Austin's projected net income for 2022 is $2.5 million and The expected growth rate in Austin's dividends is 79.17%.
a. The computation for Austin's projected 2022 net income is computed below:
Sales Revenue (2021) = $10,000,000Projected Sales Revenue (2022) = 20% increase in sales revenue= $10,000,000 × 1.20= $12,000,000Year-end operating cost, including depreciation = 75% of sales= $12,000,000 × 0.75= $9,000,000Interest expense (constant) = $500,000Tax rate (constant) = 40%Dividend payout ratio (constant) = 50%Calculation of the net income:
Net Income = [ Sales Revenue - Operating Expenses - Interest expense ] × (1 - Tax Rate) - Dividend PayoutNet Income Net Income = [ $12,000,000 - $9,000,000 - $500,000 ] × (1 - 0.40) - ($12,000,000 × 0.50)Net Income = $2,500,000.Therefore, Austin's projected 2022 net income is $2.5 million.
b. The computation for the expected growth rate in Austin's dividends is computed below:
Dividends = $12,000,000 × 0.50= $6,000,000
Projected Dividend = Dividend payout ratio × Projected Net Income
Projected Dividend = 50% × $2,500,000= $1,250,000
Expected growth rate in dividends = [(Projected Dividend / Dividend) - 1] × 100%= [($1,250,000 / $6,000,000) - 1] × 100%= 79.17% (rounded to two decimal places)
Therefore, the expected growth rate in Austin's dividends is 79.17%.
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Find the balance on current account using the following information: • U.S. merchandise exports were $60 billion • U.S. merchandise imports were $70 billion • U.S. service exports were $50 billion U.S. service imports were $48 billion • U.S. residents paid out $60 billion to foreigners as factor income • U.S. residents received $78 billion from foreigners as factor income • U.S. received grant from foreign country: $28 billion U.S. gave foreign aid to another country: $23 billion
a) debits $15 billion
b) debits $10 billion
c) credits $15 billion
d) credits $10 billion
The current Account is a measurement of a country's international trade, where the current account balance is the difference between the value of imports and exports of physical goods and services plus income from foreign investments and minus income paid to foreign investors. Correct answer is option a.
We must take into account the following factors in order to determine the current account balance:
(Merchandise Exports + Service Exports + Factor Income Receipts + Grants) - (Merchandise Imports + Service Imports + Factor Income Payments + Foreign Aid) is the formula for calculating the current account balance.
Given the data presented:
Exports of goods total $60 billion.
Imports of goods total $70 billion.
$50 billion in service exports
$48 billion in service imports
Receipts from Factor Income = $78 billion
Payments for Factor Income = $60 billion
$28 billion in grants
23 billion in foreign aid
Adding these values to the formula will produce:
($60 billion + $50 billion + $78 billion + $28 billion) - ($70 billion + $48 billion + $60 billion + $23 billion) is the current account balance.
$216 billion minus $201 billion in the current account balance.
Balance of Current Account: $15 billion
As a result, the current account balance is a) debits $15 billion.
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Discuss the role of the following strategists in strategy - making
a) The chief executive officer
b) The top management team
c) Non-executive directors
The making of strategy is one of the 1,chief executive officer's primary duties. The CEO has the authority to set the organization's direction and decide how to deploy resources to achieve the strategy.
The CEO is in charge of ensuring that the firm's mission, vision, and objectives are defined and that the strategic plan is consistent with these. The CEO may delegate the responsibility of generating proposals to the top management team, but they must ensure that the final strategy is in line with the organization's overall objectives.
The top management team's role in strategy-making is to develop plans that are consistent with the organization's mission, vision, and objectives. The team is responsible for identifying the organization's strengths and weaknesses, as well as opportunities and threats. They may then use this knowledge to create plans for resource allocation and identify initiatives that will help the organization achieve its goals.
Non-executive directors play an important role in strategy-making by bringing an external perspective to the organization. They can provide valuable feedback on strategic proposals and challenge the assumptions made by the top management team. Non-executive directors also play a critical role in ensuring that the organization's strategy is consistent with its values and ethics.
Therefore, all of these strategists play an important role in strategy-making. The CEO is responsible for setting the direction of the organization, the top management team is responsible for developing plans consistent with the organization's objectives, and non-executive directors provide an external perspective on the strategy. The collaboration of all these strategists can create a better strategic plan.
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Luther Corporation
Consolidated Income Statement
Year ended December 31 (in $millions)
2006
2005
Total sales
610.1
565.5565.5
Cost of sales
(500.2)
(360.6360.6)
Gross profit
109.9
204.9204.9
Selling, general, and
administrative expenses
(40.5)
(39.539.5)
Research and development
(24.6)
(20.420.4)
Depreciation and amortization
(3.6)
(3.13.1)
Operating income
41.2
141.9141.9
Other income
minus−minus−
minus−minus−
Earnings before interest and taxes (EBIT)
41.2
141.9141.9
Interest income (expense)
(25.1)
(15.615.6)
Pretax income
16.1
126.3126.3
Taxes
(5.5)
(44.20544.205)
Net income
10.6
82.09582.095
Price per share
$16
$15
Sharing outstanding (millions)
10.2
8.0
Stock options outstanding (millions)
0.3
0.2
Stockholders' Equity
126.6
63.6
Total Liabilities and Stockholders' Equity
533.1
386.7
Refer to the income statement above. Luther's return on equity (ROE) for the year ending December 31, 2005 is closestto:I had to break the problem up...
The return on equity (ROE) for Luther Corporation for the year ending December 31, 2005, is approximately 86.1%.
This means that for every dollar of average stockholders' equity, Luther generated a return of 86.1 cents. ROE is a measure of profitability and efficiency, indicating how effectively a company is utilizing shareholder investments to generate profits. In this case, Luther Corporation's ROE suggests that the company had a strong performance in 2005, generating significant earnings relative to the equity invested by shareholders. It indicates that Luther's management was successful in generating profits and creating value for its shareholders during that period.
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Match the equation on the left to the proper metric on the right. (Sales Revenue - Cost of Good Sold) / Total Revenue (\# of store visitors / # of pedestrians) ×100 [(Sales year 2 - sales year 1) / sales year 1]x 100 (Gross Sales / # of Transactions)
- (Sales Revenue - Cost of Good Sold) / Total Revenue matches the metric Gross Profit Margin.
- (# of store visitors / # of pedestrians) × 100 matches the metric Conversion Rate.
- (Sales year 2 - sales year 1) / sales year 1 × 100 matches the metric Sales Growth Rate.
- (Gross Sales / # of Transactions) matches the metric Average Transaction Value.
The equation (Sales Revenue - Cost of Good Sold) / Total Revenue calculates the Gross Profit Margin, which represents the profitability of each dollar of sales after accounting for the cost of producing goods. It is a crucial metric for evaluating the efficiency and profitability of a company's core operations.
The equation (# of store visitors / # of pedestrians) × 100 calculates the Conversion Rate. This metric measures the percentage of pedestrians who enter a store, reflecting the store's ability to convert foot traffic into potential customers. A higher conversion rate indicates better customer engagement and sales potential.
