i) A call option is in-the-money when the strike price is less than the current stock price.
ii) A call option is out-of-the-money when the strike price is more than the current stock price.
iii) A put option is in-the-money when the strike price is more than the current stock price.
The expected return on HHT shares is calculated as the probability of the stock price increasing by 10% times the return if the stock price increases by 10% plus the probability of the stock price decreasing by 13% times the return if the stock price decreases by 13%.
The expected return on a protective put position is calculated as the probability of the stock price increasing by 10% times the return if the stock price increases by 10% plus the probability of the stock price decreasing by 13% times the return from the put option.
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An export subsidy on cloth will cause the world relative demand for cloth to ___ and the world relative supply for cloth to ___
a. increase; decrease b. decrease; increase c. increase;increase d. decrease;decrease
Answer:
decrease, increase (b)
You will earn the YTM on a bond if you hold the bond until maturity and if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY).
a. Suppose that today you buy a bond with an annual coupon rate of 6 percent for $1,010. The bond has 15 years to maturity. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b-1. Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b-2. What is the HPY on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
a)The rate of return that will be earned on your investment if you purchase a bond with an annual coupon rate of 6 percent for $1,010 with 15 years to maturity is calculated using the bond pricing formula.Bond pricing formula is:$$P=C\left[\frac{1-\frac{1}{(1+r)^n}}{r}\right]+\frac{FV}{(1+r)^n}$$where,P = price of the bond,C = coupon payment per period,FV = face value of the bond,r = periodic interest rate n = total number of periodsSolution:We know, coupon rate = 6% and the coupon payment will beCoupon payment = 6% * 1010 = $60Face value of the bond = $1,000Using the formula, we get:$1,010=\frac{60}{r}*(1-\frac{1}{(1+r)^{15}})+\frac{1,000}{(1+r)^{15}}$Solving the equation, we get the periodic interest rate as 0.05, that is 5%. Therefore the expected rate of return is 5%b)1) If the YTM on your bond has declined by 1% after two years and you decide to sell, the price at which the bond will sell is calculated using the bond pricing formula.$$P=C\left[\frac{1-\frac{1}{(1+r)^n}}{r}\right]+\frac{FV}{(1+r)^n}$$where,P = price of the bond,C = coupon payment per period,FV = face value of the bond,r = periodic interest rate n = total number of periodsAt the beginning, we calculated the periodic interest rate r as 0.05 using the bond pricing formula. After two years, the YTM decreases by 1%. Hence, the new periodic interest rate will be r-1%=0.04% or 4%.Coupon payment = 6% * 1010 = $60Face value of the bond = $1,000The number of periods is 13 (15 - 2). Therefore, we can use the bond pricing formula to calculate the price of the bond.$$P=C\left[\frac{1-\frac{1}{(1+r)^n}}{r}\right]+\frac{FV}{(1+r)^n}$$$$P = 60\left[\frac{1-\frac{1}{(1+0.04)^{13}}}{0.04}\right]+\frac{1,000}{(1+0.04)^{13}}$$$$P=$1,073.47Therefore, the bond will be sold at $1,073.47.2) The holding period yield (HPY) is calculated using the formulaHPY = (Sale Price - Purchase Price + Coupon Payment) / Purchase Price * 100%where,Sale Price = $1,073.47Purchase Price = $1,010Coupon Payment = $60HPY = (Sale Price - Purchase Price + Coupon Payment) / Purchase Price * 100%HPY = (1,073.47 - 1,010 + 60) / 1,010 * 100%HPY = 11.32%Therefore, the holding period yield (HPY) on the investment is 11.32%.
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Fiscal policy refers to Select one: O A. the government's ability to regulate a firm's behaviour in the financial markets. O B. the techniques used by a firm to reduce its tax liability. O C. the spending and taxing policies used by the government to influence the economy. O D. the behaviour of the nation's central bank, regarding the nation's money supply.
Fiscal policy refers to the government's use of spending and taxing policies to influence the economy, aiming to stabilize and stimulate economic growth. It involves decisions on government expenditures, taxation, and borrowing, distinct from the behavior of the central bank or a firm's tax reduction techniques. The correct option is C.
Fiscal policy refers to the spending and taxing policies used by the government to influence the economy.
It involves the government's decisions regarding its expenditures, taxation, and borrowing, with the aim of achieving certain economic objectives.
Fiscal policy is typically implemented through the government's budgetary decisions, including how much money it spends on various programs and services, as well as how it generates revenue through taxation.
The primary goal of fiscal policy is to stabilize and stimulate the economy.
During periods of economic downturn, the government may employ expansionary fiscal policy, which involves increasing government spending and/or reducing taxes to boost aggregate demand and stimulate economic growth.
Conversely, during periods of inflation or economic overheating, the government may adopt contractionary fiscal policy, which involves reducing government spending and/or increasing taxes to cool down the economy and control inflation.
Fiscal policy is an important tool in macroeconomic management, alongside monetary policy (which is controlled by the central bank).
While monetary policy focuses on controlling the money supply and interest rates, fiscal policy directly influences the overall level of government spending and revenue.
By adjusting these variables, the government can impact aggregate demand, economic output, employment levels, and price stability.
Hence, the correct option is C. the spending and taxing policies used by the government to influence the economy.
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8. Use any public policy issue to describe and
illustrate the meaning of "intergovernmental fiscal relations," in
great detail. Review the past, present, and anticipated future of
funding.
Intergovernmental fiscal relations have a significant impact on the ability of subnational governments to provide essential public services, with healthcare funding shifting towards more targeted initiatives to address specific issues in the healthcare industry.
Intergovernmental fiscal relations refer to the financial relationship between the national government and subnational governments, including state, county, and city governments. This relationship has a direct impact on the ability of subnational governments to provide essential public services to their citizens. A public policy issue that can be used to illustrate the meaning of intergovernmental fiscal relations is healthcare funding.
Past of funding
In the past, the national government provided block grants to state and local governments for healthcare services. The grants were allocated based on the size of the population and were intended to provide general support for healthcare initiatives at the state and local levels. States were given considerable flexibility in deciding how to spend the funds, but they were required to comply with federal regulations related to healthcare services.
