Answer:
equal to one.
Explanation:
Systemic risk are risk that are inherent in the economy. They cannot be diversified away. They are also known as market risk. examples of this risk include recession, inflation, and high interest rates. Investors should seek compensation for systemic risk. Systemic risk is measured by beta. The higher beta is, the higher the systemic risk and the higher the compensation demanded for by investors
The market has a beta of one. If a portfolio has the same level of systematic risk that is the same as that of the market, its beta would be equal to 1.
If the portfolio is less risky than the market, its beta would be less than one
If the portfolio is more risky than the market, its beta would be greater than one
If five different errands are allocated to five time slots, 12-1pm,1-2pm,2-3pm,3-4pm and 4-5pm, how many distinct schedules are possible
Answer:
120
Explanation:
There are 5 different errands and five different time slots for the errands. We are then required to find in how many ways these errands would be arranged in the time slots schedules.
The number of ways the errands can be arranged in the time slot is 5!
5! = 1×2×3×4×5= 120
Therefore there are 120 different ways to arrange the errands in the times slots schedules(5) available.
“Every individual employee in an organization plays a role in controlling work activities.” Do you agree with this statement, or do you think control is something that only managers are responsible for? Explain.
umm...
Explanation:
Yes, Every individual employee plays a role in controlling the quality of goods and services produced by their company, and not just the managers. This is true particularly in organizations where employees have been empowered by management.
Based on the statement that “Every individual employee in an organization plays a role in controlling work activities.”, my thoughts on it are:
I agree with the statementAccording to the given question, we are asked to share our thoughts about the given statement which says that “Every individual employee in an organization plays a role in controlling work activities.”
As a result of this, we can see that a work activity are anything which is done during work hours to produce a good, make sales or things which serve the objective of the company.
With this in mind, while it is the manager's job to oversee the affairs of the workers, the workers also have a responsibility to play their role properly so that the company would function effectively.
Read more here:
https://brainly.com/question/17551436
Bond X is a premium bond making semiannual payments. The bond pays a coupon rate of 6.8 percent, has a YTM of 6.2 percent, and has 13 years to maturity. Bond Y is a discount bond making semiannual payments. This bond pays a coupon rate of 6.2 percent, has a YTM of 6.8 percent, and also has 13 years to maturity. The bonds have a par value of $1,000. What is the price of each bond today
Answer:
Bond X $1,053.02
Bond Y $948.76
Explanation:
The bond price is the present value of all future cash flows(all semiannual coupons and face value) discounted at the semiannual yield to maturity since coupons are expected semiannually.
Using a financial calculator bearing in mind that the calculator would be set to its default end mode before making the following inputs:
Bond X:
N=26(semiannual coupons in 13 years=13*2=26)
PMT=34(seminnual coupon=$1000*6.8%/2=$34)
I/Y=3.10(semiannual yield to maturity=6.2%/=3.10%)
FV=1000(the face value is $1000)
CPT
PV=$1,053.02
Bond Y:
N=26(semiannual coupons in 13 years=13*2=26)
PMT=31(seminnual coupon=$1000*6.2%/2=$31)
I/Y=3.40(semiannual yield to maturity=6.8%/=3.40%)
FV=1000(the face value is $1000)
CPT
PV=$948.76
Paxton Company can produce a component of its product that incurs the following costs per unit: direct materials, $9.50; direct labor, $13.50, variable overhead $2.50 and fixed overhead, $7.50. An outside supplier has offered to sell the product to Paxton for $33.00. Compute the net incremental cost or savings of buying the component.
Answer:
$7.50 per unit
Explanation:
Cost of buying from outside supplier = $33 per unit.
