If the price of tomatoes increases, then the demand for tomatoes will fall.
Statement 1 is false.
Statement 2 is true.
Statement 1: If we observe an increase in the equilibrium price of coffee, and a decrease in its quantity, then this implies that demand has decreased since people are drinking less coffee.
False. An increase in the equilibrium price of coffee and a decrease in its quantity does not necessarily mean that demand has decreased.
It could also mean that there has been a decrease in the supply of coffee, causing the price to increase and the quantity to decrease.
Statement 2: If the price of tomatoes increases, then the demand for tomatoes will fall.
True. In general, when the price of a good like tomatoes increases, the demand for that good tends to decrease.
This is because consumers are likely to seek alternatives or reduce their consumption of tomatoes when the price becomes higher.
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Which of the following refers to all the factors that influence the amount of goods and services that are shipped across international borders?
tariffs
trade barriers
transportation costs
institutional failures and events such as wars and natural disasters
All the factors that influence the amount of goods and services the correct answer is: institutional failures and events such as wars and natural disasters.
While tariffs and trade barriers can certainly impact international trade, they are specific policies and measures implemented by governments to restrict or regulate trade. Transportation costs, on the other hand, refer to the expenses incurred in transporting goods across borders. However, the factors that influence the overall amount of goods and services shipped across international borders encompass a broader range of elements, including institutional failures (such as political instability or corruption) and external events like wars and natural disasters. These factors can significantly disrupt trade flows and have a substantial impact on international trade volumes.
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Describe when Material Requirements Planning (MRP) or Enterprise Resources Planning (ERP) should be utilized in a production/assembly business. Be sure to consider both business size and the speed of production/assembly in your analysis.
Material Requirements Planning (MRP) and Enterprise Resource Planning (ERP) systems are valuable tools for managing and optimizing production/assembly processes in business .
The decision to utilize MRP or ERP depends on the size of the business and the speed of production/assembly.
MRP is typically suitable for small to medium-sized businesses with relatively simple production/assembly processes. It is ideal when the production/assembly speed is moderate and the business primarily focuses on managing material requirements and inventory levels. MRP helps in planning and controlling the flow of materials, ensuring that the right materials are available at the right time to meet production/assembly demands. It tracks inventory levels, generates purchase orders, and schedules production orders based on demand forecasts or customer orders.
On the other hand, ERP systems are more comprehensive and suitable for businesses of all sizes, including large enterprises. ERP integrates various business functions such as finance, human resources, sales, and manufacturing into a centralized system. It is beneficial when the business has complex production/assembly processes and requires seamless coordination and information sharing across different departments. ERP provides real-time visibility into all aspects of the business, enabling efficient planning, inventory management, order tracking, and resource allocation. It also supports financial management, customer relationship management, and other critical business functions.
In summary, MRP is suitable for small to medium-sized businesses with moderate production/assembly speed and a focus on material requirements management. ERP is recommended for businesses of all sizes, particularly those with complex production/assembly processes and a need for integrated management across multiple departments. The choice between MRP and ERP depends on the specific requirements and complexity of the business operations.
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"Most businesses provide products or services that are helpful to
people, such as cell phone companies, supermarkets, or automobile
producing companies. How do you think social business enterprises
are"
Social business enterprises have the potential to make a significant impact on society by providing products and services that are not only helpful but also address pressing social and environmental challenges. By combining entrepreneurial spirit with a commitment to social good, these enterprises contribute to a more sustainable and inclusive world.
Social business enterprises play a crucial role in addressing societal challenges while simultaneously pursuing economic objectives. These enterprises are distinct from traditional businesses as their primary goal is to create positive social or environmental impact, rather than maximizing profits for shareholders. By focusing on solving social problems, social businesses provide products or services that directly benefit people and communities.
Unlike conventional businesses, social enterprises often prioritize inclusivity, sustainability, and ethical practices. They may employ marginalized individuals, source materials responsibly, or prioritize fair trade principles. By doing so, they contribute to the well-being of employees, customers, and the environment.
Moreover, social business enterprises often tackle pressing issues that are overlooked or underserved by traditional markets. They may provide affordable healthcare services, renewable energy solutions, or educational resources in underserved communities. In this way, they address unmet needs and contribute to the overall welfare of society.
Furthermore, social enterprises can inspire and drive positive change by promoting innovative business models and practices. They serve as examples of how businesses can align profit generation with social and environmental responsibility, encouraging other companies to adopt similar approaches.
In summary, social business enterprises have the potential to make a significant impact on society by providing products and services that are not only helpful but also address pressing social and environmental challenges. By combining entrepreneurial spirit with a commitment to social good, these enterprises contribute to a more sustainable and inclusive world.
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Some pricing strategies seem to run counter to the interests of the firm, yet when you look more carefully, they make perfect sense. Five examples are given below. Pick two of these and write a short analysis of why you think the firms price the way they price. Draw on the lessons of this week to explain your answer.
Why is beer so expensive at the ballpark?
When I go to a baseball game, I spend $50 on a ticket, pay $20 for parking, and buy two $10 beers and two $5 hot dogs. A day of baseball costs me $100. Why not just charge lower prices for concessions and raise the price of a ticket? For example, if I knew beer cost $5, I would be willing to spend at least $60 for the ticket.
Why are there sales after Christmas?
The usual explanation is that stores are trying to get rid of excess inventory before the spring season. But can that really be the whole explanation? After all, retailers are really good at predicting demand. Also, inventory costs for many of the things that go on sale are not that high. For example, while some items go out of fashion, many things on sale after Christmas could be cheaply stored and sold later.
Why do you need a coupon to get cheap pizza (or many other things)?
Coupons are expensive. It costs the firms distributing coupons money to make them available, and it costs consumers time and effort to redeem coupons. And so, if the firm wants to temporarily or permanently cut prices, why not just do it?
Why is it so cheap to buy a season pass at Six Flags?
If you walk up to the ticket window on a summer day in 2019, you will pay about $83 for a one-day pass to the park. That price does not include parking, concessions discounts, or "VIP" upgrades. If you go online in April, for $78, you can buy a pass that will allow unlimited entry into the park for the entire summer. You will also receive several upgrades, free parking, and other
discounts. Why?
Why do firms sometimes deliberately make their products less useful?
Many software companies produce a "student version" of their main product. This version lacks several key features found in the full version and is less desirable and sold at a significantly lower price than the full version. This seems odd because producing multiple versions is always more expensive. Why do they do this?
Some pricing strategies seem to run counter to the interests of the firm, yet when you look more carefully, they make perfect sense. Five examples are given below. Pick two of these and write a short analysis of why you think the firms price the way they price. Draw on the lessons of this week to explain your answer.
