2. As long as the interest rate is greater than zero, the present value of a single sum will always:
Select one:
a. Equal the future value if the time period is one year.
b. Increase as the interest rate increases.
c. Be more than the future value.
d. Increase as the number of periods decreases.
e. Decrease as the number of periods increases.
3.
A project costs $525 and has cash flows of $100 for the first three years and $75 in each of the project's last five years. What is the payback period of the project?
Select one:
a. 5.67 years
b. 6.00 years
c. The project never pays back
d. 5.33 years
e. 5.00 years
3.
Your portfolio consists of two stocks. You have $2000 in stock A and $8000 in stock B. The returns for stock A have a standard deviation of 20% and the returns for stock B have a standard deviation of 10%. The correlation coefficient between A and B is 0.6. What is your portfolio standard deviation?
Select one:
a. 10.2%
b. 9.8%
c. 6.8%
d. 10.9%
e. 11.2%
4.
A project which has a discounted payback period equal to its life also has a positive NPV.
Select one:
True
False
5.
A firm's stock has a required return of 10%. The stock's dividend yield is 2.5%. What is the dividend the firm is expected to pay over a one year period if the current stock price is $80?
Select one:
a. $2.40
b. $2.80
c. $3.60
d. $2.00
e. $3.20
6.
The party to a leasing arrangement that is entitled to a business expense based upon its use of an asset is called the:
Select one:
a. Lessor.
b. Transferor.
c. Financee.
d. Lessee.
e. Manufacturer.
In: Accounting
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You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $2.75 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $2.95 million on an aftertax basis. In four years, the land could be sold for $3.15 million after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $345,000. An excerpt of the marketing report is as follows: |
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The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 6,800, 7,500, 8,100, and 6,400 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we feel that a premium price of $510 can be charged for each zither. Because zithers appear to be a fad, we feel at the end of the four-year period, sales should be discontinued. |
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PUTZ believes that fixed costs for the project will be $695,000 per year, and variable costs are 20 percent of sales. The equipment necessary for production will cost $3.5 million and qualifies for 100 percent bonus depreciation in the first year. At the end of the project, the equipment can be scrapped for $585,000. Net working capital of $295,000 will be required immediately. PUTZ has a tax rate of 22 percent, and the required return on the project is 10 percent. |
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What is the NPV of the project? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, and round your answer to 2 decimal places, e.g., 1,234,567.89.) |
In: Finance
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You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $2.55 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $2.75 million on an aftertax basis. In four years, the land could be sold for $2.95 million after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $305,000. An excerpt of the marketing report is as follows: |
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The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 6,400, 7,100, 7,700, and 6,000 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we feel that a premium price of $490 can be charged for each zither. Because zithers appear to be a fad, we feel at the end of the four-year period, sales should be discontinued. |
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PUTZ believes that fixed costs for the project will be $615,000 per year, and variable costs are 15 percent of sales. The equipment necessary for production will cost $3.3 million and qualifies for 100 percent bonus depreciation in the first year. At the end of the project, the equipment can be scrapped for $545,000. Net working capital of $255,000 will be required immediately. PUTZ has a tax rate of 23 percent, and the required return on the project is 10 percent. |
|
What is the NPV of the project? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, and round your answer to 2 decimal places, e.g., 1,234,567.89.) |
In: Finance
Storm cost and revenue
Per unit
|
Item |
J |
K |
|
Selling Price |
£45 |
£100 |
|
Direct materials costs |
£10 |
£ 18 |
|
Direct wages costs (variable) |
£ 4 |
£ 6 |
|
Variable overhead cost |
£ 2.50 |
£ 3 |
|
Machine hours |
2 hours |
3 hours |
Fixed production overhead costs are budgeted at £2,000,000 per quarter. Normal production is planned to be 500,000 machine hours per quarter.
Budgeted selling and distribution costs are as follows:
Variable £1.50 per unit sold
Fixed £800,000 per quarter
Budgeted administration costs are £1,200,000 per quarter. The company allocates production overheads to products based on machine hours.
The following pattern of sales and production is expected during the first six months of the year:
Production is higher than sales in order to meet seasonal demand in July – September.
|
January – March |
April – June |
|
|
Sales (units) |
J 80,000 |
J 70,000 |
|
K 90,000 |
K 80,000 |
|
|
Production (units) |
J 110,000 |
J 110,000 |
|
K 120,000 |
K 130,000 |
|
There is no stock on January 1st
You should assume that actual fixed costs for the two quarters were the same as budgeted fixed costs.
Required:
(c) State and explain briefly why companies might decide to use marginal costing as the basis of management reporting.
2. Compare and contrast the different worldviews on which ABC and Throughput Accounting are based.
In: Accounting
Hayes Industries purchased the following assets and constructed a building as well. All this was done during the current year. Assets 1 and 2: These assets were purchased as a lump sum for $100,000 cash. The following information was gathered. Description Initial Cost on Seller’s Books Depreciation to Date on Seller’s Books Book Value on Seller’s Books Appraised Value Machinery $100,000 $50,000 $50,000 $90,000 Equipment 60,000 10,000 50,000 30,000 Asset 3: This machine was acquired by making a $10,000 down payment and issuing a $30,000, 2-year, zero-interest-bearing note. The note is to be paid off in two $15,000 installments made at the end of the first and second years. It was estimated that the asset could have been purchased outright for $35,900. Asset 4: This machinery was acquired by trading in used machinery. (The exchange lacks commercial substance.) Facts concerning the trade-in are as follows. Cost of machinery traded $100,000 Accumulated depreciation to date of sale 40,000 Fair value of machinery traded 80,000 Cash received 10,000 Fair value of machinery acquired 70,000 Asset 5: Equipment was acquired by issuing 100 shares of $8 par value common stock. The stock had a market price of $11 per share. Construction of Building: A building was constructed on land purchased last year at a cost of $150,000. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows. Date Payment 2/1 $120,000 6/1 360,000 9/1 480,000 11/1 100,000 To finance construction of the building, a $600,000, 12% construction loan was taken out on February 1. The loan was repaid on November 1. The firm had $200,000 of other outstanding debt during the year at a borrowing rate of 8%. Record the acquisition of each of these assets.
