Answer:
On the income statement of a merchandising company, interest income and interest expense are reported:
D. As separate items of other income and expense below the net operating income or loss.
Explanation:
Interest income and expense are financing activities items. They do not form part of the operating income or loss. This is why they are shown separately after the determination of the net operating income or loss but before the deduction of income taxes. The reason for this separation is that for a merchandising company, its operating income or loss does not include earned interest income or interest expense but costs related to the merchandise sold, including selling and administrative expenses.
Type your answer in the box.
For a population with u = 25 and = 5, we would expect 90% of all x's calculated from n = 35 to
fall between
and
(Round to two decimals.)
Do you know the answer?
D Read about this
I know it
Think so
Unsure
No idea
Answer:
Your answer is given below:
Explanation:
In the retail industry, ABC tries to add value to their products and services so they can attract customers who are willing to pay a higher price. ABC can be described as utilizing which of the following strategy?
A. Differentiation strategy.
B. Local strategy.
C. Regional strategy.
D. Cost-leadership strategy.
E. Global strategy.
Answer:
A. Differentiation strategy.
Explanation:
In a market different firms try to maintain a competitive edge over others. This is achieved by using various strategies like: Differentiation strategy, Local strategy, Regional strategy, Cost-leadership strategy, Global strategy.
In the given scenario ABC tries to add value to their products and services so they can attract customers who are willing to pay a higher price.
This is a differentiation strategy where a firm tries to make their product different from.otgers in order to maintain a competitive advantage over others
Given that the DM price of the ECU was 2.0583 and the DG price of the ECU was 2.3194. Then the DG price of the DM by cross rates is given by:______
a. DM = about 4.73 DG.
b. DM = about .26 DG.
c. DM = about 1.13 DG.odno
d. DM = about .89 DG.
Answer:
Option c (DM = about 1.13 DG) is the right approach.
Explanation:
Given:
DM price,
= 2.0583
DG price,
= 2.3194
Now,
By cross rates, the DG price of DM will be:
= [tex]\frac{2.3194}{2.0583}[/tex]
= [tex]1.13[/tex]
Thus the above is the correct option.
A Consumer Expenditure Survey in the city of Firestorm shows that people buy only firecrackers and bandages. A Consumer Expenditure Survey in 2019 shows that the average household spent $44 on firecrackers and $12 on bandages. In 2019, the reference base year, the price of a firecracker was $1, and the price of bandages was $3 a pack. In the current year, 2020, firecrackers are $6 each and bandages are $3 a pack.
Calculate the CPI in 2012 and the inflation rate in 2012.
Solution :
Base year : 2019
Expenditure on crackers : $44
Expenditure on bandages : $12
Price of a firecracker : $1
Price of bandages : $3 per pack
Number of crackers bought = [tex]$\frac{44}{1}$[/tex]
= 44
Number of bandages bought = [tex]$\frac{12}{3}$[/tex]
= 4
Total expenditure in 2019 = $44 + $12
= $56
Year 2020
Price of a firecracker = $6
Price of a bandage = $3
Expenditure on the crackers = $ 6 x 44
= $ 264
Expenditure on the bandages = $ 3 x 4
= $ 12
Total expenditure in 2020 = $ 264 + $ 12
= $ 276
CPI in the year 2020 (base year 2019) = [tex]$\frac{276}{56}\times 100$[/tex]
= 492.8
Inflation in 2020 (2019 base year = 100) = [tex]$\frac{492.8-100}{100 \times 100}$[/tex]
= 0.039
= 3.9%
So, CPI = 492.8
Inflation rate = 3.9%
Which of the following conditions is characteristic of a monopolistically competitive firm in both the short-run and the long run?
a. P> MC
b. MC = ATC
c. P < MR
d. All of the above are correct.
Answer:
b or d
Explanation:
probably b but I am not sure tho sorry
The characteristic of a monopolistically competitive firm in both the short-run and the long run is P>MC.
