In all cases, we calculate the NPV to determine whether the investment is recommended or not.
Based on the given information, let's analyze the investment options for the prospective buyer:
a. Assuming the buyer has sufficient equity capital, we need to calculate the net present value (NPV) of the investment.
Step 1: Calculate the present value (PV) of the annual rentals over 10 years. Using the given information, the PV of the rentals is:
PV = P558,460 / (1+0.2)^1 + P558,460 / (1+0.2)^2 + ... + P558,460 / (1+0.2)^10
Step 2: Calculate the PV of the out-of-pocket disbursements over 10 years. Using the given information, the PV of the disbursements is:
PV = P70,000 / (1+0.2)^1 + P70,000 / (1+0.2)^2 + ... + P70,000 / (1+0.2)^10
Step 3: Calculate the PV of the selling price at the end of 10 years. Using the given information, the PV of the selling price is:
PV = P800,000 / (1+0.2)^10
Step 4: Calculate the total PV of the investment by subtracting the PV of disbursements from the sum of the PV of rentals and the PV of the selling price.
If the total PV is positive, the investment is recommended. If it is negative, the investment may not be recommended.
b. If the buyer has to borrow 25% of the required capital with a 10-year amortization and 18% interest, we need to calculate the new NPV. The steps remain the same, but we need to consider the additional interest payment on the loan.
c. If the buyer can obtain the entire capital by floating bonds at 15% interest, we need to calculate the NPV considering the bond interest payment instead of the equity capital return. The steps remain the same, but we need to consider the bond interest payment.
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Calculating the price elasticity of supply Rajw is a college student who lives in Philadelphia and provides math tutoring for extra cash. At a wage of $50 per hour, he is willing to tutor 7 hours per week. At $65 per hour, he is willing to tutor 10 hours per week. Using the midpolit method, the elasticity of Rajly's tabor supply between the wages of $50 and $65 per hour is approximately which means that Rayiv's supply of labor over this wage range is (14it) 1 Calculating the price elasticity ef sipply Y a a colvoe student who fiver in Pnilacephis meth hitaring for entra cash. At a wage of $50 per hi weet. At sis ser hour, he il willing to tutoe at 9 the mispoint mathbd, the elastelty of Rejwi betewer the maget of $50 and $55 per hour is appro: fowist toppit of inber pre this wage range a
The price elasticity of supply for Rajw's tutoring services between wages of $50 and $65 per hour is approximately 32.58, suggesting an elastic supply.
The price elasticity of supply measures the responsiveness of the quantity supplied to a change in price. To calculate it using the midpoint formula, we need the initial and final quantities supplied and the initial and final prices.
In this case, at a wage of $50 per hour, Rajw is willing to tutor 7 hours per week. At $65 per hour, he is willing to tutor 10 hours per week.
Using the midpoint method, we calculate the percentage change in quantity supplied by taking the average of the initial and final quantities: (7+10)/2 = 8.5. The percentage change in price is the difference in wages divided by the average: (65-50)/((65+50)/2) = 15/57.5 = 0.2609.
The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price: 8.5/0.2609 = 32.58.
This means that Rajw's supply of labor is relatively elastic over this wage range. A change in wage leads to a relatively large change in the quantity supplied. A price elasticity of supply greater than 1 indicates elastic supply.
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Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2020. With respect to one-third of the inventory sold to Fisher, Walsh accounts for it using the equity method of accounting.
In the consolidation worksheet for 2020, which of the following accounts would be debited to eliminate the intra-entity transfer of inventory?
Group of answer choices
A- Retained earnings.
B-Inventory.
C- Cost of goods sold.
D- Investment in Fisher Company.
E- Sales.
I am in between sales and COGS. PLEASE EXPLAIN WHY/HOW?
In the consolidation worksheet for 2020, the account that would be debited to eliminate the intra-entity transfer of inventory would be Cost of Goods Sold (COGS). Option C is correct.
1. The intra-entity transfer of inventory refers to the sale of inventory from one company to another within the same corporate group. In this case, Walsh Company is selling inventory to its subsidiary, Fisher Company.
2. When Walsh Company accounts for the transfer using the equity method of accounting, it recognizes its share of the profit on the sale in its investment in Fisher Company account.
3. To eliminate the intra-entity transfer of inventory in the consolidation worksheet, the profit on the sale needs to be eliminated. This is done by debiting the Cost of Goods Sold (COGS) account.
4. By debiting the COGS account, the profit recognized on the sale of inventory is reversed, resulting in the elimination of the intra-entity transfer.
So, the correct answer is C - Cost of Goods Sold.
By debiting the COGS account, the consolidation worksheet ensures that the profit from the intra-entity transfer is not double-counted and accurately reflects the financial results of the consolidated entity.
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t the break-even point of 2,000 units, variable costs are $110,000, and fixed costs are $64,000. How much is the selling price per unit? a. $87 b. $23 c. $32 d. Not enough information
The break-even point is when revenue is equal to expenses (both fixed and variable). In order to calculate the selling price per unit, we will use the formula for break-even point, which is: Fixed costs ÷ (Price per unit - Variable costs per unit) = Break-even point Given: At the break-even point of 2,000 units, variable costs are $110,000, and fixed costs are $64,000.
To find: How much is the selling price per unit? Solution: Substitute the given values into the formula. Fixed costs ÷ (Price per unit - Variable costs per unit) = Break-even point64000 ÷ (Price per unit - 110000 ÷ 2000) = 200064000 ÷ (Price per unit - 55) = 2000Price per unit - 55 = 64000 ÷ 2000Price per unit - 55 = 32Price per unit = 32 + 55Price per unit = $87Therefore, the selling price per unit is $87.Option A is the correct answer.
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Keeping up to date is important for all members of an international business society. You are a student in the Business and Industry Department of Sunrise College, California. As part of the midterm assignment, your professor asked you to submit a report on a recent news on international business and their unethical practices. Choose one issue listed below that interests you. Find a reliable and trusted news source when selecting the article. You will study and report the impact of the company' s unethica practices on consumers, the host country, and society. The news article you would be discussing must not be older than one year. Choose one of the following issues: - Sweatshop - Corporate corruption - Dumping and/or subsidizing - Charity Choose one of the following options: 0 500- 700 words business Report Assignment Guidelines: o Select one of the issues given above. o Research to find a reliable source that indicates an unethical issue or event connected to a business. Each source must be appropriate and current. o You can look into government issue articles, or credible magazines, or an online newspaper press. o Based on the research, you can discuss the following questions, Present details about the source, the authors, and why it was written? Summarize the article. Explain in detail the unethical practices of the business and its impact. What did you leam from the article? - Organize your ideas in a clear and logical structure. o You can include images or examples to represent and explain the content/scenario. o Cite your sources. Use the APA Citation Guide Success Criteria Check and see if you have met all of the requirements for your summative: ol presented an in-depth research that fully and accurately explains news on international business, unethical practices, and its impacts. ol researched and identified a recent news article that discusses the international business and unethical practices connected to the selected issue. ol have specified details about the source of the article, the authors, and the reason for publishing it. ol shared my understanding of the news article. ol communicated the answers clearly and answered all the required questions. ol applied my learning from the course.
