Which of the following statements is true?

A rich donor gives a hospital $1,040,000 one year from today. Each year after that, the hospital will receive a payment 6% large

alina1380 [7]

Answer:

$7,681,257.74

Explanation:

Since the hospital will receive a payment 6% larger than the previous payment each year after the first payment, the formula for the Present Value of a Growing Annuity is used to obtain the present value.

The present value of a growing annuity formula is meant for the estimation of the present day value different payments hat grow at a proportionate rate which will be received for a period of time. This formula is stated as follows:

PV = {P ÷ (r - g)} × {1 - [(1+g)÷(1+r)]^n] ...................................... (1)

Where

PV = Present value

P = First payment = $1,040,000

r = interest rate = 11% = 0.11

g = growth rate = 6% = 0.06

n = number of years = 10 years

Substuiting all the values into equation (1), we have:

PV = {$1,040,000 ÷ (0.11 - 0.06)} × {1 - [(1+0.6)÷(1+0.11)]^10]

= {$1,040,000 ÷ (0.05)} × {1 - [(1.06)÷(1.11)]^10]

= $20,800,000 × (1 - 0.630708763)

= $20,800,000 × 0.369291237

= $7,681,257.74

I wish you the best.

6 0

1 year ago

Which of the following statements represent a weakness or limitation of ratio analysis? Check all that apply. A firm may operate

Art [367]

Answer: A firm may operate in multiple industries.

Different firms may use different accounting practices.

Explanation:

Ratio Analysis as you probably know is a very useful tool in financial analysis. It works by comparing ratios based on items in the financial statements of a company to measure certain things such as the Company's Liquidity, Profitability and the like.

It does have certain drawbacks though such as,

A firm may operate in multiple industries

When a firm is operating in multiple industries. Comparing ratios is not a simple task. Different industries record profits and costs differently and just because a ratio is held in high esteem on one company does not mean it is good in another thereby making comparison based on ratios alone quite cumbersome.

Different firms may use different accounting practices

Now if different companies use different Accounting practices, you might find that ratios cannot be straightforwardly compared because different types of figures were used by the different companies. For instance, some companies might use a Straight Line Depreciation method as opposed to a Reducing Balance method which will have varying effects on income.

4 0

2 years ago

Suppose you were hired as a consultant for a company that wants to penetrate the Comp-XM market. This company wants to pursue a

Andreas93 [3]

Answer:

Option B. Chester Company

Explanation:

The company wants to pursue Niche Cost Leader Strategy. In a Niche cost leader strategy the product is highly differentiated and the cost the company charges to its customer is low as apposed to other competitors. The companies that has highly differentiated product and are new entrants usually use this strategy to win a good share of market size.

The strongest competitor would have lowest price, very stable market share price, high investment in plant and equipment, higher production capacity, lowest return on investment, lowest earnings per dollar sales. etc.

Now we will asses different reports and conclude which competitor will be the strongest competitor for the Niche Cost Leader Strategy company. The analysis is given as under:

Lowest Price: If we look at the Production information, Price Column and take the average price of the products of each company then we can conclude that Chester's price of average product is $20, Baldwin has $24.17 and the rest of the competitors are charging high. This means Chester is charging lowest price.
Stable Market Share Price: The vulnerability of share price of Chester is the lowest which stands at $0.45. This means that the stock exchange values the company's share as a stable stock with least vulnerability. (See Stock Market Summary)
Lower Return on Asset and Return on Sales: If we analyze the Selected Financial Statistics then we will acknowledge that Chester also has 2nd lowest Return on Assets and Return on sales which shows that the company is charging lower prices to its customers. Baldwin is not appropriate to consider here because the company is incurring losses hence its Return on Assets and Return on Sales can not be considered as good indication.
Higher Investment in Plant and equipment: The company has 2nd highest investment in plant and equipment with highest Net Book Value of $148k and Baldwin stands at $178k. Now again the higher investment of Baldwin is financed by debt which costs the company more than Chester. This means Chester would be strongest competitor because the company will have to only bear the depreciation cost which is non cash flow in nature and not the interest cost which Baldwin is bearing. (See Income statement for Interest Cost and Balance sheet for Carrying value of the asset).
Production Capacity: Chester has the highest production capacity which means that the company despite its 2nd largest investment in plant and equipment. This means that the plant and machinery of Chester is more innovative which is the reason that the production capacity is higher than other competitors.

From the above analysis it seems that Chester is pursuing Niche Cost Leader Market and is the strongest competitor that the company will face. Hence B is the correct option here.

6 0

2 years ago

If an automobile gets 24.5 miles to the gallon and the cost of gasoline is $2.75 a gallon, how much will it cost to drive 975 km

Ludmilka [50]

In order to know how much will it cost to drive 975 km, we need first to know how many gallons it would take to drive 975 km. First, we need to convert kilometers to miles. 975 km would be equal to 605.84 miles (1 km = 0.62 miles). Since one gallon can be consumed up to 24.5 miles, we need to divide 605.84 miles by 24.5 miles to know how many gallons will be consumed travelling such distance. Dividing the two numbers, we can get 24.73 gallons. We know that one-gallon costs $2.75. Therefore, it would cost $68.01 ($2.75 x 24.73 gallons) to drive 975 kilometers.

5 0

2 years ago

Kochi Services was formed on May 1, 2020. The following transactions took place during the first month (amounts in thousands). T

IceJOKER [234]

Answer:

See explanation Section Below:

Explanation:

Requirement A

Kochi Services

Journal entry

1. May 1 Cash Debit INR40,000

Capital Credit INR40,000

(Invested cash as sole owner but not for common stock)

2. No entry required

(Because the owner has not paid the wages for the employees)

3. Prepaid Rent Debit INR24,000

Cash Credit INR24,000

(Signed a rental agreement of 2 years for a warehouse by paying cash in advance)

4. Furniture and Equipment Debit INR30,000

Cash Credit INR10,000

Accounts payable Credit INR20,000

(Purchase furniture and equipment on account and cash)

5. Prepaid Insurance Debit INR1,800

Cash Credit INR1,800

(Paid insurance in advance for furniture and equipment)

6. Office supplies Debit INR420

Cash Credit INR420

(Paid cash for office supplies)

7. Office supplies Debit INR1,500

Accounts payable Credit INR1,500

(Purchase office supplies on account)

8. Cash Debit INR8,000

Accounts receivable Debit INR12,000

Revenues Credit INR20,000

(Receive cash for providing services and performed services on account)

9. Accounts payable Debit INR400

Cash Credit INR400

(Paid cash for office supplies due on transaction 7)

10. Cash Debit INR3,000

Accounts receivable Credit INR3,000

(Receive cash from customers due on transaction 8)

11. Utilities expense Debit INR380

Utilities payable Credit INR380

(Utilities bill to be paid on the next month)

12. Salaries expense Debit INR6,100

Cash Credit INR6,100

(Paid cash on salaries expenses)

Requirement B

See the image below

Requirement C

Kochi Services

Trial Balance

May 31, 2020

Account Title Debit (INR) Credit (INR)

Cash 8,280

Accounts Receivable 9000

Capital 40,000

Prepaid Rent 24,000

Furniture & Equipment 30,000

Prepaid Insurance 1,800

Salaries Expense 6,100

Accounts Payable 21,100

Utilities Expense 380

Revenues 20,000

Office Supplies 1920

Utilities Payable 380

Total INR 81,480 INR 81,480

8 0

2 years ago