Determine the Degree of Financial leverage (DFL) of each alternatives assuming an Earnings before interest and tax (EBIT) of $120,000.
Q: Jerome's Fashion Dezigns sells a variety of items of clothing including footwear for men and uses a ...
A: calculation of cost of 60 pairs as per FIFO method 35 pairs remaining from Oct 10 purchases= 35* (59...
Q: Selected data from Design Corporation for 2016 is as follows: Inventories Beginning $34,000 Ending $...
A: Manufacturing cost= Prime cost + manufacturing overheads Manufacturing overheads= Indirect Material+...
Q: 10. On July 1, 20x6, Entity A leased a delivery truck from Entity B under a 3-year operating lease. ...
A: Given that entity A leased the delivery truck on July 1st, 20X6 and rent payment need to be done ann...
Q: P 67,000 overstated D. P 82,000 overstat
A: Assets - treated as income so added to the net income except for beginning inventory because it will...
Q: ABC Corporation acquired 70 percent of XYZ Corporation on August 1 for P420,000. On that date, XYZ C...
A:
Q: Noncurrent Asset Held for Sale The statement of financial position of an entity on December 31, 20x...
A: An asset is considered to be as a asset held for sale when the management decides to sell such asset...
Q: ABC Corporation acquired 80 percent of XYZ Corporation on August 1 for P500,000. On that date, XYZ C...
A: Identifiable net asset and share of NCI: Amount (P) Cash 60,000 Inventory ...
Q: dependen les as Singie lax year Answer: А. S2,500 В. $5,000 C. S7,500 D. $10,000 B.
A: The correct answer is option (d)$10000
Q: Raise three issues related to the annual report and the broader area of financial reporting, and exp...
A: Annual report refers to a corporate document or financial summary which is released by the company, ...
Q: For each action for X co. below you should draw up a balance sheet and income statement that reflect...
A: Solution Concept The income statement is prepared to present the income earned during a period of ti...
Q: QUESTION 3 Calculate Boeing's cash flow from assets given the following information: Interest paid 2...
A: Cash flow from assets It includes the operating cash flow and investing cash flow = OCF – Change in ...
Q: TB MC Qu. 07-116 (Algo) Giorgio Italian Market bought... Giorgio Italian Market bought $5,200 worth ...
A: A journal entry is used to record a commercial transaction in the accounting records of a corporatio...
Q: TB MC Qu. 07-149 (Algo) MacKenzie Company sold... MacKenzie Company sold $460 of merchandise to a cu...
A: Company will record cash sales transaction in its books, as the payment has been made by the custome...
Q: Lee, Min and Ho have been in partnership for more than 10 years. They see that the business profits ...
A: On liquidation of partnership, all the non-cash assets and liabilities are transferred to realisatio...
Q: 1. A minimum company will produce drinks of type XYZ. From the data for the last 1 month, the larges...
A: Given, Biggest demand = 6000 bottles per day Smallest demand = 500 bottles per day Stock (max) =80...
Q: shares capital, P100 par, 30,000 shares 3,000,000 Share premium 500,000 Retained earnings ...
A: Dividend refers to the cash distributed by a company to its shareholders.
Q: Alibangbang Company produces 100,000 units of Part 34B, used in one of its snowblower engines, each ...
A: Variable cost means the cost which vary with the level of output where as fixed cost remain fixed wh...
Q: On decmeber 31, the trial balance indicates that the supplies account has a balance, prior to the ad...
A: The journal entries are prepared to keep the record of day to day transactions of the business. The...
Q: Question 21: The income threshold for Additional Medicare Tax levied is based on the Answer: A. age ...
A: Additional Medicare Tax is an amount that is additionally paid by the tax payer contributions to the...
Q: Under-applied manufacturing overhead costs are always the result of which of the following situation...
A: Applied overhead = Overhead rate x Actual hours incurred where, Overhead rate = Budgeted Overhead co...
Q: Book Value P50,000 140,000 530,000 210,000 Market Value P50,000 200,000 600,000 Cash Inventory Plant...
A: The acquisition means that the parent company acquires the subsidiary company.
Q: what is the difference between Accumulated Benefit Obligation and Projected Benefit Obligation? How ...
A: Difference between Accumulated Benefit obligation and projected benefit obligation: Accumulated ...
Q: 1. What is the project’s discounted payback?
A:
Q: Only help with parts c, g, I and J Scorecard Measures, Strategy Translation At the end of 20x1, Me...
A: c. Assuming 1 unit per consumer Total customer=Total unit sold=Actual production Percentage of reven...
Q: nd which of the following statements about the business variance are correct?) - The budgeted sellin...
A: Budgeted cost refers to the future expenses which are forecasted by the company and these costs are ...
Q: Question 1: Success Company has just received its bank statement for the month of July 201X from its...
A: Introduction:- The act of recording or keeping track of any financial or non-financial action is kno...
Q: Vaasa Chemicals makes a product by way of two processes – Mixing & Refining. Its process costing sy...
