Costs and benefits must be put in common terms if they are to be compared.

In order to compute equivalent units of production using the FIFO method of process costing, work for the period must be broken

Artist 52 [7]

Answer:

The correct option here is C) units in the beginning work in progress period which were completed , units which were started and completed, and units in ending work in progress.

Explanation:

FIFO ( First in first out ) method is used to take out the cost per unit when doing process costing, in this method it is assumed that the inventory which were not finished during the beginning of period would be first completed and then new shall be started.

To take out the equivalent cost per unit under the FIFO method we will add the units which were completed in the beginning plus units which were started and completed during the period and plus the units which are left in ending work in progress.

5 0

3 years ago

The crawford company has 3,000 units in beginning finished goods. the sales budget shows expected sales to be 12,000 units. if t

Olenka [21]

Formula: Finished Goods Inventory Beginning - Sales in units + Produced units= Ending Inventory

3000-12000+14000= 5000 Ending finished goods inventory in units
-ahnnahly

3 0

3 years ago

Jonathan (an individual) owns 100% of the stock of Husky, Inc. (a C corporation) and 100% of the stock of Calhoun, Inc. (another

BaLLatris [955]

Answer: A. As Expenses

B. No treatment.

Explanation:

A. The $100,000 was not structured and a loan so it will be accounted for as EXPENSES. This means that it will be deducted from the Income for the year from Calhoun's books.

B. A C Corporation is by definition taxed SEPARATELY from it's owners in the United States of America. Seeing as both Corporations were C Corporations, Jonathan as the owner of both companies need not worry about how he should treat the $100,000 payment as he will not ne taxed on it.

8 0

3 years ago

QUESTION 4 of 10: A stadium manager has signed five acts this year with a combined revenue projection of $1,000,050. The cost fo

Ainat [17]

A
85 x 5 = 425
1000 - 425 = 575
Used simple numbers but it’s correct

7 0

3 years ago

Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is

Setler79 [48]

Answer:

Initial Cash Flow at Time 0 = -(Appraised Value of Land + Cost of Building Plant and Equipment + Net Working Capital)

Substituting values in the above formula, we get,

Initial Cash Flow at Time 0 = -(6,000,000 + 32,600,000 + 1,475,000) = -$40,075,000 (answer for Part a)

_____

Part b)

Step 1: Calculate Weights of Different Sources of Finance

Market Value of Debt = Number of Bonds*Par Value*Current Selling Price Percentage = 245,000*1,000*105% = $257,250,000

Market Value of Common Stock = Number of Shares*Current Selling Price = 9,500,000*73.10 = $694,450,000

Market Value of Preferred Stock = Number of Shares*Current Selling Price = 465,000*83 = $38,595,000

Total Market Value of Firm = Market Value of Debt + Market Value of Common Stock + Market Value of Preferred Stock = 257,250,000 + 694,450,000 + 38,595,000 = $990,295,000

Now, we can calculate weights as follows:

Weight of Debt = Market Value of Debt/Total Market Value of Firm = 257,250,000/990,295,000

Weight of Equity = Market Value of Equity/Total Market Value of Firm = 694,450,000/990,295,000

Weight of Preferred Stock = Market Value of Preferred Stock/Total Market Value of Firm = 38,595,000/990,295,000

_____

Step 2: Calculate After-Tax Cost of Debt

The after-tax cost of debt can be calculated with the use of Rate function/formula of EXCEL/Financial Calculator. The function/formula for Rate is Rate(Nper,PMT,-PV,FV) where Nper = Period, PMT = Payment (here, Coupon Payment), PV = Present Value (here, Current Selling Price) and FV = Future Value (here, Face Value of Bonds).

