The cash transaction that would have resulted in the $3,500 posting to the account is the deposit made by the customer.
Which cash transaction would result in a $3,500 posting to the account?A deposit made by the customer is a cash transaction that would result in a $3,500 posting to the account.
When a customer deposits money into their account, the amount is recorded as a credit, increasing the account balance.
In this case, the customer likely deposited $3,500 into the account, leading to the $3,500 posting.
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Harper, Inc., acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2020, for $343,900 in cash. The book value of Kinman's net assets on that date was $730,000, although one of the company's buildings, with a $72,800 carrying amount, was actually worth $115,050. This building had a 10-year remaining life. Kinman owned a royalty agreement with a 20-year remaining life that was undervalued by $87,500.
Kinman sold inventory with an original cost of $86,100 to Harper during 2020 at a price of $123,000. Harper still held $20,250 (transfer price) of this amount in inventory as of December 31, 2020. These goods are to be sold to outside parties during 2021.
Kinman reported a $42,200 net loss and a $23,300 other comprehensive loss for 2020. The company still manages to declare and pay a $6,000 cash dividend during the year.
During 2021, Kinman reported a $44,200 net income and declared and paid a cash dividend of $8,000. It made additional inventory sales of $118,000 to Harper during the period. The original cost of the merchandise was $73,750. All but 30 percent of this inventory had been resold to outside parties by the end of the 2021 fiscal year.
Prepare all journal entries for Harper for 2020 and 2021 in connection with this investment. Assume that the equity method is applied
To prepare the journal entries for Harper in connection with the investment in Kinman Company for 2020 and 2021 using the equity method, we need to consider the following:
On January 1, 2020:
- Debit Investment in Kinman Company: $343,900
- Credit Cash: $343,900
On December 31, 2020:
- Debit Equity in Net Income of Kinman Company: $16,880 [(40% x $42,200) - (40% x $23,300)]
- Credit Investment in Kinman Company: $16,880
On December 31, 2020 (adjusting the building value):
- Debit Investment in Kinman Company: $42,450 [(40% x $115,050) - (40% x $72,800)]
- Credit Equity in Net Income of Kinman Company: $42,450
On December 31, 2020 (adjusting the undervalued royalty agreement):
- Debit Investment in Kinman Company: $35,000 [(40% x $87,500)]
- Credit Equity in Net Income of Kinman Company: $35,000
On December 31, 2020 (dividend received):
- Debit Cash: $2,400 [(40% x $6,000)]
- Credit Investment in Kinman Company: $2,400
On December 31, 2021:
- Debit Equity in Net Income of Kinman Company: $17,680 [(40% x $44,200)]
- Credit Investment in Kinman Company: $17,680
On December 31, 2021 (dividend received):
- Debit Cash: $3,200 [(40% x $8,000)]
- Credit Investment in Kinman Company: $3,2
these journal entries are based on the given information and may need adjustment based on additional details or specific requirements.
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Discuss the two calculation methods used for local income tax withholding.
2. What information is entered on the payroll register? Give three examples and explain them.
Calculation Methods for Local Income Tax Withholding: a) Percentage Method: Under this method, the local income tax withholding is calculated based on a percentage of an employee's taxable wages. The applicable percentage is determined by the local tax authority and can vary depending on the employee's income level or other factors.
b) Flat Amount Method: In this method, a fixed or flat amount is withheld from the employee's wages for local income tax purposes, regardless of the employee's income level or other factors. The choice between these methods depends on the regulations and guidelines provided by the local tax authority. Information Entered on the Payroll Register: The payroll register is a document or electronic record that provides a summary of payroll information for a specific period. It typically includes details of individual employees' wages, deductions, and net pay. a) Employee Name and Identification: Each employee's name, employee identification number, or any other unique identifier is recorded on the payroll register. b) Gross Wages: Gross wages represent the total earnings an employee has earned before any deductions.
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Which of these are warning signs that the owner’s revenue stream may be interrupted. Select all that apply. Review Later
1.The space is rented under an absolute lease.
2.The tenant’s business is growing rapidly and adding new headcount.
3.The area is rapidly changing with several large construction projects scheduled over the next two years.
4.The tenant provides a government service.
All of the provided options can be considered warning signs that the owner's revenue stream may be interrupted. It is advisable to review these indicators further to assess the potential risks:
The space is rented under an absolute lease: An absolute lease means that the tenant is obligated to pay rent regardless of their business performance or any external factors. If the tenant faces financial difficulties or goes out of business, it could lead to a disruption in the owner's revenue stream.
The tenant's business is growing rapidly and adding new headcount: While business growth can be positive, it can also introduce risks. Rapid expansion may strain the tenant's resources, leading to potential financial instability or operational challenges. If the tenant is unable to sustain their growth or faces setbacks, it could impact their ability to pay rent and, subsequently, the owner's revenue.
The area is rapidly changing with several large construction projects scheduled over the next two years: Construction projects can significantly impact the surrounding area, causing disruptions to businesses. The noise, road closures, and decreased foot traffic may negatively affect the tenant's operations and revenue. Consequently, the owner's revenue stream could be interrupted if the tenant struggles or decides to relocate due to the construction activities.
It is essential to carefully evaluate these warning signs to assess their potential impact on the owner's revenue stream and plan accordingly.
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Duke Company's unadjusted bank balance at March 31 is $5,390. The bank reconciliation revealed outstanding checks amounting to $790 and deposits in transit of $560. Based on this information, Duke's true cash balance is: Mualuple Choice $4.830 $5,390. 55,950 $5,160
Duke Company's true cash balance after considering outstanding checks and deposits in transit, is $5,160. The correct answer is $5,160.
To determine Duke Company's true cash balance, we need to make adjustments for outstanding checks and deposits in transit.
Outstanding checks are checks issued by Duke Company that have been recorded in their books but have not yet cleared the bank. These checks reduce the bank balance. The amount of outstanding checks is $790.
Deposits in transit are cash deposits made by Duke Company that have been recorded in their books but have not yet been added to the bank balance. These deposits increase the bank balance. The amount of deposits in transit is $560.
To calculate the true cash balance, we need to adjust the unadjusted bank balance by adding deposits in transit and deducting outstanding checks.
True cash balance = Unadjusted bank balance + Deposits in transit - Outstanding checks
True cash balance = $5,390 + $560 - $790
True cash balance = $5,390 + $560 - $790
True cash balance = $5,160
Therefore, Duke Company's true cash balance is $5,160.\
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Duke's true cash balance after subtracting outstanding checks and adding deposits in transit is $5,160.
