accounting homework

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Please solve the
problems on excel and or a word document. Excel is preferred for solutions to
the problems, your work is neater and it is easier to check errors.

1. Place an “X” in the column that
corresponds to the cost classification for each of the following scenarios.
Some items may fit in more than one column.

Avoidable Cost

Unavoidable Cost

Sunk Cost

Common Fixed Cost

Original cost of
factory machinery

Direct material

Depreciation on
home office furniture

Salary of employees
who will be fired if product is outsourced

Cost of item
previously made in factory, but now purchased from supplier

Depreciation on
factory equipment

Salary of
supervisor who will be moved to another production line if product is
eliminated

Cost of
nonrefundable airline ticket purchased last week

Cost of delivery of
products to customers

Direct labor

2. Pro-forma financial statements are
prepared using the information developed in the budget process. These
statements reflect the results of operations and the financial position of the
organization as if all actions planned in the budget had occurred. Many of the
master budget components provide direct input to the pro-forma financial
statements.

Required:

For each of the following components of
the financial statements, indicate which pro-forma financial statement will
show the item (Income Statement or Balance Sheet) and the budget within the
master budget the item originated. Number 1 provides an example.

Financial Statement Component

Pro-forma Financial Statement

Budget Where Items Originated

1.

Revenue

Income Statement

Sales Budget

2.

Selling expense

3.

Accumulated depreciation

4.

Bad debt expense

5.

Short- or long-term debt

6.

Cost of goods sold

7.

Accrued expenses

8.

Accounts payable

9.

Interest expense

10.

Raw materials inventory

11.

Accounts receivable

3. Gooding Custom Design generated
$320,000 in operating income on sales revenue of $2,500,000. The company had
$3,000,000 in assets on January 1 and $3,250,000 in assets on December 31.

Required

a. Calculate
Gooding’s margin.

b. Calculate
Gooding’s asset turnover.

c. Calculate
Gooding’s return on investment.

4. Paris Manufacturing Company Inc. uses
400 units of Part #4317 each year in the manufacture of one of its products.
The company currently produces the part internally, but an outside supplier has
offered to provide the part at a price of $20 per part. If Paris chooses to
purchase the part from the outside supplier, one third of it’s the fixed
manufacturing overhead will be eliminated. The company’s standard unit cost of
producing the part is listed below.

Direct material $8

$8$8

Direct labor $6

$6

Variable manufacturing overhead $5

$5

Fixed manufacturing overhead $9

$9

Total unit cost

$28

Required:
Ignoring qualitative factors, should Paris continue to make the parts
internally or purchase them from the outside supplier? Why? Write a
few sentences to respond on why Paris should make the parts internally or
purchase them based on your calculations.

5. Brian Lochte operates a popular water
park. Projections for the current year are as follows:

Sales revenue

$8,000,000

Operating income

$700,000

Average total assets
$4,000,000

The camp’s weighted-average cost of
capital is 10%, and Brian requires that all new investments generate a return
on investment of at least 13%.

At last week’s board meeting, Brian
told the board that he had up to $50,000 to invest in new facilities at the
Park and asked them to recommend some projects. Today the board’s president
presented Brian with the following list of three potential investments to
improve the camp facilities.


Wading Pool

Diving Pool

Hot Tub

Incremental operating income
$ 3,250

$ 4,800

$ 2,700

Average total assets

25,000
45,000
16,000

Required:

a.
Calculate the residual income and
economic value added for each of the three projects.

b.
Which of the three projects do you
recommend Brian undertake? Why, write a brief statement to explain the
resulting calculations.

6. Mantle, Inc. produces two types of
wooden mallets, Ash and Oak, in its Miami factory. Data relating to the mallets
are given below:

Ash

Oak

Unit selling price

$30

$28

Variable manufacturing costs

$11

$12

Variable selling costs

$1

$1

Minutes required per unit

20

15

Demand per period

1,200

1,600

A total of 600 hours are available in
the Miami facility.

