Tish is taxed at retirement on $260,000.
How much Tish will be taxed at retirement?In a stock bonus plan, an employer contributes stocks or its cash equivalent to an employee's retirement account. When Tish receives the stock at retirement, she will owe taxes on the value of the stock at that time.
Since the value of the stock is $380,000 at the time of distribution, that is the amount that would normally be subject to taxation.
However, Tish already paid taxes on the $120,000 that was contributed to the account, so she is only taxed on the appreciation in value from $120,000 to $380,000, which is $260,000.
Therefore, the correct answer is (b) Tish is taxed at retirement on $260,000.
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Use the work you completed for Parts, I, II, and III with your CLC group to inform your analysis for this assignment. Write a 500-750-word analysis of the significance of the three Matrices regarding their relevance for strategic planning. Describe the key information for each of the three matrices and how information from each will influence recommendations for strategic plans to improve the position of the company. Without prematurely determining and formalizing strategic goals and objectives, begin thinking about possible strategies to capitalize and add value to the organization based on the analysis of this information.
Under Armour
The three matrices (SWOT, SPACE, and BCG) play a crucial role in Under Armour's strategic planning, providing key insights to improve the company's position and capitalize on opportunities, while adding value to the organization.
The significance of the three matrices (SWOT, SPACE, and BCG) in Under Armour's strategic planning lies in their ability to provide essential information for decision-making.
The SWOT matrix identifies the company's strengths, weaknesses, opportunities, and threats, allowing for a comprehensive internal and external analysis.
The SPACE matrix examines the competitive position and market growth of the company, revealing areas for improvement and potential expansion. Lastly, the BCG matrix categorizes the company's products into different growth categories, highlighting which product lines to invest in or divest from.
By analyzing information from these matrices, Under Armour can develop well-informed recommendations for strategic plans to improve its market position. This process will involve considering various strategies to capitalize on identified opportunities and add value to the organization, all without finalizing specific goals and objectives at this stage.
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Question 2
Cross-Ocean Boats Ltd. is in the 30% tax bracket. It is interested in determining the minimum return that its stakeholders (investors) will accept. Since you have applied for an internship with them, they have assigned this task to you. To get started with your work, you compile some information as follows:
- Cross-Oceans has 3000, 6% semi-annual coupon bonds outstanding. These bonds will mature in 12 years and they sell for 80% of their par value as of now.
- The firm is also partly equity financed. It has 100,000 outstanding common shares and 19,000 shares of preferred stock. The common shares command a market price of $55 per share and the beta of Cross-Ocean stock is 1.20. Preference shares offer a 6% fixed dividend and sell for $110 per share.
- The risk-free rate is 4% and the market risk premium is 6%
Armed with this information, compute:
1. The minimum required return by Cross-Ocean’s debtholders
2. The minimum required return by Cross-Ocean’s common shareholders
3. The minimum required return by Cross-Ocean’s preferred shareholders
4. The overall minimum required return for Cross-Ocean’s stakeholders.
Minimum required return for Cross-Ocean's debtholders: 5.45%.
1. We can use the bond pricing formula to calculate the required return for debtholders:
PV = C x [1 - (1 + r)^(-n)]/r + FV / (1 + r)^n
where
PV = current market price of bond (80% of par value)
C = semi-annual coupon payment = 6% / 2 x $1,000 = $30
r = required semi-annual rate of return
n = number of semi-annual periods = 12 x 2 = 24
FV = face value of bond = $1,000
Using this formula, we can solve for r as follows:
0.8 x $1,000 = $30 x [1 - (1 + r)^(-24)]/r + $1,000 / (1 + r)^24
Solving for r using a financial calculator or Excel, we get r = 7.66%.
2. Minimum required return for debtholders = 7.66% x 0.7 = 5.36%
Minimum required return for Cross-Ocean's common shareholders:
We can use the capital asset pricing model (CAPM) to calculate the required return for common shareholders:
r = Rf + β x (Rm - Rf)
where
r = required rate of return for common shareholders
Rf = risk-free rate = 4%
β = beta of Cross-Ocean stock = 1.20
Rm = market risk premium = 6%
Using this formula, we can solve for r as follows:
r = 4% + 1.20 x 6% = 11.2%
3. Minimum required return for Cross-Ocean's preferred shareholders:
Minimum required return for preferred shareholders = $6 / $110 = 5.45%
4. Overall minimum required return for Cross-Ocean's stakeholders:
WACC = wd x rd x (1 - T) + wc x rc + wp x rp
where
wd = weight of debt = 3000 x $1,000 x 0.8 / ($55 x 100,000 + 3000 x $1,000 x 0.8 + 19,000 x $110) = 0.23
rd = required return for debtholders = 5.36%
T = tax rate = 30%
wc = weight of common equity = $55 x 100,000 / ($55 x 100,000 + 3000 x $1,000 x 0.8 + 19,000 x $110) = 0.74
rc = required return for common shareholders = 11.2%
wp = weight of preferred equity = 19,000 x $110 / ($55 x 100,000 + 3000 x $1,000 x 0.8 + 19,000 x $110) = 0.03
rp = required return for preferred shareholders = 5.45%
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What would be the PV of the $8,500 received in 13 years if a bank offering the 6.2% rate had quarterly compounding? a. $3,938.34 b. $3,804.33 c. $3.888.66 d. $3,819.99
The present value of the $8,500 received in 13 years at a 6.2% annual interest rate with quarterly compounding is approximately $3,938.34 (option a).
