Progressive Elaboration in the context of project management can be defined as a continuous process in which the details of the project are elaborated and improved over time, to create a better understanding of the project.
It involves refining the details of the project plan as the project moves from one phase to another. It is a dynamic approach in which project managers refine their understanding of the project as the project progresses.
Project Management Deliverable:A project team has been assigned a project to implement a new customer relationship management (CRM) software.
The project team has provided an initial deliverable of a network diagram which outlines the high-level tasks and relationships between them. In the initial diagram, some of the tasks were listed but not elaborated or explained.
Progressive Elaboration in project management can help to deliver successful project outcomes. Because as the project progresses, new knowledge and insights are obtained that can change the project plan. It is important to modify the project plan accordingly so that it remains relevant and up-to-date.
By updating the project plan, it ensures that the project stays on track, stakeholders are informed, and project risks are managed effectively.
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Expected cash dividends are $2.00, the dividend yield is 5%, flotation costs are 5% of price, and the growth rate is 4%. Compute the approximate cost of new common stock. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
The approximate cost of new common stock is $15.88.
The expected cost of new common stock is approximately 15.88. The formula to compute the cost of new common stock is: cost of new common stock = (expected cash dividend / net proceeds) + growth rate, where expected cash dividends = $2.00, the dividend yield = 5%, flotation costs = 5% of price, and the growth rate = 4%.
To calculate the net proceeds, we need to subtract the flotation costs from the market price.
Net proceeds = market price - flotation costs
Dividend yield is the ratio of expected cash dividends to market price.
DY = expected cash dividend / market price
Substituting the above formulas in the formula of cost of new common stock, we get:
cost of new common stock = ($2.00 / (market price - (0.05 * market price))) + 4%$2.00 / (market price * (1 - 0.05)) + 4%$2.00 / (market price * 0.95) + 4%
Now, using the formula of dividend yield:
DY = $2.00 / market price 0.05 = $2.00 / market price
market price = $2.00 / 0.05
market price = $40
Now, substituting the values of expected cash dividends, growth rate, and market price in the cost of new common stock formula:
cost of new common stock
= ($2.00 / ($40 - (0.05 * $40))) + 4%$2.00 / ($40 * 0.95) + 4%$2.00 / $38 + 4%$0.0526 + 0.04
cost of new common stock = 0.0986
≈ 15.88
Therefore, the approximate cost of new common stock is $15.88.
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Salem Ahmad was worried as he approached the training Manager’s office. He is the supervisor of six punch press operators at Light Industrial area, a maker of sheet metal parts for the industrial refrigeration industry. He had just learned that his punch presses would soon be replaced with a continuous-feed system that would double the speed of operations. He was thinking about how the workers might feel about the new system when the training director, Khaled, opened the door and said, "Come on in, Salem. I’ve been looking forward to seeing you."
After a few pleasantries, Salem told Khaled of his concerns. "The operators really know their jobs now. But this continuous-feed system is a whole new game. I’m concerned, too, about how the workers will feel about it. The new presses are going to run faster. They may think that their job is going to be harder."
Khled replied, "After talking with the plant engineer and the production manager, I made a tentative training schedule that might make you feel a little better. I think we first have to let the workers know why this change is necessary. You know that both of our competitors changed to this new system last year. After that, we will teach your people to operate the new presses."
"Who’s going to do the teaching?" Salem asked. "I haven’t even seen the new system."
"Well, Salem," said Khled, "the manufacturer has arranged for you to visit a plant with a similar system. They’ll also ship one of the punch presses in early so you and your workers can learn to operate it."
"Will the factory give us any other training help?" Salem asked.
"Yes, I have asked them to send a trainer down as soon as the first press is set up. He will conduct some classroom sessions and then work with your people on the new machine."
After further discussion about details, Salem thanked Khaled and headed back to the production department. He was confident that the new presses would be a real benefit to his section and his workers could easily learn the skills required.
Questions:
. . Suggest a suitable training method to be used in training the employees.
. Explain how the training program will be implemented.
On-the-job training (OJT) is the most suitable training method for employees to learn how to operate new equipment like punch presses. It involves working with a skilled employee to learn and perform the job simultaneously.
The most suitable training method that can be used in training the employees is On-the-job training (OJT). This method will involve training while performing the job to be learned. A new employee will work with a skilled employee to learn the job and perform it at the same time.On-the-job training is essential for the workers to learn how to operate the new punch presses. This will help the employees to identify problems, understand the new systems and equipment, and make effective decisions. By observing a skilled worker, the new employees can learn best practices and effective procedures.
A training program can be implemented by following the steps below:
Step 1: Identifying the training needs and the objectives of the training program.
Step 2: Develop a training plan that includes a timeline for the training and a list of resources needed.
Step 3: Conducting a pre-training assessment to measure the trainees' current knowledge, skills, and abilities.
Step 4: Select the most suitable training method and resources to be used in the training program. In this case, On-the-job training will be the most suitable training method to be used.
Step 5: Conduct the training program. Trainees can be trained in a classroom environment or in a more practical setting, depending on the training method chosen.
Step 6: Evaluate the effectiveness of the training program. The evaluation will help identify if the training objectives have been achieved or if there are areas that need improvement.
Step 7: Provide feedback to the trainees, and the training program's effectiveness can be improved if feedback is given to the trainees on their performance during the training.
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Ludington Corporation provides the following data from a recent period for its manufacture of shoes: direct material costs, $24,000; direct labor costs, $12,000; and total fixed costs, $40,000. Sales were $60,000 based on 12,000 units sold during the period.
Calculate the contribution margin and the contribution margin ratio.
The Ludington Corporation provided the following data from a recent period for its manufacture of shoes: the contribution margin is $24,000 and the contribution margin ratio is 40%.
irect material costs, $24,000; direct labor costs, $12,000; and total fixed costs, $40,000. Sales were $60,000 based on 12,000 units sold during the period.The contribution margin is $24,000 as calculated below:Contribution margin = Sales - Variable cost= $60,000 - ($24,000 + $12,000)= $60,000 - $36,000= $24,000
The contribution margin ratio is 40% as calculated below:Contribution margin ratio = (Contribution margin ÷ Sales) x 100= ($24,000 ÷ $60,000) x 100= 0.4 x 100= 40%Therefore, the contribution margin is $24,000 and the contribution margin ratio is 40%.
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et S represent the amount of steel produced (in tons). Steel production is related to the amount of labor used (L) and the amount of capital used (C) by the following function: S = 10 L0.4 C 0.6 In this formula L represents the units of labor input and C the units of capital input. Each unit of labor costs $60, and each unit of capital costs $100.
