Answer:
Explanation:
The coupon rate is defined as the interest rate paid on a bond by its issuer for the term of the security.
Hence,
Par Value = $800
Face Value = $1,000
N = 5 x 2 = 10
Since the interest is semi annual
i = 8% / 2 = 4%
CF = $15.34
Coupon = $30.68 per year or 3.068%
What is the yield to maturity on a bond that pays annual coupon rate of 14%, has a par value of $1,000, matures in 10 years, and is selling for $911?
Answer:
Yield to Maturity =15.6%
Explanation:
The Yield to maturity is the discount rate that equates then price of the bonds to the present of cash inflows expected from the bond
The yield on the bond can be determined as follows using the formula below:
YM = C + F-P/n) ÷ 1/2 (F+P)
YM-Yield to maturity-
C- annual coupon
F- Face Value
P- Current Price
n- number of years
DATA
Coupon = coupon rate × Nominal value = 1,000 × 14%=140
Face Value = 1000
YM-?, C- 140, Face Value - 1,000, P-911 , n- 10
YM = (140 + (1000-911)/10) ÷ ( 1/2× (1000 + 911) )
YM = 0.156 × 100 = 15.6%
Yield to Maturity =15.6%
Joy Manufacturing Company needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 25 percent of total sales each month. Historically, sales on account have been collected as follows: 50 percent in the month of the sale, 30 percent in the month after the sale, and the remaining 20 percent two months after the sale.
Gross sales for the quarter are projected as follows:
January $20,000
February $10,000
March $40,000
Accounts receivable on December 31 were $30,000.
Joy's expected cash collections for March would be:________.
A. $37,000
B. $32,000
C. $30,250
D. $47,200
Answer:
Total cash collection= $30,250
Explanation:
Giving the following information:
Cash sales are 25 percent of total sales each month.
Sales on account:
50 percent in the month of the sale
30 percent in the month after the sale
20 percent two months after the sale.
Sales:
January $20,000
February $10,000
March $40,000
We need to calculate the cash collection for March:
Sales on cash March= 40,000*0.25= 10,000
Sales on account March= (40,000*0.75)*0.5= 15,000
Sales on account February= (10,000*0.75)*0.3= 2,250
Sales on account January= (20,000*0.75)*0.2= 3,000
Total cash collection= $30,250
A mail-order house uses 18,000 boxes a year. Carrying costs are 60 cents per box a year, and ordering costs are $96. The following price schedule applies.
Determine:
A. The optimal order quantity.
B. The number of orders per year.
of boxes: 1,000-1,999 Price per box: $1.25
of boxes: 2,000- 4,999 Price per box: $1.20
of boxes: 5,000- 9,999 Price per box : $1.15
of boxes: 10,000 or more Price per box : $1.10
Answer:
Explanation:
Given that:
A mail-order house uses 18,000 boxes a year.
Carrying costs are 60 cents per box a year =$0.60
and ordering costs are $96.
Determine:
A. The optimal order quantity.
The optimal order quantity can be calculated by using the formula:
[tex]Q_o = \sqrt{\dfrac{2DS}{H}}[/tex]
[tex]Q_o = \sqrt{\dfrac{2*18000*96}{0.60}}[/tex]
[tex]Q_o = \sqrt{\dfrac{3456000}{0.60}}[/tex]
[tex]Q_o = \sqrt{5760000}[/tex]
[tex]Q_o = 2400 \ boxes[/tex]