The following information should be considered:
Monopolistically competitive firm has downward sloping demand curve and marginal revenue curve for monopolistically competitive firm should be below the demand curve. The firm maximizes it's profit where MR equivalent MC And charge price on the demand curve above in the case when MR equals MC. Therefore price >MR =MC.Learn more: brainly.com/question/17429689
Amy is on the board of directors of Computers Plus. Computers Plus is looking for a warehouse to purchase. Amy owns a warehouse. In order for Amy to sell her warehouse to Computers Plus, a. the transaction must be fair to both Amy and Computers Plus. b. a court must review the opportunity to determine its favorability. c. she must resign her position on the board of directors of Computers Plus before any negotiations for the warehouse begin. d. the disinterested members of the board of directors must approve the transaction.
Answer:
Amy and Computers Plus
In order for Amy to sell her warehouse to Computers Plus,
d. the disinterested members of the board of directors must approve the transaction.
Explanation:
For the transaction between Amy and Computers Plus to take place, the principle of independence requires that only the disinterested members of the board of directors must approve it. These include other members of the Company's Board of Directors without any material financial interest in Amy's warehouse, with the exception of Amy.
Describe TWO ways in which the above law protects citizens against human
rights violations.
Answer:
1. Protection of Human Rights Act 1993: declares the rights pertaining to life, equality, liberty,and dignity of an individual that is guaranteed by the Constitution of India.
2. The Universal Declaration of Human Rights (UDHR)- declared by the United Nations General Assembly in the year 1948.
Explanation:
According to COSO, an executive's deliberate misrepresentation to a banker who is considering whether to make a loan to an enterprise is an example of which of the following internal control limitations?
Answer:
Management override
Explanation:
Management override can be regarded as ability of management as well as those that are in charge of governance
to prepare fraudulent financial statements or to manipulate accounting records through overriding these controls, in this case, the controls might even shows that it is operating effectively. For management overrides to be prevented, culture that encourages honesty as well as one that supports employees that can speak up in cases whereby when they suspect that something is wrong should be built. It should be noted that According to COSO, An example of Management override internal control limitations is an executive's deliberate misrepresentation to a banker who is considering whether to make a loan to an enterprise
how did you find the fv factor values
Answer:
v5th factor in solve......
Leasing is often referred to as off-balance-sheet financing because of the way that the transaction is treated and reported in financial statements. According to the FASB-issued Statement 13, which of the following statements is true?
A. Assets leased under financial or capital leases should be reported as fixed assets on the balance sheet.
B. Leased assets should be reported as current assets on the balance sheet.
C. The present value of all future lease payments should be reported as a liability on the balance sheet.
D. The present value of all past lease payments should be reported as assets on the balance sheet.
Consider the following statement on capital leases:
According to Statement 13, the payments on a financial lease should be treated as an operating expense and should not in any case affect a firm's true debt ratio. Is the preceding statement true or false?
a. True
b. False
To consider the financial statement effects of leasing versus purchasing an asset, review the following case of Shoe Building Inc.
Shoe Building Inc. needs equipment that will cost the company $800. Shoe Building Inc is considering to either purchase the equipment by borrowing $800 from a local bank or leasing the equipment. Assume that the lease will be structured as an operating lease. Some data from Shoe Building Inc.'s current balance sheet prior to the lease or purchase of the equipment are:_____.
1. The company's current debt ratio is _____.
2. If the company purchases the equipment by taking a loan, the total debt in the balance sheet will _____, and the debt ratio will change to _____.
3. If the company leases the equipment, the company's debt ratio will _____ because the lease is not capitalized.
4. In this case, the company's financial risk will be _____ under a lease agreement as compared to the financial risk in purchasing the equipment by taking a loan.
5. However, if the lease is capitalized, the financial risk under the lease agreement will be _____ as compared to the risk in buying the equipment.
