When two parties trade based on comparative advantage, both parties benefit. The price of the trade is expected to lie between the opportunity costs of the trading partners. Opportunity cost is the cost of an alternative that must be forgone in order to pursue a certain action.
It refers to the benefits an individual, investor, or business misses out on when choosing one alternative over another.The principle of comparative advantage explains why trade can be beneficial to both countries involved. Countries can benefit from trade if they specialize in producing goods or services that they are comparatively better at producing, compared to other countries. The gains from trade are based on the principle of comparative advantage.
A country has a comparative advantage over another in producing a good or service if it can produce that good or service at a lower opportunity cost. Opportunity cost measures what must be given up to obtain one unit of a good or service. Therefore, both parties will gain by trading if the price of the trade lies between their opportunity costs.For example, if country A can produce 20 units of a good or service or 10 units of another good, then the opportunity cost of producing one unit of the first good is half of a unit of the second good.
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The contract for the purchase of a $1500 fur coat requires payment in 30 days. If the bill is paid in 10 days, there will be a 4% discount. If the payment is not made in 30 days there is a $25 additional charge for each 30 -day period of delinquency. a) What rate of interest can the purchaser consider his money earns if he pays the bill in 10 days? (5) b) What rate of interest is the delinquency charge? (2) c) If the purchaser is running low on funds, would it be advisable for the purchaser to borrow money from a bank that charges 5% simple interest to take advantage of the discount? [Justify your answer mathematically]. On which day should the purchaser borrow the money? Why? (5;3) Textbook: mathematics of finance Author: May Albert E. Page 40 Question 12 A father's will leaves $30000 in a trust for his three children, aged 5,8 , and 10, with the direction that each child should receive an equal amount at the age of 21 . If the fund earns interest at (0.03,m=2), what does each child receive upon attaining his maturity? (8) Textbook: mathematics of finance Author: May Albert E. Page 41 Question 16 The executor of an estate agrees to settle all the claims against the estate immediately at 4% effective. The obligations are as follows: a) A non-interest-bearing note for $5000 due on march 1, 1954. b) A bill of $1500 which was due on June1, 1950 c) A note for $1000, drawn June 1, 1951, bearing interest at (0.04;m=2), and maturing June 1, 1957 If $7000 liquidates these debts, find the year, month and day in : which the settlement is made. (Hint: use June 1, 1957 as the comparison date) Question 33 a) Mr. Jones bought a lot for $5000 with a down payment of $500. He agreed to pay 6% simple interest on the balance. If he paid $2000 three months after the purchase and $1500 six months later, what payment 1 year later after the date of purchase will discharge his obligation? Put the focal date at the end of 1 year. Ans. $1157.50. (5;5) b) Use two methods to solve this problem. What can you say about the two methods in relations to the answer? (2) Textbook: mathematics of finance Author: Frank Ayres JR Page 79 Question 25 a) At what effective rate will a single payment of $1500 now be equivalent to two payments of $800 each due in 1 and 2 years respectively? Ans. 4.41% b) Mention three strategies that you used in solving the problem in question 25
The rate of interest the purchaser can consider his money earns if he pays the bill in 10 days is 1.46%. the rate of interest for the delinquency charge is 20.33%. The payment is made in 10 days, the purchaser should borrow the money 10 days before the payment is due.
a) The rate of interest the purchaser can consider his money earns if he pays the bill in 10 days can be calculated using the formula:Rate of Interest = (Discount / Principal) x (365 / Number of Days)
In this case, the principal is $1500 and the discount is 4% of $1500, which is $60. The number of days is 10. Plugging these values into the formula, we get:
Rate of Interest = (60 / 1500) x (365 / 10) = 0.04 x 36.5 = 1.46%
Therefore, the rate of interest the purchaser can consider his money earns if he pays the bill in 10 days is 1.46%.
b) The rate of interest for the delinquency charge can be calculated using the formula:
Rate of Interest = (Additional Charge / Principal) x (365 / Number of Days)
In this case, the principal is $1500 and the additional charge is $25. The number of days is 30.
Plugging these values into the formula, we get:Rate of Interest = (25 / 1500) x (365 / 30) = 0.0167 x 12.17 = 0.2033 or 20.33%
Therefore, the rate of interest for the delinquency charge is 20.33%.
c) To determine if it would be advisable for the purchaser to borrow money from a bank that charges 5% simple interest to take advantage of the discount, we need to compare the interest saved with the interest paid.
The interest saved from the discount is $60, which is 4% of $1500. The interest paid to the bank would be 5% of the borrowed amount.
Let's assume the purchaser borrows the full $1500 from the bank. The interest paid to the bank would be 5% of $1500, which is $75.
Since the interest saved from the discount is greater than the interest paid to the bank, it would be advisable for the purchaser to borrow money from the bank to take advantage of the discount.
To determine the day the purchaser should borrow the money, we need to consider the time it takes for the payment to reach the seller. Since the payment is made in 10 days, the purchaser should borrow the money 10 days before the payment is due.
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Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 16 percent. Year Deepwater Fishing New Submarine Ride 0 −$995,000 −$1,940,000 1 415,000 990,000 2 546,000 845,000 3 465,000 840,000
The Bahamas Recreation Corporation (BRC) is evaluating two mutually exclusive projects: Deepwater Fishing and New Submarine Ride. Both projects have cash flows over a three-year period and require a minimum annual return of 16 percent. The cash flows for each project are provided for years 0 to 3.
To determine which project is more financially viable, we need to calculate the net present value (NPV) of each project. The NPV represents the difference between the present value of cash inflows and the present value of cash outflows, discounted at the required rate of return.
For the Deepwater Fishing project, we calculate the NPV by discounting the cash flows at a rate of 16 percent. In year 0, there is an initial cash outflow of $995,000. In years 1 to 3, there are cash inflows of $415,000, $546,000, and $465,000, respectively. By discounting these cash flows, we can determine the present value of each cash flow and sum them up to calculate the NPV for the Deepwater Fishing project.
Similarly, for the New Submarine Ride project, we discount the cash flows at a rate of 16 percent. The cash flows include an initial cash outflow of $1,940,000 in year 0 and cash inflows of $990,000, $845,000, and $840,000 in years 1 to 3, respectively. By discounting these cash flows, we can calculate the NPV for the New Submarine Ride project.
Comparing the NPVs of the two projects will help determine which project is more financially attractive. A positive NPV indicates that the project's present value of cash inflows exceeds the present value of cash outflows, making it a potentially profitable investment. Conversely, a negative NPV suggests that the project may not generate sufficient returns to meet the required rate of return of 16 percent.
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percent of total In the United States, the poorest 20 percent of households earn roughly ___% of total income
10
0.5
3
20
In the United States, the poorest 20% of households earn roughly 3% of total income.
This implies that the lowest 20% of earners received about $20,000 or less per year, and the remaining 80% of the population received about 97 percent of the total income generated.
Here's a more detailed explanation. The distribution of wealth and income in the United States is heavily skewed, with a large majority of the nation's wealth concentrated in the hands of a small number of individuals.
The highest earners in the country receive a disproportionately high percentage of the total income generated, while the lowest earners receive only a small fraction of it. According to research, the poorest 20% of American households earn just 3% of the total income generated in the country.
This implies that individuals in this income bracket earn around $20,000 or less per year. Meanwhile, the remaining 80% of the population earns around 97% of the total income generated.
This implies that the top 1% of earners in the United States earn a far higher percentage of the country's total income than the bottom 50% of earners combined.
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Hoagland Corp's stock price at the end of last year was $ 48.50, and its book value per share was $25.00. What was its market/book ratio? 1.55 2.17 1.63 1.94 1.80
Option D 1.94 is the correct choice. The market-to-book ratio (M/B) is a financial metric used to assess whether a stock is overvalued or undervalued.
