Production in the Long Run where
a. Long Run MC and ATC
In the long run, the marginal cost and average total cost curves are of utmost importance. The long-run marginal cost curve (LRMC) depicts the minimum cost of producing an additional unit of output when the firm has sufficient time to make production changes and all inputs, including plant size, can be varied. The long-run average total cost curve (LRATC) is the envelope of the short-run ATC curves.
b. Economies of Scale, Diseconomies of Scale, Constant Returns to Scale
When the long-run average total cost curve decreases as production increases, the company experiences economies of scale. When it rises, the company suffers from diseconomies of scale. Constant returns to scale occur when LRATC is constant at all levels of production.
c. Long run profit maximization
In the long run, firms aim to achieve maximum profits by selecting the level of output that yields the highest possible total revenue for a given total cost.
d. Long Run Shutdown Rule
The long-run shut-down rule asserts that firms will exit the market if they are unable to generate sufficient revenue to cover their variable and fixed costs, resulting in a loss.
e. Accounting vs Economic Profit
Accounting profits are earnings that are reported on a company's financial statements. Economic profits, on the other hand, include both explicit and implicit costs, and represent the return on a company's investment over and above the normal returns.
f. Long Run Perfectly Competitive Equilibrium
In the long run, firms in a perfectly competitive industry will adjust production levels until they reach the equilibrium point, where the market price equals the minimum LRAC, implying that all economic profits are zero.
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the net present value method assumes that the cash inflows from a project are immediately reinvested at the_.fill in the blank true or false.
The net present value method assumes that the cash inflows from a project are immediately reinvested at the main answer, which is true.
The net present value (NPV) method is a method of evaluating capital expenditure proposals. The net present value (NPV) technique considers all of a project's cash inflows and outflows. NPV is calculated by first determining the present value of cash inflows and then subtracting the present value of cash outflows. The amount that remains after deducting cash outflows from cash inflows is the net present value (NPV).
The reinvestment rate assumption is used in calculating net present value. The net present value method assumes that the cash inflows from a project are immediately reinvested at the reinvestment rate. As a result, the time value of money is taken into account. NPV is widely regarded as one of the most important capital budgeting methods.
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CASE: There are several pricing methods. Champion, Inc. is a manufacturer of lunch boxes, school bags, and school stationery. Charles Payton, 1 of Champion hopes to sell the products at a low price to penetrate the market quickly. Charles Payton decides to offer customers a special "letter Ait He prices the kit-which comprises letter paper, matching envelopes, and pens-at $5, even though the combined prices of the individual item
QUESTION: Identity the pricing strategy used.
The pricing strategy used by Charles Payton in the given case is called "Penetration Pricing.". Q Penetration pricing is a pricing strategy in which a company sets a low initial price for its products or services to quickly enter and capture a significant share of the market.
In this case, Charles Payton of Champion, Inc. wants to penetrate the market quickly, so he decides to offer customers a special kit comprising letter paper, matching envelopes, and pens at a price of $5. By offering this kit at a low price, Charles aims to attract customers and encourage them to try Champion's products. The price of $5 is set below the combined prices of the individual items, making it an attractive and affordable option for customers.
The goal of penetration pricing is to gain a large customer base and market share in a short period. It helps the company create brand awareness, generate sales volume, and establish itself as a competitive player in the market.
Once Champion has successfully penetrated the market and gained customer loyalty, they can gradually increase prices or introduce additional products to increase profitability.
Penetration pricing is often used when a company wants to enter a highly competitive market, introduce a new product, or challenge existing market leaders. It can create a price advantage and attract price-sensitive customers who are willing to switch brands for a lower price.
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How should I manage my portfolio's risk in the current financial
environment (Ex: COVID-19, inflation, global and political
uncertainty). Should my money stay in cash or bonds? Should I be
taking more
Managing portfolio risk in the current financial environment requires a balanced approach that considers diversification and risk tolerance. A diversified portfolio that includes cash, bonds, equities can provide stability. It is crucial to assess risk tolerance and investment goals, seeking guidance from a financial advisor to tailor the portfolio to individual needs.
Managing portfolio risk in the current financial environment, which includes factors such as COVID-19, inflation, global and political uncertainty, requires a balanced approach that considers diversification and risk tolerance. It is advisable to have a diversified portfolio that includes a mix of asset classes such as cash, bonds, equities, and alternative investments. Allocating a portion of the portfolio to cash or cash equivalents can provide stability and liquidity during uncertain times. Bonds, particularly high-quality government or corporate bonds, can offer income generation and act as a hedge against market volatility. However, it is important to assess your risk tolerance and investment goals. While cash and bonds may provide stability, they may not generate high returns. Investing in riskier assets like equities or alternative investments can offer potential growth opportunities, but also carry higher risks. Therefore, it is recommended to consult with a financial advisor who can assess your specific situation, risk tolerance, and investment objectives to provide personalized guidance on portfolio allocation and risk management strategies.
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is a set of decisions made across value chains that supports implementation of high-level business strategies. a. corporate strategy b. business strategy c. functional strategy d. operations strategy e. management strategy
The term that best describes "a set of decisions made across value chains that supports implementation of high-level business strategies" is Business strategy. Thus, option B, Business strategy, is the correct answer.
Business strategy is a long-term plan of action that outlines the goals and objectives of a company and how it plans to achieve them. It is a plan that encompasses the whole organization, such as its mission statement, competitive edge, value proposition, tactics, and strategies.
Business strategy encompasses decisions about which goods or services to sell, which markets to enter, and what type of culture the company should foster.
Business strategy provides a company with a competitive edge by defining its strengths and weaknesses and how it compares to its competitors. It sets the stage for all other business operations by outlining the company's direction and purpose.
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Which of the many IRS publications that relate to tax-exempt organizations provides a description about each of the tax-exempt categories that a nonprofit organization can apply to be exempt under? List three of the other publications that relate to tax-exempt entities.
Tax Guide for Veterans' Organizations for more information on tax-exempt organizations, visit the IRS website.
The IRS publications that relate to tax-exempt organizations provide a description about each of the tax-exempt categories that a nonprofit organization can apply to be exempt under are as follows:
IRS Publication 557: Tax-Exempt Status for Your Organization provides a comprehensive guide on how to apply for tax-exempt status, including information about the various types of tax-exempt organizations and the requirements for obtaining and maintaining tax-exempt status.
IRS Publication 526: Charitable Contributions provides information on how to claim a tax deduction for charitable contributions made to tax-exempt organizations.
IRS Publication 78: Cumulative List of Organizations lists all organizations that are recognized by the IRS as tax-exempt. It also includes information on the organization's tax-exempt status, contact information, and more. Additional publications that relate to tax-exempt entities are as follows:
IRS Publication 598: Tax on Unrelated Business Income of Exempt Organizations
IRS Publication 1771: Charitable Contributions- Substantiation and Disclosure Requirements
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e. Starting from a free-market equilibrium, a binding p floor leads to excess __ and a _ in quantity exchang f. With a binding price floor, the price is not allowed to to eliminate the excess _. Often, the government st to __ the excess supply. g. In markets for agricultural products, the government often imposes a price _ in an effort to protect produ h. In markets for products such as housing or gasoline, government often imposes a price in an effort to protect consumers.