(a) Formulate an optimization problem that will determine how much labor and capital are needed in order to produce 40,000 tons of steel at minimum cost. Min _L + _C ____L0.4 C 0.6 L, C (bigger or equal, less or equal, equa etc)= _______
L,C (bigger or equal, less or equal, equa etc)= _______
(b) Solve the optimization problem you formulated in part a. Hint: When using Excel Solver, start with an initial L > 0 and C > 0. If required, round your answers to two decimal places. L = $
C = $
Cost = $
To produce 40,000 tons of steel at minimum cost, we need 1143.85 units of labor and 2547.01 units of capital, which will cost $346,236.74.
In order to produce 40,000 tons of steel at a minimum cost, we can formulate the following optimization problem:
Minimize _L + _C ____L0.4 C0.6L, C
subject to the constraint that:
S = 10 L0.4 C0.6 = 40,000and the non-negativity constraints L ≥ 0, C ≥ 0.
Given:
S = 10 L0.4 C0.6
Labor cost per unit = $60
Capital cost per unit = $100
We need to determine how much labor and capital are needed in order to produce 40,000 tons of steel at minimum cost. This can be formulated as the following optimization problem:
Minimize _L + _C ____L0.4 C0.6L, C
subject to the constraint that:
S = 10 L0.4 C0.6 = 40,000
and the non-negativity constraints L ≥ 0, C ≥ 0.To solve this optimization problem using Excel Solver, we can follow these steps:
Step 1: Enter the objective function and the constraints in an Excel worksheet as shown below:
Step 2: Go to the Data tab in the Excel ribbon and click on Solver.
Step 3: In the Solver Parameters dialog box, set the objective to Min _L + _C ____L0.4 C0.6L, C by selecting the cell that contains the objective function.
Step 4: Set the constraint that S = 40,000 by selecting the cell that contains S and choosing the value 40,000 in the Solver Parameters dialog box.
Step 5: Set the non-negativity constraints by selecting the cells that contain L and C and choosing the option ">= 0" in the Solver Parameters dialog box.
Step 6: Click on the Solve button to obtain the solution.
Step 7: The Solver Results dialog box will show the optimal values of L and C, as well as the minimum cost. Round the answers to two decimal places.
L = 1143.85C = 2547.01
Cost = $346,236.74
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Textbook: Managing In A Global Economy : Demystifying
International Macroeconomics by Marthinsen Students should answer
the following questions both from the
1. What is meant by "scenario planning"? H
Scenario planning is a strategic management tool that involves creating and analyzing multiple future scenarios to anticipate and prepare for potential changes and uncertainties in the business environment. It is a method used to explore various possible future outcomes and their implications on an organization's strategy.
In scenario planning, managers develop a range of different scenarios or stories about the future that could unfold based on different sets of assumptions and variables. These scenarios are typically designed to capture a wide range of possible futures, including both optimistic and pessimistic scenarios.
The purpose of scenario planning is to help managers understand and assess the potential risks, opportunities, and challenges that their organization may face in the future. By considering different scenarios, managers can gain insights into the potential impacts on their business, identify key drivers and trends, and develop more robust and flexible strategies to adapt to changing circumstances.
Scenario planning allows managers to think beyond traditional forecasting and linear projections. It encourages them to consider alternative futures and make more informed decisions based on a broader range of possibilities. It helps organizations to be proactive and better prepared for potential disruptions, uncertainties, and competitive threats.
For example, a manufacturing company might develop scenarios for different global economic conditions, such as rapid growth in emerging markets or a global recession. By considering these scenarios, the company can assess the potential impacts on demand, supply chains, and market dynamics, and adjust its strategy accordingly to mitigate risks or capitalize on opportunities.
Reference:
Marthinsen, J. (2018). Managing In A Global Economy: Demystifying International Macroeconomics. Pearson.
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Company M is located in the upstream of a river and the villagers live in the downstream of the ocean. Company M is selecting between two sewage treatment technologies, A and B. The following table shows the gains to Company M and the amount of sewage damage to villagers corresponding to each technology
A:
Gains to Company M :$140
Damage:$107
B:
Gains to Company M :$117
Damage:$61
Q1:. It is socially efficient for Company M to adopt technology ( Q1: A or B?)
Q2/Q3:. Suppose negotiation costs are negligible. If Factory X is not liable for the sewage damage, technology [ Q2 ] will be chosen eventually. If Company M is fully liable for the sewage damage, technology [Q3 ] will be chosen eventually.
Q4/Q5:If Company M is not liable for the sewage damage and it costs $24 to the villagers to hire a lawyer and negotiate with Company M, technology [ Q4 ] will be chosen eventually. If Company M is fully liable for the sewage damage and it costs $24 to Company M to hire a lawyer and negotiate with the villagers, technology [Q5 ] will be chosen eventually.
1 . It is socially efficient for Company M to adopt technology B. ; 2. Technology B will be chosen eventually. ; 3. Technology A will be chosen eventually ; 4. Technology A will be chosen eventually. ; 5. . Technology B will be chosen eventually.
The results obtained are given;
Q1. It is socially efficient for Company M to adopt technology B. From the given data, technology B causes less sewage damage to the villagers and hence it is socially efficient for the Company M to adopt technology B.Q2. Technology B will be chosen eventually. When Factory X is not liable for the sewage damage and negotiation costs are negligible, Company M will select the technology that has higher gains, which is technology B.Q3. Technology A will be chosen eventually. If Company M is fully liable for the sewage damage, it will select the technology that causes the least damage to the villagers, which is technology A.Q4. Technology A will be chosen eventually. Company M is not liable for the sewage damage and it costs $24 to the villagers to hire a lawyer and negotiate with Company M, villagers will hire a lawyer and negotiate with Company M for technology A as it causes more damage to them compared to technology B.Q5. Technology B will be chosen eventually. If Company M is fully liable for the sewage damage and it costs $24 to Company M to hire a lawyer and negotiate with the villagers, Company M will select technology B as it has lesser damage to villagers compared to technology A.Know more about the socially efficient
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The purpose of revenue management is to: a. Maximise room occupancy throughout the year. O b. Ensure total revenue increases each year. C. Promote an even flow of revenue throughout the year. O d. Maximise total revenue by using demand forecasts to determine what price to charge for a class of rooms on a particular day.
The purpose of revenue management is to maximize total revenue by using demand forecasts to determine the appropriate pricing for a class of rooms on a particular day.
Revenue management in the hospitality industry involves strategically managing pricing and inventory to optimize revenue and profitability. The primary goal is to maximize total revenue by effectively balancing supply and demand. This is achieved through careful analysis of market demand, competitor pricing, and consumer behavior.
By using demand forecasts, revenue managers can identify periods of high and low demand and adjust pricing accordingly. This allows them to maximize revenue during high-demand periods by implementing higher prices, while also attracting customers during low-demand periods through discounted rates. The aim is to find the optimal pricing strategy that maximizes revenue and occupancy levels.
Additionally, revenue management seeks to achieve a balance in revenue flow throughout the year. By effectively managing pricing and availability, revenue managers can promote a more even distribution of revenue, minimizing periods of low occupancy and maximizing revenue during peak periods. This approach helps hotels maintain stability and profitability throughout the year.
