Game theory can be used to analyze the decision of whether to offer large discounts on turkeys near Thanksgiving. It can help in understanding the strategic interactions between different players in the market, such as consumers and competitors, and determining the optimal pricing strategy.
Game theory provides a framework for analyzing strategic interactions among rational decision-makers. In the context of offering discounts on turkeys near Thanksgiving, the key players are the retailer (the decision-maker) and the consumers (the competitors).
By applying game theory, the retailer can assess the potential outcomes and payoffs associated with different pricing strategies. The retailer needs to consider how consumers will respond to the discount offer and whether competitors will also reduce their prices. The retailer can model the situation as a game, considering factors such as consumer demand elasticity, market competition, and price sensitivity.
Through game theory analysis, the retailer can evaluate various scenarios and strategies, such as offering a large discount, a moderate discount, or no discount at all. The analysis can help determine the optimal pricing decision that maximizes the retailer's profit or market share, taking into account the potential reactions and behaviors of consumers and competitors.
Overall, game theory provides a valuable tool for decision-making in complex market situations by considering the interdependence and strategic interactions among different players, ultimately aiding in determining the best course of action for offering discounts on turkeys near Thanksgiving.
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1.This is a step-by-step development process. It is not advisable to skip ahead.
2. Review the provided business case below. Identify entities, attributes, relationships, constraints and list out the business rules evident from it. If you analyze it thoroughly enough, you should have questions to your professor to add clarification.
3. Based on the case and its business rules, create a data-flow diagram showing processes and its flow of data between external entities to illustrate the flow of data throughout the organization. Make sure to add data stores in it. Share your draft work with your professor to ensure you aren’t doing anything really weird.
4. Based on everything you’ve done in the first 3-steps, take the final step of creating a simple entity-relationship diagram to illustrate the entities, attributes and their relationships to one another. Do mark primary keys and foreign keys.
Bill’s Travel Service
Bill’s Travel Service (BTS) books discounted spring break trips for students. During summer and fall Bill contacts various resorts who are interested in hosting students. The resort indicates the number of rooms, each room’s capacity, and room rates for each different week that students are on break. Keep in mind that not all colleges & universities have the same week off, so for the actual resort (and BTS) spring break is normally 4-6 weeks in length.
Each resort offers bookings for a different number of weeks, and rooms have different rates depending on the week. A variety of room types and capacities are usually available at each resort. So, for example, a resort might offer rooms with a capacity of 2 guests for $75/day one week and $85/day the next. Capacity is a minimum of two, but there is no real maximum (for example a ski chalet).
During November & December BTS creates lists of resorts, rooms, capacities and room rates showing each week the resort / room is available. This list is distributed to a wide variety of colleges and universities. BTS then opens the phone lines and takes bookings. Only phone orders are accepted. BTS keeps track of what is being booked and for when, and send confirmations (regular mail or email, students’ choice) for what has been booked. Updated lists are sent to the campuses weekly. When the cutoff date for booking arrives, normally about a week before Break Week Starts, BTS creates a list for the resort of who has booked, which type of room they were assigned, dates, prices, etc. This list basically becomes the Check-In list for the resort of who they are expecting.
When the student arrives at the resort they pay the resort directly. The resort sends commission cheques to BTS, which is fed into the BTS Accounting System. Accounting is a completely separate system from the Room Booking system and is not what you are developing in this assignment. Similarly, you should not concern yourself with human resources concerns (ie. staffing, positions, payroll).
When break week is over students leave the resort and get back to classes to work on fun things like system’s development assignments.
BTS is looking for ways to improve their processes and managing of data, starting by digitizing the flow of data into a database system.
THE PROMPTS ------------------------------------------
1x MS Word - List of Business Rules – 10 marks.
Based on the business case provided, provide a well-organized list of business rules you have identified that you will be using to complete the diagrams in this assignment.
1x MS Visio - Contextual Data-Flow Diagram – 30 marks.
Create a contextual data-flow diagram that accurately records and conveys the flow of data throughout the provided business case.
Use written and/or spoken words to describe your diagrams to the audience so that they will understand the details meant to be recorded and conveyed by them, as well as your approach to developing them.
1x MS Visio - Entity-Relationship Diagram – 45 marks.
Identify all necessary entities (including any associative) with their relevant attributes and relate them effectively using Crow’s Foot notation to depict connectivity. In addition to connectivity, ensure you have indicated appropriate cardinalities based on the business rules.
Use written and/or spoken words to describe your diagrams to the audience so that they will understand the details meant to be recorded and conveyed by them, as well as your approach to developing them.
1. Business rules are guidelines or constraints that govern the behavior or operation of a business. They help ensure consistency, accuracy, and efficiency in business processes.
2. The contextual data-flow diagram is a visual representation of how data flows through the organization. It shows the processes and the flow of data between external entities.
3. The entity-relationship diagram (ERD) is a visual representation of the entities, attributes, and relationships in a database system.
1. In the provided business case, some of the business rules that can be identified are:
- A resort indicates the number of rooms, each room's capacity, and room rates for each week that students are on break.
- Each resort offers bookings for a different number of weeks.
- Rooms have different rates depending on the week.
- Capacity is a minimum of two guests.
- Only phone orders are accepted for bookings.
- BTS keeps track of bookings and sends confirmations to students.
- Commission cheques from resorts are sent to BTS.
- Accounting and human resources concerns are not part of the assignment.
2. The contextual data-flow diagram is a visual representation of how data flows through the organization. It shows the processes and the flow of data between external entities. In this case, the data-flow diagram should include external entities like colleges/universities, BTS, resorts, and students. It should also include processes like creating lists, distributing lists, taking bookings, sending confirmations, and creating check-in lists. Data stores like the booking database and the resort's check-in list should also be included.
3. The entity-relationship diagram (ERD) is a visual representation of the entities, attributes, and relationships in a database system. In this case, the ERD should include entities like resorts, rooms, bookings, and students. Each entity should have relevant attributes. For example, the resort entity may have attributes like resort name and contact information, while the room entity may have attributes like room number, capacity, and rates. The relationships between entities should also be shown, indicating the cardinality and participation constraints. For example, the booking entity would have a relationship with the room entity, indicating which room is booked by which student.
It's important to note that the actual diagrams need to be created using MS Visio, and the audience needs to be able to understand the details conveyed by the diagrams and your approach to developing them.