Starting from a free-market equilibrium, a binding price floor leads to excess supply and a decrease in quantity exchange. A price floor is a legal minimum price, below which the price is not allowed to fall, and it is usually set above the free-market equilibrium price to protect sellers.
For example, in the labor market, minimum wages are used to help workers. A binding price floor creates a surplus, also known as excess supply, because the minimum price set is higher than the equilibrium price. Therefore, the quantity supplied exceeds the quantity demanded, resulting in excess supply. The excess supply can lead to a buildup of unsold inventory, which may be wasteful.
With a binding price floor, the price is not allowed to eliminate the excess supply. Often, the government steps in to buy the excess supply. The government can use this approach to provide price support for farmers by buying surplus crops at the set minimum price. In markets for agricultural products, the government often imposes a price floor in an effort to protect producers.
In markets for products such as housing or gasoline, the government often imposes a price ceiling in an effort to protect consumers. A price ceiling is a legal maximum price that is set below the free-market equilibrium price, and it is usually used to protect buyers by keeping prices low. However, a binding price ceiling can lead to a shortage, also known as excess demand, because the maximum price set is lower than the equilibrium price. Therefore, the quantity demanded exceeds the quantity supplied, resulting in excess demand.
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How has file sharing affected the quality of music and the
economics of the recording business?
File sharing has revolutionized the way music is consumed and distributed, providing both benefits and challenges.
File sharing has had a significant impact on both the quality of music and the economics of the recording business. On one hand, file sharing has led to a democratization of music distribution, allowing artists to reach a wider audience and giving listeners access to a vast library of music.
This has led to increased diversity in musical styles and genres, as artists can experiment and release music without the traditional gatekeepers of the recording industry. Moreover, file sharing has facilitated the discovery of new artists and has fostered online communities where music enthusiasts can share their passion.
However, the downside of file sharing is that it has greatly affected the economics of the recording business. With the rise of peer-to-peer networks and online platforms, the traditional revenue streams for musicians and record labels, such as album sales and royalties, have been significantly diminished.
Many artists struggle to earn a living solely from their recorded music due to the prevalence of illegal downloads and streaming services that offer minimal payouts.
Furthermore, the decline in revenue from recorded music has led to changes in the music industry's business models. Artists and labels now rely heavily on live performances, merchandise sales, and brand partnerships to generate income.
While this shift has provided new opportunities for some artists, it has also created a highly competitive landscape where artists must constantly tour and promote themselves to sustain their careers.
In terms of music quality, the impact of file sharing is subjective. On one hand, the accessibility of music through file sharing has allowed listeners to explore a vast range of genres and artists. This exposure to diverse music can lead to greater innovation and creativity.
On the other hand, the decline in revenue from recorded music has also put financial pressure on artists, leading to potential compromises in production quality and artistic integrity.
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In less-developed countries the most important channel of distribution is:
A) door to door.
B) public marketplaces.
C) wholesale marketplaces.
D) pyramid schemes.
E) retail stores
In less-developed countries, the most important channel of distribution is often B) public marketplaces.
Public marketplaces, also known as open-air markets or bazaars, play a crucial role in the distribution of goods in less-developed countries. These markets are typically located in central areas of towns or cities and serve as gathering places for both sellers and buyers. They offer a wide variety of products, including fresh produce, household goods, clothing, and handicrafts.
Public marketplaces provide several advantages in less-developed countries. Firstly, they allow for direct interaction between sellers and buyers, fostering personal connections and building trust. This is particularly important in areas where retail infraformal structure may be limited. Customers can physically examine the products, negotiate prices, and ask questions directly to the sellers.
Secondly, public marketplaces offer a platform for small-scale producers and entrepreneurs to sell their goods without the need for a formal store or expensive infrastructure. This enables individuals and small businesses to enter the market and generate income, contributing to local economic development.
Lastly, public marketplaces often have a vibrant and bustling atmosphere, attracting a large number of customers. They serve as social hubs where people gather not only to shop but also to socialize and exchange information. This social aspect of public marketplaces contributes to the sense of community and local culture.
While other distribution channels such as door-to-door sales, wholesale marketplaces, and retail stores also exist in less-developed countries, public marketplaces stand out as the most important and prominent channel due to their accessibility, affordability, and cultural significance.
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3. It is suggested that Al (Artificial Intelligence) can make recruiting easier and quicker. It can improve the recruitment process and help with those mundane tasks that no one appreciates. Please suggest and explain three (3) improvements that Al can bring in theRecruitment and Selection process. 4. How companies can evaluate the effectiveness of their Recruitment and Selection techniques? Please provide examples to support your answers. 6. How did the pandemic conditions influence the HRMpractices of companies? Please provide an example from the real business environment to support your arguments.
Many companies are using video conferencing software for conducting interviews and hiring new employees.
Improvements that Al can bring in the Recruitment and Selection process are:
AI can be programmed to identify keywords, phrases and qualifications from job descriptions and search for them on social media profiles and CVs. It can reduce the time taken to review CVs and resumes to a large extent. This will help in fast-tracking the recruitment process.AI can be programmed to engage with candidates over email or chatbot, providing them with information about the company, the job role, salary package and any other relevant details. This will save recruiters from answering the same questions repeatedly, and ensure that every candidate receives the same information.AI can be used to conduct initial interviews via video or chatbot, or even voice recognition. This will save recruiters from conducting initial interviews, saving them a lot of time and effort.Companies can evaluate the effectiveness of their Recruitment and Selection techniques by conducting the following activities:
Measuring the time taken to fill a job opening. This is a good indicator of how efficient the recruitment process is.Measuring the retention rate of new hires. This will help in understanding how well the selection process is identifying the right candidates.Measuring the employee satisfaction rate. This will help in understanding how well the new hires are fitting into the company culture.Measuring the quality of hire. This can be done by comparing the performance of new hires against the existing employees.The pandemic conditions have influenced the HRM practices of companies in the following ways:
Companies have had to adapt to remote working, which has led to changes in their recruitment and selection processes.Companies are now focusing on hiring employees who are self-motivated and can work independently, as they may not have the same level of supervision as they would have in a physical office.Companies are also focusing on hiring employees who are adaptable and can handle change well, as the pandemic has led to a lot of uncertainty and changes in the business environment.Companies are investing in technology to facilitate remote working and collaboration, as well as to automate HR processes.For such more questions on employees
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.Identify the current federal legislation applicable to the following and explain their purpose
words each.
age discrimination
disability discrimination
racial discrimination
sex discrimination
human rights
equal opportunity
**Age Discrimination in Employment Act (ADEA):** The ADEA is the federal legislation that prohibits age discrimination against individuals who are 40 years of age or older.
Its purpose is to ensure that employees are not discriminated against in any aspect of employment, including hiring, promotion, termination, or terms and conditions of employment, based on their age. The ADEA aims to promote equal opportunities and protect older workers from unfair treatment or stereotypes related to their age.
**Americans with Disabilities Act (ADA):** The ADA is a federal law that prohibits discrimination against individuals with disabilities. Its purpose is to ensure equal access and opportunities for people with disabilities in employment, public accommodations, transportation, and other areas. The ADA requires employers to provide reasonable accommodations to qualified individuals with disabilities, enabling them to perform essential job functions. The law aims to eliminate barriers and promote inclusivity, allowing individuals with disabilities to fully participate in society.
