Answer:
16 years
Explanation:
we can use the present value of an annuity due formula:
PV of annuity due = payment + {payment x [1 - (1 + r)ⁿ⁻¹]/r}
present value = 7,000payment = 650 r = 0.0597,000 = 650 + {650 x [1 - (1 + 0.059)ⁿ⁻¹]/0.059}
6,350 = 650 x [1 - (1 + 0.059)ⁿ⁻¹]/0.059
6,350 / 650 = 9.769230769 = [1 - (1 + 0.059)ⁿ⁻¹]/0.059
9.769230769 x 0.059 = [1 - (1 + 0.059)ⁿ⁻¹]
0.576384615 = 1 - (1 + 0.059)ⁿ⁻¹
(1 + 0.059)ⁿ⁻¹ = 0.423615384
n - 1 = log 0.423615384 / log 1.059 = 0.373028275 / 0.02489596 = 14.98336571
n = 14.98336571 + 1 = 15.98336571
if an attorney remains am ember for at least 16 years (16 ≥ 15.98336571), then the lifetime membership fee is better
The following items and amounts were taken from Familia Inc.’s 2022 income statement and balance sheet, the end of its first year of operations. Interest expense $ 2,200 Equipment, net $ 54,700 Interest payable 700 Depreciation expense 3,200 Notes payable 11,800 Supplies 4,100 Sales revenue 44,300 Common stock 26,800 Cash 2,900 Retained earnings ? Salaries and wages expense 15,600 Supplies expense 900
Question is:
(a) In each case, identify whether the item is an asset, liability, stockholders' equity, revenue, or expense item as attached as picture
Answer
Items Identification
Interest expense Expense
Interest payable Liability
Notes payable Liability
Sales revenue Revenue
Cash Asset
Salaries and Expense
wages expense
Equipment, net Asset
Depreciation expense Expense
Supplies Asset
Common stock Stockholder's equity
Retained earnings Stockholder's equity
Supplies expense Expense
AIDA represents attention, interest, desire and
A. Action.
B. Assessment.
C. Attitude.
D. Accountability.
Management finds the variation in quarterly unit product costs to be confusing. It has been suggested that the problem lies with manufacturing overhead because it is the largest element of total manufacturing cost. Accordingly, you have been asked to find a more appropriate way of assigning manufacturing overhead cost to units of product. Required: 1. Assuming the estimated variable manufacturing overhead cost per unit is $0.60, what must be the estimated total fixed manufacturing overhead cost per quarter? 2. Assuming the assumptions about cost behavior from the first three quarters hold constant, what is the estimated unit product cost for the fourth quarter? 3. What is causing the estimated unit product cost to fluctuate from one quarter to the next? 4. Assuming the company computes one predetermined overhead rate for the year rather than computing quarterly overhead rates, calculate the unit product cost for all units produced during the year.
Question Completion:
Company A makes a single product that is subject to wide seasonal variations in demand. The company uses a job-order costing system and computes predetermined overhead rates on a quarterly basis, using the number of units to be produced as the allocation base. Its estimated costs, by quarter, for the coming year are given below:
Quarters
First Second Third Fourth
Direct materials $240,000 $120,000 $60,000 $180,000
Direct labor 96,000 48,000 24,000 72,000
Manufacturing overhead 228,000 204,000 192,000 ?
Total manufacturing costs $564,000 $372,000 $276,000 ?
Number of units produced 80,000 40,000 20,000 60,000
Estimated unit product cost $7.05 $9.30 $13.80 ?
Answer:
Company A
1. Total fixed manufacturing overhead cost per quarter:
Quarters
First Second Third Fourth
Fixed manufacturing o/h $180,000 $180,000 $180,000 $180,000
2. Estimated unit product cost for the fourth quarter:
= Total manufacturing costs divided by estimated units produced
= $468,000/60,000 = $7/80
3. The fluctuation in the estimated unit product cost is caused by the fixed manufacturing overhead vis-a-vis the units produced. When more units are produced, the fixed manufacturing overhead per unit is less than when less units are produced.
