The journal entry to record fees earned on account would be posted to accounts receivable and fees earned in the ledger.
When a business provides services to customers on account (i.e., with the agreement to be paid later), the journal entry to record the transaction includes debiting Accounts Receivable (an asset account that represents the amount the business expects to collect from its customers) and crediting Fees Earned (a revenue account that represents the amount earned from providing services).
This journal entry indicates that the business has earned revenue by providing services and has a claim to payment from the customer in the future. Posting the entry to the ledger updates the balances of the two accounts and provides up-to-date information on the amounts owed by customers and the revenue earned by the business.
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what exclusive organization's membership is invited to become members based on excellence in craftsmanship and other requirements such as number of ateliers (workrooms)?
The exclusive organization's membership that is invited to become members based on excellence in craftsmanship and other requirements such as the number of ateliers (workrooms) is the Meilleurs Ouvriers de France (Best Craftsmen of France).
This organization was founded in 1924 and recognizes exceptional skills and expertise in various crafts, such as cooking, pastry-making, carpentry, jewelry-making, and more. The membership is limited to those who have won the prestigious competition "Un des Meilleurs Ouvriers de France" (One of the Best Craftsmen of France), which is held every four years and requires the contestants to undergo a rigorous selection process and demonstrate their mastery of their craft.
The organization aims to promote and preserve the French tradition of excellence in craftsmanship and to support the development of young craftsmen.
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1. A semiannual, $1,000 par value bond has a coupon rate of 8%. Investors required rate of return is 6.8% a. Calculate the bond's coupon payment (2 marks) b. Will this bond sell at a discount, or a premium? Briefly explain (2 marks) 2. Ybee Inc. issues semiannual bonds with par value of $1,000. The coupon rate is 7.4%, and investors required rate of return is 8%. a. If the bond matures in 20 years, how much will it sell for today? (3 marks) b. What is the current yield of the bond? (2 marks) 3. A four-year, $1,000 par value bond, pays interest of $70 at the end of the first year, $60 at the end of the second year, and $50 at the end of years three and four. How much will this bond sell for if the required rate of return is 8.2%? (5 marks) 4. What is the value of a 10 year, $1,000 par value bond with a coupon rate of 7% for the first eight years, and 8% for the last two years? The required rate of return is 9%. (6 marks)
1. a. The bond's coupon payment is $40 (0.08 x $1,000 / 2).
b. This bond will sell at a premium because its coupon rate is higher than the required rate of return, making it more attractive to investors.
2. a. Using the present value formula, the bond will sell for $798.65 today.
b. The current yield is 9.26% ($74 / $798.65).
3. Using the present value formula and the given cash flows, the bond will sell for $918.97.
4. Using the present value formula and the given cash flows, the bond will sell for $904.28.
1. They are willing to pay more than the par value to receive a higher coupon payment.
2. The fomula for present value is P(1+r/100)ⁿ where r is rate of interest and n is time period
3. The fomula for present value is P(1+r/100)ⁿ where r is rate of interest and n is time period
4 The bond's value is lower than its par value because the required rate of return is higher than the bond's coupon rate, making it less attractive to investors.
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. what is the present (year 0) value of the cash flow stream if the opportunity cost rate is 10 percent?
To calculate the present value of a cash flow stream, you need to discount each cash flow by the opportunity cost rate. The present value is the sum of all discounted cash flows.
For example, if the cash flow stream is $100 for each of the next five years, the calculation would be:
Year 1: $100 / (1 + 0.1)^1 = $90.91
Year 2: $100 / (1 + 0.1)^2 = $82.64
Year 3: $100 / (1 + 0.1)^3 = $75.13
Year 4: $100 / (1 + 0.1)^4 = $68.30
Year 5: $100 / (1 + 0.1)^5 = $62.09
Present value = $90.91 + $82.64 + $75.13 + $68.30 + $62.09 = $379.07
Therefore, the present (year 0) value of the cash flow stream is $379.07 if the opportunity cost rate is 10 percent. The opportunity cost rate represents the return that could be earned on an alternative investment with similar risk, so it is used as a benchmark to determine whether the cash flow stream is worth investing in.
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some experts argue that applying total-quality-management principles to performance appraisals can improve them. group of answer choices true false
The given statement is true because Total Quality Management (TQM) principles can be applied to many areas of an organization, including performance appraisals.
TQM emphasizes the importance of continuous improvement, customer satisfaction, and employee involvement. When applied to performance appraisals, TQM can help organizations focus on improving the process of evaluating and providing feedback to employees.
TQM principles can be used to create a more collaborative and participative performance appraisal process that involves both the manager and the employee. This can include setting performance goals together, regularly reviewing progress, and providing ongoing feedback to help employees improve their performance.
TQM can also help to identify and eliminate biases in the performance appraisal process, ensuring that evaluations are fair and objective.
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T/F In general, a tax raises the price the buyers pay, lowers the price the sellers receive, and reduces the quantity sold.
The given statement- "In general, a tax raises the price the buyers pay, lowers the price the sellers receive, and reduces the quantity sold" is True.
When a tax is imposed on a product, it raises the cost of production for the seller, who will then try to pass on the cost to the buyers in the form of a higher price.
This increase in price paid by the buyers results in a decline in the quantity demanded, as consumers may choose to reduce their consumption of the product or switch to a substitute with a lower price.
