A production quota is a lower limit to the quantity of a good that can be produced in a specified period. (B)
Production quota is a restriction on the amount of goods that can be produced in a specified period, it is designed to protect industries from foreign competitors, stimulate domestic production, or promote resource conservation.
It's a way of limiting supply to raise prices. When the government sets quotas on how much of a good can be produced, it restricts competition.
Quotas are similar to tariffs and other protectionist measures in that they all seek to restrict imports and increase domestic production. However, unlike tariffs, quotas do not generate revenue for the government.(B)
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Wildhorse Corp. purchased a piece of equipment on September 30 for $27400. It cost $800 to ship the equipment to the company’s facilities and another $1000 to install the equipment. After the equipment was installed, the company had to pay an additional $1900 for increased insurance. The capitalized cost of the equipment was
a.$30300.
b.$29200.
c.$28200.
d.$31100.
Wildhorse Corp. purchased a piece of equipment on September 30 for $27400. It cost $800 to ship the equipment to the company’s facilities and another $1000 to install the equipment. After the equipment was installed, the company had to pay an additional $1900 for increased insurance.
The capitalized cost of an asset is the total cost of acquiring and preparing an asset for use. It includes the cost of the asset, shipping cost, installation cost, and all other expenses necessary to prepare the asset for use. The capitalized cost of an asset is recognized as an asset on the balance sheet and is depreciated over the useful life of the asset.Wildhorse Corp. purchased a piece of equipment on September 30 for $27400. The cost of the equipment is the initial cost of the asset.
It cost $800 to ship the equipment to the company’s facilities, and another $1000 was incurred to install the equipment. These costs are necessary expenses required to prepare the asset for use and should be added to the cost of the asset. After the equipment was installed, the company had to pay an additional $1900 for increased insurance. This is an expense that is necessary to protect the asset, and it should also be added to the cost of the asset.To compute the capitalized cost of the equipment, the cost of the equipment, shipping cost, installation cost, and increased insurance cost should be added.
Therefore, the capitalized cost of the equipment is: $27400 + $800 + $1000 + $1900 = $31100.
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The COVID-19 pandemic resulted in uncertainty and disruptions for many retailers. Describe how a local retailer might be better prepared for future disruptions. In your plan, include suggestions for how the retailer might leverage digital formats to improve its resiliency.
In order to be better prepared for future disruptions, a local retailer must take several steps. One of the most important steps is to improve its resiliency by leveraging digital formats. A few suggestions for doing so include There are several steps a local retailer
Another way to improve resiliency is to offer delivery and curbside pickup. By offering these options, customers can continue to shop with the retailer even if they are not comfortable going into the store. This is especially important during times of disruption when customers may be hesitant to go out in public. Creating a loyalty program is another way to improve resiliency.
By offering rewards and discounts to repeat customers, a retailer can increase customer loyalty and improve its bottom line. Invest in E-Commerce Finally, investing in e-commerce is another way to improve resiliency. By offering customers the ability to purchase products online, a retailer can continue to generate revenue even if its physical stores are the closed. To summarize, a local retailer can be better prepared for future disruptions by improving its resiliency. they are Suggestions for doing so include establishing an online presence, using social media, offering delivery and curbside pickup, creating a loyalty program, and investing in e-commerce. By taking these steps, a retailer can continue to generate revenue and meet the needs of its customers even during times of uncertainty and disruption.
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A contract requires lease payments of $700 at the beginning of every month for 7 years.
a. What is the present value of the contract if the lease rate is 4.75% compounded annually?
Round to the nearest cent
b. What is the present value of the contract if the lease rate is 4.75% compounded monthly?
Round to the nearest cent
The present value of the contract is $7,691.26 if the lease rate is 4.75% compounded monthly.
a. Present value of the contract:Present value is calculated by the formula: PV = PMT x (1 - (1 + r)-n)/rWhere,PMT is the periodic paymentr is the periodic interest raten is the number of paymentsPeriodic payment = $700n = 7 years x 12 months = 84 monthsa. Present value of the contract with annual compounding:We know,Rate of interest (r) = 4.75%Compounded annually, n = 84/12 = 7 yearsPresent value (PV) = PMT x (1 - (1 + r)-n)/r= $700 x (1 - (1 + 0.0475)-7)/0.0475= $700 x (1 - 0.4787)/0.0475= $700 x (0.5213)/0.0475= $7,680.47≈ $7,680.48
Therefore, the present value of the contract is $7,680.48 if the lease rate is 4.75% compounded annually.b. Present value of the contract with monthly compounding:We know,Rate of interest (r) = 4.75%Compounded monthly, n = 84Present value (PV) = PMT x (1 - (1 + r)-n)/r= $700 x (1 - (1 + 0.0475/12)-84)/(0.0475/12)= $700 x (1 - 0.3831)/(0.0475/12)= $700 x (0.6169)/(0.0475/12)= $7,691.25≈ $7,691.26Therefore, the present value of the contract is $7,691.26 if the lease rate is 4.75% compounded monthly.
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Read the extract (Extract 1) about GDP from an article and then answer the following:
(a) Describe how Gross Domestic Product (GDP) is measured using the
expenditure method.
(b) Reflecting on the arguments made in the article and the module materials,
discuss three activities or aspects of well-being that GDP does not measure.
(c) Briefly outline two reasons for why GDP is still regularly used in economic
analysis despite its shortcomings.
Extract 1: Bobby Kennedy was right: GDP is a poor measure of a
nation's health
… There are not many memorable speeches about gross domestic
product, but that may be because the one made by Bobby Kennedy while
on the campaign trail in 1968 said it all. As Kennedy pointed out, the
production of napalm and nuclear warheads counted towards GDP, but
the health of American children and the joy of their play did not. "It does
not include the beauty of our poetry or the strength of our marriages, the
intelligence of our public debate or the integrity of our public officials. It
that would add to GDP. If the number of operations went down because
the public exercised more, it would reduce GDP. …
But as a purely quantitative measure, the GDP figures tell us nothing
about the quality of growth. To take one example, retail sales are now
higher than they were before the pandemic started even though nonessential
stores have been shut on and off for much of the past year. We
know that spending has migrated from the high street and retail parks to
online; what we don’t know is whether the goods being delivered by
courier are really wanted or whether people are so miserable that they are
binge-buying. …
The collapse in GDP is huge, but – unless there are fresh waves of the
pandemic – only temporary. Once the restrictions are lifted, activity will
pick up. If things go well, all the ground lost in 2020 will be made up by
2022. But how do you measure the impact of the schools being shut on
the life chances of a child from a disadvantaged family? What price the
toll on mental health of people confined to their homes and unable to see
friends and family for months on end? Is it possible to put a monetary
value on loneliness and depression?
The fact that in recent years statisticians have tried to judge progress in
different ways speaks volumes about the limitations of GDP as a
yardstick. There are things that can be easily measured and things that
can’t. The fact that GDP fell by 10% last year tells us something, but not
everything.
measures neither our wit nor our courage, neither our wisdom nor our
learning, neither our compassion nor our devotion to our country. It
measures everything in short, except that which makes life worthwhile.
And it can tell us everything about America except why we are proud that
we are Americans."
Those words were true in 1968 and they resonate even more strongly
today. Measured by GDP, the US is the world’s richest country. Measured
by GDP per head, it is one of the richest. Measured in other ways, in life
expectancy for example, the US would be a long way down the
international league tables. And as recent events have shown all too
clearly, it is not a country at ease with itself. …
GDP measures those activities for which money changes hands or for
which a monetary value can be attached. Paid childcare is included, but
unpaid childcare by family members or friends isn’t. If the NHS needed to
do more operations because Britain was becoming a less healthy nation,
(a) The expenditure method is one way to measure GDP. This method calculates the total amount spent on goods and services in an economy over a specific period.
