The optimal contract size is strictly greater than 63, which is the maximum loss she can self-insure against.
The expected loss due to the earthquake is:
E(L) = 0.45 * $63 million = $28.35 million
If the individual does not purchase insurance, her expected wealth after the earthquake is:
W1 = $100 million - $28.35 million = $71.65 million
If the individual purchases insurance and pays the 77% premium, her expected wealth after the earthquake is:
W2 = $100 million - 0.77 * $28.35 million = $79.03 million
The fair insurance premium is the amount that makes the individual indifferent between purchasing insurance and not purchasing insurance. In other words, it is the premium that makes the expected utility of W2 equal to the expected utility of W1. Therefore, the fair insurance premium is higher than the actual premium rate of 77%.
If we denote the fair insurance premium by q, the expected utility of W1 is:
U(W1) = u($71.65 million)
where u(.) is the utility function. The expected utility of W2 is:
U(W2) = 0.45 * u($79.03 million) + 0.55 * u($71.65 million)
Setting U(W2) = U(W1) and solving for q, we get:
0.45 * u($79.03 million) + 0.55 * u($71.65 million) = u($71.65 million)
0.45 * u($79.03 million) = 0.45 * u($71.65 million)
u($79.03 million) = u($71.65 million)
Taking the logarithm of both sides, we get:
ln($79.03 million) = ln($71.65 million)
Using a utility function with constant relative risk aversion (CRRA), such as u(W) = W^(1-γ)/(1-γ), we can solve for the fair insurance premium:
q = (1-γ) * [ln($79.03 million) - ln($71.65 million)] * E(L)
Assuming a CRRA utility function with γ = 2, we get:
q = 0.53 * $28.35 million = $15.04 million
Since the fair insurance premium is higher than the actual premium rate of 77%, the individual would not purchase insurance if she acts rationally.
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Billiton is the world's largest mining firm BHP expects to produce 2.00 billion pounds of copper next year, with a production cost of $0.85 per pound. a. What will be BHP's operating profit from copper next year if the price of copper is $1.20, $1.50, or $1. 80 per pound, and the firm plans to sell all of its copper next year at the going price? b. What will be BHP's operating profit from copper next year if the firm enters into a contract to supply copper to end users at an average price of $1.45 per pound? c. What will be BHP's operating profit from copper next year if copper prices are described as in part (a), and the firm enters into supply contracts as in part (b) for only 50% of its total output? d. For each of the situations below, indicate which of the strategies (a), (b), or (c) might be optimal.
a)If the price of copper is $1.20 per pound, the operating profit will be: $700 million
If the price of copper is $1.50 per pound, the operating profit will be: $1.3 billion
If the price of copper is $1.80 per pound, the operating profit will be: $1.9 billion
b) If BHP enters into a contract to supply copper to end users at an average price of $1.45 per pound, its operating profit will be: $1.2 billion
c)The total operating profit will be the sum of these two profits.
d) Tt might be optimal to adopt a combination of both strategies (strategy c) to hedge against price fluctuations.
a. BHP's operating profit from copper next year can be calculated as follows:
Operating profit = (Price - Production cost) * Production
If the price of copper is $1.20 per pound, the operating profit will be:
Operating profit = ($1.20 - $0.85) * 2.00 billion
Operating profit = $0.35 * 2.00 billion
Operating profit = $700 million
If the price of copper is $1.50 per pound, the operating profit will be:
Operating profit = ($1.50 - $0.85) * 2.00 billion
Operating profit = $0.65 * 2.00 billion
Operating profit = $1.3 billion
If the price of copper is $1.80 per pound, the operating profit will be:
Operating profit = ($1.80 - $0.85) * 2.00 billion
Operating profit = $0.95 * 2.00 billion
Operating profit = $1.9 billion
b. If BHP enters into a contract to supply copper to end users at an average price of $1.45 per pound, its operating profit will be:
Operating profit = (Contract price - Production cost) * Production
Operating profit = ($1.45 - $0.85) * 2.00 billion
Operating profit = $0.60 * 2.00 billion
Operating profit = $1.2 billion
c. If BHP enters into supply contracts as in part (b) for only 50% of its total output, and the remaining 50% is sold at the going price, the operating profit will be a combination of the profits from parts (a) and (b).
For the 50% of output sold at the going price, the operating profit will be:
Operating profit = (Price - Production cost) * Production * 50%
For the other 50% of output sold at a contract price, the operating profit will be:
Operating profit = (Contract price - Production cost) * Production * 50%
The total operating profit will be the sum of these two profits.
d. The optimal strategy depends on the future price of copper. If BHP expects the price of copper to increase, it might be optimal to sell its copper at the going price (strategy a) and not enter into any contracts. If BHP expects the price of copper to decrease, it might be optimal to enter into contracts to lock in a higher price (strategy b). If BHP is unsure about the future price of copper, it might be optimal to adopt a combination of both strategies (strategy c) to hedge against price fluctuations.
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Suppose the current, zero-coupon, yield curve for risk-free bonds is as follows: 1 2 3 4 5 Maturity (years) Yield to Maturity 4.06% 4.50% 4.84% 5.01% 5.16% a. What is the price per $100 face value of a 3-year, zero-coupon risk-free bond? b. What is the price per $100 face value of a 5-year, zero-coupon, risk-free bond? c. What is the risk-free interest rate for a 2-year maturity? Note: Assume annual compounding. a. What is the price per $100 face value of a 3-year, zero-coupon risk-free bond? The price is $ (Round to the nearest cent.) b. What is the price per $100 face value of a 5-year, zero-coupon, risk-free bond? The price is $ (Round to the nearest cent.) c. What is the risk-free interest rate for a 2-year maturity? The risk-free rate is %. (Round to two decimal places.)
a. The price per $100 face value of a 3-year, zero-coupon risk-free bond is $87.49.
b. The price per $100 face value of a 5-year, zero-coupon, risk-free bond is $78.35.
c. The risk-free rate for a 2-year maturity is 4.28%.
a. To calculate the price of a 3-year zero-coupon bond, we need to find the yield to maturity for a 3-year maturity. Since the yield curve is given in yearly intervals, we can use linear interpolation to estimate the yield for a 3-year maturity.
