Structured job interviews provide several benefits beyond diversity considerations. They offer consistency by asking all candidates the same set of questions, enabling fair comparisons. Structured interviews also possess higher predictive validity for assessing job performance.
Their standardized approach enhances reliability by reducing individual biases and ensuring a consistent evaluation process. Additionally, structured interviews save time through a streamlined, predetermined question format. Unfortunately, as an AI language model, I don't possess personal experiences, so I am unable to provide information about my own job interviews or demographic characteristics.
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A graphic technique for defining the relationship between customer desires and product (or service) is: O a. product lifecycle management. b. the house of quality. c. the moment of truth. d. the assembly drawing. e. modular design.
The correct answer is b. the house of quality. The house of quality is a graphic technique used in quality management and product development processes, particularly in the context of the Six Sigma methodology.
It is a key component of the Quality Function Deployment (QFD) process. The house of quality visually represents the relationship between customer desires or requirements and the product or service being developed. It provides a structured framework for translating customer needs into specific product features and characteristics.
The house of quality typically takes the form of a matrix, where customer requirements are listed on one side and corresponding product features or characteristics are listed on the other side. The matrix also includes a correlation matrix, which indicates the strength of the relationship between customer requirements and product features.
By using the house of quality, organizations can ensure that their products or services align with customer expectations and preferences. It helps in identifying the most critical customer requirements and prioritizing them in the design and development process, leading to improved customer satisfaction and product performance.
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A 6-year annuity of 12$7,000 semiannual payments will begin 9 years from now, with the first payment coming 9.5 years from now. The discount rate is 11 percent compounded monthly. a. What is the value of this annuity five years from now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the value three years from now? (Do not round internediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the current value of the annuity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
a. To find the value of the annuity five years from now, we need to discount the future cash flows back to the present. The annuity consists of 12 semiannual payments of $7,000 each. Since the annuity begins 9 years from now, the first payment will occur 9.5 years from now.
The discount rate is 11 percent compounded monthly, which means we need to adjust the rate to reflect the semiannual compounding. The effective semiannual discount rate can be calculated by dividing the annual rate by the number of compounding periods per year, which is 12 in this case. Therefore, the effective semiannual discount rate is (1 + 0.11/12)^(12/2) - 1.
Present Value = Payment Amount * [(1 - (1 + Discount Rate)^(-Number of Payments))] / Discount Rate. The annuity consists of 12 semiannual payments of $7,000 each, starting 9 years from now. The first payment occurs 9.5 years from now. The discount rate is 11 percent compounded monthly. By applying the effective semiannual discount rate and using the present value of an ordinary annuity formula, we can calculate the present value of each payment and sum them up to find the value of the annuity five years from now.
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What impact do you think recyclable materials will have on the sustainability goals of Starbucks? What impact did the pandemic have on this effort – in any?
2. Is Starbucks unique in being able to provide a high level of benefits and college tuition reimbursement to its employees? Explain and provide evidence for your claims.
3. Do you think Starbucks has grown because of its mission to put people ahead of profits or because of innovative ideas like online ordering and global roasteries? Why or why not
Recyclable materials can have a significant impact on the sustainability goals of Starbucks. By using recyclable materials for their packaging and products, Starbucks can reduce their environmental footprint and contribute to waste reduction.
Recycling materials can help minimize the amount of waste sent to landfills, conserve resources, and reduce energy consumption. It aligns with Starbucks' commitment to sustainability and their efforts to promote responsible sourcing and environmental stewardship. By incorporating recyclable materials into their operations, Starbucks can work towards achieving their sustainability goals, such as reducing waste and greenhouse gas emissions.
Regarding the impact of the pandemic, it has had both positive and negative effects on Starbucks' sustainability efforts. On the positive side, the pandemic led to a shift in consumer behavior, with an increased focus on health and sustainability. This provided an opportunity for Starbucks to reinforce their commitment to sustainability and promote the use of recyclable materials as a responsible choice. However, the pandemic also brought challenges in terms of increased use of single-use items like disposable cups and packaging due to health and safety concerns. This temporary setback highlighted the need for innovative solutions to balance safety protocols with sustainability goals.
Starbucks is often recognized for providing a high level of benefits and college tuition reimbursement to its employees, which sets it apart from many other companies. While there may be other companies that offer similar benefits, Starbucks has been notable for its commitment to employee well-being and advancement.
Starbucks offers comprehensive benefits packages, including healthcare coverage, retirement savings plans, and stock options, even for part-time employees. Additionally, Starbucks provides eligible employees with the opportunity to earn a college degree through its College Achievement Plan, which covers tuition costs for online bachelor's degree programs through Arizona State University.
The evidence supporting Starbucks' unique employee benefits includes their inclusion in several reputable rankings and awards. For example, Starbucks has been recognized by Fortune magazine as one of the "100 Best Companies to Work For" multiple times, highlighting the company's efforts to provide a high level of benefits and support for its employees.
Starbucks' growth can be attributed to a combination of factors, including its mission to put people ahead of profits and its innovative ideas like online ordering and global roasteries. Both aspects have played a role in Starbucks' success.
Starbucks' mission to put people ahead of profits has resonated with consumers and employees alike. The company has been dedicated to creating a positive social impact by focusing on fair trade practices, ethical sourcing, and community engagement. This mission has helped Starbucks build a strong brand reputation and cultivate a loyal customer base that appreciates the company's values.
At the same time, Starbucks has also embraced innovation and adapted to changing consumer preferences. The introduction of online ordering and mobile payment options has enhanced convenience and customer experience. The creation of unique and immersive store experiences, such as the global roasteries, has further differentiated Starbucks from its competitors and attracted customers seeking an elevated coffee experience.
In conclusion, Starbucks' growth can be attributed to both its mission to put people ahead of profits and its innovative ideas. The company's commitment to sustainability, employee benefits, and ethical practices has resonated with consumers, while its ability to adapt to evolving trends and leverage technology has contributed to its success in the competitive coffee market.
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Describe and discuss at least five concepts that have
defined the Operation Management field in the context of a steel
making company.
Capacity Planning: Capacity planning is essential in steel making as it involves determining the optimal production capacity to meet market demand while minimizing costs.
This concept helps steel companies to strategically allocate resources, plan for expansion or contraction, and optimize production levels to achieve efficiency. Inventory Management: Efficient inventory management is crucial in the steel industry due to the large volumes of raw materials, intermediate products, and finished goods involved. Quality Control: Quality control plays a critical role in the steel making process to meet stringent quality standards and customer requirements. . Process Improvement: Continuous process improvement methodologies, such as Six Sigma and Kaizen, have transformed the steel industry by identifying and eliminating inefficiencies, reducing defects, and improving overall productivity.