For this assignment, you need to select an issue related to international business ethics, find a recent news article from a reliable source, summarize the article, explain the unethical practices discussed, and discuss their impact.
In this assignment, you are required to choose a recent news article that discusses unethical practices in international business. You have the option to select from the following issues: sweatshops, corporate corruption, dumping and/or subsidizing, or charity. The news article you choose should be from a reliable and trusted source, and it should not be older than one year.
To complete the assignment, follow these steps:
1. Select one of the issues provided, such as sweatshops or corporate corruption.
2. Conduct research to find a reliable source that highlights an unethical issue or event related to the chosen issue. Make sure the source is current and appropriate.
3. You can consider government issue articles, credible magazines, or online newspaper presses as potential sources.
4. Gather details about the source, including the authors and why the article was written.
5. Summarize the article and provide an overview of the unethical practices of the business discussed in the article, as well as their impact on consumers, the host country, and society.
6. Share what you learned from the article, including any insights or new knowledge you gained.
7. Organize your ideas in a clear and logical structure, using paragraphs and headings if necessary.
8. You can enhance your report by including images or examples to illustrate and explain the content or scenarios.
9. Remember to cite your sources using the APA Citation Guide.
Ensure that your report meets the success criteria provided, including presenting in-depth research, identifying a recent news article on unethical practices, specifying details about the source, summarizing the article, explaining the impact of the unethical practices, and answering all required questions clearly.
For this assignment, you need to select an issue related to international business ethics, find a recent news article from a reliable source, summarize the article, explain the unethical practices discussed, and discuss their impact. Make sure to meet all the assignment requirements and success criteria.
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In your opinion, rate the competitive rivalry of the North
American motorcycle industry? Refer to Porter’s Five Forces
Framework
In my opinion, the competitive rivalry of the North American motorcycle industry can be rated as high. This assessment is based on Porter's Five Forces Framework, which examines five key factors influencing industry competition:
Threat of New Entrants: The motorcycle industry has relatively low barriers to entry, allowing new players to enter the market easily, Bargaining Power of Buyers: Customers have significant bargaining power as they have a wide range of options and can easily switch between brands based on price, Bargaining Power of Suppliers: Suppliers, such as manufacturers of motorcycle parts and accessories, have some bargaining power, Threat of Substitutes: The availability of alternative transportation options, such as cars or public transportation, poses a moderate threat to the motorcycle industry, as consumers can choose alternative modes of transport.
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1. Do you think a business has its own set of rules that's different from the spheres of life.
2. Do you think business bluffing can be compared to a game of poker?
Answer in your own words please thanks
Yes, I believe that a business has its own set of rules that are distinct from the norms of everyday life. A business aims to generate profits, and it does so by engaging in a variety of activities that may not always be morally or ethically correct. For example, a business may seek to reduce its expenses by exploiting its employees or by engaging in environmentally harmful practices.
These types of actions would not be acceptable in other areas of life but are regarded as standard practice in the business world. Businesses are motivated by profit maximization and, as a result, may make decisions that are detrimental to society and the environment.
I do believe that business bluffing can be compared to a game of poker. Both poker players and business owners engage in bluffing to gain a strategic advantage over their opponents. In the context of business, bluffing is a tactic used to manipulate one's competitors or to convince them that one is stronger than they are.
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These items are taken from the financial statements of Ivanhoe Company at December 31, 2022 Buildings Accounts receivable Prepaid insurance Cash Equipment Land Insurance expense Depreciation expense Interest expense Common stock Retained earnings (January 1, 2022) Accumulated depreciation-buildings Accounts payable Notes payable Accumulated depreciation equipment Interest payable Service revenue $90,988 10,836 2,752 10,182 70,864 52,632 671 4,558 2236 51,600 34,400 39,216 8.170 80,496 16,099 3,096 12642 Prepare a classified balance sheet. Assume that $11.696 of the note payable will be paid in 2023. (List Current Assets in order of liquidity and Property, Plant and Equipment in order of Land, Buildings and Equipment) IVANHOE COMPANY Balance Sheet December 31, 2022 Assets Current Assets Cash $ Accounts Receivable 10182 10836 Prepaid Insurance 2752 Total Current Assets $ 22770 Long-Term Liabilities Land 52632 . 90088 Buildings $ Less Accumulated Depreciation-Buildings 39216 5 1772 Equipment 70864 "Less Accumulated Depreciation Equipment 10000 5476 159169 Total Assets 182939 Labies and Stockholders' Equity Current Latities Accounts Payable Interest Payable Total Current Liabilities Long-Term Liabilities Notes Payable Totalbes Stockholders' Equity Common stock Retained Earnings Total Stockholders' Equity Total abilities and stockholders uity
IVANHOE COMPANY Balance Sheet as of December 31, 2022:
Total Assets: $130,868; Total Liabilities: $30,891; Stockholders' Equity: $86,000.
IVANHOE COMPANY
Balance Sheet
December 31, 2022
Assets
Current Assets:
Cash $10,182
Accounts Receivable $10,836
Prepaid Insurance $2,752
Total Current Assets $23,770
Property, Plant, and Equipment:
Land $52,632
Buildings $90,988
Less: Accumulated Depreciation-Buildings ($39,216)
Net Buildings $51,772
Equipment $70,864
Less: Accumulated Depreciation-Equipment ($8,170)
Net Equipment $62,694
Total Property, Plant, and Equipment $167,098
Total Assets $190,868
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts Payable $16,099
Interest Payable $3,096
Total Current Liabilities $19,195
Long-Term Liabilities:
Notes Payable ($12,642 - $11,696 paid in 2023) $946
Total Long-Term Liabilities $946
Total Liabilities $20,141
Stockholders' Equity:
Common Stock $51,600
Retained Earnings (January 1, 2022) $34,400
Total Stockholders' Equity $86,000
Total Liabilities and Stockholders' Equity $190,868
In this classified balance sheet, the assets are presented in two main categories: current assets and property, plant, and equipment.
Current assets are listed in order of liquidity, with cash being the most liquid asset. Property, plant, and equipment are listed in order of land, buildings, and equipment.
