"A firm is considering purchasing a computer system. -Cost of system is $199,000. The firm will pay for the computer system in year 0. -Project life: 5 years -Salvage value in year 0 (constant) dollars: $17,000 -Depreciation method: five-years MACRS -Marginal income-tax rate = 40% (remains constant over time) -Annual revenue = $144,000 (year-0 constant dollars) -Annual expenses (not including depreciation) = $91,000 (year-0 constant dollars) If the general inflation rate is 4.1% during the project period (which will affect all revenues, expenses, and the salvage value but not depreciation), determine the INFLATION-FREE IRR' of the computer system. Enter your answer as a percentage between 0 and 100."

Which one of the following statements is correct concerning the weighted average cost of capital? (WACC)?

A.

The

pre?tax

rate of return on the debt is the rate that is relevant to the computation of the WACC.??

B.

When computing the? WACC, the weight assigned to the preferred stock is equal to the coupon rate multiplied by the par value assigned to the preferred stock.??

C.

The weight of the common stock used in the computation of the WACC is based on the number of shares outstanding multiplied by the book value per share.??

D.

The weight of the debt can be based on the face value of the bond? issue(s) outstanding multiplied by the quoted? price(s) when expressed as a percentage of the face value.

E.

A? firm's WACC will decrease as their corporate tax rate decreases.?

Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is available for each division:

   

Orange has established a hurdle rate of 5 percent.   

Required:
1-a. Compute each division’s return on investment (ROI) and residual income for last year.(Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.))

Required:

1. Suppose Dana’s would like to generate a profit of $1,140. Determine how many rosettes it must sell to achieve this target profit.

2. If Dana’s sells 2,160 rosettes, compute its margin of safety in units, in sales dollars, and as a percentage of sales.

3. Calculate Dana’s degree of operating leverage if it sells 2,160 rosettes.

4a. Using the degree of operating leverage, calculate the change in Dana’s profit if unit sales drop to 1,836 units.

4b. Prepare a new contribution margin income statement to verify change in dana's profit.

Scenario 3

Media Wise sells a range of media products in package deals. The products sold within bundles are as follows.  

Package A consists of a TV and a stand and is sold for a discounted price of £420. Package B consists of a TV, a stand and two speakers and is sold for a discounted price of £480. Currently packages are sold in a ratio of 2 Package As for every 3 Package Bs and 600 packages are sold each month. Fixed costs are expected to be £82,000 for the month.  

Question 3

Calculate the margin of safety (in number of bundles and as a percentage) if the current sales mix remains unchanged

"A firm is considering purchasing a computer system.
-Cost of system is $188,000. The firm will pay for the computer system in year 0.
-Project life: 4 years
-Salvage value in year 0 (constant) dollars: $24,000
-Depreciation method: five-years MACRS
-Marginal income-tax rate = 40% (remains constant over time)
-Annual revenue = $141,000 (year-0 constant dollars)
-Annual expenses (not including depreciation) = $75,000 (year-0 constant dollars)
If the general inflation rate is 2.1% during the project period (which will affect all revenues, expenses, and the salvage value but not depreciation), determine the INFLATION-FREE IRR' of the computer system. Enter your answer as a percentage between 0 and 100."

Exercise 9-14

Nash Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.

Inventory, May 1 $ 156,000
Purchases (gross) 576,100
Freight-in 29,300
Sales revenue 998,400
Sales returns 72,100
Purchase discounts 11,900

Compute the estimated inventory at May 31, assuming that the gross profit is 35% of net sales.

The estimated inventory at May 31
$

Compute the estimated inventory at May 31, assuming that the gross profit is 35% of cost. (Round percentage of sales to 2 decimal places, e.g. 78.74% and final answer to 0 decimal places, e.g. 6,225.)

The estimated inventory at May 31
$

7-7

Westerville Company reported the following results from last year’s operations:

At the beginning of this year, the company has a $350,000 investment opportunity with the following cost and revenue characteristics:

The company’s minimum required rate of return is 10%.

If the company pursues the investment opportunity and otherwise performs the same as last year, what margin will it earn this year? (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

____%

C2-1A   Choice of Accounting Method

Understanding

Slanted Building Supplies purchased 32 percent of the voting shares of Flat Flooring Company in March 20X3. On December 31, 20X3, the officers of Slanted Building Supplies indicated they needed advice on whether to use the equity method or cost method in reporting their ownership in Flat Flooring.

Required

a. What factors should be considered in determining whether equity-method reporting is appropriate?

b. Which of the two methods is likely to show the larger reported contribution to Slanted’s earnings in 20X4? Explain.

c. Why might the use of the equity method become more appropriate as the percentage of ownership increases?

Can I please have an original answer?

2) A corporation sells 66,000 units of a product for $19.75 each; the variable cost per unit is $11.50 each. The fixed costs are $315,000.

Required A) breakeven units and dollars.

B) how many units must be sold to achieve targeted income of $465,0007

C) What is the margin of safety in dollars and percentage?

D) What is the operating leverage?

E) The sales manager wants to raise prices by $2.00 each; demand will drop by ten percent, and the firm will spend an additional $95,000 on advertising. Will the firm increase income?

F) The manufacturing manager wants to automate a production line and reduce variable costs to $10.00 each. Fixed costs will increase by $75,000. Will the firm increase income?