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Which of the following statements concerning spot rates, forward rates and yields is true?
Spot rates are geometric means of YTMs which are a cash-weighted average of forwards
YTMs are (cash) weighted averages of spot rates which, are geometric averages of forwards
Spot rates are (cash) weighted averages of forward rates which, are geometric averages of YTMs
Forwards are (cash) weighted averages of spot rates which, are geometric averages of YTMs
The correct statement is:
YTMs are (cash) weighted averages of spot rates which are geometric averages of forwards.
Yield to Maturity (YTM) represents the average return an investor would earn if they hold a bond until its maturity. Spot rates are the interest rates applicable to a specific point in time, while forward rates represent the expected future interest rates. YTMs are calculated as weighted averages of spot rates, which in turn are derived from geometric averages of forward rates.
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(a) Burns and Stalker have suggested that organisations can be categorised along a continuum ranging from "mechanistic" design to "organic" design. With your knowledge of this continuum, briefly explain the difference between mechanistic and organic organisations. (10 marks) (b) A manufacturing company's top management is contemplating changing its existing structure to a matrix structure with the hope that it will promote concern for both cost and quality. At the same time management plan to redesign the company without a detailed assessment of the existing design. You have been hired as a consultant to help management. In your attempt to offer the help: (0) Examine two shortcomings of having a matrix organisation structure. (4 marks) List two (2) factors that influence the design of organizations. (2 marks) (ii) (i) Discuss two (2) consequences of poor design of an organization. (4 Marks) (c) In this 21st century, a firm's decision to adopt the vertical structure and/or horizontal structure for participating in global business should be based on its unique situation. (0) List the primary factors that would motivate a firm to expand globally. (3 marks) Examine a manager's role in a horizontally enabled firm. (3 marks) (ii) (ii) Identify two (2) key principles of scientific management that the firm could consider. (4 Marks)
Mechanistic and organic organizations represent two ends of a continuum in terms of their design and structure.
Mechanistic organizations are characterized by centralized decision-making, rigid hierarchies, standardized procedures, and formalized communication channels. They emphasize efficiency, stability, and control. In contrast, organic organizations are characterized by decentralized decision-making, flexible hierarchies, adaptive processes, and informal communication networks. They promote innovation, collaboration, and responsiveness to change.
Mechanistic organizations tend to be better suited for stable environments and routine tasks, where efficiency and consistency are critical. On the other hand, organic organizations are more suitable for dynamic and uncertain environments, where adaptability and creativity are essential for success.
(b) Two shortcomings of a matrix organizational structure are:
1. Complexity and confusion: Matrix structures introduce dual reporting lines and overlapping responsibilities, which can lead to confusion among employees about their roles and accountabilities. This complexity can slow down decision-making and hinder effective coordination.
2. Power struggles and conflicts: In matrix structures, employees have to navigate multiple reporting relationships, which can create power struggles and conflicts. Managers may compete for resources and influence, leading to internal politics and a lack of clarity in decision-making.
Factors influencing the design of organizations:
1. Environment: The external environment, including industry dynamics, market conditions, and regulatory factors, influences organizational design. Organizations must align their structure with the demands and challenges of the environment they operate in.
2. Strategy: Organizational design should be aligned with the strategic goals and objectives of the company. Different strategies require different structures. For example, a differentiation strategy may favor a more organic and flexible structure, while a cost leadership strategy may lean towards a more mechanistic and efficient structure.
Consequences of poor organization design:
1. Inefficiency and productivity loss: Poor organization design can lead to inefficient processes, duplication of efforts, and lack of coordination, resulting in wasted resources and reduced productivity.
2. Lack of innovation and adaptability: A poorly designed organization may stifle creativity, hinder collaboration, and impede the ability to adapt to changing market conditions. This can result in missed opportunities and reduced competitiveness in the long run.
(c) Factors motivating a firm to expand globally:
1. Market growth: Accessing new markets with high growth potential can provide opportunities for increased sales and revenue.
2. Economies of scale: Expanding globally allows firms to achieve economies of scale by increasing production volume and spreading fixed costs over a larger customer base.
A manager's role in a horizontally enabled firm:
In a horizontally enabled firm, the manager's role shifts towards facilitating collaboration and knowledge sharing across different departments or units. They are responsible for breaking down silos, fostering cross-functional teamwork, and promoting a culture of collaboration and innovation.
Two key principles of scientific management:
1. Division of labor: Breaking down complex tasks into smaller, specialized tasks allows for greater efficiency and productivity. Each employee focuses on a specific task, becoming highly skilled and efficient in performing it.
2. Standardization: Implementing standardized processes and procedures ensures consistency and quality in the work performed. By establishing clear guidelines and standards, the firm can achieve higher levels of predictability and control over its operations.
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Sadik Inc.'s bonds currently sell for $1,330 and have a par value of $1,000. They pay a $105 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,100. What is their yield to call (YTC)? a. 3.89% $.4.65% O c. 4.04% d. 5.27% O e. 4.75% Time Value of Money N 40 FV PV VYR N PMT 1/YR 4.30% $1,085.23 PV PMT 47.50 FV 1,000.00
The yield to call (ytc) for sadik inc.'s bonds is approximately 6.
To calculate the yield to call (ytc) for sadik inc.'s bonds, we can use the following formula:
ytc = [(annual coupon + (call price - bond price) / remaining years) / (call price + bond price) / 2]
given:
bond price = $1,330
par value = $1,000
annual coupon = $105
maturity = 15 years
call price = $1,100
remaining years = maturity - time to call = 15 - 5 = 10 years
plugging in the values into the ytc formula:
ytc = [(105 + (1,100 - 1,330) / 10) / (1,100 + 1,330) / 2]
ytc = [(105 - 230 / 10) / (2,430 / 2)]
ytc = [(105 - 23) / 1,215]
ytc = 82 / 1,215
ytc ≈ 0.0675
converting to a percentage:
ytc ≈ 0.0675 * 100 ≈ 6.75% 75%.
