Answer:
b. the asset must have an expected life of a normal operating cycle.
Explanation:
A current asset can be defined as all of the assets that are being owned by a company or business entity and are expected to be converted into their cash equivalent through sales or use within a period of one year of its date on the organization's balance sheet.
Hence, to be included in property, plant, and equipment, an asset must have all of the following;
I. The asset is expected or required to be held for use
II. It must be tangible in nature.
III. It is required to have an expected life of that is typically above a year.
AbbVie Pharmaceuticals (headquartered in Lake Forest, IL) has commenced a $80 million R&D project to develop a new drug to treat a rare disease. So far, it has spent $25 million of the $80 million, and preliminary results are positive. If the remaining $55 million is invested, the drug will certainly be completed and is expected to generate profit1 of $100 million (in present value) for AbbVie. Meanwhile, a research biologist at Northwestern has independently developed a treatment for the same disease. The scientist has offered to sell her invention to AbbVie for $2 million. Her drug would be just as effective as AbbVie’s drug, and would also generate profit of $18 million in present value.
Required:
a. Should AbbVie buy the drug for $2 million?
b. What is the most AbbVie should be willing to pay for the Illinois Tech researcher’s drug?
c. How would your answer change if the Illinois Tech biologist had developed her drug two years ago, before AbbVie started its own R&D project?
d. Suppose that Merck has also expressed interest in the biologist’s invention. If Merck buys the drug, there is a 50% chance that it will beat AbbVie’s drug to market. If that happens, suppose the profit of the second drug to market is zero. Now how much should AbbVie be willing to pay for the drug? How much should Merck be willing to pay?
Question Completion:
AbbVie Pharmaceuticals (headquartered in Lake Forest, IL) has commenced a $10 million R&D project to develop a new drug to treat a rare disease. So far, it has spent $6 million of the $10 million, and preliminary results are positive. If the additional $4 million is invested, the drug will certainly be completed and is expected to generate profit of $18 million in present value for AbbVie. Meanwhile, a research biologist at Illinois Tech has independently developed a treatment for the same disease. The scientist has offered to sell her invention to AbbVie for $2 million. Her drug would be just as effective as AbbVie’s drug, and would also generate profit of $18 million in present value.
Answer:
AbbVie Pharmaceuticals
a. AbbVie should buy the drug for $2 million.
b. The most AbbVie should be willing to pay for the Illinois Tech researcher's drug is $4 million. Luckily, this much is not demanded by the researcher.
c. If the Illinois Tech biologist had developed her drug two years ago, before AbbVie started its own R&D project, AbbVie could have paid an amount ranging from $2 million to $10 million.
d. Before Merck buys the drug, AbbVie should be willing to pay $2 million without further delays.
e. Merck should be willing to pay as much as $4 million.
Explanation:
a) Note that the introduction to the question was flawed. The mathematics do not add up. For this reason, I have worked with the more properly formulated question as shown in the Question Completion above.
b) Data and Calculations:
Projected cost of R&D = $10 million
Amount of the R&D cost spent already = $6 million
Remaining R&D cost to be spent = $4 million
Expected profit = $18 million
Cost of the offer by the research biologist = $2 million
Expected profit from the biologist's drug = $18 million
c) The conclusions above were reached because all the amounts are stated in present value terms.
“It’s great to listen to the customer when you are designing your product, but it’s just not practical in pricing. All the customers have to say is that they want lower prices. If you want me to increase profits, I can’t very well listen to that!”
a. What should the marketing director make of this response?
Answer:
189038¥$
Explanatio
first play attention in class
The candidate hasn't fully understood the marketing strategy of the company
What is marketing?Marketing refers to the actions of a company in order to promote buying or selling of the company’s product, as well as creating a brand image of its product. Marketing has become a vital part of total’s world, where everything is connected via the internet and social media. New fields like Digital Marketing, Social Media Marketing have propped up for the marketing of the products.
The marketing director while appreciating this response should know the person responding hasn't been fully aware of the marketing strategy. He should make the candidate understand how much vital it is to take the opinion of the customers. Even, the company's main focus is on customers' responses and needs.
In today’s economy, a couple of viral videos against the company by genuine customers can ruin the whole image of the company. Also, customers might not necessarily want a lower-priced product in today’s age of show-offs. The customers might be wanting a product of distinction among his/her peers to stand out.
