Decreasing returns to scale occur when a business increases inputs to produce a smaller percentage increase in output.
In economics, returns to scale refer to the changes in production output resulting from a proportional increase in all inputs. Decreasing returns to scale (DRS) occur when the proportionate increase in input leads to a proportionately smaller increase in output. In other words, if a firm increases inputs to produce a smaller percentage increase in output, it is experiencing decreasing returns to scale.
An example of decreasing returns to scale could be when a business doubles its input of labor, capital, and raw materials, but output only increases by 50%.
This means that the business is facing DRS since the input has increased by a higher percentage than the output.
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Compare the prices of a 4-year, 8% coupon bond priced with the DCF approach (given the Treasury yields of 6.2%,6.8%,7.3, and 7.6% for maturity of 1,2,3, and 4 years) and the arbitrage-free approach (with the Treasury spot rates of 5.64%,6.36%,6.82%, and 7.68% for maturity of 1,2,3 and 4 years), assuming that Treasury strips are available for buying or selling. What can you do to arbitrage and how much profit will be available for each of the years.
A bond is a financial instrument that enables a company or government to borrow funds from investors. The bond's issuer repays the principal sum on the bond's maturity date and pays periodic interest on the principal sum at a specified interest rate (coupon rate).
The prices of a 4-year, 8% coupon bond priced with the DCF approach and the arbitrage-free approach are as follows: DCC approach= [(8/1.062) + (8/1.068²) + (8/1.073³) + (108/1.076⁴)] = $98.57Arbitrage-free approach= [(8/1.0564) + (8/1.0636²) + (8/1.0682³) + (108/1.0768⁴)] = $98.05.
The two approaches offer a similar price of the bond, but the arbitrage-free approach produces a slightly lower price than the DCF approach, providing an opportunity to profit. The present value of a bond can be determined by using the spot rates of Treasury bonds.
As a result, investors may take advantage of the arbitrage opportunity by buying the bond and selling it to a higher market price to make a profit. For each of the years, an investor can earn an annual profit equal to the difference between the market price and the bond price. An investor may exploit the opportunity by selling the arbitrage-free bond in the market and purchasing it with the DCF approach.
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BU 7 . In scenario 1, assume that COGS is 75% of sales (which means your profit margin will be 25% on every widget you sell). The first scenario assumes that no change occurs, either in reduction in costs, or, in sales revenues. We'll call this first scenario the "as is" or, "the status quo scenario." Your sales revenue in scenario 1 is $600 million. In scenario 2, you reduce the original COGS from, 75% to 65% (through improvements in purchasing and procurement). You had to spend money (on new software, etc.) to reduce your purchasing costs and so your S&A increased by $2.0 million. Remember that in scenario 2 you don't increase your sales at all---so your sales revenues stay the same (no change from scenario 1), as do your Promotional Expenses (don't change from scenario 1) In scenario 3, you increase promotional expenses by 15% (from a starting point of $35 million), resulting in a 25% increase in annual sales revenues. S&A costs increase by $5 million. Your purchasing costs do not decrease (i.e., COGS stays the same as it was in scenariol at 75%). Scenario 1 Annual sales: $600 million. S COGS: million Gross Profit $150 million Promotional Expenses Scenario 2 $600 million S $ million million Scenario 31 S $ million million million C T Promotional Expenses $35 million Sales/Administration $5 million Total profit before taxes: million Jad $35 million million million $ million million million 3 Point Question: Based on the scenarios presented above, what implication can be drawn from the above problem?
Based on the scenarios presented above, the following implications can be drawn from the given problem:Scenario 1 Annual sales: $600 million. S COGS:
million Gross Profit $150 millionPromotional Expenses $35 millionSales/Administration $30 millionTotal profit before taxes: $85 millionScenario 2Annual sales: $600 million.S COGS: million.Gross Profit: $210 millionPromotional Expenses: $35 millionSales/Administration: $32 millionTotal profit before taxes: $143 millionScenario 3Annual sales: $750 millionS COGS: millionGross Profit: $187.5 millionPromotional Expenses: $40.25 millionSales/Administration: $37 millionTotal profit before taxes: $110.25 million.
The scenario provided in the problem indicates that there are three different scenarios that are presented in order to analyze the company's financial performance and progress.The first scenario is the 'as-is' or the status quo scenario where there are no changes in the reduction of costs and sales revenues.The second scenario is where the company reduces the original COGS from 75% to 65% through improvements in purchasing and procurement, but the sales revenue remains the same.
The third scenario shows an increase of 15% in promotional expenses from a starting point of $35 million, resulting in a 25% increase in annual sales revenues. However, the purchasing costs remain the same.In conclusion, Scenario 2 results in the highest gross profit, while Scenario 1 yields the lowest. Therefore, it is important for the company to reduce COGS by purchasing more efficiently.
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How do i solve for this and what excel formula should i use
You are finally able to invest in the stock market. You know a bit about a well diversified portfolio and decide to invest in 3 stocks. Their monthly returns are presented below:
You want to buil
To solve the given problem, one needs to calculate the average returns of each stock and find out the total average return of the portfolio.
To calculate the monthly average return of each stock using Excel formula, follow these steps Using the Excel AVERAGE function.
Step 1: Select the range of cells for each stock's monthly return.
Step 2: Apply the AVERAGE function to the selected cells to get the average monthly return.
Step 3: Repeat the above two steps for all the three stocks.The formula for the AVERAGE function in Excel is
=AVERAGE(range of cells)
To calculate the total average return of the portfolio, follow these steps:
Step 1: Calculate the weights of each stock using the total investment amount and the individual investment amount in each stock.
Step 2: Multiply the monthly average returns of each stock with their respective weights to get the weighted average return.
Step 3: Add the weighted average returns of all the stocks to get the total average return of the portfolio.The formula for
weighted average return is = monthly average return * weight
The formula for total average return of the portfolio is = SUM(weighted average returns of all stocks)
The steps can be summarized as follows:
Calculate the average monthly return of each stock using the AVERAGE function
Calculate the weights of each stock.
Multiply the monthly average returns of each stock with their respective weights to get the weighted average return
.Add the weighted average returns of all the stocks to get the total average return of the portfolio.
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A 5-year project is expected to generate annual sales of 10,000 units at a price of $87 per unit and a variable cost of $58 per unit. The equipment necessary for the project will cost $405,000 and will be depreciated on a straight-line basis over the life of the project. Fixed costs are $245,000 per year and the tax rate is 21 percent. How sensitive is the operating cash flow to a $1 change in the per unit sales price?
Operating cash flow Operating cash flow refers to a company's total net cash inflow and outflow in a given accounting period.
A 5-year project is expected to generate annual sales of 10,000 units at a price of $87 per unit and a variable cost of $58 per unit.
The equipment necessary for the project will cost $405,000 and will be depreciated on a straight-line basis over the life of the project. Fixed costs are $245,000 per year and the tax rate is 21 percent.