Explanation:The question pertains to calculating a company's true cash balance after accounting for outstanding checks and deposits in transit.
To find Duke's true cash balance, you would subtract the amount of outstanding checks from the unadjusted bank balance and then add the deposits in transit. The formula can be expressed as follows: True Cash Balance = Unadjusted Bank Balance - Outstanding Checks + Deposits in Transit.
So, Duke's true cash balance can be calculated as follows: $5,390 - $790 + $560 = $5,160.
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If the company paid out $654,000 in cash dividends during 2021, what was the cash flow to stockholders for the year? (enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)
The cash flow to stockholders for the year can be calculated by subtracting the cash dividends paid out from the net cash flow from operating activities. However, since the net cash flow from operating activities was not provided, I cannot provide a specific answer.
In general, the cash flow to stockholders includes dividends paid out to shareholders. It represents the cash amount that is distributed to the owners of the company's stock. This cash flow can be positive if the company pays dividends to stockholders, or it can be negative if the company raises additional capital by issuing new shares.
To determine the cash flow to stockholders for the year, it would be necessary to know the net cash flow from operating activities, which can be found in the company's financial statements such as the cash flow statement.
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You need to review the 9 Principles of War on page 9 in our textbook. Choose 3 of them that you feel particularly apply to business. State which three they are, why you think they are especially important for competing in business, and give specific examples of these strategies being used by a company or companies.
Three principles of war that apply to business are objective, unity of effort, and economy of force. These three principles from the domain of war can be successfully applied to business strategy, helping companies set clear objectives, foster collaboration, and optimize resource allocation for competitive advantage.
1. Objective: The principle of having a clear objective in business is essential for success. Just as in warfare, businesses need a clear goal or purpose to guide their actions. Having a well-defined objective helps in aligning resources, making strategic decisions, and measuring success.
For example, Apple's objective of creating innovative and user-friendly technology has guided their product development, marketing, and customer experience.
2. Unity of effort: In business, teamwork and collaboration are crucial for achieving goals. The principle of unity of effort emphasizes the importance of coordination and cooperation among different stakeholders. Companies that foster a culture of teamwork and encourage cross-functional collaboration tend to be more effective in achieving their objectives.
An example of this is the partnership between Nike and Apple, where they collaborated to create the Nike+ iPod Sports Kit, combining their expertise in sports and technology.
3. Economy of force: Efficient use of resources is vital in both warfare and business. The principle of economy of force highlights the importance of using resources wisely to maximize their impact. In business, this can mean optimizing processes, minimizing waste, and prioritizing investments.
Amazon's use of data analytics and automation to streamline their supply chain and reduce costs exemplifies the application of this principle.
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businessaccountingaccounting questions and answers1). "harmina inc.'s target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. its bonds have a 12 percent coupon rate, semiannual interest payments, a current maturity of 20 years, and
Question: 1). "Harmina Inc.'S Target Capital Structure Is 20 Percent Debt, 20 Percent Preferred Stock, And 60 Percent Common Equity. Its Bonds Have A 12 Percent Coupon Rate, Semiannual Interest Payments, A Current Maturity Of 20 Years, And
1). "Harmina Inc.'s target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon rate, semiannual interest payments, a current maturity of 20 years, and a market value equal to their par value of Php1,000. The firm's marginal tax rate is 40 percent. Harmina's policy is to use a risk premium of 3 percentage points when using the bond-yield-plus-risk-premium method. What is Harmina's cost of retained earnings?"
0.15
0.102
0.09
none of the above
2). Grace, an executive of Manila Bank, plans to issue common stock that is expected to pay dividend equal to Php11.52 per share and sells for Php120 per share to raise funds to support its growth expected to be at 5 percent, indefinitely. It will cost Php4.80 per share to issue the new common stock. What is Manila Bank's cost of issuing new common stock?"
0.1
0.15
0.096
0.146
3). Shala Inc.'s beta coefficient is 1.2, the risk-free rate is 10 percent, and the market return is 15 percent. Based on the capital asset pricing model (CAPM), what should be Shalas' cost of retained earnings.
4). Manalo Inc.'s common stock sells for Php20 per share, its current dividend was Php1.00, its growth rate is a constant 6 percent, and the company must pay flotation cost equal to 20 percent when it issues new common stock. What is Manalo's cost of retained earnings?"
5). Bea and Pia Inc. has a target capital structure of 40 percent debt, 10 percent preferred stock, and 50 percent common equity. PNR's common stock currently sells for Php40 per share. PNR recently paid a dividend equal to Php2 per share on its common stock, and investors expect the dividend to grow indefinitely at a constant rate of 10 percent per year. If it issues new common stock, the firm will incur flotation costs equal to 7 percent. What is the firm's cost of new common equity
1) 0.15
2) 0.0963) 0.162
4) 0.12
5) 0.144
businessaccountingaccounting questions and answers1). "harmina inc.'s target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. its bonds have a 12 percent coupon rate, semiannual interest payments, a current maturity of 20 years,
1) To calculate the cost of retained earnings, we need to use the bond -yield-plus-risk-premium method.
is 3 percentage points. Given a 12% coupon rate on the bonds, the cost of debt is 12% + 3% = 15%. Since the target capital structure for common equity is 60%, the cost of retained earnings is 0.15 (15%).
2) The cost of issuing new common stock can be calculated using the dividend growth model. The dividend per share is Php11.52, and the selling price is Php120. The flotation cost is Php4.80. The cost of issuing new common stock is calculated as (dividend / selling price) + flotation cost, which is (11.52 / 120) + 4.80 = 0.096.
3) Using the capital asset pricing model (CAPM), the cost of retained earnings is calculated as the risk-free rate plus the beta coefficient multiplied by the market risk premium. The risk-free rate is 10%, and the market return is 15%. With a beta coefficient of 1.2, the cost of retained earnings is 0.10 + (1.2 * (0.15 - 0.10)) = 0.162.
4) The cost of retained earnings for Manalo Inc. can be calculated using the dividend growth model. The current dividend is Php1.00, and the growth rate is 6%. The flotation cost for new common stock is 20%. The cost of retained earnings is (dividend / current stock price) + flotation cost, which is (1.00 / 20) + 0.20 = 0.12.
5) To calculate the cost of new common equity, we use the dividend growth model. The dividend per share is Php2, the growth rate is 10%, and the flotation cost for new common stock is 7%. The cost of new common equity is (dividend / current stock price) + flotation cost, which is (2 / 40) + 0.07 = 0.144.
