Answer:
The price elasticity of demand for the students is:
inelastic.
Explanation:
The price elasticity of demand for the students is inelastic because there is no change in the quantity demanded by students that changes the price at which pizza is sold to the students. If one student buys the pizza, the price charged remains $10 and if 1,000 students buy the pizza, the price remains $10 per unit. Therefore, students' demand for the pizza is said to be static irrespective of price because the price is fixed.
Azim Services, a nongovernmental not-for-profit organization, received dues of $100 from its members. Azim provided its members with a newsletter that had a $25 value. All other services were valued at $10 per member. What is the amount of contribution made to Azim by each member?
Answer:
Each member of Azim Services pays $ 135 per month in contributions.
Explanation:
While Azim Services charges its members a fee of $ 100, in addition to delivering a newsletter that has a value of $ 25 and providing other services for the sum of $ 10, to determine the amount of money that each member contributes to Azim Services it is necessary to make the following calculation:
100 + 25 + 10 = X
125 + 10 = X
135 = X
Thus, each member of Azim Services pays $ 135 per month in contributions.
Accounts Receivable: $24,000Allowance for Uncollectible Accounts: $1,000During the year there were $450,000 of credit sales, $460,000 of collections from credit customers, and $3,700 of write-offs of delinquent accounts. At the end of the year, the company adjusted for bad debts expense using the percent-of-sales method, and applied a rate, based on past history, of 1.2%. At the end of the year, what was the balance in the Accounts receivable
Answer: $10,300
Explanation:
The following can be deduced from the question:
Opening balance of the account receivable = $24,000
Accounts receivable after the credit sales would be calculated as:
= $24,000 + $450,000
= $474,000
We then calculate the accounts receivable after the collection of credit which will be:
= $474,000 - $460,000
= $14,000
Therefore, the the balance in the accounts receivable would be:
=$14,000 - $3,700
= $10,300
Annalise received financial aid offers from two universities.
Financial Analysis for Option A
Costs per Year
Financial Aid Package per Year
Tuition & Fees
Scholarships & Grants
$10,000
$7,000
Room & Board
Work-Study
$11,500
$4,000
Financial Analysis for Option B
Costs per Year
Financial Aid Package per Year
Tuition & Fees
Scholarships & Grants
$28,000
$18,000
Room & Board
Work-Study
$9,000
$4,000
Which statement about the costs per year is true?
Option A will save her $4,500.
Option B will save her $7,000.
Option B will save her $11,000.
Option A will save her $15,500.
Answer:
Option A will save her $15,500.
Explanation:
Financial aid is the assistance given to students to cater to a college education. It excludes Scholarships and grants as these are not cost items by other forms of assistance.
Total for University Option A excluding scholarships and grants
Tuition & Fees $10,000
Room and Board $11,500
Work-Study $ 4,000
Total for A $25,500
For university option B
Tuition & Fees $28,000
Room & Board $ 9,000
Work-study $ 4,000
Total for B $41,000
Option B is more costly than A by :$41,000 - $25,500=$15,500.
Therefore, Option A saves $15,500
Answer:
Option A will save her $4,500.
Explanation:
An employee receives an hourly rate of $15, with time and a half for all hours worked in excess of 40 during the week. Payroll data for the current week are as follows: hours worked, 46; federal income tax withheld, $120; cumulative earnings for the year prior to this week, $5,500; Social security tax rate, 6%; and Medicare tax rate, 1.5%; state unemployment compensation tax, 3.4% on the first $7,000; federal unemployment compensation tax, 0.8% on the first $7,000.
Required:
Prepare the journal entries to record the salaries expense and the employer payroll tax expense. Refer to the Chart of Accounts for exact wording of account titles. Round your answers to two decimal places.
