Suppose that there is asymmetric information in the market for used cars. Sellers know the quality of the car that they are​ selling, but buyers do not. Buyers know that there is a 50​% chance of getting a​ "lemon", a low quality used car. A high quality used car is worth​ $30,000, and a low quality used car is worth​ $15,000. Based on this​ probability, the most that a buyer would be willing to pay for a used car is ​$________. ​(Enter your response rounded to the nearest​ dollar.)

Answer:

$22,500

Explanation:

Chance of getting low quality car = 50%

Chance of getting high quality car = 50%

Cost of low quality car = $15,000

Cost of high quality car = $30,000

So, Price of the car = 50% of lower quality + 50% of higher quality

= (50% × $15,000) + (50% ×30,000)

=  $7,500 + $15,000

= $22,500

Hence, price of the used car will be $22,500.

You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 10 percent, -10 percent, 17 percent, 22 percent, and 10 percent. Suppose the average inflation rate over this period was 1.5 percent and the average T-bill rate over the period was 3 percent.
a. What was the average real return on Crash-n-Burn's stock?
b. What was the average nominal risk premium on Crash-n-Burn's stock?

Hurte-Paroxysm Products, Inc. (HP) of the United States exports computer printers to Brazil, whose currency, the reals (symbol R$) havebeen trading at R$3.40/US$. Exports to Brazil are currently 50,000 printers per year at the reals equivalent of $200 each. A strong rumor exists that the reals will be devalued to R$4.00/$ within two weeks by the Brazilian government. Should the devaluation take place, the exchange rate isexpected to remain unchanged for the foreseeable future. Based on this forecast, HP Products may either (1) maintain the same realprice and sell for fewer dollars, in which case Brazilian volume will not change, or (2) maintain the same dollar price, raise the realprice in Brazil to compensate for the devaluation, and experience a 20% drop in volume. Direct costs in the U.S. are 60% of the U.S. sales price.

Required:
a. What would be the short-run (one-year) impact of each pricing strategy?
b. Which do you recommend?

If HP maintains the same real price and same unit volume, what will be the firm's gross profits?

State the effect (cash receipt or payment and amount) of each of the following transactions, considered individually, on cash flows: Retired $400,000 of bonds, on which there was $3,000 of unamortized discount, for $411,000. Sold 20,000 shares of $5 par common stock for $22 per share. Sold equipment with a book value of $55,800 for $60,000. Purchased land for $650,000 cash. Purchased a building by paying $50,000 cash and issuing a $450,000 mortgage note payable. Sold a new issue of $500,000 of bonds at 98. Purchased 10,000 shares of $40 par common stock as treasury stock at $50 per share. Paid dividends of $1.50 per share. There were 1,000,000 shares issued and 120,000 shares of treasury stock.]
Amount
a. $
b. $
c. $
d. $
e. $
f. $
g. $
h. $

Garrett Company provided the following information:

Product 1 Product 2
Units Sold 10,000 20,000
Price $20 $15
Variable cost per unit $10 $10
Direct fixed cost $35,000 $75,000

Common fixed cost totaled $46,000. Garrett allocates common fixed cost to Product 1 and Product 2 on the basis of sales. If Product 2 is dropped, which of the following is true?

a. Sales will increase by $300,000.
b. Overall operating income will increase by $2,600.
c. Overall operating income will decrease by $25,000.
d. Overall operating income will not change.
e. Common fixed cost will decrease by $27,600.

Jennings Hardware Store marks up its merchandise by 30%. If a part costs $25.00, which of the following is true?

a. The price is $7.50.
b. The markup is $32.50.
c. The price is $32.50.
d. The markup is pure profit.
e. All of these choices are correct.

Pearson Electric Company uses the high-low method to analyze mixed costs. The following information relates to the production data for the first six months of the year. Month Cost(Y) Hours(H) January $ 7,300 260 February $ 9,125 730 March $ 7,540 410 April $ 7,485 330 May $ 9,460 980 June $ 9,030 705 How should the cost function be properly stated using the high-low method?

