Answer:
d. $216,200 to Land; $0 to Building.
Explanation:
Calculation of Cost of the land
Purchase price $191,000
Real estate commissions $16,600
Legal fees $2,400
Expenses of clearing the land $3,600
Expenses to remove old building $2,600
Cost of the land $216,200
Calculation of Cost of Building
0.
You expect General Motors (GM) to have a beta of 1.3 over the next year and the beta of Exxon Mobil (XOM) to be 0.9 over the next year. Also, you expect the volatility of General Motors to be 40% and that of Exxon Mobil to be 30% over the next year. Which stock has more systematic risk? Which stock has more total risk?
Answer:
As the beta of GM (1.3) is more than that of XOM (0.9), GM has more systematic risk than XOM.
The volatility of GM (40%) is higher than that of XOM (30%). Thus, GM has a higher total risk than XOM.
Explanation:
The systematic risk is the risk caused by factors that affect all of the market and are unavoidable. Such a risk is also known as a market risk and is measured by the beta of a stock. The market beta is always 1. A stock having a beta higher than 1 has higher systematic risk than market and a stock having a lower beta than 1 has a lower systematic risk than the market.
As the beta of GM (1.3) is more than that of XOM (0.9), GM has more systematic risk than XOM.
Total risk, on the other hand, is the risk that comprises of both systematic and unsystematic risk. The systematic risk is the market risk as mentioned above while the unsystematic risk is the firm specific risk and is avoidable. The total risk is measured by the standard deviation or volatility of the stock. The stock with higher volatility has higher total risk and vice versa.
The volatility of GM (40%) is higher than that of XOM (30%). Thus, GM has a higher total risk than XOM.
A customer wishes to place an order to short 50,000 shares of ABC stock. The average daily trading volume (ADTV) in ABC stock is 40,000 shares. The representative:________.
A. should place the order
b. cannot place the order because the order size exceeds the ADTV.
c. should inform the client that the firm may not be able to borrow the stock.
d. sholud inform the client that the order can only be executed on an up-bid.
Answer:
c. should inform the client that the firm may not be able to borrow the stock.
Explanation:
Since it is mentioned that there is a short of 50,000 shares of ABC stock and the average daily trading volume is 40,000 shares that represent the trading of the stock is less i.e short
According to the SHO regulation, when the stock is sold has short than the dealer should track the shares i.e to be borrowed also find out the shares i.e to be delivered by the settlement by considering the documents
Now in this case, the shares i.e be borrowed find to be tougher also the tracking is not possible
Therefore the customer would not able to short the stock
Seminole Corporation common stock currently sells for $32 per share. The firm recently paid a dividend of $1.25 per share. Flotation costs for new external equity are $3 per share. Analysts have forecast that earnings and dividends will grow at an average annual rate of 7% percent well into the future. What is the company's cost of internal equity?
Answer:
The cost of internal equity is 11.18%
Explanation:
The constant growth model of DDM can be used to calculate the price of a stock if the growth rate in the dividend is expected to remain constant. The DDM values the stock based on the present value of the expected future dividends from the stock.
The formula for price today under DDM is,
P0 = D0 * (1+g) / r - g
We already know the P0, the D0 and the g. We can plug in these values in the formula to calculate r which is the cost of equity capital.
32 = 1.25 * (1+ 0.07) / (r - 0.07)
32 * (r - 0.07) = 1.3375
32r - 2.24 = 1.3375
32r = 1.3375 + 2.24
r = 3.5775 / 32
r = 0.11179 or 11.179%
Cash $38,600 Short-term investments 9,000 Accounts receivable 40,000 Inventory 240,000 Prepaid expenses 17,400 Accounts payable 87,200 Other current payables 22,300 Multiple Choice 0.96 and 3.96. 2.99 and 1.25. 3.15 and 0.80. 3.15 and 0.32.
