Answer:
$99,600
Explanation:
If the ending inventory was understated that means that they have less of the inventory than they had originally expected, this means that they sold more than they have calculated and therefore have not included the $7,800 in the net income. Therefore, we would need to add this amount to the actual reported net income to get the correct net income for 2022...
$91,800 + $7,800 = $99,600
The correct net income for 2022 is $99,600
At the beginning of the year, a company predicts total overhead costs of $916,400. The company applies overhead using machine hours and estimates it will use 1,580 machine hours during the year. What amount of overhead should be applied to Job 65A if that job uses 31 machine hours during January?
Answer: $17980
Explanation:
The amount of overhead that should be applied to Job 65A would be calculated as:
= Overhead cost × (Machine hours in January/Total machine hours)
= 916400 × (31/1580)
= $17980
If the risk-free rate is 6 percent, the return on an average stock is 10 percent, and the beta of a capital budgeting project is 1.50, the project's required rate of return from the project is _____. a. 19% b. 21% c. 24% d. 12% e. 4%
Answer:
r = 0.12 or 12%
Option d is the correct answer.
Explanation:
Using the CAPM, we can calculate the required/expected rate of return on a stock. This is the minimum return required by the investors to invest in a stock based on its systematic risk, the market's risk premium and the risk free rate.
The formula for required rate of return under CAPM is,
r = rRF + Beta * (rM - rRF)
Where,
rRF is the risk free rate rM is the market return
We assume that the return on an average stock in the market is the return on market or rM.
r = 0.06 + 1.5 * (0.1 - 0.06)
r = 0.12 or 12%
The Pierce Co. just issued a dividend of $2.35 per share on its common stock. The company is expected to maintain a constant 5 percent growth rate in its dividends indefinitely. If the stock sells for $44 a share, what is the company's cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity__________ %
Answer:
r = 0.106079 or 10.6079% rounded off to 10.61%
Explanation:
Using the constant growth model of dividend discount model, we can calculate the price of the stock today. The DDM values a stock based on the present value of the expected future dividends from the stock. The formula for price today under this model is,
P0 = D0 * (1+g) / (r - g)
Where,
D0 is the dividend paid recently
D0 * (1+g) is dividend expected for the next period /year
g is the growth rate
r is the required rate of return or cost of equity
To calculate the cost of equity (r), we will plug in the values for P0, D0 and g in the formula,
44 = 2.35 * (1+0.05) / (r - 0.05)
44 * (r - 0.05) = 2.4675
44r - 2.2 = 2.4675
44r = 2.4675 + 2.2
r = 4.6675 / 44
r = 0.106079 or 10.6079% rounded off to 10.61%
The company's cost of equity is 10.61%.
The formula that can be used to determine the cost of equity is:
r = [tex]\frac{D_{1} }{P}[/tex] - g
Where:
[tex]D_{1}[/tex] = dividend next year = $2.35 x (1.05) = $2.47g = growth rate P = value of the stock = $44r = [tex]\frac{2.47}{44} + 0.05[/tex] = 10.61%
A similar question was answered here: https://brainly.com/question/13745120
(TCO C) For several years, Mountain Home University had used IBM computers. Recently, Apple Computers offered them a better machine at lower a price for one of the University's labs; however Mountain Home did not buy them because the _____ costs were too high.a. transactional.
b. opportunity.
c. marginal.
d. switching.
Answer:
d. switching.
Explanation:
Since in the question it is mentioned that Mountain university used IBM computers also the apple computers offered them a better machiner at a lesser cost but the university did not buyed as the switching cost is too high
Bcz from exchanging from IBM computer to Apple computers the cost is high and that cost we called as switching
Hence, the correct option is d.
Tommy is about to order a steak dinner with a salad at his favorite restaurant. The restaurant recently raised its prices on steaks but kept its prices on salads the same. How might the real-income effect and the substitution effect influence Tommy’s order?
Answer:
Explanation:
Each of these effects would most likely influence Tommy's order differently. The real-income effect would most likely cause Tommy to buy the large steak and salad regardless of the increase in price since individuals tend to spend more when they start making more money. The substitution effect on the other hand would most likely cause Tommy to order a smaller steak since it costs more but at the same time order, more salad since the price has not increased as the steak did.
