Answer:
Total Purchases(in $) 109,230
Explanation:
The computation of the budgeted material purchase is shown below;
Budgeted Production (in units) 67,000
Add:-Desired Ending Inventory (20% of 63,000) (in units) 12,600
Total needed (in units) 79,600
Less:-Opening Inventory (in units) 13,400
Total Purchases (in units) 66,200
Price per unit(in $) 1.65
Total Purchases(in $) 109,230
Hence, the same would be relevant
An outside supplier has offered to manufacture product Y for you at a wholesale price of $2 per unit. You currently make product Y in-house at a cost of $7/unit, which consists of $2/unit of fixed costs and $5/unit of variable costs. You need 1,000 units of Y per month. If you outsource the production of Y to the outside supplier in the short term, your profit will: Group of answer choices increase by $3,000 decrease by $2,000 decrease by $3,000 increase by $2,000 remain the same
Answer:
The profit will increase by $3,000.
Explanation:
This is a make or buy decision and the only relevant cost is the variable cost as the fixed is sunk cost. Therefore, we have:
Cost of buying from outside = Cost of buying from outside per unit * Number of units needed = $2 * 1,000 = $2,000
Cost making it internally = Variable cost per unit * Number of units needed = $5 * 1,000 = $5,000
Since Cost making it internally is greater, the amount by which profit increase can be calculated as follows:
Amount of increase in profit = Cost making it internally - Cost of buying from outside = $5,000 - $2,000 = $3,000
Therefore, the profit will increase by $3,000.
Sandi, shift supervisor at Johnson Meatpacking, has the highest performing team. One reason for this is how she controls her team's activities. First, she ensures that her subordinates are properly trained and properly equipped with the necessary protective equipment and work tools. Then, during the shift, she carefully monitors her workers' actions, taking notes and even measurements as needed. Finally, at the end of each work week, she analyzes her notes and measurement data, and she uses the results of her analysis to make needed production changes the following week. When Sandi is monitoring her workers' actions, she is exercising ________ control.Multiple Choicefeedforwardconcurrentforwardfeedbackexternal
Answer:
concurrent
Explanation:
Concurrent control is when the work done by labour is monitored as the task is being performed. This is to ensure that the product of labour meets quality standards.
Feedback control involves reviewing information on the performance of workers to determine if performance meets quality standards.
Feedforward controls is also known as preventive control : identifies deviation from quality standards before they occur
Garcia Co. owns equipment that cost $81,600, with accumulated depreciation of $43,200. Garcia sells the equipment for cash. Record the sale of the equipment under the following three separate cases assuming Garcia sells the equipment for (1) $50,600 cash, (2) $38,400 cash, and (3) $33,300 cash. Record the sale of equipment assuming Garcia sells the equipment for $50,600 cash.
Answer:
1. Cash Debit $ 47,000
Accumulated Depreciation equipment Debit $ 40,800
Gain on sale of equipment Credit $ 11,000
Equipment Credit $ 76,800
To record sale of equipment for $ 47,000 and gain on sale of $ 11,000
2. Cash Debit $ 36,000
Accumulated Depreciation equipment Debit $ 40,800
Equipment Credit $ 76,800
To record sale of equipment for $ 36,000
3. Cash Debit $ 31,000
Accumulated Depreciation equipment Debit $ 40,800
Loss on sale of equipment Debit $ 5,000
Equipment Credit $ 76,800
To record sale of equipment for $ 31,000 and loss on sale of $ 5,000
Explanation:
Computation of net book value
Cost of equipment $ 76,800
Less: Accumulated depreciation $ 40,800
Net book value $ 36,000
In first step where the equipment is sold of $ 47,000, the differential between the sale value and the net book value is the gain on sale and is credited in the accounting entry.
In the second step, where the equipment is sold for $ 36,000, the sale proceeds is exactly equal to the net book value and no gain or loss is recorded.
In the third step, the equipment is sold for $ 31,000 and the differential between the net book value and the sale proceeds is a loss and recorded as a debit in the accounting entry
The is recorded as Book value of old equipment = $81,600 − $43,200 =38,400 which is consider as Cash.
What is depreciation?As a result of use, damage, or obsolescence, an asset's monetary worth drops in value over time indicating depreciation. This depreciation cause due wear and tear, expiration, or consumption.
The calculation for the sale of equipment is attached with the answer.
Therefore, the Gain on sale of Equipment is calculated as 12,200 and the Loss on sale of equipment as 5,100 under separate cases.