Answer:
Current ratio and Acid-test ratio (3.15 and 0.80)
Explanation:
Note: The missing part of the question is "Using the following year-end information for Bauman, LLC, calculate the current ratio and acid-test ratio:"
i. Current ratio = Current assets/Current liabilities
Current assets = 38,600 + 9,000 + 40,000 + 240,000 + 17,400
Current assets = $345,000
Current liabilities= 87,200 + 22,300
Current liabilities = $109,500
Current ratio = $345,000 / $109,500
Current ratio = 3.15
ii. Acid-test ratio = {Current assets - (Inventory + Prepaid expenses)}/Current liabilities
Acid-test ratio = 345,000- (240,000 + 17,400 ) / 109,500
Acid-test ratio = 87,600 / 109,500
Acid-test ratio = 0.80
frolic Corporation has budgeted sales and production over the next quarter as follows: July August September Sales in units 41,500 53,500 ? Production in units 42,550 53,800 58,150 The company has 4,300 units of product on hand at July 1. 10% of the next month's sales in units should be on hand at the end of each month. October sales are expected to be 73,000 units. Budgeted sales for September would be (in units):
Answer:
56,500 units
Explanation:
The computation of Budgeted sales for September is shown below:-
we assume the no. of units sold in September be ‘x’
Budgeted Production production for September = Budgeted sale for September + desired ending inventory for September – Beginning Inventory for September
58,150 = x units + (73,000 × 10%) - (x units of Sept. × 10%)
58,150 = x + 7,300 - 0.10x
58,150 - 7300 = 0.9x
50,850 = 0.9x
x = 50850 ÷ 0.9
x = 56,500 units
In decision making under ________, there are several possible outcomes for each alternative, and the decision maker knows the probability of occurrence of each outcome
Answer: risk
Explanation:
In the decision making under risk, there are several possible outcomes for each alternative, and the decision maker knows the probability of occurrence of each outcome.
Unlike in uncertainties whereby the decision maker won't know the probability of the occurrence of the outcomes, in risk, one is aware.
Pharoah Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product. Direct materials (6 pounds at $1.60 per pound)$9.60 Direct labor (6 hours at $10.00 per hour)$60.00 During the month of April, the company manufactures 310 units and incurs the following actual costs. Direct materials purchased and used (2,400 pounds)$4,080 Direct labor (1,880 hours)$18,612 Compute the total, price, and quantity variances for materials and labor.
Answer:
Materials
price variance = $240 Unfavorable
quantity variance = $864 Unfavorable
total variance = $1,104 Unfavorable
Labor
price variance = $188 Favorable
quantity variance = $200 Unfavorable
total variance = $12 Unfavorable
Explanation:
Materials
price variance = (Aq × Ap) - (Aq × Sp)
= (2,400 × $1.70) - (2,400 × $1.60)
= $240 Unfavorable
quantity variance = (Aq × Sp) - (Sq × Sp)
= (2,400 × $1.60) - (310 × 6 × $1.60)
= $864 Unfavorable
total variance = price variance + quantity variance
= $240 + $864
= $1,104 Unfavorable
Labor
price variance = (Aq × Ap) - (Aq × Sp)
= (1,880 × $9.90) - (1,880 × $10.00)
= $188 Favorable
quantity variance = (Aq × Sp) - (Sq × Sp)
= (1,880 × $10.00) - (310 × 6 × $10.00)
= $200 Unfavorable
total variance = price variance + quantity variance
= $188 + (-$200)
= $12 Unfavorable
IBM expects to pay a dividend of $2 next year and expects these dividends to grow at 6% a year. The price of IBM is $90 per share. What is IBM's cost of equity capital?
Answer:
Cost of equity = 8.22%
Explanation:
Cost of equity = Dividend per share /current market value + growth rate of dividend
Cost of equity = 2/90 + 6%
Cost of equity = 0.0222 + 6%
Cost of equity =0.0222 + 0.06
Cost of equity = 0.0822
Cost of equity = 8.22%
Say that you purchase a house for $150,000 by getting a mortgage for $135,000 and paying a $15,000 down payment. If you get a 15-year mortgage with a 6 percent interest rate, what are the monthly payments
Answer:
Monthly installment = $1,139.21
Explanation:
When a loan is to be paid over a period of time using a series of periodic equal installments, it is called loan amortization. Each equal installment is meant to liquidate the principal and the accrued interest.