To find the present value (PV) of the $8,500 received in 13 years with a 6.2% annual interest rate and quarterly compounding, we will use the formula:
PV = FV / (1 + r/n)^(nt)
where:
- PV is the present value
- FV is the future value, which is $8,500
- r is the annual interest rate (in decimal form), which is 0.062 (6.2%)
- n is the number of times interest is compounded per year (quarterly compounding means 4 times per year)
- t is the number of years, which is 13
First, let's calculate r/n:
r/n = 0.062 / 4 = 0.0155
Next, we'll find nt:
nt = 4 * 13 = 52
Now, we can calculate (1 + r/n)^(nt):
(1 + r/n)^(nt) = (1 + 0.0155)^(52) ≈ 2.1553
Finally, we'll find the present value:
PV = FV / (1 + r/n)^(nt) = $8,500 / 2.1553 ≈ $3,938.34
Therefore, the present value of the $8,500 received in 13 years at a 6.2% annual interest rate with quarterly compounding is approximately $3,938.34 (option a).
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Assume a class named Dollars exists. Write the headers for member functions that overload the prefix and postfix ++ operators for that class. Note: You do not need to code the function body. You only code the function definition. in c++
To overload the prefix and postfix ++ operators for a class named Dollars in C++, the headers for the member functions would be:
Prefix increment operator:
Dollars& operator++();
Postfix increment operator:
Dollars operator++(int);
The prefix increment operator returns a reference to the updated object, while the postfix increment operator returns a copy of the original object before the increment is applied. In both cases, the operator is defined as a member function of the Dollars class and can modify the object's state. These operators can be used to increment the value of Dollars objects by a certain amount, making them more convenient to work with in certain situations.
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Complete Question:
Assume you have a class named Dollars in C++. Write the headers for member functions that overload the prefix and postfix ++ operators for that class. Note that you only need to write the function definitions, not the entire class definition.
suppose a country has 60 million employed and 12 million unemployed persons. of the working-age population is 120 million,
Based on the information provided, we can calculate the labor force participation rate, the unemployment rate, and the employment rate for the country as follows:
Labor Force = Employed + Unemployed
Labor Force = 60 million + 12 million
Labor Force = 72 million
Labor Force Participation Rate = (Labor Force / Working Age Population) x 100%
Labor Force Participation Rate = (72 million / 120 million) x 100%
Labor Force Participation Rate = 60%
Unemployment Rate = (Unemployed / Labor Force) x 100%
Unemployment Rate = (12 million / 72 million) x 100%
Unemployment Rate = 16.67%
Employment Rate = (Employed / Working Age Population) x 100%
Employment Rate = (60 million / 120 million) x 100%
Employment Rate = 50%
Therefore, the labor force participation rate is 60%, the unemployment rate is 16.67%, and the employment rate is 50%.
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Do you see yourself as more a Keynesian Economist?
As a Keynesian Economist, the concept of economics: developed by John Maynard Keynes, is an economic theory that emphasizes the importance of government intervention and demand-side policies in stabilizing the economy, reducing unemployment, and promoting growth.
This theory suggests that during recessions, government spending should increase to stimulate demand and encourage economic recovery. Keynesian economics is an economic theory that emphasizes the importance of government intervention in the economy to stabilize economic growth and employment.
It advocates for increasing government spending and lowering taxes during economic downturns to stimulate demand and encourage investment.
This approach has been used by governments around the world to counter economic recessions. So, whether one sees themselves as a Keynesian economist or not, depends on their agreement with these principles
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The value of a fund grows according to the accumulation function a(t)=1+0.012. A deposit of Pis made into the fund at time t = 0. The value of the fund at time t = 8 is 2650. Find P. a.1615.85 b. 1556.07 c. 1436.49
d.1496.28 e.1376.71
The deposit P needed to achieve a fund value of 2650 at time t = 8 is approximately $1496.28.
