$600,000 Chapter 18 In-Class Problems (with solutions) ACG3151 How much of the dividend will be paid to the common shareholders, and how much will be paid to the preferred shareholders? Common Shareholders=$10,000 Preferred Shareholders=$80,000($60,000 cumulative, $20,000 participating) 3. Tom, Inc. issued 1,000,000 shares of $2 par common stock in 2005 for $9 per share. In 2008 Tom, Inc. repurchased 100,000 shares at a price of $8 per share. On March 30, 2009 they decide to resell 50,000 shares at a price of $13 per share.
Ignoring taxes, the correct opportunity cost for this machine in capital budgeting decisions is: A. $75,000 B. $25,000 C. $20,000 D. $5,000 4. What is the amount of the operating cash flow for a firm with $500,000 profit before tax, $100,000 depreciation expense, and a 35% marginal tax rate? A.
$24,000 B. $75,000 C. $99,000 D. $51,000 E. $80,000 Difficulty: Easy 3. On January 1, 2008, Pacer Company paid $1,920,000 for 60,000 shares of Lennon Co.'s voting common stock which represents a 45% investment. No allocation to goodwill or other specific account was made. Significant influence over Lennon was achieved by this acquisition.
After the transaction this shareholder no longer has a controlling interest. Given these facts, to induce the shareholder to sell the block of stock Target Inc. was forced to pay an amount in excess of the current market price of the stock. Target Inc. paid the shareholder $40 per share when the market price was $30 per share. Question How should Target Inc. account for the purchase of this treasury stock? Required 1.Provide a brief written description of the proper accounting treatment, including how the extra $10 paid per share is recorded.
Calculate the expected return and standard deviation of his portfolio if he invests: (a) 40% in share X and 60% in share Y. [40%] (b) 70% in share X and 30% in share Y. [40%] (c) Calculate the correlation coefficient between X and Y. [20%] Question 3 a) Suppose your neighbour wants to invest in bonds. One of the choices is a corporate bond with a coupon rate 2%, 2-year maturity with par value of £1000 paying annual coupon payment.
The estimated sales and production of 10,000 pairs of skis as the expected volume, the accounting department has developed the following cost per pair: Direct Labor $35.00 Direct Material $30.00 Total Overhead $15.00 Total Cost $80.00 Under this scenario the company will have no profit, but no loss. In order to continue production during the off season, keeping employees working this scenario of breakeven will provide the company with the ability to continue production. Ski Pro has obtained a purchase price from a subcontractor for the bindings. The accounting department provided a predicted savings of 10% for direct labor and variable overhead cost with a 20% savings on the direct material cost. Under this scenario, as you seen on the spreadsheet provided, the company will make a profit of $.50 per ski.
Question: (TCO4) BMX Co. sells item XJ15 for $1,000 per unit, and has a cost of goods sold percentage of 80%. The gross profit to be found for selling 20 items is: Your Answer: Instructor Explanation: Their income statement should start with revenues minus cost of goods sold equals gross profit. (20*$1,000) – [20($1,000.80) ] = Gross Profit. Points Received: 0 of 5 Comments: 3. Question: (TCO4) When the LIFO method is used, cost of goods sold is assumed to consist of: Your Answer: Instructor Explanation: LIFO means last in, first out, so the last units purchased are sold and the remaining units are assumed to consist of the first units.
Capital Budgeting Case Virginia Sacco University of Phoenix Quantitative Reasoning for Business QRB 501 Li Guohong March 10, 2014 Capital Budgeting Case My company is contemplating to acquire another corporation, “Corporation A” or “Corporation B” on a $250,000 budget. Corporation A: Revenues = $100,000 in year one, increasing by 10% each year. Expenses = $20,000 in year one, increasing by 15% each year/ Depreciation expense = $5,000 each year. Tax rate = 25%. Discount rate = 10%.
The manager cited the resulting high depreciation charges as the justification for the price boost. He asked the president of the company to instruct Division P to buy from S at the $220 price. He supplied the following information: P's annual purchases of component 2,000 units S's unit and batch-related costs per unit $190 S's capacity related costs per unit $20 S's required return on investment $10 Suppose there are no alternative uses of the S facilities. Required 1) Will the company as a whole benefit if P buys from the outside suppliers for $200 per unit? 2) Suppose the selling price of outsiders drops another $15 to $185.
* What is their portfolio? Targeted companies would have enterprise value of $200mn to$2bn Invested $50mn to $500mn of equity in a company and borrowed the rest Generalist equity investor and not separated by sector or region 40% in retail, 26% industrial sector, 25%business service * How do they choose investments? Berkshire adopted a conservative approach in choose investment. ; Consensus method of deal analysis (Mondaymorning Firm Meetings); Multiple MDs worked on the same deals to seize it; and Majority voting by the staff before acquiring accompany. * How does its culture help or hinder investment choices?