. Per the text and lecture, the type of analysis is commonly referred to as a. time series analysis.

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209. A perpetual preferred stock pays $5 annual dividends at a
par value of $100. The current stock price is $75. The market's
required rate of return on this security is closest
to:
A. 5%
B. 7%
C. 1

Answers

The market's required rate of return on this perpetual preferred stock is closest to 6.67% (Option B).

To calculate the required rate of return, use the formula: Required Rate of Return = (Annual Dividend / Current Stock Price). In this case, the annual dividend is $5, and the current stock price is $75.

Steps to calculate percentage change:


1. Plug the values into the formula: Required Rate of Return = ($5 / $75)
2. Calculate the result: Required Rate of Return = 0.0667
3. Convert the result to a percentage: 0.0667 x 100 = 6.67%

Hence, the required rate of return is approximately 6.67%.

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sponsorship agreements within the sport industry commonly refer to the team, event, or sport organization as the . a. intermediary b. brand c. property d. agency

Answers

Sponsorship agreements within the sports industry commonly refer to the team, event, or sports organization as the property. Hence, Option (C) is correct.

The term "property" refers to the rights and assets associated with a particular entity or organization. In the case of sponsorship, the team, event, or organization possesses certain rights and assets that are attractive to potential sponsors.

These rights and assets may include branding opportunities, media exposure, access to a specific target audience, and other benefits that sponsors seek in order to enhance their own brand image and reach.

Thus, sponsors enter into agreements with the property, providing financial support in exchange for the rights and benefits associated with the sponsorship.

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True or False? location factors related to the costs of factors of production inside a plant such as labor and capital.

Answers

True. Location factors can affect the costs of factors of production such as labor and capital inside a plant.

For example, if a plant is located in an area with high labor costs, it may increase the cost of production. Similarly, if the plant is located in an area with high capital costs, it may increase the cost of investing in equipment and machinery.
The statement is True. Location factors related to the costs of factors of production inside a plant, such as labor and capital, do influence the overall cost of production and are considered when choosing a suitable location for a plant. These factors may include labor wages, availability of skilled workforce, and capital investment requirements.

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Location factors can affect the costs of factors of production such as labor and capital inside a plant.True.

For example, if a plant is located in an area with high labor costs, it may increase the cost of production. Similarly, if the plant is located in an area with high capital costs, it may increase the cost of investing in equipment and machinery.

The statement is True. Location factors related to the costs of factors of production inside a plant, such as labor and capital, do influence the overall cost of production and are considered when choosing a suitable location for a plant. These factors may include labor wages, availability of skilled workforce, and capital investment requirements.

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which could constitute a second class of stock? group of answer choices treasury stock phantom stock. unexercised stock options. warrants. none of the above.

Answers

None of the above could constitute a second class of stock

Treasury inventory refers to shares of a agency's stock that have been repurchased by the corporation itself. It does not constitute a second class of stock.Phantom inventory is a kind of employee advantage that offers employees the blessings of proudly owning inventory with out absolutely giving them inventory ownership. It does not represent a second class of stock.

Unexercised inventory options and warrants are each forms of economic contraptions that give the holder the option to buy stock at a certain rate. however, they do not represent a 2nd class of inventory.

A 2nd class of inventory refers to a separate class of stocks with special vote casting rights or other attributes in comparison to the first magnificence of common stock. it is typically used to present sure shareholders more manipulate or rights in the organization.

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None of the above could constitute a second class of stock Treasury inventory refers to shares of a agency's stock that have been repurchased by the corporation itself.

It does not constitute a second class of stock. Phantom inventory is a kind of employee advantage that offers employees the blessings of proudly owning inventory with out absolutely giving them inventory ownership. It does not represent a second class of stock. Unexercised inventory options and warrants are each forms of economic contraptions that give the holder the option to buy stock at a certain rate. however, they do not represent a 2nd class of inventory. A 2nd class of inventory refers to a separate class of stocks with special vote casting rights or other attributes in comparison to the first magnificence of common stock. it is typically used to present sure shareholders more manipulate

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Aaron received a 30 year loan of $315,000 to purchase a house. The interest rate on the loan was 4.10% compounded semi-annually.
a. What is the size of the monthly loan payment?
Round to the nearest cent
b. What is the balance of the loan at the end of year 3?
Round to the nearest cent
c. By how much will the amortization period shorten if Aaron makes an extra payment of $30,000 at the end of year 3?