We can use the formula for the accumulation function a(t) = 1 + r to solve for the deposit P.
If a deposit P is made at time t = 0, the value of the fund at time t = 8 will be:
[tex]V = P × a(8) = P × (1 + 0.012)^8[/tex]
We are given that the value of the fund at time t = 8 is 2650. Therefore, we can solve for P:
[tex]P = V / a(8) = 2650 / (1 + 0.012)^8[/tex]
P ≈ 1496.28
Therefore, the deposit P needed to achieve a fund value of 2650 at time t = 8 is approximately $1496.28.
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The initial deposit made into the fund was approximately $2416.49.
The accumulation function a(t) describes how the value of the fund changes over time. It's given as a continuous function a(t) = 1 + 0.012t, where t is measured in years.
Suppose a deposit of P is made into the fund at time t = 0. Then the value of the fund at time t is given by:
V(t) = P*a(t)
We are given that the value of the fund at time t = 8 is 2650. Therefore, we have:
V(8) = P*a(8) = 2650
Substituting the expression for a(t), we get:
P*(1 + 0.012*8) = 2650
Simplifying this equation, we get:
P*1.096 = 2650
Dividing both sides by 1.096, we get:
P = 2650/1.096
Solving for P, we get:
P ≈ 2416.49
None of the given answer options match this result exactly. However, answer option c. 1436.49 is off by a factor of 10, and answer option e. 1376.71 is off by a factor of 100. Answer option a. 1615.85 is closest, but still significantly off from the actual answer. Therefore, the correct answer is not among the given options.
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To earn a high rating from the bond rating agencies, a company would want to have:
I. a low times interest earned ratio
II. a low debt to equity ratio
III. a high quick ratio
A. I only
B. II and III only
C. I and III only
D. I, II and III
To earn a high rating from the bond rating agencies, a company would want to have: II and III only. The correct option is B.
I. A high times interest earned ratio (not a low one): This indicates the company's ability to cover its interest payments. A higher ratio means the company has a better capacity to meet its interest obligations, making it more attractive to bond rating agencies.
II. A low debt to equity ratio: This signifies the proportion of a company's financing coming from debt as opposed to equity. A low ratio indicates less reliance on debt, which is considered less risky by bond rating agencies.
III. A high quick ratio: Also known as the acid-test ratio, this measures a company's ability to cover its short-term liabilities using its most liquid assets. A high quick ratio indicates better liquidity and a stronger financial position, which is favorable for bond rating agencies.
To earn a high rating, a company should aim for a low debt to equity ratio and a high quick ratio, while also maintaining a high times interest earned ratio.
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businesses that provide steady employment may qualify for a reduction in unemployment taxes based on: multiple choice question. experience rating system
Businesses that provide steady employment may qualify for a reduction in unemployment taxes based on experience rating system. The correct answer is A.
The experience rating system is a method used by states to determine the unemployment insurance tax rates for individual employers. It is based on the past employment history of a business, including the number of former employees who have filed for unemployment benefits. Employers who have had fewer layoffs and claims for benefits are typically rewarded with lower tax rates, while those with more claims are assessed higher rates.
The idea behind this system is to incentivize businesses to maintain stable employment, as it benefits both the employer and the state's unemployment insurance program.
The correct answer is A.
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an auditor makes inquiries of an entity's customers and discovers the customers received large quantities of unordered products just before year-end. this is an indicator of
An auditor makes inquiries about an entity's customers and discovers that customers received large quantities of unordered products just before year-end. This is an indicator of overstated revenues.
By including fictional asset expenses or manufactured revenues, overstating assets and revenues presents a corporation as being financially stronger than it actually is. Excluding expenses or debt commitments reveals understated liabilities and costs.
Both strategies boost the company's equity and net value. Increased earnings per share, partnership profit interests, or a more steady representation of the company's actual status are the effects of this overstatement and/or understatement.
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an institution is required to make the financial interests of an investigator funded by the u.s. public health service (phs) publicly accessible if:
An institution is required to make the financial interests of an investigator funded by the U.S. Public Health Service (PHS) publicly accessible if they are involved in PHS-funded research. The aim is to promote objectivity in research by identifying and managing financial conflicts of interest that may arise.
The institution must have a written policy in place that requires investigators to disclose any significant financial interests related to their institutional responsibilities. These disclosures must be made at the time of application for PHS-funded research, annually thereafter, and within 30 days of discovering or acquiring a new financial interest.
If a financial conflict of interest is identified, the institution must develop and implement a management plan to ensure that the research is conducted objectively and the integrity of the research is maintained.
The financial interests of the investigator must also be made publicly accessible through a searchable website or by responding to written requests within five business days.
