Answer:
1.98%
Explanation:
Inflation rate = (CPI at the end of the year / CPI at the beginning of the year) - 1
(257 / 252) - 1 = 0.01984 = 1.984%
(1 + nominal interest rate) = (1 + inflation rate) (1 + real interest rate)
1.04 = 1.01984 x (1 + real interest rate)
(1 + real interest rate) = (1.04 / 1.01984) - 1 = 1.98%
_______ is best described as the process of transformation of an idea into a new product or process, or the modification and recombination of existing ones.
Answer: Invention
Explanation:
Invention simply refers to the process for transforming an idea into a new product or the modification and the recombination of existing ones.
Invention is the unique method, or process that's used in the creation of a product or may be an improvement on a product or machine that's already created.
Which business unit could have its shares quoted on the stock exchange?
Answer:
To promote trading of its stock, a corporation may choose to list its shares on a stock exchange. Apple, Walmart and Ford are high-profile publicly traded corporations, but smaller companies also trade on the major exchanges.
To determine whether a lottery winner would prefer to receive the money in a single lump sum immediately or receive an equal amount over a period of years, you would use which type of time value of money calculation
Answer:
D)The present value of annuity
Explanation:
These are the options for the question
a) future value of a single amount.b. Contingent assets, if probable and estimable, are The present value of a single amount.c. The future value of an annuity
d. The present value of annuity
The present value of an annuity can be regarded as the amount of money which would be needed today inorder to fund series annuity payments in the future. With respect to time value of money, particular sum of money that is been received today usually have worth that is more than that same sum of money at a future date. For instance, To determine whether a lottery winner would prefer to receive the money in a single lump sum immediately or receive an equal amount over a period of years, you would use present value of annuity type of time value of money calculation.
On December 31, the company provides consulting services and bills its customer $3,000 for these services.
Required:
Write down the necessary journal entry.
Answer:
Debit Accounts receivable $3,000
Credit Consulting Revenue $3,000
Explanation:
Based on the information given if the company provides consulting services and bills its customer the amount of $3,000 for these services the appropriate journal entry On December 31 will be:
On December 31
Debit Accounts receivable $3,000
Credit Consulting Revenue $3,000
On December 31
Accounts Receivable $3,000
To Consulting Revenue $3,000
(Being consulting services is recorded)
Here the account receivable should be recorded as it increased the assets and credited the consulting revenue as it also increased the revenue.
Therefore we can conclude that the above journal entry should be recorded.
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The data is D = 50,000/year, S= $500 per order, H = $0.25 per unit per year. Assume a lead time of 3 days.
Fill in the following table. Write out the formulas you are using.
Annual demand
Holding cost (units per year)
Ordering cost
Ordering quantity (EOQ)
Number of orders per year
Average inventory
Maximum inventory
Reorder level
Length of order cycle
Annual holding cost
Annual ordering cost
Annual Affected Inventory Cost
b. Suppose a mistake was made in the data and the correct data is D = 60,000 per year, S = $400 per order, H = $0.20 per unit per year. Calculate the correct EOQ and affected inventory cost.
c. Now suppose we used the incorrect EOQ (based on the first set of data) instead of the correct EOQ. Calculate the affected inventory cost.
d. Compute the percentage error in the EOQ and in the inventory cost.
e. Moral of the story is that incorrect estimation of costs or demand (does or does not) result in substantial deviation from the optimal cost (circle the right answer).
Answer:
Annual demand 50,000 units
Holding cost $0.25 per year
Ordering Cost $500 per order
EOQ : 14,142
Number of orders per year 4
Average inventory 14,142 units
Maximum inventory 14,500 units
Reorder level 410 units
Length of order cycle 3 days
Annual Holding cost $12,500
Annual ordering cost $2000
Annual affected inventory cost $14,500
Explanation:
EOQ = [tex]\sqrt{\frac{2 * D * S}{H} }[/tex]
EOQ = [tex]\sqrt{\frac{2 * 50000 * 500}{0.25} }[/tex]
EOQ = 14,142 units
Number of Order : Annual demand / EOQ
Number of order : 50,000 / 14,142 = 3.53 or approximately 4
Annual Ordering cost : No. of order * cost per order
Annual ordering cost : 4 * $500 = $2,000
Annual Holding Cost : Demand * Holding cost per unit
Annual holding cost = 50,000 * $0.25 per unit = $12,500
Reorder level : Daily demand * lead time
Reorder level : [ 50000 / 365 ] * 3 = 410 units
Allen buys only beer and pizza. When the price of beer is $2.00 per bottle and the price of pizza is $10.00, Allen maximizes his total utility (satisfaction) by buying 5 beers and 4 pizzas. If the marginal utility of the 5th beer is 100 utils. What would be the marginal utility of the 4th pizza?
