Answer: $624000
Explanation:
From the question, we are informed that Warren Co. recorded a right-of-use asset of $780,000 in a 10-year finance lease and that the interest rate charged by the lessor was 10%.
The balance in the right-of-use asset after 2 years will be calculated as:
= $780,000 - [($780,000/10) × 2]
= $780,000 - ($78000 × 2)
= $780,000 - $156,000
= $624000
Mill Company began operations on January 1,2017, and recognized income from construction-type contracts under different methods for tax purposes and financial reporting purposes. Information concerning income recognition under each method is as follows:
Year Tax Purposes Book Purposes
2017 $400,000 $ 0
2018 625,000 375,000
2019 750,000 850,000
Required Assume the income tax rate is 35% in all years and that Mill has no other temporary differences. In its December 31, 2019, balance sheet, what amount of deferred income taxes should Mill report? Indicate whether the amount is an asset or a liability.
Answer:
i. Deferred income taxes balance on December 2019 is $192,500
ii. Deferred tax asset.
Explanation:
Year Tax purpose Book purpose Difference Deferred tax book
2017 $400,000 $0 $400,000 $140,000
2018 $625,000 $375,000 $250,000 $87,500
2019 $750,000 $850,000 ($100,000) ($35,000)
Deferred tax asset balance on December 2019 = $192,500
Working
Deferred tax book
2017 = 400,000 * 35% = $140,000
2018 = 250,000 * 35% = $87,500
2019 = (100,000) * 35% = ($35,000)
ii. Book income is less than tax income in 2017 and 2018. Deferred tax asset would be accounted. Book income is higher than tax income in 2019. Deferred tax asset would be reverse (i.e. deferred tax liability). Balance at the end of December 31, 2019 would be Deferred tax asset.
Two new rides are being compared by a local amusement park in terms of their annual operating costs. The two rides are assumed to be able to generate the same level of revenue (therefore the focus on costs). The Tummy Tugger has a fixed cost of $10,000 per year and a variable cost of
Complete Question:
Two new rides are being compared by a local amusement park in terms of their annual operating costs. The two rides are assumed to be able to generate the same level of revenue (and thus the focus on costs). The Tummy Tugger has fixed costs of $10,000 per year and variable costs of $2.50 per visitor. The Head Buzzer has fixed costs of $4000 per year, and variable costs of $4 per visitor. Provide answers to the following questions so the amusement park can make the needed comparison.
Requirement:
Mathematically determine the breakeven number of visitors per year for the two rides to have equal annual costs.
Answer:
4000 visitors
Explanation:
As we know that:
Total Annual Cost = Variable Cost Per Unit * Total Units + Fixed Costs
For Tummy Tugger,
Variable Cost per Unit is $2.5 per visitor
Total Units are not given so we assume it to be "x"
Fixed cost is $10,000
By putting values we have:
Total Annual Cost = $2.50x + $10,000 ........ Equation 2
Similarly for Head Buzzer,
Variable Cost per Unit is $4 per visitor
Total Units are not given so we assume it to be "x"
Fixed cost is $4,000
By putting values we have:
Total Annual Cost = $4x + $4,000 .......... Equation 3
As per the requirement, the annual cost for both of the rides is same for the year, which means that Equation 2 is equal to Equation 3.
Mathematically,
2.50x + 10000 = $4x + 4000
$10,000 - $4,000 = $4x - $2.5x
$6,000 = $1.5x
x= $6,000 / $1.5 per unit = 4,000 Units
At 4000 visitors for a year, the annual cost of both rides is the same.
Lance Production Company has the following information:
Standard fixed factory overhead rates per direct labor-hour $1.50
Standard variable factory overhead rates per direct labor-hour $5.00
Actual number of units produced 6,000 units
Actual factory overhead costs (includes $70,000 fixed) $78,000
Actual direct labor hours 6,000 hours
Standard factory overhead rates are based on a normal monthly volume of 5,000 units (1 standard direct labor-hour per unit)
What is Lance's variable overhead efficiency variance?
