Answer and Explanation:
The journal entries are shown below:
1. Interest Receivable $300($36,000 × 10% x 30 ÷ 360)
To Interest Revenue $300
(Being accrued interest revenue is recorded)
2. Cash $36,450
To Interest Receivable A/c $300
To Interest Revenue A/c $150 ($36,000 × 10% x 15 ÷ 360)
To Notes Receivable A/c $36000
(Being note maturity date it is honoured is recorded)
Implying Bad News (L.O. 3) YOUR TASK Revise the following statements to imply the bad news. If possible, use passive-voice verbs and subordi-nate clauses to further de-emphasize the bad news. DIRECT REFUSAL: We cannot send you a price list, nor can we sell our lawn mowers directly to customers. We sell only through authorized dealers, and your dealer is HomeCo. IMPLIED REFUSAL: Our lawn mowers are sold only through authorized dealers, and your dealer is HomeCo.
a. We are sorry to tell you that we cannot ship our hand-dipped chocolate-covered fresh strawberries c.o.d. Your order was not accompanied by payment, so we are not shipping it. We have it ready, though, and will rush it to its destination as soon as you call us with your credit card number.
b. Unfortunately, we find it impossible to contribute to your excellent and worthwhile fund-raising campaign this year. At present all the funds of our organization are needed to lease equipment and offices for our new branch in Scottsdale. We hope to be able to support this commendable endeavor in the future.
c. Because of the holiday period, all our billboard space was used this month. Therefore, we are sorry to say that we could not give your charitable group free display space. However, next month, after the holidays, we hope to display your message as we promised.
Answer:
Implying Bad News
Direct Refusal Implied Refusal
a. Our hand-dipped chocolate-covered fresh strawberries
are prepaid before delivery.
b. Our contribution to your fundraising campaign will not be
forthcoming this year.
c. Our billboard space was used up this month. We shall
display your message from next month.
Explanation:
Implied refusal or bad news is a manner of indirectly presenting information such that the refusal or bad news is not explicitly stated. This implies that the message is coded by the sender to lessen the bad effect on the recipient. It is only left for a discerning recipient to untangle the truth behind the message.
Corona Industries purchased a stamping machine on January 2, 20X1, for $100,000. It made an initial payment of $20,000 and financed the balance over 5 years at State Bank. The loan terms were for annual payments of $16,000 plus 10% interest, payable on December 31 each year. The year 20X4 proves to be a difficult year and on December 1, 20X4 Corona negotiates a debt restructuring with State Bank. The settlement calls for cash payment of accrued interest plus $4,000 on December 1 and the transfer of 200 acres of land held by Corona that cost $15,000. The land has a current fair value of $22,000. Which one of the following entries will Corona make to adjust for the land just prior to transfer?
a. DR Loss on disposal of asset $7,000 CR Land $7,000
b. DR Land $7,000 CR Gain on disposal of asset $7,000
c. DR Note payable—State Bank $7,000 CR Gain on disposal of asset $7,000
d. DR Land $7,000 CR Note payable—State Bank $7,000
Answer:
(a) DR Loss on disposal of asset $7,000 CR Land $7,000
The correct option is A). DR Loss on disposal of asset $7,000 and CR Land $7,000
What is journal entry? What are the debit and credit?A journal entry is the process of recording a business transaction in the accounting records of a business.
Debits are always on the left side of the entry, which shows an increase in assets or decrease in liabilities.
Credits are always on the right side, which depicts that there is a decrease in assets or an increase in liabilities.
Learn more about the journal entry here:-
https://brainly.com/question/20421012
#SPJ2
Robert and Becca file jointly. They have taxable income of $60,000 in 2020 (before considering any capital gains or losses). They have a long-term capital gain of $28,000 and a long-term capital loss of $17,000 on sales of stock in the current year. What will their capital gains tax be in the current year
Answer: $0
Explanation:
We should note that based on the information given, Robert and Becca file jointly, therefore, their their capital gains tax be in the current year will be $0.
Assuming they filed separately, their capital gains tax be in the current year will be:
= 15% × ($28,000 - $17,000)
= 0.15 × $11000
= $1650.
