An implied warranty of merchantability will apply to Option A. All the other answers are correct.
Transactions involving the sale of goods have implied warranties of merchantability, meaning that the products sold will serve their intended purposes. This warranty is not written into the contract, but it is assumed to be included. This means that if a product is found to be defective or does not function as expected, the seller can be held liable for damages in court.
They will both be required to provide an implied warranty of merchantability. Ronaldo, a motorcycle dealer, sells a motorcycle to April, a private party consumer. He is also bound by the implied warranty of merchantability. In a sale, the seller assures the buyer that the goods sold meet the merchantability requirement.
Merchantability is a legal concept that denotes that goods are reasonably fit for the purposes for which they are commonly used. It implies that the products sold will perform as they were intended to, are free of defects, and are appropriate for sale. A car distributor, a retailer of vacuum cleaners, and a motorcycle dealer all sell goods, and as such, are expected to provide an implied warranty of merchantability in their respective sales contracts. Therefore, the correct option is A.
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Which of the following describes the internal control procedure "assignment of responsibilities"?
A) To validate their accounting records, a company should have an audit by an external accountant
B) Separate the custody of assets from accounting.
C) External auditors monitor internal controls.
D) With clearly assigned responsibilities, all important jobs get done.
D) With clearly assigned responsibilities, all important jobs get done.
The internal control procedure "assignment of responsibilities" refers to the practice of clearly assigning specific tasks and duties to individuals within an organization. By assigning responsibilities, the company ensures that all important jobs are identified, understood, and performed by the appropriate individuals.
This helps establish accountability and ensures that tasks are completed in a timely and effective manner. Clear assignment of responsibilities also helps prevent errors, fraud, and misuse of resources by providing a defined framework for accountability and oversight.
Each individual is accountable for their assigned tasks, and this segregation of duties helps to safeguard assets, prevent conflicts of interest, and enhance the overall effectiveness and efficiency of the organization's internal control system.
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The oil shock in 2000s was more LO_ severe than the one in 1970s also because recent inflation expectations have become ___(ii) ___anchored. O a. (i) more; (ii) more O b. (1) more; (ii) less O c. () less; (ii) more O d. (i) less; (ii) less
the recent inflation expectations have become less anchored, which means that the market does not expect inflation to continue to rise.
The oil shock in the 2000s was more severe than the one in the 1970s because recent inflation expectations have become less anchored. The oil price shock refers to the sudden changes in oil prices that can result from disruptions in the supply of crude oil due to geopolitical conflicts, supply shortages, and production declines, or due to market speculation. The 1970s oil price shock was a result of the OPEC oil embargo, which cut off oil supply to the United States and other countries. The price of oil increased significantly, and this led to a rise in the cost of living and the rate of inflation. The 2000s oil price shock was a result of a combination of factors, such as the increasing demand for oil from emerging economies like China and India, supply disruptions due to conflicts in oil-producing countries like Iraq, and speculation in the oil futures market. The increase in oil prices caused a significant increase in the cost of goods and services, which led to inflation. However, the recent inflation expectations have become less anchored, which means that the market does not expect inflation to continue to rise. This has made the oil price shock less severe than the one in the 1970s.
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Bahrain Company makes snow blowers. It has two departments that process all products: Assembly and Testing. The following data pertain to the Assembly departmen Direct materials are added at the beginning of the process and conversion costs are uniformly incurred. The degree of completion of conversion cost is as follows: At the beginning of September, work in process is 40% complete and at the end of the month work in process is 60% complete. Other data for the month include Beginning work-in-process inventory 6,400 units Units started 8,000 units Units completed 12,800 units Ending work-in-process inventory 2 Conversion costs for September $800,000 $1,040,000 Direct materials cost September Beginning work-in-process costs: $616,000 Materials $328,320 Conversion Required: a) Prepare a production cost schedule for the Assembly Department at the end of September using the weighted average method of process costing. b) Prepare the necessary journal entries
a) Production Cost Schedule using the Weighted Average Method: Assembly Department
Production Cost Schedule
For the Month Ended September
Units
(Beginning WIP) 6,400
(Started) 8,000
Total Units 14,400
(Completed) (12,800)
(Ending WIP) (1,600)
Units Accounted For 200
Cost per Equivalent Unit:
Conversion Costs = $800,000 ÷ 14,400 units = $55.56 per unit
Direct Materials Costs = $616,000 ÷ 14,400 units = $42.78 per unit
Costs to be Accounted For:
Beginning WIP Inventory:
Conversion Costs: 6,400 units × $55.56 per unit = $355,584
Direct Materials Costs: 6,400 units × $42.78 per unit = $273,792
Costs Added during September:
Conversion Costs: 8,000 units × $55.56 per unit = $444,480
Direct Materials Costs: 8,000 units × $42.78 per unit = $342,240
Total Costs to be Accounted For:
Conversion Costs: $355,584 + $444,480 = $800,064
Direct Materials Costs: $273,792 + $342,240 = $616,032
Costs Accounted For:
Completed Units: 12,800 units × ($55.56 + $42.78) = $1,144,576
Ending WIP Inventory: 1,600 units × ($55.56 + $42.78) = $147,456
b) Journal Entries:
To record the cost of completed units:
Debit: Work-in-Process Inventory (Assembly) $1,144,576
Credit: Conversion Costs $800,064
Credit: Direct Materials Costs $344,512
To record the cost of ending work-in-process inventory:
Debit: Work-in-Process Inventory (Assembly) $147,456
Credit: Conversion Costs $103,616
Credit: Direct Materials Costs $43,840
Note: The journal entries assume that all units started in September were completed by the end of the month.
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Question 1:
Dolby, Inc. issued a $5,000 face value, 10%, five-year bond at 96. What will be the journal entries at the maturity of the bond? The bonds have semiannual interest, and the company uses the straight-line method of discount amortization.
Face Value, F = $5,000Coupon Rate, r = 10% = 0.1Discount Rate, d = (100 - 96) / 5 = 0.80% = 0.008 for a semiannual paymentPeriod, t = 5 years = 10 semiannual paymentsSemiannual Interest, i = r/2 * F = 0.1/2 * $5,000 = $250First of all, we have to calculate the present value of the bond.
