The current yield curve for default-free zero-coupon bonds is as follows:
Maturity (Years) YTM
1 5%
2 4%
3 3%
4 2%
a. What are the implied 1-year forward rates for year 2, year 3,
and year 4? (3 points)
b. Assume that the pure expectations hypothesis of the tern
structure is correct. If market expectations are accurate, what
will be the pure yield curve (i.e., the YTM on 1-year, 2-year and
3-year zero-coupon bonds) next year? (3 points)
c. If you purchase a 3-year zero-coupon bond now, what is the
expected total rate of return over the next year? What if you
purchase a 4-year zero-coupon bond? (4 points)
d. What should be the current price of a 4-year maturity bond with
a 3% coupon rate paid annually? If you purchased it at that price,
what would your total expected rate of return be over the next year
(coupon plus price change)? (5 points)
In: Finance
Consider an economy that produces only three types of
fruit: apples, oranges & bananas.
In the base year the production & price data are as
follows:
Fruit Quantity Price
Apples 3000 Unit Rs. 2 per unit
Bananas 6000 Unit Rs. 3 per unit
Oranges 8000 Unit Rs. 4 per unit
In the current year the production & price data are as
follows:
Fruit Quantity Price
Apples 4000 Unit Rs. 3 per unit
Bananas 14,000 Unit Rs. 2 per unit
Oranges 32,000 Unit Rs. 5 per unit
a) Find nominal GDP in the current year & in the base year.
What is the percentage increase since base year? 7
b) Find real GDP in the current year & in the base year. By
what percentage does a real GDP increase from the base
year to current year?
c) Find the GDP deflator for the current year & the base year.
By what percentage does the price level change from the base year
to current year?
In: Economics
Nippon Steel’s expenses for heating and cooling a large manufacturing facility are expected to increase according to an arithmetic gradient beginning in year 2. If the cost is $550,000 this year (year 0) and will be $550,000 again in year 1, but then it is estimated to increase by $52,000 each year through year 12, what is the equivalent annual worth in years 1 to 12 of these energy costs at an interest rate of 13% per year?
The equivalent annual worth is determined to be $ ?
In: Economics
Eb's Eggs just bought a new egg sorting machine for $109,569. The machine will save $32,567 in year 1, $31,888 in year 2, $15,041 in year 3, and $9,316 per year from year 4 until the machine is salvaged at the end of year 11. At the end of year 11 it will have a salvage value of $2,409. Eb uses a MARR of 9% to make decisions.
What is the payback period (PBP) for this machine?
In: Economics
In: Economics
Eb's Eggs just bought a new egg sorting machine for $106,944. The machine will save $32,760 in year 1, $34,255 in year 2, $18,724 in year 3, and $8,568 per year from year 4 until the machine is salvaged at the end of year 11. At the end of year 11 it will have a salvage value of $2,110. Eb uses a MARR of 7% to make decisions. What is the payback period (PBP) for this machine?
In: Economics
|
The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 22 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. |
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | ||||||
| Investment | $ | 27,000 | ||||||||
| Sales revenue | $ | 14,100 | $ | 15,700 | $ | 17,100 | $ | 13,600 | ||
| Operating costs | 3,250 | 3,275 | 4,900 | 3,500 | ||||||
| Depreciation | 6,750 | 6,750 | 6,750 | 6,750 | ||||||
| Net working capital spending | 335 | 235 | 295 | 185 | ? | |||||
| a. |
Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) |
| Year1 | Year 2 | Year3 | Year 4 | ||
| Net Income |
| b. |
Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. A negative amount should be indicated by a minus sign.) |
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | |
| Cash flow |
| c. |
Suppose the appropriate discount rate is 11 percent. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
NPV=
In: Finance
Problem 6-18A Variable and Absorption Costing Unit Product Costs and Income Statements [LO6-1, LO6-2]
|
Haas Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations: |
| Variable costs per unit: | ||
| Manufacturing: | ||
| Direct materials | $24 | |
| Direct labor | $16 | |
| Variable manufacturing overhead | $4 | |
| Variable selling and administrative | $1 | |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $ | 220,000 |
| Fixed selling and administrative expenses | $ | 140,000 |
|
During its first year of operations, Haas produced 40,000 units and sold 40,000 units. During its second year of operations, it produced 55,000 units and sold 30,000 units. In its third year, Haas produced 20,000 units and sold 45,000 units. The selling price of the company’s product is $54 per unit. |
Required:
| 1. | Compute the company’s break-even point in units sold. |