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the number of new businesses that opened has been the same or over the number that have closed. Talk about a couple of reasons you think people continue to start businesses even though the last few years have been difficult with the shut down, supply chain problems, and runaway inflation.
Answer:
Starting a business can be a challenging endeavor, especially in the face of economic difficulties such as those you mentioned. However, there are still many reasons why people might choose to start a business, even in difficult times.
One reason is that some people are driven by the desire to be their own boss and have control over their own destiny. They may feel that starting a business is the best way to achieve this independence.
Another reason is the potential for financial reward. While starting a business carries inherent risks, it can also be a way to achieve significant financial success. Many entrepreneurs are willing to take on these risks in the hopes of achieving a high return on their investment.
Additionally, some people may start a business as a way to pursue a passion or address a need in their community. They may believe that their product or service can make a positive difference in the world, and are willing to put in the hard work and dedication required to turn their idea into a reality.
Finally, it's worth noting that starting a business can also be a way for people to weather economic downturns. By creating their own source of income, entrepreneurs can potentially be more resilient in the face of economic challenges.
Explanation:
Metlock, Inc. has a materials price standard of $2.00 per pound. Six thousand pounds of materials were purchased at $2.20 a pound. The actual quantity of materials used was 5100 pounds, although the standard quantity allowed for the output was 4900 pounds. Metlock, Inc.'s materials price variance is:_______
a. $980 U.
b. $1020 F.
c. $40 U.
d. $1020 U.
Answer:
d. $1,020 unfavorable
Explanation:
Given the above information, Metlock inc's material price variance is computed as;
Materials price variance = (Standard price - Actual price) × Actual quantity
Material price variance
Standard price = $2
Actual price = $2.2
Actual quantity = 5,100 pounds
Therefore,
Material price variance
= ($2 - $2.2) × 5,100
= -$0.2 × 5,100
= $1,020 unfavourable
1. Visit two supermarkets preferably Imtiaz & Carrefour and take detailed notes on the layout of each store. You should look at the layout of the store overall, as well as the layout of individual departments such as clothing, crockery, fresh fruits, frozen item produce, meat, bakery, etc.
2. Compare and contrast the layouts of the two supermarkets. Look at the placement of different departments in each store, the use of signage and other visual cues to guide customers, and the layout of the checkout areas.
3. Consider the factors that might influence the layout of each store. For example, they might think about the target customer base of each store, the size and shape of the store, and the local cultural and economic context in which the store is located.
4. Present your findings in a report or presentation, explaining your observations and analysis of the layouts of the two supermarkets.
5. Also try to create a visual comparison of the layouts using diagrams or other graphics.
urgent answer needed
Supermarkets can be compare compared, I visited Imtiaz supermarket and Carrefour supermarket and both had different pros and cons.
What is Supermarket?A supermarket is a place where a variety of products can be purchased, example Carrefour, Target and Walmart.
Both Imtiaz and Carrefour have all the departments that is clothing, crockery, fresh fruits, frozen item produce, meat, bakery and more. Comparatively Carrefour have a larger variety of clothing and bakery items.
The placement of Bakery should be near the checkout I believe and so Carrefour have it at the end while Imtiaz usually have bakery in the start of the store, Clothing department is in the middle in the two supermarkets which is the better placement, but the signage are available at both supermarkets. In general the aisles in Carrefour seems more organized as compared to Imtiaz where aisles are scattered and not made in a structural way.
Imtiaz supermarkets are usually short on space and so also the aisles are small and at one time only one way trolley can be moved, while Carrefour have much space between the aisles. In Economic ways Imtiaz supermarket have lower rates as compared to Carrefour.
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Credit unions are for-profit organizations. O A True ОВ. False
Teal Mountain Corporation recorded a right-of-use asset for $312,900 as a result of a finance lease on December 31, 2019. Teal Mountain’s incremental borrowing rate is 10%, and the implicit rate of the lessor was not known at the commencement of the lease. Teal Mountain made the first lease payment of $58,429 on on December 31, 2019. The lease requires 7 annual payments. The equipment has a useful life of 7 years with no residual value.
Prepare Teal Mountain's December 31, 2017, entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to O decimal places e.g. 5,275.)