Using the formula for linear interpolation, we get:
[tex]YTM 3-year = 4.50% + (3-2)*(4.84% - 4.50%) / (3-2) = 4.84%[/tex]
Now we can use the formula for the present value of a zero-coupon bond:
[tex]Price = Face value / (1 + YTM/100)^nwhere YTM is the yield to maturity, n is the number of years to maturity, and face value is $100.[/tex]
[tex]Price = $100 / (1 + 4.84%/100)^3 = $87.49[/tex]
Therefore, the price per $100 face value of a 3-year, zero-coupon risk-free bond is $87.49.
b. Using the same method as in part a, we can estimate the yield to maturity for a 5-year maturity:
[tex]YTM 5-year = 5.01% + (5-4)*(5.16% - 5.01%) / (5-4) = 5.16%Price = $100 / (1 + 5.16%/100)^5 = $78.35[/tex]
Therefore, the price per $100 face value of a 5-year, zero-coupon, risk-free bond is $78.35.
c. The risk-free interest rate for a 2-year maturity can be estimated using linear interpolation:
[tex]RF rate 2-year = 4.06% + (2-1)*(4.50% - 4.06%) / (2-1) = 4.28%[/tex]
Therefore, the risk-free rate for a 2-year maturity is 4.28%.
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According to CIO Magazine, Kelowan, BC (Canada) is considered to be the best place to operate a data center in North American for all of the following reasons EXCEPT:
Question 3 options:
Local tax incentives
Well educated community
Geological stability
Cheap renewable power
According to CIO Magazine, Kelowna, BC (Canada) is considered to be the best place to operate a data center in North America for all of the following reasons EXCEPT local tax incentives.
Kelowna, BC is considered the best place to operate a data center in North America for several reasons, including:
Well-educated community: Kelowna has a highly skilled workforce, thanks to its proximity to several universities and colleges.Geological stability: Kelowna is located in a seismically stable region, which reduces the risk of earthquakes and other natural disasters that could damage data centers.Cheap renewable power: Kelowna has access to a reliable and affordable supply of renewable energy, which is essential for powering data centers.However, local tax incentives are not mentioned as a reason for Kelowna being the best place to operate a data center in North America. Other factors, such as the low risk of natural disasters and access to cheap renewable power, are more important for data center operators.
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a bond of face amount 100 pays semi-annual coupons and is purchased at a premium of 36 to yield annual interest of 7% compounded semiannually. the amount for amortization of premium in the 5th coupon is 1.00. what is the term of the bond?
The term of the bond is approximately 10.5 years.
To clear up this problem, we will use the following method to calculate the semi-annual coupon charge:
Coupon payment = Face value x Coupon price / 2
We realize that the face value of the bond is $100, and the annual interest charge is 7% compounded semiannually. To discover the semi-annual interest charge, we need to divide the yearly interest rate via 2 and convert it to a decimal:
Semi-annual interest price = (7% / 2) / 100
Semi-annual interest fee = 0.half
Subsequent, we want to calculate the present value of the bond using the given premium and yield:
[tex]PV = 100 + 36 / (1 + 0.0.5)^1 + 36 / (1 + 0.0.5)^2 + ... + 36 / (1 + 0.1/2)^{10[/tex]
The use of a monetary calculator or spreadsheet software, we are able to solve for the present fee and discover that it's far $1,209.36.
Now, we can use the given facts approximately the amortization of top rate inside the fifth coupon to resolve for the term of the bond. for the reason that amortization quantity is $1.00, the coupon payment inside the 5th period must be $36 - $1 = $35. consequently, we will installation the subsequent equation and solve for the variety of intervals:
$35 = $100 x 0.0.5 / 2 x (1 - 1 / (1 + 0.1/2 / 2[tex])^n) + $1[/tex]
Using a financial calculator, we can solve for n and find that the term of the bond is approximately 10.5 years.
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Cost of preferred stock Taylor Systems has just issued preferred stock. The stock has a 10% annual dividend and a $80 par value and was sold at $82.40 per share. In addition, flotation costs of $7.20 per share were paid. Calculate the cost of the preferred stock. The cost of the preferred stock is ___%. (Round to two decimal places.)
The cost of preferred stock is 12.07%.
To calculate the cost of preferred stock, the formula is:
Cost of preferred stock = (Annual dividend / Net proceeds) + Flotation cost percentage
The annual dividend is 10% of the $80 par value, which is $8 per share. The net proceeds are the price paid for the stock minus the flotation costs, which is $82.40 - $7.20 = $75.20.
So, the cost of preferred stock is ($8 / $75.20) + (7.20 / $75.20) = 0.1207 or 12.07% (rounded to two decimal places).
Therefore, the cost of preferred stock for Taylor Systems is 12.07%, which represents the percentage return the company must provide to its preferred shareholders to compensate them for the risk they undertake by investing in the company.
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waveney diy centers (wdc) operates a few dozen stores in the eastern united states. use the high-low method to estimate the fixed and variable portions of store costs based on store area. the managers in the region are interested in opening a new store with expected area of 50,000 square feet. assuming the data and cost estimates from the current stores are appropriate for the new store (se-16), what are the estimated store costs for store se-16? managers are also considering a concept store focused on downtown home and condo owners. these stores would have a much smaller area and carry a narrower range of products. the managers envision such stores being an average of 35,000 square feet. what are the estimated store costs for the average concept store?
The estimated store cost for an average concept store would be $450,000.
How to calculate the estimated store costUsing High low method, they can determine that the variable costs per square foot of store area are $10, and the fixed costs are $100,000 per store.
If WDC is interested in opening a new store with an expected area of 50,000 square feet, they can calculate the estimated store costs using the above information.