Pearson Motors has a target capital structure of 40% debt and 60% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 8%, and its tax rate is 25%. Pearson's CFO estimates that the company's WACC is 12.20%. What is Pearson's cost of common equity? Round your answer to two decimal places.
Answer:
rE= 0.163333 or 16.3333% rounded off to 16.33%
Explanation:
The WACC or weighted average cost of capital is the cost of a firm's capital structure which can contain one or more of the following components namely debt, preferred stock and common equity. The formula to calculate WACC of a firm with only two components including debt and equity is as follows,
WACC = wD * rD * (1 - tax rate) + wE * rE
Where,
wD and wE represents the weight of debt and common equity respectively.rD and rE represents the cost of debt and common equity respectively.We take after tax cost of debt (1 - tax rate)To calculate the cost of equity, we can plug in the values of remaining variables as given in the question in the above formula,
0.122= 0.4 * 0.08 * (1 - 0.25) + 0.6 * rE
0.122 = 0.024 + 0.6 * rE
0.122 - 0.024 = 0.6 * rE
rE = 0.098 / 0.6
rE= 0.163333 or 16.3333% rounded off to 16.33%
In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. We would expect this to:_______. A. affect neither aggregate supply nor aggregate demand. B. increase aggregate demand. C. reduce aggregate demand. D. reduce aggregate supply.
Answer:
B. increase aggregate demand.
Explanation:
A recession can be defined as a period of significant fall in the economic performance such as employment, production, income level, sales of goods and services etc, of a particular country lasting over a few months.
In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. Thus, we would expect this to increase aggregate demand.
Aggregate demand (AD) can be defined as the total quantity of output (final goods and services) that is demanded by consumers at all possible price levels in an economy at a particular time.
On a standard Aggregate demand (AD)-Aggregate supply (AS) curve, the y axis denotes the Price (P) of goods and services while the x axis typically denotes the Output (Q) of final goods and services.
In the short-run, a rightward shift in the aggregate supply (AS) curve causes output to increase and result in a price fall (lower price) while a rightward shift in the aggregate demand (AD) curve also cause output to increase and rise in prices.
The short-run nominal fluctuations basically cause a change in the level of production. In the short-run, as a result of a shift in the aggregate supply; an increase in money consequently to result in increase the level of production (output).
Hence, more goods are produced as a result of the increased output (supply) and more goods would be purchased as a result of their lower prices.
Giving customers time to pay their bill generates more sales. But when a recession hits, they may have trouble making payments. If you have businesses as clients, they may have slow-paying customers, and that means they will be slow to pay you. That is what happened to a company that offered a discount card as its primary product. The owner estimated that 50 percent of the firm's customers—other small businesses—were behind in paying what they owed. The owner needed those customers to keep his business operating, so he was hesitant to demand payment on past due accounts.
1. Should a small business owner push customers to pay when times are tough? Why or why not?
2. What problems do you think a business services company might have when is customers do not pay?
Answer:
1. A compromise should be reached.
In the recession, the other small businesses are suffering including the company in question. If the owner pushes the customers to pay their bills, when the recession ends they may move to other vendors which would have made demanding money from them in the recession a myopic and damaging move.
The business however, also has bills to pay and so needs money to maintain operations as well. A compromise needs to be reached. The owner should contact the other businesses still owing and negotiate with them to pay a certain portion of what they owe with the rest coming later.
This could give the owner enough to keep the business running whilst maintaining the loyalty of his customers.
2. Problems that a business services company could have if customers do not pay include;
Inability to pay staff. Inability to pay utilities like electricity.Inability to pay rent and other expenses.Increased risk of debt default.Growth of company suffers.Becker Office Service purchased a new computer system in 2016 for $40,000. It is expected to have a five-year useful life and a $5,000 salvage value. The company expects to use the system more extensively in the early years of its life.
