# Acc290 Financial Accounting: BE5-1 Presented here are the components in Pedersen Company's

Acc290 Financial Accounting

BE5-1

Presented here are the components in Pedersen Company's income statement. Determine the missing amounts.

Sales Cost of Goods Sold Gross Profit Operating Expenses Net Income

71,200 30,000 10,800

108,000 70,000 29,500

71,900 109,600 46,200

BE5-1

Presented here are the components in Pedersen Company's income statement. Determine the missing amounts.

Sales Cost of Goods Sold Gross Profit Operating Expenses Net Income

71,200 30,000 10,800

108,000 70,000 29,500

71,900 109,600 46,200

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**Acct301 Devry Accounting: Week 3 Homework (2 Problems)**

Acct301 Devry Accounting

Week 3 Homework

Problem 1

Required: Express each income statement component as a percentage of sales, and comment on the trends in each line from 2012 to 2013. (25 points)

Problem 2

Required: Compute (1) accounts receivable turnover for 2013, (2) the inventory turnover for 2013, and (3) the net margin for 2012. (25 points)

2013 2012

Balance sheet items

Accounts receivable $380,000.00 $376,000.00

Allowance for doubtful accounts $(20,000.00) $(16,000.00)

Net accounts receivable $360,000.00 $360,000.00

Inventory $480,000.00 $440,000.00

Income statement items

Sales $3,400,000.00 $3,080,000.00

Cost of goods sold $1,600,000.00 $1,440,000.00

Operating expenses $780,000.00 $680,000.00

Week 3 Homework

Problem 1

Required: Express each income statement component as a percentage of sales, and comment on the trends in each line from 2012 to 2013. (25 points)

Problem 2

Required: Compute (1) accounts receivable turnover for 2013, (2) the inventory turnover for 2013, and (3) the net margin for 2012. (25 points)

2013 2012

Balance sheet items

Accounts receivable $380,000.00 $376,000.00

Allowance for doubtful accounts $(20,000.00) $(16,000.00)

Net accounts receivable $360,000.00 $360,000.00

Inventory $480,000.00 $440,000.00

Income statement items

Sales $3,400,000.00 $3,080,000.00

Cost of goods sold $1,600,000.00 $1,440,000.00

Operating expenses $780,000.00 $680,000.00

**BA350 Financial Management: Ch09 P18 Build a Model (Gao Computing)**

BA350 Financial Management

Chapter 9. Solution for Ch 09 Build a Model

The stock of Gao Computing sells for $50, and last year's dividend was $2.10. A flotation cost of 10% would be required to issues new common stock.

Gao's preferred stock pays a dividend of $3.30 per share, and new preferred could be sold at a price to net the company $30 per share.

Security analysts are projecting that the common dividend will grow at a rate of 7% a year.

The firm can also issue additional long-term debt at an interest rate (or before-tax cost) of 10%, and its marginal tax rate is 35%.

The market risk premium is 6%, the risk free rate is 6.5%, and Gao's beta is 0.83.

In its cost-of-capital calculations, Gao uses a target capital structure with 45% debt, 5% preferred stock, and 50% common equity

INPUTS USED IN THE MODEL

P0 $50.00

Net Ppf $30.00

Dpf $3.30

D0 $2.10

g 7%

B-T rd 10%

Skye's beta 0.83

Market risk premium, RPM 6.0%

Risk free rate, rRF 6.5%

Target capital structure from debt 45%

Target capital structure from preferred stock 5%

Target capital structure from common stock 50%

Tax rate 35%

Flotation cost for common 10%

a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock (including flotation costs), the cost of equity (ignoring flotation costs) with the DCF method and the CAPM method.

Cost of debt

Cost of preferred stock (including flotation costs)

Cost of common equity, DCF (ignoring flotation costs)

Cost of common equity, CAPM

b. Calculate the cost of new stock using the DCF model.

c. What is the cost of new common stock, based on the CAPM? (Hint: Find the difference between re and rs as determined by the DCF method, and add that differential to the CAPM value for rs.

d. Assuming that Gao will not issue new equity and will continue to use the same capital structure, what is the company's WACC?

e. Suppose Gao is evaluating three projects with the following characteristics:

(1) Each project has a cost of $1 million. They will all be financed using the target mix of long-term debt, preferred stock, and common equity. The cost of the common equity for each project should be based on the beta estimated for the project. No new equity will be issued.

(2) Equity invested in Project A would have a beta of 0.5 and an expected return of 9.0%.

(3) Equity invested in Project B would have a beta of 1.0 and an expected return of 10.0%.

(4) Equity invested in Project C would have a beta of 2.0 and an expected return of 11.0%.

f. Analyze the company's situation and explain why each project should be accepted or rejected.

Chapter 9. Solution for Ch 09 Build a Model

The stock of Gao Computing sells for $50, and last year's dividend was $2.10. A flotation cost of 10% would be required to issues new common stock.

Gao's preferred stock pays a dividend of $3.30 per share, and new preferred could be sold at a price to net the company $30 per share.

Security analysts are projecting that the common dividend will grow at a rate of 7% a year.

The firm can also issue additional long-term debt at an interest rate (or before-tax cost) of 10%, and its marginal tax rate is 35%.

The market risk premium is 6%, the risk free rate is 6.5%, and Gao's beta is 0.83.

In its cost-of-capital calculations, Gao uses a target capital structure with 45% debt, 5% preferred stock, and 50% common equity

INPUTS USED IN THE MODEL

P0 $50.00

Net Ppf $30.00

Dpf $3.30

D0 $2.10

g 7%

B-T rd 10%

Skye's beta 0.83

Market risk premium, RPM 6.0%

Risk free rate, rRF 6.5%

Target capital structure from debt 45%

Target capital structure from preferred stock 5%

Target capital structure from common stock 50%

Tax rate 35%

Flotation cost for common 10%

a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock (including flotation costs), the cost of equity (ignoring flotation costs) with the DCF method and the CAPM method.

Cost of debt

Cost of preferred stock (including flotation costs)

Cost of common equity, DCF (ignoring flotation costs)

Cost of common equity, CAPM

b. Calculate the cost of new stock using the DCF model.

c. What is the cost of new common stock, based on the CAPM? (Hint: Find the difference between re and rs as determined by the DCF method, and add that differential to the CAPM value for rs.

d. Assuming that Gao will not issue new equity and will continue to use the same capital structure, what is the company's WACC?

e. Suppose Gao is evaluating three projects with the following characteristics:

(1) Each project has a cost of $1 million. They will all be financed using the target mix of long-term debt, preferred stock, and common equity. The cost of the common equity for each project should be based on the beta estimated for the project. No new equity will be issued.

(2) Equity invested in Project A would have a beta of 0.5 and an expected return of 9.0%.

(3) Equity invested in Project B would have a beta of 1.0 and an expected return of 10.0%.

(4) Equity invested in Project C would have a beta of 2.0 and an expected return of 11.0%.

f. Analyze the company's situation and explain why each project should be accepted or rejected.

**Acct344 Devry Cost Accounting: (TCO 8) Musical Instruments Company manufactures two products**

Acct344 Devry Cost Accounting

5. (TCO 8) Musical Instruments Company manufactures two products (trumpets and trombones). Overhead costs ($175,000) have been divided into three cost pools that use the following activity drivers.

Product Number of setups Machine hours Packing orders

Trumpets 50 1,500 150

Trombones 50 4,500 250

Cost per pool 60,000 90,000 25,000

Required (show all calculations)

a. What is the allocation rate for trumpets per setup using activity-based costing?

b. What is the allocation rate for trumpets per machine hours using activity-based costing?

c. What is the allocation rate for trumpets per packing order using activity-based costing?

(Points : 30)

5. (TCO 8) Musical Instruments Company manufactures two products (trumpets and trombones). Overhead costs ($175,000) have been divided into three cost pools that use the following activity drivers.

Product Number of setups Machine hours Packing orders

Trumpets 50 1,500 150

Trombones 50 4,500 250

Cost per pool 60,000 90,000 25,000

Required (show all calculations)

a. What is the allocation rate for trumpets per setup using activity-based costing?

b. What is the allocation rate for trumpets per machine hours using activity-based costing?

c. What is the allocation rate for trumpets per packing order using activity-based costing?

(Points : 30)