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4 years ago

Respond to the following comments:

Business

1 answer:

MakcuM [25]4 years ago

5 0

Answer:

Comment for statement A - The firm must still compare the IRR with the opportunity cost of capital when using the IRR rule. Therefore, even with the IRR method, the appropriate discount rate must still be specified.

Comment for statement B - There should be a higher discount rate on risky cash flows than the rate used to discount less risky cash flows.

Making use of the payback rule is equivalent to using the NPV rule with a zero discount rate for cash flows before the payback period and an infinite discount rate for cash flows thereafter.

Explanation:

“I like the IRR rule. I can use it to rank projects without having to specify a discount rate”

The firm must still compare the IRR with the opportunity cost of capital when using the IRR rule. Therefore, even with the IRR method, the appropriate discount rate must still be specified.

“I like the payback rule. As long as the minimum payback period is short, the rule makes sure that the company takes no borderline projects. That reduces risk”

There should be a higher discount rate on risky cash flows than the rate used to discount less risky cash flows.

Making use of the payback rule is equivalent to using the NPV rule with a zero discount rate for cash flows before the payback period and an infinite discount rate for cash flows thereafter.

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dybincka [34]

I'ts not the C, gross income received from salaries, wages, tips, and commissions. I just chose that on my quiz and got it wrong. I did a little more research after that and now I believe it is

B, gross income after subtracting exemptions and deductions.

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4 years ago

Read 2 more answers

On 12/31/2015, Heaton Industries Inc. reported retained earnings of $675,000 on its balance sheet, and it reported that it had $

Sergio [31]

Answer:

Heaton paid a total of $52,500 as dividend during 2015

Explanation:

Dividends in 2015 = Previous year retained earnings - Current year retained earnings + Current year net income

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Dividends in 2015 = $52,500

Heaton paid a total of $52,500 as dividend during 2015

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3 years ago

Lance Lawn Services reports warranty expense by estimating the amount that eventually will be paid to satisfy warranties on its

kvv77 [185]

Answer:

Warranty liability at 12/31/13 = $2 million.

This means that the balance in the deferred tax asset should be $700,000

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Therefore, the deferred tax asset needs to be reduced (credited) by $37,500.

($700,000 - 737,500) = -37,500

Date Account Title Dr Cr

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3 years ago

Tom knows that the title insurance company made a mistake on his property title. Because of their mistake, his neighbor now has

kow [346]

Answer:

risk aversion.

Explanation:

Have you ever heard "A bird in the hand is worth two in the bush"?

It relates to safe investments or activities that yield known returns, instead of simply trying to go after more birds that you might or might not catch.

Tom knows that he can sue the title company and earn a lot of money, but he also knows that he might lose the case and instead of getting some money will have to spend a lot of his money in legal fees. Since he dislikes the risk of losing both the suit and his own money, he decided to accept the company's settlement.

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3 years ago

Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increa

torisob [31]

Answer:

a) $ 40,480

b) 17.60%

Explanation:

Working:

a. Increase in sales a 2,30,000

Less:

Bad debts expenses

b=a*5% 11,500

Collection costs

c=a*2% 4,600

Production ans selling costs

d=a*71% 1,63,300

Earning before tax

e=a-b-c-d 50,600

Less: Tax @ 20%

f=e*20%

10,120

Net Income 40,480

b)Return on sales

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40480/230000

17.60%

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4 years ago