Answer:
A project can create a positive operating cash flow without affecting sales.
Explanation:
A project cash flow analysis permits to look the cash inflows and cash outflows that are along with the existing or upcoming project. Also it addressed the opportunity cost
So as per the given situation, it involved that project in which it establish the positive operating cash flow without impacting the sales
Therefore as per the given options, the above statement represent an answer
Groupon offers online coupons for bargains at local shops and restaurants. Which of the following is a reason that rivals are limiting its growth?
a. Not many firms possess the same capability
b. Its core capability is easily imitated
c. Its core capability is not easily imitated.
d. There are few equivalent capabilities.
Answer:
b. Its core capability is easily imitated
Explanation:
In Business management, a strategy can be defined as a set of guiding principles, actions and decisions that an organization combines so as to achieve its business goals, attract customers and possess a competitive advantage over its rivals in the industry.
In this scenario, Groupon offers online coupons for bargains at local shops and restaurants. A reason that rivals are limiting its growth is simply because its core capability is easily imitated i.e offering of coupons for bargains.
Comparative advantage in economics is the ability of an individual or country to produce a specific good or service at a lower opportunity cost better than another individual or country.
The comparative advantage gives a country a stronger sales margin than their competitors as they are able to sell their specific products or render their peculiar services at a lower opportunity cost.
Carpet Renewal dyes carpets for residential customers. The company is interested in estimating fixed and variable costs. The following data are available for the month of June when 420 carpets were dyed:
Office rent $ 1,250
Depreciation - equipment 900
Cleaning supplies 5,140
Hourly wages 11,000
Transportation (variable) 3,600
Owner’s salary 3,100
Total $24,990
Using account analysis, how much is estimated variable cost per carpet?
a. $59.50
b. $52.12
c. $47.00
d. $38.43
Answer: c. $47 per carpet
Explanation:
Total variable costs are:
= Cleaning supplies + Hourly wages + Transportation
= 5,140 + 11,000 + 3,600
= $19,740
The variable cost per carpet is:
= Total variable cost / Number of carpets dyed
= 19,740 / 420
= $47 per carpet
The common stock of Eddie's Engines, Inc. sells for $45.68 a share. The stock is expected to pay $4.10 per share next year. Eddie's has established a pattern of increasing their dividends by 6.2 percent annually and expects to continue doing so. What is the market rate of return on this stock?
a. 15.18 percent
b. 7.26 percent
c. 8.98 percent
d. 17.67 percent
e. 11.14 percent
Answer:
no entiendo la verdad es que yo hablo español y no entiendo ajaj espero te ayude
Explanation:
15.18
Corris Co. accumulates the following data concerning a mixed cost, using miles as the activity level. Miles Driven Total Cost January 10,000 $17,000 February 8,000 13,500 March 9,000 14,400 April 7,000 12,500 Compute the variable and fixed cost elements using the high-low method. (Round variable cost to 2 decimal places, e.g. 15.25.)
Answer:
Results are below.
Explanation:
Giving the following information:
Miles Driven Total Cost
January 10,000 $17,000
February 8,000 13,500
March 9,000 14,400
April 7,000 12,500
To calculate the variable cost per unit and the total fixed cost, we need to use the following formula:
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (17,000 - 12,500) / (10,000 - 7,000)
Variable cost per unit= $1.5
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
Fixed costs= 17,000 - (1.5*10,000)
Fixed costs= $2,000
Fixed costs= LAC - (Variable cost per unit* LAU)
Fixed costs= 12,500 - (1.5*7,000)
Fixed costs= $2,000
Duval Co. issues four-year bonds with a $100,000 par value
on January 1, 2019, at a price of $95,952. The annual contract rate is 7%, and interest is paid semiannually on June 30 and December 31.
1. Prepare a straight-line amortization table like Exhibit 14.7 for these bonds.
2. Prepare journal entries to record the first two interest payments.
3. Prepare the journal entry for maturity of the bonds on December 31, 2022 (assume semiannual interest is already recorded).