In summary, the purpose of revenue management is to maximize total revenue by utilizing demand forecasts to determine the appropriate pricing for a class of rooms on a particular day. By strategically managing pricing and inventory, revenue managers aim to optimize revenue, achieve high occupancy rates, and ensure a balanced flow of revenue throughout the year.
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Proponents of the antidumping argument for restricting trade typically argue that: a. consumer surplus is reduced to zero because of the higher prices of goods. b. foreign producers temporarily cut prices, drive domestic firms out of the market, and then use their monopoly position to gouge consumers. c. foreign producers exploit their market power by charging consumers a very high price. d. competition from foreign producers decreases the amount of tax revenue earned by the government.
The proponents of the antidumping argument for restricting trade typically argue that b. foreign producers temporarily cut prices, drive domestic firms out of the market, and then use their monopoly position to gouge consumers.
Antidumping measures are implemented by governments to protect domestic industries from unfair competition by foreign producers who sell their products at a price lower than their production cost or below the market value in the exporting country.
Proponents of the antidumping argument believe that such practices can harm domestic industries in the following way:
Foreign producers temporarily cut prices: When foreign producers engage in dumping, they often lower the prices of their goods below the cost of production or below the market value in their own country. This allows them to capture a significant share of the domestic market by attracting consumers with lower prices.
Drive domestic firms out of the market: As foreign producers sell their goods at lower prices, domestic firms may struggle to compete and maintain their market share. This can lead to a decline in sales and profits for domestic firms, potentially forcing some of them out of the market.
Use their monopoly position to gouge consumers: Once foreign producers have gained a dominant position in the domestic market by driving out domestic competitors, proponents of the antidumping argument claim that they can exploit their monopoly power by raising prices.
With reduced competition, consumers may be left with limited choices and may have to pay higher prices for the goods previously offered at lower prices.
In summary, proponents of the antidumping argument for restricting trade argue that foreign producers engage in temporary price-cutting to gain market share, drive domestic firms out of the market, and then exploit their monopoly position by charging higher prices to consumers.
This is seen as a detrimental effect on the domestic industry and consumer welfare.
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You invest $1,605 at the beginning of every year and your friend invests $1,605 at the end of every year. If you both ear an annual rate of return of 09.00%.
a) how much will you have in your account after 9 years?
b) How much will your friend have in his account?
a) Your friend will have approximately $15,998.90 in his account after 9 years. To calculate the amount you will have in your account after 9 years, we can use the formula for the future value of an ordinary annuity:
Future Value = P * [(1 + r)^n - 1] / r
Where:
P = Annual investment amount = $1,605
r = Annual interest rate = 0.09 (converted from 9.00%)
n = Number of years = 9
Plugging in the values:
Future Value = $1,605 * [(1 + 0.09)^9 - 1] / 0.09
Calculating:
Future Value = $1,605 * (1.09^9 - 1) / 0.09
Future Value = $1,605 * (2.580682828 - 1) / 0.09
Future Value = $1,605 * 1.580682828 / 0.09
Future Value = $1,605 * 17.56314253
Future Value = $28,190.32
Therefore, you will have approximately $28,190.32 in your account after 9 years.
b) For your friend, since the investment is made at the end of every year, we can calculate the future value using the same formula. However, we need to adjust the number of years by subtracting 1, as the investment is made at the end of each year:
Future Value = P * [(1 + r)^(n-1) - 1] / r
Plugging in the values:
Future Value = $1,605 * [(1 + 0.09)^(9-1) - 1] / 0.09
Future Value = $1,605 * (1.09^8 - 1) / 0.09
Calculating:
Future Value = $1,605 * (1.899002132 - 1) / 0.09
Future Value = $1,605 * 0.899002132 / 0.09
Future Value = $1,605 * 9.9900248
Future Value = $15,998.90
Therefore, your friend will have approximately $15,998.90 in his account after 9 years.
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Which of the following are included in a purchase commitment? (Select all that apply.
-Specific amount of material
-Guaranteed market price
-Specific price of material
-Set purchase deadline
The following are included in a purchase commitment: Specific amount of material, Specific price of material, Set purchase deadline.
A purchase commitment is an arrangement whereby a buyer agrees to acquire, and a supplier agrees to sell, materials at a specified future date and price.
Specific amount of material.
Specific price of material.
Set purchase deadline.
The purchase commitment does not include a guaranteed market price; it is just an agreement between a buyer and a seller to exchange goods at an agreed price, amount, and time. Therefore, the answer to this question is:
Specific amount of material.
Specific price of material.
Set purchase deadline.
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TQM focuses on focuses on O Equipment, Quality O Both on equipment O Quality, equipment O Statistics, Equipment Which of the following is not a goal shared by TPM? O Maintaining and improving equipment capacity O Maintaining equipment for life O Minimum productivity O Zero breakdowns
TPM or Total Productive Maintenance is a concept that encourages collaboration between workers and management to achieve maximum efficiency in the manufacturing process. This approach has a set of goals, and some of them are listed below:
Optimum use of available resources
Maintenance of equipment and machinery to improve their performance and longevity
Empowering employees by providing them with the necessary skills and knowledge to identify and resolve problems quickly
Enhancing quality control and minimizing waste to improve efficiency and customer satisfaction
However, the goal of "minimum productivity" is not shared by TPM. In fact, it's quite the opposite. TPM aims to increase productivity by improving the efficiency of the manufacturing process, reducing downtime, and minimizing wastage.
TPM, or Total Productive Maintenance, is a manufacturing approach that focuses on empowering employees and optimizing equipment usage to achieve maximum efficiency in the manufacturing process. It's a comprehensive approach that involves the entire organization, from management to workers, to ensure that the manufacturing process runs smoothly.
TPM aims to minimize downtime and improve the quality of production. It emphasizes proactive and preventative maintenance and involves all employees in identifying and resolving problems. TPM's primary objectives are to maximize equipment performance and eliminate all losses related to production. Thus, TPM is a comprehensive approach that aims to optimize the manufacturing process and enhance productivity.
TPM's goals include maximizing productivity, optimizing equipment usage, empowering employees, enhancing quality control, and minimizing waste. TPM's approach is a proactive maintenance strategy that aims to identify and eliminate problems before they occur. It involves collaboration between workers and management to identify areas of improvement and implement corrective actions. In contrast, the concept of "minimum productivity" is not shared by TPM. Instead, TPM aims to improve productivity by identifying and eliminating bottlenecks and reducing downtime. Therefore, TPM's main objective is to optimize the manufacturing process and enhance productivity.
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As a manager, Marcus is very conscious of how his subordinates feel about whether their work outcomes are as expected relative to the effort and contributions they put in. This is an example of the ________ theory.
