You should pay approximately $119.53 for a share of stock with the given characteristic
To calculate the cost of capital for a firm with a 60/40 debt/equity split, a 4.16% cost of debt, a 15% cost of equity, and a 35% tax rate, we can use the weighted average cost of capital (WACC) formula:
WACC = (Weight of Debt × Cost of Debt) + (Weight of Equity × Cost of Equity)
Weight of Debt = 60%
Weight of Equity = 40%
Cost of Debt = 4.16%
Cost of Equity = 15%
Tax Rate = 35%
WACC = (0.60 × 0.0416) + (0.40 × 0.15)
WACC = 0.02496 + 0.06
WACC = 0.08496 or 8.496%
Therefore, the cost of capital for the firm would be 8.496%.
To calculate the cost of equity for a firm with a risk-free rate of 2.5%, a market risk premium of 4.91%, and a beta of 1.42, we can use the Capital Asset Pricing Model (CAPM) formula:
Cost of Equity = Risk-Free Rate + (Beta × Market Risk Premium)
Risk-Free Rate = 2.5%
Market Risk Premium = 4.91%
Beta = 1.42
Cost of Equity = 2.5% + (1.42 × 4.91%)
Cost of Equity = 2.5% + 6.9722%
Cost of Equity = 9.4722%
Therefore, the cost of equity for the firm would be 9.4722%.
To calculate how much you should pay for a share of stock that offers a constant growth rate of 10%, requires a 16% rate of return, and is expected to sell for $71.72 one year from now, we can use the Gordon Growth Model:
Stock Price = Dividend / (Rate of Return - Growth Rate)
Dividend = Expected Selling Price × Growth Rate
Expected Selling Price = $71.72
Growth Rate = 10%
Rate of Return = 16%
Dividend = $71.72 × 10% = $7.172
Stock Price = $7.172 / (16% - 10%)
Stock Price = $7.172 / 0.06
Stock Price = $119.53
Therefore, you should pay approximately $119.53 for a share of stock with the given characteristics.
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In the consumer product sector, brand names have tha inionaly allowed a firm to charge higher prices and enjoy much larger profit margins.
a. In a project analysis, how does the effect of a brand name show up in the estimates.
b. What are the implications of declining brand-name loyalty for the capacity of a consumer product firm like Procter and Gamble or Unilever to maintain high returns on its projects?
a. Brand name can affect estimates by influencing sales volume, market share, customer loyalty, and intangible value in project analysis.
b. Declining brand-name loyalty can reduce the capacity of consumer product firms to maintain high project returns, leading to increased competition, price pressures, and the need for strategic adaptations.
How does brand name impact project estimates and what are the implications of declining brand-name loyalty on project returns for consumer product firms?a. In a project analysis, the effect of a brand name can show up in the estimates through several aspects. Firstly, it can influence the projected sales volume and market share, as consumers may be willing to pay a premium for a well-established brand.
This can result in higher revenue projections and potentially higher profit margins. Secondly, the brand name can also impact customer loyalty and repeat purchases, which can lead to more stable and predictable cash flows over the project's lifespan. Finally, the brand name may have intangible value that needs to be accounted for, such as reputation, brand recognition, and customer perception, which can affect the overall valuation of the project.
b. Declining brand-name loyalty can have significant implications for the capacity of consumer product firms to maintain high returns on their projects. When brand loyalty decreases, it becomes more challenging for firms to command higher prices and sustain larger profit margins. Without the ability to leverage brand recognition and customer loyalty, firms may face increased competition, price pressures, and a need to invest more in marketing and advertising to maintain market share.
This can erode profitability and make it harder for firms to generate the same level of returns on their projects. Firms may need to adapt their strategies, invest in innovation, or explore new markets to counterbalance the impact of declining brand-name loyalty and maintain profitability.
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6) The business cycle is usually illustrated using movements in A) the inflation rate. B) labor productivity. C) real GDP. D) the size of the labor force.
The business cycle is usually illustrated using movements in real GDP. Option C is the correct answer. What is a business cycle? Business cycles refer to the recurring fluctuations in economic activity that happen over time.
It involves shifts in the economy's production, employment, and overall economic activity. There are four phases of the business cycle: expansion, peak, contraction, and trough. The business cycle is usually illustrated using movements in real Gross Domestic Product (GDP).
It is the broadest measure of economic activity and is the most popular method for evaluating an economy's state. GDP is calculated as the total value of all goods and services produced within a country during a specified time frame, usually a year or a quarter. The GDP data are used to determine the state of an economy and whether it is in an expansion or contraction phase of the business cycle.
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claudia smith, a real estate attorney, solved complicated legal problems to make the sale of the conner's farm. broker albert mclin, agent for the sellers, appreciated smith's work and sent smith a check after he collected his commission on the sale. is this commission sharing permissible?
Claudia, a real estate attorney, solved complicated legal problems to make the sale of the Conner's farm. The broker Albert Mclin, agent for the sellers, appreciated Smith's work and sent Smith a check after he collected his commission on the sale.
In general, commission sharing between a real estate attorney and a real estate broker or agent is not permissible. This is because it would be considered a violation of the legal ethics rules. The purpose of the real estate attorney is to provide legal advice to clients, while the purpose of the broker or agent is to bring buyers and sellers together and negotiate the terms of a sale.
When a broker or agent shares their commission with an attorney, it can create conflicts of interest, with the attorney potentially putting the interests of the broker or agent ahead of their client's interests. In addition, it can create the impression that the attorney is receiving an illegal kickback for their services. Therefore, it is generally prohibited for real estate attorneys to share in commissions with brokers or agents.
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How often should you update you check register
Answer:
Review your checkbook register at least once a week. Your second goal should be to reconcile your checkbook as soon as possible after receiving your monthly statement. Once you've mastered the following steps, you should be able to balance your account each month within 30 minutes to 45 minutes.
Answer :Review your checkbook register at least once a week.
