Based on the calculations, you should buy the oil drilling supply business as it has a positive Net Present Value (NPV) of $1.636 billion.
Based on the given information, you are currently running a web services hosting business and considering buying an oil drilling supply business. The oil drilling supply business generates $1 billion in sales with a pretax operating profit of 50%. After paying 20% in taxes, your WACC (Weighted Average Cost of Capital) is 10%. The business is not expected to grow or shrink, and profit margins have been stable for many years. Oil drilling companies have a beta of 2.0 in the stock market.
To determine whether you should buy the oil drilling supply business, you need to calculate the Net Present Value (NPV) of the business. The formula for NPV is:
NPV = (Cash Flow / (1 + WACC)^n) - Initial Investment
In this case, the initial investment is $2 billion. Since the business generates $1 billion in sales with a 50% pretax operating profit, the cash flow can be calculated as:
Cash Flow = Sales * Profit Margin * (1 - Tax Rate)
Cash Flow = $1 billion * 0.5 * (1 - 0.2)
Cash Flow = $400 million
Assuming the business remains stable for many years, you can use a perpetuity formula to calculate the cash flow indefinitely:
Perpetual Cash Flow = Cash Flow / WACC
Perpetual Cash Flow = $400 million / 0.1
Perpetual Cash Flow = $4 billion
Using the NPV formula, you can calculate the value of the business:
NPV = ($4 billion / (1 + 0.1)^1) - $2 billion
NPV = $3.636 billion - $2 billion
NPV = $1.636 billion
Since the NPV is positive, it indicates that the investment is profitable. Therefore, you should consider buying the oil drilling supply business.
The NPV calculation takes into account the cash flow generated by the business, the initial investment, and the cost of capital. In this case, the positive NPV indicates that the business is expected to generate more cash flow than the initial investment and meet the required rate of return (WACC).
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Please prepare a proper statement of changes in equity for Sweety heaven. QUESTION 5 15 Marks Sweety Haven (Pty) Ltd (Sweety Haven) is a company which manufactures sweets and chocolates. The following is an extract from the trial balance of Sweety Haven for the year ended 31 December 2021: Credit(N$ Ordinary share capital (1 million shares) 1 250 000 12% redeemable cumulative preference shares (187 500 shares) 393 750 Retained earnings 287 500 Revaluation surplus reserve 715 005 General reserve 187 333 Bank overdraft 75 000 Additional information: Sweety Haven* has the following authorised share capital: 2 500 000 Ordinary shares of no par value; and 250 000 12% redeemable preference shares of no par value 2. value shares into ordinary shares having a par value of N$ 1.20 each. The preference shares were issued on 1 January 2016 at N$2 each, and are redeemable at the option of the shareholders on 31 December 2021 at a premium of 10 cents. The shareholders elected to have their preference shares redeemed on this date at N$2.10 per share. The redemption should be financed as follows: 0 As many ordinary shares at an issue price of N$1.25 each as are necessary to have sufficient cash for the redemption; 250 debentures of N$250 each; The directors are satisfied that the company's assets, fairly valued, exceed the liabilities and that the company will be able to pay its debts as they become due; The dividends on the preference shares are to be paid by extending the existing bank overdraft; Share issue costs amount to N$22 500. These costs are to be paid by extending the bank overdraft. 4. At year-end, the directors declared ordinary dividends for the year at 30 cents per share. This must still be accounted for in the records of *Sweety Haven. 5. The share issue expenses should be written off against the share premium account. 6. The profit before tax amounted to N$ 1 715 333. A tax rate of 30% on companies is applicable. REQUIRED: Prepare the statement of changes in equity of Sweety Haven for the year ended 31 December 2021 to comply with the requirements of IFRS
Statement of Changes in Equity For the Year Ended 31 December 2021
Sweety Haven (Pty) Ltd
(N$)
Ordinary share capital Balance at the beginning of the year 1,250,000
Issuance of ordinary shares for preference share redemption - (To finance preference share redemption)
Preference share capital
Balance at the beginning of the year 393,750Redemption of preference shares (393,750)
(250,000 shares redeemed at N$2.10 per share)
Share premium Balance at the beginning of the year -
Issuance of ordinary shares for preference share redemption -(Share issue costs written off against share premium account)
Retained earnings
Balance at the beginning of the year 287,500Profit before tax 1,715,333
Tax expense (514,600)(Profit before tax * Tax rate of 30%)
Dividends declared (375,000)(Balance to be accounted for)
Revaluation surplus reserve
Balance at the beginning of the year 715,005
General reserveBalance at the beginning of the year 187,333
Total comprehensive income for the year -
(No items affecting comprehensive income provided)
Total equity at the end of the year 2,062,238
1. Issuance of ordinary shares for preference share redemption -(Share issue costs written off against share premium account)
Retained earnings
Balance at the beginning of the year 287,500Profit before tax 1,715,333
Tax expense (514,600)(Profit before tax * Tax rate of 30%)
Dividends declared (375,000)(Balance to be accounted for)
Revaluation surplus reserve
Balance at the beginning of the year 715,005
General reserveBalance at the beginning of the year 187,333
Total comprehensive income for the year -
(No items affecting comprehensive income provided)
Total equity at the end of the year 2,062,238
1. The ordinary share capital remained unchanged throughout the year.2. The preference shares were redeemed and financed by issuing additional ordinary shares and debentures.
3. Share issue costs were written off against the share premium account.4. Retained earnings increased due to the profit before tax, reduced by the tax expense and dividends declared.
5. There were no changes in the revaluation surplus reserve or general reserve during the year.6. No items affecting comprehensive income were provided.
7. The total equity at the end of the year is the sum of all equity components.
Note: This statement of changes in equity is prepared in compliance with the requirements of IFRS (International Financial Reporting Standards).
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suppose poornima earns $800 per week working as a corporate attorney for rowan and martin associates. she uses $10 to get her car washed at spotless car wash. spotless car wash pays manuel $425 per week to wash cars. manuel uses $350 to purchase legal service from rowan and martin associates.
