Answer:
Future value = $22172.56
Explanation:
Below is the given values:
Deposit made at the end of each quarter = $1100
Interest rate = 12% or 12% / 4 = 3%
Number of year = 4years
Number of compounding period = 4 x 4 = 16
Future value = Annuity x [ (1 + r)^n - 1] / r
Future value = $1100 x [ (1 + 3%)^16 - 1] / 3%
Future value = $22172.56
A TV manufacturing company uses speakers at the rate of 8000/mo. When it places an order for speakers it incurs a fixed cost of $1200. The monthly interest rate for keeping a speaker in stock is assessed at 1%/mo. The cost of the speaker depends on the order size. If less than 1000 speakers are ordered the cost is $11 each. When the order size is between 1000 and 10,000 the cost is $10.50/unit. For order sizes between 10,000 and 30,000 the cost is $10 per unit. For order quantities between 30,000 and 80,000 the cost drops to $9.50. Beyond 80,000 the cost is $9.25. Determine the optimum order size and time between orders if shortages are not allowed.
Please use excel to solve this problem. Show all cell formulas and parameters used.
Solution :
1. Ordering quantity 500 1000 10000 30000 80000
2. No. of orders 16 8 0.8 0.27 0.1
3. Average inventory 250 500 5000 15000 40000
4. Value of average 2750 5250 50000 142500 370000
inventory
5. Monthly total cost
a). Cost of material 88000 84000 80000 760000 740000
b). Ordering cost 19200 9600 960 320 120
c). Carrying cost 27.5 52.5 500 1425 3700
Total monthly cost 107227.5 93652.5 81460 77745 77820
Among the total monthly cost, $ 77,745 is the least cost.
Therefore, the optimum order size of quantity = 30,000
The number of orders per month = 8000/30000 = 0.267
Time between two consecutive orders = 30000/8000 = 3.75 months
Drew Davis goes to his local bank to get help developing a financial plan and making investment decisions. Which of the more recent services banks offer is Drew taking advantage of
Answer: b. Getting financial advice
Explanation:
As the number of banks in the world increases, banks are having to offer more products and services apart from their traditional roles as lenders in order to remain relevant and competitive. One such product is giving financial advice.
Banks now offer advice on how to make better investment decisions, develop financial plans and even organize your estate. This is what Drew Davis was taking advantage of here.
Melvin begins his retirement fund at age 30, depositing $1,000 per month until age 50. Cindy begins her retirement fund at age 20, depositing the same $1,000 per month amount until age 50. Both Melvin and Cindy earn 5 percent annual interest on their funds, and there are no tax considerations in this problem. Based on the provided information :____________
a) and assuming they retire at age 50, Cindy will have less than 50 percent more than Melvin
b) and assuming they retire at age 50. Cindy will have exactly 50 percent more than Melvin.
c) and assuming they both retire at age 60. Cindy will have less than Melvin.
d) the difference between the two will get larger with higher inflation
e) and assuming they retire at age 50. Cindy will have over 50 percent more than Melvin.
Answer: D. and assuming they retire at age 50, Cindy will have over 50% more than Melvin
Explanation:
Since Melvin begins his retirement fund at age 30, depositing $1,000 per month until age 50 while Cindy begins her retirement fund at age 20, depositing the same $1,000 per month amount until age 50 with a 5% annual interest on their funds, then we can deduce that if they retire at age 50, Cindy will have over 50% more than Melvin.
Therefore, the correct option is D.
Ramanond Technologies is an independent business that facilitates foreign exchange trades. In the context of institutions that make foreign exchange happen, Ramanond Technologies is categorized under:
Answer:
Fiscal investors.
Explanation:
Trade can be defined as a process which typically involves the buying and selling of goods and services between a producer and the customers (consumers) at a specific period of time.
Basically, trade can be categorized into two (2) main groups and these are;
I. Import: this involves bringing in goods from a foreign country to sell in a different (domestic) country.
II. Export: it involves the sales of goods produced in a domestic country to a foreign country.
Globalization can be defined as the strategic process which involves the integration of various markets across the world to form a large global marketplace. Basically, globalization makes it possible for various organizations to produce goods and services that is used by consumers across the world.
