Answer:
The cost of common equity is 22.32%.
Explanation:
This can be calculated using the weighted average cost of capital (WACC) formula as follows:
WACC = (WS * CE) + (WD * CD * (1 - T)) ……………… (1)
Where;
WACC = Weighted average cost of capital = 18.6%, or 0.186
WS = Weight of Market value of common shares outstanding = 1 - WD = 1 - 0.25 = 0.75
WD = Weight of debt = Debt-to-equity ratio = 1/4 = 0.25
CE = cost of common equity = ?
CD = Pretax cost of debt = 9.4%, or 0.094
T = Tax rate = 21%, or 0.21
Substituting the values into equation (1) and solve for CE, we have:
0.186 = (0.75 * CE) + (0.25 * 0.094 * (1 - 0.21))
0.186 = (0.75 * CE) + 0.018565
0.75 * CE = 0.186 - 0.018565
0.75 * CE = 0.167435
CE = 0.167435 / 0.75
CE = 0.223246666666667, or 22.3246666666667%
Rounding to two decimal places, we have:
CE = 22.32%
Therefore, the cost of common equity is 22.32%.
Jamie Patterson is doing research in Los Angle on a new product for Hispanic men and women, ages 18 to 39. She needs to choose a sampling technique. Which would you recommend? a) convenience sample b) any would work perfectly well c) stratified random sample d) quota sample e) random sample
Answer:
c) stratified random sample
Explanation:
Sampling is the process by which a small and representative part of a population is analysed and used to draw conclusions about the larger population.
The main aim of sampling is to reduce the time spent in drawing conclusions about he population not interest. It is easier to analyse small number of variables than the whole population.
Stratified random sample involves choosing a sample that has smaller sub groups called strata. This allows the sample to effectively represent a population when there are more than one characteristic to be considered.
In the given scenario the population is for Hispanics with subgroups of men, women, and age of 18 - 39 years.
So stratified random sampling is the best option
In the long-run the inputs of all the factors of production can be varied by the firm, consequently, firms can combine the factors of production more ______________ and, therefore, costs in the long-run are lower than in the short-run.
Answer:
Efficiently
Explanation:
In production, long run is simply the period of time that is long enough for all inputs to be changed. While short run is the time frame, usually so brief, a firm cannot change the amount of every input. Usually, in In the short run, some inputs are fixed, while in the long run, all inputs are variable and Profit maximization can only occur with minimization of costs of inputs.
Firms can combine the factors of production more in the long-run the inputs of all the factors of production and also In a long run, it can alter ot change variousproduction levels due to various economic profits or losses in view.
Assume that labor is plotted on the horizontal axis and capital is plotted on the vertical axis. A firm plans to spend $1,000 per week on inputs and confronts a wage rate of $10 per hour and a capital rental rate of $20 per hour. Given this information, what will be the slope of the isocost curve?
A. -2
b. -1/2
c. -100
d. -50
Answer:
b.-1/2
Explanation:
Calculation for what will be the slope of the isocost curve
Using this formula
Slope of isocost line = -Wage rate/Capital rental rate
Let plug in the formula
Slope of isocost line=-10/20
Slope of isocost line=-1/2
Therefore the Slope of isocost line will be -1/2
Moerdyk Corporation's bonds have a 15-year maturity, a 7.25% semiannual coupon, and a par value of $1,000. The required rate of return is 6.2%. Based on semiannual compounding, What is the market price of a bond?
Answer:
Bond price= $1,101.59
Explanation:
Giving the following information:
Time= 15*2= 30 semesters
Par value= $1,000
Rate of return= 0.062/2= 0.031
Cupon= (0.0725/2)*1,000= $36.25
To calculate the value of the bond, we need to use the following formula:
Bond Price= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]
Bond price= 36.25*{[ 1 - (1.031^-30)] / 0.031} + [1,000/(1.031^30)]
Bond price= 701.42 + 400.17
Bond price= $1,101.59
A restructuring of operations that ____ the difference between a foreign currency's inflows and outflows may ____ economic exposure.
A. reduces; increase
B. increases; reduce
C. reduces; reduce
D. reduces; increase AND increases; reduce
Answer:
C. reduces; reduce
Explanation:
When there are an inflow and outflow of capital with respect to the foreign as an in and out of an economy so this represents a major and important aspect of the globalization. Simultaneously these type of inflows and outflows important impact the depreciation and the appreciation of the currency of the country in terms of foreign exchange reserves that directly impacted
Therefore the correct option is c.