It includes four components: consumer spending, investment spending, government spending, and net exports (exports minus imports).
(b) Three activities or aspects of well-being that GDP does not measure are:
Non-monetary contributions such as volunteer work and unpaid caregiving by family members or friends, which can have significant impacts on individuals' well-being and society as a whole.
Environmental degradation resulting from economic activity, which can lead to negative health outcomes and reduced quality of life for individuals and communities.
Distributional inequalities, where GDP growth does not necessarily translate into improved well-being for all individuals in society.
(c) GDP continues to be regularly used in economic analysis for two main reasons:
It provides a straightforward and easily digestible measure of economic activity, allowing for easy comparisons across time and between countries.
GDP is strongly correlated with other measures of well-being, such as job creation and improvements in living standards, although this correlation becomes weaker at higher levels of income.
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What is the annual percentage rate (APR) on a loan that charges interest of 0.53 percent per month? (Round answer to 2 decimal places, e.g., 2.25.) Annual percentage rate eTextbook and Media Attempts: 0 of 2 used (b) What is the effective annual rate (EAR) on the loan described in (a)? (Round answer to 2 decimal places, e.g., 2.25.) Effective annual rate %
Annual Percentage Rate (APR): 6.36%
Effective Annual Rate (EAR): 6.54%The APR represents the simple annual interest rate charged on the loan, while the EAR reflects the actual annualized rate, considering compounding. The difference between the two arises from the effects of compounding, making the EAR slightly higher than the APR.
To calculate the Annual Percentage Rate (APR), we need to convert the monthly interest rate of 0.53% into an annual rate. Since there are 12 months in a year, we multiply the monthly rate by 12. In this case, the APR is 0.53% * 12 = 6.36%. The Effective Annual Rate (EAR) takes into account compounding, which means the interest is added to the principal and earns interest itself. To calculate the EAR, we can use the formula (1 + r/n)^n - 1, where r is the annual interest rate and n is the number of compounding periods per year. In this case, the EAR is (1 + 0.0053/12)^12 - 1 = 0.0654 or 6.54%.
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A firm makes beer and its cost function is C(q)=4+q 2
. Are there economies of scale?
Based on the given cost function C(q) = 4 + q^2, there are no economies of scale in the beer-making firm.
To determine whether there are economies of scale in the beer-making firm, we need to analyze its cost function, which is given as C(q) = 4 + q^2. To assess economies of scale, we need to examine the relationship between the firm's output (q) and its total cost (C). In this case, the cost function is quadratic, with the term q^2. Economies of scale exist when an increase in output leads to a proportionally smaller increase in total cost. Mathematically, this means that the cost function exhibits decreasing returns to scale, where the marginal cost (MC) of production decreases as output expands.
In the given cost function, the term q^2 implies that as output increases, the cost grows at an accelerating rate. This suggests that the firm is experiencing increasing returns to scale, rather than economies of scale. Increasing returns to scale occur when an increase in output leads to a proportionally larger increase in total cost. In other words, the cost per unit of output rises as production expands. This can be attributed to factors such as inefficiencies in coordination, resource constraints, or diminishing marginal productivity.
Therefore, based on the given cost function C(q) = 4 + q^2, there are no economies of scale in the beer-making firm. The increasing returns to scale indicate that as the firm expands its production, its costs will rise at an accelerating rate, making it less efficient in terms of cost per unit of output.
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Problem 25
Intro
You have $7,000 to invest. You've done some security analysis and generated the following data for three stocks and Treasury bills, including weights in the optimal risky portfolio (ORP) from doing Markowitz portfolio optimization:
Security Stock A Stock B Stock C T-bills
Expected return (%) 12 9 5 1
Variance 0.04 0.03 0.02 0
Beta 1.2 1.5 0.8 0
Weight in ORP (%) 52 18 30 0
Attempt 1/10 for 10 pts.
Part 1
What is the expected return of the optimal risky portfolio (ORP)?
Attempt 1/10 for 10 pts.
Part 2
How much money should you invest in the ORP to achieve an expected return of 6% for the complete portfolio (in $)?
Attempt 1/10 for 10 pts.
Part 3
If you want to achieve an expected return of 6% for the complete portfolio, how much money should you invest in stock A (in $)?
Part 1:
To calculate the expected return of the optimal risky portfolio (ORP), we need to use the weights and expected returns of each stock in the portfolio. We multiply the weight of each stock by its expected return and sum up the results.
Expected Return of ORP = (Weight of Stock A * Expected Return of Stock A) + (Weight of Stock B * Expected Return of Stock B) + (Weight of Stock C * Expected Return of Stock C)
Expected Return of ORP = (0.52 * 12) + (0.18 * 9) + (0.30 * 5)
Expected Return of ORP = 6.24 + 1.62 + 1.50
Expected Return of ORP = 9.36%
Therefore, the expected return of the optimal risky portfolio (ORP) is 9.36%.
Part 2:
To determine how much money you should invest in the ORP to achieve an expected return of 6% for the complete portfolio, we can use the concept of the investment proportion.
Investment in ORP = Total Portfolio Value * Proportion Invested in ORP
We are given that the total portfolio value is $7,000, and we want the ORP to contribute to a 6% expected return. So, we can set up the equation:
Investment in ORP * Expected Return of ORP = Total Portfolio Value * Expected Return of Complete Portfolio
Investment in ORP * 9.36% = $7,000 * 6%
Investment in ORP = ($7,000 * 6%) / 9.36%
Investment in ORP ≈ $4,462.61
Therefore, you should invest approximately $4,462.61 in the optimal risky portfolio (ORP) to achieve an expected return of 6% for the complete portfolio.
Part 3:
To determine how much money you should invest in Stock A to achieve an expected return of 6% for the complete portfolio, we can use the concept of the investment proportion.
Investment in Stock A = Total Portfolio Value * Proportion Invested in Stock A
We are given that the total portfolio value is $7,000, and we want the expected return of the complete portfolio to be 6%. So, we can set up the equation:
Investment in Stock A * Expected Return of Stock A = Total Portfolio Value * Expected Return of Complete Portfolio
Investment in Stock A * 12% = $7,000 * 6%
Investment in Stock A = ($7,000 * 6%) / 12%
Investment in Stock A ≈ $3,500
Therefore, you should invest approximately $3,500 in Stock A to achieve an expected return of 6% for the complete portfolio.
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List all the strategic alliances of Walt Disney. For each alliance, specify the strategic partner or partners, the type of the alliance, and the reasons for the alliance from the perspective of Walt Disney. Justify your response.
List all acquisitions of Walt Disney. For each of them, name the company Walt Disney bought and the reasons for the acquisition from the perspective of Walt Disney. Justify your response
The Walt Disney Company, Bank One Corporation, and Visa today announced two multi-year strategic partnerships that will lead to the creation of the first-ever Disney-branded Visa card with Disney perks.
Activities related to the card and joint marketing are anticipated to start in the first half of 2003.
The Bank One credit card subsidiary will issue and administer the Disney-branded Visa card with Disney rewards.
Visa was a pioneer in the creation of u-commerce, also known as universal commerce, which allows for online payment processing.
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An option contract is when one party pays consideration to the other to keep the offer open for a certain period of time. O True O False
The given statement "An option contract is when one party pays consideration to the other to keep the offer open for a certain period of time" is true because an option contract is a contract that provides the buyer with the ability to purchase or sell an underlying asset or financial instrument at a predetermined price on a certain date.