Solution :
Part 1
a). According to the[tex]\text{ FASB-issued statement}[/tex] 13 :
The Assets that are leased under the capital leases or the financial should be reported as the fixed assets on balance sheet.
b). False, the payments on the financial lease should not be treated as the operating expense.
Part 2
1. The debt ratio = [tex]$\frac{2400}{6000} $[/tex]
= 0.40
2. The total debt in the balance sheet is 2400 + 800 = $ 3200 whereas debt ratio will change to 0.4706
3. Debt ratio of the company will remain same as the lease will not be capitalized.
4. The financial risk of the company will be less under the the lease agreement as compared [tex]\text{to the financial risk in purchasing the equipment }[/tex] by taking the loan.
5. However, when lease is capitalized, financial risk under lease agreement will remain same as [tex]\text{compared to the risk in buying the equipment.}[/tex]
Five welding jobs are waiting to be processed. Their processing times and due dates are given below. Using the critical ratio dispatching rule, in which order should the jobs be processed
Job Processing Time (days) Job due date (days)
A 4 7
B 2 4
C 8 11
D 3 5
E 5 11
Answer:
Order of processing the jobs:
Job Critical Ratio
C 1.375
D 1.667
A 1.75
B 2.0
E 2.2
Explanation:
a) Data and Calculations:
Job Processing Job due Critical
Time (days) date (days) Ratio
A 4 7 1.75 (7/4)
B 2 4 2.0 (4/2)
C 8 11 1.375 (11/8)
D 3 5 1.667 (5/3)
E 5 11 2.2 (11/5)
b) The critical ratio (CR) dispatching indicates the priority sequencing that should be adopted to process work at a work center. The first process is to create the CR priority index number, which is obtained from the formula of due days divided by the processing days. Therefore, the job with the lowest CR is scheduled first.
The percentage of earnings paid out as dividends. A measure of a company's success in earning a return for all providers of capital. The relationship between dividends and the market price of a company's stock. The measure of a company's success in earning a return for the common stockholders. A company's bottom line stated on a per-share basis.
Answer:
Dividend payout ratio - The percentage of earnings paid out as dividends.
Return on Assets ratio - A measure of a company's success in earning a return for all providers of capital.
Dividend yield ratio - The relationship between dividends and the market price of a company's stock.
Return on common stockholder's equity ratio - The measure of a company's success in earning a return for the common stockholders.
Earnings per share - A company's bottom line stated on a per-share basis.
Explanation:
The analysis of financial statements is made by every company from time to time in order to make effective decisions for the future of the company. This evaluation involves plenty of terminologies and ratios that allow the owners to consider different aspects of the company's growth and where it lags behind. For example, The 'Dividend payout ratio' helps the companies to have a check on the amount of money returned by them to their respective shareholders. While 'return on assets ratio' assists them in knowing if the company is able to make adequate profits in comparison to its assets. Similarly, the other terms also help know about the actual status of the company.
Jeniffer, a supervisor of a customer service team, is concerned about Mark's performance. She decides to talk to Mark
and schedules a meeting with him. If Jeniffer is using the directive counseling approach, which of the following should
be Jeniffer's first step?
Answer: She should first make a good conversation with Mark because you can solve this situation easier than just going straight to the point.
Explanation:
Question 1: Topic - Bank Reconciliation
The 2020 June bank statement of Wheeler Ltd has just been received from its bankers. The owner, Ken
Wheeler, has been quietly monitoring internal controls over few months and has sufficient grounds to
believe that cash is being misappropriated in his business. He has approached an accounting consultant,
Tony, to verify his accounting records and confirm his worst fears. Tony is supplied with the
reconciliation statement at the end of last month together with the cash records and the most recent bank
statement of Wheeler Ltd.