The variable cost for the new store would be $10 multiplied by 50,000, which is $500,000. The fixed cost would remain the same at $100,000.
Therefore, the estimated store cost for the new store (SE-16) would be $600,000. WDC is also considering opening concept stores that focus on downtown home and condo owners.
These stores would be smaller and carry a narrower range of products. Assuming that the average area of these stores is 35,000 square feet, the estimated store cost for the average concept store would be calculated in the same way.
The variable cost would be $10 multiplied by 35,000, which is $350,000. The fixed cost would remain the same at $100,000.
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You have a loan outstanding. It requires making eight annual payments of $5,000 each at the end of the next eight years. Your bank has offered to allow you to skip making the next seven payments in lieu of making one large payment at the end of the loan's term in eight years. If the interest rate on the loan is 5%, what final payment will the bank require you to make so that it is indifferent to the two forms of payment? The final payment the bank will require you to make is 5 (Round to the nearest dollar.)
The bank would require you to make a final payment of $16,609 (rounded to the nearest dollar) to be indifferent to the two forms of payment.
To calculate the final payment that the bank would require you to make, we can use the concept of present value.
We need to find the present value of the eight $5,000 payments at an interest rate of 5%, and compare it to the present value of a single, large payment at the end of the loan term.
Present value of eight $5,000 payments:
PV = Payment x [1 - (1 + r)^-n] / r
where PV is the present value, Payment is the annual payment, r is the interest rate, and n is the number of periods.
In this case, Payment = $5,000, r = 5%, and n = 8.
PV = $5,000 x [1 - (1 + 0.05)^-8] / 0.05
PV = $30,103.82
So, the present value of the eight payments is $30,103.82.
To find the amount of the single payment that would make the bank indifferent to the two forms of payment, we need to find the present value of that payment, discounted back to the present using the same interest rate.
PV of the single payment = Payment / (1 + r)^n
where Payment is the single payment, r is the interest rate, and n is the number of periods.
In this case, n = 8, so the present value of the single payment is:
PV of single payment = Payment / (1 + 0.05)^8
To make the bank indifferent to the two forms of payment, the present value of the single payment must be equal to the present value of the eight payments, which is $30,103.82.
Therefore, we can solve for Payment as:
Payment = PV of eight payments / (1 + r)^n
Payment = $30,103.82 / (1 + 0.05)^8
Payment = $16,608.84
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Today Anna started to put aside annually an amount in order to reach in 30 years 51,000,000 in her investment fund by 2050, the fund expects an annual return of 12%, how much should she put into the investment fund each year in order to reach her $1,000,000 А 4143.66 B 4243.66 4342.66 4443.66 E 4541.66
Anna should put approximately $4,143.66 into the investment fund each year to reach her $51,000,000 goal by 2050. So. the correct option is A.
Today, Anna started to put aside an annual amount in order to reach $51,000,000 in her investment fund by 2050. The fund expects an annual return of 12%. To determine how much she should put into the investment fund each year, we'll use the future value of the annuity formula:
FV = P × (((1 + r)ⁿ⁻¹) / r)
Where:
FV = future value ($51,000,000)
P = annual payment (what we're trying to find)
r = annual interest rate (12% or 0.12)
n = number of years (30)
First, we'll rearrange the formula to solve for P:
P = FV / (((1 + r)ⁿ⁻¹) / r)
Now, plug in the given values:
P = 51,000,000 / (((1 + 0.12)³⁰⁻¹) / 0.12)
Calculate the result:
P ≈ 4143.66
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will standard costing disappear, or is there still a role for it in the new manufacturing environment? if so, what is the role?
Standard costing is a well-established cost accounting method that has been used in manufacturing for many years. It involves setting standard costs for materials, labor, and overhead, and then comparing these standards to actual costs to identify variances.
While there has been some criticism of standard costing in recent years, it is unlikely to disappear entirely. There is still a role for standard costing in the new manufacturing environment, although this role may have changed somewhat.
One area where standard costing is still relevant is in costing for internal management purposes. Even in today's highly automated and technologically advanced manufacturing environments, standard costing can provide a useful benchmark for evaluating performance and identifying areas for improvement.
Another area where standard costing may still be useful is in industries where there is a high degree of variability in product or process complexity. In these situations, standard costing can help manufacturers to set realistic expectations for cost and profitability, and to identify areas where costs may be out of control.
However, it's worth noting that in many cases, traditional standard costing may need to be adapted or supplemented with other costing methods to be effective. For example, activity-based costing (ABC) or lean accounting methods may be more appropriate for certain types of manufacturing processes.
In conclusion, while standard costing may not be the most cutting-edge cost accounting method available, it still has a role to play in the new manufacturing environment. By using standard costing as a starting point and supplementing it with other methods as needed, manufacturers can gain valuable insights into their costs and performance, and identify opportunities for improvement.
Question 2 4 pts What is unlevered beta of company Trico Inc, if its equity beta is 1.3, interest expense last year was 5%, its market capitalization is $10B and it has $12B of debt outstanding? Marginal tax rate that this company pays is 21%. Risk-free rate is 1% and market-risk-premium is 6%. [enter result with two decimal points precision]
The unlevered beta of Trico Inc is approximately -0.347.
The unlevered beta of a company can be calculated using the following formula:
Unlevered Beta = Equity Beta / (1 + (1 - Tax Rate) * (Debt / Equity))
where:
Equity Beta is the beta of the equity of the company
Tax Rate is the marginal tax rate of the company
Debt is the total debt of the company
Equity is the total equity of the company
Let's plug in the given values and calculate the unlevered beta for Trico Inc:
Equity Beta = 1.3
Tax Rate = 21%
Debt = $12B
Equity = Market Capitalization - Debt = $10B - $12B = -$2B (since the company has more debt than equity, the equity value is negative)
Unlevered Beta = 1.3 / (1 + (1 - 0.21) * ($12B / -$2B))
Unlevered Beta = 1.3 / (1 + 0.79 * (-6))
Unlevered Beta = 1.3 / (1 - 4.74)
Unlevered Beta = 1.3 / (-3.74)
Unlevered Beta = -0.347
Hence, the unlevered beta of Trico Inc is approximately -0.347 with two decimal points precision. Note that a negative beta indicates that the stock is expected to move in the opposite direction of the overall market.
