The correct statement is C) An increase in the underlying stock price will increase the value of a call option.
In options trading, the exercise price refers to the price at which the underlying asset can be bought or sold.
A) A decrease in the exercise price will not increase the value of a put. The value of a put option increases when the exercise price is higher than the current market price, allowing the option holder to sell the asset at a higher price.
B) A decrease in the exercise price will not decrease the value of a call. The value of a call option increases when the exercise price is lower than the current market price, allowing the option holder to buy the asset at a lower price.
C) An increase in the underlying stock price will increase the value of a call option. When the stock price rises, it becomes more likely that the call option will be profitable at expiration, resulting in an increase in its value.
D) A decrease in the underlying stock price will not decrease the value of a put option. The value of a put option increases when the stock price falls, as the option holder can sell the asset at a higher price than the current market value.
Therefore, the correct statement is C) An increase in the underlying stock price will increase the value of a call option.
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economists make a distinction between changes in quantity demanded and changes in demand:
Economists make a distinction between changes in quantity demanded and changes in demand to understand the different factors influencing consumer purchasing decisions.
Changes in quantity demanded are due to a change in the price of a good, while changes in demand are due to other factors.All things being equal, an increase in the price of a good leads to a decrease in the quantity demanded, while a decrease in the price of a good leads to an increase in the quantity demanded. This is known as the law of demand. However, changes in demand are due to factors such as changes in consumer income, tastes and preferences, and the availability of substitute goods.A change in the price of a good leads to a movement along the demand curve, while a change in any other factor that affects demand leads to a shift of the entire demand curve. Therefore, it is important for economists to make a distinction between changes in quantity demanded and changes in demand in order to accurately analyze and predict consumer behavior.
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Aconcagua Ltd. had net earnings of $80,000 in the current priod, a decrease in accounts receivable from the prior period of $8,500, an increase in inventory from the prior period of $12,300, a loss on sale of furniture of $6,300, depreciation expense of $3,000, a decrease in accounts payable from the prior period of $7,000, an increase in tax payable from the prior period of $13,200 and an increase in cash from the prior period of $12,100. What is the net cash from operating activities for the current period?
To calculate the net cash from operating activities for the current period, we need to analyze the given information and make adjustments to the net earnings.
Here's how we can calculate it step by step:
Start with net earnings: $80,000
Add back non-cash expenses:
Loss on sale of furniture: -$6,300
Depreciation expense: +$3,000
Adjusted earnings: $80,000 - $6,300 + $3,000 = $76,700
Consider changes in working capital:
Decrease in accounts receivable: +$8,500
Increase in inventory: -$12,300
Decrease in accounts payable: +$7,000
Increase in tax payable: +$13,200
Adjusted earnings considering changes in working capital: $76,700 + $8,500 - $12,300 + $7,000 + $13,200 = $93,100
Account for the change in cash:
Increase in cash: +$12,100
Net cash from operating activities: $93,100 + $12,100 = $105,200
Therefore, the net cash from operating activities for the current period is $105,200.
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Which of the following statements related to the multiple-step income statement is false? Multiple Choice TEST (Ch1-11) O O 1925 O Tied Only one total for all expenses is shown Subtotals for total selling expenses and general and administrative expenses are reported Interest revenues included with other revenue and gens Non-operating tems are reported separately from operations. The first section of the statement reports gross profe < Prev 10 of 50 Next > Help Seve & Exit 781 A04 Sudmik 214PM
The false statement related to the multiple-step income statement is: "Only one total for all expenses is shown."
In a multiple-step income statement, expenses are classified and reported in different categories to provide more detailed information about the company's financial performance. The statement typically includes multiple sections, such as gross profit, operating expenses, non-operating items, and net income.
The false statement implies that there is only one total for all expenses, which is incorrect. In a multiple-step income statement, expenses are usually grouped and presented separately based on their nature or function. This allows for better analysis and understanding of the company's cost structure and profitability.
In conclusion, the false statement is that only one total for all expenses is shown in a multiple-step income statement.
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According to the CAPM, the expected return on a risky asset depends on three components. Describe each component, and explain its role in determining expected return.
b) You are a manager for a hedge fund. Your portfolio has a beta of 1.18. The portfolio consists of 25% U.S. Treasury bills, 40% in stock A, and 35% in stock B. Stock A has a risk-level equivalent to that of the overall market. What is the beta of stock B?
c) A portfolio has 25% of its funds invested in Security C and 75% of its funds invested in Security D. Security C has an expected return of 8% and a standard deviation of 6%. Security D has an expected return of 10% and a standard deviation of 10%. The securities have a coefficient of correlation of 0.6. Which of the following values is closest to portfolio return and variance?
a) According to CAPM, the expected return on a risky asset depends on three components: Market risk premium, which is the difference between the expected return of the market and the risk-free rate. It indicates the risk an investor is taking on by investing in a risky asset. Beta is a measure of the degree of correlation between the price of the risky asset and the market.
The beta of the market is equal to 1.0, so the higher the beta of a security, the greater the expected return of the security. Idiosyncratic risk is the risk that is specific to an individual security and that is not correlated with the overall market. It is sometimes referred to as unsystematic risk. b)First, we have to use the formula of Beta to solve for the beta of Stock B:Portfolio beta = 1.18 = [(% of T-bills * beta of T-bills) + (% of Stock A * beta of Stock A) + (% of Stock B * beta of Stock B)]Therefore, 1.18 = (0.25 * 0) + (0.40 * 1) + (0.35 * beta of Stock B)1.18 = 0 + 0.4 + (0.35 * beta of Stock B)1.18 - 0.4 = 0.35 * beta of Stock B0.78 = 0.35 * beta of Stock BBeta of Stock B = 0.78/0.35 = 2.23Therefore, the beta of stock B is 2.23.c)First, let us calculate the portfolio expected return: Portfolio expected return = (% of Security C * expected return of Security C) + (% of Security D * expected return of Security D)Portfolio expected return = (0.25 * 8%) + (0.75 * 10%)Portfolio expected return = 9.5%Next, let us calculate the portfolio variance:Portfolio variance = (% of Security C)^2 * variance of Security C + (% of Security D)^2 * variance of Security D + 2(% of Security C)(% of Security D) * correlation coefficient * standard deviation of Security C * standard deviation of Security DPortfolio variance = (0.25^2 * 6%) + (0.75^2 * 10%) + 2(0.25)(0.75)(0.6)(6%)(10%)Portfolio variance = 1.44% + 5.63% + 1.08%Portfolio variance = 8.15%Therefore, the closest value to portfolio return and variance is 9.5% and 8.15%, respectively.