Answer:
500 utils.
Explanation:
Calculation to determine What would be the marginal utility of the 4th pizza
First step is to determine the Total utility maximized
Using this formula
Total utility maximized =Beer Marginal Utility/Price of beers =Pizza Marginal Utility/Price of pizza.
Let plug in the formula
Total utility maximized= 100 utils/$2.00 = Marginal Utility of pizza/$10.00.
Marginal Utility of beers = 100/$2
Marginal Utility of beers= 50 utils per dollar
Marginal Utility of pizza =50 utils per dollar
Now let determine the marginal utility of the 4th pizza
Hence,
50 = Marginal Utility of pizza/$10
Marginal Utility of pizza=50*$10
Marginal Utility of pizza= 500 utils.
Therefore What would be the marginal utility of the 4th pizza is 500 utils
The journal entry a company uses to record fully funded pension rights for its salaried employees at the end of the year is
a. debit Pension Expense; credit Unfunded Pension Liability and Cash.
b. debit Pension Expense; credit Unfunded Pension Liability.
c. debit Pension Expense; credit Cash.
d. debit Salary Expense; credit Cash.
Answer:
The answer is C.
Explanation:
The correct option to the question is C.
Debit pension expense and credit cash.
Because the pension expense account is increasing, we debit. Increase in expense goes to the debit side.
And because cash is reducing by paying out pension expense from there, we credit the cash account. Decrease in asset(like cash) goes to the credit side.
g Determine the amount to be added to Allowance for Doubtful Accounts in each of the following cases and indicate the ending balance in each case. a. Credit balance of $370 in Allowance for Doubtful Accounts just prior to adjustment. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as
Answer:
Missing word "is estimated as $8,820. Amount added Ending balance b. Credit balance of $450 in Allowance for Doubtful Accounts just prior to adjustment. Bad debt expense is estimated at 2% of credit sales, which totaled $1,111,000 for the year. Amount added Ending balance"
a. Amount added = Balance as per aging method - Credit balance
Amount added = $8,820 - $370
Amount added = $8,450
So, Amount added = $8,450, Ending balance = $8,820
b. Amount added = 2% * Credit sale
Amount added = 2% * $1,111,000
Amount added = $22,220
Ending balance = $22,220 + $370
Ending balance = $21,850
Which statement is true?
A bank interest lower than inflation means more purchasing power.
Nominal rates are an accurate figure of purchasing power.
Real interest measures the power of the saved money
Real interest is the rate quoted in loan and deposit agreements.
Answer:
Nominal rates are an accurate figure of purchasing power.
The statement nominal rates are an accurate figure of purchasing power can be marked as true. Thus, the correct option is B). Nominal rates are an accurate figure of purchasing power.
What is nominal interest rate?Nominal interest rate refers to the interest rate before taking inflation into account. It is also refer to the interest rate on a loan that is charged without taking into account any fees or compounding of interest.
The nominal rate of interest is often used in banks to describe the interest on different loans and in the investment field as well. The higher the nominal rate, the more interest will be earned on savings.
Basically, the nominal interest rate is approximately equal to the real interest rate plus the inflation rate that can be depicts as (i = R + h).
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1.how can you categorize the buyers who are not price sensitive ?
Your dream is about to come true! You are about to buy your first classic sports car. To do so, you have arranged to borrow $65,000 from your local credit union. The interest rate on the loan is 6.00%. To simplify the calculations, assume that you will repay your loan over the next four years by making annual payments at the end of each year. According to the loan officer at the credit union, you must answer the following questions before you can go pick up your new car.
a. How much is the annual payment on your new car loan?
b. How much of your Year 2 payment will constitute interest on your loan?
c. How much of your Year 3 payment will be used to repay principal on the loan?
d. How much will you pay in total interest to finance the purchase of your $65,000 car?
