The impact would be that the average size of the inventory will increase.
If the manager has decided to double the production batch size then the average size of the inventory will also increase.
What is an inventory? In general terms an inventory refers to all the goods, items, products, which are a part of the business organization. For different industries the inventories have different meanings. Manufacturing industry: the inventory is not only the finished or the final product but also the raw materials are included. Service industry: the inventory of the service industry includes the steps involved in the sales of the product. Raw materials, finished goods, work that is in process etc.. all of this is inventory. Inventory is an important asset for all businesses and it is important to understand the meaning of it.To learn more about inventory visit: https://brainly.com/question/14179825?
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Contractionary fiscal policy can be beneficial when the economy is growing at a greater rate than ____________.
Contractionary fiscal policy can be beneficial when the economy is growing at a greater rate than 2-3 per year.
What is Fiscal policy?
Any financial strategy that a country's government implements, whether by changing expenditure or taxing, is referred to as fiscal policy. Contractionary fiscal policy and expansionary fiscal policy are the two categories of fiscal policy. When the government taxes more than it spends, this is known as a contractionary fiscal policy. Fiscal expansion occurs when the government spends more than it collects in taxes. Monetary policy, which is a kind of financial influence carried out by a central bank (in the United States, the central bank is the Federal Reserve), generally takes the shape of rising or falling interest rates, goes hand in hand with fiscal policy.
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Contractionary financial coverage can be beneficial while the financial system is growing at a more charge than 3% Per year.
The contractionary economic policy stops the unemployment price from going under the highest quality stages, keeping it at what economists name “full employment,” which is when unemployment reaches its lowest point without inflicting inflation.
The authorities can use contractionary fiscal coverage to sluggish monetary activity through reducing government spending, growing tax revenue, or an aggregate of the two. lowering government spending tends to sluggish financial interest because the authorities purchase fewer items and offerings from the non-public zone.
The contractionary coverage reduces the variety of loanable funds inside the economy. as with any goods, greater scarcity ends in an extra rate, so the hobby charge, or the price of borrowing money, rises.
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When economists say that money serves as a medium of exchange, they mean that it is:________
When economists say that money serves as a medium of exchange, they mean that it is a monetary unit for measuring and comparing the relative values of goods.
A medium of exchange is a that intermediary instrument or system which is used to facilitate the sale or purchase, or even trade of goods between parties.
For a system to act as a medium of exchange between two parties, it must represent a fixed standard of value. But for this all parties must accept that standard. In modern economies, the medium of exchange is currency or money.
Money enables everyone who possesses it to participate as an equal market player. When consumers use money to purchase an item or service, they make a bid effectively in response to an asking price.
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Grande communications offers a lower price to customers who subscribe to grande television, telephone, and internet services all at once. This is an example of?
Grande communications offers a lower price to customers who subscribe to Grande television, telephone, and internet services all at once. This is an example of price bundling.
Price bundling is a pricing strategy where companies package separate products together and offer them at a single typically lower price in order for higher sales and profit.
Price bundling is very common these days as it is seen that these days there are various companies who sell two products together at a lower price than the sum of the individual price of each product. Thus, by this they sell two products and make their sales.
Hence, Grande communications offers a lower price to customers whoever subscribes to Grande television, telephone, and internet services all at once.
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Lower-level managers are empowered to make decisions in a ______ organization, which can ________ motivation and job satisfaction.
Lower-level managers are empowered to make decisions in a decentralized organization, which can increase motivation and job satisfaction.
What is motivation ?Motivation is the reason why humans and other animals begin, continue, or discontinue an activity at any particular time. Motivational states are typically viewed as internal forces that induce a desire to engage in goal-directed conduct.
The Three Kinds of Motivation
Extrinsic. Performing an action in order to achieve or prevent a specific result. Many of the things you perform every day are probably extrinsically driven. ...
Intrinsic. Internal motivation for success or a sense of purpose... Family. Motivated by a desire to provide for your family.
