Fowler is expected to pay a dividend of $1.51 one year from today and $1.66 two years from today. The company has a dividend payout ratio of 40 percent. The PE ratio is 17.45 times. The required return on the company's stock is 10.4 percent. the current stock price of Fowler is $28.38.
To find: the current stock price
Solution:
Step 1: Calculate the Dividend paid after one year
D₁ = $1.51
Step 2: Calculate Dividend paid after two years
D₂ = $1.66
Step 3: Calculate the Dividend payout ratio Dividend payout ratio = 40% or 0.4
Step 4: Calculate the Retention Ratio
Retention Ratio (RR) = 1 - Dividend payout ratio RR = 1 - 0.4 = 0.6Step 5: Calculate Earnings per share (EPS)Earnings per share = Dividend payout ratio / Retention Ratio EPS = 0.4 / 0.6EPS = 0.6667Step 6: Calculate Price Earnings Ratio PE ratio = 17.45 times
EPS = $1PE ratio = Stock Price / EPS17.45
= Stock Price / 0.6667
Stock Price = 17.45 × 0.6667
Stock Price = $11.63
Therefore, the current stock price of Fowler is $28.38.
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.If a firm has no excess capacity, which of the following is a sensible bidding strategy?
set a price to cover only the variable costs
set a price to cover only the fixed costs
set a price to minimize tax liability
set a price to cover variable costs (at a minimum) including opportunity cost
If a firm has no excess capacity, a sensible bidding strategy would be to set a price to cover variable costs (at a minimum), including opportunity cost.
When a firm has no excess capacity, it means that all of its resources are fully utilized. In such a scenario, the firm's objective should be to at least cover its variable costs to avoid incurring losses. Variable costs are costs that vary directly with the level of production or sales, such as direct materials and direct labor. By setting a price that covers variable costs, the firm ensures that it is covering the direct costs associated with producing and delivering the product or service.
In addition to variable costs, including opportunity cost in the pricing strategy is important. Opportunity cost refers to the value of the next best alternative foregone when a decision is made. By considering opportunity cost, the firm takes into account the potential revenue it could have earned by allocating its resources to alternative uses. Setting a price to cover variable costs, including opportunity cost, ensures that the firm is not only covering its immediate expenses but also accounting for the potential value lost by utilizing its resources in a particular project.
Setting a price to cover only fixed costs or minimizing tax liability may not be a sensible bidding strategy in this scenario, as it does not take into account the variable costs and opportunity cost associated with the project.
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Statement for both assignment One and Two Kwazulu-Natal, a coastal South African province, is known for its beaches, mountains and savannah populated by big game. The safari destination Hluhluwe-iMfolozi Park, in the northeast, is home to black and white rhinos, lions and giraffes. Durban is an Indian-influenced harbor city and a popular surfing spot. Cultural villages around the town of Eshowe showcase the traditions of the indigenous Zulu people. Having mentioned the few you are also aware f the current political unrest that need to be taken into consideration. Assignment One Select a Namibian company with a specific product of your choice that is entering the South African market Kwazulu-Natal in Pietermaritzburg. As a marketing strategist you are required to critically analyze the general environmental factors how they may influence or help your product to penetrate the said target market.
As a marketing strategist analyzing the general environmental factors that may influence the penetration of a Namibian company's product in the Kwazulu-Natal market, the following factors need to be considered:
Economic Factors: Assess the economic conditions of Kwazulu-Natal, including factors such as GDP growth, income levels, and consumer spending patterns. These factors will determine the purchasing power and affordability of the target market for the product.
Socio-Cultural Factors: Consider the socio-cultural aspects of the Kwazulu-Natal region, including cultural preferences, lifestyle choices, and consumer behavior. Understanding the local culture and values will help tailor the marketing strategies to resonate with the target audience.
Political and Legal Factors: Take into account the political stability and legal framework in Kwazulu-Natal. The current political unrest should be carefully considered to understand its potential impact on business operations, regulations, and market stability.
Technological Factors: Evaluate the level of technological infrastructure and digital adoption in Kwazulu-Natal. This will influence the product's marketing and distribution channels, as well as opportunities for innovation and technological advancements.
Environmental Factors: Consider the environmental factors specific to Kwazulu-Natal, such as climate, natural resources, and environmental regulations. These factors may impact the product's suitability, sustainability, and compliance with local environmental standards.
Competitive Factors: Analyze the competitive landscape in the target market. Identify existing competitors, their market share, pricing strategies, and product differentiation. This analysis will help determine how the product can differentiate itself and gain a competitive advantage.
Market Entry Barriers: Identify any specific market entry barriers, such as trade restrictions, tariffs, or legal requirements for foreign companies entering the South African market. Understanding these barriers will inform the market entry strategy and potential challenges to be overcome.
By critically analyzing these general environmental factors, the marketing strategist can gain insights into how the Namibian company's product can effectively penetrate the Kwazulu-Natal market in Pietermaritzburg. The analysis will help identify opportunities, assess risks, and develop tailored marketing strategies that align with the local market dynamics and consumer preferences.
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nareh began the year with a tax basis of $20,000 in her partnership interest. her share of partnership liabilities consists of $10,000 of recourse liabilities and $13,000 of nonrecourse liabilities at the beginning of the year and $10,000 of recourse liabilities and $15,000 of nonrecourse liabilities at the end of the year. during the year, she was allocated $37,000 of partnership ordinary business loss. nareh does not materially participate in this partnership, and she has $2,000 of passive income from other sources. a. How much of Jenna's loss is limited by her tax basis? Loss limited by her tax basis b. How much of Jenna's loss is limited by her at-risk amount? Loss limited by her at-risk amount C. How much of Jenna's loss is limited by the passive activity loss rules? Loss limited by the passive activity loss rules
Passive income from other sources is given below.
a. Loss limited by Jenna's tax basis:
Jenna started the year with a tax basis of $20,000.
She did not contribute any new money during the year.
As a result, the starting tax basis of $20,000 will be reduced by her share of the partnership's loss, which is $37,000.
Jenna's loss is limited to her tax basis, which is $20,000, therefore, $17,000 of the loss is limited by Jenna's tax basis.
b. Loss limited by Jenna's at-risk amount:
Jenna had $10,000 in recourse liabilities and $13,000 in non recourse liabilities at the start of the year.
She contributed no new money to the partnership throughout the year, so her beginning balance of $23,000 in at-risk liabilities will be decreased by the allocated share of losses, which is $37,000.
Jenna's total at-risk amount is limited to $23,000; as a result, her loss is restricted by her at-risk amount, which is $23,000, and the $14,000 excess loss over her at-risk amount is carried forward to the following year.
c. Loss limited by the passive activity loss rules:
Jenna's passive income from other sources is $2,000.
Her share of the partnership's loss is $37,000.
Jenna can use up to $2,000 of the loss to offset her passive income since she has a $2,000 passive income, but the remaining $35,000 of her loss is restricted.
Jenna may carry forward any excess loss that is not allowed this year under the passive activity loss rules.
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Fermoy Ltd, an ASX listed entity, intends to make a public issue of $50m of debentures. Required: Explain the meaning of the term ‘debentures’, and the legal disclosure requirements that apply to the proposed fundraising.
Australian law
Debentures are an investment instrument that enables investors to lend money to a corporation in exchange for a fixed rate of interest.
This allows investors to receive a regular return on their investment in return for providing a corporation with a loan of capital. The term "debenture" is often used interchangeably with "bond" in the United States. It is important to note that debentures are not secured by assets, and investors are reliant on the issuer's creditworthiness to receive their interest payments and repayments of principal.
The disclosure requirements that apply to Fermoy Ltd's proposed fundraising are determined by Australian law.A prospectus must be prepared and distributed to potential investors in accordance with the Corporations Act 2001 (Cth) if the debenture issue is marketed to the public. This prospectus must include the following information:The risks associated with the investment in debentures, The expected yield, The potential tax implications, Any fees that may be deducted from the investment, Any terms and conditions that apply to the debentures, Information about the issuer's financial situation, including its financial statements.