At the same time, the higher price may also deter some potential buyers from entering the market, further reducing the quantity sold.
On the seller side, the lower price they receive after paying the tax may cause them to reduce production or exit the market entirely if their profits fall too much.
Overall, a tax creates a wedge between the price paid by buyers and the price received by sellers, leading to a reduction in the quantity sold and potential market inefficiencies.
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Check my we Suppose that in 2023 one and two-year interest rates are 52% in the United States and 10% in Japan. The spot exchange rate is ¥120.22/$ suppose that one year later interest rates are 3% in both countries, while the value of the yen has appreciated to Y115.00/$ a. Benjamin Pinkerton from New York invested in a US, two year zero-coupon bond at the start of the period and sold it after one year What was his return?
Benjamin Pinkerton invested in a US, two year zero-coupon bond at the start of the period when the one and two-year interest rates in the United States were 52%. He sold the bond after one year when the interest rates in both countries had decreased to 3% and the value of the yen had appreciated to Y115.00/$.
To calculate his return, we need to first calculate the price of the bond at the beginning and at the end of the year. The price of a zero-coupon bond is calculated using the following formula:
Price = Face Value / (1 + Interest rate) ^ Time
Where face value is the value of the bond at maturity, interest rate is the annual interest rate and time is the number of years until maturity.
At the beginning of the period, the interest rate was 52% and the time to maturity was two years, so the price of the bond was:
Price = $1,000 / (1 + 0.52) ^ 2 = $396.31
After one year, the interest rate had decreased to 3% and the time to maturity was one year, so the price of the bond was:
Price = $1,000 / (1 + 0.03) ^ 1 = $970.87
Therefore, Benjamin Pinkerton's return on the bond was:
Return = (Selling Price - Purchase Price) / Purchase Price
Return = ($970.87 - $396.31) / $396.31
Return = 1.45 or 145%
Therefore, Benjamin Pinkerton earned a return of 145% on his investment in the US, two year zero-coupon bond. This is a significant return on investment due to the high interest rates in the United States at the start of the period. However, the appreciation of the yen reduced his return slightly. It is important to keep an eye on the currency exchange rates when investing in international bonds.
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Nancy has a strong tendency to morally disengage. As a result, when Nancy sells some company supplies on eBay for her own profit she is likely to ________
.
A) turn herself into a company official
B) feel no distress from being unethical
C) suffer from extreme role conflict
D) share her profits with the company
Nancy is likely to feel no distress from being unethical.(B)
When someone has a strong tendency to morally disengage, they can easily detach themselves from the ethical consequences of their actions. In Nancy's case, she sells company supplies on eBay for her own profit.
Due to her moral disengagement, she does not experience any distress or guilt from acting unethically. Instead, she is able to justify her actions and rationalize them in her mind.
This differs from options A, C, and D, where she would either face consequences, experience role conflict, or share profits with the company, which are not typical of someone who morally disengages.(B)
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You are looking at an appraisal and the subject property has numerous features that are more desirable than one of the comparable properties. How would you expect this to be handled by the appraiser? A. Adjust the price of the comparable property down. B. Adjust the price of the comparable property upward. C. Make no adjustments to the price of the comparable property.
If the subject property has numerous features that are more desirable than one of the comparable properties, then it is likely that the appraiser would adjust the price of the comparable property upward.
This is because the comparable property would not be a true reflection of the value of the subject property, as it does not have the same desirable features.
Adjusting the price of the comparable property upward would mean that the appraiser is taking into account the differences between the two properties and making an adjustment that reflects the added value of the desirable features.
This adjustment would ensure that the appraisal accurately reflects the value of the subject property, and would provide a fair and accurate assessment of its worth.
However, it is important to note that there may be other factors at play that could influence the appraiser's decision. For example, if the comparable property has other features that are not present in the subject property, then the appraiser may need to make adjustments in the other direction.
Overall, the key point to remember is that the appraiser's goal is to provide an accurate and fair assessment of the value of the subject property, and any adjustments made to comparable properties should reflect this aim.
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Jennifer buys a typewriter for $590. She puts 20% down and will pay $70 a month for the next 10 months. What's the total amount of monthly payments?
$700 ---- correct answer
$750
$850
$1,000
The total amount of monthly payments for Jennifer who buys a typewriter is $850.
What are payments?Payments refer to the transfer of money from one party to another in exchange for goods, services, or debts. They can be made using a variety of methods, including cash, checks, credit and debit cards, electronic funds transfer (EFT), mobile payments, and cryptocurrencies. Payments are an essential aspect of commerce and are used in both personal and business transactions. They enable individuals and companies to purchase goods and services, pay bills, and transfer money to others. With the increasing use of technology, payments have become more convenient and accessible, allowing people to make transactions from anywhere and at any time. The security and reliability of payment methods are crucial, and various measures are taken to protect against fraud and ensure the safety of transactions.
Jennifer puts 20% down on the typewriter= 0.2 * $590 = $118
Amount that Jennifer needs to finance= $590 - $118 = $472
Total amount of her monthly payments= $70 * 10 = $700
The total amount of Jennifer's payments, including her down payment=
$118 + $700 = $818
So, the closest answer is $850.