A. $4,000 (F)
B. $3,000 (F)
C. $6,000 (U)
Answer:
$0
Explanation:
Variance overhead efficiency variance = (Standard hours - Actual hours) * Standard variable overhead rate
= (6,000 hours * $1) - 6,000 hours * $5
= (6,000 hours - 6,000 hours) * $5
= 0 * $5
= $0
Thus, the Variance overhead efficiency variance = $0
The network marketing sales system works by recruiting independent businesspeople who act as distributors.
a) true
b) false
Answer: False
Explanation:
The above statement that network marketing sales system works by recruiting independent businesspeople who act as distributors is wrong.
It is the multilevel marketing sales system works by recruiting independent businesspeople who then act as distributors.
Panjim's prepaid expense account consists only of garage rental prepayments. Its 2015 beginning and ending balance were the same. Which one of the following statements must be true?Panjim had no garage rental expenses during 2015Panjim's prepaid expense account balance never varied during 2015Panjim's prepaid expense account balance varied during 2015None of the above statements is true
Answer:
Panjim's prepaid expense account balance varied during 2015
Explanation:
I will use the following example:
Panjim's prepaid garage expense was $1,000 on January 1, 2015
His garage expenses are $250 per quarter
After 6 months, the accrued expenses will be $500, so the balance of the prepaid account = $500
Pinjam incurs in the same garage expenses during the rest of the year, but on December 31, 2015, he prepays the garage expenses for 2016, so the ending balance of the account is $1,000 also.
Prepaid expenses is an asset account, it is not the same as garage expenses which belongs to the income statement. Prepaid expenses must be accrued and the account's balance decreases as time passes, so it will vary during the year.
The following data has been provided for a company’s most recent year of operations: Return on investment 20% Average operating assets $ 100,000 Minimum required rate of return 15% The residual income for the year was closest to:
Answer:
$5,000
Explanation:
The return on investment is 20%
= 20/100
=0.2
The average operating assets is $100,000
The minimum required rate of return is 15%
= 15/100
= 0.15
The first step is to calculate the net operating assets
= ROI× average operating assets
= 0.2×100,000
= $20,000
Therefore, the residual income can be calculated as follows
= Net operating income-(minimum required rate of return×average operating assets)
= $20,000-($100,000-0.15)
= $20,000-15,000
= $5,000
Hence the residual income for the year was closest to $5,000
On January 2, 2016, Lang Co. issued at par $10,000 of 4% bonds convertible in total into 1,000 shares of Lang’s common stock. No bonds were converted during 2016.Throughout 2016, Lang had 1,000 shares of common stock outstanding. Lang’s 2016 net income was $1,000. Lang’s income tax rate is 50%.No potential common shares other than the convertible bonds were outstanding during 2016. Lang’s diluted earnings per share for 2016 would bea. $ .50b. $ .60c. $ .70d. $1.00International Financial Reporting Standards are tested on the CPA exam along with U.S. GAAP. The following questions deal with the application of IFRS in accounting for share-based compensation.
Answer:
b. $0.6
Explanation:
Net income. $1,000
Add: Increase in net income if converted
[10,000 * 4% ( 1 - 50% )] $200
(a) Earnings available to equity share holders ($1,000 + $200). $1,200
(b) Number of shares outstanding
1,000 common shares + 1,000 potential shares = 2,000 shares outstanding
(a/b) Diluted earnings per share
1,200 ÷ 2,000 $0.6
Use the two state call option value in this problem. Data: S0=130 ; X=143 ; 1+r=1.1. The two possibilities for ST are 160 and 109. Calculate the value of a call option on the stock with an exercise price of $143.
Answer:
10.3
Explanation:
The computation of the value of a call option is shown below:
But before that we need to do the following calculations
P = (r - d) ÷ (u - d)
where
r = 1.1
d = down price ÷ current price
= 109 ÷ 130
= 0.838
u = up price ÷ current price
= 160 ÷ 130
= 1.231
Now placing these values
= (1.1 - 0.838) ÷ (1.231 - 0.838)
= 0.6667
Now the value of the call option is
= (cu × p) + cd × (1 - p) ÷ R
= (17 × 0.6667) + 0 × (1 - 0.6667) ÷ 1.1
= 10.3
The cu could come from i.e. payoff in that case when the option is exercised
= 160 - 143
= 17
cd = payoff in that case when the option is not exercised
you own a bond that has a duration of 7 years interest rates are currently 8% but you belive the fed is about to increase rates by 35 basis points your predicted price change on this bond is
Answer: -2.27%
Explanation:
Bond prices are inversely related to interest rates so when the interest rises, the price of a bond will fall.