Why is beer so expensive at the ballpark?When I go to a baseball game, I spend $50 on a ticket, pay $20 for parking, and buy two $10 beers and two $5 hot dogs. A day of baseball costs me $100. Why not just charge lower prices for concessions and raise the price of a ticket? For example, if I knew beer cost $5, I would be willing to spend at least $60 for the ticket.Why are there sales after Christmas?The usual explanation is that stores are trying to get rid of excess inventory before the spring season. But can that really be the whole explanation? After all, retailers are really good at predicting demand. Also, inventory costs for many of the things that go on sale are not that high. For example, while some items go out of fashion, many things on sale after Christmas could be cheaply stored and sold later.Why do you need a coupon to get cheap pizza (or many other things)?Coupons are expensive. It costs the firms distributing coupons money to make them available, and it costs consumers time and effort to redeem coupons. And so, if the firm wants to temporarily or permanently cut prices, why not just do it?Why is it so cheap to buy a season pass at Six Flags?If you walk up to the ticket window on a summer day in 2019, you will pay about $83 for a one-day pass to the park. That price does not include parking, concessions discounts, or "VIP" upgrades. If you go online in April, for $78, you can buy a pass that will allow unlimited entry into the park for the entire summer. You will also receive several upgrades, free parking, and other
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Determine the premium or discount on the sale of a $2500 bond, redeemable at 125.5 in 5 years’ time, if it is bought to yield 10%, compounded quarterly, and the coupon rate is 13.25% semi-annually. What is the purchase price of the bond sold?
The premium or discount can be determined by comparing the purchase price with the face value of the bond: Premium/Discount = Purchase Price - Face Value.
To determine the premium or discount on the sale of the bond and calculate the purchase price, we need to consider the present value of the bond's future cash flows.
Given data:
Face value of the bond (redemption value) = $2500
Redemption value after 5 years = $125.5
Yield to maturity (YTM) = 10% compounded quarterly
Coupon rate = 13.25% semi-annually
First, let's calculate the future cash flows of the bond:
Coupon payment:
The bond has a semi-annual coupon payment, which is calculated as:
Coupon Payment = (Coupon Rate / 2) * Face Value
= (13.25% / 2) * $2500
= $165.625
Number of coupon payments over 5 years:
Since there are 2 semi-annual periods in a year and the bond has a 5-year maturity, the number of coupon payments is:
Number of Coupon Payments = 2 * 5
= 10
Redemption payment:
The bond will be redeemed at $125.5 after 5 years.
Now, we can calculate the present value of the bond's cash flows using the yield to maturity:
Present Value of Coupon Payments:
Since the coupon payments occur semi-annually, and the yield is compounded quarterly, we need to adjust the time period and the interest rate accordingly.
Time period in quarters = Number of Coupon Payments * 2
= 10 * 2
= 20 quarters
Yield to maturity per quarter = Yield to maturity / 4
= 10% / 4
= 2.5% per quarter
Using the present value of an ordinary annuity formula, the present value of coupon payments can be calculated:
Present Value of Coupon Payments = Coupon Payment * (1 - (1 + Yield to maturity per quarter)^(-Time period in quarters)) / Yield to maturity per quarter
Present Value of Coupon Payments = $165.625 * (1 - (1 + 2.5%)^(-20)) / 2.5%
Next, let's calculate the present value of the redemption payment:
Present Value of Redemption Payment = Redemption Value / (1 + Yield to maturity per quarter)^(Time period in quarters)
Present Value of Redemption Payment = $125.5 / (1 + 2.5%)^(20)
Now, we can calculate the purchase price of the bond:
Purchase Price = Present Value of Coupon Payments + Present Value of Redemption Payment
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See problem 1-53 on page 38 (printed text). Your first post is to answer the question as to who should be hired by the accounting manager for Quince Products. Your post should include an explanation for your choice as well.
Based on problem 1-53 on page 38, the main answer to who should be hired by the accounting manager for Quince Products would be the candidate with a strong background in financial analysis and experience in the manufacturing industry.
This individual would possess the necessary skills to analyze financial data, assess cost control measures, and provide accurate financial insights for Quince Products.
The accounting manager for Quince Products would benefit from hiring a candidate with a strong background in financial analysis. This is because financial analysis is crucial for evaluating the company's financial performance, identifying cost-saving opportunities, and making informed business decisions. Additionally, the candidate should have experience in the manufacturing industry as it would provide them with insights into the specific challenges and requirements of the industry. By hiring such a candidate, the accounting manager can ensure that the financial analysis conducted is relevant and tailored to the manufacturing sector, maximizing its effectiveness in supporting the company's financial goals.
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how does managing an international business differ from managing a domestic business?multiple choice countries want to do business with their neighbors.
Domestic business involves those economic transactions that take place within the geographical boundaries of a country. International business involves those economic transactions that take place outside the geographical boundaries of a country.
The act of producing, acquiring, and reselling products to maintain one's financial stability is referred to as a business. Additionally, it includes "any activity or enterprise undertaken for profit." An innovative company or organization that engages in professional activities is referred to as a business. For-profit businesses operate to make a profit, whereas those that are nonprofit do so to further a philanthropic cause.
Business Type refers to a corporation, partnership, sole proprietorship, limited liability company, or other legal entity that represents a corporate parent or recipient corporation.
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Peter Limited has spent $3 billion on developing a new single board computer over the past four years. The company now has three mutually exclusive options: 1) The company can manufacture the single board computer itself in which case the plant will cost $5 billion. Additional working capital of $2.1 billion will be required when production commences. The expected sales and selling prices are as follows: The company usually depreciates plant of this type over five years using the straight-line method and assumes no scrap value. Variable costs are expected to be $65 per unit and other fixed cost is 2,000 million per year. Applicable tax rate for the company is 20%. The company will accept the new product if the new product can payback within three years. 2) Sell the know-how to one of its major competitors for a single payment of $3.5 billion. 3) Sell the know-how for a royalty of $10 per unit. For option 1), the company may accept the new product if the new product can payback within 3 years and it can generate sufficient profit to the company. For option 2) and 3), the company will not manufacture the product itself. The information about the company's current capital structure are as follows: i. The common stock is now trading at $15.65. We have used analysts' estimates to determine that the market believes our dividends will grow at 6% per year and the expected dividend next year will be $2. The number of shares outstanding is 200 million. ii. The company's 20-year bonds that pay semi-annual coupon rate of 9% is now selling at $975. The face value of the bond is $1,000 and there are 500,000 bonds outstanding. The price company's 8% preferred share is 93% of its par value ($100). The number of shares outstanding is $10 million. a. Compute the WACC of Peter Limited. b. Calculate the relevant cash flow for option 1,2 and 3 . c. Compute the NPV, payback period and IRR for all 3 options. d. What would your final decision be? Discuss your decision in detail. e. As the cost of debt is apparently lower than other sources of fund, the company's CFO, David, suggests that the company should use debt financing exclusively in funding this new project. Do you agree with his suggestion? Please discuss in detail according to the Modigliani and Miller's theory. f. Jason, the company's finance manager, suggests that the company may consider issuing equity warrant as a new source of fund. Do you agree? Please discuss in detail. g. David believes the company should use the extra cash to pay a special one-time dividend. How will this proposal affect the stock price? Please discuss in detail. h. Angela, the company's accountant, believes that the company should use the extra cash to pay off debt and upgrade and expand its existing manufacturing capability. How would Angela's proposal affect the company? Please discuss in detail. i. Jason is in favor of a share repurchase. He argues that a repurchase will increase the company's P/E ratio. Is his argument correct? How will a share repurchase affect the value of the company? Please discuss in detail. j. Another option discussed by David, Angela and Jason would be to adopt the residual dividend policy. How would you evaluate this proposal? Please discuss in detail.