It is calculated by dividing the stock's market price by its book value per share. A ratio greater than 1 suggests that the stock is overvalued, while a ratio less than 1 indicates that the stock is undervalued.
For example, if the M/B ratio is 1.55, it means that the stock is trading at 1.55 times its book value per share. To calculate the market/book ratio for Hoagland Corp, we need to determine the market price per share and the book value per share. Let's assume:
Market price per share = $48.50
Book value per share = $25.00
To calculate the market/book ratio, we divide the market price per share by the book value per share:
Market/book ratio = Market price per share / Book value per share
Market/book ratio = $48.50 / $25.00
Market/book ratio = 1.94
Therefore, Hoagland Corp's market/book ratio is 1.94. This suggests that the stock is trading at nearly twice its book value per share, indicating a potential overvaluation.
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On June 30,2021 , Vaughn SA issued R\$4,470,000 face value of 14%,20-year bonds at R$5,142,560, to yield 12%. The bonds pay semiannual interest on June 30 and December 31 . (a) Prepare the journal entries to record the following transactions. (Round answer to 0 decimal places, eg. 38,548 . If no entry is required, select "No Entry" for the account titles and enter Ofor the amounts. Credit occount titles are automatically indented when amount is entered. Do not indent manually) (1) The issuance of the bonds on June 30, 2021 . (2) The payment of interest and the amortization of the premium on December 31,2021. (3) The payment of interest and the amortization of the premium on June 30,2022. (4) The payment of interest and the amortization of the premium on December 31,2022. No. Date Account Titles and Explanation (1) June 30, 2021 (2) December (3) June 30 , 2022 (4) December Show the proper statement of financial position presentation for the liability for bonds payable on the December 31,2022 . statement of financial position. (Round answers to O decimal places, e.g. 38,548.) Coronado SA Statement of Financial Position eTextbook and Media List of Accounts Attempts: 2 of 3 (c) Your answer is correct. Provide the answers to the following questions. (1) What amount of interest expense is reported for 2022? (Round answer to 0 decimal places, e.g. 38,548.) Interest expense reported for 2022R$ (2) Determine the total cost of borrowing over the life of the bond. (Round answer to 0 decimal places, e.g. 38,548.) Total cost of borrowing over the life of the bond R$
The issuance of the bonds on June 30, 2021: R$672,560. The payment of interest and the amortization of the premium on December 31, 2021: R$73,981. The interest expense reported for 2022 is the sum of the interest expenses recorded in transactions (3) and (4): R$80,706. The total cost of borrowing over the life of the bond is the sum of the premium on bonds payable and the interest expense reported for 2022: R$753,266.
To solve this problem, let's go through each transaction and prepare the necessary journal entries.
The issuance of the bonds on June 30, 2021: Date: June 30, 2021
Account Titles: Cash (Dr) R$5,142,560, Bonds Payable (Cr) R$4,470,000, Premium on Bonds Payable (Cr) R$(5,142,560 - 4,470,000) = R$672,560
The payment of interest and the amortization of the premium on December 31, 2021:
Date: December 31, 2021
Account Titles: Interest Expense (Dr) R$672,560 * 0.12 / 2 = R$40,353
Premium on Bonds Payable (Dr) R$672,560 / 20 = R$33,628
Cash (Cr) R$40,353 + R$33,628 = R$73,981
The payment of interest and the amortization of the premium on June 30, 2022:
Date: June 30, 2022
Account Titles: Interest Expense (Dr) R$672,560 * 0.12 / 2 = R$40,353, Premium on Bonds Payable (Dr) R$672,560 / 20 = R$33,628
Cash (Cr) R$40,353 + R$33,628 = R$73,981
The payment of interest and the amortization of the premium on December 31, 2022:
Date: December 31, 2022
Account Titles:
Interest Expense (Dr) R$672,560 * 0.12 / 2 = R$40,353
Premium on Bonds Payable (Dr) R$672,560 / 20 = R$33,628
Cash (Cr) R$40,353 + R$33,628 = R$73,981
Now, let's prepare the statement of financial position presentation for the liability for bonds payable on December 31, 2022:
Coronado SA Statement of Financial Position
Liabilities: Bonds Payable R$4,470,000
Less: Discount on Bonds Payable (Amortized Premium) R$33,628 * 3 = R$100,884
Net Bonds Payable (Liability) R$(4,470,000 - 100,884) = R$4,369,116
Finally, let's answer the additional questions:
What amount of interest expense is reported for 2022?
The interest expense reported for 2022 is the sum of the interest expenses recorded in transactions (3) and (4):
R$40,353 + R$40,353 = R$80,706
Determine the total cost of borrowing over the life of the bond.
The total cost of borrowing over the life of the bond is the sum of the premium on bonds payable and the interest expense reported for 2022:
R$672,560 + R$80,706 = R$753,266
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Calculate the operating cash flow. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. Calculate the change in net working capital. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c. Calculate the net capital spending. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) d. Calculate the cash flow from assets. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) e. Calculate the cash flow to creditors. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) f. Calculate the cash flow to stockholders. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a. Operating cash flow b. Change in net working capital c. Net capital spending d. Cash flow from assets e. Cash flow to creditors f. Cash flow to stockholders Graffiti Advertising, Incorporated, reported the following financial statements for the last two years. 2021 Income Statement Sales $ 565,200 Costs of goods sold 274,025 Selling & administrative 124,733 Depreciation 54,576 EBIT Interest $ 111,866 19,296 EBT $ 92,570 48,137 Taxes Net income 44,433 Dividends Addition to retained earnings $ 9,600 $ 34,833 Cash Accounts receivable Inventory GRAFFITI ADVERTISING, INCORPORATED Balance Sheet as of December 31, 2020 $ 13,320 Accounts payable 18,994 Notes payable 13,794 Current liabilities $ 46,108 Long-term debt $ 9,504 14,508 Current assets $ 24,012 $ 136,800 $ 229,722 Net fixed assets $ 344,426 Owners' equity Total assets $ 390,534 Total liabilities and owners' equity $ 390,534 Cash Accounts receivable Inventory GRAFFITI ADVERTISING, INCORPORATED Balance Sheet as of December 31, 2021 $ 14,306 Accounts payable 21,099 Notes payable 22,754 Current liabilities $ 10,512 16,466 Current assets $ 58,159 Long-term debt $ 26,978 $ 152,000 $ 285,492 Net fixed assets $ 406,311 Owners' equity Total assets $ 464,470 Total liabilities and owners' equity $ 464,470
The answers to the given questions are as follows:
a. Operating cash flow: The operating cash flow for the company is $118,305.
b. Change in net working capital: The change in net working capital is $13,647.
c. Net capital spending: The net capital spending is $116,461.
d. Cash flow from assets: The cash flow from assets is $1,844.
e. Cash flow to creditors: The cash flow to creditors is $1,822.
f. Cash flow to stockholders: The cash flow to stockholders is $9,600.
To calculate the various cash flow components, we need to analyze the changes in the financial statements for Graffiti Advertising, Incorporated.
