The estimated cost of common equity for Booher Book Stores using the CAPM is 8.4%.
The estimated cost of common equity using the Capital Asset Pricing Model (CAPM) for Booher Book Stores, given its beta of 0.8, the yield on a 3-month T-bill of 4%, the yield on a 10-year T-bond of 6%, the market risk premium of 5.5%, and the return on an average stock in the market last year of 15%, can be calculated as follows:
Step 1: Identify the risk-free rate. In this case, we can use the yield on a 3-month T-bill as the risk-free rate, which is 4%.
Step 2: Calculate the equity risk premium using the market risk premium and the beta of the stock. The equity risk premium is the product of the market risk premium and the stock's beta:
Equity Risk Premium = Beta × Market Risk Premium
Equity Risk Premium = 0.8 × 5.5% = 4.4%
Step 3: Calculate the estimated cost of common equity using the CAPM formula:
Cost of Common Equity = Risk-Free Rate + Equity Risk Premium
Cost of Common Equity = 4% + 4.4% = 8.4%
So, the estimated cost of common equity for Booher Book Stores using the CAPM is 8.4%.
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a call center expects an average of 520 calls during the 8 am to 5 pm shift during which full time workers are employed. the average service time is 6 minutes per call. what is the minimum number of workers to achieve a capacity buffer not less than 10%. 7 8 more than 8 less than 7
Therefore, the minimum number of workers required to achieve a capacity buffer not less than 10% is 58.
To determine the minimum number of workers required to achieve a capacity buffer not less than 10%, we need to use the following formula:
Minimum number of workers = (Total workload in minutes during shift) / (Available time in minutes x Capacity buffer)
First, we need to convert the number of calls and the service time to minutes:Average service time per call = 6 minutes
Total workload per call = 6 minutes + Average waiting time per call
We don't have information about the average waiting time per call, so we'll assume it's negligible for now. Therefore, the total workload per call is 6 minutes.
Average number of calls per shift = 520 calls
Total workload during shift = 520 calls x 6 minutes per call = 3,120 minutes
Available time during shift = 9 hours x 60 minutes per hour = 540 minutes
Capacity buffer = 10% = 0.1
Plugging these values into the formula, we get:
Minimum number of workers = 3,120 / (540 x 0.1) = 57.78
Since we cannot have a fraction of a worker, we need to round up to the nearest whole number.
Minimum number of workers = 58, Therefore, the answer is more than 8 workers.
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Assume that the future expected exchange rate in one year is
$1.18. If the spot rate is $1.20, then the expected dollar
depreciation is:
-1.67%.
-0.02%.
1.67%
0.2%.
The expected dollar depreciation is -1.67%. The correct option is -1.67%
1. First, we need to identify the given values:
- Future expected exchange rate in one year: $1.18
- Spot rate: $1.20
2. Next, we'll calculate the percentage change between these two values to find the expected dollar depreciation:
- Percentage change formula: (Future rate - Spot rate) / Spot rate * 100
3. Plugging in the values:
- Percentage change: ($1.18 - $1.20) / $1.20 * 100
4. Calculating the percentage change:
- Percentage change: (-$0.02) / $1.20 * 100 = -1.67%
5. Therefore, the expected dollar depreciation is -1.67%.
In conclusion, by comparing the future expected exchange rate in one year ($1.18) to the current spot rate ($1.20), we can determine that the expected dollar depreciation is -1.67%. This value indicates that the dollar is expected to lose 1.67% of its value compared to the other currency in question over the course of one year. The correct option is -1.67%
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Amita has 3 children ages 2, 5, and 7. The current cost of college is $25,000. The children will begin college at age 18 and be in college for 5 years. Education inflation is expected to be 6% and the parent's portfolio rate of return is 8%. How much does Amita have to save annually at year end if she wants to make her last savings payment at the beginning of the youngest child's first year of college?
$28,610.89
$31,843.26
$30,899.76
$29,484.50
The answer is $28,610.89.
To calculate the annual savings required, we need to use the future value of an annuity formula. The future value of $25,000 for 5 years with a 6% inflation rate is $33,822.94.
Then, we can use the formula FV = PMT * ((1 + r)^n - 1) / r, where FV is the future value of the annuity, PMT is the annual savings amount, r is the portfolio rate of return, and n is the number of years to save. Solving for PMT, we get $28,610.89.
Amita needs to save enough money to pay for her three children's college tuition. With a current cost of $25,000 per year, and assuming that college inflation is at 6%, the total cost of college for 5 years when the youngest child starts college is $169,725.49.
To save for this expense, Amita needs to make annual savings payments until the youngest child starts college. Assuming a portfolio rate of return of 8%, she needs to save $28,610.89 per year at the end of the year to reach her goal.
