The employee does not have to prove that it was the employer’s fault in order to claim compensation (although if the employee can prove this, he or she can apply for more compensation). The employee must only show that the injury or illness arose because of or during work.
In South Africa, the Compensation for Occupational Injuries and Diseases Act 130 of 1993 governs compensation for employees who are injured while working. An employee, who is injured or contracts an illness due to his or her job, is entitled to receive compensation from the employer in terms of this Act. The employee must only show that the injury or illness arose because of or during work. According to the question, Jane owns a garden company and her employee Sam broke his arm while felling a tree. Jane does not want to offer Sam compensation because he broke his arm because he was talking on his phone to his wife, while he should have been working. There were no eye-witnesses. Sam claims the belt attaching him to the tree was broken. Therefore, Sam should receive compensation as he suffered the injury during his work time and his work nature was dangerous. Even if it was due to his own fault or a result of his negligence, the employer is still liable to compensate the employee. Therefore, option C is the correct answer, which says the employee does not have to prove that it was the employer’s fault in order to claim compensation (although if the employee can prove this, he or she can apply for more compensation). The employee must only show that the injury or illness arose because of or during work. This is the rule set by the Compensation for Occupational Injuries and Diseases Act 130 of 1993.
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Bond Z is a 2% annual coupon bond maturing in 5 years with a face value of $1,000. The interest rate for all maturities is 10%. What is Bond Z's Macaulay duration? NOTE: Answers should be expressed in
Answer:
Explanation:
To calculate Bond Z's Macaulay duration, we need to calculate the present value of each cash flow and multiply it by the respective time period. The Macaulay duration is then the sum of these values divided by the bond's current price.
Given information:
Coupon rate = 2%
Face value = $1,000
Maturity = 5 years
Interest rate = 10%
First, let's calculate the present value of each cash flow:
Year 1:
Coupon payment = 2% * $1,000 = $20
Present value = $20 / (1 + 10%)^1 = $18.18
Year 2:
Coupon payment = 2% * $1,000 = $20
Present value = $20 / (1 + 10%)^2 = $16.53
Year 3:
Coupon payment = 2% * $1,000 = $20
Present value = $20 / (1 + 10%)^3 = $15.03Year 4:
Coupon payment = 2% * $1,000 = $20
Present value = $20 / (1 + 10%)^4 = $13.66
Year 5:
Coupon payment = 2% * $1,000 = $20
Present value = ($20 + $1,000) / (1 + 10%)^5 = $925.93
Next, let's calculate the Macaulay duration:
Macaulay duration = (1 * $18.18 + 2 * $16.53 + 3 * $15.03 + 4 * $13.66 + 5 * $925.93) / $1,000
Macaulay duration = ($18.18 + $33.06 + $45.09 + $54.64 + $4,629.65) / $1,000
Macaulay duration = $4,780.62 / $1,000
Macaulay duration ≈ 4.781
Therefore, Bond Z's Macaulay duration is approximately 4.781.
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Macaulay duration is a measure of the weighted average time until the bond's cash flows (coupon payments and face value) are received.
It is calculated by dividing the present value of each cash flow by the bond's current market price and summing them up.
To calculate Bond Z's Macaulay duration, we need to calculate the present value of each cash flow and the bond's current market price.
Given:
Annual coupon rate = 2%
Face value = $1,000
Number of years to maturity = 5
Interest rate = 10%
First, let's calculate the present value of each cash flow
The coupon payments are $20 per year (2% of $1,000).
The face value payment at maturity is $1,000.
Using the formula for present value of a future cash flow, we can calculate the present value of each cash flow:
Present value of coupon payments = $20 / (1 + 10%)^1 + $20 / (1 + 10%)^2 + $20 / (1 + 10%)^3 + $20 / (1 + 10%)^4 + $1,020 / (1 + 10%)^5
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Graded and unqualified absolutism both accept the idea that absolutes can conflict with each other at times. True or False
False. Graded and unqualified absolutism hold different perspectives regarding the conflict of absolutes.
Graded absolutism, also known as the doctrine of the lesser evil, acknowledges that moral absolutes can conflict with each other. In this ethical framework, different moral principles are assigned varying levels of importance or priority, and when conflicting situations arise, one absolute may be considered more important than another. Thus, graded absolutism allows for a ranking or grading of moral absolutes based on the severity or significance of the ethical principles involved.
On the other hand, unqualified absolutism, also known as moral absolutism or ethical absolutism, asserts that moral absolutes do not conflict with each other. According to this perspective, moral principles are seen as universally binding and unchanging, and they should be followed without exception. Unqualified absolutism holds that if two moral absolutes appear to conflict, it is due to a misunderstanding or misinterpretation of those principles.
Therefore, graded absolutism acknowledges the potential for conflicting absolutes, while unqualified absolutism denies the existence of such conflicts.
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Write a two-page HR paper on workplace social media policies. Be sure to include seven references.
The title of paper will be:
The Importance of Workplace Social Media Policies: Balancing Employee Engagement and Organizational ProtectionHow can workplace social media policies effectively balance employee engagement and organizational protection?In today's digital age, the use of social media has become ubiquitous, both in personal and professional contexts. As a result, organizations are recognizing the need for well-defined workplace social media policies to address the opportunities and challenges posed by this powerful communication tool.
While it is essential to foster employee engagement through social media, it is equally important to safeguard the organization's reputation, protect confidential information and mitigate potential legal risks. This paper examines the significance of workplace social media policies and explores strategies to strike a balance between employee engagement and organizational protection.
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Strike Zone Fishing, Inc. leads charter fishing expeditions from South Beach Marina in Hilton Head Island, South Carolina. The company began business on May 1, 2022. During May, the following transactions occurred: • The owner invested $12,000 in the company in exchange for stock. The company borrowed $5,000 from HHI Bank. • The company purchased $10,000 in equipment for cash. The company purchased $700 of supplies on account. • The company earned $2,150 in revenue during the month. $1,570 of its revenue was for cash. The remainder was on account. • The company paid dock fees of $600 in cash during the month to the marina. • The company paid $800 in dividends to its owner during May. What was the company's cash flows from operating activities during May? $850 $970 $370 $2,420 $170
The correct option is: $850. Details of calculation accounting equation and explanation are provided below: To calculate the cash flows from operating activities during May, we need to compute the following: Cash Inflows.
