If the future spot price is 98.70 cents per 100 yen, the speculator will only break even.
To answer the given questions, we need to calculate the profit for different scenarios based on the information provided.
Graph the call option cash flow schedule:
The cash flow schedule for the call options can be represented as follows:
Spot Price Option Premium Option Exercised Net Profit
< 96 -1.35 0 -1.35
96 - 100 -1.35 (Spot - Strike) (Spot - 97.35)
> 100 -1.35 (100 - 96) 2.65
Note: The option is exercised only if the spot price is greater than the striking price.
Determine the speculator's profit if the yen appreciates to $1.00/100 yen:
If the yen appreciates to $1.00/100 yen, the spot price exceeds the striking price, and the speculator will exercise the options. The profit can be calculated as follows:
Profit = (Spot Price - 97.35) - Option Premium
Profit = ($1.00 - 97.35) - 1.35
Profit = 2.65 - 1.35
Profit = 1.30 cents per 100 yen
Determine the speculator's profit if the yen appreciates only to the forward rate:
If the yen appreciates only to the forward rate of 95.71 cents, the spot price does not exceed the striking price, and the speculator will not exercise the options. The profit in this case is simply the negative of the option premium:
Profit = -Option Premium
Profit = -1.35 cents per 100 yen
Determine the future spot price at which the speculator will only break even:
To determine the future spot price at which the speculator will only break even, we set the net profit to zero and solve for the spot price:
(Spot - 97.35) - 1.35 = 0
Spot - 97.35 = 1.35
Spot = 98.70 cents per 100 yen
Therefore, if the future spot price is 98.70 cents per 100 yen, the speculator will only break even.
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Cash flow schedule is shown below. 2.the total cash flow will be = -6.75 cents. 3. the total cash flow will still be -5 * 1.35 = -6.75 cents. 4. the speculator will break even when the future spot price is 97.35 cents.
1. Graph the Call Option Cash Flow Schedule:
The cash flow from buying call options can be visualized as follows:
Spot Price Profit from Options Total Cash Flow
Below 96 -5 * 1.35 -5 * 1.35
96 0 -5 * 1.35
Above 96 (Spot - 96) * 5 (Spot - 96) * 5
2. Determine the Speculator's Profit if the Yen Appreciates to $1.00/100 yen:
If the yen appreciates to $1.00/100 yen, the profit from options will be 0, and the total cash flow will be -5 * 1.35 = -6.75 cents.
3. Determine the Speculator's Profit if the Yen Appreciates Only to the Forward Rate:
If the yen appreciates to the forward rate of 95.71 cents, the profit from options will be 0, and the total cash flow will still be -5 * 1.35 = -6.75 cents.
4. Determine the Future Spot Price at Which the Speculator Will Only Break Even:
To break even, the total cash flow should be 0, which means the profit from options should equal the loss due to the higher spot price. So:
-5 * 1.35 = (Spot - 96) * 5
Solving for the spot price (Spot) gives:
Spot = 96 + (5 * 1.35) / 5 = 97.35 cents
Therefore, the speculator will break even when the future spot price is 97.35 cents.
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Analyze how you would fit into the different segmentation categories—geographic, demographic, psychographic, benefit and usage rate—for a product you use regularly. Work through the process again using family members who use the same product. How did your segments change?
While the overall segmentation categories for a product like a fitness tracker may remain consistent, the specific segments within those categories can vary among family members based on their individual preferences, needs, and goals.
Let's consider a hypothetical product: a fitness tracker.
1. Geographic Segmentation: This category segments consumers based on their geographic location. For a fitness tracker, it could include targeting urban areas with a higher concentration of fitness enthusiasts, health-conscious cities, or regions with a favorable climate for outdoor activities.
2. Demographic Segmentation: This category considers demographic factors such as age, gender, income, education, occupation, and family size. For a fitness tracker, the target demographic may include tech-savvy individuals, fitness enthusiasts of all ages, health-conscious individuals, and those with disposable income to invest in their well-being.
3. Psychographic Segmentation: This category focuses on consumers' attitudes, lifestyles, values, interests, and personalities. Psychographic segmentation for a fitness tracker might target individuals who are health-conscious, fitness-driven, goal-oriented, technology adopters, and those seeking to track their progress and improve their overall fitness levels.
4. Benefit Segmentation: This category segments consumers based on the benefits they seek from a product. For a fitness tracker, the benefits could include tracking physical activity, monitoring heart rate, sleep tracking, providing personalized fitness recommendations, and facilitating goal setting. Different consumer segments may prioritize these benefits differently based on their individual goals and needs.
5. Usage Rate Segmentation: This category divides consumers based on their frequency and level of product usage. In the case of a fitness tracker, segments could include casual users who wear the tracker occasionally, regular users who wear it daily for fitness tracking, and dedicated users who extensively utilize the device for tracking various aspects of their health and fitness.
When considering family members who use the same product, the segmentation categories may differ based on individual preferences and needs within the family unit. For example, one family member might prioritize sleep tracking and recovery features, while another might focus on heart rate monitoring for intensive workouts. This variation would lead to different psychographic and benefit segmentations within the family, despite their shared usage of the same product. Demographic factors like age and gender may also play a role, as different family members may have different health and fitness goals based on their life stage or personal preferences.
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The cost of goods sold is: A. $151,000 B. $152,000 C. $150,000 D. $167,000
To determine the cost of goods sold (COGS), we need additional information such as the beginning inventory, purchases, and ending inventory. Without this information, it is not possible to calculate the exact cost of goods sold.
Therefore, based on the given options, we cannot determine the cost of goods sold. None of the provided options can be chosen as the correct answer.
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How can a decision-maker identify strategic factors in a corporation's internal and external environment?
A decision-maker can identify strategic factors in a corporation's internal and external environment by conducting a comprehensive analysis, such as a SWOT analysis, to evaluate the strengths, weaknesses, opportunities, and threats.
1. Internal Environment: To identify strategic factors in a corporation's internal environment, decision-makers can assess the organization's strengths and weaknesses. This involves analyzing internal resources, capabilities, and core competencies.
Key areas to evaluate include the company's financial position, technological capabilities, human resources, operational efficiency, and brand reputation. By understanding these internal factors, decision-makers can identify competitive advantages or areas that need improvement to formulate effective strategies.
2. External Environment: Decision-makers also need to analyze the external environment to identify strategic factors. This involves assessing opportunities and threats presented by the industry, market trends, competitors, customers, suppliers, and other stakeholders.
Market research, competitive analysis, and scanning the business environment for relevant trends and developments are crucial in this process. Understanding the external factors helps decision-makers identify potential growth opportunities, market challenges, changing customer preferences, regulatory changes, and other factors that may influence strategic decisions.
