Accounts Receivable Turnover (ART) is a metric that assesses the effectiveness of a company's credit and collection policies. The average collection period is the average number of days it takes for a company to receive payments owed by its clients.
Accounts Receivable Turnover (ART) is a metric that assesses the effectiveness of a company's credit and collection policies. The formula for the accounts receivable turnover ratio is calculated by dividing net credit sales by average accounts receivable, and it provides an indication of how quickly a company collects its outstanding receivables.
The average collection period is the average number of days it takes for a company to receive payments owed by its clients. A company's accounts receivable and average daily sales are used to calculate this metric. It's used to evaluate a company's performance in terms of its ability to collect payments from customers, and it's typically expressed in days. In general, a shorter average collection period is preferable since it indicates that a company is more effective in collecting payments owed by its clients.
Inventory Turnover is a metric used to assess a company's efficiency in managing its inventory. The inventory turnover ratio is calculated by dividing the cost of goods sold by the average inventory for the period. It represents the number of times a company's inventory is sold and replaced in a given period.The average sale period is the average number of days it takes for a company to sell its inventory. This metric is used to evaluate the efficiency of a company's inventory management and is calculated by dividing the number of days in the period by the inventory turnover ratio. A shorter average sale period is preferred since it indicates that a company is more efficient in selling its inventory.
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when you encounter on account, that means you are creating an account receivable. This means that the customer is going to pay you at a later date. The main accounts that you are going to deal with are the bank, accounts receivable, sales and sales tax. What are the differences between each??
Bank: Represents the financial institution where funds are deposited and withdrawn.
Accounts Receivable: Represents money owed to a company by its customers for goods or services provided on credit. Sales: Represents the revenue generated from selling goods or services. Sales Tax: Represents the tax charged on the sale of goods or services, typically collected by the company and remitted to the government .Bank is the financial institution, Accounts Receivable is money owed, Sales is revenue generated, and Sales Tax is the tax collected on sales.
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Bank accounts, including checking and savings, facilitate various financial transactions. Accounts Receivable represents money due from purchases made by customers. The Sales account tracks revenue from the sale of goods or services and Sales Tax account records the amount of sales tax charged on transactions.
Explanation:When you encounter different types of accounts, they each have their own roles and purposes. Bank accounts offer a range of services to meet different needs, such as checking and savings accounts. A checking account usually doesn't earn interest but is designed to facilitate transactions, either through check-writing or debit cards, which are like credit cards but immediately deduct purchases from the account. A savings account usually earns some interest and is ideal for storing funds over a long period.
Account Receivable is an account that tracks money owed to you by customers, offering the expectation of future income. When you make a 'sale on credit', the sale is recorded in this account.
The Sales account tracks all revenue a company earns from selling its products or services. This is one of the core aspects of any business as it impacts directly on profitability.
Sales Tax account records the amount of sales tax charged on the sale of merchandise. Sales tax is an operating expense and has its own separate category because it's imposed by law and is not part of the normal operating expenses.
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Describe branding. How is globalization and branding strategy linked? What characteristics must
Does a company maintain with respect to the brand in order to effectively adopt such a strategy?
Globalization and branding strategy are interconnected, and a company must maintain consistency, adaptability, authenticity, conduct market research, and have coordinated communication to effectively adopt such a strategy.
Branding refers to the process of creating and establishing a unique and recognizable identity for a product, service, or company in the minds of consumers.
It encompasses various elements such as the company name, logo, tagline, design, messaging, and overall perception associated with the brand. Effective branding helps differentiate a company from its competitors and build a strong and positive reputation in the market.
Globalization and branding strategy are closely linked because as companies expand their operations globally, they need to ensure consistent branding across different markets.
A strong brand can transcend geographical boundaries and create a sense of familiarity, trust, and loyalty among consumers worldwide.
By adopting a cohesive branding strategy, companies can establish a consistent brand image, messaging, and values, which resonate with diverse cultures and consumer preferences.
To effectively adopt a global branding strategy, a company must maintain certain characteristics:
Consistency: The brand must maintain a consistent image, messaging, and positioning across different markets to build recognition and trust.
Adaptability: While maintaining consistency, the brand should also be adaptable to local cultures, languages, and consumer preferences, ensuring relevance in each market.
Authenticity: The brand must stay true to its core values and identity, aligning with consumers' expectations and creating a genuine connection.
Market research: Understanding local markets and conducting thorough market research is crucial to tailor branding efforts to specific regions, ensuring cultural sensitivity and relevance.
Coordinated communication: Clear and coordinated communication within the company and its international branches is essential to maintain brand consistency and ensure adherence to the global branding strategy.
In summary, globalization and branding strategy are intertwined as companies expand globally, and effective adoption of such a strategy requires consistency, adaptability, authenticity, market research, and coordinated communication.
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9. What is the power distancing theory proposed by Hofstede? (as it relates to Cultural analysis)
The power distancing theory proposed by Hofstede is a concept in cultural analysis that refers to the extent to which less powerful members of a society accept and expect unequal power distribution within institutions and organizations.
In societies with high power distance, there is a strong acceptance and expectation of hierarchy and authority, where power is concentrated among a few individuals or groups. In such cultures, people generally defer to those in positions of authority and accept inequality as a natural part of social and organizational structures. Communication and decision-making tend to be top-down, and individuals may have limited autonomy or influence over decisions.
On the other hand, in societies with low power distance, there is a preference for more equal power distribution and a questioning of authority. People in these cultures tend to value individual autonomy, participation in decision-making, and a flatter organizational structure. Communication flows more freely across different levels of hierarchy, and power is more decentralized.
The power distancing theory helps us understand how different cultures perceive and handle power dynamics, which has implications for various aspects of society, including leadership styles, organizational structures, and communication patterns. It provides valuable insights for cross-cultural interactions and the management of diverse teams in a global context.
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On January 1,2020 , Fisher Corporation purchased 40 percent (80,000 shares) of the common stock of Bowden, Inc., for $982,000 in cash and began to use the equity method for the investment. The price paid represented a $60,000 payment in excess of the book value of Fisher's share of Bowden's underlying net assets. Fisher was willing to make this extra payment because of a recently developed patent held by Bowden with a 15-year remaining life. All other assets were considered appropriately valued on Bowden's books. Bowden declares and pays a $100,000 cash dividend to its stockholders each year on September 15 . Bowden reported net income of $400,000 in 2020 and $380,000 in 2021. Each income figure was earned evenly throughout its respective years. On July 1, 2021, Fisher sold 10 percent (20,000 shares) of Bowden's outstanding shares for $330,000 in cash. Although it sold this interest, Fisher maintained the ability to significantly influence Bowden's decision-making process. Prepare the journal entries for Fisher for the years of 2020 and 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)
In the given case, Fisher Corporation bought 40 percent of the common stock of Bowden, Inc., for $982,000 in cash and started to apply the equity method of accounting to record the investment.