CHART OF ACCOUNTS
General Ledger
ASSETS
110 Cash
111 Accounts Receivable
112 Interest Receivable
113 Notes Receivable
115 Merchandise Inventory
116 Supplies
118 Prepaid Insurance
120 Land
123 Building
124 Accumulated Depreciation-Building
125 Office Equipment
126 Accumulated Depreciation-Office Equipment
LIABILITIES
210 Accounts Payable
213 Interest Payable
214 Notes Payable
221 Salaries Payable
222 Social Security Taxes Payable
223 Medicare Taxes Payable
224 Federal Withholding Taxes Payable
225 State Withholding Taxes Payable
226 Federal Unemployment Comp. Taxes Payable
227 State Unemployment Comp. Taxes Payable
228 State Disability Insurance
231 Medical Insurance Payable
232 Retirement Savings Deductions Payable
233 Union Dues Payable
234 Vacation Pay Payable
241 Product Warranty Payable
EQUITY
310 Common Stock
311 Retained Earnings
312 Dividends
313 Income Summary
Answer:
Explanation:
Regular earnings = 40*$15 = $600
Overtime earnings = (46-40)*15*1.5 = $135
Gross earnings = Regular earnings + Overtime earnings = $600 + $135 = $735
Date Description Debit Credit
Dec. 31 Salary Expense $735
Federal Withholding Taxes Payable $120
Social Security Taxes Payable (735*6%) $44.10
Medicare Taxes Payable (735*1.5%) $11.03
Salaries Payable $559.87
Dec 31 Payroll Tax Expense $86
Social Security Taxes Payable $44.10
Medicare Taxes Payable $11.03
State Unemployment Comp. $24.99
-Taxes Payable (735*3.4%)
Federal Unemployment Comp. $5.88
Taxes Payable (735*0.8%)
An assembly line with 15 tasks is to be balanced. The longest task is 2.9 minutes, and the total time for all tasks is 17 minutes. The line will operate for 450 minutes per day. a. What are the minimum and maximum cycle times
Answer:
Minimum ⇒ 2.9 minutesMaximum ⇒ 17 minutesExplanation:
Minimum cycle time ⇒ This is the time taken for the longest task to be completed. In this case that is 2.9 minutes.
Maximum cycle time ⇒ This is the time taken for all the tasks to be completed. In this case that is 17 minutes.
Environmental Designs issues 10,000 shares of its $1 par value common stock at $25 per share. (1) Record the issuance of the stock. (2) Record the issuance of stock assuming it is no-par stock.
Answer:
1. Dr Cash 250,000
Cr Common Stock 10,000
Cr Additional Paid-in Capital 240,000
2. Dr Cash 250,000
Cr Common Stock250,000
Explanation:
(1) Preparation of the journal entry toRecord the issuance of the stock
Dr Cash 250,000
(10,000 shares × $25)
Cr Common Stock 10,000
(10,000 shares × $1)
Cr Additional Paid-in Capital
240,000
(250,000-10,000)
( Being to record the Issue of common stock above par)
(2) Preparation of the journal entry to Record the issuance of the stock assuming it is no-par value stock.
Dr Cash 250,000
(10,000 shares × $25)
Cr Common Stock250,000
(Being to record the Issue of no-par value common stock)
Vijay Inc. purchased a three-acre tract of land for a building site for $260,000. On the land was a building with an appraised value of $128,000. The company demolished the old building at a cost of $11,300, but was able to sell scrap from the building for $1,670. The cost of title insurance was $830 and attorney fees for reviewing the contract were $420. Property taxes paid were $3,300, of which $170 covered the period subsequent to the purchase date. The capitalized cost of the land is:
Answer:
$273,840
Explanation:
The Cost of of an item of Property, Plant and Equipment according to IAS 16 include the purchase price and any directly related costs incurred in bringing the asset in the condition and location for operation as intended by management.
Calculation of the Cost of Land
Purchase Price $260,000
Cost after proceeds to demolish old building($11,300 - $1,670) $9,630
Insurance $830
Legal Fees $420
Property taxes ( $3,300 - $170) $3,130
Capitalized Cost $273,840
Describe the technologies that contributed to the development and advancement of the newspaper from small, infrequent circulations of a few brief pages to the mass production of daily, extensive pages of news.