Cash Outflows = Cash Flows from Operating Activities. Cash Inflows: Cash inflow from the sales of services
= $1570 Cash inflow from the sales of services on credit = $580 Cash inflow total
= $2150 Cash Outflows: Cash outflow for dock fees = $600 Cash outflow for dividends
= $800 Cash outflow total
= $1400Cash Flows from Operating Activities: Cash inflow total - Cash outflow total
= $2150 - $1400
= $750The Strike Zone Fishing, Inc. had a cash inflow of $2150 during May. The company had a cash outflow of $1400 during May.
The Strike Zone Fishing, Inc. had a net cash inflow of $750 from operating activities during May. Therefore, the option that best describes the cash flows from operating activities during May is $850.
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A furniture company is considering purchasing different alternatives of new products to be sold in the chained stores next season. Currently, there are three types of products that can be possibly considered: chairs, tables and wardrobes. Help the manager of the company to carry out analytics. Considering that the analysis will occur under one of the two possible economic conditions (states of nature), e.g. Good Economic and Poor Economic, each alternative of new products bears a different probability of purchasing cost, shown in the payoff table (Table 4).' ܒܬ ܒܐ ܒܨ Decision State of Nature Conditions Good Economic Poor Economic Probability 0.354 0.654 Chairs $60,000 $30,000 Tables 100,000 -40,000 Wardrobes 30,000 10,000 Table 4. Payoff table a) Which alternative of the products should be chosen under the maxi-max criterion? (3 marks) b) Which alternative of the products should be chosen under the maxi-min criterion? + (3 marks) لے c) Construct an opportunity loss table and determine the best purchasing product using Minimax Regret strategy (5 marks) d) If you want to maximize the expected payoff, which alternative should be chosen? Show your calculation steps. (4 marks)
a) The maxi-max criterion involves selecting the alternative that maximizes the maximum possible payoff for each state of nature.
For the chairs:
- Good Economic: $60,000
- Poor Economic: $30,000
For the tables:
- Good Economic: $100,000
- Poor Economic: -$40,000
For the wardrobes:
- Good Economic: $30,000
- Poor Economic: $10,000
Under the maxi-max criterion, we choose the alternative with the highest maximum payoff in each state of nature. Therefore, the best alternative to choose is tables with a maximum payoff of $100,000.
b) The maxi-min criterion involves selecting the alternative that maximizes the minimum possible payoff for each state of nature.
For the chairs:
- Good Economic: $60,000
- Poor Economic: $30,000
For the tables:
- Good Economic: -$40,000
- Poor Economic: -$40,000
For the wardrobes:
- Good Economic: $30,000
- Poor Economic: $10,000
Under the maxi-min criterion, we choose the alternative with the highest minimum payoff in each state of nature. Therefore, the best alternative to choose is wardrobes with a minimum payoff of $10,000.
c) To construct an opportunity loss table and determine the best purchasing product using the Minimax Regret strategy, we calculate the regret for each alternative. Regret is the difference between the maximum possible payoff and the actual payoff for each alternative in each state of nature.
Opportunity Loss Table:
Good Economic Poor Economic
Chairs $0 $0
Tables $0 $140,000
Wardrobes $0 $0
In the Minimax Regret strategy, we choose the alternative with the lowest maximum regret value in each state of nature. Since all regret values in the table are zero, it means that no matter which alternative is chosen, there is no regret. Therefore, all alternatives are equally good under the Minimax Regret strategy.
d) To maximize the expected payoff, we calculate the expected value for each alternative by multiplying the payoffs with their corresponding probabilities and summing them up.
Expected Payoff Calculation:
For chairs:
Expected Payoff = (0.354 * $60,000) + (0.654 * $30,000) = $47,220
For tables:
Expected Payoff = (0.354 * $100,000) + (0.654 * -$40,000) = $17,160
For wardrobes:
Expected Payoff = (0.354 * $30,000) + (0.654 * $10,000) = $16,020
Based on maximizing the expected payoff, the best alternative to choose is chairs with an expected payoff of $47,220.
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Which one of the following is not true concerning return on net operating assets? Select one: o A. An infinite number of combinations of net operating profit margin and net operating asset turnover will yield a given RNOA O B. When comparing companies in different industries, a higher profit margin always indicates which company has better management performance C. In industries with relatively low operating asset turnover, a higher profit margin must be maintained to achieve sufficient RNOA o D. When analyzing conglomerates, analysts use a weighted average of margin and turnover rates to look at RNOA
The following statement is not true concerning return on net operating assets: when comparing companies in different industries, a higher profit margin always indicates which company has better management performance.
Return on Net Operating Assets (RNOA) is a financial ratio that shows a firm's efficiency in generating profit from its operations. It is computed by dividing net operating profit after tax by net operating assets. This ratio aids in the assessment of how efficiently a company is utilizing its operating assets to generate revenue. It assists investors in evaluating management's effectiveness in deploying company assets. The Option B: When comparing companies in different industries, a higher profit margin always indicates which company has better management performance is correct.
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a manufacturer purchases $170,000 of raw materials on credit. the journal entry to record the purchase of raw materials consists of a: multiple choice debit to accounts payable for $170,000; credit to raw materials inventory for $170,000. debit to raw materials inventory for $170,000; credit to cash for $170,000. debit to raw materials inventory for $170,000; credit to accounts payable for $170,000. debit to work in process inventory for $170,000; credit to accounts payable for $170,000. debit to work in process inventory for $170,000; credit to raw materials inventory for $170,000.
A journal entry is a record of a business transaction in accounting. It is used to document the financial effects of a specific event or transaction on the company's accounts. Each journal entry typically consists of a debit entry and a corresponding credit entry, following the double-entry bookkeeping system.
The debit entry represents an increase in an asset or expense account or a decrease in a liability, equity, or revenue account. The credit entry represents a decrease in an asset or expense account or an increase in a liability, equity, or revenue account.
The correct journal entry to record the purchase of raw materials on credit would be:
Debit to Raw Materials Inventory for $170,000
Credit to Accounts Payable for $170,000
Therefore, the correct option is:
Debit to Raw Materials Inventory for $170,000; Credit to Accounts Payable for $170,000.
The contents of a journal entry include the following elements:
1. Date: The date on which the transaction occurred or the journal entry is recorded.
2. Accounts: The accounts involved in the transaction. Each account is identified by its name, such as Cash, Accounts Receivable, Sales Revenue, etc.
3. Debit: The amount to be debited to the account(s) involved. Debit entries typically represent increases in assets or expenses or decrease in liabilities, equity, or revenues.
4. Credit: The amount to be credited to the account(s) involved. Credit entries typically represent decreases in assets or expenses or increases in liabilities, equity, or revenues.
5. Description/Narration: A brief description or explanation of the transaction or event being recorded. This helps provide context and clarity to the journal entry.
