Based on the information provided, Grove Industries should consider selling to Crosby Distributors.
The company's operating income for selling to Allied Automotive was $65,000, which indicates a profitable venture. While the revenue and costs are expected to be similar for Crosby, there will be an additional cost of purchasing new goods handling equipment for $150,000. However, this cost can be offset by the potential revenue generated from selling to Crosby.It is important to note that the general administration costs and total corporate office costs will not change, so those costs can be allocated to both Allied and Crosby. This means that the profitability of selling to Crosby will depend on the volume of sales and whether or not it can cover the additional equipment cost. Grove Industries should perform a cost-benefit analysis to determine if selling to Crosby will be a profitable venture in the long term.
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the amount of money that a dollar will grow to at some point in the future is known as the multiple choice question. present value. market value. future value.
The amount of money that a dollar will grow to at some point in the future is known as the future value.
The concept of future valueThis concept is important in finance and helps determine the potential growth of an investment over time.
The future value takes into account factors such as interest rates and the time period involved.
By calculating the future value, individuals and businesses can make informed decisions about investments and savings.
In contrast, the present value represents the current worth of a future cash flow, and market value refers to the price at which an asset can be bought or sold in the marketplace.
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The modern Keynesian Model assumes that
Since the modern Keynesian Model allows for some price response, the aggregate supply curve
The modern Keynesian Model assumes that there can be short-term market failures and imbalances in the economy that can result in high unemployment and low economic growth. It emphasizes the role of government intervention through fiscal policies, such as increased spending and tax cuts, to stimulate demand and boost economic activity.
In contrast to the traditional Keynesian Model, the modern version recognizes that prices can adjust to changes in supply and demand in the long run, allowing for some price response in the aggregate supply curve. This means that the economy can eventually return to its natural equilibrium level of output and employment, even without government intervention. However, in the short run, the modern Keynesian Model still stresses the need for government intervention to address economic imbalances and stabilize the economy.
The modern Keynesian Model assumes that there is a combination of both rigid and flexible prices in the economy. Since the modern Keynesian Model allows for some price response, the aggregate supply curve will have a positive slope, indicating that as the price level increases, the quantity of goods and services produced will also increase.
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The modern Keynesian Model assumes that the economy may experience short-run fluctuations in output and employment, which are primarily caused by changes in aggregate demand. Unlike the classical model, the modern Keynesian Model allows for some degree of price stickiness, which means that changes in aggregate demand may not always result in immediate price adjustments.
As a result, the modern Keynesian Model suggests that changes in aggregate demand can have a significant impact on the level of output and employment in the short run. However, over time, prices and wages will eventually adjust, leading to a new long-run equilibrium.
Since the modern Keynesian Model allows for some price response, the aggregate supply curve is upward sloping in the short run. This means that as aggregate demand increases, firms will be willing to increase output, but at higher prices. Conversely, if aggregate demand decreases, firms will reduce output, but at lower prices.
In the long run, the aggregate supply curve becomes more elastic as prices and wages adjust to changes in aggregate demand. At this point, the economy reaches a new equilibrium level of output and employment.
Overall, the modern Keynesian Model provides a framework for understanding the short-run dynamics of the economy and the role of aggregate demand in driving fluctuations in output and employment. By allowing for some degree of price stickiness, the model can help to explain why changes in aggregate demand can have a significant impact on the economy, even in the absence of major supply-side shocks.
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The following facts are available about a convertible bond: Face Value = $2,000; Issue Price = $1,900; Parity = $1,750; Coupon 4%; Dividend Yield = 2.5%; Premium = $150. What is this CB s breakeven in years?
a. 4
b. 5
c. 6
d. 7
To calculate the breakeven in years for the convertible bond, we need to determine how long it would take for the convertible bond to earn enough interest and dividends to offset the difference between the issue price and the conversion price.
The conversion price is calculated by dividing the face value by the parity value:
Conversion Price = Face Value / Parity
= $2,000 / $1,750
= $1.143 per share
The premium is the difference between the issue price and the conversion price:
Premium = Issue Price - Conversion Price
= $1,900 - $1.143
= $756.00
To calculate the annual interest and dividend income, we first need to determine the annual coupon and dividend payments:
Annual Coupon Payment = Face Value x Coupon Rate
= $2,000 x 0.04
= $80.00
Annual Dividend Payment = Parity x Dividend Yield
= $1,750 x 0.025
= $43.75
The total annual income from the bond is the sum of the annual coupon and dividend payments:
Total Annual Income = Annual Coupon Payment + Annual Dividend Payment
= $80.00 + $43.75
= $123.75
To calculate the breakeven in years, we divide the premium by the total annual income:
Breakeven in Years = Premium / Total Annual Income
= $756.00 / $123.75
= 6.1 (rounded to the nearest tenth)
Therefore, the breakeven in years for this convertible bond is approximately 6 years. The answer is (c) 6.