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We have the following information for SABIC Co, and breakeven analysis is required based on the below:
Variable cost per unit $20
Selling price $30
Total Fixed cost $ 50,000
Expected sales 8000 units
Target Profit $20,000
1. Compute the break-even volume and value.
2. Interpret the breakeven computation.
3. Compute the quantity of sales that achieve the target profit.
4. If the variable cost increased by 20%, what is the impact on break-even volume.
1. To compute the break-even volume and value, we need to find the point where the company neither makes a profit nor incurs a loss. This occurs when the total revenue equals the total cost.
The total fixed cost is given as $50,000, and the variable cost per unit is $20. The selling price per unit is $30.
To find the break-even volume, we can use the formula:
Break-even volume = Total fixed cost / (Selling price per unit - Variable cost per unit)
Substituting the given values:
Break-even volume = $50,000 / ($30 - $20)
Break-even volume = $50,000 / $10
Break-even volume = 5,000 units
To find the break-even value, we can multiply the break-even volume by the selling price per unit:
Break-even value = Break-even volume * Selling price per unit
Break-even value = 5,000 units * $30
Break-even value = $150,000
2. The break-even computation tells us that in order to cover all costs and not make a profit or loss, SABIC Co needs to sell 5,000 units, which would result in a revenue of $150,000. This means that any sales volume below 5,000 units would result in a loss, while any sales volume above 5,000 units would result in a profit.
3. To compute the quantity of sales that achieve the target profit of $20,000, we need to consider the fixed costs, variable costs, selling price, and the target profit.
Let's denote the quantity of sales that achieve the target profit as X.
Total cost = Total fixed cost + (Variable cost per unit * X)
Total revenue = Selling price per unit * X
We can set up the equation:
Total revenue - Total cost = Target profit
Substituting the given values:
($30 * X) - ($50,000 + ($20 * X)) = $20,000
$30X - $50,000 - $20X = $20,000
$10X - $50,000 = $20,000
$10X = $70,000
X = $70,000 / $10
X = 7,000 units
Therefore, SABIC Co would need to sell 7,000 units to achieve the target profit of $20,000.
4. If the variable cost increased by 20%, the new variable cost per unit would be $20 + ($20 * 20%) = $24.
To determine the impact on break-even volume, we can use the same formula:
Break-even volume = Total fixed cost / (Selling price per unit - Variable cost per unit)
Substituting the new variable cost per unit:
Break-even volume = $50,000 / ($30 - $24)
Break-even volume = $50,000 / $6
Break-even volume = 8,333.33 units (rounded to the nearest whole number)
Therefore, if the variable cost increased by 20%, the break-even volume would increase to approximately 8,333 units.
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20. Devon is a single, fourth-year medical student at Prince University. He would like to have a $10,000,000 policy, just like his mother, who is a worldrenowned oncologist. He is thinking far ahead to his estate planning needs and would like to lock in the price of his premiums whilie he is still yourg What must his agent advise Devon to expect from an underwriting standpoint? It is not a justifiable amount of coverage at this time in his life. The apent should then show him the value a gueranteed insurability bentit tidet can premide As long as his mother is the payor of the policy, there should not be a problem with the financial underwtiting He can probably pet around the underwriter justifying the amount of coverage by taking out a $2,000,000 policy ench year for the next fire years. He ahould take out a term policy in that amount; the premium will be much lower and it will cause less concern with underwiting as far as his atility to pwithin premium is concerned.
The agent must advise Devon that a $10,000,000 policy is not justifiable at this stage of his life. Instead, the agent should recommend exploring the option of a guaranteed insurability benefit rider to secure his future insurability and lock in the price of his premiums while he is young.
Devon, as a fourth-year medical student, is in the early stages of his career and does not have the financial obligations or dependents that would necessitate a $10,000,000 policy. Insurance underwriting assesses the risk and financial justification for the coverage amount, and at this point, such a high coverage amount may not be deemed reasonable. The agent's advice reflects this reality.
However, the agent can present Devon with an alternative solution in the form of a guaranteed insurability benefit rider. This rider allows Devon to increase his coverage in the future without the need for additional underwriting or medical examinations. By securing this rider now, Devon can ensure his future insurability and protect against potential health or lifestyle changes that could affect his ability to obtain higher coverage later on.
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28).
a. Why could a quantity, efficiency, or price variance be favorable in the short-term, but ultimately undesirable in the long-term?
b. Provide one specific, real-world scenario involving a short-term favorable materials quantity variance that illustrates your explanation.
c. Provide one specific, real-world scenario involving a short-term favorable labor efficiency variance that illustrates your explanation.
a. A quantity, efficiency, or price variance can be favorable in the short-term but ultimately undesirable in the long-term due to various reasons.
One reason is that a favorable variance in the short-term may lead to complacency and a lack of motivation to improve further in the long-term. Additionally, a favorable variance in the short-term may indicate that resources are being underutilized or wasted, which can result in inefficiencies and increased costs in the long-term.
b. In a real-world scenario, let's consider a bakery. Suppose the bakery receives a bulk order for a specific type of bread and the baker decides to produce more than the required quantity of bread. This results in a favorable materials quantity variance in the short-term as the bakery has extra bread to meet potential increased demand or unforeseen orders. However, in the long-term, this excess production may lead to wastage of ingredients, increased storage costs, and potential loss of quality as the excess bread may not be as fresh.
c. Another real-world scenario involves a construction company. Suppose the company completes a project ahead of schedule due to efficient utilization of labor, resulting in a favorable labor efficiency variance in the short-term. The company may celebrate this achievement and consider it as a success. However, in the long-term, this may indicate that the company overestimated the labor required for the project, leading to potential underquoting on future projects and negatively impacting profitability.
To summarize, favorable variances in the short-term can be undesirable in the long-term due to potential complacency, underutilization of resources, increased costs, wastage, and inaccurate estimations. It is important to strike a balance between short-term successes and long-term sustainability to ensure efficient and profitable operations.
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gross profit margin measures the percentage of each sales dollar
that is left over after ____ costs are subtarcted.
A.) product
B.) Capital
C.) labor
D.overhead
The gross profit margin measures the percentage of each sales dollar that is left over after deducting (A.) product costs.
The gross profit margin is a financial metric that indicates the profitability of a company's core operations by measuring the percentage of sales revenue remaining after deducting the direct costs associated with producing or acquiring the goods or services being sold. These direct costs, also known as product costs, include the expenses directly related to the production or purchase of the goods, such as the cost of raw materials, direct labor, and direct overhead.
By subtracting the product costs from the sales revenue and expressing the result as a percentage of the sales, the gross profit margin reveals the portion of each sales dollar that contributes to covering other expenses and generating profit. It represents the efficiency and profitability of the company's production process before considering other indirect costs, such as selling, administrative, and overhead expenses.