But regarding the question, the answer is $0.
Assume that a three-year Treasury note (T-note) has no maturity premium, and that the real risk-free rate of interest is 3 percent. If the T-note carries a nominal risk-free rate of return of 13 percent and if the expected average inflation rate over the next two years is 9 percent, what is the implied expected inflation rate during Year 3
Answer: 12%
Explanation:
First find the Inflation premium:
= Nominal risk free rate - Real risk free rate
= 13% - 3%
= 10%
Plug it into the following equation:
Inflation premium = { (2 * expected average inflation rate over the next two years) + Inflation rate for third year) } / 3
10% = { (2 * 9%) + 1₃} / 3
3 * 10% = { (2 * 9%) + 1₃}
30% = 18% + I₃
I₃ = 30% - 18%
I₃ = 12%
Prepare the adjusting entry to record bad debts expense assuming uncollectibles are estimated to be (1) 3% of credit sales, (2) 1% of total sales and (3) 6% of year-end accounts receivable. Prepare the adjusting entry to record bad debts expense assuming uncollectibles are estimated to be (1) 3% of credit sales, (2) 1% of total sales and (3) 6% of year-end accounts receivable.
Answer:
1.
Date Account Title Debit Credit
Dec. 31 Bad debt expense $9,000
Allowance for doubtful accounts $9,000
Working
= 3% * 300,000
= $9,000
2.
Date Account Title Debit Credit
Dec. 31 Bad debt expense $12,000
Allowance for doubtful accounts $12,000
Working
= 1% * total debt
= 1% * (900,000 + 300,000)
= $12,000
3.
Date Account Title Debit Credit
Dec. 31 Bad debt expense $12,500
Allowance for doubtful accounts $12,500
Working
= 6% * Accounts receivable
= 6% * 125,000
= $7,500
As the Allowance account is in debit, it means that bad debt exceeded the allowance so this balance needs to be added to properly cater for bad debts.
= 7,500 + 5,000
= $12,500
Economics
What would likely happen to the supply of electricians if their wages suddenly doubled?
HURRY
Answer:
it would be harder to get electricinans because it costs more
Explanation:
If the wages of electricians should double then the supply of electrician is also going to double.
What is Supply?This is an increase in the quantity of a good or service that is available at a given price.
There would be more electricians that would be willing to provide more of their labor at an increase in wage. They would like to work more.
Read more on supply here:
https://brainly.com/question/4803223
Consider a firm with an EBIT of $559,000. The firm finances its assets with $1,090,000 debt (costing 6.4 percent) and 209,000 shares of stock selling at $15.00 per share. The firm is considering increasing its debt by $900,000, using the proceeds to buy back 84,000 shares of stock. The firm is in the 35 percent tax bracket. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $559,000. Calculate the EPS before AND after the change in capital structure and indicate changes in EPS. (Round your answers to 4 decimal places.) EPS before $ EPS after $ Difference $
Answer:
EPS before change in capital structure = $2.34
EPS after change in capital structure $3.45
Difference in EPS caused by the change ($1.11)
Explanation:
a) Data and Calculations:
EBIT = $559,000
6.4% Debts = $1,090,000
Common stock = 209,000 shares at $15 per share
EPS before increasing debt:
EBIT = $559,000
Interest (69,760) (6.4% of $1,090,000)
Net income = $489,240
EPS = $489,240/209,000 = $2.34 per share
EPS after increasing debt:
New debt = $1,990,000 ($1,090,000 + $900,000)
New equity shares = 125,000 shares (209,000 - 84,000)
EBIT = $559,000
Interest (127,360) (6.4% of $1,990,000)
Net income = $431,640
EPS = $431,640/125,000 = $3.45 per share
EPS before change in capital structure = $2.34
EPS after change in capital structure $3.45
Difference in EPS caused by the change ($1.11)
The existence of lags: A. makes discretionary fiscal policy more effective than automatic stabilizers. B. makes monetary policy more effective than fiscal policy. C. makes both fiscal and monetary policy more challenging to implement. D. makes fiscal policy more effective than monetary policy. E. makes both fiscal and monetary policy more effective.