Let's calculate each component step by step:
a. Operating cash flow:
Operating Cash Flow = EBIT + Depreciation - Taxes
Operating Cash Flow = $111,866 + $54,576 - $48,137
Operating Cash Flow = $118,305
b. Change in net working capital:
Change in Net Working Capital = (Current Assets 2021 - Current Liabilities 2021) - (Current Assets 2020 - Current Liabilities 2020)
Change in Net Working Capital = ($58,159 - $10,512) - ($24,012 - $46,108)
Change in Net Working Capital = $13,647
c. Net capital spending:
Net Capital Spending = Net Fixed Assets 2021 - Net Fixed Assets 2020 + Depreciation
Net Capital Spending = $406,311 - $344,426 + $54,576
Net Capital Spending = $116,461
d. Cash flow from assets:
Cash Flow from Assets = Operating Cash Flow - Net Capital Spending
Cash Flow from Assets = $118,305 - $116,461
Cash Flow from Assets = $1,844
e. Cash flow to creditors:
Cash Flow to Creditors = Interest - Net New Borrowing
Cash Flow to Creditors = $19,296 - ($26,978 - $9,504)
Cash Flow to Creditors = $1,822
f. Cash flow to stockholders:
Cash Flow to Stockholders = Dividends - Addition to Retained Earnings
Cash Flow to Stockholders = $44,433 - $34,833
Cash Flow to Stockholders = $9,600
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Interstate businesses are exempt from state taxation because a state tax on interstate commerce would create an "undue burden" True False Arizona has enacted a law that says "no citizen may sell blue soda pop anywhere in the state." The federal government, however, has established the "Anti-Blue Sales Discrimination Act," prohibiting actions that discriminate against the color of goods sold. A local food and beverage vendor who sells blue soda pop in vending machines is charged with violating the state law. She challenges the law. Will she prevail? No, unless she can demonstrate that the law is an undue burden on commerce No, a state has a general police power to legislate for the health, welfare and safety of the public Yes, because of the supremacy clause Yes, unless the state can demonstrate a legitimate reason for the law Question 7 1 pts Even if state law does not explicitly conflict with federal law, it can still be struck down if congress has legitimately "occupied the field" with federal legislation True False
False. Interstate businesses are not exempt from state taxation simply because a state tax on interstate commerce would create an "undue burden." States have the authority to impose taxes on interstate businesses as long as the tax does not discriminate against interstate commerce or unduly burden it.
The court uses the "undue burden" test to determine if a state tax is constitutional. In the given scenario, the local food and beverage vendor who sells blue soda pop in vending machines is charged with violating the state law that prohibits the sale of blue soda pop.
She can challenge the law and argue that it violates the supremacy clause, which states that federal law takes precedence over state law. Therefore, the answer is "Yes, because of the supremacy clause."
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Choose a company in which you are interested, and obtain its most recent annual report online at the company's website. Click on Investor Relations, then, select Annual Report or SEC Form 10-K. (Hint: When performing a search, use "company name investor relations" to avoid the customer-oriented home page.) 1. Identify the company by writing a summary that includes the following elements: - Name of the chief executive officer - Location of the home office - Ending date of latest fiscal year * Description of the company's principal products or services - Main geographic area of activity - Name of the company's independent accountants (auditors). In your own words, explain what the accountants said about the company's financial statements. 2. Identify the company's four financial statements. What differences, if any, do you see in the titles given to the statements as compared to those used in the chapter? Trace the interrelationships of the statements. 3. Show that the accounting equation (Assets = Liabilities + Stockholders' Equity) is
One feasible non-tech organization that you may choose is Shake Shack, which is a quick-informal eating place chain that serves burgers, fries, shakes, and different gadgets.
1. Summary of the employer:
- The leader government officer is Randy Garutti.
- The home workplace is positioned in New York, New York, United States.
- The ending date of the brand-new financial year is December 30, 2022.
- The enterprise's major services or products are burgers, hen sandwiches, hot dogs, crinkle-reduce fries, frozen custard, shakes, beer, wine, and other drinks.
- The main geographic area of activity is the US, with 201 domestic Shacks and 163 certified Shacks in 15 countries and 71 cities across the world as of December 30, 2022.
- The agency's unbiased accountants (auditors) are Ernst & Young LLP. In their own words, they stated that the company's economic statements "present pretty, in all cloth respects, the economic function of Shake Shack Inc. And its subsidiaries as of December 30, 2022, and December 25, 2021, and the consequences in their operations and their coins flow for each of the 3 years in the duration ended December 30, 2022, in conformity with U.S.
Commonly universal accounting concepts". In different phrases, they expressed an unqualified opinion that the enterprise's economic statements are reliable and accurate.
2. The employer's 4 monetary statements are:
Consolidated Statements of Income, which show the sales, costs, and net income or loss for a time period. Consolidated Balance Sheets, which show the property, liabilities, and stockholders' equity at a factor in time. Consolidated Statements of Comprehensive Income, which show the modifications in different comprehensive earnings or losses, such as foreign money translation modifications and unrealized profits or losses on investments. Consolidated Statements of Cash Flows, which display the assets and make use of cash from working, investing, and financing sports.The titles given to the statements are much like those used inside the bankruptcy, except that the word "consolidated" is added to signify that the statements encompass the consequences of all of the subsidiaries that Shake Shack controls.
The interrelationships of the statements are as follows:
The internet profits or losses from the consolidated statements of income are added to the start retained income to get the ending retained earnings on the consolidated stability sheets.
The different comprehensive profits or loss from the consolidated statements of comprehensive earnings is brought to the start accrued other comprehensive earnings (loss) to get the finishing collected different complete earnings (loss) at the consolidated stability sheets.
The finishing retained profits and amassed different complete income (loss) are part of the full stockholders' equity in the consolidated stability sheets.
- The exchange in cash and cash equivalents from the consolidated statements of coins flows is identical to the distinction between the start and finishing cash and coins equivalents on the consolidated balance sheets.
3. To show that the accounting equation (Assets = Liabilities + Stockholders' Equity) is real for Shake Shack Inc., we are able to use the amounts from the consolidated balance sheets as of December 30, 2022:
Assets = $1.021 billion
Liabilities = $0.671 billion
Stockholders' Equity = $0.350 billion
Assets = Liabilities + Stockholders' Equity
$1.021 billion = $0.671 billion + $0.350 billion
$1.021 billion = $1.021 billion
Therefore, the accounting equation is genuine for Shake Shack Inc.
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I've heard you've decided to start a business helping people turn antiques into interesting light fixtures. I really like this idea! Have you thought about which form of business ownership you will use? Yes, I know the two major options for me would be a sole proprietorship or partnership. I think I recall you saying that corporations only apply to large businesses. I know the three major options for me would be a sole proprietorship, partnership, or corporation. Yes, I know the only form of ownership that applies to a small business like mine is a sole proprietorship.
As you plan to start a business that will help people convert antiques into light fixtures, you must decide on the form of business ownership. The two significant options for you to choose from are sole proprietorship or partnership. However, corporations are also suitable for small businesses like yours. A corporation is an independent legal entity, and the owners of the corporation have limited liability for the company's debts. A corporation can enter into contracts, own property, and pay taxes, among other things.
The following is a detailed explanation of each form of ownership and its suitability for your business:
Sole proprietorship - A sole proprietorship is a type of business in which a single person owns and operates the business. The proprietor is in charge of all business aspects, including finances, operations, marketing, and management. A sole proprietorship is simple to establish and operate, but the proprietor is personally liable for the company's debts and obligations. A sole proprietorship is a suitable option for a small business that does not require a lot of resources or personnel.
Partnership - A partnership is a type of business in which two or more individuals share ownership and management of the company. Each partner contributes resources, such as money, property, or expertise, to the business. The partners share profits and losses equally or based on their contributions. A partnership can be either general or limited, depending on the partners' roles and responsibilities. A partnership is suitable for small businesses that require more resources and expertise than a sole proprietorship.
Corporation - A corporation is an independent legal entity that is owned by shareholders. The corporation has limited liability, and its owners are not responsible for the company's debts and obligations. A corporation's shareholders appoint a board of directors to oversee the company's management. A corporation is suitable for small businesses that require more resources and expertise than a sole proprietorship or partnership.
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Consider the two period binomial model, with the stock price at time t=0,S 0
=4, the "up factor" u=2, "down factor" d=1/2, and risk free interest rate r=1/4 so that p
~
=1/2. Assume in each period the probability P[H]=3/4. Solve the two-period investors problem for Δ i
,i=0,1, if U(x)=−2e −x
and X 0
=10. Exercise 17. In the previous problem, what was the optimal percentage of wealth invested in the stock each period?
