The amount of Fairview's total fixed costs was $480,000, when the variable cost per unit was $29, and Fairview's margin of safety was 80,000 units.
To determine Fairview Corporation's total fixed costs, we can follow these steps: 1. Calculate the contribution margin per unit: This is the difference between the selling price per unit ($35) and the variable cost per unit ($29). So, contribution margin per unit = $35 - $29 = $6.
2. Calculate the break-even point in units: Since the margin of safety is 80,000 units, we can calculate the break-even point by subtracting the margin of safety from the total units sold. Break-even point = 160,000 units - 80,000 units = 80,000 units.
3. Calculate the total fixed costs: To find the total fixed costs, multiply the break-even point in units by the contribution margin per unit, and then divide by the break-even point in units. Total fixed costs = (80,000 units x $6) / 80,000 units = $480,000.
Therefore, the amount of Fairview's total fixed costs was $480,000.
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one thousand dollars is borrowed for one year at an interest rate of % per month. if the same sum of money could be borrowed for the same period at an interest rate of 6% per year, how much could be saved in interest charges?
The amount saved depends on the value of the monthly interest rate, and if it is greater than 0.5%, then switching to the loan with the annual interest rate would result in savings equal to the difference in interest charges.
To compare the interest charges of two loans with different interest rates and time periods, we need to calculate the total amount of interest paid for each loan. Let's start by calculating the interest charges for the loan with the monthly interest rate.
If the loan amount is $1000 and the interest rate is x% per month, then the interest charged each month would be (1000 * x)/100. The total interest charged over one year would be the sum of the monthly interest charges, which is:
[tex]\sum_{i=1}^{n} \frac{1000x}{100} = \frac{1000x}{100} + \frac{1000x}{100} + \cdots + \frac{1000x}{100} = nx \times 10[/tex] (12 times)
Simplifying this expression, we get:
(1000 × x × 12)/100
Which can be further simplified to:
120x
Now, let's calculate the interest charges for the loan with the 6% per year interest rate. If the loan amount is $1000 and the interest rate is 6% per year, then the total interest charged over one year would be:
(1000 × 6)/100
Which simplifies to:
60
To calculate the amount saved in interest charges, we need to subtract the interest charged for the 6% per year loan from the interest charged for the monthly interest rate loan. That is:
120x - 60
To find the value of x that makes this expression equal to zero, we can set it equal to zero and solve for x:
120x - 60 = 0
120x = 60
x = 0.5
Therefore, if the monthly interest rate is 0.5%, then the interest charged for the monthly interest rate loan and the 6% per year loan would be the same. If the monthly interest rate is higher than 0.5%, then the interest charged for the monthly interest rate loan would be higher than the interest charged for the 6% per year loan, and vice versa.
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Ringo Manufacturing is considering the purchase of a new machine for $50,000. The machine is expected to save the firm $15,000 (before tax) per year in operating costs over a 5 year period, and can be depreciated on a straight-line basis to a zero salvage value over its life. Alternatively, the firm can lease the machine for $8,000 per year for 5 years, with the first payment due in 1 year. The firm's tax rate is 20%, and its before tax cost of debt is 10%. The depreciation tax shield each year is:
The depreciation tax shield each year is $2,000.
Define depreciation.A depreciable asset's depreciation is a measurement of the wear and tear, consumption, or other loss of value that results from usage, the passage of time, or obsolescence due to advancements in technology and market trends.
Cost of machine = $50,000
Useful life of machine = 5 years
Calculation of annual depreciation using Straight line method would be as follows.
annual depreciation = (Cost of machine - Salvage Value of machine )/Useful life
annual depreciation = ($50,000 - $0)/5 years
Annual depreciation = $10,000
Calculation of annual tax shield on depreciation.
Annual tax shield = Annual depreciation × Tax rate
Annual tax shield = $10,000 × 20% = $2,000
Thus, the each year depreciation tax shield = $2,000
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indicate whether the following are "deductible" or "nondeductible" as medical expenses for tax purposes.a. transportation for medical careb. medical and hospital insurance premiumsc. nonprescription drugsd. diaper service, maternity clothese. eyeglasses (including contact lenses)f. hearing aids
Medical expenses for tax purposes are A. Transportation for medical care: Deductible, B. Medical and hospital insurance premiums: Deductible, C. Nonprescription drugs: Nondeductible, D. Diaper service, maternity clothes: Nondeductible, E. Eyeglasses (including contact lenses): Deductible, and F. Hearing aids: Deductible
Here's a brief overview of whether the listed items are deductible or nondeductible:
a. Transportation for medical care: Deductible - Transportation costs related to medical care, such as bus fares, parking fees, and mileage, can be deducted as a medical expense.
b. Medical and hospital insurance premiums: Deductible - Premiums for medical and hospital insurance are considered deductible expenses, as long as they are not reimbursed or paid by an employer.
c. Nonprescription drugs: Nondeductible - Over-the-counter drugs, vitamins, and supplements are generally not considered deductible medical expenses.
d. Diaper service, maternity clothes: Nondeductible - Diaper services and maternity clothes are not considered medical expenses and therefore are not deductible.
e. Eyeglasses (including contact lenses): Deductible - Eyeglasses and contact lenses prescribed by a medical professional for vision correction are considered deductible medical expenses.
f. Hearing aids: Deductible - Hearing aids, including batteries and maintenance costs, are deductible medical expenses if prescribed by a medical professional.
