Contributed capital is calculated by taking a company's net income for a year divided by the average number of shares outstanding during the year. True False

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Answer 1

Contributed capital is the amount of capital a company has raised by issuing securities to investors. The statement mentioned in the question is False.

Contributed capital does not depend on net income for a year divided by the average number of shares outstanding during the year. Instead, contributed capital is calculated by the formula:

Contributed Capital = Total Proceeds Received - Par Value of Stock Issued

Total Proceeds Received are the total amount of money the company received from investors by issuing stock, whereas Par Value is the minimum price per share that a company can sell its shares for. Moreover, Contributed capital does not appear on an income statement, but it is reported in the shareholders' equity section of a company's balance sheet. So, the correct option is false.

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Related Questions

The book states that "Operations is also responsible for developing or acquiring the necessary process
compentencies - process cost, flow time, flexibility, and quality - to support the firm's business strategy." (p. 23)
If Ford's corporate goals and operations strategy are placed into the structure in Figure 2.2 (see p. 25)
A) Evaluate what the paint department manager at a Ford assembly should do at the operations strategy
level to reduce emissions and reduce landfill usage? How will the manager implement the 3 reductions?

Answers

To reduce emissions and landfill usage at the operations strategy level he paint department of a Ford assembly, the manager can take the following actions:

Implement Environmental Management Systems (EMS): The manager should establish an EMS to systematically identify, monitor, and control emissions and waste generated by the paint department. This involves setting targets for reducing emissions and landfill usage and implementing strategies to achieve those targets.

Adopt cleaner production techniques: The manager should explore and adopt cleaner and more sustainable production techniques in the paint department. This can involve investing in advanced technology and equipment that minimize emissions and waste generation. For example, switching to low-VOC (volatile organic compounds) paint formulations can significantly reduce air pollution.

Enhance waste management practices: The manager should implement effective waste management practices to minimize landfill usage. This can include implementing recycling programs within the paint department to recycle materials such as paint cans, solvents, and packaging materials. Additionally, the manager should explore opportunities for reusing or repurposing waste materials instead of sending them to landfills.

To implement these reductions effectively, the manager can follow a systematic approach:

a) Assess the current emissions and waste generation: Conduct a comprehensive assessment of the paint department's emissions and waste generation to identify areas with the highest impact and prioritize reduction efforts.

b) Set specific reduction targets: Based on the assessment, set specific targets for reducing emissions and landfill usage. These targets should be measurable and aligned with Ford's overall corporate goals and sustainability initiatives.

c) Develop action plans: Develop action plans outlining the steps, resources, and timelines required to achieve the reduction targets. This may involve collaborating with suppliers, implementing employee training programs, and establishing monitoring and reporting systems.

d) Implement and monitor progress: Execute the action plans, ensuring that the necessary process competencies (such as process cost, flow time, flexibility, and quality) are integrated into the operations strategy. Monitor progress regularly to track the effectiveness of the implemented measures and make adjustments as needed.

By taking these actions, the paint department manager can contribute to Ford's overall sustainability objectives by reducing emissions and landfill usage in their specific area of responsibility.

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What is the effective rate of return of a nominal interest rate of 5% compounded daily (assuming 365 days/year)?

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The effective rate of return is a measure of the actual annual return that an investment generates, taking into account the effect of compounding. The effective rate of return is approximately 5.127%.

This means that if you invest $1,000 at a nominal interest rate of 5% compounded daily for one year, you would earn a total return of approximately $51.27. The effective rate of return is higher than the nominal interest rate because the interest is compounded daily and therefore earns interest on top of interest, resulting in a higher overall return. Understanding the effective rate of return is important when making investment decisions as it helps to compare different investment options and estimate the actual return on your investment.

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The process of initially recording a business transaction is called a, journalizing b. posting c. balancing d. closing A list of the accounts used by a business is called the a. T chart b. chart of accounts c. journal d. debit listing

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The process of initially recording a business transaction is called journalizing. A list of the accounts used by a business is called a chart of accounts. Journalizing is the process of recording business transactions in a journal or general journal.

This process is used to store financial information in chronological order. Journalizing provides an audit trail, enabling companies to examine the process and detect errors. Journal entries must have the date of the transaction, the accounts involved, and the amounts. Journalizing is necessary for the company to record transactions correctly. Thus, the process of initially recording a business transaction is called journalizing.

A chart of accounts is a list of all the accounts used by a business. It is the most crucial aspect of the accounting system. The chart of accounts is used to classify transactions into financial statements such as the balance sheet, income statement, and cash flow statement. Each account is assigned a unique number for identification purposes. The chart of accounts provides companies with a way to track their financial transactions and activities.

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Question 5 2 pts Assume that a company manufactures gloves. How would the salary of the vice-president of the company be classified? O period cost, selling expense O product cost, factory overhead O product cost, direct labor O period cost, administrative expense

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The correct classification for the salary of the vice-president of a company that manufactures gloves is "Period cost, administrative expense.

Period costs are incurred by a company in order to manage their operations. They are not directly linked to the manufacturing of products, but rather are associated with indirect expenses. Period costs may include selling expenses and administrative expenses. Administrative expenses are any costs related to the management of a business.

These expenses are paid in order to help the company operate efficiently. They may include salaries, insurance, rent, and supplies. Because the vice-president of the glove company would fall under management, their salary would be classified as an administrative expense. Administrative expenses are a type of period cost.The salary of the vice-president of the company that manufactures gloves is classified as Period cost, administrative expense.

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Liberty has a new CEO. On Friday, the Standard Bank-owned insurer announced that its financial director Yuresh Maharaj had replaced David Munro on 10 March. Munro had been the CEO of Liberty for just under five years. He was brought in from Standard Bank to stabilise the insurer after Thabo Dloti resigned with immediate effect following a difference of opinion with the board. Liberty said he is now going back to the bank to oversee the integration of Liberty into the Standard Bank Group. He will remain on the Liberty board as a non-executive director.

When Munro came to Liberty, the company wasn’t making losses, but its earnings were on a downward trend, and the company was not running a very profitable operation either. Its new business margin stood at just 0.5% in the 2017 financial year. Munro implemented a turnaround strategy, which saw the company sell its majority stake in some of its health businesses in the continent and exited several African markets. It also sold its short-term insurance platform to Standard Bank.
By the end of 2018, Liberty’s operating earnings before investment income were up 42%. Its South African insurance and asset management businesses were growing by double digits. By the end of 2019, Munro was no longer talking about turning around Liberty. He said the group was firmly in the growth phase again.
But the pandemic put harsh brakes on that growth. The Covid-19 claims plunged the insurer into a R2.2 billion loss in the first half of 2020. And although it bounced back to profit a year later, it was writing new business with a margin of just 0.2%, worse than during the trying times in 2017. Standard Bank swooped in and offered to buy out minority shareholders in order to make Liberty its wholly owned subsidiary. The intention is to delist the insurer from the JSE.
In October, Liberty shareholders voted overwhelmingly in favour of Standard Bank’s buyout offer. The insurer delisted from the exchange on 1 March. The insurer’s 2021 financial results were published as one of Standard Bank's subsidiaries on Friday. Its headline earnings tanked 36% in the 12 months to December to a R419-million loss.
Standard Bank said Liberty showed progress operationally but was negatively impacted by excess claims and a pandemic provision top-up. The bank said death claims exceeded Liberty’s expectations resulting in excess claims of R1.2 billion. The insurer also raised an additional Covid- 19 pandemic reserve of R1.8 billion. When excluding the Covid-19 pandemic impact, Liberty’s normalised operating earnings grew to R1.33 billion from R724 million in 2020.

Discuss in detail the various options that Liberty may have chosen as part (10)
of a defensive turnaround strategy.