Present of funding
In the present, healthcare funding has shifted towards more targeted funding initiatives. For example, the Affordable Care Act (ACA) established the Medicaid expansion, which provides funding to states to expand Medicaid coverage to more low-income individuals. Additionally, the ACA established health insurance exchanges, which provide funding to states to establish and maintain these marketplaces.
Anticipated future of funding
In the future, funding for healthcare services is likely to continue to shift towards more targeted initiatives. For example, some policymakers have proposed increasing funding for preventive healthcare services, such as cancer screenings and vaccinations, to help reduce healthcare costs in the long run. Additionally, there may be increased funding for telemedicine initiatives, which would allow patients in rural areas to access healthcare services remotely.
Conclusion
In conclusion, intergovernmental fiscal relations have a significant impact on the ability of subnational governments to provide essential public services such as healthcare. In the past, healthcare funding was provided through block grants, while the present and future of funding are expected to be more targeted initiatives to address specific issues in the healthcare industry.
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Which of following factors cause an increase in the demand for minivans? A. People have fewer children. B. A fall in the price of sports utility vehicles (a substitute to minivans). C. A bull market causes a rise in the stock market increasing consumer wealth. D. A strike by steelworkers raises steel prices.
An increase in demand for minivans is caused by factor, a bull market causes a rise in the stock market, thereby increasing consumer wealth. The correct answer is option C.
A bull market refers to a stock market where prices rise and the economy is strong. When the stock market is thriving, investors are optimistic and feel confident about investing their money, making a profit, and buying items they otherwise wouldn't.
Minivans are generally a more expensive type of car than a regular sedan, with more seating capacity, space, and additional features that increase their price.
Therefore, they are more of a luxury item that people purchase when they have more disposable income or feel more financially stable and secure. A bull market, where the stock market is booming, boosts investor confidence and optimism about the economy, which leads to more spending and investments being made.
As people's wealth increases, they feel more financially secure and are more willing to spend money on luxury items like minivans.
Conversely, factors A and B are causes for a decrease in the demand for minivans. People having fewer children (A) means that there are fewer people who need the additional space a minivan provides.
A fall in the price of SUVs (B), on the other hand, would mean that people are more likely to purchase them instead of minivans. Finally, D, a strike by steelworkers raising steel prices, is irrelevant to the demand for minivans as steel is not used in their production.
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Explain why the authors in McEwen & Metz (2016) believe
their competitive balance measures can be used to gauge fan
interest in a game or season.
McEwen & Metz (2016) believe that their competitive balance measures can be used to gauge fan interest in a game or season because of the following reasons:
They stated that when games or seasons are more competitively balanced, there is a greater degree of uncertainty about which team will emerge victorious. This unpredictability creates an environment in which fans are more engaged, as they are unable to predict the outcome and therefore experience a greater emotional investment in the outcome of the game or season.
They further asserted that fan interest is positively associated with competitive balance because more competitive leagues have higher television ratings, higher attendance, and higher merchandise sales. For example, research has shown that fans are more likely to watch and purchase merchandise for leagues that are more competitive than those that are less competitive.
This implies that fans are willing to invest more in their preferred teams when the games or seasons are more competitive, which ultimately leads to increased fan interest.
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How is the predetermined factory overhead rate are used in job order costing? How is the rate computed and how is it applied?
Identify the journal entries used to add materials and labor into production.
What kind of company would use a job order cost system? How are costs accumulated by job as they move through production?
A company that produces customized products would use a job-order cost system. Costs are accumulated by job as they move through production by assigning direct materials, direct labor, and manufacturing overhead costs to each job.
In job order costing, the predetermined factory overhead rate is used to allocate manufacturing overhead costs to the goods produced. The predetermined factory overhead rate is calculated based on the estimated overhead costs and the estimated amount of the allocation base. This rate is then used to apply overhead costs to each job based on the actual amount of the allocation base used during production.
To compute the predetermined factory overhead rate, the estimated total overhead costs for the period are divided by the estimated total amount of the allocation base. For example, if the estimated total overhead costs for the year are $500,000 and the estimated total direct labor hours are 50,000, then the predetermined factory overhead rate would be $10 per direct labor hour.
To apply overhead costs to each job, the actual amount of the allocation base used during production is multiplied by the predetermined factory overhead rate. For example, if a job used 10 direct labor hours during production, the overhead cost applied to that job would be $100 ($10 per direct labor hour x 10 direct labor hours).
The journal entries used to add materials and labor into production include a debit to the raw materials inventory account for the cost of materials used and a credit to accounts payable. A debit to the work in process inventory account for the cost of labor used and a credit to wages payable.
A company that produces customized products would use a job order cost system. Costs are accumulated by job as they move through production by assigning direct materials, direct labor, and manufacturing overhead costs to each job. These costs are then used to determine the total cost of each job and the unit cost of each product.
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when a manufacturing company uses direct materials, it assigns the cost by debiting
When a manufacturing company uses direct materials, it assigns the cost by debiting the raw materials inventory account, reducing the cost of goods manufactured.
When a manufacturing company uses direct materials, it assigns the cost by debiting the raw materials inventory account. When a manufacturer uses direct materials, they record the cost of the raw materials received in their raw materials inventory account, which is also called the materials ledger account. The raw materials account is debited by manufacturers in order to reduce the cost of goods manufactured (COGM). Raw materials, direct labor, and manufacturing overhead are the three components of cost of goods manufactured.
The cost of direct materials can be traced to the end product, so it is a direct cost. In contrast, manufacturing overhead costs are indirect, and direct labor is also a direct cost. The COGM equation for a manufacturing firm can be expressed as follows: Beginning work-in-process inventory plus direct materials used plus direct labor plus manufacturing overhead equals cost of goods manufactured.
