The change in EBIT is $137.65. The degree of operating leverage can be calculated by dividing the change in EBIT by the change in sales. In this case, the fixed costs are $7,419 and the change in sales is 5.7%.
The change in EBIT is calculated by multiplying the variable cost per unit by the change in sales. In this case, the change in EBIT is $137.65. Therefore, the degree of operating leverage is 24.2%.
The resulting percentage change in EBIT will be 24.2%. That is, if the units sold increase by 5.7%, the EBIT will increase by 24.2%. This means that the company will experience a positive increase in their profits as a result of the increase in the sale of units.
However, the company must be aware that the degree of operating leverage is high, so any decrease in sales will result in a large decrease in profits. Therefore, the company must closely monitor their sales and take appropriate measures to ensure that their sales remain high.
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Trower Corp. has a debt-equity ratio of.85. The company is considering a new plant that will cost $114 million to build. When the company issues new equity, it incurs a flotation cost of 8.4 percent. The flotation cost on new debt is 3.9 percent. What is the initial cost of the plant if the company raises all equity externally? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Initial cash flow $ 121,707,014 What is the initial cost of the plant if the company typically uses 65 percent retained earnings? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Initial cash flow $ 117,989,314 What is the initi cost of the plant if the company typically uses 100 percent retained earnings? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Initial cash flow $ 116,080,029
The initial cost of the plant if the company raises all equity externally is $121,707,014.
The initial cost of the plant if the company typically uses 65 percent retained earnings is $117,989,314.
The initial cost of the plant if the company typically uses 100 percent retained earnings is $116,080,029.
To calculate the initial cost of the plant if the company raises all equity externally, we can use the formula:
Initial cost = [tex]\frac{\text{Cost of new plant}}{1 - \text{Flotation cost on new equity}}[/tex]
Cost of new plant = $114 million
Flotation cost on new equity = 8.4% = 0.084
Therefore, Initial cost = [tex]$\frac{114\text{ million}}{1-0.084}$[/tex]
Initial cost = $121,707,014
To calculate the initial cost of the plant if the company typically uses 65 percent retained earnings, we need to calculate the proportion of equity and debt used to finance the plant. Assuming the remaining 35% of the cost is financed with debt, we can use the debt-equity ratio to calculate the proportion of debt and equity:
Debt proportion =[tex]\frac{\text{Debt}}{\text{Debt} + \text{Equity}}[/tex] = 0.85
Equity proportion = 1 - Debt proportion = 0.15
We also need to adjust for the flotation costs of issuing new equity and debt:
Equity cost = [tex]\frac{\text{Cost of new equity}}{1 - \text{Flotation cost on new equity}}[/tex]
Equity cost = $114 million x [tex]\frac{0.15}{1-0.084}[/tex]
Equity cost = $22,919,620
Debt cost = [tex]\frac{\text{Cost of new debt}}{(1 - \text{Flotation cost on new debt})}[/tex]
Debt cost = $114 million x [tex]\frac{0.35}{1 - 0.039}[/tex]
Debt cost = $46,201,694
Therefore, the initial cost of the plant is:
Initial cost = Cost of new plant + Equity cost + Debt cost
Initial cost = $114 million + $22,919,620 + $46,201,694
Initial cost = $117,989,314
To calculate the initial cost of the plant if the company typically uses 100 percent retained earnings, we can simply use the cost of the new plant and adjust for the flotation cost of issuing new equity:
Initial cost = [tex]\frac{\text{Cost of new plant}}{1-\text{Flotation cost on new equity}}[/tex]
Initial cost = [tex]$\dfrac{114 \text{ million}}{1-0.084}$[/tex]
Initial cost = $116,080,029.
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at cooper industries, there are few similarities in the products it makes or the industries in which it completes. the corporate office adds value through such activities as improving their accounting activities and centralizing union negotiations. this is an example of creating value by using
Cooper Industries uses company level strategy to generate value. In the case of Cooper Industries, the company operates a variety of operations across a wide range of markets with little overlaps in terms of goods or sectors
The corporate office is achieving economies of scale and scope by enhancing accounting operations and centralizing union discussions, which can result in cost savings and efficiency improvements. The company's overall performance and competitiveness can be enhanced by these centralization initiatives by ensuring uniformity and standards throughout the many businesses.
In conclusion, Cooper Industries is using its wide portfolio of businesses and centralizing some functions to promote efficiency, cost savings, and consistency while utilizing corporate level strategy to produce value.
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List the insurance companies that you are familiar with.Elaborate on the factors that, in your opinion, affect a person'sdecision to be insured with a particular insurancecompany.
Allstate, State Farm, Geico, Progressive, and Nationwide are some of the insurance companies I am familiar with.
The factors that impact a person's decision to choose an insurance company are coverage options, price, reputation, discounts and incentives, ease of access, and recommendations.
Some insurance companies that I am familiar with include Allstate, State Farm, Geico, Progressive, and Nationwide. In my opinion, there are number of factors that affect a person's decision to be insured with a particular insurance company.