Required:

a. How many hours will be required to
satisfy the demand for both products?

b. How much of each product should be
produced to maximize Mantle’s operating income.

7.

Comprehensive Cash Budget?Sedona Gear Company a rapidly growing
distributor of camping equipment, is formulating its plants for the coming
year. Cody Mosbay, the firm’s marketing director, has completed the following
sales forecast.

Month
Sales
Month
Sales

January
$
900,000
July

$1,900,000

February
$1,000,000
August $1,900,000

March

$ 900,000
September
$1,600,000

April

$1,200,000 October
$1,600,000

May

$1,500,000
November $1,800,000

June

$1,900,000
December $2,000,000

Patti Bodkin, an
accountant in the Planning and Budgeting Department, is responsible for
preparing the cash flow projection. She has gathered the following information.

·
All sales are made on credit

·
Sedona’s excellent record in accounts receivable collection is expected
to continue, with 65 percent of billings collected in the month after sale and
the remaining 35 percent collected in the second month after the sale.

·
Cost of goods sold, Sedona’s largest expense, is estimated to equal 45
percent of sales dollars. Seventy percent of inventory is purchased one month
prior to sale and 30 percent during the month of sale. For example, in April,
30 percent of April cost of goods sold is purchased and 70 percent of May cost
of goods sold is purchased. (see next page)

·
All purchases are made on account. Historically, 70 percent of accounts
payable have been paid during the month of purchase, and the remaining 30
percent in the month following purchase.

Required:

a.
Prepare the cash
receipts budget for the second quarter.

b.
Prepare the purchases
budget for the second quarter.

c.
Prepare the cash
payments budget for the second quarter.

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Chad Jones is the sole
owner and manager of Jones Glass Repair Shop. In 2009, Jones purchases a
truck for $30,000 to be used in the business. Which of the following
fundamentals requires Jones to record the truck at the price paid to buy it?

.gif” alt=”Question 1 answers”>





A.

Separate-entity assumption

B.

Revenue principle

C.

Full disclosure

D.

Historical cost principle





.gif” alt=”Question 2 text”> Question
2

2 points

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Which of the following
transactions would cause retained earnings to increase?


.gif” alt=”Question 2 answers”>





A.

Collection of payment on a
customer’s account

B.

Loan from a bank

C.

Sale of service to a customer on
account

D.

Wages owed to employees




.gif” alt=”Question 3 text”> Question
3

2 points

Save

Michael Corporation
received $200,000 cash invested by its owners. The effect on the accounting
equation was?


.gif” alt=”Question 3 answers”>





A.

Stockholders’ equity and
revenues each increased by $200,000

B.

Stockholders’ equity and assets
each increased by $200,000

C.

Assets and revenues each
increased by $200,000

D.

Assets and liabilities each
increased by $200,000




.gif” alt=”Question 4 text”> Question
4

2 points

Save

Assume a company’s
January 1, 2009, financial position was: Assets, $150,000 and Liabilities,
$60,000. During January 2009, the company completed the following
transactions: (A) paid on a note payable $10,000 (no interest was paid); (B)
collected an accounts receivable, $9,000; (C) paid an accounts payable,
$5,000; and (D) purchased a truck, $5,000 cash, and a $20,000 note payable
from a bank.


a. What is the company’s January 1, 2009 stockholders’ equity?

b. What are the company’s January 31, 2009 assets, liabilities and
stockholders’ equity?


.gif” alt=”Question 4 answers”>





.gif” alt=”Question 5 text”> Question
5

2 points

Save

When a company buys
equipment for $150,000 and pays for one third in cash and the other two thirds
is financed by a note payable, the following are the effects on the
accounting equation:


.gif” alt=”Question 5 answers”>





A.

Cash decreases by $50,000

B.

Equipment increases by $100,000

C.

Liabilities increase by $150,000

D.

