The major problem with barter as a method for exchanging goods is the lack of a common measure of value and the challenge of finding a double coincidence of wants.
Barter is a direct exchange of goods and services without the involvement of money. The main problem with barter is that it requires a coincidence of wants, meaning that two parties need to simultaneously desire what the other has to offer. This can be difficult to achieve, especially in complex economies with diverse goods and services.
Additionally, barter lacks a common measure of value. In a monetary system, money serves as a medium of exchange and a unit of account, allowing for the easy comparison of the value of different goods and services. In barter, however, the lack of a common measure of value makes it challenging to determine fair exchange ratios.
While barter was historically used as a method of exchange, its limitations and inefficiencies led to the development of monetary systems. The introduction of money resolved the issues associated with barter by providing a widely accepted medium of exchange and a common measure of value. Money has played a crucial role in facilitating economic transactions and promoting economic growth.
To know more about Barter visit:
brainly.com/question/30075051
#SPJ11
Happy Trails, a bicycle rental company, is considering purchasing three additional bicycles. Each bicycle would cost them $249.66. At the end of the first year the increase to their revenues would be $140 per bicycle. At the end of the second year the increase to their revenues would be $115 per bicycle and they can sell each used bike for another $25. At which of the following interest rates is the sum of the present value of the revenues from buying a bicycle closest to the price of a bicycle?
a. 5 percent
b. 6 percent
c. 7 percent
d. 8 percent
ANS: D
Since I have the answer, I am really looking for someone who can show the work on how to solve this problem. What I have so far is this:
249.66 = [140/ (1+x)] + [(115+25)/[(1+x)^2]] but 1) I'm not sure if I'm interpreting the problem correctly and 2) I don really know where to go from here in a legit mathematical way (i.e. not just plug numbers in and see which works).
Given that Happy Trails, a bicycle rental company, is considering purchasing three additional bicycles. Each bicycle would cost them $249.66. At the end of the first year, the increase in their revenues would be $140 per bicycle.
The correct option is A.
It is required to find the present value of the revenues from buying a bicycle using the given data. Let us assume that the present value of revenues from the purchase of a bicycle is P dollars.Using the given information:At the end of the first year, the increase in revenues is $140 per bicycle. Therefore, the revenues per bicycle after the first year will be (140 + R), where R is the original revenue per bicycle.At the end of the second year, the increase in revenues is $115 per bicycle. So, the revenues per bicycle after the second year will be (140 + 115 + R), and they can sell each used bike for another $25.Therefore, the total revenue that Happy Trails will earn per bike will be:R1 = 140 + R (end of the 1st year)R2 = 140 + 115 + R + 25 (end of the 2nd year,
With selling of the bike)We can use the following equation to find the present value of revenues from purchasing a bicycle WherePV = Present Value of the RevenuesR1 = Revenue per Bicycle at the end of the 1st yearR2 = Revenue per Bicycle at the end of the 2nd yearS = Salvage Valuei = interest rateThe values of R1, R2, and S are known. Therefore, we can substitute them in the equation. It is required to find the interest rate that is closest to the present value of the revenues from buying a bicycle. To solve the above equation, they need to plug in the given interest rates one by one and calculate the value of PV. Then, they need to compare the value of PV with the cost of the bicycle. The interest rate that gives the value of PV closest to the cost of the bicycle will be the answer.Let us plug in 8% interest rate.
To know more about purchasing Visit:
https://brainly.com/question/31035675
#SPJ11
You are evaluating two different silicon wafer milling machines. The Techron I costs $303,000, has a three-year life, and has pretax operating costs of $84,000 per year. The Techron Il costs $525,000,
The Techron I silicon wafer milling machine costs $303,000 and has a three-year life with pretax operating costs of $84,000 per year. The Techron II, on the other hand, costs $525,000.
To determine the more cost-effective option between the Techron I and Techron II silicon wafer milling machines, we need to consider their total costs over their respective lifespans. The Techron I has an initial cost of $303,000 and annual pretax operating costs of $84,000 for three years, resulting in a total cost of $555,000 over its lifespan. On the other hand, the Techron II costs $525,000 upfront.
While the initial cost of the Techron II is higher, it is essential to consider its potential benefits, such as improved efficiency or reduced maintenance requirements, which could translate into lower operating costs over time.
Unfortunately, the provided information does not specify the operating costs for the Techron II or its expected lifespan. Without these details, it is challenging to make a comprehensive comparison between the two machines. However, based solely on the given information, the Techron I appears to have a lower total cost over its lifespan, making it a potentially more cost-effective option.
Learn more about costs here:
https://brainly.com/question/17120857
#SPJ11
1. What mistakes did Deans Foods make? Explain.
2. Ideas and areas for Dean Foods to diversify and expand its
food and beverage line of products?
1. Dean Foods' mistakes included lack of diversification, overreliance on traditional dairy, failure to adapt to consumer preferences for plant-based alternatives. 2. To diversify, Dean Foods can explore plant-based alternatives, introduce functional beverages and health-conscious options.
Dean Foods made critical mistakes that contributed to its downfall. Firstly, the company focused heavily on traditional dairy products and failed to diversify its offerings. This made them vulnerable to shifts in consumer preferences, particularly the rising demand for plant-based alternatives. Additionally, Dean Foods struggled with financial mismanagement, accumulating significant debt that became unsustainable.
These factors, combined with declining sales and loss of market share, led to the company filing for bankruptcy in 2019. To avoid such mistakes, companies should continuously assess market trends, diversify their product lines, and adapt to changing consumer preferences to remain competitive in the industry.
To diversify and expand its product line, Dean Foods could capitalize on the growing demand for plant-based alternatives by offering a range of non-dairy milk options, plant-based yogurts, and other dairy substitutes. This would enable them to tap into a rapidly expanding market and cater to consumers seeking healthier and sustainable options.
Additionally, they could venture into the functional beverage space, introducing products with added health benefits or targeting specific consumer segments, such as sports drinks or energy beverages. Furthermore, exploring organic and health-conscious product offerings would align with the increasing consumer focus on wellness. To expedite their diversification efforts, Dean Foods could consider partnerships or acquisitions with established brands in these segments, leveraging their expertise and existing customer base to accelerate market entry and expansion.
To know more about beverage line, here
https://brainly.com/question/30388880
#SPJ4
Bora purchased 600 shares of ABC Company at a price of $77.40 a share and sold the shares for $80.20 each. He also received $720 in dividends. If the inflation rate was 3.9 percent, what was his exact real rate of return on this investment? a. 2.21 percent b. 2.97 percent c. 3.45 percent d. 1.22 percent e. 1.97 percent
The exact real rate of return on Bora's investment in ABC Company, considering the inflation rate of 3.9 percent, is approximately 2.21 percent (option a).
