Assume a dealer is offering a last-year passenger car model for $20,400 today or 4 year financing terms for $109 weekly payment (a total of 209 payments with the first payment made now). For the dealer, it does not make an economic difference if the customer chooses any of these two options (options are equivalent). Page 2 of 2 [a] What is the effective annual interest rate (ieff = ?) implied in this offer assuming that compounding is weekly? [b] If the buyer is interested more in monthly payment instead of weekly, how much this monthly payment is expected to be using the same interest rate in [a] and assuming, still, that compounding is weekly?
In: Finance
The yield to maturity (YTM) on 1-year zero-coupon bonds is 7% and the YTM on 2-year zeros is 8%. The yield to maturity on 2-year-maturity coupon bonds with coupon rates of 10% (paid annually) is 7.5%.
a. What arbitrage opportunity is available for an investment banking firm?
The arbitrage strategy is to buy zeros with face values of $ and $ , and respective maturities of one year and two years.
b. What is the profit on the activity? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
In: Finance
In: Finance
The Millard Division's operating data for the past two years are provided below:
| Year 1 | Year 2 | ||||||||||
| Return on investment | 10 | % | 24 | % | |||||||
| Net operating income | ? | $ | 380,000 | ||||||||
| Turnover | ? | 4 | |||||||||
| Margin | ? | ? | |||||||||
| Sales | $ | 3,210,000 | ? | ||||||||
Millard Division's margin in Year 2 was 120% of the margin in Year 1.
The net operating income for Year 1 was:
Garrison 16e Rechecks 2017-10-31
Multiple Choice
$385,200
$160,500
$192,600
$190,000
Last year a company had sales of $370,000, a turnover of 2.1, and a return on investment of 56.7%. The company's net operating income for the year was:
Multiple Choice
$109,890
$209,790
$176,190
$99,900
In: Accounting
3. At the beginning of the year, Poplock began a calendar-year dog boarding business called Griff’s Palace. Poplock bought and placed in service the following assets during the year:
Asset Date Acquired Cost Basis
Computer equipment 3/23 $5,000
Dog grooming furniture 5/12 $7,000
Pickup truck 9/17 $10,000
Commercial building 10/11 $280,000
Land (one acre) 10/11 $80,000
Assuming Poplock does not elect §179 expensing or bonus depreciation, what is Poplock’s year 1 depreciation expense for each asset?
In: Accounting
| Consider the decision to purchase either a 5-year corporate bond or a 5-year municipal bond. | ||
| The corporate bond is a 12% annual coupon bond with a par value of $1,000. It is currently yielding 11.5%. | ||
| The municipal bond has an 8.5% annual coupon and a par value of $1,000. It is currently yielding 7%. | ||
| Which of the two bonds would be more beneficial to you? Assume that your marginal tax rate is 35%. | ||
| Municipal Bond | ||
| Purchase Price | ||
| After-tax Coupon Payment | ||
| Par Value | ||
| Calculated YTM | ||
| Corporate Bond | ||
| Purchase Price | ||
| After-tax Coupon Payment | ||
| Par Value | ||
| Calculated YTM | ||
| Which of the two bonds would be more beneficial to you: | ||
| Why: | ||
In: Finance
Calculate the ratios for year 2 that are listed below:
COMPANY XYZ
Income Sheet
|
Year 1 |
Year 2 |
||
|
Sales (all on credit) |
$1,400,000 |
$1,375,000 |
|
|
Cost of Goods sold |
850,000 |
900,000 |
|
|
Gross profit |
$550,000 |
$475,000 |
|
|
Selling and administrative expense* |
240,000 |
230,000 |
|
|
Operating profit (EBIT) |
$310,000 |
245,000 |
|
|
Interest expense |
40,000 |
37,000 |
|
|
Net income before taxes |
$270,000 |
208,000 |
|
|
Taxes |
81,000 |
62,400 |
|
|
Net income |
$189,000 |
145,600 |
|
|
Shares |
30,000 |
30,001 |
|
|
Earnings per share |
$6.30 |
$4.85 |
|
|
*Includes $15,000 in lease payments for each year. |
|||
COMPANY XYZ
|
Balance Sheet Assets |
Year 1 |
Year 2 |
|
Cash |
$50,000 |
$55,000 |
|
Marketable securities |
20,000 |
20,000 |
|
Accounts receivable |
150,000 |
150,000 |
|
Inventory |
200,000 |
210,000 |
|
Total current assets |
$420,000 |
435,000 |
|
Net plant and equipment |
650,000 |
650,000 |
|
Total assets |
$1,070,000 |
$1,085,000 |
|
Liabilities and Stockholders’ Equity |
||
|
Accounts payable |
$175,000 |
190,000 |
|
Accrued expenses |
25,000 |
25,000 |
|
Total current liabilities |
$200,000 |
215,000 |
|
Long-term liabilities |
310,000 |
310,000 |
|
Total liabilities |
$510,000 |
525,000 |
|
Common stock ($2 par) |
60,000 |
60,000 |
|
Capital paid in excess of par |
190,000 |
190,000 |
|
Retained earnings |
310,000 |
310,000 |
|
Total stockholders’ equity |
$560,000 |
560,000 |
|
Total liabilities and stockholders’ equity |
$1,070,000 |
$1,085,000 |
Create your response to this:
| Ratio Description | Ratio |
Formula - showing numbers (labels) 435,000 (Current Assets)/215,000 (Current Liabilities) |
|
Current Ratio |
||
| Quick Ratio (Acid Test Ratio) | ||
| Days Sales Outstanding (Average Collection Period) | ||
| Inventory Turnover | ||
| Fixed Asset Turnover | ||
| Total Asset Turnover | ||
| Debt Ratio | ||
| Times Interest Earned | ||
| Gross Profit Margin | ||
| Net Profit Margin | ||
| Return on Assets | ||
| Return on Equity |
In: Accounting
Products Inc. is analysing a 5 -year project that produces sales of £100 million per year (in years 1 through 5). Under the assumption that accounts receivable are 10% of current year sales, the project has a positive NPV of £5 million. However, the management is concerned that customers will pay at a slower rate, which will put accounts receivable for the project at 20% of current year sales. The project’s discount rate is 10%. The NPV of the project under this alternative scenario is closest to
a. £1.55 million b. £4 million
c. £2.7 million
d. Not enough information is provided
In: Accounting
Trez Company began operations this year. During this first year,
the company produced 100,000 units and sold 80,000 units. The
absorption costing income statement for this year
follows.
| Sales (80,000 units × $40 per unit) | $ | 3,200,000 | ||||
| Cost of goods sold | ||||||
| Beginning inventory | $ | 0 | ||||
| Cost of goods manufactured (100,000 units × $20 per unit) | 2,000,000 | |||||
| Cost of good available for sale | 2,000,000 | |||||
| Ending inventory (20,000 × $20) | 400,000 | |||||
| Cost of goods sold | 1,600,000 | |||||
| Gross margin | 1,600,000 | |||||
| Selling and administrative expenses | 590,000 | |||||
| Net income |
Direct materials $4 per unit
Direct labor $5 per unit
Variable overhead $3 per unit
Fixed overhead ($800,000 / 100,000 units) $8 per unit
1. Prepare an income statement for the company
under variable costing.
In: Accounting
Select the false statement:
In: Accounting