BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn’t equipped to do. Estimates regarding each machine are provided below.
|
Machine A |
Machine B |
||||
|
Original cost |
$74,100 |
$183,000 |
|||
|
Estimated life |
8 years |
8 years |
|||
|
Salvage value |
0 |
0 |
|||
|
Estimated annual cash inflows |
$20,500 |
$39,500 |
|||
|
Estimated annual cash outflows |
$4,850 |
$10,020 |
Click here to view the factor table.
Calculate the net present value and profitability index of each machine. Assume a 9% discount rate.
2. Turney Company produces and sells automobile
batteries, the heavy-duty HD-240. The 2020 sales forecast is as
follows.
|
Quarter |
HD-240 |
|
|---|---|---|
| 1 | 5,300 | |
| 2 | 7,490 | |
| 3 | 8,470 | |
| 4 | 10,290 |
3. The January 1, 2020, inventory of HD-240 is 2,120 units.
Management desires an ending inventory each quarter equal to 40% of
the next quarter’s sales. Sales in the first quarter of 2021 are
expected to be 25% higher than sales in the same quarter in
2020.
Prepare quarterly production budgets for each quarter and in total
for 2020.
Rodriguez, Inc., is preparing its direct labor budget for 2020
from the following production budget based on a calendar
year.
|
Quarter |
Units |
Quarter |
Units |
|||
| 1 | 20,200 | 3 | 35,240 | |||
| 2 | 25,280 | 4 | 30,120 |
Each unit requires 1.80 hours of direct labor.
Prepare a direct labor budget for 2020. Wage rates are expected to
be $18 for the first 2 quarters and $20 for quarters 3 and 4.
(Round Direct labor time per unit answers to 2 decimal
places, e.g. 52.50.)
|
|
In: Accounting
The stocks included in the S and P 500 are those of large publicity held companies that trade on either the New York Stock exchange or the NASDAQ. In 2008, the Sand P 500 was down 38.5%, but what about financial compensation (salary, bonuses, stock options, etc.) to the 500 CEOs that run the companies? To learn more about the mean CEO compensation, an alphabetical list of the 500 companies was obtained and ordered from 1 (3M) to 500 (Zions Bancorp). Next, the random number table was used to select a random number from 1 to 50. The number was selected was 10. then, the companies numbered 10,60,110,160,210,260,310,360,410 and 460 were investigated and the total CEO compensation recorded. The data stored in are as follows:
Number Company Compensation
10 Alfac 10,783,232
60 Big Lota 9,862, 262
110 Comerica 4,108,245
160 EMC 13,874, 262
210 Harley Davidson 6,048,027
260 Kohl's 11,638,049
310 Molson Coors Brewing 5,558,499
360 Pfizer 6,629,955
410 Sigma Aldrich 3,983,596
460 United Parcel Service 5,168, 664
a). Construct a 95% confidence interval estimate for the mean 2008 compensation for CEOs of s and p 500 companies
b). Construct a 99% confidence interval estimate for the mean 2008 compensation for CEOs of s and p 500 companies'
c). comment on the effect that changing the level of confidence had on your answers in a) and b).
In: Statistics and Probability
Question 12
The following facts pertain to a non-cancelable lease agreement between Shamrock Leasing Company and Pharoah Company, a lessee.
| Commencement date | May 1, 2020 | ||
| Annual lease payment due at the beginning of | |||
| each year, beginning with May 1, 2020 | $17,865.02 | ||
| Bargain purchase option price at end of lease term | $7,000 | ||
| Lease term | 5 | years | |
| Economic life of leased equipment | 10 | years | |
| Lessor’s cost | $65,000 | ||
| Fair value of asset at May 1, 2020 | $85,000 | ||
| Lessor’s implicit rate | 6 | % | |
| Lessee’s incremental borrowing rate | 6 | % |
1. Compute the amount of the lease receivable at commencement of the lease. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round answer to 2 decimal places, e.g. 5,275.15.)
2. Suppose the collectibility of the lease payments was not probable for Shamrock. Prepare all necessary journal entries for the company in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 5,275.15.)
In: Accounting
SS Moving Company reported $400,000 in credit sales in December 2020. The company has historically seen losses (bad debt) of approximately 1% of all credit sales. On December 31, 2020, the Accounts Receivable balance is $201,000. SS’s accountants prepared the following Aging of Accounts Receivable as of December 31, 2020:
--------------------------Number of days past due-----------------------------
Total Balance 0-30 31-60 61-90 Over 90 Accts.
Receivable $201,000 $60,000 $90,000 $50,000 $1,000
Estimated % uncollectible 1% 5% 15% 50%
Assuming that SS Moving Company uses the income statement approach (percentage of credit sales method) to record the bad debt expense each period, record the journal entry for December 2020 in each of the following scenarios (you need two journal entries and they can both be in the space provided).
A) The current balance in the Allowance for Doubtful Accounts is $3,000.
B) The current balance in the Allowance for Doubtful Accounts is $10,000. You should show your journal entries AND your calculations in this space...
