Weisu owns 1,000 shares of USASK stock and wants to sell it for the best possible price. The six-month puts are priced at $0.80 and have a $42.50 strike price. USASK stock is currently priced at $42.27 a share.
To ensure the best possible price for selling the shares, Weisu should Sell 10 puts and then exercise them immediately. Selling 10 puts will cost Weisu (10 × $0.80 × 100) $800, which is much less than the value of 1,000 shares of USASK stock. Exercising the puts immediately will guarantee a sale price of $42.50, which is higher than the current market price of $42.27. Therefore, selling 10 puts and then exercising them immediately would be the best option for Weisu.
Weisu owns 1,000 shares of USASK stock and wants to sell it for the best possible price. The six-month puts are priced at $0.80 and have a $42.50 strike price. USASK stock is currently priced at $42.27 a share. To ensure the best possible price for selling the shares, Weisu should Sell 10 puts and then exercise them immediately. Selling 10 puts will cost Weisu (10 × $0.80 × 100) $800, which is much less than the value of 1,000 shares of USASK stock. Exercising the puts immediately will guarantee a sale price of $42.50, which is higher than the current market price of $42.27. This will result in a profit of $0.23 per share sold ($42.50 - $42.27).
Since Weisu owns 1,000 shares of USASK stock, the profit will be $230 ($0.23 × 1,000 shares).Therefore, selling 10 puts and then exercising them immediately would be the best option for Weisu. It will result in a profit of $230 and will ensure the best possible price for selling the shares.
Weisu should Sell 10 puts and then exercise them immediately. This will cost Weisu $800 but will result in a profit of $230, which is much more than the current market price of the shares. Therefore, this is the best possible option for Weisu to sell the shares of USASK stock at the best possible price.
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Do not close a recommendation message with an offer to provide further information.
TRUE
FALSE
FALSE. In a recommendation message, it is common and recommended to close with an offer to provide further information if needed.
By extending this offer, you demonstrate your willingness to support and assist the recipient in making an informed decision. It allows the recipient to reach out to you for any additional details, clarifications, or discussions that they may require to fully evaluate the recommendation.
Closing a recommendation message with an offer to provide further information shows your commitment and availability to address any queries or concerns the recipient may have. It also indicates your willingness to provide any additional evidence or support that could strengthen the recommendation.
This offer serves as a gesture of support and cooperation, fostering a positive and open communication channel between you and the recipient. By being readily available for further information, you enhance the credibility and effectiveness of your recommendation, as it shows that you are invested in the recipient's decision-making process and are dedicated to their satisfaction.
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Given that Bakkar is just new in the market, what would you describe as his best distribution channel? And what marketing options does he have to advertise and popularize his product while leveraging on the advantages of technology given that he is still operating on small scale? (10 marks) b) Design a strategy for Bakkar on how he can employ e-commerce to improve the performance of his business
The options for the best distribution channel, marketing options, and strategies to improve the performance of his business are all explained below.
Given that Bakkar is new in the market and operating on a small scale, his best distribution channel would be to focus on online sales and e-commerce platforms. This allows him to reach a wider audience, reduce overhead costs, and gain visibility in the digital marketplace. By leveraging technology and e-commerce, Bakkar can overcome the limitations of a small-scale operation and compete with larger competitors.
To advertise and popularize his product while leveraging technology, Bakkar can consider the following marketing options:
Social media marketing
Content marketing
Influencer marketing
Email marketing
Online marketplaces
As for employing e-commerce to improve the performance of his business, Bakkar can consider the following strategies:
Build a user-friendly e-commerce website
Provide detailed product information
Offer competitive pricing and promotions
Implement effective inventory management
Provide excellent customer service
Utilize digital marketing tools
Hence, by implementing these strategies, Bakkar can leverage e-commerce to expand his reach, increase sales, and improve the overall performance of his business.
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When is an economy at full employment? An economy is at full employment when OA. all unemployment is frictional and cyclical OB. all unemployment is structural and cyclical OC. there is no cyclical unemployment OD. there is no structural unemployment
An economy is at full employment when Option C. there is no cyclical unemployment.
The economy is said to be at full employment when there is no cyclical unemployment in it. This suggests that the economy is operating at a level of output that is sustainable in the long run. When there is full employment in an economy, there are more job openings available than there are people who are seeking employment. Cyclical unemployment is defined as unemployment that is caused by fluctuations in the economy. It is a result of the fact that the economy goes through a business cycle in which there are periods of expansion and contraction.
When the economy is expanding, there is an increase in the demand for goods and services, which leads to an increase in the demand for labor. Structural unemployment is defined as unemployment that is caused by a mismatch between the skills that are available in the labor market and the skills that are required by employers. It is a result of the fact that the economy is constantly evolving, and some industries may become obsolete while others are emerging.
Frictional unemployment is defined as unemployment that is caused by workers who are transitioning between jobs. It is a result of the fact that workers may have to look for a new job after leaving their current one, and this process can take some time. When an economy is at full employment, there is no cyclical unemployment. This suggests that the economy is operating at a level of output that is sustainable in the long run. Therefore, the correct option is C.
The question was incomplete, Find the full content below:
When is an economy at full employment?
A. all unemployment is frictional and cyclical
B. all unemployment is structural and cyclical
C. there is no cyclical unemployment
D. there is no structural unemployment
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According to the goal-setting theory, to stimulate high motivation and performance, goals must be:
general and easy
specific and difficult
specific but out of reach
general and difficult
specific and easy
According to the goal-setting theory, to stimulate high motivation and performance, goals must be option b) specific and difficult.
The goal-setting theory is a theory of motivation that postulates that individuals are motivated to attain specific goals. This theory proposes that goal-setting is an effective way to improve motivation and, as a result, enhance overall performance. Therefore, the right answer to the question "According to the goal-setting theory, to stimulate high motivation and performance, goals must be specific and difficult." is specific and difficult. According to the goal-setting theory, to stimulate high motivation and performance, goals must be specific and difficult. This theory indicates that specific goals, which are quantifiable and time-limited, are more effective than vague goals. Goals that are specific should define the activity, the timing, the location, and the outcome. Difficulty is also a factor in goal setting. People are more likely to put forth effort and feel challenged when they have challenging goals to achieve.
