Poverty is just one aspect of inequality. It is described in terms of the total population rather than simply the fraction of it that falls below a certain poverty line. The majority of inequality indicators are independent of the distribution's mean.
Being in a financial or materially insufficient state, as compared to what is customary or socially acceptable. People are considered to be in poverty when they lack the resources to meet their fundamental necessities. In this situation, figuring out what fundamental requirements are first necessitates the identification of the impoverished.
Because nations do not exist in isolation and are more interconnected through different economic, political, and social relationships since the colonial era, inequalities between nations have a substantial impact on development in emerging nations.
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A small open economy is described by the following equations: C = 40 + 0.8(Y – T) I = 200 – 15r NX 300 – 40e Mp = 2Y – 50r G = 300, T = 300, M = 4000, P = 4 and r* = 5 (a) Derive and graph the IS* and LM*curves.
The intersection point of the IS* and LM* curves represents the equilibrium level of income (Y) and interest rate (r) in the small open economy.
The IS* curve can be derived by setting Y = C + I + G + NX, where Y represents income, C is consumption, I is an investment, G is government spending, and NX is net exports. The LM* curve can be derived by equating money demand (Md) to the money supply (M) and solving for the interest rate (r).
The IS* curve is given by the equation: Y = 1/(1 - 0.8)(40 - 0.8T + 200 - 15r + 300 - 40e)
The LM* curve is given by the equation: M/P = 2Y - 50r
To graph the IS* curve, we need to fix the values of T, r, and e and vary Y. Plotting the values of Y on the vertical axis against corresponding values of Y on the horizontal axis will give us the IS* curve.
To graph the LM* curve, we need to fix the values of M, P, and e and vary Y. Plotting the values of Y on the vertical axis against corresponding values of r on the horizontal axis will give us the LM* curve.
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as the industrial revolution spread throughout europe, parallel patterns of emigration from europe to the united states occurred. T/F
True, as the industrial revolution spread throughout Europe, parallel patterns of emigration from Europe to the United States occurred.
During the industrial revolution, which took place in the 18th and 19th centuries, Europe experienced significant economic and social changes. The industrial revolution brought about advancements in technology, manufacturing, and agriculture, leading to increased urbanization and changes in the labor market. As a result, many Europeans sought better economic opportunities and a chance for a new life, leading to parallel patterns of emigration from Europe to the United States.
The industrial revolution created economic disparities and hardships for certain groups of people in Europe, such as rural farmers or factory workers facing unemployment due to mechanization. These individuals, along with others seeking economic improvement or religious and political freedoms, saw the United States as a promising destination. The United States offered abundant natural resources, expanding industries, and the allure of the American Dream.
As a result, waves of European immigrants, including Germans, Irish, Italians, and others, migrated to the United States during this period. These parallel patterns of emigration were driven by similar factors related to the industrial revolution's impact on European societies.
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Calculate the future value at the end of the specified deposit period. b. Determine the effective annual rate, EAR. c. Compare the nominal annual rate, r, to the effective annual rate, EAR. What relationship exists between compounding frequency and the nominal and effective annual rates? a. The future value of case A at the end of year 7 is $_____(Round to the nearest cent.) Case Amount of initial deposit Nominal annual rate, r Compounding frequency, m (times/year) Deposit period (years) A $2,600 7% 2 7 B $51,000 12% 4 4 C $1,000 6% 2 12 D $17,000 15% 4 6
To calculate the future value at the end of the specified deposit period, we can use the formula for compound interest: Future Value (FV) = Initial Deposit * (1 + (Nominal Annual Rate / Compounding Frequency)) ^ (Compounding Frequency * Deposit Period)
a. Calculating the future value for each case:
Case A:
Initial Deposit = $2,600
Nominal Annual Rate (r) = 7%
Compounding Frequency (m) = 2 times/year
Deposit Period = 7 years
FV(A) = $2,600 * (1 + (7% / 2)) ^ (2 * 7)
FV(A) ≈ $4,221.80 (rounded to the nearest cent)
Case B:
Initial Deposit = $51,000
Nominal Annual Rate (r) = 12%
Compounding Frequency (m) = 4 times/year
Deposit Period = 4 years
FV(B) = $51,000 * (1 + (12% / 4)) ^ (4 * 4)
FV(B) ≈ $83,079.00 (rounded to the nearest cent)
Case C:
Initial Deposit = $1,000
Nominal Annual Rate (r) = 6%
Compounding Frequency (m) = 2 times/year
Deposit Period = 12 years
FV(C) = $1,000 * (1 + (6% / 2)) ^ (2 * 12)
FV(C) ≈ $1,806.00 (rounded to the nearest cent)
Case D:
Initial Deposit = $17,000
Nominal Annual Rate (r) = 15%
Compounding Frequency (m) = 4 times/year
Deposit Period = 6 years
FV(D) = $17,000 * (1 + (15% / 4))^ (4 * 6)
FV(D) ≈ $17,000 * 2.038
FV(D) ≈ $34,646.00 (rounded to the nearest cent)
b. To determine the effective annual rate (EAR), we can use the formula:
EAR = (1 + (Nominal Annual Rate / Compounding Frequency))^ Compounding Frequency - 1
EAR(A) = (1 + (7% / 2))^2 - 1
EAR(A) ≈ 0.071225 or 7.12% (rounded to 2 decimal places)
EAR(B) = (1 + (12% / 4)) ^4 - 1
EAR(B) ≈ 0.125508 or 12.55% (rounded to 2 decimal places)
EAR(C) = (1 + (6% / 2)) ^2 - 1
EAR(C) ≈ 0.0609 or 6.09% (rounded to 2 decimal places)
EAR(D) = (1 + (15% / 4)) ^4 - 1
EAR(D) ≈ 0.155141 or 15.51% (rounded to 2 decimal places)
c). Comparing the nominal annual rate (r) to the effective annual rate (EAR), we can observe that the effective annual rate is higher in all cases. The relationship between compounding frequency and the nominal and effective annual rates is that as the compounding frequency increases, the effective annual rate also increases. This is because more frequent compounding allows for more compounding periods within a given time frame, leading to higher returns and a higher effective annual rate.
