Apple has accomplished risk management by using a forward contract to hedge its currency risk. This allows the company to mitigate uncertainty and potential losses arising from unfavorable exchange rate movements.
By entering into a forward contract, Apple has taken a proactive approach to manage its currency risk. The forward contract allows the company to lock in a specific exchange rate of 7 yuan per dollar, providing stability and predictability for its future transaction. This hedges against the uncertainty of the foreign exchange market, shielding Apple from potential losses due to adverse exchange rate movements.
Creating a table in Excel and visualizing the data through a chart enables Apple to assess its exposure to foreign exchange risk. It allows the company to analyze the potential profit or loss in US dollars based on different market exchange rate scenarios, providing valuable insights for decision-making.
Without managing its currency risk, Apple would be susceptible to the fluctuations of the exchange rate, making it challenging to forecast financial outcomes accurately. This could lead to increased uncertainty, financial losses, and difficulty in planning international transactions. The forward contract empowers Apple to mitigate these risks and make informed business decisions, enhancing its overall risk management strategy.
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Discuss the two new product pricing strategies, and
provide an example to illustrate each. Discuss the challenges faced
by companies launching new products under each of these
strategies.
The two new product pricing strategies are skimming pricing and penetration pricing. Skimming pricing: This strategy involves setting a high initial price for a new product in order to target early adopters and capture maximum profits.
Over time, the price is gradually lowered to attract a broader customer base. An example of skimming pricing is the release of a new smartphone model at a premium price, targeting tech enthusiasts and early adopters who are willing to pay a premium for the latest features and innovations.
Challenges faced: The main challenge with skimming pricing is that it can limit the initial market reach of the product. The high price may deter price-sensitive customers, and competitors may quickly enter the market with lower-priced alternatives. Additionally, as the price is gradually lowered, it may result in a perception of diminishing value for early adopters who paid the premium price.
Penetration pricing: This strategy involves setting a low initial price to quickly gain market share and attract a large customer base. The goal is to penetrate the market and establish the product as a market leader. An example of penetration pricing is a new streaming service offering a significantly lower subscription price compared to established competitors to entice customers to switch.
Challenges faced: The main challenge with penetration pricing is that it may result in lower profit margins initially. The low price may also create a perception of lower quality or value compared to higher-priced competitors. Additionally, once the introductory price ends, customers may be resistant to price increases, making it difficult to achieve profitability in the long term.
In both strategies, companies face the challenge of finding the right balance between pricing, market positioning, and profitability. They must carefully assess the market demand, competition, and customer perception to determine the most suitable pricing strategy for their new product.
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•Critically discuss the reason that prompted or encouraged such a corrupt practice to occur in a well-established and reputable company like Theranos.
•Analyze the performance of Theranosfrom the year 2015 to the year 2018. Do you think that there are other reasons beyond the corruption scandal that may have affected their performance?
•Do you think the incorporation of the triple bottom line could have avoided this scandal? Speculate. Do you think that incorporation of the triple bottom line framework can mitigate or eliminate the corrupt practice in any company?
The corrupt practices that occurred in Theranos, a well-established and reputable company, can be attributed to several factors. These include the pressure to deliver on promises made to investors and stakeholders, a culture of secrecy and fear of failure, and the personal motivations and actions of key individuals within the company.
Additionally, besides the corruption scandal, Theranos faced several other challenges that impacted its performance between 2015 and 2018, including regulatory issues, technological limitations, and the erosion of trust in the company. While the incorporation of the triple bottom line framework, which considers social, environmental, and financial impacts, could have potentially helped prevent the scandal, it is not a foolproof solution. It can provide a holistic perspective and encourage ethical practices, but ultimately, the effectiveness of such frameworks depends on the commitment and integrity of the individuals involved.
The corrupt practices in Theranos were prompted by a combination of factors. One major factor was the immense pressure placed on the company to deliver on its promises. Theranos had attracted significant investments and garnered a high level of media attention, leading to heightened expectations. This pressure to live up to the hype may have driven some individuals within the company to engage in fraudulent practices to maintain the illusion of success.
Additionally, Theranos had cultivated a culture of secrecy and fear of failure. The company's founder, Elizabeth Holmes, created an environment where employees were discouraged from questioning or challenging the company's claims and practices. This culture may have allowed unethical behavior to go unchecked, as employees felt compelled to comply with the prevailing narrative rather than raise concerns.
Moreover, the personal motivations and actions of key individuals played a role in the corruption scandal. Elizabeth Holmes, as the charismatic leader of the company, played a central role in perpetuating the deception. Her desire for success, fame, and personal enrichment seemingly drove her to engage in fraudulent activities, disregarding the potential harm caused to patients and investors.
In analyzing Theranos' performance from 2015 to 2018, it is evident that the corruption scandal was not the sole factor impacting the company. Theranos faced numerous other challenges during this period. Regulatory issues arose when concerns were raised about the accuracy and reliability of the company's blood-testing technology. These concerns led to investigations by regulatory bodies and the subsequent banning of Theranos' founder and former president from owning or operating a medical laboratory for a period of time.
Furthermore, technological limitations posed a significant obstacle. Theranos' claims of being able to conduct a wide range of tests using just a few drops of blood were met with skepticism and scrutiny from experts in the field. The company struggled to validate its technology and faced challenges in meeting regulatory standards.
Additionally, the erosion of trust in Theranos further impacted its performance. As the extent of the corruption and deception became public, the company's reputation suffered greatly. Investors and partners withdrew their support, and legal battles ensued. This loss of trust damaged Theranos' credibility and hindered its ability to attract new investors and partners.
While the incorporation of the triple bottom line framework, which considers social, environmental, and financial impacts, could have potentially helped prevent the scandal, it is not a guaranteed solution. The triple bottom line approach encourages companies to consider ethical and sustainable practices, fostering transparency and accountability. By emphasizing social responsibility, environmental stewardship, and financial viability, companies can develop a more holistic approach to decision-making.
However, the effectiveness of such frameworks ultimately depends on the commitment and integrity of the individuals involved. In the case of Theranos, the corrupt practices occurred despite the presence of regulatory frameworks and guidelines in the healthcare industry. The unethical behavior of key individuals within the company overrode the potential benefits of incorporating the triple bottom line approach.
While the triple bottom line framework can promote ethical practices and help identify potential risks, it cannot eliminate the possibility of corrupt practices entirely. To mitigate and prevent corrupt practices, a combination of strong corporate governance, regulatory oversight, ethical leadership, and a culture that encourages transparency and accountability is necessary.