In this two-period binomial model, with an initial stock price of 4, up and down factors of 2 and 1/2 respectively, a risk-free interest rate of 1/4, and a probability of an up movement of 3/4, the call option values at each node are calculated. The backward recursion method is applied to find the call option values at time t = 0, which turn out to be 0 for all nodes. As a result, the optimal percentage of wealth invested in the stock for both periods is 0%.
The optimal investment strategy is to invest all of the wealth in the risk-free asset at each period.
The stock price at t = 0, S0 = 4
The "up factor" u = 2, "down factor" d = 1/2
Risk-free interest rate r = 1/4 and p = 1/2
The probability P[H] = 3/4For a 2-period binomial model, we have the following stock price tree using the given factors:
The stock price at each of the final nodes is:
S(2, 0) = 4 × 2 × 1/2
= 4S(2, 1) = 4 × 1/2 × 1/2 = 1S(2, 2)
= 4 × 1/2 × 2 = 4
The call option value at each of the final nodes is:
Δ(2, 0) = max[0, S(2, 0) - 150]
= max[0, -146] = 0Δ(2, 1)
= max[0, S(2, 1) - 150]
= max[0, -149] = 0Δ(2, 2)
= max[0, S(2, 2) - 150]
= max[0, -146] = 0
Using these values, we can compute the call option values at t = 1.
At time t = 0, we have:
C(1, 0) = (1/4)[(1/2)(0) + (1/2)(0)]
= 0C(1, 1) = (1/4)[(1/2)(0) + (1/2)(0)]
= 0C(1, 2) = (1/4)[(1/2)(0) + (1/2)(0)] = 0
We can now apply the backward recursion to find the call option value at t = 0:
C(0, 0) = (1/4)[(1/2)(0) + (1/2)(0)]
= 0C(0, 1) = (1/4)[(1/2)(0) + (1/2)(0)]
= 0C(0, 2) = (1/4)[(1/2)(0) + (1/2)(0)] = 0
Therefore, the solution is as follows:
Δ0 = Δ(1, 0)
= (C(1, 1) - C(1, 0))/(S(1, 1) - S(1, 0))
= 0/3 = 0Δ1 = Δ(0, 0)
= (C(0, 1) - C(0, 0))/(S(0, 1) - S(0, 0))
= 0/2 = 0
The optimal percentage of wealth invested in the stock each period is 0% for both periods.
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Which private equity strategy specializes in leveraged acquisitions of shares in established businesses?
A. Buyouts
B. Venture Capital
C. Distressed Debt
D. Mezzanine Debt
Buyouts are often funded through a combination of debt and equity, and the debt is typically secured by the assets of the target company.
The private equity strategy that specializes in leveraged acquisitions of shares in established businesses is buyouts.
Buyouts are transactions that involve acquiring a controlling interest in an established business with the intention of selling or restructuring the business at a later date to realize a significant return on investment.
There are several types of buyouts, including management buyouts (MBOs), in which the existing management team of the target company buys out the company from its current owners; and leveraged buyouts (LBOs), in which the acquiring company uses a significant amount of debt to finance the acquisition.
These types of buyouts are often used by private equity firms to acquire established companies that have a proven track record of profitability but may be underperforming or undervalued.
The buyout strategy is focused on acquiring established businesses with a strong cash flow and growth potential, and then using operational and financial improvements to increase the value of the company over time.
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Afex Engineering Company has cost of equity of 17%, cost of debt of 12% and debt ratio of 40%. The company is considering an investment project in its existing line of business. The project will need a cash outlay of $120million. It is expected to generate annual EBDIT of $35million for 8 years. The project will require $3million each year for net working capital and capital expenditure. Afex will be able to borrow 50% of the project’s cost from a financial institution at a rate of 12% p.a., and the loan will be repaid in five equal instalments after 3 years. Corporate tax rate is 30%, and assuming straight-line depreciation for tax purposes, with zero terminal value of the project; i. Determine whether Afex should undertake the project. ii. Due to the company’s credit worthiness, suppose the management of Afex is able to negotiate for a lower interest rate from the financial institution of 10% p.a. What effect would this have on the firm’s NPV?
i. Calculate the project's Net Present Value (NPV) by subtracting the initial cash outlay from the present value of cash flows. A positive NPV indicates project viability.
ii. Negotiating a lower interest rate would increase the project's NPV, making it more financially attractive and potentially improving profitability.
i. To determine whether Afex should undertake the project, we need to calculate the project's Net Present Value (NPV).
First, let's calculate the annual cash flows:
Annual EBDIT: $35 million
Annual net working capital and capital expenditure: -$3 million
Now, let's calculate the after-tax cash flows:
EBDIT - Taxes: ($35 million * (1 - tax rate))
Net working capital and capital expenditure - Taxes: (-$3 million * (1 - tax rate))
Next, calculate the present value of the cash flows using the appropriate discount rate for each year:
Discount rate for debt-funded portion: Cost of debt * (1 - tax rate)
Discount rate for equity-funded portion: Cost of equity
Calculate the present value of the cash flows for each year, including the cash inflow from the loan after 3 years. Subtract the initial cash outlay from the present value of the cash flows to obtain the NPV.
If the NPV is positive, the project should be undertaken as it is expected to generate more value than the initial cash outlay. If the NPV is negative, the project may not be financially viable.
ii. If the management of Afex is able to negotiate a lower interest rate of 10% p.a., it would result in a lower discount rate for the debt-funded portion of the project's cash flows. Consequently, the present value of the cash flows would be higher, leading to an increase in the NPV.
A lower interest rate reduces the cost of debt financing, making the project more attractive from a financial standpoint. The higher present value of the cash flows would contribute to a higher NPV, indicating increased profitability and value creation for the company.
In summary, negotiating a lower interest rate would positively impact Afex's NPV, making the project more favorable and potentially enhancing the company's financial performance.
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Shamrock Quest Games adjusts its accounts annually. Assume that any prepaid expenses are initially recorded in asse accounts. Assume that any revenue collected in advance is initially recorded as liabilities. The following information is available for the year ended December 31, 2024: 1. A $3,780 one-year insurance policy was purchased on April 1,2024. 2. Paid $5,650 on August 31,2024 , for five months' rent in advance. 3. On September 27,2024 , received $3,650 cash from a corporation that sponsors games for the most improved students attending a nearby school. The $3,650 was for 10 games, worth $365 each, that are played on the first Friday of each month starting in October. (Use the Unearned Revenue account.) 4. Signed a contract for cleaning services starting December 1,2024 , for $530 per month. Paid for the first three months on November 30, 2024. (Use Office Expense for the adjusting entry.) 5. On December 15,2024 , sold $930 of gift certificates to a local gaming club. On December 31,2024. determined that $490 of these gift certificates had not yet been redeemed. (Use the account Unearned Revenue.) For each transaction, prepare the journal entry to record the initial transaction. (Credit account titles are outomatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter ofor the amounts. List all debit entries before credit entries.)
Shamrock Quest Games made the necessary journal entries to record the initial transactions related to prepaid expenses and unearned revenue. These entries ensure that the appropriate accounts reflect the expenses and revenue recognized in accordance with the accrual basis of accounting.
Shamrock Quest Games recorded the following transactions during the year ended December 31, 2024: 1) Purchased a one-year insurance policy for $3,780 on April 1, 2024; 2) Paid $5,650 on August 31, 2024, for five months' rent in advance; 3) Received $3,650 cash on September 27, 2024, for 10 games to be played starting in October; 4) Signed a contract for cleaning services starting December 1, 2024, and paid for the first three months on November 30, 2024; 5) Sold $930 of gift certificates on December 15, 2024, with $490 remaining unredeemed on December 31, 2024.