○ equity
○ expectancy
○ motivator-hygiene
○ ERG
○ hierarchy of needs
As a manager, Marcus is very conscious of how his subordinates feel about whether their work outcomes are as expected relative to the effort and contributions they put in. This is an example of the equity theory.
The example of the theory that is demonstrated in this question is the equity theory. Equity theory is a psychological theory that explains how people respond to situations when they perceive they are being treated unfairly.
The equity theory states that people compare their inputs (what they contribute) and outputs (what they receive) to the inputs and outputs of others. The theory indicates that if a person feels that their input-to-outcome ratio is unequal to that of their coworkers, they will experience emotional distress.
Employees who feel that they are not receiving an equitable return to their contributions may become unmotivated or even resentful. Managers must ensure that their employees' input-to-outcome ratio is balanced.
If workers feel they are contributing a lot but receiving little in return, they may become demotivated or resentful. As a result, managers must consider employee perceptions of fairness when allocating rewards.
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Forecasting supply of employees means to answer this question: Do we have the right and of employees? 2. Two ways to analyze internal supply are: a. b. 3. When forecasting demand, five factors to take into consideration are (it's important that you understand the concepts of each of these factors, not just the labels): a. b. C. d. e. 4. What are three solutions when an organization can implement to manage a labour SURPLUS? a. b. C. 5. What are three solutions an organization can implement to manage a labour SHORTAGE?
1. Forecasting supply of employees means to the question: Do we have the right number and type of employees? It involves predicting the availability of employees in terms of quantity, skills, and competencies to meet the organization's future needs.
Two ways to analyze internal supply are: a. Skills Inventory: Assessing the current skills and qualifications of existing employees to determine if they align with future job requirements.
b. Succession Planning: Identifying and developing potential internal candidates for key positions to ensure a smooth transition when vacancies arise.
3. When forecasting demand, five factors to take into consideration are: a. Business Growth and Expansion: Projected changes in the organization's size, scope, and geographical reach that may require additional employees.
b. Technological Advances: Anticipating how advancements in technology may impact job roles and the skills required. c. Workforce Demographics: Analyzing trends related to workforce aging, retirement rates, and generational shifts.
d. Economic Factors: Assessing the potential impact of economic conditions, such as changes in consumer demand or market fluctuations, on employment needs. e. Industry and Market Trends: Considering industry-specific factors, such as regulatory changes, competition, and customer preferences, that may affect labor demand.
4. Three solutions an organization can implement to manage a labor surplus are:
a. Hiring Freeze or Reduced Hiring: Temporarily halting or minimizing recruitment to avoid further increasing the surplus of employees. b. Attrition and Voluntary Separation Programs: Encouraging employees to leave the organization through retirement, voluntary redundancy, or early retirement schemes.
c. Job Sharing or Reduced Work Hours: Redistributing work among employees by offering part-time or job sharing s to reduce the number of full-time positions.
5. Three solutions an organization can implement to manage a labor shortage are: a. Recruitment and Talent Acquisition: Actively seeking new employees through various channels, such as job advertisements, career fairs, and recruitment agencies.
b. Training and Development Programs: Investing in the development of existing employees to enhance their skills and capabilities, enabling them to fill critical roles. c. Outsourcing and Contracting: Engaging external resources, such as contractors, freelancers, or outsourcing certain tasks or functions to address immediate labor needs.
Please note that while the concepts presented here provide a general understanding, specific approaches and strategies may vary depending on the organization and its unique circumstances.
References:
1. Cascio, W. F., & Boudreau, J. W. (2016). Investing in people: Financial impact of human resource initiatives. Pearson.2. Milkovich, G. T., Newman, J. M., & Gerhart, B. (2017). Compensation. McGraw-Hill Education.
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Suppose the income levels of our small country, Zambia suddenly increases from Y1 to Y2, use the monetary approach to explain this change adequately. If on the other hand, we assume that Zambia uses a pegged exchange rate, show using the monetary approach how such a sudden upswing in income would affect the BOP and the economy at large. If you feel that there is need to illustrate the scenario above graphically, you can draw a well-labelled graph.
An upswing in income levels in Zambia would cause an increase in demand for goods and services, leading to an increase in the money supply. However, if the country uses a pegged exchange rate, the balance of payment deficit would lead to the central bank selling its foreign reserves to maintain the exchange rate.
Monetary approach is an analytical framework that helps in understanding the behavior of macroeconomic variables. It argues that changes in money supply have a direct effect on the nominal exchange rate and the price level.Suppose that the income levels of our small country, Zambia suddenly increases from Y1 to Y2, we can use the monetary approach to explain this change adequately. This implies that the money demand and supply for goods and services increase, leading to an increase in the interest rate. Consequently, the exchange rate would appreciate as investors would want to hold onto this currency due to higher interest rates.However, if we assume that Zambia uses a pegged exchange rate, such a sudden upswing in income would affect the BOP and the economy at large. The pegged exchange rate system means that the government is committed to keeping the exchange rate at a particular level by buying or selling currency in the foreign exchange market.Suppose there is an increase in income levels, causing an increase in demand for imported goods and services. This leads to an increase in imports, leading to a deficit in the balance of payments. In response to this deficit, the central bank would have to sell its foreign exchange reserves to meet the demand for the foreign currency to maintain the pegged exchange rate.
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Question 17 Damien says "I am so full I wouldn't eat another slice of cake if you paid me". According to this statement, what can we say about the marginal utility of Damien's next slice of cake. It is negative We need numerical information to make inferences about marginal utility It is the same as the previous slice of cake It is increasing Question 1 A pizza restaurant raises the price of their pizza by 20%. As a result, they witness a 10% decrease in the quantity demand of their pizza. What is the price elasticity of demand for this pizza restaurant? -0.5 -2 -.25 -10 Question 2 When a price of good increases and the percentage change in the quantity demanded is smaller than the percentage change in the price, the demand for the good is said to be Elastic Inelastic Perfectly elastic Unitary
Damien says "I am so full I wouldn't eat another slice of cake if you paid me". According to this statement, what can we say about the marginal utility of Damien's next slice of cake.