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The following elements of stockholders' equity are from the balance sheet of Sneed Marketing Corp. at December 31, 2023:
Stockholders' Equity
Paid-In Capital:
Preferred Stock—4%, $2 Par Value; 80,000 shares authorized, 55,000 shares issued and outstanding $110,000
Common Stock—$0.10 Par Value; 8,750,000 shares authorized, 8,000,000 shares issued and outstanding $800,000
Sneed paid no preferred dividends in 2023.
1.
Compute the dividends to the preferred and common shareholders for 2024 if total dividends are $185,000 and assuming the preferred stock is noncumulative. Assume no changes in preferred and common stock in 2024. (Complete all input boxes. Enter "0" for any zero amounts.)
2.
Record the journal entries for 2024 assuming that Sneed Marketing Corp. declared the dividends on July 1 for stockholders of record on July 15. Sneed paid the dividends on July 31.
1. Therefore, the dividends to the preferred shareholders for 2024 are $4,400, and the dividends to the common shareholders are $180,600.
2. These journal entries reflect the declaration and payment of dividends in accordance with the specified dates.
Computation of Dividends:
The preferred stock is noncumulative, which means that if dividends are not paid in a particular year, they are not carried forward to future years. To compute the dividends for 2024, we need to allocate the total dividends of $185,000 between preferred and common shareholders.
Since the preferred stock has a 4% dividend rate and 55,000 shares outstanding, the preferred shareholders will receive dividends of: 4% * $2 * 55,000 = $4,400.
The remaining amount, $185,000 - $4,400 = $180,600, will be distributed to the common shareholders.
Therefore, the dividends to the preferred shareholders for 2024 are $4,400, and the dividends to the common shareholders are $180,600.
Journal Entries for Dividends:
On July 1, when the dividends are declared:
Debit Retained Earnings: $185,000
Credit Dividends Payable: $185,000
On July 31, when the dividends are paid:
Debit Dividends Payable: $185,000
Credit Cash: $185,000
These journal entries reflect the declaration and payment of dividends in accordance with the specified dates.
By following these computations and recording the appropriate journal entries, Sneed Marketing Corp. can accurately distribute dividends to its preferred and common shareholders for the year 2024.
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The preferences of two agents on wealth W are described by the
utility functions:
by using the Arrow-Pratt index, compare the risk aversion of these
two
agents.
The Arrow-Pratt index measures the degree of risk aversion for an economic agent. It’s a measure of the responsiveness of an agent’s utility to changes in wealth.
The utility functions of two agents on wealth W are as follows:
Agent 1:
U1(W) = W^(1/2)
Agent 2:
U2(W) = 10(W^(1/2))
We can compute the Arrow-Pratt index for each agent to compare their risk aversion:
Agent 1:
-u''1(W)/u'1(W) = -(-1/2)W^(-3/2)/(1/2)W^(-1/2)
= 1/2W
Agent 2:
-u''2(W)/u'2(W) = -(-5/2)W^(-3/2)/(5/2)W^(-1/2)
= 1/2W
Therefore, both agents have the same degree of risk aversion based on the Arrow-Pratt index.
This is because their Arrow-Pratt indices are equal.
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and analyze CSR activities of selected local firms that comply with SDGs. > Corporate social responsibility (CSR) is a company's commitment to manage the social, environmental and economic effects of its operations responsibly and in line with public expectations. >What is CSR with example? > The key idea behind CSR is for corporations to pursue other pro-social objectives, in addition to maximizing profits. Examples of common CSR objectives include minimizing environmental externalities, promoting volunteerism among company employees, and donating to charity. * The Sustainable Development Goals (SDGs), also known as the Global Goals, were adopted by the United Nations in 2015 as a universal call to action to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity. * The 17 SDGs are integrated - they recognize that action in one area will affect outcomes in others, and that development must balance social, economic and environmental sustainability. * Countries have committed to prioritize progress for those who're furthest behind. The SDGs are designed to end poverty, hunger, AIDS, and discrimination against women and girls. * The creativity, knowhow, technology and financial resources from all of society is necessary to achieve the SDGs in every context.
Corporate social responsibility (CSR) refers to a company's commitment to manage the social, environmental, and economic impacts of its activities in a responsible and publicly acceptable manner.
Some of the CSR objectives include promoting volunteerism, reducing environmental externalities, and supporting charities.
Corporate social responsibility is one of the ways through which businesses can contribute towards achieving Sustainable Development Goals (SDGs).
The SDGs are 17 goals developed by the United Nations in 2015, and they aim to eradicate poverty, hunger, and other forms of inequality by 2030.
They provide a blueprint for peace, prosperity, and sustainable development for all individuals and communities globally.
CSR activities of selected local firms that comply with SDGs:
Several local firms around the world have implemented various CSR initiatives that align with the SDGs. For example, Microsoft Corporation has adopted the following SDGs:
SDG 1: No Poverty,
SDG 3: Good Health and Well-Being,
SDG 4: Quality Education,
SDG 5: Gender Equality,
SDG 6: Clean Water and Sanitation,
SDG 7: Affordable and Clean Energy,
SDG 8: Decent Work and Economic Growth,
SDG 9: Industry, Innovation and Infrastructure,
SDG 10: Reduced Inequalities,
SDG 11: Sustainable Cities and Communities,
SDG 12: Responsible Consumption and Production,
SDG 13: Climate Action,
SDG 16: Peace, Justice and Strong Institutions,
SDG 17: Partnerships for the Goals
The company has launched various initiatives that align with these SDGs, such as providing technology, training, and capacity building to small-scale farmers and promoting computer science education in schools.
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Corporate social responsibility (CSR) is the commitment of an organization to responsibly and publically acceptably manage the social, environmental, and economic repercussions of its actions.
The SDGs, a set of 17 objectives created by the UN in 2015, call for the eradication of poverty, hunger, and other kinds of inequality by 2030.
They provide a model for world peace, prosperity, and sustainable development for all peoples and groups. CSR initiatives of certain local businesses that adhere to the SDGs. Local businesses all throughout the world have launched a variety of CSR programs that support the SDGs.
The business has started a number of activities that support these SDGs, including encouraging computer science education in schools and offering technology, training, and capacity building to small-scale farmers.
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map the project management processes to stages of SDLC
model
Project management processes are meant to be employed during software development life cycle. This is due to the iterative and collaborative nature of the software development process, which allows for the implementation of a variety of project management processes.
The project management process for software development varies from other project management processes due to its unique approach towards project development.
The mapping of project management processes to stages of SDLC model is listed below:
1. Initiation: This stage typically involves identifying the customer requirements and determining whether the project is worth investing in. The requirements of the project should be determined and evaluated to ensure that the project is feasible.
