Answer:
Net Present Value = $660.98
Explanation:
The Net present value (NPV) is the difference between the Present value (PV) of cash inflows and the PV of cash outflows. A positive NPV implies a good and profitable investment project and a negative figure implies the opposite.
NPV of an investment:
NPV = PV of Cash inflows - PV of cash outflow
PV of cash inflow = A× (1- (1+r)^(-n))/r
A- annul cash inflow, r- 8%, n- 3
PV of cash inflow= 41,000× (1- 1.08^(-3))/0.08
= 105,660.98
Initial cost = 105,000
NPV = 105,660.98 - 105,000
= $ 660.98
Martha Gentry won a $16,800,000 lottery and elected to receive her winnings in 30 equal annual installments. After receiving the first 10 installments, Martha and her husband divorced, and the remaining 20 payments became part of the property settlement. The judge who presided over the divorce proceedings awarded one-half interest in the future lottery payments to Martha and the other half to her ex-husband. Following the divorce, Martha decided to sell her interest in the 20 remaining lottery payments to raise the cash needed to open a flower store. An investor has offered Martha $2,555,980.What discount rate did the investor use in calculating the purchase price?
Answer:
Discount Rate = 9%
Explanation:
Martha won: $16,800,000
Number of installments = 30
The annual payment = amount won/ number of installments
= 16,800,000 / 30 = $560,000
___________________________
Individual share of 50% each = $560,000 * 50% = $280,000
Since the investor offered Martha $2,555,980 which is the future value for the remaining period of 20 years, we have:
Future Value = Present Value x PVAF (I, 20 Years)
$2,555,980 = $280,000 × PVIFA (I, 20 years)
PVIFA (I, 20 years) = 2555980/280000
PVIFA (I, 20 years) = 9.1285
From Present value annuity Tables, the factor value for 20 years 9.1285 is for 9%
Therefore, the discount rate the investor used in calculating the purchase price is 9%
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $17 per share dividend 10 years from today and will increase the dividend by 3.9 percent per year thereafter. If the required return on this stock is 12.5 percent, what is the current share price
Answer:
$68.48
Explanation:
We have a stock that pays no dividends for 9years. Once the stock begins paying dividends, it will have a constant growth rate of dividends. We can use the constant growth model at that point. It is important to remember that general constant dividend growth formula is:Pt= [Dt× (1 + g)] / (R− g)This means that since we will use the dividend in Year 9, we will be finding the stock price in Year 10. The dividend growth model is similar to the PVA and the PV of a perpetuity: The equation gives you the PV one period before the first payment. So, the price of the stock in Year 10 will be:P9= D10/ (R− g) = $17 / (12.5/100 − 3.9/100) = $197.67
The price of the stock today is simply the PV of the stock price in the future. We simply discount the future stock price at the required return. The price of the stock today will be:P0= $197.67/ 1.125^9= $68.48
Good Investments Company forecasts a $1.74 dividend for 2017, $1.87 dividend for 2018 and a $1.98 dividend for 2019 for Mountain Vacations Corporation. For all years after 2019, Good Investments Company forecasts that Mountain Vacations will pay a $2.10 dividend. Using the dividend discount valuation model determine the intrinsic value of Mountain Vacations Corporation, assuming the company's cost of equity capital is 7%. Select one: A. $24.48 B. $18.12 C. $27.91 D. $29.37
Answer:
The correct option is D,$29.37
Explanation:
The intrinsic value of the company is the present value of the dividends plus the present value of the terminal value in year 3
present of dividends=$1.74/(1+7%)+$1.87/(1+7%)^2+$1.98/(1+7%)^3=$ 4.88
Terminal value=dividend after year /cost of capital
=$2.10/7%=$30
present value of terminal value=$30 /(1+7%)^3=$ 24.49
Note that the discount factor of year 3 is applicable to the terminal value as well.
sum of present value of dividends and terminal value=$ 24.49+$4.88=$29.37
Santos Co. is preparing a cash budget for February. The company has $18,000 cash at the beginning of February and anticipates $66,000 in cash receipts and $116,000 in cash disbursements during February. What amount, if any, must the company borrow during February to maintain a $5,000 cash balance? The company has no loans outstanding on February 1. (Negative cash balances, if any, should be indicated with minus sign.)
