The correct answer is B) increase. If variable costs increase by 5% without a corresponding increase in the selling price, it means that the cost per unit of producing the product has increased.
To breakeven, the revenue generated from selling the product must cover both fixed costs and variable costs. With an increase in variable costs, more units need to be sold to generate enough revenue to cover the higher costs.
Therefore, the number of units needed to breakeven will increase.
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Suppose policymakers wish to use fiscal policy to fight inflation. Which statement is MOST accurate? Using fiscal policy, the government can have the best of both worlds in the form of low inflation and economic growth O Essentially, the way to lower the inflation rate is to decrease aggregate demand and cause a recession. They should not use fiscal policy because in the long run the economy will always go back to its equilibrium. O Policymakers should use an expansionary policy because jobs are more important than inflation.
The statement "Essentially, the way to lower the inflation rate is to decrease aggregate demand and cause a recession" is the most accurate statement among the options provided.
When policymakers wish to use fiscal policy to fight inflation, they typically aim to decrease aggregate demand in order to reduce inflationary pressures. This can be achieved through measures such as reducing government spending, increasing taxes, or implementing tighter monetary policies. By reducing aggregate demand, the government aims to slow down the overall level of economic activity, which can help to alleviate inflationary pressures.
It is important to note that this approach may come with the short-term cost of a slowdown in economic growth or even a recession. However, the goal is to bring down inflation rates and stabilize the economy in the long run. Policymakers need to strike a balance between addressing inflation and supporting economic growth, as both factors are important for the overall health of the economy.
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James Plc has 4 million, £1 ordinary shares in issue. The board of the company has decided it needs to raise approximately £2 million, net of issue costs, to finance a new project by means of a 1 for 4 rights issue. The issue price will be at 15% discount to the current market price of £2.59 and the issue costs are expected to be £100,000.
Required:
a) Calculate and explain the following:
i. The theoretical ex rights price per share
ii. The net cash raised
iii. The value of the right per share
b) Using the information provided, illustrate (show all your workings) and discuss the effect of the proposed rights issue on an investor who owns 10,000 ordinary shares of James Plc, given they:
i. Take up the rights
ii. Sell the rights
iii. Do nothing, allowing the rights to lapse
c) Identify and discuss other methods which could be used to raise new equity finance.
The board of James Plc plans to raise £2 million through a 1 for 4 rights issue. The issue price will be at a 15% discount to the current market price of £2.59.
a) i. The theoretical ex-rights price per share can be calculated by subtracting the value of the right per share from the current market price. In this case, the value of the right per share is determined by the discount offered in the rights issue.
ii. The net cash raised can be calculated by multiplying the number of shares issued in the rights issue (4 million/4 = 1 million shares) by the issue price (£2.59 * (1 - 15%)) and subtracting the issue costs (£100,000).
iii. The value of the right per share can be calculated by subtracting the theoretical ex-rights price from the current market price.
b) i. If an investor takes up the rights, they will have the opportunity to purchase additional shares at a discounted price. The number of shares they can buy will depend on the rights ratio (1 for 4 in this case).
ii. If an investor sells the rights, they can potentially earn some income from selling their entitlement to purchase additional shares.
iii. If an investor allows the rights to lapse, they will not take any action and will not participate in the rights issue. Their ownership percentage in the company will decrease as other shareholders exercise their rights.
c) Other methods to raise new equity finance include initial public offerings (IPOs), private placements, venture capital investments, and crowdfunding. Each method has its advantages and considerations in terms of cost, control, and regulatory requirements. Companies may choose different methods based on their specific circumstances and objectives.
As a result, James Plc's board of directors intends to raise £2 million through a 1 for 4 rights offering. The issuance price will be 15% less than the current market price of £2.59.
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Car inspection: Of all the registered automobiles in a city, 11% fail the emissions test. Fourteen automobiles are selected at random to undergo an emissions test. Round the answers to four decima
The probability of exactly two out of 14 vehicles failing the emissions test is 0.1536 or 15.36% (rounded to four decimal places)
The problem presents the probability of an automobile failing the emissions test and a sample of 14 vehicles are taken.
To find the probability that a given number of automobiles pass or fail the test, we can use binomial probability. The binomial probability is used to calculate the probability of success or failure in a fixed number of independent trials under identical conditions.
Car inspection: Of all the registered automobiles in a city, 11% fail the emissions test. Fourteen automobiles are selected at random to undergo an emissions test. Round the answers to four decimals.The probability of an automobile failing the emissions test is 0.11.
A sample of 14 automobiles is taken.The probability of finding exactly k successes in n trials is given by;P(X=k)=nCkPk(1−P)n−k
where, n is the number of trials, k is the number of successes, P is the probability of success in any trial, and 1-P is the probability of failure.
We are interested in finding the probability that out of 14 vehicles, exactly two fail the emissions test, that is, P(X=2).P(X=2) = 14C2 (0.11)² (0.89)¹²= 91 (0.0121) (0.1215)≈ 0.1536 or 15.36%.
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Provide the formulas for the determining optimal basket of (consumption, demanding) 2 goods, given the budget constraints
px + py ≤≤ I
for 3 basic kinds of preferences
When goods are perfect substitutes (linear utility function u(x,y) =ax +by).
Warning: consider 3 possible cases (regarding to relations between MRS and PMRS).
When goods are perfect complements (utility L-shaped function of Koopmans-Leontief u(x,y) = min(ax,by)
For Cobb-Douglas (power) utility function u(x,y) =
xy xy
MRS = αy/βx = px/py This is the formulas used for determining optimal basket for different preferences when there are budget constraints.
For determining optimal basket of two goods, we have budget constraints aspx + py ≤≤ I, which is used for three basic kinds of preferences. The following formulas are used for determining optimal basket for different preferences:1) When goods are perfect substitutes (linear utility function u(x,y) =ax +by)
When goods are perfect substitutes, it means they are interchangeable. We need to consider 3 possible cases (regarding relations between MRS and PMRS):
Case 1: MRS = PMRS, then px/py = ax/ay = by/bx = py/px
Therefore, x/y = py/px
Case 2: MRS < PMRS, then px/py < ax/ay = by/bx < py/px
Therefore, x/y < py/px
Case 3: MRS > PMRS, then px/py > ax/ay = by/bx > py/px
Therefore, x/y > py/px2) When goods are perfect complements (utility L-shaped function of Koopmans-Leontief u(x,y) = min (ax,by)
When goods are perfect complements, it means they are used together or in fixed proportion.
The optimal consumption bundle for perfect complements is the one that satisfies the following conditions:
x = min(a/b, I/pb) and y = min(b/a, I/pa)3) For Cobb-Douglas (power) utility function u(x,y) = x^αy^β
When preferences follow Cobb-Douglas utility, the optimal consumption bundle satisfies the following conditions:
MRS = αy/βx = px/py
These are the formulas used for determining optimal basket for different preferences when there are budget constraints.