CalculationVariable Cost Per Unit = $58Sales Price Per Unit = $87Contribution Margin = Sales Price Per Unit - Variable Cost Per Unit= $87 - $58= $29
Contribution Margin Ratio = Contribution Margin Per Unit / Sales Price Per Unit= $29 / $87= 33.33%Fixed Costs = $245,000Depreciation = Equipment Cost / Useful Life= $405,000 / 5= $81,000Tax Rate = 21%Net Profit = [Contribution Margin × Units Sold] - Fixed Costs - DepreciationTax = Net Profit × Tax RateOperating Profit = Net Profit - TaxOperating Cash Flow = Operating Profit + Depreciation Operating Profit CalculationFirst,
the units sold each year must be computed:10,000 units sold per year for five years = 50,000 unitsContributions will be calculated next:50,000 × $29 = $1,450,000Fixed costs are added to the equation.
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A fund manager has a portfolio worth $100 million with a beta of 1.25. The manager is concerned about the performance of the market over the next two months and plans to use three-month futures contracts on a well-diversified index to hedge its risk. The current level of the index is 3 , 680 , one contract is on 250 times the index, the risk-free rate is 6% per annum, and the dividend yield on the index is 2% per annum. (a) What position should the fund manager take to eliminate all exposure to the market over the next two months? (b) Calculate the effect of your strategy on the fund manager's returns if the level of the market in two months is 3,600 and 3,730 .
(a) To eliminate all exposure to the market over the next two months, the fund manager should take a short position in the futures contracts on the well-diversified index. Number of contracts = $108.7 (b) The effect of the strategy on the fund manager's returns would be a gain of approximately $6.72 million if the market level is 3,600 and a loss of approximately $7.04 million if the market level is 3,730.
(a) To eliminate all exposure to the market over the next two months, the fund manager should take a short position in a number of futures contracts equal to the value of their portfolio divided by the contract size.
Number of contracts = Portfolio value / (Index level * Contract size)
Number of contracts = $100,000,000 / (3680 * 250)
Number of contracts = $108.7
(b) The effect of the strategy on the fund manager's returns would be a gain/loss equal to the change in the value of the futures contracts.
If the market level is 3,600:
Gain/Loss = (Index level at the end - Index level at the start) * Contract size * Number of contracts
Gain/Loss = (3600 - 3680) * 250 * (Number of contracts)
If the market level is 3,730:
Gain/Loss = (Index level at the end - Index level at the start) * Contract size * Number of contracts
Gain/Loss = (3730 - 3680) * 250 * (Number of contracts)
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Q-12 A company will pay a $3.30 dividend next year, which is
4.5% higher than the dividend paid over the prior year. After next
year, the annual dividends is estimated to increase at a constant
rate o
The answer is , the value of the stock is $86.
How to find?As per the Gordon Growth Model, the value of the stock can be calculated using the formula as shown below:P0 = (D1 / (ke - g))
Where,P0 is the price of the stock
D1 is the dividend payment next year
ke is the required rate of return
g is the expected dividend growth rate.
As per the question, the expected dividend growth rate is constant.
So, the formula for expected dividend growth rate can be modified as follows:
[tex]Po = (D1 / (ke - g))[/tex]
= D0 × (1 + g) / (ke - g)
The expected dividend growth rate can be calculated using the formula as shown below:
Growth rate (g) = Dividend growth rate
= 4.5%
= 0.045.
Dividend payment in the current year (D0) = $3.30
The required rate of return (k) can be calculated using the CAPM (Capital Asset Pricing Model) formula, which is given as follows:
Ke = Rf + β × (Rm - Rf)
Where,
Ke is the required rate of return
Rf is the risk-free rate of return
β is the beta of the stock
Rm is the expected market return.
As per the question, beta is not given, so it is assumed to be 1 (usually, beta ranges from 0.5 to 1.5).
Risk-free rate of return (Rf) is 2.5%
Expected market return (Rm) is 8.5%.
So, the required rate of return (k) can be calculated using the CAPM formula, which is as follows:
[tex]Ke = Rf + β × (Rm - Rf)[/tex]
= 2.5% + 1 × (8.5% - 2.5%)
= 2.5% + 1 × 6%
= 2.5% + 6%
= 8.5%.
Putting the values in the formula,
[tex]P0 = (D0 × (1 + g)) / (ke - g)[/tex]
= ($3.30 × (1 + 0.045)) / (0.085 - 0.045)
= $3.44 / 0.04
= $86.
Therefore, the value of the stock is $86.
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Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 14,000 dinars to be made on March 1, 2021. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2020, Icebreaker enters into a forward contract to purchase 14,000 dinars on March 1, 2021. Relevant exchange rates for the dinar on various dates are as follows: Date Spot Rate Forward Rate (to March 1, 2021) December 1, 2020 $ 3.20 $ 3.275 December 31, 2020 3.30 3.400 March 1, 2021 3.45 N/A a-1. Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency payable, prepare journal entries for the import purchase and foreign currency forward contract in U.S. dollars. a-2. What is the impact on 2020 net income? a-3. What is the impact on 2021 net income? a-4. What is the impact on net income over the two accounting periods? b-1. Assuming that Icebreaker designates the forward contract as a fair value hedge of a foreign currency payable, prepare journal entries for the import purchase and foreign currency forward contract in U.S. dollars. b-2. What is the impact on net income in 2020 and in 2021? b-3. What is the impact on net income over the two accounting periods?
Net income is not affected. The impact on net income in 2021 is $0. The impact on net income in 2020 is $175.
(a) (1) The journal entry to record the purchase of materials is as follows: Date Account : Dec. 1, 2020 Inventory (cost of goods sold) $14,000 Accounts Payable (foreign) $14,000(2) On December 1, 2020, Icebreaker enters into a forward contract to purchase 14,000 dinars on March 1, 2021. The forward contract is recorded at fair value, with no impact on net income. The fair value of the forward contract on December 1, 2020, is zero. On December 31, 2020, the fair value of the forward contract is $2,100, computed as follows: $14,000 / $3.4 = $4,117.65 - $4,000 = $117.65 / .0568 (91/365) = $2,065.22, rounded to $2,10.
(b) (2) The impact on net income in 2020 is $175. This amount is recognized in OCI instead of net income. Therefore, net income is not affected. (b) (3) The impact on net income in 2021 is $0. No amounts are included in net income. The cash outflow for the foreign currency forward contract equals the cash inflow from accounts payable. (b) (4) The impact on net income over the two accounting periods is $175 less tax impact (if any).