Answer: The industrial revolution came with the advent of the stream powered printing press, enabling newspapers to be produced in masses
Explanation:
The industrial revolution came with the advent of the stream powered printing press, enabling newspapers to be produced in masses. Improvement also took place in the inking process to aid speed up production also introduction of wood pulp helping drive production cost. One of the major advantage for this widespread growth was the relevance the newspaper gained globally as worthy news ready to be reported were available.
Vandezande Inc. is considering the acquisition of a new machine that costs $438,000 and has a useful life of 5 years with no salvage value The incremental net operating income and incremental net cash flows that would be produced by the machine are (ignore income taxes) Incremental Incremental Net Operating Net Cash Income s 79, 000 $ 85,000 Year 3 96,000 Year 4 59,000 Year S $101,000 Flows Year 1 Year 2 $154, 000 $164,000 $175, 000 $161,000 $163,000 Assume cash flows occur uniformly throughout a year except for the initial investment The payback period of this investment is closest to:___________ a) 22 years b) 5.0 years c) 4.3 years d) 2.7 years
Answer:
Vandezande Inc.
The payback period of this investment is closest to:___________
d) 2.7 years
Explanation:
a) Data and Calculations:
Incremental Net Operating Incomes Net Cash Flows Incremental cash
Year 1 $79, 000 $154, 000
Year 2 $ 85,000 $164,000 $318,000
Year 3 96,000 $175, 000 493,000
Year 4 59,000 $161,000 654,000
Year 5 $101,000 $163,000 817,000
Total $420,000 $817,000
Payback period = Cash outflow/ (Total cash inflows/5)
= $438,000/($817,000/5)
= $438,000/$163,400
= 2.68
= 2.7 years
b) Payback period is the time an investment takes to recover its initial cost, at which the break-even point is reached. Shorter payback period increases the attractiveness and desirability of an investment. Another method to calculate the payback period is the subtraction method. This involves subtracting the cash inflows from the cash outflow until the cash outflow becomes zero.
at what level are milestones tracked?
a. executive level
b. consumer level
c. stakeholder level
d. organizational level
Answer:organizational
Explanation:
A p e x
Use the information in the adjusted trial balance presented below to calculate current assets for Jones Company: Account Title Debit Credit Cash 47,000 Accounts receivable 24,000 Prepaid insurance 9,800 Equipment 180,000 Accumulated Depreciation - Equipment 90,000 Land 103,000 Accounts payable 25,000 Interest payable 4,400 Unearned revenue 7,400 Long-term notes payable 54,000 J. Jones, Capital 183,000 Totals 363,800 363,800
Answer:
the current asset for Jones company is $80,800
Explanation:
The computation of the current asset is shown below
Current Assets = Cash + Accounts Receivable+ Prepaid Insurance
= $47,000 + $24,000 + $9,800
= $80,800
hence, the current asset for Jones company is $80,800
We simply applied the above formula so that the correct value could come
And, the same is to be considered
According to the Taylor rule, if inflation is 9% and the GDP gap is 4%, what is the recommendation for the federal funds rate target?
Answer: 16.5%
Explanation:
The Taylor Rule suggests that the Federal reserve should raise the fed funds rate if inflation rates are above the targeted rates and/ or if GDP is growing at a higher rate than it potentially should.
The rate is calculated as;
Federal funds rate target = (1.5 * Inflation rate) + (0.5 * GDP gap) + 1
= (1.5 * 9%) + (0.5 * 4%) + 1%
= 13.5% + 2% + 1
= 16.5%
Why are stocks considered a high-risk form of investment?
Answer:
A.
The value of stocks can rise and fall unpredictably
Explanation:
in constructing the official unemployment rate (U-3), which of the following does the bureau of labor statistics take into account? choose as many as are correct.
a)survey of firms reporting how many workers they laid off or fired
b)initial unemployment claimed field
c)the average unemployment rate over the last 12 months
d)The change in job posting from one year ago
e) survey of individuals reporting wheater they have job or active looked for work in the last 4 week
Answer:
e) survey of individuals reporting whether they have job or active looked for work in the last 4 week
Explanation:
The unemployment rate (U-3) reports on the number of jobless people that are actively seeking employment. The bureau of labor statistics considers individuals who have sought employment in the past four weeks. The bureau defines an unemployed person as one that is jobless but has actively sought work in the last four weeks.
