True.The statement "the higher the reserve requirement, the lower is the monetary multiplier" is true. Reserve requirements refer to the portion of the deposits that the banks must keep in reserve rather than loaning it out to consumers.
The monetary multiplier is the effect that changes in the money supply have on the overall economy. A high reserve requirement lowers the multiplier, which means that the money supply increases at a slower rate.
Therefore, it can be said that a higher reserve requirement will reduce the money supply and, as a result, the money multiplier. A lower reserve requirement will increase the money supply and, as a result, the money multiplier.
In conclusion, the statement "the higher the reserve requirement, the lower is the monetary multiplier" is true. This is because reserve requirements and the monetary multiplier are inversely related.
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Stock in Daenerys Industries has a beta of 1.8. The market risk premium is 5 percent, and T-bills are currently yielding 4.8 percent. The company's most recent dividend was $2.00 per share, and dividends are expected to grow at an annual rate of 5 percent indefinitely. If the stock sells for $35 per share, what is your best estimate of the company's cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Step 1: Calculate the Return on Equity using CAPM
Re=[Rf+ BetaxRm]
Re = [4.8% +1.8x5%]
Re=13.8%
Step 2: Calculate the Return on Equity using Dividend Growth Model
Re= Divx(1+g)/P₀ + g
Re= $2x(1+5%)/ $35+5%
Re=11%
It is evident from the above calculations that the cost of equity from both methods is different. Also, it is difficult to say that which one is better estimate of cost of equity. Therefore, the average of cost of equity the from both the method will be the best estimate for the cost of equity of the company.
Therefore, the cost of equity is,
Using the average of two retums on equity we get the cost of equity
Cost of Equity= [13.8% +11%/2]
Cost of Equity 12.40%
Thus, the cost of equity is 12.40%.
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For many people retirement is often the goal of working hard throughout their younger years. In class we have discussed a vari that retirement can be affected. Please answer the following questions based on our class discussions. 1. Finances: talk about the role of Social Security. Pensions Plans and savings accounts for retired people. When you want how much of your pre-retirement income do you need to replace? What is this based on? 2. What is the difference between voluntary retirement and involuntary retirement? How might this affect the adjustment to ret 3. Living environments: There are many different places, environments, institutions and locations where a retired person may Discuss what may impact where and with whom a retired person may live. What might be the role of family in this decision 4. Intimacy and Sexuality: Discuss what affects intimacy and sexuality among older adults; think about being single or being partnership, address some health conditions that can cause sexual problems and discuss a few ways that women experien issues differently than men.
1. Finances: The role of Social Security, Pensions Plans, and savings accounts for retired people is:Social Security: Social Security is the primary source of income for most retirees.
Benefits are based on the amount of earnings during working years and on retirement age. Pensions Plans: Pensions are employer-sponsored retirement plans that provide regular income for the retired worker's lifetime. Savings accounts for retired people: Personal savings can include tax-advantaged accounts such as IRAs, annuities, and savings accounts.When you retire, you must have saved enough to replace at least 70% of your pre-retirement income. The percentage of income replaced depends on factors such as your health, lifestyle, and whether you own a home.2. The difference between voluntary retirement and involuntary retirement:Voluntary retirement is when a person chooses to retire. Involuntary retirement, on the other hand, is when an individual has no choice but to retire. The sudden loss of employment due to layoffs, health issues, or caring for a family member might force an individual into retirement. Involuntary retirement may affect the adjustment to retirement negatively because it comes unexpectedly.3. Living environments: The place and with whom a retired person may live depend on many factors, such as finances, lifestyle, health, personal preferences, and family roles. For instance, a retired person may choose to live in a nursing home, assisted living facility, senior apartment, or with family. Family members' role may vary depending on the family's culture, tradition, and values.4. Intimacy and Sexuality:Several factors affect intimacy and sexuality among older adults. Older adults may have physical and psychological health conditions that affect their sexual life. They may also experience differences in sexual health between men and women. Women experience more sexual dysfunction due to vaginal dryness, which is common in post-menopausal women. However, men may experience erectile dysfunction that is related to aging or chronic conditions such as diabetes and heart disease. Older adults may also experience a decline in libido due to medication and other health conditions.
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name five specific ways in which the official racial and ethnic classifications or terms in the Census have been adjusted to reflect socio-historical changes in the US population. Listing or bullet points accepted.
The official racial and ethnic classifications or terms in the Census have been adjusted to reflect socio-historical changes in the US population. There are many specific ways in which these classifications or terms have been adjusted to reflect socio-historical changes in the US population.
Some of them are given below:
The introduction of "multiracial" or "two or more races" category: For the 2000 census, a separate category was created to include people who identified with two or more races. This was a major change from earlier years when people who identified with more than one race were forced to choose only one.
The addition of Middle Eastern and North African (MENA) category: Prior to 2020, people from Middle Eastern and North African (MENA) countries were classified as white on the census. However, in 2020, a separate category was introduced for people from MENA countries, reflecting the diversity of the US population. Changes in terminology: The Census Bureau has changed the terminology used to describe certain groups in response to social and cultural changes. For example, the term "Negro" was removed from the census form after the 2010 census because it was considered outdated.
The inclusion of Hispanic or Latino origin: Prior to 1970, people of Hispanic or Latino origin were not included in the census. However, starting in 1970, a separate category was created to include people of Hispanic or Latino origin, reflecting the growing diversity of the US population. The introduction of "American Indian and Alaska Native" category: Prior to 1990, people who identified as American Indian or Alaska Native were classified as "other." However, in 1990, a separate category was created for people who identified as American Indian or Alaska Native, reflecting the growing recognition of the unique culture and heritage of these groups.
These are some of the ways the official racial and ethnic classifications or terms in the Census have been adjusted to reflect socio-historical changes in the US population.
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Al Bakara company report the following results for its calendar year December 31,2021. Cash sales 200,000 Credit sales 180,000 Account receivable 22,000 (debit) Account payable 46,000 (credit) Allowances for doubtful accounts 2,000 (debit) The company estimates bad debts to be 2% of annual total sale. Required: 1-Prepare the adjusting entry to record the estimated bad debt. Answer in the following format [Note: This is just an example and is not related to the question] Jan 1 Dr. Cash................120 Cr. Owner capital.. 120 2- Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on Al Bakara company December 31 balance sheet
The adjusting entry to record the estimated bad debt for Al Bakara company would be:
Dec 31:
Dr. Bad Debts Expense $7,600
Cr. Allowance for Doubtful Accounts $7,600
To record the estimated bad debt, we need to recognize the expense in the form of Bad Debts Expense and increase the Allowance for Doubtful Accounts. The estimated bad debt is calculated as 2% of the total sales ($200,000 + $180,000 = $380,000).