Motivation will assist him in achieving his personal objectives. Individuals who are motivated will be satisfied with their jobs. Individual self-development will benefit from motivation. Working with a dynamic would always benefit an individual.
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Whatever the firm’s quantity of production, _____________ must exceed total costs if it is to earn a profit. marginal costs average costs total revenue variable costs
Whatever the firm’s quantity of production, total revenue must exceed total costs if it is to earn a profit. Marginal costs average costs total revenue variable costs.
Marginal costs are the delivered fee to produce an extra properly. As an example, say that to make a hundred car tires, it fees $100. To make one more tire might fee $80. This is then the marginal value: how a whole lot it costs to create one additional unit of a good or provider. The charges of manufacturing decide the marginal price.
Marginal costs refer to the extra cost to provide every extra unit. as an instance, it may cost a little $10 to make 10 cups of coffee. To make every other might price $zero.80. Consequently, this is the marginal fee – the additional value to supply one greater unit of output.
Marginal price is the more fee obtained within the production of additional gadgets of products or services, most often utilized in production. It's calculated via dividing alternate in expenses through alternate in quantity, and the result of fixed charges for items already produced and variable fees that still need to be accounted for.
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During July of the current year, the management of Genuine Spice Inc. asked the controller to prepare August manufacturing and income statement budgets. Demand was expected to be 1,500 cases at $100 per case for August. Inventory planning information is provided as follows: Finished Goods Inventory: Cases Cost
Estimated finished goods inventory, August 1 300 $12,000 Desired finished goods inventory, August 31 175 7,000 Materials Inventory: Cream Base (ozs.) Oils (ozs.) Bottles (bottles) Estimated materials inventory, August 1 250 290 600 Desired materials inventory, August 31 1,000 360 240
There was negligible work in process inventory assumed for either the beginning or end of the month; thus, none was assumed. In addition, there was no change in the cost per unit or estimated units per case operating data from January.
Required:
1. Prepare the August production budget.
2. Prepare the August direct materials purchases budget.
3. Prepare the August direct labor budget. Round the hours required for production to the nearest hour.
4. Prepare the August factory overhead budget. If an amount box does not require an entry, leave it blank. (Entries of zero (0) will be cleared automatically by CNOW.)
5. Prepare the August budgeted income statement, including selling expenses. NOTE: Because you are not required to prepare a cost of goods sold budget, the cost of goods sold calculations will be part of the budgeted income statement.
Based on the August Production Budget, from the information provided, the total units to be produced are:
1, 375 cases. See the attached image for the production budget.
The production budget computes and estimates the number of units of a good that must be produced, and is calculated by summing up:
the sales forecast and the planned amount of finished goods inventory to have on hand.What is Direct Materials Purchases Budget?The amount of material that must be purchased to meet the production budget is determined by a direct materials purchasing budget. This is computed for every manufacturing period, which is often monthly or quarterly.
See the attached image for the direct materials purchasing budget.
What is the Direct Labor budget?To determine how many work hours will be required to create the items listed in the production budget, the direct labor budget is utilized. A more intricate direct labor budget will compute both the overall number of hours required and the breakdown of those hours by labor type.
See the attached image for the direct labor budget.
What is factory overhead budget?With the exception of direct expenditures, which are already covered by the direct material budget and the direct labor budget, the factory overhead budget lists all projected manufacturing expenses required to generate the budgeted output level for a period.
See the attached image for the actual budget.
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What is the coordinating mechanism in a market system?
a. competition
b. prices
c. governing board
d. supply
The correct answer is OPTION B, Prices, which is the coordinating mechanism in a market system.
Coordinating mechanism brings buyers and sellers into contact, in case of market system , Price, or the amount that a product sells for per unit, is the fundamental coordinating mechanism in a free market system. Price indicates the amount that society is ready to pay for a good or service. The expenses of the many inputs used in production are what ultimately determine how much a product will cost. As a result, prices act as a coordinating mechanism for a laissez-faire economy.