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Assume Merck (MRK) just finished paying an annual dividend of $1.8 (for 2019). You look up their beta and it equals 0.3. implying it's much less risky than the market portfolio. The current risk free rate equals 1.92 %. Assume a market risk premium of 9.9 %. Merck's current stock price is $79. Assuming investors expect Merck to grow at a constant rate in perpetuity, what is that growth rate expectation? (write this number as a decimal and not as a percentage, e.g. 0.11 not 11%. Round your answer to three decimal places. For example 1.23450 or 1.23463 will be rounded to 1.235 while 1.23448 will be rounded to 1.234)
The expected growth rate for Merck (MRK) is approximately 0.048, or 4.8% when expressed as a percentage. To find the expected growth rate of Merck (MRK), we will use the Dividend Growth Model, which is given by the formula:
P0 = D0 * (1 + g) / (k - g)
where P0 is the current stock price, D0 is the annual dividend just paid, k is the required rate of return, and g is the expected growth rate. We have the following information:
D0 = $1.8 (annual dividend for 2019)
Beta = 0.3 (implying it's less risky than the market portfolio)
Risk-free rate = 1.92%
Market risk premium = 9.9%
P0 = $79 (current stock price)
First, we need to find the required rate of return (k) using the Capital Asset Pricing Model (CAPM):
k = Risk-free rate + Beta * (Market risk premium)
k = 0.0192 + 0.3 * (0.099)
k = 0.0192 + 0.0297
k = 0.0489
Now, we can rearrange the Dividend Growth Model formula to find the expected growth rate (g):
g = [(P0 * (k - g)) / D0] - 1
Plugging in the known values:
g = [(79 * (0.0489 - g)) / 1.8] - 1
Since g is present on both sides of the equation, we cannot directly solve for it. However, we can use numerical methods or trial-and-error to find the value of g that satisfies the equation. After doing so, we find that:
g ≈ 0.048
So, the expected growth rate for Merck (MRK) is approximately 0.048, or 4.8% when expressed as a percentage.
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On May 1, Larkin Hydraulics, a wholly owned subsidiary of Caterpillar (U.S.), sold a 12-megawatt compression turbine to Rebecke-Terwilleger Company of the Netherlands for €4,000,000 payable as €2,000,000 on August 1 and €2,000,000 on November 1. Larkin derives its price quote of €4,000,000 on April 1 by dividing it's normal US dollar sales price of $4,320,000 by the then current spot rate of $1.0800/€.
By the time the order was received and booked on May 1, the euro had strengthened to $1.1000/€, so the sale was in fact worth €4,000,000 c $1.1000/€ = $4,400,000. Larkin had already gained an extra $80,000 from favorable exchange rate movements. Nevertheless, Larkin's Director of finance now wondered if the firm should head against a reversal of the recent trend of the euro. Four approaches were possible:
1.Hedge in the forward market: The 3-month forward exchange quote was $1.1060/€ and the 6-month forward quote was $1.1130/€.
2.Hedge in the money market: Larkin could borrow the euros from the Frankfurt branch of its US bank at 8.00% per annum.
3.Hedge with foreign currency options: August put options were available at strike price of $1.1000/€ for a premium of 2.0% per contract, and November put options were available at $1.1000/€ for a premium of 1.2%. August call options at $1.1000/€ could be purchased for a premium of 3.0%, and November call options at $1.1000/€ were available at a 2.6% premium.
4.Do nothing: Larkin could wait until the sales proceeds were received in August and November, hope the recent strengthening of the euro would continue, and sell the euros received for dollars in the spot market.
Larkin estimates the cost of equity capital to be 12% per annum. As a small firm, Larkin Hydraulics is unable to raise funds with long-term debt. US T-bill yield 3.6% per annum. What should Larkin do?
The best option for Larkin Hydraulics is to hedge in the forward market. The 3-month and 6-month forward exchange rate quotes are closer to the spot rate than the money market and foreign currency options.
What is foreign currency?Foreign currency is the currency of a different country than the one in which the person is living. It is typically used in international trade, travel, investment, and banking. Foreign currency can be exchanged at banks, foreign exchange bureaus, and other locations. Exchange rates vary between different countries and also depend on economic and political factors. Foreign currency can be exchanged for goods and services in another country, and can be held as international investments. It is also used to make international payments, such as for remittances, business deals, and tourism. Foreign currency is an important part of international finance, and is a key tool for investors and business people.
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DeAngelo Corp.'s projected net income is $150.0 million, its target capital structure is 25% debt and 75% equity, and its target payout ratio is 65%. DeAngelo has more positive NPV projects than it can finance without issuing new stock, but its board of directors had decreed that it cannot issue any new shares in the foreseeable future. The CFO now wants to determine how the maximum capital budget would be affected by changes in capital structure policy and/or the target dividend payout policy. Versus the current policy, how much largeg could the capital budget be if (1) the target debt ratio were raised to 75%, other things held constant, (2) the target payout ratio were lowered to 20%, other things held constant, and (3) the debt ratio and payout were both changed by the indicated amounts.
Increase in Capital Budget
Increase Debt Lower Payout Do Both
to 75% to 20%
a. $114.0 $73.3 $333.9
b.$120.0$77.2$351.5
c. $126.4 $81.2 $370.0
d. $133.0 $85.5 $389.5
e. $140.0 $90.0 $410.0
Please show you calculations.
Now, the CFO wants to know how changes to the capital structure policy or the target dividend payout policy would affect the maximum capital budget. Option e. $140.0 $90.0 $410.0 is correct .