Explanation:
In order to develop our schedule, we first need to define the activities, sequence them in the right order, estimate the resources needed, and estimate the time it will take to complete the tasks. Consider the Stake Dinner Project below. Identify the relevant activities, sequence the activities, estimate their durations and develop a Work Breakdown Structure and Network Diagram for this project.
The Stake Dinner Project involves a series of activities ranging from planning and coordination to execution and follow-up.
By identifying the relevant activities, sequencing them in the right order, estimating their durations, and developing a Work Breakdown Structure and Network Diagram, the project team can effectively schedule and manage the event, ensuring its successful execution within the desired timeframe.
The Stake Dinner Project involves organizing a dinner event for stakeholders. The relevant activities can be identified as follows:
Define event objectives and requirements., Determine the budget and secure funding., Select and book a suitable venue., Hire a catering service., Create a guest list and send out invitations., Arrange for decorations and ambience., Plan and coordinate the menu., Confirm attendance and dietary restrictions.,
Organize transportation for guests, if necessary., Prepare a program for the evening., Arrange for audiovisual equipment and technical support., Coordinate guest speakers or entertainment., Set up registration and check-in process., Manage event logistics on the day of the dinner., Conduct the stake dinner event., Follow up with attendees and gather feedback.
To sequence the activities, some dependencies need to be considered. For example, activities like securing funding, selecting a venue, and hiring a catering service should be completed before sending out invitations and confirming attendance. The durations for each activity will vary depending on the complexity and scale of the event.
A Network Diagram, such as a Gantt chart or a PERT chart, can be created to visualize the sequence of activities and their dependencies. This diagram will help identify the critical path, which represents the longest sequence of activities that determines the overall project duration.
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How can Carlito determine the total income earned by a person?
Carlito is a professional financial planner. Mr. Lopez, a new business professional in the field of computers hires Carlito to help him
manage and Invest his money.
Carlito will require Mr.Lopez's
_________to learn about his final Income after deduction. He will also require Mr. _____
Lopez's
to know the amount of Interest he earns from his savings.
Answer:
income....
Bank statement
Explanation:
Compare and contrast the following terms as used in
public sector accounting
1. Cash Basis of Accounting and Accrual Basis of
Accounting
2. Appropriation Accounting and Commitment
Accounting
Cash Basis of Accounting: This method records revenues and expenses when cash is received or paid. It focuses on the actual inflows and outflows of cash.
Under the cash basis, revenue is recognized when cash is received, and expenses are recognized when cash is paid. It does not consider the timing of when transactions are incurred or earned.
Accrual Basis of Accounting: This method recognizes revenues and expenses when they are earned or incurred, regardless of when cash is received or paid. It matches revenues with the expenses incurred to generate them, providing a more accurate picture of financial performance and position. Under the accrual basis, revenue is recognized when it is earned, and expenses are recognized when they are incurred.
Differences:
Timing: The key difference between cash basis and accrual basis accounting lies in the timing of revenue and expense recognition. Cash basis recognizes transactions when cash is received or paid, while accrual basis recognizes transactions when they are earned or incurred.
Accuracy: Accrual basis accounting provides a more accurate representation of financial performance and position by matching revenues and expenses. Cash basis accounting may not reflect the true financial position as it does not consider the timing of when transactions occur.
Compliance: In public sector accounting, accrual basis accounting is generally preferred as it provides a more comprehensive view of financial transactions and conforms to Generally Accepted Accounting Principles (GAAP) and International Public Sector Accounting Standards (IPSAS).
Appropriation Accounting and Commitment Accounting:
Appropriation Accounting: This method is used in public sector accounting to track and control government funds and expenditures. It involves the allocation and utilization of budgeted funds based on specific purposes or objectives, known as appropriations. Appropriation accounting focuses on the budgetary control and compliance with budget limits.
Commitment Accounting: This method tracks and records commitments made for future expenditures before the actual payment is made. It helps in planning and managing future cash flows by identifying and reserving funds for committed expenses. Commitment accounting provides information about the financial obligations of an organization.
Differences:
Focus: Appropriation accounting primarily focuses on the allocation and control of budgeted funds, ensuring that expenditures stay within the authorized limits. Commitment accounting focuses on recording and managing future financial commitments and obligations.
Timing: Appropriation accounting is concerned with the current fiscal year's budget and expenses incurred within that period. Commitment accounting looks ahead to future financial commitments and ensures that sufficient funds are reserved for those commitments.
Usage: Appropriation accounting is used to monitor and control government spending and adherence to budgetary limits. Commitment accounting aids in financial planning, budgeting, and ensuring funds are available when commitments become due.
In summary, cash basis of accounting records transactions based on cash inflows and outflows, while accrual basis of accounting recognizes transactions based on when they are earned or incurred. Appropriation accounting focuses on budgetary control and compliance, while commitment accounting tracks and manages future financial commitments and obligations.
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Which asian nation ranks higher than china in the world bank's doing business report, and why?
In the World Bank's Doing Business Report, Singapore ranks higher than China. Singapore is the easiest Asian nation to conduct business in, according to the report, with a ranking of second globally in 2020, whereas China ranked 31st.
The country was also ranked among the top ten nations with the most business-friendly regulations, coming in at number two overall.The Doing Business Report is a yearly study that investigates and compares regulatory environments in countries around the world. The report assesses a variety of indicators that impact a nation's economy, including starting a company, obtaining permits, registering property, securing credit, and enforcing contracts.
In general, the doing business report rankings are based on how business-friendly countries are when it comes to dealing with the regulations that pertain to businesses. The rankings are based on data gathered from various businesses within the countries, with more than 100 economies evaluated in the most recent report.
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(a) It is generally believed that mature financial markets (e.g., the New York Stock Exchange in the United States, the Tokyo Stock Exchange in Japan) satisfy the weak form of market efficiency. Why do some investors still refer to or even develop their own technical indicators in an attempt to profit from the stock market?
(b) The tourism industry has taken a hard hit following the COVID-19 pandemic. Consider the following statements regarding the impact of the pandemic on the various costs of capital for an airline company, at least for the short to medium term: • Statement 1: The debt cost of capital will increase. • Statement 2: The equity cost of capital will increase. Among the four options below, select one that you think is correct. To obtain credit, you must explain why your choice is correct and the others are not. i. Both Statements 1 and 2 are true; one statement is the consequence of the other due to the Modigliani-Miller propositions. ii. Both Statements 1 and 2 are true; neither statement is the consequence of the other one due to the Modigliani-Miller propositions. iii. Only one of the two statements is true. iv. None of the statements is true.
(c) Tesla, a major American electric vehicle company, revealed in a filing with the United States Securities and Exchange Commission on February 8, 2021 that the company has bought US$1.5 billion worth of bitcoin, a cryptocurrency. Following the news, the price of bitcoin increased by almost 10% immediately, and another 10% several hours later. Based on this observation, give one argument in favour of the proposition that the bitcoin market is efficient, and one argument against this proposition.
Although mature financial markets generally satisfy the weak form of market efficiency, some investors still refer to or develop their technical indicators to benefit from the stock market.
a) Some investors or traders use technical analysis to make more informed investing decisions. The technical analysis involves utilizing historical data to identify trends and forecast possible future stock price fluctuations.
b) The correct option is iii) Only one of the two statements is true. Statement 1 is true, and statement 2 is not. The cost of equity capital decreases during the pandemic, according to the Modigliani-Miller (MM) theory. According to the Modigliani-Miller theory, the pandemic causes only the cost of debt capital to rise. The cost of equity capital falls, but the overall weighted average cost of capital (WACC) rises due to the rise in the cost of debt capital. The increased risk of default raises the cost of debt capital. Therefore, only statement 1 is true, and statement 2 is not true.
c) An argument in favor of the proposition that the bitcoin market is efficient is that the market responded to new information. Tesla's purchase of US$1.5 billion worth of bitcoin was a major event that could significantly impact the bitcoin market. The market's immediate response to this event was a nearly 10% increase in the price of bitcoin, which indicates that the market is processing new information in a timely and accurate manner. One argument against the proposition that the bitcoin market is efficient is that the market may be influenced by external factors such as market manipulation or speculative trading.
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Toyota introduced a new mid-sized SUV, which it priced at $30,000. However, many customers did not want to buy this new model because many competitors were offering a similar car for $27,000. Therefore, Toyota informed its prospective customers that in addition to the equivalent cost of the car, they were also receiving services above that of the competition. Toyota's car care service is valued at $4,000 and the extended warranty is valued at $2,000. Therefore, when buying the Toyota SUV for $30,000, the customers are actually receiving a discount of $3,000. This technique is known as
Answer:
Unbundling price
Explanation:
Unbundling price is a marketing tool in which customers are informed about the value by break downs of the cost. In the given scenario Toyota has also used this marketing technique. It has informed its customers about the value they are given by breakdowns of the services they are offered against price.
Answer the following questions:
a. The price of a stock when you sell it in a year is predicted to be $65. If dividend is expected to be $1.5 next year, and the required return is 4.5%, what should be the price of the stock today?
b. You believe that a corporation's dividends will grow 5 percent on average into the foreseeable future. If the yearly dividend payment is $2, assuming a 4 percent required return, what is the price of the stock today?
a. If the dividend is expected to be $1.5 next year, and the required return is 4.5%, the price of the stock today is $98.33. b. If the yearly dividend payment is $2, assuming a 4 percent required return, the price of the stock today is $250.
a. In order to calculate the price of the stock today, the current stock price (P0) should be calculated. Using the constant growth model, we get:
P0 = [D1 / (r - g)] + P1,
where D1 = next year's dividend,
g = constant growth rate,
P1 = stock price at the end of the year, and
r = required rate of return.
Substituting the given values, D1 = $1.5, g = 0, P1 = $65, and r = 4.5%.P0 = [$1.5 / (0.045 - 0)] + $65P0 = $33.33 + $65P0 = $98.33
b. In order to calculate the price of the stock today, the current stock price (P0) should be calculated. Using the constant growth model, we get: P0 = [D1 / (r - g)] + P1, where
D1 = next year's dividend, g = constant growth rate,
P1 = stock price at the end of the year, and
r = required rate of return.
Substituting the given values,
D1 = $2, g = 5%, P1 = ?, and r = 4%.
We know that the constant growth rate (g) is greater than the required rate of return (r). Therefore, the stock price is positive.
P0 = [$2 / (0.04 - 0.05)] + P1P0 = -$40 + P1P1 = P0 + $40
We also know that the price of the stock at the end of the year (P1) is equal to the future dividend payment (D2) divided by the difference between the required rate of return and the constant growth rate.
P1 = [D2 / (r - g)]
Substituting the given values,
D2 = $2 x 1.05 = $2.10
P1 = [$2.10 / (0.04 - 0.05)]
P1 = $210
Therefore, P0 = P1 + $40 = $210 + $40 = $250.
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How to solve this please (all requirements)
Suppose the Hockey Hall of Fame in Toronto has approached Active-Cardz with a special order. The Hall of Fame wants to purchase 58,000 hockey card packs for a special promotional campaign and offers $
Cost per card = 1.176 x / (58,000 x 10) = $0.00202 per card. Hence, the cost per card is $0.00202, or approximately $0.002, after rounding to the nearest cent.
Active-Cardz can proceed with the special order from the Hockey Hall of Fame in Toronto by following these steps: Step 1: Calculate the cost per card first, and calculate the cost per card by dividing the offer amount by the number of card packs. We are given that the Hall of Fame wants to purchase 58,000 hockey card packs. The offer amount is missing, let us denote it by 'x'.Hence, the cost per card is the cost per card = x / (58,000 x 10) = x / 580,000.
Step 2: Add the profit margin. The profit margin is given to be 15%. This means Active-Cardz wants to earn 15% of the total cost. Let the total cost of the order be y. Then,y = x + 15% of you can simplify this by converting 15% to a decimal:y = x + 0.15yRearranging the above equation, we get:0.85y = xy = 1.176 Now, we have calculated the offer amount. We can substitute this value in the expression for the cost per card to obtain the final answer: cost per card = 1.176 x / (58,000 x 10) = $0.00202 per audience, the cost per card is $0.00202, or approximately $0.002, after rounding to the nearest cent.
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Which of the following is a liability?
A. machinery
B. accounts payable from goods
C. motor vehicles
D. cash at bank
Answer:
B. accounts payable from goods is a liability.
furniture shop. home fittings store. home furnishings store. "Of course, hoofing your way through a labyrinthian furniture store in search of that perfect chair can also be about as much fun as dental surgery without drugs."
A comparison distribution type is what we use to make inferences from the data of our study or experiment. The researcher uses the comparison distribution to determine how well the distribution can be approximated by the normal distribution. Hypothesis testing is very important for every statistical test.
furniture store sells low-end and high-end outdoor patio furniture. The selling prices ($) for their lounge chairs (low and high-end) are summarized in the boxplots below.
(a) Compare the distributions of the prices of the lowand highend lounge chairs.
(b) If a single histogram was made of all the lounge chair prices, describe its shape.
A histogram is a type of graph that displays frequency data. The X-axis shows the categories or ranges of values, and the Y-axis shows the frequency of the values in that category. The shape of a histogram depends on the distribution of the data. Therefore, the shape of a single histogram of all the lounge chair prices in a furniture shop, home fittings store, or home furnishings store would depend on the distribution of the prices of the lounge chairs.
The distribution can be symmetrical, skewed, or bimodal, depending on the shape of the data. If the prices of the chairs are evenly distributed across a range, then the histogram would be symmetrical and bell-shaped. This shape is known as a normal distribution or a Gaussian distribution.
A bell-shaped curve has a peak at the center of the graph, and the frequencies gradually decrease as you move away from the center. A normal distribution occurs when the mean, median, and mode are all the same value.If the prices are not evenly distributed, then the histogram may be skewed to the right or left.
A skewed distribution means that the data is not evenly distributed, and the frequency is higher on one side of the graph than the other. A right-skewed distribution has a long tail on the right side of the graph, while a left-skewed distribution has a long tail on the left side of the graph.
A bimodal distribution occurs when there are two peaks in the data, indicating that there are two groups of chairs with different prices.
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Saul would like to exchange land that he owns (adjusted basis $125,000 and FMV of $155,000) for land in a neighboring county (adjusted basis $110,000 and FMV $130,000) plus cash of $25,000. Assume that the parcels of land are qualified property for treating this as a deferred transaction, and that the cash is boot. a. What is Saul’s realized gain? b. What is Saul’s recognized gain? c. What is Saul’s deferred gain? d. What is Saul’s basis in the property received?
Saul’s realized gain is $30,000 and recognized gain would be $25,000. Saul's deferred gain would be $5,000 and basis in the property received would be $110,000.
To calculate Saul's realized gain, we subtract the adjusted basis of the property given up from the fair market value (FMV) of the property received:
Realized Gain = FMV of Property Received - Adjusted Basis of Property Given Up
Realized Gain = ($130,000 + $25,000) - $125,000
Realized Gain = $155,000 - $125,000
Realized Gain = $30,000
Saul's recognized gain is the lesser of the realized gain or the amount of boot received. In this case, the boot received is $25,000, so the recognized gain would be $25,000.
Saul's deferred gain is the excess of realized gain over the recognized gain. In this case, the deferred gain would be $30,000 - $25,000 = $5,000.
To calculate Saul's basis in the property received, we start with the adjusted basis of the property given up and adjust it for the recognized gain and the boot received:
Basis in Property Received = Adjusted Basis of Property Given Up + Boot Received - Recognized Gain
Basis in Property Received = $110,000 + $25,000 - $25,000
Basis in Property Received = $110,000
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Question 3 of 5 View Policies Show Attempt History Current Attempt in Progress 0.25/1 : Your answer is partially correct. Sheridan Co. uses a standard job cost system with a normal capacity of 24,500
Sheridan Co. utilizes a standard job costing system with a regular capacity of 24,500. The standard job costing system is used by businesses to estimate costs for producing or manufacturing goods or services. A standard job costing system assigns expenses to specific jobs or products, making it easier to determine the cost of producing each product.
Sheridan Co. uses a predetermined overhead rate for allocating overhead costs to individual jobs. The company's predetermined overhead rate is determined by dividing the total budgeted manufacturing overhead costs by the estimated activity level for the year.
The formula to determine Sheridan Co.'s predetermined overhead rate is as follows: Predetermined overhead rate = Total budgeted manufacturing overhead costs ÷ Estimated activity level for the yearFor example, if Sheridan Co.'s total budgeted manufacturing overhead costs are $1,000,000, and the estimated activity level for the year is 20,000 direct labor hours, the predetermined overhead rate will be $50 ($1,000,000 ÷ 20,000 direct labor hours).
In conclusion, Sheridan Co. uses a standard job costing system to estimate costs for manufacturing goods or services. It uses a predetermined overhead rate to allocate overhead costs to individual jobs based on the estimated activity level for the year.
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Take me to the text Red Ray DVD Company (Red Ray) manufactures portable DVD players. The company requires a 15% rate of return on its investments. To start up the business, an investment of $650,000 was required. General and administrative expenses total $450,000. Each year, the sales volume is equal to 25,000 DVD players, each with a unit product cost of $90. Assuming that the company uses the formula method, determine the markup percentage that Red Ray would apply in a cost-plus pricing scheme. Do not enter percentage signs or commas in the input boxes. Round your answer to 2 decimal places. Markup Percentage: %
Markup Percentage: 46.67%.To calculate the markup percentage that Red Ray would apply in a cost-plus pricing scheme, we use the following formula:
Step1. Unit product cost = Variable cost per unit + Fixed cost per unit Markup price = Unit product cost + Markup Markup percentage = Markup price ÷ Unit product cost × 100%Unit product cost is calculated as follows: Unit product cost = Total cost ÷ Sales volume We know that: Total cost = Investment + General and administrative expenses + Variable costs Variable costs = Cost of goods sold - Fixed costs Fixed costs = 0.
Step2. We are given that the investment required is $650,000, and general and administrative expenses total $450,000. The cost of goods sold is equal to the unit product cost, which is $90. Therefore, we have: Total cost = $650,000 + $450,000 + ($90 × 25,000) = $3,100,000Unit product cost = $3,100,000 ÷ 25,000 = $124Markup price is calculated as follows:
Step3. Markup price = Unit product cost × (1 + Desired rate of return on investment)We are given that the company requires a 15% rate of return on its investments. Therefore: Markup price = $124 × (1 + 0.15) = $142.60Finally, we can calculate the markup percentage as follows: Markup percentage = Markup price ÷ Unit product cost × 100% = $142.60 ÷ $90 × 100% ≈ 46.67%Rounded to 2 decimal places, the markup percentage is 46.67%.
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Based on following information.
CPO spot price = $ 980/ton
Risk-free rate = 6% /year
Annual storage cost = 4%/year ($ 39.20/ ton)
a. Is arbitrage possible? Explain
b. Explain, How do you do arbitrage?
c. Assume the price at maturity is $1,015, What would be your profit if you invested 50 tons??
Yes, Arbitrage is The concept of arbitrage is that you can buy in one market and sell in another at the same time, resulting in a profit because of the price difference. = Future price - Cost of CPO bought in the spot market - Cost of carrying CPO for one year- Cost of CPO futures + Initial margin= (50*1015)- 980*50 - (50*39.20) - (50*1019.20) + 25,480= 50*1015 - 980*50 - 50*39.20 - 50*1019.20 + 25,480= 50750 - 49000 - 1960 - 50960 + 25480= -$790. The result of the arbitrage is a loss of $790.
Yes, Arbitrage is possible. The concept of arbitrage is that you can buy in one market and sell in another at the same time, resulting in a profit because of the price difference. When we talk about the CPO market, we can see that the cost of storage alone represents 4% of the total spot price (980 + 4% of 980) = $1019.20/ton. This implies that purchasing CPO in the spot market and holding it until the future to sell it at a higher price will result in a loss of money. As a result, the cost of holding CPO in the future market should not be more than the spot market's cost plus storage cost. The present value of future prices should be less than the spot price plus the cost of storage. Because the current price plus storage cost is less than the future price, an arbitrage opportunity exists.
b. Explain, How do you do arbitrage?To conduct an arbitrage, one must first sell or short sell the asset in the market where the cost is highest, then purchase it in the market where the cost is lowest. The result is a profit because of the price difference. To carry out arbitrage in CPO spot and futures market, an investor would follow these steps:To sell 50 tons of CPO in the spot market, they would receive $980/ton.To sell 50 CPO futures contracts, they would agree to supply 50 tons of CPO at maturity, and the counterparty would agree to pay the futures price.To acquire the CPO futures contracts, an initial margin equal to a certain percentage of the total value of the futures contracts must be deposited with the exchange.To hold the CPO spot, they would need to pay $39.20 per ton for one year. This equates to $1960 of storage costs per annum for the 50-tonne cargo, which is $49.00 per tonne.To calculate the arbitrage opportunity, we compare the cost of holding 50 tons of CPO in the spot market for a year and the cost of holding 50 futures contracts for a year.If a CPO future contract for 50 tons for a year is $1,019.20 per tonne, or $50,960, it would require a 50 percent initial margin of $25,480.The cost of the future contract per tonne for 50 tons is: 50,960/50 = $1019.20, which is less than the spot price plus storage cost of $1019.20/ton.The arbitrage opportunity exists here because the price of holding 50 tons in the spot market is greater than the cost of holding 50 CPO futures contracts. As a result, the investor should sell in the spot market and purchase in the futures market to make a profit.
c. Assume the price at maturity is $1,015, What would be your profit if you invested 50 tons??If the price of CPO at maturity is $1,015, the profit earned would be:Profit = Future price - Cost of CPO bought in the spot market - Cost of carrying CPO for one year- Cost of CPO futures + Initial margin= (50*1015)- 980*50 - (50*39.20) - (50*1019.20) + 25,480= 50*1015 - 980*50 - 50*39.20 - 50*1019.20 + 25,480= 50750 - 49000 - 1960 - 50960 + 25480= -$790. The result of the arbitrage is a loss of $790.
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(1) An investor writes a call option to buy 100 shares of Apple. Strike price = $100, current stock price = $98, price of an option to buy one share = $5. What's the profit and payoff if the stock pri
Profit and Payoff of Writing a Call Option on Apple Stock
The profit from writing a call option on Apple stock can be determined by calculating the payoff at different stock prices. The payoff is the difference between the option price and the stock price, multiplied by the number of shares.
What is the profit and payoff if the stock price remains below the strike price?If the stock price remains below the strike price, the call option will not be exercised, and the investor will keep the option premium as profit. In this case, the profit can be calculated as the total premium received for writing the option.
The premium received for writing one call option is $5 per share. Since the investor writes a call option for 100 shares, the total premium received is $5 multiplied by 100, which equals $500. Therefore, the profit would be $500.
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Imboden Manufacturing Company established the following standard price and cost data: Sales price $15 per unit
Variable manufacturing cost $7 per unit Fixed manufacturing cost $32,500 total Fixed selling and administrative cost $24,000 total Imboden planned to produce and sell 18,000 units.It actually produced and sold 19,000 units.
Required a. Prepare the pro forma income statement that would appear in a master budget. Use the contribution margin format
b. Prepare the pro forma income statement that would appear in a flexible budget. Use the contibution margin format
The pro forma income statements for Imboden Manufacturing Company, both in the master budget and flexible budget, show an operating income of $95,500.
a. Pro Forma Income Statement (Master Budget)
Sales Revenue: (19,000 units * $15 per unit) = $285,000
Variable Manufacturing Costs: (19,000 units * $7 per unit) = $133,000
Contribution Margin: $285,000 - $133,000 = $152,000
Fixed Manufacturing Costs: $32,500
Fixed Selling and Administrative Costs: $24,000
Total Fixed Costs: $32,500 + $24,000 = $56,500
Operating Income: $152,000 - $56,500 = $95,500
b. Pro Forma Income Statement (Flexible Budget)
Sales Revenue: (19,000 units * $15 per unit) = $285,000
Variable Manufacturing Costs: (19,000 units * $7 per unit) = $133,000
Contribution Margin: $285,000 - $133,000 = $152,000
Fixed Manufacturing Costs: $32,500
Fixed Selling and Administrative Costs: $24,000
Total Fixed Costs: $32,500 + $24,000 = $56,500
Operating Income: $152,000 - $56,500 = $95,500
Both the pro forma income statements in the master budget and flexible budget show the same operating income of $95,500.
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Cosco Company had 300,000 shares of common stock issued and outstanding at December 31, 2017. During 2018, no additional common stock was issued. On January 1, 2018, Cosco issued 400,000 shares of convertible preferred stock. Each preferred share can be converted to one share of common stock. During 2018, Cosco declared and paid $180,000 cash dividends on the common stock and $150,000 on the convertible preferred stock. Net income for the year ended December 31, 2018 was $960,000. What should be Cosco's 2018 earnings per common share and diluted EPS rounded to the nearest penny? Show computations.
Cosco's 2018 earnings per common share should be $2.94, and the diluted earnings per share should also be $2.94.
To calculate the earnings per common share (EPS), we need to determine the weighted average number of common shares outstanding. Since no additional common stock was issued during 2018, the number of common shares remains at 300,000.
First, we calculate the weighted average number of common shares outstanding by considering the time period each share was outstanding. Since the convertible preferred stock can be converted to common stock, we include it in the calculation.
Weighted average common shares outstanding:
= Number of common shares outstanding throughout the year + (Number of convertible preferred shares × Conversion rate × [1 - (Dividends on convertible preferred stock / Net income)])
Number of common shares outstanding throughout the year = 300,000
Number of convertible preferred shares = 400,000
Conversion rate = 1 (each preferred share can be converted to one common share)
Dividends on convertible preferred stock = $150,000
Net income = $960,000
Weighted average common shares outstanding:
= 300,000 + (400,000 × 1 × [1 - ($150,000 / $960,000)])
= 300,000 + (400,000 × 1 × [1 - 0.15625])
= 300,000 + (400,000 × 1 × 0.84375)
= 300,000 + 337,500
= 637,500
Next, we can calculate the earnings per common share by dividing the net income by the weighted average number of common shares outstanding.
Earnings per common share:
= Net income / Weighted average common shares outstanding
= $960,000 / 637,500
≈ $1.50
To calculate the diluted earnings per share (EPS), we need to consider the potential dilution of the convertible preferred stock.
Diluted earnings per share:
= Net income / (Weighted average common shares outstanding + Potential dilution from convertible preferred stock)
The potential dilution from convertible preferred stock is determined by assuming the conversion of all convertible preferred shares into common shares.
Potential dilution from convertible preferred stock:
= Number of convertible preferred shares * Conversion rate
= 400,000 × 1
= 400,000
Diluted earnings per share:
= $960,000 / (637,500 + 400,000)
≈ $2.38
Since the diluted EPS of $2.38 is higher than the basic EPS of $1.50, there is a dilutive effect from the convertible preferred stock.
Therefore, Cosco's 2018 earnings per common share is $1.50, and the diluted earnings per share is $2.38, rounded to the nearest penny.
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A bank is currently offering a savings account paying an interest rate of 10.8 percent compounded quarterly. Interest is paid once per month at the end of each month. It would like to offer another account, with the same effective annual rate, but compounded monthly.
What is the equivalent rate compounded monthly? (Round answer to 4 decimal places, e.g. 25.1254%.)
The value of the equivalent rate compounded monthly is 12.50% p.a. (rounded to 4 decimal places).
To calculate the equivalent rate compounded monthly, we will first compute the annual interest rate. This is because, if the bank pays the same effective annual rate, then the annual interest rate will be constant, regardless of the compounding frequency.
Using the formula, we will determine the nominal interest rate.
Nominal rate = ((1 + r/m)^m) - 1
Where, r is the effective annual rate and m is the compounding frequency.
Substituting the given values
Nominal rate = ((1 + 0.108/4)⁴) - 1= ((1.027)⁴) - 1= 0.1255 or 12.55% approx
Therefore, the nominal interest rate is 12.55% p.a. compounded quarterly. Now we will calculate the equivalent rate compounded monthly.
Using the formula
Nominal rate = ((1 + r/m)^m) - 1Where, r is the effective annual rate and m is the compounding frequency.
Substituting the given values
Nominal rate = ((1 + r/12)^12) - 1
Given that, r = 0.108 p.a. or 10.8% p.a.
Nominal rate = ((1 + 0.108/12)¹²) - 1= ((1.009)¹²) - 1= 0.1250 or 12.50% approx
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As a long-term investment, Painters' Equipment Company purchased 20% of AMC Supplies Inc.'s 510,000 shares for $590,000 at the beginning of the fiscal year of both companies. On the purchase date, the fair value and book value of AMC’s net assets were equal. During the year, AMC earned net income of $360,000 and distributed cash dividends of 30 cents per share. At year-end, the fair value of the shares is $626,000.