Answer:
C. makes both fiscal and monetary policy more challenging to implement.
Explanation:
The existence of lags makes both fiscal and monetary policy more challenging to implement.
Cost of goods sold for a manufacturer equals cost of goods manufactured plus a. beginning finished goods inventory less ending finished goods inventory b. beginning work in process inventory less ending work in process inventory c. ending work in process inventory less beginning work in process inventory d. ending finished goods inventory less beginning finished goods inventory
Answer:
a. beginning finished goods inventory less ending finished goods inventory
Explanation:
Cost of goods sold for a manufacturer equals cost of goods manufactured plus beginning finished goods inventory less ending finished goods inventory.
Explain the use of NBT
Which of these provides a bank with collateral on a car loan?
A. A savings account
B. The car itself
o
C. The buyer's home
D. The driver's credit history
SUM
Answer:
B. The car itself.
Answer:
the car itself
Explanation:
Kenny is trying to sell his XBOX one; however, none of the potential buyers is willing to pay the price Kenny desires. Kenny's wife Zeynep, an economist, thinks this might be due to a lack of information on the part of buyers. Zeynep uses the concept of __________ to explain to Kenny why he cannot sell his XBOX one at the price he is asking
Answer: 2) Adverse selection
Explanation:
Adverse selection occurs when one party to the transaction has more information than the other and so can exploit this information to increase their benefit in the transaction.
Kenny has more information than the buyers in this situation as he knows what the Xbox One has and so is charging a certain price of it. The buyers do not know this information and so do not understand why that particular price is being charged and so refuse to pay it.
Consider two bonds, F and G. Both bonds presently are selling at their par value of $1,000. Each pays interest of $90 annually. Bond F will mature in 15 years while bond G will mature in 26 years. If the yields to maturity on the two bonds change from 9% to 10%, Group of answer choices both bonds will increase in value, but bond F will increase more than bond G. both bonds will increase in value, but bond G will increase more than bond F. both bonds will decrease in value, but bond F will decrease more than bond G. both bonds will decrease in value, but bond G will decrease more than bond F.
Answer:
Option D or the Last statement is the correct one.
Explanation:
As we can see, this is a multiple choice question with four options A, B , C , D.
And we are given two Bonds F and G.
Par Value of Both Bonds = $1000
Bond F Maturity = 15 Years
Bond G Maturity = 26 Years
Both Pays Interest = $90 Annually
Yield to Maturity Change from = 9% to 10%
So,
The correction option to this question is option D. The Last Statement.
Option D = Both bonds will decrease in value, but bond G will decrease more than bond F.
Reasoning:
The reason behind this answer is related to number of years of maturity of the bond. There is a simple rule that, Longer the maturity, the greater the price change when interest rates changes. Similarly, Shorter the maturity, the shorter the price change when interest rates change. So, here in this case, Bond G has greater number of years of maturity which is 26 Years as compared to Bond F.
Assume that the risk-free rate is 5.5% and the required return on the market is 12%. What is the required rate of return on a stock with a beta of 1.8
Answer: 17.2%
Explanation:
You can use the Capital Asset Pricing Model to calculate the required return here given the variables in the question:
Required return = Risk free rate + beta * (Market return - risk free rate)
= 5.5% + 1.8 * ( 12% - 5.5%)
= 5.5% + 11.7%
= 17.2%
Which of the following would cause consumers to demand fewer slices of pizza?
A. an increase in the supply of pizza slices
B. a decrease in the supply of tacos
C. an increase in the price of pizza slices
Answer:
C.
Explanation:
All the others make the supply of pizza larger, or high demand
Differential cost $(1.00) Cool Systems manufactures an optical switch that it uses in its final product. The switch has the following manufacturing costs per unit: Direct materials $ 5.00 Direct labor 3.00 Variable overhead 6.00 Fixed overhead 7.00 Manufacturing product cost $ 21.00 Another company has offered to sell Cool Systems the switch for $15.00 per unit. If Cool Systems buys the switch from the outside supplier, the idle manufacturing facilities cannot be used for any other purpose, yet none of the fixed costs are avoidable. Prepare an outsourcing analysis to determine whether Cool Systems should make or buy the switch.