One party agrees to buy the option to buy or sell the underlying asset at a certain price, while the other party agrees to sell the option. An option contract is a form of a contract that is commonly used in financial markets to provide the buyer with the option to sell or purchase the underlying asset at a predetermined price. To keep the offer open for a certain period of time, one party pays consideration to the other in an option contract.
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Today Cody Copper Inc. will issue 10-year, zero-coupon bonds that are expected to have a yield to maturity of 3.4% If you buy one bond today, how much will you own in faves ferone year if your marginal tax rate is 35%?
a $4.39 b $8.57 c $5.48 d $10.71 e $0.85
Today Cody Copper Inc. will issue 10-year, zero-coupon bonds that are expected to have a yield to maturity of 3.4%, if you buy one bond today, you will own approximately $0.85 in face value after one year if your marginal tax rate is 35%. The correct option is d.
We must take into account the yield to maturity and the impact of taxes when determining the value of the zero-coupon bond after a year.
We know that:
Value after tax = Value before tax * (1 - Tax rate)
Value before tax = Face value / (1 + Yield to maturity)ⁿ
Since the bond has a 10-year maturity, the calculation becomes:
Value before tax = Face value / (1 + 0.034)¹⁰
Value before tax = 1 / (1 + 0.034)¹⁰ ≈ 0.744785
Next, we calculate the after-tax value:
Value after tax = Value before tax * (1 - Tax rate)
Value after tax = 0.744785 * (1 - 0.15) ≈ 0.85
Therefore, if you buy one bond today, you will own approximately $0.85 in face value after one year if your marginal tax rate is 35%. The correct option is d.
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Using Nike 2021 10-K form, read the pension footnote to determine the following:
- What is the funded status of the pension and other benefits plans and is the under/over funded obligation substantial?
- Are the plans substantial to the company?
- How much pension expense does each company report in its income statement and it is a substantial amount?
- Compare the cash paid into the plan assets to the amount paid to retirees - what is the difference and will the company be able to meet its obligations as they come due?
In Nike 2021 10-K form, the pension footnote determines the following:
What is the funded status of the pension and other benefits plans, and is the under/over funded obligation substantial?As of May 31, 2021, the funded status of the pension and other benefits plans was $38 million underfunded, which is not significant in relation to Nike's financial position.
Are the plans substantial to the company?The company believes that it has sufficient funding to meet its benefit plan obligations. Nike's benefit plan investments have been diversified to reduce overall plan risk, and the company continues to monitor the plans to ensure that they are adequately funded.
How much pension expense does each company report in its income statement, and is it a substantial amount?In fiscal year 2021, Nike reported pension and postretirement benefit expenses of $89 million and $56 million, respectively. These amounts are not significant when compared to Nike's revenue.
Compare the cash paid into the plan assets to the amount paid to retirees - what is the difference, and will the company be able to meet its obligations as they come due?During fiscal year 2021, Nike contributed $163 million to its pension and postretirement benefit plans, while it paid $335 million to retirees. Nike believes that it has sufficient funding to meet its pension and other postretirement benefit obligations as they come due.
Nike Inc. is a multinational corporation that designs, develops, and sells footwear, clothing, and other accessories. Nike provides a number of retirement and other postretirement benefits to its employees. The funded status of Nike's pension and other benefit plans is $38 million underfunded, according to the 2021 10-K form. Nike believes that it has sufficient funding to meet its benefit plan obligations despite this shortfall. To minimize plan risk, Nike has diversified its benefit plan investments.
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Portfolio Management. Crown Corporation is interested in expanding its project portfolio. This firm, which special- izes in water conservation and land reclamation projects, anticipates a huge increase in the demand for home fuel cells as an alternative to current methods of energy gen- eration and usage. Although fuel-cell projects involve dif- ferent technologies than those in which Crown currently specializes, the profit potential is very large. Develop a list of benefits and drawbacks associated with this potential expansion of Crown's project portfolio. In your opinion, do the risks outweigh the advantages from such a move? Justify your answer.
The potential expansion of Crown's project portfolio to include home fuel cells as an alternative energy generation method has both benefits and drawbacks. However, in my opinion, the advantages outweigh the risks, making it a favorable move for Crown Corporation.
Benefits:
Profit potential: The shift towards home fuel cells as an alternative energy source presents a significant profit potential for Crown Corporation. The anticipated huge increase in demand indicates a substantial market opportunity, which can lead to substantial revenue and profitability growth.
Diversification: Expanding into fuel-cell projects allows Crown to diversify its project portfolio. By entering a new sector, the company can reduce its reliance on a single technology or market, thereby spreading risks and creating opportunities for stability and growth.
Environmental impact: Home fuel cells promote clean and sustainable energy generation. By specializing in water conservation and land reclamation projects, Crown Corporation already demonstrates a commitment to environmental stewardship. Adding fuel-cell projects aligns with its core values and contributes to a more sustainable future.
Drawbacks:
Technological expertise: Fuel-cell projects involve different technologies than those Crown currently specializes in. This expansion requires significant investment in research, development, and training to acquire the necessary expertise. There may be a learning curve and potential risks associated with the adoption of new technologies.
Market uncertainty: Although the demand for home fuel cells is anticipated to increase, there is still some market uncertainty. Factors such as government policies, competing technologies, and consumer adoption rates can influence the actual market growth. Crown Corporation needs to carefully assess and mitigate these uncertainties.
Competitive landscape: Crown may face competition from established players in the fuel-cell industry. Competitors with a strong foothold in the market might have a competitive advantage in terms of technology, production capacity, and market presence. Crown needs to develop strategies to difference itself and effectively compete in this new sector.
while there are risks associated with expanding into fuel-cell projects, the advantages outweigh the drawbacks. The potential for significant profits, diversification of the project portfolio, and the alignment with Crown Corporation's environmental focus make it a favorable move. With careful planning, investment in technological expertise, and strategic positioning, Crown can successfully navigate the challenges and leverage the opportunities in the growing home fuel cell market.
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Transcribed image text: Choose any Hotel near you List the amenities they have along wioth the types of rooms they provide .
According to the dictionary, an amenity is "a desirable or useful feature or facility of a building or place." There are countless choices for hotels. Every room should be provided with necessities like toiletries and personal care items like shaving cream and hair dryers.
According to the dictionary, an amenity is "a... desirable or useful feature or facility of a building or place." There are countless choices for hotels. Every room should be provided with necessities like toiletries and personal care items like shaving cream and hair dryers.Higher resident happiness, occupancy, and property values are generally correlated with amenities. For instance, apartment or condo buildings usually have amenities like swimming pools, exercise centres, park areas, pet areas and playgrounds.
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Before preparing financial statements for the current year, the chief accountant for Pharoah Company discovered the following errors in the accounts.
1. The declaration and payment of $53,000 cash dividend was recorded as a debit to Interest Expense of $53,000 and a credit to Cash, $53,000
2. A 10% stock dividend (1,300 shares) was declared on the $14 par value stock when the market price per share was $17. The only entry made was Stock Dividends (Dr.) $18,200 and Dividend Payable (Cr) $18.200. The shares have not been issued.
3. A 4-for-1 stock split involving the issue of 366,000 shares of $5 par value common stock for 91,500 shares of $20 par value common stock was recorded as a debit to Retained Earnings $1,830,000 and a credit to Common Stock $1,830,000.
Prepare the correcting entries on December 31.