Last Month’s Reconciliation statement is presented below:
Bank Reconciliation Statement as at 31 May 2020
($)
Balance as per Bank Statement 30 April 2020 4328.90 Cr
Add: Outstanding Deposit 1224.50
5553.40
Less: Unpresented Cheques 223.70
Balance per Cash at Bank Account at 31 May 2020 $5329.70 Dr
The total of the cash receipts journal for June is $64,776.30 and the total of the cash payments journal is
$63,265.60. The current bank statement shows that cheques presented and paid amount to $59,725.10,
and total deposits amount to $64,780.60. There are also additional debits on the statement for a
dishonored cheque for $210, and account fees for $20.
Additional information:
An examination of the records reveals that all reconciling items at 31 May 2020 appear in the bank
statement for June, unpresented cheques at 30 June total $7154.40, and the 30 June deposit of
$1950.40 has not been credited by the bank. Your check of the cash journals reveals that addition errors
have been made by the clerks responsible. Receipts should total $65,766.30 and payments should total
$63,185.60.
Required:
a) Prepare the Cash at Bank account of Wheeler Ltd showing the final balance at 30 June 2020.
(4 marks)
b) Prepare the bank reconciliation statement of Wheeler Ltd at 30 June 2020. (4 marks)
c) Advice the owner, Ken Wheeler, whether cash is being misappropriated by any amount, assuming
that the records maintained by the bank are accurate. (3 marks)
Answer:
Wheeler Ltd
Balance per Cash at Bank Account at 31 May 2020 $5,329.70 DR
Total cash receipts for June, 2020 $65,766.30
less Total cash payments for June, 2020 ($63,185.60)
Dishonored check ($210.00)
Bank charges ($20.00)
Adjusted balance per Cash at Bank $7,680.40 DR
Bank Reconciliation Statement at 30 June 2020
Adjusted balance per Cash at Bank $7,680.40
Add Unpresented cheques at 30 June total $7,154.40
Less Uncredited deposits = ($1,950.40)
Balance as per bank statement, 30 June, 2020 $12,884.40
c) Cash was misappropriated by $1,070 with the under-counting of cash receipts ($990) and overstatement of cash payments ($80).
Explanation:
a) Data and Calculations:
Total cash receipts = $64,776.30 $65,766.30 $990 error understated
Total cash payments = $63,265.60 $63,185.60 $80 error overstated
Checks presented and paid by bank = $59,725.10
Checks deposited in June = $64,780.60
Dishonored check $210
Bank charges $20
Additional information:
Unpresented cheques at 30 June total $7,154.40
Uncredited deposits = $1,950.40
Married taxpayers Otto and Ruth are both self-employed and file a joint return. Otto earns $435,200 of self-employment income and Ruth has a self-employment loss of $23,100. How much 0.9 percent Medicare tax for high-income taxpayers will Otto and Ruth have to pay with their 2020 income tax return?
Answer: $1,458.90
Explanation:
As they are filing together, the first step would be to find out the taxable income after accounting for Ruth's loss.
Total taxable income = Otto's earnings - Ruth's loss
= 435,200 - 23,100
= $412,100
There is an additional 0.9% Medicare tax on the amount that people file that is above $250,000 when they file jointly and are married..
The additional Medicare will be:
= (412,100 - 250,000) * 0.9%
= $1,458.90
Most organizations are structured along functional lines or areas. Write a 1-2 page paper to communicate these functional aspects of a management information system. Explain what information is required and available to each functional area of an organization.This assignment needs to have the following:• A cover page (includes student's name, date, class title, and assignment title)• Paper needs to be 1-2 pages (minimum 1 full page),
Answer:
m
Explanation:
His decision on what price to charge and how much to produce in the long run will be A. based on optimal plant size determination based on cost minimization. B. to charge even higher prices and produce less quantity compared to short run. C. the same as his short run profit maximizing decision. D. dependent on loss minimization principle.
Answer: A. based on optimal plant size determination based on cost minimization
Explanation:
The information given isn't complete as there are some diagrams attached which I saw online.
Based on the information gotten, the decision on the price to charge and the quantity to produce in the long run will be based on optimal plant size determination based on cost minimization.