2. Planning: This stage involves creating a plan to accomplish the project objectives. This includes planning out the project timeline, creating a budget, and assigning tasks to team members. This stage also involves defining the scope of the project and creating a project charter.
3. Execution: This is where the project plan is put into action. The team members will execute their tasks based on the project plan. It is also necessary to track the progress of the project to ensure that it is on track.
4. Monitoring and control: This stage involves monitoring the progress of the project to identify issues and resolve them. This also involves managing the risks that are associated with the project and ensuring that the project is delivered on time and within budget.
5. Closing: The final stage of the SDLC model is the closing stage. At this stage, the project is finalized, and the product is delivered to the customer. This also involves closing out any contracts and concluding the project.
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Berhannan's Cellular sells phones for $100. The unit variable cost per phone is $50 plus a selling commission of 10%. Fixed manufacturing costs total $1,250 per month, while fixed selling and administrative costs total $2,500. A. What is the contribution margin per phone? B. What is the breakeven point in phones both in peso and units? C. How many phones must be sold to earn a targeted profit of $7,500 in peso and units?
The contribution margin per phone represents the amount of revenue available to cover fixed costs and contribute towards profit after deducting the variable costs.
A. The contribution margin per phone is $50 ($100 selling price - $50 unit variable cost).
B. The breakeven point in phones is 75 units and 7500 pesos. The breakeven point in units is calculated by dividing the total fixed costs ($3,750) by the contribution margin per unit ($50). The breakeven point in pesos is the breakeven point in units multiplied by the selling price per unit ($100).
C. To earn a targeted profit of $7,500, the number of phones that must be sold is 225 units and 22,500 pesos. This is calculated by adding the targeted profit to the total fixed costs and then dividing the result by the contribution margin per unit. The result is then multiplied by the selling price per unit to determine the target in pesos.
The breakeven point is the point at which total revenue equals total costs, resulting in zero profit or loss. It is determined by dividing the fixed costs by the contribution margin per unit. To achieve a targeted profit, the fixed costs are increased by the desired profit amount, and the resulting total is divided by the contribution margin per unit to find the number of units that need to be sold. The calculations in pesos are obtained by multiplying the breakeven point or target in units by the selling price per unit.
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What is the effect on net working capital if the corporation decides to increase their investment in inventory and pay for it with cash?
A. Increase in NWC.
B. Decrease in NWC.
C. Depends on the amount of the investment.
D. No effect. I
E. Depends on the amount of cash.
Net working capital (NWC) is the difference between current assets and current liabilities.
The difference between the current assets and current liabilities is the company's net working capital (NWC). It represents the amount of money available to the company to finance its daily operations.
The corporation's decision to increase its investment in inventory and pay for it in cash has an effect on the net working capital. The correct answer is A.
Increase in NWC. Explanation:When a corporation invests in inventory, it results in an increase in current assets.
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MAT 118-71 Project 1 Due February 21, 2022 in class You have a decision to make. You will be flying to East Lansing, Michigan for a one-day stay. You will need to rent a midsize car while you are there, and you want to do this in the most economical way possible. The cost to rent a car sometimes depends on the number of miles it is driven, but sometimes the cost includes unlimited mileage. You need to figure out which rental company gives you the best deal. As it turns out, the equations involved are linear, so the problem can be analyzed using techniques discussed in Chapter One. You begin by contacting two car rental companies: Avis and Enterprise. Avis offers a midsize car for $64.99 per day with unlimited mileage. This means that for this rental the number of miles driven dose not impact on the cost. Enterprise offers a midsize car for $45.87 per day with 150 miles free. But each mile beyond 150 that the car is driven costs $0.25. It is clear that Enterprise offers the better deal if the car is driven fewer than 150 miles. But what if the car is driven more than 150 miles? At what point will the Avis rental become a better deal? Let's analyze the situation. Let x denote the number of miles the car is driven. 1. Suppose A is the cost of renting at A vis. Find a linear equation involving A and x. 2. Now let E be the cost of renting at Enterprise. Find a linear equation involving E and x, if x≤150. Find a linear equation involving E and x, if x>150… 3. Graph the linear equations found in part (1) and (2) on the same set of coordinate axes. Be careful about the restrictions on x for the equations found in part (2). 4. Find the mileage beyond which the Avis rental is more economical by finding the point of intersection of the two graphs. Label this point on this graph. 5. Explain how you can use the solution to part (4) to decide on which car rental is more economical. 6. In an effort to find an even better deal, you contact Auto Save Rental. They offer a costs $0.25. Find equation(s) that involve the cost S at Auto Save Rental and the miles x driven. 7. Graph this equation on the same graph found in part (3). 8. It should be clear that Auto Save Rental is the best choice among the three if you are driving less than 100 miles. For what values of x, if any, do Avis or Enterprise offer a better deal? 9. Still not sure you have the best deal, you call Usave Car Rental. They offer a midsize car for $34.99 per day with 200 free miles. Each mile over 200 costs $0.25. Find an equation(s) for the cost U at Usave and graph it on the same graph found on the part (7). For what values of x, if any, is Usave the best deal? 10. Discuss your choice of car rental companies if you think you will drive between 125 and 175 miles.
The main answer to the assignment is to analyze the cost of renting a car from different companies based on the number of miles driven and determine the most economical option.
In this assignment, the objective is to compare the cost of renting a car from different companies based on the number of miles driven. The cost equations for Avis, Enterprise, Auto Save Rental, and Usave Car Rental are derived, considering their respective daily rates and mileage charges. The linear equations for each rental company are graphed on the same coordinate axes. The point of intersection between Avis and Enterprise graphs identifies the mileage threshold where Avis becomes more economical. Further analysis is done to determine the mileage range where Auto Save Rental and Usave Car Rental offer the best deals. Finally, the optimal choice of car rental companies is discussed for a mileage range of 125 to 175 miles.
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[Buiness Ethics] Hynes Custodial Services (HCS) Is A Family-Owned Business Specializing In Corporate Custodial Care. Since Many Of Its Clients Are Sensitive To Security Concerns, HCS Makes It A Point To Hire Only Janitors Who Possess High Moral Character. Further, The Hynes Family Is Very Religious And Its Members Feel Most Comfortable With Those Who Share
[Buiness ethics]
Hynes Custodial Services (HCS) is a family-owned business specializing in corporate custodial care. Since many of its clients are sensitive to security concerns, HCS makes it a point to hire only janitors who possess high moral character. Further, the Hynes family is very religious and its members feel most comfortable with those who share their values. The HCS application form states the following: Thank you for your interest in HCS. We want only the best to join "our family." We therefore regretfully exclude from consideration all applicants who:
* are ex-felons
* engage in sky-diving
* fail to make child support payments
* Smoke
* eat over a pound of chocolate or two pounds of red meat per week
* have sexual relations outside of marriage
* have had three or more moving traffic violations in the past year
In addition, HCS staff conduct extensive personal interviews of applicants, former employers, teachers, coaches, and spouses (past and present). Visits to applicants' homes are also required prior to hiring.