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The manufacture of paint requires the production of the base, mixing of suitable colors, and packing. Until the 1980s, all these processes were performed in large factories, and paint cans were shipped to stores. Given the uncertainty of demand, though, the paint supply chain had great difficulty matching supply and demand. In the 1990s, paint supply chains were restructured so mixing of colors was done at retail stores after customers placed their orders. The result is that customers are always able to get the color of their choice, whereas total paint inventories across the supply chain have declined. The paint industry provides an excellent example of (Select all correct answers) the value of postponement. the gains from suitably adjusting the push/pull boundary. the cycle view of supply chain processes. the benefits of risk pooling,
The paint industry provides an excellent example of the gains from suitably adjusting the push/pull boundary. and the value of postponement. The supply chain for paint production involves the production of the base, mixing of suitable colors, and packing.
The paint industry provides an excellent example of the gains from suitably adjusting the push/pull boundary. and the value of postponement. The supply chain for paint production involves the production of the base, mixing of suitable colors, and packing. Previously, all these processes were performed in large factories, and paint cans were shipped to stores. However, the uncertainty of demand made it difficult to match supply and demand. During the 1990s, paint supply chains were restructured so that mixing of colors was done at retail stores after customers placed their orders. As a result, customers could always get the color of their choice, whereas total paint inventories across the supply chain declined.
Adjusting the push/pull boundary can help a company gain a competitive advantage by striking a balance between being responsive to demand while still minimizing costs. Push-based systems prioritize production based on forecasts and inventory levels, whereas pull-based systems prioritize production based on actual customer demand.
Postponement refers to the delay of any final product differentiation until the last possible moment. This allows companies to respond more effectively to customer demands and reduces the risk of having unsold inventory.
In conclusion, the paint industry's restructuring demonstrated the value of postponement and the gains from suitably adjusting the push/pull boundary. By adjusting their supply chain processes, paint manufacturers were able to reduce total inventories while still meeting customer demand for a wide range of color options.
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Ed's construction company has the following short-run cost function: 19³ - 8q2² + 38q. What is the minimum average cost?
The minimum average cost is 16,166.67/q according to Ed's construction company has the following short-run cost function: 19³ - 8q2² + 38q.
Given that, the short-run cost function of Ed's construction company is:19³ - 8q² + 38q, Let's find the Total Cost function from the given short-run cost function. We know that: Average Cost = Total Cost / Quantity (q)Total Cost = 19³ - 8q² + 38q Dividing both numerator and denominator by q, we get, Total Cost = (19³/q) - 8q + 38
Taking the first derivative with respect to q, we get (Total Cost)/dq = -19³/q² - 8 + 38 Equating the above equation to zero, we get-19³/q² + 30 = 0-19³/q² = -30q² = 19³/30 Substituting q² = 19³/30 in the Total Cost function, we get, Total Cost = (19³/q) - 8q + 38Total Cost = (19³ / √(30³) )- 8 (√(19³/30)) + 38On solving this, we get total Cost = 16,166.67Minimum Average cost = Total Cost / Quantity(q) Minimum Average cost = 16,166.67/answer: The minimum average cost is 16,166.67/q.
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Beleaguered State Bank (BSB) holds $400 million in deposits and maintains a reserve ratio of 10 percent.
Complete the following T-account for BSB.
Beleaguered State Bank
Assets Liabilities
Reserves ___________ million Deposits ___________ million
Loans ___________million
Now suppose that BSB's largest depositor withdraws $20 million in cash from her account. BSB decides to restore its reserve ratio by reducing the amount of loans outstanding.
Complete BSB's new T-account after it has taken this action.
Beleaguered State Bank
Assets Liabilities
Reserves___________million Deposits _____________million
Loans_____________ million
Because BSB is cutting back on its loans, other banks will find they have excess or insufficient? reserves, causing them to Increase or Decrease ? their loans.
BSB may find it difficult to cut back on its loans immediately because it cannot force people to pay off loans.
Which of the following ways represent an alternative for BSB to return to its original reserve ratio? Check all that apply.
Attract additional deposits
Borrow money from another bank
Lend money
Borrow money from the Fed
State Bank has $40 million in reserves and $400 million in deposits. After a $20 million withdrawal, reserves decrease to $20 million and deposits decrease to $380 million. The bank can increase reserves by attracting deposits, borrowing from another bank, or borrowing from the Fed. Thus, options a, b, and d are correct.
Completing the T-account for Beleaguered State Bank (BSB):
Beleaguered State Bank
Assets:
Reserves $40 million
Loans _____ million
Liabilities:
Deposits $400 million
Given that BSB has a reserve ratio of 10%, the reserve requirement for the $400 million in deposits would be $40 million (10% of $400 million). Therefore, the initial amount of reserves held by BSB is $40 million.
After the largest depositor withdraws $20 million in cash, BSB's new T-account would be as follows:
Beleaguered State Bank
Assets:
Reserves $20 million
Loans ______ million
Liabilities:
Deposits $380 million
BSB's reserves decrease to $20 million due to the withdrawal, while the deposits decrease to $380 million. As BSB aims to restore its reserve ratio, it can consider the following alternatives:
a. Attract additional deposits: By encouraging customers to make new deposits, BSB can increase its reserves and restore the desired reserve ratio.
b. Borrow money from another bank: BSB can borrow funds from another bank, which would increase its reserves and help meet the reserve ratio requirement.
c. Lend money: This option would involve extending new loans to borrowers, which would increase the asset side of the balance sheet and potentially increase reserves.
d. Borrow money from the Fed: BSB can borrow funds from the Federal Reserve, which would provide an injection of reserves to help restore the reserve ratio.
In conclusion, options a, b, and d represent alternatives for BSB to return to its original reserve ratio. By attracting additional deposits, borrowing from another bank, or borrowing from the Fed, BSB can increase its reserves and meet the reserve requirement.
However, lending money alone would not directly help BSB restore its reserve ratio unless it leads to an increase in deposits or borrowing from other sources.
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The following figure shows the results of the ultimatum game played by farmers in Kenya and university students in the US. Students, Emory University (US) (darker shading shows the proportion of offers expected to be rejected) Farmers (Kenya) (darker shading shows the proportion of offers expected to be rejected) Kenyan farmer Responders are expected to reject a 40% offer 4% of the time 45 Half of the Kenyan farmer proposers made an offer of 40% Kenyan farmer Responders are expected to reject a 30% offer 48% of the time 0 10 20 30 40 50 Fraction of the pie offered by the Proposer to the Responder (%) Which of the following statements is incorrect about the ultimatum game? The figure above shows that different groups of people may be subject to social preferences in different ways. O b. The ultimatum game is used to study social preferences. Oc. If all participants are solely self-interested, the responders of the game are predicted to accept 20% or higher percentage of the pie. d. The lab experiment results of the ultimatum game such as the figure above show that participants are not solely self-interested. Share of the Proposers making the offer indicated (%) 30 55
The correct answer is (c) If all participants are solely self-interested, the responders of the game are predicted to accept a 20% or higher percentage of the pie.
One of the statements mentioned below is incorrect about the ultimatum game. The figure above shows that different groups of people may be subject to social preferences in different ways. This statement is accurate, and the others are incorrect about the ultimatum game. The Ultimatum Game is a one-shot laboratory experiment widely used to explore social preferences. The Ultimatum Game is a two-player game in which the first player, the proposer, proposes how to divide a sum of money with the second player, the responder.
The responder decides to accept or reject the proposal, and if they reject, both players get nothing. The lab experiment results of the ultimatum game such as the figure above show that participants are not solely self-interested. If all participants were solely self-interested, the responders of the game would accept a 20% or higher percentage of the pie. The Ultimatum Game is used to study social preferences, and different groups of people may be subject to social preferences in different ways. Therefore, we conclude that the correct answer is (c) If all participants are solely self-interested, the responders of the game are predicted to accept a 20% or higher percentage of the pie.
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2. A small open economy is described by the following equations: C = 50+0.75 (Y-T) I= 200-20r NX = 200-50€ M/P= Y-40r G= 200 T= 200 M= 3,000 P=3 r* = 5 Use the equilibrium exchange rate, income, and net exports you calculated in problem set 4. Assume a fixed exchange rate. Calculate what happens to the exchange rate, income, net exports, and the money supply if the government increases its spending by 50. Use a graph to explain what you find. 4. The Mundell-Fleming model takes the world interest rate r* as an exogenous variable. Let's consider what happens when this variable changes. a. If the economy has a fixed exchange rate, what happens to aggregate income, the exchange rate, and the trade balance when the world interest rate rises?