Remember, to claim these deductions, you must itemize your deductions on your tax return and your total medical expenses must exceed a certain percentage of your adjusted gross income. Always consult a tax professional for personalized advice and guidance.
The question was incomplete, Find the full content below:
indicate whether the following are "deductible" or "nondeductible" as medical expenses for tax purposes.
a. transportation for medical care
b. medical and hospital insurance premiums
c. nonprescription drugs
d. diaper service, maternity clothes
e. eyeglasses (including contact lenses)
f. hearing aids
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The current spot exchange rate between the Japanese yen and the Canadian dollar is 105/$. The yen is expected to appreciate by 5% against the dollar over the next six months. What do you expect the spot exchange rate between the yen and the dollar to be six months from now? Multiple Choice A. x94.50/$ B. x99.75/$ C. x110.25/$ D. x115.50/$
The expected spot exchange rate between the yen and the dollar six months from now is 94.50/$.(A)
Currently, the spot exchange rate is 105 yen per Canadian dollar. The yen is expected to appreciate by 5% against the dollar over the next six months. To find the new exchange rate, we can multiply the current rate by (1 - the appreciation rate).
1. Convert the appreciation rate to a decimal: 5% = 0.05
2. Subtract the appreciation rate from 1: 1 - 0.05 = 0.95
3. Multiply the current exchange rate by the adjusted rate: 105 * 0.95 = 99.75 yen per dollar
4. Since the yen is expected to appreciate, the number of yen per dollar will decrease. So, divide 1 by the new exchange rate: 1 / 99.75 ≈ 0.01003
5. Convert the result to yen per dollar: 0.01003 * 100 = 94.50 yen per dollar
Hence, the expected spot exchange rate after six months is 94.50 yen per dollar.(A)
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in which situations would a pstn be the best internet option? why?
In certain situations, PSTN (Public Switched Telephone Network) may still be the best internet option available. This is typically the case in areas with limited broadband infrastructure or where other internet options are unavailable.
PSTN internet is delivered over a traditional phone line and offers a slower connection speed than other options such as cable or fiber optics. However, it can still be a reliable option for basic internet use such as browsing the web, sending emails, and streaming music or video at lower resolutions.
Another situation where PSTN may be preferred is for those who are not heavy internet users and do not require high-speed connections. This can include those who only use the internet for basic communication or those who live in rural areas where broadband access is limited. PSTN internet can also be less expensive than other options, making it a more affordable choice for those on a budget.
Overall, while PSTN may not be the fastest or most modern option for internet connectivity, it can still be a viable choice in certain situations.
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Crawford Inc., a litter recycling company, uses a residual dividend policy. A debt-equity ratio of 2.1 is considered optimal. Earnings for the period just ended were $2,500, and a dividend of $640 was declared.
a) How much in new debt was borrowed?
b) What were total capital outlays?
$8,195.25 is new debt was borrowed. The total capital outlays were $12,104.07.
a) To determine how much in new debt was borrowed, we first need to calculate the equity portion of the capital structure. Since the debt-equity ratio is 2.1, this means that the equity portion is 1/2.1 = 0.476 of the total capital structure.
Retained earnings for the period were $2,500 and a dividend of $640 was declared, so the amount of earnings that were retained is:
$2,500 - $640 = $1,860
Since the residual dividend policy is being used, this means that all of the earnings that were retained must have been used to finance new investments. Therefore, the equity portion of the new investments is:
Equity portion = Retained earnings / Total new investments
0.476 = $1,860 / Total new investments
Total new investments = $1,860 / 0.476 = $3,908.82
The total capital outlays would be equal to the total new investments plus the amount of new debt borrowed. Let's assume that the new debt is denoted by D. Then we can write:
Total capital outlays = Total new investments + D
But we still need to determine D. We know that the debt-equity ratio is 2.1, so this means that the debt portion of the capital structure is 2.1 times the equity portion. Therefore:
Debt portion = 2.1 × Equity portion
Debt portion = 2.1 × 0.476 = 1.00056
This means that the debt-to-capital ratio is:
Debt-to-capital ratio = Debt portion / (Debt portion + Equity portion)
Debt-to-capital ratio = 1.00056 / (1.00056 + 0.476) = 0.677
We can now use this debt-to-capital ratio to solve for the amount of new debt borrowed:
Debt-to-capital ratio = D / (Total new investments + D)
0.677 = D / ($3,908.82 + D)
0.677($3,908.82 + D) = D
$2,646.96 + 0.677D = D
0.323D = $2,646.96
D = $8,195.25
b) The total capital outlays would be equal to the total new investments plus the amount of new debt borrowed, so we have:
Total capital outlays = Total new investments + D
Total capital outlays = $3,908.82 + $8,195.25
Total capital outlays = $12,104.07
Therefore, the total capital outlays were $12,104.07.