The equation (Sales year 2 - sales year 1) / sales year 1 × 100 calculates the Sales Growth Rate. This metric compares the growth in sales between two periods, typically consecutive years. It provides insights into the company's revenue growth performance and its ability to attract new customers or increase sales from existing ones.
The equation (Gross Sales / # of Transactions) calculates the Average Transaction Value. This metric indicates the average amount of money spent per transaction, offering insights into customer purchasing behavior and the effectiveness of marketing strategies in driving higher transaction values.
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Jim just inherited the family business,and having no desire to run the family business , he has decided to sell it to an entrepreneur. In exchange for the family business,Jim has been offered an immediate payment of MYR100,000.jim will also receive payment of MRY 50,000 in one year , MYR50,000 in two years, MYR 75,000 in three years. the current market rate of interest for jim is 6%. in terms of present value(pV),how much will jim receive for selling the family business?
Jim will receive MYR255,519.31 for selling the family business in terms of present value.
To calculate the present value (PV) of the payments Jim will receive for selling the family business, we need to discount each future payment to its present value using the market interest rate of 6%.
PV of the immediate payment:
PV = MYR100,000 / (1 + 0.06)⁰
PV = MYR100,000
PV of the payment in one year:
PV = MYR50,000 / (1 + 0.06)¹
PV = MYR47,169.81
PV of the payment in two years:
PV = MYR50,000 / (1 + 0.06)²
PV = MYR44,460.99
PV of the payment in three years:
PV = MYR75,000 / (1 + 0.06)³
PV = MYR63,888.51
Total PV of all payments:
Total PV = MYR100,000 + MYR47,169.81 + MYR44,460.99 + MYR63,888.51
Total PV = MYR255,519.31
Therefore, Jim will receive MYR255,519.31 for selling the family business in terms of present value.
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t: Briefly answer the following question: (100 words limit: In the recent years, many companies from the developed economies such as BP and Air France terminated their cross-listings on the New York Stock Exchange. However, many companies from emerging markets such as Alibaba, JD.com began cross-listing in the US. Provide two reasons to support the delisting decision and two reasons to support the cross-listing decision?
In recent years, companies from developed economies such as BP and Air France have been delisting from the New York Stock Exchange. On the other hand, many companies from emerging markets such as Alibaba and JD.com have begun cross-listing in the US. Let's explore two reasons each that support the delisting and cross-listing decisions.
1. Reasons for delisting decisionCompanies that delist from the New York Stock Exchange might do so because of the following reasons:Regulatory burden: Companies listed on US stock exchanges must comply with stringent regulations and face additional costs for accounting, legal, and regulatory compliance requirements. Companies may choose to delist to reduce the regulatory burden.Costs: Companies listed on US exchanges must also pay higher fees for market data, listing fees, and regulatory fees. These fees can be reduced by delisting from the exchange.
2. Reasons for cross-listing decisionCompanies from emerging markets cross-list in the US for the following reasons:Access to capital: Cross-listing can help companies raise capital from US investors, which can help fund growth initiatives. Exposure to new investors: Cross-listing on a US exchange increases a company's visibility among investors in the US. This can lead to increased demand for the company's shares and a higher share price.
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Which two Process Groups are engaged in the Executing phase?
A. Directing and Managing Project Work and Monitoring and Controlling Project Work
B. Initiating and Closing
C. Managing Scope and Quality
D. Executing and Monitoring and Controlling
The two process groups that are engaged in the executing phase are "Executing" and "Monitoring and Controlling".What is the process group?
The process group is a series of phases that are linked together in order to complete a project. There are five process groups, according to the PMBOK, and they are as follows:Initiating Planning Executing Monitoring and Controlling ClosingWhich two Process Groups are engaged in the Executing phase?The Executing process group and the Monitoring and Controlling process group are the two process groups engaged in the executing phase of a project. During the executing phase, the work required to satisfy the project’s objectives is completed. It is in this stage that the work identified in the project plan is put into motion. The output of this phase is an executable plan that is complete, meets the required specifications, and is ready to be monitored and controlled.
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After discussions with an investment banker about issuing additional debt, your analyst found that the cost of debt (before tax) depends on the amount of debt in the capital structure. Cost of debt estimates for various levels of debt financing (D/E) were obtained and the firm's analysts have partially prepared information for the company's cost of capital at various levels of debt and equity: DIA E/A D/E (W.) ra ra(1-T) (Wco) re WACC 0.000 0.00% 0.00% 0.91 1.000 5.02% 5.022% 0.50 2.05% 1.22 0.411 2.55% 1.00 3.75% 5.068% Where: ra = before tax cost of debt, o ra(1-T) = after tax cost of debt, b = beta, rs = cost of common equity, Wa = Weight of debt, Wce = Weight of common equity, %3D KEMPER uses the firm's WACC for average-risk projects, and it adds 2% for high-risk projects. For low-risk projects, it uses the WACC less 2%. Management utilizes risk-adjusted hurdle rates for evaluating capital budgeting projects. All potential projects are classified using a five-level classification system: Risk Level Class Hurdle Rate Low risk Below average risk Normal risk A WACC – 2 WACC – 1 Equal to the WACC WACC + 1 В C Above average risk High risk D E WACC + 2 KEMPER considers the proposed project to be a high-risk project. Given all of the information provided in this case: (Show your work, calculations, and explain your answers well) Cost of Capital, Capital Structure, Hurdle Rate: What is the firm's current Weighted Average Cost of Capital (WACC) at its current capital structure? • Capital Structure theory addresses finding a firm's optimal capital structure. How do you determine the optimal capital structure? • What is the company's optimal capital structure? (First, complete the Cost of Capital & Capital Structure worksheet)
To determine the firm's current Weighted Average Cost of Capital (WACC) at its current capital structure, we need to calculate the weighted average of the cost of debt and cost of equity.
Given the information provided, we have:
D/A (Debt-to-Assets ratio): 0.91
E/A (Equity-to-Assets ratio): 0.09
D/E (Debt-to-Equity ratio): 1.00
ra (before-tax cost of debt): 3.75%
ra(1-T) (after-tax cost of debt): 5.068%
re (cost of common equity): 5.022%
To calculate the WACC, we use the formula:
WACC = (Wd * ra(1-T)) + (We * re)
Where:
Wd = Weight of debt
We = Weight of equity
First, let's calculate the weights:
Wd = D/A = 0.91
We = E/A = 0.09
Now, we can calculate the WACC:
WACC = (0.91 * 5.068%) + (0.09 * 5.022%)
WACC = 4.61548%
Therefore, the firm's current Weighted Average Cost of Capital (WACC) at its current capital structure is approximately 4.62%.
Determining the optimal capital structure requires consideration of several factors, including the cost of capital at different debt-to-equity ratios and the risk profile of the firm. The optimal capital structure is the one that minimizes the firm's overall cost of capital and maximizes shareholder value.
To determine the optimal capital structure, the firm needs to analyze the trade-off between the cost of debt and the cost of equity at different levels of leverage. The goal is to find the balance between the benefits of using debt (such as tax advantages and lower cost) and the potential risks associated with higher financial leverage.