Part 1 In a small open economy, the following equations describe: C = 50+0.75 (Y-T) I= 200-20r NX = 200-50€ M/P= Y-40r G= 200 T= 200 M= 3,000 P=3 r* = 5
According to the problem, the equilibrium exchange rate, income, and net exports were calculated in problem set 4. A fixed exchange rate is assumed. If the government increases its spending by 50, the exchange rate, income, net exports, and money supply will change.
The explanation is as follows:
Exchange Rate: Increase in government spending, given a fixed exchange rate, will cause the equilibrium interest rate to increase. Due to the interest rate effect, the demand for domestic assets increases and causes the exchange rate to appreciate.
Income: With an increase in government spending, the income level will increase. Therefore, the economy will shift upwards in the income-expenditure diagram. It implies that the equilibrium level of national income (Y*) has increased.
Net Exports: With an increase in government spending, the national income and demand for imports rise. The increase in demand for imports results in a decrease in net exports.
Money Supply: Increase in government spending will lead to an increase in money demand.
However, since the money supply is fixed, there will be an excess demand for money. Thus, the interest rate will increase. This increase in interest rates will increase the demand for the domestic currency, thereby causing the exchange rate to appreciate.
Part 2 If the world interest rate (r*) increases, the changes that happen in an economy with fixed exchange rates can be explained using the Mundell-Fleming model. The effects are described below:
Aggregate Income: When the world interest rate (r*) rises, investment spending and net exports reduce.
It causes a decrease in aggregate demand and real GDP.
Exchange Rate: When the world interest rate (r*) rises, the demand for domestic currency increases. As a result, the exchange rate appreciates. When the exchange rate increases, net exports fall.
Trade Balance: Due to a rise in the world interest rate (r*), the economy's net exports and the trade balance decline.
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the trial Martin Technical Institute (MTI), a school owned by Lindsey Martin, provides training to individuals who pay tuition directly to the school. MTI also offers training to groups in off-site locations. Its unadjusted trial balance as of December 31, 2022, is found balance tab. MTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Descriptions of items a through h that require adjusting entries on December 31 follow. a. An analysis of MTI's insurance policies shows that $2,400 of coverage has expired. b. An inventory count shows that teaching supplies costing $3,240 are available at year-end. c. Annual depreciation on the equipment is $5,400. d. Annual depreciation on the professional library is $10,200. e. On November 1, MTI agreed to do a special six-month course (starting immediately) for a client. The contract calls for a monthly fee of $2,600, and the client paid the first five months' fees in advance. When the cash was received, the Unearned Training Fees account was credited. f. On October 15, MTI agreed to teach a four-month class (beginning immediately) for an executive with payment due at the end of the class. At December 31, $3,800 of the tuition has been earned by MTI. g. MTI's two employees are paid weekly. As of the end of the year, two days' salaries have accrued at the rate of $220 per day for each employee. h. The balance in the Prepaid Rent account represents rent for December. Answer is not complete. General Requirement General Journal Trial Balance Income St of Retained Statement Earnings Balance Sheet Impact on income Ledger For each adjustment, indicate the income statement and balance sheet account affected, and the impact on net income. If an adjustment caused net income to decrease, enter the amount as a negative value. Net income before adjustments can be found on the income statement tab. (Hint: Select unadjusted on the drop-down.) Show less A Adjusted Account affecting the: Impact on net income Adjusting entry related to: Balance Sheet Income statement Insurance expense a. Insurance Prepaid insurance (2,400) Teaching supplies (3,240) b. Teaching supplies c. Depreciation - equipment Teaching supplies expense Depreciation expense - Equipment Accumulated depreciation - Equipment (5,400) Depreciation expense - Professional library Training fees earned Accumulated depreciation - Professional library (10,200) Unearned training fees (5,200) Tuition fees earned Accounts receivable 3,800 Salaries expense Salaries payable 880 Rent expense ✓Prepaid rent (3,800)✔ $ Had the adjustments not been prepared, income would have been overstated by < Balance Sheet Impact on income > d. Depreciation - library e. Training fees f. Tuition g. Salaries h. Rent Total impact on income due to adjustments Net income before adjustments Net income after adjustments ✔$ ✓ ✓ ✓ ✓ ✓ ✓ (25,560) 66,950 50,360 x 32.94%
The adjustments, income statement, balance sheet, and impact on net income for Martin Technical Institute (MTI) are discussed below: Adjusting Entry Income Statement Account Balance Sheet Account Impact on Net Income Insurance expense a.
Insurance Prepaid insurance ($2,400) Prepaid insurance Supplies ($3,240) b. Supplies Supplies Teaching supplies expense Depreciation - equipment Depreciation expense - Equipment Accumulated depreciation - Equipment ($5,400) Depreciation expense - Professional library Depreciation - library Training fees earned Unearned training fees ($5,200) Tuition fees earned Accounts receivable $3,800 Salaries expense Salaries payable $880 Rent expense Prepaid rent ($3,800) Total impact on income due to adjustments $ (25,560) Net income before adjustments $66,950 Net income after adjustments $50,360The adjusting entry for each account is given as follows:Insurance expense account: For the year ended December 31, 2022, the insurance policy on the property has expired.
The expired insurance coverage amounts to $2,400. So, the adjustment entry should be Insurance expense debit $2,400, and prepaid insurance credit $2,400.Supplies account: At the end of the year, MTI has teaching supplies on hand worth $3,240. So, the adjusting entry would be Supplies debit $3,240, and supplies expenses credit $3,240.Accumulated depreciation-equipment account: The depreciation expense on the equipment for the year is $5,400. So, the adjusting entry would be Depreciation expense-equipment debit $5,400 and accumulated depreciation-equipment credit $5,400.Accumulated depreciation-professional library account.
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QUESTION 10 Benet Division of United Refinery Company's operating results include: controllable margin, €200,000; sales €2,200,000; and operating assets, €800,000. The Benet Division's ROI is 25%. Management is considering a project with sales of €100,000, variable expenses of €60,000, fixed costs of £40,000; and an asset investment of €150,000. Should management accept this new project? No, since ROI will be lowered. Yes, since ROI will increase. O Yes, since additional sales always mean more customers. No, since a loss will be incurred. QUESTION 11 The Fulmar Division of Jayne Manufacturing had an ROI of 25% when sales were £3 million and controllable margin was £600,000. What were the average operating assets? £150,000 £750,000 £2,400,000 O £12,000
Answer: No, since ROI will be lowered.
Answer: £2,400,000
Question 10 The controllable margin is a profitability measure that considers only variable expenses of a division or segment. A controllable margin of €200,000 was generated by Benet Division of United Refinery Company, with sales of €2,200,000 and operating assets of €800,000. Benet Division's ROI was 25%.Management of the Benet Division is examining a project with sales of €100,000, variable costs of €60,000, fixed costs of €40,000, and an asset investment of €150,000. The project's ROI is given by the following formula:
ROI = (Controllable Margin ÷ Sales) x (Sales ÷ Average Operating Assets) x 100%
We can write it in terms of controllable margin, ROI, and average operating assets as:
ROI = (Controllable Margin ÷ Average Operating Assets) x 100%
From the given values, we can calculate the average operating assets as:
ROI = (Controllable Margin ÷ Average Operating Assets) x 100%25% = (€200,000 ÷ Average Operating Assets) x 100%
Average Operating Assets = €800,000/25%Average Operating Assets = €3,200,000
New Project: Sales = €100,000Variable expenses = €60,000Fixed expenses = €40,000Asset investment = €150,000
Contribution Margin = Sales - Variable Expenses = €100,000 - €60,000 = €40,000ROI = (Controllable Margin ÷ Sales) x (Sales ÷ Average Operating Assets) x 100%ROI = (€200,000 + €40,000) ÷ (€2,200,000 + €100,000) x (€2,200,000 + €100,000) ÷ €800,000
ROI = 23.93%
The ROI would decrease as a result of the new project, implying that management should decline the new project.