**Civil Rights Act of 1964 (Title VII):** Title VII of the Civil Rights Act of 1964 prohibits racial discrimination in employment. It makes it unlawful for employers to discriminate against individuals based on their race, color, national origin, religion, or sex. The purpose of this legislation is to promote equality and prevent unfair treatment or bias based on race or ethnicity. Title VII also established the Equal Employment Opportunity Commission (EEOC) to enforce the law and investigate complaints of racial discrimination.
**Title VII (Sex Discrimination):** Within the Civil Rights Act of 1964, Title VII also addresses sex discrimination in employment. It prohibits employers from discriminating against individuals based on their sex, including pregnancy, childbirth, or related medical conditions. The purpose of this legislation is to ensure equal opportunities for both men and women in the workplace, eliminating discriminatory practices and promoting gender equality.
**Human Rights Act of 1993:** While not a federal law in the United States, the Human Rights Act of 1993 is a New Zealand legislation that protects and promotes human rights in various areas, including employment. Its purpose is to prevent discrimination, harassment, and unfair treatment based on protected characteristics, such as age, race, sex, marital status, religious belief, disability, and sexual orientation. The Human Rights Act aims to create a society that respects and values the rights and dignity of all individuals, promoting equal opportunities and non-discrimination.
**Equal Employment Opportunity (EEO) Laws:** Although not a specific federal legislation, EEO laws encompass various federal statutes, including those mentioned above, that prohibit discrimination in employment. The purpose of EEO laws is to ensure equal opportunity for all individuals, regardless of their protected characteristics, in areas such as hiring, promotion, compensation, and other terms and conditions of employment. These laws aim to eliminate discrimination, promote inclusivity, and provide a fair and level playing field for all employees.
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1. Consider the economy of South Korea. Discuss how the historical, geographic, political,
cultural or ethnic background and/or natural resources endowment shaped this country’s
economic development. (It is not necessary to cover all of these mentioned factors.)
2. What are the well-understood determinants of South Korea’s economic miracle between
1963 and 1997?
1. The economy of South Korea has become one of the world's largest and most technologically advanced. South Korea's economy was able to achieve high rates of growth due to a variety of factors such as natural resources endowment, historical, geographic, political, cultural or ethnic background.
The development of the South Korean economy has been shaped by various factors such as:
Historical Factors: South Korea was devastated by the Korean War in the early 1950s, and the country's economy was in ruins. The country started rebuilding itself with the help of international organizations.
By 1960, the country's economic growth had become more significant and by the 1970s, South Korea had become one of the fastest-growing economies.
Geographic Factors: South Korea's geography, which is composed of mountains and valleys, has also played a significant role in its economic development. The country's geography has influenced its trade with other countries. The country's ports were also important in the development of its economy.
Political Factors: The South Korean government's policy of promoting export-led growth and heavy investment in education, research, and development have been instrumental in the country's economic development. The government has also created a favorable environment for foreign investment and private enterprise.
Cultural or Ethnic Factors: South Korea's cultural values have played a vital role in its economic development. The country's Confucian traditions emphasize hard work, education, and entrepreneurship. This has contributed to the development of a highly educated and skilled workforce.
Natural Resources: South Korea has limited natural resources. Its mountainous terrain makes it challenging to extract and transport resources. South Korea has, however, become one of the world's leading producers of electronics, steel, and shipbuilding.
2. Determinants of South Korea’s economic miracle between 1963 and 1997The well-understood determinants of South Korea's economic miracle between 1963 and 1997 include the following factors:
Export-led growth strategy: South Korea's government adopted an export-led growth strategy that focused on developing industries that could compete globally. The government provided subsidies, credit, and tax incentives to exporters, which led to the growth of industries such as electronics, textiles, and automobiles.Investment in education and training: South Korea's government invested heavily in education and training to develop a skilled workforce that could compete globally. The country has a highly educated and skilled workforce that is well suited for high-tech industries.
High saving rate: South Korea has a high saving rate, which has enabled the country to invest in infrastructure, research and development, and other areas that have helped to promote economic growth.
Government intervention: South Korea's government has played an active role in promoting economic development. The government has provided subsidies, credit, and tax incentives to exporters, invested in infrastructure, and provided education and training to develop a skilled workforce.
Innovation: South Korea's focus on innovation has helped the country to develop new products and technologies that have helped to drive economic growth. South Korea is a leader in areas such as electronics, automobiles, and telecommunications.
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valid business reasons for why companies should act in a socially responsible manner do not include multiple choice generating internal benefits (such as improved employee recruiting, workforce retention, training, and worker productivity). reducing the risk of reputation-damaging incidents. acting in the best interest of shareholders in terms of increased stock price and financial performance. increasing buyer patronage and customer loyalty. reducing the triple bottom line.
The valid business reasons for why companies should act in a socially responsible manner do not include acting in the best interest of shareholders in terms of increased stock price and financial performance.
Explanation:
When companies act in a socially responsible manner, it means that they embrace their corporate social responsibility by treating their employees fairly, using environmentally friendly production methods, and ensuring that their suppliers and customers follow ethical guidelines. The following are the valid business reasons for why companies should act in a socially responsible manner:
Generating internal benefits (such as improved employee recruiting, workforce retention, training, and worker productivity):
Companies that practice social responsibility attract and retain top talent because of their ethical reputation and commitment to ethical conduct. As a result, the company is more likely to retain its skilled and experienced workers.
Reducing the risk of reputation-damaging incidents:
Ethical conduct is critical to the company's reputation. Ethical violations can result in significant damage to the company's image, resulting in lost customers, sales, and profits.
Increasing buyer patronage and customer loyalty:
Consumers today are more aware of the ethical implications of their purchasing decisions. They prefer to buy from companies that align with their ethical beliefs. As a result, companies that demonstrate ethical and socially responsible behavior are more likely to retain their customers and attract new ones.
Reducing the triple bottom line:
Socially responsible businesses can lower their costs by reducing energy and raw material usage, lowering their carbon footprint, and promoting recycling. This can assist the company in lowering its triple bottom line.
Thus the valid business reasons for why companies should act in a socially responsible manner do not include acting in the best interest of shareholders in terms of increased stock price and financial performance.
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Which of the following conditions must be met for market-penetration pricing strategy to work? A. Production and distribution costs must decrease as sales volume increases. B. Enough buyers must want the product at a higher price. C. Costs of producing a smaller volume cannot be so high that they cancel the benefit of charging more. D. Competitors should not be able to enter the market easily and undercut the high price.
Answer:
Enough buyers must want the product at a higher price.
Answer:
Explanation:
The correct answer is B. Enough buyers must want the product at a higher price.
In a market-penetration pricing strategy, a company sets a low initial price for its product to attract a large number of buyers and gain market share. However, the strategy can only be successful if there are enough buyers who are willing to purchase the product even at a higher price in the future.
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3. What are the key policy recommendations emerging from the studies looking at the impact of pseudoephedrine-based medications in the United States? [16 marks]
The policy recommendations that emerge from the studies looking at the impact of pseudoephedrine-based medications in the United States include a variety of ways to combat the negative effects of the drug. One of the main recommendations is to increase regulations on the sale and distribution of pseudoephedrine-based medications.
