The reduction in taxes due to the use of the LIFO method in inventory instead of FIFO is approximately $87.9 million.Reduction in Taxes will be $87.9 million
To calculate the reduction in taxes due to the use of the LIFO (last-in, first-out) method compared to FIFO (first-in, first-out), we need to consider the difference in inventory balances and apply the tax rate.
According to the note in the annual report, if FIFO had been used instead of LIFO, the total inventory balances would have been higher by approximately $293 million at December 31, 2017.The reduction in taxes can be calculated by multiplying the difference in inventory balances by the tax rate.
Reduction in Taxes = Difference in Inventory Balances * Tax Rate= $293 million * 0.30 (30% tax rate)= $87.9 million. the reduction in taxes due to the use of the LIFO method instead of FIFO is approximately $87.9 million.
It's important to note that this reduction in taxes is an estimate based on the difference in inventory balances between LIFO and FIFO methods. The actual tax savings may vary depending on other factors and tax regulations.
Using the LIFO method allows International Paper Company to report lower net income (after taxes) due to the higher cost of goods sold associated with the LIFO reserve. This, in turn, reduces the taxable income and the amount of taxes payable. The reduction in taxes provides a potential cash flow advantage for the company.
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Calculate the Herfindahl-Hirschman Index (HHI) for each of the following markets. Using your results, arrange the markets from most competi- tive to least competitive. a. The market has two firms, each with a mar- 4.3 ket share of 50 percent. The market has two firms, one with a mar ket share of 90 percent and the other with a market share of 10 percent. b. c. The market has 10 firms, 5 with a market share of 18 percent each and 5 with a market share of 2 percent each. d. The market has 10 firms, 2 with a market share of 30 percent each and 8 with a market share of 5 percent each.
The markets, arranged from most competitive to least competitive based on the Herfindahl-Hirschman Index (HHI), are as follows options c, d, a and b.
To calculate the Herfindahl-Hirschman Index (HHI), we square the market shares of each firm and sum them up.
a. The market has two firms, each with a market share of 50 percent.
HHI = (50^2) + (50^2) = 2500 + 2500 = 5000
b. The market has two firms, one with a market share of 90 percent and the other with a market share of 10 percent.
HHI = (90^2) + (10^2) = 8100 + 100 = 8200
c. The market has 10 firms, 5 with a market share of 18 percent each and 5 with a market share of 2 percent each.
HHI = (18^2 + 18^2 + 18^2 + 18^2 + 18^2) + (2^2 + 2^2 + 2^2 + 2^2 + 2^2) = 1620 + 20 = 1640
d. The market has 10 firms, 2 with a market share of 30 percent each and 8 with a market share of 5 percent each.
HHI = (30^2 + 30^2) + (8 * 5^2) = 1800 + 200 = 2000
Arranging the markets from most competitive to least competitive based on the HHI:
c. The market with 10 firms, 5 with a market share of 18 percent each and 5 with a market share of 2 percent each (HHI = 1640)
d. The market with 10 firms, 2 with a market share of 30 percent each and 8 with a market share of 5 percent each (HHI = 2000)
a. The market with two firms, each with a market share of 50 percent (HHI = 5000)
b. The market with two firms, one with a market share of 90 percent and the other with a market share of 10 percent (HHI = 8200)
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Calculate the approximate price change for this bond using both duration ity in the computation, once again assuming that its yield to maturity dec basis points.
d. Discuss (without calculations) what would happen to your estimate
The approximate price change for a bond can be calculated using duration as a measure, assuming a decrease in yield to maturity by a certain basis point.
Duration is a measure of a bond's sensitivity to changes in interest rates. It quantifies the expected percentage change in the bond's price for a given change in yield to maturity. To calculate the approximate price change, we need to multiply the negative duration by the change in yield to maturity in decimal form.
When the yield to maturity decreases, the bond's price typically increases. This relationship is due to the inverse nature of bond prices and yields. As the yield decreases, the bond becomes more attractive, and investors are willing to pay a higher price for it. The duration provides an estimate of how much the price is expected to change based on the magnitude of the yield change.
It's important to note that the duration is an approximation and assumes a linear relationship between yield and price. In reality, bond price-yield relationships are convex, meaning the relationship is not perfectly linear. Therefore, the estimate provided by duration may not be entirely accurate, especially for large changes in yields or for bonds with high convexity.
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Annuity due. Reginald is about to lease an apartment for 12 months. The landlord wants him to make the lease payments at the start of the month. The monthly payments are $1,100 per month. The landlord says he will allow Reg to prepay the rent for the entire lease with a discount. The one-time payment due at the beginning of the lease is $12,845. What is the implied monthly discount rate for the rent? If Reg is earning 1.0% on his savings monthly, should he pay by month or make the one-time payment? What is the implied monthly discount rate for the rent?
The implied monthly discount rate for the rent can be calculated by comparing the one-time payment at the beginning of the lease with the total of monthly payments over the lease term.
To calculate the implied monthly discount rate, we need to use the formula for the present value of an annuity due:
PV = PMT * [(1 - (1 + r)^(-n)) / r] Where:
PV = Present Value (one-time payment due at the beginning of the lease)
PMT = Monthly Payment
r = Monthly Discount Rate (what we need to find)
n = Number of Payments (lease term in months)
In this case:
PV = $12,845
PMT = $1,100
n = 12 (lease term in months)
Plugging these values into the formula, we can solve for r:
$12,845 = $1,100 * [(1 - (1 + r)^(-12)) / r]
This equation can be solved using financial calculators, spreadsheets, or iterative methods to find the value of r. In this case, the implied monthly discount rate for the rent is approximately 1.39%. Now, let's compare this implied monthly discount rate with the interest rate Reg is earning on his savings, which is 1.0% per month. Since the implied monthly discount rate for the rent is higher than Reg's savings interest rate, it would be more beneficial for him to make the one-time payment at the beginning of the lease.
This means that Reg should choose to make the one-time payment rather than paying by month, as he would save more money by taking advantage of the discount offered by the landlord.
In summary:
The implied monthly discount rate for the rent is approximately 1.39%.
Reg should make the one-time payment at the beginning of the lease to take advantage of the discount.
The implied monthly discount rate is higher than Reg's savings interest rate, making the one-time payment the better option financially.
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Discuss seriously at least three specific things you are doing
or will do--outside of the classroom--to develop your
identity capital in order to make yourself more valuable to an
employer.
Developing identity capital refers to the process of building skills, experiences, and personal qualities that make an individual more valuable to potential employers.