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Year Beginning-of-Year Price Dividend Paid at Year-End 2007 $ 260 $ 6 2008 $ 270 $ 6 2009 $ 250 $ 6 2010 $ 255 $ 6 An investor buys 3 shares of XYZ at the beginning of 2007, buys another 2 shares at the beginning of 2008, sells 1 share at the beginning of 2009, and sells all 4 remaining shares at the beginning of 2010. 1: What are the arithmetic and geometric average time-weighted rates of return for the investor? (Round your answers to 2 decimal places. Omit the "%" sign in your response.) 2: (a) What is the dollar-weighted rate of return? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places. Omit the "%" sign in your response.) Rate of return % (b) Prepare a chart of cash flows for the four dates corresponding to the turns of the year for January 1, 2007, to January 1, 2010. (Negative amounts should be indicated by a minus sign. Omit the "$" sign in your response.) Year Cash flow 2007 $ 2008 $ 2009 $ 2010 $
Arithmetic average time-weighted rate of return: 4.46%
Geometric average time-weighted rate of return: 4.30%
(a) Dollar-weighted rate of return: -10.19%
(b) Year Cash flow
2007 $780
2008 $540
2009 -$255
2010 -$1,020
The investor bought 3 shares of XYZ at the beginning of 2007 for $780, 2 more shares at the beginning of 2008 for $540, then sold 1 share at the beginning of 2009 for $255. The investor then sold the remaining 4 shares at the beginning of 2010 for $1,020. The arithmetic and geometric average time-weighted rates of return of the investor were 4.46 and 4.30%, respectively. However, the dollar-weighted rate of return was -10.19%. This was primarily due to the investor selling 1 share at a lower price than what they paid for it. This shows the importance of timing when it comes to investing, as it is more beneficial to sell when the price is higher.
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A stock has an expected return of 11.85 percent, its beta is 1.08, and the risk-free rate is 3.9 percent. What must the expected return on the market be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Market expected return _________ % A stock has an expected return of 10.45 percent, its beta is .85, and the expected return on the market is 11.8 percent. What must the risk-free rate be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Risk-free rate _______ %
The expected return on the market must be 13.49% and the risk-free rate must be 2.03%.
To calculate the expected return on the market, we can use the Capital Asset Pricing Model (CAPM):
E(Ri) = Rf + βi[E(Rm) - Rf]
where E(Ri) is the expected return of the stock, Rf is the risk-free rate, βi is the beta of the stock, and E(Rm) is the expected return on the market.
Using the values given in the question, we can solve for E(Rm):
11.85% = 3.9% + 1.08[E(Rm) - 3.9%]
E(Rm) = (11.85% - 3.9%) / 1.08 + 3.9% = 13.49%
Therefore, the expected return on the market must be 13.49%.
To calculate the risk-free rate in the second part of the question, we can rearrange the CAPM equation:
Rf = E(Ri) - βi[E(Rm) - Rf]
Plugging in the values given in the question, we get:
Rf = 10.45% - 0.85[11.8% - Rf]
Solving for Rf, we get:
Rf = (10.45% - 0.85 × 11.8%) / (1 - 0.85) = 2.03%
Therefore, the risk-free rate must be 2.03%.
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If the marginal propensity to save is expected to increase, this means that in the short run:A) Real GDP will increase.B) Real GDP will decrease.C) Real GDP will be unchanged.D) Real GDP will decrease then increase.
If the marginal propensity to save is expected to increase, this means that in the short run, B) Real GDP will decrease. Thus, option B is correct.
1. When the marginal propensity to save increases, it means that people are saving more of their income rather than spending it on goods and services.
2. As a result, there will be less consumer spending, which is a major component of GDP (Gross Domestic Product).
3. With less consumer spending, demand for goods and services decreases.
4. Businesses will then respond to the decrease in demand by cutting back on production, leading to a decrease in Real GDP.
Thus, option B is correct.
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5. assuming that nominal interest rates stay the same, an decrease in the rate of inflation would raise the real interest rate, which would tend to: chergg
Assuming that nominal interest rates stay the same, a decrease in the rate of inflation would raise the real interest rate, which would tend to increase the demand for loanable funds.
This is because a decrease in inflation reduces the erosion of the purchasing power of money over time, making lending and borrowing more attractive.
With a higher real interest rate, lenders earn a higher return on their investment and are therefore more willing to lend, while borrowers face a higher cost of borrowing and are therefore less willing to borrow. This results in a shift in the supply and demand for loanable funds, which ultimately affects interest rates and economic growth.
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Payback comparisons Nova Products has a 4-year maximum acceptable payback period. The firm is considering the purchase of a new machine and must choose between two alternatives. The first machine requires an initial investment of $13,000 and generates annual cash inflows of $4,000 for each of the next 12 years. The second machine requires an initial investment of $33,000 and provides an annual cash inflow of $8,000 for 20 years. A. Determine the payback period for each machine. B. Comment on the acceptability of the machines, assuming that they are independent projects. C. Which machine should the firm buy? Why? D. Does this problem illustrate any of the payback method's weaknesses?
The payback period for the first machine is 3.25 years and for the second machine, it is 4.125 years. The first machine is acceptable as it has a payback period of 3.25 years which is shorter than the second machine. Nova Products should buy the first machine as it has a payback period of 3.25 years. Yes, this problem illustrates some of the payback method's weaknesses.
A. The payback period for the first machine can be calculated by dividing the initial investment by the annual cash inflow: $13,000/$4,000 = 3.25 years. The payback period for the second machine can be calculated in the same way: $33,000/$8,000 = 4.125 years.
B. The acceptable payback period for Nova Products is 4 years. Based on this criterion, the first machine is acceptable as it has a payback period of 3.25 years. However, the second machine has a payback period of 4.125 years, which is longer than the acceptable payback period. Therefore, the second machine is not acceptable.
C. Based on the payback period criteria, Nova Products should buy the first machine as it has a payback period of 3.25 years, which is within the acceptable limit of 4 years. Even though the second machine has higher annual cash inflows, it is not acceptable due to its longer payback period.
D. Yes, this problem illustrates some of the payback method's weaknesses. The payback method only considers the time required to recover the initial investment and ignores the cash inflows beyond the payback period.
In this case, the first machine has a shorter payback period but generates cash inflows for only 12 years, whereas the second machine has a longer payback period but generates cash inflows for 20 years. Therefore, the payback method fails to consider the profitability of the project beyond the payback period.
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At the beginning of the year, Alpha Corporation purchased 100 corporate bonds of Beta Corporation for $1000 per bond. During the year, Beta made $5,000 interest payment to Alpha. At the end of the year, Beta’s corporate bond has a market value of $1020 per bond. What amount should Alpha recognize in its year-end income statement if the investment is treated as an available-for-sale security and what amount should be recognized in the income statement if the investment is treated as a trading security?
Available-for-sale security: $5000, Trading security: $7000
Available-for-sale security: $0, Trading security: $2000
Available-for-sale security: $5000, Trading security: $5000
The amount Alpha should recognize in its year-end income statement if the investment is treated as an available-for-sale security is $5000, and if the investment is treated as a trading security is $7000. So, the correct answer is Available-for-sale security: $5000, Trading security: $7000.
If Alpha Corporation treats the investment as an available-for-sale security, it would recognize $5000 in its year-end income statement. This is because the interest payment received from Beta Corporation is recognized as income, but the change in the market value of the bond is recognized as unrealized gain or loss in other comprehensive income.
If Alpha Corporation treats the investment as a trading security, it would recognize $7000 in its year-end income statement. This is because both the interest payment and the change in the market value of the bond are recognized as income in the trading portfolio.
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Student ID Student Name Section No: Tutor Name Date of Submission Assignment Choose any company (Govemment or Private) doing business in Oman. Analyze and describe the influence of Islamic approach on the practices of the selected company Explain in short company profile andjes key projects and stily any for Inic principles and approaches the company is following in its esiness practice (100-250 words maximum 3 Mark (Guideline. You should choose one company has the companies wie ed explain the Islamic principles and approaches the company implementing in its business in your own Answer: Explain the benefits the company is getting or beneficiaries are receiving by implementing me principles and approaches in the company-100-90timum) Marks Guidelike your explain how blamic principles and peaches of the company are benefiting the customers, employees, der stakeholder may include who is getting the benefit and what are the petitive Answer: Your opinios By The Islande principles and approaches that you suggest to the chosen Organis. Justify your choice. 100-250 wurde am Marke (ulice We best any other two sitab tem principles and approaches your proper to the compaty. Explain how your suggested pipescu Awer: Reference Mark (Provide suitable references such as company was reports
A vision statement explains a company's mission, what it is aiming to accomplish, and what it is genuinely educational content striving towards. The majority of vision statement authors believe it to be a fulfilling and inspiring experience.
They get the chance to describe all the factors that affect the organization's strategy. When writing a vision statement for a business that produces educational content for students, Nora should keep in mind the type of student the business serves so that the statement makes more sense to them.
TD Bank Group, Shopify, and Sodexo are, in my perspective, three Canadian businesses that actively promote inclusion and diversity in the workplace. Through programmes like "TD Ready Commitment," which aims to break down barriers for underrepresented communities, TD Bank Group is a pioneer in fostering diversity and inclusion. They regularly participate in outreach programmes to find diverse talent and have introduced diversity training for their staff. The diversified workforce at TD Bank.
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the interstate commerce act outlawed group of answer choices none of these choices attempted to control business trusts. outlawed the restraint of trade between states. extended subsidies to railroads. unfair pricing activities on the part of railroads
The Interstate Commerce Act A. outlawed unfair pricing activities on the part of railroads.
This legislation was enacted in 1887 in response to growing public concerns about the monopolistic practices and discriminatory rates imposed by railroads on shippers. The Act aimed to ensure fair and transparent pricing by prohibiting practices such as rate discrimination and pooling arrangements. It also established the Interstate Commerce Commission (ICC) as a regulatory body to oversee compliance and enforce the provisions of the Act.
The Interstate Commerce Act marked a significant turning point in American business regulation, as it represented one of the first major attempts by the federal government to exert control over private corporations. However, it did not directly address issues related to business trusts (C) or restraint of trade between states (B), and it did not extend subsidies to railroads (D). So, Therefore the correct option is (A) outlawed unfair pricing activities on the part of railroads.
The Question was Incomplete, Find the full content below :
The Interstate Commerce Act
A) outlawed unfair pricing activities on the part of railroads
B) outlawed the restraint of trade between states
C) attempted to control business trusts
D) extended subsidies to railroads
E) none of the above
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the fundamental belief behind the market-oriented us economy is that firms are in the best position to know if their actions will group of answer choices contravene antitrust regulations. lead to attracting more customers. let them produce more efficiently. the right answer is both b and c.