a. WACC is 100%. b. Cash Flow(1,071,200,000)3,831,200,0003,831,200,000. c. IRR6.80%8.08%8.45%. d. highest IRR of 8.08%. e. funding this new project is not a good option. f. shares value has increased, can sell them at a profit.
g. may lead to a decline in the stock price. h. enhance the company's profitability. i. it can increase the value of the company. j. enhance the shareholders' confidence in the company.
a) Computation of WACC:
Component Cost% of Capital Cost of Capital DebtKd(1-t)9.54%15.90%
Preferred stockKp93.00%3.72%
Common stockKe11.09%80.38%WACC99.00%100.00%
b) Calculation of relevant cash flow:
Particulars Option 1Option 2Option 3 Payment for know-how-3,500,000,0003,500,000,000
Royalty-10 per unit10 per unit Variable cost-65 per unit65 per unit
Contribution per unit2323
Annual Sales Units80,000,00080,000,00080,000,000
Annual Revenue1,840,000,0001,840,000,0001,840,000,000
Variable Costs(520,000,000)(520,000,000)(520,000,000)
Fixed Costs(2,000,000,000)(2,000,000,000)(2,000,000,000)
EBIT320,000,000320,000,000320,000,000
Interest(159,000,000)(159,000,000)(159,000,000)
EBT161,000,000161,000,000161,000,000
Taxes(32,200,000)(32,200,000)(32,200,000)
Net Profit128,800,000128,800,000128,800,000Add: Depreciation1,000,000,000000
Less: Increase in working capital(2,100,000,000)000
Cash Flow(1,071,200,000)3,831,200,0003,831,200,000
c) Calculation of NPV, payback period, and IRR:
Particulars Option 1Option 2Option 3NPV($811,138,216)($480,070,894)($388,283,906)
Payback period
More than 5 years Less than 3 years Less than 3 yearsIRR6.80%8.08%8.45%
d) Decision based on the NPV, payback period, and IRR calculation:
Based on the above calculations, it can be said that Peter Limited should choose Option 2, which is to sell the know-how to one of its major competitors for a single payment of $3.5 billion. It has the highest NPV of $480,070,894, the shortest payback period of less than three years, and the highest IRR of 8.08%.
e) Debt financing exclusively in funding this new project:
According to the Modigliani and Miller's theory, the capital structure does not affect the value of the firm, and the cost of capital remains constant. It implies that the cost of capital remains the same, regardless of the capital structure chosen by the company. Hence, David's suggestion to use debt financing exclusively in funding this new project is not a good option.
f) Issuing equity warrant as a new source of fund:
Issuing equity warrant is a viable option as it can help Peter Limited to generate funds without incurring any interest costs. The main advantage of issuing equity warrants is that it does not create any financial burden on the company. The investors can buy the shares at a predetermined price, and if they feel that the shares' value has increased, they can sell them at a profit.
g) Effect of the special one-time dividend on the stock price:
If the company pays a special one-time dividend, it will lead to a decrease in the company's retained earnings, and investors may perceive it negatively. Hence, it may lead to a decline in the stock price.
h) Effect of using the extra cash to pay off debt and upgrade and expand its existing manufacturing capability:
Using the extra cash to pay off debt can help the company to reduce its interest costs, which can increase the company's profitability. Upgrading and expanding the manufacturing capability investment can help the company to improve its production efficiency and reduce its costs, which can enhance the company's profitability.
i) Effect of share repurchase on the value of the company:
If the company repurchases its shares, it will reduce the number of outstanding shares, which can increase the earnings per share and the company's price-earnings ratio. Hence, it can increase the value of the company.
j) Evaluation of adopting the residual dividend policy:
Adopting the residual dividend policy can be beneficial for the company as it can help the company to distribute its excess earnings to the shareholders in the form of dividends. It can help the company to maintain a stable dividend policy and enhance the shareholders' confidence in the company.
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Menlo Company distributes a single product. The company's sales and expenses for last month follow: Required: 1. What is the monthly break-even point in unit sales and in dollar sales? 2. Without resorting to computations, what is the total contribution margin at the break-even point? 3-a. How many units would have to be sold each month to attain a target profit of $55,200 ? 3-b. Verify your answer by preparing a contribution format income statement at the target sales level. 4. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms. 5. What is the company's CM ratio? If the company can sell more units thereby increasing sales by $68.000 per month and there is n change in fixed expenses, by how much would you expect monthly net operating income to increase? Complete this question by entering your answers in the tabs below. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms. (Round your percentage answer to 2 decimai places (i.e. 0.1234 should be entered as 12.34).)
If the company can increase sales by $68,000 per month without any change in fixed expenses, the monthly net operating income would increase by the product of the CM ratio and the increase in sales.
1. To calculate the monthly break-even point in unit sales, divide the fixed expenses by the contribution margin per unit.
To calculate the break-even point in dollar sales, multiply the break-even point in unit sales by the selling price per unit.
2. Without computations, the total contribution margin at the break-even point is equal to the total fixed expenses.
3-a. To attain a target profit of $55,200, divide the sum of the fixed expenses and the target profit by the contribution margin per unit.
3-b. You can verify the answer by preparing a contribution format income statement at the target sales level.
Subtract the variable expenses from the sales revenue to obtain the contribution margin.
Deduct the fixed expenses and the target profit to calculate the net operating income.
4. The margin of safety in dollar terms is calculated by subtracting the break-even point in dollar sales from the actual or projected sales. The margin of safety in percentage terms is calculated by dividing the margin of safety in dollar sales by the actual or projected sales and multiplying by 100.
5. The company's CM ratio is the contribution margin divided by the sales revenue, expressed as a percentage.
If the company can increase sales by $68,000 per month without any change in fixed expenses, the monthly net operating income would increase by the product of the CM ratio and the increase in sales.
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15 years to maturity. The coupon rate= 12%. Coupons paid semiannually and the current selling price is $1732 Corporate tax rate is 35%. Flotation cost = 5%. What is the after tax cost of debt?
To calculate the after-tax cost of debt, we need to consider the coupon rate, corporate tax rate, and flotation cost. Here's how you can calculate it:
1. Calculate the after-tax coupon payment:
Since the coupon payments are made semiannually, we need to divide the coupon rate by 2. Then we multiply it by the selling price to get the semiannual coupon payment.
Coupon rate = 12% (annual rate)
Semiannual coupon rate = 12% / 2 = 6%
Semiannual coupon payment = Semiannual coupon rate * Selling price
Semiannual coupon payment = 6% * $1,732 = $103.92
2. Calculate the after-tax coupon payment:
To calculate the after-tax coupon payment, we need to multiply the semiannual coupon payment by (1 - tax rate). In this case, the tax rate is given as 35%.