Question 11
ROI = (Controllable Margin ÷ Average Operating Assets) x 100%The given values are:
ROI = 25%
Controllable margin = £600,000Sales = £3,000,000
Average operating assets = ?
We can calculate the average operating assets using the above formula as:
25% = (£600,000 ÷ Average Operating Assets) x 100%
Average Operating Assets = £600,000/25%
Average Operating Assets = £2,400,000
Therefore, the average operating assets are £2,400,000..
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No story. Just the mathematical model of consumer choice. Consider a consumer whose preferences are represented by the following utility function (defined over bundles of exes and whys): u(x, y) = 2√x+y. (a) Are the consumer's preferences convex? 1 point (b) Find the consumer's marginal rate of substitution, and show that its absolute value decreases as the consumption of exes increases. 1 point Py, respec- (c) Find the consumer's demand function of exes. In other words, find her optimal con- sumption level of exes when the unit prices of exes and whys are px and tively, and her income is m. 1 point (d) Find the mathematical expression that describes the consumer's Engel curve for exes, and represent it graphically. 1 point (e) Find the mathematical expression that describes the consumer's income-offer curve, and represent it graphically. 1 point (f) Find the mathematical expression that describes the consumer's demand curve for exes, and represent it graphically. 1 point (g) Suppose that the government levies a per-unit tax (t) on exes, so that their new unit price is p = Px + t. Show that the change in the consumer's demand for exes is entirely due to the substitution effect. You are allowed to ignore corner solutions in this part of the exercise.
The consumer's preferences are convex. Convexity of the consumer's preferences means that the consumer prefers a mixture of two goods rather than an extreme amount of one good. For example, a bundle of 2 apples and 3 oranges is preferred to a bundle of 5 apples or a bundle of 5 oranges.
The marginal rate of substitution (MRS) of the consumer is given by the slope of the indifference curve at a particular point. It is the amount of one good that a consumer is willing to give up for an additional unit of another good while keeping the same level of utility. Hence, the MRS of the consumer is given by:$$MRS=\frac{MU_x}{MU_y}$$
The marginal utility of x is given by:$$MU_x = \frac{∂u(x,y)}{∂x} = \frac{1}{√x+y}$$Similarly, the marginal utility of y is given by:$$MU_y = \frac{∂u(x,y)}{∂y} = \frac{1}{√x+y}$$Thus, the MRS is given by:$$MRS=\frac{MU_x}{MU_y} = \frac{√x+y}{√x+y} = 1$$The absolute value of MRS decreases as the consumption of exes increases.
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hulsey outdoor had a return on assets of 15 percent and a return on equity of 15 percent. given this information, the firm:
a.is using its assets as efficiently as possible. b.has no net working capital. c.has a debt-equity ratio of 1.0. d.may have short-term, but not long-term debt. e.has an equity multiplier of 1.0.
Based on the given information, Hulsey Outdoor has a return on assets (ROA) and return on equity (ROE) both equal to 15 percent. The firm may have short-term, but not long-term debt.
The return on assets (ROA) measures the profitability of a company's assets, indicating how efficiently it generates profits relative to its total assets. A 15 percent ROA suggests that Hulsey Outdoor is effectively utilizing its assets to generate profits. The return on equity (ROE) measures the return generated on the shareholders' equity investment. With an ROE of 15 percent, Hulsey Outdoor is generating a 15 percent return on the owners' investment.
The given information does not provide details about net working capital, debt-equity ratio, or the equity multiplier. Therefore, we cannot conclusively determine if Hulsey Outdoor has no net working capital or a debt-equity ratio of 1.0. Additionally, the equity multiplier cannot be determined with the provided information. However, since the firm's ROE and ROA are both 15 percent, it suggests that Hulsey Outdoor may have short-term debt that impacts its ROE, but not necessarily long-term debt. Further information would be needed to determine the specific financial structure and ratios of the firm.
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PROBLEM 1: Prepare and evaluate financial statements from accounts (22% Marks) A list of accounts for Geewhiz Productions Co. Ltd at November 30, 2019, is shown below, in no particular order or preference. $78,000 Dividends declared Salaries Expense Income tax payable Land $ 14,000 108,000 3,200 Accumulated amortisation 74,000 Cash in Bank 27,000 13,200 Income tax expense 8,100 6,100 Credit Sales Revenue 402,200 Employees Benefits expenses Tax deductions payable Accounts Receivable Cash Sales Revenue 18,600 Inventory on Hand 78,000 33,400 Prepaid Insurance Asset 3,200 Beginning Retained 7,500 Earnings 96,600 Dividends Payable Amortisation expense 53,000 37,200 Accounts payable 184,100 Interest Income Cost of goods sold expense 2,100 13,800 Building 346,000 Insurance expense Share Capital 300,000 Trucks and Equipment 253,400 Office Expense 5,200 46,200 Salaries payable 169,800 Mortgage Payable 9,700 Miscellaneous Expenses Interest expense Bank loan owing 37,900 20,500 Required: i. Using the list, decide which ones are income statement accounts. Estimate net income based on your answer to part 1. (3 marks) (2 marks) (2 marks) iii. Estimate ending retained earnings based on your answer to part 2. iv. Prepare the following financial statements, demonstrating that your answers to parts 2 and 3 are correct: a. Income statement for the year ended November 30, 2019. (312 marks) (2½ marks) b. Statement of retained earnings for the year ended on that date. c. Balance sheet at November 30, 2019. V. Comment briefly on what the financial statements show about the company's year 2019 and financial position at November 30, 2019. (5% marks) performance for the (4 marks)
Based on the given list of accounts, the income statement accounts are as follows:
- Salaries Expense
- Income tax expense
- Credit Sales Revenue
- Cash Sales Revenue
- Income tax payable
- Dividends declared
- Cost of goods sold expense
- Interest Income
- Amortization expense
- Insurance expense
- Miscellaneous Expenses
- Office Expense
To estimate the net income, we need to subtract the total expenses from the total revenue.
Total revenue = Credit Sales Revenue + Cash Sales Revenue + Interest Income = $402,200
Total expenses = Salaries Expense + Income tax expense + Cost of goods sold expense + Amortization expense + Insurance expense + Miscellaneous Expenses + Office Expense = $13,200 + $8,100 + $37,200 + $53,000 + $2,100 + $5,200 = $118,800
Net income = Total revenue - Total expenses = $402,200 - $118,800 = $283,400
iii. To estimate ending retained earnings, we need to consider the beginning retained earnings ($7,500) and add the net income.
Ending retained earnings = Beginning retained earnings + Net income = $7,500 + $283,400 = $290,900
iv. The financial statements are prepared as follows:
a. Income statement for the year ended November 30, 2019:
Income Statement:
Revenue:
Credit Sales Revenue $402,200
Cash Sales Revenue
Total Revenue $402,200
Expenses:
Salaries Expense $13,200
Income tax expense $8,100
Cost of goods sold expense $37,200
Amortization expense $53,000
Insurance expense $2,100
Miscellaneous Expenses $5,200
Office Expense
Total Expenses $118,800
Net Income $283,400
b. Statement of retained earnings for the year ended November 30, 2019:
Statement of Retained Earnings:
Beginning Retained Earnings $7,500
Net Income $283,400
Dividends declared
Ending Retained Earnings $290,900
c. Balance sheet at November 30, 2019:
Balance Sheet:
Assets:
Cash in Bank $27,000
Accounts Receivable
Inventory on Hand $78,000
Prepaid Insurance Asset $3,200
Land $14,000
Accumulated amortization $74,000
Building $346,000
Trucks and Equipment $253,400
Total Assets
Liabilities:
Income tax payable
Dividends Payable
Accounts payable $184,100
Tax deductions payable
Salaries payable $169,800
Mortgage Payable $9,700
Bank loan owing $37,900
Total Liabilities
Equity:
Share Capital $300,000
Retained Earnings $290,900
Total Equity
v. The financial statements show that the company had a net income of $283,400 for the year 2019, resulting in an increase in retained earnings to $290,900. The balance sheet reflects the company's assets, liabilities, and equity position at November 30, 2019. Overall, the company had a profitable year and a positive financial position.
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Brookfield Railway Ltd has the following securities outstanding:
Corporate bond: 20,000, 5.0% coupon bonds outstanding, at $1,000 face value, with 15 years to maturity. The bond is currently trading at par value.
