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noname [10]
3 years ago
9

LPM’s weighted average cost of capital (WACC) is 13 percent if the firm does not have to issue new common equity; if new common

equity is needed, its WACC is 16 percent. If LPM expects to generate $80,000 in retained earnings this year, which project(s) should be purchased? Assume that the projects are independent and indivisible.

Business
1 answer:
erica [24]3 years ago
6 0

Answer:

Projects D and E should be purchased.

Explanation:

since the firm's capital structure is 60% debt and 40% equity, it can pursue up to 2 projects. Only projects D, E and F have an internal rate of return higher than the company's WACC, so project G is discarded immediately.

Since projects D and E have a higher IRR, they should be selected.

  • project D: $70,000, IRR = 18%, debt = $42,000, equity = $28,000
  • project E: $85,000, IRR = 15%, debt = $51,000, equity = $34,000
  • total equity invested = $62,000

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The records of Lohse Stores included the following data: Inventory, May 1, at retail, $14,500; at cost, $10,440 Purchases during
bulgar [2K]

Answer:

$9,3

Explanation:

                             COST    RETAIL    RATIO

Inventory, May 1 $10,440        $14,500 .72

Purchases           31,550            42,900

Freight-in          2,000

Purchase discounts

                          (250)

Net markups                                  3,400

Net markdowns                           (1,300)

Totals excluding beginning inventory

                        33,300                45,000   .74

Goods available $43,740          59,500

Sales                                          (46,500)

Inventory, May 31                         $13,000

Estimated inventory, May 31

($13,000 × .72) $ 9,360

3 0
3 years ago
Crystal Charm Company makes handcrafted silver charms that attach to jewelry such as a necklace or bracelet. Each charm is adorn
Arturiano [62]

Answer and Explanation:

The computation is shown below:

1.

Direct Material Price Variance = Actual material cost - Actual Quantity × Standard Price

For Silver

= $13848 - 577 × 23

= $577 (U)

For Crystal

= $2926 - 7700 × 0.40

= $154 (F)

Direct Material Quantity Variance = (Actual Quantity - Standard Quantity) × Standard Price

For Silver

= (577 - 1530 × 0.40) × 23

= $805 (F)

For Crystal

= (7700 - 1530 × 5) × 0.40

= $20 (U)

2.

Direct Labor Rate Variance = Actual Cost - Actual Hours × Standard Rate

= $36915 - 3210 × 12

= $1605 (F)

And,

Direct Labor efficiency Variance = (Actual hours - Standard hours) × Standard Rate

= (3210 - 1530 × 2) × 12

= $1800 (U)

6 0
3 years ago
The amount of amount of deadweight loss as a result of the tax is:______
klio [65]

Answer:

D. $5,000

Explanation:

This deadweight in a lot of cases are seen to occur especially when demand and supply are not in equilibrium and in and in the above scenario, it is pegged at $5000. Therefore sometimes consumers experience shortages, and producers earn but they'd otherwise.

Taxes are also seen in the creation of deadweight loss because they prevent people from engaging in purchases they'd otherwise make because the ultimate price of the merchandise is above the equilibrium value. If taxes on an item rise, the burden is commonly split between the producer and therefore the consumer, resulting in the producer receiving less cash in on the item and therefore the customer paying the next price.

3 0
2 years ago
Suppose Foreign (Upper F )imposes a tariff on imports from Home (Upper H ). All else​ equal, this action will cause the​ long-ru
Orlov [11]

Answer:

D. increase; decrease

Explanation:

When foreign imposes a tariff on import from home then there will be decreaing the import leading to a decreased demand of domestic currency by foreigners.

Therefore, domestic currency will depreciate and foreign currency will appreciate thus this action will lead to real home/Foreign rate to increase and will decrease the nominal home/foreign exchange rate.

5 0
3 years ago
Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 30,000 shares authorized, 15,0
Natasha_Volkova [10]

Answer:

Dr Retained Earnings $6,000

Cr Common Dividends Payable $6,000

Explanation:

Preparation of the journal entry to record the dividend declaration

Based on the information given we were told that the Corporation declared the amount of $0.50 per share cash dividend on common shares in which 12,000 shares of the common stock are outstanding, hence The journal entry to record the dividend declaration is:

Dr Retained Earnings $6,000

Cr Common Dividends Payable $6,000

(12,000*$0.50)

5 0
3 years ago
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