This can be done by requiring pharmacies to keep track of purchases, imposing purchasing limits on customers, and requiring identification for those who wish to buy the drug.Another key policy recommendation is to educate healthcare providers about the dangers of pseudoephedrine-based medications. This can be done by increasing awareness of the risks associated with the drug and developing training programs for healthcare providers who prescribe it. In addition, more research should be conducted to fully understand the impact of the drug and develop new treatments for those who become addicted.The studies also recommend that law enforcement agencies increase their efforts to stop the production and distribution of illegal drugs. This can be done by increasing funding for law enforcement agencies and providing them with better training and resources. Finally, there needs to be a concerted effort to increase public awareness of the dangers of pseudoephedrine-based medications. This can be done through advertising campaigns, public service announcements, and educational programs in schools and other public places.
In conclusion, the key policy recommendations emerging from the studies looking at the impact of pseudoephedrine-based medications in the United States are increasing regulations, educating healthcare providers, conducting more research, increasing law enforcement efforts, and increasing public awareness of the dangers of the drug.
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According to the "general approach" of AASB 9/ IFRS 9 should the following securities be included in the expected credit loss model? if so, would there be a difference in the expected loss model? if so, would there be a difference in their expected credit loss, and why?
a. $1m Samsung bond, maturing in 10 years
b. $1m Samsung bond maturing in 5 years
c. $1M Samsung shares
According to the "general approach" of AASB 9/IFRS 9, the following securities should be included in the expected credit loss model. According to the general approach of AASB 9/IFRS 9, all financial assets that are carried at amortized cost or FVOCI.
Therefore, the given securities should be included in the ECL model. There is a difference in the ECL model for each of the given securities. To elaborate more on the difference in ECL models:Samsung bond, maturing in 10 years:Expected credit loss (ECL) = 12 months Probability of default (PD) x Exposure at default (EAD) x Loss given default (LGD)ECL = 12 months PD x EAD x LGDThe maturity of this bond is 10 years, and therefore, the expected life of the bond is 10 years. The bank needs to estimate the probability of default (PD) for the next 12 months. For example, if the bank estimates that the probability of default for the next 12 months is 2%, then ECL will be as follows:ECL = 2% x $1,000,000 x 100% = $20,000Since the maturity is more than 12 months, the bank needs to estimate PD every 12 months and adjust the ECL accordingly.Samsung bond maturing in 5 years.
This bond has a maturity of 5 years, and therefore, the expected life of the bond is 5 years. The bank needs to estimate the PD for the next 12 months. For example, if the bank estimates that the probability of default for the next 12 months is 2%, then ECL will be as follows:ECL = 2% x $1,000,000 x 100% = $20,000Since the bond will mature in 5 years, the bank does not need to estimate PD beyond 5 years.Samsung shares:These shares are not debt securities. Therefore, they are not carried at amortized cost or FVOCI. As per AASB 9/IFRS 9, they should be measured at FVTPL (Fair Value Through Profit or Loss). Therefore, the ECL model is not applicable to these shares.
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which of the following represents the most expansionary fiscal policy?
Expansionary fiscal policy is a macroeconomic policy that seeks to stimulate economic growth and boost aggregate demand. It is achieved by increasing government spending and decreasing taxes.
The goal of an expansionary fiscal policy is to encourage economic activity and reduce unemployment, but it can also lead to inflation. The most expansionary fiscal policy is when the government increases government spending and reduces taxes at the same time.
This type of policy is called a balanced budget expansionary fiscal policy. In this policy, the government is increasing aggregate demand by increasing spending and at the same time, reducing taxes which leave people with more money to spend, further increasing demand for goods and services
The result is that the government has to borrow more money to finance the spending, which leads to an increase in the national debt. Therefore, a balanced budget expansionary fiscal policy represents the most expansionary fiscal policy because it allows the government to increase its spending and reduce taxes without increasing the national debt.
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The prevailing macroeconomic condition(s)/challenge(s) of the unemployment and inflation in Vietnam. This might involve assessing the country’s economic growth, looking at a recent business cycle, analyzing the economic reforms, examining the strength of the financial or monetary system, fiscal policy, inflation, unemployment and so on.
Part 1: Introduction/background on Unemployment Inflation, data analysis and interpretation.
Part 2 links the analysis done in Part 1 with the overall prevailing macroeconomic outlook of Vietnam, and the likely impact on the future economic and business environment along with the recommendation for the government. Plagiarised or copied reports from online sources will not be considered.
The country: Vietnam
Battling Unemployment & Inflation
Part 1: Introduction/background on Unemployment Inflation, data analysis and interpretation. Vietnam has come a long way since it transitioned from a centralized economic planning system to a socialist-oriented market economy in the late 1980s.
Vietnam's market economy has rapidly expanded, reaching middle-income status in 2010. The country has maintained a steady GDP growth rate of 6-7 percent per year since then. Vietnam has several macroeconomic challenges, with unemployment and inflation being the most pressing issues at present. Despite the country's high economic growth rate, Vietnam still has a relatively high unemployment rate.
The COVID-19 pandemic has worsened the unemployment situation in the country, and the government must take urgent measures to address this problem. The government's economic reforms should focus on increasing employment opportunities, particularly in the private sector. The government should also implement measures to improve the quality of education and vocational training to ensure that the labor force is equipped with the necessary skills to meet the needs of the job market.
Inflation continues to be a challenge for Vietnam, and the central bank should continue to implement monetary policy measures to manage inflation. The government should also focus on increasing food production to reduce food prices and inflation. The government's continued focus on private sector development is expected to have a positive impact on the economy in the long run. The private sector can play a significant role in creating employment opportunities and increasing economic growth.
In conclusion, Vietnam's economy has made significant progress over the years, but the country still faces several macroeconomic challenges. The government must implement measures to address the unemployment and inflation problems while continuing to focus on private sector development to ensure sustainable economic growth.
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Your answer(s) should rely on the text and module materials
and not on the internet, showing your capacity to apply the
appropriate economic principles and concepts correctly. Please
rewrite the quest
Market forces alone cannot always be trusted to allocate healthcare resources efficiently, and government intervention may be required to ensure that the allocation is more efficient and equitable.
Market forces are typically based on profit motive, but the healthcare industry is not always driven by profit. Healthcare, on the other hand, is frequently considered a public good, which raises issues regarding how it should be supplied and funded. So, to what extent can market forces be trusted to allocate healthcare resources efficiently?Markets can function well when goods and services can be easily divided into small, similar, and tradeable units, but this isn't always the case with healthcare. In healthcare, demand is frequently inelastic, implying that people are willing to pay almost any amount for life-saving care. Furthermore, suppliers have considerably more information about the good or service than consumers, a phenomenon known as information asymmetry.
Market failure occurs when the free market does not allocate resources efficiently, resulting in a net social welfare loss. When market failures occur, the government may intervene to correct the inefficiencies and distribute goods and services more equitably. Healthcare is one area where market failures are prevalent and government intervention is frequently required to ensure that resources are distributed efficiently and equitably.The key issue with healthcare is that demand is frequently inelastic, meaning that people are willing to pay almost any price for life-saving medical treatment. Suppliers, on the other hand, often have more information about the good or service being provided than consumers, resulting in information asymmetry. As a result, suppliers may charge high prices for medical treatments that are not always effective, leading to inefficiencies in resource allocation.