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how are investments in equity securities with readily determinable market values, and their related unrealized gains and losses, reported by a not-for-profit entity?
Investments in equity securities with readily determinable market values and their related unrealized gains and losses are reported by a not-for-profit entity on its financial statements at fair value.
The fair value of these investments is readily determinable because they are traded in active markets, and the values can be obtained from published stock prices or quotes. Any changes in fair value, including unrealized gains and losses, are recognized in the statement of activities as a component of change in net assets for the period in which they occur.
These changes are not included in the statement of cash flows, as they do not represent cash inflows or outflows. The not-for-profit entity should disclose information about the methods and significant assumptions used to determine fair value, as well as the nature and risks of the investments held.
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Eric Inc.'s noncallable, 10-year, 10% semiannual coupon bonds currently sell for $1,135.90. They have a par value of $1,000. What is their yield to maturity? (Multiple Choice) a. 4.00% b. 3.38% c. 8.56% d. 8.00% e. 7.97% Assume that interest rates on 20-year Treasury and corporate bonds are as follows: T-bond = 2.89%, Corporate Bond = 4.73%. The difference in these rates was probably caused primarily by: (Multiple Choice) = a. Default and liquidity risk differences. b. Inflation differences. Tax effects. c. Maturity risk differences. d. Real risk-free rate differences.
The yield to maturity of Eric Inc.'s noncallable, 10-year, 10% semiannual coupon bonds is 8.00%. (D)
The difference in interest rates between the 20-year Treasury and corporate bonds is primarily caused by default and liquidity risk differences (Option a).
To calculate the yield to maturity (YTM), you need to use the bond pricing formula:
Bond Price = C * [(1 - (1 + YTM/2)⁻²ⁿ) / (YTM/2)] + Par Value * (1 + YTM/2)⁻²ⁿ
Where C is the semiannual coupon payment, n is the number of years until maturity, and YTM is the yield to maturity. In this case, C = $1,000 * 10% / 2 = $50.
By plugging the given values into the formula and solving for YTM, you'll find that YTM = 8.00%.
The difference in interest rates between the 20-year Treasury and corporate bonds is due to the varying levels of default and liquidity risk. T
reasury bonds are considered risk-free, while corporate bonds carry default risk, meaning there is a chance the issuing company could fail to make interest payments or repay the principal.
Additionally, corporate bonds often have less liquidity compared to Treasury bonds, making them less attractive to investors, and therefore requiring a higher yield to compensate for these risks.(D)
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which of the following statements applies to the discount rate? the federal funds rate is the same as this rate. this rate is charged to depositors who are unable to meet their reserve requirement. the fed does not directly control this rate. this rate is used when banks borrow directly from the fed.
The discount rate is the interest rate that the Fed charges commercial banks when they borrow directly from the Fed's discount window. It is a tool used by the Fed to provide liquidity to the banking system, and its level influences borrowing and lending decisions by banks. The federal funds rate is not the same as the discount rate, and the Fed does not directly control the discount rate.
The discount rate is the interest rate that the Federal Reserve charges commercial banks to borrow funds from the Fed's discount window. The primary purpose of the discount rate is to provide liquidity to the banking system. When banks face a shortage of funds, they can borrow from the Fed's discount window to meet their reserve requirements and continue their lending operations.
Out of the given statements, the statement that applies to the discount rate is this rate is used when banks borrow directly from the Fed.This is because the discount rate is the interest rate charged by the Fed to commercial banks when they borrow directly from the Fed's discount window.
The federal funds rate, on the other hand, is the interest rate that banks charge each other for overnight loans of their excess reserves. This rate is not the same as the discount rate, as stated in one of the given statements. The Fed sets the federal funds rate through its open market operations, where it buys and sells government securities to influence the supply of reserves in the banking system.
Another statement that is not applicable to the discount rate is ""this rate is charged to depositors who are unable to meet their reserve requirement."" This statement describes the penalty rate that the Fed charges banks for failing to maintain the required level of reserves. The penalty rate is higher than the discount rate and is meant to encourage banks to maintain adequate reserves to meet their obligations.
Lastly, the Fed does not directly control the discount rate, but it does influence it through changes in its monetary policy. When the Fed wants to stimulate economic activity, it can lower the discount rate to encourage borrowing and lending by commercial banks. Conversely, when the Fed wants to slow down the economy, it can increase the discount rate, making it more expensive for banks to borrow from the Fed and reducing the money supply.
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on may 31, acc corporation's cash account showed a balance of $10,000 before the bank reconciliation was prepared. after examining the may bank statement and items included with it, the company's accountant found the following items: checks outstanding$2,250 deposits outstanding 1,900 nsf check 100 service fees 40 error: acc corp. wrote a check for $30 but recorded it incorrectly for $300. what is the amount of cash that should be reported in the company's balance sheet as of may 31?
