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3 years ago

Use the following information to answer the question below:

Business

1 answer:

Molodets [167]3 years ago

4 0

Answer:

d) All of the above

Explanation:

Pro forma income statements are basically estimated or expected income statements which do not necessarily comply with US GAAP norms (are not useful in legal terms), but should reflect future outcomes.

In this case, Acquirer didn't simply decide to purchase Target and carried the operation immediately. The process is long and complicated and many times companies negotiate fair values and future cash flows. If you analyze the acquisition process of Whole Foods by Amazon it is very interesting. After negotiations Amazon paid 4 times the capitalization value of Whole Foods.

Before the actual process ends, Acquirer should present a pro forma statement and it must include all the relevant issues about the merger. They already know how much the transaction will cost, what actions will be taken to increase profits and any other major event.

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In capital budgeting, the accounting rate of return (ARR) decision model: Incorporates the timing of cash flows. Considers the t

fomenos

Answer:

Incorporates the timing of cash flows.

Explanation:

The Accounting Rate of Return uses accrual accounting in order to determine net income instead of actual cash flows like the NPV, payback period or IRR.

ARR = average annual income / average investment.

For example, an increase in accounts receivable is not considered an increase in net cash flows, but it is considered part of total revenue which increases net income

5 0

3 years ago

Satellite Systems modified its model Z2 satellite to incorporate a new communication device. The company made the following expe

Korvikt [17]

Answer:

1 - Amount to be capitalized as patent is $118,000

2 - Amount to be reported as research and development expense is $6,060,000

Explanation:

1. - Amount to be capitalized as patent is $118,000

Legal fees for patent application -------------------------$79,000

Legal fees for successful defense of new patent -- $39,000

Total ---------------------------------------------------------------- $118,000

2. - Amount to be reported as research and development expense is $6,060,000

Basic research to develop the technology ---- $3,900,000

Engineering design work ---------------------------- $1,180,000

Development of a prototype ----------------------- $590,000

Testing and modification of the prototype ---- $390,000

Total -------------------------------------------------------- $6,060,000

3 0

4 years ago

State tax officials, having had considerable success in persuading delinquent individuals to pay their back taxes through the in

Akimi4 [234]

Answer:

B) stiff fines are not the only way to collect past due corporate taxes

Explanation:

Collecting taxes is not an easy or inexpensive job. The IRS spends billions of dollars in order to collect taxes and the same applies to state taxing entities (at a smaller proportion).

So if state tax official can find a way to collect past due taxes then it should always be a good idea. Everyone loves a discount and corporations probably love discounts more. If the reduction or elimination of fines will make corporations pay their state taxes, then it's a great idea.

It's always better to collect $100 in taxes than to have $200 in past due taxes that aren't collected.

7 0

4 years ago

An indirect measure of risk that tells us how much a firm earned for each dollar invested by its owners is called blank______. m

Trava [24]

An indirect measure of risk that tells us how much a firm earned for each dollar invested by its owners is called return on equity.

<h3 /><h3>What is return on equity?</h3>

Return on equity can be defined as a process use by company or organization to measure risk , profit or net income after tax divide by the company equity over a period of time.

Formula for Return or equity is:

Return on equity= Net income after tax/ Total owners' equity.

Therefore the correct option D.

Learn more about return on equity here:brainly.com/question/26412251

#SPJ1

4 0

2 years ago

Photochronograph corporation (pc) manufactures time series photographic equipment. it is currently at its target debt-equity rat

vekshin1

<u>Answer:</u> NPV: $8,430,000

<u>Explanation:</u>

Initial Investment: -$55,000,000

After Tax cash flows: $7,400,000

<u>Calculation of the Weighted Average Cost of Capital:</u>

Cost of Equity (ke) : 15%

Pre Tax Cost of Debt (kd): 7%

65 or 26.99% [/tex]

<u>Since the tax rate is not given, let us assume tax rate to be 30%</u>

Tax rate : 30%

Post tax long term debt = 7%*(1-0.30)

Post tax long term debt (kd) = 4.90%

Debt/Equity: 0.45 or 45%

$Weight of Equity = Equity / (Debt + Equity) Weight of Equity = 1 / (0.45 + 1) Weight of Equity (We) = 0.689655 or 68.97%$

$Weight of Total Debt = Debt/ (Debt + Equity) Weight of Total Debt = 0.45/(1+0.45) Weight of Total Debt = 0.310345 or 31.0345%$

Long term Debt to Accounts Payable ratio : 0.15

$Long term debt = 1/(1+0.15) Long term debt = 0.869565$

Weight of Long term debt for the purpose of calculation of Weighted Average cost of capital:

$Weight of Long Term debt = 0.310345 * 0.869565 Weight of Long Term Debt (Wd) = 0.2698$

Weighted Average Cost of Capital = Weight of Long term debt (Wd) * Post tax long term debt (kd)+ Weight of Equity (We)*Cost of equity (ke)

where, Wd = 26.9865%

We = 68.9655%

kd = 4.90%

ke = 15%

By input the variables, into the formula of WACC, $WACC = 4.90%*0.269865 + 15%*0.689655 WACC = 0.013223 + 0.103448 WACC = 0.1167 or 11.67%$

Using the WACC for the calculation of NPV:

NPV = Present Value of cash flows - Initial Investment.

$NPV = $7,400,000/0.1167 - $55,000,000 NPV = $63,430,000 - $55,000,000 NPV = $8,430,000$

Therefore NPV of the project is $8,430,000 assuming the tax rate to be 30%

5 0

3 years ago