Required:
a. Calculate the depreciation expense for each of the five years, assuming the use of straight-line depreciation.
b. Calculate the depreciation expense for each of the five years, assuming the use of double-declining-balance depreciation.
c. Assume that Becker Office Service sold the computer system at the end of the fourth year for $15,000. Compute the amount of gain or loss using each depreciation method.
Answer:
a. Calculate the depreciation expense for each of the five years, assuming the use of straight-line depreciation.
The formula is:
Straight-line depreciation: (cost of asset - salvage value) / useful life
Depreciation: ($40,000 - $5,000) / 5
Depreciation = $7,000 for each year
b. Calculate the depreciation expense for each of the five years, assuming the use of double-declining-balance depreciation.
The formula is:
2 X (Cost of asset / useful life )
2 X ($40,000 / 5 )
Depreciation = $16,000 for first year
$9,600 for second year
$5,760 for the third year
$3,456 for fourth year
$184 for fifth year
c. Assume that Becker Office Service sold the computer system at the end of the fourth year for $15,000. Compute the amount of gain or loss using each depreciation method.
Under the straight line depreciation method, by the four year, we have an accumulated depreciation of $7,000 x 4 = $28,000, so the net book value of the asset is $40,000 - $28,000 = $12,000.
If the computer system is sold for $15,000, the capital gain is of $12,000.
Under the double declining method, accumulated depreciation by the four year is $34,816, so the book value of the asset is only $5,184, and the sale of $15,000 would net a capital gain of $9,816.
Your company expects to receive 5,000,000 Japanese yen 60 days from now. You decide to hedge your position by selling Japanese yen forward. The current spot rate of the yen is .0089 USD/JPY, while the forward rate is .0095 USD/JPY. You expect the spot rate in 60 days to be .0090 USD/JPY. How many dollars will you receive for the 5,000,000 yen 60 days from now?
Answer:
$47,500
Explanation:
Calculation for How many dollars will you receive
Using this formula
Dollar to receive=Expected Japanese yen×Forward rate
Let plug in the formula
Dollar to receive= ¥5,000,000 x $.0095/¥
Dollar to receive= $47,500
Therefore the amount of dollars will you receive will be $47,500
AirQual Test Corporation provides on-site air quality testing services. The company has provided the following cost formulas and actual results for the month of February:
Fixed Component per Month Variable Component per Job Actual Total for February
Revenue $280 $39,250
Technician wages $8,400 $8,250
Mobile lab operating expenses $4,800 $31 $9,290
Office expenses $2,400 $3 $2,700
Advertising expenses $1,580 $1,650
Insurance $2,870 $2,870
Miscellaneous expenses $970 $1 $425
The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,800 plus $31 per job, and the actual mobile lab operating expenses for February were $9,290. The company expected to work 150 jobs in February, but actually worked 154 jobs.
Required:
Prepare a flexible budget performance report showing AirQual Test Corporation's revenue and spending variances and activity variances for February.
Answer:
I used an excel spreadsheet since there is not enough room here. I ordered the given data:
Fixed Variable Actual Total
Revenue $280 $39,250
Technician wages $8,400 $8,250
Mobile lab operating exp. $4,800 $31 $9,290
Office expenses $2,400 $3 $2,700
Advertising expenses $1,580 $1,650
Insurance $2,870 $2,870
Miscellaneous expenses $970 $1 $425
The actual results yielded an unfavorable operating income variance. Operating income = $14,065, unfavorable variance = $2,645
You are saving money for a down payment on a new house. You intend to place $7,500 at the end of each year for three years into an account earning 5% per year. At the end of the fourth year, you will place $10,000 into this account. How much money will be in the account at the end of the fourth year?
Answer:
$37,848.9
Explanation:
We can use the interest rate formula to figure out how much is in the account after the first 3 years. The interest rate formula is show below:
[tex]A = P (1 + r)^t[/tex]
Let me delineate what each part of this equation means:
A = The total amount
P = The initial amount of money put into the account
R = the interest rate
T = Time
The equation gives us the following:
You place $7,500 each year for three years The interest rate is 5%At the end of the 4th year $10,000 will be placed in the accountFirst, let's calculate the P in the equation.
You put $7,500 each year for 3 years, so multiply 7,500 by 3.