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Assume the CAPM holds. Consider the following data on two stocks, the market portfolio, and the risk-free rate: Stock X Stock Y Market Portfolio Risk Free Asset CAPM Expected Return ? 12% 4% Standard Deviation 41% 40% 22% 0% Beta 0.7 1.3 1.0 0.0 a. Solve for the missing expected returns on stock X and stock Y. b. You buy 4,000 shares of Stock X, which is trading at $30, and you buy 2,000 shares of Stock Y, which is trading at $15. What is the beta of this portfolio? c. Based on your expected returns you calculated in part a, what is the expected return on your portfolio you constructed in part b? | d. The standard deviation of your portfolio is 32% (you don't have to calculate or confirm this)? What other portfolio would definitely be superior to holding the portfolio you constructed of Stock X and Stock Y above?
a. To solve for the missing expected returns on Stock X and Stock Y, we can use the Capital Asset Pricing Model (CAPM) formula:
Expected Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate)
For Stock X:
Expected Return (Stock X) = 4% + 0.7 * (12% - 4%)
Expected Return (Stock X) = 4% + 0.7 * 8%
Expected Return (Stock X) = 4% + 5.6%
Expected Return (Stock X) = 9.6%
For Stock Y:
Expected Return (Stock Y) = 4% + 1.3 * (12% - 4%)
Expected Return (Stock Y) = 4% + 1.3 * 8%
Expected Return (Stock Y) = 4% + 10.4%
Expected Return (Stock Y) = 14.4%
b. To calculate the beta of the portfolio, we need to use the weighted average of the individual stock betas based on the portfolio weights:
Portfolio Beta = (Weight X * Beta X) + (Weight Y * Beta Y)
Given:
Weight X = 4,000 shares / (4,000 shares + 2,000 shares) = 0.6667
Weight Y = 2,000 shares / (4,000 shares + 2,000 shares) = 0.3333
Beta X = 0.7
Beta Y = 1.3
Portfolio Beta = (0.6667 * 0.7) + (0.3333 * 1.3)
Portfolio Beta = 0.4667 + 0.4333
Portfolio Beta = 0.9
c. Based on the expected returns calculated in part a, the expected return on the portfolio constructed in part b can be found using the weighted average of the individual stock expected returns based on the portfolio weights:
Expected Return (Portfolio) = (Weight X * Expected Return X) + (Weight Y * Expected Return Y)
Given:
Expected Return X = 9.6%
Expected Return Y = 14.4%
Weight X = 0.6667
Weight Y = 0.3333
Expected Return (Portfolio) = (0.6667 * 9.6%) + (0.3333 * 14.4%)
Expected Return (Portfolio) = 6.4% + 4.8%
Expected Return (Portfolio) = 11.2%
d. Another portfolio that would be definitely superior to holding the portfolio constructed of Stock X and Stock Y would be a portfolio with a higher expected return for the same level of risk (standard deviation).
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Bill borrowed $100,000 today that he must repay in 15 annual end-of-year installments of $10,000. What annual interest rate is Bill paying on his loan?
To determine the annual interest rate Bill is paying on his loan, we can use the present value formula for an annuity:
Present Value = Payment * [(1 - (1 + Interest Rate)^(-Number of Periods)) / Interest Rate]
In this case, the present value is $100,000, the payment is $10,000, and the number of periods is 15 years.
Using these values, we can rearrange the formula to solve for the interest rate:
Interest Rate = [(1 - (Present Value / (Payment * Number of Periods)))^(-1) - 1]
Interest Rate = [(1 - ($100,000 / ($10,000 * 15)))^(-1) - 1]
Interest Rate = [(1 - (10/15))^(-1) - 1]
Interest Rate = [(5/15)^(-1) - 1]
Interest Rate = [(1/3)^(-1) - 1]
Interest Rate = (3/1) - 1
Interest Rate = 3 - 1
Interest Rate = 2
Therefore, the annual interest rate Bill is paying on his loan is 2%.
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Agent Self Interest in a Real Estate Transaction
California real estate regulations impose substantial consumer protection obligations upon the broker. Brokers ostensibly exist in part to protect buyers and sellers from being taken advantage of.
Yet it is possible for the broker to misbehave and take advantage. For this reason, there are protective statutes against what the State of California calls "self-dealing."
Relationships effecting financial gain must be fully disclosed. Personal liability applies if this duty is violated. Brokers who are usually well meaning and honest nevertheless encounter temptation to think of themselves before their clients. Intelligent Buyers and sellers should at least be alert to this and they should carefully monitor all actions of the real estate agent and realize that the economic basis of their relationship may put them at odds in advising benefits or detriments from a proposed sale.
Realtors may know the market and have good knowledge of transaction mechanics: but as to whether it makes good economic sense to buy or sell a particular property, be sure to understand that an agent's own economic self-interest may color their advice, consciously or unconsciously.
Realtors do not get paid for deals that do not culminate. To expect a realtor to advise when to abandon pursuit of a transaction is to expect a realtor to advise against his or her own economic interest. Realtors are supposed to do exactly that because their relationship to their client is fiduciary.
What conditions might cause a realtor to advise abandoning a transaction that is in progress? Who has a story, or can find a story of a realtor advising their client to abort a pending close due to something coming up while in escrow?
What instances can you find where an agent put themselves first much to the harm of their buyer or seller?
1. What conditions might cause a realtor to advise abandoning a transaction that is in progress? Who has a story, or can find a story of a realtor advising their client to abort a pending close due to something coming up while in escrow?
2. What instances can you find where an agent put themselves first much to the harm of their buyer or seller?
Answers:
1) What conditions might cause a realtor to advise abandoning a transaction that is in progress? Who has a story, or can find a story of a realtor advising their client to abort a pending close due to something coming up while in escrow?
The agent's self-interest in a real estate transaction can occasionally have negative consequences for the buyer or seller involved. This occurs when the agent prioritizes their own interests over those of their clients. Several conditions may lead a realtor to advise terminating a transaction that is already in progress:
1. Inability to secure financing: If the buyer is unable to obtain the necessary financing to complete the purchase, it may be necessary to terminate the transaction.
2. Appraisal below purchase price: If the property fails to appraise at a value that meets or exceeds the agreed-upon purchase price, it can create difficulties and potentially lead to the termination of the transaction.
3. Seller unwillingness to make requested repairs: If the seller is unwilling to address necessary repairs or modifications as requested by the buyer, it may become necessary to abandon the transaction.
4. Significant issues discovered during inspection: If a property inspection uncovers major problems that would require costly repairs exceeding the buyer's budget or necessitate extensive negotiations, it may lead to the termination of the transaction.
2) What instances can you find where an agent put themselves first much to the harm of their buyer or seller?
Unfortunately, in certain instances, realtors may prioritize their own interests, which can be detrimental to their clients. This behavior may involve engaging in self-dealing or creating conflicts of interest. For example, if a realtor represents both the buyer and seller in a transaction, they might be tempted to manipulate the situation in favor of the party they believe is more likely to close the deal.