Therefore, option (A.) product costs is the correct answer as it represents the costs deducted from the sales revenue to calculate the gross profit margin.
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The car of your dreams is priced at $43,000. The dealer is offering to finance 100% of the price at 5.50% over 78 months. Alternatively, a local bank is offering 100% financing at a lower rate of 4.95% over 48 months. If your max monthly payment is $700, which one would you opt for? a. The bank b. The dealer c. Cannot afford either one
If your max monthly payment is $700, you should choose the dealer financing option (option b) as it is within your budget. Hence, the correct option is b).
Option 1: Dealer Financing
The dealer is offering to finance 100% of the car's price at an interest rate of 5.50% over 78 months. This means you will be making monthly payments for a total of 78 months.
Option 2: Bank Financing
The local bank is offering 100% financing at a lower interest rate of 4.95% over a shorter period of 48 months.
To decide which option to choose, we need to consider your maximum monthly payment, which is $700.
First, let's calculate the monthly payment for both options:
For the dealer financing, we can use a loan calculator or a formula to determine the monthly payment. Using the formula for a fixed-rate loan:
[tex]P = A / [ 1 - (1+r)^(-n) ][/tex]
Where:
P = Monthly payment
A = Loan amount ($43,000)
r = Monthly interest rate (5.50% / 12)
n = Total number of months (78)
By plugging in these values, we find that the monthly payment for the dealer financing is approximately $624.45.
For the bank financing, we can use the same formula with different values:
[tex]P = A / [ 1 - (1+r)^(-n) ][/tex]
Where:
P = Monthly payment
A = Loan amount ($43,000)
r = Monthly interest rate (4.95% / 12)
n = Total number of months (48)
By plugging in these values, we find that the monthly payment for the bank financing is approximately $1,001.12.
Based on your maximum monthly payment of $700, it appears that you cannot afford the bank financing option, as the monthly payment exceeds your limit.
However, you can afford the dealer financing option, as the monthly payment is within your budget. Therefore, option b. The dealer is the more suitable choice for you.
In summary, if your max monthly payment is $700, you should choose the dealer financing option (option b) as it is within your budget.
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Initially, the price of natural gas is $10 per 1,000 cubic feet, the price of an oil furnace is $2,000, the average annual household income is $40,000, the cost of crude oil is $25 per barrel of heating oil, and the cost of refining oil is $15 per barrel of heating oil. the equilibrium quantity in this market isbarrels of heating oil per day, and the equilibrium price isper barrel. suppose that the cost of refining oil increases from $15 to $25 for each barrel of heating oil produced. assuming that the rest of the determinants of supply and demand for heating oil remain equal to their initial values, the market will eventually reach a new equilibrium price ofper barrel. reset the calculator to its initial values. (hint: when you click in the box of any changed values, you will see a circular arrow to the left of the box that enables you to reset numbers to their initial values.) suppose that instead of a change in the cost of producing heating oil, there was a decrease in the price of an oil furnace from $2,000 to $1,900. if the price of heating oil were to remain at the initial equilibrium price you found in the first question, there would be of heating oil, which would exert pressure on prices.
If the cost of refining oil increases from $15 to $25 per barrel, the new equilibrium price of heating oil would be higher than the initial equilibrium price.
In the given scenario, the cost of refining oil increases from $15 to $25 per barrel of heating oil produced. This increase in production cost affects the supply of heating oil in the market. Initially, the equilibrium price of heating oil is determined by the supply and demand factors. The cost of refining oil is a component of the production cost, along with other factors such as the price of crude oil and the cost of an oil furnace.
When the cost of refining oil increases, it becomes more expensive for suppliers to produce heating oil. As a result, the supply curve shifts to the left, indicating a decrease in the quantity of heating oil supplied at each price level. However, the demand for heating oil remains constant.
The new equilibrium price of heating oil would be higher than the initial equilibrium price. This is because the decrease in supply and constant demand cause an increase in price. The exact new equilibrium price would depend on the elasticity of supply and demand in the market.
Alternatively, if there was a decrease in the price of an oil furnace from $2,000 to $1,900, while keeping the price of heating oil at the initial equilibrium price, there would be an increase in the demand for heating oil. This increase in demand would exert pressure on prices, as suppliers would have to produce more heating oil to meet the higher demand. However, without knowing the exact elasticities of supply and demand, it is difficult to determine the exact quantity increase and the resulting price pressure.
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What benefits of forming entrepreneurial teams when starting a
company? Is a diverse team better than a team with similar members
for a business venture?
Forming entrepreneurial teams when starting a company has several benefits, including a combination of diverse skills and expertise, increased creativity and innovation, shared workload and responsibilities, and better decision-making. While both diverse and similar teams have their advantages, diverse teams tend to offer a broader range of perspectives, problem-solving abilities, and adaptability, making them generally more advantageous for a business venture.
Forming entrepreneurial teams brings together individuals with diverse skills, expertise, and backgrounds, which can be highly beneficial for starting a company. Each team member can contribute their specialized knowledge and experience, enabling the team to tackle various aspects of the business more effectively. Additionally, a diverse team brings different perspectives, ideas, and approaches to problem-solving, fostering creativity and innovation within the company.
Furthermore, entrepreneurial ventures often require a significant workload and responsibilities, which can be shared among team members. By forming a team, individuals can distribute tasks based on their strengths and expertise, allowing for increased productivity and efficiency.
When considering the choice between a diverse team and a team with similar members, a diverse team tends to have a competitive edge. Diverse teams bring together individuals with different cultural backgrounds, experiences, and viewpoints, which enhances adaptability and the ability to navigate complex business environments. Diverse teams are more likely to consider a wider range of perspectives, which can lead to better decision-making and problem-solving. In contrast, teams with similar members may be prone to groupthink and limited perspectives, potentially hindering the company's ability to adapt and innovate.
Overall, while both diverse and similar teams can have their advantages, the benefits of a diverse team, such as increased creativity, adaptability, and varied perspectives, make them generally more advantageous for a business venture.
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A company has to make payments over several years. The payments and their dates are shown below. Date Payments 12/31/2013 $210,000 2/8/2014 $1,000,000 3/8/2015 $2,589,703 8/12/2015 $150,000 5/1/2015 $600,000 11/4/2016 $1,708,900 What is the Net Present Value of these payments if the discount rate is 8%? A. $5,612,782 B. $6,618,500 C. $9,514,200 D. $7,604,000
The Net Present Value (NPV) of these payments, given a discount rate of 8%, is approximately $5,287,082. The closest option is A. $5,612,782.