Answer:
Duval Co.
Journal Entries to record the first two interest payments:
June 30, 2019:
Debit Interest expense $4,006
Credit Cash payment $3,500
Credit Amortization of discounts $506
To record the first interest payment.
December 31, 2019:
Debit Interest expense $4,006
Credit Cash payment $3,500
Credit Amortization of discounts $506
To record the second interest payment.
December 31, 2022:
Debit Bonds Payable $100,000
Credit Cash $100,000
To record the payment on maturity of the bonds.
Explanation:
a) Data and Calculations:
Face value of bonds = $100,000
Price of the bonds = $95,952
Discounts = $4,048
Period of bonds = 4 years
Coupon rate = 7%
Semi-annual amortization of discounts = $506 ($4,048/8)
June 30:
Cash payment = $3,500 ($100,000 * 3.5%)
Amortization of discounts $506
Interest expense = $4,006
December 31:
Cash payment = $3,500 ($100,000 * 3.5%)
Amortization of discounts $506
Interest expense = $4,006
The production possibilities model illustrates an inverse relationship between two goods or services because Group of answer choices of diminishing returns. some goods are more difficult to produce that others. the opportunity cost of producing more of something will rise. production of different types will compete for limited resources.
Answer:
production of different types will compete for limited resources.
Explanation:
The production possibilities curve (PPC) is also known as the production possibilities frontier (PPF) and its a curve which illustrates the maximum (best) combinations of two products that can be produce in an economy if they both depend on these factors;
1. Technology is fixed.
2. Resources are fixed.
Hence, the production possibilities curve represents maximum combinations of products available with fixed resources and technology.
Additionally, the production possibilities curve influences the choice of production used by companies and as such it helps to make the best decision regarding the optimum product mix for a company.
Basically, the production possibilities model illustrates an inverse relationship between two goods or services (an increase in the production of one good or service results in a decrease in the production of another and vice-versa) because production of different types will compete for limited resources.
This ultimately implies that the manufacturing or production of one item (product) is likely to rise or increase provided the production of the other item (product) falls or decreases.
On the Tokyo Stock Exchange, Honda Motor Company stock closed at ¥2,915 per share on Monday, June 6, 2016. Honda trades as an ADR on the NYSE. One underlying Honda share equals one ADR. On June 6, 2016, the ¥/$ exchange rate was ¥107.65/$1.00. (Round your answer to 2 decimal places.) At this exchange rate, what is the no-arbitrage U.S. dollar price of one ADR?
Answer:
$27.08
Explanation:
Calculation to determine the no-arbitrage U.S. dollar price of one ADR
Using this formula
No-arbitrage U.S. dollar price of one ADR=Stock closed per share /Exchange rate
Let plug in the formula
No-arbitrage U.S. dollar price of one ADR=¥2,915 / ¥107.65
No-arbitrage U.S. dollar price of one ADR=$27.078
No-arbitrage U.S. dollar price of one ADR=$27.08 (Approximately)
Therefore the no-arbitrage U.S. dollar price of one ADR is $27.08
Materials Variances Krumple Inc. produces aluminum cans. Production of 12-ounce cans has a standard unit quantity of 4.5 ounces of aluminum per can. During the month of April, 300,000 cans were produced using 1,240,000 ounces of aluminum. The actual cost of aluminum was $0.18 per ounce and the standard price was $0.08 per ounce. There are no beginning or ending inventories of aluminum. Required: Calculate the materials price and usage variances using the columnar and formula approaches. Enter amounts as positive numbers and select Favorable or Unfavorable. Materials Price Variance$fill in the blank 1 Material Usage Variance$fill in the blank 3
Solution :
Variance Calculations Result
Direct material 0.08(300,000 x 4.5 - 1,240,000) 8,800 favorable
usage variance
Direct material 1,240,000 x (0.08 - 0.18) 124,000 unfavorable
price variance
The standard quantity = actual production x standard quantity per unit
= 300,000 x 4.5
= 1,350,000
Both Bond Sam and Bond Dave have 8 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 3 years to maturity, whereas Bond Dave has 18 years to maturity. If interest rates suddenly rise by 5 percent, what is the percentage change in the price of Bond Sam
Answer: -12.1%
Explanation:
Bond Sam was priced at Par which means it could have been priced at $1,000 and its yield was the same as the coupon rate of 8%.
