Answer:
a. 4.94%
b. 11.48%
Explanation:
Here in this question, we are interested in calculating the pretax cost of debt and cost of equity.
We proceed as follows;
a. From the question;
The debt equity ratio = 1.15
since Equity = 1 ; Then
Total debt + Total equity = 1 + 1.15 = 2.15
Mathematically ;
WACC = Cost of equity x Weight of equity + Pretax Cost of debt x Weight of debt x (1-Tax rate)
Where WACC = 8.6%
Cost of equity = 14%
Weight of equity = 1/(total debt + total equity) = 1/(1+1.15) = 1/2.15
Pretax cost of debt = ?
Weight of debt = debt equity ratio/total cost of debt = 1.15/2.15
Tax rate = 21% = 0.21
Substituting these values, we have;
8.6% = 14% x 1/2.15 + Pretax cost of debt x 1.15/2.15 x (1-21%)
8.6% = 14% x 1/2.15 + Pretax cost of debt x 1.15/2.15 x (1-21%)
Pretax cost debt = (8.6%-6.511628%)/(1.15/2.15 x (1-21%))
Pretax cost of debt = 4.94%
b. WACC = Cost of equity x Weight of equity + After tax Cost of debt x Weight of debt
8.6% = Cost of equity x 1/2.15 + 6.1% x 1.15/2.15
Cost of equity = (8.6%-3.26279%)/(1/2.15)
Cost of equity = 11.48%
b. rise, so firms decrease investment.
c. fall, so firms increase investment.
d. fall, so firms decrease investment.
Answer:
October
direct labor rate variance =$2,420 unfavorable
direct labor efficiency variance =$11,060 favorable
direct labor cost variance = $ 8,640 favorable
Investigate : direct labor efficiency variance
November
direct labor rate variance = $4,025 unfavorable
direct labor efficiency variance =$ 39,500 favorable
direct labor cost variance = $35,475 favorable
Investigate : direct labor efficiency variance
Explanation:
October
direct labor rate variance = (Aq × Ap) - (Aq × Sp)
= (12,100×$16) - (12,100×$15.80)
=$2,420 unfavorable
direct labor efficiency variance = (Aq × Sp) - (Sq × Sp)
=(12,100 × $15.80) - (6,400×2 ×$15.80)
=$11,060 favorable
direct labor cost variance = direct labor rate variance + direct labor efficiency variance
= $2,420 (A) + $11,060 (F)
= $ 8,640 favorable
November
direct labor rate variance = (Aq × Ap) - (Aq × Sp)
= (16,100×$16.05) - (16,100×$15.80)
= $4,025 unfavorable
direct labor efficiency variance = (Aq × Sp) - (Sq × Sp)
=(16,100 × $15.80) - (6,800×2 ×$15.80)
=$ 39,500 favorable
direct labor cost variance = direct labor rate variance + direct labor efficiency variance
= $4,025 (A) + $ 39,500 (F)
= $35,475 favorable
b. the incoming cash and outgoing cash
c. the assets purchased with cash contributed by the owner and the cash spent to operate the business
d. the amounts received from customers for goods or services and the amounts paid for the inputs used to provide the goods or services
Answer: D) the amounts received from customers for goods or services and the amounts paid for the inputs used to provide the goods or services
Explanation:
The profit is the difference between the income and the expenses as:
Profit = Income - expense
Income is money that one earn profit in their business and expenses are the money which we spend. And your total income is your revenue. And if the number is in positive value then, it makes profit. Therefore, (D) is the correct option.
Profit, in financial terms, is the monetary gain realized when the amount earned from a business activity (typically selling goods or services) exceeds the costs, overhead, and taxes necessary to sustain the activity. This is represented by option D in your query. The formula for profit is: total revenue - total costs.
In the context of business, 'Profit' is mentioned as the difference between the amounts received from customers for goods or services and the amounts paid for the inputs used to provide those goods or services. This definition is represented by option D in your question. To give an example, if you run a candy shop and you sell $500 worth of candies in a day, but the candies’ original cost is $200, and you have spent an additional $50 on operation costs, your profit for the day would be: $500 (amount received from sales) - $200 (cost of candies) - $50 (operation cost) = $250. This is known as Net Profit.
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Answer:
The price of the preferred stock should be $ 50.
Explanation:
Price of the issued preferred stock: semianual dividend of $2 per share.
Annual discount rate: 8%
With these details we are able to perfom the following calculations:
Annual Preferred Dividend = Semi Annual Dividend x 2
= $2.00 x 2 = $4.00 per share
Then we know that the Price of Preferred Stock = Annual Dividend per share on Preferred Stock / Discount Rate
So this is= $4.00 per share / 0.08
= $50.00 per share. Price of the preferred stock
Answer:
Williams Construction’s payment would be $57.4 million
Explanation:
According to the given data we have the followng:
cost of new facility=$45 million
money borrowed=$42 million
interest rate=8%
Therefore, to calculate the amount of Williams Construction’s payment we would have to calculate the following formula:
amount of Williams Construction’s payment=P(1+r)∧n
amount of Williams Construction’s payment=$42 million(1+0.08)∧4
amount of Williams Construction’s payment=$57.4 million
Williams Construction’s payment would be $57.4 million
Answer:
The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be $102480
Explanation:
For computing the cash disbursements for manufacturing overhead, the calculation is shown below:
= Direct labor cost + Fixed manufacturing overhead
where,
direct labor cost = Direct labor hours × per labor rate
= 6,100 × $3.00
= $18,300
And, in budgeted fixed manufacturing overhead, the depreciation should be deducted as it is a non cash expense.
So,
= Budgeted fixed manufacturing overhead - depreciation
= $103,090 - $18,910
= $84,180
Now apply the above values to the formula.
So, cash disbursements is = $18,300 + $84,180 = $102480
Hence, The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be $102480
The January cash disbursements for manufacturing overhead in Morrish Inc.'s budget are calculated by adding the total variable costs ($18,300) to the fixed costs excluding depreciation ($84,180), amounting to $102,480.
To calculate the January cash disbursements for manufacturing overhead on the Morrish Inc.'s manufacturing overhead budget, we need to separate the overall costs into its components, namely fixed and variable costs.
In this case, the variable overhead rate is $3.00 per direct labor-hour, and the company expects to require 6,100 direct labor-hours in January. This gives a total variable cost of 6100 * $3 = $18,300.
The fixed manufacturing overhead is stated as $103,090, however, this includes a depreciation cost of $18,910. As depreciation is a non-cash expenditure, it should be excluded from the cash disbursements calculation. Therefore, the fixed costs for this calculation will be $103,090 - $18,910 = $84,180.
Add together the variable and fixed costs to get the total January cash disbursements for manufacturing overhead: $18,300 (variable) + $84,180 (fixed) = $102,480.
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