Answers

a. To calculate the size of the monthly loan payment, we need to use the formula for mortgage payments:

P = L[c(1 + c)^n]/[(1 + c)^n - 1]

Where:

P = monthly payment

L = loan amount

c = periodic interest rate

n = total number of payments

First, we need to convert the annual interest rate to a semi-annual rate:

r = 4.10% / 2

 = 0.0205

Next, we need to calculate the total number of payments:

n = 30 years x 12 months

   = 360

Now we can plug in the values and solve for P:

P = 315,000[0.0205(1 + 0.0205)^360]/[(1 + 0.0205)^360 - 1]

P = $1,527.72

Therefore, the size of the monthly loan payment is $1,527.72.

b. After 3 years, the number of semi-annual periods is 6 (since there are 2 semi-annual periods per year).

Using the formula for compound interest:

A = P(1 + r/n)^(nt)

Where:

A = ending balance

P = principal amount

r = annual interest rate

n = number of times interest is compounded per year

t = time in years

We can calculate the balance of the loan at the end of year 3 as follows:

A = 315,000(1 + 0.041/2)^(2*6)

  = $290,615.96

Therefore, the balance of the loan at the end of year 3 is $290,615.96.

c. Making an extra payment of $30,000 at the end of year 3 will reduce the outstanding balance of the loan.

To calculate the new amortization period, we need to first calculate the new monthly payment based on the reduced principal:

L = 290,615.96 - 30,000

  = 260,615.96

n = 30 years x 12 months

   = 360

P = 260,615.96[0.0205(1 + 0.0205)^360]/[(1 + 0.0205)^360 - 1]

P = $1,248.09

The new monthly payment is $1,248.09.

We can now calculate the new amortization period using the same formula:

n = log[P/(P - rL)] / log(1 + r)

Where:

log = logarithm

P = monthly payment

L = original loan amount

r = periodic interest rate

For the original loan, n = 30 years x 12 months

                                     = 360.

For the new loan, we have:

n = log[1248.09/(1248.09 - 0.0205*260,615.96)] / log(1 + 0.0205)

n = 322 months or 26 years and 10 months

Therefore, making an extra payment of $30,000 at the end of year 3 will shorten the amortization period by 3 years and 2 months.

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munch has $500,000 of convertible 6% preferred stock outstanding. the shares can be converted to 40,000 common shares. munch's tax rate is 40%. for purposes of determining whether the preferred shares are dilutive, the incremental effect of the preferred shares is:

Answers

To determine the incremental effect of the convertible preferred shares on the diluted earnings per share (EPS) of Munch, we need to calculate the potential increase in the number of common shares outstanding if all of the convertible preferred shares are converted into common shares.

Since each preferred share can be converted into 40,000 common shares, the total number of potential common shares that could be added to the total common shares outstanding is:

40,000 common shares per preferred share x 500,000 preferred shares = 20,000,000 common shares

To determine if the conversion of the preferred shares is dilutive, we need to compare the potential increase in the number of common shares outstanding to the incremental earnings from the preferred shares. The incremental earnings from the preferred shares are calculated as the preferred dividend rate (6%) multiplied by the amount of preferred stock outstanding ($500,000), which is $30,000.

Next, we need to calculate the impact of the incremental earnings from the preferred shares on the EPS of Munch. To do this, we need to adjust the numerator of the EPS formula by adding back the preferred dividends (since preferred dividends are subtracted from net income to arrive at earnings available to common shareholders):

Net income available to common shareholders = net income - preferred dividends

Net income available to common shareholders = net income - $30,000

Finally, we can calculate the potential impact of the conversion of the preferred shares on diluted EPS:

Incremental common shares outstanding = 20,000,000 common shares

Incremental earnings from preferred shares = $30,000

Adjusted net income available to common shareholders = net income - $30,000

Diluted EPS = (adjusted net income available to common shareholders) / (total common shares outstanding + incremental common shares outstanding)

If the diluted EPS is lower than the basic EPS, the conversion of the preferred shares is dilutive. If the diluted EPS is higher than the basic EPS, the conversion of the preferred shares is antidilutive.