By making the adjusting entry to record the estimated bad debt, Al Bakara company acknowledges the potential uncollectible portion of its accounts receivable and updates its financial records accordingly.
Al Bakara company's December 31 balance sheet would show the following for Accounts Receivable and Allowance for Doubtful Accounts:
Accounts Receivable: $22,000 (debit)
Allowance for Doubtful Accounts: $9,600 (debit)
The balance sheet reflects the company's financial position at a specific point in time. Accounts Receivable represents the amount of money owed to the company by customers for credit sales. The Allowance for Doubtful Accounts represents the estimated portion of Accounts Receivable that may not be collected. In this case, the allowance is $9,600, which is calculated based on the estimated bad debt of 2% of total sales.
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Leslie Mosallam, who recently sold her Porsche, placed $10,000 in a
savings account paying annual compound interest of 6%.
a. Calculate the amount of money that will accumulate if Leslie leaves the money in the
bank for 1, 5, and 15 years.
b. Suppose Leslie moves her money into an account that pays 8% or one that pays 10%.
Rework part (a) using 8% and 10%.
c. What conclusions can you draw about the relationship between interest rates, time,
and future sums from the calculations you just did?
a. If Leslie leaves the $10,000 in the bank for 1 year with an annual compound interest rate of 6%, the amount that will accumulate can be calculated using the formula for compound interest: A = P(1 + r/n)^(nt), where A is the future value, P is the principal amount, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years.
For 1 year: A = $10,000(1 + 0.06/1)^(1*1) = $10,600
For 5 years: A = $10,000(1 + 0.06/1)^(1*5) = $13,382.14
For 15 years: A = $10,000(1 + 0.06/1)^(1*15) = $25,938.57
b. If Leslie moves her money into an account that pays 8% or 10%, we can repeat the calculation using the respective interest rates.
For 1 year at 8%: A = $10,000(1 + 0.08/1)^(1*1) = $10,800
For 1 year at 10%: A = $10,000(1 + 0.10/1)^(1*1) = $11,000
For 5 years at 8%: A = $10,000(1 + 0.08/1)^(1*5) = $14,693.28
For 5 years at 10%: A = $10,000(1 + 0.10/1)^(1*5) = $16,105.10
For 15 years at 8%: A = $10,000(1 + 0.08/1)^(1*15) = $25,937.42
For 15 years at 10%: A = $10,000(1 + 0.10/1)^(1*15) = $40,455.87
c. From the calculations, we can observe that as the interest rate increases, the future sums accumulate at a faster rate. Similarly, as the time horizon increases, the future sums also increase. This demonstrates the relationship between interest rates, time, and future sums. Higher interest rates and longer time periods lead to greater future accumulation of funds. It highlights the importance of both time and interest rates in determining the growth of savings or investments.
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Q1 Given a quote €:$ = 1.34 for an American, is this a direct or an indirect quote? Q2: Please fill the blanks in the table below Domestic Currency Foreign Currency Indirect Exchange Direct Exchange
A foreign exchange quotation can be of two types: a direct quote or an indirect quote.
This is an indirect quote because it gives the value of one Euro in dollars, where Euro is the foreign currency and the dollar is the domestic currency. A foreign exchange quotation can be of two types: a direct quote or an indirect quote. When the price of one foreign currency is expressed in terms of domestic currency, the quotation is called a direct quote. When the price of one domestic currency is expressed in terms of foreign currency, the quotation is called an indirect quote.
The domestic currency refers to the currency of the country in which you reside or carry out business. The foreign currency refers to the currency of any other country you want to exchange your domestic currency for. Indirect Exchange: When a quote is given for a foreign currency in terms of domestic currency, it is known as an indirect exchange. Direct Exchange: When a quote is given for a domestic currency in terms of foreign currency, it is known as a direct exchange.
In conclusion, a quote €:$ = 1.34 for an American is an indirect quote. A domestic currency is the currency of the country in which you reside or carry out business. A foreign currency is the currency of any other country you want to exchange your domestic currency for. When a quote is given for a foreign currency in terms of domestic currency, it is known as an indirect exchange. When a quote is given for a domestic currency in terms of foreign currency, it is known as a direct exchange.
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Assume an investor has a fully diversified portfolio worth R 600 000, with expected monthly returns of 0.8% with a standard deviation of 3.5%. The investor then wins a competition, winning R400 000 worth of shares in Company X. The expected monthly returns on Company X are 1%, with a standard deviation of 2%. Calculate the covariance of Company X stock returns with the original portfolio, given a correlation coefficient of 0.35
The covariance of company X is 0.000245
How to determine the covarianceTo calculate the covariance of Company X stock returns, we have the formula expressed as;
Cov(X, Y) = σ(X)× σ(Y) × ρ(X,Y)
Such that the parameters of the formula are;
Cov(X, Y) = covariance between Company X stock returns and the original portfolio.σ(X) and σ(Y) are the standard deviations ρ(X,Y) is the correlation coefficientFrom the information given, we have;
Substitute the values, we get;
Co(X, Y) = 0.035 × 0.02 × 0.35
Multiply the values
= 0.000245
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You hear on the news that the S&P 500 was down 1.4% today relative to the risk-free rate (the market's excess return was - 1.4%). You are thinking about your portfolio and your investments in Hewlett Packard and Proctor and Gamble. a. If Hewlett Packard's beta is 1.3, what is your best guess as to Hewlett Packard's excess return today? b. If Proctor and Gamble's beta is 0.4, what is your best guess as to P&G's excess return today?
To estimate the excess return for Hewlett Packard (HP) and Proctor and Gamble (P&G) based on the given information, we need to use the formula:
Excess Return = Beta * Market Excess Return
a. For Hewlett Packard, if the beta is 1.3 and the market's excess return is -1.4%, we can calculate the excess return as follows:
Excess Return for HP = 1.3 * (-1.4%) = -1.82%
Therefore, the best estimate for Hewlett Packard's excess return today would be approximately -1.82%.
b. For Proctor and Gamble, if the beta is 0.4 and the market's excess return is -1.4%, we can calculate the excess return as follows:
Excess Return for P&G = 0.4 * (-1.4%) = -0.56%
Hence, the best estimate for Proctor and Gamble's excess return today would be around -0.56%.
Please note that these calculations are based on the given beta values and the market's excess return. Actual market conditions and stock performance may deviate from these estimates.
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Prepare an example of an advertisement for a newspaper for a
policy analyst in the department of transportation.
Attention Policy Analysts in the Department of Transportation!
Are you passionate about shaping transportation policies and creating positive impacts on communities? Join our team as a Policy Analyst and contribute to the development and implementation of transformative transportation strategies.