A: Note: "Since you have posted a question with multiple sub-parts, we will solve first three subparts ...
Q: Muller Computers stores its inventory in a warehouse that burned to the ground in late November, 201...
A: Calculation of ending inventory Ending inventory = Beginning inventory + Purchases - Cost of Goods s...
Q: ABC Company and XYZ Company reported the following condensed Statements of Financial Position on Jan...
A: Consolidated financial statements means financial statements of overall group where conman have one ...
Q: The assets of J&R Associates consist entirely'of current assets and net plant and Problem 1 (Stateme...
A: As per Accounting equation,Assets =Liabilities +Shareholder's equity The amount which is required by...
Q: E4.2 (LO 2, 3) Presented below is information related to Viel Company at December 31, 2020. Sales re...
A: The income statement, together with the balance sheet and the statement of cash flows, is one of thr...
Q: ABC Corporation acquired 80 percent of XYZ Corporation on August 1 for P500,000. On that date, XYZ C...
A: 80% Acquisition of XYZ Corporation by ABC Corporation Purchase Consider = 500000 Book Value M...
Q: Martin Jackson receives an hourly wage rate of $15, with time and a half for all hours worked in exc...
A: Formula: Net pay = Gross pay - All deductions.
Q: a) Liquidity analysis. b) Solvency analysis. c) Any other financial analysis that you think can help...
A: Introduction:- Market liquidity is a property of a market that allows an individual or a corporation...
Q: On August 15, 2021, Bob bought a rental house. The property cost $310,000. Of this, the land was val...
A: As per GDS MACRS method, for residential rental property- 27.5 year, straight line class with mid mo...
Q: ABC Company acquired XYZ Company in an acquisition. What date should be used as the acquisition date...
A: Acqusition Acqusition which is describe as the purchase the control of over another companies shares...
Q: Problem 18. Book value per share The shareholder’s equity of Dancing Queen Co. in the statement of ...
A: Book value per share means how much shareholders equity is available for each equity shareholder and...
Q: Suppose that the company sold all of its completed jobs, adding 40% mark up on its cost. How much is...
A: Prime cost means the addition of direct material and direct labor and other direct expenses. Manufac...
Q: To be deductible as the cost of special work clothing or uniforms: a.The clothing must be required a...
A: The correct answer is option (d)The clothing must not be suitable for everyday use and must be requi...
Q: 17. On January 1, 2015, Battle Company purchased a delivery truck for $252,000 with an estimated use...
A: Depreciation per miles (units of production method) = (Cost of the assets - salvage value) / Expecte...
Q: Alex Miller, Inc., sells car batteries to service stations for an average of $30 each. The variable ...
A: Break even level = Total fixed costs / Contribution margin per unit where, Contribution margin per u...
Q: A. Record the withdrawal of Daryl from the partnership under each of the following independent assum...
A: Since you have asked two questions under a different multi sub-parts kindly resubmit another part to...
Q: 5) a) Four mutually exclusive alternatives including "Do Nothing" are presented below. Find the best...
A: a. The Minimum acceptable rate of return is given 7%. Among the options given, the first two options...
Q: On January 1, 20x1 Pinup Corp acquired 34,560 outstanding ordinary shares of Slug corp. for a cash c...
A: Calculation of amount of non-controlling interest are as follows.
Q: under each of the E assumption: s paid cash of P1C
A: B. The capital balance of each partner is shown as,
Q: assets of XYZ Company and also incurred 12,000 direct acquisition costs. The recorded assets and lia...
A:
Q: Hickory Company manufactures two products—15,000 units of Product Y and 7,000 units of Product Z. Th...
A: (1.) Which of the four activities is a product-level activity? Answer: (a) Product design. The produ...
Q: g the sale of machinery, which of the following do NOT appear in the journal entry? a. Cr Machinery...
A: When the sale of a fixed asset takes place the book value is compared to the sales value If the sale...
Q: Using the following budgeted information for production of 10,000 and 15,000 units, prepare a flexib...
A: Fixed costs: Fixed costs means the costs that are not dependent on the level of production of goods ...
Q: Oyster Corporation is a publicly traded company that follows IFRS. On December 31, 2019, Oyster's fi...
A: Introduction Pension worksheet is a document maintained by employer to show annual pension expense, ...
A firm needed $500,000 total resources to operate a project that would yield them a profit. It has drafted two (2) alternatives in order to procure this amount. First alternative - invest $40,000 among the five owners for a total equity of $200,000, and loan from a bank the remaining $300,000 with a 10% interest annually of $30,000. Second alternative - invest $40,000 among the five owners and invite five more investors to contribute $40,000 each for a total capital of $400,000, and loan the remaining $100,000 from the bank and pay 10% or $10,000 annual interest. Determine the Degree of Financial leverage (DFL) of each alternatives assuming an Earnings before interest and tax (EBIT) of $120,000.