Required:
1. Assume no significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year.
Record the purchase of AMC Supplies shares for $590,000 as a long-term investment.
Record Painters' Equipment's share of AMC Supplies' $360,000 net income.
Record the cash dividend of 30 cents per share.
Record any necessary year-end adjusting journal entry when the fair value of the shares held are $626,000 at year-end.
2. Assume significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year.
Record the purchase of AMC Supplies shares for $590,000 as a long-term investment.
Record Painters' Equipment's share of AMC Supplies' $360,000 net income.
Record the cash dividend of 30 cents per share.
Record any necessary year-end adjusting journal entry when the fair value of the shares held are $626,000 at year-end.
Assume no significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year The solution of the given problem is as follows 1. January 1: Record the purchase of AMC Supplies shares for $590,000 as a long-term investment.
This investment represents a passive investment, and therefore, no significant influence was acquired. Therefore, the cost of investment will be recorded as $590,000. Record the journal entry for the transaction on January 1. Account Titles Debit Credit Long-term investment in AMC Supplies 590,000 Cash 590,000 December 31: Record any necessary year-end adjusting journal entry when the fair value of the shares held are $626,000 at year-end. At year-end, Painters' Equipment will adjust the investment to fair value. The change in fair value will be recorded as unrealized gain or loss in the income statement. The journal entry to record the adjustment will be as follows:
Assume significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year:If Painters' Equipment acquires significant influence over AMC Supplies, it should record the investment using the equity method. The solution of the given problem is as follows:1. January 1: Record the purchase of AMC Supplies shares for $590,000 as a long-term investment using the equity method. The journal entry to record the transaction will be: During the year: Record Painters' Equipment's share of AMC Supplies' $360,000 net income. Painters' Equipment should record its share of the net income earned by AMC Supplies.
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a. What were the strategic objectives behind McDonalds deciding
to implement this project?
McDonald's is a renowned fast-food chain that is present in more than 119 countries around the world. The company has introduced various projects that have helped it to enhance its customer base and increase its profitability. One of these projects was the introduction of self-order kiosks in the majority of its outlets.
The strategic objectives behind McDonald's deciding to implement this project are as follows:
1. Increase Efficiency: McDonald's introduced the self-order kiosks with the primary objective of increasing efficiency. Customers could place their orders themselves, without the assistance of a server. This helped to reduce the waiting time of customers and ensured that they received their orders quickly. The reduction in waiting time also helped to increase customer satisfaction levels.
2. Reduce Labor Costs: The implementation of the self-order kiosks also helped to reduce labor costs for McDonald's. The company could now hire fewer servers as customers could place their orders themselves. The money saved from labor costs could be used to invest in other areas of the business.
3. Enhance Customer Experience: Another strategic objective of implementing the self-order kiosks was to enhance the overall customer experience. Customers could now customize their orders according to their preferences and avoid any potential language barriers with servers. The kiosks also helped to reduce any order errors that could occur due to miscommunication.
4. Increase Revenue: Finally, the implementation of the self-order kiosks helped McDonald's to increase its revenue. The kiosks also allowed McDonald's to collect valuable data about customer preferences, which it could use to develop new products or promotions to increase sales.
In conclusion, the strategic objectives behind McDonald's decision to implement self-order kiosks in the majority of its outlets were to increase efficiency, reduce labor costs, enhance the customer experience, and increase revenue.
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examine the esg analyssi frmo bloomberg for reliance industries
According to the ESG analysis from Bloomberg for Reliance Industries, the following statement is true about Reliance Greenhouse Gas (GHG) emissions and safety are very material to the Oil & Gas industry, and Reliance needs to improve on both. Thus, option D is correct.
Reliance Industries needs to improve on its greenhouse gas emissions and safety, which are very material to the Oil & Gas industry. The company has been working towards achieving its environmental, social, and governance (ESG) goals, and it has made significant progress towards reducing its carbon emissions.
However, it still needs to do more to reduce its greenhouse gas emissions and improve its safety measures. The ESG analysis from Sustainalytics rates Reliance Industries management of ESG material risk as average.
Material ESG issues are issues that are considered to be financially material to a given company in a relevant sub-industry. The analysis also shows that Reliance Industries lags behind its peers on safety issues and has less board diversity than its peers.
In conclusion, Reliance Industries needs to improve on its greenhouse gas emissions and safety, which are very material to the Oil & Gas industry. While the company has made progress toward achieving its ESG goals, it needs to do more to address these material ESG issues.
Additionally, the company needs to focus on improving its safety measures and increasing board diversity to catch up with its peers. Therefore, the correct answer is option D.
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Complete Question:
Examine the ESG analysis from Bloomberg for reliance industries, an Indian Company that manufactures petrochemicals, synthetic fibers, and textiles. Which of the following is true about Reliance?
a. Reliance leads on Air Quality and Water Management, but it needs to improve on waste management.
b. Reliance lags on safety issues and has less board diversity than its peers.
c. Waste management and Ethics & Compliance are very material to the Oil & Gas Industry, and Reliance needs to improve on both.
d. Greenhouse Gas (GHG) emissions and safety are very material to the Oil & Gas industry, and Reliance needs to improve on both.
On January 1, 1998, the reserve for discount on Debtors was $. 250. During 1998, discount allowed to debtors amounted to $. 150. The debtors on December 31, 1998, were $. 6.000. Make a provision of 5% debtors for discount. Show the Journal, Ledger and Balance Sheet.
Provision for Discount: $300. Debtors: $6,000. (No change to Discount Allowed and Reserve for Discount on Debtors mentioned).
To resolve the inquiry and give an extensive reaction, we should go through the vital stages to record the diary section, update the record, and set up the accounting report.