These include:1. Coverage options: Customers may compare the different types of coverage offered by each company to find one that suits their specific needs.
2. Price: Premium rates play a significant role in the decision-making process. Customers will typically choose a company that offers competitive prices for their desired coverage.
3. Reputation: The reputation of an insurance company is essential in gaining a customer's trust. Clients are likely to select companies known for excellent customer service, prompt claim processing, and financial stability.
4. Discounts and incentives: Some insurance companies offer various discounts and incentives that can attract customers, such as safe driver discounts, multi-policy discounts, or loyalty programs.
5. Ease of access: The availability of online tools, mobile apps, and 24/7 customer service can make it easier for customers to manage their policies and communicate with the company.
6. Recommendations: People often rely on recommendations from friends, family members, or online reviews when choosing an insurance company.
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The
average collection float is $265,450 and the approximate discount
rate is 10%. What is the annual cost of float?
The annual cost of float is $26,545. To calculate this, multiply the average collection float ($265,450) by the approximate discount rate (10%).
To calculate the annual cost of float, follow these steps:
1. Convert the discount rate to a decimal by dividing it by 100: 10% ÷ 100 = 0.10
2. Multiply the average collection float by the discount rate in decimal form: $265,450 x 0.10 = $26,545
The annual cost of float represents the opportunity cost of not having immediate access to the funds due to the time taken for checks to clear or for payments to be processed.
In this case, the annual cost of float is $26,545, which is the amount of money the company could have potentially earned if they had immediate access to the funds and invested them at the given discount rate.
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which of the following statements is true of design for manufacturing (dfm) methods? group of answer choices they help firms identify potential failures in a system and classify them according to their severity. they lengthen the development cycle time of products. they facilitate integration between engineering and manufacturing and bring issues of manufacturability into the design process as early as possible. they introduce design rules that increase the complexity of the product designs, thus making them harder to manufacture, which ultimately increases the unit costs.
The statement that is true about Design for Manufacturing (DFM) methods is they facilitate integration between engineering and manufacturing and bring issues of manufacturability into the design process as early as possible. The correct option is C.
DFM methods are a set of design practices that focus on designing products that are easy and cost-effective to manufacture. DFM methods help to identify potential manufacturing issues early in the design process, allowing engineers and designers to make adjustments to the product design before manufacturing begins.
DFM methods also facilitate integration between engineering and manufacturing by encouraging collaboration between these two functions. By involving manufacturing teams in the design process, engineers can gain valuable insights into the manufacturing process and the requirements for producing a product at scale.
DFM methods do not introduce design rules that increase the complexity of the product designs or make them harder to manufacture. Rather, the goal of DFM is to simplify product designs and make them easier and more cost-effective to manufacture.
Therefore, the correct option is C.
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bloom company predicts it will incur fixed costs of $270,000 and earn income of $330,000 in the next period. its expected contribution margin ratio is 50%. 1. compute the amount of expected total dollar sales. 2. compute the amount of expected total variable costs.
The expected total dollar sales for Bloom corporation in the subsequent duration is $330,000 and The expected total variable costs for Bloom agency within the next period is $165,000.
1 .To calculate the anticipated overall dollar sales, we can use the contribution margin ratio formula:
Contribution Margin Ratio = (income - Variable costs) / income
Rearranging this components, we are able to solve for sales:
income = Variable charges / (1 - Contribution Margin Ratio)
Substituting the given values, we get:
Contribution Margin Ratio = 50% = 0.5
Variable fees = sales x (1 - Contribution Margin Ratio) = $330,000 x 0.5 = $165,000
anticipated total dollar income = Variable fees / (1 - Contribution Margin Ratio) = $165,000 / (1 - 0.5) = $330,000
Therefore, the expected total dollar income for Bloom corporation in the subsequent duration is $330,000.
2 .To calculate the expected total variable expenses, we will use the contribution margin ratio formula once more:
Contribution Margin Ratio = (sales - Variable expenses) / income
Rearranging this formula, we will solve for variable prices:
Variable expenses = income x (1 - Contribution Margin Ratio)
Substituting the given values, we get:
Contribution Margin Ratio = 50% = 0.5
sales = $330,000
Variable prices = $330,000 x (1 - 0.5) = $165,000
Therefore, the expected total variable costs for Bloom agency within the next period is $165,000.
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Consider a circle whose equation is x2 + y2 – 2x – 8 = 0. Which statements are true? Select three options. The radius of the circle is 3 units. The center of the circle lies on the x-axis. The center of the circle lies on the y-axis. The standard form of the equation is (x – 1)² + y² = 3. The radius of this circle is the same as the radius of the circle whose equation is x² + y² = 9.
According to the question of equation, the first statement is true. The second statement is false. The third statement is false. The fourth statement is true. The fifth statement is false.
What is equation?Equation is a mathematical statement that expresses the equality of two expressions by using symbols. It typically consists of an equal sign and two expressions or terms that are linked by the equal sign. These expressions or terms can contain numbers, variables, constants, and mathematical operations such as addition, subtraction, multiplication, and division. Equations are used to describe physical phenomena and solve problems.
