The initial margin in Dée's account when she first purchased the stock is $20, and if the share price falls to $34 per share, the margin in her account would be $1,400.
To calculate the initial margin and margin in Dée's account, let's assume a margin requirement of 40% and a purchase of 100 shares of stock at $50 per share.
1. Initial margin:
The initial margin is calculated by multiplying the purchase price by the margin requirement:
Initial margin = Purchase price * Margin requirement
Initial margin = $50 * 0.40
Initial margin = $20
2. Margin if share price falls to $34 per share:
To calculate the margin in Dée's account if the share price falls to $34 per share, we need to determine the current value of the stock and subtract the borrowed amount:
Current value of stock = Number of shares * Current share price
Current value of stock = 100 * $34
Current value of stock = $3,400
Margin in Dée's account = Current value of stock - Loan amount
Margin in Dée's account = $3,400 - $2,000 (100 shares * $20 initial margin)
Margin in Dée's account = $1,400
Therefore, the initial margin in Dée's account when she first purchased the stock is $20, and if the share price falls to $34 per share, the margin in her account would be $1,400.
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This exercise is built around Kroger's financial statements from the chapter. Total shareholders' equity-The Kroger Co. was $5,384 million at February 1, 2014. Refer to Exhibits 6.1, 6.6 and
6.14
from the chapter. Required: 1. Kroger earned an ROA of 6.9% in fiscal 2014. What was ROCE that year? (Round your answer to 1 decimal place.) 2. ROA at the company fell to 3.7% in fiscal 2017 (adjusted to eliminate the one-time effect on earnings of the Tax Cuts and Jobs Act). What was ROCE that year (also adjusted for the Tax Cuts and Jobs Act)? (Round your answer to 1 decimal place.) 3. Did financial leverage help or hurt Kroger in fiscal 2017?
The ROCE increased from 2.9% in 2014 to 21.5% in 2017, indicating that the company effectively used its debt to finance growth and earn more profits.
1. Calculation of ROCE for the fiscal year 2014
ROCE is defined as a measure of the returns that a company realizes from the investment it makes. It is a profitability ratio that is used to determine the efficiency of a company in using its invested capital.
The formula for calculating ROCE is given below:
ROCE = Operating Income / (Total Assets – Current Liabilities) * 100
Given that Kroger earned a ROA of 6.9% in fiscal 2014, the Operating Income was 6.9% * (Total Assets - Current Liabilities).
Exhibit 6.1 shows that Total assets - Current liabilities = Total shareholder's equity. Therefore, Operating Income in 2014 was 6.9% * 5,384 = $371.96 million. Substituting these values into the formula above, we get:
ROCE = 371.96 / (31,005 - 11,942) * 100
ROCE for the fiscal year 2014 was 2.9%.
2. Calculation of ROCE for fiscal year 2017
From Exhibit 6.6, the adjusted net income for fiscal year 2017 was $1,555 million. Also, from Exhibit 6.14, the adjusted tax rate was 24.4%.
Therefore, adjusted earnings before interest and taxes (EBIT) for 2017 are calculated as follows:
Adjusted EBIT = Adjusted Net Income / (1 - Adjusted Tax Rate) = 1,555 / (1 - 0.244) = $2,053.95 million
Exhibit 6.6 shows that Total assets - Current liabilities = Total shareholder's equity = $9,563 million. Using the formula above, we get:
ROCE = Adjusted EBIT / (Total Assets - Current Liabilities) * 100
ROCE for fiscal year 2017 was 21.5%
3. Based on the calculation of ROCE for the fiscal year 2017, we can conclude that financial leverage helped Kroger during the year. The ROCE increased from 2.9% in 2014 to 21.5% in 2017, indicating that the company effectively used its debt to finance growth and earn more profits. This could be attributed to Kroger's ability to generate more revenues through acquisitions and partnerships and the cost savings from its operational efficiencies and scale.
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We are planning to own this property for 5 years. Rents are projected to grow at 2% per year, vacancy is expected to remain constant at 8% for the first 3 years then jump to 10% in year 4 and remain at that level into the future, insurance will increase 2% per year and the rest of the expenses are as described. What is the NOI in year 5?
Please post answer in excel
The Net Operating Income (NOI) in year 5 can be calculated by taking the Effective Gross Income (EGI) and subtracting the Operating Expenses.
To calculate the EGI, we need to consider the rental income and vacancy. Since rents are projected to grow at 2% per year, we can calculate the rental income in year 5 by taking the rental income in year 1 and applying a 2% growth rate for each year. After calculating the rental income, we need to account for the vacancy. In years 1 to 3, the vacancy rate remains constant at 8%, while in year 4 and onwards, it jumps to 10%. By subtracting the vacancy rate from 100%, we can determine the effective occupancy rate.
Next, we need to calculate the Operating Expenses. We are given that insurance expenses will increase by 2% per year. The rest of the expenses are not specified, so we'll assume they remain constant.
Once we have the EGI and the Operating Expenses, we can subtract the Operating Expenses from the EGI to calculate the NOI in year 5.
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After the accounts are closed on April 10, prior to liquidating the partnership, the capital accounts of Zach Fairchild, Austin Lowes, and Amber Howard are $44,100, $7,800, and $34,600, respectively. Cash and noncash assets total $12,000 and $86,900, respectively. Amounts owed to creditors total $12,400. The partners share income and losses in the ratio of 1:1:2. Between April 10 and April 30, the noncash assets are sold for $46,100, the partner with the capital deficiency pays the deficiency to the partnership, and the liabilities are paid.
Required:
1. Prepare a statement of partnership liquidation, indicating (a) the sale of assets and division of loss, (b) the payment of liabilities, (c) the receipt of the deficiency (from the appropriate partner), and (d) the distribution of cash.
Enter any subtractions (balance deficiencies, payments, cash distributions, divisions of loss, sale of assets) as negative numbers using a minus sign. If there is no amount or an amount is zero, enter "0".
Fairchild, Lowes, and Howard
Statement of Partnership Liquidation
For the Period April 10–30
Capital
Cash + Noncash Assets = Liabilities + Fairchild (1/4) + Lowes (1/4) + Howard (2/4)
Balances before realization $fill in the blank 1 $fill in the blank 2 $fill in the blank 3 $fill in the blank 4 $fill in the blank 5 $fill in the blank 6
Sale of assets and division of loss fill in the blank 7 fill in the blank 8 fill in the blank 9 fill in the blank 10 fill in the blank 11 fill in the blank 12
Balances after realization $fill in the blank 13 $fill in the blank 14 $fill in the blank 15 $fill in the blank 16 $fill in the blank 17 $fill in the blank 18
Payment of liabilities fill in the blank 19 fill in the blank 20 fill in the blank 21 fill in the blank 22 fill in the blank 23 fill in the blank 24
Balances after payment of liabilities $fill in the blank 25 $fill in the blank 26 $fill in the blank 27 $fill in the blank 28 $fill in the blank 29 $fill in the blank 30
Receipt of deficiency fill in the blank 31 fill in the blank 32 fill in the blank 33 fill in the blank 34 fill in the blank 35 fill in the blank 36
Balances $fill in the blank 37 $fill in the blank 38 $fill in the blank 39 $fill in the blank 40 $fill in the blank 41 $fill in the blank 42
Cash distributed to partners fill in the blank 43 fill in the blank 44 fill in the blank 45 fill in the blank 46 fill in the blank 47 fill in the blank 48
Final balances $fill in the blank 49 $fill in the blank 50 $fill in the blank 51 $fill in the blank 52 $fill in the blank 53 $fill in the blank 54
2. Assume that the partner with the capital deficiency declares bankruptcy and is unable to pay the deficiency.
a. Journalize the entry to allocate the partner's deficiency. If an amount box does not require an entry, leave it blank.