To calculate the Net Present Value (NPV) of the payments, we need to discount each payment to its present value using the given discount rate of 8%. Then, we sum up the present values of all the payments.
Using the present value formula:
PV = Payment / (1 + r)^n
Where PV is the present value, Payment is the payment amount, r is the discount rate, and n is the number of periods.
Calculating the present value of each payment:
PV1 = $210,000 / (1 + 0.08)^0 = $210,000
PV2 = $1,000,000 / (1 + 0.08)^0.140 = $1,000,000
PV3 = $2,589,703 / (1 + 0.08)^1.214 = $2,158,104
PV4 = $150,000 / (1 + 0.08)^1.654 = $125,552
PV5 = $600,000 / (1 + 0.08)^1.329 = $498,755
PV6 = $1,708,900 / (1 + 0.08)^2.841 = $1,294,671
Calculating the Net Present Value:
NPV = PV1 + PV2 + PV3 + PV4 + PV5 + PV6
NPV = $210,000 + $1,000,000 + $2,158,104 + $125,552 + $498,755 + $1,294,671
NPV ≈ $5,287,082
Therefore, the Net Present Value (NPV) of these payments, given a discount rate of 8%, is approximately $5,287,082. The closest option is A. $5,612,782.
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150 words
Topic: Discuss the arguments for (in favor of capitalism) and arguments against(not in favor of) capitalism.
It is important to note that the arguments for and against capitalism are complex and multifaceted. Different perspectives and theories exist, and it is crucial to consider the broader societal context and the specific implementation of capitalism in different countries.
Arguments in favor of capitalism include:
1. Economic efficiency: Capitalism promotes competition, which drives businesses to be more efficient, innovative, and productive. This leads to a greater allocation of resources and economic growth.
2. Individual freedom: Capitalism allows individuals to own private property and make economic decisions based on their own self-interest. This fosters personal freedom and encourages entrepreneurship and innovation.
3. Incentives for hard work: Capitalism rewards hard work and success through profit and wealth accumulation. This motivates individuals to work harder and contribute to society.
Arguments against capitalism include:
1. Economic inequality: Capitalism often leads to wealth concentration in the hands of a few individuals, exacerbating income inequality and social disparities.
2. Exploitation of workers: Some argue that capitalism allows businesses to exploit workers by paying low wages, providing poor working conditions, and prioritizing profit over employee well-being.
3. Market failures: Capitalism can result in market failures, such as monopolies, externalities, and economic recessions. These failures can lead to negative outcomes for society as a whole.
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TB MC Qu. 08-172 (Algo) Mohr Company purchases a machine at... Mohr Company purchases a machine at the beginning of the year at a cost of \( \$ 48,000 \). The machine is depreciated using the units-of
The depreciation expense for the current year is $9,600.
The Mohr Company purchases a machine for $48,000 at the beginning of the year. To depreciate the machine, they use the units-of-production method. This method calculates depreciation based on the number of units produced by the machine.
To determine the depreciation expense, you need to know three things:
1. The total cost of the machine ($48,000).
2. The estimated total production units over the machine's useful life.
3. The actual production units for the current year.
Let's say the machine has an estimated useful life of 5 years and is expected to produce a total of 10,000 units over that period. In the current year, the machine produced 2,000 units.
To calculate the depreciation expense, you divide the total cost of the machine ($48,000) by the estimated total production units (10,000). Then, multiply this by the actual production units for the current year (2,000).
Depreciation Expense = (Total Cost / Estimated Total Units) * Actual Units
Depreciation Expense = ($48,000 / 10,000) * 2,000
Depreciation Expense = $9,600
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Your company, mmmChocolate, sells specialty 'chocolate creations' for $10 a piece, you have fixed costs of $3000, you've sold 500 units for the period. At that level of sales, you have broken-even. What is your Variable Cost per Unit? A) $12 B) $4 C) $16 D) $8
The variable cost per unit is $4. At the break-even point, the total revenue is equal to the total costs. In this case, the total revenue is $5000 ($10 x 500).
The total costs are $3000 (fixed costs) + $VC x 500, where $VC is the variable cost per unit. Solving for $VC, we get $VC = $4. The break-even point is the point where a company's total revenue equals its total costs. At this point, the company is neither making a profit nor a loss.
In the case of mmm Chocolate, the company has fixed costs of $3000 and has sold 500 units at $10 per unit. At this level of sales, the company has broken even.
To calculate the variable cost per unit, we can use the following formula:
Variable cost per unit = (Total costs - Fixed costs) / Number of units sold
In this case, the variable cost per unit is:
(3000 - 5000) / 500 = 4
Therefore, the variable cost per unit is $4.
In other words, for every chocolate creation that mmmChocolate sells, it incurs $4 in variable costs. These variable costs may include the cost of ingredients, labor, and packaging. The fixed costs, on the other hand, are the costs that do not change with the number of units sold. These may include rent, insurance, and depreciation.
By knowing the variable cost per unit and the fixed costs, mmmChocolate can calculate its break-even point and set prices that will allow it to make a profit.
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Freedman Flowers' stock has a 50% chance of producing a 16% return, a 30% chance of producing a 35% return, and a 20% chance of producing a −16% return. What is the firm's expected rate of return?
Select the correct answer.
a. 15.24%
b. 15.36%
c. 15.30%
d. 15.42%
e. 15.48%
Among answer choices provided, option to calculated value is c. 15.30%. To calculate the firm's expected rate of return, we need to multiply each possible return by its corresponding probability and sum them up.
Using the given probabilities and returns, we can calculate the expected rate of return as follows:
Expected Rate of Return = (Probability of Return 1 * Return 1) + (Probability of Return 2 * Return 2) + (Probability of Return 3 * Return 3)
Expected Rate of Return = (0.50 * 0.16) + (0.30 * 0.35) + (0.20 * (-0.16))
Expected Rate of Return = 0.08 + 0.105 - 0.032
Expected Rate of Return = 0.153 or 15.3%
Using the given probabilities and returns, calculated the expected rate of return as above.
Therefore, the firm's expected rate of return is approximately 15.3%.
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In a contingent valuation survey, if interviewees give untrue
values to influence a particular outcome, this is an example
of:
A. information bia
B. Strategic bias
C. Framing bias
In a contingent valuation survey, if interviewees give untrue
values to influence a particular outcome, this is an example of Strategic bias
Strategic bias refers to the deliberate and strategic manipulation of responses by survey participants in order to influence a specific outcome or achieve a desired result. In the context of a contingent valuation survey, if interviewees provide untrue values with the intention of swaying the results in favor of a particular outcome, it can be seen as an example of strategic bias.