B. The number of orders per year.
of boxes: 1,000-1,999 Price per box: $1.25
of boxes: 2,000- 4,999 Price per box: $1.20
of boxes: 5,000- 9,999 Price per box : $1.15
of boxes: 10,000 or more Price per box : $1.10
SInce 2400 boxes lies within ''of boxes: 2,000- 4,999 Price per box: $1.20 ''
Total cost = Carrying cost + ordering cost + Purchasing cost
[tex]Total \ cost =(\dfrac{Q}{2} )H +(\dfrac{D}{Q}) S+PD[/tex]
[tex]Total \ cost =(\dfrac{2400}{2} )0.60 +(\dfrac{18000}{2400}) 96+1.20*18000[/tex]
Total cost = ( 1200) 0.60 + 7.5(96) + 1.20(18000)
Total cost = 720 + 720 + 21600
Total cost = $ 23040
If the order size is 5000, the price per box will be 1.15
[tex]Total \ cost =(\dfrac{Q}{2} )H +(\dfrac{D}{Q}) S+PD[/tex]
[tex]Total \ cost =(\dfrac{5000}{2} )0.60 +(\dfrac{18000}{5000}) 96+1.15*18000[/tex]
Total cost = 2500 (0.60) + 3.6 (96) + 20700
Total cost = 1500 + 345.6 + 20700
Total cost = $22545.6
If the order size is 10000 , the price per box will be 1.10
[tex]Total \ cost =(\dfrac{Q}{2} )H +(\dfrac{D}{Q}) S+PD[/tex]
[tex]Total \ cost =(\dfrac{10000}{2} )0.60 +(\dfrac{18000}{10000}) 96+1.10*18000[/tex]
Total cost = 5000 (0.60) + 1.8(96) + 19800
Total cost = 3000 + 172.8 + 19800
Total cost = $22972.8
From the three total cost, the least minimum cost of ordering is: 5000
So; the number of orders per year = total number of boxes per year/ boxes per order
the number of orders per year = 18000/5000
the number of orders per year = 3.6 orders per year
Finding operating and free cash flows Consider the following balance sheets and selected data from the income statement of Keith Corporation.
Keith Corporation Balance Sheets December 31
Assets 2015 2014
Cash $ 1,500 $ 1,000
Marketable securities 1,800 1,200
Accounts receivable 2,000 1,800
Inventories 2,900 2,800
Total current assets $ 8,200 $ 6,800
Gross fixed assets $ 29,500 $ 28,100
Less: Accumulated depreciation 14,700 13,100
Net fixed assets $ 14,800 $ 15,000
Total assets $ 23,000 $ 21,800
Liabilities and stockholders' equity
Accounts payable $ 1,600 $ 1,500
Notes payable 2,800 2,200
Accruals 200 300
Total current liabilities $ 4,600 $ 4,000
Long-term debt 5,000 5,000
Total liabilities $ 9,600 $ 9,000
Common stock $ 10,000 $ 10,000
Retained earnings 3,400 2,800
Total stockholders' equity $ 13,400 $ 12,800
Total liabilities and stockholders' equity $ 23,000 $ 21,800
Keith Corporation Income Statement Data (2015)
Depreciation expense $1,600
Earnings before interest and taxes (EBIT) 2,700
Interest expense 367
Net profits after taxes 1,400
Tax rate | 40%
Required
a. Calculate the firm's net operating profit after taxes (NOPAT) for the year ended December 31, 2015
b. Calculate the firm?s operating cash flow (OCF) for the year ended December 31, 2015
c. Calculate the firm?s free cash flow (FCF) for the year ended December 31, 2015
d. Interpret, compare, and contrast your cash flow estimates in parts b and c.
Answer:
a. NOPAT = EBIT * (1-t)
NOPAT = $2,700 * (1-0.40)
NOPAT = $1,620
b. OCF = NOPAT + Depreciation
OCF = $1,620 + $1,600
OCF = $3,220
c. FCF = Net fixed asset investment - Net current asset investment
FCF = $3,320 - $1,400 - $1,400
FCF = $420
Note:
Net fixed asset investment = Change in net fixed assets + depreciation
= ($14,800- $ 15,000) + $1,600
= $1,400
Net current asset investment = Change in current assets - Change in accounts payable and accurals
= ($8,200 - $6,800) - {($1,600 + $200) - ($1,500 - $300)}
= $1,400
d. FCF is meaningful as it shows that OCF is able to cover Operating expenses as well as Investment in Fixed and Current Assets
The following data regarding purchases and sales of a commodity were taken from the related perpetual inventory account:
June 1Balance 25 units at $60
6 Sale 20 units
8 Purchase 20 units at $61
16 Sale 10 units
20 Purchase 20 units at $62
23 Sale 25 units
30 Purchase 15 units at $63
Required:
Calculate the cost of the ending inventory at June 30, using (a) the first-in, first-out (FIFO) method and (b) the last-in, first-out (LIFO) method. Identify the quantity, unit price, and total cost of each lot in the inventory.