Learn more about Marketing here:
https://brainly.com/question/13414268
#SPJ2
You own shares of Somner Resources' preferred stock, which currently sells for per share and pays annual dividends of $ per share. If the market's required yield on similar shares is percent, should you sell your shares or buy more?
Answer:
You should buy more shares
Explanation:
The above-mentioned question is missing few components. I have added them to explain on how the question would be solved if all the variables were provided. Please note the additions in bold text below. The answer of which is given afterwards.
You own 300 shares of Somner Resources' preferred stock, which currently sells for $39 per share and pays annual dividends of $5.50 per share. If the market's required yield on similar shares 12% is percent, should you sell your shares or buy more?
Solution as mentioned below:
First of all we need to calculate value of the preferred stock by dividing the annual dividend per share from the market required rate.
Value of preferred stock = 5.50 / 12%
Value of preferred stock = $45.83
Now given the fact that the current price at which the stocks are sold is $39 which is less than the price at which they are actually valued which is $45.83. You should buy more of the shares as they are currently undervalued.
Pension funds pay lifetime annuities to recipients. If a firm will remain in business indefinitely, the pension obligation will resemble a perpetuity. Suppose, therefore, that you are managing a pension fund with obligations to make perpetual payments of $2 million per year to beneficiaries. The yield to maturity on all bonds is 16%. a. If the duration of 5-year maturity bonds with coupon rates of 12% (paid annually) is four years and the duration of 20-year maturity bonds with coupon rates of 6% (paid annually) is 11 years, how much of each of these coupon bonds (in market value) will you want to hold to both fully fund and immunize your obligation
Solution :
The PV "perpetual" obligation of the firm = [tex]$\frac{\$ 2 \text{ million}}{0.16}$[/tex]
= $ 12.5 million
Also based on duration of the perpetuity, duration of this obligation = [tex]$\frac{1.16}{0.16}$[/tex]
= 7.25 years
Let [tex]$w$[/tex] be the [tex]$\text{weight}$[/tex] on the [tex]$5$[/tex] year maturity bond, which has a duration of [tex]$4$[/tex]years. Then :
[tex]$w \times 4 +(1-w) \times 11 = 7.25$[/tex]
[tex]$w=0.5357$[/tex]
Therefore,
[tex]$0.5357 \times \$ 12.5 = \$ 6.7$[/tex] million in the [tex]$5$[/tex] year bond
[tex]$0.4643 \times \$12.5=\$5.8$[/tex] million in the [tex]$2$[/tex] year bond.
Therefore, the total invested amounts to $ [tex]$(6.7+5.8)$[/tex] million = [tex]$\$12.5$[/tex] million, which fully matches the funding needs.
Bald Industries disclosed the following minimum rental commitments under non-cancelable operating leases in its 2017 annual report: Minimum operating Amount lease payments (in millions) 2018 $71 2019 46 2020 34 2021 26 2022 20 Total $197 What is the present value of these operating lease payments, assuming a 6% discount rate
Answer:
The present value of these operating lease payments is $172.01 million.
Explanation:
Note: See the attached excel file for the calculation of the net present value (NPV) (in bold red color) of these operating lease payments.
In the attached excel file, the discounting factor for each year is calculated as follows:
Discounting factor = 1 / (100% + Discount rate)^Number of the year
From the attached excel file, we have:
NPV = Net present value = $172.01 million.
Comparative advantage in production is achieved by: Group of answer choices Subsidizing, specializing, and lowering the price of an exported good. Being able to produce a good with fewer inputs than in other countries. Having terms of trade that are better than the terms of trade faced in other countries. Having a lower opportunity cost of producing a good relative to that of other countries.
Answer:
Having a lower opportunity cost of producing a good relative to that of other countries.
Explanation:
Comparative advantage in economics is the ability of an individual or country to produce a specific good or service at a lower opportunity cost better than another individual or country.
The comparative advantage gives a country a stronger sales margin than their competitors as they are able to sell their specific products or render their peculiar services at a lower opportunity cost.
Also, the principle of comparative advantage asserts that countries can become better off by specializing in what they do best.
