BUSINESS COLLEGE

Suppose you operate a coal power plant and is considering upgrading the flue gas desulphurisation (FGD) facility (or "scrubbers") to reduce sulphur dioxide emissions. A contractor says their new system will cost $5000 per year to operate. Calculate, to the nearest dollar, the present value of the operational costs for the next four years. Assume a discount rate of 2%.

Answers

Answer 1
Answer:

Answer:

The present value is  $19,039

Explanation:

The computation of the Present value is shown below

= Present value of all yearly cash inflows after applying discount factor

The discount factor should be computed by

= 1 ÷ (1 + rate) ^ years

where,  

rate is 2%  

Year = 0,1,2,3,4 and so on

Discount Factor:

For Year 1 = 1 ÷ 1.02^1 = 0.9804

For Year 2 = 1 ÷ 1.02^2 = 0.9612

For Year 3 = 1 ÷ 1.02^3 = 0.9423

For Year 4 = 1 ÷ 1.02^4 = 0.9238

So, the calculation of a Present value of all yearly cash inflows are shown below

= (Year 1 cash inflow × Present Factor of Year 1) + (Year 2 cash inflow × Present Factor of Year 2) + (Year 3 cash inflow × Present Factor of Year 3) + (Year 4 cash inflow × Present Factor of Year 4)

= ($5,000 × 0.9804) + ($5,000 × 0.9612) + ($5,000 × 0.9423) + ($5,000 × 0.9238)

= $4,901.96  + $4,805.84  + $4,711.61  + $4,619.23

=  $19,039

We take the first four digits of the discount factor.  

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CD is an all equity firm that has 10,000 shares of stock outstanding at a market price of $20 a share. The firm's management has decided to issue $50,000 worth of debt and use the funds to repurchase shares of the outstanding stock. The interest rate on the debt will be 5 percent.a. What are the earnings per share at the break-even level of earnings before interest and taxes? Ignore taxes.
A static budget: _________a. should be compared to actual costs to assess how well costs were controlled. b. should be compared to a flexible budget to assess how well costs were controlled. c. is valid for only one level of activity. represents the best way to set spending targets for managers. d. A planning budget is prepared before the period begins and is valid for only the planned level of activity.
Assuming a tax rate of 30%, the after-tax cost of a $100,000 dividend payment is a. $70,000 b. $100,000 c. $30,000 d. None of the options
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The Fed buys​ $20,000 of government securities. The desired reserve ratio is 5 percent and the currency drain is zero. What will be the change in the quantity of​ money?

Answers

Answer:

The answer is $400,000

Explanation:

Quantity theory of money states that the quantity of money is directly proportional total spending in an economy.

Change in quantity of money = new deposits (which can also be new security) ÷ reserve requirements

The new security is $20,000

reserve requirements is 5 percent

Change in quantity of money is:

$20,000 / 0.05

=$400,000

Corporation needs to raise $70 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. The offer price is $30 per share and the company’s underwriters charge a spread of 8 percent. If the SEC filing fee and associated administrative expenses of the offering are $575,000, how many shares need to be sold? (Do not round intermediate calculations and enter your answer in shares, not millions of shares, rounded to the nearest whole number, e.g., 1,234,567.)

Answers

Answer:

$2536.232

Explanation:

The spread in this case is 30*8% = 2.4  

A spread is simply gap between the bid and the ask prices of a security or asset, like a stock, bond or commodity and the net proceeds are the amount of money the seller receives following the sale of an asset after all costs and expenses are deducted from the gross proceeds.

The net proceeds in this case is 30-2.4 =27.6

To get the number of share we can simply divide the funds need by the net proceeds per share = 70000000/27.6  = $2536.232. Therefore the correct answer is $2536.232

On January 1, Song Corp. receives a $100,000, two-year, note receivable from a customer in exchange for payment of goods. The note has a 12% effective interest rate. On December 31, when Song records interest for the year, Song will record

Answers

Answer:

$9,566.33  

Explanation:

We need to determine the present value of the notes receivable using the pv excel function below:

=-pv(rate,nper,pmt,fv)

rate is the interest rate of 12%

nper is the number of years before the amount on the note is received which is 2 years

pmt is the amount of fixed interest(there is no fixed interest in this case)

fv is the future value of the loan in year 2 i.e $100,000

=-pv(12%,2,0,100000)=$79,719.39  

Now,after a year 12% interest is applied to the pv:

interest=$79,719.39 *12%=$9,566.33  

Trade Mart has recently had lackluster sales. The rate of inventory turnover has? dropped, and the merchandise is gathering dust. At the same time, competition has forced AquariumAquarium's suppliers to lower the prices that Aquarium will pay when it replaces its inventory. It is now December 31, 2016, and the current replacement cost Aquarium's ending inventory is $75,000 below what Aquarium actually paid for the goods, which was $200,000.Before any adjustments at the end of the? period, the Cost of Goods Sold account has a balance of $$820,000.
Requirements:
a. What accounting action should Aquarium take in this situation?
b. Give any journal entry required.
c. At what amount should Aquarium report Inventory on the balance? sheet?
d. At what amount should the company report Cost of Goods Sold on the income? statement?
e. Discuss the accounting principle or concept that is most relevant to this situation.

Answers

Answer:

a. What accounting action should Aquarium take in this situation?

the balance of inventory account should decrease to match the replacement cost.

b. Give any journal entry required.

Dr Cost of goods sold 75,000

    Cr Inventory 75,000

c. At what amount should Aquarium report Inventory on the balance? sheet?

Inventory = $200,000 - $75,000 = $125,000

d. At what amount should the company report Cost of Goods Sold on the income statement?

Cost of goods sold = $820,000 + $75,000 = $895,000

e. Discuss the accounting principle or concept that is most relevant to this situation.

US GAAP states that companies must use the lower of cost or market rule, which means that inventory must be recognized at the lowest cost either original purchase cost or market value.

Gonzalez Company acquired $153,600 of Walker Co., 8% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, Gonzalez Company sold $43,200 of the bonds for 98.Journalize entries to record the following in Year 1 (refer to the Chart of Accounts for exact wording of account titles):a. The initial acquisition of the bonds on May 1.b. The semiannual interest received on November 1.c. The sale of the bonds on November 1.d. The accrual of $1,300 interest on December 31.

Answers

Answer:

The Journal entries are as follows:

(i) On may 1,

Investment - Walker Co. A/c    Dr.  $153,600

To cash                                                               $153,600

(To record the initial acquisition of the bonds)

(ii) On November 1,

Cash A/c( $153,600 × 8% × 6/12)   Dr.  $6,144

To Interest revenue                                            $6,144

(To record the semiannual interest received)

(iii) On November 1,

Cash A/c ($43,200 × 98%)          Dr. $30,240

Loss on sale of investment A/c  Dr. $12,960

To Investment - Walker Co.                                $43,200

(To record the sale of the bonds)

(iv) On December 31,

Interest receivable A/c   Dr. $1,300

To Interest revenue                          $1,300

(To record the accrual of $1,300 interest)

According to the life-cycle and permanent-income hypotheses, if future income rises permanently, current consumption:

Answers

Answer:

b.  rises.

Explanation:

In the case when the future income increased on permanently basis so as per the life cycle and the hypothesis of permanent income the current income rises because in this case the people rises their level of consumption patterns over their lifecycle

Therefore in the given situation, the rises is the answer and the same is to be considered

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