Market vs Book Value: The founder of Alchemy Products, Inc., discovered a way to turn lead into gold and patented this new technology. He then formed a corporation and invested $200,000 in setting up a production plant. He believes that he could sell his patent for $50 million.
a. What are the book value and market value of the firm?
b. If there are 2 million shares of stock in the new corporation, what would be the price per share and the book value per share?
Click here for the solution: The founder of Alchemy Products, Inc., discovered a way to turn lead into gold and patented this new technology
Showing posts with label gold. Show all posts
Showing posts with label gold. Show all posts
Tuesday, April 12, 2016
Monday, August 17, 2015
Imperial Jewelers is considering a special order for 20 handcrafted gold bracelets to be given as gifts to members of a wedding party
Exercise 13-4 (Evaluating a Special Order) Imperial Jewelers is considering a special order for 20 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $189.95 and its unit product cost is $149.00 as shown below:
Direct materials . . . . . . . . . . . . . . . . . . . . $ 84.00
Direct labor. . . . . . . . . . . . . . . . . . . . . . . . 45.00
Manufacturing overhead . . . . . . . . . . . . . 20.00
Unit product cost . . . . . . . . . . . . . . . . . . . $149.00
Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $4.00 of the overhead is variable with respect to the number of bracelets produced. The customer who is interested in the special bracelet order would like special filigree applied to the bracelets. This filigree would require additional materials costing $2.00 per bracelet and would also require acquisition of a special tool costing $250 that would have no other use once the special order is completed. This order would have no effect on the company’s regular sales and the order could be fulfilled using the company’s existing capacity without affecting any other order.
Required:
What effect would accepting this order have on the company’s net operating income if a special price of $169.95 per bracelet is offered for this order? Should the special order be accepted at this price?
Click here for the solution: Imperial Jewelers is considering a special order for 20 handcrafted gold bracelets to be given as gifts to members of a wedding party
Direct materials . . . . . . . . . . . . . . . . . . . . $ 84.00
Direct labor. . . . . . . . . . . . . . . . . . . . . . . . 45.00
Manufacturing overhead . . . . . . . . . . . . . 20.00
Unit product cost . . . . . . . . . . . . . . . . . . . $149.00
Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $4.00 of the overhead is variable with respect to the number of bracelets produced. The customer who is interested in the special bracelet order would like special filigree applied to the bracelets. This filigree would require additional materials costing $2.00 per bracelet and would also require acquisition of a special tool costing $250 that would have no other use once the special order is completed. This order would have no effect on the company’s regular sales and the order could be fulfilled using the company’s existing capacity without affecting any other order.
Required:
What effect would accepting this order have on the company’s net operating income if a special price of $169.95 per bracelet is offered for this order? Should the special order be accepted at this price?
Click here for the solution: Imperial Jewelers is considering a special order for 20 handcrafted gold bracelets to be given as gifts to members of a wedding party
Tuesday, July 7, 2015
The futures price of gold is $1,050
The futures price of gold is $1,050. Futures contracts are for 100 ounces of gold, and the margin requirement is $5,000 a contract. The maintenance margin requirement is $1,500. You expect the price of gold to rise and enter into a contract to buy gold.
a. How much must you initially remit?
b. If the futures price of gold rises to $1,055, what is the profit and percentage return on your investment?
c. If the futures price of gold declines to $1,048 what is the loss and percentage return on the position?
d. If the futures price falls to $1,038, what must you do?
e. If the futures price continues to decline to $1,010, how much do you have in your account?
f. How do you close your position?
Click here for the solution: The futures price of gold is $1,050
a. How much must you initially remit?
b. If the futures price of gold rises to $1,055, what is the profit and percentage return on your investment?
c. If the futures price of gold declines to $1,048 what is the loss and percentage return on the position?
d. If the futures price falls to $1,038, what must you do?
e. If the futures price continues to decline to $1,010, how much do you have in your account?
f. How do you close your position?
Click here for the solution: The futures price of gold is $1,050
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