Corporation has provided the following data for its two most recent years of operation:
| Selling price per unit | $50 |
| Manufacturing costs: | |
| Direct materials | $10 |
| Direct labor | $6 |
| Variable manufacturing overhead | $5 |
| Fixed manufacturing overhead per year | $72,000 |
| Selling and administrative expenses: | |
| Variable selling and administrative expense per unit sold | $5 |
| Fixed selling and administrative expense per year | $70,000 |
| Year 1 | Year 2 | |
| Units in beginning inventory | 0 | 3,000 |
| Units produced during the year | 9,000 | 8,000 |
| Units sold during the year | 6,000 | 9,000 |
| Units in ending inventory | 3,000 | 2,000 |
A. The unit product cost under variable costing in Year 1 is?
B. The net operating income (loss) under variable costing in Year 1 is?
C. The unit product cost under absorption costing in Year 2 is?
D. Assuming first-in first-out, net operating income (loss) under absorption costing in Year 2 is?
In: Accounting
You are trying to value Resources Limited. Your projections for the next four years are based on the following assumptions
(Total 50 Marks)
FIN3013 August
Sales will be 600 million in Year 1.
Sales will grow at 7 percent in Years 2 and 3 and 9 percent in
Year 4.
Operating profits (EBIT) will be 23 percent of sales in each year.
Interest expense will be 17 million in Year 1 and increase by 2 million every year until Year 4.
Income tax rate is 40 percent.
Earnings retention ratio will stay at 0.70.
The per-share dividend growth rate will be constant from Year 4 forward, and the final growth rate will be 300 basis points less than the growth rate from Year 3 to Year 4.
The company has 10 million shares outstanding. The required return on the stock is estimated to be 13 percent.
(a) Estimate the value of the stock at the end of Year 4.
(b) Estimate the current value of the stock.
In: Finance
This project involves a new type of widget. We think we can sell 6,000 units of the widget per year at a price of $950 each. Variable costs will run about $400 per unit and the product should have a four-year life.
Fixed costs for the project $450,000 per year and we will need to invest a total of $1,200,000 in manufacturing equipment. The equipment will be depreciated using MACRS over 7 years. In year four, the equipment will be worth half of what we paid for it.
We will invest $1,150,000 in net working capital at the start. After that, net working capital requirements will be 25% of sales. Assume a 34% tax rate.
Year MACRS Percentage
Year 1 14.29%
Year 2 24.49%
Year 3 17.49%
Year 4 12.49%
Should we undertake this project?
Prepare a pro forma income statement for each year. Then calculate OCF. Draw this on a timeline. Then calculate NPV assuming a 28% required return.
In: Finance
Correlation
To determine how the number of housing starts is affected by mortgage rates an economist recorded the average mortgage rate and the number of housing starts in a large country for the past 10 years. These data are listed here.
| Rate | Starts | |
| year #1 | 8.5 | 115 |
| year #2 | 7.8 | 111 |
| year #3 | 7.6 | 185 |
| year #4 | 7.5 | 201 |
| year #5 | 8 | 206 |
| year #6 | 8.4 | 167 |
| year #7 | 8.8 | 155 |
| year #8 | 8.9 | 117 |
| year #9 | 8.5 | 133 |
| year #10 | 8 | 150 |
In: Statistics and Probability
|
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.49 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate $2,010,000 in annual sales, with costs of $719,000. The project requires an initial investment in net working capital of $230,000, and the fixed asset will have a market value of $295,000 at the end of the project. If the tax rate is 34 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars, e.g. 1,234,567. Negative amounts should be indicated by a minus sign.) |
| Years | Cash Flow |
| Year 0 | $ |
| Year 1 | $ |
| Year 2 | $ |
| Year 3 | $ |
|
If the required return is 16 percent, what is the project's NPV? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) |
| NPV | $ |
In: Finance
Listed below are several transactions that took place during the second and third years of operations for RPG Company.
Year 2 Year 3
Amounts billed to customers for services rendered $400,000 $500,000
Cash collected from credit customers 310,000 450,000
Cash disbursements:
Payment of rent 85,000 0
Salaries paid to employees for services rendered during the year 145,000 165,000
Travel and entertainment 35,000 45,000
Advertising 17,500 40,000
In addition, you learn that the company incurred advertising costs of $30,000 in year 2, owed the advertising agency $5,500 at the end of year 1, and there were no liabilities at the end of year 3. Also, there were no anticipated bad debts on receivables, and the rent payment was for a two-year period, year 2 and year 3.
Required:
1. Calculate accrual net income for both years.
2. Determine the amount due the advertising agency that would be shown as a liability on RPG's balance sheet at the end of year 2.
In: Accounting
Dividends
Keener Company has had 800 shares of 8%, $100 par preferred stock and 44,000 shares of $5 stated value common stock outstanding for the last 3 years. During that period, dividends paid totaled $5,400, $31,000, and $35,400 for each year, respectively.
Required:
Compute the amount of dividends that Keener must have paid to
preferred shareholders and common shareholders in each of the 3
years, given the following 3 independent assumptions:
If an amount is zero, enter "0".