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Freddie was recently hired by Apacer Technology Inc. to estimate its cost of capital. Freddie obtained the following data: D₁ = $2.10; Po = $105.80; g = 15.00% (constant); and F = 6.00%. What is the cost of equity raised by selling new common stock? 15.36% 17.11% 16.87% 17.43% 16.98%
To calculate the cost of equity raised by selling new common stock, we can use the Gordon Growth Model, which is commonly used to estimate the cost of equity for companies with constant dividend growth rates. The formula for the cost of equity (Ke) is:
Ke = (D₁ / Po) + g
Where:
D₁ = Expected dividend per share in the next period
Po = Current stock price
g = Dividend growth rate
In this case, D₁ is given as $2.10, Po is $105.80, and g is 15.00% (0.15). Plugging in these values into the formula, we get:
Ke = (2.10 / 105.80) + 0.15
Ke = 0.01984 + 0.15
Ke = 0.16984 or 16.98%
Therefore, the cost of equity raised by selling new common stock is approximately 16.98%.
Among the given answer choices, the closest option is 16.98%.
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You are at retirement age and one of your benefit options is
to accept an annual annuity of $75,000 for 15 years. The first
payment would be received one year from today. What lump
sum settlement, if paid today, would have the same present
value as the $75,000 annual annuity? Assume a 10 percent
annual discount rate.
To determine the lump sum settlement that would have the same present value as the $75,000 annual annuity, present value of the annuity payments using a 10 percent annual discount rate.
Using the formula for the present value of an ordinary annuity, we can calculate the present value as follows:
PV = P * (1 - (1 + r)^(-n)) / r
Where:
PV = Present value
P = Payment per period ($75,000)
r = Interest rate per period (10% or 0.10)
n = Number of periods (15)
Plugging in the values, we get:
PV = $75,000 * (1 - (1 + 0.10)^(-15)) / 0.10
PV ≈ $563,079.61
Therefore, the lump sum settlement that would have the same present value as the $75,000 annual annuity is approximately $563,079.61 if paid today.
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Following a development of worsening relationship between Country A and Country B, the government of Country B has imposed trade restrictions on Country A's commodities and resources. This has lowered Country B's demand for Country A's commodities and resources substantially and thus decreased Country A's exports to Country B. Country B is Country A's largest trading partner.
Suppose Country A's economy was initially at the full employment long-run equilibrium and assume that Country A keeps its policy measures and everything else unchanged. Given that, answer the following questions.
(a) Using the AD-AS diagram below as a starting point, first show where the Country A's economy was initially. Then, discuss and complete the diagram showing how Country B's trade restrictions on Country A's commodities and resources would have affected the equilibrium output, price level and the unemployment rate in Country A in the short run. (hint: Think about AD = C + I + G + (X – M))
(b) The government Country A would be concerned about the short-run effects of such trade restrictions you identified in part (a) above. If that is the case in the short run, what type of fiscal policy (expansionary or contractionary) would you advise the government to implement? What are the two key fiscal policy instruments that government can use and explain how such a fiscal policy you would advise would adjust the economy in Country A. Assume that the Central Bank of Country A keeps its monetary policy and everything else unchanged. Continue using the AS-AD diagram you used in (a) to explain your answer.
The effectiveness of fiscal policy depends on various factors, including the magnitude of the trade restrictions, the responsiveness of consumers and businesses to policy measures, and other macroeconomic conditions.
(a) Country B's trade restrictions on Country A's commodities and resources would decrease the demand for Country A's exports, leading to a decrease in net exports (X - M) in the AD (Aggregate Demand) equation: AD = C + I + G + (X - M). In the short run, the decrease in net exports would shift the AD curve to the left. This would result in a decrease in equilibrium output and a lower price level in Country A. The decrease in output could also lead to an increase in the unemployment rate as businesses reduce production and lay off workers due to the decline in exports.
(b) Given the short-run effects of the trade restrictions, the government of Country A would likely implement an expansionary fiscal policy to mitigate the negative impacts. An expansionary fiscal policy aims to stimulate economic activity and increase aggregate demand.
The two key fiscal policy instruments that the government can use are government spending (G) and taxation (T). To counteract the decrease in AD, the government could increase government spending, such as investing in infrastructure projects or increasing public services. This would directly increase aggregate demand. Additionally, the government could consider reducing taxes to increase consumers' disposable income, leading to higher consumption and further boosting aggregate demand.
Implementing such expansionary fiscal policy measures would shift the AD curve to the right. This would help restore equilibrium output, mitigate the decrease in the price level, and potentially reduce the unemployment rate.
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Discuss your average phone usage. How do you feel about it? Also: What did you think of a particular subject or tool? What benefits us as humans? What harms humanity? What doesn’t work? What would you improve? What have you learned? What will you use? How will you use it? 500 words minimum.
Mobile phones have become an integral part of our lives, with many individuals using them for communication, entertainment, information, and work-related purposes. The benefits of mobile phones are numerous, with instant access to information, increased connectivity, and convenience being just a few of the advantages.
One particular tool that has gained popularity in recent years is social media. Social media platforms provide users with a means of staying connected with family and friends, sharing ideas, and accessing news and entertainment. While social media has undoubtedly brought some benefits to humanity, it has also been associated with several negative consequences such as cyberbullying, addiction, and mental health issues.
The harms caused by mobile phone usage include physical health problems such as eye strain, neck pain, and posture problems that arise due to prolonged use. Additionally, excessive mobile phone usage has been linked to sleep disorders, anxiety, depression, and even decreased productivity.
Despite their benefits, some aspects of mobile phone technology do not work effectively. One example is the issue of spam calls and message notifications, which can be disruptive and frustrating to users. Another issue is the reliance on mobile phones, leading to loss of cognitive abilities, reduced creativity, and dependence on technology for daily life activities.
To improve mobile phone usage, manufacturers and app developers should design user interfaces that are more intuitive and less distracting. There should also be more focus on developing features that cater to individuals’ well-being, such as tools to track screen time and limit usage. Users should also be educated on responsible phone usage, including taking breaks, practicing good posture, limiting screen time, and seeking professional help when necessary.
Through my interactions with humans, I have learned that technology, including mobile phones, can offer tremendous benefits to humanity, but it is essential to use them responsibly to prevent the harms they can cause. It is up to individuals to decide how much time they spend on their phones and to balance their usage with real-life interactions.
In conclusion, mobile phones have revolutionized the way we communicate and access information, but their usage should be moderated to prevent negative consequences. The benefits of technology for humanity are numerous, but we must remain aware of the potential downsides and take responsibility for our usage. By using mobile phones appropriately, humans can enhance their lives and improve their well-being.
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Watch the above video and use materials from chapter 10 to analyze the costs and benefits of implementing the Paris Agreement for USA. And how does such policy influence the automobile industry, including firms such as GM, Ford, and Tesla? The deadline is 11:59pm of June 27.