Ordinary shares: 1,000,000 ordinary shares selling for $50 per share. The share will pay a dividend of $3 next year. The dividend is expected to growth by 4% per year indefinitely.
Preference shares: 125,000, 6% preference shares (face value of $100) selling at $80 per shares.
Assume tax rate is 30%.
Calculate the WACC for Brookfield Railway Ltd.
WACC = (Wd * Kd) + (We * Ke) + (Wp * Kp) * (1 - Tax rate) . To calculate the Weighted Average Cost of Capital (WACC) for Brookfield Railway Ltd, we need to consider the cost of each component of the capital structure and its respective weight.
Given:
Corporate bond:
Face value = $1,000Coupon rate = 5%Years to maturity = 15Currently trading at par valueOrdinary shares:
Number of shares = 1,000,000Share price = $50Dividend next year = $3Dividend growth rate = 4%Preference shares:
Number of shares = 125,000Face value = $100Share price = $80Dividend rate = 6%Tax rate = 30%Calculate the cost of debt (Kd):
Since the corporate bond is trading at par value, the coupon rate represents the yield to maturity (YTM). Therefore, the cost of debt is equal to the coupon rate.
Kd = Coupon rate = 5%
Calculate the cost of equity (Ke):
The cost of equity can be calculated using the Dividend Discount Model (DDM).
Ke = (Dividend / Share price) + Dividend growth rate
Ke = ($3 / $50) + 4%
Calculate the cost of preference shares (Kp):
The cost of preference shares can be calculated as the dividend rate divided by the share price.
Kp = Dividend rate / Share price
Kp = 6% / $80
Calculate the weight of each component:
Weight of debt (Wd) = Market value of debt / Total market value
Since the corporate bond is trading at par value, the market value of debt is equal to the face value.
Weight of debt (Wd) = Face value of debt / (Face value of debt + Market value of equity)
Weight of equity (We) = Market value of equity / Total market value
Market value of equity = Number of shares * Share price
Weight of preference shares (Wp) = Market value of preference shares / Total market value
Market value of preference shares = Number of preference shares * Share price
Total market value = Market value of debt + Market value of equity + Market value of preference shares
Calculate the WACC:
WACC = (Wd * Kd) + (We * Ke) + (Wp * Kp) * (1 - Tax rate)
You can plug in the values into the equations above and perform the calculations to determine the WACC for Brookfield Railway Ltd.
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4) [20 points] Consider a survival game in which members of a large population of animals meet in pairs and either fight over or share a food source. There are two phenotypes in the population: One always fights, and the other always shares. For the purpose of this question, assume that no other mutant types can arise in the population. Suppose that the value of the food source is 200 calories, and that caloric intake determines each player's fitness. If two sharing types meet one another, they each get half the food, but if a sharer meets a fighter, the sharer concedes immediately, and the fighter gets all the food. a) [10 points) Suppose that the cost of a fight is 50 calories (for each fighter) and that when two fighters meet, each is equally likely to win the fight and get the food or to lose and get no food. i. Draw the payoff table for the game played between two random players from this population. ii. Find all the evolutionarily stable strategies in the population. Check for pure strategies as well as mixed strategies. iii. What type of game is being played in this case? b) [10 points] Now suppose that the cost of a fight is 150 calories for each fighter. As before, assume that when two fighters meet, each is equally likely to win the fight and get the food or to lose and get no food. i. Draw the payoff table for the game played between two random players from this population. ii. Find all the evolutionarily stable strategies in the population. Check for pure strategies as well as mixed strategies. iii. What type of game is being played in this case?
a) In the given scenario where the cost of a fight is 50 calories, the payoff table for the game played between two random players can be drawn. By analyzing the table, we can identify the evolutionarily stable strategies in the population, considering both pure and mixed strategies. The type of game being played in this case can also be determined.
b) Now, if the cost of a fight is increased to 150 calories, a new payoff table can be constructed. The evolutionarily stable strategies, including pure and mixed strategies, can be determined. The type of game being played in this scenario can also be identified.
a) In the first case where the cost of a fight is 50 calories, the payoff table will have different values depending on the interactions between sharers and fighters. By analyzing the table, we can identify the evolutionarily stable strategies. These strategies will be the ones that, when adopted by a large portion of the population, cannot be invaded by any other strategy. The game being played in this case is a mixed-strategy game since the outcome depends on the probabilities of winning or losing a fight.
b) In the second case where the cost of a fight is 150 calories, the payoff table will change due to the increased cost. By examining the new table, we can identify the evolutionarily stable strategies. In this scenario, the game is still a mixed-strategy game as the outcome depends on the probabilities of winning or losing a fight.
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b. What is the yield to maturity on a simple loan for $3 million that requires a repayment of $5 million in five years' time?
Yield to maturity is a measure of what an investor earns from a bond if it is held until its maturity date. It is also referred to as the redemption yield or yield to redemption.
Yield to maturity is the overall interest rate earned by an investor who purchases a bond and keeps it until its maturity date. The yield to maturity is determined by dividing the present value of the bond’s future cash flows by the bond’s price. The simple loan that requires a repayment of $5 million in five years' time, with an initial amount of $3 million, has a yield to maturity of 12.17%. The formula for yield to maturity is: P = M / (1 + i)^n where P is the price of the bond, M is the amount to be repaid, i is the yield to maturity, and n is the number of periods. By substituting the given values into the formula, we get: $3 million = $5 million / (1 + 0.1217)^5This can be simplified as: 0.1217 = [1 - (3/5)^(1/5)]/ (3/5)^(1/5)Thus, the yield to maturity on a simple loan for $3 million that requires a repayment of $5 million in five years' time is 12.17%. Hence, the investor would earn 12.17% annually if they purchased the bond and held it until maturity.
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QUESTION 39 Which of the following is consistent with lowering the lovel of risks associated with supply networks? Increasing digitization Increasing complexity of category strategies Increasing outsourcing Increasing supply chain regionalization I QUESTION 40 Which of these statements is not projected to be a future focus of supply chains? Obtaining more innovation from suppliers Leveraging supplier capabilities O An increased focus on tactical purchasing activities Increased cost management efforts QUESTION 41 When did supply chains start to transition from a vertical orientation to a horizontal orientation? 1970's 1980's O 1990's 2000's
Question 39: The statement "Increasing supply chain regionalization" is consistent with lowering the level of risks associated with supply networks.
By regionalizing the supply chain, organizations can reduce the dependence on long-distance transportation and minimize disruptions caused by global events, such as trade restrictions or geopolitical tensions.
Question 40: The statement "An increased focus on tactical purchasing activities" is not projected to be a future focus of supply chains. In the evolving landscape of supply chain management, there is a shift towards more strategic and collaborative approaches, emphasizing innovation, supplier capabilities, and cost management efforts. Tactical purchasing activities are more transactional and operational in nature, and the focus is moving towards higher-value activities.
Question 41: The transition from a vertical orientation to a horizontal orientation in supply chains occurred in the 1980s. This shift marked a move away from the traditional vertically integrated supply chains, where companies controlled most stages of production, to more collaborative and networked supply chains, involving multiple partners and focusing on core competencies. The advent of technologies and globalization played a significant role in enabling this transition and reshaping supply chain practices.
