The transportation problem refers to a mathematical model used to minimize the cost of transporting goods from sources to destinations. It can be categorized as either balanced or unbalanced.
A balanced transportation problem has an equal supply of goods and demand for goods, while an unbalanced transportation problem has unequal supply and demand. Converting an unbalanced problem into a balanced problem involves introducing a dummy source or destination to balance the supply and demand.
In a balanced transportation problem, the total supply of goods from sources equals the total demand for goods at destinations. This means that there is a perfect balance between supply and demand, making it easier to find an optimal solution. On the other hand, an unbalanced transportation problem occurs when the total supply does not match the total demand. This can happen when the supply exceeds the demand or when the demand exceeds the supply.
To convert an unbalanced transportation problem into a balanced one, a dummy source or destination is introduced. A dummy source represents a fictitious supply, while a dummy destination represents a fictitious demand. The dummy source or destination is assigned an appropriate supply or demand value to balance the problem.
By adding the dummy source or destination, the total supply and demand become equal, transforming the unbalanced problem into a balanced one. This allows for the application of standard transportation problem-solving techniques to find an optimal solution.
Learn more about goods here: https://brainly.com/question/21205542
#SPJ11
completed a $49,000 feasibility study to analyze the decision to buy the XC-750, resulting in the following estimates: - Human Resources: The expansion will require additional sales and administrative personnel at a cost of $1.91 million per year. a. Determine the incremental earnings from the purchase of the XC-750. b. Determine the free cash flow from the purchase of the XC-750. c. If the appropriate cost of capital for the expansion is 10.3%, compute the NPV of the purchase. d. While the expected new sales will be $10.15 million per year from the expansion, estimates range from $8.1 million to $12.2 million. What is the NPV in the worst case? In the best case? e. What is the break-even level of new sales from the expansion? What is the break-even level for the cost of goods sold as a percentage of sales? (above the $10.15 million expected for the XC-750) per year in those years would justify purchasing the larger machine?
Incremental Earnings:For calculating the incremental earnings of XC-750, we must subtract the additional expenses incurred from the additional revenue generated.
Incremental earnings are calculated as follows:
Incremental earnings = Additional revenue – Additional expenses We are provided with the following data:New sales revenue from the XC-750: [tex]$10.15[/tex] million per year Additional sales and administrative personnel expenses: [tex]$1.91[/tex] million per year Incremental earnings =[tex]$10.15[/tex]
million =[tex]$1.91[/tex] million
= $8.24 million Free Cash.
Flow:Free cash flow is calculated as follows:Free cash flow = Net cash flow from operating activities – Net cash flow from investing activities We are provided with the following data:Purchase price of the XC-750:[tex]$45[/tex] million Cost of capital for the expansion: 10.3%Annual depreciation on the XC-750:[tex]$900,000[/tex] per year Net increase in working capital: [tex]$700,000[/tex].
To know more about calculating visit:
https://brainly.com/question/30781060
#SPJ11
If a firm has a short-term debt of $500, debt-equity ratio of .45, and equity of $2,000, then
A. long-term liabilities must be $400.
B. retained earnings must be $810.
C. total liability must be $810.
D. preferred stock must be $400.
If a firm has a short-term debt of $500, debt-equity ratio of .45, and equity of $2,000, then A) Long-term liabilities must be $400.
We can use the debt-equity ratio formula to find the total liabilities of the firm:
Debt-Equity Ratio = Total Liabilities / Equity
0.45 = Total Liabilities / $2,000
Total Liabilities = 0.45 * $2,000
Total Liabilities = $900
Now we know that the total liabilities of the firm are $900 and the short-term debt is $500. Therefore, long-term liabilities must be:
Long-term Liabilities = Total Liabilities - Short-term Debt
Long-term Liabilities = $900 - $500
Long-term Liabilities = $400
So the correct option is A) Long-term liabilities must be $400.
Learn more about debt from
https://brainly.com/question/25035804
#SPJ11
Meyer Inc produces lampposts using labor (L) and capital (K). Its production function is given by the following expression:
Q = 80 L + 47 K
where Q is the output of lampposts.
The prices of labor (PL), capital (PK), lamppost (P) and the cost (C) are the following:
PL=56, PK=12, P=91, and C=4125
What is the MRTS?
The Marginal Rate of Technical Substitution (MRTS) for Meyer Inc's production function Q = 80L + 47K, is 80/47 or approximately 1.70.
This means that, at the margin, Meyer Inc can substitute approximately 1.70 units of labor for one unit of capital while keeping the output constant. In detail, the MRTS is calculated from the ratio of the marginal product of labor (MPL) to the marginal product of capital (MPK), or MPL/MPK. In the given production function, the MPL and MPK are the coefficients of L and K, respectively. Thus, the MRTS is 80/47 = 1.70. It suggests that the firm can substitute 1.70 units of labor for each unit of capital without affecting the quantity of lampposts produced, assuming all other factors remain constant. This measure is crucial for the firm when making decisions about the optimal mix of inputs to use in production.
Learn more about marginal product here:
https://brainly.com/question/30886200
#SPJ11
Suppose that a small town begins a project to restore the historic train depot as a tourist attraction which will improve the town's economy, benefitting all of the residents. On the weekend, each of the 30 residents may either Work on the depot, or have a Barbecue at the park. The payoffs from Working or Barbecuing are given by W (nw) = 4nw + 25 B (ng) = 100 2nB In which nw and ng are the number of people Working or Barbecuing, respectively. a) Decide which strategy, Working or Barbecuing, is participation and which is shirking, and then write down payoff functions P(n) and S(n), where n is the number of people participating. b) Create a graph illustrating the payoffs involved in the participants' and shirkers' decisions. c) On the horizontal axis of your graph, show the participation dynamics in this game. d) Find all of the equilibria shown in your graph from parts b) and c). e) of the equilibria you found in d), which are stable and which are unstable?
There are two equilibria:equilibrium 1: around 20 participants
equilibrium 2: around 21 participants
e) stability of equilibria:to determine stability, we need to evaluate the slopes of the payoff functions.
a) participation strategy: working on the depot.shirking strategy: having a barbecue at the park.
payoff functions:p(n) = 4n + 25(30 - n) = 55n + 750
s(n) = 100(2(30 - n)) = 6000 - 200n
b) graph:x-axis: number of people participating (n)
y-axis: payoff
participants' payoff (p(n)) ^
|8000 | p(n)
| | 0 15 30 --> n
shirkers' payoff (s(n)) ^
|8000 | s(n)
| | 0 15 30 --> n
c) horizontal axis: number of people participating (n)
d) equilibria:to find equilibria, set p(n) equal to s(n) and solve for n.
p(n) = s(n)
55n + 750 = 6000 - 200n255n = 5250
n = 20.59 (approx.) for equilibrium 1 (around 20 participants):
p'(n) = 55s'(n) = -200
since p'(n) > s'(n), equilibrium 1 is stable.
for equilibrium 2 (around 21 participants):
p'(n) = 55s'(n) = -200
since p'(n) > s'(n), equilibrium 2 is also stable.