Allure Company manufactures and distributes two products, M and XY. Overhead costs are currently allocated using the number of units produced as the allocation base. The controller has recommended changing to an activity-based costing (ABC) system. She has collected the following information: Activity Cost Driver Amount M XY Production setups Number of setups $82,000 8 12 Material handling Number of parts 48,000 56 24 Packaging costs Number of units 130,000 80,000 50,000 $260,000 What is the total overhead per unit allocated to Product M using activity-based costing (ABC)

Sanders Co. is planning to finance an expansion of its operations by borrowing $49,200. City Bank has agreed to loan Sanders the funds. Sanders has two repayment options: (1) to issue a note with the principal due in 10 years and with interest payable annually or (2) to issue a note to repay $4,920 of the principal each year along with the annual interest based on the unpaid principal balance. Assume the interest rate is 9.5 percent for each option.
Required
a. What amount of interest will Sanders pay in year 1 under option 1 and under option 2?
Amount of Interest
Under option 1
Under option 2
b. Wihat anount of insyinyder option 1 and under option 27 (Round your final answers to the nearest dollar amount)
Amount of Interest
Under option 1
Under option 2
c. Which option is more advantageous to Sanders?
Option 1
Option 2

when originally issued, an investment in bonds of Flushing Dough, Inc., promised to provide an annual coupon of 7.50%. The bonds have 4 years until maturity, a market price of $735, and are expected to pay all coupon on time. At maturity, however, the bonds are only forecasted to pay 84% of their par value. What is the likely yield to maturity on the bonds

Question 2
Mt Jack is a director of a company from which he receives a salary of RM15.000 per month He
also received director's fees of RM5.000 during the year ended 31 December 2020 The
benefits provided to him included:
a Accommodation for which the company pays monthly rental of RM5 000 include
RM1,500 for the furniture
b. Employer's contribution to the Employee's Provident Fund of 13% of salary
c. A company new car costing RM150.000
d. A part-time gardener who is paid RM400 per month
A domestic servant who is paid RM500 per month
f Leave passage to Japan for Mr Jack and his family and the company paid RM5.000 for
their air fait
Mc Jack also received the following Malaysian income during the year ended 31 December
2020
a
Interest income of RM3.800 from a 15-month fixed deposit in a Maaysian bank
b Royalties of RM22 500 from the publisher of his book on taxation
c. Rental income of R12 500 per month. He also paid assessment and out rent of
RM1,350 per annum as well as cost of repairs amounting to RM4500 made up of
repainting (RM1,000) and extension of the kitchen RM3.500)
Mr Jack's wife earns a salary of RM6 200 per month. She is allowed to make use of a company
car (cost RM82 000) during office hours but is not allowed to drive it home She also has
interest income of RM850 from her savings account with Bank Simpanan Nasional She made a
cash donation of RM2 500 to an approved institution as well as donated books worth RM200
to the same institution
Required: Compute the aggregate income for by Mr Jack and his wife for the year of
assessment 2020 separate assessment)​

Lunar coast Incorporated issued BBB bonds two years ago that provided a yield to maturity of 12.5
percent. Long-term risk-free government bonds were yielding 8.5 percent at that time. The current
risk premium on BBB bonds versus government bonds is half of what it was two years ago. If the riskfree long-term government bonds are currently yielding 7.8 percent, then at what rate should Lunar
coast expect to issue new bonds

Transformational leadership is a positive predictor of job performance and organizational commitment.

a. True
b. False

Shamrock, Inc. issues a $660,000, 10%, 10-year mortgage note on December 31, 2022, to obtain financing for a new building. The terms provide for annual installment payments of $107,412. Prepare the entry to record the mortgage loan on December 31, 2022, and the first installment payment on December 31, 2023. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Winslow Inc. manufactures and sells three types of shoes. The income statements prepared under the absorption costing method for the three shoes are as follows:

Winslow Inc. Product Income Statements—Absorption Costing For the Year Ended December 31, 20Y1

1 Cross Training Shoes Golf Shoes Running Shoes
2. Revenues $850,000.00 $700,000.00 $635,000.00
3. Cost of goods sold 413,000.00 338,700.00 419,000.00
4. Gross profit $437,000.00 $361,300.00 $216,000.00
5. Selling and administrative expenses 389,000.00 257,900.00 359,500.00
6. Income (Loss) from operations $48,000.00 $103,400.00 ($143,500.00)

In addition, you have determined the following information with respect to allocated fixed costs:

1 Cross Training Shoes Golf Shoes Running Shoes
2 Fixed costs:
3 Cost of goods sold $128,500.00 $90,300.00 $120,500.00
4 Selling and administrative expenses 95,900.00 82,400.00 143,500.00

These fixed costs are used to support all three product lines and will not change with the elimination of any one product. In addition, you have determined that the effects of inventory may be ignored. The management of the company has deemed the profit performance of the running shoe line as unacceptable. As a result, it has decided to eliminate the running shoe line. Management does not expect to be able to increase sales in the other two lines. However, as a result of eliminating the running shoe line, management expects the profits of the company to increase by $54,200.


Required:
a. Do you agree with management’s decision and conclusions? Explain your answer. (Note: You may wish to complete part (b), the variable costing income statement, first.)
b. Prepare a variable costing income statement for the three products. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. If a net loss is incurred, enter that amount as a negative number using a minus sign. Enter all other amounts as positive numbers.
c. Use the report in (b) to determine the profit impact of eliminating the running shoe line, assuming no other changes. Use the minus sign to indicate a decline in profit.

On January 1, 2021, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year period ending December 31, 2024, at which time possession of the leased asset will revert back to Aqua. The equipment cost Aqua $414,430 and has an expected economic life of five years. Aqua expects the residual value at December 31, 2024, to be $52,000. Negotiations led to Maywood guaranteeing a $73,000 residual value. Equal payments under the lease are $104,000 and are due on December 31 of each year with the first payment being made on December 31, 2021. Maywood is aware that Aqua used a 7 % interest rate when calculating lease payments. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 6 Required: 1. & 2. Prepare the appropriate entries for Maywood on January 1, 2021 and December 31, 2021, related to the lease. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to the nearest whole dollar.)

oneycutt Co. is comparing two different capital structures. Plan I would result in 39,000 shares of stock and $108,000 in debt. Plan II would result in 33,000 shares of stock and $324,000 in debt. The interest rate on the debt is 7 percent. a. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $160,000. The all-equity plan would result in 42,000 shares of stock outstanding. What is the EPS for each of these plans

Lancelot Corporation manufactures tennis gear and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information relates to the company's manufacturing overhead data: Budgeted output units 8,000 units Budgeted machine-hours 24,000 hours Budgeted variable manufacturing overhead costs for 8,000 units $288,000 Actual output units produced 8,500 units Actual machine-hours used 23,750 hours Actual variable manufacturing overhead costs $250,000 What is the flexible-budget amount for variable manufacturing overhead

CHRO Conversations: SVP of HR Tim Richmond, AbbVie
People will work harder if they know their results are noticed and rewarded appropriately. At AbbVie, the Human Resources area places special emphasis on rewarding employees based on levels of contributions. This activity is important because it will examine how one company utilizes talent philosophies that differentiate rewards based on employee results.
The goal of this activity is to help you recognize how strategic goals of a company can be supported by HR activities that reward and recognize employees who produce at high levels. These rewards go well beyond salary and include opportunities for career growth and development.
At AbbVie, people want to know their ________ and results will be rewarded appropriately.
a) hard work
b) time off
c) verbal communication
d) philosophical ideals
At AbbVie, HR tends to think of "more and better and now" as it relates to career opportunities, human capital capabilities, and raising the bar on a continual basis for:__________
a) career growth.
b) higher salaries.
c) better benefits.
d) higher quantity outputs.
e) higher quality outputs.
The "talent philosophy" at AbbVie includes differentiating levels of:________
a) development and hiring.
b) performance and rewards.
c) rewards and terminations.
d) performance and hiring.
e) development and global travel.
AbbVie has a standard in hiring of "replacing every person who leaves with someone":________
a) younger.
b) with a college degree.
c) who has more experience.
d) better.
e) from another country.
AbbVie does not want to pay its ________ performers the same as it pays its higher performers.
a) older
b) more experienced
c) lower
d) international
e) specialized