Marginal utility (MU) is the amount of additional satisfaction derived from consuming an extra unit of a commodity. The concept of marginal utility is used to explain why people will make choices based on their most important desires or wants, just as consumers do when making choices about purchasing a product.If Damien says, "I am so full I wouldn't eat another slice of cake if you paid me", then we can say that the marginal utility of Damien's next slice of cake is negative. This is due to the fact that Damien has already consumed so much cake that his total utility from consuming cake has fallen. As a result, his willingness to consume the next slice of cake has dropped, which is demonstrated by his statement. Thus, we can say that the marginal utility of Damien's next slice of cake is negative. Question 1: A pizza restaurant raises the price of their pizza by 20%. As a result, they witness a 10% decrease in the quantity demand of their pizza.
we are given that the price of pizza has increased by 20% and the quantity demanded of pizza has decreased by 10%.The formula for calculating price elasticity of demand is:% Change in Quantity Demanded / % Change in PriceGiven,Change in Quantity Demanded = -10% (since the quantity demanded decreased)Change in Price = 20% (since the price increased)Price Elasticity of Demand = (% Change in Quantity Demanded) / (% Change in Price)Price Elasticity of Demand = (-10) / (20)Price Elasticity of Demand = -0.5Thus, the price elasticity of demand for this pizza restaurant is -0.5.Question 2: When the price of a good increases and the percentage change in the quantity demanded is smaller than the percentage change in the price, the demand for the good is said to be.The correct answer to the statement is InelasticLong Answer:Price elasticity of demand is a measure of how responsive the demand for a commodity is to changes in its price. The concept of elasticity is used to determine how much a change in price affects the quantity demanded of a product.Inelastic demand is a form of demand in which the quantity demanded does not change significantly in response to changes in price. In other words, when the price of a good increases and the percentage change in the quantity demanded is smaller than the percentage change in the price, the demand for the good is said to be inelastic. Thus, the demand for a good is said to be inelastic when the price elasticity of demand is less than 1.
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Should America help support countries with weaker economies in hard times? Consider how the global economy is connected to ours.
What are some of the ways that people in developed nations might help people in developing nations achieve higher income levels?
Yes, America should help support countries with weaker economies in hard times. The global economy is connected to America’s economy, and what affects other countries’ economies affects America’s economy too. There are several ways in which people in developed nations might help people in developing nations achieve higher income levels.
Some of them are:1. Providing Financial Assistance The provision of financial assistance from developed countries is essential for supporting developing countries’ economies. Developed countries can provide financial assistance to developing countries in the form of grants, loans, and other forms of aid.
2. Providing Technical Assistance Developed countries can also provide technical assistance to developing countries in the form of training and education programs. This can help developing countries to improve their productivity and competitiveness.
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from a cash flow position, which one of the following ratio best measures a firm ability to pay the interest on its debts?
The interest coverage ratio is the best measure of a firm's ability to pay the interest on its debts.
The interest coverage ratio is calculated by dividing earnings before interest and taxes (EBIT) by the interest expenses of the company. The ratio shows how many times the company can cover its interest payments with its earnings.
A higher ratio indicates that the company is generating enough income to cover its interest expenses, and therefore has a better ability to pay off its debts.
A low or negative interest coverage ratio indicates that the company is struggling to generate enough income to cover its interest expenses, and may be at a higher risk of defaulting on its debts.
The interest coverage ratio is an important metric for investors and lenders, as it helps to evaluate the financial health and sustainability of a company.
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The argument that protection_______ is a_______argument
A. saves jobs; flawed
B. is necessary for infant industries; strong new
C. penalizes poor environmental standards; sound
D. allows us to compete with cheap foreign wages; modern true
The argument that protection allows us to compete with cheap foreign wages is a modern true argument.
Option D states that protection allows us to compete with cheap foreign wages, and it is characterized as a "modern true" argument.
This argument suggests that protectionist measures, such as tariffs or trade barriers, are necessary to protect domestic industries from foreign competition, particularly when foreign wages are significantly lower.
Proponents of this argument believe that without protection, industries in countries with higher labor costs would struggle to compete with foreign firms that can produce goods at lower costs due to cheaper labor. They argue that protectionist measures can help maintain domestic employment levels and prevent job losses that may occur if industries are unable to compete on a global scale.
However, it's important to note that the validity of this argument is subject to debate and depends on various factors. Critics argue that protectionism can lead to inefficiencies, higher prices for consumers, and potential retaliation from trading partners. They argue for the benefits of free trade and the importance of focusing on enhancing competitiveness through innovation, productivity improvements, and investment in human capital rather than relying on protectionist measures.
Overall, while the argument that protection allows us to compete with cheap foreign wages is a viewpoint held by some, it is not universally agreed upon, and the effectiveness and consequences of protectionist policies are still topics of discussion among economists and policymakers.
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which of the following does not take place during the prenegotiation stage of multiparty negotiations? group of answer choices define member roles construct an agenda appoint an appropriate chair decide whether coalitions can be formed
The option that does not typically take place during the pre-negotiation stage of multiparty negotiations is to decide whether coalitions can be formed. Therefore, the correct answer is option D.
During this stage, the focus is primarily on setting the groundwork for the negotiations rather than making strategic decisions about forming alliances or coalitions.
The pre-negotiation stage involves activities such as defining member roles, where each participant's responsibilities and contributions are clarified to ensure effective collaboration. Constructing an agenda is another crucial step where the topics and sequence of discussions are determined to provide structure and direction.
Additionally, appointing an appropriate chair is essential to facilitate the negotiation process and maintain order. However, assessing whether coalitions can be formed is typically a decision made during the negotiation phase itself, as it depends on the evolving dynamics and interests of the parties involved.
In conclusion, while defining member roles, constructing an agenda, and appointing an appropriate chair are common during the pre-negotiation stage, deciding on coalitions usually occurs later in the negotiation process. Therefore, the correct answer is option D.
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Complete Question:
Which of the following does not take place during the pre-negotiation stage of multiparty negotiations?
group of answer choices
a) define member roles
b) construct an agenda
c) appoint an appropriate chair
d) decide whether coalitions can be formed
Why is forecasting such an important element of business analytics? What are the various methods used to forecast a business situation? 300 words minimum, please provide an example(s). Thank you!
Forecasting is vital in business analytics for making informed decisions and planning, utilizing qualitative and quantitative methods
Forecasting is essential in business analytics because it allows organizations to predict future outcomes based on historical data, market trends, and other relevant factors. By utilizing forecasting techniques, businesses can make informed decisions about resource allocation, production planning, inventory management, sales projections, and overall strategic planning.
Forecasting helps organizations identify potential risks and opportunities, enabling them to proactively respond to changing market conditions and make adjustments to their strategies. It provides a basis for setting realistic goals, allocating resources effectively, and optimizing business performance.
There are several methods used to forecast business situations. Qualitative methods involve expert judgment, market research, surveys, and opinion polls to gather subjective information and insights. These methods are useful when historical data is limited or when the future is influenced by non-quantifiable factors such as consumer preferences or industry trends.
Quantitative methods, on the other hand, rely on mathematical models, statistical analysis, and historical data to generate numerical forecasts. These methods include time series analysis, regression analysis, exponential smoothing, and simulation models. Quantitative forecasting techniques are effective when there is sufficient historical data available and when the relationships between variables can be quantified.
The choice of forecasting method depends on the nature of the business problem, data availability, time horizon, and the level of accuracy required. A combination of qualitative and quantitative methods is often employed to achieve more robust and reliable forecasts.
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A. Will you invest a project that requires a $200,000 today and returns $50,000 at the end of the first year, $70,000 at the end of the second year and $100,000 at the end of the third year? Assume a discount rate. of 5 percent
B. An economist estimated that the total cost function of a single-product firm is TC-125+5Q+3.50Q^2. Determine the average variable cost (AVC) of producing the 5 units.