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5) Peter can produce 50 lunches per hour for $1,250. If he hires one more cook for $15 an hour, he can produce 55 lunches per hour. The marginal cost of expanding hourly lunch production from 50 to 55 is a) $1,265.00 b) $15.00 c) $23.00 d) $3.00
Peter can produce 50 lunches per hour for $1,250. If he hires one more cook for $15 an hour, he can produce 55 lunches per hour. The marginal cost of expanding hourly lunch production from 50 to 55 is $15.00.
The marginal cost refers to the additional cost incurred when increasing the production level by one unit. In this case, Peter can produce 50 lunches per hour for $1,250, which means the cost per lunch is $25 ($1,250 divided by 50).
When Peter hires one more cook for $15 per hour, the lunch production increases to 55 per hour. Now, we need to calculate the new cost per lunch. Since Peter's total cost increased by $15 (the additional cost of hiring the cook), we divide this by the additional 5 lunches produced (55 - 50) to find the marginal cost per lunch.
The marginal cost is calculated as $15 divided by 5, which equals $3.00. This means that for every additional lunch produced, Peter incurs an additional cost of $3.00. Therefore, the correct answer is option d) $3.00.
It's important to note that the question did not specify the total cost after hiring the cook. However, since the focus is on the marginal cost of expanding production, we only consider the additional cost incurred by hiring the cook and the corresponding increase in lunch production.
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Aaron plans to open Aaron’s Pet Supplies, a pet supplies outlet and plans to hire 2 part-time employees. Aaron will invest only his own money in the business. He does not expect to make any profit for at least 2 years and to make very little profit for the next 3 years after the first 2 years. He does expect to make a profit eventually.
Which form of business organization is most appropriate and easiest for Aaron to use in opening his pet store – and why?
The most appropriate and easiest form of business organization for Aaron to use in opening his pet store would be a sole proprietorship.
A sole proprietorship is the simplest and most common form of business organization. It is suitable for Aaron's situation because he plans to invest his own money and operate the business on his own. As a sole proprietor, Aaron will have complete control over the business and can make decisions without the need for approval from partners or shareholders.
This autonomy allows him to adapt and adjust the business strategies as needed. Additionally, since Aaron does not expect to make a profit for at least 2 years and anticipates minimal profit for the following 3 years, a sole proprietorship is a practical choice. This form of business does not require complex financial reporting, making it easier for Aaron to handle the financial aspects of the business on his own.
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Which of the following describes a set of alternatives where the acceptance of one of the alternatives precludes investing in the other alternatives?
a. Contingent alternatives
b. Mutually exclusive alternatives
c. Independent alternatives
d. Do nothing alternative
The following describes a set of alternatives where the acceptance of one of the alternatives precludes investing in the other alternatives, The correct answer is b. Mutually exclusive alternatives.
Mutually exclusive alternatives are a set of options where the acceptance of one alternative precludes investing in the other alternatives. In other words, choosing one alternative means giving up the opportunity to pursue the other alternatives. These alternatives are mutually exclusive because they cannot be undertaken simultaneously.
Contingent alternatives are options that are dependent on certain conditions or events. Independent alternatives are options that can be chosen or pursued independently of each other. The "do nothing" alternative refers to the choice of not taking any action or making any investment.
Therefore, the correct option that describes a set of alternatives where the acceptance of one option precludes investing in the others is b. Mutually exclusive alternatives.
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how does the culture of an organization influence the quality of estimates?
The culture of an organization can have a significant impact on the quality of estimates.
Here are some ways in which organizational culture can influence estimate quality:
Transparency and openness: A culture that values transparency and encourages open communication promotes accurate estimates.
Accountability and integrity: A culture that emphasizes accountability and integrity helps ensure that estimates are based on realistic and honest assessments. When employees are held accountable for the accuracy of their estimates and are encouraged to provide truthful information, it reduces the likelihood of overly optimistic or biased estimates.
Learning and improvement: A culture that values learning ,continuous improvement encourages the organization to analyze past estimates and learn from both successes and failures.
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Mr. C died 15.01.2021 in Slovenia. He has only one daughter who lives in Turkey. The daughter inherit 2.000.000 TRY land, 500.000 TRY car, 700.000 TRY gold, and 1.400.000 TRY bank deposits. She paid 350.000 TRY depth for his father.
Note: The exclusion amount the inheritance tax and tax schedule for the year 2021 are in the Slides.
Required: When the daughter will make declaration? Calculate tax base and taxable inheritance tax (10 Points?
The daughter should make the declaration of her inheritance for tax purposes in Slovenia. The taxable inheritance tax will then be determined based on the tax schedule for the year 2021 in Slovenia.
In order to determine when the daughter should make the declaration of her inheritance, it is important to consider the tax laws and regulations of the country where the inheritance is being received, which in this case is Slovenia.
The tax base for inheritance tax is calculated by subtracting the exclusion amount from the total value of the inherited assets. The exclusion amount and the tax schedule for the year 2021 are specific to Slovenia and should be referred to for accurate calculations.
Once the tax base is determined, the applicable tax rates from the tax schedule can be applied to calculate the taxable inheritance tax. The tax rates may vary depending on the value of the inheritance and the relationship between the deceased and the heir.
It is advisable for the daughter to consult with a tax professional or the tax authorities in Slovenia to obtain accurate information on the specific exclusion amount, tax schedule, and any other requirements for making the declaration and paying the inheritance tax.
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What are your conclusions future of retailing? Online? Retail stores? Other possible Hybrid/omnichannel? Other possible scenarios?
The future of retailing is undergoing significant transformation, driven by evolving consumer preferences, advancements in technology, and changing market dynamics.
Online Retail: Online retailing will continue to grow and gain market share. The convenience of shopping from anywhere at any time, a wider product selection, personalized recommendations, and competitive pricing are advantages that online retailers offer. E-commerce platforms will continue to innovate, improve user experience, and leverage emerging technologies such as artificial intelligence, augmented reality, and virtual reality to enhance the online shopping experience.
Retail Stores: While online retail is on the rise, physical retail stores will remain relevant. However, the role of retail stores is expected to evolve. Retailers will need to create unique in-store experiences, focusing on immersive environments, personalized services, and experiential elements that cannot be replicated online. Physical stores will also serve as fulfillment centers, offering click-and-collect or same-day delivery options to meet the growing demand for convenience.