Learn more about evaluate here:
https://brainly.com/question/20067491
#SPJ11
Maxwell Software, Inc., has the following mutually exclusive projects.
Year Project A Project B
0 –$22,000 –$25,000
1 13,000 14,000
2 9,500 10,500
3 3,100 9,500
a-1. Calculate the payback period for each project. (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)
Payback period
Project A years
Project B years
a-2. Which, if either, of these projects should be chosen?
Project A
Project B
Both projects
Neither project
b-1. What is the NPV for each project if the appropriate discount rate is 16 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
NPV
Project A $
Project B $
b-2. Which, if either, of these projects should be chosen if the appropriate discount rate is 16 percent?
Project A
Project B
Both projects
Neither project
Project B should be selected as it has a positive NPV of $943.84 if the appropriate discount rate is 16%.Project B should be chosen if the appropriate discount rate is 16%.
a-1. Calculation of Payback Period for each project:
For Project A: Initial investment = -22,000Cash inflow for year 1 = 13,000Cash inflow for year 2 = 9,500Cash inflow for year 3 = 3,100Cash inflow for year 4 = 0Amount recovered at the end of year 3 = 22,600 Amount to recover = 22,000 – 22,600 = -600Payback period = 2.31 years (Approximately 2.308 years)For Project B:Initial investment = -25,000Cash inflow for year 1 = 14,000Cash inflow for year 2 = 10,500Cash inflow for year 3 = 9,500Cash inflow for year 4 = 0Amount recovered at the end of year 3 = 34,000Amount to recover = 25,000 – 34,000 = -9,000Payback period = 2.632 years (Approximately 2.632 years)
a-2. Based on the payback period of Project A and Project B, we can conclude that Project A has a lower payback period than Project B, which means that Project A has less risk as compared to Project B. Thus, Project A should be selected.Neither project should be chosen as both have a negative NPV if the appropriate discount rate is 16%.
b-1. Calculation of NPV for each project:For Project A:Year Cash flows Discount Factor at 16%Discounted Cash flows0 (22,000) 1.0000 (22,000)1 13,000 0.8621 11,202.60 2 9,500 0.7432 7,056.94 3 3,100 0.6412 1,987.28 NPV = -1,753.18For Project B:Year Cash flows Discount Factor at 16%Discounted Cash flows0 (25,000) 1.0000 (25,000)1 14,000 0.8621 12,058.50 2 10,500 0.7432 7,807.14 3 9,500 0.6412 6,090.20 NPV = 943.84
b-2. Based on the NPV of Project A and Project B, we can conclude that Project B should be selected as it has a positive NPV of $943.84 if the appropriate discount rate is 16%.Thus, Project B should be chosen if the appropriate discount rate is 16%.
Learn more about Investments here,https://brainly.com/question/29547577
#SPJ11
Based on the Solow growth model of economic growth and with the help of a graph comment on the effects of immigration on a country's a. Aggregate output b. Output per capita c. Capital labor ratio
Based on the Solow growth model of economic growth,
Immigration raises the capital-labor ratio and output per capita of a nation in the short term.Immigration raises the aggregate output of a country in the long run, but not significantly.Immigration may not have a significant long-term impact on output per capita.The Solow growth model, which is a neoclassical growth model, asserts that over time, any economy will reach a steady-state level of per-capita output that is determined by the levels of productivity, population growth, and capital stock. Therefore, immigration affects the capital-labor ratio and output per capita of a nation, which eventually leads to a change in its aggregate output.
The Solow model states that the long-term output per capita, y*, can be calculated as:
Y* = F(K*, L*)
Where F represents the production function; K* is the steady-state capital stock, and L* is the steady-state population size.
Incorporating immigration into the Solow growth model: Immigration alters the labor force size of a country. An increase in the labor force, holding other factors constant, implies a higher capital-labor ratio in the economy. An increased capital-labor ratio increases output per capita and raises the level of total output in the economy. Therefore, immigration raises aggregate output.
The effect of immigration on a country's capital-labor ratio:Immigration raises the labor force in the country, leading to an increase in the capital-labor ratio in the short term. An increase in capital-labor ratio raises the output per capita in the economy, leading to economic growth. This short-term effect, however, is mitigated over time by a decline in capital per worker as the population grows, causing a reduction in output per worker.
The effect of immigration on a country's output per capita:Immigration raises the output per capita in the economy in the short term as labor and capital resources are reallocated. However, in the long term, this effect is mitigated by the decline in capital per worker that arises from population growth. Therefore, immigration may not have a significant long-term effect on output per capita.
To know more about Solow growth model, refer to the link below:
https://brainly.com/question/31526354#
#SPJ11
You deposit $2,700 in your bank account. a. If the bank pays 5% simple interest, how much will you accumulate in your account after 8 years? b. How much will you accumulate If the bank pays compound interest? Note: Do not round Intermedlate calculations. Round your answer to 2 decimal places.
a. If the bank pays 5% simple interest, you will accumulate $3,780 in your account after 8 years. b With compound interest, you will accumulate $3,888.27 in your account after 8 years.
a. The formula for simple interest is:
Interest = Principal x Rate x Time
Principal (P) = $2,700
Rate (R) = 5% = 0.05
Time (T) = 8 years
Using the formula, we can calculate the interest first:
Interest = $2,700 x 0.05 x 8 = $1,080
To find the total amount accumulated, we add the interest to the principal:
Total amount = Principal + Interest = $2,700 + $1,080 = $3,780
Therefore, after 8 years, you will accumulate $3,780 in your account with 5% simple interest.
b. If the bank pays compound interest, the calculation requires the use of the compound interest formula:
Compound Interest = Principal x (1 + Rate)^Time - Principal
Given the same values as in part a, we can calculate the compound interest:
Compound Interest = $2,700 x (1 + 0.05)^8 - $2,700
Simplifying this equation step by step:
Compound Interest = $2,700 x (1.05)^8 - $2,700
Compound Interest = $2,700 x 1.4401 - $2,700
Compound Interest = $3,888.27 - $2,700
Compound Interest = $1,188.27
The compound interest over 8 years amounts to $1,188.27.
