) A homeowner is considering putting solar panels on the roof of his house. The installed cost of putting 3 kW of solar panels is $6000 and the panels come with a 25 year guarantee. The panels would be able to meet the average monthly electrical consumption of 850 kW-hrs for the house. a) If the homeowner has the $6000 available for the project, what would the cost of electricity from the power company need to be greater than ($/kW-hr) to make the project viable if other investments are providing 8% interest. ($0.0545/kW-hr) b) If the homeowner had to borrow the $6000 from the bank at 5% interest for 10 years (monthly payments) what would the cost of electricity need to be greater than in $/kWhr from the power company to make the project viable if other investments are providing 8% interest. ($0.0476/kW-hr)

Answer:

(a) What is the yield to maturity (annual compounding) on the bond?

Yield to maturity (YTM) = (face value / market price)¹/ⁿ - 1

• face value = $1,000
• market price = $800
• n = 5

YTM = ($1,000 / $800)⁰°² - 1 =  0.0456 or 4.56%

(b) Assume the yield to maturity on comparable zeros increases to 7% immediately after purchasing the bond and remains there. Calculate your annual return (holding period yield) if you sell the bond after one year.

holding period yield = (end of period value - initial value) / initial value

initial value = $800

end of period value = ?

to determine the end of period value we must solve:

7% = ($1,000 / ?)⁰°²⁵ - 1

1.07 = ($1,000 / ?)⁰°²⁵

1.07⁴ = $1,000 / ?

? = $1,000 / 1.3108 = $762.90

holding period yield = ($762.90 - $800) / $800 = -4.64%

(c) Assume yields to maturity on comparable bonds remain at 7%, calculate your annual return if you sell the bond after two years.

1.07³ = $1,000 / ?

? = $1,000 / 1.225 = $816.30

holding period yield = ($816.30 - $800) / $800 = 2.04%

annualized return = (1 + total return)¹/ⁿ - 1 = (1 + 0.0204)¹/² - 1 = 1.01%

(d) Suppose after 3 years, the yield to maturity on similar zeros declines to 3%.  Calculate the annual return if you sell the bond at that time.

1.03² = $1,000 / ?

? = $1,000 / 1.0609 = $942.60

holding period yield = ($942.60 - $800) / $800 = 17.83%

annualized return = (1 + total return)¹/ⁿ - 1 = (1 + 0.1783)¹/³ - 1 = 5.62%

Final answer:

This business related question deals with the calculation and understanding of yield to maturity and holding period yield related to a zero-coupon Treasury bond. The yield to maturity is the estimated total return if a bond is held until it matures. The holding period yield is dependent on the current market conditions and may alter if the bond is sold before it reaches its maturity.

Explanation:

To answer these questions, you first need to understand key concepts related to bonds. A zero-coupon bond is a bond that doesn't give regular interest payments to the investor. Instead, the investor purchases the bond for a price lower than its face value, then receives the face value when the bond reaches maturity. The difference represents the investor's profit.

Let's handle each sub-question in the context of a five-year zero-coupon Treasury bond that you bought for $800 but has a face value of $1000:

a) The yield to maturity (YTM) is the total return anticipated on a bond if it is held until it matures. Yield to maturity is expressed annually as a percentage. In this case, the equation to solve for yield to maturity is: $1,000 = $800*(1+YTM)^5. Normally, it's impossible to directly solve this equation for YTM (without using calculators or software with financial functions), making it a more complex business topic.

b & c) The holding period yield is different than the yield to maturity and takes into account the current market conditions. In this scenario, if interest rates were to rise to 7%, the bond's value would decrease, impacting your returns if you decided to sell before maturity.

d) The same concept applies if yield to maturity changes after 3 years or at any other time before maturity. An alteration in the market interest rates would affect the price at which you could sell your bond, hence influencing your annual return.

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Answer:

The correct answer is letter "A": sales promotion.

Explanation:

Sales promotion is the marketing technique in which the benefits or special features of a product or service are provided to potential customers directly. In some cases, the sales promotion also is provided to the distribution channel so later the distribution channel reuses the information obtained to promote the same goods or services to the final customers.

Answer:

$20,000

Explanation:

The computation of the taxable gain is shown below:

The corporate gain is

= $40,000 - $20,000

= $20,000

Now the stock basis is increased i.e.