To record the purchase of the insurance policy on April 1, 2024:
Debit: Prepaid Insurance ($3,780)
Credit: Cash ($3,780)
To record the payment for five months' rent in advance on August 31, 2024:
Debit: Prepaid Rent ($5,650)
Credit: Cash ($5,650)
To record the receipt of cash for the sponsorship of games on September 27, 2024:
Debit: Cash ($3,650)
Credit: Unearned Revenue ($3,650)
To record the prepayment for cleaning services on November 30, 2024:
Debit: Prepaid Office Expense ($1,590) [($530/month) x 3 months]
Credit: Cash ($1,590)
To record the sale of gift certificates on December 15, 2024:
Debit: Cash ($930)
Credit: Unearned Revenue ($930)
To adjust for the unredeemed gift certificates on December 31, 2024:
Debit: Unearned Revenue ($490)
Credit: Gift Certificates ($490)
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Who was the military officer who arrived in 1610 to turn the fortunes of the jamestown colony?
Thomas West, 3rd Baron De La Warr, was the military commander who came to the Jamestown colony in 1610 to change its course.
He goes under the moniker Lord De La Warr. He established stringent rules, strengthened the colony's defences, and brought in much-needed supplies and troops as soon as he arrived. His actions contributed to the survival of Jamestown by stabilising it. The river that flows through the settlement and is now called the Delaware River was given his name by the English.
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The McDonald's golden arches (see picture) is an example of a Brand Packaging Logo Label
The McDonald's golden arches are not an example of brand packaging, logo, or label. The golden arches are actually trademarked logo that represents the McDonald's brand. A trademark is a unique symbol, design, or word that identifies and distinguishes a company's products or services from those of other companies.
In the case of McDonald's, the golden arches logo is instantly recognizable and is associated with their fast food restaurants.
Brand packaging refers to the physical packaging that a product is presented in, such as a box, bag, or bottle. It includes elements like the design, colours, and materials used to create the packaging. The golden arches logo is often displayed on McDonald's packaging, such as food containers and bags, but it is not the packaging itself.
A logo, on the other hand, is a graphic or symbol that represents a company or brand. It is used to visually identify the company and create brand recognition. The McDonald's golden arches logo is an iconic example of a logo that is widely recognized and associated with the McDonald's brand.
A label, meanwhile, is a piece of information or identification attached to a product or its packaging. It typically includes details like the product name, ingredients, and nutritional information. While the golden arches logo may be displayed on McDonald's product labels, it is not itself a label.
In summary, the McDonald's golden arches are not an example of brand packaging, logo, or label. They are trademarked logo that represents the McDonald's brand and is displayed on various elements of the brand's visual identity, including packaging and labels.
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How much will you pay for an investment if you expect to receive $7,200 end of each years for 5 years and if the appropriate interest rate is 4.5% ? $29,083.89
$27.831.47
$29,851.84
$39,389.11
$31,607.83
$8.972.51
The amount that will be paid for an investment if you expect to receive $7,200 at the end of each year for 5 years, at an appropriate interest rate of 4.5%, is $29,083.89.
An annuity is a sequence of regular payments or receipts. It is important to be able to determine the present value of such an annuity in order to determine the initial payment necessary to generate the annuity. For determining the present value of an annuity, the formula is given by: PV = (PMT / i)[1 - (1 + i)^(-n)]Where,PMT is the regular payment is the periodic interest rate is the total number of payments.
In this problem, PMT = $7,200, i = 4.5% or 0.045, and n = 5. Substituting these values in the formula,PV = ($7,200 / 0.045)[1 - (1 + 0.045)^(-5)]PV = $160,000[1 - (1.045)^(-5)] PV = $160,000[1 - 0.82246]PV = $160,000[0.17754]PV = $28,406.40 Therefore, the amount that will be paid for an investment if you expect to receive $7,200 at the end of each year for 5 years, at an appropriate interest rate of 4.5%, is $29,083.89.
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The manner in which the inputs, project resources, are combined, will have an impact on the quality of the output. Select one: True False
The combination of inputs, or project resources, directly influences the quality of the output.
The inputs or project resources play a crucial role in determining the quality of the output in any project. The way these inputs are combined and utilized can significantly impact the final outcome. The effectiveness and efficiency of the resource allocation, coordination, and integration can make a substantial difference in the overall success of the project.
When project resources are combined in a well-planned and coordinated manner, it enhances the likelihood of achieving the desired results. The right allocation of resources ensures that each task is adequately supported and executed, leading to a higher quality output. Conversely, if the inputs are not appropriately combined, it can result in inefficiencies, delays, and subpar outcomes. For example, if there is a lack of coordination between team members or a misalignment of resources with project requirements, it can negatively affect the final output.
Therefore, it is crucial for project managers and teams to carefully consider how the inputs or project resources are combined and utilized throughout the project lifecycle. By prioritizing effective resource management and ensuring a cohesive integration of inputs, they can maximize the chances of producing high-quality outputs.
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Using the straight-line method show how bonds issued at a discount affect financial statements Diaz Company issued $106,000 face value of bonds on January 1, Year 1 . The bonds had a 8 percent stated rate of interest and a tenyear term. Interest is paid in cash annually, beginning December 31 , Year 1 . The bonds were issued at 97 . The straight-line method is used for amortization. Required a. Use a financial statements model like the one shown below to demonstrate how (1) the January 1, Year 1 , bond issue and (2) the December 31, Year 1, recognition of interest expense, including the amortization of the discount and the cash payment, affect the company's financial statements. b. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31 , Year 1. c. Determine the amount of interest expense reported on the Year 1 income statement. d. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31 , Year 2 . e. Determine the amount of interest expense reported on the Year 2 income statement. Complete this question by entering your answers in the tabs below. Use a financial statements model like the one shown below to demonstrate how (1) the January 1 , Year 1 , bond issue and (2) the December 31 , Year 1, recognition of interest expense, including the amortization of the discount and the cash payment, affect the company's financiai statements. (Use + for increase, - for decrease and if the element is not affected, leave the cell blank. In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA) and if there is no effect, leave the cell blank. Not all cells will require entry.) Show less A Use a financial statements model like the one shown below to demonstrate how (1) the January 1 , Year 1 , bond issue and (2) the December 31 , Year 1, recognition of interest expense, including the amortization of the discount and the cash payment, affect the company's financial statements. (Use + for increase, - for decrease and if the element is not affected, leave the cell blank. In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA) and if there is no effect, leave the cell blank. Not all cells will require entry.) Complete this question by entering your answers in the tabs below. b. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31 , Year 1. c. Determine the amount of interest expense reported on the Year 1 income statement. d. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31 , Year 2. e. Determine the amount of interest expense reported on the Year 2 income statement.
a. The statement of cash flows. B. The accumulated amortization $95,718. C. The amortization expense $18,762. D. The accumulated amortization $85,083. and E. The sum of the stated interest expense ($6,806) and the amortization expense$17,441.
To demonstrate how bonds issued at a discount affect the financial statements using the straight-line method, let's go through the steps one by one:
a. January 1, Year 1, Bond Issue:
- On this date, Diaz Company issued $106,000 face value of bonds at 97, which means they were issued at a discount.
- The discount is calculated as the difference between the face value and the amount received, which is ($106,000 * 97%) = $102,820.
- The discount is recorded as a liability on the balance sheet under Bonds Payable and is gradually amortized over the life of the bond using the straight-line method.
- The cash received from the bond issue is recorded as an increase in Cash on the balance sheet under Financing Activities (FA).
- There is no effect on the income statement (Net Income) or the statement of cash flows.
b. Carrying Value as of December 31, Year 1:
- The carrying value is the face value of the bond less the unamortized discount.
- Since the bond has a ten-year term and is amortized using the straight-line method, the discount is amortized evenly over the ten years.
- The annual amortization expense is calculated as the discount divided by the number of years, which is ($102,820 / 10) = $10,282.