The formula for calculating this fall is;
= - Duration * ( Change in interest rate / (1 + current rate))
= -7 * ( 0.35%/(1 +8%))
= -0.022685
= -2.27%
Holiday Laboratories purchased a high-speed industrial centrifuge at a cost of $440,000. Shipping costs totaled $30,000. Foundation work to house the centrifuge cost $8,600. An additional water line had to be run to the equipment at a cost of $3,000. Labor and testing costs totaled $5,300. Materials used up in testing cost $2,600. The capitalized cost is:__________.
a. $489,900.
b. $470,000.
c. $481,600.
d. $489,500.
Answer:
d. $489,500
Explanation:
The capitalized cost will include all the costs incurred by Holiday laboratories to readily make the asset for use.
Therefore,
Capitalized cost = High speed industrial centrifuge + Shipping cost + Foundation cost + Equipment cost + Labor and testing cost + Material cost
= $440,000 + $30,000 + $8,600 + $3,000 + $5,300 + $2,600
= $489,500
Based on the costs incurred for the fixed asset, the capitalized cost will be a. $489,900
When it comes to fixed assets, all the costs that were needed to acquire the asset and install it will be capitalized.
The capitalized cost is therefore:
= Cost of equipment + Shipping cost + Foundation work cost + Additional water line cost + Labor costs + Materials cost
= 440,000 + 30,000 + 8,600 + 3,000 + 5,300 + 2,600
= $489,500
In conclusion, the capitalized cost was $489,500
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Fogle Florist specializes in large floral bouquets for hotels and other commercial spaces. The company has provided the following data concerning its annual overhead costs and its activity-based costing system:Overhead costs: Wages and salaries $143,000Other expenses 60,000Total $203,000Distribution of resource consumption: Making Bouquets (Activity Cost Pools) Delivery (Activity Cost Pools) Other (Activity Cost Pools) TotalWages and salaries 55% 35% 10% 100%Other expenses 40% 30% 30% 100%The "Other" activity cost pool consists of the costs of Idle capacity and organization-sustaining costs.The amount of activity for the year is as follows:Activity Cost Pool ActivityMaking bouquets 58,325 bouquetsDelivery 8,500 bouquetsWhat would be the total overhead cost per bouquet according to the activity-based costing system? In other words, what would be the overall activity rate for the making bouquets activity cost pool?a. $1.81 per bouquets.b. $1.76 per bouquets.c. $1.74 per bouquets.d. $1.66 per bouquets.
Answer:
b. $1.76 per bouquet.
Explanation:
Wages and Salaries cost is 143,000
Other expenses is 60,000
Making bouquet activity allocations :
Wages and Salaries 143,000 * 55% = 78650
Other expenses 60,000 * 40% = 24,000
Total is 102,650
number of bouquets is 58,325
102,650 / 58,325 = 1.76 per bouquets.
The cost of making each bouquet is approximately $1.76 per bouquet.
On January 1, 2021, Julee Enterprises borrows $31,000 to purchase a new Toyota Highlander by agreeing to a 8%, 4-year note with the bank. Payments of $756.80 are due at the end of each month with the first installment due on January 31, 2021.
Record the issuance of the note payable and the first two monthly payments. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations. Round your answers to 2 decimal places.)
Answer:
January 1, 2021, received loan from bank to purchase a Toyota Highlander.
Dr Toyota Highlander 31,000
Cr Notes payable 31,000
January 31, 2021, first installment paid on bank loan (8% interest rate)
Dr Interest expense 203.84
Dr Notes payable 552.96
Cr Cash 756.80
interest expense = $31,000 x 8% x 30/365 = $203.84
February 28, 2021, second installment paid on bank loan (8% interest rate)
Dr Interest expense 186.85
Dr Notes payable 569.95
Cr Cash 756.80
interest expense = ($31,000 - $552.96) x 8% x 28/365 = $186.85
Aide Industries is a division of a major corporation. Data concerning the most recent year appears below: Sales $17,560,000 Net operating income $1,071,160 Average operating assets $4,300,000 The division's return on investment (ROI) is closest to
Answer:
24.91%
Explanation:
The formula for return on investment is given as;
Net operating income / Average operating assets
= $1,071,160 / $4,300,000
= 24.91%
Therefore, return on investment is 24.91%.