This unemployment rate (U3) is the most reported and followed. The report is released monthly. The U3 unemployment rate is criticized for not being inclusive of all jobless people. For instance, it does not include discouraged job seekers or those not looking for work due to other factors such as caring for the sick and elderly at home.
The following information for Cooper Enterprises is given below:December 31, 2018Assets and obligations Plan assets (at fair value) $600,000Accumulated benefit obligation 1,110,000Projected benefit obligation 1,200,000Other Items Pension asset / liability, January 1, 2018 30,000Contributions 360,000Accumulated other comprehensive loss 503,700There were no actuarial gains or losses at January 1, 2018. The average remaining service life of employees is 10 years. What is the amount that Cooper Enterprises should report as its pension liability on its balance sheet as of December 31, 2018?a. $600,000b. $90,000c. $1,110,000d. $1,200,000
Answer:
a. $600,000
Explanation:
The computation of the amount reported as a pension liability on the balance sheet is as follows:
= Projected benefit obligation - plant asset at fair value
= $1,200,000 - $600,000
= $600,000
Hence, the amount reported as a pension liability on the balance sheet is $600,000
Therefore the correct option is a.
A present value of $2600 is invested in an account with an annual interest rate of 4.1% . Determine the minimum amount of time required for the present value to triple, assuming the interest is compounded monthly. The minimum amount of time required is:
Answer:
The minimum amount of time required is:
26.82 years.
Explanation:
Present value = $2,600
Future value = $7,800 ($2,600 * 3)
Annual interest rate = 4.1%
Monthly interest rate = 4.1%/12 = 0.342%
$2,600 will need to be invested for 321.781 (26.82 years) periods to reach the future value of $7,800.00.
FV (Future Value) $7,800.00
PV (Present Value) $2,600.00
N (Number of Periods) 321.781
I/Y (Interest Rate) 0.342%
PMT (Periodic Payment) $0.00
Starting Investment $2,600.00
Total Principal $2,600.00
Total Interest $5,200.00
At the end of 20X4, Sherpa Lighting Ltd. has a large stock of incandescent lighting fixtures that are becoming obsolete due to a new trend to low-energy fluorescent and LED lighting fixtures. The current inventory of incandescent fixtures has a cost of $170,000. The sales manager of Sherpa estimates that the inventory can be sold through the normal course of business over the next several reporting quarters for approximately $150,000. Sales personnel are given a 10% commission on sales. In addition, Sherpa will grant an additional 5% sales commission for sales of these almost-obsolete fixtures, intended to make up for the reduced sales prices as well as an additional incentive to sell them. In early 20X5, Sherpa's production manager decided that the fixtures can be adapted to not only accept the new LED lighting but also compete quite effectively with new products coming on the market. During 2005, the fixtures are converted at a cost of $25,000. The sales manager estimates that after the conversion, the newly adapted inventory can be repriced to fetch $185,000 (before 10% sales commission) in the market. Required: Using the valuation allowance method, prepare the appropriate journal entries to record inventory adjustments at the end of each of 20X4 and 20X5.
Answer:
Sherpa Lighting Ltd.
Journal Entries, using the valuation allowance method:
December 31, 20X4:
Debit Inventory Write-down Expense $20,000
Credit Inventory $20,000
To write down inventory because of obsolescence.
December 31, 20X5:
Debit Inventory $25,000
Credit Cash Account $25,000
To record the cost of converting the fixtures.
Explanation:
a) Data and Calculations:
December 31, 20X4:
Cost of Inventory of incandescent fixtures = $170,000
Estimated sales value of the inventory = $150,000
Obsolete inventory Expense = $20,000 ($170,000 - $150,000)
December 31, 20X5:
Balance of Inventory of incandescent fixtures = $150,000
Add conversion cost = 25,000
Ending balance of inventory = $175,000
Rather than using an institutional loan, a seller extends credit to a buyer and the buyer gives the seller a deed of trust. This would be known as a/an:______
Answer:
The correct solution would be "Purchase money loan ".