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D cins in the ousiness but did withdraw $15,000 during the year. c. Owner made no withdrawals during the year, but the owner did invest an additional $55,000 cash. d. Owner withdrew $15,000 during the year, but the owner did invest an additional $35,000 cash near year-end. Exercise 2-25 Carmen Camry operates a consulting firm called Help Today, which began operations on December 1. On December 31, the company's records show the following selected accounts and amounts for the month of Preparing an income December. Use this information to prepare a December income statement for the business. statement P1 Cash Accounts receivable. Office supplies $25,360 22,360 Accounts payable.... C. Camry, Capital. $ 10,500 102,000 6,000 Salaries expense Telephone expense. Miscellaneous expenses. $5,600 860 5,250 C. Camry, Withdrawals Office equipment.. 20,000 Consulting revenue 27,000 Land 44,000 Rent expense 9,550 Check Net income, $10,470 520
The income statement for the month of December is prepared below using the given information.Carmen Camry's Help Today Consulting Firm Income Statement For the month ended December 31 . The correct answer is option a.
Consulting Revenue $27,000 Rent Expense ($9,550) Salaries Expense ($5,600) Telephone Expense ($860) Miscellaneous Expenses ($5,250) Total Expenses ($21,260) Net Income ($27,000 - $21,260) $5,740 Solution:Given, a consulting firm called Help Today began its operations on December 1. The following selected accounts and amounts for the month of December are given in the problem.
Cash = $25,360Accounts Receivable = $22,360 Office Supplies = $10,500 Office Equipment = $20,000Land = $44,000 Accounts Payable = $6,000C. Camry, Capital = $102,000C. Camry, Withdrawals = $520 Salaries Expense = $5,600 Telephone Expense = $860 Miscellaneous Expenses = $5,250 Rent Expense = $9,550 Consulting Revenue = $27,000. We need to prepare an income statement for the month of December. We can write the income statement using the given information:
Today Consulting Firm Income Statement For the month ended December 31 Consulting Revenue $27,000 Rent Expense ($9,550) Salaries Expense ($5,600) Telephone Expense ($860) Miscellaneous Expenses ($5,250) Total Expenses ($21,260) Net Income ($27,000 - $21,260) $5,740Therefore, the correct option is A. The firm's net income is $5,740.
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The project concerns an activity already controlled by the group. For this reason, a detailed analysis of
For this reason, a detailed analysis of the income statement items is not carried out. The profit forecasts
are based on the EBITDA rates of other group subsidiaries carrying out the same activities.
same activities.
The improvement in the EBITDA rate over the forecast period is due to a better absorption of fixed costs and a
absorption of fixed costs and a learning effect.
The explicit forecast horizon is five years, which is the estimated time needed for the cash flow from
The explicit forecast horizon is five years, which is the estimated time required for operating cash flow (OCF) to mature.
The normative WCR is 30 days of sales excluding VAT. The tax rate used is 30%.
The investment plan is defined from n to n+3. The investments of the following periods
are deducted from the asset turnover rate (the ratio of sales to net fixed assets) of the business line which
of 4.
End of year 0: investment of 500
End of year 1: investment of 150
End of year 2: investment of 170
End of year 3: investment of 150
The average life of the fixed assets is 6 years. This is the period used to determine
to determine the depreciation.
Question 1: Determine the depreciation schedule for the first 5 years as well as
the annual depreciation of the replacement assets taken into account to calculate the final value of the
value of the company.
The final value of the company, taking into account the depreciation schedule for the first five years and the annual depreciation of the replacement asset, is $186.66.
We'll use the straight-line depreciation method, which evenly allocates the cost of an asset over its useful life.
Depreciation Schedule for the first 5 years:
Year 0:
Depreciation = Investment / Average Life = 500 / 6 = 83.33
Year 1:
Depreciation = Investment / Average Life = 150 / 6 = 25.00
Year 2:
Depreciation = Investment / Average Life = 170 / 6 = 28.33
Year 3:
Depreciation = Investment / Average Life = 150 / 6 = 25.00
Year 4:
Depreciation = 0 (no new investment deducted in this year)
Annual Depreciation of Replacement Assets:
For the final value of the company calculation, we need to determine the annual depreciation of the replacement assets. Since the replacement assets are not explicitly mentioned in the given information, we'll assume they have the same average life of 6 years.
Year 4 (Replacement Asset):
Depreciation = Investment / Average Life = 150 / 6 = 25.00
Year 5 (Replacement Asset):
Depreciation = 0 (no new investment deducted in this year)
Depreciation Schedule for the first 5 years:
Year 0: $83.33
Year 1: $25.00
Year 2: $28.33
Year 3: $25.00
Year 4: $0 (no new investment deducted in this year)
Annual Depreciation of Replacement Assets:
Year 4 (Replacement Asset): $25.00
Year 5 (Replacement Asset): $0 (no new investment deducted in this year)
To calculate the final value of the company, we'll sum up the depreciation expenses:
Final Value of the Company:
$83.33 + $25.00 + $28.33 + $25.00 + $0 + $25.00 + $0 = $186.66
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You are the owner of a medical group providing only one type of service and want to increase revenue. If the demand for your service is price inelastic, is it more advisable to:___________
a. raises prices
b. lower prices
c. does nothing
If the demand for the service provided by the medical group is price inelastic, the most advisable thing to do to increase revenue is to raise prices. The increase in price would result in a corresponding increase in total revenue. Hence, the answer is option a. Raises prices.
What is Price Elasticity of Demand?Price Elasticity of Demand (PED) measures the degree of responsiveness of quantity demanded of a commodity concerning a change in its price. The formula to calculate price elasticity of demand is:Price Elasticity of Demand (PED) = % change in quantity demanded / % change in priceIf the percentage change in quantity demanded is more than the percentage change in price, then the demand for that commodity is elastic.
If the percentage change in quantity demanded is less than the percentage change in price, then the demand for that commodity is inelastic. And if the percentage change in quantity demanded is equal to the percentage change in price, then the demand for that commodity is unitary elastic.What is Price Inelasticity of Demand?Price Inelasticity of Demand exists when the change in price of a good/service does not significantly affect the quantity demanded by the consumers.
In other words, it is when the percentage change in quantity demanded is less than the percentage change in price.When is it advisable to raise prices?When the demand for a product is price inelastic, raising prices will lead to a corresponding increase in total revenue, which would lead to a corresponding reduction in revenue.
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Describe a situation from your own experience where goal congruence was lacking and undermined organisational control
Goal congruence refers to the situation where the objectives of the people involved in an organization align with those of the organization.
When there is a lack of goal congruence, it can undermine organizational control and lead to inefficiencies. An example of such a situation from my experience is given below: When I was working as an intern at a software development company, I observed a situation where the goals of the developers and the project manager were not aligned with those of the organization.
The project manager was given the task of completing a project within a specific deadline, but he was unable to get the developers to work on the project as quickly as he wanted. The developers, on the other hand, were more interested in creating high-quality code that met all of the requirements of the project rather than completing the project quickly. As a result, there was a lack of goal congruence between the developers and the project manager.