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GE is selling locomotives to China. If GE requires China to pay USD instead of RMB, O GE is shifting its FX exposure to China China is better-off in this case O this is hedging exposure through invoice currency from the perspective of GE O A and C O B and C
If GE requires China to pay in USD instead of RMB for locomotives, it is shifting its foreign exchange (FX) exposure to China. Thus, the correct answer is option C: A and C.
When GE requires China to pay in USD instead of RMB, GE is effectively shifting its FX exposure to China. By invoicing in USD, GE is transferring the currency risk to China, as China will need to convert its RMB into USD to make the payment. This means that any fluctuations in the exchange rate between RMB and USD will impact China, rather than GE.
From China's perspective, this arrangement can be seen as advantageous. If the RMB depreciates against the USD, China will have to pay more RMB to acquire the necessary USD for payment. Conversely, if the RMB appreciates, China will benefit by paying fewer RMB. Therefore, this practice can be considered as hedging exposure through the invoice currency, as GE is using the USD invoice to mitigate its foreign exchange risk, while China bears the risk associated with currency fluctuations.
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Sheffield Company is considering investing in a new dock that will cost $720,000. The company expects to use the dock for 5 years, after which it will be sold for $460,000. Sheffield anticipates annual cash flows of $270,000 resulting from the new dock. The company's borrowing rate is 8%, while its cost of capital is 11%.
Based on the given information, Sheffield Company's net present value (NPV) for the investment in the new dock is $165,189.72. Since the NPV is positive, the project is financially feasible and would create value for the company.
To determine the net present value (NPV) of Sheffield Company's investment in the new dock, we need to discount the cash flows using the appropriate discount rate. The annual cash flow from the dock is $270,000 for 5 years, and the salvage value at the end of 5 years is $460,000. Using the cost of capital as the discount rate, we discount each annual cash flow and the salvage value back to their present value. The discount rate is given as 11%. After discounting each cash flow, we sum up all the present values and subtract the initial cost of the dock. The NPV is calculated as the sum of the present values minus the initial cost, resulting in $165,189.72. Since the NPV is positive, the project is considered financially feasible and would create value for Sheffield Company. A positive NPV indicates that the expected cash inflows exceed the initial investment and the required rate of return. Therefore, Sheffield Company should consider investing in the new dock.
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The complete question is: Sheffield Company is considering investing in a new dock that will cost $720,000. The company expects to use the dock for 5 years, after which it will be sold for $460,000. Sheffield anticipates annual cash flows of $270,000 resulting from the new dock. The company's borrowing rate is 8%, while its cost of capital is 11%. Calculate the net present value of the dock.
when a threat to independence arises, an auditor should consider:
When a threat to independence arises, the auditor should consider the degree of the threat and whether appropriate safeguards are available to mitigate the risk. The auditor must assess the nature and significance of the threat and determine the potential impact on the audit's overall quality. If appropriate safeguards are not available, the auditor may need to withdraw from the engagement to maintain their independence.
An auditor is a qualified professional who inspects and examines financial statements, accounting records, and other business documents to ensure the accuracy and integrity of a company's financial statements. Auditors are tasked with providing an unbiased assessment of a company's financial position, and they play an important role in the financial reporting process. Threats to Independence Threats to independence occur when there is a risk that the auditor will be influenced by factors that could affect their objectivity or independence. Threats to independence can arise in several ways, including financial, economic, and personal relationships between the auditor and the client.
Considerations of an auditor in response to a threat to independence When a threat to independence arises, the auditor should assess the degree of the threat and determine whether appropriate safeguards are available to reduce the risk. Some of the factors that an auditor should consider include the following:-
1. The nature of the threat: The auditor must assess the nature of the threat to independence.
2. The significance of the threat: The auditor must determine the significance of the threat to independence and the potential impact on the audit's overall quality.
3. Availability of safeguards: The auditor must consider whether appropriate safeguards are available to mitigate the risk. Safeguards may include such measures as providing education and training to auditors, separating audit and non-audit services, and establishing an independent audit committee.
4. The client's response: The auditor should consider the client's response to the threat to independence and whether the client is willing to take appropriate actions to address the issue
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View Policies Current Attempt in Progress These financial statement items are for Wildhorse Company at year-end, July 31, 2022. Salaries and wages payable $1,500 Notes payable (due after 2023) Salaries and wages expense 51,300 Cash Utilities expense 22,900 Accounts receivable Equipment 30,900 Accumulated depreciation-equipment Accounts payable 4,900 Owner's drawings Service revenue 63,400 Depreciation expense Rent revenue 8,000 Owner's capital (beginning of the year] $2,000 14,100 9,300 5,500 3,400 4,100 50,700 * Prepare an income statement for the year. (Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses e.g. (45).) WILDHORSE COMPANY Income Statement Question 7 of 7 < eTextbook and Media List of Accounts Save for Later (a2) -/10 E I Attempts: 0 of 2 used Submit Answer (52) Prepare an owner's equity statement for the year. The owner did not make any new investments during the year WILDHORSE COMPANY Owner's Equity Statement eTextbook and Media List of Accounts Seve for Later Attempts: 0 of 2 used Submit Answer (b) Prepare a classified balance sheet at July 31. (List Current Assets in order of liquidity) WILDHORSE COMPANY Balance Sheet Assets -/10 1 Tetbookand Media Liabilities and Owner's Equity $
Total liabilities and owner's equity based on the information provided through calculation is = $30,500
Income statement of Wildhorse Company for the year ended July 31, 2022
Sales revenue = $63,400
Rent revenue = $8,000
Total revenue = $71,400
Operating expenses
Salaries and wages expense = $51,300
Depreciation expense = $14,100
Utilities expense = $22,900
Total operating expenses = $88,300
Net loss = $(16,900)
Owner's Equity Statement of Wildhorse Company for the year ended July 31, 2022
Owner's capital (beginning of the year) = $2,000
Net loss = $(16,900)
Owner's capital (end of the year) = $(14,900)
Classified balance sheet of Wildhorse Company as of July 31, 2022
Assets
Current assets
Cash = $3,400
Accounts receivable = $5,500
Total current assets = $8,900
Equipment = $30,900
Accumulated depreciation-equipment = $(9,300)
Total equipment =$21,600
Total assets = $30,500
Liabilities and owner's equity
Current liabilities
Salaries and wages
payable= $1,500
Accounts payable = $4,900
Total current liabilities = $6,400
Long-term liabilities
Notes payable (due after 2023) = $14,100
Total liabilities = $20,500
Owner's equity
Owner's capital = $(14,900)
Total liabilities and owner's equity = $30,500
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What is the impact of increased fears related to the H1N1 virus in the market for surgical masks?
a. increase price and increase quantity
b. increase price and decrease quantity
c. decrease price and increase quantity
d. decrease price and decrease quantity
Increased fears related to the H1N1 virus in the market for surgical masks would result in an increase in price and change in quantity demanded.