I apologize, but as an AI text-based model, I am unable to watch or analyze specific videos.
However, I can provide you with some general information on the costs and benefits of implementing the Paris Agreement for the USA and its potential impact on the automobile industry.The costs of implementing the Paris Agreement for the USA may include investments in renewable energy sources, updating infrastructure, and transitioning to low-carbon technologies. However, the benefits can include reduced greenhouse gas emissions, improved air quality, job creation in clean energy sectors, and increased energy efficiency.In terms of the automobile industry, the Paris Agreement's policies and regulations can influence firms like GM, Ford, and Tesla. These companies may face stricter emissions standards, which could require them to invest in electric vehicle (EV) technology and infrastructure. Such policies can accelerate the transition to EVs, leading to increased demand for electric cars and potentially benefiting companies like Tesla that specialize in this area. Meanwhile, traditional automakers like GM and Ford may need to adapt and invest in EV production to remain competitive in the changing market.
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Describe the training methods that can be used to create more effective leaders. Describe what methods you think would be most effective in your organization and why.
The most common training methods used for creating effective leaders include job rotation, coaching and mentoring, classroom training, simulations, and on-the-job training.
Leadership development and training are important components of creating effective leadership in an organization. There are various training methods that can be used to develop leadership skills in employees.
Job Rotation: This training method involves moving an employee from one position to another within the organization. Job rotation is particularly useful when an organization has several departments with different functions. By rotating employees through different departments, they can learn different skills and gain a wider perspective on the organization.
Coaching and Mentoring: This training method involves pairing a less experienced employee with a more experienced one. The more experienced employee acts as a coach or mentor to the less experienced one, guiding them on the skills they need to develop.
Classroom Training: This training method is typically used to deliver theoretical knowledge. It is an effective way to teach leadership concepts and theories that are not readily accessible through on-the-job training.
Simulations: These are activities that create a situation similar to what employees are likely to face on the job. Simulations provide a risk-free environment for employees to experiment with different leadership techniques and strategies.
On-the-job training: This training method is one of the most effective methods of developing leadership skills. It involves learning on the job and can take the form of job shadowing, observation, or taking on new responsibilities.
Methods that can be most effective in an organization depend on the nature of the organization and the training needs of its employees. The most effective training method should be tailored to the specific needs of the organization. For example, a small start-up may need to use coaching and mentoring to develop its employees, while a large multinational may need to use classroom training to deliver theoretical knowledge across different departments.
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(j) Open market operations 2. Explain why you would be more or less willing to buy a share of Microsoft stock in the following situations: (a) Your wealth falls. (b) You expect the stock to appreciate in value. (c) The bond market becomes more liquid. (d) You expect gold to appreciate in value. (e) Prices in the bond market become more volatile.
This is because stocks may be seen as a safer investment during a volatile bond market. Thus, they would be more willing to buy a share of Microsoft stock.Therefore, an individual would be more willing to buy a share of Microsoft stock if they expect the stock to appreciate in value.
Open market operations refer to the process of buying and selling government securities in the market to expand or contract the money supply. This is a monetary policy tool that the Federal Reserve uses to influence the economy.The factors affecting the willingness to buy a share of Microsoft stock in various situations are:(a) Your wealth falls: If an individual's wealth falls, they may not be as willing to buy a share of Microsoft stock as before. This is because they have less disposable income and may have to prioritize their spending. Hence, they may not be able to invest in the stock market.(b) You expect the stock to appreciate in value: If an individual expects the stock to appreciate in value, they would be more willing to buy a share of Microsoft stock. This is because they stand to gain from the increase in the stock's value.(c) The bond market becomes more liquid: If the bond market becomes more liquid, investors may be more willing to invest in bonds rather than stocks.
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Discuss confrontation and negotiation. Must be atleast 150-200
word with one internet article source. Must be typed.
Confrontation and negotiation are two of the most effective conflict resolution strategies. While confrontation involves addressing the problem in a direct and assertive manner, negotiation is all about finding a mutually acceptable solution that meets the interests of all the parties involved.
In conclusion, confrontation and negotiation are two conflict resolution strategies that can be effective when used correctly. Confrontation is best used when one party is at fault, while negotiation is best used when both parties have valid points. The choice of strategy depends on the situation, and both strategies can lead to positive outcomes if used correctly. It is also important to note that these strategies should not be used in isolation but in combination with other communication strategies such as active listening, empathy, and respect.
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The Chris Korth Corporation has outstanding bonds with a face value of $1000, selling for $1132.28 today. These semi-annual bonds mature in 17 years and have an annual coupon rate of 4.5%. What is the after-tax cost of debt for Korth if the marginal tax rate is 36%? more than 4.5 percent 4.5 percent 3.5 percent 1.7 percent 2.2 percent
To calculate the after-tax cost of debt, we need to consider the annual interest payment and the tax savings from deducting the interest expense.
The annual interest payment can be calculated as:
Annual Interest Payment = Face Value * Coupon Rate = $1000 * 4.5% = $45
The tax savings from deducting the interest expense can be calculated as:
Tax Savings = Annual Interest Payment * Tax Rate = $45 * 36% = $16.20
The after-tax cost of debt is then calculated by subtracting the tax savings from the annual interest payment and dividing it by the bond price:
After-Tax Cost of Debt = (Annual Interest Payment - Tax Savings) / Bond Price = ($45 - $16.20) / $1132.28
Calculating the above expression gives us an after-tax cost of debt of approximately 2.20%.
Therefore, the correct answer is:
2.2 percent
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A person with this type of power has considerable influence due to knowledge and skills that enable him or her to understand a situation, suggest solutions, use solid judgment, and generally outperform others. What type of power is this? Referent Expert Coercive Legitimate Celobrities often have this type of power, which is why they can influence everything from what pescle buy to whom they elect to office. What type of power is this? A. Relerent B. Expert C. Reward D. Legitirmat
The power described in the first scenario is Expert power, derived from knowledge and skills, second scenario is Referent power, arising from attractiveness and influence over others.
The type of power described in the first scenario, where an individual has considerable influence due to their knowledge and skills, is known as Expert power. Expert power is derived from a person's expertise, competence, and specialized knowledge in a particular field or domain. When someone possesses expertise that surpasses others, they are often sought out for advice, guidance, and decision-making.
In the second scenario, where celebrities can influence consumer behavior and political choices, the type of power at play is Referent power. Referent power is based on the attractiveness, charisma, and admiration that others have for a person.
Celebrities often possess a significant following and fan base, which gives them the power to influence public opinion and shape popular trends. Their influence can extend beyond their specific field of expertise and impact various aspects of society, including consumer preferences and political affiliations.
