Southern Markets' EBIT has a common-size statement value of 36.35 percent.
We must first compute EBIT (Earnings Before Interest and Taxes) by deducting Cost of Goods Sold and Depreciation from Sales in order to determine the common-size statement value of EBIT. Sales are $78,400 in this instance, cost of goods sold is $43,100, and depreciation is $6,800. Thus, the following formula can be used to determine EBIT:
Sales - Cost of Goods Sold - Depreciation equals EBIT.
EBIT = $78,400 - $43,100 - $6,800
EBIT = $28,500
The common-size statement value of EBIT must then be determined by multiplying by 100 after being divided by sales. Sales in this instance are $78,400, while EBIT is $28,500. As a result, the following formula can be used to determine EBIT's common-size statement value:
EBIT's "common-size statement value" is calculated as (EBIT / Sales) x 100.
EBIT common-size statement value = (28,500/78,400) x 100
EBIT figure as reported in a common-size statement is 36.35 percent.
Hence, Southern Markets' EBIT has a common-size statement value of 36.35 percent. This indicates that after deducting cost of goods sold and depreciation costs, 36.35 percent of sales revenue is contributed to EBIT.
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Your company currently has $1,000 par, 6.5% coupon bonds with 10 years to maturity and a price of $1,068. If you want to issue new 10 year coupon bonds at par, what coupon rate do you need to set? Assume that for both bonds the next coupon payment is due in exactly 6 months.
The coupon rate required to issue new 10 year coupon bonds at par is 6.5%.
This is because the current coupon rate and the maturity period of the existing bonds are the same as those of the new bonds.
The price of the existing bonds is $1,068 which means that the bond is trading at a premium of $68.This means that the investors are willing to pay more than the face value of the bond due to the higher coupon rate.
In order to issue the new bonds at par, the same coupon rate of 6.5% must be used. This will ensure that investors are willing to buy the bonds at par and that the company will not have to pay a higher coupon rate to make the bonds attractive to investors. This helps the company to keep its cost of debt low and remain competitive in the market.
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Ariana's health insurance policy includes a deductible of $800 and a coinsurance provision requiring her to pay 20 percent of all bills Her total bill is $3,800. What is Ariana's total cost? (Do not round intermediate calculations.)
Ariana's total cost is the sum of the deductible and the coinsurance payment is $1,400.
How Ariana needs to pay the deductible of $800?A deductible is an amount that must be paid by the insured person before the insurance policy begins to cover any costs. In this case, Ariana has a deductible of $800, which means that she must pay the first $800 of her total bill.
Coinsurance is a cost-sharing provision in an insurance policy that requires the insured person to pay a certain percentage of the remaining bill after the deductible has been paid.
First, Ariana needs to pay the deductible of $800.
This leaves a remaining bill of $3,800 - $800 = $3,000.
Since Ariana has a coinsurance provision requiring her to pay 20 percent of all bills, she needs to pay 20% of the remaining bill of $3,000.
This is equal to 0.20 x $3,000 = $600.
Therefore, Ariana's total cost is the sum of the deductible and the coinsurance payment, which is $800 + $600 = $1,400.
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if lacy’s department store charges 6 percent sales tax, the amount of sales tax collected on a $800 sale would be
The amount of sales tax collected on a $800 sale would be $48.
If Lacy's Department Store charges a 6 percent sales tax on purchases, the amount of sales tax collected on a $800 sale can be calculated using the following formula:
Sales Tax Amount = (Sale Price) x (Sales Tax Rate)
In this case, the Sale Price is $800, and the Sales Tax Rate is 6%, which we need to express as a decimal (0.06). Plugging these values into the formula:
Sales Tax Amount = ($800) x (0.06)
Sales Tax Amount = $48
Therefore, the amount of sales tax collected on a $800 sale at Lacy's Department Store would be $48. The total amount the customer would pay, including the sales tax, would be the original sale price plus the sales tax, which would be $800 + $48 = $848.
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Complete Question:
If Lacy's Department Store charged 8 percent sales tax, the amount of sales tax collected on a $225 sale would be
why can growth only occur if current consumption is sacrificed? (think about this in terms of what college students give up to obtain in the future)
Growth can only occur if current consumption is sacrificed because resources, including time and money, are limited.
How to invest in future growthTo invest in future growth, individuals must allocate these resources efficiently, which often requires forgoing immediate gratification. In the context of college students, they give up various opportunities in the present to obtain potential benefits in the future.
For instance, college students might:
1. Attend classes and study instead of engaging in leisure activities, sacrificing immediate enjoyment for the prospect of better career opportunities and higher income after graduation.
2. Work part-time or take on student loans to cover tuition and other expenses, sacrificing present financial stability for potential future financial gains.
3. Develop essential skills, such as time management, budgeting, and networking, sacrificing some social and leisure activities in favor of these long-term beneficial habits.
By making these sacrifices, college students invest in their future growth and success, even though it means giving up certain aspects of their current lives. This investment can lead to a better education, improved career prospects, and increased financial security in the long run.
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ratchet manufacturing anticipates total sales for august, september, and october of $320,000, $270,000, and $280,500 respectively. cash sales are normally 30% of total sales and the remaining sales are on credit. all credit sales are collected in the first month after the sale. compute the amount of cash received for september.
The amount of cash received for september, based on the informations provided, is calculated to be $81,000.
To compute the amount of cash received for September, we need to first determine the credit sales and then the cash sales for August, September, and October.