Bora purchased 600 shares of ABC Company at a price of $77.40 per share, which amounts to a total investment of 600 * $77.40 = $46,440. He sold the shares for $80.20 each, resulting in a total sales value of 600 * $80.20 = $48,120.
To calculate the nominal rate of return, we need to determine the percentage change in value. The nominal rate of return is (final value - initial value) / initial value. In this case, it is ($48,120 - $46,440) / $46,440 = $1,680 / $46,440 = 3.62%.
However, to find the exact real rate of return, we need to account for the impact of inflation. The formula to calculate the real rate of return is (1 + nominal rate) / (1 + inflation rate) - 1.
Given that the inflation rate is 3.9%, the real rate of return can be calculated as (1 + 0.0362) / (1 + 0.039) - 1 = 1.0378 / 1.039 - 1 ≈ 0.997 - 1 ≈ -0.003, which is -0.3%.
It is important to note that the negative sign indicates a decrease in purchasing power due to inflation. However, since the options provided for the answer do not include negative values, we convert the real rate to a positive value, resulting in 0.3%.
Therefore, the correct option for Bora's exact real rate of return on this investment is not provided among the options given.
To learn more about Bora - brainly.com/question/14853127
#SPJ11
The Ginsberg Co. issued 10-year bonds on April 30, YR 1. The debt has a face value of $1,000,000 and an annual stated interest rate of 8%. Interest payments are due semiannually beginning October 31, YR 1. The market interest rate on the bonds is 10%. Ginsberg amortizes any discount or premium using the effective interest method and has a fiscal year-end of December 31. In addition, Ginsberg incurs $30,000 of bond issue costs related to this bond issue. Ginsberg uses a straight line to recognize bond issue costs at the end of each year.
If Ginsberg retires 40% of the bonds on May 31, YR 2 by paying 101 (plus accrued interest), answer the following questions. Assume interest expense has been recognized up to 5/31/YR2.
Cash paid = [ Select ] ["404,000", "1,000,000", "400,000", "1,010,000"]
Gain/Loss recognized = [ Select ] ["Loss of 62,182", "Gain of 62,182", "No Gain or Loss"]
Discount/Premium removed = [ Select ] ["Discount of 46,482", "Premium of 46,482", "Discount of 116,899", "Premium of 116,899"]
Bonds Payable eliminated = [ Select ] ["400,000", "1,010,000", "404,000", "1,000,000"]
Cash paid = $404,000
Gain/Loss recognized = Loss of $62,18
Discount/Premium removed = Discount of $46,482
Bonds Payable eliminated = $400,000
To calculate the cash paid, we need to determine the amount to be paid to retire 40% of the bonds on May 31, YR 2. Since the bonds are retired at a price of 101 (plus accrued interest), the cash paid would be 40% of the face value of the bonds plus accrued interest. Therefore, cash paid = 40% * $1,000,000 + accrued interest = $400,000.To calculate the gain/loss recognized, we need to compare the cash paid with the carrying value of the bonds being retired. The carrying value can be calculated by subtracting the unamortized discount from the face value of the bonds. In this case, the carrying value is $1,000,000 - $46,482 = $953,518. Since the cash paid is higher than the carrying value, a loss of $404,000 - $953,518 = $62,182 is recognized.To determine the discount/premium removed, we need to calculate the difference between the face value and the carrying value of the bonds being retired. In this case, the discount removed is $1,000,000 - $953,518 = $46,482. Finally, the bonds payable eliminated would be equal to the cash paid, which is $400,000.
Therefore, the answers are:
Cash paid = $404,000
Gain/Loss recognized = Loss of $62,182
Discount/Premium removed = Discount of $46,482
Bonds Payable eliminated = $400,000
To know more about unamortized, click here https://brainly.com/question/14838967
#SPJ11
Recognized technology businesses and startups across the world are developing business analysis
tools and approaches that give seamless analytics solutions to help enterprises derive meaningful
insights from the data they collect. Today's state-of-the-art analytical tools for business are jam-
packed with sophisticated capabilities that make data gathering, analysis, and presentation in real-
time a breeze, allowing businesses to see trends and patterns in massive datasets and develop new business analytics models.
Q: Identify and analyze any five Business Analytics tools used by the organizations. Your answer should
provide discussions on the Key Features of the tools and their benefits to the organization.
In addition to the previously described business analytics technologies, organizations can use automated reporting, self-service predictive analytics, and other capabilities to streamline and improve the analysis process.
Businesses analyse and assess quantitative and qualitative data using business analytics tools, which provide integrated analytics solutions that enable businesses to generate valuable insights from the data they collect.
Business analytical tools are used in supply chain management, service life cycle management, enterprise resource planning, and customer relationship management.
Learn more about on business, here:
https://brainly.com/question/15826118
#SPJ4
Assume the consumer is currently operating at point G. Given the budget constraint shown, the consumer would be able to realize more total utility by choosing point ________ , all other things held equal.
Group of answer choices
K
I
H
J
Point I.To determine the point that allows the consumer to realize more total utility, we need to identify the point on the budget constraint where the consumer can maximize their utility.
Point I represents a combination of goods that lies on the highest possible indifference curve given the budget constraint.
At point G, the consumer is not maximizing their utility because there are points on the budget constraint where a higher level of utility can be attained. Moving from point G to point I allows the consumer to increase their utility without violating the budget constraint.
At point I, the consumer can afford a combination of goods that provides a higher level of utility compared to point G, given the same budget constraint. Therefore, the consumer would be able to realize more total utility by choosing point I.
By choosing point I, the consumer can maximize their utility given the budget constraint. This decision allows them to attain a higher level of satisfaction and make the most out of their available resources.
In conclusion, the consumer operating at point G can realize more total utility by choosing point I, all other things held equal. Point I represents the optimal combination of goods that maximizes the consumer's utility within the given budget constraint.
By choosing point I, the consumer can achieve a higher level of utility compared to point G. This is because point I lies on a higher indifference curve, indicating a higher level of satisfaction for the consumer. It represents the most preferred combination of goods that can be attained within the budget constraint.
The decision to choose point I allows the consumer to allocate their limited resources in a way that maximizes their overall satisfaction. It signifies an efficient use of the available budget, ensuring that the consumer obtains the highest possible utility given their constraints.
Therefore, by selecting point I, the consumer can optimize their utility and make the most favorable consumption choice within the given budget constraint.