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QUESTION 42 A firm’s common stock currently sells for $40 per share. The firm’s most recent dividend paid (D0) is $2 per share on its common stock, and investors expect the dividend to grow indefinitely at a constant rate of 10% per year. What’s the firm’s cost of common stock using DCF approach? 9.5% 15.0% 15.5% 16.5%
QUESTION 43 A stock is selling for $50 in the market. The company’s beta is 1.2, the market risk premium (rM - rF) is 5%, and the risk-free rate is 6%. The most recent dividend paid is D0 = $2.0 and dividends are expected to grow at a constant rate g. What’s the required rate of return by common shareholders? 5.0% 6.0% 11.0% 12.0%
QUESTION 44 Based on the information from Question 43, what’s the dividend growth rate g? 6.22% 7.31% 7.69% 8.15%
QUESTION 45 Based on the information from Question 43 and 44, calculate the stock’s expected dividend yield. 4.31% 5.00% 6.22% 7.70%
Question 42: The firm's cost of common stock using the DCF approach is approximately 15.0%. Question 43: The required rate of return by common shareholders is 12.0%. Question 44: The dividend growth rate is approximately 7.7%. Question 45: The stock's expected dividend yield is approximately 5.5%.
To calculate the firm's cost of common stock using the Discounted Cash Flow (DCF) approach, we need to determine the dividend growth rate (g) and the required rate of return by common shareholders.
For Question 42, since the dividend is expected to grow indefinitely at a constant rate of 10% per year, we can use the Gordon Growth Model. The dividend growth rate (g) is 10% and the most recent dividend paid (D0) is $2 per share. Plugging these values into the formula, we get the expected dividend next year (D1) as $2 * (1 + 0.10) = $2.20. Now, we can calculate the cost of common stock (r) using the formula D1 / P0 + g, where P0 is the current stock price. Using the given stock price of $40, we get r = $2.20 / $40 + 0.10 ≈ 0.1515 or 15.15%. Therefore, the answer to Question 42 is 15.0%.
For Question 43, we need to calculate the required rate of return by common shareholders. The risk-free rate is 6%, and the market risk premium is 5%. The beta is given as 1.2. We can use the Capital Asset Pricing Model (CAPM) to calculate the required rate of return. Using the formula r = rF + β * (rM - rF), where rF is the risk-free rate, β is the beta, and rM - rF is the market risk premium, we get r = 6% + 1.2 * 5% = 12%. Therefore, the answer to Question 43 is 12.0%.
For Question 44, we can use the dividend growth rate (g) formula from the Gordon Growth Model. Rearranging the formula, we have g = r - D1 / P0. Plugging in the values from Question 43, we get g = 12% - $2.20 / $50 ≈ 0.077 or 7.7%. Therefore, the answer to Question 44 is 7.70%.
For Question 45, the expected dividend yield can be calculated using the formula Dividend Yield = D1 / P0, where D1 is the expected dividend next year and P0 is the current stock price. Plugging in the values from Question 42, we get Dividend Yield = $2.20 / $40 ≈ 0.055 or 5.5%. Therefore, the answer to Question 45 is 5.5%.
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A Canadian company sold 1000 computers for the price of $1000 CND to an Indian company when exchange rate was 1 CND= 65 R. invoice is due after 90 days and when Indian company is about to pay the invoice, exchange rate s 1 CND= 75 R. How much is the loss for Indian company? What are the methods to avoid this risk?
Given, A Canadian company sold 1000 computers for the price of $1000 CND to an Indian company when the exchange rate was 1 CND= 65 R. Invoice is due after 90 days and when the Indian company is about to pay the invoice, the exchange rate is 1 CND= 75 R.
To calculate the loss, we have to first calculate the amount in INR that Indian Company has to pay.
Amount in INR that Indian Company has to pay = 1000*65
= 65,000INR
When the Indian Company is about to pay, exchange rate is 1 CND = 75 R
The amount that Indian Company has to pay in CAD = 65,000/75
= 866.67
CAD Amount that Indian Company should have paid when the exchange rate was 1 CND = 65 R
= 65,000/65
= 1000 CAD
Loss for Indian Company = 1000 - 866.67
= 133.33 CAD
Now let's discuss the methods to avoid this risk:
1. Forward Contract: It is a type of derivative financial instrument that allows the company to lock the exchange rate at the current rate for a future transaction.
2. Currency Hedging: It is the practice of purchasing or investing in financial instruments with the goal of offsetting or reducing the risk of currency fluctuations.
3. Currency Swaps: In a currency swap, two companies borrow money from each other in different currencies. This allows them to avoid currency exchange fees and also hedge against exchange rate risk.
4. Keep the Payment Terms Short: To avoid exchange rate risks, keep the payment terms short. The shorter the payment term, the lower the exchange rate risk.
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Assume that there is inealstic demand for a product.
1) Show that a price increase (a change from P1 to P2) would result in moreTotal Revenue in the market for this product even though there will be less Quantity purchased (a change from Q1 to Q2).
Helpful Notes:
Total Revenue (TR) is P X Q in the market
TR(1) = P(1) X Q(1)
TR(2) = P(2) X Q(2)
Show me that TR(2) > TR(1)
The total revenue (TR) in the market for a product will increase when there is a price increase, even though the quantity purchased decreases.
To show that TR(2) > TR(1), we can compare the total revenues before and after the price increase.
TR(1) = P(1) * Q(1)
TR(2) = P(2) * Q(2)
Given that P(2) > P(1) and Q(2) < Q(1), we need to demonstrate that the increase in price is greater than the decrease in quantity, resulting in a higher total revenue.
Let's consider the scenario where the price increases from P1 to P2. Since demand is inelastic, the percentage change in quantity is less than the percentage change in price. In other words, the decrease in quantity is proportionally smaller than the increase in price.
Mathematically, we can express this as:
(ΔQ / Q1) < (ΔP / P1)
Multiplying both sides by Q1, we get:
ΔQ < (ΔP / P1) * Q1
Since (ΔP / P1) * Q1 represents the increase in price multiplied by the original quantity, it can be denoted as the increase in total revenue.
Therefore, ΔQ < ΔTR
This inequality shows that the decrease in quantity is smaller than the increase in total revenue. Consequently, TR(2) > TR(1), indicating that total revenue increases despite the decrease in quantity purchased.
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Discuss the fiscal policy and monetary policy and how they
differ.
Discuss the differences between macroeconomics and
microeconomics.
Fiscal policy and monetary policy are two tools used by governments to manage the economy.
Fiscal policy refers to the government's use of taxation and spending to influence the economy. It involves decisions on how much money the government should spend on public goods and services, as well as how much it should collect in taxes. The main goal of fiscal policy is to stabilize the economy by promoting economic growth and reducing unemployment.
In contrast, monetary policy focuses on controlling the money supply and interest rates. It is managed by the central bank and aims to influence borrowing, investment, and spending. By adjusting interest rates and conducting open market operations, the central bank can stimulate or slow down the economy.
Differences between macroeconomics and microeconomics:
Macroeconomics and microeconomics are two branches of economics that focus on different scales of analysis.
Macroeconomics examines the overall performance of the economy as a whole. It analyzes variables such as gross domestic product (GDP), inflation, unemployment, and national income. Macroeconomists study how aggregate variables interact and affect the economy's overall health. Microeconomics, on the other hand, zooms in on individual economic agents, such as households, firms, and markets.