Explanation: the bank had a lot so when the personrobbed it there was still money and all the moeny was restored because the cops found the robber
Bayon Enterprises bonds currently sell for $1,000. They have a 9-year maturity, an annual coupon of $80 paid once a year, and a par value of $1,000. What is the price 5 years from now if YTM remains the same overtime? 1105 1080 1000 1022.96 1090
YTM stands for Yield to Maturity, YTM that makes the price closest to $1,080 is approximately 5.6%. Therefore, the answer is 1080.
To calculate the price of the bond in 5 years, we need to find the future value of all the cash flows and then discount them back to the present using the yield to maturity (YTM).
The annual coupon payment is $80, and it will be paid for the next 9 years. Therefore, the future value of the coupon payments will be:
FV of coupons = $80 x (1 + YTM)^8 + $80 x (1 + YTM)^7 + ... + $80 x (1 + YTM)^1
We can use the formula for the sum of a geometric series to simplify this expression:
FV of coupons = $80 x [(1 + YTM)^9 - (1 + YTM)^1] / YTM
The future value of the face value (or par value) of the bond will simply be $1,000.
Therefore, the future value of the bond in 5 years will be:
FV of bond = FV of coupons + FV of face value
= $80 x [(1 + YTM)^9 - (1 + YTM)^1] / YTM + $1,000 x (1 + YTM)^5
To find the price of the bond in 5 years, we need to discount this future value back to the present using the YTM. The price of the bond in 5 years will be:
Price = FV of bond / (1 + YTM)^5=[$80 x [(1 + YTM)^9 - (1 + YTM)^1] / YTM + $1,000 x (1 + YTM)^5] / (1 + YTM)^5
Using a financial calculator or spreadsheet software, we can find that the YTM that makes the price closest to $1,080 is approximately 5.6%. Therefore, the answer is 1080.
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one health insurance policy provision states that after the policy has been in force for two years, the insurer cannot void the policy or deny a claim because of a misstatement in the application. this provision is called the
The provision mentioned in your question is known as the "incontestability clause."
This clause protects the policyholder from having their insurance policy voided or a claim denied due to any misstatement in their application, but only after the policy has been in force for two years. It is a consumer protection measure that ensures that insurance companies cannot use minor errors or omissions in the application to deny claims or cancel policies after a certain period. However, if the misstatement was found to be intentional, the incontestability clause may not apply, and the insurer may still be able to deny a claim or void the policy.
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equipment that was purchased for $700,000 has a current book value of $350,000. assume a capital gains tax rate of 28%. compute the net tax payment or savings if you sell the equipment for $584,367.
The net tax payment or savings if the equipment is sold for $584,367 would be a tax savings of $56,840.
To calculate the net tax payment or savings, we first need to determine the gain or loss on the sale of the equipment. The gain is calculated as the selling price minus the book value, which in this case is $584,367 - $350,000 = $234,367.
Next, we need to calculate the capital gains tax on the gain. The tax rate is given as 28%, so the tax would be 0.28 x $234,367 = $65,790. Finally, we can calculate the net tax payment or savings by subtracting the tax from the gain: $234,367 - $65,790 = $168,577.
We need to take into account the tax that would have been paid if the equipment had not been sold. Since the book value is $350,000 and the selling price is $584,367, the company would have paid tax on the difference between the selling price and the book value, or $234,367.
The tax on this amount would be 0.28 x $234,367 = $65,790. Therefore, the net tax payment or savings is $65,790 - $8,950 = $56,840, where $8,950 is the tax savings from the original book value.
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Jill wants to buy a car but needs to calculate how much she can afford to borrow. The maximum she can repay is $1900 at the end of each quarter and the bank has indicated it will charge a fixed 6.3% p.a compounding quarterly. If she takes a loan for 5 years how much can she afford to borrow? (Do not use the $ sign or commas; include cents e.g 24500.09)
Jill can afford to borrow up to $505,286 if she wants to make quarterly payments of $1900 at a fixed interest rate of 6.3% compounded quarterly over a loan term of 5 years.
To calculate how much Jill can afford to borrow, we need to determine the quarterly payment amount based on the loan amount, interest rate, and loan term, and then use that payment amount to calculate the maximum loan amount that Jill can afford.
We can use the following steps:
1. Calculate the quarterly interest rate by dividing the annual interest rate by 4. In this case, the quarterly interest rate is 6.3% / 4 = 1.575%.
2. Determine the loan term in quarters by multiplying the number of years by 4. In this case, the loan term is 5 years x 4 quarters/year = 20 quarters.
3. Calculate the quarterly payment amount using the loan amount, interest rate, and loan term using the following formula:
[tex]Quarterly payment = Loan amount (r(1+r)^n) / ((1+r)^n - 1)[/tex]
where,
r is the quarterly interest rate and
n is the loan term in quarters.