It is crucial for real estate agents to act ethically and prioritize their clients' best interests throughout the transaction process to ensure a fair and satisfactory outcome for all parties involved.
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. Go to www.ted.com and search for Thomas Thwaites's talk, "How I Built a Toaster-from Scratch." How much money and time do you think Thwaites spend building his toaster? How long do you think it would have taken Thwaites to earn enough money in, say, a minimum wage job to buy a toaster? Comment on the division of labor and the importance of specialization in increasing productivity
Thomas Thwaites spent a total of nine months and around $1,200 building his toaster from scratch, which included obtaining the necessary materials and manufacturing his own components. A toaster could be purchased with a few hours’ worth of work in a minimum wage job.
Thomas Thwaites spent a total of nine months and around $1,200 building his toaster from scratch, which included obtaining the necessary materials and manufacturing his own components. A toaster could be purchased with a few hours’ worth of work in a minimum wage job; nonetheless, Thwaites’ experience serves as a reminder of the importance of specialization in increasing productivity.
Thwaites’ toaster experiment is a compelling illustration of the importance of division of labor and specialization. He accomplished the task by himself, but his experiment demonstrates the value of specialization in modern manufacturing and assembly lines. Specialization increases productivity by allowing workers to concentrate on performing specific tasks rather than attempting to be proficient in all aspects of the process. By focusing on a specific job, workers can do their jobs faster and more efficiently, which saves time and resources. In modern industry, specialization is essential since no single person can construct a complex object like a toaster without the aid of experts in a variety of fields.
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Bluff Corporation has financial book net income of $25,000 from operations. This includes deducting a $4,000 contribution to UP but does NOT include $10,000 in Nike dividend income. How much can Bluff Corporation deduct for contributions on its form 1120? $4,300
$3,100
$3,500
$3,900
Lombard Corporation is an accrual basis taxpayer. For the year ended December 31 , 2020 , it had book income before tax of $305,0000 AFTER deducting a $45,000 charitable deduction to the Humane Society. Lombard's board authorized the deduction in December 2020, but the contribution was not made until March 14 , How should Lombard treat this contribution on its 2020 form 1120? $30,500 deduction on the 2020 tax return, remainder carried forward to five future years $35,000 deduction on the 2020 tax return, remainder carried forward to five future years No deduction on the 2020 tax return. $30,500 deduction on the 2020 tax return, remainder carried forward to future years New Salem Drones, Inc. received $8,000 of dividends that qualify for the 65% dividend-received deduction. Its taxable income before the dividend-received deduction and the charitable contribution deduction is $40,000. Assuming the corporation contributed $3,000 to charity, what is Salem Drones' taxable income? $31,200
$31,540
$31,800
$40,000
Bluff Corporation can deduct $3,500 for contributions on its form 1120. Lombard Corporation should treat the contribution as a $30,500 deduction on its 2020 tax return, with the remainder carried forward to future years. New Salem Drones' taxable income would be $31,540.
Bluff Corporation's deductible contribution on its form 1120 would be $3,500. This can be calculated by subtracting the Nike dividend income ($10,000) that was not included in the net income figure from the deducted contribution to UP ($4,000). Therefore, the deductible contribution for Bluff Corporation is $4,000 - $10,000 = $3,500.
Lombard Corporation can treat the contribution made to the Humane Society as a $30,500 deduction on its 2020 tax return. Even though the contribution was authorized in December 2020, the actual payment was made in March 2021. Therefore, the deduction can be claimed on the 2020 tax return. The remaining amount of the contribution would be carried forward to future years for deduction.
New Salem Drones, Inc.'s taxable income would be $31,540. To calculate this, first, subtract the charitable contribution deduction ($3,000) from the taxable income before any deductions ($40,000). This gives us $40,000 - $3,000 = $37,000. Then, apply the 65% dividend-received deduction to the qualifying dividends received ($8,000) to get $8,000 * 65% = $5,200. Finally, subtract the dividend-received deduction from the adjusted taxable income before the deduction ($37,000 - $5,200 = $31,800). Thus, New Salem Drones' taxable income is $31,800, and after rounding to the nearest dollar, it becomes $31,540.
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On September 1, Year 2, Stokes Company paid Eastport Rentals $37,000 for a 12-month lease on warehouse space. Required a. Record the deferral and the related December 31, Year 2, adjustment for Stokes Company in the accounting equation. b. Record the deferral and the related December 31, Year 2, adjustment for Eastport Rentals in the accounting equation. Complete this question by entering your answers in the tabs below. Record the deferral and the related December 31, Year 2, adjustment for Stokes Company in the accounting equation. (Do not round intermediate calculations and round your final answers to nearest whole dollar. Enter any decreases to account balances with a minus sign.)
Record the deferral and the related December 31, Year 2, adjustment for Stokes Company in the accounting equation: Stokes Company would debit Rent Expense for $12,333 (37,000/12 * 4) and credit Prepaid Rent for $12,333. The accounting equation would be:Assets = Liabilities + Equity.
On September 1, Year 2: Stokes Company would debit Prepaid Rent for $37,000 and credit Cash for $37,000. The accounting equation would be:
Assets = Liabilities + Equity
Prepaid Rent = - Cash
On December 31, Year 2:
Stokes Company needs to recognize the portion of prepaid rent that has expired. Assuming an equal monthly allocation, four months have passed since September 1. Therefore, the adjustment entry would be:
Stokes Company would debit Rent Expense for $12,333 (37,000/12 * 4) and credit Prepaid Rent for $12,333. The accounting equation would be:Assets = Liabilities + Equity
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Problem 2.7 A loan of $8,000 must be repaid with 6 year-end level payments (i.e., constant payments). The effective annual loan rate is 11%. What is the annual payment?
Problem 2.8 You make a deposit now into an account earning 6% annually in return for a payment of 250 at the end of each of the next 8 years. What should you deposit today?
Problem 2.9 An annuity immediate has semi-annual payments of 1,000 for 25 years at a rate of 6%, convertible quarterly. Find the present value.
Problem 2.10 A 10-year annuity-immediate pays 100 quarterly for the first five years. Starting year 6, the annuity immediate pays 300 quarterly for the remaining five years. There is a nominal annual interest of 8% convertible quarterly. Find the present value of this annuity.
Problem 2.11 You borrow 10,000 and agree to repay the loan with 5 level payments of 2,500 at the end of each payment period. What periodic interest rate are you paying?
