Question 3
Stock Valuation at Ragan, Inc 1. Assuming the company continues its current growth rate, what is the value per share of the company's stock? 2. To verify their calculations, Ragan, Inc. has hired an equity analyst familiar with the HVAC industry who has examined Ragan Inc.'s financial statements as well as those of its competitors. Although Ragan, Inc. currently has a technological advantage, the consultant's research indicates that other companies are investigating methods to improve efficiency and the consultant believes that Ragan's technological advantage will only last for the next five years. After that period, the company's growth will likely slow to the industry growth average. Additionally, the consultant believes that the required return used by Ragan, Inc. is too high and that the average required return rate is more appropriate. Under this growth rate assumption, what is your estimate of the stock price? 3. What is the industry price-earnings ratio? What is the price-earnings ratio for Ragan, Inc.? Is this the relationship you would expect between the ratios? Why or why not? 4. Carrington and Genevieve are unsure how to interpret the price-earnings ratio but have come up with the following expression: P0 = 1 - b -- ------------ E1 R - (ROE x b) Beginning with the constant dividend growth model, verify this result. What does this expression imply about the relationship between the dividend payout ratio, the required return on the stock, and the company's ROE? 5. Assume the company's growth rate slows to the industry average in five years. What future return on equity does this imply, assuming a constant payout ratio? 6. After discussing the stock value with the consultant, Genevieve and Carrington agree that they would like to increase the value of the company stock. Like many small business owners, they would like to retain control of the company, but they do not want to sell stock to outside investors. They also feel that the company's debt is at a manageable level and do not want to borrow more money. How can they increase the price of the stock? Are there any conditions under which such an action would not increase the stock price? Explain.,Hi there, Do you think it will be completed by tonight? Thanks!,Hi, I'm not sure about the HVAC piece. I'm not seeing that in the question. Plesae clarify. Thx,Please disregard any specifics for the HVAC aspect. My textbook question is identical to what's posted here, but doesn't mention the HVAC industry. I don't believe it's relevant to the question based on how I'm reading it. However, I just realized you may not have this information that is the opening of the problem: Larissa has been talking with the company's directors about the future of East Cost Yachts. To this point, the company has used outside supliers for various key components of the company's yachts, including engines. Larissa has decided that East Coast Yachts should consider the purchase of an engine manufacturer to allow East Coast Yachts to better integrate its supply chain and get more control over engine features. After investingating several possible companies, Larrissa feels that the purchase of Ragan engines is a possiblity. She has asked Dan Ervin to analyze Ragan's value. Ragan Engines was founded nine years ago by a brother and a sister--Carrington and Genevieve Ragan--and has remained privately owned company. The company manufactureres marine engines for a variety of applications. Ragan has experienced rapid growth because of the proprietary technology that increases fuel efficiency of its negines with very little sacrifice in performance. The company is equally owned by Carrington and Generiveieve. The oringinal agreement between the two siblings gave each 150,000 shares of stock. Larissa has asked Dan to determine a value per share of Ragan stock. To accomplish this, Dan has gathered the following information about some of Ragan's competitors that are publicly traded. (this is the EPS, DPS, etc stuff I sent you yesterday) Nautilus Marine Enginees negative EPS wer the result of an accouting write off last year. Without the write-off, EPS for the company would have been 1.97. Last year, Ragan had an EPS of 5.08 and paid a dividend to Carrington and Genevieve of 320,000 each. The company also had a return on equity of 25 percent. Larissa tells Dan that required return for Ragan of 20 percent is appropriate.,Hi there, Do you have all of the information you need at this point? Also, any idea on when you might be able to provide a solution? Thx!