The present value of the bond can be calculated by the following formula:PV = i * [1 - (1 / (1 + d)^n)] / d + F / (1 + d)^nWhere, n = number of semiannual periodsPV = present value of bondIn this case, i = $250, n = 10, d = 0.008 and F = $5,000, therefore:PV = $2,868.67Now, let’s see how to record the journal entries for the bond at maturity. At maturity, the company pays back the face value of the bond to the bondholders. Hence, the entry to record the maturity payment is as follows:At maturity, the bondholder will receive a payment of the face value of the bondFace Value of Bond $5,000 Discount on Bond Payable $2,868.67 Bond Interest Payable $131.33 Cash $5,000At the time of bond issuance, the discount on bond payable account is created to show the amount of discount on bonds.
It is a contra-liability account, that is, it decreases the value of the liability account, i.e., bond payable. The account balance of the discount on bond payable is increasing with each interest expense recording. In this example, the bond discount was $2,868.67 at the bond issuance, so this account will decrease by this amount at maturity.The bond interest payable account is created to record the interest expense that has accrued since the last interest payment date. At the bond issuance, the company records the bond interest payable account with a zero balance, and as interest accrues, it increases.
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credit is the most commonly used method of purchase in the united states.True or False
"credit is the most commonly used method of purchasing in the United States, he answer is true because credit is the most widely used payment method in the United States, as indicated by the most recent data from the 2019 Survey of Consumer Payment Choice.
Explanation:Credit is one of the most popular methods of payment in the United States. According to the 2019 Survey of Consumer Payment Choice, the most recent data available, credit cards were the second most commonly used payment method, accounting for approximately 29 percent of consumer transactions.The answer is true because credit is the most widely used payment method in the United States, as indicated by the most recent data from the 2019 Survey of Consumer Payment Choice. It accounts for almost 30% of all consumer transactions in the country.A long answer in 100 words:
The statement is correct. Credit is one of the most common ways to pay in the United States. Credit cards accounted for approximately 29% of all consumer transactions, according to the 2019 Survey of Consumer Payment Choice, making it the second most widely used payment method. Although it is popular, it is important to understand the advantages and disadvantages of using credit. Interest rates and late payments can accumulate over time, resulting in a significant amount of debt. Additionally, using credit may have an impact on your credit score, which can affect future borrowing opportunities. As a result, it is critical to be a responsible credit user and manage your payments carefully.
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Q3. The law of diminishing returns applies only to businesses
with very simply production. (8.5 marks)
Your Answer and Graph:
The law of diminishing returns is a fundamental economic principle that states that as more units of a factor of production are added to a production process, the marginal product of each additional unit will eventually decline.
This principle applies to all businesses, regardless of the complexity of their production processes.
The law of diminishing returns is based on the assumption that all resources are not equally efficient for producing goods and services.
As businesses add more of a specific factor of production, such as labor or capital, the output of each additional unit will eventually become less than the previous one.
This occurs because the fixed resources, or the resources that do not increase with additional units, become stretched too thin, thus bottlenecking production.
While the law of diminishing returns is often illustrated with simple examples, such as the production of crops in agriculture, it applies to all businesses, including those with complex production processes.
In fact, complex businesses may be even more prone to experiencing diminishing returns due to the interdependence of various factors of production.
For example, as more workers are added to a manufacturing plant, the production line may become overcrowded, leading to reduced efficiency and quality.
Therefore, all businesses must be mindful of the principle of diminishing returns and strive to optimize the use of their resources to ensure maximum productivity.
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When calculating net present value for a bond refunding calculation, all of the following are considered either outflows are inflows EXCEPT:
a Cost savings with the new interest rates.
b Net loss from underwriting cost on old issue.
c Net cost of underwriting expense on new issue.
d Net cost of call premium.
Bond Refunding Refunding bonds is issuing new debt to pay off an old debt. Bond refunding is when an issuer replaces its outstanding debt with new debt.
By doing so, the issuer may be able to reduce its debt costs, extend its debt payments, or shift risk to the bondholder. The Bond Refunding Process The process of bond refunding is very similar to the process of issuing a new bond. To refinance a bond, the issuer must, Hire an underwriter to help prepare a prospectus and sell the bonds, Choose the interest rate or rates to offer on the new bonds, Decide on the call provisions (if any) for the old bonds, Decide on the maturity of the new bonds, and Price the new bonds The issuer may also calculate the internal rate of return (IRR) to help determine the feasibility of the bond refunding.
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Mario divides his time between fishing and farming. In one day he can catch 20 kilograms of fish or harvest 10 bushels of potatoes. Mario's opportunity cost of farming is:
a. 2 kilograms fish per bushel of potatoes.
b. 2 bushels potatoes per kilogram of fish.
c. 1/2 bushel potatoes per kilogram of fish.
d. 2 potatoes per fish.
e. 1/2 kilogram fish per bushel of potatoes.
The opportunity cost measures the value of the next best alternative forgone when making a choice. In this case, Mario can catch 20 kilograms of fish or harvest 10 bushels of potatoes in a day.
To determine Mario's opportunity cost of farming, we need to compare the productivity of fishing and farming. The opportunity cost of farming is the amount of fish Mario could have caught if he chose to fish instead of farming. Since he can catch 20 kilograms of fish in a day, we need to determine the trade-off between fish and potatoes. From the given options, the correct answer is (e) 1/2 kilogram fish per bushel of potatoes. This means that for every bushel of potatoes Mario chooses to farm, he is giving up the opportunity to catch 1/2 kilogram of fish. Therefore, the opportunity cost of farming is 1/2 kilogram of fish per bushel of potatoes.
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230 PARTM The Core of Macroeconomic Theory AS (Long run) AS (Short run Price level, AD By using aggregate supply and demand curves and other useful graphs, illustrate the following: a. Those pushing the Fed to act were right, and prices start to rise more rapidly in 2000. The Fed acts belatedly to slow money growth (contract the money supply), driv ing up interest rates and pushing the economy back to potential GDP b. The worldwide glut gets worse, and the result is a falling price level (deflation) in the United States despite expand ing aggregate demand. 5.4 Using AS and AD curves to illustrate, describe the effects of the following events on the price level and on equilib rium GDP in the long run assuming that input prices fully adjust to output prices after some lag: a. An increase occurs in the money supply above potential GDP b. GDP is above potential GDP, and a decrease in govern- ment spending and in the money supply occurs c. Starting with the economy at potential GDP, a war in the Middle East pushes up energy prices temporarily. The Fed expands the money supply to accommodate the inflation.
In the long run, the AS curve will shift back to its initial position, decreasing the price level while returning output to its initial level.
a. Those pushing the Fed to act were right, and prices start to rise more rapidly in 2000. The Fed acts belatedly to slow money growth (contract the money supply), driving up interest rates and pushing the economy back to potential GDP:AS in the short run will have a positive slope due to the existence of nominal wage rigidity, while AS in the long run will be vertical since output prices will increase to adjust to any changes in input prices.
AD will shift to the right, increasing the price level and equilibrium output in the short term, as well as long-term output. If the Fed slows down money growth, the AD curve shifts back to its original position, the economy will return to its potential GDP in the short term, and the price level will remain the same.
Since output prices will fully adjust to input prices, output will return to its original level in the long run. b. The worldwide glut gets worse, and the result is a falling price level (deflation) in the United States despite expanding aggregate demand :When there is an increase in the money supply above potential GDP, the AD curve shifts rightward, raising both equilibrium output and the price level in the short run.
Since prices will rise to adjust to any increases in input prices, the AS curve will shift up in the long run, raising the price level and reducing output to the initial level .c. Starting with the economy at potential GDP, a war in the Middle East pushes up energy prices temporarily.
The Fed expands the money supply to accommodate the inflation: If GDP is above potential GDP and government spending and the money supply are decreased, the AD curve will shift leftward, decreasing both equilibrium output and the price level in the short term. Output prices will drop, leading the AS curve to shift down in the long run, reducing the price level and returning output to its original level.
In the short term, an increase in energy prices raises the AS curve, increasing the price level and reducing equilibrium output. The AD curve will shift rightward if the Fed increases the money supply to adjust for inflation, resulting in a temporary increase in both equilibrium output and the price level in the short run.
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Trade Receivables Turnover Ratio 4 times, Cost of Revenue from Operations $2,56,000. Gross Profit on Revenue from operations 20%, Closing Trade Receivables were $8,000 more than at beginning. Cash Revenue from operations being 33-1/3 % of Credit Revenue from operations. Find out the amount of Opening and Closing Trade Receivables.
The amount of Opening Trade Receivables is $176,000, and the amount of Closing Trade Receivables is $184,000 ($8000 more than the opening Trade Receivables).
Trade Receivables Turnover Ratio = Credit Revenue from operations / Average Trade Receivables
where, Average Trade Receivables = (Opening Trade Receivables + Closing Trade Receivables) / 2
From the question, it is given that:
Trade Receivables Turnover Ratio = 4 times
Credit Revenue from operations = Cash Revenue from operations + Credit Revenue from operations / 3 = (1/3 + 1) * Credit Revenue from operations / 3 = 4/9 * Credit Revenue from operations
Gross Profit on Revenue from operations = (Sales - Cost of Revenue from operations) / Sales * 100= (Sales - $256000) / Sales * 100 = 20% => (Sales - $256000) / Sales = 0.2
=> Sales = $320000
Now we can substitute the given values in the formula to find the opening and closing trade receivables:4 = (4/9 * Credit Revenue from operations) / ((Opening Trade Receivables + Closing Trade Receivables) / 2)
=>(Opening Trade Receivables + Closing Trade Receivables) / 2 = (9/4 * Credit Revenue from operations) / 4= (9/16) * Credit Revenue from operations= (9/16) * $320000 = $180000
Therefore, (Opening Trade Receivables + Closing Trade Receivables) = 2 * $180000 = $360000Let's assume the opening trade receivables are x dollars.T
herefore, Closing Trade Receivables = (x + $8000) dollarsOpening Trade Receivables + Closing Trade Receivables = $360000
Substitute the value of Closing Trade Receivables to get the value of opening trade receivables as x + (x + $8000) = $360000=> 2x = $352000=> x = $176000
Therefore, the amount of Opening Trade Receivables is $176,000, and the amount of Closing Trade Receivables is $184,000 ($8000 more than the opening Trade Receivables).
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Suppose you are the money manager of a $5.22 million investment fund. The fund consists of four stocks with the following investments and betas:
Stock Investment Beta
A $ 460,000 1.50
B 800,000 (0.50 )
C 1,160,000 1.25
D 2,800,000 0.75
The portfolio beta for the $5.22 million investment fund is approximately 0.544. This indicates that the fund's overall volatility is expected to be lower than that of the overall market.
To calculate the portfolio beta, you need to weight each stock's beta by its proportionate investment in the portfolio. Here's how you can calculate the portfolio beta:
Step 1: Calculate the weighted beta for each stock:
Stock A: Weighted Beta = Investment in Stock A * Beta of Stock A = $460,000 * 1.50 = $690,000
Stock B: Weighted Beta = Investment in Stock B * Beta of Stock B = $800,000 * (-0.50) = -$400,000 (Note: The negative sign indicates an inverse relationship to the market.)
Stock C: Weighted Beta = Investment in Stock C * Beta of Stock C = $1,160,000 * 1.25 = $1,450,000
Stock D: Weighted Beta = Investment in Stock D * Beta of Stock D = $2,800,000 * 0.75 = $2,100,000
Step 2: Calculate the total weighted beta:
Total Weighted Beta = Sum of Weighted Betas = $690,000 + (-$400,000) + $1,450,000 + $2,100,000 = $2,840,000
Step 3: Calculate the portfolio beta:
Portfolio Beta = Total Weighted Beta / Total Investment = $2,840,000 / $5,220,000 ≈ 0.544
Therefore, the portfolio beta for the $5.22 million investment fund is approximately 0.544.
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A USA store expects €1,250,000 in repatriated profits from its
German subsidiary six months from today. Currently, the spot rate
is US $1.0550/€, and the six-month forward rate is US $1.0300/€.
The use of the forward rate hedged against exchange rate risk, thus the company is sure of receiving $1,612,500 from the repatriation of profits.
Given the spot rate US $1.0550/€, and the six-month forward rate US $1.0300/€, a USA store expects €1,250,000 in repatriated profits from its German subsidiary six months from today.
The expected value of repatriated profits of €1,250,000 can be converted to USD using the spot exchange rate of US $1.0550/€. Expected amount in USD
= €1,250,000 × $1.0550/€
= $1,318,750.
If the USA store uses the six-month forward rate of US $1.0300/€ to exchange euros into dollars, then the expected amount in USD will be calculated as follows;
Expected amount in USD = €1,250,000 × $1.0300/€
= $1,612,500.
The use of the forward rate hedged against exchange rate risk, thus the company is sure of receiving $1,612,500 from the repatriation of profits.
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On 18 Jan 2022, Microsoft announced to acquire Activision Blizzard for $95 per share, in an all-cash transaction valued at $68.7 billion. After the announcement, Activision share jumped and gains 26%, while Microsoft shares fell by 2.4%. For most M&A cases, the acquiring firm shareholders seem to benefit little or even lose from a takeover.
Why do acquiring firm shareholders gain litter or even lose from an M&A deal? Explain any three reasons.
Acquiring firm shareholders often benefit little or even lose from an M&A (merger and acquisition) deal due to several reasons:
Overpayment: Acquiring firms may sometimes pay a premium price for the target company. The excitement and competition surrounding the acquisition can lead to inflated prices, causing the acquiring firm's shareholders to bear the burden of overpayment. In the case of Microsoft's acquisition of Activision Blizzard, the announcement caused a drop in Microsoft's shares, indicating that investors were concerned about the price paid for the deal.
Integration challenges: Merging two companies involves combining different corporate cultures, management styles, and operational systems. The process of integrating the acquired company with the acquiring firm can be complex and time-consuming. Difficulties in achieving synergies, streamlining operations, and realizing cost savings can lead to underperformance and decreased shareholder value. Shareholders may become skeptical about the expected benefits of the merger, resulting in a decline in the acquiring firm's share price.
Dilution of ownership: Mergers and acquisitions often involve issuing new shares or using cash reserves to finance the transaction. This can result in dilution of ownership for existing shareholders, as their proportionate ownership in the merged entity reduces. If the benefits from the deal do not outweigh the dilution effect, shareholders may experience a decrease in the value of their holdings.
It's worth noting that not all M&A deals lead to negative outcomes for acquiring firm shareholders. Some mergers and acquisitions are successful and create value through improved market position, increased economies of scale, expanded product portfolios, or enhanced innovation. However, the potential risks and challenges associated with M&A transactions make it crucial for acquiring firms to conduct thorough due diligence and strategic planning to maximize the chances of a successful outcome for their shareholders.
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Based on how the unemployment rate has changed, the Bronx request the federal reserve to take action. If they wish to make the unemployment rate move in the opposite direction from what you found what should I do to the IORB rate?
If the Bronx request the Federal Reserve to take action based on the changes of the unemployment rate, and they want to make the unemployment rate move in the opposite direction from what they found, then they should take steps to alter the IORB (Interest on Required Reserves) rate.
A change in the IORB rate is a powerful tool that the Federal Reserve uses to achieve its monetary policy objectives. The Interest on Required Reserves (IORB) rate is the interest rate paid by the Federal Reserve on required reserves that depository institutions keep with the Federal Reserve Banks. As a result, a change in the IORB rate affects the supply of and demand for excess reserves and, as a result, can affect the federal funds rate.
The Federal Reserve may increase the IORB rate to decrease the supply of excess reserves in the system and thereby raise the federal funds rate.
This change in the IORB rate will cause depository institutions to raise the interest rate on their loans, causing borrowers to limit their loan requests, which will lower the money supply and eventually reduce inflation and the unemployment rate. Therefore, the Bronx should persuade the Federal Reserve to increase the IORB rate to encourage job growth and reduce unemployment.
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Suppose that a worker has 16 hours per day available for work and leisure. Let's consider the budget constraint of the worker where V = non-labour income, w = wage rate, Y = total income, H = work hours, L = leisure hours. If Y = $200, w = $20 and V = $80, therefore the leisure hours L of this worker is: O A. 10 OB. 8 O C. 7 O D. 6
To determine the leisure hours (L) of the worker, we need to consider the budget constraint, which is expressed as:
Y = wH + V
Given:
Y = $200 (total income)
w = $20 (wage rate)
V = $80 (non-labour income)
Substituting the given values into the budget constraint equation:
$200 = $20H + $80
Simplifying the equation:
$20H = $200 - $80
$20H = $120
Dividing both sides of the equation by $20:
H = $120 / $20
H = 6
The work hours (H) of the worker are 6 hours per day. Since the worker has 16 hours available for work and leisure, we can calculate the leisure hours (L) by subtracting the work hours from the total available hours:
L = 16 - H
L = 16 - 6
L = 10
Therefore, the leisure hours (L) of this worker are 10 hours per day. Hence, the correct answer is **A. 10**.
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The Federal Reserve Bank of St. Louis offers a wide range of economic data at its Web site, called FRED (fred.stlouisfed.org/). Use these data to examine real GDP for Canada from 1960 to 2011.
a. Download annual data (CANRGDPR) on real GDP from 1960 to 2011. Calculate the annual growth rates, starting with 1960. Are there years in which real GDP decreased? With what events are these years associated? (2+2+2=6)
b. Calculate the average rate of real GDP growth for the period from 1960 to the most recent year available. Calculate the average annual growth rate from 2008 to 2010. How does the growth rate during this three-year period compare to the average growth rate from 1960 to 2011?
In this task, the analysis of the real GDP for Canada from 1960 to 2011 is to be done. The analysis includes calculating annual growth rates and finding years in which real GDP decreased.
The Federal Reserve Bank of St. Louis provides economic data on its website FRED. In this task, the annual data for real GDP from 1960 to 2011 is to be analyzed. The annual growth rates of real GDP starting with 1960 have to be calculated. After performing the calculation, if there are any years where real GDP decreased, the associated events have to be found.
The calculation steps for the annual growth rate of real GDP are:
Growth rate of GDP = [(GDP in the current year – GDP in the previous year) / GDP in the previous year] * 100
From the calculation, years with decreasing real GDP are found and the events associated with them are observed.
To compare the average growth rate of real GDP from 1960 to 2011 with the average growth rate from 2008 to 2010, the average growth rate for both periods is calculated. The average rate of real GDP growth from 1960 to the most recent year is found, and the average annual growth rate from 2008 to 2010 is computed. The growth rate during the three-year period is compared to the average growth rate from 1960 to 2011.
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Consider the model of leverage cycles discussed in lectures. Suppose investors are endowed with one unit of money and two units of the asset. Assume that the asset pays a return of 1 in the good state of the world and 0.4 in the bad state of the world. Assume other aspects of the model presented in lectures are unchanged. In a world without borrowing, which two equations could be used to solve for the equilibrium price and quantity? O p = h +0.4 (1 h) and h* = (1- h*)/p* O p*=h* + 0.4 (1-h*) and 2 h* = (1-h*)/p* O p*=h* + 0.8 (1 -h*) and h* = (1-h*)/p* O None of the above.
Answer:
In a world without borrowing, the two equations that could be used to solve for the equilibrium price and quantity are:
p = h + 0.4(1 - h)
h* = (1 - h*) / p*
The first equation represents the equilibrium price condition for the price (p) in terms of the proportion of investors holding the asset (h). It states that the price is determined by the weighted average of the returns in the good state (1) and the bad state (0.4), based on the proportion of investors holding the asset.
The second equation represents the equilibrium quantity condition for the investor's proportion holding the asset (h*). It states that the proportion of investors holding the asset is equal to the complement of the proportion of investors not holding the asset (1 - h*), divided by the price (p*).
These two equations together capture the equilibrium relationship between the price and quantity of the asset in a world without borrowing.
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Discuss the short-run and medium-run effects of an decrease in the price of oil.
What should the reserve bank do in order to stabilize the inflation rate? Illustrate your answer on a IS-LM-PC model (with horizontal LM). (10 marks)
A decrease in the price of oil can have both short-run and medium-run effects on the economy. In the short run, a decrease in oil prices leads to lower production costs for businesses, resulting in lower input costs and potentially lower prices for consumers. This can stimulate consumer spending and boost economic growth.
Additionally, it can reduce production costs for firms in energy-intensive industries, leading to increased profitability and investment. However, in the medium run, the effects can be more complex. While lower oil prices can initially stimulate economic activity, they can also lead to reduced investment in the energy sector and negatively impact oil-producing regions. This can result in job losses and decreased economic activity in those areas.
To stabilize the inflation rate, the reserve bank can use monetary policy tools. In an IS-LM-PC model with a horizontal LM curve, the reserve bank can adjust the interest rate to influence aggregate demand and stabilize inflation. If the reserve bank wants to decrease inflation, it can increase the interest rate, which reduces investment and consumption expenditure, shifting the IS curve to the left. This contractionary monetary policy decreases aggregate demand and helps control inflationary pressures.
On the other hand, if the reserve bank wants to stimulate the economy and counter deflationary pressures, it can lower the interest rate, which increases investment and consumption, shifting the IS curve to the right. This expansionary monetary policy boosts aggregate demand and supports economic growth. The reserve bank's actions aim to achieve price stability while considering the state of the economy and inflationary pressures.
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a) What rate of return will shareholders require before the firm changes its capital structure?< b) What will be the firm value after the firm changes its capital structure? c) What will be the firm's cost of equity after the firm changes its capital structure?
a) The rate of return that shareholders will require before the firm changes its capital structure is not provided in the given information. Additional information is needed to calculate the required rate of return.
b) The firm value after the firm changes its capital structure can be determined by summing the value of equity and the value of debt. However, the specific values for equity and debt are not provided in the given information. Without these values, we cannot calculate the firm value after the capital structure change.
c) The firm's cost of equity after the firm changes its capital structure is not provided in the given information. The cost of equity is influenced by factors such as the risk-free rate, equity risk premium, and beta. Without these values, we cannot determine the firm's cost of equity after the capital structure change. Additional information is needed to calculate the cost of equity.
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What could be the major problem in exploiting inbound and
outbound logistics functions? Pertaining to globalization and
Covid-19. (15 Marks)
One of the major problems in exploiting inbound and outbound logistics functions pertaining to globalization and COVID-19 is the disruption of supply chains.
The pandemic has had a severe impact on logistics, resulting in supply chain disruptions, product shortages, and delivery delays. As a result, businesses have been forced to seek alternative methods of transportation and supply chain management to maintain their operations and meet the demands of their customers.
Additionally, globalization has led to increased competition, and logistics functions must be executed with precision and efficiency to remain competitive. This requires advanced technologies, skilled labor, and significant investments, which can be difficult for small and medium-sized enterprises to manage. As a result, businesses must carefully balance the costs of logistics against their benefits to remain competitive in today's global economy.
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Bruce Corporation makes four products... Bruce Corporation makes four products in a single facility. These products have the following unit product costs: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost Additional data concerning these products are listed below. Grinding minutes per unit Selling price per unit Variable selling cost per unit Monthly demand in units Multiple Choice O O O Product B Product A Product D Product C A B $17.50 $ 21.40 22.90 7.50 16.30 $72.70 $ 68.10 $58.10 $ 53.80 19.50 6.30 29.40 Products A 2.40 $88.20 $ 3.25 4,900 The grinding machines are potentially the constraint in the production facility. A total of 10,500 minutes are available per month on these machines. Direct labor is a variable cost in this company. Which product makes the MOST profitable use of the grinding machines? Note: Round your intermediate calculations to 2 decimal places. C $14.40 B 1.45 $ 80.60 $3.95 3,900 17.30 10.00 16.40 Products C 1.00 $77.40 $ 4.70 3,900 D $ 17.10 11.30 7.00 18.40 D 1.30 $72.10 $5.40 5,900
To determine which product makes the most profitable use of the grinding machines, we need to calculate the contribution margin per grinding minute for each product. The contribution margin per grinding minute indicates how much profit is generated for each minute of machine time used.
The contribution margin per grinding minute can be calculated as follows:
Contribution Margin per Grinding Minute = (Selling Price per Unit - Variable Cost per Unit) / Grinding Minutes per Unit
For each product:
Product A: (68.10 - 21.40) / 2.40 = $18.12
Product B: (72.70 - 17.50) / 1.45 = $38.14
Product C: (53.80 - 22.90) / 1.00 = $30.90
Product D: (72.10 - 17.10) / 1.30 = $41.62
Comparing the contribution margin per grinding minute for each product, we find that Product D makes the most profitable use of the grinding machines with a contribution margin of $41.62 per minute.
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Select two Tourism/Hospitality companies (you need 2 actual companies) and search for samples of recent advertising in English. It could be traditional media like TV or magazines or digital media, social media. You need 3 examples for each company (for a total of 6 examples) and include the images of the ads found in your search. If you do not use Tourism/Hospitality companies mark for the assignment will be "0". (6 Marks-2 marks each)
Identify and describe the strategies used in the ads to overcome the problem of intangibility.
Which company in your view does a better job of overcoming the intangibility of its services an explain why?
How does each company deal with the question of the service quality offered and the risk for the consumer in possibly making a wrong decision in selecting this company?
Hilton and Airbnb employ strategies such as highlighting experiences, personalization, and leveraging testimonials to overcome the intangibility of their services.
Company 1: Hilton Hotels & Resorts
Strategy 1: Emphasizing Experience: Hilton's ads showcase luxurious hotel amenities, exquisite dining experiences, and breathtaking views to create a sensory experience for potential customers. They highlight the unique features and ambiance of their properties, making the intangible aspects of a hotel stay more tangible and appealing.
Strategy 2: Testimonials and Reviews: Hilton incorporates customer testimonials and positive reviews in their ads to build trust and credibility. By showcasing real guest experiences, they address the intangible nature of their service and provide social proof of their quality.
Company 2: Airbnb
Strategy 1: Personalization: Airbnb's ads focus on the idea of "belonging anywhere" and highlight unique accommodations that cater to individual preferences and interests. By showcasing a diverse range of properties, they address the intangibility of traditional hotels and offer a personalized and authentic experience.
Strategy 2: Local Experiences: Airbnb promotes the idea of immersing oneself in local culture and encourages travelers to explore unique experiences in their destination. By emphasizing the connection with local communities, Airbnb overcomes the intangibility by offering a more immersive and authentic travel experience.
In terms of which company does a better job of overcoming intangibility, it depends on individual preferences and needs. Hilton Hotels & Resorts may appeal more to customers seeking luxurious and consistent hotel experiences, while Airbnb may resonate with travelers seeking unique and personalized accommodations.
Both companies address the issue of service quality by leveraging positive reviews, testimonials, and emphasizing the uniqueness of their offerings. They mitigate the risk for consumers by providing detailed property descriptions, photos, and guest reviews, enabling customers to make informed decisions.
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The following graph shows the domestic market for steel in the United States, where Sp is the domestic supply curve, and Dp is the domestic demand curve. Assume the United States is considered a large nation, meaning that changes in the quantity of its imports due to a tariff influence the world price of steel. Under free trade, the United States faced a total supply schedule of Sp+W, which shows the quantity of steel that both domestic and foreign producers together offer domestic consumers. In this case, the free-trade equilibrium (black plus) occurs at a price of $240 per ton of steel and a quantity of 18 million tons. At this price, the United States imports 12 million tons of steel. Suppose the U.S. government imposes a $60-per-ton tariff on steel imports. On the following graph, use the tan line (rectangle symbol) to draw the new total supply schedule including the tariff (SD+W+D. Then use the grey point (star symbol) to indicate the new market equilibrium price and quantity as a result of the tariff. 420 PRICE (Dollars per ton) ▬▬▬ SD+W+T Equilibrium Under Tariff Domestic Revenue Effect Terms-of-Trade Effect SD+W 0 4 20 Deadweight Loss 6 8 10 12 14 16 QUANTITY OF STEEL (Millions of tons) The tarrif's revenue effect (the import tariff multiplied by the quantity of steel imported) can be broken into two components: • Domestic revenue effect • Terms-of-trade effect 390 360 330 300 270 240 210 180 150 120 DD 2 Sp 18 On the previous graph, use the green rectangle (triangle symbols) to indicate the domestic revenue effect of the tariff. Then use the purple rectangle (diamond symbols) to indicate the terms-of-trade effect. Now consider the effect of the tariff on welfare in the United States. On the previous graph, use the black triangles (plus symbols) to indicate the deadweight loss caused by the tariff. True or False: National welfare in the United States increases as a result of a $60-per-ton tariff on steel imports. O True False O
The correct answer is false. When a $60-per-ton tariff is imposed on steel imports in the United States, national welfare does not increase; in fact, it decreases. The tariff leads to several effects that contribute to this outcome.
First, the domestic revenue effect of the tariff is represented by the green rectangle on the graph. This indicates the additional revenue collected by the government through the tariff. However, this revenue comes at the expense of higher prices for steel, reducing consumer surplus and negatively impacting consumer welfare.
Second, the terms-of-trade effect, shown by the purple rectangle, represents the change in the United States' position in international trade. By imposing the tariff, the United States reduces its imports of steel, which can influence the world price of steel. This effect may benefit domestic producers but results in higher prices for consumers and can negatively impact overall welfare.
Lastly, the deadweight loss, indicated by the black triangles, represents the efficiency loss caused by the distortion in the market. Tariffs create artificial barriers and reduce the quantity of trade, leading to a loss in economic efficiency and overall welfare.
Therefore, due to the decrease in consumer surplus, the potential negative impact on international trade, and the deadweight loss, the statement that national welfare in the United States increases as a result of the $60-per-ton tariff on steel imports is false.
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Assume there are two types of communities in Pakistan, those in which there is a high benefit of pollution control and a high cost of pollution control, and those in which there is
a low benefit of pollution control and a low cost of pollution control. Assume that the government must set either uniform regulations (a uniform level of pollution control) or a
uniform fine for pollution.
a. Show diagrammatically that a regulatory scheme may be preferable to a system of fines.
b. How does your answer change if communities in which there is a high marginal cost of pollution control happen to be communities in which there is a low marginal benefit; and communities with a low marginal cost of pollution control happen to be communities in which there is a high marginal benefit ?
a. A regulatory scheme is preferable to a system of fines if there are two types of communities in Pakistan, those in which there is a high benefit of pollution control and a high cost of pollution control, and those in which there is a low benefit of pollution control and a low cost of pollution control.
The government can either impose uniform regulations or a uniform fine for pollution. In this situation, a regulatory scheme can be preferred as an effective way to reduce pollution because it can be tailored to fit each community's specific circumstances.
Diagrammatically, the regulatory scheme shows that the marginal benefit of pollution reduction in high-benefit communities is greater than the marginal cost of pollution reduction, so the optimal level of pollution reduction is higher.
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Friends Partnership has three partners. The balance of each partner' capital is: Alia $48,000; Mariam $50,000 and Fatima $52,000. Alla withdraws from the Partnership. The remaining partners, Mariam and Fatima, agreed to pay cash of $54,000 for Alla from partnership. The partners share income and loss equally.
Required :
How much is the capital balance for the remaining partners Mariam and Fatima after the withdrawal of Alia
After the withdrawal of Alia, the capital balance for the remaining partners Mariam and Fatima can be calculated as follows:
Total capital balance before withdrawal:
Alia: $48,000
Mariam: $50,000
Fatima: $52,000
Total capital balance before withdrawal = $48,000 + $50,000 + $52,000 = $150,000
Since the partners share income and loss equally, the remaining partners, Mariam and Fatima, will split the share of Alia's capital equally.
Amount to be paid to each remaining partner = $54,000 / 2 = $27,000
Mariam's new capital balance = Mariam's previous capital balance + Amount received from Alia - Amount paid to Alia
Mariam's new capital balance = $50,000 + $27,000 - $27,000 = $50,000
Fatima's new capital balance = Fatima's previous capital balance + Amount received from Alia - Amount paid to Alia
Fatima's new capital balance = $52,000 + $27,000 - $27,000 = $52,000
Therefore, the capital balance for the remaining partners Mariam and Fatima after the withdrawal of Alia is:
Mariam: $50,000
Fatima: $52,000
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Berjaya Holding Sdn. Bhd is planning to implement a new reservation system that incorporates the existing web-based system with a new data mining capability. The new system will enable the integration of multiple systems across the company and streamline the processes between various departments. The total cost to implement the system is about RM1.5 million and it is anticipated to generate more reservations that lead to yearly return of RM500,000 for the next five years. The project is assigned to the Information Technology Division to lead and you have been appointed as the project manager. a) Considering that discount rate is 10%, calculate the Net Present Value (NPV) of this project. (Discount Factor (DF) for year 1 = 0.909, year 2 = 0.826, year 3 = 0.751, year 4 = 0.683 and year 5 = 0.621) (6 marks) b) Based on the answer in 5 a), should Berjaya Holding carry out the project? Explain your answer. (2 marks) c) In justifying an IT investment, another alternative to NPV is the Return on Investment (ROI). Calculate the total ROI and Annual ROI of this investment. (3 marks)
a) The Net Present Value (NPV) of the project is RM225,810.
b) Yes, Berjaya Holding should carry out the project as the NPV is positive, indicating potential profitability.
c) The total ROI is 33.3% and the Annual ROI is 6.7%.
a) To calculate the Net Present Value (NPV) of the project, we need to discount the expected yearly returns using the discount rate.
Year 1: RM500,000 * 0.909 = RM454,500
Year 2: RM500,000 * 0.826 = RM413,000
Year 3: RM500,000 * 0.751 = RM375,500
Year 4: RM500,000 * 0.683 = RM341,500
Year 5: RM500,000 * 0.621 = RM310,500
NPV = (RM454,500 + RM413,000 + RM375,500 + RM341,500 + RM310,500) - RM1,500,000
NPV = RM1,894,000 - RM1,500,000
NPV = RM394,000
b) Based on the positive NPV of RM394,000, Berjaya Holding should carry out the project.
A positive NPV indicates that the project is expected to generate more value than the initial investment, making it financially viable.
c) To calculate the Return on Investment (ROI), we divide the total return over the investment cost.
Total ROI = (RM500,000 * 5) / RM1,500,000
Total ROI = RM2,500,000 / RM1,500,000
Total ROI = 1.67 or 167%
Annual ROI = Total ROI / Number of years
Annual ROI = 167% / 5
Annual ROI = 33.4%
The total ROI of the investment is 167% and the annual ROI is 33.4%, indicating a favorable return on the investment in the project.
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Real-word companies often seek to reduce the complexity of their operations in an attempt to increase profits. In 2012, Procter & Gamble believed it could increase the company's profit by eliminating some product-lines. In 2017, P&G announced that it had "divested, discontinued, or consolidated 105 brands." As a result, even though its sales had decreased by 22 percent from 2012 to 2017, its profits as a percentage of sales had increased by 55 percent. Other companies have also tried to improve their financial performance by downsizing. In November 2017, General Electric announced it would begin a downsizing operation that would result in their exiting businesses using over $20B in assets in the next one to two years. In January 2018, Newell Brands, the company whose products include Tupperware, Sharpie pens, Elmer's Glue, and Rawlings sports products, announced it would be reducing its products offerings to the extent that it would close half of its facilities and reduce it revenues by 20 percent.
Required
Identify some cost savings these companies might realize by reducing the number of items they sell or use in production. Be as specific as possible, and use your imagination.
Consider the additional information presented as follows, which is hypothetical. All dollar amounts are in thousands; unit amounts are not. Assume that P&G decides to eliminate one shampoo line, Luster, for one of its segments that currently produces three products. As a result, the following are expected to occur.
(1) The number of units sold for the segment is expected to drop by only 125,000 because of the elimination of Luster, since most customers are expected to purchase an Anagen or Catagen product instead. The shift of sales from Luster to Anagen and Catagen is expected to be evenly split. In other words, the sales of Anagen and Catagen will each increase by 50,000 units.
(2) Rent is paid for the entire production facility, and the space used by Luster cannot be sublet.
(3) Utilities costs are expected to be reduced by $40,000.
(4) All of the supervisors for Luster were terminated. No new supervisors will be hired for Anagen or Catagen.
(5) Half of the equipment being used to produce Luster is also used to produce the other two products and its depreciation cost must be absorbed by them. The remaining equipment has a book-value of $340,000 and can be sold for only $60,000.
(6) Facility-level costs will continue to be allocated between the product lines based on the number of units produced.
Prepare revised product-line earnings statements based on the elimination of Luster. (Hint: It will be necessary to calculate some per-unit data to accomplish this).
The cost savings that companies might realize by reducing the number of items they sell or use in production can come from various sources.
Procter & Gamble (P&G) reduced its product offerings by divesting, discontinuing, or consolidating 105 brands, resulting in a decrease in sales but an increase in profits.
The cost savings were likely due to simplified operations, reduced manufacturing costs, reduced marketing costs, and increased focus on high-profit products. General Electric and Newell Brands also downsized in an attempt to improve their financial performance.
Cost savings from downsizing can come from reduced facility costs, reduced production costs, reduced marketing costs, reduced supervision costs, and increased focus on high-profit products.
To prepare revised product-line earnings statements based on the elimination of Luster, it is necessary to calculate some per-unit data.
The elimination of Luster is expected to result in a drop in the number of units sold for the segment by only 125,000 since most customers are expected to purchase an Anagen or Catagen product instead, with the sales of Anagen and Catagen evenly split.
As utilities costs are expected to be reduced by $40,000, and all of the supervisors for Luster were terminated without new supervisors being hired for Anagen or Catagen, the cost savings for utilities and supervision will be $40,000 and supervisor salaries, respectively.
Half of the equipment being used to produce Luster is also used to produce the other two products and its depreciation cost must be absorbed by them.
The remaining equipment has a book-value of $340,000 and can be sold for only $60,000.
The facility-level costs will continue to be allocated between the product lines based on the number of units produced. Based on these factors, it is possible to calculate the revised product-line earnings statements for P&G, taking into account the elimination of Luster.
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A competitive industry discharges pollution that is damaging crop yields. This question concerns measuring the costs of controlling the pollution. Without undertaking the pollution control, industry marginal cost (MC) is where q denotes quantity of output produced and sold; with the pollution control marginal costs are The industry faces inverse demand . Price is measured in dollars per unit and quantity in thousands of units per year. (30 of 100 points) a. Determine the competitive equilibrium quantity and price without the pollution control. Quantity _______________. Price __$__________/unit. b. Determine the competitive equilibrium quantity and price with the pollution control. Quantity _______________. Price __$__________/unit. c. Draw one graph showing the two equilibria from parts a and b. On this graph, show the areas corresponding to compliance cost and to the value of the reduced output from pollution control. d. Determine the annual total variable cost of the pollution control. Annual cost=
a. Without pollution control:The competitive equilibrium quantity and price can be determined by setting the industry's margin cost (MC) equal to the inverse demand.
Quantity: Equilibrium quantity (q*)
Price: Equilibrium price (P*)
implementing pollution control, the marginal cost (MC) of the industry changes. Determine the new equilibrium quantity and price by setting the revised marginal cost equal to the inverse demand.
Quantity: Equilibrium quantity with pollution control (q'*)
Price: Equilibrium price with pollution control (P'*)
c. The graph should show the two equilibria, with one representing the equilibrium without pollution control (q*, P*) and the other representing the equilibrium with pollution control (q'*, P'*). The compliance cost area and the value of reduced output from pollution control should be depicted on the graph.
d. The annual total variable cost of pollution control can be determined by calculating the difference in total variable costs between the two equilibria. Subtract the total variable cost without pollution control from the total variable cost with pollution control.
Annual cost: Total variable cost with pollution control - Total variable cost without pollution control.
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MC Qu. 20-98 (Algo) Assume the demand for automobile... Assume the demand for automobile tires is unitary elastic and that the supply is unitary elastic. The burden of a $2 excise tax on each tire will be Multiple Choice borne by resource suppliers that provide the inputs for manufacturing tires bome primarily by sellers of tires a shared about equally by buyers and sellers of tires. bome primarily by buyers of tires
If the demand for automobile tires is highly inelastic and that the supply is highly elastic, then the burden of a $2 excise tax on each tire will be :c) borne primarily by buyers of tires.
What is the reason?The demand for automobile tires is unitary elastic and so is the supply. An excise tax of $2 on each tire will increase the price of each tire by $2 (assume all other factors to be constant).Since the demand is unitary elastic, the percentage change in the quantity demanded is equal to the percentage change in the price. So, the amount of the increase in price will be shared equally between the buyers and sellers. Now, since the supply is unitary elastic, the percentage change in the quantity supplied is equal to the percentage change in the price. This means that the sellers will be able to pass on the entire tax amount of $2 to the buyers as an increase in the price of the tires.Thus, it can be concluded that the burden of a $2 excise tax on each tire will be borne primarily by buyers of tires.Hence, option c. is correct.
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Maria Gonzalez, Ganado's Chief Financial Officer, estimates the risk-free rate to be 3.80%, the company's credit risk premium is 4.40%, the domestic beta is estimated at 1.18, the international beta is estimated at 0.86, and the company's capital structure is now 40% debt. The before-tax cost of debt estimated by observing the current yield on Ganado's outstanding bonds combined with bank debt is 8.30% and the company's effective tax rate is 38%. Calculate both the CAPM and ICAPM weighted average costs of capital for the following equity risk premium estimates.
a. 8.70%
b. 7.80%
c. 5.60%
d. 4.70%
a. Using the domestic CAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 8.70%? % (Round to two decimal places.)
Therefore, if the equity risk premium is 8.70%, Ganado's WACC using the domestic CAPM is approximately 10.50%.
To calculate Ganado's weighted average cost of capital (WACC) using the domestic CAPM and an equity risk premium of 8.70%, we need to consider the cost of equity and the cost of debt.
First, let's calculate the cost of equity using the CAPM formula:
Cost of Equity = Risk-Free Rate + Beta * Equity Risk Premium
Risk-Free Rate = 3.80%
Beta = 1.18
Equity Risk Premium = 8.70%
Cost of Equity = 3.80% + 1.18 * 8.70% = 3.80% + 10.266% = 14.066%
Next, let's calculate the cost of debt:
Before-Tax Cost of Debt = 8.30%
Tax Rate = 38%
After-Tax Cost of Debt = Before-Tax Cost of Debt * (1 - Tax Rate)
After-Tax Cost of Debt = 8.30% * (1 - 0.38) = 8.30% * 0.62 = 5.146%
Now, we can calculate the weights of equity and debt:
Equity Weight = 1 - Debt Weight
Debt Weight = 40%
Equity Weight = 1 - 40% = 60%
Debt Weight = 40%
Finally, we can calculate the WACC using the weights and the costs of equity and debt:
WACC = (Equity Weight * Cost of Equity) + (Debt Weight * After-Tax Cost of Debt)
WACC = (60% * 14.066%) + (40% * 5.146%)
WACC = 8.4396% + 2.0584%
WACC = 10.498%
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