BUSINESS COLLEGE

KINGBIRD, INC. Income Statement For the Year Ended December 31, 2020 Sales revenue $446,700
Cost of goods sold 202,300
Gross profit 244,400
Expenses (including $16,300 interest and $20,800 income taxes) 70,800
Net income $ 173,600

Additional information:

1. Common stock outstanding January 1, 2020, was 27,200 shares, and 38,600 shares were outstanding at December 31, 2020.
2. The market price of Kingbird stock was $15 in 2020.
3. Cash dividends of $21,700 were paid, $6,500 of which were to preferred stockholders.

Compute the following measures for 2020.

(a) Earnings per share
(b) Price-earnings ratio
(c) Payout ratio

Answers

Answer 1
Answer:

Answer and Explanation:

The computation is shown below:

a. Earning per share

= (Net income - preferred dividend) ÷ (Weighted average number of outstanding shares)

= ($173,600 - $6,500) ÷ (27,200 shares + 38,600 shares) ÷ 2

= $167,100 ÷ 32,900 shares

= $5.08 per share

b. Price earnings ratio = Market price ÷ Earning per share

                                    = $15 / $5.08

                                    = 2.95

c. Payout ratio = Dividend paid ÷ Net income

= ($21,700 - $6,500) ÷ ($173,600)

= 8.76%

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What is the present value of a $500 payment received at the end of each of the next five years, worth to you today at the appropriate discount rate of 6 percent? $1,105 $1,850 $2,106 $2,778

Answers

Answer:

PV= $2,106.18

Explanation:

Giving the following information:

Annual payment= $500

Number of periods= 5 years

Interest rate= 6%

To calculate the present value, first, we need to determine the future value:

FV= {A*[(1+i)^n-1]}/i

A= annual payment

FV= {500*[(1.06^5) - 1]} / 0.06

FV= $2,818.55

Now, the present value:

PV= FV/(1+i)^n

PV= 2,818.55/1.06^5

PV= $2,106.18

Final answer:

The present value of a $500 payment received at the end of each of the next five years at an appropriate discount rate of 6 percent is approximately $2,106.

Explanation:

The question you asked involves the concept of calculating the present value of a series of future payments, also known as an annuity. The present value of an annuity can be determined using the formula:

PV = PMT * [(1 - (1 + r)^-n)/r]

where 'PV' is the present value, 'PMT' is the periodic payment, 'r' is the discount rate (as a decimal), and 'n' is the number of periods.

Plugging in the values from your question we get:

PV = 500 * [(1 - (1 + 0.06)^-5) /0.06]

This will give us the present value of the cash flows. Thus, the present value for a $500 payment received at the end of each of the next five years, worth to you today at the appropriate discount rate of 6 percent is $2,106.

Learn more about Present Value here:

brainly.com/question/34554678

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Which of the following categories in the portfolio matrix is a market leader and growing fast?a.Star
b.Meteor
c.Cash cow
d.Shiner
e.Top dog

Answers

Answer:

It is Star (B)

Explanation:

Option (a) True. Star is a product with high relative market share in a high growing market . This product is full of potential but require more investment and spending in the areas of advertising,innovation and  market research in order to maintain its market leadership position. Hence, it might be cash neutral at this stage.

In the long-run, it will eventually turns to cash cow in the portfolio if we can sustain its position.

Option(b) Meteor. False. This does not exist in product portfolio matrix.

Option (c) Cash cow. False.

This product has a large relative market share in a stagnating (mature) market, profits and cash flows are expected to be high. Because of the lower growth rate, investments needed should also be low.

Hence, they  typically generate cash in excess of the amount of cash needed to maintain the business and this  ‘excess cash’ is supposed to be ‘milked’ from the Cash Cow for investments in other business units (Stars and Question Marks). Cash Cows ultimately bring balance and stability to a portfolio.

Option (d) Shiner. False .It does not exist

Option (e) Top dog. It is a product with low relative market share in a stagnant market.

Hayes Corp. is a manufacturer of truck trailers. On January 1, 2021, Hayes Corp. leases ten trailers to Lester Company under a six-year non-cancelable lease agreement. The following information about the lease and the trailers is provided: 1) Annual payment of $120,175 is due on January 1, 2021 and at December 31 from 2021 to 2025. Hayes Corp. has an implicit rate of 8% (present value factor for 6 periods at 8% is 4.99271). 2) Titles to the trailers pass to Lester at the end of the lease. 3) The fair value of each trailer is $60,000. The cost of each trailer to Hayes Corp. is $54,000. Each trailer has an expected useful life of nine years. 4) Collectibility of the lease payments is probable. Instructions (a) What type of lease is this for the Lester Company and Hayes Corp? (b) Prepare a lease amortization schedule for Lester Company till 12/31/2021. (c) Prepare the journal entries for Lester Company on 1/1/2021 and 12/31/2021. Round all amounts to the nearest dollar.

Answers

Answer:

FINANCING LEASE.

\left[\begin{array}{cccccc}YEAR&Beginning&Cuota&Interest&amortization&Ending\n0&600000&120175&0&120175&479825\n1&479825&120175&38386&81789&398036\n2&398036&120175&31842.88&88332.12&309703.88\n3&309703.88&120175&24776.31&95398.69&214305.19\n4&214305.19&120175&17144.42&103030.58&111274.61\n5&111274.61&120175&8901.97&111273.03&1.58\n\end{array}\right]

trailer    600,000 debit

  lease liability        479,825 credit

 cash                        120,175 credit

--to record Jan 1st entry--

interest expense    38,386 debit

lease liability           81,789 credit

 cash                                 120,175 credit

--to record Dec 31st entry--

Explanation:

The lease is for more than half of the asset useful life. Also, it has a present value equal to the fair value of the trailer. Also, ownership is acquired at the end of the lease life.

