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The standardized approach for calculating operational risk capital requirements uses beta factors
for a given business line and annual gross income for business lines over a 3-year period. Which of
the following business units has the highest beta factor?
A. Trading and sales.
B. Retail banking.
C. Agency and custody services.
D. Asset management.
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Solved in 2 steps
- The income statement comparison for Forklift Material Handling shows the income statement for the current and prior year. A. Determine the operating income (loss) (dollars) for each year. B. Determine the operating income (percentage) for each year. C. The company made a strategic decision to invest in additional assets in the current year. These amounts are provided. Using the total assets amounts as the investment base, calculate the return on investment. Was the decision to invest additional assets in the company successful? Explain. D. Assuming an 8% cost of capital, calculate the residual income for each year. Explain how this compares to your findings in part C.Financial information for BDS Enterprises for the year-ended December 31, 20xx, was gathered from an accounting intern, who has asked for your guidance on how to prepare an income statement format that will be distributed to management. Subtotals and totals are included in the information, but you will need to calculate the values. A. In the correct format, prepare the income statement using the following information: B. Calculate the profit margin, return on investment, and residual income. Assume an investment base of $100,000 and 6% cost of capital. C. Prepare a short response to accompany the income statement that explains why uncontrollable costs are included in the income statement.Average rate of return method, net present value method, and analysis for a service company The capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Year Robotic AssemblerOperating Income Robotic AssemblerNet Cash Flow WarehouseOperating Income WarehouseNet Cash Flow 1 $47,500 $152,000 $100,000 $243,000 2 47,500 152,000 76,000 205,000 3 47,500 152,000 38,000 144,000 4 47,500 152,000 17,000 99,000 5 47,500 152,000 6,500 69,000 Total $237,500 $760,000 $237,500 $760,000 Each project requires an investment of $500,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for purposes of the net present value analysis. Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747…
- Average rate of return method, net present value method, and analysis for a service company The capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Year Robotic AssemblerOperating Income Robotic AssemblerNet Cash Flow WarehouseOperating Income WarehouseNet Cash Flow 1 $34,200 $105,000 $72,000 $168,000 2 34,200 105,000 55,000 142,000 3 34,200 105,000 27,000 100,000 4 34,200 105,000 12,000 68,000 5 34,200 105,000 5,000 47,000 Total $171,000 $525,000 $171,000 $525,000 Each project requires an investment of $360,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis. Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621…Average Rate of Return Method, Net Present Value Method, and Analysis for a service company The capital investment committee of Arches Landscaping Company is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Front-End Loader Greenhouse Year OperatingIncome Net CashFlow OperatingIncome Net CashFlow 1 $58,000 $183,000 $122,000 $293,000 2 58,000 183,000 93,000 247,000 3 58,000 183,000 46,000 174,000 4 58,000 183,000 20,000 119,000 5 58,000 183,000 9,000 82,000 Total $290,000 $915,000 $290,000 $915,000 Each project requires an investment of $580,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826…Six measures of solvency or profitabilityThe following data were taken from the financial statements of GatesInc. for the current fiscal year. Assuming that long-term investments totaled $3,000,000 throughout theyear and that total assets were $7,000,000 at the beginning of the currentfiscal year, determine the following: (A) ratio of fixed assets to long-termliabilities, (B) ratio of liabilities to stockholders' equity, (C) assetturnover, (D) return on total assets, (E) return on stockholders" equity,and (F) return on common stockholders' equity. (Round ratios andpercentages to one decimal place as appropriate.)
- Average rate of return method, net present value method, and analysis for a service company The capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Year Robotic Assembler Operating Income Robotic Assembler Net Cash Flow Warehouse Operating Income Warehouse Net Cash Flow 1 $52,800 $172,000 $111,000 $275,000 2 52,800 172,000 84,000 232,000 3 52,800 172,000 42,000 163,000 4 52,800 172,000 18,000 112,000 5 52,800 172,000 9,000 78,000 Total $264,000 $860,000 $264,000 $860,000 Each project requires an investment of $480,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 12% for purposes of the net present value analysis. Present Value of $1 at Compound Interest Year 6%. Required: Compute the net present value for each investment. Use the present value of $1 table above. If required, round to the nearest…Average Rate of Return Method, Net Present Value Method, and Analysis for a Service Company The capital investment committee of Arches Landscaping Company is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Front-End Loader Greenhouse Year Operating Income net cash flow Operating Income Net cash Flow 1 $25,000 40,000 11,250 26,250 2 20,000 35,000 11,250 26,250 3 7,000 22,000 11,250 26,250 4 3,000 18,000 11,250 26,250 5 1,250 16,250 11,250 26,250 Total $56,250 $131,250 $56,250 $131,250 Each project requires an investment of $75,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 12% for purposes of the net present value analysis. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756…Average Rate of Return Method, Net Present Value Method, and Analysis for a service company The capital investment committee of Arches Landscaping Company is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Front-End Loader Greenhouse Year OperatingIncome Net CashFlow OperatingIncome Net CashFlow 1 $57,000 $182,000 $120,000 $291,000 2 57,000 182,000 91,000 246,000 3 57,000 182,000 46,000 173,000 4 57,000 182,000 20,000 118,000 5 57,000 182,000 8,000 82,000 Total $285,000 $910,000 $285,000 $910,000 Each project requires an investment of $600,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for purposes of the net present value analysis. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826…
- Average Rate of Return Method, Net Present Value Method, and Analysis for a service company The capital investment committee of Arches Landscaping Company is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Front-End Loader Greenhouse Year OperatingIncome Net CashFlow OperatingIncome Net CashFlow 1 $58,000 $177,000 $122,000 $283,000 2 58,000 177,000 93,000 239,000 3 58,000 177,000 46,000 168,000 4 58,000 177,000 20,000 115,000 5 58,000 177,000 9,000 80,000 Total $290,000 $885,000 $290,000 $885,000 Each project requires an investment of $580,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 12% for purposes of the net present value analysis. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826…Which of the following best describes trend analysis? A comparing a company's financial statements with that of other companies B expressing each financial statement amount as a percentage of a budgeted amount C expressing each year's financial statement amounts as a percentage of the base year amounts D calculating key ratios to evaluate performanceThe income statement for Forklift Electrical Ltd for two years is attached as a pic. Required: Assuming an 8% cost of capital, calculate the residual income for each year. Would the management of Forklift Electrical Ltd have been more likely to accept the investment opportunity if the residual income had been used as a performance measure instead of ROI? Explain your answer