[tex](7,500) * (3) = 22,500[/tex]
Next, let's start putting everything into the equation, like this:
[tex]A = 22,500(1 + .05)^3[/tex]
(When doing interest rate you have to move the decimal over twice)
Now that we have the equation, let's solve it!
[tex]A = 22,500(1.05)^3\\A = 22,500(1.15763)\\A = 26,046.6[/tex]
After 3 years $26,046.6 is in the account.
But, don't forget the last part of the question!
But you have a fourth year too!
Add the $10,000 onto the $26,046.6
That equals $36,046.6.
Lets plug this back into the equation for the final year
[tex]A = 36046.6(1.05)^1\\A = 37848.9[/tex]
Thus, the final answer will be $37,848.9
Hope this helps!
- Kay :)
After saving the money for the four years and by adding $10,000 in the end of fourth year the money the amount that will be saved is $48,942.23.
What is Future Value?
The temporal value of money is based on the simple notion that one dollar today is worth more than one dollar in the future. This is because one can invest the dollar they have today and have it increase at a rate of return, or interest, over time.
The formula for future value is-
[tex]\begin{aligned}\text{FV}&=\text{CF}\times\dfrac{(1+r)^n-1}{\text{r}}+\text{FV}\\&=\$7,500\times\dfrac{(1+0.05)^4-1}{0.05}+\$7,500\\&=\$48,942.23\end{aligned}[/tex]
Thus, the future value by the end of the fourth year is $48,942.23.
For further details about the future value refer to this link:
https://brainly.in/question/40202543
The cost of common equity is based on the rate of return that investors require on the company's common stock. New common equity is raised in two ways: (1) by retaining some of the current year's earnings and (2) by issuing new common stock. Equity raised by issuing stock has a(n) ____________ cost, re, than equity raised from retained earnings, rs, due to flotation costs required to sell new common stock. Some argue that retained earnings should be "free" because they represent money that is left over after dividends are paid. While it is true that no direct costs are associated with retained earnings, this capital still has a cost, a(n) ______________ cost. The firm's after-tax earnings belong to its stockholders, and these earnings serve to compensate them for the use of their capital. The earnings can either be paid out in the form of dividends to stockholders who could have invested this money in alternative investments or retained for reinvestment in the firm. Therefore, the firm needs to earn at least as much on any earnings retained as the stockholders could earn on alternative investments of comparable risk. If the firm cannot invest retained earnings to earn at least rs, it should pay those funds to its stockholders and let them invest directly in stocks or other assets that will provide that return. There are three procedures that can be used to estimate the cost of retained earnings: the Capital Asset Pricing Model (CAPM), the Bond-Yield-Plus-Risk-Premium approach, and the Discounted Cash Flow (DCF) approach.
Answer:
Equity raised by issuing stock has a(n) HIGHER cost,
When a corporation issues new equity, they will always incur in underwriting costs and other legal expenses, e.g. the underwriter always charges a fee which can be fixed or a percentage, and the actual process of registering new stocks and issuing them costs money.While it is true that no direct costs are associated with retained earnings, this capital still has a cost, a(n) OPPORTUNITY cost.
Opportunity costs are extra costs or benefits lost resulting from choosing one activity or investment from another alternative. In this case, the owners could invest the company's earnings somewhere else and they could earn money by doing so, e.g. buy corporate bonds or other stocks.
You purchase a Par Value $1,000, 9% coupon, two-year maturity bond for $990. What is the annual required rate of return (YTM)?
Answer:
the annual required rate of return is 9.57%
Explanation:
The computation of the required rate of return is shown below:
Given that
Future value = $1,000
Present value = $990
PMT = $1,000 × 9% = $90
NPER = 2
The formula is shown below:
=RATE(NPER;PMT;-PV;FV;TYPE)
The present value comes in negative
After applying the above formula, the annual required rate of return is 9.57%
What is the value of $1000 investment that loses 5% each year for eight years
Answer:
$663.420
Explanation:
The value for the investment is the future of $1000, earning a compound interest of -5% for eight years.
The formula for compound interest is as below.
