[Q3] BEC Study Group 2014 - Page 119

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  • May 14, 2014 at 3:33 pm #185552
    jeff
    Keymaster

    @h0wdyus

    Incorrect

    The answer is B. Comparable sales.

    “The use of comparable sales is not an income approach to valuation of a business, it is a market approach. Under the comparable sales approach, the value of a business is determined by comparing it to other entities with comparable characteristics for which the value is more readily determinable.”

    This was a tricky one

    Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

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  • August 23, 2014 at 9:09 pm #595398
    Anonymous
    Inactive

    B. Logic being you want to maximize cost of goods so as to reduce profit margins resulting in lower taxes?

    August 23, 2014 at 9:10 pm #595399
    h0wdyus
    Member

    @Random

    C

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    FROM NJ

    August 23, 2014 at 9:12 pm #595400
    Anonymous
    Inactive

    Howdy, that was my second choice. I guess you recognize the income in the country with the lowest tax rate.

    August 23, 2014 at 9:14 pm #595401
    h0wdyus
    Member

    Greco does not want to sell at high price.. since tax is 20% so he will minimize the transfer price.

    Engco sells for high price to Global. Since tax is very low in england at 8%

    Global get high price goods so profit will be low which is good since Tax in USA is high

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    FROM NJ

    August 23, 2014 at 9:17 pm #595402
    RandomAlt
    Member

    The correct answer is C

    It all comes down to the income taxes. You want to minimize the transfer price going to the entity with the lowest tax rate. They will have the highest profit, so you want to pay lower taxes on that profit. And vice versa for the entity with the highest tax rate.

    @h0wdyus … Yes, I do know about that. That is another situation where a chart really shows the relationship. Price is indeterminate because you don't know if demand or supply will change by a greater magnitude.

    I wish we could share pictures on this message board

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    August 23, 2014 at 9:29 pm #595405
    RandomAlt
    Member

    LOL…

    Related to the CFROI metric, “the required annual cash investment needed to replace fixed assets” is the definition of what?

    A. Free cash flow.

    B. Economic depreciation.

    C. Economic value added (EVA).

    D. Cash flow return on investment (CFROI).

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    August 23, 2014 at 9:33 pm #595406
    h0wdyus
    Member

    B. Depreciation.

    You should add your pic to the profile. I am not adding it since, no one at my work knows that I taking CPA exams.

    I work in IT as a unix system admin as of now. Yukkkkk

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    FROM NJ

    August 23, 2014 at 9:37 pm #595407
    RandomAlt
    Member

    I more meant pictures like charts & graphs lol.

    Edit: You are correct, B

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    August 23, 2014 at 9:37 pm #595408
    h0wdyus
    Member

    well put your pic up. now that you started it. 🙂 🙂

    FAR - 81 29th Aug 2013
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    FROM NJ

    August 23, 2014 at 9:40 pm #595409
    RandomAlt
    Member

    I enjoy questions like this:

    Based on potential sales of 500 units per year, a new product has estimated traceable costs of $990,000. What is the target price to obtain a 15% profit margin on sales?

    A. $2,329

    B. $2,277

    C. $1,980

    D. $1,935

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    August 23, 2014 at 9:46 pm #595411
    h0wdyus
    Member

    A

    So you have started enjoying BEC. hahahahaha

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    FROM NJ

    August 23, 2014 at 9:47 pm #595412
    Anonymous
    Inactive

    A

    When do you guys test?

    August 23, 2014 at 9:47 pm #595413
    h0wdyus
    Member

    500 x Q – 990,000 = .15 ( 500 x Q)

    Solve for Q

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    FROM NJ

    August 23, 2014 at 9:48 pm #595414
    h0wdyus
    Member

    Q should be P 🙂

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    FROM NJ

    August 23, 2014 at 9:54 pm #595415
    RandomAlt
    Member

    A is correct …

    Actually, I usually enjoy computational problems (except when they keep changing variable names on me), I enjoyed the economic section a lot.

    I test the last day possible of this window. Sunday the 31st.

    Ehh…Jeff needs to setup a system for avatars. I'm not setting up a new account to upload an avatar. That is way too much work 😉

    FAR - [10/07/2013 --> 66] [07/07/2014 --> 86]
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