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According the the textbook, accounting is: A collection of systems and processes Used to record, report and interpret business transactions Provides a way to demonstrate to stakeholders that managers have acted in their best interests All of the above Question 2 (1 point) According to the textbook, accounting is traditionally seen as fulfilling three functions: Score keeping, attention directing and problem solving Score Keeping, bookkeeping and Problem Soving Attention directing, bookkeeping and Problem Solving None of the above Financial Accounting reports are prepared to provide information to: External users Internal users Both a and b None of the above Question 4 ( 1 point) Management accounting reports are prepared to provide information to: External users Internal users Both a and b None of the above Management accounting: Emphasizes special-purpose information Is prepared for shareholders Pertains to the entity as a whole Is governed by generally accepted accounting principles (GAAP) Question 6 (1 point) Financial Accounting is limited to cost data emphasizes special-purpose information pertains to the entity as a whole pertains to sub-units of the entity Examples of a line position would be: The payroll clerk The receptionist The director of HR The plant manager
Question 1: According to the textbook, accounting is: All of the above
Question 2: According to the textbook, accounting is traditionally seen as fulfilling three functions: Score keeping, attention directing, and problem solving.
Question 3: Financial Accounting reports are prepared to provide information to: External users.
Question 4: Management accounting reports are prepared to provide information to: Internal users.
Question 5: Management accounting: Emphasizes special-purpose information.
Question 6: Financial Accounting is limited to: Pertains to the entity as a whole.
A line position refers to a position within an organization that has direct authority and responsibility for achieving the organization's objectives. Line positions are involved in the core operations and activities of the organization. Examples of line positions include the plant manager, who is responsible for overseeing the day-to-day operations of the plant and ensuring production targets are met.
The payroll clerk and receptionist mentioned in the options are typically considered staff positions rather than line positions. Staff positions support the line positions and provide specialized services or expertise to the organization. The director of HR is also a staff position as they provide support and guidance in human resource management rather than directly overseeing operational activities.
In summary, line positions are directly involved in the organization's core operations and have authority over achieving objectives, making the plant manager the example of a line position in this context.
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At some point in a software development project, the project team is going to have to make a choice regarding the software development process model to use. The various process models that are available can be broadly grouped as waterfall, evolutionary, incremental or agile.
a) Discuss any two of these process models. Your answer should include at least 2 advantages and 2 disadvantages of each model as well as 2 criteria that can be used to help the project team decide when a model is the most appropriate process model for their project.
(60 marks)
b) An invoicing system is to have the following components: amend invoice, produce invoice, produce monthly statements, record cash payment, clear paid invoices from database, create customer records, delete customer.
1. What physical dependencies govern the order in which these transactions are implemented ? (25 marks)
2. How could the system be broken down into increments which would be of some value to the users ? (15 marks)
A. The waterfall model is a linear sequential approach to software development. It consists of a series of phases that must be completed sequentially, with each phase being fully completed before the next one can begin. Advantages and Disadvantages
b. 1.The order in which the transactions are implemented will depend on the physical dependencies between the components.
2. Increments: The system could be broken down into increments based on the different components that need to be implemented.
a) Waterfall Model: The waterfall model is a linear sequential approach to software development. It consists of a series of phases that must be completed sequentially, with each phase being fully completed before the next one can begin.
Advantages:
The process is well-structured, which makes it easier to manage and plan.
Each stage has specific deliverables, which makes it easier to measure progress and track the project timeline.
Disadvantages:
It is difficult to make changes once a stage has been completed, which means that requirements must be very clearly defined from the outset.
Testing occurs only at the end of the cycle, which can lead to problems being discovered late in the development cycle when they are more expensive to fix.
Criteria for choosing the waterfall model:
The requirements for the project are well understood and unlikely to change significantly during the development cycle.
The project has a clearly defined timeline and budget.
Agile Model: The agile model is an iterative approach to software development, where requirements and solutions evolve through collaboration between self-organizing cross-functional teams.
Advantages:
Changes can be easily incorporated into the development cycle, making the process more flexible and adaptable.
User involvement is high, leading to greater satisfaction with the final product.
Disadvantages:
The process can be less structured, making it more difficult to manage and plan.
Documentation may be lacking, which can make it harder to maintain and support the system.
Criteria for choosing the agile model:
There is a high level of uncertainty surrounding the project requirements, meaning that changes are likely throughout the development cycle.
The team is experienced and capable of working collaboratively in a fast-paced environment.
b)
Physical dependencies:
The order in which the transactions are implemented will depend on the physical dependencies between the components. For example, customer records must be created before invoices can be produced, and invoices must be produced before they can be amended or paid.
Increments:
The system could be broken down into increments based on the different components that need to be implemented. For example, the first increment could include creating customer records and producing invoices, while the second increment could focus on recording cash payments and clearing paid invoices from the database. This approach allows for testing and feedback to be incorporated throughout the development cycle, leading to a more user-friendly and effective system.
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Eqaute Co produces a single product. During the year ended 31 August 2021, 4,000 units were produced and 4,000 were sold at BWP160.00 per unit. There was no opening or closing inventory. The costs of manufacturing during the year were shown as follows:
BWP
Direct Materials 240,000
Direct Labor 80,000
Production overheads (40% is variables and 60% is fixed) 136,000
Variable Selling and distribution costs 8,400
Fixed selling and administration overheads 160,000
Required
Calculate the production cost per unit using marginal and absorption costing. [5 marks]
Calculate the profit in the month of August 2021 using Absorption and marginal costing system. [
The profit earned in August 2021 using marginal costing is BWP 66,000. The profit earned in August 2021 using absorption costing is BWP 139,200.
Marginal Costing:
The calculation of production cost per unit using marginal costing is as follows:
Direct materials: BWP 240,000
Direct labor: BWP 80,000
Variable production overhead: BWP 136,000
Variable selling and distribution costs: BWP 8,400
Total variable costs: BWP 464,400
Fixed production overhead: BWP 81,600
Fixed selling and administration overheads: BWP 160,000
Total fixed costs: BWP 241,600
Total cost: BWP 706,000
Production cost per unit: BWP 176.50
Absorption Costing:
The calculation of production cost per unit using absorption costing is as follows:
Direct materials: BWP 240,000
Direct labor: BWP 80,000
Variable production overhead: BWP 136,000
Fixed production overhead: BWP 81,600
Total manufacturing overheads: BWP 217,600
Total cost: BWP 537,600
Production cost per unit: BWP 134.40
Profit Calculation:
The profit calculation is performed using both absorption and marginal costing methods:
August 2021 sales: 4,000 × BWP 160 = BWP 640,000
Marginal Costing:
Total cost per unit: BWP 176.50
Total cost of sales: 4,000 × BWP 176.50 = BWP 706,000
Contribution: Sales – Total variable cost = BWP 640,000 – BWP 464,400 = BWP 175,600
Profit: Contribution – Fixed costs = BWP 175,600 – BWP 241,600 = (BWP 66,000)
The profit earned in August 2021 using marginal costing is BWP 66,000.
