Answer:
The free cash flow for year 0 will be $ -10,448,000
The free cash flow for years 1–5 will be $2,746,360
Explanation:
Free Cash Flow for the Year 0
Free Cash Flow for the Year 0 = Cost of the Machine + Transportation + Installation Charges
= -$10,400,000 - $48,000
= -$10,448,000
Free cash flows for the Years 1 – 5
Incremental free cash flows =
[(Annual Sales - Costs) x (1 – Tax Rate)] + [Depreciation x Tax Rate]
= [($4,200,000 - $1,100,000) x (1 – 0.35)] + [($10,448,000 / 5 Years) x 0.35]
= [$3,100,000 x 0.65] + [$2,089,600 x 0.35]
= $2,015,000 + $731,360
= $2,746,360
Therefore the The free cash flow for year 0 will be $ -10,448,000 and the free cash flow for years 1–5 will be $2,746,360
Factor Co. can produce a unit of product for the following costs: Direct material $ 7.70 Direct labor 23.70 Overhead 38.50 Total product cost per unit $ 69.90 An outside supplier offers to provide Factor with all the units it needs at $40.95 per unit. If Factor buys from the supplier, the company will still incur 70% of its overhead. Factor should choose to:
Fabulous Fabrics budgeted to manufacture 1300 curtains in February. Actual output for March was with total direct materials cost of $3700 and total direct labor cost of $5250. The direct labor standard is 20 minutes per curtain at a direct labor rate of $15.50 per hour. The direct material standard is 0.75 yards of direct materials per curtain at a cost of $11 per pound. Actual direct labor hours were 150.
A variance analysis for February may show a direct labor rate variance of ______. (Round any intermediary calculations and your final answer to the nearest cent.)
Answer:
$2,925 Unfavorable
Explanation:
The computation of direct labor rate variance is shown below:-
Actual rate = Direct labor cost ÷ Actual direct labor hours
= $5,250 ÷ 150
= 35
Direct labor rate variance = (Selling rate - Actual rate) × Actual hours rate
= ($15.50 - 35) × 150
= -$19.5 × 150
= $2,925 Unfavorable
Therefore for computing the direct labor rate variance we simply applied the above formula.
Under the last-in, first-out (LIFO) inventory valuation method, a price index for inventory must be established for tax purposes. The quantity weights are based on year-ending inventory levels. Unit Price ($) Product Ending Inventory Beginning Ending A 500 0.17 0.21 B 50 1.40 1.80 C 100 4.50 4.20 D 40 12.00 13.20 Use the beginning-of-the-year price per unit as the base-period price and develop a weighted aggregate index for the total inventory value at the end of the year. (Round your answer to the nearest integer.) I
Answer:
105.35
Explanation:
The computation of Laspeyres Index is shown below:-
Laspeyres Index = 100 × (Sum(Ending × Ending Inventory) ÷ Sum(Beginning × Ending Inventory))
= 100 × ((500 × 0.21) + (50 × 1.80) + (100 × 4.20) + (40 × 13.20)) ÷ ((500 × 0.17) + (50 × 1.40) + (100 × 4.50) + (40 × 12)
= 100 × (105 + 90 + 420 + 528) ÷ (85 + 70 + 450 + 480)
= 100 × 1,143 ÷ 1,085
= 100 × 1.053
= 105.35
So, for computing the Laspeyres Index we simply applied the above formula.
Round Hammer is comparing two different capital structures: An all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 175,000 shares of stock outstanding. Under Plan II, there would be 125,000 shares of stock outstanding and $1.7 million in debt outstanding. The interest rate on the debt is 5 percent, and there are no taxes. a. If EBIT is $325,000, what is the EPS for each plan
Answer:
1.86
Explanation:
Data provided as per the question is here below:-
Net income = $325,000
Number of shares outstanding = 175,000
The computation of EPS for each plan is shown below:-
EPS = Net income ÷ Number of shares outstanding
= $325,000 ÷ 175,000
= 1.86
Therefore for computing the EPS we simply applied the above formula.