The current liabilities section includes accounts payable and interest payable, while the long-term liabilities section includes notes payable. The stockholders' equity section shows the common stock and retained earnings.
Overall, the balance sheet provides a snapshot of Ivanhoe Company's financial position as of December 31, 2022, by showing its assets, liabilities, and stockholders' equity.
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For this assignment, you are creating a risk register for the
Wilmont/DroneTech Project. Using the major deliverables and tasks
mentioned in the case study, create a risk register using the
template f
To create a risk register for the Wilmont/DroneTech Project, the major deliverables and tasks mentioned in the case study will be utilized, following the provided template.
A risk register is a vital tool in project management that helps identify, assess, and manage potential risks that may impact the successful completion of a project. By using the major deliverables and tasks mentioned in the case study as a reference, a comprehensive risk register can be developed to address the specific challenges and uncertainties associated with the Wilmont/DroneTech Project.
The risk register template provides a structured approach to capture relevant information about identified risks. It typically includes columns for risk description, likelihood, impact, risk rating, risk owner, mitigation strategies, and contingency plans. By populating this template with project-specific details, the risk register becomes a valuable resource for project stakeholders to effectively monitor and manage risks throughout the project lifecycle.
Each major deliverable and task in the case study should be thoroughly analyzed to identify potential risks. This can involve brainstorming sessions, expert consultations, and a careful review of historical data from similar projects. The identified risks should be described in a clear and concise manner, outlining their potential consequences and impacts on project objectives.By assessing the likelihood and impact of each risk, a risk rating can be assigned, indicating the level of risk exposure. This allows project managers to prioritize risks and allocate appropriate resources for risk mitigation.
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Question 5
Give arguments to support the statement that Wal-mart has achieved good strategic fit between its competitive and supply chain strategies. What challenges does it face as it works to open smaller stores in urban environments?
Wal-Mart has achieved a good strategic fit between its competitive and supply chain strategies by focusing on low prices, efficient operations, and distribution. However, opening smaller stores in urban environments presents challenges that require adaptation to the specific needs and preferences of urban consumers.
Wal-Mart has achieved good strategic fit between its competitive and supply chain strategies through various arguments.
Firstly, Wal-Mart's competitive strategy of offering low prices is supported by its supply chain strategy of efficient operations and large-scale purchasing.
By leveraging its massive buying power, Wal-Mart can negotiate lower prices with suppliers, enabling them to pass on cost savings to customers.
This alignment allows Wal-Mart to maintain its competitive advantage in the retail industry.
Secondly, Wal-Mart's supply chain strategy emphasizes distribution efficiency, with a network of strategically located distribution centres.
This enables Wal-Mart to quickly restock its stores and respond to customer demands, which aligns with its competitive strategy of providing a wide range of products and maintaining high levels of customer satisfaction.
However, opening smaller stores in urban environments presents challenges for Wal-Mart. Urban environments often have limited space and higher real estate costs, making it difficult for Wal-Mart to replicate its traditional large-scale stores.
Additionally, urban consumers may have different preferences and shopping behaviours compared to suburban or rural areas. Wal-Mart needs to adapt its product assortment and store format to meet the needs of urban consumers while still maintaining its competitive advantage in terms of pricing and convenience.
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Question 3 Given the following information C = 500+ 0.7Yd T = 150 I = 400 G = 100 a) Calculate the national income equilibrium. b) Based on your answer in (a), draw the aggregate expenditure graph. c) Suppose that investment changes by 300, what would happen to the national income equilibrium? d) Suppose that the tax (T) changes, and the new T is T = 0.2Y +50, calculate the new national income equilibrium.
The calculation of national income equilibrium in this scenario yields a value of 3,066.67. This means that at this income level, aggregate demand (C + I + G + X - M) is equal to national income (Y). The aggregate expenditure graph confirms this equilibrium point, which occurs at the intersection of the aggregate expenditure line and the
a) Calculation of national income equilibrium:
The national income equilibrium is calculated using the equation: Y = C + I + G + (X - M), where Y represents national income, C is consumption, I is investment, G is government spending, X is exports, and M is imports.
To determine the equilibrium, we substitute the given values into the equation and solve for Y:
Y = (500 + 0.7Yd) + I + G + (X - M)
Where Yd = Y - T and T = 0.2Y + 50
Simplifying the equation:
Y = 500 + 0.7Y - 0.7T + I + G + (X - M)
Y - 0.7Y = 500 - 0.7T + I + G + (X - M)
0.3Y = 500 - 0.7T + I + G + (X - M)
Y = (500 - 0.7T + I + G + (X - M)) / 0.3
Substituting the given values:
Y = (500 - 0.7(0.2Y + 50) + 400 + 100 + 0) / 0.3
Simplifying further:
Y = (500 - 70 - 10 + 400 + 100 + 0) / 0.3
Y = 920 / 0.3 = 3,066.67
Therefore, the national income equilibrium is 3,066.67.
b) Aggregate Expenditure Graph:
The aggregate expenditure graph represents the total amount of spending in an economy at different levels of national income. The x-axis represents national income, and the y-axis represents expenditure. The national income equilibrium is determined by the intersection of the aggregate expenditure line and the 45-degree line.
To plot the graph, we need to calculate the components of expenditure:
Y = C + I + G + (X - M)
Substituting the given values:
Y = (500 + 0.7Yd) + I + G + (X - M)
Where Yd = Y - T and T = 0.2Y + 50
Simplifying the equation:
(500 + 0.7(Y - (0.2Y + 50))) + 400 + 100 + 0 = Y
Solving for Y:
Y = 3,066.67
The aggregate expenditure graph would display the equilibrium level of expenditure at Y = 3,066.67, which intersects with the 45-degree line.
In conclusion, the calculation of national income equilibrium in this scenario yields a value of 3,066.67. This means that at this income level, aggregate demand (C + I + G + X - M) is equal to national income (Y). The aggregate expenditure graph confirms this equilibrium point, which occurs at the intersection of the aggregate expenditure line and the
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What are the three major elements of the total customer response time? Multiple Choice Receipt time, manufacturing lead time, delivery time. Wait time, delivery time, cycle time. Manufacturing lead time, production cycle time, receipt time. Receipt time delivery time, order time. Receipt time, cycle time, wait time.
The three major elements of the total customer response time are receipt time, manufacturing lead time, and delivery time. The correct option is Multiple Choice: Receipt time, manufacturing lead time, delivery time.
The receipt time, in terms of customer service, refers to the time elapsed between the moment when the customer orders a product or service and when the supplier acknowledges receipt of the order and commences processing it.
