Choose the correct statement about the manufacturing overhead budget?Investment in debt securities not held-to-maturity of other company.Investment in the common shares less than 20% of other company.All the above.Investment in debt securities held-to-maturity of other company.

Option a: This option is incorrect because investment in debt securities not held to maturity of…

Answered: Choose the correct statement about the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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21. The weighted average cost of capital represents the Group of answer choices overall cost of capital from all organization financing sources equivalent units of capital used by the organization cost of bonds, preferred stock, and common stock divided by the three sources overall cost of dividends plus interest paid by the organization
CFC is a company that deals with general supplies. The CFO has invited you to a meeting to discuss proposed investment projects for the company. You have been requested to compute the overall cost of capital of the firm as this will be used to evaluate the projects.The following information has been provided to aid in the computation. (i)The company has a cost of equity of 12%, an after-tax cost of debt of 5%, and a cost of preference stock of 10%. (ii) CFC has 10,000 outstanding ordinary shares that are currently trading at Sh.46 per share. (iii) The firm has 5,000 outstanding preference shares issued at a price of Sh.58 a share. (iv) The firm issued 2,000 debentures whose par value is Shs. 105.The current market price is Shs.100. Required: Compute the firm's weighted average cost of capital (WACC).
The extent, or relative size of fixed costs in a company;s total cost structure is known as Financial Leverage True False
Each of the following factors affects the weighted average cost of capital (WACC) equation. Which of the following factors are outside a firm's control? Check all that apply. Tax rate The inflation rate The firm's dividend payout ratio The impact of cost of capital on managerial decisions Consider the following case: National Petroleum Refiners Corporation (NPR) has two divisions, L and H. Division L is the company's low-risk division and would have a weighted average cost of capital of 8% if it was operated as an independent company. Division H is the company's high-risk division and would have a weighted average cost of capital of 14% if it was operated as an independent company. Because the two divisions are the same size, the company has a composite weighted average cost of capital of 11%. Division H is considering a project with an expected return of 12%. Should National Petroleum Refiners Corporation (NPR) accept or reject the project? O Reject the project Accept the project On…
Return on Investment; Present Value Depreciation; Spreadsheet Application As indicatedin the chapter, there are goal congruence problems associated with the use of ROI as an indicator ofbusiness unit financial performance. One such problem relates to the bias against accepting new investments because of the adverse effect on a business unit’s ROI metric. Assume, for example, that themanager of a business unit can invest in a new, depreciable asset costing $75,000 and that this asset hasa 3-year life with no salvage value. Cash inflows associated with this investment are projected to beas follows: $30,000, $35,000, and $43,200. (Ignore taxes.) This scenario leads to an estimated internalrate of return (IRR) of 19.44%. Assume that the minimum required rate of return is 15%.Required1. Demonstrate, using the IRR function in Excel, that the IRR on this proposed investment is indeed19.44%.2. Calculate the year-by-year return on investment (ROI) on this proposed investment. For this…
The relationship between financial leverage and profitability Pelican Paper, Inc., and Timberland Forest, Inc., are rivals in the manufacture of craft papers. Some financial statement values for each company follow. Use them in a ratio analysis that compares the firms' financial leverage and profitability. a. Calculate the following debt and coverage ratios for the two companies. Discuss their financial risk and ability to cover the costs in relation to each other. (1) Debt ratio (2) Times interest earned ratio b. Calculate the following profitability ratios for the two companies. Discuss their profitability relative to each other. (1) Operating profit margin (2) Net profit margin (3) Return on total assets (4) Return on common equity c. In what way has the larger debt of Timberland Forest made it more profitable than Pelican Paper? What are the risks that Timberland's investors undertake when they choose to purchase its stock instead of Pelican's? a. The debt ratio for Pelican is %.…
T/F: The acid-test ratio measures a company's liquidity by excluding inventory from current assets.
Which of the following statements most likely describes a situation that would motivate amanager to issue low-quality fi nancial reports?A . Th e manager’s compensation is tied to stock price performance.B . Th e manager has increased the market share of products signifi cantly.C . Th e manager has brought the company’s profi tability to a level higher thancompetitors.
Which of the following would be expected to result in a reduction in actual net profit compared to budgeted net profit in an accounting period? Please select all that apply. A decrease in the actual selling price of products compared to the budgeted selling price of products without a corresponding decrease in the actual costs of producing those goods. An increase in actual expenditure on non-current assets compared to budgeted expenditure on non-current assets. A more productive workforce than budgeted. An increase in the actual cost of raw materials compared to the budgeted cost of raw materials without a corresponding increase in the actual selling price of goods produced.
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Which of the following statements are correct? Preferred equities are separate form common equities Opportunity cost should not be included in the capital budgeting decision Retained earnings are important in calculating the WACC Weights for equity in the WACC calculation are always on book values Cash from net working capital for each year is defined as NWCn- NWCn-1
Why is comparison with industry averages helpful when analyzing financial statements? Question 9 options: a. Companies want to be average b. Serves as a base line for comparison with similar companies of larger/smaller size c. Management bonuses are based on averages d. Helpful in evaluating sales campaigns

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Choose the correct statement about the manufacturing overhead budget? Investment in debt securities not held-to-maturity of other company. Investment in the common shares less than 20% of other company. All the above. Investment in debt securities held-to-maturity of other company.