4. Calculation of the unit product cost for all units produced during the year = total manufacturing costs divided by total units produced
= $1,680,000/200,000
= $8.40
Explanation:
Data and Calculations:
a) Estimated variable cost = $0.60
Quarters
First Second Third Fourth
Direct materials $240,000 $120,000 $60,000 $180,000
Direct labor 96,000 48,000 24,000 72,000
Manufacturing overhead 228,000 204,000 192,000 216,000
Total manufacturing costs $564,000 $372,000 $276,000 $468,000
Number of units produced 80,000 40,000 20,000 60,000
Estimated unit product cost $7.05 $9.30 $13.80 $7.80
b) Variable manufacturing overhead = $0.60 * units produced
Quarters
First Second Third Fourth
Number of units produced 80,000 40,000 20,000 60,000
Variable manufacturing
overhead (units * $0.60) $48,000 $24,000 $12,000 $36,000
c) Fixed manufacturing overhead = Total manufacturing overhead minus variable manufacturing overhead
Manufacturing overhead $228,000 $204,000 $192,000 $216,000
Variable overhead $48,000 $24,000 $12,000 $36,000
Fixed manufacturing o/h $180,000 $180,000 $180,000 $180,000
d) Total manufacturing costs per annum:
Total manufacturing costs $564,000 $372,000 $276,000 $468,000
= $1,680,000
Number of units produced 80,000 40,000 20,000 60,000
Total units produced = 200,000 units
A company's overhead rate is 60% of direct labor cost. Using the following incomplete accounts, determine the cost of direct materials used. Work in Process Inventory Beginning WIP 116,900 Direct materials ? Direct labor ? Applied overhead ? To finished goods ? Ending WIP 152,000 Factory Overhead 116,900 105,210 Finished Goods Inventory Beginning FG 137,100 376,700 349,100
Answer:
The cost of direct materials used is $124,090
Explanation:
Ending Finished Goods = $349,100 - $376,700 = $137,100 - ($27,600)
Ending Finished Goods = $109,500
Calculation of Direct labor
Here, the company's overhead cost is 60% of direct labor cost
Ending factory overhead cost = 60% * Direct labor cost
$109,500 = 60% * Direct labor cost
Direct labor cost = $109,500 / 60%
Direct labor cost = $182,500
Calculation of direct materials cost
Particular Amount
Beginning finished goods inventory $376,700
Add: Ending WIP $152,000
Less: Beginning WIP $116,900
Less: Direct labor $182,500
Less: Ending Factory overhead $105,210
Direct Material Cost $124,090
Hence, the cost of direct materials used is $124,090.
The purchasing function's main concern is with:________
Answer:
Sourcing of Suppliers
Explanation:
Purchasing Function of the Business deals with the requisitions of materials and supplies to supply the internal demands or order of the business.
This function entails finding the right supplier offering quality materials at affordable prices.
The use of theory and observation is more difficult in economics than in sciences such as physics due to the difficulty in a. formulating theories about economic events. b. performing an experiment in an economic system. c. applying mathematical methods to economic analysis. d. analyzing available data.
Answer:
b. performing an experiment in an economic system.
Explanation:
In contrast to scientific experimentation, whereby connections and differences can be measured between two or more variables. In economics, theory and observation are more difficult than in sciences such as physics due to the difficulty in performing an experiment in an economic system, as human beings' opinions change over time, due to dynamism in human society.
Hence, in this case, the correct answer is option
Regina Corp. is a property and casualty insurance company in its third year of operations and has a net loss of $100,000. Regina had taxable income of $10,000 and $30,000 in its first and second year of operations, respectively. Regina expects to be profitable within the next year. Regina is allowed to carry back the net operating loss to previous years. The enacted income tax rate is 40%. The income tax benefit from the NOL carryforward shown on Regina's income statement in the year of the loss is
Answer:
$24,000
Explanation:
Total Taxable income of first and second year = $10,000 + $30,000 = $40,000
Net loss in 3rd year = $100,000
Net Operating loss carry back = Regina Taxable income Total of first and second year of operations
Net Operating loss carry back = $40,000
Net Operating loss Carry forwards = Net loss - Net Operating loss carry back
Net Operating loss carry forward = $100,000 - $40,000
Net Operating loss carry forward = $60,000
Income tax rate = 40%
Income tax benefit from the Net Operating loss carry forward = Net Operating loss carry forward * Income tax rate
Income tax benefit from the Net Operating loss carry forward = $60,000 * 40%
Income tax benefit from the Net Operating loss carry forward = $24,000 .