In: Accounting
Here are comparative balance sheets for Velo Company.
|
Velo Company |
||||||
|
Assets |
2020 |
2019 |
||||
| Cash |
$73,400 |
$33,100 |
||||
| Accounts receivable |
85,800 |
71,200 |
||||
| Inventory |
170,200 |
187,000 |
||||
| Land |
72,800 |
101,000 |
||||
| Equipment |
260,600 |
200,800 |
||||
| Accumulated depreciation—equipment |
(66,100 |
) |
(33,900 |
) |
||
| Total |
$596,700 |
$559,200 |
||||
|
Liabilities and Stockholders’ Equity |
||||||
| Accounts payable |
$35,000 |
$47,500 |
||||
| Bonds payable |
151,400 |
203,400 |
||||
| Common stock ($1 par) |
217,600 |
174,100 |
||||
| Retained earnings |
192,700 |
134,200 |
||||
| Total |
$596,700 |
$559,200 |
||||
Additional information:
| 1. | Net income for 2020 was $103,600. | |
| 2. | Cash dividends of $45,100 were declared and paid. | |
| 3. | Bonds payable amounting to $52,000 were redeemed for cash $52,000. | |
| 4. | Common stock was issued for $43,500 cash. | |
| 5. | No equipment was sold during 2020, but land was sold at cost. |
Prepare a statement of cash flows for 2020 using the indirect
method. (Show amounts that decrease cash flow with
either a - sign e.g. -15,000, or in parenthesis e.g.
(15,000).)
|
Velo Company |
In: Accounting
Gruman Company purchased a machine for $198,000 on January 2, 2019. It made the following estimates:
| Service life | 5 years or 10,000 hours |
| Production | 180,000 units |
| Residual value | $ 18,000 |
In 2019, Gruman uses the machine for 2,000 hours and produces 50,000 units. In 2020, Gruman uses the machine for 1,200 hours and produces 32,000 units. If required, round your final answers to the nearest dollar.
Required:
| 2019 | $ |
| 2020 | $ |
| 2019 | $ |
| 2020 | $ |
| 2019 | $ |
| 2020 | $ |
| 2019 | $ |
| 2020 | $ |
| 2019 | $ |
| 2020 | $ |
| 2019 | $ |
| 2020 | $ |
| 2019 | $ |
| 2020 | $ |
| 2019 | $ |
| 2020 | $ |
| 2019 | $ |
| 2020 | $ |
| 2019 | $ |
| 2020 | $ |
Depreciation expense
| 2019 | $ |
| 2020 | $ |
| 2019 | $ |
| 2020 | $ |
| 2019 | $ |
| 2020 | $ |
Book value
| 2019 | $ |
| 2020 | $ |
| 2019 | $ |
| 2020 | $ |
| 2019 | $ |
| 2020 | $ |
In: Accounting
Company A, today expects to earn $8.50 per share for each of the future operating periods (beginning at Time 1), today if the firm makes no new investments and returns the earnings as dividends to the shareholders. However, the CEO has discovered an opportunity to retain and invest 20 percent of the earnings beginning three years from today. This opportunity to invest will continue for each period indefinitely. He expects to earn 10 percent on this new equity investment, the return beginning one year after each investment is made. The firm’s equity discount rate is 12 percent.
a. What is the price per share of Company A's stock without making the new investment?
b. If the new investment is expected to be made, per the preceding information, what would the price of the stock be now?
c. Suppose the company could increase the investment in the project by whatever amount it chose. What would the retention ratio need to be to make this project attractive?
In: Finance
You are the finance manager of a company and currently your company has $100 million in cash that will not be needed for a few more weeks. You are thinking about arbitrage opportunities using Euro and GBP in order to put the cash reserves into use and hopefully earn more money for your company. You have to make a decision about details of your arbitrage with regard to which currency to buy in which order. Check exchange rates, find current rates for USD, Euro, and GBP, and share the details of your arbitrage plan with your CEO. Is it poosible to find an arbitrage trade to generate some profits (assume you will have no trading costs)? If so, what should be the order of your transactions in order to make a profit from this arbitrage operations?
I received a response stating "need enough knowledge" and about "exchange rates". I am not sure what that means, please elaborate instead of 2-3 word responses.
In: Finance
Elf Company manufactures miniature picnic tables to be sold to elementary schools and children daycares. The controller of Elf Company is currently preparing a budget for the second quarter of the year. The following sales forecast has been made by the sales manager for the first half of 2020:
January 8,500 tables
February 9,000 tables
March 9,500 tables
April 10,000 tables
May 12,000 tables
June 15,000 tables
Each table sells for $50 and all sales are on account. Past history has shown that 30% of credit sales are collected in the month that the sale occurred, 40% of the sales are collected the month following the month of sale, 25% of credit sales are collected two months following the month of sale and the remaining 5% is collected in the third month following the sale. The estimated sales for July and August are 16,000 and 16,500 tables respectively. Elf Company had 2,000 tables in finished goods inventory at the end of March. The department ends each month with enough finished-goods inventory to cover 20 percent of the next month’s sales.
Each picnic table requires 10 board metres of spruce blanks to manufacture. Spruce planks cost $0.50 per board metre, and the production department ends each month with enough wood to cover 10 percent of the next month’s production requirements. The company had 10,400 board metres of spruce wood in its ending raw material inventory at the end of March. The purchase of wood is all on account and the company pays 60% of its purchases in the month of purchase and the remaining 40% in the month following the purchase. Purchases of wood in March totalled $48,400.
Each table requires 1.5 hours of direct labour to manufacture. The production department incurs a cost of $20 per hour for direct-labour wages and fringe benefits.
Required:
We need all the budgets and schedules above, you must show a column for April, May and June as well as a column for the total of Quarter 2 of the year. Excel answer only.
In: Accounting
Wilson Corporation (not real) has a targeted capital structure of 40% long term debt and 60% common stock. The debt is yielding 6% and the corporate tax rate is 35%. The common stock is trading at $50 per share and next year's dividend is $2.50 per share that is growing by 4% per year. Prepare a minimum 700-word analysis including the following: Calculate the company's weighted average cost of capital. Use the dividend discount model. Show calculations in Microsoft® Word. The company's CEO has stated if the company increases the amount of long term debt so the capital structure will be 60% debt and 40% equity, this will lower its WACC. Explain and defend why you agree or disagree. Report how would you advise the CEO
In: Finance