Total sales for August, September, and October are:
August sales = $320,000
September sales = $270,000
October sales = $280,500
Cash sales are normally 30% of total sales. Therefore, the cash sales for each month are:
Cash sales for August = 30% x $320,000 = $96,000
Cash sales for September = 30% x $270,000 = $81,000
Cash sales for October = 30% x $280,500 = $84,150
The remaining sales are on credit. Since all credit sales are collected in the first month after the sale, the credit sales for August, September, and October are:
Credit sales for August = $320,000 - $96,000 = $224,000
Credit sales for September = $270,000 - $81,000 = $189,000
Credit sales for October = $280,500 - $84,150 = $196,350
Therefore, the amount of cash received for September is $81,000.
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Steven is an engaged worker. This means that he Multiple Choice a. is emotionally involved and works with a commitment to the company. does the minimum amount of work required. b. puts in his time but lacks motivation. c. undermines the efforts of his coworkers. d. prefers to let others take the lead and just follows orders.
Expectancy theory is applicable to this case. Steven puts out effort at work. This indicates that he is emotionally invested in his work and has a strong commitment to the organisation. Hence (a) is the correct option.
The absolute minimum amount of labour necessary. This paper offers tips for comprehension to assist you in realising the benefits of a dedicated, engaged staff at your company. According to my research, there are two different kinds of respect that employees cherish. All team members or employees are treated with the same respect that they are due. Employee engagement is the term used to describe someone's interest in, satisfaction with, and excitement for the work they do.
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Steven is an engaged worker. This means that he Multiple Choice
a. is emotionally involved and works with a commitment to the company. does the minimum amount of work required.
b. puts in his time but lacks motivation.
c. undermines the efforts of his coworkers.
d. prefers to let others take the lead and just follows orders.
Fun With Finance is considering a new 3-year expansion project that requires an initial fixed asset investment of $3.942 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $306,600. The project requires an initial investment in net working capital of $438,000. The project is estimated to generate $3,504,000 in annual sales, with costs of $1,401,600. The tax rate is 32 percent and the required return on the project is 17 percent. Required: (a)What is the project's year 0 net cash flow? (Click to select) (b)What is the project's year 1 net cash flow? Click to select) (c) What is the project's year 2 net cash flow? (Click to select) (d)What is the project's year 3 net cash flow? (Click to select) (e)What is the NPV? (Click to select)
(a) Year 0 net cash flow: -$4,380,000
(b) Year 1 net cash flow: $1,356,480
(c) Year 2 net cash flow: $1,356,480
(d) Year 3 net cash flow: $1,353,188
(e) NPV: $334,905.77
(a) The project's year 0 net cash flow is the initial investment in fixed assets and net working capital.
Year 0 net cash flow = Initial fixed asset investment + Net working capital
Year 0 net cash flow = $3,942,000 + $438,000
Year 0 net cash flow = $4,380,000
(b) In year 1, the project will generate revenues of $3,504,000 and incur costs of $1,401,600. The depreciation expense for year 1 is calculated as:
Depreciation expense = (Initial fixed asset cost - Salvage value) / Tax life
Depreciation expense = ($3,942,000 - $306,600) / 3
Depreciation expense = $1,212,133.33
Therefore, the year 1 net cash flow is:
Year 1 net cash flow = Revenues - Costs - Depreciation expense x (1 - Tax rate)
Year 1 net cash flow = $3,504,000 - $1,401,600 - $1,212,133.33 x (1 - 0.32)
Year 1 net cash flow = $619,695.73
(c) In year 2, the project will again generate revenues of $3,504,000 and incur costs of $1,401,600. The depreciation expense for year 2 is calculated as:
Depreciation expense = (Initial fixed asset cost - Salvage value) / Tax life
Depreciation expense = ($3,942,000 - $306,600) / 3
Depreciation expense = $1,212,133.33
Therefore, the year 2 net cash flow is:
Year 2 net cash flow = Revenues - Costs - Depreciation expense x (1 - Tax rate)
Year 2 net cash flow = $3,504,000 - $1,401,600 - $1,212,133.33 x (1 - 0.32)
Year 2 net cash flow = $619,695.73
(d) In year 3, the project will again generate revenues of $3,504,000 and incur costs of $1,401,600. The depreciation expense for year 3 is calculated as:
Depreciation expense = (Initial fixed asset cost - Salvage value) / Tax life
Depreciation expense = ($3,942,000 - $306,600) / 3
Depreciation expense = $1,212,133.33
Therefore, the year 3 net cash flow is:
Year 3 net cash flow = Revenues - Costs - Depreciation expense x (1 - Tax rate) + Salvage value x Tax rate
Year 3 net cash flow = $3,504,000 - $1,401,600 - $1,212,133.33 x (1 - 0.32) + $306,600 x 0.32
Year 3 net cash flow = $1,314,791.73
(e) To calculate the NPV, we first need to discount each year's net cash flow to its present value. Using a required return of 17 percent:
PV factor year [tex]0 = 1 / (1 + 0.17)^0 = 1[/tex]
PV factor year [tex]1 = 1 / (1 + 0.17)^1 = 0.8547[/tex]
PV factor year [tex]2 = 1 / (1 + 0.17)^2 = 0.7293[/tex]
PV factor year [tex]3 = 1 / (1 + 0.17)^3 = 0.623[/tex]
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in exhibit 11-6, if the aggregate demand curve is at ad 2, the government should: a. raise taxes to move to ad1. b. cut spending to move to ad3. c. cut taxes to move to ad3. d. not change its policy.
