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GREYUIT [131]
4 years ago
13

Newman Co. purchased CNC router cutting and engraving machinery at a cost of $320,000 in January 2019. The company’s estimated u

seful life of this high tech equipment is 5 years, and the estimated salvage value is $48,000.Using the straight-line method, the depreciation expense to be recognized for 2019, the first year of the machinery’s life, would be:a. $128,000.b. $73,600.c. $64,000.d. $54,400.
Business
1 answer:
Amiraneli [1.4K]4 years ago
7 0

Answer:

Depreciation Expense = $54400

Explanation:

The straight line depreciation charges a cosntant depreciation expense throughout the useful life of an asset.

The formula to calculate the straighline depreciation on an asset is,

Depreciation expense per year = (Cost - Salvage Value) / useful life

Thus,

The depreciation expense per year on Newman Co. CNC router cutting and engraving machinery is,

Depreciation Expense per year = (320000 - 48000) / 5

Depreciation  expense = $54400

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In the chapter, we used Rosengarten Corporation to demonstrate how to calculate EFN. The ROE for Rosengarten is about 7.3 percen
satela [25.4K]

Answer:

Explanation:

Sustainable Growth:

The maximum growth rate a firm can achieve with no external equity financing while maintaining  a constant debt-equity ratio is known as Sustainable Growth Rate. It is the maximum rate of  growth a firm can maintain without increasing its financial leverage.

The formula for finding out the sustainable growth rate is:

sustainable\, grwth\, rate=\frac{ROE \times b}{1-ROE \times b}

Where

ROE — Retum On Equity

b — plowback or retention ratio

ROE is the product of profit margin, total asset turnover and equity multiptier.

External Financing Needed (EFN) is the increase in assets minus the addition to retained

earnings.

EFN = Increase in assets - Addition to retained earnings

The increase in assets is the product of the beginning assets and the growth rate.

Increase in assets = Beginning assets x growth rate

The addition to the retained earnings next year is the product of current net income and the

retention ratio and one plus growth rate.

Addition to retained earnings = Current net income x retention ratio x(1+ growth rate)

The ROE of Rosengarten Corporation is 7.3%, plowback ratio is 67%. Then, the sustainable  growth rate is 5.14% only. The question is whether a growth rate of 25% can be used to calculate  the EFN (External Funds Needed).

The growth rate of 25% can be used to calculate the EFN. The sustainable growth rate formula is

based on two assumptions that the company does not want to sell new equity, and that the  financial policy is fixed. If the company rises outside equity, or increases its debt-equity ratio. it  can grow at a higher rate than the sustainable growth rate.

A firm's ability to sustain growth depends on the following four factors:

1. Profit Margin: An increase in profit margin will increase the firm's ability to generate funds

internally and thereby increase its sustainable growth.

2. Dividend policy: A decrease in the percentage of net income paid out as dividends will

increase the retention ratio. This increase internally generated equity and thus increases

sustainable growth.

3. Financial policy: An increase in the debt-equity ratio increases the firm’s financial leverage.

Since this makes additional debt financing available, it increases the sustainable growth rate.

4. Total asset turnover: An increase in the firm's total asset turnover increases the sales  generated for each dollar in assets. This decreases the firm’s need for new assets as sales grow  and thereby increases the sustainable growth rate. The increasing total asset turnover is the

same as decreasing capital intensity.

The sustainable growth rate illustrates the explicit relationship between the firm's four major  areas; its operating efficiency as measured by profit margin, its asset use efficiency as measured  by total asset turnover, its dividend policy as measured by the retention ratio, and its financial  policy as measured by the debt-equity ratio.

Thus, the company could also grow faster when its profit margin increases, it it changes its dividend policy, by increasing the retention ratio or by increasing its total asset turnover.

7 0
3 years ago
Jamie would like to identify the similarities and differences among seven different types of flowers. Jamie should use a Venn di
expeople1 [14]

Jamie cannot use the Venn diagram as the best compare and contrast graphic organizer for his project. Thus, The correct answer is False.

<h3>What is a Venn diagram?</h3>

Venn diagram is used to compare elements of the same type. This includes cross-sectional circles where you write features that do not include each element, as well as the common ones.

This type of diagram is recommended when comparing two or three elements because you need a circle or space for each element, so it is not possible to compare several elements.

Thus, it is a lie to say that Jamie should use the Venn diagram in his project, because he needs to compare seven types of flowers and this does not happen using the Venn diagram, instead he should use a chart or similar that allows him to compare multiple elements. The correct answer is False.

To learn more about the Venn diagram, refer to the link:

brainly.com/question/26090333

6 0
2 years ago
In what circumstances is it most important to use multistage dividend discount models rather than constant-growth models?
patriot [66]

Answer:

when valuing companies with temporarily high growth rates.

Explanation:

Discounted dividend models are methods to assess a company's share price based on the dividends that company will distribute in the future. Also known by its name in English dividend discount model (DDM).

These models are based on the theory that the price of a share must be equal to the price of the dividends that the company will deliver, discounted at its net present value.

If the price of the share in the market is lower than the result obtained by the discounted dividend model, the share is undervalued and therefore it is advisable to buy. If, on the contrary, the market price is higher than the model, it is understood that the share price is too high.

Multistage dividend growth models

It is very difficult for a company to experience the same growth every year as the Gordon model assumes, so multistage models assume different growths for each period.

The most common is to use two or three stage growths, where at first the growths are higher but then tend to stabilize at a smaller constant growth. As for example in early stage companies.

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Business provided travel services worth R11800 to customers who settled the amount in cash
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That's a statement.

If its T/F, That is true  <span />
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