This simply means that, any country applying the principle of comparative advantage, would enjoy an increase in output and consequently, a boost in their Gross Domestic Products (GDP).
Hence, comparative advantage in production is achieved by having a lower opportunity cost of producing a good relative to that of other countries.
Renaissance Creations restores antique stained glass windows. All jobs generate some breakage or improper cuts. This scrap can be sold to stained glass hobbyists. Renaissance Creations expects to incur approximately 45,000 direct labor hours during 2013. The following estimates are made in setting the predetermined overhead rate for 2013:
One job that Renaissance Creations completed during 2013 was a stained glass window of the Pierce family crest that took 125 hours, and direct labor is invoiced at $20 per hour. Total direct material cost for the job was $890. Scrap that was generated from this job was sold for $93.
a. What was the predetermined overhead rate (set on the basis of direct labor hours) for 2013?
b. What was the cost of the Pierce stained glass window?
c. Prepare the journal entry to record the sales value of the scrap from the Pierce stained glass window.
d. Assume instead that only certain jobs generate scrap. What was the cost of the Pierce stained glass window?
Answer:
hello your question has some missing information attached below is the missing information
answer :
a) $7
b) $4265
c) attached below
d) $4192
Explanation:
a) determine the predetermined overhead rate
= Total estimated overhead / estimated direct labor hour
Total estimated overhead = $315,000
estimated direct labor hour = 45,000
hence predetermined overhead rate = 315,000 / 45,000 = $7
b) calculate the cost of the Pierce stained glass window
Direct material cost = $890
number of labor hours = 125
direct labor cost = $20 per hour
predetermined overhead rate = $7
∴cost of glass window = [ ( 890 + ( 125 * 20 ) + ( 125 * 7 ) ] = $4265
c) Journal entry used to record sell of scrap
Account name
cash $93
manufacture overhead $93
d) assuming only some jobs generate scrap
first we will calculate the overhead rate per hour
= ( $297000 + $25200) / 45,000 = $7.16
∴ Total cost of pierce stained glass window
= [ (direct material cost + number of labor hours ) + number of labor hours ( predetermined overhead rate ) ] - $93
= $4285 - $93 = $4192
Required information
Problem 9-3A Aging accounts receivable and accounting for bad debts LO P2, P3
[The following information applies to the questions displayed below.]
Jarden Company has credit sales of $3,100,000 for year 2017. On December 31, 2017, the company’s Allowance for Doubtful Accounts has an unadjusted credit balance of $19,564. Jarden prepares a schedule of its December 31, 2017, accounts receivable by age. On the basis of past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here.
December 31, 2017
Accounts Receivable Age of
Accounts Receivable Expected Percent
Uncollectible
$ 620,000 Not yet due 0.85 %
248,000 1 to 30 days past due 1.60
49,600 31 to 60 days past due 6.10
24,800 61 to 90 days past due 30.75
4,960 Over 90 days past due 64.00
Problem 9-3A Part 1
Required:
1. Estimate the required balance of the Allowance for Doubtful Accounts at December 31, 2017, using the aging of accounts receivable method.
Problem 9-3A Part 2
2. Prepare the adjusting entry to record bad debts expense at December 31, 2017.
Answer and Explanation:
1.
The estimation of the required balances are as follows:
Age Balance Estimated Estimated Uncollectible amount
of Dec-31 Percentage
Accounts Uncollectible
Not yet due $620,000 0.85% $5,270.00
1–30 days $248,000 1.60% $3,968.00
31–60 days $49,600 6.10% $3,025.60
61–90 days $24,800 30.75% $7,626.00
Over 90 days $4,960 64.00% $3,174.40
Total $947,360 $23,064
2.
Now the journal entry is
but before that following calculation is needed
Ending balance of allowance for doubtful account $23,064
Less: Opening balance in allowance for doubtful account -$19,564
Bad debt expense for the year $3,500
The journal entry is
Bad debt expense $ 3,500
To Allowance for doubtful accounts $ 3,500
(Being bad debt expense is recorded)
what does CPI stand for and what is it used to measure?
Answer:
please give me brainlist and follow
Explanation:
Consumer Price Index
The Consumer Price Index (CPI) is a measure of the average change overtime in the prices paid by urban consumers for a market basket of consumer goods and services.