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The objective of this discussion is to examine the purpose of brand elements and determine the proper mix in order to maximize brand equity.
Arturo, the CMO of General Motor (GM) just finished a strategy meeting and immediately scheduled a meeting with the GM division Marketing VP's. Arturo said: "The recent strike set our brands behind the times. Consumers are losing confidence. I want each one of you to look at one of our brands and determine how we can improve the brand process and equity by better mixing and matching the brand elements and building blocks. Have the report back to me no later than Sunday".
What will Arturo expect in each of the reports?
What research will Arturo expect?
The research should be comprehensive and provide a solid foundation for the proposed recommendations in the reports. In each of the reports, Arturo will expect an analysis of a specific brand within General Motors (GM) and suggestions on how to improve the brand process and equity.
Specifically, Arturo will be looking for information on how to better mix and match the brand elements and building blocks to enhance the brand's positioning and appeal to consumers. The reports should provide a detailed assessment of the current state of the brand, identify areas of improvement, and propose actionable strategies to maximize brand equity.
As for the research, Arturo will expect the reports to be based on thorough market research and consumer insights. This research should include an analysis of consumer perceptions, preferences, and trends related to the brand. Additionally, competitive analysis and benchmarking should be conducted to understand the market landscape and identify opportunities for differentiation.
The research should be comprehensive and provide a solid foundation for the proposed recommendations in the reports.
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you want to buy a cabin at retirement in 20 years. you have shopped around and predict that a cabin to your liking will cost $500,000 in 20 years. this is based on an assumption of inflation being 3% per year. you want to save money at the end of each year for the next 20 years to fund this goal. instead of fixed payments you want to make payments that increase each year by inflation. what is your first year's payment (rounded to the nearest dollar) if you expect to earn 8% annually on your savings?
The first year's payment (rounded to the nearest dollar) is Option D. $15,816.
The calculation for the first year's payment is shown below, The future cost of the cabin (FV) is given as $500,000.
Inflation rate (i) is given as 3% which is compounded annually.
Number of years (n) is 20 years.
The rate of return on savings (R) is 8%
The formula for the future value of a single sum is:
FV = PV(1+i)n
where
PV = Present Value of the Investment
i = Annual Inflation Rate
n = Number of years
FV = Future Value of the investment
Using the formula, the Future cost of the cabin in 20 years = PV (1+i) n$500,000 = PV (1 + 3%) 20PV = $500,000 / (1 + 3%)20 = $271,823.53
The present value of the amount that needs to be saved = $271,823.53
The formula for finding the first year's payment is:
PMT = (PV * R * (1+R)n) / ((1+R)n - 1)4
where
PV = Present Value of the Investment
n = Number of years
R = Rate of Return on savings
PMT = Annual Payment
Using the formula,
PMT = (PV * R * (1+R)n) / ((1+R)n - 1)
PMT = ($271,823.53 * 8% * (1 + 8%)20) / ((1 + 8%)20 - 1)
PMT = $15,816.66 ≈ $15,816
Therefore, the first year's payment (rounded to the nearest dollar) is $15,816. Therefore, the correct option is D.
The question was incomplete, Find the full content below:
You want to buy a cabin at retirement in 20 years. You have shopped around and predict that a cabin to your liking will cost $500,000 in 20 years. This is based on an assumption of inflation being 3% per year. You want to save money at the end of each year for the next 20 years to fund this goal. Instead of fixed payments you want to make payments that increase each year by inflation. What is your first year's payment (rounded to the nearest dollar) if you expect to earn 8% annually on your savings?
A. $8,502
B. $8,757
C. $15,356
D. $15,816
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The scenario: ABC Pty Ltd. purchased 5 acres of land, which had been used as land for grazing sheep, for $2 million. The company was formed for the purpose of purchasing the land and grazing sheep on it and Mr and Mrs Jones owned all the shares in the company and were the directors of the company. Five years after the purchase, Mr and Mrs Jones are considering either selling the land or selling the shares in the company. The property was vacant for the entire time that Mr and Mrs Jones owned it (they did not live on the property). It was never used as grazing property. Mr and Mrs Jones have no knowledge or experience regarding how to graze sheep but had purchased and resold land on several occasions. Required: 1. Citing all relevant legislation and case law, advise Mr and Mrs Jones as to the income tax consequences of the below potential transactions: (a) The sale of the land by ABC Pty. Ltd.; and (b) The sale of the shares in the company by Mrs and Mrs Jones.
The sale of land by ABC Pty. Ltd.The sale of land by ABC Pty. Ltd. may have different tax consequences depending on how the sale proceeds are allocated.
The Australian Taxation Office (ATO) generally treats the sale of land as the disposal of a capital asset, which is subject to capital gains tax (CGT). However, it may also be subject to ordinary income tax if the land is sold in the ordinary course of carrying on a business.In the present case, ABC Pty. Ltd. was formed for the purpose of purchasing the land and grazing sheep on it.
Therefore, the sale of the land would likely be considered as the disposal of a business asset, which would be subject to ordinary income tax. In addition, if the sale proceeds exceed the cost of the land ($2 million), the excess amount would be subject to CGT under the normal rules that apply to capital assets.
These concessions include a 50% CGT discount, the retirement exemption, the 15-year exemption, and the small business rollover.If the company is not considered an SBE, Mr and Mrs Jones would not be eligible for the small business CGT concessions, and any capital gain on the sale of their shares would be subject to CGT.
The CGT rules would also apply if the company owned any other assets that were sold as part of the share sale.Under the rules in section 109-5 of the Income Tax Assessment Act 1997 (Cth), any capital gain or capital loss made on the disposal of the shares would be disregarded if the shares were acquired before 20 September 1985. However, this exemption would not apply if the company had made any significant changes to its business or assets after that date.
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.
deleito publishing is known for its consultative buying center culture. recognizing this corporate culture, someone attempting to sell to deleito publishing should
Deleito Publishing's consultative buying center culture emphasizes collaboration, information sharing, and relationship-building. Salespeople should work closely with the buying team, share insights, and be responsive to increase sales success.