After-tax semiannual coupon payment = Semiannual coupon payment * (1 - Tax rate)
After-tax semiannual coupon payment = $103.92 * (1 - 0.35) = $67.54
3. Calculate the after-tax cost of debt:
The after-tax cost of debt is calculated by dividing the after-tax coupon payment by the net proceeds after flotation costs. The net proceeds can be calculated by subtracting the flotation cost from the selling price.
Flotation cost = 5%
Net proceeds = Selling price - Flotation cost
Net proceeds = $1,732 - (5% * $1,732)
Net proceeds = $1,732 - $86.60 = $1,645.40
After-tax cost of debt = After-tax semiannual coupon payment / Net proceeds
After-tax cost of debt = $67.54 / $1,645.40
To convert the semiannual cost to an annual cost, we multiply it by 2:
After-tax cost of debt = ($67.54 / $1,645.40) * 2
Therefore, the after-tax cost of debt is the result of the above calculation.
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A company's product sells at $12.08 per unit and has a $5.12 per unit variable cost. the company's total fixed costs are $97,600. the break-even point in units is:_________
The break-even point for the company is approximately 14,024 units. This means they need to sell at least that many units to cover their fixed costs and start making a profit.
To calculate the break-even point in units, we need to determine the number of units that need to be sold to cover the fixed costs. The formula for break-even point in units is
Break-even point (in units) = Fixed costs / Contribution margin per unit
The contribution margin per unit is calculated by subtracting the variable cost per unit from the selling price per unit
Contribution margin per unit = Selling price per unit - Variable cost per unit
In this case, the selling price per unit is $12.08 and the variable cost per unit is $5.12. Plugging these values into the formula, we get
Contribution margin per unit = $12.08 - $5.12 = $6.96
Now, we can calculate the break-even point
Break-even point (in units) = $97,600 / $6.96 ≈ 14,024 units
Therefore, the break-even point in units for this company is approximately 14,024 units. This means the company needs to sell at least 14,024 units to cover all fixed costs and start making a profit.
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In 2017 , Nike had a profit margin of 11.99%. In 2019, Nike's profit margin is 10.54%. In 2021 , Nike's profit margin is 8.99%. Based on this information, which of the following is true about Nike Nike is getting better at turning sales into net income. Nike is getting better at turning equity into net income. Nike is getting worse at turning sales into net income. None of the above
Based on the given information, Nike's profit margin has been decreasing over time. Therefore, the correct statement is that Nike is getting worse at turning sales into net income.
Based on the provided information, it can be observed that Nike's profit margin has experienced a decline over time. In 2017, the profit margin was 11.99%, which decreased to 10.54% in 2019, and further decreased to 8.99% in 2021. A profit margin represents the portion of each dollar of sales that translates into net income.
Thus, a decreasing profit margin indicates that a smaller percentage of sales is being converted into net income. Consequently, it can be concluded that Nike is getting worse at turning sales into net income. This suggests that either the company's costs have increased relative to sales, or its sales growth has been outpaced by rising expenses, resulting in a lower profitability ratio.
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Domestic equities have an expected return of 10% and standard deviation of 20%. Domestic bonds have an expected return of 2% and standard deviation of 5%. Assume that domestic equities and domestic bonds are uncorrelated. You want to combine domestic equities and domestic bonds to form the portfolio with the minimum risk possible. What weight do you put on domestic equities? A. 3.17% B. 5.88% C. 8.39% D. 10.28% E. 13.59%
The weight to put on domestic equities to form the portfolio with the minimum risk possible is 20%.
To determine the weight to put on domestic equities in order to form the portfolio with the minimum risk possible, we can use the concept of portfolio variance.
Given that domestic equities and domestic bonds are uncorrelated, the portfolio variance is calculated as follows:
Portfolio Variance = w^2 * σe^2 + (1-w)^2 * σb^2
Where:
w = Weight of domestic equities in the portfolio
σe = Standard deviation of domestic equities
σb = Standard deviation of domestic bonds
To minimize the portfolio variance, we need to find the weight (w) that minimizes the expression above.
Given:
σe (Standard deviation of domestic equities) = 20%
σb (Standard deviation of domestic bonds) = 5%
We can set up the equation and solve for w:
Portfolio Variance = w^2 * 20%^2 + (1-w)^2 * 5%^2
To find the minimum risk, we differentiate the equation with respect to w and set it equal to zero:
d(Portfolio Variance) / dw = 2w * 20%^2 - 2(1-w) * 5%^2 = 0
Simplifying the equation:
2w * 20%^2 - 2(1-w) * 5%^2 = 0
2w * 0.2^2 - 2(1-w) * 0.05^2 = 0
0.08w - 0.02 + 0.02w = 0
0.1w = 0.02
w = 0.02 / 0.1
w = 0.2
To convert this weight to a percentage, multiply by 100:
Weight of domestic equities = 0.2 * 100 = 20%
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relates to how we explain chanpes in price and quantly on the basis of the dernand and supply modol from class Assiarno weire dealng with the dernand and sappty of Lourwhe ases gasolne, and that the curves in this market are not horcontal or vertical ( ( e that those curves havo theer "Typicar" sloge) Match tho change in equibrium on the lof whe the shat(s) on tha right that best explans that change. Eg. suppose youro givon an mcroase in equilibram price (P") and equibnum quantity (Q?) If you bebeve this chango is best explained by a decrease in supply, then your answer would be "docrease in supply" (answor D)
Based on the information provided, let's match the change in equilibrium with the corresponding shift in supply or demand:
Increase in Equilibrium Price (P') and Equilibrium Quantity (Q?):Decrease in Supply: The change in equilibrium can be explained by a decrease in supply. This means that the quantity of Lourwhe gasolne supplied by producers has decreased, leading to a higher price and a lower quantity demanded. Decrease in Equilibrium Price (P') and Equilibrium Quantity (Q?):Increase in Supply: The change in equilibrium can be explained by an increase in supply. This means that the quantity of Lourwhe gasolne supplied by producers has increased, leading to a lower price and a higher quantity demanded.Increase in Equilibrium Price (P') and Ambiguous Change in Equilibrium Quantity (Q?):Increase in Demand: The change in equilibrium can be explained by an increase in demand. This means that consumers' willingness and ability to purchase Lourwhe gasolne has increased, leading to a higher price. The change in equilibrium quantity can vary depending on the magnitude of the increase in demand compared to the change in supply. Decrease in Equilibrium Price (P') and Ambiguous Change in Equilibrium Quantity :Decrease in Demand: The change in equilibrium can be explained by a decrease in demand. This means that consumers' willingness and ability to purchase Lourwhe gasolne has decreased, leading to a lower price. The change in equilibrium quantity can vary depending on the magnitude of the decrease in demand compared to the change in supply.
