A passenger metal detector at Chicago’s Midway Airport gives an alarm

A passenger metal detector at Chicago’s Midway Airport gives an alarm 0.45 time a minute.

(a) Find the median waiting time until the next alarm. (Round your intermediate calculations and answer to 4 decimal places.)

Median waiting time minutes

(b) Find the first quartile of waiting time before the next alarm. (Round your intermediate calculations and answer to 4 decimal places.)

First quartile of waiting time minutes

(c) Find the 10th percentile waiting time until the next alarm. (Round your intermediate calculations and answer to 4 decimal places.)

10th percentile waiting time minutes

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Borgia Enterprises has the following statement of earnings data

Borgia Enterprises has the following statement of earnings data available for 2018:

Sales revenue $737,200

Operating expenses 243,700

Interest expense 39,500

Income tax rate 34%

Borgia uses a perpetual inventory accounting system and the weighted average cost method. Borgia is considering adopting the FIFO method for costing inventory. Borgia’s accountant prepared the following data:

If Weighted Average Cost UsedIf FIFO UsedEnding inventory$ 61,850 $ 80,200 Cost of goods sold403,150 384,800 Required:

1. Compute income before taxes, income tax expense, and net income for both of the inventory costing methods (rounded to the nearest dollar).

Weighted Average CostFIFOIncome before taxes$$Income tax expense / Tax savings due to loss$$Net income$$

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Jim Co. uses aging of Accounts Receivable to estimate uncollectible.

Jim Co. uses aging of Accounts Receivable to estimate uncollectible. The unadjusted trial balance amount of accounts receivable on Dec. 31, 2016, has a balance that is days outstanding amount estimated uncollectible

0-60 120,000 1%

61-120 90,000 2%

over 120 100,000 6%

total: 310,000

Activity during FY 2016 consists of:

7/15: Jim Co wrote off Bob Co. account as not collectable for the amount of $7,000

10/20: Jim Co. recovered $4000 from Calvin Co. for settlement of their prior debt that had been written off FY 2015.

Jim Co. Dec. 31, 2015 allowance for uncollectible accounts was $2,200. Using the aging method what amounts should Jim Co. report for Dec. 31, 2016

Allowance for uncollectible accounts
Bad Debt Expense

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Interest rates have fallen over the seven years since a $1,000 par

1. Interest rates have fallen over the seven years since a $1,000 par, 10-year bond was issued with a coupon of 7%. What is the present value of this bond if the required rate of return is currently five percent? (For simplicity, assume annual payments.)

2 . Jamaica Corp. pays a constant $6 dividend on its stock. The company will maintain this dividend for the next 15 years and will then cease paying dividends forever. If the required return on this stock is 12 percent, what is the current share price?

3. The Dow Chemical Company just paid a dividend (D0) of $4 per share. It is expected to increase its dividend by 4% per year. If the market requires a return of 18% on assets with this kind of risks, how much should the stock is selling for?

4. A portfolio is invested 25 percent in Stock A, 40 percent in Stock B, and 35 percent in Stock

C. The expected returns on these stocks are 8 percent, 14 percent, and 18 percent, respectively.

What is the portfolio’s expected return? How do you interpret your answer?

16. Consider the following two mutually exclusive projects:

Year Cash Flow Project A Cash Flow Project B

0 – $175,000 – $25,000

1 22,500 12,000

2 32,500 11,000

3 32,500 9,750

4 220,000 7,300

Whichever project you choose, if any, you require a 15 percent return on your investment.

a) If you apply the payback criterion, which investment will you choose? Why?

b) If you apply the discounted payback criterion, which investment will you choose? Why?

c) If you apply the NPV criterion, which investment will you choose? Why?

d) If you apply the IRR criterion, which investment will you choose? Why?

e) If you apply the profitability index criterion, which investment will you choose? Why?

f) Based on your answers in (a) through (e), which project will you finally choose? Why?

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(Calculating rates of return) The common stock of Maco Enterprises

1. (Calculating rates of return) The common stock of Maco Enterprises had a market price of $12 on the day you purchased it just one year ago. During the past year the stock had paid a $1 dividend and closed at a price of $14. What rate of return did you earn on your investment in Maco’s stock?

2. (Expected rate of return and risk) Almay, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on risk (as measured by the standard deviation) and return?

Common Stock A Common Stock B

Probability Return Probability Return

0.3 11% 0.2 25%

0.4 15% 0.3 6%

0.3 19% 0.3 14%

0.2 22%

3. (Expected rate of return) Carl Jones is considering whether to invest in a newly formed investment fund. The fund’s investment objective is to acquire home mortgage securities at what it hopes will be bargain prices. The fund sponsor has suggested to James that the fund’s performance will hinge on how the national economy performs in the coming year. Specifically, he suggested the following possible outcomes:

State of the Economy

Probability Fund Return

Rapid expansion and recovery 5% 100%

Modest growth 45% 35%

Continued recession 45% 5%

Falls into depression 5% -100%

Based on these potential outcomes, what is your estimate of the expected rate of return from this investment opportunity?
Calculate the standard deviation

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The Holmes Company’s currently outstanding bonds have a 10% yield

QUESTION 1

The Holmes Company’s currently outstanding bonds have a 10% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 40%, what is Holmes’ after-tax cost of debt?
a.4%
b.5%
c.6%
d.7%
e.8%