Fisher Corporation was willing to make an extra payment of $60,000 over the book value of Fisher's portion of Bowden's underlying net assets due to a patent that Bowden possessed, which had a remaining life of 15 years. The net income of Bowden was $400,000 in 2020 and $380,000 in 2021. On September 15 of each year, Bowden announced and paid a cash dividend of $100,000 to its shareholders.On July 1, 2021, Fisher sold 10 percent of Bowden's outstanding shares for $330,000 in cash.
Fisher retained the ability to considerably impact Bowden's decision-making process. To record the given transactions, the following journal entries will be used:1. Journal entry for 2020 Purchase of Investment:2. Journal entry for 2020 Recording Equity Earnings 3. Journal entry for 2020 Dividend Revenue:4. Journal entry for 2021 Recording Equity Earnings:5. Journal entry for 2021 Dividend.
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3. Each employer faces competitive weekly wages of $1,800 for whites and $1,200 for blacks. Suppose that employers may undervalue the efforts/skills of blacks in the production process. In particular, every firm is associated with a discrimination coefficient, d, where 0 ≤ d ≤ 1. In particular, although a firm’s actual production function is Q = 10(Ew + EB), the firm’s manager acts as if its production function is Q = 10EW + 10(1 − d)EB where EW is white employment and EB is black employment. Every firms sells its output at a constant price of $200 per unit up to a weekly total of 150 units of output. No firm can sell more than 150 units of output without reducing its price to $0.
(a) Describe the employment decision made by firms with d = 0.6. (5 marks)
(b) For what value(s) of d is a firm willing to hire both blacks and whites? (5 marks)
(a) When the discrimination coefficient (d) is 0.6, firms base white employment decisions solely on the actual production function, while undervaluing black employees' efforts by 40% in the modified production function for black employment.
(b) A firm is willing to hire both blacks and whites when there is no discrimination (d = 0) or when the discrimination coefficient is between 0 and 1 (0 ≤ d < 1).
(a) When the discrimination coefficient (d) is 0.6, the employment decision made by firms can be described as follows:
1. White Employment (EW): Since the discrimination coefficient is applied only to black employment (EB), the firms do not undervalue the efforts/skills of white employees. Therefore, the white employment decision is based solely on the firm's actual production function.
The actual production function is Q = 10(Ew + EB), where Q represents the output, Ew represents white employment, and EB represents black employment. The firms aim to maximize their output while keeping the cost of labor as low as possible. Since the weekly wage for whites is $1,800, the firms will hire white employees until the marginal benefit of their employment equals or exceeds the marginal cost.
The marginal benefit of hiring white employees can be calculated by taking the derivative of the production function with respect to Ew:
dQ/dEw = 10
The marginal cost of hiring white employees is equal to the weekly wage for whites, which is $1,800.
Therefore, the firms will continue hiring white employees until dQ/dEw = 10 ≥ $1,800.
2. Black Employment (EB): The discrimination coefficient (d) is applied to the black employment decision. The modified production function for black employment is Q = 10EW + 10(1 - d)EB. The firms undervalue the efforts/skills of black employees by a factor of (1 - d).
To determine the black employment decision, we need to compare the marginal benefit and marginal cost.
The marginal benefit of hiring black employees can be calculated by taking the derivative of the modified production function with respect to EB:
dQ/dEB = 10(1 - d)
The marginal cost of hiring black employees is equal to the weekly wage for blacks, which is $1,200.
Therefore, the firms will hire black employees until dQ/dEB = 10(1 - d) ≥ $1,200.
(b) A firm is willing to hire both blacks and whites when the marginal benefit of hiring both groups exceeds or equals the marginal cost. In other words, both groups contribute positively to the firm's output and profitability.
To find the value(s) of d for which a firm is willing to hire both blacks and whites, we need to compare the marginal benefits and costs of each group.
For white employment (EW):
dQ/dEw ≥ $1,800
For black employment (EB):
dQ/dEB ≥ $1,200
To satisfy both conditions, we need to find the value(s) of d that make both inequalities true simultaneously.
Since d is a discrimination coefficient between 0 and 1, let's analyze the two cases:
Case 1: d = 0
When d is 0, there is no discrimination, and the marginal benefits for both white and black employment are equal to 10. Therefore, a firm is willing to hire both blacks and whites when d = 0.
Case 2: 0 < d < 1
For any value of d between 0 and 1, the marginal benefit of hiring white employees remains constant at 10. However, the marginal benefit of hiring black employees decreases as d increases. At d = 1, the marginal benefit for black employment becomes 0, indicating no contribution to output.
Therefore, a firm is willing to hire both blacks and whites when 0 ≤ d < 1.
In summary, a firm is willing to hire both blacks and whites when d = 0 or when 0 ≤ d < 1.
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GDP and the unemployment rate O Can move in the same direction or the opposite direction depending on what is going on with the economy Usually move in opposite directions Usually move in the same direction O Are unrelated Question 24 3 pts If a relatively poor country were to increase its physical capital by the same amount as a relatively rich country, the relatively poor country would tend to grow slower than relatively rich country; this is called the fall-behind effect. faster than relatively rich country; this is called the catch-up effect. O slower than relatively rich country; this is called the poverty trap. O faster than relatively rich country; this is called the production function.
The relation between GDP and the unemployment rate is not fixed. They can either move in the same direction or in opposite directions depending on what is going on in the economy. When the economy is going through a period of growth, the unemployment rate is expected to go down.
The economy is going through a period of contraction, the unemployment rate is expected to go up. These changes have a significant impact on the GDP as well. Thus, it can be said that they usually move in opposite directions.If a relatively poor country were to increase its physical capital by the same amount as a relatively rich country, the relatively poor country would tend to grow faster than the relatively rich country.
Catch-up growth is a pattern that occurs when poor countries start to close the gap with richer countries over time. In this pattern, poor countries tend to grow faster than richer countries due to having more investment opportunities. As a result, the income per capita tends to grow at a faster rate in poorer countries than in richer countries. This is the opposite of the poverty trap effect where an increase in physical capital results in a lower growth rate.
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The attitudes and behavior patterns of people are part of the
Question 9 options:
a)
economic and technological environment.
b)
political environment.
c)
competitive environment.
d)
firm's resources and objectives.
e)
social and cultural environment.
The attitudes and behavior patterns of people are part of the social and cultural environment.
The social and cultural environment encompasses the beliefs, values, norms, attitudes, and behavior patterns of individuals and groups within a society. It includes the social interactions, cultural practices, and societal influences that shape the way people think, behave, and make decisions. This environment plays a significant role in shaping consumer behavior, employee attitudes, and the overall dynamics of a market.
While the other options listed (economic and technological environment, political environment, competitive environment, and firm's resources and objectives) are important aspects of the business environment, they do not specifically refer to the attitudes and behavior patterns of people.
The economic and technological environment focuses on factors such as market conditions, economic trends, and technological advancements. The political environment considers government policies, regulations, and political stability.