Total assets increase by
$200,000




.gif” alt=”Question 6 text”> Question
6

2 points

Save

The principle that
requires us to record a transaction when we provide service to a client and
bill them is?


.gif” alt=”Question 6 answers”>





A.

Historical cost principle

B.

Cost principle

C.

Full disclosure

D.

Revenue recognition




.gif” alt=”Question 7 text”> Question
7

2 points

Save

Which of the following
activities will most likely result in a reportedgainon the income statement?


.gif” alt=”Question 7 answers”>





A.

The sale of inventory to
customers

B.

The sale of old equipment

C.

The wages and benefits paid to
employees

D.

The payment of dividends to
stockholders




.gif” alt=”Question 8 text”> Question
8

2 points

Save

A landlord received
$5,000 cash for December 2011’s rent but the tenant’s rent for December is
$8,000. Which of the following is true for year ended 2011?


.gif” alt=”Question 8 answers”>





A.

$8,000 would be reported on the
statement of cash flows

B.

$8,000 would appear on the
balance sheet as rent receivable

C.

$8,000 would appear on the
income statement as rent revenue earned

D.

$5,000 would appear on the
balance sheet as prepaid rent




.gif” alt=”Question 9 text”> Question
9

2 points

Save

On January 1, 2010,
Denmark Inc., started the year with a $200,000 credit balance in its retained
earnings account. During 2010, the company earned net income of $70,000 and
declared and paid dividends of $10,000. Also, the company received cash of
$15,000 as an additional investment by its owners. Therefore, the balance in
retained earnings on December 31, 2010, would be?


.gif” alt=”Question 9 answers”>





A.

$200,000

B.

$270,000

C.

$245,000

D.

$260,000




.gif” alt=”Question 10 text”> Question
10

2 points

Save

During 2010, Sensa
Corporation incurred operating expenses amounting to $100,000 of which
$75,000 was paid in cash; the balance will be paid in January 2011.
Transaction analysis of operating expenses for 2010 should reflect only the
following:


.gif” alt=”Question 10 answers”>





A.

Decrease stockholders’ equity,
$75,000; decrease assets, $75,000

B.

Decrease assets, $100,000;
decrease stockholders’ equity, $100,000

C.

Decrease assets, $100,000;
increase liabilities, $25,000; decrease stockholders’ equity, $100,000

D.

Decrease stockholders’ equity,
$100,000; decrease assets, $75,000; increase liabilities, $25,000




11 -Business Transactions and Financial Statement Preparation


While the majority of companies, and their accountants, follow the
rules as stated in Generally Accepted Accounting Principles (GAAP), there are
always the exceptions that do not. Find an example of a company that has run
into trouble because their accounting data was not prepared properly – either
intentionally or unintentionally.


– (Post a link to any articles that you reference. In your post describe the issue at hand)


what caused this company to violate accounting principles?


How did this affect the company?


How were others, outside the company,
affected by the issues?


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Accounting Homework

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analysis?

BA 421 – 2014-15 Term V Mid Term Exam Page 8

Irate Pigeons

Your company is developing a new phone game calledIrate Pigeons, which is set for release on July 1, 2015. Based on market research, there is a 77% chance that the game will sell poorly, a 20% chance that the game will sell okay, and a 3% chance that the game becomes an Internet Sensation. If you make the game available for free, forecasted downloads (in units) per fiscal quarter are as follows:

You spent $120,000 to develop the game and are hoping to recoup your investment and make a profit. There are several revenue models that you have researched, described below.

Freemium– Under this model, the game is free to download, and users have an option to buy a premium version with more characters and power-ups. 2% of all users will spend $5 for the premium version.


Pay-To-Download– Under this model, you will charge $5 for the user to download the game. If you use this model, your downloads will be only 1% of the forecasted numbers if the game does poorly, 3% of the forecasted numbers if the game does okay, and 10% of the forecasted numbers if the game becomes an Internet Sensation.