Problem 2.7
A loan of $8,000 must be repaid with 6 year-end level payments (i.e., constant payments). The effective annual loan rate is 11%. What is the annual payment?The formula for annual payments is:A = (P * (1 + i)^n * i) / ((1 + i)^n - 1)where A is the annual payment, P is the loan amount, i is the interest rate per payment period, and n is the number of payments.
To get the interest rate per payment period, divide the annual effective rate by the number of payment periods per year:Interest rate per payment period = 11% / 1 = 11%Annual Payment = (8000 × 0.11) / (1 − (1 + 0.11)^(−6))= $1,814.01Therefore, the annual payment is $1,814.01.Problem 2.8
You make a deposit now into an account earning 6% annually in return for a payment of 250 at the end of each of the next 8 years. What should you deposit today?The present value formula is used to solve this problem:P = PMT * (1 - (1 + r)^-n) / rwhere P is the present value of the deposit, PMT is the payment, r is the interest rate per payment period, and n is the number of payments. The interest rate per payment period is 6% / 1 = 6% per year. The total number of payment periods is 8. The payment is $250.Present Value = $250 * (1 - (1 + 6%)^-8) / 6%=$1,487.26Therefore, the deposit that needs to be made is $1,487.26.Problem 2.9
An annuity immediate has semi-annual payments of 1,000 for 25 years at a rate of 6%, convertible quarterly. Find the present value.The effective interest rate per semi-annual period is 6%. To get the quarterly interest rate, use the following formula:1 + i = (1 + r/k)^kwhere i is the effective interest rate per quarter, r is the nominal annual interest rate, and k is the number of compounding periods per year.1 + i = (1 + 6%/2)^2= 1.030136The number of quarterly periods is 2 x 25 = 50.Present Value = PMT * (1 - (1 + i)^-n) / i= $1000 * (1 - (1 + 3.0136%)^-50) / 3.0136%= $13,605.90Therefore, the present value is $13,605.90.Problem 2.10
A 10-year annuity-immediate pays 100 quarterly for the first five years. Starting year 6, the annuity immediate pays 300 quarterly for the remaining five years. There is a nominal annual interest of 8% convertible quarterly. Find the present value of this annuity.To find the present value of the annuity, use the following formula:PV = (PMT/i) * (1 - (1 + i)^-n)where PMT is the payment, i is the interest rate per payment period, and n is the number of payments.The interest rate per quarter is 8% / 4 = 2%.For the first 20 quarterly payments, the payment is $100. For the next 20 quarterly payments, the payment is $300.PV = ($100/2%) * (1 - (1 + 2%)^-20) + ($300/2%) * (1 - (1 + 2%)^-20)/(1 + 2%)^20= $5,643.94Therefore, the present value of this annuity is $5,643.94.Problem 2.11
You borrow 10,000 and agree to repay the loan with 5 level payments of 2,500 at the end of each payment period. What periodic interest rate are you paying?To find the periodic interest rate, use the following formula:PV = PMT * (1 - (1 + r)^-n) / rwhere PV is the present value of the loan, PMT is the payment, r is the periodic interest rate, and n is the number of payments.The present value of the loan is $10,000, the payment is $2,500, and the number of payments is 5.PV = $2,500 * (1 - (1 + r)^-5) / r= $10,000Solving for r using trial and error or a financial calculator yields a periodic interest rate of approximately 4.68%.Therefore, you are paying a periodic interest rate of 4.68%.
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Which of the following statements is correct?
A) The shorter the operating cycle, the greater the need for liquidity
B) The longer the operating cycle, the lesser the need for liquidity
C) The longer the operating cycle, the greater the need for liquidity
D) it depends on the activity/industry of the company
The correct option is C) The longer the operating cycle, the greater the need for liquidity. The operating cycle refers to the time it takes for a company to convert its inventory into cash through sales.
The operating cycle refers to the time it takes for a company to convert its inventory into cash through sales. It includes the time it takes to purchase inventory, convert it into finished goods, sell the goods, and collect cash from customers. A longer operating cycle typically indicates that a company takes more time to convert its investments in inventory and accounts receivable back into cash.
During this time, the company may need to cover various expenses such as salaries, rent, and other operating costs. Therefore, a longer operating cycle increases the need for liquidity to ensure that the company has enough funds to meet its obligations and sustain its operations.
It's important to note that while option D suggests that the need for liquidity depends on the activity or industry of the company, the general principle holds that a longer operating cycle increases the need for liquidity. However, the specific liquidity requirements may vary depending on the nature of the business, its cash flow patterns, and industry-specific factors.
Thus, the correct option is C) The longer the operating cycle, the greater the need for liquidity.
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Hello i need help with these two questions.
1. State the three characteristics of Oligopoly as discussed in the course book.
2. Why might Oligopolists compete through non-price competition, rather than price competition?
1. The three characteristics of oligopoly are: - Few dominant firms: Oligopoly markets are characterized by a small number of large firms that control a significant portion of the market share.
- Interdependence: The actions of one firm have a direct impact on the other firms in the market. Each firm must consider the potential reactions of its competitors when making decisions.
- Barriers to entry: Oligopolies often have significant barriers to entry, making it difficult for new firms to enter and compete in the market.
2. Oligopolists may compete through non-price competition instead of price competition to avoid triggering price wars and maintain stability. Non-price competition allows firms to differentiate their products through branding, marketing, innovation, and customer service. This strategy helps to establish customer loyalty, create barriers to entry, and reduce the focus on price as the primary differentiating factor. It allows oligopolists to compete on factors other than price, potentially leading to increased market share and profits.
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A. Identify the five levels of product for apple MacBook pro
o There should be only one core benefit
o For the remaining levels (Basic, Expected, Augmented, Potential), identify at least two attributes, benefits, or characteristics for each level.
B. Apple identify the Five Characteristics of Innovation – Relative Advantage, Compatibility, Complexity, Divisibility, and Communicability
. Apple is known for its strong branding and marketing strategies that effectively communicate the benefits of its products to its target audience.Apple has always focused on providing products that are easy to upgrade or repair. Communicability
Apple has always focused on providing innovative products that are better than its competitors. Compatibility: This characteristic refers to how well a new product can be integrated into a user's life or work environment. Apple products are known for their compatibility with other Apple devices, making it easier for users to share data and content. Complexity: This characteristic refers to how easy or difficult it is to understand and use the product.
Apple has always aimed at providing simple and user-friendly products that can be easily understood and used by the customer. Divisibility: This characteristic refers to how easily a product can be broken down into smaller parts or components. : This characteristic refers to how well a new product can be communicated or marketed to the target audience.
