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Nastasia [14]
3 years ago
7

The Reynolds Corporation buys from its suppliers on terms of 3/13, net 35. Reynolds has not been utilizing the discounts offered

and has been taking 35 days to pay its bills. Ms. Duke, Reynolds Corporation's vice president, has suggested that the company begin to take the discounts offered. Duke proposes that the company borrow from its bank at a stated rate of 17 percent. The bank requires a 12 percent compensating balance on these loans. Current account balances would not be available to meet any of this compensating balance requirement.
A) Calculate the cost of not taking a cash discount.
B) Calculate the effective rate of interest if the company borrows from the bank.
Business
1 answer:
grin007 [14]3 years ago
3 0

Answer:

Explanation:

A)

cost of not taking a cash discount = (1+3/(100-3))^(360/(35-13)) -1

cost of not taking a cash discount = 66.5%

B)

Effective rate of interest if the company borrows from the bank = (17/(100-12))

Effective rate of interest if the company borrows from the bank = 19.3%

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Alpha Industries is considering a project with an initial cost of $8 million. The project will produce cash inflows of $1.49 mil
IrinaVladis [17]

Answer:

NPV = 1,003,046

Explanation:

NPV = Present value of income - investment

investment 8,000,000

1,490,000 income per year during 8 years at rate x

We need to calculate the WACC so we can know the rate

WACC = K_e(\frac{E}{E+D}) + K_d(1-t)(\frac{D}{E+D})

equity-ratio = 0.40

\frac{E}{E+D} =0.40

debt-equity ratio = 0.6

\frac{D}{E+D} =0.60

K_e= 11.27\\0.1127 \times0.40 = 0.04508

K_d = 5.61 \\0.0561\times (1-.35)\times 0.6 = 0.021879

WACC 6.69590%

Now that we achieve the rate we solve for the present value of the cash flow

C * \frac{1-(1+r)^{-time} }{rate} = PV\\

1.49* \frac{1-(1.06959)^{-8} }{0.06959} = PV\\

PV 9,003,046

And finally get the answer

NPV 9,003,046 - 8,000,000 = 1,003,046

3 0
4 years ago
Identify each of the following accounts as a component of asset (A), liabilities (L), or equity (E). Account Balance sheet secti
brilliants [131]

Answer:

a. asset (A)

b. liabilities (L)

c. equity (E)

d. asset (A)

e. liabilities (L)

f. equity (E)

g. equity (E)

h. liabilities (L)

Explanation:

A Balance sheet shows the balance of assets, liabilities and equity at the reporting date.

Assets are economic resources controlled by the entity such as equipment and cash.

Liabilities are obligation that arise such as wages payable and tax payable.

Equity is the residue after deducting liabilities from assets. it represents the owners contribution through equity and retained income.

6 0
3 years ago
bob katz and sally mander are a married couple with four children. total wages for 2018 equaled $102,400. stock which had been p
xxTIMURxx [149]

Answer:

Bob Katz and Sally Mander

Taxable Income for 2018:

= $78,200

Explanation:

a) Data and Calculations:

Total wages =                  $102,400

Gain from sale of stock =     5,200

Interest income =                      100

Total income =                 $107,700

less total deductions =     (29,500)

Taxable Income =            $78,200

b) Bob Katz and Sally Mander will have taxable income of $78,200 when the appropriate rate of tax is applied and the tax liability obtained, then the $1,500 tax credit will be deducted before arriving at the tax liability due.  

c) The short-term capital gain of $5,200 is taxed as ordinary income.  Since it is held for less than a year, it will be included in the taxable income for that year and it follows the same tax brackets as ordinary income.  On the other hand, the long-term capital gain of  $13,000 will attract a tax rate of 0 percent for a taxable income of $78,200.  Otherwise, it will attract a tax rate of 15 percent or 20 percent, depending on income level. This means that long-term capital gains tax rates are much lower than the ordinary income tax rate.

8 0
4 years ago
The goal of channels of distribution is to move products from producers to
Delvig [45]

Answer:

Final consumers

Explanation:

The goal of channels of distribution is to move products from producers to final consumers, that is, by bridging the gap between the producer and the consumer by bringing the product or service to the final buyer or consumer. Products and services may go through channel members known as intermediaries which include wholesalers, retailers, distributors.

7 0
3 years ago
State and local governments in the United States share the costs of criminal justice by making ________ primarily a local functi
Marta_Voda [28]

Answer:

The correct word for the blank space is: policy protection; corrections.

Explanation:

Policy protection is related to the regulation of individuals' reckless behavior such as <em>abuse or trafficking of drugs, theft, domestic violence, school safety, and juvenile misbehavior</em>. Local governments -counties and districts- have the power to enforce law over those matters until their jurisdiction allows it.

Criminal corrections involve all the penalties a state must impose on individuals who committed improper behavior and were against the law, thus, they must be punished.

6 0
3 years ago
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