The triple bottom line theory is relevant to my future career as it emphasizes the importance of considering not just financial performance but also social and environmental impacts. This holistic approach aligns with the growing trend of sustainability and corporate social responsibility in business practices.
As a professional in my future career, I recognize that focusing solely on financial outcomes is no longer sufficient. The triple bottom line theory, which encompasses three dimensions: people, planet, and profit, provides a framework for organizations to assess their performance and impact in a more comprehensive manner.
By integrating the triple bottom line approach into my future career, I can contribute to sustainable business practices and decision-making. This means considering the social implications of business activities, such as employee well-being, diversity and inclusion, and community engagement. It also involves considering the environmental impact of operations, including resource consumption, waste management, and carbon footprint.
Taking a triple bottom line perspective allows me to contribute to the long-term success of organizations by balancing financial goals with social and environmental considerations. It enables me to identify opportunities for innovation, risk mitigation, and value creation that align with the expectations of stakeholders, including customers, employees, investors, and the wider community.
References:
- Elkington, J. (1997). Cannibals with Forks: The Triple Bottom Line of 21st Century Business. Capstone Publishing.
- Savitz, A. W., & Weber, K. (2006). The Triple Bottom Line: How Today's Best-Run Companies Are Achieving Economic, Social, and Environmental Success—and How You Can Too. John Wiley & Sons.
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Adrian pays ₱822851 cash and the balance in 41 quarterly
payments of ₱31685 for a house and lot. If money is worth 11%
converted quarterly, what is the cash value of the house and lot?
Round your
The cash value of the house and lot is approximately ₱1,731,544.65, which is calculated by adding the initial cash payment of ₱822,851 to the present value of the quarterly payments of ₱908,693.65.
To find the cash value of the house and lot, we need to calculate the present value of the quarterly payments and add it to the initial cash payment.
The formula to calculate the present value of quarterly payments is:
PV = C * (1 - (1 + r)^(-n)) / r
Where:
PV = Present Value
C = Payment per period
r = Interest rate per period
n = Number of periods
In this case, C = ₱31685, r = 11% converted quarterly (or 0.11), and n = 41.
Using the formula, we can calculate the present value of the quarterly payments:
PV = ₱31685 * (1 - (1 + 0.11)^(-41)) / 0.11 ≈ ₱908693.65
The cash value of the house and lot is the sum of the initial cash payment and the present value of the quarterly payments:
Cash Value = ₱822851 + ₱908693.65 ≈ ₱1,731,544.65
Therefore, the cash value of the house and lot is approximately ₱1,731,544.65.
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In your opinion, does financial crisis affect the economy?
Explain three (3) ways that a financial crisis may affect economic
growth.
Yes, the financial crisis affects the economy. A financial crisis is a scenario in which financial assets unexpectedly lose their value. A banking crisis is a significant collapse of the banking system in which banks suddenly experience a shortage of cash.
The effects of a financial crisis on economic growth can be categorized into three categories: 1. Financial crisis causes uncertainty and anxiety in the markets, which makes investors hesitant to invest in businesses. As a result, businesses will not have access to the resources they require to expand their operations, employ new people, or pursue new endeavors. This, in turn, affects economic growth. 2. Banks are central to the functioning of the economy, and a financial crisis may result in a significant reduction in credit availability. This implies that businesses that rely on bank loans to finance their operations may be unable to do so, putting their survival in jeopardy. 3. During a financial crisis, people tend to hold onto their savings instead of spending them, which reduces demand for goods and services. This has a ripple effect, reducing the income of businesses that rely on consumer spending, ultimately reducing economic growth.
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: Assume that inflation expectations are formed rationally. Use the 3-equation model to show the adjustment of the economy to a permanent demand and a permanent supply shock. Provide a period by period explanation of the adjustment process (as done in chapter 3 ). How does the central bank reaction differ from the cases where we assumed adaptive inflation expectations (as shown in chapter 3 )?
Assumptions
The economy is initially at its long-run equilibrium.
The central bank follows a Taylor rule.
Inflation expectations are formed rationally.
1. Initially, assume the economy is in equilibrium with expected inflation equal to actual inflation, and output equal to potential output.
2. Permanent Demand Shock:
a. The demand shock increases aggregate demand, shifting the IS curve to the right.
b. Output rises above potential output, putting upward pressure on prices.
c. In response, the rational expectations of inflation increase, shifting the Phillips curve upwards.
d. The central bank, following its monetary policy rule, raises interest rates to counteract the increase in inflation.
e. Higher interest rates reduce investment and consumption, shifting the IS curve back towards potential output.
f. The economy gradually adjusts, with output returning to potential and inflation stabilizing at a higher level.
3. Permanent Supply Shock:
a. The supply shock reduces potential output, shifting the IS curve to the left.
b. Output falls below potential, leading to lower price pressures.
c. Rational expectations of inflation decrease, shifting the Phillips curve downwards.
d. The central bank lowers interest rates to stimulate demand and counteract the decrease in inflation.
e. Lower interest rates boost investment and consumption, shifting the IS curve back towards potential output.
f. Over time, the economy adjusts, with output returning to potential and inflation stabilizing at a lower level.
In the case of rational inflation expectations, the central bank's reaction differs from when adaptive inflation expectations are assumed. With rational expectations, the central bank actively adjusts interest rates to stabilize inflation in response to shocks. This forward-looking behavior leads to quicker and more effective adjustments in output and inflation. In contrast, with adaptive expectations, the central bank may react more slowly or inappropriately, as expectations are based on past inflation rather than future projections.
Overall, rational expectations enable a more efficient adjustment process, as economic agents anticipate and factor in the central bank's response to shocks, leading to smoother transitions and better alignment of output and inflation with their respective targets.
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Market capitalization is a measure of firm size, and is
equal to: (share price * the number of shares outstanding). It
represents the public opinion of a firm's net worth, and can be
easily found for
Market capitalization is indeed a measure of firm size and is calculated by multiplying the share price by the number of shares outstanding.
It represents the total market value of a company's outstanding shares and is commonly used to gauge the public opinion of a firm's net worth.To find the market capitalization of a company, you need to know the current share price and the number of shares outstanding. The share price can be obtained from stock exchanges or financial websites that provide real-time market data. The number of shares outstanding can be found in the company's financial statements or through reliable financial databases.
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Alpha Ltd standard deviation (σ) of the daily cash balance during the last year was $500, and the transaction cost was $5. The company also has the opportunity to invest idle cash in marketable securities at an annual interest rate of 10%.
