The annual growth rate is I in the following equation: $1(1 + I)10 = $2. We can find I in the equation above as follows: Using a financial calculator input N = 10, PV = -1, PMT = 0, FV = 2, and I/YR = ? Solving for I/YR you obtain 7.18%. Viewed another way, if earnings had grown at the rate of 10% per year for 10 years, then EPS would have increased from $1.00 to $2.59, found as follows: Using a financial calculator, input N = 10, I/YR = 10, PV = -1, PMT = 0, and FV = ?. Solving for FV you obtain $2.59.
Accelerated depreciation refers to any one of several methods by which a company, for 'financial accounting' and/or tax purposes, depreciates a fixed asset in such a way that the amount of depreciation taken each year is higher during the earlier years of an asset’s life. For financial accounting purposes, accelerated depreciation is generally used when an asset is expected to be much more productive during its early years, so that depreciation expense will more accurately represent how much of an asset’s usefulness is being used up each year. For tax purposes, accelerated depreciation provides a way of deferring corporate income taxes by reducing taxable income in current years, in exchange for increased taxable income in future years. This is a valuable tax incentive that encourages businesses to purchase new assets. For financial reporting purposes, the two most popular methods of accelerated depreciation are the declining balance method and the sum-of-the-years’ digits method.
Profit: the amount of money a business has made over a certain time period. Profit= Total revenue-Total costs. Budgets Budgets Profit Profit Net profit margin: A net profit margin is a ratio that expresses a business’s profit after the deduction of all costs, as a percentage of sales income. Net profit margin= Net profit x 100 / sales revenue Net profit margin: A net profit margin is a ratio that expresses a business’s profit after the deduction of all costs, as a percentage of sales income. Net profit margin= Net profit x 100 / sales revenue Profit is when a business is generating higher revenue than its total costs over a period of time.
What are the earnings after interest? Firm A Firm B EBIT $3,000.00 $3,000.00 Interest 0 500 $3,000.00 $2,500.00 c. If sales increase by 10 percent to 11,000 units, by what percentage will each firm’s earnings after interest increase? To answer the question, determine the earnings after taxes and compute the percentage increase in these earnings from the answers you derived in part b. Firm A Firm B Sales Revenue: 11,000 x $2.50= $27,500.00 $27,500.00 Variable Cost: 11,000 x $1= $11,000.00 $11,000.00 Fixed Cost: $12,000.00 $12,000.00 EBIT $4,500.00 $4,500.00 Interest: 0 500 $4,500.00 $4,000.00 50% 60% Increases d. Why are the percentage changes different? The percentage changes are different because of the interest Firm B is paying on their debt interest.
Given the following cash flow stream at the end of each year: Year 1: $4,000 Year 2: $2,000 Year 3: 0 Year 4: -$1,000 Using a 10% discount rate, the present value of this cash flow stream is: a. $4,606 b. $3,415 c. $3,636 d. Other 8. Consider a 10-year annuity that promises to pay out $10,000 per year, given this is an ordinary annuity and that an investor can earn 10% on her money, the future value of this annuity, at the end of 10 years, would be: a. $175,312 b.
Redo questions a, b, c, and d under these conditions. a. Total revenue | (100x7500) | | $750,000 | Total Var Cost | (25x7500) | | 187,500 | Total contribution margin | | $562,500 | Fixed Costs | | | 500,000 | Profit | | | $62,500 | b. Contribution margin: $75; breakeven point: Contribution margin x Volume=FC $75 x Volume = $500,000 Volume = 6,667 c. ($75 x Volume)-$500,000 = $100,000 $75 x Volume = $600,000 Volume = 8,000 ($75 x Volume)-$500,000 = $200,000 $75 x Volume = $700,000 Volume = 9,333 d. | | | | | | | | | | | | e. Total revenue | (80x7500) | | $600,000 | Total Var Cost | (25x7500) | | 187,500 | Total contribution margin | | $412,500 | Fixed Costs | | | 500,000
This percentage is obtained by dividing the margin of safety in dollar terms by total sales. Following equation is used for this purpose. [Margin of Safety = Margin of safety in dollars / Total budgeted or actual sales] Example: Sales(400 units @ $250) | $100,000 | Break even sales | $87,500 | Calculate margin of safety | Calculation: | Sales(400units @$250) | $100,000 | Break even sales | $ 87,500 | | --------- | Margin of safety in dollars | $ 12,500 | | ======= | Margin of safety as a percentage of sales:12,500 / 100,000= 12.5% | It means that at the current level of sales and with the company's current prices and cost structure, a reduction in sales of $12,500, or 12.5%, would result in just breaking even. In a single product firm, the margin of safety can also be expressed in terms of the number of units sold by dividing the margin of safety in dollars by the selling price per unit. In this case, the margin of safety is 50 units ($12,500 ÷ $ 250 units = 50 units).
This study is based on how the portfolio turnover ratio affects the returns of the mutual funds. Portfolio turnover is a valuable tool to analyze the investment strategies of a Fund Manager, fund cost structure and tax exposure. It helps in measuring how actively the Fund manager manages the portfolio investment. The rate of trading activity in a fund’s portfolio is the lesser of purchases or sales of the portfolio securities for a financial year divided by the average value of portfolio securities during the year. If a fund has 100 percent turnover rate that means the fund manager, in theory has sold every single stock position once.
ALTERNATIVE PROBLEMS AND SOLUTIONS ALTERNATIVE PROBLEMS 11- 1A. (Individual or Component Costs of Capital) Compute the cost for the following sources of Financing: a. A bond that has a $1,000 par value (face value) and a contract or coupon interior rate of 12%. A new issue would have a flotation cost of 6% of the $1,125 market value. The bonds mature in 10 years.
Question 3 Which price increase is needed to offset the profit impact of the increased raw material costs (assuming that volumes are constant)? Which price decrease will result from instituting price-flex (assume a best case and a worst case)? Answer 3 The selling price would increase by offsetting the raw material cost which is given in the “Appendix A” which shows that increase in the price by 6.5% would result in the positive side and a reductioncompany from reduction in the price. Understanding all this is done with respect to the case material. The volume is a constant which is assumed at 80% in the analysis of the price.