Elle holds a $5,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stock’s beta, is listed in the following table:
|
Stock |
Investment |
Beta |
Standard Deviation |
|---|---|---|---|
| Omni Consumer Products Co. (OCP) | $1,750 | 0.90 | 18.00% |
| Zaxatti Enterprises (ZE) | $1,000 | 1.50 | 11.00% |
| Western Gas & Electric Co. (WGC) | $750 | 1.10 | 18.00% |
| Mainway Toys Co. (MTC) | $1,500 | 0.60 | 22.50% |
Suppose all stocks in Elle’s portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
Mainway Toys Co.
Zaxatti Enterprises
Western Gas & Electric Co.
Omni Consumer Products Co.
Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk?
Western Gas & Electric Co.
Omni Consumer Products Co.
Zaxatti Enterprises
Mainway Toys Co.
If the risk-free rate is 7% and the market risk premium is 8.5%, what is Elle’s portfolio’s beta and required return? Fill in the following table:
|
Beta |
Required Return |
|
|---|---|---|
| Elle’s portfolio |
In: Finance
Retail Method; Gross Profit Method
Selected data on inventory, purchases, and sales for Celebrity
Tan Co. and Ranchworks Co. are as follows:
| Cost | Retail | ||||
|---|---|---|---|---|---|
| Celebrity Tan Co. | |||||
| Inventory, August 1 | $216,000 | $328,000 | |||
| Transactions during August | |||||
| Purchases (net) | 2,490,000 | 3,772,000 | |||
| Sales | 3,880,000 | ||||
| Ranchworks Co. | |||||
| Inventory, March 1 | $278,000 | ||||
| Transactions during March through November: | |||||
| Purchases (net) | 3,698,000 | ||||
| Sales | 6,057,000 | ||||
| Estimated gross profit rate | 38% | ||||
Required:
1. Determine the estimated cost of the inventory of Celebrity Tan Co. on August 31 by the retail method, presenting details of the computations.
| Celebrity Tan Co. | |||
| Estimated Cost of Inventory | |||
| August 31 | |||
| Cost | Retail | ||
| $ | $ | ||
| $ | $ | ||
| Ratio of cost to retail price: | % | ||
| $ | |||
| $ | |||
2a. Estimate the cost of the inventory of Ranchworks Co. on November 30 by the gross profit method, presenting details of the computations.
| Ranchworks Co. | ||
| Estimated Cost of Inventory | ||
| November 30 | ||
| Cost | ||
| $ | ||
| $ | ||
| $ | ||
| $ | ||
2b. Assume that Ranchworks Co. took a physical
inventory on November 30 and discovered that $214,660 of inventory
was on hand. What was the estimated loss of inventory due to theft
or damage during March through November?
$
In: Accounting
The following selected transactions were completed during August between Summit Company and Beartooth Co.:
| Aug. | 1 | Summit Company sold merchandise on account to Beartooth Co., $52,150, terms FOB destination, 2/15, n/eom. The cost of the goods sold was $25,940. |
| 2 | Summit Company paid freight of $1,235 for delivery of merchandise sold to Beartooth Co. on August 1. | |
| 5 | Summit Company sold merchandise on account to Beartooth Co., $60,090, terms FOB shipping point, n/eom. The cost of the goods sold was $36,900. | |
| 9 | Beartooth Co. paid freight of $2,140 on August 5 purchase from Summit Company. | |
| 15 | Summit Company sold merchandise on account to Beartooth Co., $62,600, terms FOB shipping point, 1/10, n/30. Summit Company paid freight of $1,515, which was added to the invoice. The cost of the goods sold was $32,600. | |
| 16 | Beartooth Co. paid Summit Company for purchase of August 1. | |
| 25 | Beartooth Co. paid Summit Company on account for purchase of August 15. | |
| 31 | Beartooth Co. paid Summit Company on account for purchase of August 5. |
In: Accounting
American Airlines is currently considering the issuance of a series of $1,000 par bonds. The coupon rate offered, based on current market interest rates and the Standard & Poor's based AMR bond rating, will be 10%. The current interest rate is coincidentally 10% as well. Interest on the bonds will be paid semi-annually. However, American cannot decide on the maturity of the new issue. The life of the bonds will be 10, 20, or 30 years.
A. Ignoring floatation costs, what will the bonds sell for today if American decides to issue the bonds with a maturity of 10 years? What will the price be if the bonds have a maturity of 20 years? 30 years?
B. If the bonds are issued with 10 years to maturity and the day after they are issued, the market interest rates increase to 12%, what will be the price of American Airline's bonds? What if interest rates drop to 8%?
C. If the bonds are issued with 20 years to maturity and the day after they are issued, the market interest rates increase to 12%, what will be the price of American Airline's bonds? What if interest rates drop to 8%?