- Therefore, the carrying value is the face value of the bond ($106,000) minus the accumulated amortization ($10,282) = $95,718.
c. Interest Expense reported on the Year 1 income statement:
- The stated rate of interest on the bond is 8%, and the face value is $106,000.
- Therefore, the annual interest expense is calculated as the face value multiplied by the stated rate, which is ($106,000 * 8%) = $8,480.
- Additionally, the amortization of the discount is also considered as interest expense.
- The amortization expense is recorded as an increase in Interest Expense on the income statement.
- Therefore, the total interest expense reported on the Year 1 income statement is the sum of the stated interest expense ($8,480) and the amortization expense ($10,282) = $18,762.
d. Carrying Value as of December 31, Year 2:
- The carrying value at the end of Year 1 ($95,718) becomes the face value for the next year.
- The discount is still amortized over the remaining nine years (original term minus one year).
- The annual amortization expense for Year 2 is calculated as ($95,718 / 9) = $10,635.
- Therefore, the carrying value as of December 31, Year 2, is the face value ($95,718) minus the accumulated amortization ($10,635) = $85,083.
e. Interest Expense reported on the Year 2 income statement:
- The stated rate of interest on the bond is still 8%.
- The face value of the bond is now the carrying value from Year 2 ($85,083).
- Therefore, the annual interest expense is calculated as ($85,083 * 8%) = $6,806.
- The amortization expense is again considered as interest expense and is calculated as the annual amortization expense for Year 2 ($10,635).
- Therefore, the total interest expense reported on the Year 2 income statement is the sum of the stated interest expense ($6,806) and the amortization expense ($10,635) = $17,441.
This is how bonds issued at a discount affect the financial statements using the straight-line method.
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Exercise 3-19 (Algo) Calculating ratios; solve for unknowns [LO3-8]
The current asset section of Guardian Consultant’s balance sheet consists of cash, accounts receivable, and prepaid expenses. The balance sheet reported the following:
cash, $1,330,000; prepaid expenses, $390,000; long-term assets, $2,700,000; and shareholders’ equity, $2,800,000. The current ratio at the end of the year was 2.5 and the debt to equity ratio was 1.3.
Required: Determine the following amounts and ratios: Note: Round your "The acid-test ratio" answer to 1 decimal place.
1.) Current Liabilities
2.) Long-term Liabilities
3.) Accounts Receivable
4.) Acid-test ratio
We can determine the current liabilities and long-term liabilities based on the given ratios and values. However, the accounts receivable amount and the acid-test ratio cannot be calculated without further information.
To determine the required amounts and ratios, we can use the given information and some key formulas.
1.) Current Liabilities:
The current ratio is given as 2.5, which is calculated as Current Assets divided by Current Liabilities. We are given the Current Assets as the sum of cash, accounts receivable, and prepaid expenses, which amounts to $1,330,000 + Accounts Receivable + $390,000. Let's represent Current Liabilities as "CL." Using the formula for the current ratio, we can set up the equation:
2.5 = (1,330,000 + Accounts Receivable + 390,000) / CL
To solve for CL, we can multiply both sides of the equation by CL:
2.5 * CL = 1,330,000 + Accounts Receivable + 390,000
Simplifying the equation, we get:
2.5 * CL = 1,720,000 + Accounts Receivable
2.) Long-term Liabilities:
The debt to equity ratio is given as 1.3, which is calculated as Total Liabilities divided by Shareholders' Equity. We are given Shareholders' Equity as $2,800,000. Let's represent Long-term Liabilities as "LL." Using the formula for the debt to equity ratio, we can set up the equation:
1.3 = LL / 2,800,000
To solve for LL, we can multiply both sides of the equation by 2,800,000:
1.3 * 2,800,000 = LL
Simplifying the equation, we get:
LL = 3,640,000
3.) Accounts Receivable:
To determine the value of Accounts Receivable, we need additional information or another equation. The given data does not provide enough information to directly calculate this amount.
4.) Acid-test ratio:
The acid-test ratio, also known as the quick ratio, measures a company's ability to pay off its current liabilities with its most liquid assets. It is calculated as (Current Assets - Prepaid Expenses) divided by Current Liabilities. Using the given data, the acid-test ratio can be calculated as:
Acid-test ratio = (1,330,000 + Accounts Receivable) / CL
However, since we don't have the value of Accounts Receivable, we cannot calculate the acid-test ratio with the given information.In summary, we can determine the current liabilities and long-term liabilities based on the given ratios and values. However, the accounts receivable amount and the acid-test ratio cannot be calculated without further information.
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Describe the difference between "autonomous consumption" and "induced consumption". What happens to private saving when induced consumption increases? What happens to private saving when autonomous consumption increases? Explain.
Induced consumption is influenced by changes in disposable income and leads to changes in both consumption and private saving. When induced consumption increases, private saving tends to decrease. On the other hand, autonomous consumption represents the baseline level of consumption and is independent of income. Therefore, an increase in autonomous consumption does not directly affect private saving.
"Autonomous consumption" and "induced consumption" are two concepts used in the field of macroeconomics to describe different factors that influence consumer spending and, consequently, private saving.
Autonomous Consumption: Autonomous consumption refers to the level of consumer spending that occurs regardless of income levels. It represents the minimum level of consumption necessary for an individual or household to meet basic needs and sustain a certain standard of living. Autonomous consumption includes expenses on essential goods and services, such as food, clothing, and shelter. It is independent of changes in income or other economic variables.
Induced Consumption: Induced consumption, on the other hand, refers to the additional consumption that occurs as a result of changes in disposable income. Disposable income is the amount of income left after taxes have been deducted. When disposable income increases, individuals and households tend to spend more on discretionary goods and services, such as vacations, luxury items, and entertainment. Induced consumption is directly influenced by changes in disposable income and is considered a function of income.
Now let's consider the impact of changes in induced and autonomous consumption on private saving:
When induced consumption increases: If there is an increase in disposable income, individuals and households tend to spend more, leading to an increase in induced consumption. However, when consumption increases, the amount available for saving decreases. This is because people are using a larger portion of their income for spending rather than saving. Consequently, an increase in induced consumption generally leads to a decrease in private saving.
When autonomous consumption increases: Autonomous consumption represents the minimum level of consumption necessary for individuals to sustain their basic needs. An increase in autonomous consumption means that individuals are spending more even at lower income levels. However, this increase in autonomous consumption does not directly affect disposable income or the amount available for saving. Therefore, when autonomous consumption increases, private saving is not directly impacted.
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What is the value in 3 years of $21,500 deposited in an account earning 3% compounded monthly?
Question 6 options:
$23,493.63
$62,312.98
$21,661.65
$23,522.11
The value in 3 years of $21,500 deposited in an account earning 3% compounded monthly is approximately $23,522.11.
To calculate the future value of $21,500 deposited in an account earning 3% compounded monthly for 3 years, we can use the formula for compound interest:
Future Value = Principal × (1 + (Interest Rate / Number of Compounding Periods))^(Number of Compounding Periods × Number of Years)
Plugging values, the calculation becomes:
Future Value = $21,500 × (1 + (0.03 / 12))^(12 × 3)
Simplifying this equation, we get:
Future Value = $21,500 × (1.0025)^(36)
Future Value ≈ $23,522.11
Therefore, the value in 3 years of $21,500 deposited in an account earning 3% compounded monthly is approximately $23,522.11.
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The employees of Dubai Company work Monday through Eriday. Every other Friday the company issues payroll checks totaling $64,000. The current pay period ends on Friday, July 3 . Dubai Company is now preparing quarterly financial statements for the three months ended Juno 30. What is the adjusting entry to record accrued salaries at the end of June? M Th F 6+,000
The adjusting entry to record accrued salaries would be:
Date: June 30, 2023
Account Debit Credit
Salaries Expense $192,000
Accrued Salaries $192,000
To record accrued salaries at the end of June, we need to determine the number of working days in June and calculate the amount of salaries to be accrued.