The following elements represent a flow from a household to a firm:
The car wash Caroline receives.The $275 per week Antonio earns working for Spotless Car Wash.The statement that the actual economy is more complicated than the previous circular-flow diagram of a simple economy is true.
In the given scenario, let's identify whether each event occurs in the market for factors of production or the market for goods and services:
Caroline spends $10 to get her car washed.
This event occurs in the market for goods and services.
Antonio spends $150 to purchase a necklace from Classy's Jewelry Store.
This event occurs in the market for goods and services.
Antonio earns $275 per week working for Spotless Car Wash.
This event occurs in the market for factors of production.
Based on the elements of this scenario, the following flows from a household to a firm can be identified:
The car wash Caroline receives.
The $275 per week Antonio earns working for Spotless Car Wash.
Now, regarding the statement: "The actual economy is more complicated than the one illustrated in the previous circular-flow diagram of a simple economy." The statement is True. The previous circular-flow diagram represents a simplified version of the economy and does not account for all the complexities and interactions that exist in the real economy.
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Based on this model, households earn income when firms ▼ purchase goods and services ▼in markets for factors of production. Suppose Caroline earns $625 per week working as jewelry appraiser for Classy's Jewelry Store. She uses $10 to get her car washed at Spotless Car Wash. Spotless Car Wash pays Antonio $275 per week to wash cars. Antonio uses $150 to purchase a necklace from Classy's Jewelry Store. Identify whether each of the following events in this scenario occurs in the market for factors of production or the market for goods and services. Market for Factors of Production Market for Goods and Services Event Caroline spends $10 to get her car washed. Antonio spends $150 to purchase a necklace from Classy's Jewelry Store. Antonio earns $275 per week working for Spotless Car Wash. Which of the elements of this scenario represent a flow from a household to a firm? This could be a flow of dollars, inputs, or outputs. Check all that apply. The car wash Caroline receives The $275 per week Antonio earns working for Spotless Car wash The $150 Antonio spends to purchase a necklace from Classy's Jewelry Store True or False: The actual economy is more complicated than the one illustrated in the previous circular-flow diagram of a simple economy True False
How would a test of Nordstrom’s sales returns around the holiday season help us determine if and why sales returns are different from the nonholiday season? How would this be an example of diagnostic analytics?
A test of Nordstrom's sales returns around the holiday season can help us determine if and why sales returns are different from the non-holiday season by analyzing the data and identifying patterns or trends.
By comparing the sales returns during the holiday season to those in the non-holiday season, we can look for any significant differences in terms of the number of returns, reasons for returns, or the types of products being returned.
This would be an example of diagnostic analytics because it aims to understand the root causes of the differences in sales returns between the holiday and non-holiday seasons. Diagnostic analytics involves digging deeper into the data to identify the factors that contribute to a specific outcome or phenomenon. In this case, it would involve examining various variables such as customer behavior, promotional strategies, product quality, and customer satisfaction during the holiday and non-holiday seasons.
By conducting such a test, Nordstrom can gain insights into the reasons behind the differences in sales returns, which can help them make informed decisions to address any issues or optimize their operations. It enables them to identify areas of improvement and make data-driven changes to reduce sales returns and enhance customer satisfaction.
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No risk, no reward. Most people intuitively understand that they 4. At the end of the month, you find yourself: have to bear some risk to achieve an acceptable return on their a. Short of cash and impatiently waiting for your next investment portfolios. paycheck. But how much risk is right for you? If your investments turn b. Not overspending your salary, but not saving very much. sour, you may put at jeopardy your ability to retire, to pay for c. With a comfortable surplus of funds to put into your savyour kid's college education, or to weather an unexpected ings account. 5. You are 30 years old and enrolling in your company's retirement plan, and you need to allocate your contribu- tions across 3 funds: a money market account, a bond fund, and a stock fund. Which of these allocations sounds best to you? on how to manage our exposure to uncertainty. Assessing-and quantifying-risk aversion is, to put it mildly, difficult. It requires confronting at least these two big questions. First, how much investment risk can you afford to take? If you have a steady high-paying job, for example, you have greater ability to withstand investment losses. Conversely, if you are close to retirement, you have less ability to adjust your best to you? a. Invest everything in a safe money-market fund. b. Split your money evenly between the bond fund and
on an investor’s risk tolerance.
a. Keep the $1,000 in cash.
b. Sit tight and do nothing. c. Put more of your assets into that fund, reasoning that its value is clearly trending upward. 3. How would you describe your non-investment sources of income (for example, your salary)? a. Highly uncertain b. Moderately stable c. Highly stable
Assessing an investor's risk tolerance involves considering their ability to withstand investment losses and their personal comfort level with taking risks. The optimal allocation for the retirement plan will depend on their individual circumstances and preferences.
Determining the best allocation for the retirement plan requires evaluating the investor's risk tolerance and financial situation. If the investor has a high aversion to risk and prefers stability, investing everything in a safe money-market fund (option a) may be suitable. This option prioritizes capital preservation over potential returns, providing a low-risk investment with minimal fluctuations.
On the other hand, if the investor has a moderate risk tolerance and seeks a balanced approach, splitting the money evenly between the bond fund and stock fund (option b) may be more appropriate. This allocation offers a combination of income generation and growth potential, although it comes with a higher level of risk compared to a money-market fund.
When it comes to investing, determining the right level of risk is a highly individual decision. Risk tolerance varies from person to person based on their financial circumstances, goals, and personal comfort with uncertainty. While some individuals may prefer a conservative approach to minimize risk and prioritize capital preservation, others may be willing to take on more risk in pursuit of higher potential returns.
It is important for investors to conduct a thorough self-assessment of their risk tolerance, considering factors such as their financial stability, time horizon, and emotional response to market fluctuations. By understanding their risk appetite, investors can make informed decisions about asset allocation and construct a portfolio that aligns with their goals and comfort level.
Seeking professional guidance from a financial advisor can provide valuable insights and help investors navigate the complexities of risk management. A personalized approach that considers both financial circumstances and emotional considerations is key to finding the optimal balance between risk and reward.
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a company has an investment in 9% bonds with a par value of $100,000 that pays interest on october 1 and april 1. the amount of interest accrued on december 31 (the company's year-end) would be:
The amount of interest accrued on December 31 (the company's year-end) would be $6,750.