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Ernie is a director of Five-Star Properties, Inc. Ernie is a property appraiser. Five-Star makes several purchases in which it pays too much. Ernie approves all the transactions without evaluating them. He is most likely liable for breach of a. the duty of care. b. none of the choices. c. the duty of loyalty. d.the business judgment rule
Ernie is most likely liable for breach of the duty of care. As a director of Five-Star Properties, Inc., Ernie has a duty to exercise reasonable care, skill, and diligence in making business decisions that affect the company. The correct option is a.
This duty of care requires Ernie to act in good faith and with the level of care that a reasonably prudent person would exercise in similar circumstances. By approving transactions without evaluating them, Ernie failed to exercise reasonable care and diligence, and thus breached his duty of care to Five-Star Properties, Inc. The business judgment rule is a legal principle that protects directors from personal liability for decisions made in good faith and with the best interests of the company in mind.
However, this protection only applies when directors have fulfilled their duty of care and duty of loyalty. Since Ernie has breached his duty of care, the business judgment rule is not applicable in this case. The duty of loyalty requires directors to act in the best interests of the company and avoid conflicts of interest. While it is possible that Ernie also breached this duty if he had a personal interest in the transactions, the question does not provide enough information to determine this. Therefore, the most likely answer is a. the duty of care.
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Ernie is most likely liable for breach of the duty of care as a director of Five-Star Properties, Inc. By approving transactions without evaluating them, he fails to exercise the diligence and care that a reasonable person in his position would exercise.
As a director of Five-Star Properties, Inc., Ernie owes a duty of care to the company and its shareholders. By approving transactions without evaluating them, he fails to exercise the diligence and care that a reasonable person in his position would exercise. This breach of the duty of care can make Ernie liable for any damages or losses incurred by the company as a result of the transactions. The business judgment rule does not protect Ernie in this case as it only provides a defense if the director acted in good faith and with the reasonable belief that their actions were in the best interest of the company. Ernie's lack of evaluation shows that he did not act in good faith and may have violated his duty of care.
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A stock recently paid a $5/share dividend and they currently have a constant growth policy with g=10%/year. They will maintain this policy for the next 3 years. The growth rate will fall down to 3%/year after year 3 into perpetuity (i.e., from year 3 to year 4, the growth rate is 3%). R = 15%. Calculate the stock price. A stock will pay the following dividends over the next 5 years: $4 in year 1, $4.5 in year 2, $5 in year 3, $5.5 in year 4, and $6 in year 5. Afterwards, they will maintain a zero growth dividend policy. R=15%. Calculate the stock price.
For the first scenario, the stock price is $93.86.
For the second scenario, the stock price is $50.37.
For the first scenario,
To calculate the stock price in the first scenario, we use the formula:
[tex]P0 = (D1 / (r - g)) + (D2 / (1+r)^2) + (D3 / (1+r)^3) + (P3 / (r - g))[/tex]
where D1, D2, and D3 are the dividends in years 1, 2, and 3 respectively, r is the required rate of return, g is the growth rate, and P3 is the expected stock price in year 3.
Plugging in the given values, we get:
[tex]P0 = ($5.50 / (0.15 - 0.10)) + ($6.05 / (1.15)^2) + ($6.66 / (1.15)^3) + ($182.78 / (0.15 - 0.03)) = $93.86.[/tex]
For the second scenario,
To calculate the stock price in the second scenario, we use the formula:
[tex]P0 = (D1 / (1+r)) + (D2 / (1+r)^2) + (D3 / (1+r)^3) + (D4 / (r - g)) + (D5 / (r - g)) / (1+r)^5[/tex]
where D1 to D5 are the dividends in years 1 to 5 respectively, r is the required rate of return, and g is the growth rate.
Plugging in the given values, we get:
[tex]P0 = ($4 / 1.15) + ($4.5 / (1.15)^2) + ($5 / (1.15)^3) + ($5.5 / (0.15 - 0.03)) + ($6 / (0.15 - 0.03)) / (1.15)^5 = $50.37[/tex]
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as long as the mp is positive, the tp will be increasing. true false
The statement "as long as the mp is positive, the tp will be increasing" is false because marginal product and total product are not directly related.
The given statement "as long as the mp is positive, the tp will be increasing" is false because the relationship between mp and tp is not necessarily a direct one. MP (marginal product) refers to the change in output resulting from a change in the input. TP (total product), on the other hand, is the total output resulting from a specific amount of input. While a positive MP may contribute to an increase in TP, there are other factors that can affect TP as well, such as diminishing returns.
Therefore, a positive MP does not necessarily guarantee an increase in TP. The given statement is false.
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Eight years ago Zack& Co. had purchased an equipment fo: $1,200,000. This equipment was being depreciated on a straight line basis over a 12 year period to a 300,000 salvage value. The equipment has six more years of economic life. During this period the annual revenues and operating costs assocaited with this machine are expected to be $388,000 and $87,500, respectively. Zack is now considering replacing this machine with a more modern one. The old equipment can now be sold for $180,000. Investment in net working capital is expected to increase by $132,000 as a result of the investment. The new machine will cost $1,500,000 and another $120,000 will be needed to modify it. This machine falls into the ACRS 5-year class life. It. is also expected to have an economic life of SiX years. The annual revenue and operating costs from the new machine are expected to be $750,000 and $58,000, respectively. At the sixth year Zack expects to sell the nes machine for $180,000. Zack's marginal tax rate is 34%. The equipment will be equity financed. (14 pts.) 1 Please calculate Zack's Net Investment and the Net Cash flows for the next six years if the replacement decision is made.
The net investment for the replacement decision is $1,512,000 and the net cash flows for the next six years are -$186,600, $322,800, $436,000, $386,000, $347,800, and $293,400 respectively.
To calculate the net cash flows for the next six years, we need to calculate the annual depreciation expense for the new machine using the ACRS depreciation method, which is $240,000 for the first year and $360,000 for the second year.
We also need to calculate the tax savings from the depreciation expense, which is $81,600 for the first year and $122,400 for the second year. Then, we can calculate the net operating cash flows for each year by subtracting the operating costs and taxes from the revenues.
Finally, we can calculate the net cash flows for each year by subtracting the net operating cash flows, the investment in net working capital, and the annual loan payments from the tax savings. At the end of the sixth year, we add the salvage value of the new machine and the salvage value of the old machine to get the total net cash flow.
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in my engagement, there are multiple projects with different project type (project type - development, application operation, infrastructure support). what is correct about the operational process (opd) for the engagement?
The operational process (OPD) for your engagement may vary based on the specific requirements and characteristics of the projects involved.
However, there are some general considerations that can be applied to the operational process in a multi-project environment:
Resource Allocation: Determine the allocation of resources, such as personnel, equipment, and budget, based on the needs of each project. Consider the skill sets required for each project type and allocate resources accordingly.
Project Planning: Develop individual project plans for each project, considering the specific objectives, deliverables, timelines, and dependencies.
Coordination and Communication: Establish effective coordination and communication channels among the project teams and stakeholders.
Monitoring and Control: Implement a monitoring and control mechanism to track the progress of each project.
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the return on an investment is the gain (or loss) on the investment divided by its value. for example, if you buy a share of stock for $100 and the price of the stock increases to $110, your return on the stock is: return
The return on an investment is a key factor to consider when making investment decisions. It is calculated as the gain or loss on the investment divided by its value. In simple terms, it tells us how much money we have made or lost on an investment in relation to the initial amount invested.
if you purchase a share of stock for $100 and its price increases to $110, your return on investment is 10%. Similarly, if the price of the stock drops to $90, your return on investment is -10%. The higher the return on an investment, the better it is for the investor.
Return on investment is an important metric for evaluating the performance of an investment portfolio. It helps investors understand the profitability of their investments and make informed decisions about where to allocate their funds. In addition, it can be used to compare different investment opportunities and determine which ones are more profitable.
Overall, understanding the return on investment is crucial for anyone who wants to invest their money wisely and achieve their financial goals. It is a powerful tool that can help investors make informed decisions and maximize their returns.
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an initial amount of $2500 is invested in an account at an interest rate of 8% per year, compounded continuously. assuming that no withdrawals are made, find the amount in the account after four years.
After four years, the account balance will be about $3,442.75, assuming no withdrawals are made.
How to calculate the account balanceGiven an initial amount of $2,500 invested at an interest rate of 8% per year compounded continuously, we can calculate the account balance after four years using the formula
A = P * e^(rt)
where A is the final amount, P is the principal, r is the interest rate (as a decimal), t is time in years, and e is Euler's number (approximately 2.718).
In this case, P = $2,500, r = 0.08, and t = 4 years.
Plugging these values into the formula, we get:
A = $2,500 * e^(0.08 * 4)
A = $2,500 * e^(0.32) A ≈ $2,500 * 1.3771
After calculating, the final amount (A) is approximately $3,442.75.
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Coway Tours choosing between two bus One is more tive to purchase and maintain but much longer than the Gawrys su 11.1 The company into con with one the models for the forature. Based on the costs of each shown below, which should choose? (Note: dollar amounts are in thousands Model Year Year 1 Od Year 2 Year 3 - 5100 Yaar -30 Year Short and Sweet -2 -$38 Yew - $37 -510 - 138 -333 Years Based on the costs of each model which should choose?
Based solely on the costs provided, it appears that Short and Sweet (Model Year Year 1) is cheaper in the first year compared to Gawrys su 11.1 (Model Year Year 2). However, Gawrys su 11.1 has lower costs in Year 2 and Year 3 compared to Short and Sweet.
What are the costs associated with each bus?
Based on the costs provided, it seems like there are two bus models to choose from:
Model Year Year 1, referred to as "Short and Sweet," and Model Year Year 2, referred to as "Gawrys su 11.1."
The costs associated with each model are as follows:
Short and Sweet (Model Year Year 1):
Year 1: -$2,000 (thousands of dollars)
Year 2: -$38,000
Year 3: -$37,000
Gawrys su 11.1 (Model Year Year 2):
Year 1: -$5,100
Year 2: -$30,000
Year 3: -$10,000
Based solely on the costs provided, it appears that Short and Sweet (Model Year Year 1) is cheaper in the first year compared to Gawrys su 11.1 (Model Year Year 2). However, Gawrys su 11.1 has lower costs in Year 2 and Year 3 compared to Short and Sweet.