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When applying the rules of the equity method, the equity investments account is credited for the receipt of a cash dividend because?
When applying the rules of the equity method, the equity investments account is credited for the receipt of a cash dividend because the dividend decreases the Investor’s Investment Conclusion.
A business uses the equity method as an accounting approach to record the earnings made by its investment in another business. The investor firm declares the revenue generated by the other company on its income statement using the equity method of accounting, in a proportional amount to the equity stake it has in the other company.
The equity technique recognizes the significant economic connection between the two businesses. On the income statement, the investor denotes their portion of the investee's profits as revenue from investments.
Using the equity method, a company that owns 25% of a company with a $1 million net income would report profits from its $250,000 investment.
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A manager's operation had sales this period of $89,775. last period sales were $85,500. what was the manager's percentage sales increase for this period when compared to last period?
A manager's operation had sales this period of $89,775. last period sales were $85,500. So the manager's percentage sales increase for this period when compared to last period was 5% .
The percentage increase is the measure of the percentage change. The percentage increase is defined as the ratio of increased value to the original value and then multiplied by 100. Here the increased value can be calculated by taking the difference between the final value and the initial value. The formula to calculate increase is given by -
Percentage Increase = [(Final value – Original value) × 100] / Original value %
In this case, original value is $85500 and the final value is $89775, then the percentage increase is:
Percentage Increase = [(89775-85500) ×100]/85500
= 427500/85500
= 5%
So, the percentage increase will be 5% .
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Debt management ratios show the extent to which a firm's managers are attempting to magnify returns on owners' capital through the use of financial leverage.
a. true
b. false
Debt control ratios show the volume to which a firm's managers try to exaggerate returns on owners' capital via using monetary leverage. A) True
The debt control ratio measures how tons of a organization's operations comes from debt rather than other sorts of financing, along with inventory or private savings. The debt management ratio is one degree amongst lots of a agency's risk and likelihood of default.
Underneath are five of the maximum typically used leverage ratios:
Debt-to-property Ratio = total Debt / overall assets.Debt-to-fairness Ratio = total Debt / overall equity.Debt-to-Capital Ratio = these days Debt / (general Debt + total equity)Debt-to-EBITDA Ratio = overall Debt / income before interest Taxes Depreciation & Amortization (EBITDA)A organization's debt ratio may be calculated with the aid of dividing total debt by using overall property. A debt ratio of extra than 1.0 or a hundred% approach a organization has more debt than belongings whilst a debt ratio of much less than a hundred% shows that a agency has extra property than debt.
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To attract and hire employees with the skills, abilities, and experience to help the organization achieve its goals. Managers use?
Human resource management (HRM) is the procedure of recruiting, hiring, deploying and handling an organization's employees.
Human resource managementThe commitments of a human resource manager fall into three primary areas: staffing, worker compensation and concessions, and defining/designing work. Basically, human resource management standards span thrugh different industries and can fall into one of two types of general categories: strategic and traditional.
Effectively, the goal of HRM is to maximize the productivity of an organization by optimizing the effectiveness of its employees.
Four roles of Human Resource Management are Planning, Directing, Controlling and Organizing.
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When banks borrow through the term auction facility, the price of borrowing is determined by:_________
When banks borrow through the Term Auction Facility, the price of borrowing is determined by : a Competitive Bidding Process.
What Is the Term Auction Facility?
The Term Auction Facility (TAF) was a monetary policy used by the Federal Reserve to increase liquidity in the U.S. credit markets. The TAF began following the financial crisis of 2007.
It allowed the Federal Reserve to auction set amounts of collateral-backed short-term loans to depository institutions (savings banks, commercial banks, savings and loan associations, credit unions) that were judged to be in sound financial condition by their local reserve banks. The Facility relieved the pressure on lending institutions during a period of financial distress.
The TAF was implemented with the express purpose of addressing "elevated pressures in short-term funding markets," according to a press release from the Federal Reserve System Board of Governors in 2007.