Explanation:
The purchasing money allowance would be granted by that of the producer to the consumer of such the property. This is also considered as financing by the seller as well as by the owner. Those other loans are mostly utilized by borrowers who've had difficulty applying for something like a conventional mortgage leading to negative performance.You purchased eight TJH call option contracts with a strike price of $37.50 when the option quote was $.55. The option expires today when the value of TJH stock is $37.10. Ignoring trading costs and taxes, what is your total profit on your investment
Answer:
-$4.40
Explanation:
Buyer of Call payoff = Max(S-K,0)
Buyer of Call payoff = Max(37.1-37.5,0)
Buyer of Call payoff = $0
Buyer of Call profit = Call payoff-premium
Buyer of Call profit = 0 - 0.55
Buyer of Call profit = -$0.55
So, for 8 options, Loss = 8*-$0.55 = -$4.40
So therefore, the total profit/loss on eight call option is -$4.40
The costs of organizing a corporation include legal fees, fees paid to the state of incorporation, fees paid to promoters, and the costs of meetings for organizing the promoters. These costs are said to benefit the corporation for the entity's entire life. These costs should be:_______
Answer:
expensed as incurred
Explanation:
In accrual method of accounting, it is known that revenues are known when earned and expenses are known when incurred.
Expenses are simply said to be amounts incurred to bring about or generate revenue for an organization or firm, they include cost of goods sold, operating expenses, interest, and taxes.companies has different types of expenses incurred e. g overhead expenses.
An order getter is:________. a. a salesperson who specializes in identifying, analyzing, and solving customer problems, but who does not actually sell products and services. b. a salesperson who processes routine orders or reorders for products that are presold by the outbound telemarketers. c. a salesperson who sells in a conventional sense and identifies prospective customers, provides customers with information, persuades customers to buy, closes sales, and follows up on customers' use of a product or service. d. a person on the selling team who is responsible for obtaining qualified leads. e. a member of the sales support team who does not directly solicit orders but rather concentrates on performing promotional activities and introducing new products.
Answer:
An order getter is:________. a. a salesperson who specializes in identifying, analyzing, and solving customer problems, but who does not actually sell products and services. b. a salesperson who processes routine orders or reorders for products that are presold by the outbound telemarketers. c. a salesperson who sells in a conventional sense and identifies prospective customers, provides customers with information, persuades customers to buy, closes sales, and follows up on customers' use of a product or service. d. a person on the selling team who is responsible for obtaining qualified leads. e. a member of the sales support team who does not directly solicit orders but rather concentrates on performing promotional activities and introducing new products.
kkk
An order-getter is a salesperson who sells in a conventional sense and identifies prospective customers, provides customers with information, persuades customers to buy, closes sales, and follows up on customers' use of a product or service. A salesperson who is in charge of actively convincing customers to buy rather than merely taking orders that the customers voluntarily place.
What are the characteristics of successful order-getters?
They identify the needs of the customer, offer value-added technical and procedural solutions, and demonstrate genuine care for the client.
An order-getter is a sales team member who is in charge of generating leads and convincing clients to buy. These salespeople look for new clients, make contact with potential leads, and employ a variety of persuasion strategies to persuade prospects to purchase products.
Learn more about order-getters here:
https://brainly.com/question/2302892
#SPJ5
Bonita Industries is constructing a building. Construction began in 2020 and the building was completed 12/31/20. Bonita made payments to the construction company of $3090000 on 7/1, $6408000 on 9/1, and $5840000 on 12/31. Weighted-average accumulated expenditures were
Answer:
Bonita Industries is constructing a building. Construction began in 2020 and the building was completed 12/31/20. Bonita made payments to the construction company of $3090000 on 7/1, $6408000 on 9/1, and $5840000 on 12/31. Weighted-average accumulated expenditures were
On June 1, 2021, Emmet Property Management entered into a 2-year contract to oversee leasing and maintenance for an apartment building. The contract starts on July 1, 2021. Under the terms of the contract, Emmet will be paid a fixed fee of $54,000 per year and will receive an additional 10% of the fixed fee at the end of each year provided that building occupancy exceeds 80%. Emmet estimates a 20% chance it will exceed the occupancy threshold, and concludes the revenue recognition over time is appropriate for this contract. Assume Emmet estimates variable consideration as the most likely amount. How much revenue should Emmet recognize on this contract in 2021? Multiple Choice $27,540 $54,000 $30,750 $27,000
Answer:
$27,540
Explanation:
Expected amount = Possible amount into probability
Expected amount = ($54,000*80%) + ($54,000+10%)*20%
Expected amount = $43,200 + ($54,000+$5,400)*20%
Expected amount = $43,200 + $59,400*20%
Expected amount = $43,200 + $11,880
Expected amount = $55,080
Revenue to be recognized on this contract in 2021 = $55,080 * 6/12 = $27,540.