Failure Mode and Effect Analysis is: a) a technique to determine the ways in which a technical system might fail (including the behavior of people) and the effects that identified failures would have on the performance, safety of the system and its environment b) a technique to analyze the mode in which equipment has failed and the effect it has caused c) neither off the above
Answer:
A technique used to determine the ways in which a technical system might fail(including the behaviour of people) and the effects that identified failures will have on the performance, safety of the system and it's environment.
Explanation:
Failure mode and effect analysis can be described as the various ways in which a potential risk is identified. It is an approach that is used to identify the causes and effect of the occurrence of a failure.
Failure mode and effect analysis helps to detect the various errors that might have occurred during the production of a product, it also studies the different effect of these errors on the consumers. This approach is used when redesigning a new product, It is a very essential part for the continuous improvement of the product.
During the year ended December 31, 2018, Kelly’s Camera Shop had sales revenue of $180,000, of which $90,000 was on credit. At the start of 2018, Accounts Receivable showed a $12,000 debit balance and the Allowance for Doubtful Accounts showed a $620 credit balance. Collections of accounts receivable during 2018 amounted to $70,000.
Data during 2018 follow:
On December 10, a customer balance of $1,600 from a prior year was determined to be uncollectible, so it was written off.
On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year.
Required:
Give the required journal entries for the two events in December.
Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the balance sheet and income statement for 2018.
On the basis of the data available, does the 2 percent rate appear to be reasonable?
Answer:
(a) On December 10, a customer balance of $1,400 from a prior year was determined to be uncollectible
Dr Sales Returns and Allowances $ 1,400
Cr Accounts Receivable $ 1,400
(b) On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year.
Dr Bad Debt Expense $ 752
Cr Allowance for Uncollectible Accounts $ 752
Explanation:
Initial Balance
Dr Accounts Receivable $ 12,000
Cr Allowance for Uncollectible Accounts $ 500
Kelly’s Camera Shop had sales revenue, of which $60,000 was on credit
Dr Accounts Receivable $ 60,000
Cr Sales $ 60,000
Collections of accounts receivable during 2018 amounted to $58,000.
Dr Cash $ 58,000
Cr Accounts Receivable $ 58,000
(a) On December 10, a customer balance of $1,400 from a prior year was
determined to be uncollectible, so it was written off.
Dr Allowance for Uncollectible Accounts $ 1,400
Cr Accounts Receivable $ 1,400
(b) On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year.
Dr Bad Debt Expense $ 752
Cr Allowance for Uncollectible Accounts $ 752
Hunt Company purchased factory equipment with an invoice price of $90,000. Other costs incurred were freight costs, $1,100; installation wiring and foundation, $2,200; material and labor costs in testing equipment, $700; oil lubricants and supplies to be used with equipment, $500; fire insurance policy covering equipment, $1,400. The equipment is estimated to have a $5,000 salvage value at the end of its 8-year useful service life. Compute the acquisition cost of the equipment. Acquisition cost of the equipment $ If the double-declining-balance method of depreciation was used, the constant percentage applied to a declining book value would be
Answer:
Acquisition cost of the Equipment = $94,000
Double declining depreciation rate = 25%
Explanation:
a. The computation of the acquisition cost of the equipment is shown below:-
Acquisition cost of the Equipment = Invoice cost + Freight costs + Installation wiring and foundation + Material and labor costs used in testing
= $90,000 + $1,100 + $2,200 + $700
= $94,000
b. The computation of double declining depreciation rate is here below:-
Double declining depreciation rate = 1 ÷ Depreciation life × Times
= 1 ÷ 8 × 2
= 0.125 × 2
= 0.25
or
= 25%
Estate Corp., has the following information: Month Budgeted Purchases January $27,600 February 29,400 March 28,500 April 30,480 May 27,680 Purchases are paid for in the following manner: 15% of the purchase amount in the month of purchase 35% of the purchase amount in the month after purchase 50% of the purchase amount in the second month after purchase What is the expected Accounts Payable balance as of May 31