Answer:
Cool System should choose to Make the switch.
Explanation:
Outsourcing analysis which considers only the relevant variable cost per unit can be prepared as follows:
Details Make ($) Outsource ($) Difference ($)
A B C = A - B
Direct materials 5.00 5.00
Direct labor 3.00 3.00
Variable overhead 6.00 6.00
Outsourcing price 15.00 –15.00
Total differential 14.00 15.00 –1.00
The analysis above shows that the total differential per unit is minus $1 which indicates that outsourcing is $1 per unit more expensive than make. Therefore, Cool System should choose to Make the switch.
On December 31, 2020, Heffner Company had 100,000 shares of common stock outstanding and 30,000 shares of 7%, $100 par, cumulative preferred stock outstanding. On February 28, 2021, Heffner purchased 24,000 shares of common stock on the open market as treasury stock paying $45 per share. Heffner sold 6,000 of the treasury shares on September 30, 2021, for $47 per share. Net income for 2021 was $540,000. The income tax rate is 25%. Also outstanding at December 31, 2020, were fully vested incentive stock options giving key employees the option to buy 50,000 common shares at $40. The market price of the common shares averaged $50 during 2021. Five thousand 6% bonds were issued at par on January 1, 2021. Each $1,000 bond is convertible into 125 shares of common stock. None of the bonds had been converted by December 31, 2021, and no stock options were exercised during the year. Required: Compute basic and diluted earnings per share for Heffner Company for 2021.
Answer: Basic earnings per share = $4.05
Diluted earnings per share = $0.71
Explanation:
Based on the information given in the question, the basic earnings per share will be:
= [$540,000 - (7% x $100 x 30,000)] / [$100,000 - (24,000 x 10/12) + (6,000 x 3/12)]
= ($540,000 - $210,000) / ($100,000 - $20,000 + $1500)
= $330,000 / $81,500
= $4.05
The Diluted Earnings per share will be:
= [$540,000 - (7% x $100 x 30,000) + (5,000 x $1,000 x 6% x 60%)] / [$100,000 -(24,000 x 10/12) + (6,000 x 3/12) + (50,000 - ((50,000 x $40) / $50)) + (5,000 × 125)]
= [$540,000 - ($210,000) + ($180,000)] / [$100,000 -($20,000) + ($1500) + (50,000 - (($2,000,000) / $50)) + (5,000 × 125)]
= 510,000 / 716,500
=$0.71
Monty loaned his friend Ned $24,000 three years ago. Ned signed a note and made payments on the loan. Last year, when the remaining balance was $18,000, Ned filed for bankruptcy and notified Monty that he would be unable to pay the balance on the loan. Monty treated the $18,000 as a nonbusiness bad debt. Last year, before considering the tax implications of the nonbusiness bad debt, Monty had capital gains of $7,200 and taxable income of $42,000. During the current year, Ned paid Monty $16,200 in satisfaction of the debt.
Determine Monty's tax treatment for the $16,200 received in the current year.
The nonbusiness bad debt of $18,000 would have been reported as a ________ , and $________ would be included in Monty's gross income.
Answer:
Short term capital loss and $10,800
Explanation:
Remaining balance - Capital gains
$18,000 - $7,200 = $10,800
Monty can report the bad debt of $18,000 as short term capital loss since it is expense for the business and receivables are not recoverable. This amount can be reported as loss of the business.
According to the video, what tasks do Helpers-Production Workers commonly perform? Check all that apply. fetching and holding materials o supervising other workers o moving materials between work areas o managing budgets training assembly workers keeping records o cleaning machinery
Answer:
a,c,f,g
Explanation: its right!!!!
The tasks that Helpers-Production Workers commonly perform include:
Fetching and holding materialsMoving materials between work areasCleaning MachineryThe correct options are A, C, and E.
What is a production worker?Work that requires manual labor is done by production workers in settings that involve manufacturing or production. Their everyday tasks in an assembly line could include packaging, inspecting, and assembling products. In addition, they might control tools or machinery used in manufacturing.
