Thomas asks…
I need help in my Accounting homework due in an hour please help?
If $3,000,000 of 10% bonds are issued at 95, the amount of cash received from the sale is
a.
$3,300,000
b.
$3,000,000
c.
$3,150,000
d.
$2,850,000
2.
The entry to record the issuance of 150 shares of $5 par common stock at par to an attorney in payment of legal fees for organizing the corporation includes a credit to
a.
Cash
b.
Goodwill
c.
Organizational Expenses
d.
Common Stock
3.
A corporation has 40,000 shares of $25 par value stock outstanding. If the corporation issues a 3-for-1 stock split, the number of shares outstanding after the split will be
a.
40,000 shares
b.
120,000 shares
c.
13,333 shares
d.
80,000 shares
4.
The journal entry a company records for the issuance of bonds when the contract rate is greater than the market rate would be
a.
debit Cash, credit Premium on Bonds Payable and Bonds Payable
b.
debit Bonds Payable, credit Cash
c.
debit Cash and Discount on Bonds Payable, credit Bonds Payable
d.
debit Cash, credit Bonds Payable
5.
Nexis Corp. issues 1,000 shares of $15 par value common stock at $25 per share. When the transaction is recorded, credits are made to:
a.
Common Stock $15,000 and Paid-in Capital in Excess of Par Value $10,000.
b.
Common Stock $25,000 and Retained Earnings $15,000.
c.
Common Stock $25,000.
d.
Common Stock $15,000 and Paid-in Capital in Excess of Stated Value $10,000.
6.
A corporation issues for cash $8,000,000 of 8%, 25-year bonds, interest payable semiannually. The amount received for the bonds will be
a.
present value of 50 semiannual interest payments of $320,000, plus present value of $8,000,000 to be repaid in 25 years
b.
present value of 25 annual interest payments of $640,000, plus present value of $8,000,000 to be repaid in 25 years
c.
present value of $8,000,000 to be repaid in 25 years, less present value of 50 semiannual interest payments of $320,000
d.
present value of 25 annual interest payments of $640,000
7.
A corporation has 50,000 shares of $25 par value stock outstanding that has a current market value of $120. If the corporation issues a 5-for-1 stock split, the par value of the stock will be:
a.
unchanged
b.
$24
c.
$60
d.
$5
8.
The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $1 per share dividend is declared?
a.
$55,000
b.
$60,000
c.
$5,000
d.
$100,000
9.
On January 1, 2009, $1,000,000, 5-year, 10% bonds, were issued for $960,000. Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the semiannual amortization amount is
a.
$5,000
b.
$6,000.
c.
$8,000.
d.
$4,000
10.
If $1,000,000 of 8% bonds are issued at 105, the amount of cash received from the sale is
a.
$950,000
b.
$1,000,000
c.
$1,050,000
d.
$1,080,000
11.
Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $15,500. If the issuing corporation redeems the bonds at 98.5, what is the amount of gain or loss on redemption?
a.
$500 gain
b.
$15,500 gain
c.
$500 loss
d.
$15,500 loss
12.
The following information is available for Calvin Co.:
2009
Dividends per share of common stock
$ 0.90
Market price per share of common stock
20.00
a.
The dividend yield is roughly 22%, which is of interest to bondholders.
b.
The dividend yield is 4.5 times the market price, which is important in solvency analysis.
c.
The dividend yield is 4.5%, which is of interest to investors seeking an increase in market price of their stocks.
d.
The dividend yield is 4.5%, which is of special interest to investors seeking current returns on their investments.
13.
Any unamortized premium should be reported on the balance sheet of the issuing corporation as
a.
as paid-in capital
b.
a direct deduction from retained earnings
c.
an addition to the face amount of the bonds in the liability section
d.
a direct deduction from the face amount of the bonds in the liability section
14.
The Reagan Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2009, at 95. The journal entry to record the issuance will show a
a.
debit to Cash of $1,000,000.
b.
credit to Cash for $950,000.
c.
credit to Discount on Bonds Payable for $50,000.
d.
credit to Bonds Payable for $1,000,000.
15.
The journal entry to issue 1,000,000 shares of $6 par common stock for $8.00 per share on January 2nd would be:
a.