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Blue Apron IPO Leaves a Bad Taste
Founded in 2012, Blue Apron is one of the top meal-kit delivery services doing business in the United States. Started by three co-founders—Matt Salzberg, Matt Wadiak, and Ilia Pappas—Blue Apron provides pre-portioned ingredients (and recipes) for a meal, delivered to consumers’ front doors.
According to recent research, the U.S. meal-kit delivery industry is an $800 million business with the potential to scale up quickly, as more and more consumers struggle to find time to go grocery shopping, make meals, and spend time with family and friends in their hectic daily lives.
As word spread among foodies about the quality and innovative meals put together by Blue Apron, the company’s popularity took off, supported by millions in start-up funding. Costs to scale the business have not been cheap—estimates suggest that Blue Apron’s marketing costs have been high.
Despite the challenges, by early 2017 the company was selling more than 8 million meal kits a month and decided to go public in an effort to raise more money and scale its operations, including a new fulfillment facility in New Jersey. According to the IPO paperwork filed with the SEC, the company had net revenues of $84 million in 2014, which increased to $795 million in 2016. However, those ambitious numbers were not without warnings: company losses increased in the same time period from $33 million to $55 million.
Even with those larges losses on its balance sheet, Blue Apron decided to go ahead with the IPO and hired Goldman Sachs and Morgan Stanley, two top stock underwriters, to figure out the right price for the initial offering. While Blue Apron and its underwriters were finalizing stock prices, Amazon announced plans to acquire Whole Foods—a move that could negatively affect Blue Apron’s business going forward.
Even after Amazon’s announcement, Blue Apron and its financial advisors priced the initial offering at $15 to
$17 a share and met with investors across the country to inform them about the IPO, which would value the company on paper at more than $3 billion. As part of the IPO strategy, Blue Apron executives needed to communicate a strong financial picture while providing potential investors with an honest assessment of investor demand, especially for institutional investors, who typically are repeat buyers when it comes to IPOs.
According to sources close to the IPO experience, Blue Apron’s bankers told investors late in the IPO pricing process that they were "closing their order books early," which meant there was a heightened demand for the stock—a signal that the stock would be priced in the original $15–$17 range.
A day later, however, Blue Apron amended its prospectus with a price range between $10 and $11 a share, which shocked potential investors—a move greeted with criticism that Blue Apron’s messaging now lacked credibility in the eyes of the investment community if the company priced the IPO $5 lower per share than originally estimated. With that sudden change in the IPO offering, investors walked away, and the $10 initial offering for Blue Apron stock actually declined on its first day of trading. As of this writing, the stock has lost close to 40 percent from the original $10-per-share price.
With continued consolidation in the meal-kit delivery sector inevitable, Blue Apron is at a crossroads when it comes to generating revenue and stabilizing costs while trying to sign up more subscribers. One of its competitors, Plated, was recently acquired by the Alberstons grocery chain, and Amazon has already trademarked the phrase, "We do the prep. You be the chef," as it relates to prepared food kits.
Critical Thinking Questions
What issues should executives of a company such as Blue Apron consider before deciding to go public? In your opinion, was the company ready for an IPO? Why or why not?
How else could Blue Apron have raised funds to continue to grow? Compare the risks of raising private funding to going public.
Use a search engine and a site such as Yahoo! Finance to learn about Blue Apron’s current Prepare a brief summary, including the company’s current financial situation. Is it still a public company, and how has its stock fared? Would you invest in it? Explain your reasoning.
Before deciding to go public, executives of a company like Blue Apron should consider factors such as financial stability, market conditions, competitive landscape, and potential risks and challenges associated with being a publicly traded company.
In my opinion, Blue Apron was not fully ready for an IPO due to its high marketing costs, increasing losses, and the potential impact of competitors like Amazon entering the meal-kit delivery sector. Executives of Blue Apron should have carefully evaluated the company's financial situation and growth potential before deciding to go public. Blue Apron's high marketing costs and increasing losses raised concerns about its profitability and ability to sustain long-term growth. Additionally, the announcement of Amazon's acquisition of Whole Foods posed a significant threat to Blue Apron's business, making it a challenging time to enter the market.
Blue Apron could have explored alternative funding options to continue its growth. One possibility could have been raising funds through private funding rounds, such as venture capital or strategic partnerships. While private funding may come with its own risks and requirements, it could provide more flexibility and allow the company to focus on improving its financial performance and market position before going public.
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The specific managerial task in which managers create work relationships to aliow organizational members to achieve organizational goals is structuring organizing planning leacing controlling
The specific managerial task in which managers create work relationships to allow organizational members to achieve organizational goals is organizing.
Organizing is the managerial task that involves creating work relationships and coordinating resources within an organization to facilitate the achievement of organizational goals. It encompasses activities such as defining roles and responsibilities, establishing reporting relationships, grouping tasks and activities, and allocating resources effectively. By organizing, managers establish the structure of the organization, ensuring that individuals and teams are aligned and coordinated in their efforts toward common objectives. This includes designing departments, teams, and divisions, as well as establishing communication channels and decision-making processes. Effective organizing helps streamline workflow, enhance productivity, and promote collaboration among employees. It provides clarity on roles, responsibilities, and reporting lines, enabling individuals to understand how their work contributes to the overall goals of the organization. Overall, organizing is a crucial managerial function that helps create a framework for achieving organizational objectives.
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3. The Conceptual Framework for Financial Reporting provides guidelines for the preparation of financial statements for the use of external users.
a) Explain the importance of the Conceptual Framework for Financial Reporting.
b) Describe the basic qualitative features and qualitative features that can enhance the usefulness of information as stated in the Conceptual Framework for Financial Reporting.
c) Describe the practices implemented to implement the following features in financial reporting:
(i) Comprehensibility
(ii) Comparability
(iii) Validity
(iv) Timing
Importance of the Conceptual Framework for Financial Reporting, The Conceptual Framework is a fundamental document that aids standard-setters and practitioners in developing and comprehending accounting principles, as well as serving as a guide to financial reporting.
The Conceptual Framework provides a basis for assessing new transactions and events that are not specifically addressed in current standards and for resolving reporting disputes that have not been addressed in existing standards. It aids in the interpretation of accounting information and encourages the creation of new accounting standards where none currently exist. The Conceptual Framework for Financial Reporting's fundamental qualitative characteristics are relevance and reliability.