The radius of the circle is 3 units because the equation can be rearranged to (x – 1)² + y² = 3, which is the standard form of a circle. The center of the circle lies at the point (1, 0) and does not lie on the x-axis. The center of the circle lies at the point (1, 0) and does not lie on the y-axis. The standard form of the equation is (x – 1)² + y² = 3. The radius of this circle is 3 units, while the radius of the circle whose equation is x² + y² = 9 is 3√2 units, which is not the same as 3.
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Creation of an advertising campaign for tony's pizza that will appeal to 6- to 12-year-olds is best described as what part of the final step in the marketing research approach, to take marketing actions? multiple choice question. Make action recommendations forecast the results implement the action recommendations evaluate the decision
The ultimate step within the promoting inquire about approach is to require showcasing activities based on the discoveries of the inquiry. This step includes executing the activity recommendations that have been created based on the investigate discoveries.
Within the case of Tony's Pizza, the showcasing inquire about may have uncovered that there's a critical advertise section of 6- to 12-year-olds who are fascinated by pizza. Based on this finding, the promoting group may have created an activity proposal to form an publicizing campaign that particularly targets this age bunch.
By and large, the usage of activity proposals may be a basic step within the showcasing investigative approach since it empowers the organization to put its investigative discoveries into activity and accomplish its showcasing goals.
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Establishing global capital structure can be formed through ________.
A. averaging capital structure of all domestic firms across countries
B. expanding capital structure of a subsidiary of a particular MNC
C. averaging capital structure of all MNCs across countries
D. averaging capital structure of a particular MNC overall (including all subsidiaries)
The establishment of a global capital structure can be formed through various methods, but one possible approach is Option C. averaging the capital structure of all (MNCs) across countries.
Averaging the capital structure of a given multinational company (MNC) overall, including all subsidiaries, is the best technique to build a global capital structure. This strategy takes into consideration each subsidiary's individual qualities and requirements, as well as the MNC's overall financial status.
It offers a more realistic picture of the MNC's worldwide financial status, which is critical for making strategic financial choices.
While averaging the capital structures of all MNCs across countries or all domestic enterprises across countries might give some insight, it does not account for the unique characteristics that affect each MNC or subsidiary. Therefore, option B is the correct answer for the above question.
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economics is the study of: a. how to allocate resources to satisfy wants and needs. b. capitalism. c. how to make money. d. how to make workers more productive and firms more profitable. e. markets.
Economics is the study of how to allocate resources to satisfy wants and needs.
It involves examining how goods and services are produced, distributed, and consumed. This includes analyzing the behavior of individuals, firms, and governments in markets, as well as exploring the role of incentives, competition, and regulations in shaping economic outcomes.
While capitalism is a type of economic system that emphasizes private ownership and market-based decision-making, it is just one of many approaches that fall under the broader umbrella of economics.
Similarly, while making money and improving productivity and profitability are important considerations in many economic activities, they are not the sole focus of the discipline.
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Two years ago, Grey Ltd issued $1,000 denominations with an original maturity of 15 years and a coupon rate of 12%. Determine the value today of one of these bonds to an investor who requires a 10% rate of return on these securities. a. $871.53 b. $1,106.70 c. $863.78 d. $900.65 e. $1,142.07
The value of the Grey Ltd's bond today is $871.53. Therefore, the correct option is A.
To determine the value today of the bond, we need to use the present value formula:
PV = C * (1 - (1 + r)^-n) / r + FV / (1 + r)^n
Where PV is the present value, C is the annual coupon payment, r is the required rate of return, n is the number of years remaining until maturity, and FV is the face value of the bond.
Plugging in the given values, we get:
PV = 120 * (1 - (1 + 0.1)^-13) / 0.1 + 1000 / (1 + 0.1)^13
PV = 120 * 7.3601 + 1000 * 0.23938
PV ≈ 871.53
Therefore, the value today of the bond to an investor who requires a 10% rate of return is $871.53, which is option A.
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Columbus Corp. has annual sales of $80,000,000; its average inventory is $20,000,000; and its average accounts receivable is $16,000,000. The firm buys all raw materials on terms of net 35 days payable deferral with $180,000 cost of the good sold per day. The firm is searching for ways to shorten the cash conversion cycle. If inventory conversion can be lowered to 92 days and average collection period can be shortened to 68 days while payable deferral, cost of the good sold, and annual sales remain constant, how much is the increase in firm’s free cash flow?
The increase in the firm's free cash flow is $1,440,000.
To calculate the increase in free cash flow, follow these steps:
1. Calculate the current cash conversion cycle (CCC):
CCC = Inventory Conversion Period (ICP) + Average Collection Period (ACP) - Payable Deferral Period (PDP)
2. Calculate the new CCC with the given improvements:
New CCC = New ICP (92 days) + New ACP (68 days) - PDP (35 days)
3. Find the difference between the old and new CCC:
Difference = Old CCC - New CCC
4. Multiply the difference by the cost of goods sold per day:
Increase in Free Cash Flow = Difference × Cost of Goods Sold per day
In this case, the old ICP is 365 days * ($20,000,000 / $80,000,000) = 91.25 days, and the old ACP is 365 days * ($16,000,000 / $80,000,000) = 73 days.