In order to make a decision, other factors such as the anticipated maintenance costs, fuel efficiency, seating capacity, and other operational considerations would need to be taken into account. Additionally, the company's specific requirements and budget constraints would also play a significant role in the decision-making process. It is important to consider all relevant factors and conduct a thorough analysis before making a final decision on which model to choose.
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The application of sugar tariffs would cost all of the following individuals except:
A. an American sugar producer
B. an American consumer of foods made with sugar
C. No one would benefit from the application of sugar tariffs
D. a Brazilian sugar farmer
The application of sugar tariffs would cost all of the following individuals except a Brazilian sugar farmer. The reason for this is that sugar tariffs are essentially taxes placed on imported sugar, making it more expensive for foreign producers to sell their sugar in the domestic market. The correct option is d.
This has the effect of protecting local sugar farmers from foreign competition, as their domestically produced sugar becomes relatively cheaper than imported sugar.
Therefore, if you are a Brazilian sugar farmer, the application of sugar tariffs would have no impact on you, as you are not exporting your sugar to the country that has implemented the tariffs. Instead, it is the foreign sugar producers who would be negatively affected, as their sugar would become more expensive and therefore less competitive in the domestic market.
On the other hand, consumers who purchase sugar from foreign countries would likely face higher prices due to the tariffs, as they would be paying not only the cost of the sugar itself but also the added tariff. Domestic sugar farmers, meanwhile, would benefit from increased demand for their relatively cheaper sugar.
Overall, the application of sugar tariffs can have significant effects on both domestic and foreign sugar producers, as well as on consumers. However, Brazilian sugar farmers are not among those who would be affected by such tariffs.The correct option is d.
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P15–3 Multiple changes in cash conversion cycle Garrett Industries turns over its inventory
six times each year; it has an average collection period of 45 days and an average
payment period of 30 days. The firm’s annual sales are $3 million. Assume that
there is no difference in the investment per dollar of sales in inventory, receivables,
and payables, and assume a 365-day year.
a. Calculate the firm’s cash conversion cycle, its daily cash operating expenditure,
and the amount of resources needed to support its cash conversion cycle.
b. Find the firm’s cash conversion cycle and resource investment requirement if it
makes the following changes simultaneously.
(1) Shortens the average age of inventory by 5 days.
(2) Speeds the collection of accounts receivable by an average of 10 days.
(3) Extends the average payment period by 10 days.
c. If the firm pays 13% for its resource investment, by how much, if anything,
could it increase its annual profit as a result of the changes in part b?
d. If the annual cost of achieving the profit in part c is $35,000, what action would
you recommend to the firm? Why?
a. The firm’s cash conversion cycle is 60 days, its daily cash operating expenditure is $41,096. and the amount of resources needed to support its cash conversion cycle is $2,465,753.
b. After the changes, the firm’s cash conversion cycle will be 50 days, and the amount of resources needed to support its cash conversion cycle will be $2,054,795.
c. The firm could increase its annual profit by $20,960.
d. I would recommend the firm to implement the changes because the potential increase in profit ($20,960) is greater than the cost of achieving it ($35,000). By implementing the changes, the firm can improve its cash conversion cycle and reduce its resource investment requirement, leading to increased profitability.
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the key proposition of new growth theory that makes growth persist is that ______ is not subject to diminishing returns.
The key proposition of new growth theory that makes growth persist is that Knowledge and innovation is not subject to diminishing returns.
The key proposition of new growth theory that makes growth persist is that knowledge and innovation are not subject to diminishing returns. Unlike traditional factors of production such as capital and labor, the more knowledge and innovation are applied, the greater the potential for growth and productivity. This is because knowledge and innovation can be shared and replicated infinitely without losing their value, leading to an endless cycle of growth and development.
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the key proposition of the new growth theory that makes growth persist is that technological innovation is not subject to diminishing returns.
The theory suggests that as more knowledge and innovation are created, there are increasing returns to scale, meaning that each additional unit of input leads to a larger increase in output.
This is in contrast to traditional neoclassical growth theory, which assumes that all factors of production are subject to diminishing returns, and therefore, growth will eventually slow down.
What are diminishing returns?The law of diminishing returns is an economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain constant.