The time between the moment the customer places an order and the time the supplier receives the order is referred to as receipt time.Manufacturing lead time is the period of time required for a manufacturer to complete an order from the time the raw materials arrive on the factory floor to the moment the finished product is ready to ship.
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The health risk to others from secondhand smoke is a ______________ externality because ____________.
A.
negative production; if the smoker knows they are polluting the environment, they will begin to purchase fewer cigarettes.
B.
negative consumption; if the smoker knows they are polluting the environment, they will begin to purchase fewer cigarettes.
C.
negative production; the nonsmoker's health is negatively impacted by the secondhand smoke, and that person (the nonsmoker) is not compensated for the damage to their health.
D.
negative consumption; the nonsmoker's health is negatively impacted by the secondhand smoke, and that person (the nonsmoker) is not compensated for the damage to their health.
The correct answer is D. negative consumption; the nonsmoker's health is negatively impacted by the secondhand smoke, and that person (the nonsmoker) is not compensated for the damage to their health.
In this scenario, the health risk to others from secondhand smoke is considered a negative externality of consumption. The negative externality arises because the actions of the smoker (consumer) in consuming cigarettes have adverse effects on the health of the nonsmokers, who are not involved in the consumption decision. The nonsmokers bear the cost of the health risks associated with secondhand smoke without receiving any compensation.
Therefore, option D is the correct answer as it accurately describes the nature of the externality and the impact on the nonsmoker's health.
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Can you think of product categories in the maturity or
decline stage that you think are poised for reinvention, or that
have been successfully reinvented? Give examples and explain your
answer.
There are several product categories in the maturity or decline stage that have been successfully reinvented or are poised for reinvention. One such category is physical music media, like vinyl records and cassette tapes.
While these formats were considered outdated with the rise of digital music, they have experienced a resurgence in recent years. Many music enthusiasts appreciate the tactile and nostalgic experience of owning physical copies of their favorite albums. This reinvention has been supported by initiatives such as Record Store Day, which promotes independent record stores and exclusive vinyl releases.
Another example is print media, specifically newspapers and magazines. With the advent of online news and digital publications, print media faced a decline. However, some publishers have successfully reinvented themselves by adopting digital platforms and offering online subscriptions. They have also focused on creating unique content and engaging readers through interactive features and multimedia elements.
Physical music media and print media are examples of product categories that have reinvented themselves to stay relevant in a changing market. The reinvention of vinyl records and cassette tapes can be attributed to the growing interest in retro and vintage culture. Many people enjoy the tactile experience of flipping through records and the warm sound quality they provide. Record Store Day has also contributed to the resurgence by organizing special releases and events that attract collectors and music enthusiasts.
Similarly, print media has embraced the digital age by offering online editions and subscriptions. This allows readers to access content on various devices and platforms. Publishers have also focused on creating unique content that differentiates them from online news sources. They have incorporated interactive elements, videos, and other multimedia features to enhance the reading experience and engage readers.
In conclusion, the reinvention of physical music media and print media demonstrates how product categories in the maturity or decline stage can successfully adapt to changing consumer preferences and technological advancements.
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The Present Value of all four of the following future cash flows is $2,000 when discounted at 4 percent annually.
1 year in the future $700
2 years in the future $700
3 years in the future $?
4 years in the future $900
What is the dollar amount of the missing future cash flow?
According to the given statement the missing future cash flow in this scenario is $893.15.
The missing future cash flow can be calculated by finding the difference between the present value of all four future cash flows and the sum of the present values of the known future cash flows.
To find the present value of each cash flow, we need to discount it at a rate of 4 percent annually. The present value formula is:
Present Value = Future Value / (1 + Discount Rate)^n
Using this formula, we can calculate the present value of the known future cash flows:
1 year in the future: Present Value = $700 / (1 + 0.04)^1 = $673.08
2 years in the future: Present Value = $700 / (1 + 0.04)^2 = $647.10
4 years in the future: Present Value = $900 / (1 + 0.04)^4 = $786.67
Now, let's calculate the present value of all four future cash flows:
$2,000 = $673.08 + $647.10 + ? + $786.67
To find the missing future cash flow, we rearrange the equation:
? = $2,000 - $673.08 - $647.10 - $786.67 = $893.15
Therefore, the dollar amount of the missing future cash flow is $893.15.
To find the missing future cash flow, we first need to calculate the present value of the known future cash flows using the present value formula. Then, we can subtract the sum of the present values of the known future cash flows from the present value of all four future cash flows to find the missing cash flow. By rearranging the equation, we can calculate the missing future cash flow as $893.15.
The missing future cash flow in this scenario is $893.15.
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A financial manager is considering evaluating the risk of investing in Microsoft common stocks. The table below shows monthly returns on the stock in year 2020.
Month Return
202001 7.95%
202002 -4.83%
202003 -2.39%
202004 13.63%
202005 2.25%
202006 11.37%
202007 0.74%
202008 10.01%
202009 -6.51%
202010 -3.74%
202011 5.73%
202012 4.17%
The financial manager does not want to use standard deviation to measure investment risk of the stock. What are the three major problems of standard deviation as a measure of risk?
A client is concerned about variation in returns below the average level. Please indicate the risk measure that the client cares about and compute the risk measure for Microsoft stock based on the sample of 12 monthly returns.
Another client is very loss averse and is extremely concerned about possible substantial loss on her investment. She wants be 99% confidence about the possible investment loss. Assuming returns on Microsoft stocks are normally distributed, calculate the relevant risk measure of the stock for the loss averse investor.
Standard deviation as a measure of risk has limitations due to its assumptions, failure to differentiate between upside and downside risk, For the loss averse investor, the relevant risk measure would be the Value at Risk at a 99% confidence level.
Standard deviation measures the dispersion of data points around the mean and the three major problems with using standard deviation as a measure of risk are as follows :
1. It assumes that returns are normally distributed: Standard deviation is based on the assumption that returns follow a normal distribution, which means that extreme events are considered rare. However, in reality, financial markets can experience significant fluctuations and outliers, making the assumption of normality unrealistic.
2. It treats both positive and negative deviations equally: Standard deviation considers both positive and negative deviations from the mean as equally risky. However, investors typically have a greater aversion to downside risk, meaning they are more concerned about losses rather than gains. Standard deviation fails to differentiate between the two, which may not accurately capture an investor's true risk preferences.
3. It does not account for non-linear relationships: Standard deviation assumes a linear relationship between returns and risk. However, in financial markets, the relationship between risk and return is often non-linear. For example, a small decrease in returns may have a significantly larger impact on an investor's portfolio compared to the same magnitude of increase. Standard deviation fails to capture this non-linear relationship.