So, the old CCC = 91.25 + 73 - 35 = 129.25 days, and the new CCC = 92 + 68 - 35 = 125 days. The difference is 4.25 days. Therefore, the increase in free cash flow is 4.25 days × $180,000 = $1,440,000.
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PPP and Cash Flows Boston Co. will receive 1 million euros in 1 year from selling exports. It did not hedge this future transaction. Boston believes that the future value of the euro will be determined by purchasing power parity (PPP). It expects that inflation in countries using the euro will be 12 percent next year, while inflation in the United States will be 7 percent next year. Today the spot rate of the euro is $1.46, and the 1-year forward rate is $1.50. a. Estimate the amount of U.S. dollars that Boston will receive in 1 year when converting its euro receivables into U.S. dollars.
Boston Co. will receive approximately $1,521,400 in U.S. dollars in 1 year when converting its 1 million euro receivables into U.S. dollars based on PPP.
To estimate the amount of U.S. dollars that Boston Co. will receive in 1 year when converting its euro receivables into U.S. dollars, we need to follow these steps:
1. Determine the expected spot rate in 1 year using PPP:
PPP states that the change in the exchange rate between two currencies is determined by the inflation rates in the respective countries. Therefore, we can use the formula:
Expected future spot rate = Current spot rate × (1 + Inflation rate of Eurozone) / (1 + Inflation rate of the U.S.)
Expected future spot rate = $1.46 × (1 + 0.12) / (1 + 0.07)
Expected future spot rate = $1.46 × 1.12 / 1.07 ≈ $1.5214
2. Convert the 1 million euros into U.S. dollars using the expected future spot rate:
Amount in U.S. dollars = 1,000,000 euros × Expected future spot rate
Amount in U.S. dollars = 1,000,000 × $1.5214 ≈ $1,521,400
So, Boston Co. will receive approximately $1,521,400 in U.S. dollars in 1 year when converting its 1 million euro receivables into U.S. dollars based on PPP.
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A. How do you make people believe that the banking system is safe?
B. In the old days it was often done with architecture. Bank buildings were massive buildings with large cement pillars in front. Would you agree or disagree with this statement?
A. Banking system can projected as safe to people by implementing strong security measures, promoting transparency, establishing a solid reputation, providing insurance coverage, and complying with regulations.
B. I agree with the statement as massive bank buildings offered an impression of strength and permanence.
A. There are number of ways to make people believe that the banking system is safe.
These include:1. Implement strong security measures: Ensure that the bank employs robust cybersecurity measures, fraud detection systems, and secure encryption technologies to protect customer information and transactions.
2. Promote transparency: Regularly share information about the bank's performance, policies, and procedures with the public to build trust and credibility.
3. Establish a solid reputation: Develop a track record of excellent customer service, fair practices, and a commitment to financial stability.
4. Provide insurance coverage: Offer deposit insurance to customers, which guarantees that their deposits are safe even if the bank fails.
5. Comply with regulations: Follow all banking laws and regulations to demonstrate the bank's commitment to maintaining a secure and stable financial system.
B. I agree with the statement that in the old days, banks often used architecture to convey a sense of security and stability. Massive buildings with large cement pillars in front gave the impression of strength and permanence, which in turn made people feel more confident about entrusting their money to the bank. This architectural style served as a visual representation of the bank's reliability and trustworthiness.
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"please answer these questions
QUESTION 6
Exchange-traded funds offer automatic reinvestment.
True
False
10 points QUESTION 7
Mutual funds are structured in three ways: closed-end funds,
open-"
QUESTION 6: False. Exchange-traded funds (ETFs) do not offer automatic reinvestment. Instead, investors can manually reinvest their dividends or capital gains if they choose to do so.
QUESTION 7: Mutual funds can be structured in three ways: closed-end funds, open-end funds, and unit investment trusts. Closed-end funds have a fixed number of shares and are traded on stock exchanges.
Open-end funds issue and redeem shares on demand at their net asset value (NAV). Unit investment trusts issue a fixed number of units that are sold to investors, and the portfolio of securities is fixed until the trust expires.
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Consider an American Call option with a Strike of $100 and a term of 6 months at time 0.
After 3 months the spot price is 105 and a dividend will be paid amounting to $1. The risk free rate is 5%.
Should this option be exercised at time 3 months after time 0?
a) Not enough information to answer the question
b) Yes
c) Indifferent between early exercise and holding to maturity
d) No
The answer is (b) Yes.
Whether a particular American Call option should be exercised or not at a specific time, given certain conditions?At time 0, the option is out of the money because the spot price is less than the strike price. However, after 3 months, the spot price is 105 which is greater than the strike price of 100, and the option is now in the money. Additionally, since the option is an American option, it can be exercised at any time before expiration.
The time to maturity of the option is 6 months, and at the end of the 3rd month, there are still 3 months left until expiration. Therefore, it is optimal to exercise the option at this point because the intrinsic value of the option (the amount by which the spot price exceeds the strike price) is greater than the time value of the option.