To find the total amount accumulated, we add the compound interest to the principal:
Total amount = Principal + Compound Interest = $2,700 + $1,188.27 = $3,888.27
Therefore, with compound interest, you will accumulate $3,888.27 in your account after 8 years.
Learn more about interest
https://brainly.com/question/28431906
#SPJ11
1. Define the following terms in detail: par value, paid in capital in excess of par, common stock, preferred stock, cumulative preferred stock, stock dividend, stock split, and treasury stock, (LO 2) 2. Describe the proper reporting of stockholders' equity in the financial statements.
Definitions of terms: Par Value, Paid-in Capital in Excess of Par, Common Stock, Preferred Stock, Cumulative Preferred Stock, Stock Dividend, Stock Split, Treasury Stock.
Par Value: Par value is the nominal or face value assigned to a share of stock by the company. It represents the minimum price at which the stock can be issued. Par value has legal significance but does not necessarily reflect the market value of the stock.
Paid-in Capital in Excess of Par: Paid-in capital in excess of par, also known as additional paid-in capital, represents the amount of capital contributed by shareholders in excess of the par value of the stock. It includes amounts received from the sale of stock above its par value.
Common Stock: Common stock represents ownership shares in a corporation. Shareholders who hold common stock have voting rights and are entitled to a portion of the company's profits through dividends. In the event of liquidation, common stockholders have a residual claim on the company's assets after the satisfaction of all other obligations.
Preferred Stock: Preferred stock is a class of stock that carries certain preferences over common stock. Preferred stockholders receive preferential treatment in terms of dividends and liquidation proceeds. They have a fixed dividend rate and a higher claim on company assets compared to common stockholders.
Cumulative Preferred Stock: Cumulative preferred stock is a type of preferred stock where any unpaid dividends accumulate and must be paid before any dividends can be distributed to common stockholders. If a company is unable to pay dividends in a particular period, the unpaid dividends on cumulative preferred stock carry over to future periods.
Stock Dividend: A stock dividend is a distribution of additional shares of stock to existing shareholders. It is usually expressed as a percentage of the outstanding shares and is proportional to the number of shares held by each shareholder. Stock dividends do not involve the distribution of cash but increase the number of shares outstanding.
Stock Split: A stock split is a corporate action where a company increases the number of its outstanding shares by dividing the existing shares into multiple shares. The purpose of a stock split is to make the shares more affordable and increase liquidity. A typical stock split ratio is 2-for-1 or 3-for-1, where each existing share is divided into two or three shares, respectively.
Treasury Stock: Treasury stock refers to the company's own stock that has been repurchased from shareholders. It represents shares that were once issued and outstanding but have been subsequently bought back by the company. Treasury stock is held by the company and does not have voting rights or receive dividends. It can be retired or reissued at a later time.
Reporting of Stockholders' Equity in Financial Statements:
In the financial statements, stockholders' equity is typically presented on the balance sheet. It includes various components such as common stock, preferred stock, additional paid-in capital, retained earnings, and treasury stock.
The proper reporting of stockholders' equity involves the following:
Common Stock and Preferred Stock: The par value and number of shares of common stock and preferred stock issued by the company are disclosed in the stockholders' equity section.
Additional Paid-in Capital: The amount of capital contributed by shareholders in excess of the par value is reported as additional paid-in capital or paid-in capital in excess of par.
Retained Earnings: Retained earnings represent the accumulated profits or losses of the company that have not been distributed as dividends. It reflects the reinvestment of earnings back into the business.
Accumulated Other Comprehensive Income: This component of stockholders' equity includes gains and losses that are not recognized in the income statement but are reported directly in the statement of comprehensive income. It may include items such as unrealized gains or losses on available-for-sale securities or foreign currency translation adjustments.
Treasury Stock: If the company has repurchased its own stock, the cost of the treasury stock is subtracted from the total stockholders' equity.
Learn more about Stock from
https://brainly.com/question/26128641
#SPJ11
Identify key elements to consider when conducting an industry
analysis for a startup.
When conducting an industry analysis for a startup, several key elements need to be considered to gain a comprehensive understanding of the market landscape and make informed strategic decisions. Here are some essential elements to consider:
Market Size and Growth: Assess the overall market size, growth rate, and potential for expansion. Understand the demand dynamics, trends, and factors driving market growth or decline.
Competitor Analysis: Identify and analyze key competitors in the industry. Evaluate their market share, strengths, weaknesses, product offerings, pricing strategies, and competitive advantages. This analysis helps identify opportunities, differentiate the startup's offering, and position it effectively.
Customer Analysis: Understand the target customer segments, their needs, preferences, and behaviors. Analyze customer demographics, psychographics, buying patterns, and decision-making processes. This analysis helps tailor the startup's product or service to meet customer demands effectively.
Know more about industry analysis here;
https://brainly.com/question/28902963
#SPJ11
for the agency problem, what is entrenching investment? and what is empire building? briedly explain
In the context of the agency problem, entrenching investment and empire building are two concepts that reflect the conflicting interests between company managers and shareholders.
1. Entrenching investment:
Entrenching investment refers to investment decisions made by managers that are primarily driven by their desire to protect their position or power within the company. These investments may not necessarily align with the best interests of shareholders or the long-term profitability of the company. Examples of entrenching investments include excessive spending on luxurious office spaces, unnecessary acquisitions, or investments in projects that do not generate significant returns but help managers solidify their control
2. Empire building:
Empire building refers to managers' actions of expanding the size or scope of the company beyond what is necessary or beneficial for shareholder value.
Managers engaged in empire building may pursue growth opportunities or acquisitions that are not economically justified, driven by personal ambitions or the desire for increased status or power. Empire building can result in the company taking on excessive debt, diluting shareholder value through the issuance of additional shares, or diverting resources away from more profitable investments. Shareholders may suffer from the negative consequences of empire building if it leads to reduced profitability or increased risk for the company.
Both entrenching investment and empire building highlight the potential conflicts of interest between managers and shareholders and underscore the importance of effective corporate governance mechanisms to align the interests of managers with those of the shareholders.
Learn more about managers here:
https://brainly.com/question/32150882
#SPJ11
On September 30, 2020, Peace Frog International (PFI) (a U.S.-based company) negotiated a two-year, 1,600,000 Chinese yuan loan from a Chinese bank at an interest rate of 4 percent per year. The company makes interest payments annually on September 30 and will repay the principal on September 30, 2022. PFI prepares U.S. dollar financial statements and has a December 31 year-end. Relevant exchange rates are as follows: Date U.S. Dollar per Chinese Yuan (CNY) September 30, 2020 $ 0.160 December 31, 2020 0.165 September 30, 2021 0.180 December 31, 2021 0.185 September 30, 2022 0.210 Prepare all journal entries related to this foreign currency borrowing. Taking the exchange rate effect on the cost of borrowing into consideration, determine the effective interest rate in U.S. dollars on the loan in each of the three years 2020, 2021, and 2022.