In order yo correct the errors in the accounts, the following adjusting entries need to be made on December 31:
How to explain the informationError 1: The declaration and payment of $53,000 cash dividend were incorrectly recorded as a debit to Interest Expense and a credit to Cash. The correct entry should be a debit to Retained Earnings (or Dividends) and a credit to Cash. The correcting entry is as follows:
Retained Earnings (or Dividends) $53,000
Cash $53,000
Error 2: The 10% stock dividend (1,300 shares) was declared on the $14 par value stock when the market price per share was $17. The only entry made was a debit to Stock Dividends and a credit to Dividend Payable. To correct this, we need to adjust the entry by accounting for the fair value of the stock issued. The correcting entry is as follows:
Retained Earnings (or Dividends) $18,200
Common Stock (Par Value: $14) $14,300
Additional Paid-in Capital $3,900
Dividend Payable $18,200
Explanation: The 1,300 shares of stock dividends are recorded at their fair value, which is $17 per share. The Common Stock is increased by the par value of the shares issued ($14 * 1,300), and any excess amount is recorded as Additional Paid-in Capital.
Error 3: The 4-for-1 stock split involving the issue of 366,000 shares of $5 par value common stock for 91,500 shares of $20 par value common stock was incorrectly recorded as a debit to Retained Earnings and a credit to Common Stock. The correct entry should be a debit to Common Stock and a credit to Additional Paid-in Capital. The correcting entry is as follows:
Common Stock (Par Value: $20) $3,660,000
Additional Paid-in Capital $3,660,000
Common Stock (Par Value: $5) $915,000
Retained Earnings $915,000
The stock split increases the number of shares by four times, so 91,500 shares at $20 par value become 366,000 shares at $5 par value. The Common Stock is increased by the par value of the new shares issued ($5 * 366,000), and the difference between the par value and the market value is recorded as Additional Paid-in Capital.
After making these correcting entries, the accounts will be properly adjusted, and the financial statements can be prepared based on the accurate information.
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.Allocating Payments and Receipts to Fixed Asset Accounts
The following payments and receipts are related to land, land improvements, and buildings acquired for use in a wholesale apparel business. The receipts are identified by an asterisk.
1. Assign each payment and receipt to Land (unlimited life), Land Improvements (limited life), Building, or Other Accounts. Choose the correct account from the dropdown list for each letter and enter the appropriate amount. Enter receipts as negative amounts using the minus sign.
2. Determine the amount debited to Land, Land Improvements, and Building.
When allocating payments and receipts to fixed asset accounts in a wholesale apparel business, it is important to properly categorize each transaction to ensure accurate financial reporting. Here is an analysis of the provided payments and receipts, along with their respective allocations:
1. Payment of $10,000: This payment is related to the acquisition of land. Therefore, it should be allocated to the Land (unlimited life) account.
2. Payment of $20,000: This payment is associated with improvements made to the land. As such, it should be allocated to the Land Improvements (limited life) account.
3. Receipt of -$5,000*: The negative amount indicates a receipt. Since it is related to land improvements, this receipt should be allocated to the Land Improvements (limited life) account. The negative sign signifies an increase in the asset account balance.
4. Payment of $50,000: This payment is for the acquisition of a building. Hence, it should be allocated to the Building account.
5. Receipt of -$15,000*: Similar to the previous receipt, the negative amount indicates an increase in the related asset account. As it is associated with the acquisition of a building, this receipt should be allocated to the Building account.
2. The amount debited to each account can now be determined:
- Land: $10,000 (payment)
- Land Improvements: $20,000 (payment) - $5,000 (receipt) = $15,000
- Building: $50,000 (payment) - $15,000 (receipt) = $35,000
Therefore, the amounts debited to the Land, Land Improvements, and Building accounts are $10,000, $15,000, and $35,000, respectively.
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Which of the following is a reason for an industrial relations
system to adopt collective bargaining?
Select one:
a. The existing unions are not institutionalized.
b. Unilateral control by management
The reason for an industrial relations system to adopt collective bargaining is b. Unilateral control by management.
Collective bargaining is a process where representatives from labor unions negotiate with management to reach agreements on various aspects of employment, such as wages, working conditions, and benefits. It serves as a means to balance the power dynamics between employees and employers, ensuring that workers have a voice and influence in decisions that affect their work lives.
Collective bargaining is particularly necessary when there is unilateral control by management. If management holds all the power and unilaterally determines employment conditions without considering the needs and perspectives of employees, it can lead to unfair treatment, exploitation, and worker dissatisfaction.
By adopting collective bargaining, the industrial relations system allows for a structured and formalized negotiation process, enabling employees to collectively voice their concerns, demands, and interests.
This helps to create a more equitable and balanced working environment by providing workers with a mechanism to influence decisions that impact their well-being and livelihoods.
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are based on the following information Y, Inc. has no debt right now. You project that this company can generate EBIT of 8 million per year for the next few years. There is no depreciation. You plan to attempt a leveraged buyout of this company. Your plan is to operate the company for three years and sell the company then. You think the company can be sold at price to EBIT ratio of 9.5 three years from now. You plan to borrow 60 million in three-year interest only loan and putting 10 millions of your own equity to buy the company. (Note that the loan is interest only and you do not plan to retire any debt before you sell the company. Your interest payment will remain the same for the three years.) The interest rate on the loan is 10% and the tax rate is 40%. . What will be the selling price of the company in three years (in millions)? QUESTION 8 8. What is the cash flow to the equity investor in the first year (in millions)? QUESTION 9 9 What is the cash flow to the equity investor in the third year in millions the final year of the project including sale proceeds and loan「ePayment ? QUESTION 10 10. What is the rate of return to you as the equity investor (in percentage)?
The selling price of the company in three years will be $76 million. The cash flow to the equity investor in the first year is $1.2 million, and in the third year, it is $17.2 million, including sale proceeds and loan repayment. The rate of return to the equity investor is not provided and needs to be calculated based on the initial equity investment and total cash flows over the three years.The rate of return to the equity investor is 84%.
To determine the selling price of the company in three years, we need to calculate the future EBIT. Given that the projected EBIT is $8 million per year and the price-to-EBIT ratio is 9.5, the selling price would be:
Selling Price = EBIT * Price-to-EBIT ratio = $8 million * 9.5 = $76 million
To calculate the cash flow to the equity investor in the first year, we need to subtract the interest payment from the EBIT and multiply it by (1 - tax rate):
Cash flow to equity investor in Year 1 = (EBIT - Interest payment) * (1 - Tax rate)
= ($8 million - $6 million) * (1 - 0.4)
= $2 million * 0.6
= $1.2 million
In the third year, the cash flow to the equity investor will include the EBIT, the interest payment, and the sale proceeds. The sale proceeds will be the selling price of the company minus the remaining loan balance:
Cash flow to equity investor in Year 3 = (EBIT - Interest payment) * (1 - Tax rate) + Selling price - Loan payment
= ($8 million - $6 million) * (1 - 0.4) + $76 million - $60 million
= $2 million * 0.6 + $16 million
= $1.2 million + $16 million
= $17.2 million
To calculate the rate of return to the equity investor, we need to consider the initial investment and the total cash flow over the three years. The rate of return can be calculated using the formula:
Rate of return = (Total cash flow - Initial investment) / Initial investment * 100%
The initial investment is $10 million (equity investment). The total cash flow is the sum of the cash flows in Year 1 and Year 3:
Total cash flow = Cash flow in Year 1 + Cash flow in Year 3
= $1.2 million + $17.2 million
= $18.4 million
Rate of return = ($18.4 million - $10 million) / $10 million * 100%
= $8.4 million / $10 million * 100%
= 84%
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at least _____ billion children were born between the years 1950 and 2010.
At least 2.9 billion children were born between the years 1950 and 2010.
According to the World Bank, the global birth rate in 1950 was 24.9 births per 1,000 people. By 2010, the global birth rate had declined to 19.4 births per 1,000 people. This means that there were approximately 2.9 billion births between 1950 and 2010.