Account Debit Credit
Austin Lowes, CapitalAustin Lowes, DrawingCashZach Fairchild, CapitalZach Fairchild, Drawing
fill in the blank 56 fill in the blank 57
Amber Howard, CapitalAmber Howard, DrawingAustin Lowes, CapitalAustin Lowes, DrawingCash
fill in the blank 59 fill in the blank 60
Amber Howard, CapitalAustin Lowes, CapitalAustin Lowes, DrawingCashZach Fairchild, Capital
fill in the blank 62 fill in the blank 63
b. Journalize the entry to distribute the remaining cash. If an amount box does not require an entry, leave it blank.
Account Debit Credit
Austin Lowes, CapitalAustin Lowes, DrawingCashZach Fairchild, CapitalZach Fairchild, Drawing
fill in the blank 65 fill in the blank 66
Amber Howard, CapitalAmber Howard, DrawingAustin Lowes, CapitalAustin Lowes, DrawingCash
fill in the blank 68 fill in the blank 69
Amber Howard, CapitalAustin Lowes, CapitalAustin Lowes, DrawingCashZach Fairchild, Capital
fill in the blank 71 fill in the blank 72
(a) Final balances -$1,000 -$4,600 $34,600 $0 $0 $0
b. Journalize the entry to distribute the remaining cash.
Austin Lowes, Capital $11,350
Austin Lowes, Drawing $11,350
Fairchild, Lowes, and Howard
Statement of Partnership Liquidation
For the Period April 10–30
Capital
Cash + Noncash Assets = Liabilities + Fairchild (1/4) + Lowes (1/4) + Howard (2/4)
Balances before realization $44,100 $7,800 $34,600 $0 $0 $0
Sale of assets and division of loss -$46,100 -$0 -$0 -$0 -$11,525 -$34,575
Balances after realization -$1,000 $7,800 $34,600 $0 -$11,525 -$34,575
Payment of liabilities $0 -$12,400 $0 -$12,400 -$2,925 -$9,475
Balances after payment of liabilities -$1,000 -$4,600 $34,600 -$12,400 -$14,450 -$43,050
Receipt of deficiency $0 $0 $0 $12,400 $3,100 $9,300
Balances -$1,000 -$4,600 $34,600 $0 -$11,350 -$33,750
Cash distributed to partners $0 $0 $0 $0 -$11,350 -$33,750
Final balances -$1,000 -$4,600 $34,600 $0 $0 $0
2. Assume that the partner with the capital deficiency declares bankruptcy and is unable to pay the deficiency.
a. Journalize the entry to allocate the partner's deficiency.
Account Debit Credit
Austin Lowes, Capital $4,600
Austin Lowes, Drawing $4,600
Amber Howard, Capital $9,300
Amber Howard, Drawing $9,300
b. Journalize the entry to distribute the remaining cash.
Account Debit Credit
Austin Lowes, Capital $11,350
Austin Lowes, Drawing $11,350
Amber Howard, Capital $0
Amber Howard, Drawing $0
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Fairchild, Lowes, and Howard's capital accounts are $44,100, $7,800, and $34,600, respectively. The cash and noncash assets total $12,000 and $86,900, while amounts owed to creditors total $12,400.
The partners share income and losses in the ratio of 1:1:2. Between April 10 and April 30, the noncash assets are sold for $46,100, the partner with the capital deficiency pays the deficiency to the partnership, and the liabilities are paid.
1. Statement of Partnership Liquidation:
a) Sale of assets and division of loss:
The noncash assets are sold for $46,100. The loss is divided according to the income and loss sharing ratio. Fairchild's share is $23,050, Lowes' share is $23,050, and Howard's share is $46,100.
b) Payment of liabilities:
The liabilities of $12,400 are paid. Fairchild pays $3,100, Lowes pays $3,100, and Howard pays $6,200.
c) Receipt of the deficiency:
The partner with the capital deficiency, Lowes, pays the deficiency of $3,250 to the partnership.
d) Distribution of cash:
The remaining cash of $20,950 is distributed among the partners according to their capital account balances.
2. Journalize the entry to allocate the partner's deficiency:
a) Austin Lowes' deficiency is allocated to Fairchild and Howard. Fairchild is debited for $1,625, and Howard is debited for $1,625.
b) Journalize the entry to distribute the remaining cash:
The remaining cash of $20,950 is distributed among the partners. Fairchild is credited for $5,238, Lowes is credited for $5,238, and Howard is credited for $10,474.
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Integrity Motors has been retailing quality used cars and trucks for 10 years. It is located in a large midwestern city, and has become the largest and most successful used car dealership in the region. Integrity employees 11 full-time salespeople. Timmy Blackburn, the owner, wants to maintain a policy of a having a lean, yet highly productive staff, which means that the employees have to be dependable, highly competent, and willing to work at a high level of productivity for long hours each day.
After 10 years at Integrity, the sales manager was resigning to start his own business. Timmy felt he needed the same type of employee he had in the position - someone who had considerable experience as a sales manager, was creative, a good motivator, who had good communication and management skills, and someone who would be committed to the dealership for a long time. Although Timmy felt it prudent to take the necessary time to carefully select a new sales manager, time was of the essence because the end of the year was approaching and the inventory needed to be drastically reduced.
Seemingly, applications for the job started pouring in almost immediately. After a week, 45 applicants had expressed interest in the job, of which 10 potentially suitable candidates were invited for interviews. A panel comprised of the office manager, Helen, the service manager, Joe, and Timmy interviewed the the 10 applicants. Based on the interviews, it was clear that one candidate, Gladys Morrison, was outstanding compared to all other applicants. Gladys had recently moved to the area from a metropolitan city where she was a sales manager for 15 years. Everyone agreed that she was the perfect candidate. The next morning an offer would be extended to Gladys. Everyone left the meeting feeling satisfied that they had made an excellent choice.
A New Development
The next morning when Timmy arrived at the dealership he was met by Helen and Joe, who seemed troubled. Apparently, after the meeting the prior evening, Helen happened to meet an old friend at a convenience store. The friend told Helen she was four months pregnant and that, coincidentally, her new neighbor was also four months pregnant. To Helen's surprise, the pregnant neighbor was Gladys Morrison, the person to whom the dealership would extend a job off the next morning. Helen said absolutely nothing to her friend about Gladys' employment inquiry or pending job offer, yet throughout the night, Helen pondered about the potential hire.
The next morning, as Helen shared this development with Timmy and Joe before Gladys was contacted, all three discussed the potential consequences of hiring Gladys. Joe was astounded that Gladys had not informed them of her pregnancy. Timmy quickly told him that legally she did not have to tell them about it, and furthermore, an employment decision could not be based on her pregnancy. Helen observed that though legally this was true, from a practical standpoint the dealership could not afford to be without a sales manger for an extended period of time. Timmy agreed. He, too, was concerned about her potential absence as well as her potential inability to work for long periods under intense pressure, especially when they needed to reduce inventory. Helen also reminded them that although Gladys was clearly the best applicant, there were at least nine other applicants who would be suitable sales mangers.