Under globalization, a fiscal investor refers to an independent business that facilitates or enhances foreign exchange trades between two or more countries.
This ultimately implies that, fiscal investors are institutions or business firms that make it possible for foreign exchange to take place with respect to the buying and selling of goods and services between countries.
Supriya invested $14,320 in a highly rated ETF. At the end of four years, she had $18,434. What was her annual effective yield on this investment
Answer:
6.517%
Explanation:
Present Value PV = $14,320
Future Value FV = $18,434
Number of period Nper = 4
Annual effective yield = Rate(Nper, Pmt, Pv, -Fv)
Annual effective yield = Rate(4, 0, 14320, -18434)
Annual effective yield = 0.06517
Annual effective yield = 6.517%
Under the temporal method, income statement items that relate to newly recognized assets and liabilities generally are remeasured using the:
Answer: historical exchange rate
Explanation:
The temporal method is also referred to as the historical method. Under this method, the currency of a foreign subsidiary is being converted into the currency of the parent company.
It should be noted that under the temporal method, the income statement items which relate to newly recognized assets and liabilities generally are remeasured using the historical exchange rate.
True or False: With a minimum wage of $8.70, unemployment of unskilled workers is lower with the tax credit versus without it.
Answer: True
Explanation:
Generally speaking, a tax credit would bring about a lower unemployment rate for unskilled labor as opposed to a situation where there is no tax credit.
A tax credit would reduce the amount of taxes that a company is to pay which would leave them with more income to reinvest into the business. This reinvestment will lead to the business having a higher production capacity such that it requires more workers so they will hire more workers, both unskilled and skilled thereby reducing the unemployment rate for both.
There is a phenomena that worker/capital output has not increased in line with the increased performance capabilities of information technology. What is this phenomena called?
Answer:
The productivity paradox
Explanation:
productivity paradox (can be regarded as the peculiar observation which is made in business analyst process when there is more investment as regards information technology.
It should be noted that the productivity paradox is a phenomena that worker/capital output has not increased in line with the increased performance capabilities of information technology. What is this phenomena
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.
A company would like to invest in a capital budget project that will be worth $500,000 in 40 years. How much should this company invest today, assuming an average inflation rate of 2% and a 10% annual return
Answer:
Company needs to invest amount = $23000
Explanation:
Below is the calculation of the present value:
Given the future value, FV = $500000
Number of years, n = 40 years
Real interest rate = 10% - 2% = 8%
Present value = ?
Present value = FV (P/F, r, n)
Present value = $500000 (P/F, 8%, 40)
Present value = $500000 (0.046)
Present value = $23000
Company needs to invest amount = $23000
When a market is in equilibrium, the: multiple choice 1 quantity demanded equals the price. quantity demanded equals the quantity supplied at the market price. quantity demanded equals the quantity supplied and they both equal the price. quantity supplied equals the price. The market for cell phones reaches equilibrium because cell phone sellers have an incentive: multiple choice 2 to decrease quantity and so do cell phone consumers, so the price goes to to equilibrium. for prices to rise and some cell phone consumers will not buy at higher prices, driving the price to equilibrium. to increase quantity and so do cell phone consumers, so the price goes to to equilibrium. for prices to fall and some cell phone consumers only buy at higher prices, driving the price to equilibrium.
ANSWER:
2 Batteries
Explanation:
Promoting from within should __________ be regarded as an act of discrimination because the information costs of inside versus outside employees are __________.
Answer: sometimes not; higher for the outsider
Explanation:
The options are:
a. always; the same
b. always; higher for the insiders
c. sometimes not; the same
d. sometimes not; higher for the outsiders
Promoting from within should (sometimes not) be regarded as an act of discrimination because the information costs of inside versus outside employees are (higher for the outsider).
Kandy Kane Corporation has income before taxes of $400,000 and a loss from discontinued operations pretax of $100,000. If the income tax rate is 25% on all items, the income statement should show income tax expense of
Answer:
The income tax expense = $100000
Explanation:
Below is the given values:
Income before the taxes = $400000
Loss discontinued = $100000
Income tax rate = 25%
In order to calculate the income tax expense, just find the 25% of the income before tax and the resulting answer will be the income tax expense.