Bait-And-Switch– Under this model, you allow the game to be downloaded for free through the second quarter of 2016. At that point, players must pay $5 to continue playing the game or it will no longer be usable. You expect 40% of the people who have downloaded your game will pay this amount. Beginning the third quarter of 2016, the model becomes pay-to-download, as described above.BA 421 – 2014-15 Term V Mid Term Exam Page 9



In-Game Purchases– Under this model, you allow the game to be downloaded for free. You offer the ability for customers to spend money on new characters and in-game bonuses. During each quarter, 20% of new players buy an upgrade, 10% of players who downloaded the game the previous quarter will buy an upgrade, and 5% of players who downloaded the game two quarters ago will buy an upgrade. You price the upgrades at $1 each.


Advertising Revenue– Under this model, the game is downloaded for free, and you will receive $0.20 directly from advertisers for every download.

When a user pays money to you, 30% of the sales price must be paid for commissions. There are no other variable costs or fixed costs in the marketing and selling of the game.

Hint: Calculate the revenues that each model will earn separately, based on if the game will sell poorly, sell okay, or become an Internet Sensation, and use the expected value methods.

Required:

1. Determine which revenue model is the best under the following expectations:

a. The game will sell poorly

b. The game will sell okay

c. The game will become an Internet Sensation

2. Determine the expected revenues to be earned using each of the five pricing models.

3. Including the effects of the variable costs and fixed costs, determine the expected profit for each of the revenue models

4. What non-financial considerations should you consider in making your revenue model decision? You do not need to limit your answer to information provided in this problem.

5. Based on your answers above, which model should you use to earn money from your game?

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Accounting Homework

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Accounting Questions

1. Contribution margin can be defined
as: (Points : 2)
the amount of sales revenue necessary to cover variable expenses.
sales revenue minus fixed expenses.
the amount of sales revenue necessary to cover fixed and variable
expenses.
sales revenue minus variable expenses.

2. If a company is operating at the
break-even point: (Points : 2)
its contribution margin will be equal to its variable expenses.
its margin of safety will be equal to zero.
its fixed expenses will be equal to its variable expenses.
its selling price will be equal to its variable expense per unit.

3. Break-even analysis assumes
that: (Points : 2)
Total revenue is constant.
Unit variable expense is constant.
Unit fixed expense is constant.
Selling prices must fall in order to generate more revenue.

4. A company makes a single product that
it sells for $16 per unit. Fixed costs are $76,800 per month and the product
has a contribution margin ratio of 40%. If the company’s actual sales are
$224,000, its margin of safety is: (Points : 2)
$32,000
$96,000
$128,000
$192,000

5. Sorin Inc., a company that produces
and sells a single product, has provided its contribution format income statement
for January.
If the company sells 4,600 units, its total contribution margin should be
closest to: (Points : 2)
$54,600
$59,800
$69,400
$13,362

6. Rovinsky Corporation, a company that
produces and sells a single product, has provided its contribution format
income statement for November.
If the company sells 5,300 units, its net operating income should be closest
to: (Points : 2)
$24,600
$2,200
$22,874
$15,400

7. Holt Company’s variable expenses are
70% of sales. At a $300,000 sales level, the degree of operating leverage is
10. If sales increase by $60,000, the degree of operating leverage will
be: (Points : 2)
12
10
6
4

8. Gayne Corporation’s contribution
margin ratio is 12% and its fixed monthly expenses are $84,000. If the
company’s sales for a month are $738,000, what is the best estimate of the
company’s net operating income? Assume that the fixed monthly expenses do not
change.(Points : 2)
$565,440
$654,000
$88,560
$4,560

9. Borich Corporation produces and sells
a single product. Data concerning that product appear below:
The break-even in monthly unit sales is closest to: (Points : 2)
2,055
4,030
4,194
3,426

10. Data concerning Follick
Corporation’s single product appear below:
The break-even in monthly dollar sales is closest to: (Points : 2)
$1,148,400
$638,851
$321,552
$446,600

11. Hettrick International Corporation’s
only product sells for $120.00 per unit and its variable expense is $52.80. The
company’s monthly fixed expense is $396,480 per month. The unit sales to attain
the company’s monthly target profit of $13,000 is closest to: (Points :
2)
7,755
6,093
5,753
3,412

12. The costing method that treats all
fixed costs as period costs is: (Points : 2)
absorption costing.
job-order costing.
variable costing.
process costing.