The amount to be financed by way of loan=
= cost of house - down payment
= $150,000 - 15,000 = $135,000
The monthly equal installment is calculated as follows:
Monthly equal installment-= Loan amount/Monthly annuity factor
Monthly annuity factor
=( 1-(1+r)^(-n))/r
Monthly interest rate (r)
= 6%/12= 0.5%
Number of months ( n) in 15 years
= 15* 12 = 180
Annuity factor
= ( 1- (1.005)^(-180)/0.005= 118.504
Monthly installment = 135,000/ 118.504 =1139.21
Monthly installment = $1139.21
If annual demand is 50,000 units, the ordering cost is $25 per order, and the holding cost is $5 per unit per year, which of the following is the optimal order quantity in order to minimize the total annual inventory cost?
A. 707
B. 909
C. 634
D. 500
E. 141
Answer:
22
3 25
6 15
a. Determine which variable is the dependent variable.
b. Compute the least squares estimated line.
c. Compute the coefficient of determination. How would you interpret this value22
3 25
6 15
a. Determine which variable is the dependent variable.
b. Compute the least squares estimated line.
c. Compute the coefficient of determination. How would you interpret this value
True or false: A flexible budget reporting sales volumes at three different levels will have the same fixed costs.
Answer:
True
Explanation:
A flexible budget is a budget in which you modify the activity levels to reflect changes in sales to help the company adjusts to different circumstances that may occcur. Also, in this budget the fixed costs remain constant and the variable costs change with the activity levels. According to this, the answer is that the statement that says that a flexible budget reporting sales volumes at three different levels will have the same fixed costs is true.
It is true that a flexible budget presenting sales volumes at three levels would have the same fixed expenses.
Flexible budget:A flexible budget is one in which activity levels are adjusted to reflect sales performance, allowing the organization to respond to unforeseen events.
Furthermore, in this budget, fixed expenditures stay constant while variable costs vary according to activity levels. The assumption that a flexible budget reporting sales volumes at three distinct levels will have the same fixed expenses.
Find out more information about 'Flexible budget'.
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Four companies were sued by customers for injuries sustained from faulty products. All four companies settled out of court for $400,000. For which of the following companies is this event the LEAST material?a. A company with assets totaling $36 billion.b. A company with assets totaling $40 billion.c. A company with assets totaling $15 billion. d. A company with assets totaling $50 billion.
Answer:
d. A company with assets totaling $50 billion.
Explanation:
In order to calculate the material impact of the lawsuit on each company, we must divide the settlement by total assets. In this case, we do not need to do the math, we simply have to select which company has the most assets. The more assets a company has, the lesser the material impact of any unfavorable settlement.
Skyline Corp. will invest $210,000 in a project that will not begin to produce returns until the end of the 3rd year. From the end of the 3rd year until the end of the 12th year (10 periods), the annual cash flow will be $46,000. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Calculate the net present value if the cost of capital is 12 percent.
Answer:
$-2,801.13
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
Cash flow in year 0 = $-210,000
Cash flow each year from year 1 to 2 = 0
Cash flow each year from year 3 to 12 = $46,000.
I = 12%
NPV = $-2,801.13
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
rdier attached to a life insurance policy that provides coverage on the insureds family members is called the
Answer: Other insured rider
Explanation:
The rider that is attached to a life insurance policy that provides coverage on the insureds family members is referred to as the other insured rider.
When more than one member of a particular family is to be provided insurance for, this type of rider is typically used.
IBM just paid a dividend of and expects these dividends to grow at % a year. The price of IBM is per share. What is IBM's cost of equity capital?
Question
The question is incomplete. The complete version is given below:
IBM just paid a dividend of $3.5 and expects these dividends to grow at 7% a year. The price of IBM is $100 per share. What is? IBM's cost of equity? capital?