Relevant cost of making such component in-house = Direct materials+ Direct labor+ Variable overhead
= $9.50 per unit + $13.50 per unit + $2.50 per unit
= $25.50 per unit
Net incremental cost of buying the component = Cost of buying from outside supplier- Relevant cost of making such component in-house
= $33.00 per unit - $25.50 per unit
= $7.50 per unit
A firm has taxes of $2,000, interest expense of $1,000, EBIT of $7,500, common stock dividends of $1,500, and preferred dividends of $1,200. What is the profit margin if sales are $22,000
Answer:
the profit margin is 15%
Explanation:
The computation of the profit margin is shown below:
= (EBIT - interest - taxes - preferred dividend) ÷ Sales
= ($7,500 - $1,000 - $2,000 - $1,200) ÷ $22,000
= $3,300 ÷ $22,000
= 15%
Hence, the profit margin is 15%
Basically the above formula should be applied for the same
Felix's profit is maximized when he produces teddy bears. When he does this, the marginal cost of the last teddy bear he produces is $ , which is than the price Felix receives for each teddy bear he sells. The marginal cost of producing an additional teddy bear (that is, one more teddy bear than would maximize his profit) is $ , which is than the price Felix receives for each teddy bear he sells. Therefore, Felix's profit-maximizing quantity corresponds to the intersection of the curves. Because Felix is a price taker, this last condition can also be written as .
Lil Uzi Vert or Gunna?
Answer:
Lil uzi
Explanation:
The second step in developing a Performance Measurement Baseline (PMB) is to: Define and scope the work Schedule the work Prepare the Integrated Program Management Report (IPMR) Budget the work
Answer:
The second step in developing a Performance Measurement Baseline (PMB) is to:
Schedule the work.
Explanation:
After determining the goal and deliverables of the project, the scope baseline is created using the scope statement, the work breakdown structure and dictionary. These documents require stakeholders approval. Then, the second step is to determine the sequence of activities, estimate the durations of activities, and determine the resource needs of the scheduled activities.
Assume that you purchase a 6-year, 8% certificate of deposit for $1,000. If interest is compounded annually, what will be the value of the certificate when it matures
Answer:
$ 1,586.8743
Explanation:
Calculation to determine what will be the value of the certificate when it matures
Compounded annually
Principal P= 1000
Rate r=0.08
Period n = 6
Using this formula
A = P (1+r)^n
Let plug in the formula
1000 (1.08)^6
= 1586.8743
Therefore what will be the value of the certificate when it matures is $1586.8743
The following is a list of various costs of producing T-shirts. Classify each cost as either a variable, fixed, or mixed cost for units produced and sold.
a. Ink used for screen printing Variable
b. Warehouse rent of $8,000 per month plus $0.50 per square foot of storage used Mixed
c. Thread Variable
d. Electricity costs of $0.038 per kilowatt-hour Variable
e. Janitorial costs of $4,000 per month Fixed
f. Advertising costs of $12,000 per month
g. Accounting salaries
h. Color dyes for producing different colors of T-shirts Variable
i. Salary of the production supervisor
j. Straight-line depreciation on sewing machines Fixed
k. Salaries of internal pattern designers
l. Hourly wages of sewing machine operators Variable
m. Property taxes on factory, building, and equipment Fixed
n. Cotton and polyester cloth
o. Maintenance costs with sewing machine company (the cost is $2,000 per year plus $0.001 for each machine hour of use.) Mixed
B) Magnolia, Inc. manufactures bedding sets. The budgeted production is for 31,800 comforters this year. Each comforter requires 7 yards of material. The estimated January 1 beginning inventory is 5,320 yards with the desired ending balance of 4,100 yards of material. If the material costs $6.80 per yard, determine the materials budget for the year.
$_______
C) Gleason invested $90,000 in the James and Kirk partnership for ownership equity of $90,000. Prior to the investment, land was revalued to a market value of $425,000 from a book value of $200,000. James and Kirk share net income in a 1:2 ratio.
a. Provide the journal entry for the revaluation of land. If an amount box does not require an entry, leave it blank.
b. Provide the journal entry to admit Gleason.
D) If the contribution margin ratio for France Company is 37%, sales were $413,000, and fixed costs were $106,000, what was the income from operations?
$152,810
$106,000
$37,448
$46,810
E) Cash and accounts receivable for Adams Company are provided below:
Current Year Prior Year
Cash $70,000 $50,000
Accounts receivable (net) 70,400 80,000
Based on this information, What is the amount and percentage of increase or decrease that would be shown with horizontal analysis?