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Cost of exhibition catalogues. A catalogue for each exhibitionwill cost £5,000 to produce. The catalogue for the first exhibitionwill have been paid for in December out of Caroline’s remaining£10,000. The catalogues for the second and third exhibitions will also be paid for one month in advance.Gallery premises costs. Business rates are to be paid monthly; the cost is £750 per month. Electricity costs will average out at £60 per month and Caroline expects to receive a bill for the first three months' electricity in March, and to pay it in April.Wages. Caroline will pay a part time assistant £550 per month.Other expenses. Caroline estimates that a total of £1,000 in other expenses will be paid each month.Drawings. She plans to draw £700 per month in cash.Private view expenses. In each of the three months Caroline will have to spend an estimated £450 on buying in wine and other refreshments for the private view. This figure also includes the cost of hourly-paid waiting staff to take drinks round to guests.Advertising. The initial round of press adverts will appear in December, and the £3,000 cost will be paid for out of Caroline’s remaining £10,000. Each month £400 will be paid for brochures and postage costs to send out to people on the gallery’s mailing list.The bank balance at 1 January 20X4 will be £2,000 after advertising and catalogue costs have been paid for. The advertising and catalogue costs form part of Caroline’s start-up capital.The gallery premises are to be depreciated over 25 years on the straight-line basis, with an assumption of nil residual value.Prepare for Caroline:a budget cash flow statement for the three months of January, February and March 20X4a budget statement of profit or loss for the three months ending 31 March 20X4a budget statement of financial position at 31 March 20X4 and:briefly discuss whether or not you think Caroline’s business is going to be successful, identifying any areas where cash flow might be a problem
Budget cash flow statement:
January:
Inflow: None
Outflow: Business rates (£750), Electricity (£60), Wages (£550), Other expenses (£1,000), Drawings (£700), Private view expenses (£450), Brochures and postage (£400), Catalogue for second exhibition (£5,000)
Total outflow: £8,910
Net cash flow: -£8,910
February:
Inflow: None
Outflow: Business rates (£750), Electricity (£60), Wages (£550), Other expenses (£1,000), Drawings (£700), Private view expenses (£450), Brochures and postage (£400), Catalogue for third exhibition (£5,000)
Total outflow: £8,910
Net cash flow: -£8,910
March:
Inflow: None
Outflow: Business rates (£750), Electricity (£60), Wages (£550), Other expenses (£1,000), Drawings (£700), Private view expenses (£450), Brochures and postage (£400)
Total outflow: £3,910
Net cash flow: -£3,910
Budget statement of profit or loss:
Total revenue: None
Total expenses: Catalogues (£15,000), Business rates (£2,250), Electricity (£180), Wages (£1,650), Other expenses (£3,000), Private view expenses (£1,350), Advertising (£3,000), Brochures and postage (£1,200)
Net loss: £27,630
Budget statement of financial position at 31 March 20X4:
Assets: None
Liabilities: None
Equity: Start-up capital (£20,000), Net loss (£27,630)
Total equity: -£7,630 (Negative)
Caroline’s business appears to be facing cash flow problems. Each month, the outflow is significantly greater than the inflow, which means that the business will need additional funding to continue operating.
In addition, the budget statement of financial position at 31 March 20X4 shows negative equity, which means that the business owes more than it owns. Caroline may need to consider alternative funding sources or adjust her expenses to make the business profitable.
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10. Consider a Trading desk is trying to hedge their risk by delta hedging and other similar methods. Assume you have a portfolio of one security and have two different options on that security in your trading book. The Delta Gamma and Vega of option 1 and 2 and that of the portfolio is given below: (18 points)
To effectively hedge their risk, the Trading desk can use delta hedging and other similar methods. When considering a portfolio with one security and two different options on that security, the Delta, Gamma, and Vega of each option as well as the portfolio as a whole must be taken into account.
Delta represents the change in the price of the option in response to a change in the underlying security's price. Gamma measures the change in delta for every change in the underlying security's price. Vega represents the change in the price of the option in response to a change in volatility.
With this information, the Trading desk can use delta hedging to adjust their positions in the options and underlying security in order to maintain a neutral or desired level of exposure. They may also use other methods such as gamma hedging or vega hedging to further manage their risk.
Overall, having a clear understanding of the Delta, Gamma, and Vega of each option and the portfolio as a whole is crucial for effective risk management and hedging strategies in the Trading desk.
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Classic Potato Chips is thinking of distributing a coupon on its 454 g bag of regular crinkled chips. Currently, the cost of producing a bag of chips is $0.60, with typical expenses of $0.21 per bag. Classic sells the bag to retailers for $1.50 per bag. The coupon is in the amount of $0.60, while retailers are offered $0.13 for handling expenses. Classic forecasts an increase in sales of 500,000 bags with the coupon, incurring total marketing expenses of $115,000. What is its profit (or loss) per unit if Classic goes forward with the coupon? For full marks your answer(s) should be rounded to the nearest cent. Profit/loss = $ 0.00
The answer to the question is if Classic goes forward with the coupon, their profit or loss per unit would be a loss of $0.64 per bag.
We need to calculate the profit or loss per unit for Classic Potato Chips if they go forward with the coupon.
1. Calculate the total cost per bag without the coupon:
Cost of production: $0.60
Expenses per bag: $0.21
Total cost per bag = $0.60 + $0.21 = $0.81
2. Calculate the revenue per bag without the coupon:
Revenue per bag = Selling price to retailers = $1.50
3. Calculate the total cost per bag with the coupon:
Cost of production: $0.60
Expenses per bag: $0.21
Coupon amount: $0.60
Retailer handling expenses: $0.13
Total cost per bag = $0.60 + $0.21 + $0.60 + $0.13 = $1.54
4. Calculate the revenue per bag with the coupon:
Revenue per bag = Selling price to retailers - Coupon amount = $1.50 - $0.60 = $0.90
5. Calculate the profit or loss per unit with the coupon:
Profit/loss per unit = Revenue per bag with the coupon - Total cost per bag with the coupon
Profit/loss per unit = $0.90 - $1.54 = -$0.64
So, if Classic goes forward with the coupon, their profit or loss per unit would be a loss of $0.64 per bag.
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mccorp spent $240,000 to acquire a building (appraised at $180,000) on a parcel of land (appraised at $120,000). additional, mccorp spent another $50,000 renovating the building to get it ready for use. after the revovation and the building was occuppied the assets will be valued at?