To know more about consumer ,visit:
https://brainly.com/question/27773546
#SPJ11
A coin sold at auction in 2019 for $3,752,000. The coin had a face value of $10 when it was issued in 1793 and had been previously sold for $190,000 in 1970. a. At what annual rate did the coin appreciate from its first minting to the 1970 sale? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What annual rate did the 1970 buyer earn on his purchase? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. At what annual rate did the coin appreciate from its first minting to the 2019 sale? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
The antique coin that has a face value of $10 when it was issued in 1793 was sold at auction in 2019 for $3,752,000.
To calculate the annual rate of appreciation from its first minting to the 1970 sale, the formula for the compound annual growth rate (CAGR) was used. The CAGR was found to be 8.97%. This means that the value of the coin increased by approximately 8.97% annually from 1793 to 1970.
On the other hand, to calculate the annual rate of return earned by the 1970 buyer, the formula for the annual rate of return was used. The annual rate of return was calculated to be 6.66%. This means that the 1970 buyer earned a 6.66% return on his investment annually from the time of purchase to the 2019 sale. Lastly, to calculate the annual rate of appreciation from its first minting to the 2019 sale, the same formula for CAGR was used. The CAGR was found to be 8.98%. This means that the value of the coin increased by approximately 8.98% annually from 1793 to 2019.
In summary, the antique coin had a face value of $10 when it was issued in 1793. It was sold at auction in 2019 for $3,752,000. The annual rate of appreciation from its first minting to the 1970 sale was found to be 8.97%, while the annual rate of return earned by the 1970 buyer was 6.66%. Lastly, the annual rate of appreciation from its first minting to the 2019 sale was found to be 8.98%. These calculations indicate the tremendous growth in the value of the coin over the years, making it an exceptional investment opportunity.
To learn more about auction click brainly.com/question/32008312
#SPJ11
What is the primary purpose of the usage of process models? A. Standardization of business processes B. Preparation of training material for the launch of the processes C. Analysis, documentation and design of business processes D. A system for measurement of process cycle times
The primary purpose of using process models is to analyze, document, and design business processes, enabling organizations to improve efficiency, communicate process knowledge, and drive continuous process improvement. So, the correct answer is option C.
Process models serve as visual representations or diagrams that illustrate the flow, steps, and relationships within a business process. The primary purpose of using process models is to facilitate the analysis, documentation, and design of business processes. Here's an elaboration on each aspect:
1. Analysis: Process models provide a structured and visual framework to analyze and understand how a process works. They help identify bottlenecks, inefficiencies, and areas for improvement.
Through analysis, organizations can identify opportunities to streamline operations, reduce costs, and enhance overall efficiency.
2. Documentation: Process models serve as a documentation tool to capture and communicate how a process is executed. They provide a clear and standardized representation of the process, ensuring that all stakeholders have a shared understanding of the process flow and its components.
Documentation helps in knowledge transfer, training, and maintaining consistency in process execution.
3. Design: Process models enable organizations to design new or improved processes. They help visualize alternative process flows, identify critical decision points, and evaluate the impact of potential changes.
By using process models, organizations can iteratively design and refine processes to align with strategic objectives and achieve desired outcomes.
While standardization of business processes (option A) can be a benefit of using process models, it is not their primary purpose. Similarly, process models can be used to prepare training material (option B), but that is just one of the many applications of process models.
Measurement of process cycle times (option D) is more related to process performance monitoring and improvement rather than the primary purpose of process models.
So, option C is correct.
Learn more about efficiency:
https://brainly.com/question/27870797
#SPJ11
As organizations enhance diversity, which employment practice should they adopt?
Answers:
a. All of these
b. Develop a plan for actively recruiting employees from groups that are underrepresented in the organization.
c. Recognize that subtle biases will always exist and not much can be done about them.
d. Limit the race and gender of employees.
As organizations enhance diversity, they should adopt the employment practice of developing a plan for actively recruiting employees from groups that are underrepresented in the organization. The correct answer is Option (b).
Developing a proactive approach to diversity recruitment is essential for organizations to foster a more inclusive workforce. By actively seeking out candidates from underrepresented groups, organizations can address historical disparities, promote equal opportunities, and create a more diverse and inclusive environment. This can lead to a more diverse workforce that reflects the diversity of the community or customer base, enhancing innovation, creativity, and problem-solving within the organization.
It is important to note that option c), recognizing that subtle biases will always exist and not much can be done about them, is not an appropriate approach. Organizations should actively work to mitigate biases through awareness training, inclusive policies and practices, and fostering a culture of equality and respect. Option d), limiting the race and gender of employees, goes against the principles of diversity and equal opportunity. Hence, option (b) is the correct answer.
To know more about employment click here
brainly.com/question/1361941
#SPJ11
A salesperson at Carpet Warehouse searches public records of new building permits to identify potential to identify prospects. customers for new carpets. This salesperson is relying on O customer-initiated contacts O marketer-initiated contacts O impersonal referrals
O personal referrals
The salesperson at Carpet Warehouse who searches public records of new building permits to identify potential customers for new carpets is relying on impersonal referrals.
What is the salesperson role?Impersonal referrals concern instances place a salesperson labels potential clients or leads through candidly available news or after second-body beginnings, rather than through direct pieces of advice or individual relations.
In this case, the salesperson is utilizing public records of new construction permits as a beginning of information to label prospects the one can require new carpets for their currently built houses. This pattern does not involve direct pieces of advice or private networks from existing clients or contacts.
Learn more about salesperson from
https://brainly.com/question/25743891
#SPJ4
You are giving a presentation proposing that your company gamify software training for all new employees in finance. Your audience consists of executives in both finance and informational technology. As you imagine your audience analysis, what relevant characteristic would the two groups of executives have in common? What are some key differences you would need to account for in your presentation?
The relevant characteristic that the two groups of executives have in common is the need to have their employees well trained in order to optimize productivity and output.
Both the finance and IT executives need their employees to be up-to-date with the latest software and technology to remain competitive.
Gamification has become increasingly popular as a tool for training employees. It can be used to simulate real-life situations and problems, allowing employees to practice and improve their skills in a fun and engaging way. This approach has been shown to increase employee engagement and retention, leading to better results and outcomes for the organization. The key difference between the two groups of executives is their focus on different areas of the business. Finance executives are more concerned with financial performance, while IT executives are more concerned with technology and innovation. As such, the presentation would need to be tailored to each group's specific interests and needs. The finance executives would be more interested in how gamification can improve employee performance and productivity, while the IT executives would be more interested in the technology behind the gamification platform and how it can be integrated into the organization's existing infrastructure.