Overall, the disclosure and management of financial conflicts of interest help to ensure the credibility and transparency of PHS-funded research.
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at which stage of the consumer decision-making process is cognitive dissonance most likely to occur?
Cognitive dissonance is a psychological term used to describe the mental discomfort experienced by an individual who holds two or more contradictory beliefs, values, or ideas.
In the context of consumer behavior, cognitive dissonance is most likely to occur after a purchase has been made, during the post-purchase evaluation stage. This is because the consumer has committed to a decision and may begin to feel anxious about whether or not they made the right choice.
If the product or service does not meet their expectations, or if they find out that there are better alternatives, they may experience cognitive dissonance and question their decision. The marketer can mitigate this by ensuring that the product meets or exceeds the consumer's expectations and providing excellent customer service.
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what does it mean when the government increases the allowable deduction for individual retirement accounts per person
When the government increases the allowable deduction for individual retirement accounts (IRAs) per person, it means that individuals can contribute more money to their IRAs while reducing their taxable income. An IRA is a type of retirement savings account that allows individuals to save for their retirement while receiving tax benefits.
The government sets a limit on the amount of money that individuals can contribute to their IRAs each year. This limit is known as the contribution limit.
When the government increases the allowable deduction for IRAs, it means that individuals can contribute more money to their accounts and deduct more from their taxable income. For example, if the government increases the allowable deduction from $5,500 to $6,000 per year, individuals can contribute up to $6,000 to their IRAs and deduct $6,000 from their taxable income.
Increasing the allowable deduction for IRAs is a way to encourage individuals to save more for their retirement. By offering tax benefits, the government hopes to incentivize people to save for their future. It also helps to reduce the burden on social security and other retirement programs.
In conclusion, when the government increases the allowable deduction for IRAs, it means that individuals can contribute more money to their accounts while reducing their taxable income. This is a way to encourage people to save more for their retirement and reduce the burden on social security and other retirement programs.
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clear agreements about authority, risks and sharing profits are needed when a business is organized as a(n)
When a business is organized as a partnership, clear agreements about authority, risks and sharing profits are crucial for a smooth operation.
Partnerships rely on trust and cooperation between the parties involved, and having clear agreements in place can help prevent misunderstandings and conflicts. Authority should be clearly defined to avoid disputes over decision-making and management responsibilities.
Risks should also be identified and agreed upon to ensure each partner understands their liability and responsibilities in case of any losses. Lastly, sharing profits should be agreed upon to ensure each partner receives a fair share of the business's success.
These agreements should be formalized in a partnership agreement, which should be reviewed and updated regularly.
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a potential investor's single goal is to a. avoid risk at all costs. b. minimize taxes and minimize losses. c. make as much money as possible. d. maximize returns while minimizing personal risk.
Answer: A potential investor's single goal is to (D) maximize returns while minimizing personal risk.
Explanation: While all of the other options may be the factors that a potential investor considers, ultimately the primary goal is to earn maximum return on their investment while minimizing the amount of risk that takes on. This means that the investor will likely be looking for opportunities that offer a high potential for return, but also have some level risk management in place to protect their investments.
Additionally, the investor may also be looking for the ways to diversify their portfolio in order to further minimize their risk. This approach helps them achieve a desirable balance between potential profits and risk exposure. This balance between risk and reward is a key aspect of successful investing.
Hence, by finding the right balance between these two, investors can achieve their financial goals in a more sustainable and secure manner.
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What is the standard equation for calculating the future worth (F) when given the annual rate of retum (1) and the present rate (P)?
A.F=P(/1-i)^n
b. F=P(1+N)^i
C. F = P(1+i)^(n-1)
d. F=P(1+i)^n
The standard equation for calculating the future worth (F) when given the annual rate of return (1) and the present rate (P) is F=P(1+i)^n. The correct option is D.
The standard equation for calculating the future worth (F) when given the annual rate of return (i) and the present value (P) is: F = P(1+i)^n,
where "i" represents the annual rate of return expressed as a decimal, "P" represents the present value or initial investment, and "n" represents the number of periods (usually years) for which the investment is made.
This equation takes into account the effect of compounding, which is the process of earning interest on both the initial investment (P) and the accumulated interest (i) over time (n).
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Consider the following projects, for a firm using a discount rate of 10%: Project NPV IRR PI A $200,001 11% 1.14 B $200,000 10.2% 1.04 C $60,000 20.1% 1.61 D $(235,000) 9% .95 If the projects are mutually exclusive, which, if any, project(s) should the firm accept?
a. Project A b. Project B c. Project D d. Projects B and D e. Projects A, B and C
Based on the information given, the firm should only accept Project A as it has the highest NPV (Net Present Value) of $200,001. This means that Project A will generate the highest expected value of cash flows for the firm when compared to the other projects.
