Business
A granary has two options for a conveyor used in the manufacture of grain for transporting, filling, or emptying. One conveyor can be purchased and installed for $75,000 with $2,500 salvage value after 16 years. The other can be purchased and installed for $120,000 with $2,000 salvage value after 16 years. Operation and maintenance for each is expected to be $21,500 and $12,000 per year, respectively. The granary uses MACRS-GDS depreciation, has a marginal tax rate of 40%, and has a MARR of 9% after taxes. Determine which alternative is less costly, based upon comparison of after-tax annual worth. Show the AW values used to make your decision: Conveyor 1: $ Conveyor 2: $
you are considering two investment opportunities. for investment a there is a 25% chance that you lose $20,000, a 50% chance that you break even, and a 25% chance that you make $80,000. for investment b there is a 30% chance that you lose $50,000, a 50% chance that you break even, and a 20% chance that you make $180,000. based on the expected value of each, which investment should you make?the expected value of investment a is $.the expected value of investment b is $.based on the expected value, you should make
Carla Vista Co. Has these comparative balance sheet data:CARLA VISTA CO. Balance SheetsDecember 312022 2021Cash $ 16,140 $ 32,280Accounts receivable (net) 75,320 64,560Inventory 64,56 53,800Plant assets (net) 215,200 193,680$371,220 $344,320Accounts payable $ 53,800 $ 64,560Mortgage payable (15%)107,600 107,600Common stock, $10 par 150,640 129,120Retained earnings 59,180 43,040$371,220 $344,320Additional information for 2022:1. Net income was $32,500. 2. Sales on account were $392,900. Sales returns and allowances amounted to $27,300. 3. Cost of goods sold was $217,300. 4. Net cash provided by operating activities was $57,200. 5. Capital expenditures were $30,000, and cash dividends were $19,000. Compute the following ratios at December 31, 2022. (Round current ratio and inventory turnover to 2 decimal places, e. G. 1. 83 and all other answers to 1 decimal place, e. G. 1. 8. Use 365 days for calculation. )(a) Current ratio(b) Accounts receivable turnover. (c) Average collection period. (d) Inventory turnover. (e) Days in inventory. (f) Free cash flow
On January 1, 2021, Labtech Circuits borrowed $220,000 from First Bank by issuing a three-year, 9% note, payable on December 31, 2023. Labtech wanted to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. Therefore, Labtech entered into a three-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value hedge. The agreement called for the company to receive payment based on an 9% fixed interest rate on a notional amount of $220,000 and to pay interest based on a floating interest rate tied to LIBOR. The contract called for cash settlement of the net interest amount on December 31 of each year. Floating (LIBOR) settlement rates were 9% at inception and 10%, 8%, and 8% at the end of 2021, 2022, and 2023, respectively. The fair values of the swap are quotes obtained from a derivatives dealer. These quotes and the fair values of the note are as follows:January 1 December 312021 2021 2022 2023Fair value of interest rate swap 0 $(3,759) $2,935 $0 Fair value of note payable $300,000 $296,241 $302,935 $300,000 Required:a. Calculate the net cash settlement at the end of 2021, 2022, and 2023. b. Prepare the journal entries during 2021 to record the issuance of the note, interest, and necessary adjustments for changes in fair value. c. Prepare the journal entries during 2022 to record interest, net cash interest settlement for the interest rate swap, and necessary adjustments for changes in fair value. d. Prepare the journal entries during 2023 to record interest, net cash interest settlement for the interest rate swap, necessary adjustments for changes in fair value, and repayment of the debt
On December 31, 2020, Dow Steel Corporation had 780,000 shares of common stock and 318,000 shares of 10%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 5% common stock dividend on May 15 and paid cash dividends of $580,000 and $87,000 to common and preferred shareholders, respectively, on December 15, 2021. On February 28, 2021, Dow sold 68,000 common shares. In keeping with its long-term share repurchase plan, 5,000 shares were retired on July 1. Dow's net income for the year ended December 31, 2021, was $3,000,000. The income tax rate is 25%. Also, as a part of a 2020 agreement for the acquisition of Merrill Cable Company, another 24,000 shares (already adjusted for the stock dividend) are to be issued to former Merrill shareholders on December 31, 2022, if Merrill's 2022 net income is at least $680,000. In 2021, Merrill's net income was $810,000. As part of an incentive compensation plan, Dow granted incentive stock options to division managers at December 31 of the current and each of the previous two years. Each option permits its holder to buy one share of common stock at an exercise price equal to market value at the date of grant and can be exercised one year from that date. Information concerning the number of options granted and common share prices follows:Options GrantedDate Granted(adjusted for the stock dividend)Share PriceDecember 31, 201925,000$42December 31, 202020,000$51December 31, 202123,500$50The market price of the common stock averaged $50 per share during 2021. On July 12, 2019, Dow issued $1,000,000 of convertible 8% bonds at face value. Each $1,000 bond is convertible into 25 common shares (adjusted for the stock dividend). Required:Compute Dow's basic and diluted earnings per share for the year ended December 31, 2021
