Which of the following best describes why the predicted incremental earnings arising from a given decision are not sufficient in and of themselves to determine whether that decision is worthwhile? A) They do not show how the firm's earnings are expected to change as the result of a particular decision.
B) They are not easily predicted from historical financial statements of a firm and its competitors.
C) These earnings are not actual cash flows.
D) They do not tell how the decision affects the firm's reported profits from an accounting perspective.

Answers

Answer 1

Answer:

Answer and Explanation:

C) These earnings are not actual cash flows.

Related Questions

Use the following information: Beginning cash balance on March 1, $76,000. Cash receipts from sales, $304,000. Budgeted cash payments for direct materials,$137,000. Budgeted cash payments for direct labor $77,000. Other budgeted cash expenses, $43,000. Cash repayment of bank loan, $10,000. Prepare a cash budget for the month ended on March 31 for Gado Company. The budget should show expected cash receipts and cash disbursements for the month of March and the balance expected on March 31.
On January 1, 2011, Deuce Inc. acquired 15% of Wiz Co.'s outstanding common stock for $62,400 and categorized the investment as an available-for-sale security. Wiz earned net income of $96,000 in 2011 and paid dividends of $36,000. On January 1, 2012, Deuce bought an additional 10% of Wiz for $54,000. This second purchase gave Deuce the ability to significantly influence the decision making of Wiz. During 2012, Wiz earned $120,000 and paid $48,000 in dividends. As of December 31, 2012, Wiz reported a net book value of $468,000. For both purchases, Deuce concluded that Wiz Co.'s book values approximated fair values and attributed any excess cost to goodwill. What amount of equity income should Deuce have reported for 2012?
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Grant Company reported net income of $74,000 and sales revenue of $201,000 for the current year. The company also reported beginning and ending accounts receivable at $25,500 and $16,000, respectively. What was the amount of cash collected from customers?

The Crestar Company reported net income of $112,000 on 20,000 average outstanding common shares. Preferred dividends total $12,000. On the most recent trading day, the preferred shares sold at $50 and the common shares sold at $95. What is this company's current price-earnings ratio?

Answers

Answer:

Price earnings ratio = 19 times.

Explanation:

Price earning ratio is calculated as for the common equity, as the earnings on preference share is fixed.

Accordingly, the earnings for equity = Net income - preference dividend = $112,000 - $12,000 = $100,000

Number of shares outstanding = 20,000

Earnings per share = $100,000/20,000 = $5 per share.

Selling price of the share = $95

Thus, price earnings ratio = $95/$5 = 19 times.

This reflects that the 19 times of earnings is the price of share.

Question 2 Pluto has $100 to spend and his preferences are represented by the quasi-linear utility function U (2,m) = 10x-1/2x^2+m where x is the amount of pizza he eats and m is the amount of money he spends on other stuff. (a) What is Pluto's demand curve for pizza? (b) How much consumer surplus does Pluto get when the price of pizza is $5? Illustrate the calculation of consumer surplus with a diagram. (b) What is Pluto's utility if the price of pizza is $5? (c) Suppose that Pluto is uanble to purchase pizza. What is his utility? What is the gain in utility when he has the opportunity to buy pizza at a price of $5?

Answers

Answer:

(a) see curve on attachment

(bi) consumer surplus= $4

(bii) see diagram on attachment

(biii) utility = 2

(ci) u(0,1) = 1

Explanation:

Tim, who is subject to a 35 percent marginal gift tax rate, made a gift of a painting to Ben, valuing the property at $7,000. The IRS later valued the gift at $15,000. Compute the applicable undervaluation penalty.

Answers

Answer:

The undervaluation penalty is $560

Explanation:

Solution

Under valuation penalty applied when a person valued assets understated to save tax.

The undervaluation reduces the tax and hence comes with accuracy related penalty.

From the example, Tim undervalued the gift of $7,000 which is valued at $15,000 by IRS.

The deduction is undervalued for more than 150% and hence penalty is assessed. this is so because the income tax valuation is lower than 40%, so the penalty rate is 20%

Thus,

The calculation of overvaluation penalty is given below:

Undervaluation = $8000

Tax rate = 35%

Tax amount = $2,800

Penalty rate = 20%

Penalty on undervaluation is =$560

Therefore, the undervaluation penalty is $560

Perfect Confectionery Co. expects to earn $3.20 per share during the current year, its expected dividend payout ratio (i.e., the proportion of earnings paid out as dividend) is 60%, its expected constant dividend growth rate is 5.0%, and its common stock currently sells for $30.00 per share. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. What would be the cost of equity from new common stock? 10.73% 11.29% 11.82% 12.11% 12.67%

Answers

Answer:

Correct answer is 12.11%

Explanation:

expected dividend =$3.2*60%

=$1.92

Hence cost of equity from new common stock=(D1/Current price(1-Floatation cost)+Growth rate

=1.92/(30(1-0.1))+0.05

=(1.92/27)+0.05

which is equal to

=12.11%(Approx).

Answer: 12.11%

Explanation:

GIVEN THE FOLLOWING ;

Earning per Share = $3.20

Expected dividend pay out ratio.(proportion of earning paid out as interest.)

Cost of stock per share = $30

Dividend growth rate = 5%= 0.05

Floatation cost = 10% = 0.1

Cost of equity=(dividend/(Current price(1-Floatation cost)) +Growth rate

Cost of Equity =[ (1. 92÷(30(1 - 0.1)) + 0.05

Cost of equity = [ (1.92 ÷ (30(0.9)) + 0.05

Cost of equity = (1.92 ÷ 27) + 0.05

Cost of equity = 0.07111111 + 0.05 = 0.121111

0.12111 × 100 = 12.11%

The adjusted trial balance of Sunland Company shows these data pertaining to sales at the end of its fiscal year, October 31, 2022: Sales Revenue $903,400; Freight-Out $13,700; Sales Returns and Allowances $22,000; and Sales Discounts $15,400. Prepare the sales section of the income statement.

Answers

Answer and Explanation:

The preparation of the sales section of the income statement is presented below:

Income Statement

For the year ended

Sales

Sales revenue $903,400

Less:

Sales Discount $15,400

Sales return & allowances $22,000

Net Sales $866,000

hence the net sales is $866,000

The freight out would not be considered. Hence, ignored it

Everything else the same, the higher the expected rate of inflation, _____. a. the lower the loss in purchasing power of investors
b. the higher the required rate of return on an investment
c. the lower the maturity premium required by the investors
d. the higher the money supply in the economy
e. the lower the tax rate in the economy

Answers

Answer: b. the higher the required rate of return on an investment

Explanation: Inflation is an increase in the general level of prices or in the cost of living. It is the decline in the value of money and as such it erodes the purchasing power of future cash flows or investments. All things being equal, higher inflation rates (current or expected) equates to rising yields across the yield curve. As a result, investors demand this higher yield to account for the risk of inflation. This makes option b the only option that is true and accurate.

Final answer:

The higher the expected rate of inflation, the higher the required rate of return on an investment.

Explanation:

The correct answer is b. The higher the expected rate of inflation, the higher the required rate of return on an investment. When the expected rate of inflation is high, investors require a higher rate of return to compensate for the loss in purchasing power of their money. This is because high inflation erodes the value of money over time, reducing the real return on an investment. Therefore, investors demand a higher rate of return to maintain their purchasing power.

Learn more about expected rate of inflation here:

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