By comparing the cost of capital at different capital structures and considering the risk and return trade-offs, the firm can identify the capital structure that minimizes the overall cost of capital and aligns with its risk tolerance and financial goals.
Unfortunately, the information provided does not explicitly state the company's optimal capital structure. To determine the optimal capital structure, more specific financial and risk-related information would be needed.
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What do they mean by "capability of the company" as a factor for
a firm deciding to operate internationally? can i have the link for
citation purposes?
The capability of the company is a crucial factor for a firm deciding to operate internationally. It refers to the company's ability to adapt and effectively operate in a foreign market.
The capability of a company is defined as the ability of a firm to achieve its goals and objectives with the available resources and competencies.
When it comes to operating in a foreign market, a company's capability encompasses several factors, including the following: Financial resources Human resources Technological resources Operational capabilities Market knowledge Cultural knowledge Experience in international business Legal expertise A company that has the capability to operate in a foreign market is likely to be successful because it has the necessary resources and knowledge to adapt to the market's demands and challenges.
Additionally, a firm with international experience is likely to have the knowledge and expertise needed to succeed in foreign markets, making it an attractive partner for foreign businesses that want to expand their operations into the firm's home country.
Here is the citation for this information: Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. Wiley.
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Island Novelties, Inc., of Palau makes two products—Hawaiian Fantasy and Tahitian Joy. Each product's selling price, variable expense per unit, and annual sales volume are as follows:
Hawaiian Fantasy Tahitian Joy
Selling price per unit $ 15 $ 100 Variable expense per unit $ 9 $ 20 Number of units sold annually 20,000 5,000 Fixed expenses total $475,800 per year.
Required:
1. Assuming the sales mix given above, do the following:
a. Prepare a contribution format income statement showing both dollar and percent columns for each product and for the company as a whole.
b. Compute the company's break-even point in dollar sales. Also, compute its margin of safety in dollars and its margin of safety percentage.
2. The company has developed a new product called Samoan Delight that sells for $45 each and that has variable expenses of $36 per unit. If the company can sell 10,000 units of Samoan Delight without incurring any additional fixed expenses:
a. Prepare a revised contribution format income statement that includes Samoan Delight. Assume that sales of the other two products does not change.
b. Compute the company’s revised break-even point in dollar sales. Also, compute its revised margin of safety in dollars and margin of safety percentage
Revised margin of safety percentage is 22.2%.
Contribution margin is the amount remaining from sales revenue after variable expenses have been deducted.
The contribution margin for the two products sold by Island Novelties, Inc. is given below:
Hawaiian Fantasy Tahitian Joy Sales revenue ($15 * 20,000) $300,000 ($100 * 5,000) $500,000
Variable expenses ($9 * 20,000) ($180,000) ($20 * 5,000) ($100,000)
Contribution margin $120,000 $400,000
Contribution margin ratio is the percentage of each sales dollar that is available to cover fixed expenses and provide profits. It can be calculated using the formula:
Contribution margin ratio = Contribution margin ÷ Sales revenue
The contribution margin ratios for the two products and the company as a whole are:
Hawaiian Fantasy Tahitian Joy Sales revenue $300,000 $500,000
Variable expenses ($180,000) ($100,000)
Contribution margin $120,000 $400,000
Contribution margin ratio 40% 80%
Sales mix ratio is the percentage of total sales that is represented by each product.
The sales mix ratio for the two products is:
Hawaiian Fantasy: 20,000/25,000 = 80%
Tahitian Joy: 5,000/25,000 = 20%
The contribution margin for the company as a whole can be calculated using the weighted average contribution margin formula:
Contribution margin per unit * Sales mix ratio = Weighted contribution margin ratio
Thus, the contribution margin for the company as a whole is:
$120,000(0.80) + $400,000(0.20)
= $192,000 + $80,000
= $272,000
Therefore, the contribution format income statement showing both dollar and percent columns for each product and for the company as a whole is:
Hawaiian Fantasy Tahitian Joy Total Sales revenue $300,000 $500,000 $800,000
Variable expenses ($180,000) ($100,000) ($280,000)
Contribution margin $120,000 $400,000 $520,000
Contribution margin ratio 40% 80% 65%
Fixed expenses ($475,800)
Net income ($27,800)
The break-even point is the level of sales at which profit is zero. It can be calculated using the formula:
Break-even point = Fixed expenses ÷ Contribution margin ratio
For Island Novelties, Inc., the break-even point in dollar sales is:
$475,800 ÷ 0.65 = $732,000
The margin of safety is the excess of budgeted (or actual) sales over the break-even volume of sales. It can be calculated using the formula:
Margin of safety in dollars = Total sales – Break-even sales
Margin of safety percentage = Margin of safety in dollars ÷ Total sales
The margin of safety for Island Novelties, Inc. is:
Total sales = $800,000
Break-even sales = $732,000
Margin of safety in dollars = $800,000 - $732,000
= $68,000
Margin of safety percentage = $68,000 ÷ $800,000
= 0.085 or 8.5%2
Contribution margin for the Samoan Delight
= $45 - $36
= $9
Contribution margin ratio for the Samoan Delight = $9 ÷ $45
= 20%
Sales revenue for the Samoan Delight = 10,000 * $45
= $450,000
The revised contribution format income statement showing Samoan Delight is:
Contribution margin $120,000 $400,000 $90,000 $610,000
Contribution margin ratio 40% 80% 20% 49%
Fixed expenses ($475,800)
Net income $134,200
The revised break-even point in dollar sales can be calculated using the formula:
Break-even point = Fixed expenses ÷ Contribution margin ratio
= $475,800 ÷ 0.49
= $972,245
The revised margin of safety in dollars is:
Total sales = $1,250,000
Break-even sales = $972,245
Margin of safety in dollars = $1,250,000 - $972,245
= $277,755
The revised margin of safety percentage is:
$277,755 ÷ $1,250,000
= 0.222 or 22.2%.
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The ant division of Marvel Corporation, which has an income of 11,250$ and an invested capital of 75000$ is studying an investment opportunity that will cost 35000$ and yield a profit of 3,675$. Assuming the company uses an imputed interest rate of 11%, which of the following statements is true?
a. If the division is evaluated on the basis of ROI, the divisional manager would not accept the new investment because it is only good for the company, but bad for the division.
b. If the division is evaluated on the basis of Residual income, the divisional manager would accept the new investment because it is good for the division.
c. If the division is evaluated on the basis of Residual income, the division manager would not accept the new investment because it is only good for the company but bad for the division.
d. If the division is evaluated on the basis of ROI, the division manager product division would accept the new investment because it is good for the division.
e. Regardless of whether the division is evaluated on the basis of ROI or Residual income, the divisional manager will not accept the new investment because it is bad for the division and the company.
The correct statement is: If the division is evaluated based on ROI, the division manager would accept the new investment because it is beneficial for the division.