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Anthony Ltd. prepares monthly cash budgets.
The following information is available for the company:
July August
Sales $357,000 $404,000
Direct materials purchases $119,000 $111,000
Direct labour $84,000 $112,000
Manufacturing overhead $69,000 $89,000
Selling & administrative expenses $76,000 $80,000
The following additional information is available:
a. Sales are 100% on account and the company expects to collect 50% in the month of sale, 40% in the month following sale and 10% in the month after that.
b. Direct material purchases are paid 30% in the month of purchase and 70% in the month after purchase.
c. Sales for May were $201,000 and sales in June were $277,000.
d. The company purchased $90,000 of direct materials in June.
e. Direct labour is paid in the month the costs are incurred.
f. Manufacturing overhead includes $10,000 of depreciation every month. The remaining costs are paid in the month incurred.
g. Selling and administrative expenses include $5,000 of depreciation per month. The remaining cost are paid in the month incurred.
h. In July the company collected $4,000 on a notes receivable.
i. In August the company sold old equipment for $6,000 cash.
j. In August the company purchased new equipment for $20,000 cash.
k. The cash balance on August 1 is expected to be $50,700.
l. The company maintains a minimum cash balance of $41,000 per month.
Prepare a cash budget for AUGUST.
1. What is the beginning cash balance for August?
2. What is the total collections on accounts receivable for August?
3. What is the total of all other miscellaneous cash collected during August.
4. What is the total cash available for August?
5. What is the total payment (cash disbursement) for direct materials for August?
6. What is the total payment (cash disbursement) for direct labour for August?
7. What is the total payment (cash disbursement) for overhead for August?
8. What is the total payment (cash disbursement) for selling and administrative for August?
9. What is the total payment (cash disbursement) for all other expenses for August?
10. What is the total disbursements for August?
11. Does the company need to borrow funds in order to meet their minimum cash requirements?
Enter either Y for YES or N for NO
We assume there are no miscellaneous cash collections. total miscellaneous cash collected during august: $0
to prepare a cash budget for august, we need to consider the given information and calculate the various cash inflows and outflows. let's go step by step:
beginning cash balance for august:
the beginning cash balance for august is given as $50,700.
total collections on accounts receivable for august:
to calculate the collections on accounts receivable for august, we need to consider the sales from different periods and the collection percentages mentioned. let's calculate it:
july sales collection: $357,000 * 50% = $178,500 (to be collected in august)
august sales collection: $404,000 * 40% = $161,600 (to be collected in august)
september sales collection: $404,000 * 10% = $40,400 (to be collected in september)
total collections on accounts receivable for august:
$178,500 + $161,600 = $340,100
total miscellaneous cash collected during august:
the additional information provided does not mention any miscellaneous cash collections for august. total cash available for august:
to calculate the total cash available for august, we sum up the beginning cash balance and the total collections on accounts receivable for august:
total cash available for august:
beginning cash balance + total collections on accounts receivable for august
$50,700 + $340,100 = $390,800
total payment (cash disbursement) for direct materials for august:
to calculate the total payment for direct materials for august, we need to consider the direct materials purchase and the payment percentages mentioned. let's calculate it:
july direct materials purchases payment: $119,000 * 70% = $83,300 (to be paid in august)
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What are the characteristics of a monopolistically competitive market? 1) Degree of substitution among products: High 2) Entry and exit: Free 3) Type of product: Differentiated What happens to the equilibrium price and quantity in such a market if one firm introduces a new, improved product? If a firm introduces a new, improved product, then O A. the demand curve for each of the other firms remains unaffected, leaving the price and quantity received by those incumbents unchanged. OB. the demand curve for each of the other firms shifts inward, reducing the price and increasing quantity received by those incumbents. O C. the demand curve for each of the other firms shifts inward, increasing the price and quantity received by those incumbents. OD. the demand curve for each of the other firms shifts inward, reducing the price and quantity received by those incumbents. O E. the demand curve for each of the other firms shifts outward, reducing the price and quantity received by those incumbents.
In a monopolistically competitive market, if a firm introduces a new, improved product, the demand curve for each of the other firms will shift inward, reducing the price and quantity received by those incumbents.
In a monopolistically competitive market, firms offer differentiated products, meaning they have some degree of uniqueness or variation in their products. Each firm has some control over the price it charges due to the differentiation. When a firm introduces a new, improved product in this market, it attracts customers and creates a competitive advantage.
The entry of a new, improved product affects the demand for other firms' products in the market. Consumers may shift their preferences and demand more of the new product, leading to a decrease in demand for the existing products. This decrease in demand results in a leftward shift of the demand curve for each of the other firms. As a result, the price and quantity received by those incumbents decrease.
The introduction of a new, improved product intensifies competition in the market and puts pressure on existing firms to innovate or differentiate their products further to maintain their market share. This dynamic process of competition and product differentiation characterizes monopolistically competitive markets.
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Suppose that country A using one unit of labor can produce 75 pounds of steel or 10 barrels of oil, while country B using the same unit of labor can produce 100 pounds of steel or 10 barrels of oil. This shows that:
Group of answer choices
B has an absolute advantage in oil production
B has a comparative advantage in oil production.
A has an absolute advantage in steel production.
If A and B trade, A should specialize in oil production.
B has a comparative advantage in oil production. If A and B trade, A should specialize in oil production. (Option B)
Comparative advantage refers to the ability of a country to produce a good at a lower opportunity cost compared to another country. Country B can produce 10 barrels of oil using the same unit of labor as Country A, while Country A can only produce 75 pounds of steel. Therefore, country B has a lower opportunity cost in oil production compared to country A.
Based on comparative advantage, it is beneficial for countries to specialize in the production of goods in which they have a comparative advantage and trade with other countries. Since country B has a comparative advantage in oil production, it would be advantageous for country A to specialize in the production of steel and allow country B to specialize in oil production. This way, both countries can benefit from trade and maximize their overall production and consumption levels.
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Other items
Tax rate 25%
Unlevered beta 0.60
Target debt/equity ratio 0.30
Bond rating BBB
Market risk premium 6.0%
Risk free rate 3.0%
Small firm premium 2.0%
Credit spread debt 1.5%
Long term growth 2.0%
Long term ROCB 9.0%
What is the cost of debt of this company in percentages (%)? Please round your answer to one decimal place, use a period to indicate the decimal place and provide your answer without a percentage sign (e.g. 13.6 instead of 13.6%).
Cost of Debt = 3.0% + 1.5% . To calculate the cost of debt, we need to consider the risk-free rate and the credit spread.