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OBJ. 2,3 PR 11-3A Wage and tax statement data on employer FICA tax Ehrlich Co. began business on January 2, 20Y8. Salaries were paid to employees on the last day of each month, and social security tax, Medicare tax, and federal income tax were withheld in the required amounts. An employee who is hired in the middle of the month receives half the monthly salary for that month. All required payroll tax reports were filed, and the correct amount of payroll taxes was remitted by the company for the calendar year. Early in 20Y9, before the Wage and Tax Statements (Form W-2) could be prepared for distribution to employees and for filing with the Social Security Administra- tion, the employees' earnings records were inadvertently destroyed. None of the employees resigned or were discharged during the year, and there were no changes in salary rates. The social security tax was withheld at the rate of 6.0% and Medicare tax at the rate of 1.5%. Data on dates of employment, salary rates, and em- ployees' income taxes withheld, which are summarized as follows, were obtained from personnel records and payroll records: Employee Arnett Cruz Edwards Harvin Nicks Shiancoe Ward Date Employed Nov. 16 Jan. 2 Oct. 1 Dec. 1 Feb. 1 Mar. 1 Nov. 16 Gross Earnings Monthly Salary Federal Income Tax Withheld $ 5,500 4,800 8,000 6,000 10,000 11,600 5,220 Monthly Income Tax Withheld $ 944 833 Instructions 1. Calculate the amounts to be reported on each employee's Wage and Tax Statement (Form W-2) for 20Y8, arranging the data in the following form: 1,592 1,070 2,350 2,600 876 Social Security Tax Withheld Medicare Tax Withheld Employee 2. Calculate the following employer payroll taxes for the year: (a) social security; (b) Medicare; (c) state unemployment compensation at 5.4% on the first $10,000 of each employee's earnings; (d) federal unemployment compensation at 0.6% on the first $10,000 of each employee's earnings; (e) total. a. b. Employee e. Arnett Cruz Edwards Harvin Nicks Shiancoe Ward Totals c. and d. Social security tax paid by employer Medicare tax paid by employer Employee Arnett Cruz Amounts to Be Reported on Wage and Tax Statements (Form W-2) Gross Earnings Federal Income Tax Withheld Edwards Harvin Nicks Shiancoe Ward Total SUTA/FUTA Earnings Total employer payroll taxes Employer Payroll Taxes Social Security Tax Withheld State unemployment compensation tax Federal unemployment compensation tax Medicare Tax Withheld [1
Amounts to be reported on each employee's Wage and Tax Statement (Form W-2) for 20Y8Employee Gross Earnings Social Security Tax Withheld Medicare Tax.
Withheld Federal Income Tax With held Arnett Cruz $5,500 $330 $82 $944Edwards $4,800 $288 $72 $833Harvin $8,000 $480 $120 $2,350Nicks $6,000 $360 $90 $2,600Shiancoe $10,000 $600 $150 $876Ward $11,600 $696 $174 $5,2202.
(a) Social security tax paid by employer = Total social security tax withheld × 2 = $1,854
(b) Medicare tax paid by employer = Total Medicare tax withheld × 2 = $462
(c) State unemployment compensation tax = Total SUTA Earnings × SUTA rate = $10,000 × 5.4% = $540
(d) Federal unemployment compensation tax = Total FUTA Earnings × FUTA rate = $10,000 × 0.6% = $60
(e) Total employer payroll taxes = Social security tax paid by employer + Medicare tax paid by employer + State unemployment compensation tax + Federal unemployment compensation tax = $1,854 + $462 + $540 + $60 = $2,916.
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After liquidating noncash assets and paying creditors, account balances in the Pharoah Co, are Cash $18,100; A, Capital (Cr.) $8,500; B. Capital (Cr.) $6,400; and C, Capital (Cr.) $3,200. The partners share income equally. Journalize the final distribution of cash to the partners. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Account Titles and Explanation eTextbook and Media Debit Credit
The final distribution of cash to the partners in the Pharoah Co. would be as follows: - Partner A: $6,033.33 (rounded), - Partner B: $4,866.67 (rounded), - Partner C: $2,400.00.
To journalize the final distribution of cash to the partners, you would debit each partner's capital account for their respective share and credit the cash account for the total amount distributed.
Journal entry:
Cash $18,100.00
Partner A, Capital $6,033.33
Partner B, Capital $4,866.67
Partner C, Capital $2,400.00
This entry reflects the distribution of cash to the partners based on their respective capital balances.
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The final distribution of cash to the partners in the Pharoah Co. would be as follows: - A, Capital: $6,000, - B, Capital: $5,700, - C, Capital: $5,400.
1. Start by calculating the total capital: $8,500 + $6,400 + $3,200 = $18,100.
2. Since the partners share income equally, divide the total capital by the number of partners: $18,100 / 3 = $6,033.33 per partner.
3. Determine the distribution of cash to each partner by comparing their individual capital balances to the calculated per-partner amount:
- Partner A: $8,500 - $6,033.33 = $2,466.67 (debit)
- Partner B: $6,400 - $6,033.33 = $366.67 (debit)
- Partner C: $3,200 - $6,033.33 = $-2,833.33 (credit)
4. Journalize the final distribution of cash:
- Debit Cash for $2,466.67 (Partner A)
- Debit Cash for $366.67 (Partner B)
- Credit Cash for $2,833.33 (Partner C)
Note: The negative amount for Partner C indicates that they owe money to the partnership, which would be settled in the future.
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Adam Inc. is a manufacturing firm which designs and manufactures electric switches for use in construction. Below is the expected (budgeted) data for the start of next year: September October November 600 800 740 $20.00 $22.00 $21.00 Sales in units Sales price per unit August 400 $18.00 The desired ending inventory for finished goods (production) is 20% of next month's sales. The desired ending inventory for raw materials is 40% of the next month's raw material requirements. Raw material required for each unit of the product is 5 units. The cost of each unit of raw material is $3 per unit. Time required to assemble one (1) switch is 15 minutes. Workers are paid $20 per direct labour hour. Using the above information answer the following questions. Using the sales budget, calculate the budgeted sales for September. HINT: remember the entry rules! Complete the production budget. How many units will have to be produced in September to meet the requirements? HINT: What are the "Units to be produced" on the production budget for September? Prepare the Direct Materials Purchases Budget. What will be the cost of September's production? HINT: On the Direct Materials Purchases Budget, what will be the "Total direct materials cost"? Prepare the Direct Labour Budget. What will be the total direct labour cost (rounded to the nearest dollar) for September?
a. The budgeted sales for September will be 600 units.
b. The units to be produced in September to meet the requirements are 680 units.
c. The cost of September's production, as per the Direct Materials Purchases Budget, will be $12,240.
d. The total direct labour cost for September, rounded to the nearest dollar, will be $5,600.
a) Based on the given data, the budgeted sales for September is provided as 600 units.
b) To calculate the units to be produced in September, we need to consider the desired ending inventory for finished goods and the budgeted sales for October. The desired ending inventory for finished goods is 20% of October's sales, which is 800 units. Therefore, the total units to be produced in September will be the sum of the budgeted sales for September (600 units) and the desired ending inventory for finished goods in October (800 units x 20% = 160 units), which equals 680 units.
c) To calculate the cost of September's production, we need to consider the units to be produced in September (680 units) and the cost of each unit of raw material ($3 per unit). Multiplying these values together, we get the total direct materials cost, which is 680 units x $3 per unit = $2,040. However, since the cost of raw materials is 40% of the total direct materials cost, we need to divide $2,040 by 40% to get the total cost, which is $12,240.
d) To calculate the total direct labour cost for September, we need to consider the units to be produced in September (680 units) and the time required to assemble one switch (15 minutes). Since workers are paid $20 per direct labour hour, we need to convert the time to hours by dividing 15 minutes by 60 (1 hour = 60 minutes). This gives us 0.25 hours per unit. Multiplying this by the number of units and the labour cost per hour ($20), we get the total direct labour cost, which is 680 units x 0.25 hours per unit x $20 per hour = $5,600.
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Briefly explain what "no barriers to entry" mean for a competitive market
Q2. Out of the 3 conditions below, which one is for finding the profit maximizing quantity, which one is for a firm to be profitable, and which one for a firm to keep operating (not shut down)?
P > ATC
P > AVC
MR = MC
Answer:
........................................................
"No barriers to entry" in a competitive market means that there are no obstacles or restrictions preventing new firms from entering the market and competing with existing firms.
It implies that there are no legal, technological, or economic barriers that hinder new entrants from participating in the market.
The condition "P > ATC" is for a firm to be profitable. In a competitive market, if the price (P) is greater than the average total cost (ATC) of production, the firm is earning a positive profit per unit and is considered profitable.
The condition "P > AVC" is for a firm to cover its variable costs. If the price (P) is greater than the average variable cost (AVC), the firm is able to cover its variable costs per unit of production. However, it may not be making a profit and could still be incurring losses if the price does not cover its fixed costs.
The condition "MR = MC" is for finding the profit-maximizing quantity. In a competitive market, firms aim to maximize their profits by producing at a quantity where marginal revenue (MR) equals marginal cost (MC). This condition ensures that the firm is producing an optimal quantity that maximizes the difference between revenue and cost.