FV = PV × (1+r)^n
Fv = $1000 x ( 1 + (-5/100)^8
Fv= $1000 x (1 +(-0.05)^8
FV= $1000 x (0.95)^8
Fv=$1000x 0.6634204
Fv=$663.420
The value will be $663.42
Answer:
663.42
Explanation:
Trust me and him ^
Your local T-Spirit store is having a sale on the latest i-razpod cell phone. The store is also offering financing to those who
qualify. The new cell phone is on sale for $150.00 with a two year contract. The sales associate informs you that the
closed-end installment loan offered by the store is a 24 month installment plan with monthly payments of $8.44.
Determine the finance charge (interest) of the installment loan.
a $52.00
C. $54.30
b. $52.56
d. $56.10
Answer:
$52.56 on edge 2020
Explanation:
Answer:
b
Explanation:
yep
Green House operates a commercial plant nursery where it propagates plants for garden centers throughout the region.
Green House has $5,100,000 in assets. Its yearly fixed costs are $650,000, and the variable costs for the potting soil, container, label, seedling, and labor for each gallon-size plant total $1.90.
Green House's volume is currently 500,000 units. Competitors offer the same plants, at the same quality, to garden centers for $4.25 each. Garden centers then mark them up to sell to the public for $9 to $12, depending on the type of plant.Read the requirements
Requirement 1.
Green House's owners want to earn an 11% return on investment on the company's assets. What is
Green House's target full product cost?
Revenue at current market price ?
Less:Desired profit ?
Target full product cost ?
Requirement 2. Given Green House's current costs, will its owners be able to achieve their target profit? Begin by calculating Green House's current full product cost.
Current variable costs ?
Plus:Current fixed costs ?
Current full product cost ?
Requirement 3. Assume Green House has identified ways to cut its variable costs to $1.75 per unit. What is its new target fixed cost? Will this decrease in variable costs allow the company to achieve its target profit?Begin by calculating Green House's new target fixed cost.
Target full product cost ?
Less:Variable costs ?
Target fixed cost ?
Requirement 4.
Green House started an aggressive advertising campaign strategy to differentiate its plants from those grown by other nurseries.
Green House does not expect volume to be affected, but it hopes to gain more control over pricing. If Green House has to spend $145,000 this year to advertise and its variable costs continue to be $1.75 per unit, what will its cost-plus price be?
Begin by calculating the cost-plus price per unit. (Round your answer to the nearest cent.)
Current variable costs ?
Plus:Fixed costs ?
Full product cost ?
Plus:Desired profit ?
Target revenue ?
Divided by:Number of units ?
Cost-plus price per unit ?
Answer:
1. Revenue at current market price $2,125,000 (500,000 units * $4.25)
Less: Desired profit $561,000 ($51,000,000 * 11%)
Target full product cost $1,564,000
2. Current variable costs $950,000 (500,000 units * $1.90)
Add: Current fixed costs $650,000
Current full product cost $1,600,000
Answer: No, the owner will not be able to meet its desired profits because the above product cost is still more than target cost of $ 1,564,000
3. Target full product cost $1,564,000
Less: Variable costs $875,000 (1.75*500,000 units)
Target fixed cost $689,000
Answer: Yes, now the company will be able to meet its target profit because the target Fixed cost calculated above is MORE than actual Fixed Cost of $ 650,000
4. Current variable costs $875,000
Add: Fixed costs $795,000
($650,000 + $145,000)
Full product cost $1,670,000
Add: Desired profit $561,000
($51,000,000 x 11%)
Target revenue $2,231,000
Cost-plus price per unit = Target revenue / Number of units
Cost-plus price per unit = $2,231,000 / 500,000 units
Cost-plus price per unit = $4.46
Strategic PlanningImagine that IBM has decided to diversify into the telecommunications business to provide online cloud-computing data services and broadband access for businesses and individuals. What method would you recommend that IBM pursue to enter this industry? Why?
Answer:
IBM could either diversify by the strategy of market penetration, which consists in increasing the market share in a particular sector (in this case, cloud computing) through more marketing efforts.
Or it could integrate horizontally, acquiring a possible competitor that is more advanced in the cloud-computing business. Or even a start-up with good prospects, because with the amount of capital that IBM has, it could more easily expand the start-up operation as a new internal business division.
