Future Value and Annuity Payments,Christy and Michael are trying to decide if they will haveenough money to retire early in 15 years, at age 60. Their current assets are $250,000 in retirement plansand they have $90,000 in other investments. ,Together, they contribute $30,000 per year to theirretirement plans and another $6,000 to other investments.,a. If their assets grow at 9 percent per year, how muchmoney will they have when they turn 60?,b. After they retire, they will invest their wealth moreconservatively and it will earn 6 percent per year. What will be the amount of their annual payments if theyexpect to live for 30 years in retirement?
Using the AFN formula approach, calculate the total assetsof Harmon Photo Company given the following information: ,Sales this year =$3,000; increase in sales projected for next year = 20%; net income this year =$250; Dividend payout ratio = 40%; projected excess funds available next year =$100; accounts payable = $600; notes payable = $100; and accrued wages andtaxes = $200. ,Except for the accounts noted, there were no other currentliabilities. Assume that the firm’s profit margin remains constant andthat the company is operating at full capacity.
An inexperienced accountant prepared this condensed incomestatement for Wright Company, a retail firm that has been in business for a number of years.,WRIGHT COMPANY,Income Statement,For the Year Ended December 31, 2014,Revenues,Net sales,$952,000,Other revenues16,000,968,000,Cost of goods sold 548,000,Gross profit,420,000,Operating expenses,Sellingexpenses,160,000,Administrativeexpenses 104,000,264,000,Net earnings,$156,000,As an experienced, knowledgeable accountant, you review thestatement and determine the following facts.,1.,Net salesconsist of sales $972,000, less freight-out on merchandise sold $20,000.,2.,Other revenuesconsist of sales discounts $12,000 and interest revenue $4,000.,3.,Sellingexpenses consist of salespersons’ salaries $88,000; depreciation on equipment$4,000; sales returns and allowances $46,000; advertising $12,000; andsales commissions $10,000. All compensation should be recorded as Salaries and Wages Expense.,4.,Administrative expenses consist of office salaries $54,000; dividends $14,000;utilities$13,000; interest expense $3,000; and rent expense $20,000, which includesprepayments totaling $2,000 for the first month of 2015. The utilities represent utilities paid. AtDecember 31, utility expense of $3,000 has been incurred but not paid.,Instructions,Prepare a correct detailed multiple-step income statement.
Bon Nebo Co. sold 25,000 annual subscriptions of Bjorn 20XXfor $85 during December 2014. These new subscribers will receive monthly issues, beginning inJanuary 2015. In addition, the business had taxable income of $840,000 during the first calendar quarter of2015. The federal tax rate is 40%. A quarterly tax ,payment will be madeon April 12, 2015. Prepare the Current Liabilities section of the balance sheetfor Bon Nebo Co. on March 31, 2015
Suppose your company has decided to use a divisional WACCapproach to analyze projects. The firm currently has 2 divisions, A and B, withbetas for each division of 0.5 and 1.5, respectively. If all current and futureprojects will be financed with half debt and half equity, and if the currentcost of equity (based on an average firm beta of 1.0 and a current risk-freerate of 5%) is 16% and the after-tax yield on the company’s bonds is 6%, whatare the WACCs for divisions A and B? Hint: First Solve for Market Risk Premium(MRP). MRP = (Km-Rf),a. Division A WACC?,b. Division B WACC?