You need a particular piece of equipment for your production process. An equipment-leasing company has offered to lease the equipment to you for $ 10,000 per year if you sign a guaranteed 5-year lease (the lease is paid at the end of each year). The company would also maintain the equipment for you as part of the lease. Alternatively, you could buy and maintain the equipment yourself. The cash flows from doing so are listed below (the equipment has an economic life of 5 years). If your discount rate is 7.1 %, what should you do?
| year 0 | year 1 | year 2 | year 3 | year 4 | year 5 |
| -39,200 | -2,100 | -2,100 | -2,100 | -2,100 | -2,100 |
The net present value of the leasing alternative is $ nothing. (Round to the nearest dollar.)
In: Finance
Dividends Per Share Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as follows: 80,600 shares of cumulative preferred 3% stock, $15 par, and 398,300 shares of $23 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $56,900 ; second year, $77,100 ; third year, $80,900 ; fourth year, $99,500 . Calculate the dividends per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, enter "0". 1st Year 2nd Year 3rd Year 4th Year Preferred stock (dividends per share) $ 0.45 $ 0.45 $ 0.45 $ 0.45 Common stock (dividends per share) $ $ $ $
In: Accounting
Dividends Per Share
Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as follows: 80,700 shares of cumulative preferred 3% stock, $15 par, and 400,000 shares of $24 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $57,000 ; second year, $77,200 ; third year, $80,900 ; fourth year, $100,600 .
Calculate the dividends per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, enter "0".
| 1st Year | 2nd Year | 3rd Year | 4th Year | |
| Preferred stock (dividends per share) | $ | $ | $ | $ |
| Common stock (dividends per share) | $ | $ | $ | $ |
In: Accounting
Suppose that a 1 year zero coupon bond with a face of $100 sells at $94.34. While a zero 2 year sells at $84.99. You are considering the purchase of a 2 year maturity bond making annual coupon payments. The face value of the bond is $100 and the coupon rate is 12% per year.
1. What is the yield to maturity of the 2 year zero?
2. What is the yield to maturity of the 2 year coupon bond?
3. What is the forward rate for the second year?
4. According to he expectations hypothesis what are (1) the expected price of the coupon bond at the end of the first year and (2) the expected holding period return on the coupon bond over the first year?
5. Will the expected rate of return be higher or lower if you accept the liquidity preference hypothesis?
In: Finance
A small company heats its building and spends $8,400 per year on natural gas for this purpose. Cost increases of natural gas are expected to be 8% per year starting one year from now (i.e., the first cash flow is $9,072 at EOY one). Their maintenance on the gas furnace is $345per year, and this expense is expected to increase by 12% per year starting one year from now (i.e., the first cash flow for this expense is $386.4 at the EOY one). If the planning horizon is 14 years, what is the total annual equivalent expense for operating and maintaining the furnace? The interest rate is 15% per year.
discrete compounding when iequals=8% per year.
discrete compounding when iequals=12
discrete compounding when iequals=15% per year.
In: Finance
Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations:
| Variable costs per unit: | ||
| Manufacturing: | ||
| Direct materials | $ | 20 |
| Direct labor | $ | 13 |
| Variable manufacturing overhead | $ | 4 |
| Variable selling and administrative | $ | 3 |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $ | 320,000 |
| Fixed selling and administrative expenses | $ | 70,000 |
During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $83 per unit.
Required:
1. Assume the company uses variable costing:
a. Compute the unit product cost for Year 1 and Year 2.
b. Prepare an income statement for Year 1 and Year 2.
2. Assume the company uses absorption costing:
a. Compute the unit product cost for Year 1 and Year 2.
b. Prepare an income statement for Year 1 and Year 2.
3. Reconcile the difference between variable costing and absorption costing net operating income in Year 1.
In: Accounting
Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations:
| Variable costs per unit: | ||
| Manufacturing: | ||
| Direct materials | $ | 24 |
| Direct labor | $ | 13 |
| Variable manufacturing overhead | $ | 5 |
| Variable selling and administrative | $ | 4 |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $ | 240,000 |
| Fixed selling and administrative expenses | $ | 50,000 |
During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $54 per unit.
Required:
1. Assume the company uses variable costing:
a. Compute the unit product cost for Year 1 and Year 2.
b. Prepare an income statement for Year 1 and Year 2.
2. Assume the company uses absorption costing:
a. Compute the unit product cost for Year 1 and Year 2.
b. Prepare an income statement for Year 1 and Year 2.
3. Reconcile the difference between variable costing and absorption costing net operating income in Year 1.
In: Accounting
Data:
Selling price $275
Manufacturing Cost:
Variable per unit produced:
Direct materials $104
Direct labor 63
Variable manufacturing overhead 33
Fixed manufacturing overhead per year $113,400
Selling and Administrative expenses:
Variable per unit sold $4
Fixed per year 58,000
Year 1 Year 2
Units in beginning inventory 0
Units produced during the year 2,700 2,100
Units sold during the year 2,300 2,300
|
1. What is the net operating income (loss) in Year 2 under absorption costing?
|
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In: Accounting
Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations:
| Variable costs per unit: | ||
| Manufacturing: | ||
| Direct materials | $ | 21 |
| Direct labor | $ | 14 |
| Variable manufacturing overhead | $ | 2 |
| Variable selling and administrative | $ | 1 |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $ | 240,000 |
| Fixed selling and administrative expenses | $ | 80,000 |
During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $90 per unit.
Required:
1. Assume the company uses variable costing:
a. Compute the unit product cost for Year 1 and Year 2.
b. Prepare an income statement for Year 1 and Year 2.
2. Assume the company uses absorption costing:
a. Compute the unit product cost for Year 1 and Year 2.
b. Prepare an income statement for Year 1 and Year 2.
3. Reconcile the difference between variable costing and absorption costing net operating income in Year 1.
In: Accounting
Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations:
| Variable costs per unit: | ||
| Manufacturing: | ||
| Direct materials | $ | 21 |
| Direct labor | $ | 11 |
| Variable manufacturing overhead | $ | 5 |
| Variable selling and administrative | $ | 4 |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $ | 320,000 |
| Fixed selling and administrative expenses | $ | 90,000 |
During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $58 per unit.
Required:
1. Assume the company uses variable costing:
a. Compute the unit product cost for Year 1 and Year 2.
b. Prepare an income statement for Year 1 and Year 2.
2. Assume the company uses absorption costing:
a. Compute the unit product cost for Year 1 and Year 2.
b. Prepare an income statement for Year 1 and Year 2.
3. Reconcile the difference between variable costing and absorption costing net operating income in Year 1.
In: Accounting