Ch 2 Solution

The fixed cost is assumed that Larry has discovered the other fixed cost incurred. The total investment is $800,000. The worst case scenario assumes that Larry got a total line of credit from the bank in the amount of $400,000 and invested $400,000 from other source. The Notes payable – short term and the long-term debt is (11.8 + 3.7) = 15.5 % from Table F in the handout. The Loan interest and payment per year is ($400,000 * 0.155)= $62,000. The Income data from Table F indicates that there is a 0.4% of all other expenses net out of the total sales which equals to $109,908 (5,700,666 gallons * $4.82 *0.4%) .

Problem 1.15. It is May and a trader writes a September call option with a strike price of $20. The stock price is $18, and the option price is $2. Describe the investor’s cash flows if the option is held until September and the stock price is $25 at this time. The trader has an inflow of $2 in May and an outflow of $5 in September. The $2 is the cash received from the sale of the option. The $5 is the result of the option being exercised. The investor has to buy the stock for $25 in September and sell it to the purchaser of the option for $20. Problem 1.16. An investor writes a

1. Do you think the characteristics of feudalism help explain the later success of Western & Japanese societies?

The Dietary Supplement Health and Education Act (DSHEA) is legislation that defines and classifies nutrient supplements and certain other products as foods. Check all of the ingredients that are considered dietary supplements according to DSHEA:

14. Global Enterprises has just signed a $3 million contract. The contract calls for a payment of $.5 million today, $.9 million one year from today, and $1.6 million two years from today. What is this contract really worth if Global Enterprises can earn 12 percent on its money?

24. Mobilee Oil Company accepted a $10,000, 120-day note, dated March 3, at 8.5% to settle a past due accounts receivable. Mobilee Oil discount the note to raise cash on May 10 at a discounted rate of 9%. What proceeds did Mobilee Oil receive?

Date: Name: ID: Answer the following Questions: 1. Tower Inc. owns 30% of Yale Co. and applies the equity method. During the current year, Tower bought inventory costing $66,000 and then sold it to Yale for $120,000. At year-end, only $24,000 of merchandise was still being held by Yale. What amount of inter-company inventory profit must be deferred by Tower? A. $6,480 B. $3,240 C. $10,800 D. $16,200 E. $6,610 2. All of the following statements regarding the investment account using the equity method are true except A. The investment is recorded at cost B. Dividends received are reported as revenue C. Net income of investee increases the investment account D. Dividends received reduce the investment account E.

6. MB4 Profit and Loss Account 2: A worked example of your solutions to your identified problems in P&L1

13. Sunglass Hut purchases a pair of Tiffany sunglasses from a wholesaler for $180 and sells it for $300. If the wholesaler increases its price by 20%, to the nearest dollar, what should Sunglass Hut charge in order to maintain the same percent margin?

Exchange rate gains or losses are brought to account in determining the net profit or loss in the period in which they arise, as are exchange gains or losses relating to cross currency swap transactions on monetary items. Exchange differences relating to hedges of specific transactions in respect of the cost of inventories or other assets, to the extent that they occur before the date of receipt, are deferred and included in the measurement of the transaction. Exchange differences relating to other hedge transactions are brought to account in determining the net profit or loss in the period in which they arise. Foreign controlled entities are considered self-sustaining. Assets and liabilities are translated by applying the rate ruling at balance date and revenue and expense items are translated at the average rate calculated for the period. Exchange rate differences are taken to the foreign currency translation reserve.

If Marlene Herbert were to discontinue place mats, he would miss $270,000 that will go toward Mendel paper company fixed cost. The company currently has a plant overhead that is estimated at $420,000 for the quarter. In addition to the fixed plant overhead, the plant incurs fixed selling and administrative expenses per quarter of $118,000. This draws the company to a total fixed cost of $538,000. If Marlene Herbert were to discontinue the second highest contributor to the fixed cost, he would need to increase the volume of computer paper and lower material cost to help pull the contribution margin of the lowest product up to help support the lost of a whole product line.

1. Write out the initial transaction and cash flows for the trade based on entering

(Refer to original data.) Fuel cost is a significant variable cost to any railway. If crude oil increases by $ 20 per barrel, it is estimated that variable cost per passenger will rise to $ 90. What will be the new break-even point in passengers and in number of passenger train cars? Then, proceed to compute number of passengers =?

If there are no feasible solutions, explain what is needed to produce 30 tons of fuel additive and 15 tons of solvent base.

Based on your answer to question 2, how would Mesa’s cash flows be affected by the expected exchange rate movements? Explain.