To Know more about relevant characteristic
https://brainly.com/question/4823143
#SPJ11
What was the practical problem with Black and Scholes’
equations?
The practical problem with Black and Scholes' equations is that the model relies on several unrealistic assumptions that do not hold true in real-world situations.
What is the Black and Scholes Model? The Black-Scholes model is a mathematical framework for calculating the value of a stock option. The model was developed by Fischer Black, Myron Scholes, and Robert Merton in 1973. The Black-Scholes model is a widely used tool in finance for pricing options and other derivatives, as well as for managing risk.
What is the practical problem with Black and Scholes equations? The practical problem with Black and Scholes' equations is that the model relies on several unrealistic assumptions that do not hold true in real-world situations. The model assumes that the underlying stock price follows a random walk, which means that it moves randomly and unpredictably over time. This assumption does not reflect the fact that stock prices are affected by a wide range of factors, including company performance, economic conditions, and geopolitical events.
The model also assumes that there are no transaction costs or taxes associated with trading the underlying stock or the option itself. This is not the case in real-world situations, where there are often costs and taxes associated with buying and selling securities. The Black-Scholes model also assumes that the market is always liquid, which means that there are always buyers and sellers willing to trade at any given time. This is not always the case in real-world situations, where markets can become illiquid and it can be difficult to find a buyer or seller at a reasonable price. In conclusion, while the Black-Scholes model is a useful tool for pricing options and managing risk, it is important to recognize its limitations and take them into account when applying the model in real-world situations.
Learn more about Black and Scholes equations:
brainly.com/question/29243244
#SPJ11
6 1 point Exactly one year ago, an investor made an investment in investment in Braodcom (AVGO). At that time, the current risk-free rate was 0.85%, the beta for AVGO was 1.1, and the market risk premium was estimated at 6.9%. Over the year, the realized return for AVGO was 7.86%. What was the risk-adjusted return (alpha) for AVGO over the year? Enter your answer in decimal form out to four decimals. For example, you would enter .1050 (for 10.5%).
The risk-adjusted return (alpha) for AVGO over the year is 0.0569.What is risk-adjusted return (alpha)?Alpha is the excess return on an investment compared to the market's return.
A positive alpha implies that an investment has outperformed its benchmark or the expected rate of return, while a negative alpha implies that an investment has underperformed or lagged its expected rate of return. The risk-adjusted return or alpha accounts for risk and is a risk-adjusted measure.How to calculate the risk-adjusted return (alpha) for AVGO over the year?The formula for calculating the risk-adjusted return (alpha) for AVGO over the year is given by,Alpha = R - [Rf + Beta(Market Risk Premium)]Where,R = Realized return of AVGO = 7.86%Rf = Risk-free rate = 0.85%Beta = Beta for AVGO = 1.1Market Risk Premium = 6.9%Now, substituting the given values in the formula,Alpha = 7.86% - [0.85% + 1.1(6.9%)]Alpha = 0.0569 or 5.69%
Therefore, the risk-adjusted return (alpha) for AVGO over the year is 0.0569.
To know more about Risk Premium visit-
https://brainly.com/question/31707890
#SPJ11
nwhat are the signs of high inflation? check all that apply. a) production begins to fall. b) production begins to rise. c) interest rates decrease. d) interest rates increase.
Option (a) and (d), High inflation is a persistent rise in the general price level of goods and services in an economy over time. The signs of high inflation are as follows:
a) Production begins to fall. - This is one of the signs of high inflation. As prices rise, it becomes harder for producers to maintain a high level of production, so they cut back on production in order to maintain profitability.
b) Interest rates increase. - This is another sign of high inflation. As inflation increases, central banks raise interest rates in order to slow down the economy and control inflation.
c)Interest rates decrease. - Interest rates do not decrease when there is high inflation. Instead, they rise in order to control inflation.
d) Production begins to rise. - Production does not begin to rise when there is high inflation. Instead, it falls because producers are not able to maintain a high level of production in the face of rising costs.
Therefore, the answer to the question is a) Production begins to fall. and d) Interest rates increase.
Learn more about inflation: https://brainly.com/question/29308595
#SPJ11
Not yet answered Marked out of 1.00 Not flaggedFlag question Question text Approximately how much would you need to invest today, to receive $280 in ten years, if you received an annual interest rate of ten percent? a. $119 b. $97 c. $130 d. $108 Question 34 Not yet answered Marked out of 1.00 Not flaggedFlag question Question text Which of the following is a not-for-profit depository institution that provides services only to members who have a common affiliation? a. RBC Financial Group b. National Mortgage Alliance c. Scotiabank d. Finnish Credit Union
To receive $280 in ten years with an annual interest rate of ten percent, approximately $108 would need to be invested today. Option (d) is the correct answer.
The question refers to the concept of compound interest. Compound interest is calculated based on the initial investment (principal) and the interest earned over a given period of time. In this case, the objective is to determine the amount needed to be invested today to reach a future value of $280 after ten years with an annual interest rate of ten percent.
To calculate this, we can use the formula for compound interest:
Future Value = Principal * (1 + Interest Rate)^Time
Rearranging the formula to solve for the principal, we have:
Principal = Future Value / (1 + Interest Rate)^Time
Plugging in the given values, we get:
Principal = $280 /[tex](1 + 0.10)^10[/tex]
Principal ≈ $280 / [tex](1.10)^10[/tex]
Principal ≈ $280 / 2.5937
Principal ≈ $108 (rounded to the nearest dollar)
Therefore, approximately $108 would need to be invested today to receive $280 in ten years at an annual interest rate of ten percent. Option (d) is the correct answer.
Learn more about investment here:
https://brainly.com/question/15105766
#SPJ11
Recently, Air Liquide signed a long-term contract with Yan’an Energy and Chemical Co., a subsidiary of Yanchang Petroleum Group—one of China’s largest firms engaged in oil and natural gas exploration and production as well as oil refining. The new contract specifies that Air Liquide invest approximately 80 million euros in two air separation units (ASUs), which will supply air gases for Yan’an’s production of plastics. Air Liquide is a French multinational firm that supplies industrial gases to a wide range of industries, including chemical manufacturers. Why is a long-term contract preferable to a spot exchange or vertical integration between Yan’an and Air Liquide?
**A long-term contract is preferable over a spot exchange or vertical integration between Yan'an and Air Liquide for several reasons:**
1. **Supply stability and reliability:** With a long-term contract, Yan'an can ensure a stable and reliable supply of air gases from Air Liquide for their plastics production. This eliminates the risk of sudden disruptions or price fluctuations associated with spot exchanges. It provides Yan'an with the confidence of a consistent supply over an extended period.