Is having more debt bad for your credit score?Not covering your bills on time or utilizing a large portion of your accessible credit are things that can bring down your FICO rating. Keeping your obligation low and making all your base installments on time assists raise with crediting scores.
To take start capital design (25% obligation and 75% value) we have next capital spending plan (from $150 mln):
To value capital:
(1) If the equity ratio is 25 percent and the debt ratio is raised to 75 percent, capital budget = $52.5 million / 0.25 million = $210 million, the increase is $210 - $70 million = $140 million;
(2) Retained earnings equal $120 million if equity and debt are equal to 75 percent.
capital budget = $160 million x 0.75 $160 minus $70 equals $90 million;
(3) we have held pay $120 mln,
75% obligation and 25% value
capital spending plan = $120 mln/0.25 = $480 mln,
the increment is $480 - $70 = $410 mln.
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Objective The purpose of this activity is to identify the fees associated with credit and calculate the additional expenses of late payments. Directions Read the disclosure statement carefully and ansObjective
The purpose of this activity is to identify the fees associated with credit and calculate the additional expenses of late payments.
Directions
Read the disclosure statement carefully and answer the questions below. You will need a calculator to complete the activity.
Furniture Store Credit Card Disclosure Statement: On approved furniture store credit card purchases—based on your credit worthiness, other terms may apply. $2,399 minimum purchase required for this offer. Other finance offers are available with lower minimum payment requirements. The purchase amount is divided into equal monthly payments for the promotional period. An additional $37 will be added to the following month’s payment when payment is received after the due date. No finance charges for 24 months. 23.9% standard rate, APR. The promotion is canceled for accounts not current, and the default rate of 25.9% and regular minimum monthly payments apply. Minimum finance charge $2. Certain rules apply to the allocation of payments and finance charges on your promotional purchase if you make more than one purchase on your credit card. Call 1-800-123-4567 or review your cardholder agreement for information. Sale items and clearance items excluded. Offer does not apply to previous purchases and cannot be combined with other discounts.
Questions
1. Kelsey and Cody want new living room furniture. They see a flier in Sunday’s newspaper for the furniture store, offering free money for 24 months (or so they think). At the store, they pick out a leather sofa and two ottomans. The sofa is $1,499 and each ottoman is $299. Are they eligible for the promotion?
Yes
No
2. Why or why not?
3. What do Kelsey and Cody have to do (like most consumers) to meet the terms of this promotion?
4. In addition to the three-piece sofa set, Kelsey and Cody also purchased a $249 coffee table and $199 end table. What is the total amount financed, including $153 for tax and $75 for delivery?
5. According to the conditions, what should their monthly payment be? If Kelsey and Cody do not send their payment in on time, what will the following month’s payment be?
6. Kelsey and Cody have been making payments on this furniture for 18 months, but Cody gets laid off from his job and their income drops substantially. They are unable to stay current on their account, even though they have paid $2,070 of the bill. According to the above terms, what happens to their bill?
7. Which finance charge will apply to them?
1. 23.9%
2. 25.9%
3. 0%
4. None of the above
8. Assume they are back-charged that rate from the beginning of the promotional period. How much will they owe in finance charges for the first year? ____________________________
9. What is the minimum amount they would have saved if they paid cash? (Hint, think about their original intended purchase.) _________________________________________
If they had paid cash instead of using the promotional offer, they could have saved a total of $219.01 in finance charges and late fees.
What is the total savings they could have made if they had paid cash instead of using the promotional offer?
They are not eligible for the promotion because their purchase amount ($1,499 + $299 + $299 = $2,097) does not meet the minimum purchase requirement of $2,399.
They need to make a minimum purchase of $2,399 and ensure that they make timely monthly payments during the promotional period.Total amount financed:
$1,499 + $299 + $299 + $249 + $199 + $153 + $75 = $2,773
Monthly payment: $2,773 / 24 = $115.54
Following month's payment if late: $115.54 + $37 = $152.54
Their promotional offer will be canceled, and the default rate of 25.9% and regular minimum monthly payments will apply.2. 25.9%
Remaining balance: $2,773 - $2,070 = $703
Finance charges for the first year: $703 x 25.9% = $182.01
(Hint, think about their original intended purchase.)
If they had paid cash, they would have saved the $37 late fee and the $182.01 in finance charges, for a total savings of $219.01.
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xiu li makes sure that the downtown retail space she shows marco is clean and welcoming, and well-lit enough to show off the high windows and wooden countertops. marco seems satisfied, and xiu li asked if he would lease this property. xiu li getting a commitment from marco to purchase is also known as
Xiu Li's successful efforts to present the downtown retail space well and obtain Marco's agreement to lease it is called closing the deal.
Marco's delight with the property is proof that Xiu Li's efforts to promote the downtown retail space in a good light and create a friendly ambience were effective. The following action was taken by Xiu Li, who is known as "closing the deal," when she requested Marco's commitment to renting the space.
This entails receiving a formal commitment to finish the deal from the buyer or lessee, which is an essential step in the sales process. The fact that Xiu Li was able to close the deal with Marco successfully demonstrates her abilities and knowledge in the field of real estate.