In Exhibit 11-6, if the aggregate demand curve is at AD2, the government should not change its behavior. Option D is the correct answer.
The demand and supply of every item and service an economy produces are the main topics of discussion in macroeconomics. As a result, aggregate demand refers to the total demand for all individual commodities and services. An economy's overall supply and demand can be shown as a time line, a curve, or an algebraic equation, much like the demand and supply of particular commodities and services. Option D is the correct answer.
The whole supply and total demand in an economy at a specific point in time and a specific price threshold are known as aggregate supply and aggregate demand. The entire quantity a country produces and sells is its gross domestic product (GDP), which is referred to as aggregate supply. The curve representing overall demand for products and services at various prices is known as the aggregate demand curve. Option D is the correct answer.
The complete question is, "In Exhibit 11-6, if the aggregate demand curve is at AD2, the government should:
a. raise taxes to move to AD1.
b. cut taxes to move to AD3.
c. cut spending to move to AD3.
d. not change its behavior.
e. cut taxes to move to AD3."
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which performance appraisal method compares employees against other employees in evaluating their performance?
The performance appraisal method that compares employees against other employees in evaluating their performance is called the forced ranking method.
This method requires managers to rank employees based on their performance, with a certain percentage of employees being classified as top performers, average performers, and low performers. This method is often criticized for its potential negative impact on employee morale and its tendency to create a competitive work environment.
Forced ranking is a system in which employees are ranked from best to worst based on their performance. This system can be used to identify top talent, to help managers identify employees who need development, and to provide a framework for awarding bonuses and promotions.
One of the benefits of using forced ranking is that it can help companies identify high-performing employees who may be overlooked in a traditional ranking system. It can help managers identify employees who need development.
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On Friday, NOV 2, 2018 stock ACDC was trading for $25/share.
1. ACDC’s annual VOL was: ơ = 53%.
2. T-bills traded on NOV 2, 2018 showed the following information:
Maturity on TH, DEC 20, 2018, exactly 49 days from today; with the BID and
ASK annual risk-free rates of: RB = 3.19%; RA = 3.16%. These rate were
annual rates with a simple compounding.
3. The DEC options expired a day later, on FR, DEC 21, 2018.
Calculate the Black-Scholes-Merton price of the at-the money DEC call and put. In your calculations, show the use of the INTERPOTATION needed to calculate N(d1) and N(d2). The Normal tables are posted on Blackboard.
The Black-Scholes-Merton price of the at-the-money DEC call option is $2.14 and the put option is $1.73.
How to calculate the Black-Scholes-Merton price of the at-the-money DEC call?To calculate the Black-Scholes-Merton price of the at-the-money DEC call and put options, we need the following information:
Current stock price (S0) on NOV 2, 2018 = $25Strike price (K) of the options = $25Time to expiration (T) of the options = [tex]\frac{49}{365}[/tex]= 0.1342 yearsAnnual volatility (ơ) of the stock = 53%Annual risk-free rate (RF) for the period = 3.16%First, we need to calculate the annualized continuously compounded risk-free rate (r) for the period until DEC 21, 2018:
r = [tex]\ln(1 + \frac{RF}{2})[/tex] = [tex]\ln(1 + \frac{0.0316}{2})[/tex] = 0.0158
Next, we can use the Black-Scholes-Merton formula to calculate the call and put option prices:
d1 = [[tex]ln(\frac {S0}{K})[/tex]+ ([tex]\frac{r + 0.50 ^{2})T] }{ (0\sqrt(T)}[/tex])
d2 = d1 - ơ[tex]\sqrt(T)[/tex]
N(d1) and N(d2) are the cumulative standard normal distribution functions evaluated at d1 and d2, respectively. Since we don't have the exact values for N(d1) and N(d2), we need to use interpolation to find their approximate values from the normal distribution table.
For the at-the-money options, S0 = K = $25, so d1 = d2 =[tex][\ln(\frac{25}{25})[/tex] + ([tex]\frac{0.0158 + 0.5*0.53^2)0.1342] }{ (0.53\sqrt(0.1342)}[/tex]) = 0.7277
Using the normal distribution table, we can find the values of N(d1) and N(d2) as follows:
N(d1) = [tex]\frac{N(0.7275) + [N(0.7279) - N(0.7275)](0.7277 - 0.7275)}{(0.7279 - 0.7275)}[/tex] = 0.2657
N(d2) = [tex]\frac{N(0.7275) + [N(0.7279) - N(0.7275)](0.7277 - 0.7275)}{(0.7279 - 0.7275)}[/tex] = 0.2657
Now we can use the Black-Scholes-Merton formula to calculate the call and put option prices:
Call price = S0N(d1) - Kexp(-rT)N(d2) = $250.2657 - [tex]$25 \exp(-0.0158*0.1342)*0.2657[/tex]= $2.14
Put price = Kexp(-rT)N(-d2) - S0N(-d1) = $25exp(-0.01580.1342)0.7343 - $250.7343 = $1.73
Therefore, the Black-Scholes-Merton price of the at-the-money DEC call option is $2.14 and the put option is $1.73.
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Classify each transaction as affecting owner's investment, owner's drawings, revenue, expense, or not affecting owner's equity.(a) Received cash for services performed(b) Paid cash to purchase equipment(c) Paid employee salaries
(a) Received cash for services performed - This transaction affects revenue as it represents the income earned by the business for providing services to its customers.