Absorption Costing:
Total cost per unit: BWP 134.40
Total cost of sales: 4,000 × BWP 134.40 = BWP 537,600
Gross profit: Sales – Cost of goods sold = BWP 640,000 – BWP 537,600 = BWP 102,400
Profit: Gross profit – Fixed costs = BWP 102,400 – BWP 241,600 = (BWP 139,200)
The profit earned in August 2021 using absorption costing is BWP 139,200.
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The return on equity of Ahemba Limited is 20%. At its Board meeting recently, shareholders approved a dividend payout ratio of 40% for the foreseeable future. The company just paid a dividend of GHS 25 per share and investors require 15% return on their investment in the company.
a) What the growth rate of Ahemba Limited?
b) How much dividend will the company pay 10yrs from today?
c) What is the price of a stock of Ahemba Limited 10yrs from today assuming the
growth rate remains the same forever?
d) How much will you pay for a stock of Ahemba Limited today?
The growth rate of Ahemba Limited is 6%. The company will pay GHS 26.50 as dividend 10 years from today. The price of the stock of Ahemba Limited 10 years from today assuming the growth rate remains the same forever is GHS 265. You would pay GHS 250 for a stock of Ahemba Limited today.
a) The growth rate of Ahemba Limited:
The dividend payout ratio is 40%.
Therefore, the company would keep 60% of the earnings.
Retained Earnings = Net Income - DividendPaid.
The dividend paid is GHS 25 per share. So, the retained earnings per share would be:
Retained Earnings per share = Net Income per share - GHS 25
The investors require a 15% return on their investment in the company.
Therefore, the Price of the Stock would be:
Price of the Stock = Dividend / (Required Rate of Return - Growth Rate)
Growth Rate = (Dividend / Price of the Stock) - Required Rate of Return
From the given information,
Return on Equity = 20%
Dividend Payout Ratio = 40%
Dividend Paid = GHS 25
Required Rate of Return = 15%
a) Growth Rate:
= (40% * Net Income) / Net Income
= 40%Net Income
= (20/100) * EquityNet Income per share
= (20/100) * Equity / Number of shares
= (20/100) * Equity / 1 (1 share)
Therefore,Net Income per share
= 0.20 * Equity
= (40/100) * (0.20 * Equity) / (0.15 + growth rate)
= 6%
Therefore, growth rate is 6%.
b) The amount of dividend will the company pay 10yrs from today:
We have calculated the Growth Rate as 6%.
Dividend Payment in year 11
= Dividend in year 10 * (1+ Growth Rate)
= 25 * (1+0.06)
= GHS 26.50
Therefore, the company will pay GHS 26.50 as dividend 10 years from today.
c) The price of a stock of Ahemba Limited 10 years from today assuming the growth rate remains the same forever:
The Dividend Payment in year 11 = GHS 26.50.
We have calculated the Growth Rate as 6%.
The Required Rate of Return is 15%.
Price of Stock
= Dividend / (Required Rate of Return - Growth Rate)
= GHS 26.50 / (15%-6%)
= GHS 265
Therefore, the price of the stock of Ahemba Limited 10 years from today assuming the growth rate remains the same forever is GHS 265.
d) The amount you will pay for a stock of Ahemba Limited today:
The Dividend Payment in year 1 = GHS 25.
We have calculated the Growth Rate as 6%.
The Required Rate of Return is 15%.
Price of Stock
= Dividend / (Required Rate of Return - Growth Rate)
= GHS 25 / (15%-6%)
= GHS 250
Therefore, you would pay GHS 250 for a stock of Ahemba Limited today.
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Cassandra's demand for orange juice is price elastic
A severe frost destroys much of the Florida orange crop
What happens to the amount that Cassandra spends on orange juice?
Cassandra
SOA. decreases the amount that she spends on orange juice
OB. increases or decreases the amount that she spends on orange juice, depending on whether or not the grapefruit crop has also been affec
OC continues to spend the same amount on orange juice
OD. increases the amount that she spends on orange juice
Option A, which states that Cassandra decreases the amount she spends on orange juice, is the correct answer in this situation.
When Cassandra's demand for orange juice is price elastic, it means that she is highly responsive to changes in the price of orange juice. This indicates that Cassandra's quantity demanded is highly influenced by price fluctuations.
Now, let's consider the scenario where a severe frost destroys much of the Florida orange crop. This event leads to a decrease in the supply of oranges, causing a decrease in the availability of orange juice in the market. As a result, the price of orange juice is likely to increase due to the limited supply and increased demand.
Given Cassandra's price elastic demand, the increase in price will have a significant impact on her purchasing decision. The higher price will deter her from buying the same quantity of orange juice as before, as the price increase exceeds her willingness to pay. In other words, the price elasticity of her demand causes her to be sensitive to price changes, resulting in a decrease in the amount of orange juice she is willing and able to purchase.
Consequently, Cassandra will spend less on orange juice due to the decrease in supply caused by the severe frost. The higher prices make it less attractive for her to buy the same quantity of orange juice, leading to a reduction in her overall expenditure on orange juice. Therefore, option A, which states that Cassandra decreases the amount she spends on orange juice, is the correct answer in this situation.
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A offered his car to B for RM 50,000. B asked A if he sells his car for RM 45,000. A
did not agree and B said "Ok I buy your car for RM 50,000 as you mentioned earlier".
A refused to sell his car. B argued that a binding contract is formed.
Advice A.
A should consult with a legal professional who can assess the specific circumstances and applicable contract laws to determine the validity of the contract and the best course of action.
In this situation, several elements of contract formation need to be considered to determine if a binding contract exists between A and B. For a contract to be legally binding, there must be an offer, acceptance, consideration, intention to create legal relations, and certainty of terms.
A made an initial offer to sell his car for RM 50,000. However, B responded with a counter-offer of RM 45,000. A did not accept B's counter-offer, which can be seen as a rejection of the counter-offer.
Later, B agreed to purchase the car for the original price of RM 50,000 as mentioned by A. This indicates that B accepted the initial offer made by A.
However, it is essential to consider the intention to create legal relations and the certainty of terms in this case. If A can provide evidence to show that there was no intention to create a legally binding contract or that the terms were uncertain, A may have a valid argument to refute B's claim.
To obtain accurate advice regarding this matter, A should consult with a legal professional who can assess the specific circumstances and applicable contract laws to determine the validity of the contract and the best course of action.
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Click to see additional instructions You purchase a $160000 home on a 25-year loan with an APR of 6.25%. Rounded to the nearest dollar, your monthly payments are $ Question 6 of 10 1 Points Click to see additional instructions Starting today, you deposit $20 into an account that has an APR of 3.09%, and you continue doing so for 15 years. Rounded to the nearest dollar, one week after your last deposit, the balance in your account will be $
$3,964 is the monthly payments on a $160,000 loan for 25 years with an APR of 6.25%.