September 30, 2020:
Debit: Cash ($256,000)Credit: Foreign Currency Payable ($256,000)September 30, 2021:
Debit: Foreign Currency Payable ($288,000)Debit: Loss on Foreign Exchange ($6,400)Credit: Interest Expense ($64,000)September 30, 2022:
Debit: Foreign Currency Payable ($336,000)Debit: Loss on Foreign Exchange ($5,600)Credit: Interest Expense ($64,000)The effective interest rates are as follows:
4%4%0.67%Peace Frog International (PFI) recorded a two-year loan in Chinese yuan. Journal entries involved loan recording, exchange rate adjustments, and recognizing interest expense. The effective interest rates were calculated for each year, considering exchange rate impact.
To record the foreign currency borrowing and subsequent transactions, the following journal entries are made:
1. September 30, 2020 (Loan Received):
Dr. Cash ($0.160 x 1,600,000) $ 256,000Cr. Foreign Currency Loan 256,0002. December 31, 2020 (Exchange Rate Adjustment):
Dr. Unrealized Foreign Exchange Gain $ 8,000Cr. Foreign Currency Loan3. September 30, 2021 (Interest Payment):
Dr. Interest Expense ($256,000 x 4%) $ 10,240Cr. Cash 10,2404. December 31, 2021 (Exchange Rate Adjustment):
Dr. Unrealized Foreign Exchange Gain $ 8,000Cr. Foreign Currency Loan5. September 30, 2022 (Interest Payment & Principal Repayment):
Dr. Interest Expense ($256,000 x 4%) $ 10,240Dr. Foreign Currency Loan 1,600,000Cr. Cash 10,240Cr. Foreign Currency Loan 1,600,000To determine the effective interest rate in U.S. dollars for each year, we need to calculate the total interest expense in U.S. dollars and divide it by the average outstanding loan balance. The effective interest rates are as follows:
2020: $10,240 / $256,000 = 4%2021: $10,240 / $256,000 = 4%2022: $10,240 / ($256,000 + $1,600,000) = 0.67%Therefore, the effective interest rate in U.S. dollars for the loan is 4% in 2020 and 2021, and 0.67% in 2022.
For more questions on interest rates
https://brainly.com/question/31238493
#SPJ8
Uranus, a Web site reviewing the latest trends in fashion, has a banner link to an online clothes retailer. When consumers purchase from the retailer, through this link, Uranus receives a percentage of the sale. On the basis of the given information we can say that this is an example of:
1. cloud targeting.
2. affiliate marketing.
3. behavioral targeting.
4. a company name that teenagers will make fun of.
5. viral marketing.
Uranus, a Web site reviewing the latest trends in fashion, has a banner link to an online clothes retailer. When consumers purchase from the retailer, through this link, Uranus receives a percentage of the sale. On the basis of the given information we can say that this is an example of affiliate marketing.
In this scenario, Uranus is acting as an affiliate for the online clothes retailer by promoting their products through a banner link on their website. When consumers make a purchase through that link, Uranus receives a percentage of the sale as a commission. This is a common practice in affiliate marketing, where websites or individuals earn a commission for driving traffic and sales to a retailer's website.
know more about affiliate marketing here:
https://brainly.com/question/32553484
#SPJ11
Pearson Motors has a target capital structure of 30% debt and 70% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 9%, and its tax rate is 25%. Pearson's CFO estimates that the company's WACC is 10.50%. What is Pearson's cost of common equity?
Pearson Motors' cost of common equity is approximately 14.97%.
To calculate Pearson Motors' cost of common equity, we can use the weighted average cost of capital (WACC) formula, which is the weighted average of the cost of debt and the cost of equity.
Given information:
Debt ratio (D/E): 30%
Equity ratio (E/E): 70%
Yield to maturity on bonds (cost of debt): 9%
Tax rate: 25%
WACC: 10.50%
First, let's calculate the after-tax cost of debt:
Cost of debt = Yield to maturity * (1 - Tax rate)
Cost of debt = 0.09 * (1 - 0.25) = 0.09 * 0.75 = 0.0675 or 6.75%
Next, we can calculate the cost of equity using the WACC formula:
WACC = (E/E) * Cost of equity + (D/E) * Cost of debt
10.50% = 0.70 * Cost of equity + 0.30 * 0.0675
Now, let's solve for the cost of equity:
0.70 * Cost of equity = 10.50% - 0.30 * 0.0675
0.70 * Cost of equity = 10.50% - 0.02025
0.70 * Cost of equity = 10.47975
Cost of equity = 10.47975 / 0.70
Cost of equity ≈ 14.97%
Know more about cost of common equity here:
https://brainly.com/question/32993951
#SPJ11
a. Discuss the decision taken by the Production Manager.
b. If the performance of a divisional manager at SAG operates in many countries and has a diverse product offering. With such complex and broad operations, there are invariably many factors that can affect the performance of a business sector or division. In its 2019 Annual Report, SAG refers to its future trading strategy, called ‘Vision 2020+’, which aims to grant their individual businesses more entrepreneurial freedom and responsibility for their results. A key component of this strategy relates to sustainable company development, and it is reported that, as one element of determining the total remuneration payable to the Managing Board, sustainability is to be measured according to a bespoke SAG Sustainability Index which takes into account the following: ‘three equally weighted key factors: CO2 emissions (environmental), learning hours per employee (social) and Net Promoter Score (governance)’. Presumably, these (or very similar) measures would also form part of the performance measurement system for divisional management. Throughout the 2019 Annual Report, the targets set under the Vision 2020+ programme are outlined and reported upon. For example, under the financial heading, revenue growth is referred to as follows: ‘Our primary measure for managing and controlling our revenue growth is comparable growth, because it shows the development in our business net of currency translation ... and port-folio effects.’
Required:
How might the actual assessment of divisional performance differ in recessionary times?
The Performance of a Divisional Manager at SAG operates in many countries and has a diverse product offering. The production manager has decided to introduce various ways of motivating employees to improve their efficiency.
The measures he introduced include the encouragement of teams to come up with new suggestions for improving production systems, the inclusion of overtime as part of the work contract, and the provision of recognition and cash rewards for employees who make outstanding contributions to production.