Jan 2 Cash 1,000,000
Common Stock
financi4 answers:
Do your own homework. Read the book.
Charles asks…
Need Help on Finance Homework?
Task 4. Capital Budgeting for a New Machine
A few months have now passed and AirJet Best Parts, Inc. is considering the purchase on a new machine that will increase the production of a special component significantly. The anticipated cash flows for the project are as follows:
Year 1 $1,100,000
Year 2 $1,450,000
Year 3 $1,300,000
Year 4 $950,000
You have now been tasked with providing a recommendation for the project based on the results of a Net Present Value Analysis. Assuming that the required rate of return is 15% and the initial cost of the machine is $3,000,000.
1. What is the project’s IRR?
2. What is the project’s NPV?
3. Should the company accept this project and why (or why not)?
4. Explain how depreciation will affect the present value of the project.
5. Provide examples of at least one of the following as it relates to the project:
a. Sunk Cost
b. Opportunity cost
c. Erosion
6. Explain how you would conduct a scenario and sensitivity analysis of the project. What would be some project-specific risks and market risks related to this project?
Task 5: Cost of Capital
AirJet Best Parts Inc. is now considering that the appropriate discount rate for the new machine should be the cost of capital and would like to determine it. You will assist in the process of obtaining this rate.
1. Compute the cost of debt. Assume AirJet Best Parts Inc. is considering issuing new bonds. Select current bonds from one of the main competitors as a benchmark. Key competitors include Raytheon, Boeing, Lockheed Martin, and the Northrop Grumman Corporation.
a. What is the YTM of the competitor’s bond? You may use a number of sources, but we recommend Morningstar. Find the YTM of one 15 or 20 year bond with the highest possible creditworthiness. You may assume that new bonds issued by AirJet Best Parts, Inc. are of similar risk and will require the same return.
b. What is the after-tax cost of debt if the tax rate is 34%?
c. Explain what other methods you could have used to find the cost of debt for AirJet Best Parts Inc.
d. Explain why you should use the YTM and not the coupon rate as the required return for debt.
2. Compute the cost of common equity using the CAPM model. For beta, use the average beta of three selected competitors. You may obtain the betas from Yahoo Finance. Assume the risk free rate to be 3% and the market risk premium to be 4%.
a. What is the cost of common equity?
b. Explain the advantages and disadvantages to use the CAPM model as the method to compute the cost of common equity. Compare and contrast this method with the dividend growth model approach.
3. Compute the cost of preferred equity assuming the dividend paid for preferred stock is $2.93 and the current value of the stock is $50 per share.
a. What is the cost of preferred equity?
b. Is there any other method to compute this cost? Explain.
4. Assuming that the market value weights of these capital sources are 30% bonds, 60% common equity and 10% preferred equity, what is the weighted cost of capital of the firm?
5. Should the firm use this WACC for all projects? Explain and provide examples as appropriate.
6. Recompute the net present value of the project based on the cost of capital you found. Do you still believe that your earlier recommendation for accepting or rejecting the project was adequate? Why or why not?