1) Diary Section: Date: January 1, 1998, Account Charge Credit no diary section required as it specifies the save for rebate on account holders toward the start of the year.
Date: December 31, 1998, Account Charge Credit.
Markdown Permitted $150
Arrangement for Markdown $300
Clarification: We charge the Rebate Permitted record to record the markdown given to debt holders during the year, and credit the Arrangement for Rebate record to build the arrangement sum.
2) Record, Rebate Permitted:
Date Portrayal Charge Credit Equilibrium Dec 31, 1998 To Arrangement $150. Arrangement for Rebate:
Date Portrayal Charge Credit Equilibrium, Dec 31, 1998 By Markdown Permitted $150 $300.
3) Monetary record:
As of December 31, 1998: Resources, Indebted individuals: $6,000 and Liabilities. Arrangement for Markdown: $300
Save for Rebate on Account holders: $250
The arrangement for markdown is determined as 5% of the debt holders' surplus, which adds up to $300. This arrangement is kept in the arrangement for rebate account and is displayed as a responsibility yet to be determined sheet. The hold for rebate on indebted individuals stays at $250 as referenced toward the start of the year.
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An insurance company offers you $1,000 annually during the next 5 years. If Interest rates are 9% How much you will pay this financial product PRESENT YOUR ANSWER ROUNDED WITH ZERO DECIMAL PLACES
The amount you'll pay for the financial product is $3,890. This is rounded to zero decimal places. Interest rates are a percentage charged on the principal amount borrowed.
They are used to calculate the interest that will be paid for a loan, bond, or any other financial product. To calculate the amount you will pay for a financial product, you can use the formula for the present value of an annuity. Present value of an annuity formula PV = PMT x [1 - (1 + r/n)^(-nt)] / (r/n) Where: PV = Present Value, PMT = Payment per period, r = Interest rate, n = Number of payments per year, t = Number of years.
The problem provides us with the following information. Present value = $1,000, r = 9%, n = 1, t = 5. Using this information, we can substitute into the formula and solve for PV.
PV = $[tex]1,000 * [1 - (1 + 0.09/1)^{(-1x5)} / (0.09/1)[/tex] PV = $3,890Rounding to zero decimal places, the amount you will pay for the financial product is $3,890.
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Prokter and Gramble (PKGR) has historically maintained a
debt-equity ratio of approximately
0.25.
Its current stock price is
$52
per share, with
2.1
billion shares outstanding. The firm enjoy
Procter & Gamble (PKGR) has historically maintained a debt-equity ratio of approximately 0.25.The debt-equity ratio is an essential indicator that provides insights into how much debt a firm has relative to its equity.
The debt-equity ratio is calculated by dividing the total liabilities of the company by its shareholder equity.P&G has had a debt-equity ratio of about 0.25 for a long time, which means the company has more equity than debt in its capital structure. The company's stock price is $52 per share, and it has 2.1 billion shares outstanding. The total market capitalization of P&G can be calculated as follows: Number of outstanding shares = 2.1 billion
Stock price per share = $52Total market capitalization = Number of outstanding shares × Stock price per shareTotal market capitalization = 2.1 billion × $52Total market capitalization = $109.2 billion Therefore, the market capitalization of P&G is approximately $109.2 billion.
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In a study of Minneapolis it was found that the elasticity of house values with respect to a NEF is -0.58. A NEF is a measure of aircraft noise related to human hearing and discomfort. This means that an
increase of NEFs of 5.8% produces a decrease in housing values of 1%
increase of NEFs of 1% produces an increase in housing values of 5.8%
increase of NEFs of 0.58% produces a decrease in housing values of 0.58%
increase of NEF of 1% produces an increase in housing values of 0.58%
increase of NEFs of 0.1% produces a decrease in housing values of 0.58%
increase in NEFs of 1% produces a decrease in housing values of 0.58%
The correct interpretation of the elasticity of house values with respect to a NEF is that a 1% increase in NEFs leads to a decrease in housing values of 0.58%.
This means that as the level of aircraft noise measured by NEFs increases, the value of houses in Minneapolis decreases, although not proportionally. For example, a 5.8% increase in NEFs would result in a 1% decrease in housing values.
It's important to note that the elasticity value indicates the percentage change in housing values for a given percentage change in NEFs. In this case, the elasticity of -0.58 suggests an inverse relationship between aircraft noise and housing values.
As NEFs increase, indicating higher levels of noise, the demand for housing decreases, leading to a decrease in housing values.
Therefore, the statement "an increase of NEFs of 5.8% produces a decrease in housing values of 1%" is incorrect. Instead, an increase of NEFs of 1% produces a decrease in housing values of approximately 0.58%.
The other options listed in the question are also incorrect based on the given elasticity value.
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How do you define the term ‘tax avoidance’? Give at least one
example.
Tax avoidance refers to the use of legal methods to reduce the amount of tax that an individual or organization pays. Tax avoidance involves taking advantage of the loopholes in the tax laws to minimize tax payments.
Tax avoidance is considered legal and ethical as it involves the use of legal methods to minimize tax payments.Tax avoidance involves the use of legal ways to minimize tax payments. Some of the tax avoidance methods used by individuals and organizations include investing in tax-efficient savings plans, offshore investments, and trust funds, among others. For instance, individuals can invest in Individual Savings Accounts (ISA), which allow them to earn tax-free interest on their savings. Additionally, companies can establish subsidiaries in tax-friendly jurisdictions to reduce their tax liability. While tax avoidance is legal and ethical, tax evasion is illegal. Tax evasion involves the use of illegal means to avoid paying taxes. For example, failing to declare income, exaggerating expenses, and hiding assets are considered tax evasion and are punishable by law.
In conclusion, tax avoidance involves the use of legal means to minimize tax payments, while tax evasion involves the use of illegal means to avoid paying taxes. Tax avoidance is legal and ethical, while tax evasion is illegal and unethical.
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