Dake Corporation's relevant range of activity is 5,200 units to 6,000 units. When it produces and sells 5,600 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 6.55 Direct labor $ 3.80 Variable manufacturing overhead $ 2.15 Fixed manufacturing overhead $ 3.50 Fixed selling expense $ 1.05 Fixed administrative expense $ 0.75 Sales commissions $ 0.85 Variable administrative expense $ 0.75 If 5,400 units are produced, the total amount of direct manufacturing cost incurred is closest to:
Answer:
Total direct manufacturing cost= $55,890
Explanation:
Giving the following information:
5,600 units:
Average Cost per Unit Direct materials $ 6.55
Direct labor $ 3.80
The manufacturing overhead is an indirect cost. It is allocated based on a predetermined rate. We will take into account only the direct materials and direct labor.
For 5,400 units:
Total direct manufacturing cost= 5,400*(6.55 + 3.8)
Total direct manufacturing cost= $55,890
ConAgra Foods is a global manufacturer of processed and packaged foods with revenues of $11 billion annually. It recently acquired Pinnacle Foods, which added iconic brands to its portfolio such as Birds Eye, Duncan Hines, Earth Balance, and Vlasic. Pinnacle Foods will continue to have control over its resources and distinct mission, and it will operate independently of ConAgra Foods. Pinnacle Foods is known as a(n) _______.
Answer:
wholly owned subsidiary
Explanation:
A wholly-owned subsidiary is a form of subsidiary arrangement, between two companies, whereby a company is completely owned or its whole stock is bought by another company often referred to as Parent Company after the arrangement or the agreement of the acquisition.
It is also characterized by having control over its resources and specific mission, also operates independently.
Hence, in this case, the right answer is a wholly owned subsidiary
Answer:
Strategic Business Unit
Explanation:
I'm taking the class now
Opportunity Cost is the measurement
of sacrifice. Opportunity Cost exists
because of what?
A. the production of two goods in an economy
B. the PPF Model of economics
C. the scarcity of resources available in an economy
Answer:
C. the scarcity of resources available in an economy
Explanation:
Opportunity cost is the cost of the option foregone when one alternative is choose over other alternatives.
It is usually assumed that humans wants are limitless and the resources available to satisfy these needs are limited. So, as more quantity of a good is being produced, there would be less resources available to produce another good.
It is due to opportunity costs that the PPF curve is bowed outward because as more of one good is being produced, less of the other good would be produced
Answer: C. the scarcity of resources available in an economy
Explanation:
Opportunity Cost is indeed a measurement of sacrifice as it is the cost of the next best alternative foregone in other to be able to make the current decision.
The reason Opportunity costs exist is because of a scarcity of resources. This means that we have to manage our resources by applying them to one alternative at a time so that they do not finish. Had resources been infinite, all alternatives could be embarked on.
Which of the following best defines rational behavior? Group of answer choices A. Analyzing the total gains from a decision. B. Improving net gain by pursuing decisions as long as the marginal benefits exceed the marginal costs. C. Seeking to gain by choosing to undertake actions as long as the marginal costs exceed the associated marginal benefits. D. Seeking to maximize total gain regardless of cost.
Answer:
B. Improving net gain by pursuing decisions as long as the marginal benefits exceed the marginal costs.
Explanation:
A rational consumer continues consumption as long as marginal benefit derived from consumption exceeds marginal cost.
Marginal benefit is the increase in benefit as a result of consuming an extra unit of a product.