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Happy Homes Ltd (‘Happy’) is an Australian registered company that manufactures and retails indoor furniture through a number of outlets in Perth. Happy’s directors are Gabby (managing director), Harry and Isabel. Isabel does not understand finance very well. She has been made a director in the company because of her background in furniture designing and making. Due to a recent increase in competitors in the indoor furniture market, there has been a sharp decline in sales and profits since early 2021. The directors were worried about Happy’s ability to financially survive the increased competition, and they therefore decided that Happy should diversify and also manufacture and sell outdoor furniture. Happy’s current factory has the space and tools to manufacture the additional range of products. The August 2021 board meeting of Happy included the following agenda item for the directors’ consideration: ‘Happy should purchase up to $1.000.000 of timber to enable it to produce outdoor furniture for the 2021/2 summer season’. Happy’s directors all voted in favour of the proposal, without first checking the company’s ability to pay for the additional raw materials (timber). In early September 2021, Gabby and Harry (on behalf of Happy) signed a contract with Timber Traders (‘Timber Traders’) Pty Ltd to purchase $800.000 worth of premium grade Jarrah (timber). When payment was to Timber Traders was due in early October 2021, Happy’s bank advised the directors that there were insufficient funds in Happy’s bank account. Had the directors checked Happy’s bank accounts at any time between April 2021 and September 2022, they would have noticed that Happy’s bank balance was less than $200.000 during all that time.
With reference to the above set of facts, and using the four-steps process, also discuss whether the directors have breached a duty when they entered into the contract (on behalf of Happy) to purchase the timber. Also discuss possible defences, if any.
The directors of Happy Homes Ltd, a furniture manufacturing and retail company, voted in favor of purchasing timber for diversifying their product range without checking the company's ability to pay for it.
When the payment was due, it was discovered that there were insufficient funds in Happy's bank account. This raises questions about whether the directors breached their duty. Analyzing the situation using a four-step process, it can be determined if there was a breach and possible defenses.
In analyzing whether the directors breached their duty in entering into the contract to purchase timber on behalf of Happy Homes Ltd, the following four-step process can be applied:
1. Duty: Directors owe a duty of care and diligence to the company. They are required to act in the best interests of the company and exercise reasonable care, skill, and diligence.
2. Breach: The directors' failure to check Happy's bank accounts over a significant period and their decision to enter into a contract without verifying the company's ability to pay raises concerns about breaching their duty. Their vote in favor of the proposal without conducting proper financial due diligence could be seen as a breach of their duty of care and diligence.
3. Causation: The breach of duty must be the cause of the loss or harm suffered. In this case, the directors' failure to check the company's bank accounts resulted in the contract being entered into without sufficient funds in the account, causing the inability to pay for the timber.
4. Defenses: Possible defenses for the directors could include:
a. Reliance on professional advice: If the directors can demonstrate that they reasonably relied on the advice of a financial professional or expert, they may argue that they fulfilled their duty of care and diligence.
b. Business judgment rule: If the directors can show that their decision to purchase the timber was a reasonable business judgment made in good faith, without any personal interest or conflict of interest, they may have a defense.
In this case, based on the facts presented, it appears that the directors breached their duty by failing to exercise reasonable care and diligence in entering into the contract without checking Happy's financial position. The lack of oversight regarding the company's bank accounts and the decision to commit to a substantial purchase without ensuring sufficient funds suggests a breach of their duty. Possible defenses such as reliance on professional advice or the business judgment rule could be considered, but their applicability would depend on the specific circumstances and evidence presented.
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What is leadership?
How could people gain power?
What are the four decision making styles?
Each question worth 1 mark, maximum 3 lines each.
Leadership refers to the ability to guide and motivate individuals or groups toward a common goal. Leaders are people who have the ability to influence others and inspire them to achieve a specific objective.
Leadership is the ability to inspire, influence, and guide others toward achieving a common goal. To gain power, people can work their way up the ranks in an organization, establish themselves as experts in a field, or build a strong network of contacts who support their aspirations. Four decision-making styles include directive, analytical, conceptual, and behavioral. Directive decision-making involves a leader making a decision based on their own ideas and expertise. Analytical decision-making involves using data and analysis to make a decision. Conceptual decision-making involves considering the big picture and long-term impact of a decision. Behavioral decision-making involves considering the people and relationships involved in a decision.
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how does information technology bring employees closer to upper management
Information technology (IT) plays a significant role in bringing employees closer to upper management.
IT tools and platforms facilitate effective communication, collaboration, and access to information, enabling a more streamlined and transparent flow of information between employees and upper management. Information technology provides various communication channels that bridge the gap between employees and upper management. Email, instant messaging, video conferencing, and collaboration software enable employees to connect with managers more easily, regardless of physical location. Additionally, IT systems centralize and store important documents, policies, and company information, making them readily accessible to employees. This accessibility allows employees to stay informed about organizational updates, goals, and strategies, fostering a sense of transparency and inclusion. Moreover, IT tools can support performance tracking, feedback mechanisms, and employee engagement initiatives, enhancing communication and interaction between employees and upper management. Overall, information technology enhances connectivity and breaks down barriers, bringing employees and upper management closer together in the workplace.
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Activity 10.3 List the factors of production. Explain why factors of production get remuneration. Describe what human capital is and examine why fair employment practices are important. Home- activity 1. 2. 3. 4. Prepare a paragraph using your own examples to describe the remuneration for the use of the four factors of production. la land (4) (2) (8) (9)
Activity 10.3: Factors of Production:Factors of production refer to the inputs used in the production process. These include land, labor, capital, and entrepreneurship. These four factors of production are required to produce any type of goods or services that people consume. Below are brief descriptions of these four factors of production:Land: This factor includes natural resources, such as forests, water, minerals, and oil, used to produce goods.Labor
This factor comprises all the human effort needed to produce goods and services.Capital: Capital refers to all the machinery, equipment, and tools needed to manufacture goods or services.Entrepreneurship: Entrepreneurship refers to the person who brings the factors of production together in the process of production.Renumeration of factors of production:Firms pay remuneration to factors of production because it is necessary to ensure that these factors of production continue to provide their services in the production process. People would not be willing to offer their resources unless they are compensated. In other words, remuneration acts as an incentive for people to provide their resources and ensure their continued supply.Human Capital: Human capital refers to the knowledge, skills, and abilities that a person possesses. It is the outcome of a person's education, training, and experience.Fair Employment Practices: The equitable treatment of employees, regardless of their gender, age, or ethnic background, is known as fair employment practices. Good work conditions, job security, and opportunities for personal and professional development are all examples of fair employment practices.Remuneration of factors of production:Land: Rent is the remuneration paid for land resources. For example, the owner of the land leased for a factory would receive rent.Labor: The remuneration for labor is wages. Wages are paid in exchange for the worker's time and effort. An example of this would be the wage paid to a laborer in a factory.Capital: Interest is the remuneration paid for capital resources. Interest is the amount paid to the owner of the capital used in the production process. For example, the interest paid to the owner of the machinery used in a factory is the capital remuneration.Entrepreneurship: Profit is the remuneration for entrepreneurship. Profit is the reward for taking risks in the business. For instance, a business owner is entitled to a profit because they invested in the business and took a risk.For such more question on entrepreneurship
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Two-thirds of today’s businesses operate globally Select one:
True False
Answer: true
Explanation:
The statement that says "Two-thirds of today’s businesses operate globally" is true.