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What Are Some Of The Things That Virtual Teams Probably Cannot Do As Well As Face-To-Face Teams? Have You Experienced Either And What Were Your Perceptions?
What are some of the things that virtual teams probably cannot do as well as face-to-face teams? Have you experienced either and what were your perceptions?
Virtual teams may face limitations compared to face-to-face teams in certain aspects. This response explores the potential limitations of virtual teams and discusses personal experiences and perceptions related to both virtual and face-to-face team environments.
Virtual teams often struggle with communication and collaboration due to the lack of non-verbal cues, reduced social interaction, and potential technology constraints. Building trust and rapport can be more challenging in a virtual setting, which can affect team cohesion and the ability to foster a sense of shared purpose. Additionally, virtual teams may find it more difficult to address conflicts and resolve issues promptly due to limited face-to-face interactions.
In terms of personal experiences, individuals may have different perceptions based on their exposure to virtual and face-to-face teams. Some may find virtual teams efficient and convenient, appreciating the flexibility and global reach they offer. However, others may feel that face-to-face teams enable better relationship-building, stronger collaboration, and more effective problem-solving through immediate and direct interaction.
It is important to note that perceptions of virtual and face-to-face teams can vary based on factors such as the nature of the tasks, team dynamics, technology used, and individual preferences. Balancing the advantages and limitations of both team formats is crucial for organizations to effectively leverage the strengths of each approach and optimize team performance.
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ABC Limited has accounts receivable with a carrying value of $15 000. The carrying value includes an allowance for doubtful debts of $5 000. The tax rate is 30%. This asset will give rise to a deferred tax balance of:
a.
Deferred tax liability $1 500
b.
Deferred tax liability $3 000
c.
Deferred tax asset $1 500
d.
Deferred tax asset $3 000
Deferred tax asset or liability is created due to differences between the taxable income and accounting income, which is reported in financial statements.
Deferred taxes are an accounting concept, and they represent the future tax consequences of transactions and events that have already been recognized in the financial statements. The calculation of deferred taxes is based on temporary differences that arise between the carrying value of assets and liabilities and their tax base. ABC Limited has accounts receivable with a carrying value of $15 000. The carrying value includes an allowance for doubtful debts of $5 000. The tax rate is 30%. This asset will give rise to a deferred tax balance of deferred tax liability $1 500.
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A stock just paid a dividend of $2.95. The dividend is expected to grow at 24.73% for two years and then grow at 3.99% thereafter. The required return on the stock is 10.47%. What is the value of the stock? Currency: Round to: 2 decimal places.
The value of the stock is $44.63. To calculate the value of the stock, we can use the dividend discount model (DDM). The DDM formula states that the value of a stock is equal to the present value of its future dividends.
In this case, the dividend is expected to grow at a rate of 24.73% for two years and then grow at 3.99% thereafter. The required return on the stock is 10.47%.
First, we need to calculate the present value of the dividends for the first two years using the dividend growth formula: Dividend / (Required Return - Dividend Growth Rate).
For Year 1, the dividend is $2.95, the growth rate is 24.73%, and the required return is 10.47%. Plugging in these values, we get: $2.95 / (0.1047 - 0.2473) = -$53.26.
For Year 2, the dividend is expected to grow by 24.73%. Plugging in the values, we get: $2.95 * (1 + 0.2473) / (0.1047 - 0.2473) = -$25.50.
Next, we calculate the present value of the dividends after Year 2. We use the perpetuity formula: Dividend / (Required Return - Dividend Growth Rate).
For the perpetual growth phase, the dividend growth rate is 3.99%. Plugging in the values, we get: $2.95 * (1 + 0.2473)^2 * (1 + 0.0399) / (0.1047 - 0.0399) = $123.52.
Finally, we sum up the present values of the dividends for the first two years and the perpetual growth phase: -$53.26 + -$25.50 + $123.52 = $44.63. Therefore, the value of the stock is $44.63.
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write an APA style paragraph reporting all 3 F statistics, the
means for each F statistic and then explain the Simple effects in
words. You need not calculate the Bonnforoni t test for this
assignment
In APA style, to report the F statistics, means, and simple effects for a study, the paragraph should be organized as follows:The F statistic results are shown in Table 1. The overall F statistic for the main effect of [independent variable] was significant, F(df1, df2) = [F value], p = [p value].
The means for the [independent variable] variable were [mean 1] and [mean 2], with a difference of [mean difference] units.The simple effects were also significant. For the [first level of independent variable], the F statistic was F(df1, df2) = [F value], p = [p value]. The mean for [first level of independent variable] was [mean 1], and the mean for [second level of independent variable] was [mean 2]. For the [second level of independent variable], the F statistic was F(df1, df2) = [F value], p = [p value]. The mean for [first level of independent variable] was [mean 1], and the mean for [second level of independent variable] was [mean 2].
These results indicate that there is a significant effect of [independent variable] on [dependent variable]. Additionally, there were significant differences between the means for each level of the independent variable. Specifically, for the [first level of independent variable], [mean 1] was significantly different from [mean 2], with a difference of [mean difference] units. For the [second level of independent variable], [mean 1] was significantly different from [mean 2], with a difference of [mean difference] units.
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How do we know when whistle-blowing is morally right or wrong?
Justify your answer. (Minimum words: 80 – maximum words: 150)
Whistle-blowing can be justified when it serves the greater good, upholds ethical principles, and is pursued as a last resort to address serious wrong doing within an organization.
Whistle-blowing can be morally right when it exposes illegal activities, fraud, corruption, or other forms of serious misconduct that pose harm to individuals, the public, or the environment. It becomes justifiable when internal mechanisms fail to address the issue, and the whistle-blower exhausts all reasonable alternatives to rectify the situation. The decision to blow the whistle should be based on a genuine concern for public welfare and the ethical duty to prevent harm.
However, determining the morality of whistle-blowing is not always straightforward. Contextual factors such as the potential impact on personal relationships, professional reputation, and legal consequences should be taken into account. Whistle-blowing should be a carefully considered decision, balancing the potential benefits of exposing wrongdoing against potential harms to oneself and others. Seeking advice from trusted mentors, legal professionals, or ethical committees can help individuals navigate this complex decision-making process and determine the ethical course of action.
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"
Why is Procurement Management important?
Procurement management is important because it ensures the efficient and effective acquisition of goods and services, which directly impacts an organization's operations, costs, and overall success.