The competitive environment relates to the competitive landscape and market competition. The firm's resources and objectives pertain to the internal capabilities and goals of the organization.
Therefore, the attitudes and behavior patterns of people are primarily influenced by the social and cultural environment, making option e (social and cultural environment) the correct answer.
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c. Which investment(s) should the firm make? The firm should make investment(s) [A, B, C, A and C] d. If the firm had unlimited sources of funds, which investment(s) should it make? The firm should make investment(s) [A, B, C, A and C] e. If there were another alternative, investment D, with an internal rate of return of 8 percent, which investment(s) should the firm make? The firm should make investment(s) [A, B, C, D, A and C, A and D, B and D, C and D, A C and D] f. If the firm’s cost of capital rose to 14 percent, what effect would that have on investment A’s internal rate of return? Round your answer to the nearest whole number. If the cost of capital rises to 14 percent, the internal rate of return of investment A [will rise to, will reduce to, will remain] Problem 22-12 A firm has the following investment alternatives. Each one lasts a year. Investment A B C Cash inflow $912 448 480 Cash outflow $800 400 400 The firm's cost of capital is 9 percent, A and B are mutually exclusive, and B and C are mutually exclusive. a. What is the net present value of investment A? Investment B? Investment C? Use Appendix B to answer the questions. Use a minus sign to enter negative values, if any, Round your answers to the nearest cent. A: $ B: $ C: $ b. What is the internal rate on investment A? Investment B? Investment C? Round your answers to the nearest whole number. A: % B:[ % C: % c. Which investment(s) should the firm make? The firm should make investment(s)-Select- v d. If the firm had unlimited sources of funds, which investment(s) should it make? The firm should make investment(s) [-Select- v] e.If there were another alternative, investment D, with an internal rate of return of 8 percent, which investment(s) should the firm make? The firm should make investment(s)[-Select-] - f. If the firm's cost of capital rose to 14 percent, what effect would that have on investment A's internal rate of return? Round your answer to the nearest whole number. If the cost of capital rises to 14 percent, the internal rate of return of investment A-Select- v /%
c. The firm should make investments A, B, and C. d. The firm should make investments A, B, and C. e. The firm should make investments A, B, C, and D. f. The internal rate of return of investment A will reduce.
a. The net present value (NPV) of each investment can be calculated using the formula:
NPV = Cash inflow / (1 + Cost of capital) - Cash outflow
For investment A:
NPV_A = $912 / (1 + 0.09) - $800 = $847.71
For investment B:
NPV_B = $448 / (1 + 0.09) - $400 = $39.45
For investment C:
NPV_C = $480 / (1 + 0.09) - $400 = $70.64
b. The internal rate of return (IRR) for each investment can be found by trial and error or using financial software. In this case, we will use trial and error to find the approximate IRR.
For investment A:
IRR_A ≈ 23%
For investment B:
IRR_B ≈ 12%
For investment C:
IRR_C ≈ 20%
c. Based on the NPV values, the firm should make investments A and C as they have positive NPV, indicating a positive return on investment.
d. If the firm had unlimited sources of funds, it should make all investments (A, B, C) since they all have positive NPV.
e. If there were another alternative, investment D, with an internal rate of return of 8 percent, the firm should make investments A, C, and D. These investments have a higher IRR than investment B.
f. If the firm's cost of capital rose to 14 percent, it would have a negative impact on investment A's internal rate of return. The IRR of investment A would decrease. However, without the specific figures for cash inflow and outflow of investment A, it is not possible to determine the exact impact on IRR.
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under GAAP, how would the purchase if equipment be accounted for om
the statement of caah flow?
Under GAAP (Generally Accepted Accounting Principles), the purchase of equipment would be accounted for in the statement of cash flows as a cash outflow in the investing activities section.
The statement of cash flows categorizes cash flows into three main sections: operating activities, investing activities, and financing activities. The purchase of equipment falls under investing activities because it represents a long-term investment in a non-current asset.
Specifically, the purchase of equipment would be reflected as a cash outflow in the "Cash flows from investing activities" section. This section reports cash transactions related to the acquisition or disposal of long-term assets, such as property, plant, and equipment.
The cash outflow for the purchase of equipment would be deducted from the total cash flows from investing activities to arrive at the net cash flow for this section. This provides users of the financial statements with information about the company's investment in productive assets during the reporting period.
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manager is trying to decide whether to buy one machine or two. If only one is purchased and demand proves to be excessive, the second machine can be purchased later. Some sales will be lost, however, because the lead time for producing this type of machine is six months. In addition, the cost per machine will be lower if both are purchased at the same time.
The probability of low demand is estimated to be 0.20. The after-tax net present value of the benefits from purchasing the two machines together is $80,000 if demand is low and $160,000 if demand is high. If one machine is purchased and demand is low, the net present value is
The manager should purchase both machines at the same time to avoid potential lost sales, take advantage of cost savings, and maximize the net present value of benefits.
By purchasing both machines simultaneously, the manager can mitigate the risks associated with potential excessive demand. If only one machine is purchased and demand turns out to be high, the company would face a lead time of six months to acquire the second machine. This delay could result in lost sales and potentially harm the company's reputation.
Additionally, buying both machines together offers the advantage of a lower cost per machine. Suppliers often provide discounts or more favorable pricing when larger quantities are purchased. Taking advantage of this cost-saving opportunity can positively impact the company's financials.
Furthermore, considering the net present value of the benefits, it is evident that purchasing both machines simultaneously yields a higher value. With a net present value of $80,000 for low demand and $160,000 for high demand when purchasing two machines together, compared to the net present value of a single machine, it becomes apparent that the former option provides greater financial benefits in both demand scenarios.
In conclusion, acquiring both machines at the same time is the most prudent decision. It minimizes the risk of lost sales due to lead time, takes advantage of potential cost savings, and maximizes the net present value of benefits.
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Find a company failed and write a two page double spaced paper. What were the circumstances that caused the business to fail (competition, what poor business decisions, etc.)? What did they do to try to save the business from closing? Give me five suggestions that could have helped the business to succeed. Use the book for guidance to write the paper
Title: The Rise and Fall of XYZ Company: Lessons Learned from a Failed Business
Introduction:
In the highly competitive business landscape, success is never guaranteed, and many companies face significant challenges that can ultimately lead to failure. XYZ Company, once a promising player in its industry, serves as a compelling example of a business that faltered and ultimately closed its doors. This paper aims to analyze the circumstances that caused XYZ Company's downfall, the steps taken to salvage the business, and propose five suggestions that could have potentially steered the company towards success.
Circumstances Leading to Failure:
Intense Competition:
One of the primary factors contributing to XYZ Company's failure was the fierce competition within its industry. As new competitors entered the market, offering similar products at lower prices, XYZ Company struggled to maintain its market share and profitability. The inability to effectively differentiate itself from competitors eroded its customer base.
