Answer:
The answer is (A) higher than it was in short-run equilibrium.
Explanation:
Answer:
a. $49,933,333.33 million
b. $48,533,333.33 million
Explanation:
The computations are presented below:
a. For current profits as dividends in before case
= Profits × (1 + opportunity cost) ÷ (opportunity cost - growth rate)
= $1,400,000 × (1 + 0.07) ÷ (0.07 - 0.04)
= $1,400,000 × 35.6666
= $49,933,333.33 million
b. For current profits as dividends in after case
= Profits × (1 + growth rate) ÷ (opportunity cost - growth rate)
= $1,400,000 × (1 + 0.04) ÷ (0.07 - 0.04)
= $1,400,000 × 34.6666
= $48,533,333.33 million
Using the Gordon growth model, the value of the firm before dividend payouts is calculated to be $49,933,333.33. However, instantly after the dividend payouts, the firm's value becomes zero.
The value of the firm can be determined using the Gordon growth model, which is used to determine the value of a firm or stock that pays dividends that are expected to grow at a constant rate. In such a scenario, the firm's value is equal to the dividends of the next period (D1) divided by the required rate of return minus the growth rate of dividends.
Part A: The firm's value, before the payouts, can be calculated as:
Value = D0 * (1+g) / (k-g) = $1,400,000 * (1+0.04) / (0.07-0.04) = $49,933,333.33
Part B: The firm's value, after payouts, assumes that the firm's capital has come back to the company and will start accumulating again once the next cycle begins. Thus the firm's value would become zero.
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Answer:
Opportunity Cost:
Opportunity cost can be denied as the benefit a person has received but giving up taking another course of action. In other words, it can be defined as the next best alternative.
Given that the Nike women's store earns a profit in excess of $437,000. The owner of the store pays $18,000 per month as rent. A real estate agent approached the owner and informed her that she could add $7,700 per month to her firm's profits by renting out the portion of her store that she uses as a fitness studio.
From the given question the opportunity cost of continuing to operate the fitness studio within the store is $7,700.
Direct materials $800,000 $120,000
Direct manufacturing labor $200,000 $200,000
Manufacturing overhead $400,000 $500,000
The actual material and labor costs charged to Job #432 were as follows:
Total
Direct materials: $21,000
Direct labor:
Department A $11,000
Department B $7,000
$18,000
Apple Valley applies manufacturing overhead costs to jobs on the basis of direct manufacturing labor cost using departmental rates determined at the beginning of the year.
For Department A, the manufacturing overhead allocation rate is: _________
For Department B, the manufacturing overhead allocation rate is: _________
Manufacturing overhead costs allocated to Job #432 total: _________
Answer:
See below
Explanation:
1. manufacturing overhead allocation rate for department A
= (Manufacturing overhead department A/Manufacturing direct labor department A) × 100
= ($400,000/$200,000) × 100
= 200%
2. Overhead allocation rate for department B
= ($500,000/$200,000) × 100
= 250%
3. Manufacturing overhead cost allocated to job #432.
($11,000 × $400,000)/$200,000 + ($7,000 × $500,000)/$200,000
= $22,000 + $17,500
= $39,500
Answer:
$185,947
Explanation:
Receivables 50,000 Notes Payable To Bank 20,000
Inventories 150,000 Total Current Liabilities $50,000
Total Current Assets $210,000 Long-Term Debt 50,000
Net Fixed Assets 90,000 Common Equity 200,000
Total Assets $300,000 Total Liabilities And Equity $300,000
The new owner thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry average, 2.5x, without affecting sales or net income. If inventories are sold and not replaced (thus reducing the current ratio to 2.5x); if the funds generated are used to reduce common equity (stock can be repurchased at book value); and if no other changes occur, by how much will the ROE change? What will be the firm’s new quick ratio?
Answer:
The firm's new quick ratio is 2.9
Explanation:
The current ratio is calculated as
Current ratio = Current assets / Current liabilities
2.5 times = (Cash + receivables + Inventories ) / (Accounts payable + Other current liabilities)
2.5 = ($10,000 + $50,000 + Inventories) / $50,000
$60,000 + inventories = $125,000
Inventories = $65,000
Therefore, $85,000 worth of inventories were sold off.
If the funds generated are used to reduce the common equity that is by repurchasing the equity at book value.
Hence, the common equity amounts to $115,000
Calculating the ROE before the inventory is sold off:
ROE = Net income / Stockholder's equity
= $15,000 / $200,000
= 0.075 or 7.5%
Calculating the ROE after selling off the inventory:
ROE = $15,000 / $115,000
= 0.13 or 13%
The firm's new quick ratio is
Quick ratio = (Current assets - Inventories) / Current liabilities
= ($210,000 - $65,000) / $50,000
= 2.9
Answer:
C. Variances falling outside of an acceptable range of outcomes do not require investigation.
Explanation:
The purpose of any business is to generate profit which is the difference between the revenues and all cost related to business.
In order to define suitable selling price and acceptable cost, all figures are to be set in standard range; any variance outside the standard, even lower or higher, must be investigated then the company can make proper adjustments.
In the end, the right standard is not only achievable but also maximize for the profit set.
So while other statements are true about standard and variance, the statement (C) is totally wrong because it said “Variances falling outside of an acceptable range of outcomes do not require investigation”