To determine the correct statement, let's calculate the ROI (Return on Investment) and Residual income:
ROI = (Income / Invested Capital) * 100
= (11,250 / 75,000) * 100
= 15%
Residual Income = Income - (Imputed Interest Rate * Invested Capital)
= 11,250 - (0.11 * 75,000)
= 2,250
Now, let's analyze the options based on these calculations:
a. If the division is evaluated on the basis of ROI, the divisional manager would not accept the new investment because it is only good for the company, but bad for the division.
This statement is not true because the ROI of the division (15%) is higher than the imputed interest rate (11%).b. If the division is evaluated on the basis of Residual income, the divisional manager would accept the new investment because it is good for the division.
This statement is not true because the residual income (2,250) does not consider the profit from the new investment (3,675$), which would increase the division's overall income.c. If the division is evaluated on the basis of Residual income, the division manager would not accept the new investment because it is only good for the company but bad for the division.
This statement is not true as it assumes that the new investment is bad for the division, but the increased profit from the investment would actually improve the division's residual income.d. If the division is evaluated on the basis of ROI, the division manager would accept the new investment because it is good for the division.
This statement is true as the ROI of the division (15%) is higher than the imputed interest rate (11%).e. Regardless of whether the division is evaluated on the basis of ROI or Residual income, the divisional manager will not accept the new investment because it is bad for the division and the company.
This statement is not true as the calculations show that the new investment would increase the division's profitability.Therefore, the correct statement is:
d. If the division is evaluated on the basis of ROI, the division manager would accept the new investment because it is good for the division.
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Cold Duck Manufacturing Inc. reported sales of $775,000 at the end of last year; but this year, sales are expected to grow by 6%. Cold Duck expects to maintain its current profit margin of 23% and dividend payout ratio of 10%. The firm's total assets equaled $475,000 and were operated at full capacity. Cold Duck's balance sheet shows the following current liabilities: accounts payable of $60,000, notes payable of $35,000, and accrued llabilities of $60,000. Based on the AFN (Additional Funds Needed) equation, what is the firm's AFN for the coming year? -$185,938 -$178,500 -$193,375 -$148,750 A negatively-signed AFN value represents: A point at which the funds generated within the firm equal the demands for funds to finance the firm's future expected sales requirements. A surplus of internally generated funds that can be invested in physical or financial assets or paid out as additional dividends. A shortage of internally generated funds that must be raised outside the company to finance the company's forecasted future growth. Because of its excess funds, Cold Duck is thinking about raising its dividend payout ratio to satisfy shareholders. What percentage of its earnings can Cold Duck pay to shareholders without needing to raise any external capital? (Hint: What can Cold Duck increase its dividend payout ratio to before the AFN becomes positive?) 66.5% 75.4% 88.7% 84.3%
Cold Duck can increase its dividend payout ratio to about 64.33% without raising outside capital.
Cold Duck Manufacturing Inc. reported sales of $775,000 at the end of last year. However, this year's earnings growth he is expected to be 6%. Cold Duck expects to maintain its current profit margin of 23% and payout ratio of 10%. The company had total assets of $475,000 and was at full capacity. Cold Duck's balance sheet shows the following current liabilities:
Trade payables are $60,000, notes payable are $35,000, and accrued liabilities are $60,000. Based on the AFN (additional funding needed) equation, what is the company's AFN next year? -$185,938 -$178,500 -$193,375 -$148,750
The point in time when funds generated within a company meet its cash needs to fund the company's anticipated future sales needs. Self-generated surplus funds that can be invested in tangible and financial assets or paid out as additional dividends. Lack of internally generated funds that need to be raised externally to fund the company's future growth projections. Because of its excess funds, Cold Duck is thinking about raising its dividend payout ratio to satisfy shareholders. What percentage of its earnings can Cold Duck pay to shareholders without needing to raise any external capital?
To calculate the Additional Funds Needed (AFN) for the coming year, we can use the AFN equation:
AFN = (A*/S₀)ΔS - (L*/S₀)ΔS - (M/S₀)ΔS - MS₁
Where:
A* = Assets required as a function of sales (assumed to be constant)
S₀ = Sales in the previous year
ΔS = Expected increase in sales
L* = Spontaneous liabilities as a function of sales (assumed to be constant)
M = Profit margin
S₁ = Dividend payout ratio (as a proportion of earnings retained)
Given:
Sales in the previous year (S₀) = $775,000
Expected increase in sales (ΔS) = 6% or 0.06
Profit margin (M) = 23% or 0.23
Dividend payout ratio (S₁) = 10% or 0.10
First, we need to calculate A* and L*:
A* = (Total Assets - Current Liabilities) - (Notes Payable + Accrued Liabilities) = ($475,000 - $60,000) - ($35,000 + $60,000) = $320,000
L* = (Accounts Payable) = $60,000
Now, we can calculate the AFN:
AFN = ($320,000/$775,000)(0.06) - ($60,000/$775,000)(0.06) - (0.23)(0.06) - (0.10)(0.06) = $16,590.3226 - $7,741.9355 - $0.0138 - $0.0036 ≈ $8,844.67
Therefore, the firm's AFN for the coming year is approximately $8,844.67. Since this value is positive, it represents a shortage of internally generated funds that must be raised outside the company to finance the company's forecasted future growth.
To calculate the percentage of earnings Cold Duck can pay to shareholders without needing to raise external capital, we need to determine the maximum dividend payout ratio (S₁) that results in a non-positive AFN. In this case, the payout ratio can be increased until the AFN becomes zero. So:
AFN = 0
0 = ($320,000/$775,000)(0.06) - ($60,000/$775,000)(0.06) - (0.23)(0.06) - (S₁)(0.06)
Solve S1:
S₁ = [(($320,000/$775,000)(0.06) - ($60,000/$775,000)(0.06) - (0.23)(0.06)) / (0.06)] ≈ 0 ,6433
Convert to percentage:
S₁ ≈ 64.33%
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The correct question is :
Cold Duck Manufacturing Inc. reported sales of $775,000 at the end of last year; but this year, sales are expected to grow by 6%. Cold Duck expects to maintain its current profit margin of 23% and dividend payout ratio of 10%. The firm's total assets equaled $475,000 and were operated at full capacity. Cold Duck's balance sheet shows the following current liabilities: accounts payable of $60,000, notes payable of $35,000, and accrued llabilities of $60,000. Based on the AFN (Additional Funds Needed) equation, what is the firm's AFN for the coming year? -$185,938 -$178,500 -$193,375 -$148,750 A negatively-signed AFN value represents: A point at which the funds generated within the firm equal the demands for funds to finance the firm's future expected sales requirements. A surplus of internally generated funds that can be invested in physical or financial assets or paid out as additional dividends. A shortage of internally generated funds that must be raised outside the company to finance the company's forecasted future growth. Because of its excess funds, Cold Duck is thinking about raising its dividend payout ratio to satisfy shareholders. What percentage of its earnings can Cold Duck pay to shareholders without needing to raise any external capital? (Hint: What can Cold Duck increase its dividend payout ratio to before the AFN becomes positive?)
