1.A firm produces a unit where delivery of units to its customers are related with all overheads.

Compute expenditure and efficiency variance by using only with ABC method.

Not to use other methods.

Budget:

Overheads=4,000

Output=2,000 units

Deliveries-customer=20

Actual:

Overheads=3,900

Output=2,100 units

Deliveries-customer=19

2.John, a speculator based in Ontario, believes that the Canadian dollar will increase in value against the U.S dollar in three months.

The spot rate currently is $0.6750/C$. He sees the following quotes for European options on Canadian dollars:

a) Should John buy a put option or call option on Canadian dollars?

b) What's John's breakeven price on the option purchased?

c) Calculate John's gross profit and net profit (including premium) if after 3 months, the spot rate is $0.7600/C$

d) Calculate John's gross profit and net profit if after 3 months, the spot rate is $0.8250/C$

Put on C$= Strike Price= $0.7000 / Premium = $0.00003/S$

Call on C$=Strike Price=$0.7000 / Premium=$0.00049/S$

3.Apex Ltd acquired 10 percent of Santa Corporation on January 1, 2017, for $186,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2018, Apex purchased an additional 30 percent of Santa for $661,000 which resulted in significant influence over Santa. On that date, the fair value of Santa's common stock was $2,030,000 in total. Santa's January 1, 2018 book value equaled $1,880,000, although land was undervalued by $135,000. Any additional excess fair value over Santa's book value was attributable to a trademark with an 8-year remaining life. During 2018, Santa's reported income of $345,000 and declared and paid dividends of $100,000. Prepare the 2018 journal entries for Apex related to its investment in Santa

4.Walker Machine Tools has 6.7 million shares of common stock outstanding. The current market price of Walker common stock is $76 per share rights-on. The company's net income this year is $23.50 million. A rights offering has been announced in which 670,000 new shares will be sold at $70.50 per share. The subscription price plus nine rights is needed to buy one of the new shares.

a.What are the earnings per share and price-earnings ratio before the new shares are sold via the rights offering?(Do not round intermediate calculations and round your answers to 2 decimal places.)

Earnings per share

Price-earnings ratio

5.Welker Products sells small kitchen gadgets for $15 each. The gadgets have a variable cost of $4 per unit, and Welker Products' fixed operating costs are $220,000 per year. Welker Products' capital structure includes 55% debt and 45% equity. Annual interest expense is $25,000, and the corporate tax rate is 35%.

a.Calculate the break-even point in units.

b.If Welker Products sells 25,000 units, calculate the firm's EBIT and net income.

c.If sales increase ten percent from 25,000 units to 30,000 units, estimate the firm's expected EBIT and net income.

6.The treasurer of Brandon Blue Sox is seeking a $23,000 loan for 180 days from the Brandon Credit Union. The stated interest rate is 15 percent and there is a 20 percent compensating balance requirement. The treasurer always keeps a minimum of $1,800 in the firm's chequing account. These funds could count toward meeting any compensating balance requirements.

What is the annual rate of interest on this loan?(Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.)

Annual rate of interest%

7.DEF Company's current share price is $17 and it is expected to pay a $1.55 dividend per share next year. After that, the firm's dividends are expected to grow at a rate of 2.7% per year.

What is an estimate of DEF Company's cost of equity?

DEF Company also has preferred stock outstanding that pays a $2.45 per share fixed dividend. If this stock is currently priced at $25.6 per share, what is DEF Company's cost of preferred stock?

DEF Company has existing debt issued three years ago with a coupon rate of 6%. The firm just issued new debt at par with a coupon rate of 6.2%. What is DEF Company's pre-tax cost of debt? Enter your answer as a percentage.

8.Robert Gillman, an equity research analyst at Gillman Advisors, believes in efficient markets. He has been following the mining industry for the past 10 years and needs to determine the constant growth rate that he should use while valuing Pan Asia Mining Company.

Robert has the following information available:

Pan Asia Mining Company's stock (Ticker: PAMC) is trading at $16.25.

The company's stock is expected to pay a year-end dividend of $0.78 that is expected to grow at a certain rate.

The stock's expected rate of return is 7.80%.

Based on the information just given, what will be Robert's forecast of PAMC's growth rate?