Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
In: Accounting
Alpha Industries is considering a project with an initial cost of $8.2 million. The project will produce cash inflows of $1.93 million per year for 6 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.67% and a cost of equity of 11.31%. The debt-equity ratio is 0.62 and the tax rate is 40%. What is the net present value of the project?
Hint: You'll need to calculate the appropriate discount rate and use it to calculate the NPV. Be careful not to confuse debt-equity ratios with debt-value ratios.
In: Accounting
A financial administrator believes the average cost of tuition and room and board at a small liberal arts college exceeds $8,500 per term. A study conducted using 350 small liberal arts colleges showed that the average cost per term is $8,745. The population standard deviation is $1,200. Let α = 0.05. What is the p-value for this test?
0.0500
0.0000
0.4938
0.0124
In: Statistics and Probability
Select all of the following statements about intangibles that are TRUE
The cost of a purchased intangible includes the purchase price, legal fees and other incidental expenses Bond investments are considered intangibles
A company can capitalize legal costs associated with an internally created intangible asset
When amortizing an intangible asset, an accumulated amortization contra account is always used
Only limited life intangibles are regularly evaluated for impairment
Trademarks are considered the property of the company originating the trademark for 70 years
The useful life of an intangible is the period over which these assets will contribute to a company's cash flows
In: Accounting
Carl's Construction Inc. will buy a machine that has an initial cost of $1,200,000 and is expected to be useful for 8 years. Several estimations have been created but the company is going to focus on 3 main scenarios. One scenario estimates yearly benefits of $310,000 and O&M costs of $60,000 per year with a 30% chance of occurrence. The second scenario involves benefits of $280,000 per year and O&M costs of $70,000 annually with a 50% chance of occurring. The last scenario involves annual benefits of $240,000 and annual O&M costs of $80,000 with a probability of 20%. The company uses an interest rate of 7%. What is the standard deviation of this project?
In: Economics
Consider a machine that has an initial cost of $126,000 and an estimated salvage value of $27,000. After some analysis we conclude that this machine will have O&M costs of $1,850 per year but based on the faulty nature of this machine we will have to incur in major maintenance costs at the end of year 3 and 6. During year 3 we expect to pay $14,000 and for year we estimate a $16,500. The machine will have a useful life of 8 years and we will use an interest rate of 6%. Use annual cash flow analysis.
In: Economics
Carl's Construction Inc. will buy a machine that has an initial cost of $1,200,000 and is expected to be useful for 8 years. Several estimations have been created but the company is going to focus on 3 main scenarios. One scenario estimates yearly benefits of $310,000 and O&M costs of $60,000 per year with a 30% chance of occurrence. The second scenario involves benefits of $280,000 per year and O&M costs of $70,000 annually with a 50% chance of occurring. The last scenario involves annual benefits of $240,000 and annual O&M costs of $80,000 with a probability of 20%. The company uses an interest rate of 7%. What is the expected net present value (NPV) of this project?
In: Economics
Duke Energy reported that the cost of electricity for an efficient home in a particular neighborhood of Cincinnati, Ohio, was $104 per month.† A researcher believes that the cost of electricity for a comparable neighborhood in Chicago, Illinois, is higher. A sample of homes in this Chicago neighborhood will be taken and the sample mean monthly cost of electricity will be used to test the following null and alternative hypotheses.
H0: μ ≤ 104
Ha: μ > 104
(A)
Assume the sample data led to rejection of the null hypothesis. What would be your conclusion about the cost of electricity in the Chicago neighborhood?
a) Conclude that the population mean monthly cost of electricity in the Chicago neighborhood is not greater than $104 and hence is not higher than in the comparable neighborhood in b) Cincinnati. Conclude that the population mean monthly cost of electricity in the Chicago neighborhood is greater than $104 and hence higher than in the comparable neighborhood in Cincinnati.
(b)
What is the type I error in this situation?
The type I error is rejecting H0 when it is true.
The type I error is accepting H0 when it is true.
The type I error is rejecting H0 when it is false.
The type I error is accepting H0 when it is false.
What are the consequences of making this error?
This error occurs if the researcher concludes that the population mean monthly cost of electricity is greater than $104 in the Chicago neighborhood when the population mean cost is actually less than or equal to $104.
This error occurs if the researcher concludes that the population mean monthly cost of electricity is less than or equal to $104 in the Chicago neighborhood when the population mean cost is less than or equal to $104.
This error occurs if the researcher concludes that the population mean monthly cost of electricity is greater than $104 in the Chicago neighborhood when the population mean cost is greater than $104.
This error occurs if the researcher concludes that the population mean monthly cost of electricity is less than or equal to $104 in the Chicago neighborhood when the population mean cost is actually greater than $104.
(c)
What is the type II error in this situation?
The type II error is rejecting H0 when it is true.
The type II error is accepting H0 when it is true.
The type II error is rejecting H0 when it is false.
The type II error is accepting H0 when it is false.
What are the consequences of making this error?
This error occurs if the researcher concludes that the population mean monthly cost of electricity is greater than $104 in the Chicago neighborhood when the population mean cost is actually less than or equal to $104.
This error occurs if the researcher concludes that the population mean monthly cost of electricity is less than or equal to $104 in the Chicago neighborhood when the population mean cost is less than or equal to $104.