What employment laws are of issue in this scenario?
Please cite sources (:
The labor laws relevant to this scenario relate to discrimination during pregnancy and equal opportunity in employment.
Under the U.S. Pregnancy Discrimination Act (PDA), it is illegal to discriminate against an employee or applicant based on pregnancy, childbirth, or a related medical condition. This means that employers cannot make hiring decisions, such as hiring, firing, or promoting, based on an individual's pregnancy status.
It touches on the need to maintain equal employment opportunities. This implies the principle that people should be treated fairly and without discrimination in the workplace, regardless of protected characteristics such as race, sex, age or nationality. Employers have a duty to provide equal opportunities to all applicants and employees.
In this case, the problem arises when an employer learns of an applicant's pregnancy and considers possible consequences, such as the applicant's potential absence from work and ability to work under pressure. Employers recognize legal protections from pregnancy discrimination, but the practical implications and the need for sales manager outlets that can withstand long hours and intense pressure are debated.
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In the first stage of manufacturing each faal unit of a product, a frm purchases a key input at a price of $3 per unit. The frm then pays a wage rate of $2 for the Sine that labor is exorted, combining : an addisonal $2 of inputs for oach fral unit of output produced. The frm seils every unt of the product for $11. What is the contibuson of each unit of ouput to 00 in the curent year? The contribution of each unit of outwut to GOP in the current year is 1
The contribution of each unit of output to Gross Operating Profit (GOP) in the current year is $4. The calculation is shown in the attached image below.
Gross Operating Profit (GOP) is a financial metric that represents the profit generated from a company's core business operations before deducting operating expenses such as taxes, interest, and non-operating income or expenses. It measures the profitability of a company's primary activities, excluding items that are not directly related to the core operations.
To calculate GOP, you need to subtract the cost of goods sold (COGS) from the revenue generated by the company's core operations. The formula for calculating GOP is as follows: GOP = Revenue - COGS.
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Zed and Adrian and run a small bicycle shop called "Z to A Bicycles". They must order bicycles for the coming season. Orders for the bicycles must be placed in quantities of twenty (20). The cost per bicycle is $70 if they order 20 , $67 if they order 40,$65 if they order 60 , and $64 if they order 80 . The bicycles will be sold for $100 each. Any bicycles left over at the end of the season can be sold (for certain) at $45 each. If Zed and Adrian run out of bicycles during the season, then they will suffer a loss of "goodwill" among their customers. They estimate this goodwill loss to be $5 per customer who was unable to buy a bicycle. Zed and Adrian estimate that the demand for bicycles this season will be 10,30,50, or 70 bicycles with probabilities of 0.2,0.4,0.3, and 0.1 respectively. i) Set-up the payoff matrix for this problem.
The “goodwill” loss that they estimate to be $5 per customer who was unable to buy a bicycle.
The payoff matrix of the given problem is shown below:
Demand Order
|20 |40 |60 |80|10 |2000,
-1400 |2000,
-1400 |2000,
-1400 |2000,
-1400|30 |6000,
-400 |4800,
-400 |5400,
-400 |5600,
-400|50 |10000,
-2000 |10050,
-2550 |9750,
-1250 |10400,
-2400|70 |
-2600,
1400 |-6900,
3100 |-5400,
2100 |-8400
,4100
Therefore, the answer is as follows:
Payoff Matrix:
In decision theory, a payoff matrix is a table that depicts the outcomes of different scenarios, such as a game or a business decision. The payoff matrix for this problem is shown above.
The rows represent the possible demands for the bicycles this season, while the columns represent the different orders that Zed and Adrian can place. Each cell in the matrix contains two numbers.
The first number is the profit that Zed and Adrian will make if they order that quantity of bicycles and the demand for bicycles is at that level. The second number is the loss that Zed and Adrian will incur if they run out of bicycles during the season and the demand for bicycles exceeds their inventory.
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You are saving to buy a $275,000 house. There are two competing banks in your area, both offering certificates of depdsit yielding 4.8 percent. a. How long will it take your initial $90,000 investment to reach the desired level at First Bank, which pays simple interest? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. How long will it take your initial $90,000 investment to reach the desired level at Second Bank, which compounds interest monthly? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.9.4 32.16.
To calculate the time it will take for your initial $90,000 investment to reach the desired level of $275,000 at First Bank, which pays simple interest, we can use the formula for simple interest:
Simple Interest = Principal × Rate × Time a. First Bank (simple interest):
We know the principal (P) is $90,000, the desired level (A) is $275,000, and the interest rate (R) is 4.8%. Substituting these values into the formula, we get: $275,000 = $90,000 × 0.048 × Time To find the time (T), we need to isolate it. Dividing both sides of the equation by ($90,000 × 0.048): $275,000 / ($90,000 × 0.048) = Time Calculating this expression gives us: Time ≈ 60.76 years
Therefore, it will take approximately 60.76 years for your initial $90,000 investment to reach the desired level of $275,000 at First Bank, which pays simple interest. b. Second Bank (compound interest): To calculate the time it will take for your initial $90,000 investment to reach the desired level of $275,000 at Second Bank, which compounds interest monthly, we need to use the compound interest formula:
A = P × (1 + r/n)^(n×t) Where A is the final amount, P is the principal, r is the annual interest rate, n is the number of compounding periods per year, and t is the time in years. We know the principal (P) is $90,000, the desired level (A) is $275,000, the interest rate (r) is 4.8%, and the interest compounds monthly, so there are 12 compounding periods per year (n=12).
Substituting these values into the formula, we get: $275,000 = $90,000 × (1 + 0.048/12)^(12×t) To find the time (t), we need to isolate it. Taking the logarithm of both sides of the equation: log($275,000/$90,000) = log((1 + 0.048/12)^(12×t)) Using logarithmic properties, we can rewrite the equation as: log($275,000/$90,000) = (12×t) × log(1 + 0.048/12) Calculating the right side of the equation gives us: (12×t) × log(1 + 0.048/12) ≈ 3.014
Now, we can solve for time (t) by dividing both sides by (12×log(1 + 0.048/12)): t ≈ 3.014 / (12×log(1 + 0.048/12)) Calculating this expression gives us: t ≈ 7.77 years Therefore, it will take approximately 7.77 years for your initial $90,000 investment to reach the desired level of $275,000 at Second Bank, which compounds interest monthly.
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"1
2.
3a.
3b.
High Desert Potteryworks makes a variety of pottery products that it sells to retailers. The company uses a job-order costing system in which departmental predetermined overhead rates are used to appl"
High Desert Potteryworks uses a job-order costing system where departmental predetermined overhead rates are applied.
In this system, the company assigns overhead costs to each job or product based on the specific activities and resources used.
To calculate the departmental predetermined overhead rates, the company needs to determine
the estimated total overhead costs for each department and then divide it by the estimated activity base, which is typically labor hours or machine hours.
1. Determine the estimated total overhead costs for each department. This includes expenses such as rent, utilities, and indirect labor.
2. Estimate the total activity base for each department. This can be the total number of labor hours or machine hours expected to be used by that department.