To summarize:
Profitability: P > ATC
Covering variable costs: P > AVC
Profit-maximizing quantity: MR = MC
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Consider a two-firm model with a negative production externality. Let xi denote firm i ’s output, with i = 1, 2 . Suppose that two firms operate in two different competitive markets and each firm sells its product in its respective competitive market, at the prices p1 = 100 and p2 = 150 , respectively, and that they face the same direct production cost cixi=xi22 . Let ex1,x2=x1x2 be the external cost on firm 2’s activity generated by the production of firm 1.
Find each firm’s best response function to the output set by the other firm and compute the Nash equilibrium assuming that firms choose their output non-cooperatively and independently. Illustrate the equilibrium in an appropriate graph. [10 marks]
Calculate each firm’s equilibrium profits and the total external cost imposed on firm 2. [5 marks]
Consider a two-firm model with a negative production externality. Let xi denote firm i ’s output, with i = 1, 2 . Suppose that two firms operate in two different competitive markets and each firm sells its product in its respective competitive market, at the prices p1 = 100 and p2 = 150 , respectively, and that they face the same direct production cost cixi=xi22 . Let ex1,x2=x1x2 be the external cost on firm 2’s activity generated by the production of firm 1.
Find each firm’s best response function to the output set by the other firm and compute the Nash equilibrium assuming that firms choose their output non-cooperatively and independently. Illustrate the equilibrium in an appropriate graph. [10 marks]
To find each firm's best response function and compute the Nash equilibrium, we need to analyze the strategic interaction between the two firms. In this two-firm model with a negative production externality, let xi denote firm i's output, with i = 1, 2. The prices in their respective competitive markets are p1 = 100 and p2 = 150, and the direct production cost for each firm is cixi = xi^2/2. The external cost on firm 2's activity generated by firm 1's production is ex1,x2 = x1x2.
To determine each firm's best response to the output set by the other firm, we need to find the output level that maximizes each firm's profit given the output level of the other firm. We can set up the following optimization problems for each firm:
Firm 1's optimization problem:
Maximize π1 = p1x1 - c1x1 - ex1,x2
Firm 2's optimization problem:
Maximize π2 = p2x2 - c2x2
By taking the first-order derivative of each firm's profit function with respect to their respective output, we can find their best response functions. The best response function for firm 1 is given by:
BR1(x2) = argmax π1 = argmax (p1x1 - c1x1 - ex1,x2) = (p1 - c1 - ex1,x2) / 2
Similarly, the best response function for firm 2 is given by:
BR2(x1) = argmax π2 = argmax (p2x2 - c2x2) = (p2 - c2 - ex2,x1) / 2
To compute the Nash equilibrium, we need to find the intersection of the best response functions. By setting BR1(x2) = x1 and BR2(x1) = x2, we can solve for the equilibrium output levels of both firms.
Now, let's illustrate the equilibrium in an appropriate graph. We can plot the output levels of both firms on the x-axis and the profits on the y-axis. The graph will show the best response functions for each firm and the intersection point representing the Nash equilibrium.
In the graph, the best response functions will be downward-sloping lines representing the optimal output choices for each firm given the output of the other firm. The intersection point will indicate the Nash equilibrium, where both firms' output choices are mutually optimal.
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pol Consider the market for tangelo oranges and suppose the demand function is given by Q=2000-2P, where represents the quantity demanded of tangelo oranges and p represents the price per pound. Suppose the supply function is given by Q=3P. where Q represents the quantity supplied. Find the equilibrium quantity and price of tangelo oranges in the market. d O a. Equilibrium price and quantity are, respectively, P=400, Q = 1200- O b. Equilibrium price and quantity are, respectively, P=500, Q=500. O c. Equilibrium price and quantity are, respectively, P= 1000, Q=300. O d. Equilibrium price and quantity are, respectively, P=425, Q=925 QUESTION 3 Suppose the population's income increases, shifting the demand curve to the right. Now the demand curve for tangelo oranges becomes Q-4000-2P. The supply curve remains the same. Q=3P. The new equilibrium price and quantity in the market are: O a. P=800, Q=2400. O b. p=2200, Q=1100. OCP=500, Q=500. O d. P=100, Q=250. 10 poi
The correct option is (A) P = 800, Q = 2400. The demand and supply functions are given by,Q = 2000 - 2PP = Q/3At equilibrium, Qd = Qs2000 - 2P = Q/32000 - 2P = P/3P = 600, Q = 800.
Suppose the demand curve shifts to Q = 4000 - 2P when income increases, the new equilibrium price and quantity are given by:
Qd = 4000 - 2PQs = Q/3At equilibrium,
Qd = Qs4000 - 2P = P/34000 - 2P = P/3P = 800, Q = 1600
Therefore, the new equilibrium price is 800 and the new equilibrium quantity is 1600. (Option A)
Hence, the correct option is (A) P = 800, Q = 2400.
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Steps in the Strategic Management Process Strategic management involves managers from all parts of the organization in the formulation and implementation of strategic goals and strategies. Traditionally, strategic planning emphasized a top-down approach with senior executives developing goals and plans for the entire organization. Currently, many senior executives are involving managers throughout the organization in the strategy formation process. All levels of the organization must be involved in idea generation and innovation to remain competitive. It integrates strategic planning and management into a single process. Strategic planning should be an ongoing activity in which all managers are encouraged to focus on both long-term, externally oriented issues as well as short-term tactical and operational issues. Courtney's Cookies, a gourmet cookie company, was founded by Courtney Ashly with the idea of bringing gourmet cookies to the masses at a reasonable price point. The company has been in business for 5 years and is positioned for a change. Its top competitor, Miss Meadow's Cookies, has higher brand recognition and a large share in the cookie market. Courtney has substantial financial resources, which will enable her to have a cookie kiosk on almost every street corner in New York City. She will also be able to purchase her ingredients in bulk, resulting in greater profit margins. Based on these factors, Courtney gets the necessary permits and begins positioning her kiosks on the first 10 street corners and signs purchase orders for supplies to begin baking. She will monitor the customer traffic and sales at each kiosk to determine where to place her next 10 kiosks. The goal of this activity is to explain the strategic management process. This activity is important because it demonstrates that all managers should focus on both long-term, externally-oriented issues as well as short-term tactical and operational issues. Match the fact in the case that corresponds to the stage in the Strategic Management Process. Skilled managersand unreliable suppliers Step of the Strategic Management Process Mission, vision, and goals Kiosks on ten street corners Substantial financial resources External opportunities and threats Internal strengths and weaknesses SWOT analysis and strategy formulation Cookies for the masses Strategy implementation Monitor customertraffic and sales Strategic control Miss Meadow's cookies
The Strategic Management Process involves step 1: Mission, Vision, and Goals Step 2: External Opportunities and Threats Step 3: Internal Strengths and Weaknesses Step 4: SWOT Analysis and Strategy Formulation
The steps include the following:
Step 1: Mission, Vision, and Goals Step 2: External Opportunities and Threats Step 3: Internal Strengths and Weaknesses Step 4: SWOT Analysis and Strategy Formulation Step 5: Strategy Implementation Step 6: Monitor Customer Traffic and Sales Step 7: Strategic Controlling the given case study, Courtney's Cookies, a gourmet cookie company, is in a good position to expand its business in the cookie market.
The company has been in business for 5 years and is positioned for a change. Its top competitor, Miss Meadow's Cookies, has higher brand recognition and a large share in the cookie market. Based on the company's substantial financial resources, Courtney can position kiosks on the first 10 street corners and sign purchase orders for supplies to begin baking. She will monitor the customer traffic and sales at each kiosk to determine where to place her next 10 kiosks.
The following is the matching of the fact in the case that corresponds to the stage in the Strategic Management Process: Skilled managers and unreliable suppliers - Internal strengths and weaknesses Mission, vision, and goals - Step of the Strategic Management Process Kiosks on ten street corners - Strategy implementation Substantial financial resources - External opportunities and threats External opportunities and threats - Step of the Strategic Management Process Internal strengths and weaknesses - SWOT analysis and strategy formulation SWOT analysis and strategy formulation - Step of the Strategic Management Process Cookies for the masses - Mission, vision, and goals Strategy implementation - Step of the Strategic Management Process Monitor customer traffic and sales - Strategic control Miss Meadow's cookies - External opportunities and threats
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19. The inverted yield curve is used to predict recessions.