They may also assist in training assembly workers and keeping records, but supervising other workers and managing budgets are typically not part of their job duties. Production worker assistants perform duties on the factory floor by providing supplies, holding tools, and cleaning workspaces and machinery. Production worker assistants may run and load machinery as well as do small adjustments and repairs.
Thus, the ideal selections are options A, C, and E.
Learn more about production workers here:
https://brainly.com/question/15129221
#SPJ2
McNulty, Inc., produces desks and chairs. A new CFO has just been hired and announces a new policy that if a product cannot earn a margin on sales of at least 20 percent, it will be dropped. The margin is computed as product gross profit divided by reported product cost.Manufacturing overhead for year 1 totaled $800,000. Overhead is allocated to products based on direct labor cost. Data for year 1 show the following: Chairs DesksSales revenue $ 1,150,000 $ 2,105,000 Direct materials 584,000 800,000 Direct labor 160,000 340,000 Required:a-1. Based on the CFO's new policy, calculate the profit margin for both chairs and desks.Profit Margin (%)Chairs Desks a-2. Which of the two products should be dropped?b. Regardless of your answer in requirement a, the CFO decides at the beginning of year 2 to drop the chair product. The company cost analyst estimates that overhead without the chair line will be $650,000. The revenue and costs for desks are expected to be the same as last year. What is the estimated margin for desks in year 2?
Answer:
McNulty, Inc.
Chairs Desks
a) Profit margin (%) 6.33% 31.36%
b) The estimated margin for desks in year 2 is:
= 17.6%
Explanation:
a) Data and Calculations:
Expected gross profit margin on cost = 20%
Manufacturing overhead for year 1 = $800,000
Chairs Desks Total
Sales revenue $ 1,150,000 $ 2,105,000 $ 3,255,000
Direct materials 584,000 800,000 1,384,000
Direct labor 160,000 340,000 500,000
Overhead 337,572 462,428 800,000
Total costs $1,081,572 $1,602,428 $2,684,000
Gross Profit $68,428 $502,572 $571,000
Profit margin 6.33% 31.36% 21.27%
Margin (%) = Gross profit/Total costs * 100
Allocation of Manufacturing Overhead based on direct labor cost:
Chairs = $337,572 ($584,000/$1,384,000 * $800,000)
Desks = $462,428 ($800,000/$1,384,000 * $800,000)
Year 2:
Desks
Sales revenue $ 2,105,000
Direct materials 800,000
Direct labor 340,000
Overhead 650,000
Total costs $ 1,790,000
Gross Profit $315,000
Profit margin 17.6%
Javonte Co. set standards of 2 hours of direct labor per unit of product and $16.10 per hour for the labor rate. During October, the company uses 13,000 hours of direct labor at a $211,900 total cost to produce 6,700 units of product. In November, the company uses 17,000 hours of direct labor at a $277,950 total cost to produce 7,100 units of product.
AH= Actual Hours
SH =Standard Hours
AR =Actual Rate
SR =Standard Rate
Required:
a. Compute the direct labor rate variance, the direct labor efficiency variance, and the total direct labor cost variance for each of these two months. Classify each variance as favorable or unfavorable.
b. Javonte investigates variances of more than 5% of actual direct labor cost. Which direct labor variances will the company investigate further?
Answer:
Part a.
October Labor Rate Variance (2600) unfavorable
October Labor Efficiency Variance 6440 favorable
Labor Cost Variance For October 3840 favorable
November Labor Rate Variance (4250) unfavorable
November Labor Efficiency Variance (45080) unfavorable
Labor Cost Variance For November 49330 unfavorable
Part b.
Direct labor Efficiency variance for November will be investigated further as it varies more than 5 % 0f actual direct labor cost.
Explanation:
Direct Labor Rate Variance For October
Time * Rate = Amount
Actual Hours Worked 13000 * 16.3 actual = 211900
Actual Hours Worked 13000 * 16.10 standard = 209300
Labor Rate Variance 0.2 (2600) unfavorable
When actual rate is greater than the standard rate the variance is unfavorable.
Direct Labor Rate Variance For November
Time * Rate = Amount
Actual Hours Worked 17000 * 16.35 actual = 277950
Actual Hours Worked 17000 * 16.10 standard = 273700
Labor Rate Variance 0.25 (4250) unfavorable
When actual rate is greater than the standard rate the variance is unfavorable.