Answer:
$38,768
Explanation:
January Purchases:
$27,600
January Payments:
15% of $27,600 = $4,140
February Purchases:
$29,400
February Payments:
15% of $29,400 = $4,410
35% of $27,600 = $9,660
Total February Payments = $4,410 + $9,660 = $14,070
March Purchases:
$28,500
March Payments:
15% of $28,500 = $4,275
35% of $29,400 = $10,290
50% of $27,600 = $13,800
Total March Payments = $4,275 + $10,290 + $13,800 = $28,365
April Purchases:
$30,480
April Payments:
15% of $30,480 = $4,572
35% of $28,500 = $9,975
50% of $29,400 = $14,700
Total April Payments = $4,572 + $9,975 + $14,700 = $29,247
May Purchases:
$27,680
May Payments:
15% of $27,680 = $4,152
35% of $30,480 = $10,668
50% of $28,500 = $14,250
Total May Payments = $4,152 + $10,668 + $14,250 = $29,070
Total Purchases = $27,600 + $29,400 + $28,500 + $30,480 + $27,680
Total Purchases = $143,660
Total Payments = $4,140 + $14,070 + $28,365 + $29,247 + $29,070
Total Payments = $104,892
Accounts Payable = Total Purchases - Total Payments
Accounts Payable = $143,660 - $104,892
Accounts Payable = $38,768
Jordan Company produces basketballs and uses a standard costing system. Budgeted fixed overhead was $296,000. Rent changed during the year, causing actual fixed overhead to be $274,000. Jordan Company applies overhead on the basis of DLH. They projected 1,080,000 basketballs would be produced during the year. They actually produced 1,238,000 basketballs. The standard is 1DLH per basketball. They actually used 1DLH per basketball. What is the fixed overhead budget variance
Answer:
Explanation:
o
11.1. One reason why firms might want to pursue a strategic alliance strategy is to exploit economies of scale. Exploiting economies of scale should reduce a firm’s costs. Why would this mean that a firm pursuing an alliance strategy to exploit economies of scale is actually pursuing a cost leadership strategy?
Answer:
In simple words, economies of scale refers to the method of reducing cost of production by producing any commodity at a very high level. By doing strategic alliance two companies can combine their operations to work more efficiently.
Thus, strategic alliance will help the combining group in two ways, first they can target more customers without effective competition and also they can reduce their cost from economies of scale. The further effect of economies of scale would be lesser priced products, that is, cost leadership in the market.
Final answer:
Firms exploit economies of scale through strategic alliances to become cost leaders by reducing per-unit costs and increasing production efficiency. This cost-saving aligns with the cost leadership strategy as firms aim to offer goods or services at a lower price than their competitors while maintaining profitability.
Explanation:
A firm pursuing a strategic alliance strategy to exploit economies of scale is effectively implementing a cost leadership strategy because economies of scale result in reduced costs per unit by spreading fixed costs over a larger number of units and utilizing more efficient production methods. This cost reduction is a hallmark of cost leadership strategies where firms aim to become the lowest-cost producers in their industry. According to Michael Porter, firms should either pursue cost leadership or product differentiation to delay the effects of perfect competition and maintain sustainable profits.
Engaging in strategic alliances allows firms to merge their resources and capabilities, thus achieving cost efficiencies and higher volumes which lead to economies of scale. This not only helps firms lower their costs but also hinders new competitors due to the larger scale needed to compete effectively. Horizontal integration is one such example where firms expand or merge to achieve cost efficiencies.
Thus, when a firm forms an alliance to gain economies of scale, it is essentially focusing on minimizing costs to gain a competitive price advantage, which underpins the cost leadership approach. Being a cost leader can also potentially lead to market dominance by setting prices that are difficult for smaller or less efficient competitors to match, which can result in higher market shares for the cost-leading firms.