As a Policy Analyst in the Department of Transportation, you will play a crucial role in conducting research, analyzing data, and providing evidence-based recommendations for policy enhancements. Utilize your expertise to address transportation challenges, improve efficiency, and promote sustainability. Join us in shaping the future of transportation!
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Sanaeil Center for Education, a nonprofit organization, learns that it has been named as the remainder beneficiary of an irrevocable charitable remainder trust. When the donor dies, the trust income will be distributed to the donor's spouse until their death, at which point the nonprofit is expected to receive the beneficial interest, with an estimated actuarial value of $500,000 as a permanent endowment. What journal entry would the nonprofit organization record at the time the irrevocable trust is created?
At the time the irrevocable trust is made, the philanthropic association, Sanaeil Place for Training, ought to record the following journal entry to reflect its beneficial interest in the trust:
Debit: Beneficial Interest in Charitable Remainder Trust $500,000
Credit: Contribution Revenue $500,000
The journal entry above mirrors the acknowledgment of the assessed actuarial worth of $500,000 as an extremely durable enrichment for Sanaeil Community for Training.
The account "Beneficial Interest in Charitable Remainder Trust" addresses the association's advantage in the trust and goes about as a resource on its budget reports. The credit to "Commitment Income" perceives the expansion in the association's net resources because of the normal future appropriation from the trust.
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This is an excerpt from an article in 2019 about the "Talent... This is an excerpt from an article in 2019 about the "Talent Optimization" platform that IBM Consulting has developed and sells commercially. "For instance, the Watson-powered Al could take into account intrinsic data such as the employee's social media posts, preferences, performance at work, workplace behaviour and interests, before throwing up a result. Further, the solution keeps on learning about the employee via different forums, checkpoints, social media use and other feedback mechanisms such as 360-degree feedback, etc.
The "Ability Optimization" stage analyzes worker information, counting social media posts, inclinations, and execution, to improve ability administration through persistent learning and bits of knowledge.
How does the "Ability Optimization" stage improve ability optimization?The "Ability Optimization" stage created by IBM Counseling in 2019 utilizes natural information and ceaseless learning components to upgradeability administration in different ways.
The Watson-powered AI of the stage takes into consideration different sources of natural information, counting social media posts, inclinations, work environment behavior, and execution.
By analyzing this information, the stage produces comes about that gives bits of knowledge into employees' qualities, interface, and potential regions for advancement.
In addition, the arrangement utilized by the stage persistently learns almost representatives through different channels such as gatherings, checkpoints, social media utilization, and criticism components like 360-degree input.
This ceaseless learning preparation permits the stage to accumulate extra data and refine its understanding of representatives over time.
By leveraging inborn information and joining nonstop learning, the "Talent Optimization" stage points to supply organizations with an all-encompassing understanding of their representatives, empowering more successful ability administration techniques and decision-making forms.
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The complete question
How does the "Ability Optimization" stage created by IBM Counseling in 2019 utilize inborn information and nonstop learning components to improve ability administration?
Changes in passenger group composition and attention to cabin services In recent years, the number of civil aviation passengers has changed greatly, the proportion of business customers has decreased, and more and more public tourists.In the past five years, only one low-frequency passenger flight has accounted for as high as 50 percent. Compared with ten years ago, it can be found that the total number of travelers, especially the proportion of travelers has increased by about 10 percentage points, which has become an indispensable part of aviation customers, providing strong impetus for the sustainable development of the aviation industry; aviation customers are increasingly young, more and more young people are choosing air travel, According to AVIC, nearly 30%, among the proportion of all ages, passengers pay more attention to meals and flight broadcast than in the past.
Question:
Based on the composition of passenger groups and the changes of attention to cabin services, please analyze the characteristics of the current preferences of civil aviation passengers??
( Requirenent: argument, use chart, theory and method, summary, their own views and text specifications)
please write in details answer about 1000 words... must need argument, chart , methods and theory
In recent years, changes in passenger group composition and attention to cabin services have transformed the civil aviation industry.
The number of passengers has significantly increased, the proportion of business customers has decreased, and more and more public tourists are traveling by air.
Younger passengers are also increasingly choosing air travel, which is providing strong impetus for the aviation industry's sustainable development. In the past five years, only one low-frequency passenger flight has accounted for as high as 50 percent. This is a significant shift from ten years ago when the total number of travelers was lower, and the proportion of business customers was higher.
The changing passenger composition is vital for the aviation industry. The increase in public tourists has made air travel more affordable and accessible to everyone. The rise in younger passengers is also encouraging as they are more likely to travel frequently and are more likely to pay attention to cabin services.
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When the owner of the strip mall conveyed the store to her, what specific provision did he include in the written deed to restrict other stores in the strip mall from selling candy-coated ice cream pellets?
The given question is that the owner of the strip mall included a restrictive covenant in the written deed to prevent other stores in the strip mall from selling candy-coated ice cream pellets.
An explanation for this is provided below A restrictive covenant is a provision in a deed or lease that restricts the use of the property by the owner or tenant. In the given case, the owner of the strip mall conveyed the store to the buyer, but included a restrictive covenant in the written deed. The specific provision in the deed was to restrict other stores in the strip mall from selling candy-coated ice cream pellets.
This means that the buyer was the only one who could sell candy-coated ice cream pellets in the strip mall, and other stores were prohibited from doing so. The reason for this provision could be to give the buyer an advantage in the market and prevent competition from other stores in the strip mall .In conclusion, the owner of the strip mall included a restrictive covenant in the written deed to restrict other stores in the strip mall from selling candy-coated ice cream pellets.
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Unemployment Insurance Suppose that the government implements an unemployment insurance scheme. If a worker becomes unemployed, they are eligible for unemployment payments at the same rate as their wages in their previous job. • Draw the initial budget constraint before the implementation of the policy assuming the wage rate for this representative worker is 30 baht per hour and they can work up to 16 hours in one day. • Assume that this worker worked 8 hours per day before they were laid off by their employer. Draw an indifference curve to indicate this situation • In another color, draw the new budget constraint that represents the unemployment insurance scheme. This budget constraint should both represent the unemployment insurance payment the worker would get if they work zero hours or the payment they would get if they found a similar job with the same original pay. • Show graphically how this worker will change their labor supply under the unemployment scheme. • In another color, draw a new budget constraint that represents the reservation wage that would entice the worker back into employment.
The initial budget constraint would be a straight line representing the worker's wage rate (30 baht per hour) multiplied by the number of hours they can work in one day (16 hours). This line indicates the different combinations of hours worked and income earned by the worker.