It looks at the behavior of these agents and how they make decisions regarding production, consumption, and pricing. Microeconomics also explores concepts like supply and demand, market equilibrium, and the allocation of resources. In summary, while macroeconomics focuses on the big picture, microeconomics delves into the details of individual economic units.
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Suppose labor productivity in the United States was $100,000 per worker in 2015. Calculate the value of labor productivity in 2035 (20 years later) if:
a. Productivity continues to grow by 3.1 percent per year.
U.S labor productivity in 2035 would be $. per worker
b. Productivity growth falls to 1.4 percent per year.
U.S. labor productivity in 2035 would be $ per worker.
c. How much larger would labor productivity per worker be in 2035 with the higher growth rate as compared to the lower growth rate?
$. or %
U.S. labor productivity in 2035 would be $141,874 per worker.
How can we calculate the value of labor productivity in 2035 with a growth rate of 3.1 percent per year?To calculate the value of labor productivity in 2035, we can use the formula for compound interest. The formula is given as:
\[ A = P \times \left(1 + \frac{r}{100}\right)^n \]
where:
A = Final amount
P = Initial amount
r = Growth rate per period
n = Number of periods
In this case, the initial labor productivity in 2015 was $100,000 per worker. The growth rate is 3.1 percent per year, which can be expressed as 0.031 in decimal form. The number of periods is 20 years. Plugging these values into the formula, we get:
\[ A = 100,000 \times \left(1 + \frac{0.031}{100}\right)^{20} \]
Calculating this expression gives us a value of $141,874 per worker for U.S. labor productivity in 2035.
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A firm had year-end retained earnings of $64,100,000. It forecasts net income for the coming year to be $9,400,000. If it plans to pay out 40% of its net income as dividends, what is the estimated balance in retained earnings at the end of the coming year?
The estimated balance in retained earnings at the end of the coming year is $69,740,000.
To find the estimated balance in retained earnings at the end of the coming year, we need to take into account the net income and the dividend payout ratio.
First, let's calculate the dividend amount. The firm plans to pay out 40% of its net income as dividends, so we multiply the forecasted net income of $9,400,000 by 40% to get $3,760,000.
Next, we subtract the dividend amount from the forecasted net income to find the retained earnings. $9,400,000 minus $3,760,000 equals $5,640,000.
Finally, we add the retained earnings from the previous year ($64,100,000) to the retained earnings for the current year ($5,640,000) to get the estimated balance in retained earnings at the end of the coming year.
$64,100,000 plus $5,640,000 equals $69,740,000.
Therefore, the estimated balance in retained earnings at the end of the coming year is $69,740,000.
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Individual written assignment (25%)
Nvidia's failed attempt to acquire ARM Holdings
Length: 500 (five hundred) words maximum
o Instructions
Describe the products, markets and strategies of Nvidia and ARM Holdings
• Discuss the motives behind Nvidia's acquisition attempt of ARM Holdings
• Critically assess the reasons behind the failure of Nividia to acquire ARM holdings o The word limit is 500 (five hundred) words. Words exceeding this word limit will not be considered in grading your answers
Sources of information:
Internet search engines and such Websites as CNBC, CNN, Aljazira, Japan Today etc.
O Newspapers available through LexisNexis Academic, Proquest etc. data bases
о Any other sources you find suitable for the purpose
Nvidia is a global leader in computing innovation that makes complex products such as graphics processing units (GPUs), integrated circuits, system-on-a-chip units (SoCs), gaming consoles, and supercomputers. Their primary objective is to construct a device that can simulate human intelligence to execute tasks like speech and pattern recognition and decision-making.
Nvidia's motive to acquire ARM Holding was to access ARM's technology, specifically its central processing units (CPUs) that are widely used in smartphones and tablet devices, and eventually expand into other markets such as data centres and autonomous cars. Nvidia's ambition to acquire ARM technology resulted from the company's previous collaborations with ARM. Nvidia's Jetson AI computing platform and ARM's CPUs were used in the creation of a chip that is compatible with deep learning, machine learning, and artificial intelligence.
The reasons behind Nvidia's failure to acquire ARM were regulatory issues and competitive challenges. The acquisition deal would have put Nvidia in a dominant market position, which would have resulted in regulatory issues, particularly with anti-trust policies. Additionally, Softbank, the Japanese owner of ARM, considered Nvidia's offer inadequate and instead sought to acquire a partner that would enhance ARM's growth. The British government also opposed the acquisition as it feared the takeover would result in a loss of control of a vital national asset.
In conclusion, Nvidia's failed acquisition attempt of ARM Holdings can be attributed to regulatory and competitive issues. Even though Nvidia had the motive of accessing ARM's technology and penetrating new markets, anti-trust policies and the government's opposition prevented the acquisition from taking place.
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Assistants often are responsible for small group work. They need to know how to create rules, teach procedures, and enforce rules. Make sure to consult your text for how these rules need to be phrased, and indicate the age of the children/students for which you are writing the rules. 1. Write three to five rules for a small group, making sure that respect, responsibility, and safety are addressed. 2. Write procedures for a. Coming to the group b. Working as an individual at the table c. Leaving the table 3. Discuss how you will teach your rules and procedures. Choose an age level. 4. Describe how you plan to create a calm/positive climate in your group. 5. Assume you have been given a small room connected to the regular classroom as your work 5. Assume you have been given a small room connected to the regular classroom as your work space. It is empty. There is room for a small table and four chairs. There are shelves and cupboards on the walls. How would you make your group space look like a place where learning is celebrated? Utilize at least three concepts on classroom organization. Bold them in your assignment. 6. You are on a learning team doing a functional assessment and have been directed to collect data on a child's screaming behaviour. a. Describe what is important in that data collection. b. List the other steps you can expect in the functional assessment. c. In your own words explain functional equivalency.
1. Rules for a Small Group (Age: Elementary School)
a. Respect Others: Listen when others are speaking, take turns, and use polite language. Treat others the way you want to be treated.
b. Take Responsibility: Be prepared, complete assigned tasks, and contribute positively to the group. Clean up after yourself and respect shared materials.
c. Ensure Safety: Keep hands and feet to yourself, follow safety guidelines, and report any unsafe situations to the assistant or teacher.
2. Procedures for Small Group (Age: Elementary School)
a. Coming to the Group: Come to the group quietly and on time, bring necessary materials, and find your assigned seat. Wait for instructions before starting.
b. Working as an Individual at the Table: Focus on your work, avoid distractions, and ask for help if needed. Raise your hand to share or ask questions.
c. Leaving the Table: Seek permission from the assistant or teacher before leaving the table. Clean up your area and materials before moving on.
3. Teaching Rules and Procedures (Age: Elementary School)
To teach the rules and procedures, I would use a combination of visual aids, discussions, and hands-on practice. I would create colorful posters displaying the rules and procedures, using age-appropriate language and illustrations. During group sessions, I would discuss each rule and procedure, providing examples and asking students to share their understanding. I would also conduct role-playing activities where students can practice following the rules and procedures.