Journalizing Business Transactions Prepare journal entries for each of the following transactions.
(a) Issue stock for $1,000 cash
(b) Purchase inventory for $500 cash
(c) Sell inventory from (b) for $2,000 on credit
(d) Record $500 for cost of inventory sold in (c)
(e) Receive $2,000 cash on receivable from (c)
Answer:
a.
Cash $1000 Dr
Common stock $1000 Cr
b.
Purchases $500 Dr
Cash $500 Cr
c.
Accounts Receivable $2000 Dr
Sales Revenue $2000 Cr
d.
Cost of Goods Sold $500 Dr
Inventory Account $500 Cr
e.
Cash $2000 Dr
Accounts Receivable $2000 Cr
Explanation:
a.
The cash received as a result of issuing shares is debited as cash is increasing while as the capital is increasing so common stock is credited.
b.
The inventory is purchased for cash so cash is credited and purchases are debited.
c.
The sale of inventory on credit means a debit to the accounts receivable account for the amount of sale and a credit to sales revenue.
d.
When inventory is purchased, we debit the purchases account and credit either cash or accounts payable.
Later on, we transfer the purchases to the inventory amount as it is purchased for the intention of sale. Thus, we credit the purchases account and debit the inventory account.
When a sale is made, we debit the cost of goods sold by the amount of inventory sold and credit the inventory account.
e.
Cash is received so it will be debit and accounts receivable be credited.
A record is the act of recording or staying abreast of any financial or non-financial activity. An accounting journal records transactions and illustrates an industry's card payment balances.
Each writing in the published article can be either a deduction or a profit.
The Journal entries of each of the transactions have been attached below.
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Tranquility Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan has 20 separate parts. The direct materials cost is $ 70 and each ceiling fan requires 3 hours of machine time to manufacture. There is no direct labor. Additional information is as follows:________.
Activity Allocation Base Predetermined Overhead Allocation Rate
Materials handling Number of parts $ 0.08
Machining Machine hours 7.6
Assembling Number of parts 0.2
Packaging Number of finished units 2.7
What is the total manufacturing cost per ceiling fan? (Round any intermediate calculations and your final answer to the nearest cent.)
Answer:
unitary manufacturing cost= $101.1
Explanation:
Giving the following information:
Each ceiling fan has 20 separate parts.
The direct materials cost is $70 and each ceiling fan requires 3 hours of machine time to manufacture.
Activity Allocation Base Predetermined Overhead Allocation Rate
Materials handling Number of parts $ 0.08
Machining Machine hours 7.6
Assembling Number of parts 0.2
Packaging Number of finished units 2.7
First, we need to allocate overhead using the following formula:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Materials handling= 0.08*20= $1.6
Machining= 7.6*3= $22.8
Assembling= 0.2*20= $4
Packaging= 2.7*1= $2.7
Total allocate overhead per unit= $31.1
Now, we can calculate the unitary manufacturing cost:
unitary manufacturing cost= 70 + 31.1
unitary manufacturing cost= $101.1
Assume the spot Swiss franc is $0.7000 and the six-month forward rate is $0.6950. What is the minimum price that a six-month American call option with a strik-ing price of $0.6800 should sell for in a rational market
Answer:
2 cents
Explanation:
The spot price = $0.7000 = 70 cents, The forward rate = $0.6950 = 69.5 cents and the call option with striking price = $0.6800 = 68.00 cents
The annualized six month rate = 3 1/2 % = 3.5 %, therefore the rate = r/n, where n is the number of period per year = 2. Therefore r/n = 3.5% / 2 = 0.035 / 2 = 0.0175
The minimum price = Maximum (spot price - striking price, (forward rate - striking price) / (1 + 0.0175), 0) = Maximum(70 - 68, (69.5 - 68)/ 0.0175, 0)
Minimum price = Maximum (2 , 1.47, 0) = 2 cents
The minimum price for the American option is 2 cents.
We can arrive at this answer in the following format:
First, we will need to calculate the six-month annualized rate. This will be done as the following calculation:[tex]3*(\frac{1}{2})=3.5[/tex]%
Then we will calculate the division of this value by the number of periods in the years, which are two. So we will calculate:[tex]\frac{0.035}{2} = 0.0175[/tex]
With that we can calculate the minimum price as follows:[tex]spot price - striking price = minimum price\\70 - 68= 2[/tex]
With that, we can say that the minimum price is equal to 2 cents.