Account Dollar Change Percent Change
Cash $ %
Accounts Receivable $
%
Answer:
A. Production and Sales Cost Classification:
Variable
a. Ink used for screen printing
c. Thread
d. Electricity costs of $0.038 per kilowatt-hour
h. Color dyes for producing different colors of T-shirts
k. Salaries of internal pattern designers
l. Hourly wages of sewing machine operators
n. Cotton and polyester cloth
Mixed
b. Warehouse rent of $8,000 per month plus $0.50 per square foot of storage used
o. Maintenance costs with sewing machine company (the cost is $2,000 per year plus $0.001 for each machine hour of use.)
Fixed
e.Janitorial costs of $4,000 per month Fixed
f. Advertising costs of $12,000 per month
g. Accounting salaries
i. Salary of the production supervisor
j. Straight-line depreciation on sewing machines
m. Property taxes on factory, building, and equipment
B. The materials budget for the year is:
= $1,505,384.
C. James, Kirk, and Gleason Partnership
Debit Land $225,000
Credit Land revaluation gain $225,000
To record land revaluation.
a. Debit Land Revaluation gain $225,000
Credit James, capital $75,000
Credit Kirk, Capital $150,000
To share the revaluation gain.
b. Debit Cash $90,000
Credit Gleason, Capital $90,000
To record Gleason's admission as a partner.
Debit James, Capital $30,000
Debit Kirk, Capital $60,000
Credit Cash $90,000
To reduce James and Kirk's capital accounts.
D. France Company
Income from operations = $46,810
E. Adams Company:
Account Dollar Change Percent Change
Cash $20,000 40%
Accounts Receivable ($9,600) (12%)
Explanation:
a) Data and Calculations:
A) Variable costs vary in total and are fixed per units. Fixed costs vary per units but are fixed in total within the relevant production capacity. Mixed costs have variable and fixed costs combined.
B) Magnolia, Inc.
Budgeted production of comforters for this year = 31,800
Materials required by each comforter = 7 yards
Total materials required for production =222,600 (31,800 * 7)
Beginning inventory = 5,320 yards
Ending balance = 4,100 yards
Total materials to be bought = 221,380 (222,600 + 4,100 - 5,320)
Material costs $6.80 per yard
Materials budget for the year = $1,505,384 (221,380 * $6.80)
$_______
C) Gleason invested $90,000 in the James and Kirk partnership for ownership equity of $90,000.
Land $225,000
Land revaluation $225,000
a. Land Revaluation $225,000
James, capital $75,000
Kirk, Capital $150,000
b. Cash $90,000 Gleason, Capital $90,000
James, Capital $30,000 Kirk, Capital $60,000 Cash $90,000
D) France Company
Contribution margin ratio = 37%
Sales $413,000
Contribution margin = $152,810 ($413,000 * 37%)
Fixed costs $106,000
Income from operations = $46,810
E) Adams Company:
Current Year Prior Year
Cash $70,000 $50,000
Accounts receivable (net) 70,400 80,000
Account Dollar Change Percent Change
Cash $20,000 40%
Accounts Receivable ($9,600) (12%)
Present value Present value of an
Periods of $1 at 9% Annuity of $1 at 9%
1 0.9174 0.9174
2 0.8417 1.7591
3 0.7722 2.5313
4 0.7084 3.2397
Cliff Co. wants to purchase a machine for $82,000, but needs to earn a return of 9%. The expected year-end net cash flows are $32,000 in each of the first three years, and $36,000 in the fourth year. What is the machine's net present value?
a. $(998).
b. $24,504.
c. $106,504.
d. $(56,498).
e. $132,000.
Answer:
B
Explanation:
Net present value is the present value of after-tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
Only projects with a positive NPV should be accepted. A project with a negative NPV should not be chosen because it isn't profitable.
When choosing between positive NPV projects, choose the project with the highest NPV first because it is the most profitable.
Cash flow in year 0 = $-82,000
Cash flow in year 1 = $32,000
Cash flow in year 2 = $32,000
Cash flow in year 3 = $32,000
Cash flow in year 4 = $36,000
I = 9%
NPV = $24,504.