Question 4
MULTIPLE CHOICES ......... Question Which of the following is not a step needed to maximize the profits from joint products? 1.Forecasting the sales price of each final product 2.Identifying alternative sets and quantities of final products possible from the joint process 3.Determining how to allocate joint costs to the final products 4.Estimating the costs required to further process joint products into salable products Question A product's net realizable value is calculated by: 1.Deducting the cost of goods sold from the sales revenue 2.Deducting the allocated joint costs and processing costs after split-off from the sales revenue 3.Deducting unit-level costs from the sales revenue 4.Deducting processing costs after split-off from the sales revenue Question Great Sweets Candy Company produces various types of candies. Several candies could be sold at the split-off point or processed further and sold in a different form after further processing. The candies are produced in a joint processing operation with $500,000 of joint processing costs monthly, which are allocated based on pounds produced. Information concerning this process for a recent month appears below: Candy type - Sweet Meats- # of pounds 50,000, Price per pound a split off $ 8.00 - Further processing Cost 75,000, price after processing $10.00 Candy type - Sweet Meats- # of pounds 100,000, Price per pound a split off $ 10.00 - Further processing Cost 30,000, price after processing $10.50 Candy type - Sweet Meats- # of pounds 25,000, Price per pound a split off $ 5.00 - Further processing Cost 20,000, price after processing $5.50 The joint processing costs in this operation: 1.Should be allocated to products to determine whether they are sold at split-off or processed further 2.Should be ignored in determining whether to sell at split-off or process further 3.Should be ignored in making all product decisions 4.Are never included in product cost, as they are misleading to all management decisions Question Gardner Company processes products in a joint processing operation that produces products A and B in a joint process. The company incurs $1,200,000 of joint processing costs monthly. Currently, 3,600 of A and 2,800 of B are being produced each month. Management plans to decrease B's production by 600 units in order to increase the production of A by 1,000 units. Additionally, this change will require minor modifications which will add $40,000 to the production costs. This cost is entirely attributable to product B What is the amount of the joint costs allocable to A before the changes are made to the existing production process, assuming Gardner allocates its joint costs according to the proportion of A and B produced? 1.$675,000 2.$547,058 3.$529,412 4.$525,000 Question Which of the following is not a method of allocating joint costs? 1.Sales value at split-off 2.Net realizable value 3.By-product method 4.Physical-measures method Question Which of the following would not be a physical measure used to allocate joint costs? 1.Number of pounds produced 2.Cubic feet of gas produced 3.Sales value at split off 4.Energy content (BTUs) Question In joint-process costing and analysis, which of the following costs is relevant when deciding the point at which a product should be sold to maximize profits? 1.The cost of the machinery used to produce the three products 2.The salaries of production personnel making the product 3.The cost of the materials required for the joint products 4.The selling price if the products are processed further Question Which of the following would not be a joint-product cost? 1.Cost of picking apples to be processed into cider and applesauce in a cider factory 2.Cost of cinnamon used in applesauce 3.Cost of maintaining oil rigs for an oil manufacturer 4.Costs of running a fishing boat that sells haddock, cod, and lobsters to wholesalers Question Allocation of factory service department costs to the production departments is necessary to: 1.Measure use of plant capacity 2.Make sure that machines are operating efficiently 3.Calculate cost per unit for purposes of external financial reporting 4.Control costs Question Which of the following would be an appropriate cost-allocation base for allocating the cost of the company cafeteria? 1.Square footage occupied by departments 2.Number of hours of use 3.Number of meals served 4.Salaries of personnel purchasing meals Question Which of the following would not be an appropriate cost-allocation base for the Personnel department costs? 1.Space occupied 2.Number of employees 3.Total payroll dollars in department using the equipment 4.Labor hours Question Which of the following would not be an appropriate cost-allocation base for allocating the cost of the corporate library in a consulting company with multiple divisions? 