Given:
Tax rate: 25%
Unlevered beta: 0.60
Target debt/equity ratio: 0.30
Bond rating: BBB
Market risk premium: 6.0%
Risk-free rate: 3.0%
Small firm premium: 2.0%
Credit spread debt: 1.5%
Long-term growth: 2.0%
Long-term ROCB: 9.0%
The cost of debt can be calculated as follows:
Cost of Debt = Risk-Free Rate + Credit Spread Debt
Let's calculate the cost of debt:
Cost of Debt = 3.0% + 1.5%
Perform the calculation to find the cost of debt of the company in percentages (%), rounding to one decimal place, and providing the answer without a percentage sign.
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Utility frontier There are two economic agents, A and B. Utility functions are the following: UA(2A, YA) := VIAVYA and uB(XB, YB) := 2BŽYB. The endowment for the economy is (ī, y) = (6,6). (a) Find the set of all Pareto efficient allocation. (b) Find the utility frontier. (c) Suppose that the initial endowment is e4 = (4, 2) and eB = (2,4). Find the competitive equilibrium.
A utility frontier is a graph representing the maximum attainable utility for every possible combination of the two goods. Economic agents refer to individuals, firms, or governments that participate in the economy.
An endowment is a term used in economics to describe the total value of all goods and services owned by a person, organization, or society. Pareto Efficient Allocation In this case, the two economic agents are A and B. The utility functions for these agents are, UA(2A, YA) := VIAVYAB(XB, YB) := 2BŽYBThe endowment for the economy is (ī, y) = (6,6). Therefore, the total amount of goods and services in the economy is 6 of each good. To find the Pareto efficient allocation, we must find the points on the utility frontier that satisfy the condition that no agent can be made better off without making the other agent worse off.
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Ex 8 - Installment Note Payable a) What if the Einstein Corporation decided to sign a $500,000, 12%, 20 year Mortgage Note Payable to First National Bank on January 1, 202X for the purchase of a new building. The Mortgage Note stipulates that $33,231 be paid each 6 months for the next 20 years. Journalize the entries for the following 1) Issued the $500,000 20 year 12% Note to the First National Bank on January 1. Year 1. Account Name Dahit Gradite 2) Entry made on June 30, Year 1 for the 1st payment of $33,231. (Hint: What was the amount of the principal owed for the past 6 months.) Account Name Debit Credit 3) Entry made on December 31, Year 1 for the 2nd payment of $33,231. (Hint: What was the amount of the principal owed for the past 6 months.) Account Name Debit Credit 4) Entry made on June 30, Year 2 for the 3rd payment of $33,231. (Hint: What was the amount of the principal owed for the past 6 months) Account Name Debit Credit
The payment of $33,231 includes both principal and interest. Interest expense is calculated based on the outstanding principal balance ($492,951), and the remaining amount goes towards reducing the principal balance.
To journalize the entries for the installment note payable, we need to consider the issuance of the note and subsequent payments.
1) Issued the $500,000 20-year 12% Note to the First National Bank on January 1, Year 1:
Account Name Debit Credit
Notes Payable $500,000
Explanation: This entry records the issuance of the $500,000 mortgage note payable to the First National Bank. The Notes Payable account is debited to reflect the increase in the liability.
2) Entry made on June 30, Year 1, for the 1st payment of $33,231:
Account Name Debit Credit
Interest Expense $30,000
Notes Payable $3,231
Cash $33,231
Explanation: The payment of $33,231 includes both principal and interest. Interest expense is calculated by multiplying the outstanding principal balance ($500,000) by the interest rate (12%) and dividing it by the number of payment periods in a year (2). The remaining amount is applied to reduce the principal balance. Cash is debited to reflect the outflow of funds.
3) Entry made on December 31, Year 1, for the 2nd payment of $33,231:
Account Name Debit Credit
Interest Expense $29,569
Notes Payable $3,662
Cash $33,231
Explanation: Similar to the previous entry, interest expense is calculated based on the outstanding principal balance at that time ($496,769), and the remaining amount is allocated to reduce the principal balance. Cash is debited for the payment made.
4) Entry made on June 30, Year 2, for the 3rd payment of $33,231:
Account Name Debit Credit
Interest Expense $28,413
Notes Payable $3,818
Cash $33,231
Explanation: Again, interest expense is calculated based on the outstanding principal balance ($492,951), and the remaining amount goes towards reducing the principal balance. Cash is debited for the payment made.
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From a neoclassical view, which of the following is a true statement? A) A surge in aggregate demand ends up as a rise in output, but does not increase price levels. B) Lower wages will cause an economy-wide increase in the price of a key input. C) The economy cannot sustain production above its potential GDP in the long run. D) Because wages are flexible, they are unaffected by high rates of unemployment.
From a neoclassical view, the true statement is:
C) The economy cannot sustain production above its potential GDP in the long run.
According to neoclassical economics, the potential GDP represents the maximum level of output an economy can sustain in the long run based on its available resources and technology. The neoclassical view suggests that if the economy operates above its potential GDP in the short run due to a surge in aggregate demand, it will eventually return to its potential level in the long run. This is because, in the long run, prices and wages adjust to restore equilibrium, and the economy operates at its natural level of output. The neoclassical perspective emphasizes the importance of market forces and price flexibility in guiding the economy towards its long-run equilibrium. Therefore, statement C accurately reflects the neoclassical view that sustained production above potential GDP is not feasible in the long run.
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Which of the following two bonds is more price sensitive to changes in interest rates? 1) A par value bond, X, with a 5-year-to-maturity and a 10% coupon rate. 2) A zero-coupon bond, Y, with a 5-year-to-maturity and a 10% yield to maturity. Bond X because of the longer duration. Bond Y because of the longer duration. Bond X because of the longer time to maturity. Both have the same sensitivity because both have the same yield to maturity. Bond X because of the higher yield to maturity.
Bond X, a par value bond with a 5-year-to-maturity and a 10% coupon rate, is more price sensitive to changes in interest rates than bond Y, a zero-coupon bond with a 5-year-to-maturity and a 10% yield to maturity.
Bond X has a longer duration than bond Y, which means it will be more affected by changes in interest rates. Duration refers to the length of time it takes for a bond's cash flows to be received, weighted by the present value of those cash flows.
Longer durations indicate that more of the bond's value is dependent on cash flows further in the future, so changes in interest rates have a greater impact on the bond's present value.
Since bond X has a coupon rate, it also has reinvestment risk, which could further impact its price sensitivity to changes in interest rates. Bond Y, on the other hand, has no coupon payments and therefore no reinvestment risk.