Deleito publishing is a firm that is well-known for its consultative buying center culture. A consultative buying center culture is a type of organizational structure that puts a premium on collaboration and information sharing in order to make better buying decisions. This kind of culture helps to promote the idea that the people involved in the buying process should be willing to work together and share information in order to make the best possible buying decisions. When attempting to sell to Deleito publishing, it is important to keep this corporate culture in mind. This means that someone trying to sell to this company should focus on building relationships and working collaboratively with the buying team. They should also be prepared to share information and provide insights that can help the team make the best possible buying decision. Additionally, it is important to be responsive to the needs of the buying team and be willing to work closely with them throughout the buying process. By doing so, a salesperson can help to build trust with the buying team and increase the chances of making a successful sale.For more questions on company culture
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Upiter explorers has $8,000 in sales. the profit margin is 4 percent. there are 4,200 shares of stock outstanding, with a price of $1.50 per share. what is the company's price-earnings ratio?
The market price per share is subtracted from the company's profits per share to arrive at the P/E ratio. A high P/E ratio may indicate that a stock is overvalued and its price is excessive to its earnings. A low P/E ratio can suggest that the stock price right now is undervalued in earnings.
The price-earnings ratio, often known as the P/E ratio, P/E, or PER, calculates the price an organization pays for its shares about its earnings per share. The ratio is used to assess a company's value and determine if it is fair or not.
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Global Services is considering a promotional campaign that will increase annual credit sales by $620,000. The company will require investments in accounts receivable, inventory, and plant and equipment. The turnover for each is as follows: Accounts receivable 4x Inventory 8x Plant and equipment 2x All $620,000 of the sales will be collectible. However, collection costs will be 3 percent of sales, and production and selling costs will be 73 percent of sales. The cost to carry inventory will be 4 percent of inventory. Depreciation expense on plant and equipment will be 15 percent of plant and equipment. The tax rate is 35 percent. (a) Compute the investments in accounts receivable, inventory, and plant and equipment based on the turnover ratios. Add the three together. (Omit the "$" sign in your response.) Accounts receivable $ Inventory Plant and equipment Total Investment $ (b) Compute the accounts receivable collection costs and production and selling costs and add the two figures together. (Omit the "$" sign in your response.) Collection cost $ Production and selling costs Total costs related to accounts receivable $ (c) Compute the costs of carrying inventory. (Omit the "$" sign in your response.) Cost of carrying inventory $ (d) Compute the depreciation expense on new plant and equipment. (Omit the "$" sign in your response.) Depreciation expense $ (e) Compute total cost. (Omit the "$" sign in your response.) Total costs $ (f) Compute income after taxes. (Omit the "$" sign in your response.) Income after taxes $ (g) If the firm has a required return on investment of 12 percent, should it undertake the promotional campaign described throughout this problem? Yes No
Yes, the return on investment (12.45%) exceeds the required return on investment (12%), the firm should undertake the promotional campaign.
(a) Compute the investments in accounts receivable, inventory, and plant and equipment based on the turnover ratios:
Accounts receivable investment:
Accounts receivable turnover = 4
Credit sales increase = $620,000
Accounts receivable investment = Credit sales increase / Accounts receivable turnover
Accounts receivable investment = $620,000 / 4 = $155,000
Inventory investment:
Inventory turnover = 8
Cost of goods sold (production and selling costs) = 73% of sales = 0.73 * $620,000 = $452,600
Inventory investment = Cost of goods sold / Inventory turnover
Inventory investment = $452,600 / 8 = $56,575
Plant and equipment investment:
Plant and equipment turnover = 2
Plant and equipment investment = Credit sales increase / Plant and equipment turnover
Plant and equipment investment = $620,000 / 2 = $310,000
Total Investment:
Total Investment = Accounts receivable investment + Inventory investment + Plant and equipment investment
Total Investment = $155,000 + $56,575 + $310,000 = $521,575
(b) Compute the accounts receivable collection costs and production and selling costs:
Accounts receivable collection costs:
Collection costs = 3% of sales = 0.03 * $620,000 = $18,600
Production and selling costs:
Production and selling costs = 73% of sales = 0.73 * $620,000 = $452,600
Total costs related to accounts receivable:
Total costs related to accounts receivable = Collection costs + Production and selling costs
Total costs related to accounts receivable = $18,600 + $452,600 = $471,200
(c) Compute the cost of carrying inventory:
Cost of carrying inventory = 4% of inventory investment
Cost of carrying inventory = 0.04 * $56,575 = $2,263
(d) Compute the depreciation expense on new plant and equipment:
Depreciation expense = 15% of plant and equipment investment
Depreciation expense = 0.15 * $310,000 = $46,500
(e) Compute the total cost:
Total cost = Total costs related to accounts receivable + Cost of carrying inventory + Depreciation expense
Total cost = $471,200 + $2,263 + $46,500 = $519,963
(f) Compute income after taxes:
Income before taxes = Credit sales increase - Total cost
Income before taxes = $620,000 - $519,963 = $100,037
Income after taxes = Income before taxes * (1 - tax rate)
Income after taxes = $100,037 * (1 - 0.35) = $65,025.05
(g) If the firm has a required return on investment of 12 percent, should it undertake the promotional campaign described throughout this problem?
To determine if the firm should undertake the promotional campaign, compare the income after taxes to the total investment:
Return on investment = Income after taxes / Total investment
Return on investment = $65,025.05 / $521,575 = 0.1245
Since the return on investment (12.45%) exceeds the required return on investment (12%), the firm should undertake the promotional campaign.
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Baxter international has an EPS of 2.35 a book value per share of 21.84 and a market book ratio of 2.3 X. what is it's P/E ratio?
The P/E ratio of Baxter International is 10.05.
The P/E ratio, or price-to-earnings ratio, is a financial metric that measures the valuation of a company's stock relative to its earnings. It is calculated by dividing the market price per share by the earnings per share (EPS). In this case, the given EPS of Baxter International is 2.35.
To calculate the P/E ratio, we need to know the market price per share. However, only the market-to-book ratio (2.3X) and the book value per share (21.84) are provided. The market-to-book ratio compares the market value of a company's stock to its book value per share. It indicates how much investors are willing to pay for each dollar of book value.
In order to determine the market price per share, we can multiply the book value per share by the market-to-book ratio: 21.84 × 2.3 = 50.232.
Now, we can calculate the P/E ratio by dividing the market price per share (50.232) by the earnings per share (2.35): 50.232 / 2.35 = 10.05.
Therefore, Baxter International has a P/E ratio of 10.05, indicating that investors are willing to pay approximately 10 times the company's earnings for each share of its stock.
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Mahon Corporation has two production departments, Casting and Curtomiting. The compory uses a joborder costing sytes and computas a predetemined overhead rate in each production department. The Castin
The amount of overhead applied in the Customizing Department to Job T138 is $1,000. The predetermined overhead cost for the Customizing Department is based on direct labor-hours.