Answer:
$5,000
Explanation:
The computation of Ending Cash balance is shown below:-
Financing
Preliminary cash Balance = Beginning cash balance + Cash receipt - Cash Disbursement + Financing
= $18,000 + $66,000 - $116,000
= -$32,000
Financing = Preliminary cash Balance + Minimum Cash Balance Required
= $32,000 + $5,000
= $37,000
Ending cash balance = Financing - Preliminary cash Balance
= $37,000 - $32,000
= $5,000
The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense. Accounts receivable$434,000Debit Allowance for Doubtful Accounts 1,360Debit Net Sales 2,210,000Credit All sales are made on credit. Based on past experience, the company estimates 3.0% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense
Answer:
The adjusting entry to be made at the end of the current year to record its estimated bad debts expense will be:
Debit Bad debt expense $67,660
Credit Allowance for doubtful accounts $67,660
(To record bad debt expense)
Explanation:
The company uses the percent of sales method to determine its bad debts expense.
3.0% of credit sales ($2,210,000) = $66,300
Balance in Allowance for Doubtful Accounts $1,360 Debit
Required bad debt expense = $66,300 + $1,360 = $67,660
The addition of the opening debit balance is necessary in order to reinstate the allowance account to $66,300.
Craigmont uses the allowance method to account for uncollectible accounts. Its year-end unadjusted trial balance shows Accounts Receivable of $154,500, allowance for doubtful accounts of $1,165 (credit) and sales of $1,175,000. If uncollectible accounts are estimated to be 0.5% of sales, what is the amount of the bad debts expense adjusting entry?
Answer:
$4,710
Explanation:
The computation of bad debts expense adjusting entry is shown below:-
Bad debts expense adjusting entry = Sales + Uncollectible allowances - Balance in allowance for doubtful accounts
= ($1,175,000 × 0.5%) - $1,165
= $5,875 - $1,165
= $4,710
Therefore for computing the bad debts expense adjusting entry we simply applied the above formula.
The adjusting entry is shown below:-
Bad Debt A/c Dr, $4,710
To Allowance for Doubtful Debts $4,710
(Being bad debt account is recorded)
Simon graduated from Lessard University last year. He financed his education by working part-time and borrowing $16,000. During the current year, he pays $1,400 of interest on his student loan. a. If his adjusted gross income is $33,000, Simon can deduct $ of student loan interest. b. If his adjusted gross income is $77,000, Simon can deduct $
Answer:
a.
$1,400
b.
$280
Explanation:
According to Internal Revenue code the interest expense can only be deductible as adjusted gross income deduction, if the qualified education loan is used only for study credit, higher educational expenses like enrollment in the course, cost of books and accommodation cost.
a.
The maximum allowable interest deduction is $2,500.
Amount of Interest paid on the educational loan $1,400
Allowable deduction is Lesser of
maximum allowable interest deduction of $2,500.Interest Payment on educational loan of $1,400.b.
Adjusted Gross Income $77,000
Formula
Educational Interest rate = (AGI - $65,000) / $15,000
Placing values in the formula
Educational Interest rate = ($77,000 - $65,000) / $15,000
Educational Interest rate = 1.13 = 0.8%
Allowable interest deduction = [ (lesser of interest deduction or interest payment on the educational loan) x ( 1 - Educational interest rate)
Allowable interest deduction = $1,400 x ( 1 - 0.8 ) = $280
You are planning your retirement in 10 years. You currently have $171,000 in a bond account and $611,000 in a stock account. You plan to add $6,900 per year at the end of each of the next 10 years to your bond account. The stock account will earn a return of 11.25 percent and the bond account will earn a return of 7.75 percent. When you retire, you plan to withdraw an equal amount for each of the next 24 years at the end of each year and have nothing left. Additionally, when you retire you will transfer your money to an account that earns 7 percent.How much can you withdraw each year in your retirement?
Answer :
$194,767.71
Explanation :
As per the data given in the question,
Future value of ordinary annuity = C × [(1+i)^n - 1 ÷ i]
value of bond = $171,000 × (1+0.0775)^10 + $6,900 × ((1+0.0775)^10 - 1) ÷ 0.0775
= $360,718.90 + $98,778.37
= $459,497.27
Now
Future value of stock = $6,11000 × (1+0.1125)^10
= $1,774,358.645
Combined value = $459,497.27 + $1,774,358.645
= $2,233,855.92
After solving this, we need to apply the PMT formula for yearly payment i.e to be shown below
NPER = 24 years
RATE = 7%
PV = $2,233,855.92
FV= 0
The formula is shown below:
= PMT(RATE;NPER;-PV;FV;0)
The present value comes in negative
After applying the above formula, the yearly payment is $194,767.71
. Homer Simpson wins a lottery prize. As a result, the Simpson family increases its consumption by $1,000 at each level of after-tax income. ("Income" does not include the prize money.) How does this change affect their consumption function?