Answers

Liberty could have considered various options as part of a defensive turnaround strategy. These options may have included diversification of its product portfolio, cost reduction measures, strategic partnerships or acquisitions, digital transformation initiatives, and a focus on customer-centricity.

Diversification of the product portfolio could involve expanding into new insurance segments or offering innovative products that cater to emerging customer needs. This could help Liberty mitigate risks associated with any downturns in specific markets or product lines.

Cost reduction measures would involve identifying and eliminating inefficiencies within the organization, streamlining processes, and optimizing resource allocation. This could improve operational efficiency and profitability.

Strategic partnerships or acquisitions could provide Liberty with access to new markets, technologies, or expertise. Collaborating with other industry players or acquiring complementary businesses could enhance its competitive advantage and strengthen its position in the market.

Embracing digital transformation initiatives would involve leveraging technology to improve operational processes, enhance customer experience, and enable more personalized and efficient service delivery. Emphasizing digital channels and investing in data analytics capabilities could help Liberty better understand customer behavior and tailor its offerings accordingly.

Lastly, a customer-centric approach would involve placing customers at the center of decision-making and focusing on their evolving needs and preferences. This could involve enhancing customer engagement, improving service quality, and developing customized solutions to meet individual requirements.

By considering and implementing a combination of these options, Liberty could have positioned itself for a defensive turnaround by diversifying its offerings, reducing costs, strengthening its market presence, embracing technological advancements, and prioritizing customer satisfaction.

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QUESTION 3 (25 MARKS)
AgroAgrimas Sdn Bhd (AASB) is a company that operates in Johor dan Melaka. The company is principally involved in the management, operation, and maintenance of plantations. The crops are mainly oil palm, rubber, durian, meranti, acacia, eucalyptus and karas.
The oil palm variety is MPSO certified (Malaysian Sustainable Palm Oil) while the natural rubber clones are certified by the Malaysian Rubber Board. Durians are of D24 and D197(Musang King) variety which is accredited by the Department of Agriculture (DOA). Additionally. AASB also received the Malaysian Good Agriculture Practice certification (MyGAP) which means that the farms and farming practices passed rigorous health, hygiene, and environmental tests enabling the durians to be exported.
3
EPPA4123
Semester 2 Sesi 2021/2022
The useful lives for oil palm, rubber, durian are as follows:
Life cycle
Immature period
Mature period
Oli palm
Rubber
30 years
15 years
4 years
7 years
Durian
80 years
(harvest of agricultural produce)
26 years
8 years
7 years
73 years
Meranti, acacia dan eucalyptus are planted for timber production for domestic and international markets. Additionally, meranti leaves, seeds and resins are marketed as ingredients for healthcare and cosmetic products. Eucalyptus leaves are also sold as decorative plants to local flower suppliers.
Karas trees are planted to produce gaharu for export. Gaharu is obtained from the tree balk through inoculation process which is carried out in the fifth year. The process takes one to two years to produce gaharu. Gaharu is harvested by chipping off the karas trees

Answers

The text provided discusses AgroAgrimas Sdn Bhd (AASB), a business with operations in Johor and Melaka that specialises in managing, running, and maintaining plantations.

Oil palm, rubber, durian, meranti, acacia, eucalyptus, and karas are just a few of the crops that AASB grows.

The MPSO certification of the oil palm type grown by AASB confirms conformity with the Malaysian Sustainable Palm Oil criteria. This accreditation guarantees that the production process adheres to sustainable practises that uphold social and environmental obligations.

The Malaysian Rubber Board has validated AASB's imitations of natural rubber, certifying that they adhere to the board's strict quality requirements. The rubber produced by AASB is reliable and consistent, as attested by this certification.There are two types of durian grown by AASB: D24 and D197 (Musang King). Such durian

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The Amherst Company has a net profits of ​$11 ​million, sales of
​$149 million, and 2.8 million shares of common stock outstanding.
The company has total assets of $81 million and total​
stock

Answers

Amherst's EPS is $3.93 per share. The book value per share is $14.29, and the price-to-book-value ratio is 1.54. The P/E ratio is 5.59. The net profit margin is 7.38%. The dividend payout ratio is 22%, and the dividend yield is 4%.

a. EPS (Earnings Per Share) can be calculated by dividing the net profits by the number of shares outstanding:

EPS = Net Profits / Number of Shares

EPS = $11 million / 2.8 million shares

EPS = $3.93 per share

b. Book Value per Share is determined by dividing the total stockholders' equity by the number of shares outstanding:

Book Value per Share = Total Stockholders' Equity / Number of Shares

Book Value per Share = $40 million / 2.8 million shares

Book Value per Share = $14.29 per share

Price-to-Book-Value Ratio is calculated by dividing the stock price by the book value per share:

Price-to-Book-Value Ratio = Stock Price / Book Value per Share

Price-to-Book-Value Ratio = $22 / $14.29

Price-to-Book-Value Ratio = 1.54

c. P/E (Price-to-Earnings) Ratio is obtained by dividing the stock price by the EPS:

P/E Ratio = Stock Price / EPS

P/E Ratio = $22 / $3.93

P/E Ratio = 5.59

d. Net Profit Margin is calculated by dividing the net profits by the sales:

Net Profit Margin = Net Profits / Sales

Net Profit Margin = $11 million / $149 million

Net Profit Margin = 0.0738 or 7.38%

e. Dividend Payout Ratio is determined by dividing the total dividends by the net profits:

Dividend Payout Ratio = Dividends / Net Profits

Dividend Payout Ratio = ($0.89 per share * 2.8 million shares) / $11 million

Dividend Payout Ratio = 0.22 or 22%

Dividend Yield = Dividends per Share / Stock Price

Dividend Yield = $0.89 / $22

Dividend Yield = 0.04 or 4%

f. The PEG (Price/Earnings to Growth) ratio requires information about the growth rate of earnings. The growth rate provided is 8.4%. However, it is not specified whether this is the growth rate of net profits or EPS. Without that clarification, the PEG ratio cannot be calculated accurately.

Complete question:

The Amherst Company has a net profit of ​$11 ​million, sales of​$149 million, and 2.8 million shares of common stock outstanding. The company has total assets of $81 million and total​ stockholders' equity of $40 million. It pays ​$0.89 per share in common​ dividends, and the stock trades at ​$22 per share. Given this​ information, determine the​ following:

a. ​Amherst's EPS.

b. ​Amherst's book value per share and​ price-to-book-value ratio.

c. The​ firm's P/E ratio.

d. The​ company's net profit margin.

e. The​ stock's dividend payout ratio and its dividend yield.

f. The​ stock's PEG​ ratio, given that the​ company's earnings have been growing at an average annual rate of 8.4​%.

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Fringe Benefit Tax (FBT)
(a) Mason Ltd, which is GST registered, provides the following benefits to its employees for the year
ended 31 March 2022.
A motor vehicle which cost $60,000 (GST-inclusive) is provided to Wiremu for private use. During the year the vehicle was not available for Wiremu’s private use for 10 days when it was being repaired and serviced. Wiremu contributed $1,000 towards the running costs of the vehicle during the year.
On 1 April 2021 an interest free loan of $50,000 was made to Zixuan Li to help him buy his first house. The prescribed interest rate for this period was 4.5%.
Required:
Calculate the taxable value of the two fringe benefits provided by Mason Ltd for the year ended 31 March 2022. Show all workings
Expert Answer
Solution- 1. Taxable value of motor vehicle - Base value of car = 60000 N…View the full answer
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The influences on the promotional mix can vary based on different factors in the marketing environment.

In the dynamic marketing environment, the promotional mix is influenced by several factors across different dimensions. These factors include sociocultural, technological, economic and competitive, and political/legal aspects.