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Rosas, Inc will not pay a dividend for two years. Three years from today, the company will pay out a dividend of $3.30 (i.e., D3 = 3.30). After that, the dividend will grow at 6% per year forever. If the required rate of return on Rosas' stock is 14%, the stock's current price (i.e., Po) is $
The stock's current price is$19.30. The current price of Rosas' stock is determined by the dividend discount model (DDM), which models the stock price as the sum of all future dividends discounted back to the present.
This model assumes that the current dividend is equal to zero due to the fact that Rosas is not paying a dividend for the next two years. Therefore, the current price of Rosas' stock is equal to the present value of the future dividends, discounted at the required rate of return.
Specifically, the current price is equal to the present value of the dividend at the end of the third year (D3 = 3.30) discounted back for three years at the required rate of return (14%). This yields a current stock price of $19.30. In other words, investors are willing to pay $19.30 today in anticipation of receiving a dividend of $3.30 in three years and then a growing dividend at 6% per year thereafter.
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a business with a strong customer focus . select one: a. lacks a long-term perspective. b. realizes higher profits over the short-term. c. attracts shareholder that want high short-term earnings. d. managers are judged on the last quarter's results, rather than on efforts to ensure the long-run survival of the business. e. is in sync with customers' needs and therefore can ignore competitors' strategies.
e - is in sync with customers' needs and therefore can ignore competitors' strategies.
A business with a strong customer focus must put customers first in order to remain competitive and successful. This means being aware of customer needs and expectations, and adapting to changing market trends.
Such a business should focus on customer satisfaction, providing quality products and services, and developing a customer-centric culture. It should also strive to build relationships with customers and establish a long-term relationship with them.
By staying in tune with customers' needs and preferences, such a business can ignore competitors' strategies and focus on providing the best experience for its customers. This helps ensure long-term survival and success.
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when sports 360, a sports bar in new york, saw yet another sports bar open up across the street, it knew that it would have to lower its price again to stay in business. the city already had too many sports bars, and sports 360 intended on being one of those left after the inevitable shake out. in this situation, the best pricing strategy for sports 360 would be: group of answer choices premium pricing. a freemium program. market skimming. survival pricing.
Survival pricing is the best pricing strategy for Sports 360 to use in this highly competitive market. By lowering their prices to match or undercut the competition, they can maintain their customer base and stay in business long enough to outlast the competition. So the answer is survival pricing.
As a high school student, understanding the different pricing strategies used by businesses can be essential. One common pricing strategy that businesses use is survival pricing, which is used in highly competitive markets to stay afloat. In this situation, Sports 360, a sports bar in New York, saw another sports bar open up across the street, and it knew that it would have to lower its price again to stay in business. In this case, the best pricing strategy for Sports 360 would be survival pricing.
Survival pricing is a pricing strategy used by businesses to maintain their market position in highly competitive environments. In this strategy, a business will lower its prices to match or undercut the competition to maintain its customer base. The goal of survival pricing is to stay in business long enough to outlast the competition and emerge as the leader in the market.
In the case of Sports 360, there were already too many sports bars in the city, and they intended to be one of the remaining ones after the inevitable shakeout. To do so, they would need to lower their prices to stay competitive and maintain their customer base. Survival pricing is the most appropriate pricing strategy for Sports 360 because it allows them to stay in business long enough to outlast the competition.
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how
do ethnic rules affect ethnic party positions?
Ethnic rules are a set of laws, regulations or customs governing a particular ethnic group. These rules can affect the positions adopted by ethnic political parties in a number of ways.
First, they may be used to define the boundaries of a particular ethnic group, thereby creating a sense of political unity and distinctiveness from other groups. This can lead to an emphasis on the protection of rights and interests exclusive to that ethnic group.
Second, ethnic rules can also form the basis of political appeals to a particular ethnic group. This could include appeals to a shared history, language, culture or religious practices. This can be used to form a narrative about the uniqueness of the group and its need for protection from outside forces.
Finally, ethnic rules can also be used to create a sense of solidarity and loyalty to the party within an ethnic group. This could include the use of symbols, slogans and rituals associated with the group.
Overall, ethnic rules can have a significant impact on the positions taken by ethnic political parties. They can be used to create a sense of unity and distinctiveness, to form political appeals, and to generate loyalty and solidarity within the group.
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western company is preparing a cash budget for june. the company has $10,500 in cash at the beginning of june and anticipates $31,500 in cash receipts and $37,500 in cash payments during june. western company has an agreement with its bank to maintain a minimum cash balance of $10,000. as of may 31, the company has no loans outstanding. to maintain the $10,000 required balance, during june the company must: g
To maintain a minimum cash balance of $10,000, Western Company can either:
Reduce its cash payments during June to stay above the $10,000 minimum balance requirement.Borrow money to increase its cash balance.How to maintain a minimum cash balance of $10,000?Western Company needs to ensure that its ending cash balance at the end of June is not less than $10,000.
Starting cash balance (June 1): $10,500
Add: Cash receipts during June: $31,500
Total cash available: $42,000
Subtract: Cash payments during June: $37,500
Ending cash balance before maintaining minimum balance: $4,500
Since the ending cash balance before maintaining the minimum balance is less than $10,000, Western Company needs to take action to ensure it meets the agreement with its bank.