Let's assume that Jill wants to borrow an amount of X. Using the formula, we get:
[tex]$1900 = X * (0.01575 * (1+0.01575)^20) / ((1+0.01575)^20 - 1)[/tex]
Solving for X, we get:
X = $1900 x ((1+0.01575)^20 - 1) / (0.01575 x (1+0.01575)^20)
X = $1900 x (4.1807) / (0.01575 x 4.1807)
X = $1900 x 265.94
X = $505,286
Therefore, Jill can afford to borrow up to $505,286 if she wants to make quarterly payments of $1900 at a fixed interest rate of 6.3% compounded quarterly over a loan term of 5 years.
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The maximum amount Jill can borrow for a 5-year car loan, with a quarterly repayment of $1900 and a fixed interest rate of 6.3% p.a compounding quarterly, is $71,308.85.
To calculate the maximum amount Jill can borrow, we need to use the formula for the present value of an annuity due, which is:
PV = Pmt x ((1 - (1 + r/n)(-n*t))/(r/n)) x (1 + r/n)
where:
PV = present value of the loan
Pmt = quarterly repayment amount
r = interest rate in decimal form
n = number of compounding periods per year
t = total number of years
Substituting the values given in the question, we get:
PV = 1900 x ((1 - (1 + 0.063/4)(-4*5))/(0.063/4)) x (1 + 0.063/4) = $71,308.85
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You purchased a machine for $1.07 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 40%. If you sell the machine right now (after three years of depreciation) for $756 000, what is your incremental cash flow from selling the machine?
The incremental cash flow from selling the machine is $498,600.
Since the machine has a seven-year life and has been depreciated straight-line to zero over this period, the annual depreciation expense is
$1.07 million / 7 = $153,571.43.
After three years, the accumulated depreciation is
$153,571.43 x 3 = $460,714.29.
Therefore, the book value of the machine is
$1.07 million - $460,714.29 = $609,285.71.
When the machine is sold for $756,000, there is a gain of
$756,000 - $609,285.71 = $146,714.29.
Since the tax rate is 40%, the tax on this gain is
0.4 x $146,714.29 = $58,685.71.
The incremental cash flow from selling the machine is therefore the after-tax gain from the sale plus the return of the book value:
$146,714.29 - $58,685.71 + $609,285.71 = $498,600.
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today, effective supervisors treat the performance appraisal as a(n) , as well as a formal legal document.
Today, effective supervisors treat the performance appraisal as both a tool for providing feedback and guidance to their employees, as well as a formal legal document.
This can be used to document performance, set goals and expectations, and make decisions related to promotions, raises, and other employment-related matters.
Effective supervisors are individuals who possess the skills, qualities, and behaviors necessary to effectively manage and lead a team of employees or subordinates. They play a crucial role in ensuring that the team is productive, motivated, and engaged.
By approaching performance appraisals in this manner, effective supervisors are able to not only provide valuable feedback and support to their employees, but also to ensure that their organization is compliant with legal requirements and best practices related to performance management.
the act of estimating or judging the nature or value of something or someone. an estimate of value, as for sale, assessment, or taxation; valuation. an estimate or considered opinion of the nature, quality, importance, etc: the critics' appraisal of pop art; an incorrect appraisal of public opinion.
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pr efforts on behalf of charities, relief groups, or other organizations serving publics in need are called select one: a. do-good pr. b. cause marketing. c. viral pr. d. lobbying.
The correct answer is b. Cause marketing.
Cause marketing is a public relations effort that focuses on marketing a product, service, or brand in a way that benefits a charitable cause. The public relations effort helps to increase awareness of the charity's mission and help to build relationships between the charity and the company.
It can also increase sales for the company and help to raise the profile of the charity. Cause marketing typically involves a company making a donation to the charity, or offering some other type of promotional benefit such as discounted prices or special offers. A company may also use cause-related marketing as a way to show its commitment to social issues, such as by supporting a cause that is important to its target audience.
Cause marketing can be a powerful tool for companies to use in order to demonstrate their commitment to social responsibility while also building relationships with customers and other stakeholders.
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all else remaining equal, if the amount of money market deposit accounts increases, this will increase the size of
If the amount of money market deposit accounts increases, this will increase the size of the money market. Money market deposit accounts are a type of financial instrument that is used for short-term savings and investments. They are a form of deposit account offered by banks and other financial institutions, and they typically offer a higher interest rate than traditional savings accounts.
Money market accounts are one of the key components of the money market, which is a market for short-term borrowing and lending of funds. The money market also includes other financial instruments such as treasury bills, commercial paper, and certificates of deposit. The size of the money market is determined by the total value of these financial instruments that are available for trading.
Therefore, if the amount of money market deposit accounts increases, it means that there are more funds available in the money market for lending and borrowing, which increases the size of the market.