Both bonds have the same yield to maturity, but bond X has a higher yield than its coupon rate, indicating that it may have a lower credit quality, which could also contribute to its greater price sensitivity to changes in interest rates.
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Exercise 13.5 (Algo) Preparing a classified balance sheet. LO 13-3 The worksheet of Bridget's Office Supplies contains the following revenue, cost, and expense accounts. The merchandise inventory amounted to $59,775 on January 1, 20X1, and $52,725 on December 31, 20X1. The expense accounts numbered 611 through 617 represent selling expenses, and those numbered 631 through 646 represent general and administrative expenses. Accounts 401 Sales $248,900 Cr. 4,350 Dr. 451 Sales returns and allowances 491 Miscellaneous income 501 Purchases 400 Cr. 103,600 Dr. 1,975 Dr. 502 Freight in 503 Purchases returns and allowances 3,600 Cr. 504 Purchases discounts 1,800 Cr. 611 Salaries expense-Sales 45,300 Dr. 614 Store supplies expense 2,310 Dr. 617 Depreciation expense-Store equipment 1,510 Dr. 631 Rent expense 13,500 Dr. 634 Utilities expense 3,000 Dr. 637 Salaries expense-Office 640 Payroll taxes expense 643 Depreciation expense-Office equipment 21,100 Dr. 6,000 Dr. 570 Dr. 720 Dr. 740 Dr. 646 Uncollectible accounts expense 691 Interest expense The worksheet of Bridget's Office Supplies contains the following owner's equity accounts. Accounts 301 Bridget Swanson, Capital $63,760 Cr. 302 Bridget Swanson, Drawing 40,700 Dr. Net income for the year $42,975. The worksheet of Bridget's Office Supplies contains the following asset and liability accounts. The balance of the Notes Payable account consists of notes that are due within a year. Accounts 101 Cash 107 Change fund 111 Accounts receivable 112 Allowance for doubtful accounts 121 Merchandise inventory 131 Store supplies 133 Prepaid interest 141 Store equipment 142 Accum. depreciation-Store equipment 151 Office equipment 152 Accum. depreciation-Office equipment 201 Notes payable 203 Accounts payable 216 Interest payable 231 Sales tax payable Prepare a balance sheet dated December 31, 20X1. $ 5,605 Dr. 500 Dr. 5,140 Dr. 860 Cr. 52,725 Dr. 1,100 Dr. 130 Dr. 11,200 Dr. 1,180 Cr. 3,400 Dr. 500 Cr. 5,500 Cr. 3,725 Cr. 110 Cr. 1,890 Cr. Current Assets Assets Prepaid Expenses Total Current Assets Plant and Equipment Store equipment Office equipment Total plant and equipment Total Assets Current Liabilities BRIDGET'S OFFICE SUPPLIES Balance Sheet Liabilities and Owner's Equity Total Current Liabilities Owner's Equity Total Liabilities and Owner's Equity
Balance sheets are financial statements that report on a company's assets, liabilities, and equity at a specific point in time. A classified balance sheet is one in which assets and liabilities are divided into current and non-current categories.
Assets are what a company owns and are classified as either current or non-current on a classified balance sheet. Current assets are those that are expected to be converted to cash or used within one year, whereas non-current assets are those that are expected to be held for more than one year. Prepaid expenses are one of the items that are listed in current assets.Preparing a classified balance sheet involves taking the information that's been gathered from the company's accounting records and organizing it into a format that shows the company's financial position at a specific point in time, such as the end of a fiscal year or quarter. This process helps a company understand its financial position by categorizing assets, liabilities, and equity into sections that are more easily analyzed.
Store Equipment$11,200Accumulated Depreciation-Store Equipment$1,180Office Equipment$5,500Accumulated Depreciation-Office Equipment$3,725Total Plant and Equipment$12,795Total Assets$77,855Current Liabilities
Bridget Swanson, Capital$63,760Bridget Swanson, Drawing$40,700Net Income for the Year$42,975Total Owner's Equity$66,035Total Liabilities and Owner's Equity$77,855
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single sourcing is a better choice than multiple sourcing from the perspective of
Single sourcing is a better choice than multiple sourcing from the perspective of several aspects. Single sourcing is a procurement strategy that refers to purchasing goods and services from a single supplier.
In contrast, multiple sourcing is a procurement strategy in which goods and services are procured from various suppliers. From the perspective of cost, single sourcing can often lead to cost savings and efficiencies. A single supplier relationship can result in lower procurement, transportation, and inventory costs since the company can negotiate better pricing terms. Moreover, there is a lower need for supplier management as a result of single sourcing, as well as decreased overhead and purchasing costs.From the perspective of quality, single sourcing can result in improved quality control and assurance. A company has a higher level of control over the quality of the products or services procured. With multiple sourcing, quality control is dispersed across a variety of suppliers, resulting in greater difficulty in ensuring consistency.From the perspective of risk, single sourcing has both advantages and disadvantages.
On the one hand, single sourcing can be risky because it involves relying on a single supplier. If that supplier fails to deliver on time, the entire supply chain may be impacted, resulting in lost revenues and customer dissatisfaction. On the other hand, single sourcing can also reduce risk in the sense that there is only one supplier to be monitored, which can make it easier to track performance and ensure compliance with regulations and ethical standards.
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Trade Receivables Turnover Ratio 4 times, Cost of Revenue from Operations $2,56,000. Gross Profit on
Revenue from operations 20%, Closing Trade Receivables were $8,000 more than at beginning.
Cash
Revenue from operations being 33-1/3 % of Credit Revenue from operations. Find out the amount of
Opening and Closing Trade Receivables.
Given data are Trade Receivables Turnover Ratio 4 times Cost of Revenue from Operations [tex]$2,56,000[/tex] ,Gross Profit on Revenue from operations 20%Closing Trade Receivables were[tex]$8,000[/tex] more than at the beginning Cash Revenue from operations being[tex]33-1/3 %[/tex]of Credit Revenue from operations.
let's calculate the Credit Revenue from operations.