To maintain a minimum cash balance of $10,000, Western Company can either:
Reduce its cash payments during June to stay above the $10,000 minimum balance requirement.Borrow money to increase its cash balance.If Western Company decides to reduce its cash payments, it would need to reduce its payments by at least $5,500 ($10,000 minimum balance requirement - $4,500 ending cash balance before maintaining minimum balance).
If Western Company decides to borrow money, it would need to borrow at least $5,500 to bring its ending cash balance up to the $10,000 minimum balance requirement. However, this option would come with interest charges and other fees, so it may not be the most cost-effective solution.
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What monthly payment is required to pay or a 550.000 loan in seven years if the interest on the compounded De not round intermediate calcune around your newer 2 decimale) a. Arally b. Setan ally Quarterly d. Monthly
The monthly payment required to pay off a $550,000 loan in seven years depends on the interest rate and the compounding frequency.
I will explain the calculation using these compounding frequencies: a) Annually, b) Semi-annually, c) Quarterly, and d) Monthly.
To find the monthly payment, you need to use the loan payment formula:
P = L[r(1 + r)ⁿ]/[((1 + r)ⁿ) - 1]
Where:
P = monthly payment
L = loan amount ($550,000)
r = interest rate per month
n = total number of payments (7 years * 12 months = 84)
First, find the effective annual rate (EAR) based on the given nominal rate (i) and compounding frequency:
EAR = (1 + i/n)ⁿ - 1
Next, convert the EAR to a monthly rate (r):
r = (1 + EAR)¹/¹² - 1
Now, plug in the values for L, r, and n into the loan payment formula to find the monthly payment for each compounding frequency. Make sure to calculate the interest rate (r) for each frequency before calculating the monthly payment (P).
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true or false drinking stimulants like coffee is a good strategy to reduce your bac.
False. Drinking stimulants like coffee is not a good strategy to reduce your BAC (Blood Alcohol Concentration).
BAC is a measure of the amount of alcohol in your bloodstream, and it is influenced by various factors such as the amount and type of alcohol consumed, body weight, gender, and metabolism. Drinking stimulants like coffee may make you feel more alert and awake, but it does not lower your BAC or speed up the metabolism of alcohol in your system. In fact, combining alcohol with stimulants can be dangerous as it may mask the effects of alcohol and lead to overconsumption, resulting in impaired judgment, poor decision-making, and a higher risk of accidents and injuries.
The only way to reduce your BAC is to wait for your body to metabolize the alcohol naturally, which takes time. The liver can metabolize about one standard drink per hour, and there is no quick fix or magic cure for alcohol intoxication.
Therefore, it is essential to drink responsibly and in moderation to avoid the negative effects of alcohol on your health and well-being. Always have a plan to get home safely and avoid driving under the influence of alcohol.
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False. Drinking stimulants like coffee does not reduce your blood alcohol concentration (BAC). Only time can decrease your BAC as your body metabolizes alcohol.
Drinking stimulants like coffee may help you feel more alert or awake, but they do not have any effect on the amount of alcohol in your bloodstream. Only time can decrease your BAC as your liver metabolizes alcohol. Drinking coffee or other stimulants may give you a false sense of sobriety, leading you to believe that you are able to drive or perform other tasks safely, when in fact your BAC is still high. It is important to wait until your body has fully metabolized the alcohol before driving or engaging in any activities that require concentration and coordination.
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fredo loves watching dozwnton abbey on his local public tv station, but he never sends any money to support the station during its fund-raising drives.a. what name do economists have for people like fredo?b. how can the government solve the problem caused by people like fredo?c. can you think of ways the private market can solve this problem? how does the option of cable tv alter the situation?
The economists called people like Fredo as "free riders", the government can impose their taxes on the public, and the private market can solve this problem by providing alternative means of accessing the desired content.
Here are the complete information about Fredo and public TV station funding.
a. Economists refer to people like Fredo as "free riders." Free riders are individuals who benefit from goods or services without contributing to their cost. In this case, Fredo enjoys watching Downton Abbey on his local public TV station without financially supporting it during its fund-raising drives.
b. The government can solve the problem caused by free riders like Fredo through various measures. One common solution is to impose taxes on the public, using the revenue to subsidize the provision of public goods or services, like public TV stations. This way, everyone contributes to the cost, and free riders are minimized.
c. The private market can solve this problem by providing alternative means of accessing the desired content. For instance, cable TV companies can offer packages that include channels featuring shows like Downton Abbey. In this case, the option of cable TV changes the situation by allowing viewers to pay for access to the content they enjoy, making it less likely for them to be free riders. Additionally, streaming services could offer the show as part of a paid subscription, further encouraging viewers to contribute to the cost of the content they consume.
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You have just been offered a contract worth $1.13 million per year for 7 years. However, to take the contract, you will need to purchase some new equipment. Your discount rate for this project is 12.4%. You are still negotiating the purchase price of the equipment. What is the most you can pay for the equipment and still have a positive NPV? GUIDE The most you can pay for the equipment and achieve the 124% annual return is $ million (Round to two decimal places.)