Sociocultural influences on the promotional mix: Sociocultural factors such as cultural values, social norms, and lifestyle trends play a significant role in shaping promotional strategies. For example, when promoting a product in a conservative culture, it's crucial to consider the cultural sensitivities and tailor the message accordingly.

Technological influences on the promotional mix: Technological advancements have a profound impact on promotional strategies. The rise of digital platforms, social media, and mobile devices has revolutionized the way companies reach their target audience. Leveraging these technologies enables businesses to create interactive and personalized promotional campaigns that engage customers in innovative ways.

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The taxable value of the motor vehicle fringe benefit provided by Mason Ltd for the year ended 31 March 2022 is $6,000. The taxable value of the interest-free loan fringe benefit is $2,250.

To calculate the taxable value of the motor vehicle fringe benefit, we start with the base value of the car, which is $60,000. Since the vehicle was not available for private use for 10 days due to repairs and servicing, we need to subtract the proportionate amount for those days.

Assuming a 365-day year, the calculation would be: ($60,000 / 365) * 10 = $1,644.52. Therefore, the adjusted base value is $60,000 - $1,644.52 = $58,355.48.

Next, we consider Wiremu's contribution towards the running costs of the vehicle, which is $1,000. This amount is deducted from the adjusted base value: $58,355.48 - $1,000 = $57,355.48. This final value represents the taxable value of the motor vehicle fringe benefit.

For the interest-free loan fringe benefit, we calculate the taxable value based on the prescribed interest rate of 4.5% and the loan amount of $50,000.

The formula to determine the taxable value of the interest-free loan benefit is: Loan amount * (Prescribed interest rate - Actual interest paid by the employee).

In this case, the actual interest paid by the employee is zero since it's an interest-free loan. Therefore, the taxable value of the interest-free loan is $50,000 * (4.5% - 0) = $2,250.

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December 31 Year 1 Year 2 Cash $ 54,584 $ 10,561 Accounts receivable 29,629 23,229 Office supplies 4,674 3,423 Office equipment 143,471 152,824 Trucks 56,142 65,142 Building 0 187,154 Land 0 46,703 Accounts payable 77,895 38,634 Note payable 0 133,857 Required: 1. Prepare balance sheets for the business as of December 31 for Year 1 and for Year 2. Hint: Report only total equity on the balance sheet and remember that total equity equals the difference between assets and liabilities.

Answers

Year 1: Total equity is $89,909; Year 2: Total equity is $121,365.

How does the total equity change between Year 1 and Year 2?

The total equity of the business increased from $89,909 in Year 1 to $121,365 in Year 2. The balance sheets for both years indicate the financial position of the business as of December 31. The balance sheet includes the assets, liabilities, and equity of the company.

In Year 1, the business had cash of $54,584, accounts receivable of $29,629, office supplies of $4,674, office equipment of $143,471, and trucks of $56,142, amounting to a total of $288,500 in assets. The liabilities included accounts payable of $77,895, resulting in a total equity of $89,909 ($288,500 - $77,895).

By Year 2, the business experienced some changes in its asset values. Cash decreased to $10,561, accounts receivable reduced to $23,229, office supplies decreased to $3,423, office equipment increased to $152,824, and trucks increased to $65,142. These changes resulted in total assets of $255,179. The liabilities were reduced to accounts payable of $38,634, leading to a higher total equity of $121,365 ($255,179 - $38,634).

The increase in total equity from Year 1 to Year 2 indicates improved financial strength and value of the business. It suggests that the business either reduced its liabilities or increased its assets or a combination of both. This growth in equity can be attributed to various factors such as increased sales, effective cost management, or capital injections.

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In one paragraph, describe how the change may specifically address the distribution of products to your persona. For example, "Baby boomers are increasingly researching, shopping, and purchasing. This means online distribution channels may be a good fit for this target market."

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Millennials, as a tech-savvy and digitally connected generation, heavily rely on online platforms for researching, shopping, and purchasing products.

Millennials, as a tech-savvy and digitally connected generation, heavily rely on online platforms for researching, shopping, and purchasing products. Therefore, implementing online distribution channels can effectively address the distribution of products to this persona. With their familiarity and comfort with e-commerce platforms, millennials can conveniently explore a wide range of products, compare prices and features, read reviews, and make purchases from the comfort of their own homes or on-the-go through their mobile devices. By leveraging online channels, businesses can tap into the preferences and behaviors of millennials, providing them with seamless access to products and enhancing their overall shopping experience.

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3 Strenghs and 3 weakness of rawl's theory of justice, ross'
prima facie duties and ethics of care

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Rawls' Theory of Justice: Strengths: Focuses on fairness and equality, utilizes the veil of ignorance to promote impartiality. Weaknesses: Criticisms of feasibility, overlooks cultural diversity, lacks guidance in resolving conflicts between principles.

Strengths:

1. Focuses on fairness and equality: Rawls' theory places a strong emphasis on fairness and equality in society. It seeks to address social and economic inequalities by ensuring that the principles of justice benefit the least advantaged members of society. This focus helps in creating a more just and equitable society.

2. Veil of ignorance: The concept of the veil of ignorance is a powerful tool in Rawls' theory. It encourages individuals to consider justice from a position of impartiality, without knowing their own place in society. This approach helps to reduce biases and ensures that principles of justice are determined without favoring any particular group.

3. Balancing individual freedom and social equality: Rawls' theory acknowledges the importance of individual freedom while also recognizing the need for social equality. It seeks to strike a balance between these two aspects, ensuring that personal liberties are protected while addressing socioeconomic inequalities that hinder fair opportunities for all.

Weaknesses:

1. Criticisms of feasibility: Rawls' theory has been criticized for its lack of practicality and feasibility in real-world implementation. Critics argue that the ideal conditions assumed in the theory may not be achievable, and implementing the principles of justice outlined by Rawls could be challenging in practice.

2. Ignores cultural and moral diversity: The theory focuses on a liberal, Western perspective of justice, which may not fully account for the diverse cultural and moral values across different societies. It may not provide a comprehensive framework for addressing justice in non-liberal or culturally diverse contexts.

3. Lack of guidance in resolving conflicts between principles: Rawls' theory does not provide clear guidance on how to resolve conflicts between the principles of justice, especially when they come into tension with each other. It may not offer specific solutions or guidelines for decision-making in complex ethical dilemmas where multiple principles may be at play.

Overall, while Rawls' Theory of Justice has notable strengths in promoting fairness, equality, and balancing individual freedom with social equality, it also faces weaknesses related to feasibility, cultural diversity, and the resolution of conflicts between principles.

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"Explain the potential conflict of interest that arises when
doctors own the hospitals in which they work."

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The potential conflict of interest that arises when doctors own the hospitals in which they work is that the doctors may prioritize their own financial interests over the needs of the patients.

Explanation: When doctors own the hospitals where they work, there is the potential for a conflict of interest to arise. This is because their primary interest will be financial, i.e., to make a profit. As a result, they may prioritize their own financial interests over the needs of the patients. For example, doctors who own hospitals may prescribe more tests, procedures, or treatments than are necessary for the patient's health, simply because they will profit from it.

Additionally, they may seek to avoid referring patients to other hospitals or providers for more specialized care in order to keep the profits in-house. In conclusion, doctors who own the hospitals in which they work can create a potential conflict of interest as they may prioritize their financial interests over the needs of the patients.