To determine the amount of interest accrued on December 31, we need to consider the interest payment dates and the time period between those dates.
Par value of the bonds: $100,000
Interest rate: 9%
Interest payment dates: October 1 and April 1
Since the interest payment dates are on October 1 and April 1, we need to calculate the time period from the last interest payment date (April 1) to December 31, the year-end.
From April 1 to December 31, there are nine months: May, June, July, August, September, October, November, December.
To calculate the interest accrued for this period, we need to multiply the par value of the bonds by the interest rate and the fraction of the year that has passed.
Interest Accrued = Par Value * Interest Rate * Fraction of the year
Fraction of the year = 9/12 (since there are nine months between April 1 and December 31)
Now, let's calculate the interest accrued:
Interest Accrued = $100,000 * 9% * (9/12)
Interest Accrued = $100,000 * 0.09 * 0.75
Interest Accrued = $6,750
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Your APR is 2% compounded daily. Determine the r, M, im, and ieff. Explain in words the differences and similarities between the effective interest rate and period interest rate approaches.
r = 2% (annual interest rate)
M = 365 (number of compounding periods in a year)
im = 0.02/365 (period interest rate)
ieff = (1 + 0.02/365)^365 - 1 (effective interest rate)
Given that the APR is 2% compounded daily, we can calculate the parameters as follows:
r represents the annual interest rate, which is 2%.M represents the number of compounding periods in a year, which is 365 since the interest is compounded daily. im represents the period interest rate, which is calculated by dividing the annual interest rate by the number of compounding periods in a year. In this case, it is 0.02/365.ieff represents the effective interest rate, which is calculated by applying the compound interest formula. In this case, it is (1 + 0.02/365)^365 - 1.Differences and Similarities between Effective Interest Rate and Period Interest Rate Approaches:
The period interest rate approach focuses on the interest rate for a specific period, such as daily, monthly, or quarterly. It measures the interest earned or charged during that period. On the other hand, the effective interest rate approach considers the overall interest earned or charged over a year, taking into account compounding effects.The effective interest rate reflects the true annual interest rate after compounding, providing a more accurate measure of the total interest earned or charged. The period interest rate, on the other hand, captures the interest for a specific time interval but does not account for compounding effects.
While the period interest rate is useful for calculating interest for shorter periods and tracking cash flows, the effective interest rate provides a comprehensive measure of the total impact of compounding on the interest earned or charged over a year.
The effective interest rate approach considers compounding effects and provides a more accurate measure of the annual interest rate. The period interest rate approach focuses on interest rates for specific periods but does not account for compounding. Both approaches have their uses depending on the context and calculations required.
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The level of prices and the value of money. Suppose the price level reflects the n year one, the basket costs $10.00. In year two, the price of the same basket is $9.00. From year one to year two, there is at an annual rate of In year one, $80.00 will buy baskets, and in year two, $80.00 will buy baskets. This example itiustrates that, as the price level folls, the value of money
The answer to your question is that as the price level falls, the value of money increases.
In the given example, the price of the basket decreased from $10.00 in year one to $9.00 in year two. This means that the same amount of money, $80.00, can now buy more baskets in year two compared to year one. This shows that the value of money has increased because it can purchase more goods with the same amount of currency. In other words, as the price level decreases, the purchasing power of money increases. This is beneficial for consumers as they can buy more goods and services with their money. To summarize, when the price level falls, the value of money increases, allowing individuals to purchase more with the same amount of currency.
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You are considering in a security that has the following cash flow pattern. At the end of year 7 , you will receive the first payment of $400. Every year after that, you will receive the same amount forever. What is the maximum amount that you should be willing to pay for this security if you want a rate of return of 6.99% ? Answer: $ (round to the nearest cent)
Maximum amount that you should be willing to pay for this security if you want a rate of return of 6.99% = $ 4,884.92
Let P be the maximum amount that you should be willing to pay for this security. Given, you will receive $400 at the end of year 7, and every year after that, the same amount forever, and you want a rate of return of 6.99%. Hence, the present value of the security can be found using the formula, Present value = Payment / (1 + r) ^ n
Where, r is the rate of return, n is the number of years
P = 400 / (1 + 0.0699) ^ 7 + 400 / 0.0699 = $4,884.92
Hence, the maximum amount that you should be willing to pay for this security if you want a rate of return of 6.99% is $ 4,884.92.
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If a company is new and just bought equipment will depreciation show up while making journal entries? and will it show up on the next balance sheet? or do I need to wait for a full year?
Depreciation will show up in journal entries when recording the purchase of equipment, even for a new company. It will also affect the next balance sheet, as depreciation is recognized as an expense and reduces the value of the equipment over time.
When a company purchases equipment, it is required to record the transaction in its accounting records through journal entries. One of the entries will involve debiting the Equipment account to reflect the increase in the asset's value. Simultaneously, a corresponding credit will be made to either Cash or Accounts Payable, depending on whether the equipment was purchased with cash or on credit. Additionally, depreciation expense will also be recorded as a journal entry. Depreciation represents the systematic allocation of the cost of the equipment over its useful life. This expense is recognized to reflect the wear and tear, obsolescence, or decrease in value of the equipment over time.
Depreciation will typically be recorded periodically, such as monthly or annually, depending on the company's accounting policies. The effect of depreciation will be reflected on the next balance sheet. The accumulated depreciation for the equipment will be shown as a contra-asset account, reducing the carrying value of the equipment. This reflects the gradual decrease in the value of the equipment due to depreciation expense over time. The net value of the equipment (original cost minus accumulated depreciation) will be reported on the balance sheet as of the reporting date. Therefore, a new company does not need to wait for a full year to recognize depreciation. It will be recorded from the time the equipment is acquired and will affect both journal entries and subsequent balance sheets.
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backed by the u.s. government, these financial instruments are fixed-rate debt securities with a maturity of more than one year. they are considered default free but are subject to interest rate risk. issued by a nonfinancial firm, these financial instruments are guaranteed by a bank. there is less risk involved because of bank backing. these financial instruments are investment pools that buy such short-term debt instruments as treasury bills (t-bills), certificates of deposit (cds), and commercial paper. they can be easily liquidated. issued by corporations, these financial instruments give their holders a class ownership in a company. they are considered the most risky but provide higher expected returns.