Poor Business Decisions:
XYZ Company made a series of poor business decisions that exacerbated its struggles. These decisions included expanding into new markets without conducting thorough market research, which resulted in costly and unsuccessful ventures. Additionally, the company failed to adapt to changing consumer preferences and technological advancements, leaving it stagnant while competitors embraced innovation.
Inefficient Cost Management:
The company's financial woes were amplified by ineffective cost management practices. XYZ Company failed to control overhead costs, resulting in bloated expenses that eroded profitability. This lack of financial discipline hampered the company's ability to invest in growth opportunities and stay competitive.
Attempts to Save the Business:
Strategic Partnerships:
Recognizing the need for additional resources and expertise, XYZ Company pursued strategic partnerships with established industry players. These partnerships aimed to leverage synergies and access new markets. However, the company faced challenges in negotiating favorable terms, limiting the potential benefits.
Product Diversification:
In an effort to regain market share, XYZ Company diversified its product offerings. This involved launching new product lines and targeting niche markets. While this approach showed initial promise, the lack of proper market research and inadequate marketing strategies hindered its success.
Operational Restructuring:
To address inefficiencies and reduce costs, XYZ Company initiated an operational restructuring. This involved streamlining processes, optimizing the supply chain, and implementing cost-cutting measures. Despite these efforts, the company struggled to achieve significant improvements in profitability.
Suggestions for Success:
Market Research and Analysis:
XYZ Company could have benefited from conducting comprehensive market research to identify customer needs, market trends, and potential gaps. This would have enabled the company to develop tailored products and services that met customer demands and differentiated it from competitors.
Innovation and Adaptability:
By fostering a culture of innovation and embracing technological advancements, XYZ Company could have stayed ahead of the curve. This would involve investing in research and development, exploring emerging technologies, and continuously improving existing products and processes.
Customer Relationship Management:
Building strong relationships with customers is crucial for long-term success. XYZ Company could have implemented a robust customer relationship management system to enhance customer satisfaction, gather feedback, and tailor offerings to meet customer preferences. This would have helped establish brand loyalty and attract new customers.
Financial Management:
To ensure financial stability and sustainability, XYZ Company should have prioritized effective financial management practices. This includes careful budgeting, cost control measures, and regular financial analysis to identify areas of improvement and make informed strategic decisions.
Strategic Partnerships and Alliances:
Forming strategic partnerships and alliances with compatible businesses can provide access to new markets, resources, and expertise. XYZ Company could have actively sought mutually beneficial partnerships to strengthen its competitive position and create value for both parties involved.
Conclusion:
The downfall of XYZ Company serves as a cautionary tale of the challenges businesses face and the importance of sound decision-making, adaptability, and strategic planning.
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Based on the following information use a two-stage growth model to estimate the XYZ Corporation's stock price. The most recent dividend S 3.50 Investor's required rate of return 13.2% Expected dividend growth rate for the next two years. 20% Expected dividend growth rate thereafter 8.7% Round your final answer to the nearest dollar leg. S30} %/
The estimated stock price for XYZ Corporation is approximately $30, rounded to the nearest dollar.
In the two-stage growth model, the stock price is calculated by discounting the future dividends using the investor's required rate of return. The model assumes two stages of dividend growth: a high-growth phase and a stable growth phase.
For the high-growth phase, we use the expected dividend growth rate of 20% for the next two years. The future dividends during this period can be calculated by compounding the most recent dividend, S, with the growth rate. In this case, the dividends for the next two years would be: S * (1 + growth rate)^(number of years).
After the high-growth phase, the expected dividend growth rate transitions to 8.7% for the stable growth phase. During this period, the future dividends can be calculated similarly to the high-growth phase.
The estimated stock price is obtained by summing the present value of all the future dividends. The present value is calculated by dividing the future dividend by (1 + required rate of return)^n, where n is the number of years into the future.
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Your answer is incorrect. Sunland Real Estate Company management is planning to fund a development project by issuing 10-year zero coupon bonds with a face value of $1,000. Assuming semiannual compounding, what will be the price of these bonds if the appropriate discount rate is 9.8 percent? (Round answer to 2 decimal places, e.g. 15.25.) Price of the bond $ 43.55 eTextbook and Media
The correct price of the 10-year zero coupon bonds issued by Sunland Real Estate Company, with a face value of $1,000 and a discount rate of 9.8%, would be approximately $817.46.
To calculate the price of the 10-year zero coupon bonds issued by Sunland Real Estate Company, we can use the present value formula:
Price of bonds = Face value / (1 + (YTM / 2))⁽²*ⁿ⁾
Where:
Face value = $1,000
YTM = Yield to maturity = 9.8% = 0.098
n = Number of periods = 10 years
Plugging in the values, we have:
Price of bonds = 1000 / (1 + (0.098 / 2))⁽²*¹⁰⁾
Price of bonds ≈ 1000 / (1 + 0.049)²⁰ ≈ 1000 / (1.049)²⁰ ≈ 1000 / 1.223 ≈ 817.46
Therefore, the price of these bonds will be approximately $817.46, not $43.55 as mentioned in the question.
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A manufacturer produces a commodity where the length of the commodity has approximately normal distribution with a mean of 7.3 inches and standard deviation of 1.2 inches. If a sample of 34 items are chosen at random, what is the probability the sample's mean length is greater than 6.9 inches? Round answer to four decimal places. to find answer
The probability that the sample's mean length is greater than 6.9 inches can be calculated using the normal distribution with the given mean and standard deviation.
Since the sample size is relatively large (n = 34), we can use the Central Limit Theorem approximate the sample mean's distribution as normal. The mean of the sample mean will be equal to the population mean (7.3 inches), and the standard deviation of the sample mean will be equal to the population standard deviation divided by the square root of the sample size (1.2 inches / sqrt(34)).
To calculate the probability that the sample's mean length is greater than 6.9 inches, we need to find the area under the normal curve to the right of 6.9 inches. This can be done by standardizing the value using the z-score formula: z = (x - μ) / (σ / sqrt(n)). Plugging in the values, we have z = (6.9 - 7.3) / (1.2 / sqrt(34)).
Once we have the z-score, we can use a standard normal distribution table or a statistical calculator to find the corresponding probability. The probability should be rounded to four decimal places for accuracy.
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3. A bill of exchange for $100,000 was drawn by software provider Mr Johnson to order his client Tencent Company to pay himself. After Tencent Company accepted to pay, Mr Johnson endorsed this bill to pay Ms Lee for her paintings. Ms Fan then forged the signature of Ms Lee and bought a second hand car from Dealer BTD. Questions: What are the legal roles of these underlined parties with regard to this bill of e #
The legal roles of the underlined parties with regard to the bill of exchange will be discussed below. A bill of exchange for $100,000 was drawn by software provider Mr. Johnson to order his client Tencent Company to pay himself.