Participants bid for TAF funds through the reserve banks with a minimum bid set at an overnight indexed swap rate related to the maturity of the loans. These auctions allowed financial institutions to borrow funds at a rate that was below the discount rate.
Therefore, we can conclude that the correct option is B.
Your question is incomplete, but most probably your full question was:
When banks borrow through the Term Auction Facility, the price of borrowing is determined by:
A) the Federal Reserve.
B) a competitive bidding process.
C) the difference between the discount rate and the interest rate on three-month Treasury securities.
D) open-market operations.
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When the total body surface area burned exceeds 20 percent, which event occurs first?
When the total body surface area burned exceeds 20 percent, the systemic inflammatory response is initiated.
What is systemic inflammatory response?In order to pinpoint and ultimately eradicate the endogenous or external source of the insult, the body overreacts in its defense against unpleasant stressors including infections, trauma, surgery, acute inflammation, ischemia or reperfusion, or cancer, to mention a few. The dysregulated release of acute and chronic phase reactants is at the core of the clinical scenario, which also involves dysregulation of the proinflammatory and anti-inflammatory system homeostasis.Basically, The body's overactive defense reaction to a harmful stressor is known as the systemic inflammatory response syndrome (SIRS), which aims to identify and then eradicate the endogenous or external source of the insult.
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Pricing strategy may change over time due to the changing direction of clearly formulated:_______.
Pricing strategy may change over time due to the changing direction of clearly formulated pricing objectives.
The most important pricing objective is to maximize a company's profitability either in the short term or the long term (preferably both). Pricing should also reflect the desire to retain customers, grow customer numbers, extend customer lifecycles, and outperform the competition.
The three pricing strategies are Growing, Skimming, and Following. Growth: Set low prices, keep most of the value in the hands of the customer, and squeeze margins out of the competition.
Examples of pricing goals include maximizing profits, increasing sales volume, matching competitors' prices, deterring competitors, or simply surviving. Each pricing target requires a different pricing strategy to successfully meet your business goals.
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A bank’s reserve ratio is 10 percent and the bank has $5,000 in deposits. Its reserves amount to?
The reserves amount is $500.
What are reserves amount?
The reserves amount means the portion of deposits the bank has received from customers that it must hold on to and not give out as loans to its borrowers, it is usually a percentage of the deposits made by the bank as it is 10% of total bank's deposits in this case.
The reserves amount is mandatory cash the bank must keep as required by the supervisory bank such as the central banks.
It is compulsory, so as to make provisions for unexpected withdrawal requests that depositors could make so as to avoid a situation the bank runs out of cash , where cash is non-available to meet the requests of depositors for funds kept with the bank.
reserves amount=reserve %*deposits
reserve ratio=10%
deposits=$5,000
reserves amount=10%*$5,000
reserves amount=$500
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When a business is managed and owned by a group of individuals sharing in making the decisions and taking the risks, the business entity is considered to be:__.
When a business is managed and owned by a group of individuals sharing in making the decisions and taking the risks, the business entity is considered to be a Partnership.
What is Partnership?A partnership is an agreement in which two or more people, known as business partners, agree to work together to further their shared interests. Individuals, businesses, interest-based organisations, schools, governments, or combinations can form partnerships.
A partnership is a single business owned by two or more people. Each partner contributes to every facet of the firm, whether it's money, property, work, or expertise. In exchange, each partner shares in the company's gains and losses.
The goal of a partnership agreement (or partnership contract) is to create a legally enforceable contract between two or more individuals or other legal entities in order to establish a business entity. This partnership agreement specifies each partner's or entity's rights and duties.
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Which organization would most likely mount a vigorous campaign to oppose a reduction in the staffing levels of the texas rehabilitation commission?
Texas Public Employees Association would most likely mount a vigorous campaign to oppose a reduction in the staffing levels of the texas rehabilitation commission.