For a predetermined duration, typically several years, fixed-rate debt establishes a fixed interest rate either a loan or bond. Over the course of the loan, the borrower repays the financial obligation in full, including the set interest rate. In the form of interest payments, the lender receives a constant and predictable return on their investment.
The word "fixed rate debt" refers to long-term, continuous payments made to settle loans (debt) for things like mortgages, student loans, or auto loans. These expenses often account for a consistent portion of overall monthly expenses.
In order to account for prospective increases brought on by potential market conditions, fixed-rate debt frequently becomes greater.
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which portfolio earns the most, and by how much? portfolio 1 earns $128.27 more. portfolio 2 earns $128.27 more. portfolio 1 earns $122.97 more. portfolio 2 earns $122.97 more.
Based on the information provided, both portfolio 1 and portfolio 2 earn $128.27 more than the other, and they also earn $122.97 more than the other.
Therefore, it seems that both portfolios have the same earning potential. There is no clear indication of which portfolio earns the most, as the difference in earnings is the same for both cases.
It is important to note that without additional information, such as the initial investments or the duration of the investment, it is not possible to determine the actual earning potential of each portfolio.
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Hartford Mining has 90 million shares that are currently trading for $8 per share and $120 million worth of debt. The debt is risk free and has an interest rate of 7%, and the expected return of Hartford stock is 10%. Suppose a mining strike causes the price of Hartford stock to fall 27% to $5.84 per share. The value of the risk-free debt is unchanged. Assuming there are no taxes and the risk (unlevered beta) ofHartford's assets is unchanged, what happens to Hartford's equity cost of capital?
The equity cost of capital for Hartford decreases from 9.571% to 9.13% due to the mining strike causing a decrease in the stock price.
The equity cost of capital is a measure of the return required by investors to invest in a company's equity. It takes into account the risk associated with the company's assets.
To calculate the equity cost of capital, we need to determine the weighted average cost of capital (WACC). The WACC is the average rate of return required by both equity investors and debt holders.
Let's break down the steps to calculate the change in Hartford's equity cost of capital:
1. Calculate the market value of equity: Multiply the number of shares by the stock price. In this case, the market value of equity is 90 million shares multiplied by $8 per share, which equals $720 million.
2. Calculate the market value of debt: The debt is given as $120 million.
3. Calculate the total value of the firm: Add the market value of equity and the market value of debt. In this case, the total value of the firm is $720 million + $120 million, which equals $840 million.
4. Calculate the weight of equity: Divide the market value of equity by the total value of the firm. In this case, the weight of equity is $720 million / $840 million, which equals 0.8571.
5. Calculate the weight of debt: Divide the market value of debt by the total value of the firm. In this case, the weight of debt is $120 million / $840 million, which equals 0.1429.
6. Calculate the cost of equity: The expected return of Hartford stock is given as 10%.
7. Calculate the cost of debt: The debt is risk-free and has an interest rate of 7%.
8. Calculate the weighted average cost of capital (WACC): Multiply the weight of equity by the cost of equity and the weight of debt by the cost of debt, and then add them together. In this case, the WACC is 0.8571 * 0.10 + 0.1429 * 0.07, which equals 0.08571 + 0.01, resulting in a WACC of 0.09571 or 9.571%.
Now, let's consider the impact of the mining strike on Hartford's stock price:
9. Calculate the new market value of equity: Multiply the number of shares by the new stock price. In this case, the new market value of equity is 90 million shares multiplied by $5.84 per share, which equals $525.6 million.
10. Calculate the new total value of the firm: Add the new market value of equity and the market value of debt. In this case, the new total value of the firm is $525.6 million + $120 million, which equals $645.6 million.
11. Calculate the new weight of equity: Divide the new market value of equity by the new total value of the firm. In this case, the new weight of equity is $525.6 million / $645.6 million, which equals 0.813.
12. Calculate the new WACC: Multiply the new weight of equity by the cost of equity and the weight of debt by the cost of debt, and then add them together. In this case, the new WACC is 0.813 * 0.10 + 0.1429 * 0.07, which equals 0.0813 + 0.01, resulting in a new WACC of 0.0913 or 9.13%.
Therefore, the change in Hartford's equity cost of capital due to the mining strike is a decrease from 9.571% to 9.13%.
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A publisher for a promising new novel figures fixed costs (overhead, advances, promotion, copy editing, typesetting, and so on) at \( \$ 50,000 \), and variable costs (printing, paper, binding, shipping
Total Cost = $50,000 + ($5 x 2,000) = $50,000 + $10,000 = $60,000. The total cost of publishing 2,000 books would be $60,000.
In this case, the publisher has fixed costs and variable costs associated with publishing a novel. The fixed costs, totaling $50,000, are the expenses that do not change regardless of the number of books printed or sold. These costs include overhead, advances, promotion, copy editing, and typesetting.
On the other hand, the variable costs are directly related to the number of books produced and sold. These costs include printing, paper, binding, and shipping.
To calculate the total cost of publishing a certain number of books, you need to consider both the fixed and variable costs. The formula to find the total cost is:
Total Cost = Fixed Costs + (Variable Cost per Book x Number of Books)
Let's say the variable cost per book is $5, and the publisher plans to print and sell 2,000 books. Using the formula, we can calculate the total cost as:
Total Cost = $50,000 + ($5 x 2,000) = $50,000 + $10,000 = $60,000
Therefore, the total cost of publishing 2,000 books would be $60,000.
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Suppose that the market for video games is competitive with demand function Q
d
=100−4p+2Y+3p
m
−2p
c
, where Q
d
is the quantity demanded, p is the market price, Y is the monthly budget that an average consumer has available for entertainment, P
m
is the average price of a movie, and p
c
is the price of a controller that is required to play these games. Given that Y=$100,p
m
=$30 and p
c
=$30, use Excel to calculate quantity demanded for p= $10 to p=$80 in $5 increments. Using Excel's spreadsheet, Find Qd= when P=$30. Find Qd= Now, Y increases to $120. Re-calculate the demand schedule and find Qd= when P=$20. Let Y=$100 again, but p
m
increases to $40. Re-calculate the demand schedule and find Qd= when P=$25. Let Y=$100,p
m
=$30, and p
C
increases to $40. Re-calculate the demand schedule and find Qd= when P=$50.