1. Preferred stock is nonparticipating and noncumulative.
| Keener Company | |||
| Schedule of Dividends | |||
| Preferred | Common | Total | |
| Year 1 | $ | $ | $ |
| Year 2 | $ | $ | $ |
| Year 3 | $ | $ | $ |
2. Preferred stock is nonparticipating and cumulative.
| Keener Company | |||
| Schedule of Dividends | |||
| Preferred | Common | Total | |
| Year 1 | $ | $ | $ |
| Year 2 | $ | $ | $ |
| Year 3 | $ | $ | $ |
3. Preferred stock is fully participating and cumulative.
| Keener Company | |||
| Schedule of Dividends | |||
| Preferred | Common | Total | |
| Year 1 | $ | $ | $ |
| Year 2 | $ | $ | $ |
| Year 3 | $ | $ | $ |
In: Accounting
Pro Forma Income Statement (Version 1) Ranger Company Assumptions: Revenues for the first year of operation are projected to be $2,500,000. These revenues are expected to increase by 7% each year thereafter. The Cost of Goods sold is estimated to be 54% of the revenue figure per year. Operating Expenses for the first year include the following: Administrative Costs: $50,000 Rent: $150,000 Repairs/Maintenance: $75,000 Utility Expenses: $24,000 Wage Expense: $468,000 After the first year, all of the operating expenses are expected to increase by 4% annually Depreciation expense is fixed for the entire five-year projected operating period at $100,000 per year. Other income includes Interest Income totaling $5,000 per year for all five years. Other expenses include inventory loss estimated at 1% of revenues. The company will have a $2,000,000 loan to help finance its operations. This loan is an interest-only loan (no principal will be paid for the entire five-year operating projection period). The loan carries an annual interest rate of 8.00%. This loan will represent the only source of interest expense for the company. Tax expense is estimated at 28% of taxable income. Year 1 Year 2 Year 3 Year 4 Year 5
Total Revenues $2,500,000.00
COGS 1,350,000.00
Gross Profit
Operating Expenses
Administrative Costs $50,000.00
Rent 150,000.00
Repairs/Maintenance 75,000.00
Utility Expenses 24,000.00
Wage Expense 468,000.00
Total Operating Expenses $767,000.00
EBITDA
Depreciation Expense 100,000.00
NOI
Interest Income
Inventory Loss
Total Other Income/Loss
EBIT
Interest Expense
EBT Tax Expense
Net Income
Free Cash Flow (prepare for year 3)
In: Finance
A corporation was formed January 1, Year 1 when the firm issued 10,000 shares of its $25 par value common stock for $350,000. On the same date the firm issued 1,000 shares of its 10% preferred shares for $100,000. The preferred shares have a par value of $100 per share. The preferred shares are cumulative and participating. The coporation had Net Income in Year 1 of $250,000. The firm declared and paid no dividends of any sort in Year 1. In Year 2, the firm had Net Income of $300,000. On December 31, Year 2, the firm declared and paid a $100,000 cash dividend. On January 1, Year 3, the firm declared and distributed a 15% common stock dividend when the fair market value was $50 per share. In Year 3, the firm’s Net Income was $500,000. On January 1, Year 4, the firm declared and distributed a 50% common stock dividend when the fair market value per share was $60. On December 31, Year 4, the firm declared and paid a cash dividend of $200,000. The firm's Net Income for Year 4 was $400,000.
How much money would the common shareholders receive from the cash dividend declared and paid on December 31, Year 2?
Considering both the common stock dividend in Year 3 and the firm's Net Income for Year 3, what is the net change in the firm's Retained Earnings account during Year 3?
How much cash would be given to the preferred shareholders out of the cash dividend declared and paid on December 31, Year 4?
(for reference, the textbook answers are 1. $64286 2. $425,000 and 3. $45745... I just need help with the work)
In: Accounting
Case - Apple is planning to launch a new easy-to-use kitchen appliance with a touchscreen interface, the iToaster. Apple expects to sell 1 million and 2 million units in the first two years after launch, respectively, and then to discontinue this product. Each unit will sell for $200 in the first year after launch, and $150 in the second year. The costs of components and labor are $40 per unit, while salaries and other expenses add up to $10 million in each year the product is sold. The factory that manufactures the iToaster requires an investment of $60 million right now and $30 million one year from now. It will take one year to complete, so production will only start in the second year, i.e. at the end of year 2 followed by one more year of production in at the end of year 3. The factory will be depreciated linearly to zero over 5 years after its completion.
To get production up and running, Apple has to buy components worth $5 million immediately before the launch of the product, and add another $2 million worth of components to its inventory exactly one year later. The firm's marginal tax rate is 34%.
a. What is the annual depreciation (in $ million)?
b. What is the net operating profit after taxes in year 2 (in $ million)?
c. What is the net operating profit after taxes in year 3 (in $ million)?
d. What is the free cash flow (FCF) at the end of year 0 (in $ million)?
e. What is the free cash flow (FCF) at the end of year 1 (in $ million)?
f. What is the free cash flow (FCF) at the end of year 2 (in $ million)?
In: Finance