Mary Co. paid dividends of $5,000, $6,200, and $8,000 during Year 1, Year 2, and Year 3, respectively. The company had 1,700 shares of 3.5%, $100 par value preferred stock outstanding that paid a cumulative dividend. The company also had 5,000 shares of $1 par value common stock outstanding. What is the total amount of dividends paid to common shareholders during Year 3
Answer :
Amount of dividend paid =$1,350
Explanation :
The computation is shown below:
As per the data given in the question,
Dividend per year for preferred stock = $1700 × $100 × 3.5%
= $5,950
Particulars Year 1 Year 2 Year 3
Preferred dividend $5,000 $6,200 $6,650
($700+$5,950)
Preferred dividend in arrears $950 $700
($5,950-$5,000) ($5,950+$950-$6,200)
Therefore dividends for common shareholders is
= $8,000 - $6,650
= $1,350
An outside supplier has offered to make the part and sell it to the company for $25.10 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including the direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company, none of which would be avoided if the part were purchased instead of produced internally. In addition, the space used to make part E14 could be used to make more of one of the company's other products, generating an additional segment margin of $25,500 per year for that product. The annual financial advantage (disadvantage) for the company as a result of buying part E14 from the outside supplier should be:
Final answer:
The annual financial advantage (disadvantage) for the company as a result of buying part E14 from the outside supplier can be calculated by comparing the costs of producing the part internally versus buying it externally.
Explanation:
The annual financial advantage (disadvantage) for the company as a result of buying part E14 from the outside supplier can be calculated by comparing the costs of producing the part internally versus buying it externally.
If the company produces the part internally, it incurs various costs such as direct labor, variable costs, allocated general overhead, and the opportunity cost of using the space to make other products. On the other hand, if the company buys the part from the outside supplier, it only incurs the cost of purchasing the part.
To calculate the annual financial advantage (disadvantage), we subtract the cost of buying the part from the cost of producing the part internally and also add the additional segment margin generated from using the freed-up space. The result would be the net financial impact of the decision.
You are consulting for a beverage distributor who is interested in determining the benefits it could achieve from implementing new information systems. What will you advise as the first step? Group of answer choices Identify the business ecosystem the distributor is in. Implement a strategic transition to the new system. Perform a strategic systems analysis. Benchmark existing systems.
Answer: Perform a strategic systems analysis
Explanation:
According to the given question, the best advise is to perform a strategic system analysis for determining the various types of benefits by implementing the various types of new information system.
The main objective of the strategic system analysis is to conduct the various types of research in the company by formulating different types of strategy in an organization.
The strategic system analysis helps in measuring all the external as well as internal environment and evaluating all the business strategies.
Therefore, the given answer is correct.
Crusoe Waterworks Company provides plumbing services. Transactions of Crusoe Waterworks during the first year of operations are given below. a) The owner, Robin Crusoe, invested $5,000 cash in the company. The cash was deposited in the business checking account. b) Paid $4,000 cash for equipment to be used for plumbing repairs. c) Borrowed $26,000 from a local bank and deposited the money in the checking account. d) Paid $700 rent for the year. e) Purchased $1,500 of office supplies on account. f) Completed a plumbing repair project for a local lawyer and received $3,400 cash. Calculate the amount of total owner's equity after recording the transactions. Assume office supplies of $1,500 are left at the end of the year. Group of answer choices $7,700 $3,400 $5,000 $26,000
Answer:
$7,700
Explanation:
Equity of a company is Total Assets minus Total liabilities. Equity is the business worth for shareholders. For Crusoe Waterworks Company the equity will be the initial capital investment by Robin Crusoe plus any revenue received from the business operations.
The equity will be calculated by,
Equity = Capital Investment + Revenue - Expense
Equity = $5,000 + $3,400 - $700
An unfavorable labor efficiency variance is created when: Multiple Choice actual labor hours worked exceed standard hours allowed. actual hours worked are less than standard hours allowed. actual wages paid are less than amounts that should have been paid. actual units produced exceed budgeted production levels. actual units produced exceed standard hours allowed.
Answer:
actual labor hours worked exceed standard hours allowed.
Explanation:
In simple words, The variation in labor productivity tests the capacity to employ labor as expected. This variability is measured as the discrepancy between both the real working hours used only to manufacture an element, magnified by the standard labor rate, and the standard amount that would have been used.
Thus, from the above we can conclude that the correct option is A.