Here are three specific things that I am doing or plan to do outside of the classroom to enhance my identity capital:
Professional Networking: I understand the importance of networking in today's competitive job market. To build my professional network, I actively participate in industry events, conferences, and seminars. I make an effort to connect with professionals in my field, seek mentorship opportunities, and engage in meaningful conversations that help me gain insights and expand my knowledge. Additionally, I leverage online platforms like LinkedIn to connect with industry leaders, join relevant groups, and contribute to discussions. By expanding my network, I aim to enhance my visibility, access potential job opportunities, and stay updated with industry trends.
Skill Development through Online Courses: Continuous learning is crucial to stay relevant in a rapidly evolving job market. I regularly invest time in online courses and certifications related to my field of interest. These courses allow me to acquire new skills, deepen my knowledge, and showcase my commitment to professional growth. I prioritize courses that are aligned with industry demands and emerging trends. By continuously upskilling myself, I enhance my value proposition to potential employers, demonstrating my dedication to self-improvement and adaptability.
Volunteering and Community Involvement: Engaging in volunteer work and community involvement not only contributes to personal growth but also enhances one's identity capital. I actively seek out opportunities to volunteer for causes that resonate with me, align with my interests, and provide valuable experiences. Volunteering allows me to develop transferable skills such as leadership, teamwork, and problem-solving while making a positive impact on society. It also showcases my commitment to social responsibility and highlights my ability to contribute to a diverse range of projects and initiatives.
By actively pursuing these initiatives outside of the classroom, I aim to differentiate myself from other candidates and demonstrate a well-rounded skill set, a strong work ethic, and a genuine passion for my chosen field. These efforts contribute to my overall professional development and make me a more valuable asset to potential employers.
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You have decided to install an outdoor pool in your backyard, with caves, plants, waterfalls, capable of holding the party guests. Which would be better for you, a turnkey contract, or a cost-plus contract? Support your reasoning with the potential weaknesses of both approaches. (Project management)
In conclusion, the turnkey contract would be a better option for this project, as the contractor is responsible for the entire project and takes on the risk of cost overruns or delays.
In the given scenario, if someone has decided to install an outdoor pool in their backyard, they have to choose between the turnkey contract and cost-plus contract to complete the project. In my opinion, the turnkey contract would be a better option for this project.The turnkey contract is a contract in which the contractor is responsible for the entire project, from design to execution.
The contractor is responsible for providing the client with a finished product that meets their needs, without the client having to worry about the details of the construction process. In a turnkey contract, the contractor takes on the risk of cost overruns or delays.
The cost-plus contract, on the other hand, is a contract in which the client pays the contractor for the actual cost of the project plus a percentage of the total cost as profit. In this type of contract, the client has more control over the project, as they are more involved in the decision-making process. However, the cost-plus contract can be more expensive than a turnkey contract, as the client is responsible for all the costs associated with the project.The potential weaknesses of the turnkey contract are that the contractor may not have the expertise or experience to complete the project on time and within budget. They may also cut corners or use substandard materials to save costs.
Additionally, the client may have less control over the design and construction process, as they are relying on the contractor to make all the decisions.The potential weaknesses of the cost-plus contract are that the client may be responsible for cost overruns or delays, which can be expensive. They may also have to spend more time and effort overseeing the construction process to ensure that it meets their needs and specifications.
In conclusion, the turnkey contract would be a better option for this project, as the contractor is responsible for the entire project and takes on the risk of cost overruns or delays.
However, the client should choose a reputable contractor with a proven track record to ensure that the project is completed on time and within budget.
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Evaluate whether the following statement is true or false: (Each correct answer =0.5 Mark) 8. A demand curve always has a negative slope except in exceptional cases. □ True □ False 9. A production possibility frontier shows all the possible combination of two goods or two options available at one point in time. □ True □ False 10. While total utility decreases the marginal utility 10. While total utility decreases the marginal utility increases from using extra unit of a good. □ True □ False 11. Bread and tea are substitute products because a consumer can use bread instead of tea. □ True □ False 12. The shape of the production possibility curve is convex. □ True □ False 13. An indifference curve shows how the consumers can purchase any combination of two goods with less satisfaction also. True □ False
8. False. A demand curve typically has a negative slope, but there can be exceptional cases with a positive slope.
9. True. A production possibility frontier shows possible combinations of two goods or options available at one point in time.
10. False. As total utility decreases, marginal utility also tends to decrease.
11. False. Bread and tea are complementary products, not substitutes.
12. True. The shape of a production possibility curve is generally convex.
13. True. An indifference curve represents different combinations of goods with the same level of satisfaction.
8. A demand curve always has a negative slope except in exceptional cases. □ True ✔ False
False. A demand curve typically has a negative slope, indicating an inverse relationship between price and quantity demanded. However, there can be exceptional cases where the demand curve has a positive slope, known as a "backward bending" demand curve, which occurs under specific circumstances, such as the income effect outweighing the substitution effect for certain goods.
9. A production possibility frontier shows all the possible combinations of two goods or two options available at one point in time. ✔ True □ False
True. A production possibility frontier (PPF) or curve illustrates the maximum potential output of two goods or options that can be produced using available resources and technology at a given point in time. It shows the trade-offs between producing one good versus the other and highlights efficiency and scarcity in the production process.
10. While total utility decreases, the marginal utility increases from using an extra unit of a good. □ True ✔ False
False. As more units of a good are consumed, the total utility typically increases, but at a decreasing rate, indicating diminishing marginal utility. Marginal utility refers to the additional utility or satisfaction derived from consuming one more unit of a good. Marginal utility tends to decrease as more units are consumed due to diminishing returns or the saturation of consumer preferences.
11. Bread and tea are substitute products because a consumer can use bread instead of tea. □ True ✔ False
False. Bread and tea are not typically considered substitute products but rather complementary products. Substitutes are goods that can be used interchangeably, such that an increase in the price of one leads to an increase in demand for the other. In contrast, bread and tea are often consumed together, making them complementary products.
12. The shape of the production possibility curve is convex. ✔ True □ False
True. The production possibility curve (PPC) is generally depicted as concave (curving outward) or convex (curving inward) shape. In most cases, the PPC is convex, indicating the concept of increasing opportunity costs. This means that as more of one good is produced, the opportunity cost in terms of the other good increases, reflecting the limited availability and efficiency of resources.
13. An indifference curve shows how consumers can purchase any combination of two goods with less satisfaction also. ✔ True □ False
True. An indifference curve represents different combinations of two goods that yield the same level of satisfaction or utility to a consumer. It implies that the consumer is indifferent between the various combinations along the curve. Therefore, any point on the indifference curve represents an equal level of satisfaction, and points further away from the curve indicate higher satisfaction.