Direct Labor Efficiency Variance for October
Time * Rate = Amount
Actual Hours Worked 13000 * 16.1 standard = 209300
Standard Hours Allowed 13400 * 16.10 standard = 215740
( 2* 6700)
Labor Efficiency Variance 400 6440 favorable
When actual hours are less than the standard hours allowed the variance is favorable.
Direct Labor Efficiency Variance for November
Time * Rate = Amount
Actual Hours Worked 17000 * 16.1 standard = 273700
Standard Hours Allowed 14200 * 16.10 standard = 228620
( 2* 7100)
Labor Efficiency Variance 2800 (45080) unfavorable
When actual hours are more than the standard hours allowed the variance is unfavorable.
Labor Cost Variance For October
Standard hours * standard rate- Actual hours * actual rate
13400 * 16.10- 13000 * 16.3
= 215740 -211900
=3840 favorable
Labor Cost Variance For November
Standard hours * standard rate- Actual hours * actual rate
14200 * 16.1 - 17000 * 16.35
= 228620 - 277950
=49330 unfavorable
Direct labor Efficiency variance for November will be investigated further as it varies more than 5 % 0f actual direct labor cost.
45080> 5% of 277950
5% of 277950 = 13897.5
13897.5 > 45080
Diving Fiasco. Mike, who owns a dive shop in the United States, decides to take a group of his customers diving in U.S. waters. Mike is aware that sharks occasionally visit the area where the divers will be visiting. He is also aware that while stingrays are usually tame, they can become aggressive when fed. Mike does not reveal that information to the group of divers going with him. The divers go down into the water, and some have squid with which to feed the stingrays. During the dive, one of the stingrays becomes agitated and latches onto diver Susie's arm. Susie is so disconcerted that she drops her regulator (her breathing device) from her mouth and is in considerable difficulty. Another diver, Billy, encounters a shark, which snaps at him. While the shark does not actually bite Billy, the attack results in damage to his diving equipment. Mike, who is in charge of the dive, does nothing to help and leaves the other divers to return to the boat because the dive turned out to be more trouble than expected. Wendy, another diver on the trip, also returns to the boat without doing anything to help the divers in distress. Sam, on the other hand, goes to rescue the divers who are in distress. He manages to do so but in the process he pulls his back and requires medical care. All divers are very unhappy with Mike. Billy and Susie are annoyed that Mike did not come to their assistance. Which is true regarding Mike's duty to provide assistance to them during the dive?
A) Mike had no duty to provide any assistance to them.
B) Mike had a duty to come to their aid because he arranged the dive and was charging them.
C) Mike had a duty to come to their assistance only if he had specifically agreed to do so prior to the dive.
D) Mike had a duty to come to their assistance only if they were minors.
E) Mike had a duty to come to their assistance only if no one else did so.
Answer:
B) Mike had a duty to come to their aid because he arranged the dive and was charging them.
Explanation:
Mike organized the diving trip as part of his business activities. he is making money out of it, he is not doing it for free. He should haver warned the other divers about the risks involved and should also help them in case they are in trouble. When you provide a service, you are responsible for your customers' safety.
GUYS PLEASE HELP AND DONT STEAL MY POINT!! I WILL GIVE U BRAINLIEST!!!
You just bought your first new (used) car for $15,000. The car is out of factory warranty but the salesman can offer you an extended warranty that is 5 years, 50,000 miles, and covers the same items as a factory warranty for $2,000. Will you purchase it? Why or why not?
Answer:
I would buy it, one, because it's a warranty that is covered for 5 years, and two, because it covers everything that the factory warranty covers as well as up to 50,000 miles
Explanation:
Air Tampa has just been incorporated, and its board of directors is grappling with the question of optimal capital structure. The company plans to offer commuter air services between Tampa and smaller surrounding cities. Air Tampa believes it would have the same business risk as Jaxair, which is an airline that has been around for a few years and that has had zero growth. Jaxair's market-determined beta is 1.8, and it has a current market value debt ratio (total debt to total assets) of 45% and a federal-plus-state tax rate of 25%. Air Tampa expects to have investment tax credits when it begins business, which reduces its federal-plus-state tax rate to 15%. Air Tampa's owners expect that the total book and market value of the firm's stock, if it uses zero debt, would be $14 million. Air Tampa's CFO believes that the MM and Hamada formulas for the value of a levered firm and the levered firm's cost of capital should be used because zero growth is expected.