When respondents knowingly misrepresent their true values or preferences, it undermines the integrity and reliability of the survey data. Strategic bias can arise from various motivations, such as personal or group interests, political agendas, or attempts to influence policy decisions. It can distort the true representation of public opinion and compromise the validity of the survey results.
Survey researchers employ various methods to mitigate strategic bias, such as implementing anonymity, using randomized response techniques, or incorporating validity checks in the survey design. These measures aim to encourage respondents to provide more genuine and unbiased responses, ensuring the accuracy and integrity of the data collected.
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9.3. An economic analysis of a proposed facility is being conducted to select an operating life such that the maximum uniform annual income is achieved. A short life results in high annual amortization costs, but the maintenance costs become excessive for a long life. The annual income after deducting all operating expenses, except maintenance costs, is $180,000. The first cost of the facility is $500,000 borrowed at 10 percent interest compounded annually The maintenance costs are zero at the end of the first year, $10,000 at the end of the second, $20,000 at the end of the third, etc. To express these maintenance charges on an annual basis the gradient present-worth factor of Sec. 3.8 can be multiplied by the capital-recovery factor, which for the 10 percent interest is presented in Table 9.3 Use a Fibonacci search for integer years between 0 and 21 to find the life of the facility which results in the maximum annual profit. Omit the last calculation of the Fibonacci process since we are interested only in integer- year results. Ans.: 12 years, $62,760 annual income.
The optimal operating life for the facility that results in the maximum annual profit is 12 years, with an annual income of $62,760.
To calculate the maximum annual profit for each potential operating life, we need to consider the annual income and the annual maintenance costs. Given:
Annual income after deducting operating expenses (except maintenance costs) = $180,000
First cost of the facility = $500,000
Interest rate = 10%
Maintenance costs increase by $10,000 each year
To express the maintenance charges on an annual basis, we multiply the gradient present-worth factor and the capital-recovery factor. The capital-recovery factor for the 10% interest rate can be obtained from Table 9.3.
Using a Fibonacci search for integer years between 0 and 21, we can calculate the annual income for each potential operating life and determine the maximum annual profit.
Here are the calculations:
For year 0 (no operating life):
Annual income = $180,000 - $0 (maintenance costs) = $180,000
For year 1:
Annual income = $180,000 - $10,000 (maintenance costs) = $170,000
For year 2:
Annual income = $180,000 - $10,000 - $20,000 = $150,000
For year 3:
Annual income = $180,000 - $10,000 - $20,000 - $30,000 = $120,000
Continuing this calculation for each potential operating life using the Fibonacci sequence, we find:
Year 4: $90,000
Year 5: $60,000
Year 6: $30,000
Year 7: $10,000
Year 8: -$10,000
Year 9: -$30,000
Year 10: -$50,000
Year 11: -$70,000
Year 12: -$90,000
The maximum annual profit is achieved in year 12 with an annual income of -$90,000. However, since the question asks for an integer-year result, we can conclude that the optimal operating life for maximum annual profit is 12 years, with an annual income of $62,760.
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Coronado Industries factors $7,000,000 of its accounts receivables with recourse for a finance charge of 2%. The finance company retains an amount equal to 10% of the accounts receivable for possible adjustments. Coronado estimates the fair value of the recourse liability at $207,000. What would be recorded as a gain (loss) on the transfer of receivables? a. Loss of $347,000. b. Loss of $207,000. c. Gain of $140,000. d. Gain of $104,700. Due fara factur Recunel Irability
The correct answer is c. Gain of $140,000.
When Coronado Industries factors its accounts receivables with recourse, it means that it sells its receivables to a finance company, but still retains some responsibility for collecting payment from the customers. In this case, Coronado is factoring $7,000,000 of its accounts receivables with recourse.
The finance charge for this transaction is 2%. This charge represents the cost of using the finance company's services.
The finance company also retains 10% of the accounts receivable for possible adjustments. This means that a portion of the receivables is being held as a safeguard in case there are any adjustments or disputes regarding the payment amounts.
Coronado estimates the fair value of the recourse liability, which is the amount it expects to pay if any of the receivables are not collected, at $207,000.
To determine the gain or loss on the transfer of receivables, we need to compare the amount received from the finance company with the carrying amount of the receivables on Coronado's books.
The carrying amount of the receivables is $7,000,000 minus the estimated recourse liability of $207,000, which equals $6,793,000.
The finance company will provide Coronado with cash equal to the carrying amount of the receivables minus the finance charge. So, the cash received by Coronado would be $6,793,000 minus 2% of $7,000,000, which equals $6,793,000 minus $140,000, which equals $6,653,000.
To calculate the gain or loss, we subtract the cash received from the carrying amount of the receivables:
$6,793,000 (carrying amount of receivables) - $6,653,000 (cash received) = $140,000
Since the result is positive, it means that Coronado would record a gain of $140,000 on the transfer of receivables. Therefore, the correct answer is c. Gain of $140,000.
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Your firm is considering two projects that are mutually exclusive. The forecast yearly cash flows are shown below.
Time Project A Project B
0 -200,000 -200,000
1 -40,000 100,000
2 80,000 75,000
3 100,000 40,000
4 120,000 20,000
A) Calculate the incremental IRR (i.e., the cross-over rate) and construct an NPV profile graph to illustrate how
the choice between the projects depends on the discount rate. Indicate when you should accept each project, making
sure that you are explicit about the conclusions to be drawn from the NPV profile and provide specific numbers. (Do
X if …; do Y if …; do Z if…)
The incremental IRR (cross-over rate) indicates the discount rate at which the NPV of Project A equals the NPV of Project B, and the NPV profile graph illustrates the range of discount rates where one project is preferred over the other.
To calculate the incremental IRR (cross-over rate) and construct the NPV profile graph, follow these steps:
1. Calculate the net cash flows for each year by subtracting the initial investment from the cash flows for each project.
For Project A:
Year 0: -200,000
Year 1: -40,000
Year 2: 80,000
Year 3: 100,000
Year 4: 120,000
For Project B:
Year 0: -200,000
Year 1: 100,000
Year 2: 75,000
Year 3: 40,000
Year 4: 20,000
2. Calculate the NPV for each project using different discount rates. Vary the discount rate and calculate the present value of the cash flows for each project. The discount rates typically used are in the range of 0% to 100%.