Plantwide Overhead Rate, Activity-Based Costing, Job Costs
Foto-Fast Copy Shop provides a variety of photocopying and printing services. On June 5, the owner invested in some computer-aided photography equipment that enables customers to reproduce a picture or illustration, input it digitally into the computer, enter text into the computer, and then print out a four-color professional quality brochure. Prior to the purchase of this equipment, Foto-Fast Copy Shop's overhead averaged $30,400 per year. After the installation of the new equipment, the total overhead increased to $83,600 per year. Foto-Fast Copy Shop has always costed jobs on the basis of actual materials and labor plus overhead assigned using a predetermined overhead rate based on direct labor hours. Budgeted direct labor hours for the year are 7,600, and the wage rate is $9 per hour.
Required:
1. What was the predetermined overhead rate prior to the purchase of the new equipment?
$ per direct labor hour
2. What was the predetermined overhead rate after the new equipment was purchased?
$ per direct labor hour
3. Suppose Rick Anselm brought in several items he wanted photocopied. The job required 600 sheets of paper at $0.03 each and 36 minutes of direct labor time. What would have been the cost of Rick's job on May 20? On June 20? If required, round your answers to the nearest cent. Round your intermediate computations to two decimals places and final answer to the nearest dollar
Total job cost
May 20 $
June 20 $
4. Suppose that the owner decides to calculate two overhead rates, one for the photocopying area based on direct labor hours as before, and one for the computer-aided printing area based on machine time. Estimated overhead applicable to the computer-aided printing area is $55,440, and forecasted usage of the machines is 2,100 hours. What are the two overhead rates? If required, round your answers to the nearest cent.

Two years ago, Kimberly became a 30 percent partner in the KST Partnership with a contribution of investment land with a $14,750 basis and a $22,650 fair market value. On January 2 of this year, Kimberly has a $20,700 basis in her partnership interest, and none of her pre-contribution gain has been recognized. On January 2 Kimberly receives an operating distribution of a tract of land (not the contributed land) with a $18,175 basis and an $26,075 fair market value.
a) What is the amount and character of Kimberly’s recognized gain or loss on the distribution?
b) What is Kimberly’s remaining basis in KST after the distribution?
c) What is KST’s basis in the land Kimberly contributed after Kimberly receives this distribution?

When a company uses a
allocation rate there is only one base for allocating all overhead costs to products or other cost objects.

Acort Industries owns assets that will have a 75% probability of having a market value of $52 million in one year. There is a 25% chance that the assets will be worth only $22 million. The current risk-free rate is 5%, and Acort's assets have a cost of capital of 10%. a) If Acort is unlevered, what is the current market value of its equity? b) Suppose instead that Acort has debt with a face value of $18 million due in one year. According to MM (i.e. perfect market), what is the value of Acort's equity in this case? c) What is the expected return of Acort's equity without leverage? What is the expected return of Acort's equity with leverage? d) What is the lowest possible realized return of Acort's equity with and without leverage?