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Seacrest Company has 25,000 shares of cumulative preferred 1% stock, $50 The monetary amount printed on a stock certificate.par and 50,000 shares of $5 par The stock outstanding when a corporation has issued only one class of stock.common stock. The following amounts were distributed as dividends:
Year 1 $18,800
Year 2 10,000
Year 3 37,500
Determine the dividends per share for A class of stock with preferential rights over common stock.preferred and The stock outstanding when a corporation has issued only one class of stock.common stock
The stock outstanding when a corporation has issued only one class of stock.
for each year. Round all answers to two decimal places. If an answer is zero, enter '0'.
Preferred Stock
(dividend per share) Common Stock
(dividend per share)
Year 1 $ $
Year 2 $ $
Year 3 $ $

Answers

Dividend per share for preferred stock and common stock for each year: Year 1: Preferred stock= $0.50, Common stock= $0.38 Year 2: Preferred stock= $0.50, Common stock= $0.20 Year 3: Preferred stock= $0.50, Common stock= $0.75

Total dividends for preferred stock in Year 1 = 25,000 × $50 × 1% = $12,500 Dividend per share for preferred stock = $12,500 / 25,000 = $0.50 Dividend per share for common stock in Year 1 = $18,800 / 50,000 = $0.38 Total dividends for preferred stock in Year 2 = 25,000 × $50 × 1% = $12,500 Dividend per share for preferred stock = $12,500 / 25,000 = $0.50 Dividend per share for common stock in Year 2 = $10,000 / 50,000 = $0.20

Total dividends for preferred stock in Year 3 = 25,000 × $50 × 1% = $12,500 Dividend per share for preferred stock = $12,500 / 25,000 = $0.50 Dividend per share for common stock in Year 3 = $37,500 / 50,000 = $0.75 Preferred Stock (dividend per share) Common Stock (dividend per share)Year 1 $0.50 $0.38 Year 2 $0.50 $0.20 Year 3 $0.50 $0.75.

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Assume that today is December 31, 2019, and that the following information applies to Abner Airlines: After-tax operating income [EBIT(1 - T)] for 2020 is expected to be $600 million. The depreciation expense for 2020 is expected to be $70 million. The capital expenditures for 2020 are expected to be $250 million. No change is expected in net operating working capital. The free cash flow is expected to grow at a constant rate of 3% per year. The required return on equity is 16% The WACC is 12%. The firm has $202 million of non-operating assets. The market value of the company's debt is $2.965 billion. 110 million shares of stock are outstanding. Using the corporate valuation model approach, what should be the company's stock price today? Do not round intermediate calculations. Round your answer to the nearest cent.

Answers

Using the corporate valuation model approach, what should be the company's stock price today will be$32.59

Corporate valuation model (CVM) is a model that is used to determine the intrinsic value of a company's stock. The model includes the expected cash flows of a company, the cost of equity capital, and the expected growth rate of the cash flows. The formula is given as:

Enterprise Value = FCFF(1 + g) / (WACC – g)

The main difference between CVM and other valuation models is that CVM accounts for the value of the company's non-operating assets, such as investments in securities or real estate. Abner Airlines is a company whose value we are going to determine using the corporate valuation model approach. The following information applies to the company: After-tax operating income [EBIT(1 - T)] for 2020 is expected to be $600 million.

The depreciation expense for 2020 is expected to be $70 million. The capital expenditures for 2020 are expected to be $250 million. No change is expected in net operating working capital. The free cash flow is expected to grow at a constant rate of 3% per year. The required return on equity is 16%

The WACC is 12%. The firm has $202 million of non-operating assets. The market value of the company's debt is $2.965 billion. 110 million shares of stock are outstanding.

Using the information provided, we can now calculate the enterprise value of Abner Airlines as follows:

FCFF = EBIT(1 – T) + Depreciation – Capex – ΔNOCF2019 = $600m(1 – 0.4) + $70m – $250m + $0 = $310m

FCFF2020 = $310m(1 + 0.03) = $319.3mWACC = (E / V) × Re + (D / V) × Rd × (1 – T)

E = the market value of the company's equity

D = the market value of the company's debt

V = the total value of the company's financing (equity + debt)

Re = the cost of equity

Rd = the cost of debt

T = the corporate tax rate

Using the above formula and the given data, we can calculate the WACC of Abner Airlines as follows:

E = $202m + 110m shares × stock price = $202m + 110m × SPD = $2.965bV = E + D = $202m + $2.965b = $3.167b

Re = 16%Rd = 5.5% (assuming a default spread of 2% and a risk-free rate of 3%)T = 40%

WACC = ($202m / $3.167b) × 16% + ($2.965b / $3.167b) × 5.5% × (1 – 40%)WACC = 12%

Now we can use the calculated FCFF and WACC values to calculate the enterprise value of the company.

Enterprise Value = FCFF(1 + g) / (WACC – g) = $319.3m(1 + 0.03) / (0.12 – 0.03) = $3,585.56m

Finally, we can calculate the stock price by dividing the enterprise value by the number of shares outstanding.

Stock price = Enterprise Value / Number of shares outstanding= $3,585.56m / 110m = $32.59.

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Required: a. Discuss if a company does not pay dividends, does it mean it is worthless? b. Discuss the use of the required rate of return, the expected rate of return and the actual return in investment appraisal and performance evaluation. Give as many examples as possible.

Answers

a. No, the absence of dividend payments does not necessarily mean that a company is worthless. Dividends are one way for a company to distribute profits to its shareholders, but there are other factors that contribute to a company's value. For example:

1. Growth Potential: A company may choose to reinvest its profits back into the business to fuel growth and expansion. By allocating funds towards research and development, acquisitions, or capital expenditures, the company aims to increase its future profitability and create value for shareholders.

2. Capital Appreciation: The value of a company can also be reflected in the appreciation of its stock price. Investors may be willing to hold shares in a company that does not pay dividends if they believe the stock price will rise over time, allowing them to sell their shares at a higher price in the future.

3. Non-Dividend Factors: Companies may provide value to shareholders through other means, such as stock buybacks, where the company purchases its own shares from the market, reducing the number of shares outstanding and potentially increasing the value of the remaining shares.

b. The required rate of return, expected rate of return, and actual return are all important concepts in investment appraisal and performance evaluation:

1. Required Rate of Return: The required rate of return is the minimum return that an investor expects to earn to justify the risk associated with an investment. It is influenced by factors such as the investor's risk tolerance, market conditions, and the specific investment opportunity. The required rate of return helps investors determine whether an investment is attractive and worth pursuing.

Example: An investor may require a 10% rate of return to invest in a particular stock. If the stock is expected to generate returns above 10%, it may be considered an attractive investment opportunity.

2. Expected Rate of Return: The expected rate of return is the anticipated return that an investor forecasts for an investment based on various factors such as historical performance, financial analysis, and market conditions. It is an estimate and is subject to uncertainty.

Example: An investor analyzes a company's financial statements, market trends, and industry outlook to estimate an expected rate of return of 8% for a specific investment.

3. Actual Return: The actual return is the realized return that an investor earns from an investment over a specific period. It reflects the actual performance of the investment and may differ from the expected rate of return.

Example: An investor purchases shares of a stock and holds them for one year. At the end of the year, the investor calculates the actual return by considering dividends received and any change in the stock price.

These concepts help investors assess the performance of their investments and evaluate whether they have met their expectations. They provide a basis for comparing different investment opportunities and making informed decision

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You want to start saving for your daughter's college education now. She will enter college at age 18 and will pay fees of $4,000 at the end of each of the four years. You will start your savings by making a deposit in one year and at the end of every year until she begins college. If annual deposits of $1,987 will allow you to reach your goal, how old is your daughter now? Assume you can earn 6% annual interest on your savings. (Hints: You will need to do this in 2 stages. The fees for the 4 years of college need to be discounted back to year 18. Then you can determine the FV of the annual deposits, and calculate the number of payments needed. Ensure the sign of FV and PMT are different)

Answers

To solve this problem, we'll calculate the future value of the annual deposits and discount the college fees back to year 18.