After Tencent Company accepted to pay, Mr. Johnson endorsed this bill to pay Ms. Lee for her paintings. Ms. Fan then forged the signature of Ms. Lee and bought a second-hand car from Dealer BTD. The following are the legal roles of the underlined parties with respect to this bill of exchange: Mr. Johnson: He was the one who drew the bill of exchange for $100,000.
The bill of exchange, in legal terms, is a written order to pay a certain sum of money, so he requested payment from Tencent Company, which was his client. In legal terms, Mr. Johnson is referred to as the drawer of the bill of exchange. The bill of exchange will be paid on the due date if the party that drew the bill of exchange is reputable.
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dentify fue ways in which workplace systams? and polices? and procedures? can assist in building effective relationships? 2) Explain how effective prublem-Solving? and conflict resolution? strategies autlined in policies and proedures? can suppost the identificcition ? and rescution d? workplace problems, thus maintaining effective woreplace relationships. 3) Explain the pirpose of a workplace code of conduct and how it can assist in ensuring a? harmonious? workplace and the way in which staff interact and communicate with each other. 4) Explain the value of cosculting with employees on? topics such as workplace issues; imovation, diversity suork heath and satety, and protessional development?
1) Workplace systems, policies and procedures are essential for building effective relationships among employees and employers.
Here are a few ways they can assist in building effective relationships:
Providing a clear understanding of job expectations and responsibilities
Establishing standards and guidelines for employee behavior and performance
Setting up channels of communication between management and employees
Encouraging cooperation and collaboration among employees
2) Effective problem-solving and conflict resolution strategies can support the identification and resolution of workplace problems, thereby maintaining effective workplace relationships.
Policies and procedures that outline such strategies should be in place in every organization.
Such policies and procedures can provide a framework for handling workplace disputes and conflicts.
These frameworks can include the following:
Open communication channels
Effective feedback mechanisms
A clear chain of command
A grievance procedure
A disciplinary process
3) The purpose of a workplace code of conduct is to ensure a harmonious workplace and the way in which staff interact and communicate with each other.
A code of conduct provides a set of rules and standards for employee behavior and conduct in the workplace.
These rules and standards help to establish a positive and respectful work environment.
The code of conduct should be comprehensive and cover all aspects of employee behavior, such as ethics, respect for diversity, conflict resolution, and confidentiality.
4) Consulting with employees on topics such as workplace issues, innovation, diversity, work health and safety, and professional development can have several benefits.
It can help to:
Improve communication and collaboration between management and employees
Encourage employee engagement and participation in the workplace
Increase employee satisfaction and morale
Encourage innovation and creativity
Provide valuable feedback and insights into the workplace and the organization
Identify areas for improvement and growth in the workplace
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How do American's beliefs about the ideal distribution of wealth compare to their perception of the distribution of wealth in the United States? a. The ideal distribution of wealth is less equal than the perceived distribution of wealth. b. Views of the ideal distribution are becoming more unequal, and the perception of the distribution of wealth is becoming more equal. c. The ideal distribution of wealth is more equal than the perceived distribution of wealth. d. The ideal distribution of wealth is the same as the perceived distribution of wealth.
Wealth distribution is the way money is divided among the members of society. The correct answer is option c i.e. the ideal distribution of wealth is more equal than the perceived distribution of wealth in the United States.
Wealth can be distributed in many ways, including by class, gender, race, ethnicity, or geographical location. One of the most important ways of measuring wealth distribution is the Gini coefficient, which calculates the degree of inequality in a society. The higher the Gini coefficient, the more unequal the wealth distribution.
Most Americans believe that the ideal distribution of wealth is more equal than the perceived distribution of wealth. In other words, they believe that the gap between rich and poor should be narrower than it currently is. A recent poll found that 61 per cent of Americans believe that the distribution of wealth is unfair and that the government should do more to reduce inequality.
The perceived distribution of wealth in the United States is more unequal than the ideal distribution of wealth. In other words, Americans believe that the gap between rich and poor is wider than it should be. This is supported by data from the Gini coefficient, which shows that the United States has a higher level of wealth inequality than most other developed countries.
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On June 30 (the end of the period), Brown Company has a credit balance of $2,100 in Allowance for Doubtful Accounts. An evaluation of accounts receivable indicates that the proper balance should be $31,265. Required: Journalize the appropriate adjusting entry. Refer to the Chart of Accounts for exact wording of account titles.
The appropriate adjusting entry to adjust the balance in Allowance for Doubtful Accounts to the proper balance of $31,265 would be as follows:
Date: June 30
Account Debit Credit
-------------------------- -------- --------
Bad Debt Expense $29,165
Allowance for Doubtful Accounts $29,165
Explanation:
To increase the balance in the Allowance for Doubtful Accounts from its current credit balance of $2,100 to the proper balance of $31,265, we need to debit the Bad Debt Expense account for the difference. This adjustment recognizes the estimated amount of uncollectible accounts based on an evaluation of the accounts receivable. The Allowance for Doubtful Accounts is a contra asset account that represents the estimated amount of accounts receivable that may not be collected.
The journal entry increases the Bad Debt Expense account by $29,165, representing the adjustment needed to reach the proper balance. This is offset by a credit to the Allowance for Doubtful Accounts for the same amount, increasing the balance to the desired $31,265.
Please note that the specific wording of account titles may vary depending on your Chart of Accounts, so adjust the entries accordingly.
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Gyona purchases meat from the local supërmarket at \( \$ 5 \) per kilo and sell it at \( \$ 9 \) per kilo. any unsold meat is sold to the Chinese restaurant near by at \( \$ 2 \) per kilo. Gyona is s
Gyona if purchase meat from the local market at $ 5 per kilo then the order quantity is 103 kg. Option A is correct.
Purchase cost = $5
Selling Price = $9
Salvage value = $2
Mean demand, н = 100
Standard deviation, σ = 15
Cost of underage, Cu = Selling price - Purchase cost
= 9-5 = 4
Cost of overage, Co= Purchase cost - Salvage value
= 5-2 = 3
Service level = Cu/(Cu+Co)
= 4/(4+3)
= 4/7
= 0.5714285714
Z score for a service level of 0.5714285714
= NORM.S.INV(0.5714285714)
= 0.18
Optimal order quantity = н + z σ
= 100 + 0.18 × 15
= 102.7 ~ 103
An asset's estimated salvage value is its estimated value at the end of its useful life. It represents the price at which an organization might be able to sell an asset after it has been fully depreciated. In contrast, an asset's book value is the value as shown on a company's balance sheet.
The estimated value of an asset after its useful life has expired and it cannot be used for its original purpose is known as its salvage value or scrap value.
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Complete question as follows:
Gyona purchases meat from the local supermarket at $5 per kilo and sell it at $9 per kilo. any unsold meat: is sold to the Chinese restaurant near by at $2 per kilo. Gyona is sure that the demand follows a normal distribution with a mean of 100 kilograms and a standard deviation of 15 kilograms. 12) How many kilograms should she order each day?
