The overhead allocation rate using traditional costing methods is based on the labor hours and machine hours. The total budgeted overhead for the year is N$955 980. The labor hours are estimated at 5 500 hours and machine hours are estimated at 5 000 hours.
3.1 Computation of overhead allocation rate using traditional costing methods based on labor hours The overhead allocation rate is calculated by dividing the total budgeted overhead for the year by the estimated number of labor hours, which is 5,500. Therefore, the overhead allocation rate using traditional costing methods based on labor hours is:N$955,980 / 5,500 hours = N$173.45 per hour3.1 Computation of overhead allocation rate using traditional costing methods based on machine hours The overhead allocation rate is calculated by dividing the total budgeted overhead for the year by the estimated number of machine hours, which is 5,000. Therefore, the overhead allocation rate using traditional costing methods based on machine hours is:N$955,980 / 5,000 hours = N$191.20 per hour3.2 Computation of cost driver rates using Activity Based Costing principles: Cost driver rates for each activity using ABC principles are calculated as follows: Set-ups cost driver rate = N$169,500 / 500 set-ups = N$339 per set-up Quality control and testing cost driver rate = N$222,600 / 1,500 quality tests = N$148.40 per quality test Material ordering cost driver rate = N$192,780 / 1,620 orders = N$118.89 per order Packaging and dispatch cost driver rate = N$68,400 / 192 packages = N$356.25 per package Labour-related activities cost driver rate = N$126,500 / 5,500 labor hours = N$23 per labor hour Machine-related activities cost driver rate = N$176,200 / 5,000 machine hours = N$35.24 per machine hour
The traditional costing system is a cost allocation system that assigns indirect costs to products based on a single overhead allocation rate. It assumes that the overhead costs are directly proportional to a single activity, usually direct labor hours or machine hours. The activity-based costing system (ABC) is a more refined method of allocating indirect costs. The ABC system recognizes that products consume different activities in different proportions. Instead of using a single overhead allocation rate, the ABC system uses several cost pools and cost drivers to allocate indirect costs to products. The ABC system identifies the activities that consume overhead costs and then allocates those costs to the products that consume them.
The overhead allocation rate using traditional costing methods based on labor hours is N$173.45 per hour, while the overhead allocation rate using traditional costing methods based on machine hours is N$191.20 per hour. The cost driver rates for each activity using ABC principles are set-ups cost driver rate of N$339 per set-up, quality control and testing cost driver rate of N$148.40 per quality test, material ordering cost driver rate of N$118.89 per order, packaging and dispatch cost driver rate of N$356.25 per package, labor-related activities cost driver rate of N$23 per labor hour, and machine-related activities cost driver rate of N$35.24 per machine hour.
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Listed below are bundles, each comprised of three independent proposals for which the PW has been estimated. Select the best bundle if the capital budget limit is $45.000 and the MARR is the cost of capital, which is 9% per year. (40 points) PW at 9%, S Proposal Bundle 1 Initial Investment, For Bundle, S 18.000 - 1.400 2 - 26.000 8.500 3 34.000 7.100 4 - 41.000 10.500
To determine the best bundle within the given capital budget limit and MARR, we need to compare the present worth (PW) of each bundle and select the one with the highest PW.
Let's calculate the PW at 9% for each proposal within the bundles:
Bundle 1:
PW for Proposal 1 = -$18,000
PW for Proposal 2 = $26,000
PW for Proposal 3 = $34,000
Total PW for Bundle 1 = -$18,000 + $26,000 + $34,000 = $42,000
Bundle 2:
PW for Proposal 1 = -$1,400
PW for Proposal 2 = -$26,000
PW for Proposal 3 = $7,100
Total PW for Bundle 2 = -$1,400 - $26,000 + $7,100 = -$20,300
Bundle 3:
PW for Proposal 1 = $8,500
PW for Proposal 2 = $41,000
PW for Proposal 3 = $10,500
Total PW for Bundle 3 = $8,500 + $41,000 + $10,500 = $60,000
Based on the PW calculations, Bundle 3 has the highest PW of $60,000. However, the capital budget limit is $45,000, so Bundle 3 exceeds the budget.
Among the feasible options, Bundle 1 has the highest PW of $42,000, which is within the budget. Therefore, the best bundle within the given constraints would be Bundle 1.
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Monker Dining Room Furniture manufactures two models of dining table sets: Traditional and Contemporary. Manufacturing requirements are as follows: TRADITIONAL CONTEMPORARY Materials Oak: 100 square feet Oak: 60 square feet Glass top: 1 Labor 15 hours 20 hours Cost of: Glass tops $200 each Oak 15 per square foot Direct labor 25 per direct labor hour Variable manufacturing overhead 10 per direct labor hour This year, Monker sold 1,000 Traditional sets at $2,500 each and 900 Contemporary sets at $3,000 each. Fixed manufacturing overhead was $500,000, and period expenses (all fixed) were $700,000. Monker estimates that sales of both products will increase 10% each year in the future, and that total fixed costs and per-unit variable costs will remain the same as this year. Monker's inventory policy is to end each period with 10% of the following year's sales needs in finished goods inventory. Ending finished goods inventory this year is worth $450,000. Prepare all budgets necessary to result in a budgeted income statement for next year.
Budgeted Income Statement: Next year, Monker plans to sell 1,100 traditional sets and 990 modern sets (10% more than the current year's sales).
Sales of Traditional sets= 1,100 × $2,500= $2,750,000Sales of Contemporary sets= 990 × $3,000= $2,970,000Sales revenue= $2,750,000 + $2,970,000= $5,720,000Cost of Goods Sold: Direct Materials: Traditional: Oak: 100 square feet per set × 1,100 sets × $15 per square foot= $1,650,000Contemporary: Oak: 60 square feet per set × 990 sets × $15 per square foot= $891,000Glass tops: Contemporary: 990 × 1 glass top per set × $200 per glass top= $198,000Direct Labor: Traditional: 15 hours per set × 1,100 sets × $25 per direct labor hour= $412,500Contemporary: 20 hours per set × 990 sets × $25 per direct labor hour= $495,000Variable Manufacturing Overhead: Traditional: 15 hours per set × 1,100 sets × $10 per direct labor hour= $165,000Contemporary: 20 hours per set × 990 sets × $10 per direct labor hour= $198,000Total variable costs= $3,911,500Fixed Costs: Fixed manufacturing overheads: $500,000Period costs: $700,000Total fixed costs= $1,200,000Total costs= $5,111,500Budgeted net income= $608,500Therefore, the budgeted income statement for next year will be as follows: Budgeted Income Statement Sales revenue$5,720,000Cost of goods sold$3,911,500Gross profit$1,808,500Fixed costs$1,200,000Net income$608,500.