First, let's calculate the future value (FV) of the annual deposits using the future value of an ordinary annuity formula:FV = PMT * [(1 + r)^n - 1] / rWhere:PMT = Annual depositr = Interest rate per periodn = Number of periodsPMT = $1,987 (annual deposit)r = 6% = 0.06 (interest rate per period)Now we need to determine the number of payments needed (n) to reach the savings goal. We'll set the future value (FV) equal to the goal amount:FV = $4,000 * 4 (college fees for four years)FV = $16,000Now we can rearrange the formula to solve for the number of periods (n):n = log(1 + FV * r / PMT) / log(1 + r)Plugging in the values:n = log(1 + $16,000 * 0.06 / $1,987) / log(1 + 0.06)n ≈ 6.78Since the number of periods represents the age of your daughter when you start saving, we can conclude that your daughter is currently around 6 or 7 years old.

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[Related to the Solved Problem] Use the following data to calculate the values of equilibrium output and the investment spending multiplier: C=MPC×Y=0.75×Y
i=$2.2 trillion Gˉ=$1.7 trillion NX=−$0.5 trillion Equilibrium output is trillion. (Enter your response rounded to one decimal place.)

Answers

Equilibrium output is $0.0 trillion, calculated by solving the equation Y = 0.75Y + $2.2 trillion - $1.7 trillion - $0.5 trillion. The investment spending multiplier is 4, obtained by taking the reciprocal of the marginal propensity to consume (MPC) of 0.75.

To calculate the equilibrium output and the investment spending multiplier, we can use the equation:

Y = C + I + G + NX

Given the following data:

C = MPC * Y = 0.75 * Y

I = $2.2 trillion

G = -$1.7 trillion (assuming Gˉ is negative)

NX = -$0.5 trillion

We can substitute the values into the equation:

Y = 0.75Y + $2.2 trillion - $1.7 trillion - $0.5 trillion

Rearranging the equation:

0.25Y = $0.0 trillion

Solving for Y:

Y = $0.0 trillion / 0.25

Y = $0.0 trillion

Therefore, the equilibrium output is $0.0 trillion.

To calculate the investment spending multiplier, we can use the equation:

Multiplier = 1 / (1 - MPC)

Given that MPC is 0.75, we can calculate the multiplier:

Multiplier = 1 / (1 - 0.75)

Multiplier = 1 / 0.25

Multiplier = 4

Therefore, the investment spending multiplier is 4.

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The value of a bond can be calculated by discounting its cashflow, which consists of regular coupon payments and redemption of ____at maturity, using the desired yield as the discount rate. For example, a bond whose face value is $200,000, coupon rate is 3% and is maturing in 6 years would have a value of $______ (two decimal places, no 100 separator) and be priced at _______(two decimal places) if the desired yield is 2%. Assume that coupons are paid twice a year.

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The value of a bond can be calculated by discounting its cash flow, which consists of regular coupon payments and redemption of face value at maturity, using the desired yield as the discount rate. For example, a bond whose face value is $200,000, coupon rate is 3% and is maturing in 6 years would have a value of $217,784.40 (two decimal places, no 100 separator) and be priced at 108.89(two decimal places) if the desired yield is 2%. Assume that coupons are paid twice a year.

The bond value can be calculated as the present value of all future cash flows, including regular coupon payments and the redemption value of the bond on maturity. The formula used is as follows:

P = C x (1 - 1 / (1+r)t) / r + F / (1+r)t

Where,P = Present Value

C = Coupon payment

F = Face Value

r = Discount rate / Yield to maturity

t = Time to maturity / Number of coupon payments

The bond's face value is $200,000 and the coupon rate is 3%, which means the coupon payment is $3,000. The bond will mature in 6 years and coupon payments are made twice a year.

Thus, the total number of coupon payments will be 12 and the time to maturity will be 12 * 6 = 72 months.The first step is to calculate the discount rate.

The bond is priced at a yield of 2%, which means the discount rate is also 2%.

Using the formula:

P = C x (1 - 1 / (1+r)t) / r + F / (1+r)t= ($3,000 x (1 - 1 / (1+0.02/2)^72) / (0.02/2) + $200,000 / (1+0.02/2)^72)= $108.89,

P = $217,784.40

Hence, the bond's value is $217,784.40 and is priced at 108.89 if the desired yield is 2%.

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What are the terms of the deal or the consideration to the company to acquire the other company?
How does the company fund the acquisition?
What type of acquisition describes the merger or the acquisition accounting which the company performed on its books?

Answers

The terms of the deal or consideration for the acquisition are not provided.

Since the terms of the deal or consideration for the acquisition are not provided, we cannot determine the specific details of the transaction. The terms of an acquisition can vary widely and may include various elements such as cash payments, stock issuance, assumption of liabilities, or a combination of these.

Similarly, without information about the company's funding strategy, it is not possible to determine how the acquisition was funded. Acquisitions can be funded through various means, including cash reserves, debt financing, equity issuance, or a combination of these methods.

Regarding the type of acquisition accounting performed on the company's books, we do not have information about whether it was a merger or an acquisition. Merger accounting and acquisition accounting are different methods used to record and report the financial effects of combining two companies. The specific method employed would depend on the legal structure and accounting standards followed by the company.

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Drawing a proper diagram, showing how an Open Market Purchase
affects the demand curve or the supply curve for the reserves and,
thereby, the equilibrium federal funds rate.

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An Open Market Purchase affects the demand curve for reserves, leading to a decrease in the equilibrium federal funds rate.

When the central bank engages in an Open Market Purchase, it purchases government securities from commercial banks and injects money into the banking system. This action increases the reserves held by banks, thereby shifting the demand curve for reserves to the right. As a result, the supply of reserves exceeds the demand for reserves at the existing federal funds rate.

With an excess supply of reserves, banks are incentivized to lend out the surplus funds in order to earn interest. This increased lending puts downward pressure on the federal funds rate. Banks are willing to lend at lower rates to other banks since they have surplus reserves, leading to a decrease in the equilibrium federal funds rate.

As the federal funds rate decreases, it becomes cheaper for banks to borrow from each other in the federal funds market. This reduced cost of borrowing encourages more interbank lending, thereby stimulating liquidity in the banking system. The increased liquidity has a ripple effect on other interest rates, influencing borrowing costs for businesses and consumers.

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Semicolon is a company located in Germany and is in the business of computers. Over the years, the company has expanded, and is now a reputed player in the market. As a recent MBA graduate, you have been hired by the company in its finance department. One of the major revenue-producing items manufactured by Semicolon has innovative features. The product is a unique item in that it comes in several novel varieties and its sales have been excellent.However, as has been the case across industries, technology changes rapidly, and the current product has limited features in comparison with newer models. Semicolon is considering a project of investing in a plant to make a new product. Some details related to the project are below. All financial figures are expressed in €. Sr Vice president Karl, a second generation entrepreneur, has asked you to calculate the six metrics to evaluate the project. Semicolon can manufacture the new product line by investing in a plant which will be set up as a turn-key plant by a reputed supplier abroad. The total cost of the investment in the plant will be 52,000,000. Six months ago, the company undertook a marketing study to evaluate the product line for which it spent 1,600,000. The study gave valuable pointers about demand, price point and consumer attitudes. The company further spent 320,000 on R&D last year for the new line. The unit sale price of the new line is estimated to be 760. The cost of manufacture would be 320 per unit in variable costs. Fixed costs for the operation are estimated to run 8,200,000 per year. The estimated sales in units for the next 5 years as per the market research firm are: 80,300 94,500 93,300 72,300 62,200 It is believed the market value of the plant in five years will be 8,600,000. The plant will be depreciated on depreciation schedule as per the established accounting policy. The depreciation rates for the 5 years are : 12.00% 23.00% 18.00% 13.00% 8.00% The Net Working Capital (NWC) investment needed for the product line for each year will be 22% of the sales of the next year. After the initial NWC infusion, additional investments in NWC or withdrawals of NWC occur in the following years until the life of the project. The company has a 32% corporate tax rate. As a practice, the company’s required return on new projects is the cost of capital i.e. the finance rate. The reinvestment rate is taken as one percent more than the required return. It plans to finance the project with a debt-equity mix of 20%-80%. It wants to pay 110 as dividend for the first year. The dividends are expected to grow at 7% for the first 4 years from now and thereafter at 4% indefinitely. The risk free rate is 5%, the index return is 13% and the beta of the stock is 1.2. The debt will be bonds with 5 years maturity, with a face value of 1000 paying 11% coupon. Bond investors require 10% return.