If interest rates rise by 5%, the yield becomes:
= 8% + 5%
= 13%
Price of bond is attached:
Yield = 13% /2 = 6.5% per semiannual period
Coupon = 8% * 1,000 * 0.5 = $40 per semi annual period
Period till maturity = 3 * 2 = 6 semiannual periods
Price = $878.97
Percentage change in price:
= (878.97 - 1,000) / 1,000 * 100%
= -12.1%
asino Inc. expects to pay a dividend of $3 per share at the end of year 1 (Div1) and these dividends are expected to grow at a constant rate of 6 percent per year forever. If the required rate of return on the stock is 18 percent, what is the current value of the stock today?
Answer:
the current stock of the value today is $25
Explanation:
The computation of the current stock of the value today is shown below:
Next year dividend D1 = $3
growth rate g =6% forever
rate of return = 18%
So,
Current Stock Price P = D1 ÷ (r - g)
=3 ÷ (18% - 6%)
= 3 ÷ 12%
= 3 ÷ 0.12
= $25
Hence, the current stock of the value today is $25
If a firm enjoys economies of scale,
its average total cost will increase as production increases
its total costs will decrease as production increases
its average total cost will decrease as production increases
its marginal revenue will increase as production increases
Answer: Its average total cost will decrease as production increases
Explanation: Variable cost will decrease as a result of economies of scale, therefore the cost/unit or average total cost will decrease.
Job enlargement tends to deter an employee's development because:_________
a. it is so time-consuming.
b. means adding new challenges and responsibilities to an employee's current job.
c. means moving the position up the organizational hierarchy.
d. refers to hiring more people for the same job category.
Answer:
b. means adding new challenges and responsibilities to an employee's current job.
Explanation:
Job enlargement refers to rise in the scope of the job via extending the range with respective to the duties and responsibilities of the job normally at the similar level. It means it added the different kind of activities at the similar level and the same is to be added in the existing job
So here the fear in the employee development is that they need to add the new challenges and responsibilities
Therefore the option b is correct
(Ignore income taxes in this problem.) Your Company has a truck that needs a new engine that would cost $35,000. This will extend the useful life of the truck by 5 years. As an alternative, Your Company could buy a brand new truck for $120,000. The new truck would also last 5 years. The annual operating expenses of the old truck are $8,500. The annual operating expenses of the new truck will only be $5,000. The old truck has a salvage value of $12,000 now and $3,500 in 5 years. The new truck is expected to have a $10,000 salvage value in 5 years. Your Company discount rate is 6%. What is the net present value of the decision to buy the new truck instead of repairing the old truck
Answer:
Hence the net cost to the company is 68,160.
NPV to buy a new truck instead of repairing
NPV = -65390
Explanation:
Step 1:-
P.V. of Old Truck Repaired
Given
Discount rate = 6%
New engine = 35000
Life = 5 years
Annual operating expenses = 8500
Salvage (after 5 years)= 3500
Step 2:-
Repair
Net Cost to company = Cost + Annual operating expenses x P.V. Annuity
Factor (6%, 5) - Salvage value x P.V. Intrinsic
Factor (6%, 5)
P.V.A.F. (6%, 5)= [tex]\sum_{5}^{1}1 / (1.06)^{n} = 4.21[/tex]
n = 4.21
P.V.I.F. (6%, 5) = [tex]1/ (1.06)^{5} =0.75[/tex]
Net Cost to company: = 35000 + 8500 x 4.21 - 3500 x 0.75
= 35000 + 35785 - 2625
= 68,160
P.V. of New truck purchased
New Truck
Cost = 120000
Discount rate = 6%
Life = 5 years
Annual operating expenses = 5000
Salvage (after 5 years)= 10000
Net Cost to company: = Cost + Annual operating expenses x P.V. Annuity
Factor (6%, 5) - Salvage value x P.V. Intrinsic
Factor (6%, 5)
= 120000 + 5000 x 4.21 - 10000 x 0.75
= 120000 + 21050 - 7500
= 133550
NPV to buy a new truck instead of repairing
NPV = Net cost of repairing - Net cost of new truck
= 68160 - 133550
= -65390
analysis of the meaning of the bill of lading
Answer:
A bill of lading is a legal document issued by a carrier to a shipper that details the type, quantity, and destination of the goods being carried. 12 A bill of lading is a document of title, a receipt for shipped goods, and a contract between a carrier and shipper.