We know that the total fixed manufacturing overhead cost for the Customizing Department is $48,000, and there are 12,000 direct labor-hours estimated for the year. To calculate the predetermined overhead rate for the Customizing Department, we divide the total fixed manufacturing overhead cost by the estimated direct labor-hours: $48,000 / 12,000 = $4 per direct labor-hour.
For Job T138, the recorded direct labor-hours in the Customizing Department is 100. To calculate the amount of overhead applied to Job T138 in the Customizing Department, we multiply the recorded direct labor-hours by the predetermined overhead rate: 100 hours * $4 per direct labor-hour = $400. Therefore, the amount of overhead applied in the Customizing Department to Job T138 is $400.
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The complete question is: Mahon Corporation has two production departments, Casting and Customizing. The company uses a job order costing system and computes a predetermined overhead rate in each production department. The Casting Department's predetermined overhead rate is based on machine-hours and the Customizing Department's predetermined overhead rate is based on direct labor-hours At the beginning of the current year, the company had made the following estimates Machine-hours Direct labor-hours Total fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour Casting 16.000 5.000 $112.000 $ 2.80 Customizing 12.000 .00 $48.000 During the current month the company started and finished Job T138. The following data were recorded for this job Casting Customizing Job 7138: Machine-hours Direct labor-hours 100 The amount of overhead applied in the Customizing Department to Job T138 closest to (Round your intermediate calculations to 2 decimal places.) I Multiple Choice O $60.00 o o O $360,00 O $48000 o o 1.000.00
If performed in a proper manner, building commissioning activities begin in the _______________ and may continue throughout the entire life cycle of a building. group of answer choices
If performed in a proper manner, building commissioning activities begin in the design phase and may continue throughout the entire life cycle of a building.
A process to test and verify that a facility and its systems function according to the owner’s requirements and design intent is known as Building commissioning. Commissioning involves various activities and phases from planning and design to construction, installation, operation, and documentation and it can apply to both new and existing buildings.
Commissioning aims to ensure quality, energy efficiency, environmental health, occupant safety, and lower operation and maintenance costs. The building commissioning process usually follows these steps:
PreparationDesignPre-ConstructionConstructionCommissioning of ServicesPre-HandoverInitial OccupancyPost-Occupancy CareTo learn more about Commissioning:
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Loyalty programs and location-based promotions are often implemented through apps as part of a(n) _____________ marketing strategy.
Loyalty programs and location-based promotions are often implemented through apps as part of a mobile marketing strategy.
Mobile marketing refers to the use of mobile devices, such as smartphones and tablets, to reach and engage with consumers. It allows businesses to connect with their target audience on a personal level, delivering targeted messages and offers directly to their mobile devices. Loyalty programs are a popular marketing tool used by businesses to incentivize customer loyalty and repeat purchases. They typically involve offering rewards, discounts, or exclusive offers to customers who frequently make purchases or engage with a brand.
By implementing loyalty programs through mobile apps, businesses can provide a convenient and personalized experience for their customers. For example, customers can easily track their points, redeem rewards, and receive notifications about exclusive promotions. Location-based promotions, on the other hand, leverage the GPS capabilities of mobile devices to deliver targeted offers and messages based on a customer's location. Businesses can use geolocation technology to send push notifications or display targeted ads when customers are near their physical stores or within a specific geographic area.
This allows businesses to drive foot traffic, increase sales, and enhance the overall customer experience. For instance, a retail store may send a personalized discount coupon to a customer's mobile device when they are in close proximity to their store. In conclusion, loyalty programs and location-based promotions are commonly integrated into mobile apps as part of a mobile marketing strategy. These strategies allow businesses to engage with customers on a personal level, increase customer loyalty, and drive sales through targeted and convenient mobile experiences.
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You have $69,000. You put 15% of your money in a stock with an expected return of 15%,$31,000 in a stock with an expected return of 18%, and the rest in a stock with an expected return of 21%. What is the expected return of your portfolio? The expected return of your portfolio is \%. (Round to two decimal places.)
To calculate the expected return of your portfolio, we need to consider the weight or proportion of each stock in your portfolio and multiply it by the expected return of that stock. Here's how you can calculate it:
1. Calculate the amount of money invested in each stock based on the given percentages:
- Amount invested in the stock with a 15% expected return: 15% * $69,000 = $10,350
- Amount invested in the stock with an 18% expected return: $31,000
- Amount invested in the stock with a 21% expected return: Remaining balance = $69,000 - $10,350 - $31,000
2. Calculate the weighted average of the expected returns:
- Multiply the amount invested in each stock by its expected return.
- Sum up the results and divide by the total amount invested.
Let's calculate the expected return of your portfolio:
Expected return from the stock with a 15% expected return: 15% * $10,350 = $1,552.50
Expected return from the stock with an 18% expected return: 18% * $31,000 = $5,580
Expected return from the stock with a 21% expected return: 21% * (Remaining balance)
To find the expected return of the portfolio, we need to calculate the remaining balance:
Remaining balance = $69,000 - $10,350 - $31,000 = $27,650
Expected return from the stock with a 21% expected return: 21% * $27,650 = $5,802.50
Now, sum up the expected returns from each stock:
Total expected return = $1,552.50 + $5,580 + $5,802.50
Finally, divide the total expected return by the total investment amount ($69,000) and multiply by 100 to express it as a percentage:
Expected return of your portfolio = (Total expected return / $69,000) * 100
Calculating the expected return:
Expected return of your portfolio = (($1,552.50 + $5,580 + $5,802.50) / $69,000) * 100
Expected return of your portfolio ≈ 16.45%
Therefore, the expected return of your portfolio is approximately 16.45% (rounded to two decimal places).
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Determine the multifactor measure of productivity using the following numbers:
Output: 10 toys per hour
Labor: 4.4 hours at $10 per hour
Capital: $12.50 total
Energy: $.23 cents per hour
The multifactor measure of productivity can be determined by dividing the output by the combined input of labor, capital, and energy. In this case, the multifactor productivity is 0.857 toys per dollar.
To calculate the multifactor measure of productivity, we divide the output by the combined input of labor, capital, and energy.