A.First alternative - 1.33; Second alternative - 1.09
B.First alternative - 1.25; Second alternative - 1.07
C.First alternative - 1.20; Second alternative - 1.05
D.First alternative - 1.14; Second alternative - 1.04
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: The system will cost 9,000,000 and last 10 years. The companys cost of capital is 12 percent. Required: 1. Calculate the payback period for the system. Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Should the system be purchasedeven if it does not meet the payback criterion? 3. The project manager reviewed the projected cash flows and pointed out that two items had been missed. First, the system would have a salvage value, net of any tax effects, of 1,000,000 at the end of 10 years. Second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of 300,000. Recalculate the payback period, NPV, and IRR given this new information. (For the IRR computation, initially ignore salvage value.) Does the decision change? Suppose that the salvage value is only half what is projected. Does this make a difference in the outcome? Does salvage value have any real bearing on the companys decision?Wansley Lumber is considering the purchase of a paper company, which would require an initial investment of $300 million. Wansley estimates that the paper company would provide net cash flows of $40 million at the end of each of the next 20 years. The cost of capital for the paper company is 13%. Should Wansley purchase the paper company? Wansley realizes that the cash flows in Years 1 to 20 might be $30 million per year or $50 million per year, with a 50% probability of each outcome. Because of the nature of the purchase contract, Wansley can sell the company 2 years after purchase (at Year 2 in this case) for $280 million if it no longer wants to own it. Given this additional information, does decision-tree analysis indicate that it makes sense to purchase the paper company? Again, assume that all cash flows are discounted at 13%. Wansley can wait for 1 year and find out whether the cash flows will be $30 million per year or $50 million per year before deciding to purchase the company. Because of the nature of the purchase contract, if it waits to purchase, Wansley can no longer sell the company 2 years after purchase. Given this additional information, does decision-tree analysis indicate that it makes sense to purchase the paper company? If so, when? Again, assume that all cash flows are discounted at 13%.The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditure of 50 million on a large-scale, integrated plant that will provide an expected cash flow stream of 8 million per year for 20 years. Plan B calls for the expenditure of 15 million to build a somewhat less efficient, more labor-intensive plant that has an expected cash flow stream of 3.4 million per year for 20 years. The firms cost of capital is 10%. a. Calculate each projects NPV and IRR. b. Set up a Project by showing the cash flows that will exist if the firm goes with the large plant rather than the smaller plant. What are the NPV and the IRR for this Project ? c. Graph the NPV profiles for Plan A, Plan B, and Project .
- Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $17 million, and production and sales will require an initial $5 million investment in net operating working capital. The company’s tax rate is 25%. What is the initial investment outlay? The company spent and expensed $150,000 on research related to the new product last year. What is the initial investment outlay? Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using. The building could be sold for $1.5 million after taxes and real estate commissions. What is the initial investment outlay?Your division is considering two investment projects, each of which requires an up-front expenditure of 25 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows (in millions of dollars): a. What is the regular payback period for each of the projects? b. What is the discounted payback period for each of the projects? c. If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake? d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake? e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake? f. What is the crossover rate? g. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?Manny Carson, certified management accountant and controller of Wakeman Enterprises, has been given permission to acquire a new computer and software for the companys accounting system. The capital investment analysis showed an NPV of 100,000. However, the initial estimates of acquisition and installation costs were made on the basis of tentative costs without any formal bids. Manny now has two formal bids, one that would allow the firm to meet or beat the original projected NPV and one that would reduce the projected NPV by 50,000. The second bid involves a system that would increase both the initial cost and the operating cost. Normally, Manny would take the first bid without hesitation. However, Todd Downing, the owner of the firm presenting the second bid, is a close friend. Manny called Todd and explained the situation, offering Todd an opportunity to alter his bid and win the job. Todd thanked Manny and then made a counteroffer. Todd: Listen, Manny, this job at the original price is the key to a successful year for me. The revenues will help me gain approval for the loan I need for renovation and expansion. If I dont get that loan, I see hard times ahead. The financial stats for loan approval are so marginal that reducing the bid price may blow my chances. Manny: Losing the bid altogether would be even worse, dont you think? Todd: True. However, if you award me the job, Ill be able to add personnel. I know that your son is looking for a job, and I can offer him a good salary and a promising future. Additionally, Ill be able to take you and your wife on that vacation to Hawaii that weve been talking about. Manny: Well, you have a point. My son is having an awful time finding a job, and he has a wife and three kids to support. My wife is tired of having them live with us. She and I could use a vacation. I doubt that the other bidder would make any fuss if we turned it down. Its offices are out of state, after all. Todd: Out of state? All the more reason to turn it down. Given the states economy, it seems almost criminal to take business outside. Those are the kind of business decisions that cause problems for people like your son. Required: Evaluate the ethical behavior of Manny. Should Manny have called Todd in the first place? Would there have been any problems if Todd had agreed to meet the lower bid price? Identify the parts of the Statement of Ethical Professional Practice (Chapter 1) that Manny may be violating, if any.