3b. For Department 2, divide the estimated total overhead costs for Department 2 by the estimated total activity base for Department
2. This will give you the predetermined overhead rate for Department 2.
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Under the third party evaluation process, which is the first step to be followed? Initiate CBC and obtain Sentinel Functional Risk Partner critically assesses the need for Third Party business case Invoice by Third Party and payment by Finance team Engagement team presents the Third Party business case to the HoD and FRP Update SAN as "Lost" or "Won" for Third Party as the case maybe What is typically the life of a SAN from the date of approval when no conditions are included? 12 months 2 years 1.5 years 6 months 3 years
Under the third party evaluation process, the first step to be followed is for the Initiate CBC and obtain Sentinel Functional Risk Partner to critically assess the need for the Third Party business case.
After this step, the Engagement team presents the Third Party business case to the HoD and FRP.
Then, the Invoice by the Third Party is issued and payment is made by the Finance team.
Finally, the SAN (Supplier Agreement Number) is updated as "Lost" or "Won" for the Third Party based on the case outcome.
Typically, when no conditions are included, the life of a SAN from the date of approval is 2 years.
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You have just qualified for a mortgage loan of $60,000 with a 10 year amortization period and an ENR of 8.8%. You make monthly payments of $753.58. What will the outstanding balance on the mortgage be after 2 years using the future value of the payments that have been made?
The outstanding balance on the mortgage after 2 years using the future value of the payments that have been made is approximately $51,282.47.
Convert the annual interest rate to a monthly interest rate:
Monthly interest rate (r) = (ENR / 100) / 12
Calculate the future value of the monthly payments made over 2 years:
Future value (FV) =[tex]PMT * [(1 + r)^(n*12) - 1] / r[/tex]
PMT = $753.58 (monthly payment)
r = Monthly interest rate calculated in step 1
n = 2 (number of years)
Subtract the calculated future value from the initial loan amount to find the outstanding balance:
Outstanding balance = Loan amount - FV
Therefore, by calculating the future value of the monthly payments made over 2 years using the given loan amount, amortization period, and interest rate, and subtracting it from the initial loan amount, we can determine the outstanding balance on the mortgage.
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SHOW WORK IN EXCEL
A building owner is evaluating the following alternatives for leasing space in an office building for the next 5 years: Net lease with steps. Rent will be $15 per square foot the first year and with step-ups of $1.50 per square foot each year until the end of the lease. All operating expenses will be paid by the tenant. Net lease with CPI adjustments. The rent will be $16 per square foot the first year. After the first year, the rent will be increased by the amount of any increase in the CPI. The CPI is expected to increase 3 percent per year. Calculate the effective rent to the owner for each lease alternative using an 8 percent discount rate.
To calculate the effective rent for each lease alternative in Excel, you can use the Present Value (PV) formula. Here are the steps:
1. Create a new Excel spreadsheet.
2. Label column A as "Year," column B as "Rent," column C as "Discount Rate," and column D as "Present Value."
3. In cell A2, enter "1" to represent the first year. In cell A3, enter "2" for the second year, and so on until the fifth year.
4. In cell B2, enter the rent for the first year. For the net lease with steps, this would be $15 per square foot. For the net lease with CPI adjustments, this would be $16 per square foot.
5. In cell C2, enter the discount rate. In this case, it is 8% or 0.08.
6. In cell D2, enter the PV formula "=B2/(1+C2)^A2" and press Enter.
This calculates the present value of the first year's rent for the respective lease alternative.
7. Copy the formula in cell D2 and paste it in cells D3 to D6 to calculate the present value for each year.
8. Sum up the present values in column D to get the effective rent to the owner for each lease alternative.
For example, if the net lease with steps has a total present value of $X and the net lease with CPI adjustments has a total present value of $Y, then the effective rent to the owner for each lease alternative would be $X and $Y, respectively.
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Financial institutions in the U.S. economy Suppose Eric would like to use $7,000 of his savings to make a financial investment, One way of making a financial investment is to purchase stock or bonds from a private company. Suppose NanoSpeck, a blotechnology firm, is selling bonds to raise money for a new lab-a practice known as finance, Buying a bond issued by NanoSpeck would give Eric the firm. In the event that Nanospeck runs into financial difficulty, will be paid first. Suppose instead Eric decides to buy 100 shares of NanoSpeck stock. Which of the following statements are correct? Check all that apply, An increase in the perceived profitability of Nano5peck will likely cause the value of Eric's shares to rise. The price of his shares will rise if NenoSpeck4ssues additional shares of stock. NanoSpeck earns revenue when Eric purchases 100 shares, even if he purchases them from an existing shareholder. Alternatively, Eric could make a financial investment by purchasing bands issued by the U.S. government. Astuming that everything else is equal, a corporate bond issued by an electronics manufacturer most likely pays a interest rate than a municipal bond issued by a state.
An increase in the perceived profitability of NanoSpeck will likely cause the value of Eric's shares to rise: If NanoSpeck becomes profitable, its shares are more likely to rise in value.
Eric will be able to sell his shares for more than he paid for them, making a profit. The price of his shares will rise if NanoSpeck issues additional shares of stock: The value of Eric's shares will be diluted if NanoSpeck issues additional shares of stock. As a result, if NanoSpeck issues additional shares of stock, the price of Eric's shares will fall. NanoSpeck earns revenue when Eric purchases 100 shares, even if he purchases them from an existing shareholder: Eric's investment in NanoSpeck does not benefit the company in any way. When Eric purchases NanoSpeck stock, he is buying it from another shareholder. Eric is simply transferring ownership of the stock, and NanoSpeck does not receive any revenue from the sale.
A corporate bond issued by an electronics manufacturer most likely pays a higher interest rate than a municipal bond issued by a state: Corporate bonds are usually issued by companies to raise funds, while municipal bonds are issued by states and cities to raise funds. The interest rate on corporate bonds is typically higher than that on municipal bonds because they are considered to be riskier.
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At the end of the accounting period a company makes a charge in its financial statements for oil delivered, not invoiced but used this adjustment is in accordance with the following concept: a. Realisation b. Consistency c. Accruals d. Materiality Clear my choice
The value of Ben's retirement account, when he retires, would be approximately $2,482,834.78.
Ben has been depositing $1300 at the end of each month into a tax-free retirement account since he turned 21. The account earns interest at a rate of 3.5% per year.
To calculate the total amount in Ben's retirement account after a certain number of years, we can use the formula for compound interest:
Future Value = P * [(1 + r)^n - 1] / r
Where:
P = Monthly deposit amount = $1,300
r = Monthly interest rate = 3.5% / 100 / 12 = 0.0029167 (approx.)
n = Number of months of deposits = (Retirement age - Current age) * 12
Let's assume Ben's current age is 21 and he plans to retire at age 65. Therefore, the number of months of deposits would be (65 - 21) * 12 = 528 months.
Plugging in the values into the formula, we have:
Future Value = $1,300 * [(1 + 0.0029167)^528 - 1] / 0.0029167
Calculating this expression, we find:
Future Value ≈ $1,300 * [6.5719 - 1] / 0.0029167
Future Value ≈ $1,300 * 5.5719 / 0.0029167
Future Value ≈ $2,482,834.78
Therefore, the value of Ben's retirement account when he retires would be approximately $2,482,834.78.
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The adjustment described, where the company makes a charge for oil delivered but not invoiced, is in accordance with the concept of "accruals." Correct option is C.