Standard deviation does not consider the investor's risk appetite. Standard deviation is an objective measure that does not take into account an investor's risk tolerance or preferences. It does not capture subjective factors such as the investor's aversion to losses or willingness to take on higher levels of risk for potentially higher returns. To compute the risk measure that the client cares about, which is the variation in returns below the average level, you can use the downside risk measure. Downside risk measures the volatility of returns that fall below a certain threshold, such as the average return. It focuses on the negative deviations from the average, which aligns with the client's concern.
To calculate the downside risk measure for Microsoft stock based on the sample of 12 monthly returns, you would:
- Determine the average return by summing the 12 monthly returns and dividing by 12.
- Calculate the deviations of each monthly return from the average.
- Square each deviation and sum them up.
- Divide the sum by 12 to get the mean squared deviation.
- Take the square root of the mean squared deviation to get the downside risk measure.
The relevant risk measure for the loss averse investor, who wants to be 99% confident about the possible investment loss, would be the Value at Risk (VaR) at a 99% confidence level. VaR measures the maximum potential loss an investment may incur over a given time period at a certain confidence level.
To calculate the VaR for the loss averse investor, assuming returns on Microsoft stocks are normally distributed, you would: Calculate the mean and standard deviation of the 12 monthly returns. Determine the critical value at the 99th percentile of the standard normal distribution. Multiply the critical value by the standard deviation and subtract it from the mean to obtain the VaR.
In conclusion, standard deviation as a measure of risk has limitations due to its assumptions, failure to differentiate between upside and downside risk, and lack of consideration for an investor's risk appetite. To address the client's concern about variation in returns below the average level, downside risk can be used. For the loss averse investor, the relevant risk measure would be the Value at Risk at a 99% confidence level.
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The following contract does not have to be in writing pursuant to the statute of frauds:
a. Contract for goods of $500.00 or more
b. Contracts that cannot be completed in a year
c. Contract for sale of land
d. Contracts for any service in excess of $450.00
Contracts for any service in excess of $450.00 do not have to be in writing pursuant to the statute of frauds. So, the correct answer is d.
The correct answer is d. Contracts for any service in excess of $450.00 do not have to be in writing pursuant to the statute of frauds. The statute of frauds typically requires certain types of contracts to be in writing to be enforceable, but not all contracts fall within its scope.
Option a is incorrect because contracts for goods of $500.00 or more generally do fall within the statute of frauds. The Uniform Commercial Code (UCC), which governs sales of goods, sets the threshold at $500.00 for contracts to be in writing.Option b is incorrect because contracts that cannot be completed within a year generally fall within the statute of frauds. The requirement for written documentation applies to contracts that cannot be performed within one year from the date of formation.Option c is incorrect because contracts for the sale of land almost always fall within the statute of frauds. The transfer of real property typically requires a written agreement to be enforceable.Therefore, the correct answer is d. Contracts for any service in excess of $450.00 do not have to be in writing pursuant to the statute of frauds. However, it's important to note that individual jurisdictions may have specific rules and exceptions regarding the statute of frauds, so it's always advisable to consult local laws and regulations.
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(ii)Elasticity is a useful decision making tool used by company management in running their operations. John is currently selling peanut butter for Zmw15.00 per bottle and demand at this price is 120 bottles per month. He is planning to reduce the current price by Zmw3.00 per bottle and expects that demand will increase by 30% per month. Using the Point Method and assuming that the projections will be achieved in full, advise John whether he should proceed with the price reduction decision. (50 marks)
The price elasticity of demand using the point method : -1.5 . Demand is elastic. This means that a 1% decrease in price will result in a more than 1.5% increase in quantity demanded.
To advise John on whether he should proceed with the price reduction decision, we can use the point method to calculate the price elasticity of demand.
The price elasticity of demand measures the responsiveness of quantity demanded to a change in price.
The formula for price elasticity of demand using the point method is:
E = (% change in quantity demanded) / (% change in price)
Given the information provided, let's calculate the price elasticity of demand using the point method:
Current price = Zmw 15.00 per bottleCurrent demand = 120 bottles per monthNew price = Zmw 15.00 - Zmw3.00
= Zmw 12.00 per bottle
Expected increase in demand = 30% increase from the current demand of 120 bottles per month
Step 1: Calculate the percentage change in quantity demanded:
% change in quantity demanded = (new demand - current demand) / current demand * 100% change in quantity demanded = (0.3 * 120) / 120 * 100% change in quantity demanded = 30%Step 2: Calculate the percentage change in price:
% change in price = (new price - current price) / current price * 100% change in price = (12 - 15) / 15 * 100% change in price = -20%Step 3: Calculate the price elasticity of demand:
E = (% change in quantity demanded) / (% change in price)
E = 30% / -20%
E = -1.5
Interpreting the elasticity value:
Since the price elasticity of demand is -1.5, it indicates that demand is elastic. This means that a 1% decrease in price will result in a more than 1.5% increase in quantity demanded.
Based on this analysis, John should proceed with the price reduction decision. The price elasticity of demand suggests that a decrease in price by Zmw3.00 per bottle is likely to lead to a significant increase in demand, more than compensating for the reduction in price.
However, it's important to note that other factors such as cost implications and competition should also be considered before making a final decision.
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WHAT ARE THE DETERMINANTS OF BETA (SYSTEMATIC RISK COEFFICIENT
IN THE CAPM RISK RETURN MODEL FOR FINDING COST OF EQUITY)?
The determinants of beta, which is the systematic risk coefficient in the CAPM risk-return model for finding the cost of equity, include the company's business risk, financial risk, and market risk.
Beta is a measure of a stock's sensitivity to market movements and is a key component in calculating the cost of equity using the Capital Asset Pricing Model (CAPM). Several factors determine a stock's beta.
Business Risk: The nature and stability of a company's operations and its susceptibility to changes in the business cycle can affect beta. Companies with higher business risk, such as those operating in cyclical industries, tend to have higher betas.
Financial Risk: Financial risk arises from a company's capital structure and its ability to meet financial obligations. Companies with higher levels of debt and financial leverage tend to have higher betas due to increased financial risk.
Market Risk: Beta reflects the sensitivity of a stock to overall market movements. A beta of 1 indicates that the stock moves in line with the market, while a beta greater than 1 indicates higher volatility than the market, and a beta less than 1 indicates lower volatility.
Industry Factors: The industry in which a company operates can influence its beta. Industries with higher levels of systematic risk, such as technology or biotech, tend to have higher betas compared to industries with more stable demand, such as utilities or consumer staples.
Financial Leverage: The level of financial leverage, i.e., the proportion of debt in the capital structure, can affect beta. Higher leverage can amplify the company's market risk, leading to a higher beta.