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Is zero economic profit inevitable in the long run for monopolistically competitive firms? In the long run, monopolistically competitive firms:
A. will not continue to earn a profit because monopolistically competitive firms produce identical products.
B. will not continue to earn a profit because the cost of production will rise as new firms enter the market.
C. will continue to earn profit due to barriers to new firms entering the market.
D. may continue to earn profit by instead beginning to produce a product identical to competitors.
E. may continue to earn profit by convincing consumers their products are different.
In the long run, monopolistically competitive firms may continue to earn profit by convincing consumers their products are different (option E). Monopolistically competitive firms differentiate their products through branding, packaging, and advertising.
If they are successful in convincing consumers that their products are unique, they can charge a higher price and earn economic profit. However, if new firms enter the market and also offer differentiated products, the profit margin may decrease. Therefore, monopolistically competitive firms must continually innovate and differentiate their products to maintain their economic profit in the long run. In the long run, monopolistically competitive firms may experience zero economic profit. This is because they often produce differentiated products, allowing them to continue earning profits by convincing consumers their products are different (E). However, as new firms enter the market, the cost of production may rise, making it harder for these firms to maintain profits (B). Barriers to entry (C) and producing identical products (D) are not key factors for monopolistically competitive firms. Thus, zero economic profit is not inevitable, but it is a possibility depending on market conditions and firms' abilities to differentiate their products.
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Consider the following information: April 1 Inventories on hand are 50 units at the rate of $2 and 100 units at the rate of $4.50. April 5 Purchased 100 units at $1.80. April 6 10 units of inventories purchased on April 5 at $1.80 are returned to supplier. April 10 80 units issued to factory. April 15 50 units issued to factory April 20 20 units purchased at $1.50. April 25 70 units issued to factory. April 30 50 units purchased at $1.70. April 30 10 units returned to store out of units issued to factory on April 25. REQUIRED Calculate the closing value of the inventory on hand on April 30 using the First In First Out (FIFO) method
The closing value of inventory on hand on April 30 using the First In First Out (FIFO) method is $632.
Given the following information: April 1 Inventories on hand are 50 units at the rate of $2 and 100 units at the rate of $4.50. April 5 Purchased 100 units at $1.80. April 6 10 units of inventories purchased on April 5 at $1.80 are returned to supplier. April 10 80 units issued to the factory.
April 15 50 units issued to the factory. April 20 20 units purchased at $1.50.April 25 70 units issued to the factory. April 30 50 units purchased at $1.70. April 30 10 units returned to store out of units issued to factory on April 25. The calculation of the closing value of inventory on hand on April 30 using the First In First Out (FIFO) method is given as follows:
The number of inventories on hand at the beginning of the month is given as: 50 units at $2 = $100 and 100 units at $4.50 = $450. Total: $550.
Purchase on April 5 is 100 units at $1.80 = $180. Purchase on April 20 is 20 units at $1.50 = $30. Purchase on April 30 is 50 units at $1.70 = $85. The number of units returned to the supplier on April 6: 10 units at $1.80 = $18. Therefore, the total cost of goods available for sale is $873.
The number of units issued to the factory during the month of April is given as: 80 units on April 10,50 units on April 15, and70 units on April 25. The total units issued to the factory during the month of April is 80 + 50 + 70 = 200 units. Therefore, the number of units on hand on April 30 is (550 + 180 + 30 + 85) - 18 - (200 - 10) = $632.
Thus, the closing value of inventory on hand on April 30 using the First In First Out (FIFO) method is $632.
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The Solow model emphasizes O capital and diminishing returns. o cultural factors. O the development of institutions. O technological change. the importance of skilled labor.
The correct answer is A. The Solow model emphasizes capital and diminishing returns.
The Solow model, named after economist Robert Solow, is an economic growth model that focuses on understanding the long-term growth of an economy. It emphasizes the role of capital and diminishing returns in determining the growth rate of an economy.
In the Solow model, capital refers to the stock of physical assets such as machinery, equipment, and infrastructure that is used in the production process. The model suggests that increasing the amount of capital in an economy can lead to economic growth. However, the model also recognizes the concept of diminishing returns, which means that as more capital is accumulated, the additional output gained from each additional unit of capital decreases. This is because as an economy already has a significant amount of capital, the marginal productivity of additional capital diminishes over time.
By emphasizing capital and diminishing returns, the Solow model highlights the importance of investment in the economy. It suggests that sustained economic growth requires continuous investment in new capital to offset the diminishing returns and maintain a steady growth rate.
While cultural factors, the development of institutions, technological change, and the importance of skilled labor are also important factors for economic growth, they are not the primary focus of the Solow model. The model simplifies the analysis by primarily focusing on the role of capital and its diminishing returns. However, these other factors can be incorporated into the model to provide a more comprehensive understanding of economic growth dynamics.
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Suppose that CAPM holds, the risk-free rate is 2% and the expected return on the market portfolio is 12%. What is the beta of a stock that has an expected return of 29%?
The beta of a stock that has an expected return of 29% will be 2.5%.
The beta of a stock is a measure of its volatility relative to the market. It is calculated as the covariance of the stock's returns with the market's returns, divided by the variance of the market's returns.