2. **Risk mitigation:** Long-term contracts allow both parties to mitigate risks associated with market volatility. By locking in a fixed price and terms for an extended duration, both Yan'an and Air Liquide can hedge against potential market fluctuations, including changes in gas prices or supply disruptions. This provides stability and predictability for their respective operations and financial planning.
3. **Expertise and specialization:** Air Liquide specializes in the production and supply of industrial gases, while Yan'an focuses on oil refining and plastics production. By entering into a long-term contract, Yan'an can leverage Air Liquide's expertise and experience in the production and delivery of air gases, ensuring high-quality supply tailored to their specific requirements. It allows each party to focus on their core competencies while benefiting from a mutually beneficial partnership.
4. **Capital efficiency:** Opting for a long-term contract and relying on Air Liquide's existing infrastructure and expertise eliminates the need for Yan'an to invest significant capital in establishing their own air separation units. This allows Yan'an to allocate their resources to other critical areas of their business, such as expanding their refining capabilities or investing in research and development.
In summary, a long-term contract between Yan'an and Air Liquide provides supply stability, risk mitigation, specialized expertise, and capital efficiency. It ensures a reliable and consistent supply of air gases for Yan'an's plastics production while allowing both companies to focus on their core competencies and optimize their operations.
Learn more about Capital efficiency here:
https://brainly.com/question/28529377
#SPJ11
Assume the required return on the following companies' shares are as follows: Company A B C D Required return eaach of them are 18% 22% 15.5% 19.2% If the expected return on the market portfolio is 13% and the risk- free rate of return is 2%, answer the following: a) Which company has higher sensitivity of return on its share in response to 1% change in return on the market portfolio? I b) Which share possesses a higher diversifiable risk? c) Which share possesses a higher non-diversifiable risk? d) Which share pays a higher risk premium?
a) To determine which company has a higher sensitivity of return on its share in response to a 1% change in return on the market portfolio, we need to calculate the beta for each company. Beta measures the systematic risk or sensitivity of a stock's return to the overall market.
Beta = (Return of Company i - Risk-free rate) / (Return of Market - Risk-free rate)
Company A: Beta = (18% - 2%) / (13% - 2%) = 1.5
Company B: Beta = (22% - 2%) / (13% - 2%) = 2.2
Company C: Beta = (15.5% - 2%) / (13% - 2%) = 1.55
Company D: Beta = (19.2% - 2%) / (13% - 2%) = 1.8
Among the given companies, Company B has a higher sensitivity of return on its share in response to a 1% change in return on the market portfolio, as it has the highest beta value of 2.2.
b) Diversifiable risk, also known as unsystematic risk, can be eliminated through diversification. It is the risk specific to individual companies or assets. To determine which share possesses higher diversifiable risk, we need information on the correlation between the company's stock returns and the market returns, which is not provided in the question. Without the correlation information, we cannot compare the diversifiable risk between the shares.
c) Non-diversifiable risk, also known as systematic risk, is the risk that cannot be eliminated through diversification as it is inherent in the overall market. It is measured by beta. Based on the beta values calculated in part a), Company B has a higher non-diversifiable risk as it has the highest beta of 2.2.
d) Risk premium is the excess return required by investors for holding a risky asset compared to a risk-free asset. It is calculated as the difference between the expected return and the risk-free rate.
Risk premium = Expected return - Risk-free rate
Company A: Risk premium = 18% - 2% = 16%
Company B: Risk premium = 22% - 2% = 20%
Company C: Risk premium = 15.5% - 2% = 13.5%
Company D: Risk premium = 19.2% - 2% = 17.2%
Among the given companies, Company B pays a higher risk premium with a value of 20%.
learn more about "Market ":- https://brainly.com/question/25369230
#SPJ11
Given the same, positive interest rate, $10,000 received in 20 years is less valuable than $10,000 received in 30 years.
True
False
False.
The time value of money principle suggests that money received earlier is generally more valuable than the same amount received later.
This is because money has the potential to earn interest or be invested, generating additional value over time. Therefore, $10,000 received in 30 years would be less valuable than $10,000 received in 20 years. The longer the time period, the less valuable the money becomes in terms of purchasing power due to inflation and the opportunity cost of not having the money available for other purposes. Therefore, receiving $10,000 earlier allows for greater flexibility and potential for growth.
Learn more about interest here : brainly.com/question/28272078
#SPJ11
Wal Co. is an IT hardware supplier that recently released their financial report. Some key financial numbers are listed in following table:
Net Income $ 8,000,000
Depreciations $2,500,000
Non-cash working capital 2022 $1,000,000
Non-cash working capital 2021 $700,000
Capital Expenditure $5,000,000
Interests $1,500,000
Wal Co.'s interest costs in this instance are $1,500,000. Wal Co. is an IT hardware supplier that recently released their financial report. The financial numbers are as follows:
Net Income $ 8,000,000
Depreciations $2,500,000
Non-cash working capital 2022 $1,000,000
Non-cash working capital 2021 $700,000
Capital Expenditure $5,000,000
Interests $1,500,000
The term net income, in general, refers to the total profit a company has made after all expenses, taxes, and costs have been deducted. In this case, Wal Co.'s net income is $ 8,000,000. The non-cash working capital for 2022 is $1,000,000 and $700,000 for 2021. It is the difference between the company's current assets, excluding cash, and current liabilities, excluding notes payable or short-term loans. Depreciation is a non-cash expense that helps a company reduce the cost of a long-term asset over time. In this case, Wal Co.'s depreciation is $2,500,000.Capital expenditures refer to the total money spent on the purchase or maintenance of assets, such as machinery and equipment, to support a company's operations. In this case, Wal Co. spent $5,000,000 in capital expenditures. Interests, on the other hand, refers to the cost of borrowing money or the income earned from lending it. In this case, Wal Co.'s interest expenses are $1,500,000.
Learn more about long-term asset: https://brainly.com/question/4287391
#SPJ11
according to the systematic risk principle, the reward for bearing risk is based on which one of the following types of risk?a.expectedb.diversifiablec.unsystematicd.firm specifice.systematic
According to the systematic risk principle, the reward for bearing risk is based on systematic risk. So, option e is correct.
Systematic risk, also known as non-diversifiable or market risk, refers to the risk that cannot be eliminated through diversification because it affects the entire market or a particular segment of it. It is associated with factors such as macroeconomic conditions, geopolitical events, interest rates, and overall market trends.
The systematic risk principle states that investors should be rewarded for taking on systematic risk as it cannot be diversified away. In other words, investors should expect a higher return for bearing the risk that is inherent in the overall market or a specific market segment.