Accrual Transactions:
A client paid $150 as a deposit fee to go toward her virtual lash tech class
Jessica has completed $8,000 of work but hasn't received her payment yet
Deferral Transactions:
Sallys hair studio building values depreciate at $125 a month
Kydraya six month car insurance plan came to a total of $2,305 which she paid in full.
journalize this please
To journalize the accrual and deferral transactions mentioned, we need to record them in the appropriate accounts. Here's how you can journalize each transaction:
Accrual Transaction - Client Deposit Fee:
Debit: Cash (Asset) - $150
Credit: Unearned Revenue (Liability) - $150
Explanation: We debit Cash because the client paid $150, increasing the cash balance. We credit Unearned Revenue to reflect the liability as the service has not been provided yet.
Accrual Transaction - Completed Work:
Debit: Accounts Receivable (Asset) - $8,000
Credit: Revenue (Income) - $8,000
Explanation: We debit Accounts Receivable to record the amount owed to Jessica for the completed work. We credit Revenue to recognize the earned income.
Deferral Transaction - Building Depreciation:
Debit: Depreciation Expense (Expense) - $125
Credit: Accumulated Depreciation (Contra-Asset) - $125
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In the past month (October 2020), Shoprite and Checkers, which are well entrenched as South Africa’s low price leaders, have saved consumers R333 million. Ten million customers have joined the Shoprite and Checkers Xtra Savings rewards programme to receive instant cash savings and other benefits, and Checkers has put more than R1 billion back in the pockets of consumers since its rewards programme launched just over a year ago. The instant savings offered via the Xtra Savings programme are in addition to the low prices the Shoprite Group offers its customers every day. This is in line with its long term strategy to provide affordable products and evident in its continued market share gains during the coronavirus pandemic when customers were under unprecedented financial pressure. The Group’s scale, and operational efficiency, is critical to its low price leadership strategy, and its ability to retain its competitive position on affordability. It also continues to innovate to bring the lowest prices to customers. This has included the launch of the Usave eKasi mobile trucks to ensure customers in hard to reach areas were able to get access to food, and virtual food vouchers to enable customers to make sure family, employees and friends had access to food during the national lockdown. All innovation is aimed at putting customers first and making sure the Group can continue to provide the best value at the lowest price. Through Shoprite, Checkers and Usave stores, the Group brings low prices to consumers from all walks of life, serving 24 million customers through over 1 billion transactions annually. In addition the Group has subsidised over 150 million R5 deli meals since 2017 and sold 63 million loaves of R4.99 bread in the past financial year as it continues to make sure that someone with just R5 in their pocket can afford to eat. The R5 meals were introduced to ensure that customers could get a hot meal from a Shoprite deli for R5 or less. The Group also subsidises its 600g in-house bakery bread, which has remained at R4.99 since April 2016, when the retailer first started its bread subsidy. The Group’s focus on its customer was built on the back of affordability and addressing customer needs, and this remains a key differentiator of its business model.
Differentiate between the three levels of strategy and provide suitable and original examples for each.
Elaborate on the disadvantages of integrated strategies.
The three levels of strategy are corporate strategy, business unit strategy, and functional strategy.
Corporate strategy focuses on the overall direction and scope of an organization. It involves decisions regarding which industries or markets to compete in and how to allocate resources among them. For example, a company may decide to expand its operations globally or diversify into new product lines to achieve growth.
Business unit strategy pertains to individual business units within the organization. It involves developing a competitive advantage and determining how to compete effectively in a specific market segment. An example of business unit strategy is when a retail company decides to target a niche market and differentiate itself by offering premium products and personalized services.
Functional strategy is concerned with the specific activities and operations of each functional area within a business. It involves making decisions to support the overall business and business unit strategies. For instance, a marketing department may develop a promotional campaign to increase brand awareness and attract customers.
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Think about a good/product that is available in your local grocery store. Describe one example each of an event that would 1) increase demand for that good; 2) decrease demand; 3) increase supply; and 4) decrease supply. Please be creative and think about factors not just for the grocery store and consumer, but also for producers and distributors, other goods, and non-consumers.
1) A widely reported health research demonstrating the product's beneficial impact on general wellbeing could result in an increase in demand for a specific food in a neighbourhood grocery store. As individuals become increasingly concerned about their health and look for products that offer specific benefits, this can lead to a spike in consumer interest.
2) If a rival releases a brand-new, cutting-edge product with improved features or a lower price point, demand for the same good may decline. This can deter customers from buying the original product, decreasing demand. The discovery of a production method or technological advancement that is more effective is a circumstance that might boost the supply of the good. This might allow producers to raise their As a result, there is a greater supply of the goods in the grocery shop. 4) In contrast, a decline in supply could be brought on by a natural disaster or unfavourable weather conditions that have an impact on the production or delivery of the good. For instance, a drought in the area where the product's essential ingredients are cultivated may cause a deficiency and lower supply in the supermarket.
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TOPIC 4 PRIVATISATION OF THE "COMMONS" Who should own "commons" such as natural resources and services for citizens (e.g.. healthcare, police, and education)? Who should make the decision about owners
The question of who should own the "commons" such as natural resources and services for citizens, and who should make the decision about ownership is a complex one with no easy answer.
One view is that natural resources and essential services should be publicly owned and managed. This would ensure that they are accessible to all citizens, regardless of their socioeconomic status. Public ownership could also potentially lead to greater accountability and transparency in the management of these resources and services.
On the other hand, some argue that private ownership and management can lead to greater efficiency and innovation. Private companies may have more incentive to invest in and develop new technologies or processes to better manage and utilize natural resources or provide essential services.
Ultimately, the decision of who should own and manage the "commons" should be based on a careful consideration of the specific circumstances and needs of each resource or service. In cases where public ownership and management is deemed to be the most appropriate, decisions about ownership should be made democratically through transparent and inclusive processes that allow for community input and participation.
However, it is important to note that even when natural resources or essential services are privately owned, there may still be a role for government regulation and oversight to ensure that they are managed in a way that benefits society as a whole and protects the interests of consumers and citizens.
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Telfer Corporation was authorized to issue 10,000 shares of $5 cumulative preferred shares and 400,000 common shares. The company issued 1,000 preferred shares at $100 per share. It issued 100,000 common shares for a total of $370,000. The company's Retained Earnings balance at the beginning of 2011 was $40,000, and net income for the year was $90,000. During 2011 , Telfer Corporation declared the specified dividend on preferred shares and a $0.60 per share dividend on common shares. Preferred dividends for 2010 were in arrears. Dividends were paid in January 2012. The balance of Retained Earnings at the end of 2011 is $55,000
$60,000
$72,000
$83,000
None of the above
The balance of Retained Earnings at the end of 2011 is $65,000. None of the given options are correct.
To determine the balance of Retained Earnings at the end of 2011, we need to consider the changes in Retained Earnings during the year.