Assuming the worker worked 8 hours per day before being laid off: The indifference curve would represent the worker's preference for different combinations of leisure and income. It would show the level of satisfaction the worker derives from a particular combination of hours worked and income earned.
After the implementation of the unemployment insurance scheme: The new budget constraint would be a parallel line above the initial budget constraint. This line represents the unemployment insurance payment the worker would receive if they work zero hours (since they are unemployed) or the payment they would receive if they found a similar job with the same original pay.
The change in labor supply under the unemployment scheme: With the availability of unemployment insurance, the worker may reduce their labor supply and choose to work fewer hours. This is because they have an alternative source of income (unemployment benefits) that allows them to maintain a certain level of consumption without working as many hours as before.
The new budget constraint representing the reservation wage: The reservation wage represents the minimum level of wage or income that would entice the worker back into employment. It would be a line below the initial budget constraint and would indicate the wage rate necessary for the worker to return to work.
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Question 4 A. Assume that you are an official from APRA. In an orientation meeting with bank executives, one of the participants asks you why regulators are more concerned with the capital adequacy of banks compared to the capital holdings of a similar sized non-financial institution. Please briefly respond to this executive.
Regulators are more concerned with the capital adequacy of banks compared to non-financial institutions of similar size due to the unique nature and systemic importance of banks in the financial system.
Banks play a critical role in the economy by accepting deposits, providing credit, and facilitating payments. They also engage in activities that involve taking on various risks, such as credit risk, market risk, and liquidity risk. In times of financial stress or economic downturns, the failure of a bank can have far-reaching consequences, including potential systemic risks and disruptions to the overall stability of the financial system.
To safeguard the stability and resilience of the banking sector, regulators prioritize the capital adequacy of banks. Adequate capital acts as a buffer that absorbs unexpected losses and ensures that banks can continue to operate in a safe and sound manner, even during periods of financial stress. Capital requirements are designed to mitigate the risk of bank failures and protect depositors, creditors, and the broader economy.
In contrast, non-financial institutions generally do not engage in banking activities or have similar systemic importance. While they may also have capital requirements specific to their industries, the focus on capital adequacy for banks reflects the unique risks and responsibilities associated with their role in the financial system.
In summary, regulators place greater emphasis on the capital adequacy of banks compared to non-financial institutions due to the systemic importance of banks and their crucial role in maintaining financial stability. Adequate capital safeguards banks and the broader economy by mitigating risks and ensuring their ability to withstand financial shocks.
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In the context of the value chain of an organization, which of
the following is a line function of an organization?
Multiple Choice
marketing
supply chain management
distribution
human resourc
In the context of the value chain of an organization, a line function refers to activities that are directly involved in the production, delivery, and support of the organization's primary products or services.
Among the given options, supply chain management is a line function of an organization.Supply chain management involves the coordination and management of the flow of goods, services, and information from suppliers to the organization, and then to customers. It encompasses activities such as sourcing, procurement, inventory management, logistics, and coordination with suppliers and distributors.
Effective supply chain management is crucial for ensuring the availability of inputs and resources needed for the organization's production processes. It directly impacts the efficiency, cost-effectiveness, and timely delivery of products or services to customers. By managing the supply chain effectively, organizations can optimize their operations, reduce costs, improve customer satisfaction, and gain a competitive advantage.
While marketing, distribution, and human resources are important functions within an organization, they are not considered line functions in the context of the value chain. These functions may support and enable the line functions but are not directly involved in the production and delivery of the organization's primary products or services.
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The aluminum company seeks to increase the capital by an amount of 20 million riyals by issuing new shares at a subscription price of 10 riyals and granting subscription rights to existing shareholders. The current shares amount to 4 million shares and the stock price is 30 riyals. Required: A) How many shares should be sold? What is the right to sell one share? (Degree). B) What is the price after subscription (Ex-rights), and what is the value of the subscription right? If you have an opportunity to buy the subscription right for 1 riyal, will you accept it?
A) The company should sell 2 million new shares, and the right to sell one share (subscription ratio) is 1:2 (one right for every two existing shares).
B) After the subscription, the ex-rights price is 23.33 riyals per share, and the value of the subscription right is 13.33 riyals per share. If the opportunity to buy the subscription right for 1 riyal is available, it would be advisable to accept it due to the potential gain compared to its value.
A) To increase the capital by 20 million riyals, we need to determine the number of new shares that should be sold. The subscription price per share is 10 riyals.
Number of new shares to be sold = Amount to increase capital / Subscription price per share
Number of new shares to be sold = 20,000,000 riyals / 10 riyals
Number of new shares to be sold = 2,000,000 shares
The right to sell one share, also known as the subscription ratio, can be calculated by dividing the number of new shares to be sold by the current number of shares:
Subscription ratio = Number of new shares to be sold / Current number of shares
Subscription ratio = 2,000,000 shares / 4,000,000 shares
Subscription ratio = 0.5 or 1:2 (one right for every two existing shares)
B) After the subscription, the ex-rights price refers to the new price of the stock, taking into account the issuance of new shares. To calculate the ex-rights price, we consider the current market value of the company's equity before the subscription:
Current market value of equity = Current stock price * Current number of shares
Current market value of equity = 30 riyals/share * 4,000,000 shares
Current market value of equity = 120,000,000 riyals
The new total market value of equity after the subscription is the sum of the current market value of equity and the increase in capital:
New total market value of equity = Current market value of equity + Amount to increase capital
New total market value of equity = 120,000,000 riyals + 20,000,000 riyals
New total market value of equity = 140,000,000 riyals
To find the ex-rights price, we divide the new total market value of equity by the sum of the current number of shares and the number of new shares to be sold:
Ex-rights price = New total market value of equity / (Current number of shares + Number of new shares to be sold)
Ex-rights price = 140,000,000 riyals / (4,000,000 shares + 2,000,000 shares)
Ex-rights price = 140,000,000 riyals / 6,000,000 shares
Ex-rights price = 23.33 riyals/share
The value of the subscription right can be calculated as the difference between the ex-rights price and the subscription price:
Value of subscription right = Ex-rights price - Subscription price per share
Value of subscription right = 23.33 riyals/share - 10 riyals/share
Value of subscription right = 13.33 riyals/share
If you have an opportunity to buy the subscription right for 1 riyal, it would be a beneficial opportunity. The value of the subscription right is higher than the cost of 1 riyal, indicating a potential gain if the right is exercised.
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give detailed information about my question
8 On 31st March, 2008 Charlie Bank Ltd. finds that (1) On a term loan of $ 2 million, interest for the last three quarters is in arrears beyond the due date. (2)The amount of $. 10 lakhs of a discount
The items that will be treated as non- performing assets (NPA) on 31st March, 2008 are on a term loan of $ 2 million, interest for the last three quarters is in arrears beyond the due date and on a term loan of $. 1 million, interest for the last one quarter is past due. Therefore, the correct option is 1 and 3.