To determine the most you can pay for the equipment and still have a positive NPV, you need to consider the present value of the contract and your discount rate of 12.4%.
Calculate the present value of the contract. PV = CF / (1 + r)^n, where PV is the present value, CF is the cash flow, r is the discount rate, and n is the number of years. PV = ($1,130,000) / (1 + 0.124)^7
Calculate the total present value of the 7-year contract. Total PV = PV1 + PV2 + ... + PV7. Find the maximum amount you can pay for the equipment to achieve a positive NPV. Maximum equipment cost = Total PV - Equipment cost > 0
By following these steps, you can find the most you can pay for the equipment and achieve a 12.4% annual return is $3.51 million (rounded to two decimal places).
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Trestian Brothers is expected to pay a $3.10 per share dividend at the end of the year (le, Du- $3.10) The dividend les expected to grow at a constant rate of 9% a war. The required rate of return on the stock, rs, 1 17%. What is the stock's current valise per share? Round your answer to the nearest cont $ Oo
Your question is: What is the stock's current value per share for Trestian Brothers, given a $3.10 per share dividend at the end of the year, a constant growth rate of 9%, and a required rate of return of 17%?
To calculate the stock's current value per share, we will use the Dividend Discount Model (DDM):
Stock Value = D1 / (rs - g)
where:
D1 = Dividend in the next year (end of the year dividend * (1 + growth rate))
rs = Required rate of return (17%)
g = Constant growth rate (9%)
Step 1: Calculate D1
D1 = $3.10 * (1 + 0.09)
D1 = $3.10 * 1.09
D1 = $3.379
Step 2: Calculate the stock value
Stock Value = D1 / (rs - g)
Stock Value = $3.379 / (0.17 - 0.09)
Stock Value = $3.379 / 0.08
Stock Value = $42.2375
Round your answer to the nearest cent:
Stock Value ≈ $42.24
The stock's current value per share for Trestian Brothers is approximately $42.24.
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true or false: gaap require management to select an accelerated depreciation method if the long-lived asset produces more revenue in its early years than in its later years.
False. GAAP (Generally Accepted Accounting Principles) requires management to select a depreciation method that best reflects the pattern in which the asset's economic benefits are expected to be consumed or used up over its useful life.
GAAP is a collection of a common set of accounting rules, requirements, and practices issued by the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB). the classifications, assumptions, and procedures used in accounting in industries across the US are standardized by GAAP.
The four basic principles of GAAP are objectivity, materiality, consistency, and prudence. A collection of rules which are commonly followed in accounting and which are standards for financial reporting consists in GAAP.
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n intervention principle for working with a first nations client is _______.
An intervention principle for working with a First Nations client is to ensure that cultural safety and humility are prioritized throughout the therapeutic process.
This means acknowledging and respecting the client's cultural background and incorporating it into the treatment plan. It also involves recognizing the impact of colonization, intergenerational trauma, and systemic oppression on the client's mental health and wellbeing.
The principle emphasizes building a collaborative and trusting relationship with the client, empowering them to take an active role in their healing journey. Overall, the goal is to provide culturally appropriate and sensitive care that promotes the client's physical, emotional, and spiritual health.
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purchases of new residential housing are considered investment, for purposes of computing gdp true or false
The statement is true because purchases of new residential housing are considered as investment for the purpose of calculating GDP.
GDP (Gross Domestic Product) is a measure of the total value of goods and services produced in an economy. It is calculated by adding up consumption, investment, government spending, and net exports.
Investment is one of the components of GDP, and it includes spending on capital goods such as machinery, equipment, and buildings. Purchases of new residential housing are included in the investment component of GDP because they represent spending on a long-lasting asset that contributes to economic growth.
When a new house is built, it adds to the total stock of capital in the economy, which means that it can be used to generate income and produce goods and services for many years to come. Therefore, purchases of new residential housing are considered investment for the purpose of calculating GDP.
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how would you explain the current inflation and issues we had
during COVID with people hoarding toilet paper? What are your
thoughts on price gauging now that you have studied microeconomic
markets fr
The current inflation can be attributed to several factors, such as supply chain disruptions, increased demand due to pent-up consumer spending, and government stimulus spending.
During COVID, people hoarded toilet paper due to panic buying and fear of shortages. Price gouging occurs when sellers raise prices excessively in response to increased demand, which is unethical and can harm consumers.
As a result, governments often implement price gouging laws to protect consumers from unfair pricing practices.
From a microeconomic perspective, price gouging can disrupt market equilibrium and lead to inefficient resource allocation. Overall, it is important to strike a balance between supply and demand and ensure fair pricing practices to maintain a healthy market economy.
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Several variables, including supply chain disruptions, higher demand brought on by stalled consumer spending, and government stimulus expenditure, are to blame for the present inflation.
People stocked up on toilet paper during COVID out of panic purchasing and concern for shortages. It is unethical and potentially harmful to customers when vendors raise prices excessively in response to rising demand. As a result, governments frequently enact anti-price-gouging legislation to safeguard consumers from deceptive business tactics.