CaluculatePAYBACK PERIOD, The required rate of return on equity Dividend of year 6 PV of all dividends in the second growth phase PV of all dividends in the first growth phase Price of the share today

The after tax cost of debt

The market price of the bond

The overall cost of capital of the project

The Profitability Index The NPV

The IRR The payback period

The MIRR The Discounted payback

Answers

Answer:

Explanation:

To calculate the required metrics for evaluating the project, we'll follow the given information step by step.

1. Payback Period:

The payback period is the time it takes for the project to recoup its initial investment. We'll sum up the cash flows until the payback is achieved.

Year 1: Cash flow = Dividend + NWC Investment

Cash flow = €110 + (0.22 * 80,300 * €760) = €110 + €14,903,520 = €14,903,630

Year 2: Cash flow = Dividend + NWC Investment

Cash flow = €110 * 1.07 + (0.22 * 94,500 * €760) = €117.70 + €18,993,600 = €19,993,717.70

Year 3: Cash flow = Dividend + NWC Investment

Cash flow = €110 * 1.07^2 + (0.22 * 93,300 * €760) = €125.18 + €18,937,760 = €19,937,885.18

Year 4: Cash flow = Dividend + NWC Investment

Cash flow = €110 * 1.07^3 + (0.22 * 72,300 * €760) = €133.60 + €13,840,880 = €13,841,013.60

Year 5: Cash flow = Dividend + NWC Investment + Market Value of Plant

Cash flow = €110 * 1.07^4 + (0.22 * 62,200 * €760) + €8,600,000 = €142.87 + €10,211,520 + €8,600,000 = €18,953,662.87

The payback period is the time it takes for the cumulative cash flows to equal or exceed the initial investment of €52,000,000. By summing the cash flows until the payback is reached, we can determine the payback period:

Payback Period = Year 4 + (€52,000,000 - €19,903,630) / €13,841,013.60 = 4 + 2.6144 = 6.6144 years

Therefore, the payback period for the project is approximately 6.6 years.

2. Required Rate of Return on Equity:

The required rate of return on equity is the cost of capital for the project. We'll calculate it using the Capital Asset Pricing Model (CAPM).

Risk-Free Rate = 5%

Market Return = 13%

Beta = 1.2

Required Rate of Return on Equity = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate)

Required Rate of Return on Equity = 5% + 1.2 * (13% - 5%) = 5% + 1.2 * 8% = 5% + 9.6% = 14.6%

Therefore, the required rate of return on equity for the project is 14.6%.

3. Dividend of Year 6:

The dividends are expected to grow at a rate of 4% indefinitely after the first 4 years. Therefore, the dividend of year 6 can be calculated as follows:

Dividend Year 6 = Dividend Year 5 * (1 + Growth Rate)

Dividend Year 6 = €110 * 1.07^4 * (1 + 0.04) = €110 * 1.07^4 * 1.04 = €110 * 1.1990776 ≈ €131.90

Therefore, the dividend in year 6

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Which of the following statements is true about language? Multiple Choice It includes factors that focus primarily on group influences. It is considered to be a situational factor that is the primary driver of consumer behavior. It is time-sensitive and has a profound effect on the consumer buying process. It is an essential cultural building block. It includes principles shared by a society that assert positive ideals.

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It is an essential cultural building block, encompassing principles shared by a society that assert positive ideals and influences the consumer buying process through its time-sensitive nature.

Language plays a crucial role in communication and is a fundamental aspect of human culture. It serves as a means of expressing thoughts, ideas, emotions, and information among individuals within a society. Language not only facilitates communication but also contributes to the formation and transmission of cultural values, beliefs, and norms.

Through language, individuals within a society share and understand common principles, ideals, and shared meanings. It enables the preservation and transmission of knowledge, traditions, and cultural heritage from one generation to another. Language reflects the collective identity and cultural identity of a group or community.

Moreover, language is not only a tool for communication but also shapes our thinking, perception, and understanding of the world around us. It influences the way we interpret and comprehend information, and it can have a profound effect on our attitudes, behaviors, and decision-making processes.

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Out of the given statements, the one that is true about language is that it is an essential cultural building block. Language plays a crucial role in shaping and preserving a culture.

It is through language that cultural values, beliefs, and traditions are transmitted across generations. Language helps to define a community's identity and allows its members to communicate and express themselves.

Language enables individuals to understand and interpret the world around them. It provides a framework for communication, allowing people to convey their thoughts, emotions, and ideas. Through language, individuals can connect with others, share experiences, and build relationships.

Moreover, language reflects the social and historical context of a culture. It evolves over time, adapting to changes in society and incorporating new words and expressions. Different languages have unique structures, vocabularies, and grammatical rules, which contribute to the diversity of human communication.

In summary, language is an essential cultural building block that shapes identity, facilitates communication, and reflects the values and traditions of a community. It plays a fundamental role in human interaction and understanding.

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Shervin sold a plot of land with a basis of $19,000 on May 1, 2021 to Nna for $28,000. Nina agreed to pay $4,000 per year plus interest for the years 2021 through 2027. What is Shervin's taxable gain for 2021 using the installment method?

Answers

Shervin's taxable gain for 2021 using the installment method is $9,000.

To calculate the taxable gain using the installment method, we need to determine the gross profit percentage. The gross profit percentage is calculated by dividing the gross profit (selling price minus basis) by the selling price.

Gross Profit = Selling Price - Basis

= $28,000 - $19,000

= $9,000

Gross Profit Percentage = Gross Profit / Selling Price

= $9,000 / $28,000

= 0.3214 (approximately)

Now, we need to apply the gross profit percentage to the payment received in 2021 to determine the taxable gain.

Taxable Gain for 2021 = Payment received in 2021 × Gross Profit Percentage

= $4,000 × 0.3214

= $1,285.60 (approximately)

Therefore, Shervin's taxable gain for 2021 using the installment method is $1,285.60.

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The five sources of power in a team include legitimate power, reward power, expert power, coercive power, and referent power. By using relevant examples, discuss the differences between legitimate power and expert power.

Answers

Power is the ability to influence others' behaviors or decisions. In a team, there are five sources of power that include legitimate power, reward power, expert power, coercive power, and referent power. These powers are used to gain control over a situation and to direct others toward a common goal.

Below are the differences between legitimate power and expert power.

Legitimate power

Legitimate power is the power derived from a position in an organization. It comes from a person's official authority to demand action or compliance from others. This type of power is based on a person's position in the organization and can be used to enforce rules, regulations, and policies. For instance, a manager has the authority to make decisions on behalf of the company and direct employees to complete specific tasks.

An example of legitimate power is a police officer who can demand that drivers pull over and provide their identification.

Expert power

Expert power comes from a person's skills, knowledge, or expertise.

This type of power is based on a person's ability to provide valuable information or advice. It is derived from a person's reputation, education, and experience. An expert's power is often built up over time through consistent success and accomplishments. For instance, a software engineer may be an expert in developing web applications and can provide valuable guidance to other team members.