Here, Nper = 23*2 = 46, PMT = 1,000*6%*1/2 = $30, PV = 1,000*105% = $1,050 and FV = $1,000

Using these values in the above function/formula for Rate, we get,

Pre-Tax Cost of Debt = Rate(46,30,-1050,1000)*2 = 5.61%

After-Tax Cost of Debt = Pre-Tax Cost of Debt*(1-Tax Rate) = 5.61%*(1-22%) = 4.38%

______

Step 3: Calculate Cost of Preferred Stock

The cost of preferred stock is determined as below:

Cost of Preferred Stock = Annual Dividend/Current Stock Price*100 = (3.8%*100)/83*100 = 4.58%

______

Step 4: Calculate Cost of Equity

The cost of equity is arrived as below:

Cost of Equity = Risk Free Rate + Beta*(Market Risk Premium) = 2.9% + 1.2*(6%) = 10.10%

Calculate Discount Rate

The value of discount rate is calculated as follows:

Discount Rate = (Weight of Debt*After-Tax Cost of Debt + Weight of Preferred Stock*Cost of Preferred Stock + Weight of Equity*Cost of Equity) + Appropriate Risk Adjustment Factor

Substituting values in the above formula, we get,

Discount Rate = (257,250,000/990,295,000*4.38% + 38,595,000/990,295,000*4.58% + 694, 450,000/990,295,000*10.10%) + 1.5% = 9.90% (answer for Part b)

The after-tax salvage value of the plant is arrived as below:

Annual Depreciation = Cost of Plant and Equipment/Useful Life = 32,600,000/8 = $4,075,000

Book Value of Plant and Equipment After 5 Years = Cost of Plant and Equipment - Annual Depreciation*5 = 32,600,000 - 4,075,000*5 = $12,225,000

Loss on Sale of Plant and Equipment = Book Value of Plant and Equipment After 5 Years - Salvage Value = 12,225,000 - 5,200,000 = $7,025,000

After-Tax Salvage Value = Salvage Value + Loss on Sale of Plant and Equipment*Tax Rate = 5,200,000 + 7,025,000*22% = $6,745,500 (answer for Part c)

The annual operating cash flow (OCF) is determined as follows:

Sales Value (19,550*11,070) 216,418,500

Less Variable Costs (19,550*9,700) 189,635,000

Fixed Costs 7,500,000

Depreciation 4,075,000

EBT 15,208,500

Less Taxes 3,345,870

EAT 11,862,630

Add Depreciation 4,075,000

Operating Cash Flow $15,937,630

Answer for Part d) is $15,937,630.

The accounting break-even quantity is calculated as follows:

Accounting Break-Even Quantity = (Fixed Cost + Depreciation)/(Selling Price - Variable Cost)

Substituting values in the above formula, we get,

Accounting Break-Even Quantity = (7,500,000 + 4,075,000)/(11,070 - 9,700) = 8,449 units (answer for Part e)

IRR

IRR is the minimum rate of return acceptable from a project. It can be calculated with the use of IRR function/formula of EXCEL/Financial Calculator. The basic formula for calculating IRR is given below:

NPV = 0 = Cash Flow Year 0 + Cash Flow Year 1/(1+IRR)^1 + Cash Flow Year 2/(1+IRR)^2 + Cash Flow Year 3/(1+IRR)^3 + Cash Flow Year 4/(1+IRR)^4 + Cash Flow Year 5/(1+IRR)^5

IRR is calculated with the use of EXCEL as below:

Year Cash Flow 0 -40075000 15937630 15937630 15937630 15937630 30558130 33.16% 4 6 4 IRR 10

where

IRR = RR(B2:B7) = 33.16%

NPV

The NPV can be calculated with the use of following formula:

NPV = Cash Flow Year 0 + Cash Flow Year 1/(1+Discount Rate)^1 + Cash Flow Year 2/(1+Discount Rate)^2 + Cash Flow Year 3/(1+Discount Rate)^3 + Cash Flow Year 4/(1+Discount Rate)^4 + Cash Flow Year 5/(1+Discount Rate)^5

Substituting values in the above formula, we get,

NPV = -40,075,000 + 15,937,630/(1+9.90%)^1 + 15,937,630/(1+9.90%)^2 + 15,937,630/(1+9.90%)^3 + 15,937,630/(1+9.90%)^4 + (15,937,630 + 6,745,500 + 1,475,000 + 6,400,000)/(1+9.90%)^5 = $29,619,521.66

6 0

3 years ago