Diet For You paid an annual dividend of $1.18 a share last month. The company is planning on paying $1.50, $1.75, and $1.80 a share over the next 3 years, respectively. After that, the dividend will be constant at $1.50 per share per year. What is the market price of this stock if the required rate of return is 10.5 percent?
Last year, you purchased a stock at a price of $51.50 a share. Over the course of the year, you received $1.80 per share in dividends and the annual inflation rate averaged 2.6 percent. Today, you sold your shares for $53.60 a share. What is your approximate annual real rate of return on this investment?
You are
thinking of adding one of two investments to your already well-diversified
portfolio.
Security A Security B
Expected return = 12% Expected
return = 12%
Standard deviation of returns = 11.0% Standard
deviation of returns = 20.1%
Beta = 2.0 Beta
= 0.9
If you are a very risk-averse investor, which security is the better choice?
(1)
a. Security A.
b. Security B.
c. Either security would be acceptable.
d. Cannot be determined with the information given.
| Problem 1 | |||||||||||
| Period | Project A | ||||||||||
| CF0 | -100 | Please turn in one sheet tab only in your homework this week, with | |||||||||
| CF1 | 50 | these 4 problems answered in full. Add cosmetics as possible, | |||||||||
| CF2 | 40 | and make sure to check your formulas and functions. | |||||||||
| CF3 | 40 | ||||||||||
| CF4 | 15 | ||||||||||
| RRR (Discount) | 15% | ||||||||||
| NPV | |||||||||||
| Problem 2 | |||||||||||
| Period | Project A | Project B | |||||||||
| CF0 | -100 | -100 | |||||||||
| CF1 | 50 | 70 | |||||||||
| CF2 | 70 | 75 | |||||||||
| CF3 | 40 | 10 | |||||||||
| RRR | 10% | 10% | |||||||||
| NPV | |||||||||||
| Which Project would you choose, assuming they were mutually exclusive? | |||||||||||
| I would choose project | |||||||||||
| Would it make a difference if the required rate were 14%, instead of 10%? | |||||||||||
| Project A | Project B | ||||||||||
| NPV | |||||||||||
| @14%, I would choose | |||||||||||
| Problem 3 | |||||||||||
| CF0 | -8900 | ||||||||||
| CF1 | 2150 | ||||||||||
| CF2 | 2150 | ||||||||||
| CF3 | 2150 | ||||||||||
| CF4 | 2150 | ||||||||||
| CF5 | 2150 | ||||||||||
| CF6 | 2150 | ||||||||||
| CF7 | 2150 | ||||||||||
| CF8 | 2150 | ||||||||||
| CF9 | 2150 | ||||||||||
| What RRR, or discount rate, would cause NPV to be 0? | |||||||||||
| Please show how you came to that conclusion using the NPV function | |||||||||||
| Problem 4 | |||||||||||
| Period | Project A | Project B | |||||||||
| CF0 | -50000 | -100000 | |||||||||
| CF1 | 26000 | 14000 | |||||||||
| CF2 | 20000 | 18000 | |||||||||
| CF3 | 16000 | 22000 | |||||||||
| CF4 | 12000 | 26000 | |||||||||
| CF5 | 24000 | ||||||||||
| CF6 | 19000 | ||||||||||
| CF7 | 26000 | ||||||||||
| CF8 | 40000 | ||||||||||
| RRR | 11.00% | 11.00% | |||||||||
| NPV | |||||||||||
| Assume these projects are mutually exclusive. | |||||||||||
| Which project would you select based on NPV? | |||||||||||
| Is this a fair comparison? Yes or No, and why or why not? | |||||||||||
These birdhouses are available in three models: mini, deluxe and castle. The deluxe model has been manufactured for the years. The additional models were added to appeal to a broader customer base. Sales of the castle have skyrocketed while the company’s profits have steadily declined. Management has become concerned about the accuracy of its costing system.
Manufacturing overhead is assigned to products on the basis of direct labor hours. For the current year, the company has estimated that it will incur $993,750 in manufacturing overhead cost and produce 2,500 units of the mini, 15,000 of the deluxe and 7,500 units of the castle. Direct material and direct labor cost per units are as follows:
|
|
Model |
||
|
Mini |
Deluxe |
Castle |
|
|
Direct Materials |
$ 12.50 |
$ 15 |
$ 20 |
|
Direct Labor |
$ 10 |
$ 20 |
$ 45 |
The mini takes .4 direct labor hours per unit, the deluxe takes .8 direct labor hours per unit, and the castle uses 1.8 labor hours per unit. (Direct labor cost per hour is $25)
Required:
1. Using a traditional product costing system with one plantwide overhead rate based on direct labor-hours as the basis for assigning manufacturing overhead cost to the products, compute the pre-determined overhead rate. Determine the unit cost of each of the models using the one overhead rate.
2. Management is considering switching to an activity-based costing (ABC) system to apply manufacturing overhead costs to each model. A review of the manufacturing process has resulted in the following cost pools:
|
Machining |
Number of machine hours |
$ 600,000 |
|
Assembling |
Number of parts |
$ 250,000 |
|
Packaging |
Number of finished units |
$ 143,750 |
|
Total Overhead Cost |
$ 993,750 |
|
|
Activity Measure |
Model |
|||
|
Mini |
Deluxe |
Castle |
Total |
|
|
Machining |
100,000 |
1,000,000 |
1,400,000 |
2,500,000 |
|
Assembling |
1,150 |
50,000 |
75,000 |
126,150 |
|
Packaging |
2,500 |
30,000 |
15,000 |
47,500 |
3. Compute the activity rates for each of the three activity cost pools. Using these rates, determine the amount of manufacturing overhead to be applied to each model. Then calculate the cost per unit for each model (material, labor, and manufacturing overhead).
4. Use your answers from requirements 1-3 to identify factors that may account for the company’s declining profits.
Wilmington Chemical Company manufactures specialty chemical by a series of three processes, all materials being introduced in the Distilling Department, the material pass through the reaction and Filling departments, emerging as finished chemicals.
|
The balance in the accounts work in process- Filling was as follows on decemver1 |
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|
work in process-filling dept. |
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|
(2,500 units 60% complete) |
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|
Direct material (2,500x13.10) 32,750 |
41225 |
||||
|
Conversion (2,500x605x5.65) 8,475 |
|||||
|
The following cost were charged to work in process- Filling during December |
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|
Direct Materials transferred from reaction |
|||||
|
department 42,100 units at 13.000 a unit 547,300 |
547300 |
||||
|
direct Labor 143,200 |
|||||
|
Factory overhead 79,650 |
222850 |
||||
|
During December 40,900 units of specialty chem. Were completed. Work in process filling dept. on dec. 31 3,700 units completed' |
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|
1 Prepare a cost of production report for the filling department for December |
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|
2 journalize the entries for cost transferred from reactions to filling and cost transferred from filling to finished goods |
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|
3 determine the increase or decrease in the cost per equivalent units from nov. to dec. for direct material and conversion cost |
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|
4 disscuss the uses of the cost of production report and the results of part3 |
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