AUR (Asset Utilization Ratio): The total assets of the bank divided by the total loans and advances.
To calculate AUR:
AUR = Total Assets / Total Loans and Advances
For Bank Dhofar Saog, the total assets for the year ended December 2015 are OMR 2,067,364,440, and the total loans and advances are OMR 1,673,860,759. Therefore, AUR = 2,067,364,440 / 1,673,860,759 = 1.23
ER (Equity Ratio): The total equity of the bank divided by the total risk-weighted assets.
To calculate ER:
ER = Total Equity / Total Risk-Weighted Assets
For Bank Dhofar Saog, the total equity for the year ended December 2015 is OMR 377,004,010, and the total risk-weighted assets are OMR 1,421,056,643. Therefore, ER = 377,004,010 / 1,421,056,643 = 25.64
ROA (Return on Assets): The net income of the bank divided by the total assets.
To calculate ROA:
ROA = Net Income / Total Assets
For Bank Dhofar Saog, the net income for the year ended December 2015 is OMR 122,697,133, and the total assets are OMR 2,067,364,440. Therefore, ROA = 122,697,133 / 2,067,364,440 = 0.59
EM (Efficiency Measure): The ratio of net income to average equity.
To calculate EM:
EM = Net Income / Average Equity
For Bank Dhofar Saog, the average equity for the year ended December 2015 is OMR 377,004,010. Therefore, EM = 122,697,133 / 377,004,010 = 0.32
ROE (Return on Equity): The net income of the bank divided by the average equity.
To calculate ROE:
ROE = Net Income / Average Equity
For Bank Dhofar Saog, the average equity for the year ended December 2015 is OMR 377,004,010. Therefore, ROE = 122,697,133 / 377,004,010 = 0.32
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QUESTION 36 Which of the following has no affect on the accumulated Adjustments Account (AAA) of an 5 Corporation O Expenses related to Tax-Exempt Income. Nontaxable Distributions to shareholders of the S Corporation. Charitable Contribution. Section 1231 Gain.
The given options, the expense related to tax-exempt income, non-taxable distributions to shareholders of the S Corporation, and charitable contributions can affect the accumulated adjustments account (AAA) of an S corporation Therefore the correct option is B.
However, section 1231 gain does not have any effect on AAA as it is not related to the taxation of an S corporation's income. Section 1231 gain refers to the gain or loss from the sale or exchange of property used in a business or held for investment purposes.
Therefore, it does not impact the AAA, which is a record of an S corporation's taxable income and distributions to shareholders.
Hence the correct option is B
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An American airline company started a grocery chain in Australia. This is an example of product development. True / False
Answer:
False.
Explanation:
This is not an example of product development.
Hope this helps!
Explain how a pandemic like COVID-19 can potentially affect the whole financial system. Need detailed answer explaining everything step by step and with all necessary information, also use important terminologies and examples.
It is a fact that pandemic like COVID-19 can potentially disrupt the entire financial system.
How does a pandemic like COVID-19 affect the whole financial system?During a pandemic, the widespread outbreak of a contagious disease can lead to disruptions in economic activities. Governments impose lockdowns and social distancing measures to contain the spread which results in the closure of businesses, reduced consumer spending and disrupted supply chains.
These factors directly affect the revenue and profitability of companies leading to financial distress, bankruptcies, and job losses. The investor confidence tends to decline during such uncertain times leading to market volatility and fluctuations in asset prices.
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roust Company has FCFF of $ 1.9 billion and FCFE of $1.6 billion. Proust's WACC is 12 percent, and its required rate of return for equity is 15 percent. FCFF is expected to grow forever at 6.5 percent, and FCFE is expected to grow forever at 6 percent. Proust has debt outstanding of $20 billion. What is the value of stock based on FCFE model (in billions)?
FCFE stands for "Free Cash Flow to Equity" and it is an essential financial metric that indicates the cash flow accessible to the equity shareholders of a corporation.
FCFE can be calculated by subtracting capital expenditures from the cash flow from operations and adjusting for net borrowing.
Similarly, the valuation model is used to assess the value of a corporation or its assets in terms of future income, cash flows, or earnings.
As per the given data: FCFF = $1.9 billionFCFE = $1.6 billionWACC = 12%Rate of return for equity = 15%
FCFF growth rate = 6.5%
FCFE growth rate = 6%
Debt = $20 billion
To calculate the value of stock based on FCFE model (in billions):
First, we will calculate the cost of equity by using CAPM (Capital Asset Pricing Model)
formula:
Cost of equity = Rf + Beta (Rm - Rf)Where, Rf = Risk-free rateBeta = Beta of the stockRm = Market rate of return
Rf is not given in the question. We will assume it to be 3% and Beta is also not given in the question.
So, we will assume it to be 1.25.
Market rate of return is given in the question which is 15%.
Therefore,
Cost of equity = 3 + 1.25(15 - 3) = 3 + 12.5 = 15.5%Now, we will calculate the Equity value using the following formula:
Equity value = FCFE / (Cost of equity - FCFE growth rate)By putting the given values in the formula:
Equity value = $1.6 billion / (15.5% - 6%) = $1.6 billion / 9.5% = $16.84 billion
Therefore, the value of stock based on FCFE model is $16.84 billion (in billions).
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Choose the best answer. Stablecoins are generally capable of being more stable than volatile cryptocurrency for which of the following reasons?
They are generally pegged to assets which are historically (and relatively) more stable than cryptocurrency, such as using certain fiat currency.
Being algorithmically pegged to stable cryptocurrency makes them more stable than fiat currency.
Stablecoins are generally capable of crashing and burning crypto more quickly and algorithmically to maintain the monetary supply.
Stablecoin backing and reserves are more trustworthy than government backed fiat currency.
Which is true about multisignature wallets?