Date Account Titles and Explanation Debit Credit
December 31, 2017
Answer:
Date Account titles and Explanation Debit Credit
31 Dec 19 Lease liability $32,982
Interest expense $25,447
[(312900-58,429)*10%]
Cash $58,429
(To record interest expense)
31 Dec 19 Amortization expense $44,700
[312,900/7]
Right of use asset $44,700
(To record amortization of the right of use asset)
You happen to be checking the newspaper and notice an arbitrage opportunity. The current stock price of Intrawest is $20 per share and the one-year risk-free interest rate is 8%. A one-year put on Intrawest with a strike price of $18 sells for $3.33, while the identical call sells for $7. Explain what you must do to exploit this arbitrage opportunity. Berk, Jonathan; DeMarzo, Peter; Harford, Jarrad. Fundamentals of Corporate Finance (2-downloads) (Berk, DeMarzo
Answer:
Using the Put-Call parity principle where the following relationship holds:
Covered Call = Protective Put
Using the above, find the call price:
Call + Strike price / (1 + risk free rate) = Stock price + Put
Call + 18 / (1.08) = 20 + 3.33
Call + 16.67 = 20 + 3.33
Call = 23.33 - 16.67
Call = $6.66
The call option is overvalued at $7 so sell the Call option and buy the Put option and the Stock and borrow $16.67 which is the present value of the Put.
The net gain will be:
= 7 - 6.66
= $0.34
15 stores and their distribution warehouse. The Paint Supply Store franchise sells an average of 70 gallons of Purple Paint every week (for 52 weeks per year). Their current policy is that when they place an order for Purple Paint from their supplier, they order 90 gallons at a price of $4.00 per gallon. [The company does not hold Safety Stock] It takes 2.50 weeks to receive an order from the supplier. Administrative costs for Ordering paint have been estimated to be $35 per order. Holding Costs = 40% of the purchase price per gallon per year. What is the Total Annual Inventory Cost for the company's current policy?
Answer: $1,487.56
Explanation:
Total annual inventory cost = Ordering cost + Inventory Holding cost
Ordering cost = Number of orders * ordering cost
= (Annual demand / Order quantity) * 35
= ((52 weeks per year * 70) / 90) * 35
= $1,415.56
Inventory holding cost:
= Average inventory * holding cost
= (90 gallons / 2) * (40% * 4)
= $72
Total annual inventory cost = 1,415.56 + 36
= $1,487.56
Decrease in accounts receivable $ 33,000 Increase in accounts payable $ 20,000 Increase in retained earnings $ 110,000 Cash paid for purchase of new music equipment $ 29,000 Depreciation expense $ 6,800 Klutz uses the indirect method to prepare its statement of cash flows. What is Klutz's net cash provided by (used in) operating activities
Answer:
$262,800
Explanation:
Missing word: "Klutz Dance Studio had net income of $203,000 for the year just ended. Klutz collected the following additional information to prepare its statement of cash flows for the year:"
Particulars Amount
Net income $203,000
Adjustments to reconcile net income to
net cash flows from operating activities
Depreciation $6,800
Decrease in accounts receivable $33,000
Increase in accounts payable $20,000 $59,800
Net cash provided by operating activities $262,800
Nantua Corporation has two divisions, Southern and Northern. The following information was taken from last year's income statement segmented by division: Total Company Southern Northern Sales $4,000,000 $2,500,000 $1,500,000 Contribution margin $1,650,000 $1,050,000 $600,000 Divisional segment margin $850,000 $700,000 $150,000 Net operating income last year for Nantua Corporation was $400,000. In last year's income statement segmented by division, what were Nantua's total common fixed expenses? Group of answer choices $450,000 $800,000 $1,250,000 $1,300,000
Answer:
$450,000
Explanation:
the computation of the total common fixed expenses is shown below:
= Divisional segment margin - net operating income
= $850,000 - $400,000
= $450,000
By deducting the net operating income from the divisional segment margin we can determine the total common fixed expense
And, the same is to be considered
As loan analyst for Second Bank, you have been presented the following information.
Pink Co. Blue Co.
Assets
Cash 120,000 320,000
Receivables 220,000 302,000
Inventories 570,000 518,000
Total current assets 910,000 1,140,000
Other assets 500,000 612,000
Total Assets 1,410,000 1,752,000
Liabilities and Stockholder's Equity
Current liabilities 305,000 350,000
Long-term liabilities 400,000 500,000
Capital Stock and Retained Earnings 705,000 902,000
Total liabilities and Stockholder's equity 1,410,000 1,752,000
Annual Sales 930,000 1,500,000
Rate of Gross Profit on sales 30% 40%
Each of these companies has requested a loan of $50,000 for 6 months with no collateral offered. In as much as your bank has reached its quota for loans of this type, only one of these requests is to be granted.