In your discussion post, think about some examples of exponential growth in the real world. They might be examples from science, medicine, or finances. Share two examples of exponential growth, and include a description of who would benefit from the information found in these examples. Also include, two examples of careers and jobs that would be difficult to work in if you didn't understand exponential growth. Describe why it would be difficult in these specific examples.
Answer: interest and population growth
Explanation:
Examples of exponential growth in real world.
1. interest on a savings account (finance). example when you deposit let say $1000 in an account that earns you a simple interest rate of 10% in a year you would earn $100, with each year the amount of interest paid continues to grow exponentially. The bank customer or owner of the account stands to benefit from this growth.
2. Population growth ( science ) population continues to grow exponentially overtime due to individuals available to produce not minding the available resources.a large population usually translates to a good economy development due to more people available so the citizen benefits from it.
Examples of career that it would be difficult to work in
1. Financial advisor
2. Bankers
For someone working as a financial advisor or banker would need the knowledge of exponential growth by understanding compound returns. In finance, compound returns leads to exponential growth. Compounding powers is part the most powerful tools in finance. This method is used by financial advisors and bankers for creating large sums from an initial deposit.
Cobe Company has already manufactured 17,000 units of Product A at a cost of $10 per unit. The 17,000 units can be sold at this stage for $470,000. Alternatively, the units can be further processed at a $280,000 total additional cost and be converted into 5,200 units of Product B and 11,300 units of Product C. Per unit selling price for Product B is $104 and for Product C is $52. 1. Prepare an analysis that shows whether the 17,000 units of Product A should be processed further or not?
Answer:
Company should be processed further of product A.
Explanation:
According to the scenario, computation of the given data are as follows:-
Particular Sales Amount Further Process
Sales $4,70,000 $11,28,400
For Further process additional cost $2,80,000
Income/Loss $4,70,000 $8,48,400
Further Processed Total Additional Sales = Sale Units of Product B × Price Per Unit of Product B + Sale Units of Product C × Price Per Unit of Product C
= (5200 × $104) + (11,300 × $52)
= $540,800 + $587,600 =$1,128,400
If Processed Further Incremental Net Income = Income -Sales
= $848,400 - $470,000
= $378,400.
According to the Analysis, Company should be processed further of product A.
In 2020, Antle Inc. had acquired Demski Co. and recorded goodwill of $275 million as a result. The net assets (including goodwill) from Antle's acquisition of Demski Co. had a 2021 year-end book value of $610 million. Antle assessed the fair value of the Demski reporting unit at this date to be $730 million, while the fair value of all of Demski's identifiable tangible and intangible assets (excluding goodwill) was $583 million. The amount of the impairment loss that Antle would record for goodwill at the end of 2021 is: Multiple Choice $147 million. $128 million. $0. $120 million.
Final answer:
Antle Inc. would record a goodwill impairment loss of $128 million for Antle's acquisition of Demski Co., as the carrying value of the goodwill ($275 million) exceeds its implied fair value ($147 million) determined by the fair value of the reporting unit ($730 million) minus the fair value of identifiable assets ($583 million).
Explanation:
To determine the amount of goodwill impairment, we must assess the carrying value of the reporting unit against its fair value. According to the information provided, Antle Inc. recorded goodwill for the acquisition of Demski Co. at $275 million. The fair value of the reporting unit, which includes Demski Co., is $730 million, and the fair value of its identifiable tangible and intangible assets (excluding goodwill) is $583 million.
Initially, we calculate the implied fair value of goodwill by subtracting the fair value of identifiable assets from the fair value of the reporting unit:
Fair value of the reporting unit: $730 millionFair value of identifiable assets: $583 millionImplied fair value of goodwill: $730 million - $583 million = $147 millionNow, compare the carrying value of the goodwill with the implied fair value. The carrying value of goodwill is $275 million and the implied fair value is $147 million. Therefore, Antle must record an impairment loss to write down the carrying value of goodwill to the lower implied fair value.
Goodwill impairment loss = Carrying value of goodwill - Implied fair value of goodwill = $275 million - $147 million = $128 million.