In this case, the risk-free rate is 2%, the expected return on the market portfolio is 12%, and the expected return on the stock is 29%. The beta of the stock is calculated as follows:
Beta = (Expected return of the stock - Risk-free rate) / (Expected return of the market portfolio - Risk-free rate)
= (29% - 2%) / (12% - 2%)
= 2.5
Therefore, the beta of the stock is 2.5. This means that the stock is 2.5 times more volatile than the market.
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indicate which market structure most accurately characterizes each of the following industries.
To indicate which market structure most accurately characterizes each of the following industries, there are four different market structures, including Perfect competition, Monopolistic competition, Oligopoly, and Monopoly.
Perfect Competition:In this type of market structure, no single company has significant control over the price of the product. For example, a local vegetable market.
Monopolistic Competition:This type of market structure characterizes a scenario in which companies have the power to set their own prices, and there is a small degree of competition present in the industry.
For example, restaurants in a city.
Oligopoly:This market structure is characterized by a small number of large firms dominating an industry, resulting in high barriers to entry for potential new competitors.
For example, the airline industry.
Monopoly:This market structure is characterized by a single company having complete control over the market.
For example, a natural gas or water utility company.
Now, let's apply the above concepts to the following industries:Industry
1: Smartphones
Market structure: Monopolistic competitionIndustry
2: Coffee shops
Market structure: Monopolistic competitionIndustry
3: Mobile operating systems
Market structure: OligopolyIndustry
4: Search engines
Market structure: MonopolyIndustry
5: Aircraft manufacturing
Market structure: OligopolyIndustry
6: Gas service in a small town
Market structure: Monopoly
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Summit Systems will pay a dividend of $1.50 this year. If you expect Summits dividend to grow by 6.0% per year, what is its price per share it the firm's equity cost of capital is 11.09 The price per shares
Summit Systems will pay a dividend of $1.50 this year. If you expect Summits dividend to grow by 6.0% per year, what is its price per share it the firm's equity cost of capital is 11.09 The price per shares is $31.24.
To calculate the price per share of Summit Systems, we will use the Dividend Discount Model (DDM), which incorporates the dividend payment, dividend growth rate, and equity cost of capital. Your question states that Summit Systems will pay a dividend of $1.50 this year, has a dividend growth rate of 6.0%, and an equity cost of capital of 11.09%.
Step 1: Determine the expected dividend for next year.
Expected Dividend (D1) = Current Dividend * (1 + Dividend Growth Rate)
D1 = $1.50 * (1 + 0.06) = $1.59
Step 2: Calculate the price per share using the Dividend Discount Model formula.
Price per Share (P0) = D1 / (Equity Cost of Capital - Dividend Growth Rate)
P0 = $1.59 / (0.1109 - 0.06) = $1.59 / 0.0509 = $31.24
So, the price per share for Summit Systems is $31.24.
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Characteristics associated with faithfully representative accounting information are
verifiable and timely.
neutral and verifiable.
complete and neutral.
relevance and verifiable.
Faithfully representative accounting information must possess certain characteristics to be reliable and useful to its users. One of the key characteristics is verifiability, which means that the information can be supported by evidence and can be independently confirmed by other parties. This ensures that the information is accurate and free from errors or biases.
Another important characteristic is neutrality, which means that the information is free from any bias or influence that may affect its reliability or usefulness. Neutrality ensures that the information is objective and can be relied upon by users to make informed decisions. Completeness is also a critical characteristic of faithfully representative accounting information. This means that the information is comprehensive and includes all relevant details necessary for users to understand the underlying transactions and events.
Incomplete information can lead to incorrect or incomplete conclusions, which can ultimately lead to poor decisions. Finally, relevance is another important characteristic of accounting information. This means that the information is useful to its users and is capable of influencing their decisions. Relevant information is timely and provides users with the information they need to make informed decisions.
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Explain equilibrium of the firm under perfectly competitive market by choosing output level at which
a. P=MC=MR and Firm is making zero economic profit
b. P=MC=MR and Firm is making a loss
c. Explain shut down rule with the help of graph
a. In perfect competition, equilibrium occurs when P=MC=MR, resulting in zero economic profit for the firm. b. Equilibrium is at P=MC=MR, but with price below ATC, causing a loss for the firm. c. The shutdown rule advises the firm to stop production when price falls below AVC to minimize losses.
a. In a perfectly competitive market, equilibrium for a firm occurs when the price (P) is equal to the marginal cost (MC), which is also equal to the marginal revenue (MR).
At this output level, the firm is making zero economic profit, meaning its total revenue (TR) equals total cost (TC). This occurs when the average total cost (ATC) intersects with the price (P) at the minimum point of the ATC curve.
b. When P = MC = MR and the firm is making a loss, the equilibrium output level is determined where the price is equal to the marginal cost. However, in this case, the price is lower than the average total cost (ATC) of production, resulting in a loss for the firm.
The firm will continue to produce as long as it can cover its variable costs, but it will incur losses in the short run.
c. The shutdown rule states that a firm should shut down production in the short run if the price falls below the minimum average variable cost (AVC). This means that the firm is unable to cover its variable costs and would minimize its losses by ceasing production.
The shutdown point is where the price (P) intersects with the average variable cost curve, and the firm would produce zero output in this situation. The graph would show the AVC curve intersecting the price below the average total cost (ATC) curve.
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Consider average demand during lead time is 20 & standard
deviation is 8 if there is a chance of only 5% of stockouts to
happen what would be the re-order point ? And safety stock
To calculate the reorder point and safety stock, we need to consider the average demand during lead time, the standard deviation, and the desired service level.
Reorder Point:
The reorder point represents the inventory level at which a new order should be placed to replenish stock. It is calculated by multiplying the average demand during lead time by the desired lead time and adding the safety stock.
Reorder Point = (Average Demand during Lead Time) * (Lead Time) + Safety Stock
In this case, the average demand during lead time is 20, and we need to determine the safety stock based on the desired service level.