Answer:
Car Loan
a. The annual payment on the new car loan = $18,758.45.
b. Year 2 payment that is interest on the loan = $3,008.49.
c. Year 3 payment that is principal repayment = $16,694.95
d. The total interest to be paid to finance the purchase of the $65,000 car is:
= $10,033.79.
Explanation:
Data and Calculations:
Loan Amount 65000
Loan Term 4 years 0 months
Interest Rate 6
Compound Annually (APY)
Pay Back Every Year
Results:
Payment Every Year $18,758.45
Total of 4 Payments $75,033.79
Total Interest $10,033.79
Principal 87%
Interest 13%
Amortization Schedule
Beginning Balance Interest Principal Ending Balance
1 $65,000.00 $3,900.00 $14,858.45 $50,141.55
2 $50,141.55 $3,008.49 $15,749.95 $34,391.60
3 $34,391.60 $2,063.50 $16,694.95 $17,696.65
4 $17,696.65 $1,061.80 $17,696.65 -$0.00
The mean of a set of data is 5.07 and its standard deviation is 3.39.
Find the z-score for a value of 9.65.
Answer:
1.35
Explanation:
zscore= (x-mean)/(Standard deviation)
(9.65-5.07)/3.39= 1.35
In a pull manufacturing system, ______. Group of answer choices Production is based on government regulations Production is based on capacity of the manufacturer Production is based on actual customer demand Production is based on past trends only
Answer:
actual customer demand
Explanation:
Pull production systems can be regarded as system whereby the product is been manufactured as a result of response to a specific demand. pull system can be regarded as lean manufacturing strategy , this strategy helps in reduction of waste in the production process. The components that is been used in manufacturing process are been only replaced only when consumed , so in this case, enough products are been made by companies only to meet customer demand. It should be noted that In a pull manufacturing system, Production is based on actual customer demand
Derk owns 960 shares of stock in Rose Corporation. The remaining 2,240 shares of Rose are owned as follows: 320 by Derk's daughter Rosalie, 640 by Derk's aunt Penelope, and 1,280 by a partnership in which Derk holds an interest of 90%. Determine the number of shares that Derk owns (directly and indirectly) in Rose Corporation. Derk is deemed to own (directly and indirectly) __________ shares in Rose Corporation.
Answer:
2,432 shares
Explanation:
Calculation to determine the number of shares that Derk owns (directly and indirectly) in Rose Corporation
First step is to determine the Shares in partnerships holding
Using this formula
Shares in partnerships holding = Interest rate * Partnership
Let plug in the formula
Shares in partnerships holding = 90% * 1,280
Shares in partnerships holding = $1152
Now let determine the Total shares deemed to be own
Total shares deemed to be own = Own shares + Daughter shares + Shares in partnerships holding
Let plug in the formula
Total shares deemed to be own = 960 + 320 + 1152
Total shares deemed to be own = 2432
Therefore Derk is deemed to own (directly and indirectly) 2432 shares in Rose Corporation.
A one-year insurance policy was purchased on June 1 for $2,400. The adjusting entry on December 31 would be:____________. (If an amount box does not require an entry, leave it blank.) Dec. 31 i. Accounts Payable ii. Cash iii. Insurance Expense iv. Insurance Payable v. Prepaid Insurance
Answer:
Adjusting Journal Entry:
Debit Insurance Expense $1,400
Credit Prepaid Insurance $1,400
To record the insurance expense for the year (7 months).
Explanation:
This adjustment will cause the Prepaid Insurance account to remain $1,000. This balance represents the insurance cost for 5 months having deducted the insurance cost for 7 months from June 1 to December 31. So, in line with the accrual concept and the matching principle of generally accepted accounting principles, only $1,400 Insurance was incurred for the current year. The balance will be charged to the account when the service is consumed.
You are a farmer who is putting away bales of hay for the winter months. Each bale is 3 feet long, 2 feet wide, and 1.5
feet thick. The bales of hay are stacked in storage bins 12 feet long, 8 feet wide, and 6 feet deep.
What is the minimum number of bins needed for 350 bales of hay?
