It is estimated that a certain piece of equipment can save $ per year in labor and materials costs. The equipment has an expected life of years and no market value. If the company must earn a % annual return on such investments, how much could be justified now for the purchase of this piece of equipment?
Answers
Answer:
The amount that could be justified now for the purchase of this piece of equipment is $73,747.41.
Explanation:
Note: This question is not complete as all the data in it are omitted. A complete question is therefore provided before answering the question as follows:
It is estimated that a certain piece of equipment can save $22,000 per year in labor and materials cost. The equipment has an expected life of five years and no market value. If the company must earn a 15% annual return on such investments, how much could be justified now for the purchase of this piece of equipment?
The explanation to the answer is now given as follows:
To calculate this, the formula for calculating the present value of an ordinary annuity is used as follows:
PV = P * [{1 - [1 / (1 + r)]^n} / r] …………………………………. (1)
Where;
PV = Present value of the amount to justify the equipment purchase = ?
P = yearly savings in labor and materials costs = $22,000
r = annual return rate = 15% = 0.15
n = Equipment has an expected life = 5
Substitute the values into equation (1) to have:
PV = $22,000 * [{1 - [1 / (1 + 0.15)]^5} / 0.15]
PV = $22,000 * [{1 - [1 / 1.15]^5} / 0.15]
PV = $22,000 * [{1 - 0.869565217391304^5} / 0.15]
PV = $22,000 * [{1 - 0.497176735298289} / 0.15]
PV = $22,000 * [0.502823264701711 / 0.15]
PV = $22,000 * 3.35215509801141
PV = $73,747.41
Therefore, the amount that could be justified now for the purchase of this piece of equipment is $73,747.41.
Final answer:
The question asks about the amount a company can justify spending on equipment, based on expected savings and a required rate of return. This requires understanding the concept of Present Value in financial calculations, using the formula PV = CF / (1 + r.
Explanation:
The problem is related to the concept of Present Value in finance. Present value is the current worth of a future sum of money or stream of cash flows given a specified rate of return. In this scenario, the stream of cash flows is the annual savings in labor and materials costs due to the equipment. The return rate is the annual return the company requires on such investments.
To calculate the present value, use the formula:
PV = CF / (1 + r
Where:
PV is the Present Value
CF is the annual savings (Cash flow)
r is the annual return rate
n is the expected life of the equipment.
Plug in the given values into this formula to get the amount the company could justify for the purchase of this equipment. Do remember, the rate (r) is expressed in decimal, so if the annual return is say, 5%, use 0.05 in the formula.
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True or false. The primary functions of price in a free market are to inform, direct, and motivate consumers and firms.
Required:
a. Determine the proceeds of the note, assuming that the note carries an interest rate of 6%.
b. Determine the proceeds of the note, assuming that the note is discounted at 6%.
Answers
Answer:
A. $100,000
B.$99,000
Explanation:
A. Calculation for Determining the proceeds of the note, assuming that the note carries an interest rate of 6%
Based on the information given the note is not discounted which means the face value is equal to the proceeds of $100,000
Hence,
Face value = Proceeds of $100,000
Therefore the proceeds of the note, assuming that the note carries an interest rate of 6% will be $100,000
b. Calculation for Determining the proceeds of the note, assuming the note is discounted at 6%
First step is to find the discount
Using this formula
Discount = Face value amount x Discount rate x (term of note / 360)
Let plug in the formula
Discount= $100,000 x .06 x 60/360
Discount =$360,000/360
Discount= $1,000
Second step is to calculate for the Proceeds
Calculation for the Proceeds
Using this formula
Proceeds = face amount – discount
Let plug in the formula
Proceeds=$100,000 – $1,000
Proceeds= $99,000
Therefore the proceeds of the note, assuming that the note is discounted at 6% will be $99,000
Answers
Answer:
The correct option is d) only the face of the instrument
Explanation:
Here when Leilani is entering in to a contract with Metro taxi company to work as a cabdriver, the contract made by the Metro taxi company has clearly stated the terms of condition for the job of cabdriver and it is told in the question that the terms of contract were unequivocal which means all the terms and condition were clearly stated and there was no confusion regarding any of the detail.
So when under the plain meaning rule, the meaning of the terms would be determined only the basis of what is written in the contract not on any extrinsic evidence or something which is not there but only on the face of the instrument.
Answers
Answer:
MONTY
cash 216,000
bond payable 216,000
interest expense 4,320
cash 4,320
interest expense 4,320
interest payable 4,320
Flounder
cash 178,080
bond payable 168,000
interest payable 10,080
interest payable 10,080
cash 10,080
interest expense 10,080
interest payable 10,080
Explanation:
Monty
issuance will receive the same amount as face value, as it was issued at par
July 1st payment: 216,000 x 8%/4 = 4,320
we divide by 4 as the payment are quarterly and there are 4 quarter per year
we recognize this interest expense and pay it.
accrued interest at December 31th:
we will recognize the interest accrued form october 1st to december 31th
we put a payable account as there is no cash payment
Flounder
issuance will receive the same amount as face value, and the interest accrued from Jan 1st to June 30th as the bonds were issued with delay
168,00 x 12%/2 = 10,080 interest payable
(the payment are semiannually so we split the rate in two)
The sum of these payable and the face value will be the cash proceeds to Flounder
july 1st payment
we "pay" the interest agains the payable account
accrued interest at December 31th:
168,00 x 12%/2 = 10,080 interest expense
we will recognize the nterest accrued form July 1st to december 31th
we put a payable account as there is no cash payment
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 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%
Answers
Answer:
December 31, 2022 Bad debts $ 2975
Explanation:
On December 31, 2021, Accounts Receivable $70,000
Allowance for Uncollectible Accounts $1,250
During 2022, Bad Debts $2,675
Allowance for Uncollectible Accounts $5,650 at December 31, 2022
Bad debt expense for 2022 would be
December 31, 2021
Allowance for Uncollectible Accounts $1,250
During 2022, Bad Debts $2,675
Required Adjustment $ 1425
December 31, 2022 Bad debts $ 2975
Allowance for Uncollectible Accounts $5,650 adjusted Balance
Allowance for Uncollectible Accounts Written Off $2,675
Required Adjustment $ 2975
Answer:
$7,075
Explanation:
Bad debt expense occur when the account receivables are no longer collectible due to inability to fulfill financial obligations by the customers in which it must be recorded and accounted for every time a company prepares its financial statements
Bad debt expense = $5,650− ($1,250 − $2,675) = $7,075
Therefore Bad debt expense for 2022 would be $7,075
Answers
Answer:
recognize a liability and an expense in its financial statements.
Explanation:
Contingent liability refers to a liability that arises in some unpredictable future event. In this, the amount is expected or predicted.
Here in the question the actual occurrence would be categorized also its amount would be predicted so the same is to be recorded as a liability and recorded as an expense in the financial statement i.e. balance sheet & income statement