Highgrove Industries must decide which process technology to adopt, given the information below. Cost Technology A Technology B Technology C Price per unit $3 $3 $3 Fixed costs per year $80,000 $120,000 $130,000 Variable costs per unit $2.20 $1.85 $1.65 Which one of the process technologies would you recommend they adopt if the expected demand is 100,000 units

A company must decide between scrapping or reworking units that do not pass inspection. The company has 22,000 defective units that cost $6 per unit to manufacture. The units can be sold as is for $2.00 each, or they can be reworked for $4.50 each and then sold for the full price of $8.50 each. If the units are sold as is, the company will be able to build 22,000 replacement units at a cost of $6 each, and sell them at the full price of $8.50 each.
What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them? (Deductible amounts should be indicated with a minus sign.)
Sell as scrap Rework
Sales of scrap units
Sales of reworked units
Cost to rework units
Opportunity cost of not making new units
Incremental income (loss) $0 $0
The company should:

You run a coffee shop where demand is constant week to week. You use 10 bags of roasted coffee each week. Currently, you order whole roasted coffee beans from an out-of-town supplier who charges $20 per bag and a fixed cost of $100 per delivery. Storage for each bag per month is estimated at $1. Assume your coffee shop operates for 52 weeks and 12 months per year. Assume there are no lead times.

Required:
a. Under these costs, what is the optimal order size (in bags)?
b. How often (in months) do I place an order under my solution to part a?
c. What are my annual total costs (including purchasing costs) under my solution to part a?

Why do you think our economy continues to experience wage differences among groups - please
discuss with relevant examples?

Given the following information: Percent of capital structure: Preferred stock 10 % Common equity (retained earnings) 40 Debt 50 Additional information: Corporate tax rate 34 % Dividend, preferred $ 7.00 Dividend, expected common $ 2.50 Price, preferred $ 104.00 Growth rate 8 % Bond yield 9 % Flotation cost, preferred $ 9.40 Price, common $ 76.00 Calculate the weighted average cost of capital for Digital Processing Inc.

Iggy Company is considering three capital expenditure projects. Relevant data for the projects are as follows.
Project Investment Annual Income Life of Project
22A $243,500 $17,320 6 years
23A 271,400 20,600 9 years
24A 283,000 15,700 7 years
Annual income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project. Iggy Company uses the straight-line method of depreciation.
Determine the internal rate of return for each project. (Round answers 0 decimal places)

The Gecko Company and the Gordon Company are two firms whose business risk is the same but that have different dividend policies. Gecko pays no dividend, whereas Gordon has an expected dividend yield of 6 percent. Suppose the capital gains tax rate is zero, whereas the income tax rate is 40 percent. Gecko has an expected earnings growth rate of 10 percent annually, and its stock price is expected to grow at this same rate.

Required:
If the aftertax expected returns on the two stocks are equal (because they are in the same risk class), what is the pretax required return on Gordon’s stock?

Orange Corporation has gathered the following data on a proposed investment project: Investment in depreciable equipment $ 520,000 Annual net cash flows $ 78,000 Life of the equipment 10 years Salvage value $ 0 Discount rate 6 % The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment. The payback period for the investment would be: Multiple Choice 1.0 years 0.2 years 4.7 years 6.7 years

Hewell Co. started 2020 with two assets: Cash of E200,000 (Euros) and Land that originally cost E252,000 when acquired on April 4, 2015. On April 1, 2020, the company rendered services to a customer for E75,000, an amount immediately paid in cash. On October 1, 2020, the company incurred an operating expense of E50,000 that was immediately paid. On October 1, 2020, they also declared and paid a dividend of E100,000 to their parent company. No other transactions occurred during the year, so an average exchange rate is not necessary. Currency exchange rates were as follows:

Exchange Rate Chart
April 4, 2015 §1 = $0.28
January 1, 2018 §1 = $0.29
May 1, 2018 §1 = $0.30
October 1, 2018 §1 = $0.31
December 31, 2018 §1 = $0.35

Assume Boerkian was a foreign subsidiary of a U.S. multinational company and the U.S. dollar was the functional currency of the subsidiary. Prepare a schedule of changes in the net monetary assets of Boerkian for the year 2018 and properly label the resulting gain or loss.