Monthly payment = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]where P is the principal (the amount of the loan), i is the monthly interest rate, and n is the number of months.
Let's break it down:
Principal (P) = $160,000Monthly interest rate (i) = APR ÷ 12 = 6.25% ÷ 12 = 0.00520833333
Number of months (n) = 25 years × 12 months/year = 300Using these values in the formula above, we get:
Monthly payment = $160,000 [ 0.00520833333(1 + 0.00520833333)^300 ] / [ (1 + 0.00520833333)^300 – 1]
Monthly payment = $1,003.69Rounded to the nearest dollar, the monthly payments are $1,004.Now, let's move on to the second part of the question.
We need to find out the balance in an account after depositing $20 per month for 15 years with an APR of 3.09%. We can use the following formula to find out:
Balance = P(1 + i)n + PMT[((1 + i)n – 1) ÷ i]where P is the principal (the initial amount deposited), i is the monthly interest rate, n is the number of months, and PMT is the monthly payment.
Let's break it down:
Principal (P) = $0 (assuming the account has no balance initially)Monthly interest rate (i) = APR ÷ 12 = 3.09% ÷ 12 = 0.002575
Number of months (n) = 15 years × 12 months/year = 180Monthly payment (PMT) = $20Using these values in the formula above, we get:
Balance = $0(1 + 0.002575)^180 + $20[((1 + 0.002575)^180 – 1) ÷ 0.002575]Balance =
$3,964.11
Therefore, Rounded to the nearest dollar, the balance in the account will be $3,964 after one week of the last deposit (assuming there are no additional deposits or withdrawals during this time).
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A bond is maturing in 7 years and paying annual coupons of 5% If the annual required rate of return is 4%, compute: 1. The PV of the bonds; 2. 3. The duration of the bond; The modified duration (volatility); 4. Interpret your result in question 3. b) You have the following bond maturing in 4 years: Face Value = 1.000$; Semiannual dividends = 35$; Annual Interest rate= 5% 1. Compute the PV of the cash flows? 2. What will happen to the bond price if the interest rate decreases to 6%? 3. What will be the price if the annual interest is 4%?
a) For the bond maturing in 7 years with annual coupons of 5% and a required rate of return of 4%:
1. PV of the bond:
To calculate the present value (PV) of the bond, we need to discount the future cash flows (coupon payments and face value) at the required rate of return.
The coupon payment is 5% of the face value, which is received annually for 7 years. The face value is received at the end of the 7th year.
PV of the coupon payments = Coupon Payment / (1 + Required Rate of Return)^n
PV of the coupon payments = 5% of face value * [1 - (1 + 4%)^-7] / 4%
PV of the face value = Face Value / (1 + Required Rate of Return)^n
PV of the face value = Face Value / (1 + 4%)^7
PV of the bond = PV of the coupon payments + PV of the face value
2. Duration of the bond:
Duration measures the weighted average time it takes to receive the cash flows from the bond. It is calculated using the formula:
Duration = (PV of Year 1 * Time to Year 1 + PV of Year 2 * Time to Year 2 + ... + PV of Year n * Time to Year n) / Bond Price
3. Modified duration (volatility):
Modified duration measures the sensitivity of the bond price to changes in interest rates. It is calculated as:
Modified Duration = Duration / (1 + Required Rate of Return)
Interpretation: The modified duration indicates the percentage change in the bond price for a 1% change in interest rates. A higher modified duration implies higher price volatility in response to interest rate changes.
b) For the bond maturing in 4 years with a face value of $1,000, semiannual dividends of $35, and an annual interest rate of 5%:
1. PV of the cash flows:
To calculate the present value (PV) of the cash flows, we need to discount the future dividends and face value at the required rate of return.
PV of the cash flows = PV of the semiannual dividends + PV of the face value
2. If the interest rate decreases to 6%:
When the interest rate decreases, the bond becomes more attractive, and its price tends to increase. The bond price will increase.
3. If the annual interest rate is 4%:
Similarly, when the interest rate decreases further to 4%, the bond price will increase even more compared to the previous scenario.
Please note that the exact calculations for PV, duration, modified duration, and bond price require precise formulas and the specific time periods for each cash flow.
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Alas Corporation is authorized to issue 8,000,000 ordinary shares with par value of ₱20 per share. At the start of 2020, 60% of the shares are already issued, 120,000 of which are held by the company. On July 1, the company declared a 20% share dividend. On this date, the company’s shares were trading at ₱40 per share. These were distributed to the shareholders on August 15. Treasury shares totaling 50,000 were reissued on September 15. On December 15, the entity declared a dividend of ₱2 per share. How many shares are entitled to receive the share dividends declared on July 1?
At the start of 2020, the Alas Corporation was authorized to issue 8,000,000 ordinary shares with par value of ₱20 per share.
At this point, 60% of the shares (4,800,000 shares) are already issued, 120,000 of which are held by the company. Therefore, the total shares outstanding are 4,800,000 - 120,000 = 4,680,000 shares. The company declared a 20% share dividend on July 1. On this date, the company’s shares were trading at ₱40 per share. The number of shares entitled to receive the dividend is:20% × 4,680,000 = 936,000 shares. As the shares were trading at ₱40 per share, the total value of the share dividend declared on July 1 is:936,000 shares × ₱40 per share = ₱37,440,000Therefore, 936,000 shareholders are entitled to receive the share dividend declared on July 1.
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The facts that are to be recorded in the fact table is Course Grade and CompletionDate.
1. Draw a star schema for this problem. (10 points)
2. Estimate the number of rows in the fact table, using the assumptions stated previously. (5 points)
3. If you didn’t want to or didn’t have to stick with a strict star schema for this data mart, how would you change the design? Why? (10 points)
4. Various characteristics of sections, professors, and students change over time. Dimensional segmentation is recommended. The student, section, and professor dimensions would be divided into two segments each, one for constant attributes and one for attributes that change. For example, the room might change frequently for the section. This approach would eliminate a large number of rows in the dimension tables if the changing attributes were to change each semester. Having mastered the principles of normalization, you recognize immediately that the star schema you developed for Millennium College is not in third normal form. Using these principles, convert the star schema to a snowflake schema. (15 points)
1. Star Schema:
A star schema for the given problem would consist of a central fact table surrounded by dimension tables.
on the provided information, the star schema can be designed as follows:
Fact Table: CourseGradeFact
- CourseGrade (numeric): The grade obtained by a student in a particular course.
- CompletionDate (date): The date when the course was completed.
Dimension Table: CourseDim
- CourseID (primary key): A unique identifier for each course.
- CourseName: The name of the course.
- CourseDescription: A description of the course.