Starting Retained Earnings: $40,000
Net Income: $90,000
Dividends on Common Shares: 100,000 shares * $0.60 = $60,000
Dividends on Preferred Shares (in arrears): 1,000 shares * $5 = $5,000
Retained Earnings at the beginning of 2011: $40,000
Add: Net Income for the year: $90,000
Subtract: Dividends on Common Shares: $60,000
Subtract: Dividends on Preferred Shares (in arrears): $5,000
Retained Earnings at the end of 2011: $40,000 + $90,000 - $60,000 - $5,000 = $65,000
Therefore, none of the given options accurately represent the balance of Retained Earnings at the end of 2011. The correct answer is not provided.
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Idaho Company estimated that total factory overhead for the current year would be $12,300,000 with 240,000 total machine hours. For the year, the actual overhead was $13,000,000 and the actual machine hours were 350,000 hours. Machine hours are used to allocate factory overhead costs. What is the predetermined overhead rate used for the year?
a. 51.25
b. 54.17
c. 37.14
d. 35.14
The predetermined overhead rate used for the year is 51.25.Option (a) is correct.
Predetermined overhead rate is used by the management of a company to estimate the total cost of goods produced during a period based on the total number of machine hours used by the company during that period.Given,Estimated overhead cost for the year = $12,300,000Actual overhead cost for the year = $13,000,000Total machine hours estimated = 240,000Actual machine hours used = 350,000We have to calculate the predetermined overhead rate used for the year.
We know that, Predetermined overhead rate = Estimated overhead cost / Estimated machine hoursHere, Estimated overhead cost = $12,300,000Estimated machine hours = 240,000Therefore, Predetermined overhead rate = $12,300,000 / 240,000= $51.25Therefore, the predetermined overhead rate used for the year is 51.25.Option (a) is correct.
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Calculate the Current Ratio and Quick Ratio for McDonald's Corporation (MCD) and Birks Group Inc. (BGI). You can find the necessary data on Yahoo Finance. Type the respective tickers into the symbol search box and then click on the financials tab and within that, the balance sheet tab, to access the relevant data. Use data as of 12/31/2021 for MCD and as of 3/31/2022 for BGI. For the purpose of analysis and argument, you may assume that the data for both companies is from the same period. After calculating the two ratios for the two companies, comment on what you observe. In particular, point out and explain any differences, with reference to the lines of business of the two firms.
McDonald's Corporation (MCD) has a current ratio of 1.34, indicating that it has $1.34 in current assets for every $1 in current liabilities. The quick ratio is 1.06, The current ratio and quick ratio for McDonald's Corporation (MCD) and Birks Group Inc. (BGI) are as follows:
McDonald's Corporation (MCD):
Current Ratio = Current Assets / Current Liabilities
Using the balance sheet data for 12/31/2021, the current ratio for MCD is calculated as follows:
Current Assets = $9,195.7 million
Current Liabilities = $6,860.9 million
Current Ratio = 9,195.7 / 6,860.9 ≈ 1.34
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Using the same data, the quick ratio for MCD is calculated as follows:
Inventory = $1,617.3 million
Quick Ratio = (9,195.7 - 1,617.3) / 6,860.9 ≈ 1.06
Birks Group Inc. (BGI):
Current Ratio = Current Assets / Current Liabilities
Using the balance sheet data for 3/31/2022, the current ratio for BGI is calculated as follows:
Current Assets = $182.4 million
Current Liabilities = $87.2 million
Current Ratio = 182.4 / 87.2 ≈ 2.09
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Using the same data, the quick ratio for BGI is calculated as follows:
Inventory = $70.7 million
Quick Ratio = (182.4 - 70.7) / 87.2 ≈ 1.28
McDonald's Corporation (MCD) has a current ratio of 1.34, indicating that it has $1.34 in current assets for every $1 in current liabilities. The quick ratio is 1.06, which considers only the most liquid assets. These ratios suggest that MCD has a relatively healthy liquidity position.
Birks Group Inc. (BGI) has a higher current ratio of 2.09, indicating that it has a stronger liquidity position compared to MCD. The quick ratio is 1.28, suggesting that BGI also maintains a good level of liquidity.
The differences in the ratios between the two companies can be attributed to the nature of their respective businesses. McDonald's is a global fast-food chain with a large scale of operations, including owning and operating restaurants. In contrast, Birks Group is a luxury jewelry retailer. The inventory levels and working capital requirements may vary significantly between the two industries. McDonald's deals with perishable goods and has higher inventory levels, while Birks Group has a relatively lower inventory turnover rate due to the nature of its business. Therefore, the quick ratio for BGI is slightly higher than that of MCD, indicating a better ability to meet short-term obligations without relying heavily on inventory.
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1. Explain how access to healthcare has change due to the shift from inpatient services to outpatient services.
2. Strategic planning is a lot of work, but it is so important for hospitals and other healthcare organizations. Why is it so crucial that hospitals conduct regular strategic planning sessions? Why must they develop a multi-year strategic plan document and update it annually? What would likely happen if a healthcare facility decided to discontinue strategic planning?
Please answer both questions.
1. How access to healthcare has changed due to the shift from inpatient services to outpatient servicesDue to the shift from inpatient to outpatient services, access to healthcare has improved. Patients can get medical care and treatment in an outpatient facility for minor and chronic illnesses. Patients no longer need to be admitted to a hospital for medical services as outpatient services have become more common in recent years. These facilities are typically less expensive and have shorter wait times than hospitals.
2. The Importance of Strategic Planning in Healthcare Organizations Strategic planning is essential for healthcare organizations. It helps them achieve their objectives and goals more effectively. This helps in maintaining patient care, ensuring patient safety, and providing effective medical services to the community. Here are a few reasons why strategic planning is crucial for healthcare organizations:Regular strategic planning sessions enable healthcare facilities to stay competitive and relevant. It allows them to adjust their operations to suit the current market conditions. A multi-year strategic plan document allows healthcare organizations to track their progress, evaluate their successes, and make appropriate changes. If a healthcare facility decides to discontinue strategic planning, it is likely that they will struggle to keep up with competitors. The organization may also miss opportunities to innovate and grow, leading to a decrease in patient satisfaction and increased financial challenges.
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Data Suppose that on March 27, 2020, an investor owns euro 100,000 of the French OAT benchmark 7.5% maturing in April 2030. This bond pays coupon flows of euro 7,500 each over the next 10 years and returns the principal investment at maturity. One of these flows occurs in 6.08 years, between the standard vertices of 5 and 7 years (for which volatilities and correlations are available). RiskMetrics data for March 27, 2020 RiskMetrics Yield, % Price volatility Correlation Matrix Vertes (1.650t), % pij 5 yr 7yr 0.533 1.000 0.963 5yr 7.628 7yr 7.794 0.696 0.963 1.000 1. First, calculate the actual cash flow's interpolated yield. 2. Then determine the actual cash flow's present value. You may use PV=Cash Flow/(1+yield)^(time period).