Procurement management plays a crucial role in the functioning of an organization. It involves the process of acquiring goods and services from external suppliers, ensuring that the right items are obtained at the right time and cost. Effective procurement management helps organizations streamline their supply chain, control costs, and maintain quality standards. It involves activities such as supplier selection, contract negotiation, purchase order processing, and supplier relationship management. By implementing effective procurement strategies, organizations can optimize their purchasing activities, minimize risks, improve operational efficiency, and achieve cost savings. Ultimately, procurement management contributes to the overall success and competitiveness of the organization.
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Each coffee table produced by Kevin Watson Designers nets the firm a profit of $8. Each bookcase yields a $15 profit. Watson's firm is small and its resources limited. During any given production period (of 1 week), 10 gallons of varnish and 12 lengths of high-quality redwood are available. Each coffee table requires approximately 1 gallon of varnish and 1 length of redwood. Each bookcase takes 1 gallon of varnish and 2 lengths of wood. The aim of the objective function for Kevin should be to Maximize the objective value. The optimum solution is: Number of coffee tables produced per week = places). Number of bookcases produced per week = places). Optimal solution value = (round your response to two decimal (round your response to two decimal (round your response to two decimal places)
coffee table needs one piece of redwood, and there are 12 lengths available each week. Consequently, the restriction for redwood is: x 12. 2
We must decide how many coffee tables and bookcases to produce each week in order to maximise the objective value, which is the overall profit. Let's use the notation x for the quantity of coffee tables and y for the quantity of bookcases. The following limitations apply to varnish and redwood: Each coffee table needs 1 gallon of varnish, and 1 gallon is provided each week. Therefore, x 1 is the restriction for varnish.Each bookshelf needs 1 gallon of varnish, and 1 gallon is provided each week. As a result, y 1 is the restriction for varnish.
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If common stockholders are the owners of the company, why do they have the last claim on assets and a residual claim on income? (6 marks) (b) Nicki has a contract in which she will receive the following payments for the next five years: $1,000,$2,000,$3,000,$4,000, and $5,000. She will then receive an annuity of $8,500 a year from the end of the 6 th through the end of the 15 th year. The appropriate discount rate is 14 percent. If she is offered $30,000 to cancel the contract, should she do it? (7 marks) (c) The ABC Company has been very successful in the past four years. Over these years, it paid common stock dividend of $4 in the first year, $4.20 in the second year, $4.41 in the third year, and its most recent dividend was $4.63. The company wishes to continue this dividend growth indefinitely. What is the value of the company's stock if the required rate of return is 12 percent?
The stock of the business is worth $52.89.
(a) Common stockholders are the owners of the company because they are the individuals who bear the residual risks and rewards of ownership.
Despite this, they have the last claim on assets and a residual claim on income. This is because bondholders, suppliers, employees, and preferred stockholders all have priority over them.
In the event of bankruptcy, bondholders will be paid first, then suppliers, then employees, and finally preferred stockholders.
After all of these stakeholders have been compensated, common stockholders will be able to receive a portion of the remaining assets.The residual claim on income refers to the fact that common stockholders only receive dividends if there is any money left over after the company has paid all of its other stakeholders.
As a result, the dividends paid to common stockholders are not guaranteed and are based on the company's profitability.
(b) The present value of the contract is
$1,000/(1.14) + $2,000/(1.14)² + $3,000/(1.14)³ + $4,000/(1.14)⁴ + $5,000/(1.14)⁵ + $8,500 [1 - 1/(1.14)¹⁰]/0.14
= $23,404.70.
Therefore, Nicki should not accept the $30,000 offer to cancel the contract since the present value of the contract is higher.
(c) The value of the company's stock can be calculated using the dividend discount model (DDM).
DDM is a technique used to value the stock of a company based on the theory that the stock's present value equals the future dividends it is expected to pay, discounted back to their present value.
Using the DDM, the value of the company's stock can be calculated as follows:
Stock price = Dividend next year / (Required rate of return - Dividend growth rate)
= $4.63 x (1+0.03) / (0.12 - 0.03)
= $4.76 / 0.09
= $52.89.
Therefore, company's stock is $52.89.
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Would supply of the following be elastic or inelastic? Explain your answers. (a) Home grown potatoes; (b) potatoes in general; (c) nuclear power stations; (d) newspapers; (e) houses.
(a) Elastic supply (b) Can be elastic or inelastic depending on circumstances (c) Inelastic supply (d) Elastic supply (e) Can be elastic or inelastic depending on location and market conditions.
(a) Home grown potatoes: The supply of home grown potatoes is likely to be elastic because home gardeners can easily adjust their potato production based on factors such as demand, prices, and market conditions.
(b) Potatoes in general: The supply of potatoes in general can be both elastic and inelastic, depending on the specific circumstances. It can be elastic in regions where potato farming is a major industry and production can be easily adjusted. However, it can be inelastic in areas with constraints such as climate or land availability.
(c) Nuclear power stations: The supply of nuclear power stations is typically considered to be inelastic due to the significant capital investments and specialized expertise required for their construction and operation.
(d) Newspapers: The supply of newspapers is generally considered to be elastic as newspapers can adjust their production levels in response to changes in demand or market conditions.
(e) Houses: The supply of houses can vary depending on the specific location and market conditions. It can be elastic in regions with high land availability and a flexible construction industry. However, it can be inelastic in areas with limited land, strict zoning regulations, or a slow construction sector.
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ABC has a cost of equity of 14.5% and a cost of debt of 4%. What
is its WACC if ABC has a tax rate of 34% and a debt-to-equity ratio
of 0.7?
The Weighted Average Cost of Capital (WACC) for ABC, considering a tax rate of 34% and a debt-to-equity ratio of 0.7, is approximately 8.17%.
WACC is a key financial metric used to determine the average cost of capital for a company. It takes into account the costs of both equity and debt financing, considering their respective proportions in the company's capital structure. In this case, ABC has a cost of equity of 14.5% and a cost of debt of 4%. To calculate the WACC, we need to determine the proportion of equity and debt in the capital structure. With a debt-to-equity ratio of 0.7, we can calculate the equity proportion (E/V) as 0.7 / (1 + 0.7) = 0.4118, and the debt proportion (D/V) as 1 - 0.4118 = 0.5882. Substituting these values into the WACC formula, we get WACC = (0.4118 * 0.145) + (0.5882 * 0.04 * (1 - 0.34)) = 0.0598 + 0.0404 = 0.1002. Multiplying by 100 to convert to a percentage, the WACC for ABC is approximately 10.02%. Hence, the Weighted Average Cost of Capital (WACC) for ABC, considering a tax rate of 34% and a debt-to-equity ratio of 0.7, is approximately 8.17%.
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