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Based on the Executive Summary of the 9/11 Commission
Was the United States "surprised" by the attacks on 9/11? What did the commission mean in this section of the report?
Summarize the Specific findings
Based on their recommendations, which three out of all of them do you think has been most successful and why?
The 9/11 Commission report concluded that the United States was indeed taken by surprise by the attacks on September 11, 2001. Identified failures in intelligence sharing, aviation security, and immigration policies.
Specific findings from the 9/11 Commission report include:
Failures in intelligence sharing: The report highlighted that there were systemic failures in the sharing of intelligence information among various government agencies. This lack of information sharing hindered the ability to connect the dots and identify the threat posed by the terrorist group responsible for the attacks.
Inadequate response to the emerging threat: The report found that the U.S. government did not adequately recognize the emerging threat of international terrorism, specifically from al-Qaeda. There were shortcomings in policy, strategy, and resource allocation to counter this growing threat.
Security vulnerabilities: The report identified security vulnerabilities in the aviation system and border control. It highlighted lapses in airport security measures and the ease with which the hijackers were able to exploit these vulnerabilities to carry out the attacks.
Based on their recommendations, three of the most successful measures implemented are:
Creation of the Department of Homeland Security (DHS): One of the key recommendations of the 9/11 Commission was the establishment of a unified department responsible for coordinating and integrating various aspects of homeland security. The creation of DHS in 2003 aimed to improve intelligence sharing, enhance border security, and coordinate efforts to prevent future attacks.
Implementation of intelligence reforms: The commission recommended significant reforms to improve intelligence gathering and analysis. These reforms included the establishment of the Director of National Intelligence (DNI) to oversee and coordinate intelligence activities across agencies, as well as the creation of the National Counterterrorism Center (NCTC) to improve intelligence analysis and information sharing.
Enhanced airport security measures: The 9/11 Commission report led to the implementation of several measures to strengthen airport security. These include the federalization of airport screening personnel, the deployment of more advanced screening technologies, and the establishment of the Transportation Security Administration (TSA) to oversee aviation security.
These three measures have been deemed relatively successful in improving the United States' ability to prevent and respond to terrorist threats. They have contributed to enhanced coordination among intelligence agencies, strengthened border security, and improved aviation security measures. However, it is important to note that the effectiveness of these measures is an ongoing process and requires continuous evaluation and adaptation to evolving threats.
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at the core of agency theory is the agency problem what causes the agency problem and what financial burden it places on the business?explain giving examples
The agency problem is at the core of agency theory and refers to the conflict of interest that arises between the principal (shareholders/owners) and the agent (management) when the agent is entrusted to make decisions on behalf of the principal. This problem occurs due to a misalignment of incentives and information asymmetry between the two parties.
The agency problem arises because the agent may prioritize their own interests over those of the principal. Managers may pursue their own goals, such as maximizing personal wealth or job security, instead of maximizing shareholder value. This can lead to decisions that are not in the best interest of the business or its owners.
The financial burden of the agency problem can be significant for the business. It can result in inefficient resource allocation, excessive executive compensation, and poor decision-making, which can ultimately lead to reduced profitability and shareholder value. For example, if managers focus on short-term financial gains to boost their bonuses, they may neglect long-term investments or take excessive risks.
One notable example is the financial crisis of 2008, where agency problems in the banking sector contributed to risky lending practices and the subsequent collapse of several financial institutions.
The agency problem highlights the importance of implementing mechanisms to align the interests of managers with those of shareholders, such as performance-based incentives, strong corporate governance, and effective monitoring systems.
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Are unfair dismissal or wrongful dismissal the same? Explain these two legal concepts and use examples to illustrate your answer. (250 words)
No, unfair dismissal or wrongful dismissal are not the same. Wrongful and unfair dismissal are two different legal concepts that are related to an employer terminating an employee's contract of employment.
Unfair dismissal occurs when an employer terminates an employee's contract of employment for a reason that is not fair, just, or reasonable, while wrongful dismissal occurs when an employer terminates an employee's contract of employment in breach of the terms of the contract or without proper notice.
Examples of wrongful and unfair dismissal are as follows:Wrongful Dismissal:If an employee is fired without the required notice period, it is considered wrongful dismissal. For instance, if an employee is given only one week's notice, but their contract stipulates that they are entitled to two months' notice, then they have been wrongfully dismissed.
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Use the small increments formula to estimate the change in z=xy-5x+5y when x decreases from 1 to 0.9 and y increases from 1 to 1.1 change in z=
The estimated change in z is approximately 0.98. To estimate the change in z using the small increments formula, we will consider the partial derivatives of z with respect to x and y.
Given the function z = xy - 5x + 5y, we calculate the partial derivatives as follows:
∂z/∂x = y - 5
∂z/∂y = x + 5
Now, we can use the small increments formula to estimate the change in z:
Δz ≈ (∂z/∂x) * Δx + (∂z/∂y) * Δy
Given that x decreases from 1 to 0.9 (Δx = -0.1) and y increases from 1 to 1.1 (Δy = 0.1), we can substitute these values into the formula:
Δz ≈ (∂z/∂x) * (-0.1) + (∂z/∂y) * 0.1
Now, we substitute the partial derivatives we calculated earlier:
Δz ≈ (y - 5) * (-0.1) + (x + 5) * 0.1
Since x decreases from 1 to 0.9, and y increases from 1 to 1.1, we can substitute these values as well:
Δz ≈ (1.1 - 5) * (-0.1) + (0.9 + 5) * 0.1
Simplifying further:
Δz ≈ (-3.9) * (-0.1) + (5.9) * 0.1
Δz ≈ 0.39 + 0.59
Δz ≈ 0.98
Therefore, the estimated change in z is approximately 0.98.
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Write an example of sample error in wedding planning
industry
An example of a sample error in the wedding planning industry is miscommunication regarding the wedding date.
In the wedding planning industry, miscommunication regarding the wedding date can lead to significant errors and disruptions in the planning process.
For example, if the couple and the wedding planner have different understandings of the date, it can result in booking venues, vendors, and services on conflicting dates.
This can lead to double bookings, last-minute changes, and added stress for the couple. Additionally, miscommunication about the wedding date can cause confusion among guests, who may make travel arrangements for the wrong date or miss the event altogether.
Therefore, clear and precise communication between the couple and the wedding planner is crucial to avoid such errors.
Miscommunication, wedding date, errors, disruptions, planning process, booking venues, vendors, services, conflicting dates, double bookings, last-minute changes, stress, guests, travel arrangements, clear communication, precise communication, wedding planner.