Answer:
Under LIFO:
date transaction units unit price total
1 Balance 25 $60 $1,500
6 Sale 20 $60 $1,200
8 Purchase 20 $61 $1,220
16 Sale 10 $61 $610
20 Purchase 20 $62 $1,240
23 Sale 20 $62 $1,240
23 Sale 5 $61 $305
30 Purchase 15 $63 $945
ending inventory = total purchases + beginning balance - COGS = ($1,220 + $1,240 + $945) + $1,500 - ($1,200 + $610 + $1,240 + $305) = $3,405 + $1,500 - $3,355 = $1,550
Under FIFO:
date transaction units unit price total
1 Balance 25 $60 $1,500
6 Sale 20 $60 $1,200
8 Purchase 20 $61 $1,220
16 Sale 5 $60 $300
16 Sale 5 $61 $305
20 Purchase 20 $62 $1,240
23 Sale 15 $61 $915
23 Sale 10 $62 $620
30 Purchase 15 $63 $945
ending inventory = total purchases + beginning balance - COGS = ($1,220 + $1,240 + $945) + $1,500 - ($1,200 + $300 + $305 + $915 + $620) = $3,405 + $1,500 - $3,340 = $1,565
Fallow Corporation has two separate profit centers. The following information is available for the most recent year: West Division East Division Sales (net) $ 410,000 $ 560,000 Salary expense 47,000 61,000 Cost of goods sold 143,000 259,000 The West Division occupies 10,250 square feet in the plant. The East Division occupies 6,150 square feet. Rent, which was $ 82,000 for the year, is an indirect expense and is allocated based on square footage. Compute operating income for the West Division.
Answer:
$168,750
Explanation:
The data below are extracted from the above question.
West division
Sales (S) = $410,000
Salary expense (E) = $47,000
Cost of goods sold (C) = $143,000
Proportional rent (R) = $82,000 % of square footage
Area of the division = 10,250 square feet.
Total area of both division = 10,250 + 6,150
= 16,400 square feet
Therefore, the operating income (I) for the West Division is given by the amount of sales minus salary expenses , cost of goods sold and rent.
I = S - E - C - R
= $410,000 - $47,000 - $143,000 - (82,000 × 10,250 / 16,400)
= $220,000 - $51,250
= $168,750
The yearly operating income for Fallow's Corporation West Division is $168,750.
White says, “We live in a world where success is defined by income.” Do you agree with this statement? Discuss examples in your life that support or negate this idea.
Answer:
yes i agree coz nowadays even in my family, the outsiders give more respect and praise my big brother as he earns big income
The decision that could be made regarding the statement that "In the modern world, income has turned equivalent to success" would be:
Yes.
The reason to agree with this statement is due to the increased importance that the modern world has provided to money.For example, a person is considered successful only when he earns a handsome amount while a person with a lower or average income but greater satisfaction level is considered unsuccessful. However, there is also a saying that "money can't buy happiness" which suggests that people can be sad even after having money and vice versa.Thus, it depends on the individual's perception and the way they equate success with happiness or material possessions.Learn more about "Income" here:
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Lake Incorporated purchased all of the outstanding stock of Huron Company, paying $1,000,000 cash. Lake assumed all of the liabilities. Book values and fair values of acquired assets and liabilities were: Book Value Fair Value Current assets (net) $ 190,000 $ 125,000 Property, plant, equip. (net) 650,000 765,000 Liabilities 255,000 255,000 Lake would record goodwill of
Answer:
Lake would record goodwill of $365,000
Explanation:
Fair value of net assets = Fair value of current asset + Fair value of property, plant and equipment
Fair value of net assets = $125,000 + $765,000
Fair value of net assets = $890,000
Fair market value = Fair value of net assets - Liabilities assumed
Fair market value = $890,000 - 255,000
Fair market value = $635,000
Goodwill = Consideration - Fair market value
= $1,000,000 - $635,000
= $365,000
Hence, the amount of goodwill is $365,000.
The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output 5.2 hours Standard variable overhead rate $11.60 per hour The following data pertain to operations for the last month: Actual hours 2,500 hours Actual total variable manufacturing overhead cost $29,590 Actual output 150 units What is the variable overhead efficiency variance for the month?
Answer:
Variable overhead efficiency variance= $19,952 unfavorable
Explanation:
Giving the following information:
Standard hours per unit of output 5.2 hours
Standard variable overhead rate $11.60 per hour
Actual hours 2,500 hours
Actual output of 150 units
To calculate the variable overhead efficiency variance, we need to use the following formula:
Variable overhead efficiency variance= (Standard Quantity - Actual Quantity)*Standard rate
Standard quantity= 5.2*150= 780
Variable overhead efficiency variance= (780 - 2,500)*11.6
Variable overhead efficiency variance= $19,952 unfavorable
A seller has accepted another offer, but your client doesn't want to give up. Even now, she can submit an offer to the seller, called a:
Answer: b. backup offer
Explanation:
A backup offer is one that is made when an offer has already been made by another. With a backup offer, the person offering it is acknowledging that someone else has made another offer that was accepted but they still offer this in case the accepted offer falls through for whatever reason.
If the seller accepts this offer, they will have a contract with the person offering that legally obliges them to sell the good in question to the person offering if the current offer is not honored.
On December 31, 2016, when its Allowance for Doubtful Accounts had a debit balance of $1,432, Sunland Company estimates that 9% of its accounts receivable balance of $105,900 will become uncollectible and records the necessary adjustment to Allowance for Doubtful Accounts. On May 11, 2017, Sunland Company determined that B. Jared’s account was uncollectible and wrote off $1,091. On June 12, 2017, Jared paid the amount previously written off.Required:Prepare the journal entries on December 31, 2016, May 11, 2017, and June 12, 2017.
Answer: Please see explanation column for answers
Explanation:
1) To record bad debts expense
Date Account Debit Credit
Dec 31, 2016 Bad Debt Expense $10,963
Allowance for doubtful account $10,963
Calculation ;
Bad debts expense
9% x $105,900 = $9,531
Adjustment= $9,531 + debit balance of $1,432=$10,963
2) To write off uncollectible accounts receivables
Date Account Debit Credit
May 11, 2017 Allowance for doubtful account $1,091.
Accounts receivable--- B. Jared $1,091.
3) To reinstate accounts accounts previously written off
Date Account Debit Credit
June 12, 2017 Accounts receivable--- B. Jared $1,091.
Allowance for doubtful account $1,091.
3b)to collect cash from receivables
Date Account Debit Credit
June 12, 2017 Cash $1,091.
Accounts receivable--- B. Jared $1,091.
Tameika Johnson’s supervisor is in charge of the arrangements for the annual company party. He has given Johnson the responsibility for finding a caterer for the event, arranging the entertainment, and selecting the door prizes. Johnson’s supervisor used _____ to make her accountable for most of the success or failure of the picnic.
Answer: delegation of authority
Explanation:
From the question, we are informed that Tameika Johnson’s supervisor is in charge of the arrangements for the annual company party and that he has given Johnson the responsibility for finding a caterer for the event, arranging the entertainment, and selecting the door prizes.
