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2 years ago

A firm with a WACC of 10% is considering the following mutually exclusive projects:

Business

1 answer:

8090 [49]2 years ago

8 0

Answer:

Option e is the correct answer.

As the NPV of project 1 is higher than Project 2's NPV, Project 1 is recommended,

Explanation:

To determine which project to choose, we will calculate the net present value (NPV) of both projects and the project with the higher NPV will be chosen.

NPV is the present value of the future cash flows inflows expected from the project less any initial cost. The formula for NPV is as follows,

NPV = CF1 / (1+WACC) + CF2 / (1+WACC)^2 + ... + CFn / (1+WACC)^n - Initial outlay

Where,

CF1, CF2,... is the cash flow in year 1, Year 2 and so on

NPV - Project 1 = 60 / (1+0.1) + 60 / (1+0.1)^2 + 60 / (1+0.1)^3 +

220 / (1+0.1)^4 + 220 / (1+0.1)^5 - 200

NPV - Project 1 = $236.076 rounded off to $236.08

NPV - Project 22 = 300 / (1+0.1) + 300 / (1+0.1)^2 + 100 / (1+0.1)^3 +

100 / (1+0.1)^4 + 100 / (1+0.1)^5 - 600

NPV - Project 2 = $126.1861 rounded off to $126.19

As the NPV of project 1 is higher than Project 2's NPV, Project 1 is recommended,

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Firm X has total earnings of $49,000, a market value per share of $64, a book value per share of $38, and has 25,000 shares outs

sveticcg [70]

Answer:

$1,456,000

Explanation:

Calculation to determine the value of the total equity of the combined firm, XY, if the purchase method of accounting is used

First step is to calculate the Assets from Firm X

Assets from Firm X = 25,000 ( $38 )

Assets from Firm X= $950,000 (book value)

Second step is to calculate the Assets from Firm Y

Assets from Firm Y = 22,000 ( $21 )

Assets from Firm Y = $462,000 (Market value)

Third step is to calculate the Goodwill

Goodwill = 22,000 ($21 + 2 ) - $462,000

Goodwill= $44,000

Now let calculate the the total equity of the combined firm, XY,

Total equity of XY = $950,000 + $462,000 + $44,000

Total equity of XY = $1,456,000

Therefore the value of the total equity of the combined firm, XY, if the purchase method of accounting is used will be $1,456,000

6 0

2 years ago

What would bill fall under, he applied and acquired for a new credit card and uses it regularly?

lidiya [134]

If he applied and acquired for a new credit card and uses it regularly he will fall under: Voluntary.

<h3>What is credit card?</h3>

Credit card can be defined as the card that enables the card holder to carryout transactions such as purchases online in which the holder is expected to payback the amount used for the purchases.

If a obtain a new credit card which he use often or frequently, bill will tend to fall under voluntary because he voluntary applied for the credit card without being comply to do so.

Therefore bill will fall under voluntary.

Learn more about credit card here:brainly.com/question/8432538

#SPJ12

4 0

1 year ago

Your client, Cascade Company, is planning to invest some of its excess cash in 5-year revenue bonds issued by the county and in

muminat

Answer:

Memorandum

Date 27th March'2017

To: Cascade Company

Subject: Re: Accounting treatment for the investments based on FASB Codification research

Purpose

This memorandum addresses the investment concern of Cascade Company in Teton Co. about accounting treatment based on FASB Codification research

Details

Query- 1). Since the Teton shares do not trade on one of the large stock markets; Cascade argues that the fair value of this investment is not readily available. According to the authoritative literature, when is the fair value of a security “readily determinable”?

Query- 2). How is an impairment of a security accounted for?

Query- 3). To avoid volatility in their financial statements due to fair value adjustments, Cascade debated whether the bond investment could be classified as held-to-maturity; Cascade is pretty sure it will hold the bonds for 5 years. How close to maturity could Cascade sell an investment and still classify it as held-to-maturity?

