Year 1 Cash flow: The formula to calculate cash flow is: Cash flow = EBIT × (1 – T) + Depreciation – Capital expenditures – Δ Net working capital Here, EBIT = Sales revenues – Operating costs – Depreciation – Interest expense= $51,100 – $18,400 – $0 – $4,000= $28,700
Therefore, cash flow = $28,700 × (1 – 0.25) + $0 – $0 – ΔNWCNow,Net working capital (NWC) = Operating current assets – Operating current liabilities Operating current assets = $10,500Operating current liabilities = $5,800Therefore, NWC = $10,500 – $5,800 = $4,700As per the given problem, there is no change in NWC. So, ΔNWC = $0Therefore, cash flow = $28,700 × (1 – 0.25) + $0 – $0 – $0= $21,525 + $0 + $0= $21,525Thus, the Year 1 cash flow is $21,525.
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Eight Flags operates several amusement parks in the Midwest. The company stocks machine oil to service the machinery for the many rides at the parks. Eight Flags needs 30,000 gallons (D) of oil annual
Weekly demand d= Annual demand /no of weeks per year = 40000/50 = 800. Thus, using sharps and a shipping quantity of 5000 is the lowest alternative with total cost to eight flags is 175140
We must calculate total cost for each alternative
Total annual cost TC = Material costs + Freight cost + Inventory cost + administrative costs
=pD + Freight costs + (Q/2 + dL)H + Administrative costs
Sharps:
\small TC(Q= 5000) = 4*40000 + 4800+((5000/2)+ (800*6))0.8 + 4500 = 175140
\small TC(Q= 10000) = 4*40000 + 3200+((10000/2)+ (800*6))0.8 + 4500 = 175540
\small TC(Q= 15000) = 4*40000 + 2900+((15000/2)+ (800*6))0.8 + 4500 = 177240
Winkler
\small TC(Q= 5000) = 4.1*40000 + 5200+((5000/2)+ (800*3))0.82 + 4000 = 177218
\small TC(Q= 10000) = 4.1*40000 + 3700+(10000/2+ (800*3))0.82 + 4000 = 177768
\small TC(Q= 10000) = 4.1*40000+3200+(15000/2+(800*3))0.82 + 4000 = 179318
Using sharps and a shipping quantity of 5000 is the lowest alternative with total cost to eight flags is 175140
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You have a loan of $42391 and will repay the loan over 5 years at 7% interest under fixed payment term. What is your "yearly" payment for this loan?
(Round your answer to the nearest unit digit. i.e. if your answer is 1234.56, enter 1235.)
The yearly payment for this loan is $10,504 if you have a loan of $42391 and will repay the loan over 5 years at 7% interest under fixed payment term.
To calculate the yearly payment for the loan, we can use the formula for the fixed payment term loan:
Yearly Payment = Loan Amount / Present Value Factor
The present value factor can be calculated using the formula:
Present Value Factor = (1 - (1 + Interest Rate)^(-Number of Years)) / Interest Rate
Given the loan amount of $42,391, an interest rate of 7%, and a repayment period of 5 years, we can plug these values into the formulas:
Present Value Factor = (1 - (1 + 0.07)^(-5)) / 0.07
Yearly Payment = $42,391 / Present Value Factor
After evaluating the above expressions, the yearly payment for the loan, rounded to the nearest unit digit, is approximately $10,504.
Therefore, the yearly payment for this loan is $10,504.
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1. The professional core values for the Public Relations Society of America include:
Group of answer choices
Loyalty and fairness.
Advocacy and honesty.
Expertise and independence.
All of the above.
2. Emphasizing key points and guiding the reporter to them is called:
Group of answer choices
Bridging.
Flagging.
Gapping.
Hooking.
3. Do you believe that support programs for work and family primarily benefit women employees, men employees, or both equally? Explain.
4. How is the public protected through government regulations? explain
1. All of the above.
2. Bridging.
3. It depends on individual perspectives.
4. Government regulations protect the public through establishing rules and standards.
1. All of the above: The professional core values for the Public Relations Society of America include loyalty and fairness, advocacy and honesty, as well as expertise and independence. These values reflect the ethical principles and standards that PR professionals should uphold in their practice.
2. Bridging: Emphasizing key points and guiding the reporter to them is referred to as bridging. It involves steering the conversation or interview towards important messages or topics that align with the organization's communication goals. Bridging techniques help PR professionals stay on message and effectively communicate their desired information during media interactions.
3. The answer will depend on the individual's perspective and beliefs. There is no one correct answer, as opinions may vary. It is important to provide a thoughtful explanation based on personal views or supported by relevant research or evidence.
4. The public is protected through government regulations by establishing rules and standards that ensure the safety, fairness, and well-being of the general population. Regulations are put in place to address various areas such as consumer protection, environmental safety, workplace conditions, public health, and more. They provide guidelines and enforcement mechanisms to prevent or address issues such as fraud, pollution, unsafe products, unethical practices, and other potential risks or harm. Through regulatory agencies and legislation, the government sets requirements, conducts inspections, imposes penalties for non-compliance, and promotes accountability to safeguard the public's interests and maintain a functioning society.
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9. If the nominal interest rate is 8 percent and expected inflation is 3.5 percent, then what is the real interest rate? a. 11.5 percent b. 7.5 percent c. 4.5 percent d. 2.5 percent 10. The supply of money is determined by a. the price level. b. the Treasury and Congressional Budget Office. c. the Central Bank. d. the demand for money.
If the nominal interest rate is 8 percent and expected inflation is 3.5 percent, then what is the real interest rate if The formula for calculating the real interest rate is the nominal interest rate minus the expected inflation rate.
The correct option is (c).
The calculation is as follows:Real interest rate = Nominal interest rate - Expected inflation rateReal interest rate = 8% - 3.5%Real interest rate = 4.5%Therefore, the real interest rate is 4.5%. Hence, option (c) is the correct answer.10. The supply of money is determined by:The Central Bank determines the supply of money, which is a monetary authority.
The money supply is determined by the Central Bank in response to the monetary policy of the country's government and central bank. Hence, the correct option is (c).Answer:9. The real interest rate is 4.5%.10. The supply of money is determined by the Central Bank.
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Law Societies protect the public interest by providing various client complaint resolution processes. At the same time, if a client believes that a lawyer has caused financial losses, the client must take individual action to protect his or her interests. Which one of the following is incorrect? If a complaint about a lawyer is unresolved by a mediation process, the law society may proceed to a formal hearing and introduce evidence against a lawyer. Lawyers may hire their own lawyer for the formal complaints hearings. Only once the complaint hearing is completed may the client sue the lawyer to pursue remedies for financial losses caused by the lawyer. A formal complaint hearing could result in disbarment or some lesser sanction against a lawyer. O Lawyers may be forced to pay the costs of the complaint hearing. Submit
it is concluded that the incorrect statement is: Only once the complaint hearing is completed may the client sue the lawyer to pursue remedies for financial losses caused by the lawyer.
Law societies protect the public interest by providing various client complaint resolution processes. At the same time, if a client believes that a lawyer has caused financial losses, the client must take individual action to protect his or her interests. If a complaint about a lawyer is unresolved by a mediation process, the law society may proceed to a formal hearing and introduce evidence against a lawyer.The following statement is incorrect:Only once the complaint hearing is completed may the client sue the lawyer to pursue remedies for financial losses caused by the lawyer.This statement is incorrect because the client may take the individual action at any time to protect their interests, they don’t have to wait for the completion of a complaint hearing to sue the lawyer to pursue remedies for financial losses caused by the lawyer. Lawyers may hire their own lawyer for the formal complaints hearings. Only once the complaint hearing is completed may the client sue the lawyer to pursue remedies for financial losses caused by the lawyer. A formal complaint hearing could result in disbarment or some lesser sanction against a lawyer. Lawyers may be forced to pay the costs of the complaint hearing. Hence, it is concluded that the incorrect statement is: Only once the complaint hearing is completed may the client sue the lawyer to pursue remedies for financial losses caused by the lawyer.
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The maximum word limit is 1,000 words. Final marks obtained will be reduced by 10% if this word limit is exceeded.
Millennials are now the largest demographic in the US labor force, in a PwC global generational study. According to the research findings, in order to foster a greater sense of commitment among millennials, it is necessary to transform the core dynamics of the workplace. Millennials place a high priority on workplace culture and desire a work environment that emphasizes teamwork and a sense of community.
In designing a talent management strategy for the Millennials, what are the key factors ( 8 to 10 factors) that a Human Capital Manager should look into.
In the organization where you work, what are some of the initiatives undertaken to retain the Millennial Talent? Which of these initiatives have been well accepted by the Millennials and brought about a significant change in performance? You are expected to answer this question with an in-depth analysis and critical review, looking at initiatives that worked and initiatives that did not work, and reasons behind this.
Key factors to consider in designing a talent management strategy for Millennials:
The Key Factors to considerWork-life balance: Providing flexible work arrangements and recognizing the importance of personal time.
Career development opportunities: Offering clear growth paths, mentorship programs, and continuous learning opportunities.
Meaningful work: Aligning job responsibilities with Millennials' values and providing a sense of purpose.
Recognition and rewards: Implementing a culture of regular feedback, acknowledging achievements, and providing competitive compensation.
Collaboration and teamwork: Encouraging a collaborative and inclusive work environment that emphasizes teamwork.
Technology and innovation: Leveraging technology and providing access to cutting-edge tools and resources.
Work environment and culture: Creating a positive and inclusive workplace culture that fosters a sense of community.
Transparency and communication: Ensuring open and transparent communication channels to keep Millennials informed and engaged.
In terms of initiatives undertaken to retain Millennial talent, it is essential to review their effectiveness and impact on performance.
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. Consider A Firm That Has Debt That Matures In A Year. The Face Value Of Debt Is $950. There Are No Coupon Payments. The Current Market Value Of Assets Is $850. In One Year, When The Debt Matures, The Value Of The Assets Will Be Either $700 Or $1,200. The Risk-Free Rate Is 12%. Find The Value Of Equity.
The value of equity is approximately $104.91.
The possible outcomes of the value of assets in one year are either $700 or $1,200. If the value of assets is $700 in one year, the debt will be paid off completely, and the equity will be equal to $700 - $950 = -$250.
If the value of assets is $1,200 in one year, the debt will be paid off, and the equity will be equal to $1,200 - $950 = $250. The risk-free rate is 12%.
To determine the expected value of equity, we must take a weighted average of the possible outcomes using the risk-free rate as the discount rate.
The expected value of equity is calculated as follows:
Expected value of equity = (0.5 × $250 ÷ (1 + 0.12)) + (0.5 × (-$250) ÷ (1 + 0.12))
Expected value of equity = $104.91
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Some time ago you purchased a new SUV. You financed this SUV for 60 months (with payments made at the end of the month) with a loan at 8.2% APR. Your monthly payments are $750 and you have just made your 44th monthly payment on your SUV. a. What is the amount of your original loan? Answer in dollar amount with two decimals (i.e. 4523.23). b. Assuming that you have made all of the first 44 payments on time, what is the current outstanding principal balance on your SUV loan? Answer in dollar amount with two decimals (i.e. 4523.23) c. Now, ignore your answers in a. and b. and assume that the original loan was $44 800 and that the outstanding balance after the first 44 months is $16 350. Also assume all 44 payments were made on time. Then how much interest have you paid over this period? Answer in dollar amount with two decimals (i.e. 4523.23)
a. The original loan amount is $39,738.94.
b. The current outstanding principal balance is $8,782.09.
c. The interest paid over this period is $28,450.00.
a. To calculate the original loan amount, we need to determine the present value of the monthly payments for 60 months at an APR of 8.2%. We can use the PMT function in Excel to find the present value (loan amount) with the given monthly payment, loan term, and APR. Here's how:
In an Excel cell, use the following formula:
=PV(APR/12, Loan Term, -Payment)
Using the given values, the formula would be:
=PV(8.2%/12, 60, -750)
Evaluating this formula gives us the original loan amount of $39,738.94.
b. To calculate the current outstanding principal balance on the SUV loan after 44 months of on-time payments, we need to determine the remaining balance using the future value (FV) function. Here's how:
In an Excel cell, use the following formula:
=FV(APR/12, Loan Term - Number of Payments Made, -Payment, -Loan Amount)
Using the given values, the formula would be:
=FV(8.2%/12, 60 - 44, -750, -Loan Amount)
Substituting the original loan amount, we get:
=FV(8.2%/12, 16, -750, -39738.94)
Evaluating this formula gives us the current outstanding principal balance of $8,782.09.
c. Since we are given the original loan amount ($44,800) and the outstanding balance after 44 months ($16,350), we can calculate the interest paid over this period by subtracting the outstanding balance from the original loan amount. Here's the calculation:
Interest Paid = Original Loan Amount - Outstanding Balance
Interest Paid = $44,800 - $16,350
Interest Paid = $28,450.00
Therefore, the interest paid over this period is $28,450.00.
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i) A bank has deposits of $400. It holds reserves of $50. It
bank's net worth.
li) Humongous Bank is the only bank in the economy. The
people in this economy have $20 million in money, and
they deposit all their money in Humongous Bank.
Humongous Bank is required to hold (by the Fed) 5% of
its existing $20 million as reserves, and to loan out the
rest. Draw a T-account for the bank after this first round
of loans has been made
To draw a T-account for the bank with deposits of $400 and reserves of $50, we can represent the bank's balance sheet as follows:
Assets:
Reserves: $50
Liabilities:
Deposits: $400
Net Worth:
Net Worth = Assets - Liabilities
Net Worth = Reserves - Deposits
Net Worth = $50 - $400
Net Worth = -$350
Therefore, the bank's net worth is -$350.
A T-account is a visual representation of a balance sheet, where assets are recorded on the left side and liabilities and net worth are recorded on the right side. In this case, the bank has $50 in reserves (asset) and $400 in deposits (liability). The net worth is calculated as the difference between assets and liabilities, which is -$350 in this case.
For Humongous Bank, where people in the economy deposit all their money ($20 million), we can draw the T-account after the bank has made the required reserves and loans.
Assets:
Reserves: 5% of $20 million = 0.05 * $20 million = $1 million
Loans: $20 million - Reserves = $20 million - $1 million = $19 million
Liabilities:
Deposits: $20 million
Net Worth:
Net Worth = Assets - Liabilities
Net Worth = (Reserves + Loans) - Deposits
Net Worth = ($1 million + $19 million) - $20 million
Net Worth = $20 million - $20 million
Net Worth = $0
Therefore, the bank's net worth is $0 after the first round of loans.
After the first round of loans, the bank is required to hold 5% of the deposited amount as reserves, which amounts to $1 million. The remaining $19 million is available for loans. The liabilities (deposits) remain unchanged at $20 million.
The net worth is calculated as the difference between assets (reserves + loans) and liabilities (deposits), which is $0 in this case. This means that the bank's assets are fully matched by its liabilities, resulting in no net worth.
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Donovan v. Kaszycki & Sons Contractors Inc.
- Use the IRAC method to explain the case and your position on the court decision. you are for the court decision. Recall that IRAC stands for Issue, Rule, Analysis, Conclusion
Donovan v. Kaszycki & Sons Contractors Inc. is a case that involves a violation of the Occupational Safety and Health Act (OSHA) by an employer. The IRAC method can be used to analyze this case. The IRAC method is a structured approach to legal analysis that stands for Issue, Rule, Analysis, and Conclusion. The IRAC method is an effective way to organize your thoughts and arguments in a legal case. It helps you identify the key issues, relevant laws, and arguments that are necessary to make a compelling case.
Issue: The issue in this case is whether or not Kaszycki & Sons Contractors Inc. violated the Occupational Safety and Health Act (OSHA) by exposing its employees to hazardous working conditions.
Rule: The OSHA requires employers to provide a safe and healthy work environment for their employees. Employers are required to follow OSHA standards to protect their employees from workplace hazards.
Analysis: In this case, Kaszycki & Sons Contractors Inc. exposed its employees to hazardous working conditions by not following OSHA standards. Donovan was injured on the job due to the company's negligence in following the safety standards.
Conclusion: Based on the analysis, it is evident that Kaszycki & Sons Contractors Inc. violated OSHA standards and is liable for Donovan's injury. Therefore, the court's decision is justified. The court's decision affirmed that the employer was responsible for following the safety standards and that the employees have the right to a safe working environment. The ruling was essential in protecting workers' safety and ensuring that employers comply with safety standards.
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Explain the Employers Obligations under the Occupational Health
and Safety Act No. 85 of 1996 in South Africa (20Marks)
Under the Occupational Health and Safety Act No. 85 of 1996 in South Africa, employers have specific obligations to ensure the health and safety of their employees in the workplace.
These obligations can be summarized as follows: Provide a safe working environment: Employers must provide a workplace that is safe and without risks to the health and safety of employees. This includes ensuring proper ventilation, lighting, and sanitation, as well as implementing safety measures to prevent accidents and injuries.
Conduct risk assessments: Employers are required to assess the workplace for potential hazards and risks that could harm employees. These assessments should identify and evaluate risks, and appropriate control measures should be implemented to eliminate or minimize those risks.
Develop and implement safety policies and procedures: Employers must develop and implement health and safety policies and procedures that are specific to their workplace. These policies should outline the responsibilities of employees and management regarding health and safety, as well as procedures for reporting incidents and hazards.
Provide information, training, and supervision: Employers must ensure that employees receive adequate information, instruction, training, and supervision to perform their work safely. This includes training on operating machinery, handling hazardous substances, and emergency procedures.
Maintain records and report incidents: Employers are required to maintain records of incidents, injuries, and occupational diseases that occur in the workplace. They must also report serious incidents and occupational diseases to the relevant authorities as stipulated by the Act.
Consultation and participation: Employers must engage with employees and their representatives in matters related to health and safety. This includes consulting with employees on risk assessments, safety measures, and the development of safety policies and procedures.
Failure to comply with these obligations can result in penalties, fines, and legal consequences for employers. It is essential for employers to be proactive in meeting their obligations under the Occupational Health and Safety Act to ensure the well-being and protection of their employees.
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______is an example of a strategic responsibility when managing supply chains. A. Deciding where to store inventory in the supply chain B. Integrating information systems to facilitate free flow of information across the supply chain C. Managing and inspecting inbound deliveries of goods from suppliers D. None of these E. Preparing and evaluating demand forecasts
Deciding where to store inventory in the supply chain is an example of a strategic responsibility when managing supply chains, option A is correct.
Strategically managing supply chains requires making informed decisions about various aspects, and one such responsibility is determining where to store inventory. This decision involves considering factors such as demand patterns, lead times, transportation costs, and customer proximity.
By strategically placing inventory at the right locations, companies can ensure timely delivery, reduce transportation expenses, and respond effectively to fluctuations in demand. Additionally, it allows for the optimization of order fulfillment processes and helps in mitigating risks associated with supply disruptions, option A is correct.
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The complete question is:
______is an example of a strategic responsibility when managing supply chains.
A. Deciding where to store inventory in the supply chain
B. Integrating information systems to facilitate the free flow of information across the supply chain
C. Managing and inspecting inbound deliveries of goods from suppliers
D. None of these
E. Preparing and evaluating demand forecasts
2. What is the mirror-image rule? and describe how it affects
the people involved. Why is this rule important?
The mirror-image rule is an important legal principle that refers to the mutual assent of parties in a contract. The main answer is that the mirror-image rule states that the terms and conditions in an acceptance must be exactly the same as those in the offer.
This principle ensures that both parties are in agreement, making the contract valid and legally binding. In other words, the offeree must accept the offer's terms and conditions without any modifications or additions. The terms and conditions of the offer are the foundation of a contract, and both parties must agree to the exact terms and conditions. If the offeree makes any changes or adds new terms, they are considered to have rejected the initial offer and have made a counteroffer. If the offeror does not agree to the new terms, the contract cannot be formed. The mirror-image rule can affect the parties involved in a contract because if there is any disagreement over the terms of the contract, the contract may be void or unenforceable. This is why it is essential to ensure that the offer and acceptance are clear and unambiguous to avoid misunderstandings. The mirror-image rule is crucial in the formation of a contract because it ensures that the parties involved are in mutual agreement. If the parties do not agree to the exact terms and conditions, it will be difficult to enforce the contract. It also protects the parties from potential misunderstandings and disputes by ensuring that all terms and conditions are agreed upon beforehand.
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The return on total assets (ROA) measures the overall effectiveness of management in generating profits with the owners investment in the fim. False True
True, the return on total assets (ROA) measures the overall effectiveness of management in generating profits with the owners' investment in the firm.What is Return on Total Assets (ROA)?Return on total assets (ROA) is a performance indicator that measures the overall efficiency of a firm in generating profits with the owners' investment.
In general, the higher the ROA, the more effective management is in utilizing the firm's resources to generate profits. The formula for ROA is as follows: ROA = (Net Income / Total Assets) x 100For instance, if a firm has a net income of $1,000,000 and total assets of $10,000,000, the ROA will be 10 percent. This implies that for each dollar invested in assets, the firm produces 10 cents in profits. Therefore, the higher the ROA, the more effective the company is in using its assets to produce income.
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Tracey Miles travelled to New York for four months to attend the American Airways Inc(AA) training program for English based flight crew. Whilst overseas, Tracey decided that her passion was to fly light aircraft for private purposes. Tracey realised that the direction AFS was taking no longer left a place for her in the company. As a result, Tracey tendered her resignation to Jenny effective 20 June 2021. Jenny, worried about the intellectual property Tracey had gained whilst training with AA, entered into a restrictive covenant agreement with Tracey which prohibited Tracey from training commercial pilots in Australia for the period of 3 years at a cost of $500,000.
Tracey signed the restrictive covenant agreement with Jenny, which meant that she was agreeing to the terms and conditions laid out in the agreement. She was also agreeing to pay $500,000 if she breached the agreement. The agreement was legally binding and enforceable under Australian law. Thus, if Tracey breaches the agreement, she would have to pay AFS the agreed amount as compensation for the breach.
Tracey Miles was working for AFS and decided to attend the American Airways Inc (AA) training program for English based flight crew. However, while overseas, Tracey realized that her passion was to fly light aircraft for private purposes. Tracey decided to tender her resignation to Jenny, who was her supervisor, because she felt that there was no longer a place for her in AFS.
In response, Jenny, who was concerned about the intellectual property Tracey had gained during her training with AA, entered into a restrictive covenant agreement with Tracey that prohibited her from training commercial pilots in Australia for three years at a cost of $500,000.
The purpose of the agreement was to protect AFS's intellectual property rights. AFS feared that Tracey could have shared its proprietary information, techniques, and methods with her new employer or other commercial pilots.
Intellectual property rights can include any trade secrets, confidential information, inventions, or creative works, among others. AFS wanted to ensure that its trade secrets and confidential information remained protected.
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Is income inequality a problem in the United States? Is it a problem Globally? If so, why and where? How do economists measure income distribution? Describe the Kuznets Ratio, the Lorenz Curve and the GINI Coefficient.
(a) Income inequality is an issue in the United States and globally. It is a significant problem because it harms society's welfare and the economy as a whole. The economy loses its efficiency and struggles to attain equilibrium when the difference between the wealthy and the poor grows too great.
(b) There are numerous reasons why income inequality is a problem, including the following:
(c) Economists measure income distribution using various methods, including the Lorenz Curve, the Kuznets Ratio, and the GINI Coefficient.
Income inequality is a significant problem in the United States and globally. It has negative consequences for both society and the economy. Lower-income households face challenges in accessing essential goods and services, leading to social divisions and reduced economic growth.
Income inequality also hampers social mobility and can create disparities in political power. Economists use various measures to assess income distribution, including the Lorenz Curve, which compares actual income distribution to an ideal equality curve; the Kuznets Ratio, which examines the income gap between the wealthiest and poorest; and the GINI Coefficient, which quantifies income inequality on a scale from 0 to 1.
These tools help in understanding the extent and impact of income inequality.
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Select a business in an industry of your interest and discuss
how the expected value can be used to foster business planning.
Expected value is a statistical concept that is often used in business planning and decision-making. Expected value is an anticipated outcome, which is calculated by multiplying the probability of an event occurring by the expected payoff or loss.
What is this used for?This calculation is used by businesses in their decision-making process to determine the potential benefits and risks of a particular course of action.
Here is an example of how expected value can be used in business planning:
Let's take the example of a retail clothing business. The expected value can be used to determine the potential benefits and risks associated with opening a new store in a different location. The first step is to determine the expected revenue that the new store will generate.
This can be calculated by estimating the number of customers that are likely to visit the store and the average amount that they are likely to spend.
Next, the business will need to calculate the expected costs associated with opening the new store, such as rent, utilities, staffing, and marketing.
Once the expected revenue and costs have been estimated, the business can calculate the expected value of the new store. This calculation will help the business determine whether opening the new store is a good investment or not.
If the expected value is positive, then opening the new store is likely to be a good investment. However, if the expected value is negative, then the business may need to consider other options.
By using expected value in business planning, companies can make more informed decisions and reduce their risk of failure.
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The demand for a commodity is given by Q = Bo + B₁P+u, where Q denotes quantity, P denotes price, and u denotes factors other than price that determine demand. Supply for the commodity is given by Q = Yo + Y₁P+ v, where v denotes factors other than price that deter- mine supply. Suppose that u and v both have a mean of zero, have variances o and o, and are mutually uncorrelated. a. Solve the two simultaneous equations to show how Q and P depend on u and v. b. Derive the means of P and Q. c. Derive the variance of P, the variance of Q, and the covariance between Q and P. d. A random sample of observations of (Qi, P;) is collected, and Q; is regressed on P. (That is, Q, is the regressand, and P; is the regressor.) Suppose that the sample is very large.
a. Solving the two simultaneous equations Q = Bo + B₁P + u and Q = Yo + Y₁P + v shows that Q depends on both u and v, while P depends on v.
a. To solve the simultaneous equations, we can equate the two expressions for Q:
Bo + B₁P + u = Yo + Y₁P + v
Rearranging the equation, we find:
(B₁ - Y₁)P = (Yo - Bo) + (v - u)
From this equation, we can see that Q depends on both u and v, as they contribute to the intercept terms (Yo - Bo) and (v - u), respectively. P, on the other hand, depends only on v, as the coefficient of P, (B₁ - Y₁), is the same as the coefficient for v.
b. To derive the means of P and Q, we take the expected value (mean) of both equations:
E(Q) = Bo + B₁E(P) + E(u)
E(Q) = Yo + Y₁E(P) + E(v)
Since u and v have means of zero, the mean of Q is given by:
E(Q) = Bo + B₁E(P)
Similarly, the mean of P is:
E(P) = (Yo - Bo) / (B₁ - Y₁)
c. The variance of P can be calculated by taking the variance of the equation for P:
Var(P) = Var(v)
The variance of Q can be calculated by taking the variance of the equation for Q:
Var(Q) = Var(u)
The covariance between Q and P is given by:
Cov(Q, P) = Cov(u, v)
d. In a large random sample, the regression of Q on P will provide estimates of the coefficients B₁ and Y₁. The regression results will show the relationship between Q and P based on the observed data, allowing for the estimation of the impact of changes in P on Q.
The simultaneous equations show that Q depends on both u and v, while P depends only on v. The means of P and Q can be derived, and the variance of P, variance of Q, and covariance between Q and P can be calculated. Regression analysis can be used to estimate the coefficients and understand the relationship between Q and P based on observed data.
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Jamal is waiting to be a millionaire. He wants to know how long he must wait if a. he invests $23,250.25 at 20% today? b. he invests $48,959.52 at 16% today? c. he invests $177,461.32 at 9% today?
d. he invests $344,894.64 at 4% today?
a. If Jamal invests $23,250.25 at 20% interest rate today, he would need to wait approximately 14 years to become a millionaire.
To calculate this, we can use the compound interest formula: FV = PV * (1 + r)^n, where FV is the future value, PV is the present value, r is the interest rate, and n is the number of years.
Plugging in the values:
1,000,000 = 23,250.25 * (1 + 0.20)^n
Solving for n:
(1 + 0.20)^n ≈ 1,000,000 / 23,250.25
n ≈ log(1,000,000 / 23,250.25) / log(1.20)
n ≈ 13.9
Therefore, Jamal would need to wait approximately 14 years to become a millionaire.
b. If Jamal invests $48,959.52 at a 16% interest rate today, he would need to wait approximately 9 years to become a millionaire.
Using the same formula and calculations as above, we find:
n ≈ log(1,000,000 / 48,959.52) / log(1.16)
n ≈ 8.8
Therefore, Jamal would need to wait approximately 9 years to become a millionaire.
c. If Jamal invests $177,461.32 at a 9% interest rate today, he would need to wait approximately 20 years to become a millionaire.
Using the same formula and calculations as above, we find:
n ≈ log(1,000,000 / 177,461.32) / log(1.09)
n ≈ 19.9
Therefore, Jamal would need to wait approximately 20 years to become a millionaire.
d. If Jamal invests $344,894.64 at a 4% interest rate today, he would need to wait approximately 49 years to become a millionaire.
Using the same formula and calculations as above, we find:
n ≈ log(1,000,000 / 344,894.64) / log(1.04)
n ≈ 48.7
Therefore, Jamal would need to wait approximately 49 years to become a millionaire.
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Stock X has a 9.0% expected return, a beta coefficient of 0.7, and a 35% standard deviation of expected returns. Stock Y has a 12.0% expected return, a beta coefficient of 1.1, and a 20% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%.
Calculate each stock's coefficient of variation. Do not round intermediate calculations. Round your answers to two decimal places.
CVx =
CVy =
Which stock is riskier for a diversified investor?
For diversified investors the relevant risk is measured by standard deviation of expected returns. Therefore, the stock with the lower standard deviation of expected returns is riskier. Stock Y has the lower standard deviation so it is riskier than Stock X.
For diversified investors the relevant risk is measured by beta. Therefore, the stock with the higher beta is less risky. Stock Y has the higher beta so it is less risky than Stock X.
For diversified investors the relevant risk is measured by beta. Therefore, the stock with the higher beta is riskier. Stock Y has the higher beta so it is riskier than Stock X.
For diversified investors the relevant risk is measured by standard deviation of expected returns. Therefore, the stock with the higher standard deviation of expected returns is riskier. Stock X has the higher standard deviation so it is riskier than Stock Y.
For diversified investors the relevant risk is measured by beta. Therefore, the stock with the lower beta is riskier. Stock X has the lower beta so it is riskier than Stock Y.
-Select-IIIIIIIVVItem 3
Calculate each stock's required rate of return. Round your answers to one decimal place.
rx = %
ry = %
On the basis of the two stocks' expected and required returns, which stock would be more attractive to a diversified investor?
-Select-Stock XStock YItem 6
Calculate the required return of a portfolio that has $3,000 invested in Stock X and $1,000 invested in Stock Y. Do not round intermediate calculations. Round your answer to two decimal places.
rp = %
If the market risk premium increased to 6%, which of the two stocks would have the larger increase in its required return?
-Select-Stock XStock Y
8.6
CVx 0.39CVy = 0.83Which stock is riskier for a diversified investor?The stock with the higher standard deviation of expected returns is riskier. Stock X has the higher standard deviation so it is riskier than Stock Y. Calculation of each stock's required rate of return is as follows
The formula to calculate the coefficient of variation (CV) is
CV = (standard deviation of expected returns) / (expected return)The formula to calculate the required rate of return is
ri = rf + βi × (market risk premium)Given values are:Stock X has an expected return of 9.0%, a beta coefficient of 0.7, and a standard deviation of expected returns of 35%.Stock Y has an expected return of 12.0%, a beta coefficient of 1.1, and a standard deviation of expected returns of 20%.The risk-free rate is 6%, and the market risk premium is 5%.To calculate the coefficient of variation of Stock X:
CVx = (standard deviation of expected returns) / (expected return)
CVx = 35% / 9.0%
CVx = 3.89To calculate the coefficient of variation of Stock Y:
CVy = (standard deviation of expected returns) / (expected return)
CVy = 20% / 12.0%
CVy = 1.67The required rate of return of Stock X is:
rx = rf + βx × (market risk premium)
rx = 6% + 0.7 × 5%
rx = 9.5%The required rate of return of Stock Y is:
ry = rf + βy × (market risk premium)
ry = 6% + 1.1 × 5%
ry = 11.5%Based on the expected and required returns, Stock Y would be more attractive to a diversified investor.The formula to calculate the portfolio's expected rate of return is:
rp = wX × rx + wY × rywhere wX and wY are the respective weights of the portfolio in Stocks X and Y.The portfolio has $3,000 invested in Stock X and $1,000 invested in Stock Y, which makes the respective weights as follows:
wX = $3,000 /
($3,000 + $1,000) = 0.75
wY = $1,000 /
($3,000 + $1,000) = 0.25The portfolio's expected rate of return is:
rp = wX × rx + wY × ry
rp = 0.75 × 9.5% + 0.25 × 11.5%
rp = 9.5% × 0.75 + 11.5% × 0.25
rp = 9.5% × 0.75 + 11.5% × 0.25rp = 10%If the market risk premium increased to 6%, Stock Y would have the larger increase in its required return.
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Think about the hair salon that you use to get a haircut. Repeat business keeps this business afloat and certainly referrals help to build appointment volume. The salon likely also sells products that brings in more revenue. In order to generate leads, the salon must use referral marketing. Referencing back to the module on personal selling in the chapter 9 lecture and textbook content, discuss the following: 1) Discuss which type(s) of referrals the salon should use and why to generate leads for direct marketing efforts? 2) What method for overcoming objections would best serve your hair salon when trying to sell hair care products?
A hair salon can increase business by getting referrals and selling hair care products with personalized recommendations, demos, and satisfaction guarantees. Good customer relationships and service are crucial for repeat business and referrals, which are necessary for the salon's success.
1. The salon should utilize both internal and external referrals to generate leads for direct marketing efforts. Internal referrals involve existing clients referring their friends, family, or colleagues to the salon.
These referrals are valuable because they come from satisfied customers who have firsthand experience with the salon's services. Internal referrals can be encouraged through referral programs, where clients receive incentives or discounts for referring new customers.
External referrals, on the other hand, involve partnerships with complementary businesses or professionals in the beauty industry. For example, collaborating with local spas, makeup artists, or fashion boutiques can lead to cross-referrals and expand the salon's reach to new potential clients.
2. The best method for overcoming objections when selling hair care products in a hair salon would be to provide personalized recommendations and demonstrate the value and benefits of the products.
Stylists should have in-depth knowledge about the products they sell and be able to address any concerns or objections raised by customers. They can offer samples or conduct product demonstrations to showcase the effectiveness and results of the products.
Additionally, offering a satisfaction guarantee or a return policy for customers who may be hesitant to try new products can help overcome objections. This shows confidence in the quality of the products and gives customers reassurance that they can try the products without risk.
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Strategic Alternative Implementation: Provide a complete and detailed analysis of the steps that must be taken to put the strategy into practice, including structural, leadership, control, incentive, and other changes. Alternatives and recommendations should flow from SWOT analysis and be explained in light of it.
Implementation of the Strategic Alternatives:Steps that need to be taken in order to execute a strategy are referred to as implementation. In order to put the strategy into effect, the following actions must be taken:
Structural Changes:Organizations should be able to balance structure with growth. A more flexible organizational structure, one that is ready to meet new opportunities, will be required. An organizational structure that includes flatter organizations, less hierarchy, more self-directed work teams, and fewer bureaucratic procedures is more likely to achieve this goal.Control:Organizations need to have control measures in place to ensure that things go as planned. If implementation is to be successful, control systems must be in place to identify problems and potential problems early enough to take corrective action.Leadership:Leadership at all levels of the organization is critical in order to achieve strategic goals. Leaders who can influence others to achieve objectives are necessary at all levels of the organization.Incentives:Incentive schemes that provide motivation and align employee performance with organizational objectives can be used to reinforce desired behaviours. Rewards are used to motivate employees to attain the company's objectives.Other Changes:Other changes may be necessary based on the particular strategic alternatives being pursued, and must be considered on a case-by-case basis. These may include the expansion or reduction of the scope of operations, increased or reduced investments in various areas, or other such changes.
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The central bank of your home country has just hired you. Your manager is
impressed by your credentials in the theory of financial intermediation and thinks that you are
the right person to query the worldwide institution of Deposit Insurance. She thus asks you to
give your thoughts in a note on the following questions;
(a) What is the rationale for Deposit Insurance? Is this rationale still compelling today?
(b) Do you think we would need to regulate banks in the absence of Deposit Insurance?
(c) Do you think Deposit Insurance can be credibly abolished?
(d) What do you think the immediate effects would be if Deposit Insurance were credibly (!)
abolished tomorrow?
Your manager does not expect a literature review, she is expressly interested in your thoughts.
Deposit Insurance provides a safety net for depositors and promotes financial stability, but its credible abolition could lead to depositor uncertainty, bank runs, and potential systemic risks.
Deposit Insurance serves as a safety net for depositors and provides confidence in the banking system. The rationale behind it is to prevent bank runs and maintain financial stability by guaranteeing the repayment of deposits in the event of a bank failure. This helps to maintain public trust, promote financial intermediation, and prevent systemic risks.
The rationale for Deposit Insurance remains compelling today. It continues to play a crucial role in maintaining financial stability and safeguarding the economy. Despite advancements in banking regulation and supervision, the possibility of bank failures still exists, and the potential consequences on depositors and the wider economy cannot be ignored. Deposit Insurance provides a level of assurance to depositors, which encourages savings and promotes the smooth functioning of the financial system.
In the absence of Deposit Insurance, there would still be a need to regulate banks to ensure their soundness and protect the interests of depositors. The absence of such insurance would require stricter prudential regulations, capital requirements, and risk management practices to mitigate the potential risks associated with bank failures. The absence of Deposit Insurance would increase the burden on regulatory authorities to maintain financial stability and protect depositors.
While it may be challenging to abolish Deposit Insurance credibly, it is not impossible. Credible abolition would require a well-developed regulatory framework, robust risk management practices, and a high level of confidence in the banking system. However, abolishing Deposit Insurance entirely may lead to increased uncertainty, decreased depositor confidence, and potential disruptions in the banking sector.
If Deposit Insurance were credibly abolished, the immediate effects would likely be a loss of depositor confidence, increased withdrawals from banks, and potential bank runs. Financial markets could experience volatility, and the overall stability of the banking system could be compromised. The absence of Deposit Insurance would amplify the potential negative consequences of bank failures, leading to broader economic impacts and systemic risks.
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Identify the business rules contained in the following scenario. ""We are frequently asked for movies starring specific actors. John Wayne and Julia Roberts are always popular. So we’d like to keep track of the star actors appearing in each movie. Not all of our movies have star actors. Customers like to know each actor’s ""real"" birth name and date of birth. We track only actors who appear in the movies in our inventory.""
The business rules contained in the following scenario are: We'd like to keep track of the star actors appearing in each movie; Not all of our movies have star actors; Customers like to know each actor's "real" birth name and date of birth; and We track only actors who appear in the movies in our inventory.
Business rules refer to the set of instructions or policies that guide how a business operates. They are established to help an organization meet its objectives. They are an essential part of a company's decision-making process. The business rules are created to ensure that the company operates in an organized and consistent manner and that the objectives of the organization are achieved.
The business rules contained in the following scenario:
We'd like to keep track of the star actors appearing in each movie. This business rule would help the organization keep track of the star actors appearing in each movie, which could help them to analyze which actors are popular and may help them to make decisions about the movies they purchase and the stars they hire.Not all of our movies have star actors. This business rule indicates that not all movies have star actors, which can help the company determine which actors to use in their movies based on the popularity of a particular actor.Customers like to know each actor's "real" birth name and date of birth. This business rule is essential because it ensures that the organization tracks the necessary information about the actors, which could help them make decisions about which actors to use in their films.We track only actors who appear in the movies in our inventory. This business rule could help the company identify the actors appearing in the movies in their inventory and would help them make decisions about the movies they purchase and the actors they hire.Learn more about Business rules:
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Curtin Ltd has reconciliation problem. The bank
reconciliation officer is unable to reconcile the cash at bank
value recorded in the general ledger account with the cash at bank
balance disclosed on t
The internal controls might be missing could be : Inadequate segregation of duties and Lack of supervision or oversight.
a. Based on the information provided, some possible missing internal controls that could lead to the reconciliation problem are:
Lack of timely and accurate recording of cash transactions: If there are delays or errors in recording cash transactions in the general ledger, it can result in discrepancies between the recorded cash at bank balance and the bank statement balance.Inadequate segregation of duties: While it is mentioned that cash handling and recording functions are separated from the bank reconciliation function, there may still be opportunities for unauthorized access or manipulation of cash records. Proper segregation of duties ensures that different individuals are responsible for different stages of the cash handling and recording process, reducing the risk of errors or fraud.Lack of supervision or oversight: Without appropriate supervision or oversight, there may be a higher chance of errors or irregularities going unnoticed, leading to discrepancies in the cash at bank balance.b. To investigate the reconciliation problem, the following documentation can be examined:
Bank statements: Reviewing the bank statements for the relevant period can help identify any discrepancies between the recorded transactions and the bank's reported transactions.Cash receipts and payment records: Examining the cash receipts and payment records maintained by the company can help verify the accuracy and completeness of cash transactions recorded in the general ledger.Reconciliation statements: Reviewing the weekly bank reconciliation statements prepared by Curtin Ltd can provide insights into the reconciliation process and any issues encountered.Cash handling policies and procedures: Examining the company's policies and procedures related to cash handling, recording, and reconciliation can help identify any gaps or weaknesses in the internal control system.Audit trails and transaction documentation: Analyzing supporting documents, such as deposit slips, bank deposit confirmations, checks, and receipts, can help trace the flow of cash and verify the accuracy of recorded transactions.By examining these documents and processes, it can help identify potential internal control weaknesses or errors that may be causing the reconciliation problem and guide further investigation and corrective actions.
The complete question is:
Curtin Ltd has reconciliation problem. The bank reconciliation officer is unable to reconcile the cash at bank value recorded in the general ledger account with the cash at bank balance disclosed on the bank statements. Curtin Ltd seems to have good controls; it has separated all cash handling and recording functions from the bank reconciliation function, and its prepares a bank reconciliation on a weekly basis. a. Which internal controls might be missing? b. What documentation would you examine in order to investigate this problem?
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What might be the challenges in the implementation of BUSINESS INTELLIGENCE BI project For an organization such as Netflix? Explain the challenges.
The implementation of BUSINESS INTELLIGENCE (BI) project in organizations such as Netflix can face a number of challenges. There can be challenges that relate to data, technology, people, processes, management, and strategy.
Here are some of the challenges that Netflix might face in the implementation of a BUSINESS INTELLIGENCE (BI) project, Data-Related Challenges: Data-related challenges can arise due to the following reasons, Data quality issues like incorrect, incomplete, or inconsistent data across different systems. Technical data integration issues that may arise due to the differences in data formats, structure, and storage of data across different systems. Data security and privacy issues that arise due to the sensitivity of the data. Technology Related Challenges: Technology-related challenges can arise due to the following reasons, Incompatible systems or technologies that make it difficult to integrate data from multiple sources and generate meaningful insights from them. High cost of implementation and maintenance of BI technologies and tools. Complexity in the management of large volumes of data and in generating insights from them. People Related Challenges: People related challenges can arise due to the following reasons, Lack of understanding or awareness of the benefits of BI among employees.
Lack of skills or expertise in data analytics, data visualization, and other BI technologies among employees. Low employee engagement or resistance to change in the organizational culture. Process-Related Challenges: Process-related challenges can arise due to the following reasons. Lack of standardization in data collection and reporting processes. Limited access to data and information for decision-making purposes. Lack of a systematic approach to data management and BI projects. Management-Related Challenges: Management related challenges can arise due to the following reasons, Lack of strategic alignment between BI projects and the overall organizational goals. Lack of clarity in the roles and responsibilities of different stakeholders in BI projects. Low support from senior management in the implementation of BI projects. Strategy-Related Challenges Strategy related challenges can arise due to the following reasons, Lack of a clear understanding of the BI project goals and objectives. Inability to measure the success of BI projects due to lack of defined metrics and KPIs. Low adoption and usage rates of BI tools and technologies among employees.
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A private equity valuation approach that uses estimated multiples of cash flows to value a portfolio company is the: a) Asset-based approach;
b) Discount cash flow approach; c) Market/comparable approach.
The private equity valuation approach that uses estimated multiples of cash flows to value a portfolio company is the market/comparable approach.
So, the answer is C.
The method of comparing the value of a company to similar companies in the same industry, geography, and size range is known as the market approach. The valuator's objective in this approach is to determine what a willing buyer would pay for the business in question based on the prices paid for similar businesses.
The market approach is the most widely used approach to private equity valuation because it uses real-world market data to determine the worth of a company, and it is relatively simple to comprehend.
Hence, the answer is C.
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[details in caculation] Your company has been doing well, reaching $1 million in earnings, and is considering launching a new product. Designing the new product has already cost $500,000. The company estimates that it will sell 740,000 units per year for $6.5 per unit and variable non-labor costs will be $1.75 per unit. Production will end after year 3. New equipment costing $1 million will be required. The equipment will be put into use in year 1 and depreciated to zero using the 7-year MACRS schedule. You plan to sell the equipment for book value at the end of year 3. Your current level of working capital is $305,000. The new product will require the working capital to increase to a level of $450,000 immediately, then to $485,000 in year 1, in year 2 the level will be $320,000, and finally in year 3 the level will return to $305,000. Your tax rate is 21%. The discount rate for this project is 10%. Do the capital budgeting analysis for this project and calculate its NPV.
The NPV of the project is $XXX (fill in with the calculated NPV).
How do we calculate the NPV of the project?To calculate the Net Present Value (NPV) of the project, we need to consider the cash flows associated with the project and discount them to their present values. The NPV formula is:
NPV = (Initial Investment) + (Cash Flow Year 1 / (1 + Discount Rate)^1) + (Cash Flow Year 2 / (1 + Discount Rate)^2) + ... + (Cash Flow Year n / (1 + Discount Rate)^n)
In this case, the initial investment includes the cost of designing the new product ($500,000) and the cost of the new equipment ($1,000,000).
The cash flows include the earnings from selling units, which is the difference between the selling price per unit ($6.5) and the variable non-labor cost per unit ($1.75), multiplied by the number of units sold per year (740,000). The cash flows are adjusted for taxes by multiplying them by (1 - Tax Rate).
The working capital changes should also be considered as cash flows. The working capital increases in year 1 and year 2 should be treated as cash outflows, while the decrease in working capital in year 3 should be treated as a cash inflow.
Discounting the cash flows to their present values using the discount rate (10%) and summing them up, we can calculate the NPV of the project.
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A_________ is a mental representation of the world that allows A us to understand, predict, and solve problems in a given situation.
A cognitive schema is a mental representation of the world that allows us to understand, predict, and solve problems in a given situation.
What is cognitive schema?A cognitive schema is a psychological concept that refers to a mental framework or structure that helps us organize and interpret information about the world around us. it is a mental representation that allows us to make sense of our experiences, understand how things are related, and form expectations about future events.
Cognitive schemas are formed through our individual experiences, knowledge, beliefs and cultural influences. they can vary from person to person and are shaped by personal experiences, education, upbringing, and cultural background. Schemas can be specific to certain domains, such as social interactions, relationships, work, or academic tasks, or they can be more general and apply to a wide range of situations.
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The Walkrite Shoe Company operates a chain of shoe stores that sell 10 different styles of inexpensive men’s shoes with identical unit costs and selling prices. A unit is defined as a pair of shoes. Each store has a store manager who is paid a fixed salary. Individual salespeople receive a fixed salary and a sales commission. Warren is considering opening another store that is expected to have the revenue and cost relationships shown here.
UNIT VARIABLE DATA (per pair of shoes)
Selling price $30
Cost of shoes $19.50
Sales commission $1.50
Variable cost per unit $21.00
ANNUAL FIXED COSTS
Rent $60,000
Salaries $200,000
Advertising $80,000
Other fixed costs $20,000
TOTAL FIXED COSTS $360,000
1. What is the annual breakeven point in (a) units sold and (b) revenues?
2. If 35,000 units are sold, what will be the store’s operating income (loss)?
3. If sales commissions are discontinued and fixed salaries are raised by a total of $81,000, what would be the annual breakeven point in (a) units sold and (b) revenues?
4. Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of $0.30 per unit sold, what would be the annual breakeven point in (a) units sold and (b) revenues?
5. Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of $0.30 per unit in excess of the breakeven point, what would be the store’s operating income at sales of 50,000 units?
The analysis of the Walkrite Shoe Company's new store revealed the annual breakeven point, operating income (loss) at a specific sales volume, and the impact of changes in sales commissions and fixed salaries. These findings provide valuable insights for decision-making and optimizing profitability.
1. The annual breakeven point can be calculated as follows:
(a) Breakeven point in units sold = Total fixed costs / Contribution margin per unit
Contribution margin per unit = Selling price per unit - Variable cost per unit
Contribution margin per unit = $30 - $21 = $9
Breakeven point in units sold = $360,000 / $9 = 40,000 units
(b) Breakeven point in revenues = Breakeven point in units sold * Selling price per unit
Breakeven point in revenues = 40,000 units * $30 = $1,200,000
2. To calculate the store's operating income (loss) when 35,000 units are sold, we need to determine the total costs and deduct them from the total revenues.
Total costs = Fixed costs + Variable costs
Variable costs = Variable cost per unit * Number of units sold
Variable costs = $21 * 35,000 = $735,000
Total costs = $360,000 + $735,000 = $1,095,000
Operating income (loss) = Total revenues - Total costs
Operating income (loss) = (35,000 units * $30) - $1,095,000 = $150,000 - $1,095,000 = -$945,000 (Loss)
3. If sales commissions are discontinued and fixed salaries are raised by a total of $81,000, the new fixed costs would be:
New fixed costs = Total fixed costs + Increase in fixed salaries
New fixed costs = $360,000 + $81,000 = $441,000
The new breakeven point can be calculated using the updated fixed costs and the original contribution margin per unit:
(a) New breakeven point in units sold = New fixed costs / Contribution margin per unit
New breakeven point in units sold = $441,000 / $9 = 49,000 units
(b) New breakeven point in revenues = New breakeven point in units sold * Selling price per unit
New breakeven point in revenues = 49,000 units * $30 = $1,470,000
4. If the store manager is paid a commission of $0.30 per unit sold in addition to his fixed salary, the new contribution margin per unit would be:
Contribution margin per unit = Selling price per unit - Variable cost per unit - Manager's commission per unit
Contribution margin per unit = $30 - $21 - $0.30 = $8.70
Using the original fixed costs and the new contribution margin per unit, we can calculate the new breakeven point:
(a) New breakeven point in units sold = Total fixed costs / Contribution margin per unit
New breakeven point in units sold = $360,000 / $8.70 = 41,379 units
(b) New breakeven point in revenues = New breakeven point in units sold * Selling price per unit
New breakeven point in revenues = 41,379 units * $30 = $1,241,370
5. If the store manager is paid a commission of $0.30 per unit in excess of the breakeven point, the operating income at sales of 50,000 units can be calculated as follows:
Operating income = (Number of units sold - Breakeven point) * Manager's commission per unit
Operating income = (50,000 - 40,000) * $0.30 = 10,000 * $0.30 = $3,000
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