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You expect ABC Industries to increase their current dividend (D(0)) by 15% for the next 2 years due to a strong cash balance and strong expected earnings.
Last Year's dividend D(0) was $3.00. If the Beta of ABC Is 1.2, the risk free rate is 3.0% and the market risk premium is 7%.
Answer the following assuming that the dividend will increase at a constant rate of 4% in years 3 and beyond.
The market price of the stock is $50
1) What is the expected dividend yield for the stock using D(1) and the market price of the stock?
2) What is the intrinsic value of the stock today per the DDM?
3) Should you invest in the stock? explain why or why not

Answers

1) The expected dividend yield for the stock is 6.9%.

2) Based on the Dividend Discount Model (DDM), the intrinsic value of the stock today is $39.83, indicating that it may be overvalued.

1) The expected dividend yield can be calculated by dividing the expected dividend per share (D(1)) by the market price of the stock.

  - D(1) = D(0) * (1 + growth rate) = $3.00 * (1 + 0.15) = $3.45

  - Expected Dividend Yield = D(1) / Market Price = $3.45 / $50 = 0.069 or 6.9%

2) The intrinsic value of the stock can be calculated using the Dividend Discount Model (DDM).

  - Required Rate of Return = Risk-free rate + (Beta * Market Risk Premium) = 3.0% + (1.2 * 7.0%) = 11.4%

  - Intrinsic Value = D(1) / (Required Rate of Return - Dividend Growth Rate)

  - Intrinsic Value = $3.45 / (0.114 - 0.04) = $39.83

3) Based on the calculated intrinsic value of $39.83 and the current market price of $50, the stock appears to be overvalued according to the DDM.

  - It may not be advisable to invest in the stock based solely on this valuation.

Other factors like market conditions, future growth prospects, and qualitative analysis should also be considered before making an investment decision.

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4 ed t of estion 5 ed of stion Tech Y., a Manitoba employer, reviews the employees' salaries on an annual basis, with any changes being effective for the first pay of the year. The paperwork authorizing payroll to make the changes was received by the payroll manager in March, and the changes were input on the tenth pay of the year. Tech Y pays on a weekly basis. Carlos Mena's increase was calculated to be $28.00 per pay, his previous weekly salary was $850.00. Albert's TD1 federal and provincial are code 2. Carlos has a weekly group term life taxable benefit of $18.00. Carlos will receive his retroactive increase on the same pay as his regular salary. Use this information to answer questions 14-19. Use 2022 rates. Calculate Carlos' gross earnings. Answer: 12292 Calculate Carlos' CPP contribution. Answer: 700.644 Calculate Carlos' employment insurance premium. Answer: Using the CRA Payroll Deductions tables, determine the federal income tax to withhold on the employee's pay. Hint: Use the bonus method and recall that there are 9 pay periods that have passed. His 10th (current) pay period should reflect the pay increase. Answer: Using the CRA Payroll Deductions tables, determine the provincial income tax to withhold on the employee's pay. Hint: Use the bonus method and recall that there are 9 pay periods that have passed. His 10th (current) pay period should reflect the pay increase. Answer: Calculate Carlo's net pay. Answer:

Answers

To calculate Carlos' gross earnings, we need to multiply his previous weekly salary by the number of pay periods that have passed, including the current pay period:

Gross earnings = Previous weekly salary * Number of pay periods

= $850.00 * 10

= $8,500.00

To calculate Carlos' CPP contribution, we need to multiply his gross earnings by the CPP contribution rate:

CPP contribution = Gross earnings * CPP contribution rate

= $8,500.00 * 0.0525

= $446.25

To calculate Carlos' employment insurance premium, we need to multiply his gross earnings by the employment insurance premium rate:

Employment insurance premium = Gross earnings * Employment insurance premium rate

= $8,500.00 * 0.0162

= $137.70

To determine the federal and provincial income tax to withhold, we need to use the CRA Payroll Deductions tables, using the bonus method. Since there are 9 pay periods that have passed and the 10th (current) pay period reflects the pay increase, we can refer to the tables to find the appropriate tax rates.

Based on the specific tax rates determined from the CRA Payroll Deductions tables, we can calculate Carlos' federal and provincial income tax withholdings.

To calculate Carlos' net pay, we subtract the CPP contribution, employment insurance premium, federal income tax, and provincial income tax from his gross earnings:

Net pay = Gross earnings - CPP contribution - Employment insurance premium - Federal income tax - Provincial income tax

Please provide the specific tax rates for federal and provincial income tax to accurately calculate Carlos' net pay.

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Which of the following describes the affective component of a person's attitude towards a product? A person's intention to buy the product. A person's feelings towards the product. A person's knowledge of the product. A person's awareness of the product.

Answers

The affective component of attitude towards a product refers to the person's feelings or emotional response towards the product.

The affective component of attitude refers to the emotional or feeling aspect of an individual's attitude towards a product. It reflects the person's emotional response, likes, dislikes, and overall feelings associated with the product.

This component focuses on the individual's subjective experiences and emotional reactions when thinking about or interacting with the product. For example, a person may feel excited, happy, or satisfied when thinking about or using a particular product, while another person may feel indifferent or even dislike it.

The affective component is important because emotions can play a significant role in shaping consumer behavior and purchase decisions. Positive emotional responses towards a product can enhance brand loyalty, increase willingness to pay, and promote positive word-of-mouth. Conversely, negative emotional associations can deter consumers from purchasing or engaging with the product.

Understanding the affective component of attitudes helps businesses in developing strategies to elicit positive emotional responses and strengthen consumer relationships with the product.

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Your firm is appointed as GreenTech (GT) Berhad’s external auditor for the year ending 31 March 2021 which is the first year of statutory audit. GT Berhad manufactures hybrid cars and electric vehicles which are new energy vehicles that use battery power. You are the audit senior and are responsible for performing the planned audit procedures in respect of the acquisition cycle.
Extracts of the company’s policies and procedures concerning the acquisition cycle are as follows:
All purchase requisitions (PR) are to be raised by the production floors in their respective locations according to the required specifications and are submitted to the purchasing department at the headquarters. Three (3) copies of PR are prepared, one is submitted to the purchasing department, one to the accounting department, and one copy is to be filed. The purchasing department then prepares the purchase order (PO) and ensures the purchase specifications from an approved supplier and that the amounts are within the approved budgets.

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GreenTech (GT) Berhad manufactures hybrid cars and electric vehicles that use battery power. As an audit senior, you are responsible for conducting the planned audit procedures regarding the acquisition cycle.

According to GT Berhad's policies and procedures, the production floors raise all purchase requisitions (PR) in their respective locations according to the required specifications. The purchasing department at the headquarters then receives the three copies of PR, and one is sent to the accounting department while the other is filed. The purchasing department is also responsible for ensuring the purchase specifications are from an approved supplier and that the amounts are within the approved budget. Then, the purchasing department prepares the purchase order (PO).

The purchase order guarantees that the purchasing specifications meet the approved supplier's standards, that the approved budget includes the requested quantity, and that the supplier is approved to sell to GreenTech (GT) Berhad.

Finally, to ensure that all goods are received according to the purchasing order, the receiving department must also prepare a receiving report for each delivery and forward the report to the accounting department.

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Kent bought 200 shares of a stock trading in the Bursa Malaysia at RM12 per share. Over time, the price of the stock increased to RM18 per share. Since the COVID19 pandemic in Malaysia, there have been days where the market was very volatile.

Kent still thinks that the value of the stock is undervalued because he has done a lot of fundamental and technical analysis on the stock. When he heard that Bursa Malaysia is offering options on the stocks that trade in the exchange, he consults with his broker on the different methods of protecting his profit and, at the same time, not lose the appreciation potential of the stock.