Query- 4). What disclosures must be made for any sale or transfer from securities classified as held-to-maturity?

Issue:

1) To determine accurately the fair value of the security of a given firm or Company, the necessary three conditions to be met are:

The fair value per share, in another word known as a unit must be indomitable and in print.
At this point, the unit qualifies to be the basis for current transactions.
In an event the fair market value of an equity security is determined then the sales price can be easily reached on a securities exchange which is registered with the United States Securities and Exchange Commission.
The sales price also can made be available in the over the counter markets. The last condition relates in foreign market situations exclusively. The overseas market should be analogous in width and extent to the American markets pursuant to (FASB, ASC 320-10-20).

2) The impairment of a security is accounted for by evaluation of the impairment test to the level of loss in value showing exterior the temporary measures. The company is allowed to take stepladder to recognize and account for securities grouped as either available for sale or held to maturity by making an assessment of whether a decline in fair value down the amortized cost basis is other than temporary. Providing a general allowance for anonymous impairment in securities portfolio in an inappropriate way (FASB, ASC 320-10-35-18). Additionally, amortized initial outlay exceeds the fair value of a project or investment at the date of balance sheet reporting period for which the respective impairment is assessed, the impairment is either other than temporary or temporary”(FASB, ASC 320-10-35-30).

3) To classify a bond as a held to maturity investment, the company must have the affirmative intent and capability to hold respective securities to maturity (FASB, ASC 320-10-25-1). In case the bonds were sold as a five-year term, it would be satisfactory to categorize the asset as held-to-maturity. It depends upon standard to sell a held-to-maturity security early. The sale of a held-to-maturity security must be in rejoinder to an actual decline, not mere conjecture, to the credit worthiness of the issuer pursuant to as according to (FASB, ASC 320-10-25-5(d)). Cascade can only sell the security based on the standards adjoining held-to-maturity categories if following conditions are met:

The security sale appears near adequate to its maturity time (or call period if exercise of the call is plausible) that risk on interest rate is significantly removed as a pricing factor, or
The sale of a security appears after the firm has already unruffled a considerable portion of the principal outstanding at acquisition due either to scheduled payments on a debt security payable in equal installments or to prepayments on the debt security (it would include both principal and interest) over its term period (FASB, ASC 320-10-25-14).

4) The entities must disclose the following for either the sale or transfer from securities classified as held-to-maturity:

The net carrying amount of the security transferred or sold.
The aggregate amount of net gain or loss that is accumulated in other comprehensive income for derivatives which is hedged the predetermined acquisition of the security held-to-maturity.
The correlated amount realized or unrealized loss or gain
The state of affairs leading to the decision to sell or transfer the security. (These transfers or sales should be rare on exceptions for transfers or sales due to the changes in conditions in accordance to paragraph 320-10-25-6(a) through (f))” (FASB, ASC 320-10-50-10).

8 0

2 years ago

With the emergence of smartphones, users no longer have to carry a separate music player, a video game, a laptop, or a magazine

ohaa [14]

Answer: (D) Industry convergence

Explanation:

The industry convergence is basically representing the fundamental growth in an organization and it basically helps in defining the various types of industries boundaries according to the business principle.

The industry convergence is the way for applying the knowledge by using the various types of technology related application in the industry.

According to the given question, the emergence of the smartphones industry with the different types of given application best illustrating the industry convergence concept.

Therefore, Option (D) is correct answer.

6 0

3 years ago

Jiyaing is an hr manager at a research firm in china, and her company has decided to open a branch in the united states. jiyaing

grandymaker [24]

The type of cultural intelligent Jiyaing needs is "low-context culture".

There are two terms which are used, high-context culture and low-context culture, both are opposite to each other.In low-context culture, individuals utilize communication principally to trade realities and data; meaning is resulted basically from words; business exchanges are more critical than building connections and trust; and individual welfare and accomplishment are more imperative than the gathering.

4 0

3 years ago