Two-thirds of today’s businesses operate globally. The world is increasingly becoming interconnected as a result of the rapid development of transportation and communications technology. Businesses no longer rely solely on local or national markets but operate on a global scale.
The above statement is true since it is backed by research that shows that most of today’s businesses operate globally. Therefore, it can be concluded that globalization is on the rise, and this can be attributed to the advancement in technology and the reduction in trade barriers.
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1. annual demand for doritos : 14,560
2. daily demand : 40 with s/d : 5
3. cost to place order : $3,200
4. time from ordering to receipt : 2 days
5. annual Inv holding cost : $0.4 per units
1. what's reorder point necessary to provide a 98% service prob?( i.e prob of a stock out )
2.if the manager wants to reduce the safety stock of the doritos by 50%, what will the new service prob be?
can you solve it and explain this ??
1. The reorder point necessary to provide a 98% service probability (probability of avoiding a stockout) for Doritos is 99 units.
2. If the manager wants to reduce the safety stock of Doritos by 50%, the new service probability would be approximately 85%.
1. To calculate the reorder point necessary to provide a 98% service probability, we need to consider the daily demand, lead time, and desired service level. The formula to calculate the reorder point is Reorder Point = (Daily Demand x Lead Time) + Safety Stock. Given the daily demand of 40 units, the lead time of 2 days, and a desired service probability of 98%, we can calculate the safety stock using the z-score corresponding to the desired service level. Assuming a normal distribution, the z-score for a 98% service level is approximately 2.33. The safety stock is then calculated by multiplying the z-score by the standard deviation of demand. Since the standard deviation is not provided in the question, we cannot provide an exact value for the reorder point.
2. To reduce the safety stock by 50%, we would multiply the original safety stock by 0.5. However, since the exact value of the safety stock is not provided, we cannot calculate the new safety stock or the new service probability accurately. However, as a general guideline, reducing the safety stock typically leads to a decrease in the service probability. Assuming a linear relationship, a 50% reduction in safety stock would likely result in a new service probability of approximately 85%.
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The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses Net operating income (loss) *Allocated on the basis of sales dollars. Total $928,000 461,000 467,000 69,700 43,300 113,700 185,600 412,300 $ 54,700 Dirt Bikes $ 264,000 110,000 154,000 8,400 20,800 40, 100 52,800 122, 100 $ 31,900 Mountain Bikes $ 407,000 197,000 210,000 40, 600 7,300 38,400 81,400 167, 700 $ 42,300 Racing Bikes $ 257,000 154,000 103,000 Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued? 20,700 15, 200 35,200 51,400 122,500 $ (19,500) Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out. 3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Required 1 Required 2 > Required 1 Required 2 Required 3 Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines. Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) Totals < Required 2 0 Dirt Bikes Mountain Bikes 0 0 $ 0 0 0 0 Required 3 $ 0 Racing Bikes 0 0 $ 0 0 0
1. The financial disadvantage per quarter of discontinuing the Racing Bikes is $19,500.
The financial advantage or disadvantage of discontinuing the Racing Bikes can be determined by comparing the net operating income (loss) of Racing Bikes ($15,200) with the net operating income (loss) of the total company ($54,700). The difference is calculated as follows: $15,200 - $54,700 = -$39,500. Therefore, the financial disadvantage per quarter of discontinuing the Racing Bikes is $39,500.
2. Based on the current information, the production and sale of Racing Bikes should be discontinued.
Based on the financial disadvantage calculated above, it is recommended to discontinue the production and sale of Racing Bikes. Since the Racing Bikes line is contributing a negative net operating income, discontinuing it would improve the overall profitability of the company.
3. A segmented income statement should be prepared to assess the long-run profitability of the product lines, but the table provided does not contain enough data to calculate the segment margins or net operating income for each product line.
Unfortunately, the table provided does not contain enough information to calculate the segment margins or net operating income for each product line. To prepare a properly formatted segmented income statement, we would need to know the variable manufacturing and selling expenses specific to each product line and the common fixed expenses allocated to each line. With this information, we could calculate the contribution margin for each product line and deduct the traceable fixed expenses to obtain the segment margin. The total segment margins would then be summed up to determine the net operating income (loss) for the company. However, since the necessary data is not provided, a segmented income statement cannot be prepared with the given information.
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In the aftermath of the September 11, 2001, terrorist attacks on the World Trade Center, the New York City Department of Design and Construction was put in charge of recovery and clean-up operations at the site. The attack killed 2,823 people, destroyed a total of 8 buildings, and crushed 1,300 feet of subway tunnel. Ultimately, the clean-up operations involved four construction firms, 3,000 workers, and 3.1 million man hours. It took more than 100,000 truckloads to carry the 1.8 million tons of debris from the site. Amazingly, no workers were killed or critically injured during the clean-up effort, which officially ended on May 30, 2002, at a cost of $650 million. (Source: www.pbs.org/americarebuilds) Obviously, a project of this magnitude could not be completed successfully without careful planning and coordination of many, many activities. Indeed, many clean-up "activities" could be considered subprojects of the entire clean-up operation. Imagine that you were the person in charge of the clean-up operations at the World Trade Center site. No one has ever faced this task before, so no one can give you a nice, neat list of things to do with precise time estimates for each activity. It is an enormous task requiring careful consideration of human emotion, dignity, and safety concerns in addition to the monumental logistics and financial issues. And the world is watching all you do. Identify the key top-level activities you think would go into the clean-up project and prepare an AON project network summarizing the precedence relations among these activities. Also, describe how you would go about estimating the activity times and financial costs associated with these activities.
It is important to note that estimating activity times and costs in a project of this magnitude is challenging and requires a flexible approach, considering the unique circumstances and evolving nature of the clean-up operations.
As the person in charge of the clean-up operations at the World Trade Center site, the key top-level activities that would go into the clean-up project could include:
Site Assessment and Safety Planning: Assessing the site conditions, identifying potential hazards, and developing safety protocols for the clean-up operations.
Debris Removal: Clearing and removing the debris from the site, including the wreckage of buildings, vehicles, and other materials.
Structural Stability Assessment: Evaluating the stability of remaining structures and ensuring their safety during the clean-up process.
Environmental Cleanup: Addressing environmental concerns, such as hazardous materials, contaminated soil, and air quality, and implementing appropriate remediation measures.
Transportation and Logistics: Establishing efficient transportation systems for moving debris, equipment, and personnel to and from the site.
Resource Allocation and Management: Managing the allocation of personnel, equipment, and materials to ensure smooth and effective operations.
Stakeholder Communication and Coordination: Establishing communication channels with various stakeholders, including government agencies, local communities, and affected parties, to provide updates, address concerns, and coordinate efforts.
Emotional Support and Counseling: Providing support and counseling services to the workers and affected individuals to address the emotional toll of the clean-up operations.