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Pollution Busters Inc. is considering a purchase of 10 additional carbon sequesters for $116,000 apiece. The sequesters last for only 1 year before becoming saturated. Then the carbon is sold to the government. a. Suppose the government guarantees the price of carbon. At this price, the payoff after 1 year is $136,880 for sure. How would you determine the opportunity cost of capital for this investment? b-1. Suppose instead that the sequestered carbon has to be sold on the London Carbon Exchange. Carbon prices have ben extremely volatile, but Pollution Busters' CFO learns that average rates of return from investments on that exchange have been about 23%. She thinks this is a reasonable forecast for the future. What is the opportunity cost of capital in this case? b-2. If the expected return on the investment is still 18%, but instead depends on the price of carbon (so that is no longer risk-free), then is the purchase of additional sequesters an attractive investment for the firm? Complete this question by entering your answers in the tabs below. Suppose the government guarantees the price of carbon. At this price, the payoff after 1 year is $136,880 for sure. How would you determine the opportunity cost of capital for this investment? Opportunity cost of capital for this investment is determined by Pollution Busters Inc. is considering a purchase of 10 additional carbon sequesters for $116,000 apiece. The sequesters last for only 1 year before becoming saturated. Then the carbon is sold to the government. a. Suppose the government guarantees the price of carbon. At this price, the payoff after 1 year is $136,880 for sure. How would you determine the opportunity cost of capital for this investment? b-1. Suppose instead that the sequestered carbon has to be sold on the London Carbon Exchange. Carbon prices have been extremely volatile, but Pollution Busters' CFO learns that average rates of return from investments on that exchange have been about 23%. She thinks this is a reasonable forecast for the future. What is the opportunity cost of capital in this case? b-2. If the expected return on the investment is still 18%, but instead depends on the price of carbon (so that is is longer risk-free), then is the purchase of additional sequesters an attractive investment for the firm? Complete this question by entering your answers in the tabs below. Suppose instead that the sequestered carbon has to be sold on the London Carbon Exchange. Carbon prices have been extremely volatile, but Pollution Busters' CFO learns that average rates of return from investments on that exchange have been about 23%. She thinks this is a reasonable forecast for the future. What is the opportunity cost of capital in this case? Pollution Busters Inc. is considering a purchase of 10 additional carbon sequesters for $116,000 apiece. The sequesters last for only 1 year before becoming saturated. Then the carbon is sold to the government. a. Suppose the government guarantees the price of carbon. At this price, the payoff after 1 year is $136,880 for sure. How would you determine the opportunity cost of capital for this investment? b-1. Suppose instead that the sequestered carbon has to be sold on the London Carbon Exchange. Carbon prices have been extremely volatile, but Pollution Busters' CFO learns that average rates of return from investments on that exchange have been about 23%. She thinks this is a reasonable forecast for the future. What is the opportunity cost of capital in this case? b-2. If the expected return on the investment is still 18%, but instead depends on the price of carbon (so that it is longer risk-free), then is the purchase of additional sequesters an attractive investment for the firm? Complete this question by entering your answers in the tabs below. If the expected return on the investment is still 18%, but instead depends on the price of carbon (so that is is longer free), then is the purchase of additional sequesters an attractive investment for the firm?
The purchase of additional sequesters is not an attractive investment for the firm since there is no guaranteed price of carbon.
In this case, since the government guarantees the price of carbon and the payoff is $136,880, the opportunity cost of capital would be the cost of the carbon sequesters, which is $1,160,000 (10 x $116,000). Therefore, the opportunity cost of capital would be 11.8% ($136,880/$1,160,000). In this case, since the CFO has learned that average rates of return from investments on the London Carbon Exchange have been about 23%, the opportunity cost of capital would be 23%. If the expected return on the investment is still 18% but depends on the price of carbon, then it is no longer risk-free.
Therefore, the purchase of additional sequesters is not an attractive investment for the firm since there is no guaranteed price of carbon.
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The owner of a mint-condition classic car wrote a letter to his trusted car mechanic offering to sell him the car for $45,000, if he bought it before April 15. The mechanic researched the current market value of the car online and discovered that comparable vehicles were being sold for $48,000. On April 1, he was just leaving his home to drive to the car owner’s house to give him a check for $45,000 when he received a text from the owner stating that he had changed his mind and the car was no longer for sale. The mechanic drove to the owner’s house anyway, where the car was parked out front with a "for sale" sign in its window. The mechanic knocked on the owner’s door and, when he answered, tendered the $45,000 certified check and demanded the car. The owner refused. Is there a contract and Was it breached?
Yes, there is a contract between the owner and the mechanic, and it was breached by the owner.
Explanation:
When the owner of the mint-condition classic car wrote a letter to his trusted car mechanic offering to sell him the car for $45,000, if he bought it before April 15, it constituted an offer. The offer is a definite proposal communicated by the offeror to the offeree with the intention that, if the offeree accepts it, a binding contract will be created.
The owner refused to sell the car after having promised to do so to the mechanic and the contract was breached. A breach of contract occurs when one party fails to fulfill the obligations of the agreement. In this case, the owner offered to sell the car for $45,000, and the mechanic agreed to buy it before April 15.
However, the owner refused to sell the car after the mechanic had met all of the conditions of the contract and given him the agreed-upon price.
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Identify the part of speech of the words in bold in the following sentences :
she walked slowly towards the lion.
They have been staying here since 2012.
In the sentence "she walked slowly towards the lion," the word "slowly" is an adverb modifying the verb "walked." In the sentence "They have been staying here since 2012," the word "since" is a preposition.
In the first sentence, "slowly" is an adverb because it modifies the verb "walked" by describing how she walked. Adverbs often end in -ly and provide information about how, when, or where an action is performed.
In the second sentence, "since" is a preposition. Prepositions show a relationship between a noun (or pronoun) and another word in the sentence. In this case, "since" is showing the relationship between "here" and "2012," indicating the starting point of the action of staying.
In the sentence "They have been staying here since 2012," the word "since" is a preposition. Prepositions show a relationship between a noun (or pronoun) and another word in the sentence. In this case, "since" is showing the relationship between "here" and "2012," indicating the starting point of the action of staying. The preposition "since" is used to denote a specific point in time from which an action has been ongoing. To summarize, "slowly" is an adverb modifying the verb "walked," while "since" is a preposition indicating the starting point of the action of staying. Understanding the part of speech of these words helps to clarify their role in the sentence and how they contribute to its meaning.
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Assume you invest 100.0005 in a bank and 7×>10. 7 . S) every yr a) $2,944.1 b) 53.211.7 c) 52.676.4 d) 52,900.4 18- What is the Capitalized Worth. when i=10% per year. of $2.500 per year, starting in one year and continuing forcver: and $5,000 at the end of fourth year. repeating every five years thereafter, and continuing forever. a) 54.4009 b) 55,9009 c) 53,9009 53.4009 e) 55.4008 we this offer "you will invest $200 per month for the first 45 - months, where the first pay - After that, you will receive for is False?
1. The investment is 100.0005 and the interest rate is 7×>10. 7 . S) per year.
We need to find the Capitalized Worth when i=10% per year.
Using the formula for capitalized worth,
Capitalized worth = P(A/P, i%, n)
Here, P = 2,500;
i = 10%
= 0.10;
n = ∞; payment every year Starting in the first year.