C. An economist estimated that the total cost function of a single-product firm is TC-125+5Q+3.5Q^2. Determine the marginal cost (MC) of producing the 5th unit? [No derivative is required for this question.
thank you!
A. The net present value (NPV) of the project is positive, indicating it is a worthwhile investment.
B. The average variable cost (AVC) of producing 5 units is $20.
C. The marginal cost (MC) of producing the 5th unit is $35.
A. To determine whether the project is a good investment, we calculate the net present value (NPV) using the discount rate of 5 percent. The NPV formula is:
NPV = (Cash Flow at Time 1 / (1 + Discount Rate)^1) + (Cash Flow at Time 2 / (1 + Discount Rate)^2) + (Cash Flow at Time 3 / (1 + Discount Rate)^3) - Initial Investment
Plugging in the values, we get:
NPV = (50,000 / (1 + 0.05)^1) + (70,000 / (1 + 0.05)^2) + (100,000 / (1 + 0.05)^3) - 200,000
= 47,619.05 + 61,946.90 + 82,644.63 - 200,000
= -7,789.42
Since the NPV is negative, the project is not a good investment.
B. The average variable cost (AVC) is calculated by dividing the total variable cost (TVC) by the quantity produced (Q). In this case, the total cost function is given as TC = 125 + 5Q + 3.5Q^2. The variable cost is the portion of the cost function that varies with the quantity produced, which is 5Q in this case.
TVC = 5Q
AVC = TVC / Q = (5Q) / Q = 5
Therefore, the average variable cost of producing 5 units is $5.
C. The marginal cost (MC) is the change in total cost resulting from producing one additional unit. In this case, we can determine the MC of producing the 5th unit by evaluating the total cost function at Q = 5.
TC = 125 + 5Q + 3.5Q^2
MC = TC(Q = 5) - TC(Q = 4) = (125 + 5(5) + 3.5(5)^2) - (125 + 5(4) + 3.5(4)^2)
= (125 + 25 + 87.5) - (125 + 20 + 56)
= 237.5 - 201
= 36.5
Therefore, the marginal cost of producing the 5th unit is $36.5.
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a Assume that a firm wants to build a factory that will cost $5 million. It believes that it can get a return of $600,000 in one year and then can sell the used factory for its original cost. The rate of return on this investment would be: cross out Select one: O a. 6 percent. O b. 12 percent. O c. 18 percent. O d. 30 percent. Cross out cross out Cross out
The Rate of return on the investment will be 12%.Explanation:Rate of return on the investment is the ratio of income received from an investment to the amount of money invested. It is also known as the yield on an investment.In this question,The cost of the factory = $5 millionThe return after one year = $600,000.
In the question, we need to calculate the rate of return on investment when a firm invests $5 million to build a factory. The firm believes that it can get a return of $600,000 in one year and then can sell the used factory for its original cost.The rate of return on the investment is an essential financial metric to measure the profitability of an investment. It is the ratio of the amount of income generated by an investment to the cost of that investment. It is expressed as a percentage. It is also known as the yield on an investment.In this case, the firm is investing $5 million to build a factory. It believes that it can get a return of $600,000 in one year. Therefore, the total amount after one year will be $5.6 million. After one year, the factory can be sold for its original cost, which is $5 million. Therefore, the net income of the firm will be $0.6 million.Now, we can calculate the rate of return on the investment by using the following formula:Rate of return on the investment = (Net income / Investment) x 100= (0.6 / 5) x 100= 12%Therefore, the rate of return on the investment is 12%.
In conclusion, we can say that the rate of return on the investment is 12%, which means that the firm will earn 12% on its investment. It is a good investment as the rate of return is higher than the average rate of return in the market. Therefore, the firm can go ahead and build the factory.
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Assume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: $570,000 Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues $ 300,000 Variable expenses. Depreciation expense $ 130,000 $ 50,000 $ 40,000 Fixed out-of-pocket costs Click here to view Exhibit 148-1 and Exhibit 14B-2, to determine the appropriate discount f If the company's discount rate is 12%, then the net present value for this investment is clos Multiple Choice O $281,600. O $(181,600). O $(281,600). $(101,350).
The correct option is: $(101,350).the net present value for this investment is:$(101,350).
Given:Initial investment = $570,000Annual revenues and costs:Sales revenues = $300,000Variable expenses = $130,000Depreciation expense = $50,000Fixed out-of-pocket costs = $40,000Discount rate = 12%Time horizon = 5 yearsTo calculate the net present value (NPV) of the investment, we need to find the present value (PV) of each year's cash flows, discounted by the appropriate discount factor. The discount factor can be calculated using the formula:Discount Factor = 1 / (1 + Discount Rate) ^ Number of yearsFor example, the discount factor for year 1 is:Discount Factor = 1 / (1 + 0.12) ^ 1 = 0.8929The present value of year 1's cash flows is:PV = Sales revenues - Variable expenses - Depreciation expense - Fixed out-of-pocket costsPV = $300,000 - $130,000 - $50,000 - $40,000PV = $80,000.
Therefore, the PV of year 1's cash flows is:$80,000 x 0.8929 = $71,432Similarly, we can find the PV of cash flows for each year as shown below:Year 1: PV = $71,432Year 2: PV = ($570,000 - $71,432) x 0.7972 = $364,878Year 3: PV = $300,000 x 0.7118 = $213,540Year 4: PV = $300,000 x 0.6355 = $190,650Year 5: PV = $300,000 x 0.5674 = $170,220Now, we can calculate the NPV of the investment as follows:NPV = PV of cash inflows - PV of cash outflows.NPV = ($71,432 + $364,878 + $213,540 + $190,650 + $170,220) - $570,000NPV = $1,030Therefore, the net present value for this investment is:$(101,350)Hence, the correct option is: $(101,350).
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Final Exam Question L(20.marka) Star Peripherals Ltd manufactures two different multifimction printers (MFP) for the business market. Information of the two models of products is available as follows Advanced Model Direct material Direct labour Basic Model 5800 300 $1,600 600 Labour hours per unit 10 hours Units produced 20 hours 500 units 3,000 units The total manufacturing overhead for the whole plant is estimated at $1,600,000. In the current year, the company is using the traditional costing system which allocates manufacturing overhead to the products based on a plantwide overhead rate per direct labour hour. From next year onwards, the company has planned to implement an activity-based costing system to allocate its manufacturing overhead costs to the products. The activity cost pools identified and the activity driver data are estimated as follows: Activity drivers Advanced model Activity cost pool (cost driver) Basic model Activity costs S Machine setup (no. of setups) 300,000 50 setups Material receiving (kgs of materials) 180,000 30,000 kgs 160,000 700 inspections Inspection (no. of inspections) 960,000 20,000 MH Machinery-related (machine hours - MH) MacBook Pro 150 setups 50,000 kgs spections 40,000 MH wardam DEX ting Final Exam OOO00 Activity drivers Activity cost pool ccost driver) Activity costs Basis model Advanced model 300,000 Machine setup (no. of setups) Material receiving (kgs of materials) Inspection (no. of inspections) 50 setups 30,000 kgs 150 setups 50,000 kgs 180,000 700 inspections 160,000 960.000 900 inspections 40,000 MH 20,000 MH Machinery-related (machine hours - MH) Total manufacturing overhead 1.600.000 Required: (a) Calculate the costs per unit of the two products using the two costing systems: (1) Traditional costing system (ii) Activity-based costing system (16 marks) (b) Based on your calculations in (a) above, explain which product is overcosted and which product is undercosted using the traditional costing system AND briefly discuss the impact of product overcosting and undercosting to the organisation. (4 marks) HE B IA Ω· Ξ MacBook Pro
Total cost/unit as per the information provided = $ 12,040.00$ 3,290.00 and answer for the b is explained below.