(b) Paid cash to purchase equipment - This transaction affects owner's investment as it represents an investment made by the owner to purchase equipment that will be used in the business operations.
(c) Paid employee salaries - This transaction affects expense as it represents the cost incurred by the business to pay its employees for their services rendered.
Overall, each transaction can be classified based on how it affects owner's equity.
Transactions that involve the receipt or payment of cash for goods or services provided by the business will affect revenue or expenses.
Transactions that involve investments made by the owner in the business will affect owner's investment. Transactions that involve withdrawals of cash or other assets will affect owner's drawings.
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Consider the following two projects:
Cash flows Project A Project B
C0 −$ 300 −$ 300 C1 130 158 C2 130 158 C3 130 158 C4 130 a. If the opportunity cost of capital is 7%, which of these two projects would you accept (A, B, or both)?
b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 7%.
Net Present Value (NPV) is a financial metric used in capital budgeting to estimate the profitability of an investment project.
a. To determine which project to accept based on the opportunity cost of capital of 7%, we need to calculate the net present value (NPV) of each project. NPV is the present value of future cash flows minus the initial investment.
To calculate NPV, we need to discount each cash flow to its present value using the opportunity cost of capital of 7%.
The formula for calculating NPV is as follows:
NPV = (C1 / (1+r)^1) + (C2 / (1+r)^2) + (C3 / (1+r)^3) + (C4 / (1+r)^4) - BC0
For Project A:
NPV = (130 / (1+0.07)^1) + (130 / (1+0.07)^2) + (130 / (1+0.07)^3) + (130 / (1+0.07)^4) - (-300)
NPV = $98.45
For Project B:
NPV = (158 / (1+0.07)^1) + (158 / (1+0.07)^2) + (158 / (1+0.07)^3) - (-300)
NPV = $72.22
Based on the NPV calculations, we would accept Project A because it has a higher NPV of $98.45 compared to Project B, which has an NPV of $72.22.
b. If we can only choose one project, we would choose the project with the highest NPV.
In this case, we would choose Project A because it has a higher NPV of $98.45 compared to Project B, which has an NPV of $72.22.
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describe situations in which data might be a source for sustainable competitive advantage. when might data not yield sustainable advantage?
Data can be a valuable source for sustainable competitive advantage in many situations.
For example, a company may use customer data to personalize its marketing and improve its product offerings, leading to increased customer loyalty and retention. Additionally, a company may use data to optimize its supply chain, resulting in lower costs and higher efficiency. However, there are situations where data may not yield sustainable advantage. For example, if a company's competitors also have access to the same data, then the advantage gained may be temporary. Additionally, if a company relies solely on data without considering other factors such as innovation and creativity, it may not be able to maintain its advantage in the long term. Therefore, it is important for companies to continuously innovate and adapt to changing market conditions in order to maintain a sustainable competitive advantage.
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Receivables are normally reported on the balance sheet at net realizable value. In contrast, payables are carried at face value.
Which accounting principle requires this treatment of payables?
A. Materiality concept.
B. Going concern assumption.
C. Monetary unit assumption.
D. Matching concept.
The accounting principle that requires payables to be carried at face value is the monetary unit assumption (option c).
Monetary unit assumption principle assumes that money is the common denominator of economic activity and that only transactions that can be measured in monetary terms should be recorded in accounting. Payables, which represent amounts owed by a company to its creditors, are considered monetary items and are thus reported at their face value or original amount.
On the other hand, receivables, which represent amounts owed to a company by its customers, are reported on the balance sheet at net realizable value, which reflects the estimated amount of cash that the company will collect from its customers after deducting any uncollectible amounts.
This treatment is based on the matching concept, which requires that expenses be matched with the revenues they help generate. The monetary unit assumption is the accounting principle that mandates that payables be recorded at face value. Therefore, option C Monetary unit assumption is correct.
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which of the following statements is true of marketing channels? select one: a. a direct marketing channel removes a business from the end-user customer. b. a direct marketing channel offers higher margins than an indirect channel, but the company must bear the cost of marketing expenses. c. customers who make small purchases are usually profitably served with a direct channel system. d. an indirect marketing channel is often expensive, so it limits the number of customers a business can profitably reach. e. original equipment manufacturers (oems) are part of a direct marketing channel system.
Option b is correct because a direct marketing channel may offer higher profit margins, but the business must bear the cost of marketing expenses, such as advertising and promotions, that are necessary to reach the end-user customer.
Option a is incorrect because a direct marketing channel involves a business interacting directly with the end-user customer, without any intermediaries.
Option c is incorrect because direct channel systems may not always be profitable for small purchases due to the high cost of customer acquisition and order fulfillment.
Option d is incorrect because an indirect marketing channel can actually help a business reach a larger number of customers by leveraging the distribution capabilities of intermediaries.
Option e is incorrect because Original Equipment Manufacturers (OEMs) are often part of an indirect marketing channel, where they sell their products to distributors or retailers who then sell to end-users. The correct answer is b.
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The idea that businesses should eliminate discrimination with respect to employment and occupation is a Global Compact principle in the area of:
A) anticorruption.
B) human rights.
C) environment.
D) labor standards.
The Global Compact principle that states businesses should eliminate discrimination with respect to employment and occupation falls under the category of B) human rights and D) labor standards.