The given demand function is: Qd = 100 - 4p + 2Y + 3Pm - 2
Pcwhere Qd is the quantity deman dedp is the market price Y is the monthly budget that an average consumer has available for entertainment Pm is the average price of a movie, and Pc is the price of a controller that is required to play these games Given that Y = $100, Pm = $30, and Pc = $30, we need to calculate the quantity demanded for p = $10 to p = $80 in $5 increments
Excel can be used to compute this calculation and the following table summarizes the quantity demanded values for p = $10 to $80 in $5 increments
Given that P = $30, we need to find Qd:At P = $30, Qd = 82, and 50.Now, let Y = $120 and re-calculate the demand schedule
Now we need to find Qd for P = $20:At P = $20, Qd = 98, and 70.Now, let Y = $100, Pm = $40, and re-calculate the demand schedule:Now we need to find Qd for P = $25:At P = $25, Qd = 88, and 10.Now, let Y = $100, Pm = $30, and Pc = $40, and re-calculate the demand schedule
Now we need to find Qd for P = $50:At P = $50, Qd = 54. Therefore, the values of Qd are 82, 50, 98, 70, 88, 10, 54.
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You have seen in this chapter that there are different types of investors and there can be different levels of investment. These investors come into the business facing potentially different types of risk and return.
1. Think about and discuss the ethical obligations you have to early-stage investors versus later-stage investors. Do you promise more returns to someone that shows faith in you at an earlier stage?
2. What are the ethical obligations if some investors are family members and some are not? Do family members deserve different investor treatment?
Ethical obligations to early-stage investors versus later-stage investors: As an entrepreneur or business owner, you have ethical obligations to all investors, regardless of whether they are early-stage or later-stage investors.
These obligations include being transparent, honest, and acting in the best interest of all investors. However, the nature of the relationship with early-stage investors may lead to certain considerations when it comes to returns and promises.
Early-stage investors often take on higher levels of risk by investing in a venture at its earliest stages when the business model and product may still be unproven.
These investors are often crucial in providing the initial capital and support necessary to help a business get off the ground. In recognition of their higher risk and the trust they place in the entrepreneur, it can be considered ethical to offer them more favorable terms, such as potentially promising higher returns or providing additional perks like early access to new products or services.
However, it's important to strike a balance between offering reasonable incentives and maintaining fairness and transparency. Making exaggerated promises or misleading early-stage investors would be unethical.
It's crucial to manage expectations appropriately, communicate any risks associated with the investment, and ensure that all investors are treated fairly and receive the necessary information to make informed decisions.
Ethical obligations when dealing with family members as investors:
When family members are investors, additional ethical considerations may come into play due to the personal relationships involved. It is essential to treat family members and non-family members equally and fairly in terms of investment treatment.
While family members may have a personal connection and emotional investment in the success of the entrepreneur, it is still important to uphold professional standards and ensure that all investors are treated equitably. This includes providing the same level of transparency, communicating risks, and avoiding conflicts of interest.
The entrepreneur has an ethical obligation to prioritize the best interests of the business and all stakeholders, which includes family members who have invested.
However, this does not mean that family members should receive preferential treatment or be given special privileges solely based on their familial relationship. Such preferential treatment can create conflicts of interest and damage the overall integrity and fairness of the investment process.
Overall, ethical obligations in dealing with family members as investors involve maintaining professionalism, ensuring fairness, and avoiding any actions that could compromise the business's integrity or cause harm to other investors.
Clear communication, transparency, and adherence to established standards are crucial in managing investments involving family members while maintaining ethical practices.
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Aerotron Electronics has just bought a used delivery truck for $15.000. The small business paid $1,000 down and financed the rest, with the agreement to pay nothing for the entire first year and then to pay $516.83 at the end of each month over years 2,3 , and 4 (first payment is in 13 th month). a. What nominal interest rate is Aerotron paying on the loan? 96 b. What effective interest rate are they paying? \% Round your answer to 4 decimal places for a and b. The tolerance is ±0.0005. c. How much of the 14 th month's payment is interest? How much is principal? payment interest =$ , and principal =$ d. How much of the 18 th month's payment is interest? How much is principal? payment interest −$ . and principal −$ e. How much of the 22 nd month's payment is interest? How much is principal? payment interest =$ and principal =$
a. The nominal interest rate on the loan is 8.3333%. b. The effective interest rate they are paying is 8.5477%. c. In the 14th month's payment, $20.15 is interest and $496.68 is principal. d. In the 18th month's payment, $14.73 is interest and $502.10 is principal. e. In the 22nd month's payment, $9.30 is interest and $507.53 is principal.
To calculate the nominal interest rate, we need to find the interest rate per period. In this case, the loan term is 4 years, and there are 36 monthly payments.
a. Nominal interest rate:
Total amount financed = Loan amount - Down payment = $15,000 - $1,000 = $14,000
Monthly payment = $516.83
Nominal interest rate = (Monthly payment * Number of payments - Total amount financed) / Total amount financed
Nominal interest rate = (($516.83 * 36) - $14,000) / $14,000 ≈ 8.3333%
b. Effective interest rate:
Effective interest rate = (1 + nominal interest rate/Number of periods)^Number of periods - 1
Effective interest rate = (1 + 0.0833333/12)^12 - 1 ≈ 8.5477%
c. In the 14th month's payment:
Interest = Monthly payment - Principal payment = $516.83 - $496.68 ≈ $20.15
Principal = $496.68
d. In the 18th month's payment:
Interest = Monthly payment - Principal payment = $516.83 - $502.10 ≈ $14.73
Principal = $502.10
e. In the 22nd month's payment:
Interest = Monthly payment - Principal payment = $516.83 - $507.53 ≈ $9.30
Principal = $507.53
Aerotron Electronics is paying a nominal interest rate of 8.3333% on the loan. The effective interest rate they are paying is 8.5477%. The interest and principal portions of each monthly payment vary, with interest decreasing over time and principal increasing accordingly. In the 14th, 18th, and 22nd months, the interest amounts are approximately $20.15, $14.73, and $9.30, respectively, while the principal amounts are approximately $496.68, $502.10, and $507.53, respectively.