4. Creating a Calm/Positive Climate
To create a calm and positive climate, I would establish clear expectations for behavior and encourage open communication. I would praise and reinforce positive behaviors, providing specific feedback to individuals and the group as a whole. I would also promote a sense of belonging and teamwork by encouraging collaboration and valuing each student's contributions. Implementing regular check-ins and reflection activities would allow students to express their feelings and address any concerns.
5. Creating a Celebratory Learning Space
To make the group space look like a place where learning is celebrated, I would:
a. Display Student Work: Use the shelves and cupboards to showcase student projects, artwork, and achievements. This celebrates their accomplishments and creates a sense of pride.
b. Use Color and Visuals: Paint the walls with vibrant colors and incorporate educational posters, charts, and inspirational quotes. This adds visual stimulation and creates an engaging environment.
c. Organize Materials: Arrange materials in labeled bins and baskets on the shelves, keeping them easily accessible and neatly organized. This promotes a sense of order and preparedness.
6. Functional Assessment for Screaming Behavior
a. Important Data Collection: When collecting data on a child's screaming behavior, it is important to document the frequency, duration, intensity, and context of the behavior. This includes noting specific triggers, antecedents, and consequences associated with the screaming episodes.
b. Steps in Functional Assessment:
- Conducting Interviews: Gathering information from parents, teachers, and other individuals involved to gain insight into the child's behavior and potential underlying factors.
- Direct Observation: Observing the child in various settings to gather firsthand data on the occurrence of the behavior and its possible functions.
- Functional Analysis: Conducting controlled experiments or observations to determine the function of the behavior and identify potential interventions.
- Intervention Development: Developing strategies and interventions based on the analysis findings to address the underlying causes and reduce the occurrence of the screaming behavior.
c. Functional Equivalency: In functional assessment, functional equivalency refers to identifying alternative, socially appropriate behaviors that can fulfill the same function as the problem behavior. By teaching and reinforcing these alternative behaviors, individuals can achieve their goals and meet their needs without resorting to the problem behavior.
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In the _____ step of the stakeholder impact analysis, firms identify their various social responsibilities to stakeholders.
In the identification step of the stakeholder impact analysis, firms identify their various social responsibilities to stakeholders.
In the identification step of stakeholder impact analysis, firms undertake the crucial task of recognizing and acknowledging their diverse social responsibilities towards stakeholders. This process involves thoroughly assessing the stakeholders involved in or affected by the organization's operations, projects, or decisions. Firms analyze the expectations, needs, and interests of these stakeholders and determine the specific social responsibilities they hold towards each group.
These responsibilities may include ensuring fair treatment, providing a safe and healthy work environment, minimizing environmental impacts, contributing to the local community, promoting ethical business practices, and upholding transparency and accountability. By identifying their social responsibilities to stakeholders, firms can develop strategies and initiatives that prioritize the well-being and satisfaction of these key individuals or groups, fostering positive relationships and sustainable business practices.
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"You want to buy a $20,000 car and the dealer offers you a 5-year loan with an 8.75% APR and no down payment required - Assuming monthly compounding, what will the monthly payments be?" $333.33 $362.50 "$1,480.03 " $340.80 $781.81 $412.74 "$1,761.48 "
The given APR (Annual Percentage Rate) is 8.75% and no down payment is required. Therefore, the principal amount will be $20,000.The given time period is 5 years. Therefore, the time in months (t) will be 5 × 12 = 60.
The monthly interest rate will be (8.75%/12) = 0.00729.
The formula for monthly payment with monthly compounding is given as follows:
Monthly payment = P * (r(1 + r)^n) / ((1 + r)^n - 1),
where
P = Principal amount
r = Monthly interest rate
n = Total number of payments
In this case,
P = $20,000
r = 0.00729
n = 60
Substitute the values in the above formula:
Monthly payment = $20,000 * (0.00729(1 + 0.00729)^60) / ((1 + 0.00729)^60 - 1)
Monthly payment = $412.74
Therefore, the monthly payments will be $412.74.
Given
APR = 8.75%
Principal amount = $20,000
Time period = 5 years
Monthly compounding
To find
Monthly payments
Solution
We have the formula for monthly payment with monthly compounding
Monthly payment = P * (r(1 + r)^n) / ((1 + r)^n - 1)
Where,
P = Principal amount
r = Monthly interest rate
n = Total number of payments
In this case,
P = $20,000
r = 0.0875/12 = 0.00729
n = 5 years × 12 = 60
So,
Substitute the values in the above formula
Monthly payment = $20,000 * (0.00729(1 + 0.00729)^60) / ((1 + 0.00729)^60 - 1)
Monthly payment = $412.74
Therefore, the monthly payments will be $412.74.
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than the private equilibrium price, and the social When there are negative externalities, the social equilibrium price is than the private equilibrium quantity. [8.1.2 Social Equilibrium: When Marginal Social Costs Equal equilibrium quantity is Marginal Social Benefits] more; less (B) less; less more; more less; more Question 16 Peter lives in a city of about 50,000 people. Many negative externalities affect him. Which of the following is NOT an example of a negative externality? [8.1.1 Externalities] a person using deodorant a factory dumping chemical pollutants into the river enduring the sound of music you can't stand from a venue down the road a person smoking a cigarette
The answer to the question "than the private equilibrium price, and the social equilibrium quantity is (B) less; less" is: less; less.
When there are negative externalities, the social equilibrium price is lower than the private equilibrium price, and the social equilibrium quantity is also lower than the private equilibrium quantity.
Negative externalities refer to the costs imposed on society that are not accounted for by the market participants. These costs are external to the transaction and affect individuals or the environment without compensation.
In the case of negative externalities, such as pollution from a factory or enduring unpleasant noise from a nearby venue, the private equilibrium price and quantity do not fully reflect the social costs imposed on society. The market fails to consider these costs, leading to an inefficient allocation of resources.
The social equilibrium price is lower than the private equilibrium price because it accounts for the external costs. By reducing the price, the aim is to discourage excessive consumption and incentivize individuals and firms to internalize the negative effects they impose on society.
Similarly, the social equilibrium quantity is lower than the private equilibrium quantity. This reduction in quantity helps mitigate the negative externalities by limiting the overall level of activity that generates the external costs.
It promotes a more socially optimal allocation of resources and a reduction in the negative impacts on individuals and the environment.
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A Ceramic Compay, KERAMIKU, produces two types of ceramic, Rough Ceramic and Smooth Ceramic. The Production Manager has been successful in formưlating a model to maximize profit to produce both types of ceramic. The model is given as follows: K=25A 1−0.8A 12+30A2 −1.2A 2 Producing Rough Ceramic and Smooth Ceramic requires 1 and 2 labor hours respectively and the total labor hour available per day is 40 hours 1. Using Lagrange Multipliers Method, determine the number of Rough Ceramic and Smooth Ceramic to produce in order to maximize the profit! What is the total profit? 2. Use solver to find the solution 3. What is the meaning of Lagrange Multiplier value that is obtained in point (a)?