The intrinsic value of the option at this point is 105 - 100 - 1 = 4, and the time value is zero because the remaining time to expiration is relatively short. Therefore, it is optimal to exercise the option and realize the intrinsic value of the option.
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Beach & Company reported net income of $40 million for last year. Depreciation expenses totaled $18 million and capital expenditures came to $8 million. Free cash flow is expected to grow at a rate of 5% for the foreseeable future. Beach faces a 40% tax rate and has a 0.40 debt to equity ratio with $200 million (market value) in debt outstanding. Beach's equity beta is 1.25, the risk-free rate is currently 4.5% and the market risk premium is estimated to be 8.0%.
What is the current total value of Beach & Company (in millions)?
a. $655.90
b. $730.18
c. $840.95
d. $919.46
e. $1,025.95
The current total value of Beach & Company is $1,025.95 million.
How to calculate total value of Beach & Company?To calculate the total value of Beach & Company, we can use the free cash flow to the firm (FCFF) approach and the weighted average cost of capital (WACC) formula.
First, let's calculate the FCFF:
FCFF = Net Income + Depreciation - Capital Expenditures - Taxes
FCFF = $40 + $18 - $8 - 0.4($40 - $18 - $8) = $31.2 million
Next, we need to calculate the WACC:
WACC = (E/V) * Re + (D/V) * Rd * (1 - Tc)
Where:
E = market value of equity = ?
V = total market value of equity and debt = ?
D = market value of debt = $200 million
Re = cost of equity
Rd = cost of debt
Tc = corporate tax rate = 40%
To calculate the cost of equity, we can use the Capital Asset Pricing Model (CAPM):
Re = Rf + Beta * (Rm - Rf)
Re = 4.5% + 1.25 * 8.0% = 14.5%
Now, let's calculate the cost of debt. We don't have the information to calculate the yield to maturity, so we can use the market interest rate on similar debt as a proxy:
Rd = 5%
Finally, we can plug in the values and solve for E and V:
WACC = (E/V) * 14.5% + (0.4) * (200/ V) * 5% * (1 - 40%)
10.25% = (E/V) * 14.5% + 0.012 * (V - 200)
We can solve for V by trial and error, or by using a financial calculator or spreadsheet:
V = $1,025.95 million
Therefore, the current total value of Beach & Company is $1,025.95 million. The answer is (e).
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Assume that JCP will experience a $1.5 billion net income loss for 2013 and that a cash balance of $1.0 billion is required for JCP to operate efficiently. Create a pro forma sources and uses statement to estimate JCP’s external funding required by year-end 2013. Be prepared to recommend whether the debt or equity issuance is the better choice as the source for external funding. How will the stock price react to the announcement of a debt offering? An equity issuance?
If the equity issuance is seen as funding growth opportunities, it may have a positive impact on the stock price.
Ultimately, the choice between debt or equity issuance depends on JCP's financial health, investor sentiment, and market conditions.
Create a pro forma sources and uses statement for JCP and provide a recommendation on debt or equity issuance.
Assumptions:
- Net income loss for 2013: -$1.5 billion
- Required cash balance: $1.0 billion
Pro Forma Sources and Uses Statement:
Sources:
1. Debt issuance
2. Equity issuance
Uses:
1. Cover net income loss: -$1.5 billion
2. Maintain required cash balance: $1.0 billion
External funding required by year-end 2013: $2.5 billion ($1.5 billion net income loss + $1.0 billion required cash balance)
Recommendation:
Between debt and equity issuance, it depends on the company's financial situation, market conditions, and investors' preferences.
Debt issuance can be a better choice if the interest rates are low and the company has a good credit rating, allowing it to secure funds at a lower cost. However, it increases the company's debt load and may limit future borrowing.
Equity issuance can be a better choice if the company has a high debt-to-equity ratio or wants to avoid increasing its debt load. However, it may dilute existing shareholders' ownership and be less favorable in a bearish market.
Stock price reaction:
Debt offering announcement: The stock price may react negatively if the market perceives the company is taking on too much debt, increasing its risk. Conversely, it may react positively if the debt issuance is seen as a strategic move to fund growth opportunities.
Equity issuance announcement: The stock price may react negatively due to dilution of existing shareholders' ownership, signaling that the company needs cash, which might be perceived as a sign of financial distress.
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RJS generated $65,000 net income this year. The firm's financial statements also show that it interest expense was $40,000, its marginal tax rate was 35%, and its invested capital was $800,000. If its average cost of funds is 12%, what was RJS's economic value added (EVA) this year?