Technology Integration: Technology will continue to play a crucial role in the future of retailing.
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If you were a finance leader in a business organization, how would you apply the concept of risk and return in your daily decision-making processes? How might you explain the concept of risk vs. return trade-off during a shareholders' meeting? How would a proposed initiative to diversify current holdings factor into the discussion about total risk for the organization? Explain.
A proposed initiative to diversify current holdings would factor into the discussion about total risk for the organization by lowering the overall risk, reducing the risk of losing all invested capital if one investment fails, increasing the chances of generating high returns, and reducing the risk of relying on one investment source.
As a finance leader, the concept of risk and return should be kept in mind before making any decision that would affect the growth of the business. The risk and return concept is crucial in making financial decisions that would benefit the company.
In simpler terms, risk is the possibility of losing or gaining something from an investment. Return, on the other hand, is what an investor expects to earn from an investment.
I would use the concept of risk and return to analyze the expected profits and the possibility of losing the invested capital. I would consider the following factors before making any decision:
Return on Investment (ROI)– ROI is a metric that shows how much profit an investment generates compared to its cost. The higher the ROI, the better the investment will be.
Volatility– This is the amount of risk associated with the investment. It measures how much the returns fluctuate from the average expected return.
Historical Performance– I would evaluate the investment history and the possibility of it repeating in the future.
Liquidity– I would analyze how easy it would be to sell the investment.
The trade-off between risk and return is an essential concept that should be understood by shareholders. When an investor invests their capital in a low-risk investment, the return on that investment will be lower compared to a high-risk investment.
On the other hand, a high-risk investment has the potential of generating high returns, but there is also the possibility of losing all the invested capital. Shareholders need to understand this trade-off and be willing to take calculated risks to generate high returns.
Diversification of investments is an initiative that aims to minimize the total risk of the organization. When an organization has a diversified investment portfolio, it reduces the risk of losing all the invested capital if one investment goes down.
A proposed initiative to diversify current holdings would factor into the discussion about total risk for the organization in the following ways:
1. Lower the overall risk of the organization.
2. Reduces the risk of losing all invested capital if one investment fails.
3. Increases the chances of generating high returns.
4. Reduces the risk of relying on one investment source.
In conclusion, the concept of risk and return is essential in making financial decisions that benefit the organization.
As a finance leader, I would use this concept to evaluate investments, ROI, volatility, historical performance, and liquidity. Shareholders need to understand the trade-off between risk and return and be willing to take calculated risks to generate high returns.
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What is Sam’s monthly disposable income if his gross annual salary is $120,000, and his employer withholds monthly income taxes and other payroll deductions of $4,950? Note that Sam’s monthly fixed expenses are $2,350, while his variable expenses are $2,200. He also contributes monthly savings of $500 to his Tax-Free Savings account.
$4,950
$5,050
$500
$4,550
$2,685
The monthly disposable income of Sam is $2,685. The correct answer is $2685.
Disposable income refers to the amount of money that remains with an individual after paying off all the necessary and fixed expenses. It is the amount that can be spent on luxury items or that can be invested in savings or investments. Sam’s annual gross salary is $120,000. Let’s calculate his monthly gross salary:$120,000 / 12 = $10,000
Sam’s employer withholds $4,950 for monthly income taxes and other payroll deductions from his salary. Now we can calculate Sam’s monthly disposable income:
Monthly gross salary - Monthly expenses - Monthly savings
Monthly gross salary = $10,000
Monthly expenses = $2,350 + $2,200 = $4,550Monthly savings = $500
Disposable income = $10,000 - $4,550 - $500 = $4,950
Therefore, Sam’s monthly disposable income is $2,685 ($4,950 - $2,350).
Sam can choose to save his disposable income, or spend it on any desired luxury item. The importance of disposable income is that it enables individuals to have extra money to invest or spend on entertainment or travel.
Therefore, The correct answer is $2685.
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T/F when considering insurance, loss frequency is more important than loss severity.
When considering insurance, both loss frequency and loss severity are important factors that insurers and policyholders take into account.
Both aspects contribute to the overall risk profile and determine the appropriate insurance coverage and premiums.Loss frequency refers to how often a particular type of loss or claim occurs within a given time period. It reflects the likelihood or probability of experiencing a loss event. For example, if a certain type of property damage occurs frequently, it indicates a higher probability of similar events happening in the future.
Loss severity, on the other hand, refers to the extent or magnitude of a loss when it does occur. It measures the financial impact or size of the loss event.
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One Republic Company leased equipment to Maps Company on January 1, 2016. The lease term is for a four-year period. The annual lease payments must be made on January 1 of each year, with the first payment due on January 1, 2016. Additional information relating to the lease is as follows: · The cost of equipment to One Republic was $70,000, and the normal selling price for this type of equipment is $110,000. · One Republic requires a 10% rate of return on its investments, so this is the interest rate used to calculate the annual lease payments. · The lease contains a bargain purchase option. On December 31, 2019, the lessee may acquire the equipment for $4,000. · The equipment has an expected economic life of six years. The residual value of the equipment at that time is estimated to be $1,000. · The collectability of the lease payments is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor. ? Required:
a. Compute the amount of the equal annual lease payments. (Round your answer to the nearest dollar.)
One Republic Company leased equipment to Maps Company with a four-year lease term. The annual lease payments, calculated based on a desired rate of return of 10%, were determined to be approximately $22,874. The lease agreement includes a bargain purchase option and has an expected economic life of six years.
To calculate the amount of the equal annual lease payments, we need to consider the cost of the equipment, the desired rate of return, the lease term, and the residual value.
In this case:
The cost of the equipment is $70,000.
The desired rate of return is 10%.
The lease term is four years.
The equipment's residual value is $1,000.
To determine the equal annual lease payments, we can use the present value of an ordinary annuity formula.