During the month of March, Munster Company's employees earned wages of $64,000. Withholdings related to these wages were $4,896 for FICA, $7,500 for federal income tax, $3,100 for state income tax, and $400 for union dues. The company incurred no cost related to these earnings for federal unemployment tax but incurred $700 for state unemployment tax. Journalize payroll entries.
Answer:
A. Dr salaries and wages expense for 64,000
Cr to FICA taxes payable for 4,896
Cr Federal Income Tax Payable for 7,500
Cr State Income Tax Payable for 3,100
Cr Union Dues Payable for 400
Cr Salaries and Wages Payable for 48,104
B. Dr payroll tax expense for 5,596
Cr FICA tax payable for 4,896
Cr State Unemployment for 700
Explanation:
Preparation to Journalize the payroll entries
A. Dr salaries and wages expense for 64,000
Cr to FICA taxes payable for 4,896
Cr Federal Income Tax Payable for 7,500
Cr State Income Tax Payable for 3,100
Cr Union Dues Payable for 400
Cr Salaries and Wages Payable for 48,104
(64,000-4,896-7,500-3,100-400)
B. Dr payroll tax expense for 5,596
(4,896+700)
Cr FICA tax payable for 4,896
Cr State Unemployment for 700
Which of the following is not true concerning account titles:multiple choiceThere is a wide range of account titles among different types of companies.All companies use exactly the same account titles.There is a small range in account titles regardless of type of company.All companies use different account titles.
Answer:
There is a wide range of account titles among different types of companies
Explanation:
An account title can be regarded as a
unique name that is been assigned or associated to particular account in an accounting system. It is very crucial to use An account title when there is a need for identification of accounts by
accounting staff , this is because the title usually conveys the purpose of that particular account. Some of the account titles that can be used are;
Cash on Hand, Petty Cash Fund, and
Cash in Bank,. In account titles;
✓All companies use exactly the same account titles.
✓There is a small range in account titles regardless of type of company.
✓All companies use different account titles.
On November 15, 2018, X Corp., an accrual basis taxpayer, enters into a contract which will provide the corporation with the use of manufacturing equipment for the 5 year period beginning on December 1, 2018. X Corp. paid $100,000 for the 5-year period on December 1, 2018. How much, if any of the payment can X Corp. deduct in 2018
Answer: $20000
Explanation:
Since $100,000 is paid for the contract which will provide the use of manufacturing equipment for 5 years, the payment that can be deducted for each of the 5 years will be an equal payment.
Therefore, the payment that X Corp. can deduct in 2018 will be:
= $100,000 / 5
= $20000
The following options it gives me are
There would be a shortage of 2,000 bags of popcorn and consumers would be happy with the quality
There would be a shortage of 2,000 bags and consumers would be unhappy with the quality
There would be a surplus of 2,000 bags and consumers would be happy with the quality
There would be a shortage of 2,000 bags and producers would be happy with the law
There would be a surplus of 2,000 bags and producers would be happy with the law
Answer:
There would be a surplus of 2,000 bags, and producers would be happy with the law.
Explanation:
Unlike a price floor that prevents the price of movie theater popcorn from falling below the equilibrium price level of $15, a price ceiling of $5 prevents the price of movie theater popcorn from rising above $20. When a price ceiling is set above the equilibrium price, the quantity supplied exceeds the quantity demanded by 2,000 packets of popcorn, and there will be a surplus supply.
James, Inc., has purchased a brand new machine to produce its High Flight line of shoes. The machine has an economic life of 6 years. The depreciation schedule for the machine is straight-line with no salvage value. The machine costs $594,000. The sales price per pair of shoes is $87, while the variable cost is $37. Fixed costs of $295,000 per year are attributed to the machine. The corporate tax rate is 22 percent and the appropriate discount rate is 10 percent.
What is the financial break-even point?
Answer:
James, Inc.