If an investor purchases a bond when its current yield is higher than the coupon rate, then the bond's price will be expected to::_______
a. increase over time, reaching par value at maturity
b. exceed the face value at maturity
c. be less than the face value at maturity
d. decline over time, reaching par value at maturity
Answer:
a. increase over time, reaching par value at maturity
Explanation:
If current yield is more than coupon rate, it means that the bond price is less than par value, as time to maturity decreases bond value amortizes to par value. Thus, If an investor purchases a bond when its current yield is higher than the coupon rate, then the bond's price will be expected to increase over time, reaching par value at maturity.
Suppose that the coupon rate for a TIPS is 4%. Suppose further that an investor purchases $50,000 of par value initial principal) of this issue today.
(1) What is the dollar coupon interest that will be paid in cash at the end of the first six months if the current rate of inflation is 3.25%?
(2) What is the dollar coupon interest that will be paid in cash at the end of the first year if the rate of inflation increases to 3.75% six month later?
Answer:
1. $1,016.25
2. $1,035.30
Explanation:
Dollar coupon interest = Par value * (1+inflation/2)*coupon rate/2
1. Dollar coupon interest = 50000* (1+3.25%/2)*4%/2
Dollar coupon interest = 50,000*(1+3.25%/2)*4%/2
Dollar coupon interest = 50,000*1.01625*0.02
Dollar coupon interest = $1,016.25
2. Dollar coupon interest = 50,000*(1+3.25%/2)*(1+3.75%/2)*4%/2
Dollar coupon interest = 50,000*1.01625*1.01875*0.02
Dollar coupon interest = 1035.3046875
Dollar coupon interest = $1,035.30
The Distance Plus partnership has the following capital balances at the beginning of the current year: Tiger (40% of profits and losses) $ 150,000 Phil (30%) 120,000 Ernie (30%) 135,000 Each of the following questions should be viewed independently.
Required:
a. If Sergio invests $190,000 in cash in the business for a 20 percent interest, what journal entry is recorded?
b. If Sergio invests $100,000 in cash in the business for a 20 percent interest, what journal entry is recorded? Assume that the bonus method is used.
c. If Sergio invests $102,000 in cash in the business for a 20 percent interest, what journal entry is recorded? Assume that the goodwill is used.
Answer:
A. Total Capital After Investment = 150000+120000+135000+190000 = 595000
Sergio's Share = 595000*20% = 119000
Bonus Distributed to Existing Partners = 190000 - 119000 = 71,000
Journal Entry
Particulars Debit Credit
Cash 190,000
Sergio, Capital 119,000
Tiger, Capital (71,000*40%) 28,400
Phil, Capital (71,000*30%) 21,300
Ernie, Capital (71,000*30%) 21,300
B. Total Capital After Investment = 150000+120000+135000+100000 = 505000
Sergio's Share = 505000*20% = 101000
Bonus Taken from Existing Partners = 101000 - 100000 = 100
Journal Entry
Particulars Debit Credit
Cash 100000
Tiger, Capital (1000*40%) 400
Phil, Capital (1000*30%) 300
Ernie, Capital (1000*30%) 300
Sergio, Capital 101000
C. Total Capital After Investment = 150000+120000+135000+102000 = 507000
Implied Value of Business = 102000/20% = 510000
Goodwill = 510000 - 507000 = 3000
Journal Entry
Particulars Debit Credit
Goodwill 3000
Tiger, Capital (3000*40%) 1200
Phil, Capital (3000*30%) 900
Ernie, Capital (3000*30%) 900
Journal Entry
Particulars Debit Credit
Cash 102000
Sergio, Capital 102000
If an asset costs $16,000, has an expected useful life of 8 years, is expected to have a $2,000 salvage value and generates net annual cash inflows of $2,000 a year, the cash payback period is:__________.
A) 8 years.
B) 7 years.
C) 6 years.
D)5 years.
Answer:A) 8 years
Explanation: For every business, the shorter the payback period, the more attractive the investments and the longer the payback period the less attractive such investment is.
Payback period is the time in which the initial cost of an investment is able to be recouped through inflow of cash generated by such investment.
It is calculated as cost of the initial investment divided by the annual cash flow. ie
Cash Payback Period= Initial Investment/ Annual Cash flow
= 16,000/ 2000
= 8 years
Jill Angel holds a $200,000 portfolio consisting of the following stocks. The portfolio's beta is 0.875.