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Critical Thinking Questions What investment options are open to Natasha? What chance does she have of earning a satisfactory return if she invests her $15,000 in (a) bluechip stocks, (b) growth stocks, (c) speculative stocks, (d) corporate bonds, or (e) municipal bonds?
Explanation:
Remember, a good investment is one that provides extra returns also called profit. Thus, Natasha faces the grim reality of accepting a certain percentage of risk for whatever investment choice she decides.
However, in terms of risk, the $15,000 could best be preserved in corporate bonds.
Over a 38-year period an asset had an arithmetic return of 12.4 percent and a geometric return of 10.3 percent. Using Blume’s formula, what is your best estimate of the future annual returns over 6 years? 10 years? 19 years?
Answer:
Blume's formula combines the geometric and arithmetic means of an asset to be able to predict its returns in a given period.
The formula is;
= Geometric Mean*(T-1)/(N-1) + Arithmatic Mean *(N-T)/(N-1)
Where,
T = Period in question
N = Total period
6 years
= 10.3%*(6-1)/(38-1) + 12.4%*(38-6)/(38-1)
= 12.1 %
10 years
= 10.3%*(10-1)/(38-1) + 12.4%*(38-10)/(38-1)
= 11.89%
19 years
= 10.3%*(19-1)/(38-1) + 12.4%*(38-19)/(38-1)
= 11.38%
Interest received from which of the following federal agency securities is exempt from all state and local taxation?
A. Fannie Mae Pass Through Certificates.
B. Treasury notes.
C. Federal Farm Credit Funding Corporation Bonds.
D. Federal Home Loan Bank Bonds.
Answer: B. Treasury notes.
Explanation:
Treasury Notes are tax exempt from all state and local taxation but are taxable by the Federal Government with the relevant tax rate being the investor's marginal tax rate.
The amount taxed is the interest received on the note when it matures. The investor can also be taxed on capital gain if they bought the Note at discounted prices and then sold it for more than that.
Suppose that the government is currently in a recession and elected officials have reached a conclusion that fiscal stimulus is needed. A new fiscal stimulus law (that was just passed) will involve spending $150 billion. Economists have informed you that the spending multiplier in the economy is 2.5 What is the total macroeconomic impact of the fiscal stimulus?
Answer:
The total macroeconomic impact of the fiscal stimulus is $375 billion.
Explanation:
In macroeconomics, a sending multiplier refers to a propositional factor that has a primary function of measuring the extent of the effect of a change in gross domestic product (GDP) as a result of a change in expenditure.
In order to determine the total macroeconomic impact of the fiscal stimulus, we just need to obtain the product of the spending and multiplier as follows:
Total macroeconomic impact = Spending * spending multiplier ............ (1)
Where;
Spending = $150 billion
Spending multiplier = 2.5
Substituting the values into equation (1), we have:
Total macroeconomic impact = $150 billion * 2.5 = $375 billion
Therefore, the total macroeconomic impact of the fiscal stimulus is $375 billion.
A dearborn company has earning per share of $2.30, it paid a dividend of $1.60 per share, and the market price of the company's stock is $64 per share. The price/earnings ratio is closest to:_______
a. 1.29
b. 91.43
c. 20.65
d. 9.60
Answer:
Price -earnings ratio= 27.83 times
Explanation:
The price-earning ratio is the ratio of the market price of a share to its earnings per share .
It helps investors to place a value on the shares of a company.The ratio gives an idea of how much a dollar of earning is worth in a company.
It is calculate as follows:
Price-Earnings ratio = Market price per share(MPS)/Earnings per share(EPS)
Price-earnings ratio = 64/2.30=27.83
Price -earnings ratio= 27.83 times
The budget for Department 6 of Cardinal Company for the current month ending March 31 is as follows:
Materials $208,000
Factory wages 265,000
Supervisory salaries 67,800
Depreciation of plant and equipment 35,000
Power and light 22,500
Insurance and property taxes 15,500
Maintenance 9,700
During March, the costs incurred in Department 6 of Cardinal Company were materials, $204,000; factory wages, $285,000; supervisory salaries, $63,600; depreciation of plant and equipment, $35,000; power and light, $21,360; insurance and property taxes, $14,400; maintenance, $9,456.