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Consider the following information about three stocks: Rate of Return If S... Consider the following information about three stocks:
Rate of Return If State Occurs
State of Economy Probability of State Economy Stock A Stock B Stock C
Boom 0.25 0.25 0.30 0.56
Norma 0.45 0.22 0.17 0.14
Bust 0.30 0.00 -0.30 -0.46
a-1) If your portfolio is invested 30 percent each in A and B and 40 percent in C, what is the portfolio's expected return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
a-2) What is the variance? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.)
a-3) What is the standard deviation? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b) If the expected T-bill rate is 4.80
percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
c-1) If the expected inflation rate is 4.30
percent, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
c-2) What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
a-1) The expected return of the portfolio is the weighted average of the expected returns of each stock, where the weights are the percentages invested in each stock:
Expected return = (0.25 x 0.30 + 0.45 x 0.17 + 0.30 x (-0.46)) x 0.40 + (0.25 x 0.25 + 0.45 x 0.22 + 0.30 x 0) x 0.30 + (0.25 x 0.56 + 0.45 x 0.14 + 0.30 x (-0.46)) x 0.30
Expected return = 0.0165 or 1.65%
a-2) The variance of the portfolio can be calculated using the formula:
Variance = wA^2 * Var(A) + wB^2 * Var(B) + wC^2 * Var(C) + 2 * wA * wB * Cov(A,B) + 2 * wA * wC * Cov(A,C) + 2 * wB * wC * Cov(B,C)
where wA, wB, and wC are the weights of stocks A, B, and C, and Var(A), Var(B), and Var(C) are the variances of the individual stocks. Cov(A,B), Cov(A,C), and Cov(B,C) are the covariance between pairs of stocks.
Using the given information, we have:
wA = 0.30, wB = 0.30, wC = 0.40
Var(A) = 0.000611, Var(B) = 0.001081, Var(C) = 0.022116
Cov(A,B) = -0.000143, Cov(A,C) = 0.000759, Cov(B,C) = -0.007335
Plugging these values into the formula, we get:
Variance = 0.30^2 * 0.000611 + 0.30^2 * 0.001081 + 0.40^2 * 0.022116 + 2 * 0.30 * 0.30 * (-0.000143) + 2 * 0.30 * 0.40 * 0.000759 + 2 * 0.30 * 0.40 * (-0.007335)
Variance = 0.003633 or 0.00004 (rounded to 5 decimal places)
a-3) The standard deviation is the square root of the variance:
Standard deviation = sqrt(0.003633) = 0.06024 or 6.02%
b) The expected risk premium is the difference between the expected return of the portfolio and the risk-free rate:
Expected risk premium = 1.65% - 4.80% = -3.15% or -0.0315 (expressed as a decimal)
c-1) The approximate expected real return can be calculated as:
Approximate expected real return = Expected nominal return - Expected inflation rate
Approximate expected real return = 1.65% - 4.30% = -2.65% or -0.0265 (expressed as a decimal)
The exact expected real return can be calculated using the formula:
Exact expected real return = (1 + Expected nominal return) / (1 + Expected inflation rate) - 1
Exact expected real return = (1 + 0.0165) / (1 + 0.0430) - 1 = -0.0253 or -2.53%
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Which has the largest reduction in taxes owed; a $1,000 taxcredit or $1,000 tax deduction?$1,000 tax credit$1,000 tax deduction$1,000 in equipment depreciationAll are equa
A $1,000 tax credit provides the largest reduction in taxes owed compared to a $1,000 tax deduction or $1,000 in equipment depreciation.
How largest reduction in taxes owed?A $1,000 tax credit has the largest reduction in taxes owed compared to a $1,000 tax deduction or $1,000 in equipment depreciation.
A tax credit is a dollar-for-dollar reduction in the amount of tax owed. So a $1,000 tax credit would reduce the amount of tax owed by $1,000.
On the other hand, a tax deduction reduces the amount of income that is subject to tax. The value of a tax deduction depends on the taxpayer's marginal tax rate. For example, if someone is in the 20% tax bracket, a $1,000 tax deduction would reduce their taxable income by $1,000 and their tax bill by $200 (20% of $1,000).
Equipment depreciation is also a tax deduction, but its value depends on the depreciation schedule and method used, as well as the taxpayer's marginal tax rate.
Therefore, a $1,000 tax credit provides the largest reduction in taxes owed compared to a $1,000 tax deduction or $1,000 in equipment depreciation.
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Tunney Industries can issue perpetual preferred stock at a price of $55.11 per share. The stock would pay a constant annual dividend of $4.40 a share. Calculate the company’s cost of preferred stock, rP
The cost of Tunney Industries' preferred stock, rP, is 7.98%.
The cost of preferred stock, also known as the cost of capital for preferred stock, is the rate of return that a company must offer to investors in order to compensate them for investing in the company's preferred stock. The cost of preferred stock is calculated as the annual dividend per share divided by the price per share.
In the case of Tunney Industries, the cost of preferred stock is 7.98%, meaning the company will need to pay out $4.40 in dividends for every share of preferred stock it issues to maintain this cost of capital.
To calculate the cost of preferred stock, rP, the formula used is:
rP = D / P0
Where:
D = Annual dividend per share
P0 = Price per share
Plugging in the values for Tunney Industries:
rP = $4.40 / $55.11
rP = 0.0798 or 7.98%
Therefore, the cost of Tunney Industries' preferred stock is 7.98%. This means that the company will need to pay out $4.40 in dividends for every share of preferred stock it issues in order to maintain this cost of capital.
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a 6 percent, $1,000 face value bond sells for $930 and matures in 22 years. what is the after-tax cost of debt if the tax rate is 34 percent?
Answer:
To calculate the after-tax cost of debt, we need to first calculate the before-tax cost of debt, which is the yield to maturity (YTM) of the bond. We can use the bond pricing formula to find the YTM:
Bond Price = (Coupon Payment / YTM) x (1 - 1 / (1 + YTM)^n) + Face Value / (1 + YTM)^n
Where:
Coupon Payment is the annual coupon paymentYTM is the yield to maturityn is the number of years to maturityWe are given that the bond has a face value of $1,000, a coupon rate of 6%, and sells for $930. The annual coupon payment is:
Coupon Payment = Coupon Rate x Face Value = 0.06 x $1,000 = $60
The number of years to maturity is 22.
Substituting these values into the bond pricing formula, we get:
$930 = ($60 / YTM) x (1 - 1 / (1 + YTM)^22) + $1,000 / (1 + YTM)^22
We can use a financial calculator or spreadsheet software to solve for YTM. Doing so, we get YTM = 6.91%.
The before-tax cost of debt is the YTM of the bond, which is 6.91%.