They are typically far less complicated to use than single, non-multisig wallets
They require 2 or more signatures to transfer funds
They have all the benefits of regular wallets without any drawbacks or management issues
They require at least 3 signatures to transfer funds
Stablecoins are generally capable of being more stable than volatile cryptocurrency for the following reason: They are generally pegged to assets which are historically (and relatively) more stable than cryptocurrency, such as using certain fiat currency.
This is because by pegging stablecoins to a stable asset, their value remains less volatile and more predictable.On the other hand, volatile cryptocurrencies like Bitcoin can experience sudden spikes and drops in value due to market speculation and other factors.
The true statement about multisignature wallets is: They require 2 or more signatures to transfer funds. This feature provides enhanced security, as it necessitates multiple parties to authorize transactions, thereby reducing the risk of unauthorized access or fraud.While they may be more secure, multisignature wallets can be more complicated to use and may require more management than regular wallets. They typically require multiple users to agree on a transaction before it can be executed.
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next to fresh _______________ procurement, fresh produce buying is perhaps the most difficult purchasing task the hospitality buyer faces.
Fresh produce buying is considered one of the most challenging purchasing tasks for hospitality buyers, second only to fresh seafood procurement.
The perishable nature, seasonality, quality variations, and complex supply chain of fresh produce contribute to the difficulties in its procurement. Several factors contribute to the complexities of buying fresh produce. Firstly, fresh produce is highly perishable and has a limited shelf life. This necessitates precise timing and coordination to ensure that the produce arrives at the establishment in optimal condition. Additionally, the seasonality of fresh produce introduces further complexities, as the availability and quality of certain items fluctuate throughout the year. Hospitality buyers must stay informed about seasonal variations and adjust their purchasing accordingly. Furthermore, fresh produce exhibits natural variations in quality, appearance, and taste. These variations make it challenging to consistently source produce that meets specific standards and expectations. Hospitality buyers must carefully select suppliers who can provide consistent quality and establish clear specifications and quality standards. Coordinating and managing these various stakeholders, ensuring timely delivery, and maintaining product integrity throughout the chain require careful attention and effective communication. Overall, the perishable nature, seasonality, quality variations, and complex supply chain make fresh produce buying a formidable task for hospitality buyers. Successful procurement relies on a combination of market knowledge, strong supplier relationships, effective communication, and meticulous planning to ensure the availability of high-quality produce that meets the needs of the establishment and its customers.
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An account was opened with $1,000 eight years ago. Today, the account balance is $1,700. If the account paid interest compounded semiannually, how much interest on interest was earned? Please enter your answer in dollars to two decimals (cents) without a $ sign. An investment will pay you $400 per year for 25 years with the first payment received 9 years from today. If you use a 8% rate to evaluate investments, how much would you pay for the investment today? Please enter your answer in whole dollars without a $ sign. You are planning to retire in 30 years and are planning a 20 year retirement. Prior to retirement, you will save $1200 at the end of each year. If your investments can earn 8% per year over the entire time, how much can you withdraw at the end of each year during retirement? Please enter your answer in whole dollars without a $ sign. One bank will pay you 3.8% interest compounded annually. If you invest $1000 today, what simple interest rate would you need to earn at a competing bank to have the same amount of money in 9 years? Please enter your answer as a percentage to one decimal without a % sign. You buy an antique today for $1000 and sell it 3 months from today for $1100. What is the difference between the EAR and APR? Please enter your answer as a percentage to one decimal without a % sign. You deposit $200 each year in an account for 15 years and then $400 each year in the same account for the 15 years after that. If you are earning 8% annual compounding interest in the account the entire time how much do you have in 30 years? Please enter your answer in whole dollars without a $ sign.
1. Interest on interest earned To calculate the interest on interest, we need to subtract the initial principal from the final account balance. In this case, the interest earned would be $1,700 - $1,000 = $700.
2. Present value of the investment:
To determine the present value of the investment, we can use the formula for the present value of an ordinary annuity. Given an annual payment of $400 for 25 years and an 8% interest rate, the present value would be approximately $4,004.
3. Withdrawal amount during retirement:
Using the formula for the future value of an ordinary annuity, with an annual deposit of $1,200 for 30 years and an 8% interest rate, the accumulated amount would be approximately $168,820. Assuming a 20-year retirement, you can withdraw $8,441 annually.
4. Simple interest rate needed to match another bank's offer:
To find the needed interest rate, we can use the formula: Future Value = Principal × (1 + Interest Rate × Time). Rearranging the formula, we find that the required interest rate would be approximately 4.77%.
5. Difference between EAR and APR:
Without specific compounding information, it is not possible to determine the exact difference between the Effective Annual Rate (EAR) and the Annual Percentage Rate (APR). The EAR takes into account compounding, while the APR does not.
6. Accumulated amount in 30 years:
Using the future value formula, with annual deposits of $200 for the first 15 years and $400 for the next 15 years, and an 8% interest rate, the accumulated amount would be approximately $39,351.
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what is the coupon rate of an 8 year, 10,000 bond with semiannual coupons and a price of 9006.6568, if it has a yield to maturity of 6.5%?
a. 4.888%
b. 5.87%
c. 6.84%
d. 3.91%
The cοupοn rate οf an 8 year, 10,000 bοnd with semi-annual cοupοns and a price οf 9006.6568, if it has a yield tο maturity οf 6.5% is 4.888%.
Hοw tο calculate the cοupοn rate?Tο calculate the cοupοn rate, we need tο find the annual cοupοn payment and divide it by the face value οf the bοnd.
First, let's calculate the annual cοupοn payment:
Since the bοnd has semi-annual cοupοns, it will make 8 years * 2 = 16 cοupοn payments.
The bοnd's face value is $10,000, sο each cοupοn payment will be $10,000 * cοupοn rate / 2.
Next, let's calculate the price οf the bοnd based οn the given yield tο maturity:
The price οf the bοnd is $9006.6568.
Nοw, we can set up an equatiοn tο sοlve fοr the cοupοn rate:
Price οf the bοnd = Present value οf the cοupοn payments + Present value οf the face value.