To calculate RJS's economic value added (EVA) for the year, we need to use the following formula:
EVA = Net Operating Profit After Tax (NOPAT) - (Weighted Average Cost of Capital (WACC) x Invested Capital)
First, let's calculate NOPAT. We know that RJS's net income for the year was $65,000 and its marginal tax rate was 35%. Therefore:
NOPAT = Net Income x (1 - Marginal Tax Rate)
NOPAT = $65,000 x (1 - 0.35)
NOPAT = $42,250
Next, let's calculate the WACC. We know that RJS's average cost of funds is 12%. To calculate the WACC, we need to take into account the cost of debt and the cost of equity. We know the cost of debt, which is the interest expense of $40,000. To calculate the cost of equity, we can use the Capital Asset Pricing Model (CAPM) formula:
Cost of Equity = Risk-Free Rate + Beta x (Expected Market Return - Risk-Free Rate)
Assuming a risk-free rate of 2%, a beta of 1.5, and an expected market return of 10%, the cost of equity would be:
Cost of Equity = 2% + 1.5 x (10% - 2%)
Cost of Equity = 2% + 1.5 x 8%
Cost of Equity = 14%
Now we can calculate the WACC:
WACC = (Cost of Debt x (1 - Marginal Tax Rate) x Debt/Total Capital) + (Cost of Equity x Equity/Total Capital)
WACC = (12% x (1 - 0.35) x 40%/80%) + (14% x 60%/80%)
WACC = 4.68% + 10.5%
WACC = 15.18%
Finally, we can calculate the EVA:
EVA = NOPAT - (WACC x Invested Capital)
EVA = $42,250 - (15.18% x $800,000)
EVA = $42,250 - $121,440
EVA = -$79,190
The negative EVA indicates that RJS did not generate enough returns to cover its cost of capital. This means that the company's investments are not generating value for its shareholders. To increase EVA, RJS would need to improve its profitability or reduce its cost of capital.
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Monetary neutrality means that while real variables may change in response to changes in the money supply, nominal variables do not.
true
false
The given statement about Monetary neutrality is true. The details on this system is given in the below section.
Monetary neutrality way that at the same time as actual variables might also additionally alternate in reaction to modifications withinside the cash deliver, nominal variables do now no longer. According to the Fisher effect, if inflation rises then the nominal hobby fee rises. Shoeleather charges and menu charges are each charges of predicted inflation. The neutrality of cash, additionally referred to as impartial cash, is an monetary principle declaring that modifications withinside the cash deliver simplest have an effect on nominal variables and now no longer actual variables. Monetary neutrality is the concept that a alternate withinside the cash deliver does now no longer have a actual effect at the economic system withinside the lengthy run, apart from converting the mixture rate stage in share to the alternate withinside the cash deliver.
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True, monetary neutrality is a concept in economics that suggests that changes in the money supply have no long-term effects on nominal variables such as prices, interest rates, or exchange rates.
It assumes that there is no relationship between the money supply and real variables such as output, employment, or consumption.
Monetary neutrality is based on the idea that changes in the money supply only have a temporary effect on the economy because they are quickly absorbed by price adjustments. This implies that in the long run, changes in the money supply do not affect the level of output, employment, or other real variables. Instead, they only lead to changes in nominal variables.
The concept of monetary neutrality is often used to evaluate the effectiveness of monetary policy. If monetary neutrality holds true, then the central bank's ability to influence real variables through changes in the money supply is limited. In this case, monetary policy can only affect nominal variables, and the real economy will be largely unaffected.
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At 31.12.21, a business reports a net working capital cycle of 25 days. At 31.12.20, the net working capital cycle reported was 10 days. At 31.12.19, the net working capital cycle reported was 11 days. Which reported working capital cycle is deemed as most favourable for the business? a. 11 Days b. None of the options C. 25 Days d. 10 Days
The best reported working capital cycle for the company is 10 days, option d.
The most favorable reported working capital cycle for a business would be the one with the shortest number of days. In this case, the net working capital cycle reported on 31.12.20 was 10 days, which is shorter than both the 11 days reported on 31.12.19 and the 25 days reported on 31.12.21.
A shorter net working capital cycle means that the business is able to convert its current assets into cash more quickly, which can improve cash flow and liquidity. Therefore, option d, 10 days, is the most favorable reported working capital cycle for the business.
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the "standard consumer package" of the 1950s included a car, house, and television. (True or False)
False. While it is true that the car, house, and television were all popular consumer goods in the 1950s, they were not typically sold as a package or bundle. The idea of a "standard consumer package" including these items is a myth or exaggeration.
During the 1950s, owning a car became more common and accessible to middle-class families, as the post-war economic boom led to increased prosperity and a growing automobile industry.
Similarly, the rise of suburbanization and the Baby Boom led to a housing boom, as families sought out new homes in the suburbs.
Television also became increasingly popular during this time, as more households acquired sets and programming expanded.
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False. While it is true that the car, house, and television were all popular consumer goods in the 1950s, they were not typically sold as a package or bundle. The idea of a "standard consumer package" .
including these items is a myth or exaggeration. During the 1950s, owning a car became more common and accessible to middle-class families, as the post-war economic boom led to increased prosperity and a growing automobile industry. Similarly, the rise of suburbanization and the Baby Boom led to a housing boom, as families sought out new homes in the suburbs. Television also became increasingly popular during this time, as more households acquired sets and programming expanded.