In this scenario, the outcome of the picnic has already been delegated to Johnson because the job role has been shared to him.
g A decrease in the basis will __________ a long hedge and __________ a short hedger. Group of answer choices hurt; hurt hurt; benefit benefit; have no effect upon benefit; benefit benefit; hurt
Answer:
1. hurt
2. benefit
Explanation:
Given that a contract and an asset are to be converted in cash early, this implies that, basis risk exists and futures price and spot price should not move in lockstep before delivery date. However, a reduction in the basis will then hurt the long hedger and benefit the short hedger.
Hence, considering the nature of the hypothetical situation, a decrease in the basis will HURT a long hedge and BENEFIT a short hedge.
A one-month summary of manufacturing costs for Rapid Routers Company follows.
Direct materials $40,000
Direct labour 20,000
Material handling costs 1,500
Product inspection and rework 2,000
Materials purchasing and inspection 500
Routine maintenance and equipment servicing 1,200
Repair of equipment 300
Required:
Classify each cost as value-added or non-value-added
Answer:
Cost Classification
Direct materials Value added
Direct labor Value added
Material handling costs Non-value added
Product inspection and rework Non-value added
Materials purchasing and inspection Value added
Routine maintenance and equipment Non-value added
servicing
Repair of equipment Non-value added
The involvement by a company in more than one of the activities in the entire value chain from development through production, distribution, sales, and after-sales service is called ________. opportunity cost vertical integration relevant cost avoidable cost
Answer: vertical integration
Explanation: The integrating (to include as a constituent part or functionality) of successive stages in the production and marketing process under the ownership or control of a single management organization is known as vertical integration. As such, such a firm is usually involved in various activities in the entire value chain. This helps it reduce costs, ensure tighter quality control, as well as ensuring a better flow and control of information across the value chain.
Compute the new national income given MPC = 0.9, and an autonomous injection of $100B from federal government stimulus spending.
Answer:1200
Explanation:
The new national income is given MPC = 0.9, and an autonomous injection of $100B from federal government stimulus spending will be 1000.
What is stimulus spending?To stimulate a market and pull it out of an economic downturn or depression, the government will boost expenditure while lowering taxes as asset prices. This is known as a stimulus package.
The term "economic stimulus" refers to focused monetary and financial actions designed to spur business activity in the private sector. To compensate for the decline in aggregate demand, fiscal recovery focuses on promoting private sector expenditure.
The MPC is given as 0.9
The MPS will be
1 = MPC + MPS
1 - 0.9
MPS = 0.1
The stimulus spending will be
= 1000 / 0.1
= $10000
The federal government has spent of $10000.
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Which of the following is not a good example of a marketing-related key success factor?
A. a well-known and well-respected brand name
B. breadth of product line and product selection
C. proven ability to improve production processes
D. clever advertising
E. courteous, personalized customer service
Answer: A. a well-known and well-respected brand name
Explanation:
Good examples of a marketing-related key success factor include breadth of product line and product selection, proven ability to improve production processes, clever advertising and courteous, personalized customer service.
Therefore, a well-known and well-respected brand name is not among the options for Marketing related success factors.
S Corporation makes 50,000 motors to be used in the production of its sewing machines. The average cost per motor at this level of activity is: Direct materials $ 10.90 Direct labor $ 9.90 Variable manufacturing overhead $ 4.15 Fixed manufacturing overhead $ 5.10 An outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to S Corporation for this motor is $28.15. If S Corporation decides not to make the motors, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. Direct labor is a variable cost in this company. The annual financial advantage (disadvantage) for the company as a result of making the motors rather than buying them from the outside supplier would be: Multiple Choice $160,000 $367,500 ($95,000) $255,000
Answer:
If the company makes the motors, it will save $160,000.
Explanation:
Giving the following information:
Production= 50,000 units
Production costs:
Direct materials $10.90
Direct labor $9.90
Variable manufacturing overhead $4.15
The price offered to S Corporation for this motor is $28.15.