When there is an increase in fears related to a specific virus like H1N1, the demand for protective equipment such as surgical masks tends to rise. This increased demand leads to a shift in the demand curve to the right. As a result, the equilibrium price of surgical masks would likely increase due to the higher demand.
The impact on quantity supplied may vary depending on the capacity of producers to respond to the increased demand. If producers are able to increase their production sufficiently to meet the higher demand, the quantity supplied could increase. However, if production capacity is limited, the quantity supplied may not be able to keep up with the increased demand, leading to a potential decrease in quantity available in the market.
Therefore, the most appropriate answer is b. increase price and decrease quantity, as increased fears would likely lead to higher prices for surgical masks and potentially a decrease in the quantity available in the market due to supply limitations.
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Assuming a linear demand curve, lower prices would result in:
Group of answer choices
an increase in demand.
less price elastic demand.
more price elastic demand.
none of these
C) Assuming a linear demand curve, lower prices would result in more price elastic demand.
Explanation: Price elasticity of demand is the measure of the responsiveness of the quantity demanded of a good or service to a change in its price.
The price elasticity of demand is positive but less than 1 when demand is price inelastic.
The price elasticity of demand is greater than 1 when demand is price elastic, and it is equal to 1 when demand is unit elastic.
A linear demand curve is one in which the price and quantity demanded are inversely related; in other words, the price of a good or service increases as the quantity demanded decreases and vice versa.
A linear demand curve may be price inelastic, price elastic, or unit elastic depending on the slope of the line.
Assuming a linear demand curve, lower prices would result in more price elastic demand because price elasticity of demand is greater than 1 when demand is price elastic.
When prices are lowered, consumers are more responsive to the price change and demand more of the good or service. Hence answer C) is correct.
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do software companies need application lifecycle management tools
Yes, software companies can greatly benefit from using Application Lifecycle Management (ALM) tools. ALM tools provide a comprehensive set of functionalities and processes to manage the entire lifecycle of software development.
ALM tools offer numerous advantages for software companies. Firstly, they provide a centralized platform for managing all aspects of software development, including requirements management, version control, testing, bug tracking, and release management. This helps improve collaboration, efficiency, and overall productivity within development teams.
ALM tools also facilitate the tracking and management of software development projects, allowing teams to monitor progress, allocate resources effectively, and identify and address potential bottlenecks or issues. They help ensure that projects stay on schedule and within budget.
Furthermore, ALM tools enable better visibility and traceability throughout the software development process. They provide documentation and audit trails, making it easier to comply with industry regulations and quality standards. Additionally, ALM tools often integrate with other software development tools and systems, such as code repositories, build servers, and issue trackers, creating a seamless and integrated development environment.
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In issuing a negligent audit opinion, an accountant is liable to
Group of answer choices
a. all parties that read the audit.
b. anyone they knew would rely on the information in the audit.
c. only the company the audit was prepared for.
d. only the company the audit was prepared for and its shareholders.
d. Only the company the audit was prepared for and its shareholders.
When an accountant issues a negligent audit opinion, they can be held liable for their actions. The extent of their liability typically extends to the company for which the audit was prepared and its shareholders. The purpose of an audit is to provide an independent assessment of a company's financial statements, and the primary responsibility of the accountant is to ensure the accuracy and reliability of the information presented in the audit report. If the accountant fails to exercise due care and provides a negligent opinion, resulting in financial losses for the company or its shareholders, they can be held accountable for their negligence. However, their liability generally does not extend to all parties that read the audit or to individuals beyond the company and its shareholders.
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QUESTION 8 Discuss the basic concept of the expectancy theory. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). B I US Paragraph Arial > 1 P Р QUESTION 9 What are the two functions of job ana
According to expectancy theory, people are more driven to succeed when they are aware that their above-average effort will be appreciated and rewarded. So, performance-based pay users might anticipate gains in their businesses.
According to the Expectancy Theory, people are motivated to act in a certain way because they think their efforts will result in the desired results and rewards. The idea was created by Victor Vroom in the 1960s and focuses on expectation, instrumentality, and valence.
According to the Expectancy Theory, people are driven to exert effort and engage in behavior when they anticipate that their efforts will result in successful performance, that successful performance will bring about desired outcomes (instrumentality), and that the desired outcomes will be valued by them personally (valence).
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26
Firms using fend off an acquisition by taking over the firm or firms bidding for them. the Pac Man defense shark repellents O a golden parachute O a crown jewel sale
Firms using Pac Man defense, shark repellents, golden parachute, and crown jewel sale in order to fend off an acquisition by taking over the firm or firms bidding for them.
Pac-Man defense: It is a strategy that is deployed by a firm, where the firm tries to ward off an acquisition by making a counter-takeover attempt on the acquirer's company.
Shark repellents: These are defenses that are utilized by companies to try to ward off hostile takeovers. This can include such actions as implementing poison pills, making the company less attractive to the acquirer, and increasing the costs associated with an acquisition.Golden parachute: It is an agreement that is put in place by a company and an employee, which provides the employee with financial compensation if they are let go from their position due to a takeover. It is meant to provide employees with a financial cushion, and also can make the company less attractive to potential acquirers.Crown jewel sale: It is a type of defense that involves the sale of a company's most valuable assets. This can help to make the company less attractive to potential acquirers, as they may not be able to access the most valuable parts of the company.To know more about acquisition visit:
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a
90-day, $1200 promisory note was issued March 31 with interest at
7% what is the value of the note on June 29?
The promissory note value on June 29 is $1210.9 a organization 90-day, $1200 promisory note was issued March 31 with interest at 7% what is the value of the note on June 29
It is given that:A 90-day, $1200 promissory note was issued March 31 with interest at 7%The amount of interest paid = P×R×T/100 Where,P = $1200R = 7%T = 90/360 (since 90 days given and year has 360 days)So, the interest paid = $1200×7×90/36000 = $21The value of note on June 29 = Principal + Interest= $1200 + $21 + $10.92= $1210.92Therefore, the value of the note on June 29 is $1210.92.
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(Preparing a balance sheet) Prepare a balance sheet from the information in the popup window, What is the net working capital and debt ratio? m Complete the part of the balance sheet below. (Round to the nearest dollar. NOTE: Input the Accumulated depreciation account as a negative value) Balance Sheet ASSETS Data table Cash Accounts receivable Accounts payable Short-term notes payable Inventories Gross fixed assets Other current assets Long-term debt $50,000 42,700 23,000 10,500 40,000 1,280,000 5,000 200.000 0 Other current assets Long-term debt Common stock Other assets 5,000 200,000 490,000 15,000 Accumulated depreciation 312,000 ? Retained earnings (Click on the icon located on the top-right corner of the data table above in order to copy its contents into a spreadsheet.)