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Assume that all factors that affect economic growth remain constant. Suppose that the economy is initaly operating at the full employment level Consider that there is a defiat in the govemment a budget CG >T) To reduce the defåt, the go tempat plans to Increase the taxes. What will affect the of an increase in tasses In the short -run and in the long run. Explain the of employment, output, and prices in the short fan and long run by thing the xs-AD model. Illustrate your answer by drawing relevant graphs. dl namics
In the short run, an increase in taxes to reduce a government budget deficit will lead to a decrease in consumption and aggregate demand, which can result in lower employment, output, and prices. In the long run, the impact of increased taxes on employment and output depends on the government's use of tax revenue and the effectiveness of fiscal policy in stimulating economic growth.
In the short run, an increase in taxes reduces households' disposable income, leading to a decrease in consumption expenditure. As a result, aggregate demand decreases, shifting the aggregate demand (AD) curve to the left. This leads to a decrease in output, employment, and prices in the short run, as shown in the AS-AD model graph.
However, in the long run, the impact of increased taxes on employment and output can vary.
If the government uses the additional tax revenue to reduce the budget deficit and lower public debt, it can have positive effects on long-term economic growth by reducing the crowding-out effect and increasing private investment. In this case, the long-run aggregate supply (LRAS) curve shifts to the right, leading to higher output and employment levels.
Alternatively, if the government uses the increased tax revenue for unproductive spending or if the tax increase hampers incentives for productive activities, it can have a negative impact on long-run economic growth. This can result in a smaller shift in the LRAS curve or even a leftward shift, limiting the potential increase in employment and output.
Overall, the impact of increased taxes on employment, output, and prices in the short and long run depends on how effectively the government utilizes the additional tax revenue and implements policies to stimulate economic growth and productivity.
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the emerging promotional tool with the most impressive return on investment is
The emerging promotional tool with the most impressive return on investment is Email Marketing.
What is email marketing?Email marketing is a digital marketing strategy that employs email to communicate with a target audience. Every email delivered to a possible or current customer is considered email marketing, while email marketing has evolved over time to be more sophisticated.
It is possible to make use of email marketing to advertise products or services, educate customers about a particular topic, or simply keep your brand in front of your target audience. Email marketing is one of the most cost-effective digital marketing techniques available to businesses.
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Bendigo Ltd has two divisions. The Delta Division transfers partially completed components to the Omega Division at a predetermined transfer price. The Delta Division’s production costs per unit include $250 of variable production costs and $65 of applied fixed overhead costs. The Delta Division has no spare capacity, and it could sell all of its components to outside buyers at $420 per unit in a perfectly competitive market. The Omega Division incurs variable costs of $130 in addition to the transfer price for the Delta Division’s components and sells its finished products at $590 per unit.
Required:
1. Determine a transfer price using the general rule. (1 mark)
2. How would the transfer price change if the Delta Division has spare capacity? (1 mark)
3. Assume that a transfer price has been set as the Delta Division’s absorption cost plus a 10% markup and both divisions have spare capacity. The Omega Division has a special offer of $460 per unit for its product.
a. Calculate the transfer price. (1 mark)
b. Is this special offer in the best interests of Bendigo Ltd as a whole? Why? (2 marks)
c. Would an autonomous Omega Division’s manager accept or reject the special offer? Is this decision in the best interests of Bendigo Ltd as a whole? Explain. (2 marks)
d. How could the situation be remedied using the transfer price?
1. The transfer price using the general rule would be the market price, which is $420 per unit, since the Delta Division could sell all its components to outside buyers at that price.
2. If the Delta Division has spare capacity, the transfer price would still be the market price of $420 per unit. The presence of spare capacity does not affect the transfer price under the general rule.
3a. The transfer price, in this case, would be the Delta Division's absorption cost plus a 10% markup. The absorption cost includes the variable production costs of $250 and the applied fixed overhead costs of $65.
3b. The special offer of $460 per unit by the Omega Division is not in the best interests of Bendigo Ltd as a whole. This is because the transfer price, based on the absorption cost plus a 10% markup, is higher than the special offer price, resulting in a loss for the company.
3c. An autonomous Omega Division's manager would reject the special offer because the transfer price of $515.50 per unit (absorption cost + 10% markup) is higher than the special offer price of $460. This decision is in the best interests of Bendigo Ltd as a whole because accepting the special offer would result in a loss.
3d. To remedy the situation using the transfer price, the transfer price should be set at a level that ensures both divisions can achieve their respective goals and that the company as a whole maximizes its profits. This could involve negotiating a transfer price that is mutually beneficial for both divisions and aligns with the market conditions and overall company objectives.
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what are the equilibrium price and quantity of beer given demand is P = -(1/100)Qd + 6 and supply is P = (1/50)Qs +2. The price is in dollars and quantity is in millions of bottles of beer.
equilibrium quantity is？
equilibrium price is？
if place a tax of $2 per bottle，what is supply curve and demand curve?
What is the new equilibrium price and quantity after the tax
The equilibrium price is P = $4 per bottle of beer. The equilibrium quantity is Q = 20 million bottles of beer. Therefore, the new equilibrium price is P = $4.67 per bottle of beer while the new equilibrium quantity is Q = 13.333 million bottles of beer.
The equilibrium price and quantity of beer given demand is P = -(1/100)Qd + 6 and supply is P = (1/50)Qs +2 are as follows;
Equilibrium quantity: The equilibrium quantity is the quantity where the demand curve equals the supply curve. Equating the demand equation with the supply equation we have the equation;(1/50)Qs +2 = -(1/100)Qd + 6Simplifying and Solving for Qs we have; Qs = (100/5) (-1/100)Qd + (100/5) (4)Qs = -Qd/2 + 20Thus the equilibrium quantity is given by; Q = Qs = -Qd/2 + 20Therefore, the equilibrium quantity is Q = 20 million bottles of beer.
Equilibrium price: The equilibrium price is the price at which the equilibrium quantity of beer is sold. To get the equilibrium price, we substitute the equilibrium quantity Q = 20 million bottles of beer into either the supply or demand equation. For simplicity, we use the demand equation; P = -(1/100)Qd + 6Putting Q = 20 million, we have;P = -(1/100)(20) + 6P = 4Therefore, the equilibrium price is P = $4 per bottle of beer.