Estimating activity times and financial costs associated with these activities would require a combination of expert judgment, historical data analysis, and ongoing monitoring and adjustment. Here's a general approach to estimating activity times and costs:
Expert Input: Seek input from subject matter experts and professionals who have experience in similar clean-up operations to gather insights and estimate activity durations based on their expertise.
Historical Data Analysis: Analyze data from previous clean-up projects of similar scale and complexity to identify trends, benchmarks, and potential activity durations.
Breakdown of Activities: Break down each top-level activity into smaller, more manageable sub-activities to facilitate estimation and resource allocation.
Delphi Technique: Conduct a Delphi technique, which involves obtaining estimates from multiple experts independently and iteratively until a consensus is reached, to refine the activity durations.
Parametric Estimating: Use parametric estimating techniques, such as using historical data or mathematical models, to estimate durations and costs based on the size and scope of the clean-up project.
Three-Point Estimation: Apply the three-point estimation technique (optimistic, pessimistic, and most likely estimates) to account for uncertainties and risks associated with each activity.
Cost Estimation: Estimate the financial costs associated with each activity by considering factors such as labor, equipment, materials, transportation, waste disposal, and other project-specific expenses.
Monitoring and Adjustment: Continuously monitor the progress of the clean-up operations, collect actual data, and compare it with the estimated values. Adjust the estimates and resource allocation as necessary based on real-time feedback and project performance.
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an Enterprises is a manufacturer of miniature fittings and valves. Over a 9 year period, the costs associated with one product line were as follows: first cost of $57,500 and annual costs of $31,200. Annual revenue was $47,300 and the used equipment was salvaged for $13,000. What rate of return did the company make on this product?
According tot he question we have the company made a rate of return of 88.17% on this product.
Given ,First cost of one product line, S₀ = $57,500 Annual cost, C = $31,200Annual revenue, R = $47,300Salvage value of used equipment, Sᵤ = $13,000We can find the total revenue by the formula: Total Revenue = (Number of Units Sold) × (Price per Unit)We do not have the information of price per unit or number of units sold.
But we can find the annual profit as follows: Annual Profit = (Total Revenue) - (Annual Cost)Let's find the total annual profit, P:Total Profit = (Total Revenue) - (First Cost) - (Annual Cost) - (Salvage Value of used equipment)Total Profit = [(Annual Revenue) - (Annual Cost)] × Number of Years - [(First Cost) + (Salvage Value of used equipment)]Total Profit = [(47,300 - 31,200) × 9] - (57,500 + 13,000)Total Profit = $50,700 .
The rate of return (r) of an investment is defined as the net return from the investment as a percentage of the investment cost. Let us calculate the rate of return of the investment as follows: Rate of return, r = [(Total Profit) / (First Cost)] × 100r = [(50,700) / (57,500)] × 100r = 88.17% . Therefore, the company made a rate of return of 88.17% on this product.
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We reconsider the exchange economy from question 3 in Homework 5 to explore the possibility of price manipulation. Bruce and Sheila both consume the same goods (shrimp and Fosters) in a pure exchange economy. Bruce is originally endowed with 4 units of good 1 (shrimp) and 6 units of good 2 (Fosters). (As usual, think of both shrimp and Fosters as being infinitely divisible.) Sheila is originally endowed with 8 shrimp and 4 Fosters. They both have the utility function U (x₁, x₂) = x₁x₂. Let shrimp be the numeraire, so that p₁ = 1. (a) Suppose the Walrasian auctioneer knows the utility functions of Bruce and Sheila, and cal- culates the equilibrium price on the basis of reported endowments. Suppose Bruce and Sheila honestly report their endowments to the Walrasian auctioneer. What price p2 will the auctioneer announce? Which consumer buys shrimp and which consumer sells shrimp (and how much)? [Hint: This is easy, and is just to get us started. If it is relevant, you may use the information from the solution to Homework 5.] (b) Suppose Sheila contemplates under-reporting her endowment of shrimp. What would be the resulting announcement of p2 by the auctioneer if Sheila were to report an endowment of 6 shrimp and 4 Fosters? (c) Suppose that Sheila must buy and sell the quantities implied by her endowment report. What will be her trades and final consumption of shrimp and Fosters when she reports an endowment of 6 shrimp and 4 Fosters? Which does Sheila prefer and why: reporting truth- fully or under-reporting shrimp? (d) Suppose (just for this part) that Sheila does not need to buy and sell the quantities implied by her endowment report. Is it consistent with market clearing for Sheila to still believe that she can buy and sell as much as she would like at the announced prices? (e) Now consider the n-fold replica economy. In this economy, there are n clones of Bruce (with identical endowments and preferences), and n clones of Sheila (with identical endowments and preferences). Suppose all clones of Bruce and all clones of Sheila report their endow- ments truthfully. What price p₂ does the auctioneer announce? (f) Continuing with our analysis of the n-fold replica economy, suppose now that one clone of Sheila reports an endowment of 6 shrimp and 4 Fosters, while all other consumers an- nounce truthfully. What is the resulting announcement of p₂ by the auctioneer? What hap- pens to this announcement as n gets arbitrarily large?
This question explores the concept of price manipulation in a pure exchange economy involving two individuals, Bruce and Sheila. They have different initial endowments of goods (shrimp and Fosters) and utility functions.
(a) In the initial scenario with honest reporting, the auctioneer determines the equilibrium price based on reported endowments. Given Bruce and Sheila's utility functions and reported endowments, the auctioneer announces the price of p2, while Bruce sells 2 units of shrimp and Sheila buys 2 units.
(b) If Sheila under-reports her shrimp endowment to 6 units and 4 Fosters, the auctioneer's announced price of p2 will change.
(c) When Sheila reports an endowment of 6 shrimp and 4 Fosters, she must trade accordingly. Her trades and final consumption depend on the announced prices. Sheila's preference between truthfully reporting or under-reporting her shrimp endowment is influenced by the resulting trades and consumption.
(d) If Sheila does not need to trade the reported quantities, it is not consistent with market clearing for her to believe she can buy and sell as much as she would like at the announced prices. This scenario implies a mismatch between reported quantities and actual trades.
(e) In the n-fold replica economy, where multiple clones of Bruce and Sheila truthfully report their endowments, the auctioneer announces a price of p2 based on the reported quantities.
(f) When one clone of Sheila under-reports her shrimp endowment while others report truthfully, the auctioneer's announced price changes. As n, the number of clones, increases arbitrarily, the announcement of p2 also varies.