13. Under the variable costing method,
which of the following is always expensed in its entirety in the period in
which it is incurred? (Points : 2)
fixed manufacturing overhead cost
fixed selling and administrative expense
variable selling and administrative expense
All of these

14. Assuming that direct labor is a
variable cost, the primary difference between the absorption and variable
costing is that: (Points : 2)
variable costing treats only direct materials and direct labor as product
cost while absorption costing treats direct materials, direct labor, and the
variable portion of manufacturing overhead as product costs.
variable costing treats direct materials, direct labor, the variable
portion of manufacturing overhead, and an allocated portion of fixed
manufacturing overhead as product costs while absorption costing treats only
direct materials, direct labor, and the variable portion of manufacturing
overhead as product costs.
variable costing treats only direct materials, direct labor, the variable
portion of manufacturing overhead, and the variable portion of selling and
administrative expenses as product cost while absorption costing treats direct
materials, direct labor, the variable portion of manufacturing overhead, and an
allocated portion of fixed manufacturing overhead as product costs.
variable costing treats only direct materials, direct labor, and the variable
portion of manufacturing overhead as product costs while absorption costing
treats direct materials, direct labor, the variable portion of manufacturing
overhead, and an allocated portion of fixed manufacturing overhead as product
costs.

15. Net operating income under
absorption costing may differ from net operating income determined under
variable costing. How is this difference calculated? (Points : 2)
A) change in the quantity of units in inventory times the fixed
manufacturing overhead rate per unit.
B) number of units produced during the period times the fixed manufacturing
overhead rate per unit.
C) change in the quantity of units in inventory times the variable
manufacturing cost per unit.
D) number of units produced during the period times the variable manufacturing
cost per unit.

16. Shun Corporation manufactures and
sells a handheld calculator. The following information relates to Shun’s
operations for last year:
What is Shun’s unit product cost under absorption costing for last
year? (Points : 2)
$4.10
$4.55
$5.85
$6.30

17. A manufacturing company that
produces a single product has provided the following data concerning its most
recent month of operations:
What is the total period cost for the month under the variable costing
approach? (Points : 2)
$138,600
$134,400
$46,200
$184,800

18. Pungent Corporation manufactures and
sells a spice rack. Shown below are the actual operating results for the first
two years of operations:
Pungent’s cost structure and selling price were the same for both years. What
is Pungent’s variable costing net operating income for Year 2? (Points :
2)
$48,000
$50,000
$54,000
$56,000

19. The following data pertain to last
year’s operations at Clarkson, Incorporated, a company that produces a single
product:
What was the absorption costing net operating income last year? (Points :
2)
$44,000
$48,000
$50,000
$49,000

20. Beamish Inc., which produces a
single product, has provided the following data for its most recent month of
operations:
There were no beginning or ending inventories. The unit product cost under
absorption costing was: (Points : 2)
$93
$97
$136
$194

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Question 1

If last dividend = $6, g = 6.4%, and P0 = $69.3, what is the stock’s expected total return for the coming year?

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

Answer .

Question 2
ABC Inc., is expected to pay an annual dividend of $0.3 per share next year. The required return is 15.4 percent and the growth rate is 4.7 percent. What is the expected value of this stock five years from now?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.
Answer .

Question 3
ABC Enterprises’ stock is currently selling for $50.4 per share. The dividend is projected to increase at a constant rate of 7.3% per year. The required rate of return on the stock is 12%. What is the stock’s expected price 5 years from today (i.e. solve for P5)?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Answer .