Explanation:
I searched it up if its not what your looking for my bad sorry.
You are considering an investment project with an internal rate of return of 8.7 percent, a net present value of $393, and a payback period of 2.44 years. Which one of the following is correct given this information?
A. The discount rate used to compute the net present value is equal to the Internal rate of return.
B. The discounted payback period will be less than 2.44 years.
C. The required payback period must be greater than 2.44 years.
D. The discount rate used in computing the net present value was less than 8.7 percent.
E. This project should be rejected based on the net present value.
Answer:
Hence the correct option is d) The discount rate used in computing the net present value was less than 8.7 percent.
Explanation:
As the discount rate increases, the present value decreases, and also at IRR the present value is zero, thus the answer is:-
d) The discount rate used in computing the net present value was less than 8.7 percent
Answer:
D). The discount rate used in computing the net present value was less than 8.7 percent.
Explanation:
'Net Present Value' is described as the 'difference that exists between existing values of cash inflows, as well as, cash outflows for a particular time period.' This assists in evaluating the profitability of an investment and make worthy decisions regarding investment.
As per the details provided, the discount rate considered for estimating the Net Present Value of the investment had been lesser than 8.7% which shows that the Net Present Value in positive i.e. $ 393. However, the investment project is not beneficial at all rather it may cause losses because the required return rate is 9.5% which is actually lesser and therefore, the project would prove incompetent and it must be rejected at once. Thus, option D is the correct answer.
Sigma Corporation applies overhead cost to jobs on the basis of direct labor cost. Job V, which was started and completed during the current period, shows charges of $6,300 for direct materials, $8,600 for direct labor, and $5,848 for overhead on its job cost sheet. Job W, which is still in process at year-end, shows charges of $4,300 for direct materials and $5,400 for direct labor.
Required:
Calculate the overhead cost be added to Job W at year-end.
Answer:
Allocated MOH= $3,672
Explanation:
Giving the following information:
Job V:
DM= $6,300
DL= $8,600
Overhead= $5,848
Job W:
DM= $4,300
DL= $5,400
First, we need to calculate the predetermined overhead rate based on Job V:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
5,848 = Estimated manufacturing overhead rate*8,600
Estimated manufacturing overhead rate= 5,848/8,600
Estimated manufacturing overhead rate= $0.68
Now, the allocated overhead to Job W:
Allocated MOH= 0.68*5,400
Allocated MOH= $3,672
If a firm has a cash cycle of 30 days and an operating cycle of 64 days, what is its average payment period
Answer: 34 days
Explanation:
The average payment period is a measure that is used to show the time the firm takes on average to pay its creditors.