This means that the production manager's decision is to focus on employee motivation to improve productivity, which is the key to the company's profitability.
In recessionary times, the assessment of divisional performance might differ in the following ways: Revenue: During the recession, the revenue generated by the company may decrease as customers become less interested in buying expensive products or services that are not a priority.
In this case, the revenue target set in Vision 2020+ will be affected, and thus, the actual assessment of divisional performance might be negative.
To know more about operates visit:
https://brainly.com/question/30581198
#SJP11
Mark is planning for his daughter's education. She will be attending a college in 11 years. The college expenses are estimated to be $67,000 for a 4-year college. If he can earn 10 percent APR with monthly compounding on a college savings plan, how much does he have to invest every month for the next 11 years? Round it to two decimal places and do not include the $ sign, e.g., 1234.56.
Mark is planning for his daughter's education. She will be attending college in 11 years. The college expenses are estimated to be $67,000 for a 4-year college.
He can earn 10% APR with monthly compounding on a college savings plan. To Find Formula, Monthly payment
= (PMT × (1 + r)N - 1) / (1 - (1 + r)-N)Where,
PMT = Monthly investment
N = Number of yearsr
= Rate of interest / 12 years.
We need to find the monthly investment required to achieve Mark's target. Here, we can use the above formula to find the monthly investment required. To apply the formula, we have to put the given values into the formula.Calculate the total amount required for a college degree.
To know more about Mark visit:
https://brainly.com/question/7412988
#SPJ11
A doctor may order more tests than necessary for a patient. This situation is called a _________ problem.
Medicare
adverse selection
moral hazard
principal-agent
market externality
The situation in which a doctor orders more tests than necessary for a patient is known as a moral hazard.
Moral hazard is a concept commonly observed in insurance and healthcare contexts. It occurs when one party, in this case, the patient, engages in risky or excessive behavior because they are insulated from the full consequences of their actions. In the context of healthcare, this can manifest as a doctor ordering more tests or procedures than necessary for a patient, knowing that the cost will be covered by insurance or a third-party payer like Medicare.
The presence of insurance or third-party payment systems can create a moral hazard by decoupling the cost of services from the individual receiving them. Patients may be less concerned about the cost implications of additional tests or procedures and may not have the same incentives to question their necessity. As a result, doctors may feel more inclined to order additional tests or procedures as a precautionary measure, leading to the potential overutilization of healthcare resources.
Overall, the moral hazard created by insurance or third-party payment systems can contribute to increased healthcare costs and resource allocation inefficiencies. Addressing this issue often involves finding ways to align the incentives of patients, doctors, and insurers to promote cost-conscious decision-making and ensure that healthcare services are appropriately utilized.
To learn more about moral hazards visit:
brainly.com/question/31066410
#SPJ11
Choose any Hotel near you
List the amenities they have along wioth the types of rooms they
provide .
A general list of common amenities found in hotels and some common types of rooms that hotels typically offer.
Common amenities in hotels can include Wi-Fi or internet access, Complimentary breakfast, Swimming pool, Fitness center, On-site restaurant or room service, Business center, Parking facilities, Spa or wellness facilities, 24-hour front desk, Laundry services. Standard or Deluxe Room, Suite, Executive Room, Family Room, Connecting Rooms, Accessible or ADA-compliant Room, Penthouse or Presidential Suite, Studio Room, Junior Suite, Extended Stay Room or Apartment. When searching for a hotel near your location, I recommend using online hotel booking platforms or search engines where you can specify your desired amenities and room types to find hotels that meet your preferences.
To know more about business refer :
https://brainly.com/question/15826604
#SPJ11
At December 31, 2021, Warm Weather Travel has an Accounts Receivable balance of $89,000, Alowance for Uncolectible Accounts has a credit balance of $850 before the year-end adjustment Service revenue (al on account) for 2021 was $560,000. Warm Weather estimates that its uncollectible-account expense for the year is 3% of service revenue.
a. Make the year-end entry to record uncolectible account expense. b. Show how Accounts Receivable and Allowance for Uscollectitie Accounts are recone on the balance sheet at December 31, 2021.
a. The year-end entry to record uncollectible account expense would be:
Debit: Uncollectible Account Expense $16,800
Credit: Allowance for Uncollectible Accounts $16,800
To record the estimated uncollectible account expense, Warm Weather Travel will debit the Uncollectible Account Expense account for $16,800. This represents 3% of the service revenue of $560,000. The credit of $16,800 will be made to the Allowance for Uncollectible Accounts account, which is a contra-asset account used to offset the Accounts Receivable and reflect the estimated amount of uncollectible accounts.
b. The presentation on the balance sheet at December 31, 2021, would be as follows:
Accounts Receivable: $89,000
Less: Allowance for Uncollectible Accounts: ($16,800)
Net Accounts Receivable: $72,200
The balance sheet will show the Accounts Receivable balance of $89,000, representing the total amount owed by customers.
Learn more about uncollectible account expense here:
https://brainly.com/question/13752118
#SPJ11
Last year Carson Industries issued a 10-year, 14% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,070 and it sells for $1,280. What are the bond's nominal yield to maturity and its nominal yield to call?
The bond's nominal yield to maturity is 8.38% and its nominal yield to call is 5.98%.
To calculate the nominal yield to maturity, we need to find the discount rate that equates the present value of the bond's future cash flows (coupons and par value) to its current price.
Using the present value formula for a bond, we can set up the following equation:
$1,280 = C × [1 - (1 + r/2)^(-2×10)] / (r/2) + $1,000 / (1 + r/2)^(2×10)
where C is the semiannual coupon payment, r is the yield to maturity, and the bond has a 10-year maturity with semiannual payments.
Solving this equation for r, we find that the yield to maturity is approximately 8.38%.
To calculate the nominal yield to call, we use a similar approach, but instead of using the bond's maturity, we consider the call price and the remaining time to call.
$1,070 = C × [1 - (1 + r/2)^(-2×6)] / (r/2) + $1,000 / (1 + r/2)^(2×6)
Solving for r, we find that the yield to call is approximately 5.98%.
Therefore, the bond's nominal yield to maturity is 8.38% and its nominal yield to call is 5.98%.
Learn more about nominal yield here:
https://brainly.com/question/26382622
#SPJ11
Click Submit to complete this assessment Question 41 10 points Save Ar [CLO-4) Around 50 billion square yards of used carpet are being thrown every year. Therefore, a carpet manufacturer has decided to recycle obsolete carpet (at the end of its useful life). The cost of recycling is $1.50 per square yard of carpet, and the remanufactured carpet can be sold for $3 per square yard if the recycling equipment costs $0.85 million and has an estimated salvage value of $60,000 at the end of the eight-year ide, how many square yards of carpet must be recycled annually to make this a profitable undertaking? Assume that the company's MARR is 10% per year and the study period is 8 years Question 41 of 41 Capsunare Question 41 of 41
The company needs to recycle at least $3.21 million / $3 per sq yd = 1.07 billion sq yds of carpet annually to make this a profitable undertaking.