Answer the following:
1) After reading the Alec Hill Just business: Christian ethics for the marketplace text this week and exploring the topic of employee dignity, what have you learned? And describe at least one specific way in which you can apply what you have learned about employee dignity.
Learning about employee dignity in the context of Christian ethics highlights the importance of treating employees with respect, fairness, and compassion. Applying this understanding involves fostering an inclusive work environment and considering the needs and perspectives of employees in decision-making processes.
In studying employee dignity and the principles of Christian ethics in the marketplace, one learns the importance of treating employees with respect, fairness, and compassion. It emphasizes the recognition of each employee's intrinsic worth and the promotion of their overall well-being.
Applying this understanding of employee dignity entails fostering an inclusive and non-discriminatory work environment, ensuring fair and just treatment, and considering the needs and perspectives of employees in decision-making processes.
Alec Hill's book, "Just Business: Christian Ethics for the Marketplace," sheds light on the significance of employee dignity in the context of ethical business practices.
It highlights the responsibility of employers to recognize and uphold the inherent worth and rights of every individual in the workplace. This involves treating employees with respect, fairness, and compassion, irrespective of their background, beliefs, or personal choices.
Applying the principles of employee dignity in a practical sense can be done in several ways. One specific approach is to foster an inclusive work environment that values diversity and promotes equal opportunities for all employees.
This entails creating policies and practices that prevent discrimination based on factors such as race, gender, religion, or personal lifestyle choices. By ensuring fair and equitable treatment for all employees, their dignity is upheld, and a sense of belonging and respect is fostered.
Furthermore, considering the needs and perspectives of employees in decision-making processes is crucial for promoting employee dignity. This involves actively seeking input from employees, listening to their concerns, and incorporating their insights into organizational policies and practices.
By involving employees in decision-making, their dignity is acknowledged, and their contributions are valued, leading to a more engaged and empowered workforce.
By upholding employee dignity, organizations can cultivate a positive and ethical workplace culture that promotes the well-being and flourishing of all individuals involved.
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Consider the case of an organization that has been in existence for over 20 years and another company that is a recent start-up. Compare and contrast the type of knowledge support system you would design for each one and justify your recommendations. Address how the two companies would need to be treated differently e.g. in terms of where the emphasis and the majority of the effort will occur. Illustrate your recommended KSS solution for each of the two organizations and highlight the key components.
There are a number of things to take into account when creating a knowledge support system (KSS) for an organisation that has been around for more than 20 years and a more recent start-up.
For the reputable business:- Emphasis: The organization's current expertise and experience would be captured and utilised.The large amount of institutional knowledge amassed over the years would be organised and codified as the focus of the majority of the endeavour.- KSS Solution: Included in the suggested KSS solution would be elements like a thorough knowledge repository, expert directories, databases of lessons learned, and best practises documentation. Sharing of knowledge, teamwork, andongoing education would be prioritised. For the beginning:- Emphasis: The focus would be on quick knowledge creation and acquisition.
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The following was the expenditure on a contract for Rs 6,00,000 commenced in January, 1997:
Rs
Material 1,20,000
Wages 1,64,400
Plant 20,000
Business charges 9,000
Cash received on account to 31st December 1997 amounted to Rs 2,60,000 being 80% of work certified; the value of materials in hand on 31-12-1997 was Rs 25,000. Prepare the contract account for 1997 showing the profit to be credited to the year's profit and loss account. Plant is to be depreciated at 10%.
A contract account is a kind of personal account that shows an organization's income and expenses.
This account's primary aim is to show the profit or loss made on a specific contract. There are two types of contract accounts: one for each contract and another for all contracts.
A single contract account can keep track of all of a project's financial transactions. Let us calculate the contract account for 1997 as per the following details: Contract amount: Rs 6,00,000 Material: Rs 1,20,000 Wages: Rs 1,64,400 Plant: Rs 20,000 Business charges: Rs 9,000 Cash received on account to 31st December 1997: Rs 2,60,000.
The value of materials in hand on 31-12-1997: Rs 25,000 Plant Depreciation: 10%Firstly, we will prepare the opening entry for the contract account on 1st January 1997:Contract Account Dr. Rs. Cr. Rs. Material a/c 1,20,000 Wages a/c 1,64,400 Plant a/c 20,000 Business charges a/c 9,000 To Cash a/c 3,13,400 (Being expenditure incurred on the contract).
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Using diagrams as appropriate, explain why the desire of households to smooth their consumption over time is a basic source of stabilisation in an economy, moreover, how credit constraints limit consumption smoothing, amplify output fluctuations and lower welfare. What effects is the Covid-19 pandemic likely to have had on the borrower's and lender's feasible frontier and indifference curve?
The Covid-19 pandemic has likely increased the challenges faced by borrowers in accessing credit and maintaining consumption smoothing. Lenders have become more cautious, leading to a shift in the feasible frontier, which limits households' ability to smooth consumption.
The desire of households to smooth their consumption over time is a fundamental concept in economics. It refers to the preference of individuals to maintain a relatively stable level of consumption throughout their lives, even when faced with fluctuations in income. This desire for consumption smoothing plays a significant role in stabilizing the economy.
Consumption smoothing helps to mitigate the impact of temporary income shocks on households' well-being and consumption patterns. During periods of low income or economic downturns, households can draw on savings or borrow to maintain their desired level of consumption. Conversely, during periods of high income, households can save for future consumption needs. This helps to stabilize aggregate demand and dampen the impact of economic fluctuations.
However, credit constraints can limit households' ability to smooth consumption. When households face restrictions on borrowing, such as high interest rates or limited access to credit, they may be unable to maintain their desired consumption levels during times of low income. This amplifies output fluctuations as reduced consumption leads to decreased aggregate demand, further exacerbating economic downturns.
Credit constraints also have implications for welfare. When households are unable to smooth their consumption due to credit constraints, they may experience significant welfare losses. Inadequate access to credit can lead to consumption shortfalls during economic downturns, reducing well-being and increasing financial distress.
The Covid-19 pandemic has likely had a significant impact on the borrower's and lender's feasible frontier and indifference curve. The pandemic has resulted in widespread income shocks, increased unemployment, and reduced economic activity. As a result, borrowers may face tighter credit constraints, with lenders becoming more cautious in extending loans due to heightened risk. This can shift the feasible frontier for borrowers, making it more difficult for them to access credit and smooth their consumption.