Answer: 5.46 bins would be needed, so 6 bins for 350 bales of hay.
Explanation: Bales 350 bales have 9³ft each L=3×W=2×H=1.5 totals 3150³ft Bins L 12ft × W 8ft × H 6ft have 546³ft each 3150³ft ÷ 546³ft = 5.46875you can't buy half a bin, you would need 6 binsMelhoyo Corporation, a manufacturing company, has provided data concerning its operations for September. The beginning balance in the raw materials account was $37,000 and the ending balance was $29,000. Raw materials purchases during the month totaled $57,000. Manufacturing overhead cost incurred during the month was $102,000, of which $2,000 consisted of raw materials classified as indirect materials. The direct materials cost for September was: Group of answer choices
Answer:
The correct answer is "$63,000".
Explanation:
Given:
Beginning balance of raw materials,
= $37,000
Purchases made,
= $57,000
Ending balance,
= $29,000
Expenses of raw material,
= $2,000
Now,
The direct material cost will be:
= [tex]Beginning \ balance+Purchases \ made-Ending \ balance-Expenses \ of \ raw \ material[/tex]= [tex]37000+57000-29000-2000[/tex]
= [tex]63,000[/tex] ($)
Tan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Osaka Yokohama Sales $ 9,600,000 $ 26,000,000 Net operating income $ 672,000 $ 2,340,000 Average operating assets $ 3,200,000 $ 13,000,000 Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16%. Compute the residual income for each division.
Answer and Explanation:
The computation is shown below;
a. The return on investment is
= Margin turnover
= Net operating income ÷ sales × sales ÷ average operating assets
For Osaka
= $672,000 ÷ $9,600,000 × $9,600,000 ÷ $3,200,000
= 21%
For Yokohama
= $2,340,000 ÷ $2,600,000 × $2,600,000 ÷ $13,000,000
= 18%
2. The residual income is
= Net operating income - (average operating assets × rate of return)
For Osaka
= $672,000 - ($3,200,000 × 16%)
= $160,000
For yokohama
= $2,340,000 - ($13,000,000 × 16%)
= $260,000
Gray, Stone, and Lawson open an accounting practice on January 1, 2016, in San Diego, California, to be operated as a partnership. Gray and Stone will serve as the senior partners because of their years of experience. To establish the business, Gray, Stone, and Lawson contribute cash and other properties valued at $410,000, $340,000, and $170,000, respectively. An articles of partnership agreement is drawn up. It has the following stipulations:
Personal drawings are allowed annually up to an amount equal to 10 percent of the beginning capital balance for the year.
Profits and losses are allocated according to the following plan:
1. A salary allowance is credited to each partner in an amount equal to $8 per billable hour worked by that individual during the year.
2. Interest is credited to the partners’ capital accounts at the rate of 12 percent of the average monthly balance for the year (computed without regard for current income or drawings).
3. An annual bonus is to be credited to Gray and Stone. Each bonus is to be 10 percent of net income after subtracting the bonus, the salary allowance, and the interest. Also included in the agreement is the provision that there will be no bonus if there is a net loss or if salary and interest result in a negative remainder of net income to be distributed.
4. Any remaining partnership profit or loss is to be divided evenly among all partners.
Because of financial shortfalls encountered in getting the business started, Gray invests an additional $9,200 on May 1, 2016. On January 1, 2017, the partners allow Monet to buy into the partnership. Monet contributes cash directly to the business in an amount equal to a 20 percent interest in the book value of the partnership property subsequent to this contribution. The partnership agreement as to splitting profits and losses is not altered upon Monet’s entrance into the firm; the general provisions continue to be applicable. The billable hours for the partners during the first three years of operation follow:
2016 2017 2018
Gray 2,020 4,200 2,130
Stone 1,680 2,300 1,860
Lawson 3,700 1,620 1,550
Monet 0 1,430 1,820
The partnership reports net income for 2016 through 2018 as follows:
2016 $98,000
2017 (44,400)
2018 236,000
Each partner withdraws the maximum allowable amount each year.
