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sergij07 [2.7K]
3 years ago
12

On January 1, 1997, an investment account is worth 100,000. On April 1, 1997, the value has increased to 103,000 and 8,000 is wi

thdrawn. On January 1, 1999, the account is worth 103,992. Assuming a dollar weighted method for 1997 and a time weighted method for 1998, the annual effective interest rate was equal to x for both 1997 and 1998.Calculate x.(A) 6.0% (B) 6.25% (C) 6.50% (D) 6.75% (E) 7.0%
Business
1 answer:
loris [4]3 years ago
4 0

Answer:

(B) 6.25%

Explanation:

January 1, 1997 = $100,000

April 1. 1997 = $103,000 - $8,000 = $95,000

January 1, 1999 = $103,992

annual interest rate for 1997 = i = (x - 100,000 + 8,000) / [100,000 - 8,000(1 - ³/₁₂) = (x - 100,000 + 8,000) / [100,000 - 8,000(1 - 0.25) = (x - 92,000) / 94,000

x = 92,000 + 94,000i

annual interest rate for 1998 = 1 + i = 103,992/x

x = 103,992/(1 + i)

0 = x(1 + i) - 103,992

now we replace x by 92,000 + 94,000i

0 = (92,000 + 94,000i)(1 + i) - 103,992

0 = (94,000 (1 + i) - 2,000)(1 + i) - 103,992

we now replace 1 + i by Y

0 = (94,000Y - 2,000)Y - 103,992

0 = 94,000Y² - 2,000Y - 103,992

using a calculator, Y = 6.25%

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The 2021 income statement of Adrian Express reports sales of $20,710,000, cost of goods sold of $12,600,000, and net income of $
Verizon [17]

Answer:

Adrian Express

1. Five Profitability Ratios:

Gross profit ratio: = 39.2%

Return on assets = 20%

Profit margin = 9.6%

Asset turnover = 2.1 times

Return on equity = 37.4%

2. I think the company is:

Less profitable

than the industry average.

Explanation:

a) Data and Calculations:

Sales Revenue        $20,710,000

Cost of goods sold $12,600,000

Gross profit                $8,110,000

Net income               $1,980,000

ADRIAN EXPRESS

Balance Sheets

December 31, 2021 and 2020

                                                                          2021                  2020

Assets

Current assets:

Cash                                                              $840,000            $930,000

Accounts receivable                                     1,775,000            1,205,000

Inventory                                                      2,245,000            1,675,000

Current assets                                          $4,860,000          $3,810,000

Long-term assets                                        5,040,000            4,410,000

Total assets                                             $ 9,900,000         $8,220,000

Liabilities and Stockholders' Equity

Current liabilities                                     $ 2,074,000          $1,844,000

Long-term liabilities                                   2,526,000           2,584,000

Common stock                                          2,075,000           2,005,000

Retained earnings                                    3,225,000             1,787,000

Total Equity                                               5,300,000           3,792,000

Total liabilities & stockholders' equity   $9,900,000         $8,220,000

Industry averages for the following profitability ratios are as follows:

Gross profit ratio 45 %

Return on assets 25 %

Profit margin 15 %

Asset turnover 8.5 times

Return on equity 35 %

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= $8,110,000/$20,710,000 * 100

= 39.2%

Return on assets = Net income/Assets * 100

= $1,980,000/$9,900,000 * 100

= 20%

Profit margin = Net Income/Sales * 100

= $1,980,000/$20,710,000 * 100

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Asset turnover = Sales/Total Assets

= $20,710,000/$9,900,000 = 2.1 times

Return on equity = Net Income/Total Equity * 100

= $1,980,000/$5,300,000 * 100

= 37.4%

6 0
3 years ago
The shareholders need to earn 20%. The firm can borrow at 5%. The risk free rate is 2%. The tax rate is 40%. Find the weighted a
lbvjy [14]

Answer:

11.5%

Explanation:

The computation of the weighted average cost of capital is shown below:

= Weightage of debt × cost of debt × ( 1- tax rate) + (Weightage of  common stock) × (cost of common stock)

= (0.50 × 5%) × ( 1 - 40%) +  (0.50 × 20%)

= 1.5% + 10%

= 11.5%

Basically we multiplied the weightage of capital structure with its cost so that the weighted average cost of capital could come

3 0
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