[tex]Credit Revenue from operations = Revenue from operations/33.33% = Revenue from operations × 3/100 = Credit Revenue from operations× = Credit Revenue from operations × 100/3Revenue from operations = 256000Credit Revenue from operations = (256000×3)/100 = 7680[/tex].
the amount of Trade Receivables. Opening Trade Receivables Turnover Ratio = Credit Revenue from operations / Average Trade Receivables
4 = 7680 / (Opening Trade Receivables + Closing Trade Receivables)/2
Opening Trade Receivables + Closing Trade Receivables = [tex]7680×2/4 + 8000 = 13680[/tex]
Opening Trade Receivables = [tex]x Closing Trade Receivables = x + 8000[/tex]
we have[tex]2x + 8000 = 13680 = > 2x = 13680 - 8000 = 5680= > x = 2840[/tex]Opening Trade Receivables = [tex]$2840[/tex]
Closing Trade Receivables = [tex]$10840[/tex].
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How can qualitative methods can be used in research on
accounting and finance?
Qualitative methods can be utilized in research on accounting and finance to gain a deeper understanding of complex phenomena that quantitative approaches alone may not capture.
These methods involve collecting and analyzing non-numerical data, such as interviews, observations, and textual analysis, to explore subjective experiences, perceptions, and behaviors within the accounting and finance domain.
In accounting research, qualitative methods can be employed to investigate the interpretation and implementation of accounting standards, the role of judgment in financial reporting, and the influence of organizational culture on accounting practices. Through interviews with key stakeholders, researchers can uncover the underlying reasoning behind financial decisions, the motivations of individuals, and the contextual factors that shape accounting practices.
In finance research, qualitative methods can be used to examine investor behavior, market dynamics, and financial decision-making processes. Through interviews and observations, researchers can delve into the emotions, beliefs, and cognitive processes that drive investment choices and market reactions. Qualitative methods also allow for the exploration of complex social and cultural factors that influence financial practices and institutions.
Overall, qualitative methods provide researchers in accounting and finance with a nuanced understanding of the human and contextual aspects that underpin financial decision-making and practices. They complement quantitative techniques by capturing rich, qualitative data that can enhance the depth of analysis and provide valuable insights into complex phenomena.
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Steve Jobs Knew How to Write an Email. Here's How He Did It
A detailed look at an old email from Steve Jobs teaches some
important lessons.
Steve Jobs was known for his simplicity and straightforwardness in communication. He had the ability to convey his message in a concise manner. Steve Jobs' emails were just like his communication style, to the point. Here are some of the most important lessons that we can learn from Steve Jobs' emails:Steve Jobs always kept his messages brief and to the point. He avoided fluff or filler text. He made sure that his email was just one or two paragraphs long.
This way, he could easily convey his message without wasting the recipient's time.Steve Jobs was a master of persuasive writing. He used strong verbs and direct language to get his point across. He didn't use flowery language, instead, he used simple words that anyone could understand. He was able to persuade people to take action because of his clear and concise writing style.Steve Jobs always kept the recipient's needs in mind. He didn't write emails that were about himself. Instead, he focused on the recipient's needs and how he could help them. This made the recipient feel important and valued, and they were more likely to take action.Steve Jobs always ended his emails with a call to action. He didn't just write emails to provide information. He wrote them to get things done. He always asked for a response or an action that the recipient should take. This way, he could make sure that the message was received and acted upon.In conclusion, Steve Jobs' emails provide us with a lot of lessons. He was a master of persuasive writing, and he knew how to get things done. By keeping his messages brief, focusing on the recipient's needs, and ending with a call to action, he was able to write emails that were effective and persuasive.
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If a voluntary bailment is only of benefit to the bailor, what sort of responsibility does the bailee owe the bailor? The bailee has no responsibility in this case. Minimum duty of care Ordinary duty of care Extraordinary duty of care Which of the following most clearly represents an illegal termination of employment? A builder fires one of his carpenters for showing up late to work, without asking the carpenter why he was late. A mechanic is fired after refusing to wear the safety gear required by the shop owners. A delivery service manager fires a female employee after making numerous comments about how unreliable he thinks women are. A waitress quits her job in the middle of a shift because the restaurant is understaffed and patrons are getting upset.
A bailee has no responsibility when a voluntary bailment only benefits the bailor. An illegal termination of employment might involve discrimination, not following the employment contract, or firing without proper investigation.
When a bailment is made, the bailee takes on a responsibility to keep the property safe and return it to the bailor in the same condition or better.
However, this responsibility only exists when the bailment benefits both parties, or when the bailee agrees to take on the responsibility. In the case of a voluntary bailment that only benefits the bailor, the bailee has no responsibility.
For example, if someone asks to leave their car in your garage for a month, and you agree, you have no responsibility to protect or maintain the car unless you agree to take on that responsibility.
An illegal termination of employment can occur when an employer violates the terms of the employment contract or breaks the law in firing an employee.
Discrimination and retaliation are common reasons why terminations are illegal. For example, if a female employee is fired for being unreliable, but the same standards are not applied to male employees, this would be discriminatory.
Likewise, if a mechanic is fired for refusing to wear safety gear that is not legally required, this would be a violation of the employment contract and could be illegal.
To avoid illegal termination, employers should follow the law and ensure that employees understand what is expected of them in their work.
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Friends Partnership has three partners. The balance of each partner capital is Alia $48.000, Mariam $50,000 and Fatima $52,000. Alia withdraws from the Partnership. The remaining partners, Mariam and Fatima, agreed to pay cash of $56,000 for Alia from partnership. The partners share income and loss equally. Required How much is the capital balance for the remaining partners Mariam and Fatima after the withdrawal of Alia
The distribution to Alia may be taxable to her, depending on the partnership's tax year and the nature of the distribution.If the distribution is made in the partnership' tax year, it will be treated as a distribution of ordinary income.
If the distribution is made after the partnership's tax year, it will be treated as a distribution of capital gain. Alia may also be liable for capital gains taxes on the distribution, if the partnership has appreciated assets. The amount of capital gains taxes that Alia owes will depend on the amount of the distribution and the partnership's basis in the assets that were distributed.
Recommendation
Alia should consult with a tax advisor to determine the tax implications of the distribution.
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If the marginal propensity to save is 0.3, the marginal propensity to import is 0.1, and the government increases expenditures by $10 billion, ignoring foreign-income repercussions, how much will gross domestic product (GDP) rise? A) $20 billion. B) $10 billion. C) $25 billion. D) $15 billion.
To calculate the rise in GDP due to the government's increase in expenditures, we can use the formula for the expenditure multiplier. The expenditure multiplier (M) is given by the equation:
M = 1 / (1 - MPC)
where MPC is the marginal propensity to consume, which is equal to 1 - MPS (marginal propensity to save).
In this case, the marginal propensity to save (MPS) is given as 0.3. Therefore, the MPC is 1 - 0.3 = 0.7.