Answer:
Cost of equity = 10.7%
Explanation:
Cost of equity can be ascertained using the dividend valuation model. The dividend valuation model states that the price of a stock is the present value of future dividends discounted at the required rate of return. The required rate of return is the cost of equity.
The cost is the minimum rate of return that ordinary shareholders are willing to accept considering the opportunity cost of their capital
Cost of equity (Ke) =( Do( 1+g)/P ) + g
DATA
Ke- ?
D0- 3.5
P-100
g-7%
Ke= 3.5×(1.07)/100 + 0.07 = 0.10745
Ke- 0.10745 × 100 = 10.7%
Cost of equity = 10.7%
You own two bonds. Both bonds pay annual interest, have 7 percent coupons, and currently have 7 percent yields to maturity. Bond A has 5 years to maturity and Bond B has 10 years to maturity. If the market rate of interest changes unexpectedly to 6 percent, the price of Bond A will change by _____ percent and the price of Bond B will change by _____ percent.
Answer:
the price of Bond A will change by 4.21% and the price of Bond B will change by 7.36%.
Explanation:
Bonds A and B
current bond price $1,000
interest rate 7%
Bond A matures in 5 years, annual payments
Bond B matures in 10 years, annual payments
if market interest decreases to 6%
Bond A:
$1,000 / (1 + 6%)⁵ = $747.26
$70 x 4.2124 (annuity factor, 6%, 5 periods) = $294.87
market price = $1,042.13
% change = 4.21%
Bond B:
$1,000 / (1 + 6%)¹⁰ = $558.39
$70 x 7.3601 (annuity factor, 6%, 10 periods) = $515.21
market price = $1,073.60
% change = 7.36%
In an international communication process carried out by a company, the sales force of the company that conveys the encoded message to the intended receiver acts as a(n)
Answer: message channel
Explanation:
In an international communication process carried out by a company, the sales force of the company that conveys the encoded message to the intended receiver acts as a message channel.
The sales force are said to act as a.mesage channel because they are the ones that pass the message across to the intended receiver.
Hannah Co. has 10,000 shares of $10 par common stock outstanding. A 10% stock dividend is declared when the market price is $50 per share.Following the stock dividend, a cash dividend of $4 per share is declared and paid to Hannah Cos' shareholders. The debit to Retained Earnings will be:
Answer:
Hannah Co.
The debit to Retained Earnings will be:
$44,000
Explanation:
Common Stock outstanding = 10,000 shares of $10 par
With a 10% stock dividend, the outstanding shares increase to 11,000 (10,000 x 1.1).
The cash dividend per share = $4
Total cash dividend equals $44,000 ($4 x 11,000).
So the Retained Earnings will be debited to the sum of $44,000 following the cash dividend to reduce the Retained Earnings account by $44,000.
When estimating the incremental after-tax free cash flows for a project, we include which one of the following costs?A. Investment costsB. Opportunity costsC. Sunk costsD. Costs that impact another product that the firm does not produce.
Answer: Opportunity cost
Explanation:
Opportunity cost is the cost of what one forgoes when one makes another decision or another choice. When estimating the incremental after-tax free cash flows for a project, the opportunity cost is included.
A sunk cost is a type of cost that an economic agent such as the individual, the firm or the government has already spent and therefore cannot be recovered again. This isn't included.
Kate is in the 15% tax bracket and has $29,000 available for investment during her current tax year. Assume that she remains in the same tax bracket over the next 11 years, and determine the accumulated amount of her investment after taxes if she puts the$29,000 into the following. (Round your answers to the nearest cent.)(a) a tax-deferred annuity that pays 4%/year, tax deferred for 11 years$ (b) a taxable instrument that pays 4%/year for 11 years
Answer and Explanation:
The computation is shown below:
a. The Accumulated amount of her investment atter taxes is
Before that first we have to determine the future value which is shown below:
As we know that
Future value = Present value × (1 + interest rate)^number of years
= $29,000 × (1 + 0.04)^11
= $44,644.17
And, the tax rate is 15%
So, the after tax value is
= $44,644.17 × (1 - 0.15)
= $37,947.54
b. Now for the second part it is
= Annual cash flows × Annuity factor at 3.4% for 11 years
= $29,000 × 10.638
= $308,502
The advantages of using typedef do not include:a. Making programs more portable by allowing data types to be easily changed to meet system specifications.b. Making type names shorter.c. Making programs more readable.d. Increasing the efficiency of accessing struct member variables.