Given:
Output = 10 toys per hour
Labor = 4.4 hours at $10 per hour
Capital = $12.50
Energy = $0.23 cents per hour
First, we calculate the total cost of labor:
Total labor cost = Labor hours * Hourly wage = 4.4 * $10 = $44
Next, we calculate the total cost of energy:
Total energy cost = Energy cost per hour * Labor hours = $0.23 * 4.4 = $1.012
Now, we calculate the total input cost:
Total input cost = Total labor cost + Capital cost + Total energy cost
= $44 + $12.50 + $1.012 = $57.512
Finally, we determine the multifactor productivity:
Multifactor productivity = Output / Total input cost
= 10 / $57.512
≈ 0.1738 toys per dollar
Therefore, the multifactor measure of productivity is approximately 0.1738 toys per dollar.
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investment banks make loans that individuals and businesses use to buy goods or expand business operations, which in turn leads to more deposited funds that make their way to bank
False. Investment banks primarily facilitate financial transactions and provide advisory services, while commercial banks typically make loans to individuals and businesses, leading to more deposited funds.
Investment banks:
Investment banks focus on providing financial services such as underwriting securities offerings, facilitating mergers and acquisitions, and offering advisory services to corporations and institutions.They assist in raising capital, managing risks, and executing complex financial transactions for their clients.Investment banks play a vital role in the global financial system by connecting investors with opportunities and helping companies access capital markets.Commercial banks:
Commercial banks primarily offer banking services to individuals and businesses, including accepting deposits, granting loans, and providing various financial products and services.They serve as a safe place for individuals to deposit their money and offer loans to individuals and businesses for personal and commercial purposes.Commercial banks play a crucial role in stimulating economic growth by facilitating the flow of funds, supporting businesses with financing, and providing essential banking services to individuals.Learn more about Commercial banks here:
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Your complete question is here:
Investment banks make loans that individuals and businesses use to buy goods or expand business operations, which in turn leads to more deposited funds that make their way to bank. True/False.
How many years will it take an investment to double if the interest rate is 8.4% compounded at the given intervals? (a) Quarterly (b) Monthly (c) Continuously
The interest rate is 8.4% and we need to calculate the number of years required to double the investment amount for different compounding intervals. Quarterly =32.85 years, Monthly =99.65 , Continuously= 8.24
(a) Quarterly To calculate the time required for the investment to double when compounded quarterly, we use the formula for the time required for an investment to double under compound interest. Here, the interest rate is 8.4% per year, which gives us an effective interest rate of 8.4/4 = 2.1% per quarter.
Now, we can solve for the time using the formula: 2 = 1(1 + 2.1/100)^t/4⇒ 2 = (1 + 0.021)^t/4⇒ 2 = (1.021)^t/4
Now, taking log on both sides, we get: t/4 * log(1.021) = log(2)⇒ t = 4 * log(2) / log(1.021)≈ 32.85
Therefore, it will take approximately 32.85 years for the investment to double if the interest rate is 8.4% compounded quarterly.
(b) Monthly To calculate the time required for the investment to double when compounded monthly, we use the same formula, but with an effective interest rate of 8.4/12 = 0.7% per month. 2 = 1(1 + 0.7/100)^t/12⇒ 2 = (1.007)^t/12
Taking log on both sides, t/12 * log(1.007) = log(2)⇒ t = 12 * log(2) / log(1.007)≈ 99.65
Therefore, it will take approximately 99.65 years for the investment to double if the interest rate is 8.4% compounded monthly.
(c) Continuously To calculate the time required for the investment to double when compounded continuously, we use the formula for continuous compound interest. Here, the effective interest rate is also 8.4%.2 = 1e^(0.084t)
Taking natural log on both sides, ln(2) = 0.084t⇒ t = ln(2) / 0.084≈ 8.24
Therefore, it will take approximately 8.24 years for the investment to double if the interest rate is 8.4% compounded continuously.
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Analyze the various financial tools available to you to determine which tools will be most helpful in assessing a fix a flat business and whether I can afford to purchase the competitor.
To analyze the various financial tools available to assess a fix a flat business and determine affordability to purchase a competitor, there are a few key tools that can be helpful:
1. Financial Statements: Reviewing financial statements such as the income statement, balance sheet, and cash flow statement can provide insights into the current financial position and performance of the business. This analysis can help assess the feasibility of purchasing a competitor.
2. Ratio Analysis: Calculating and analyzing financial ratios can provide a deeper understanding of the financial health of the business. Common ratios include profitability ratios, liquidity ratios, and solvency ratios. By comparing these ratios to industry benchmarks, you can assess the financial viability of the business and evaluate if purchasing a competitor is feasible.
3. Cash Flow Analysis: Analyzing the cash flow of the business is crucial to understanding its ability to generate sufficient cash to meet its obligations. This includes assessing the cash flow from operations, investing activities, and financing activities. A positive and consistent cash flow is essential for evaluating affordability.
4. Budgeting and Forecasting: Developing a comprehensive budget and financial forecast can help in assessing the financial feasibility of purchasing a competitor. By projecting revenue, expenses, and cash flow, you can determine if the business can sustain the costs associated with the acquisition.
5. Cost-Benefit Analysis: Conducting a cost-benefit analysis can assist in determining the potential benefits and risks of acquiring a competitor. This involves evaluating the expected financial gains from the acquisition against the costs and potential risks involved.
By utilizing these financial tools and conducting a thorough analysis, you can assess the financial viability of fixing a flat business and determine whether you can afford to purchase the competitor.
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Logano Driving School's 2017 balance sheet showed net fixed assets of $5.4 million, and the 2018 balance sheet showed net fixed assets of $6 million. The company's 2018 Income statement showed a depreciation expense of $425,000. 1.31 points What was net capital spending for 2018? (Do not round Intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) (2 02:07:30 Net capital spending eBook Hint Print References
Logano Driving School's 2017 balance sheet showed net fixed assets of $5.4 million, and the 2018 balance sheet showed net fixed assets of $6 million. The company's 2018 Income statement showed a depreciation expense of $425,000. The net capital spending for 2018 was $175,000.
The net capital spending for 2018 can be calculated by finding the change in net fixed assets and adding the depreciation expense.
The change in net fixed assets, subtract the net fixed assets from the previous year from the net fixed assets of the current year:
Change in net fixed assets = Net fixed assets in 2018 - Net fixed assets in 2017
Change in net fixed assets = $6,000,000 - $5,400,000
Change in net fixed assets = $600,000
Next, add the depreciation expense to the change in net fixed assets:
Net capital spending = Change in net fixed assets + Depreciation expense
Net capital spending = $600,000 + $425,000
Net capital spending = $1,025,000
Therefore, the net capital spending for 2018 is $1,025,000.