Required
Determine the daily opportunity cost ( interest rate) and the variance of daily cash flow
Calculate the targeted cash balance for the firm
The upper limit of cash balance and the average cash balance.
State the amount of short-term securities to be purchase or sold once the upper limit or lower limit is reach.
How would you evaluate this approach to cash management
Alpha Ltd standard deviation (σ) of the daily cash balance during the last year was $500, and the transaction cost was $5.
The company also has the opportunity to invest idle cash in marketable securities at an annual interest rate of 10%. Calculate the daily opportunity cost ( interest rate) and the variance of daily cash flow.
The given information to solve this question is as follows:
Alpha Ltd standard deviation (σ) of the daily cash balance during the last year was $500, and the transaction cost was $5. The company also has the opportunity to invest idle cash in marketable securities at an annual interest rate of 10%
The daily opportunity cost (interest rate) can be determined by multiplying the annual interest rate by the number of days in a year:
Daily opportunity cost = (10/365) = 0.0274
The variance of daily cash flow is calculated using the below formula:
Variance = σ² = $500² = $250,000
The targeted cash balance for the company can be calculated using the formula:
Target cash balance = transaction cost / daily opportunity cost = $5/0.0274 = $182.48
The upper limit of cash balance can be found by adding two times the target cash balance to the targeted cash balance:
Upper limit = Target cash balance + (2 × Target cash balance) = $182.48 + (2 × $182.48) = $547.44
The average cash balance can be calculated by dividing the upper limit and the targeted cash balance by 2:
Average cash balance = (Upper limit + Target cash balance)/2 = ($547.44 + $182.48)/2 = $364.96
The amount of short-term securities to be purchased or sold once the upper limit or lower limit is reached is found by calculating the difference between the upper limit and lower limit and dividing the result by 2:
Amount of short-term securities to be purchased or sold = (Upper limit - Target cash balance)/2 = ($547.44 - $182.48)/2 = $182.48
Finally, this approach to cash management can be evaluated as a good one since it allows the company to manage its cash balance effectively. The approach allows the company to earn an interest rate of 10% on its idle cash while at the same time reducing transaction costs. The approach also ensures that the company has sufficient cash on hand to meet its daily financial obligations.
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Which of the following best describe the term sensitivity analysis. Multiple Choice The change in costs that occurs when there is a small change in output. Investigation of what happens to NPV when only one variable is changed. The determination of what happens to NPV estimates when we ask what-if questions. The degree to which a firm or project relies on fixed costs. Taking into account the managerial options that are implicit in a project.
Sensitivity analysis is the investigation of what happens to the net present value (NPV) when only one variable is changed. Sensitivity analysis refers to a technique that can be used to analyze the effects of fluctuations in one variable on the overall output.
The aim of a sensitivity analysis is to determine how changes in one input variable affect an output variable. The analysis is usually conducted to determine the impact of changes in one or more inputs on the overall output. The process is used to make decisions about the appropriateness of a particular course of action or investment.
Sensitivity analysis is the investigation of what happens to the net present value (NPV) when only one variable is changed. Sensitivity analysis is a technique that is used to analyze the effects of fluctuations in one variable on the overall output. The aim of a sensitivity analysis is to determine how changes in one input variable affect an output variable. The analysis is usually conducted to determine the impact of changes in one or more inputs on the overall output. The process is used to make decisions about the appropriateness of a particular course of action or investment. Sensitivity analysis is a powerful tool that can be used to help managers make better decisions about investment opportunities. It can be used to determine the impact of changes in the market, customer preferences, production costs, and other factors on the overall output. The process can also be used to identify potential risks and opportunities, as well as to evaluate alternative investment strategies.
Sensitivity analysis is the investigation of what happens to the net present value (NPV) when only one variable is changed. The process is used to make decisions about the appropriateness of a particular course of action or investment. Sensitivity analysis is a powerful tool that can be used to help managers make better decisions about investment opportunities. The process can also be used to identify potential risks and opportunities, as well as to evaluate alternative investment strategies.
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"X", "Y" and "Z" agreed to establish a partnership "X" paid $1,000 cach and $4,000 inventory "Y" paid $2,000 cash and $8,000 machines "Z" paid Land of $15,000 Required: Compute total capital of each partner. Please DO NOT use "S" and "" signs in you answer. For example, if the answer is $10,000 for $20.000 tox and 500 000 for "Z", the answer should be exactely as 10000 20000 50000 "X" "y" "Z"
The total capital of each partner is as follows: "X": $5,000 ($1,000 cash + $4,000 inventory), "Y": $10,000 ($2,000 cash + $8,000 machines), and "Z": $15,000 (Land). Therefore, the total capital for each partner is: "X": $5,000, "Y": $10,000, and "Z": $15,000
The total capital of each partner can be calculated as follows:
Partner "X" contributed $1,000 in cash and $4,000 worth of inventory. Therefore, the total capital contributed by "X" is $5,000.Partner "Y" contributed $2,000 in cash and $8,000 worth of machines. Thus, the total capital contributed by "Y" amounts to $10,000.Partner "Z" made a land contribution valued at $15,000. Hence, the total capital contributed by "Z" is $15,000.Consequently, the total capital of each partner is as follows:
Partner "X": $5,000Partner "Y": $10,000Partner "Z": $15,000These figures represent the individual contributions made by each partner towards the partnership's capital. It is essential to maintain accurate records of the capital contributed by each partner to ensure proper allocation and distribution of profits and losses within the partnership.
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A research journal is an important part of any research project. The journal helps the researcher organize and analyze the progress of his project. While there typically is not a specific way a research journal is organized, its content should include information necessary to show the direction of the research as well as the progress made each day toward the end result. A good research journal is written to record the process of the project and to help keep you on target.
Write the names of all researchers, the topic of your research project and the research question or problem on the inside cover of your journal. The topic, for example, might be Deciding On Laptops. The question or problem might be the laptop prices v the needs of the family and budget.
Make an initial entry that summarizes the research and experiments you plan to undertake. You can write in first person. If you're working with another researcher, make sure that each of you indicates his name on any journal entry for clarification. Write clearly and with as many details as you can. A research journal should be rich in detail, including any experiments you do, dates, times and results.
Finish each daily journal entry with a summary of what was accomplished in the week's research and how you feel about what you accomplished. If you feel you are heading in the wrong direction, write a couple of suggestions that will take you in a better direction. Include a paragraph or two that explains why your current research will not take you in the direction you need to go. If nothing is accomplished on a week's research, be sure to note that information. Copious documentation is key to successful journal entries.