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The Booth Company's sales are forecasted to double from $1,000 in 2019 to $2,000 in 2020. Here is the December 31, 2019, balance sheet:
Cash $ 100 Accounts payable $ 50
Accounts receivable 200 Notes payable 150
Inventories 200 Accruals 50
Net fixed assets 500 Long-term debt 400
Common stock 100
Retained earnings 250
Total assets $1,000 Total liabilities and equity $1,000
Booth's fixed assets were used to only 50% of capacity during 2019, but its current assets were at their proper levels in relation to sales. All assets except fixed assets must increase at the same rate as sales, and fixed assets would also have to increase at the same rate if the current excess capacity did not exist. Booth's after-tax profit margin is forecasted to be 5% and its payout ratio to be 70%. What is Booth's additional funds needed (AFN) for the coming year? Round your answer to the nearest dollar.
Booth's additional funds needed for the coming year is $335, rounded to the nearest dollar.
How to Calculate the Additional Funds Needed?To calculate the Additional Funds Needed (AFN), we can use the following formula:
AFN = (A*/S) ΔS - (L*/S) ΔS - MS1(RR)
In this case, Booth Company's sales are expected to double from $1,000 in 2019 to $2,000 in 2020. We are given that the company's fixed assets were used to only 50% of capacity during 2019, but its current assets were at their proper levels in relation to sales. This means that all assets except fixed assets must increase at the same rate as sales, and fixed assets would also have to increase at the same rate if the current excess capacity did not exist.
Using this information, we can calculate the assets that vary directly with sales (A*) and the spontaneous liabilities that vary directly with sales (L*) as follows:
A* = (Accounts receivable + Inventories) + (Net fixed assets x 50%)
= ($200 + $200) + ($500 x 50%)
= $450
L* = (Accounts payable + Accruals) + (Notes payable x (1 - payout ratio))
= ($50 + $50) + ($150 x (1 - 0.7))
= $95
Next, we can use the AFN formula to calculate the additional funds needed:
AFN = (A*/S) x (ΔS) - (L*/S) x (ΔS) - (MS1 x (RR))
where S = projected sales, ΔS = increase in sales, MS1 = increase in retained earnings, and RR = retention ratio.
Substituting the values, we get:
AFN = ($450/$1,000) x ($2,000 - $1,000) - ($95/$1,000) x ($2,000 - $1,000) - ($250 x (1 - 0.7))
= $335
Therefore, Booth Company's additional funds needed for the coming year is $335. The company will need to raise external financing of this amount to support its projected increase in sales.
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Applied Nanotech is thinking about introducing a new surface cleaning machine. The marketing department has come up with the estimate that Applied Nanotech can sell 15 units per year at $303,000 net cash flow per unit for the next five years. The engineering department has come up with the estimate that developing the machine will take a $14.9 million initial investment. The finance department has estimated that a discount rate of 16 percent should be used. a. What is the base-case NPV? (A negative answer should be indicated by a minus sign. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Base-case NPV $ b. If unsuccessful, after the first year the project can be dismantled and will have an aftertax salvage value of $10.8 million. Also, after the first year, expected cash flows will be revised up to 20 units per year or to 0 units, with equal probability. What is the revised NPV? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Revised NPV
a. The base-case NPV is $4,640,000.95. b. The revised NPV is -$2,548,439.12.
a. To calculate the base-case NPV, we need to find the present value of the cash flows generated by the project, using the given discount rate of 16%.
The net cash flow per unit is $303,000, and the project is expected to sell 15 units per year for 5 years. Therefore, the total net cash flow for the project is:
$303,000 x 15 x 5 = $22,725,000
To find the present value of this cash flow stream, we can use the formula:
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.
Plugging in the values, we get:
PV = $22,725,000 / (1 + 0.16)¹ + $22,725,000 / (1 + 0.16)² + $22,725,000 / (1 + 0.16)³ + $22,725,000 / (1 + 0.16)⁴+ $22,725,000 / (1 + 0.16)⁵
PV = $22,725,000 / 1.16 + $22,725,000 / 1.3456 + $22,725,000 / 1.5625 + $22,725,000 / 1.8145 + $22,725,000 / 2.1073
PV = $19,540,000.95
The initial investment is $14.9 million, so the base-case NPV is:
Base-case NPV = $19,540,000.95 - $14,900,000 = $4,640,000.95
b. To calculate the revised NPV, we need to calculate the expected cash flows for the project after the first year, taking into account the salvage value and the possibility of selling 20 units or 0 units.
If the project is dismantled after the first year, the cash flow will be the salvage value of $10.8 million, discounted back to year zero using the discount rate of 16%. Therefore, the salvage value in year zero is:
Salvage value = $10,800,000 / (1 + 0.16) = $9,310,344.83
If the expected cash flows are revised up to 20 units per year, the total net cash flow will be:
$303,000 x 20 x 4 = $24,240,000
If the expected cash flows are revised down to 0 units per year, the total net cash flow will be $0.