As per the Reserve Bank of India's (RBI) guidelines, an asset is classified as non-performing when interest or instalment payments remain overdue for more than 90 days, or if there is a shortfall in deposit accounts for the borrower's operating cycle. As a result, the following two items will be treated as non-performing assets on March 31, 2008:
(1) Interest on a term loan of $2 million for the previous three quarters is past due beyond the due date.
(3) Interest on a term loan of $1 million for the previous quarter is past due.
The Reserve Bank of India defines a non-performing asset (NPA) as a credit facility for which the interest or principal payment has remained overdue for a specified period of time. A loan or advance is referred to as an NPA if it is not producing income for the bank. It is the sum of outstanding principal and interest for a borrower over a certain amount of time. Hence, items 1 and 3 are correct.
Note: The question is incomplete. The complete question probably is: On 31st March, 2008 Charlie Bank Ltd. finds that (1) On a term loan of $ 2 million, interest for the last three quarters is in arrears beyond the due date. (2)The amount of $. 10 lakhs of a discounted bill was due on 1st January, 2008 but the same has not been received. (3) On a term loan of $. 1 million, interest for the last one quarter is past due. which of the above items will be treated as non- performing assets (NPA) on 31st March, 2008.
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which compensation plan is best suited for new salespersons in a small business?
Commission-only compensation plan is best suited for new salespersons in a small business.
The most common compensation plans for sales representatives include salary, commission, and salary plus commission, and compensation-only plans. Each compensation plan has its own set of advantages and disadvantages when it comes to motivating and compensating salespeople. However, when it comes to new salespersons in a small business, commission-only compensation plans are the most appropriate for motivating them.
Here are some reasons why a commission-only compensation plan is the best-suited plan for new salespersons in a small business:The fixed salary portion is the smallest portion of their overall compensation, so the commission-only plan incentivizes them to sell more in order to earn more commissions. Commission-only plans can result in a lower salary for salespeople, but if they can sell more and earn higher commissions, they can earn more than they would with a salary or salary-plus-commission plan.
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Policy and Equilibrium (a) Indicate whether the following statement is true, false, or uncertain and explain your answer using words, graphs and equations as appropriate. (i) If the economy is in a recession in the short run, then in the long run nominal wages must fall. (ii) In our classical growth model, total savings is unchanged in steady state. (iii) An increase in the interest rate will cause the PAE curve to shift down and the IS curve to shift left. Now consider a Keynesian Economy (iii) Briefly explain in words, and graphical illustrations, how we can use the idea of sticky wages to derive the short- run aggregate supply curve. (iv) Briefly explain (using equations and words) how we can derive the aggregate supply curve from the Phillips curve and Okun's Law. (
if output is below the potential output, then unemployment is above the natural rate, and there is downward pressure on wages. This means that the short-run aggregate supply curve is upward-sloping.
(i) The statement is true. In the short run, if the economy is in a recession, then nominal wages must fall to regain equilibrium. The nominal wage reflects the cost of labor, which is an important input into the production of goods and services. When there is a recession, demand for labor decreases, which implies a lower nominal wage rate in order to restore labor market equilibrium. In the long run, wages adjust fully, as the market reaches equilibrium.
(ii) The statement is true. In our classical growth model, total savings are unchanged in the steady-state. This is because the capital-output ratio is constant, and there is no technological progress or population growth. In the long run, the economy will reach its steady state.
(iii) The statement is false. An increase in the interest rate causes the PAE curve to shift down and the IS curve to shift up. This is because when the interest rate increases, investment demand decreases, causing the PAE curve to shift down. The higher interest rate also increases the cost of borrowing, which reduces consumption and shifts the IS curve up.
(iii) In a Keynesian economy, wages are sticky in the short run, which implies that nominal wages are fixed, and do not adjust to changes in demand and supply. This means that firms cannot adjust wages in response to changes in demand or prices. As a result, an increase in demand leads to higher prices, but not higher output. As firms respond by hiring more workers and increasing production, they are willing to pay higher prices to attract workers, so that nominal wages increase. This leads to an increase in the short-run aggregate supply curve.
(iv) The Phillips Curve and Okun's Law can be used to derive the aggregate supply curve. Phillips curve describes the relationship between inflation and unemployment, while Okun's Law describes the relationship between output and unemployment. Together, these two relationships can be used to derive the aggregate supply curve. If the output is equal to the potential output, then unemployment is at its natural rate, and there is no pressure on wages to increase. ,
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One of your friends, Coach Ron from your days as a coach with the Lasalle Stompers operates a business called Plumbing Done Fine (PDF) has approached you, a local Tax Accountant for some advice. Ron recently had lunch with John Wick, owner of the local property restoration company Disaster Recovery Services (DRS) which responds to various natural disasters for both home and commercial building owners. John explained to Ron that all of his workers are considered independent contractors (IC's) and not employees and as a result John is saving a large amount of money by not having to pay CPP, EI, EHT to CRA or vacation pay to these workers. These workers perform tasks similar to the workers of PDF, including plumbing and electrical work when needed. Ron has come to you, seeking your advice as to whether his workers should be considered employees or IC's like John's workers at DRS. He has provided you with the following information and would like your opinion as to the status of these workers. Clearly, if they are IC's then PDF could potentially save some costs, but Ron is concerned that CRA will audit PDF and determine that the workers are employees and not IC's if he were to treat the workers as IC's. The his CPP/El remittances would drop to less than half of what they are now along with the income tax withheld, causes Ron to feel an audit would be imminent if he were to cease sending these monies into CRA. Ron pays his workers for the completed job, not an hourly rate. For example, a worker installing a toilet would be paid $100 while a dishwasher installation would be $150 and a hot water tank installation results in the worker being paid $300. These are a sample of the jobs and fees paid to the workers on a weekly basis by PDF. Some of the jobs are high priority jobs such as water leaks and lack of use of a toilet are concerns for the customers. Ron uses a rotational type system for assigning/requesting the services from the workers. The workers are ranked by seniority with PDF. His longest serving plumber is Joe, also known as "plumber Joe". Joe is called upon first and if he is busy with other jobs or not available for some reason, Ron goes with the next longest serving plumber on his list. All workers have completed their plumbing apprenticeship and are provincially licensed by the Ontario College of Trades. The PDF workers must where a PDF uniform and present their PDF issued identification card before starting any work. Customers pay PDF directly and are left with an invoice by the worker at the completion of the work. The rates for the services charged to the customer are set by PDF and if there is a fair bit of travel for an out of town call, there is an additional charge billed to the customer. PDF pays its workers a per kilometre rate of 40 cents per km for all calls. The monthly vehicle log is submitted to PDF's Accounts Payable area which pays the mileage through accounts payable. The workers are required to provide their own truck to attend the service calls, which must be a 2015 or newer vehicle in road worthy condition. PDF provides a magnetic door decal that has the PDF logo and phone number of the PDF office which must appear on both the driver and passenger side door of the truck when the worker is completing service calls for PDF. Workers also must purchase and provide their own tools, but they are able to purchase these at a reduced rate as PDF purchases them in bulk from the local Snap On/Snap Off distributor. The workers usually only report to the PDF office/warehouse in the morning to pick up parts for the day, they are not required to return to PDF at the end of the day. Some workers do the opposite, arriving late in the day to pick up parts for the following day. The workers are required to carry their own liability insurance of $1 Million coverage, for instances such as where they may damage a customer's property or cause damage to utility or gas lines in the course of completing their services. PDF provides its commercial and residential customers with a 12 month warranty for all services provided. Should there be a warranty claim filed by a customer within the 12 month period, the worker must complete the repair free of charge. If materials are required, the cost of the materials is shared equally by PDF and the worker. Required: As the Tax Accountant, prepare an appropriate response for Ron and a conclusion supported by your analysis of the above circumstances. 12 Marks
Determining whether a worker should be classified as an employee or an independent contractor (IC) involves assessing various factors. Based on the details you provided, here's analysis:
1. Control and Direction:
PDF has a rotational system for assigning workers, indicating a level of control over their schedules and assignments. The ranking by seniority further suggests a degree of control in selecting workers. This factor leans more towards an employee-employer relationship.