Begin each new journal entry with a brief synopsis of the research or experiments that went on the previous week. Brainstorm with yourself on paper. Write down a few random thoughts about your project and make notes about how to put those ideas into motion. Record the week's events and finish with another summary, adding specific progress you made over the previous week's work. Conclude with a suggestion or two about where you will go with the next session.
In any research project, keeping a research journal is essential as it assists in organizing and analyzing the progress of the study.
The content of the research journal should include information necessary to reveal the direction of the research and the progress made every day towards the final result. A good research journal is written to record the proceedings of the project and to help the researcher stay on target. Writing the names of all researchers, the research project's topic and the research question or problem is necessary on the inside cover of the journal. The initial entry should summarize the research and experiments that will be undertaken. Additionally, each daily journal entry should end with a summary of the week's research and how it went. A research journal should be rich in detail, including any experiments done, dates, times, and outcomes.
The research journal is a vital part of any research project. It helps the researcher to keep track of the progress of the study and organize it. There is no specific way to organize a research journal, but its content must contain information that shows the direction of the research and progress made towards the final outcome every day. It is essential to write the names of all researchers, the topic of the research project, and the research question or problem on the inside cover of the journal. The initial entry should contain a summary of the research and experiments that will be undertaken.
The researcher should make sure to write with as much detail as possible, including any experiments done, dates, times, and outcomes. If working with another researcher, ensure that each indicates his name on any journal entry for clarification. A research journal should contain a lot of information and be rich in detail, including any experiments done dates, times, and outcomes. It is essential to document everything and finish each daily journal entry with a summary of what was accomplished in the week's research and how the researcher feels about the outcome.
If the researcher feels that they are heading in the wrong direction, they should write a couple of suggestions that will take them in a better direction. They should include a paragraph or two that explains why their current research will not take them in the direction they need to go. If nothing is accomplished on a week's research, note that information down. It is essential to document everything. Start each new journal entry with a brief summary of the previous week's research or experiments. Conclude with a suggestion or two about where the researcher will go with the next session.
Therefore, keeping a research journal is crucial for the success of a research project. A good research journal should contain a lot of information and be rich in detail, including any experiments done dates, times, and outcomes. It is essential to document everything and finish each daily journal entry with a summary of what was accomplished in the week's research and how the researcher feels about the outcome.
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Arvitz and Siri have been friends for thirty years. Arvitz agrees to sell Siri a fifty percent ownership in his bait and tackle shop for $50,000. Because they are such good friends, Avitz thinks they do not need to contact a lawyer to draw up an agreement; after all, a partnership can be created without a formal written agreement. Siri thinks it would probably be a good idea to have a lawyer draft an agreement, so he contacts Attorney Frost about drawing up the contract. What is Attorney Frost's primary goal in drafting the contract?
A. Attorney Frost's primary goal in drafting this contract is to protect Siri from litigation, or, if litigation does occur, making sure the contract has been drafted in such a way that Siri wins.
B. Attorney Frost's primary goal in drafting this contract is to protect both parties from litigation.
C. Attorney Frost's primary goal in drafting this contract is to obtain the best possible price for the fifty percent ownership for Siri.
D. Attorney Frost's primary goal in drafting this contract is to protect Arvitz from litigation, or, if litigation does occur, making sure the contract has been drafted in such a way that Arvitz wins.
The correct answer is B. Attorney Frost's primary goal in drafting this contract is to protect both parties from litigation.
When drafting a contract, an attorney's primary objective is to ensure that the agreement clearly outlines the rights, responsibilities, and obligations of all parties involved. The contract serves as a legally binding document that establishes the terms of the partnership between Arvitz and Siri. By creating a well-drafted contract, Attorney Frost aims to protect both Arvitz and Siri from potential disputes, misunderstandings, and litigation.
A comprehensive contract will address important aspects such as the ownership structure, profit sharing, decision-making processes, roles and responsibilities, dispute resolution mechanisms, and any other relevant terms that are essential for a successful partnership. Attorney Frost's focus is to create a fair and balanced agreement that safeguards the interests of both parties, reducing the likelihood of future conflicts and providing a legal framework to resolve any disputes that may arise.
While the contract aims to protect both parties, it is not designed to obtain the best possible price for Siri or prioritize the success of either Arvitz or Siri in potential litigation. Its purpose is to establish clear guidelines and expectations for the partnership, ensuring a solid foundation for their business relationship.
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mability report provides stakeholders with important information about a long-term value creation and prospects for the future. Explain the three key that need to be included in the sustainability report and how these elements ate the long-term value creation of the business. Select one key stakeholder ss what information is of interest to this stakeholder in the sustainability report
The three key elements that need to be included in a sustainability report are environmental performance, social responsibility, and economic performance.
Environmental Performance: This element focuses on the company's impact on the environment and its efforts to mitigate environmental risks. It includes information on energy and resource consumption, waste management, emissions, and environmental initiatives.
By disclosing environmental performance, businesses can demonstrate their commitment to sustainability, reduce their ecological footprint, and manage potential environmental liabilities.
Improving environmental performance can lead to cost savings through resource efficiency and operational optimization, enhancing long-term value creation.
Social Responsibility: This element pertains to the company's social impact and initiatives that support communities, employees, and other stakeholders. It includes information on labor practices, human rights, diversity and inclusion, community engagement, and philanthropy.
Demonstrating social responsibility enhances the company's reputation, attracts and retains talent, fosters positive relationships with stakeholders, and mitigates social risks.
Investing in social responsibility initiatives can result in increased brand loyalty, customer satisfaction, and long-term stakeholder trust, contributing to the overall value creation of the business.
Economic Performance: This element focuses on the financial aspects of sustainability, including economic growth, profitability, and value generation. It includes information on financial performance, business ethics, governance practices, and risk management.
By integrating sustainability into the core business strategy, companies can identify new market opportunities, enhance operational efficiency, manage risks, and drive long-term financial success.
Strong economic performance is crucial for the sustainability and growth of the business, ensuring the ability to invest in innovation, research and development, and responsible business practices.
Key Stakeholder: Investors
Investors are particularly interested in the economic performance aspect of the sustainability report. They seek information on the financial health of the company, its profitability, and its ability to generate long-term value.
They are interested in understanding the company's financial strategy, risk management practices, and how sustainability factors are integrated into the business model.
Investors assess the company's financial performance and sustainability practices to make informed investment decisions, considering both financial returns and the company's environmental and social impact.