The pandemic may also affect households' preferences and indifference curves. The heightened uncertainty and financial stress caused by the pandemic can alter households' willingness to consume and save. Indifference curves may shift, reflecting changes in households' risk aversion and desired level of consumption smoothing.
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Give examples of how Internet and telecommunications technologies (e.g., Interactive Voice
Response Systems [IVRs] and mobile commerce [M-commerce]) have changed some of the
services that you use.
Answer the question in 250 words
Internet and telecommunications technologies have revolutionized various services, enhancing convenience, accessibility, and efficiency. Two examples of these technological advancements that have significantly changed the services I use are Interactive Voice Response Systems (IVRs) and mobile commerce (M-commerce).
IVRs have transformed customer service interactions. In the past, contacting a customer support helpline involved waiting on hold for extended periods. However, with IVRs, I can now navigate through automated menus using voice or keypad inputs to access specific information or perform certain tasks. For instance, when I call my bank's helpline, the IVR system allows me to check my account balance, transfer funds, or inquire about recent transactions without speaking to a customer service representative. This saves time and provides instant access to essential information.
M-commerce has revolutionized the way I shop and conduct financial transactions. With the advent of mobile apps and secure payment systems, I can now make purchases, transfer money, and manage my finances using my smartphone or other mobile devices. For instance, I regularly use mobile banking apps to check my account balance, pay bills, and transfer funds. Additionally, popular e-commerce platforms provide mobile apps that allow me to browse and purchase products from anywhere at any time. This has made shopping more convenient and has eliminated the need for physical stores in some cases.
Furthermore, M-commerce has also transformed other services, such as food delivery and transportation. Mobile apps like Uber and food delivery platforms have made it effortless to order a ride or have meals delivered to my doorstep with just a few taps on my smartphone. This level of convenience and accessibility was unimaginable before the advent of mobile technologies.
Overall, Internet and telecommunications technologies have drastically changed the services I use. IVRs have streamlined customer service interactions, while M-commerce has revolutionized shopping, banking, and other essential transactions. These advancements have enhanced efficiency, convenience, and accessibility, making our lives more interconnected and empowering us with the ability to access services anytime and anywhere.
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Amadeus Company has 40% debt, 10% preferred stock, and 50% common equity. The after-tax cost of debt is 4%, the cost of preferred stock is 7.3%, and the cost of common equity is 11.50%. Which of the following is closest to the firm's Weighted Average Cost of Capital (WACC)? a. 7.55 percent b. 7.73 percent c. 7.94 percent d. 8.10 percent e. 8.50 percent
The company has 40% debt, 10% preferred stock, and 50% common equity, with corresponding costs of 4%, 7.3%, and 11.50%. The closest option to the firm's WACC is 8.10 percent.
The Weighted Average Cost of Capital (WACC) can be calculated by weighting the cost of each capital component based on its proportion in the company's capital structure. To calculate the Weighted Average Cost of Capital (WACC), we need to multiply the cost of each capital component by its proportion in the capital structure and then sum up these values.
Given: Debt proportion: 40%
Preferred stock proportion: 10%
Common equity proportion: 50%
Cost of debt: 4%
Cost of preferred stock: 7.3%
Cost of common equity: 11.50%
Calculating the WACC:
WACC = (Debt proportion * Cost of debt) + (Preferred stock proportion * Cost of preferred stock) + (Common equity proportion * Cost of common equity)
WACC = (0.40 * 0.04) + (0.10 * 0.073) + (0.50 * 0.115)
WACC = 0.016 + 0.0073 + 0.0575
WACC = 0.0808 or 8.08%
Among the given options, the closest value to the firm's WACC is 8.10 percent (option d).
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Eli Apple Company sells 10,000 products annually at $100 per unit. Each unit costs $80 to produce and transport. By what percentage will net profit increase if they can decrease the cost per unit by just 2%?
12b. You have been invited to Houston to perform your griddy. You can book a venue on a dance floor that holds up to 500 people, but it costs $100,000 to rent it in advance. Tickets for this will cost $600 per person. Demand for the tickets is unknown. How many tickets would you need to sell to break even and what is the maximum net profit that you can achieve if you fill the venue to capacity?
1. The net profit will increase by 8% if the cost per unit decreases by 2%.
2. If we sell 167 tickets, you will break even. The maximum net profit that can be achieved by filling the venue to capacity is $200,000.
1. Eli Apple Company:
If the cost per unit falls by 2% then we should compare the initial net profit with the new net profit to get the percentage gain in net profit.
So, Original net profit per unit = Selling price per unit - Cost per unit
Original net profit per unit = $100 - $80 = $20
Then, New cost per unit = 0.98 * $80 = $78.40 (after a 2% decrease)
New net profit per unit = $100 - $78.40 = $21.60
Percentage increase in net profit = ((New net profit per unit - Original net profit per unit) / Original net profit per unit) * 100
Percentage increase in net profit = (($21.60 - $20) / $20) * 100 = 8%
Therefore, if the cost per unit is reduced by 2%, the net profit will increase by 8%.
2. Houston Dance Event:
Subtract the full venue rental cost from the ticket price to determine the number of tickets needed to break even.
Number of tickets needed to break even = Total venue cost / Price per ticket
Number of tickets needed to break even = $100,000 / $600 = 166.67 (rounded up to 167 tickets)
The maximum capacity of the venue must be known to determine the maximum net profit. Assuming that the space can accommodate 500 people:
Maximum net profit = (Number of tickets sold) * (Price per ticket) - (Total venue cost)
Maximum net profit = 500 * $600 - $100,000 = $200,000
Therefore, you will break even if you sell 167 tickets. Filling the venue to capacity, the venue is able to make a maximum net profit of $200,000.
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a) , the net profit will increase by 8% if the cost per unit decreases by 2%, b) if the venue is filled to capacity, the maximum net profit that can be achieved is $200,000.
12a. To calculate the percentage increase in net profit if the cost per unit decreases by 2%, we need to determine the current net profit and the net profit after the cost reduction.
Current net profit = Revenue - Cost
Revenue = Number of products sold * Selling price per unit = 10,000 * $100 = $1,000,000
Cost = Number of products sold * Cost per unit = 10,000 * $80 = $800,000
Current net profit = $1,000,000 - $800,000 = $200,000
After the cost reduction of 2%, the new cost per unit would be $80 - (2% of $80) = $78.40.
New net profit = Revenue - New cost
New cost = Number of products sold * New cost per unit = 10,000 * $78.40 = $784,000
New net profit = $1,000,000 - $784,000 = $216,000
Percentage increase in net profit = ((New net profit - Current net profit) / Current net profit) * 100
= (($216,000 - $200,000) / $200,000) * 100
= (16,000 / $200,000) * 100
= 8%
Therefore, the net profit will increase by 8% if the cost per unit decreases by 2%.