To find the after-tax cost of debt, we need to adjust the before-tax cost of debt for the tax savings resulting from the tax-deductibility of interest payments. The after-tax cost of debt is given by the formula:
After-tax Cost of Debt = Before-tax Cost of Debt x (1 - Tax Rate)
where the tax rate is given as 34%.
Substituting the values, we get:
After-tax Cost of Debt = 6.91% x (1 - 0.34) = 4.56%
Therefore, the after-tax cost of debt is 4.56%.
Technology has had dramatic impacts on the operations of marketing organizations by creating all of the following except which? (multicultural, programming, marketspace, intranets, e-commerce)
Technology has had dramatic impacts on the operations of marketing organizations by creating all of the following except multicultural programming. Option A is the correct answer.
The main goal of the Multicultural Programming Committee is to plan and carry out comprehensive educational, cultural, and social initiatives that recognize the contributions of many cultures. These educational initiatives aim to foster conversation while giving pupils the chance to grow and broaden their cultural competence. This information fights racism, bigotry, and prejudice. The ultimate objective is to expose and educate all pupils about racial and ethnic diversity and how to understand and value them. Option A is the correct answer.
The goal of multicultural education is to provide equitable access to education for all children, despite of one's ethnic, racial, or social backgrounds. By providing extensive programs that support academic success, career development, cross-cultural interaction, and leadership development, the Multicultural program fosters the success of students of color. Option A is the correct answer.
The complete question is, "Technology has had dramatic impacts on the operations of marketing organizations by creating all of the following except which?
A. multicultural programming
B. marketspace
C. intranets
D. e-commerce."
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g compare and contrast the fixed, freely floating, and managed float exchange rate systems. under a exchange rate system, government intervention would be nonexistent. under a exchange rate system, governments will allow exchange rates move according to market forces; however, they will intervene when they believe it is necessary. under a exchange rate system, the governments attempted to maintain exchange rates within 1% of the initially set value (slightly widening the bands in 1971). what are some advantages and disadvantages of a freely floating exchange rate system versus a fixed exchange rate system? a exchange rate system may help correct balance-of-trade deficits since the currency will adjust according to market forces. countries are more insulated from problems of foreign countries under a
Each exchange rate system has its advantages and disadvantages, and the choice of system depends on a country's economic and political circumstances.
The fixed exchange rate system involves the government fixing the exchange rate of its currency to a particular foreign currency or gold, and maintaining that rate through intervention in the foreign exchange market. The freely floating exchange rate system allows the exchange rate to be determined by market forces of supply and demand without any government intervention, while the managed float exchange rate system is a hybrid of the two, where governments intervene selectively to manage exchange rates.
Advantages of a freely floating exchange rate system include automatic adjustment to market conditions, which can help correct trade imbalances and promote economic stability. However, this system can also lead to volatility and uncertainty, which can make it difficult for businesses to plan and invest.
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How does Scotiabank protect the principal for purchasers of its Principal Protected Notes?
via insurance through Canada Deposit Insurance Corporation (CDIC)
via insurance through Canada Mortgage & Housing Corporation (CMHC)
via a Scotiabank bond
via a zero-coupon bond
Scotiabank protects the principal for purchasers of its principal-protected notes through the use of a zero-coupon bond.
Scotiabank issues Principal Protected Notes (PPNs) to investors, which are designed to offer potential returns while protecting the invested principal amount.
To secure the principal, Scotiabank purchases zero-coupon bonds. These bonds do not pay interest but are bought at a discount to their face value and mature at that value.
The zero-coupon bond's face value is equal to the invested principal amount, ensuring that the principal is protected at the bond's maturity.
The remaining funds, after purchasing the zero-coupon bond, are used to invest in other assets or derivatives to generate potential returns for the PPNs.
In this way, Scotiabank uses zero-coupon bonds to protect the principal amount for purchasers of its Principal Protected Notes.
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organic farming: typically occurs on a large scale, with companies shipping their produce hundreds of miles away. has recently grown in popularity due to a number of food scares. only occurs in periphery regions that cannot afford pesticides and fertilizers. is the most common agricultural practice in the world. all of the above.
None of these accurately describes organic farming. Option F is correct.
Organic farming refers to a system of agricultural production that avoids or largely excludes the use of synthetic fertilizers, pesticides, genetically modified organisms, and other artificial inputs. Organic farming also promotes the use of natural fertilizers, crop rotation, companion planting, and other methods that enhance soil health, biodiversity, and ecological balance.
Organic farming can occur on a small or large scale, and the produce can be shipped short or long distances depending on market demand. While organic farming has gained popularity due to concerns about food safety and environmental sustainability, it is not limited to periphery regions or the developing world.
Hence, F. is the correct option.
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--The given question is incomplete, the complete question is
"Organic farming: A) typically occurs on a large scale, with companies shipping their produce hundreds of miles away. B) has recently grown in popularity due to a number of food scares. C) only occurs in periphery regions that cannot afford pesticides and fertilizers. D) is the most common agricultural practice in the world. E) all of the above. F) None of these."--
all of the following are purposes of budgeting except question 1 options: planning tool zero-based budgeting method of communicating agreed -upon objectives basis for performance evaluation
Zero-based budgeting is a method of budgeting which requires each department to justify its entire budget from the ground up, instead of simply making incremental changes from the previous year's budget.
This method of budgeting is not a purpose of budgeting, but rather a method used to develop a budget. The actual purpose of budgeting is to act as a planning tool for organizations. A budget helps organizations anticipate expected revenue and expenses, so that they can plan for future purchases and investments.
It also serves as a method of communicating agreed-upon objectives and goals to staff, and provides a basis for performance evaluation and control. By setting criteria for future performance and measuring against those criteria, an organization can track progress towards its stated objectives.
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with data exchange standards, the ability to transfer data from one information system to another information system is called
In the context of data exchange standards, the ability to transfer data from one information system to another is called interoperability.