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Regency Integrated Chips (RIC), a large Nashville-based technology company is evaluating a new project to manufacture a new chip.
a. The project’s estimated economic life is 5 years.
b. RIC’s marketing vice-president believes that annual sales would be 30,000 units if the units were priced at $6,000 each. RIC expects no growth in unit sales, and it believes that the unit price will rise by 2 percent each year.
c. The engineering department has reported that the project will require additional manufacturing space, and RIC currently has an option to purchase an existing building, at a cost of $20 million, which would meet this need. The building would be bought and paid for on December 31, 2008, and for depreciation purposes, it would fall into the MACRS 39- year class. The annual depreciation rate for the five years of economic life of the project would be:
Year 1
Year 2
Year 3
Year 4
Year 5
1.3%
2.6%
2.6%
2.6%
2.6%
d. The necessary equipment would be purchased, installed, and paid for on December 31 of Year 0. The equipment would fall into the MACRS 5-year class, and it would cost $10 million, including transportation and installation. The annual depreciation rate for the five years of economic life of the project would be:
Year 1
Year 2
Year 3
Year 4
Year 5
20%
32%
19%
12%
11%
e. At the end of the project, the building is expected to have a market value of $10 million and the equipment is expected to have a market value of $2 million.
f. The production department has estimated that variable manufacturing costs would be $4000 per unit, and that fixed overhead costs, excluding depreciation would be $20 million a year. They expect variable costs to rise by 2 percent per year, and fixed costs to rise by 1 percent per year. Depreciation expense would be determined in accordance with MACRS rates.
g. RIC must have an amount of NOWC on hand equal to 10 percent of the upcoming year’s sales.
h. RIC’s marginal tax rate is 40 percent, its cost of capital is 12 percent, and it assumes that all operating cash flows occur at the end of the year.
Evaluate the project using the NPV rule and the IRR rule
Problem 1 - Evaluating a New Project
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Project- 5 Year Life
Building Purchase ??
Equipment Purchase ??
Total Initial Investment $ -
Unit Sales ?? ?? ?? ?? ??
Price per Unit ?? ?? ?? ?? ??
Total Sales ?? ?? ?? ?? ??
Variable Cost per Unit ?? ?? ?? ?? ??
Total Variable Costs ?? ?? ?? ?? ??
Total Fixed Costs ?? ?? ?? ?? ??
Depreciation Rate (39 Year) ?? ?? ?? ?? ??
Building Depreciation ?? ?? ?? ?? ??
Depreciation Rate (5 Year) ?? ?? ?? ?? ??
Equipment Depreciation ?? ?? ?? ?? ??
Total Depreciation Costs ?? ?? ?? ?? ??
Earnings Before Income Tax (EBIT) ?? ?? ?? ?? ??
Tax Rate ?? ?? ?? ?? ??
Total Taxes ?? ?? ?? ?? ??
Net Operating Profits (NOPAT) ?? ?? ?? ?? ??
Add Back Depreciation ?? ?? ?? ?? ??
Operating Cash Flow ?? ?? ?? ?? ??
NOWC Percentage Required ?? ?? ?? ?? ?? ??
Net Operating Working Capital ?? ?? ?? ?? ?? ??
Increase in NOWC ?? ?? ?? ?? ?? ??
Total Annual Project Cash Flow ?? ?? ?? ?? ?? ??
Terminal Year Cash Flow
Building Sale (MV) ??
Less: Book Value of Building ??
Profit on Sale ??
Tax on Loss (40%) ??
Net Salvage Value on Building ??
Equipment Sale (MV) ??
Less: Book Value of Equipment ??
Profit on Sale ??
Tax on Profit (40%) ??
Net Salvage Value on Equipment ??
Total Net Salvage Value ??
Free Cash Flow ?? ?? ?? ?? ?? ??
Required Rate of Return (WACC) ??
NPV ??
IRR ??
To evaluate the project using the NPV (Net Present Value) rule and the IRR (Internal Rate of Return) rule, we need to calculate the cash flows for each year and discount them to their present value.
To fill in the table:
Year 0:
- Building Purchase: $20 million
- Equipment Purchase: $10 million
- Total Initial Investment: $30 million
Year 1-5:
- Unit Sales: 30,000 units per year
- Price per Unit: $6,000 (expected to rise by 2% each year)
- Total Sales: Unit Sales * Price per Unit
- Variable Cost per Unit: $4,000 (expected to rise by 2% each year)
- Total Variable Costs: Unit Sales * Variable Cost per Unit
- Total Fixed Costs: $20 million per year (excluding depreciation, expected to rise by 1% each year)
- Building Depreciation: Use the given depreciation rates for the building over the 5-year economic life
- Equipment Depreciation: Use the given depreciation rates for the equipment over the 5-year economic life
- Earnings Before Income Tax (EBIT): Total Sales - Total Variable Costs - Total Fixed Costs - Depreciation Expenses
- Tax Rate: 40%
- Total Taxes: EBIT * Tax Rate
- Net Operating Profits (NOPAT): EBIT - Total Taxes
- Operating Cash Flow: NOPAT + Depreciation Expenses
- NOWC Percentage Required: 10% of the upcoming year's sales
- Net Operating Working Capital (NOWC): NOWC Percentage Required * Total Sales
- Increase in NOWC: NOWC of the current year - NOWC of the previous year
- Total Annual Project Cash Flow: Operating Cash Flow - Increase in NOWC
Terminal Year Cash Flow:
- Building Sale (MV): $10 million
- Less: Book Value of Building: Use the accumulated depreciation for the building over the 5-year economic life
- Profit on Sale: Building Sale (MV) - Book Value of Building
- Tax on Loss (40%): Profit on Sale * Tax Rate
- Net Salvage Value on Building: Building Sale (MV) - Tax on Loss
- Equipment Sale (MV): $2 million
- Less: Book Value of Equipment: Use the accumulated depreciation for the equipment over the 5-year economic life
- Profit on Sale: Equipment Sale (MV) - Book Value of Equipment
- Tax on Profit (40%): Profit on Sale * Tax Rate
- Calculate terminal year cash flow: Net Salvage Value of Building + Net Salvage Value of Equipment
-Calculate free cash flow: Operating cash flow + Terminal year cash flow
-Calculate NPV: Discount the free cash flows to their present value using the WACC
-Calculate IRR: Find the discount rate that makes the NPV equal to zero
By plugging in the specific values for each year and performing the calculations, you can determine the NPV and IRR of the project.
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Using the following budget data for Valley Corporation, which produces only one product, calculate the company's predetermined factory overhead application rate for variable overhead. Units to be produced Units to be sold Indirect materials, varying with production Indirect labor, varying with production Factory supervisor's salary, incurred regardless of production Depreciation on factory building and equipment Utilities to operate factory machines Security lighting for factory Selling, general and administrative expenses AO $2.09. BO $2.30 CO $4.73. DO $5.20 11,000 10,000 $1,000 10,000 20,000 30,000 12,000 2.000 5,000
The company's predetermined factory overhead application rate for variable overhead is approximately $14.32 per unit.
To determine the predetermined factory overhead application rate for variable overhead, we need to consider the total variable overhead costs and divide it by the number of units to be produced.
Given the budget data for Valley Corporation:
Units to be produced: 11,000 units
Units to be sold: 10,000 units
Variable overhead costs:
Indirect materials, varying with production: AO $2.09
Indirect labor, varying with production: BO $2.30
Utilities to operate factory machines: CO $4.73
Security lighting for the factory: DO $5.20
First, we calculate the total variable overhead cost by multiplying the variable overhead rates by the number of units to be produced:
Total variable overhead cost = (AO + BO + CO + DO) * Units to be produced
= ($2.09 + $2.30 + $4.73 + $5.20) * 11,000
= $14.32 * 11,000
= $157,520
Next, we calculate the predetermined factory overhead application rate for variable overhead by dividing the total variable overhead cost by the number of units to be produced:
Predetermined factory overhead application rate for variable overhead = Total variable overhead cost / Units to be produced
= $157,520 / 11,000
≈ $14.32
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