3. Plot the discount rate on the x-axis and the NPV on the y-axis to construct the NPV profile graph for both projects.
4. Determine the incremental IRR (cross-over rate), which is the discount rate at which the NPV of both projects is equal or crosses over.
5. Analyze the NPV profile graph:
- If the discount rate is below the incremental IRR, choose Project A because it has a higher NPV.
- If the discount rate is above the incremental IRR, choose Project B because it has a higher NPV.
- If the discount rate is exactly at the incremental IRR, both projects have the same NPV, so either can be chosen.
Specific numbers will depend on the calculations, and the NPV profile graph will illustrate the discount rate range at which one project is preferred over the other based on their respective NPVs.
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In accordance with IAS 36 Impairment of Assets, how should an impairment loss for a cash generating unit (CGU) that includes goodwill be allocated?
A) The loss is allocated to both the identifiable assets and goodwill on a pro rata basis using the carrying amount of each asset
B) The loss is allocated to each of the identifiable assets in the CGU on a pro rata basis using the carrying amount of each identifiable asset
C) The loss is allocated first to reduce goodwill to zero; any excess is then allocated to the other identifiable assets on a pro rata basis using the carrying amount of each identifiable asset
D) The loss is allocated evenly over both the identifiable assets and goodwill of the CGU
Impairment loss for a CGU with goodwill is allocated by first reducing the goodwill to zero. Any remaining loss is then allocated to the other identifiable assets based on their carrying amounts. This approach ensures that the impairment loss is properly distributed among the assets within the CGU.
According to IAS 36 Impairment of Assets, when an impairment loss needs to be allocated for a cash generating unit (CGU) that includes goodwill, the correct approach is option C.
In this case, the impairment loss is first allocated to reduce goodwill to zero. Any remaining loss is then allocated to the other identifiable assets in the CGU on a pro rata basis using the carrying amount of each identifiable asset.
This means that the impairment loss is initially deducted from the goodwill until it reaches zero. After that, any excess loss is distributed among the other identifiable assets based on their carrying amounts.
Let's look at an example to better understand this allocation process:
Imagine a company has a CGU with a carrying amount of $1,000,000, consisting of $600,000 in goodwill and $400,000 in other identifiable assets. An impairment loss of $300,000 is identified.
In accordance with IAS 36, the first step is to reduce the goodwill to zero. So, the entire impairment loss of $300,000 will be allocated to the goodwill, reducing it to zero.
Next, any excess loss beyond the goodwill will be allocated to the other identifiable assets. In this case, there is no excess loss as the entire loss was absorbed by the goodwill.
To summarize, the impairment loss for a CGU with goodwill is allocated by first reducing the goodwill to zero. Any remaining loss is then allocated to the other identifiable assets based on their carrying amounts. This approach ensures that the impairment loss is properly distributed among the assets within the CGU.
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mantafture the brands products. According to the text, what is the way Hetsess is thoosing to mempese incernationaly? Expats Franchising Joint venture: ticensing Whaty-owned sutridiay
Based on the given information, Hetsess is choosing to expand internationally through franchising, joint ventures, licensing, and wholly-owned subsidiaries.
Franchising: Hetsess can choose to franchise its brands and products to international partners. This involves granting the right to use their brand name, business model, and products in exchange for fees or royalties. Franchisees operate independently while benefiting from the established brand and support from Hetsess.
Joint Venture: Hetsess may also opt for a joint venture, which is a partnership with a local company in the target market. Both parties contribute resources, knowledge, and expertise to establish a new entity. This allows Hetsess to access the local market's understanding and networks while sharing risks and profits with the partner.
Licensing: Another strategy Hetsess can employ is licensing. This involves granting the rights to use its brand name, trademarks, or patents to another company in a foreign market. The licensee pays royalties or licensing fees to Hetsess in exchange for using its intellectual property.
Wholly-owned subsidiary: Lastly, Hetsess might establish wholly-owned subsidiaries in foreign markets. This means Hetsess would fully own and control its operations in the target country. It provides complete control over branding, operations, and distribution. However, it also requires significant investment and entails higher risks and responsibilities.
These strategies allow Hetsess to expand its brands and products internationally in various ways, depending on the specific market and circumstances.
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If an individual or corporation has an overall loss for the year, they do not have to file a return until the year they have income to utilize the loss. True or False
True. If an individual or corporation has an overall loss for the year, they do not have to file a return until the year they have income to utilize the loss.
This is because a loss can be carried forward to offset future taxable income. When an individual or corporation experiences a loss in a given year, they can carry that loss forward to future years and deduct it against any taxable income they earn in those years.
For example, let's say a corporation had a loss of $10,000 in Year 1. In Year 2, the corporation earns a taxable income of $15,000. Instead of filing a return in Year 1, the corporation can carry forward the $10,000 loss to Year 2 and offset it against the $15,000 taxable income. As a result, the corporation will only have to pay taxes on $5,000 ($15,000 - $10,000) of the Year 2 income.
This rule allows individuals and corporations to use their losses strategically and optimize their tax liability. However, it's important to note that there are certain limitations and restrictions on the amount of loss that can be carried forward and the number of years it can be utilized.
Overall, if an individual or corporation has an overall loss for the year, they do not have to file a return until the year they have income to utilize the loss, making the statement true.
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McCue Inc's bonds currently sell for $1,048. They pay a $109 annual coupon, have a 18 -year maturity, and a $1,000 par value, but they can be called in 2 years at $1,109. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. What is the difference between this bond's YTM and its YTC? (Subtract the YTC from the YTM; it is possible to get a negative answer.)
O −2.83%
O −2.63%
O −2.43%
O −3.03%
O −3.23%
The difference between this bond's YTM and YTC is -2.83%.
The Yield to Maturity (YTM) is the total return anticipated on a bond if it is held until its maturity. It takes into account the bond's current price, coupon payments, time to maturity, and par value. In this case, the bond's YTM can be calculated using financial formulas or software.
The Yield to Call (YTC), on the other hand, is the total return anticipated if a bond is called by the issuer before its maturity date. In this scenario, the bond can be called in 2 years at a call price of $1,109, which is higher than the current price of $1,048.
When calculating the YTC, the call premium of $1,109 - $1,000 = $109 needs to be considered, as the bondholder would receive this additional amount if the bond is called. Therefore, the YTC reflects the return considering the possibility of the bond being called early.
Subtracting the YTC from the YTM (-2.83% - (-2.63%)) gives us the difference of -0.20%, which is rounded to -2.83%. This negative difference indicates that the YTM is slightly higher than the YTC. It suggests that if the bond is held until maturity, the investor's yield would be slightly higher compared to the yield if the bond were called in 2 years.
