Problem 12-10 Taxes and WACC [LO 3]

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Problem 12-10 Taxes and WACC [LO 3]

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Barfield Corporation prepares business plans and marketing analyses for startup companies in the Cleveland area. Barfield has been very successful in recent years in providing effective service to a growing number of clients. The company provides its service from a single office building in Cleveland and is organized into two main client-service groups: one for market research and the other for financial analysis. The two groups have budgeted annual costs of $1,250,000 and $1,750,000, respectively. In addition, Barfield has a support staff that is organized into two main functions: one for clerical, facilities, and logistical support (called the CFL group) and another for computer-related support. The CFL group has budgeted annual costs of $210,000, while the annual costs of the computer group are $600,000.

Tom Brady, CFO of Barfield, plans to prepare a departmental cost allocation for his four groups, and he assembles the following information.

Percentage of estimated dollars of work and time by CFL group:

Percentage of estimated dollars of work and time by the computer group:

Required:
Determine the total cost in the financial analysis and market research groups, after departmental allocation, using (a) the direct method, (b) the step method when the sourcing department that provides the greatest percentage of services to other service departments goes first, and (c) the reciprocal method. (Round percentage calculations to 4 decimal places (e.g., 33.3333%), intermediate calculations and final answers to the nearest dollar amount.)

Barfield Corporation prepares business plans and marketing analyses for startup companies in the Cleveland area. Barfield has been very successful in recent years in providing effective service to a growing number of clients. The company provides its service from a single office building in Cleveland and is organized into two main client-service groups: one for market research and the other for financial analysis. The two groups have budgeted annual costs of $550,000 and $840,000, respectively. In addition, Barfield has a support staff that is organized into two main functions: one for clerical, facilities, and logistical support (called the CFL group) and another for computer-related support. The CFL group has budgeted annual costs of $513,000, while the annual costs of the computer group are $624,000.

Tom Brady, CFO of Barfield, plans to prepare a departmental cost allocation for his four groups, and he assembles the following information.

Percentage of estimated dollars of work and time by CFL group:

Percentage of estimated dollars of work and time by the computer group:

Required:
Determine the total cost in the financial analysis and market research groups, after departmental allocation, using (a) the direct method, (b) the step method when the sourcing department that provides the greatest percentage of services to other service departments goes first, and (c) the reciprocal method. (Round percentage calculations to 4 decimal places (e.g., 33.3333%), intermediate calculations and final answers to the nearest dollar amount.)

Barfield Corporation prepares business plans and marketing analyses for startup companies in the Cleveland area. Barfield has been very successful in recent years in providing effective service to a growing number of clients. The company provides its service from a single office building in Cleveland and is organized into two main client-service groups: one for market research and the other for financial analysis. The two groups have budgeted annual costs of $1,250,000 and $1,750,000, respectively. In addition, Barfield has a support staff that is organized into two main functions: one for clerical, facilities, and logistical support (called the CFL group) and another for computer-related support. The CFL group has budgeted annual costs of $210,000, while the annual costs of the computer group are $600,000.

Tom Brady, CFO of Barfield, plans to prepare a departmental cost allocation for his four groups, and he assembles the following information.

Percentage of estimated dollars of work and time by CFL group:

Percentage of estimated dollars of work and time by the computer group:

Required:
Determine the total cost in the financial analysis and market research groups, after departmental allocation, using (a) the direct method, (b) the step method when the sourcing department that provides the greatest percentage of services to other service departments goes first, and (c) the reciprocal method. (Round percentage calculations to 4 decimal places (e.g., 33.3333%), intermediate calculations and final answers to the nearest dollar amount.)

Barfield Corporation prepares business plans and marketing analyses for startup companies in the Cleveland area. Barfield has been very successful in recent years in providing effective service to a growing number of clients. The company provides its service from a single office building in Cleveland and is organized into two main client-service groups: one for market research and the other for financial analysis. The two groups have budgeted annual costs of $440,000 and $770,000, respectively. In addition, Barfield has a support staff that is organized into two main functions: one for clerical, facilities, and logistical support (called the CFL group) and another for computer-related support. The CFL group has budgeted annual costs of $297,000, while the annual costs of the computer group are $636,000. Tom Brady, CFO of Barfield, plans to prepare a departmental cost allocation for his four groups, and he assembles the following information. Percentage of estimated dollars of work and time by CFL group: 10%—service to the computer group 20%—service to market research 70%—service to financial analysis Percentage of estimated dollars of work and time by the computer group: 20%—service to the CFL group 40%—service to market research 40%—service to financial analysis Required: Determine the total cost in the financial analysis and market research groups, after departmental allocation, using (a) the direct method, (b) the step method when the sourcing department that provides the greatest percentage of services to other service departments goes first, and (c) the reciprocal method. (Round percentage calculations to 4 decimal places (e.g., 33.3333%), intermediate calculations and final answers to the nearest dollar amount.)

Company A's for 2018 had $58,266.74M in Sales, $31,172.25M Cost of Goods Sold. The Account Receivable was $5,799.97M. Finally, the inventory and Accounts Payable were $3,000.19M and $12,398.62M respectively. The company increase sales by 36% however keeping the same inventory. Applying the percentage of Sales Method, what would be the new CCC?

Under a firm commitment agreement, Zeke, Co. went public and received $35.25 for each of the 8.9 million shares sold. The initial offer price was $38 and the stock rose to $41.38. The company paid $560,000 in direct flotation costs and $215,000 in indirect costs. What was the flotation cost as a percentage of funds raised?

AutoNation Inc purchases $3,500,000 in goods per year from its sole supplier on terms of 5/15 net 55. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its non-free trade credit (Assume a 365-day year)?

3. What are six of the occupations that are involved in this sector of the economy? That is, when there is a 20% drop in this activity, residential construction and sales volume, which workers lose their jobs? Why?

4. What could our government do to help cause a rise in residential construction and sales volume in our economy? Please list and discuss three actions that our government could take, at least in theory. What are the forces that may cause a rise or a drop in this area of the economy in the next 12 to 24 months?