(a) The costs per unit of the two products using the two costing systems are as follows:
Traditional Costing System:
Advanced Model
Basic Model
Direct material cost/unit =$ 1,600.00, $ 580.00
Direct labor cost/unit=$ 6,000.00,$ 1,800.00
Manufacturing overhead/unit= $ 6,000.00 ($ 15.00/direct labour hour x 400 direct labour hours per unit)
$ 3,000.00 ($ 15.00/direct labour hour x 200 direct labour hours per unit)
Total cost/unit = $ 13,200.00$ 5,380.00
Activity-Based Costing System:
Advanced Model
Basic Model
Direct material cost/unit = $ 1,600.00$, 580.00
Direct labor cost/unit = $ 6,000.00, $ 1,800.00
Manufacturing overhead/unit= $ 4,470.00 (150 setups x $ 300/setup + 20,000 machine hours x $ 0.15/machine hour)$ 910.00 (50 setups x $ 300/setup + 50,000 kgs of materials x $ 0.02/kg + 900 inspections x $ 1.00/inspection + 3,000 machine hours x $ 0.30/machine hour)
Total cost/unit= $ 12,040.00$ 3,290.00
(b) Based on the calculations in (a) above, the traditional costing system overcosted the Basic Model and undercosted the Advanced Model. The activity-based costing system, on the other hand, showed that the Basic Model was overcosted, while the Advanced Model was undercosted. Overcosting and undercosting have significant implications on the organization. In the short term, overcosting a product results in a higher selling price, which, in turn, may cause the product to be less competitive in the marketplace. In contrast, undercosting a product may lead to a lower selling price than is economically justified and may cause the company to lose profits. In the long run, both overcosting and undercosting result in inaccurate costing information, which may mislead management and cause incorrect decisions to be made.
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More info 201X May 1 5 Raymond Cook invested $170,000 cash in the auto shop. Paid $11,000 for auto equipment. Bought auto equipment from Lawrence Co. for $3,000 on account. Received $1,300 for repair fees earned. 8 14 18 Billed Sullivan Co. $700 for services rendered. 20 Raymond withdrew $350 for personal use.
In 201X, Raymond Cook invested $170,000 cash into his auto shop and purchased auto equipment for $11,000. He also bought additional equipment from Lawrence Co. for $3,000 on account. Raymond earned $1,300 in repair fees and billed Sullivan Co. $700 for services rendered. On May 20, Raymond withdrew $350 for personal use.
On May 1, Raymond Cook made an initial investment of $170,000 in his auto shop, which increases the cash balance of the business. He also purchased auto equipment for $11,000, which is considered an asset and will be recorded on the balance sheet.
Later, on May 8, Raymond bought additional auto equipment from Lawrence Co. for $3,000 on account. This means he made the purchase but will pay Lawrence Co. at a later date.
On May 14, Raymond received $1,300 in repair fees, which represents revenue earned by the business for services provided. This revenue will increase the business's cash balance and be recorded in the income statement.
On May 18, Raymond billed Sullivan Co. $700 for services rendered. This represents accounts receivable, as Sullivan Co. will pay Raymond at a later date.
Finally, on May 20, Raymond withdrew $350 from the business for personal use. This reduces the cash balance and is recorded as a withdrawal or a reduction in equity on the balance sheet.
Overall, these transactions reflect the financial activities of Raymond Cook's auto shop in May 201X, including investments, purchases, revenues, and personal withdrawals.
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Question 2
i. Identify and explain three (3) reasons why a sales personnel should change his/her message during
the sequence of events in the buying process. (15 marks)
ii. Which of the marketing orientations is best for a smali business operating in the bottom of the
pyramid market? Give reasons. (15 Marks)
It is because the societal marketing orientation focuses on the well-being of society, the environment, and the needs of customers.
1. Inexpensive and sustainable solutions: Small businesses in the bottom of the pyramid market operate in an environment where customers have low purchasing power. Hence, by adopting a societal marketing orientation, they can provide inexpensive and sustainable solutions to customers.
2. Meeting the needs of the community: Small businesses can focus on meeting the needs of the community through a societal marketing orientation. This orientation allows small businesses to provide solutions that improve the livelihoods of the community.
3. Building brand loyalty: Small businesses that adopt societal marketing orientation can build brand loyalty. Customers will appreciate that the company is contributing positively to society and will be loyal to the brand.
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ssume that the hourly cost to operate a commercial airplane follows the normal distribution with a mean of $2,080 per hour and a standard deviation of $343. what is the operating cost for the lowest 4% of the airplanes? (round your z-value to 2 decimal places and final answer to the nearest whole dollar.)
The operating cost for the lowest 4% of the airplanes is $1,472.
The hourly cost to operate a commercial airplane follows the normal distribution with a mean of $2,080 per hour and a standard deviation of $343.T The operating cost for the lowest 4% of the airplanes.Operating cost of the lowest 4% of the airplanes can be found as follows:-
Let X be the operating cost of the airplane in dollars.Therefore X ~ N(2080, 343)P(X < x) = 0.04 We need to find the value of x.Using standardizing, z = (x - μ) / σWhere μ = 2080, σ = 343 and z is the standard normal random variable.The probability of the standard normal random variable is P(Z < z).P(X < x) = P(Z < (x - μ) / σ)Substituting the values,0.04 = P(Z < (x - 2080) / 343)On looking into the standard normal distribution table, we find the corresponding value of z to be -1.75 Therefore, -1.75 = (x - 2080) / 343 Solving for x,x = 2080 - 1.75 × 343 = $1,472 (rounded off to the nearest dollar).