Required:
a. Estimate the beta of an unlevered firm in the commuter airline business based on Jaxair's market-determined beta.
b. Now assume that rd= rRF= 10% and that the market risk premium RPM for an unlevered commuter airline. 5%. Find the required rate of return on equity
c. Air Tampa is considering three capital structures: (1) $2 million debt, (2) $4 million debt, and (3) $6 million debt. Estimate Air Tampa's rs for these debt levels.
Answer:
a. Unlevered beta = 1.12
b. Required rate of return on equity = 15.60%
c-1. rs = 16.37%
c-2. rs = 17.40%
c-2. rs = 18.81%
Explanation:
a. Estimate the beta of an unlevered firm in the commuter airline business based on Jaxair's market-determined beta.
Levered beta = Unlevered beta * (1 + (D/S)(1 - T))
Therefore, we have:
Unlevered beta = Levered beta / (1 + (D/S)(1 - T)) .............. (1)
Where:
Levered beta = Jaxair's market-determined beta = 1.8
D = Debt ratio = 45%, or 0.45
S = Equity ratio = 1 - D = 1 - 0.45 = 0.55
T = Federal-plus-state tax rate = 25%, or 0.25
Substituting the values into equation (1), we have:
Unlevered beta = 1.8 / (1 + (0.45/0.55)(1 - 0.25)) = 1.12
b. Now assume that rd= rRF= 10% and that the market risk premium RPM for an unlevered commuter airline. 5%. Find the required rate of return on equity
Required rate of return on equity = ro = Rf + beta(Rm - Rf) .............. (2)
Where;
rd = Rf = 10%, or 0.10
beta = Unlevered beta = 1.12
(Rm - Rf) = market risk premium = RPM for an unlevered commuter airline = 5%, or 0.05
Substituting the values into equation (2), we have:
Required rate of return on equity = ro = 10% + 1.12(5%) = 10% + (1.12 * 5%) = 15.60%
c. Air Tampa is considering three capital structures: (1) $2 million debt, (2) $4 million debt, and (3) $6 million debt. Estimate Air Tampa's rs for these debt levels.
c-1. $2 million debt
D = Debt = $2 million
Value of unlevered firm = $14 million
T = Tax rate at start-up = 15%, or 0.15
Value of lerevered firm = Value of unlevered firm + (Debt * T) = $14 + ($2 * 15%) = $14.30 million
S = Value of equity = Value of lerevered firm - Debt = $14.30 - $2 = $12.30 million
rs = ro + ((ro - rd) * (D / S) * (1 - T)) ................... (3)
Where;
ro = 15.60%
rd = Rf = 10%, or 0.10
D = Debt = $2 million
S = Value of equity = $12.30 million
T = Tax rate at start-up = 15%, or 0.15
Substituting the values into equation (3), we have:
rs = 15.60% + ((15.60% - 10%) * (2 / 12.30) * (1 - 0.15)) = 16.37%
c-2. $4 million debt
D = Debt = $4 million
Value of unlevered firm = $14 million
T = Tax rate at start-up = 15%, or 0.15
Value of lerevered firm = Value of unlevered firm + (Debt * T) = $14 + ($4 * 15%) = $14.60 million
S = Value of equity = Value of lerevered firm - Debt = $14.60 - $4 = $10.60 million
Substituting all the relevant values into equation (3), we have:
rs = 15.60% + ((15.60% - 10%) * (4 / 10.60) * (1 - 0.15)) = 17.40%
c-3. $6 million debt
D = Debt = $6 million
Value of unlevered firm = $14 million
T = Tax rate at start-up = 15%, or 0.15
Value of lerevered firm = Value of unlevered firm + (Debt * T) = $14 + ($6 * 15%) = $14.90 million
S = Value of equity = Value of lerevered firm - Debt = $14.90 - $6 = $8.90 million
Substituting all the relevant values into equation (3), we have:
rs = 15.60% + ((15.60% - 10%) * (6 / 8.90) * (1 - 0.15)) = 18.81%
how can a business deal with employees who have lack of focus and future goals ?