To find the NPV 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
In the month of March, Wildhorse Salon services 620 clients at an average price of $130. During the month, fixed costs were $16,380 and variable costs were 70% of sales
(a) Determine the total contribution margin in dollars, the per unit contribution margin, and the contribution margin ratio Contribution margin in dollars 5 Contribution margin per unit $ Contribution margin ratio %
Answer:
a) We have:
Total contribution margin in dollars = $24,180
Per unit contribution margin = $39
Contribution margin ratio = 30%
b) We have:
Break-even point in dollars = $54,600
Break-even point in in units = 420 units
Explanation:
Note: This question is not complete as its part b is missing. The part b of the question is therefore provided to complete it before answering it as follows:
b) Using the contribution margin technique, compute the break-even point in dollars and in units.
The explanation of the answer is now provided as follows:
a) Determine the total contribution margin in dollars, the per unit contribution margin, and the contribution margin ratio
Average price = $130
Variable costs = Average price * 70% = $130 * 70% = $91
Total sales = Number of clients * Average price = 620 * $130 = $80,600
Total variable cost = Total sales * 70% = $80,600 * 70% = $56,420
Therefore, we have:
Total contribution margin in dollars = Total sales - Total variable cost = $80,600 - $56,420 = $24,180
Per unit contribution margin = Average price - Variable costs = $130 - $91 = $39
Contribution margin ratio = (Total contribution margin in dollars / Total sales) * 100 = ($24,180 / $80,600) * 100 = 30%
b) Using the contribution margin technique, compute the break-even point in dollars and in units.
Break-even point in dollars = Fixed cost / Contribution margin ratio = $16,380 / 30% = $54,600
Break-even point in in units = Fixed cost / Per unit contribution margin = $16,380 / $39 = 420 units
1. Inventory that consists of the costs of the direct and indirect materials that have not yet entered the manufacturing process is known as ________. work in process inventory materials inventory finished goods inventory None of these choices are correct.
Answer:
materials inventory
Explanation:
An inventory is a term used to describe a list of finished goods, goods still in the production line and raw materials that would be used for the manufacturing of more goods in a bid to meet the unending consumer demands.
Basically, an inventory can be classified into three (3) main categories and these are; finished goods, work in progress, and raw materials.
An inventory is recorded as a current asset on the balance sheet because it's primarily the most important source of revenue for a business entity.
Generally, the three (3) main cost concept associated with an inventory include;
1. First In First Out (FIFO).
2. Last In First Out (LIFO).
3. Weighted average cost.
In Financial accounting, direct cost can be defined as any expense which can easily be connected to a specific cost object such as a department, project or product. Some examples of direct costs are cost of raw materials, machineries or equipments.
On the other hand, any cost associated with the running, operations and maintenance of a company refers to indirect costs. Some examples of indirect costs are utility bill, office accessories, diesel etc.
Materials inventory can be defined as an inventory that comprises of direct and indirect materials costs which have not been used in a manufacturing process.
In comparing the deviations of returns, which one of the following assets has historically had the largest standard deviation of annual returns?
a. large company stocks
b. long-term corporate bonds
c. long-term government bonds
d. U.S. Treasury bills
Answer:
A
Explanation:
Suppose velocity is constant, but real GDP is not independent of the money supply. If this is the case, a 10 percent increase in the money supply will:
Answer: d. have an unpredictable effect on inflation.
Explanation:
Changes in money supply affect inflation with an increase in money supply causing inflation to rise and a decrease calling inflation to fall. Real GDP is supposed to be independent of the money supply as it is not meant to be affected by inflation.
If a situation arises where real GDP is not actually independent of the money supply then that means that it is not independent of inflation either. Should the money supply therefore rise, the effect on the prices of goods and services (real GDP) in the economy will be unpredictable as it might go either way.
The acid-test ratio differs from the current ratio in that: _______
a) The acid-test ratio is a measure of liquidity but the current ratio is not.
b) Liabilities are divided by current assets
c) The acid-test ratio measures profitability and the current ratio does not.
d) Prepaid expensand inventory are excluded from the calculation of the acid-test ratio.
e) The acid-test ratio excludes short-term investments from the calculation.
Answer:
d) Prepaid expensand inventory are excluded from the calculation of the acid-test ratio.