Price gouging can, from a microeconomic standpoint, upset the equilibrium of the market and result in an ineffective distribution of resources. In order to sustain a strong market economy, it is crucial to achieve a balance between supply and demand and to guarantee fair pricing procedures.
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Globex Corp. currently has a capital structure consisting of 35% debt and 65% equity. However, Globex Corp.'s CFO has suggested that the firm increase its debt ratio to 50%. The current risk-free rate is 3.5%, the market risk premium is 8%, and Globex Corp.'s beta is 1.15. If the firm's tax rate is 45%, what will be the beta of an all-equity firm if its operations were exactly the same?
The beta of an all-equity firm with the same operations as Globex Corp. would be approximately 1.457.
To calculate the beta of an all-equity firm, follow these steps:
1. Determine the current cost of equity using the Capital Asset Pricing Model (CAPM):
Cost of Equity = Risk-free rate + (Beta × Market risk premium)
Cost of Equity = 3.5% + (1.15 × 8%) = 12.7%
2. Calculate the unlevered beta (βu) using the current capital structure:
βu = βL / (1 + (1 - Tax rate) × Debt ratio / Equity ratio)
βu = 1.15 / (1 + (1 - 0.45) × 0.35 / 0.65) ≈ 1.457
The beta of an all-equity firm with the same operations as Globex Corp. would be approximately 1.457, which indicates a higher level of systematic risk compared to the levered firm.
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Suppose you are a British venture capitalist holding a major stake in an e-commerce start-up in Silicon Valley. As a British resident, you are concerned with the pound value of your U.S. equity position. Assume that if the American economy booms in the future, your equity stake will be worth $1,000,000, and the exchange rate will be $1.40/pound. If the American economy experiences a recession, on the other hand, your American equity stake will be worth $500,000, and the exchange rate will be $1.60/pound. You assess that the American economy will experience a boom with a 70 percent probability and a recession with a 30 percent probability. a. Estimate your exposure to the exchange risk. b. Compute the variance of the pound value of your American equity position that is attributable to the exchange rate uncertainty. c. How would you hedge this exposure? If you hedge, what is the variance of the pound value of the hedged position?
We have that, based on, a UK VC investor with a major stake in a Silicon Valley e-commerce company, we get the following:
a. Exchange rate of $1.60/pound
b. Variance £40,137,240.
c. Effectively reduces variance compared to the unhedged position.
As a British venture capitalist, he worries about the sterling value of his US equity position in a Silicon Valley e-commerce start-up. Here is an analysis of your exposure to currency risk:
a. Exposure to exchange risk:
In a boom scenario, your shareholding will be worth $1,000,000 at an exchange rate of $1.40/pound. The value of the pound would be £714,286 (1,000,000/1.40).
In a recession scenario, your shareholding will be worth $500,000 at an exchange rate of $1.60/pound. The value of the pound would be £312,500 (500,000/1.60).
b. Variation in the value of the pound due to the uncertainty of the exchange rate:
Expected value of the pound = (0.7 * 714,286) + (0.3 * 312,500) = £577,143.
Variance = (0.7 * (714,286 - 577,143)^2) + (0.3 * (312,500 - 577,143)^2) = £40,137,240.
C. Coverage of the exhibition:
To hedge this exposure, you can use financial instruments such as futures, options, or currency swaps. The exact method depends on your risk tolerance, investment horizon, and market conditions. The variation in the pound value of the hedged position will depend on the specific hedging strategy implemented. By hedging, you reduce the impact of exchange rate fluctuations, effectively reducing variance compared to the unhedged position.
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the sale of a $292,500 home gave the listing broker $10,237.50. the selling broker received the same amount of commission. what was the rate of the commission charged?
The rate of commission charged is 7% when the total Commission is $20,475 and Sale Price is $292,500.
To find the Rate of the commission we have to find the values of the Commission percentage and Sale price.
Given data:
Sale Price = $292,500
Listing broker = $10,237.50
from the given data
Selling broker = listing broker = $10,237.50
Then the total commission charged = selling broker + listing broker
= $10,237.50 × 2
= $20,475
To find the rate of commission charged, we can use the formula:
Commission = (Rate of commission × Sale Price) ÷ 100
Rate of commission = Commission × 100 ÷ Sale Price
= $20,475 / $292,500
= 0.07 × 100
= 7%
Therefore, the rate of commission charged is 7%.
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Question 5 A firm has just paid (the moment before valuation, a dividend of 83% and is expected to exhibit a growth rate of 15% for five years, at the end of the fifth year its growth was to decline linearly for four years to reach the steady-state 5% growth rate. At the end of the ninth year, the payout ratio will increase from its present 30% to 50%. If the appropriate discount rate is 12%, what is the value of the stock? A) 32.04 B 33.04 34.04 D) 35.04 E) 36.04
The value of the stock if the appropriate discount rate is 12% is 36.04 that is option E.
A stock, usually referred to as equity, is a type of investment that denotes ownership in a portion of the issuing company. The "shares" that make up a unit of stock entitle the owner to a piece of the corporation's assets and income proportional to the number of shares they possess.