An employee is someone who is employed by an enterprise and is paid for the work they do. Employees are categorized as individuals who are mentored by other professionals within the company. Employers have some control over their actions, finances, and performance.
They are the people who contribute effectively to the well-functioning of the organization. They do their best and work hard to achieve their assigned goals within the set time frame. Employees play a key role in determining workplace culture.
The fact that someone is being paid to work for a company or organization: Employment levels are unlikely to increase significantly by the end of next year.
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As lynn is working on writing the text that will be incorporated into a new magazine ad for her company’s line of handbags, she is engaging in the _______ stage of the communication process.
As lynn is working on writing the text that will be incorporated into a new magazine ad for her company’s line of handbags, she is engaging in the Encoding stage of the communication process.
What is encoding?Character encoding refers to the process of giving numerical values to pictorial characters, particularly the written characters of human language, to enable their storage, transmission, and transformation using digital computers. Code points, sometimes referred to as "code spaces," "code pages," or "character maps," are the numerical values that make up a character encoding.A subset of the characters used in written languages could only be represented by the early character codes used with optical or electrical telegraphs, which were occasionally limited to upper case letters, numbers, and some punctuation. Modern computer systems can employ more complex character codes (like Unicode), which represent the majority of the characters used in many written languages, due to the low cost of digital data representation. Internationally recognized standards for character encoding enable the exchange of text in electronic form.A subset of the characters used in written languages could only be represented by the early character codes used with optical or electrical telegraphs, which were occasionally limited to upper case letters, numbers, and some punctuation.Modern computer systems can employ more complex character codes (like Unicode), which represent the majority of the characters used in many written languages, due to the low cost of digital data representation.Internationally recognized standards for character encoding enable the exchange of text in electronic form.To know more about encoding with the given link
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A company sold equipment that originally cost $280,000 for $140,000 cash. the accumulated depreciation on the equipment was $140,000. the company should recognize a:____.
A company sold equipment that originally cost $280,000 for $140,000 cash. the accumulated depreciation on the equipment was $140,000. the company should recognize a $0 gain or loss.
The term depreciation refers to an accounting technique used to spread the cost of a tangible or physical asset over its useful life. Depreciation indicates how much of an asset's value has been used. It allows companies to generate income from the assets they own by making payments over a period of time.
Depreciation is a method of calculating the depreciation of an asset through use, wear and tear, and obsolescence. The value of most assets declines over time after purchase. Organizations should take this loss of value into account when analyzing performance and calculating costs.
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Monopolistically competitive firms are unlikely to _______
a. produce where price equals average total cost.
b. produce a smaller quantity than firms in perfect comp
Monopolistically competitive firms are unlikely to:
A. produce where price equals average total cost.
B. charge a higher price than firms in perfect competition.
C. produce a smaller quantity than firms in perfect competition.
D. operate where price equals marginal cost.
E. exit the industry when demand falls below long-run average costs.
The Correct answer is OPTION D.
When several firms provide similar but not identical replacement goods or services, we have monopolistic competition.
An industry with low barriers to entry and little impact from any one company's actions is said to be monopolistically competitive. Companies separate themselves from one another in the market by using price and advertising strategies.
It is called monopolistic competition when multiple businesses sell nearly identical goods. In monopolistic competition, businesses use price and marketing tactics to set themselves apart from rivals. In monopolistic competition, there are few barriers to entry in the form of high start-up costs or other difficulties to new entrants.
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Cindy's car wash has average variable costs of $2 and average fixed costs of $3 when it produces 100 units of output (car washes). the firm's total cost is:_______
a. $300.
b. $500.
c. $100.
d. $200
The correct option is b. the firm's total cost $500.
Total cost:
Total fixed costs are the total of all recurring, fixed costs that a business incurs.
The variable and fixed expenses of providing commodities are combined to create a total using the total cost formula. The equation is:
Total cost = (Average fixed cost x average variable cost) × Number of units produced.