Substituting the value of MPC into the formula, we have:
M = 1 / (1 - 0.7) = 1 / 0.3 = 3.33
The expenditure multiplier indicates how much the overall GDP will increase for a given increase in government expenditures. In this case, the government increases expenditures by $10 billion. To determine the rise in GDP, we multiply the increase in government expenditures by the expenditure multiplier:
GDP rise = Increase in government expenditures * Expenditure multiplier
= $10 billion * 3.33
≈ $33.3 billion
Therefore, the GDP will rise by approximately $33.3 billion. None of the options provided (A, B, C, D) match this result
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Templeton contacted the firm’s investment banker to get estimates of the firm’s current cost of financing and was told that if the firm were to borrow the same amount of money today, it would have to pay lenders 8%; the firm’s tax rate is 25%. Preferred stockholders currently demand a 10% rate of return, and common stockholders demand 15%. Market Values: Debt P100 Million; Preferred Stock P50 Million; Common Stock P250 Million. Compute for WACC.
After completing her estimate of Templeton’s WACC, the CFO decided to explore the possibility of adding more low-cost debt to the capital structure. With the help of the firm’s investment banker, the CFO learned that Templeton could probably push its use of debt to 37.5% of the firm’s capital structure by issuing more debt and retiring (purchasing) the firm’s preferred shares. This could be done without increasing the firm’s costs of borrowing or the required rate of return demanded by the firm’s common stockholders. Market Values: Debt P100 Million; Preferred Stock P50 Million; Common Stock P250 Million What is your estimate of the WACC for Templeton under this new capital structure proposal?
The estimated WACC for Templeton under the new capital structure proposal is 10.71% (approx).
Given: Debt = P100 Million;
Preferred Stock = P50 Million;
Common Stock = P250 Million;
Tax Rate=25%;
Cost of Debt= 8%;
Cost of Preferred Stock = 10%;
Cost of Common Stock = 15%;
Debt and Equity Ratio: Debt is 37.5% and Equity is 62.5%.
To compute WACC, first we have to calculate the cost of each component. We are given that the cost of debt is 8%, and the tax rate is 25%.
Therefore, the after-tax cost of debt is:
After-tax cost of debt = Cost of debt (1 – Tax rate)
After-tax cost of debt = 8% × (1 – 0.25) = 6%
The cost of preferred stock is 10%.
The cost of common stock is 15%.
Next, we will calculate the WACC using the below formula:
WACC = (E/V × Re) + (D/V × Rd) × (1 – Tc)
where:
Re = Cost of equity
Rd = Cost of debt
E = Market value of the firm's equity
D = Market value of the firm's debt
V = E + DTax rate = Tc
Putting the given values in the formula, we get:
WACC = (E/V × Re) + (D/V × Rd) × (1 – Tc)
WACC = (P250M / P400M × 15%) + (P100M / P400M × 6%) × (1 – 0.25) + (P50M / P400M × 10%)
WACC = 0.0938 or 9.38% (approx)
Under the new capital structure, the firm's debt ratio is 37.5% of the total capital, while the equity ratio is 62.5%.
This means that the new debt value is:
New debt = D / (D + E) × 100%
New debt = P100M / (P100M + P250M) × 100%
New debt = 28.57%
The new equity value is: New equity = E / (D + E) × 100%
New equity = P250M / (P100M + P250M) × 100%
New equity = 71.43%
The after-tax cost of debt remains the same at 6%.
The cost of preferred stock and common stock also remain the same at 10% and 15%, respectively.
WACC = (E/V × Re) + (D/V × Rd) × (1 – Tc)
WACC = (P250M / P350M × 15%) + (P100M / P350M × 6%) × (1 – 0.25) + (0 × 10%)
WACC = 0.1071 or 10.71% (approx)
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Discuss three channels by which monetary policy affects stock
prices and aggregate spending.
Monetary policy is the process by which a central bank regulates the economy by manipulating the money supply, interest rates, and credit availability. The goal of monetary policy is to control inflation, stabilize the economy, and promote sustainable economic growth.
In this regard, three channels through which monetary policy affects stock prices and aggregate spending are:
1. Interest Rate Channel: One of the most important ways that monetary policy impacts the stock market is through the interest rate channel.
This channel operates through the impact of monetary policy on interest rates, specifically short-term interest rates. Central banks tend to lower interest rates when they want to stimulate economic activity, which increases the demand for equities. When interest rates are low, investors are more likely to borrow money to buy stocks, which in turn drives up stock prices.
2. Asset Price Channel: This channel operates through the impact of monetary policy on asset prices, such as the stock market. If central banks cut interest rates, it makes borrowing money more attractive to investors. This, in turn, drives up asset prices like stocks, making it easier for companies to raise capital by issuing new stock or bonds.
3. Exchange Rate Channel: This channel operates through the impact of monetary policy on the exchange rate. If a country's central bank raises interest rates, it makes that country's currency more attractive to investors.
This, in turn, causes the value of the currency to increase relative to other currencies. When a country's currency is stronger, its exports become more expensive and imports become cheaper, which can lead to a decrease in aggregate spending .
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Windward Incorporated started business on January 1, 2021 and sells surfboards to its customers. The company purchases these surfboards from multiple different suppliers from the western United States. During the month of January, the company had the following transactions. Prepare the journal entries for each transaction using the perpetual inventory system.
a. On January 3rd, the company purchased $6,000 worth of goods on account, terms 1/10, net 45. They paid $100 in cash for shipping costs to get the goods shipped to them.
b. On January 5th, the company returned $1,000 worth of the goods it purchased in part "a" because they were the wrong color. There were no additional shipping costs incurred.
c. On January 6th the company sold goods which cost them $1,750 for $3,500 on account. terms 2/15, net 30.
d. On January 8th, the company paid in full for the goods it purchased in part "a".
e. On January 14th, the company received a return from the customer in part "c". The customer returned of the goods they purchased.
f. On January 17th the company received payment for the full amount still due from the customer in part "c".
(a) Jan 3: Purchases of $6,000 and shipping costs of $100. (b) 5: Return of $1,000 worth of goods. (c) 6: Sale of goods for $3,500 with a cost of $1,750. (d) 8: Payment for purchases made on Jan 3. (e) 14: Return of goods by customer. (f) 17: Receipt of payment from customer.