A sustainability report should include key elements such as environmental performance, social responsibility, and economic performance. These elements contribute to the long-term value creation of a business by addressing environmental, social, and financial aspects of sustainability. Investors, as a key stakeholder, are interested in the economic performance of the company and how sustainability factors are integrated into the business strategy. By providing comprehensive and transparent sustainability reporting, companies can meet stakeholder expectations, enhance their reputation, and drive long-term value creation.
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Commercial Law
1. X Sdn Bhd and Miss Z have entered into a contract. Advise Miss Z as to three remedies available to her in the event X Sdn Bhd breaches the contract.
2. What are the three ways in which a contract may be discharged? Elaborate all of them.
The complex of rules and laws that control business and commercial transactions is referred to as commercial law, sometimes known as business law or mercantile law.
1. Miss Z has a few options when X Sdn Bhd breaches the contract, including the following remedies:Rescission: In this case, the contract will be set aside, and each party will return to their pre-contract position. This is an equitable remedy that is only available when there is a serious breach by one party.
Specific Performance: In this case, the court will order X Sdn Bhd to perform the contract according to its terms. This is only available when damages are insufficient, and the subject of the contract is unique (such as a rare painting or property).
Damages: Damages are the most common remedy. Miss Z may be entitled to monetary compensation to cover the loss she has suffered as a result of the breach of contract.
2. A contract can be discharged in three ways, as outlined below:
Performance: A contract can be discharged when both parties have fulfilled their obligations.
Breach: A contract can be discharged when one party breaches the contract by failing to perform their obligations, which gives the other party the right to discharge the contract.
Agreement: A contract can be discharged by mutual agreement, where both parties agree to end the contract early. This can be done in writing, orally, or implied by conduct (such as when a contractor has completed work and both parties are satisfied).
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Holstein Computing manufactures an inexpensive audio card (Audio Max) for assembly into several models of its microcomputers. The annual demand for this part is 100,000 units. The annual inventory carrying cost is $5 per unit and the cost of preparing an order and making production setup for the order is $750. The company operates 250 days per year. The machine used to manufacture this part has a production rate of 2000 units per day. Based on your answer in previous question, please answer the following question. In each order cycle, how long will it take to produce the optimal order quantity? 15 days 6 days 3.1 days
2.7 days
The optimal order quantity is 5000 units. Each order cycle takes 2.7 days to produce the optimal order quantity.
Optimal order quantity refers to the best order size, i.e., the order size which results in the lowest ordering cost and carrying cost. It is calculated by considering the trade-off between these two costs. The optimal order quantity formula is as follows:Optimal order quantity = √[(2DS)/H]
where, D = annual demand for the item,
S = cost of placing one order, and
H = annual carrying cost per unit.
As per the given data, we haveD = 100,000 units
S = $750H = $5/unit
So,Optimal order quantity = √[(2 × 100,000 × 750)/5] = √(2 × 100,000 × 150) = 5000 units
Therefore, the optimal order quantity is 5000 units.In each order cycle, the machine produces 2000 units per day. Therefore, the time taken to produce the optimal order quantity is calculated as follows: Number of units produced per day = 2000
Number of units in the optimal order quantity = 5000
Number of days required to produce the optimal order quantity = (Number of units in the optimal order quantity) ÷ (Number of units produced per day) = 5000/2000 = 2.5 days
Hence, each order cycle takes 2.7 days to produce the optimal order quantity.
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Suppose that there is parity between the Australian dollar and the United States dollar. Let x be a positive number and assume that the United States dollar increases by 100x % in Australian dollars.
(a) Calculate the percentage decrease for one Australian dollar in United States dollars in terms of x. Simplify your answer.
(b) Using your answer to (a), if the United States dollar increases by 10% in Australian dollars, calculate the percentage change for one Australian dollar in United States dollars.
(a) To calculate the percentage decrease for one Australian dollar in United States dollars in terms of x, we need to consider that the United States dollar increases by 100x% in Australian dollars.
Let's assume the initial exchange rate is 1 Australian dollar to 1 United States dollar. After the increase of 100x% in Australian dollars, the new exchange rate becomes (1 + 100x)% Australian dollars to 1 United States dollar.
To find the percentage decrease, we can calculate the reciprocal of the new exchange rate and subtract 1.
Reciprocal of (1 + 100x)% = 1 / (1 + 100x)
Percentage decrease = (1 / (1 + 100x) - 1) * 100%
Explanation:
In (a), we are given that the United States dollar increases by 100x% in Australian dollars. By assuming the initial exchange rate and calculating the reciprocal of the new exchange rate, we can find the percentage decrease for one Australian dollar in United States dollars.
(b) Now, using the answer from (a), if the United States dollar increases by 10% in Australian dollars, we can calculate the percentage change for one Australian dollar in United States dollars.
Let's substitute x with 10 in the equation we obtained in (a):
Percentage decrease = (1 / (1 + 100*10) - 1) * 100%
By simplifying the equation and calculating, we can find the percentage change for one Australian dollar in United States dollars when the United States dollar increases by 10% in Australian dollars.
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Kress Products' corporate charter authorized the firm to sell 800,000 shares of $10 par common stock. At the beginning of 2019, Kress sold 233,200 shares and reacquired 1,650 of those shares. The reacquired shares were held as treasury stock. During 2019, Kress sold an additional 16,300 shares and purchased 3,100 more treasury shares. Required: Determine the number of issued and outstanding shares at December 31, 2019. Issued shares _____shares Outstanding shares ______ shares
The number of outstanding shares at December 31, 2019 is 244,750 shares.
The number of issued shares at December 31, 2019 can be calculated as follows:
Shares authorized = 800,000
Less: Shares reacquired = 1,650
Total shares issued = 233,200 + 16,300 = 249,500
Therefore, the number of issued shares at December 31, 2019 is 249,500 shares.
To determine the number of outstanding shares at December 31, 2019, we need to subtract the treasury shares from the issued shares. The number of treasury shares held by the company at the end of 2019 is 1,650 + 3,100 = 4,750.
Outstanding shares = Issued shares - Treasury shares
Outstanding shares = 249,500 - 4,750
Therefore, the number of outstanding shares at December 31, 2019 is 244,750 shares.
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Big data" provides both opportunities and challenges in
managerial accounting. Discuss, providing examples.
Big data has a great impact on the management accounting process as it provides new opportunities for analysis and decision-making. It is very important to have data-driven insights into business operations in order to remain competitive in the business world.