A. Determine the allocation of income for each of these three years.
B. Prepare in appropriate form a statement of partners’ capital for the year ending December 31, 2018.
Answer:
thast way too long for just 10 points
Explanation:
sy
Politicalization of Accounting Standards
Some accountants have said that politicization in the development and acceptance of generally accepted accounting principles (i.e., rule-making) is taking place. Think about the term more broadly to mean the compromise that results when the bodies responsible for developing generally accepted accounting principles (FASB) are pressured by interest groups (SEC, American Accounting Association, businesses through their various organizations, Institute of Management Accountants, financial analysts, bankers, lawyers, and so on).
Required:
a. The Committee on Accounting Procedure of the AICPA was established in the mid to late 1930s and functioned until 1959, at which time the Accounting Principles Board came into existence. In 1973, the Financial Accounting Standards Board was formed, and the APB went out of existence. Do the reasons these groups were formed, their methods of operation while in existence, and the reasons for the demise of the first two indicate an increasing politicalization (as the term is used in the broad sense) of accounting standard setting? Explain.
b. What arguments can be raised to support the politicalization of accounting standard setting?
c. What arguments can be raised against the politicalization of accounting standard setting?
Answer: Some accountants have said that politicization in the development and acceptance of generally accepted accounting principles (i.e., rule-making) is taking place. Some use the term “politicization” in a narrow sense to mean the influence by governmental agencies, particularly the Securities and Exchange Commission, on the development of generally accepted accounting principles. Others use it more broadly to mean the compromise that results when the bodies responsible for developing generally accepted accounting principles are pressured by interest groups (SEC, American Accounting Association, businesses through their various organizations, Institute of Management Accountants, financial analysts, bankers, lawyers, and so on).
Instructions
(a) The Committee on Accounting Procedure of the AICPA was established in the mid- to late 1930s
and functioned until 1959, at which time the Accounting Principles Board came into existence. In
1973, the Financial Accounting Standards Board was formed and the APB went out of existence.
Do the reasons these groups were formed, their methods of operation while in existence, and the
reasons for the demise of the first two indicate an increasing politicization (as the term is used in
the broad sense) of accounting standard-setting? Explain your answer by indicating how the CAP,
the APB, and the FASB operated or operate. Cite specific developments that tend to support your
answer.
(b) What arguments can be raised to support the “politicization” of accounting rule-making?
(c) What arguments can be raised against the “politicization” of accounting rule-making?
Solution
a) CAP. The Committee on Accounting Procedure, CAP, which was in existence from 1939 to 1959, was a natural outgrowth of AICPA committees which were in existence during the period 1933 to 1938. The committee was formed in direct response to the criticism received by the accounting profession during the financial crisis of 1929 and the years thereafter. The authorization to issue pronouncements on matters of accounting principles and procedures was based on the belief that the AICPA had the responsibility to establish practices that would become generally accepted by the profession and by corporate management.
Explanation:
The purpose of GAAP's flexibility in its reporting standards allows companies to: Select one: a. Smooth reported revenues and earnings over several reporting periods. b. Change accounting estimates to meet target sales or earnings. c. Change accounting principles to improve reported earnings. d. Adopt specific accounting and reporting procedures to represent the firm's activities more accurately.
Answer:
D. Adopt specific accounting and reporting procedures to represent the firm's activities more accurately.
Explanation:
GAAP in accounting means Generally accepted accounting principle. It is a uniform collection of accounting rules and standards for reporting financial accounting for organizations
The main reason or purpose of GAAP is to ensure that there is transparency and consistency in the reporting of financial details from one organization to another. The aim is to also help firms record their financial activities accurately by adopting specific accounting and reporting procedures as stipulated by GAAP.