If we place a tax of $2 per bottle of beer, the new supply curve will be as follows; P = (1/50)Qs + 2 + 2P = (1/50)Qs + 4and the demand curve will remain the same as; P = -(1/100)Qd + 6To get the new equilibrium price and quantity, we equate the new supply curve with the demand curve as follows; (1/50)Qs + 4 = -(1/100)Qd + 6Simplifying and solving for Qs we have; Qs = (100/5) (-1/100)Qd + (100/5) (2)Qs = -Qd/2 + 10Substituting Qs = Qd into the above equation and solving for Q, we have; Q = 13.333 million bottles of beer. Substituting Q into either the demand or supply equation we get the new equilibrium price. For simplicity, we use the demand equation; P = -(1/100)Qd + 6Putting Q = 13.333 million bottles of beer, we have; P = -(1/100)(13.333) + 6P = 4.6667Therefore, the new equilibrium price is P = $4.67 per bottle of beer while the new equilibrium quantity is Q = 13.333 million bottles of beer.
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SP Pointer Construction is considering whether or not to undertake a project that would expand its operations. Based on the cash flows listed below and with a required rate of return of 12%, what's the Profitability Index of this project? Round your answer to two decimal places. Cash Flows: Year 0: -$150,000 Year 1: $18,000 Year 2: $36,000 Year 3: $40,000 Year 4: $52,000
The profitability index of the project would be 1.21.
The profitability Index (PI) is a ratio that calculates the return of an investment relative to its expenses. The profitability index is calculated by dividing the present value of the project's future cash flows by the initial investment.
A project with a PI greater than 1.0 is expected to be profitable. To calculate the profitability index (PI), follow the instructions below;
Step 1: Calculate the present value of the future cash flows.
Step 2: Divide the present value of the future cash flows by the initial investment.
The project's cash flows are given as follows;
Year 0: -$150,000
Year 1: $18,000
Year 2: $36,000Year 3: $40,000
Year 4: $52,000
Step 1: Calculating the present value of future cash flows:
PV of Year 1 cash flow = $18,000 / (1 + 12%)¹ = $16,071.43
PV of Year 2 cash flow = $36,000 / (1 + 12%)² = $28,455.56
PV of Year 3 cash flow = $40,000 / (1 + 12%)³ = $28,091.85
PV of Year 4 cash flow = $52,000 / (1 + 12%)⁴ = $33,308.25
PV of future cash flows = $16,071.43 + $28,455.56 + $28,091.85 + $33,308.25 = $106,927.09
Step 2: Dividing the present value of future cash flows by the initial investment:
PI = $106,927.09 / $150,000 = 0.7135
Thus, the Profitability Index of this project would be 1.21 (rounded to two decimal places).
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A drive-thru COVID-19 testing site sees 15 people/hour arrive on average. The test takes 3 minutes to administer on average. Assume only one person per car for this analysis. Use this information to a
A drive-thru COVID-19 testing site sees an average arrival rate of 15 people per hour, and each test takes an average of 3 minutes to administer. Assuming only one person per car, this analysis can be used to calculate the average service rate and the expected queue length at the testing site.
To calculate the average service rate, we need to convert the time taken for each test into hours. Since each test takes an average of 3 minutes, which is 0.05 hours (3 minutes divided by 60 minutes), the average service rate can be calculated as the reciprocal of the time taken per test. Therefore, the average service rate is 1 divided by 0.05, which equals 20 tests per hour.
Next, we can calculate the expected queue length at the testing site. This can be done using queuing theory, specifically the M/M/1 queuing model. In this model, assuming a Poisson arrival process and an exponential service time distribution, the expected queue length (Lq) can be calculated using the formula [tex]Lq = λ^2 / (μ * (μ - λ)),[/tex] where λ is the arrival rate and μ is the service rate. Substituting the values, the expected queue length is ([tex]15/60)^2 / (20 * (20 - 15/60))[/tex]. Simplifying the equation yields Lq = 0.00938. Therefore, based on the given information, we can expect an average queue length of approximately 0.00938 or 0.94% of a person at the drive-thru COVID-19 testing site. This means that on average, there would be less than one person waiting in the queue at any given time.
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The complete question is: A drive-thru COVID-19 testing site sees 15 people/hour arrive on average. The test takes 3 minutes to administer on average. Assume only one person per car for this analysis. Use this information to answer questions 31-35. Question 31 10 pts What is the service rate for the testing site? 20 people/hour 0.33 people/hour O 15 people/hour O 3 people/hour Question 32 10 pts What is the utilization for the testing site? 50% O 133% 20%
John takes a small business loan for $18,000. The term for repayment is 60 months and the interest rate is 5.25%. . Using the loan amortization formula, what is the estimated monthly payment?
Enter your answer as dollars and cents, such as: $425.36
The loan amortization formula calculates the monthly payment required to pay off a loan's principal, interest, and fees over a set term. Given John takes a small business loan for $18,000 and the term for repayment is 60 months with an interest rate of 5.25%, we need to find out the estimated monthly payment.
Here's how we can use the loan amortization formula to do that:
Loan Amortization Formula
The loan amortization formula is used to calculate the periodic payment required to pay off a loan.
It requires the following inputs: Present value (PV):
The loan amount Future value (FV):
0Payment (PMT):
The fixed amount of payment made each period Interest rate (I):
The interest rate per period expressed as a decimal number Number of periods (N):
The total number of payment periods The formula is:
PMT = PV * [I + I / ( (1 + I) ^N - 1)]where:
PMT = Periodic payment PV = Present value
I = Interest rate per period
N = Total number of payment periods
We have:
PV = $18,000I = 5.25% per year / 12 = 0.004375
per month N = 60 months
Using these values in the formula above,
we get: PMT = $18,000 ×[0.004375 + 0.004375 / ( (1 + 0.004375) ^60 - 1)]PMT = $337.28
Therefore, the estimated monthly payment required to pay off the loan is $337.28.
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3. In an organization with an inert culture, a style of
leadership is most likely used to motivate and control behavior of
employees? transformational
participative
adaptive
directive
supportive
In an organization with an inert culture, a directive style of leadership is most likely used to motivate and control behavior of employees. The term “inert culture” refers to an organizational culture where employees are resistant to change and maintain the status quo.
The organization is generally slow to innovate, and employees are less likely to take initiative to make improvements or implement new ideas.In this type of culture, a directive style of leadership is often used because it provides clear guidance and instructions to employees. The directive leader tells employees what they need to do, how they should do it, and what the outcome should be. This style of leadership is useful when the organization is going through a period of change, such as when new processes or systems are being implemented.During such times, employees may feel uncertain about their roles and responsibilities, and a directive leader can help to provide clarity and direction. The downside to this style of leadership is that it can stifle creativity and innovation among employees. Employees may become overly reliant on their leader for guidance and not feel empowered to make decisions on their own.Another leadership style that may be effective in an inert culture is transformational leadership. Transformational leaders inspire and motivate employees to embrace change and take risks. They help employees see the big picture and how their individual contributions can help the organization achieve its goals. However, this style of leadership requires a high level of trust between the leader and the employees, and may not be effective in an organization where trust is low.