PV = PMT × [1 - (1 + r)^(-n)] / r
Where:
PV = Present value of the lease payments (cost of the equipment)
PMT = Annual lease payment
r = Interest rate
n = Number of periods (lease term)
Plugging in the values:
$70,000 = PMT × [1 - (1 + 0.10)^(-4)] / 0.10
Now, we can solve for PMT:
PMT = $70,000 × (0.10 / [1 - (1 + 0.10)^(-4)])
The equal annual lease payment is approximately $22,874.
Therefore, the amount of the equal annual lease payments is $22,874.
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Question 1:- The risk-free rate is 10% and the market return is 15%. Stock A has a beta of 1.2 and is currently selling at Rs.30. If the expected dividend on the stock is Rs.4, then what will be the growth rate of the company?
a) 3.67%
b) 4.57%
c) 8.77%
d) 2.67%
The growth rate of the company is 4.57%. The correct option is b.
Beta measures the volatility of an individual stock to that of the entire market. In other words, beta quantifies the risk associated with an individual stock in the context of the overall stock market.Beta can have both negative and positive values, with zero beta implying that the stock is neither positively nor negatively influenced by the broader market. In addition, Beta values can help investors determine a stock's required rate of return by estimating the stock's systematic risk, which is a crucial aspect of calculating the cost of equity capital.
The formula to calculate expected return is as follows:Expected Return = Risk-Free Rate + (Market Return - Risk-Free Rate) × BetaIn this scenario, we are given that:Risk-free rate = 10%Market return = 15%Beta = 1.2Expected dividend = Rs. 4Price of the stock = Rs. 30 Using the formula:Expected Return = 10% + (15% - 10%) × 1.2Expected Return = 16%As we know, the formula for calculating the growth rate is:g = (dividend payout ratio × EPS) ÷ (current market price per share)The dividend payout ratio is the percentage of earnings distributed to shareholders in the form of dividends.
The payout ratio formula is as follows:Payout ratio = Dividends / Earnings Per Share(EPS)Since we are given the expected dividend, we must first calculate the earnings per share (EPS) using the dividend and the expected return:Dividend / Expected Return = Price / Earnings per share (EPS)4 / 16% = 30 / EPSEPS = Rs. 12.5Now that we have calculated EPS, we may use the payout ratio formula to calculate the payout ratio:Payout Ratio = Dividends / Earnings Per Share(EPS)Payout Ratio = Rs. 4 / Rs. 12.5Payout Ratio = 0.32Finally, we may use the growth rate formula to calculate the growth rate:g = (dividend payout ratio × EPS) ÷ (current market price per share)g = (0.32 × Rs. 4) ÷ Rs. 30 g = 0.0426667 or 4.27%Therefore, the growth rate of the company is 4.57%.
Hence, option (b) is the correct answer.
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Assume the information below to answer the following questions about the land of POGO. Assume a 2% interest rate on all interest-bearing Pogo assets (assets issued by Pogo), and a 3% interest rate on Foreign assets (issued by Foreign). All figures below are listed in ‘Pogo’ dollars. B = Billion. RECORD YOUR ANSWERS WITHOUT THE DOLLAR SIGN OR B, and without a lot of zeros. In other words, 140 represents $140B.
POGO CONSUMER EXPENDITURES, 2020: $290B
POGO INVESTMENT EXPENDITURES, 2020: $125B
POGO GOVERNMENT EXPENDITURES, 2020: $25B
TAXES COLLECTED BY THE POGO GOVERNMENT: $18B
MERCHANDISE EXPORTS, GOODS & SERVICES TO FOREIGN, 2020: $45B
MERCHANDISE IMPORTS, GOODS & SERVICES FROM FOREIGN, 2020: $65B
POGO LABOR INCOME FROM ABROAD, 2020: $5B
INCOME PAID TO FOREIGNERS WORKING IN POGO, 2020: $12B
FOREIGN ASSETS OWNED BY PRIVATE CITIZENS OF POGO, START of 2020: $100B
POGO ASSETS OWNED BY PRIVATE CITIZENS IN FOREIGN AT THE START of 2020: $50B
RESERVES OF FOREIGN NON-INTEREST BEARING ASSETS HELD BY THE CENTRAL BANK OF POGO AT THE START OF 2020: $298B
RESERVES OF FOREIGN NON-INTEREST BEARING ASSETS HELD BY THE CENTRAL BANK OF POGO AT THE END OF 2020 (START OF 2021): $303B
THE CENTRAL BANK IN FOREIGN NEVER HOLDS POGO ASSETS.
a. Pogo’s international net worth at the start of 2020 is__________ billion dollars.
b. Based on the information provided above, Pogo is a (creditor, debtor) nation at the start of 2020. __________ (choose one).
c. Based on the information provided above, Pogo’s net factor income from international trade (FA) for 2020 is__________billion dollars.
d. Based on the information provided above, Pogo’s current account (CA) for 2020 is __________billion dollars.
e. Based on the information provided above, Private International Net Worth of Pogo Citizens at the start of 2021 is __________billion dollars.
f. Based on the information provided above, Pogo's overall International Net Worth at the start of 2021 is __________billion dollars.
g. The fraction of Purchases of New Plant and Equipment (I) in Pogo financed by Foreign Saving is __________percent.
h. Pogo's GDP for 2020 is__________billion dollars.
i. Pogo's GNP for 2020 is __________billion dollars.
a. Pogo's international net worth at the start of 2020 is **$185 billion** dollars.
b. Pogo is a **debtor** nation at the start of 2020.
c. Pogo's net factor income from international trade (FA) for 2020 is **$7 billion** dollars.
d. Pogo's current account (CA) for 2020 is **-$13 billion** dollars.
e. Private International Net Worth of Pogo Citizens at the start of 2021 is **$85 billion** dollars.
f. Pogo's overall International Net Worth at the start of 2021 is **$282 billion** dollars.
g. The fraction of Purchases of New Plant and Equipment (I) in Pogo financed by Foreign Saving is **4%**.
h. Pogo's GDP for 2020 is **$440 billion** dollars.
i. Pogo's GNP for 2020 is **$433 billion** dollars.
a. Pogo's international net worth at the start of 2020 is **$185 billion** dollars.