Emphasizing personal selling rather than mass media advertising is an example of a __________ strategy.
Answer: personal selling rather than mass media advertising in the promotional mix the firm is using a Standardized strategy
Explanation:
Hope this helps <3
Lower wages in the U.S. auto industry would ______ the prices of autos and ______ the quantity exchanged.
Answer:
Lower wages in the U.S. auto industry would DECREASE the prices of autos and INCREASE the quantity exchanged.
Explanation:
When the price of key inputs decreases, the supply curve shifts to the right, increasing the total quantity supplied and at the same time decreasing the equilibrium price. The same would happen if the price of steel, plastics (oil) or any other key input decreased.
On the other hand, an increase int he price of key inputs will shift the supply curve to the left, decreasing the total quantity supplied and increasing equilibrium price.
Suppose the real gross domestic product (GDP) grows by 2% and inflation is equal to 3%, but there is no change in the velocity of money. based on the equation of exchange, by how much does the quantity of money change?
Answer:
the quantity of money growed to be 5%
Explanation:
The computation of the expected change in the quantity of money is shown below:
As we know that
Growth rate of money supply = Real GDP growth rate + inflation rate
= 2% + 3%
= 5%
Keeping the velocity be constant
Hence, the quantity of money growed to be 5%
We simply applied the above formula so that the correct value could come
And, the same is to be considered
Which of the following would be most likely associated with the expansionary phase of the economic business cycle?
)
A)
unemployment rate is high
B)
inflation is at its highest level
businesses produce more and hire workers
D)
business profits are on the decline
When an employee reaches a $200,000 income level, they are required to pay a supplementary percentage to their _______________________ tax deduction?A. Social SecurityB. MedicareC. FederalD. Local
Answer:
B. Medicare
Explanation:
given data
employee reaches income level = $200,000
so they are require to pay a supplementary percentage to their Medicare tax because at an income level above than the each and every employee are required to pay their additional percentage of income as FICA Medicare tax.
and current rate for Medicare is approx 1.45% for the employee and employer.
A country's currency is said to be _____ when the country's government allows both residents and nonresidents to purchase unlimited amounts of a foreign currency with it.
A) externally convertible
B) nonconvertible
C) internally convertible
D) freely convertible
Answer:
D) freely convertible
Explanation:
Since in the question it is mentioned that the country government permits to both residents and non-residents for acquiring the non-limited values of the foreign currency so this represents the freely convertible.
As in the case of freely convertible the currency should be traded without having any kind of limitations that are imposed by the monetary authorties
Hence, the correct option is D.
A factory worker really wants to move up in the corporation. He does his work, stays late, and is always looking for extra ways to help. He gets denied a promotion after promotion. This will most likely affect his ________.a. equityb. valencec. expectancyd. instrumentality
Answer:
equity
Explanation:
Cynthia Ogago is planning to make investment in a scheme
earning 10% interest rate and expects to receive ksh. 50,000
after 3 years. Advise her on how much she needs to invest now
in order to achieve these
O a. Ksh. 50,000
O b. Ksh. 66,550
O c. Ksh. 35,656
O d. Ksh. 37,566
Answer:
d. Ksh. 37,566
Explanation:
The $50,000 represent the future amount expected after 3 years.
the interest rate is 10%.
Implementing the formula A = P x ( 1+ r) ^n
A= $50,000
P= amount to invest
R=10% or 0.10
n=3 years
Ksh.50,000 = P x (1 + 0.10) ^ 3
Kshs.50,000 = P x (1.1) ^3
Kshs.50,000 = P x 1.331
P= Kshs50,000 / 1.331
P=Kshs.37,565.74
= Kshs. 37,566
If a 7% increase in the price of cheese causes a 7% reduction in the total revenue received by cheese farmers, the demand for cheese is:A.Inelastic.B.Elastic.C.Unit elastic.D.Infinite
Answer:
C.Unit elastic
Explanation:
Unit elastic demand is the term that describes a scenario where a change in price causes a proportionate change in demand. It is one of the types of elastic demand. A good or service is said to have elastic demand if a small change in price causes a considerable change in the quantity demanded.