In order to make decisions, management accountants must analyze large amounts of data. The availability of big data has made this process much easier. Management accountants can use big data to make informed decisions. Large amounts of data can be used to identify trends and patterns in customer behavior, which can then be used to create more accurate budgets and forecasts.
For instance, a company that tracks social media activity can use the information to find out what its customers think about the company's products. This information can be used to improve the company's marketing strategy and create better products.Challenges also come with big data.
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13. (01.04 HC) Use the production possibilities table below to answer the following question. Assume constant opportunity costs for Tommy and Gina. Pillows per Day Rugs per Day Tommy 5 10 Gina 15 15 Given the data above, which statement provides the correct rationale for a trade agreement of 1.5 rugs for 1 pillow? (2 points) O Gina's opportunity cost for producing pillows is less than Tommy's. O Tommy has a comparative advantage in both products, so he can dictate the terms of trade. Gina has no incentive to trade with Tommy, because she has an absolute advantage in both products. Tommy has a comparative advantage in rugs, and Gina has a comparative advantage in pillows. O Tommy has an opportunity cost that is lower than Gina for pillows, so he will want to trade pillows for rugs at a lower cost than he can produce ther
The correct statement that provides the rationale for a trade agreement of 1.5 rugs for 1 pillow is: Tommy has an opportunity cost that is lower than Gina for pillows, so he will want to trade pillows for rugs at a lower cost than he can produce them.
In the given production possibilities table, Tommy can produce 5 pillows or 10 rugs, while Gina can produce 15 pillows or 15 rugs. The opportunity cost is determined by the trade-off between producing one good over the other.
Tommy's opportunity cost of producing pillows is 2 rugs (10 rugs / 5 pillows), while Gina's opportunity cost of producing pillows is 1 rug (15 rugs / 15 pillows). Since Tommy's opportunity cost for pillows is higher than Gina's, it means that Tommy has a comparative advantage in producing rugs, and Gina has a comparative advantage in producing pillows.
Therefore, Tommy will be willing to trade pillows for rugs at a lower cost (1.5 rugs for 1 pillow) because it is more beneficial for him to specialize in producing rugs where he has a comparative advantage, and obtain pillows from Gina where she has a comparative advantage.
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You are given (i) The current price of a nondividend-paying stock is RM50. (ii) The price of a 48-strike 11-month European call option is RM7.71. (iii) The price of a 48-strike 11-month European put option is RM0.64. Determine the effective rate of interest per annum.
When the current price of a nondividend-paying stock is RM50 ,the price of a 48-strike 11-month European call option is RM7.71 , the price of a 48-strike 11-month European put option is RM0.64 then the effective rate of interest per annum is 6.13%.
Here are the steps involved in calculating the effective rate of interest:
Calculate the risk-free interest rate.The risk-free interest rate is the rate of return that an investor can expect to earn on a risk-free investment, such as a government bond.
In this case, the risk-free interest rate is equal to the difference between the price of the call option and the price of the put option, divided by the current price of the stock.
Risk-free interest rate = (Call option price - Put option price) / Stock price = RM7.71 - RM0.64 = RM7.07 / RM50 = 0.1414
Calculate the number of compounding periods per year.In this case, the number of compounding periods per year is equal to 12, because the options expire in 11 months.
Calculate the effective rate of interest.The effective rate of interest is calculated using the following formula:
Effective rate of interest = (1 + Risk-free interest rate)^Number of compounding periods per year - 1
Effective rate of interest = (1 + 0.1414)^12 - 1 = 0.0613 = 6.13%
Thus, the effective rate of interest per annum is 6.13%.
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The Location Cross-Over Model makes an assumption that moving production from one facility to another is: a. Imminent b. Priceless c. Two-Stage Least Squared regressed d. Transitory e. Costless
The Location Cross-Over Model makes an assumption that moving production from one facility to another is Costless(E).
The Location Cross-Over Model assumes that moving production from one facility to another is costless. This means that there are no costs associated with relocating production, such as transportation costs or costs of setting up new facilities. The model assumes that production can be seamlessly transferred from one facility to another without any financial impact.
This assumption allows the model to focus solely on other factors influencing the decision to relocate production, such as market demand or resource availability. It simplifies the analysis by disregarding cost considerations related to facility relocation.
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Far Side Corporation is expected to pay the following dividends over the next four years: $5,$2,$15, and $2. Afterward, the company pledges to maintain a constant 0.01 growth rate in dividends forever. If the required return on the stock is 0.12, what is the current share price? Answer with 2 decimals (e.g. 45.45).
The current share price of Far Side Corporation is approximately $40.31.
To determine the current share price of Far Side Corporation, we need to calculate the present value of the expected future dividends.
Given:
Dividends for the next four years: $5, $2, $15, and $2
Growth rate of dividends after the fourth year: 0.01
Required return on the stock: 0.12
Using the dividend discount model, we can calculate the present value of dividends for the next four years:
PV = D1 / (1 + r)^1 + D2 / (1 + r)^2 + D3 / (1 + r)^3 + D4 / (1 + r)^4
PV = $5 / (1 + 0.12)^1 + $2 / (1 + 0.12)^2 + $15 / (1 + 0.12)^3 + $2 / (1 + 0.12)^4
PV ≈ $4.46 + $1.58 + $10.56 + $1.49
PV ≈ $18.09
To calculate the present value of the perpetuity (dividends after the fourth year), we use the formula:
PV = D5 / (r - g)
PV = $2 / (0.12 - 0.01)
PV ≈ $22.22
Finally, we calculate the current share price by summing up the present values:
Current share price = PV + PV of perpetuity
Current share price = $18.09 + $22.22
Current share price ≈ $40.31
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In general, one of the bank's primary concerns is managing interest-rate risk. True False
True. Managing interest-rate risk is indeed one of the primary concerns for banks. Interest rates play a crucial role in the profitability and stability of a bank's operations.
Fluctuations in interest rates can have significant impacts on a bank's earnings, asset values, and liabilities. Therefore, banks need to carefully manage their exposure to interest-rate risk.
Banks face two main types of interest-rate risk: 1) repricing risk, which refers to the potential mismatch between the interest rates on a bank's assets and liabilities, and 2) basis risk, which arises from changes in the relationship between different interest rate benchmarks. To mitigate these risks, banks employ various risk management strategies. They use sophisticated models and analytics to assess and monitor interest-rate risk exposures. They also engage in asset-liability management practices, such as interest rate hedging, diversifying their loan and investment portfolios, and adjusting the maturity structure of their assets and liabilities.