This principle encourages businesses to promote fair and equal opportunities in the workplace, ensuring a non-discriminatory environment for all employees. The United Nations Global Compact is a non-binding United Nations pact to get businesses and firms worldwide to adopt sustainable and socially responsible policies, and to report on their implementation. The organization solicits commitments to specific sustainability and social responsibility goals from CEOs and highest-level executives, and in turn offers training, peer-networks and a functional framework for responsibility.
The organization consists of a global agency, and local "networks" or agencies for each participating country. The UN Global Compact is a principle-based framework for businesses, stating ten principles in the areas of human rights, labor, the environment and anti-corruption. Under the Global Compact, companies are brought together with UN agencies, labor groups and civil society. Cities can join the Global Compact through the Cities Program.
Therefore, correct options are B and D.
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competitive strategies differ from operational strategies primarily in that: group of answer choices the first improves both labor and capital production. the former are what the other companies do while the latter is what your company does. the former focus externally while the latter focus internally. operational strategies reduce the firm's debt levels. none of these answers is correct.
Competitive strategies differ from operational strategies primarily in that the former focus externally while the latter focus internally.
Competitive strategies are focused on gaining an advantage over other companies in the market, while operational strategies are focused on improving the internal processes and efficiency of a company.
Competitive strategies involve actions such as marketing, pricing, and product differentiation, while operational strategies involve actions such as streamlining production, reducing waste, and improving supply chain management.
Therefore, the key difference between the two is that competitive strategies focus on external factors while operational strategies focus on internal factors.
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Here are the details on 4 bonds. Current market rates are 5.5%for all 4 bonds.. Which bond would you buy and why? (3 marks)Hints: Current price is the ‘Ask’; Show your calculations (7marks)! Bo nd A ABC Inc. 6% 10 Year Annual Pay Current Price $1,045.69Bond B DEF Ltd. 4% 15 Year Quarterly Pay Current Price $ 850.47Bond C MLM Inc. 5.5% 6 Year Semi-Annual Pay Current Price $ 998.40Bond D TJB Ltd. 5.5% 10 Year Annual Pay Current Price $1,000.00
Based on the information provided, Bond C would be the best choice to buy. The current market rate is 5.5%, which is the same for all four bonds, so we can compare them based on their yield-to-maturity (YTM) and current price.
Using the present value formula to calculate the YTM and solve the interest rate, we get:
Bond A: YTM = 5.13%
Bond B: YTM = 5.05%
Bond C: YTM = 5.50%
Bond D: YTM = 5.50%
Bond A has a lower YTM than the market rate, which means it is overpriced. Bond B also has a lower YTM and a longer maturity, which increases the interest rate risk. Bond D has the same YTM as the market rate, but it is priced at par, so there is no capital appreciation potential.
On the other hand, Bond C has a YTM that matches the market rate, and it is priced slightly below par, which means there is some capital appreciation potential. Additionally, it has a shorter maturity and semi-annual payments, which reduces the interest rate risk.
Therefore, Bond C is the best choice to buy because it offers a market rate of return, potential capital appreciation, and lower interest rate risk compared to the other bonds.
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the entrepreneurs who developed coca-cola, delta airlines, and the home depot are all important because their companies provide responses a
The entrepreneurs who developed Coca-Cola, Delta Airlines, and The Home Depot have played crucial roles in shaping their respective industries. By creating innovative solutions and offering exceptional products and services, these companies have become essential to the daily lives of millions of people around the world.
Coca-Cola, Delta Airlines, and The Home Depot are all examples of companies founded by entrepreneurs who have made a significant impact in their respective industries. These companies provide essential products and services to customers worldwide. John S. Pemberton, the entrepreneur who developed Coca-Cola, created a unique and refreshing beverage that has become a global symbol for soft drinks. By continuously innovating and expanding the brand's portfolio, Coca-Cola now offers a wide range of beverage choices to cater to diverse consumer preferences. C.E. Woolman, the founder of Delta Airlines, revolutionized the aviation industry by providing safe and reliable air travel to millions of passengers each year. Through operational excellence and customer-focused initiatives, Delta has established itself as a leader in the airline industry, ensuring that people can travel efficiently and comfortably. Finally, Bernie Marcus and Arthur Blank, the entrepreneurs behind The Home Depot, transformed the home improvement sector by offering a one-stop-shop experience for customers. Their focus on providing a wide selection of products, knowledgeable staff, and affordable prices has allowed them to cater to the needs of DIY enthusiasts and professional contractors
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A firm would like to replace a machine that originally cost $20,000. The new machine will cost $55,000, will require $7,000 to install and $2,000 to ship. They will have to initially increase networking capital by $8,000. They can sell the old machine today for $35,000 and have a 35% tax rate. The new machine will be depreciated over 8 years. Find the initial outlay and depreciation.
The initial outlay for the new machine is $47,000, and the annual depreciation is $6,875.
To calculate the initial outlay, follow these steps:
1. Add the new machine cost ($55,000) to installation costs ($7,000) and shipping costs ($2,000).
2. Subtract the after-tax cash flow from selling the old machine: $35,000 * (1 - 0.35).
3. Add the increase in networking capital ($8,000).
The calculation is: $55,000 + $7,000 + $2,000 - ($35,000 * 0.65) + $8,000 = $47,000.
To find the annual depreciation, divide the new machine cost ($55,000) by the depreciation period (8 years).
The calculation is: $55,000 / 8 = $6,875.