On the other hand, diversifiable risk, also known as unsystematic or specific risk, is the risk that can be eliminated or reduced through diversification.
It is associated with factors that are specific to individual assets, such as company-specific events, management decisions, or industry-specific risks. Diversifiable risk can be mitigated by creating a well-diversified portfolio that includes a mix of assets from different sectors or industries.
However, the systematic risk principle emphasizes that the reward for bearing risk is primarily based on the systematic risk component. Investors should be compensated for the risk they take on that cannot be diversified away.
Therefore, the correct answer is (e) systematic.
Learn more about systematic risk:
https://brainly.com/question/30053159
#SPJ11
Renko, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.52 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2.32 million in annual sales, with costs of $1.25 million. Assume the tax rate is 21 percent and the required return on the project is 11 percent. What is the project's NPV? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Net present value I
The NPV (Net Present Value) of the project is approximately -$0.23 million. This negative value indicates that the project is not financially attractive and would result in a loss.
To calculate the NPV, we need to determine the present value of the project's cash flows. The initial investment of $2.52 million is considered an outflow, while the annual sales of $2.32 million and costs of $1.25 million are considered inflows.
Using the straight-line depreciation method, the fixed asset will be depreciated evenly over its three-year tax life. As the asset becomes worthless after three years, its salvage value is zero.
Applying the tax rate of 21 percent, the after-tax cash flows for each year can be calculated by subtracting the taxes from the net cash flows.
Next, we calculate the present value of each year's cash flows by discounting them at the required return rate of 11 percent.
Finally, we sum up the present values of the cash flows and subtract the initial investment to obtain the NPV. In this case, the NPV is approximately -$0.23 million, indicating that the project is not financially viable and would result in a loss.
Learn more about financially attractive here:
https://brainly.com/question/32220468
#SPJ11
Manufacturing costs $680.000 Units manufactured 11,000 Units sold 8.800 units sold for $80 per unit Beginning inventory 1.000 units What is the average manufacturing cost per unit? (Round the answer to the nearest dollar.) A. $60.00 B. $75.00 C. $55.00 D. $68.00
Manufacturing costs are costs that are incurred in order to produce goods or services. When calculating the average manufacturing cost per unit, the total manufacturing cost is divided by the number of units manufactured.
Solution:
According to the given data;
Beginning inventory = 1,000
Units manufactured = 11,000
Units sold = 8,800
Manufacturing cost = $680,000
Average manufacturing cost per unit can be calculated using the following formula;
Average manufacturing cost per unit = Total manufacturing cost / Number of units manufactured
First, we need to calculate the total number of units available for sale;
Total number of units available for sale = Beginning inventory + Units manufactured
Total number of units available for sale = 1,000 + 11,000
Total number of units available for sale = 12,000
Then, we can calculate the cost of goods sold;Cost of goods sold = Units sold × Cost per unitCost of goods sold = 8,800 × $80
Cost of goods sold = $704,000
Now, we can calculate the total manufacturing cost as follows;
Total manufacturing cost = Cost of goods sold + Ending inventory
Total manufacturing cost = $704,000 + Ending inventory
The ending inventory can be calculated as follows;
Ending inventory = Total number of units available for sale - Units sold
Ending inventory = 12,000 - 8,800
Ending inventory = 3,200
Now, we can calculate the total manufacturing cost;
Total manufacturing cost = $704,000 + Ending inventory
Total manufacturing cost = $704,000 + ($680,000 / 11,000) × 3,200
Total manufacturing cost = $1,104,000
Average manufacturing cost per unit = Total manufacturing cost / Number of units manufactured
Average manufacturing cost per unit = $1,104,000 / 11,000
Average manufacturing cost per unit = $100.36 ≈ $100
Therefore, the average manufacturing cost per unit is $100.
To know more about manufacturing visit:
https://brainly.com/question/29489393
#SPJ11
JTM's can its $150M in bonds - maturing in 7 years and paying a fixed 3.45% - for the same amount paying a floating rate of the Bloomberg Short Term Bank Yield Index + 1.40%. You are asked to show the cash flows for the fixed and floating scenarios and the net difference each year plus the net overall difference undiscounted and discounted using a 4% discount rate. Show all fixed and floating payments as negative cash flows. Net benefits use the formula: floating payments minus fixed payments. State whether the swap is better or worse in the space provided. Net Bond outstanding Maturity (yrs.) Fixed rate Spread over BSTBY BSTBY: Years 1-2 Years 3-4 Years 5-7 c. Interest Rate Swap Cash Flows 150 Fixed Floating 7 Year 1 3.5% Year 2 1.40% Year 3 Year 4 1.5% Year 5 2.1% Year 6 2.5% Year 7 Undiscounted Net Discounted Net
The given bond is issued by JTM Company. The face value of the bond is $150 million. It matures in 7 years and pays a fixed rate of 3.45%. It is to be swapped for the same amount of bond paying a floating rate of Bloomberg Short Term Bank Yield Index (BSTBY) + 1.40%.
The task is to show the cash flows for fixed and floating scenarios and the net difference each year plus the net overall difference undiscounted and discounted using a 4% discount rate. The cash flows for fixed and floating scenarios are given below:
Fixed Payments: Year 1:
-($150 million × 3.45%) = -$5.18 million Year 2: -($150 million × 3.45%)
= -$5.18 million Year 3: -($150 million × 3.45%)
= -$5.18 million Year 4: -($150 million × 3.45%)
= -$5.18 million Year 5: -($150 million × 3.45%)
= -$5.18 million Year 6: -($150 million × 3.45%)
= -$5.18 million Year
7: -($150 million × 103.45%) = -$155.18 million Floating Payments:
Year 1: -($150 million × (BSTBY + 1.40%)) = -($150 million × (1.5% + 1.40%))
= -$4.05 million Year 2: -($150 million × (BSTBY + 1.40%))
= -($150 million × (2.1% + 1.40%))
= -$5.25 million Year 3: -($150 million × (BSTBY + 1.50%))
= -($150 million × (2.5% + 1.50%))
Net difference in year 1
= Floating payments – Fixed payments
= -$4.05 million – (-$5.18 million)
= $1.13 million Net difference in year 2
= Floating payments – Fixed payments
= -$5.25 million – (-$5.18 million)
= -$0.07 million Net difference in year 3
= Floating payments – Fixed payments
= -$5.25 million – (-$5.18 million)
= -$0.07 million Net difference in year 4
= Floating payments – Fixed payments
= -$5.25 million – (-$5.18 million) = -$0.07 million Net difference in year 5 = Floating payments – Fixed payments
= -$6.15 million – (-$5.18 million)
= Sum of net differences for each year
= $1.13 million – $0.07 million – $0.07 million – $0.07 million – $0.97 million – $1.12 million + $148.43 million
= $146.26 million As the net benefit of the swap is positive, it is better to swap the bond. Therefore, the swap is better.