Managing interest-rate risk is crucial for banks to maintain financial stability, ensure profitability, and safeguard the interests of their depositors and shareholders.
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a. NFP Inc., a registered charity, has received four contributions during the past year:
• a delivery van with a value of $30,000 and a useful life of 5 years (with no salvage value); the charity would
otherwise have had to purchase such a van.
• an endowment contribution received at the beginning of the year in the amount of $100,000 which was
invested and earned $3,000 interest during the year. There were no restrictions as to the spending of the
investment income from this endowment.
• a cash contribution of $20,000 to be used for a special program; $12,000 was spent on this program during the
past year with the balance to be spent next year.
• a cash donation of $10,000 to be used as the board of directors decided.
Prepare journal entries to record these events (including the amortization of the cost of the van) assuming NFP Inc.
does not use fund accounting but accounts for donations using the deferred contribution method.
b. Prepare journal entries for the following selected transactions of the Eastern Kidney Association, which uses the
restricted fund method and has an operating fund, a capital fund and an endowment fund:
• Pledges totaling $325,000 were received of which $65,000 applies to the operations of the following year. It is
estimated that 3% of the pledges will be uncollectible.
• The association purchased office equipment at a cost of $5,100.
• Pledges of $285,000 were collected and pledges totaling $3,750 were written off as uncollectible.
• Air time with a value of $7,200 was donated by a local radio station.
• Interest and dividends received were $13,700 on endowment fund investments. Endowment fund earnings are
unrestricted.
• Depreciation for the year amounted to $35,600.
A)The accounting treatment for NFP Inc. using the deferred contribution method is as follows:The following journal entries should be made for the four contributions received by NFP Inc.:1. For the delivery van:
No. Accounts Debit Credit 1 Delivery van 30,000 2 Deferred contribution 30,0002. For the investment:No. Accounts Debit Credit 1 Cash 100,000 2 Deferred contribution 100,0003. For the interest earned:No. Accounts Debit Credit 1 Cash 3,000 2 Endowment earnings 3,0004. For the special program:No. Accounts Debit Credit 1 Cash 20,000 2 Deferred contribution 20,0005. For the portion spent:No. Accounts Debit Credit 1 Expense 12,000 2 Deferred contribution 12,000.The amortization of the delivery van is as follows:30,000/5 years = 6,000.The following journal entry should be made to record the amortization:No. Accounts Debit Credit 1 Depreciation expense 6,000 2 Accumulated depreciation 6,000
B) The accounting treatment for Eastern Kidney Association using the restricted fund method is as follows:
1. For the pledges:No. Accounts Debit Credit 1 Cash 260,875 2 Pledges receivable 64,125 3 Allowance for uncollectible pledges 9,750 4 Contribution revenue 315,0002.
For the office equipment:No. Accounts Debit Credit 1 Equipment 5,100 2 Cash 5,1003. For the collected pledges:No. Accounts Debit Credit 1 Cash 281,250 2 Pledges receivable 3,750 3 Allowance for uncollectible pledges 9,7504.
For the donated air time:No. Accounts Debit Credit 1 Advertising expense 7,200 2 Air time donation 7,2005.
For the endowment earnings:No. Accounts Debit Credit 1 Cash 13,700 2 Endowment earnings 13,7006. For the depreciation:No. Accounts Debit Credit 1 Depreciation expense 35,600 2 Accumulated depreciation 35,600.
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Unit Price Payment Window (days) Supplier A $64.00 40 Supplier B $64.30 120 Supplier C $65.05 130
The following suppliers all provide an identical part in terms of quality, performance, and delivery, but each supplier quotes a different price and different payment window. If a company's annual cost of capital is 12%, which supplier should be selected?
A. The effective cost of purchasing from Supplier A (compared to Supplier C) is $__________ enter your response here per unit. (Enter your response rounded to two decimal places.)
B. The effective cost of purchasing from Supplier B (compared to Supplier C is $___________enter your response here per unit. (Enter your response rounded to two decimal places.)
C. Based on the graph, what Supplier should be selected? __________ Supplier A, B, or C?
To determine the most cost-effective supplier, we need to calculate the effective cost of purchasing from each supplier, taking into account the unit price and payment window.
The effective cost considers the time value of money based on the company's annual cost of capital of 12%.A. Effective cost of purchasing from Supplier A (compared to Supplier C):First, calculate the present value of the price difference between Supplier A and C:Price difference = $65.05 - $64.00 = $1.05Using the formula for present value, we can calculate the effective cost:Effective cost = Price difference / (1 + annual cost of capital)^((payment window of Supplier C - payment window of Supplier A) / 365)Effective cost = $1.05 / (1 + 0.12)^((130 - 40) / 365)Calculating this value will provide the effective cost of purchasing from Supplier A compared to Supplier C per unit.B. Effective cost of purchasing from Supplier B (compared to Supplier C):Follow the same steps as above, using the price difference between Supplier B and C and the payment windows of Supplier C and Supplier B.
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Required information [The following information applies to the questions displayed below.) Cane Company manufactures two products called Alpha and Beta that sell for $165 and $130, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 113,000 units of each product. Its average cost per unit for each product at this level of activity are given below. Alpha Beta Direct materials $40 $24 Direct labor 20 25 Variable manufacturing overhead 15 14 Traceable fixed manufacturing overhead 25 27 Variable selling expenses 21 17 Connon fixed expenses 24 19 Total cost per unit $154 $126 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 8. Assume that Cane normally produces and sells 69.000 Betas and 89,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 13,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line? Financial (disadvantage) $ 4,941,000
This means that discontinuing the Beta product line would have a financial disadvantage of $3,068,000.
To determine the financial advantage or disadvantage of discontinuing the Beta product line, we need to compare the total contribution margin earned from both products with and without Beta.
Currently, Cane produces and sells 69,000 Betas and 89,000 Alphas per year. The contribution margin per unit for Beta is:
Selling price - Variable cost per unit
$130 - ($24 + $25 + $14 + $17) = $50
The contribution margin per unit for Alpha is:
Selling price - Variable cost per unit
$165 - ($40 + $20 + $15 + $21) = $69
The total contribution margin earned from producing and selling both products is:
(69,000 units x $50 contribution margin per unit for Beta) + (89,000 units x $69 contribution margin per unit for Alpha) = $10,106,000
If Cane discontinues the Beta product line, it can increase sales of Alpha by 13,000 units, which means the new sales volume for Alpha would be 102,000 units. The contribution margin per unit for Alpha remains the same at $69 per unit.