Explanation:
The acid-test can be regarded quick ratio, this ratio makes the comparison between most short-term assets of a company and most short-term liabilities of the company in order to ascertain if there is enough cash for the company to pay immediate liabilities in the company. These immediate liabilities could be short-term debt. There is usually disregards of current assets by acid-test ratio which it's liquidation is difficult example is inventory.
Current ratio can be regarded as ratio that compares current assets of a company and the current liabilities. It can be gotten by finding ratio of current assets of the company and current liabilities. liquidity of a company can be measured using current ratio by potential creditors.
It should be noted that The acid-test ratio differs from the current ratio in that Prepaid expensand inventory are excluded from the calculation of the acid-test ratio.
Quantity (Units) Private Value (Dollars) Private Cost (Dollars) External Cost (Dollars)
1 46 21 6
2 44 24 6
3 42 27 6
4 40 30 6
5 38 33 6
6 36 36 6
7 34 39 6
The table represents a market in which:
a. there is no externality
b. there is a positive externality.
c. there is a negative externality.
d. The answer cannot be determined from inspection of the table.
Answer:
c. there is a negative externality.
Explanation:
At the time when one individual actions develops the benefits for others but at the same time they dont pay so it is to be known as positive externality
At the time when one individual action develops loss but the other who received the loss because of the action of the person so for this they didnt get the compensation so it is the negative externality
As we can see that there is three types of values so the correct option is c.
The Down and Out Co. just issued a dividend of $2.91 per share on its common stock. The company is expected to maintain a constant 6 percent growth rate in its dividends indefinitely. If the stock sells for $35 a share, what is the company's cost of equity?
Answer:
14.81%
Explanation:
Cost of equity = (Dividend for next period / Current price) + Growth rate
Cost of equity = (($2.91*1.06) / $35) + 0.06
Cost of equity = $3.0846/$35 + 0.06
Cost of equity = 0.08813143 + 0.06
Cost of equity = 0.14813143
Cost of equity = 14.81%
The increase or decrease in owner's equity is reported on the
O A income statement.
B statement of owner's equity.
C balance sheet.
D All of the above
Accounting
Answer:
B
Explanation:
Owners equity also known as the Statement of Changes in Owner's Equity is an example of a financial statement. It records the owners equity and changes to the owners equity during a financial year.
A balance sheet is a financial statement that reports a company's assets, liabilities and shareholders' equity at a point in time.
The income statement records a company's income and expenses in a financial year. It is used for determining if a company is earning a profit or a loss
Establishment Industries borrows $890 million at an interest rate of 8.5%. Establishment will pay tax at an effective rate of 21%. What is the present value of interest tax shields if:
Answer: See explanation
Explanation:
Your question isn't complete but I got a similar question online and here is the question that was asked.
What is the present value of interest tax shields if it expects to maintain this debt level into the far future?
The present value of the interest tax shield will be calculated as:
= Tax rate x Debt
= 890million x 21%
= $186.90 million
In September, Jeanette Company purchased materials costing $34,400 and incurred direct labor cost of $22,100. Manufacturing overhead totaled $58,000 for the month. Information on inventories was as follows: September 1 September 30 Materials $10,300 $9,800 Work in process 6,500 7,400 Finished goods 3,630 2,970 What was the cost of direct materials used in production for the month of September? a. $34,900 b. $33,900 c. $35,300 d. $33,500
Answer:
a. $34,900
Explanation:
The computation of the cost of direct material used is shown below:
= Opening balance of raw material + purchased materials - ending balance of raw material
= $10,300 + $34,400 - $9,800
= $34,900
Hence, the correct option is a.
Herman Company has three products in its ending inventory. Specific per unit data at the end of the year for each of the products are as follows: Product 1 Product 2 Product 3 Cost $ 35 $ 105 $ 65 Selling price 85 165 115 Costs to sell 8 70 25 Required: What unit values should Herman use for each of its products when applying the lower of cost or net realizable value (LCNRV) rule to ending inventory
Answer:
Cost Selling Price Costs to Sell NRV Inventory value
A B C D=(B-C) E=(lowerof A&D)
Product 1 35 85 8 77 35
Product 2 105 165 70 95 95
Product 3 65 115 25 90 65
Which of the following relationships is NOT valid? A. When marginal cost is above average variable cost, AVC is rising. B. Rising marginal cost implies that average total cost is also rising. C. When marginal cost is below average total cost, the latter is falling. D. None of the above
Answer:
b
Explanation:
Why the mode of pollination in maize is cross-pollination? Why it is important to cover the ear shoot with a butter paper bag before the emergence of silks? What could be the consequences if a few silks emerge before bagging? (Marks4)
Answer:
Its advisable to cover the ears as shot may enters or fly in air.