(a) Prepare a budget performance report for the supervisor of Department 6 of Cardinal Company for the month of March.
(b) Are there any significant variances (5% or greater) of the budgeted amounts that should be examined by the supervisor?
Answer:
a) Cardinal Company, department 6
Budget performance report
For the month ended march 31, 202x
Budget Actual Over Under
budget budget
Materials $208,000 $204,000 $4,000
Factory wages $265,000 $285,000 ($20,000)
Supervisory salaries $67,800 $63,600 $4,200
Depreciation P&E $35,000 $35,000 - -
Power and light $22,500 $21,360 $1,140
Insurance and $15,500 $14,400 $1,100
property taxes
Maintenance $9,700 $9,456 $244
Total $623,500 $632,816 ($9,316)
b) Factory wages were higher than budgeted by $20,000 or 7.55%, supervisory salaries were lower than budget by $4,200 or 6.19%, power and light were lower than budgeted by $1,140 or 5.07%, and insurance and property taxes were lower than budgeted by $1,100 or 7.1%
a) The Budget Performance Report for the month ending March 31 to be presented to the Supervisor of Department 6, Cardinal Company is as follows:
Budget Actual Variance
Materials $208,000 $204,000 $4,000 F
Factory wages 265,000 285,000 20,000 U
Supervisory salaries 67,800 63,600 4,200 F
Depreciation of plant and equipment 35,000 35,000 0 None
Power and light 22,500 21,360 1,140 F
Insurance and property taxes 15,500 14,400 1,100 F
Maintenance 9,700 9,456 244 F
b) Significant Variances:
Factory Wages = 7.55% ($20,000/$265,000 x 100) Unfavorable
Supervisory salaries = 6.2% ($4,200/$67,800 x 100) Favorable
Power and Light = 5.1% ($1,140/$22,500 x 100) Favorable
Insurance and property taxes = 7.1% ($1,100/$15,500 x 100) Favorable
Thus, the significant variances that should be investigated by the supervisor included Factory Wages, Supervisory Salaries, Power and Light, and Insurance and Property Taxes for March.
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A single-stock futures contract on a non-dividend-paying stock with current price $250 has a maturity of 1 year. If the T-bill rate is 4%. What should the futures price be if the maturity of the contract is 2 years?
Answer:
$270.4
Explanation:
Calculation for What should the futures price be if the maturity of the contract is 2 years
Using this formula
Future Price= Stock Price ×(1 + Risk Free rate)^Maturity years
Let plug in the formula
Future Price=$250×(1+4%)^2
Future Price=$250×(1+0.04)^2
Future Price$250×(1.04)^2
Future Price=$250×1.0816
Future Price=$270.4
Therefore What should the futures price be if the maturity of the contract is 2 years will be $270.4
ABC will purchase a machine that will cost $2,575,000. Required modifications will cost $375,000. ABC will need to invest $75,000 for additional inventory. The machine has an IRS approved useful life of 7 years; it is presumed to have no salvage value. ABC plans to depreciate the machine by using the straight-line method. The machine is expected to increase ABC's sales revenues by $1,890,000 per year; operating costs excluding depreciation are estimated at $454,600 per year. Assume that the firm's tax rate is 40%. What is the annual operating cash flow?
Answer:
The Annual Operating Cash Flow is $1,029,811.43
Explanation:
Initial Investment = Cost of Machine + Modification Cost
Initial Investment = $2,575,000 + $375,000
Initial Investment = $2,950,000
Salvage Value = $0
Useful Life = 7 years
Depreciation per year = (Initial Investment - Salvage Value) / Useful Life
Depreciation per year = ($2,950,000 - $0) / 7
Depreciation per year = $421,428.57
Annual Operating Cash Flow = (Sales – Operating Costs) * (1 – Tax Rate) + Tax Rate * Depreciation
Annual Operating Cash Flow = ($1,890,000 - $454,600) * (1 - 0.40) + 0.40 * $421,428.571
Annual Operating Cash Flow = $1,435,400 * 0.60 + 0.40 * $421,428.571
Annual Operating Cash Flow = $1,029,811.4284
Annual Operating Cash Flow = $1,029,811.43
Stocks that don't pay dividends yet
Goodwin Technologies, a relatively young company, has been wildly successful but has yet to pay a dividend. An analyst forecasts that Goodwin is likely to pay its first dividend three years from now. She expects Goodwin to pay a $5.5000 dividend at that time (D $5.5000) and believes that the dividend will grow by 28.60% for the following two years (D4 and D5). However, after the fifth year, she expects Goodwin's dividend to grow at a constant rate of 4.38% per year.