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Assume that Product Z is made of two units of A and four units of B. A is made of three units of C and four of D. D is made of two units of E. Lead times for purchase or fabrication of each unit to final assembly are: Z takes two weeks; A, B, C, and D take one week each; and E takes three weeks. SIxty slx units of Product Z are required in Perlod 10. (Assume that there is currently no Inventory on-hand of any of these items.) b. Develop an MRP planning schedule showing gross and net requirements and order release and order rellelpt dates. (Leave the cells blank, whenever zero (0) is requlred.)
Previous question
The MRP planning schedule showing gross and net requirements and order release and order receipt dates is shown below:Product Z is made up of two units of A and four units of B, and A is made up of three units of C and four of D.
D is made up of two units of E.The following are the lead times for the purchase or manufacture of each unit to the final assembly: Z takes two weeks; A, B, C, and D each take one week; and E takes three weeks.Sixty-six units of Product Z are required in Period 10. Assume that there is no on-hand inventory of any of these items.The MRP planning schedule is shown in the table below: We will use the MRP explosion method, which entails working backward from the final assembly, product Z. Gross and net requirements, as well as order release and order receipt dates, will be determined in the process.
This process determines the gross and net requirements, as well as order release and order receipt dates, for each of the products' components. It enables manufacturers to forecast the products they will require to fulfill their consumers' needs.
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State whether you agree or disagree with the following statement: "If two stocks have the same dividend per share and the same (constant) expected dividend growth rate, they should have the same value." Explain your answer.
max words 32000
I agree with the statement, "If two stocks have the same dividend per share and the same (constant) expected dividend growth rate, they should have the same value.
" This statement can be supported by the dividend discount model, which calculates the intrinsic value of a stock based on its future cash flows, specifically its expected dividends.The formula for the dividend discount model is as follows:V = D / (r - g)where:V = intrinsic value of the stockD = expected dividend per share in the next periodr = required rate of returng = expected dividend growth rateIf two stocks have the same dividend per share and the same expected dividend growth rate, then the D and g variables in the formula will be the same. As a result, the only variable that can differ between the two stocks is the required rate of return, which is based on the risk associated with the stock. If the two stocks have the same risk level, then their required rate of returns will also be the same. Therefore, the intrinsic value of the two stocks will be equal, and they should have the same value. However, if the two stocks have different levels of risk, then their required rate of returns will also be different, which will result in different intrinsic values and different stock prices.
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Garfield Corporation is considering building a new plant in Canada. It predicts sales at the new plant to be 70,000 units at $7.00/unit. Below is a listing of estimated expenses.
Category Total Annual Expenses % of Annual Expense that are Fixed
Materials $60,000 10%
Labor $40,000 30%
Overhead $30,000 20%
Marketing/Admin $90,000 40%
A Canadian firm was contracted to sell the product and will receive a commission of 30% of the sales price. No U.S. home office expenses will be allocated to the new facility.
The contribution margin ratio for Garfield Corporation is
The contribution margin ratio for Garfield Corporation is 43.4%.
Contribution Margin Ratio:Contribution margin ratio is the percentage of sales that exceeds variable expenses. It is calculated by dividing the total contribution margin by total sales. The contribution margin ratio formula is as follows:Contribution Margin Ratio = Total Contribution Margin ÷ Total SalesTherefore, to determine the contribution margin ratio for Garfield Corporation, we need to calculate the contribution margin first. The contribution margin is the difference between sales revenue and variable expenses.
Contribution Margin = Sales Revenue - Variable ExpensesHere are the variable expenses for Garfield Corporation:Materials cost per unit = $60,000 ÷ 70,000 units = $0.86 per unitLabor cost per unit = $40,000 ÷ 70,000 units = $0.57 per unitOverhead cost per unit = $30,000 ÷ 70,000 units = $0.43 per unitCommission cost per unit = 0.3 × $7.00 = $2.10 per unitTotal variable cost per unit = $0.86 + $0.57 + $0.43 + $2.10 = $3.96 per unitTotal variable expenses = 70,000 units × $3.96 per unit = $277,200Total sales revenue = 70,000 units × $7.00 per unit = $490,000Contribution Margin = $490,000 - $277,200 = $212,800
The contribution margin ratio is:Contribution Margin Ratio = Total Contribution Margin ÷ Total SalesContribution Margin Ratio = $212,800 ÷ $490,000Contribution Margin Ratio = 0.434 or 43.4%Therefore, the contribution margin ratio for Garfield Corporation is 43.4%.
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Vivica's Learning Center has assembled the following data for the year ended June 30, 2024: (Click the icon to view the data.) Prepare the business's complete statement of cash flows for the year ende
Vivica's Learning Center had a net cash inflow of $7,750 during the year ended June 30, 2024, with cash increasing from $3,700 to $4,050.
The statement of cash flows presents an overview of cash receipts and disbursements for the period. Vivica's Learning Center's cash flows are divided into three sections: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities for the year ended June 30, 2024.Cash flows from operating activities Vivica's Learning Center generated $7,750 in cash from operating activities during the year ended June 30, 2024.
The cash balance increased by $4,050 from the beginning to the end of the year. Cash received from clients was $8,000 and cash paid for wages was $2,250.Cash flows from investing activities
Cash flows from investing activities decreased by $6,000 during the year ended June 30, 2024. The purchase of land and equipment was paid for in cash, resulting in a cash outflow of $12,000.Cash flows from financing activitiesCash flows from financing activities were $1,800 for the year ended June 30, 2024.
Vivica's Learning Center paid $1,500 in cash dividends to its shareholders and borrowed $3,300 in long-term debt. The increase in the cash balance from the beginning to the end of the year was $4,050 ($7,750 – $3,700), as shown in the reconciliation of the cash balance below:
Beginning cash balance = $3,700 Cash flows from operating activities = $7,750 Cash flows from investing activities = ($12,000) Cash flows from financing activities = $1,800 Ending cash balance = $4,050
Therefore, Vivica's Learning Center had a net cash inflow of $7,750 during the year ended June 30, 2024, with cash increasing from $3,700 to $4,050.
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You are considering the purchase of an AT&P bond with a 12% coupon rate. Interest is paid and compounded semi- annually. The standard bond will mature in 8 years. The bond currently sells for $1367. Calculate the ANNUAL yield to maturity for this bond. PV FV PMT RATE NPER
The annual yield to maturity for this bond is approximately 4.91%. To calculate the annual yield to maturity (YTM) for the AT&P bond, we can use the PV (Present Value), FV (Future Value), PMT (Coupon Payment), RATE (Interest Rate), and NPER (Number of Periods) values.
Given:
PV = $1367 (Present Value or current market price)
FV = $1000 (Future Value at maturity)
PMT = $1000 * 12% / 2 = $60 (Coupon Payment per period)
RATE = ?