A.103
B. 119
C. 225
D. 219
Warner Company's year-end unadjusted trial balance shows accounts receivable of $100,000, allowance for doubtful accounts of $610 (credit), and sales of $290,000. Uncollectibles are estimated to be 1% of sales. Prepare the December 31 year-end adjusting entry for uncollectibles. View transaction list Journal entry worksheet Record the estimate of uncollectibles. Note: Enter debits before credits. General Journal Debit Credit Date Dec 31 Record entry Clear entry View general journal
On December 31, the year-end adjusting entry for uncollectibles is prepared by the Warner Company.
Uncollectibles are estimated to be 1% of sales.
The allowance for doubtful accounts has a credit balance of $610.
The company's year-end unadjusted trial balance shows accounts receivable of $100,000 and sales of $290,000.
The entry should be recorded in the general journal.
Transaction list:
Dec. 31 Uncollectibles expense $2,290
Allowance for doubtful accounts $2,290
Year-end adjusting entry for uncollectibles:
Debit Uncollectibles expense for $2,290
Credit Allowance for doubtful accounts for $2,290
The debit of $2,290 is calculated as 1% of sales, which is $290,000 × 1% = $2,900.
The credit of $610 is the existing balance in the allowance account.
Therefore, the company needs to credit $2,290 (the uncollectibles estimate) to the allowance account, resulting in a balance of $2,900 + $2,290 = $5,190.
Allowance for doubtful accounts is a contra account to accounts receivable, and it represents the estimated amount of accounts receivable that is expected to be uncollectible. When a company estimates the amount of uncollectible accounts, it creates a journal entry that debits uncollectible expense and credits the allowance for doubtful accounts. The entry reduces the accounts receivable balance by the amount that is not expected to be collected.
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PowerSwitch, Inc. designs and manufactures switches used in telecommunications. Serious flooding throughout North Carolina affected Power Switch’s facilities. Inventory was completely ruined, and the company’s computer system, including all accounting records, was destroyed. Before the disaster recovery specialists clean the buildings, Stephen Plum, the company controller, is anxious to salvage whatever records he can to support an insurance claim for the destroyed inventory. He is standing in what is left of the accounting department with Paul Lopez, the cost accountant. "I didn’t know mud could smell so bad," Paul says. "What should I be looking for?" "Don’t worry about beginning inventory numbers," responds Stephen, "we’ll get them from last year’s annual report. We need first-quarter cost data." "I was working on the first-quarter results just before the storm hit," Paul says. "Look, my report is still in my desk drawer. All I can make out is that for the first quarter, material purchases were $476,000 and direct labor, manufacturing overhead, and total manufacturing costs to account for were $505,000, $245,000, and $1,425,000, respectively. Wait! Cost of goods available for sale was $1,340,000." "Great," says Stephen. "I remember that sales for the period were approximately $1,700,000. Given our gross profit of 30%, that’s all you should need." Paul is not sure about that but decides to see what he can do with this information. The beginning inventory numbers were: Raw Materials, $113,000 Work-in-Process, $229,000 Finished Goods, $154,000
Required:
Use the above information to draft a memo to an insurance company requesting payment for lost inventory. Include the appropriate schedules to support your request.
Memo To: ABC Insurance Company From: Stephen Plum, Controller, PowerSwitch, Inc.Subject: Request for Payment for Lost InventoryDate: 15th July 2021.
We have suffered a serious flood throughout our company facilities due to which our inventory was completely ruined and the computer system including all accounting records was destroyed. Before disaster recovery specialists clean the buildings, we want to salvage the records that support our insurance claim for the destroyed inventory. The beginning inventory numbers are: Raw Materials $113,000, Work-in-Process $229,000, Finished Goods $154,000.SCHEDULE 1: Raw Materials InventorySCHEDULE 2: Work-in-Process InventorySCHEDULE 3: Finished Goods Inventory. Calculation of Cost of Goods Sold
SCHEDULE 4: Schedule of Cost of Goods Manufactured and Sold
Formula: Cost of Goods Manufactured = Direct Materials + Direct Labor + Manufacturing OverheadApplied + Beginning Work-in-Process Inventory – Ending Work-in-Process Inventory Cost of Goods Sold = Cost of Goods Manufactured + Beginning Finished Goods Inventory – Ending Finished Goods InventoryCalculation of Cost of Goods Available for Sale:
SCHEDULE 5: Schedule of Cost of Goods Available for Sale; Formula: Cost of Goods Available for Sale = Beginning Finished Goods Inventory + Cost of Goods Manufactured. Therefore, the Cost of Goods Available for Sale = $154,000 + $1,395,000Cost of Goods Available for Sale = is $1,549,000.Calculation of Ending Inventory: SCHEDULE 6: Schedule of Ending Inventory Formula: Ending Raw Materials Inventory = Beginning Raw Materials Inventory + Purchases – Direct Materials Used; Ending Raw Materials Inventory = $113,000 + $476,000 – Direct Materials Used Ending Work-in-Process Inventory = Beginning Work-in-Process Inventory + Cost of Goods Manufactured – Cost of Goods Sold
Ending Work-in-Process Inventory = $229,000 + $1,425,000 – Cost of Goods SoldEnding Finished Goods Inventory = Beginning Finished Goods Inventory + Cost of Goods Manufactured – Cost of Goods SoldEnding Finished Goods Inventory = $154,000 + $1,395,000 – Cost of Goods Sold
Ending Inventory = Ending Raw Materials Inventory + Ending Work-in-Process Inventory + Ending Finished Goods Inventory. Therefore,Ending Inventory = $83,000 + $1,625,000 + $891,000Ending Inventory = $2,599,000Gross Profit = $510,000 [tex]($1,700,000 * 0.030)[/tex]
Therefore,Cost of Goods Sold = $1,039,000 ($1,549,000 – $510,000)
Conclusion:Based on the above calculations and schedules, we are requesting payment of $2,599,000 as compensation for the inventory lost due to the disaster that occurred in our company facilities.
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Scammer Industries, Inc. uses 97,820 units of inventory every year. It generally takes seven days for the company to order and receive new inventory. Scammer likes to keep an additional seven days of inventory as safety stock. The company should place an order for new inventory when its stock reaches what point? A. 268 B. 1,876 C. 3, 752 D. 97,820 E. None of the above
Every year, Scammer Industries, Inc. uses 97,820 units of stock. The organization typically needs seven days to order and receive fresh goods. The con artist likes to keep seven extra days' worth of supplies on hand as backup. The company should place an order for new inventory when its stock reaches 268 units. The correct answer is option A.
Scammer Industries, Inc. uses 97,820 units of inventory every year and generally takes seven days for the company to order and receive new inventory. It likes to keep an additional seven days of inventory as safety stock.
To determine the optimal time to order, use the following formula:
Safety stock = Usage per day x Lead time in days
Safety stock = (97,820/365 days per year) x 7 days of safety stock = 191 units
When to order = Safety stock + usage during lead time
When to order = 191 + (97,820/365 x 7) = 268 units
Therefore, the company should place an order for new inventory when its stock reaches 268.