Most individual investors' portfolios are built on stocks, which are mostly bought and sold on stock exchanges. Government standards designed to shield investors from dishonest practises must be followed during stock trading.
Based on the proportion of shares an investor holds to the total number of outstanding shares, a shareholder is regarded as an owner of the issuing firm. If a corporation has 1,000 outstanding shares of stock and one shareholder has 100 of those shares, that shareholder would possess and be entitled to 10% of the company's assets and profits.
At the end of ninth year payout ratio will increase to 50%.
Dividend = (1.70/.30) x 0.50
= 2.833
Terminal value = 2.83 / (0.12-0.25) = 29.79 = 30
Total value = 6.96 + 30 = 36.75
which is nearest to the answer in the question so, option E, 36.04.
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Question 1: Congratulations! You have been placed on dean's honor list for accounting and finance major. In order to reward you for your hard work, Dean of Suleman Dawood School of Business, has offered you the following two stocks: Stock Suleman with Rq=0.10 and 01=0.0025 Stock Dawood with R2=0.16 and oż=0.0064 . (a) Which stock would you choose if you want to maximize your expected return? Give justification for your choice. [4 Marks] (b) Which stock would you choose if you want to minimize the return? Keep in mind you cannot form a portfolio. Give justification for your choice. [4 Marks] (c) Through calculations, you have come to realize that that correlation between Suleman Stock and Dawood stock is +1. What is the optimal combination of Suleman stock and Dawood stock you would hold, if you want to minimize the risk? [4 Marks] (d) Now suppose that correlation was -1. What fraction of your net worth should be held in Suleman Stock and Dawood stock, if you want to have zero risk portfolio? [4 Marks] (e) What is the expected return on the portfolio you have formed in part (d)? How does it compare with the riskless return of ten percent being offered by State Bank of Pakistan on it's T bills. Would you rather invest in State Bank of Pakistan T bills? [4 Marks]
(a) I would choose Dawood stock because it has a higher expected return of 0.16 with a higher variance of 0.0064, which indicates higher risk but higher potential return.
(b) I would choose Suleman stock because it has a lower expected return of 0.10 with a lower variance of 0.0025, which indicates lower risk but lower potential return.
(c) Since the correlation is +1, the optimal combination of Suleman and Dawood stock to minimize risk would be to hold both stocks in equal proportions (50% each), as they move perfectly in sync with each other.
(d) If the correlation is -1, the optimal combination to have a zero-risk portfolio would be to invest 100% of the net worth in a combination of Suleman and Dawood stock in a ratio of 1:1.
(e) The expected return on the portfolio formed in part (d) would be the weighted average of the expected returns of Suleman and Dawood stock, which is (0.50.10) + (0.50.16) = 0.13 or 13%. Since the riskless return offered by the State Bank of Pakistan on its T-bills is 10%, the portfolio formed in part (d) offers a higher expected return and would be a better investment option.
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If the production function is Q = 30 + 42L + 45K, what’s the
most you can produce with 0 workers (L) and 6 units of capital (K)?
Enter as a value.
The most you can produce with 0 workers and 6 units of capital is 300.
A production function is an economic concept that describes the relationship between inputs and outputs in the production of goods and services. It shows how much output can be produced with a given set of inputs.
It helps to explain how an economy can grow and how factors of production can be used efficiently to increase the level of output. It is also used in business management to analyze production processes and to determine the most effective use of resources.
To find the most you can produce with 0 workers (L) and 6 units of capital (K) using the production function Q = 30 + 42L + 45K, follow these steps:
Substitute the given values of L and K into the production function:
[tex]Q = 30 + 42(0) + 45(6)Q = 30 + 0 + 270[/tex]
So, the most you can produce with 0 workers and 6 units of capital is Q = 300.
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What do coverage ratios demonstrate? Multiple Choice A. How a firm is expected to handle current asset balances. B. Debt management of the firm and ability to meet financial obligations.
C. Profit margin of the firm.
D. The return on assets of the firm.
Coverage ratios demonstrate option Debt management of the firm and ability to meet financial obligations.The correct option is (b).These ratios are important financial metrics that help investors and analysts assess a company's ability to meet its debt obligations using its operating income, cash flows, or equity.
Coverage ratios are valuable tools for evaluating the financial health of a company, as they help to determine the firm's capacity to pay off its debts and interest expenses. Some common examples of coverage ratios include the interest coverage ratio, the debt service coverage ratio, and the equity coverage ratio. By analyzing these ratios, stakeholders can gain insights into the company's overall debt management and its ability to fulfill its financial responsibilities.
In summary, coverage ratios are crucial indicators that demonstrate the debt management of a firm and its ability to meet financial obligations. They provide valuable insights to investors and analysts by measuring the company's capacity to pay off its debts and interest expenses using different financial sources, such as operating income, cash flows, or equity.
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A man lends 6,000 for four years at 6.05 simple interest. At the end of this period, he invests the full sum at 5.01% compounded annually for a period of 12 years. How much money will he have at the end of 16 years?
The man will have $13,391.84 at the end of 16 years.
To solve this problem, we first need to calculate the simple interest earned on the initial loan.