The financial break-even point in:
Sales unit = 8,322
Sales dollars = $724,014
Explanation:
a) Data and Calculations:
Cost of machine purchased = $594,000
Estimated economic life = 6 years
Salvage value = $0
Sales price per pair of shoes = $87
Variable cost per pair of shoes = 37
Contribution margin per pair = $50
Discounted contribution = $50 * 0.909 = $45.45
After-tax contribution = $35.45 ($45.45 * 0.78)
After-tax contribution margin ratio = $35.45/$87 * 100 = 41%
Fixed cost per year = $295,000
Corporate tax rate = 22%
Discount rate = 10%
Break-even point = Fixed cost/After-tax contribution
= $295,000/$35.45
= 8,322 units
= $724,014 ($87 * 8,322)
Presented below is information related to Splish Company at December 31, 2020, the end of its first year of operations.
Sales revenue $334,910
Cost of goods sold 149,030
Selling and administrative expenses 54,000
Gain on sale of plant assets 32,710
Unrealized gain on available-for-sale debt investments 9,080
Interest expense 6,360
Loss on discontinued operations 11,260
Dividends declared and paid 4,660
Compute the following:
(a) Income from operations -
(b) Net income -
(c) Comprehensive income
(d) Retained earnings balance at December 31, 2020 -
Answer:
a. $131,880
b. $167,310
c. $156,050
d. $151,390
Explanation:
(a) Income from operations
Income from Operations is Income resulting from Primary Trading Activities of the Company.
Income from Operations = Gross Profit + Operating Income - Operating Expenses
where,
Gross Profit = Sales - Cost of Goods Sold
= $334,910 - $149,030
= $185,880
thus,
Income from Operations = $185,880 - $54,000 = $131,880
(b) Net income
Income resulting from Primary and Secondary Trading Activities of the the Company.
Net income = Income from Operations + Non Operating Income - Non Operating Expenses
= $131,880 + $32,710 + $9,080 - $6,360
= $167,310
(c) Comprehensive income
Income from both Continuing and Non - Continuing Activities.
Comprehensive income = Net income + Non - Continuing Activities
= $167,310 - $11,260
= $156,050
(d) Retained earnings balance at December 31, 2020
The Income remaining after distributions to shareholders have been made.
Retained earnings = Comprehensive income - Dividends
= $156,050 - $4,660
= $151,390
3
Hame and explain
of skills that should be possess by an entrepreneur
Answer:
1. Curiosity. Great entrepreneurs are tasked with identifying new problems, identifying potential niche opportunities, refactoring their existing business processes, and innovating. This necessitates a passion for various fields of study and business cases that are outside of one's comfort zone.
2. Time management. Prioritization, milestone definition, execution, and iteration are all critical. None of this would be possible without the proper project management and time allocation methodologies in place to complete the work.
3. Strategic thinking. Learning to break down a problem to its simplest components and identify growth opportunities. Inventive problem-solving and spotting the low-hanging fruit. Defining an MVP's scope and testing concepts in a short amount of time and on a tight budget.
On August 2, ABC Co. receives a $7,900, 90-day, 10.5% note from its customer who is past due on what he owes. This note is replaces the customer's $7,900 account receivable. Prepare ABC's journal entry assuming the note is honored by the customer on October 31 of that same year. (Do not round intermediate calculations. Round your answers to nearest whole dollar value. Use 360 days a year.)
Answer:
Oct 31
Dr Cash $8,107
Cr Notes receivable$7,900
Cr Interest revenue $207
Explanation:
Prepare ABC's journal entry assuming the note is honored by the customer on October 31 of that same year
Oct 31
Dr Cash $8,107
[$7,900+($7,900*10.5%*90/360)]
Cr Notes receivable$7,900
Cr Interest revenue $207
($7,900*10.5%*90/360)]
A progressive tax is a tax that:
A. Requires you to pay less money in taxes when you have more income.
B. Requires everyone to pay the same tax rate.
c. Only applies to people who make more than $150,000 per year.
D. Requires people who make more money to pay a larger percentage of their income in taxes.
Answer:
I’m pretty sure it’s B.
Explanation:
^ I said pretty sure
Crypton Electronics has a capital structure consisting of percent common stock and percent debt. A debt issue of $ par value, percent bonds that mature in years and pay annual interest will sell for $. Common stock of the firm is currently selling for $ per share and the firm expects to pay a $ dividend next year. Dividends have grown at the rate of percent per year and are expected to continue to do so for the foreseeable future. What is Crypton's cost of capital where the firm's tax rate is percent?
Answer:
A. After-cost of debt 4.20%
B. Cost of common equity 12.15%
C. Cost of capital 7.02%
Explanation:.