Below is the balance sheet prepared from the information in the popup window.
What is this?Balance Sheet Assets: Cash: $50,000, Accounts receivable: $42,700, Inventories: $40,000, Other current assets: $5,000 Gross fixed assets: $1,280,000 Less accumulated depreciation: -$312,000 Total Assets: $1,106,700 Liabilities: Accounts payable: $23,000.
Short-term notes payable: $10,500Other current liabilities: $5,000Long-term debt: $200,000Total Liabilities: $238,500Equity: Common stock: $490,000Retained earnings: $15,000Total Equity: $505,000Total Liabilities and Equity: $1,106,700Net working capital is calculated as the difference between current assets and current liabilities.
Net Working Capital = Current Assets - Current Liabilities, Net Working Capital = $50,000 + $42,700 + $40,000 + $5,000 - $23,000 - $10,500 - $5,000Net Working Capital = $98,200.
Debt ratio is calculated as the ratio of total liabilities to total assets. Debt Ratio = Total Liabilities / Total AssetsDebt Ratio = $238,500 / $1,106,700Debt Ratio = 0.215 (rounded to three decimal places).
Therefore, the net working capital is $98,200 and the debt ratio is 0.215.
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Starlight Drive-Ins borrowed money by issuing $2,500,000 of 10% bonds payable at 94 5 Requirements 1. How much cash did Starlight receive when it issued the bonds payable? 2 How much must Starlight pay back at maturity? 3. How much cash interest will Starlight pay each six moriths? Requirement 1. How much cash did Starlight receive when it issued the bonds payable? Starlight received when the bonds payable were issued Requirement 2. How much must Starlight pay back at maturity? Al maturity, Starlight must pay backs Requirement 3. How much cash interest will Starlight pay each six months? Starlight will pay interest of $ oach 5 months
(1) the cash that Starlight Drive-Ins received when it issued the bonds payable is: $2,500,000 x 94% = $2,350,0002
(2) Starlight Drive-Ins will pay each six months is $125,000
1. How much cash did Starlight receive when it issued the bonds payable?Starlight Drive-Ins borrowed money by issuing $2,500,000 of 10% bonds payable at 94. When Starlight Drive-Ins issued bonds payable, it received an amount equal to the issue price of the bonds payable. Here, the issue price is 94% of the face value of the bonds payable. Therefore, the cash that Starlight Drive-Ins received when it issued the bonds payable is:
$2,500,000 x 94% = $2,350,0002.
How much must Starlight pay back at maturity?At maturity, Starlight Drive-Ins must pay back the face value of the bonds payable. Here, the face value of the bonds payable is $2,500,000. Therefore, Starlight Drive-Ins must pay back $2,500,000 at maturity.3. How much cash interest will Starlight pay each six months?The annual interest rate is 10%. The face value of the bonds payable is $2,500,000. Therefore, the annual interest expense of Starlight Drive-Ins is:
10% x $2,500,000 = $250,000
The annual interest expense of Starlight Drive-Ins is payable in two semi-annual installments. Therefore, the cash interest that Starlight Drive-Ins will pay each six months is:
$250,000 ÷ 2 = $125,000
Therefore, the cash interest that Starlight Drive-Ins will pay each six months is $125,000.Bonds are a financial instrument that businesses, governments, and other organizations can use to borrow money. Bonds are essentially IOUs that are sold to investors, with the promise to repay the principal at maturity and to pay periodic interest until then. The price of the bonds can fluctuate during the lifetime of the bond, depending on the prevailing interest rates in the market. When an organization issues bonds, it receives cash equal to the face value of the bonds multiplied by the issue price of the bonds. At maturity, the organization must repay the face value of the bonds. The interest expense associated with bonds is a tax-deductible expense for the organization. The interest expense is typically paid in two semi-annual installments, which are calculated as the product of the annual interest rate, the face value of the bonds, and 0.5. The interest rate on a bond is typically higher than the interest rate on a bank loan because bonds are riskier than loans. However, the interest rate on a bond can be lower than the interest rate on a bank loan if the bond issuer has a strong credit rating.
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For a firm producing at any level of output GREATER THAN the most profitable one, a reduction in output decreases total revenue _____ total cost.
A. by the same amount as
B. more than
C. but not
For a firm producing at any level of output GREATER THAN the most profitable one, a reduction in output decreases total revenue more than total cost.
The total cost is a firm's total economic cost for producing a given quantity of output or goods. A company’s total revenue is the total amount of money that is received from selling goods or services. Profit is the difference between total revenue and total cost. The total revenue decreases when the number of units sold decreases. If the level of production is greater than the most profitable level, then the production should be decreased. Reducing output affects total revenue and total cost. When a firm produces at a level greater than the most profitable one, then a reduction in output decreases total revenue more than total cost. The revenue from the production of goods will not be sufficient to cover all the costs of producing them.
In this case, it is better for the company to reduce its output. Reducing the output allows the company to produce more efficiently. This reduction in output reduces the costs incurred to produce goods and services. Therefore, a reduction in output decreases total revenue more than total cost when a firm produces at any level of output GREATER THAN the most profitable one.
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Preston Concrete is a major supplier of concrete to residential and commercial builders in the Pacific Northwest. The company's general pricing policy is to set prices at $129 per cubic yard. Deliveries for 2013 were 400,000 cubic yards. Total costs were:
Material costs $21,480,000
Yard operation costs $6,000,000
Administrative costs $840,000
$1,500,000 of the estimated yard operation costs were fixed, and all of the administrative costs were fixed. In addition to the costs above, estimated fixed delivery costs were $205,000 for the year, and estimated variable delivery costs were $6.00 per mile and $40.50 per truck hour. The rate per mile reflects the fact that more miles result in more gas, oil, and maintenance. The rate per truck hour reflects the fact that trucks that are waiting at a jobsite are kept running (so the concrete mix won't solidify), and drivers continue to get paid during that time.
Near the end of 2013, Fairview Construction Company asked for a delivery of 4,900 cubic yards of concrete but was unwilling to pay the regular price; it was only willing to pay $87 per cubic yard. Preston estimated that the job would require 7,100 miles of driving and 290 truck hours. The housing market in the Pacific Northwest had slowed during recent months, leaving Preston with enough capacity to fill the order, but its sales manager was reluctant to commit to such a reduced price.
REQUIRED
If Preston accepted the offer, what would the profit or loss have been (enter a loss as a negative number)?
If Preston Concrete accepted the offer from Fairview Construction Company at a reduced price of $87 per cubic yard, the company would have incurred a significant loss.
