Answer:
A) Offering 1/2 price discounts through Costco.
Explanation:
Probably the most commonly used and most effective sales promotion is to offer a discount to your products or services. Everyone loves the idea of paying less for a product they need or want. But there is a catch with this type of activity, you shouldn't do it very often. If discounts are offered on a regular basis, then customers will tend to purchase the product only when a discount is available.
Answer:
The economic value establish in this case is $450
Explanation:
Economic value is the term which is defined as the computation of the profits an asset has either manufactured or might produce in the future. It is that measure of the product or service benefit provide the economic agent.
For computing the economic value as:
EV (Economic value) = (Actual rate of return - Cost of Capital) × Net Investment
where
Actual rate of return is $800
Cost of capital is $350
Net Investment is nil
Putting the values above:
EV = $800 - $350
EV = $450
Answer:
greater than both the current yield and the coupon rate.
Explanation:
A discount bond is a bond that at the point of issuance, it's less than its face or par value.
When a bond is trading for less than its face value in the market, it's known as a discount bond.
The yield to maturity on a discount bond is greater than both the current yield and the coupon rate. This simply means that the coupon rate is usually lower than the yield to maturity of the discount bond.
Additionally, the yield to maturity can be defined as the bond's total rate of return required by the secondary market while the coupon rate is defined as the annual interest of a bond divided by its face value.
For instance, when a bond is issued at a par or face value of $5,000, at maturity the investor would be paid $5,000. But because bonds are being sold before its maturity, it would trade below its face value.
Hence, a bond with the face value of $5,000 could trade for as low as $4,800, thus making it a discount bond.
Answer:
Interest Expense $39,600
Cash Flow from Operating Activities $39,600
Explanation:
Payment of Interest Expense is the cash expense paid during the year which is deducted from the operating profit in the calculation of net income which is used to determine the cash flow from operating activities.
Interest on the Bond = $660,000 x 6% = $39,600
At the time of payment Journal Entry will be as follow
Dr. Interest Expense $39,600
Cr. Cash $39,600
As the cash is paid against the operating activities.
Answer:
NPV = 138,347.55
Explanation:
<em>Net Present Value (NPV) : This is one of the techniques available to evaluate the feasibility of an investment project. The NPV of a project is the difference between the present value of the cash inflows and the cash outflows of the project.</em>
We sahall compute theNPV of this project by discounting the appropriate cash flows as follows:
<em>Prevent Value of operating cash flow</em>
PV =A× (1- (1+r)^(-n))/r
A- 23,900, r - 12%, n- 5
PV = $23,900 × (1- (1.12)^(-5))/0.05
=206,769.963
<em>PV of Working Capital recouped</em>
PV = 5600× 1.12^(-5)
= 3,177.59
NPV = initial cost + working capital + Present Value of working capital recouped + PV of operating cash inflow
NPV = (66,000) + (5600) + 3,177.59 + 206,769.96
NPV = 138,347.55