We will take into account only the avoidable costs:
Make in-house:
Total cost= 50,000*(10.9 + 9.9 + 4.15)= $1,247,500
Buy:
Total cost= 50,000*28.15= $1,407,500
If the company makes the motors, it will save $160,000.
Using the periodic FIFO inventory costing method, what is the cost of the ending inventory? (Assume all sales were made on the last day of the month.) Multiple Choice $3,405. $3,445. $3,200. $3,540. $3,270.
Answer:
The question is incomplete, below is the completed question:
A company had the following purchases and sales during its first year of operations:
January: Purchases 10 units at $120-sales 6 units
February: Purchases 20 units at $125-sales 5 units
May: Purchases 15 units at $130-sales 9 units
September: Purchases 12 units at $135-sales 8 units
November: Purchases 10 units at $140-sales 13 units
On December 31, there were 26 units remaining in ending inventory. Using the periodic FIFO inventory costing method, what is the cost of the ending inventory? (Assume all sales were made on the last day of the month.) Multiple Choice $3,405. $3,445. $3,200. $3,540. $3,270.
Answer:
The cost of ending inventory = $3,540
Explanation:
FIFO (First-in-first-out) inventory costing method is a costing method where the goods purchased first are sold first before those purchased at a later date.
In order to answer this question, let us first determine the total number of units of goods purchased during the year
Month units
January 10
February 20
May 15
September 12
November 10
Total 67
Therefore a total of 67 units were purchased during the year.
Next, we are told that the ending inventory balance = 26 units
Therefore the number of units sold during the year = Total purchase - ending inventory = 67 - 26 = 41
41 units were sold during the year.
using the FIFO inventory method, the units purchased first are sold out first therefore, out of the 41 units sold:
January = 10 units
February = 15 units
May = 11 units
Total = 41 units
This means that out of the 15 unit purchased in may, 11 units were sold, hence the number of units remaining = 15 - 11 = 4 units.
From this point up to November, forms the ending iniventory therefore, the the total ending inventory is calculated as follows:
Month units price per unit($) Total($)
May 4 130 520
September 12 135 1,620
November 10 140 1,400
Total 26 3,540
Therefore, the cost of ending inventory = $3,540
the frequency of deposits of federal income taxes withheld and social security and medicare taxes is
Answer: A) amount of the tax liability.
Explanation:
Federal taxes like income taxes withheld and social security and Medicare taxes are mandated to be paid by the IRS depending on the amount of tax liability that is owed.
For 2020 for instance, if in a company's tax lookback period it owed $50,000 or less than $50,000 in tax liability, the company should be a monthly depositor. If however, the company owed more than $50,000 then it is to be a semi-weekly depositor.
Answer:
✓ amount of the tax liability.
Explanation:
The frequency of deposits of federal income taxes withheld and social security and Medicare taxes is most dependent on the:
You, as the team leader, were not aware of the concerns of the Marketing Department, although certain members of your team have known about the concerns for some time. Which symptom of Groupthink (Irving Janis) may your team be displaying
Answer:
Self-Appointed Mindguards
Explanation:
This is an incomplete information
Irving Janis identified eight symptoms of Groupthink: Illusion of Invulnerability, Belief of Inherent Morality of the Group, Collective Rationalization, Out-group Stereotypes, Self-Censorship, Illusion of Unanimity, Direct Pressure on Dissenters, and Self-Appointed Mindguards. You are leading a Decision Making Team and suspect that your team may be suffering from Groupthink. Identify which symptom your team may be displaying.Group of answer choices Self-Appointed Mindguards. Belief in Inherent Morality of the Group. Illusion of Unanimity. Self-Censorship.
The self-appointed mind guards refer to the actions where the company or community members or both secure their group that contains the contradicting views and decisions
here, in the given situation, as a team leader, you dont know the concerns but your team is known about the concerns
So this symptom reflects the self-appointed mind guards
Calculate the future value of an investment of $463 for 10 years earning an interest of 9%? (Round your answers to 2 decimal places.)