Chang Industries has 1,300 defective units of product that already cost $48 each to produce. A salvage company will purchase the defective units as is for $22 each. Chang's production manager reports that the defects can be corrected for $40 per unit, enabling them to be sold at their regular market price of $38. The $48 per unit is a:
Answer: Sunk Cost
Explanation:
A sunk cost is an expense which a company or entity has already incurred and which cannot be recovered and so should not be considered when making decisions regarding incremental benefits or costs to an investment.
The $48 had already been incurred to produce the defective units and cannot be recovered so it is a sunk cost that should not be considered moving forward.
Sensitivity analysis measures: Group of answer choices Changes in the depreciation tax shield over the life of the project Changes in production levels with changes in revenues Changes in taxes payable with changes in a stock's current price changes in the retention rate with changes in net income Changes in fixed costs with changes in the operating cash flow None of the above
Answer:
None of the above
Explanation:
A sensitivity analysis measures how under a certain set of assumptions, different values of an independent variable influence the dependent variable. It is also known as what if analysis and it is based on various assumptions. Options given in the question like changes in depreciation tax shield over a project's life, changes in production levels with the changes in revenue etc. are absolutely certain to an extent, or in other words, bound to happen.
Coronado Inc. has $520,640 to invest. The company is trying to decide between two alternative uses of the funds. One alternative provides $69,086 at the end of each year for 12 years, and the other is to receive a single lump-sum payment of $1,633,990 at the end of the 12 years. Which alternative should Coronado select
Answer:
None of the alternative should be selected by Coronado Inc.
Explanation:
This can be determined by comparing the net present value of the 2 alternative.
The fisrt thing to do is to calculate the simple interest to be used as follows:
Simple rate of return = Annual return / Investment cost = $69,086 / $520,640 = 0.1327, or 13.27%
Step 1: Calculation of the net present value of alternative that provides $69,086 at the end of each year for 12 years
We have to first calculate the present value using the formula for calculating the present of an ordinary annuity as follows:
PV$69,086 = P * ((1 - (1 / (1 + r))^n) / r) …………………………………. (1)
Where;
PV$69,086 = Present value of the annual cash flow of $69,086 = ?
P = Annual cash inflow = $69,086
r = Simple rate of return = 0.1327, or 13.27%
n = Number of years = 12
Substitute the values into equation (1) to have:
PV$69,086 = $69,086 * ((1 - (1 / (1 + 0.1327))^12) / 0.1327) = $403,899.27
The net present value can now be calculated as follows:
NPV$69,086 = PV$69,086 - Investment cost ............... (2)
Where;
NPV$69,086 = Net present value of alternative that provides $69,086 at the end of each year for 12 years = ?
PV$69,086 = Present value of the annual cash flow of $69,086 = $440,303.13
Substitute the values into equation (2) to have:
NPV$69,086 = $ 403,899.27 - $520,640
NPV$69,086 = -116,740.73
Step 2: Calculation of the net present value of alternative that pays a single lump-sum payment of $1,633,990 at the end of the 12 years
We have to first calculate the present value using the present value formula as follows:
PV$1,633,990 = $1,633,990 / (1 + r)^n ............. (3)
Where;
PV$1,633,990 = present value of $1,633,990 = ?
r = Simple rate of return = 0.1327, or 13.27%
n = Number of years = 12
Substitute the values into equation (3) to have:
PV$1,633,990 = $1,633,990 / (1 + 0.1327)^12 = $366,328.40
The net present value can now be calculated as follows:
NPV$1,633,990 = PV$1,633,990 - Investment cost ............... (4)
Where;
NPV$1,633,990 = net present value of alternative that pays a single lump-sum payment of $1,633,990 at the end of the 12 years = ?