Cindy's Car Wash has average variable costs of $[tex]2[/tex] and average fixed costs of [tex]$3[/tex] when it produces [tex]100[/tex] units of output (car washes).
The firm's total cost is
AFC = $[tex]3[/tex], AVC = $[tex]2[/tex]
Average total cost = AFC + AVC = $[tex]5[/tex]
It produces [tex]100[/tex] units
$[tex]5[/tex] × [tex]100[/tex]= $[tex]500[/tex]
Therefore, option b is the answer $[tex]500[/tex].
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Compare the national cultures of the u. s. and india using hofstede’s dimensions. How might these differences affect ups’s formulation and implementation of an expansion strategy in india?
`The CAGE Distance Framework, commonly known as the Hofstede dimensions, can be used to pinpoint the cultural, geographic, economic, and governmental disparities between two nations.
Power Distancing: As per Hofstede dimension India has a high level of power distance because it acknowledges the disparity in power and has a strong power-distancing culture. The US nation has embraced a culture that reduces the power gap because it encourages equality at all social levels and fosters individual independence.
Uncertainty Avoidance: Hofstede dimension says India has a low to medium preference when it comes to the idea of avoiding uncertainty. The US nation has a culture that encourages initiative, the generation of new ideas, and the rejection of ambiguity.
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Jax is reading an informational text that uses words and phrases like as a result of, due to, and consequently. what type of informational text is jax reading based on these clues?
Jax is reading an informational text that uses words and phrases like as a result of, due to, and consequently. Jax is reading about the conjunction.
What is Conjunction?A conjunction, often known by the abbreviations conj or cnj, is a speech unit that joins the conjuncts of a conjunction, which are words, phrases, or clauses.There may be overlap between this description and that of other elements of speech, therefore it is necessary to specify what a "conjunction" is in each language.Depending on the sentence's grammar, a given word in English may have various meanings, including preposition or conjunction. For instance, the preposition after is a conjunction in "he departed after they battled," but a preposition in "he left after the fight."A conjunction is typically an unchanging (uninflected) grammatical particle that can stand between the conjoined items or not.To know more about conjunction with the given link
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Assume this firm is producing two units. which action should this firm take to maximize profits? produce one less unit. produce one more unit. produce two more units. produce three more units.
This firm should produce three more units to maximize profits as the production cost will decrease.
What is production cost?All production cost in the production of a good or service are included. Fixed costs and variable costs are the two categories into which they are subdivided.The continual, comparatively steady costs of running a business that are independent of production levels are known as fixed costs.They comprise all-encompassing overhead costs including salary and wages, building rent, or electricity bills.In contrast, variable costs are those that are directly associated with output levels and change accordingly, such as the price of raw materials used in manufacturing or the expense of running machinery during production.To know more about production cost with the given link
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Joel and maria have a son named david who is a 20-year old student at the university of southern california. david received $1300 worth of investment income in 2020 and had earned income $1700 but that was far less than half of the support he received from his parents. both joel and maria are still alive. based on this information what can be said about the tax liability in california?
David had earned payment and must pay California taxes on his investment and earned income he received.
Tax liability in CaliforniaTax liability is the full amount of tax owed in a delivered period, by people and organizations, to federal, state, and local administrations. For companies, tax liabilities are short-term liabilities registered on a balance sheet and paid within a year.
California holds nine tax brackets: 1%, 2%, 4%, 6%, 8%, 9.3%, 10.3%, 11.3% and 12.3%. Here are the rates and stands for the 2021 tax year, which you'll file in 2022, via the California Franchise Tax Board. The ordinary deduction in California is $4,803 for single filers and $9,606 for married families.
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Fine properties, inc. , negotiates with general maintenance corporation to include a liquidated damages clause in their contract. To be enforceable, at the time of the contract. An estimate of the damages from a breach must be?.
An estimate of the damages from a breach must be set when the contact is formed due to the difficulty of estimating the damages that would result from a breach.
What is the liquidated damages clause?
