A company has a margin of safety of 20%. If expected sales are $50,000, then break-even sales are:______

Suppose you invest $20,000 by purchasing 200 shares of Abbott Labs (ABT) at $50 per share, 200 shares of Lowes Companies, Inc. (

nikitadnepr [17]

Answer:

Portfolio return = 0.035 or 3.5%

Explanation:

The portfolio return is a function of the weighted average of individual stocks' returns that form up the portfolio. The formula to calculate the portfolio return is as follows,

Portfolio return = wA * rA + wB * rB + ... + wN * rN

Where,

w represents the weight of each stock in the portfolio
r represents the return of each stock

First we need to calculate the investment of each stock,

Abbott = 200 * 50 = $10000

Lowes = 200 * 30 = $6000

Ball = 100 * 40 = $4000

Portfolio return = (10000 / 20000) * -0.10 + (6000/20000) * 0.20 +

(4000/20000) * 0.125

Portfolio return = 0.035 or 3.5%

4 0

3 years ago

Aaron's Rentals has 58,000 shares of common stock outstanding at a market price of $36 a share. The common stock just paid a $1.

snow_lady [41]

Answer:

The firm's weighted average cost of capital (WACC) is 7.76%.

Explanation:

Note: Par value of the preferred stock is $100 but it is omitted in the question.

Market price share = (Dividend just paid (1 + Dividend growth rate)) / (Cost of equity – Dividend growth rate) ………………………………….. (1)

Substituting the relevant values into equation and solve for cost of equity, we have:

36 = (1.64 * (1 + 0.028)) / (Cost of equity – 0.028)

36 = 1.68592/ (Cost of equity – 0.028)

36(Cost of equity – 0.028) = 1.68592

36Cost of equity - 1.008 = 1.68592

36Cost of equity = 11.68592 + 1.008

Cost of equity = (1.68592 + 1.008) / 36

Cost of equity = 0.0748, or 7.48%

Cost of preferred stock = (Par value * Dividend rate) / Current price = (100 * 6%) / 51 = 0.1176, or 11.76%

Cost of debt = Coupon rate * (100% - tax rate) = 8% * (100% - 34%) = 0.0528, or 5.28%

Common stock market value = 58,000 * $36 = $2,088,000

Preferred market value = 12,000 * $51 = $612,000

Bond market value = $750,000 * ($1,011 / $1,000) = $758,250

Total market value of the company = Common stock market value + Preferred market value + Bond market value = $2,088,000 + $612,000 + $758,250 = $3,458,250

WACC = (7.48% * ($2,088,000 / $3,458,250)) + (11.76% * (612,000 / $3,458,250)) + (5.28% * ($758,250/ $3,458,250)) = 0.0776, or 7.76%

4 0

3 years ago

On June 30, 2009, Apricot Co. paid $7,500 cash for management services to be performed over a two-year period. Apricot follows a

My name is Ann [436]

Answer:

c. A debit to a prepaid expense for $7,500.

Explanation:

Because the pament for management services are in-advance, is a right for Apricot, as now has the right to receive this management services for two-years

The entry will do the following:

it will recognize the prepaid expense

prepaid management services

and will post the cashoutflow for the amount paid.

prepaid management services 7,500 debit

cash 7,500 credit

From the option we are given:

a.- FALSE there is no expense in the entry

b.- FALSE there is no expense in the entry

d.- FALSE the prepaid expense is debited, not credited

e.- FALSE. cash is credit, not debit.

c.- CORRECT there is a prepaid expense, which is being debited.

3 0

3 years ago

Eunice buys a worm farm. She plans to sell a small carton of worms to people who want to fish for $3. Her fixed costs are $1,201

Evgesh-ka [11]

Answer:

C. 534 units

Explanation:

The formula to compute the break-even point is shown below:

= (Fixed cost) ÷ (Contribution margin per unit)

where,

Contribution margin per unit = Selling price per unit - Variable expense per unit

= $3 - $0.75

= $2.25

So, the break-even point would be

= $1,201 ÷ $2.25 per unit

= 534 units

Simply we divide the fixed cost by the contribution margin per unit so that the accurate units can come.

3 0

4 years ago

The current ratio is A. current assets divided by current liabilities. B. current assets minus current liabilities. C. current a

Mandarinka [93]

Answer: Current assets divided by current liabilities

Explanation: Current ratio is a liquidity ratio commonly used by analyst to evaluate the ability of company to pay for its short term liabilities with the given level of short term liquid assets. The difference between current assets and current liabilities is called the working capital.

The ideal current ratio as per the analyst is 1.

5 0

3 years ago

A company has a margin of safety of 20%. If expected sales are $50,000, then break-even sales are:_______