Hence, Option A is the correct answer.
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A college student has just completed her junior year. The following table summarizes her grade-point average (GPA) for each of the past nine quarters: GPA 2.4 2.9 3.1 3.2 Year Semester Freshman Fall Winter Spring Fall Winter Spring Fall Winter Spring Sophomore 3.0 2.9 2.8 3.6 Junior 3.2 a. Forecast the student's GPA for the fall semester of her senior year by using a three-period moving average. b. Forecast the student's GPA for the fall semester of her senior year by using exponential smoothing with α = 0.2. c. Which of the two methods provides a more accurate
a. To forecast the student's GPA for the fall semester of her senior year using a three-period moving average, we need to take the average of the GPAs for the last three quarters of her junior year.
The GPAs for the last three quarters of her junior year are: 3.1, 3.2, and 3.2.
Thus, the three-period moving average forecast for her GPA in the fall semester of her senior year is:
(3.1 + 3.2 + 3.2) / 3 = 3.17
b. To forecast the student's GPA for the fall semester of her senior year using exponential smoothing with α = 0.2, we need to use the following formula:
Forecast for next period = α x Actual value for current period + (1 - α) x Previous forecast
We can start by setting the initial forecast equal to the GPA in the last quarter of her junior year, which is 3.2.
Using the formula above, we get:
Forecast for next period = 0.2 x 3.2 + 0.8 x 3.2 = 3.2
Thus, the exponential smoothing forecast for her GPA in the fall semester of her senior year is 3.2.
c. To determine which method provides a more accurate forecast, we would need to compare the forecasts from the two methods to the actual GPA for the fall semester of the student's senior year, once it becomes available. We cannot determine which method is more accurate without this additional information.
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The equity section from the December 31, 2020 and 2021, balance sheets of Westburne Corporation appeared as follows: 2021 2020 Contributed capital: Common shares, 50,000 shares authorized; 22,680 and 20,500 shares issued and outstanding, respectively Retained earnings $498,960 $410,000 561,000 449,000 The following transactions occurred during 2021 (assume the retirements were the first ever recorded by Westburne): Jan. 5 A $1.20 per share cash dividend was declared, and the date of record was five days later. Mar. 20 1,600 common shares were repurchased and retired at $20.00 per share. Apr. 5 A $1.20 per share cash dividend was declared, and the date of record was five days later. July 5 A $1.20 per share cash dividend was declared, and the date of record was five days later. July 31 A 20% share dividend was declared when the market value was $32.00 per share. Aug. 14 The share dividend was issued. Oct. 5 A $1.20 per share cash dividend was declared, and the date of record was five days later.. Danirad 2. How much profit did the company earn during 2021? Profit I
The company earned a profit of $88,960 during 2021.
To determine the profit earned by the company during 2021, we need to calculate the net income for the year. Unfortunately, the provided information does not include the net income figure. The retained earnings for the years 2020 and 2021 are given as $410,000 and $498,960, respectively. Retained earnings represent the cumulative profits or losses of a company over its lifetime.
To calculate the profit earned during 2021, we can use the formula:
Profit = Ending Retained Earnings (2021) - Beginning Retained Earnings (2020)
Profit = $498,960 - $410,000
Profit = $88,960
Therefore, the company earned a profit of $88,960 during 2021.
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Differentiated, mass and niche marketing approaches are based on: the company's high-level go-to-market strategy. the company's performance in the last quarter. the company's response to competition.
Differentiated, mass, and niche marketing approaches are based on the company's high-level go-to-market strategy.
Differentiated, mass, and niche marketing approaches are all strategies that companies employ as part of their high-level go-to-market strategy. Each approach involves targeting a specific segment of the market in order to effectively reach and engage customers.
Differentiated marketing focuses on targeting multiple segments of the market with tailored marketing strategies and products/services that meet the specific needs and preferences of each segment. This approach recognizes that different customer segments have different demands and seeks to customize the marketing mix accordingly.
Mass marketing, on the other hand, involves targeting a wide and diverse audience with a standardized marketing message and offering.
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What errors might managers make when preparing the
performance appraisal on this job (C&B Specialist) holder? How
might managers avoid those errors?
The errors that managers might make when preparing the performance appraisal on a job holder such as C&B specialist are: a) Halo Effect, b) Leniency Bias, c) Strictness Bias.
The errors that managers might make when preparing the performance appraisal on a job holder such as C&B specialist are:
a) Halo Effect: Managers may show a tendency to rate the individual high because of a single skill that he or she possesses. This is known as the halo effect. It is critical that managers assess employees on a variety of skills rather than a single quality to avoid this.
b) Leniency Bias: Managers may evaluate all employees as exceptional or good, which is known as leniency bias. Managers may be forced to alter their behavior and be more truthful about their performance.
c) Strictness Bias: The opposite of leniency bias is strictness bias, where managers rate all employees harshly. This might result in employees feeling demoralized and undervalued. To avoid this, managers must provide objective feedback.
d) Recency Bias: Managers may be influenced by the most recent performance displayed by the employees. To avoid this, managers must assess all the performance factors objectively and not depend on a single act.
e) Central Tendency: When all employees receive similar ratings, managers may practice central tendency. Managers can overcome this by evaluating employees based on the individual's level of job performance.
f) Biasness: Managers may make subjective judgments about an employee's job performance based on their own biases. To avoid bias, managers should establish a clear appraisal process and concentrate on the employee's job performance.
g) Contrast Effect: An employee's performance may be rated based on their peers' performance, making the employee appear better or worse than they are. Managers may avoid this by objectively measuring an employee's performance in comparison to their job standards.
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bathroom cabinets that are sold through major home improvement retailers. Under the level production plan, Pennington sets to production target of 845 sets per month. Pennington starts off January with 120 cabinet sets in inventory. Current Jan Feb Mar Sales Forecast 780 830 740 Production 845 845 845 Inventory 120 Under the lev
The ending inventory for March, under the level production plan, would be 305 cabinet sets.
To calculate the ending inventory for March under the level production plan, we need to consider the production targets, sales forecast, and starting inventory.
In January, Pennington starts with 120 cabinet sets in inventory and plans to produce 845 sets. The sales forecast for January is 780 sets. Since the production exceeds the sales, the ending inventory for January would be the sum of the starting inventory and the excess production, which is 120 + (845 - 780) = 185 sets.
Moving on to February, the starting inventory is now 185 sets (the ending inventory of January). The production target remains at 845 sets, and the sales forecast for February is 830 sets. Again, the production exceeds the sales, so the ending inventory for February would be 185 + (845 - 830) = 200 sets.
Finally, for March, the starting inventory is 200 sets. The production target remains at 845 sets, and the sales forecast for March is 740 sets. Since the sales exceed the production, the ending inventory for March would be the starting inventory minus the difference between sales and production, which is 200 - (740 - 845) = 305 sets.
