The ledger of Marigold Corp. on March 31 of the current year includes the following selected accounts before quarterly adjusting entries have been prepared:

An analysis of the accounts shows the following:

The following table shows the nominal returns on U.S. stocks and the rate of inflation.

a. What was the standard deviation of the nominal market returns? (Do not make the adjustment for degrees of freedom described in footnote 18.) (Use decimals, not percents, in your calculations. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Standard deviation             %

b. Calculate the arithmetic average real return. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)  

Average real return             %

A company is issuing a 6-year maturity bond that is expected to pay $40 annually and a lump sum of $1000 at the end of six-year from now. If bond investors require 9% annual nominal interest rate (APR) but the interest rate is compounded quarterly, how much is the price of this bond today?

Please show your formula in your answer and explain step-by-step calculation to arrive to your final answer.

The asset cost is $600,000. The machine is expected to have a 10-year useful life with no salvage value. Straight-line depreciation is used. The net cash inflow is expected to be $138,000 each year for 10 years. The company uses a 12% discount rate in evaluating capital investments.

What is the Net present value and ARR?

XYZ Corporation is preparing a cash budget for January of the coming year. The following data have been forecasted:
January February
Sales 750,000 800000
Purchases 450,000 480000
Operating expenses:
Payroll 146,800 167400
Advertising 52,700 62800
Rent 8,750 8750
Depreciation 23,750 23,750
End-of-December balances:
Cash 120,000
Accounts payable 200,000
Bank loan 480,000
Additional data:
Sales are 40% cash. The term of credit sales is 2/10, n/30. The collection pattern for credit sales is 75% in the month following the month of sale (of which 80% are collected within 10 days), and 23% are collected in the month thereafter. The remaining credit sales are considered as uncollectible.
The accounts receivable balance on January 1 is $1,000,000, of which $800,000 represents uncollected December sales and $200,000 represents uncollected November sales.
Purchases are all on credit, with 40% paid in the month of purchase and the balance the following month. Operating expenses are paid in the month incurred.
Starting from January, the firm desires to maintain a minimum cash balance of $150,000 at the end of each month. 6% APR loans are used to maintain the minimum cash balance. At the end of each month, monthly interest is paid on the outstanding loan balance as of the beginning of the month. Repayments are made (at the end of the month) whenever the cash balance exceeds $150,000.

Required:
What is amount of cash inflow from operations in January?
What is amount of cash outflow from operations in January?
What is amount of loan balance at the end of January after loan repayments, if any?

4. A review of the degree of operating leverage (DOL) It is December 31. Last year, Carter Chemical Co. had sales of $8,000,000, and it forecasts that next year’s sales will be $7,600,000. Its fixed costs have been and are expected to continue to be $4,400,000, and its variable cost ratio is 12.50%. Carter’s capital structure consists of a $13.5 million bank loan, on which it pays an interest rate of 9%, and 250,000 shares of common equity. The company’s profits are taxed at a marginal rate of 40%.

Given this data, complete the following sentences:

• The percentage change in the company’s sales is .

• The percentage change in Carter’s EBIT is .

• The degree of operating leverage (DOL) at $7,600,000 is .

There are several ways to use and interpret a firm’s DOL value. Consider the following statement and indicate whether it accurately reflects the meaning or an appropriate use of a firm’s DOL value. Assume that at a given sales level, a firm’s DOL is 2.5. This means that a 1% change in the firm’s sales will result in a corresponding 2.5% change in the firm’s EBIT. True or False: This statement accurately describes a firm’s DOL. True False

Last year Minden Company introduced a new product and sold 25,900 units of it at a price of $100 per unit. The product's variable expenses are $70 per unit and its fixed expenses are $836,100 per year.

Required:

1. What was this product's net operating income (loss) last year?

2. What is the product's break-even point in unit sales and dollar sales?

3. Assume the company has conducted a marketing study that estimates it can increase annual sales of this product by 5,000 units for each $2 reduction in its selling price. If the company will only consider price reductions in increments of $2 (e.g., $68, $66, etc.), what is the maximum annual profit that it can earn on this product? What sales volume and selling price per unit generate the maximum profit?

4. What would be the break-even point in unit sales and in dollar sales using the selling price that you determined in requirement 3?

Company X is in its first year of operations and has decided to use the percentage of sales method for estimating uncollectible accounts. Sales for the year totaled $112,000. Company X has assessed uncollectible accounts at 10% of sales. The company recorded $11,200 of bad debt expense. Write-offs for the period were $3,000. What is the effect of this transaction?

a. Net income is overstated by 3,000

b. None of the these

c. Bad debt expense is overstated by 3,000

d. Cost of Goods sold is understated by 3,000