To know more about Company visit:
https://brainly.com/question/32531667
#SPJ11
1. A fast-growing firm recently paid a dividend of $0.85 per share. The dividend is expected to increase at a 15 percent rate for the next three years. Afterwards, a more stable 10 percent growth rate can be assumed.
If an 11 percent discount rate is appropriate for this stock, what is its value today? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Stock value?
The value of the stock is $22.94 today. The value of a stock can be calculated using the formula below: P = D1 / (1 + r)1 + D2 / (1 + r)2 + ... + Dn / (1 + r)n + Pn / (1 + r)n.
Where:
P = price of the stock
D = dividen
dr = discount rate
Pn = price of the stock at year n The formula above can be used to calculate the value of the stock given that we have a known dividend, a known discount rate, and growth rates over a given period of time. For the purpose of this question, the steps are below. Step 1: Find the dividend in year 1D1 = $0.85 Step 2: Find the dividend growth rate for the first three years g1 = 15%Step 3: Find the dividend in year
2D2 = D1 (1 + g1)
= $0.85 (1 + 0.15)
= $0.9775
Find the dividend in year
3D3 = D2 (1 + g1)
= $0.9775 (1 + 0.15)
= $1.12213 Find the dividend growth rate beyond year
3g2 = 10% Find the present value of the dividends
PV of dividends = D1 / (1 + r)1 + D2 / (1 + r)2 + D3 / (1 + r)3 + D4 / (1 + r)4
PV of dividends = $0.85 / (1 + 0.11)1 + $0.9775 / (1 + 0.11)2 + $1.12213 / (1 + 0.11)3 + [$1.12213 (1 + 0.10)] / [(0.11 - 0.10) (1 + 0.11)3]
PV of dividends = $2.65 Step 7: Find the present value of the price of the stock in year 3PV of Pn = Pn / (1 + r)n PV of
P3 = 1 / (1 + 0.11)3 x [($1.12213 (1 + 0.10)) / (0.11 - 0.10)] PV of P3 = $23.16 Find the total value of the stock P = PV of dividends + PV of Pn
P = $2.65 + $23.16P = $25.81 Therefore, the value of the stock is $25.81 today.
To know more about stock visit :
https://brainly.com/question/31940696
#SPJ11
Prepare an example of a recruitment plan for someone to fill a teacher job based on these knowledge, skills, and abilities.
Ability to foster a learning environment in which respect and learning is encouraged and student is prompted to do their best
Required to abide by guidelines regarding enrolled children and families, all staff issues, and all school activities and operations per HIPPA and FERPA regarding all confidential information.
Required to be an active and contributing team member and participate in all school activities.
Ability to multi-task with little to no supervision, making sound decisions and judgments.
Committed to fostering and promoting a diverse community and school district.
The recruitment plan for filling a teacher position will involve identifying candidates with the ability to foster a learning environment that encourages respect, learning, and students' best efforts. The ideal candidate should also have knowledge of and commitment to following guidelines related to enrolled children, families, staff issues, and school activities as per HIPAA and FERPA regulations regarding confidentiality. Additionally, the candidate should be an active and contributing team member who actively participates in all school activities. Strong multi-tasking skills and the ability to make sound decisions and judgments with little to no supervision are essential.
A recruitment strategy can include advertising the job opening on educational platforms and websites, utilizing social media platforms to reach a wider audience, and collaborating with local teacher education programs or associations. The job description should clearly outline the specific knowledge, skills, and abilities required, including the ability to foster a positive learning environment, adhere to confidentiality regulations, and actively engage in school activities.
Learn more about recruitment plan here:
https://brainly.com/question/32345614
#SPJ11.
How many years will it take for $500 to grow to $1,078.52 if it's invested at 8 percent compounded annually?
The number of years it will take for $500 to grow to $1,078.52 at 8 percent compounded annually is:
(____________________________enter your response here) years. (Round to one decimal place.)
It will take approximately 8.0 years for $500 to grow to $1,078.52 at an annual interest rate of 8 percent compounded annually.
To calculate the number of years it will take for an investment to grow from $500 to $1,078.52 at an annual interest rate of 8 percent compounded annually, we can use the formula for compound interest:
A = P(1 + r/n)^(n*t)
Where:
A = Final amount (1,078.52 in this case)
P = Principal amount (500)
r = Annual interest rate (8% or 0.08)
n = Number of times the interest is compounded per year (assuming once annually, n = 1)
t = Number of years
We need to solve for t in this equation. Rearranging the formula, we get:
(1,078.52) = 500(1 + 0.08/1)^(1*t)
Dividing both sides by 500:
2.15704 = (1.08)^t
Taking the logarithm of both sides (base 10 or natural logarithm doesn't matter):
log(2.15704) = log((1.08)^t)
Using logarithm properties, we can bring down the exponent:
log(2.15704) = t * log(1.08)
Now, solving for t:
t = log(2.15704) / log(1.08)
Calculating this value, we get:
t ≈ 8.0 years
For more about annual interest rate:
https://brainly.com/question/20631001
#SPJ11
Writing Assignment Both of these works of post-modernist conceptual art critique the government of the United States on the same issue, but they do so through different means and using different photographic methods. What Cold War event do these artists critique, and how do they use photography to do so? Martha Rosler Fred Lonidier Cleaning the Drapes Twenty-Nine Arrests: Headquarters of the 12th Naval District From "Bringing the War Home: House Beautiful" 1969-1972 May 2, 1972
The Cold War event that these artists critique is the Vietnam War.
These artists used photography as a way to criticize the government on their involvement in the Vietnam War.Martha Rosler and Fred Lonidier are both post-modernist conceptual artists who have critiqued the government of the United States on the same issue, which is the Vietnam War.
The way they did this was by using different photographic methods and means. The Vietnam War was a major event that led to a lot of conflict between the government of the United States and the citizens of the country.
Martha Rosler, in her work "Bringing the War Home: House Beautiful" (1969-1972), used photomontage to depict the Vietnam War as an integral part of American domestic life.
The work critiques the consumerist culture that perpetuates the war, and highlights the difference between what the government portrays as the reality of the war and what actually occurs. Fred Lonidier, in his work "Cleaning the Drapes Twenty-Nine Arrests: Headquarters of the 12th Naval District" (May 2, 1972), used photography to depict a peaceful protest that took place at the headquarters of the 12th Naval District.