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At the yearly annual investment meeting, asset allocation across all classes is reviewed and revised. Currently, the size of the fund is £500m and fund’s allocation is as follows:
10% forex (US and Euros dollar)
20% bonds
30% equity
20% alternate Investments (Real estate and commodities)
20% Private equity
Inflation forecasts have recently been upgraded due to supply and demand mismatch in the fuel and energy sector. This has impacted cost of living index around the world and most central banks now increasing key interest rates for this first time after the Covid-19 pandemic. Due to the uncertain forecast of the UK economy, the investment committee has decided to synthetically reduce bond and equity exposure by 10% each and redirect the funds to Real Estate through REITs (Real Estate Investment Trusts) and commodities.
Beta of stocks in the fund is 1.2
Beta of equity index futures is 1
Price of equity index futures is 150,000
Modified duration of bond portfolio is 6.2
Price of bond futures is 30,500
Duration of treasury futures is 5.0
Beta of REITs in the fund is 1.2
I) Calculate the number of bond index futures contract and equity index futures that should be bought or sold to reduce to achieve the new allocation. (5 marks)
II) Calculate the number of REITs index futures the fund should buy or sell to increase the allocation to alternate investment by 15% of the fund value that is, £75m. REIT index future beta is 1 and price of REIT index future is £99,000. (3 marks)
III) As the risk manager, you are required to advise the investment committee on whether additional 5% exposure to commodities be gained through forwards and futures. Outline the main similarities and differences between these two. (6 marks)
IV) Assume, the firm decides to enter a forward contract with settlement in 3 months. Determine the price of the forward contract assuming discrete cash flows when the risk-free rate is 3.5%, spot price is £1509.04/ounce, carry cost is £ 3.86 and benefit is £6.76/ per ounce. Briefly explain how this works and expected gain or loss at settlement date. (3 marks)
V)You are also asked to explain the committee how a futures contract works. The clearing house that the hedge fund uses requires a 25% initial margin and 18% maintenance margin of the contract price. The expected spot price of the future over the next month is: Price end of Day 10 = 1520
Day 20 = 1535
Day 30 = 1400
Assume both parties agree to close out their position. Determine the expected payoff to long and short party. (4 marks)
Given the bleak economic outlook, the firm would also like to hedge its equity portfolio against unexpected price movements. Based on historical data, the equity portfolio manager expects some volatility but is convinced that extreme outcomes are unlikely. He is considering several hedging strategies but is faced with severe cash shortages. Mr. Smith; one of the portfolio managers, suggested to the investment committee that it would be cheaper to acquire increased equity exposure synthetically through options rather than futures.
(V) Do you agree that options are cheaper than futures contracts? Consider overall gain and losses from these 2 positions in explanation your answer? (3 marks)
VI) Mr. Smith also suggested either a collar or a straddle should be used to benefit from the uncertainty. Explain with the aid of diagram, how a collar and straddle work and which strategy would cost lesser to employ. Consider for both: maximum profit, maximum loss and break-even. (6 marks)
(30 marks)
I) To achieve the new allocation by reducing bond and equity exposure by 10% each, we need to calculate the amounts to be bought or sold for bond index futures and equity index futures.
Current bond allocation: 20% of £500m = £100m
New bond allocation: 20% - 10% = 10% of £500m = £50m
Change in bond exposure: £100m - £50m = £50m (to be sold)
Price of bond futures: £30,500
Number of bond index futures contracts = Change in bond exposure / Price of bond futures
= £50m / £30,500
≈ 1639 contracts
Current equity allocation: 30% of £500m = £150m
New equity allocation: 30% - 10% = 20% of £500m = £100m
Change in equity exposure: £150m - £100m = £50m (to be sold)
Price of equity index futures: £150,000
Number of equity index futures contracts = Change in equity exposure / Price of equity index futures
= £50m / £150,000
≈ 333 contracts
II) To increase the allocation to alternate investment by 15% of the fund value (£75m), we need to calculate the number of REITs index futures to be bought.
Price of REIT index future: £99,000
Number of REITs index futures contracts = Increase in allocation / Price of REIT index future
= £75m / £99,000
≈ 758 contracts
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A for sale by owner brokerage relationships disclosure document requires _____________.
A for-sale by owner brokerage relationships disclosure document requires the broker to disclose his/her relationship with the buyer.
A for sale by owner brokerage relationships disclosure document requires that sellers complete or sign off on dozens of documents, such as a Natural Hazards Disclosure Statement, Local and State Transfer Disclosure Statements, and even Megan’s Law Disclosures. A broker is a person or a firm that buys and sells things or executes transactions for other parties in exchange for a commission.
In the United States, a federal law that requires law enforcement authorities to make information available to the public regarding registered sex offenders is known as Megan’s Law. In some states, real estate disclosure laws require the seller to provide the buyer with details of any known problems, including issues outside of the property in the local area, which could be related to Megan’s Law.
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In what industry is inventory valuation not a key accounting issue?
a.
Health Care.
b.
Banking and Capital Markets.
c.
Technology.
d.
Manufacturing.
Inventory valuation is not a key accounting issue in the banking and capital markets industry. This is option (b) in the answer choices provided.
In the banking and capital markets industry, the primary focus is on financial assets such as loans, securities, and other financial instruments rather than physical inventory. Unlike industries such as manufacturing or retail, where inventory plays a central role in operations, the banking and capital markets sector deals primarily with financial transactions and services. The valuation and reporting of financial assets, such as loans and securities, are more critical in this industry.
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Super Ltd manufactures snack foods and commenced a new research project, known as "Super Bar", on 1 July 2015.
Research costs of $100,000 were expensed during the year ended 30 June 2016. Development costs of $200,000, incurred during the year ended 30 June 2017, were capitalised. Commercial production started on 1 July 2017 and it is expected there will be profitable sales from the Super Bar project for a five (5) year period. Super Ltd has adopted the cost model for Development Assets.
At 30 June 2019 the recoverable amount of the Development Asset relating to the Super Bar project was estimated to be $100,000.
Under AASB 136: Impairment of Assets, the impairment loss recognised in Super Ltd’s statement of profit or loss and other comprehensive income for the year ended 30 June 2019 is:
The impairment loss recognized by Super Ltd for the year ended 30 June 2019, as per AASB 136, is $100,000. This loss arises from the carrying amount of the Development Asset exceeding its estimated recoverable amount of $100,000.
To determine the impairment loss recognized in Super Ltd's statement of profit or loss and other comprehensive income for the year ended 30 June 2019, we need to compare the carrying amount of the Development Asset with its recoverable amount.
The carrying amount of the Development Asset at 30 June 2019 is the capitalized development costs, which is $200,000.