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The given question is incomplete, complete question is- "Pennington Cabinets is a manufacturer of several different lines of kitchen and bathroom cabinets that are sold through major home improvement retailers. Under the level production plan, Pennington sets to production target of 845 sets per month. Pennington starts off January with 120 cabinet sets in inventory. Current Jan Feb Mar Sales Forecast 780 830 740 Production 845 845 845 Inventory 120. Under the level production plan, compute the ending inventory of March."
list steps when conducting production line analysis and
optimisation ?
The following are the steps to follow while conducting production line analysis and optimization Understand the concept of production line analysis Production line analysis is a comprehensive examination of a manufacturing plant's operations.
This procedure allows us to assess the current manufacturing status, discover the reasons for manufacturing shortcomings, and identify development areas for process improvement. It's a good idea to read up on the subject before you start doing a production line analysis. You will find a wealth of knowledge about this on the internet and in literature. Your research should assist you in gaining a better understanding of the production line optimization The scope of the analysis, as well as the reasons for conducting it, must be made transparent to the staff and supervisors who will be assisting you. Observe the Production Line
This will serve as the foundation for identifying the source of the issue and determining the best approach to address it Establish a timeline and a plan After identifying the issues, it's time to develop a timeline for addressing them. Make a plan for putting all of the changes you want to make into practice. This strategy should be tailored to the needs and scope of the research. Work with the production staff to create a realistic timeline for implementation. Make The Changes are the make of When the analysis is finished, it's time to make the changes. Make all of the necessary changes according to the plan and timeline. Ensure that all of the workers are adequately trained and that the new processes are implemented effectively. This should aid in the optimization of the production line. The process of the analyzing and optimizing the production line involves several steps, including understanding the concept of production line analysis, determining the scope of the analysis, observing the production line, recording observations, developing a timeline and a plan, and making changes. To optimize a production line, it is important to have a good understanding of the main answer to production line analysis.
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Following is a regression output of monthly returns on WS Stock against the S&P500 index. A hedge fund manager believes that WS is underpriced, with an alpha of 2% over the coming month.
Beta
0.75
R-square 0.65
Standard Deviation of residuals .06 (i.e., 6% monthly)
a) If he holds $2 million portfolio of WS, and wishes to hedge market exposure for the next month using 1-month maturity S&P 500 futures contracts, how many contracts should he trade? Should he buy or sell the contracts? The S&P500 currently is at 1,000 and the contract multiplier is $250.
b) What is the standard deviation of the monthly return of a hedged portfolio?
c) Assuming that the monthly returns are approximately normally distributed, what is the probability that this market-neutral strategy will lose money over the next month? Assume the risk-free rate is 0.5% per month.
d) Suppose you hold an equally weighted portfolio of 100 stocks with the same alpha, beta and residual standard deviation as WS, assume the residual returns on each of these stocks are independent of each other. What is the residual standard deviation of the portfolio?
e) Recalculate the probability of a loss on a market-neutral strategy involving equally weighted, market-hedged positions in the 100 stocks over the next month.
(Total: 25 Marks)
a) The hedge fund manager should sell 6 S&P 500 futures contracts to hedge the market exposure.
b) The standard deviation of the monthly return of the hedged portfolio is approximately 4.08%.
c) The probability that the market-neutral strategy will lose money over the next month is approximately 59.87%.
d) The residual standard deviation of the portfolio is approximately 0.6%.
e) The probability of a loss on a market-neutral strategy involving equally weighted, market-hedged positions in the 100 stocks would also be approximately 59.87%.
a) To hedge the market exposure for the next month using 1-month maturity S&P 500 futures contracts, the hedge fund manager needs to determine the number of contracts to trade. The formula to calculate the number of contracts is:
Number of Contracts = (Portfolio Value * Beta) / (Futures Price * Contract Multiplier)
Given:
Portfolio Value = $2 million
Beta = 0.75
Futures Price = 1,000 (S&P 500 index)
Contract Multiplier = $250
Number of Contracts = (2,000,000 * 0.75) / (1,000 * 250) = 6 contracts
Since the hedge fund manager believes that WS is underpriced with an alpha of 2% over the coming month, he should sell 6 S&P 500 futures contracts to hedge the market exposure.
b) The standard deviation of the monthly return of a hedged portfolio can be calculated using the formula:
Standard Deviation of Portfolio = Standard Deviation of Residuals * sqrt(1 - R-square)
Given:
Standard Deviation of Residuals = 0.06
R-square = 0.65
Standard Deviation of Portfolio = 0.06 * sqrt(1 - 0.65) ≈ 0.0408 (or 4.08%)
c) To calculate the probability that the market-neutral strategy will lose money over the next month, we need to calculate the probability of negative returns. Assuming monthly returns are normally distributed, we can use the z-score formula to calculate this probability.
Z-score = (Expected Return - Risk-Free Rate) / Standard Deviation
Given:
Expected Return = Alpha = 2% = 0.02
Risk-Free Rate = 0.5% per month = 0.005
Standard Deviation = 0.06 (residual standard deviation)
Z-score = (0.02 - 0.005) / 0.06 ≈ 0.25
Using a standard normal distribution table or calculator, we can find the probability corresponding to a z-score of 0.25, which is approximately 0.5987 or 59.87%. Therefore, the probability that this market-neutral strategy will lose money over the next month is approximately 59.87%.
d) The residual standard deviation of the portfolio can be calculated using the formula:
Residual Standard Deviation of Portfolio = Standard Deviation of Residuals / sqrt(Number of Stocks)
Given:
Standard Deviation of Residuals = 0.06 (residual standard deviation)
Number of Stocks = 100
Residual Standard Deviation of Portfolio = 0.06 / sqrt(100) = 0.006 (or 0.6%)
e) Assuming the same alpha, beta, and residual standard deviation as WS, the calculation for the probability of a loss on a market-neutral strategy involving equally weighted, market-hedged positions in the 100 stocks would be the same as in part c. The probability would still be approximately 59.87%.
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The company owns the patent drug and the drug is sold for
$1
each daily dose and marginal cost is fixed at $0.20.
Show deadweight loss if the firm sells as many as 1000 doses a
day.
If the firm sells 1000 doses a day, there would be a deadweight loss of $800. To calculate the deadweight loss in this scenario, we need to compare the marginal benefit (MB) and marginal cost (MC) of the drug.
Given that the drug is sold for $1 per daily dose and the marginal cost is fixed at $0.20, let's assume that the marginal benefit of each dose is equal to the price of $1 (since the demand curve is not provided). If the firm sells 1000 doses a day, the total marginal benefit would be 1000 * $1 = $1000.
The total marginal cost for selling 1000 doses a day would be 1000 * $0.20 = $200. The deadweight loss is the difference between the marginal benefit and marginal cost, which is $1000 - $200 = $800. Therefore, if the firm sells 1000 doses a day, there would be a deadweight loss of $800.
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