financi4 answers:
-3000000 1100000 1450000 1300000 950000
Using this online NPV Calculation Tool http://finance.thinkanddone.com/online-npv-calculation.html we get the following NPV at 15%
Net Cash Flows
CF0 = -3000000
CF1 = 1100000
CF2 = 1450000
CF3 = 1300000
CF4 = 950000
Discounted Net Cash Flows
DCF1 = 1100000/(1+0.15)^1 = 1100000/1.15 = 956521.74
DCF2 = 1450000/(1+0.15)^2 = 1450000/1.3225 = 1096408.32
DCF3 = 1300000/(1+0.15)^3 = 1300000/1.52087 = 854771.1
DCF4 = 950000/(1+0.15)^4 = 950000/1.74901 = 543165.58
NPV Calculation
NPV = 956521.74 + 1096408.32 + 854771.1 + 543165.58 -3000000
NPV = 3450866.74 -3000000
NPV = $450,866.74
Using this online IRR Calculation Tool http://finance.thinkanddone.com/online-irr-calculation.html we get the following IRR
Discounted Net Cash Flows at 19%
DCF1 = 1100000/(1+19%)^1 = 1100000/1.19 = 924369.75
DCF2 = 1450000/(1+19%)^2 = 1450000/1.4161 = 1023938.99
DCF3 = 1300000/(1+19%)^3 = 1300000/1.68516 = 771440.56
DCF4 = 950000/(1+19%)^4 = 950000/2.00534 = 473735.31
NPV Calculation at 19%
NPV = 924369.75 + 1023938.99 + 771440.56 + 473735.31 -3000000
NPV = 3193484.61 -3000000
NPV at 19% = 193484.61
Discounted Net Cash Flows at 24%
DCF1 = 1100000/(1+24%)^1 = 1100000/1.24 = 887096.77
DCF2 = 1450000/(1+24%)^2 = 1450000/1.5376 = 943028.1
DCF3 = 1300000/(1+24%)^3 = 1300000/1.90662 = 681833.44
DCF4 = 950000/(1+24%)^4 = 950000/2.36421 = 401824.92
NPV Calculation at 24%
NPV = 887096.77 + 943028.1 + 681833.44 + 401824.92 -3000000
NPV = 2913783.23 -3000000
NPV at 24% = -86216.77
IRR with Linear Interpolation
iL = 19%
iU = 24%
npvL = 193484.61
npvU = -86216.77
irr = iL + [(iU-iL)(npvL)] / [npvL-npvU]
irr = 0.19 + [(0.24-0.19)(193484.61)] / [193484.61–86216.77]
irr = 0.19 + [(0.05)(193484.61)] / [279701.38]
irr = 0.19 + 9674.2305 / 279701.38
irr = 0.19 + 0.0346
irr = 0.2246
irr = 22.46%
The company should accept this project since its IRR is higher than the required rate of return and it has a positive NPV
Donald asks…
Financial Planning questions (Multiple questions)?
Can you guys please help answering there questions
8.Which of the following is not one of the risks equity (i.e., stock) investors normally face?
a.inflation risk
b.reinvestment risk
c.maturity risk
d.market risk
9.Which of the following is not one of the variables in the discounted dividend model for valuing a common stock?
a.dividend per share
b.earnings per share
c.growth rate of the dividend
d.discount rate
10.A form of property ownership in which each person owns his or her share independently and retains the right to transfer that share by sale or in their will is a:
a.joint tenancy with right of survivorship
b.tenancy in common
c.community property ownership
d.tenancy with reservation
11.An investor with a long time horizon (i.e., time when he/she will sell the investment) whose cash flow needs are satisfied by their employment income will most likely choose which of the following types of mutual funds?
a.an income-oriented fund
b.a balanced fund
c.a growth fund
d.an growth and income fund
12.A disability insurance policy that would pay benefits to the policy owner even if that person changes careers to a more risky profession than when they applied for the coverage is said to be:
a.convertible
b.universal
c.guaranteed renewable
d.non-cancellable
13.A stop-loss limit on a health insurance policy means
a.there are no out-of-pocket expenses for the insured after this limit is reached.
b.the insurer will not cover any more of the expenses.
c.there is no co-pay and no co-insurance provision on the policy.
d.the insurer will bear 100 percent of the expense only if the illness is catastrophic.
14.Which of the following variables and/or time-value-of-money calculations would be used to calculate the retirement wealth goal (total amount of money to have accumulated by retirement using the “capital utilization method.”
a.rate of return on investments
b.inflation rate
c.PV of an inflation-adjusted annuity
d.all of the above
15.A student with a degree in management would only sell their Personal Finance textbook after conducting which of the following analyses?
a.only checking with the bookstore to see if it will buy it back.
b.looking in their checking account to see if their “hard up” for cash.
c.comparing the present value of the information and knowledge that can be obtained in the future from the book to the amount of money that they would receive today for the book.
d.none of the above—analysis only causes paralysis!!
financi4 answers:
8. C.
9. I think d, not sure.
10. Not a, but maybe b.
11. C, but this is industry dogma.
12. Don’t know.
13. Don’t know.
14. D.
15. C, which is basically the same as b.
William asks…
Please help with these problems! have to use excel..?
6. Following are financial statements for the Genatron Manufacturing
Corporation for 2012 and 2011.
