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3 years ago

Assigning discount rates to individual projects based on the risk level of each project:

1 answer:

3 0

Answer: c. May cause the company's overall weighted average cost of capital to either increase or decrease over time.

Explanation:

Weighted Average Cost of Capital (WACC) as the term implies, is a weighted average of the various rates that the company uses to source capital. If therefore, the company assigns different discount rates based on risk level, WACC will either increase or decrease overtime.

With better discount rates, the WACC will decrease to reflect the lower risk and with worse rates, WACC will increase to reflect the higher risk associated with the company. .

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Jakarta Company is a service firm with current service revenue of $500,000 and a 40% contribution margin. Its fixed costs are $8

Lady_Fox [76]

Answer and Explanation:

The computation of the margin of safety is shown below:

As we know that

margin of safety = Actual sales - break even sales

For Jakarta, it is

= $500,000 - ($80,000 ÷ 0.40)

= $500,000 - $200,000

= $300,000

And, for maldives, it is

= $6,620,000 - ($2,151,500 ÷ 50%)

= $2,317,000

7 0

3 years ago

People's Clinic purchased a special machine for use in its laboratory on January 2, 2016. The machine cost $100,000 and was expe

klemol [59]

Answer:

Depreciation Expense for 2018; $10,528.57

Explanation:

On January 2, 2016

machine cost = $100,000

Useful life = 10 years

Annual depreciation = ($100,000 - $6000)/10

= $9,400

By early 2018,

Carrying amount of the machine

= $100,000 - 2($9,400)

= $100,000 - $18,800

= $81,200

Useful life is reassessed to 7 years (rather than 8) with a salvage value of $7,500

Annual Depreciation = ($81,200 - $7,500)/7

= $73,700/7

= $10,528.57

Depreciation Expense for 2018; $10,528.57

6 0

4 years ago

rayer Corporation has income from continuing operations of $319,000 for the year ended December 31, 2017. It also has the follow

faltersainse [42]

Answer:

before tax 305,500

tax expense 48,880

after tax 300,620

Explanation:

income from continuing operations of 319,000

Capital gain 33,500

understatement of 2016 income 20,000

loss on available-for-sale securities. (58,800)

discontinued operations <u> (8,200) </u>

Total other comprehensive income 305,500

tax expense 16% <u> (48,880) </u>

net 300,620

We will list each transaction, notice the understatement of 2016 income means the company recognize a lower income than it should, so we increase the other comprehensive income.

5 0

3 years ago

The management of Madeira Computing is considering the introduction of a wearable electronic device with the functionality of a

Alenkasestr [34]

Answer:

Best-case profit: $2,500,000

Worst-case profit: -$300,000

Base case profit: $100,000

Explanation:

initial cost $300,000

variable cost between $160 - $240

most likely variable cost $200

sales price per unit $300

expected demand 0 - 20,000 units

most likely expected demand 4,000 units

best case scenario:

20,000 units x $300 = $6,000,000

- variable costs 20,000 x $160 = -$3,200,000

- fixed cost = -$300,000

profit = $2,500,000

base case scenario:

4,000 units x $300 = $1,200,000

- variable costs 4,000 x $200 = -$800,000

- fixed cost = -$300,000

profit = $100,000

worst case scenario:

0 units x $300 = $0

- fixed cost = -$300,000

profit = -$300,000

6 0

4 years ago

Sargent Corporation bought equipment on January 1, 2021. The equipment cost $360,000 and had an expected salvage value of $60,00

Fiesta28 [93]

Answer:

c. $50,000.

Explanation:

Depreciation: The depreciation is a non-cash expense that shows a reduction in the value of the fixed assets due to tear and wear, obsolesce, usage, time period, etc. It is shown on the debit side of the income statement.

The computation of the depreciation expense under the straight line method is shown below:

= (Original cost - expected salvage value) ÷ (estimated life of the equipment)

= ($360,000 - $60,000) ÷ (6 years)

= ($300,000) ÷ (6 years)

= $50,000

In this method, the depreciation is same for all the remaining useful life

5 0

4 years ago