D. If the bonds are issued with 30 years to maturity and the day after they are issued, the market interest rates increase to 12%, what will be the price of American Airline's bonds? What if interest rates drop to 8%?
E. Based on your answers to questions (b) through (d), what is the relationship between time to maturity and the price of the bond?
F. Based on your answer to question (a), what is the relationship between current interest rates, the coupon rate, and time to maturity?
In: Finance
In a certain city, 30% of the families have a MasterCard, 20% have an American Express card, and 25% have a Visa card. Eight percent of the families have both a MasterCard and an American Express card. Twelve percent have both a Visa card and a MasterCard. Six percent have both an American Express card and a Visa card.
31. Is possession of a Visa card independent of possession of a MasterCard? Why or why not?
|
No, because P (M | V) ≠ P (V) |
||
|
No, because P (V | M) ≠ P (V) |
||
|
Yes, because P (M) = P(V) |
||
|
Yes, because P (V ∩ M) ≠ 0 |
||
|
No, because Visa and MasterCard are different things |
32. If a family has a Visa card, what is the probability that it has a MasterCard?
|
0.25 |
||
|
0.12 |
||
|
0.39 |
||
|
0.48 |
||
|
0.40 |
33.Is possession of an American Express card mutually exclusive of possession of a Visa card? Why or why not?
|
No, because P (A ∩ V) ≠ P (V) |
||
|
Yes, because P (A ∩ V) = .0000 |
||
|
No, because P (A ∩ V) ≠ .0000 |
||
|
Yes, because P (V ∩ A) ≠ P (A) |
||
|
No, because American Express and Visa card are different things |
34.What is the probability of selecting a family that has either a Visa card or an American Express card?
|
0.25 |
||
|
0.20 |
||
|
0.37 |
||
|
0.33 |
||
|
0.39 |
35.If a family has a MasterCard, what is the probability that it has a Visa card?
|
0.48 |
||
|
0.12 |
||
|
0.30 |
||
|
0.20 |
||
|
0.40 |
36.What is the probability of selecting a family that has either a Visa card or a MasterCard?
|
0.25 |
||
|
0.30 |
||
|
0.55 |
||
|
0.43 |
||
|
0.12 |
In: Statistics and Probability
In: Economics
An American Legend
Macy’s is an iconic American Company, but like many brick and mortar retailers, it has been struggling to maintain market share. For this case study find the company’s most recent financial statements, including the income statement and balance sheet. There are many sources of this data, but one quick source is Morningstar.com. If you enter the company’s ticket symbol, “M” in the quote box, you will find a report on the company’s stock price as well as a host of other information, such as performance, key ratios, and financials. On the financial tab, you can find the income statement and balance sheet for the past five years.
Question 1- Worth 25points
Looking at Macy’s income statement, what has been the trend in sales (total Revenue) over the past three years? What can you conclude from this? What picture does it tell?
Question 2- Worth 25points
As you have learned, gross profit is the difference between sales (or total revenues) and cost of sales (or cost of revenue). What is Macy’s gross profit for the last three years? What does this data tell you about Macy’s pricing strategy and costs?
Question 3- Worth 25points
Looking at Macy’s income statement, what has been the trend in net income over the past three years? What can you concluded by this?
Question 4- Worth 25points
What is the relationship between the price of Macy’s stock and earnings? What are the earnings per share for each of the past three years, and what does that number mean to investors?
In: Finance
Ink Spill, a printing company, provides printing services to its customers. Customers normally pay for printing services in advance. In October 2020, Ink Spill received $20,000 from customers for services to be provided in November 2020. A senior accountant at Ink Spill wants to record the full amount as a liability in the company’s Balance Sheet at the end of October 2020.
Required:
Should the $20,000 be recorded as a liability in the company’s Balance Sheet at the end of October 2020? Explain, using the definition and recognition criteria of a liability in your explanation.
In: Accounting
Kimberly has just started her first job and decides to begin saving for a car. She opens a savings account on October 31, 2003 with a deposit of $160, and will continue to make deposits of the same amount at the end of each month until October 31, 2006, when she will make the final deposit. If the account pays 9% interest rate compounded monthly, how much is in the account on October 31, 2009, (when Kimberly will use this money as a down payment for a car), rounded to the nearest dollar?
In: Finance
On 31 October 2013, Josh borrowed money from his parents. He promised that he would repay the money on 31 October 2017, with interest at a nominal interest rate of 7% p.a., compounding quarterly. The total amount that he was due to pay his parents at that time was exactly $10,000 but he started his studies at university so he couldn’t afford to repay the loan. If interest continues to accrue, what amount must Josh pay on 31 October 2022 to fully pay off the loan?
In: Finance