Safety Stock:
The safety stock is the additional inventory maintained to buffer against uncertainties such as demand variability and lead time fluctuations. It provides a cushion to reduce the risk of stockouts. The safety stock is determined based on the desired service level and the standard deviation.To calculate the safety stock, we need to determine the appropriate z-score corresponding to the desired service level. For a 5% chance of stockouts, the z-score is approximately 1.645.
Safety Stock = Z-score * Standard Deviation
Safety Stock = 1.645 * 8 (assuming standard deviation is 8)
Now, we can calculate the reorder point:
Reorder Point = (Average Demand during Lead Time) * (Lead Time) + Safety Stock
Reorder Point = (20) * (1) + (1.645 * 8)
Therefore, the reorder point is 20 + 13.16 = 33.16.
The safety stock is 1.645 * 8 = 13.16.Hence, the reorder point is 33.16 and the safety stock is 13.16.
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companies receive interest revenue after extending the time for repayment of accounts receivable by
Companies receive interest revenue after extending the time for repayment of accounts receivable by charging their customers interest on the overdue amounts. When companies extend the time for repayment of accounts receivable, they are essentially allowing their customers to delay payment for a certain period of time.
This can be beneficial for both parties as it can help the customer manage their cash flow and allow the company to maintain a good relationship with their customer. However, if the customer does not pay within the agreed-upon timeframe, the company may start charging interest on the overdue amount. This interest is typically calculated as a percentage of the outstanding balance and is added to the amount owed by the customer.
By charging interest on overdue amounts, companies can generate additional revenue from their accounts receivable. This revenue is known as interest income and is recorded as a separate line item in the company's financial statements. It is worth noting that companies may also incur additional expenses when extending the time for repayment of accounts receivable. For example, they may need to hire additional staff to manage the collection process or may need to allocate resources to pursue legal action against delinquent customers. Overall, while extending the time for repayment of accounts receivable can provide benefits for both companies and their customers, it is important for companies to carefully manage the process to ensure that they are maximizing their revenue and minimizing their expenses.
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mong the examples of evidence listed below, we can say that the most reliable that the auditor can obtain is:
a. Analysis of a representative sample of client documents.
b. Analysis of the balance of an account prepared by the client.
c. A frank interview with the client.
d. The external confirmation of the balance of the accounts receivable of our client.
The most reliable evidence that the auditor can obtain among the examples listed is: d. The external confirmation of the balance of the accounts receivable of our client.
External confirmation provides independent and objective evidence directly from third parties. Confirmations are typically obtained by the auditor directly contacting external parties, such as the client's customers or financial institutions, to verify the accuracy and of the client's account balances or transactions. This type of evidence is considered more reliable because it comes from an independent source and provides direct confirmation of the information in question.
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Stagflation is:
A. a combination of high interest rates and low inflation.
B. a combination of high inflation and low or negative economic growth that (like disco) sucks and should stay in the 1970s.
C. the combination of high wages and low prices.
D. the combination of low unemployment and low prices.
Stagflation is:a combination of high inflation and low or negative economic growth that (like disco) sucks and should stay in the 1970s.
What is stagflationStagflation is an economic phenomenon characterized by a combination of high inflation and low or negative economic growth. It refers to a situation where there is both stagnant or contracting economic activity and rising prices.
Stagflation gained prominence in the 1970s and is seen as an undesirable economic condition. It is important to note that stagflation is different from other economic scenarios, such as high interest rates and low inflation or high wages and low prices.
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A call option on a stock has a strike price equal to the stock
price.
The standard deviation is 0.1
The time to maturity is 1-Year
The Interest rate is 10%
The Dividend yield = 0.
Calculate the Delta.
The delta of the call option is approximately 0.4525. This means that for every $1 increase in the stock price, the call option price is expected to increase by approximately $0.4525.
To calculate the delta of a call option, we can use the Black-Scholes option pricing model. The delta measures the sensitivity of the option price to changes in the underlying stock price. In this case, since the strike price is equal to the stock price, the call option is at-the-money.
The delta of an at-the-money call option can be approximated as the cumulative standard normal distribution function of the risk-neutral probability of the stock price ending up above the strike price at expiration.
Given the information provided, we can calculate the delta as follows:
Calculate the risk-neutral probability using the formula: Probability = (ln(S/K) + (r + (σ^2)/2) * T) / (σ * sqrt(T))
Where S is the stock price, K is the strike price, r is the interest rate, σ is the standard deviation, and T is the time to maturity.
In this case, since the strike price is equal to the stock price, the natural logarithm term becomes zero.
Calculate the delta using the formula: Delta = e^(-r * T) * Probability
Where e is the exponential function.
Substituting the given values, we have: Delta = e^(-0.10 * 1) * Probability
Since the dividend yield is zero, the risk-neutral probability simplifies to 0.5.
Delta = e^(-0.10 * 1) * 0.5
Delta = 0.5 * 0.905
Delta ≈ 0.4525
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in the keynesian model, it is assumed that, when demand for a firm's product changes, the firm changes
In the Keynesian model, it is assumed that when demand for a firm's product changes, the firm adjusts its output accordingly.
This economic theory, developed by John Maynard Keynes, emphasizes the importance of aggregate demand in determining the overall level of economic activity. When demand increases, firms typically respond by increasing production, hiring more workers, and investing in capital equipment. Conversely, when demand decreases, firms may reduce output, lay off workers, and cut back on investment.
This adjustment process plays a crucial role in stabilizing the economy, as it ensures that resources are allocated efficiently and helps maintain an equilibrium between supply and demand. In summary, the Keynesian model highlights the responsiveness of firms to changes in demand, which in turn impacts overall economic activity.
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what 1990s mcdonald's invention is still available at only three locations?
The 1990s McDonald's invention that can still be found at only three locations is the McPizza².