Goodwin's required return is 14.60%. Fill in the following chart to determine Goodwin's horizon value at the horizon date when constant growth begins and the current intrinsic value. To increase the accuracy of your calculations, carry the dividend values to four decimal places.
Term Value
Horizon value
Current Intrinsic value
Assuming that the markets are in equilibrium, Goodwin's current expected dividend yield is and Goodwin's capital gains yield is______.
Goodwin has been very successful, but it hasn't paid a dividend yet. It circulates a report to its key investors containing the following statement:
Goodwin's investment opportunities are poor.
Is this statement a possible explanation for why the firm hasn't paid a dividend yet?
A. True
B. False
Answer:
horizon value at year 5 = $94.3444
current intrinsic intrinsic value P₀ = $47.73
Assuming that the markets are in equilibrium, Goodwin's current expected dividend yield is and Goodwin's capital gains yield is 0(it pays no dividends).
Goodwin has been very successful, but it hasn't paid a dividend yet. It circulates a report to its key investors containing the following statement:
Goodwin's investment opportunities are poor.
Is this statement a possible explanation for why the firm hasn't paid a dividend yet?
B. False
Generally companies that are experiencing a rapid growth do not pay dividends, because they need all the cash that they can use to finance their expansion. Sometimes mature companies that have a steady growth rate will also choose not to pay dividends because they consider themselves as solid investments and not paying dividends allows them to grow more and should increase stockholders' wealth more.
Explanation:
D₃ = $5.50
D₄ = $7.073
D₅ = $9.096
D₆ = $9.642 (and a constant growth rate of 4.38%
Re = 14.60%
horizon value at year 5 = $9.642 / (14.6% - 4.38%) = $94.3444
intrinsic value P₀ = $94.3444 / 1.146⁵ = $47.73
Supposing that the markets are in equilibrium, Goodwin's current common dividend yield is and Goodwin's capital gains result is 0(it pays no dividends). False.
What is Markets Equilibrium?
The horizon value at year 5 is = $94.3444
current intrinsic intrinsic value P₀ is = $47.73
Considering when the markets are in equilibrium, Also Goodwin's current common dividend yield is and also Goodwin's capital gains yield is 0(it pays no dividends).
Goodwin has been extremely successful, but it hasn't paid a premium yet. It disseminates a report to its key investors including the subsequent declaration:
Goodwin's investment opportunities are lacking.
B. False
Commonly, companies that are undergoing rapid evolution do not pay dividends, because they require all the cash that they can use to finance their development.
Sometimes when mature companies that have a steady growth rate will also when choose not to pay dividends because they consider themselves solid investments and not paying dividends allows them to grow more and also should increase stockholders' wealth more.
Then, D₃ = $5.50
After that, D₄ = $7.073
Then, D₅ is = $9.096
After that, D₆ = $9.642 (and a constant growth rate of 4.38%
Then, Re = 14.60%
Then, horizon value at year 5 = $9.642 / (14.6% - 4.38%) = $94.3444
Therefore, intrinsic value P₀ = $94.3444 / 1.146⁵ = $47.73
Find more information about Markets Equilibrium here:
https://brainly.com/question/12252562
This morning, you put a European protective put strategy in place when the cost of ABC stock was $29.15 per share and the 1-year $30 ABC put was priced at $1.05 per share. How much profit or loss per share will you earn from this strategy if the stock is worth $28 a share on the put expiration date? A) −$2.2 B) −$1.05 C) −$.20 D) $1.15 E) $4.20
Answer:
C) −$0.20
Explanation:
Stock Price (So) = $29.15, Po = $1.05
Initial outflow = So + Po = $29.15 + $1.05
Initial outflow = $30.20
Strike Price (k) $30
Stock price at maturity (St) = $28
Payoff = max(k-st,0)
Payoff = max(30-28,0)
Payoff = max(2,0)
Payoff = $2
The stock on maturity is sold in the market for $28.