To determine the profit or loss, we compared the revenue generated from the delivery with the total costs associated with it. The revenue from the delivery was calculated by multiplying the number of cubic yards (4,900) by the offered price per cubic yard ($87), resulting in a revenue of $426,300. However, the total costs associated with the delivery, in luding material costs, yard operation costs, administrative costs, fixed delivery costs, and variable delivery costs, amounted to $28,579,345.
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Explain, using examples, whether Carsales.com Ltd classifies expenses by nature, or by function. Identify and briefly discuss the components of Othere Comprehensive Income.
Carsales.com Ltd. classifies expenses by nature. They have listed their expenses and income in their financial statements under these heads:
Sales Revenue, Direct Costs Employee Expenses, Marketing Costs, Information Technology Expenses , Depreciation and Amortization Expenses, Other Expenses, Interest Expense,
Taxation
Carsales.com Ltd. classifies its expenses into the following nature:
Direct Costs: These are expenses incurred while producing goods and services.
Employee Expenses: These include salaries, bonuses, and other incentives paid to employees.Marketing Costs:
These are expenses incurred while promoting and advertising products and services.Information Technology Expenses:
These include expenses on software, hardware, and other IT equipment.
Depreciation and Amortization Expenses: These expenses are associated with non-current assets like buildings, machinery, equipment, and vehicles.
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Hijrah Mart engaged in the following transactions in April 2022:
April 7
Sold merchandise on credit to En. Amin, terms 2/10, n/30, FOB shipping point, RM3,000 (cost RM1,800)
8
Purchased merchandise on credit from Borong Jaya, terms 2/10, n/30, FOB shipping point, RM6,000.
9
Paid Borong Jaya for shipping charges on merchandise purchased on 8 April, RM254.
10
Purchased merchandise on credit from Nusa Asia, terms 2/10, n/30, FOB shipping point, RM9,600, including RM600 freight costs paid by Nusa Asia.
11
Sold merchandise on credit to Koperasi Jitra, terms 2/10, ; n/30, FOB shipping point, RM2,400 (cost RM1,440).
11
Returned RM600 of the merchandise received from Borong Jaya on 8 April.
13
Received cheque from En. Amin for his purchase on 7 April.
15
Sold merchandise for cash, RM1,800 (cost RM1,080).
17
Paid Nusa Asia for purchase of 10 April.
18
Paid Borong Jaya the balance from the transactions of 8 April and 11 April.
20
Accepted from Koperasi Jitra a return of merchandise, which was put back in inventory, RM200 (cost RM120).
REQUIRED:
Prepare journal entries to record the transactions. Hijrah Mart uses the perpetual inventory syste
Journal entries for the transactions that happened in April 2022 are as follows:DateParticularsDebit CreditApril 7 Accounts Receivable – En Amin 3,000 Sales 3,000 Cost of Goods Sold 1,800 Merchandise Inventory 1,800
On April 7, the company sold merchandise on credit to En. Amin for RM3,000 (Cost RM1,800). Therefore, the Accounts Receivable Account is debited for RM3,000, while the Sales Account is credited for RM3,000. The Cost of Goods Sold Account is debited for RM1,800, while the Merchandise Inventory Account is credited for RM1,800.April 8 Merchandise Inventory 6,000 Accounts Payable – Borong Jaya 6,000
On April 8, the company purchased merchandise on credit from Borong Jaya for RM6,000. Therefore, the Merchandise Inventory Account is debited for RM6,000, while the Accounts Payable – Borong Jaya Account is credited for RM6,000.April 9 Freight-Out 254 Cash 254
On April 9, the company paid Borong Jaya for the shipping charges of the merchandise purchased on April 8. Therefore, the Freight-Out Account is debited for RM254, while the Cash Account is credited for RM254.April 10 Merchandise Inventory 9,000 Accounts Payable – Nusa Asia 9,000
On April 10, the company purchased merchandise on credit from Nusa Asia for RM9,600, including RM600 freight costs paid by Nusa Asia. Therefore, the Merchandise Inventory Account is debited for RM9,000, while the Accounts Payable – Nusa Asia Account is credited for RM9,000.April 11 Accounts Receivable – Koperasi Jitra 2,400 Sales 2,400 Cost of Goods Sold 1,440 Merchandise Inventory 1,440.
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Wolf Computer exchanged a machine with a book value of $40,000 and a fair value of $45,000 for a very similar machine. In addition, Wolf paid $6,000 as part of the exchange. Wolf should recognize:
Multiple Choice
A gain of $11,000.
A loss of $1,000.
A gain of $5,000.
When Wolf Computer exchanged a machine with a book value of $40,000 and a fair value of $45,000 for a very similar machine and paid $6,000 as part of the exchange, they should recognize a gain of $5,000. Let's explain it in detail.
In a machine exchange transaction, the company should determine a gain or loss by comparing the book value of the machine given up with the fair value of the machine received, plus any cash paid or received.
The book value of a machine is the value shown on the company's books as the asset's cost minus the accumulated depreciation. On the other hand, fair value is the amount at which an asset could be exchanged between knowledgeable, willing parties. It is determined by considering all available information.In the given question, the machine Wolf Computer exchanged had a book value of $40,000 and a fair value of $45,000.
Book value of the machine given up= $51,000 - $40,000= $11,000Hence, the gain is $11,000, which means Wolf Computer should recognize a gain of $5,000 ($11,000 - $6,000). Therefore, the correct option is A gain of $5,000.
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WHAT TO DO?
According to Stacy Adams, the experience of inequity or social injustice is a motivating
force for human behaviour. This exercise provides you and your group with a brief
scenario of an inequity at work. Your task is to consider feasible actions for redress of
this inequity.
John and Mary are full professors in the same medical school department of a large
private university. As a private institution, neither the school nor the university makes the
salaries and benefits of its faculty a matter of public record. Mary has pursued a longterm
(14 years) career in the medical school, rising through the academic ranks while
married to a successful businessman with whom she has raised three children. Her
research and teaching contributions have been broad-ranging and award-winning. John
joined the medical school within the last three years and was recruited for his leadingedge
contribution to a novel line of research on a new procedure. Mary thought he was
probably attracted with a comprehensive compensation package, yet she had no details
until an administrative assistant gave her some information about salary and benefits a
month ago. Mary learned that John’s base contract salary is 16 percent higher than hers
($250,000 versus $215,000), that he was awarded an incentive pay component for the
commercialization of his new procedure, and that he was given an annual discretionary
travel budget of $35,000 and a membership in an exclusive private club. Mary is in a
quandary about what to do. Given pressures from the board of trustees to hold down costs
associated with public and private pressure to keep tuition increases low, Mary wonders
how to begin to close this $70,000 inequity gap.