A. Calculation to determine the After-cost of debt
After-cost of debt =RATE(15,5.8%*1000,-980,1000)*(1-30%)
After-cost of debt =4.20%
Therefore After-cost of debt is 4.20%
b) Calculation to determine cost of common equity
Cost of common equity=2.17/29.12+4.7%
Cost of common equity=12.15%
Therefore Cost of common equity is 12.15%
c) Calculation to determine cost of capital
Cost of capital=(4.20%*63%)+(12.15%*36%)
Cost of capital=7.02%
Therefore Cost of capital is 7.02%
On January 1, 2021, Peach Corporation issues $600,000, 5-year, 7% bonds at par. Interest is paid semiannually on January 1 and July 1. Peach Corporation uses the straight-line method of amortization. The company's fiscal year ends on December 31. Which of the following statements about the journal entry for these bonds on July 1, 2021 is TRUE?
a. The entry decreases assets and increases stockholder's equity
b. The entry increases expenses and increases assets.
c. The entry decreases net income and increases liabilities
d. The entry decreases assets and stockholder's equity
Answer:
The correct option is d. The entry decreases assets and stockholder's equity.
Explanation:
Since interest is paid semiannually on January 1 and July 1, that means cash has to be paid on July 1, 2021 as interest on bond.
Since cash is a current asset, that means the the payment of cash as intetest enxpen on July 1, 2021 will decrease asset.
Since the amount of interest expense on bond paid July 1, 2021 will reduce net income which is one of the elements of stockholder's equity, the entry will also therefore decrease the stockholder's equity.
Therefore, the correct option is d. The entry decreases assets and stockholder's equity.
Financial information is presented below: Operating expenses $ 45000 Sales returns and allowances 3000 Sales discounts 7000 Sales revenue 160000 Cost of goods sold 96000 Gross Profit would be $64000. $54000. $61000. $67000.
Explanation:
160,000−3,000−96,000=61000
expenses are not taken into account because their not required to find the gross profit.
Financial information is presented below: Operating expenses $ 45000 Sales returns and allowances 3000 Sales discounts 7000 Sales revenue 160000 Cost of goods sold 96000 Gross Profit would be "$64000". The correct option is A.
To calculate the Gross Profit, we use the formula:
Gross Profit = Sales Revenue - Cost of Goods Sold
Given the financial information,
Sales Revenue = $160,000
Cost of Goods Sold = $96,000
Gross Profit = $160,000 - $96,000
Gross Profit = $64,000
Therefore, the correct option is A that is $64,000.
To know more about Gross Profit here,
https://brainly.com/question/33973104
#SPJ2
Why is it a good idea to turn off Wi-Fi while using a mobile banking app?
Answer:
The fact that Wi-Fi broadcasts data to anybody in range means that your information could be at risk.
Explanation: 1 That's especially risky if you use Wi-Fi for online banking. Avoiding Wi-Fi altogether is not realistic. It's probably not even practical to save banking sessions for when you're at home or on a wired connection.
Luke Company has three divisions: Peak, View, and Grand. The company has a hurdle rate of 5.76 percent. Selected operating data for the three divisions follow:
Peak View Grand
Sales revenue $339,000 $223,000 $300,000
Cost of goods sold 197,000 111,000 188,000
Miscellaneous operating expenses 43,000 32,000 38,000
Average invested assets 1,320,000 960,000 1,185,000.
Required:
a. Compute the return on investment for each division.
b. Compute the residual income for each division.
Answer:
I DUNNNNO
Explanation:
All of the following are examples of current account transactions EXCEPT: Elimination Tool Select one answer A The United States purchases 200 tons of Canadian bacon. B Argentina purchases 10,000 French berets. C Mexico purchases 500 Spanish matador outfits. D Germany pays 1 million euro for the services of Swiss accountants. E China purchases $10 billion of United States government securities.
Answer:
E
Explanation:
the current account of a country measures the value of the trade balance, transfers and the net income
the component of the current account includes
trade balance - it measures the value of the import and export of goods and services of a country.
net income - measures the value of the income received by a country's residents less the income paid to foreigners
transfers - it includes income sent home by a country's citizens working outside the country
Asset income - measures changes in the asset income
this transaction - China purchases $10 billion of United States government securities - would be included in the capital account
Caldwell Corporation is considering an investment proposal that will require an initial outlay of $816,000 and would yield yearly cash inflows of $212,000 for nine years. The company uses a discount rate of 10%. What is the NPV of the investment?