= $20,000 + $20,000

= $40.000

Now the stock basis decreased to zero i.e.

= $40,000 - $40,000

= $0

So, here the taxable gain is of $20,000

Answer:

the answer is in the explanation

Explanation:

particulars                                                 cost                           retail

beginning inventory                            $17,564.00               $42,500.00

purchases                                            $51,500.00               $88,500.00

purchases returns                              $-2,100.00               $ -3,000.00

freight on purchsases                        $2,600.00  

total                                                     $69,564.00                              $1,28,000.00

(+) markups                                                                                  $10,100.00

(-)markup cancellation                                                              $ -1,700.00

COST OF GOODS AVAILABLE           $69,564.00                 $1,36,400.00

FOR SALE

(+) mark downs                                                                               $-9,800.00

(-) markdown cancellations                                                 $2,900.00

sale price of goods available            $69,564.00             $1,29,500.00

for sale(A)

(-) net sales($106300-$2100)(B)                                           104200

ending inventory at retail price                                     $25,300.00

(A-B)  

ENDING INVENTORY BY CONVENTIONAL RETAIL INVENTORY METHOD  

COST OT RETAIL RATIO=             69567/136400*100          51%

ENDING INVENTORY=                    25300*51%               $12,903.00

ENDING INVENTORY AT LIFO RETAIL INVENTORY METHOD    

                                           COST(A)  RETAIL PRICE(B)  COST TO RETAIL

                                                                                               RATIO(A/B)

BEGINNING INVENTORY  17564          42500                       41%

COST OF GOODS             69564         136400                      51%

AVAILABLE FOR SALE

ENDING INVENTORY      LAYERS AT    COST TO        ENDING LIFO

PRICE                             RETAIL PRICE     RETAIL          RETAIL

                                                                      RATIO           COST

                                                (A)                   (B)                 (A)*(B)

$25,300.00        OPENING   $ 42,500.00    41%               17425

                            CLOSING   $ -17,200.00    51%              -8772

                                               $ 25,300.00                          8653

ENDING INVENTORY AT LIFO RETAIL INVENTORY METHOD=$8653

Final answer:

The estimated ending inventory for Cullumber’s Boutique using the conventional retail inventory method is approximately $15,171. This is calculated by adjusting the beginning inventory at retail price, computing the cost-to-retail ratio, and applying it to the ending inventory at the retail price.

Explanation:

To compute the ending inventory using the conventional retail inventory method, we first need to adjust the beginning and ending inventory to account for the markups, markdowns, and returns.

Firstly, we calculate the adjusted beginning inventory by taking the beginning inventory at the retail price and subtracting markdowns, markdown cancellations, and adding markups and markup cancellations:

• Adjusted beginning inventory at retail price = $42,500 - $9,800 + $2,900 + $10,100 - $1,700 = $44,000

Next, we add the net purchases at the retail price to the adjusted beginning inventory to determine the Goods Available for Sale at retail price:

• Net purchases = Purchases (at sales price) + Freight on purchases - Purchase returns (at sales price) = $88,500 + $2,600 - $3,000 = $88,100
• Goods Available for Sale at retail price = Adjusted beginning inventory + Net purchases = $44,000 + $88,100 = $132,100

Afterward, we subtract the sales and sales returns at retail price to get the ending inventory at the retail price:

• Ending inventory at retail price = Goods Available for Sale at retail - Sales Revenue + Sales returns = $132,100 - $106,300 + $2,100 = $27,900

Lastly, to convert the ending inventory from retail price to cost, we use the cost-to-retail ratio:

• Cost-to-retail ratio = (Beginning Inventory at cost + Purchases at cost + Freight on purchases - Purchase returns at cost) / (Beginning Inventory at retail + Purchases at retail - Purchase returns at retail)
• Cost-to-retail ratio = ($17,564 + $51,500 + $2,600 - $2,100) / ($42,500 + $88,500 - $3,000) = $69,564 / $128,000 ≈ 0.5435
• Ending inventory at cost = Ending inventory at retail price × Cost-to-retail ratio = $27,900 × 0.5435 ≈ $15,171

The estimated ending inventory at cost using the conventional retail inventory method is approximately $15,171.

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