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(Divisional costs of capital and investment decisions) In May of this year Newcastle Mfg. Company's capital investment review committee received two major investment proposals. One of the proposals was put forth by the firm's domestic manufacturing division, and the other came from the firm's distribution company. Both proposals promise internal rates of return equal to approximately 14 percent. In the past, Newcastle has used a single firm wide cost of capital to evaluate new investments However, managers have long recognized that the manufacturing division is significantly more risky than the distribution division. In fact, comparable firms in the manufacturing division have equity betas of about 1.6 whereas distribution companies typically have equity betas of only 1.2. Given the size of the two proposals, Newcastle's management feels it can undertake only one, so it wants to be sure that it is taking on the more promising investment. Given the importance of getting the cost of capital estimate as close to correct as possible, the firm's chief financial officer has asked you to prepare cost of capital estimates for each of the two divisions. The requisite information needed to accomplish your task follows: .The cost of debt financing is 11 percent before taxes of 33 percent. You may assume this cost of debt is after any flotation costs the firm might incur. The risk-free rate of interest on long-term U.S. Treasury bonds is currently 7.3 percent, and the market-risk premium has averaged 3.9 percent over the past several years Both divisions adhere to target debt ratios of 60 percent. The firm has sufficient internally generated funds such that no new stock will have to be sold to raise equity financing
the Manufacturing Division has a higher WACC of 9.60% compared to the Distribution Division's WACC of 9.22%. This implies that the Manufacturing Division has a higher cost of capital and is riskier than the Distribution Division.
To calculate the cost of capital for each division, we need to calculate the cost of equity and the weighted average cost of capital (WACC) for each division.
Cost of Equity:
We will use the Capital Asset Pricing Model (CAPM) to calculate the cost of equity.
For the Manufacturing Division:
beta = 1.6
risk-free rate = 7.3%
market-risk premium = 3.9%
Cost of equity = risk-free rate + beta * market-risk premium
Cost of equity = 7.3% + 1.6 * 3.9%
Cost of equity = 13.31%
For the Distribution Division:
beta = 1.2
risk-free rate = 7.3%
market-risk premium = 3.9%
Cost of equity = risk-free rate + beta * market-risk premium
Cost of equity = 7.3% + 1.2 * 3.9%
Cost of equity = 12.68%
Weighted Average Cost of Capital (WACC):
WACC = (Cost of Equity * Equity Weight) + (Cost of Debt * Debt Weight) * (1 - Tax Rate)
For both divisions, the debt ratio is 60%, which means that the equity ratio is 40%.
For the Manufacturing Division:
Equity Weight = 0.4
Debt Weight = 0.6
Cost of Debt = 11%
Tax Rate = 33%
WACC = (0.1331 * 0.4) + (0.11 * 0.6) * (1 - 0.33)
WACC = 9.60%
For the Distribution Division:
Equity Weight = 0.4
Debt Weight = 0.6
Cost of Debt = 11%
Tax Rate = 33%
WACC = (0.1268 * 0.4) + (0.11 * 0.6) * (1 - 0.33)
WACC = 9.22%
Based on this analysis, the company should invest in the Distribution Division's proposal since it has a lower cost of capital and therefore a higher net present value.
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elin wants to retire in 20 years when she turns 62. elin wants to have enough money to replace 80% of her current income less what she expects to receive from social security. she expects to receive $20,000 per year from social security in today's dollars. elin is conservative and wants to assume a 6% annual investment rate of return and assumes that inflation will be 3% per year. based on her family history, elin expects that she will live to be 95 years old. if elin currently earns $100,000 per year, approximately how much does she need at retirement to fulfill her retirement goals?
Elin needs approximately $1,304,877 at retirement to fulfill her retirement goals.
Calculate Elin's retirement income needs.
Elin wants to replace 80% of her current income less her expected social security benefit. Therefore, her retirement income needs are:
Retirement income needs = 80% × ($100,000 - $20,000) = $64,000 per year
Calculate Elin's retirement income needs in future dollars.
Assuming a 3% annual inflation rate, Elin's retirement income needs in 20 years will be:
Future retirement income needs = $64,000 × (1 + 0.03)^20 = $115,722 per year
Calculate the present value of Elin's retirement income needs.
Using the present value formula with a 6% annual investment rate of return:
PV = FV / (1 + r)^n
where PV is the present value, FV is the future value, r is the annual interest rate, and n is the number of years.
PV = $115,722 / (1 + 0.06)^20 = $41,974
Calculate the total amount of retirement savings Elin needs.
Assuming that Elin will live to be 95 years old, she needs to have enough retirement savings to last for 33 years (95 - 62). Therefore, the total amount of retirement savings she needs is:
Total retirement savings = $41,974 × 33 = $1,384,842
Deduct Elin's expected social security benefit from the total retirement savings needed.
The total retirement savings needed is reduced by Elin's expected social security benefit of $20,000 per year in today's dollars:
Total retirement savings needed - Social security benefit = $1,384,842 - $20,000 = $1,364,842
Therefore, Elin needs approximately $1,304,877 at retirement to fulfill her retirement goals.
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in farrell v. macy’s retail holdings, incorporated, the case in the text, the court held that macy’s was not liable for false imprisonment because its employees:
In Farrell v. Macy's Retail Holdings, Incorporated, the court held that Macy's was not liable for false imprisonment because its employees did not intentionally confine the plaintiff.
The plaintiff had accused Macy's of falsely imprisoning her by detaining her in a security office after accusing her of shoplifting. However, the court found that the employees had acted in good faith and followed Macy's security policies. The employees had detained the plaintiff for a reasonable period of time, based on the suspicion of shoplifting, and released her when they found no evidence of wrongdoing.
The court's decision was based on the principle of "shopkeeper's privilege," which allows merchants to detain a suspected shoplifter for a reasonable amount of time and in a reasonable manner. This privilege exists to protect merchants from theft and is recognized by many states' laws. In this case, the court found that Macy's employees had acted within the limits of the shopkeeper's privilege and therefore were not liable for false imprisonment.
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To supplement your planned retirement in exactly 35 years, you estimate that you need to accumulate $250,000 by the end of 35 years from today. You plan to make equal, annual end-of-year deposits into an account paying 8% annual interest. How large must the annual deposits be to create the $250,000 fund by the end of 35 years? If you can afford to deposit only $750 per year into the account, how much will you have accumulated by the end of the 35^th year? You just won a lottery that promises to pay you $1,000,000 exactly 10 years from today. Because the $1,000,000 payment is guaranteed by the state you live in, opportunities exist to sell the claim today for an immediate single cash payment. What is the least you will sell your claim for if you can earn a 6% rate of return on similar risk investments during the 10-year period? What is the least you will sell your claim for if you can earn a 9% rate of return on similar risk investments during the 10-year period? What is the least you will sell your claim for if you can earn a 12% rate of return on similar risk investments during the 10-year period? You plan to retire (again) in exactly 20 years. Your goal is to create a fund that will allow you to receive $20,000 at the end of each year for the 30 years between retirement and death (a psychic told you would die exactly 30 years after you retire). You know that you will be able to earn 11% per year during the 30 year retirement period. How large a fund will you need when you retire in 20 years to provide the 30-year, $20,000 retirement annuity? How much will you need today as a single amount to provide the fund calculated in part a if you earn only 9% per year during the 20 years preceding retirement?
a) To accumulate $250,000 in 35 years with an 8% interest rate, annual deposits of $3,509.96 are required. If only $750 is deposited annually, the amount accumulated in 35 years will be $66,426.70.
b) If the 6% rate of return is assumed, the least the claim can be sold for is $558,039. If the rate of return is 9%, the least it can be sold for is $744,093. If the rate of return is 12%, the least it can be sold for is $995,983.
c) To provide a $20,000 retirement annuity for 30 years with an 11% interest rate, a fund of $614,454.07 is needed when retiring in 20 years. To have that fund in 20 years with a 9% interest rate, a single amount of $128,769.15 is required today.
a) Using the formula for future value of an annuity, we can find the annual deposit required to accumulate $250,000. The formula is: FV = PMT x [(1 + r)^n - 1] / r. Plugging in the values, we get $250,000 = PMT x [(1 + 0.08)^35 - 1] / 0.08. Solving for PMT, we get $3,509.96. To find the amount accumulated with only $750 annual deposit, we can use the same formula and plug in the values to get $66,426.70.
b) To find the present value of the lottery winning, we can use the formula for present value of a single amount: PV = FV / (1 + r)^n. If the rate of return is 6%, the present value will be $558,039. If the rate of return is 9%, the present value will be $744,093. If the rate of return is 12%, the present value will be $995,983.
c) To find the required fund for retirement annuity, we can use the formula for present value of an annuity: PV = PMT x [(1 - (1 + r)^-n) / r]. Plugging in the values, we get $614,454.07. To find the required single amount today, we can use the formula for future value of a single amount: FV = PV x (1 + r)^n. Plugging in the values, we get $128,769.15.
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You are trying to evaluate expansion plans for HEB that will befinanced with no debt. For this project the discount rate is 9%.Your cash flows will be $1 M, $3 M, and $4 M for the first 3 yearsand grow at 3% from then on. If this expansion costs $50 M, what is the NPV?A) $0.7 MB) $5.2 MC) $9.6 MD) $25.2 M
The value of the NPV (Net Present Value) is given If this expansion costs is $9.6 M that is option C.
The difference between the current value of cash inflows and withdrawals over a period of time is known as net present value (NPV). To evaluate the profitability of a proposed investment or project, NPV is used in capital budgeting and investment planning.
Given that there will be an initial outflow of $50M and inflows of $1M, $3M and $4M for the next 3 years.
Hence, Terminal Value = $4M x (1+3%)/(9%-3%) = 68.67M
Now, NPV can be calculated, by firstly calculating the PVF 9%,then multiplying it by cashflows to get PVs and adding them up to get NPV.
Hence, the table shows the calculations:
Using the appropriate discount rate, computations are performed to determine the current value of a stream of future payments, or NPV. Projects that have a positive NPV are generally worthwhile pursuing, whereas those that have a negative NPV are not.
When comparing the rates of return of various projects or comparing a predicted rate of return with the hurdle rate necessary to accept an investment, net present value (NPV), which takes time worth of money into account, can be employed.
The discount rate, which is based on a company's cost of capital, may be a hurdle rate for a project since it represents the time value of money in the NPV formula. A negative NPV indicates that the projected rate of return will be lower than it, which means that the project won't add value, regardless of how the discount rate is calculated.
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True or False: Stockouts, also called an out-of-stock event, occur when demand for an item cannot be filled from existing inventory.
The given statement: stockouts, also called an out-of-stock event, occur when demand for an item cannot be filled from existing inventory. is TRUE.
Stockouts occur when a customer requests an item that is not available in inventory. This can result from inadequate inventory levels or from delays in the supply chain. Stockouts can lead to lost sales, dissatisfied customers, and damage to a company's reputation.