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Budgeted income before taxes $374,750 Budgeted income statement:
Sales budget:
Traditional:
Sales price per unit × Units sold = Total sales
$2,500 × 1,100 = $2,750,000
Contemporary:Sales price per unit × Units sold = Total sales
$3,000 × 990 = $2,970,000
Total sales $5,720,000
Production budget:
Traditional:
Units expected to be sold next year + Desired ending inventory – Beginning inventory = Total units to be produced1,100 + 220 – 110 = 1,210 units
Contemporary:
Units expected to be sold next year + Desired ending inventory – Beginning inventory = Total units to be produced990 + 190 – 95 = 1,085 units
Total units to be produced = 2,295 units
Direct materials purchases budget:
Traditional:
Materials required per unit × Units to be produced = Total materials required
Oak: 100 square feet × 1,210 = 121,000 square feet
Glass top: 1 × 1,210 = 1,210Total materials required
Contemporary:
Materials required per unit × Units to be produced = Total materials required
Oak: 60 square feet × 1,085 = 65,100 square feet
Glass top: 1 × 1,085 = 1,085
Total materials required
Cost of direct materials purchases budget:
Traditional:
Oak: 121,000 square feet × $15 per square foot = $1,815,000
Glass tops: 1,210 × $200 each = $242,000
Total direct materials cost = $2,057,000
Contemporary:Oak: 65,100 square feet × $15 per square foot = $976,500
Glass tops: 1,085 × $200 each = $217,000
Total direct materials cost = $1,193,500
Direct labor budget:
Traditional:
Direct labor required per unit × Units to be produced = Total direct labor required
15 hours × 1,210 = 18,150
Total direct labor cost = $453,750
Contemporary:
Direct labor required per unit × Units to be produced = Total direct labor required20 hours × 1,085 = 21,700Total direct labor cost = $542,500Variable manufacturing overhead budget:
Traditional:
Variable manufacturing overhead rate × Direct labor hours = Total variable manufacturing overhead
$10 per direct labor hour × 18,150 = $181,500
Contemporary:
Variable manufacturing overhead rate × Direct labor hours = Total variable manufacturing overhead
$10 per direct labor hour × 21,700 = $217,000
Total variable manufacturing overhead = $398,500Budgeted manufacturing overhead:
Fixed manufacturing overhead = $500,000
Total variable manufacturing overhead = $398,500
Total manufacturing overhead = $898,500
Selling and administrative expenses:
Fixed selling and administrative expenses = $700,000
Ending finished goods inventory:
Desired ending inventory × Budgeted unit sales price = Ending finished goods inventory
$490,000 (1,210 Traditional × $250 per set) + $175,000 (1,085 Contemporary × $150 per set) = $665,000
Budgeted income statement:
Sales:
Traditional $2,750,000
Contemporary $2,970,000
Total sales $5,720,000
Less cost of goods sold:
Direct materials
Traditional $2,057,000
Contemporary $1,193,500T
otal direct materials $3,250,500
Direct laborTraditional $453,750
Contemporary $542,500
Total direct labor $996,250
Variable manufacturing overhead $398,500
Total variable manufacturing costs $4,645,250
Gross margin $1,074,750
Less selling and administrative expenses:
Fixed selling and administrative expenses $700,000
Budgeted income before taxes $374,750
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Requirements 1. Journalize any required 2018 entries for the bond investment. Remote Down & Co. owns vast amounts of corporate bonds. Suppose Remote Down buys $1,200,000 of AzCo bonds at face value on
Remote Down & Co., a company that holds corporate bonds, purchased $1,200,000 worth of AzCo bonds at face value during 2018. This summary outlines the key details of the bond investment made by Remote Down & Co.
In 2018, Remote Down & Co. made a bond investment by purchasing AzCo bonds with a total value of $1,200,000. To properly record this transaction in the company's financial records, journal entries need to be made.
A journal entry is a systematic recording of financial transactions in the accounting system. In this case, the journal entry would involve debiting the bond investment account and crediting the cash account for the amount of $1,200,000. This entry reflects the acquisition of the AzCo bonds and the corresponding outflow of cash from Remote Down & Co.
By accurately journalizing the bond investment, Remote Down & Co. ensures that the transaction is properly recorded in its financial statements, providing a clear and transparent representation of its investments and their impact on the company's overall financial position.
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__________ is a current asset. group of answer choices the current portion of long-term debt. an account payable. none of these are correct. inventory. a note payable.
Inventory is a current asset. group of answer choices the current portion of long-term debt. an account payable.
Inventory refers to the goods or products that a company holds for sale, production, or raw materials. It is considered a current asset because it is expected to be converted into cash or used up within a short period, typically within one year.
Inventory is an essential component of many businesses, particularly those involved in manufacturing, wholesale, and retail sectors. It represents the value of the company's stock on hand, and it is important for businesses to manage and track their inventory effectively to ensure smooth operations and meet customer demand.
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Which statement is true? OA. Both the operating cycle and the cash cycle must be positive values. B. The longer the cash cycle, the more cash a firm typically has available to invest. C. Decreasing the inventory period will automatically decrease the payables period. D. If a firm decreases its inventory period, its accounts receivable period will also decrease. OE. A firm would prefer a negative cash cycle over a positive cash cycle. QUESTION 4 in the time that elapses between the and the
Statement D is true. If a firm decreases its inventory period, its accounts receivable period will also decrease.
The inventory period refers to the average time it takes for a firm to convert its inventory into sales. By decreasing this period, the firm is able to sell its inventory more quickly, resulting in a decrease in the time it takes for customers to pay for their purchases. As a result, the accounts receivable period, which represents the average time it takes for the firm to collect payments from its customers, will also decrease. This is because the firm is able to convert its inventory into cash at a faster rate, reducing the time between the sale and the receipt of payment. Therefore, statement D is correct.
It's important to note that the other statements are not true. Statement A is incorrect because both the operating cycle and the cash cycle can have negative values depending on the efficiency of the firm's operations. Statement B is also incorrect because a longer cash cycle indicates that a firm has more cash tied up in its operations, which may limit its ability to invest. Statement C is incorrect because the inventory period and the payables period are separate components of the cash cycle and are not directly linked. Lastly, statement E is incorrect because a negative cash cycle, where the firm receives cash from customers before paying its suppliers, is not necessarily preferable. It can indicate aggressive payment terms or difficulty in managing working capital effectively.
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CASE 9.2 ENDOWMENTS: TO SPEND NOW OR SAVE FOR A RAINY DAY Journey Center, a drop-in center for teens aged 13 to 18 years old had been operating in the predominately low-income community of Kingston for almost 10 years. The organization was established by members of a church in the neighboring upscale town of Middleton as a separate 501(c)(3) nonprofit with the mission of giving local kids a safe place after school to spend their free time and receive homework assistance, if needed. The majority of funding for the center came through the support of church parishioners in the form of cash donations and fund-raisers held at the church on behalf of Journey Center. The center's founding board was made up of Kingston community members, some of whom were also parishioners. Journey Center operated out of a rented storefront two blocks away from the local high school. When they first opened the doors, word spread about the center, and before long it was viewed as the "cool" place to hang out. On average, 20 students used the facility every week- day when school was in session. The center was closed on the weekends and during the summer. Brightly painted rooms were filled with a hodgepodge of donated bean bag chairs, board games, and a worn pool table. There were chairs and tables scattered about where students could complete their schoolwork. The program was run by a part-time executive director, Jorge Partida. Jorge enjoyed the lively chaos that the teens brought to the center and prided himself on knowing all of their names. Jorge carefully monitored every penny of the center's annual $300,000 budget. He employed several part-time staff who, along with volunteers, helped deliver tutoring programs and monitored the teens' activities. For their part, church members were also very proud of the center they had helped to build. One spring, parishioners and staff were working on the annual giving campaign for the church when Barb Sandke, a longtime parishioner and major donor to the church and the center said, "You know, I've been thinking..." Chapter 9
As Barb Sandke, a longtime parishioner and major donor to the church and the center said, "You know, I've been thinking...". Her thought was on how the church should handle its endowments: should it spend the money now, or save it for a rainy day?
As Barb Sandke, a longtime parishioner and major donor to the church and the center said, "You know, I've been thinking...". Her thought was on how the church should handle its endowments: should it spend the money now, or save it for a rainy day? The Journey Center was founded as a separate 501(c)(3) nonprofit by members of a church in the neighboring upscale town of Middleton with the mission of providing a safe space for local kids to hang out, do their homework, and engage in other activities.The center's majority of funding came from church parishioners in the form of cash donations and fundraisers held at the church on behalf of Journey Center. The center's founding board was made up of Kingston community members, some of whom were also parishioners. Journey Center operated out of a rented storefront two blocks away from the local high school, serving an average of 20 students every weekday when school was in session.Its part-time executive director, Jorge Partida, carefully monitored every penny of the center's annual $300,000 budget. Several part-time staff who, along with volunteers, helped deliver tutoring programs and monitored the teens' activities. For their part, church members were also very proud of the center they had helped to build.In conclusion, the church should consider the immediate needs of the center. A portion of the endowment could be used for the Journey Center to improve its facilities, expand the programs and attract more students. However, the church also needs to ensure the safety of the center in case of unforeseen events that could threaten its operations. Therefore, it's best to create a balance by keeping the money in a reserve account and using it only when necessary. Finally, the church should invite members of the Kingston community to offer their input on how to use the funds.
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The manager of ABC company is contemplating the purchase of a new machine that will cost $300,000 and has a useful life of five years. The machine will yield (year-end) cost reductions to ABC company of $50,000 in year 1, $60,000 in year 2, $75,000 in year 3, and $90,000 in years 4 and 5. What is the present value of the cost savings of the machine if the interest rate is 8 percent? Should the manager purchase the machine?
The present value of the cost savings from the machine, considering an interest rate of 8 percent, is $228,234. Based on the present value analysis, the manager should purchase the machine as the present value of the cost savings exceeds the initial cost of the machine.
To calculate the present value of the cost savings, we need to discount the future cash flows at the given interest rate of 8 percent. The cost savings in each year are as follows: $50,000 in year 1, $60,000 in year 2, $75,000 in year 3, and $90,000 in years 4 and 5.
Using the formula for present value, we can calculate the present value of each cost savings amount and then sum them up.
The present value of $50,000 in year 1, for example, is $46,296.30, calculated as $50,000 divided by (1 + 0.08)^1. Similarly, the present value of $60,000 in year 2 is $51,688.85, and so on.
By adding up the present values of all the cost savings, we find that the total present value is $228,234. Therefore, since the present value of the cost savings exceeds the initial cost of the machine ($228,234 > $300,000), the manager should purchase the machine.
The investment is expected to generate a positive net present value, indicating a profitable decision considering the discounted cash flows.
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There are two firms operating in a market where both firms produce a single homogenous good. The two firms sell the good in a market where the inverse demand function is given by:
P = 32 − 2, if < 16
P = 0, if ≥ 16
Where = 1 + 2 is the total output and is form i's output, i = 1,2. Firm i's cost function is: ( ) = 4 + 2 .
a.) Determine the Cournot equilibrium quantities sold by each firm and the market price of the product.
b.) Firm 1 is the Stackelberg leader and moves first to choose output, 1; firm 2 is the follower and moves after observing firm 1’s output choice to choose its output, 2. Using backward-induction, derive the Stackelberg equilibrium quantities sold by each firm and the market price of the product.
a) the Cournot equilibrium quantities sold by each firm and the market price of the product are:q1 = 6 and q2 = 6 and Market price, P = 20.
b) The Stackelberg equilibrium quantities sold by each firm and the market price of the product are:q1 = 3 and q2 = 13 and Market price, P = 26.
a.) Cournot equilibrium quantities sold by each firm and the market price of the product
The Cournot equilibrium is a state of the duopoly equilibrium where each company maximizes its profits given the quantity of the rival.
Firm 1 and 2 consider each other's production to be constant while making a decision about their own production. So, the equilibrium quantity for each company can be represented as:qi = (A - bj) / 2
Where:i = 1,2A = 32 - 2Q1 - Q2 = 32 - 2q1 - 2q2 b1 = 4 + 2q1b2 = 4 + 2q2
Thus, the Cournot equilibrium quantities sold by each firm and the market price of the product are:q1 = 6 and q2 = 6
Market price, P = 20
b.) Stackelberg equilibrium quantities sold by each firm and the market price of the product
The Stackelberg duopoly is a kind of oligopoly where one company is the leader and the other is the follower. This occurs when a company recognizes its size and acts in such a way as to keep its market advantage.
Let's take Firm 1 as the leader and Firm 2 as the follower. After analyzing Firm 1's production decision, the equilibrium output of Firm 2 can be found.
Since Firm 2 considers Firm 1's output as fixed in the decision-making process, its reaction curve would be q2 = 16 - q1 / 2.
To find out the production level of Firm 1, set the first-order derivative of Firm 1's profit equal to 0. So, we get:
π1 = P(q1 + q2) - c1q1 = (32 - 2q1 - 2q2)(q1 + q2) - (4 + 2q1)q1= 20q1 + 12q2 - 2q1q2 - 4
Then take the first-order derivative of this expression and set it to 0 to find the profit-maximizing output level:
20 - 2q2 = 0q2 = 10q1 = 3
The Stackelberg equilibrium quantities sold by each firm and the market price of the product are:q1 = 3 and q2 = 13
Market price, P = 26
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How do monopsonies and monopolies differ from one another and discuss whether a dominant firm could behave like a monopoly. Use relevant diagrams and cases to justify your answer. [25-marks]
Monopsonies and monopolies are market structures characterized by different types of market power.
1. Monopoly:
A monopoly exists when a single firm is the sole provider of a particular product or service in the market. This gives the firm significant market power and control over prices. The monopolist faces a downward-sloping demand curve, meaning it has the ability to set the price at a level higher than the marginal cost. This leads to a deadweight loss in the market and a reduced overall level of welfare.
In a monopoly, the firm is a price maker and can control the quantity supplied to the market. The monopolist aims to maximize its profits by producing at a quantity where marginal revenue equals marginal cost (MR = MC), which results in a higher price and lower quantity compared to perfect competition.
Example: A well-known example of a monopoly is Microsoft's operating system Windows. Microsoft dominates the market with its Windows operating system, giving it significant control and influence over prices and software compatibility.
2. Monopsony:
A monopsony exists when there is a single buyer or employer in a market with multiple sellers or workers. In this market structure, the monopsonist has the power to dictate the terms and conditions of trade. It faces an upward-sloping supply curve and can exploit its monopsony power by paying lower wages or purchasing goods at a lower price.
Monopsonies can result in a reduction of wages and employment levels, leading to inefficiencies and potential exploitation of workers. Similar to a monopoly, a monopsonist has the ability to influence market outcomes and may result in a deadweight loss.
Example: A company that has exclusive control over the labor market in a small town could be considered a monopsony. The company can dictate wages and employment levels since workers have limited alternative job opportunities in the area.
Dominant Firm and Monopoly Behavior:
A dominant firm refers to a firm that holds a substantial market share but operates in a market with multiple competitors. While a dominant firm has a significant influence on market outcomes, it may not necessarily exhibit all the characteristics of a monopoly. A dominant firm can still face competition from smaller rivals and may be constrained by market forces.
The behavior of a dominant firm can vary. It may act in ways similar to a monopoly by setting prices above marginal cost and limiting the quantity supplied. However, it may also face competitive pressure and need to consider the potential response of other firms in the market. As a result, the dominant firm's behavior may not be as extreme as that of a pure monopoly.
In conclusion, while monopsonies and monopolies share some similarities in terms of market power, they differ in their control over the buying or selling side of the market. A dominant firm can exhibit behavior resembling a monopoly, but it is influenced by competition and may not fully exert its market power like a pure monopoly.
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Consider the following two merger candidates. The merger is for diversification purposes only with no synergies involved. Risk-free rate is 4%. Company A Company Market value of assets $900 $800 Face value of zero coupon debt $900 $800 Debt maturity 4 years 4 years 50% 50% Asset return standard deviation The asset return standard deviation for the combined firm is 20%. How much more value will debtholders collectively receive after the merge(keep two decimal places)?
After the merger, debtholders collectively will receive a total additional value of $45.54.
To calculate the additional value received by debtholders, we need to compare the present value of the debt in the merged firm with the present value of the debt in the separate firms.
For Company A:
Present value of debt = Face value of debt / (1 + Risk-free rate)^(Debt maturity)
= $900 / (1 + 0.04)^4
= $900 / 1.1699
= $769.36
For Company B:
Present value of debt = $800 / (1 + 0.04)^4
= $800 / 1.1699
= $683.42
Total present value of debt in separate firms = $769.36 + $683.42 = $1,452.78
The present value of debt in the merged firm would be the same as the total present value of debt in separate firms.
However, since the asset return standard deviation for the combined firm is 20%, we can use the formula:
Additional value = Total present value of debt * (Asset return standard deviation)^2 / 2
= $1,452.78 * (0.20)^2 / 2
= $145.28 / 2
= $72.64
Since the debt is split 50% each, each debtholder would receive an additional value of $72.64 / 2 = $36.32.
Therefore, collectively, debtholders will receive an additional value of $36.32 * 2 = $72.64.
However, the question asks for the additional value with two decimal places, so the correct answer would be $72.64 rounded to two decimal places, which is $72.64
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Suppose the demand for oil is P=140Q-0.20. There are
two oil producers who do not cooperate. Producing oil costs $10 per
barrel. What is the profit of each cartel member?
To calculate the profit of each cartel member, we need to consider the cost of production, the demand function, and the optimal quantity of oil produced. Profit for each cartel member is $59,143,370.
Demand function: P = 140Q - 0.20
Cost of production: $10 per barrel
To find the optimal quantity, we need to equate the marginal cost (MC) with the marginal revenue (MR): MC = $10
MR = d(P*Q)/dQ
Differentiating the demand function with respect to Q, we get:
MR = 140 - 0.20Q
Setting MR equal to MC: 140 - 0.20Q = 10
Solving for Q:
0.20Q = 130
Q = 130 / 0.20
Q = 650
So, the optimal quantity for each cartel member is 650 barrels of oil.
Now, let's calculate the profit for each cartel member: Revenue = Price * Quantity
Revenue = (140Q - 0.20) * Q
Revenue = (140 * 650 - 0.20) * 650
Cost = Cost per barrel * Quantity
Cost = $10 * 650
Profit = Revenue - Cost
Substituting the values, we can calculate the profit for each cartel member:
Profit = [(140 * 650 - 0.20) * 650] - ($10 * 650)
Calculating this expression will give us the profit for each cartel member individually.
Profit = [(91,000 - 0.20) * 650] - ($10 * 650)
Profit = [90,999.80 * 650] - ($10 * 650)
Profit = 59,149,870 - 6,500
Profit = 59,143,370
Therefore, the profit for each cartel member is $59,143,370.
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Find out what are the characteristics of workers representation
model in Japan given its employment relations and industrial
relations system. Provide references to the Findings.
The characteristics of the worker representation model in Japan is that it has a high degree of unionization and a strong connection between unions and management, and it emphasizes the importance of enterprise unions. The Japanese labor market also has a focus on lifetime employment, where workers remain with a single firm for the entirety of their career.
In Japan, worker representation is achieved through enterprise unions, which are composed of workers from a single company. These unions engage in collective bargaining with management to negotiate wages, benefits, and working conditions. The enterprise union system promotes a sense of shared responsibility between management and labor and encourages cooperation between the two parties.There is also a focus on lifetime employment in Japan, which means that workers remain with a single company for the entirety of their career.
Japan's worker representation model is unique compared to other industrialized nations due to its strong emphasis on enterprise unions, lifetime employment, and mutualism between labor and management. According to a 2020 report by the Ministry of Health, Labour, and Welfare, the unionization rate in Japan was 16.5% in 2019. This high degree of unionization is due in part to the enterprise union system, which emphasizes the importance of collective bargaining and cooperation between labor and management.The enterprise union system is composed of unions that represent workers from a single company. These unions engage in collective bargaining with management to negotiate better wages, benefits, and working conditions.
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Use the Heckscher-Ohlin model to analyse the long-run consequences of a reduction in capital. There are two factors of production: labour and capital. There are two sectors of economic activity: manufacturing and services. Manufacturing and services use labour and capital for production. Manufacturing goods are capital-intensive and services are labour- intensive. Labour and capital are both mobile across sectors. The price of the manufacturing good and of services are determined in the global market and are not affected by develop- ments in the UK. 4. Draw a box diagram to describe the pre-Brexit equilibrium. Depict the labour force on the horizontal axis and capital on the vertical axis. The service sector starts at the lower-left corner and the manufacturing sector at the upper-right corner. Denote the original point of equilibrium by B and show the split of labour and capital across the two sectors. Show that manufacturing is capital-intensive and services are labour- intensive.
The Heckscher-Ohlin model is used to analyze the long-run consequences of a reduction in capital in an economy with two factors of production (labour and capital) and two sectors (manufacturing and services). In this model, manufacturing goods are capital-intensive, while services are labor-intensive. The equilibrium is determined by the global market prices of the goods, and both labor and capital are mobile across sectors.
In the pre-Brexit equilibrium, we can depict the Heckscher-Ohlin model using a box diagram. The horizontal axis represents the labor force, and the vertical axis represents capital. The service sector is located at the lower-left corner, while the manufacturing sector is at the upper-right corner.
The original equilibrium point, denoted as B, represents the allocation of labor and capital across the two sectors.
Since manufacturing goods are capital-intensive, a larger share of capital is allocated to the manufacturing sector, leading to a higher vertical position on the graph for manufacturing compared to services. Conversely, services being labor-intensive are allocated a larger share of the labor force, resulting in a higher horizontal position for services compared to manufacturing.
The box diagram visually illustrates the capital-intensity of manufacturing and the labor-intensity of services in the economy. This representation highlights the relative importance of capital and labor in each sector and helps analyze the implications of a reduction in capital on the economy in the long run.
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On January 1, you sold one February maturity S&P 500 Index futures contract at a futures price of 2,436. If the futures price is 2,540 at contract maturity, what is your profit? The contract multiplier is $50. (Input the amount as positive value.)
The profit from selling one February maturity S&P 500 Index futures contract can be calculated by finding the difference between the selling price and the futures price at contract maturity, multiplied by the contract multiplier. The profit will be positive if the futures price at contract maturity is lower than the selling price.
To calculate the profit, we first need to determine the difference between the selling price and the futures price at contract maturity. In this case, the selling price is 2,436 and the futures price at contract maturity is 2,540.
Profit = (Futures Price at Maturity - Selling Price) * Contract Multiplier
Profit = (2,540 - 2,436) * $50
Profit = 104 * $50
Profit = $5,200
Since the futures price at contract maturity is higher than the selling price, the profit will be positive. The profit from selling one February maturity S&P 500 Index futures contract in this scenario would be $5,200.
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Which of the following is not one of Hofstede's four dimensions that explain variation among cultures? (Points : 1)
A.introversion/extraversion
B.masculinity(aggressive)/ femininity (nurturing)
C.low uncertainty avoidance/high uncertainty avoidance
D.individualism/collectivism
Hofstede's cultural dimensions are a framework that helps explain the variation in cultural values and behaviors across different societies.
The four dimensions proposed by Hofstede are:
Masculinity (aggressive)/femininity (nurturing): This dimension reflects the extent to which a society values traditionally masculine or feminine traits, such as assertiveness, competitiveness, and achievement versus nurturing, cooperation, and quality of life.
Uncertainty avoidance (low/high): This dimension refers to the degree to which a society feels threatened by uncertain or ambiguous situations and tries to avoid them. Cultures with high uncertainty avoidance tend to have rigid rules, strong social norms, and a preference for structured environments.
Individualism/collectivism: This dimension explores the degree to which individuals prioritize their own interests and independence versus the interests of the group or community. Individualistic cultures value personal freedom, autonomy, and individual achievement, while collectivistic cultures emphasize group harmony, cooperation, and loyalty.
Power distance (small/large): This dimension examines the extent to which a society accepts and expects power inequalities and hierarchical structures. Cultures with a small power distance value equality, participative decision-making, and a more egalitarian social structure, whereas cultures with a large power distance accept and respect authority, hierarchy, and social status differences.
Among these dimensions, introversion/extraversion is not one of Hofstede's dimensions. It is a personality trait that is not specifically addressed in his framework for understanding cultural differences.
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All of the following would shift the supply curve for grapes EXCEPT
A. an increase in the wages paid to grape harvesters
B. an increase in the number of vineyards
C. an increase in government regulations concerning grape production
D. a strike by all vineyard workers
E. an increase in all household incomes
An increase in all household incomes will not shift the supply curve. (Option E)
All the options provided except for option E can directly impact the supply of grapes.
A. An increase in the wages paid to grape harvesters would increase production costs for grape producers, potentially leading to a decrease in the supply of grapes.
B. An increase in the number of vineyards would expand the production capacity and increase the overall supply of grapes.
C. An increase in government regulations concerning grape production may impose additional costs or restrictions on grape producers, affecting the supply of grapes.
D. A strike by all vineyard workers would disrupt the grape harvesting process, leading to a decrease or complete halt in the supply of grapes.
However, an increase in all household incomes (Option E) would affect the demand for grapes rather than the supply. It would result in an increase in the quantity demanded of grapes, but it would not directly impact the supply curve for grapes.
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Case 1: (2 marks) (0.5 each). 1- Fast Forward purchased $25,000 of equipment for cash. The Equipment asset account is for $25,000 and the cash account is for $25,000. 2- If the liabilities of a busine
When Fast Forward purchases equipment for $25,000 in cash, it is a transaction involving two accounts: Equipment (an asset account) and Cash.
1- The Equipment asset account is debited for $25,000, and the cash account is credited for $25,000.
2- If the liabilities of a business increased $75,000 and the owner's equity decreased $30,000 during the same period, the assets of the business must have decreased by $45,000 (since liabilities + owner's equity = assets).
3- The Collection of Accounts Receivable will result in a debit to the cash account and a credit to the accounts receivable account, to keep the accounting equation in balance.
4- If the assets of a business increased $89,000 and its liabilities increased $67,000 during the same period, equity in the business must have increased by $22,000 (since assets = liabilities + equity).
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The complete question is: Case 1: (2 marks) (0.5 each)
1- Fast Forward purchased $25,000 of equipment for cash. The Equipment asset account is_____ for $25,000 and the cash account is______ for $25,000.
2- If the liabilities of a business increased $75,000 during a period of time and the owner's equity in the business decreased $30,000 during the same period, the assets of the business must have and to keep ______
3- The Collection of Accounts Receivable will result in a(n)______ and _____, to keep the accounting equation in balance.
4- If the assets of a business increased $89,000 during a period of time and its liabilities increased $67,000 during the same period, equity in the business must have _____.
You observe a put option on ImpoExpo's stock, with an
exercise price of $56 and time to maturity of one year, trading at
$1.56. Can you construct a portfolio where you make a risk-free
profit in a perfect market? Demonstrate your portfolio's net payoff when stock price rises or falls.
A put option is a contract that allows the owner to sell a specific underlying asset at an agreed-upon price (the exercise price or strike price) before the contract's expiration date. For this question, you have been given information about a put option on ImpoExpo's stock.
The exercise price is $56, the time to maturity is one year, and it is trading at $1.56. You are required to show if a portfolio exists that allows a risk-free profit in a perfect market.
You can construct a portfolio with the following combination of securities:
Purchase one put option with an exercise price of $56 and a premium of $1.56. Buy the stock of ImpoExpo for $56.Invest the total portfolio's value in a risk-free asset that has a 1-year maturity horizon.
Constructing this portfolio would allow an arbitrage opportunity in a perfect market, resulting in a risk-free profit. If the stock price rises above $56 by the expiration date, the call option becomes useless, and you will exercise the put option, selling the stock at the exercise price. The total payoff of the portfolio will be the present value of the exercise price minus the present value of the put option's premium plus the stock's present value. However, if the stock price falls below $56 at the expiration date, the put option will be exercised, allowing you to sell the stock at the exercise price, which is $56. The stock's payoff will be the present value of the put option's premium plus the present value of the exercise price minus the stock's present value. In either situation, the portfolio's net payoff would be the same, resulting in a risk-free profit.
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Why do bars offer free peanuts? Suppose Nike’s managers were
considering expanding into producing sports beverages. Why might
the company decide to do this under the Nike brand name?
Bars often offer free peanuts as a form of a complementary good or marketing strategy. There are several reasons behind this practice.
Firstly, peanuts are inexpensive and easily accessible, making them a cost-effective way for bars to provide a snack to their customers. By offering free peanuts, bars create a positive atmosphere and encourage customers to stay longer, potentially leading to increased alcohol sales.
In the case of Nike considering expanding into producing sports beverages, leveraging the Nike brand name can provide several advantages. Nike is a well-established and recognized brand in the sports industry, primarily known for its athletic footwear and apparel.
By extending the brand to sports beverages, Nike can capitalize on its brand reputation, credibility, and existing customer loyalty. The Nike brand carries associations of performance, quality, and fitness, which can attract consumers who are already familiar with and trust the Nike brand. This can give Nike a competitive edge in the sports beverage market and facilitate brand recognition and acceptance among consumers.
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Zielow Corporation has 2.1 milion shares of common stock outstanding with a book vake per share of 755 with a recent divided of 45 The for's capital also includes 29000 shares of 62% pred stock outstanding with a par value of 100 and the firms debt include 2620 65 percent quarterly bonds outstanding with 25 years maturity und five years ago The curent wading price at the prefered stock and bonds are 102% of its par value and comomon stock trades for 255 with a constant growth rate of 6% The beta of the stock is 113 and the market k prema 7% Calculate the art Weighted Avergae Cost of Capital of the firm assuming a tax rate of 30% (Must show the steps of calculation)
Weighted average cost of capital (WACC) refers to the minimum acceptable average rate of return needed by an organisation on its investments in order to achieve a long-term target for growth. The weighted average cost of capital of Zielow Corporation is 12.14%.
The WACC for Zielow Corporation has to be calculated, given the following information:2.1 million common stock outstanding Book value per share = $755 Recent dividend = $4529,000 preferred stock outstanding Par value = $100Debt includes 2,620, 65% quarterly bonds outstanding Maturity = 25 years Beta of stock = 1.13Current price of preferred stock and bonds are 102% of par valueCommon stock trades at $255 per share Constant growth rate = 6% Market k prem = 7% Tax rate = 30% Calculation of WACC:
The weight for each of the sources of capital must be determined first.Common stock Weight = 2,100,000/2,152,000 = 0.974299 Weight = 97.43%Preferred stock Weight = 29,000/2,152,000 = 0.013487 Weight = 1.35%Debt Weight = (2620 x 0.65 x $25)/(2,152,000 + $165,920,000) Weight = 0.0222 Weight = 2.22% The next step is to determine the cost of each source of capital.
Common stock Beta of stock = 1.13Risk-free rate (Rf) = 7% Market risk premium (Rm-Rf) = 7%-2% = 5%Cost of common stock (Rs) = Rf + β(Rm-Rf) Cost of common stock (Rs) = 7% + 1.13(5%) Cost of common stock (Rs) = 12.65%Preferred stockCost of preferred stock (Rp) = Dp / PpCost of preferred stock (Rp) = $62 / $100Cost of preferred stock (Rp) = 62% Debt Cost of debt (Rd) = i(1-T)Cost of debt (Rd) = 0.65(4)(1-0.30)Cost of debt (Rd) = 1.82%
Finally, the WACC is calculated using the following formula:WACC = WsRs + WpRp + WdRdWACC = 0.974299(12.65%) + 0.013487(62%) + 0.0222(1.82%)WACC = 12.14%Therefore, the weighted average cost of capital of Zielow Corporation is 12.14%.
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Q.3 Some studies reveal that organization who embraces with
economies of technology will tend to opt for a lower-cost structure
than a competitor of similar size and capability.
(ii) What are the common innovation strategies used by
companies in this day and age? Explain your answer.
(8 marks)
(iii) Discuss the ways how can an organization foster a spirit of
innovativeness by means of technology application in
workplace. Justify your answer with relevant example.
(12 marks)
(ii) Common innovation strategies used by companies in this day and age include:
Product Innovation: Companies focus on developing new and improved products or services to meet customer needs and stay ahead of the competition. This could involve enhancing features, functionality, or performance, or introducing entirely new offerings.
Process Innovation: Companies seek to improve operational efficiency and effectiveness by implementing new processes or technologies. This may involve streamlining workflows, automating tasks, or adopting advanced manufacturing techniques to reduce costs and enhance productivity.
Business Model Innovation: Companies explore alternative ways of delivering value to customers and capturing market share. This could involve creating new revenue streams, adopting disruptive pricing models, or leveraging digital platforms to reach customers in innovative ways.
Open Innovation: Companies collaborate with external partners, such as customers, suppliers, or research institutions, to share knowledge, resources, and ideas. Open innovation allows organizations to tap into external expertise and accelerate the development of new products or technologies.
Sustainable Innovation: Companies focus on developing environmentally friendly and socially responsible solutions. This includes adopting sustainable practices in their operations, utilizing renewable resources, and minimizing the environmental impact of their products and services.
(iii) Organizations can foster a spirit of innovativeness through technology application in the workplace in several ways:
Encouraging a Culture of Experimentation: Organizations can create an environment that values experimentation and risk-taking. They can allocate resources for employees to explore new ideas and provide them with the freedom to learn from failures. This can be facilitated by using technology tools and platforms that support experimentation and rapid prototyping.
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an employee of 20 years recently retired at age 59 and a half this employee group life contract can be
An employee of 20 years recently retired at age 59 and a half, the employee group life contract can be converted to an individual contract.
The conversion of a group life insurance policy to an individual policy is known as a conversion privilege. In this case, an employee of 20 years who recently retired at the age of 59 and a half can convert his/her group life contract to an individual contract. A conversion privilege is an agreement between an insurance company and a policyholder that allows the policyholder to transform their current group life insurance policy into an individual life insurance policy. The premium rate for the individual policy is generally higher than the group rate. However, this option enables policyholders to maintain life insurance coverage after leaving their job or losing their group insurance benefit. When a policyholder converts from group insurance to an individual policy, he or she may need to pay higher premiums, but the conversion will enable him or her to keep the policy in force. The conversion privilege enables policyholders to retain the coverage they have already earned and paid for, even though they no longer work for the company that provided the group coverage. The conversion privilege may be a very useful benefit if a person wants to maintain life insurance coverage but is unable to afford the premiums for a new individual life insurance policy.
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A retired employee could potentially remain covered under an employer's group life insurance policy, depending on company policy and the specific terms of the contract. The Age Discrimination in Employment Act allows workers to retire at any age, without losing their protections. Finally, life insurance can be an essential part of retirement, alongside pensions and social security, providing financial security for retirees and families.
Explanation:An employee of 20 years who recently retired at age 59 and a half can still be under their company's group life insurance contract. However, this is contingent on the specifics of their contract conditions and company policies.
Under amendments to the Age Discrimination in Employment Act (ADEA), U.S. workers no longer must retire upon reaching a specified age. This could potentially allow them to maintain their benefits longer. But, note that after retirement, some benefits may be reduced or cease.
In some cases, companies provide retirement benefits like a pension or annuity which is based on the employees' earnings over their working life. The employee might also be eligible for social security benefits.
Together with retirement pensions and Social Security, life insurance forms an integral part of a comprehensive retirement plan. It provides a certain protection and economic security to the retirees and their families.
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Given the following information, calculate earnings per share. (answer rounded to nearest cent) Earnings before depreciation and taxes $3,600,000 Depreciation expense $500,000 Tax rate 25% Common dividends paid $400,000 Number of shares of common stock outstanding 200,000
The earnings per share (EPS) for the given information is $8.50.
To calculate the EPS, we need to subtract the tax and depreciation expense from the earnings before depreciation and taxes. First, we subtract the depreciation expense of $500,000 from the earnings before depreciation and taxes of $3,600,000, which gives us $3,100,000. Then, we calculate the tax amount by multiplying the earnings after depreciation by the tax rate of 25%, which gives us $775,000. Subtracting the tax amount from the earnings after depreciation, we get $2,325,000. Finally, we divide the earnings after depreciation and taxes by the number of shares of common stock outstanding, which is 200,000 shares, to calculate the earnings per share. Therefore, the earnings per share is $8.50.
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Suppose you purchased a stock a year ago. Today, you receive a
dividend of $19 and you sell the stock for $111. If your return was
9%, at what price did you buy the stock? $________.
You bought the stock for $82.83.
The price you bought the stock is $97.71. Here's how to get the answer:
Given that you received a dividend of $19 and you sold the stock for $111. The dividend and the selling price gives you a total return of $130 ($19+$111 = $130).The problem also gives a total return of 9% for the year using the formula:return = (ending price - beginning price) / beginning price * 1009% = ($111 - beginning price) / beginning price * 100Solve for the beginning price:
Beginning price = $111 / (1 + 0.09)Beginning price = $101.83The beginning price is $101.83. Now you can solve for the price you actually bought the stock by subtracting the dividend of $19 from the beginning price:Price bought = $101.83 - $19Price bought = $82.83
Therefore, you bought the stock for $82.83.
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5. Explain the techniques you use to deal with your ‘hot buttons’ during times of conflict. Attach copies of at least two documents (i.e., module application activities or other) that prove your use of these techniques.
When dealing with ‘hot buttons’ during times of conflict, there are several techniques that can be employed to defuse the situation and prevent it from escalating into something more severe. One technique is the use of active listening.
When active listening is used, the individual will listen intently to the other person's concerns and perspective without interrupting them. This can be an effective tool in preventing misunderstandings, reducing hostility, and reaching a resolution to the conflict. Another technique that can be used is compromise. A compromise is a situation in which each party agrees to give up something in order to reach a mutually acceptable solution. This technique is particularly useful in situations where both parties have a stake in the outcome. Finally, another technique is the use of empathy. Empathy is the ability to understand and share the feelings of another person.
When empathy is used, the individual will put themselves in the other person's shoes and try to see the situation from their perspective. This can be an effective tool in reducing hostility and preventing the conflict from escalating. Here are some examples of how these techniques have been used in practice:EXAMPLE 1: Module Application ActivitiesIn one module application activity, the individual was asked to reflect on a past conflict they had experienced and describe how they could have handled it differently. The individual described a situation where they had become very angry with a co-worker who had criticized their work. Instead of listening to the co-worker's concerns and trying to understand their perspective, the individual had become defensive and argumentative. To deal with this ‘hot button’ in the future, the individual identified several techniques that they could use. These included active listening, empathy, and compromise.
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"Consider a project with a value of $5,000 and initial investment of $5,500. Suppose, the value of the project may be revised 1 year from now either up to $7,000 or down to $3,000. At that time, the project can be abandoned with a terminal cash flow of $4,500. The risk-free rate is 5%. Find the value of the option to abandon." Show your work, please label all acronyms (e.g. PV = present value)
To find the value of the option to abandon the project, we need to calculate the present value of the expected cash flows and compare it to the terminal cash flow if the project is abandoned. Here's the step-by-step calculation:
Calculate the expected value of the project at year 1:
Expected Value = (Probability of Value $7,000 * Value $7,000) + (Probability of Value $3,000 * Value $3,000)
Expected Value = (0.5 * $7,000) + (0.5 * $3,000)
Expected Value = $3,500 + $1,500
Expected Value = $5,000
Calculate the present value of the expected cash flows at year 0:
PV = Expected Value / (1 + Risk-Free Rate)^1
PV = $5,000 / (1 + 0.05)^1
PV = $5,000 / 1.05
PV = $4,761.90
Calculate the value of the option to abandon:
Value of Option to Abandon = Terminal Cash Flow / (1 + Risk-Free Rate)^1
Value of Option to Abandon = $4,500 / (1 + 0.05)^1
Value of Option to Abandon = $4,500 / 1.05
Value of Option to Abandon = $4,285.71
Therefore, the value of the option to abandon the project is $4,285.7
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Consider a perpetuity with annual payments. The first payment is
six years from now. The first ten payments are $250, the next ten
payments are $150 and all payments after that are $100.
Find the pres
Total Present Value = Present Value of the first ten payments + Present Value of the next ten payments + Present Value of perpetuity
Present Value of all payments after the first twenty payments of $100:
To find the present value of a perpetuity with annual payments that follow the given pattern, we can break it down into three parts: the first ten payments of $250, the next ten payments of $150, and all payments after that of $100.
1. Value of the first ten payments of $250:Since the first payment is six years from now, we need to discount each payment to its present value using the appropriate discount rate. Let's assume a discount rate of 'r' for this calculation.
Present Value of the first ten payments = $250 / (1+r)⁶ + $250 / (1+r)⁷ + ... + $250 / (1+r)¹⁵
2. Present Value of the next ten payments of $150:
Similarly, we need to discount each payment to its present value using the same discount rate 'r'.
Present Value of the next ten payments = $150 / (1+r)¹⁶ + $150 / (1+r)¹⁷ + ... + $150 / (1+r)²⁵
3.The payments after the first twenty years form a perpetuity, which means they will continue indefinitely. The formula for the present value of a perpetuity is the payment amount divided by the discount rate.
Present Value of perpetuity = $100 / r
Finally, to find the total present value of the perpetuity, we add the present values of all three parts:
Please note that to obtain an exact numerical value, we need to know the discount rate 'r' and perform the calculations using the appropriate time periods.
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suppose you are the money manager of a $4.16 million investment fund. the fund consists of four stocks with the following investments and betas:
The weighted average beta of the portfolio can be calculated as: Weighted average beta = (Beta A * Weight A) + (Beta B * Weight B) + (Beta C * Weight C) + (Beta D * Weight D)= (1.4 * 0.2885) + (0.8 * 0.2163) + (1.1 * 0.2404) + (1.7 * 0.2548)= 0.4034 + 0.1730 + 0.2644 + 0.4336= 1.2744Therefore, the weighted average beta of the portfolio is 1.2744.
As a money manager of a $4.16 million investment fund, suppose the fund consists of four stocks with the following investments and betas:StockInvestmentBetaA$1,200,0001.4B$900,0000.8C$1,000,0001.1D$1,060,0001.7We can calculate the weighted average beta for the portfolio as follows:We have to find out the weight of each stock in the portfolio:Weight of Stock A = Investment in Stock A / Total Portfolio Investment = $1,200,000 / $4,160,000 = 0.2885Weight of Stock B = Investment in Stock B / Total Portfolio Investment = $900,000 / $4,160,000 = 0.2163Weight of Stock C = Investment in Stock C / Total Portfolio Investment = $1,000,000 / $4,160,000 = 0.2404Weight of Stock D = Investment in Stock D / Total Portfolio Investment = $1,060,000 / $4,160,000 = 0.2548
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Which of the following is NOT an example of a precautionary money balance?
a. currency in a cash register at a department store
b. funds deposited in a separate bank account because you may need to replace an aging furnace
c. an extra $100 in cash withdrawn from your savings account before you visit a sick aunt
d. an extra $20 bill in the purse of a college student going on her first blind date
e. a $100 traveler's check, folded and placed behind your driver's license in your wallet
The example that is NOT an example of a precautionary money balance is:
d. an extra $20 bill in the purse of a college student going on her first blind date.
Precautionary money balances refer to holding money as a precautionary measure for unexpected or uncertain future needs. It involves keeping additional funds readily available to meet unforeseen expenses or emergencies.
In the case of options a, b, c, and e, they all involve holding extra cash or funds for potential future needs or contingencies. These examples align with the concept of precautionary money balances.
However, option (d) does not fit the definition of a precautionary money balance. Having an extra $20 bill in the purse for a college student going on a blind date does not serve as a precautionary measure for unexpected or uncertain future needs. It is not directly related to potential emergencies, unforeseen expenses, or contingency planning.
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MEENERY Prepare the journal entry for purchasing $100,000 bonds for cash. Prepare the journal entry when purchased $1,000 raw materials on account. Prepare the journal entry for issuing $300,000 bonds
The journal entry for purchasing $100,000 bonds for cash would be a debit to the Bond Investment account and a credit to the Cash account. The journal entry for purchasing $1,000 raw materials on account would be a debit to the Raw Materials inventory account and a credit to the Accounts Payable account. The journal entry for issuing $300,000 bonds would be a debit to the Cash account and a credit to the Bonds Payable account.
When purchasing $100,000 bonds for cash, the company would increase its investment in bonds (Bond Investment) and decrease its cash. Therefore, the journal entry would include a debit to the Bond Investment account and a credit to the Cash account, both for $100,000.
When purchasing $1,000 of raw materials on account, the company would increase its inventory of raw materials (Raw Materials) and also create a liability to the supplier (Accounts Payable). The journal entry would include a debit to the Raw Materials inventory account for $1,000 and a credit to the Accounts Payable account for the same amount.
When issuing $300,000 bonds, the company would receive cash from investors. This would increase the company's cash balance, and at the same time, create a liability for the bonds issued (Bonds Payable). The journal entry would include a debit to the Cash account for $300,000 and a credit to the Bonds Payable account for the same amount.
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