1.Number of employees employed in each division 2.Square footage occupied by each division 3.Cost of periodicals ordered by each division 4.Number of consultants employed in each division Question Mansfield River Corporation maintains computer equipment and provides services in all 50 states and in 20 countries. The Corporation has a fleet of 3 Corporate Jets and 2 Helicopters and employs 6 full time pilots who receive salary and benefits. The most appropriate way to allocate the total cost of the corporate jets, helicopters and pilots to individual user departments would be: 1.Number of trips taken by each department 2.Sales revenue generated by each department 3.Number of miles flown by each department 4.Number of employees in each department Question Which of the following is not a recognized method of allocating costs of service departments to user departments? 1.The direct method 2.The reciprocal method 3.The labor hours method 4.The step method Question There was an error in the text of this question, so everyone gets this one correct... but I had already activated the quiz when the error was discovered (thanks, Scott!) so Blackboard will not allow me to remove the question. To have this automatically scored as correct, select the letter for the answer of $187,000. 1.$187,000 2.$165,000 3.$171,583 4.$136,334 Question Which of the following statements regarding traditional cost accounting systems is False? 1.Products are often over or under costed in traditional cost accounting systems 2.Most traditional cost accounting systems do not trace individual costs to products 3.The advantage of traditional cost accounting systems is their simplicity 4.Traditional cost accounting systems can be sufficient to meet managers' cost information needs as long as the level of indirect costs is relatively high compared to the level of direct costs Question Costs associated with a special machine which sands the edges of all finished products would be an example of: 1.Unit-level activity 2.Batch-level activity 3.Customer-level activity 4.Product-level activity Question The review of each tax return by H & R Block would be an example of: 1.Unit-level activity 2.Facility-level activity 3.Product-level activity 4.Batch-level activity Question Ferguson Molding Company produces custom bottle caps and jar covers for large cosmetic companies. Each customer owns the custom-made molds that are used for the caps and jar covers, so caps are produced only to customer order. Each order requires the setting of molds in molding machines. Two full time mechanics, whose combined total annual salary and benefits are $160,000 per year, are employed setting up and breaking down the molding machines. An order consists of anywhere from 50,000 to 500,000 units. 80 orders were received during the year 2008 for individual custom production runs. The total number of units produced was 8 million. The cost of setting up the molding machines is an example of 1.Facility-level activity 2.Product-level activity 3.Batch-level activity 4.Customer-level activity Question Ferguson Molding Company produces custom bottle caps and jar covers for large cosmetic companies. Each customer owns the custom-made molds that are used for the caps and jar covers, so caps are produced only to customer order. Each order requires the setting of molds in molding machines. Two full time mechanics, whose combined total annual salary and benefits are $160,000 per year, are employed setting up and breaking down the molding machines. An order consists of anywhere from 50,000 to 500,000 units. 80 orders were received during the year 2008 for individual custom production runs. The total number of units produced was 8 million. The most appropriate cost driver base to allocate the salaries of the two mechanics under Activity-Based Costing would be: 1.The number of bottle caps and jar covers produced 2.The number of setups 3.The number of hours spent on each setup 4.The number of setup mechanics Question Salaries of the human resource staff responsible for hiring production personnel at Dell Computer would be an example of: 1.Unit-level activity 2.Facility-level activity 3.Batch-level activity 4.Product-level activity Question The purchase of chemicals to make a special batch of synthetic fiber would be an example of: 1.Customer-level resource 2.Facility-level resource 3.Product-level resource 4.Batch-level resource Question Richardson Motors uses ten units of part Number T305 each month in the production of large Diesel engines. The cost to manufacture one unit of T305 is presented below: Direct Material: $2000 Material Handling 20% of direct material cost: 400 Direct Labor: 16000 Manufacturing Overhead 150% of direct labor cost: 24000 Material handling, which is not included in manufacturing overhead, represents the direct variable costs of the receiving department that are applied to direct materials and purchased components on the basis of their costs. Richardson's annual manufacturing overhead budget is one-third variable and two-thirds fixed) Simpson Castings, one of Richardson's reliable vendors, has offered to supply T305 at a unit price of $30,000. Assume Richardson Motors is able to rent all idle capacity for $50,000 per month. If Richardson decides to purchase the ten units from Simpson Castings, Richardson's monthly Cost for T305 would: 1.Decrease $14,000 2.Increase $46,000 3.Decrease $34,000 4.Decrease $64,000 Question In differential analysis, changes in the cost of direct materials among alternatives is an example of 1.Price discrimination 2.Relevant data 3.Batch-level costs 4.None of the above Question TwoWheels (TW) manufactures hi-tech bicycles that sell for $600 each. They sell 1,000 bicycles per year. Fixed higher-level costs amount to $100,000. Break-even for TW is 300 bicycles. TW's margin safety is 1.$50,000 2.$180,000 3.$360,000 4.$420,000 Question Faulk Industries (FI) produces low cost digital cameras that sell for $100. FI requires a 25% return on sales. Currently feasible costs are $5,160,000 and a cost reduction of $660,000 is required to meet their target. FI assumes they will sell ____ cameras. 1.60,000 2.75,000 3.85,000 4.None of the above Question Juarez Healthcare Center receives reimbursement from C.H.E.A.T.E.M. insurance company. Juarez receives $20 per physical therapy session. Each session lasts 15 minutes. Because of a shortage of physical therapists, Juarez often finds it necessary to use a temporary service to provide therapists. Assume collections and other variable cost amount to $5 per visit and all other facility costs are fixed. What other qualitative factors should Juarez consider before using a temporary service? 1.What is the training of the employees? 2.Will Juarez builds relationships with the employees and has a potential source of new therapists? 3.Can Juarez uses the temporary service as a means to screen employees for a good match with the company? 4.All of the above Question Relevant costs exclude 1.Fixed costs 2.Costs that change from year to year 3.Costs that do not change based upon the alternative choices 4.All of the above Question When deciding on special order pricing, it is important to consider 1.Alternative capacity uses 2.The reaction of other customers 3.The potential for future sales 4.All of the above Question Abrams Corporation sells a product for $75 per unit. Its market share is 20 percent. The market share can be increased to 30 percent with a reduction in price to $63. The product is currently earning a profit of $12 per unit. The president of Abrams feels that the $12 profit per unit must be maintained. What is the target price per unit? 1.$53 2.$63 3.$65 4.$75 Question Use of negotiation to arrive at a transfer price can lead to divisiveness and competition between participating division managers. 1.True 2.False Question A particular manufacturing job is subject to an estimated 90% learning curve. The first unit required 40 labor hours to complete. What is the cumulative average time per unit after four units are completed? 1.32.0 hours 2.32.4 hours 3.36.0 hours 4.40.0 hours Question In which cost estimation method would costs most likely be broken into unit-level, batch-level, product-level and facility-level costs? 1.Scattergraph method 2.Account analysis method 3.Regression method 4.Engineering estimates method Question An amusement park estimates average costs per day. Which of the following is true? 1.Average cost per day considers the relationship between labor costs and other variables such as temperature 2.Average cost per day can be useful in estimating labor costs 3.Average cost per day would include a component of variable labor costs but not fixed labor cost 4.All of the above Question Which method of cost estimation does not use the company records as its primary source of cost-activity data? 1.Engineering estimates 2.Regression analysis 3.Account analysis 4.High-low method Question Which of the following companies would most likely use operation costing? 1.A piano manufacturer 2.A potato chip company 3.An oil company 4.A pocketbook manufacturer Question Oak Bluff Company incorrectly assigns a $50,000 overhead item to selling expense. Borden has more inventory at the end of the year than at the beginning of the year. The result of this error will be to: 1.Understate inventory and profit for the year 2.Have no effect on inventory and profit for the year 3.Overstate inventory and profit for the year 4.Understate inventory but have no effect on profit for the year Question ] Before prorating overhead, the current period overhead component of Cost of Goods Sold for Wilmington Company was $230,000, while the current period overhead component of the ending inventory was $80,000. Manufacturing overhead of $310,000 was applied during the period, whereas $296,000 was actually incurred. Wilmington has no Work-in-Process inventory at the end of the period. If the manufacturing overhead-variance is prorated between inventory and cost of goods sold, how much will be allocated to the ending inventory? (round to the nearest whole dollar) 1.$14,000 2.$ 0 3.$3,613 4.$2,868 Question Which of the following statements about activity-based flexible budgeting are true? 1.It uses several cost drivers 2.Costs that may appear fixed with respect to a single volume-based cost driver may be variable with respect to other appropriate cost drivers 3.It can also be used as the basis for a flexible budget for planning and cost management purposes 4.All of the above Question Which of the following is not important to managers when analyzing revenue sales-volume variance information? 1.The combination of the individual revenue sales-volume variances 2.The comparison of budgeted and actual total costs 3.The picture of the product-line portrayed by aggregate dollars 4.The production for the period Question XYZ Corp. produced 26,000 units of its only product. Machine hours per unit are 2.8. The budget planned for 23,000 units. What are the budgeted machine hours and the flexible-budget machine hours, respectively? 