Dimension Table: StudentDim
- StudentID (primary key): A unique identifier for each student.
- StudentName: The name of the student.
- StudentAddress: The address of the student.
Dimension Table: ProfessorDim
- ProfessorID (primary key): A unique identifier for each professor.
- ProfessorName: The name of the professor.
- ProfessorDepartment: The department to which the professor belongs.
2. Estimating the number of rows in the fact table:
To estimate the number of rows in the fact table, we would need additional information. Without the exact number of courses, students, and completion dates, it is not possible to provide an accurate estimation. The number of rows in the fact table would depend on the cardinality of the relationships between the dimensions and the fact table.
3. Changing the design if not sticking with a strict star schema:
If not sticking with a strict star schema, an alternative design approach could be a snowflake schema. In a snowflake schema, the dimension tables are further normalized, resulting in more tables and relationships. This design may be preferred when dealing with complex data structures or when dimensions have a large number of attributes. However, it increases the complexity of the schema and the number of tables involved.
4. Converting the star schema to a snowflake schema:
To convert the star schema to a snowflake schema, we can normalize the dimension tables by removing redundant attributes and creating additional tables for related attributes. For example, we can split the CourseDim table into two tables: CourseDim and CourseDescriptionDim. The CourseDescriptionDim table would contain the CourseID and CourseDescription attributes, which are related to the CourseDim table.
Similarly, we can create separate tables for changing attributes in the StudentDim and ProfessorDim tables. For nce, a ProfessorDepartmentDim table can be created to store the relationship between ProfessorDim and the changing attribute ProfessorDepartment.
The snowflake schema reduces redundancy and allows for more flexibility in managing changing attributes. However, it increases the complexity of the schema and the number of tables involved, which can impact query performance and maintenance.
Note: The points mentioned in parentheses are arbitrary and do not reflect any specific scoring system.
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Reporting contingent losses but not contingent gains is an example of which accounting principle? A>Cost/benefit B>Conservatism C>Matching D>Going concern
Reporting contingent losses but not contingent gains is an example of Conservatism accounting principle. B> Conservatism
The principle of conservatism in accounting suggests that when there is uncertainty or ambiguity in reporting financial information, it is better to err on the side of caution and report potential losses or liabilities rather than contingent gains.
This principle aims to prevent overstating the financial position and performance of a company by recognizing potential losses and risks even if they are not certain to occur. By reporting contingent losses but not contingent gains, the principle of conservatism is being applied.
In the context of contingent losses and gains, conservatism dictates that potential losses should be recognized and reported even if they are not certain to occur. This is done to ensure that financial statements provide a more realistic and cautious view of a company's financial position and performance. By recognizing contingent losses, a company acknowledges potential risks and liabilities that may affect its future financial outcomes.
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By Closing Off The Financial Account To The Rest Of The World Arcadia (A Fictious Country) Finds It Hard To Maintain High Levels Of Investment. Agree Or Disagree? Explain In No More Than Two Or Three Sentences.
By closing off the financial account to the rest of the world Arcadia (a fictious country) finds it hard to maintain high levels of investment. Agree or disagree? Explain in no more than two or three sentences.
I disagree with the statement. By Closing Off The Financial Account To The Rest Of The World Arcadia (A Fictious Country) Finds It Hard To Maintain High Levels Of Investment.
This strategy would create an environment that encourages local investors to invest in their domestic market, resulting in increased levels of investment within the country. Furthermore, restricting the outflow of capital in the form of foreign investment would contribute to greater economic growth. Despite Arcadia being a fictional country, this concept aligns with basic economic principles.
Closing off the financial account refers to imposing restrictions or controls on the movement of capital in and out of a country. By implementing such measures, Arcadia can regulate and manipulate its domestic investment environment. This creates an advantage by channeling investment into the domestic market and encouraging local investors to contribute to economic development within the country.
It is important to note that these principles apply regardless of whether the country in question is real or fictional. The concept of encouraging local investment and restricting capital outflows to foster economic growth is a fundamental economic principle that can be observed in various countries worldwide.
In conclusion, by closing off the financial account to the rest of the world, Arcadia would be able to maintain higher levels of investment in its domestic market. This would encourage local investors to participate in the country's economic development, leading to increased investment and subsequent economic growth. The fictional nature of Arcadia does not negate the validity of these economic principles, as they are rooted in fundamental concepts of capital flow and investment.
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Compound interest. If your parents have $10,000 in college savings account that is paying an interest rate of 5% which is being compounded annually, how many years will i take to double if the interest rate stays the same? 40. Compound interest. For the account in Exercise 39 , hov many years will it take to triple? 41. Population growth. In 2011 , the population of the Unites States was 307 million and the growth rate was 0.7%. If the growth rate remains the same, in what year will the populatior be double what it was in 2011?
40. Compound interest: For the account in Exercise 39, how many years will it take to triple?The amount of time it will take to triple is found using the formula:n = ln(A/P) / ln(1 + r)Where A = final amount P = principal amount r = annual interest rateln = natural log The given values are:P = $10,000r = 5% = 0.05A = 3 * 10,000 = $30,000n = ln(30,000/10,000) / ln(1 + 0.05)n = ln(3) / ln(1.05)n = 22.48 years (approx.)
Therefore, it will take approximately 22.48 years for the account to triple if the interest rate remains the same.41. Population growth: In 2011, the population of the United States was 307 million, and the growth rate was 0.7%. If the growth rate remains the same, in what year will the population be double what it was in 2011?Let the population be P.Now,P = P₀e^(rt)where,P₀ = initial population (in 2011)P = 2P₀ = 2 × 307 million = 614 million r = growth rate = 0.7% = 0.007t = time taken (in years)So,614 million = 307 million × e^(0.007t)2 = e^(0.007t)ln2 = 0.007 tln2/0.007 = t = 99.26 Therefore, the population will be double what it was in 2011 in the year 2011 + 99 = 2110 (approx.).
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Consider the following duopoly model. Let a > 0. If qi0 is produced by firm i € {1, 2}, then Q = 9₁ +92 is the aggregate quantity in the market and P = P(Q) = =a- Q (assuming Q 0 is Q = D(p) = = a - p (in case p > a, it is 0). If the firms announce prices p; > 0, then firm i sells D(p;) and the other firm has no demand if pi < P3-i. Moreover, both firms share D(p;) equally if p₁ = P2. Assume that the cost of firm i for producing qi units is Ci(qi) q, hence it is quadratic in the produced quantity. = Compute all Bertrand equilibria. Is it possible to find a Bertrand equilibrium with the payoffs of the Cournot equilibrium?
In a Bertrand duopoly model, firms compete on price rather than quantity. Each firm sets its price, and consumers choose the firm with the lowest price. Let's analyze the Bertrand equilibria in this duopoly model.
