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stepladder [879]
3 years ago
11

The owner of Grandma's Applesauce is planning to retire after the coming year. She has to repay a loan of $50,000 plus 8 percent

interest and must rely on cash flow from operations to do so. Cash flow from operations is uncertain; there is a 70% probability it will equal $65,000, and a 30% probability it will equal $45,000.
Assuming a tax rate of 0%, what is the owner's expected cash flow after debt service?

A. $9,000 B. $5,000 C. $11,000 D. $7,700
Business
1 answer:
Aleks04 [339]3 years ago
3 0

Answer:

Option (B) $5,000

Explanation:

Data provided in the question:

Repayment of Loan = $50,000

Interest = 8%

Cash flow             Probability

$65,000                    70%

$45,000                    30%

Tax rate = 0%

Now,

Interest on loan = 8% of $50,000

= $4,000

Expected value of cash flow = ∑[cash flow × Probability ]

= ( 0.7 × $65,000 ) + ( 0.3 × $45,000 )

= $45,500 + $13,500

= $59,000

The owner's expected cash flow after debt service

= Expected value of cash flow - Interest on loan - Repayment of Loan

= $59,000 - $4,000 - $50,000

= $5,000

Hence,

Option (B) $5,000

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Bismith Company reported: Actual fixed overhead Fixed manufacturing overhead spending variance Fixed manufacturing production-vo
max2010maxim [7]

Answer:

D. Debit fixed manufacturing overhead spending variance for $40,000

Explanation:

Since fixed manufacturing overhead shows the difference between the actual fixed overhead costs and budgeted fixed overhead cost during a period, Bismith would debit fixed manufacturing overhead spending variance of $40,000 inorder to write off the recording of the variances at the end of the accounting period because the value for fixed manufacturing overhead spending variance has already being gotten hence would be applied at the end of the period.

5 0
3 years ago
Matt plans to start his own business once he graduates from college. He plans to save $1,400 every six months for the next five
NemiM [27]

Answer:

$18,453.40

Explanation:

the easiest way to determine how much money Matt is going to save is by using the future value annuity factor. Using a future value annuity table, we must look for the value that correspond to 5% interest and 10 periods =  13.181

Now we multiply our annuity factor times the amount of money that Matt saves every 6 months = $1,400 x 13.181 = $18,453.40

When Matt graduates from college he should have saved $18,453.40.

6 0
3 years ago
Destiny prefers investments that offer the highest possible returns, even if they are risky. Which of the following bonds is Des
Eva8 [605]

Based on Destiny's preference for investments with the highest returns without consideration of their riskiness, he will most likely be interested in <em>A. junk bonds.</em>

  • Junk bonds issued by corporate entities lack investment-grade credit ratings. They usually yield higher returns than the average bonds with good investment-grade credit ratings.

  • Destiny will not be interested in municipal bonds because they do not meet his high-risk appetite.  Municipal bonds do not yield high returns. They are for the risk-averse investor.

  • Destiny will not be interested in corporate bonds with investment-grade credit ratings because they are more secured and less risky than junk bonds.

  • Finally, savings bonds will not be attractive to Destiny, as the U.S. Treasury issues them and they remain the safest investments.

Thus, Destiny's interest will be in junk bonds because he does not mind the risks but wants the highest returns from his investments.

Read more: brainly.com/question/11619330 and brainly.com/question/24691173

6 0
3 years ago
A down payment deposit from a potential buyer must be held in: Group of answer choices The seller's bank account The salesperson
Andreyy89

Answer:

The explanation and solution of this question is given below in explanation section.

Explanation:

The correct option of this question is :

The broker’s escrow trust account.

This method mostly used in freelancing. Upwork is one of the freelancing websites. It uses escrow trust account where potential buyer deposit the down payment and this deposit payment will be released to a potential client as he completes the contract with the buyer.

Why other options are not correct.

The amount does not directly deposited in the seller's bank account. because it is chances that the seller either will not work or complete the work and take the money away.

A salesperson bank account is also an incorrect option.

4 0
3 years ago
_____ 24. Audrey Corporation's cost formula for its selling and administrative expense is $47,900 per month plus $52 per unit. F
creativ13 [48]

Answer:

The estimated cost for selling and administration expenses is:

47900+52*6000=$359900

Explanation:

Audrey Corporation's cost for selling and administrative expenses present fix and variable costs. They plan a fixed cost of $47,900 and a variable cost of $52 unit.

The formula is:

SandA COST= 47900+52*Q

For April they planned to sell 6000 units.

The estimated cost for selling and administration expenses is:

47900+52*6000=$359900

If the formula is accurate the real cost of selling and administration is:

47900+52*5960=$357,820

7 0
3 years ago
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