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Question -
a. Company KPC has an average trade receivables of $6,500,000 and annual sales of $14.5 million. It is considering the use of factoring given that this would result in a reduction in credit control costs of $970,000 per annum. The factoring house charges a fee of 1.6% of sales. It will provide an advance to the company of 86% of its receivables and will charge interest on this advance of 13 % per annum.
Required - Assess whether it is financially beneficial for company KPC to enter into this factoring arrangement.
b. A Toys Company has 2.5 million shares in issue. The current market price is $34 per share. The company's debt is publicly traded on the London Stock Exchange and the most recent quote for its price was at 88% of face value. The debt has a total face value of $ 10 million and the company's credit risk premium is currently 2.9%. The risk-free rate is 3.8% and the equity market risk premium is 7.4%. The company's beta is estimated at 1.4 and its corporate tax rate is 31%.
Required - Calculate the company's WACC.
Explain the budgeting process and its importance to a business, identifying the components of different budgets, forecast estimates for inclusion in the budgets.
Prepare a retained earnings statement for the year and Prepare a stockholders' equity section of given case.
Prepare a master budget for the three-month period.
Construct the company's direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced.
Evaluate the Predetermined Overhead Rate
Determine the company's bid if activity-based costing is used and the bid is based upon full manufacturing cost plus 30 percent.
Complete the schedule to compute the pool rates for the different activities.
Prepare Company financial statements
This individual assignment is based on the TerraCycle Inc.
Discuss the ethical issues
Calculate the GDP in Income Approach and Expenditure Approach
A new plant accountant suggested that the company may be able to assign support costs to products more accurately by using an activity based costing system that relies on a separate rate for each manufacturing activity that causes support costs.
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