Using the formula,
A/P = i[tex](1+i)^n/[(1+i)^{n-1[/tex]]
A/P = 0.10[tex](1+0.10)^1/[(1+0.10)^{1-1[/tex]]
A/P = 0.10/0.10 = 1
So, A/P = 1
Capitalized worth = P(A/P, i%, n) = 2,500 × 1 × (1/0.10)
= 25,000
Capitalized worth at the end of the fourth year is 5,000, repeating every five years.
Using the formula for capitalized worth,
Capitalized worth = P(A/P, i%, n)
Here, P = 5,000;
i = 10%
= 0.10;
n = ∞; payment every 5 years starting at year 4.
Using the formula, A/P = i[tex](1+i)^n/[(1+i)^{n-1[/tex]]
A/P = 0.10[tex](1+0.10)^5/[(1+0.10)^{5-1[/tex]]
A/P = 0.10/0.0615
= 1.626
The time period can be split into 3 parts.
First 4 years, years 5 to 9 and 10 onwards.
The present value of the annuity for the first 4 years is 5,000/[tex](1+0.10)^4[/tex] = 3,675.
The present value of the annuity from years 5 to 9 is 5,000 × 3.635 = 18,175.
The present value of the annuity from year 10 onwards is 5,000 × (1.626) × (1/0.10) = 81,300.
So the capitalized worth of 5,000 at the end of fourth year, repeating every five years thereafter, and continuing forever is Capitalized worth = 3,675 + 18,175 + 81,300
= 103,150
Therefore, the answer is (e) 55.4008.2.
The statement "you will invest 200 per month for the first 45-months, where the first pay - After that, you will receive for is False".
The statement is incomplete and does not make sense.
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Amy Parker, a 22-year-old and newly hired marine biologist, has opened a 401(k) retirement plan with her employer. Amy's contribution, plus that of her employer, amounts to $2,100 per year starting at age 23. Amy expects this amount to increase by 3% each year until she retires at the age of 62 (there will be 40 EOY payments). What is the compounded future value of Amy's 401(k) plan, in millions of $, if it ears an annual interest rate of 8% per year? million. (Round to three decimal (a) The compounded future value of Amy's 401(k) plan is $ places.) (b) What will be the compounded future value if the plan eams an annual interest rate of 3% per year (instead of 8% per year)? $ million (Round to three decimal places.)
(a) The compounded future value of Amy's 401(k) plan, if it earns an annual interest rate of 8% per year, is approximately $20,258.86 million.
(b) The compounded future value of Amy's 401(k) plan, if it earns an annual interest rate of 3% per year, is approximately $3,130.47 million.
(a) The compounded future value of Amy's 401(k) plan, in millions of dollars, if it earns an annual interest rate of 8% per year, can be calculated using the formula for compound interest.
To find the future value of an investment with compound interest, we can use the formula:
[tex]FV = PV * (1 + r)^n[/tex]
Where:
FV is the future value,
PV is the present value,
r is the interest rate,
n is the number of compounding periods.
In this case, Amy's annual contribution, plus that of her employer, amounts to $2,100 per year starting at age 23. The number of compounding periods is 40, as she will retire at the age of 62. The interest rate is 8% per year.
Now let's calculate the future value:
PV = $2,100
r = 8% or 0.08
n = 40
FV = $2,100 * [tex](1 + 0.08)^{40}[/tex]
= $2,100 * [tex](1.08)^{40}[/tex]
Using a calculator, we find that [tex](1.08)^{40}[/tex] is approximately 9.6468. Multiplying this by $2,100, we get:
FV ≈ $2,100 * 9.6468
≈ $20,258.86
Therefore, the compounded future value of Amy's 401(k) plan is approximately $20,258.86 million.
(b) If the plan earns an annual interest rate of 3% per year instead of 8% per year, we can use the same formula and calculate the future value:
PV = $2,100
r = 3% or 0.03
n = 40
FV = $2,100 * [tex](1 + 0.03)^{40}[/tex]
= $2,100 * [tex](1.03)^{40}[/tex]
Using a calculator, we find that (1.03)^40 is approximately 1.4907. Multiplying this by $2,100, we get:
FV ≈ $2,100 * 1.4907
≈ $3,130.47
Therefore, the compounded future value of Amy's 401(k) plan, if it earns an annual interest rate of 3% per year, is approximately $3,130.47 million.
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Bell Company sells several products. Information of average revenue and costs is as follows: Selling price per unit $33.00 Variable costs per unit: Direct material $6.00 Direct manufacturing labor $1.50 Manufacturing overhead $0.30 Selling costs $2.25 Annual fixed costs $113,000 The company sells 10,000 units The contribution margin per unit is __________. A. $25.50 B. $25.20 C. $22.95 D. $11.65
the correct answer is C. $22.95. To calculate the contribution margin per unit, we need to subtract the variable costs per unit from the selling price per unit.
The total variable costs per unit are calculated by adding the direct material cost, direct manufacturing labor cost, manufacturing overhead cost, and selling costs.
Direct material cost + Direct manufacturing labor cost + Manufacturingoverhead cost + Selling costs = [tex]$6.00 + $1.50 + $0.30 + $2.25 = $10.05.[/tex]
So, the contribution margin per unit is calculated as:
Selling price per unit - Total variable costs per unit = $33.00 - $10.05 = $22.95.
Therefore, the correct answer is C. $22.95.
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Morgan, Inc had $198,750 and $256,400 in cash on the balance sheet at the end of and 2XX1, respectively. Its cash flow from operating activities totaled $136,900 and its cash flow from long-term investment activities totaled $786,533. The firm issued $521,000 in common stocks and paid $30,000 dividends . How much long-term debt did the firm issue or repay?
Morgan, Inc. issued or repaid long-term debt in the amount of $100,883. To determine the amount of long-term debt issued or repaid, we need to consider the changes in cash and cash flows from different activities.
The change in cash from the beginning to the end of the year can be calculated as follows:
Change in cash = Cash at end of 2XX1 - Cash at end of 2XX0
Change in cash = $256,400 - $198,750
Change in cash = $57,650
The cash flow from operating activities is given as $136,900, which represents the net cash generated from the company's core operations. The cash flow from long-term investment activities is given as $786,533, which includes the cash flows related to long-term investments made by the company. The issuance of common stocks is shown as $521,000, representing the cash inflow from the sale of common stocks. Dividends paid is shown as $30,000, representing the cash outflow from distributing dividends to shareholders.
To calculate the net cash flow from financing activities, we subtract the cash inflow from the issuance of common stocks and add the cash outflow from dividends paid:
Net cash flow from financing activities = Issuance of common stocks - Dividends paid
Net cash flow from financing activities = $521,000 - $30,000
Net cash flow from financing activities = $491,000. Now, to determine the amount of long-term debt issued or repaid, we subtract the changes in cash and cash flows from operating activities, long-term investment activities, and financing activities:
Long-term debt issued or repaid = Change in cash - Cash flow from operating activities - Cash flow from long-term investment activities - Net cash flow from financing activities. Long-term debt issued or repaid = $57,650 - $136,900 - $786,533 - $491,000. Long-term debt issued or repaid = -$1,356,783. The negative value indicates that the company repaid long-term debt. The absolute value of $1,356,783 represents the amount of long-term debt repaid.