Step 1. Working in groups of six, discuss the equity issues in this medical school
department situation using the text material on social exchange and equity theory. Do the
outcome differences here appear to be gender based, age based, performance based, or
marital status based? Do you need more information? If so, what additional information
do you need?
Step 2. Consider each of the seven strategies for the resolution of inequity as portrayed in
this situation. Which ones are feasible to pursue based on what you know? Which ones
are not feasible? Why? What are the likely consequences of each strategy or course of
action? What would you advise Mary to do?
Step 3. Once your group has identified feasible resolution strategies, choose the best
strategy. Next, develop a specific plan of action for Mary to follow in attempting to
resolve the inequity so that she can achieve the experience and reality of fair treatment at
work.
Step 4 (Optional). Your group may be asked to share its preferred strategy for this
situation and your rationale for the strategy.
Mary should gather more information about the salary and benefits structure in the medical school department to determine the underlying reasons for the inequity. Based on this information, she should consider feasible strategies for resolving the inequity and achieving fair treatment at work.
Mary's first step should be to analyze the equity issues in the department and determine whether the outcome differences are based on factors such as gender, age, performance, or marital status. This analysis will help her identify any additional information she needs to fully understand the situation. Once she has a clear understanding, she can evaluate the seven strategies for resolving inequity and assess their feasibility and likely consequences. This evaluation will guide her in choosing the best strategy to pursue.
Mary should develop a specific plan of action based on the chosen strategy, which may involve negotiating with the relevant stakeholders, seeking support from colleagues or higher authorities, or exploring legal avenues if necessary. By following this approach, Mary can strive to close the inequity gap and achieve fair treatment at work.
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Using what you have learned online this week (and using the video content below) about the savings-investment identity for an open economy, interpret and discuss the following statement within the context of the identity. Statement: "If I owe you $100,000, you own my blood, but if I owe you $1,000,000,000, I own your soul." a.
What does this statement say about the debt leverage high-indebted economies have in the global economy?
b. How does a highly indebted economy's external borrowing of savings from the rest of the world (financed by running large trade deficits as a share of the global economy) impact other economies' abilities translate domestic savings into domestic investment if such domestic savings is being lent to larger-indebted economies?
c. Would such external financing by highly indebted economy crowd out domestic private investment in such smaller economies? Why or why not?
d. Finally, does this suggest countries that save the least and borrow the most for investment will grow much faster than countries that save the most?
The statement highlights the dynamics and potential consequences of high levels of debt for highly indebted economies. It underscores the potential loss of control and independence when a country owes significant amounts to creditors.
However, the impact of debt on economic growth and the relationship between savings, investment, and borrowing is complex and influenced by various factors beyond just the level of borrowing.
The statement, "If I owe you $100,000, you own my blood, but if I owe you $1,000,000,000, I own your soul," uses a metaphorical language to highlight the impact of high levels of debt on the relationship between indebted economies and their creditors. Let's discuss the implications of this statement within the context of the savings-investment identity for an open economy:
a. This statement suggests that highly indebted economies have limited leverage and control over their own economic affairs when they owe significant amounts of debt to other countries or entities. The metaphor implies that the debtor becomes subordinate to the creditor, losing their independence and ability to make decisions freely. In the global economy, highly indebted economies may face pressures and constraints from creditors, potentially compromising their economic sovereignty and policy autonomy.
b. When a highly indebted economy borrows from the rest of the world, it relies on external financing to fund its domestic investment. This is often facilitated by running large trade deficits, meaning they are importing more goods and services than they are exporting. This external borrowing allows the indebted economy to access savings from other countries to finance its investment projects.
However, this can impact other economies' abilities to translate their domestic savings into domestic investment. As highly indebted economies borrow a significant portion of global savings, there may be less capital available for other countries to invest domestically. This can potentially lead to a crowding-out effect, where the borrowing by highly indebted economies limits the availability of funds for investment in other economies.
c. Yes, the external financing by a highly indebted economy can crowd out domestic private investment in smaller economies. When a highly indebted economy borrows a large share of global savings, it increases the demand for funds in the global capital market. This can result in higher interest rates or reduced availability of funds for other countries, making it more difficult for domestic businesses and investors in smaller economies to access capital for their own investment projects.
d. The statement does not necessarily suggest that countries that save the least and borrow the most for investment will grow faster than countries that save the most. Economic growth is influenced by various factors, including productivity, innovation, institutional frameworks, and access to capital. While high levels of borrowing can stimulate investment in the short term, it also exposes the economy to potential risks and vulnerabilities associated with debt.
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Juan deposits 100 into an account that grows at an annual simple interest rate of 6%. On the same date, Tina deposits 80 into an account that grows at an annual effective interest rate of i. Two years after their deposits are made, Juan's balance is 27% larger than Tina's balance. Find i (a) 4.67% (b) 4.82% (c) 4.99% (d) 5.21% (e) 5.46%
The correct answer is (b) 4.82%.
Let's calculate Juan's balance after two years. Since he deposited $100 and the account grows at a simple interest rate of 6%, his balance after two years would be:
Juan's balance = Principal + (Principal * Interest Rate * Time)
Juan's balance = $100 + ($100 * 0.06 * 2)
Juan's balance = $100 + $12 = $112
Tina's balance after two years with an effective interest rate of i can be calculated using the compound interest formula:
Tina's balance = Principal * (1 + Interest Rate)^Time
Tina's balance = $80 * (1 + i)^2
According to the problem, Juan's balance is 27% larger than Tina's balance after two years. Mathematically, we can represent this as:
Juan's balance = 1.27 * Tina's balance
Now we can equate the expressions for Juan's and Tina's balances and solve for i:
$112 = 1.27 * ($80 * (1 + i)^2)
Dividing both sides by 1.27:
$112 / 1.27 = $80 * (1 + i)^2
Simplifying further:
88.1889 = (1 + i)^2
Taking the square root of both sides:
1 + i = √88.1889
Solving for i:
i = √88.1889 - 1
Calculating the value, we find:
i ≈ 4.82% (rounded to two decimal places)
Therefore, the answer is (b) 4.82%.
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List 3 strengths, 3 weaknesses, 3 threats and 3 opportunities for
expansion of supermarket.
1-Established Brand and Reputation: The supermarket has built a strong brand and reputation in the local market, which can attract customer loyalty and trust.
2-Wide Product Range: The supermarket offers a diverse range of products, including groceries, fresh produce, household items, and more, catering to the varied needs of customers.
Convenient Location: The supermarket is strategically located in a densely populated area with easy accessibility, making it convenient for customers to shop.
Weaknesses:
Limited Online Presence: The supermarket may have a weak online presence or limited e-commerce capabilities, which could hinder its ability to tap into the growing online shopping trend.
Inefficient Inventory Management: There might be issues with inventory management, leading to stockouts or overstocking, resulting in potential customer dissatisfaction or increased operational costs.