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which partition management utility can be used to define and change various different guid
The partition management utility that can be used to define and change various different GUID is GPT .
GUID stands for Globally Unique Identifier. It is a standard system for giving unique identifiers to entities or objects in computer systems. GUID is used in various applications and sy.stems that need to create unique identifiers.GUID is commonly used with GPT (GUID Partition Table).
The GPT is a partitioning scheme that is used to define the partition table on a disk drive.
It is a part of the Unified Extensible Firmware Interface (UEFI) standard for booting the computer.GUID partition management utility can be used to define and change various different GUID. It is a disk partition management tool that is used to manage and configure the partition scheme of the disk drive.
It is used for the purpose of partitioning the disk drive and is a key component of modern operating systems. It is a reliable and robust tool for managing partitions, formatting disks, and creating partitions up to 2 TB.The GUID Partition Table is a successor to the Master Boot Record (MBR) partitioning scheme.
It is used in modern computers that have a UEFI firmware. The GUID Partition Table is more reliable, flexible, and efficient than the MBR scheme. It supports larger disk drives, up to 9.4 zettabytes, and allows for more partitions. It also includes a backup partition table, which makes it more resilient to disk failures.
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When operating a business the calculation of taxable income is important as it is the basis for determining the amount of tax that must be paid on the income of the business. How is taxable income computed by the business if it is operated as a "C" corporation, and "S" corporation or a partnership?
The computation of taxable income varies depending on the type of business entity: "C" corporation, "S" corporation, or partnership.
For a "C" corporation, taxable income is determined by subtracting allowable deductions from the corporation's total revenues. The deductions include business expenses, cost of goods sold, depreciation, and other applicable expenses. The resulting amount is the corporation's taxable income, on which corporate income tax is levied.
In the case of an "S" corporation, the corporation itself is not subject to federal income tax. Instead, the taxable income passes through to the individual shareholders in proportion to their ownership percentage. The shareholders report their share of the corporation's income on their personal tax returns and pay taxes at their individual tax rates.
For a partnership, the taxable income is calculated at the partnership level, similar to an "S" corporation. The partnership's income and deductions are allocated among the partners based on their partnership agreement or ownership percentage. Each partner includes their share of the partnership's income on their personal tax return and pays taxes at their individual tax rates.
Overall, the calculation of taxable income for a business entity depends on its legal structure and the specific tax regulations governing that structure.
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(a) Calculate the software size in terms of use case points. Please show your works and state your assumptions. (20 marks)
The software size is calculated in use case points using the UCP method, considering actor weights, use case complexity, technical factors, and adjusting for the final adjusted use case points.
Use the Use Case Points (UCP) method to calculate software size.Identify and list all relevant use cases.Assign weights to actors based on complexity and significance (Simple: 1, Average: 2, Complex: 3).Assess complexity of use cases and assign weights (Simple: 5, Average: 10, Complex: 15).Calculate total use case points by multiplying actor weights and use case complexity weights for each use case.Consider technical factors such as database complexity, reusability, performance requirements.Adjust the total use case points by multiplying them with technical factor weight adjustment.Add the adjusted use case points to the total use case points to get the final adjusted use case points.The final adjusted use case points represent the software size in terms of use case points, aiding in estimation, planning, and resource allocation.Learn more about software size
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Jason Jackson is attempting to evaluate two possible portfolios consisting of the same five assets but held in different proportions. He is particularly interested in using beta to compare the risk of the portfolios and, in this regard, has gathered the following data: a. Calculate the betas for portfolios A and B. b. Compare the risk of each portfolio to the market as well as to each other. Which portfolio is more risky? Data table (Click on the icon here in order to copy its contents of the data table below into a spreadsheet.) Asset 1 2 3 4 5 Total Asset Beta 1.28 0.71 1.27 1.09 0.88 Portfolio Weights Portfolio A 20% 31% 8% 10% 31% 100% Portfolio B 32% 8% - X 21% 18% 21% 100%
Since the beta of Portfolio A is higher than the beta of Portfolio B, Portfolio A is considered more risky compared to Portfolio B.
To calculate the betas for portfolios A and B, we need to consider the weighted average of the asset betas.
For portfolio A:
Portfolio A Beta = (Weight of Asset 1 * Beta of Asset 1) + (Weight of Asset 2 * Beta of Asset 2) + (Weight of Asset 3 * Beta of Asset 3) + (Weight of Asset 4 * Beta of Asset 4) + (Weight of Asset 5 * Beta of Asset 5)
Using the provided weights and betas, we have:
Portfolio A Beta = (0.20 * 1.28) + (0.31 * 0.71) + (0.08 * 1.27) + (0.10 * 1.09) + (0.31 * 0.88)
Portfolio A Beta = 0.256 + 0.2201 + 0.1016 + 0.109 + 0.2728
Portfolio A Beta = 0.9595
For portfolio B:
Portfolio B Beta = (Weight of Asset 1 * Beta of Asset 1) + (Weight of Asset 2 * Beta of Asset 2) + (Weight of Asset 4 * Beta of Asset 4) + (Weight of Asset 5 * Beta of Asset 5)
Using the provided weights and betas, we have:
Portfolio B Beta = (0.32 * 1.28) + (0.08 * 0.71) + (0.21 * 1.09) + (0.18 * 0.88)
Portfolio B Beta = 0.4096 + 0.0568 + 0.22989 + 0.1584
Portfolio B Beta = 0.85469
Now, to compare the risk of each portfolio to the market and to each other, we need to consider the betas.
Generally, a higher beta indicates higher risk compared to the market. In this case, we have:
Portfolio A Beta = 0.9595
Portfolio B Beta = 0.85469
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A truck acquired at a cost of $585,000 has an estimated residual value of $34,600, has an estimated useful life of 64,000 miles, and was driven 5,800 miles during the year. Determine the following. If required, round your answer for the depreciation rate to two decimal places. (a) The depreciable cost $ ____ (b) The depreciation rate $ ____ per mile (c) The units-of-activity depreciation for the year $ _____
The units-of-activity depreciation approach can be used to calculate the necessary values. Based on the quantity of units of activity, in this example the number of miles driven, this method determines depreciation.
a) The depreciable expense Cost minus residual value equals depreciable cost. $585,000 minus $34,600 is the depreciable cost. Cost depreciable = $550,400 (a) The mileage-based depreciation rate Expected usable Depreciation rate per mile equals Depreciable cost divided by life Depreciation rate divided by 64,000 miles equals $550,400. A mile's worth of depreciation equals $8.63 (rounded to two decimal places). (b) The annual units-of-activity depreciation Miles driven during the year multiplied by the depreciation rate per unit of activity Depreciation per unit of activity = $8.63 x 5,800 miles Depreciation in units of activity equals $50,054.00 As a result, (a) $550,400 is the depreciable cost. (a) The depreciation per mile is $8.63 (rounded to the nearest dollar).
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1. Which of the following is NOT true about IPOs?
a)They are good deals for investors who buy them at a public offering and then sell them quickly afterward.
b)They are very popular among companies because of the easy assess to money.
c)They are initially underpriced in every country where stocks are publicly traded.
d)They usually result in dilution of earnings per share.
Which of the following statements about secondary offerings is FALSE?
Secondary offerings may occur when holders of large blocks of stock wish to sell too many shares for normal channels to handle.
Secondary offerings occur after an IPO.
Secondary offerings occur when an investment banker underwrites the sale of stock for existing stockholders, rather than for the company.
There is a trend away from the use of secondary offerings.
Option a) They are good deals for investors who buy them at a public offering and then sell them quickly afterward is not true about IPOs.The claim concerning secondary offers that is untrue is that there is a trend away from their use.
An IPO is an acronym for Initial Public Offering, which is a process by which a company issues shares of stock for sale to the general public for the first time. The stock will be offered through an underwriter who will set the price and quantity of shares to be sold.The shares are traded on the secondary market after the IPO.
Secondary offerings are used by companies to raise additional capital by issuing more shares to investors who already own stock in the company. The new shares are sold through an investment banker who underwrites the offering, with the proceeds going to the company or the stockholders who are selling the shares.
The statement that is false about secondary offerings is: There is a trend away from the use of secondary offerings. There is no trend away from the use of secondary offerings.
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A (fake) firm makes shirts according to production function Q =
L.8K.2. The firm is employing 100 units of labor for $1 each and
100 units of capital for $2 each. (Capital and labor are the only
costs
The total cost of the fake firm that produces shirts according to the production function Q = L.8K.2 is $300.
Given the production function Q = L.8K.2 and the firm's employment of 100 units of labor for $1 each and 100 units of capital for $2 each, the total cost of the fake firm can be determined as follows:
Total cost = Total cost of labor + Total cost of capital
Total cost of labor = Number of units of labor × Cost per unit of labor
Total cost of labor = 100 × $1Total cost of labor = $100
Total cost of capital = Number of units of capital × Cost per unit of capital
Total cost of capital = 100 × $2
Total cost of capital = $200
Now, total cost of the fake firm = Total cost of labor + Total cost of capital
Total cost of the fake firm = $100 + $200
Total cost of the fake firm = $300
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At the end of the current year (before adjusting entries), Captain Corporation had a balance of $94,000 in Accounts Receivable and a credit balance of $5,000 in Allowance for Uncollectible Accounts. Service revenue (all on credit) for the year totaled $470,000. Requirement 1. Assume that Captain Corporation uses the aging-of-receivables method. Captain Corporation estimates that its Allowance for Uncollectible Accounts should have a credit balance of $13,000. Calculate the amount of its Uncollectible-Account Expense. What is the ending balance of the Allowance for Uncollectible Accounts under this scenario?
The Uncollectible-Account Expense for Captain Corporation is $8,000, and the ending balance of the Allowance for Uncollectible Accounts is $13,000(credit balance).
To calculate the Uncollectible-Account Expense using the aging-of-receivables method, we need to consider the desired ending balance of the Allowance for Uncollectible Accounts and compare it to the existing balance.
Given:
Balance in Accounts Receivable: $94,000
Credit balance in Allowance for Uncollectible Accounts: $5,000
Desired credit balance in Allowance for Uncollectible Accounts: $13,000
Service revenue for the year: $470,000
To calculate the Uncollectible-Account Expense, we need to determine the difference between the desired ending balance and the existing balance in the Allowance for Uncollectible Accounts.
Desired Ending Balance - Existing Balance = Uncollectible-Account Expense
$13,000 - $5,000 = $8,000
Therefore, the Uncollectible-Account Expense for Captain Corporation is $8,000.
Next, to calculate the ending balance of the Allowance for Uncollectible Accounts, we add the Uncollectible-Account Expense to the existing credit balance.
Existing Balance + Uncollectible-Account Expense = Ending Balance
$5,000 + $8,000 = $13,000
Hence, the ending balance of the Allowance for Uncollectible Accounts is $13,000 (credit balance) under this scenario.
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According to the Classical \& Neoclassical Paradigm the shape of the Long Run Aggregate Supply Curve is Horizontal Vertical Downward Sloping Upward Sloping
According to the Classical & Neoclassical Paradigm, the Long Run Aggregate Supply (LRAS) Curve is vertical.
In the Classical & Neoclassical Paradigm of economics, the LRAS curve is depicted as vertical. This suggests that in the long run, changes in aggregate demand do not affect the level of output in an economy.
The LRAS curve represents the full employment level of output, where all available resources are efficiently utilized.
The vertical shape of the LRAS curve implies that the economy operates at its potential output in the long run, regardless of changes in aggregate demand.
The Classical economists argue that market forces, such as flexible wages and prices, ensure that the economy always returns to its full employment level.
According to the Classical & Neoclassical Paradigm, any temporary deviations from the full employment level are self-correcting.
For example, if there is an increase in aggregate demand causing inflationary pressure, wages and prices will adjust upward, bringing the economy back to its potential output.
This perspective emphasizes the importance of supply-side factors, such as labor, capital, and technology, in determining the long-run performance of an economy. It suggests that policies aimed at improving productivity and promoting efficiency are crucial for sustained economic growth in the long term.
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During January, Luxury Cruise Lines incurs employee salaries of $2.8 million. Withholdings in January are $214,200 for the employee portion of FICA, and $595,000 for employee federal and state. The company incurs an additional $173,600 for federal and state unemployment tax and $84,000 for the employer portion of health insurance. Required: Record the necessary entries in the Journal Entry.
In January, Luxury Cruise Lines incurred various expenses related to employee salaries and taxes. The company recorded these transactions in its journal, reflecting the following entries:
Luxury Cruise Lines incurred employee salaries of $2.8 million in January. To record this expense, the company would debit the Salaries Expense account and credit the Salaries Payable or Cash account, depending on whether the salaries were paid immediately or will be paid in the future.
The withholdings for FICA (Federal Insurance Contributions Act) and employee federal and state taxes totaled $809,200 ($214,200 + $595,000). These amounts represent obligations that the company needs to remit to the appropriate government authorities on behalf of its employees. The entry would include a debit to the Payroll Tax Expense account and credits to both the FICA Payable and Employee Tax Payable accounts.
Luxury Cruise Lines also incurred $173,600 for federal and state unemployment tax. This tax is levied on employers to fund unemployment benefits for eligible workers. To record this expense, the company would debit the Payroll Tax Expense account and credit the Unemployment Tax Payable account.
Additionally, the company paid $84,000 for the employer portion of health insurance. This amount represents the cost of providing health insurance coverage to its employees. The entry would include a debit to the Health Insurance Expense account and a credit to the Cash account.
To summarize, the journal entries for Luxury Cruise Lines in January would include debits to Salaries Expense, Payroll Tax Expense, and Health Insurance Expense, and credits to Salaries Payable or Cash, FICA Payable, Employee Tax Payable, and Unemployment Tax Payable.
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Choose a listed company of your choice and devise an overall audit strategy for the financial year 2019-20/2020/21 (Year end 30 June 2020 or 30 June 2021) for the company. You can download financial statements and other interim reports from the company’s website. Other publicly published (newspaper extracts, interim reports, etc...) information may be used. Required You are expected to
1. Write a short project report on the audit strategy of the company(maximum 10 pages).
2. You need to include as annexure to the report a copy of the financial statements used for the assignment (Balance Sheet and Profit and Loss
Audit Strategy for the Financial Year 2019-20/2020-21. [Date]Table of Contents: Executive Summary, Introduction, Company Background, Audit Objectives, Materiality, Risk Assessment, Audit Procedures, Reporting, Annexure: Copy of Financial Statements
Company Background: [Provide a brief description of the company, its industry, market position, and any significant recent developments or changes.]
Audit Objectives: The audit objectives for [Company Name] are as follows:
a) To ensure that the financial statements are prepared in accordance with the applicable accounting standards and regulatory requirements.
b) To assess the effectiveness of internal controls and identify any deficiencies or weaknesses.
Materiality: Materiality refers to the magnitude of misstatements that could influence the economic decisions of users. Materiality will be determined based on quantitative and qualitative factors, including the company's size, nature of its operations, and financial reporting framework.
Risk Assessment: A comprehensive risk assessment will be conducted to identify and assess the risks of material misstatement in the financial statements. The assessment will consider both inherent and control risks.
Audit Procedures: Audit procedures will include the following:
a) Understanding the entity's internal control environment and assessing the design and effectiveness of internal controls.
b) Testing of transactions and account balances to ensure accuracy, completeness, and validity.
c) Performing substantive analytical procedures to assess the reasonableness of financial information and identify any unusual or unexpected trends or relationships.
Reporting: The audit report will include an opinion on the fair presentation of the financial statements in all material respects. If any material misstatements or weaknesses in internal controls are identified, they will be communicated to management and the audit committee.
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Sanford Ltd. produces a product with the following standard cost card:
Variable overhead (7 hours) 18
The actual results for the month of July 20x5 are as follows:
Direct labour (92,350 hours) 1,023,000
Variable overhead 338,500
Fixed overhead 580,000
Units produced and sold 15,200 units
What is Sanford's variable overhead spending variance for July 20x5?
Sanford Ltd.'s variable overhead spending variance for July 20x5 is favorable, indicating that the actual variable overhead cost incurred was less than the standard cost.
The variable overhead spending variance measures the difference between the actual variable overhead cost incurred and the standard cost. To calculate the variance, we need to compare the standard cost of variable overhead with the actual variable overhead cost.
The standard cost of variable overhead is determined by multiplying the standard variable overhead rate by the actual hours worked. In this case, the standard variable overhead rate is 18 per 7 hours, which equals 2.57 per hour. Multiplying this rate by the actual direct labor hours of 92,350 results in a standard cost of variable overhead of 237,937.50.
The actual variable overhead cost incurred in July 20x5 is given as 338,500. By subtracting the standard cost of variable overhead from the actual cost, we can calculate the variable overhead spending variance. In this case, the calculation would be:
Variable overhead spending variance = Actual variable overhead cost - Standard cost of variable overhead
= 338,500 - 237,937.50
= 100,562.50
Therefore, Sanford Ltd. has a favorable variable overhead spending variance of $100,562.50, indicating that the actual variable overhead cost incurred in July 20x5 was less than the standard cost. This favorable variance suggests that Sanford Ltd. managed to control its variable overhead costs effectively during the period.
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Alexandra has a mortgage of $730,000 through the RSC for a vacation property. The mortgage is repaid by end of month payments with an interest rate of 4.9% compounded monthly for a term of 4 years, amortized over 15 years. At the end of the 4-year term, Alexandra will renew the mortgage for another 4-year term at a new, lower interest rate of 4.5% compounded monthly Round ALL answers to two decimal places if necessary 1) What are the end of month payments before the renewal of the mortgage? P/Y = 12 C/Y = 12 N =
I/Y = 4.9 PV = $ 730000 FV = $ 0
PMT = $ -5754.84
2) What is the balance when the mortgage is renewed?
PT = P2 = BAL = $
3) What will be the new end of month payments after the mortgage is renewed?
P/Y = 12 C/Y = 12 N = I/Y = 4.5 % PV = $ FV = 0
PMT = $
The end of month payments before the renewal of the mortgage are $5,754.84.
Explanation:
Using the given information and the financial calculator functions, we can calculate the end of month payments before the renewal of the mortgage. The present value (PV) is $730,000, the interest rate (I/Y) is 4.9%, compounded monthly (P/Y = 12, C/Y = 12), the number of periods (N) is calculated based on the term of 4 years amortized over 15 years.
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will the firm create value by increasing dividend payment because
of the cliente effect?
Increasing dividend payments may create value for a firm due to the cliente effect, as it can attract and retain investors who prefer stable income streams.
The cliente effect refers to the phenomenon where investors are attracted to companies that pay regular dividends, as it provides them with a predictable income stream. By increasing dividend payments, a firm can appeal to a broader range of investors, particularly those who prioritize income generation and prefer stable returns. This can potentially increase demand for the firm's stock and positively impact its stock price, thereby creating value for the company and its shareholders.
However, it's important to consider that the impact of increasing dividend payments on firm value is not universal. Several factors influence the overall effect on the company's value. Firstly, the financial health of the firm plays a crucial role. If a company has sufficient cash flow and earnings to support higher dividend payments without compromising its operations or growth opportunities, it can create value through increased dividends.
Secondly, the growth prospects of the company are essential. In some cases, investors may prioritize capital appreciation over dividends, especially if the company has significant growth potential. Lastly, the preferences of the firm's shareholders matter. If a significant portion of the shareholder base prefers capital gains or reinvestment of earnings, increasing dividends may not create significant value.
In conclusion, increasing dividend payments can potentially create value for a firm through the cliente effect by attracting income-oriented investors. However, the overall impact on firm value depends on factors such as financial health, growth prospects, and shareholder preferences. It is crucial for companies to assess their specific circumstances and consider a balanced approach that aligns with the interests of their shareholders and the long-term sustainability of the business.
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Problem Statement You have purchased a used car for $3000 with a loan at 6% APR, compounded monthly. You have agreed to repay the loan in 12 equal beginning-of-month payments. After you have made six payments, one of your friends has shown interest in purchasing the car from you when the next payment is due. Your friend is willing to close the loan when the next payment is due and pay you additional $1000. What is the total cost of the car to your friend when he purchases the car from you? Price of the car is $3000, monthly payment =$X(?) 1. Solve the "Used Car Purchase" problem discussed in the first lecture with the following changes: (i) The payments are to be made at the end of each month. Therefore, no down payment is required. Estimate the monthly payment. (ii) The new owner takes the car when the seventh payment is due with additional payment of $1000 to the owner. (iii) Estimate the interest payment and payment towards principal made in the first monthly Payment.
The interest payment and payment towards principal made in the first monthly payment are $15.00 and $249.67 respectively.
Calculation of the monthly payment:
Loan = $3000, Rate = 6%/, year compounded monthlyTime = 12 months,Payments are to be made at the end of each month.
Therefore, no down payment is required. Monthly payment will be equal payments to be paid at the end of each month. We need to find this amount by using PMT function in excel.
=PMT(6%/12, 12, 3000)= $264.67 (approx)
(ii) Calculation of the payoff balance at the end of sixth payment:
To calculate the payoff balance, we need to calculate the remaining balance on the loan after sixth payment. This can be done using the PPMT function in excel.
=PPMT(6%/12, 6, 12, 3000)= $1016.56 (approx)
Outstanding loan balance after six payments = $2,084.45 + $1016.56 = $3,101.01(rounded off to the nearest cent)
So, the owner has to pay $3,101.01 to close the loan at the end of sixth payment.
(iii) Calculation of the interest payment and payment towards principal made in the first monthly payment:In the first monthly payment, the total payment will be $264.67.
Out of this, the interest payment can be calculated using IPMT function in excel.
=IPMT(6%/12, 1, 12, 3000)= $15.00 (approx)
Payment towards principal = Total payment - Interest payment
= $264.67 - $15.00= $249.67
So, the interest payment and payment towards principal made in the first monthly payment are $15.00 and $249.67 respectively.
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Zinc Corp. obtained a $100,000 loan from First Capital Bank on December 31, 2019, its fiscal year-end. It purchased a piece of heavy equipment for $95,000 on January 1, 2020. The loan bears interest at 8% per year on the unpaid balance and is repayable in four annual blended payments of $30,192 on December 31 each year, starting in 2020. Required: 1. Prepare the journal entries to record the following transactions: a. Receipt of loan proceeds from the bank b. Purchase the equipment.
1. a. Journal entry for the receipt of loan proceeds from the bank:
Date: December 31, 2019
Debit: Cash (or Bank) $100,000Credit: Loan Payable $100,000
The company receives a loan of $100,000 from First Capital Bank, increasing its cash (or bank) balance and creating a liability in the form of a loan payable.
b. the purchase of equipment:
Date: January 1, 2020
Debit: Equipment $95,000
Credit: Cash (or Bank) $95,000
The company purchases a piece of heavy equipment for $95,000, reducing its cash (or bank) balance and increasing its asset value in the form of equipment.
For the receipt of loan proceeds, the company debits the cash (or bank) account for $100,000, reflecting the increase in cash. The corresponding credit is made to the loan payable account, recognizing the liability of the loan received from the bank.
Regarding the purchase of equipment, the company debits the equipment account for $95,000, recognizing the increase in the asset value. The cash (or bank) account is credited for the same amount, reflecting the reduction in cash due to the equipment purchase.
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Read the scenario below and answer the questions that follow.
Sales were below target at the cooperative retail store. The manager was very concerned about
this. She decided to write to every staff member of the organization about 30 of them to warn
them of the problem of falling sales and how jobs were now at risk. In the letter she asked for
ideas on how to increase sales. Staffs were asked to confirm that they had received the letter and
tell her if they had any good ideas.
a) Identify the type of communication used in this scenario (2 marks)
b) Assume the sales did not improve and a meeting was called between management and
staff about reducing the staff salaries. Outline two communication problems that might
arise in such a meeting. (4 marks)
c) Recommend two strategies for making communication effective in an organization
a) The type of communication used in this scenario is written communication.
b) Two potential communication problems in a meeting about reducing staff salaries are emotional resistance and lack of clarity/transparency.
c) Two strategies for effective communication in an organization are open and transparent communication channels and active listening with feedback.
a) The type of communication used in this scenario is written communication.
In the given scenario, the manager of the cooperative retail store decided to write a letter to every staff member, which indicates the use of written communication. Written communication involves the use of written words to convey information, instructions, or messages. It allows for documentation and provides a formal record of the communication exchanged.
Written communication is an important aspect of organizational communication as it enables clear and precise transmission of information. It helps in disseminating consistent messages to a large number of individuals simultaneously. Additionally, written communication allows individuals to review and refer back to the information provided, ensuring clarity and understanding.
b) Two communication problems that might arise in a meeting about reducing staff salaries are:
1. Resistance and emotional reactions: When discussing salary reductions, employees may react emotionally due to concerns about their financial stability and job security. Some employees might express frustration, anger, or resistance during the meeting, making it challenging to have a productive discussion.
2. Lack of clarity and transparency: Communication regarding salary reductions needs to be transparent and provide clear explanations of the reasons behind the decision. However, if management fails to provide a detailed rationale or fails to address employees' concerns adequately, it can lead to confusion and misunderstandings. This lack of clarity can hinder effective communication and create an atmosphere of mistrust.
In meetings, communication problems can arise due to various factors such as emotional reactions, misinterpretation of information, lack of clarity, or ineffective listening. It is essential for management to anticipate and address these potential issues in order to ensure productive and meaningful discussions during sensitive topics like salary reductions.
c) Two strategies for making communication effective in an organization are:
1. Open and transparent communication channels: Establishing open lines of communication within an organization promotes transparency and fosters a culture of trust. This can be achieved through regular meetings, feedback sessions, and accessible communication channels such as email, messaging platforms, or intranet systems. Encouraging employees to share their ideas, concerns, and suggestions freely creates a collaborative environment where effective communication can thrive.
2. Active listening and feedback: Effective communication involves not only transmitting information but also actively listening to others. Encouraging managers and staff to actively listen and provide constructive feedback can enhance understanding and engagement. Regular feedback sessions, performance evaluations, and opportunities for open dialogue allow individuals to express their opinions and contribute to the organization's overall communication process.
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Discuss The Certification Requirements Of The Sarbanes-Oxley Act Relating To Corporate Accountability.
Discuss the certification requirements of the Sarbanes-Oxley Act relating to corporate accountability.
The Sarbanes-Oxley Act (SOX) introduced significant reforms to enhance corporate accountability and improve the integrity of financial reporting in publicly traded companies.
One key aspect of SOX is the certification requirements imposed on company executives, specifically the CEO and CFO, regarding the accuracy and completeness of financial statements.
Under Section 302 of SOX, CEOs and CFOs are required to personally certify the accuracy of financial statements and disclosures in periodic reports filed with the Securities and Exchange Commission (SEC).
The certification must confirm that the financial statements present a true and fair view of the company's financial condition and results of operations, and that any material changes or deficiencies have been reported to the company's auditors and audit committee.
The certification requirements of SOX include several key elements:
1. Statement of Responsibility: CEOs and CFOs must acknowledge their responsibility for establishing and maintaining internal controls and procedures for financial reporting.
2. Assessment of Internal Controls: They must evaluate the effectiveness of the company's internal controls and disclose any significant deficiencies or material weaknesses that could affect financial reporting.
3. Disclosure of Changes: They must disclose any changes in internal controls or other factors that could have a significant impact on the company's financial operations.
4. Disclosure of Fraud: They must disclose any instances of fraud involving management or other employees that could have a material impact on the financial statements.
5. Disclosure Controls and Procedures: They must evaluate the effectiveness of the company's disclosure controls and procedures and ensure that all material information is reported to the appropriate parties in a timely manner.
The certification requirements of SOX aim to increase corporate accountability by holding top executives personally responsible for the accuracy of financial statements. By requiring CEOs and CFOs to certify the financial statements, SOX promotes transparency, reduces the risk of financial fraud, and provides investors and stakeholders with greater confidence in the reliability of corporate financial reporting.
Non-compliance with the certification requirements of SOX can result in severe penalties, including fines, imprisonment, or both. Therefore, it is crucial for CEOs and CFOs to ensure they have implemented robust internal controls, performed necessary assessments, and maintained accurate financial records to meet the certification requirements under the Sarbanes-Oxley Act.
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Assume a small open economy initially in equilibrium and experiencing a trade deficit. What would happen to the real interest rate, desired levels of saving and investment, and the net capital inflows if business investment were to increase? Answer this question with the help of a graph.
If business investment were to increase in a small open economy initially in equilibrium and experiencing a trade deficit, the real interest rate would rise, desired levels of saving and investment would decrease, and net capital inflows would decrease.
In a small open economy, an increase in business investment would lead to an increase in the demand for loanable funds. This would shift the demand curve for loanable funds to the right, resulting in a higher equilibrium real interest rate. As the real interest rate increases, the desired levels of saving and investment would decrease. Higher interest rates discourage borrowing and investment, leading to a decrease in the desired levels of saving and investment. Additionally, an increase in business investment would not directly affect the trade deficit. However, if the trade deficit remains unchanged while investment increases, it implies that net capital inflows would decrease. This is because a larger portion of domestic savings would be used to finance the increased investment, reducing the reliance on foreign capital.In terms of the graph, the initial equilibrium would be shown where the demand and supply of loanable funds intersect. When business investment increases, the demand curve for loanable funds would shift to the right, leading to a higher equilibrium interest rate.
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On May 31 of the current year, the assets and liabilities of Riser, Incorporated are as follows: Cash $19,300; Accounts Receivable, $7,200; Supplies, $600; Equipment, $11,950; Accounts Payable, $9,250. What is the amount of equity as of May 31 of the current year? Multiple Choice $39,050. $13,050. $19,300 $48,300 $29,800.
Therefore, the amount of equity on May 31 can be calculated as:Equity = Assets – Liabilities= $39,050 – $9,250= $29,800Thus, the amount of equity as of May 31 of the current year is $29,800.
The correct answer is $29,800What is the amount of equity as of May 31 of the current year?On May 31 of the current year, the assets and liabilities of Riser, Incorporated are as follows:
Cash $19,300Accounts Receivable, $7,200Supplies, $600Equipment, $11,950Accounts Payable, $9,250To calculate the amount of equity as of May 31 of the current year, we need to apply the accounting equation, which states that:
Assets = Liabilities + EquityThe amount of assets on May 31 = Cash + Accounts Receivable + Supplies + Equipment= $19,300 + $7,200 + $600 + $11,950= $39,050The amount of liabilities on May 31 = Accounts Payable= $9,250
Therefore, the amount of equity on May 31 can be calculated as:Equity = Assets – Liabilities= $39,050 – $9,250= $29,800Thus, the amount of equity as of May 31 of the current year is $29,800.
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Chip and Dale are best friends from university. Chip invested $3,000, earned 6.76% annually, and now has $3,821.66. Dale invested $4,000, earned 6.47% annually, and now has $4,653.08. Chip invested his money _____ years _____ Dale.
1.3; after
1.3; before
2; after
2; before
Chip invested his money 2 years before Dale.
To determine the time difference between their investments, we can use the formula for compound interest:
Future Value = Present Value * (1 + Interest Rate)^Time
For Chip:
Present Value = $3,000
Future Value = $3,821.66
Interest Rate = 6.76%
$3,821.66 = $3,000 * (1 + 0.0676)^Time
Dividing both sides by $3,000 and taking the natural logarithm, we can solve for Time:
ln(1.27388) = Time * ln(1.0676)
Time ≈ 2 years
Therefore, Chip invested his money 2 years before Dale.
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Bond \( P \) is a premium bond with a 10 percent coupon. Bond \( D \) is a 5 percent coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of 7 percent, and have fiv
Bond P is a premium bond with a 10 percent coupon, while Bond D is a discount bond with a 5 percent coupon. Both bonds have an annual yield to maturity (YTM) of 7 percent.
A premium bond is a bond that is priced higher than its face value because its coupon rate is higher than the prevailing interest rate. In this case, Bond P has a 10 percent coupon rate, which is higher than the YTM of 7 percent.
A discount bond, on the other hand, is priced lower than its face value because its coupon rate is lower than the prevailing interest rate. Bond D has a 5 percent coupon rate, which is lower than the YTM of 7 percent.
Both bonds make annual coupon payments, which means the coupon payment is calculated as a percentage of the face value and paid once a year.
The YTM of 7 percent represents the expected annual rate of return on the bond, taking into account its current market price, coupon payments, and the time to maturity.
The main difference between the two bonds is their pricing relative to their face value. Bond P is priced higher (at a premium) due to its higher coupon rate, while Bond D is priced lower (at a discount) due to its lower coupon rate.
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The view that has had a large influence on normative policy judgments is:
A. utilitarianism.
B. John Rawls's maximin principle.
C. All three of these views have been very influential.
D. Robert Nozick's entitlement theory of justice.
The view that has had a large influence on normative policy judgments is **utilitarianism**.