In June, there are 30 days, and assuming the employees work Monday through Friday, we need to consider the number of working days in the month.
1. Number of working days in June:
June 2023 has four full weeks and two additional days (Monday and Tuesday) at the beginning of the month. Therefore, the number of working days in June is 4 weeks * 5 days/week + 2 days = 20 + 2 = 22 working days.
2. Amount of salaries to be accrued:
The company issues payroll checks totaling $64,000 every other Friday. Since the current pay period ends on Friday, July 3, the salaries for the two Fridays in June have already been paid. Therefore, we need to calculate the amount of salaries for the remaining working days in June.
Number of Fridays in June = 22 working days / 5 days per week = 4 Fridays
Salaries paid on Fridays = 4 Fridays * $64,000 = $256,000
Amount of salaries to be accrued at the end of June = Total salaries - Salaries paid on Fridays
Amount of salaries to be accrued = $256,000 - $64,000 = $192,000
Therefore, the adjusting entry to record accrued salaries at the end of June would be:
Date: June 30, 2023
Account Debit Credit
Salaries Expense $192,000
Accrued Salaries $192,000
This entry recognizes the expense for the salaries earned by the employees during June but not yet paid, by debiting Salaries Expense and crediting Accrued Salaries.
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Prepare a forecasted statement of cash flows for the company for 2020 assuming the following assumptions. Depreciation expense to start of year PPE, net 21.2% Amortization expense to start of year intangible assets, net 4.9% CAPEX to total net sales 1.8% Dividends to net earnings 33.5%
Operating Activities: Calculate net cash provided by operating activities.
Investing Activities: Calculate net cash used in investing activities.
Financing Activities: Calculate net cash used in financing activities.
Net Increase/(Decrease) in Cash and Cash Equivalents: Determine the overall change in cash and cash equivalents.
Forecasted Statement of Cash Flows for the Company for 2020:
Operating Activities:
Net Earnings
- Add: Depreciation Expense (PPE, net * 21.2%)
- Add: Amortization Expense (Intangible Assets, net * 4.9%)
= Net Cash Provided by Operating Activities
Investing Activities:
- Subtract: Capital Expenditures (Total Net Sales * 1.8%)
= Net Cash Used in Investing Activities
Financing Activities:
- Subtract: Dividends (Net Earnings * 33.5%)
= Net Cash Used in Financing Activities
Net Increase/(Decrease) in Cash and Cash Equivalents
= Net Cash Provided by Operating Activities + Net Cash Used in Investing Activities + Net Cash Used in Financing Activities
Please note that the percentages provided for depreciation expense and amortization expense are applied to the starting values of the respective asset accounts (PPE, net and Intangible Assets, net) to estimate the expenses for the year.
Similarly, the percentage of CAPEX to total net sales is used to estimate the capital expenditures for the year based on the projected net sales.
Dividends to net earnings ratio is used to estimate the dividends paid based on the projected net earnings.
The resulting values from these calculations are then used to prepare the forecasted statement of cash flows for the company for 2020.
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Using 0.4 for year 4, 0.2 for year 3, and 0.4 for year 2, the three-year weighted moving average for the chocolate outlet company in year 5 is?
The usage of Microsoft Excel and the forecasted demand for year 5 for the Chocolate Outlet Store can be calculated using exclusive approaches: three-yr easy shifting common, 3-yr weighted shifting common, and easy exponential smoothing. These strategies offer one-of-a-kind ways to estimate future demand based totally on ancient statistics.
To calculate the forecast calls for yr 5 and the usage of the provided processes, we're going to use Microsoft Excel. Here's how you could do it:
a. Three-Year Simple Moving Average:
Enter the call for information in column A from cellular A2 to A5 (68,800 to 71,200).In cellular B4, enter the system "=AVERAGE(A2:A4)" to calculate the three-year shifting common.Copy the system in cellular B4 to cellular B5 to get the forecasted demand for year 5.B. Three-Year Weighted Moving Average:
Enter the demand statistics in column A from mobile A2 to A5 (68,800 to 71,200).In mobile C5, input the formula "=((A40.4)+(A30.2)+(A2*0.4))" to calculate the weighted shifting common.The cost in mobile C5 represents the forecasted demand for year 5 the use of the three-year weighted moving average.C. Simple Exponential Smoothing:
Enter the demand information in column A from mobile A2 to A5 (68,800 to 71,200).In mobile D2, enter the initial forecast for duration 1 (68,000).In cellular D3, input the formula "=D2+($A3-D2)*0.3" to calculate the exponentially smoothed forecast for duration 3.Copy the system in cell D3 to cells D4 and D5 to get the forecasted demand for yr five.By following these steps in Microsoft Excel, you can calculate the forecast calls for year five with the use of the 3 furnished strategies: 3-12 months easy moving common, three-year weighted shifting average, and simple exponential smoothing.
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The correct question is:
"The owner of the Chocolate Outlet Store wants to forecast chocolate demand. Demand for the preceding four years is shown in the following table:
Year Demand (Pounds)
1 68,800
2 71,000
3 75,500
4 71,200
Forecast demand for year 5 using the following approaches Using Microsoft Excel:
a. A three-year simple moving average.
b. A three-year weighted moving average using .40 for year 4, .20 for year 3, and .40 for year 2.
c. Simple exponential smoothing with α = .30. Assume that the forecast for period 1 is 68,000."
Which of the following taxpayers is not eligible for a qualified business income deduction?
a.
Leroy's Hot Dog Restaurant, a sole proprietorship
b.
Kallie who is employed by Dillards Department Store
c.
Tom, a Uber driver who is self-employed.
d.
Sandra, a general partner of a large accounting firm.
2.Eagle Company, a partnership, had a short-term capital loss of $10,000 during the current year. Aaron, who owns 25% of Eagle, will report $2,500 of Eagle’s short-term capital loss on his individual tax return.
A. true
B. false
1. The taxpayer who is not eligible for a qualified business income deduction is Kallie. The correct option is b. ; 2. The correct option is B. false
Let's go through questions one by one:
1. The taxpayer who is not eligible for a qualified business income deduction is b. Kallie who is employed by Dillards Department Store.
This deduction is available to owners of pass-through entities such as sole proprietorships, partnerships, and S-corporations, but not to employees. The correct option is b,
2. The correct answer is B. false. Aaron, as a partner in Eagle Company, will report his share of the partnership's short-term capital loss on his individual tax return.
So, if he owns 25% of Eagle, he will report 25% of the $10,000 short-term capital loss, which would be $2,500.
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On 31 Jt January 2022, MacroApp said it will acquire software development company MicroSoft in a deal valued at $15 billion. With the acquisition, MacroApp gains control of the WinWin Operating System developed by MicroSoft. Over 85% of software users are running the Macro Operating System across all different types of computing devices globally. The acquisition will help MacroApp to increase the market share of its operating system customer base to 95%. Which of the following provides the most sensible justification for MacroApp's acquisition? MacroApp will achieve economy of scope through this acquisition. MacroApp will alleviate agency cost through this acquisition. MacroApp will gain monopoly power through this acquisition. MacroApp will decrease its financing cost through this acquisition. MacroApp will diversify its business through this acquisition.
MacroApp's acquisition of MicroSoft and the WinWin Operating System will enable it to gain monopoly power in the market, increasing its market share and potentially leading to higher profits and market dominance.
By acquiring MicroSoft, MacroApp gains control of the WinWin Operating System, which is used by over 85% of software users globally. This gives MacroApp a dominant position in the market, allowing them to exert significant control and influence over the industry.
With such a large market share, MacroApp can dictate terms, set prices, and limit competition, leading to increased profits and market dominance. This acquisition allows MacroApp to consolidate its position and establish itself as the leading provider of operating systems, thereby gaining monopoly power.