Answer:
$1,096.09
Explanation:
The computation of the future value by using the following formula is shown below:
As we know that
Future value = Present value × (1 + interest rate)^number of years
= $463 × (1 + 0.09)^10
= $463 × 2.367363675
= $1,096.09
We simply applied the above formula so that the future value could arrive and the same is to be considered
A bank that uses a computer system to record deposits and withdrawals from its customers' checking accounts is using a(n):
Answer: transaction processing system
Explanation:
A bank that uses a computer system to record deposits and withdrawals from its customers' checking accounts is using a transaction processing system.
Transaction processing system is when the system is used in the processing of transactions and data is being sent and recorded in the system.
Unlike direct materials, the sum of all the direct labor variances is always equal to the flexible budget variance.
A. True
B. False
Answer:
A. True
Explanation:
Unlike direct materials, the sum of all the direct labor variances is always equal to the flexible budget variance. Also, a negative direct labor efficiency variance is considered favorable one. And for a direct labor, if the efficiency and rate variances are both negative, then the flexible budget variance will be unfavorable. Therefore, the statement of the question is true.
Net present value method The following data are accumulated by Geddes Company in evaluating the purchase of $160,000 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $43,500 $83,500 Year 2 23,000 63,000 Year 3 13,500 53,500 Year 4 6,500 46,500 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet Assuming that the desired rate of return is 12%, determine the net present value for the proposal. If required, round to the nearest dollar. Net present value $ 86,500 Would management be likely to look with favor on the proposal
Answer:
A.$32,396
B. Yes
Explanation
A. Calculation to determine the net present value for the proposal
Year Net Cash Flow Present value Discounting factor at 12% Discounted Cash Flow
1 $ 83,500.00 0.893 $ 74,565.50
2 $63,000.00 0.797 $ 50,211.00
3 $ 53,500.00 0.713 $ 38,145.50
4 $ 46,500.00 0.636 $ 29,574.00
Present value of net cash flows $ 192,496.00
Amount to be invested $ 160,000.00
Net Present Value $ 32,496
Net Present Value $ 32,496/Amount to be invested $160,000.00 =0.2031*100
=20.31%
B.Yes the management would likely to look with favor on the proposal because the net present value of 20.31% is higher than the expected rate of return of 12%.
A customer owns a long-term negotiable CD. If the customer wishes to tender the CD prior to maturity, the registered representative should inform the customer that:
Complete Question:
A customer owns a long-term negotiable CD. If the customer wishes to tender the CD prior to maturity, the registered representative should inform the customer that:
A. a prepayment penalty will be charged
B. he or she will receive par value of the principal plus accrued interest
C. the CD may not be redeemed prior to maturity
D. the customer will receive the market value plus accrued interest
Answer:
D. the customer will receive the market value plus accrued interest.
Explanation:
In this scenario, a customer owns a long-term negotiable certificate of deposit (CD). If the customer wishes to tender the CD prior to maturity, the registered representative should inform the customer that the customer will receive the market value plus accrued interest.
Generally, in the stock markets when a customer wishes to withdraw his or her funds on any brokered CD, there are no penalties for such actions or choice. The registered representative should pro-rate the amount of interest earned by the customer over the period of time for the deposit.
True or False: The modern view of the Phillips curve indicates that to keep the unemployment rate low, policymakers should aggressively fight inflation to rapidly lower the inflation rate.
Answer:
False
Explanation:
False, the given statement is false because the Philips curve shows the inverse relationship between the inflation rate and unemployment. If the curve represents the inflation on the verticle axis and unemployment on the horizontal axis, then we can see that if the inflation rises, then unemployment falls. However, if inflation falls, then unemployment rises. Therefore, if the government wants to keep the unemployment low then it should fight with inflation.