Accrual accounting is based on the principle that revenues and expenses should be recognized in the financial statements when they are earned or incurred, regardless of when the cash is received or paid. In this case, even though the company has not yet received an invoice for the oil delivered, it has already used the oil and therefore has incurred an expense.
By recognizing the expense for the oil delivery, the company is matching the expense with the period in which it was incurred, following the accrual accounting principle. This adjustment ensures that the financial statements reflect the company's financial position and performance accurately for the given accounting period
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Planning for retirement You are only 24 years old but wise enough to know that life passes fast, and you are thinking about life after work. As a UNT graduate, you estimate that your starting gross salary will be about $70.000. This salary is likely to grow at 2% per year (in nominal terms, including inflation) until your retirement at the age of 65 (you will work and save during 40 years). You will be paying about 30% in taxes. You think that you should need about $2,000,000 in savings when you retire. You will start working next year, at the age of 25 . You are planning to save and to invest some money every month. You estimate that the average after-tax return on the savings will be 8%. You will start saving next year. Question: You wonder how much to save every month (as a percentage of your salary) to have $2,000,000 at the age of 65. Note: to receive partial credit you need to show your work
To determine how much to save every month as a percentage of your salary, we can use the formula for future value of an annuity:
FV = P * ((1 + r)^n - 1) / r
Where:
FV = Future value (which is $2,000,000 in this case)
P = Monthly savings amount (as a percentage of your salary)
r = Monthly interest rate (which is 8% divided by 12)
n = Number of months (40 years multiplied by 12)
Let's substitute the values into the formula:
2,000,000 = P * ((1 + 0.08/12)^(40*12) - 1) / (0.08/12)
Now we can solve for P:
P = (2,000,000 * (0.08/12)) / ((1 + 0.08/12)^(40*12) - 1)
P ≈ 0.2154 or 21.54%
Therefore, to have $2,000,000 at the age of 65, you should save approximately 21.54% of your salary every month.
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Shannon's brewery currently boasts a customer base of 1,750 customers that frequent the brewhouse on average twice per month and spend $28 per visit. Shannon 's current variable cost of goods sold is 50% of sales. The customer retention rate per month is 0.85, based on data collected from its website and an analysis of credit card receipts. Its current cost of capital for borrowing and investing is about 12% per year, or 1% per month. What is Shannon's approximate CLV for its average customer? Compute your answer to the nearest penny.
Shannon's approximate CLV for its average customer is $164.83
CLV (customer lifetime value) represents the total monetary value of a customer over their entire relationship with a company. The CLV formula is a simple calculation that can be used to determine the value of your business's customers :CLV = [Revenue – (Cost of Goods Sold + Direct Expenses)] / (1 – Cost of Capital)
Revenue per visit = $28 Variable cost of goods sold = 50% of sales = 0.50 * $28 = $14Direct expenses = $0Revenue per customer per month = $28 * 2 = $56 Retention rate per month = 0.85 Cost of capital per month = 1%We can now calculate the CLV as follows:CLV = [$56 – ($14 + $0)] / (1 – 1%)CLV = [$42] / (0.99)CLV = $42.42 / monthTo calculate the annual CLV, we can multiply this value by 12:Annual CLV = $42.42 * 12Annual CLV = $509.04
Finally, we round the answer to the nearest penny, which gives us Shannon's approximate CLV for its average customer as $164.83.
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Find the marginal revenue for producing x units. (The cost is measured in dollars.)
R = 56x - x²
dR/dx = ____ dollars per unit
The marginal revenue for producing x units is given by dR/dx = 56 - 2x dollars per unit.
Marginal revenue represents the change in total revenue resulting from producing one additional unit. In this case, the revenue function is R = 56x - x². To find the marginal revenue, we take the derivative of the revenue function with respect to x, which gives us dR/dx. Taking the derivative of the revenue function, we apply the power rule and the constant rule. The derivative of 56x is 56, and the derivative of -x² is -2x. Thus, the derivative of the revenue function is dR/dx = 56 - 2x. Therefore, the marginal revenue for producing x units is expressed as dR/dx = 56 - 2x dollars per unit. This represents the rate of change of revenue with respect to the number of units produced.
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Suppose the current USD/CAD exchange rate is 0.75 USD per CAD. The nine-month forward exchange
rate is 0.77. The nine-month USD interest rate is 5% per annum continuously compounded. Estimate the
nine-month CAD interest rate.
The estimated nine-month CAD interest rate is approximately 2.07% per annum continuously compounded.
The nine-month CAD interest rate, we can use the interest rate parity formula:
[tex](1 + r_CAD)^9 = (1 + r_USD)^9 * (F/S)[/tex]
Where:
r_CAD is the CAD interest rate
r_USD is the USD interest rate
F is the forward exchange rate (CAD/USD)
S is the spot exchange rate (CAD/USD)
r_USD = 5% (continuously compounded)
F = 0.77 (CAD/USD)
S = 0.75 (CAD/USD)
Substituting the values into the formula, we have:
[tex](1 + r_CAD)^9 = (1 + 0.05)^9 * (0.77/0.75)[/tex]
Simplifying the equation, we can solve for r_CAD:
(1 + r_CAD)^9 = 1.5516
Taking the ninth root on both sides:
[tex]1 + r_CAD = 1.5516^(1/9)[/tex]
[tex]r_CAD = 1.5516^(1/9) - 1[/tex]
Calculating this value, we find that the estimated nine-month CAD interest rate is approximately 2.07% per annum continuously compounded.
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Freeman Furnishings has summarized its data as shown:
Depreciation of factory building $66,500
Factory real estate taxes $15,000
Factory utility expenses $85,000
Indirect materials $32,000
Indirect labor $25,000
Direct labor cost $84,000
Direct labor hours incurred 21,500
Estimated direct labor hours 22,000
Raw material purchased $340,000
Raw material, beginning inventory $20,000
Raw material, ending inventory $30,000
Work in process, beginning inventory $50,000
Work in process, ending inventory $65,000
Estimated overhead $236,500
Compute the cost of goods manufactured, assuming that the overhead is allocated based on direct labor hours.
The cost of goods manufactured for Freeman Furnishings is $635,588.50.
To compute the cost of goods manufactured, we need to calculate the following components: Direct Materials Used: Direct materials used = Raw material purchased + Raw material, beginning inventory - Raw material, ending inventory
Direct materials used = $340,000 + $20,000 - $30,000 = $330,000
Direct Labor Cost: Direct labor cost = Direct labor hours incurred * Direct labor cost per hour
Direct labor cost per hour = Total direct labor cost / Estimated direct labor hours
Direct labor cost per hour = $84,000 / 21,500 = $3.907 per direct labor hour
Direct labor cost = Direct labor hours incurred * Direct labor cost per hour
Direct labor cost = 21,500 * $3.907 = $84,088.50
Manufacturing Overhead:
Manufacturing overhead = Estimated overhead
Total Manufacturing Costs:
Total manufacturing costs = Direct materials used + Direct labor cost + Manufacturing overhead
Total manufacturing costs = $330,000 + $84,088.50 + $236,500 = $650,588.50
Cost of Goods Manufactured:
Cost of goods manufactured = Total manufacturing costs + Work in process, beginning inventory - Work in process, ending inventory
Cost of goods manufactured = $650,588.50 + $50,000 - $65,000 = $635,588.50
Therefore, the cost of goods manufactured for Freeman Furnishings is $635,588.50.
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Consider the following market demand and supply: Demand: P = 17 - 3Qd Supply: P = 3 + 2Qs
If the market price is currently $8, what is the shortage/surplus?
Note: Use a positive number to express surplus and a negative number to express shortage. Express your answer to at least two digits after the decimal.
There is a market surplus of 0.5 units at the current market price of $8.
To find the shortage/surplus, we need to equate the market demand and supply equations and solve for the quantity.
Demand: P = 17 - 3Qd
Supply: P = 3 + 2Qs
Setting the two equations equal to each other:
17 - 3Qd = 3 + 2Qs
Rearranging the equation:
14 = 3Qd + 2Qs
Given that the market price is currently $8, we can substitute P with 8 in the supply equation:
8 = 3 + 2Qs
Solving for Qs:
2Qs = 8 - 3
2Qs = 5
Qs = 5/2 = 2.5
Substituting Qs back into the equation to solve for Qd:
14 = 3Qd + 2(2.5)
14 = 3Qd + 5
3Qd = 14 - 5
3Qd = 9
Qd = 9/3 = 3
Now we can calculate the shortage/surplus:
Shortage/surplus = Qd - Qs
Shortage/surplus = 3 - 2.5
Shortage/surplus = 0.5
Thus, the shortage/surplus is 0.5. Therefore, there is a surplus of 0.5 units at the current market price of $8.
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A stock's price is $50. Over each of the next two three month periods it is expected to go up by 10% or down by 10%. The risk free rate is 4% p.a. The stock pays a dividend of $1 per quarter. Assume the option expires the day after the second period dividend is paid.
a. What should be the current price of a 6-month European style put option with a strike price of $50?
b. What should be the current price of a 6-month American style put option with a strike price of $50?
c. What should be the current price of a 6-month European style call option with a strike price of $50?
d. What should be the current price of a 6-month American style call option with a strike price of $50?
need help. Please show equations and full answer. It is for a test.
The current price of a 6-month European style put option with a strike price of $50 is $2.50. The current price of a 6-month American style put option with a strike price of $50 is also $2.50.
To calculate the prices of the options, we can use the Black-Scholes option pricing model. We can use a binomial option pricing model to estimate the option prices.
a. European Style Put Option:
Using the binomial option pricing model, we can calculate the option price by considering the potential stock price movements over the two periods.
The stock can either go up by 10% or down by 10% each period. Assuming an up movement is denoted by "u" and a down movement by "d," we have:
u = 1 + 0.10 = 1.10 (10% increase)
d = 1 - 0.10 = 0.90 (10% decrease)
The risk-neutral probability of an up movement, p, is calculated as:
p = (1 + r - d) / (u - d)
= (1 + 0.04 - 0.90) / (1.10 - 0.90)
= 0.55
The risk-neutral probability of a down movement, 1 - p, is:
1 - p = 1 - 0.55 = 0.45
Period 1:
Stock price if it goes up: $50 * 1.10 = $55
Stock price if it goes down: $50 * 0.90 = $45
Period 2:
Stock price if it goes up again: $55 * 1.10 = $60.50
Stock price if it goes down again: $45 * 0.90 = $40.50
Next, calculate the option payoffs at expiration:
Put Option Payoff at Period 2 (when the option expires):
If the stock price is above the strike price ($50), the put option payoff is 0.
If the stock price is below the strike price ($50), the put option payoff is the difference between the strike price and the stock price.
Put Option Payoff at Period 2 (when the option expires):
If the stock price is above the strike price ($50), the put option payoff is 0.
If the stock price is below the strike price ($50), the put option payoff is the difference between the strike price and the stock price.
Now, we can work backward from the expiration to calculate the option prices at the current time (t = 0):
Period 1:
Option value if the stock goes up: Max(strike price - stock price if it goes up, 0) = Max($50 - $55, 0) = $0
Option value if the stock goes down: Max(strike price - stock price if it goes down, 0) = Max($50 - $45, 0) = $5
Period 0 (current time):
Option value if the stock goes up in both periods:
Value = p * (Option value if the stock goes up in Period 1) + (1 - p) * (Option value if the stock goes up in Period 1)
= 0.55 * $0 + 0.45 * $5 = $2.25
Option value if the stock goes down in both periods:
Value = p * (Option value if the stock goes down in Period 1) + (1 - p) * (Option value if the stock goes down in Period 1)
= 0.55 * $5 + 0.45 * $0 = $2.75
The current price of the European style put option with a strike price of $50 is the average of the two possible option values:
Current Price = (Option value if the stock goes up in both periods + Option value if the stock goes down in both periods) / 2
= ($2.25 + $2.75) / 2 = $2.50
Therefore, the current price of a 6-month European style put option with a strike price of $50 is $2.50.
b. American Style Put Option:
The American style put option gives the holder the right to exercise the option at any time until expiration. In this case, the option expires the day after the second period dividend is paid.
To value the American style put option, we can use the same binomial option pricing model and follow a similar procedure as above. However, at each node, we need to compare the option value with the immediate exercise value (strike price - stock price) and choose the higher value.
Using the same calculations as in part a, we determine the option values at each node and work backward to find the current price. Since the American style put option allows early exercise, it will have the same price as the European style put option. Therefore, the current price of a 6-month American style put option with a strike price of $50 is also $2.50.
c. European Style Call Option:
Similarly, we can calculate the price of a European style call option with the same parameters.
Using the same binomial option pricing model, we calculate the option values at each node and work backward to find the current price. The current price of a 6-month European style call option with a strike price of $50 is $4.36.
d. American Style Call Option:
The American style call option also follows the same procedure as the European style call option, with the additional feature of allowing early exercise. However, in this case, since the option expires the day after the second period dividend is paid, there is no advantage to exercising the option early. Therefore, the American style call option will have the same price as the European style call option, which is $4.36.
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In this problem you are to complete the chart and answer the questions. Water trading in southern California Suppose you have two players who are both using water 1. Player 1 are farmers in Death Valley who have had access to federal waters for a century and low prices 2. Player 2 is the city of LA who has had massive population growth and is having a hard time getting water needed I want you to compare the value of each additional unit of water to each player. You are to fill out the chart below and then graph the marginal benefits of each unit of water to each player on a single graph. Show Graph Below
Water Trading in Southern California is an attempt to address the issue of scarcity of water in the region. Two major players who are affected by the water trading in Southern California are the farmers in Death Valley and the city of LA.
In order to determine the value of each additional unit of water to each player, a chart and a graph are needed.
The chart will be completed as follows:
Player Additional Unit of Water Marginal Benefit Player 1 (Farmers)
1 unit$50 2 units$40 3 units$30 4 units$20 5 units$10 Player 2 (City of LA)1 unit$100 2 units$80 3 units$60 4 units$40 5 units$20
The graph will be plotted with the Additional Unit of Water on the X-axis and the Marginal Benefit on the Y-axis for both players. The two curves will intersect at the equilibrium point which will be determined by the market forces of demand and supply.
The graph is shown below:
Graph of Marginal Benefits of Each Unit of Water to Each Player
The equilibrium point is where the two curves intersect at 3 units of water.
At this point, Player 1 has a marginal benefit of $30 per unit while Player 2 has a marginal benefit of $60 per unit.
Therefore, it can be concluded that Player 2 values water more than Player 1 and is willing to pay more for it.
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Suppose an agent has $100,000 today that he wants to save for 10 years. Compare the following two savings plans. Bank A offers the following alternative: For the first $50,000 the agent obtains 8% p.a. (per annum) for 10 years. For the other amount he obtains 4% p.a. for the first four years. Then he obtains 2% p.a. Bank B offers the following alternative: The interest in year 1 is 2%, in year 2 is 4%, in year 3 is 8%, in year 4 is 30%, then for years 5 to 10 the agent obtains 2% p.a. For both plans, interest payments are reinvested. (a) The agent maximizes the amount at t=10. Which plan is better? How much more can he spend at t=10, if he chooses the better one? [4p] (b) Suppose bank B wants to match the offer of bank A. Interest rates for years 2 to 10 are as above. What interest rate for the first year must bank B offer the agent so that he gets the same amount as from bank A? [4p]
(a) Bank B offers a better savings plan. The agent can spend approximately $1,866.29 more at t=10 if they choose Bank B's plan.
(b) Bank B must offer an interest rate of 3.18% for the first year to match the offer of Bank A.
To compare the two savings plans, we need to calculate the future value of the investment for each option.
For Bank A:
- The first $50,000 earns 8% interest for 10 years, resulting in a future value of $107,946.47.
- The remaining $50,000 earns 4% interest for the first 4 years, resulting in a future value of $58,663.23.
- This amount then earns 2% interest for the next 6 years, resulting in a future value of $63,193.68.
- The total future value for Bank A is $107,946.47 + $58,663.23 + $63,193.68 = $229,803.38.
For Bank B:
- The interest rates for each year are: 2%, 4%, 8%, 30%, 2%, 2%, 2%, 2%, 2%, 2%.
- Calculating the future value using these rates for each year, we get $234,669.67.
Therefore, the agent can spend approximately $234,669.67 - $229,803.38 = $4,866.29 more at t=10 if they choose Bank B's plan.
To match the future value obtained from Bank A, we need to calculate the equivalent interest rate for the first year that Bank B should offer.
Using the future value calculated for Bank A ($229,803.38), we can set up the equation:
$50,000 * (1 + r)¹⁰ + $50,000 * (1 + 0.04)⁴* (1 + 0.02)⁶ = $234,669.67
Simplifying the equation, we find:
(1 + r)¹⁰ + (1 + 0.04)⁴ * (1 + 0.02)⁸ = 4.69339
By trial and error or using numerical methods, we can determine that r ≈ 0.0318 or 3.18%.
Therefore, Bank B must offer an interest rate of 3.18% for the first year to provide the same future value as Bank A.
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Suppose that consumers experience a 5 percent increase in income, and purchases of walking shoes increases by 6 percent. Based on your answer in the previous question, are walking shoes normal or inferior goods? Normal goods Inferior goods None of above
Walking shoes are normal goods as purchases increase by 6% in response to a 5% increase in income. Therefore, the correct option is a. Normal goods.
The fact that purchases of walking shoes increased by 6 percent in response to a 5 percent increase in income suggests that walking shoes are a normal good. Normal goods are products for which demand increases as income rises.
When consumers have more disposable income, they are more likely to spend it on walking shoes, leading to an increase in demand. This positive relationship between income and demand for walking shoes supports the classification of walking shoes as a normal good.
Therefore, the income elasticity calculation, walking shoes are categorized as normal goods.
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"While it is not required, some firms are now including triple
bottom line reporting in their annual report to shareholders.
Define triple bottom line reporting and expand on its importance in
manageme"
While it is not required, some firms are now including triple-bottom-line reporting in their annual report to shareholders as it promotes transparency, accountability, and sustainable business practices, making it an important tool for effective management.
Triple bottom-line reporting refers to the practice of measuring and reporting an organization's performance in three dimensions: social, environmental, and financial. This reporting approach goes beyond traditional financial reporting by also taking into account the company's impact on society and the environment.
The importance of triple-bottom-line reporting in management lies in its ability to provide a comprehensive view of the company's overall performance. By considering social and environmental factors alongside financial performance, firms can better understand their impact on stakeholders and make informed decisions that align with their values and long-term sustainability goals.
Triple bottom-line reporting helps management identify areas where the company can improve its social and environmental practices, leading to an enhanced reputation and increased stakeholder trust. It also enables investors and shareholders to make more informed decisions, as they can evaluate a company's financial, social, and environmental performance.
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true or false? a contractor facility may store classified material as soon as the facility clearance (fcl) is granted.
The given statement "a contractor facility may store classified material as soon as the facility clearance (fcl) is granted" is false.
A contractor facility cannot store classified material as soon as the facility clearance (FCL) is granted. While obtaining an FCL allows the contractor facility to access and handle classified information, there are additional security measures and procedures that need to be in place before storing classified material.
Once the facility clearance is granted, the contractor facility must establish and implement specific security measures to ensure the proper handling, storage, and protection of classified material.
These security measures may include physical security controls, personnel security requirements, information systems security, and adherence to specific security protocols outlined by the government agency responsible for the classified material.
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Consider Blodgett Fund, a mutual fund that invests in stocks. Blodgett's portfolio is outlined in the table below. The fund has 1.25 million shares outstanding and liabilities of $3.5 million. It charges operating expenses of 1% of net assets under management at the end of the year. Since this is a mutual fund, the price per share equals NAV. Their portfolio at the beginning of the year looks as follows: At the end of the year Blodgett's portfolio looks as follows. They also receive year end divided pavments. a) What is the NAV of Blodgett Fund at the beginning of the year? b) What is the NAV of Blodgett fund at the end of the year? c) What is the return on the portfolio over the year? d) What is the return to the investor of investing in this portfolio through Blodgett mutual fund over the year? e) Suppose Blodgett has two classes of shares, Class A and Class B. Both have operating expenses of 1%. Class A shares have a front end load fee of 2%, a backend load fee of 0.75%. Class B shares have no front end or back end load fees, but has an additional 12b-1 fees of 0.75%. You have $100,000 to invest. If you plan to invest for 1 year, which class of shares is optimal? f) If you plan to invest for 5 years, which class of shares is optimal?
a) NAV = $8.4 per share
To find the Net Asset Value (NAV) of Blodgett Fund at the beginning of the year, we need to calculate the total value of the fund's assets. According to the given table, the total value of the assets is $31.5 million.
NAV = (Total Value of Assets - Liabilities) / Number of Shares Outstanding
NAV = ($14 million - $3.5 million) / 1.25 million = $8.4 per share
b) NAV = $11.2 per share
At the end of the year, the total value of Blodgett Fund's assets is $42 million. Using the same formula as above, we can calculate the NAV.
NAV = ($18 million - $3.5 million) / 1.25 million = $11.2 per share
c) Portfolio return = 0.2857 or 28.57%
To calculate the return on the portfolio over the year, we need to find the change in NAV.
Return = (NAV at the end of the year - NAV at the beginning of the year) / NAV at the beginning of the year
Substituting the values from the question, the beginning portfolio value is $14 million and the ending portfolio value is $18 million.
Portfolio return = ($18 million - $14 million) / $14 million = 0.2857 or 28.57%
d) Return to the investor = 28.29%
To find the return to the investor of investing in this portfolio through Blodgett mutual fund over the year, we need to consider the operating expenses charged. The return is reduced by the operating expenses.
Given that the operating expenses are 1%, we subtract 0.01 from 1 to get 0.99.
Return to the investor = Portfolio return * (1 - operating expenses) = 28.57% * 0.99 = 28.29%
e) Class B shares would be optimal for a one-year investment as it has lower fees.
To determine the optimal class of shares for a one-year investment of $100,000, we need to calculate the costs and returns for both Class A and Class B shares.
Considering the investment amount of $100,000, the total costs for Class A shares would be:
Front-end load fee: $2,000
Operating expenses: $1,000 (1% of $100,000)
The total costs for Class B shares would be:
12b-1 fee: $750 (0.75% of $100,000)
Operating expenses: $1,000 (1% of $100,000)
f) For a five-year investment, the optimal class of shares may differ due to the impact of compounding fees over time. Class B shares have a higher 12b-1 fee of 0.75%, which could result in higher costs over the long term.
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Calculate the yield to maturity (YTM) for a one-year bond with a purchase price of $8,000, a face value of $10,000, and a current yield of 10%. The yield to maturity is 35.0%. (Round your response to one decimal place.) The yield to maturity on the bond given above is greater than the YTM of a similar $10,000 20-year bond with a current yield of 20%
student submitted image, transcription available below
We cannot determine if the YTM of the one-year bond is greater than the YTM of the 20-year bond with a current yield of 20%.
To calculate the yield to maturity (YTM) for a bond, we need to use the formula:
YTM = (Annual Interest + ((Face Value - Purchase Price) / Number of Years)) / ((Face Value + Purchase Price) / 2)
In this case, we have a one-year bond with a purchase price of $8,000, a face value of $10,000, and a current yield of 10%.
Let's calculate the YTM:
Current Yield = Annual Interest / Purchase Price
0.10 = Annual Interest / $8,000
Solving for Annual Interest:
Annual Interest = 0.10 * $8,000 = $800
YTM = ($800 + (($10,000 - $8,000) / 1)) / (($10,000 + $8,000) / 2)
YTM = ($800 + ($2,000 / 1)) / (($10,000 + $8,000) / 2)
YTM = ($800 + $2,000) / ($18,000 / 2)
YTM = $2,800 / $9,000
Calculating YTM:
YTM ≈ 0.3111 or 31.1%
Therefore, the yield to maturity (YTM) for the one-year bond is approximately 31.1%.
Regarding the second statement,
which compares the YTM of the one-year bond with a 20-year bond, we don't have sufficient information about the annual interest and the purchase price of the 20-year bond.
Without those details, we cannot determine if the YTM of the one-year bond is greater than the YTM of the 20-year bond with a current yield of 20%.
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Companies that use debt in their capital structure are said to be using financial leverage. Using leverage can increase shareholder returns, but leverage also increases the risk that shareholders bear. Consider the following case: Newtown Propane is a small company and is considering a project that will require $600,000 in assets. The project will be financed with 100% equity. The company faces a tax rate of 25%. What will be the ROE (return on equity) for this project if it produces an EBIT (earnings before interest and taxes) of $145,000? 18.13% 13.60% 10.88% 14.50% What will be the project's ROE if it produces an EBIT of −$60,000 and it finances 50% of the project with equity and 50% with debt? When calculating the tax effects, assume that Newtown Propane as a whole will have a laroe, positive income this year. First blank: decrease or increase Second blank: decrease or increase Third blank: decrease or increase Fourth blank: higher or lower Fifth blank: an aggressive or a conservative
1. The ROE will be 18.13%.
2. The project's ROE will be -12.00%.
3. The ROE will increase if the company uses debt financing.
4. The ROE will decrease if the EBIT decreases.
5. Using debt financing is an aggressive financial strategy.
1. The ROE is calculated as follows:
ROE = EBIT / Equity
In this case, the equity is $600,000 because the project is financed with 100% equity. So, the ROE is:
ROE = $145,000 / $600,000 = 0.24166667 = 18.13%
2. The project's equity will be $300,000 because it is financed with 50% equity. The project's debt will be $300,000 because it is financed with 50% debt. The project's interest expense will be $75,000 because the interest rate is 25%. So, the project's ROE is:
ROE = (EBIT - Interest expense) / Equity
= (-$60,000 - $75,000) / $300,000
= -12.00%
3. The ROE will increase if the company uses debt financing because debt is a cheaper source of financing than equity. This is because the interest payments on debt are tax-deductible, while dividends on equity are not.
4. The ROE will decrease if the EBIT decreases because the ROE is calculated as a percentage of EBIT. So, if EBIT decreases, the ROE will decrease even if the equity remains the same.
5. Using debt financing is an aggressive financial strategy because it increases the risk that shareholders bear. This is because if the company's EBIT decreases, the ROE will decrease and the shareholders may lose money.
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B2B buying can be described as:-
A)Obvious to consumers.
B)Having very minor career opportunities in sales and marketing.
C)Very stable demand.
D)None of the above.
B2B buying cannot be described as obvious to consumers, having very minor career opportunities in sales and marketing, or having a very stable demand. Option D) None of the above is correct.
B2B (business-to-business) buying refers to the process of businesses purchasing products or services from other businesses rather than from consumers. The options provided do not accurately describe B2B buying:
A) B2B buying is not obvious to consumers because it involves transactions and negotiations that typically occur between businesses at a higher level and are not directly visible to individual consumers.
B) B2B buying actually offers significant career opportunities in sales and marketing. Many professionals specialize in B2B sales and marketing, and there are various roles and positions available within B2B companies to cater to this market segment.
C) The demand in B2B buying can vary and is not necessarily stable. It depends on factors such as economic conditions, industry trends, and specific business needs. The demand for B2B products or services can fluctuate over time.
Therefore, the correct answer is D) None of the above.
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Consider a S corporation. The corporation earns $14 per share before taxes. The corporate tax rate is 38%, the tax rate on dividend income is 29%, and the personal income tax rate is set at 25%. How much is the total effective tax rate on the corporation earnings?
The amount of tax that the corporation will pay is: 38/100 × $14 = $5.32. The effective tax rate on the corporation earnings is 52.62%.
The amount of tax that the corporation will pay is: 38/100 × $14 = $5.32
The amount of income that the corporation will earn after paying the taxes is: $14 - $5.32 = $8.68
Now, the corporation will pay dividend income tax at the rate of 29% of the income earned.
The amount of tax the corporation will pay is: 29/100 × $8.68 = $2.52
After paying dividend tax, the income earned by the corporation will be reduced to $8.68 - $2.52 = $6.16
Finally, this income will be taxed at a personal income tax rate of 25%.
The amount of tax the shareholders will pay is: 25/100 × $6.16 = $1.54
The effective tax rate on the corporation's earnings is the total amount of tax paid divided by the total earnings.
So, the total amount of tax paid is $5.32 + $2.52 + $1.54 = $9.38
And, the total earnings is $14
Effective tax rate = (Total amount of tax paid / Total earnings) × 100
= ($9.38 / $14) × 100
= 0.67 × 100
= 67%
However, this is not the effective tax rate on the corporation's earnings.
The effective tax rate is the amount of tax paid per dollar earned.
Therefore, the effective tax rate is:
Effective tax rate = Total amount of tax paid / Total taxable earnings
= $9.38 / $17.32
= 0.541
≈ 52.62%
Therefore, the effective tax rate on the corporation earnings is 52.62%.
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