The formula is:
Cash cycle = Operating cycle - Average payment period
30 = 64 - APP
APP + 30 = 64
APP = 64 - 30
APP = 34 days
Blackwell Industries received a 120-day, 9% note for $180,000, dated August 10 from a customer on account. Assume 360-day year. Required: a. Determine the due date of the note. b. Determine the maturity value of the note. When required, round your answers to the nearest dollar. $fill in the blank abd719f5d049ff0_2 c. Journalize the entry to record the receipt of the payment of the note at maturity. If an amount box does not requ
Answer: a. 120 days
b. $185400
Explanation:
a. The due date of the note will be:
August = 31-10 = 21 days
September = 30 days
October = 31 days
November = 30 days
December = 8 days
Total = 120 days
b. The maturity value of the note will be:
= 180000 + (180000 × 9% * 120/360)
= 180000 + (180000 × 0.09 × 0.33)
= 180000 + 5346
= 185346
= 185400 to nearest dollar
3. 8 december
Debit Cash $ 185,400
Credit Note Receivable $180,000
Credit Interest Revenue $5,400
Of all the promotional tools we looked at, which one is the most effective in getting your attention and interesting you in a product? Conversely, which of the tools is something that has a slim to zero chance of reaching you, much less interesting you?
Answer:
There are basically four tools of promotion namely, Advertisement, public relations, sales promotions, and direct marketing.
Of these, direct marketing will be most effective in capturing my attention while public relations will be less effective to me.
Explanation:
Direct marketing involves establishing direct communication with the potential buyer. It allows for a personal relationship with the buyer. Media such as telemarketing, direct mails, and face-to-face marketing are used to sell the goods. I will be easily convinced because I can easily relate with the person selling the goods and ask questions about the product.
Public relations refers to ways the company formally promotes its image to maintain its customer base. Press release is a measure employed by these companies. I will not be captivated by this because of the formality involved. I believe that through these measures, the company only lets out information they will like you t know.
MC Qu. 123 Fallow Corporation has... Fallow Corporation has two separate profit centers. The following information is available for the most recent year: West Division East Division Sales (net) $450,000 $600,000 Salary expense 51,000 65,000 Cost of goods sold 155,000 275,000 The West Division occupies 11,250 square feet in the plant. The East Division occupies 6,750 square feet. Rent, which was $ 90,000 for the year, is an indirect expense and is allocated based on square footage. Compute operating income for the West Division.
Answer:
$187,750
Explanation:
Computation for operating income for the West Division.
OPERATING INCOME FOR THE WEST DIVISION
Sales $450,000
Less Cost of goods sold ($155,000)
Gross profit $295,000
($450,000-155,000)
Less: Salary Expense ($51,000)
Allocated rent ($56,250)
($90,000 * 11250/18,000)
West Division income $187,750
Total area of both division = 11,250 + 6,750 = 18,000 square feet
Therefore operating income for the West Division is $187,750
Aspen Technologies has the following budget data:
Estimated direct labor hours 8,200 Estimated direct labor dollars $64,200 Estimated factory overhead costs $170,100
If factory overhead is to be applied based on direct labor hours, the predetermined overhead rate is:_______.
a. $24.89
b. $20.74
c. $31.12
d. $16.60
Answer:
Overhead rate = $20.74
Explanation:
Below is the given values:
Given the direct labor hours = 8200
Direct labor dollars = $64200
Factory overhead costs =$170100
Use below formula to find the overhead rate.
overhead rate = Overhead cost / Direct labor hours
Now plug the values in formula:
Overhead rate = 170100 / 8200
Overhead rate = $20.74
A company has already incurred $7,200 of costs in producing 6,000 units of Product XY. Product XY can be sold as is for $31 per unit. Instead, the company could incur further processing costs of $10 per unit and sell the resulting product for $35 per unit. Should the company sell Product XY as is or process it further
Answer: Sell as is or lose $36,000
Explanation:
If the company sells as is, they could sell at a price of $31 per unit.
If they process further and sell at $35, they would incur a cost of $10 per unit which leaves them with profit of:
= 35 - 10
= $25
This is lower than the selling price if they sell as is and will therefore give a loss of:
= (31 - 25) * 6,000 units
=- $36,000
Company should sell as is so as not to lose $36,000
Martin Corporation’s (a C corporation) bookkeeper told the owner that she could not have all the tax information ready for the accountant immediately after the tax year end of June 30. She was having surgery and asked if the tax return could be postponed. The accountant’s answer should be:
Answer:
Yes, we can request an extension until the following April 15
Explanation:
In general, there is a room for automatic extension of 6 months for
a corporation to file its income tax return so far appropriate form (7004) has been filed by the corporation, and
estimated unpaid tax liability is been paid before date of the return is due. It should be noted that until tax year 2026, Until June 30 fiscal-year which is tax year 2026 there is duration of 7 months given to the corporation. Though there could be rovoking of the extension by The IRS at any time. tax return of Martin will be due under normall condition by September 15, but since extension comes in it will be due April 15.