Explanation:
The cross-pollination is a type of pollination n which the sperm-laden pollen is a transfer from one cone of flower of one plant. This created flowering in plants. Wheat is a self-pollinated crop and for cross foliation to take place what florets must be opened. This is done to allow for genetic diversity and is only available for short peroid of time. Once the skills are viable they make already to be contaminated with foreign pollen and its vital that ears are bagged before the process. As the consequences could be that pollen might fly away.Wagner Assets Management Group holds 3 stocks in their investment portfolio. The amount of the investment and beta of each stock is listed below.
Stock Investment Beta
A $ 200,000 1.50
B 300,000 ??
C 500,000 1.20
If the beta of the portfolio is 0.75, what is the beta of stock B?
Answer:
-0.5
Explanation:
Stock Investment (W) Beta (B) W*B
A 200,000 1.50 300,000
B 300,000 X 300,000X
C 500,000 1.20 600,00
1,000,000 900,000+300,000X
Using the formula of Beta of Portfolio to find out X
0.75 = 900,000 + 300,000X / 1,000,000
0.75 * 1,000,000 = 900,000 + 300,000X
750,000 = 900,000 + 300,000X
750,000 - 900,000 = 300,000X
-150,000 = 300,000X
X = -150,000 / 300,000
X = -0.5
So, the beta of stock B is -0.5.
aner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices—one in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company’s most recent year is given: Assume that Minneapolis’ sales by major market are: Market Minneapolis Medical Dental Sales $ 600,000 100 % $ 400,000 100 % $ 200,000 100 % Variable expenses 360,000 60 % 260,000 65 % 100,000 50 % Contribution margin 240,000 40 % 140,000 35 % 100,000 50 % Traceable fixed expenses 72,000 12 % 20,000 5 % 52,000 26 % Market segment margin 168,000 28 % $ 120,000 30 % $ 48,000 24 % Common fixed expenses not traceable to markets 18,000 3 % Office segment margin $ 150,000 25 % The company would like to initiate an intensive advertising campaign in one of the two market segments during the next month. The campaign would cost $8,000. Marketing studies indicate that such a campaign would increase sales in the Medical market by $70,000 or increase sales in the Dental market by $60,000. Required: 1. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Medical Market? 2. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Dental Market? 3. In which of the markets would you recommend that the company focus its advertising campaign?
Answer:
1. $ 136,500
2. $70000
3. Medical market
Explanation:
1. Calculation to determine How much would the company's profits increase (decrease) if it implemented the advertising campaign in the MEDICAL MARKET
First is to calculate the sales
Sales = (400 000 + 70 000)
Sales = $470 000
Second step is to calculate the profit
Variable cost =$470 000 *65%
Variable cost=$305 500
Contribution =$470 000*35%
Contribution =$164,500
Fixed Expense= $28 000
Profit = $ 136,500
Now let calculate the Difference made by advertisement
Difference = 136500 - 120000
Difference=16500
2. Calculation to determine How much would the company's profits increase (decrease) if it implemented the advertising campaign in the
DENTAL MARKET
vcr Of The Dental market = 50%
Variable cost =50% $260 000
Variable cost = $130 000
Contribution = $130 000
Fixed expenses = $60 000
Profit = $70000
Now let determine difference made by the advertisement
Difference =(70000) - 48000
Difference= 22000
3. Based On the above calculation the markets I would recommend that the company focus its advertising campaign is medical market
Consider the following information for Evenflow Power Co.,
Debt: 5,500 5.5 percent coupon bonds outstanding, $1,000 par value, 19 years to maturity, selling for 104 percent of par; the bonds make semiannual payments.