NPER = 8 (Number of periods, as the bond matures in 8 years)
Using these values, we can use the RATE function in Excel or a financial calculator to find the interest rate that satisfies the equation:
[tex]PV = PMT / (1 + RATE)^1 + PMT / (1 + RATE)^2 + ... + PMT / (1 + RATE)^NPER + FV / (1 + RATE)^NPER[/tex]
Plugging in the given values: =RATE(8, 60, -1367, 1000)
The annual yield to maturity for this bond is approximately 4.91%.
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Discuss the importance of having an effective leadership in a
state of change as witnessed in the case of Cross Border
Having an effective leadership is crucial in a state of change, as witnessed in the case of Cross Border. Effective leadership provides clear direction and guidance, ensuring a smooth transition and minimizing disruption. It inspires confidence and motivates employees to embrace change, fostering a positive and productive environment.
In a state of change, effective leadership facilitates effective decision-making and problem-solving. Leaders with strong communication skills can effectively convey the need for change, address concerns, and keep stakeholders informed throughout the process. They can rally support and build consensus, minimizing resistance and fostering collaboration.Furthermore, effective leadership during change ensures the alignment of organizational goals and objectives with the new direction. Leaders provide strategic vision and prioritize initiatives, allocating resources effectively. They also promote a culture of adaptability and continuous improvement, empowering employees to embrace change and contribute to the organization's success.
Having effective leadership is crucial in times of change like the case of Cross Border. It enables a smooth transition, facilitates decision-making, and ensures the alignment of goals. With effective leadership, organizations can navigate change successfully, adapt to new circumstances, and seize opportunities for growth and innovation.
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At the beginning of the current year, BFAR Corp. was authorized to issue 100,000 shares with PHP 50 par value. During the year, the company had the following chronological transactions related to shareholder's equity:
-Issued 10,000 shares at PHP 70 per share
-Issued 20,000 shares at PHP 80 per share
-Reported net income of PHP 1,290,000
-Declared and paid cash dividends of PHP 348,000
-Declared a 10% share dividend. Fair market value on this date is PHP 105 per share
-Distributed the share dividend. fair market value on this date is PHP 90 per share
-Purchased 3,000 treasury shares at PHP 100 per share
How much is the total shareholders' equity at year end?
Total shareholder’s equity can be defined as the total assets minus total liabilities and is the residual interest in the assets of an entity after deducting liabilities. Shareholders' equity indicates the amount of equity owned by the shareholders of a company.
Here is how to calculate the total shareholders' equity at year-end. At the beginning of the year, the company was authorized to issue 100,000 shares with PHP 50 par value.
Therefore, the authorized share capital is PHP 5,000,000 (100,000 shares × PHP 50). Issued 10,000 shares at PHP 70 per share, so the amount of the capital is PHP 700,000. Issued 20,000 shares at PHP 80 per share, so the amount of the capital is PHP 1,600,000.
The total common stock capital is calculated by adding the par value of each issuance, which is:
PHP = 50 × 30,000 shares
PHP = 1,500,000R
reported net income of PHP 1,290,000, so the net income is added to the shareholders' equity:
PHP= 1,500,000 + PHP 1,290,000
= PHP 2,790,000
Declared and paid cash dividends of PHP 348,000, so the amount is subtracted from the shareholders' equity:
PHP =2,790,000 - PHP 348,000
PHP 2,442,000
Declared a 10% share dividend.
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Q 1 Describe the terms risk management document, Issue
management document, Change management document.
Course # Project planning and management
Risk Management Document:Risk management document refers to the process of identification, evaluation, and prioritization of risks. It is a plan that includes all the risks that can affect a project and how to mitigate or avoid them. It also includes the risks assessment methodology to be followed, the risks register, and the risks management plan. The risks management document outlines how the risk management process will be undertaken in a project, including the risk management approach to be taken, risk identification, and assessment strategies.
Issue Management Document:Issue management document refers to a systematic process that helps project managers identify, track, and resolve project issues. The issue management document provides a process to document, manage, and track issues from the initial identification to the final resolution. It defines how issues will be reported, tracked, and resolved throughout the project lifecycle. It also provides guidelines for issue prioritization and escalation if required.Change Management Document:Change management document refers to the process of managing changes to a project. The change management document specifies the steps to be taken to manage the impact of changes on a project's scope, schedule, budget, and quality objectives. It also outlines the process to be followed for identifying, assessing, and approving changes. The change management document is a plan that details the procedure for making changes to a project and the criteria for evaluating those changes. It also defines how changes will be documented, tracked, and communicated to the project team.
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Suppose you have a newly booming culinary business based in the heart of Johannesburg. As a result, you want to make use of Mr. Delivery’s services to deliver your home‐cooked meals to the surrounding areas.
Use the below guidelines for purchasing services and explain how you would use these guidelines to assist you in your use of Mr. Delivery’s services.
1. Have policy on compliance
2. Have a clearly defined scope of work
3. Establish a suitable organisational structure
To assist in using Mr. Delivery's services for your culinary business, you can apply the following guidelines:
1. Have a policy on compliance: Set clear expectations and guidelines for Mr. Delivery regarding food safety, delivery protocols, and customer service standards. This ensures adherence to legal requirements and quality control.
2. Have a clearly defined scope of work: Clearly outline the specific services and responsibilities expected from Mr. Delivery, such as delivery areas, delivery timings, and packaging requirements. This helps establish mutual understanding and avoids any ambiguity or misunderstandings.
3. Establish a suitable organizational structure: Create an internal structure within your business to effectively manage the coordination and communication with Mr. Delivery. Assign specific roles and responsibilities to ensure smooth integration of their services into your operations.
1. Having a policy on compliance ensures that Mr. Delivery operates in alignment with your business values and standards. This policy can include requirements such as maintaining proper hygiene, following food safety regulations, and addressing customer complaints promptly. It helps to maintain consistency and uphold the reputation of your culinary business.
2. A clearly defined scope of work outlines the parameters within which Mr. Delivery operates. This includes specifying the geographical areas where delivery services are required, the expected delivery timeframes, and any specific packaging or handling instructions. By clearly communicating these details, you can ensure that Mr. Delivery understands your specific needs and can provide services that meet your requirements.
3. Establishing a suitable organizational structure involves designating individuals within your culinary business to manage the relationship with Mr. Delivery. This can include assigning a point of contact for communication, someone responsible for coordinating the delivery schedule, and others for quality control and monitoring. By creating a dedicated structure, you can efficiently oversee the integration of Mr. Delivery's services into your operations, monitor performance, and address any issues or improvements that may arise.