The total value of the assets after the renovation and occupation would be $300,000 + $50,000 = $350,000.
Based on the information provided, McCorp spent a total of $290,000 ($240,000 for acquisition and $50,000 for renovation) on the building and the land.
The initial appraised value of the building and the land was $300,000 ($180,000 for the building and $120,000 for the land).
Therefore, the total value of the assets after the renovation and occupation would be $300,000 + $50,000 = $350,000.
This is because the renovation improved the value of the building, and the occupation of the building would make it a productive asset.
It is important to note that the actual value of the assets could be different depending on various factors such as market demand, depreciation, and maintenance costs. However, based on the information given, the assets would be valued at $350,000.
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the accompanying schedule contains data for a private closed economy. all figures are in billions. if gross investment is $10 at all levels of gdp, the equilibrium gdp will be
1) The equilibrium GDP will be 220. The calculations for the same are shown in the below section.
Macroeconomic equilibrium happens whilst the amount of actual GDP demanded equals the amount of actual GDP provided on the factor of intersection of the AD curve and the AS curve. If the amount of actual GDP provided exceeds the amount demanded, inventories pile up in order that companies will reduce manufacturing and prices. if we desired to forecast how much (aggregate) expenditure might arise whilst GDP is $20,000, then we are able to simply plug $20,000 into that equation for Y and solve. The solution might be that AE = $15,000 whilst Y = $20,000. Remember, however, that our aim is to locate the factor in which this economic system is at equilibrium.
The equilibrium GDP will be calculated as follows-
C + I = 210 + 10 = 220
when GDP is 220.
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Complete question-
1: GDP C $140 $150 180 180 220 210 260 240 300 270 The Accompanying Schedule Contains Data For A Private Closed Economy. All Figures Are In Billions. If Gross Investment Is $10 At All Levels Of GDP, The Equilibrium GDP Will Be Question 25 Options:
1:
GDP C
$140 $150
180 180
220 210
260 240
300 270
The accompanying schedule contains data for a private closed economy. All figures are in billions. If gross investment is $10 at all levels of GDP, the equilibrium GDP will be
a large automobile repair shop installs about 1,250 mufflers per year, 18 percent of which are for imported cars. (assume a very steady demand rate.) all of the imported-car mufflers are purchased from a single local supplier at a cost of $18.50 each. the shop uses a holding cost based on a 25 percent cost of capital (i.e., 25% of the purchase cost). the fixed cost for placing an order is estimated to be $28. the following questions are about imported-car mufflers only. a. determine the optimal number of imported-car mufflers the shop should purchase each time an order is placed, and the time between placement of orders. b. if the (replenishment) lead-time is six weeks, what are the reorder point and on-hand inventory at the time of placing an order? c. the current reorder policy is to buy imported-car mufflers only once a year. what is the additional annual inventory cost (which consists of annual holding cost and order (setup) cost) incurred by this policy? d. due to some administrative reason, the manager decides to order every quarter (3months). repeat (c) with this order interval. do you see anything about the robustness of the eoq model?
Here's the answer to each of the question:
a. The optimal number of imported-car mufflers the shop should purchase each time an order is placed can be calculated using the Economic Order Quantity (EOQ) model.
EOQ = √[(2DS)/H]
where D = annual demand, S = ordering cost per order, and H = holding cost per unit per year.
Given,
Annual demand (D) = 18% of 1,250 = 225 mufflers per year
Ordering cost (S) = $28 per order
Holding cost (H) = 25% of $18.50 = $4.625 per muffler per year
Substituting the values,
EOQ = √[(222528)/4.625] = 103 mufflers per order (rounded to nearest integer)
The time between placement of orders can be calculated as:
Time between orders = EOQ / D = 103/225 = 0.457 years or approximately 5.48 months.
b. The reorder point is the level of inventory at which an order should be placed to avoid stockouts during the lead time. The lead time is given as 6 weeks, which is approximately 0.115 years. The reorder point can be calculated as:
Reorder point = D * Lead time = 225 * 0.115 = 25.875 or approximately 26 mufflers
On-hand inventory at the time of placing an order should be equal to the EOQ minus the reorder point, which is:
On-hand inventory = EOQ - Reorder point = 103 - 26 = 77 mufflers
c. If the current reorder policy is to buy imported-car mufflers only once a year, the additional annual inventory cost can be calculated by comparing the annual cost of the current policy to the annual cost of the EOQ model.
Annual cost of current policy = (D * H) + (D/Q) * S
= (225 * $4.625) + (225/1250) * $28
= $1,309.38
Annual cost using EOQ model = √(2DSH)
= √[(222528*4.625)]
= $239.45
Therefore, the additional annual inventory cost of the current policy compared to the EOQ model is:
$1,309.38 - $239.45 = $1,069.93
d. If the manager decides to order every quarter, the new time between orders would be 3 months or 0.25 years. The EOQ would remain the same, but the annual demand would need to be adjusted:
Quarterly demand = (225/4) = 56.25 mufflers per quarter
Time between orders = EOQ / Quarterly demand = 103/56.25 = 1.836 quarters
The new annual cost using EOQ model can be calculated as:
Annual cost using EOQ model = (D/Q) * S + (Q/2) * H
= (225/103) * $28 + (103/2) * $4.625
= $132.99
Therefore, the additional annual inventory cost of the quarterly policy compared to the EOQ model is:
$132.99 - $239.45 = -$106.46
The negative value indicates that the quarterly policy is actually cheaper than the EOQ model. This shows that the EOQ model is not always robust to changes in the ordering interval, lead time, or other factors. In this case, ordering more frequently than the EOQ suggests leads to a lower inventory cost.