Menning Inc. uses a job-order costing system in which any underapplied or overapplied overhead is closed out to cost of goods sold at the end of the month. The company has provided the following data for June:
Direct materials $78,750
Direct labor cost $94,000
Manufacturing overhead cost incurred $61,275
Manufacturing overhead cost applied $65,800
Inventories: Beginning Ending
Work in process $17,500 $19,850
Finished goods $61,500 $38,250
The cost of goods sold that appears on the income statement for August and that has been adjusted for any underapplied or overapplied overhead is closest to: __________
a. $254,925
b. $263,975
c. $236,200
d. $259,450
Answer:
Adjusted COGS= $254,925
Explanation:
First, we need to calculate the cost of goods manufactured:
cost of goods manufactured= beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP
cost of goods manufactured= 17,500 + 78,750 + 94,000 + 65,800 - 19,850
cost of goods manufactured= $236,200
Now, the COGS:
COGS= beginning finished inventory + cost of goods manufactured - ending finished inventory
COGS= 61,500 + 236,200 - 38,250
COGS= $259,450
Finally, the over/under applied overhead and the adjustment:
Under/over applied overhead= real overhead - allocated overhead
Under/over applied overhead= 61,275 - 65,800
Overapplied overhead= $4,525
As overhead was overapplied, COGS must be reduced:
Adjusted COGS= 259,450 - 4,525
Adjusted COGS= $254,925
Currency $1,000 Checking Account Balances $2,000 Savings Account Balances $5,000 Small-Denomination Time Deposits $6,000 Non-Institutional Money Market Fund Shares $7,000 Consider the information above from 2019 and assume there are no traveler's checks. Calculate M1.
Answer:
M1 = $3000
Explanation:
Below is the given values:
Given the currency = $1000
The balance of checking account = $2000
In order to find the M1, just add the balances of currency and balances of the checking account.
Thus M1 = Currency + Balance of checking account
M1 = 1000 + 2000
M1 = 3000
Therefore, the M1 = $3000
The Beauty Beyond Words Salon uses an activity-based costing system in its beauty salon to determine the cost of services. The salon has determined the costs of services by activity as follows:
Activity Activity Rate
Hair washing $4.00
Conditioning $3.50
Chemical treatment $25.00
Styling $10.00
Hair Washing
Conditioning Chemical Treatment
Styling
Haircut 1 1 0 0
Complete style 1 1 0 1
Perm 2 3 1 1
Highlights 3 4 2 1
Calculate the cost of services for a haircut.
a. $7.50
b. $4.00
c. $3.50
d. $11.50
Answer:
The correct option is a. $7.50.
Explanation:
Note: The data in this question are merged together. They are therefore sorted before answering the question. See the attached pdf file for the complete question with the sorted data.
The explanation of the answer is now provided as follows:
Activity-based costing is a costing system that involves identifying an organization's activities and assigning the cost of each activity to all products and services based on actual consumption.
Based on the data in the question, a haircut requires one units each of Hair Washing and Conditioning, while it requires zero unit of each of Chemical Treatment and Styling.
Therefore, we have:
Cost of services for a haircut = (Units of Hair Washing * Rate of Hair Washing) + (Units of Conditioning * Rate of Conditioning) = (1 * $4.00) + (1 $3.50) = $4.00 + $3.50 = $7.50
Therefore, the correct option is a. $7.50.
Link Co. purchased machinery that cost $3,000,000 on January 4, 2019. The entire cost was recorded as an expense. The machinery has a nine-year life and a $200,000 residual value. The error was discovered on December 20, 2021. Before the correction was made, and before the books were closed on December 31, 2018, retained earnings was understated by:__________
a. $3,000,000.
b. $2,066,667.
c. $2,377,778
d. $2,333,333.
Answer:
See below
Explanation:
Renegade Publishers Inc. projected sales of 29,000 diaries for 2016. The estimated January 1, 2016, inventory is 1,200 units, and the desired December 31, 2016, inventory is 3,000 units. What is the budgeted production (in units) for 2016
Answer:
30,800 units
Explanation:
Production Budget for 2016
Budgeted Sales 29,000
Add Budgeted Closing Inventory 3,000
Total 32,000
Less Budgeted Opening Inventory (1,200)
Budgeted Production 30,800
therefore,
The budgeted production (in units) for 2016 is 30,800 units
When first eliminating multiple choice answer choices, you should cross out answers that are silly or are impossible
to be correct
Please select the best answer from the choices provided
ОТrue
OFalse
Answer:
True
.......
When approaching a multiple-choice question, it's essential to first eliminate answer choices that are obviously incorrect or "silly." Hence th statement is true .
What is MCQ ?Doing so will increase your chances of selecting the correct answer from the remaining options.
To begin, carefully read the question stem and identify any clues or keywords that might help you narrow down the possible answers. Then, review each answer choice and eliminate any that are blatantly wrong, based on your knowledge of the subject matter or common sense.