| 2. | Assume the company uses variable costing: |
| a. |
Compute the unit product cost for year 1, year 2, and year 3. |
| b. |
Prepare an income statement for year 1, year 2, and year 3. |
| 3. | Assume the company uses absorption costing: |
| a. |
Compute the unit product cost for year 1, year 2, and year 3. (Round your intermediate and final answers to 2 decimal places.) |
| b. |
Prepare an income statement for year 1, year 2, and year 3. (Round your intermediate calculations to 2 decimal places.) |
Problem 6-18A Variable and Absorption Costing Unit Product Costs and Income Statements [LO6-1, LO6-2] Haas Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations: Variable costs per unit: Manufacturing: Direct materials $24 Direct labor $16 Variable manufacturing overhead $4 Variable selling and administrative $1 Fixed costs per year: Fixed manufacturing overhead $ 220,000 Fixed selling and administrative expenses $ 140,000 During its first year of operations, Haas produced 40,000 units and sold 40,000 units. During its second year of operations, it produced 55,000 units and sold 30,000 units. In its third year, Haas produced 20,000 units and sold 45,000 units. The selling price of the company’s product is $54 per unit. Required: 1. Compute the company’s break-even point in units sold. 2. Assume the company uses variable costing: a. Compute the unit product cost for year 1, year 2, and year 3. b. Prepare an income statement for year 1, year 2, and year 3. 3. Assume the company uses absorption costing: a. Compute the unit product cost for year 1, year 2, and year 3. (Round your intermediate and final answers to 2 decimal places.) b. Prepare an income statement for year 1, year 2, and year 3. (Round your intermediate calculations to 2 decimal places.)
In: Accounting
Bernoulli Glass Company provides the following information at the end of its current year:
|
Sales revenue earned during the year |
120,000 |
|
Cash remaining at end of year |
13,200 |
|
Salaries owed to employees at end of year |
2,000 |
|
Accounts receivable from customers |
7,700 |
|
Loan borrowed from bank that is due in two years |
8,800 |
|
Cost of equipment purchased in prior years, expected to last four more years |
14,000 |
|
Salary earned by employees during the year |
6,400 |
|
Cost of inventory sold during the year |
8,500 |
|
Inventory purchases that are still unpaid and owed to suppliers at end of year |
3,900 |
|
Dividends declared and paid during the year |
14,900 |
|
Capital contributions received from shareholders during prior years |
44,000 |
|
Capital contributions received from shareholders during the current year |
1,000 |
|
Cost of delivery van purchased at end of year; expected to last six years |
26,200 |
|
Cost of research expenditures sustained during the year |
17,900 |
|
Retained earnings at end of year |
? |
|
Cost of rent used up during the year |
25,000 |
|
Income taxes paid during the year attributable to income earned during the year |
15,600 |
|
Cost of inventory still on hand at end of year |
32,400 |
|
Retained earnings at beginning of year |
2,100 |
Required:
In: Accounting
Question 2: Balance Sheet Build and Analysis
Q.Clean, a student run dry-cleaning service has the following financial information as of December 31, 2020:
The cash ending balance for the year was $117,820
Buildings & Equipment for the year was $91,350
Accounts Receivables for the year was $31,510
Common Shares for the year was $194,860
Inventory for the year was $87,970
Land for the year for the year was $281,490
Accounts Payable for the year was $74,250
Retained earnings for the year was $70,100
Buildings & Equipment Accumulated Depreciation for the year was $40,000
Wages payable for the year was $46,190
Short-term debt for the year was $10,500
Taxes payable for the year was $55,750
Mortgage for the year was $60,010
10-year bond for the year was $20,500
Interest Payable for the year was $37,980
Prepare a 2020 Balance Sheet for the company. Ensure you categorize your accounts into Current and Non-Current Assets/Liabilities, and Shareholders’ Equity.
Calculate the Net Working Capital and Quick Ratio of the company. Explain what these values are and what they are used for. Comment on the company’s financial position, based on the ratios you calculated.
3. In 2021, the company plans to purchase additional retail space in Ray Hall. This space will cost $100,000. Half of the purchase will be made in cash, and the other half will be added to the mortgage. Also, the company takes an additional $35,000 of short-term debt. Please answer the following questions:
Describe the effect that these transactions will have on the 2020 Balance Sheet.
Will this impact the Income Statement in any way? If yes, identify and explain the impact. If no, explain why there is no impact.
In: Finance