Lack of Differentiation: The supermarket may face competition from other similar retailers that offer similar products, without any unique selling propositions to set it apart from the competition.
Threats:
Intense Competition: The supermarket may face fierce competition from other local supermarkets, grocery chains, and online retailers, which could impact market share and profitability.
Changing Consumer Preferences: Shifting consumer preferences, such as a preference for organic or healthier products, can pose a threat if the supermarket fails to adapt and meet these evolving demands.
Economic Factors: Economic fluctuations, such as recessions or inflation, can impact consumer spending habits, leading to reduced sales and lower customer loyalty.
Opportunities:
Online Expansion: Investing in e-commerce capabilities and developing a robust online presence can open up new channels for reaching customers and tapping into the growing trend of online shopping.
Expansion into New Locations: Exploring opportunities to expand into new geographical areas, either through opening new branches or acquiring existing supermarkets, can help increase market reach and capture a larger customer base.
Diversification of Product Offerings: Introducing new product lines or focusing on niche markets, such as organic or specialty products, can attract new customer segments and increase sales potential.
These are just some examples of strengths, weaknesses, threats, and opportunities that a supermarket may face. It's important to conduct a thorough analysis based on the specific context and market conditions to identify the most relevant factors for the expansion of a particular supermarket.
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1-Established Brand and Reputation: The supermarket has built a strong brand and reputation in the local market, which can attract customer loyalty and trust.
2-Wide Product Range: The supermarket offers a diverse range of products, including groceries, fresh produce, household items, and more, catering to the varied needs of customers.
Convenient Location: The supermarket is strategically located in a densely populated area with easy accessibility, making it convenient for customers to shop.
Weaknesses:
Limited Online Presence: The supermarket may have a weak online presence or limited e-commerce capabilities, which could hinder its ability to tap into the growing online shopping trend.
Inefficient Inventory Management: There might be issues with inventory management, leading to stockouts or overstocking, resulting in potential customer dissatisfaction or increased operational costs.
Lack of Differentiation: The supermarket may face competition from other similar retailers that offer similar products, without any unique selling propositions to set it apart from the competition.
Threats:
Intense Competition: The supermarket may face fierce competition from other local supermarkets, grocery chains, and online retailers, which could impact market share and profitability.
Changing Consumer Preferences: Shifting consumer preferences, such as a preference for organic or healthier products, can pose a threat if the supermarket fails to adapt and meet these evolving demands.
Economic Factors: Economic fluctuations, such as recessions or inflation, can impact consumer spending habits, leading to reduced sales and lower customer loyalty.
Opportunities:
Online Expansion: Investing in e-commerce capabilities and developing a robust online presence can open up new channels for reaching customers and tapping into the growing trend of online shopping.
Expansion into New Locations: Exploring opportunities to expand into new geographical areas, either through opening new branches or acquiring existing supermarkets, can help increase market reach and capture a larger customer base.
Diversification of Product Offerings: Introducing new product lines or focusing on niche markets, such as organic or specialty products, can attract new customer segments and increase sales potential.
These are just some examples of strengths, weaknesses, threats, and opportunities that a supermarket may face. It's important to conduct a thorough analysis based on the specific context and market conditions to identify the most relevant factors for the expansion of a particular supermarket.
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Calculating EVA Brewster Company manufactures elderberry wine. Last year, Brewster earned operating income $187,000 after income taxes. Capital employed equaled $2.5 million. Brewster is 40 percent equity and 60 percent 10-year bonds paying 7 percent interest. Brewster's marginal tax rate is 40 percent. The company is considered a fairly risky investment and probably commands a 12-point premium above the 5 percent rate on long-term Treasury bonds. Jonathan Brewster's aunts, Abby and Martha, have just retired, and Brewster is the new CEO of Brewster Company. He would like to improve EVA for the company. Compute EVA under each of the following independent scenarios that Brewster is considering, Required: Use a spreadsheet to perform your calculations and round all interim and percentage figures to four decimal places. If the EVA is negative, enter your answer as a negative amount. 1. No changes are made; calculate EVA using the original data. $ 8.52 X 2. Sugar will be used to replace another natural ingredient (atomic number 33) in the elderberry wine. This should not affect costs but will begin to affect the market assessment of Brewster Company, bringing the premium above long-term Treasury bills to 10 percent the first year and 7 percent the second year. Calculate revised EVA for both years. EVA Year 1 $ -47,080 X Year 2 $ -47,080 X 3. Brewster is considering expanding but needs additional capital. The company could borrow money, but it is considering selling more common stock, which would increase equity to 80 percent of total financing, Total capital employed would be $3,700,000. The new after-tax operating income would be $370,000. Using the original data, calculate EVA. Then, recalculate EVA assuming the materials substitution described in Requirement 2. New after-tax income will be $370,000, and in Year 1, the premium will be 10 percent above the long-term Treasury rate. In Year 2, it will be 7 percent above the long-term Treasury rate. (Hint: You will calculate three EVAs for this requirement.) EVA Year 1 10.18 x Year 1 (10% premium) $ -10.18 X Year 2 (7% premium) $ 10.18 X Foodback Check My Work 1. To calculate EVA, first calculate the after-tax cost. After-tax cost = Interest rate - (Tax rate x Interest Rate). EVA = After-tax operating income - (Weighted average cost of capital x Total capital employed). 2. Consider revised Information. To calculate EVA, first calculate the after-tax cost. After-tax cost - Interest rate - (Tax rate x Interest Rate). EVA - After-tax operating income - (Weighted average cost of capital x Total capital employed). 3. Consider revised information. To calculate EVA, first calculate the after-tax cost. After-tax cost - Interest rate - (Tax rate x Interest Rate). EVA - After-tax operating income -(Weighted average cost of capital x Total capital employed).
Revised EVA for both years ; year 1 EVA = $233,380; year 2 EVA = $299,960. Economic Value Added can be used as a performance metric to help managers make strategic decisions about how to allocate resources and improve profitability.
Economic Value Added (EVA) is a measure of how much value a company has generated from its assets and is calculated by subtracting the cost of capital from operating profit.
EVA is a more accurate representation of a company's performance because it takes into account the cost of capital required to generate that profit. Here's how to calculate EVA for Brewster Company:
1. Original Data Operating income after tax = $187,000
Capital employed = $2,500,000
Weighted average cost of capital (WACC) = (0.4 x 0.07 x 60%) + (0.6 x 0.05 x 40%) + 12% = 7.32%
After-tax cost of capital = 7.32% - (40% x 7.32%) = 4.39%
EVA = $187,000 - (4.39% x $2,500,000) = $89,0502.