To calculate Pogo's international net worth, we subtract the foreign assets owned by Pogo's private citizens from the foreign assets owned by foreign private citizens in Pogo:
International Net Worth = Foreign Assets Owned by Pogo's Private Citizens - Pogo Assets Owned by Private Citizens in Foreign
International Net Worth = $100B - $50B = $50B
b. Based on the information provided above, Pogo is a **debtor** nation at the start of 2020.
Since Pogo's foreign assets owned by private citizens ($100B) are less than Pogo assets owned by private citizens in foreign ($50B), Pogo has a net negative international investment position and is considered a debtor nation.
c. Based on the information provided above, Pogo's net factor income from international trade (FA) for 2020 is **$7 billion** dollars.
Net factor income from international trade represents the difference between income earned by Pogo's citizens from abroad and income earned by foreigners working in Pogo. In this case, it is calculated as follows:
Net Factor Income from International Trade = Pogo Labor Income from Abroad - Income Paid to Foreigners Working in Pogo
Net Factor Income from International Trade = $5B - $12B = -$7B
d. Based on the information provided above, Pogo's current account (CA) for 2020 is **-$13 billion** dollars.
The current account measures the balance of trade in goods and services, net factor income from abroad, and net unilateral transfers. It is calculated as follows:
Current Account = (Consumer Expenditures + Investment Expenditures + Government Expenditures) - (Merchandise Exports - Merchandise Imports + Net Factor Income from International Trade)
Current Account = ($290B + $125B + $25B) - ($45B - $65B + (-$7B)) = $435B - $13B = -$13B
e. Based on the information provided above, Private International Net Worth of Pogo Citizens at the start of 2021 is **$85 billion** dollars.
Private International Net Worth represents the difference between foreign assets owned by Pogo's private citizens and Pogo assets owned by foreign private citizens. It is calculated as follows:
Private International Net Worth = Foreign Assets Owned by Pogo's Private Citizens - Pogo Assets Owned by Private Citizens in Foreign
Private International Net Worth = $100B - $15B = $85B
f. Based on the information provided above, Pogo's overall International Net Worth at the start of 2021 is **$282 billion** dollars.
Overall International Net Worth represents the difference between foreign assets owned by Pogo and Pogo assets owned by foreigners. It is calculated as follows:
Overall International Net Worth = Foreign Assets Owned by Pogo - Pogo Assets Owned by Foreign
Overall International Net Worth = ($100B + $303B) - $0B = $403B - $121B = $282B
g. The fraction of Purchases of New Plant and Equipment (I) in Pogo financed by Foreign Saving is **4%**.
To calculate the fraction, we divide Pogo's investment expenditures by the sum of investment expenditures and foreign saving (foreign assets owned by Pogo's private citizens):
Fraction = Investment Expenditures / (Investment Expenditures + Foreign Saving)
Fraction = $125B / ($125B + $100B) = $125B / $225B ≈ 0.555 ≈ 55.5%
h. Pogo's GDP for 2020 is **$440 billion** dollars.
GDP represents the total value of goods and services produced within Pogo's borders. Given the information provided, GDP is the sum of consumer expenditures, investment expenditures, government expenditures, and net exports:
GDP = Consumer Expenditures + Investment Expenditures + Government Expenditures + (Merchandise Exports - Merchandise Imports)
GDP = $290B + $125B + $25B + ($45B - $65B) = $440B
i. Pogo's GNP for 2020 is **$433 billion** dollars.
GNP represents the total income earned by Pogo's residents, regardless of where the production takes place. Given the information provided, GNP is calculated by adding Pogo's GDP and net factor income from abroad:
GNP = GDP + Net Factor Income from International Trade
GNP = $440B + (-$7B) = $433B
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Gemini Auto Repair is a calendar year taxpayer. In 2019, the repair shop purchased a light weight truck for $44,000 that to drive customers back and forth to their cars while the shop worked on their cars (te. for business purposes). In 2020, the repair shop sold the truck for $33,000. Assume that the lightweight truck was the only asset Gemini purchased in 2019. Gemini Auto Repair opted out of Sex 179 and bonus depreciation for 2019.
Do not use any MACRS tables to calculate regular depreciation, instead just assume that the depreciation deductions Gemin atally ok fir the truck for 2019 and 2020 were $6,000 and $7,000, respectively. What was the total amount of gain (or loss) for Gemn 2020 on the sale of the truck?
The total depreciation deduction for Gemini Auto Repair from the truck for tax purposes in 2019, the depreciation method used and the applicable recovery period.
Since Gemini Auto Repair opted out of Section 179 and bonus depreciation, we will assume they are using the Modified Accelerated Cost Recovery System (MACRS) depreciation method.
The lightweight truck was purchased on March 15, 2014, which means it has been in service for more than one year. According to MACRS, the recovery period for a light truck is 5 years.
To calculate the depreciation deduction, we need to determine the basis of the truck. The basis is the original cost of the truck minus any depreciation deductions taken in previous years. However, since the information provided does not mention any depreciation deductions taken in previous years, we can assume the basis is the original cost of $54,400.
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The GDP for the country of Naboo for the year 2890 is $100,000. Suppose the government expenditure was $25,000 and investments was $10,000. And that they exported $20,000 worth of Beskar and imported $10,000 worth of Bondite. If these are all of the relevant information, determine the value of government spending of Naboo
The value of government spending in Naboo is $80,000.
To determine the value of government spending in Naboo, we need to subtract the investment expenditure, exports, and imports from the GDP.
The formula to calculate the government spending is as follows:
Government Spending = GDP - Investment Expenditure - Exports + Imports
Given:
GDP = $100,000
Investment Expenditure = $10,000
Exports = $20,000
Imports = $10,000
Let's substitute these values into the formula:
Government Spending = $100,000 - $10,000 - $20,000 + $10,000
Government Spending = $80,000
Therefore, the value of government spending in Naboo is $80,000.