For example, if you are taking a math test and the question asks you to solve for x in the equation 2x + 5 = 13, you can quickly eliminate answer choices such as -5 or 50, which are clearly impossible solutions.
It's important to note that eliminating "silly" answer choices is just the first step in the process of solving a multiple-choice question. After you've narrowed down the possibilities, you'll need to carefully consider each remaining option and choose the one that best fits the question stem.
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For tax reasons, your client wishes to purchase an annuity that pays $60,000 each year for 11 years, with the first payment in one year. At an interest rate of 12% and focusing on time value of money without consideration of any fees, how much would the client need to invest now?
Equivalent problem structure (in neutral time-value-of-money terms): What is the present value of an annuity that pays $60,000 each year for 11 years, assuming a discount rate of 12% and the first payment occurs one year from now? Equivalent problem structure (as a borrower): How much could you borrow today in exchange for paying back $60,000 each year for 11 years, assuming an interest rate of 12% and the first payment occurs one year from now?
Answer:
$356,261.95
Explanation:
Interest rate per annum = 12%
No of years = 11
No of corresponding per annum = 1
Interest rate per period = 12% (12%/1)
No of period = 11
Payment per period = $60,000
1.12^11
Investment today = P * [1 - (1/(1+r)^n)]/r
Investment today = 60,000 * {1 - (1/(1+0.12)^11)] / 12%
Investment today = 60,000 * {1 - (1/3.47855) / 0.12
Investment today = 60,000 * {1 - 0.2874761) / 0.12
Investment today = 60,000 * 0.7125239/0.12
Investment today = 60,000 * 5.937699167
Investment today = 356261.95002
Investment today = $356,261.95
North Pole Fishing Equipment Corporation and South Pole Fishing Equipment Corporation would have identical equity betas of 1.10 if both were all equity financed. The market value information for each company is shown here: North Pole South PoleDebt $ 2,900,000 $ 3,800,000 Equity $ 3,800,000 $ 2,900,000 The expected return on the market portfolio is 10.9 percent, and the risk-free rate is 3.2 percent. Both companies are subject to a corporate tax rate of 35 percent. Assume the beta of debt is zero.a. What is the equity beta of each of the two companies? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))Equity betaNorth Pole South Pole b. What is the required rate of return on each of the two companies’ equity? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))Rate of returnNorth Pole % South Pole %
Answer and Explanation:
The calculation is given below;
For North Pole:
Unlevered Beta = 1.10
Debt = $2,900,000
Equity = $3,800,000
So,
D/E Ratio = Debt ÷ Equity
= $2,900,000 ÷ $3,800,000
= 0.76316
Now
Levered Beta = Unlevered Beta × [1 + (1 - tax) × D ÷ E Ratio]
= 1.10 × [1 + (1 - 0.35) × 0.76316]
= 1.65
Required Return = Risk-free Rate + Levered Beta × (Market Return - Risk-free Rate)
= 3.20% + 1.65 × (10.90% - 3.20%)
= 15.91%
For South Pole:
Unlevered Beta = 1.10
Debt = $3,800,000
Equity = $2,900,000
So,
D/E Ratio = Debt ÷ Equity
= $3,800,000 ÷ $2,900,000
= 1.31034
Now
Levered Beta = Unlevered Beta × [1 + (1 - tax) × D ÷ E Ratio]
= 1.10 × [1 + (1 - 0.35) × 1.31034]
= 2.04
And
Required Return = Risk-free Rate + Levered Beta × (Market Return - Risk-free Rate)
= 3.20% + 2.04 × (10.90% - 3.20%)
= 18.91%
Twinkies on the shelf of a convenience store lose their fresh tastiness over time. We say that the taste quality is 11 when the Twinkies are first put on the shelf at the store, and that the quality of tastiness declines according to the function Q(t)=.85tQ(t)=.85t (tt in days). Determine when the taste quality will be one half of its original value.
Answer:
4.27 days
Explanation:
Initial taste quality = 1
Quality of tastiness declines using this function
Q(t) = 0.85^t ( t in days )
Determine when the taste quality will be 1/2 of original value
i.e. when Q(t) = 1/2
1/2 = 0.85^t
= In ( 2 ) = - t ( In 0.85 )
∴ t = - In (2) / In (0.85)
= 4.265 days ≈ 4.27 days