Answer:
motivation
Explanation:
Encourage them,make them see vision .
The income statement of Kimbrough Community Clinic for the year ended December 31, 2017, is provided below.
Kimbrough Community Clinic Income Statement For the year ended 12/31/2017
Revenues:
Net patient service revenue $774,000
Operating Expenses:
Medical services $361,000
Support services 253,000
General services 95,000
Depreciation 33,000 (742,000)
Operating Income 32,000
Other Income and Expenses:
Interest income 34,000
Interest expense 12,000 22,000
Net Income $54,000
Assuming a maximum annual debt service of $68,000, calculate the organization's debt service coverage ratio.
a. 1.46
b. 1.78
c. 0.79
d. 0.13
Answer:
0.47
Explanation:
Debt service coverage ratio = Net Operating Income ÷ Total Debt Service
where,
Net Operating Income = Revenue - Certain Operating Expenses
Total Debt Service = Current Debt Obligations
therefore,
debt service coverage ratio = $32,000 ÷ $68,000 = 0.47
why employment laws might increase easyjet plc costs
Answer: rapid amount of turn around flights
Explanation: because it’s a low cost air line, it emphasises the rapid turn around flights and a lot of the customers now use mobile boarding passes. This gives them more customers
On January 1, 2022, the Hermann Company ledger shows Equipment $36,000 and Accumulated Depreciation $13,600. The depreciation resulted from using the straight-line method with a useful life of 10 years and a salvage value of $2,000. On this date, the company concludes that the equipment has a remaining useful life of only 2 years with the same salvage value. Compute the revised annual depreciation. The revised annual depreciation $enter the revised annual depreciation in dollars
Answer:
Annual depreciation= $10,200
Explanation:
Giving the following information:
Purchase price= $36,000
Accumulated depreciation= $13,600
Salvage value= $2,000
Useful life: 2 years
To calculate the revised annual depreciation, we need to use the following formula:
Annual depreciation= [(book value - salvage value)/estimated life (years)]
Book value= purchase price - accumulated depreciation
Book value= 36,000 - 13,600= $22,400
Annual depreciation= (22,400 - 2,000) / 2
Annual depreciation= $10,200
The following information is available for the first year of operations of Creston Inc., a manufacturer of fabricating equipment:
Sales $1,378,600
Gross profit 372,200
Indirect labor 124,100
Indirect materials 51,000
Other factory overhead 23,400
Materials purchased 703,100
Total manufacturing costs for the period 1,522,000
Materials inventory, end of period 51,000
Using the above information, determine the following amounts:
a. Cost of goods sold________$
b. Direct materials cost ______$
c. Direct labor cost ________$
qfhvFBEvfaehuvtaebhiavrehibavfeibhavgebhi
Emil borrowed money so he would be able to afford to add a screened-in porch to the back of his house. When he applied for the loan, the rate on the loan was very low based given the current market trends. Over the following months, however, the market fluctuated a great deal, and suddenly he was faced with higher rates for the same loan. Which type of financial risk did Emil face?
a. income risk
b. interest rate risk
c. personal risk
d. inflation risk
Answer:
since i chose inflation risk and that was incorrect the only other logical option for me would be option B. Interest rate risk
Explanation:
The financial risk that Emil faced when he borrowed money at a low rate but due to market fluctuations, he faced higher rates later was b. interest rate risk.
What is interest rate risk?Interest rate risk is a financial risk that results from changes in the interest rate of an investment or loan.
Increasing credit risk gives rise to increased debt exposure. This can force a lending institution to increase the interest rate if the contract recognized a fluctuating rate (not fixed) at the initiation stage.
Thus, the type of financial risk that Emil faced when he borrowed money at a low rate but due to market fluctuations, he faced higher rates later was b. interest rate risk.
Learn more about interest rate risks at https://brainly.com/question/13163076