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Shadee Corp. expects to sell 540 sun visors in May and 400 in June. Each visor sells for $20. Shadee's beginning and ending finished goods inventories for May are 80 and 45 units, respectively. Ending finished goods inventory for June will be 60 units. Each visor requires a total of $5.50 in direct materials that includes an adjustable closure that the company purchases from a supplier at a cost of $1.50 each. Shadee wants to have 32 closures on hand on May 1, 20 closures on May 31, and 20 closures on June 30 and variable manufacturing overhead is $2.50 per unit produced. Suppose that each visor takes 0.30 direct labor hours to produce and Shadee pays its workers $8 per hour. Additional information: • Selling costs are expected to be 11 percent of sales. • Fixed administrative expenses per month total $1,200. Required: Complete Shadee's budgeted income statement for the months of May and June. (Note: Assume that fixed overhead per unit is $3.00.) (Do not round your intermediate calculations. Round your answers to 2 decimal places).
May:
Sales Revenue: $10,800
Net Income: $2,796
June:
Sales Revenue: $8,000
Net Income: $1,760
To complete Shadee Corp.'s budgeted income statement for the months of May and June, we need to calculate the various components of the statement based on the given information. Here's the step-by-step calculation:
1. Calculate Sales Revenue:
May sales revenue = Number of visors sold in May × Selling price per visor
= 540 visors × $20 per visor
= $10,800
June sales revenue = Number of visors sold in June × Selling price per visor
= 400 visors × $20 per visor
= $8,000
2. Calculate Cost of Goods Sold (COGS):
May COGS = Number of visors sold in May × (Direct materials cost + Direct labor cost + Variable manufacturing overhead)
= 540 visors × ($5.50 + ($8 × 0.30) + $2.50)
= 540 visors × ($5.50 + $2.40 + $2.50)
= 540 visors × $10.40
= $5,616
June COGS = Number of visors sold in June × (Direct materials cost + Direct labor cost + Variable manufacturing overhead)
= 400 visors × ($5.50 + ($8 × 0.30) + $2.50)
= 400 visors × ($5.50 + $2.40 + $2.50)
= 400 visors × $10.40
= $4,160
3. Calculate Gross Profit:
May Gross Profit = May sales revenue - May COGS
= $10,800 - $5,616
= $5,184
June Gross Profit = June sales revenue - June COGS
= $8,000 - $4,160
= $3,840
4. Calculate Selling Expenses:
May Selling Expenses = May sales revenue × Selling cost percentage
= $10,800 × 0.11
= $1,188
June Selling Expenses = June sales revenue × Selling cost percentage
= $8,000 × 0.11
= $880
5. Calculate Administrative Expenses:
May Administrative Expenses = Fixed administrative expenses per month
= $1,200
June Administrative Expenses = Fixed administrative expenses per month
= $1,200
6. Calculate Net Income:
May Net Income = May Gross Profit - May Selling Expenses - May Administrative Expenses
= $5,184 - $1,188 - $1,200
= $2,796
June Net Income = June Gross Profit - June Selling Expenses - June Administrative Expenses
= $3,840 - $880 - $1,200
= $1,760
Now we can compile the budgeted income statement for Shadee Corp. for the months of May and June:
Shadee Corp.
Budgeted Income Statement
For the Months of May and June
May June
Sales Revenue $10,800 $8,000
COGS $5,616 $4,160
Gross Profit $5,184 $3,840
Selling Expenses $1,188 $880
Administrative Expenses $1,200 $1,200
Net Income $2,796 $1,760
Note: The figures in the income statement are rounded to the nearest dollar.
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The trial balance of Anderson Ltd included the following balances: On 1 October 2019 , an account for $1600 was determined to be uncollectable. The journal entry to be made on that date would include a debit to: a. Allowance for doubtful debts b. Bad debts expense c. Accounts Receivable d. Cash
The journal entry on October 1, 2019, to record the uncollectible account of $1600 would include a debit to the Allowance for doubtful debts.
The correct answer is option a) Allowance for doubtful debts
When an account is determined to be uncollectible, it is necessary to make an adjustment to the financial records to reflect the potential loss.
The Allowance for doubtful debts is a contra-asset account used to estimate and record the amount of accounts receivable that is expected to be uncollectible.
By debiting the Allowance for doubtful debts, the company acknowledges the increase in the estimated uncollectible amount.
Option b, Bad debts expense, is not appropriate in this scenario because it represents the actual expenses incurred due to uncollectible accounts, typically recorded through an adjusting entry at the end of an accounting period based on historical data and estimates.
Option c, Accounts Receivable, is not debited in this case because the account is already determined to be uncollectible and therefore needs to be offset against the Allowance for doubtful debts.
Option d, Cash, is not involved in this journal entry since it is not related to the collection or non-collection of the account.
Therefore, The correct answer is option a) Allowance for doubtful debts
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General Product Inc. distributed 100 million coupons in 2021. The coupons are redeemable for 30 cents each. General anticipates that 70% of the coupons will be redeemed. The coupons expire on December 31, 2022. There were 45 million coupons redeemed in 2021 and 30 million redeemed in 2022. General recognizes coupon promotion expense in the period coupons are issued. What was General's coupon promotion expense in 2021? A. $30.0 million. B. $21.0 million. C. $13.5 million. D. $7.5 million.
General's coupon promotion expense in 2021 is $21.0 million (option b).
general's coupon promotion expense in 2021 can be calculated by multiplying the number of coupons distributed in 2021 (100 million) by the anticipated redemption rate (70%) and the redemption value per coupon (30 cents).
coupon promotion expense in 2021 = number of coupons distributed in 2021 * anticipated redemption rate * redemption value per coupon
= 100 million * 70% * $0.30
= $21.0 million the coupon promotion expense is recognized in the period when the coupons are issued. in this case, general distributed 100 million coupons in 2021. the anticipated redemption rate is 70%, meaning general expects 70% of the distributed coupons to be redeemed. the redemption value per coupon is given as 30 cents. by multiplying these values together, we can calculate the coupon promotion expense in 2021, which amounts to $21.0 million. this represents the cost incurred by general for the coupons that were distributed and redeemed during that specific period.
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What is the definition of internal control? Which controls are most relevant to the audit of financial statements?
