Answer:
a. The depreciation expense isn't separately listed, but its influences are shown in the projected tax payments.
Explanation:
The cash budget reflects all cash transactions, both receipts and payments
It includes interest and dividend disbursements, indicating cash outflows when payments are made in cash
Additionally, it impacts the Days Sales Outstanding (DSO) and encompasses cash inflows related to long-term sources such as bond issuance
However, since depreciation is a non-cash expense, it's not explicitly accounted for, but its impact is included in tax payment projections
Since the WACC exceeds 7.5%, option D is the appropriate selection. Explanation: The weighted average cost of capital (WACC) reflects a company’s capital structure costs. To compute WACC, we evaluate the weight of respective capital structure components alongside the cost of each. The components can include debt, preferred stock, and common stock. The WACC formula is as follows: WACC = wD * rD * (1-tax rate) + wP * rP + wE * rE. Here, w denotes the weight, and r indicates the cost for each component—debt (D), preferred stock (P), and common stock (E). Initially, we derive costs of debt and equity. We apply the market value of debt in the WACC calculation. The cost of debt takes its yield to maturity as the current rate, thus rD is set at 6%. We can ascertain the cost of equity utilizing the constant growth model for dividends. Thus, we can develop the equation P0 = D0 * (1+g) / (r - g), yielding values of 80 = 5 * (1+0.05) / (r - 0.05) simplifying to 80(r - 0.05) = 5.25. Solving grants us r = 0.115625 or 11.5625%. Now, calculating WACC yields WACC = 0.5 * 0.06 * (1-0.3) + 0.5 * 0.115625 = 0.0788125 or 7.88125%. Thus, since WACC is greater than 7.5%, option D remains correct.
Answer:
C) As an alternative financing source in the debt service fund and as an alternative financing use in the capital projects fund.
Explanation:
The content lacks the options:
- A) As revenue in the debt service fund and as expenditure in the capital projects fund.
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B) As an alternative financing source in the capital projects fund and as an alternative financing use in the debt service fund.
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C) As an alternative financing source in the debt service fund and as an alternative financing use in the capital projects fund.
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D) As a special item recorded in both the debt service and capital project funds.
Accounts for other financing sources are utilized by governments to register revenues and expenses not tied to operational activities. The debt service fund consists of the funds that the government has allocated to cover its outstanding obligations. The capital projects fund is where the government tracks expenditures relating to designated projects.