By considering these determinants, investors and analysts can estimate a company's beta and use it to calculate the cost of equity, which is a key input in various financial models and investment valuation techniques.
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7) All of the following except one are examples of price discrimination. Which is the exception? A) An airline charges difierent prices to difierent trayellers. B) A telephone company charges difierent rates according to the time of use. C) A professional gardener is able to buy plants at a lower price than a householder can. D) An electricity company charges lower rates during the daytime compared to night time. E) A hairdresser charges different rates according to the age of his clients.
C) A professional gardener is able to buy plants at a lower price than a householder can.
The exception is C) A professional gardener is able to buy plants at a lower price than a householder can. This situation does not involve price discrimination because it is based on the buyer's occupation or status rather than charging different prices for the same product or service to different customers. In this case, the price difference is due to the professional gardener's ability to access wholesale or trade discounts, which are typically available to professionals in various industries. Price discrimination, on the other hand, refers to the practice of charging different prices for the same product or service based on factors such as the buyer's willingness to pay, their demographic characteristics, or their purchase behavior. Examples A, B, D, and E all involve different pricing strategies based on such factors and can be considered examples of price discrimination.
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Question 32 ( 2 points) Donald's Donuts is preparing to roll out a new dotrut offering at theic donut thete featuring at new raspberry filling. Donald estimates that there will either be high, medlum, of lew demand for this new donut. He estimates that there is a 40 his probability that there will be hiph demand, in which case he will make a $10,000 profit. He estimates that diere la a 20 hy probability that there will be medium demand, in which case he will make a 83,000 profit. and if there is low demand, he will make a loss (negative profic) of $5.000. What is the expected monetary value associated with the new product offering?) A)
The expected monetary value associated with the new product offering is $2,600. The expected monetary value (EMV) associated with the new product offering can be calculated by multiplying the probability of each demand level by the corresponding profit or loss.
To calculate the EMV, we need to multiply the probability of each demand level by the profit or loss associated with that demand level, and then sum up the results.
1. High demand: Probability = 0.40, Profit = $10,000
EMV for high demand = Probability * Profit = 0.40 * $10,000 = $4,000
2. Medium demand: Probability = 0.20, Profit = $3,000
EMV for medium demand = Probability * Profit = 0.20 * $3,000 = $600
3. Low demand: Probability = 0.40, Loss = -$5,000
EMV for low demand = Probability * Loss = 0.40 * (-$5,000) = -$2,000
Now, we sum up the EMVs for each demand level:
EMV = EMV for high demand + EMV for medium demand + EMV for low demand
= $4,000 + $600 + (-$2,000) = $2,600
Therefore, the expected monetary value associated with the new product offering is $2,600.
The EMV is calculated by multiplying the probability of each demand level by the corresponding profit or loss. In this case, Donald estimates a 40% probability of high demand with a $10,000 profit, a 20% probability of medium demand with an $3,000 profit, and a 40% probability of low demand with a -$5,000 loss. By multiplying the probabilities with the corresponding profits or losses and summing up the results, we get an EMV of $2,600. This means that, on average, Donald can expect to make a profit of $2,600 with the new product offering.
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you
have decided to pursue a career
there mate spacific to starbucks. Eucrefie 1-1 Accounting and accounting-reiated opportarites Lo3 Edernal auditiri, (2) a crotrolier, and (0) a ter speriallat. Fuencive 14 Applying the Cha
To pursue a career in any of these roles, it is beneficial to have a strong understanding of accounting principles, financial analysis, and relevant software applications. Obtaining a degree in accounting or a related field, such as finance or business administration, can provide a solid foundation for these careers. Gaining practical experience through internships or entry-level positions can also be helpful in building your skills and knowledge in the field.
If you have decided to pursue a career specifically related to Starbucks, there are several accounting and accounting-related opportunities you can consider. Let's go through each option:
1. Internal Auditing: Internal auditors are responsible for evaluating and assessing the financial processes and controls within an organization. In the context of Starbucks, an internal auditor would review the company's financial records, policies, and procedures to ensure compliance with accounting standards and identify any potential risks or discrepancies. They play a crucial role in maintaining the integrity and accuracy of financial information.
2. Controller: A controller is a financial professional who oversees the accounting and financial reporting functions of an organization. In the case of Starbucks, a controller would be responsible for managing the company's financial statements, budgeting, financial analysis, and ensuring compliance with relevant regulations. They provide financial guidance to management and help in making strategic decisions based on the company's financial performance.
3. Treasury Specialist: A treasury specialist focuses on managing an organization's cash flow, liquidity, and financial assets. In the context of Starbucks, a treasury specialist would handle tasks such as managing bank accounts, monitoring cash flow, forecasting cash needs, and optimizing the company's financial resources. They work closely with other departments to ensure efficient financial operations and mitigate risks.
It's important to note that these are just a few examples of accounting and accounting-related opportunities within Starbucks. The company also offers various other roles, such as financial analysts, tax specialists, and payroll administrators. Additionally, there may be opportunities to work in the finance department at the corporate level or in regional offices.
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How would you rewrite the job advert you choose to ensure you attracted the right talent? Provide examples of the language/graphics you would use.
Relate to the following HUMAN RESOURCES TOPIC: Attracting and Selecting Talent
To attract the right talent, you would need to rewrite the job advertisement by using language and graphics that effectively communicate the job requirements, company culture, and opportunities for growth.
Here is a step-by-step guide on how to do this:
1. Begin with an attention-grabbing headline: Use clear and concise language to highlight the most appealing aspects of the job. For example, "Exciting Opportunity for Growth in a Dynamic Company!"
2. Clearly outline the job requirements: State the essential skills, qualifications, and experience needed for the role. Use bullet points to make the information easily scannable. For instance:
- Bachelor's degree in a related field
- Minimum 3 years of experience in a similar role
- Proficiency in Microsoft Office Suite
- Excellent communication and teamwork skills
3. Highlight company culture and values: Describe the company's mission, values, and work environment to attract candidates who align with your organization's culture. For example:
"At XYZ Company, we foster a collaborative and inclusive work environment where innovation is encouraged. We believe in work-life balance and offer flexible schedules and remote work options."
4. Showcase growth opportunities: Mention any opportunities for professional development, career advancement, or additional training programs. For instance:
"Join our team and unlock opportunities for advancement through our comprehensive training programs, mentorship initiatives, and performance-based promotions."
5. Use engaging graphics: Incorporate visuals such as images, videos, or infographics to make the job advertisement visually appealing and engaging. For example, use images of employees working together or showcase the company's vibrant office space.