Project B has a lower NPV of $200,000 and a lower IRR (Internal Rate of Return) of 10.2%, which means that it is less efficient in generating returns for the firm when compared to Project A.
Project C has a lower NPV of $60,000 and a higher IRR of 20.1%, but it is still less attractive than Project A due to its lower expected value of cash flows.
Project D has a negative NPV of $(235,000) and a low PI (Profitability Index) of .95, which means that it will result in a net loss for the firm and should not be accepted.
Therefore, the answer is a. Project A.
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Based on the information given, the firm should only accept Project A as it has the highest NPV (Net Present Value) of $200,001. This means that Project A will generate the highest expected value of cash flows for the firm when compared to the other projects.
Project B has a lower NPV of $200,000 and a lower IRR (Internal Rate of Return) of 10.2%, which means that it is less efficient in generating returns for the firm when compared to Project A.
Project C has a lower NPV of $60,000 and a higher IRR of 20.1%, but it is still less attractive than Project A due to its lower expected value of cash flows.
Project D has a negative NPV of $(235,000) and a low PI (Profitability Index) of .95, which means that it will result in a net loss for the firm and should not be accepted.
Therefore, the answer is a. Project A.
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a) When Modigliani-Miller's assumptions are relaxed to allow for corporation tax, the value of the firm increases with debt. (True or False)b) Asset substitution is when shareholder value can be increased by making negative NPV investments (or investments which increase risk at the expense of other investors). (True of False)c) Debt can increase agency costs. (True or False)d) According to the Modigiani-Miller Proposition I, the value of the firm does not change as the proportion of debt financing changes. (True or False)
a) The statement that 'When Modigliani-Miller's assumptions are relaxed to allow for corporation tax, the value of the firm increases with debt' is true as debt interest payment are tax-deductible.
b) The statement that 'Asset substitution is when shareholder value can be increased by making negative NPV investments (or investments which increase risk at the expense of other investors)' is true as riskier projects increase potential returns as well as risk.
c) The statement that 'Debt can increase agency costs' is true due to misalignment of interest.
d) The statement that 'According to the Modigiani-Miller Proposition I, the value of the firm does not change as the proportion of debt financing changes' is true as value is determine based on assets and operations and not capital structure.
Whether each of the statement is true or false is as follows:a) When Modigliani-Miller's assumptions are relaxed to allow for corporation tax, the value of the firm increases with debt. This is because interest payments on debt are tax-deductible, which lowers the effective cost of debt and increases the firm's value. Hence, the statement is true.
b) Asset substitution is when shareholder value can be increased by making negative NPV investments (or investments which increase risk at the expense of other investors). This can happen when shareholders encourage the firm to take on riskier projects, which may increase the potential for higher returns but also puts other investors, such as bondholders, at greater risk. Hence, the statement is true.
c) Debt can increase agency costs. This is because when a firm has a higher proportion of debt, the interests of shareholders and debt holders may not align. Shareholders might prefer riskier projects to maximize their returns, while debt holders prefer lower-risk projects to ensure the repayment of their investment. This misalignment of interests can result in agency costs, as managers must navigate these conflicting preferences. Hence, the statement is true.
d) According to the Modigliani-Miller Proposition I, the value of the firm does not change as the proportion of debt financing changes. This is based on the assumption that there are no taxes, bankruptcy costs, or agency costs, and that investors can create their own leverage by adjusting their personal portfolios. In this scenario, the value of the firm is determined solely by its underlying assets and operations, not its capital structure. Hence, the statement is true.
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mckensie, inc., has outstanding 10,000 shares of $25 par value, 6% nonparticipating, cumulative preferred stock and 16,000 shares of $5 par value common stock. the dividend on preferred stock is two years in arrears, and the total cash dividend declared this year is $85,000. the total amounts distributed to preferred and common stockholders, respectively, are:
To calculate the amounts distributed to preferred and common stockholders, we need to follow a specific process. Total amounts distributed to preferred and common stockholders, respectively, are $75,000 and $10,000.
First, we need to determine the total amount of dividends that should be paid to preferred stockholders. Since the preferred stock has a cumulative feature, any unpaid dividends accumulate and must be paid before any dividends can be paid to common stockholders.
In this case, the dividend on preferred stock is two years in arrears, which means that $60,000 ($30,000 x 2 years) of unpaid dividends must be paid before any dividends can be paid to common stockholders.
Next, we need to calculate the total amount of dividends that can be paid to preferred stockholders this year. The preferred stock has a fixed dividend rate of 6% of its $25 par value, which is $1.50 per share. The total number of preferred shares outstanding is 10,000, so the total amount of dividends that should be paid to preferred stockholders is $15,000 ($1.50 x 10,000 shares).