Utilitarianism is an ethical theory that focuses on maximizing overall happiness or utility for the greatest number of people. It has been widely influential in shaping normative policy judgments because it provides a framework for evaluating policies based on their consequences and societal benefits. Utilitarianism emphasizes the importance of promoting the greatest amount of happiness or well-being while minimizing harm or suffering.
While other views, such as John Rawls's maximin principle and Robert Nozick's entitlement theory of justice, have also had some influence on normative policy judgments, utilitarianism stands out as the most pervasive and widely applied ethical framework in policy discussions. Its emphasis on the overall welfare of society and the optimization of outcomes has made it a prominent guide for policymakers and policymakers in various fields.
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Ray Stone has $26,000 to invest in a small business venture. His partner has promised to pay him back $52,000 in five years. The annual return earned on this investment is expected to be %. (Do not include the % sign, and round it to two decimal places, e.g., 8.44)
The expected annual return on Ray Stone's investment in the small business venture is approximately 16.97%.
Ray Stone's investment of $26,000 is expected to generate a return of $52,000 in five years. To calculate the annual return rate, we can use the formula for compound interest:
Future Value = Principal * (1 + Rate)^Time
Rearranging the formula to solve for the rate:
Rate = (Future Value / Principal)^(1/Time) - 1
Substituting the given values:
Rate = ($52,000 / $26,000)^(1/5) - 1
Simplifying the calculation:
Rate = 1.00 - 1
Therefore, the annual return rate for Ray Stone's investment is 0%, indicating that he will not earn any interest or return on his investment.
This implies that Ray Stone's partner is returning the exact amount invested without any additional profits or interest earned. While this may be considered a low return on investment, it is still a guaranteed repayment of the initial investment amount. It's important for investors to carefully consider the potential returns and risks associated with any business venture before making investment decisions.
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Oriole Inc. operates a retail computer store. To improve its delivery services to customers, the company purchased four new trucks on April 1, 2020. The terms of acquisition for each truck were as follows:
1. Truck #1 had a list price of $29,200 and was acquired for a cash payment of $23,500.
2. Truck #2 had a list price of $28,700 and was acquired for a down payment of $2,000 cash and a non–interest-bearing note with a face amount of $26,700. The note is due April 1, 2021. Oriole would normally have to pay interest at a rate of 11% for such a borrowing, and the dealership has an incremental borrowing rate of 8%.
3. Truck #3 had a list price of $24,400. It was acquired in exchange for a computer system that Oriole carries in inventory. The computer system cost $17,600 and is normally sold by Oriole for $20,600. Oriole uses a perpetual inventory system.
4. Truck #4 had a list price of $26,100. It was acquired in exchange for 1,000 common shares of Oriole Inc. The common shares trade in an active market valued at $22 per share in the most recent trade.
Prepare the appropriate journal entries for Oriole Inc. for the above transactions, assuming that Oriole prepares financial statements in accordance with IFRS.
Journal entry for the acquisition of Truck #1:
Truck #1 [Asset] 23,500
Cash [Asset] 23,500
Journal entry for the acquisition of Truck #2:
Truck #2 [Asset] 26,700
Notes Payable [Liability] 26,700
To record the acquisition of Truck #2 with a non-interest-bearing note.
Journal entry for the acquisition of Truck #3:
Truck #3 [Asset] 20,600
Inventory [Asset] 17,600
Gain on Exchange [Income] 2,000
To record the exchange of a computer system for Truck #3, recognizing a gain on the exchange.
Journal entry for the acquisition of Truck #4:
Truck #4 [Asset] 22,000
Common Shares [Equity] 22,000
To record the acquisition of Truck #4 in exchange for 1,000 common shares of Oriole Inc.
These journal entries reflect the transactions based on the information provided, following the principles of IFRS. It's important to note that the specific account titles used may vary depending on Oriole Inc.'s chart of accounts and accounting policies.
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REITs behave most like what type of stocks (choose all correct answers, can pick more than one). small cap stocks income stocks All of these are correct growth stocks large cap stocks
Real Estate Investment Trusts (REITs) can exhibit characteristics of different types of stocks, but they are commonly associated with income stocks. Here's an elaboration on why REITs behave most like income stocks:
Income Generation: REITs primarily focus on owning and operating income-generating real estate properties, such as office buildings, residential complexes, shopping malls, and hotels.
Their main objective is to generate rental income from these properties and distribute a significant portion of their earnings to shareholders in the form of dividends. This income distribution aspect aligns with the characteristics of income stocks, which prioritize providing a steady stream of income to investors.Dividend Yield: Real Estate Investment Trusts REITs typically have higher dividend yields compared to other types of stocks.
The requirement to distribute a significant portion of their taxable income to shareholders allows investors to receive regular dividend payments. This income stream can be attractive to investors seeking stable and consistent cash flows, similar to income stocks.Stability and Predictability: REITs often operate in stable and established real estate markets, and their revenue streams tend to be relatively predictable.
Rental income from long-term leases provides a level of stability to their cash flows, reducing the volatility typically associated with growth stocks. This stability aligns with the income-focused nature of income stocks, which prioritize consistent returns.Capital Appreciation: While REITs are primarily associated with income generation, they can also experience capital appreciation over time.
The value of the underlying real estate properties owned by REITs can appreciate, leading to an increase in the market value of the REIT shares. This dual potential for income and capital appreciation makes them attractive to investors seeking a combination of income and growth, resembling some aspects of growth stocks.Diversification: REITs provide investors with an opportunity to diversify their investment portfolios.
By investing in a REIT, investors can gain exposure to a portfolio of real estate assets across different sectors and geographic locations. This diversification potential is similar to that of large-cap stocks, which offer exposure to a broad range of companies in various industries.Overall, while REITs share similarities with multiple types of stocks, they align most closely with income stocks due to their primary focus on generating rental income, high dividend yields, stability of cash flows, and emphasis on providing regular income to shareholders.
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