Using the yield tο maturity οf 6.5%, we can discοunt the future cash flοws tο their present values.
Let's sοlve the equatiοn tο find the cοupοn rate:
Price οf the bοnd = [($10,000 * cοupοn rate / 2) / (1 + (6.5% / 2))^1] + [($10,000 / (1 + (6.5% / 2))^16]
$9006.6568 = [($10,000 * cοupοn rate / 2) / (1.0325)] + [($10,000 / (1.0325))^16]
After sοlving this equatiοn, the calculated cοupοn rate is apprοximately 4.888%.
Therefοre, the cοrrect answer is οptiοn a. 4.888%.
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Core inflation refers to the inflation picture after stripping away the Multiple Choice o capital goods prices. o food and energy prices. o government-regulated prices. o service-sector prices.
Core inflation refers to the inflation picture after stripping away the food and energy prices. The reason for the removal of these two items is that they can be extremely volatile and their prices can fluctuate drastically.
This makes it difficult to analyze and interpret inflation data. By removing these two items, economists and policymakers can get a better idea of how underlying inflation is behaving. Core inflation provides a more stable measure of inflation, which is useful for policymakers as it helps them to make better decisions when it comes to monetary policy.
They can use core inflation data to set interest rates and adjust other policies that affect the economy. Additionally, it is also useful for businesses and consumers as they can make more informed decisions about prices and wages. Overall, core inflation is an important tool that helps us to better understand the economy and make more informed decisions.
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Michigan Inc. purchased a 1-year insurance policy for $120,000, and the firm makes quarterly financial statements. If the March 31 quarterly adjusting entry for prepaid insurance is omitted, which of the following will be true? Assets will be overstated by $10,000 and net income will be understated by $10,000. b. Assets will be overstated by $30,000 and net income will be overstated by $30,000. c. Failure to make the adjustment does not affect the quarterly financial statements. d. Expenses will be overstated by $30,000 and net income and stockholders' equity will be understated by $30,000.
The correct option is d. Expenses will be overstated by $30,000 and net income and stockholders' equity will be understated by $30,000.
When the adjusting entry for prepaid insurance is omitted, the prepaid insurance account remains unchanged at its original value of $120,000. However, as time passes, a portion of the prepaid insurance becomes an expense that should be recognized on the income statement.For the quarter ending March 31, the company should recognize 1/4th of the prepaid insurance as an expense, which amounts to $30,000 ($120,000 divided by 4). By failing to make this adjusting entry, the company does not record the expense, resulting in expenses being understated by $30,000. Since expenses are understated, net income will also be understated by the same amount, $30,000. Additionally, stockholders' equity will be reduced by the amount of the net income reduction.
Therefore, the correct statement is that expenses will be overstated by $30,000 and net income and stockholders' equity will be understated by $30,000.
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Visa, Inc. (V) has a beta of 0.72, is selling for $203.50, and will pay a $1.85 dividend at the end of the year. If the stock is priced at $209.45 at year-end, it is __________, so __________ it. Assume the risk-free rate is 2.41%, and the expected market return is 3.83%.
A. underpriced / sell
B. underpriced / buy
C. overpriced / buy
D. overpriced / sell
Visa, Inc. (V) has a beta of 0.72, is selling for $203.50, and will pay a $1.85 dividend at the end of the year. If the stock is priced at $209.45 at year-end, it is underpriced , so buy it. Assume the risk-free rate is 2.41%, and the expected market return is 3.83%.(B)
To determine if Visa Inc. (V) is underpriced or overpriced, we need to calculate the expected return using the Capital Asset Pricing Model (CAPM):
1. Find the market risk premium: Market risk premium = Expected market return - Risk-free rate = 3.83% - 2.41% = 1.42%.
2. Calculate the stock's expected return: Expected return = Risk-free rate + Beta * Market risk premium = 2.41% + 0.72 * 1.42% = 3.43%.
3. Determine the stock's actual return: Actual return = (Year-end price + Dividend - Current price) / Current price = ($209.45 + $1.85 - $203.50) / $203.50 = 3.85%.
Since the actual return (3.85%) is higher than the expected return (3.43%), Visa Inc. (V) is underpriced, and it is advisable to buy it.
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Question 19 10 pts Assume a corporation has just paid a dividend of $ 3.52 per share. The dividend is expected to grow at a rate of 3.8% per year forever, and the discount rate is 6.9%. What is the Capital Gains yield of this stock? Enter your answer as a percentage, rounded to 1 decimal, and without the percentage sign. So, if your answer is 0.05678, just enter 5.7.
The capital gains yield of this stock is -3.1%.
How to calculate the capital gainsThe Capital Gains yield of a stock is the change in the price of a stock divided by the original price of the stock. It is expressed as a percentage.
To calculate the Capital Gains yield of this stock, we need to find the price of the stock. We can use the Gordon Growth Model to find the price of the stock.
The formula for the Gordon Growth Model is:
Price = Dividend / (Discount Rate - Growth Rate)
Where:
Dividend = $3.52
Discount Rate = 6.9%
Growth Rate = 3.8%
Substituting these values into the formula, we get:
Price = $3.52 / (0.069 - 0.038) = $87.99
calculate the Capital Gains yield using the following formula:
Capital Gains Yield = (New Price - Old Price) / Old Price x 100
Where:
New Price = Price after dividend growth
Old Price = Price before dividend growth
We already calculated the Old Price as $87.99.
calculate the New Price
Dividend after one year = Dividend x (1 + Growth Rate)
= $3.52 x (1 + 0.038) = $3.65
New Price = Dividend after one year / (Discount Rate - Growth Rate)
New Price = $3.65 / (0.069 - 0.038) = $118.11
we can calculate the Capital Gains yield
Capital Gains Yield = ($118.11 - $87.99) / $87.99 x 100 ≈ 33.9%
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Rogers Radiology has demanded that all employees report family medical histories to determine whether they are likely to develop debilitating illnesses. Under the Genetic Information Nondiscrimination Act of 2008
Under the Genetic Information Nondiscrimination Act (GINA) of 2008, it is prohibited for employers to request or use the genetic information of employees or their family members for employment-related decisions. Thus, option B is correct.