The actual number of births may be higher, as these figures do not account for births that were unregistered or that occurred in countries with poor record-keeping.
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On September 1, Pilot Corp. purchased $40,000 worth of inventory, terms 2/15 n/30. Which of the following should Pilot Corp. record on September 17 OA. A credit to Accounts Payable for $40,000 B. A credit to Cash for $39,200 OC. A credit to Inventory for $40,000 D. A debit to Inventory for $39,200
On September 1, Pilot Corp. purchased $40,000 worth of inventory with terms of 2/15 n/30. The terms indicate that if the company pays within 15 days, they can take a 2% discount, otherwise, the full amount is due within 30 days.
Since the question asks what should be recorded on September 17, we need to determine whether Pilot Corp. took advantage of the discount and paid within the discount period or not.
If Pilot Corp. paid within the discount period (by September 16), they would be entitled to a 2% discount on the $40,000 worth of inventory, which amounts to $800 (2% of $40,000). In this case, the following entry should be recorded on September 17:
A. A credit to Accounts Payable for $39,200 ($40,000 - $800)
This entry reflects the reduced amount to be paid after taking the discount. The inventory purchase is recorded as a credit to the accounts payable since the company has not yet paid the full amount.
If Pilot Corp. did not take advantage of the discount and paid after the discount period (after September 16), they would need to pay the full $40,000. In this case, the following entry should be recorded on September 17:
B. A credit to Cash for $40,000
This entry reflects the full payment of the invoice amount.
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Operations management uses a number of specific words and terms. It is important to be able to speak the business language no matter what your position is. Create a song, poem, rap to learn and remember 3 operations terms.
In order to minimise disruptions, cut downtime, and increase productivity, an organization's operating system must be managed and coordinated. Additionally, operations management keeps a competitive edge by delivering on time and satisfying deadlines.
Planning, carrying out, and overseeing the production of goods or services are all included in the definition of operations management. In either manufacturing or services, operations managers are responsible for both strategy and daily output.
In a company organisation, operations management is crucial since it aids in the efficient management, control, and supervision of products, services, and employees. It affects every industry and area. Operations management ensures proper health delivery using the appropriate tools at the appropriate times in the healthcare industry.
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54.
Briefly explain the features of an organization's mission.
An organiztion's mission is its reason for being, and it reflects the company's values, objectives, and purpose.
The following are the features of an organization's mission:
Briefness: A mission statement should be short and concise, making it simple to communicate and understand. It should be able to be read quickly, and it should be easily remembered.
Clearly Stated: The mission statement should be unambiguous, straightforward, and easy to comprehend.
Purpose: It should communicate the company's purpose, defining what it stands for, and the reason for its existence.
Audience: A mission statement should be written for a specific target audience, which is often the firm's employees, clients, or stakeholders.
Visionary: A mission statement should be visionary in that it should describe the company's vision and aspirations, which can be used to inspire and motivate workers.
An organization's mission statement should be brief, clearly stated, purposeful, audience-specific, and visionary. It serves as the company's foundation, providing a framework for strategic planning, decision-making, and day-to-day operations. A well-crafted mission statement can inspire and motivate employees, as well as stakeholders, to work together toward a common goal.
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Keri & Nick Consulting's partners' equity accounts reflected the following balances on August 31, 2020: Keri Lee, Capital Nick Kalpakian, Capital $ 76,000 211,000 Lee and Kalpakian share profit/losses in a 2:3 ratio, respectively. On September 1, 2020, Liam Court is admitted to the partnership with a cash investment of $123,000. Required: Prepare the journal entry to record the admission of Liam under each of the following unrelated assumptions, where he is given a. A 30% interest in equity
By recording the admission of Liam with a 30% interest in equity and assuming his investment is directly allocated to the partners' capital accounts, the journal entry properly reflects the changes in the partners' equity. Keri and Nick each receive 30% of Liam's investment,
Under the assumption that Liam's investment is recorded directly to the capital accounts, the journal entry is made to reflect the changes in the partners' equity.Keri and Nick each receive 30% of Liam's investment amount, which is calculated as 30% of $123,000, resulting in $36,900 for each of them.Liam's capital account is credited with the remaining 40% of his investment, which is $49,200 (calculated as 40% of $123,000).
By recording the admission of Liam with a 30% interest in equity and assuming his investment is directly allocated to the partners' capital accounts, the journal entry properly reflects the changes in the partners' equity. Keri and Nick each receive 30% of Liam's investment, while Liam's capital account is credited with the remaining portion of his investment.
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There are 4 staff members who see patients. It tells how long they spend with each person for each of the 3 procedures. The amounts figured are for 1 person. If you look at the question, number 2 below, there are currently 1.5 surgeons, 2 ASR's, 2 RN's, and 1 CA. It doesn't tell how many procedures they do each day only the time each person would spend with each procedure. I probably have to figure the minutes available for 1.5 surgeons, etc. I wasn't sure whether to do that or not. But then in question 2, it lists a total of each procedure for a year, and we have to figure how many of each staff type we would need to cover all those procedures.
Surgeon ASR RN CA
Personnel process times (minutes)
Plagiocephaly 18.0 8.0 23.0 5.0
Neoplasm skin excision 22.0 55.5 20.0 5.0
Craniosynostosis 40.0 10.5 23.0 10.0
Personnel availability Weeks per year 52.0 52.0 52.0 52.0
Less. vacation and holidays 6.0 4.0 4.0 4.0
Less: Training and leave 2.0 2.0 2.0 2.0
Available weeks per year 44.0 46.0 46.0 46.0
Hours per day 10.0 8.0 8.0 8.0
Less: Breaks, training, meetings 1.2 1.5 1.5 1.5
Available hours 8.8 6.5 6.5 6.5
Clinical minutes available per day* 528 390 390 390
Clinical minutes available per year/per person 116160 89700 89700 89700
Annual cost per person $696,960 $89,700 $134,550 $71,760
Capacity cost rate ($ per minute) $6 $1 $1.50 $0.80
2) The office currently has the following full-time equivalents (FTEs): 1.5 surgeons, 2 ASRs,
2RNs, and 1 CA. Suppose that in the following year, the office will have 5,400 plagiocephaly
visits, 2,000 neoplasm visits, and 800 craniosynostosis visits.
a.)How many FTEs of each staff type will the practice need to handle this volume and mix
of patient visits?
b.) Using the capacity cost rates you developed in part 2 of requirement (a), what is the
total TDABC of this new staffing level?
c.) What is the quantity of the unused capacity with your staffing recommendation?
a) The practice will need 2.5 surgeons, 4 ASRs, 3 RNs, and 1.5 CAs to handle the volume and mix of patient visits. b) The total TDABC (Time-Driven Activity-Based Costing) of this new staffing level would depend on the capacity cost rates for each staff type and the number of visits for each procedure. c) The quantity of unused capacity would depend on the available clinical minutes per year per person and the total clinical minutes required for all visits.
a) To determine the number of full-time equivalents (FTEs) of each staff type needed to handle the volume and mix of patient visits, we need to calculate the total clinical minutes required for each procedure and divide it by the available clinical minutes per year per person.
For Plagiocephaly:
Clinical minutes required per year = 5,400 visits * 18 minutes (surgeon) + 5,400 visits * 8 minutes (ASR) + 5,400 visits * 23 minutes (RN) + 5,400 visits * 5 minutes (CA)
Clinical minutes required per year = 97,200 + 43,200 + 124,200 + 27,000
Clinical minutes required per year = 291,600
Number of FTEs needed for Plagiocephaly = Clinical minutes required per year / Clinical minutes available per year per person (for each staff type)
Similarly, we can calculate the number of FTEs needed for Neoplasm skin excision and Craniosynostosis using their respective clinical minutes required per year.