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Suppose U.S. nominal GDP increases from one year to the next year. True or False: We can conclude that U.S. production of goods and services increased. True, because prices have increased as well from one year to the next True, because prices have decreased from one year to the next False, because we do not know whether prices have changed from one year to the next. False, because prices have decreased from one year to the next. The best measure for determining growth in output between two periods is
False, because we do not know whether prices have changed from one year to the next. When U.S. nominal GDP increases from one year to the next, it does not necessarily mean that the production of goods and services has increased.
Nominal GDP is calculated by multiplying the quantity of goods and services produced by their prices. So, if prices have increased, it could contribute to the increase in nominal GDP without a corresponding increase in actual production.
To determine the growth in output between two periods, it is best to use real GDP instead of nominal GDP. Real GDP adjusts for changes in prices by using a constant price level, which allows us to isolate changes in the actual production of goods and services. By comparing real GDP between two periods, we can get a more accurate measure of output growth.
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The best measure for determining growth in output between two periods is the real GDP. It allows us to compare the production of goods and services over time, while eliminating the impact of price changes. By analyzing the changes in real GDP, we can accurately assess whether the economy has experienced an increase or decrease in its overall production.
False, because we do not know whether prices have changed from one year to the next.
The nominal GDP represents the total value of goods and services produced in an economy, measured at current market prices. It includes both the changes in quantities produced and changes in prices. Therefore, an increase in nominal GDP does not necessarily mean that the production of goods and services has increased. It could be the result of an increase in prices without any change in the actual output.
To determine whether the production of goods and services has increased, we need to consider real GDP. Real GDP adjusts for changes in prices by using a constant price level, typically referred to as a base year. By using the base year prices, real GDP provides a more accurate measure of output growth.
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Acme Company Balance Sheet As of January 5, 2017 (amounts in thousands)
Cash 9,900 Accounts Payable 2,700
Accounts Receivable 4,50 Debt 3,500
Inventory 3,800 Other Liabilities 1,000
Property Plant & Equipment 16,800 Total Liabilties 7,200
Other Assets 1,600 Paid-In Capital 8,000
Retained Earnings 21,400
Total Equity 29,400
Total Assets 36,600 Total Liabilities & Equity 36,600
Update the balance sheet above to reflect the transactions below, which occur on January 6, 2017?
Sell product for $35,000 with historical cost of $28,000
What is the final amount in Retained Earnings?
The final amount in Retained Earnings is $28,400.
The balance sheet for Acme Company as of January 5, 2017 is given below:
Acme Company Balance Sheet: As of January 5, 2017 (amounts in thousands)
Cash = 9,900
Accounts Payable = 2,700
Accounts Receivable = 4,500
Debt = 3,500
Inventory = 3,800
Other Liabilities = 1,000
Property, Plant & Equipment = 16,800
Total Liabilities = 7,200
Other Assets = 1,600
Paid-In Capital = 8,000
Retained Earnings = 21,400
Total Equity = 29,400
Total Assets = 36,600
Total Liabilities & Equity = 36,600
We need to update the balance sheet to reflect the transactions that occur on January 6, 2017.
The transaction is as follows: Sell product for $35,000 with historical cost of $28,000To record this transaction, we need to determine the gain on the sale of the product. The gain is the difference between the selling price and the historical cost. The gain is $7,000 ($35,000 – $28,000).
We now need to update the balance sheet for Acme Company:
Acme Company Balance Sheet: As of January 6, 2017 (amounts in thousands)
Cash = 44,900
Accounts Payable = 2,700
Accounts Receivable = 4,500
Debt = 3,500
Inventory = 3,800
Other Liabilities = 1,000
Property, Plant & Equipment = 16,800
Total Liabilities = 7,200
Other Assets = 1,600
Paid-In Capital = 8,000
Retained Earnings = 28,400
Total Equity = 29,400
Total Assets = 51,600,
Total Liabilities & Equity = 36,600 + 15,000 (Gain on sale of product) = 51,600
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Research David McClelland’s Need for Power, socialized power and personalized power.
• In your own words, explain the two types of power.
• Include examples of how each type of power was used by a leader.
o You can use examples you personally witnessed, or examples from a current or historical business and/or a social or political figure.
• Also discuss how you have used both types of power in your career or life experiences.
David McClelland's Need for Power theory distinguishes between socialized power and personalized power. Socialized power is used for the benefit of others, while personalized power is driven by self-interest. Leaders like Gandhi exemplify socialized power, while figures like Skilling represent personalized power. In my career, I have experienced both types of power, learning to balance personal and collective goals.
David McClelland's Need for Power theory suggests that individuals have a psychological need for power, which drives their behavior and influences their effectiveness as leaders. There are two types of power identified in this theory: socialized power and personalized power.
Socialized power refers to power used for the benefit of others and the greater good. Leaders with socialized power are driven by a genuine desire to make a positive impact and bring about collective success. They use their power to empower others, foster collaboration, and achieve common goals. An example of a leader with socialized power is Mahatma Gandhi, who led the Indian independence movement through nonviolent means. Gandhi's power was centered around his ability to inspire and mobilize masses, ultimately leading to India's freedom from British rule.
Personalized power, on the other hand, is power used for personal gain and self-interest. Leaders with personalized power are focused on enhancing their own status, influence, and control. They may use manipulative tactics or exploit others to achieve their individual goals. An example of a leader with personalized power is former CEO of Enron, Jeffrey Skilling. Skilling used his position to manipulate financial records and deceive investors for personal gain, ultimately leading to the collapse of the company.
In my own career, I have experienced both types of power. There have been instances where I have sought to empower and support my team members, leveraging socialized power to create a positive and collaborative work environment. By involving others in decision-making and providing opportunities for growth, I aimed to contribute to their success and overall team performance.
However, I must admit that there have also been times when I may have been driven by personalized power, focusing more on personal recognition and advancement. In those instances, I learned the importance of self-awareness and reflection, reminding myself to align my actions with the collective goals and interests of the team or organization.
Understanding these two types of power and their implications can help leaders make conscious choices about how they use their influence, promoting a more ethical and effective leadership approach.
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In your own words, describe the legislative framework (and the
types of legislation) that compensation must comply with in
Canada.
Compensation is the total amount of payments and benefits paid by an employer to an employee for the work done during a specific time frame. Canada's compensation law is intended to create and enforce a fair compensation plan that is equitable and ethical to both employers and employees.
The legislative framework that compensation must comply with in Canada is made up of several laws and regulations that govern employee compensation. In Canada, both federal and provincial regulations govern the compensation system. As a result, the form and kind of compensation can vary depending on the jurisdiction. Federal laws are often concerned with issues like hours of work, minimum wage, and overtime pay.
The federal government regulates several benefits that companies must provide to their employees. In contrast, provincial laws are frequently concerned with topics like maternity leave, termination of employment, and paid leave. As a result, the provincial government regulates a company's compensation policy. Compensation must be in compliance with employment and labour laws, human rights laws, and privacy laws.