Genetic information includes information about an individual's genetic tests, genetic diseases, or conditions, as well as family medical history. In the given scenario, Rogers Radiology's demand for employees to report family medical histories falls under the category of genetic information.
Family medical history can provide insights into an individual's genetic predisposition to certain illnesses or conditions. Therefore, requesting employees to disclose this information would be a violation of GINA.
C and D are also incorrect because GINA prohibits the use of genetic information for decisions regarding hiring, firing, promotions, and offering insurance to employees.
The law aims to protect individuals from discrimination based on their genetic information and to ensure equal opportunities in employment and insurance coverage.
In summary, under GINA, Rogers Radiology's demand for employees to report family medical histories is not allowed because it involves genetic information, which is protected under the law to prevent discrimination in employment and insurance decisions. Thus, option B is correct.
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Complete Question:
Rogers Radiology has demanded that all employees report family medical histories to determine whether they are likely to develop debilitating illnesses. Under the Genetic Information Nondiscrimination Act of 2008?
A. this is allowed because it does not involve genetic testing.
B. this is not allowed because it involves genetic information.
C. this information may be used for decisions regarding whether or not to offer insurance to employees, but not hiring, firing or promotions.
D. this information may be used for decisions regarding hiring, firing or promotions, but not whether or not to offer insurance to employees.
In an indifference curve/budget line diagram, at the consumer equilibrium the slope of the budget line
a. is greater than the slope of the indifference curve.
b. has nothing to do with the equilibrium.
c. may be greater than, equal to, or less than the slope of the indifference curve.
d. is less than the slope of the indifference curve.
e. equals the slope of the indifference curve.
At consumer equilibrium in an indifference curve/budget line diagram, the slope of the budget line equals the slope of the indifference curve.
This means that the consumer is spending their entire budget and maximizing their utility by choosing a combination of goods that puts them on the highest attainable indifference curve given their budget constraint. Therefore, the correct answer is (e) equals the slope of the indifference curve.
Your answer: In an indifference curve/budget line diagram, at the consumer equilibrium, the slope of the budget line (e) equals the slope of the indifference curve. This is because, at equilibrium, the consumer maximizes their satisfaction given their budget constraints, and the indifference curve is tangent to the budget line.
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onsider the following information about company C's performance and financial position in yeart Net profit = $100 Book value of equity =$300 Cost of equity = 8 percent Company's C abnormal earings in year t are
To calculate the weighted average cost of capital (WACC) for Company C, we need to use the following formula: WACC = (D1 * w1) + (D2 * w2) + (D3 * w3) + ... + (Dn * wn)
Here D1, D2, D3, ..., Dn are the different sources of financing for the company, w1, w2, w3, ..., wn are their respective weights, and n is the total number of sources of financing.
The information provided in the question only specifies the net profit and book value of equity for Company C. The company's cost of debt, cost of preferred equity, or other sources of financing. Therefore, we cannot calculate the WACC for Company C using the given information.
To obtain a more accurate estimate of Company C's WACC, we would need to gather additional information about the company's financing structure and the rates of return associated with each source of financing.
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Manufacturing overhead is allocated by:
O Debiting costs of goods sold and crediting the Manufacturing overhead account
O Debiting the Manufacturing overhead account and crediting factory related costs
O Debiting the Work-in-process inventory account and crediting the Manufacturing overhead account
O Debiting the Manufacturing overhead account and crediting the Work-in-process inventory account
The correct answer is: "Debiting the Manufacturing overhead account and crediting the Work-in-process inventory account."
In the process of manufacturing goods, various indirect costs are incurred that cannot be directly attributed to a specific product. These costs, known as manufacturing overhead, include expenses like factory utilities, equipment depreciation, and indirect labor. To allocate these costs to the products being manufactured, the manufacturing overhead account is debited. This ensures that the indirect costs are properly accounted for in the overall cost of production.
On the other hand, the Work-in-process inventory account represents the cost of partially completed goods that are still in the production process. By crediting the Work-in-process inventory account, the allocated manufacturing overhead costs are added to the cost of the goods in progress. This accounting entry reflects the inclusion of manufacturing overhead in the inventory valuation and accurately represents the total cost of the products being manufactured.
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A company is able to sell 50 000 cans of deodorant per year for the next three years at a price of R4.00 per can. The variable cost per unit is R2.50 while it required R50 000 in research and development to develop the product. The fixed costs associated with the project are R12 000 while the equipment will cost R90 000 including installation costs. An initial outlay of R20 000 will be required for working capital. The equipment will be depreciated using the straight line method over three years and has a salvage value of R20 000. The company’s tax rate is 40% while the cost of capital is 20%. What are the associated cash flows for the project? Calculate the payback period, accounting rate of return, IRR, NPV and profitability index associated with the project
To calculate the associated cash flows for the project, we need to consider the various costs, revenues, and depreciation over the three-year period. Here's a breakdown of the cash flows:
Year 0:
Initial outlay for working capital: -R20,000
Research and development cost: -R50,000
Equipment cost: -R90,000
Total cash flow in Year 0: -(R20,000 + R50,000 + R90,000) = -R160,000
Year 1:
Revenue: 50,000 cans * R4.00 per can = R200,000
Variable costs: 50,000 cans * R2.50 per can = R125,000
Fixed costs: -R12,000
Depreciation expense (straight-line): (R90,000 - R20,000) / 3 = R23,333.33
Taxable income: Revenue - Variable costs - Fixed costs - Depreciation = R200,000 - R125,000 - R12,000 - R23,333.33 = R39,666.67
Taxes (40%): -R15,866.67
Net income: Taxable income - Taxes = R39,666.67 - R15,866.67 = R23,800
Net cash flow in Year 1: Net income + Depreciation = R23,800 + R23,333.33 = R47,133.33
Year 2:
Revenue: R200,000
Variable costs: R125,000
Fixed costs: -R12,000
Depreciation expense: R23,333.33
Taxable income: R200,000 - R125,000 - R12,000 - R23,333.33 = R39,666.67
Taxes: -R15,866.67
Net income: R23,800
Net cash flow in Year 2: R23,800 + R23,333.33 = R47,133.33
Year 3:
Revenue: R200,000
Variable costs: R125,000
Fixed costs: -R12,000
Depreciation expense: R23,333.33
Taxable income: R200,000 - R125,000 - R12,000 - R23,333.33 = R39,666.67
Taxes: -R15,866.67
Net income: R23,800
Net cash flow in Year 3: R23,800 + R23,333.33 = R47,133.33
Now, let's calculate the payback period, accounting rate of return, internal rate of return (IRR), net present value (NPV), and profitability index (PI).