Determine what are the mcdonald's invention?The McPizza², introduced by McDonald's in the 1990s, is a square-shaped pizza with various toppings available. Although McDonald's experimented with pizza as an addition to their menu, it was ultimately not successful and was phased out in most locations.
However, there are still three McDonald's restaurants in the United States that continue to offer the McPizza² as part of their menu.
The McPizza² was an attempt by McDonald's to diversify their offerings and compete with other fast-food chains that served pizza. It featured a thin crust, tomato sauce, cheese, and toppings such as pepperoni, sausage, and vegetables.
Despite initial popularity, the complexities of preparing pizzas in a fast-food environment and longer wait times for customers led to its discontinuation in most locations.
Today, the McPizza² remains a nostalgic item available exclusively at three McDonald's locations, serving as a reminder of McDonald's brief foray into the world of pizza during the 1990s.
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If an insured’s claim was denied, the mortgagee can collect under the policy as long as the mortgagee meets all of the following requirements, except:
A
Pays any premium due under the policy on demand if the insured fails to do so
B
Hire a private investigator to follow the insured
C
Notifies the insurer of any change of ownership or change in risk if aware of those changes
D
Submit proof of loss to the insurer if the insured fails to do so
If an insured’s claim was denied, the mortgagee can collect under the policy as long as the mortgagee meets all of the following requirements, except: Hire a private investigator to follow the insured
What to do when the insured clain is deniedThe mortgagee can collect under an insurance policy if an insured's claim is denied, as long as the mortgagee fulfills certain requirements. These requirements include paying any premium due if the insured fails to do so, notifying the insurer of ownership or risk changes, and submitting proof of loss if the insured fails to do so.
However, hiring a private investigator to follow the insured is not a requirement for the mortgagee to collect under the policy.
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Joe plans to deposit $300 at the end of each month into a bank account for a period of 3 yr, after which he plans to deposit $400 at the end of each month into the same account for another 4 yr. If the bank pays interest at the rate of 8%/year compounded monthly, how much will Joe have in his account by the end of 7 yr? (Assume no withdrawals are made during the 7-yr period.)
Joe will have approximately $33,416.96 in his account by the end of 7 years.
To calculate the total amount Joe will have in his account by the end of 7 years, we can break down the calculation into two parts: the first 3 years with monthly deposits of $300 and the next 4 years with monthly deposits of $400. Since the interest is compounded monthly, we need to calculate the future value of each set of deposits separately and then sum them up.
Let's calculate the amounts step by step:
Part 1: Deposits of $300 per month for 3 years.
The monthly interest rate is 8%/12 = 0.0066667.
The number of months for this part is 3 * 12 = 36.
Using the future value of an ordinary annuity formula:
FV1 = P * ((1 + r)ⁿ - 1) / r,
where:
FV1 is the future value of the deposits,
P is the monthly deposit amount,
r is the monthly interest rate, and
n is the number of periods.
FV1 = $300 * ((1 + 0.0066667)³⁶ - 1) / 0.0066667 ≈ $11,191.86.
Part 2: Deposits of $400 per month for 4 years.
The monthly interest rate and the number of months for this part remain the same.
FV2 = $400 * ((1 + 0.0066667)⁴⁸ - 1) / 0.0066667 ≈ $22,225.10.
Total Future Value:
The total future value is the sum of FV1 and FV2.
Total Future Value = FV1 + FV2 ≈ $11,191.86 + $22,225.10 ≈ $33,416.96.
Therefore, by the end of 7 years, Joe will have approximately $33,416.96 in his account.
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At December 31, 2020, Marigold Corp. had 1290000 shares of common stock outstanding. In addition, Marigold had 456000 shares of preferred stock which were convertible into 740000 shares of common stock. During 2021, Marigold paid $1140000 cash dividends on the common stock and $797000 cash dividends on the preferred stock. Net income for 2021 was $6780000 and the income tax rate was 45%. The diluted earnings per share for 2021 is (rounded to the nearest penny)
$2.41.
$3.34.
$5.25.
$4.59.
Rounded to the nearest penny, the diluted earnings per share (EPS) for 2021 is $2.95. None of the provided answer choices match the calculated value.
To calculate the diluted earnings per share (EPS), we need to consider the impact of the convertible preferred stock on the number of common shares outstanding.
Step 1: Calculate the weighted average number of common shares outstanding.
Common shares outstanding = 1,290,000 shares (given)
Additional common shares from conversion of preferred stock = 740,000 shares (456,000 shares of preferred stock convertible into 740,000 common shares)
Weighted average number of common shares outstanding = Common shares outstanding + Additional common shares
Weighted average number of common shares outstanding = 1,290,000 + 740,000 = 2,030,000 shares
Step 2: Calculate the diluted EPS.
Diluted EPS = (Net Income - Preferred Stock Dividends) / Weighted Average Number of Common Shares Outstanding
Diluted EPS = ($6,780,000 - $797,000) / 2,030,000 shares
Diluted EPS = $5,983,000 / 2,030,000 shares
Diluted EPS ≈ $2.95
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The Hamster Company uses the indirect method to determine its cash flows from operating activities. Hamster reported net income of $400,000 for the year. Depreciation expense is $60,000 and gain on sale of equipment is $20,000. During the year, accounts receivable went up by $2,000 and accounts payable fell by $7,000. Determine the amount of cash generated by operating activities? a $449,000 b $400,000 c $435,000 d $431,000 e $445,000
The amount of cash generated by operating activities is $485,000 (option is not provided in the given answer choices).
To determine the amount of cash generated by operating activities using the indirect method, we start with the net income and make adjustments for non-cash items and changes in working capital.