To determine the number of square yards of carpet that must be recycled annually to make this a profitable undertaking, we need to calculate the net present value (NPV) of the project and then use that to find the annual equivalent cost (AEC) of the project.
First, let's calculate the total cost of the project:
Cost of recycling equipment = $0.85 million
Salvage value of equipment at end of eight-year life = $60,000
Total cost of equipment = $0.85 million - $60,000 = $0.79 million
Annual cost of recycling = 50 billion sq yds * $1.50/sq yd = $75 billion
Now, let's calculate the total revenue from the remanufactured carpet:
Revenue per square yard of remanufactured carpet = $3
Assuming all recycled carpet is successfully remanufactured and sold, the total revenue would be:
50 billion sq yds * $3/sq yd = $150 billion
Next, let's calculate the NPV of the project using a discount rate of 10% and an eight-year study period:
NPV = -(0.79 million) + (150 billion / (1+0.10)^1) + (75 billion / (1+0.10)^2) + (75 billion / (1+0.10)^3) + ... + (75 billion / (1+0.10)^8)
NPV = $17.63 million
Finally, we can use the NPV to find the AEC of the project:
AEC = NPV / [(1 - 1/(1+0.10)^8)/0.10]
AEC = $3.21 million
Therefore, the company needs to recycle at least $3.21 million / $3 per sq yd = 1.07 billion sq yds of carpet annually to make this a profitable undertaking.
learn more about profitable here
https://brainly.com/question/29987711
#SPJ11
A drill press was purchased 4 years ago for $40,000. Its estimated salvage value after 7 years was $5,000. The press can be sold for $15,000 today, or for $12,000, $9,000, or $6,000 at the ends of each of the next 3 years. The annual operating and maintenance cost for the next 3 years will be $2,700 for this year and then will increase by $800 per year. Considered MARR is 10%. What is the total marginal cost for year-3?
The total marginal cost for year-3 of the drill press is $11,946. This cost includes the annual operating and maintenance cost, the reduction in salvage value, and the opportunity cost of not selling the press.
To calculate the total marginal cost for year-3, we need to consider the annual operating and maintenance cost, the reduction in salvage value, and the opportunity cost of not selling the press.
The annual operating and maintenance cost for year-3 is $2,700, as given.
The reduction in salvage value is the difference between the salvage value at the end of year-3 ($6,000) and the salvage value at the end of year-7 ($5,000), discounted back to year-3 using the MARR of 10%.
The discounted reduction in salvage value is calculated as follows:
Reduction in Salvage Value = [tex]\frac{(6,000 - 5,000)}{(1 + 0.10)^{4} }[/tex] = $452.49
The opportunity cost is the difference between the value of selling the press at the end of year-3 ($9,000) and the value of selling it today ($15,000), discounted back to year-3 using the MARR of 10%.
The discounted opportunity cost is calculated as follows:
Opportunity Cost = [tex]\frac{(9,000 - 15,000)}{(1 + 0.10)^{3} }[/tex] = -$3,085.46 (negative since it represents a cost)
The total marginal cost for year-3 is the sum of the annual operating and maintenance cost, the reduction in salvage value, and the opportunity cost:
Total Marginal Cost = $2,700 + $452.49 + (-$3,085.46) = $11,946.03
Therefore, the total marginal cost for year-3 of the drill press is $11,946.
Learn more about salvage here:
https://brainly.com/question/30271566
#SPJ11
conmissiens, what weuld tave been your rate of roturn en this itwestment? Rownd your antwer to two docmal plecos. What weuld be your fate of return if yeu had put in a markat erden Round yose ander to two becimul places. What e voiut lime oriser was at 816? Since the narkat to 11 a the li-it ordar The stock of the Madson Travel Co. is selling for $30 a share. You put in a limit buy order at $27 for ose month, During the manth the stock frice declines wo 122 , then furnit to $38, fanoting comnitsions, What would have been your rabe of ceturn on this itvestrient? Rourd yoer antwer to twe decmal places. What wauld be your rate of resum if you had put in a market order? Reued vour anawer to two decimal places. What if your limit arder was at $13? Sirce the market to 518 the litis ocder
Given that the stock of Madison Travel Co. is selling for $30 a share and you put in a limit buy order at $27 for one month. During the month, the stock price declines to $22, then rises to $38. Find the rate of return on this investment if the commission was $150.The number of shares you could have bought with $27 is 150/27 = 5.55 shares. So, the total cost of your investment would be 5.55 × $27 = $150The stock price drops to $22, which is less than your limit buy order, and the order gets executed.
You buy 5.55 shares of Madison Travel Co. at $22 per share, spending $122.1 in total ($22 × 5.55).With the commission of $150, the total cost of your investment becomes $272.1. After one month, the stock price increases to $38. To calculate the rate of return, we will need to find the market value of your investment after one month.Market value = Number of shares × Market price per share = 5.55 × $38 = $210.9Gain or loss = Market value − Total cost = $210.9 − $272.1 = −$61.2As there is a loss of $61.2 on your investment, the rate of return is negative. The rate of return can be calculated as follows:Rate of return = Gain or loss / Total cost= −$61.2 / $272.1= −0.225 or −22.5% (rounded to two decimal places)If you had put in a market order, you would have bought the shares at the current market price. So, you would have bought 150/30 = 5 shares of Madison Travel Co. at $30 per share, spending $150 in total.After one month, the market value of your investment would be 5 × $38 = $190. Gain or loss = Market value − Total cost = $190 − $150 = $40Rate of return = Gain or loss / Total cost= $40 / $150= 0.267 or 26.7% (rounded to two decimal places)If your limit order was at $13, the order would not have been executed since the stock price never dropped below $13 during the month. So, you would not have bought any shares of Madison Travel Co.
Learn more on decimal here:
brainly.com/question/30958821
#SPJ11
manufacturers' agents are most likely used in such lines as ________.
Manufacturers' agents are most likely used in such lines as furniture, sporting goods, and hardware.
An agent is a person who represents the seller and has a contract with the manufacturer to sell the goods. They get paid a commission on their sales. Manufacturers' agents are a type of agent that is involved in selling a manufacturer's goods. They work on commission and are hired by the manufacturer to sell their products to wholesalers, retailers, and other distributors. In the furniture industry, manufacturers' agents may be used to sell furniture to retailers, wholesalers, and distributors.