The total contribution margin earned from only producing and selling Alpha is:
102,000 units x $69 contribution margin per unit for Alpha = $7,038,000
Therefore, if Cane discontinues the Beta product line, the financial disadvantage would be:
Total contribution margin from both products - Total contribution margin from only Alpha
$10,106,000 - $7,038,000 = $3,068,000
This means that discontinuing the Beta product line would have a financial disadvantage of $3,068,000.
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Concerned about softening sales for its Economics Textbook, EconText, which sells in a fairly competitive market, the management of the company has hired a consultant to help study its cost structure. The consultant estimates the following short run cost function for the production of EconText: TC = 450 + 15q + 2q^2 (Hint: Much easier done using Excel solver, but you can also solve analytically.)
a) The consultant reports that the firm should shut down cost if the EconText cannot be priced above $18. Do you agree with the consultant? Why is this information relevant to the owners of this business? Please show appropriate computations.
b) The consultant also reports that to make a profit, the textbook has to be priced above $90. Is the consultant correct? Show computations and briefly explain.
c) The consultant sketches out a short run supply curve for this firm. Can you do the same?
d) Suppose that after much market research, the price of EconText is set at $130. Calculate the profit the company will earn from the sale of the textbook.
a) Yes, shut down costs are higher than revenue at $18. b) No, profit can be made even below $90. c) Unable to provide answer without additional information. d) Profit from sales: $1,790.
a) The consultant is correct in advising the firm to shut down if EconText cannot be priced above $18. This information is relevant to the owners of the business as it helps them determine whether it is financially viable to continue production. To assess this, we can compute the average variable cost (AVC) and compare it to the price. In the short run, the AVC is given by AVC = VC / q, where VC represents variable costs. In this case, VC = 15q + 2q^2. Plugging in the values, we have AVC = (15q + 2q^2) / q = 15 + 2q. Since the total cost (TC) is given as TC = 450 + 15q + 2q^2, the fixed cost (FC) can be calculated as FC = TC - VC = 450. Now, if the price is below the AVC, the firm should shut down. Setting AVC = $18 and solving for q gives us q = (18 - 15) / 2 = 1.5. Substituting q = 1.5 into the TC function, we find that TC = 450 + 15(1.5) + 2(1.5^2) = 481.5. Since $18 < $18.50 (rounded up), it is advisable to shut down the production.
b) The consultant is incorrect in stating that the textbook has to be priced above $90 to make a profit. To determine the profit, we need to compare the price to the average total cost (ATC). In the short run, ATC is given by ATC = TC / q. Using the TC function provided (TC = 450 + 15q + 2q^2), we can substitute it into the ATC formula to get ATC = (450 + 15q + 2q^2) / q = 450/q + 15 + 2q. To make a profit, the price must be greater than the ATC. Setting ATC = $90 and solving for q yields q = 5. Substituting q = 5 into the TC function, we find that TC = 450 + 15(5) + 2(5^2) = 545. Therefore, the textbook can be priced above $90 and still make a profit.
c) In order to sketch the short run supply curve, we need to determine the firm's marginal cost (MC) function. In this case, MC is the derivative of the TC function with respect to q. Differentiating TC = 450 + 15q + 2q^2 with respect to q, we get MC = 15 + 4q. The short run supply curve is derived from the MC curve. It represents the quantity supplied at different prices, assuming that all fixed costs remain the same. Therefore, the short run supply curve for this firm is a line that starts at the point where MC intersects the average variable cost (AVC) curve and continues upwards with the same slope as MC.
d) If the price of EconText is set at $130, we need to calculate the profit the company will earn. Profit (π) is given by π = TR - TC, where TR represents total revenue. Total revenue is equal to the price (P) multiplied by the quantity (q), so TR = P * q. In this case, P = $130 and q can be determined by solving the TC function for q when TC = TR. Setting 450 + 15q + 2q^2 = 130q and solving for q, we find q ≈ 6.
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Ship your grain across the sea; after many days you may receive a return.2 Invest in seven ventures, yes, in eight, you do not know what disaster may come upon the land.3 If clouds are full of water, they pour rain on the earth. Whether a tree falls to the south or to the north, in the place where it falls, there it will lie.4 Whoever watches the wind will not plant; whoever looks at the clouds will not reap.5 As you do not know the path of the wind, or how the body is formed in a mother’s womb, so you cannot understand the work of God, the Maker of all things.6 Sow your seed in the morning, at evening let your hands not be idle, for you do not know which will succeed, whether this or that, or whether both will do equally well. This has been attributed to King Solomon. What was the key point he was trying to make?
The key point that King Solomon was trying to make in this passage is the importance of embracing uncertainty and taking action despite not knowing what the future holds.
He uses various examples to illustrate this point, such as shipping grain across the sea and investing in multiple ventures.
Solomon advises against being overly cautious or complacent, warning that watching the wind and clouds too closely will prevent us from planting and reaping. Instead, he encourages us to sow our seed in the morning and work diligently throughout the day, recognizing that we cannot always predict which efforts will be successful.
Furthermore, Solomon emphasizes the idea that there are forces beyond our control, such as the path of the wind or how a body is formed in a mother's womb. He suggests that we should accept the limitations of our understanding and trust in the work of God, the Maker of all things.
Overall, Solomon's message seems to be that while life is uncertain and unpredictable, we should not let fear or uncertainty hold us back from taking action and working hard towards our goals. We must embrace the unknown and trust that our efforts will ultimately lead to some form of return, even if it may not be exactly what we had anticipated.
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(a) Many Malaysians think that Takaful agents are considered salesman and pushing product to solicit the solution for their prospective clients. Elaborate TWO (2) aspects of agent roles in order to focus on a consultative approach based.
(b) Describe TWO (2) importances of evaluating Cash Flow in the risk management process.
(c) Discuss the use of evaluating personal Net Worth in constructing risk assessment for individuals.
The answers to the above questions are as follows:
(a) Takaful agents' role is to provide protection and promote risk awareness to their clients. Instead of merely pushing products to their potential clients, the consultative approach emphasizes the value of the consultation process. This approach leads to a better understanding of the client's needs and expectations. A more consultative approach will provide the agents with a better understanding of the client's risk profile.
Therefore, the two aspects of the agents' roles that are critical to developing a consultative approach are:
Client relationship management: Effective communication and building long-term relationships with clients are critical to consultative selling. Clients will only trust agents who are knowledgeable and passionate about their jobs. An agent's role is to educate clients about the protection products available and how the products can benefit them. Agents must focus on understanding the client's needs, identifying gaps, and matching them with the right product offerings.
