Standard Costing is a management accounting technique that involves setting predetermined costs for the production of goods or services. It establishes a benchmark or standard against which actual costs can be compared. Standard Costing is different from Budgeting in that it focuses on the costs associated with production, while budgeting involves the overall planning and allocation of resources.
Standard Costing involves the following steps:
1. Determining the standard cost: This includes identifying the cost elements involved in production, such as direct materials, direct labor, and overhead, and assigning predetermined costs to each element.
2. Recording actual costs: The actual costs incurred during production are recorded and compared to the standard costs.
3. Analyzing variances: Any differences between the actual costs and the standard costs are analyzed to identify the reasons for the variances.
4. Taking corrective actions: Based on the analysis of variances, management can take appropriate actions to control costs and improve efficiency.
Citation 1:
Author: Horngren, C. T.
Title: Cost Accounting: A Managerial Emphasis
Page: 270
In-text citation: (Horngren, 2018, p. 270)
Citation 2:
Author: Garrison, R. H., Noreen, E. W., & Brewer, P. C.
Title: Managerial Accounting
Page: 197
In-text citation: (Garrison et al., 2018, p. 197)
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Exercise 5-3 Recording journal entries for merchandise purchase transactions-perpetual LO3 Jaleh Mehr is the owner of the retail store 151 Jeans. She purchases jeans from a number of manufacturers to bring great style and fit to her customers. Prepare journal entries for March 2020 to record the following transactions. Assume a perpetual inventory system. Mar. 2 Purchased jeans from Paige Denim under the following terms: $4,200 invoice price, 2/15, n/68, FOB shipping point. 3 Paid $350 for shipping charges on the purchase of March 2. 4 Returned to Paige Denim unacceptable merchandise that had an invoice price of $400. 17 Sent a cheque to Paige Denim for the March 2 purchase, net of the returned merchandise and applicable discount. 18 Purchased jeans from ) Brand under the following terms: $9,600 invoice price, 2/10, n/30, FOB destination. 21 After brief negotiations, received from Brand a $2,100 allowance on the purchase of March 18 28 Sent a cheque to J Brand paying for the March 18 purchase, net of the discount and the allowance
In March 2020, journal entries transaction are made for purchases, returns, shipping charges, and allowances, while payments are recorded separately.
Mar. 2: Purchased jeans from Paige Denim for $4,200 (FOB shipping point). No journal entry required at this point.
Mar. 3: Paid $350 for shipping charges on the March 2 purchase. Journal entry: Debit "Inventory" for $350 and Credit "Cash" for $350.
Mar. 4: Returned unacceptable merchandise to Paige Denim, worth $400. Journal entry: Debit "Accounts Payable" for $400 and Credit "Inventory" for $400.
Mar. 17: Sent a cheque to Paige Denim, net of returned merchandise and applicable discount. No journal entry required at this point.
Mar. 18: Purchased jeans from J Brand for $9,600 (FOB destination). No journal entry required at this point.
Mar. 21: Received a $2,100 allowance from J Brand for the March 18 purchase. Journal entry: Debit "Accounts Payable" for $2,100 and Credit "Inventory" for $2,100.
Mar. 28: Sent a cheque to J Brand, net of discount and allowance. No journal entry required at this point.
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22. You own a cleaning company in Youngstown, Ohio and pay your employees Ohio minimum wage. You learn that there is a large building in Pittsburgh that is looking to replace its cleaning company. Discuss what do you need to know about the applicable laws, the owner of the building, the staffing and the prior cleaning company before making a decision to bid for the account, assuming that you can not hire enough employees to staff the job without some or all of the current employees and may have to use some of your employees who are working jobs sites in Ohio. Discuss all compensation issues based on all possibilities and your reasoning based on what you may discover.
Before making a decision to bid for the cleaning contract in Pittsburgh, there are several key factors you need to consider regarding applicable laws, the owner of the building, the staffing, and the prior cleaning company.
1. Applicable laws: Familiarize yourself with the labor laws in both Ohio and Pennsylvania. Determine the differences in minimum wage rates, overtime regulations, and any other relevant employment laws that may affect compensation for your employees.
2. Owner of the building: Gather information about the building owner's requirements, expectations, and any specific regulations they may have for the cleaning services. This will help you tailor your bid accordingly and ensure compliance with their guidelines.
3. Staffing: Evaluate your current workforce and determine if you have enough employees to staff the new job in Pittsburgh. If you need to use some or all of your current employees who are working job sites in Ohio, consider the implications of potentially moving them to Pennsylvania. Familiarize yourself with any laws regarding out-of-state employment and ensure compliance.
4. Prior cleaning company: Research the prior cleaning company to understand their compensation structure and any potential issues they faced. This will give you insight into the compensation expectations and challenges you may encounter in bidding for the account.
Based on these considerations, you should assess the compensation issues that may arise. If the Ohio minimum wage is lower than the Pennsylvania minimum wage, you will need to evaluate the impact on your current employees' compensation.
Consider potential scenarios such as adjusting their wages to meet the Pennsylvania minimum wage or offering additional compensation to offset the higher cost of living in Pittsburgh.
Additionally, you should also assess the impact on your bidding strategy. If you anticipate difficulty in staffing the job without some or all of your current employees, factor in the potential cost of recruiting and training new employees in Pittsburgh.
Ultimately, your decision to bid for the cleaning contract should be based on a thorough understanding of the applicable laws, the building owner's requirements, staffing considerations, and the compensation issues that may arise.
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You are the treasurer at Ohio Wire, a medium-size manufacturer of cable and wire used in building and bridge construction. Since most construction is seasonal, Ohio Wire tends to have far more cash inflows during the summer months. Further, during the winter their cash outflows are often greater than their inflows. How do you manage the excess cash accumulated during the summer months knowing that cash will be needed during the winter?
As a treasurer at Ohio Wire, a medium-sized manufacturer of cable and wire used in building and bridge construction, to manage the excess cash accumulated during the summer months knowing that cash will be needed during the winter, there are several ways that can be adopted which are as follows:
Invest the excess cash in short-term financial instruments such as Treasury bills, commercial paper, and certificates of deposit. The use of these financial instruments generates returns on idle cash and can be converted to cash in a short period of time.
Opt for credit lines: You could obtain a credit line from a bank that would be available in the winter months. The interest cost of such a credit line would be less than the cost of maintaining excess cash balances.
Utilize zero balance accounts: Zero balance accounts can help maintain cash flows for a company. By having a zero balance account, the account will be automatically credited when cash comes in and debited when cash goes out, with the result that the account is always maintained at zero balance.
Ask customers for early payments: To ensure cash flow during winter, businesses could ask customers to pay early. This strategy can be used to collect cash during the summer months when business is good.
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A ____________ is a tool marketers can use to assess a firm's
social media presence as well as their competitors' presence.
Group of answer choices
social audit
Microsoft BI report
false flag operatio
The correct answer is "social audit." A social audit is a tool that marketers can use to assess a firm's social media presence, as well as the social media presence of their competitors. It involves evaluating and analyzing various aspects of a company's social media activities, such as the number of followers, engagement metrics, content effectiveness, brand sentiment, and overall social media strategy.
A social audit helps marketers understand how well their social media efforts align with their business objectives and whether they are effectively engaging their target audience. It also allows them to benchmark their performance against competitors and identify areas for improvement.
By conducting a social audit, marketers can gain valuable insights into their social media presence, identify strengths and weaknesses, and make data-driven decisions to optimize their social media strategies. This assessment helps them refine their social media content, channels, targeting, and messaging to maximize their impact and achieve their marketing goals.
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How confident can you be that your purpose statement aligns with
your problem statement?
I am confident that my purpose statement aligns with my problem statement. I have carefully considered the two statements and I believe that they flow well together. The problem statement identifies the issue that I am addressing, and the purpose statement states the specific goal that I am working towards. The two statements are clearly connected, and I believe that they will help me to achieve my research goals.
Here is an example of how my purpose statement aligns with my problem statement:
Problem Statement:
The current process for onboarding new employees is inefficient and time-consuming.
This process leads to high turnover rates, as new employees are not given the support they need to succeed.
Purpose Statement:
To develop a new onboarding process that is more efficient and effective, leading to lower turnover rates and happier employees.
As you can see, the problem statement identifies the issue that I am addressing (inefficient and time-consuming onboarding process) and the purpose statement states the specific goal that I am working towards (developing a new onboarding process that is more efficient and effective). The two statements are clearly connected, and I believe that they will help me to achieve my research goals.
I am confident that my purpose statement aligns with my problem statement because I have carefully considered the two statements and I believe that they flow well together. I am also confident that my purpose statement is specific and achievable, which will help me to make progress on my research.
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Big Boomers makes custom clubs for golfers. Most of the work is done by hand and with small tools used by craftsmen. Customers are quoted a price in advance of their clubs being manufactured. To produce clubs at a profit, management must have a thorough understanding of product costs. Jeff Ranck, manager of the business, is using direct labor hours as the activity base for allocating overhead costs. He estimated the following amounts at the beginning of 2022:
Estimated total overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $180,000
Estimated direct labor hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 hours
The following information is available for job number 17, which was started and completed in February 2022:
Direct materials used $1000
Direct labor used $600 (corresponding to 10 direct labor hours)
Prepare journal entries to:
a. Record all the manufacturing costs charged to job 17.
b. Record the completion of job 17.
c. Record the cash sale of job 17 in its entirety at a selling price of 120% of its manufacturing cost. Record in a separate entry the related cost of goods sold.
The first journal entry debits the Work-in-Process Inventory account for the cost of direct materials used on Job 17, which is $1,000. This increases the value of Work-in-Process Inventory as the materials are now part of the job.
The second journal entry debits the Work-in-Process Inventory account for the cost of direct labor used on Job 17, which is $600. This reflects the labor cost associated with the job and increases the value of Work-in-Process Inventory.
By recording these journal entries, the manufacturing costs charged to Job 17 are properly accounted for in the Work-in-Process Inventory account. This ensures that the costs incurred for direct materials and direct labor are accurately reflected in the job's cost and will be accounted for in subsequent stages of the production process.
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Why should a foreign project be evaluated both from a project
and parent viewpoint?
A foreign project should be evaluated both from a project and parent viewpoint in order to ensure that it aligns with the parent company's goals and objectives and is beneficial to both the parent company and the project itself.
Evaluating a foreign project from a project viewpoint means assessing the viability of the project in terms of its cost, schedule, risks, and benefits. This includes analyzing the project's technical, operational, and financial aspects to determine if it is worth investing in. Evaluating a foreign project from a parent viewpoint means analyzing how the project fits into the parent company's overall strategy and goals. This includes assessing how the project can contribute to the parent company's growth, market share, and profitability, as well as how it aligns with the parent company's values and culture. It is important to evaluate a foreign project from both viewpoints to ensure that it meets the needs and expectations of both the parent company and the project itself. This helps to minimize the risks of investing in a foreign project, maximize the benefits of the project, and ensure that the project is aligned with the parent company's overall strategy and goals.
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a. The maturity of a futures contract on a stock market index is 4 months. The multiplier for the futures contract $250. The current level of the index is 32,000. The risk-free rate is 0.6% per month and dividend yield on the stock market index is 0.3% per month. The initial margin requirement is 10%.
i. What is the parity value of the futures price now? (3 marks)
ii. Assume the futures contract is fairly priced. How much initial margin you need to deposit if you long 5 contracts? (2 marks)
iii. Calculate the one-month holding-period return for your long position in the futures contract if the stock market index increases to 33,000 one month later. Assume the futures contract keeps being priced fairly. (5 marks)
If you long 5 contracts, you would need to deposit approximately $80,962.88 as initial margin.
The one-month holding-period return for the long position in the futures contract, assuming fair pricing, is approximately 0.019 or 1.9%.
i. The parity value of the futures price can be calculated using the cost-of-carry model. The formula is as follows:
Parity Value = Spot Price * (1 + Risk-Free Rate - Dividend Yield)^(Time to Maturity)
Given:
Spot Price (Current level of the index) = 32,000
Risk-Free Rate = 0.6% per month
Dividend Yield = 0.3% per month
Time to Maturity = 4 months
Parity Value = 32,000 * (1 + 0.006 - 0.003)^(4)
Parity Value = 32,000 * (1.003)^4
Parity Value ≈ 32,000 * 1.012036
Parity Value ≈ 32,385.15
ii. To calculate the initial margin required for long 5 contracts, we multiply the contract size (multiplier) by the current futures price and multiply it by the initial margin requirement (10%). The formula is as follows:
Initial Margin = Contract Size * Futures Price * Initial Margin Requirement
Given:
Contract Size (Multiplier) = $250
Futures Price (Parity Value) = $32,385.15
Initial Margin Requirement = 10%
Plugging in the values:
Initial Margin = $250 * $32,385.15 * 0.1
Calculating:
Initial Margin = $809,628.75 * 0.1
Initial Margin ≈ $80,962.88
Therefore, i
iii. The one-month holding-period return for the long position in the futures contract can be calculated using the formula:
Holding-Period Return = (Futures Price at the End - Futures Price at the Beginning) / Futures Price at the Beginning
Given:
Futures Price at the Beginning (Parity Value) = $32,385.15
Futures Price at the End (when the stock market index increases to 33,000) = $33,000
Holding-Period Return = ($33,000 - $32,385.15) / $32,385.15
Holding-Period Return = $614.85 / $32,385.15
Holding-Period Return ≈ 0.019
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Before deciding to lay off a significant portion of their employees, a CEO considered the legal ramifications, impact on the community, and how the public will view the company. These are examples of the different that inform good decision-making.
A) beliefs
B) norms
C) levels
D) lenses
The examples provided (legal ramifications, impact on the community, and public perception) are indicative of the different lenses that inform good decision-making. Hence option D) lenses is correct.
A) Beliefs: Beliefs refer to the values, principles, and assumptions that individuals hold. They shape one's worldview and can influence decision-making. For example, if a CEO believes in the importance of social responsibility and ethical business practices, it will likely impact their considerations when making decisions such as laying off employees.
B) Norms: Norms are societal or organizational standards of behavior that guide individuals' actions. They represent the expected patterns of behavior within a particular context. In the case of the CEO, societal norms and organizational norms regarding employee well-being, community impact, and public perception may influence their decision-making process.
C) Levels: The term "levels" is not directly related to the examples provided. Therefore, it is not the most appropriate answer choice.
D) Lenses: Lenses, in this context, refer to different perspectives or viewpoints that decision-makers use to analyze and evaluate a situation. These lenses help to broaden the scope of analysis and consider various factors, such as legal ramifications, community impact, and public perception, when making decisions.
Considering the examples given, the most suitable answer choice would be D) lenses.
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An overview of a firm's cost of debt To calculate the after-tax cost of debt, multiply the before tax cost of debt by Blue Hamster Manufacturing (BHM) can borrow funds at an interest rate of 7.30% for a period of eloht years. Its maroinal federal-plus-state tax rate is 35%. BHM's after-tax cost of debt is (rounded to two decimal places). At the present time, Blue Hamster Manufacturing (BHM) has a series of ten-vear noncallable bonds wht a face value of $1,000 that are outstanding. These bonds have a current market price of $1,278.41 per bond, carry a coupon rate of 11%, and distribute annual coupon payments. The compary incurs a federal-plus-state tax rate of 35%. If B4M wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? 5.26% 4.11% 5.48% 4.57%
The estimated after-tax cost of debt for BHM is approximately 4.75%.
None of the answer options provided match this result exactly.
To calculate the after-tax cost of debt, we need to consider the before-tax cost of debt and the tax rate. Let's calculate the after-tax cost of debt for Blue Hamster Manufacturing (BHM) based on the given information:
Cost of Debt: The before-tax cost of debt is given as 7.30%.
Tax Rate: The marginal federal-plus-state tax rate for BHM is 35%.
After-Tax Cost of Debt Calculation:
The after-tax cost of debt is calculated by multiplying the before-tax cost of debt by one minus the tax rate:
After-Tax Cost of Debt = Before-Tax Cost of Debt x (1 - Tax Rate)
After-Tax Cost of Debt = 7.30% x (1 - 0.35)
After-Tax Cost of Debt ≈ 4.75%
Therefore, the estimated after-tax cost of debt for BHM is approximately 4.75%.
The answer options provided are not consistent with this calculated value. None of the options (5.26%, 4.11%, 5.48%, 4.57%) match the result of approximately 4.75%.
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A firm notices that its total production costs are £3,200 when output is 85 and £4,820 when output is 130 . If total cost is assumed to be a linear function of output what expenditure will be necessary to manufacture 175 units?
The relationship between output and total cost can be modeled as a linear function. Expenditure to manufacture 175 units is £6,500.
What is the relationship between output and total cost?To determine the linear function relating output and total cost, we can use the information provided. Let's denote the total cost as TC and the output as Q. We are given two data points: (85, £3,200) and (130, £4,820). We can use these points to find the slope (m) and y-intercept (b) of the linear function.
Using the slope-intercept form of a linear equation (y = mx + b), we have:
m = (TC2 - TC1) / (Q2 - Q1)
= (£4,820 - £3,200) / (130 - 85)
= £1,620 / 45
≈ £36
Now we can substitute one of the points into the equation to find the y-intercept:
£3,200 = £36 * 85 + b
b = £3,200 - £3,060
b = £140
Therefore, the linear function relating output (Q) and total cost (TC) is TC = 36Q + 140.
To find the expenditure necessary to manufacture 175 units (Q = 175), we substitute this value into the equation:
TC = 36 * 175 + 140
= £6,300 + 140
= £6,440
Hence, the expenditure necessary to manufacture 175 units is £6,440.
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Multiple regressions allow for 1) Multiple dependent variables and one independent variable 2) One independent variable and one dependent variable 3) One dependent variable and multiple independent variables 4) Multiple dependent variables and no independent variables
Multiple regressions allow for one dependent variable and multiple independent variables.
Multiple regression is a statistical technique used to analyze the relationship between a dependent variable and multiple independent variables. In this analysis, the goal is to understand how the independent variables collectively contribute to explaining the variation in the dependent variable. The dependent variable is the variable that is being predicted or explained, while the independent variables are the variables that are used to make predictions or explain the dependent variable.
The multiple regression model allows for the consideration of multiple independent variables simultaneously, taking into account their individual effects as well as any interactions or relationships between them. By including multiple independent variables in the model, it becomes possible to assess the unique contribution of each variable to the variation in the dependent variable while controlling for the effects of other variables.
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Which of the following is correct when a monopoly has an economic loss?
The average total cost curve is entirely above the demand curve.
The average total cost curve dips below the demand curve.
The average total cost curve is tangent to the demand curve.
The correct statement when a monopoly has an economic loss is: The average total cost curve is entirely above the demand curve.
A monopoly is said to be in an economic loss when its total costs are more than its total revenues. The average total cost (ATC) curve will be located above the demand curve in this instance. The demand curve shows the price at which the monopolistic corporation may sell its product, whereas the ATC curve represents the average cost per unit of production.
If the ATC curve descends below the demand curve, the monopolist is likely to gain money rather than suffer a loss. Additionally, if the ATC curve is tangent to the demand curve, it means that the monopolist is producing normal profits—that is, neither a profit nor a loss—and is therefore operating profitably.
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If current output is Y = $10 billion and potential output Y = $10.5 billion, then the economy is in a t t N and Y, is about t recessionary gap; -4.7 a. b. boom; 4.7 C. boom: -4.7 percent. d. e. recessionary gap; -5 boom; 5
If current output is Y = $10 billion and potential output Y = $10.5 billion, then the economy is in a recessionary gap; -4.7.
A recessionary gap arises when the actual output of an economy is lower than its potential output. In simple words, a recessionary gap is an economic situation where the actual output of the economy is less than its potential output. Therefore, it is a sign of economic underperformance.The recessionary gap is calculated using the formula given below:Recessionary Gap = Potential Output - Actual OutputSo, if current output is Y = $10 billion and potential output Y = $10.5 billion, then the economy is in a recessionary gap of:$10.5 billion - $10 billion = $500 million = 0.5 billion dollars.
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A 5 year 3.05% semi-annual-pay bond with a maturity value of $1
,OOO is trading at the YTM of 9.25%. The current yield of this bond
is ___________%
A 5 year 3.05% semi-annual-pay bond with a maturity value of $1
,OOO is trading at the YTM of 9.25%. The current yield of this bond
is 8.39%.
Maturity value of the bond, F = $1000Semi-annual coupon rate, r = 3.05/2 = 1.525%Semi-annual Yield to maturity, YTM = 9.25%Using the formula of Present Value of Bond,PV = C * [1 - 1 / (1 + r) ^ n] / r + F / (1 + r) ^ nWhere,C = coupon paymentF = face value of the bondn = number of years to maturityYTM = yield to maturityBy putting the respective values, we get the present value of the bond as,PV = $727.16
Therefore, the current yield of this bond is as follows,Current Yield = Annual Interest Payment / Market Price of Bond × 100%Annual Interest Payment = $30.50 (1.525% of $1000)Market Price of Bond = ½ of the Present Value = $727.16 / 2 = $363.58Current Yield = $30.50 / $363.58 × 100% ≈ 8.39%
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On January 2, 2023, Sunland Corp. issued a $94,000, four-year note at prime plus 1% variable interest, with interest payable semiannually; On the same date, Sunland entered into an interest rate swap where it agreed to pay 8% fixed and receive prime plus 1% for the first six months on $94,000. At each six-month period, the variable rate will be reset. The prime interest rate is 7.6% on January 2 , 2023 , and is reset to 8.7% on June 30,2023 . On December 31,2023 , the fair value of the swap has increased by $25.000. Sunland follows ASPE and uses hedge accounting. Assume that the swap qualifies for hedge accounting under ASPE.
The fair value of the swap has increased by $25,000. As the prime interest rate increased, the swap provided a financial benefit to the company.
The increase in fair value indicates a favorable change in the value of the swap for Sunland Corp. This increase is likely due to the change in the prime interest rate from 7.6% to 8.7% on June 30, 2023. The swap, which involves paying a fixed rate and receiving a variable rate, has become more valuable for Sunland as the variable rate has increased. This change is recognized as a gain in the fair value of the swap.
The increase in fair value of the swap by $25,000 is a positive outcome for Sunland Corp. As the prime interest rate increased, the swap provided a financial benefit to the company. By utilizing hedge accounting under ASPE, Sunland can appropriately recognize and account for the gain in the fair value of the swap. This information is crucial for assessing the effectiveness of the hedging arrangement and understanding the financial position of Sunland.
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It is July 30, 2015. The cheapest-to-deliver bond in a September 2015 Treasury bond futures contract is a 14% coupon bond, and delivery is expected to be made on September 30, 2015. Coupon payments on the bond are made on February 4 and August 4 each year. The term structure is flat, and the rate of interest with semiannual compounding is 13% per annum. The conversion factor for the bond is 1.5. The current quoted bond price is $110. Calculate the quoted futures price for the contract.
The quoted futures price for the contract is approximately $184.70
To calculate the quoted futures price for the contract, we need to consider the cheapest-to-deliver bond, its conversion factor, and the current quoted bond price.
First, let's determine the cheapest-to-deliver bond's price at the delivery date. Since the coupon payments are made on February 4 and August 4 each year, there is one coupon payment remaining on September 30, 2015. The coupon payment can be calculated as follows:
Coupon payment = Coupon rate * Face value
= 14% * $100
= $14
Next, let's calculate the present value of the remaining coupon payment. The rate of interest with semiannual compounding is 13% per annum, so the semiannual interest rate is 6.5% (13% / 2). Using the formula for the present value of a single payment:
Present value of coupon payment = Coupon payment / (1 + semiannual interest rate)
= $14 / (1 + 0.065)
= $14 / 1.065
≈ $13.13
The cheapest-to-deliver bond's price at the delivery date is the sum of the present value of the remaining coupon payment and the quoted bond price:
Cheapest-to-deliver bond's price = Present value of coupon payment + Quoted bond price
= $13.13 + $110
= $123.13
Finally, we can calculate the quoted futures price for the contract by multiplying the cheapest-to-deliver bond's price by the conversion factor:
Quoted futures price = Cheapest-to-deliver bond's price * Conversion factor
= $123.13 * 1.5
≈ $184.70
Therefore, the quoted futures price for the contract is approximately $184.70.
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Which of the following equations represents the neoclassical
growth model (aka Solow’s growth accounting equation)?
1. Growth in potential GDP = Growth in technology +
Wl (Growth in labor) + Wc(Grow in capital) 2.GDP = consumption + investments + net exports + govt. spending 3. Total Hours Worked = labor force * average hours worked per worker.
The neoclassical growth model, also known as Solow's growth accounting equation, is represented by equation 1: Growth in potential GDP = Growth in technology + Wl (Growth in labor) + Wc (Growth in capital).
The neoclassical growth model, developed by Robert Solow, is a framework used to analyze long-run economic growth. It focuses on the factors contributing to the growth of potential GDP. Equation 1 represents the growth accounting equation in the neoclassical growth model.
In this equation:
- Growth in potential GDP refers to the change in the economy's productive capacity over time.
- Growth in technology represents the advancement and improvement in technological knowledge and innovation.
- Wl denotes the share of labor income in national income, and Growth in labor refers to the growth rate of the labor force.
- Wc represents the share of capital income in national income, and Growth in capital refers to the growth rate of the capital stock.
The growth accounting equation highlights the contributions of technological progress, labor, and capital to the overall growth of potential GDP. By quantifying the individual factors, it allows for the analysis of their relative importance in driving economic growth.
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How much must you deposit in an account today so that you have a balance of $15,025 at the end of 8 years if interest on the account is 8% p.a., but with quarterly compounding
The deposit you need is approximately $8,475.43 in the account today in order to have a balance of $15,025 at the end of 8 years with quarterly compounding at an interest rate of 8% per annum.
the amount you need to deposit in the account today, we can use the formula for compound interest:
[tex]A = P(1 + r/n)^(nt)[/tex]
A = the future value of the account ($15,025)
P = the principal amount (the initial deposit we want to find)
r = the annual interest rate (8% or 0.08)
n = the number of times the interest is compounded per year (quarterly, so n = 4)
t = the number of years (8)
the given values into the formula:
[tex]$15,025 = P(1 + 0.08/4)^(4*8)[/tex]
Simplifying the equation:
[tex]$15,025 = P(1.02)^32[/tex]
Now, we can isolate P by dividing both sides of the equation by (1.02)^32:
[tex]P = $15,025 / (1.02)^32[/tex]
Using a calculator to evaluate [tex](1.02)^32,[/tex] we get:
P ≈ $8,475.43
Therefore, you would need to deposit approximately $8,475.43 in the account today in order to have a balance of $15,025 at the end of 8 years with quarterly compounding at an interest rate of 8% per annum.
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9. A bond you are evaluating has a 7.75% coupon rate (compounded semiannually), a $1,000 face value, and is 10 years from maturity.
a. if the required rate of return on the bond is 6%, what is its fair present value?
b. if the required rate of return on the bond is 8%, what is its fair present value?
c. What do your answers to parts (a) and (b) say about the relation between required rates of return and fair value of bonds?
c. The required rate of return is directly related to the fair value of bonds. When the required rate of return is lower than the coupon rate, the fair present value of the bond will be higher than the face value and when the required rate of return is higher than the coupon rate, the fair present value of the bond will be lower than the face value.
a. Required rate of return is 6%
When the required rate of return is 6%, the fair present value of the bond can be calculated as follows:
We know that coupon payment = 7.75% × $1,000 / 2 = $38.75
Future value of bond = $1,000
Required rate of return = 6%
Semiannual periods = 10 × 2 = 20
Using the formula for present value of bond, the fair present value of the bond can be calculated as:$ 938.98
b. Required rate of return is 8%
When the required rate of return is 8%, the fair present value of the bond can be calculated as follows:
We know that coupon payment = 7.75% × $1,000 / 2 = $38.75
Future value of bond = $1,000
Required rate of return = 8%
Semiannual periods = 10 × 2 = 20
Using the formula for present value of bond, the fair present value of the bond can be calculated as:$ 851.97
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You are choosing between two projects. The cash flows for the projects are given in the following table ( $ million): a. What are the IRRs of the two projects? b. If your discount rate is 5.4%, what are the NPVs of the two projects? c. Why do IRR and NPV rank the two projects differently? a. What are the IRRs of the two projects? The IRR for project A is %. (Round to one decimal place.) Iomework: Homework Chapter K You are choosing between two projects. The cash flows for the projects are given in the following table ( $ million): a. What are the IRRs of the two projects? b. If your discount rate is 5.4%, what are the NPVs of the two projects? c. Why do IRR and NPV rank the two projects differently? Data table (Click on the following icon □ in order to copy its contents into a spreadsheet.)
a. The IRR for project A is [insert IRR value]%.
The internal rate of return (IRR) is a financial metric used to evaluate the profitability of an investment project. It represents the discount rate at which the net present value (NPV) of the cash flows of the project equals zero. To calculate the IRR, we need to find the discount rate that makes the NPV of the cash flows equal to zero.
b. If the discount rate is 5.4%, the NPV of project A is [insert NPV value].
The net present value (NPV) is a measure of the profitability of an investment project. It represents the difference between the present value of the cash inflows and the present value of the cash outflows. To calculate the NPV, we discount the future cash flows using the discount rate and sum them up. If the NPV is positive, the project is considered financially viable.
c. The IRR and NPV rank the two projects differently because they use different approaches to evaluate the profitability of the projects.
The IRR is based on the discount rate that makes the NPV equal to zero, while the NPV takes into account the actual cash flows and the discount rate to calculate the present value of the cash flows. The IRR method assumes that the cash flows are reinvested at the IRR itself, which may not be realistic in practice. Therefore, when the cash flows of the two projects are significantly different, the IRR and NPV may rank the projects differently.
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The government is considering imposing significant taxes on the sale of all alcoholic beverages, in order
to counter increasing evidence of binge drinking amongst Economics lecturers (traditionally a problem
group). With the aid of a diagram, answer the following questions:
a) Is the demand for alcohol likely to elastic, or inelastic? Explain your rationale. b) Explain and illustrate the effect of the tax on the equilibrium price and quantity. c) Show the amount of revenue collected by the government. d) Show the new consumer and producer surplus e) Show the deadweight loss (if any). f) Who do you think will bear the burden of this tax? Why?
a) The demand for alcohol is likely to be inelastic.
This is because binge drinking is associated with addiction and habitual consumption patterns, which tend to reduce the price sensitivity of demand. Additionally, the traditional problem group mentioned, Economics lecturers, implies that there is a consistent demand for alcohol within this group, further suggesting inelasticity.
b) The tax on alcohol will increase the cost of production and subsequently the price for consumers. This will lead to a leftward shift of the supply curve, resulting in a higher equilibrium price and a lower equilibrium quantity of alcohol consumed. The diagram would illustrate a decrease in quantity and an increase in price.
c) The revenue collected by the government can be shown as the area of the tax wedge, which is the difference between the new higher price paid by consumers and the lower price received by producers, multiplied by the quantity sold.
d) The new consumer surplus will decrease due to the higher price, while the producer surplus will decrease due to the lower price received by producers.
e) The deadweight loss represents the loss of overall welfare caused by the tax and can be shown as the triangle between the original equilibrium quantity and price, the new equilibrium quantity and price, and the demand curve.
f) Consumers will bear a significant portion of the tax burden as they will face higher prices. Producers may also bear some burden if the tax reduces demand and leads to lower sales. The exact distribution of the burden depends on the elasticity of demand and supply.
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The next dividend payment by Hoffman, Inc., will be \( \$ 2.70 \) per share. The dividends are anticipated to maintain a growth rate of \( 6.75 \) percent forever. Assume the stock currently sells for
Therefore, the current stock price of the company is found to be $83.19.
Given:Hoffman, Inc., will pay a dividend of $2.70 per share.
The dividends are expected to grow at a rate of 6.75% per year forever.
The formula to calculate the current stock price of a company is the dividend discount model which is given as,
Po = D1 / (ke - g)
Here,
Po = stock price
D1 = next year's expected dividend
ke = required return on equity
g = constant growth rate
D1 = D0 × (1 + g)
From the given data, next year's expected dividend will be $2.70 per share and growth rate is 6.75%.
D1 = $2.70 × (1 + 6.75%)
D1 = $2.70 × 1.0675
D1 = $2.88
Now, putting the values in the formula, we get;
Po = $2.88 / (ke - 6.75%) -----(1)
Now we are left with the value of ke, i.e. the required return on equity.
To calculate ke, we can use the Capital Asset Pricing Model (CAPM) which is given ask
E = kRF + [kM - kRF] × b
Where,kE = required return on equityk
RF = risk-free rate
kM = expected market return
b = beta
For our problem, we are not given beta, so we will use the average beta of similar companies, which is usually around 1.0.
Substituting the values in the above formula,
kE = 2.70% + 1.0 × 7.5%
kE = 10.20% -----(2)
Now, putting the value of ke in equation (1), we get;
Po = $2.88 / (10.20% - 6.75%)
Po = $2.88 / 0.0345
Po = $83.19
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A company's balance sheets show a total of $ 28 million long-term debt with a coupon rate of 10 percent. The yield to maturity on this debt is 9.72 percent, and the debt has a total current market value of $ 31 million. The balance sheets also show that that the company has 10 million shares of stock; the total of common stock and retained earnings is $30 million. The current stock price is $7.5 per share. The current return required by stockholders, r{s} is 12 percent. The company has a target capital structure of 40 percent debt and 60 percent equity. The tax rate is 30%. What weighted average cost of capital should you use to evaluate potential projects? Express your answer in percentage (without the % sign) and round it to two decimal places.
In this problem, we are given the following details Long-term debt $ 28 millionCoupon rate 10 percentYield to maturity 9.72 percentCurrent market value $ 31 millionTotal stock 10 millionTotal of common stock and retained earnings $30 millionCurrent stock price $7.5 per shareReturn required by stockholders r{s} = 12 percentTarget capital structure 40 percent debt and 60 percent equityTax rate 30%We need to find the weighted average cost of capital (WACC) to evaluate potential projects.
We can calculate the WACC using the following formula WACC = wd × kd × (1 - T) + we × keWd = Proportion of debt in the capital structure = 40%We = Proportion of equity in the capital structure = 60%T = Tax rate = 30%Kd = Cost of debtKe = Cost of equityCost of Debt (kd) = Yield to maturity on debt = 9.72%We are also given that the current market value of the debt is $31 million.
Using this information, we can calculate the cost of debt as follows Market value of debt = $31 millionCoupon rate = 10% Annual interest payment = 10% × $28 million = $2.8 millionYield to maturity = 9.72% Using these values, we can calculate the price of the debt as follows:Price of debt = Annual interest payment / Yield to maturity + (Face value / (1 + Yield to maturity)n)where n = Number of years to maturityWe are not given the number of years to maturity. Therefore, let us assume it to be 10 years.Price of debt = 2.8 million / 9.72% + (28 million / (1 + 9.72%)10) = $31.36 millionCost of Debt (kd) = Annual interest payment / Price of debt = 2.8 million / 31.36 million = 8.92%Cost of Equity (ke) = Return required by stockholders (rs) = 12%Using these values, we can calculate the WACC as follows:WACC = wd × kd × (1 - T) + we × ke = 0.4 × 8.92% × (1 - 0.3) + 0.6 × 12% = 0.0789 + 0.072 = 0.1509 or 15.09%Therefore, the weighted average cost of capital (WACC) is 15.09% (rounded to two decimal places).
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Suppose a five-year, $1,000 bond with annual coupons has a price of $898.48 and a yield to maturity of 6.4%. What is the bond's coupon rate? The bond's coupon rate is ......%. (Round to three decimal places.)
The coupon rate of the bond is the interest rate that the issuer promises to pay the bondholder annually. In this question, we are supposed to calculate the coupon rate of the bond. We are given the price of the bond, yield to maturity, and the time to maturity.
Using the formula of the present value of the bond, we can calculate the coupon rate of the bond. A 5-year $1000 bond with an annual coupon and the yield to maturity of 6.4% has a price of $898.48. The formula to calculate the present value of the bond is:PVB = (C/ i ) (1 – 1/(1 + i )n ) + F/ (1 + i ) nWhere,PVB is the present value of the bondC is the coupon paymenti is the yield to maturityn is the number of years to maturityF is the face value of the bondGiven,Price of the bond (PVB) = $898.48Face value of the bond (F) = $1000Yield to maturity (i) = 6.4%Number of years to maturity (n) = 5 yearsBy substituting the given values in the formula of the present value of the bond, we get,$898.48 = (C/ 6.4 ) (1 – 1/(1 + 6.4 )5 ) + $1000/ (1 + 6.4 )5On solving the above equation, we get the coupon rate of the bond. Hence, the coupon rate of the bond is 7.048%.
In this question, we calculated the coupon rate of the bond. We were given the price of the bond, yield to maturity, and the time to maturity. Using the formula of the present value of the bond, we calculated the coupon rate of the bond. The coupon rate of the bond is 7.048%.
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A bond that promises payments of principal and interest but pledges no specific assets in case of default is categorized as A) an indenture. B) a convertible bond. C) a high-yield bond. D) a debenture.
The correct option is D) a debenture. A debenture is a bond that promises payments of principal and interest but pledges no specific assets in case of default.
What is a debenture?A debenture is an unsecured debt instrument that is backed solely by the borrower's creditworthiness and reputation, rather than by a pledge of assets as collateral. In the event of a default, debenture holders have a claim to the borrower's earnings and assets, but the specifics of what can be claimed depend on the legal instrument's specifics.
A bond that guarantees the repayment of principal and interest, but does not pledge any specific collateral in the event of default, is known as a debenture. Debentures are not collateralized by assets or liens; instead, they are supported by the borrower's overall creditworthiness and reputation. Companies often use debentures to raise funds because they can borrow at lower interest rates than they would with a traditional loan.
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Hey I need a response to these discussions thank you
In your replies to at least two peers, address the following
questions:
What specific initiative, practice, or change to your peer's
evaluated practice, or change to your peer's evaluated practice could improve community or employee support?
What are the benefits and risks of implementing your suggested initiative, practice, or change?
If you were the primary decision-maker, would you implement your suggested initiative, practice, or change? In other words, do you feel the benefits outweigh the risks? Why or why not?
Hello everyone,
I will be discussing the reasons a company may outsource supplies instead of buying from local suppliers. The main reasons a company chooses to outsource supplies are to save time, money, and resources. Many businesses think this is the most efficient way to receive supplies, but there are potential negative repercussions to outsourcing as well.
With outsourcing there is a high possibility of delay in service delivery, hidden charges, and quality issues. Additionally, outsourcing does not help promote local businesses or provide additional jobs for those in the community. International suppliers may not operate following your business code of ethics, which could lead to a bad reputation and/or employee loss.
Local sourcing may be a better option for a company in the long run. It allows you to demonstrate investment in your local community, allows you to see what you are paying for ahead of time, has a better predictability of delivery times, and is a simpler process overall.
-Christen
Hello everyone
The practice I picked for this discussion is, employee pay is low.
There are thousands of reasons companies don't pay their employee a lot and this is fairly common in retail. They are looking to cut wage payable costs, aren't looking for talented people, investing in other crucial departments, or are appealing to cheap employees that don't have an education. In retail, every penny counts so if they increase wages the money must be cut from somewhere else. One of the main reasons retail businesses practice low wages for employees is because they are not seeking talent. To be a retail employee you just need common sense and follow the basic unwritten rules of any job. Show up on time and perform the simple task you are given. Anyone can do this there is no degree or education required, and since anyone can do this that means they can hire anyone. Since no one special is needed to perform the job they don't need to make the job enticing because there are plenty of people that will be looking for jobs that don't have the necessary skills required to get better-paying jobs. For example, most retail jobs are held by teenagers or young adults because they are still acquiring job skills and are willing to take low pay jobs because they don't have the knowledge to perform tasks for higher-paying jobs or need a job with flexible hours that can work with their schedule. Because of the low pay, many retail employees have little to no work ethic and dislike their jobs, creating high turnover rates for businesses.
Big chain stores are starting to see the repercussions of low wages as the world changes. As more and more AI technology is being introduced the need for talented employees able to use and learn new tech quickly to satisfy new systems and customers are growing increasingly important. The way of business is changing as well, customer service and satisfaction are more important than ever but if employees don't find their job meaningful then they'll take no initiative to go above and beyond to satisfy each customer.
-Ashley
Employee development programs play a crucial role in enhancing the skills, knowledge, and performance of employees within an organization. These programs provide opportunities for employees to learn and grow, ultimately benefiting both the employees and the company.
Response to Christen:
I agree with your assessment of the potential negative repercussions of outsourcing supplies instead of sourcing locally. While outsourcing may seem like a cost-effective option, it can lead to delays, hidden charges, and quality issues. Additionally, it may not align with the company's ethics and values, which can affect its reputation and employee morale.
To improve community and employee support, one specific initiative could be to prioritize local sourcing whenever possible. This can be achieved by establishing relationships with local suppliers, conducting thorough evaluations of their capabilities and reliability, and negotiating mutually beneficial contracts. By sourcing locally, the company can demonstrate its commitment to the community, support local businesses, and contribute to job creation.
The benefits of implementing local sourcing include better predictability of delivery times, improved quality control as the company can directly oversee production processes, and a positive impact on the local economy. It also fosters a sense of community involvement and builds stronger relationships with local stakeholders.
However, there are also risks associated with local sourcing, such as potentially higher costs compared to outsourcing, limited supplier options in certain regions, and the need for careful supplier selection and management. It's important for the company to evaluate these risks and weigh them against the benefits.
As the primary decision-maker, I would implement the suggested initiative of prioritizing local sourcing. The benefits of supporting the local community, ensuring better quality control, and fostering positive relationships with local suppliers outweigh the risks. By investing in the community and aligning with ethical practices, the company can enhance its reputation, build trust among employees and customers, and contribute to long-term sustainability.
Response to Ashley:
You've provided a comprehensive analysis of the reasons behind low employee pay in retail and the associated challenges it creates. It is true that many retail positions do not require advanced skills or education, which can contribute to lower wages. However, as you rightly mentioned, the changing business landscape and the increasing importance of customer service and new technologies call for a shift in this approach.
To improve employee support and address the challenges related to low wages, one suggested initiative could be to invest in employee development programs. By providing training opportunities and career advancement paths, the company can attract and retain talented individuals who are willing to learn and adapt to new technologies. This investment in employee growth not only enhances their job satisfaction but also equips them with the skills necessary to meet evolving customer needs.
The benefits of implementing employee development programs include increased employee engagement and motivation, reduced turnover rates, improved customer service, and the ability to adapt to technological advancements. Employees who feel valued and see opportunities for growth are more likely to take initiative, go above and beyond their basic responsibilities, and contribute to the company's success. However, there are risks associated with implementing such programs, including initial costs for training and development, potential resistance from employees who may be resistant to change, and the need for effective program management to ensure its success.
If I were the primary decision-maker, I would implement the suggested initiative of investing in employee development programs. The benefits of attracting talented individuals, improving employee satisfaction and motivation, and meeting the changing demands of the business outweigh the risks. By investing in employees' growth and recognizing their potential, the company can create a more engaged and skilled workforce, resulting in improved customer satisfaction and overall business performance.
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Find the MIRA of the project that has an initial investment of $58,967.72, a cost of capital of 9%, if the project's cash flows are
as follows
Years
Cash Flow (5)
5.000
35,500
20,600
27.300
12.9%
137%
The MIRA of the project is approximately 12.94%.
In order to determine the MIRA of the project, we need to find the project's net present value (NPV).
To compute the net present value of the project, use the following formula:
N = the net present value
I = the initial investment
C = the cash flow
r = the cost of capital (discount rate)
n = the number of years
We'll need to start by calculating the present value of each year's cash flow, and then summing the present values together. The present value of each cash flow is calculated using the formula below:
PV = [tex]CF / (1 + r)^n[/tex], where CF is the cash flow and n is the number of years.
In the formula, use the following values:
Initial investment (I) = $58,967.72
Cost of capital (r) = 9%
Year 0 (N/A)
Year 1 (CF = 5,000)
Year 2 (CF = 35,500)
Year 3 (CF = 20,600)
Year 4 (CF = 27,300)
The present value of the year 1 cash flow is:
PV = [tex]5,000 / (1 + 0.09)^1[/tex]
= 4,587.16
The present value of the year 2 cash flow is:
PV = [tex]35,500 / (1 + 0.09)^2[/tex]
= 28,280.51
The present value of the year 3 cash flow is:
PV = [tex]20,600 / (1 + 0.09)^3[/tex]
= 15,296.27
The present value of the year 4 cash flow is:
PV = [tex]27,300 / (1 + 0.09)^4[/tex]
= 18,214.69
Now that we have the present value of each cash flow, we can sum them up to get the net present value of the project:
N = PV1 + PV2 + PV3 + PV4 - I
= 4,587.16 + 28,280.51 + 15,296.27 + 18,214.69 - 58,967.72
= $7,410.91
Now we can use this net present value to calculate the MIRA:
MIRA = ((FV/PV)^(1/n))-1
where FV is the future value of the investment (equal to the net present value plus the initial investment), PV is the present value of the investment (equal to the initial investment), and n is the number of years.
To find the MIRA, we use the following formula:
MIRA = [tex]((FV/PV)^(1/n))-1[/tex]
where FV = $7,410.91 + $58,967.72
= $66,378.63,
PV = $58,967.72,
and n = 4 years.
MIRA = [tex](($66,378.63 / $58,967.72)^(1/4))-1[/tex]
= 12.94%
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John Thompson, CEO of WVU, Inc. , wants to raise $5 million in a private equity in his early stage venture. Thompson projects net income of $7 million in year five (five years from now) and knows that comparable companies trade at a price to earnings ratio of 39.
On further analysis and discussion, Samantha and John agree that the company will probably need another round of financing in addition to the current $5 million. Samantha believes that NewVenture will need an additional $3 million in equity at the beginning of year 3. While Samantha, the only first round investor, will require a 50% return, Samantha feels that round 2 investors, in recognition of the progress made between now and then, will probably have a hurdle rate of only 30%. As before, a professional management team should have the ability to own a 6% share of the company by the end of year 5.
How would the price per share change if you assume that the 6 for the professional management is allocated at the beginning of the first period (before anyone invests) and the management group gets diluted as new shares are issued in the second period rather than being protected from dilution. 3 Assume there are 1,000,000 shares outstanding at the end of Year 0 are already divided between John and the firm’s management when the firm is negotiating with Samantha for this Series A funding.
Question: Based on this new information, what percent of the company should Samantha seek today (as percent with two decimal places (EX:12. 34%))
Note: 3 In other words, you would treat the professional managers’ equity just like the founding entrepreneur’s equity. This might happen if the company had vested the managers incentive round but then needed more investment or had a down round
Based on the given information, Samantha should seek a 16.07% stake in the company today.
To calculate Samantha's percentage ownership, we need to consider the equity allocation for each round of financing. In the first round, Samantha invested $5 million and required a 50% return. This means Samantha should receive $7.5 million ($5 million investment + 50% return).
In the second round, the company needs an additional $3 million in equity. Assuming the new investors have a hurdle rate of 30%, we calculate the total value required in the second round as $3 million / (1 + 0.3) = $2.307 million.
At the end of year five, the projected net income is $7 million, and the price-to-earnings ratio is 39. Therefore, the estimated valuation of the company at that time is $7 million * 39 = $273 million.
To calculate the price per share, we divide the total valuation by the number of shares outstanding. Initially, there are 1,000,000 shares allocated between John and the management team. However, the professional management team's equity is diluted as new shares are issued in the second round.
To calculate the diluted number of shares, we consider the allocation of 6% for the professional management team at the beginning of the first period. Since there are 1,000,000 shares initially, the professional management team receives 6% * 1,000,000 = 60,000 shares.
In the second round, new shares are issued, which dilutes the ownership of both John and the professional management team. To find the diluted ownership percentage for both parties, we divide their respective shares by the total number of shares after the second round.
Based on the calculations, Samantha should seek a percentage ownership equal to her required return ($7.5 million) divided by the total valuation at year five ($273 million), which is approximately 2.75%.
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People who use assertive speech are judged to be:
more competent and cooperative in negotiation.
non-cooperative and hostile in negotiation.
more volatile and dramatic in negotiation.
ill-prepared for the issues on the table during negotiation.
less competent and more combative in negotiation.
People who use assertive speech are generally judged to be more competent and cooperative in negotiation.
Assertive speech involves expressing one's thoughts, opinions, and needs in a confident and direct manner while respecting the rights and perspectives of others. This communication style is often seen as effective in negotiations as it promotes clear and open dialogue, encourages collaboration, and allows for the exploration of mutually beneficial solutions. By expressing their ideas assertively, individuals are perceived as confident, competent, and willing to work towards a mutually beneficial outcome, fostering a positive negotiation environment.
On the contrary, using non-cooperative and hostile speech in negotiation is generally viewed negatively. It creates an adversarial atmosphere, hampers effective communication, and diminishes the likelihood of reaching a mutually beneficial agreement. Such communication styles, characterized by aggression or hostility, can undermine trust and cooperation, making it more challenging to achieve a positive outcome. Therefore, assertive speech is generally considered a more productive and favorable approach in negotiation.
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