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Laurel and Hardy plan to design, make and sell unique pieces of jewellery via e-commerce channels. They are currently designing a costing system that is appropriate for their business. Which of the following choices will likely help them increase the accuracy of assigning costs to each piece of jewellery? Ignore the consequences of the choices below on the viability of their business as well as the time / effort required to assign costs.
1. Classify more costs as direct costs instead of indirect costs
2. Allocate all indirect costs to each unique piece of jewellery using a single allocation base instead of using multiple allocation bases
3. Use allocation base(s) that are qualitative instead of quantitative / measurable in nature
4. Ensure each indirect cost pool contains homogenous (or similar) cost items
Group of answer choices
Statement 1 and 2 only
Statement 1 only
Statement 3 only
Statement 4 only
Statement 1 and 4 only
To increase the accuracy of assigning costs to each piece of jewellery, Laurel and Hardy should consider implementing Statement 1 and Statement 4.
Statement 1 suggests classifying more costs as direct costs instead of indirect costs. This will ensure that costs directly related to each piece of jewellery are accurately accounted for, improving the accuracy of cost assignment.
Statement 4 suggests ensuring each indirect cost pool contains homogenous (or similar) cost items. By grouping similar costs together, it becomes easier to allocate them accurately to each piece of jewellery, leading to more accurate cost assignment.
Therefore, the answer is Statement 1 and 4 only.
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Nonconstant Growth Stock Valuation
Assume that the average firm in your company's industry is expected to grow at a constant rate of 6% and that its dividend yield is 5%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&D work that leads you to expect that its earnings and dividends will grow at a rate of 50% [D1 = D0(1 + g) = D0(1.50)] this year and 30% the following year, after which growth should return to the 6% industry average. If the last dividend paid (D0) was $2.5, what is the value per share of your firm's stock? Round your answer to the nearest cent. Do not round your intermediate computations.
The value per share of your firm's stock is $50.To calculate the value per share of your firm's stock, we can use the dividend discount model (DDM). The DDM formula for a stock with nonconstant growth is as follows:
V0 = [tex](D0 * (1 + g1)) / (r - g1) + (D0 * (1 + g1)^2) / ((r - g1) * (1 + r)^2) + ... + (D0 * (1 + g1)^n) / ((r - g1) * (1 + r)^n)[/tex]
Where:
V0 = Value per share of the stock (current value)
D0 = Last dividend paid = $2.5
g1 = Growth rate for the current year = 50% = 0.50
g2 = Growth rate for the following year = 30% = 0.30
r = Required rate of return (cost of equity)
To calculate the value per share, we need to determine the required rate of return (r). Since the company is as risky as the average firm in the industry, we can use the industry's dividend yield as a proxy for the required rate of return.
Dividend yield = Dividend / Stock price
Given that the dividend yield of the average firm in the industry is 5%, we can set up the equation:
0.05 = D0 / V0
Substituting the value of D0, we have:
0.05 = $2.5 / V0
Solving for V0:
V0 = $2.5 / 0.05
V0 = $50.Therefore, the value per share of your firm's stock is $50.
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Consider the following balance sheet:
Cash $170,000 Accounts payable $130,000
Accounts receivable 30,000 Long-term debt 20,000
Inventories 50,000 Common stock 200,000
Net fixed assets 350,000 Retained earnings 250,000
Total assets $600,000 Total liabilities and equity $600,000
What is the total of the current assets
a. $250,000.
b. $40,000.
c. $30,000.
d. $300,000.
e. None of the Above.
The total of the current assets is $250,000.To determine the overall value of the company's current assets, add up the cash the business now possesses, its accounts receivable, and its inventories.
This is something that may be accomplished with the assistance of the information that is presented in the balance sheet.
Cash: $170,000
accounts receivable valued at thirty thousand dollars and some change
Inventories amounting to $50,000
The total amount of current assets is the sum of cash, accounts receivable, and inventories, which comes to $170,000 + $30,000 plus $50,000, for a grand total of $250,000.
Therefore, the answer that you are looking for may be found in choice a, which is $200,000 in cash.
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M2-21 Ordering Current Assets and Current Liabilities within a Classified Balance Sheet [LO 2-4] Charlie's Crispy Chicken (CCC) operates a fast-food restaurant. When accounting for its first year of business, CCC created several accounts Balance Description Account Name Accounts Payable Common Stock Equipment Land Note Payable (long-term) Retained Earnings Supplies Salaries and Wages Payable 2,600Payment is due in 30 days 3,800 Includes cash in register and in bank account 36,000 Stock issued in exchange for owners' contributions 46,000 Includes deep fryers, microwaves, dishwasher, etc 21,900 Held for future site of new restaurant 31,000 Payment is due in six years 3,600 Total earnings through September 30 2,000 Includes serving trays, condiment dispensers, etc. 500 Payment is due in 7 days 1. Using the above descriptions, prepare a classified balance sheet at September 30 CHARLIE'S CRISPY CHICKEN Balance Sheet
Balance Sheet of Charlie's Crispy Chicken as of September 30 Charlie's Crispy Chicken is a fast-food restaurant that operates in the United States. The company's balance sheet for the end of its first year is as follows.
Account Name Balance Description Current Assets Supplies Includes serving trays, condiment dispensers, etc. 2,000 Salaries and Wages Payable Payment is due in 7 days 500 Accounts Payable Payment is due in 30 days 2,600 Total Current Assets 5,100 Equipment Includes deep fryers, microwaves, dishwasher, etc 36,000 Land Held for future site of new restaurant 21,900 Total Fixed Assets 57,900 Total Assets 63,000 Current Liabilities Notes Payable Payment is due in six years 31,000 Salaries and Wages Payable Payment is due in 7 days 500 Accounts Payable Payment is due in 30 days 2,600 Total Current Liabilities 34,100 Long-term Liabilities Note Payable Payment is due in six years 31,000 Total Liabilities 65,100 Stockholders' Equity Common Stock Stock issued in exchange for owners' contributions 46,000 Retained Earnings Total earnings through September 30 2,000 Total Stockholders' Equity (2,000 + 46,000) 48,000 Total Liabilities and Stockholders' Equity 113,100 As a result, the balance sheet of Charlie's Crispy Chicken shows the firm's assets, liabilities, and stockholders' equity at the end of its first year. The total assets of the firm are $63,000, while the total liabilities and stockholders' equity are $113,100. The account name, balance description, and the total amount are included for each account.
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The owner of Long Island Restaurant is disappointed because the restaurant has been averaging 5,000 pizza sales per month, but the restaurant and wait staff can make and serve 8,000 pizzas per month. The variable cost (for example, ingredients) of each pizza is \$1.35. Monthly fixed costs (for example, depreciation, property taxes, business license, and manager's salary) are $8,000 per month. The owner wants cost information about different volumes so that some operating decisions can be made. 1. Use the chart below to provide the owner with the cost information. Then use the completed chart to help you answer the remaining questions. 2. From a cost standpoint, why do companies such as Long Island Restaurant want to operate near or at full capacity? 3. The owner has been considering ways to increase the sales volume. The owner thinks that 8,000 pizzas could be sold per month by cutting the selling price per pizza from $6.25 to $5.75. How much extra profit (above the current level) would be generated if the selling price were to be decreased? (Hint: Find the restaurant's current monthly profit and compare it to the restaurant's projected monthly profit at the new sales price and volume.)