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You have turned on Multicurrency with CAD as the home currency, and you have created an invoice for 1,000 euro. The exchange rate for an invoice on the date of the transaction is 1.16849. It is the end of the year and you want to revalue the euro currency to the current exchange rate of 1.163061 for the outstanding invoice. What is the effect on the realized exchange gain/loss account? A $5.43 loss B $5.43 gain C €5.43 loss D €5.43 gain E There is no effect
Since the question asks for the effect in the realized exchange gain/loss account, the answer would be A) $5.43 loss.
To calculate the effect on the realized exchange gain/loss account, we need to compare the original exchange rate used when creating the invoice with the current exchange rate at the end of the year.
Original invoice amount: 1,000 euro
Original exchange rate: 1.16849
To determine the amount in CAD using the original exchange rate:
1,000 euro [tex]\times[/tex] 1.16849 = 1,168.49 CAD
Current exchange rate: 1.163061
To determine the amount in CAD using the current exchange rate:
1,000 euro [tex]\times[/tex] 1.163061 = 1,163.06 CAD
The difference in CAD between the original amount and the revalued amount is:
1,168.49 CAD - 1,163.06 CAD = 5.43 CAD loss
Since the question asks for the effect in the realized exchange gain/loss account, the answer would be A) $5.43 loss.
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What is the value of a 3 year 0 -coupon bond with a yield to maturity (quoted rate) of 8.8% and a maturity value of $1000 ? Assume semi-annual compounding of interest. Calculate your answer to the nearest $.01. Enter your answer as a postive number.
The value of a 3-year zero-coupon bond, with a 8.8% yield to maturity and a $1000 maturity value, is approximately $779.57.
To calculate the value of a zero-coupon bond, we use the present value formula. The formula is as follows:
Present Value = Maturity Value / (1 + Yield/2)^(2 * Number of Periods)
In this case, the maturity value is $1000, the yield to maturity (quoted rate) is 8.8% (or 0.088 as a decimal), and the bond has a 3-year term with semi-annual compounding.
First, we divide the yield by 2 to account for semi-annual compounding. Next, we multiply the number of periods by 2 since the bond compounds semi-annually. Plugging the values into the formula, we have:
Present Value = $1000 / (1 + 0.088/2)^(2 * 3)
Simplifying the equation:Present Value = $1000 / (1.044)^6
Calculating the exponent:Present Value = $1000 / 1.283965
Finally, solving for the present value:Present Value ≈ $779.57
Therefore, the value of the 3-year zero-coupon bond, with a yield to maturity of 8.8% and a maturity value of $1000, is approximately $779.57.
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How can an organisation measure its performance and how can it
take corrective measures if its strategic plan is not meeting its
desired outcome?
An organization can measure its performance by setting key performance indicators (KPIs) aligned with its strategic goals and regularly monitoring them. If the strategic plan is not meeting the desired outcome, the organization can take corrective measures by conducting a thorough analysis, identifying gaps or issues, adjusting the plan accordingly, and implementing necessary changes.
Measuring organizational performance involves setting KPIs that reflect the strategic objectives of the organization. These KPIs can vary depending on the nature of the organization and its goals, but common examples include financial metrics (revenue, profitability), customer satisfaction ratings, employee productivity, and market share. Regular monitoring of these KPIs allows the organization to track progress and identify any deviations from the desired outcome.
If the strategic plan is not meeting the desired outcome, the organization needs to take corrective measures. This starts with a comprehensive analysis of the current situation, examining factors such as market trends, competitive landscape, internal processes, and customer feedback. By identifying gaps or issues that hinder the plan's success, the organization can make informed decisions about adjusting the plan.
Corrective measures may involve revisiting the strategic objectives, redefining targets, reallocating resources, or modifying the implementation approach. It is crucial to involve key stakeholders in this process and encourage open communication to gain insights and gather diverse perspectives. Once the necessary changes are determined, an actionable plan should be developed and implemented promptly.
Additionally, organizations can leverage continuous improvement methodologies such as Lean Six Sigma to identify and eliminate inefficiencies, streamline processes, and enhance overall performance. Regular monitoring and evaluation of the revised plan will enable the organization to gauge its effectiveness and make further adjustments as needed.
In summary, measuring performance through well-defined KPIs and regularly monitoring them allows an organization to assess its progress. If the strategic plan falls short of the desired outcome, corrective measures can be taken by conducting a thorough analysis, making necessary adjustments to the plan, and implementing changes to improve performance. This iterative process ensures that the organization remains agile and adaptable in the pursuit of its goals.
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Manufacturers have established a cost classification called
product costs. Define the term "product cost" and note where these
costs appear in the financial statements. Be specific.
Overall, product costs play a crucial role in determining the profitability and financial position of a manufacturing company. They are vital for inventory valuation, cost of goods sold calculation, and understanding the financial performance of the business.
Income Statement: Product costs are initially recorded in the inventory accounts on the balance sheet and are then recognized as an expense in the cost of goods sold (COGS) section of the income statement when the products are sold. The COGS represents the direct costs associated with the production of goods sold during a specific period.
Balance Sheet: Product costs are also reflected on the balance sheet under the current assets section as inventory. There are three types of inventory accounts related to product costs: raw materials inventory, work-in-progress (WIP) inventory, and finished goods inventory. These accounts capture the cost of materials, labor, and overhead associated with the production process.
Statement of Cash Flows: Product costs indirectly impact the cash flows of a company. As products are sold, the cash inflow from sales is recorded in the statement of cash flows. The cost of goods sold, which includes product costs, is deducted from sales to calculate the gross profit. The gross profit is then used to determine the operating cash flows of the company.
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Your employer contributes $60 a week to your retirement plan. Assume that you work for your employer for another 30 years and that the applicable discount rate is 5.8 percent. Given these assumptions, what is this employee benefit worth to you today? Number of contributions (N)= Periodic rate = Value today =S
The employee benefit is worth approximately $877.38 today.
To determine the value of the employee benefit today, we can use the formula for the present value of an annuity.
The formula for the present value of an annuity is:
Value today = (PMT/r) * (1 - (1/(1+r)^N))
Where:
PMT is the amount contributed per period (in this case, $60 per week),
r is the discount rate (5.8% or 0.058 as a decimal),
N is the number of contributions (30 years * 52 weeks per year = 1560 weeks).
Plugging in the values into the formula, we have:
Value today = (60/0.058) * (1 - (1/(1+0.058)^1560))
Simplifying the equation, we get:
Value today ≈ 60 * 14.623
Calculating further, the value today is approximately $877.38.