Answer:
Their consumption function would shift upwards
Explanation:
Their consumption function shifts upward because the lottery prize has given them an autonomous consumption of $1000. This prize is independent of income. At each level of income, consumption rises by $1000. Causing consumption spending to be shifted upward by $1000. The marginal propensity to consume is unaffected because increase in consumption is the same at each level of disposable income.
A personal business letter is written by an individual to a company for resolving issues related to an unexpected error on a bill, for refunding of defected products, or poor services. So, assuming you are complaining with XYZ Company, write a professional Complaint Letter. To XYZ Company?
Answer:
See the explanation below.
Explanation:
62, Charlton Street,
Ibadan, Oyo State,
Nigeria.
14 May 2020.
The Accounting Officer,
XYZ Company,
Ibadan, Oyo State,
Nigeria.
Dear Sir,
Complaint Lodgment Over an Unexpected Error in My Bill
This is to bring to your notice an unexpected error of $9 over charge in the consumable items I purchased from your store yesterday, 13 May 2020.
From my recalculation of the total amount for the purchased item, I could observed that the error was due to a transposition of figure by your cashier; he charged me a total sum of $76 instead of $67.
Copies of the invoice and the payment receipt for the items are hereby attached to this letter for your verification. After your verification, kindly get back to me so that I can come to your office for the refund.
I look forward to receiving your usual timely response.
Yours sincerely,
Amcool.
The corporate charter of Llama Co. authorized the issuance of 12 million, $1 par common shares. During 2021, its first year of operations, Llama had the following transactions: January 1 sold 10 million shares at $17 per share June 3 purchased 4 million shares of treasury stock at $20 per share December 28 sold the 4 million shares of treasury stock at $22 per share What amount should Llama report as additional paid-in capital in its December 31, 2021, balance sheet
Answer:
$168 million
Explanation:
Additional Paid-in-Capital is the amount of capital received on the issuance of stock over its par value. Additional paid-in-capital is normally received against the issuance of common shares, preferred share and treasury share.
In this question Company made the following transaction.
January 1, 2021
As we Know Par value of the share is $1 any amount excess of this value will be added in additional paid-in-capital account.
Additional Paid-in-Capital = 10 million x ( $17 - $1 ) = $160 million
December 28, 2021
Additional Paid-in-Capital = 4 million x ($22-$20) = $8 million
Total Additional Paid-in-Capital = $160 million + $8 million = $168 million
Final answer:
Llama Co. should report $160 million as additional paid-in capital on its December 31, 2021, balance sheet.
Explanation:
In this case, we are asked to determine the amount of additional paid-in capital that Llama Co. should report in its December 31, 2021, balance sheet.
Additional paid-in capital is the excess amount that a company receives when issuing shares of stock above the par value of the stock.
To calculate the additional paid-in capital, we need to determine the total amount received from the sale of the common shares and subtract the par value of the shares. In this case, Llama Co. sold 10 million shares at $17 per share. The par value of each share is $1.
Therefore, the total amount received from the sale is 10 million shares x $17 per share = $170 million.
The par value of the shares is 10 million shares x $1 per share = $10 million.
Therefore, the additional paid-in capital is $170 million - $10 million = $160 million.
Ceramics produces large planters to be used in urban landscaping projects. A special earth clay is used to make the planters. The standard quantity of clay used for each planter is 24 pounds. The company uses a standard cost of $ 2.15 per pound of clay. Lily produced 3,000 planters in May. In that month, 75,000 pounds of clay were purchased and used at the total cost of $ 153,000. Requirement 1. Calculate the direct material price variance. Begin by determining the formula for the price variance, then compute the price variance for the direct materials. 2. Calculate the direct material quantity variance. Determine the formula for the quantity variance, then compute the quantity variance for the direct materials.
Answer:
Instructions are below.
Explanation:
Giving the following information:
The standard quantity of clay used for each planter is 24 pounds. The company uses a standard cost of $ 2.15 per pound of clay. Lily produced 3,000 planters in May. In that month, 75,000 pounds of clay were purchased and used at the total cost of $ 153,000.