Desert Company purchased land to be used as a factory site for $1,350,000. Desert paid $100,000 to tear down two buildings on the land. Salvage was sold for $8,500. Legal fees of $5,250 were paid for title investigation and making the land purchase. Architect’s fees were $46,600. Title insurance cost $3,600 and liability insurance during construction cost $3,900. Excavation cost $16,720. The contractor was paid $4,200,000. Landscaping cost $9,800. Interest costs during construction were $225,000. What is the historical cost of the land that should be recorded by Desert, Co.?
Answer:
historical cost is $1,460,150
Explanation:
Computation of Cost of Land
Cost $1,350,000
Tear down $100,000
Salvage -$8,500
Legal fees $5,250
Title insurance $3,600
pavement $9,800
Total $1,460,150
Answer:
Desert Company
Historical cost of Land:
Purchase price = $1,350,000
Tearing down Buildings = $91,500 $(100,000 - 8,500)
Title Investigation = $5,250
Title Insurance = $3,600
Total = $1,450,350
Explanation:
The historical cost of land is the initial price paid to purchase the land and any other costs incurred in order to put the land to use, except building costs.
The other costs, including Architect's fee, Liability Insurance during construction, excavation cost, contractor fee, and landscaping cost are costs incurred for the building and not for the land.
An outside supplier has offered to sell motors to RGM for $52 per motor. If RGM stops making the motors, 1/4 of the fixed manufacturing overhead would be avoidable. In addition, the facilities being used to make motors could be rented to another company for $40,000 per year. If RGM purchases the motors from the supplier, by how much will net income change?
Answer:
net income will decrease by $60,000
Explanation:
current costs:
direct materials = $20direct labor = $18variable manufacturing overhead = $10fixed manufacturing overhead = $8total cost per unit = $56total production costs = $56 x 50,000 = $2,800,000relevant costs if product is purchased form external supplier:
purchase price per unit = $52 x 50,000 = $2,600,000fixed manufacturing overhead = $8 x 3/4 x 50,000 = $300,000- lease of facilities = ($40,000)total relevant costs if product is purchased = $2,860,000Since the relevant costs of purchasing the product are $60,000 higher, net income would decrease by that amount.
Consider an indifference curve for someone deciding how to allocate time between work (and thus consumption) and leisure. Suppose the wage increases. The substitution effect induces a person to work and consume in response to higher wages. If consumption is a normal good, the income effect induces the person to consume when the wage rises, but if consumption is an inferior good, the income effect induces the person to consume in response to higher wages. True or False: It is possible that the person's consumption falls as a result of the higher wage. True False
Answer: True if Consumption is of Inferior Good
Explanation:
Inferior goods are inversely related to wages. They are consumed because wages are less and people do not have the capacity to buy what they really want which are normal goods. If wages rise, people will leave Inferior goods for normal goods which is to reduce consumption of normal goods.
Examples of inferior goods are off brand cereals. Notice how as wages increase they are bought less of and instead their more popular counterparts are purchased.
The agreement of the trial balance totals is an indication that all transactions have been properly
recorded in the books of accounts. Do you agree with this statement?
Required:
Outline 4 reasons to justify your response
Answer:
NO, I do not agree with this statement.
Explanation:
So, a TRIAL BALANCE is a list in which all entries(debits and credits statement) for a particular business, firm, company or organization are kept and BALANCED. A trial balance also contains information about the organization or company's dividends, liabilities, expenses and many more.
The reason the Statement in the question is faulted is because TRIAL BALANCE does NOT prove the the record is ACCURATE, there is no guarantee that the record is ACCURATE although it shows to some extent that the record are PRECISED BUT NOT ACCURATE.
The Four Reasons to Justify the answer are;
(1). ERROR OF COMMISSION: error that occurs when amount is entered in a wrong account.
(2). ERROR OF OMISSION: error that occurs when data is being omitted.
(3). ERROR OF PRINCIPLE: error that occurs when data is recorded in the wrong ledger.