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For each of the following examples, identify whether it reflects a single-use plan or a standing pian. You are developing a plan to ensure that employees in your department are dressed appropriately when clients are on-site. What type of plan should you create? Project Rule Program Standard operating procedure An operational plan provides a detailed road map of the steps necessary to achieve operational goals (sometimes referred to as objectives). Although there are many specific types of operational plans, they can be broadly characterized as either single-use plans or standing plans. A program plan is an example of a while a policy is an example of a For each of the following exampl An operational plan provides a detailed road map of the steps necessary to achieve operational goals (somnetimes referred to as objectives). Although there are many speciffc types of operational plans, they can be broadly characterized as either single-use plans or standing plans. A program plan is an example of a while a policy is an example of a For each of the following examples, identify whether it reflects a single-use plan or a stan
Standard operating procedure . In this case, the SOP would outline the specific dress code requirements, expectations, and any relevant protocols for employees to follow when clients are present.
In the given example, creating a plan to ensure that employees in the department are dressed appropriately when clients are on-site would involve developing a standard operating procedure (SOP). A standard operating procedure is a type of standing plan that provides detailed instructions and guidelines for carrying out recurring activities or tasks within an organization. It is a set of established procedures that are followed consistently to ensure consistency and efficiency in operations. In this case, the SOP would outline the specific dress code requirements, expectations, and any relevant protocols for employees to follow when clients are present.
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Gourmet shop purchased cash registers on april 1 for $12,000. if this asset has an estimated useful life of four years, what is the book value of the cash registers on may 31?
The book value of the sales registers on May 31 would be $11,500.
To ascertain the book worth of the sales registers on May 31, we really want to decide the collected deterioration for the period from April 1 to May 31 and take away it from the underlying expense.
Since the assessed helpful existence of the sales registers is four years, we can utilize straight-line deterioration to ascertain the month to month devaluation cost.
In the first place, we should ascertain the month to month deterioration cost:
Deterioration Cost each Month = (Introductory Expense - Rescue Worth)/Valuable Life
Given:
Starting Expense = $12,000
Helpful Life = 4 years
Rescue Worth:
The rescue esteem is the assessed worth of the resource toward the finish of its helpful life. In the event that it isn't given, we will expect it to be $0.
Deterioration Cost each Month = ($12,000 - $0)/(4 years * a year/year)
Devaluation Cost each Month = $12,000/four years
Devaluation Cost each Month = $250
Presently, we should work out the collected devaluation for the period from April 1 to May 31:
Collected Deterioration = Devaluation Cost each Month * Number of Months
Number of Months = 1 (April) + 1 (May) = 2 months
Collected Devaluation = $250/month * 2 months
Collected Devaluation = $500
At last, we should work out the book worth of the sales registers on May 31:
Book value = Introductory Expense - Amassed Devaluation
Book value = $12,000 - $500
Book value = $11,500
Hence, the book value of the sales registers on May 31 would be $11,500.
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Treasury Stock (Need to know 11.4) Use this information of Nero Aerospace to record the following entries related to repurchases of its own stock: 1. Record the transaction where Nero Acrospace repurchases 10,000 shares of its own stock from the market, when the market price as $70 per share. 2. After the market increases to $80 per share, Nero Aerospace resells 7,000 shares into the market. 3. Nero Aerospace resells the remaining 3,000 shares when the market price has fallen to $30 per share.
1. Treasury Stock : 700,000
Cash : 700,000
2. Cash : 560,000
Treasury Stock : 490,000
Paid-in Capital from Treasury Stock : 70,000
3. Cash : 90,000
Treasury Stock : 210,000
Paid-in Capital from Treasury Stock : 500,000
1. Record the transaction where Nero Aerospace repurchases 10,000 shares of its own stock from the market, when the market price as $70 per share. Treasury Stock : (10,000x$70) = 700,000.
2. After the market increases to $80 per share, Nero Aerospace resells 7,000 shares into the market. (7000x$70) = 560,000
3. Nero Aerospace resells the remaining 3,000 shares when the market price has fallen to $30 per share.
Cash (3000x$30)
Treasury Stock (3000x$70) = $210,000
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6.10 FARO Technologies, whose products include portable 3D measurement equipment, recently had 17 million shares outstanding trading at $42 a share. Suppose the company announces its intention to raise$200 million by selling new shares.
a. What do market signaling studies suggest will happen to FARO’s stock price on the announcement date? Why?
b. How large a gain or loss in aggregate dollar terms do market signaling studies suggest existing FARO shareholders will experience on the announcement date?
c. What percentage of the value of FARO’s existing equity prior to the announcement is this expected gain or loss?
d. At what price should FARO expect its existing shares to sell immediately after the announcement?
Market signaling studies suggest that FARO's stock price will likely decrease on the announcement date due to the dilution effect caused by the sale of new shares.
Market signaling studies propose that when a company announces its intention to raise capital by selling new shares, it sends a signal to the market that the company may be in need of additional funds or that it is anticipating future challenges. This signal often leads to a decrease in the stock price. In the case of FARO Technologies, with 17 million shares outstanding trading at $42 a share, the announcement of selling new shares to raise $200 million implies a considerable increase in the number of shares available in the market.
Investors perceive the issuance of new shares as dilution of their ownership stake and expect a decrease in earnings per share as the company's profits would be distributed among a larger number of shares. As a result, existing shareholders may sell their shares to mitigate potential losses, putting downward pressure on the stock price.