Question:
Which of the two companies, as judged by the information given above, would you recommend as the better risk and why? Assume that the ending account balances are representative of the entire year.
I have the work done...I just need to check my work. I would appreciate any help as soon as possible.
Based on the computed liquidity ratios below, the loan should be advanced to Blue Co. It has better performing liquidity ratios than Pink Co.
What are liquidity ratios?
Liquidity ratios assess a company's ability to pay off its short-term liabilities. Liquidity ratios determine how quickly a company can convert assets and use them to pay off debts. The higher the ratio, the easier it is to clear debts and avoid payment defaults.
Current Ratio = Current assets/Current liabilities
Pink Co. Blue Co.
Current Ratio $910,000/$305,000 $1,140,000/$350,000
= 2.98 = 3.25
Quick Ratio = (Current assets - Inventory)/Current liabilities
Pink Co. Blue Co.
Quick Ratio 910,000-570,000/305,000 1,140,000-518,000/350,000
= 1.11 =1.77
Operating Cash Flow Ratio = Cash/Current liabilities
Pink Co. Blue Co.
Operating Cash Flow Ratio = $120,000/$305,00 $320,000/$350,000
= 0.39 = 0.91
Therefore, Blue company is at better risk due to high liquidity ratios.
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which best describes which careers would work in offices. for 100 points
Answer:
Trochanter
Explanation:
Marketing Information Management and Research, Distribution and Logistics, and Marketing Communications and Promotion employees can work in offices
~Thanks
~Hope this helps
Answer:
Marketing Information Management and Research, Distribution and Logistics, and Marketing Communications and Promotion employees can work in offices.
Explanation:
ik bc edge 2022
Assume that the required reserve ratio is10 percent, banks keep no excess reserves,and borrowers deposit all loans made by banks.Suppose you have saved $100 in cash at home and decide to deposit it in your checking account.As a result of your deposit, the money supply can increase by a maximum of
Answer:
The right answer is "10".
Explanation:
The given values are:
Deposit amount,
= $100
Required reserve ration,
= 10%
or,
= 0.1
Now,
The formula to calculate the multiplier will be:
⇒ [tex]Multiplier=\frac{1}{Required \ reserve \ ratio}[/tex]
On putting the values in the above formula, we get
⇒ [tex]=\frac{1}{0.1}[/tex]
⇒ [tex]=10[/tex]
How can you best protect your own intellectual property?
Answer:
Explanation:
The four primary ways to protect intellectual property are:
Copyrights.
Trademarks.
Patents.
Trade secrets.
Tia and Eric went to trade school at the same time. Each graduated with an associate's degree. They have received similar performance evaluations. Eric's employer is not a good business manager, and the sales manager lost a major deal. Because of the decrease in profits, the employees did not receive raises last year. Tia's employer is a savvy business manager and the sales manager is experienced and works hard. If Tia has higher earnings than Eric, the difference is most likely a function of
Answer:
differences in human capital
Explanation:
Here are the options :
differences in human capital
differences in signaling
discrimination
chance
Human capital is an example of an intangible asset. It is the economic value attached to labours' skills and expertise.
Qualities of human capital includes
Education. on-the-job training. Hard workexperience Mental and emotional well-being. People management. Communication skills.Tia's employer has more human capital qualities when compared with Eric's employer. Tia's employer is more hardworking and experienced. Due to these skills. Tia's employer is likely to make more profit than Eric's employer. This can explain the wage differential between Tia and Eric
Which is the best general statement about the role of government in business in the United States?
Answer: Government acts to allow markets to function efficiently
The best general statement is that "Government acts to allow markets to function efficiently". Therefore, option B is correct.
The United States has a mixed economy, which means that it is a combination of a market economy and a command economy. In a market economy, businesses are free to operate without much government interference.
The government's role in business in the United States is to allow markets to function efficiently. This means that the government creates a framework in which businesses can compete and innovate without being unduly burdened by regulations. The government also provides some services that would be difficult or impossible for businesses to provide on their own, such as national defense and education.
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Your question is incomplete, most probably the full question is this:
Which is the best general statement about the role of government in business in the United States?
O A. Government owns the resources of production.
OB. Government acts to allow markets to function efficiently.
OC. The government determines what goods and services are produced.
O D. Government has no role in business.