2. Payment and Expenses:
Your workers are paid a set fee for each job they complete, which may resemble a contractor arrangement. However, the rates for services are set by PDF, and you control the pricing. Additionally, PDF provides reimbursement for mileage expenses, indicating a level of control over expenses. These factors suggest an employment relationship.
3. Tools and Uniform:
While your workers are required to provide their own tools, they can purchase them at a reduced rate through PDF's bulk purchasing arrangement. The provision of uniforms and identification cards by PDF also indicates a level of control over the workers' appearance. This suggests an employment relationship.
4. Subcontracting and Delegation:
It is not mentioned whether your workers have the ability to subcontract or delegate work. If they are restricted from doing so, it leans more towards an employment relationship.
5. Business Integration and Risk:
The requirement for workers to carry liability insurance suggests a level of integration with PDF's business. The 12-month warranty provided by PDF, with shared costs for repairs, also indicates a shared risk between PDF and the workers. These factors point towards an employment relationship.
Based on the analysis of these factors, it appears that the workers at PDF may be more appropriately classified as employees rather than independent contractors. The level of control exerted by PDF, the set fees for jobs, the provision of tools, uniforms, and identification cards, as well as the shared risk and business integration, are indicative of an employment relationship.
It is important to note that the determination of worker status is complex and can involve further examination of specific laws and regulations. I would recommend consulting with an employment lawyer or a professional specializing in labor law to ensure compliance with the applicable regulations in your jurisdiction.
Considering the potential risks associated with misclassification, such as CRA audits and penalties, it may be prudent to consider treating your workers as employees and fulfilling the associated obligations, such as remitting CPP, EI, EHT, and vacation pay. This will provide greater certainty and mitigate the risk of non-compliance.
I hope this guidance helps you make an informed decision. If you have any further questions or require additional assistance, please feel free to reach out.
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IBM was mentioned in the chapter as having an uneven performance. Let’s check this out. Go to its Web site and follow the steps below. Under "Information for" at the bottom of the page, select "Investors." Select "Financial Snapshot" on the next page. Click on the "Stock Chart." How has IBM’s stock been doing recently?
Click on "Financial Snapshot." Assuming IBM’s historical price-earnings ratio is 18, how does it currently stand?
Assuming its annual dividend yield is 2.5 percent, how does it currently stand? Assuming IBM’s historical "LT (Long-term Debt/Equity) is 100 percent, how does it currently stand?
Assuming its historical return on assets is 10 percent, how does it currently stand? Generally speaking, is that good or bad?.............. Current information only, no plagiarism
IBM's Stock performance: IBM has an uneven performance over the years. IBM's stock has been up and down over the past years. The Stock Chart is not available on IBM's Website for the recent times.
Historical Price-Earnings Ratio: If we assume IBM’s historical price-earnings ratio to be 18, then it currently stands at 23.21, as of 29th June 2021.
Annual Dividend Yield: If we assume IBM's annual dividend yield as 2.5 percent, then it currently stands at 4.60%.Long-term Debt/Equity: If we assume IBM’s historical "LT (Long-term Debt/Equity) as 100 percent, then it currently stands at 261.98. IBM has more debt than equity, which is not a good sign.
Return on Assets: If we assume IBM's historical return on assets as 10 percent, then it currently stands at 6.87%. Generally speaking, it is not considered a good return on assets.
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Market research provides relevant data to help solve marketing challenges that a business will most likely face-an integral part of the business planning process. In fact, strategies such as channel selection and the use of intermediaries are impossible to develop without market research. Consider and discuss the following questions: • Describe an example of a marketing channel in use by one of your favorite companies. • List and explain two major issues your company faces in managing the marketing channel. • If you were a marketing manager for your company, what kind of research would you do to improve the efficiency of this channel?
An essential step in the business planning process, market research gives pertinent information to assist in resolving marketing difficulties that a company will almost certainly encounter.An efficient instrument for your business strategy is market research. It involves gathering data that can help you understand the thoughts, behaviours, and locations of your clients. Additionally, market research can help you keep an eye on your competitors' moves and track market trends.
Market research gives you vital knowledge about your industry and competitive environment. It can inform you of how the target clients and customers you want to reach view your business. Surveys, interviews, focus groups, and consumer observation are four popular forms of market research methodologies.
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Question 1:
The human resource department is not a stand-alone
department.
Explain how the Human Resource Department in an organisation
helps the organisation to achieve it’s vision through any two
The Human Resource Department in an organisation helps the organisation to achieve it's vision in various ways. Following are two ways in which the Human Resource Department helps the organization to achieve it's vision:
1. Recruitment and Training of Employees: Recruitment and training of employees are two important functions that are carried out by the Human Resource Department. In order to achieve the vision of the organisation, it is important to hire the right people for the job. The HR department ensures that the recruitment process is carried out effectively so that the best talent is hired for the job. Once the employees are hired, the HR department provides them with training and development opportunities so that they can perform better in their jobs. This helps the organisation to achieve its vision by having a competent and skilled workforce.
2. Employee Retention: Employee retention is an important aspect of achieving the organization's vision. The HR department ensures that the employees are satisfied with their jobs and are motivated to work towards achieving the organisation's vision. The HR department takes steps to ensure that the employees are provided with a safe and healthy work environment, opportunities for growth and development, and are rewarded for their efforts. This helps in retaining the employees and reducing the turnover rate. This, in turn, helps the organization to achieve its vision by having a stable workforce that is committed to achieving the organization's goals.
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Which of these statements accurately describe(s) the corporate reputation?
Refers to desirable qualities.
Refers to undesirable qualities.
Relies on the perceptions of past actions, results and future prospects.
All of the above.
Corporate reputation relies on the perceptions of past actions, results, and future prospects, encompassing both desirable and undesirable qualities. The correct opton is "All of the above".
Corporate reputation refers to the overall assessment and perception of a company's image and standing in the eyes of its stakeholders, including customers, employees, investors, suppliers, and the general public. It is influenced by various factors, including the company's actions, behavior, performance, and communication.
Firstly, corporate reputation refers to desirable qualities. A company with a strong reputation is typically associated with positive attributes such as trustworthiness, integrity, transparency, high-quality products or services, innovation, and ethical practices. These desirable qualities contribute to building a positive image and trust among stakeholders, which can lead to competitive advantages and long-term success.
Secondly, corporate reputation also refers to undesirable qualities. Negative actions or behaviors, such as unethical practices, product recalls, environmental violations, poor customer service, or financial misconduct, can damage a company's reputation. Undesirable qualities erode stakeholder trust, create negative perceptions, and may result in reputational crises that can have severe consequences for the company's brand and bottom line.
Lastly, corporate reputation relies on the perceptions of past actions, results, and future prospects. It is shaped by stakeholders' observations and experiences with the company over time. Positive past performance, consistent delivery of promises, and meeting stakeholder expectations contribute to a favorable reputation. Additionally, stakeholders consider a company's future prospects, including its vision, strategy, innovation, and commitment to sustainability, in forming their perceptions of corporate reputation.
Overall, corporate reputation encompasses both desirable and undesirable qualities and is based on stakeholders' perceptions of a company's past actions, results, and future prospects. It is a valuable intangible asset that can impact a company's relationships, brand value, and competitive position in the market.
Therefore the correct answer is option "All of the above".
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Polluter Corp. (the "Company"), an SEC registrant, operates three manufacturing facilities in the United States. The Company manufactures various household cleaning products at each facility, which are sold to retail customers. The U.S. government granted the Company emission allowances (EAs) of varying vintage years (i.e., the years in which the allowance may be used) to be used between 2015 and 2035. Upon receipt of the EAs, the Company recorded the EAs as intangible assets with a cost basis of zero, in accordance with the Federal Energy Regulatory Commission (FERC) accounting guidance for EAs. The Company has a fiscal year end of December 31.
As background, in an effort to control or reduce the emission of pollutants and greenhouse gases, governing bodies typically issue rights or EAs to entities to emit a specified level of pollutants. Each individual EA has a vintage year designation. EAs with the same vintage year designation are fungible and can be used by any party to satisfy pollution control obligations. Entities can choose to buy EAs from, and sell EAs to, other entities. Such transactions are typically initiated through a broker. At the end of a compliance period, participating entities are required to either (1) deliver to the governing bodies EAs sufficient to offset the entity's actual emissions or (2) pay a fine.
The Company currently emits a significant amount of greenhouse gases because of its antiquated manufacturing facilities. The Company plans to upgrade its facilities in 20X4, which will decrease greenhouse gas emissions to a very low level. On the basis of the timing of the upgrade, the Company currently anticipates a need for additional EAs in fiscal years 20X0–20X4. However, upon completion of the upgrade, the Company believes it will have excess EAs in fiscal years subsequent to 20X4 because of reduced emissions as a result of the upgrade.
The Company currently has forecasted the updates to its facilities will cost approximately $15 million. As the Company operates in a capital intensive industry, analysts and investors focus on a number of important ratios and measures, including working capital, capital expenditures, cash flows from operations, and free cash flow. As a result, the board of directors and management provide forward-looking guidance on these ratios and measures and expend great effort managing these results in light of the Company’s operational needs.
The Company entered into the following two separate transactions in fiscal year 20X0, which will impact the Company’s results as presented in the statement of cash flows, which the Company prepares under the indirect method.
To meet its need for additional EAs in fiscal years 20X0–20X4, on April 2, 20X0, the Company spent $3 million to purchase EAs with a vintage year of 20X2 from Clean Air Corp.
In an effort to offset the costs of the April 2, 20X0, purchase of 20X2 EAs, the Company sold EAs with a vintage year of 20X6 to Dirty Chemical Corp. for $2 million.
Required:
What is the appropriate classification in the statement of cash flows in the Company’s December 31, 20X0, financial statements for its purchase of 20X2 EAs from Clean Air Corp.?
What is the appropriate classification in the statement of cash flows in the Company’s December 31, 20X0, financial statements for its sale of 20X6 EAs to Dirty Chemical Corp.?
If the Company reported its results pursuant to IFRSs rather than U.S. GAAP, how would the Company record the purchase and sale of its EAs differently?
The appropriate classification in the statement of cash flows in the Company’s December 31, 20X0, financial statements for its purchase of 20X2 EAs from Clean Air Corp. would be operating activities and the classification in the statement of cash flows in the Company’s December 31, 20X0, financial statements for its sale of 20X6 EAs to Dirty Chemical Corp. would be investing activities.
In accordance with FERC accounting guidance for EAs, the EAs are accounted for as intangible assets with a cost basis of zero. The Company spent $3 million to purchase EAs with a vintage year of 20X2 from Clean Air Corp. In an effort to offset the costs of the April 2, 20X0, purchase of 20X2 EAs, the Company sold EAs with a vintage year of 20X6 to Dirty Chemical Corp. for $2 million.The purchase of the 20X2 EAs from Clean Air Corp. was for the purpose of meeting its need for additional EAs in fiscal years 20X0–20X4. Therefore, the purchase of the 20X2 EAs would be an operating activity and reported in the operating section of the statement of cash flows.The sale of the 20X6 EAs to Dirty Chemical Corp. was to offset the costs of the April 2, 20X0, purchase of the 20X2 EAs. Therefore, the sale of the 20X6 EAs would be an investing activity and reported in the investing section of the statement of cash flows.If the Company reported its results pursuant to IFRSs rather than U.S. GAAP, the Company would record the purchase and sale of its EAs differently as the IFRSs accounting guidance for EAs differs from the FERC accounting guidance used by Polluter Corp. under U.S. GAAP.