The recoverable amount is the higher of the asset's fair value less costs to sell or its value in use. Since the fair value is not given in the information provided, we will consider the value in use.
If the recoverable amount is less than the carrying amount, an impairment loss is recognized.
In this case, the recoverable amount of the Development Asset was estimated to be $100,000. Since the carrying amount ($200,000) is higher than the recoverable amount ($100,000), an impairment loss needs to be recognized.
The impairment loss is calculated as the difference between the carrying amount and the recoverable amount. In this case, it is:
Impairment loss = Carrying amount - Recoverable amount
Impairment loss = $200,000 - $100,000
Impairment loss = $100,000
Therefore, the impairment loss recognized in Super Ltd's statement of profit or loss and other comprehensive income for the year ended 30 June 2019 is $100,000.
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Let
θ
^
1
,
θ
^
2
and
θ
^
3
be three estimators for population parameter θ. All estimators are calculated using all available observations in a given sample. We know that E[
θ
^
1
]=E[
θ
^
2
]=θ but E[
θ
^
3
]=θ−1/
n
and Var(
θ
^
1
)=σ
2
. Var(
θ
^
2
)=σ
2
/n and Var(
θ
^
3
)=σ
2
/n
2
. Which is the estimator with the lowest MSE if σ
2
=100 and n=10 ?
θ
^
3
Not enough information to answer.
θ
^
2
θ
^
1
The estimator with the lowest MSE if σ^2 = 100 and n = 10 is θ^3.
From the provided information,[tex]E[θ^1]=E[θ^2]=θ, E[θ^3]=θ−1/n, Var(θ^1)=σ^2, Var(θ^2)=σ^2/n, and Var(θ^3)=σ^2/n^2.[/tex]
Hence, the formula for MSE (Mean Squared Error) of the estimator is given by, MSE = Var(estimator) + (bias of estimator)^2. where bias of estimator = E[estimator] - θ.
For estimator θ^1, MSE =[tex]σ^2 + (θ - θ)^2 = σ^2.[/tex]
For estimator θ^2, MSE = [tex]σ^2/n + (θ - θ)^2/n^2 = σ^2/n.[/tex]
For estimator θ^3, MSE = [tex]σ^2/n^2 + (θ - θ + 1/n)^2 = σ^2/n^2 + 1/n^2 = (σ^2[/tex]+ 1)/n^2.As σ^2 and n are known, we can compare the MSE of the three estimators to find the estimator with the lowest MSE. From the above computations, we get that θ^3 has the lowest MSE because, the estimator with the lowest MSE is θ^3, which has MSE = [tex](σ^2 + 1)/n^2 = (100 + 1)/10^2 = 0.0101[/tex], which is the lowest among the three. Therefore, the estimator with the lowest MSE if σ^2 = 100 and n = 10 is θ^3.
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Consider the market illustrated in the figure to the right. Supply curve S_1, represents the private cost of production and demand curve D_1, represents the private benefit from consumption. Suppose the consumption of this good creates a positive externality. In turn, the social benefit from consumption is represented by demand curve D_2. Show how the externality affects market efficiency. Use the triangle drawing tool to shade in the new economic surplus (New surplus) or the deadweight loss (Deadweight loss) created by the positive externality. Properly label this shaded area. Carefully follow the instructions above, and only draw the required objects.
This is the area between the private market equilibrium and the socially optimal equilibrium that is not included in the new economic surplus. Label this area as "Deadweight loss".
Shading in the new economic surplus and the deadweight loss, you can visually illustrate how the positive externality affects market efficiency.
To show how the externality affects market efficiency, we need to compare the equilibrium of the market without the externality (private market equilibrium) to the equilibrium with the externality (socially optimal equilibrium).
1. Start by drawing the original supply curve (S_1) and demand curve (D_1) on the graph.
2. Draw the new demand curve (D_2) to represent the social benefit from consumption. D_2 should be located above D_1 because the positive externality increases the benefit to society.
3. Identify the intersection point of the original supply curve (S_1) and demand curve (D_1). This is the private market equilibrium.
4. Identify the intersection point of the new demand curve (D_2) and the original supply curve (S_1). This is the socially optimal equilibrium.
5. Shade in the triangle that forms between the two demand curves (D_1 and D_2) and the vertical line that intersects the private market equilibrium. This shaded area represents the new economic surplus created by the positive externality. Label this shaded area as "New surplus".
6. The difference between the private market equilibrium and the socially optimal equilibrium is the deadweight loss caused by the positive externality.
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According to our textbook, wage rigidity may arise from (choose one or more)
A minimum-wage laws
B the monopoly power of unions
C the payment of efficiency wages
33. The purchasing power parity (PPP) theorem (choose one or more)
A is an application of the law of one price
B is limited by transportation costs, the fact that some goods cannot be
shipped at all, and tariffs and quotas
C holds more tightly in the long run than in the short run
34. If we assume constant returns to scale, profit maximization, and competition,
(choose one or more)
A each factor of production is paid its average product
B each factor of production is paid its marginal product
C economic profit is negative D economic profit is positive
E economic profit is zero
According to our textbook, wage rigidity may arise from the minimum-wage laws, the monopoly power of unions, and the payment of efficiency wages. The purchasing power parity (PPP) theorem holds more tightly in the long run than in the short run and is an application of the law of one price.
If we assume constant returns to scale, profit maximization, and competition, each factor of production is paid its marginal product. The wage rigidity refers to the phenomenon in which the wages of employees do not vary according to the changes in market conditions and instead are inflexible. According to the textbook, wage rigidity may arise from minimum-wage laws, the monopoly power of unions, and the payment of efficiency wages.
For instance, minimum wage laws mandate the wages for employees, leaving employers with no other choice but to comply with these laws. Similarly, monopolistic unions can demand higher wages than what the market would typically pay, leading to wage rigidity.The purchasing power parity (PPP) theorem is an application of the law of one price. According to this theorem, exchange rates should be adjusted in a manner that the same good has the same price across all countries.
The PPP theorem holds more tightly in the long run than in the short run. It is limited by transportation costs, tariffs and quotas, and the fact that some goods cannot be shipped at all. If we assume constant returns to scale, profit maximization, and competition, each factor of production is paid its marginal product. Marginal product refers to the increase in output resulting from the addition of one unit of input.
Therefore, if we assume constant returns to scale, profit maximization, and competition, each factor of production is paid its marginal product. This is the best way for firms to ensure that they are optimizing the use of their factors of production. Economic profit would be zero in this scenario.
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