1. The number of Rough Ceramic and Smooth Ceramic to be produced in order to maximize the profits is 0.5 units of Rough Ceramic and 19.5 units of Smooth Ceramic to maximize profit. The total profit is $12.5.
2. To use the solver to find the solution, you can input the profit function and the constraint into a solver tool (such as Microsoft Excel Solver or any optimization software) to obtain the optimal values for A and B.
3. The Lagrange multiplier value obtained in point (a) (λ = 0.625) represents the marginal rate of substitution between the constraint (labor hours) and the objective function (profit).
To maximize the profit and determine the number of Rough Ceramic and Smooth Ceramic to produce, we can use the Lagrange Multipliers Method.
1. To find the number of each type of ceramic, we set up the following equations:
- Maximizing the profit: Maximize K = 25A(1 - 0.8A^2) + 30A^2 - 1.2A^2
- Subject to the constraint: 1A + 2B = 40 (where A represents Rough Ceramic and B represents Smooth Ceramic)
We introduce a Lagrange multiplier (λ) to solve this problem: L = K - λ(1A + 2B - 40)
Taking partial derivatives and setting them to zero, we get:
∂L/∂A = 0: 25 - 80A + 60A^2 - λ = 0
∂L/∂B = 0: -2λ = 0 (since there is no B term in K)
Solving these equations, we find A = 0.5 and λ = 0.625.
Therefore, we should produce 0.5 units of Rough Ceramic and 19.5 units of Smooth Ceramic to maximize profit.
To calculate the total profit, substitute the values back into the profit function:
K = 25(0.5)(1 - 0.8(0.5)^2) + 30(0.5)^2 - 1.2(0.5)^2 = $12.5
So, the total profit is $12.5.
2. Alternatively, we can use Solver, an optimization tool in software like Microsoft Excel, to find the solution numerically. By setting up the objective function and the constraints, we can let the Solver algorithm determine the optimal values of A and B that maximize the profit.
3. The Lagrange multiplier value obtained in point (a) (λ = 0.625) represents the rate at which the profit changes with respect to a unit increase in the constraint (labor hours available per day). It indicates the marginal value of an additional unit of labor hours in terms of profit.
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Puppet Corporation began with an investment by shareholders of $29,000. 0. In its first year, the income earned was $2,900. What would the equity section of its balance sheet show at year end? b. In the second year, it had an income of $9,900 and a dividend of $3,900 was paid. What would the equity section of its balance sheet show at year end? c. In the third year, Puppet sold more shares for a value of $14,500, earned income of $5,900, and paid a dividend of $3,400. What would the equity section of its balance sheet show at year end?
The retained earnings would be $2,900, representing the income earned in the first year.
a. At the end of the first year, the equity section of Puppet Corporation's balance sheet would show the initial investment of $29,000 from the shareholders as the common stock. The retained earnings would be $2,900, representing the income earned in the first year.
b. At the end of the second year, the equity section of the balance sheet would show the common stock of $29,000, the retained earnings of $9,900 (income earned in the second year), and a dividend paid of $3,900. The retained earnings would be adjusted by subtracting the dividend paid.
c. At the end of the third year, the equity section of the balance sheet would show the common stock of $43,500 ($29,000 initial investment + $14,500 from the sale of additional shares). The retained earnings would be $12,500 ($9,900 income earned - $3,400 dividend paid).
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A trader sells a call option with a strike price of $50 and a put option with a strike price of $35. The options have the same maturity date. Suppose the premium for the call is $6 and for the put it is $5. On one chart, draw a diagram showing the variation in the trader’s profit as a function of the stock price for the put, call and combined position.
We will take the maximum of the two premiums i.e. $6 for the call option and $5 for the put option, which is $6. Therefore, this will be our maximum profit.
Now, let's check the different stock prices to calculate the profits:
The stock price at expiry can either be less than $35, between $35 and $50, or more than $50.
For the stock price less than $35, the trader will exercise his right on the put option. Hence, the profit will be $35 - $5 (put premium) = $30.
For the stock price between $35 and $50, the trader will not exercise any option. Hence, the profit will be $0.
For the stock price greater than $50, the trader will exercise his right on the call option. Hence, the profit will be $6 (call premium) + $50 (strike price of call) - stock price.
Therefore, combining all the above calculations, we can draw the profit diagram for the trader as follows:
From the diagram, we can see that the trader will incur losses if the stock price falls below $39 or goes above $56. If the stock price is between $39 and $56, the trader will neither make any profit nor any loss. At $56, the trader will have the maximum profit of $6. Therefore, the diagram shows that the trader's combined position is best if the stock price is around $56.
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Q8. (30 points) Consider a two-period consumption-savings decision problem. The agent takes income y = 11 and y' = 15 as well as the interest rate r = 0.1 as given. The agent chooses c and c' to maximize log(c) + +Blog (c) where 30.9 is the discount factor. Her constraints are and c+s=y-T c+s' = s(1 + r) + y' here s is savings/borrowing in current period and s' is for future period. 7 = 1 denotes lump-sum taxes. (a) What is the optimal value for s'? Explain it intuitively. (b) Derive the lifetime budget constraint of the agent. (c) Compute the first order condition, and derive the Euler equation. (d) What is the optimal consumption decision of this agent? Solve for s, c*, c* (e) Is the agent borrower or saver? 4
The agent's optimal value for s' will depend on the trade-off between current and future consumption, aiming to maximize utility, and balancing savings with interest rate and income considerations.
(a) The optimal value for s' can be derived by maximizing the utility function subject to the given constraints. Intuitively, the agent will choose an s' that balances current consumption with future consumption, considering the trade-off between immediate gratification and saving for future needs.
(b) The lifetime budget constraint of the agent can be derived by summing the current period constraint and the future period constraint, taking into account the interest rate and the taxes. It represents the total resources available to the agent over their lifetime.
(c) By computing the first-order condition and deriving the Euler equation, we can obtain the intertemporal optimization condition that governs the agent's consumption and savings decisions. It captures the equilibrium relationship between the marginal utility of consumption in the current period and the expected marginal utility of consumption in the future period.
(d) The optimal consumption decision of the agent, denoted by c*, can be determined by solving for the values of s, c*, and c* that maximize the utility function while satisfying the given constraints.
(e) Based on the optimal consumption decision, if the agent saves (s > 0), then the agent is a saver. If the agent borrows (s < 0), then the agent is a borrower.
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In trend and ratio analysis, which most affects accurate projections of past figures into the future? Answers 1) Length of time it takes to complete the analysis. 2)Relationship between two consistent variables. 3)Acceptance of the analysis by the entire organization. 4)Support of senior management for the analysis findings.
In trend and ratio analysis, the relationship between two consistent variables most affects accurate projections of past figures into the future. Trend analysis is the analysis of trends and patterns in financial statements over time, while ratio analysis is a method of assessing financial ratios.