QUESTION 2

The Evanec Company’s next expected dividend, D1, is $3.18; its growth rate is 6%; and its common stock now sells for $36.00. New stock (external equity) can be sold to net $32.40 per share.
Using the Gordon Model, what is Evanec’s cost of retained earnings, rs?

a.14.44%
b.14.53%
c.14.67%
d.14.78%
e.14.83%

QUESTION 3

What is Evanec’s percentage flotation cost, F?
a.8.00%
b.9.00%
c.10.00%
d.11.00%
e.12.00%

QUESTION 4

Using the Gordon Model, what is Evanec’s cost of new common stock, re?
a.14.91%
b.15.81%
c.16.32%
d.16.24%
e.17.59%

QUESTION 5

You were hired as a consultant to Giambono Company, whose target capital structure is 40% debt, 15% preferred, and 45% common equity. The after-tax cost of debt is 6.00%, the cost of preferred is 7.50%, and the cost of retained earnings is 12.00%. The firm will not be issuing any new stock. What is its WACC?
a.8.93%
b.7.59%
c.6.96%
d.7.68%
e.6.69%

QUESTION 6

The Sarco Company has a target capital structure of 30% debt, 10% preferred stock and 60% common equity from retained earnings. Sarco finished its most recent fiscal with $57 million in retained earnings and would like to raise capital to expand its operations.
Given the information provided above, What is Sarco’s retained earnings breakpoint?
a.$92,000,000
b.$93,000,000
c.$94,000,000
d.$95,000,000
e.$96,000,000

QUESTION 7

Given the information provided above, how much new debt can Sarco raise and still maintain its current capital structure?
a.$28,300,000
b.$28,400,000
c.$28,500,000
d.$28,600,000
e.$28,700,000

QUESTION 8

Given the information provided above, how much new preferred stock can Sarco raise and still maintain its current capital structure?
a.$9,500,000
b.$9,600,000
c.$9,700,000
d.$9,800,000
e.$9,900,000

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Jade Inc. has identified some valuable growth opportunities and would like

Jade Inc. has identified some valuable growth opportunities and would like to maximize these opportunities for their shareholders. Management has decided that they want to accomplish this goal by adjusting their capital structure in an attempt to decrease their cost if capital and have identified a target weighted average cost of capital of 9.6%. The firm currently has an after-tax cost of debt of 5.1% and a cost of equity of 11.1%.

If Jade is to meet their target weighted average cost of capital, what debt-equity ratio is needed? (Report answer in percentage terms and round to 2 decimal places. Do not round intermediate calculations).

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I purchased a stock for $10 one year ago, and I received $1 dividend

1) I purchased a stock for $10 one year ago, and I received $1 dividend and the market price of the stock is $9 today. What is my holding period return over the last year?

2) Stock A is expected to have a return of either 15% or 5% tomorrow with the same likelihood. What is the expected return and risk (measured by the standard deviation) of Stock A? Suppose the risk free rate over tomorrow is 8%, what is the Sharpe Ratio of Stock A?

3) I want to pick two stocks from three stocks: stocks A, B and C. The returns of A and B are positively correlated, B and C are independent, and A and C are negatively correlated. If my goal is to maximize my investment’s Sharpe Ratio, which two should I choose?

4) Risk free rate is 5%. Stock A’s expected return is 15% and its standard deviation is 10%. If I want to construct a portfolio with Stock A and a risk free asset so that the portfolio’s standard deviation is 5%, what percentage of my wealth should be spent on Stock A?

5) Following question 4, if I observe Stock B, whose expected return and standard deviation are 20% and 16% respectively, which stock, A or B, should I choose to construct a 5% standard deviation portfolio together with the risk free asset? Why?

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You are provided with the following information for Perkins Inc

P6-5B You are provided with the following information for Perkins Inc. for the month ended October 31, 2017. Perkins uses a periodic method for inventory.                                                                                             Unit Cost or

Date          Description                                                Units       Selling Price

October  1    Beginning inventory          60                 $25

October  9    Purchase                         120                  26

October 11    Sale                                100                  35

October 17    Purchase                          70                  27

October 22    Sale                                 60                  40

October 25    Purchase                          80                  28

October 29    Sale                                110                  40

Instructions


(a)(iii) Gross profit:

LIFO       $3,050

FIFO       $3,230

Average $3,141

 (a) Calculate (i) ending inventory, (ii) cost of goods sold, (iii) gross profit, and

(iv) gross profit rate under each of the following methods.    (1) LIFO.

(2) FIFO.

(3) Average-cost. (Round average cost per unit to 3 decimal places.)

(b) Compare results for the three cost flow assumptions.

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SkinTan’s top five customers generate sales revenue of $950,000

SkinTan’s top five customers generate sales revenue of $950,000 per annum. Each generates a different gross margin as a consequence of price negotiations that have been carried out over several years. Because of their location, each customer incurs different distribution expenses. Sales commissions are paid at the rate of 6% on all sales. Fixed costs are customer specific, covering salaries of sales and office staff who service each customer. The following table shows the information for each of the top customers for the previous year.

Sales

250,000

250,000

200,000

150,000

100,000

Gross margin %

30%

25%

21%

37%

39%

Distribution expenses

30,000

14,000

25,000

12,000

6,000

Fixed costs

30,000

25,000

16,000

15,000

10,000

Carry out a customer profitability analysis and make recommendations in relation to any future strategies SkinTan should take in relation to its top customers.

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