Payback period:
The payback period is the time it takes for the initial investment to be recovered.
Year 0: -R160,000
Year 1: R47,133.33
Year 2: R47,133.33
Year 3: R47,133.33
The payback period occurs in Year 2, and there is still R12,600.01 remaining.
Payback period = Year 2 + (Remaining amount / Year 3 cash flow)
Payback period = 2 + (R12,600.01 / R47,133.33) ≈ 2.27 years
Accounting rate of return (ARR):
ARR = (Average annual net income / Initial investment) * 100
Average annual net income = (R23,800 + R23,800 + R23,800) / 3 = R23
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You have a margin trading account with a 50% initial margin and a 35% maintenance margin. The interest rate on your loans is 8% per year.
1. You deposit $15,000 of your own money in the account. You will use all of it to buy on margin a stock trading at $50 per share.
a) Calculate the price at which you will receive a margin call
b) Calculate your ROI — if after 3 months the share pays a dividend of $0.35 per share and is trading at $56.50 per share.
a) To calculate the price at which you will receive a margin call, we need to determine the minimum equity level required based on the maintenance margin. The initial margin is 50%, which means you initially borrowed 50% of the stock's value.
Initial Margin = $15,000
Borrowed Amount = Initial Margin / (1 - Initial Margin) = $15,000 / (1 - 0.5) = $15,000 / 0.5 = $30,000
Now, let's calculate the minimum equity level required using the maintenance margin:
Maintenance Margin = 35%
Minimum Equity = Maintenance Margin * Total Position Value = 0.35 * ($15,000 + $30,000) = $0.35 * $45,000 = $15,750
Therefore, you will receive a margin call if the equity in your account falls below $15,750.
b) To calculate the ROI (Return on Investment), we need to consider the initial investment, the dividend received, and the current value of the investment after three months.
Initial Investment = $15,000
Dividend per Share = $0.35
Number of Shares = Initial Investment / Share Price = $15,000 / $50 = 300 shares
Dividend Received = Dividend per Share * Number of Shares = $0.35 * 300 = $105
Current Value of Investment = Share Price * Number of Shares = $56.50 * 300 = $16,950
ROI = (Dividend Received + Current Value of Investment - Initial Investment) / Initial Investment
= ($105 + $16,950 - $15,000) / $15,000
= $2,055 / $15,000
≈ 0.137 or 13.7%
Therefore, your ROI after three months, considering the dividend and the increase in share price, is approximately 13.7%. This indicates a positive return on your investment.
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Voluntary Export Restraints between two large countries: (a) are unambiguosly welfare-reducing for the country adopting them (b) may improve the welfare of the trading partner of the country adopting them (c) reduce export while leaving prices unaffected (d) none of the above
This can occur if the trading partner's domestic industries benefit from reduced competition or if it gains access to a larger market share due to the export restrictions imposed by the other country.
The correct option is: (b) may improve the welfare of the trading partner of the country adopting them
Voluntary Export Restraints (VERs) are agreements between countries where the exporting country agrees to limit its exports voluntarily. While VERs are often used as a protectionist measure, their impact on welfare and trade outcomes can vary.
Option (a) stating that VERs are unambiguously welfare-reducing for the country adopting them is not necessarily true. While the restricting country may benefit certain domestic industries or producers, the overall welfare effects depend on various factors such as the specific market conditions, the cost of implementing the VERs, and the response of trading partners.
Option (c) suggesting that VERs reduce exports while leaving prices unaffected is not always the case. Depending on the market dynamics and the response of domestic and foreign firms, VERs can have effects on both export levels and prices. The specific impact would vary depending on the circumstances.
Option (d) states "none of the above," which is the correct answer as the impact of VERs on welfare and trade outcomes is not unambiguously determined and can vary depending on several factors.
However, option (b) is more accurate as VERs may improve the welfare of the trading partner of the country adopting them. This can occur if the trading partner's domestic industries benefit from reduced competition or if it gains access to a larger market share due to the export restrictions imposed by the other country. Nonetheless, the overall welfare effects should be carefully assessed in each specific case.
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Gogo Co. is selling bonds to the market with a face value of
$1000 and the quoted offer price is 98.239, what is the price of
the bond
The price of the bond being sold by Gogo Co. is $982.39. The price of the bond is determined by multiplying the quoted offer price by the face value.
In this case, Gogo Co. is selling bonds with a face value of $1000 and a quoted offer price of 98.239. To calculate the bond price, we multiply the quoted offer price (98.239) by the face value ($1000).
This gives us a bond price of $982.39. The quoted offer price represents a percentage of the face value, so multiplying it by the face value provides the actual dollar value of the bond. Thus, the price of the bond being sold by Gogo Co. is $982.39.
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If the threat of a takeover increases the likelihood that managers will act in the interests of stockholders or bondholders, what type of asymmetric information problem is eliminated?
worthy
the FOMC.
moral hazard
The type of asymmetric information problem that is eliminated when the threat of a takeover increases the likelihood that managers will act in the interests of stockholders or bondholders is the moral hazard problem. The correct answer is moral hazard.