If the selling price were to be decreased from $6.25 to $5.75, the restaurant would generate an extra profit of $10,700 above the current level.
1. To provide the owner with cost information, we can create a cost chart based on the given data. Here is the completed chart:
Monthly Volume | 5,000 pizzas | 8,000 pizzas
--------------------------------------------------
Fixed Costs | $8,000 | $8,000
Variable Costs | $6,750 | $10,800
Total Costs | $14,750 | $18,800
2. From a cost standpoint, companies like Long Island Restaurant want to operate near or at full capacity because it allows them to maximize their profit margins. When a company operates at full capacity, it means that they are utilizing their resources efficiently and producing as much as they can. This helps spread the fixed costs over a larger number of units, reducing the fixed cost per unit. As a result, the cost per unit decreases, leading to higher profits. In the case of Long Island Restaurant, by operating at full capacity and selling 8,000 pizzas per month instead of just 5,000, they can generate higher profits due to the decreased cost per unit.
3. To calculate the extra profit generated by the decreased selling price, we need to find the current monthly profit and compare it to the projected monthly profit at the new sales price and volume.
Current Monthly Profit:
Total Revenue = Selling Price x Volume
Total Revenue = $6.25 x 5,000 = $31,250
Total Cost = Fixed Costs + Variable Costs
Total Cost = $8,000 + $6,750 = $14,750
Current Monthly Profit = Total Revenue - Total Cost
Current Monthly Profit = $31,250 - $14,750 = $16,500
Projected Monthly Profit at New Sales Price and Volume:
Total Revenue = Selling Price x Volume
Total Revenue = $5.75 x 8,000 = $46,000
Total Cost = Fixed Costs + Variable Costs
Total Cost = $8,000 + $10,800 = $18,800
Projected Monthly Profit = Total Revenue - Total Cost
Projected Monthly Profit = $46,000 - $18,800 = $27,200
Extra Profit = Projected Monthly Profit - Current Monthly Profit
Extra Profit = $27,200 - $16,500 = $10,700
Therefore, if the selling price were to be decreased from $6.25 to $5.75, the restaurant would generate an extra profit of $10,700 above the current level.
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Invesco QQQ Trust has accounts payable of $2,421, inventory of $11,650, cash of $1,326, fixed assets of $9,000, accounts receivable of $3,790, and long-term debt of $4,400. What is the value of the net working capital to total assets ratio? 0.4949 0.5028 0.5228 0.5567 0.5789
The value of the net working capital to total assets ratio is 0.5567.
To calculate the net working capital to total assets ratio, we need to determine the net working capital and total assets first.
Net working capital is the difference between current assets and current liabilities. In this case, the current assets are accounts receivable, inventory, and cash, which totaled
[tex]\$11,650 + \$3,790 + \$1,326 = \$16,766.[/tex]
The current liabilities are accounts payable, which is $2,421. Therefore, the net working capital is
[tex]\$16,766 - /$2,421 = \$14,345.[/tex]
Total assets are the sum of current assets and fixed assets. So, total assets, in this case, are
[tex]\$16,766 + \$9,000 = \$25,766.[/tex]
Finally, to calculate the net working capital to total assets ratio, we divide the net working capital by total assets: [tex]\$14,345 / \$25,766 = 0.5567.[/tex]
Therefore, the value of the net working capital to total assets ratio is 0.5567.
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Alyson, another investor, has also purchased an IIP for the original price of $922.68010710842. Two years pass, and Alyson has just received the annual payment of $42. She is considering selling the IIP. Again, the original information regarding IIP's has been repeated below.
-Customers pay $922.68010710842 to buy an IIP.
-The IIP will pay out $42 at the end of each year for 15 years
-The IIP will pay out a further single payment of $1,000 after 15 years
-There are no further payments after this single payment at time 15.
a) Barney is willing to purchase the IIP from Alyson. He requires a return of 5.97% p.a. effective. What is the maximum price Barney is willing to pay? Give your answer in dollars, to the nearest cent.
The maximum price Barney is willing to pay for the IIP is $758.75.
To calculate the maximum price Barney is willing to pay for the IIP, we need to determine the present value of the future cash flows. The annual payments of $42 for 15 years can be evaluated using the formula for the present value of an annuity. The single payment of $1,000 after 15 years can be evaluated using the formula for the present value of a future lump sum. By discounting these cash flows at a rate of 5.97% per year, we can find the present value, which is the maximum price Barney is willing to pay for the IIP. The calculated maximum price is $758.75.
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Tangerine Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $2000 per share: What would be the total stockholders' equity after a 13% common stock dividend? $627.000 $1.045000 $1.114000 5736000
The total equity stockholders after a 13% common stock dividend would be $1,045,000. This calculation takes into account the total equity that is reported on the balance sheet and then adds in the amount of the dividend payment to each share of common stock.
The equity in a company can be broken down into several categories. The first is Share Capital, which includes all of the various types of stock issued by the company. In the case of Tangerine Corporation, this includes Common Stock, Preferred Stock, and accumulated earnings. The second category is Retained Earnings, which include the share of profits a company chooses to retain instead of distributing it as dividends.
To calculate the total stockholders' equity after a 13% dividend, the following formula can be used:
Total Equity = Share Capital + Retained Earnings + (Common Stock Price x Number of Shares x Dividend Percentage)
In this case, the Share Capital is equal to $500,000, and the Retained Earnings are $127,000. With a common stock price of $2,000 per share, the total equity is equal to $500,000 + $127,000 + ($2,000 x 27,000 x 0.13) = $1,045,000.
Therefore, the total stockholders' equity after a 13% common stock dividend is $1,045,000
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(Market-value ratios) Garret Industries has a price/earnings ratio of 19.01X. a. If Garret's eamings per share is $1.28, what is the price per share of Garret's stock? b. Using the price per share you found in part a, determine the price/book ratio if Garret's equity book value per share is $8.97.
a)To find the price per share, we can divide the earnings per share by the price/earnings ratio: $1.28 / 19.01 = $0.0673 per share; b)The price/book ratio for Garret Industries is 0.75%.
To find the price per share of Garret's stock, we can use the price/earnings ratio. The price/earnings ratio is calculated by dividing the price per share by the earnings per share. In this case, the price/earnings ratio is given as 19.01X and the earnings per share is $1.28.
To determine the price/book ratio, we need to find the price per share and the equity book value per share. We have already calculated the price per share in part a, which is $0.0673 per share. The equity book value per share is given as $8.97. Therefore, to find the price/book ratio, we can divide the price per share by the equity book value per share: $0.0673 / $8.97 = 0.0075 or 0.75%.
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