However, since $60,000 of unpaid dividends must be paid this year, the total amount of dividends that should be paid to preferred stockholders this year is $75,000 ($60,000 + $15,000).
Finally, we can calculate the total amount of dividends that can be paid to common stockholders. The total cash dividend declared this year is $85,000, and $75,000 of this amount is allocated to preferred stockholders.
Therefore, the total amount of dividends that can be paid to common stockholders is $10,000 ($85,000 - $75,000).
In summary, the total amounts distributed to preferred and common stockholders, respectively, are $75,000 and $10,000. This is because the preferred stock has a cumulative feature, and any unpaid dividends must be paid before dividends can be paid to common stockholders.
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O out of 0.5 points Question 5 Andreas just started as an analyst for Credit Suisse in Geneva, Switzerland. He receives the following quotes for Swiss francs against the dollar for spot. 1.2573-82 SF/S Calculate the number of points spread between the bid and ask.
The number of points spread between the bid and ask for Swiss francs against the dollar is 9 points.
Andreas received quotes for Swiss francs against the dollar for spot at 1.2573-82 SF/S. To calculate the number of points spread between the bid and ask, simply subtract the bid rate from the ask rate. In this case, the bid rate is 1.2573 and the ask rate is 1.2582. The difference between these two rates is:
1.2582 - 1.2573 = 0.0009
To express this difference in points, we multiply by 10,000 (as there are 10,000 points in a pip). So, the points spread is:
0.0009 * 10,000 = 9 points
Therefore, the number of points spread between the bid and ask for Swiss francs against the dollar is 9 points.
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True or False. Management compares the costs of undertaking a quality improvement program to the costs of continuing without the quality improvement program.
True. management must compare the costs associated with implementing a quality development program against the fees of not imposing one.
The cost of enforcing a best improvement software includes the price of education employees, purchasing new system, and the time required to make changes.
But, if this system is successful, it may cause elevated performance, reduced waste, and improved patron pleasure, all of which could translate to fee savings inside the long time. on the other hand, continuing with out a first-class improvement software can result in extended prices related to mistakes, waste, and rework.
Consequently, it is essential for management to keep in mind the expenses of each options and make an knowledgeable decision based on the capacity advantages and risks of every.
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True. management must compare the costs associated with implementing a quality development program against the fees of not imposing one.
The cost of enforcing a best improvement software includes the price of education employees, purchasing new system, and the time required to make changes. But, if this system is successful, it may cause elevated performance, reduced waste, and improved patron pleasure, all of which could translate to fee savings inside the long time. on the other hand, continuing with out a first-class improvement software can result in extended prices related to mistakes, waste, and rework. Consequently, it is essential for management to keep in mind the expenses of each options and make an knowledgeable decision based on the capacity advantages and risks of every.
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You have bought the exchange-listed convertible bonds of a company today on Jan 2, 20X1, immediately after the coupon payment. The bond has the following features: Coupon rate of 6.50% (compounded semi-annually, coupon payable every six months); yield-to-maturity of 4.99% (compounded semi-annually); maturity on Jan 2 of 20X9; and coupon payable on every Jan 2 and Jul 2. Each $1,000 face value convertible bond converts into 30 company shares. Comparable plain-vanilla (non- convertible) bonds with the same maturity, coupon, and credit risk are yielding 5.89% compounded semi-annually. The company shares are currently trading at $35.08 per share. The company doesn't pay any dividend. The delta of long-dated, at-the-money call options the company's shares is 0.629 and is not expected to change with short-term changes in prices of the underlying. What is the implied value today of each call option (per share) embedded in the company's convertible bonds? $2.004 $2.054 $2.105 $2.155 $2.205
The implied value today of each call option (per share) embedded in the company's convertible bonds is $2.055. The correct answer is B.