In the unit elastic demand, if a product price changes by a certain percentage, the demand will change by an equal percentage. In this scenario, a 7 percent price increase results in a 7 percent decrease in demand.
Gomez runs a small pottery firm. He hires one helper at $14,500 per year, pays annual rent of $7,500 for his shop, and spends $18,000 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that could earn him $5,000 per year if alternatively invested. He has been offered $23,000 per year to work as a potter for a competitor. He estimates he could use his talents to earn an additional $6,000 per year in consulting fees if he were working full time as a potter. Total annual revenue from pottery sales is $86,000.
Instructions:
A. Calculate the accounting profit for Gomez’s pottery firm.
B. Now calculate Gomez's economic profit.
Answer:
Gomez
Accounting Vs. Economic Profit
Accounting profit:
Sales revenue $86,000
Business cost 40,000
Profit $46,000
Economic profit:
Accounting profit $46,000
Opportunity cost 34,000
Profit $ 12,000
Explanation:
a) Data and Calculations:
Annual Wages for helper = $14,500
Annual Rent = $7,500
Annual Direct materials = $18,000
Business cost = $40,000
Funds investment = $40,000
Opportunity cost (alternative option)
Interest on funds = $5,000
Wages 23,000
Consulting fees 6,000
Total opportunity costs = $34,000
Total annual sales revenue = $86,000
b) Gomez's economic profit equals the accounting profit minus the expenses incurred for lost opportunities (alternative uses) of resources. This means that the economic profit is always less than the accounting profit, which does not consider opportunity costs.
Redesigned Computers has 6.5 percent coupon bonds outstanding with a current market price of $832. The yield to maturity is 16.28 percent and the face value is $1,000. Interest is paid semiannually. How many years is it until these bonds mature? A. 2.10 years B. 4.19 years C. 7.41 years D. 9.16 years E. 18.32 years
Answer:
A. 2.10 years
Explanation:
Use following formula to calculate the numbers of years to maturity of the bond.
Price of the bond = [ Periodic Coupon payment x ( 1 - ( 1 + periodic yield to maturity )^-numbers of periods ) / Periodic yield to maturity ] + [ Face value / ( 1 + periodic yield to maturity )^numbers of periods
where
Price of the bond = $832
Periodic Coupon payment = $1,000 x 6.5% x 6/12 = $32.5
Periodic yield to maturity = 16.28% x 6/12 = 8.14%
Face value = $1,000
Numbers of periods = ?
Placing values in the formula
$832 = [ $32.50 x ( 1 - ( 1 + 8.14% )^-numbers of periods ) / Periodic 8.14% ] + [ $1,000 / ( 1 + 8.14% )^numbers of periods ]
Numbers of periods = 4.20 period
Numbers of years = 4.20 x 12/6 = 2.10 years
The demand for football tickets is Q = 360 â 10P and the supply of football tickets is Q= 20P. The government levies a per-ticket tax of $4, which is paid by consumers. Calculate the after-tax price paid by consumers. Calculate the gross price received by ticket sellers. What are consumerâs and producerâs tax burdens?
Answer:
After tax price paid by consumers
Supply function n terms of price;
P = Q / 20
P = 0.05Q
Add the tax;
P = 0.05Q + 4
Demand function in terms of price is;
Q = 360 – 10P
P = (Q - 360) / -10
Price will be;
Demand = Supply
(Q - 360) / -10 = 0.05Q + 4
36 - 0.1Q = 0.05Q + 4
0.15Q = 32
Q = 213
After tax price = 36 - 0.1Q
= 36 - 0.1 * (213)
= $14.70
Gross price for ticket sellers is;
= Price - tax
= 14.7 - 4
= $10.70
Consumer and Producer tax burden.
Without tax, price is;
36 - 0.1Q = 0.05Q
0.15Q = 36
Q = 240
P = 36 - 0.1 * 240
= $12
Consumer tax burden = 14.70 - 12 = $2.70
Producer tax burden = Tax - consumer tax burden = 4 - 2.7 = $1.30