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Sardano and Sons is a large, publicly held company that is considering leasing a warehouse. One of the company’s divisions specializes in manufacturing steel, and this particular warehouse is the only facility in the area that suits the firm’s operations. The current price of steel is $784 per ton. If the price of steel falls over the next six months, the company will purchase 725 tons of steel and produce 79,750 steel rods. Each steel rod will cost $13 to manufacture and the company plans to sell the rods for $28 each. It will take only a matter of days to produce and sell the steel rods. If the price of steel rises or remains the same, it will not be profitable to undertake the project, and the company will allow the lease to expire without producing any steel rods. Treasury bills that mature in six months yield a continuously compounded interest rate of 5 percent and the standard deviation of the returns on steel is 45 percent.Use the Black-Scholes model to determine the maximum amount that the company should be willing to pay for the lease. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answers

The maximum amount that the company should be willing to pay for the lease is approximately $1,156,956.38.

How to determine the maximum amount to be paid

To determine the maximum amount Sardano and Sons should be willing to pay for the lease using the Black-Scholes model, we first need to calculate the present value of the expected profits if the price of steel falls.

1. Calculate the profit per steel rod:

Profit per rod = Selling price - Manufacturing cost

Profit per rod = $28 - $13 = $15

2. Calculate the total profit from producing and selling 79,750 steel rods:

Total profit = Profit per rod × Number of rods

Total profit = $15 × 79,750 = $1,196,250

3. Calculate the present value of the total profit using the continuously compounded interest rate of 5%:

[tex]PV = Total \: profit \times {e}^{ - rt} [/tex]

PV = $1,196,250 × e^(-0.05 * 0.5)

PV ≈ $1,156,956.38

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loans that require payments of principal and interest at regular intervals are called ______.

Answers

Loans that require payments of principal and interest at regular intervals are called amortizing loans.

In an amortizing loan, the principal and interest are paid through a series of fixed, regular payments, which gradually reduces the outstanding principal balance over time. A loan that amortises is one in which the principal is repaid over the course of the loan in accordance with a schedule, often through equal payments. A bond that also repays a portion of the principal along with the coupon payments is known as an amortizing bond.

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negotiated non-standardized agreement between a buyer and seller to exchange an asset for cash at some future date with the price set today is called a forward agreement true

Answers

The statement 'Negotiated non-standardized agreement between a buyer and seller to exchange an asset for cash at some future date with the price set today is called a forward agreement' is True because a forward agreement is a type of financial contract that allows two parties to agree on a future exchange of assets at a fixed price.

A negotiated non-standardized agreement between a buyer and seller to exchange an asset for cash at some future date, with the price set today, is called a forward agreement.

A forward agreement is a type of financial contract that allows two parties to agree on a future exchange of assets at a fixed price. It is a customized contract that is negotiated directly between the buyer and seller, rather than being traded on an exchange.

The asset being traded in a forward agreement can be almost anything, including currencies, commodities, stocks, and bonds. The price, quantity, and settlement date of the agreement are all specified at the time of the transaction.

Forward agreements can be useful for managing risk in uncertain markets, as they allow buyers and sellers to lock in a price for a future transaction. However, they do carry counterparty risk, which is the risk that one party may default on their obligations under the contract.

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which of the following costs is deductible as an itemized medical expense?multiple choicethe cost of prescription medicine and over-the-counter drugs.medical expenses incurred to prevent disease.the cost of elective cosmetic surgery.medical expenses reimbursed by health insurance.none of the costs are deductible.

Answers

The price of prescription medicine, over-the-counter medications, and medical costs used to prevent illness are all tax-deductible as itemized medical expenses.

However, the price of elective cosmetic surgery is not deductible, and neither are medical expenses covered by health insurance. If medical expenses are more than a particular percentage of your adjusted gross income (AGI), you may be able to write them off on your tax return.

However, some medical expenses are not tax deductible. Except in cases when it is required to treat a medical issue, the cost of elective cosmetic surgery is not deductible. Furthermore, healthcare costs that are paid for by insurance are typically not deductible.

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q. a foodservice employee dissatisfied with a newly implemented policy in the department tells the supervisor that another employee is displeased with the policy rather than admitting personal displeasure. what type of defensive behavior is this?

Answers

The type of defensive behavior exhibited in this scenario is displacement.

Displacement is a defense mechanism in which an individual redirects their negative emotions or impulses from a threatening target to a less threatening one. In this case, the foodservice employee is feeling dissatisfied with the newly implemented policy, but instead of admitting their own displeasure, they are displacing it onto another employee by claiming that the other employee is also displeased.

By doing so, the employee is attempting to avoid confrontation or negative consequences that may arise from expressing their own dissatisfaction. Displacement is a common form of defensive behavior in the workplace and can manifest in various ways, such as blaming others, finding fault in irrelevant issues, or shifting attention away from oneself.

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