To calculate the direct material price and quantity variance, we need to use the following formulas:
Direct material price variance= (standard price - actual price)*actual quantity
Actual price= 153,000/75,000= $2.04
Direct material price variance= (2.15 - 2.04)*75,000
Direct material price variance= $8,250 favorable
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Standard quantity= 3,000*24= 72,000 pounds
Direct material quantity variance= (72,000 - 75,000)*2.15
Direct material quantity variance= $6,450 unfavorable
Vaughn’s Manufacturing Company can make 100 units of a necessary component part with the following costs: Direct Materials $127000 Direct Labor 32000 Variable Overhead 44000 Fixed Overhead 30000 If Vaughn’s Manufacturing Company can purchase the component externally for $205000 and only $4000 of the fixed costs can be avoided, what is the correct make-or-buy decision? Buy and save $2000 Make and save $16000 Buy and save $16000 Make and save $2000
Answer:
Buy and save $2000
Explanation:
Vaughn’s Manufacturing Company
Differential Analysis
Make Buy
Direct Materials $127000
Direct Labor 32000
Variable Overhead 44000
Fixed Overhead 30000 26000
Purchasing Cost $205000
Total 233,000 231,000
From the above we see that the total costs to make are $ 233,000 and purchasing costs are $ 231,000. There's a difference of $ 2,000 so buying and saving $ 2000 is the correct option.
$ 26,000 ( 30000- 4000) are irrelevant costs that will continue whether the product is purchased or made.
3) Nerdware Corp. began a new software development project in 2017. The project reached technological feasibility on June 30, 2018, and was available for release to customers at the beginning of 2019. Development costs incurred prior to June 30, 2018, were $5,000,000 and costs incurred from June 30 to the product release date were $1,700,000. The 2019 revenues from the sale of the new software were $5,000,000, and the company anticipates additional revenues of $6,500,000. The economic life of the software is estimated at four years. Amortization of the software development costs for the year 2019 would be:
Answer:
$739,160.00
Explanation:
The amount of amortization recorded in 2019 would reflect the sales revenue made in 2019.
The appropriate way to calculate the amortization charge each year is to divide the year's revenue by total revenue expected from the software over the four-year period,then multiply by the cost incurred on the software from the day the project reached technological feasibility till the date of product release as shown below
% of cost amortized in 2019=$5,000,000/($5,000,000+$6,500,000)=43.48%
Amortization in 2019=43.48%*$1,700,000=$739,160.00
The cost incurred to the date of technological feasibility should be expensed to profit or loss account
Answer:
506.09
Explanation:
i think this is right
Caroline is working for a marketing firm making $60,000 per year but considers starting her own marketing company. Caroline has determined that to launch the business, she needs to invest $100,000 of her own funds. The annual cost of running the business will include $75,000 for the rent of the office space, $190,000 for employee wages, and $6,000 for materials and utilities. Caroline plans to manage the business, which means that she will have to quit her current job. Suppose that the interest rate (or rate of return) on investments in the economy is 6%.
Caroline's total implicit cost per year is .
Answer:
$66,000
Explanation:
The computation of the total implicit cost per year is shown below:
= Given up salary + investment amount × interest rate on investment in the economy
= $60,000 + $100,000 × 6%
= $60,000 + $6,000
= $66,000
We simply added the given up salary and investment amount after considering the interest rate on investment so that the accurate amount could come
Final answer:
Caroline's total implicit costs per year amount to $66,000, which includes her foregone salary of $60,000 and the investment income of $6,000 she would have earned from her $100,000 at a 6% interest rate.
Explanation:
To calculate Caroline's total implicit costs per year, we need to consider the opportunity costs of her decision to start her own marketing firm. Implicit costs are those costs that represent foregone opportunities, such as the income she would have earned if she did not start the business. In Caroline's case, the foregone salary from her current job ($60,000) and the foregone investment income on her own funds ($100,000 invested at a 6% return rate, which equals $6,000) are her implicit costs.
Therefore, Caroline's total implicit cost per year is her foregone salary plus her foregone investment income:
$60,000 (foregone salary) + $6,000 (foregone investment income) = $66,000 (total implicit cost per year)
Frick Road Paving Corporation is considering an investment in a curb-forming machine. The machine will cost $180,000, will last 10 years, and will have a $30,000 salvage value at the end of 10 years. The machine is expected to generate net cash inflows of $40,000 per year in each of the 10 years. Frick's discount rate is 10%. The net present value of the proposed investment is closest to:
Answer:
$77,348.98
Explanation:
The net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
Cash flow in year 0 = $-180,000
Cash flow each year from year 1 to 9 = $40,000
Cash flow in year 10 = $40,000 + $30,000 = $70,000
I =10%
NPV = $77,348.98
To find the NPV using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
I hope my answer helps you
To find the Net Present Value (NPV) of the curb-forming machine investment, we calculate the present value of the annual net cash inflows and the salvage value using the given discount rate, and then subtract the initial investment cost. This financial calculation helps assess the investment's profitability over the machine's life.