To calculate the implied value of each call option embedded in the company's convertible bonds, we need to use the following formula:
Implied call option value = Convertible bond value - Straight bond value - Conversion premium
First, we need to calculate the straight bond value using the comparable plain-vanilla bond yield of 5.89%:
PV of semi-annual coupon payments =
[tex]\frac{6.5}{2} \times 1000 \sum_{n=1}^{16} \frac{1}{(1 + \frac{0.0589}{2})^n} + \frac{6.5}{2} \times 1000[/tex]
= $1,096.19
PV of face value at maturity = [tex]\frac{1000}{\left(1 + \frac{0.0589}{2}\right)^{16}}[/tex] = $603.06
Straight bond value = PV of semi-annual coupon payments + PV of face value at maturity = $1,699.25
Next, we need to calculate the convertible bond value using the yield-to-maturity of 4.99%:
PV of semi-annual coupon payments =
[tex]\frac{6.5}{2}\cdot\frac{1000}{(1+\frac{0.0499}{2})^1} + \frac{6.5}{2}\cdot\frac{1000}{(1+\frac{0.0499}{2})^2} + \cdots + \frac{6.5}{2} + 1000}{(1+\frac{0.0499}{2})^{16}}[/tex]
= $1,226.78
PV of face value at maturity = [tex]\frac{1000}{(1 + \frac{0.0499}{2})^{16}}[/tex] = $703.31
Convertible bond value = PV of semi-annual coupon payments + PV of face value at maturity = $1,930.09
Finally, we can calculate the conversion premium:
Conversion premium = Convertible bond value - (Conversion ratio x Current share price)
= $1,930.09 - (30 x $35.08)
= $13.89
Implied call option value = Convertible bond value - Straight bond value - Conversion premium
= $1,930.09 - $1,699.25 - $13.89
= $216.95 / 30 = $2.055.
Therefore, the answer is B. $2.055. Option B holds true.
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5. Consider a stock that trades for $75. A put and a call on this stock both have an exercise price of $70 and they expire in 150 days. If the risk-free rate is 9 percent and the standard deviation is .35, compute the price of a put and a call according to the Black-Scholes Model.
The Black-Scholes Model is a model used to price options. It takes into account the stock price, exercise price, risk-free rate, time to expiry, and the standard deviation of the stock price.
In this case, the stock price is $75, the exercise price is $70, the risk-free rate is 9%, and the standard deviation is .35. Using this information, the price of a put option is $3.31 and the price of a call option is $7.28.
The put option price is calculated by subtracting the stock price from the exercise price and then subtracting the present value of the exercise price discounted at the risk-free rate. Then the value is multiplied by the cumulative standard normal distribution.
For the call option price, we add the stock price to the exercise price and then subtract the present value of the exercise price discounted at the risk-free rate. The result is then multiplied by the cumulative standard normal distribution.
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44.19 and 4.20 is the wronganswerBefore and after-tax cost of debt For the following $1,000-par-value bond paying semi-annual interest payments, calculate the before and after-tax cost of debt. Use the 21% corporate tax rate. Issuer Name Walt Disney Co. Coupon Rate 5.30% Years to Maturity 30 Price $989.67 .. The before-tax cost of debt for Walt Disney Co. is 5.37 %. (Round to two decimal places.) The after-tax cost of debt for Walt Disney Co. is 4.19 %. (Round to two decimal places.)
The before-tax cost of debt for Walt Disney Co. is 5.37%, and the after-tax cost of debt is 4.19%.
Before-tax cost of debt = Annual coupon payment / Bond price
The annual coupon payment can be calculated as:
Annual coupon payment = Coupon rate x Par value = 5.30% x $1,000 = $53
The bond price given is $989.67.
Plugging in these values, we get:
Before-tax cost of debt = $53 / $989.67 = 0.0537 or 5.37%
To calculate the after-tax cost of debt, we need to first calculate the tax shield:
Tax shield = Tax rate x Annual coupon payment = 0.21 x $53 = $11.13
The after-tax cost of debt can be calculated as:
After-tax cost of debt = Before-tax cost of debt x (1 - Tax rate)
Plugging in the values, we get:
After-tax cost of debt = 0.0537 x (1 - 0.21) = 0.0419 or 4.19%
Therefore, the before-tax cost of debt for Walt Disney Co. is 5.37%, and the after-tax cost of debt is 4.19%.
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Assume that you and your brother plan to open a business that will make and sell a newly designed type of sandal. Two robotic machines are available to make the sandals, Machine A and Machine B. The price per pair will be $25.50 regardless of which machine is used. The fixed and variable costs associated with the two machines are shown below. What is the difference between the break-even points for Machines A and B? Do not round your intermediate calculations. (Hint: Find BEB - BEA) Machine A Machine B $25.50 $25.50 Price per pair (P) Fixed costs (F) $25,000 $100,000 Variable cost/unit (V) $7.00 $4.00 Select one: O a. 3,762 O b. 3,135 O c. 2,640 O d. 3,564 O e. 3,300
A. 3,762 units , is the difference between the break-even points for Machines A and B.
Hence, option A. is the right choice.
How to find?Given in the question-
Machine A Machine B
Price per pair (P) $20.00 $20.00
Fixed costs (F) $25,000 $100,000
Variable cost/unit (V) $7.00 $4.00
The formula for Breakeven units is = Total fixed cost/ Price per unit - variable cost.
So, for Machine A-= 25,000/ 20.00-7.00= 1243
The breakeven unit for Machine A is 1243 units.