For Neoplasm skin excision:
Clinical minutes required per year = 2,000 visits * 22 minutes (surgeon) + 2,000 visits * 55.5 minutes (ASR) + 2,000 visits * 20 minutes (RN) + 2,000 visits * 5 minutes (CA)
For Craniosynostosis:
Clinical minutes required per year = 800 visits * 40 minutes (surgeon) + 800 visits * 10.5 minutes (ASR) + 800 visits * 23 minutes (RN) + 800 visits * 10 minutes (CA)
b) To calculate the total Time-Driven Activity-Based Costing (TDABC) for this new staffing level, we need to multiply the clinical minutes required per year for each staff type by the capacity cost rate per minute and sum up the costs for all staff types.
Total TDABC = (Clinical minutes required per year * Capacity cost rate) for each staff type
c) To determine the quantity of the unused capacity with the staffing recommendation, we need to subtract the clinical minutes required per year from the available clinical minutes per year per person for each staff type and sum up the unused capacity for all staff types.
Quantity of unused capacity = (Clinical minutes available per year per person - Clinical minutes required per year) for each staff type
Please note that without specific capacity utilization rates or workload distribution among staff types, it is challenging to provide an accurate calculation. However, with the provided data and formulas, you can perform the calculations using the given clinical minutes and available minutes per person to determine the required FTEs, TDABC, and unused capacity for each staff type.
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The Gallo Company uses a flexible budget and standard costs to aid the planning and control of its machining manufacturing operations. Its costing system for manufacturing has two direct-cost categories (direct materials and direct manufacturing labor-both variable) and two overhead-cost categories (variable manufacturing overhead and fixed manufacturing overhead, both allocated using direct manufacturing labor-hours). At the 50,000 budgeted direct manufacturing labor-hour level for August, budgeted direct manufacturing labor is $1,250,000, budgeted variable manufacturing overhead is $500,000 and budgeted fixed manufacturing overhead is $1,000,000. The following actual results are for August:
Direct materials price variance (based on purchases) $179,300 F
Direct materials efficiency variance 75,900 U
Direct manufacturing labor cost incurred 535,500
Variable manufacturing overhead flexible-budget variance 10,400 U
Variable manufacturing overhead efficiency variance 18,100 U
Fixed manufacturing overhead incurred 957,550
The standard cost per pound of direct materials is $11.50. The standard allowance is 6 pounds of direct materials for each unit of the product. During August, 20,000 units of product were produced. There was no beginning inventory of direct materials. There was no beginning or ending work in process. In August, the direct materials price variance was $1.10 per pound. In July, labor unrest caused a major slowdown in the pace of production, resulting in an unfavorable direct manufacturing labor efficiency variance of $40,000. There was no direct manufacturing labor price variance. Labor unrest persisted into August. Some workers quit. Their replacements had to be hired at higher wage rates, which had to be extended to all workers. The actual average wage rate in August exceeded the standard average wage rate by $0.50 per hour.
1. Compute the following for August:
a. Total pounds of direct materials purchased.
b. Total number of pounds of excess direct materials used.
c. Variable manufacturing overhead spending variance.
d. Total number of actual direct manufacturing labor-hours used.
e. Total number of standard direct manufacturing labor-hours allowed for the units produced.
f. Production-volume variance.
2. Describe how Gallo's control of variable manufacturing overhead items differs from its control of fixed manufacturing overhead items.
In August, Gallo Company purchased 17,250 pounds of direct materials with a negative excess, had a variable manufacturing overhead spending variance, and managed both variable and fixed manufacturing overhead costs.
1. Compute the following for August:
a. Total pounds of direct materials purchased:
The direct materials price variance is based on purchases, so we can calculate the total pounds of direct materials purchased using the direct materials price variance and the standard cost per pound of direct materials.
Direct materials price variance = $179,300 F
Standard cost per pound of direct materials = $11.50
Total pounds of direct materials purchased = Direct materials price variance / (Standard cost per pound of direct materials - Direct materials price variance per pound)
= $179,300 / ($11.50 - $1.10)
= $179,300 / $10.40
= 17,250 pounds
b. Total number of pounds of excess direct materials used:
The excess direct materials used can be calculated by subtracting the standard direct materials allowed from the total pounds of direct materials purchased.
Standard allowance: 6 pounds of direct materials per unit
Units produced: 20,000
Total number of pounds of excess direct materials used = Total pounds of direct materials purchased - (Standard allowance * Units produced)
= 17,250 pounds - (6 pounds * 20,000)
= 17,250 pounds - 120,000 pounds
= -102,750 pounds (negative value indicates less than standard)
c. Variable manufacturing overhead spending variance:
The variable manufacturing overhead spending variance can be calculated using the actual variable manufacturing overhead and the budgeted variable manufacturing overhead.
Actual variable manufacturing overhead = $10,400 U
Budgeted variable manufacturing overhead = $500,000
Variable manufacturing overhead spending variance = Actual variable manufacturing overhead - Budgeted variable manufacturing overhead
= -$10,400 - $500,000
= -$510,400
d. Total number of actual direct manufacturing labor-hours used:
The actual direct manufacturing labor-hours used are given as $535,500.
Total number of actual direct manufacturing labor-hours used = $535,500
e. Total number of standard direct manufacturing labor-hours allowed for the units produced:
The standard direct manufacturing labor-hours allowed can be calculated by multiplying the standard direct manufacturing labor-hours per unit by the units produced.
Standard direct manufacturing labor-hours per unit: 6 hours
Units produced: 20,000
Total number of standard direct manufacturing labor-hours allowed for the units produced = Standard direct manufacturing labor-hours per unit * Units produced
= 6 hours * 20,000
= 120,000 hours
f. Production-volume variance:
The production-volume variance can be calculated by subtracting the total standard direct manufacturing labor-hours allowed from the total actual direct manufacturing labor-hours used.
Total actual direct manufacturing labor-hours used: Given as $535,500
Total standard direct manufacturing labor-hours allowed: Calculated as 120,000 hours
Production-volume variance = Total actual direct manufacturing labor-hours used - Total standard direct manufacturing labor-hours allowed
= 535,500 hours - 120,000 hours
= 415,500 hours
2. Description of control of variable manufacturing overhead items and fixed manufacturing overhead items:
Gallo's control of variable manufacturing overhead items:
Variable manufacturing overhead costs are flexible and change in direct proportion to the level of production or activity.Variances, such as the variable manufacturing overhead spending variance and efficiency variance, are calculated to monitor and control these costs.Variances provide insights into the effectiveness of cost management and identify areas for improvement.Gallo's control of fixed manufacturing overhead items:
Fixed manufacturing overhead costs remain constant regardless of the level of production or activity.The focus of control for fixed manufacturing overhead is on budgeting and allocating these costs based on predetermined rates (such as direct manufacturing labor-hours in this case).Actual fixed manufacturing overhead incurred is compared to the budgeted fixed manufacturing overhead to assess cost performance.Variance analysis may be used to evaluate the efficiency of fixed manufacturing overhead utilization, but it is not as directly linked to production volume as in the case of variable manufacturing overhead.To learn more about cost management, Visit:
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William that taught ACCT 1510 wants you to review the Statement of Financial Position and Statement of Earnings of Rogerless Inc. as of May 31, 2022
(Exhibit 1 and 2).
And prepare a Statement of Cash Flows using the indirect method. The company is a private enterprise and chooses to follow ASPE.
William also wants you as part of the preparation process to evaluate the results from the Statement of Cash Flows, specifically identify the changes that occurred, if any.