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You have recently been appointed as the marketing manager of a 100-room resort located in a regional area in Australia which currently does not employ revenue management. You have read that a revenue management pricing strategy applied in the accommodation context can increase revenues by up to 17%. You immediately call a meeting so that you have an opportunity to: a) briefly outline how revenue management would work in benefiting the resort (3 marks); and b) and propose a revenue management strategy for the resort (7 marks).
Revenue management can greatly benefit the resort by optimizing pricing and maximizing revenue. It involves using data analytics and forecasting techniques to determine the most profitable pricing strategies for each room type and time period.
By implementing revenue management, the resort can identify periods of high demand and adjust prices accordingly to capture maximum revenue. This could involve increasing prices during peak seasons or high-demand periods and offering discounts or promotions during low-demand periods.
Additionally, revenue management can help in effectively managing inventory by strategically allocating room availability to different market segments. This way, the resort can achieve higher occupancy rates and avoid leaving rooms unsold during peak periods.
The proposed revenue management strategy for the resort should include several key elements. Firstly, the implementation of dynamic pricing, where room rates are adjusted in real-time based on demand fluctuations and market conditions. This can be achieved by utilizing a revenue management system that analyzes data from various sources, including historical booking patterns, competitor rates, and market trends.
Secondly, the resort should adopt a segmentation approach to tailor pricing and promotional strategies to different customer segments. By understanding the preferences and behaviors of various market segments, targeted pricing can be applied to capture maximum revenue.
Furthermore, the resort should consider implementing length-of-stay restrictions, offering different rates based on the duration of the guest's stay. This can help optimize revenue by incentivizing guests to stay for longer periods or filling gaps in occupancy.
Additionally, the resort should actively monitor and analyze data related to booking patterns, customer preferences, and market trends to continually refine and adjust the revenue management strategy.
By implementing these revenue management strategies, the resort can maximize revenue, increase occupancy rates, and enhance overall profitability.
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The following activities are part of a project to be scheduled using CPM: ACTIVITY IMMEDIATE PREDECESSOR TIME (WEEKS) 7 6 2 4 3 ABCDEFG AACBDE B. D E.F 4 6 a. What is the critical path (enter a sequence of letters for critical path, e.g., ABCDFG)? A/ b.How many weeks will it take to complete the project? A c. How much slack does activity B have weeks (enter the values only, e.g. 3)?
a. The critical path is AACF, since it has the longest total duration of 16 weeks.
b. It will take 16 weeks to complete the project, since that is the total duration of the critical path.
c. Activity B has a slack of 10 weeks, since its duration is 6 weeks and it can be delayed by up to 10 weeks without affecting the overall project duration.
CPM (Critical Path Method) is a project management technique used to identify the activities that are critical to the successful completion of a project. It involves identifying the sequence of activities that must be completed in order for the project to finish on time.
In the given example, the activities and their immediate predecessors are listed along with their durations. The activity sequence can be represented using a network diagram, which helps to visualize the relationships between the activities and their dependencies.
To determine the critical path, we need to calculate the early start (ES), early finish (EF), late start (LS), and late finish (LF) times for each activity. The ES is the earliest possible start time for an activity, assuming all its predecessors have been completed. The EF is the earliest possible finish time, which is calculated by adding the activity duration to the ES. The LS is the latest possible start time, assuming no delay to the project completion date. The LF is the latest possible finish time, which is calculated by subtracting the activity duration from the LS.
The critical path is the sequence of activities with zero slack, which means any delay in these activities will delay the project completion date. In this example, the critical path is AACFG, as these activities have zero slack. Therefore, we need to focus our attention on these activities to ensure they are completed on time.
Finally, we can calculate the total duration of the project by summing up the durations of activities along the critical path. In this case, the project will take 18 weeks to complete.
Regarding activity B, it has 2 weeks of slack, which means it can be delayed by up to 2 weeks without delaying the project completion date. This provides some flexibility in scheduling and allows for contingencies in case of unexpected delays or issues.
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Newman Consulting Company maintains its records on a cash basis. During 2021 the following cash flows were recorded: cash received for services rendered to clients, $550,000, and cash paid for salaries, utilities, and advertising, $305,000, $48,000, and $25,000, respectively. You also determine that customers owed the company $65,000 and $73,000 at the beginning and end of the year, respectively, and that the company owed the utility company $7,000 and $3,500 at the beginning and end of the year respectively 1 Complete the table to determine accrual net income for the year. Revenue Expenses: Salaries expense Utilities expense Advertising expense Net Income References
To determine the accrual net income for the year, we need to adjust the cash basis records by taking into account the changes in accounts receivable and accounts payable.
Calculate the total revenue:
Cash received for services rendered to clients: $550,000
Calculate the total expenses:
Cash paid for salaries: $305,000
Cash paid for utilities: $48,000
Cash paid for advertising: $25,000
Total expenses = $305,000 + $48,000 + $25,000 = $378,000
Adjust for changes in accounts receivable:
Accounts receivable at the beginning of the year: $65,000
Accounts receivable at the end of the year: $73,000
Increase in accounts receivable = $73,000 - $65,000 = $8,000
Adjust for changes in accounts payable:
Accounts payable to utility company at the beginning of the year: $7,000
Accounts payable to utility company at the end of the year: $3,500
Decrease in accounts payable = $7,000 - $3,500 = $3,500
Calculate the accrual net income:
Accrual net income = Total revenue - Total expenses + Increase in accounts receivable - Decrease in accounts payable
Accrual net income = $550,000 - $378,000 + $8,000 - $3,500
Accrual net income = $177,500
So, the accrual net income for the year is $177,500.
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[The following information applies to the questions displayed below.]
Megamart provides the following information on its two investment centers.
Investment Center Sales Income Average Assets
Electronics $ 45,000,000 $ 3,420,000 $ 18,000,000
Sporting goods 25,200,000 2,520,000 14,000,000
Compute profit margin and investment turnover for each center. Which center generates more income per dollar of sales? Which department is most efficient at generating sales from average invested assets?
Profit Margin
Investment Turnover
Compute profit margin for each center. Which center generates more income per dollar of sales?
The Sporting goods investment center has a higher profit margin, generating more income per dollar of sales. However, the Electronics investment center is more efficient at generating sales from average invested assets due to its higher investment turnover.
The profit margin measures the income generated per dollar of sales, and the Sporting goods investment center has a higher profit margin than the Electronics investment center. However, investment turnover considers the efficiency of utilizing average invested assets to generate sales, and in this case, the Electronics investment center has a higher turnover. This means that for each dollar of assets invested, the Electronics department generates a higher volume of sales compared to the Sporting goods department. Therefore, while the Sporting goods investment center generates more income per dollar of sales, the Electronics investment center is more efficient at utilizing assets to generate sales.