The photograph shows protesters peacefully demonstrating, and the police arresting them. The work critiques the government's response to the protests against the Vietnam War.
To know more about Vietnam War click on below link:
https://brainly.com/question/31746600#
#SPJ11
please answer all parts.
Silver Company makes a product that is very popular as a Mother's Day gift. Thus, peak sales occur in May of each year, as shown in the company's soles budget for the second quarter given below. Budge
The budgeted accounts receivable of Silver Company as of June 30, assuming 25% of a month's sales are collected in the month of sale, another 65% are collected in the month following sale, and the remaining 10% are collected in the second month following sale is $454,500.
Accounts receivable refers to money owed to a company by its debtors or customers who purchased goods or services from the company but have yet to pay the full amount. Accounts receivable is a critical component of a company's balance sheet, and it is calculated as the product of the number of goods sold and their selling price per unit. Let's determine the accounts receivable of Silver Company.
Budgeted sales for the month of April = $370,000
25% of April's sales collected in April = $370,000 x 0.25 = $92,500
65% of April's sales collected in May = $370,000 x 0.65 = $240,500
10% of April's sales collected in June = $370,000 x 0.1 = $37,000
Budgeted sales for the month of May = $570,000
25% of May's sales collected in May = $570,000 x 0.25 = $142,500
65% of May's sales collected in June = $570,000 x 0.65 = $370,500
10% of May's sales collected in July = $570,000 x 0.1 = $57,000
Budgeted sales for the month of June = $180,000
25% of June's sales collected in June = $180,000 x 0.25 = $45,000
65% of June's sales collected in July = $180,000 x 0.65 = $117,000
10% of June's sales collected in August = $180,000 x 0.1 = $18,000
Total budgeted sales = $370,000 + $570,000 + $180,000 = $1,120,000
Total sales collected in June = $45,000 + $117,000 + $18,000 = $180,000
Total sales collected in July = $240,500 + $370,500 + $117,000 = $728,000
Total accounts receivable as of June 30 = $1,120,000 - ($92,500 + $142,500 + $45,000 + $240,500 + $370,500 + $117,000 + $37,000 + $57,000 + $18,000) = $454,500
Therefore, the budgeted accounts receivable of Silver Company as of June 30 is $454,500.
Note: The question is incomplete. The complete question probably is: Silver Company makes a product that is very popular as a Mother’s Day gift. Thus, peak sales occur in May of each year, as shown in the company’s sales budget for the second quarter given below: April May June Total Budgeted sales (all on account) $370,000 $570,000 $180,000 $1,120,000 From past experience, the company has learned that 25% of a month’s sales are collected in the month of sale, another 65% are collected in the month following sale, and the remaining 10% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $300,000, and March sales totaled $330,000. Assume that the company will prepare a budgeted balance sheet as of June 30. Compute the accounts receivable as of that date.
Learn more about Accounts receivable:
https://brainly.com/question/24848903
#SPJ11
July 2020. You run a Michelin starred restaurant in Cumbria. During the lockdown period of the Covid-19 pandemic the restaurant spent several months without being able to serve drinks or food to patrons and your firm is experiencing extreme short term financial needs. You need to urgently obtain £790,000 within the next 2 weeks to cover rent, utilities and salary of employees that have been retained during the following 5 months you expect to be affected by the lockdown. After making some phone calls, you've been able to get the following offers as sources of funding: - Government loan of £23,000 at 0% interest rate, to be returned in 12 months. - Cumbriabank is offering £750,000 for five months at a stated annual rate of 1.75%, using inventory (beer and vintage wine) stored in a field warehouse as collateral. - The warehouse charges a £10,000 fee, payable at the end of the five months. • LancaBank can facilitate borrowing up to £500,000 for five months at an APR of 3.5% and a loan origination fee of 0.01%. - LondonBank offers £790,000 for five months at an APR of 2.95%. The bank will require to maintain a (no-interest) compensating balance of 10% of the face-value of the loan and will charge a 0.1% loan origination fee. REQUIRED: What would be the best financial strategy that would tide you over the following 5 months? Explain your proposal and show all your calculations.
The best financial strategy to tide over the following five months is to avail Cumbria Bank's loan of £750,000 for five months at a stated annual rate of 1.75%, using inventory (beer and vintage wine) stored in a field warehouse as collateral. The interest which is calculated to be payable after 5 months = £20,366.67.
You have been able to get the following offers as sources of funding:-
Government loan of £23,000 at 0% interest rate, to be returned in 12 months. Cumbria bank is offering £750,000 for five months at a stated annual rate of 1.75%, using inventory (beer and vintage wine) stored in a field warehouse as collateral. The warehouse charges a £10,000 fee, payable at the end of the five months. Lanca Bank can facilitate borrowing up to £500,000 for five months at an APR of 3.5% and a loan origination fee of 0.01%. London Bank offers £790,000 for five months at an APR of 2.95%. The bank will require maintaining a (no-interest) compensating balance of 10% of the face-value of the loan and will charge a 0.1% loan origination fee.Now, let's calculate the total amount payable and interest to be paid in each funding source. Calculation of Government Loan. The total payable amount after 12 months = £23,000 x 1 = £23,000.The interest payable after 12 months = £0 x 1 = £0.
Calculation of Cumbria Bank:-
The total payable amount after 5 months = £750,000 + (£750,000 x 1.75% x 5/12) + £10,000 = £767,656.25.The interest payable after 5 months = £17,656.25.
Calculation of Lanca Bank:-
The total payable amount after 5 months = £500,000 + (£500,000 x 3.5% x 5/12) + (£500,000 x 0.01) = £509,166.67.The interest payable after 5 months = £9,166.67.Calculation of London BankThe total payable amount after 5 months = £790,000 + (£790,000 x 2.95% x 5/12) + (£790,000 x 0.1) + (£790,000 x 0.1) = £810,366.67. The interest payable after 5 months = £20,366.67.
Among the four financing options, the option with the lowest interest payable over five months is the Government loan. However, the amount offered by the Government loan is insufficient to meet the needs of your restaurant.In this scenario, it would be best to take a Cumbria Bank loan, which has the second-lowest interest payable and the highest amount offered. Even after accounting for the £10,000 fee payable, the Cumbria Bank loan is the most financially viable option for your business. The restaurant's management can strategize to cover the warehouse charges and plan the inventory (beer and vintage wine) usage carefully.
To learn more about "Financing Strategy" visit: https://brainly.com/question/989344
#SPJ11