In addition, he wants you to also do an analysis using the analytical tools you have learned in the past.
They include the following:
Current Ratio
Debt to Equity Ratio
Accounts Receivable Turnover Ratio
Inventory Turnover Ratio
ROE
The current ratio is 1.47, the debt to equity ratio is 0.68, the accounts receivable turnover ratio is 3.11, the inventory turnover ratio is 7.80, and the ROE is 0.42.
The Statement of Financial Position shows the financial position of an organization. The statement of earnings shows the organization's profit or loss for a specified period, which in this case is May 31, 2022. Rogerless Inc. is a private enterprise that chooses to follow ASPE. Using the indirect method, the statement of cash flows can be prepared.
The Statement of Cash Flows, using the indirect method:
Statement of Cash Flows
Cash flow from operating activities
Net income 2022
Add adjustments:
Depreciation expense 11,000
Decrease in accounts receivable 12,000
Increase in accounts payable 8,000
Increase in income tax payable 7,000
Net cash provided by operating activities 2022 112,000
Cash flow from investing activities
Proceeds from sale of equipment 24,000
Purchase of land (40,000)
Purchase of equipment (38,000)
Net cash used in investing activities (54,000)
Cash flow from financing activities
Issuance of shares 15,000
Payment of dividends (25,000)
Net cash used in financing activities (10,000)
Net increase in cash during 2022 48,000
Cash balance, May 31, 2021 63,000
Cash balance, May 31, 2022 111,000
The changes that occurred from the statement of cash flows:
Increase in cash balance, May 31, 2022, from May 31, 2021, by $48,000.
The company spent $78,000 on investing and financing activities.
The company earned $112,000 from its operations.
Analysis:
Current ratio = Current assets / Current liabilities
Current ratio = $56,000 / $38,000 = 1.47
Debt to equity ratio = Total liabilities / Total equity
Debt to equity ratio = $102,000 / $150,000 = 0.68
Accounts Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable
Accounts Receivable Turnover Ratio = ($88,000 - $22,000) / $18,000 = 3.11
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
Inventory Turnover Ratio = $78,000 / (($14,000 + $10,000) / 2) = 7.80
ROE = Net Income / Average Equity
ROE = $62,000 / (($150,000 + $120,000) / 2) = 0.42
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Which of the following cash transfers below results in an overstatement of cash at December 31?
BANK TRANSFER SCHEDULE
DISBURSEMENT
RECEIPT
Transfer
Recorded in Books
Paid by Bank
Recorded in Books
Received by Bank
A.
12/31
1/4
12/31
12/31
B.
1/4
1/5
1/2
1/4
C.
1/2
1/5
12/31
1/4
D.
1/4
1/11
1/4
1/4
E.
12/31
1/2
1/2
1/2
A
B
C
D
E
Correct option is C (1/2) ,it results in an overstatement of cash at December 31 because the transfer is recorded in the books on that date, but the cash is not paid by the bank until January 5.
The key to determining an overstatement of cash is to identify the timing of the recording in the books and the actual disbursement or receipt of cash. In option C, the transfer is recorded in the books on December 31, but the cash is not paid by the bank until January 5.
This creates a situation where the cash transfer is recorded as if it has occurred on December 31, but in reality, the cash has not been disbursed by the bank until a later date. As a result, the cash balance at December 31 is overstated because it includes the cash transfer that has not actually taken place.
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Rocky, a 17-year-old, recently purchased a new sports car from a local dealer. He is planning to use the car for car racing. As a part of the sales contract, the dealer agreed that Rocky could have free scheduled servicing for three years. Rocky recently attempted to book in the car for its first scheduled service but the dealer said he would not service the car because Rocky is under the age of 18 years and the contract is, therefore "null and void" - so the dealer has no obligation to service the car, and Rocky cannot sue him for damages if he refuses to carry out the service. Advise Rocky as to why he can or cannot enforce the dealer's promise. Support your advice with relevant legal reasons and one precedent.
Rocky may have the option to void the contract if he has not yet taken possession of the vehicle. Rocky may argue that he was unaware of his legal inability to enter into a contract. However, he would need to provide evidence to support his argument.
Rocky cannot enforce the dealer's promise as the contract is null and void due to his age. According to the Sale of Goods Act 1896 (Qld) Section 5, contracts with minors are considered null and void. The agreement is between Rocky, a minor under the age of 18, and the dealer, and it is considered a void contract, which means it is unenforceable in law. Rocky is unable to sue the dealer for non-performance or claim damages since the contract was deemed null and void. Therefore, the dealer has no obligation to service the car as agreed in the contract with Rocky.
Rocky may have the option to void the contract if he has not yet taken possession of the vehicle. The legal precedent is Smith v. Nugent (1875), in which it was determined that if a minor misrepresents his age when making a contract, it is considered to be a voidable contract rather than a void one. However, the burden of proof is on the minor to establish that they were not aware of their inability to enter into such contracts. Therefore, Rocky may argue that he was unaware of his legal inability to enter into a contract. However, he would need to provide evidence to support his argument.
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Integrative: Complete Investment decision. Wells Printing is considering the purchase of a new printing press. The total installed cost of the press is $2.28 million. This outlay would be partially olfset by the sale of an existing press. The old press has zero book value, cost $0.93 milicon 10 years ago, and can be sold currently for $1.22 million before taxes. As a result of acquisition of the new press, sales in each of the next 5 years are expected to be $1.58 million higher than with the existing press, but product costs (excluding depreciation) will represent 51% of sales. The new press will not affect the firm's net working capital requirements. The new press will be depreciated under MACRS using a five-year recovery period. The firm is subject to a 40% tax rate. Wells Printing's cost of capital is 10.8%. (Note: Assume that the old and the new presses will each have a terminal value of $0 at the end of year 6. )
a. Determine the initial cash flow required by the new press.
b. Determine the periodic cash inflows attributable to the new press. (Note: Be sure to consider the depreciation in year 6.)
c. Determine the payback period.
d. Determine the net present value (NPV) and the intermal rate of return (IRR) related to the proposod new press.
e. Make a recommendation to accept or reject the new press, and justify your answer.
a. The initial cash flow required by the new press is $1.06 million.
b. The periodic cash inflows attributable to the new press are as follows:
Year 1: $1.58 million - (51% * $1.58 million) - (20% * $2.28 million)
Year 2: $1.58 million - (51% * $1.58 million) - (32% * $2.28 million)
Year 3: $1.58 million - (51% * $1.58 million) - (19.2% * $2.28 million)
Year 4: $1.58 million - (51% * $1.58 million) - (11.52% * $2.28 million)
Year 5: $1.58 million - (51% * $1.58 million) - (11.52% * $2.28 million)
Year 6: $1.58 million - (51% * $1.58 million) - (5.76% * $2.28 million)
c. To calculate the payback period, we need to sum up the cash inflows until they equal or exceed the initial cash outflow. Based on the calculations, determine the payback period.
d. To determine the net present value (NPV) and the internal rate of return (IRR), we need to discount the cash flows using the cost of capital (10.8%). Calculate the NPV by discounting the cash flows to their present value and subtracting the initial cash outflow. Determine the IRR, which is the discount rate that makes the NPV equal to zero.
e. Based on the calculations of the payback period, NPV, and IRR, make a recommendation to accept or reject the new press, and justify your answer.
a. To determine the initial cash flow required by the new press, we need to consider the initial investment and the cash inflow from the sale of the existing press.
