Homework Answers
Answer
TRUE
Explanation: The use of market weights in the calculation of WACC will induce a bias as the market value of the capital is dependent upon the ongoing market variation. This will keep on changing the market weights of the individual capital which will be reflected in the WACC calculation. Therefore, there would always remain a bias in such a situation.
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QUESTION 3 Per the analysis in the text, using market values in calculating the weighted cost...
The difference in the denominator units (for purposes of calculating cost per unit) between the weighted...
The difference in the denominator units (for purposes of calculating cost per unit) between the weighted average and the FIFO methods is that the units in the ending work in process inventory are not included in the FIFO calculation. a true false In computing unit cost figures for materials and conversion, costs in the beginning work in process inventory are not included in the numerator when the FIFO method is used. true b. false The following information applies to questions...
The weighted average cost of capital for a firm is dependent upon the firm's level of...
The weighted average cost of capital for a firm is dependent upon the firm's level of risk. TRUE OR FALSE It is generally better to base estimates of the WACC on book value weights of debt and equity since market values, particularly those for equity, tend to fluctuate widely. TRUE OR FALSE Ignoring taxes, if a firm issues debt at par, then the YTM cannot be computed. TRUE OR FALSE
QUESTION 13 Under the weighted-average cost flow method, the average cost per unit equals the cost...
QUESTION 13 Under the weighted-average cost flow method, the average cost per unit equals the cost of goods available for sale divided by the number of units available for sale. True OFalse QUESTION 14 A company's gross margin reported on the income statement is not affected by the inventory cost flow method it uses. OTrue eFalse QUESTION 15 A company uses a cost flow method (such as LIFO or FIFO) to allocate product costs between cost of goods sold and...
(Calculating the weighted average cost of capital) You are working as a consultant to the Lulu...
(Calculating the weighted average cost of capital) You are working as a consultant to the Lulu Athletic Clothing Company, and you have been asked to compute the appropriate discount rate to use in the evaluation of the purchase of a new warehouse facility. You have determined the market value of the firm's current capital structure (which the firm considers to be its target mix of financing sources) as follows:B To finance the purchase, Lulu will sell 20-year bonds with a...
(Calculating the weighted average cost of capital) You are working as a consultant to the Lulu At...
(Calculating the weighted average cost of capital) You are working as a consultant to the Lulu Athletic Clothing Company, and you have been asked to compute the appropriate discount rate to use in the evaluation of the purchase of a new warehouse facility. You have determined the market value of the firm's current capital structure (which the firm considers to be its target mix of financing sources) as follows: To finance the purchase, Lulu will sell 20-year bonds with a...
The proportions of debt and equity used to determine the weighted average cost of capital for...
The proportions of debt and equity used to determine the weighted average cost of capital for a firm is based on the market value of debt and equity outstanding. True False Question 38 (0.2 points) Saved Distinguishing between fixed and variable costs will enable one to calculate the sensitivity of EBITDA to changes in revenue. True False
D Question 3 3 pts The breakeven point in sales is the fixed cost divided by...
D Question 3 3 pts The breakeven point in sales is the fixed cost divided by the contribution margin per unit. True O False D Question 4 3 pts The margin of safety equal actual sales-breakeven sales O True O False 3 pts D Question 5 D Question 5 3 pts machine hours can be used as an allocation base for calculating the pre determined rate True ○ False 3 pts D Question 6 rates are assigned to An unfavorable...
Question: Calculating chain-weighted real GDP Prices (in dollars) and production for an orchard are provide... Calculating...
Question: Calculating chain-weighted real GDP Prices (in dollars) and production for an orchard are provide... Calculating chain-weighted real GDP Prices (in dollars) and production for an orchard are provided in the following table: Year--------Good------Price------Quantity 2016-------apples -----5----------20,000 2016-------apple juice---10-------9,000 2016-------cider----------14--------5,000 ________________________________ 2017------apples--------8--------25,000 2017----apple juice----15-------12,000 2017-----cider-----------18-------4,500 ______________________________ 2018----apples----------12-------35,000 2018-----apple juice----18-------15,000 2018-----cider------------25-------10,000 In all years, half of all apple production is used to produce apple juice and cider. For this problem, round all market values to the nearest whole dollar. a) Calculate chain-weighted...
QUESTION 6 Calculate Weighted Average Cost of Capital using a corporate tax rate of 35% •...
QUESTION 6 Calculate Weighted Average Cost of Capital using a corporate tax rate of 35% • Debt Number of bonds outstanding - 10,000 price per bond 51,165 o par value per bond - $1,000 o coupon rate=6% (paid annually) • Years to maturity - 10 • Common Stock Number of shares outstanding - 1,000,000 o Price per share - $25 o Book value per share - $15 O Beta-1.4 O Risk free rate 4.5% • Market risk premium - 5%...
E3-7 Calculating Equivalent Units, Cost per Equivalent Unit, Reconciling the Cost of Work in Process (Weighted...
E3-7 Calculating Equivalent Units, Cost per Equivalent Unit, Reconciling the Cost of Work in Process (Weighted Average Method) [LO 3-2, 3-3] Silver Company manufactures kites and has the following information available for the month of April: Work in process, April 1 (100% complete for materials, 41% for conversion) Direct materials Conversion cost AA 32,000 units 39,000 63,000 Number of units started 79,000 units April costs Direct materials Conversion cost $ $ 119,000 167,000 Work in process, April 30 (100% complete...
The difference in the denominator units (for purposes of calculating cost per unit) between the weighted average and the FIFO methods is that the units in the ending work in process inventory are not included in the FIFO calculation. a true false In computing unit cost figures for materials and conversion, costs in the beginning work in process inventory are not included in the numerator when the FIFO method is used. true b. false The following information applies to questions...
QUESTION 13 Under the weighted-average cost flow method, the average cost per unit equals the cost of goods available for sale divided by the number of units available for sale. True OFalse QUESTION 14 A company's gross margin reported on the income statement is not affected by the inventory cost flow method it uses. OTrue eFalse QUESTION 15 A company uses a cost flow method (such as LIFO or FIFO) to allocate product costs between cost of goods sold and...
(Calculating the weighted average cost of capital) You are working as a consultant to the Lulu Athletic Clothing Company, and you have been asked to compute the appropriate discount rate to use in the evaluation of the purchase of a new warehouse facility. You have determined the market value of the firm's current capital structure (which the firm considers to be its target mix of financing sources) as follows:B To finance the purchase, Lulu will sell 20-year bonds with a...
(Calculating the weighted average cost of capital) You are working as a consultant to the Lulu Athletic Clothing Company, and you have been asked to compute the appropriate discount rate to use in the evaluation of the purchase of a new warehouse facility. You have determined the market value of the firm's current capital structure (which the firm considers to be its target mix of financing sources) as follows: To finance the purchase, Lulu will sell 20-year bonds with a...
The proportions of debt and equity used to determine the weighted average cost of capital for a firm is based on the market value of debt and equity outstanding. True False Question 38 (0.2 points) Saved Distinguishing between fixed and variable costs will enable one to calculate the sensitivity of EBITDA to changes in revenue. True False
D Question 3 3 pts The breakeven point in sales is the fixed cost divided by the contribution margin per unit. True O False D Question 4 3 pts The margin of safety equal actual sales-breakeven sales O True O False 3 pts D Question 5 D Question 5 3 pts machine hours can be used as an allocation base for calculating the pre determined rate True ○ False 3 pts D Question 6 rates are assigned to An unfavorable...
QUESTION 6 Calculate Weighted Average Cost of Capital using a corporate tax rate of 35% • Debt Number of bonds outstanding - 10,000 price per bond 51,165 o par value per bond - $1,000 o coupon rate=6% (paid annually) • Years to maturity - 10 • Common Stock Number of shares outstanding - 1,000,000 o Price per share - $25 o Book value per share - $15 O Beta-1.4 O Risk free rate 4.5% • Market risk premium - 5%...
E3-7 Calculating Equivalent Units, Cost per Equivalent Unit, Reconciling the Cost of Work in Process (Weighted Average Method) [LO 3-2, 3-3] Silver Company manufactures kites and has the following information available for the month of April: Work in process, April 1 (100% complete for materials, 41% for conversion) Direct materials Conversion cost AA 32,000 units 39,000 63,000 Number of units started 79,000 units April costs Direct materials Conversion cost $ $ 119,000 167,000 Work in process, April 30 (100% complete...
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