First, let's consider the demand function, D(p), which is given as D(p) = a - p, where a > 0 represents the maximum price consumers are willing to pay. The total quantity demanded in the market is Q = Q1 + Q2.
Now, let's analyze the different cases of Bertrand equilibrium:
Case 1: Firm 1 charges a price lower than Firm 2 (p1 < p2)
In this case, all consumers will buy from Firm 1 since it offers a lower price. Therefore, Firm 2 will have zero demand, and its profit will be zero. Firm 1 will supply the entire market with quantity Q1 = D(p1). The profit of Firm 1 can be calculated as follows:
Profit1 = (p1 - C1(Q1)) * Q1
Case 2: Firm 2 charges a price lower than Firm 1 (p2 < p1)
Similarly, all consumers will buy from Firm 2 since it offers a lower price. Firm 1 will have zero demand and zero profit, while Firm 2 will supply the entire market with quantity Q2 = D(p2). The profit of Firm 2 is given by:
Profit2 = (p2 - C2(Q2)) * Q2
Case 3: Both firms charge the same price (p1 = p2)
In this case, consumers will be indifferent between the two firms, and they will split their demand equally. Each firm will supply half of the market with quantity Q/2 = D(p1) = D(p2). The profit for both firms will be:
Profit1 = Profit2 = (p1 - C1(Q/2)) * (Q/2)
Now, let's address the second part of the question regarding the payoffs of the Cournot equilibrium. In the Cournot equilibrium, firms choose their quantities simultaneously, taking into account the expected reaction of the other firm. The payoffs in the Cournot equilibrium are based on quantity decisions rather than price decisions. Therefore, it is not possible to directly compare the payoffs of the Cournot equilibrium with the Bertrand equilibria, as they are based on different decision variables (quantity vs. price).
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You are going to use a mortgage to buy a house. This mortgage will have an initial balance of $250,000. You go online to a bank and they make two offers to you: You can get a 3.75% loan for 30 years with no points, or You can get a 3.50% loan for 30 years with 1.5points (you have enough cash to cover the points at closing.) c. If you anticipate staying in the house for 5 years, what would be the effective interest rate on the loan with points?
The effective interest rate on the loan with points, considering a 5-year stay in the house, would be approximately 19%.
To calculate the effective interest rate on the loan with points, we need to consider the upfront cost of the points and the reduced interest rate over the 5-year period.
Let's calculate the effective interest rate on the loan with points:
Loan amount: $250,000
Loan term: 30 years
Interest rate: 3.50% (with points)
Points: 1.5% (paid upfront)
First, calculate the upfront cost of the points:
Points cost = Loan amount * Points percentage
Points cost = $250,000 * 1.5% = $3,750
Next, calculate the total interest paid over the 5-year period for the loan with points:
Total interest paid = Loan amount * Interest rate * Loan term
Total interest paid = $250,000 * 3.50% * 5 years = $43,750
Add the upfront cost of the points to the total interest paid:
Total cost = Total interest paid + Points cost
Total cost = $43,750 + $3,750 = $47,500
Finally, calculate the effective interest rate:
Effective interest rate = Total cost / Loan amount * 100%
Effective interest rate = $47,500 / $250,000 * 100% ≈ 19%
Therefore, the effective interest rate on the loan with points, considering a 5-year stay in the house, would be approximately 19%.
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A small auto-repair shop has 4 cars for repair. Only Mario is available to do the repairs. Mario has agreed with the car owners for the due times as 30, 90, 120, and 100 minutes for cars 1, 2, 3, 4, respectively, when they left their cars early in the morning, at time=0. He now estimates the times needed to repair the cars as 20, 45, 25, and 30 minutes for cars 1, 2, 3, 4, respectively. Then the cars are to be sequenced at the order of so as to minimize the average lateness for a car owner. The average lateness is minutes. Mario wants to maximize the customer satisfaction. Then the maximum tardiness is of importance. The sequence should be and the maximum tardiness is Bron
Mario needs to sequence the car repairs to minimize average lateness and maximize customer satisfaction.
The best approach would be the Earliest Due Date (EDD) rule, arranging jobs in increasing order of their due dates. The maximum tardiness, or the maximum delay beyond the agreed time, is a crucial metric for assessing customer satisfaction. In the EDD rule, Mario starts by working on the car with the earliest due time and then progresses to the next earliest due time, and so on. By this, he attempts to minimize the lateness of each job and thus minimize the average lateness across all jobs. The maximum tardiness would be the greatest difference between the completion time and the due time for any job. By minimizing the maximum tardiness, Mario aims to avoid any significant delays that could severely impact customer satisfaction.
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Assume that today is December 31, 2021, and that the following information applies to Abner Airlines:
After-tax operating income [EBIT(1 - T)] for 2022 is expected to be $650 million.
The depreciation expense for 2022 is expected to be $190 million.
The capital expenditures for 2022 are expected to be $500 million.
No change is expected in net operating working capital.
The free cash flow is expected to grow at a constant rate of 6% per year.
The required return on equity is 15%.
The WACC is 10%.
The firm has $193 million of nonoperating assets.
The market value of the company's debt is $4.134 billion.
90 million shares of stock are outstanding.
Using the corporate valuation model approach, what should be the company's stock price today? Do not round intermediate calculations. Round your answer to the nearest cent.
The company's stock price today should be approximately $51.12 per share.
To determine the company's stock price using the corporate valuation model approach, we need to calculate the present value of free cash flows and the present value of the terminal value. The formula for the corporate valuation model is as follows:
Stock Price = PV of Free Cash Flows + PV of Terminal Value
Calculate the Free Cash Flows (FCF):
FCF = EBIT(1 - T) + Depreciation - Capital Expenditures
FCF = $650 million + $190 million - $500 million
FCF = $340 million
Calculate the Present Value of Free Cash Flows:
PV of FCF = FCF / (Required Return on Equity - Growth Rate)
PV of FCF = $340 million / (0.15 - 0.06)
PV of FCF = $4.86 billion
Calculate the Terminal Value:
Terminal Value = FCF(1 + Growth Rate) / (Required Return on Equity - Growth Rate)
Terminal Value = $340 million(1 + 0.06) / (0.15 - 0.06)
Terminal Value = $4.040 billion
Calculate the Present Value of Terminal Value:
PV of Terminal Value = Terminal Value / (1 + WACC)^n
PV of Terminal Value = $4.040 billion / (1 + 0.10)^1
PV of Terminal Value = $3.672 billion
Calculate the Stock Price:
Stock Price = PV of FCF + PV of Terminal Value + Nonoperating Assets - Market Value of Debt / Number of Shares
Stock Price = $4.86 billion + $3.672 billion + $193 million - $4.134 billion / 90 million shares
Stock Price = $4.601 billion / 90 million shares
Stock Price = $51.123 per share
Therefore, the company's stock price today should be approximately $51.12 per share.
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