Answer:
d. Increasing the efficiency of accessing struct member variables.
Explanation:
In the programming language C and C++ there is a keyword i.e typedef that function is to provide a new name. It is to be used to develop an extra name for the other data type but it does not develop a new data type
Here the advantage of using typedef is as follows
1. It allows the data types for meeting the specifications of the system
2. The name would become shorter
3. Readable program
but it does not increase the efficiency
Hence, the last option is correct
Mr. Green contracts with Mr. Brown to repair his roof. Mr. Brown is about 75% done when the deadline of the contract occurs. Which legal standard would prevent Mr. Brown from being considered to be in breach of his agreement with Mr. Green?
Answer:
Substantial performance standard
Explanation:
Substantial performance standard refers to the legal standard in which the good and faith attempt is made so that the requirements of the contract or agreement could be performed
even if is not meet the requirements so we assume that the performance should be completed if its main motive is fulfilled
Therefore in the given case, the substantial performance standard is the correct option that fits to the situation
Suppose Hyperpolis’s GDP increases by 15% and its inflation rate is 12%, while Superpolis’s GDP increases by 6% and its inflation rate is 3%. Assuming the population in both countries remained constant, which economy grew faster?
Answer: c) Both economies grew at the same rate
Explanation:
The faster growing economy would be the one that saw a greater increase in Real GDP than the other.
Real GDP growth = Nominal GDP growth - Inflation growth.
Hyperpolis Real GDP growth = 15% - 12%
Hyperpolis Real GDP growth = 3%
Superpolis Real GDP growth = 6% - 3%
Superpolis Real GDP growth = 3%
Both countries grew at the same rate of 3%.
Suppose the following financial data were reported by 3M Company for 2019 and 2020 (dollars in millions). 3M Company Balance Sheets (partial) 2020 2019 Current assets Cash and cash equivalents $ 3,008 $1,899 Accounts receivable, net 3,110 3,065 Inventories 2,675 3,017 Other current assets 1,890 1,542 Total current assets $10,683 $9,523 Current liabilities $ 4,974 $5,821 (a) Calculate the current ratio and working capital for 3M for 2019 and 2020.
Answer:
Current ratio = Current Assets / Current Liability
Current ratio 2019 = 9,523 / 5,821
Current ratio 2019 = 1.64 : 1
Current ratio 2020 = 10,683 / 4,974
Current ratio 2020 = 2.15 : 1
Working Capital = Current asset - Current liability
Working capital 2019 = $9,523 - $5,821
Working capital 2019 = $3,702
Working capital 2020 = $10,683 - $4,974
Working capital 2020 = $5,709
Data related to the inventories of Costco Medical Supply are presented below: Surgical Equipment Surgical Supplies Rehab Equipment Rehab Supplies Selling price $ 276 $ 134 $ 354 $ 152 Cost 156 136 255 152 Costs to sell 17 17 16 7 In applying the lower of cost or net realizable value rule, the inventory of surgical supplies would be valued at:
Answer:
$117
Explanation:
Costco Medical Supply's merchandise inventory:
Surgical equip. Surgical supplies Rehab equip. Rehab supplies
Selling price $276 $134 $354 $152
Cost $156 $136 $255 $152
Cost to sell $17 $17 $16 $7
Net realizable V. $259 $117 $338 $145
If we apply the lower of cost or net realizable rule for determining the value of surgical supplies, its value would be: $117 < $136
When we use the lower of cost or net realizable rule, we should value our inventory at the lowest value between original purchase cost and current net realizable value of the products.
An investor with a balanced domestic portfolio who is looking for diversification and returns in the event that U.S. markets do not continue to expand, would be most interested in investing in which of the following?
a. Equities in Emerging Markets
b. Equities in U. S. companies with international appeal
c. Equities in U. S. companies involved in exports of their products
d. Equities in Italian wine exporting companies
Answer:
Option A, Equities in Emerging Markets, is the right answer.