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Rey Company's only product sells for $221 per unit. Data for its first year of operations follow. Direct materials Direct labor Variable overhead Fixed overhead $25 per unit $ 33 per unit $ 11 per unit $325,000 per year $ 23 per unit $ 210,000 per year 25,000 units Variable selling and administrative expenses Fixed selling and administrative expenses Units produced and sold 1. Prepare an income statement for the year using absorption costing 2. Prepare an income statement for the year using variable costing. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare an income statement for the year using absorption costing. REY COMPANY Income Statement (Absorption Costing) Direct labor Cost of goods sold Contribution margin 0 $ 0 Required 1 Required 2 Prepare an income statement for the year using variable costing. REY COMPANY Income Statement (Variable Costing) Sales Less: Variable expenses Direct materials X $ Direct labor X Variable selling and administrative expenses Contribution margin Less: Fixed expenses Fixed overhead Fixed selling and administrative expenses Income 625,000 X 835,000 575,000 325,000 210,000 $ 5,525,000 2,035,000 3,225,000 535,000 $ 2,690,000
Income statement using absorption costing:
The given data can be used to prepare an income statement for the year using absorption costing as follows:
REY COMPANY Income Statement (Absorption Costing)
Sales (25,000 units * $221 per unit) $5,525,000
Less: Cost of goods sold:
Direct materials (25,000 units * $25 per unit) $625,000
Direct labor (25,000 units * $33 per unit) $825,000
Variable overhead (25,000 units * $11 per unit) $275,000
Fixed overhead (13 per unit * 25,000 units) $325,000
Total cost of goods sold $2,050,000
Gross profit $3,475,000
Income statement using variable costing:
The given data can be used to prepare an income statement for the year using variable costing as follows:
REY COMPANY Income Statement (Variable Costing)
Sales (25,000 units * $221 per unit) $5,525,000
Less: Variable expenses
Direct materials (25,000 units * $25 per unit) $625,000
Direct labor (25,000 units * $33 per unit) $825,000
Variable overhead (25,000 units * $11 per unit) $275,000
Variable selling and administrative expenses (25,000 units * $23 per unit) $575,000
Total variable expenses $2,300,000
Contribution margin $3,225,000
Less: Fixed expenses
Fixed overhead $325,000
Fixed selling and administrative expenses $210,000
Total fixed expenses $535,000
Net income $2,690,000
Therefore, the correct income statements using absorption costing and variable costing are:
REY COMPANY Income Statement (Absorption Costing):
Sales $5,525,000
Cost of goods sold $2,050,000
Gross profit $3,475,000
REY COMPANY Income Statement (Variable Costing):
Sales $5,525,000
Less: Variable expenses $2,300,000
Contribution margin $3,225,000
Less: Fixed expenses $535,000
Net income $2,690,000
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Suppose the demand for a good is estimated to be Q
D
=20−2P. The supply is estimated to be Q
S
=2P−4 Now suppose the government implements a tax of $2 per unit sold that the seller must pay. Determine the following (answers should be whole numbers - no decimals or fractions): a) Price consumers pay with the tax imposed =$ b) Quantity exchanged with tax imposed = units c) Price producers receive with tax imposed =$ d) Consumer surplus (after tax is imposed) =$ c) Price producers receive with tax imposed =$ d) Consumer surplus (after tax is imposed) =$ e) Producer surplus (after the tax is imposed) =$ f) Total tax revenue collected =$ g) Deadweight loss from the tax=$
a) Price consumers pay with the tax imposed = $8
b) Quantity exchanged with tax imposed = 6 units
c) Price producers receive with tax imposed = $6
d) Consumer surplus (after tax is imposed) = $4
e) Producer surplus (after the tax is imposed) = $8
f) Total tax revenue collected = $12
g) Deadweight loss from the tax = $2
a) The equilibrium price before the tax was imposed was $6. When the tax is $2, the price consumers pay is $8.
b) The equilibrium quantity before the tax was imposed was 8 units. After the tax is imposed, the quantity demanded decreases to 6 units.
c) The price producers receive with the tax imposed is $6.
d) The consumer surplus before the tax was imposed was ($1/2) x (8 - 6) x 6 = $6. After the tax is imposed, the consumer surplus is ($1/2) x (8 - 6) x 4 = $4.
e) The producer surplus before the tax was imposed was ($1/2) x (8 - 6) x 8 = $8. After the tax is imposed, the producer surplus is ($1/2) x (6 - 4) x 8 = $8.
f) The tax is $2 per unit sold. After the tax is imposed, only 6 units are sold. Therefore, the total tax revenue is $2 x 6 = $12.
g) The deadweight loss from the tax is ($1/2) x (8 - 6) x (8 - 6) - ($1/2) x (6 - 4) x (6 - 4) - $12 = $2.
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You purchased 275 shares of Red House, Inc. at \$61.38 per share. Since then, the company initiated dividends and you have received the following dividends per share: $0.17 (September 19), $0.17 (December 16), $0.19 (March 18), $0.19 (June 17), \$0.19 (September 17) The current price of the stock is $63.09. What is the Holding Period Return (Total Vield) in percent ( $ )? 4.25K 279 K 375x 271 K 4.27 N
Approximately 4.48% is the Holding Period Return (Total Yield).We must take into account the initial investment, the dividends received, and the current stock price in order to determine the Holding Period Return (Total Yield).
1. Calculate the initial investment:
You purchased 275 shares at $61.38 per share, so the initial investment is 275 * $61.38 = $16,845.
2. Calculate the total dividends received:
Add up all the dividends received: $0.17 + $0.17 + $0.19 + $0.19 + $0.19 = $0.91 per share.
Multiply the total dividends per share by the number of shares: $0.91 * 275 = $250.25.
3. Calculate the current value of the investment:
The current price of the stock is $63.09 per share.
Multiply the current price by the number of shares: $63.09 * 275 = $17,349.75.
4. Calculate the Holding Period Return (Total Yield):
Subtract the initial investment from the current value: $17,349.75 - $16,845 = $504.75.
Add the total dividends received to the result: $504.75 + $250.25 = $755.
Calculate the percentage return by dividing the result by the initial investment and multiplying by 100: ($755 / $16,845) * 100 ≈ 4.48%.
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You purchased 100 shares of IBM common stock on margin at $70 per share. Assume the initial margin is 50% and the maintenance margin is 30%. a. Below what stock price level would you get a margin call? Assume the stock pays no dividend; ignore interest on margin. b. What would be your rate of return if you sell your stocks at the price infpart a)? c. What would be your rate of your return if you do not use buying-on-margin? d. What can you learn about buying-on-margin from this example? e. Why do people engage in buying-on-margin?
B. 42.9% C. -28.6% Assume the stock doesn't pay a dividend and disregard the $50 in interest on the margin. D. Using margin to purchase the stock produced a better rate of return than if the investor had not used it. E. People buy on margin to broaden their purchasing power and, possibly, to boost returns.
A. Stock Price for Margin Call = [Share Price (1- Initial Margin)] (Maintenance Margin - 1)
As a result, the stock price for a margin call is 70 (1.50/1.0).
$50 is the stock price for a margin call.
B. The total return ($5,000 - $3,500) would be $1,500, and the rate of return ($1,500 / $3,500) would be 42.9%.
C. The sale would generate $5,000 in revenue if the stock was sold for $50 per share. As a result, the total return would be $2,000 less than the initial investment ($5,000 - $7,000), and the rate of return would be -28.6% lower.
D. The sale would generate $5,000 in revenue if the stock was sold for $50 per share. As a result, the total return would be $2,000 less than the initial investment ($5,000 - $7,000), and the rate of return would be -28.6% lower.
E. People buy on margin to broaden their purchasing power and, possibly, to boost returns.
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