Write the relationship between audit and finance?
Answer:
Financial management makes decisions about managing finances: managing cash, using credit, paying bills, minimizing tax bills and borrowing costs, ensuring money for the firm’s current plan, and reporting the status of the finances. They are one part of the broader management team, and have a direct role in planning and can actually contribute profits or losses to the bottom line via their decisions.
Auditors are more like investigators or quality control: they don’t make business decisions, they make sure the financials being reported actually match the reality of what the company is doing. They usually are independent of management: they report to the board of the company, not the management they are auditing; they often have the mandate to look at anything they choose; they sometimes have a forensics function: collecting and analyzing evidence of serious wrongdoing if things are really out of control.
1.audit refers to the systematic process of examining verify of data related to the financial activities of an organization.
2.auditor is a professional inside audit
Financial management
1.Financial management refers to managing the fund of an organization.
2.finance manager is a professional inside finance management.
Communication which occurs with
people of similar positions would fall
under which category?
A. synchronous
C. vertical
B. a synchronous
D. horizontal
Communication which occurs with people of similar positions is called horizontal.
What is communication?Giving, receiving, and exchanging information are all parts of communication, which might take the form of talking, writing, listening, or reading. Effective communicators pay close attention to others' perspectives, talk or write effectively, and respect them. Kids that have good communication skills may communicate both in person and online. Understanding how words and visuals influence other people is essential for texting, talking, and publishing safely. By modeling effective communication, training kids to use social media responsibly, and exposing them to material that values healthy communication, you may aid in their development as communicators. Depending on whether information is exchanged between people, members of other species, or non-living objects like computers, different types of communication can be classified. The contrast between verbal and non-verbal communication is significant for human communication. Language-based communications are exchanged during spoken conversation. Esperanto is an example of an artificial language, although it may also occur through natural languages like English or Japanese.
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Butler Corporation is considering the purchase of new equipment costing $78,000. The projected annual after-tax net income from the equipment is $2,800, after deducting $26,000 for depreciation. The revenue is to be received at the end of each year. The machine has a useful life of 3 years and no salvage value. Butler requires a 11% return on its investments. The present value of an annuity of $1 for different periods follows: Periods 11% 1 0.9009 2 1.7125 3 2.4437 4 3.1024 What is the net present value of the machine
Answer:
-$7,621
Explanation:
Calculation to determine the net present value of the machine
Using this formula
Net present value of the machine=(Net cash flow *present value of an annuity at 11%)- Amount invested
Let plug in the formula
Net present value of the machine=($2,800+$26000*2.4437)-$78,000
Net present value of the machine=($28,800*2.4437)-78,000
Net present value of the machine=$70,379-$78,000
Net present value of the machine=-$7,621
Therefore the Net present value of the machine is -$7,621
Maintenance Department: budgeted variable cost, $2 per case; and budgeted total fixed cost, $830,000. Paints Division: percentage of peak period capacity required; 30%; and actual cases, 20,000. Stains Division: percentage of peak period capacity required, 70%; and actual cases, 63,000. For performance evaluation purposes, the amount the Maintenance Department cost should be charged to the Paints Division at the end of the year is _
Answer: $289,000
Explanation:
For performance evaluation purposes, the amount of Maintenance Department cost that should be charged to the Paints Division at the end of the year will be calculated thus:
= (20000 × $2) + ($830,000 × 30%)
= $40,000 + ($830000 × 0.3)
= $40000 + $249,000
= $289,000
An increase in the expected real interest rate tends to raise desired saving, but lower desired investment. Explain how and why? Also give an example
Savings have increased as a result of the higher lending rates, and the quantity of loanable money available has climbed. The need to borrow money at various interest rates is reflected in the request for loanable funds.
What is an interest rate?An amount that a borrower must pay to a loan as interest during the course of a loan, is stated as a percentage of the loan amount.
The nation's economic balances of fixed investments and savings impact the real interest rate. All other things being equal, if saving raises or asset growth declines, the real interest rate lowers; if saving grows or asset growth reduces, the real interest rate increases.