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Youth Bouncebeds Inc. has been selling trampoline beds for 'active' children for many years. It is currently studying a proposal to tighten credit policy in an attempt to reduce its bad debt expense ratio, now 5 percent to 3 percent. Sales are estimated to decline by 10 percent. The cost of sales is 80 percent of the selling price. Should the company adopt this new credit policy?
Multiple Choice
It doesn't matter, since profits don't change
It doesn't matter, since the customer will buy the product anyway.
There is not enough information
No, profits are reduced because of lost sales
Yes, profits increase because of the reduction in bad debt expense
Yes, Youth Bouncebeds Inc. should adopt the new credit policy as profits increase due to the reduction in bad debt expense.
To determine if the new credit policy should be adopted, we can compare the profit changes resulting from both reduced bad debt expense and decreased sales. Here's a step-by-step analysis:
1. Calculate the reduction in bad debt expense: 5% (current ratio) - 3% (proposed ratio) = 2% decrease
2. Calculate the estimated sales decline: 10% decrease
3. Determine the cost of sales: 80% of the selling price
4. Analyze the impact on profits: Reduced bad debt expense will increase profits, while decreased sales might lead to a decrease in profits. However, since the reduction in bad debt expense is significant (2% decrease), it outweighs the potential profit loss from the decline in sales (10%).
In conclusion, adopting the new credit policy will likely result in increased profits for Youth Bouncebeds Inc., making it a viable strategy.
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chhom corporation makes a product whose direct labor standards are 0.6 hours per unit and $35 per hour. in november the company produced 7,700 units using 4,120 direct labor-hours. the actual direct labor cost was $86,520. the labor efficiency variance for november is:
Chhom corporation makes a product whose direct labor standards are 0.6 hours per unit and $35 per hour. In november the company produced 7,700 units using 4,120 direct labor-hours. The actual direct labor cost was $86,520. the labor efficiency variance for november is "-$17,850".
The labor efficiency variance is calculated by the actual hours is minus from the standard hours and into with standard rate.
As follow,
Actual Hours - Standard Hours × Standard Rate
In this case, the actual hours worked were 4,120, and the standard hours should have been 0.6 hours per unit × 7,700 units, or 4,620 hours.
So the labor efficiency variance is:
4,120 actual hours - 4,620 standard hours × $35 standard rate = -$17,850
The negative sign indicates an unfavorable variance, which means that the actual labor hours used were greater than the standard labor hours that should have been used to produce the 7,700 units. This resulted in higher direct labor costs than expected.
Therefore, the labor efficiency variance for November is -$17,850.
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select all that apply when frito-lay decided to introduce a salsa product line, it used the existing tostitos brand (under which it sells taco chips). what advantages did this strategy provide frito-lay? (choose every correct answer.)
When Frito-Lay decided to introduce a salsa product line under the existing Tostitos brand, it provided the company with several advantages. These include: Brand recognition, Cost savings, Cross-promotion opportunities, Faster market penetration, Consistent brand image.
1. Brand recognition: By using the existing Tostitos brand, Frito-Lay was able to leverage the brand's popularity and trust among consumers, making it easier to introduce the new salsa product line.
2. Cost savings: Using the existing brand infrastructure, including packaging design, logo, and marketing channels, Frito-Lay saved on costs that would otherwise be incurred if they were to create a completely new brand.
3. Cross-promotion opportunities: With the Tostitos brand already selling taco chips, Frito-Lay could promote the new salsa products alongside the chips, encouraging consumers to purchase both items together.
4. Faster market penetration: Since Tostitos was already a well-known brand, it was likely that retailers and distributors were more willing to stock the new salsa product line, allowing for a quicker entry into the market.
5. Consistent brand image: By adding the salsa product line under the Tostitos brand, Frito-Lay maintained a consistent brand image focused on Mexican-inspired snack foods, which could reinforce the brand's identity among consumers.
By choosing this strategy, Frito-Lay was able to capitalize on the existing Tostitos brand equity and streamline the introduction of the new salsa product line.
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placement goals should be: group of answer choices designed to measure progress toward equal employment opportunity. treated as a floor for employing certain groups. rigid and inflexible quotas which must be met. treated as a ceiling for employing certain groups.
Placement goals should be A. designed to measure progress toward equal employment opportunity.
These goals are an essential part of ensuring a diverse and inclusive work environment. By setting specific objectives related to equal employment opportunities, organizations can track their progress in addressing any disparities in their workforce composition. This, in turn, allows them to take appropriate measures to promote diversity and inclusivity.
It is important to note that placement goals should not be treated as B. a floor or D. a ceiling for employing certain groups, as this would not foster genuine equality or fair opportunities for all applicants. By merely adhering to minimum or maximum quotas, companies could overlook qualified candidates from underrepresented groups and maintain existing imbalances.
Furthermore, placement goals should not be considered as C. rigid and inflexible quotas that must be met. Strict quotas could lead to hiring decisions based on a candidate's demographics rather than their qualifications and skills. Instead, organizations should focus on fostering equal opportunities and removing barriers to employment for individuals from diverse backgrounds.