Stock Investment Beta
A $50,000 0.5
B 50,000 0.8
C 50,000 1
D 50,000 1.2
Total $200,000
If Jill replaces Stock A with another stock, E, which has a beta of 1.50, what will the portfolio's new beta be?
a. 1.40
b. 1.29
c. 0.86
d. 0.75
e. 1.08
The options provided are incorrect. The correct answer is given below
Answer:
New Portfolio beta = 1.125
Explanation:
The portfolio beta is the function of the weighted average of the individual stock betas that form up the portfolio. The formula to calculate the beta of a portfolio is as follows,
Portfolio beta = wA * Beta of A + wB * Beta of B + .... + wN * Beta of N
Where,
w represents the weight of each stock in the portfolioNew Portfolio beta = 50000/200000 * 0.8 + 50000/200000 * 1 +
50000/200000 * 1.2 + 50000/200000 * 1.5
New Portfolio beta = 1.125
Financial markets:____________.
a. reduce diversification.
b. increase transaction costs.
c. determine tax rates.
d. provide liquidity.
Answer:
b. increase transaction costs & d. provide liquidity.
Explanation:
Financial markets reduce diversification and provides liquidity. The market provides means for reduce diversification (reducing risk for borrowers & lenders) and also enhancing liquidity for borrowers & lenders as well.
The Dewey Corporation has the following data, in thousands. Assuming a 365-day year, what is the firm's cash conversion cycle?
Annual sales =
Annual cost of goods sold =
Inventory =
Accounts receivable =
Accounts payable = $45,000
$31,500
$4,000
$2,000
$2,400
a. 25 days
b. 28 days
c. 31 days
d. 35 days
e. 38 days
Answer:
d. 35 days
Explanation:
Cash conversion cycle = Average inventory/ (COGS/365) + Average account receivables/(Credit sales/365) - Average account payable / (COGS/365)
Cash conversion cycle = 4,000 / (31,500/365) + 2,000/(45,000/365) - 2,400/(31,5000/365)
Cash conversion cycle = 4,000/86.3014 + 2,000/123.2877 - 2,400/86.3014
Cash conversion cycle = 46.3492 + 16.2222 - 27.8095
Cash conversion cycle = 34.7619
Cash conversion cycle = 35 days
Based on the information given Cash conversion cycle is d. 35 days.
Cash conversion cycle = Days in Inventory + Days in Receivables – Days in payables
Cash conversion cycle = Inventory/Cost of Goods sold×365 + Accounts receivables/Annual Sales×365 – Accounts payable/Cost of goods sold×365
Let plug in the formula
Cash conversion cycle= 4,000 /31,500×365+ 2,000/45,000×365 - 2,400/31,5000×365)
Cash conversion cycle = 46.3492 + 16.2222 - 27.8095
Cash conversion cycle = 34.7619
Cash conversion cycle = 35 days (Approximately)
Inconclusion Cash conversion cycle is d. 35 days.
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Marginal cost is defined as:________.
a. total variable cost divided by total output.
b. the change in total costs from producing one more unit of output.
c. total cost divided by total output.
d. the change in fixed cost from producing one more unit of output.
Answer:
b. the change in total costs from producing one more unit of output.
Explanation:
The marginal cost is the cost that incurred for generating one more additional unit of output
It could be computed as shown below:
Marginal cost = Change in total cost ÷ change in quantity
Therefore as per the above explanation, the option b is correct
And, the same is to be considered
Thus, all the other options are incorrect
What is the term used to describe the linking of key product or service requirements to process capabilities?
Answer:
Product or service profiling.
Explanation:
Product or service profiling is the term used to describe the linking of key product or service requirements to process capabilities.
Generally, most organizations and business owners use the product or service profiling strategy to enhance consistency through the identification of their key services or product line and as such are avail the opportunity to select the appropriate process, procedures and techniques to achieve their goals and objectives successfully.
On March 1st, the Picasso Co. issued a 12 month, $120,000 note, to the Bank of Carbondale. The note carries a 10% interest rate and all payments for principal and interest will be paid at the end of 1 year. What is the maturity value of the note?
Answer:
The maturity value of the note is $132,000
Explanation:
A Loan note is a promissory note that is signed to make a promise of an amount of Loan taken by someone that to be returned after a specific time with interest value at a defined in the loan note.
The maturity value of the loan note can be calculated as follow
Face value = $120,000
Interest rate = 10%
Time period = 1 years
Use following formula to calculate the maturity value of the loan note.
Maturity value = Face value x ( 1 + interest rate )^ numbers of years
Placing values in the formula
Maturity value = $120,000 x ( 1 + 10% )^1
Maturity value = $132,000
You are evaluating shares in Honeywell International (HON). They currently pay an annual dividend of $4.00 per share this year and expect to raise that by 5% per year every year in the future. If you use a discount rate of 10%, what is the value of HON shares(to two decimal places)?