Moral hazard occurs when one party (in this case, the managers) has more information than the other party (the stockholders or bondholders) and therefore may take actions that benefit themselves at the expense of the other party. When managers know that there is a threat of a takeover, they are incentivized to act in the best interest of the stockholders or bondholders to prevent the takeover from happening. This eliminates the moral hazard problem because the managers are now aligned with the interests of the stockholders or bondholders.
This alignment of interests ensures that the managers will make decisions that are worthy of the interests of the stockholders or bondholders and not just their own interests. Therefore, the threat of a takeover can be an effective way to align the interests of managers with those of stockholders or bondholders and eliminate the moral hazard problem. The correct answer is moral hazard.
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Explain the link between the Mexican demand for U.S.goods and the supply of pesos. Next, explain the link between the U.S. demand for Mexican goods and the supply of dollar. The lower the dollar price of a peso, the higher the quantity demanded of pesos, and the lower the quantity supplied of pesos. Do you agree or disagree? Explain.
The link between the Mexican demand for U.S. goods and the supply of pesos is based on the exchange rate between the two currencies. As the Mexican demand for U.S. goods increases, there is a higher demand for U.S. dollars to make payments for those goods. This increased demand for dollars leads to an increased supply of pesos in the foreign exchange market.
When Mexican consumers and businesses seek to purchase U.S. goods, they need U.S. dollars to conduct those transactions. This higher demand for dollars creates upward pressure on the exchange rate, causing the dollar to appreciate relative to the peso. As the dollar strengthens, the quantity of pesos supplied in the foreign exchange market increases. This is because Mexican holders of pesos are willing to exchange them for a higher amount of dollars.
Regarding the U.S. demand for Mexican goods and the supply of dollars, a similar relationship exists. When there is a higher demand for Mexican goods in the United States, U.S. consumers and businesses need Mexican pesos to make payments for those goods. This increased demand for pesos leads to an increased supply of U.S. dollars in the foreign exchange market.
As for the statement that "the lower the dollar price of a peso, the higher the quantity demanded of pesos, and the lower the quantity supplied of pesos," I would disagree. In fact, the opposite is true. A lower dollar price of a peso, or a depreciation of the dollar against the peso, would make Mexican goods relatively more expensive for U.S. consumers. This would decrease the quantity demanded of pesos as U.S. consumers are less willing to exchange their dollars for a higher amount of pesos. Conversely, the quantity supplied of pesos would increase as Mexican holders of pesos are more willing to exchange them for a higher dollar price. Therefore, a lower dollar price of a peso would result in a lower quantity demanded of pesos and a higher quantity supplied of pesos.
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XYZ ltd has identified 2 projects for investment, A and B. Both projects would last for 2 years. The company pays a corporate tax rate of 35% on its cash flow. It can have a 100% first year capital allowance on all forms of capital spending, and is allowed to carry forward but not backward. XYZ ltd has a fixed income of £50,000 every year. The prevailing annual discount rate is 10%.Project A requires an initial investment of £150,000 and will generate £200,000 and £250,000 respectively at the end of each year. Project B requires an initial investment of £300,000 and will generate £500,000 at the end of the project.
(a) Which project(s) the company should invest? Explain your reasoning and show all the necessary calculations.
(b) Do you agree with the following statement? Briefly discuss your reasoning.
"The Net Present Value method generally is the best method to evaluate investment projects and to help firms with capital budget decision. It tells how much added value a firm may have by carrying out the project. The decision rule is simply. Firms should accept a project with a positive NPV and reject one with a negative NPV."
Answer is (a) The company should invest in Project A. The net present value (NPV) of Project A is positive, indicating that it adds value to the company. (b) Yes, I agree with the statement.
(a) The company should invest in Project B. The Net Present Value (NPV) of Project B is higher, indicating greater profitability.
Calculation for Project A:
Year 1 cash flow: £200,000
Year 2 cash flow: £250,000
Calculation for Project B:
Year 2 cash flow: £500,000
Using the discount rate of 10% and considering the corporate tax rate of 35%, we can calculate the NPV for each project.
Therefore, the NPV of Project B (£413,223.14) is higher than the NPV of Project A (£388,429.75), indicating that Project B is more profitable and should be chosen for investment.
(b) Yes, I agree with the statement. The Net Present Value (NPV) method is generally considered the best method for evaluating investment projects and aiding firms with capital budget decisions. NPV takes into account the time value of money, incorporates cash flows over the project's life, and considers the required rate of return.
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A US investor holds a portfolio with $10m invested in the iShares Gold Trust (IAU), which is traded on the New York Stock Exchange, and $30m invested in the iShares Gilt Trak Index Fund (IE), which is traded on the London Stock Exchange. The returns on IAU have a volatility of 40%, the IE index returns have a volatility of 15% and the two returns have a correlation of 0.6. The GBP/USD exchange rate has a volatility of 10% and a correlation of -0.3 with IAU and a correlation of 0.2 with IE. Assume that the discounted expected return on every risk factor is zero. (a) Calculate the 1% 10-day normal linear total Value-at-Risk (VaR) of the portfolio, in $. (b) Decompose this total 1% 10-day normal linear VaR into VaR due to (i) uncertainty in the ETF returns, and (ii) the VaR due to uncertainty in the exchange rate returns. (c) In what circumstances would you expect the total VaR to be greater than, equal to, or less than the sum of the two risk factor VaRs? What is the case in this numerical example? Give reasons why this is the case.
The total VaR is expected to be less than the sum of the risk factor VaRs. This is because the correlation between the ETF returns and the exchange rate returns is negative (-0.3), indicating some diversification benefits in the portfolio.
To calculate the 1% 10-day normal linear total Value-at-Risk (VaR) of the portfolio in USD, we need to consider the volatilities, correlations, and portfolio weights of the investments.