Remember to proofread and edit the advertisement to ensure clarity and coherence. By using these strategies, you can attract the right talent by effectively conveying the job requirements, company culture, and growth opportunities.
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Micro Spinoffs Inc. issued 10-year debt a year ago at par value with a coupon rate of 7%, paid annually. Today, the debt is selling at $1, 350. If the firm's tax bracket is 40%, what is its percentage after-tax cost of debt? Assume a face value of $1,000. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) After-tax cost of debt ___________ %
The after-tax cost of debt for Micro Spinoffs Inc. is 3%. The coupon payment on the debt is 7% of the face value, which is $1,000. So the annual coupon payment is $70.
Since the debt is selling at a premium ($1,350), it means that investors are willing to pay more than the face value to own the debt. The yield to maturity (YTM) of the debt is the rate of return that will make the present value of all future cash flows equal to the current market price ($1,350). We can use a financial calculator or Excel to solve for this rate, but for simplicity, let's assume that the YTM is 5%.
The after-tax cost of debt can be calculated as follows:
First, we need to calculate the before-tax cost of debt. This is the yield to maturity (YTM) of the debt, which we assumed to be 5%.
The interest expense on the debt is tax-deductible, so the after-tax cost of debt is lower than the before-tax cost. The tax savings from the interest expense can be calculated as follows:
Tax savings = Interest expense x Tax rate
= $70 x 40%
= $28
Therefore, the after-tax cost of debt is:
After-tax cost of debt = Before-tax cost of debt x (1 - Tax rate)
= 5% x (1 - 40%)
= 3%
Therefore, the after-tax cost of debt for Micro Spinoffs Inc. is 3%.
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An assembly must vreae on finished product every 5 minutes. The sum of the task times required to create a product is 700 seconds. What is theoretical minimum number of this assembly line?
a. 4
b. 3
c. 5
d. 233
e. 140
The theoretical minimum number of assembly line stations required is 3. Thus, the correct answer is Option (b).
To find the theoretical minimum number of assembly line stations required, we need to calculate the number of stations based on the cycle time.
The cycle time is the time required to produce one unit of the product. In this case, the assembly must create a finished product every 5 minutes, which is equivalent to 5 × 60 = 300 seconds.
To calculate the number of stations, we divide the sum of task times by the cycle time:
Number of stations = Sum of task times / Cycle time
Number of stations = 700 seconds / 300 seconds
Number of stations ≈ 2.33
Since we can't have a fraction of a station, we need to round up to the nearest whole number. Therefore, the theoretical minimum number of assembly line stations required is 3.
The correct answer is (b) 3.
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Providing for Doubtful Accounts At the end of the current year, the accounts receivable account has a debit balance of $629,000 and sales for the year total $7,130,000.
a. The allowance account before adjustment has a debit balance of $8,500. Bad debt expense is estimated at 1/2 of 1% of sales. b. The allowance account before adjustment has a debit balance of $8,500. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $27,200
c. The allowance account before adjustment has a credit balance of $8,100. Bad debt expense is estimated at 1/4 of 1% of sales.
d. The allowance account before adjustment has a debit balance of $8,100. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $67,200
Determine the amount of the adjusting entry to provide for doubtful accounts under each of the assumptions (a through d) listed above.
a. $ ________
b. $ ________
c. $ ________
d. $ ________
a. The adjusting entry to provide for doubtful accounts under assumption (a) is $35,650.
b. The adjusting entry to provide for doubtful accounts under assumption (b) is $19,700.
c. The adjusting entry to provide for doubtful accounts under assumption (c) is $17,825.
d. The adjusting entry to provide for doubtful accounts under assumption (d) is $75,350.
In order to determine the amount of the adjusting entry to provide for doubtful accounts, we need to consider the information given in each scenario.
a. In assumption (a), the bad debt expense is estimated at 1/2 of 1% of sales. Therefore, the estimated bad debt expense would be $7,130,000 * 0.005 = $35,650. Since the allowance account before adjustment has a debit balance of $8,500, the adjusting entry would be $35,650 - $8,500 = $27,150.
b. In assumption (b), an aging of the accounts in the customer ledger indicates estimated doubtful accounts of $27,200. This amount represents the estimated bad debt expense. Since the allowance account before adjustment has a debit balance of $8,500, the adjusting entry would be $27,200 - $8,500 = $19,700.
c. In assumption (c), the bad debt expense is estimated at 1/4 of 1% of sales. Therefore, the estimated bad debt expense would be $7,130,000 * 0.0025 = $17,825. Since the allowance account before adjustment has a credit balance of $8,100, the adjusting entry would be $17,825 + $8,100 = $25,925.
d. In assumption (d), an aging of the accounts in the customer ledger indicates estimated doubtful accounts of $67,200. This amount represents the estimated bad debt expense. Since the allowance account before adjustment has a debit balance of $8,100, the adjusting entry would be $67,200 - $8,100 = $59,100.
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A principle of organization design is that organization design facilitates the ____________________________________. a. development of investment capital b. satisfaction of employees c. hiring of staff d. implementation of strategies Which of the following are disadvantages of bureaucratic organizations? Check all that apply. ▢ The division of labor may limit employees from gaining broad skills. ▢ Social processes may not receive adequate attention ▢ Changing rules may be difficult. ▢ Reliance on rules usually results in efficient operations. For each item, categorize the statement to indicate whether it is consistent with Likert’s description of a System 1 organization or a System 2 organization.
A principle of organization design is that organization design facilitates the implementation of strategies. The correct answer is option d.
The disadvantages of bureaucratic organizations are that the division of labor may limit employees from gaining broad skills and that social processes may not receive adequate attention. The correct option is both a and b.
The advantages of bureaucratic organizations are that they usually result in efficient operations, and the changing of rules may be difficult. Likert's description of System 1 and System 2 organizations:System 1 Organizations: It is characterized by a relatively small hierarchy of authority, less formalization, decentralized decision-making, and a more flexible structure.
In System 1, the organization is highly adaptable and values the feedback and opinions of its employees. The main idea behind this type of organization is to maximize employee participation and encourage teamwork, autonomy, and creativity.System 2 Organizations: This is an organization that has a relatively large hierarchy of authority, strict rules and regulations, centralized decision-making, and a more rigid structure.
The organization values consistency and uniformity, and its employees have less autonomy and less input into the decision-making process. In System 2 organizations, the authority resides at the top, and the employees are expected to follow orders without questioning them.