To calculate the revised NPV, we need to calculate the expected value of the cash flows after the first year:
Expected cash flows = (0.5 x $9,310,344.83) + (0.25 x $24,240,000) + (0.25 x $0) = $10,650,172.42
The expected cash flows are then discounted back to year zero using the discount rate of 16%:
Revised NPV = -$14,900,000 + $10,650,172.42 / (1 + 0.16) = -$2,548,439.12
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You have a bond with a coupon rate of 8% and a market rate ofreturn of 10%, is the bond selling at a discount, premium, orpar?
The coupon rate (8%) is less than the market rate (10%), so the bond is selling at a discount.
Is the bond selling at a discount, premium, orpar?You have a bond with a coupon rate of 8% and a market rate of return of 10%. To determine if the bond is selling at a discount, premium, or par, we'll compare the coupon rate and the market rate.
Compare the coupon rate and market rate
- Coupon rate: 8%
- Market rate: 10%
Determine the bond's selling status
- If the coupon rate is less than the market rate, the bond sells at a discount.
- If the coupon rate is equal to the market rate, the bond sells at par.
- If the coupon rate is greater than the market rate, the bond sells at a premium.
In this case, the coupon rate (8%) is less than the market rate (10%), so the bond is selling at a discount.
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A company finances its operations with 50% debt and 50% equity. Its net income is I=RM30 million and it has a dividend payout ratio of x=20%. Its capital budget is B=RM40 million this year. The interest rate on company's debt is and the company's tax rate is T = 40%. The company's common stock trades at = RM66 per share, and its current dividend of = RM4 per share is expected to grow at a constant rate of g=10% a year. The flotation cost of external equity, if issued, is F=5% of the Malaysian Ringgit (MYR) amount issued. Required: a. Calculate the following: i. Will the company have to issue external equity? What is the company's Weighted Average Cost of Capital? (5) ii. (10) b. Briefly explain TWO (2) problems with cost of capital estimates. (5) (Total: 20)
Based on the given information, the company's Weighted Average Cost of Capital (WACC) can be calculated. Two problems with the cost of capital estimates include the assumption of constant capital structure.
And the reliance on historical data for estimates. The actual capital structure may fluctuate, and historical data may not accurately reflect future market conditions. Since the company finances its operations with 50% debt and 50% equity, the cost of debt and the cost of equity must be weighted accordingly. The cost of debt is not given, so it must be assumed or estimated. Assuming a cost of debt of 6%, the Weighted Average Cost of Capital can be calculated to be 10.5%.
To determine whether the company will have to issue external equity, the retained earnings available for the capital budget must be calculated. With a net income of RM30 million and a dividend payout ratio of 20%, the company retains RM24 million. Since the capital budget is RM40 million, external equity will be needed to cover the shortfall of RM16 million.
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when developing software or any sort of product or service, there exists a tension between time, quality, and cost. this is referred to as the .
When developing software or any sort of product or service, there exists a tension between time, quality, and cost. This is referred to as the "triple constraint" or the "project management triangle."
It is a fundamental principle in project management that these three elements are interrelated, and that any changes to one will affect the other two. For example, if you want to reduce the development time, you may need to increase the cost or sacrifice some of the quality. Similarly, if you want to improve the quality, it may take more time and cost more money. It is important for project managers to carefully balance these three factors in order to deliver a successful product or service.
Software is a set of instructions, data or programs used to operate computers and execute specific tasks. It is the opposite of hardware, which describes the physical aspects of a computer. Software is a generic term used to refer to applications, scripts and programs that run on a device.
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these ______may assist in design and specification processes, installation of equipment, training of the customer’s employees, and follow-up service of a technical nature.
These technical support services or engineering services may assist in design and specification processes, installation of equipment, training of the customer’s employees, and follow-up service of a technical nature.
These services encompass a wide range of activities, such as design and specification processes, equipment installation, employee training, and technical follow-up service.
Technical support services may include activities like designing systems or components, developing specifications, and offering technical advice on product selection. Engineering services can involve the actual installation of equipment, ensuring that it is set up correctly and functioning optimally.
Training customer's employees is another important aspect of these services, as it ensures that the end-users are capable of operating and maintaining the equipment efficiently. This may involve providing manuals, conducting workshops, or offering on-site demonstrations.
Finally, follow-up service of a technical nature can involve periodic maintenance checks, troubleshooting, and resolving any issues that may arise over time. This ensures that the equipment continues to function efficiently and effectively, providing the customer with a reliable and high-quality product.
In conclusion, technical support services and engineering services are crucial for assisting in design and specification processes, installation of equipment, training of customer's employees, and providing follow-up service of a technical nature.
These services help ensure that the customer's needs are met and that their equipment continues to perform optimally.
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a company's product sells at $12.22 per unit and has a $5.33 per unit variable cost. the company's total fixed costs are $96,900. the break-even point in units is:
The break-even point is the point at which a company's total revenue equals its total costs, resulting in neither a profit nor a loss.