(4). COMPENSATING ERROR: this error cause offset of another error.
ou are valuing a company that is projected to generate a free cash flow of $10 million next year, growing at a stable 3.0% rate in perpetuity thereafter. The company has $22 million of debt and $8.5 million of cash. Cost of capital is 10.0%. There are 50 million shares outstanding. How much is each share worth according to your valuation analysis
Answer:
Each share worth is $2.59
Explanation:
According to the given data we have the following:
D1 = Cash Flow at the end of year 1 = $ 10 million
r = Cost of Capital = 10% = 0.1
g = perpetual growth of cash flows
Hence, The present value of Cash Flows = D1/(r-g)
= 10/(0.1-0.03)
=10/0.07
= $ 142.8571428571 million
= $ 142.86 million
To find the equity value we need to remove the net debt from cash flows
Net Debt = Debt - Cash
= 22 - 8.5
= $ 13.5 million
Now net cash flows = Cash Flows - Net Debt
= 142.86 - 13.5
= $ 129.36 million
Therefore, each share worth = Present Value of Cash Flow / No of Outstanding Shares
= 129.36 / 50 (Both values are in millions so the zeros are ignored)
= 2.5872
= $2.59
Each share worth is $2.59
If the coupon interest rate remains constant from the time of issue until the bond matures, then the bond is called afixed-rate bond. The contract that describes the terms of a borrowing arrangement between a firm that sells a bond issue and the investors who purchase the bonds is called the . Which term is used to describe a call provision in which the issuer is prevented from calling a portion or the entire issue for several years during the early years of the bond issue? Deferred call provision Sinking fund provision Declining call provision
Answer:
Indenture
Deferred call provision
Explanation:
Indenture is defined as the contract that describes the terms of a borrowing arrangement between a firm that sells a bond issue and the investors who purchase the bonds.
A call provision is defined as the right that the issuer of a security has to call or redeem the security at certain times and under specific conditions.
The call provision in which the issuer is prevented from calling a portion or the entire issue for several years during the early years of the bond issue is called deferred call provision.
Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $3.20 per unit. Bluebird currently produces and sells 75,000 units at $7.20 each. This level represents 80% of its capacity. These bird feeders would be marketed under the wholesaler’s name and would not affect Bluebird’s sales through its normal channels. Production costs for these units are $3.80 per unit, which includes $2.35 variable cost and $1.45 fixed cost. If Bluebird accepts this additional business, the effect on net income will be:
Answer:
Effect on income= $12,750 increase
Explanation:
Giving the following information:
Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $3.20 per unit. Production costs for these units are $3.80 per unit, which includes $2.35 variable cost and $1.45 fixed cost.
Because it is a special offer and there is unused capacity, we will not take into account the fixed costs:
Effect on income= 15,000*(3.2 - 2.35)= $12,750 increase
A quality improvement team is best described as a: A. Group of employees coming together for a specific, unplanned purpose B. Group of selected employees that must be prepared to convene quickly in response to an emergency C. Group of individuals working together to address a particular problem or process D. Team in the storming phase of development E. Formally established and defined group of individuals who work together over time
Answer:
Group of individuals working together to address a particular problem or process.
Explanation:
Quality improvement team can be be described as a group of employees whose task is the ensure the quality of a particular product. This team is in charge of an entire production process, they also have the right to make alterations to the design of a product to ensure that there is more demand for the product in the market.
The quality improvement team also take part in decision making by bringing up new policies and ideas capable of boosting the amount of profit incurred by the organisation.
Department S had 500 units 70% completed in process at the beginning of the period, 7,600 units completed during the period, and 900 units 53% completed at the end of the period. What was the number of equivalent units of production for the period for conversion if the first-in, first-out method is used to cost inventories? Assume the completion percentage applies to both direct materials and conversion cost.
Answer:
7,727 units
Explanation:
According to the scenario, computation of the given data are as follows:
Department S beginning = 500 units
Completed % in process = 70%
Total completed during period = 7,600 units
End of period = 900 units 53 % completed
So, we can calculate the units of production using FIFO method.
Check attachment for the Solution.
The attachment is attached below.