Revised Data: Year 1 Operating income after tax = $187,000
Capital employed = $2,500,000
Materials substitution premium = 10%
Weighted average cost of capital (WACC) = (0.4 x 0.07 x 60%) + (0.6 x 0.05 x 40%) + 10% = 7.22%
After-tax cost of capital = 7.22% - (40% x 7.22%) = 4.33%
EVA = $187,000 - (4.33% x $2,500,000) = -$13,850
Year 2 Operating income after tax = $187,000
Capital employed = $2,500,000
Materials substitution premium = 7%
Weighted average cost of capital (WACC) = (0.4 x 0.07 x 60%) + (0.6 x 0.05 x 40%) + 7% = 7.12%
After-tax cost of capital = 7.12% - (40% x 7.12%) = 4.27%
EVA = $187,000 - (4.27% x $2,500,000) = -$35,7503.
Revised Data: Year 1 Operating income after tax = $370,000 Capital employed = $3,700,000
Materials substitution premium = 10% Weighted average cost of capital (WACC) = (0.2 x 0.07 x 20%) + (0.8 x 0.05 x 80%) + 10% = 6.90%
After-tax cost of capital = 6.90% - (40% x 6.90%) = 4.14%
EVA = $370,000 - (4.14% x $3,700,000) = $233,380
Year 1 with Materials Substitution Operating income after tax = $370,000 Capital employed = $3,700,000
Materials substitution premium = 10% Weighted average cost of capital (WACC) = (0.2 x 0.07 x 20%) + (0.8 x 0.05 x 80%) + 10% = 6.90%
After-tax cost of capital = 6.90% - (40% x 6.90%) = 4.14%
EVA = $370,000 - (4.14% x $3,700,000) = $233,380
Year 2 with Materials Substitution Operating income after tax = $370,000
Capital employed = $3,700,000
Materials substitution premium = 7% Weighted average cost of capital (WACC) = (0.2 x 0.07 x 20%) + (0.8 x 0.05 x 80%) + 7% = 6.80%
After-tax cost of capital = 6.80% - (40% x 6.80%) = 4.08%
EVA = $370,000 - (4.08% x $3,700,000) = $299,960
In summary, EVA takes into account the cost of capital required to generate that profit, giving a more accurate representation of the company's performance.
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Find an example of a news article that uses supply and demand to talk about why prices are increasing or decreasing. Share the link, summarize the article, and comment on whether you think the journalist who wrote the article seems to be applying the supply and demand model correctly.
To receive full credit
Post a link to a news article and summarize
Describe what good or service the market is for, and how supply and demand was applied in the article, and whether you agree with how the journalist applied the model.
Supply and demand is a fundamental concept in economics that explains how the price and quantity of goods and services are determined in a market. When the demand for a particular good or service is high, and the supply is low, the price of that commodity increases.
On the other hand, when the demand is low, and the supply is high, the price falls. In other words, the price of a good or service is a function of the interaction between supply and demand.There are numerous examples of news articles that use supply and demand to explain price fluctuations in a market. A recent example is the COVID-19 pandemic, which has affected the supply and demand of many products, leading to price hikes in some cases and price reductions in others.
For instance, the price of hand sanitizers, face masks, and toilet paper skyrocketed during the early days of the pandemic due to an increase in demand and limited supply.However, as more companies started to produce these products, the supply increased, and the price went down. This is a clear example of how the supply and demand model affects the price of goods and services.
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Which of the following are likely advantages of employee share purchase plans for employees? (Select all that apply.) A discount on the purchase price of the shares. The absence of brokerage fees to purchase the shares. Shares that promise special privileges.
The likely advantages of employee share purchase plans for employees are a discount on the purchase price of the shares and the absence of brokerage fees.
Employee share purchase plans offer several advantages for employees. One significant advantage is the discount on the purchase price of the shares. These plans often allow employees to buy company shares at a discounted price compared to the market value.
This discount can range from a certain percentage off the market price to a fixed discounted price per share. By purchasing shares at a lower cost, employees can potentially benefit from immediate financial gains if the share price increases in the future.
Another advantage of employee share purchase plans is the absence of brokerage fees. When employees participate in these plans, they can typically purchase shares directly from the company without incurring any brokerage fees.
This eliminates the cost associated with using a brokerage firm to facilitate the share purchase. As a result, employees can maximize their investment by saving on transaction costs and increasing the overall value of their shareholdings.
It's worth noting that shares that promise special privileges are not typically associated with employee share purchase plans. These plans primarily focus on providing financial benefits through discounted share prices and reduced transaction fees.
Special privileges or benefits are more commonly seen in other types of equity-based compensation programs such as stock options or restricted stock units.
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The likely advantages of employee share purchase plans for employees include a discount on the purchase price of the shares and the absence of brokerage fees to purchase the shares.
Employee share purchase plans (ESPPs) are designed to provide employees with the opportunity to purchase company shares at a discounted price. This discount on the purchase price of the shares is one of the significant advantages for employees. It allows employees to acquire company shares at a lower cost, potentially enabling them to benefit from any future increase in the share price.
Additionally, ESPPs often waive or reduce brokerage fees that employees would typically incur when purchasing shares through traditional means. By eliminating these fees, employees can save on transaction costs and increase their potential returns.
However, shares that promise special privileges are not commonly associated with employee share purchase plans. While some companies may offer special privileges or benefits to shareholders, such as voting rights or dividend preferences, these privileges are typically associated with specific types of shares (e.g., preferred shares) and may not be part of standard employee share purchase plans.
In summary, the likely advantages of employee share purchase plans for employees include a discounted purchase price of shares and the absence of brokerage fees, while shares with special privileges are not typically included in such plans.
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How does a limited liability company (LLC) acquire capital? What are the obligations involved in a member's contribution of capital?
(a) A limited liability company (LLC) can acquire capital through various means, including contributions from its members, loans, investments, or retained earnings.
(b) The obligations involved in a member's contribution of capital in an LLC generally depend on the terms outlined in the LLC's operating agreement, which may specify the amount, timing, and form of capital contributions, as well as any additional obligations or restrictions.
An LLC can acquire capital through member contributions, which are the funds or assets provided by the LLC's owners (members) to finance the company's operations and growth. The specific obligations involved in a member's contribution of capital are typically determined by the LLC's operating agreement. The operating agreement outlines the rules and regulations governing the LLC's operations, including capital contributions.
The operating agreement may specify the amount of capital each member is required to contribute, the timing of contributions (whether upfront or in installments), and the form of contributions (cash, property, or services). It may also outline any additional obligations or restrictions related to capital contributions, such as restrictions on withdrawing contributed capital or requirements for additional contributions in the future.
By clearly defining the obligations and terms of capital contributions in the operating agreement, LLCs can ensure transparency and provide clarity to members regarding their financial commitments to the company. It is important for members to carefully review and understand the provisions related to capital contributions in the operating agreement before becoming a member of an LLC.
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