This error occurs if the researcher concludes that the population mean monthly cost of electricity is greater than $104 in the Chicago neighborhood when the population mean cost is greater than $104.
This error occurs if the researcher concludes that the population mean monthly cost of electricity is less than or equal to $104 in the Chicago neighborhood when the population mean cost is actually greater than $104.
In: Statistics and Probability
Provide a definition of the following types of contracts, as it pertains to construction contracts:
Cost Plus Fee Contract
In: Civil Engineering
1. Which of the following is an example of a cost center within a factory?
a.The Production Department
b.The Administrative Department
c.The Investment Department
d.The Marketing Department
2. A responsibility center in which a manager is responsible for both revenues and costs is called the:
a.investment center.
b.revenue center.
c.cost center.
d.profit center.
3. A decision relating to keeping or dropping a product line is taken by the manager of a(n):
a.profit center.
b.revenue center.
c.investment center.
d.cost center.
4.A mechanism which allows managers at lower levels to make and implement key decisions pertaining to their areas of responsibility is called:
a.decentralized decision making.
b.hypothetical decision making.
c.discretionary decision making.
d.consolidated decision making.
5. Which of the following is an advantage of decentralization?
a.It works as motivation to segment managers.
b.It helps the central management to focus on the operating decisions of various divisions.
c.It provides less access to local information which leads to the best decision.
d.It reduces the competition among divisions.
6.Which of the following is considered a measure of efficiency?
a.Employee turnover
b.Number of units produced per hour
c.Customer loyalty index
d.Number of value added activities carried out
7. Which of the following is true of return on investment (ROI)?
a.It refers to earnings before interest and income taxes.
b.It is the difference between operating income and the dollar return required.
c.It is the most common measure of performance for a cost center.
d.It is used by stockholders to indicate the health of a company.
8. Which of the following equations is used to compute residual income?
a.Residual income = Operating income − (Minimum rate of return × Operating assets)
b.Residual income = Total income − (Minimum rate of return × Operating assets)
c.Residual income = Total income − (Minimum rate of return × Total assets)
d.Residual income = Operating income − (Minimum rate of return × Total assets)
9. The after-tax operating income reported by Beta, Inc., is $125,000. The weighted average cost of capital is 15.30 percent, and the total capital employed is $750,000. Determine the economic value added (EVA) of Beta, Inc.
a.$100,000
b.$10,250
c.$114,750
d.$15,000
10. Cash compensation includes:
a.salaries and bonuses.
b.stock options and right shares.
c.stock dividends and gains.
d.perquisites and profit shares.
11. Which of the following statements is true of stock-based compensation given to employees by a firm?
a.It always reduces the profitability of a firm.
b.It can be issued only to top-level managers of a firm.
c.It includes raises, bonuses, and other monetary rewards.
d.It encourages goal congruence within a firm.
12. Autonomy in the conduct of managers' daily business is an example of:
a.income-based compensation.
b.noncash compensation.
c.cash compensation.
d.stock-based compensation.
13. Which of the following statements is true about the transfer price charged by one division to another division of a company?
a.It affects the costs of the transferring division and the revenues of the receiving division.
b.It affects the revenues of the transferring division and the costs of the receiving division.
c.It affects the balance sheet of the transferring division and the income statement of the receiving division.
d.It affects the income statement of the transferring division and the balance sheet of the receiving division.
14. Which of the following is affected by the transfer price charged by one division to another?
a.Divisional profitability
b.Divisional non-current assets
c.Divisional fixed cost
d.Divisional production expenses
15. Which of the following statements is true about transfer prices?
a.Transfer prices are the expenses incurred for transferring goods from a factory to a customer's location.
b.Transfer prices are the expenses incurred for transferring goods from one division to another division.
c.Transfer prices are the prices charged for goods produced by one multinational firm to another multinational firm.
d.Transfer prices are the prices charged for goods produced by one division and transferred to another.
16. Which of the following transfer pricing approaches can provide perverse incentives and distort performance measures?
a.Opportunity cost transfer pricing
b.Variable cost plus fixed fee transfer pricing
c.Market-based transfer pricing
d.Full-cost transfer pricing
17. Which of the following transfer prices allowed by the Internal Revenue Service (IRS) for a multi-national corporation is equal to the sales price received by the reseller less an appropriate markup?
a.Negotiated transfer price
b.Resale price
c.Comparable uncontrolled price
d.Cost-plus price
18. Cadmium, Inc., has two divisions, Division Nickel and Division Barium. Division Nickel manufactures Product A that can be used by Division Barium in manufacturing its final product. The details of cost information of Product A per unit is as follows:
| Direct material | $4.0 |
| Direct labor | 3.5 |
| Variable overhead | 4.5 |
| Fixed overhead | 3.0 |
| Total cost | $15.0 |
If Cadmium, Inc., has a transfer pricing policy that requires
transfer at full product cost, what would the transfer price
be?
a.$8.0 per unit
b.$15.0 per unit
c.$12.0 per unit
d.$7.5 per unit
Please Help me answer these multiple choice questions. I would really appreciate it if you could answer all of them. Thank you so much
In: Accounting