Answer:
the conversion cost is $58,200
Explanation:
The computation of the conversion cost is shown below:
The conversion cost is
= Direct Labor + Manufacturing Overhead
= $32,800 + $25,400
= $58,200
Hence, the conversion cost is $58,200
It is the combination of the direct labor and the manfacturing overhead
Publicity is more credible because it is less biased :)
Answer:
a) WACC = 12.20%
Explanation:
Weighted average cost of capital is computed by allocating weights to different capitals.
Cost of bonds = Cost of debt = 5%
Cost of preferred stock = 9%
Cost of equity = 16%
As it is new issued and not from retained earnings.
With weights cost will be as follows
Bonds = 5% X $5/$20 = 1.25%
Preference share = 9% X $3/$20 = 1.35%
Equity = 16% X $12/$20 = 9.6%
WACC = 1.25 + 1.35 + 9.6 = 12.20%
Answer:
21.29%
Explanation:
The computation of the internal growth rate is shown below:
But before that we need to determine the following calculations
Debt equity ratio js
= debt ÷ equity
The debt is 0.6 of equity
So,
= 0.6 × $8,600
= $5,160
Now
Total assets = Total liabilities + Total equity
= $8,600 + $5,160
= $13,760
Return on assets = Net income ÷ Total assets
= $3450 ÷ $13760
= 0.2507
Now as we know that
Retention ratio = 1 - payout ratio
= 1 - 0.3
= 0.7
And, finally
The Internal growth rate is
= (Return on assets × Retention ratio) ÷ [1 - (Return on assets × Retention ratio)]
= (0.2507 × 0.7) ÷ [1 - (0.2507 × 0.7)]
= 21.29%
Answer:
The Firm should not Buy and Install the press as it delivers a negative NPV of -$24,924 at 11% discount rate over its 4 year operations
Explanation:
The General rule is to appraise the investment based on various appraisal techniques.
A technique that should be considered must have special focus on the time value of money, the required rate of returns expected by the firm and other Cashflow considerations.
The Net Present Value (NPV) approach will be the best method to proceed with.
The NPV approach typically falls under the following decision tree:
a. If NPV is negative (Reject the proposal)
b. If NPV is positive (Accept if it's a singular project, Accept the highest positive NPV if it's for mutually exclusive Projects)
c. If Zero (this is the breakeven line at which the Project covers all its cost but does not return a profit.) Also referred to as the IRR
Kindly refer to the attached for detailed workings