Sporting goods manufacturers' agents may be used to sell sports equipment to retailers, wholesalers, and distributors. In the hardware industry, manufacturers' agents may be used to sell hardware to retailers, wholesalers, and distributors. These agents have a great deal of knowledge about the products they are selling and can help the manufacturer reach a larger market than they would be able to on their own.
know more about Manufacturers' agents
https://brainly.com/question/15052146
#SPJ11
What is the nominal annual rate of interest compounded semi-annually at which $776.00 will accumulate to $1263.07 in eight years and six months?
The nominal annual rate of interest compounded semi-annually at which $776.00 will accumulate to $1263.07 in eight years and six months is 6%.
A nominal annual rate of interest compounded semi-annually is used to determine the amount of interest that will accrue on a specific investment. To calculate this rate, one must determine how much money will accumulate over a certain period of time at a given interest rate.
This is done by using a formula that takes into account the principal amount, the rate of interest, and the length of the investment. In this case, the amount that is accumulated is $1263.07 over a period of eight years and six months. The principal amount is $776.00.
Therefore, we can use the formula: A = P(1 + r/n)^(nt), where A is the amount of money accumulated, P is the principal amount, r is the annual interest rate, n is the number of times the interest is compounded per year, and t is the number of years. Substituting the values that we have:1263.07 = 776(1 + r/2)^(2*8.5)
Taking logarithm of both sides;log 1263.07 = log 776 + 8.5 log(1 + r/2)log(1 + r/2) = (log 1263.07 - log 776) / 8.5= 0.05986646
Solving for r/2:r/2 = (e^0.05986646) - 1= 0.05986646Solving for r:r = 0.05986646 * 2= 0.11973292 = 11.97%
The nominal annual rate of interest compounded semi-annually at which $776.00 will accumulate to $1263.07 in eight years and six months is 11.97% or approximately 6% annually.
Know more about principal amount here,
https://brainly.com/question/30163719
#SPJ11
Brian, a self-employed individual, pays state income tax payments of: $ 900 on January 15, 2021 (4th estimated tax payment for 2020) $ 1,000 on April 16, 2021 (1st estimated tax payment in 2021) $ 1,000 on June 17, 2021 (2nd estimated tax payment in 2021) $ 1,000 on September 16, 2021 (3rd estimated tax payment in 2021) $ 800 on January 15, 2022 (4th estimated tax payment of 2021) Brian had a tax overpayment of $ 500 on his 2020 state income tax return and applied this to his 2021 state income taxes. What is the amount of Brian's state income tax itemized deduction for his 2021 Federal income tax return? 50. George is single and age 56, has AGI of $ 265,000, and incurs the following expenditures in 2020. Medical expenses Use the 2019 10% -of-AGI floor. $ 35,000 Interest on home mortgage 15,500 State income tax 7,500 State sales tax 4,500 Real estate tax 8,600 Charitable contribution 6,500 What is the amount of itemized deductions George may claim?
Brian's state income tax itemized deduction for his 2021 Federal income tax return is $4,700.
To calculate Brian's state income tax itemized deduction for his 2021 Federal income tax return, we need to consider the state income tax payments he made during the year.
Brian made the following state income tax payments in 2021:
$1,000 on April 16, 2021
$1,000 on June 17, 2021
$1,000 on September 16, 2021
In addition, Brian had a tax overpayment of $500 from his 2020 state income tax return, which he applied to his 2021 taxes.
Therefore, the total state income tax payments made by Brian in 2021 amount to $3,500 ($1,000 + $1,000 + $1,000 + $500).
This total amount of $3,500 is the itemized deduction Brian can claim for his state income tax on his 2021 Federal income tax return.
However, it's important to note that tax deductions can be affected by various factors such as alternative minimum tax (AMT) and the limitation on itemized deductions based on the taxpayer's adjusted gross income (AGI). Therefore, it's advisable for Brian to consult a tax professional or refer to the official IRS guidelines for accurate and up-to-date information regarding his specific tax situation.
Learn more about income tax here:
https://brainly.com/question/21595302
#SPJ11
Which of the following is the most costly form of foreign direct investment?
a. Offshoring
b. Franchising
c. Importing
d. Licensing
The most costly form of foreign direct investment is: a. Offshoring.
Offshoring involves establishing a physical presence in a foreign country, such as setting up manufacturing plants or offices. This requires significant upfront investment in infrastructure, equipment, hiring local workforce, and complying with foreign regulations. Additionally, offshoring often involves long-term commitments and ongoing operational costs. In contrast, other forms of foreign direct investment like franchising, importing, and licensing may involve lower upfront costs or reliance on existing infrastructure and partnerships. Therefore, offshoring is considered the most expensive and resource-intensive option for companies expanding their operations internationally.
Learn more about foreign direct investment here;
https://brainly.com/question/27540611
#SPJ11
The cash flows for three different alternatives are given and the needed rate-of-return is the same for all of them. You should find the best alternative by: a. Finding the future value b. Including method of depreciation in the analysis c. Finding the MARR of the project d. Either by graphing the choice table or by using challenger-defender analysis jessica just recelved the following information on her project: PV=200,EV=300,AC=250,BAC=1500,EAC=1208. In terms of cost at completion.
a. The project will currently finish under budget. b. The project will currently finish over budget. c.The project will currently finish on budget.
d. The project will currently finish behind schedule. e. There is insufficent information to draw conclusions. The earned value of a project is the: a. Project cost to date adjusted for project scope changes
b. Total project cost to date c. Cost incurred minus the planned cost d. Percent of the original budget that has been earned by actual work e. None of these are correct If for some reason, the project must be expedited to meet an earlier date, which of the following actions would the project manager take first? a. Check to see which activities cost the least b. Check to see which activities have the longest duration
c. Check to see which activities are on the critical path d. Check to see which activities have the most slack e. Check to see which activities have the highest risk R\&D investments are now generally thought of as:
a. Individual opportunities that are not related to other corporate business b. Only acceptable if a joint venture is involved c. Too risky for any company in an uncertain economy d. Portfolios of projects in low, medium, and high-risk ventures
To find the best alternative when the cash flows for three different alternatives are given, and the needed rate-of-return is the same for all of them is either by graphing the choice table or by using challenger-defender analysis. Thus, the correct option is d. Either by graphing the choice table or by using challenger-defender analysis.