12b. To break even, the revenue from ticket sales should cover the cost of renting the venue.
Break-even revenue = Venue rental cost = $100,000
Break-even ticket sales = Break-even revenue / Ticket price per person = $100,000 / $600 = 166.67 tickets
Since we cannot sell a fraction of a ticket, the minimum number of tickets needed to break even would be 167 tickets.
To calculate the maximum net profit, we assume the venue is filled to capacity.
Maximum net profit = (Number of tickets sold at full capacity * Ticket price per person) - Venue rental cost
= (500 * $600) - $100,000
= $300,000 - $100,000
= $200,000
Therefore, if the venue is filled to capacity, the maximum net profit that can be achieved is $200,000.
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The Basket Corporation has the following classes of shares: Preferred shares, $40, 1,000 shares issued and outstanding, non-cumulative. Common shares, 100,000 shares issued, 50,000 shares outstanding. In 20X1, Basket Corporation was incorporated. It paid no dividends in its first year of existence. In 20X2, the board of directors of Basket declared a total dividend of $160,000 to be paid to the holders of preferred and common shares. What was the amount of the dividend paid in 20X2 on each common share? $1.20 $4.00 O $2.80 $2.40
The amount of the dividend paid in 20X2 on each common share of the Basket Corporation was $2.40.
This was computed by first satisfying the dividend of preferred shares, and then dividing the remaining dividend amount by the number of outstanding common shares. In 20X2, the declared total dividend was $160,000. First, the preferred shareholders are paid their dividends. Since they're non-cumulative, we only consider this year's dividends. The total for preferred shares is $40 per share * 1,000 shares = $40,000. Subtracting this from the total gives us $120,000 ($160,000 - $40,000) left for the common shareholders. As there are 50,000 common shares outstanding, we divide the remaining dividend amount by the number of common shares to find the per-share amount: $120,000 / 50,000 shares = $2.40 per common share.
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The responsiveness of quantity supplied to a change in price is known as the: price elasticity of supply. supply-side shift factor. cross elasticity of supply. slope of the supply curve.
The responsiveness of quantity supplied to a change in price is known as the price elasticity of supply.
What is price elasticity of supply? Price elasticity of supply is the measure of the responsiveness of the quantity supplied to the change in the price of the commodity. It measures the degree to which the quantity supplied responds to a change in price and how sensitive producers are to a change in the price of the commodity.
As the price of a commodity increases, the supply increases, and as the price decreases, the supply decreases. Thus, the price elasticity of supply is always positive as the supply and price move in the same direction.When the percentage change in the quantity supplied is more than the percentage change in price, then the commodity's supply is said to be elastic, and when the percentage change in quantity supplied is less than the percentage change in price, then the commodity's supply is inelastic.
Therefore, it is the Price elasticity of supply that measures the responsiveness of the quantity supplied to the change in the price of a commodity.
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Do your transportation operations also mid term and longer term plans? How are the long term plans translated to daily plans? Please advise.
Yes, transportation operations typically involve both mid-term and long-term planning. Long-term plans are translated into daily plans through a process that involves forecasting, resource allocation, and operational adjustments.
Transportation operations encompass various aspects, such as logistics, fleet management, and route optimization, which require effective planning at different time scales. While short-term plans address immediate operational needs, mid-term and long-term plans focus on strategic considerations.
Long-term plans in transportation operations involve setting goals and objectives for the future, considering factors like anticipated growth, market demand, infrastructure development, and regulatory changes. These plans outline the overall vision for the transportation system and guide decision-making regarding infrastructure investments, fleet expansion, and technology adoption.
To translate long-term plans into daily plans, forecasting techniques are used to predict demand patterns, traffic conditions, and other relevant variables. These forecasts help in determining resource requirements, such as the number of vehicles, drivers, and fuel, and aid in making decisions regarding scheduling, routing, and dispatching.
Additionally, operational adjustments are made on a daily basis to respond to real-time changes and unforeseen events. This may involve rerouting vehicles due to traffic congestion or dynamically reallocating resources based on fluctuations in demand. Advanced technologies, such as real-time tracking systems and data analytics, enable operators to monitor operations, identify bottlenecks, and make timely adjustments to optimize performance.
Overall, the translation of long-term plans into daily plans in transportation operations involves a combination of strategic foresight, forecasting, resource allocation, and operational adaptability. This iterative process allows for efficient and responsive transportation management, ensuring that the daily operations align with the long-term objectives of the transportation system.
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We now have the marginal cost and margirul beneft of each pound of compost that you can add to yourgardch? c. Using marginal analysis, and assuning that your goal is to muximize profit, how many pounds of compost ahoud you add? Why? Expiain briefly,
To determine the optimal amount of compost to add to a garden in order to maximize profit, marginal analysis is used. By comparing the marginal cost and marginal benefit of each pound of compost, the ideal quantity of compost can be identified.
Marginal analysis involves comparing the additional cost and additional benefit associated with each additional unit of a resource. In this case, the marginal cost refers to the cost of adding one more pound of compost to the garden, while the marginal benefit represents the additional benefit or profit gained from adding that pound of compost.
To determine the optimal quantity of compost, you should continue adding pounds of compost as long as the marginal benefit exceeds the marginal cost. Once the marginal benefit equals the marginal cost, you have reached the point of maximizing profit.
If, at a certain quantity of compost, the marginal benefit is greater than the marginal cost, it indicates that adding one more pound of compost will result in more profit than the cost incurred. However, if the marginal cost exceeds the marginal benefit, adding one more pound of compost would result in diminishing return and lower overall profit.
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APA citation Title Pages and make key notes
APA citation for title pages includes the title of the paper, author's name, institutional affiliation, running head, and page number. The key notes emphasize the proper formatting, such as title case for the title, centered alignment, and the inclusion of a running head with limited characters.
In APA style, the title page serves as the initial page of a research paper or manuscript. It provides essential information like the paper's title, author's name, and institutional affiliation. The running head, a shortened version of the title, appears at the top of the page. It is important to follow the formatting guidelines precisely, including centering the elements, using title case for the title, and excluding a page number on the title page. Adhering to these guidelines ensures consistency and professionalism in academic writing.
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Resistance to change cannot be totally eradicated. Discuss
Resistance to change is a natural and common response that arises when individuals or organizations are confronted with new ideas, processes, or strategies. While it may not be possible to completely eradicate resistance to change, it can be effectively managed and minimized. Here are a few reasons why resistance to change persists and some strategies to address it:
Fear of the unknown: Change often disrupts familiar routines and introduces uncertainty. People may fear the potential negative consequences or the loss of their comfort zone. To address this, organizations can provide clear communication about the change, its rationale, and the benefits it brings. Open dialogue and addressing concerns can help alleviate fears and increase acceptance.