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he following data are taken from the financial statements of JB Thomas, Inc. The average number of shares of commo outstanding for the year was 3,920. The following data are in are provided: Compute the following: (Round Earnings per share to 2 decimal places, e.g. 52.51 and all other answers to 1 decimal place, e. 1. Current ratio : 1 2. Debt to assets ratio 3. Earnings per share $ per share 4. Profit margin %
Based on the given data, the calculations are as follows: 1. Current ratio: 1 2. Debt to assets ratio: Not enough information provided 3. Earnings per share: Not enough information provided 4. Profit margin: Not enough information provided.
Current ratio: The current ratio is calculated by dividing current assets by current liabilities. However, the data for current assets and current liabilities is not provided, so we cannot compute the current ratio with the given information.
Debt to assets ratio: The debt to assets ratio is calculated by dividing total debt by total assets. Unfortunately, the data for total debt and total assets is not given, so we cannot determine the debt to assets ratio.
Earnings per share: To calculate earnings per share (EPS), we need the net earnings or net income of the company. However, the net earnings is not provided in the given information, so we cannot calculate the EPS.
Profit margin: The profit margin is calculated by dividing net income by net sales and expressing the result as a percentage. Since the net income and net sales data is not provided, we cannot compute the profit margin.
Unfortunately, without additional information, we cannot calculate the current ratio, debt to assets ratio, earnings per share, or profit margin.
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Ozarka Products reported $9,500,000 in net income for the current year. The company had $5,000,000 of 7% cumulative, preferred stock outstanding all year, along with, $10,000,000 of 6% bonds (10,000 bonds at $1,000 par each). Each bond had 4 detachable stock warrants and each warrant allowed the warrant holders to buy a share of stock for $60. The average share price for the year was $80. Common shares outstanding at the beginning of the year was 4,000,000, but on June 15, the company declared a 10% stock dividend. Assume that the stock dividend did not impact the stock warrant agreement fi.e., after the stock dividend, the bonds still each had only 4 detachable warrants and each warrant still allowed the holder to buy a share of stock for $60 ) Compute both basic and diluted EPS when the tax rate is 40%.
The basic earnings per share (EPS) for Ozarka Products, considering a 10% stock dividend, is $1.91, and the diluted EPS, including the impact of stock warrants, is $1.81.
To calculate the basic and diluted EPS, we consider the following information:
1. Basic EPS:
Net income available to common shareholders = Net income - Preferred stock dividends
Net income available to common shareholders = $9,500,000 - ($5,000,000 * 7%) = $9,500,000 - $350,000 = $9,150,000
Basic EPS = Net income available to common shareholders / Weighted average number of common shares
Weighted average number of common shares = (Common shares at the beginning of the year * Weightage) + (Common shares after stock dividend * Weightage)
Weighted average number of common shares = (4,000,000 * 6/12) + (4,400,000 * 6/12) = 2,000,000 + 2,200,000 = 4,200,000
Basic EPS = $9,150,000 / 4,200,000 = $2.18
2. Diluted EPS:
To calculate diluted EPS, we need to consider the impact of stock warrants.
Convertible bonds = Number of bonds * Number of warrants per bond = 10,000 * 4 = 40,000
Potential common shares from convertible bonds = Convertible bonds * Conversion ratio
Conversion ratio = 1 / Exercise price = 1 / $60 = 0.0167
Potential common shares from convertible bonds = 40,000 * 0.0167 = 667
Diluted weighted average number of common shares = Weighted average number of common shares + Potential common shares from convertible bonds
Diluted weighted average number of common shares = 4,200,000 + 667 = 4,200,667
Diluted EPS = Net income available to common shareholders / Diluted weighted average number of common shares
Diluted EPS = $9,150,000 / 4,200,667 = $2.18
Therefore, the basic EPS is $2.18, and the diluted EPS is also $2.18, considering the impact of stock warrants.
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Calibrating production equipment every month and checking product designs are examples of:
Group of answer choices
A) Appraisal costs and prevention costs respectively
B) Appraisal and internal failure cost respectively
C) Prevention and external failure costs respectivly
D) External and internal costs respectively
Calibrating production equipment every month is an example of prevention costs, while checking product designs is an example of external failure costs. The correct answer is option: (C).
Prevention costs are incurred to prevent defects from occurring in the first place, such as calibrating equipment regularly to ensure accurate production.
On the other hand, external failure costs occur when defects are detected after the product has been delivered to customers, like checking product designs to prevent customer dissatisfaction or product recalls.
Both prevention and external failure costs are part of the broader category of quality costs, which also includes appraisal costs (costs incurred to detect defects) and internal failure costs (costs incurred when defects are detected during the production process).
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Entries for Issuing and Calling Bonds; Gain year of the company is the calendar year. Journalize the entries to record the following selected transactions: 20Y5 May 1 Issued the bonds for cash at their face amount. Nov. 1 Paid the interest on the bonds. 20Y9 Nov. 1 Called the bond issue at 98 , the rate provided in the bond indenture. (Omit entry for payment of interest.) If an amount box does not require an entry, leave it blank. Issued the bonds for cash at their face amount. 20 Y 5 May 1 Paí 21 Called the bond issue at 98 , the rate provided in the bond indenture. (Omit entry for payment of interest.) 20Y9 Nov. 1
To journalize the entries for the selected transactions, we need to consider the accounts involved and their respective debits and credits. Based on the information provided, we can determine the following journal entries:
Issuing the bonds for cash at their face amount:
Date: 20Y5 May 1
Account Debit Credit
Cash (Face amount of bonds) -
Bonds Payable +
Paying the interest on the bonds:
Date: 20Y5 Nov. 1
Account Debit Credit
Interest Expense +
Cash (Interest payment amount) -
Calling the bond issue at 98% of face value:
Date: 20Y9 Nov. 1
Account Debit Credit
Bonds Payable (Face value of bonds) -
Loss on Bond Redemption (Face value * (100% - 98%)) -
Cash (98% of face value) +
Note: Since the payment of interest is omitted in the entry for calling the bond issue, we don't need to record it separately.
Please note that the specific amounts for the cash, face amount, and interest payment were not provided, so you would need to insert the actual figures into the journal entries based on the given values.
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what is the main characteristic of partnership business entity? group of answer choices taxed on the partners’ share of revenue. thus, no income tax as a business only one person is needed to form a partnership and it creates financial strength each partner is not responsible for his/her shares of revenue and liability limited legal liability and thus uninsurable risk of the business
The main characteristic of a partnership business entity is that each associate isn't answerable for his/her stocks of revenue and liability.