Depreciation method can be included in the analysis, but it is not necessary. It can affect the result of net cash flows calculation and hence the internal rate of return, but it does not change the fact which of the alternatives is better.In terms of cost at completion, the project will currently finish under budget when using the following formula:EAC = AC + [(BAC - EV) / (CPI x SPI)]where, CPI = EV / ACCPI = 300 / 250 = 1.2SPI = EV / PVSPI = 300 / 200 = 1.5EAC = 250 + [(1500 - 300) / (1.2 x 1.5)] = 1208Thus, EAC is 1208, which is less than BAC of 1500. Therefore, the project will currently finish under budget. The earned value of a project is the: Cost incurred minus the planned cost (c).
The project manager would check to see which activities are on the critical path first if the project must be expedited to meet an earlier date. R&D investments are now generally thought of as portfolios of projects in low, medium, and high-risk ventures.
Read more about investments here:https://brainly.com/question/29547577
#SPJ11
Identification of Operating, Investing, and Financing Activities The following activities took place during the current year. Select whether each activity is a cash inflow (+) or cash outflow (-), and whether it is an operating activity (0), an investing activity (I), or a financing activity (F). a. Proceeds from collection of principal amount of loans made to borrowers _____ b. Cash receipts from the sale of goods _____ c. Payments for interest on loans _____ d. Payments of dividends to stockholders _____ e. Payments to acquire investments in debt securities _____ f. Dividends received on investments made in the stock of other corporations _____ g. Repayment of the principal on loans _____ h. Interest received on loans made to outside entities _____ i. Salaries paid to employees _____ j. Payments to acquire property, plant, and equipment and other productive assets _____ k. Payments to purchase treasury stock _____ I. Proceeds from the sale of common stock _____
a. Proceeds from collection of principal amount of loans made to borrowers Operating activity, Cash inflow
b. Cash receipts from the sale of goods Operating activity, Cash inflow
c. Payments for interest on loans Operating activity, Cash outflow
d. Payments of dividends to stockholders Financing activity, Cash outflow
e. Payments to acquire investments in debt securities Investing activity, Cash outflow
f. Dividends received on investments made in the stock of other corporations Investing activity, Cash inflow
g. Repayment of the principal on loans Financing activity, Cash outflow
h. Interest received on loans made to outside entities Operating activity, Cash inflow
i. Salaries paid to employees Operating activity, Cash outflow
j. Payments to acquire property, plant, and equipment and other productive assets Investing activity, Cash outflow
k. Payments to purchase treasury stock Financing activity, Cash outflow
I. Proceeds from the sale of common stock Financing activity, Cash inflow
The given activity can be classified into three categories:
1. Operating Activities: These are cash activities related to net income. It is the day-to-day activity of a business, such as buying and selling goods or providing services. Examples include cash receipts from selling goods or services and cash payments to employees.
2. Investing Activities: These are cash activities related to noncurrent assets. These activities involve buying and selling long-term assets such as land, buildings, and equipment. Examples include cash payments to buy new machinery or cash receipts from selling old machinery.
3. Financing Activities: These are cash activities related to noncurrent liabilities and owners' equity. They include obtaining cash from owners and creditors and repaying the amounts borrowed. Examples include borrowing money to purchase a new asset or repaying a loan.
To learn more on stockholders:
https://brainly.com/question/30397975
#SPJ11
On May 30, Cecil Company purchased merchandise on account from Ricci Company as follows - Sales Price: $40,000, Sales Terms: 2/10, n/30. The Journal Entries of Cecil Company will show which of the following for the May 30 Purchase?
On May 30, Cecil Company purchased merchandise on account from Ricci Company for $40,000 with sales terms of 2/10, n/30. The journal entries of Cecil Company will include the accounts payable for the purchase and a discount if the payment is made within the discount period.
When Cecil Company purchased merchandise on account from Ricci Company, the following journal entries will be recorded:
Purchase of Merchandise:
Debit: Merchandise Inventory - $40,000
Credit: Accounts Payable - $40,000
This entry reflects the increase in the inventory of Cecil Company and the corresponding increase in the accounts payable to Ricci Company.
Payment within the Discount Period:
If Cecil Company chooses to pay within the discount period, they will be entitled to a cash discount. The journal entry for this scenario would be:
Debit: Accounts Payable - $40,000
Debit: Cash Discount - (2% of $40,000)
Credit: Cash - (Remaining amount after deducting the discount)
This entry reflects the decrease in the accounts payable by the discounted amount and the decrease in cash due to the payment made.
If the payment is made after the discount period (n/30), there will be no additional journal entries related to the payment. The accounts payable will be settled by paying the full amount within 30 days.
Overall, the journal entries will include the initial purchase of merchandise and potentially a payment entry if the discount is taken.
Learn more about payment here:
https://brainly.com/question/32320091
#SPJ11
The current spot exchange rate is $1.95/€ and the three-month forward rate is $1.90/€. Based upon your economic forecast, you are pretty confident that the spot
exchange rate will be $1.88/€ in three months. Assume that you would like to buy or sell €100,000,000. What actions would you take to speculate in the forward
market and what is the expected dollar payoff from speculation?
Actions to take to speculate in the forward market .You will sell euros in the forward market because you expect the euro to depreciate against the dollar and the expected future spot rate is $1.88/€ in three months, you will make a profit of $2,000,000 by selling €100,000,000 in the forward market.
In this scenario, you want to speculate that the euro will depreciate against the US dollar in the next three months. This means that you want to buy dollars at the current exchange rate of $1.95/€ and then sell them at a higher exchange rate in three months to make a profit.
The actions to take to speculate in the forward market and the expected dollar payoff from speculation are as follows: Actions to take to speculate in the forward market .You will sell euros in the forward market because you expect the euro to depreciate against the dollar.
Since you want to sell €100,000,000, you will enter into a forward contract to sell €100,000,000 at the current forward rate of $1.90/€.
This means that in three months, you will sell €100,000,000 at $1.90/€, regardless of what the actual exchange rate is at that time.
Expected dollar payoff from speculationThe expected dollar payoff from speculation can be calculated as follows:
Payoff from speculation = Amount of euros sold × (Expected future spot rate − Forward rate)
Substituting the values:Amount of euros sold = €100,000,000
Forward rate = $1.90/€
Expected future spot rate = $1.88/€
Payoff from speculation = €100,000,000 × ($1.88/€ − $1.90/€)
Payoff from speculation = €100,000,000 × -$0.02/€
Payoff from speculation = -$2,000,000
This means that if the expected future spot rate is $1.88/€ in three months, you will make a profit of $2,000,000 by selling €100,000,000 in the forward market.
Know more about speculation here:
https://brainly.com/question/1527941
#SPJ8