It should be noted that the quantity of goods produced in the long run, and the price that'll be charged will depends on optimal size of the plant. In the long, there can be an alteration of the plant size and therefore, the output and price will be determined by the optimal plant size.
During its most recent fiscal year, Dover, Inc. had total sales of $3,260,000. Contribution margin amounted to $1,530,000 and pretax income was $445,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year
Answer:
$1,730,000
Explanation:
Given that;
Total sales = $3,260,000
Contribution margin = $1,530,000
Pretax income = $445,000
We know that
Contribution margin = Total sales - variable cost
Fixing in the above values, we'll have
$1,530,000 = $3,260,000 - Variable cost
Variable cost = $3,260,000 - $1,530,000
Variable cost = $1,730,000
Which of the following is NOT one of the factors complicating the techniques for addressing the fixed-position layout?
A) The volume of materials needed is dynamic.
B) At different stages of a project, different materials are needed; therefore, different items become critical as the project develops.
C) Takt times at workstations are dynamic.
D) There is limited space at virtually all sites.
E) All of the above are complicating factors
Answer:
C) Takt times at workstations are dynamic.
Explanation:
A fixed-position layout can be regarded as a layout that allow products to stay in one place, and movement of workers and machinery can be moved to it once needed. Some of the Products that are not possible to move are airplanes, construction projects as well as ships. Fixed-position layout is usually used when dealing with product which are too large or heavy to move. Disadvantages is that it takes space, and administration burden is usually high. Factors that could complicate the techniques for addressing the fixed-position layout are;
✓There is limited space at virtually all sites.
✓The volume of materials needed is dynamic.
✓At different stages of a project, different materials are needed; therefore, different items become critical as the project develops.
Assume that the risk-free rate is 3% and the required return on the market is 9%. What is the required rate of return on a stock with a beta of 1.9? Round your answer to two decimal places.
Answer:
Required return = 14.4%
Explanation:
Below is the calculation for the required rate of return:
Risk free rate = 3%
The required return on the market = 9%
Beta value = 0.9
Use the below formula:
Required return = Risk free rate + (Market risk premimum)(Beta value)
Required return = 3% + (9% - 3%)(1.9)
Required return = 3% + 6%
Required return = 14.4%
The retained earnings balance was $22,900 on January 1. Net income for the year was $18,100. If retained earnings had a credit balance of $23,800 after closing entries were made for the year, and if additional stock of $5,200 was issued during the year, what was the amount of dividends declared during the year
Answer:
$17,200
Explanation:
Calculation to determine what was the amount of dividends declared during the year
Beginning retained earnings + Net income - Dividends = Ending retained earnings.
$22,900 + $18,100 - Dividends = $23,800
Dividends=$41,000-$23,800
Dividends = $17,200
Therefore the amount of dividends declared during the year is $17,200
Using the following transactions, record journal entries, create financial statements, and assess the impact of each transaction on the financial statements.
Jun. 1 Jenna Aracel, the owner, invested $100,000 cash, office equipment with a value of $5,000, and $60,000 of drafting equipment to launch the company in exchange for common stock.
Jun. 2 The company purchased land worth $49,000 for an office by paying $6,300 cash and signing a long-term note payable for $42,700.
Jun. 3 The company purchased a portable building with $55,000 cash and moved it onto the land acquired on June 2.
Jun. 4 The company paid $3,000 cash for the premium on an 18-month insurance policy.
Jun. 5 The company completed and delivered a set of plans for a client and collected $6,200 cash.
Jun. 6 The company purchased $20,000 of additional drafting equipment by paying $9,500 cash and signing a long-term note payable for $10,500.
Jun. 7 The company completed $14,000 of engineering services for a client. This amount is to be received in 30 days.
Jun. 8 The company purchased $1,150 of additional office equipment on credit.
Jun. 9 The company completed engineering services for $22,000 on credit.
