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When estimating the sales of a firm as a function of its advertising expenditures using the model Sales Advertising , an analyst obtains the following ANOVA results:
a. What proportion of the sample variation in sales is explained by advertising expenditures?
b. What proportion of the sample variation in sales is unexplained by advertising expenditures?
Carow Corporation purchased on January 1, 2017, as a held-to-maturity investment, $60,000 of the 8%, 5-year bonds of Harrison, Inc. for$65,118, which provides a 6% return. The bonds pay interest semiannually. Prepare Carow’s journal entries for (a) the purchase of the investment, and (b) the receipt of semiannual interest and premium amortization. Assume effective-interest amortization is used.
Lukow Products is investigating the purchase of a piece of automated equipment that will save $400,000 each year in direct labor and inventory carrying costs. This equipment costs$2,500,000 and is expected to have a 15-year useful life with no salvage value. The company’s required rate of return is 20% on all equipment purchases. Management anticipates that this equipment will provide intangible benefits such as greater flexibility and higher-quality output that will result in additional future cash inflows.
What dollar value per year would these intangible benefits have to have to make the equipment an acceptable investment?