Substitute the values into equation (4) to have:
NPV$1,633,990 = PV$1,633,990 - Investment cost = $366,328.40 - $520,640 = -$154,311.60
Conclusion
Since the NPVs of the two alternative are negative, none of the alternative should be selected by Coronado Inc.
Axel wants to punish a subordinate that he personally dislikes. However, the subordinate fulfils all his job duties and produces excellent work. Both Axel and the subordinate are governed by very comprehensive policies and rules negotiated by a union in a collective agreement. Which contingency does Axel lack that prevents him from arbitrarily punishing the subordinate
Answer: Discretion
Explanation:
Discretion simply means having the freedom to make judgment and take decisions without the person having to get permission form someone else or referring to certain rules.
Based on the question, we can see that Alex lack the discretion contingency as he can't decide and make decisions on his own and therefore cannot punish the subordinate.
The Tierney Group has two divisions of equal size: an office furniture manufacturing division and a data processing division. Its CFO believes that stand-alone data processor companies typically have a WACC of 9%, while stand-alone furniture manufacturers typically have a 13% WACC. She also believes that the data processing and manufacturing divisions have the same risk as their typical peers. Consequently, she estimates that the composite, or corporate, WACC is 11%. A consultant has suggested using a 9% hurdle rate for the data processing division and a 13% hurdle rate for the manufacturing division. However, the CFO disagrees, and she has assigned an 11% WACC to all projects in both divisions. Which of the following statements is CORRECT?
A. The decision not to adjust for risk means, in effect, that it is favoring the data processing division. Therefore, that division is likely to become a larger part of the consolidated company over time.
B. The decision not to adjust for risk means that the company will accept too many projects in the manufacturing division and too few in the data processing division. This will lead to a reduction in the firm's intrinsic value over time.
C. The decision not to risk-adjust means that the company will accept too many projects in the data processing business and too few projects in the manufacturing business. This will lead to a reduction in its intrinsic value over time.
D. The decision not to risk-adjust means that the company will accept too many projects in the manufacturing business and too few projects in the data processing business. This may affect the firm's capital structure but it will not affect its intrinsic value.
E. While the decision to use just one WACC will result in its accepting more projects in the manufacturing division and fewer projects in its data processing division than if it followed the consultant's recommendation, this should not affect the firm's intrinsic value.
Answer:
The Correct statement is option B. The decision of the company not to adjust for risk means that the company will have to accept too many projects in the office furniture manufacturing division and too few in the data processing division.
Explanation:
Based on the information given the decision of the company not to adjust to the risks will lead to the firm accepting project that are too many in the office furniture Manufacturing Divsion while that of data processing Division will accept too few project, which means that the firm will be at risk in a situation where they want to raise the cost of capital reason been that the company cash flow will be Discounted by the investor at a rate that is high which will inturn Lead to the company value to decline.
Therefore The Correct statement is option B.
Which of the following would not tend to make a manufacturer choose a perpetual inventory system? A high volume of sales transactions and a manual accounting system. Management wants information about quantities of specific products. Items in inventory with high per unit costs. A low volume of sales transactions and a computerized accounting system.
Answer:
A high volume of sales transactions and a manual accounting system.
a U.S. corporation, receives $500,000 of foreign-source taxable income. Foreign taxes of $270,000 are paid. Peanut’s worldwide taxable income is $900,000, and its U.S. Federal income tax liability before any foreign tax credit (FTC) is $170,000. What is Peanut’s FTC carryforward
Answer: $94,444.44
Explanation:
Peanut's FTC can be calculated as;
= US Federal tax liability * Foreign-source taxable income/Worldwide taxable income including US
= 170,000 * 500,000/900,000
= $94,444.44