Question 4
A stock just paid a dividend of $3. The required rate of return is 16.5%, and the constant growth rate is 3.2%. What is the current stock price?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Answer .

Question 5
ABC just paid a dividend of D0 = $4.9. Analysts expect the company’s dividend to grow by 30% this year, by 22% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this stock is 12%. What is the best estimate of the stock’s current market value?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Answer .

Question 6
ABC’s stock has a required rate of return of 13%, and it sells for $74 per share. The dividend is expected to grow at a constant rate of 4.7% per year. What is the expected year-end dividend, D1?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Answer .

Question 7
A stock is expected to pay a dividend of $1.8 at the end of the year. The required rate of return is rs = 11.7%, and the expected constant growth rate is g = 6.9%. What is the stock’s current price?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Answer .

Question 8
ABC is expected to pay a dividend of $1 per share at the end of the year. The stock sells for $107 per share, and its required rate of return is 13.2%. The dividend is expected to grow at some constant rate, g, forever. What is the growth rate (i.e. solve for g)?

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

Answer .

Question 9
If D1 = $4.86, g (which is constant) = 2%, and P0 = $81.65, what is the stock’s expected dividend yield for the coming year?

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

Answer .

Question 10
ABC Company’s last dividend was $0.7. The dividend growth rate is expected to be constant at 28% for 2 years, after which dividends are expected to grow at a rate of 6% forever. The firm’s required return (rs) is 16%. What is its current stock price (i.e. solve for Po)?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Answer .

Question 11
If D1 = $6.1, g (which is constant) = 2.9%, and P0 = $76.4, what is the stock’s expected total return for the coming year?

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

Answer .

Question 12
The common stock of Connor, Inc., is selling for $85 a share and has a dividend yield of 2.8 percent. What is the dividend amount?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Answer .

Question 13
The common stock of Wetmore Industries is valued at $54.8 a share. The company increases their dividend by 4.6 percent annually and expects their next dividend to be $4.5. What is the required rate of return on this stock?

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

Answer .

Question 14
A stock just paid a dividend of D0 = $2.4. The required rate of return is rs = 17.7%, and the constant growth rate is g = 3.6%. What is the current stock price?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Answer .

Question 15
ABC’s last dividend paid was $1.1, its required return is 12.4%, its growth rate is 3.6%, and its growth rate is expected to be constant in the future. What is Sorenson’s expected stock price in 7 years, i.e., what is P7?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Answer .

Question 16
ABC’s last dividend was $3.2. The dividend growth rate is expected to be constant at 20% for 3 years, after which dividends are expected to grow at a rate of 6% forever. If the firm’s required return (rs) is 12%, what is its current stock price (i.e. solve for Po)?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Answer .

Question 17
A stock’s next dividend is expected to be $1.7. The required rate of return on stock is 16.8%, and the expected constant growth rate is 7.1%. What is the stock’s current price?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Answer .

Question 18
ABC Enterprises’ stock is expected to pay a dividend of $1.9 per share. The dividend is projected to increase at a constant rate of 8.9% per year. The required rate of return on the stock is 15.6%. What is the stock’s expected price 3 years from today (i.e. solve for P3)?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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Accounting homework

$28.00

Description

1. The following procedure is recommended when creating financial statements in Excel, in order to minimize error and make the statements easier to read when provided to others:
a. Use custom number formats
b. Make excel do as little work as possible by avoiding the use of formulas
c. Use as many fonts and colors as possible in order to separate line items and subheadings
d. Hide data you do not want others to see before distributing a worksheet

2. You are thinking of buying a miniature golf course to operate. It is expected to generate cash flows of $40,000 per year in years one through four and $50,000 per year in years five through eight. If the appropriate discount rate is 10%, what is the present value of these cash flows?
a. $285,288
b. $167,943
c. $235,048
d. $828,230