The fundamental belief behind the market-oriented us economy is that firms are in the best position to know if their actions will "lead to attracting more customers" and "let them produce more efficiently" as antitrust regulations. The correct answer is (B) and (C).
Antitrust regulations are in place to prevent monopolies and promote competition in the market, but ultimately, it is up to the firms to determine if their actions comply with these regulations. Meanwhile, firms are motivated to produce efficiently and attract more customers to maximize profits in a competitive market economy.
Therefore, the correct option is B and C.
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Company ZWZ manufactures three products in a serial system: Product XA is manufactured in Stage 1. Product XB in Stage 2, and XC in Stage 3. Product XB has a sales potential in the market; hence, some of it can be sold at the end of Stage 2, and the remaining can be moved to Stage 3. The third stage produces Product XC, and then delivers it to customers. Two units of Product XA produced in Stage 1 are required for each unit of Product XB in Stage 2. In addition, four units of Product XB produced in Stage 2 are required for each unit of Product XC in Stage 3. Stage 1 can only use regular time, however. Stage 2 has the options of using regular time and overtime in manufacturing. On the other hand, Stage 3 has only one alternative, which is subcontracting. The pertinent data are provided below: Stage 1 Stage 2 Stage 3 Unit regular time cost (TL) 11 12 No regular time Unit overtime cost (TL) No overtime 18 No overtime Unit subcontracting cost (TL) No subcontracting No subcontracting 22 Unit selling price (TL) No sales 25 30 Unit processing time (hrs) 0.07 0.09 - Regular time capacity (hrs) 320 160 No regular time Overtime capacity (hrs) No overtime 80 No overtime Minimum subcontracting No subcontracting No subcontracting 100 volume (units) Maximum sales volume (units) No sales 3300 4500 Formulate the production planning problem of the company as a three-stage model (Define the decision variables explicitly!). Hint: Drawing the system first will help you in modelling.
The production planning problem of Company ZWZ can be formulated as a three-stage model with the following decision variables:
x1: Number of units of Product XA produced in Stage 1
x2: Number of units of Product XB produced in Stage 2
x3: Number of units of Product XC produced in Stage 3
y: Number of units of Product XB sold at the end of Stage 2.
The objective is to maximize the total profit, which is the revenue from sales minus the total cost of production and subcontracting.
Constraints include the availability of regular time and overtime in Stage 2, the requirement of units of Product XA and XB for producing XB and XC, and the minimum volume requirement for subcontracting in Stage 3.
The model should also consider the maximum sales volume for each product.
Note: A diagram of the system would help in visualizing the constraints and decision variables.
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Given the following possible corporate objectives, provide a rational argument explaining which of them should be the main goal of the financial manager (a) profit maximization (b) sales maximization (c) maximization of benefit to employees and the local community (d) maximization of shareholder wealth
Briefly explain the role of the following: a) The money markets b) The bond markets c) The foreign exchange markets d) The share markets e) The derivatives market 21 Hou do 10 30. Firm A has a s
The main goal of the financial manager should be profit maximization.
Here, correct option is A.
Profit is the difference between revenue and costs and it is the most important indicator of a company's performance and profitability. Profit maximization helps to increase the value of the firm over time and will ultimately benefit shareholders. It also helps to return value to the employees, as well as to the local community, as a profitable firm can pay more wages and support more local businesses.
A. The money markets are markets for short-term loans and investments. These instruments provide a quick and efficient way to raise money for short-term investments and trading activities.
B. The bond markets are where debt instruments, such as bonds and treasuries, are bought and sold. These instruments provide a way for companies and governments to raise money for longer-term investments.
C. The foreign exchange markets are where different currencies are bought and sold. These markets provide a way for companies to manage their currency exchange risk.
D. The share markets are where stocks and other equity instruments are bought and sold. This is a way for companies to raise capital and for investors to buy and sell shares.
E. The derivatives markets are where derivatives, such as futures and options, are bought and sold. These instruments provide a way to manage risk and hedge against price movements.
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How do you know if you use z-test or t-test?
The decision to use a z-test or t-test depends on several factors, such as the sample size, the population standard deviation, and the level of significance.
If the sample size is large (typically above 30), and the population standard deviation is known, then a z-test can be used. On the other hand, if the sample size is small (typically less than 30), and the population standard deviation is unknown, then a t-test is appropriate.
Additionally, if the level of significance is very high or very low, a z-test may be more appropriate since it assumes a normal distribution. However, if the sample size is small and the population distribution is unknown or non-normal, a t-test may be more appropriate.
Ultimately, the choice of which test to use should be based on the specific circumstances of the study and the assumptions of each test.
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The decision to use a z-test or t-test depends on several factors, such as the sample size, the population standard deviation, and the level of significance.
If the sample size is large (typically above 30), and the population standard deviation is known, then a z-test can be used. On the other hand, if the sample size is small (typically less than 30), and the population standard deviation is unknown, then a t-test is appropriate.
Additionally, if the level of significance is very high or very low, a z-test may be more appropriate since it assumes a normal distribution. However, if the sample size is small and the population distribution is unknown or non-normal, a t-test may be more appropriate.
Ultimately, the choice of which test to use should be based on the specific circumstances of the study and the assumptions of each test.
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Sportsman Company To: Roula Khan Controller From: CPA Candidate. Supervisory Accountant Date: April 2. Year 6 RE: AR General Ledger Balance Per your request, I have reviewed the AR general ledger balance prepared by the junior accountant Highlight #1 The 22 March sales return credit entry of $1,200 is correct, Choose an option [Original text] The 22 March soles return credit entry of $1,200 is correct. [Delete text) [Replace with) The March sales return entry should be a debit entry of $1,200. [Replace with) The 22 March sales return entry should be a debit entry of $14,000. Highlight 4 The 29 March customer account write-off debit entry of $25.600 is correct. Choose an option Highlight #5 The 29 March customer account recovery credit entry of $14.000 is correct. - Choose an option Highlight #6 The 31 March credit sales debit entry of $636.250 is correct Choose an option Highlight #7 The 31 March credit sales credit entry of $314.800 is correct. Choose an option Highlight The March ending balance of $791.650 is correct. Choose an option
The March ending balance of $791,650 is correct, and no changes are required for this entry.
Firstly, highlight #1 indicates that the 22 March sales return credit entry of $1,200 is correct. Therefore, no changes are required for this entry.
Moving on to highlight #4, the 29 March customer account write-off debit entry of $25,600 is also correct. Therefore, there is no need to make any changes to this entry.
Highlight #5 shows that the 29 March customer account recovery credit entry of $14,000 is also correct. Hence, no changes are required for this entry either.
Highlight #6 indicates that the 31 March credit sales debit entry of $636,250 is correct. Therefore, there is no need to make any changes to this entry.
Highlight #7 shows that the 31 March credit sales credit entry of $314,800 is correct. Hence, no changes are required for this entry either.
Lastly, highlight #2 shows that the March sales return entry should be a debit entry of $14,000, and not $1,200 as originally stated. Therefore, this entry needs to be replaced with the correct amount.
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How to calculate the percentages of all New Interest-OnlyLending and New Principal-and-Interest Lending out of Total NewLending during the period.This question is related to the "Mortgage Market" i
The percentages of new interest-only lending and new principal-and-interest lending out of total new lending during the period can be calculated by dividing the total new interest-only lending and new principal-and-interest lending by the total new lending and multiplying by 100.
Can you explain the method of calculating the percentages for New Interest-Only Lending and New Principal-and-Interest Lending out of Total New Lending during a given period in the Mortgage Market?To calculate the percentages of all new interest-only lending and new principal-and-interest lending out of total new lending during a specific period in the Mortgage Market, you can follow these steps:
Collect data on the total new lending during the period in question.Collect data on the total new interest-only lending during the period in question.Collect data on the total new principal-and-interest lending during the period in question.Calculate the percentage of new interest-only lending by dividing the total new interest-only lending by the total new lending and multiplying by 100.Calculate the percentage of new principal-and-interest lending by dividing the total new principal-and-interest lending by the total new lending and multiplying by 100.The sum of the percentages of new interest-only lending and new principal-and-interest lending should equal 100%.For example, if the total new lending during the period is $100 million, and the total new interest-only lending is $30 million, and the total new principal-and-interest lending is $70 million, then:
The percentage of new interest-only lending would be (30/100) x 100 = 30%The percentage of new principal-and-interest lending would be (70/100) x 100 = 70%The sum of the percentages of new interest-only lending and new principal-and-interest lending would be 30% + 70% = 100%.Learn more about Mortgage Market
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(Common stock valuation) You intend to purchase Dorchester common stock at $51.00 per share, hold it for 1 year, and then sell it after a dividend of $6.25 is paid. How much will the stock price have to appreciate for you to satisfy your required rate of return of 18 percent?
The stock price must rise to 87.62 in order for your required rate of return of 18 percent to be met.
How is the value of common stock determined?Common stock is calculated as follows: Total equity minus preferred stock, additional paid-in capital, retained earnings, and Treasury stock.
1.16= (6.25 + SP - 50.50) / 50.50 .
SP=87.62
Present value, multiplier, and asset-based valuation models are the three main types of equity valuation models. Value is estimated by present value models as the present value of anticipated benefits in the future. Based on a multiple of some fundamental variable, multiplier models calculate intrinsic value.
The fact that a stock's intrinsic value may differ from its current price gives rise to the significance of stock valuation. By knowing a stock's characteristic worth, a financial backer might decide if the stock is finished or underestimated at its ongoing business sector cost.
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Patterson Leasing is a private company that specializes in leasing industrial extruders for pulping fruits. A new extruder is priced at $235,000 and the installation costs would be $15,000. It would fall in the 3–year age group for tax purposes although it has a useful life of 8 years (the allowed deprecation rates are 33.33%, 44.45%, 14.81%, 7.41%). The company could invest money at 6% in alternative projects. It falls in the 38% tax bracket. The service and maintenance costs (due at the beginning of each year) from the manufacturer would cost $12,000 and the warranty + insurance charges are $2000 per year (due also at the beginning of each year). Alphonso Pulping wants to lease this equipment for 5 years. The residual value of the equipment at the end of 5 years is expected to be $25,000. Compute what should be the minimum lease amount Patterson should charge to Alphonso Pulping (due at the beginning of each year)?
The minimum lease amount that Patterson should charge to Alphonso Pulping is $51,939.67. This amount is calculated by taking into account the present value of the lease payments, the residual value, the depreciation, and the internal rate of return.
The present value of the lease payments is the sum of the discounted cash flows of each year's lease payments. The discounted cash flow of each year is calculated by multiplying the lease payment by the discounted factor to factor in the time value of money.
The residual value is the value of the equipment at the end of the lease term. The depreciation is the amount of the purchase price that can be written off each year for tax purposes.
The internal rate of return is the rate of return that the company could have earned if it invested its money in an alternative project. The internal rate of return is calculated by finding the interest rate that makes the present value of the lease payments equal to the purchase price of the equipment.
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Initial Cost (includes installation): $6,000 Useful Life: 6 years Residual value: $500 Annual rent for space $1,0000 Annual repairs and maintenance $300 Annual revenue: $4,000. This rate will increase 2.5% per year. Annual electricity cost: $ 500. This rate will increase 1% per year. A $1,300 overhaul/upgrade is expected at the end of year 3. This cost is depreciated over the remaining 3 years. Charging companies have a pretax cost of capital of 10% due to their high risk. After 6 years the charging equipment can be sold for its residual value. The tax rate is currently 20% and straight-line depreciation can be used for tax purposes. 1. Calculate the NPV/payback and annualized ROI* of an average EV charging station under the current conditions. What is the PV of the income taxes/payments collected/paid by the government for the 100,000 planned charging stations? The Government's cost of capital is 2%..governments don't pay taxes. Assume that the charging companies have other income, so they are eligible for tax credits (refunds/reductions). For example, at the 40% tax rate, an annual loss of $10,000 will generate an offsetting $4,000 cash inflow due to the reduction of taxes (net cash flow -$6,000). 2. Analyze the following INDEPENDENT policy ideas to encourage investment in EV charging stations. Show the incremental effect on NPV of an average charging station and the effect on total income taxes/payments collected/paid by the Government. A. Reducing the corporate tax rate on new charging station profits to 30%. B. Charging no income taxes on new charging stations for the first 3 years. C. Allowing charging station companies to fully depreciate their initial investment in the first year for tax purposes. D. Providing free rent for charging stations at federal buildings. E. Federally guarantee loans to charging station companies thereby lowering their pre-tax cost of debt to 2%.
The NPV of an average EV charging station is -$734, with a payback period of 5 years and an annualized ROI of -6.9%. The PV of income taxes/payments collected/paid by the government for the 100,000 planned charging stations is $16,368,000.
The incremental effect on NPV and total income taxes/payments collected/paid by the government for policy ideas A, B, C, D, and E are as follows: A) NPV +$1,676, Total taxes paid -$8,400; B) NPV -$11,507, Total taxes paid $0; C) NPV +$5,230, Total taxes paid -$4,000; D) NPV +$332, Total taxes paid $0; E) NPV +$2,223, Total taxes paid -$1,200,000.
Policy A would increase the NPV and reduce total taxes paid, while policy B would decrease the NPV and result in no income taxes paid. Policy C would increase the NPV and reduce income taxes paid.
Policy D would increase the NPV slightly and result in no income taxes paid. Policy E would increase the NPV and reduce income taxes paid significantly.
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Question 2 A firm has total assets of $3,750,000 and total liabilities of $1,104,000. The firm's net profit for the period is $250,000. If the firm's payout ratio is 60%, how much is the amount of additions to retained earnings? Answer:
The amount of additions to retained earnings is $100,000.
The amount of additions to retained earnings can be calculated using the formula:
Additions to Retained Earnings = Net Profit - Dividends
First, we need to calculate the amount of dividends, which is equal to the payout ratio multiplied by the net profit:
Dividends = Payout Ratio * Net Profit
Given that the payout ratio is 60% and the net profit is $250,000, we can calculate the dividends as follows:
Dividends = 0.60 * $250,000 = $150,000
Now, we can substitute the calculated dividends value into the formula for additions to retained earnings:
Additions to Retained Earnings = Net Profit - Dividends
Additions to Retained Earnings = $250,000 - $150,000
Additions to Retained Earnings = $100,000
We can also calculate this using this method:
If the firm's payout ratio is 60%, it means that 40% of the net profit will be added to retained earnings.
So, the amount of net profit added to retained earnings can be calculated as:
$250,000 x 40% = $100,000
Therefore, the amount of additions to retained earnings is $100,000.
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suppose that you solve the lp relaxation of a production problem in which you are trying to minimize cost. the optimal value of the objective function is $250,000. you know that when you solve this problem as an integer program that the optimal solution will be greater than or equal to $250,000. less than or equal to $250,000. greater than $250,000. less than $250,000.
When the LP relaxation of a production problem with the objective of minimizing cost has an optimal value of $250,000, the optimal solution of the integer program will be a) greater than or equal to $250,000.
The LP relaxation of an integer programming problem is obtained by relaxing the integer constraints to continuous variables, allowing non-integer values in the solution.
The LP relaxation solution provides a lower bound on the optimal solution of the integer program, but it may not be feasible in the integer program. In this case, the LP relaxation solution has an optimal value of $250,000.
When we solve the integer program, we enforce the integer constraints and seek feasible solutions. The objective function value of the integer program can be equal to, greater than or less than the optimal value of the LP relaxation.
However, since the objective function is to minimize cost, we cannot have a solution greater than the optimal value of the LP relaxation, which is $250,000. Therefore, the optimal solution of the integer program will be greater than or equal to $250,000(A).
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cooking wok value to home users value to professional chefs no-name brand $50 $60 high-end professional series $70 $100 given an equal amount of users, if the firm can only set one price, how should the firm price the no-name brand wok?
If the firm can only set one price, it should price the no-name brand wok at $60, the value to professional chefs.
This is because professional chefs are likely to be willing to pay more for a wok that meets their specific needs, whereas home users may be more price-sensitive and willing to settle for a lower-quality wok at a lower price. By pricing the no-name brand wok at $60, the firm can capture the maximum value from the professional chef market while still being competitive enough to attract home users.
If the firm aims to maximize profits, it may consider pricing the no-name brand wok at $60, as this is the value to professional chefs who may be willing to pay more for a functional tool.
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in principal-principal conflicts (conflicts between controlling shareholders and minority shareholders), the ownership (of equity) is group of answer choices widely dispersed. controlled almost completely by management. concentrated by controlling shareholders. often held by employee stock ownership programs.
In principal-principal conflicts, the ownership (of equity) is concentrated; often greater than 50% of equity is controlled by controlling shareholders. The right answer is c.
Conflicts between the minority shareholders and the controlling shareholders are referred to as principal-principal (PP) conflicts. PP conflicts are significant in businesses when there is a controlling shareholder who controls ownership and control. PP conflicts are frequently observed in emerging and transitioning economies, which exhibit concentrated company ownership and a lack of institutional support.
By directly influencing the incentives of the controlling shareholder to obtain private advantages of control—defined as the tangible and intangible rewards from company ownership that are not shared with other shareholders—institutions play a significant role in PP conflicts.
The correct answer is option c.
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A hospital employee's internal customers do not include: Group of answer choices A)The employee's supervisor B)Fellow employees in the same unit or department c)Employees from other departments D) Vendor representatives
Internal customers are people within the same organization who require a service or product from another department. They are typically employees within the same business or organization.
An example of an internal customer is a doctor in the hospital requesting supplies from the purchasing department. The hospital employee's internal customers would include the employee's supervisor, fellow employees in the same unit or department, and employees from other departments.
Vendor representatives, however, would not be considered internal customers because they are not employees of the same company. Internal customers can be seen as the provider's peers, whereas external customers are seen as people who are not part of the organization.
Internal customers and external customers both have a different set of expectations and requirements when it comes to service, so it is important to know the difference between the two. Internal customers have a more intimate knowledge of the organization and therefore have higher expectations for the services they receive.
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lakeside incorporated produces a product that currently sells for $48 per unit. current production costs per unit include direct materials, $13; direct labor, $15; variable overhead, $8; and fixed overhead, $8. product engineering has determined that certain production changes could refine the product quality and functionality. these new production changes would increase material and labor costs by 20% per unit. required: what would be the incremental profit or loss if lakeside could sell the refined version of its product for $53 per unit? note: do not round your intermediate calculations. round your final answer to 2 decimal places. loss amounts should be indicated with a minus sign. should it be processed further?
So implementing the production changes would result in a loss of $0.60 per unit. Based on this analysis, it may not be worthwhile to process the product further.
To calculate the incremental profit or loss, we need to first calculate the current total production cost per unit:
Direct materials + Direct labor + Variable overhead + Fixed overhead = $13 + $15 + $8 + $8 = $44 This means that the current profit per unit is $48 - $44 = $4.
If Lakeside were to implement the production changes, the new production cost per unit would be: 20% increase in direct materials cost = $13 x 1.2 = $15.60
20% increase in direct labor cost = $15 x 1.2 = $18 Variable overhead remains the same at $8 Fixed overhead remains the same at $8
If Lakeside were to sell the refined version of the product for $53 per unit, the new profit per unit would be: Sale price - Total production cost per unit = $53 - $49.60 = $3.40
Therefore, the incremental profit or loss for implementing the production changes would be: Incremental profit/loss = New profit per unit - Current profit per unit Incremental profit/loss = $3.40 - $4 = -$0.60 (loss)
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everyone is excited about the new subdivision going in on the south end of the valley. it will have more than 400 new homes, a shopping center, a water park, and an extensive park system. people are so excited, in fact, that there is a long waiting list of people who want to buy into the community. according to arizona law, what must the association do when one of those waiting-list members states his intention to buy?
According to Arizona law, when a waiting-list member states their intention to buy in the new subdivision, the association must follow a specific process.
The specific process in the new subdivisionFirst, they need to provide the prospective buyer with detailed information about the community, including the rules and regulations, fees, and any other important documents. This ensures the buyer is fully informed about the community they are considering joining.
Next, the association should promptly update the waiting list, giving priority to the interested buyer based on their position in the list. They should also communicate with the buyer about the next steps, such as signing a purchase agreement and completing any required paperwork.
Lastly, the association should ensure that the buyer meets all eligibility requirements to join the community, such as financial stability and adherence to community guidelines.
By following these steps, the association will maintain a fair and orderly process for welcoming new residents into the exciting subdivision on the south end of the valley.
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capital is the amount of money paid into a company by its owners.need help? review these concept resources.
The given statement "capital is the amount of money paid into a company by its owners" is TRUE because it serves as a source of funding for the company's operations, growth, and investments.
Definition of capitalCapital refers to the amount of money that is invested by the owners of a company or organization. This can include both financial and non-financial contributions, such as equipment or property.
The purpose of capital is to provide the business with the resources it needs to operate and grow. In return for their investment, owners receive a share of the company's profits and have a say in how it is run.
It is important for businesses to carefully manage their capital in order to ensure that they have enough resources to operate effectively, while also providing a return on investment to their owners.
Additionally, businesses may seek external sources of capital, such as loans or investments from third-party individuals or organizations, in order to further expand and grow their operations.
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QUESTION 28 If you were to compare a short term bond and a long time to maturity bond, which has more interest rate risk: A. the short term bond B. the long term bond C neither has interest rate
When comparing a short term bond and a long time to maturity bond, the one with more interest rate risk is B. the long term bond.
Interest rate risk refers to the potential for the value of a bond to decrease due to changes in interest rates. Bonds with longer maturities are more sensitive to changes in interest rates, resulting in a greater level of interest rate risk. This is because the longer the time to maturity, the more uncertain the future interest rates become.
As interest rates change, the present value of the bond's future cash flows will also change. If interest rates rise, the present value of the bond's cash flows decreases, which results in a lower bond price. Conversely, if interest rates fall, the present value of the bond's cash flows increases, which results in a higher bond price.
On the other hand, short term bonds have less interest rate risk because they have a shorter time to maturity. This means that there is less uncertainty regarding future interest rates, and therefore, the bond's price is less likely to be affected by interest rate changes.
In summary, long term bonds have a higher interest rate risk compared to short term bonds due to the increased uncertainty of future interest rates and their greater sensitivity to interest rate changes.
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Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 5% rate. Dantzler's WACC is 16%.
Year 0 FCF N/A
Year 1 FCF -$15 million
Year 2 FCF $28 million
Year 3 FCF $46 million
a. What is Dantzler's horizon, or continuing value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year 3.) Round your answer to 2 decimal places. Enter your answers in millions.
b. What is the firm's value today? Round your answer to 2 decimal places. Enter your answers in millions. Do not round intermediate calculations.
c. Suppose Dantzler has $141 million of debt and 7 million shares of stock outstanding. What is your estimate of the current price per share? Round your answer to 2 decimal places.
Dantzler's horizon value is $536.67 million. Dantzler's firm value today is $290.88 million. The estimated price per share is $21.98 .
a. To calculate the horizon value, we need to find the present value of all free cash flows beyond year 3, discounted back to year 3 using the constant growth rate formula:
Horizon value = (FCF4 / (WACC - g))
where,
FCF4 is the free cash flow in year 4 and
g is the expected constant growth rate.
Since FCF4 is not given, we need to estimate it by applying the 5% growth rate to the year 3 FCF:
FCF4 = FCF3 x (1 + g)
= $46 million x 1.05
= $48.3 million
Substituting the values into the formula, we get:
Horizon value = ($48.3 million / (0.16 - 0.05))
= $536.67 million
Therefore, Dantzler's horizon value is $536.67 million.
b. To find the firm's value today, we need to find the present value of all free cash flows, including the horizon value.
Using the formula for the present value of a growing perpetuity, we can find the present value of the horizon value:
Present value of horizon value = (Horizon value / (1 + WACC)^3)
= ($536.67 million / (1 + 0.16)^3)
= $254.19 million
Using the formula for the present value of a series of cash flows, we can find the present value of the first 3 years' cash flows:
Present value of first 3 years' cash flows = (-$15 million / (1 + 0.16)^1) + ($28 million / (1 + 0.16)^2) + ($46 million / (1 + 0.16)^3)
= $36.69 million
Therefore, the firm's value today is the sum of the present value of the horizon value and the present value of the first 3 years' cash flows:
Firm's value today = Present value of horizon value + Present value of first 3 years' cash flows
= $254.19 million + $36.69 million
= $290.88 million
Therefore, Dantzler's firm value today is $290.88 million.
c. To find the estimated price per share, we need to divide the firm's value by the number of outstanding shares.
Number of outstanding shares = 7 million
Estimated price per share = (Firm's value today - Debt) / Number of outstanding shares
= ($290.88 million - $141 million) / 7 million
= $21.98
Therefore, the estimated price per share is $21.98.
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