Related Content. A contractual provision requiring a party in breach to pay a pre-determined amount to the other party as compensation for the breaching party's failure to perform a specific task or comply with a particular duty or obligation.
How do you know if a liquidated damages clause is valid?
In determining whether a liquidated damage provision is enforceable, a court will look at whether the amount of the liquidated damage is reasonable in light of either:
(1) the anticipated loss at the time the contract was entered into; or
(2) the actual damages caused by the breach.
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Which report presents data that is distributed inside the organization and is intended for employees within an organization?
Answer:
internal reports is the answer.
Internal reports presents data that is distributed inside the organization and is intended for employees within an organization.
An internal report is a document which is designed to be viewed and evaluated only by individuals working within the organization. It contains data which is intended only for employees within an organization.
An organization's internal reports should be carefully identified as they contain sensible information about the business, indicators, health, finance, sales, marketing, human resources, performance and development in different areas.
Hence, companies often protect themselves by classifying these documents properly as confidential, in order to avoid accidental or intended disclosure.
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Phil greb has a thriving practice in which he assists attorneys in preparing litigation dealing with accounting and auditing matters. he is ""practicing public accounting"" if he:____.
Phil greb has a thriving practice in which he assists attorneys in preparing litigation dealing with accounting and auditing matters. he is ""practicing public accounting"" if he uses his CPA designation on his letterhead and business card.
Accounting, also called bookkeeping, is the measurement, processing, and transmission of financial and non-financial information about economic entities such as businesses and enterprises.
1: A system for recording and summarizing business and financial transactions and analyzing, verifying and reporting the results: The principles and procedures of this system I learned accounting as a freshman.
2a: accounting or accountant work.
Definition of Accounting is the process of systematically recording and maintaining financial accounts. Creating an income statement is an example of accounting. noun.
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One of the major reasons for the decrease in the need for agricultural workers was?
One of the major reasons for the decrease in the need for agricultural workers was due to insufficient public investment for agrarian development.
There were many other reasons for the decrease in the need for agricultural workers which are landlessness, population pressure, environmental constraints, and technological changes in agriculture.
It is seen that worldwide, the percentage of people who work in agriculture has dropped as many people don't want to work on farms anymore. With heavy debts to pay and agricultural land being lost for other purposes, it became difficult for the agricultural workers.
Hence, these were the reasons for the decrease in the need for agricultural workers.
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What is the future value of $1,000 in three years if the rate of discount is equal to 5 percent?
Future value = $1000× 1+([tex]\frac{5}{100}[/tex])³
= $1157.3
What is future value ?
Future Value = Present Value (1 + (cost of capital / 100)number of years
For example-
i.e. Future Value = $ 1000(1.10)3
i.e. Future Value = $ 1331
This means that the equivalent sum of money that we should expect in 3 years, given our cost of capital is $1331. This means that we should accept proposals where future value is more than $1331, reject proposals where future value is less than $1331 and be indifferent towards proposals where future value is equal to $1331.
From henceforth, we will refer to this by stating that the future value of $1000, at our given cost of capital, for a period of 3 years is $1331. Also, it must be noted that future values are nominal in nature.
What is present value ?
Present values are the exact opposite of future values. During future values we were compounding a present value at a given rate to reach a future value. But in present value calculations, we will discount the future values, which are nominal in nature, at the given cost of capital for the given period to reach the present value. Let’s look at it with the help of an example.
Now, we have a proposal that offers to pay us $1000, 3 years from hence. Our given cost of capital is 10%.
The formula for calculating the present values is as follows:
Present Value = Future Value / (1 + (cost of capital / 100)number of years
i.e. Present Value = $1000 / (1.10)3
i.e. Present Value = $ 751.31
Conclusion :
This means that the equivalent sum of money that we should expect today, given our cost of capital is $751.31. This means that we should accept proposals where present value is more than $751.31, reject proposals where present value is less than $751.31 and be indifferent towards proposals where future value is equal to $751.31.
Learn more about future values :
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