You plan to save $6,500 per year for the next 8 years. After the last deposit, you will keep the money in the account for 6 more years. The account will earn an interest rate of 6.8 percent. How much will there be in the account 14 years from today
Answer:
$98,254.57
Explanation:
Value after 8 years
Future Value of Annuity = P * ((1 + r)^n - 1 ) / r
Future Value of Annuity = 6500 * ((1 + 6.8%)^8 - 1) / (6.8%)
Future Value of Annuity = 6500 * [(1.69266113113-1) / 0.068]
Future Value of Annuity = 6500 * 10.18619
Future Value of Annuity = $66,210.24
Value after 14 years
FV = PV * (1 + r )^n
FV = 66210.26*(1+ 6.8%)^6
FV = 66210.26 * 1.483978
FV = $98,254.57
So, the amount that will be there in the account 14 years from today is $98,254.57.
A property title search firm is contemplating using online software to increase the productivity of the researcher performing the search. Currently, an average of 64 minutes is needed to do a title search. The researcher cost is $1.70 per minute. Clients are charged a fee of $410. Company A’s software would reduce the average search time by 20 minutes, at a cost of $3.50 per search. Company B’s software would reduce the average search time by 21 minutes at a cost of $5.50 per search.
a. Calculate the productivity in terms of revenue per dollar of input.
b. Which option would have the highest productivity in terms of revenue per dollar of input?
a) Company A
b) Company B
c) Current
Answer:
a. Productivity in terms of revenue per dollar input:
Cost = Average time taken * Cost per minute + additional cost per search
Current cost = 64 * 1.70 = $108.80
Company A cost = (64 - 20 mins) * 1.70 + 3.50 = $78.30
Company B cost = (64 - 21) * 1.70 + 5.50 = $78.60
Productivity = Client fee / Cost
Current productivity
= 410 / 108.80
= $3.77
Company A
= 410 / 78.30
= $5.24
Company B
= 410 / 78.60
= $5.22
b. Company A is best.
Given the following data: Average Operating Assets $250,000 Total Liabilities $100,000 Sales $600,000 Contribution Margin $150,000 Net Operating Income $30,000 Return on investment (ROI) would be: a. 5%. b. 12%. c. 25%. d. 60%.
Answer:
b. 12%.
Explanation:
The computation of the return on investment is given below:
return on investment is
= net income ÷ avergae total assets
= ($30,000 ÷ $250,000)
= 12%
Hence, the return on investment is 12%
Therefore the option b is correct
And, the same should be considered and relevant
A fixed asset with a cost of $41,000 and accumulated depreciation of $36,500 is traded for a similar asset priced at $60,000. Assuming a trade-in allowance of $3,000, the recognized loss on the trade is
Answer:
1,500
Explanation:
The fixed assets cost is $41,000
The accumulated depreciationn is $36,500
Similar assets was priced at $36,000
Trade in allowance is $3000
Therefore the recognised law on trade can be calculated as follows
41,000-36,500-3,000
= 1,500
If the State of California raised the average state consumer sales tax rate from 9.25 percent to 15 percent, then this sales tax will have its heavist impact on and raise the marginal cost curves for California businesses.
a. True
b. False
Answer: False
Explanation:
Consumer sales tax is not charged to businesses but rather to the customers through a business. The tax would therefore increase the prices of goods and services for consumers and not the businesses.
The businesses would therefore not see their marginal cost curves increase. They could still be affected however, by Californians demanding less goods and services because it is now more expensive for them on account of the new sales tax.