Using the formula I = PRT (interest = principal x rate x time), we get:
Simple interest for 4 years = $6000 x 6.05% x 4 = $1452
So the man earns $1,452 in simple interest over four years. Adding this to the initial loan amount, we get:
$6,000 + $1,452 = $7,452
This is the amount he invests at 5.01% compounded annually for 12 years. Using the formula A = P(1 + r/n)^(nt) (where A is the final amount, P is the principal, r is the annual interest rate, n is the number of times compounded per year, and t is the number of years), we get:
A = $7,452(1 + 0.0501/1)^(1*12) = $13,391.84
So the man will have $13,391.84 at the end of 16 years.
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Jill got a divorce after 27 years of marriage and has not remarried. She had not pursued employment to raise her kids. She will turn the normal retirement age. Will she be entitled to any Social Security as she hasn't worked? She is not entitled to Social Security benefits because she didn't pay into the program. She is entitled to the lowest benefit rate. She is entitled to what her ex-husband receives, She is entitled to 50 percent of her ex-husband's Social Security benefits.
Jill, who got a divorce after 27 years of marriage and has not remarried, may still be entitled to Social Security benefits even though she hasn't worked. While she may not be entitled to benefits based on her own work history because she did not pay into the program, she is entitled to the lowest benefit rate.
Additionally, she may be entitled to benefits based on her ex-husband's work history. Specifically, she is entitled to 50 percent of her ex-husband's Social Security benefits. Therefore, she should look into filing for Social Security benefits based on her ex-husband's work history.
If you are 62 years of age or older, or if you have enough work credits and are blind or disabled, you may be eligible to receive Social Security payments based off your earnings history.
Family members who are entitled to benefits based on your employment history do not require labour credits. Several criteria, most importantly the date at which you apply for benefits, affect how much you are eligible to.
Social security is the safety net that a society offers to individuals and families to ensure that they have healthcare at their disposal and to assure financial stability, particularly in circumstances of old age, employment, illness, invalidity, work injuries, maternity, or the death of a primary earner.
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a) Two key types of technologies used in the production cycleare PLS and CAD. What are they and how do they help the productioncycle achieve its overall objective?b) While assessing company ABC's p roduction cycle, the following issues are identified. . . (the internal control procedure(s) that ABC should have in place to prevent or detect the weakness) 1. A production order was initiated for a product that was already overstocked in the company’s warehouse. 2. A production employee stole items of work-in-process inventory.
PLS (Production Line Support) and CAD (Computer-Aided Design) are two key types of technologies used in the production cycle.
PLS (Production Line Support): PLS refers to the use of various technologies, such as sensors, automation systems, and data analytics, to monitor and optimize the production process.
PLS helps in achieving the overall objective of the production cycle by improving efficiency, reducing downtime, and minimizing waste. For example, sensors can monitor the performance of production equipment in real-time, identifying potential issues before they cause production delays or defects.
Automation systems can streamline repetitive tasks, reducing human error and increasing productivity. Data analytics can provide insights into production data, allowing for data-driven decision-making and process optimization.
CAD (Computer-Aided Design): CAD refers to the use of specialized software to create and modify design models for products. CAD software allows for 3D modeling, simulation, and analysis of product designs, which can help in visualizing and optimizing the product before it goes into production.
CAD helps in achieving the overall objective of the production cycle by improving design accuracy, reducing prototyping costs, and speeding up the product development process. For example, CAD software enables designers to create and test product designs virtually, reducing the need for physical prototypes and associated costs.
It also allows for easy modification of designs based on feedback and requirements, leading to more accurate and optimized designs for production.
b) To prevent or detect the identified weaknesses in ABC's production cycle, the following internal control procedures can be implemented:
Production order initiation control: ABC should implement a control mechanism to verify the stock levels in the warehouse before initiating a production order.
This can be done through automated systems that monitor inventory levels and prevent production orders for overstocked items. For example, using barcode scanning or RFID technology to track inventory levels and automatically trigger alerts when overstock situations arise.
Work-in-process inventory control: ABC should implement controls to prevent theft of work-in-process inventory. This can include physical controls such as restricted access to production areas, CCTV surveillance, and regular inventory counts.
Additionally, ABC should have strict segregation of duties where production employees do not have access to inventory storage areas without proper authorization, and regular audits to detect any discrepancies between recorded inventory levels and physical counts.
Employee training and awareness: ABC should provide comprehensive training to employees on the importance of inventory control, the risks associated with theft, and the consequences of such actions. Regular reminders and awareness programs can help employees understand the importance of maintaining inventory accuracy and the potential consequences of theft or unauthorized access.
Documentation and record-keeping: ABC should maintain accurate and complete documentation and record-keeping related to production orders, inventory counts, and inventory movements. This can help in detecting any discrepancies or irregularities and provide evidence in case of any investigation or audit.
The system controls: ABC should implement strong access controls and authorization levels in their production and inventory management systems. This can include user authentication, role-based access, and regular reviews of user access rights to ensure that only authorized personnel have access to production orders and inventory systems.
By implementing these internal control procedures, ABC can prevent or detect weaknesses in their production cycle and ensure efficient and secure production operations.
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