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You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product, "Battlin’ Bobby." You had planned on using the unused capacity to start selling "BB" on the west coast in two years. You would eventually have had to purchase additional duplicating machines 10 years from today, but using the capacity for your new product will require moving this purchase up to 2 years from today. If the new machines will cost $115,000 and will be depreciated straight-line over a 5-year period to a zero salvage value, your marginal tax rate is 32 percent, and your cost of capital is 16 percent, what is the opportunity cost associated with using the unused capacity for the new product? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)
The company would need to generate at least $61,091.13 in additional profits from the new product to make up for this opportunity cost. The opportunity cost associated with using the unused capacity for the new product is the cost of the additional duplicating machines that will need to be purchased two years earlier than planned.
This cost is calculated by determining the present value of the future cost of the machines, which is $115,000, using the company's cost of capital of 16 percent.
This gives a present value of $61,091.13. Therefore, the opportunity cost of using the unused capacity for the new product is -$61,091.13.
This negative value indicates that by using the capacity for the new product, the company is sacrificing the potential future profits that could have been generated by using it for Battlin' Bobby on the west coast in two years.
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Joe Fatcat, an investment banker, states, "It is not worth my while to worry about detailed long-term forecasts. Instead, I use the following approach when forecasting cash flows beyond three years: I assume that sales grow at the rate of inflation, capital expenditures are equal to depreciation, and that net profit margins and working capital to sales ratios stay constant." What pattern of return on equity is implied by these assumptions? Is this reasonable?
The pattern of return on equity (ROE) implied by Joe Fatcat's assumptions is a constant ROE. This may not be entirely reasonable, as it assumes no changes in growth, efficiency, or risk factors over time.
Explanation: Joe Fatcat assumes sales grow at the rate of inflation, meaning that real sales growth remains constant. By setting capital expenditures equal to depreciation, he assumes that the net book value of assets stays the same.
Additionally, keeping constant net profit margins and working capital to sales ratios implies no changes in profitability or operational efficiency. Under these assumptions, the company maintains a steady level of performance, which leads to a constant return on equity.
However, this may not be realistic as it overlooks the possibility of changes in growth rates, improvements in efficiency, or shifts in market and business risk factors that could impact ROE over the long term.
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1. Portfolio D has an annual return of 8.5% and an annual return standard deviation of 25%. Calculate the expected return over 9 years.2. Portfolio D has an annual return of 8.5% and an annual return standard deviation of 25%. Calculate the 9-year standard deviation.
1. The expected return over 9 years is 99.2%. 2. The standard deviation over 9 years is 75%.
We will calculate the expected return and the 9-year standard deviation for Portfolio D.
1. To calculate the expected return over 9 years for Portfolio D, follow these steps:i. Find the annual return for one year, which is given as 8.5%.
ii. Convert the annual return to a decimal:
8.5% / 100 = 0.085.
iii. We'll use the formula for compound interest:
(1 + r)^n - 1, where r is the annual return and n is the number of years.
iv, Plug in the values:
(1 + 0.085)^9 - 1
v. Calculate the result:
≈ 1.992 - 1 = 0.992
vi. Convert the result back to a percentage: 0.992 * 100 ≈ 99.2%
The expected return for Portfolio D over 9 years is approximately 99.2%.
2. To calculate the 9-year standard deviation for Portfolio D, follow these steps:i. Find the annual return standard deviation for one year, which is given as 25%.
ii. Convert the standard deviation to a decimal:
25% / 100 = 0.25.
iii. Since standard deviation scales with the square root of time, we'll use the formula:
SD = σ * √n, where σ is the annual return standard deviation and n is the number of years.
iv. Plug in the values:
0.25 * √9
v. Calculate the result:
0.25 * 3 = 0.75
vi. Convert the result back to a percentage:
0.75 * 100 = 75%
The 9-year standard deviation for Portfolio D is 75%.
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Under what conditions would a company call back (i.e., buy back,repurchase) one of its outstanding bond issues? Discuss fully witha numerical example.
A company may call back an outstanding bond issue when it can benefit from lower interest rates, improved credit ratings, or a change in its capital structure. This allows the company to optimize its debt management and potentially reduce its overall borrowing costs.
What's reasons of company call backA company might call back (buy back or repurchase) one of its outstanding bond issues under certain conditions, such as lower interest rates, improved credit ratings, or a change in its capital structure.
This decision helps the company reduce its interest expenses and optimize its debt management.
For example, let's assume Company XYZ issued a 10-year bond with a face value of $1,000,000 and a 6% annual interest rate.
After five years, the market interest rates drop to 4%. To take advantage of the lower rates, Company XYZ can call back the outstanding bonds and issue new bonds at the lower interest rate. By doing this, the company can reduce its interest expenses and save money in the long run.
Additionally, if the company's credit rating improves, it may be able to refinance its debt at more favorable terms. This can lead to lower borrowing costs and better financial management.
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