To build the schedule we calculate the interest on the principal

then, we subtract that from the installment to get the principal amortization  and solve for the remaining at year-end

we repeat this procedure during the life of the lease.

Jan 1st, 2021

the journal entries will recognize the lease liability, the cash from the first payment, and the trailers received

Dec 31st, 2021

Here we must recognize the interest expense as well as the decrease in the lease liability.

A firm pays a $11.80 dividend at the end of year one (D1), has a stock price of $145, and a constant growth rate (g) of 4 percent. Compute the required rate of return (Ke). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Answers

Answer:

The required rate of return is 12.13%

Explanation:

According to the DDM model, the formula for a price of a stock is

P=D1/R-G

D1= Year end dividend

P= Stock price

R= required rate of return

G= Growth rate of stock

SO we will input the values given to us in the question, in this formula.

145=11.80/(R-0.04)

145R - 5.8=11.80

145R= 17.6

R=17.6/145

R=0.121

R= 12.13%

Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales $ 1,000,000 Variable expenses 390,000 Contribution margin 610,000 Fixed expenses 625,000 Net operating income (loss) $ (15,000 ) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Division East Central West Sales $ 250,000 $ 400,000 $ 350,000 Variable expenses as a percentage of sales 52 % 30 % 40 % Traceable fixed expenses $ 160,000 $ 200,000 $ 175,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $15,000 based on the belief that it would increase that division's sales by 20%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented? 2-b. Would you recommend the increased advertising?

Answers

Answer:

\left[\begin{array}{ccccc}&East&Central&West&Total\nSales&250000&400000&350000&1000000\nVariable Cost&-130000&-120000&-140000&-390000\nContribution&120000&280000&210000&610000\nTracable fixed&-160000&-200000&-175000&-535000\nOperating Income&-40000&80000&35000&75000\nCommon&&&&-90000\nNet Income&&&&-15000\n\end{array}\right]

Income Smatement will increase by 27,000

Therefore to 13,000 net income from 15,000 net loss.

I would recommended.

Explanation:

We will calcualte the contribution per division and the opèrating income at division level. Then, we apply the common fixed cost and get the net income.

Increase of West division sales by 20%

350,000 x 20% = 70,000

70,000 x ( 1-40%) = 42,000 increase in contribution

less 15,000 adertizing cost: 27,000

Answer: (1) Divisional segmented margin East ($40,000) Central $80,000, West $35,000 (2) incremental profit $27,000 (b ) I would recommend the increased advertising because it would increase profit by $27,000

Explanation:

East. Central. West. Total

Sales 250,000. 400,000. 350,000. 1,000,000

Less:variable

Expenses 130,000. 120,000. 140,000. 390,000

---------------- ------------------ ------------------- -------------------

Contribution

Margin. 120,000. 280,000. 210,000. 610,000

Traceable fixed

Expenses. 160,000. 200,000. 175,000. 535,000

Divisional

Segmented margin (40,000) 80,000. 35,000. 75,000

Common fixed

Expenses not traceable to

Division. - - - 90,000

Net operating income (loss) - - - (15,000)

Working of common fixed expenses not traceable to division

Fixed Expenses - Total traceable fixed expenses

625,000 - 535,000 = 90,000

(2)

Incremental contribution (0.2 × 210,000) 42,000

Less : Fixed cost. 15,000

-----------------

Incremental profit. 27,000

-------------------

(b) I would recommend the increased advertising because it would increase profit by $27,000

Ray’s Satellite Emporium wishes to determine the optimal order size for its best-selling satellite dish (Model TS111). Ray has estimated the monthly demand for this model to be 230 units. This model costs Ray $396 to purchase from his supplier. His annual cost to carry inventory is 10% and he estimates that orders cost $38 to process. If Ray used an order quantity of 2000 instead of the optimal order quantity, how much money would he be wasting each year?

Answers

Answer:

It waster $74,941.2‬ per year

Explanation:

The procedure is as follow:

  1. We calcualte the Economic order Quantity
  2. Then we calculatethe cost for EOQ and current order size
  3. compare to know the loss for inefficiency in inventory

1.- EOQ

Q_(opt) = \sqrt{(2DS)/(H)}

D = annual demand 230 units x 12 month = 2,760

S= setup cost = ordering cost = 38

H= Holding Cost= 10% of unit cost 39.60

Q_(opt) = \sqrt{(2*2760*38)/(39.6)}

EOQ = 72.78028371 = 73

2.-  Calculate Cost:

EOQ cost:

orders 2,760 / 73 = 37.80 = 38 order x $38 each = $1,444

holding cost: 73 x 39.6 = $2,890.8

Total: 1,444 + 2,890.8 = 4,334.8

Current Cost:

orders: 2,760 / 2,000 = 1.* = 2 order per year x $38 each = $76

holding cost: 2,000 x 39.6 = 79.200‬

Total 79,200 + 76 = 79,276

3.- Difference:

79,276 - 4,334.8 = 74,941.2‬
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