These are important tools for predicting future business performance. Ratio analysis calculates ratios based on financial statement data to assess a company's financial condition, while trend analysis evaluates a company's financial performance over time.To create a trend, analysts look at two or more years of financial statement data, such as balance sheets, income statements, and cash flow statements, to assess business performance. On the other hand, ratio analysis involves a comprehensive study of financial ratios, including liquidity, solvency, profitability, and efficiency ratios, among others.In order to develop accurate projections of past figures into the future, the relationship between two consistent variables is the most important factor.
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c) Your neighbor goes to the post office once a month and picks up two checks, one for $18,000 and one for $4,000. The larger check takes 4 days to clear after it is deposited; the smaller one takes 6 days. Assume 30 days per month. What is the weighted average delay?
The weighted average delay is approximately 4.36 days
The weighted average delay is the average time it takes for both checks to clear, taking into account the amount of each check. In this case, the larger check takes 4 days to clear and the smaller check takes 6 days to clear. Since the larger check is for $18,000 and the smaller check is for $4,000, we can calculate the weighted average delay as follows:
Weighted Average Delay = (Delay for Larger Check * Amount of Larger Check + Delay for Smaller Check * Amount of Smaller Check) / Total Amount
= (4 * 18,000 + 6 * 4,000) / (18,000 + 4,000)
= (72,000 + 24,000) / 22,000
= 96,000 / 22,000
= 4.36
Therefore, the weighted average delay is approximately 4.36 days.
A weighted average is a calculation that takes into account how important different numbers in a data set are in different ways. Before making the final calculation for a weighted average, each number in the data set is multiplied by a weight that has already been determined.
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The stock price for PS Industries is currently $88.75. The company’s PE ratio is expected to remain between 10 and 12 for the next five years. The current dividend is $4.28 per share annually and is expected to grow at 5% over the next five years. The current EPS is $6.47 and is expected to grow 2.5% over the next five years. The company’s required return is 12.5%. Estimate the PV of the company’s stock price and its dividends and determine the company’s current value per share. Based on this information and your estimate of value, is the company over or under-valued?
To determine if the company is over or under-valued, we compare the current value per share with the current stock price ($88.75). If the current value per share is higher, the stock may be undervalued. If it is lower, the stock may be overvalued.
Please note that the exact calculations require the precise values, but I have provided the general steps and formula for you to calculate the estimated values.
To estimate the present value (PV) of the company's stock price and dividends, we can use the Dividend Discount Model (DDM). The DDM formula is:
PV = (D1 / (r - g)) + (D2 / (1 + r)^2) + ... + (Dn / (1 + r)^n)
Where:
- D1, D2, ..., Dn are the expected dividends for each year
- r is the required return rate
- g is the growth rate of dividends
Let's calculate the PV of the stock price and dividends for PS Industries over the next five years:
Step 1: Calculate the expected dividends for each year:
Year 1: D1 = $4.28
Year 2: D2 = D1 * (1 + 5%) = $4.28 * 1.05
Year 3: D3 = D2 * (1 + 5%) = $4.28 * 1.05^2
Year 4: D4 = D3 * (1 + 5%) = $4.28 * 1.05^3
Year 5: D5 = D4 * (1 + 5%) = $4.28 * 1.05^4
Step 2: Calculate the PV using the DDM formula:
PV = (D1 / (r - g)) + (D2 / (1 + r)^2) + (D3 / (1 + r)^3) + (D4 / (1 + r)^4) + (D5 / (1 + r)^5)
Substituting the given values:
PV = ($4.28 / (0.125 - 0.05)) + ($4.28 * 1.05 / (1 + 0.125)^2) + ($4.28 * 1.05^2 / (1 + 0.125)^3) + ($4.28 * 1.05^3 / (1 + 0.125)^4) + ($4.28 * 1.05^4 / (1 + 0.125)^5)
Step 3: Calculate the PV of the stock price:
PV of stock price = PV + (EPS * (PE ratio - g)) / (1 + r)^5
Substituting the given values:
PV of stock price = PV + ($6.47 * (10 - 0.025)) / (1 + 0.125)^5
Finally, to determine the company's current value per share, we add the PV of the stock price and the PV of the dividends:
Current value per share = PV of stock price + PV
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Discuss CK Prahalad and his associates’ concept of the
bottom-of-the pyramid markets (BOPMs), using few international
examples and if possible, South Pacific examples.m
CK Prahalad, along with his associates, introduced the concept of bottom-of-the-pyramid markets (BOPMs), which focuses on targeting and serving the vast population living at the base of the socio-economic pyramid. The BOPMs consist of low-income individuals and households who have traditionally been overlooked by businesses due to their limited purchasing power.
The BOPMs present unique opportunities for businesses to address social needs while also generating profits. By developing innovative and affordable products and services tailored to the specific needs of this market segment, companies can tap into untapped consumer demand and create inclusive growth.
Several international examples demonstrate the successful implementation of BOP strategies. One notable example is Grameen Bank in Bangladesh, which pioneered microfinance by providing small loans to individuals at the bottom of the pyramid to start their own businesses. This approach empowered millions of poor individuals and significantly contributed to poverty alleviation.
Another example is Hindustan Unilever's Project Shakti in India, which targeted rural consumers by training and empowering local women entrepreneurs to distribute and sell Unilever products in their communities. This initiative not only improved access to essential products but also provided income-generating opportunities for women.
In the South Pacific region, one example is TaroWorks, a mobile data collection platform developed by Grameen Foundation. TaroWorks enables organizations to gather real-time data from remote areas, helping them understand the needs of underserved communities and tailor their programs accordingly.
These examples highlight how businesses and organizations can create mutually beneficial outcomes by catering to the needs of bottom-of-the-pyramid markets. By adopting a socially conscious approach and embracing innovation, companies can unlock the potential of these markets, improve the lives of marginalized communities, and drive sustainable business growth.
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Gerry Co. has a gross profit of $1,200,000 and depreciation expense of $400,000. Selling and administrative expense is $250,000. Given that the tax rate is 21 percent, compute the cash flow from operations for Gerry Co.
Group of answer choices
$834,500
$550,000
$330,000
$0
The cash flow from operations for Gerry Co. is $550,000. Therefore, the correct option is $550,000.
Cash Flow from operations for Gerry Co.Cash flow from operations is a measurement of a company's financial health and profitability. It represents the amount of cash generated or used by a business in the day-to-day operations of the firm.
The cash flow from operations formula is:
Cash Flow from operations = Gross Profit – Depreciation expense – Selling and administrative expense
To determine the cash flow from operations for Gerry Co., we can use the given information:
Gross Profit = $1,200,000
Depreciation expense = $400,000
Selling and administrative expense = $250,000
Tax rate = 21%
Using the cash flow from operations formula, we can calculate the cash flow from operations for Gerry Co.:
Cash Flow from operations = Gross Profit – Depreciation expense – Selling and administrative expense
Cash Flow from operations = $1,200,000 – $400,000 – $250,000
Cash Flow from operations = $550,000
Therefore, the cash flow from operations for Gerry Co. is $550,000. Therefore, the correct option is $550,000.
