Why is the nominal interest rate the opportunity cost of holding money? If the Fed makes the quantity of money grow at the same rate as the growth rate of real GDP and velocity does not change, in the long run, what happens to the price level and the inflation rate?
In: Finance
Why is the nominal interest rate the opportunity cost of holding money? If the Fed makes the quantity of money grow at the same rate as the growth rate of real GDP and velocity does not change, in the long run, what happens to the price level and the inflation rate?
In: Finance
The company applies overhead cost to jobs on the basis of machine-hours worked. For the current year, the company estimated that it would work 75,000 machine-hours and incur $450,000 in manufacturing overhead cost. The following transactions were recorded for the year: a. Raw materials were purchased on account, $ 410,000 b. Raw materials were requisitioned for use in production, $ 380,000 ($360,000 direct materials and $20,000 indirect materials). c. The following costs were incurred for employees services: direct labor, $ 75,000; indirect labor,$110,000; sales commissions, $90,000; and administrative salaries,$200,000 d. Sales travel costs were $ 17,000 e. Utility costs in the factory were $ 43,000 f. Advertising costs were $ 180,000 g. Depreciation was recorded for the year, $ 350,000 (80% relates to factory operations, and 20% relates to selling and administrative activities). h. Insurance expired during the year, $ 10,000(70% relates to factory operations, and the remaining 30% relates to selling and administrative activities). i. Manufacturing overhead was applied to production. Due to greater than expected demand for its products, the company worked 80,000 machine-hours during the year. j. Good costing $900,000 to manufacture according to their job cost sheets were complete during the year. k. Goods were sold on account to customers during the year for a total of $ 1,500,000. The goods cost $ 870,000 to manufacture according to their job cost sheets. Required: 1. Prepare journal entries to record the preceding transactions. 2. Is Manufacturing Overhead underapplied or overapplied for the year? Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.
In: Accounting
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In: Finance
A-Rod Manufacturing Company is trying to calculate its cost of capital for use in making a capital budgeting decision. Mr. Jeter, the vice-president of finance, has given you the following information and has asked you to compute the weighted average cost of capital. The company currently has outstanding a bond with a 11.3 percent coupon rate and another bond with an 8.9 percent rate. The firm has been informed by its investment banker that bonds of equal risk and credit rating are now selling to yield 12.2 percent. The common stock has a price of $67 and an expected dividend (D1) of $1.87 per share. The historical growth pattern (g) for dividends is as follows: $ 1.42 1.56 1.71 1.87 The preferred stock is selling at $87 per share and pays a dividend of $8.30 per share. The corporate tax rate is 30 percent. The flotation cost is 3.0 percent of the selling price for preferred stock. The optimum capital structure for the firm is 30 percent debt, 10 percent preferred stock, and 60 percent common equity in the form of retained earnings. a. Compute the average historical growth rate. (Do not round intermediate calculations. Round your answer to the nearest whole percent and use this value as g. Input your answer as a whole percent.) b. Compute the cost of capital for the individual components in the capital structure. (Use the rounded whole percent computed in part a for g. Do not round any other intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) c. Calculate the weighted cost of each source of capital and the weighted average cost of capital. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)
In: Accounting
Which of the following statements about the corporate cost of capital is most correct?
| A | Because the use of debt financing increases a business’s financial risk, increasing the debt ratio will always increase the corporate cost of capital. |
| B | Because debt financing is less costly than equity financing, increasing the debt ratio will always reduce the corporate cost of capital. |
| C | Increasing the debt ratio typically will reduce the marginal cost of both debt and equity; however, it still may increase the corporate cost of capital. |
| D | Statements a. and c. are correct. |
| E | None of the above statements is correct. |
In: Finance
in a slow year, Deutsche Burgers will produce 3.800 million hamburgers at a cost of $5.400 million. in a good year, it can produce 5.800 million hamburgers at a total cost of $6.500 million
what is the fixed costs of hamburger production, variable cost per hamburger, an average cost per burger when 3 million burgers are made, an average cost per burger when 4 million are produced?
In: Finance
4. a fitness magazine advertises that the mean monthly cost of joining a health club is less than $50. you work for a consumer advocacy group and find that a random sample of 30 clubs has a mean monthly cost of 48.25$ and a standard deviation of $5.23
1. construct a 99% confidence interval for the mean monthly cost of joining a health club
2. at a 0.1 level fo significance, do you have enough evidence to reject the advertisement's claim? your answer should include both hypotheses, the rejection region, the test statistic and a conclusive statement in non-technical terms.
3. based on your conclusion, what type of error are you possibly making (type 1 or 2)? can the probability of this error be easily measured?
4. if the number of fitness clubs you surveyed had been 10 instead of 30. with the same sample mean and standard deviation, would the conclusion of your test in (2) have been different? if so, is it surprising? explain. (assume the distribution of the population to be close to normal
In: Statistics and Probability
7. Provide a clear outline of what factors are captured in the weighted average cost of capital (WACC) and what additional factors may be captured in a discount rate.
In: Economics
On January 1, ABC Inc. sold used equipment with a cost of $14,500 and a carrying amount of $1,300 to XYZ Inc. in exchange for a $6,600, three-year non–interest-bearing note receivable. Although no interest was specified, the market rate for a loan of that risk would be 7%. Assume that Teal Mountain follows IFRS.
(a) Prepare the entry to record the sale of ABC’s equipment and receipt of the note.
(b) Prepare the entries to record the recognition of interest each year.
(c) Prepare the entry to record the collection of the note at maturity.
In: Accounting