Vortex Company operates a retail store with two departments. Information about those departments follows:
Department A Department B
Sales $832,000 $448,000
Cost of goods sold 410,000 291,200
Direct expenses:
Salaries 117,000 86,000
Insurance 13,500 10,900
Utilities 21,000 25,500
Depreciation 18,000 13,500
Maintenance 6,400 5,200
The company also incurred the following indirect costs.
Salaries $29,000
Insurance 6,600
Depreciation 14,800
Office expenses 40,000
Indirect costs are allocated as follows: salaries on the basis of sales; insurance and depreciation on the basis of square footage; and office expenses on the basis of number of employees. Additional information about the departments follows.
Department Square footage Number of employees
A 29,400 66
B 12,600 44
Required:
a. Determine the departmental contribution to overhead and the departmental net income for department A and Department B.
b. Should Department B be eliminated?
Answer:
Vortex Company
Department A Department B
a. Contribution margin $246,100 $15,700
Net income $188,270 ($16,870)
b. Department B should not be eliminated unless the indirect costs allocated to it can be eliminated as well.
Explanation:
a) Data and Calculations:
Department A Department B
Sales $832,000 $448,000
Cost of goods sold 410,000 291,200
Gross profit $422,000 $156,800
Direct expenses:
Salaries 117,000 86,000
Insurance 13,500 10,900
Utilities 21,000 25,500
Depreciation 18,000 13,500
Maintenance 6,400 5,200
Total direct expenses $175,900 $141,100
Contribution margin $246,100 $15,700
Total indirect expenses 57,830 32,570
Net income $188,270 ($16,870)
Department Square footage Number of employees
A 29,400 66
B 12,600 44
Total 42,000 110
Indirect Costs: Costs Rates Department A Department B
Salaries $29,000 $0.02266 $18,850 $10,150 ($448/$1,280)
Insurance 6,600 $0.15714 4,620 1,980
Depreciation 14,800 $0.35238 10,360 4,440
Office expenses 40,000 $363.64 24,000 16,000
Total costs $90,400 $57,830 $32,570
Suppose you purchase a $1,000 TIPS on January 1, 2021. The bond carries a fixed coupon of 1 percent. Over the first two years, semiannual inflation is 4 percent, 1 percent, 2 percent, and 3 percent, respectively. For each six-month period, calculate the accrued principal and coupon payment.
Answer:
FOR THE FIRST SIX-MONTH PERIOD
Accrued principal = $1,040
Coupon payment = $5.20
FOR THE SECOND SIX-MONTH PERIOD
Accrued principal = $1,050.40
Coupon payment = $5.25
FOR THE THIRD SIX-MONTH PERIOD
Accrued principal = $1,071.41
Coupon payment = $5.36
FOR THE FOURTH SIX-MONTH PERIOD
Accrued principal = $1,103.55
Coupon payment = $5.52
Explanation:
These can be calculated using the following formulae:
Accrued principal = Amount or previous accrued principal * (100% + inflation rate) ...........(1)
Coupon payment = Accrued principal * (Fixed coupon rate * (6 months / 12 months))............(2)
Therefore, we have:
FOR THE FIRST SIX-MONTH PERIOD
Accrued principal = $1,000 * (100% + 4%) = $1,040
Coupon payment = $1,040 * (1% * (6 / 12)) = $5.20
FOR THE SECOND SIX-MONTH PERIOD
Accrued principal = $1,040 * (100% + 1%) = $1,050.40
Coupon payment = $1,050.40 * (1% * (6 / 12)) = $5.25
FOR THE THIRD SIX-MONTH PERIOD
Accrued principal = $1,050.40 * (100% + 2%) = $1,071.41
Coupon payment = $1,071.41 * (1% * (6 / 12)) = $5.36
FOR THE FOURTH SIX-MONTH PERIOD
Accrued principal = $1,071.41 * (100% + 3%) = $1,103.55
Coupon payment = $1,103.55 * (1% * (6 / 12)) = $5.52