The question revolves around calculating the Net Present Value (NPV) of investing in a curb-forming machine by Frick Road Paving Corporation. To find the NPV, we must consider the initial investment cost, annual net cash inflows, the salvage value at the end of the machine's life, and the discount rate. The formula for NPV is:
NPV = (Sum of Present Value of Cash Inflows over n years) - Initial Investment
Using the given details:
Cost of the machine: $180,000Annual net cash inflow: $40,000 for each of 10 yearsSalvage value at the end of 10 years: $30,000Discount rate: 10%First, calculate the present value of annual cash inflows and the salvage value. Then, subtract the initial cost of the machine to get the NPV.The steps are as follows:
Calculate the present value (PV) of $40,000 annual inflows for each of the 10 years.Calculate the PV of the $30,000 salvage value.Sum these present values.Subtract the initial investment of $180,000 from this sum to find the NPV.This approach, using the given discount rate and cash flows, allows us to evaluate the investment's profitability accurately. It is important for businesses to use such financial metrics to make informed decisions regarding their capital investments.Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November. Sales (7,100 units) $ 326,600 Variable expenses 184,600 Contribution margin 142,000 Fixed expenses 103,500 Net operating income $ 38,500 If the company sells 7,000 units, its net operating income should be closest to: (Do not round intermediate calculations.)
Answer:
Instructions are below.
Explanation:
Giving the following information:
Sales (7,100 units) $ 326,600
Variable expenses 184,600
Contribution margin 142,000
Fixed expenses 103,500
Firsts, we need to calculate the selling price and unitary varaible cost:
Selling price= 326,600/7,100= $46
Unitary variable cost= 184,600/7,100= $26
For 7,000 units:
Sales= (7,000*46)= 322,000
Variable cost= (7,000*26)= (182,000)
Total contribution margin= 140,000
Fixed costs= (103,500 )
Net operating income= 36,500
Northern purchased the entire business of Southern including all its assets and liabilities for $600,000. Below is information related to the two companies Northern Fair value of assets $1,050,000 $800,000 575,000 Fair value of liabilities 300,000 Reported assets 800,000 650,000 Reported liabilities 500,000 250,000 Net Income for the year 50,000 60,000 How much goodwill did Northern pay for acquiring Southen?
A) $300,000.
B) $200,000
C) $150,000.
D) $100,000
Answer:
D) $100,000
Explanation:
As per the given question the solution of goodwill is provided below:-
To reach at goodwill first we need to find out the fair value of net assets which is here below:-
Fair value of Net assets = Fair value of assets - Fair value of liabilities
= $800,000 - $300,000
= $500,000
Goodwill = Price paid - Acquired Fair value of net assets
= $600,000 - $500,000
= $100,000
So, we have calculated the goodwill by deducting the acquired Fair value of net assets from price paid.
Consider a $1,000 par value bond with a 9% annual coupon. The bond pays interest annually. There are 20 years remaining until maturity. You have expectations that in 5 years the YTM on a 15-year bond with similar risk will be 7.5%. You plan to purchase the bond now and hold it for 5 years. Your required return on this bond is 10%. How much would you be willing to pay for this bond today
Final answer:
To determine the price you are willing to pay for the bond today, you must calculate the present value of the annual coupon payments for the next 5 years and the present value of the expected sale price in 5 years, all discounted at your required return of 10%.
Explanation:
To price the bond you are considering purchasing today, we'll need to discount the cash flows from the bond (the annual coupon payments and the expected sale price in 5 years) back to the present using your required return of 10%. First, we calculate the present value of the annual coupon payments you would receive for the next 5 years. The bond has a 9% annual coupon on a $1,000 par value, which equals $90 per year. Next, we have to estimate the sale price of the bond in 5 years, assuming that the YTM will then be 7.5%. This is equivalent to finding the present value of the remaining cash flows (15 years of $90 coupons plus the $1,000 par value at maturity) discounted at the new YTM of 7.5%. Finally, we sum the present value of the 5 years' worth of coupon payments and the present value of the price we expect to sell the bond for after 5 years, both discounted at your required return of 10%.
To calculate this precisely requires use of the present value formula for an annuity and a complex calculation for the sale price in 5 years, which is beyond the scope of this explanation but is usually done using financial calculators or spreadsheet software.
Michael's, Inc., just paid $1.85 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 4.1 percent. If you require a rate of return of 8.3 percent, how much are you willing to pay today to purchase one share of the company's stock?
Answer:
$45.85
Explanation:
Price today = Next year dividend / (Rate of return - Dividend growth rate)
Next year dividend = $1.85 * 1.041% = $1.92585
Therefore, we have:
Price today = $1.92585 / (8.3% - 4.1%) = $45.85
Therefore, you will be willing to pay $45.85 today to purchase one share of the company's stock.
Wildhorse Company uses the LCNRV method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2020, included product X. Relevant per-unit data for product X are as follows. Estimated selling price $49 Cost 39 Estimated selling costs 15 Normal profit 9 There were 990 units of product X on hand at December 31, 2020. Product X was incorrectly valued at $38 per unit for reporting purposes. All 990 units were sold in 2021. Compute the effect of this error on net income for 2020 and the effect on net income for 2021, and indicate the direction of the misstatement for each year.
Answer:
Net income for 2020 = $6,360 Overstated
Net income for 2021 = $6,360 Understated
Explanation:
The computation of net income for 2020 and the effect on net income for 2021 is shown below:-
Net realizable value per unit = Estimated selling price - Estimated selling expenses
= $49 - $15
= $34
Total value of ending inventory = 990 × $34
= $33,660
Incorrect value = 990 × $38
= $37,620
So, ending inventory of 2020 is overstated by
= $37,620 - $33,660
= $3,960
Overstatement of ending the inventory reduces the expense of the products sold and thereby raises the 2020 net profit by $3,960
The ending 2020 inventory is the beginning inventory for 2018. Overstatement of ending 2020 inventory leads to over establishment of beginning 2021 inventory. Increased beginning inventory results in higher cost of produced products and lower net profits.
Net income of 2021 is understated by $3,960
Net income for 2020 $6,360 Overstated
Net income for 2021 $6,360 Understated
The borrower in a $238,000 loan makes interest payments at the end of each six months for eight years. These are computed using an annual effective discount rate of 6.5%. Each time he makes an interest payment, the borrower also makes a deposit into a sinking fund earning a nominal interest rate of 4.2% convertible monthly. The amount of each sinking fund deposit is D in the first three years and 2D in the remaining five years, and the sinking fund balance at the end of the eight years is equal to the loan amount. Find D.
Answer:
D = 7980.55
Explanation:
Since the borrower pays in 6 months wich is half a year, we calculate the semi-annual rate = [tex]\frac{Annual rate of intrest}{Number of months}[/tex]
= [tex]\frac{0.042}{12}[/tex]
= 0.0035 = 0.35%
The effective semi-annual rate is, [(0.0035)⁶- 1] = 0.02118461
[tex]\frac{D[(1.02118461)^{16} - 1]}{1.02118461) - 1}[/tex] + [tex]\frac{D[(1.02118461)^{10} - 1]}{1.02118461) - 1}[/tex] = 238000
[tex]\frac{D(1.398518 - 1)}{0.02118461}[/tex] + [tex]\frac{D(1.233226 - 1)}{0.02118461}[/tex] = 238000
0.631744D = 238000 * 0.02118461
0.631744D = 5041.937
Therefore D = 7980.55
SInking funds are the funds or the money that is kept aside by the company for paying off future debts or bonds. This amount cannot be sed for any other payments. This helps in balancing the financial economy of the entity.
The value of D is $7,980.55
Computation:
Given:
Loan amount =$238,000Interest payment period =semi annual rateannual effective discount rate =6.5%nominal interst rate convertible monthly =4.2%Computation of effective semi-annual interest rate:
[tex]\text{Effective semi-annual interest rate}=(\dfrac{\text{Nominal Interest rate}}{\text{Number of month}})^\text{Payment period}-1\\\\=(\dfrac{0.042}{12})^6-1\\\\=(0.035)^6-1\\\\=0.02118\;\text{or}\;2.12\%[/tex]
The value of D will be computed based upon the total loan payment formula:
[tex]\begin{aligned} \text{Loan}&=\dfrac{\text{D(1+i)}^\text{n}-1}{(1+\text{i}-1)}\\&+\dfrac{\text{2D(1+i)}^\text{n}-1}{(1+\text{i}-1)}\\\$238,000&=\dfrac{\text{D}(1+0.02118)^{16}-1}{(1+0.02118)-1}+\dfrac{\text{2D}(1+0.02118)^{16}-1}{(1+0.02118)-1}\\\$238,000\times0.02118&=0.63174\text{D}\\\text{D}&=\$7,980.55\end{aligned}[/tex]
were,
D is sinking fund deposit
i is the effective interest rate
n is the number of payment period
To know more about sinking funds, refer to the link:
https://brainly.com/question/8500652
onghorn Fabricators Inc. plans to expand its metals-forming facility over the next 5 years. The company will add 20,000 square feet to its 100,000-square-foot plant as it adds robotic welding units, additional laser technology, and automated loading facilities. Construction at the plant is expected to start by the end of next year. The company expects to pay 5 equal payments of $250,000 every 12 months over the 5 year period. What is the future value of the total improvement cost, if the interest rate is 18% per year, compounded every 12 months?
Answer:
Future value of total improvement cost = $1,788,552.44
Explanation:
As per the data given in the question,
Regular deposit amount = $250,000
No. of period = 5 years
Interest rate = 18%
Future value = Regular deposit amount × [((1+interest rate per period)^no. of period - 1) ÷ interest rate per period]
Face value = $250,000×[((1+0.18)^5-1) ÷ 0.18]
= $250,000×7.154
= $1,788,552.44
Future value of total improvement cost = $1,788,552.44
Using existing plant and equipment, Priceless Moments Figurines can be manufactured using plastic, clay, or any combination of these materials. A figurine can be manufactured by F = 4P + 2C, where P is pounds of plastic and C is pounds of clay. Plastic costs $2 per pound and clay costs $5 per pound. What would be the lowest cost of producing 40,000 figurines? a. $20,000 b. $100,000 c. $60,000 d. $10,000
Answer:
a) 20,000
Explanation:
F = 4P + 2C, where P is pounds of plastic and C is pounds of clay. Plastic costs $2 per pound and clay costs $5 per pound.
4P + 2C = 60000 units
Now suppose only plastic is used.
so C=0 and we get 4 P = 40000
i.e P = 10000 pounds of plastic to produce 40000 figurine...
COST = 2 P + 5 C
In this case, its only 2 P
i.e 2 x 10000 = $20000
Now suppose only clay is used.
so P=0 and we get 2 C = 40000
i.e C = 20000 pounds of clay to produce 40000 figurine...
COST = 2 P + 5 C
In this case, its only 5 C
i.e 5 x 20000 = $100000
Hence least cost is $20,000 by using only clay to produce 40,000 figurines
List three conditions for perfect competition.Instructions: You may select more than one answer.1. There is only one firm that makes up the entire market.2. There are high barriers to entry.3. Firms’ products are differentiated.4. There are no barriers to entry.5. Both buyers and sellers are price takers.6. Firms engage in strategic decision making.7. Firms’ products are identical.
Answer:
There are no barriers to entry.
5. Both buyers and sellers are price takers
.7. Firms’ products are identical.
Explanation:
A perfect competition is characterised by many buyers and sellers of homogenous goods and services. Market prices are set by the forces of demand and supply. There are no barriers to entry or exit of firms into the industry.
In the long run, firms earn zero economic profit. If in the short run firms are earning economic profit, in the long run firms would enter into the industry. This would drive economic profit to zero.
Also, if in the short run, firms are earning economic loss, in the long run, firms would exit the industry until economic profit falls to zero.
A monopoly is when there's only one firm operating in an industry.
I hope my answer helps you
Answer:
4. There are no barriers to entry.
5. Both buyers and sellers are price takers.
7. Firms’ products are identical.
Explanation:
Perfect.competitionnis one in which the lead of demand and supply apply effectively. In this type of competition no one company has monopoly of supply. Instead there are many firms that sell identical products.
These firms need to compete to gain market share. They do this through advertising and trying to differentiate their products from others.
Buyers and sellers are price takers, meaning both of them cannot influence the price of products in the market by their transactions.
Because of the lack of monopoly in this market there are no barriers to entry.
Max sells for Whatisits Company. His batting average is by far the highest in the firm – .400. Unfortunately, his average order is the lowest – $3,000. He only saves himself by making a large number of calls per day (5) while working 275 days a year. Which of the following questions is most relevant to a sales manager evaluating Max? As Max's sales manager, before talking with Max what one fact would you like to know?
A) How is his home life?B) The size of the potential accounts in Max's territory.C) Is he using some stimulants?D) What is his work record with the company?E) How old is he?
Answer:
B) The size of the potential accounts in Max's territory
Explanation:
The question that is most relevant to a sales manager evaluating Max will be the size of the potential accounts in Max's territory because Max sells his batting average is by far the highest in the firm – .400 and his average order is the lowest – $3,000 in which he only saves himself by making a large number of calls per day (5) while working 275 days a year which is why As Max's sales manager, before talking with Max the one fact I would like to know will be The size of the potential accounts in Max's territory.