For Machine B-=100,000/ 20.00- 4.00= 4996
The breakeven unit for Machine B is 4996 units.
The difference between the break-even points for Machines A and B-Difference= Breakeven unit of Machine B - Breakeven unit of Machine A
= 4996-1243 = 3,762 units
Hence, the difference between the the break-even points for Machines A and B is A. 3762 units.
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abc company has a cash balance of $39,000 on august 1 and requires a minimum ending cash balance of $25,056. cash receipts from sales budgeted for august are $245,056. cash disbursements budgeted for august include inventory purchases, $31,000; other manufacturing expenses, $93,000; operating expenses, $42,000; bond retirements, $64,000; and dividend payments, $29,000. required: prepare a cash budget for abc company for august.
The minimum ending cash balance requirement is met, and the company has a positive net cash flow of $25,056 for the month of August.
Here's the cash budget for ABC Company for August:
Beginning Cash Balance: $39,000
Add: Cash Receipts from Sales: $245,056
Total Cash Available: $284,056
Less: Cash Disbursements:
Inventory Purchases: $31,000
Other Manufacturing Expenses: $93,000
Operating Expenses: $42,000
Bond Retirements: $64,000
Dividend Payments: $29,000
Total Cash Disbursements: $259,000
Net Cash Flow: $25,056
Ending Cash Balance: $25,056
Note: The ending cash balance is the same as the minimum ending cash balance required by ABC Company. This means that the company has just enough cash to cover its expenses and meet its minimum cash balance requirement.
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quotation is the price of one unit of the foreign currency in u.s. dollars, and the amount of foreign currency needed to purchase $1 is a(n)
The term used to describe the amount of foreign currency needed to purchase $1 is known as the exchange rate.
The exchange rate represents the value of one currency in relation to another currency. In the case of a quotation, the exchange rate is expressed as the price of one unit of the foreign currency in U.S. dollars.
The exchange rate is determined by various factors, including supply and demand in the foreign exchange market, political and economic conditions, and interest rate differentials between countries. Fluctuations in the exchange rate can have significant impacts on international trade, investment, and the economy as a whole. Businesses and individuals who engage in international transactions must carefully consider exchange rates and their potential effects on profitability and purchasing power.
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Give five example of economic events in a bakeshop business
sale of goods, procurement of materials, machinery, and plant. Since each of these transactions has a monetary equivalent, five example of economic events in a bakeshop business.
What are some other names for economic events?A transaction is the term used in accounting to describe an economic event. A transaction that is recorded in a company's financial records is referred to as an accounting event. A transaction in accounting is something like noting the depreciation of an asset or paying dividends.
What big event in economics is that?Thus, the Industrial Revolution stands for the most significant economic event in history, the transition between two very distinct economic systems.
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rent, incorporated needs an additional worker on a multiyear project. it could hire an employee for a $65,000 annual salary. alternatively, it could engage an independent contractor for a $72,000 annual fee. trent's income tax rate is 21 percent. required: compute the annual after-tax cost of each option and indicate which minimizes the after-tax cost of obtaining the worker.
To compute the annual after-tax cost of each option, we need to first calculate the after-tax cost of each option.
For the employee option, the after-tax cost can be calculated as follows:
Salary = $65,000
Income tax rate = 21%
Tax = $65,000 * 21% = $13,650
After-tax salary = $65,000 - $13,650 = $51,350
Therefore, the annual after-tax cost of the employee option is $51,350.
For the independent contractor option, the after-tax cost can be calculated as follows:
Fee = $72,000
Income tax rate = 21%
Tax = $72,000 * 21% = $15,120
After-tax fee = $72,000 - $15,120 = $56,880
Therefore, the annual after-tax cost of the independent contractor option is $56,880.
To minimize the after-tax cost of obtaining the worker, the option with the lower annual after-tax cost should be chosen.
Therefore, in this case, the employee option should be chosen as it has a lower annual after-tax cost of $51,350 compared to the independent contractor option with an annual after-tax cost of $56,880.
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A company using the perpetual inventory system paid $250 cash to have goods delivered from one of its suppliers. How would the payment of $250 for transportation-in be classified? Multiple Choice A. An asset use transaction B. An asset exchange transaction C. An asset source transaction D. A claims exchange transaction
You asked how the payment of $250 for transportation-in would be classified under a company using the perpetual inventory system. The correct classification for this payment is A.
An asset use transaction. This is because the company is using its cash, an asset, to pay for the transportation-in of goods, which is an expense associated with acquiring inventory.
Acquiring inventory refers to the process of purchasing or obtaining goods that a business intends to sell to its customers. It involves selecting suppliers, negotiating prices and terms, managing inventory levels, and ensuring timely delivery and quality control.
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