1.64,400 machine hours; 72,800 machine hours 2.72,800 machine hours; 64,400 machine hours 3.68,000 machine hours; 75,000 machine hours 4.75,000 machine hours; 68,000 machine hours Question Rhone Corporation produces a product called Sharone, which gives rise to a by-product called Erone. The only costs associated with Erone are additional processing costs of $2 for each unit. Rhone accounts for Erone's sales first by deducting its separable costs from its sales and then by deducting this net amount from the cost of goods sold of Sharone. This year, 4,800 units of Erone were produced. They were all sold for $10 each. Company operating expenses were $120,000 for the year. Sales revenue and cost of goods sold for Sharone were $800,000 and $400,000, respectively, for the year. (CPA adapted) If Rhone changes its method of accounting for Erone's sales, assuming that all of Erone's production is sold in the period that it is produced, what would be the effect on Rhone's overall profits? 1.Overall profit would increase 2.Overall profit would decrease 3.Overall profit would remain the same 4.Additional information is needed to determine the effect on overall profit Question The Stanford Corporation produces three outputs: A, B and C from one input. The net-realizable-value of A at the split-off point is $200,000. The net-realizable-value of B at the split-off point is $400,000 and the net-realizable- value of C at the split-off is $50,000. Final sales values are $400,000, $600,000 and $50,000 for A, B and C respectively. However, these prices are subject to erratic change. The additional processing costs for A, B and C are $100,000, $150,000 and $0 respectively. Stanford produces 120,000 units of A, 120,000 units of B and 60,000 units of C. The total costs incurred up to the split-off point are $300,000 What is the expected gross margin for Stanford Corporation? 1.$350,000 2.$450,000 3.$500,000 4.The expected gross margin cannot be determining without knowing how joint-costs will be allocated Question Which of the following statements regarding the physical-measures method of allocating joint-product costs is false? 1.Joint product costs are allocated proportional to economic values 2.It is based on the relative volume, weight, or other physical measure of each joint product at the split-off point 3.It is preferred when prices of output products are highly volatile or unpredictable 4.The total profit of the company will be the same regardless of which physical measure is used to allocated joint-product costs
Question 5
I need a help in 5 financial problems. Can you guys help me with them? 1- Your firm purchased machinery with a 7-year MACRS life for $9 million. The project, however, will end after 4 years. If the equipment can be sold for $3.5 million at the completion of the project, and your firm?s tax rate is 30%, what is the after-tax cash flow from the sale of the machinery? Use MACRS depreciation schedule 2- Expenses are expected to be 40% of revenues, and working capital required in each year is expected to be 10% of revenues in the following year. The product requires an immediate investment of $53,000 in plant and equipment. a. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm?s tax rate is 20%, what are the project cash flows in each year? (Enter your answers in thousands of dollars. Do not round intermediate calculations. b. If the opportunity cost of capital is 12%, what is project NPV? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. c. What is project IRR? 3- Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $8 million. The system will last 4 years. Do-It-Right sells a sturdier but more expensive system for $18 million; it will last for 9 years. Both systems entail $3 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm?s tax rate is 30%, and the discount rate is 16%. a. Calculate the equivalent annual cost of each alternative ? Quick & Dirty ? Do-It-Right 4- The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $30. The unit cost of the giftware is $10. Year Unit Sales 1 24,000 2 32,000 3 16,000 4 7,000 Thereafter 0 ________________________________________ It is expected that net working capital will amount to 30% of sales in the following year. For example, the store will need an initial (year-0) investment in working capital of .30 ? 24,000 ? $30 = $216,000. Plant and equipment necessary to establish the Giftware business will require an additional investment of $202,000. This investment will be depreciated using MACRS and a 3-year life. After 4 years, the equipment will have an economic and book value of zero. The firm?s tax rate is 20%. What is the net present value of the project? The discount rate is 12% 5- Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $7,750 and sell its old washer for $3,750. The new washer will last for 5 years and save $2,050 a year in expenses. The opportunity cost of capital is 14%, and the firm?s tax rate is 30%. What is the equivalent annual cost of the washer, if the firm uses straight-line depreciation?