Riley Company promises to pay Janet Anderson or her estate $150,000 per year for the next 10 years, even if she leaves the company or passes away to try to induce her to stay with the company. Riley Company wants to properly record this transaction as deferred compensation, but is unsure how to record the cost. In addition, Riley Company purchased a whole life insurance policy for Janet, naming the company as the beneficiary. Riley Company wants to determine if it can offset the cash surrender value of the life insurance policy against the deferred compensation liability.
a. summarize the background of your case and indicate any assumptions that you are making regarding the case. Define your problem statement and research question(s).b. identify the key terms in your case, and state why you believe each is relevant to your case.c. Gather data from multiple sources and present that data in one to two pages Document your sources.d. Organize and interpret the findings of your research in one to two pages.
Answer:
Explanation:
The $ 150,000 per year to be paid each year for the next 10 years by Riley Company to Janet Anderson should be recorded as a deferred compensation liability. The present value of the annual payments should be calculated.
32,500 shares of common stock outstanding at a price per share of $80 and a rate of return of 12.95 percent. The firm has 7,350 shares of 7.90 percent preferred stock outstanding at a price of $95.50 per share. The preferred stock has a par value of $100. The outstanding debt has a total face value of $407,000 and currently sells for 111.5 percent of face. The yield to maturity on the debt is 8.11 percent and the bonds have a coupon rate of 5.6 percent. What is the firm's weighted average cost of capital if the tax rate is 40 percent?
Answer:
WACC = 11.1%
Explanation:
The weighted Average cost of Capital is the average cost of capital for the different sources of long-term capital available to a firm weighted according to the proportion each source of finance bears to the total capital in the pool.
Market of securities
Common stock = $80 × 32,500= 2,600,000.
Preferred stock = $95.50 × 7,350= 701,925.00
Bond = 407,000/100 × 111.5= 453,805.00
Cost of each capital type
Common stock= 12.95
Preferred stock = (7.90%× 100)/95.50= 8.3%
Bond= 8.11%× (1-0.4)=4.87%
WACC
Type Market Value Cost Market value cost
Common stock 2,600,000. 12.95% 336,700.00
Preferred 701,925.00 8.3% 58,065.00
Bond 453,805.00 4.87% 22,100.30
Total 3,755,730.00 416,865.30
WACC = (416,865.30 / 3,755,730.00) × 100
= 11.1%
WACC = 11.1%
The Phelan Division produces and sells a product to external and internal customers. Per-unit information about its operations include: Selling price per unit to external customers $250 Variable manufacturing costs per unit 115 Fixed manufacturing overhead costs per unit 70 If Phelan is operating at capacity and has unlimited external customer demand, what should be the (internal) transfer price for Phelan's product
Answer:
The answer is $250
Explanation:
Solution
From the example given, we are asked to find the internal transfer price of Phelan's product.
So, if Phelan is operating at capacity or speed and has unlimited external customer demand then the transfer price for Phelan's product is $250 as it has huge demand from customers
Which of the following statements about value is FALSE? a. Value is critical to maintaining long-term customer relationships. b. Value, unlike quality, means the same thing to all customers. c. Value includes the concept of quality, but it is broader in scope. d. Value takes into account every marketing program element. e. Value allows for the necessary balance among the five types of utility.
Answer:
Value, unlike quality, means the same thing to all customers.
Explanation:
Value refers to the benefits a customer receive from a product or service compared to its costs. As the value refers to the perception the customers have and every person has different needs, different people will assign a distinct value to the same product. According to that, the answer is that the statement about value that is false is that value, unlike quality, means the same thing to all customers.
The other options are true because if the customer feels that the product offers value, he/she will maintain a long-term relationship. Also, value refers to the quality of a product relative to the price and the marketing program elements describe what the company has to do to create value to customers. Moreover, the five types of utility are used together to develop a solution that generates value.
The FALSE statement about value is "Value, unlike quality, means the same thing to all customers". Hence, option B is the correct answer.
Value and quality are related concepts, but have different meanings and interpretations for different customers. While quality refers to the inherent characteristics and excellence of a product or service, value is subjective and varies from customer to customer.
Value encompasses not only quality but also factors such as price, features, benefits, and customer satisfaction.
Option b states that value means the same thing to all customers, which is not true. Different customers may prioritize different aspects when evaluating value, such as price sensitivity, specific features, or personal preferences.
Learn more about customer satisfaction here:
brainly.com/question/32406737
#SPJ6