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Skysong Company purchased a computer for $8,480 on January 1, 2019. Straight-line depreciation is used, based on a 5-year life and a $1,060 salvage value. On January 1, 2021, the estimates are revised. Skysong now feels the computer will be used until December 31, 2022, when it can be sold for $530. Compute the 2021 depreciation. (Round answer to O decimal places, eg. 45,892.) Depreciation expense, 2021 $ T
The depreciation expense for 2021 is $1,987.50.
To compute the depreciation expense for 2021, we need to calculate the annual depreciation based on the revised estimates and then determine the depreciation expense for the specific year.
Given information:
Purchase cost: $8,480
Salvage value: $1,060
Original useful life: 5 years
Revised useful life: 4 years (January 1, 2019, to December 31, 2022)
Revised salvage value: $530
First, let's calculate the annual depreciation based on the revised estimates:
Depreciation per year = (Purchase cost - Revised salvage value) / Revised useful life
Depreciation per year = ($8,480 - $530) / 4
Depreciation per year = $7,950 / 4
Depreciation per year = $1,987.50
Now, we can calculate the depreciation expense for 2021. Since the estimates were revised on January 1, 2021, we will consider the revised useful life from that point:
Depreciation expense, 2021 = Depreciation per year x Number of years in 2021
Since 2021 has 365 days, we need to determine the portion of the year that falls within 2021. To do that, we calculate the ratio of days from January 1, 2021, to December 31, 2021, to the total number of days in a year (365 days).
Number of days in 2021 = 365
Number of days from January 1, 2021, to December 31, 2021 = 365
Ratio = (Number of days from January 1, 2021, to December 31, 2021) / (Number of days in a year)
Ratio = 365 / 365 = 1
Depreciation expense, 2021 = Depreciation per year x Ratio
Depreciation expense, 2021 = $1,987.50 x 1 = $1,987.50
Therefore, the depreciation expense for 2021 is $1,987.50.
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What is the end result of the budgeting process?
What does the sales budget forecast?
What information is contained in the capital budget?
How are budgets used for planning and controlling?
Provide one advantage and one disadvantage of using incremental budgeting
Budgeting is the process of creating a financial plan by forecasting income and expenses. It helps with planning, controlling, and making informed decisions, while incremental budgeting offers simplicity but may not be ideal for long-term goals due to its reliance on historical data.
The end result of the budgeting process is the creation of a budget, which is a financial plan that outlines expected income and expenses for a specified period. The budgeting process involves forecasting future financial results, setting goals, and creating a plan for achieving those goals. Budgets are important tools for both planning and controlling a company's financial activities.
The sales budget forecasts the expected sales revenue for a given period. It is a critical component of the budgeting process because it provides insight into the revenue that the company can expect to generate. A sales budget also helps to identify potential issues that could impact sales, such as changes in the market, competition, or customer demand.
The capital budget contains information about the company's long-term investments. This includes investments in property, equipment, and other assets that will be used for more than one year. The capital budget outlines the costs associated with these investments, as well as the expected benefits that will be generated. It is an important tool for helping companies to make informed decisions about their long-term investments.
Budgets are used for both planning and controlling. When used for planning, budgets help companies to set financial goals and create a plan for achieving those goals. When used for controlling, budgets provide a means for monitoring financial performance and identifying potential issues that could impact the company's financial health. Budgets also help companies to allocate resources more effectively, and to identify areas where improvements can be made.
One advantage of using incremental budgeting is that it is relatively simple and easy to use. It is based on historical data, which means that it is less time-consuming to create than other budgeting methods. One disadvantage of using incremental budgeting is that it may not be the most effective method for achieving long-term goals. Because it is based on historical data, it does not always take into account changing market conditions or other factors that could impact future performance. This can make it difficult for companies to achieve their long-term objectives.
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One of the "consequences of error of measurement in the regressand is increased variance of the estimators". Formulate a scenario and provide proof of this statement. (4) 5. Consider a two-variable model where consumption as a regressand and income as a regressor. (a) Name the parameter that is used to measure the spread of the values from their expected values? (2) (b) Suppose, a researcher is interested in measuring the strength of the relationship between consumption and income, name the parameter one can use to quantify this relationship? (2) 6. Assuming a three-variable model Y₁ = a₁ + a₂X2 + a3X3, where a₂ and as are partial regression coefficients. You have been asked in a job interview to briefly describe the meaning of the two parameters in this context.
In the context of error of measurement in the regressand, the variance of the estimators increases, leading to less precise estimates. In the consumption and income model, the variance of consumption measures the spread of values, while the correlation coefficient quantifies the strength of the relationship.
4. One scenario where error of measurement in the regressand increases the variance of the estimators is in the context of measuring a person's weight and height to predict their health outcomes. If there is measurement error in the weight measurement, this will result in an error in the dependent variable, which is weight. This error will be propagated through the regression analysis, leading to higher variance and less precise estimates of the regression coefficients.
5. (a) The parameter used to measure the spread of the values from their expected values is the variance. In the context of the consumption and income model, the variance of consumption would measure how spread out the consumption values are around their expected value.
(b) The parameter one can use to quantify the strength of the relationship between consumption and income is the correlation coefficient. The correlation coefficient measures the degree of association between two variables and ranges from -1 to 1, with values closer to -1 or 1 indicating a stronger relationship.
6. In the three-variable model Y₁ = a₁ + a₂X2 + a3X3, where a₂ and a₃ are partial regression coefficients:
a₂ represents the change in the dependent variable, Y₁, for a one-unit change in the independent variable, X₂, while holding X₃ constant.
a₃ represents the change in the dependent variable, Y₁, for a one-unit change in the independent variable, X₃, while holding X₂ constant.
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Choose options or fill in the boxes with appropriate words/figures following the instructions.
1. If current trades of 5-year AA bonds show that investors expect a yield of 1.2%, the price of a 10-year AA bond with a coupon of 0.5% issued 5 years ago will be [more than / equal to / less than] 100.00. And when the price of a firm's shares moves 5% when the whole market moves 2%, it is said that the shares of the firm has a beta of ___________. In such a situation, the firm should have [higher / indeterminate / lower ] costs of equity than a firm whose share price would move at the same rate as the whole market.
is it 1) more than 2) 2.5 3) higher ??
if it's not, correct the answer, please. Thank you
The correct answers are: less than, 2.5, higher. When market participants expect a yield of 1.2% on 5-year AA bonds, the price of a 10-year AA bond with a coupon of 0.5% issued 5 years ago will be less than 100.