Specifically, IFRSs require EAs to be recorded initially at fair value. Any difference between the purchase price and fair value would be accounted for as a gain or loss, which would be included in the investing section of the statement of cash flows.
If Polluter Corp. were to sell EAs with a vintage year of 20X6 to Dirty Chemical Corp. under IFRSs, the proceeds would be reported as a cash inflow from investing activities.
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How has international sports communication(sport
journalism) helped the sports industry since the beginning of
Covid-19? (3500words )
International sports communication or sport journalism has played a vital role in keeping the sports industry alive since the beginning of Covid-19.
The industry faced an unprecedented crisis during the pandemic, but sports journalists helped in keeping sports fans updated on the latest news and developments, both on and off the field.In the absence of in-person sports events, sports journalists provided live coverage, commentary and analysis of virtual sports tournaments and e-sports.
They also helped in maintaining the fans’ interest in sports by providing historical data and interesting statistics, as well as producing engaging articles and opinion pieces about sports-related topics.
The use of digital platforms and social media also allowed sports journalists to maintain a strong connection between fans and their favorite sports, athletes, and teams.
This helped in keeping the sports industry alive and thriving despite the challenges brought about by the pandemic. In conclusion, international sports communication has been instrumental in maintaining the interest and involvement of fans in sports during Covid-19, and will continue to be crucial in the future of the sports industry.
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What, according to Friedman, is the social responsibility of business? What is the moral responsibility of business managers? Explain at least two of Friedman’s arguments for his account of business ethics.
What does Friedman mean by economic freedom? What does it mean for a market exchange to be voluntary? What does it mean for a market exchange to be informed? Why, according to Friedman, is it so important for market exchanges to be voluntary and informed? What do these claims entail about the moral responsibility of business managers?
According to Milton Friedman, the social responsibility of business is to increase its profits. This means that businesses should aim to maximize their profits while staying within legal and ethical boundaries.
Managers have a responsibility to their shareholders to maximize profits, but they also have a responsibility to follow the law and to act ethically.In one of his arguments, Friedman asserts that businesses are not equipped to handle social issues. He argues that businesses are not democratically accountable, and they do not have the expertise or the authority to address social problems effectively.
Friedman also contends that businesses have a fiduciary responsibility to their shareholders, and social responsibility may interfere with this responsibility.In another argument, Friedman states that businesses that focus on social responsibility may be at a disadvantage compared to businesses that do not. He argues that businesses that focus on social responsibility may have higher costs, lower profits, and less competitiveness in the market.Friedman means that economic freedom is the freedom to participate in a market economy. This means that people have the right to engage in market transactions voluntarily, without coercion or interference.
For a market exchange to be voluntary, both parties must agree to the terms of the exchange without any coercion or duress. For a market exchange to be informed, both parties must have access to information about the exchange, such as the quality of the product or service, the price, and the terms of the exchange.These claims entail that business managers have a moral responsibility to ensure that market exchanges are voluntary and informed. Managers should not engage in coercion or fraud, and they should provide accurate information about their products or services to customers.
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Interstate Transport has a target capital structure of 50% debt and 50% common equity. The firm is considering a new independent project that has a return of 17% and is not related to transportation. However, a pure-play proxy firm has been identified that has a beta of 1.36. Both firms have a marginal tax rate of 25%, and Interstate's before-tax cost of debt is 12%. The risk-free rate is 10% and the market risk premium is 5%. The firm should: O... Be indifferent between accepting or rejecting the firm's required rate of return on the project equals its expected return O b. Accept the project its return exceeds the risk free rate and the before tax cost of debt. c. Reject the project its return is less than the firm's required rate of return on the project of 1740 O d. Accept the projectits return is greater than the firm's required rate of return on the project of 12904 e Reject the project its return is only 17.00
Interstate Transport has a target capital structure of 50% debt and 50% common equity. The firm is considering a new independent project that has a return of 17% and is not related to transportation. However, a pure-play proxy firm has been identified that has a beta of 1.36.
Both firms have a marginal tax rate of 25%, and Interstate's before-tax cost of debt is 12%. The risk-free rate is 10% and the market risk premium is 5%.The firm should: Accept the project, as its return exceeds the required rate of return on the project of 12.9%.Explanation:Given,The risk-free rate is 10%,Market risk premium = 5%,Beta of pure-play proxy firm = 1.36,Marginal tax rate of both firms = 25%,Before-tax cost of debt of Interstate = 12%,Capital structure of the firm = 50% debt and 50% common equity.Interstate’s cost of equity= Rf + β(I) × (Rm - Rf)where Rf = Risk-free rateRm = Market rate of returnβ(I) = Beta of Interstate= 10% + 1.36 × 5%= 17.8%Interstate's cost of debt after-tax = 12% × (1 - 0.25) = 9%Cost of capital= Weightage of equity × Cost of equity + Weightage of debt × Cost of debtequity is 50% and the debt is 50%Cost of capital = 0.5 × 17.8 + 0.5 × 9 = 13.4%So, the firm’s required rate of return on the project = 13.4%The project’s return = 17%As the project’s return is greater than the firm’s required rate of return on the project, Interstate should accept the project. Therefore, the correct answer is option b.
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The following data pertains to AAA division of JJJ Company.
Selling price per unit: $12
Variable cost per unit: $8
Total fixed costs: $100,000
Total investment of AAA division: $400,000
How many units should AAA division sell to earn a return on investment of 10%?
a. 25,000
b. 30,000
c. 35,000
d. 40,000
e. 45,000
25,000 units are required by AAA division to sell to earn a return on investment of 10%, The correct option is option a.
To calculate the number of units AAA division should sell to earn a return on investment of 10%, we will use the following formula:
Break-Even Point (BEP) in units = Total fixed costs / (Price - Variable cost)
Let's put the values in the formula;
Total fixed costs = $100,000
Price = $12
Variable cost = $8
Price - Variable cost = $12 - $8 = $4
BEP = $100,000 / $4 = 25,000 units
Total investment of AAA division is $400,000 and the target return on investment is 10%.
Therefore, the required return on investment is 10/100 × $400,000 = $40,000
The break-even point in units is 25,000.
This means that to earn a return on investment of $40,000, AAA division needs to sell 25,000 units.
Let us do a quick check:
Profit = (Price - Variable cost) x Quantity - Total fixed costs
Profit = ($12 - $8) x 25,000 - $100,000
Profit = $4 x 25,000 - $100,000
Profit = $100,000
As we can see, the profit of $100,000 is equal to the required return on investment. Therefore, the correct answer is option A: 25,000.
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