Net Income: $400,000
Depreciation Expense: $60,000
Gain on Sale of Equipment: $20,000
Adjustments for Changes in Working Capital:
Increase in Accounts Receivable: -$2,000
Decrease in Accounts Payable: +$7,000
Cash generated by operating activities can be calculated as follows:
Cash generated by operating activities = Net Income + Depreciation Expense + Gain on Sale of Equipment - Increase in Accounts Receivable + Decrease in Accounts Payable
Cash generated by operating activities = $400,000 + $60,000 + $20,000 - $2,000 + $7,000
Cash generated by operating activities = $485,000
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Answer the following questions in a few sentences:
1. What are some assumptions that you would modify to improve your IRR or CoC
returns on a buyout deal that only regards deal structure (Hint: revenue, COGs,
SG&A, etc) cannot be adjusted since this is only regards to deal structure?
2. What are some qualitative methods one could take to verify the financials of a
company as well as project the quality of revenue in the future?
3. Based on class discussion explain how and why the quality of recurring revenue can
positively and/or adversely affect valuations.
1 Assumption include Adjusting the projected growth rates of key financial metrics, such as revenue and operating expenses 2 Conducting in-depth interviews , Analyzing the company's industry position, etc 3 quality of recurring revenue can significantly impact valuations.
a) Adjusting the projected growth rates of key financial metrics, such as revenue and operating expenses, to be more optimistic. b) Extending the forecast period to capture potential long-term growth and profitability. c) Modifying the discount rate or cost of capital to reflect a more favorable risk profile or lower required rate of return.
Qualitative methods to verify the financials of a company and project the quality of revenue in the future can include: a) Conducting in-depth interviews with management to gain insights into their business strategies, competitive advantages, and growth plans.
b) Analyzing the company's industry position, market dynamics, and competitive landscape to assess its growth potential and sustainability. c) Reviewing customer testimonials, client relationships, and contract terms to evaluate the stability and quality of revenue sources. d) Conducting site visits or market research to validate the company's claims and assess its reputation and customer satisfaction.
The quality of recurring revenue can significantly impact valuations. High-quality recurring revenue, such as subscription-based or long-term contract revenue, tends to be more predictable, stable, and sustainable. This can positively impact valuations by providing a reliable cash flow stream and reducing uncertainty for investors.
On the other hand, if a company relies heavily on one-time sales or has a high customer churn rate, it may have lower-quality recurring revenue, which can adversely affect valuations by introducing revenue volatility and increasing investor risk.
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"IFAC defines the public interest as the net benefits derived for, and procedural rigor employed on behalf of, all society in relation to any action, decision or policy."
"Publicly stating the commitment to serving the public interest over their own and/or their employer’s private interests should make auditors mindful of their role and responsibilities as guardians of the public trust in capital markets and the corporate system,"
Van Mourik, C; Humphrey, C (2019) PIE, directors and statutory auditor public interest statements – a note for the Brydon Review as cited in Brydon, D (2019) Report of the Independent Review into the Quality and Effectiveness of Audit.
Required
Critically appraise the role of the IFAC 2019 Code of Ethics in promoting the consideration of the public interest in professional accountants in business and conclude whether, in your opinion, this discharges our duty to act in the public interest.
The International Federation of Accountants (IFAC) defines the public interest as the overall benefits that society derives from actions, decisions, or policies, considering procedural rigor. The IFAC 2019 Code of Ethics plays a critical role in promoting the consideration of the public interest among professional accountants in business. It is a fundamental component of their ethical framework.
Upholding ethical standards is vital in accounting, as it ensures the proper functioning of the profession.
The IFAC Code of Ethics assists accountants in implementing principles such as integrity, objectivity, professional competence, confidentiality, and professional behavior.
These principles contribute to maintaining public trust in the accounting profession. Accountants have a responsibility not only to their employers but also to the public interest.
The primary goal of serving the public interest is to provide reliable financial information that supports investment decisions and drives economic growth.
The IFAC 2019 Code of Ethics emphasizes the significance of the public interest in accounting.
Auditors, as guardians of public trust in capital markets and the corporate system, should prioritize the public interest over personal or employer-related interests.
Thus, in my view, the IFAC 2019 Code of Ethics fulfills our obligation to act in the public interest.
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Assess the Situation Imagine that you are a customer service representative for the fictional company, GopherMe (read about it here), an online service that lets users hire local "gophers" to run errands for them.
You are communicating with a customer through the live chat feature on your website. This is your exchange thus far:
You: Hi! Thank you for contacting GopherMe. How can I help you today?
Julie: I want to hire someone to make party favors for my wedding. I've been clicking all over the site though and can't find a task category that matches my project.
You: I'm sorry to hear you're having trouble. Can you give me a little more detail about what you need a gopher to do?
Julie: I need someone who can get my pictures off my phone, print them, cut them into squares, glue them to glass tiles, and glue the tiles to magnets.
You: Neat! That sounds like a fun project. I would be happy to help you get started.
Julie: Okay. Is there someone that can get everything done today, or do I need to start looking into other options?
Summarize the conversation so far. Then explain how you would move forward in the conversation.
Some things to consider are: What do you know about Julie?
What problem is she facing? What can you tell about Julie's current state of mind? What other information do you need to fulfill her request?
Julie is a potential customer of GopherMe, an online service that lets users hire local "gophers" to run errands for them. She wants to hire someone to make party favors for her wedding, but she can't find a task category that matches her project.
Assuming that Julie's project is not in GopherMe's task categories, I would inform her that we can still provide her with the service she needs. I would then ask for her location to check if there are available Gophers in her area who can do the job for her. If there are, I would inform her of the available Gophers and ask if she wants to book one of them.
If there are none available, I would apologize and suggest other options or alternatives that she can consider. I would also ask her if she has any specific requirements or preferences, such as the budget and the timeline, to help me provide her with better options. Through the conversation, I can tell that Julie is eager to have her project done, but she's also open to exploring other options.