In a partnership, two or extra people come together to mutually very own and perform an enterprise. Partnerships can be formed with an easy settlement, and they do not require complicated legal formalities like businesses. Unlike agencies, companions in a partnership are not granted limited liability safety.
Each accomplice is personally liable for the partnership's debts and duties. This approach that partners are responsible for their shares of sales and also are personally accountable for any losses or prison claims in opposition to the partnership. This characteristic distinguishes partnerships from other enterprise entities like organizations, in which shareholders have restrained liability protection.
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(Evaluating liquidity) The Tabor Sales Company had a gross profit margin (gross profits + sales) of 30.5 percent and sales of $9.8 million last year. Seventy-five percent of the firm's sales are on credit and the remainder are cash sales. Tabor's current assets equal $2.6 million, its current liabilities equal $289,000, and it has $103,000 in cash plus marketable securities. a. If Tabor's accounts receivable are $562,500, what is its average collection period? b. If Tabor reduces its average collection period to 20 days, what will be its new level of accounts receivable? c. Tabor's inventory turnover ratio is 9.7 times. What is the level of Tabor's inventories? ... a. If Tabor's accounts receivable are $562,500, its average collection period is days. (Round to two decimal places.)
The average collection period for Tabor Sales Company is approximately 55.96 days.
To calculate the average collection period, we need to determine the number of days it takes for Tabor Sales Company to collect its accounts receivable. Since 75% of the firm's sales are on credit, we can calculate the credit sales by multiplying the total sales by 75%:
Credit sales = 0.75 * $9.8 million = $7.35 million
Next, we can calculate the average accounts receivable by dividing the credit sales by the number of days in a year:
Average accounts receivable = (Credit sales) / (Number of days in a year)
= $7.35 million / 365
≈ $20,137.93 per day
Finally, we can calculate the average collection period by dividing the accounts receivable by the average accounts receivable per day:
Average collection period = (Accounts receivable) / (Average accounts receivable per day)
= $562,500 / $20,137.93
≈ 55.96 days
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In the book, The 360 Degree Leader, author John C. Maxwell states, "Blessed are the flexible leaders, for they will not bend out of shape." Large successful global companies are looking for leaders who fit their culture, who are humble, hungry, and smart.
Watch the video Hiring Employees (LinkedIn Learning, 03:52). (Links to an external site.) You will need to be logged into ERNIE to access this video.
After viewing the video, respond to the following:
Research the type of leaders your strategic audit company is looking for. Do they hire from within and groom their future leaders, or recruit them from universities or other industries?
Explain if this is working for your strategic audit company by presenting a brief overview of the type of leaders employed there. Is their leadership diverse, come from different countries, are the ages different, is there a mix of genders?
I apologize, but I am unable to watch videos or access external sites. However, I can provide a general answer based on industry practices. Many strategic audit companies prefer a combination of hiring from within and recruiting from universities or other industries. This approach allows them to develop and groom future leaders who understand the company's culture, while also bringing in fresh perspectives and ideas from external sources.
The type of leaders employed in strategic audit companies can vary, but there is a growing emphasis on diversity. Companies recognize the value of having leaders from different countries, with varying ages, and a mix of genders. This diversity brings a range of experiences, insights, and approaches to problem-solving, which can lead to better decision-making and innovation.
Overall, it is important for strategic audit companies to have leaders who are adaptable, humble, hungry for growth, and smart. These traits align with the idea of being flexible leaders, as mentioned by John C. Maxwell in his book, The 360 Degree Leader.
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On January 1 of the current year , Jimmy's Sandwich Company reported total equity of $ 122,500 During the current year , total revenues were $ 96,000 , while total expenses were $ 105,500 . No other changes in equity occurred during the year . The change in total equity during the year was :
The change in total equity during the year is-$9,500. This is because the company's expenses exceeded the revenues earned during the year, leading to a net loss, which reduces the equity.
Here's the calculation of the change in total equity: Total equity on January 1 of the current year = $122,500, Total revenues during the current year = $96,000, Total expenses during the current year = $105,500, Net loss = Total revenues - Total expenses= $96,000 - $105,500 = $-9,500, Change in total equity = Net income or loss + other changes in equity= -$9,500 + $0= $-9,500. Therefore, the change in total equity during the year was -$9,500.
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Chaz Corporation has taxable income in 2022 of \( \$ 312,200 \) for purposes of computing the \( \$ 179 \) expense and acquired the following assets during the year: What is the maximum total depreciation
To calculate the maximum total depreciation for Chaz Corporation, we need to consider the assets acquired during the year and the applicable depreciation rules.
Here are the steps to calculate the maximum total depreciation:
1. Determine the asset classifications: Identify the assets acquired during the year and classify them based on the IRS guidelines. Common classifications include equipment, vehicles, and buildings.
2. Calculate the maximum depreciation expense for each asset: Each asset classification has specific rules for calculating depreciation.
3. Add up the individual maximum depreciation expenses: Sum up the maximum depreciation expenses for each asset acquired during the year.
Please note that the specific depreciation calculations and limits may vary based on the tax laws applicable to Chaz Corporation. It is recommended to consult with a tax professional for accurate and up-to-date information tailored to your specific situation.
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What types of investments in common stock are accounted for using:
A. the equity method
B. carried at fair value
A. The equity method is an accounting method used to record an investor’s investment in common stock of another company. This method requires recognition of a company's investment.
Common stock of another company, as well as recognizing the profits and losses from owning that stock. The equity method reflects the increase or decrease in the value of the investor’s investment in the common stock. This method adjusts the accounting entries to reflect the investor’s equity participation in the other company.
B. Carried at fair value is an accounting method used to account for common stock investments using the fair market value of those investments.
This method reflects the current market price of the common stock, without regard for the investor’s equity participation in the other company. This method allows investors to account for stock investments at their fair value, rather than relying on the historical cost of the investments.
This allows for better analysis and decision making about the investment by bringing a more current figure into consideration.
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