The income tax expense = 25% x 400000
The income tax expense = $100000
During the year, Gary, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. At the end of last year, his stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct?a. Gary recognizes a $1,000 LTCG.b. Gary’s stock basis is $2,000.c. Gary’s ordinary income is $15,000.d. Gary’s tax-free return of capital is $11,000.
Answer: a. Gary recognizes a $1,000 LTCG
Explanation:
Long Term Capital Gain is calculated by the formula:
= Distribution from company - Basis in stock - Ordinary income earned during the year
= 16,000 - 4,000 - 11,000
= $1,000
First statement is therefore correct that Gary would recognize an LTCG of $1,000.
You want to take out a $125,000 mortgage. The interest rate on the mortgage is 5%, and the loan is for 30 years. How much will your monthly payments be
Answer: $671.03
Explanation:
The monthly payment will be an annuity because it will be constant. The loan amount will be the present value of the loan.
Periodic interest rate of loan = 5%/12 = 5/12%
Loan period = 30 * 12 months = 360 months
Present value of annuity = Annuity * ( 1 - ( 1 + rate) ^ -number of periods) / rate
125,000 = Annuity * ( 1 - ( 1 + 5/12%)⁻³⁶⁰) / 5/12%
125,000 = Annuity * 186.2816170
Annuity = 125,000 / 186.2816170
= $671.03
Answer:
Answer on the picture
Explanation:
Do you think the licensing process for international medical graduates is an unnecessary hurdle meant to shield U.S. doctors from foreign competition?
Answer:
No licensing is right. Doctors in U.S. are spending more on medical studies than any other country. It is necessary for other country medical students to gain license in order to do practice in the country.
Explanation:
In U.S. doctors are in deficiency so the country cannot completely cease employment for foreign doctors. The country needs to welcome foreign doctors but it is also necessary to safeguard home doctors. If U.S. will not safeguard rights of home country doctors then they will be demotivated and will not be patriotic for the country.
The __________ will provide the organization with the assurance that all necessary steps are included in the disaster recovery plan
On July 1, 2020 Garcia Corporation issued 5%, 10-year bonds with a face value of $8,000,000 at 96. Interest is paid on Jan 1 and July 1, with any premiums or discounts amortized on a straight-line basis. Bond interest expense reported on the December 31, 2020 income statement of Garcia Corporation would be
Answer:
Garcia Corporation
Bond interest expense reported on the December 31 2020 income statement of Garcia Corporation would be:
= $216,000.
Explanation:
a) Data and Calculations:
Face value of bonds issued = $8,000,000
Issue price at 96 = 7,680,000 (96% * $8,000,000)
Discount on bonds = $320,000
Coupon rate of interest = 5% or 2.5% semi-annually
Maturity period = 10 years
Period of bonds = 20 (10 * 2)
Interest payment = Jan 1 and July 1 (semi-annually)
Amortized semi-annual discounts = $16,000 ($320,000/20)
Interest payment = $200,000 ($8,000,000 * 2.5%)
Interest expense = $216,000 ($200,000 + $16,000)
Analysis on December 31, 2020:
Interest expense $216,000
Interest payable $200,000
Amortized discounts $16,000
Perit Industries has $135,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project B Cost of equipment required $ 135,000 $ 0 Working capital investment required $ 0 $ 135,000 Annual cash inflows $ 25,000 $ 63,000 Salvage value of equipment in six years $ 9,800 $ 0 Life of the project 6 years 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries’ discount rate is 17%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.
Answer:
1. Net present value of Project A = -41,449.96
2. Net present value of Project B = $143,746.85
3. I would recommend that company accept Project B.
Explanation:
Note: This question is not complete as the requirement are omitted. The requirements are therefore provided to complete the question before answering it as follows:
Perit Industries has $135,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are:
Project A Project B
Cost of equipment required $ 135,000 $ 0
Working capital investment required $ 0 $ 135,000
Annual cash inflows $ 25,000 $ 63,000
Salvage value of equipment in six years $ 9,800 $ 0
Life of the project 6 years 6 years
The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries’ discount rate is 17%.