Common stock: 137,500 shares outstanding, selling for $56 per share; the beta is 1.08.
Preferred stock: 18,500 shares of 5 percent preferred stock outstanding, currently selling for $106 per share.
Market: 7.5 percent market risk premium and 4 percent risk-free rate.
Assume the company's tax rate is 31 percent.
Required:Find the WACC.
Answer:
8.02 %
Explanation:
Weighted Average Cost of Capital (WACC) is the the cost required by holders of permanent source of capital pooled together.
WACC = Cost of Equity x Weight of Equity + Cost of Preferred Stock x Weight of Preferred Stock + Cost of Debt x Weight of Debt
where,
Cost of Equity (CAPM) = 4 % + 1.08 x 7.5 %
= 12.10 %
Cost of Preferred Stock = 5%
Cost of Debt :
PMT = ($1,000 x 5.5%) ÷ 2 = $27.50
N = 19 x 2 = 38
PV = $1,000 x 104 % = - $1,040
P/YR = 2
FV = $1,000
I/YR = ??
Using a Financial calculator the YTM (which is the cost of debt) is 5.17 %
But,
We use after tax cost of debt.
After tax cost of debt = 5.17 % x (1 - 0.31) = 3.57%
also
Total Market Value = $5,720,000 + $7,700,000 + $1,961,000 = $15,381,000
Weight of Equity = 0.50
Weight of Preferred Stock = 0.13
Weight of Debt = 0.37
therefore,
WACC = 12.10 % x 0.50 + 5% x 0.13 + 3.57% x 0.37
= 8.02 %
In 2020, Susan retired from her active participation in a 50% owned restaurant business, which she owned for 20 years. Susan is also a material participant in a clothing store which she has a 50% ownership. Susan continues to actively participate in the clothing store in 2020. The restaurant generated an $80,000 loss, and the clothing store produced $150,000 in income in 2020. These amounts are Susan's share of each activity. Susan does not participate nor own any other business.
Question Completion with Options:
a. Susan cannot deduct the $80,000 loss from the restaurant because she is not a material participant.
b. Susan can offset the $80,000 loss against the $150,000 of income from the retail store.
c. Susan will not be able to deduct any losses from the restaurant until she has been retired for at least three years.
d. Assuming Susan continues to hold the interest in the restaurant, she will always treat the losses as active.
Answer:
Susan
b. Susan can offset the $80,000 loss against the $150,000 of income from the retail store.
Explanation:
Susan can offset the $80,000 loss from the restaurant business against the income from the retail store because she has been an active and material participant in both businesses. For the past 20 years, she had participated materially in the restaurant, only just retiring this year. At least, she has passed the material participant test, number 5.
On November 1st, Neiman Marcus at the Florida Mall signed a $100,000, 2%, eight-month note payable with all of the principal and interest due at maturity eight months later on July 1. Neiman Marcus' Store at Florida Mall should report interest payable at (year-end) December 31, in the amount of:
Costs associated with two alternatives, code-named Q and R, being considered by Albiston Corporation are listed below: Alternative Q Alternative R Supplies costs$79,000 $79,000 Power costs$36,600 $35,600 Inspection costs$32,000 $35,600 Assembly costs$48,000 $48,000 Required: a. Which costs are relevant and which are not relevant in the choice between these two alternatives
Answer:
Albiston Corporation
Relevant and Irrelevant Costs:
Relevant Costs:
Alternative Q Alternative R
Power costs $36,600 $35,600
Inspection costs $32,000 $35,600
Irrelevant Costs:
Alternative Q Alternative R
Supplies costs $79,000 $79,000
Assembly costs $48,000 $48,000
Explanation:
a) Data and Comparisons:
Alternative Q Alternative R
Supplies costs $79,000 $79,000
Power costs $36,600 $35,600
Inspection costs $32,000 $35,600
Assembly costs $48,000 $48,000
b) Relevant costs make a difference in the choice between alternative Q or R. The costs that are the same in amount are not relevant. Supplies costs and Assembly costs are two irrelevant costs, while Power costs and Inspection costs are relevant because they are not the same under the two alternatives. They make a difference in the choice of each alternative.