Present value of an ordinary annuity of $1:
8%
9%
10%
1
0.926
0.917
0.909
2
1.783
1.759
1.736
3
2.577
2.531
2.487
4
3.312
3.24
3.17
5
3.993
3.89
3.791
6
4.623
4.486
4.355
7
5.206
5.033
4.868
8
5.747
5.535
5.335
9
6.247
5.995
5.759
A.
$251,667
B.
$371,000
C.
$408,000
D.
$404,908
Answer:
623
Explanation:
because I guessed and 816,000-212,000= 604,000
You are considering the acquisition of XYZ Enterprises. You have made the following projections for XYZ for years 1-5 ($ millions): Year 1 Year 2 Year 3 Year 4 Year 5 EBIT $ 20 $ 22 $ 25 $ 26 $ 30 Depreciation 5 5 6 7 8 Capital Expenditures 10 10 15 15 15 Investment in Working Capital 3 4 4 3 4 Assume a tax rate of 34%, a WACC of 13%, 2 million shares outstanding, $30 million debt value, and a growth rate of 5% after year 5. What is the estimated value per share to the nearest penny of XYZ using the perpetual growth method for calculating terminal value
Answer:
Value per share = $26.29675928947 rounded off to $26.30
Explanation:
To calculate the value of shares today, we first need to calculate the value of firm. We can calculate the value of firm by using the FCFF approach. The FCFF is calculated as follows,
FCFF = EBIT * (1- tax rate) + Depreciation - Capital Expenditure - Working Capital Investment
FCFF - Year 1 = 20 * (1-0.34) + 5 - 10 - 3 = 5.2 million
FCFF - Year 2 = 22 * (1-0.34) + 5 - 10 - 4 = 5.52 million
FCFF - Year 3 = 25 * (1-0.34) + 6 - 15 - 4 = 3.5 million
FCFF - Year 4 = 26 * (1-0.34) + 7 - 15 - 3 = 6.16 million
FCFF - Year 5 = 30 * (1-0.34) + 8 - 15 - 4 = 8.8 million
The value of firm can be calculated as follows,
Value of Firm = FCFF1 / (1+WACC) + FCFF2 / (1+WACC)^2 + ... +
FCFFn / (1+WACC)^n + [(FCFFn * (1+g) / (WACC - g)) / (1+WACC)^n]
Value of firm = 5.2 / (1+0.13) + 5.52 / (1+0.13)^2 + 3.5 / (1+0.13)^3 +
6.16 / (1+0.13)^4 + 8.8 / (1+0.13)^5 + [(8.8 * (1+0.05) / (0.13 - 0.05)) / (1+0.13)^5
Value of Firm = 82.59351857894 million
Value of Equity = Value of firm - value of debt
Value of equity = 82.59351857894 - 30
Value of equity = $52.59351857894 million rounded off to 52.59 million
To calculate the price per share, we need to divide the value of equity by the number of shares outstanding
Value per share = $26.29675928947 rounded off to $26.30
Mann Co. is preparing an Excel spreadsheet for its 5-year, 6%, $400,000 installment notes. The notes were issued on January 1 for $421,236. Installment payments are payable each December 31. A portion of the spreadsheet appears as follows: A B C D E 1 Effective rate: 0.06 2 Cash payments: 100,000 3 Term to maturity in years: 5 4 5 Period Cash Payment Interest Expense Change in Balance Outstanding Balance 6 0 7 1 8 2 What formula should Mann use in cell E8 to calculate the outstanding balance (book value) of the notes after the second interest
Answer:
The correct formula that Mann should use in cell E8 is =E7-D8.
Explanation:
Note: The data in this question are merged together. They are therefore sorted before answering the question. See the attached excel file for the complete question with the sorted data.
The explanation of the answer is now given as follows:
The correct formula that Mann should use in cell E8 is =E7-D8. If this formula is used, it will calculate the outstanding balance (book value) of the notes after the second interest for period 2.
