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4 years ago

Presented below is information related to Bramble Enterprises.

Business

2 answers:

Dafna11 [192]4 years ago

7 0

Answer:

The valuation of inventory at Lower of costs or net realizable value always calls for adjustments to our inventory balances.

As a standard, the impact of this valuation must go against the costs of sales as an added cost if the valuation is lower than the inventory costs. but a benefit by way of lowering the cost of sales if the valuation is higher than the cost of inventory.

For the 3 months respectively we see valued costs lower than the inventory costs, therefore cost of sales will go up by these adjustments:

Feb $2,850

March $1,596

April $798

See attached document for the complete presentation

jeka57 [31]4 years ago

6 0

Answer:

Bramble Enterprises' Income Statement is attached.

Explanation:

The inventory valuation losses determined by comparing the inventory at cost with inventory at the lower of cost and net realizable value.

In all cases, the net realizable values were lower than the costs. Therefore, the total costs were adjusted to show the loss in income.

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= $33,000 + $9,000 + $6,000 + $31,000

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b The total liabilities and owners equity is

= Account payable + long term debt + common stock + retained earnings

= $23,000 + $40,000 + $10,000 + $59,000

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c. The earnings from operations is

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Less cost of goods sold $90,000

Gross profit $50,000

add: service revenue $20,000

Less depreciation expense $12,000

Less supplies expense $14,000

Operating income $44,000

d. The net income is

= operating income - interest expense - income tax expense

= $44,000 - $4,000 - $12,000

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= $12,000 ÷ $40,000 × 100

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Explanation:

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3 years ago

The market consensus is that Analog Electronic Corporation has an ROE = 9%, a beta of 1.25, and plans to maintain indefinitely i

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Answer:

a. Stock Price is $10.60.

b. Trailing P/E ratio is 3.53, while Leading P/E ratio is 3.33.

c. Present value of growth opportunitiesis -$9.28.

d .Stock Price is $15.85.

Explanation:

The following are given in the question:

ROE = 9%

b = beta = 1.25

pr = Plowback ratio = 2/3 = 0.67

dpr = dividend payout ratio = 1- pr = 1/3 = 0.33

e0 = This year’s earnings per share = $3

mr = The coming year’s market return = 14%

tr = T-bills return = 6%

We can now proceed as follows:

a. Find the price at which Analog stock should sell. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

The stock price can be calculated using the following formula:

P0 = Stock Price = d * (1 + g) / (r - g) …………………………. (1)

Where;

d = dividend per share = e0 / dpr = $3 / (1 / 3) = $1

g = Sustainable growth rate = ROE * pr = 9% * 2/3 = 0.06

rf = Risk free rate = Return on T-bills = 6%

b = Beta = 1.25

mr = Market return = 14%

r = Required return on Equity = rf + b * (mr - rf) = 6% + 1.25 * (14% - 6%) = 0.16

Substituting the values into equation (1), we have:

Stock Price = $1 * (1 + 0.06) / (0.16 – 0.06)

Stock Price = $1 * 1.06 / 0.10

Stock Price = $1 * 10.60

P0 = Stock Price = $10.60

b. Calculate the P/E ratio. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Trailing P/E ratio = P0/E0 = $10.60 / $3 = 3.53

Leading P/E ratio = P0/e1 ………………………………………. (2)

Where;

e1 = e0 * (1 + g) = $3 * (1 + 0.06) = 3.18

Substituting the values into equation (2), we have:

Leading P/E ratio = $10.60 / 3.18 = 3.33

c. Calculate the present value of growth opportunities. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

P0 = e1 / r + pvgo …………………………………… (3)

Where pvgo denotes present value of growth opportunities, and P0, e1 and r are as already obatained in part a and b.

Substituting the values into equation (2) and solve for pvgo, we have:

$10.60 = $3.18 / 0.16 + pvgo

$10.60 = $19.875 + pvgo

pvgo = $10.60 - 19.875

pvgo = -$9.28

d. Suppose your research convinces you Analog will announce momentarily that it will immediately reduce its plowback ratio to 1/3. Find the intrinsic value of the stock.

g = ROE * pr = 9% * (1 / 3) = 3%

dpr = 1 – pr = 1 - 1/3 = 2/3

d = dividend per share = e0 / dpr = $3 / (2 / 3) = $2

Stock Price = d * (1 + g) / (r - g) = $2 * (1 + 3%) / (0.16 – 3%)

Stock Price = $2 * (1 + 3%) / (0.16 – 3%)

Stock Price = $15.85

4 0

4 years ago