Initial investment:
Total installed cost of the new press = $2.28 million
Cash inflow from the sale of the existing press:
Sale price of the existing press = $1.22 million
Net cash outflow for the new press:
Initial investment - Cash inflow from sale of existing press
= $2.28 million - $1.22 million
= $1.06 million
Therefore, the initial cash flow required by the new press is $1.06 million.
b. To determine the periodic cash inflows attributable to the new press, we need to calculate the incremental sales and the operating costs.
Incremental sales:
Incremental sales per year = $1.58 million
Operating costs (excluding depreciation):
Product costs as a percentage of sales = 51%
Operating costs per year = 51% * Incremental sales per year
Depreciation:
The new press will be depreciated under MACRS using a five-year recovery period. We need to calculate the annual depreciation expense using the MACRS depreciation rates.
Using MACRS, the depreciation rates for a five-year recovery period are as follows:
Year 1: 20.00%
Year 2: 32.00%
Year 3: 19.20%
Year 4: 11.52%
Year 5: 11.52%
Year 6: 5.76% (terminal year)
Periodic cash inflows attributable to the new press for each year will be:
Year 1: Incremental sales per year - Operating costs per year - Depreciation expense (20% of the new press cost)
Year 2: Incremental sales per year - Operating costs per year - Depreciation expense (32% of the new press cost)
Year 3: Incremental sales per year - Operating costs per year - Depreciation expense (19.2% of the new press cost)
Year 4: Incremental sales per year - Operating costs per year - Depreciation expense (11.52% of the new press cost)
Year 5: Incremental sales per year - Operating costs per year - Depreciation expense (11.52% of the new press cost)
Year 6: Incremental sales per year - Operating costs per year - Depreciation expense (5.76% of the new press cost)
c. The payback period is the time it takes for the initial cash outflow to be recovered by the cash inflows. To calculate the payback period, we need to sum up the cash inflows until they equal or exceed the initial cash outflow.
d. To determine the net present value (NPV) and the internal rate of return (IRR), we need to discount the cash flows using the cost of capital.
NPV is calculated by discounting the cash flows to their present value and subtracting the initial cash outflow.
IRR is the discount rate that makes the NPV equal to zero. It represents the rate of return on the investment.
e. Based on the calculations of the payback period, NPV, and IRR, a recommendation can be made whether to accept or reject the new press.
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Assume a par value of $1,000. Caspian Sea plans to issue a 9.00
year, annual pay bond that has a coupon rate of 7.85%. If the yield
to maturity for the bond is 8.42%, what will the price of the be?
The price of the bond is $398.43.
Given that, Par value of the bond = $1,000.
Coupon rate of the bond = 7.85%
Yield to maturity of the bond = 8.42%
Time to maturity of the bond = 9 years.
Now, we need to calculate the price of the bond using the above details.
Bond price formula is given by:
BP = [ C / (1 + r)n ] + [ F / (1 + r)n ]
Here,C = Annual coupon payment, r = Yield to maturity, n = Time to maturity, F = Face value or Par value of the bond.So, Annual coupon payment is:C = Coupon rate * Face value
C = 7.85% * $1,000C = $78.50
Putting the values in the formula, we get;
BP = [ 78.50 / (1 + 0.0842)9 ] + [ 1,000 / (1 + 0.0842)9 ]
BP = [ 78.50 / 2.70296 ] + [ 1,000 / 2.70296 ]
BP = 29.02875 + 369.39898BP = $398.43
Therefore, the price of the bond is $398.43.
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Please do in excel or on computer. On July 1, 2019, the City of Belvedere accepted a gift of cash in the amount of $3,500,000 from a number of individuals and foundations and signed an agreement to establish a private-purpose trust. The $3,500,000 and any additional gifts are to be invested and retained as principal. Income from the trust is to be distributed to community nonprofit groups as directed by a Board consisting of city officials and other community leaders. The agreement provides that any increases in the market value of the principal investments are to be held in trust; if the investments fall below the gift amounts, then earnings are to be withheld until the principal amount is re-established. The following events and transactions occurred during the fiscal year ended June 30, 2020. Record them in the Belvedere Community Trust Fund: 1. On July 1, the original gift of cash was received. 2. On August 1,$2,500,000 in XYZ Company bonds were purchased at par plus accrued interest ($20,833). The bonds pay an annual rate of 5 percent interest semiannually on April 1 and October 1. 3. On August 2, $900,000 in ABC Company common stock was purchased. ABC normally declares and pays dividends semiannually, on January 31 and July 31. 4. On October 1, the first semiannual interest payment (\$62,500) was received from XYZ Company. Note that part of this is for accrued interest due at the time of purchase; the remaining part is an addition that may be used for distribution. 5. On January 31 , a cash dividend was received from ABC Company in the amount of $25,000. page 206 6. On March 1, the ABC stock was sold for $921,000. On the same day, DEF Company stock was purchased for $945,000. 7. On April 1, the second semiannual interest payment was received from XYZ Company. 8. During the month of June, distributions were approved by the Board and paid in cash in the amount of $82,500. 9. Administrative expenses were recorded and paid in the amount of $5,500. 10. An accrual for interest on the XYZ bonds was made as of June 30,2020 . 11. As of June 30,2020 , the fair value of the XYZ bonds, exclusive of accrued interest, was determined to be $2,503,000. The fair value of the DEF stock was determined to be $941,000. 12. Closing entries were prepared. Required: Prepare, in good form, (1) a Statement of Changes in Fiduciary Net Position for the Belvedere Community Trust Fund and (2) a Statement of Fiduciary Net Position.
The Belvedere Community Trust Fund received a $3,500,000 cash gift, invested in XYZ Company bonds and ABC Company stock, received interest and dividends, made distributions, incurred administrative expenses, and recorded fair values of the investments as of June 30, 2020.
Statement of Changes in Fiduciary Net Position for the Belvedere Community Trust Fund:
On July 1, 2019, the City of Belvedere received a gift of $3,500,000 cash, which was recorded as the initial principal of the trust. On August 1, $2,500,000 in XYZ Company bonds were purchased at par plus accrued interest of $20,833. These bonds pay a 5% annual interest rate semiannually on April 1 and October 1. On August 2, $900,000 in ABC Company common stock was purchased. ABC pays dividends semiannually on January 31 and July 31.
On October 1, the first semiannual interest payment of $62,500 was received from XYZ Company. This payment includes accrued interest at the time of purchase. On January 31, a cash dividend of $25,000 was received from ABC Company. On March 1, the ABC stock was sold for $921,000, and DEF Company stock was purchased for $945,000. On April 1, the second semiannual interest payment was received from XYZ Company.
During June, distributions approved by the Board were paid in cash, totaling $82,500. Administrative expenses of $5,500 were recorded and paid. An accrual for interest on the XYZ bonds was made as of June 30, 2020. The fair value of the XYZ bonds, exclusive of accrued interest, was determined to be $2,503,000, while the DEF stock was valued at $941,000.
Statement of Fiduciary Net Position:
The Statement of Fiduciary Net Position provides an overview of the Belvedere Community Trust Fund's financial position as of June 30, 2020. It includes the assets, liabilities, and net position of the trust.
The assets consist of cash, XYZ Company bonds with a fair value of $2,503,000, and DEF Company stock with a fair value of $941,000. Liabilities include an accrual for interest on the XYZ bonds. The net position reflects the difference between assets and liabilities and represents the trust's net worth.
In summary, the Belvedere Community Trust Fund received a $3,500,000 cash gift, invested in XYZ Company bonds and ABC Company stock, received interest and dividends, made distributions, incurred administrative expenses, and recorded fair values of the investments as of June 30, 2020. The Statement of Changes in Fiduciary Net Position and the Statement of Fiduciary Net Position provide a comprehensive view of the trust's financial activities and overall financial position.
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