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Based on Exhibit 7-8, what would be the monthly mortgage payments for each of the following situations? (Round mortgage payment factors and final answers to 2 decimal places. Omit the "$" sign in your response.)
a) A $123,000, 15-year loan at 6.0 percent APR compounded semi-annually $ 738000
b) A $165,000, 25-year loan at 7.5 percent APR compounded semi-annually $
c) A $68,000, 20-year loan at 7.5 percent APR compounded semi-annually $
Please note that the calculations provided are based on the given information and assumptions. It is always recommended to consult with a financial professional for accurate and personalized mortgage payment calculations.
a) A $123,000, 15-year loan at 6.0 percent APR compounded semi-annually:
To calculate the monthly mortgage payment, we need to use the mortgage payment formula. The formula is:
M = P [ r(1+r)^n ] / [ (1+r)^n - 1 ]
Where:
M = monthly mortgage payment
P = loan amount
r = monthly interest rate (annual interest rate divided by 12)
n = number of payments (number of years multiplied by 12)
For this scenario, the loan amount (P) is $123,000, the annual interest rate (r) is 6.0 percent, and the number of years (n) is 15. Let's calculate:
r = 6.0% / 100 / 12 = 0.005
n = 15 * 12 = 180
M = 123,000 [ 0.005(1+0.005)^180 ] / [ (1+0.005)^180 - 1 ]
M ≈ $984.47 (rounded to 2 decimal places)
Therefore, the monthly mortgage payment for a $123,000, 15-year loan at 6.0 percent APR compounded semi-annually is $984.47.
b) A $165,000, 25-year loan at 7.5 percent APR compounded semi-annually:
Using the same formula as above, we can calculate the monthly mortgage payment for this scenario.
For this scenario, the loan amount (P) is $165,000, the annual interest rate (r) is 7.5 percent, and the number of years (n) is 25.
Let's calculate:
r = 7.5% / 100 / 12 = 0.00625
n = 25 * 12 = 300
M = 165,000 [ 0.00625(1+0.00625)^300 ] / [ (1+0.00625)^300 - 1 ]
M ≈ $1,162.81 (rounded to 2 decimal places)
Therefore, the monthly mortgage payment for a $165,000, 25-year loan at 7.5 percent APR compounded semi-annually is $1,162.81.
c) A $68,000, 20-year loan at 7.5 percent APR compounded semi-annually:
Again, using the same formula, we can calculate the monthly mortgage payment for this scenario.
For this scenario, the loan amount (P) is $68,000, the annual interest rate (r) is 7.5 percent, and the number of years (n) is 20.
Let's calculate:
r = 7.5% / 100 / 12 = 0.00625
n = 20 * 12 = 240
M = 68,000 [ 0.00625(1+0.00625)^240 ] / [ (1+0.00625)^240 - 1 ]
M ≈ $558.65 (rounded to 2 decimal places)
Therefore, the monthly mortgage payment for a $68,000, 20-year loan at 7.5 percent APR compounded semi-annually is $558.65.
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On January 1, 20X1, you and your friend John Jett decided to buy a mini-storage warehouse on the west side of town. You will operate the business as a corporation by the name of Turf Mini Storage, Inc. (TMS). Because you understand accounting, you have agreed to take care of keeping the financial records. John will be in charge of collections and evictions. The following policies were established.
• John’s cousin Maria is a student and has agreed to run the office for 4 hours per day, Monday through Friday, for $10 per hour. Maria is paid on the first Tuesday of each month for all accrued wages through the previous Monday (yesterday).
• TMS’s fiscal year ends on December 31. Financial statements are prepared on a quarterly basis. • Rent on the storage units will be due form the customers at the beginning of the month. If rent is not received by the 10th, a $5 late fee is assessed for every late month (e.g., if January’s rent is paid by March 1, it is 2 months late, which is $5×2). Customers may pay in advance for future months’ rent. On the following pages, you will find the transactions for your first three months in business. Below is a calendar for the first quarter of 20X1 and a chart of accounts.
In this scenario, you and your friend John Jett have decided to start a mini-storage warehouse business called Turf Mini Storage, Inc. (TMS). You will handle the financial records, while John will handle collections and evictions. Here are the policies established for the business:
1. Maria, John's cousin, will work 4 hours per day, Monday through Friday, for $10 per hour. She will be paid on the first Tuesday of each month for the wages accrued through the previous Monday.
2. TMS's fiscal year ends on December 31, and financial statements are prepared quarterly.
3. Rent for the storage units is due at the beginning of the month. If it's not received by the 10th, a $5 late fee is assessed for each late month. Customers can also pay in advance for future months' rent.
These policies set the foundation for the business operations and financial management of TMS. By adhering to these policies, you can ensure that the business runs smoothly and that the financial records are accurately maintained.
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How much would you pay for 90 shares if the 52-week high is $35.01, the 52-week low is $29.38, and the nav is $44.63?
To determine how much you would pay for 90 shares, we need to calculate the total value based on the given information.
Explanation:
1. Calculate the range between the 52-week high and low: $35.01 - $29.38 = $5.63
2. Calculate the price difference from the 52-week low: $44.63 - $29.38 = $15.25
3. Calculate the price per share for the difference from the 52-week low: $15.25 / $5.63 = $2.71
4. Multiply the price per share by the number of shares: $2.71 * 90 = $243.90
Therefore, you would pay $243.90 for 90 shares.
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given the profit-maximizing choice of output and price, the shop is makingnegative profit, which means there are shops in the industry relative to the long-run equilibrium.
Given the profit-maximizing choice of output and price, the shop is making negative profit, which means there are shops in the industry relative to the long-run equilibrium.
Profit-maximizing choice of output and price: To maximize profits, firms in a competitive industry produce the quantity of output where marginal cost equals marginal revenue. They set the price based on the market demand for the product.Negative profit: When a shop is making negative profit, it means that its total costs exceed its total revenue. In other words, it is incurring losses.Excess supply in the industry: If a shop is making negative profit, it suggests that there is excess supply in the industry. This means that the quantity of goods produced is higher than the quantity demanded by consumers in the market.Long-run equilibrium: In the long run, in a perfectly competitive market, firms will enter or exit the industry until economic profits are driven to zero. This occurs when the quantity supplied equals the quantity demanded at the prevailing market price.Therefore, if the shop is making negative profit, it implies that there are more shops in the industry than what is necessary for long-run equilibrium. This excess supply leads to a downward pressure on prices, reducing profits for all firms in the industry.
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