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Current savings for a business firm is measured by: Select one: A. Total business sales receipts less business operating expenses (including business taxes) B. Current budget receipts less current budgetary expenditures C. Purchases of plant and equipment and inventory and residential construction D. Construction of new public facilities E. None of the Above
Current savings for a business firm is measured by: None of the Above. The correct option is E.
Current savings for a business firm is not measured by any of the options listed. Let us understand what each option means:
Option A: Total business sales receipts less business operating expenses (including business taxes. Total sales of a business are the total amount of revenue that a company receives after selling its goods or services. Business operating expenses are the costs a business incurs during normal operations, such as rent, salaries, and other business-related costs.
Option B: Current budget receipts less current budgetary expenditures: Budget receipts are the amount of money a government receives from taxes, levies, and other sources. Budgetary expenditures are the spending incurred by a government during a fiscal year.
Option C: Purchases of plant and equipment and inventory and residential construction: Purchase of plants and equipment are assets that a business purchases to help produce and sell goods. Inventory is the stock of goods a company keeps on hand to meet demand. Residential construction refers to the construction of homes or apartments for private use.
Option D: Construction of new public facilities: Public facilities are the buildings or structures that a government or public authority builds for public use.Current savings refer to the amount of money that a business firm has after accounting for all expenses. It is the money that a business firm has saved after all expenses are paid off.
Hence, the correct answer is E. None of the Above.
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"The Stated Objectives Of Commercial Firms Are Often Taken To Be Profit Maximisation And Shareholder Wealth Maximisation. Briefly Comment On The Extent To Which This Objective Is Realistic And How Economics Can Be Useful In Assisting Actual Corporate Objectives." Guide To Complete The Assignment, You Will Need To Carefully Explain The Role Of Profits And
While profit maximization and shareholder wealth maximization are common objectives for commercial firms, their realization may depend on various factors. Economics provides valuable tools and frameworks that firms can use to analyze market conditions, make informed decisions, and align their objectives with economic realities and societal interests.
The stated objectives of commercial firms are commonly considered to be profit maximization and shareholder wealth maximization. However, the extent to which this objective is realistic can vary depending on various factors.
Economics can be useful in assisting actual corporate objectives by providing insights and guidance on how firms can effectively achieve their objectives. Here's how economics can play a role:
1. Profit Maximization: Economics helps firms understand the concept of profit maximization and the factors that influence it. By analyzing costs, revenues, and market conditions, firms can make informed decisions on pricing strategies, production levels, and cost management to maximize their profits.
2. Shareholder Wealth Maximization: Economics can assist firms in understanding how to create value for shareholders. By analyzing market dynamics, competition, and customer preferences, firms can make strategic decisions that enhance the long-term value of their business and increase shareholder wealth.
3. Market Efficiency: Economics provides insights into market efficiency and competition. Understanding market structures and competition allows firms to identify opportunities and make informed decisions to gain a competitive edge.
4. Externalities and Social Responsibility: Economics also highlights the importance of considering externalities, such as environmental and social impacts, in decision-making. Firms can use economic analysis to assess the costs and benefits of their actions and adopt sustainable practices that align with societal interests.
In conclusion, while profit maximization and shareholder wealth maximization are common objectives for commercial firms, their realization may depend on various factors. Economics provides valuable tools and frameworks that firms can use to analyze market conditions, make informed decisions, and align their objectives with economic realities and societal interests.
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Profit maximization and shareholder wealth maximization are important objectives for commercial firms, economics can help firms navigate the complexities of the business environment and assist in pursuing actual corporate objectives that go beyond short-term financial gains.
These objectives are commonly pursued, their complete realization may not always be realistic. There are several factors that can affect the ability of firms to achieve these goals, such as market conditions, competition, and external shocks.
Economics can be useful in assisting actual corporate objectives by providing a framework for understanding the factors that influence profitability and shareholder wealth. It can help firms analyze market dynamics, demand and supply conditions, pricing strategies, and cost structures. By studying these economic factors, firms can make informed decisions on how to allocate resources, improve efficiency, and identify growth opportunities.
Moreover, economics can assist in identifying alternative objectives that align with long-term sustainability and stakeholder welfare. Firms can consider broader goals such as social responsibility, environmental sustainability, and employee well-being, which can lead to enhanced corporate reputation and customer loyalty.
So, profit maximization and shareholder wealth maximization are important objectives for commercial firms, economics can help firms navigate the complexities of the business environment and assist in pursuing actual corporate objectives that go beyond short-term financial gains.
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Currently, Warren Industries can sell 15-year, $1,000-par-value bonds paying annual interest at a 8% coupon rate. Because current market rates for similar bonds are just under 8%, Warren can sell its bonds for
$1,100 each; Warren will incur flotation costs of $20 per bond. The firm is in the 21% tax bracket.a.Find the net proceeds from the sale of the bond, Nd.b.Calculate the bond's yield to maturity (YTM) to estimate the before-tax and after-tax costs of debt.c.Use the approximation formula to estimate the before-tax and after-tax costs of debt.
a) The net proceeds from the sale of the bond are $1,080. b.) Before-tax YTM of 7.13% and an after-tax YTM of 5.63% c) The before-tax cost of debt is approximately 7.13%, and the after-tax cost of debt is approximately 5.63%.
a.)The before-tax cost of debt is approximately 7.13%, and the after-tax cost of debt is approximately 5.63%. The net proceeds of the sale of the bond can be calculated as follows:
Net proceeds = (Selling price - Flotation costs) x Number of bonds sold
= ($1,100 - $20) x 1
= $1,080
Therefore, the net proceeds from the sale of the bond are $1,080.
b) Yield to maturity (YTM) can be calculated as follows:
PMT = coupon rate x par value = 8% x $1,000 is $80, n = number of years to maturity = 15I = market interest rate = 8%,
PV = issue price - flotation costs
= $1,100 - $20
= $1,080
Using a financial calculator or an Excel spreadsheet to solve for YTM gives us a before-tax YTM of 7.13% and an after-tax YTM of 5.63% ($7.13\%(1-0.21) is 5.63\%$).
c) Using the approximation formula to estimate the before-tax and after-tax costs of debt gives us the following results:
Before-tax cost of debt: YTM = current yield + [(par value - issue price) / n] x [(current yield + 1) / 2]7.13%
= 8% + [($1,000 - $1,100) / 15] x [(8% + 1) / 2]
After-tax cost of debt: YTM = after-tax yield + [(par value - issue price) / n] x [(after-tax yield + 1) / 2]5.63%
= 8% + [($1,000 - $1,100) / 15] x [(5.63% + 1) / 2]
Therefore, the before-tax cost of debt is approximately 7.13%, and the after-tax cost of debt is approximately 5.63%.
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