Explanation:
A person who is not interested to invest in the U.S market or company then will not prefer the U.S companies for their diversification because the economic contraction in the U.S will affect these companies. He will be willing to invest in the equities in the emerging market. Moreover, he will not invest only in the foreign company because it will not provide him with the diversification. Therefore, the option “a” is correct.
Kenny, Inc., is looking at setting up a new manufacturing plant in South Park. The company bought some land six years ago for $7.9 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent facilities elsewhere. The land would net $10.7 million if it were sold today. The company now wants to build its new manufacturing plant on this land; the plant will cost $21.9 million to build, and the site requires $940,000 worth of grading before it is suitable for construction.
Required:
What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?
Answer:
$33,540,000
Explanation:
initial investment:
opportunity cost of land (resale price of land) = $10,700,000building cost of the facilities = $21,900,000other expenses related to the site (grading) = $940,000total $33,540,000The purchase cost of the land is considered a sunk costs, since it is not relevant now. What is relevant is the price at which the land could be sold at the moment of starting the project.
Do you believe the cash flows from investing activities should include not only the return of investment, but also the return on investment, that is the interest and dividend revenue?
Answer:
Yes. Cash flows from investing activities should also include return on investment.
Explanation:
Dividend and Interest revenue arise as a result of the Investments that were made by the company and as such constitutes cash flow from investing activities of a Company.
Amy and Maxwell Walker have decided to invest their investment dollars: 40 percent in stocks, 30 percent in bonds, and 30 percent in cash equivalents. Over the past year, the market value of their bonds increased while the market value of their stocks declined. Using the asset allocation model, they should now
Answer:
C.use some of their cash equivalents to buy more stocks.
Explanation:
Data provided in the question
Stock = 40%
Bond = 30%
cash equivalent = 30%
The Market value of the bond rise
The market value of the stock falls
Based on the above information,
According to the asset allocation model, mostly everyone uses some of their cash equivalents i.e bank account, marketable securities to purchased more stock
Hence, the option c is correct
The following data were taken from the records of Clarkson Company for the fiscal year ended June 30, 2020.
Raw Materials Inventory 7/1/19 $48,100
Factory Insurance $4,700
Raw Materials Inventory 6/30/20 39,700
Factory Machinery Depreciation 16,100
Finished Goods Inventory 7/1/19 96,100
Factory Utilities 28,700
Finished Goods Inventory 6/30/20 19,900
Office Utilities Expense 8,550
Work in Process Inventory 7/1/19 19,900
Sales Revenue 555,000
Work in Process Inventory 6/30/20 19,900
Sales Discounts 4,300
Direct Labor 139,350
Plant Manager’s Salary 61,100
Indirect Labor 24,560
Factory Property Taxes 9,610
Accounts Receivable 27,100
Factory Repairs 1,500
Raw Materials Purchases 96,500
Cash 32,100
Required:
Prepare an income statement through gross profit.
Answer:
Clarkson Company
Income statement for the year ended June 30, 2020
Sales Revenue $555,000
Less Costs of Goods Sold :
Opening Finished Goods Inventory $96,100
Add Cost of Goods Manufactured $390,520
Less Closing Finished Goods Inventory ($19,900) ($466,720)
Gross Profit $83,280
Explanation:
First prepare a Schedule of Manufacturing Costs to determine the Cost of Goods Manufactured.
Schedule of Manufacturing Costs
Factory Insurance $4,700
Raw Materials ($48,100 + $96,500 - $39,700) $104,900
Factory Machinery Depreciation $16,100
Factory Utilities $28,700
Direct Labor $139,350
Plant Manager’s Salary $61,100
Indirect Labor $24,560
Factory Property Taxes $9,610
Factory Repairs $1,500
Add Opening Work In Process Inventory $19,900
Less Closing Work In Process Inventory ($19,900)
Cost of Goods Manufactured $390,520