Explain what an inversion of the yield curve means.
An inversion of the yield curve refers to a situation where short-term interest rates on government bonds become higher than long-term interest rates. It is often seen as a predictor of recessions, signaling concerns about the future economic outlook.
The yield curve represents the relationship between the interest rates and the maturity periods of government bonds. Under normal circumstances, longer-term bonds tend to have higher interest rates compared to shorter-term bonds due to the higher risks associated with longer-term investments. This results in an upward-sloping yield curve.
However, when the yield curve inverts, it means that short-term interest rates surpass long-term interest rates. This inversion typically occurs when investors anticipate economic challenges and uncertainty in the future. It can reflect a pessimistic outlook on economic growth, inflation, and monetary policy.
An inverted yield curve is seen as a potential predictor of recessions because it has been historically observed that recessions often follow such inversions. It suggests that investors have less confidence in the short-term economic outlook and are seeking the relative safety of longer-term bonds. This behavior may be driven by expectations of future interest rate cuts by central banks to stimulate the economy in response to an anticipated slowdown.
The inversion of the yield curve is closely monitored by economists, policymakers, and investors as it can provide valuable insights into market sentiment and economic expectations. However, it is important to note that while an inverted yield curve has often been associated with recessions in the past, it does not guarantee a recession will occur. Other factors and indicators need to be considered to assess the overall health and direction of the economy.
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In Week 2, you reviewed the lecture, ‘Risk/Opportunity Management,’ and discussed this technique from the perspective of using it to identify potential projects to help an organization either avoid risk or exploit an opportunity. This week’s lecture revisited some of those concepts and applied them in a different way.
With those lectures in mind, along with material from the Gido text, identify three things that you think might be a risk to the project you proposed during Week 4. Describe each risk, assess it in terms of impact and likelihood of occurring, and suggest a response for each. (Note: You can recycle this as a part of your Project Management Plan deliverables!)
The proposed project faces technical risks, stakeholder resistance, and budgetary constraints. Mitigation strategies include thorough technical assessment, change management, and effective budget planning and control.
Risk Identification for Proposed Project:
Technical Risk:
Description: The project involves implementing a new software system, which may pose technical challenges such as compatibility issues, system integration problems, or inadequate infrastructure.
Impact: If technical issues arise, they can delay the project timeline, increase costs, and hinder the successful implementation of the new system.
Likelihood: Moderate. While the organization has experience with similar projects, the complexity of the new software system introduces a level of uncertainty.
Response: Conduct a thorough technical assessment before initiating the project to identify potential issues. Allocate sufficient resources for testing and quality assurance. Engage IT experts or consultants to provide guidance and support throughout the implementation process.
Stakeholder Resistance:
Description: The proposed project may face resistance from stakeholders, including employees, who may be resistant to change or fear the impact on their roles or job security.
Impact: Stakeholder resistance can hinder project progress, cause delays, and result in low user adoption rates, limiting the project's overall success.
Likelihood: High. Organizational changes often face resistance, and without proper change management strategies, stakeholders may be reluctant to embrace the project.
Response: Implement a robust change management plan that includes clear communication, stakeholder engagement, and training programs. Address concerns and involve stakeholders in the decision-making process to increase buy-in and reduce resistance.
Budgetary Constraints:
Description: Limited budget allocation for the project may pose challenges in achieving project goals and meeting all requirements.
Impact: Insufficient funding can lead to compromises in quality, reduced scope, or delays in implementation, ultimately affecting project success.
Likelihood: High. Many projects face budget limitations, and it is crucial to manage resources effectively within the allocated budget.
Response: Conduct a comprehensive cost estimation and budget planning exercise at the beginning of the project. Implement strict financial controls and regularly monitor and track expenses. Prioritize project activities to focus on critical deliverables within the available budget. Explore potential cost-saving measures or alternative funding sources if needed.
By identifying and assessing these risks, the project team can proactively plan and implement appropriate responses to mitigate their potential negative impacts. Including these risk assessments and response strategies in the Project Management Plan ensures that the project is well-prepared to address challenges and increases the likelihood of a successful outcome.
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According to the Quantity theory of Money, MV=PT, if the Central Bank increases the supply of money dramatically, the main consequence will be: (some versions of the model use Y instead of T) P will increase None of the above V will increase T will increase
According to the Quantity theory of Money, MV=PT, if the Central Bank increases the supply of money dramatically, the main consequence will be that P will increase.
This is because the Quantity theory of Money establishes that the general price level (P) is directly proportional to the amount of money circulating in an economy (M) multiplied by the velocity of money (V) that circulates in the economy and divided by the number of transactions (T) that the economy performs. Precisely,
the Quantity theory of Money can be expressed as MV = PT, where M is the money supply, V is the velocity of money, P is the price level, and T is the volume of transactions. The model suggests that a rise in the money supply can cause the general price level to increase as well. In other words, the more money there is in the economy, the higher the price levels will be.
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Game therory True or False, and Why
(a) Say that we are looking at a two player normal form game which represents a situation in which both players make their choices simultaneously. It is possible for Normal Form Rationalizability and Extensive Form Rationalizability to make different predictions for this game.
(b) A rational agent will not play a weakly dominated strategy.
(c) A Nash equilibrium of the stage game must be played in every period of a SGPNE of a FINITELY repeated game.
(d) The iterated deletion of weakly dominated strategies is an order independent procedure.
(e) In an alternating offers bargaining game, the agent who makes the first offer always gets a larger share of the pie.
(a) True. When we look at a two-player normal form game that shows a situation where both the players make their choice at the same time, it is possible for Normal Form Rationalizability and Extensive Form Rationalizability to make different predictions for this game. Both these rationality concepts may result in different predictions for a given game. The reason for this is that different solution concepts are appropriate in different situations.
(b) True. An agent who is rational will not play a weakly dominated strategy. This is because a weakly dominated strategy will always produce a worse outcome than another strategy that the agent could choose to play.
(c) True. A Nash equilibrium of the stage game must be played in every period of a subgame perfect Nash equilibrium of a finitely repeated game.(d) True. The iterated deletion of weakly dominated strategies is an order-independent process. This is because the order in which the strategies are removed does not have an effect on the result.
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What is the bond's yield to maturity (YTM)? A) 9.26%. B) 10.34%. C) 10.05%. D) 10.55%.
The yield to maturity is also known as the yield to redemption, is the expected internal rate of return of an investment in a bond when the bond is held until maturity. The bond's yield to maturity (YTM) is the rate of return that an investor could gain by holding a bond to maturity.
The bond's yield to maturity (YTM) is a calculation that measures the total yield of a bond from the purchase date until maturity. The formula to calculate the yield to maturity is:
YTM = C + ((F - P) / N) / ((F + P) / 2),
where C = annual coupon payment,
F = face value of the bond,
P = bond price,
and N = number of years until maturity.
The yield to maturity (YTM) is a calculation of the expected internal rate of return of an investment in a bond when the bond is held until maturity. YTM takes into account the price of the bond, its face value, time to maturity, and the coupon rate, which is the annual interest rate that the bond pays. The YTM is essential for investors to know because it provides a measure of the total yield an investor can expect to receive if they hold the bond until maturity. It can also help investors compare different bonds' yields to determine which one would be a better investment. To calculate the bond's YTM, one would need to use the formula:
YTM = C + ((F - P) / N) / ((F + P) / 2), where
C = annual coupon payment,
F = face value of the bond,
P = bond price, and
N = number of years until maturity.
The YTM can be used to determine if the bond is worth purchasing at its current price. If the YTM is higher than the required rate of return, the bond may be a good investment.
The formula to calculate the bond's yield to maturity is: YTM = C + ((F - P) / N) / ((F + P) / 2). The yield to maturity is the expected internal rate of return of an investment in a bond when the bond is held until maturity. The bond's yield to maturity (YTM) is the rate of return that an investor could gain by holding a bond to maturity. The correct answer to the given question is option C, 10.05%.
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