Collaboration with the underwriter: Agents should work closely with the underwriter to understand the products, pricing, and terms. They must possess the knowledge to explain the product benefits and terms clearly. They can also provide feedback to the underwriters on the suitability of products and services to clients based on their unique needs and risk profile.
(b) Cash flow is an essential part of risk management because it helps to assess the sustainability of a business or investment.
The two importances of evaluating cash flow in the risk management process are as follows:
Cash flow helps businesses to meet financial obligations: Cash flow analysis is vital to risk management as it helps businesses to plan for short and long-term cash needs. Understanding how cash is generated and used in a business can help the management team make decisions that will support the growth and profitability of the company.
Cash flow supports investment decisions: Evaluating cash flow is critical to making investment decisions. It helps to determine if a particular investment will generate sufficient cash to support the investment. Evaluating cash flow can help investors understand the potential risks and returns of a particular investment.
(c) Net worth is a measure of an individual's financial position. Evaluating net worth is important in risk assessment for individuals.
The two reasons why personal net worth is important in constructing risk assessment are as follows:
Net worth is a measure of financial stability: Evaluating personal net worth can help individuals assess their financial stability and security. It provides an understanding of how much they own and owe, which can help them determine their risk tolerance and appetite.
Net worth helps in determining insurance needs: Personal net worth is an essential factor when determining the appropriate insurance coverage for an individual. A person's net worth can be used to evaluate the adequacy of coverage for life, disability, and health insurance. A higher net worth may require higher coverage levels to provide adequate protection.
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Which one of the following tax credits may only be carried forward? Select one: O a. the charitable contribution amount Ob. the tuition amount O c. the average earnings amount O d. the expected value
The tuition amount is a tax credit that can be carried forward. The correct answer is option B.
What is a tax credit?A tax credit is an amount of money that taxpayers can subtract from their taxes owed to the government. It is a type of tax incentive that helps to reduce the amount of tax owed, dollar for dollar. In general, tax credits are more beneficial than tax deductions, as tax deductions lower the amount of income that is subject to taxation.
Tuition tax creditTuition tax credit is a tax incentive that allows individuals to reduce their tax liability by a certain amount for eligible education expenses. This tax credit is available to taxpayers who pay tuition and other eligible fees for themselves, their spouse, or their dependent children. The tuition tax credit can be claimed for post-secondary education courses at a qualifying educational institution.
The amount of the tax credit is calculated based on a percentage of the eligible tuition fees paid by the taxpayer.
Carryforward of tax creditsCarrying forward tax credits means that if the amount of tax credit that a taxpayer is eligible to claim is more than the taxes owed for the current tax year, the excess amount can be carried forward to future tax years. The unused tax credit can be applied to reduce the taxes owed in future tax years.
Thus, option B is the right choice.
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WV governor Jim Justice has proposed a bill to get rid of the state's income tax. The state will raise taxes on a variety of other items, including increasing the tax on alcoholic beverages. In order
In 2021, Justice proposed a plan to phase out the personal income tax. While the Senate at that time supported the plan, the House backed a different plan to phase out the tax. The bill died in the House on a 0-100 vote after both sides could not come to an agreement.
Intro Value Equivalence Part 1 Which of the following identities are true about a firm? Check all that apply: The discounted present value of the liabilities and equity must equal the discounted present value of the assets The accounting value of the liabilities and equity must equal the accounting value of the assets The value of the equity is always equal to 5,000 Dogecoin The cash flows accruing to/from or paid to/from the liability and equity holders must equal the cash flows to/from the assets Save
The identities which are true about a firm are the discounted present value of the liabilities and equity must equal the discounted present value of the assets.
The accounting value of the liabilities and equity must equal the accounting value of the assets. The cash flows accruing to/from or paid to/from the liability and equity holders must equal the cash flows to/from the assets. Value equivalence is the concept that values in different time periods may be compared and are therefore equivalent provided that a standard rate of return can be applied to the amounts in question and the resulting calculations are the same.
This concept is utilized in finance and economics when computing present value of future cash flows to make these values equivalent to a single amount of money presently. Value equivalence aids in determining which of two choices provides the greatest return or amount of income given the cash flow and time period involved. An introduction to value is a component of a company that concentrates on the perceived value of a service or product. The introduction to value refers to how a service or product satisfies or surpasses the expectations of customers and provides them with the most benefit for their money. Value can be determined by a variety of criteria, including price, quality, and reputation.
The first part of equivalence is simply the idea that money received in the future is worth less than money received now. In general, money you get right now is worth more than money you get later, because if you have the money now you can use it to make more money or to purchase things you need or want. That is, you would want to have money now rather than later, and would be willing to give up some amount of money later to get it now. This is true for everyone, so we say that the present value of any amount received in the future is less than the future value of that same amount.
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Please explain how to complete this problem with a financial
calculator rather than with excel. ThanksAnnuity due. Reginald is about to lease an apartment for 30 months. The landlord wants him to make the lease payments at the start of the month. The monthly payments are $1,400 per month. The landlord says he will allow Reg to prepay the rent for the entire lease with a discount. The one-time payment due at the beginning of the lease is $37,506. What is the implied monthly discount rate for the rent? If Reg is earning 1.3% on his savings monthly, should he pay by month or make the one-time payment? What is the implied monthly discount rate for the rent? % (Round to two decimal places.) (I)
The implied monthly discount rate is approximately 0.9984% or 0.99%. Since Reg is earning 1.3% on his savings monthly, which is higher than the implied monthly discount rate for the rent.
To calculate the implied monthly discount rate for the rent, we can use the formula for the present value of an annuity:
PV = PMT × [(1 - (1 + r)⁽⁻ⁿ⁾) / r],
where PV is the present value (one-time payment), PMT is the monthly payment, r is the monthly discount rate, and n is the number of months.
We know:
PV = $37,506
PMT = $1,400
n = 30 months
Substituting the values into the formula, we have:
37,506 = 1,400 × [(1 - (1 + r)⁽⁻³⁰⁾) / r].
This equation cannot be easily solved algebraically, but we can use numerical methods to find the value of r that satisfies the equation. Using a financial calculator or software, we find that the implied monthly discount rate is approximately 0.9984% or 0.99%.
Since Reg is earning 1.3% on his savings monthly, which is higher than the implied monthly discount rate for the rent, it would be more beneficial for him to make the one-time payment and take advantage of the discount offered by the landlord. By paying upfront, Reg would save money compared to paying monthly over the lease period.
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