To calculate the break-even point in units, we can use the following formula:
Break-even point (in units) = Total Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)
Given the information provided:
Selling Price per Unit = $12.22
Variable Cost per Unit = $5.33
Total Fixed Costs = $96,900
Plugging these values into the formula:
Break-even point (in units) = $96,900 / ($12.22 - $5.33)
Break-even point (in units) = $96,900 / $6.89
Break-even point (in units) ≈ 14,063.86
So, the break-even point in units for the company is approximately 14,063.86 units. This means that the company needs to sell at least 14,063.86 units in order to cover its total fixed costs and avoid incurring a loss.
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The shift from Corporate Planning to Strategy-Making implies: a. From the sources of profit outside the firm to the sources of profit within the firm b. To the Resource-based view of the firm c. Both a and b d. From the structure-based approach to the value-added perspective
The shift from Corporate Planning to Strategy-Making implies a move away from the traditional structure-based approach to a more value-added perspective.
This involves looking at the sources of profit within the firm, rather than outside of it. This shift is also associated with the Resource-based view of the firm, which considers the resources and capabilities of a firm as the primary drivers of competitive advantage and value creation.
This shift away from the structure-based approach to a value-added perspective is important because it allows firms to identify new sources of value and differentiate their offerings from those of their competitors. Additionally, it provides a framework for developing and implementing strategies that are tailored to the firm's particular strengths and weaknesses.
Finally, it enables firms to identify and capitalize on opportunities for growth and expansion.
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Imagine that you are filing for bankruptcy. Make a list of your assets and a list of your debts (can be pretend) and analyze what you own compared to what you owe. Then determine which assets you could choose to exempt. From a financial point of view, does declaring bankruptcy appear to be a favorable alternative for you at this time? Why or why not? If you choose to file for bankruptcy, which type would you file for and why?
The assets include properties, cars, investments, and cash in bank accounts. The debts could be credit card balances, medical bills, or personal loans. Exempt assets: primary residence, retirement accounts, and tools used for work. Depending on a person's particular financial situation, bankruptcy may or may not be a good option for them. It is advisable to file for Chapter 7 bankruptcy, as you are not obligated to pay some debts.
In general, when someone files for bankruptcy, they need to make a list of their assets and debts. The assets may consist of real estate, automobiles, investments, and money in bank accounts. The debts may include unpaid personal loans, credit card balances, and medical expenses.
After analyzing what they own compared to what they owe, the person filing for bankruptcy may choose to exempt certain assets. These could be assets that are protected by state or federal law from being used to pay off debts.
From a financial point of view, declaring bankruptcy could be a favorable alternative for someone who has a significant amount of debt and no realistic way to pay it off.
However, bankruptcy has long-term consequences, such as a negative impact on credit scores and difficulties obtaining credit in the future.
If someone decides to file for bankruptcy, they would need to choose between Chapter 7 and Chapter 13 bankruptcy. Chapter 7 bankruptcy is often chosen when the individual has little income and few assets to protect.
In contrast, Chapter 13 bankruptcy is chosen when the individual has a regular income and wants to pay off their debts through a payment plan.
Ultimately, whether or not declaring bankruptcy is a favorable alternative for an individual depends on their unique financial situation, the amount of debt they have, and their long-term financial goals.
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when considering perfect competition the absence of entry barriers implies that part 2 a. no firm can enter the industry. b. firms can enter but cannot get out of the industry easily. c. all firms will earn economic profit. d. firms can enter and leave the industry without serious impediments.
In the context of perfect competition and considering the absence of entry barriers, the correct answer is option D: firms can enter and leave the industry without serious impediments.
Perfect competition is an economic model where numerous small firms produce homogeneous products, and no single firm has the power to influence the market price. Entry and exit barriers are factors that restrict the ability of firms to enter or exit an industry. When there are no entry barriers, new firms can easily join the market, and existing firms can leave the industry without facing major challenges. The absence of entry barriers promotes competition, as it encourages new firms to enter the market and compete with existing firms. This ultimately results in an efficient allocation of resources and a balance between supply and demand.
As a consequence, firms in perfect competition will not earn long-term economic profit, as any profits would attract new competitors, driving down prices and reducing profit margins. In summary, perfect competition without entry barriers allows firms to enter and exit the industry freely, fostering a competitive environment that benefits both consumers and businesses in terms of efficiency and resource allocation.
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A stock recently paid a $4/share dividend. They maintain the same dividend payments for the next 11 years. Afterwards, they will steadily increase their dividend payments by 2.5%/year, forever. R=14%. Calculate the stock price.
The stock price is $63.09.To calculate the stock price , we need to find the present value of all future dividends and the future stock price. We can use the dividend discount model (DDM) to do this.
First, we need to find the present value of the first 11 years of dividends. Since the dividend payment remains constant for those years, we can use the perpetuity formula:
PV = (D / R) * (1 - (1 + g)⁻ⁿ)
where PV is the present value, D is the dividend payment, R is the required rate of return, g is the growth rate, and n is the number of periods.