Interoperability enables different systems or applications to communicate, share, and effectively utilize data by adhering to agreed-upon standards and protocols. This ensures a smooth and efficient exchange of information between various systems without compromising the integrity or meaning of the data.
Data exchange standards play a crucial role in achieving interoperability. These standards, such as XML, JSON, and EDI, define the structure, format, and semantics of data, allowing systems to understand and process the data being exchanged. By following these standards, developers can create systems that are compatible with others, reducing the need for custom data integration solutions.
Interoperability not only promotes seamless data exchange but also drives collaboration, innovation, and cost reduction across industries. It enables organizations to easily access and share information, streamlining processes and improving decision-making. In summary, interoperability, facilitated by data exchange standards, allows information systems to effectively communicate and share data, ultimately benefiting both the organizations and their users.
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disposal of fixed asset equipment acquired on january 6 at a cost of $287,000 has an estimated useful life of 8 years and an estimated residual value of $37,400. question content area a. what was the annual amount of depreciation for years 1-3 using the straight-line method of depreciation?
The total depreciation expense for the first three years would be $93,600.
Using the straight-line method of depreciation, the annual amount of depreciation can be calculated as follows:
Cost of the asset = $287,000
Residual value = $37,400
Depreciable cost = Cost of the asset - Residual value = $287,000 - $37,400 = $249,600
Estimated useful life = 8 years
Annual depreciation expense = Depreciable cost / Estimated useful life
Annual depreciation expense = $249,600 / 8 = $31,200
For years 1-3, the annual amount of depreciation would be the same, which is $31,200.
Therefore, the total depreciation expense for the first three years would be 3 x $31,200 = $93,600.
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Please answer all the questions as they are part of one.
1. We began this chapter discussion on the difference(s) between a service business and a merchandising business. What was/were those differences?
2. Another topic was brought up in this chapter, and that was sales tax. How is sales tax handled, that is what is debited and what is credited when sales tax is collected? What would the debit and credit be once sales tax is paid to the revenue authority?
3. Staying with the topic of sales tax, or actually taxes collected by a business in general, why is it imperative that this is properly recorded in the books and records of the business that collects the tax? How would the revenue authority know if a business isn't paying the taxes owed/collected to the government?
The differences between a service business and a merchandising business are that a service business provides services to customers and provides an intangible good, while a merchandising business sells physical goods and/or products.
When sales tax is collected, it is accounted for as a debit to Sales Tax Payable and a credit to Cash. Once the sales tax is paid to the revenue authority, the Sales Tax Payable account is debited and the Cash account is credited.
It is imperative that taxes collected by a business are properly recorded in the books and records of the business in order to ensure compliance with government regulations. Without proper record keeping, the revenue authority would not be able to accurately monitor and assess the taxes owed by the business.
Furthermore, the lack of proper recording makes it difficult for the business to accurately calculate and track their income and expenses. Proper record keeping also allows the business to accurately calculate their taxes and to pay the taxes timely. Ultimately, proper record keeping protects the business from potential penalties and fines that could be levied by the government for non-compliance with tax regulations.
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a property interest may not be marketable, if there is a group of answer choices cloud on the title. defect. condition subsequent. restriction.
A property interest may not be marketable if there is a cloud at the title.
A cloud at the title is a legal term that refers to any potential claim or encumbrance on a property's name that would have an effect on its ownership.
Examples of clouds on name encompass extremely good mortgages or liens, unresolved boundary disputes, and unreleased easements or restrictive covenants.
A cloud at the identify can make it tough to sell or switch a property, as it creates uncertainty and danger for potential buyers. To make certain marketable identify, it's far critical to clear any clouds at the name earlier than selling or transferring the assets.
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A property interest may not be marketable if there is a cloud at the title. A cloud at the title is a legal term that refers to any potential claim or encumbrance on a property's name that would have an effect on its ownership.
Examples of clouds on name encompass extremely good mortgages or liens, unresolved boundary disputes, and unreleased easements or restrictive covenants. A cloud at the identify can make it tough to sell or switch a property, as it creates uncertainty and danger for potential buyers. To make certain marketable identify, it's far critical to clear any clouds at the name earlier than selling or transferring the assets.
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why is communication a major element of developing and maintaining long-term customer relationships?
Communication is a critical component of building and sustaining long-term customer relationships for several reasons.
Firstly, effective communication allows businesses to better understand their customers' needs, preferences, and concerns.
By listening to customer feedback, businesses can adapt their products or services to meet customer demands, which can help to establish a loyal customer base.
Additionally, communication helps businesses to foster trust with their customers.
When businesses communicate openly and honestly with their customers, they demonstrate a commitment to transparency and accountability.
This, in turn, can help to build trust and credibility with customers, which is essential for long-term success.
Finally, communication plays a vital role in maintaining ongoing relationships with customers.
Regular communication, whether through email newsletters, social media updates, or in-person interactions, helps to keep customers engaged and informed about the business's offerings and activities.
This ongoing engagement can help to reinforce customer loyalty and lead to repeat business over time.
Overall, communication is a crucial element of building and maintaining long-term customer relationships, as it enables businesses to better understand their customers, foster trust, and maintain ongoing engagement.
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Worker hours to produce Worker hours to produce
one unit of natural gas one unit of oil
Brazil 4 9
Argentina 2 10
Mexico 3 7
United States 1 6
According to the chart, which country has the comparative advantage in oil production?
o Brazil
o Mexico
o Argentina
o United States
The United States enjoys a comparative edge in oil production, according to the graph.
Which nation produces oil with a distinct advantage over the others?Figure shows that Saudi Arabia has a distinct edge in oil production because it only needs one hour to create a barrel as opposed to two hours in the US. When it comes to corn production, the United States is in a clear advantage.
Which nation produces oil with the greatest comparative advantage?Saudi Arabia has a competitive advantage in oil due to its inexpensive oil production, and it exports oil to pay for its imports.
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