Required:
1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.)
2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.)
3. Which investment alternative (if either) would you recommend that the company accept?
The explanation of the answers is now provided as follows:
1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.)
Cost of equipment required = $135,000
Using the formula for calculating the present value of an ordinary annuity, the present value (PV) of the annual cash inflows can be calculated as follows:
PV of annual cash inflow = Annual cash inflow * (1 - (1 / (1 + discount rate))^Project life) / discount rate) = $25,000 * ((1 - (1 / (1 + 0.17))^6) / 0.17) = $89,729.62
The present value (PV) of the salvage value can be calculated as follows:
PV of salvage value = Salvage value / (1 + + discount rate)^Project life = $9,800 / (1 + 0.17)^6 = $3,820.42
Net present value of Project A = PV of annual cash inflow + PV of salvage value - Cost of equipment required = $89,729.62 + $3,820.42 - $135,000 = -41,449.96
2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.)
Working capital investment required = $135,000
Using the formula for calculating the present value of an ordinary annuity, the present value (PV) of the annual cash inflows can be calculated as follows:
PV of annual cash inflow = Annual cash inflow * (1 - (1 / (1 + discount rate))^Project life) / discount rate) = $63,000 * ((1 - (1 / (1 + 0.17))^6) / 0.17) = $226,118.64
The present value (PV) of the Working capital investment required can be calculated as follows:
PV of Working capital investment required = Working capital investment required / (1 + + discount rate)^Project life = $135,000 / (1 + 0.17)^6 = $52,628.21
Net present value of Project B = PV of annual cash inflow + PV of Working capital investment required - Working capital investment required = = $226,118.64 + $52,628.21 - $135,000 = $143,746.85
3. Which investment alternative (if either) would you recommend that the company accept?
From parts 1 and 2 above, we have:
Net present value of Project A = -41,449.96
Net present value of Project B = $143,746.85
Since the Net present value of Project A is negative, it should be rejected.
Since the Net present value of Project B is positive, it should be accepted.
Therefore, I would recommend that company accept Project B.
The domestic demand (QD) for wheat in the United States is estimated to be
QDD = 1430 - 55P
where the quantity of wheat is measured in millions of bushels per year. Suppose China also demands U.S. wheat (QDC) and that its demand is given by
QDC = 2100 - 100P
What is the total demand for U.S. wheat, assuming the only two sources of demand are domestic and Chinese?
The total demand for U.S. wheat is:____.
A. QD = 3530 - 155P for all P.
B. QD = 1430 - 55P for all P.
C. QD = 3530 - 155P for P < or = to $26 and QD = 2100 - 100P for P > $26.
D. QD = 3530 - 155P for P < or = to $21 and QD = 2100 - 100P for P > $21.
E. QD = 3530 - 155P for P < or = to $21 and QD = 1430 - 55P for P > $21.
Answer:
E. QD = 3530 - 155P for P < or = to $21 and QD = 1430 - 55P for P > $21.
Explanation:
United States domestic demand function is QDD = 1430 - 55P
Demand for wheat in China is QDC = 2100 - 100P.
The total demand function for U.S. wheat will be given by function:
QD = 3530 - 155P
The minimum that firm needs to do to engage in international business is to: Invest directly in in operations in another country. Export or import products from other countries. Export low-wage manufacturing jobs to companies in other countries. Establish joint ventures or strategic alliances with companies in other countries. Visit a foreign country frequently.
Answer: Export or import products from other countries.
Explanation:
Anything that has to do with the trading in goods and services with an entity from another country constitutes international business.
The minimum that one has to do therefore, to be involved in international business is to simply export to other countries or import from them. This is the cheapest and most widespread method of international business and as a result, represents the bulk of international business.
Because of their sharp quality text output and fast printing speeds, ___ printers are often preferred by businesses.
Answer:
Laser printer
Explanation:
Laser printers are quicker than inkjet printers (producing more pages per minute), generate higher-quality output (with some limitations), and are better suited for high-volume production. Laser printers produce significantly finer lines than inkjet printers, making them ideal for text, logos, and corporate information graphics.