Jun. 10 The company received a bill for rent of equipment that was used on a recently completed job. The $1,333 rent cost must be paid within 30 days.
Jun. 12 The company collected $7,000 cash in partial payment from the client billed on June 9.
Jun. 14 The company paid $1,200 cash for wages to a drafting assistant.
Jun. 17 The company paid $1,150 cash to settle the account payable created in on June 8.
Jun. 20 The company paid $925 cash for minor maintenance of its drafting equipment.
Jun. 23 The company paid $9,480 cash in dividends.
Jun. 28 The company paid $1,200 cash for wages to a drafting assistant.
Jun. 29 The company paid $2,500 cash for advertisements on the web during June.
Required:
Journalize the above entires.
Answer:
1 - Cash (Dr.) $100,000
Office equipment (Dr.) $5,000
Drafting equipment (Dr.) $60,000
Capital (Cr.) $165,000
2- Land (Dr.) $49,000
Cash (Cr.) $6,300
Long term notes payable (Cr.) $42,700
3- Portable building (Dr.) $55,000
Cash (Cr.) $55,000
4- Insurance premium (Dr.) $3,000
Cash (Cr.) $3,000
5- Cash (Dr.) $6,200
Service Revenue (Cr.) $6,200
Explanation:
6- Drafting equipment (Dr.) $20,000
Cash (Cr.) $9,500
Long term notes payable (Cr.) $10,500
7- Accounts Receivable (Dr.) $14,000
Service revenue (Cr.) $14,000
8- Office equipment (Dr.) $1,150
Accounts Payable (Cr.) $1,150
9- Accounts Receivable (Dr.) $22,000
Engineering Service (Cr.) $22,000
10- Cash (Dr.) $9,000
Accounts Receivable (Cr.) $9,000
11- Wages expense (Dr.) $1,200
Cash (Cr.) $1,200
12- Accounts Payable (Dr.) $1,150
Cash (Cr.) $1,150
13- Maintenance expense (Dr.) $925
Cash (Cr.) $925
14- Dividends (Dr.) $9,480
Cash (Cr.) $9,480
15- Wages expense (Dr.) $1,200
Cash (Cr.) $1,200
16- Advertising expense (Dr.) $2,500
Cash (Cr.) $2,500
Environment degradation does not consist of
Answer: None of the above
Explanation:
The options include:
A. Land degradation and soil erosion
(B) Problem of overgrazing and ecological degradation
(C) Floods
(D) None of the above
Environmental degradation simply refers to the deterioration of the environment whcih occurs when there's depletion of the resources like soil, water and air, pollution and the the destruction of habitats and ecosystems.
It should be noted that environmental degradation consist of land degradation and soil erosion, problem of overgrazing and ecological degradation, floods etc.
Therefore, the correct option is None of the above.
Dotterel Corporation uses the variable cost concept of product pricing. Below is cost information for the production and sale of 35,000 units of its sole product. Dotterel desires a profit equal to a 11.2% rate of return on invested assets of $350,000. Fixed factory overhead cost $105,000 Fixed selling and administrative costs 35,000 Variable direct materials cost per unit 4.34 Variable direct labor cost per unit 5.18 Variable factory overhead cost per unit .98 Variable selling and administrative cost per unit .70 The markup percentage for the sale of the company's product is: Group of answer choices 14% 5.6% 45.71% 11.2%
Answer:
Dotterel Corporation
The markup percentage for the sale of the company's product is:
= 45.71%.
Explanation:
a) Data and Calculations:
Production and sales units = 35,000
Desired rate of return = 11.2%
Invested assets = $350,000
Desired profit = $39,200 ($350,000 * 11.2%)
Fixed factory overhead cost = $105,000
Fixed selling and administrative costs = $35,000
Total fixed costs = $140,000 ($105,000 + $35,000)
Variable direct materials cost per unit $4.34
Variable direct labor cost per unit 5.18
Variable factory overhead cost per unit 0.98
Variable selling and administrative cost per unit 0.70
Total variable costs per unit $11.20
Total variable costs = $392,000 ($11.20 * 35,000)
Contribution margin:
Fixed costs = $140,000
Desired profits 39,200
Total = $179,200
Markup = 45.71% ($179,200/$392,000 * 100)
Sales revenue = $571,000
Selling price per unit = $16.31
Someone from ____________ is most likely to answer the question "Who am I?" by saying, "I am a mother" or "I work for ABC Corporation."