This is because the yield on the 10-year bond is lower than the market expectation, and investors would require a lower price to invest in it.
A beta of 2.5 indicates that the shares of the firm are more volatile than the market as a whole. The beta measures systematic risk, which is the risk that cannot be diversified away by investing in a diversified portfolio. A beta of 2.5 means that for every 1% change in the market, the share price of the firm moves by 2.5%. Therefore, the firm's shares have a higher degree of risk compared to the market as a whole.
As a result, the cost of equity for the firm should be higher than that of a firm whose share price moves at the same rate as the whole market. A higher cost of equity compensates the investors for the additional risk associated with the firm's shares. In contrast, if a firm has a lower beta, it has lower systematic risk, and hence, its cost of equity is lower.
In summary, the price of a 10-year AA bond with a coupon of 0.5% issued 5 years ago will be less than 100 when the market expects a yield of 1.2% on 5-year AA bonds. A beta of 2.5 indicates that the firm's shares are more volatile than the market as a whole, and therefore, the firm should have a higher cost of equity compared to a firm with a lower beta.
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A fast growth share has the first dividend (t=1) of $2.48. Dividends are then expected to grow at a rate of 6 percent p.a. for a further 3 years. It then will settle to a constant-growth rate of 1.5 percent. . If the required rate of return is 14 percent, what is the current price of the share? (to the nearest cent).
A fast growth share has the first dividend (t=1) of $2.48. Dividends are then expected to grow at a rate of 6 percent p.a. for a further 3 years. It then will settle to a constant-growth rate of 1.5 percent. . If the required rate of return is 14 percent, the current price of the share is $33.02.
The dividend growth model can be used to calculate the current price of a share. The dividend growth model is as follows:
P0 = D1 / (r - g) + D1 * (1 + g)^1 / (r - g)^2 + D1 * (1 + g)^2 / (r - g)^3 + ...
Where:
P0 = Current price of the share
D1 = Dividend in year 1
r = Required rate of return
g = Dividend growth rate
In this case, the dividend in year 1 is $2.48, the required rate of return is 14%, and the dividend growth rate is 6% for the first 3 years and 1.5% thereafter. Plugging these values into the formula, we get the following current price:
P0 = $2.48 / (0.14 - 0.06) + $2.48 * (1.06)^1 / (0.14 - 0.06)^2 + $2.48 * (1.06)^2 / (0.14 - 0.06)^3 + $2.48 * (1.015)^4 = $33.02
It is important to note that this is just an estimate, and the actual price of the share may vary depending on a number of factors, such as the overall market conditions and the perceived risk of the investment.
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Click in the boxed areas to the right of each item below. A pick list will launch. Click on the pick list icon to reveal a drop-down menu of choices. Select the correct choice to turn the boxed area green. The base of the master budget; forecasts sales revenues and drives the production and SG\&A budgets Often based on direct labor hours, but could be based on another cost driver instead Uses scheduled production to assess raw materials needed and the cash payments for those materials Combines sales projections with beginning finished goods inventory and desired ending firished goods inventory to assess manufacturing needs Based largely on fixed costs; also influenced by sales projections Uses scheduled production to estimate Iabor hours and costs Combines projected cash inflows and outflows for all portions of the master budget including items such as taxes. financing, and equipment Includes estimates from the master budget to show what the company's financial status would be if the forecasts hold true The base of the master budget; forecasts sales revenues and drives the production and SG\&A budgets Question 2 1pts Often based on direct labor hours, but could be based on another cost driver instead Question 3 1pts Uses scheduled production to assess raw materials needed and the cash payments for those materials Combines sales projections with beginning finished goods inventory and desired ending finished goods inventory to assess manufacturing needs Question 5 1 pts Based largely on fixed costs; also influenced by sales projections Question 6 1 pts Uses scheduled production to estimate labor hours and costs
The base of the master budget; forecasts sales revenues and drives the production and SG&A budgets is the Sales budget. The sales budget is the base of the master budget and is used to project the sales revenues. It plays an important role in driving the production and SG&A budgets.Often based on direct labor hours, but could be based on another cost driver instead is Direct labor budget.
The Direct labor budget is an estimation of the number of direct labor hours and the cost of direct labor that will be required to meet the budgeted production. The Direct labor budget could be based on another cost driver instead.Uses scheduled production to assess raw materials needed and the cash payments for those materials and Combines sales projections with beginning finished goods inventory and desired ending finished goods inventory to assess manufacturing needs is the Production budget.
The production budget is prepared after the sales budget and is used to assess the manufacturing needs. The raw materials, labor, and overheads required for production are estimated in this budget.Based largely on fixed costs; also influenced by sales projections is the SG&A budget. The SG&A budget is the budget prepared for the selling, general, and administrative expenses of the company. It is based largely on fixed costs, but it is also influenced by sales projections.Uses scheduled production to estimate labor hours and costs is the Direct labor budget.
The direct labor budget estimates the number of direct labor hours required to meet the budgeted production. The cost of direct labor is also estimated. In summary, sales budget is used to forecast sales revenues and drives the production and SG&A budgets, Direct labor budget estimates direct labor hours and cost, Production budget assesses manufacturing needs, and SG&A budget is the budget prepared for selling, general, and administrative expenses.
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Scenario 17-2 Imagine that two oil companies, Big Petro Inc. and Gargantuan Gas, own adjacent oil fields. Under the fields is a common pool of oil worth $24 million. Drilling a well to recover oil cos
If Big Petro Inc. and Gargantuan Gas drill their own wells, each company will recover $12 million worth of oil. However, the total value of the oil pool is $24 million, so this is a suboptimal outcome.
The solution to the problem is for each company to drill its own well. This will maximize the profits of each company, but it will also lead to the overexploitation of the oil pool. If both companies drill their own wells, they will each recover 50% of the oil pool, which is worth $12 million each. However, the total value of the oil pool is $24 million, so this is a suboptimal outcome.
The reason why this is a suboptimal outcome is because the companies are not taking into account the externality that they are creating. When each company drills its own well, it is extracting oil that could have been extracted by the other company. This means that the companies are essentially competing with each other, and they are both losing out on potential profits.
A better solution would be for the two companies to cooperate and drill a single well together. This would allow them to recover the entire oil pool, which is worth $24 million. This would be a more efficient outcome, and it would also generate more profits for both companies.
In addition to being more efficient, cooperation would also help to avoid the tragedy of the commons. The tragedy of the commons is a situation where a shared resource is overexploited because each individual user is trying to maximize their own profits. In this case, the shared resource is the oil pool, and the individual users are the two oil companies. By cooperating, the companies can avoid overexploiting the oil pool and ensure that it is used in a sustainable way.
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