It's also evident that she's looking for a quick turnaround. Therefore, it's essential to manage her expectations and be transparent about the available options and their limitations. Overall, my approach would be to provide Julie with the best possible service by understanding her needs and being responsive to her inquiries.
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an increment must be released to customers or users at the end of each sprint. true or false
False. In the Scrum framework, an increment does not necessarily have to be released to customers or users at the end of each sprint.
It is ideal for the team to have a potentially releasable product increment at the end of each sprint, the decision to release it to customers or users is made by the product owner based on various factors such as the product's readiness, business needs, and market considerations.
At the end of each sprint, the development team should have completed a potentially releasable increment of the product. This means that the increment should meet the definition of "Done" agreed upon by the team, indicating that it is in a usable and demonstrable state. The decision to release the increment is typically made in collaboration with the product owner, who considers the overall product strategy and priorities.
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Treasury bill with a par value of $5000 sold at $4,750. After six month the discount of this treasury bill is 8.6%. Show your answer.
TRUE/False :
Assuming free markets, purchasing power parity refers to a situation in which the real purchasing power of a currency is the same in domestic and international trade.
TRUE/False :
When companies accumulate too much debt, they usually engage in secondary offerings to acquire money for paying the debt.
TRUE/False :
The discounted price of the treasury bill is $4,750, which is lower than its par value of $5,000. The discount on the treasury bill is 5%.
The statement about Purchasing power parity (PPP) is True.
The last statement is False.
To calculate the discount amount, we can use the formula:
Discount = Par Value - Selling Price
Discount = $5,000 - $4,750 = $250
The discount rate of 8.6% indicates the proportion of the discount relative to the par value. To calculate the discount as a percentage of the par value, we can use the formula:
Discount % = (Discount / Par Value) * 100
Discount % = ($250 / $5,000) * 100 = 5%
Therefore, the discount on the treasury bill is 5%.
True. Purchasing power parity (PPP) is an economic concept that suggests exchange rates should adjust to ensure that the same basket of goods has the same cost in different countries. In a free market with efficient arbitrage, exchange rates should reflect relative price levels and adjust to maintain purchasing power equality between currencies.
False. When companies accumulate excessive debt, they typically explore various strategies to manage their financial situation. Engaging in secondary offerings, where additional shares are issued and sold to investors, is one possible strategy to raise capital. The proceeds from the offering can be used for various purposes, such as expansion, investment, or debt repayment. However, it is not the only method employed when companies have too much debt. Other options include debt restructuring, refinancing, negotiating with creditors, asset sales, cost-cutting measures, and improving operational efficiency. The specific approach will depend on the company's circumstances, market conditions, and the availability of alternative solutions.
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Sonic Corp. produces sportwear and operate retail stores in Hong Kong, Vietnam and Italy. There are three companies established under Sonic Corp.: Sonic (Hong Kong) Co., Sonic (Vietnam) Co. and Sonic (Italy) Co. All invested capital decisions have to be submitted to Sonic Corp. for approval. The manufacturing function is located in Vietnam. Finished goods are transported to Hong Kong and Italy for sale.
The group has six divisions: research and development, product/ process design, production, marketing, distribution, and customer services. All the upstream and midstream activities are conducted in Vietnam. For downstream activities, they are taken care by retail stores operated in each of the regions.
Sonic Corp. is structuring its performance measures with following objectives for coming year.
1. Increase market share
2. Provide excellent service to customers
3. Establish competitive edge in product and process innovations
4. Develop efficient production processes with latest information technology
Sonic Corp. conducts "centralized budgeting" without employee participation. Employees are evaluated based on whether they are able to achieve the budget assigned. The Chief Executive Officer is considering whether to introduce "decentralized budgeting", inviting employees to participate in budgeting.
REQUIRED:
(a) How "centralized budgeting" could demotivate employees of Sonic Corp.? (b) Identify and explain the nature of responsibility center for (i) production division (ii) Sonic (Hong Kong) Co. What is the concept that support responsibility center management?
(c) Suggest TWO financial performance measures for Sonic (Vietnam) Co.
(d) Suggest ONE non-financial performance measures under each objective.
(e) Elaborate how ONE of the six divisions could support the performance measure suggested in (d) to achieve each of the above objectives
(a) Centralized budgeting can demotivate employees at Sonic Corp. by limiting their participation in the process, making them feel disconnected and reducing their sense of ownership and commitment.
The lack of employee participation can lead to reduced motivation, as employees may perceive their efforts as less meaningful or influential in achieving the budget goals. Additionally, centralized budgeting may not consider the valuable insights and knowledge that employees possess, resulting in less accurate and realistic budget targets.
Determine how the centralized budgeting?With centralized budgeting, the decision-making power lies solely with Sonic Corp., and employees are not actively involved in setting budget goals or providing input. This approach can create a sense of disempowerment among employees, as they are not given the opportunity to contribute their ideas and suggestions.
As a result, employees may feel less motivated to work towards the budget targets since they were not involved in the decision-making process. Furthermore, when employees are not engaged in the budgeting process, they may lack a sense of ownership and commitment towards achieving the budget goals, leading to reduced motivation and performance.
(b) (i) The nature of responsibility center for the production division of Sonic Corp. is a cost center. The production division is responsible for manufacturing and production processes. Its performance is evaluated based on cost efficiency, quality control, and meeting production targets. The concept that supports responsibility center management in this case is cost control, as the production division's objective is to achieve efficient production processes.
A cost center focuses on controlling and minimizing costs while delivering the desired level of output or service. The production division in Sonic Corp. is primarily concerned with managing costs associated with manufacturing operations, ensuring efficient utilization of resources, and optimizing production processes.
Its responsibility is to produce goods in a cost-effective manner while maintaining quality standards.