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On November 1, 2021, Sandhill Co. places a new asset into service. The cost of the asset is $84000 with an estimated 10-year life and $12000 salvage value at the end of its useful life. What is the depreciation expense for 2022 if Sandhill Co. uses the straight-line method of depreciation
Answer:
$7,200
Explanation:
According to the scenario, computation of the given data are as follows,
Total cost = $84,000
Salvage value = $12,000
Estimated life = 10 years
So, we can calculate depreciation expense by using following formula,
Depreciation yearly = (Total cost - Salvage value) ÷ Estimated life
= ($84,000 - $12,000) ÷ 10
= $72,000 ÷ 10
= $7,200
You have a opportunity to be hired into a exciting new career. Explain what types of clothing you would wear to the interview and how you would use your communication skills to make a good impression. (Use examples of both verbal and nonverbal communication.)
Answer:
I would wear something simple not to flashy like some black pants with a button up top and a blazer I think that is very professional. I would use my communication skills by using eye contact not interrupting and asking questions if I don’t understand something. Also I would try my best to answer the questions they ask to the best of my ability and use a good speaking voice and good grammar. Hope this helps!!
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QUESTION 3 of 10: Which of the following demonstrate your restaurant's concept?
The thing that demonstrate your restaurant's concept is a) your food.
What is restaurant concept ?A restaurant is a place of business that prepares and provides customers with food and beverages. Although many restaurants also provide take-out and food delivery services, meals are often served and consumed on the premises. Within the hospitality industry, which is a subset of the larger service industry, restaurants, bars, and other similar enterprises typically belong under the "food and drink" category.
The topic that characterizes your restaurant serves as your restaurant concept. Restaurant themes describe the overarching theme or philosophy that underpins a restaurant's menu, service method, and musical selection.
Therefore, option A is correct.
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missing options:
a) Your food b) Your staff c) Your presentation d) All of the above. d) All of the above.
Under its executive stock option plan, Z Corporation granted options on January 1, 2021, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. The options expired in 2027 without being exercised. By what amount will Z's shareholder's equity be increased as a result of having granted the options
Answer:
$60 million
Explanation:
Calculation to determine By what amount will Z's shareholder's equity be increased as a result of having granted the option
Using this formula
Increased in shareholder's equity=Fair value per option*Options granted
Let plug in the formula
Increased in shareholder's equity=$4* 15 million shares
Increased in shareholder's equity=$60 million
Therefore The amount that Z's shareholder's equity increased as a result of having granted the option is $60 million
Which of the following are ways that business directly benefits
society?
Choose 5 correct answers.
Encourages innovation
Raises self-esteem
Extends lifespan
Builds social bonds in the workplace
Provides employment
Encourages entrepreneurship
Teaches critical thinking skills
Allows for specialization through competition
Answer: Encourages innovation
Raises self-esteem
Provides employment
Encourages entrepreneurship
Teaches critical thinking skills
Explanation: All the above five points can be the core points for a business to have a good impact on the society. A business does not only helps to grow the one who is the boss but it also benefits the society in many ways. A business with the above mentioned goals is a boon for the society.
Anastasia is a principal who is responsible for telling one of her teachers that the school will be cutting her Spanish program in the fall. She has been friends with this teacher for years and knows that the teacher will be very upset. What is the most appropriate communication channel for Anastasia to choose to share this news with the teacher in this scenario?
Question 2 options:
She should send the teacher a formal, typed letter.
She should talk to the teacher face-to-face.
She should send the teacher a text message.
She should post the news on the school website.
Answer she should talk to her face to face
Explanation:
if she respects this woman that is the best way to keep it
Net Present Value Analysis [LO12-2]
Kathy Myers frequently purchases stocks and bonds, but she is uncertain how to determine the rate of return that she is earning. For example, three years ago she paid $13,000 for 200 shares of Malti Company’s common stock. She received a $420 cash dividend on the stock at the end of each year for three years. At the end of three years, she sold the stock for $16,000. Kathy would like to earn a return of at least 14% on all of her investments. She is not sure whether the Malti Company stock provide a 14% return and would like some help with the necessary computations.
Required:
1. Compute the net present value that Kathy earned on her investment in Malti Company stock.
2. Did the Malti Company stock provide a 14% return?
Answer:
NPV = $-1,225.37
No. The return is less than 14%, because the net present value is negative
Explanation:
Net present value is the present value of after-tax cash flows from an investment less the amount invested.
Only projects with a positive NPV should be accepted. A project with a negative NPV should not be chosen because it isn't profitable.
NPV can be calculated using a financial calculator
Cash flow in year 0 = $-13,000
Cash flow in year 1 and 2 = 420
Cash flow in year 3 = $420 + $16,000 = $16,420.
I = 14%
NPV = $-1,225.37
The return is less than 14%, because the net present value is negative
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute