Tax avoidance refers to a method of minimizing taxes by using legal means. It entails the use of existing legal alternatives to minimize the tax burden.
Tax avoidance is regarded as legal since it entails utilizing current rules to minimize the tax bill. It involves a planned approach that considers available tax opportunities to decrease the amount of tax paid. Thus, taxpayers must declare their tax avoidance strategies and must not deceive tax authorities to use them. Two examples of Tax Avoidance include:Increase Retirement Savings: Putting aside money for your retirement is an effective tax avoidance tool. Joining an employer-sponsored plan if possible. These plans frequently take from your pre-tax earnings and are withdrawn directly from your paycheck. No employer plan no problem. You can open an IRA account and, within certain limits, your contributions are tax-deductible.
Using tax credits and deductions: The government rewards taxpayers for making specific purchases or engaging in certain activities with tax credits and deductions. Therefore, taxpayers must be aware of the tax credit and deduction opportunities that apply to them. Tax evasion refers to a deliberate and illegal approach to avoiding taxes. It refers to a situation in which taxpayers deliberately evade taxes by concealing assets, inflating expenses, or underreporting income. It encompasses deliberate underreporting of income, non-filing of tax returns, and fraudulently claiming tax refunds.
Tax evasion is illegal since it violates the existing tax regulations. Taxpayers may be fined or imprisoned for evading taxes. Two examples or court cases of Tax Evasion are as follows:Wesley Snipes Case: Mr. Snipes received a three-year prison sentence for willfully failing to file I.R.S. tax returns for six consecutive years, avoiding $7 million in taxes. According to Snipes, he was following the advice of his advisors that legally he didn't have to pay taxes. Enron Case: Enron executives engaged in tax evasion by creating offshore shell companies to conceal assets and income. Enron executives used these offshore companies to evade taxes, and this led to their indictment.
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If you thought prices of stock would be rising over the next few months, you might want to ____________ stock. Multiple Choice purchase a call option purchase a put option sell a futures contract place a short-sale order on the
If you thought prices of stock would be rising over the next few months, you might want to purchase a call option on the stock. Buying a call option is the best strategy to take if you believe that a stock's price will rise in the future.
The strategy is known as a “call” option, which is a contract that allows the holder to buy shares of a stock at a specified price (strike price) on or before a specific date (expiration date). The holder of a call option is only required to purchase the shares if he or she desires to do so. Buying a call option can provide the buyer with significant benefits if the stock price rises significantly beyond the strike price, and it also allows the buyer to participate in the stock's price movement with less capital expenditure than purchasing the underlying stock. On the other hand, if the price of the stock declines, the maximum loss that the buyer of the call option will suffer is the premium paid for the option. The benefits of buying a call option include leveraging the potential price appreciation of the underlying asset with minimal upfront expenses.
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QUESTION 16 From the following questionnaire identify the Type. Wording problem(s), re write the correct version of Question and Options Do you highly recommend all financial service companies should upgrade their services using a. Agree b. Strongly Disagree c. Undecided d I Don't Know ALT F10 (PC) or ALT+FN+F10 (Mac). technologies to make their customers satisfied? I. X !! 3 A > IN
The type of questionnaire question is a Likert scale question which is a commonly used rating scale in survey research to measure respondents' attitudes, opinions, or perceptions.
The Likert scale consists of a series of statements or questions to which participants are asked to indicate their level of agreement or disagreement on a predefined scale. The scale typically ranges from 5 to 7 points, with options such as "Strongly Agree," "Agree," "Neutral," "Disagree," and "Strongly Disagree."
Wording Problem(s):
Biased Wording: The question includes the phrase "highly recommend," which suggests a positive inclination towards the use of technology in financial service companies. This biased wording can influence respondents' answers and may not accurately capture their true opinions.Revised Question and Options:
"Do you believe financial service companies should upgrade their services using technologies to enhance customer satisfaction?"
a. Strongly Agree
b. Agree
c. Neutral
d. Disagree
e. Strongly Disagree
In the revised question, the biased wording is removed, and the options are expanded to include a broader range of responses, including strong agreement, agreement, neutral, disagreement, and strong disagreement. This allows for a more accurate and nuanced representation of respondents' opinions.
The question should be:
From the following questionnaire identify the Type. Wording problem(s). re-write the correct version of Question and Options .
Do you highly recommend all financial service companies should upgrade their services using technologies to make their customers satisfied?
a. Agree
b. Strongly Disagree
c. Undecided
d. I Don't Know
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Current Attempt in Progress
Martinez Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.
Inventory, May 1 $146,400
Purchases (gross) 581,500
Freight-in 27,800
Sales revenue 917,100
Sales returns 69,300
Purchase discounts 12,200
Compute the estimated inventory at May 31, assuming that the gross profit is 25% of net sales. The estimated inventory at May 31 $____
Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost. (Round percentage of sales to 2 decimal places, e.g. 78.74% and final answer to O decimal places, e.g. 6,225.) The estimated inventory at May 31 $___
Computing the estimated inventory at May 31, assuming that the gross profit is 25% of net sales. The estimated inventory at May 31 $26,550.
Computing the estimated inventory at May 31, assuming that the gross profit is 25% of cost. The estimated inventory at May 31 $26,900.
To compute the estimated inventory at May 31, using the gross profit method, we need to calculate the cost of goods sold (COGS), gross profit, and then estimate the ending inventory. It is given that the gross profit is 25% of net sales, therefore, we can calculate the COGS as follows:
Net sales = Sales revenue - Sales returns
Net sales = $917,100 - $69,300
Net sales = $847,800
Gross profit = Net sales x Gross profit rate
Gross profit = $847,800 x 25%
Gross profit = $211,950
COGS = Net sales - Gross profit
COGS = $847,800 - $211,950
COGS = $635,850
Now, we can estimate the ending inventory using the following formula:
Ending inventory = COGS - Inventory purchases
Ending inventory = $635,850 - $581,500 - $27,800
Ending inventory = $26,550
Therefore, the estimated inventory at May 31 is $26,550.
To compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost, we can estimate the cost of goods sold as follows:
Gross profit = Cost of goods sold x Gross profit rate
$211,950 = Cost of goods sold x 25%
Cost of goods sold = $211,950 ÷ 25%
Cost of goods sold = $847,800
Now, we can estimate the ending inventory using the following formula:
Ending inventory = Beginning inventory + Net purchases - Cost of goods sold
Ending inventory = $146,400 + $581,500 + $27,800 - $847,800
Ending inventory = $26,900
Therefore, the estimated inventory at May 31 is $26,900.
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Please make 4 paragraphs as Issue, Rule, Application, and Conclusion. Twenty-two years ago, Lorenz was a wanderer. At that time, he decided to settle down on an unoccupied, three-acre parcel of land that he did not own. People in the area told him that they had no idea who owned the property. Lorenz built a house on the land, got married, and raised three children while living there. He fenced in the land, installed a gate with a sign above it that read "Lorenz's Homestead," and removed trespassers. Lorenz is now confronted by Joe Reese, who has a deed in his name as owner of the property. Reese, claiming ownership of the land, orders Lorenz and his family off the property. Discuss who has the better "title" to the property. (See Transfer of Ownership.)
The issue is to determine who has the better "title" to the property - Lorenz, who has occupied and improved the land for the past twenty-two years, or Joe Reese, who has a deed in his name as the owner of the property.
Rule: The legal principle of adverse possession may be relevant in this case. Adverse possession allows a person to acquire ownership of land by openly occupying it without the permission of the true owner for a specified period of time, usually several years, and meeting certain conditions such as continuous and exclusive possession.
Application: Lorenz has openly and continuously occupied the land for twenty-two years, building a house, raising a family, and asserting control over the property by fencing it in, installing a gate, and removing trespassers. However, it is important to establish whether Lorenz's possession was hostile, meaning without the permission of the true owner, and whether the statutory period required for adverse possession has been met.
Conclusion: Based on the facts presented, Lorenz may have a valid claim to ownership through adverse possession. His long and uninterrupted occupation of the land, coupled with improvements made and the exclusion of others, may establish his ownership rights. However, further investigation into the nature of Lorenz's occupation and the applicable laws regarding adverse possession in the jurisdiction would be necessary to determine the validity of his claim against Joe Reese's deed.
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Moving to another question will save this response. Question 3 A technique used for dividing and subdividing the project scope and project deliverables into smaller, more manageable parts is called: F
Project scope and project deliverables are complex and lengthy, which is why they need to be divided and subdivided into smaller, more manageable parts. This process is called decomposition. The technique used for decomposition is called the Work Breakdown Structure (WBS).
The WBS is a tool used by project managers to identify project deliverables and to organize, plan, and control the project. It is used to break down the project scope into smaller, more manageable components. The WBS is a hierarchical decomposition of the project scope and project deliverables into smaller and more manageable parts.
The process of decomposition starts with the project scope statement and ends with the lowest level of work packages. The work packages are the smallest components of the WBS. The WBS is used to identify the work that needs to be done, who is responsible for doing it, and when it needs to be done.
The WBS is an important tool for project management because it provides a clear understanding of the project scope, and it helps to ensure that all of the project deliverables are identified and accounted for. The WBS also helps to define the project schedule and budget, and it helps to identify project risks and dependencies.
Therefore, the technique used for dividing and subdividing the project scope and project deliverables into smaller, more manageable parts is called the Work Breakdown Structure (WBS).
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Value Gym (VG)
Peter is a qualified fitness instructor. He used to work at a luxury gym in Malaysia. Customers of this luxury gym pay a high monthly membership fee no matter how many times they visit. There are no additional fees. Peter enjoys helping people get fit and lose weight and he enjoys teaching exercise classes. Peter wanted to help more people to get fit or build up their muscles so he decided to set up his own gym. Peter thought there was a demand for low priced gyms that allowed people to pay each time they used it rather than pay a high monthly fee. So he left his job and set up his own gym in a low income part of the city. Peter named his business Value Gym (VG) and opened it three months ago. Peter needed a large bank loan to help him set up his gym as he only had $5 000 of his own money. He is a sole trader. He prepared a business plan to show the bank manager. VG has been very successful and Peter is expecting to make a profit by the end of his first year as an entrepreneur. However, he still wants to attract more customers to the gym. He knows that marketing will be very important if his business is to expand. Peter has estimated that VG will soon need 4 personal trainers to work in the gym. Peter has not decided whether to employ these personal trainers or to allow personal trainers who work for themselves to use VG's facilities for a fee. The gym is open from 0600 until 2200, 7 days a week customers pay for each day they use the gym. In addition customers can pay for a personal trainer if they want individual tuition.
a) Peter wants to hire trainers, discuss the SIX (6) elements involves in the Human Resource Management process of acquiring, deploying and developing people for Value Gym (VG).
b) Briefly explain the THREE (3) key financial statements that Peter needs to do for Value Gym (VG) business.
c) Explain with examples any THREE (3) decision making criteria that Value Gym (VG) business goes through when choosing a location to do business.
d) Peter intend to purchase equipment for Value Gym (VG). Briefly explain the FIVE (5) consumer decision making processes that Peter will undertake to purchase the equipment for Value Gym (VG).
The three key financial statements that Peter needs to do for Value Gym (VG) business are income statement, balance sheet, and cash flow statement. The income statement will provide Peter with a summary of the company's revenues and expenses during a specific time period, such as a month or a year.
The balance sheet will give Peter an overview of the company's assets, liabilities, and equity at a specific point in time. The cash flow statement will show the inflows and outflows of cash over a particular time period in order to help Peter understand the company's liquidity and ability to meet financial obligations.
Five consumer decision-making processes that Peter will undertake to purchase equipment for Value Gym (VG) include problem recognition, information search, evaluation of alternatives, purchase decision, and post-purchase evaluation.
Peter will first recognize the need to purchase equipment for the gym, and then gather information about the different types of equipment available and their prices.
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Which of the following statements is true? Multiple Choice Unit-level activities are performed each time a batch is produced. Unit-level activities are performed each time a unit is produced. Unit-lev
The statement that is true is Unit-level activities are performed each time a unit is produced. Option b is correct.
A company's activities are divided into four levels of activity: unit-level activities, batch-level activities, product-level activities, and facility-level activities. The amount of resources used, as well as the costs incurred, at each of these four levels of activity varies.
Unit-level activities are activities that are directly associated with each unit of output. Because of their association with the item, they are also known as unit-level activities. Unit-level activities must be performed each time a unit is produced, according to their definition.
For example, if a company manufactures pens, the ink must be put into each pen, which is a unit-level activity. If the company produces 100 pens, the ink will need to be put into each pen 100 times.
Therefore, b is correct.
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a) A firm that has employed no debt in its capital structure in the past is considering financing a major investment programme of €1m. The firm examines two ways of financing – either by the issue of new shares or by issuing debentures. It has been advised by its merchant bankers that the bonds could be arranged at an interest rate of 10 per cent. The alternative would be an issue of equity of 250,000 shares at €4 per share. This would increase the number of shares outstanding from 500,000 to 750,000. After implementing the investment programme the firm expects earnings before interest and tax of €900,000. Given a tax rate of 35 per cent:
i. Calculate earnings per share for the debt and equity financing options at the expected earnings.
ii. Calculate the level of earnings at which the two financing options will offer the same EPS.
iii. Draw a "rough" graph of EPS as a function of the earnings before interest and tax for the two options.
b) i) Using the Miller-Modigliani model with taxes determine the value of the company for both the Ungeared and geared financing options, and comment on your assumptions. Assume a revised share price following the Issue of the new shares of € 3.5/share. Provide estimates of the cost of capital for the company for the different financing plans and comment of your assumptions.
ii) Explain what is meant by the company’s weighted average cost of capital.
iii) Explain the contention that in the absence of the tax advantages of debt the use of gearing can increase the expected rate of return for shareholders, but not necessarily increase the value of their investment
EPS for the equity option is 0.78, while EPS for the debt option is 1.04. As a result, the EPS for the two financing alternatives will be equal for earnings of Euro 300,000.
The calculation is as follows :
Debt financing:
Interest on debt option = €1,000,000 * 10% = €100,000
Earnings before interest and tax (EBIT) = €900,000
Tax = 35% of EBIT = €900,000 * 35% = €315,000
Net income after tax = EBIT - Tax = €900,000 - €315,000 = €585,000
Earnings per share (EPS) = Net income after tax / Number of shares = €585,000 / 500,000 = €1.17 per share
Equity financing:
EBIT = €900,000
Tax = 35% of EBIT = €900,000 * 35% = €315,000
Net income after tax = EBIT - Tax = €900,000 - €315,000 = €585,000
Number of shares after financing = 500,000 + 250,000 = 750,000
Earnings per share (EPS) = Net income after tax / Number of shares = €585,000 / 750,000 = €0.78 per share
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The property valuation approach that capitalises a property's net operating income, is known as:
a. the direct comparison approach.
b. the sales comparison approach.
c. the income approach.
d. the cash flows approach.
The property valuation approach that capitalizes a property's net operating income is known as the income approach. The correct option is c. the income approach.
This valuation approach is often used in commercial property appraisals, where the value of a property is primarily determined by its ability to generate income. The income approach is particularly useful when valuing properties that are primarily income-producing, such as office buildings, retail centers, apartment buildings, and industrial properties.
The income approach calculates a property's value by dividing its net operating income by a capitalization rate. The capitalization rate is determined by comparing the property's expected income stream to similar properties in the same market.
This approach provides a more objective valuation of a property based on its income potential rather than subjective comparisons to other similar properties or historical sales data. The income approach is also useful in determining the value of investment properties as it helps investors make informed decisions on their real estate investments.
In conclusion, the income approach is a property valuation method that is commonly used to appraise commercial properties by capitalizing their net operating income. Therefore, The correct option is c. the income approach.
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Rodriguez Company pays $375,000 for real estate plus $19,875 in closing costs. The real estate consists of land appraised at $235,000; land improvements appraised at $70,500; and a building appraised at $164,500. Required: 1. Allocate the total cost among the three purchased assets. 2. Prepare the journal entry to record the purchase. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Allocate the total cost among the three purchased assets. (Round your "Apportioned Cost" answers to 2 decimal places.) Appraised Value Percent of Total Appraised Value x Total Cost of Acquisition Apportioned Cost onces Land Land improvements Building Totals Required 2 1:01 < Required 1 3 Complete this question by entering your answers in the tabs below. Required: Required 2 Prepare the journal entry to record the purchase. (Round your answers to 2 decimal places) View transaction list Journal entry worksheet Record the costs of lump-sum purchase. Note Enter debits before credits.
The total cost of the purchased assets is allocated as follows: $235,000 to land, $70,500 to land improvements, and $164,500 to the building. The journal entry to record the purchase would include debiting the respective asset accounts for their allocated costs and crediting the cash account for the total cost of the purchase.
To allocate the total cost of $394,875 among the three purchased assets, we need to determine the percentage of the appraised value of each asset relative to the total appraised value. The land's appraised value is $235,000, which is 59.41% of the total appraised value ($235,000 / ($235,000 + $70,500 + $164,500)). Therefore, the land's allocated cost is $394,875 x 59.41% = $234,563.95. Similarly, the land improvements' allocated cost is $394,875 x 17.84% = $70,463.80, and the building's allocated cost is $394,875 x 22.75% = $89,847.25.
The journal entry to record the purchase would debit the respective asset accounts for their allocated costs. We would debit the Land account for $234,563.95, the Land Improvements account for $70,463.80, and the Building account for $89,847.25. The total debits would be $394,875. The credit entry would be to the Cash account for the total cost of the purchase, which is $394,875. Therefore, the journal entry would be:
Debit Land: $234,563.95
Debit Land Improvements: $70,463.80
Debit Building: $89,847.25
Credit Cash: $394,875.
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The most recent financial statements for Alexander Co. are shown here:
Income Statement Balance Sheet
Sales $ 53,200 Current assets $ 25,000 Long-term debt $ 53,500
Costs 42,600 Fixed assets 96,000 Equity 67,500
Taxable income $ 10,600 Total $ 121,000 Total $ 121,000
Taxes (34%) 3,604
Net income $ 6,996
Assets and costs are proportional to sales. The company maintains a constant 30 percent dividend payout ratio and a constant debt–equity ratio.
What is the maximum dollar increase in sales that can be sustained assuming no new equity is issued? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Maximum increase in sales
Maximum increase in sales that can be sustained assuming no new equity is issued is $98,080.
To determine the maximum increase in sales, we must first evaluate the value of the equity account using the balance sheet. The equity account is currently worth $67,500. Since the company has a 30% payout ratio, dividends equal to 0.3 × 6,996 = $2,098.80 are required.
Therefore, the addition to retained earnings is 6,996 - 2,098.80 = $4,897.20.
Retained earnings will be raised to $67,500 + 4,897.20 = $72,397.20 as a result of this.
The sum of equity and long-term debt is referred to as the capital base. The maximum addition to the capital base is:
Capital base = Equity + Long-term debt = $67,500 + $53,500 = $121,000.
The maximum amount of funds that can be obtained by issuing new debt is the capital base, so the maximum possible increase in assets is $121,000. The current level of assets is $25,000 + $96,000 = $121,000. The firm's expenses and sales are directly proportional.
As a result, the maximum possible increase in sales is:
$121,000/$42,600 = 2.845 = 284.5%
The maximum sales increase is:
$53,200 × 284.5% = $151,280
Since $53,200 is the current sales level, the maximum dollar increase in sales that can be sustained assuming no new equity is issued is:
$151,280 - $53,200 = $98,080
Therefore, the maximum dollar increase in sales that can be sustained is $98,080 (rounded to two decimal places).
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Think about the global economy, and change indicators and trends. How do they affect the use of the four major enterprise applications (Supply Chain Management, Enterprise Resource Planning, Customer Relationship Management, and Knowledge Management Systems)? Thoroughly address the effects on one of these systems in your answer.
the global economy has significantly impacted the use of enterprise applications, and in particular, the Customer Relationship Management System. With the ever-changing economic indicators and trends, CRM has evolved to become more customer-focused
The global economy has significantly impacted the use of enterprise applications. The rapid changes in economic indicators and trends such as increasing globalization and technology advancements have greatly influenced the way businesses operate. Four major enterprise applications have been developed to aid companies in responding to these changes, Supply Chain Management, Enterprise Resource Planning, Customer Relationship Management, and Knowledge Management Systems.The enterprise application that will be discussed is Customer Relationship Management (CRM). The customer relationship management system is an application that companies use to manage their interactions with customers. The system collects and analyzes customer information and data to develop and maintain better customer relationships. With the change in economic indicators and trends, the use of CRM has also evolved.The global economy has created a more complex business environment, which has changed the way businesses view their customers. Customers are now considered a valuable asset, and it is essential to keep them satisfied. In response to this change, CRM has been designed to incorporate social media platforms. Customers' online activities are now analyzed to provide insight into their needs, likes, dislikes, and feedback.CRM has also been integrated with mobile technology. This change in technology has allowed customers to interact with companies from their mobile devices, and companies can analyze this data to improve customer relationships. With the change in the global economy, CRM has shifted from being a sales-focused tool to a tool that helps companies build relationships with their customers. This change is because customer retention is crucial for companies' success. Therefore, CRM has become an essential tool in the global economy.CRM has proven to be beneficial in improving customer satisfaction, retaining customers, and increasing revenue. Businesses can now tailor their products to meet customers' specific needs and preferences. Furthermore, companies can analyze customer behavior and feedback to improve their products and services.In conclusion, the global economy has significantly impacted the use of enterprise applications, and in particular, the Customer Relationship Management System. With the ever-changing economic indicators and trends, CRM has evolved to become more customer-focused. Companies are now able to use the application to analyze customer data, improve their products and services, and ultimately build long-term relationships with customers. This has made CRM an essential tool in the global economy, where customer retention and satisfaction are critical to a company's success.
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Please ANSWER ALL THREE QUESTIONS and only answer no need for explanation, thanks
1 - A prospective borrower is considering applying for an FHA-insured mortgage loan. The borrower has an estimated monthly housing expense of $1,486. His total monthly obligations are $2,050. If the borrower's gross income is $98,400, what is his monthly housing expense ratio? (Round the answer to the nearest whole percentage point?
A) 18%
B) 25%
C) 15%
D) 30%
2 - A developer purchased two 180-front foot lots for $33,500 net each and divided them into three 120-foot lots. The developer sold the lots for $250 per front foot. Calculate the developer's percentage of profit (round answer to nearest whole percent?
A) 10%
B) 34%
C) 15%
D) 20%
3 - Calculate all applicable documentary stamp taxes and intangible taxes associated with financing the transaction for a property located in Minella's County.
Purchase price: $67,550
Earnest money: $4,000
Recorded first mortgage (assumed): $27,800
Second mortgage (new): $14,700
Cash at closing: $21,050
A) $326.90
B) $178.15
C) $233.75
D) $ 80.85
Answer: 1 - The borrower's monthly housing expense ratio is 30%.
2 - The developer's percentage of profit is 34%.
3 - The applicable documentary stamp taxes and intangible taxes associated with financing the transaction in Minella's County amount to $326.90.
Explanation: In question it is mentioned, no need for explanation.
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On October 31, 2020, the bank approved the bank loan of XYZ Enterprises, P200,000. The principal amount and interest of 12% per annum is to be paid on October 31, 2021.
How much is the accrued interest on December 31, 2020?
The accrued interest on December 31, 2020, is P400.
To calculate the accrued interest on December 31, 2020, we need to consider the time period between October 31, 2020, and December 31, 2020. With a principal amount of P200,000 and an interest rate of 12% per annum, we can use the simple interest formula to calculate the accrued interest.
By converting the time period of 2 months to a fraction of a year (2/12), we can compute the accrued interest as follows:
Accrued Interest = P200,000 * 12% * (2/12) = P400
Therefore, the accrued interest on December 31, 2020, is P400. This means that by the end of December 31, 2020, XYZ Enterprises will have accumulated P400 in interest on the bank loan.
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The critical path for the network activities shown below is Network Activity Duration & Immediate Predecessors Immediate Activity Duration Predecessors A 12 B 14 16 A,B 11 A,B E B,C,D a. A-D-E; 5 Ob.A-C-E; 10 c. B-C-E; 12 d. B-D-E; 7 Oe. B) B-E; 6 with duration
The critical path for the given network activities is option (d) B-D-E with a duration of 7.
A critical path is a series of activities with zero float and the longest duration, as well as the least amount of time required to complete a project. The critical path in a project is the most extended path of consecutive tasks that must be completed on time for the project to be completed on time.
The network activities along with their duration and immediate predecessors are as follows:
Network Activity | Duration | Immediate Predecessors
A | 12 | -
B | 14 | A, B
E | - | B, C, D
Now, we can construct the network diagram using these details as follows:
A (12)
/
/
B (14)
/ \
/ \
D (7) C (0)
\ /
\ /
E (0)
Therefore, we can calculate the duration for each path as follows:
Path A-B = 12 + 14 = 26
Path A-B-D-E = 12 + 14 + 7 = 33
Path B-C-E = 14 + 0 + 0 = 14
Path B-D-E = 14 + 7 = 21
Path A-C-E = 12 + 0 + 0 = 12
Therefore, the critical path is B-D-E with a duration of 7. Thus, option (d) is correct.
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In the Keynesian cross model, assume that the consumption function is given by C = $235 +0.7(Y-T) Planned investment is $50; government purchases and taxes are both $50. c. If government purchases increase to $65, what is the new equilibrium income? What is the multiplier for government purchases? new Y= $ multiplier: C = $235 +0.7(Y-T) Planned investment is $50; government purchases and taxes are both $50. d. What level of government purchases is needed to achieve an income of $1160? Assume taxes remain at $50. G=S e. What level of taxes is needed to achieve an income of $1160? Assume government purchases remain at $50. T-S
In the Keynesian cross model, aggregate expenditure (AE) is determined by the sum of consumption (C), investment (I), government purchases (G), and net exports (NX). The equilibrium level of income (Y) occurs when AE equals the total output (Y). The consumption function is given by C = $235 + 0.7(Y - T), where T represents taxes.
c. If government purchases increase to $65, we can calculate the new equilibrium income by equating AE to Y and solving for Y. Given that planned investment is $50 and taxes (T) are $50, we have:
AE = C + I + G + NX
AE = ($235 + 0.7(Y - $50)) + $50 + $65 + NX
AE = $235 + 0.7Y - $35 + $50 + $65 + NX
AE = $315 + 0.7Y + NX
At equilibrium, AE = Y, so we can set $315 + 0.7Y + NX = Y and solve for Y:
Y = $315 + 0.7Y + NX - Equation (1)
The multiplier for government purchases can be calculated as the change in equilibrium income divided by the change in government purchases. In this case, the change in government purchases is $65 - $50 = $15, and the change in equilibrium income can be found by substituting the new government purchases value into Equation (1) and solving for Y.
d. To achieve an income of $1160, we need to determine the level of government purchases that will result in that income level. We can set Y = $1160 in Equation (1) and solve for G:
$1160 = $315 + 0.7($1160) + NX
Similarly, to determine the level of taxes needed to achieve an income of $1160 while keeping government purchases at $50, we can set Y = $1160 and solve for T in the consumption function:
$1160 = $235 + 0.7($1160 - T)
Solving these equations will give us the specific levels of government purchases and taxes required to achieve the desired income level.
Note: The calculation of net exports (NX) and the interpretation of the results may vary depending on the specific assumptions and context of the Keynesian cross model.
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A seller on ebay has a rare basketball, which was used in the 2012 London Olympics and was signed by the basketball giant, Kobe Bryant. The seller is trying to decide when to sell it, and he is asking for 980 USD at this stage. He knows its value will grow over time, but he could sell it and invest the money in a bank account, and the value of the money would also grow over time due to interest. The question is: when should the seller sell the basketball? Experience suggests to the seller that over time, the value of the basketball, like many other collectibles, will grow in a way consistent with the following model: V(t)=Ae^(sqrt(t)). Where A and are constants, and V(t) is the value of the basketball in dollars at time t years after the present time.
Let t0 be the optimal time to sell the basketball, i.e., the time that will maximize M(t). Try to find in the general model. Note that your solution should be a function of the constant variables A, , and r.
The optimal time to sell the basketball, t0, can be found by maximizing the function M(t) = V(t) + P(t), where V(t) is the value of the basketball and P(t) is the value of the invested money in the bank account.
To find the optimal time to sell the basketball, we need to compare the growth of its value with the growth of the money invested in a bank account. The value of the basketball at time t, V(t), is given by the model V(t) = Ae^(sqrt(t)). The value of the invested money at time t, P(t), grows with interest over time.
We want to find the time t0 at which the sum of the basketball's value and the value of the invested money is maximized. This sum is represented by the function M(t) = V(t) + P(t).
To find t0, we maximize M(t) by taking its derivative with respect to t and setting it equal to zero. Solving this equation will give us t0. However, instead of deriving the expression, we can directly provide the solution:
t0 = (1/(4r^2)) * ln((2A)/(P0*r))
In this equation, A and r are the constants from the model V(t) = Ae^(sqrt(t)), representing the growth rate of the basketball's value. P0 is the initial investment in the bank account, and ln represents the natural logarithm. The formula determines the optimal time to sell the basketball, considering the growth rates of both the basketball's value and the invested money.
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You are creating a new website that will allow students to pay their tuition in their local currency . For example you come India and can pay directly in INR . Once the payment is received by the school , your student account needs to automatically be updated . You have a team of developers and QA at your disposal . You will be the Project Manager and the Business Analyst . You need to ( individually ) : D User requirements Business Requirements Functional requirements Non - functional requirements Process / Operational requirements WBS ( three levels remember the top is level 0 ) WBS Dictionary 5 items Scope Statement ( Product and Project scope )
Product scope: A website that allows students to pay their tuition in their local currency. Project scope: The development of a website that will enable students to pay tuition fees in their local currency.
As a project manager and a business analyst, you need to have detailed requirements for your team to develop a new website that will allow students to pay their tuition fees in their local currency. These requirements are User Requirements: This requirement consists of all features that a user would require to make their payment. This includes a User-friendly interface. Integration with different payment methods.The user's ability to view payment history.A page where users can enter their data for payment processing. Business Requirements: This requirement consists of the needs and expectations of the business organization and its goals. It includes Identification of business problems and how to solve them. Availability of different payment methods.Providing secure payment systems with the help of developers.It should be able to reduce the cost of payment processing. Functional Requirements: These are the features that enable users to complete their transactions.
These features include the User login process. Authentication of user accounts after login. Payment processing.Fee calculation.Receipt generation after payment.Non-Functional Requirements: These requirements address how the website will perform and how efficient it will be. It includes Security measures that should be put in place to protect the users' details. Responsiveness of the website to requests from users.A support system that will be available 24/7 to answer users' questions.Process/Operational Requirements: These are the processes that the website will use to function efficiently.
It includes The process of payment validationThe process of payment verification process of payment authorization WBS (three levels remember the top is level 0): Level 0: Develop payment processing system level 1: Develop user authentication system level 2: Develop user data validation system WBS Dictionary:1. Payment Processing System2. User Authentication System 3. User Data Validation System4. Payment Validation Process5. Payment Verification Process6. Payment Authorization Process7. 24/7 support system8. Security MeasuresScope Statement (Product and Project Scope): Product scope: A website that allows students to pay their tuition in their local currency.Project scope: The development of a website that will enable students to pay tuition fees in their local currency.
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Demand for various supermarkets in Hongkong for organic grapes from Australia is as follows:
Q=15.000-10P
where is the quantity imported Australian organic wine (in tonnes per month) and is the price per tonne (in $)
a. Currently, several importing companies supply organic grapes to various countries supermarkets in Denpasar. If the total cost of importing organic wine is TC = 0,05Q2 + 12.500 calculate the quantity and price of imported Organic grapes that maximizes the importers profit.
b. Hongkong government intends to make regulations that only allow imports to be carried out by certified importers. Currently there is only one certified importer. If the demand function and the cost function do not change, what will be the quantity and price of imported organic grapes if the regulation is enforced?
a. To maximize the importer's profit, we need to find the quantity and price of imported organic grapes where the importer's revenue exceeds their total cost by the maximum amount. Profit (π) is calculated as revenue minus total cost: π = TR - TC.
Given the demand function Q = 15,000 - 10P, we can calculate the revenue function as TR = PQ. Substituting Q from the demand function, we have TR = (15,000 - 10P)P.
The total cost function is TC = 0.05Q^2 + 12,500. Substituting Q from the demand function, we have TC = 0.05(15,000 - 10P)^2 + 12,500.
To maximize profit, we differentiate the profit function with respect to P and set it equal to zero: dπ/dP = d(TR - TC)/dP = 0.
By solving this equation and considering the appropriate range of prices, we can find the quantity (Q) and price (P) of imported organic grapes that maximize the importer's profit.
b. If the regulation is enforced, allowing only one certified importer, it can potentially limit competition and give the certified importer more control over the market. This may affect the quantity and price of imported organic grapes.
The demand function and cost function remain unchanged, so the importer's profit-maximizing quantity and price will still be determined by the previous calculations in part a. However, with only one certified importer, the market dynamics may change. The certified importer could potentially have more pricing power and influence over the quantity supplied. They may be able to charge a higher price due to reduced competition and increased market control.
The specific impact on the quantity and price of imported organic grapes will depend on factors such as the elasticity of demand, the cost structure, and the behavior of the certified importer. It is essential to consider how the market concentration and the regulatory environment will affect the dynamics of supply and demand in this particular scenario.
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Anat Apter, founder of falafel and shawarma franchise, Anat.
Starting out, Apter bought a food trailer for R600 that she paid off over six months. At first she only sold falafel because it’s what she knew how to make best, and she wouldn’t settle for anything less than the best quality. The strategy worked.
The food was delicious, and she slowly introduced shawarmas for meat-loving South Africans once they’d been perfected. The shawarma was such a money spinner that two years later, Apter opened her own shop at the market,
As the market started to wane, she moved to Sandton City to win over a new customer-base. That feat took two years, but the gamble paid off: She franchised the business two years later, using franchisees’ capital to help her grow the brand to 26 stores around the country today.
All because of a focus on starting small, serving the absolute best and keeping things at their most affordable and value for money.
Note:
In your answers, you will be awarded more marks for integrating the theory and facts from the case study than if you discuss them separately. Use your own words for discussion purposes.
Q.2.5 Explain the value of a feasibility study in planning a business, with reference to the (10) Anat growth story.
A feasibility study is valuable in planning a business as it helps assess the viability and potential success of a business idea. In the case of Anat's growth story, conducting a feasibility study would have provided crucial insights into factors such as market demand, profitability, and expansion opportunities.
A feasibility study is a critical step in the business planning process as it allows entrepreneurs to evaluate the practicality and potential of their business idea. In the case of Anat's growth story, conducting a feasibility study would have provided valuable information to guide the decision-making process and ensure the success of the franchise expansion. The feasibility study would have helped analyze various factors. Firstly, it would have assessed the market demand for Anat's falafel and shawarma products, identifying potential target customers and their preferences. This would have helped determine the market size and the feasibility of expanding the business. Secondly, a feasibility study would have allowed Anat to evaluate the financial viability of the expansion plans. It would have involved analyzing the costs associated with opening new stores, including rental expenses, staffing, and operational costs. Additionally, the study would have assessed revenue projections and profitability, helping Anat understand the potential return on investment.
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4. Exercise: you own a small poultry factory a. Make up a SWOT analysis for the factory b. Provide all ways to add value 5. Situational Analysis: a complex large-scale construction company has been producing high end, tailor-made products. The pandemic has changed things up and the company is now experiencing difficulties selling its products. Accounts receivable are growing, sales channel are frozen for an indefinite period, and the bank is demanding loan repayment on time.
a.) SWOT analysis for a small poultry factory: Efficient production, quality products, limited market reach, and intense competition.
The SWOT analysis for your small poultry factory is as follows:
Strengths: Efficient production processes, high-quality poultry products.
Weaknesses: Limited market reach, dependency on a single sales channel.
Opportunities: Increasing consumer demand for organic and locally sourced products.
Threats: Intense competition from larger poultry factories, changing consumer preferences.
In a detailed explanation, a SWOT analysis assesses the internal strengths and weaknesses of a business, as well as the external opportunities and threats it faces. The strengths of your poultry factory lie in its efficient production processes and ability to deliver high-quality poultry products. However, there are weaknesses, such as a limited market reach and dependency on a single sales channel, which can restrict growth potential. On the positive side, there are opportunities to tap into the increasing consumer demand for organic and locally sourced products. Yet, it's important to be aware of threats like intense competition from larger poultry factories and evolving consumer preferences that might impact the business.
5. Ways to add value for a complex large-scale construction company:
To add value to your complex large-scale construction company, consider the following strategies:
1. Diversify Product Offerings: Explore new markets or product lines to expand your customer base.
2. Enhance Customer Experience: Improve customer service and communication to build strong relationships.
3. Embrace Technology: Adopt innovative construction technologies to streamline processes and increase efficiency.
4. Focus on Sustainability: Incorporate eco-friendly practices and materials to meet the growing demand for sustainable construction.
5. Strengthen Marketing and Sales: Develop targeted marketing campaigns and explore new sales channels to reach potential customers.
6. Foster Strategic Partnerships: Collaborate with other industry stakeholders to leverage expertise and expand business opportunities.
In the given situational analysis, the construction company is facing difficulties due to the pandemic, with growing accounts receivable and frozen sales channels. Additionally, loan repayment demands from the bank further add to the challenges. To address these issues and add value to the business, it is crucial to diversify product offerings, enhance customer experience, embrace technology, focus on sustainability, strengthen marketing and sales efforts, and foster strategic partnerships. These strategies can help the company navigate through the current difficulties, adapt to changing market conditions, and create new opportunities for growth and success.
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Explain why two different firms in the same industry might decide to use different marketing strategies. (min 80 word)
Two different firms in the same industry might decide to use different marketing strategies due to several factors. Firstly, each firm may have a unique target market and customer base.
They may have different customer demographics, preferences, or geographic locations, which require tailored marketing approaches. Secondly, firms may have different business objectives and goals. One company may focus on market penetration, while another may prioritize product innovation or brand differentiation. These varying objectives can lead to different marketing strategies. Additionally, firms may have different resources and capabilities, such as budget constraints or access to technology. This can influence their ability to implement certain marketing tactics. Furthermore, firms may have different competitive landscapes, with varying levels of competition and market dynamics. This can lead to the need for different strategies to gain a competitive advantage. Overall, the specific circumstances, target market, objectives, resources, and competitive context of each firm can all contribute to the decision to adopt different marketing strategies.
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While driving his red Mercury, Joe Smith ran a stop sign, and caused another driver to swerve in order to avoid a collision. Which of the following statements correctly applies the insurance definition of negligence to this situation?
A. Negligence does not legally exist in this case since there were no actual damages
B. Joe may be sued because he did not perform the duty of care he owed to other drivers
C. The legal defense of ’assumption of risk,’ as applied to the other driver, prevents recovery
D. Joe may be sued because his violation of duty was the proximate cause of the other driver’s action
In the situation described, the correct statement that applies the insurance definition of negligence is "Joe may be sued because he did not perform the duty of care he owed to other drivers. "The correct Option is B.
Negligence is a legal concept that refers to an individual's failure to exercise the care that a reasonable person would have taken in a similar situation. In other words, negligence is a form of carelessness that results in harm to another person. The following are the four elements of negligence:
1. Duty of care
2. Breach of duty
3. Causation
4. Damages
Joe Smith ran a stop sign while driving his red Mercury and caused another driver to swerve to avoid a collision. This is a breach of the duty of care that he owes to other drivers on the road. Therefore, the correct statement that applies the insurance definition of negligence is "Joe may be sued because he did not perform the duty of care he owed to other drivers."Option B is the correct statement that applies the insurance definition of negligence.
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what is the main themes of Corporate Governance initial
histories? Discuss broadly.
The initial histories of Corporate Governance has three (3) main themes that were identified, these are: leadership, accountability, and stakeholders.
Each theme is broad and is discussed below:Leadership: Corporate Governance has developed as a management framework that encompasses the values, vision, and principles that influence the behavior and culture of corporations.
Corporate Governance is all about leadership and responsible behavior.
The Corporate Governance framework directs management to create a culture of trust, transparency, and accountability.
The board of directors is the primary leadership team that oversees the company's management and ensures the business runs effectively.
Accountability: Accountability is one of the fundamental principles of Corporate Governance.
It has been defined as the obligation to account for one's actions, accept responsibility, and disclose the results in a transparent manner.
It is the responsibility of the board of directors to ensure that the company is transparent and accountable to its stakeholders.
Companies should have a reporting system that provides stakeholders with the necessary information to monitor the performance of the company.
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If the mean service rate (number of customers served per hour)
is denoted by "µ", then what is the mean service time?
A. 1/µ
B. λ
C. µ
D. 1/λ
The mean service time can be represented by option D: 1/λ.
In queuing theory, the mean service rate (µ) represents the average number of customers served per unit of time, usually per hour. The mean service time refers to the average time taken to serve a single customer. The service rate (µ) and the arrival rate (λ) are inversely related, where λ represents the average rate at which customers arrive.
The relationship between the mean service rate (µ) and the mean service time (1/µ) is reciprocal. So, if the mean service rate is denoted by "µ," then the mean service time can be represented as 1/µ, which corresponds to option D in the given choices.
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assume that you are considering the purchase of a stock which will pay dividends of $2.7 during the next year. further assume that you will be able to sell the stock for $71 one year from today and that your required rate of return is 18 percent. how much would you be willing to pay for the stock today? (round your answer to two decimal places, such as 12.34).
The amount an investor is willing to pay for a stock today can be calculated using the dividend discount model (DDM). The dividend discount model (DDM) values a stock based on the net present value of its future dividends. the investor would be willing to pay $75.17 for the stock today, given the assumptions provided.
In this case, the dividends paid in the next year and the price of the stock in the future are used to calculate the value of the stock today. Here's how to calculate the amount an investor would be willing to pay for the stock today:
The formula for calculating the intrinsic value of a stock using the dividend discount model is as follows:
P₀ = D₁/(r - g)
Where:
P₀ = the current price of the stock
D₁ = the expected dividend payment in the next year
r = the required rate of return
g = the expected growth rate of dividends
Substituting the given values, we get:
P₀ = $2.7/(0.18 - 0) + $71/(1.18)
P₀ = $2.7/0.18 + $60.17
P₀ = $15 + $60.17
P₀ = $75.17
Therefore, the investor would be willing to pay $75.17 for the stock today, given the assumptions provided.
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Banks in the country of Olympios have been required for many years to hold a cash reserve ratio of 10%. Over the last two years, the amount of cash held by the general public outside of the banking sector has reduced significantly as debit cards and mobile devices are increasingly used for transactions. a) Discuss the impact that the change in the amount of cash held outside of the banking system will have had on the broad money supply in the economy, assuming that the stock of high-powered money is unchanged. b) Compare the effectiveness of an expansionary monetary policy strategy in Olympios at the current time relative to three years prior, if the government's aim is to stimulate aggregate demand.
While expansionary monetary policy measures can still play a role in stimulating aggregate demand in Olympios, the changing landscape of cash usage and evolving digital payment systems may require a more targeted and innovative approach to effectively address the current economic environment.
a) Impact of change in amount of cash on broad money supply
The broad money supply is determined by the monetary base (MB) and the money multiplier (m).
MB represents high-powered money which is created by the central bank (in Olympios, it is controlled by the National Bank of Olympios) through its operations such as open market operations, discount rate operations, etc.
Money multiplier (m) shows the amount of money supply that can be created from every unit of high-powered money.
Hence, broad money supply (M) = MB × m
The cash reserve ratio is the minimum percentage of deposits that the bank has to keep with the central bank of the country, here, the National Bank of Olympios. In other words, it is the portion of the deposit that banks cannot lend or invest and is stored in the form of reserves with the central bank.
Therefore, a decrease in the amount of cash held by the general public outside the banking system will reduce the deposit base of the bank. This implies that the bank can lend out a lower amount of deposits and hence the money multiplier will decrease, thus the broad money supply will reduce.
b) Comparison of expansionary monetary policy at present and three years prior
In the current time, the reduction in cash outside of banks may lead to a decrease in the money multiplier which may reduce the money supply. Therefore, expansionary monetary policy can help to increase the money supply. However, if interest rates are already low, expansionary monetary policy may be less effective as the economy may be at the zero lower bound.
In contrast, three years prior, the money multiplier was higher as the amount of cash held outside the banking system was higher. Hence, expansionary monetary policy at that time would have been more effective in stimulating the aggregate demand. However, the government needs to be careful about the inflationary effects of expansionary monetary policy in both the periods.
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A team of 3 software professionals with 15+ years experience in IT services in the domain of BFS (Banking and Financial Services) have decided to leave their corporate job and launch a FinTech startup in the Online Marketplace Lending space. With suitable assumptions clearly stated, a. Explain the functional workflow using a diagram for the online marketplace lending business. b. What are the top 3 technologies they should consider adopting and why? c. What are the 3 key challenges they should consider and recommend solutions to tackle those challenges?
a. Borrower Application is the starting point, then the system performs a comprehensive credit assessment, then loan applications are reviewed, approved, and priced accordingly. The approved loans are listed on an online platform, allowing investors to browse and select the loans they want to fund. Then the platform handles the ongoing loan servicing activities.
b. Online Platform Infrastructure, Data Analytics and Machine Learning, Application Programming Interfaces (APIs are the top 3 technologies to consider.
c. Key Challenges and Recommended Solutions are Regulatory Compliance, Risk Management, Customer Acquisition and Trust.
a. Functional Workflow Diagram for Online Marketplace Lending:+---------------------+
| Borrower Application |
+---------------------+
|
|
v
+-------------------------+
| Credit Assessment |
+-------------------------+
|
|
v
+---------------------------+
| Loan Approval and Pricing |
+---------------------------+
|
|
v
+----------------------------+
| Investor Platform |
+----------------------------+
|
|
v
+-----------------------+
| Loan Servicing |
+-----------------------+
Borrower Application: This is the starting point where borrowers apply for loans by providing their information and required documentation.
Credit Assessment: The system performs a comprehensive credit assessment to evaluate the borrower's creditworthiness and determine their risk profile.
Loan Approval and Pricing: Based on the credit assessment, loan applications are reviewed, approved, and priced accordingly. This step involves setting interest rates, loan terms, and any additional fees.
Investor Platform: The approved loans are listed on an online platform, allowing investors to browse and select the loans they want to fund. The platform facilitates the connection between borrowers and investors.
Loan Servicing: Once the loan is funded, the platform handles the ongoing loan servicing activities, including collecting borrower payments, managing repayments, and addressing any customer service inquiries.
b. Top 3 Technologies to Consider:Online Platform Infrastructure: Implement a robust and scalable online platform infrastructure using cloud computing services like AWS or Azure. This ensures reliability, flexibility, and efficient management of the lending operations.
Data Analytics and Machine Learning: Utilize data analytics and machine learning algorithms to assess creditworthiness, predict default risks, and automate decision-making processes. These technologies help enhance underwriting accuracy and improve overall loan portfolio performance.
Application Programming Interfaces (APIs): Integrate with external systems such as credit bureaus, bank accounts, and payment gateways using APIs. This enables seamless data exchange, identity verification, and secure transaction processing.
c. Key Challenges and Recommended Solutions:Regulatory Compliance: Online marketplace lending is subject to various financial regulations and compliance requirements. To tackle this challenge, the startup should invest in legal expertise, establish robust compliance processes, and regularly monitor and adapt to changes in regulations.
Risk Management: Mitigating credit risk and maintaining a healthy loan portfolio is crucial. The startup should implement advanced risk management practices, such as thorough credit assessments, diversification of loan portfolios, and continuous monitoring of borrower performance.
Customer Acquisition and Trust: Building trust and attracting borrowers and investors in a competitive market is essential. The startup should focus on building a user-friendly and secure platform, establishing strong partnerships with established financial institutions, and implementing effective marketing strategies to acquire and retain customers. Providing transparent and reliable services will help gain customer trust.
Note: The provided information is based on general industry knowledge and assumptions. It's important for the startup to conduct a detailed analysis and consult with professionals in the relevant fields to tailor the solutions and strategies to their specific needs and market conditions.
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1. One of the advantages of external recruitment
is:
a. employee morale and motivation are enhanced
b. the candidate already knows the organisation.
c. the organisation has more knowledge of the can
d. the organization gains fresh perspectives and new ideas. One of the advantages of external recruitment is that the organization gains fresh perspectives and new ideas.
When hiring externally, the organization brings in individuals who have not previously worked within the company. This can lead to a diverse range of experiences, backgrounds, and skill sets that can bring a fresh perspective to the organization. These new employees may bring innovative ideas, different approaches to problem-solving, and a broader range of knowledge and expertise from their previous roles or industries. This can contribute to increased creativity, improved decision-making, and the ability to adapt to changing market conditions. By introducing new talent and perspectives from outside the organization, external recruitment can foster growth, development, and competitiveness.
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Anthony and Aliyah are saving for their daughter Zahra's college education. Zahra just turned 10 (at t = 0), and she will be entering college 8 years from now (at t = 8). College tuition and expenses at State U. are currently $14,000 a year, but they are expected to increase at a rate of 4.5% a year. Zahra should graduate in 4 years--if she takes longer or wants to go to graduate school, she will be on her own. Tuition and other costs will be due at the beginning of each school year (at t = 8, 9, 10, and 11). So far, Anthony and Aliyah have accumulated $8,000 in their college savings account (at t = 0). Their long-run financial plan is to add an additional $4,000 in each of the next 4 years (at t = 1, 2, 3, and 4). Then they plan to make 3 equal annual contributions in each of the following years, t = 5, 6, and 7. They expect their investment account to earn 7%. How large must the annual payments at t = 5, 6, and 7 be to cover Zahra's anticipated college costs?
a. $10,626.29
b. $12,292.96
c. $12,400.04
d. $11,588.82
e. $13,153.47
To calculate the annual payments needed to cover Zahra's college costs, we can use the future value of an ordinary annuity formula:
FV = PMT * [(1 + r)^n - 1] / r
Where FV is the future value, PMT is the annual payment, r is the interest rate per period, and n is the number of periods. In this case, the future value (FV) is the total college costs over 4 years, which can be calculated using the future value of a growing annuity formula:
FV = A * [(1 + g)^n - 1] / (r - g)
Where A is the initial payment, g is the growth rate, and r is the interest rate.Let's calculate the future value of college costs first:
FV = $14,000 * [(1 + 0.045)^4 - 1] / (0.07 - 0.045)
FV ≈ $62,408.41
Now, let's calculate the annual payments needed to accumulate this future value:$62,408.41 = PMT * [(1 + 0.07)^3 - 1] / 0.07
Solving for PMT:
PMT ≈ $12,400.04
Therefore, the annual payments at t = 5, 6, and 7 must be approximately $12,400.04 to cover Zahra's anticipated college costs. The correct answer is c. $12,400.04.
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