(ii) The nature of responsibility center for Sonic (Hong Kong) Co. is a profit center. Sonic (Hong Kong) Co. operates the retail stores in Hong Kong and is responsible for generating revenue and maximizing profitability. Its performance is evaluated based on sales revenue, gross profit margin, and overall profitability.
A profit center is responsible for both generating revenue and managing costs to achieve profitability. Sonic (Hong Kong) Co. operates the retail stores and focuses on driving sales, managing inventory, and controlling expenses to maximize profits.
(c) Two financial performance measures for Sonic (Vietnam) Co. could be:
(i) Return on Investment (ROI): This measure evaluates the profitability of Sonic (Vietnam) Co.'s investments by comparing the net profit generated to the invested capital. It provides insights into the efficiency and effectiveness of capital utilization.
(ii) Gross Profit Margin: This measure assesses the profitability of Sonic (Vietnam) Co.'s operations by determining the percentage of revenue remaining after deducting the cost of goods sold. It indicates the company's ability to generate profit from its products or services.
(d) Non-financial performance measures for each objective:
(i) Increase market share: Customer satisfaction index, which measures the level of satisfaction among Sonic Corp.'s customers and indicates the company's ability to attract and retain customers.
(ii) Provide excellent service to customers: Customer retention rate, which measures the percentage of customers who continue to purchase from Sonic Corp. over a specific period. It reflects the company's ability to maintain customer loyalty and satisfaction.
(iii) Establish competitive edge in product and process innovations: Number of new product launches, which measures the frequency of introducing innovative products to the market. It reflects Sonic Corp.'s commitment to staying ahead of competitors through continuous product development.
(iv) Develop efficient production processes with the latest information technology: Production cycle time, which measures the time taken to complete the entire production process from start to finish. It indicates the efficiency of Sonic Corp.'s production operations and the effectiveness of integrating information technology.
(e) The research and development division could support the objective of establishing a competitive edge in product and process innovations. By investing in research and development activities, such as market research, trend analysis, and technological advancements, the division can identify customer needs, drive product innovation, and enhance production processes.
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Drawing on theoretical arguments and empirical research, explain in detail the efficacy of the negative interest rate policy (NIRP) that has been undertaken by certain central banks. Also evaluate whether such a policy would have any adverse effect on the banking sector. [50 marks]
The efficacy of the negative interest rate policy (NIRP) undertaken by certain central banks is a complex and debated topic.
How does the negative interest rate policyimpact the economy and financial system?Negative interest rate policy (NIRP) is a monetary policy tool used by central banks to stimulate economic growth and combat deflationary pressures. It involves setting the benchmark interest rate below zero which effectively charging commercial banks for holding excess reserves.
The intention behind NIRP is to incentivize banks to lend more, encourage borrowing and spending and discourage saving. Proponents of NIRP argue that it can have several positive effects on the economy. By penalizing banks for holding excess reserves, NIRP aims to encourage them to lend more to businesses and consumers. This increased lending can boost investment, consumption, and overall economic activity.
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The table below gives information extracted from the annual accounts of Make-it (Pty) Ltd for the past two years. Make-it (Pty) Ltd: Extracts from year-end accounts: Year 1 R'000 Year 2 R'000 Stocks: Raw materials Work-in progress Finished goods Purchases Cost of goods sold Sales Debtors Trade creditors 276 186 285 1 440 2 196 2 376 594 252 291 194 259 1 404 1 944 2 160 562 210 You are required to: Answer the following questions: a) Calculate the length of the working capital cycle for years 1 and 2 assuming 365 days in the year and using end of year working capital balances, not averages. b) Explain possible actions that might be taken to reduce the length of that cycle and the possible disadvantages of each. c) Assume that the company is negotiating to do business with a new supplier who has offered credit terms of 3/15, net 30. The financial manager is planning to delay payment for an additional 10 days i.e. to only settle the account after 40 days. The current bank overdraft rate for the firm is 25% per annum. Calculate the effective cost of finance provided by this supplier and comment on the financial manager’s plans.
d) An aspect of working capital policy that requires managerial attention is the manner in which the items are financed. Discuss aggressive policy in this regard
The duration it takes to convert current liabilities (such as acquired shares) and net current assets (such as cash) is known as the working capital cycle (WCC).
A long cycle is keeping money invested for a longer period of time without seeing a return. Short cycles enable your company to be more adaptable and to release funds more quickly.
Accounts Receivable, Inventory, Accounts Payable, and Cash Conversion Cycle are the four major parts of the working capital cycle.
Inventory Days + Receivable Days - Payable Days is the formula for the working capital cycle. Your inventory days aren't always just how long you have an item in stock until it sells.
Statement of combined income or loss for the fiscal year ended September 30, 2013
$’000
(4,000 + 9,000 intra-group sales) - revenue (110,000 + 66,000 multiplied by 6/12) 130,000
Sales expense (w (i)) 109,300
––––––––
total revenue of 20,700
Costs associated with distribution (3,000 + (2,000 x 6/12)) (4,000)
Administrative costs ($5,250 plus $2,400 multiplied by six (12) minus $3,400 of badwill ($3,400) ($3,050)
Equity investment losses (200)
A reduction in the contingent consideration (1,800 – 1,500) 300
(250) Finance charges ––––––––
13,500 in profit before taxes
Tax liability (3,500 - (1,000 x 6/12)) (3,000) ––––––––
10,500 in profit for the year.
––––––––
Profit for the year due to:
Owners of the parent's equity Losses from non-controlling interest totaling 11,250 (see below) (750) ––––––––
10,500
––––––––
For the fiscal year that concluded on September 30, 2013, Southstar's adjusted post-acquisition losses totaled $3 million (4,600 x 6/12 + (100 additional depreciation + 600 URP)).
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