. Jasper Corp, has the following Stockholders’ Equity account balances and activity for Year 2.
|
Net income |
$14,655,000 |
|||
|
Retained earnings |
$16,500,000 |
|||
|
Preferred stock shares outstanding |
2,000 |
|||
|
Common stock shares outstanding at January 1, Year 2 |
7,375,000 |
|||
|
Additional Common shares issued at July 1, Year 2 |
30,000 |
|||
|
4-for-1 stock split at December 31, Year 2 |
||||
|
Preferred Dividends |
$10,000 |
|||
|
Common Dividends |
$75,000 |
|||
|
Year 1 EPS |
$3.60 |
|||
Earnings per share = __________________ / ___________________* = ________
* Compute Denominator: Weighted average common shares outstanding
|
Date |
Shares |
Portion of year |
Weighted Average Shares |
|
January 1, Y2 |
7,375,000 |
||
|
July 1, Y2 |
|||
|
Weighted Average December 31 before split |
|||
|
Stock split 4-for-1 |
|||
|
*Total Weighted Average, 12/31/Y2 |
|||
|
Note: Year 1 restated |
$3.60 / 4 =_____ |
Is performance better or worse (circle) in Year 2 $ _____ as compared to Year 1 $ _____ ? Why?
In: Accounting
| Turbine | United Hydro Services | Kiser Hydro, LLC |
| Initial Cost | $200,000 | $1,500,000 |
| Maintenance Cost | $200 per year, increasing by 4% per year | $1,000 per year for the first ten years, then $2,000 per year thereafter |
| Overhaul Cost | $50,000 at year ten | $750,000 at year thirty |
| Income | $20,000 per year | $25,000 per year |
| Salvage Value | $15,000 | $50,000 |
| Life | 20 Years | Infinite |
. Memphis Light, Gas and Water Division is exploring the possibility of installing hydrokinetic turbines in the Mississippi River to generate power for the Memphis and Shelby County area. Consulting engineers have identified two potential types of hydrokinetic turbines to meet the needs of MLG&W. The costs and expected income for the two types of turbines are shown in the table below. Using a perpetual annual worth analysis and a MARR of 6% per year, determine which type of hydrokinetic turbine, if any, should be selected. Complete all calculations to the nearest dollar.
In: Economics
A machine can be purchased for $226,000 and used for five years,
yielding the following net incomes. In projecting net incomes,
double-declining depreciation is applied using a five-year life and
a zero salvage value.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||||||||||||||||
| Net income | $ | 22,500 | $ | 44,000 | $ | 77,000 | $ | 46,000 | $ | 108,000 | ||||||||||
Compute the machine’s payback period (ignore taxes). (Round
payback period answer to 3 decimal places.)
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In: Accounting
Listed below are several transactions that took place during the
first two years of operations for the law firm of Pete, Pete, and
Roy.
| Year 1 | Year 2 | |||||
| Amounts billed to clients for services rendered | $ | 184,000 | $ | 234,000 | ||
| Cash collected from clients | 167,000 | 197,000 | ||||
| Cash disbursements | ||||||
| Salaries paid to employees for services rendered during the year | 97,000 | 107,000 | ||||
| Utilities | 33,500 | 47,000 | ||||
| Purchase of insurance policy | 62,100 | 0 | ||||
In addition, you learn that the company incurred utility costs of
$38,500 in year 1, that there were no liabilities at the end of
year 2, no anticipated bad debts on receivables, and that the
insurance policy covers a three-year period.
Required:
1. & 3. Calculate the net
operating cash flow for years 1 and 2 and determine the amount of
receivables from clients that the company would show in its year 1
and year 2 balance sheets prepared according to the accrual
accounting model.
2. Prepare an income statement for each year
according to the accrual accounting model.
In: Accounting
Sauer Food Company has decided to buy a new computer system with
an expected life of three years. The cost is $380,000. The company
can borrow $380,000 for three years at 12 percent annual interest
or for one year at 10 percent annual interest. Assume interest is
paid in full at the end of each year.
a. How much would Sauer Food Company save in interest over the
three-year life of the computer system if the one-year loan is
utilized and the loan is rolled over (reborrowed) each year at the
same 10 percent rate? Compare this to the 12 percent three-year
loan.
10% loan -
12% loan -
Interest Savings -
b. What if interest rates on the 10 percent loan go up to 15 percent in year 2 and 18 percent in year 3? What would be the total interest cost compared to the 12 percent, three-year loan?
Fixed 12% loan -
Variable Rate loan -
Additional Interest Cost -
In: Finance
The following information relates to the Jimmy Johnson Company.
Ending Inventory Ending Inventory
Date At Base-Year Cost At Current Year Cost Price Index
___________________________________________________________________________________________
12/31/15 (base) $68,400 $68,400 1.00
12/31/16 $91,600 $122,744 1.34
12/31/17 $89,800 $132,904 1.48
Using dollar-value LIFO, 2016 ending inventory is?
Using dollar-value LIFO, 2017 ending inventory is?
What is the change in inventory in base-year prices in 2016 (i.e., comparing 2016 ending inventory to 2015 ending inventory, what is the change in base-year, not current year, prices)?
What is the change in inventory in base-year prices in 2017 (i.e., comparing 2017 ending inventory to 2016 ending inventory, what is the change in base-year, not current year, prices)?
Including the base-year of $68,400, how many layers are there at the end of 2017? (Hint: Any negative changes in inventory should be a correction to a previous layer, not a new layer.)?
In: Accounting
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 will run $450,000 per year and we will need to invest a total of $1,200,000 in manufacturing equipment. The equipment will be depicted using MACRS over seven 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.
MACRS Table:
Year 1 = 14.29%
Year 2 = 24.49%
Year 3 = 17.49%
Year 4 = 12.49%
Should we undertake the project?
HINT: 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. Show work using Excel.
In: Finance
A machine can be purchased for $222,000 and used for five years,
yielding the following net incomes. In projecting net incomes,
double-declining depreciation is applied using a five-year life and
a zero salvage value.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||||||||||||||||
| Net income | $ | 19,000 | $ | 49,000 | $ | 59,000 | $ | 57,500 | $ | 105,000 | ||||||||||
Compute the machine’s payback period (ignore taxes). (Round
payback period answer to 3 decimal places.)
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In: Accounting
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 comma 500 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 6.7 %, what should you do? Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 negative $ 40 comma 800 negative $ 2 comma 000 negative $ 2 comma 000 negative $ 2 comma 000 negative $ 2 comma 000 negative $ 2 comma 000 The net present value of the leasing alternative is $ nothing. (Round to the nearest dollar.)
In: Finance
XYZ is a company located in Italy, the company manufactures machine parts. It is currently involved in making a decision concerning the acquisition of new machining tool. Two different versions of the tool are available: X AND Y. The forecasted cash flows of the two alternative are listed below; XYZ normally uses payback with a 3-year criterion. NET CASH FLOWS ($000s) Tool X Year 0 -1000, Year 1 +400, Year 2 +600, Year 3 +187, Tool Y Year 0 -450, Year 1+300, Year 2+150, Year 3+106. XYZ faces a perfect capital market, in which the interest rate for the projects' risk level is 5%. Required: (a) Using the Payback and the IRR decisions rule, indicate which projects the company should accept and state clearly the reasons for your decisions. (b) How would your conclusions in (a) will change if the projects were mutually exclusive? (c) State clearly any limitations and assumptions that you made in your calculations.
In: Finance