In summary, placement goals should be designed to measure progress toward equal employment opportunity. This approach enables organizations to effectively promote diversity and inclusivity while ensuring that all applicants are evaluated based on their merits and qualifications, rather than quotas or predetermined limits. Therefore, the correct option is A.
The question was incomplete, Find the full content below:
placement goals should be: group of answer choices
A. designed to measure progress toward equal employment opportunity.
B. treated as a floor for employing certain groups.
C. rigid and inflexible quotas which must be met.
D. treated as a ceiling for employing certain groups.
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The liquidity of secondary markets is NOT demonstrated by:
the daily turnover
the sale of securities by issuers at an acceptable price
the size of the bid-ask spread
the degree of price resilience.
An
The liquidity of secondary markets is NOT demonstrated by the sale of securities by issuers at an acceptable price. The correct option is the sale of securities by issuers at an acceptable price.
Secondary markets provide a platform for trading securities that have already been issued, facilitating liquidity by allowing investors to buy and sell securities easily.
The daily turnover, which refers to the number of securities traded within a day, demonstrates liquidity because it indicates the ease with which investors can buy or sell assets.
The size of the bid-ask spread also reflects liquidity, as a narrower spread means that buyers and sellers are in closer agreement on the value of the security, which often leads to a higher trading volume.
Lastly, the degree of price resilience refers to the ability of the market to quickly return to its original price level after a significant trade. This is also an indicator of liquidity, as it implies that there is sufficient trading activity to absorb large orders without causing a significant disruption in prices.
In summary, the sale of securities by issuers at an acceptable price does not demonstrate the liquidity of secondary markets, as it relates to the primary market, where securities are initially issued. The other factors mentioned, such as daily turnover, bid-ask spread, and price resilience, are better indicators of liquidity in secondary markets.
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What is the price of a Zero coupon bond that will pay $1,000 on
maturity if the current interest rate is 5.4% and maturity is in 11
years?
The price of the Zero-coupon bond is $528.16. To calculate the price of a Zero-coupon bond, we need to use the present value formula, which is:
PV = FV / (1 + r)^n
Where PV is the present value, FV is the future value, r is the interest rate, and n is the number of years.
In this case, the future value is $1,000, the interest rate is 5.4%, and the number of years is 11. So we can plug these values into the formula:
PV = $1,000 / (1 + 0.054)^11
PV = $1,000 / 1.893
This means that if you were to purchase this bond today for $528.16, you would receive $1,000 at maturity in 11 years. The lower price of the bond reflects the fact that you are not receiving any interest payments along the way, unlike other types of bonds that pay regular interest.
Instead, all of the return on this bond comes from the difference between the purchase price and the face value at maturity.
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The sale or transfer of accounts receivable to raise funds is called a. discounting. b. collateralizing. c. pledging. d. factoring
The sale or transfer of accounts receivable to raise funds is called factoring
Option D is correct.
Factoring is the sale or transfer of accounts receivable to a third party (the factor) at a discount, in order to raise funds for the business. The factor then assumes responsibility for collecting the payments from the customers who owe the receivables.
Factoring allows a business to access cash quickly, without having to wait for customers to pay their invoices. It can also help to manage credit risk, as the factor assumes the risk of non-payment by the customers.
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The correct answer is d. factoring. Factoring is the process of selling or transferring accounts receivable to a third party, known as a factor, in exchange for immediate funds.
The factor then collects payment from the debtor on behalf of the original creditor. This is often done to improve cash flow or to raise funds for business operations.The sale or transfer of accounts receivable to raise funds is called d. factoring. In factoring, a business sells its accounts receivable to a third party, known as a factor, who provides immediate cash to the business. This helps the business improve its cash flow without waiting for the customers to pay their outstanding invoices.The correct answer is d. factoring.
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You have been managing a $5 million portfolio that has a beta of 0.95 and a required rate of return of 9.175%. The current risk-free rate is 3%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 0.75, what will be the required return on your $5.5 million portfolio? Do not round intermediate calculations. Round your answer to two decimal places.
The required return on the $5.5 million portfolio will be 9.18%.
To calculate the required return on the $5.5 million portfolio, we need to first calculate the new portfolio beta. The current portfolio beta can be calculated as follows:
Beta_portfolio = 0.95
The beta of the new stock is given as 0.75. To calculate the new portfolio beta, we can use the following formula:
Beta new portfolio =
[tex]\frac{ ( \text{Current\_portfolio\_value} \times \text{Current\_portfolio\_beta} ) + ( \text{New\_investment} \times \text{New\_investment\_beta} ) }{ \text{New\_total\_portfolio\_value} }[/tex]
Substituting the values, we get:
= [tex]\frac{(5{,}000{,}000 \times 0.95) + (500{,}000 \times 0.75)}{5{,}500{,}000}[/tex]
= 0.9295
Next, we can calculate the required return on the new portfolio using the CAPM formula:
Required return = [tex]$R_f + \beta_{\text{new portfolio}} \times MRP$[/tex]
= 3% + 0.9295 * 6.175%
= 9.18%
Therefore, the required return on the $5.5 million portfolio will be 9.18%.
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