Additional Note:
Although this is not part of the requirement of the question, but it is provided for you to assist your further in your learning.
Note: See the below the attached excel file for the full answer and calculations of all the cells required for the amortization schedule.
For example, using the correct formula =E7-D8 in cell E8 gives $267,301 (in red color).
Gilberto Company currently manufactures 75,000 units per year of one of its crucial parts. Variable costs are $2.45 per unit, fixed costs related to making this part are $85,000 per year, and allocated fixed costs are $72,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Gilberto is considering buying the part from a supplier for a quoted price of $3.65 per unit guaranteed for a three-year period.
Required:
Calculate the total incremental cost of making 75,000 and buying 75,000 units. Should the company continue to manufacture the part, or should it buy the part from the outside supplier?
Answer:
$2,000
Explanation:
The total incremental cost of making 75,000 and buying 75,000 units.
Logistics Solutions provides order fulfillment services for dot merchants. The company maintains warehouses that stock items carried by its dot clients. When a client receives an order from a customer, the order is forwarded to Logistics Solutions, which pulls the item from storage, packs it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor-hours. In the most recent month, 190,000 items were shipped to customers using 8,300 direct labor-hours. The company incurred a total of $29,050 in variable overhead costs. According to the company’s standards, 0.03 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $3.55 per direct labor-hour. Required: 1. What is the standard labor-hours allowed (SH) to ship 190,000 items to customers? 2. What is the standard variable overhead cost allowed (SH × SR) to ship 190,000 items to customers? 3. What is the variable overhead spending variance? 4. What is the variable overhead rate variance and the variable overhead efficiency variance?
Answer:
1. Standard labor hour allowed 5,700 Hour
2. Standard variable overhead cost allowed $20,235
3. Variable overhead spending variance 8,815 U
4. Variable overhead rate variance 415 F
Variable overhead efficiency variance 9230 U
Explanation:
1. Calculation to determine the standard labor-hours allowed
Standard labor hour allowed = 190,000*.03
Standard labor hour allowed= 5,700 Hour
Therefore the Standard labor hour allowed is 5,700 Hour
2. Calculation to determine the standard variable overhead cost allowed
Using this formula
Standard variable overhead cost allowed=Standard quantity of labour hours allowed*Standard variable overhead rate
Let plug in the formula
Standard variable overhead cost allowed = 5,700*3.55
Standard variable overhead cost allowed = $20,235
Therefore the Standard variable overhead cost allowed is $20,235
3. Calculation to determine the variable overhead spending variance using this formula
Variable Overhead Spending Variance=Standard Cost- Actual Cost
Let plug in the formula
Variable overhead spending variance = 20,235-29,050
Variable overhead spending variance = 8,815 U
Therefore the Variable overhead spending variance is 8,815 U
4. Calculation to determine the variable overhead rate variance
Using this is formula
Variable overhead rate variance
=(Standard Rate*Actual Hour)-Actual cost
Let plug in the formula
Variable overhead rate variance = (3.55*8300-29050)
Variable overhead rate variance= 415 F
Therefore the variable overhead rate variance is 415 F
Calculation to determine variable overhead efficiency variance
Using this formula
Variable Overhead Efficiency Variance=
(Standard Hours - Actual Hours ) x Standard Rate
Let plug in the formula
Variable overhead efficiency variance = (5700-8300)*3.55
Variable overhead efficiency variance = 9230 U
Therefore the Variable overhead efficiency variance is 9230 U
Miscellaneous costs associated with the purchase of new equipment? include:
Insurance costs before the equipment is ready for use $3,000
Maintenance costs before the equipment is ready for use 700
Insurance costs after the equipment is placed into service 1,400
Cost of trial run 800
Training costs for employees to learn how to use equipment 400
What is the amount assigned to the new? equipment?
A. $4,200.
B. $4,500.
C. $4,900.
D. $6,300.
Answer:
C. $4,900.
Explanation:
Determining the amount assigned to the new equipment
Details Amount
Insurance costs before the equipment is ready for use $3,000
Add: Maintenance costs before the equipment is ready for use $700
Add: Cost of trial run $800
Add: Training costs for employees to learn how to use equipment $400
Total costs assigned to the new equipment $4,900
So, the correct options is option c.