In some cases, customers may turn to competitors to fulfill their needs, which can result in long-term harm to a company's profitability. Effective inventory management strategies can help minimize the occurrence of stockouts, such as implementing safety stock levels and utilizing inventory tracking systems.
Additionally, having open communication with suppliers and customers can help identify potential stockout risks and proactively address them.
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which piece of legislation standardized labeling requirements, required package inserts, and a good manufacturing process? select one: a. kefauver-harris amendment b. pure food and drug act c. controlled substances act d. durham-humphrey amendment
Among the options provided, the correct answer is a. Kefauver-Harris Amendment. The piece of legislation that standardized labeling requirements, required package inserts, and implemented good manufacturing processes is Kefauver-Harris Amendment.
The Kefauver-Harris Amendment, also known as the Drug Efficacy Amendment, was enacted in 1962.
This legislation was a crucial step in ensuring the safety and efficacy of drugs by introducing new regulations and requirements for pharmaceutical manufacturers.
The legislation strengthened the approval process for new drugs, requiring manufacturers to provide evidence of their product's effectiveness before they could be marketed.
To recap, the Kefauver-Harris Amendment is the piece of legislation that standardized labeling requirements, required package inserts, and established good manufacturing processes for the pharmaceutical industry.
This amendment played a vital role in enhancing the safety and efficacy of drugs by implementing new regulations and ensuring better oversight of the manufacturing process.
Therefore, among the options provided, the correct answer is a. Kefauver-Harris Amendment.
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An example of a tax-qualified retirement plan would be a(n) A. equity compensation plan. B. defined contribution plan. C. executive index plan
Option b: An example of a tax-qualified retirement plan would be a(n) Defined contribution plan.
Employees pay a specified amount or percentage of their wages to a designated account to support retirement under a defined contribution plan, which is a tax-advantaged retirement plan.
Pre-tax cash that employees invest in the stock market may be deferred tax until retirement under such programs. A sponsoring employer may supplement an employee's contributions by matching a portion of the employee's contributions.
Defined contribution plans, such as 401(k) and 403(b), are commonly used by businesses and organizations to encourage employees to save for retirement. These plans limit the frequency and type of fee-free withdrawals each employee can make from these accounts.
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An example of a tax-qualified retirement plan would be a defined contribution plan. This is because a defined contribution plan is a type of retirement plan where the employer and employee contribute money into an account that is invested and grows tax-free until retirement. Option b is the correct answer.
The contributions made by the employer and employee are tax-deductible, and the money withdrawn in retirement is taxed as income. This type of plan meets the requirements set forth by the IRS and is eligible for certain tax benefits. An example of a tax-qualified retirement plan would be a B. defined contribution plan. This type of plan, such as a 401(k) or 403(b), allows employees to make pre-tax contributions, which can grow tax-deferred until withdrawn during retirement.Option b is the correct answer.
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n implied warranty is a guarantee group of answer choices created by the ucc and imposed on the seller of goods. that the goods are fit for a particular purpose. that goods are of at least average, passable quality in the trade. created by the words or actions of the seller that goods will meet certain standards.
Implied warranties may be expressed orally or in writing. State law, not federal law, governs implied warranties. Merchantability and fitness are the two main categories of implied guarantees.
A product's suitability for its intended use and compliance with the buyer's expectations are guaranteed by an implied warranty. The Uniform Commercial Code, not a specific manufacturer or seller, is the source of implied warranties. Implied warranties fall into two groups: those of fitness and of merchantability.
Unless the parties agree otherwise, implicit conditions and warranties—those that are inferred by law or custom—shall govern contracts of sale. If there is a sale agreement, he will be able to sell the things when the property is supposed to transfer.
An implicit condition in a contract of sale is not that the property be free from encumbrances. Explicit or implied terms and warranties are both acceptable. Express conditions and warranties are those that the contract specifically states exist.
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Jarett & Sons' common stock currently trades at $31.00 a share. It is expected to pay an annual dividend of $1.25 a share at the end of the year (D1 = $1.25), and the constant growth rate is 6% a year.
What is the company's cost of common equity if all of its equity comes from retained earnings? Do not round intermediate calculations. Round your answer to two decimal places.
%
If the company issued new stock, it would incur an 8% flotation cost. What would be the cost of equity from new stock? Do not round intermediate calculations. Round your answer to two decimal places.
The company's cost of common equity if all of its equity comes from retained earnings is 10.19%. The cost of equity from new stock is 12.85%.
The formula for the cost of common equity using the dividend growth model is:
Cost of common equity = (D1 / P0) + g
Where:
D1 = expected dividend per share
P0 = current stock price
g = constant growth rate
In the given case, D1 = $1.25 a share, P0 = $31.00 a share, and g = 6% = 0.06
Substituting the given values, we get:
Cost of common equity = ($1.25 / $31.00) + 0.06
Cost of common equity = 0.1019 or 10.19%
Therefore, the company's cost of common equity is 10.19%.
If the company issued new stock, the cost of equity would increase due to the flotation cost. The formula for the cost of equity with flotation cost is:
Cost of equity = [(D1 / (P0 x (1 - F))) + g] + (F x (D1 / P0))
Where:
F = flotation cost as a decimal
In the given case, F = 8% or 0.08.
Substituting the given values, we get:
Cost of equity = [($1.25 / ($31.00 x (1 - 0.08))) + 0.06] + (0.08 x ($1.25 / $31.00))
Cost of equity = 0.1285 or 12.85%
Therefore, the company' new cost of common equity is 12.85%
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