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german
3 years ago
6

A project produces annual net income of $18,200, $21,800, and $22,900 over its three-year life, respectively. the initial cost i

s $197,000, which is depreciated straight-line to a zero book value over three years. what is the average accounting rate of return if the required discount rate is 14.5 percent?
Business
1 answer:
rjkz [21]3 years ago
3 0
Initial cost = $197,000
Total net accounting income over three years = $18,200+$21,800+$22,900 = $62,900

Average annual accounting net income = $62,900/3 = $20,966.67

Accounting rate of return = Average net annual income / Initial cost = 20,966.67/197,000 = 0.106 = 10.6%

Since Accounting net income is  lower than the required discount rate, the project is not viable.
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ExxonMobil has historically had a very low debt-to-equity ratio within the oil industry, but it recently issued $12 billion in n
Galina-37 [17]

Answer:

The WACC before bond issuance is 3.9% and the WACC after bond issuance is 3.71%

Explanation:

In order to calculate the WACC before bond issuance , we would have to calculate first the cost of equity  using capital asset pricing model .

So Using CAPM we have Rf + Beta x Market risk premium

= 0.5% + 0.85 * 4%

= 3.9% . cost of equity

Therefore WACC before bond issuance = (Cost of equity x weight of equity + cost of debt (1-tax) x weight of debt)

= 3.9% . WACC before bond issuance will be equal to cost of equity in this case as there is no debt issue.

In order to calculate the WACC after bond issuance  we make the following calculation:

WACC after bond issuance = (Cost of equity x weight of equity + cost of debt (1-tax) x weight of debt)

= (3.9% x 0.9) + (2% x 0.1)

= 3.51% + 0.2%

= 3.71%

4 0
3 years ago
Read 2 more answers
You are given the following long-run annual rates of return for alternative investment instruments: U.S. Government T-bills 3.10
Dvinal [7]

Answer:

The real rate of return is 0.10%

Explanation:

For computing the real rate of return, we need to apply the formula which is shown below:

( 1 + nominal rate) = ( 1 + real rate) × (1 + inflation rate)

So,

The real rate = {(1 + nominal rate) ÷  (1 + inflation rate)} - 1

                     = ((1 + 3.10%) ÷  (1 + 2%)} - 1

                     = (1.031 ÷ 1.02) - 1

                     = 1.0107 - 1

                     = 0.10

The Government T-bills is only the nominal rate so we considered this only

5 0
3 years ago
On January 1, 2019, Marigold Corp. Had the following stockholders' equity accounts.
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a. The preparation of the stockholders' equity section of the balance sheet at December 31 foro Marigold Corp. is as follows:

<h3>Stockholders' Equity Section:</h3>

Marigold Corporation

<h3>Balance Sheet</h3>

At December 31, 2019

Common Stock ($5 par value)

186,560 shares issued and outstanding                       $932,800

Paid-in Capital in Excess of Par Value-Common Stock  268,880

Retained Earnings                                                             446,408

Total equity                                                                  $1,648,088

b. The payout ratio and return on common stockholders' equity are as follows:

Payout ratio = Cash Dividends/Net Income

= 94% ($206,912/$220,000 x 100)

Return on Common Stockholders' Equity = Net Income/Beginniing Outstanding Equity

= 13.5% ($220,000/$1,635,000 x 100)

<h3>Data and Analysis:</h3>

Common Stock ($10 par value)

84,800 shares issued and outstanding                       $848,000

Paid-in Capital in Excess of Par Value-Common Stock 218,000

Retained Earnings                                                           569,000

Total equity                                                                $1,635,000

Jan. 15 Retained Earnings $94,976 (84,800 x $1.12) Cash Dividends Payable $94,976

Feb. 15 Dividends Payable $94,976 Cash $94,976

Apr. 15 Retained Earnings $135,680 Stock Dividends Payable $135,680 ($16 x 84,800 x 10%)

May 15 Stock Dividends Payable $135,680 Common Stock $84,800 Paid-in Capital in Excess of Par Value $50,880

July 1 Common Stock increased to 186,560 at $5 each (84,800 + 8,480 x 2)

Dec. 1  Retained Earnings $111,936 (186,560 x $0.60) Cash Dividends Payable $111,936
Dec. 31 Net income for the year = $220,000

<h3>Retained Earnings:</h3>

Beginning balance         $569,000

Net Income                       220,000

Dividends:

Jan. 15 Cash Dividends    (94,976)

Apr. 15 Stock Dividends (135,680)

Dec. 1  Cash Dividends    (111,936)

Ending balance             $446,408

Learn more about the stockholders' equity section at brainly.com/question/13373888

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3 0
2 years ago
Carmen is the vice president for marketing for nita's web design. she also sits on the board of directors. carmen would be consi
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An inside director.

An inside director is someone who sits on the board of directors and is also an employee of the company (some board members are external non-employee advisors).

5 0
3 years ago
. Doug purchased a new factory building on January 15, 1990, for $400,000. On March 1, 2017, the building was sold. Determine th
erma4kov [3.2K]

Answer:

e. None of the above

Explanation:

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Depreciation per year (assuming no 5% residual value)

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= $ 126,667

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Dep. till March 1, 2017 from December 31, 2016

= (122667*2)/12

= $21,111  

Total Dep. till March 1, 2017 =  $2,660,000 + $21,111

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Cost of recovery deduction = $4,000,000 - $2,681,111

                                              = $ 1,318,889

Therefore, The cost recovery deduction for the year of the sale is $ 1,318,889

6 0
3 years ago
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