What is the impact on cash flow from operations in the current year based on the change in operating assets and liabilities listed below
2 Balance sheets
Prior Year Current Year
4
5 Accounts receivable 1,725 1,825
6 Inventories 1,535 1,785
7 Accounts payable 1,325 1,475
a. -200
b. 0
c. -150
d. 200
Answer:
The impact on cash flow from operations in the current year based on the changes in operating assets and liabilities is:
a. -200
Explanation:
a) Data and Calculations:
Prior Year Current Year Changes
Accounts receivable 1,725 1,825 $100
Inventories 1,535 1,785 $250
Accounts payable 1,325 1,475 $150
b) Accounts receivable increased by $100, thereby reducing cash inflows. Inventories increased by $250, thereby reducing cash inflows. Accounts payable increased by $150, thereby increasing cash inflows. The net effect or impact is a reduction of $200 in the cash from operations.
On January 1, 2020, Ellison Co. issued eight-year bonds with a face value of $5,000,000 and a stated interest rate of 8%, payable semiannually on June 30 and December 31. The bonds were sold to yield 6%. The issue price of the bonds is closest to:
Answer:
"$4,417,800" is the correct solution.
Explanation:
According to the question,
Principal amount,
= $5,000,000
Number of period will be:
= [tex]8\times 2[/tex]
= [tex]16[/tex]
Interest rate yield per period will be:
= [tex]\frac{8 \ percent}{2}[/tex]
= [tex]4[/tex] %
Interest rate started per period will be:
= [tex]\frac{6 \ percent}{2}[/tex]
= [tex]3[/tex] %
Now,
The present value of principal will be:
= [tex]Principal\ amount\times Yield \ discount \ factor[/tex]
= [tex]5,000,000\times 0.534[/tex]
= [tex]2,670,000[/tex] ($)
The present value of interest will be:
= [tex]Interest \ amount\times Yield \ discount \ factor[/tex]
= [tex](5,000,000\times 3 \ percent)\times 11.652[/tex]
= [tex]1,747,800[/tex] ($)
hence,
The issue price of bonds will be:
= [tex]2,670,000+1,747,800[/tex]
= [tex]4,417,800[/tex] ($)
The adjusted trial balance for Cowboy Company follows: Cowboy Company Adjusted Trial Balance December 31, 2020 ACCOUNT NAMEDEBITCREDIT Cash 156,750 Accounts Receivable 4,500 Prepaid Rent 7,800 Building 145,000 Accumulated Depreciation - Building 65,000 Accounts Payable 5,500 Salaries Payable 1,300 Interest Payable 2,000 Unearned Revenue 24,000 Notes Payable 60,000 Cowboy, Capital 98,000 Cowboy, Withdrawals 22,000 Fees Earned 156,000 Wages Expense 35,000 Rent Expense 20,100 Supplies Expense 7,800 Utilities Expense 3,600 Depreciation Expense 9,000 Interest Expense 250 Totals411,800411,800 Prepare the closing journal entries
Answer:
Cowboy Company
Closing Entries:
Debit Fees Earned 156,000
Credit Income Summary 156,000
To close the revenue account to the income summary.
Debit Income Summary 75,750
Credit:
Wages Expense 35,000
Rent Expense 20,100
Supplies Expense 7,800
Utilities Expense 3,600
Depreciation Expense 9,000
Interest Expense 250
To close the expenses to the income summary.
Debit Net Income 80,250
Credit Cowboy, Capital 80,250
To close the income summary to the Capital account.
Explanation:
a) Data and Calculations:
Cowboy Company
Adjusted Trial Balance
December 31, 2020
ACCOUNT NAME DEBIT CREDIT
Cash 156,750
Accounts Receivable 4,500
Prepaid Rent 7,800
Building 145,000
Accumulated Depreciation - Building 65,000
Accounts Payable 5,500
Salaries Payable 1,300
Interest Payable 2,000
Unearned Revenue 24,000
Notes Payable 60,000
Cowboy, Capital 98,000
Cowboy, Withdrawals 22,000
Fees Earned 156,000
Wages Expense 35,000
Rent Expense 20,100
Supplies Expense 7,800
Utilities Expense 3,600
Depreciation Expense 9,000
Interest Expense 250
Totals 411,800 411,800
Coronado Industries constructed a building at a cost of $30150000. Weighted-average accumulated expenditures were $12500000, actual interest was $1230000, and avoidable interest was $604000. If the salvage value is $2390000, and the useful life is 40 years, depreciation expense for the first full year using the straight-line method is
Answer:
$709,100
Explanation:
Cost of the building = $30150000
Average accumulated expenditures = $12500000
Actual interest = $1230000
Avoidable interest = $604000
Salvage value = $2390000
Useful life = 40 years
Depreciation expense for the first full year:
= ((Cost of the building + Avoidable interest) - Salvage value) / Useful life
= [($30150000 + $604000) - $2390000] / 40
= [$30754000 - $2390000] / 40
= $28364000 / 40
= $709,100
So, the depreciation expense for the first full year using the straight-line method is $709,100.
Portfolio Expected Return An investor puts 32% of their money in Stock 1 with a 10.15% expected return, 27% of their money in Stock 2 with a 10.95% expected return and the rest in Stock 3 with an expected return of 13.55%. What is the portfolio's expected return
Answer:
the expected return of the portfolio is 11.76%
Explanation:
The computation of the expected return of the portfolio is shown below:
= Respective return × Respective weights
= 0.32 × 10.15 + 0.27 × 10.95 + 0.41 × 13.55
= 3.248% + 2.9565% + 5.5555%
= 11.76%
Hence, the expected return of the portfolio is 11.76%
The same should be considered and relevant
John is working on his department's annual plan. Employee performance has been okay and commitment to his department's goals moderate. In the past John
has asked his employees to do their best. This year he is asking each employee to work with him in determining exactly what that employee is going to
accomplish this year. John wants his people to feel the goals are theirs, to invest in their accomplishment. He wants them to believe that they can accomplish
these goals. He thinks he can help this whole process by meeting with each employee quarterly and talking about where the department is and where the
employee is in regards to goal accomplishment. In the past what principle of goal setting did John violate?
O A) Goal commitment
OB) Assigning specific goals
O Setting difficult but acceptable goals
OD) Providing feedback on goal attainment
Answer:B
Explanation:
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 %
Below are amounts (in millions) from three companies' annual reports. Beginning Accounts Receivable Ending Accounts Receivable Net Sales WalCo $ 1,625 $ 2,572 $ 303,427 TarMart 5,216 5,744 48,878 CostGet 439 475 49,963 Required: 1. Calculate the receivables turnover ratio and the average collection period for WalCo, TarMart and CostGet
Answer:
1. Accounts Receivable Turnover
Walco 144.59 Times
Tarmart 8.9 Times
Costget 109.33 Times
Average collection period
Walco 2.52 Days
Tarmart 41.01 Days
Costget 3.34 Days
2. Walco
Explanation:
1. Calculation to determine the receivables turnover ratio and the average collection period for WalCo, TarMart and CostGet
ACCOUNTS RECEIVABLE TURNOVER
Using this formula
Accounts Receivable Turnover=Net Sales/Average Accounts receivable
Walco=$ 303,427/($ 1,625+2,572)/2
Walco=$ 303,427/$2,098.5
Walco =144.59 Times
Tarmart= 48,878/(5,216 + 5744)/2
Tarmart= 48,878/5480
Tarmart= 8.9 Times
Costget= 49,963/(439 + 475)/2
Costget= 49,963/457
Costget= 109.33 Times
Therefore the receivables turnover ratio is :
Walco 144.59 Times
Tarmart 8.9 Times
Costget 109.33 Times
AVERAGE COLLECTION PERIOD
Using this formula
Average collection period=Average Collection Period
365 /Receivables turnover ratio
Let plug in the formula
Walco= 365.00/144.59 Walco=2.52 Days
Tarmart= 365.00/8.9
Tarmart= 41.01 Days
Costget= 365.00/109.33
Costget=3.34 Days
2. Based on the above calculation the company that appears MOST EFFICIENT in collecting cash from sales is WALCO 144.59 Times.