3. The intrinsic value of an asset is:
a. The price which a marginal investor is willing to pay for an asset
b. The required rate of return demanded by an investor
c. The price of an asset less its accumulated depreciation
d. The present value of expected future cash flows provided by the asset

4. Using the Net Present Value method of capital budgeting will always lead you to the economically correct decision because_____, however it can be misleading when comparing projects of ____.
a. NPV represents the change in shareholder wealth that accompanies the acceptance of an investment ; differing size
b. NPV considers the time value of money; differing payback periods
c. NPV considers the time value of money; differing size
d. NPV can be greater than, equal to, or less than zero; differing payback periods
?
5. In calculating the risk associated with two potential projects (A & B), which of the following statistical calculations indicates that the projects are equally risky?
I. The standard deviation of A is 100, and the coefficient of variation of A is 80.912
II. The standard deviation of B is 1,000, and the coefficient of variation of B is 809.12
III. The variance of A’s possible outcomes is 258.10, and the standard deviation of A is 100
IV. The variance of B’s possible outcomes is 2,581, and the standard deviation of B is 1,000

a. III and IV
b. II and III
c. I and II
d. I and IV
e. None of the above
6. The value for “a” in the regression equation Y = a + b(X) + e is shown in Excel as
a. the slope
b. the forecasted variable
c. the intercept
d. the independent predictor variable
e. none of the above
7. The best example of a useful function macro created by a financial analyst might be to:
a. Insert a standard header on a worksheet for a weekly expense summary report
b. Calculate the IRR of various investment opportunities as they arise throughout the fiscal year
c. Format a monthly financial report prior to internal distribution
d. Summarize a column of sales data by product
e. B and C

8. As a bank loan officer, you want to reference detailed columnar loan portfolio data with a list of past-due loans. Which of the following is the most effective tool for doings so?
a. Pivot table
b. H Lookup
c. Search function
d. Scatter plot
e. V Lookup

Use the information below for the next problem, No 9.

9. Calculate the free cash flow

Use the following information for the next problem, No. 10

10. What is the expected return for Security X?
Use the following information for the next three problems, Nos. 11-13
PV
Year Cash Flow Cash Flows
1 $14,000 $12,726
2 $14,000 $11,564
3 $10,000 $7,510
4 $10,000 $6,830
5 $8,000 $4,968

11. What is the NPV of above project if the initial investment was $35,000?
12. Calculate the IRR
13. and MIRR of the project, respectively, assuming a cost of capital of 10%.

14. Suppose that you are approached with an offer to purchase an investment that will provide cash flows of $1,200 per year for 15 years. The cost of purchasing this investment is $9,800. You have an alternative investment opportunity, of equal risk, that will yield 8% per year. What is the NPV that makes you indifferent between the two options?
15. The Claustrophobic Solution, Inc., a residential window and door manufacturer, has the following historical record of earnings per share (EPS) from 2011 to 2007:

2011 2010 2009 2008 2007
EPS $1.10 $1.05 $1.00 $0.95 $0.90

The company’s payout ratio has been 60% over the last five years and the last quoted price of the firm’s share of stock was $10. Flotation costs for new equity will be 7%. The company has 30,000,000 of common shares of stock outstanding and a debt-equity ratio of 0.5.
If dividends are expected to grow at the same arithmetic average growth rate of the last five years, what is the dividend payment in 2012?
16. The following are the company sales from 2000-2009
Year Goggles
1 $225
2 $568
3 $989
4 $1,678
5 $3,189
6 $6,138
7 $10,604
8 $16,594
9 $21,795
10
Fit an exponential trend curve to the data and calculate the projected sales in 2010.

?