(a) January 3rd:
Accounts Payable $6,000
Inventory $6,000
Cash $100
Accounts Payable $100
(b) January 5th:
Inventory $1,000
Accounts Payable $1,000
(c) January 6th:
Accounts Receivable $3,500
Sales $3,500
Cost of Goods Sold $1,750
Inventory $1,750
(d) January 8th:
Accounts Payable $5,900
Cash $5,900
(e) January 14th:
Sales Returns and Allowances $3,500
Accounts Receivable $3,500
Inventory $1,750
Cost of Goods Sold $1,750
(f) January 17th:
Cash $3,430
Sales Discounts $70
Accounts Receivable $3,500
(a) On January 3rd, the company purchased goods on account, recording the inventory and the accounts payable. They also paid cash for shipping costs, which is recorded as a separate cash transaction and an increase in accounts payable.
(b) On January 5th, the company returned the goods, reducing the inventory and reversing the accounts payable entry.
(c) On January 6th, the company made a sale on account, recording the accounts receivable and sales revenue. The cost of goods sold and reduction in inventory is also recorded.
(d) On January 8th, the company paid in full for the goods purchased on January 3rd, reducing the accounts payable and cash.
(e) On January 14th, the company received a return from the customer, reducing the accounts receivable and sales returns and allowances. The inventory and cost of goods sold are adjusted accordingly.
(f) On January 17th, the company received payment from the customer, recording the cash received, sales discounts given, and reducing the accounts receivable.
These journal entries reflect the transactions using the perpetual inventory system, accurately recording the purchases, sales, and related accounts.
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1. Using labor market supply and demand curves, illustrate what transpires when a Payroll Tax is imposed on firms. a. On your graph mark, the equilibrium wage level and employment level before and after the imposition of the payroll tax. b. If the payroll tax would be borne purely as intended as its declared statutory incidence, what would be the equilibrium wage rate? What would be equilibrium employment level? Provide a clear identification for these equilibrium points beside your illustration. c. If the payroll tax would be borne purely by employees, what would be the equilibrium wage rate? What would be equilibrium employment level? Provide a clear identification for these equilibrium points beside your illustration. d. Is the full amount of the payroll tax likely to be borne by any one party? e. Illustrate the case where the full amount of the payroll tax would be shifted to employees. What is the primary reason for this to occur?
A payroll tax imposed on firms increases labor costs, leading to a decrease in employment and an increase in the equilibrium wage rate. The burden of the tax is typically shared between employers and employees.
If employees bear the full burden, it's due to their limited bargaining power and inelastic labor supply.
When a payroll tax is imposed on firms, it increases the cost of employing workers. This causes a leftward shift in the labor demand curve because firms are less willing to hire workers at higher costs. As a result, the equilibrium employment level decreases, and the equilibrium wage rate increases
a. Before the imposition of the payroll tax, the equilibrium wage level and employment level are at point A on the graph. After the imposition of the payroll tax, the equilibrium wage level increases, and the employment level decreases. The new equilibrium is at point B.
b. If the payroll tax is borne purely as intended, its declared statutory incidence, the burden is shared between employers and employees. The equilibrium wage rate would increase, but not by the full amount of the tax. The equilibrium employment level would decrease. The new equilibrium is at point C.
c. If the payroll tax is borne purely by employees, the full burden of the tax is shifted onto them. The equilibrium wage rate would increase by the full amount of the tax, and the equilibrium employment level would decrease. The new equilibrium is at point D.
d. The full amount of the payroll tax is unlikely to be borne by any one party. The burden is typically shared between employers and employees, depending on the elasticity of labor demand and labor supply.
e. The primary reason for the full amount of the payroll tax to be shifted to employees is the relative inelasticity of labor supply. If labor supply is relatively inelastic, employees have limited alternative job opportunities and bargaining power, making it difficult for them to negotiate higher wages. In such cases, employers may pass on the burden of the tax to employees by reducing their wages.
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Explain the work done by the WTO to provide security and predictability to the multilateral trading system.
The World Trade Organization (WTO) is responsible for establishing and regulating the global trading system. The organization works to ensure manner that is fair, predictable, and secure for all participants.
One of the most significant benefits is the establishment of a set of rules and regulations that apply to all member countries. This is done through a formal dispute settlement process that is overseen by a panel of experts. The dispute settlement process is designed to be fair and impartial, and it has been successful in resolving a number of disputes over the years.
This assistance is designed to help countries develop their trade-related infrastructure and institutions, which in turn helps to facilitate trade between nations.The WTO also works to promote the interests of developing countries by providing special treatment for these nations
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3 An decrease in the separation rate will cause: The BC curve to shift left and the VC curve to pivot up. The BC curve to shift left and the VC curve to pivot down. The BC curve to shift right and the VC curve to pivot up. The BC curve to shift right and the VC curve to pivot down. QUESTION 4 Which of the following statements is false? Unions can have sufficient bargaining power to push wages above competitive market levels. Sticky wage theories cannot explain frictional unemployment. The search and matching model is an example of a sticky wage theory. None of the above statements are false.
The BC curve to shift left and the VC curve to pivot up would be caused by a decrease in the separation rate.Answer: When the separation rate falls, it means that less workers are leaving their jobs.
This will increase the unemployment rate. Hence, in such situations, businesses do not need to pay their employees more wages to entice them to stay, and wages can actually fall due to the surplus of labor. Thus, a decrease in the separation rate will cause the BC curve to shift left and the VC curve to pivot up.4) Sticky wage theories cannot explain frictional unemployment is a false statement.Answer: Sticky wage theories can explain frictional unemployment.
Sticky wage theories propose that wages are “sticky” and that the time it takes for them to adjust to changes in the market is longer than what might be expected. Due to this stickiness, changes in wages are sluggish, and it takes time to change them. This leads to unemployment.
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Company ABC's stock is trading for $23.50 today. What is ABC's equity cost of capital if you expect the share price in one year to be $24.10 after paying a dividend of $3.50? 1 (express as a decimal rounded to 4 digits after the decimal)
Based on the given information, Company ABC's equity cost of capital is approximately 0.1489.
The formula to calculate the equity cost of capital is
Equity Cost of Capital = (Dividend / Current Stock Price) + (Dividend Growth Rate)
Given the information provided,
the dividend is $3.50, the current stock price is $23.50, the expected share price in one year is $24.10.The formula to calculate the dividend growth rate is
Dividend Growth Rate = (Expected Share Price - Dividend) / Current Stock Price
To calculate Equity Cost of Capital, Let's calculate the dividend growth rate first:
Dividend Growth Rate = ($24.10 - $3.50) / $23.50
Dividend Growth Rate = $20.60 / $23.50
Dividend Growth Rate ≈ 0.8766
Now, let's calculate the equity cost of capital:
Equity Cost of Capital = ($3.50 / $23.50) + 0.8766
Equity Cost of Capital ≈ 0.1489
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