Marginal cost is the increase in cost as a result of consuming one more unit of a product
For example, the marginal benefit from consuming a 5th bottle of a drink is $5. The cost of the bottle is $4. The rational consumer can increase benefit by consuming one extra bottle of the drink. If the cost of the drink were $7, a rational consumer would not consume the 5th bottle because marginal cost exceeds marginal benefit
Read the description to determine which type of illegal or unethical price strategy is used. a. A manufacturer favors Retailer A, offering the retailer price discount allowances, but denies these benefits to Retailer B, although it sells the same quantity of the products.b. Push Nonsales items only- A computer store uses the promises of a great value laptop to attract customers into the store while not intending to sell the product but aggressively push more expensive models insteadc. Sell below store’s cost- A large retailer is offering buy one, get one free on popular brand products, selling the two products for less than their cost.d. Harm Competitor’s Business- A retail giant radically cuts prices to drive its competition out of business and monopolize the markete. Horizontal Collusion-Airlines work together to keep airfares artificially high across the country.1. Loss leader pricing2. Bait and switch3. Predatory pricing4. Price discrimination
Answer:
Option A- 4. Price discrimination
Option B - 1. Loss leader pricing
Option C - 2. Bait and Swtich
Option D - 3. Predatory pricing
Explanation:
Price discrimination is a form of unethical pricing strategy by the producer or supplier to attract consumers whereby similar commodities are traded at varying prices to different customers by the same producer. Hence, the perfect illustration is option A
Loss Leader Pricing is another form of unethical pricing technique whereby a commodity is sold or advertised by a producer promotes other sales of more high yield commodities. Hence, the best illustration is option B.
Bait and Switch is a form of illegal pricing strategy whereby the producer promotes commodities of lower cost to greater quality ratio, however, it is such a product tends to be elusive one potential buyer's approach. The perfect example is option C
Predatory pricing is an unethical pricing technique whereby the producer intentionally priced commodities produced such that other customers are unable to compete. The perfect example is option D.
A basic ARM is made for $120,000 at an initial interest rate of 3 percent for 30 years with an annual reset date. The borrower believes that the interest at the beginning of year 2 will increase to 4 percent (i.e., the interest rate will reset). Assume no negative amortization. Given that the interest rate will increase to 4 percent as predicted, what will be the balance at the end of year 2 or the beginning of year 3
Answer:
$115,302.71
Explanation:
During the first year, the monthly payments were $505.92, and at the end of the year, the principal's balance was $117,494.70.
Then the interest rate increases to 4%, and your monthly payment also increases to $570.72. At the end of year 2, the principal's balance is $115,305.96 (see amortization schedule).
you can determine the monthly payment by using an annuity formula:
original monthly payment = $120,000 / 237.18938 (PV annuity factor, 0.25%, 360 periods) = $505.9248437 ≈ $505.92
adjusted monthly payment (second year) = $117,494.70 / 205.86942 (PV annuity factor, 0.3333%, 348 periods) = $570.7243941 ≈ $570.72
Treasury Bonds are issued by the U.S. Government in:_______.I. bearer form.
II. book entry form.
III. minimum denominations of $100.
IV. minimum denominations of $10,000.
Answer:
minimum denominations of $100
Explanation:
These bonds are issued by the United States government in minimum denomination of a 100 dollars.
These bonds have their maturity periods to be greater than 20 years. Before they get to their period of maturity, these kind of bonds earn interest at certain periods. The owner of such a bond would earn an amount that is the same as the principal.
Diseconomies of scale arise primarily because: of the difficulties involved in managing and coordinating a large business enterprise. the short-run average total cost curve rises when marginal product is increasing. beyond some point marginal product declines as additional units of a variable resource (labor) are added to a fixed resource (capital). firms must be large both absolutely and relative to the market to employ the most efficient productive techniques available.
Answer: of the difficulties involved in managing and coordinating a large business enterprise
Explanation:
Diseconomies of scale is when there's an increases in average total cost used during the production of a product due to the expansion in size of the firm in the longrun.
The main factor that can be attributed to diseconomies of scale is when there's difficulty in the effective and efficient control and coordination of the operations of a firm due to its growth.
Diseconomies of scale arise primarily because of the difficulties involved in managing and coordinating a large business enterprise.
Diseconomies of scale arise primarily because of the difficulties involved in managing and coordinating a large business enterprise. Option (b) is correct.
Diseconomies of scale can happen for a number of reasons, but the inability to effectively manage an expanding staff is a common culprit. A company's internal overcrowding impact is frequently the main factor contributing to scale-related inequities.
Economies of scale result in reduced production costs and higher production while diseconomies of scale result in higher production costs.
Therefore, Option (b) is correct.
