Reference no: EM132893226

Question -

1. Product P has a sales of 80,000 units per annum and other details as follows:

Material = 4,80,000

Labor = 1,60,000

Variable Overheads = 3,20,000

Fixed Overhead = 5,00,000

Fixed portion of the capital employed is 12 Lakhs. Its varying portion will be 50% of sales turnover.

Find the selling price per unit to earn 12% net on capital employed (Net of Tax @40%).

Q2. Margin of Safety = 3,75,000

Total Cost = 3,87,500

Margin of Safety (Qty.) = 15,000 units

Break Even Sales in Units = 5,000 units

Calculate:

Selling price per unit

Profit

Profit/ Volume Ratio

Q3. Vision Corp has outstanding $5,540,000 of 11% bonds (interest payable July31 and January) due in 10 years.

On July 1, it issued $8,870,000 of 10%, 15-year bonds (interest payable July 1 and January 1) at 99. A portion of the proceeds was used to call the 11% bonds (with unamortized discount of $55,400) at 101 on August 1.

Prepare the journal entries necessary to record issue of the new bonds and the refunding of the bonds.

Q4. Consider a scenario where the annual carrying cost of material 'X' is 3.6 per unit, in which it has a total carrying cost of 9,000 per annum. Assume that there is no Safety stock of material X, find the Economic order quantity for material 'X'.

Q5. 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.