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Accounting homework

$21.00

Description

1. Square Manufacturing is considering investing in a robotics
manufacturing line. Installation of the line will cost an estimated $10.0
million. This amount must be paid immediately even though construction will
take three years to complete (years 0, 1, and 2). Year 3 will be spent
testing the production line and, hence, it will not yield any positive cash
flows. If the operation is very successful, the company can expect after-tax
cash savings of $7.0 million per year in each of years 4 through 7. After reviewing
the use of these systems with the management of other companies, Square’s
controller has concluded that the operation will most probably result in
annual savings of $5.2 million per year for each of years 4 through 7.
However, it is entirely possible that the savings could be as low as $2.8
million per year for each of years 4 through 7. The company uses a 14 percent
discount rate.

Required:

Compute the NPV under the three scenarios.(Negative amount should
be indicated by a minus sign. Round present value factor for each year to
three decimal places. Do not round other intermediate computations and round
your final answer to the nearest dollar amount. Enter your answers in
thousands of dollars and not in millions of dollars.)

Best Case

Expected

Wore case

NPV

2.

Rush Corporation plans to acquire production equipment for
$612,500 that will be depreciated for tax purposes as follows: year 1,
$122,500; year 2, $212,500; and in each of years 3 through 5, $92,500 per
year. An 14 percent discount rate is appropriate for this asset, and the
company’s tax rate is 40 percent.

Required:

(a)

Compute the present value of the tax shield resulting from
depreciation.(Round present value factor for each year to three decimal places and
other computations to nearest whole dollar value.)

present value of the tax shield=

Compute the present value of the tax shield from depreciation
assuming straight-line depreciation ($122,500 per year). (Round present value
factor for each year to three decimal places and other computations to
nearest whole dollar value.)

present value of the tax shield=

3. Star City is considering an investment in
the community center that is expected to return the following cash flows:

Year

Net Cash Flow

1

$

39,000

2

69,000

3

99,000

4

99,000

5

119,000


This schedule includes all cash inflows from
the project, which will also require an immediate $219,000 cash outlay. The
city is tax-exempt; therefore, taxes need not be considered.

Required:

(a)

What is the net present value of the project
if the appropriate discount rate is 24 percent?(Round present value factor for each year to
three decimal places. Negative amount should be indicated by a minus sign.)

net present value of
the project=

(b)

What is the net present value of the project
if the appropriate discount rate is 14 percent?(Round present value factor for each year to
three decimal places.
Negative amount should be indicated by a minus sign.)

net present value=

4. The Johnson Research Organization, a
nonprofit organization that does not pay taxes, is considering buying
laboratory equipment with an estimated life of 7 years so it will not have
to use outsiders’ laboratories for certain types of work. The following are
all of the cash flows affected by the decision:

Investment (outflow at time 0)

$

7,000,000

Periodic operating cash flows:

Annual cash savings
because outside laboratories

are
not used

1,500,000

Additional cash outflow
for people and supplies to operate

the
equipment

300,000

Salvage value after seven years, which is the
estimated

life of this project

500,000

Discount rate

6

%


Required:

Calculate the net present value of this
decision. Should the organization buy the equipment?(Round present value
factors to three decimal places. Negative amount should be indicated by a
minus sign.)

net present value=

Should the organization buy the equipment? Yes?, No?

3.

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Accounting homework

$15.00

Description

Question #3
Expected production (units) 13,000
Standard DML hours per unit 5
Standard DML rate per hour $24
Standard pounds of DM usage per unit 4
Standard DM price per pound $12

Actual
Units produced 12,000
DML hours worked 62,000
Total cost of DML $1,240,000
Pounds of DM purchased 54,000
Total cost of DM purchased $702,000
Pounds of DM used 47,000

a) Calculate the following variances:
Direct manufacturing labor rate variance
Direct manufacturing labor usage variance
Direct materials price variance (how we did it in the chat session)
Direct materials usage variance

b) Explain what each of the calculated variances imply about the firm’s operations. Be specific!
Direct manufacturing labor rate variance
Direct manufacturing labor usage variance
Direct materials price variance
Direct materials usage variance

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