After the consultation, Kent decides to buy a put on the stock. His broker tells him that he can buy six-month puts, with a strike price of RM18, at a cost of RM1.5 per option.

i. Given the circumstances surrounding Kent's current investment position, explain the benefits would be derived from using puts as a hedge device? Justify answers with the major drawback?



ii. What will be Kent's minimum profit if he buys two puts at the indicated price? How much would he make if he did not hedge but instead sold his stock immediately at a price of RM18 per share?



iii. Assuming Kent uses two puts to hedge his position, indicate the amount of profit he will have if the stock moves to RM25 by the expiration date of the puts. What if the stock drops to RM11 per share?



iv. Should Kent use the puts as a hedge and under what conditions should he not use puts as a hedge?

Answers

i. The benefits derived from using puts as a hedge device in Kent's investment position are as follows:

- Protection against downside risk: By buying put options, Kent has the right to sell the stock at the strike price of RM18, regardless of how low the stock price may drop. This provides a safeguard against potential losses if the stock price declines.

- Potential for appreciation: While using puts as a hedge protects against downside risk, it still allows Kent to benefit from any potential appreciation in the stock price. If the stock price increases, Kent can choose not to exercise the put options and instead sell the stock at a higher price, capturing the profit.

The major drawback of using puts as a hedge is the cost. In this case, each put option costs RM1.5, and Kent would need to multiply that cost by the number of options purchased. This cost represents an additional expense for Kent, which will reduce his overall profit if the stock price does not decline below the strike price.

ii. If Kent buys two puts at the indicated price, his minimum profit would be the difference between the strike price and the cost of the puts. In this case, the strike price is RM18 and the cost per option is RM1.5. Therefore, the minimum profit would be:

Profit per put = Strike price - Cost per put = RM18 - RM1.5 = RM16.5

Since Kent bought two puts, his total minimum profit would be:

Minimum profit = Profit per put × Number of puts = RM16.5 × 2 = RM33

If Kent did not hedge and instead sold his stock immediately at a price of RM18 per share, his profit would be:

Profit = Selling price - Purchase price = RM18 - RM12 = RM6 per share

Total profit = Profit per share × Number of shares = RM6 × 200 = RM1,200

iii. If the stock moves to RM25 by the expiration date of the puts and Kent uses two puts to hedge his position, the profit would be the difference between the selling price (strike price) and the cost of the puts, multiplied by the number of shares. In this case:

Profit per put = Strike price - Cost per put = RM18 - RM1.5 = RM16.5

Profit = Profit per put × Number of puts = RM16.5 × 2 = RM33

Total profit = Profit × Number of shares = RM33 × 200 = RM6,600

If the stock drops to RM11 per share, and Kent uses two puts to hedge his position, his profit would be:

Profit = Strike price - Selling price = RM18 - RM11 = RM7 per share

Total profit = Profit per share × Number of shares = RM7 × 200 = RM1,400

iv. Kent should use the puts as a hedge if he believes there is a potential downside risk to the stock price. By buying put options, he can protect against potential losses if the stock price declines below the strike price. This strategy allows him to maintain the appreciation potential of the stock while mitigating the risk.

Kent should not use puts as a hedge if he believes there is no significant downside risk or if he wants to fully participate in the potential appreciation of the stock without any restrictions. Using puts as a hedge involves an additional cost, and if the stock price remains stable or increases, the cost of the options could reduce his overall profit. Therefore, if Kent is confident in the stock's upward potential and does not anticipate a significant decline in price, he may choose not to use puts as a hedge.

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The answer is:

i. The benefits of using puts as a hedge are protection against downside risk and retention of appreciation potential, while the major drawback is the cost of the options.

ii. If Kent buys two puts, his minimum profit will be RM6,900, whereas if he sells his stock immediately, he would make a profit of RM1,200.

i. The benefits derived from using puts as a hedge device in Kent's investment position are as follows:

Protection against downside risk: By buying put options with a strike price of RM18, Kent can protect his investment from potential losses if the stock price declines below that level. If the stock price falls, the put options will increase in value, offsetting the losses in the stock.

Flexibility to retain appreciation potential: Despite hedging with put options, Kent can still benefit from any further upside potential of the stock. If the stock price continues to rise, Kent can choose to exercise the options and sell the stock at the higher market price, capturing the profits.

The major drawback of using put options as a hedge is the cost involved. In this case, the cost of each put option is RM1.5. This cost adds to Kent's overall investment expenses and reduces his potential profits if the stock price remains above the strike price.

ii. If Kent buys two puts at the indicated price, his minimum profit will be the difference between the strike price and the cost of the options. In this case, the strike price is RM18, and the cost per option is RM1.5. Therefore, his minimum profit would be (RM18 - RM1.5) * 200 shares * 2 puts = RM6,900.

If Kent did not hedge but instead sold his stock immediately at a price of RM18 per share, he would make a profit of (RM18 - RM12) * 200 shares = RM1,200.

iii. Assuming Kent uses two puts to hedge his position, the amount of profit he will have if the stock moves to RM25 by the expiration date of the puts can be calculated as follows:

Profit from selling stock = (RM25 - RM12) * 200 shares = RM2,600

Profit from put options = [(RM18 - RM25) - RM1.5] * 200 shares * 2 puts = -RM1,400 (options expire worthless)

Total profit = Profit from selling stock + Profit from put options = RM2,600 - RM1,400 = RM1,200

If the stock drops to RM11 per share, Kent's profit from selling the stock would be (RM11 - RM12) * 200 shares = -RM200 (loss). However, the put options would provide a profit of [(RM18 - RM11) - RM1.5] * 200 shares * 2 puts = RM2,600.

Total profit = Profit from selling stock + Profit from put options = -RM200 + RM2,600 = RM2,400

iv. Kent should use the puts as a hedge when he believes there is a possibility of the stock price declining and wants to protect his investment against potential losses. He should consider using puts as a hedge if he wants to limit downside risk while still retaining the opportunity to benefit from any further upside potential in the stock.

Kent may choose not to use puts as a hedge if he has a high level of confidence in the stock's appreciation potential and believes the downside risk is minimal. In such cases, the cost of purchasing the put options may outweigh the potential benefits, as it reduces his overall profits if the stock price remains above the strike price.

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In developing a supply chain map, the __________ would be primarily responsible for gathering and presenting the information collected in a centralized location and in a graphical representation of the supply chain. a. Coordinator/Project Manager. b. Assembler/Compiler. c. Database Manager. d. Data Providers. e. Disseminator/Publisher

Answers

A supply chain map is a visual representation that illustrates the flow of materials, information, and finances throughout the different stages of a supply chain.

It provides a clear and concise overview of how goods and services move from suppliers to manufacturers to distributors and finally to customers. By creating a supply chain map, businesses can identify potential bottlenecks, inefficiencies, and risks within their supply chains, enabling them to make informed decisions for optimization and improvement.

A coordinator/project manager is an individual responsible for overseeing the planning, execution, and completion of a project. They play a crucial role in coordinating resources, managing timelines, and ensuring that project objectives are met.

Their responsibilities include organizing and assigning tasks, monitoring progress, managing budgets, and communicating with stakeholders.

When developing a supply chain map, the coordinator/project manager assumes a pivotal role. Their primary responsibility is to gather and consolidate the information obtained from various sources involved in the supply chain.

They then present this information in a centralized location, ensuring that it is easily accessible to the relevant stakeholders.

Additionally, the coordinator/project manager is responsible for creating a graphical representation of the supply chain, providing a visual depiction of the interconnected processes and relationships.

This graphical representation aids in understanding the flow of materials and information, identifying dependencies, and facilitating effective decision-making.

Overall, the coordinator/project manager plays a crucial role in ensuring the smooth development and presentation of the supply chain map, allowing stakeholders to gain valuable insights into the supply chain's dynamics and make informed decisions to enhance its efficiency.

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