Answer:
$84
Explanation:
Calculation for what is the value of HON shares
Using this formula
Value of HON shares=(Expected dividend next year)/(Discount rate -Growth rate of dividend)
Let plug in the formula
Value of HON shares= 4(1+.05)/(.10-.05)
Value of HON shares= (4.2/ .05)
Value of HON shares= $84
Therefore the Value of HON shares will be $84
Solomon Services Company has 69 employees, 29 of whom are assigned to Division A and 40 to Division B. Solomon incurred $413,310 of fringe benefits cost during 2018. Required: Determine the amount of the fringe benefits cost to be allocated to Division A and to Division B.
Answer:
Division A - $173,710Division B - $239,600Explanation:
First determine the fringe benefits per employee for the whole company;
= 413,310 / 69
= $5,990 per employee
Division A has 29 employees so the fringe benefit cost is;
= 29 * 5,990
= $173,710
Division B has 40 employees so the fringe benefit cost is;
= 40 * 5,990
= $239,600
A) A country's natural unemployment rate is 4 percent and its actual unemployment rate is 7 percent, what is its cyclical unemployment rate? Instructions: Enter the value for the output gap as an absolute number B) According to Okun's law, this country would have a recessionary output gap of percent percent.
Answer:
a. Cyclical unemployment rate = 3%
b. According to Okun's law, this country would have recessionary output gap of 6%
Explanation:
Note: The full and organized question is attached as picture below
a. A country's natural unemployment rate = 4% & its actual unemployment rate = 7%
Cyclical unemployment rate = Actual unemployment rate - Natural unemployment rate
Cyclical unemployment rate = 7 - 4
Cyclical unemployment rate = 3%
Cyclical unemployment is known to happen when the overall demand for goods and services in an economy cannot reach the level of full employment
b. Okun's law is known as the relationship between the economy unemployment rate and its Gross National Product
According to Okun's law, this country would have recessionary output gap of 6%. This comes from if a country's recessionary output gap grows by 4%, then its cyclical unemployment rate will increase by 2%
a. The cyclical unemployment rate is 3%
Cyclical unemployment can be described as the type of unemployment that exists because full demand for goods and services cannot attain full employment.
The natural rate of unemployment = 4%
The actual rate of unemployment = 7%
cyclical unemployment =
Actual - natural
7% - 4% = 3%
Therefore the cyclical unemployment rate is 3%.
b. According to Okun's law the recessionary gap would be 6%.
The reason for this is that the law states that when there is natural unemployment, the recessionary gap can be gotten by adding 2% to the natural rate.
4%+2% = 6%
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A contingent liability: multiple choice is only remotely possible. cannot be estimated. will result from a future event. is a potential liability that has arisen because of a past event or transaction. will only result when a remote event becomes probable. is remotely estimable and probable
Answer:
is a potential liability that has arisen because of a past event or transaction.
Explanation:
A contingent liability is a potential liability that has arisen because of a past event or transaction.
Some of the characteristics of contingent liabilities includes being remote, probable, estimable, and reasonably possible.
In order to record a contingent liability as a liability on a company's balance sheet, it must be probable (likely to occur) and subject to estimate.
Hence, companies are advised to record the contingent liabilities so as to meet the Generally Accepted Accounting Principles (GAAP) and IFRS requirements.
The composition of the Fingroup Fund portfolio is as follows:
Stock Shares Price
A 200,000 $ 34
B 268,000 56
C 416,000 36
D 520,000 45
The fund has not borrowed any funds, but its accrued management fee with the portfolio manager currently totals $56,000. There are 4.5 million shares outstanding.
What is the net asset value of the fund? (Round your answer to 2 decimal places.)
Answer:
$13.36
Explanation:
The computation of the net asset value of the fund is as follows:
Total value
= 200,000 shares × $34 + 268,000 shares × $56 + 416,000 shares × $36 + 520,000 shares × $45
= $6,800,000 + $15,008,000 + $14,976,000 + $23,400,000
= $60,184,000
Now the net asset value is
= ($60,184,000 - $56,000) ÷ (4,500,000)
= $13.36
How will the depreciation of the Japanese Yen vis-Ã -vis the USD impact FDI from U.S. into Japan?
Answer:
Generally, when a currency depreciates, that results in higher foreign direct investment. I.e. if the currency of any country depreciates, investing in that country becomes cheaper for foreign companies, e.g. land, equipment or existing facilities are worth less if the investors brings an appreciated foreign currency.
In this specific case, if the yen depreciates, US foreign direct investment in Japan should increase.