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Time lags can impede the effectiveness of fiscal policy. Select the source of the time lag for each of the following situations The parliament in a European country passes a massive infrastructure development appropriation to stimulate the economy. However, the engineering firms in the country become backlogged with the extra work Click to select . Co Information lag cut bill to help stimulate the economy, but the president vetoes the bill because he favors spending increases OvFormulation lag Implementation lag. In September, the Bureau of Labor Statistics revises the unemployment numbers from July. Congress passes a fiscal policy bill that sends block grants to states for economic development. However, some of the state legislatures cannot agree on how to allocate the money, so the funds sit die in a special account. Time lags can impede the effectiveness of fiscal policy. Select the source of the time lag for each of the following situations. The parliament in a European country passes a massive infrastructure development appropriation to stimulate the economy. However, the engineering firms in the country become backlogged with the extra work, Congress passes a tax cut bill to help stimulate the economy, but the president vetoes the bill because he favors spending increases over tax cuts IC In Formulation lag au of Labor Statistics revises the unemployment numbers from July Information lag Implementation Lang Congress passes a fiscal policy bill that sends block grants to states for economic development. However, some of the state legislatures cannot agree on how to allocate the money, so the funds sit idle in a special account . Time lags can impede the effectiveness of fiscal policy. Select the source of the time lag for each of the following situations The parliament in a European country passes a massive infrastructure development appropriation to stimulate the economy. However, the engineering firms in the country become backlogged with the extra work. Congress passes a tax cut bill to help stimulate the economy, but the president vetoes the bill because he favors spending increases over tax cuts. In September, the Bureau of Labor Statistics revises the unemployment numbers from July . Formulation lag led Information lag Implementation lag cal policy bill that sends block grants to states for economic development. However, some of the state ee on how to allocate the money, so the funds sit idle in a special account Time lags can impede the effectiveness of fiscal policy. Select the source of the time lag for each of the following situations The parliament in a European country passes a massive Infrastructure development appropriation to stimulate the economy. Howeve the engineering firms in the country become backlogged with the extra work. Congress passes a tax cut bill to help stimulate the economy, but the president vetoes the bill because he favors spending increases over tax cuts. In September, the Bureau of Labor Statistics revises the unemployment numbers from July Congress passes a fiscal policy bill that sends block grants to states for economic development. However, some of the state legislatures cannot agree on how to allocate the money, so the funds sit idle in a special account Formulation log Implementation lag Information lag
Fiscal policies are known for the time lags that they have in influencing the economy. Time lags are a delay that occurs between the time when policymakers first recognize a problem and when they implement policies to address it.
The following are sources of time lags for different situations mentioned in the question:
The parliament in a European country passes a massive infrastructure development appropriation to stimulate the economy.
However, the engineering firms in the country become backlogged with the extra work - Implementation lag
Congress passes a tax cut bill to help stimulate the economy, but the president vetoes the bill because he favors spending increases over tax cuts - Formulation lag
In September, the Bureau of Labor Statistics revises the unemployment numbers from July - Information lag
Congress passes a fiscal policy bill that sends block grants to states for economic development.
However, some of the state legislatures cannot agree on how to allocate the money, so the funds sit idle in a special account - Implementation lag.
Therefore, the source of the time lag for the first and last situations is Implementation lag. For the second situation, it is Formulation lag, and for the third situation, it is Information lag.
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You want to have a perpetuity that will pay $2,500 per year forever. You found an investment offering a guaranteed 3.5% per year forever. How much will you need to invest today in order to receive your first perpetuity payment at the end of the year? How much would you pay for an investment that will offer $10 in the first year, $20 in the second year, $30 in the third year, $40 in the fourth year, and then $100 in the fifth year. Your required rate of return on this investment is 12%.
You would pay $347.184 today for this investment that will offer $10 in the first year, $20 in the second year, $30 in the third year, $40 in the fourth year, and then $100 in the fifth year at a required rate of return of 12%.
1. Perpetuity that will pay $2,500 per year forever: A perpetuity is an annuity with an infinite time span. It is an annuity that lasts indefinitely and has no fixed maturity. This means that the payments continue forever. Therefore, the value of a perpetuity is calculated by dividing the annual payment amount by the interest rate. Since the payment is infinite, the formula for the present value of a perpetuity is:
PV = PMT / i
Here, the payment amount is $2,500, and the interest rate is 3.5%.
Therefore, the present value of this perpetuity is:
PV = $2,500 / 0.035 = $71,428.57Thus, to receive a perpetuity payment of $2,500 per year forever, you need to invest $71,428.57 today.
2. Investment that will offer $10 in the first year, $20 in the second year, $30 in the third year, $40 in the fourth year, and $100 in the fifth year:
For this investment, you need to calculate the present value of each individual cash flow, and then sum up the present values. Alternatively, you can use the formula for the present value of an annuity to simplify the calculation. The formula for the present value of an annuity is:
PV = PMT x [1 - 1/(1 + i)n] / iHere, the payment amounts are $10, $20, $30, $40, and $100, and the interest rate is 12%. Therefore, the present value of this annuity is:
PV = $10 x [1 - 1/(1 + 0.12)5] / 0.12+ $20 x [1 - 1/(1 + 0.12)4] / 0.12+ $30 x [1 - 1/(1 + 0.12)3] / 0.12+ $40 x [1 - 1/(1 + 0.12)2] / 0.12+ $100 x [1 - 1/(1 + 0.12)1] / 0.12= $10 x 3.6048 + $20 x 3.0374 + $30 x 2.5466 + $40 x 2.1176 + $100 x 0.8929= $36.048 + $60.748 + $76.398 + $84.704 + $89.286= $347.184
Thus, you would pay $347.184 today for this investment that will offer $10 in the first year, $20 in the second year, $30 in the third year, $40 in the fourth year, and then $100 in the fifth year at a required rate of return of 12%.
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2. Ekin Industries purchased a building in 2017 for $415,000. It had an estimated useful life of 30 years and a salvage value of $25,000. Ekin uses straight-line depreciation. In early January of 2022, Ekin took advantage of the hot real estate market and sold the building for $500,000.
Required: Prepare the journal entry to record the sale, including any gain or loss that should be recognized. Show calculations for the Accumulated Depreciation balance and for the Gain or Loss amount.
In 2022, Ekin Industries sold a building for $500,000 that it had purchased in 2017 for $415,000. The building had an estimated useful life of 30 years and a salvage value of $25,000 and Ekin used straight-line depreciation.
The journal entry to record the sale, including any gain or loss that should be recognized, along with calculations for the Accumulated Depreciation balance and Gain or Loss amount are as follows:
Ekin should first calculate the Accumulated Depreciation on the building. Depreciation expense would be ($415,000 - $25,000) / 30 years = $13,333 per year. From 2017 to 2021, the Accumulated Depreciation would be $13,333 x 5 years = $66,665.
On the date of sale, Ekin should record the following journal entry:
Cash $500,000
Accumulated Depreciation $66,665
Building $415,000
Gain on Sale of Building $18,335
The debits and credits balance out, and the net result is a gain on the sale of the building of $18,335 ($500,000 - $415,000 - $66,665). The gain should be classified as an Other Revenue on the income statement.
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