Given data:
Investment 1 (IAU - iShares Gold Trust):
Volatility (IAU): 40%
Correlation with GBP/USD: -0.3
Investment 2 (IE - iShares Gilt Trak Index Fund):
Volatility (IE): 15%
Correlation with GBP/USD: 0.2
Portfolio weights:
IAU: $10m
IE: $30m
(a) Calculating the total VaR of the portfolio:
We'll use the Delta Normal Approach to calculate the VaR.
The formula for the total VaR is:
Total VaR = (Portfolio Volatility) * (Z-Score)
First, we need to calculate the portfolio volatility:
Portfolio Variance = (Weight of IAU)² * (Volatility of IAU)² + (Weight of IE)² * (Volatility of IE)² + 2 * (Weight of IAU) * (Weight of IE) * (Correlation IAU-IE) * (Volatility of IAU) * (Volatility of IE)
Portfolio Volatility = √(Portfolio Variance)
Now, let's calculate the total VaR:
Z-Score for 1% 10-day VaR ≈ 2.33
Total VaR = Portfolio Volatility * Z-Score
(b) Decomposing the total VaR into VaR due to ETF returns and VaR due to exchange rate returns:
To decompose the total VaR, we need to calculate the contribution of each risk factor to the portfolio VaR.
(i) VaR due to uncertainty in the ETF returns:
This can be calculated using the portfolio volatility and weight of the ETF (IAU).
VaR from ETF returns = (Weight of IAU) * (Volatility of IAU) * Z-Score
(ii) VaR due to uncertainty in the exchange rate returns:
This can be calculated using the portfolio volatility and weight of the exchange rate (GBP/USD).
VaR from exchange rate returns = (Weight of GBP/USD) * (Volatility of GBP/USD) * Z-Score
(c) Relationship between the total VaR and the sum of risk factor VaRs:
The total VaR can be greater than, equal to, or less than the sum of the risk factor VaRs depending on the correlation between the risk factors. If the correlation is positive, diversification benefits are limited, and the total VaR can be close to or greater than the sum of the risk factor VaRs. If the correlation is negative, diversification benefits are more significant, and the total VaR is expected to be less than the sum of the risk factor VaRs.
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Glenn carries on a business and is registered for GST. He made a taxable supply of goods in the course of his business and received $1500 in cash and goods with a market value of $700 inclusive of GST in return for the supply. What is the value of the taxable supply made by Glenn?
The value of the taxable supply made by Glenn is $1500.
When determining the value of a taxable supply for GST (Goods and Services Tax) purposes, it is important to consider the consideration received in return for the supply. In this case, Glenn received $1500 in cash and goods with a market value of $700, which includes GST. When calculating the value of the taxable supply, we exclude the GST component. Therefore, the value of the taxable supply made by Glenn is the amount he received in cash, which is $1500.The inclusion of goods with a market value of $700 in the consideration does not affect the value of the taxable supply, as the value for GST purposes is based on the cash received.
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customization, changing consumer preferences, and shorter product life cycles reward agility T/F
Customization, changing consumer preferences, and shorter product life cycles have all become increasingly important factors in the modern business landscape. True.
Companies that can adapt quickly to these changes are rewarded with greater agility, which is necessary to stay competitive and maintain market share. Customization allows companies to tailor their products and services to the unique needs and preferences of individual customers, which can help to build customer loyalty and increase overall satisfaction.
Changing consumer preferences are becoming more common due to advances in technology and shifts in societal values, and companies that can keep up with these changes will be better positioned to succeed in the long run. Finally, shorter product life cycles mean that companies must be able to quickly develop and launch new products to keep up with evolving market demands.
Overall, the ability to be agile in the face of customization, changing consumer preferences, and shorter product life cycles is critical for long-term success in many industries. True.
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New derivative prodcuts are introducted to the market everyday. Some products are not necessarily traded on the exchange such as forward contracts. In this task each student is asked to design a new derivative product. You are not required to use exchange traded assets as underlying assets, but the fair price of the asset should be available. Try to come up with original ideas.
Questions to answer
1) type of derivative, specification of a contract needs to be provided (2marks) 2) provide an analysis of the underlying asset related to your product (2marks)
3) explain what benefits your product has and which type of investors will be interested in your product (2marks)
4) assume an investor opens a long position worth 1mil AUD by using your product by 1st April 5) calculate the return for your investment strategy assuming the contact is closed 1st may 22-you are given the following three cases. provide results:
a) price of underlying assets stays the same from 1st April to may 1st
b) price of underlying assets prices increases by 1 standard deviation of the historical volatility on 1st may 22
Type of Derivative: Volatility Swap Contract
Specification of Contract: The volatility swap contract is an over-the-counter derivative that allows investors to trade on the volatility of an underlying asset. The contract specifies a fixed period during which the investor agrees to pay or receive the difference between the realized and agreed-upon volatility of the underlying asset.
Analysis of the Underlying Asset: The underlying asset for the volatility swap contract could be a stock index, such as the S&P 500. The analysis of the index would involve studying its historical volatility, assessing any factors that may impact volatility (e.g., economic indicators, geopolitical events), and analyzing the options market for implied volatility.
Benefits and Targeted Investors: The volatility swap contract offers several benefits. Firstly, it allows investors to gain exposure to the volatility of an asset without directly buying or selling the asset itself. This can be useful for investors who want to hedge against volatility risk or speculate on future market volatility.
Calculation of Return:
a) If the price of the underlying asset stays the same from April 1st to May 1st, the return on the volatility swap contract would be zero. This is because the volatility of the asset remains unchanged, and there would be no difference between the realized and agreed-upon volatility.
b) If the price of the underlying asset increases by 1 standard deviation of the historical volatility on May 1st, the return on the volatility swap contract would depend on the direction and magnitude of the change in volatility.
In both cases, it is important to note that the return on the volatility swap contract is solely based on the difference between realized and agreed-upon volatility, rather than the direction or magnitude of the price change of the underlying asset.