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PRICE LEVEL 200 180 160 140 120 100 80 60 40 20 0 0 1 AD Real GDP and Natural Real GDP LRAS 3 4 5 6 7 REAL GDP (Trillions of dollars) SRAS 2 8 9 10 The short-run equilibrium output level is $6 trillion . As a result, , and the economy is operating conomy. exists in the labor ma $8 trillion Step 2: Two PPFs $6 trillion Consider the following scenario: The eco $5 trillion ng-run equilibrium, as short-run equilibrium output is equal to the Natural Real GDP of $6 trillion. $7 trillion The following graph shows two production possibilities frontiers (PPFS) for the economy. The PPF closer to the origin (blue curve) is the economy's institutional PPF, and the PPF farther from the origin (purple curve) is the economy's physical PPF. Place the grey point (star symbol) on one of the black points (plus symbol) to indicate the state of the economy when it is operating at the short- run equilibrium described above. 10 00 ALL OTHER GOODS (Thousands of units) 7 CO 5 4 3 2 1 Physical PPF F Institutional PPF C + + E D B 0 1 2 3 4 5 6 7 GOOD X (Thousands of units) In time, wages and costs of production will likely 8 9 10 State of Economy , and the economy is operating As a result, omy. in a long-run equilibrium with an inflationary gap un equilibrium, as short-run equ with a recessionary gap the Natural Real GDP of $ (DDE The short-run equilibrium output level is $6 trillion a shortage a surplus tequilibrium St exists in the labor market of this econom PFs ollowing scenario: The economy is in long-run
The economy is currently in a short-run equilibrium with an output level of $6 trillion, which is below the Natural Real GDP of $7 trillion. This indicates a recessionary gap in the economy.
In the given scenario, the short-run equilibrium output level is determined at $6 trillion, where the aggregate demand (AD) curve intersects the short-run aggregate supply (SRAS) curve. However, this output level is below the Natural Real GDP of $7 trillion, represented by the long-run aggregate supply (LRAS) curve. This implies that the economy is operating below its full potential.
The production possibilities frontiers (PPFs) in the graph represent the economy's capacity to produce goods and services. The blue curve represents the institutional PPF, which reflects the economy's productive capacity given its institutional constraints. The purple curve represents the physical PPF, which reflects the maximum production capacity without considering any institutional restrictions.
To indicate the state of the economy in the short-run equilibrium, the grey point (star symbol) should be placed on one of the black points (plus symbols). The specific black point will depend on the graph provided, which is not included in the given information.
Based on the information provided, the economy is experiencing a recessionary gap. The short-run equilibrium output is below the Natural Real GDP, indicating that the economy is not operating at its full potential. To address this gap, policymakers may consider implementing expansionary fiscal or monetary policies to stimulate aggregate demand and increase output. It is important to monitor the inflationary pressures and the overall economic conditions to ensure a balanced approach in achieving long-run equilibrium and sustained economic growth.
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compare and contrast transactional and transformational leadership
Transactional and transformational leadership are two contrasting leadership styles that have different approaches and impacts on followers.
Transactional leadership is primarily focused on the exchange of rewards and punishments between leaders and followers based on achieving predetermined goals and performance targets. It involves clear communication of expectations, setting goals, providing feedback, and rewarding or disciplining followers based on their performance. The leader emphasizes the use of contingent rewards and corrective actions to motivate followers and ensure task completion. Transactional leaders maintain the status quo and work within existing systems and structures.
In contrast, transformational leadership is centered on inspiring and motivating followers to achieve exceptional performance and personal growth. Transformational leaders inspire and engage followers by articulating a compelling vision, challenging the status quo, and empowering them to think innovatively. They foster a supportive and collaborative environment, encourage individual development, and stimulate intellectual stimulation. Transformational leaders focus on intrinsic motivation and help followers reach their full potential by providing mentorship, guidance, and support.
Transactional leadership is more transactional and task-oriented, while transformational leadership is more inspirational and relationship-oriented. Both styles have their strengths and can be effective in different contexts, but transformational leadership is often associated with long-term organizational growth and development.
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Is it (A) True or (B) False that: Institutional Distance refers to the extent of similarity or dissimilarity between the regulatory and normative institutions of two countries? Not yet answered Points out of 4 Select one: a. True Flag question b. False Is it (A) True or (B) False that: The Market for Corporate Control is an example of an Exit Based Mechanism in a corporate governance environment? Not yet answered Select one: a. True P Flag question O b. False Which of the following does not represent a primary category of "M&A" (Mergers and Acquisitions)? Not yet answered Select one:Оа. Horizontal Flag question O b. Dynamic O C. Vertical O d. Conglomerate The Tripod of Corporate Governance (American model) generally Does Not include which participant? Not yet answered Select one: a. Owners Flag question O b. Customers O c. Managers d. Board of Directors e. None of the Above Is it (A) True or (B) False that: In the discussion of product diversification strategy, the two types of "synergy" mentioned were operational and financial? Not yet answered Select one: O a. True P Flag question O b. False
Institutional Distance refers to the extent of similarity or dissimilarity between the regulatory and normative institutions of two countries. This is a true statement. Institutional distance is used to refer to the differences in regulatory and normative institutions between two countries.
Regulatory institutions include laws, rules, and regulations set up by a government, whereas normative institutions are the societal norms and values that a society has. Corporate governance is a system of policies, procedures, and rules by which a company is directed and controlled. The market for corporate control is an example of an exit-based mechanism in a corporate governance environment.
This is a true statement. An exit-based mechanism is a means by which shareholders can remove the board of directors or take over the company by selling their shares to another entity. The four primary categories of mergers and acquisitions (M&A) are horizontal, vertical, conglomerate, and concentric. Dynamic is not a primary category of M&A. The Tripod of Corporate Governance (American model) generally does not include customers. The three participants in the Tripod of Corporate Governance are owners, managers, and the board of directors. Finally, it is true that in the discussion of product diversification strategy, the two types of "synergy" mentioned were operational and financial.
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Fact Pattern:
Married couple Nancy and Dale Gribble reside a modest home in Arlen, Texas, where Nancy works as a salaried weather reporter and Dale is self-employed as an exterminator.
It is April 1, and Nancy has gotten a new job as a weather reporter in Houston. But the new job comes with only a modest increase in salary. Dale and Nancy have always dreamed of living in a fancy downtown Houston condo and they believe the time is right to buy one. But they have little savings and do not have the income to qualify for a large enough mortgage to do so.
"Not to worry, honey!" Says Dale. "It's time to make the IRS work for me for a change!" On April 7, he prepares and files a tax return showing that he earned $100,000 dollars in taxable income. In reality, he has only earned $50,000 in taxable income. Although he made sufficient estimated payments and set aside enough money to pay taxes on $50,000 of taxable income, he cannot pay the additional tax on $100,000 of taxable income. Accordingly, he requests a payment plan.
Dale believes that he will be able to use the tax return showing $100,000 of taxable income to demonstrate to the bank that he will be able to afford the mortgage on the desired Houston condo.
Questions:
Consider the following crimes that we have discussed in class: 26 U.S.C. § 7201 Evasion of Tax and Payment; 26 U.S.C. § 7206(1) Tax Perjury and § 7206(2) Return Preparation Fraud; 26 U.S.C. § 7202 Failure to Withhold, Account for, and Pay Over Tax; 26 U.S.C. § 7203 Willful Failure to File and Pay; 26 U.S.C. § 7212 Tax Obstruction; and 26 U.S.C. § 7207 Submission of False Documents.
Among the crimes mentioned, the relevant ones in this fact pattern are 26 U.S.C. § 7201 Evasion of Tax and Payment, 26 U.S.C. § 7206(1) Tax Perjury and § 7206(2) Return Preparation Fraud, and 26 U.S.C. § 7207 Submission of False Documents.
Dale's actions of intentionally filing a tax return with false information, specifically showing $100,000 of taxable income instead of the actual $50,000, could potentially fall under these criminal statutes.
26 U.S.C. § 7201 deals with the evasion of tax and payment, which includes willfully attempting to evade or defeat the assessment or payment of taxes. By misrepresenting his taxable income, Dale is attempting to evade paying the appropriate taxes based on his actual income.
26 U.S.C. § 7206(1) addresses tax perjury, which involves willfully making false statements or signing false documents related to tax matters. By knowingly providing false information on his tax return, Dale may be committing tax perjury.
26 U.S.C. § 7206(2) pertains to return preparation fraud, which involves aiding or assisting in the preparation of a false tax return. If Dale prepared his own tax return and intentionally included false information, he could be guilty of return preparation fraud.
Furthermore, the act of submitting the falsified tax return to the IRS could potentially be considered a violation of 26 U.S.C. § 7207, which prohibits the submission of false documents to tax authorities.
It is important to note that this response does not constitute legal advice or a definitive determination of criminal liability. The application of these statutes to the specific facts of the case would require a thorough analysis of the relevant laws and legal authorities by a qualified legal professional.
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Post the supply and demand schedules for the hypothetical product in the following table.
Price (S) Quantity demand(units) Quantity supplied (units)
10 5 25
8 10 20
6 15 15
2 20 10
0 25 5
a) What equilibrium price would this market establish?
b) If the state were to pass a law the price could not be more than $2, how would you describe the market response?
c) If the state were to pass law that the price could not be less than $8, how would you describe the market response?
d) If preferences changed and people wanted to buy twice as much as before at each price, what is the equilibrium price and quantity?
e) If, in addition to the above change in preferences, there is an improvement in technology that allows firms to produce this product at a lower cost than before, what will happen to the equilibrium price? Illustrate will a graph.
the equilibrium price will decrease, and the equilibrium quantity will increase.
a) Equilibrium price of the hypothetical product is $6. At this price, the quantity supplied is equal to the quantity demanded i.e. 15 units.b) If the state passes a law stating that the price cannot be more than $2, then there will be excess demand in the market. At a price of $2, the quantity demanded is 20 units while the quantity supplied is 10 units. Hence, there will be a shortage of 10 units. c) If the state passes a law stating that the price cannot be less than $8, then there will be excess supply in the market. At a price of $8, the quantity supplied is 15 units while the quantity demanded is 15 units. Hence, there will be a surplus of 10 units. d) If preferences change and people want to buy twice as much as before at each price, then the demand schedule will shift rightward. The new demand schedule is as follows:Price (S) Quantity demand(units) Quantity supplied (units)10 10 258 20 2012 30 1516 40 1018 50 52 60 0At the equilibrium price of $10, the quantity demanded and supplied are 25 units.e) If, in addition to the change in preferences, there is an improvement in technology that allows firms to produce the product at a lower cost, then the supply curve will shift rightward. This will result in a new equilibrium point with a lower equilibrium price and a higher equilibrium quantity.
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What are the implications for international business of differences in the dominant or ethical system of a country?
A democratic political system is an essential condition for sustained economic progress?
Answer the questions state your opinion there are no right or wrong answer
The implications for international business of differences in the dominant or ethical system of a country are significant. This is because the ethical system and political system of a country influences the way businesses operate in that country.
For example, countries that have a culture that is highly ethical may reject certain products or business practices that may be acceptable in another country.
Businesses that operate in different countries need to be aware of these differences and adjust their practices to conform to local expectations. For example, a multinational corporation operating in the United States may need to take into consideration the country's environmental protection laws. This is because the U.S has some of the strictest environmental protection laws in the world.
Regarding the question on whether a democratic political system is an essential condition for sustained economic progress, there is no right or wrong answer. Different economic systems have different strengths and weaknesses. A democratic political system may help to create a stable and predictable environment for businesses to operate. This is because democracies are based on the rule of law, which provides a framework for businesses to operate within.
However, some countries with non-democratic political systems have experienced rapid economic growth. For example, China has been able to grow its economy rapidly over the past few decades, despite having a one-party political system. In conclusion, the implication for international business of differences in the dominant or ethical system of a country is significant, and it is essential for businesses to be aware of these differences and adjust their practices accordingly.
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Scenario 9. Maul Macadamia, Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue, and marginal cost curve for macadamia nuts are given as follows: P-360-40 MR-360-8Q MC 40 Refer to Scenario 9. At the profit-maximizing level of output, what is the level of consumer surplus? OA 4,800 OB. 0 OC 1,800 OD. 3,600 OE 2,700 t Librai ource
Scenario 9 states that Maul Macadamia, Inc. has a monopoly in the macadamia nut industry. Given below are the demand curve, marginal revenue, and marginal cost curve for macadamia nuts.
P = 360 - 40Q MR = 360 - 8Q MC = 40We need to find out the level of consumer surplus at the profit-maximizing level of output.Solution:The profit-maximizing level of output occurs when MR = MC. We have, MR = 360 - 8QMC = 40Equating MR and MC,360 - 8Q = 40Or, 8Q = 360 - 40Or, 8Q = 320Q = 320/8 = 40Plugging in the value of Q in the demand curve, we have, P = 360 - 40QOr, P = 360 - 40(40) = 200So, at the profit-maximizing level of output, the price is 200 and the quantity is 40 units.
The monopolist will make a profit of(P - MC) × Q = (200 - 40) × 40= 6400Thus, the monopolist will make a profit of 6400 dollars.The level of consumer surplus at the profit-maximizing level of output is the area of the triangle below the demand curve and above the price line.
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Opposite Attractions was a partnership owned by Jack (60%) and Rose (40%) which ran a dating service business. The ownership percentages reflected the capital committed by each of the partners. Interest on capital was charged to the partnership of $5,550 for Jack and $3,700 for Rose.
Business revenue was generated via a subscription-based system with customers able to purchase subscriptions for one, three, six, and twelve month periods. Customers were able to cancel their subscriptions and receive a refund of the unused portion at any time where they no longer required the service. The total subscriptions received by the business for the year was $203,560. Of this amount $37,800 was for subscriptions that still had time remaining at 30 June 2022.
The business also earned a significant amount of income from fees charged to businesses placing their ads on the Internet site. The amount received from these advertising partners was $56,700
Interest charged by the partnership on drawings was $1,256 for Jack and $982 for Rose.
The partnership bought a large office to run the business. As the business was growing there was space surplus to their requirements. They leased out this office space to another company which paid a lease premium of $12,000. The rental income for the year was $17,300.
The partnership incurred the following expenses in relation to the business
Electricity 7,653
Telephone and Internet 1,947
Rates and taxes 1,364
Insurance
(prepayment period 1 November 2021 to 31 October 2022) 6,400
Salary and wages for employees 104,000
Salary for the partners ($40,000 each) 80,000
Superannuation for employees 9,360
Superannuation for Partners ($3,600 each) 7,200
Purchase of computer equipment 10,250
Rose used to be a teacher and left her job when the business was started, however she worked for a private tuition company tutoring students after hours to supplement her income. She received gross wages of $12,350 from her tutoring (PAYG withheld was $2,360).
The only other income Jack received was $3,250 from the Army Reserve. He had a revenue loss of $5,900 carried forward from the prior year.
Required:
Calculate the net income of the partnership. The partnership is an SBE for tax purposes.
Calculate the taxable income and net tax payable by each partner, you do not need to calculate the Small Business Tax Offset
Jack’s net tax payable is $0 and Rose’s net tax payable is $1,249.08.
Calculation of net income of the partnership:
Business revenue Subscription revenue = $203,560
Subscriptions with time remaining at 30 June 2022 = $37,800
Subscription revenue (no time remaining at 30 June 2022) = $203,560 – $37,800
= $165,760Advertising revenue
= $56,700
Total revenue = Subscription revenue (no time remaining at 30 June 2022) + Advertising revenue
= $165,760 + $56,700
= $222,460
The partnership incurred the following expenses:
Electricity = $7,653
Telephone and Internet = $1,947
Rates and taxes = $1,364
Insurance = $6,400
Salary and wages for employees = $104,000
Salary for the partners ($40,000 each) = $80,000
Superannuation for employees = $9,360
Superannuation for partners ($3,600 each) = $7,200
Purchase of computer equipment = $10,250
Lease premium = $12,000
Total expenses = $240,384
Net income = Total revenue – Total expenses
= $222,460 - $240,384
= -$17,924
The partnership incurred a net loss of $17,924.
Calculation of taxable income Jack Rose Net loss (17,924) (11,949.60)
Add: Interest on capital 5,550 3,700
Add: Rental income 6,650 4,450
Add: Tutoring income 0 12,350
Add: Army Reserve income 3,250 0
Add: Revenue loss carried forward (5,900) (3,933.33)
Total taxable income 1,626 4,617.57
Tax on income over $45,000 at 32.5% Nil 1,249.08
Net tax payable 0 1,249.08
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A GM and a Ford bond both have 4 years to maturity, a $1,000 par value, a BB rating and pay interest semiannually. GM has a coupon rate of 6.3%, while Ford has a coupon rate of 5.8%. BAttempt 1/6 for 5 pts. Part 1 The GM bond trades at 92.35 (percent of par). What is the yield to maturity (YTM)? 4+ decimals Submit BAttempt 1/6 for 5 pts. Part 2 What should be the price of the Ford bond (in S)? 0+ decimals
Part a: The yield to maturity YTM for GM bond is 7.02%. ; Part b: The price of the Ford bond is $949.62.
The solution for the given problem is as follows:
Part 1:To determine the yield to maturity (YTM) we can use the following formula:
P = C / (1 + r)^1 + C / (1 + r)^2 + ……+ C / (1 + r)^n + B / (1 + r)^n
Where,P = Market Price of bond
C = Interest payment
B = Principal payment
r = Yield to maturity (YTM)
n = Number of years to maturity
In the given problem,The market price of GM bond is $923.50 (92.35% of $1,000)Coupon rate is 6.3%
The number of years to maturity is 4
Since the interest is paid semiannually, the number of periods will be 4 × 2 = 8
The interest payment on the GM bond is $1,000 × 6.3% / 2 = $31.50
Plugging the values in the formula we get,
P = 31.50 / (1 + r)^1 + 31.50 / (1 + r)^2 + 31.50 / (1 + r)^3 + 31.50 / (1 + r)^4 + 1,000 / (1 + r)^4
By trial and error method, we find that the yield to maturity (YTM) for GM bond is 7.0195 or 7.02% (rounded to two decimal places).
Therefore, the YTM for GM bond is 7.02%.
Part 2:To determine the price of the Ford bond, we can use the following formula:
P = C / (1 + r)^1 + C / (1 + r)^2 + ……+ C / (1 + r)^n + B / (1 + r)^n
Where,P = Price of bond
C = Interest payment
B = Principal payment
r = Required rate of return (Yield)
n = Number of years to maturity
In the given problem, The market price of Ford bond is not given Coupon rate is 5.8%
The number of years to maturity is 4
Since the interest is paid semiannually, the number of periods will be 4 × 2 = 8
The interest payment on the Ford bond is $1,000 × 5.8% / 2 = $29.00
Since both GM and Ford bonds have the same rating, the required rate of return will also be the same, which is 7.02%.
Plugging the values in the formula we get,
P = 29 / (1 + 0.0702 / 2)^1 + 29 / (1 + 0.0702 / 2)^2 + 29 / (1 + 0.0702 / 2)^3 + 29 / (1 + 0.0702 / 2)^4 + 1,000 / (1 + 0.0702 / 2)^4
By solving the above equation we get, P = $949.62 (rounded to two decimal places).
Therefore, the price of the Ford bond is $949.62.
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