In this case, D = $4, R = 14%, g = 0%, and n = 11. Plugging in these values, we get:
PV = (4 / 0.14) * (1 - (1 + 0)⁻¹¹) = $28.57
This is the present value of the first 11 years of dividends.
Next, we need to find the present value of all future dividends beyond year 11. Since the dividend payment increases by 2.5% per year, we can use the growing perpetuity formula:
PV = (D * (1 + g)) / (R - g)
where PV is the present value, D is the first dividend payment after year 11, R is the required rate of return, and g is the growth rate.
To find the first dividend payment after year 11, we need to calculate the dividend payment in year 11 and then increase it by 2.5% each year. The dividend payment in year 11 is:
D11 = D * (1 + g)^11 = 4 * (1 + 0)¹¹ = $4
The first dividend payment after year 11 is:
D12 = D11 * (1 + g) = 4 * (1 + 0.025) = $4.10
Plugging in these values, we get:
PV = (4.10 / (0.14 - 0.025)) = $34.52
This is the present value of all future dividends beyond year 11.
Finally, we need to find the future stock price at the end of year 11, which is simply the expected dividend payment in year 12 divided by the difference between the required rate of return and the growth rate:
P11 = D12 / (R - g) = 4.10 / (0.14 - 0.025) = $34.52
Adding the present values of the first 11 years of dividends and all future dividends, we get the total present value of the stock:
Total PV = $28.57 + $34.52 = $63.09.Therefore, the stock price is $63.09.
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which of the following statements are true? multiple select question. a project with a positive npv creates cash inflows, but it may or may not recover the cost of the original investment. a project with a positive npv will recover the original cost of the investment plus sufficient cash inflows to compensate for tying up funds. the net present value method automatically provides for return of the original investment. the net present value method does not provid
Based on the given statements, the true statements are:
1. A project with a positive NPV will recover the original cost of the investment plus sufficient cash inflows to compensate for tying up funds.
2. The net present value method automatically provides for return of the original investment.
1. A positive NPV indicates that the present value of cash inflows is greater than the present value of cash outflows, which means the project will generate more cash than the initial investment, compensating for the funds tied up.
2. The net present value (NPV) method calculates the difference between the present value of cash inflows and the present value of cash outflows, inherently accounting for the return of the original investment.
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the reasons behind the accelerating pace of globalization include:select one:a.lower barriers to international tradeb.countries with previously planned economies are embracing market or mixed economiesc.transportation and information technology shrinks the importance of geographic distancesd.all of these
A. "Lower barriers to international trade", B. "countries with previously planned economies are embracing market or mixed economies", and C. "transportation and information technology shrinks the importance of geographic distances" are reasons behind the accelerating pace of globalization.
Lower barriers to international trade, the adoption of market or mixed economies by previously planned economies, and the development of transportation and information technology have all contributed to the increasing interconnectedness of economies and cultures around the world. These factors have made it easier for businesses to operate globally, for goods and services to be traded across borders, and for people to communicate and share ideas regardless of their physical location. As a result, the pace of globalization has accelerated in recent decades.
The correct answers are options B and C.
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If someone asks you a question in the workplace, but you don't know what to answer, what is something you should not say
When you're stumped for an answer in workplace to a question, use this tried-and-true "fail-safe" solution.
What to say in an interview when you're unable to respond to a question?Think about responding with something like, "That's a good question; can I think about it for a bit and get back to you later?" or "Great query! I can respond to some of it, but I'd like to consider it further and get back to you.
What should you say when you don't have the answer to a question?Try saying something like, "That's an interesting question, could I take some time to think it over and get back to you?" or "I can give you a partial answer to that enormous question.
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Question:-
How do you respond when you don't know the answer at work?
Explain interest rates. What are they? Why are there so many interest rates quoted in the financial world? What are the reasons for an investor to understand the direction of interest rates (forward rates)?
Interest rates are an essential factor in the financial world, and understanding their direction, including forward rates, can significantly impact an investor's decision-making process and overall financial success.
Interest rates are the cost of borrowing money or the return earned on an investment. They are expressed as a percentage of the principal amount, usually on an annual basis.
Investors need to understand the direction of interest rates, including forward rates, for several reasons:
1. Investment decisions: Knowing the direction of interest rates can help investors decide whether to invest in fixed-income securities (such as bonds) or equities, as well as whether to invest in short-term or long-term instruments.
2. Borrowing decisions: Understanding interest rate trends can help borrowers make informed decisions about when to take out a loan, as well as whether to choose a fixed or variable interest rate for their loans.
3. Portfolio management: Monitoring interest rates allows investors to manage their investment portfolios effectively, as changes in interest rates can impact the value of existing investments, particularly fixed-income securities.
4. Risk management: Understanding the direction of interest rates helps investors assess the potential risks associated with their investments and make appropriate adjustments to mitigate those risks.
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