When firms invest in suppliers to exchange knowledge and collaborate on improvements, they create shared value for:_______
a. The public.
b. Both the supplier and the lead firm.
c. The supplier only.
d. The lead firm only
Which item is not correct with respect to the treatment of sustainable and transitory items and a company's income statement?
a. Financial reporting assists statement users in forecasting future cash flows by providing an income statement format that segregates components of net income.
b. Income statements prepared in accordance with GAAP differentiate between income components that are believed to be sustainable and those that are transitory.
c. The income statement isolates a key figure called "income from sustainable operations."
d. Transitory items are disclosed separately on the income statement so that statement users can place less weight on these earnings components when forecasting future profitability.
Answer:
c. The income statement isolates a key figure called "income from sustainable operations."
Explanation:
Remember, an income statement is a financial report document that contains the revenues and expenses of a company in other to determine if the company is making a profit or loss in a particular period.
However, with respect to the treatment of sustainable and transitory items and a company's income statement, it is incorrect to say that the "income statement has an isolated key figure called "income from sustainable operations," because it often notes transitory items and sustainable income components but not isolating them.
In many countries, one of the roles of the central bank is to provide loans to distressed financial institutions. In economics, the term for this is:
A. bailout bank
B. ender of last resort
C. source of ultimate credit
D. rovider of fiduciary nsurance
E. liquidity resource
Answer: Bailout Banking
Explanation:
benefits are an important aspect of employee compensation and they involve the direct financial payments employees receive for remaining with an employer.
true or false
Park Co. is considering an investment that requires immediate payment of $21,530 and provides expected cash inflows of $6,500 annually for four years. Assume Park Co. requires a 7% return on its investments.
What is the internal rate of return?
Answer:
8.00%
Explanation:
The internal rate of return is the rate of return on the investment which gives a zero net present value.
IRR can be computed using excel IRR function as shown below:
=IRR(values)
values are the cash flows arranged from the earliest( year zero ) to the latest (year 4) as contained in the attached.
IRR=8.00%
The IRR is proven thus:
NPV=-$21,530+$6500/(1+8%)^1+$6500/(1+8%)^2+$6500/(1+8%)^3+$6500/(1+8%)^4=-$1.18(which is very close to zero)
E-Tech Initiatives Limited plans to issue $500,000, 10-year, 4 percent bonds. Interest is payable annually on December 31. All of the bonds will be issued on January 1, 2019. Show how the bonds would be reported on the January 2, 2019, balance sheet if they are issued at 102.
Answer:
E-Tech Initiatives Limited
Partial balance sheet
as on January 2, 2019
Liabilities
Long term Liabilities
Bond Payable ________________ $500,000
Add: Premium on Bond _________ $10,000
_____________________________________ $510,000
Explanation:
First Calculate the issuance value
Issuance value = $500,000 x 102% = $510,000
The bond is issued on Premium, Now calculate the premium on bond value
Premium on bond = Issuance value - Premium on Bond
Premium on bond = $510,000 - $500,000
Premium on bond = $10,000
The bond payable value of $500,000 and Premium on the bond aer reported in the long term liability section of balance sheet.
The preparation of the bond that should be reported on the balance sheet is presented below:
E-Tech Initiatives Limited
Partial balance sheet
As on January 2, 2019
Liabilities
Long term Liabilities
Bond Payable $500,000
Add: Premium on Bond $10,000 ($510,000 - $500,000)
Carrying value $510,000 ($500,000 * 102%)
In this way, it should be presented.
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How long do financial records remain on your credit report?
Answer: Approximately seven years
HOPE U HAD A GREAT THANKSGIVING <3
Your leader demonstrates both high concern for performance and high concern for employee welfare. Which leadership studies would this be consistent with?
Answer:
The Ohio State studies
Explanation:
A Leader is someone in a group that is straddled with the task of directing task-relevant group activities or, in the absence of a chosen leader, carrying the primary responsibility for performing the above functions in the group.
The Ohio's research/ studies carried out focus on Behavioral approach which was begun by researchers at Ohio State University. Its Leadership theory focus on the kinds of behavior engaged in by people in leadership roles and identified two major types which are consideration and initiating structure. Consideration as a type of behavior identified in the Ohio State studies are behavior showing mutual trust, respect, and a certain warmth and communication between the supervisor and group.
Martin owns his own motorcycle and ATV store and operates as a small business. He notices that many of his customers talk about golf while in his store. He quickly adds golf carts and golf clubs to his merchandise selection. Rapidly adjusting to the needs of his customers is possible because small businesses