Total inflow = Payoff + Stock price on maturity
Total inflow = $2 + $28
Total inflow = $30
Profit = Total inflow - Initial outflow
Profit = $30 - $30.20
Profit = -$0.20
Taylor Equipment Repair Service is owned by Jason Taylor. Cash $ 33,700 Supplies 5,780 Accounts Receivable 12,600 Equipment 77,400 Accounts Payable 23,400 Use the above figures to prepare a balance sheet dated February 28, 2019. Analyze: What is the net worth, or owner’s equity, at February 28, 2019, for Taylor Equipment Repair Service?
Answer:
Owners Equity/Net Worth is $106,080
Explanation:
Assets
Cash $33,700
Supplies $5,780
Accounts Receivable $12,600
Equipment $77,400
Total Assets $129,480
Liabilities
Accounts Payable $23,400
Owners Equity (Balance) $106,080
Total Liabilities and Equity $129,480
A property management company hit its corporate goals for the year by increasing profits by 5%, two points higher than its 3% goal. Management was very pleased with the results and decided to celebrate with an extravagant meal for all managers. The following year, the company set the same goal, 3%, but fell very short. When digging into the cause, management found out that the associates were not as productive or as motivated as they were the year before. What should the company do to ensure it hits its goals for years to come
Available Options Are:
A. Continue training to improve its employees' skills
B. Promote the best associates to managers
C. Threaten lay-offs if goals are not hit
D. Provide positive reinforcement for hitting goals
Answer:
Option D. Provide positive reinforcement for hitting goals
Explanation:
The training program is not required as the managers are already trained which means their is not skills deficit which has resulted in not achieving the business goals. Hence Option A is incorrect.
Option B is also incorrect because previously the same managers had achieved the goals hence promoting best associates to managers will not be impact making.
Option C is incorrect because threatening may result in further demotivating employees and it will also increase employee turnover. Hence it is also not a solution.
Option D is correct because the employees are demotivated and all they need is motivation which can be developed by developing a system of reward. This can be achieved by linking their interests with the company's interest. If they achieve their target then they must be awarded a certain portion of the target say 1%. This will increase their motivation to earn more by making additional sales.
The contribution margin ratio of Kuck Corporation's only product is 75%. The company's monthly fixed expense is $456,000 and the company's monthly target profit is $42,000. Determine the dollar sales to attain the company's target profit.
Answer:
$664,000
Explanation:
Kuck corporation has a product whose contribution margin ratio is 75%
= 75/100
= 0.75
The company has a fixed expense of $456,000
The company has a target profit of $42,000
Based on the values above, the dollar sales to attain the company's target profit can be calculated as follows
Dollar sales to reach target profit = (Target profit + fixed expenses) /Contribution margin ratio
= ($456,000+$42,000)/75/100
= $498,000/0.75
= $664,000
Hence the dollar sales to reach the required company's target profit is $664,000
Summerdahl Resort's common stock is currently trading at $39.00 a share. The stock is expected to pay a dividend of $1.50 a share at the end of the year (D1 = $3.00), and the dividend is expected to grow at a constant rate of 5% a year. What is its cost of common equity?
The question is incorrect as the dividend at the end of the year is given at $1.5 which is also the D1. So the correct question is,
Summerdahl Resort's common stock is currently trading at $39.00 a share. The stock is expected to pay a dividend of $1.50 a share at the end of the year (D1 = $1.50), and the dividend is expected to grow at a constant rate of 5% a year. What is its cost of common equity?
Answer:
The cost of common equity is 8.85%
Explanation:
The constant growth model of DDM values a stock whose dividends are expected to grow at a constant rate indefinitely. The model calculates the value of the stock today based on the present value of the expected future dividends from the stock. The formula for price today under this model is,
P0 = D1 / (r - g)
Where,
P0 is price todayD1 is the dividend expected at the end of the year or Year 1r is the cost of equityg is the growth rate in dividendsPlugging in the values for all the available variables, we can calculate the value of r.
39 = 1.5 / (r - 0.05)
39 * (r - 0.05) = 1.5
39r - 1.95 = 1.5
39r = 1.5 + 1.95
r = 3.45 / 39
r = 0.08846 or 8.846% rounded off to 8.85%