Carter & Carter is considering setting up a regional lockbox system to speed up collections. The company sells to customers all over the U.S., and all receipts come in to its headquarters in San Francisco. The firm's average accounts receivable balance is $2.5 million, and they are financed by a bank loan at an 11% annual interest rate. The firm believes this new lockbox system would reduce receivables by 20%. If the annual cost of the system is $15,000, what pre-tax net annual savings would be realized? a. $32,400 b. $29,160 c. $40,000 d. $44,000 e. $36,000
Answer:
c. $40,000
Explanation:
Reduction in Account Receivables $500,000
($2,500,000 * 20%)
* Interest rate 11%
Annual saving $55,000
Less: Annual cost of system -$15,000
Pretax Net annual savings $40,000
Wookie Company issues 8%, five-year bonds, on January 1 of this year, with a par value of $108,000 and semiannual interest payments.
Semiannual Period-End Unamortized Premium Carrying Value
(0) January 1, issuance $8,271 $116,271
(1) June 30, first payment 7,444 115,444
(2) December 31, second payment 6,617 114,617
Use the above straight-line bond amortization table and prepare journal entries for the following:
a) The issuance of bonds on January 1.
b) The first interest payment on June 30.
c) The second interest payment on December 31.
Answer:
See the journal entries and explanation below.
Explanation:
The journal entries will look as follows
a) The issuance of bonds on January 1.
Date Accounts title Debit ($) Credit ($)
Jan. 1 Cash 111,671
Premium on Bonds Payable 8,271
Bonds Payable (w.1) 108,000
(To record issuance of bonds.)
b) The first interest payment on June 30.
Date Accounts title Debit ($) Credit ($)
Jun. 30 Interest Expense (w.4) 3,493
Premium on Bonds Payable (w.2) 827
Cash (w.3) 4,320
(To record first interest payment)
c) The second interest payment on December 31.
Date Accounts title Debit ($) Credit ($)
Dec. 31 Interest Expense (w.4) 3,493
Premium on Bonds Payable (w.5) 827
Cash (w.6) 4,320
(To record second interest payment)
Workings:
w.1: Bond payable = Cash - Premium on Bonds Payable = $111,671 - $8,271
w.2: Premium on Bonds Payable = January 1 Unamortized Premium - June 30 Unamortized Premium = $8,271 - $7,444 = $827
w.3: Cash = $108,000 * 8% * (6 / 12) = $4,320
w.4: Interest expense = w.3 - w.2 = $4,320 - $827 = $3.493
w.5: Premium on Bonds Payable = June 30 1 Unamortized Premium - December 31 Unamortized Premium = $7,444 - $6,617 = $827
w.6: Cash = $108,000 * 8% * (6 / 12) = $4,320
w.7: Interest expense = w.6 - w.5 = $4,320 - $827 = $3,493
Akram owns a small farm. He employs 80 workers in the field and has recently hired a manager to help him manage the farm. The income of the business varies greatly during the year. The farm makes a small profit but Akram is ambitious. He wants to take over a neighbour’s farm and increase the range of crops he sells. He thinks that he needs long-term finance and plans to take out bank loan to pay for the takeover. He has already borrowed money to buy a new tractor. A friend has advised him to form a company and sell shares
Question Completion:
Requirement. Identity two types of short-term finance Akram could use when the farm income is low
Answer:
Akram's Farm
Akram's farm can make good use of the following short-term financing sources:
1. Akram's farm can use Accounts Payable to provide short-term trade finance when the farm buys farm inputs, equipment, and other supplies on credit. The farm's Accounts Payable can provide interest-free trade loans by allowing the farm to take longer time to settle the suppliers. But, the farm should not miss out on cash discounts - an important source of trade finance.
2. Akram's farm can generate finances by ensuring early collections of the Accounts Receivable. Akram's farm can also go ahead and borrow on the accounts receivable through short-term bank loans guaranteed on the accounts. The farm can also factor the accounts receivable by selling them to factoring and finance houses for less.
Explanation:
Akram's farm is still a small farm that is not yet formed as a company. The immediate concentration is growing the entity and starting the processes for changing its corporate status so that it can take advantage of the sources of finance available to companies.