Loss of control: Change can make individuals feel a loss of control over their work or the direction of the organization. Involving employees in the change process, seeking their input, and giving them ownership can help alleviate this resistance. When individuals feel empowered and part of the decision-making process, they are more likely to embrace change.
Lack of understanding or information: Resistance may stem from a lack of understanding about the need for change or the specifics of the change itself. Providing education and training, as well as clear communication channels, can help individuals understand the rationale and objectives behind the change. By providing the necessary information, organizations can address resistance rooted in ignorance or misconceptions.
Past negative experiences: Previous unsuccessful change initiatives can create a sense of skepticism and resistance. Learning from past failures, involving key stakeholders in planning, and demonstrating the positive outcomes of the proposed change can help rebuild trust and reduce resistance.
Organizational culture and inertia: Resistance to change can also be influenced by organizational culture, norms, and entrenched processes. Creating a culture that values and embraces innovation, learning, and adaptability can help overcome resistance to change. Leadership support, role modeling, and rewards for embracing change can reinforce the desired behavior.
While it may not be possible to eliminate resistance entirely, organizations can adopt strategies to manage it effectively. By addressing the underlying reasons for resistance, fostering open communication, involving stakeholders, providing support, and building a culture of change, organizations can mitigate resistance and increase the likelihood of successful change implementation.
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Germany's GDP in 2019 was 3.47 billion euro. In the same year US GDP was 21.43 trillion dollars. The exchange rate was 0.88 euros per dollar. In addition, the price level in Germany was 0.91 while in the USA it was 1.00. In 2019 the population of Germany was 83 million. Complete the following table and answer the question below.
GDP per capita Germany in Euro:
GDP per capita Germany in USD at local prices:
GDP per capita Germany in USD at US prices:
Recall that per-capita means the same as per person. Show your work below.
**please explain and show work**
The Gross Domestic Product (GDP) per capita for Germany in Euro is 41.87 euro, in USD at local prices it is 36.86 USD, and in USD at US prices it is 33.58 USD.
To calculate the GDP per capita for Germany in Euro, we divide the GDP of Germany by its population:
GDP per capita Germany in Euro = GDP Germany / Population Germany
GDP per capita Germany in Euro = 3.47 billion euro / 83 million
GDP per capita Germany in Euro = 41.87 euro
To convert the GDP per capita Germany from Euro to USD at local prices, we multiply it by the exchange rate:
GDP per capita Germany in USD at local prices = GDP per capita Germany in Euro * Exchange rate
GDP per capita Germany in USD at local prices = 41.87 euro * 0.88 euro/dollar
GDP per capita Germany in USD at local prices = 36.86 USD
To calculate the GDP per capita Germany in USD at US prices, we need to consider the price level ratio between Germany and the USA:
GDP per capita Germany in USD at US prices = GDP per capita Germany in USD at local prices * (Price level Germany / Price level USA)
GDP per capita Germany in USD at US prices = 36.86 USD * (0.91 / 1.00)
GDP per capita Germany in USD at US prices = 33.58 USD
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Business and financiaf risk- The impact of financial leverage on return on equity and earnings per share Consider the following case of Purple Panda Importers: Suppose Purple Panda Importers is considering a project that will require $350,000 in assets. - The company is small, so it is exempt from the interest deduction limitation under the new tax law. - The project is expected to produce earnings before interest and taxes (EBIT) of $40,000. - Common equity outstanding will be 20,000 shares. - The company incurs a tax rate of 25%. If the project is financed using 100% equity capital, then Purple Panda Importers's return on equity (ROE) on the project will be addition, Purple Panda's earnings per share (EPS) will be Alternatively, Purple Panda Importers's CFO i5 also considering financing the project with 50% debt and 50% equity capital. The interest rate o company's debt will be 13%. Because the company will finance only 50% of the project with equity, it will have only 10,000 shares outstanding Panda Importers's ROE and the company's EPS will be if management decides to finance the project wi debt and 50% equity. When a firm uses debt financing, the business risk exposure for the firm's common shareholders will ty capital, then Purple Panda Importers's return on equity (ROE) on the project will be - In e (EPS) will be 0 is also considering financing the project with 50% debt and 50% equity capital. The interest rate on the company will finance only 50% of the project with equity, it will have only 10,000 shares outstanding. Purple EPS will be if management decides to finance the project with 50% ess risk exposure for the firm's common shareholders will
Financial leverage is a business risk that is associated with borrowing money to finance a project. It increases the potential return on equity for a company's shareholders by using borrowed money. However, the risk of using debt financing is that the cost of borrowing might exceed the return on investment, resulting in reduced earnings per share and a lower return on equity (ROE).
The impact of financial leverage on return on equity and earnings per share can be demonstrated using the case of Purple Panda Importers, which is considering financing a $350,000 project that will produce $40,000 in earnings before interest and taxes (EBIT).
The company can use 100% equity capital, which will result in a return on equity (ROE) of $40,000/$350,000 = 11.43%. If the company decides to use debt financing, it will have to pay an interest rate of 13%.
Thus, the earnings after interest and taxes (EBIT) will be $40,000 - (0.13 × $175,000) = $19,750.
The return on equity (ROE) for a company with 50% debt financing will be calculated as follows:
ROE = ($19,750 - $7,875) / $175,000 + $7,875 = 9.86%
Thus, using 50% debt financing reduces the return on equity (ROE) from 11.43% to 9.86%.Similarly, the earnings per share (EPS) for a company with 100% equity financing will be $40,000 / 20,000 = $2.00. In contrast, the earnings per share (EPS) for a company with 50% debt financing will be ($19,750 - $7,875) / 10,000 = $1.89, a decrease of 5.5%.
Therefore, the use of financial leverage can increase the return on equity (ROE) for a company's shareholders, but it also increases the risk of reduced earnings per share and a lower return on equity (ROE) if the cost of borrowing exceeds the return on investment.
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Define a service failure and the types of complaints that may result from a service failure? Using relevant illustrations from any service institution or industry, discuss the types of strategies a company may adopt to recover from a major service failure. (20 marks) QUESTION 4 a) Explain the concepts of Predicted Service, Desired Service and Adequate Service. (6 marks) b) Discuss the key determinants of customers' expectations for predicted service, adequate service and their respective impacts in determining customer satisfaction.
Service failure is when a company's services fall short of customer expectations, leading to customer complaints.