In: Accounting
Required information [The following information applies to the questions displayed below.] Chipolo sells a coin-sized tracking tag that attaches to keys, wallets, and other personal items. Chipolo began January with an inventory of 200 tags purchased from its supplier in November last year at a cost of $12 per tag, plus 100 tags purchased in December last year at a cost of $15 per tag. Chipolo sells the tags at a price of $30 per tag, on account with terms n/30, FOB destination. Chipolo uses a perpetual inventory system to account for the following transactions. Jan. 8 Chipolo gave 250 tags to a courier company (FedEx) to deliver to customers. Jan. 9 FedEx confirmed that all 250 tags were delivered today to customers. Jan. 11 Chipolo ordered 350 tags from its supplier. The supplier was out of stock but promised to send them to Chipolo as soon as possible. Chipolo agreed to a cost of $21 per tag, n/30. Jan. 17 Chipolo received cash payment from customers for 125 of the tags delivered 8 days earlier. Jan. 21 The 350 tags ordered on January 11 were shipped to and received by Chipolo today. Jan. 23 Chipolo gave 375 tags to FedEx, which were delivered “same day” to customers. Jan. 31 Chipolo counted its inventory and determined 20 tags were on hand. Chipolo made a “book-to-physical adjustment” to account for the missing 5 tags. Required: Assume Chipolo uses FIFO in its perpetual inventory system. Prepare the journal entry for each transaction. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
In: Accounting
Nash Corporation was organized on January 1, 2017. It is authorized to issue 9,600 shares of 8%, $100 par value preferred stock, and 501,500 shares of no-par common stock with a stated value of $1 per share. The following stock transactions were completed during the first year. Jan. 10 Issued 80,050 shares of common stock for cash at $6 per share. Mar. 1 Issued 5,930 shares of preferred stock for cash at $113 per share. Apr. 1 Issued 24,680 shares of common stock for land. The asking price of the land was $90,820; the fair value of the land was $80,050. May 1 Issued 80,050 shares of common stock for cash at $8 per share. Aug. 1 Issued 9,600 shares of common stock to attorneys in payment of their bill of $50,400 for services rendered in helping the company organize. Sept. 1 Issued 9,600 shares of common stock for cash at $10 per share. Nov. 1 Issued 1,100 shares of preferred stock for cash at $115 per share. Prepare the journal entries to record the above transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 10Mar. 1Apr. 1May 1Aug. 1Sept. 1Nov. 1 Jan. 10Mar. 1Apr. 1May 1Aug. 1Sept. 1Nov. 1 Jan. 10Mar. 1Apr. 1May 1Aug. 1Sept. 1Nov. 1 Jan. 10Mar. 1Apr. 1May 1Aug. 1Sept. 1Nov. 1 Jan. 10Mar. 1Apr. 1May 1Aug. 1Sept. 1Nov. 1 Jan. 10Mar. 1Apr. 1May 1Aug. 1Sept. 1Nov. 1 Jan. 10Mar. 1Apr. 1May 1Aug. 1Sept. 1Nov. 1 Show List of Accounts
In: Accounting
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You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $2.3 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $2.5 million on an aftertax basis. In four years, the land could be sold for $2.7 million after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $255,000. An excerpt of the marketing report is as follows: |
|
The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 5,900, 6,600, 7,200, and 5,500 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we feel that a premium price of $465 can be charged for each zither. Because zithers appear to be a fad, we feel at the end of the four-year period, sales should be discontinued. |
|
PUTZ believes that fixed costs for the project will be $515,000 per year, and variable costs are 20 percent of sales. The equipment necessary for production will cost $3.05 million and qualifies for 100 percent bonus depreciation in the first year. At the end of the project, the equipment can be scrapped for $495,000. Net working capital of $205,000 will be required immediately. PUTZ has a tax rate of 23 percent, and the required return on the project is 13 percent. |
|
What is the NPV of the project? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, and round your answer to 2 decimal places, e.g., 1,234,567.89.) |
In: Accounting
May. 1 Purchased 600 Clifford Ltd. common shares for £60 per share. This investment is held for trading purposes.
June. 1 Purchased 1,000 bonds of Gladstone Inc. at face-value price of £100 each. These bonds bear interest at 6%, which is paid semi-annually on November 30 and May 31 each year. They were also purchased for trading purposes.
July. 1 Purchased 4,000 Waterloo Corporation common shares for £70 per share. This represents 25% of the issued common shares. Because of this investment, the directors of Waterloo have invited a Brighton’s executive to sit on their board.
Sep. 1 Received a £1-per-share cash dividend from Waterloo Corporation.
Nov. 1 Sold 200 Clifford Ltd. common shares for £63 per share.
Nov. 30 Interest on the Gladstone Inc. bonds was received.
Dec. 15 Received a £0.50-per-share cash dividend on Clifford Ltd. common shares.
Dec. 31 On this date, the fair values per share were £55 for Clifford Ltd. and £73 for Waterloo Corporation. The fair value of the Gladstone bonds was £101 each. Waterloo reported a profit for the year ended December 31, 2019, of £100,000.
Instructions:
In: Accounting
Practice with value of single time events.
In: Economics