The volatility swap contract is a unique derivative product that allows investors to trade on the expected future volatility of an underlying asset. By focusing on volatility, investors can potentially profit from significant price fluctuations or hedge against potential losses caused by market uncertainty.
To design such a product, an analysis of the underlying asset, such as a stock index like the S&P 500, is essential. Historical data would be examined to determine the average volatility, standard deviation, and any patterns or trends in volatility over time. Additionally, factors influencing volatility, such as economic indicators, geopolitical events, and market sentiment, would be considered. Implied volatility from options prices could also provide insights into market expectations.
The volatility swap contract offers benefits to different types of investors. Hedgers, such as asset managers or institutional investors, can utilize this product to mitigate volatility risk in their portfolios. By entering into a volatility swap, they can receive compensation.
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how does an increase in the income tax rate affect the breakeven point?
When calculating the breakeven point, businesses take into account their fixed costs, variable costs, and selling price. An increase in the income tax rate can impact both fixed and variable costs, ultimately affecting the breakeven point. If the income tax rate increases, fixed costs such as rent and salaries may also increase, causing the breakeven point to rise.
Additionally, an increase in income tax may lead to an increase in the cost of materials or labor, which would impact variable costs and therefore the breakeven point. It is important for businesses to re-evaluate their breakeven point when there are changes in tax rates to ensure they are pricing their products or services appropriately to maintain profitability. Overall, an increase in the income tax rate can have a significant impact on the breakeven point and should be taken into consideration when making financial decisions.
An increase in the income tax rate can affect the breakeven point in a few ways. The breakeven point is the point at which a company's revenues equal its total costs, resulting in no profit or loss.
1. Impact on revenue: Higher income tax rates may lower disposable income for consumers, leading to reduced demand for products and services. This could decrease a company's revenue, pushing the breakeven point further away.
2. Impact on costs: If the income tax increase affects a company's employees, it could lead to higher labor costs. The company may need to increase wages to offset the higher tax burden, which raises its total costs. This could also move the breakeven point further away.
In summary, an increase in the income tax rate can affect the breakeven point by potentially lowering revenues and increasing costs for a company. This may result in a higher breakeven point, making it more challenging for the company to achieve profitability.
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true or false, mandatory medicaid expansion was added under the affordable care act.
Under the Affordable Care Act (ACA), commonly known as Obamacare, mandatory Medicaid expansion was added. True statement.
The ACA was signed into law in 2010 with the intention of expanding healthcare coverage to millions of Americans who were uninsured or underinsured. One of the key provisions of the law was to expand Medicaid eligibility to individuals and families with incomes up to 138% of the federal poverty level. The Medicaid expansion was aimed at increasing access to affordable healthcare for low-income Americans, particularly those who had previously fallen through the cracks of the healthcare system.
However, the mandatory nature of the Medicaid expansion was challenged by some states in court, and the Supreme Court ultimately ruled in 2012 that states could not be forced to expand Medicaid. As a result, some states have chosen not to expand Medicaid eligibility, leaving millions of low-income Americans without access to affordable healthcare.
Overall, the mandatory Medicaid expansion has been a significant part of the ACA's efforts to improve access to healthcare for all Americans. True statement.
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Discuss the issues surrounding the Civil Rights Movement during the 1960s. Why did it happen during the 1960's and not sooner or later? Talk about the strategies behind the protests but what setbacks also occurred. Has enough progress been made when you consider 2020? Or do you believe that more changes need to be made? Provide examples.
The Civil Rights Movement of the 1960s addressed systemic racial discrimination and fought for equal rights for African Americans. It occurred during this period due to a combination of factors, including heightened social and political awareness, the influence of earlier civil rights efforts, the impact of significant events, and the strategies employed by activists. While progress has been made since then, significant challenges and disparities persist, highlighting the need for ongoing change and reform.
Timing of the Civil Rights Movement: The Civil Rights Movement gained momentum in the 1960s due to several factors. The influence of earlier civil rights efforts, such as the work of organizations like the National Association for the Advancement of Colored People (NAACP) and individuals like Rosa Parks and Martin Luther King Jr., laid the groundwork for further action. The changing social and political climate, influenced by the Cold War and the struggle for global democracy, also created a context conducive to demands for racial equality.
Protest strategies: The Civil Rights Movement employed various strategies to challenge racial discrimination and achieve equality. Nonviolent protests, such as sit-ins, freedom rides, and peaceful marches, were key tactics used to draw attention to injustice and prompt change. These strategies aimed to expose the brutality and unfairness of segregation, gain sympathy and support from the wider public, and put pressure on lawmakers to enact civil rights legislation.
Setbacks and challenges: The Civil Rights Movement faced significant setbacks and challenges. Opposition and resistance to desegregation were fierce, resulting in violence, arrests, and even loss of life. The Southern states, in particular, resisted change and employed tactics such as voter suppression, intimidation, and police brutality. Additionally, internal divisions within the movement itself, differing ideologies, and strategic disagreements posed challenges to its effectiveness and unity.
Progress and ongoing challenges: The Civil Rights Movement brought about significant changes and legislative victories. The Civil Rights Act of 1964 and the Voting Rights Act of 1965 were major milestones in dismantling legal segregation and ensuring voting rights for African Americans. However, persistent racial disparities and injustices indicate that more progress is needed. In 2020, the Black Lives Matter movement gained prominence, highlighting the ongoing systemic racism, police violence, and inequalities faced by Black communities. This demonstrates that despite progress, more changes and reforms are necessary to achieve true equality and justice.
The Civil Rights Movement of the 1960s was a response to entrenched racial discrimination and inequality. It emerged due to a combination of social and political factors, the influence of earlier civil rights efforts, and the strategies employed by activists. While progress has been made since then, setbacks and ongoing challenges persist. Racial disparities and injustices in areas such as education, employment, criminal justice, and systemic racism necessitate continued efforts to bring about meaningful change. Movements like Black Lives Matter demonstrate the ongoing need for reform and the imperative of addressing racial inequality in contemporary society.
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