Learn more about diseconomies, here;
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After a tragic event in which an armed intruder storms into a mall and fatally shoots several people, the city of Belmonte institutes a law that prohibits any form of weapon in public retail establishments. This reaction would be an example of following which school of risprudential toucht? a. Sociological b. Historical c. Irrational Forces d. Natural Law e. Legal Realism
Answer: c. Irrational Forces
Explanation:
The Irrational Forces school of Jurisprudential thought explains that sometimes laws are passed due to some stimuli in the society that draws such a reaction from the society that the law makers pass a law under pressure
The law therefore does not have to be rational or based on reason. The law makers of Belmonte passing this law against firearms in public areas did this because of the public shooting. It therefore falls under this school of thought.
When Apple introduced its iPhone 11 with Slofie (slow-
motion selfie) capability and a high price tag, it used_______ to avoid direct competition with Samsung,
Google, and others.
Answer:
trademark
Explanation:
When the announcement was made about the iPhone 11's new Slofie (slow- motion selfie) capability, Apple also said it had applied for a US trademark on Slofie.
Note, a trademark is a legally issued right for a symbol, phrase, or word to be used to denote a specific product or service, thus it gives a right of ownership to the trademark applicant. Therefore, it limits direct competition from others.
Answer:
Trademark
Explanation:
A trademark is an intellectual property which consists of a particular design aimed at identifying a product as being from a particular source.
Once a trademark is established on a product other companies will be unable to use that technology nor design without purchasing rights to use the trademark.
Apple first introduced Solfie which is a name coined for slow motion selfie on their iPhone 11.
In order to avoid competition with Samsung, Google, and others they trademarked Slofie thereby preventing competitors from using similar technology
g If you could reinvest the cash flow stream of $798, $508, $509, $967, $503, $1,362, $1,015, and $1,387 at 8.6% interest, how much will you have from this investment in 8 years? (In other words, what is the future value of this stream of cash flows?) Note that the cash flows are not necessarily the same as the previous problem's cash flows. The cash flow stream starts in one year; so, the last cash flow is 8 years from now. Round to the nearest cent.
Answer:
$4,707.92
Explanation:
Present value is the sum of discounted cash flows
Present value can be calculated using a financial calculator
Cash flow in year 1 = $798
Cash flow in year 2 = $508
Cash flow in year 3 = $509
Cash flow in year 4 = $967
Cash flow in year 5= $503
Cash flow in year 6 = $1,362
Cash flow in year 7 = $1,015
Cash flow in year 8 = $1,387
I = 8.6%
Present value = $4,707.92
To find the PV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
Bill’s Bakery is trying to decide if it should use all of its resources to make 12 dozen chocolate chip cookies or 10 dozen peanut butter kiss cookies. What is the trade off that Bill will make?
Answer:
The trade off Bill's Bakery will make will be using most of its resources in producing the product that would be more attractive to the customers while producing lesser of the less attractive product
Explanation:
The trade off that Bill will make will be using most of its resources in producing the product that would be more attractive to the customers while producing lesser of the less attractive product. this will be dependent on which product will be more beneficial to Bill's Bakery financial i.e based on customers depend .
A Trade off is a business exchange where by one benefit is given up for another because both cannot be compatible at a time
A sweatshop is an example of an ethical mode of production.
Answer:
Algunas de las empresas maquiladoras en México son General Motors, General Electric, Ford Motors, Sony, HP, Hyundai, entre otros. Los productos que elaboran las maquiladoras son de gran variedad, tales como: . - Productos alimenticios.11 abr. 2016
Explanation:
Answer:
False
Explanation:
The government spends $45 million on heart disease research and gains in reducing death from heart disease are significant. If the law of diminishing returns holds, what would additional increases in expenditure on heart disease research likely do to reduce death from heart disease
Answer:
They would cause relatively smaller reductions in death from heart disease.
Explanation:
Since in the question it is mentioned that the government incurred $45 million for research on the heart disease and gain that decreased the death occured from the heart disease. Now if the law of diminishing retuns hold, so the extra rise in expenditure on heart disease result in relatively small decline as it decreases the returns
Therefore the same is to be considered
In identifying an industry's key success factors, strategists should Select one: A. consider whether the number of strategic groups is increasing or decreasing and whether the five competitive forces are powerful or relatively weak. B. consider on what basis customers choose between competing brands, what resources and competitive capabilities firms need to be competitively successful, and what shortcomings are almost certain to put a company at a significant competitive disadvantage. C. focus their attention on what it will take to capitalize on the impacts of the industry's driving forces. D. try to single out all factors that play a major role in shaping whether buyer demand grows rapidly or slowly. E. consider what it will take to overtake the company with the industry's overall best strategy.
Answer:
B. consider on what basis customers choose between competing brands, what resources and competitive capabilities firms need to be competitively successful, and what shortcomings are almost certain to put a company at a significant competitive disadvantage
Explanation:
In any industry there is always competition between firms to attract and retain customers. They must come up with strategic ways by which competitive edge is maintained.
This will translate to higher profits compared to other firms.
As a strategist the key success factors in the industry must be identified to aid in planning.
These success factors include: what makes customers choose between brands, capabilities that ensure a firm's success, and factors that can put a business at a competitive disadvantage.
The Wall Street Journal reports that the rate on three-year Treasury securities is 1.22 percent and the rate on four-year Treasury securities is 1.4 percent. The one-year interest rate expected in three years, E(4r1), is 1.8 percent. According to the liquidity premium hypotheses, what is the liquidity premium on the four-year Treasury security, L4? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))
Answer:
0.142%
Explanation:
We are required to find the liquidity premium on the four-year Treasury security (L4)
1R4 = 1.4%
1R3 = 1.22%
E(4r1) = 1.8%
1 + 1R4 = [{(1+1R3)^3} * (1+E(4R1) + L4)]^1/4
1 + 0.014 = [{(1 + 0.0122)^3) * (1+0.018 + L4)]^1/4
1.014^4 = [{(1 + 0.0122)^3) * (1+0.018 + L4)]
1.057187 = (1.0370483) * (1.018 + L4)
1.057187/1.0370483 = 1.018 + L4
1.0194192 = 1.018 + L4
L4 = 1.0194192 - 1.018
L4 = 0.00142
L4 = 0.142%
Hence, liquidity premium on the four-year Treasury security(L4) = 0.142%
On January 1, 2005, Marcy Company purchased 1,000 shares of its own common stock for $22,000. On February 1, 2005, they sold 600 of these shares for $25 per share, and on March 1, 2005, they sold the remaining 400 shares for $15 per share. The journal entry required on March 1 will include: A) credit Contributed Capital, Treasury Stock, $1,800 B) debit Retained Earnings for $1,800 C) debit Retained Earnings for $2,800 D) debit Contributed Capital, Treasury Stock, $2,800 E) debit Contributed Capital, Treasury Stock, $1,800
Answer: E) debit Contributed Capital, Treasury Stock, $1,800
Explanation:
Treasury stock was bought at price of;
= 22,000/1,000
= $22
Sold 600 for $25 so they made a profit of;
= (25 - 22) * 600
= $1,800
This gain was sent to Contributed Capital, Treasury Stock.
Now that stock is to be sold on March 1, it is sold at $15. Loss from initial purchase is;
= ( 22 - 15) * 400
= $2,800
Debit Contributed Capital, Treasury Stock of the maximum amount it can be debited of to reflect this loss which would be $1,800 which was gained in the February purchase. The rest of the loss will go to Retained earnings.
Greystone Inc. plans to pay a $4.30 dividend during the upcoming year, and dividends are expected to grow at the rate of 8% per year. The risk free rate is 6% and the expected return on the market portfolio is 12%. The current price of the stock is $85. What is the estimated beta of Greystone, Inc.