Crane Company purchases Cullumber Company for $2390000 cash on January 1, 2021. The book value of Cullumber Company’s net assets, as reflected on its December 31, 2020 balance sheet is $1851000. An analysis by Crane on December 31, 2020 indicates that the fair value of Cullumber’s tangible assets exceeded the book value by $178500, and the fair value of identifiable intangible assets exceeded book value by $134000. How much goodwill should be recognized by Crane Company when recording the purchase of Cullumber Company? $539000 $360500 $226500 $0
Answer:
$226,500
Explanation:
The computation of the goodwill is shown below:
Goodwill = cash paid - book value of net assets - tangible assets exceeded the book value - fair value of identifiable intangible assets exceeded book value
= $2,390,000 - $1,851,000 - $178,500 - $134,000
= $226,500
We simply applied the above formula so that the goodwill amount could arrive
The Tornado Truck Body Company decides to repurchase 10,000 shares of its common stock on January 20. The stock has $1 par value, and the market value per share of common stock on January 20 is $8.75. The company decides to sell 5,000 of the treasury stock shares on April 30 for $9.00 per share. What is the amount of the gain recognized as a result of the transaction
The amount of the gain recognized as a result of the transaction is $35,000.
Explanation:The gain recognized as a result of the transaction is calculated by subtracting the cost of the repurchased shares from the proceeds of the sale of the treasury stock. In this case, the cost of repurchased shares is $1 par value per share multiplied by the number of shares repurchased, which is 10,000. So the cost is $10,000. The proceeds of the sale of the treasury stock is the selling price per share multiplied by the number of shares sold, which is $9.00 per share multiplied by 5,000 shares. So the proceeds are $45,000.
The gain is calculated by subtracting the cost from the proceeds, which is $45,000 - $10,000 = $35,000.
Therefore, the amount of the gain recognized as a result of the transaction is $35,000.
You own a two-bond portfolio. Each has a par value of $1000. Bond A matures in 5 years, has a coupon rate of 8 percent, and has an annual yield to maturity of 9.20 percent. Bond B matures in 15 years, has a coupon rate of 8 percent and has an annual yield to maturity of 8.20 percent. Both bonds pay interest semiannually. (a) What is the value of your portfolio?(b) If each yield to maturity rises by one percentage point, then the value of your portfolio is $1,748.28. True or False?
Answer:
True, The Value of the portfolio is $ 1748.28 , there is a reduction in value of portfolio due to increase in YTM rate.
Explanation:
Solution
Given that:
For Bond A
The Maturity period (n) = 5 years
The Coupon rate = 8% (coupon rate is paid semiannually)
Then,
The total semiannual period is 10.
YTM = R = 9.2%
Par value = $1000
So,
The Current price of the bond = Present value of all coupon cash flows + Present value of the bond at maturity
The Current price of the bond = 40*(1-1/(1+R/2)^10)/(R/2) + 1000/(1+R/2)^10
The Current price of the bond =40*(1-1/1.046^10)/.046 + 1000/1.046^10 = $952.756
For Bond B
The Maturity period (n) = 15 years
The Coupon rate = 8% (coupon rate is paid semiannually)
Then,
The total semiannual period is 30.
Thus,
YTM = R = 9.2%
Par value = $1000
So,
The Current price of the bond = Present value of all coupon cash flows + Present value of the bond at maturity
The Current price of the bond = 40*(1-1/(1+R/2)^30)/(R/2) + 1000/(1+R/2)^30
The Current price of the bond =40*(1-1/1.046^30)/.046 + 1000/1.046^30 = $903.406
Now,
The value of portfolio = $952.756+$903.406 = $1856.16 approx.
Thus,
If each yield to maturity increases by 1% point
Then,
YTM = 10.2%
The half yearly rate is 5.1%
The Current price of the bond A =40*(1-1/1.051^10)/.051 + 1000/1.051^10 = $915.48
The Current price of the bond B =40*(1-1/1.051^30)/.051 + 1000/1.051^30 = $832.82
This scenario changes to:
The Value of the portfolio = $915.48+ $832.82 = $ 1748.28
so, there is a reduction in value of portfolio due to increase in YTM rate.
The percentage decrease in value of portfolio = (1748.28 - 1856.16)/ 1856.16 = -5.81%