Someone from [tex]\boxed{ Japan }[/tex] is most likely to answer the question "Who am I?" by saying, "I am a mother" or "I work for ABC Corporation."
[tex]\large\mathfrak{{\pmb{\underline{\orange{Mystique35 }}{\orange{ヅ}}}}}[/tex]
BMX Company has one employee. FICA Social Security taxes are 6.2% of the first $117,000 paid to its employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 0.6% and SUTA taxes are 2.9% of the first $7,000 paid to its employee. Compute BMX€™s amounts for each of these four taxes as applied to the employee€™s gross earnings for September under each of three separate situations (a), (b), and (c).
Gross pay through August Gross pay for September
a. 6400 800
b. 18,200 2100
c. 11700 8000
Answer:
Scenario Accumulated September FICA taxes FUTA / SUTA
gross pay gross pay 7.65% 3.5%
a. $6,400 $800 $61.20 $21
b. $18,200 $2,100 $160.65 $0
b. $11,700 $8,000 $611.20 $0
What type of companies engage in marketing?
Answer:
American Heart Association (AHA), Walmart, Procter & Gamble.
Explanation:
An emerging industry is an industry in which a large number of small or medium-sized firms operate and no small set of firms has a dominant market share or creates dominant technologies
a. True
b. False
Answer: False
Explanation:
In an emerging market, there are only a few firms as the product is new and so has not been copied extensively yet. As a result, only a small set of firms are dominant in the market.
As the market grows and firms see that there is profit to be made, they will come into the market and this will increase the number of firms and reduce the dominance of the earlier firms.
Jennifer is saving up for the closing costs ($4250) and down payment on a home. For a better interest rate and savings on mortgage insurance, she must have a down payment of 10%. She can afford a monthly payment of $900 based on her current earnings and expenses. The amount available for the mortgage is reduced by an estimated $175 per month to cover home insurance and real estate taxes. The current nominal annual interest rate is 3% for a 30-year fixed-rate mortgage loan. How much of a loan can she afford
Answer:
The amount of Loan Jennifer can afford is $171,962.30.
Explanation:
This can be calculated using the formula for calculating the present value of an ordinary annuity as follows:
PV = P * ((1 - (1 / (1 + r))^n) / r) …………………………………. (1)
Where;
PV = Present value or the amount of Loan Jennifer can afford =?
P = Monthly payment for the mortgage = Monthly amount she can afford - Estimated monthly home insurance and real estate taxes = $900 - $175 = $725
r = Monthly nominal interest rate = Annual nominal interest / 12 = 3% / 12 = 0.03 / 12 = 0.0025
n = number of months = Number of years * 12 = 30 * 12 = 360
Substitute the values into equation (1) to have:
PV = $725 * ((1 - (1 / (1 + 0.0025))^360) / 0.0025)
PV = $725 * 237.189381504283
PV = $171,962.30
Therefore, the amount of Loan Jennifer can afford is $171,962.30.
True or false: a firm with a capital structure containing 70% retained earnings has a marginal cost of capital of $50,000. This indicates that after the first $50,000 of capital raised, retained earnings can no longer provide the 70% equity position of the firms capital structure.
Answer:
False
Explanation:
Marginal cost of capital is the total cost of debt and equity which is used to fund business operations. This denotes any additional capital raised to fund the business. If the capital structure has retained earnings of 70% and marginal cost of capital is $50,000. This means the additional cost to raise the fund will be $50,000.