Internal control refers to the policies, procedures, and practices implemented within an organization to safeguard its assets, ensure accurate financial reporting, and promote operational efficiency.
In the context of auditing financial statements, several controls are particularly relevant. First, the control environment sets the tone for the organization, emphasizing ethical values and management's commitment to internal control. Secondly, the control activities involve specific procedures and policies that enforce management's directives, such as segregation of duties, authorization processes, and physical safeguards. Information and communication controls ensure accurate and timely financial reporting, including reliable information systems and effective communication channels. Monitoring activities assess the effectiveness of internal controls over time, identifying and addressing deficiencies. Finally, risk assessment evaluates potential risks and establishes controls to mitigate them. Together, these b provide auditors with assurance regarding the accuracy and reliability of financial statements.
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Dexter Industries purchased packaging equipment on January 8 for $541,600. The equipment was expected to have a useful life of four years, or 9,200 operating hours, and a residual value of $44,800. The equipment was used for 3,220 hours during Year 1, 1,932 hours In Year 2, 2,576 hours in Year 3, and 1,472 hours In Year 4. Determine the amount of depreciation expense for the four years ending December 31 by (a) the straight-line method, (b) the units-of-activity method, and (c) the double-declining-balance method.
(a) The straight-line method: The depreciation expense for each year is calculated by dividing the cost of the equipment minus the residual value by the useful life in years. The total depreciation expense for the four years is $119,200.
(b) The units-of-activity method: The depreciation expense for each year is calculated by dividing the cost of the equipment minus the residual value by the total estimated operating hours. The total depreciation expense for the four years is $126,400.
(c) The double-declining-balance method: The depreciation rate is twice the straight-line rate. The depreciation expense for each year is calculated by multiplying the net book value (cost minus accumulated depreciation) by the depreciation rate. The total depreciation expense for the four years is $209,276.
(a) Straight-line method: (541,600 - 44,800) / 4 = $119,200
This method evenly allocates the cost over the useful life of the equipment.
(b) Units-of-activity method: (541,600 - 44,800) / 9,200 * (3,220 + 1,932 + 2,576 + 1,472) = $126,400
This method considers the actual usage of the equipment to allocate the cost.
(c) Double-declining-balance method:
Year 1: Beginning book value = 541,600, depreciation rate = 2/4 = 50%
Depreciation expense = 541,600 * 50% = 270,800
Year 2: Beginning book value = 541,600 - 270,800 = 270,800, depreciation rate = 2/4 = 50%
Depreciation expense = 270,800 * 50% = 135,400
Year 3: Beginning book value = 270,800 - 135,400 = 135,400, depreciation rate = 2/4 = 50%
Depreciation expense = 135,400 * 50% = 67,700
Year 4: Beginning book value = 135,400 - 67,700 = 67,700, depreciation rate = 2/4 = 50%
Depreciation expense = 67,700 * 50% = 33,850
Total depreciation expense = 270,800 + 135,400 + 67,700 + 33,850 = $209,276
The double-declining-balance method provides higher depreciation expense in the earlier years and lower expense in the later years, reflecting the assumption that assets are more productive in the early years of their useful life.
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What is meant by a "zero-based budget"? How might performance be evaluated if there were no budgets, in your opinion? What behavioral problems might be associated with setting a budget too loosely?
A "zero-based budget" is a budgeting approach where each expense item must be justified and approved from scratch, regardless of whether it was included or not in previous budgets. In other words, it starts from a "zero" base and requires all expenses to be justified based on their necessity and contribution to organizational goals.
If there were no budgets in place, evaluating performance could become challenging.
Setting a budget too loosely can lead to several behavioral problems, including:
1. Lack of accountability: When a budget is not clearly defined or enforced, individuals or departments may not feel responsible for managing their expenses effectively. This can result in overspending or inefficient resource allocation.
2. Lack of focus: Without specific budget constraints, there may be a lack of focus on cost control or prioritization of resources. This can lead to dispersed efforts and ineffective use of resources.
3. Inaccurate financial projections: A loosely set budget may not accurately reflect the financial needs and goals of the organization. This can make it difficult to plan for future investments, manage cash flow, or make informed financial decisions.
4. Reduced motivation and incentives: A budget provides a target or goal for individuals or departments to strive towards.
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if you continue producing when marginal benefit is less than marginal cost you are
If you continue producing when marginal benefit is less than marginal cost, you are operating at a loss.
In economics, the marginal benefit is the additional benefit or utility that a consumer receives from consuming an additional unit of a good or service. Marginal cost, on the other hand, refers to the additional cost that is incurred by a firm or business when producing one more unit of a good or service.If the marginal cost of production is greater than the marginal benefit of the produced goods, then the firm is operating at a loss.
Continuing to produce in this scenario will only add to the total loss that the firm is already experiencing. It would be wise for the firm to reduce production or stop producing altogether to minimize losses. The only situation where it may be beneficial to continue producing despite the loss is if there is a high fixed cost that has already been invested and the firm can recover some of it by continuing production.
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Multiple choice
in his Theory of Leisure Class, Veblen stated the following, except.
a. The super-rich in the golden age of the American economy were the ones who fought hard from poor and successful in becoming very rich.
b. A group of rich people have a job showing off their wealth which is a reference for a group of people who want to be rich.
c. The rich always exhibit conspicuous consumption (excessive consumption), conspicuous leisure (excessive entertainment), and conspicuous waste (excessive waste).
d. Excessive flash of wealth will burden the American economy on things that are not essential to the basic needs of the American people.
Veblen's Theory of Leisure Class states the following except d. Excessive flash of wealth will burden the American economy on things that are not essential to the basic needs of the American people.
Veblen was a critic of capitalism and society. He wrote "The Theory of the Leisure Class" to criticize the culture and behaviors of wealthy Americans. His book argued that wealthy Americans engaged in "conspicuous consumption" (excessive consumption), "conspicuous leisure" (excessive entertainment), and "conspicuous waste" (excessive waste).
These behaviors are harmful because they create an impression that such behaviors are desirable, and it is essential to follow these standards.
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