GENATRON MANUFACTURING CORPORATION
BALANCE SHEET 2012 2011
ASSETS
Cash $40,000 $50,000
Accts. receivable 260,000 200,000
Inventory 500,000 450,000
Total current assets 800,000 700,000
Fixed assets, net 400,000 300,000
Total assets $1,200,000 $1,000,000
LIABILITIES AND EQUITY
Accts. Payable $170,000 $130,000
Bank loan 90,000 90,000
Accruals 70,000 50,000
Total current liabilities 330,000 270,000
Long-term debt, 12% 400,000 300,000
Common stock, $10 par 300,000 300,000
Capital surplus 50,000 50,000
Retained earnings 120,000 80,000
Total liabilities & equity $1,200,000 $1,000,000
INCOME STATEMENT 2012 2011
Net sales $1,500,000 $1,300,000
Cost of goods sold 900,000 780,000
INCOME STATEMENT 2012 2011
Gross profit 600,000 520,000
Expenses: general
and administrative 150,000 150,000
Marketing 150,000 130,000
Depreciation 53,000 40,000
Interest 57,000 45,000
Earnings before taxes 190,000 155,000
Income taxes 76,000 62,000
Net income $114,000 $93,000
a. Apply Du Pont analysis to both the 2012 and 2011 financial
statements’ data.
b. Explain how financial performance differed between 2012
and 2011.
7. This problem uses the financial statements for the Genatron
Manufacturing Corporation for the years 2012 and 2011 from
Problem 6.
a. Calculate Genatron’s dollar amount of net working capital in
each year.
b. Calculate the current ratio and the acid-test ratio in each year.
c. Calculate the average collection period and the inventoryturnover
ratio in each year.
d. What changes in the management of Genatron’s current
assets seem to have occurred between the two years?
8. Genatron Manufacturing expects its sales to increase by 10
percent in 2013. Estimate the firm’s external financing needs by
using the percent-of-sales method for the 2012 data. Assume that no
excess capacity exists and that one-half of the 2012 net income will
be retained in the business.
financi4 answers:
You have a better chance of getting answers, if you post this question in the homework section
Daniel asks…
Homework Please help!!?
Homework Please help!!?
6. Following are financial statements for the Genatron Manufacturing
Corporation for 2012 and 2011.
GENATRON MANUFACTURING CORPORATION
BALANCE SHEET 2012 2011
ASSETS
Cash $40,000 $50,000
Accts. receivable 260,000 200,000
Inventory 500,000 450,000
Total current assets 800,000 700,000
Fixed assets, net 400,000 300,000
Total assets $1,200,000 $1,000,000
LIABILITIES AND EQUITY
Accts. Payable $170,000 $130,000
Bank loan 90,000 90,000
Accruals 70,000 50,000
Total current liabilities 330,000 270,000
Long-term debt, 12% 400,000 300,000
Common stock, $10 par 300,000 300,000
Capital surplus 50,000 50,000
Retained earnings 120,000 80,000
Total liabilities & equity $1,200,000 $1,000,000
INCOME STATEMENT 2012 2011
Net sales $1,500,000 $1,300,000
Cost of goods sold 900,000 780,000
INCOME STATEMENT 2012 2011
Gross profit 600,000 520,000
Expenses: general
and administrative 150,000 150,000
Marketing 150,000 130,000
Depreciation 53,000 40,000
Interest 57,000 45,000
Earnings before taxes 190,000 155,000
Income taxes 76,000 62,000
Net income $114,000 $93,000
a. Apply Du Pont analysis to both the 2012 and 2011 financial
statements’ data.
b. Explain how financial performance differed between 2012
and 2011.
7. This problem uses the financial statements for the Genatron
Manufacturing Corporation for the years 2012 and 2011 from
Problem 6.
a. Calculate Genatron’s dollar amount of net working capital in
each year.
b. Calculate the current ratio and the acid-test ratio in each year.
c. Calculate the average collection period and the inventoryturnover
ratio in each year.
d. What changes in the management of Genatron’s current
assets seem to have occurred between the two years?
8. Genatron Manufacturing expects its sales to increase by 10
percent in 2013. Estimate the firm’s external financing needs by
using the percent-of-sales method for the 2012 data. Assume that no
excess capacity exists and that one-half of the 2012 net income will
be retained in the business.
financi4 answers:
Yeah because I’m gonna waste my time doing your homework for two measly points!!
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