Answer:
Beta = 1.18
Explanation:
The computation of the beta is shown below:
But before that we need to calculate the following calculations
Current stock price = D1 ÷ (Required rate of return - growth rate)
$85 = $4.30 ÷ (Ke - 0.08)
(Ke - 0.08) = 0.0506
Ke = 0.1306
= 13.06%
Now
Expected rate of return(Ke) = Risk free rate + Beta × (Market rate of return - Risk free rate of return)
13.06% = 6% + Beta × (12% - 6%)
13.06% = 6% + Beta × 6%
So, the Beta = 1.18
3. Beginning three months from now, you want to be able to withdraw $1,500 each quarter from your bank account to cover college expenses over the next three years. If the account pays .37 percent interest per quarter, how much do you need to have in your bank account today to meet your expense needs over the next three years
Answer:
The total amount needed = $17,574.47
Explanation:
Total amount needed = Annuity payment * Present value annuity
When Present Value annuity = Annuity payment * [1 – [1/ (1 + r)^12] / r}
R = Rate of Interest = 0.37% = 0.0037
N= No. of Periods = 12(Quarters)
= Annuity payment * {[1 – [1/ (1 + 0.0037)12] / 0.0037}
= $1,500 * {[1 – (1/ 1.0037)12] / 0.0037}
= $1,500 * {[1 – (0.95664963507)] / 0.0037}
= $1,500 * {0.04335036493 / 0.0037}
= $1,500 * 11.716315
= $17574.4725
Hence, the total amount needed = $17,574.47
You are considering a stock investment in one of two firms (Lots of Debt, Inc. and Lots of Equity, Inc.), both of which operate in the same industry. Lots of Debt, Inc. finances its $34.25 million in assets with $32.25 million in debt and $2.00 million in equity. Lots of Equity, Inc. finances its $34.25 million in assets with $2.00 million in debt and $32.25 million in equity. Calculate the debt ratio. (Round your answers to 2 decimal places.) Calculate the equity multiplier. (Round your answers to 2 decimal places.)
Answer:
Debt Ratio = Total Debt Total/ Assets
Equity Multiplier = Assets/Equity
Lots of DebtDebt Ratio
= 32.5/34.25
= 0.95
Equity Multiplier
= 34.25/2
= 17.13
Lots of EquityDebt Ratio
= 2/34.25
= 0.06
Equity Multiplier
= 34.25/32.25
= 1.06
The agency relationship in corporate finance occurs:__________
Answer:
when the shareholders hire a manager to run their company.
Explanation:
An agency relationship in corporate finance is a situation whereby a party known as an agent is hired by another party which is the principal, to perform certain functions or services. Based on this question, the share holders are known as the principal while the manager act as the agent. The relationship is formed after the agent has agreed that he or she will represent the principal
The firm projected its proforma of financial statements using AFN method and finds that next year its AFN is $2 million. Its total asset this year is $40 million and its net sales this year is $50 million. The CFO has decided to finance its entire projected AFN through issuing common stock. What would you expect to happen in next year’s financial ratio based on AFN method if we expect its net income remains constant?
Answer:
Its earnings per share will decrease.
Its return on equity will go down.
Its equity multiplier will go down.
Explanation:
Since net income remains the same, earnings per share will decrease. This happens because there will be more stocks outstanding (the denominator in the EPS formula), so the result will be lower.
Return on equity will also decrease, since net income will remain the same while equity increases (same logic as EPS).
Unless this company is 100% financed through equity, it will have some debt (liabilities). The equity multiplier = total assets / total equity. E.g. total assets increase from $20 to $22 million, and total equity increases from $30 to $32 million.
Original equity multiplier = $40 / $30 = 1.333
Equity multiplier after issuing more stocks = $42 / $32 = 1.3125
C. Its equity multiplier will go down.
D. Its current ratio will go down.
E. Its quick ratio will go down.
5. Mr. G has $15,000 to invest. He is undecided about putting the money into tax-exempt municipal bonds paying 7 percent annual interest or corporate bonds paying 9.5 percent annual interest. The two investments have the same risk. a) Which investment should Mr. G make if his marginal tax rate is 33 percent? b) Would your conclusion change if Mr. G’s marginal tax rate is only 15%?
Answer:
a. Municipal bond
b. Yes. To Corporate Bond.
Explanation:
Municipal bonds are tax exempt so the better option will be the one offering a higher return after it is adjusted for tax.
a. Corporate after-tax rate = 9.5% * ( 1 - 33%)
= 0.06365
= 6.4%
Municipal rate is higher at 7% and so is a better option.
b. Corporate after-tax rate = 9.5% * ( 1 - 15%)
= 0.08075
= 8.08%
Corporate bond return is now higher than Municipal bond so is a better option.
Answer:
a. Municipal bond
b. Yes. To Corporate Bond
Explanation:
