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• Market value weights

• Book value weights

Plutarch Corp. has recently developed a new product which is the first of its kind. Plutarch expects this will give it a significant first mover advantage in the market and that is expected to provide growth in earnings per share of 400% within the coming year, and 75% growth in each of the subsequent 3 years. After that time, it is expected competitors will have developed and brought to market similar products with the result that Plutarch would expect earnings growth to drop back to its normal level of 3% per year forever. Plutarch's cash dividend was 10 cents per share last year and is expected to remain at that amount for each of the next 5 years. In the sixth year, it is expected that the payout ratio will be 80% of the earnings per share, and the payout ratio is expected to remain at that level forever. The required rate of return on Plutarch's ordinary shares is 20% per year and the latest earnings per share was 25 cents.

Required:

Calculate the price that Plutarch Corp. ordinary shares should be selling for in the market?

Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations:

During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $59 per unit.

Required:

1. Assume the company uses variable costing:

b. Prepare an income statement for Year 1 and Year 2.

2. Assume the company uses absorption costing:

b. Prepare an income statement for Year 1 and Year 2.

3. Reconcile the difference between variable costing and absorption costing net operating income in Year 1.

Dinklage Corp. has 7 million shares of common stock outstanding. The current share price is $86, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $70 million, a coupon rate of 9 percent, and sells for 96 percent of par. The second issue has a face value of $45 million, a coupon rate of 10 percent, and sells for 104 percent of par. The first issue matures in 24 years, the second in 6 years. Suppose the most recent dividend was $5.80 and the dividend growth rate is 7 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 34 percent. What is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

WACC---- %

Complete the first step in the accounting cycle: Record journal entries for the following transactions in the General Journal, which is the first sheet in the template file. Explanations are not needed.

Dec.     1          Investors contributed $96,000 in exchange for shares of common stock.

             8          Performed services on account for $32,350.

             9          Purchased supplies on account for $672.

            10         Purchased furniture at a purchase price of $12,000, by making a cash down payment of $2,000, and signing a note for the remainder. (HINT: This journal entry will have 3 accounts – one debit and two credits. Remember, debits have to equal credits in every journal entry.)

            12         Received utility bill to be paid next month, $525.

            15         Paid wages, $15,000.

            17         Received payments on account from customers, $26,960.

            21         Paid vendors on account, $6,195.

            24         Received $5,000 from customers for work to be performed in January.

            28         Paid dividends of $44,000.

            31         Paid the next 6 months rent in advance, $12,000.

Cordova manufactures three types of stained glass window, cleverly named Products A, B, and C. Information about these products follows:

Cordova currently is limited to 60,000 labor hours per month. Cordova’s marketing department has determined the following demand for its products:

Required:
Given the company’s limited resource and expected demand, compute how many units of each product Cordova should produce to maximize its profit. (Enter the products in the sequence of their preferences; the product with first preference should be entered first. Round your answers to the nearest whole number.)

[The following information applies to the questions displayed below.]

At the beginning of the year, Plummer's Sports Center bought three used fitness machines from Brunswick Corporation. The machines immediately were overhauled, installed, and started operating. The machines were different; therefore, each had to be recorded separately in the accounts.

By the end of the first year, each machine had been operating 6,500 hours.

2. Prepare the entry to record depreciation expense at the end of Year 1, assuming the following. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Ten Pins Manufacturing has 9.2 million shares of common stock outstanding. The current share price is $62, and the book value per share is $4. The company also has two bond issues outstanding. The first bond issue has a face value of $71.8 million and a coupon rate of 7.9 percent and sells for 107.4 percent of par. The second issue has a face value of $61.8 million and a coupon rate of 8.4 percent and sells for 110.7 percent of par. The first issue matures in 8 years, the second in 27 years.
The company’s stock has a beta of 1.2. The risk-free rate is 4 percent, and the market risk premium is 7.9 percent. Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 35 percent. What is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

What is WACC?