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Cookie Dough Pty Ltd is a bakery that recently opened in South Yarra. Their written advertisement was published in the local newspaper and contains the following information: COME AND VISIT COOKIE DOUGH! All cookies baked fresh daily in our store. Usually $15.95 for 12 cookies. $5.95 for 12 cookies - this week only!!!!!!!! You are provided with the following additional information from Cookie Dough Pty Ltd. The cookies are not baked fresh. The cookies are first partially pre-baked and then frozen. After this process has occurred the cookies are shipped to Cookie Dough from their supplier in Sydney. The cookies have never been sold at the price of $15.95. Advise Cookie Dough Pty Ltd whether they have breached section 18 and any of the sub-sections in section 29 of the Australian Consumer Law, including references to any relevant legal cases to support your arguments. Ensure you specifically consider the contents of the advertisement under both section 18 and section 29, and identify any specific contraventions.
Based on the information provided, Cookie Dough Pty Ltd has potentially breached section 18 of the Australian Consumer Law (ACL) by engaging in misleading or deceptive conduct.
The advertisement falsely claims that the cookies are baked fresh daily in their store when, in fact, they are partially pre-baked and frozen. This misrepresentation can mislead consumers about the quality and freshness of the cookies. Additionally, the advertisement may also breach section 29 of the ACL, specifically subsections 29(1)(a) andprohibits making false or misleading representations about the price of goods, and subsection 29(1)(g) prohibits making false or misleading representations about the availability of goods.
By stating that the cookies are "usually $15.95 for 12 cookies" and then offering them for $5.95 "this week only," Cookie Dough Pty Ltd may have created a false impression that consumers are getting a special discounted price. However, if the cookies have never been sold at the stated original price of $15.95, this can be seen as a false or misleading representation about the price.
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ADVANCED ANALYSIS Currently, at a price of $1 each, 100 popsicles are sold per day in the perpetually hot town of Rostin. Consider the elasticity of supply. In the short run, a price increase from $1 to $2 is unit-elastic ( ES=1.0 ). in the long run, a price increase from $1 to $2 has an elastleity of supply of 1.50. (Hint: Apply the midpoints approach to the elasticity of supply) Instructions: Enter your answers as a whole number. a. How many popsicles will be sold each day in the short run if the price rises to $2 each? popsicles b. How many popsicles will be sold per day in the long run if the price rises to $2 each? popsicles
a. In the short run, if the price rises to $2 each, approximately 50 popsicles will be sold each day.
b. In the long run, if the price rises to $2 each, approximately 75 popsicles will be sold per day.
The elasticity of supply measures the responsiveness of quantity supplied to changes in price. In this case, we are given that the price of popsicles in the town of Rostin increases from $1 to $2.
To determine the quantity of popsicles sold in the short run and long run, we need to apply the midpoint approach to calculate the elasticity of supply.
a. In the short run, the elasticity of supply is given as unit-elastic (ES = 1.0) when the price increases from $1 to $2. Using the midpoint formula, we can calculate the percentage change in quantity supplied:
Elasticity of supply (ES) = (% change in quantity supplied) / (% change in price)
Since the elasticity is 1.0, it means that the percentage change in quantity supplied is equal to the percentage change in price. Therefore, if the price increases by 100% (from $1 to $2), the quantity supplied will decrease by 100% as well. This implies that approximately 50 popsicles will be sold each day in the short run.
b. In the long run, the elasticity of supply is given as 1.50 when the price increases from $1 to $2. Again, using the midpoint formula, we calculate the percentage change in quantity supplied:
1.50 = (% change in quantity supplied) / (% change in price)
With a price increase of 100%, we can solve for the percentage change in quantity supplied, which is 150%. This means that in the long run, the quantity supplied will decrease by 150% when the price increases from $1 to $2. Therefore, approximately 75 popsicles will be sold per day in the long run.
It's important to note that these estimates are based on the given elasticity of supply values and assume other factors remain constant. Actual market conditions may vary, and additional factors such as production capacity or input availability can influence the actual quantity supplied.
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Two characteristics of publicness in goods are nonexcludability and nonrivalry. Define each characteristic, making sure to clearly differentiate them. For each characteristic, explain why in theory markets may fail to allocate good efficiently. How can government improve upon the market outcome? Graphically demonstrate and explain the efficient quantity of a public good and the price paid by each member of society. You are to assume a two-person society for the purposes of the graphical demonstration.
Overall, public goods face challenges in market allocation due to nonexcludability and nonrivalry, but government intervention can improve efficiency by addressing the free rider problem through taxation and providing the optimal quantity of the public good.
Publicness in goods refers to goods that possess the characteristics of nonexcludability and nonrivalry. Nonexcludability means that individuals cannot be excluded from consuming the good, regardless of whether they pay for it or not. Nonrivalry means that one person's consumption of the good does not diminish its availability for others.
In theory, markets may fail to efficiently allocate public goods due to the free rider problem. Since individuals cannot be excluded from consuming the good, they have an incentive to not pay for it and still benefit from it. This leads to underproduction of public goods in the market.
To improve upon the market outcome, the government can step in and provide public goods. The government can use taxation to finance the provision of public goods, ensuring that everyone contributes to their production. This overcomes the free rider problem and allows for the efficient allocation of public goods.
Graphically, the efficient quantity of a public good occurs where the marginal cost of providing the good equals the sum of the marginal benefits of all individuals in society. The price paid by each member of society is equal to their individual marginal benefit at the efficient quantity.
In a two-person society, the efficient quantity of the public good is where the marginal cost curve intersects with the combined marginal benefit curve of both individuals. The price paid by each member of society is determined by their respective individual marginal benefits.
Overall, public goods face challenges in market allocation due to nonexcludability and nonrivalry, but government intervention can improve efficiency by addressing the free rider problem through taxation and providing the optimal quantity of the public good.
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Wissler, Inc. owes $318,000 to the bank for some improvements made to its office building. The loan is for 60 months and the monthly payment is $7,295.79 What is the interest rate on the loan? Multiple Choice
a. 13.37 percent
b. 13.87 percent
c. 14.12 percent
d. 13.12 percent
The correct answer is b. 13.87 percent.
To find the interest rate on the loan, we can use the formula for calculating the monthly payment on a loan:
Monthly Payment = (Loan Amount * Interest Rate * (1 + Interest Rate) ^ Number of Months) / ((1 + Interest Rate) ^ Number of Months - 1)
In this case, we know the monthly payment is $7,295.79, the loan amount is $318,000, and the number of months is 60. We need to solve for the interest rate.
To find the interest rate, we can use a numerical method called the trial and error method. By trying different interest rates, we can see which one gives us a monthly payment closest to $7,295.79.
Using this method, we find that an interest rate of 13.87 percent (option b) gives a monthly payment of approximately $7,295.77. This is the closest to the desired monthly payment of $7,295.79.
Therefore, the correct answer is b. 13.87 percent.
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