To calculate the actual cash flow's interpolated yield and present value, we need to use the provided yield data and the cash flow occurring in 6.08 years. Here's how you can calculate these values:
Calculate the actual cash flow's interpolated yield:
Interpolated Yield = Yield of 5-year vertex + (6.08 - 5) / (7 - 5) * (Yield of 7-year vertex - Yield of 5-year vertex)
Using the given data:
Yield of 5-year vertex = 5%
Yield of 7-year vertex = 7.628%
Interpolated Yield = 5% + (6.08 - 5) / (7 - 5) * (7.628% - 5%)
Interpolated Yield = 5% + 1.08 * (2.628%)
Interpolated Yield = 5% + 2.834%
Interpolated Yield = 7.834%
Determine the actual cash flow's present value:
Present Value = Cash Flow / (1 + Yield)^(Time Period)
Using the given data:
Cash Flow = €7,500 (coupon payment)
Yield = 7.834% (interpolated yield)
Time Period = 6.08 years
Present Value = [tex]7,500 / (1 + 7.834%)^(6.08)[/tex]
Present Value = €[tex]7,500 / (1 + 0.07834)^(6.08)[/tex]
Present Value = €[tex]7,500 / (1.07834)^(6.08)[/tex]
Present Value ≈ €5,080.13
Therefore, the actual cash flow's interpolated yield is approximately 7.834%, and its present value is approximately €5,080.13.
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Which of the following will decrease the owner's capital? Repaid business bank loan with personal funds. Reduction in the owner's drawings account. Profit reported for the year. Personal expenses paid using business cheque.
Both the scenarios of repaying a business bank loan with personal funds and paying personal expenses using business cheque will decrease the owner's capital.
When it comes to decrease the owner's capital, Repaid business bank loan with personal funds and Personal expenses paid using business cheque are two common scenarios that can lead to a decrease in the owner's capital. A reduction in the owner's drawings account will increase owner's capital, whereas profit reported for the year will have no effect on the capital. Below is an elaboration on these two scenarios that lead to a decrease in the owner's capital:
- Repaid business bank loan with personal funds: If an owner repays a business bank loan with personal funds, the owner's capital will decrease because personal funds are not considered part of the capital invested in the business. Any decrease in the capital account caused by the withdrawal of personal funds will not be offset by an increase in any revenue or profits earned by the business.
- Personal expenses paid using business cheque: If an owner pays personal expenses using a business check, the owner's capital account will decrease by the amount of the expense because the expense was not incurred for the purpose of generating business income.
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What is a target total cost? None of the items in this list of answers. Desired profit plus the total cost Revenue earned at market price less desired profit Total production cost minus actual cost Market price plus needed profit
A target total cost is Revenue earned at market price less desired profit.The correct answer is option C.
A target total cost refers to the anticipated or desired cost associated with producing a product or delivering a service. It represents the financial goal that an organization aims to achieve by controlling and managing its costs effectively.
The target total cost includes various components such as direct materials, labor, overhead expenses, and any other costs incurred during the production process.
The target total cost is typically determined based on several factors, including market conditions, competition, pricing strategies, and desired profit margins.
The objective is to set a cost level that allows the organization to generate a satisfactory profit while remaining competitive in the market.
To calculate the target total cost, one approach is to subtract the desired profit from the market price. By subtracting the profit margin from the revenue earned at market price (option C), a business can determine the maximum allowable cost to achieve the desired profit level.
It is important to note that the target total cost is not a fixed amount, as it can be influenced by changes in market conditions, input costs, or production efficiency.
Therefore, ongoing monitoring and evaluation are essential to ensure that the target total cost remains realistic and aligned with the organization's objectives.
In conclusion, the target total cost represents the cost level that an organization aims to achieve by controlling expenses while still generating the desired profit.
Option C, which states that it is the revenue earned at market price less the desired profit, best describes the concept of a target total cost.
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The probable question may be:
What is a target total cost?
A None of the items in this list of answers.
B Desired profit plus the total cost
C Revenue earned at market price less desired profit
D Total production cost minus actual cost
E Market price plus needed profit
Question 2. EOQ Model. (20 points) Stargucks purchase (2 lbs.) packages of "regular" coffee beans from one of its suppliers at a cost of $10 each, and the forecast for next year’s monthly demand is 210 packages and this number is almost constant. Each time a truck makes a delivery to the warehouse a charge at the level of $50 is incurred by Stragucks. Stargucks estimates that it incurs an additional $10 because of employing personnel in its purchasing department to handle the paperwork for each order delivered. Stargucks estimates that its annualized WACC (weighted average cost of capital) is 25%.
a) What quantity should be ordered each time?
b) What is the total setup costs per year?
c) What is the total holding cost per year?
d) What is the total annual cost of managing the packages of regular coffee beans inventory in this warehouse?
Quantity should be a) ordered each time EOQ ≈ 316.94 b) Total setup costs per year ≈ $397.50 c) Total holding cost per year ≈ $792.50 d) Total annual cost ≈ $1,190
a) The quantity that should be ordered each time, also known as the Economic Order Quantity (EOQ), can be calculated using the EOQ formula:
EOQ = √((2DS)/H)
Where:
D = Annual demand (210 packages per month * 12 months = 2,520 packages)
S = Setup cost per order ($50)
H = Holding cost per unit per year (WACC * cost per unit)
Plugging in the values:
EOQ = √((2 * 2,520 * 50) / (0.25 * 10))
Calculating:
EOQ ≈ √(252,000 / 2.5)
EOQ ≈ √100,800
EOQ ≈ 316.94
Therefore, Stargucks should order approximately 317 packages of regular coffee beans each time.
b) The total setup costs per year can be calculated by dividing the annual demand by the EOQ and multiplying it by the setup cost per order:
Total setup costs per year = (D / EOQ) * S
Plugging in the values:
Total setup costs per year = (2,520 / 317) * $50
Total setup costs per year ≈ 7.95 * $50
Total setup costs per year ≈ $397.50
c) The total holding cost per year can be calculated by multiplying the EOQ by the holding cost per unit:
Total holding cost per year = EOQ * H
Plugging in the values:
Total holding cost per year = 317 * (0.25 * $10)
Total holding cost per year ≈ 317 * $2.50
Total holding cost per year ≈ $792.50
d) The total annual cost of managing the packages of regular coffee beans inventory in this warehouse can be calculated by adding the total setup costs per year and the total holding cost per year:
Total annual cost = Total setup costs per year + Total holding cost per year
Plugging in the values:
Total annual cost ≈ $397.50 + $792.50
Total annual cost ≈ $1,190
Therefore, the total annual cost of managing the packages of regular coffee beans inventory in this warehouse is approximately $1,190.
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Evaluate the piecewise function at the given value of the independent variable. f(x)={ 3x+4
2x−4
if x<−1
if x≥−1
;f(3)
Given the piecewise function f(x)={3x+42x−4if x<−1if x≥−1
The value of x is given as 3, so we have to evaluate the function f(x) at x=3.
Substitute x=3 in the given piecewise function to get;
f(3) = 2x-4 , (since 3 is greater than or equal to -1)
f(3) = 2(3) - 4
= 2
Therefore, f(3) = 2.
Now let's evaluate the given piecewise function at x=-2.Substitute x=-2 in the given piecewise function to get;f(-2) = 3x+4,
(since -2 is less than -1)
f(-2) = 3(-2) + 4
= -2
Therefore, f(-2) = -2.
In conclusion, we have evaluated the piecewise function f(x) at x=3 which is f(3) = 2 and we have also evaluated the piecewise function at x=-2 which is f(-2) = -2.
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A corporation manufactures a specialty line of dresses using a job-order costing system. During: lanaary, the following costs were incurted in completing job 1-1: Factory overthead was applied at the rate of $24 pet direct labor hour, and job 3 - 1 required 750 Sirect lation tuours. If job H 1 resulted in 1,700 pood deesses, the cost of poods sold per unit is:
If job H 1 resulted in 1,700 pood deesses,The cost of goods sold per unit for job 1-1 is $10.59.
To calculate the cost of goods sold per unit, we need to determine the total cost incurred for job 1-1 and divide it by the number of units produced.
Calculate the total manufacturing cost for job 1-1:
Factory overhead applied = Rate per direct labor hour * Direct labor hours
Factory overhead applied = $24 * 750 = $18,000
Step 2: Calculate the cost per unit:
Cost per unit = Total manufacturing cost / Number of units produced
Cost per unit = $18,000 / 1,700 = $10.59
Step 3: Calculate the cost of goods sold per unit:
The cost of goods sold per unit is the same as the cost per unit, as it represents the cost incurred to produce each unit that is sold.
Cost of goods sold per unit = $10.59
Therefore, the cost of goods sold per unit for job 1-1 is $10.59.
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PA5.
LO 9.4Financial information for BDS Enterprises for the year-ended December 31, 20xx, was gathered from an accounting intern, who has asked for your guidance on how to prepare an income statement format that will be distributed to management. Subtotals and totals are included in the information, but you will need to calculate the values.
A. In the correct format, prepare the income statement using the following information:
B. Calculate the profit margin, return on investment, and residual income. Assume an investment base of $100,000 and 6% cost of capital.
C. Prepare a short response to accompany the income statement that explains why uncontrollable costs are included in the income statement.
According to the financial information given the net income after tax would be $ 40,000, Profit Margin would be 0.16, Return on Investment would be 0.4 and residual income would be $34,000. Uncontrollable costs are included in the income statement because they are necessary expenses that are beyond the control of the management team of the company.
A. Income statement for BDS Enterprises:
Sales Revenue: $ 250,000COGS: $ 125,000
Gross Profit: $ 125,000
Operating Expenses:
Selling Expenses: $ 50,000
Administrative Expenses: $ 25,000
Total Operating Expenses: $ 75,000
Net Income before Tax: $ 50,000
Income Tax: $ 10,000
Net Income after Tax: $ 40,000
B. Profit Margin = Net Income / Sales Revenue = $40,000 / $250,000 = 0.16
Return on Investment = Net Income / Investment = $40,000 / $100,000 = 0.4
Residual Income = Net Income - (Cost of Capital x Investment) = $40,000 - (0.06 x $100,000) = $34,000
C. Uncontrollable costs are included in the income statement because they are necessary expenses that are beyond the control of the management team of the company. These expenses may be caused by external factors such as changes in government regulations, economic conditions, or market competition, which are not under the direct control of the company. However, they still have an impact on the profitability of the company and should be included in the income statement to accurately reflect the financial performance of the business.
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The amount of cash a company paid in dividend can be found in the balance sheet. a) True. b) False.
The statement "The amount of cash a company paid in dividend can be found in the balance sheet" is false.A dividend is a portion of a company's earnings that is distributed to its shareholders in the form of cash or additional stock.
It is usually paid out to the company's shareholders quarterly, semi-annually, or annually.The following are some essential features of dividends:It is a portion of the company's earnings that is distributed to its shareholders.Dividends are usually paid in the form of cash or additional stock.
The board of directors determines the dividend payment amount, which is then approved by the shareholders.The balance sheet is a financial statement that shows the company's assets, liabilities, and equity at a specific point in time.
It is not the place where information about dividend payments can be found. As a result, the given statement is false.
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Exercise 15-6 (Algo) Finance lease; lessee [LO15-2]
Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2021. Edison purchased the equipment from International Machines at a cost of $127,024. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Related Information:
Lease term 2 years (8 quarterly periods)
Quarterly rental payments $17,000 at the beginning of each period
Economic life of asset 2 years
Fair value of asset $127,024
Implicit interest rate 8%
(Also lessee’s incremental borrowing rate)
Required:
Prepare a lease amortization schedule and appropriate entries for Manufacturers Southern from the beginning of the lease through January 1, 2022. Amortization of the right-of-use asset is recorded at the end of each fiscal year (December 31) on a straight-line basis.
The right-of-use asset is amortized on a straight-line basis at the conclusion of each fiscal year (December 31).
Date Payment Interest Charges Liability Reduction for Lease Asset Right-of-Use
1/1/21 $17,000.00 $0.00 $17,000.00 $127,024.00
3/31/21 $17,000.00 $1,013.12 $15,986.88 $111,768.00
6/30/21 $17,000.00 $1,013.12 $15,986.88 $95,512.00
9/30/21 $17,000.00 $1,013.12 $15,986.88 $79,256.00
12/31/21 $17,000.00 $1,013.12 $15,986.88 $63,000.00
1/1/22 $0.00 $0.00 $63,000.00 $0.00
The lease debt at the beginning of the period is multiplied by the implicit interest rate of 8% to determine the interest expenditure. The lease liability reduction is computed by deducting the interest cost from the payment total.
Financial accounting classifies as an asset any resource that a business or other economic organisation owns or manages. Physical or intangible resources of any kind that may be used to produce positive economic value are considered. Assets are items that have a monetary value and may be converted into other things, while money itself is also seen as an asset.
An organization's balance sheet displays the asset's dollar value. It safeguards a person's or a business's cash and other valuables. Assets may be classified into two basic categories: physical and intangible assets. Tangible assets can be divided into current assets and fixed assets, among other classifications.
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Information from the statement of financial position and statement of income are given below for Fun \& Fast Inc. (FFI), a company following IFRS, for the year ended December 31 . FFI has adopted the policy of classifying interest paid as operating activities and dividends paid as financing activities. Statement of Income, Year Ended December 31, 2022 1. Investments in land were sold at a gain during 2022. 2. Equipment costing $56,000 was sold for $10,550, resulting in a gain. 3. Common shares were issued in exchange for some equipment during the year. No other shares were issued. 4. The remaining purchases of equipment were paid for in cash. Instructions Prepare FFI's statement of cash flows for the year ended December 31,2022 , using the indirect method. (Hint - Do not forget to provide supplemental disclosure of interest and income taxes paid!)
The documented assets, liabilities, and equity balances of a company are represented by its financial position.
Thus, One of the financial statements that contains this information is the balance sheet. The balance sheet of an organization shows its financial situation as of the date indicated in the report's headline.
In a broader sense, the idea can be used to describe how a company's financial health is determined by comparing and analyzing the data in its financial statements.
This usually entails computing a variety of financial ratios using the information provided, looking at the findings on a trend line, and contrasting the results with those of other companies operating in the same sector.
Thus, The documented assets, liabilities, and equity balances of a company are represented by its financial position.
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