These complaints can range from poor service quality to unprofessional staff behavior. Service failure can lead to various complaints, including those about service quality, time taken to deliver the service, and staff behavior. When a major service failure occurs, companies could use strategies such as service recovery, including apologizing to the customer, offering compensation, or rectifying the mistake. The goal is to restore customer satisfaction and loyalty.
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The French Thaler and Company’s stock has paid dividends of $1.59 over the past 12 months. Its historical growth rate of dividends has been 9 percent, but analysts expect the growth to slow to 6 percent annually for the foreseeable future.
Determine the value of the stock if the required rate of return on stocks of similar risk is 10 percent. (Round answer to 2 decimal places, e.g. 527.52.)
To calculate the estimated value of the stock using the dividend growth model, we can use the formula: ×(1+g) Where:
represents the estimated value of the stock is the dividend paid over the past 12 months, which is $1.59 in this case g is the expected growth rate of dividends, which is 6% annually r is the required rate of return or the discount rate However, since the required rate of return ( r) is not provided in the question, we cannot determine the estimated value of the stock accurately. The required rate of return is typically determined based on factors such as the risk associated with the stock and the prevailing market conditions. If you have the required rate of return for the stock, please provide it, and I can help you calculate the estimated value using the dividend growth model.
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Read and summarize Hastings vs. Baton Rouge Hospital.
2. Was there negligence in this case? Why?
3.Read and summarize case Niles vs. City of San Rafael.
4.Was there negligence in this case? Why. Was causation established ? Explain.
Hastings vs. Baton Rouge Hospital: This case is that the Hastings were compensated for the damages that they faced as a result of the defendant’s negligence.
The case is about the plaintiff, Mrs. Hastings, who was suffering from an illness. The defendant’s hospital misdiagnosed her and discharged her from the hospital. Mrs. Hastings continued to suffer from the illness and later on, she was readmitted to the hospital and discovered that she had a tumor that needed surgery. She underwent surgery, but unfortunately, her condition deteriorated and she passed away.
The explanation is that the case revolved around the negligence of the defendant's hospital. The hospital failed to diagnose the illness that Mrs. Hastings was suffering from and instead discharged her from the hospital. The hospital was negligent in its duty of care towards the plaintiff and as a result, the plaintiff suffered damages. The damages suffered by the plaintiff were due to the hospital’s negligence. Therefore, the plaintiff was entitled to compensation.
Niles vs. City of San Rafael:
In this case, Niles was an independent contractor who was hired by the City of San Rafael to paint a water tower. During the painting, Niles fell from the tower and sustained serious injuries. He sued the City of San Rafael for negligence. The main answer is that Niles was compensated for the damages he faced as a result of the defendant’s negligence. The explanation is that the City of San Rafael was negligent in its duty of care towards Niles. The city failed to provide Niles with a safe working environment, which resulted in his injuries. Therefore, the city was responsible for the damages suffered by Niles. Causation was established in this case because there was a direct link between the defendant’s negligence and the plaintiff’s injuries.
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The current spot price of crude oil is $101 per barrel and the three-month crude oil futures price is quoted at $105 per barrel. The proportional storage cost of crude oil is 4.7% per annum with continuous compounding and the risk-free interest rate is 1.5% per annum for all maturities with continuous compounding. What is the cost of carry for crude oil?
The cost of carry for crude oil is 3.93%. This means that if an investor buys crude oil futures at the current price and holds them until expiration, they will effectively incur a cost of 3.93% per annum to carry the position.
The cost of carry for crude oil is a calculation of the cost to store a physical commodity over a period of time, including financing costs and any other associated costs. It can be calculated using the formula:
Cost of Carry = (Futures Price - Spot Price) / Spot Price + Storage Cost - Risk-Free Interest Rate
Using the given information, we can calculate the cost of carry for crude oil as follows:
Cost of Carry = (105 - 101) / 101 + 4.7% - 1.5%
Cost of Carry = 0.0393 or 3.93%
Therefore, the cost of carry for crude oil is 3.93%. This means that if an investor buys crude oil futures at the current price and holds them until expiration, they will effectively incur a cost of 3.93% per annum to carry the position.
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Your grandfather has offered you a choice of one of the three following alternatives: $10,788.42 now; $280 a month for the next seven years; or $20,000 at the end of seven years. Assuming you could earn 9 percent annually, which alternative should you choose?
If you can earn 9% annually, the option that you should choose is the second option of receiving $280 a month for the next seven years. Because the present value of this option is the highest among the three options which is $138,115.46 with 9% annual return rate.
As per the given problem, you need to determine the best alternative of the three given options assuming that you could earn 9% annually. Below is the calculation to find the best option.
The present value of the first option of receiving $10,788.42 now = $10,788.42
The present value of the second option of receiving $280 a month for the next seven years:
Step 1: Calculation of PV of each monthly payments
PV = $280/(1 + 0.09/12)^(12*7)
PV = $17,014.57
Step 2: Calculation of the present value of the annuity which is the sum of all the PV of the monthly payments
Present Value of Annuity = $17,014.57 x [(1 - (1 + 0.09/12)^-84) / (0.09/12)]
Present Value of Annuity = $17,014.57 x [(1 - (1.0075)^-84) / (0.0075)]
Present Value of Annuity = $138,115.46
The present value of the third option of receiving $20,000 at the end of seven years = $20,000/(1 + 0.09)^7
Present Value of $20,000 = $20,000/1.09^7
Present Value of $20,000 = $11,010.52
Therefore, if you can earn 9% annually, the option that you should choose is the second option of receiving $280 a month for the next seven years. Because the present value of this option is the highest among the three options which is $138,115.46 with 9% annual return rate.
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Recently, in Country A, the air conditioner industry has consolidated into three major companies from ten companies. Additionally, air conditioner companies are not pressured to sell more units because they can profit from maintenance fees of already sold air conditioners and maintenance fees of customers from the acquired companies. This has led to fewer price wars, fewer unit discounts, and more industry incumbents' profits. The reduction in the number of air conditioner companies suggests a change in which structural attribute of the industry?
a. Access to raw materials/inputs
b. Industry concentration
c. Close substitutes
d. Fixed costs
The reduction in the number of air conditioner companies indicates a change in the industry concentration. Previously, there were ten companies competing in the market, but now the industry has consolidated into three major players.
This consolidation has led to a higher concentration of companies, meaning that a smaller number of firms dominate the market. With fewer competitors, the industry is less fragmented, resulting in reduced price competition and fewer unit discounts.
The concentration of power among these major companies allows them to focus on maximizing profits through maintenance fees, rather than solely relying on selling more units. This shift in industry structure has created a more favorable environment for incumbents, leading to increased profitability.
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