1.Matt Maloney and Mike Evans took risks by starting Grubhub, including the uncertainty of the market, competition from established players, financial risks, and the challenge of building a reliable delivery network.
2.GrubHub can continue growing by expanding into new markets, diversifying their service offerings, investing in technology for efficient operations, improving customer experience, and forming strategic partnerships.
3.The risks of becoming an entrepreneur include financial insecurity, uncertainty, and the responsibility of managing all aspects of the business. The benefits include autonomy, potential for higher financial rewards, personal fulfillment, and the ability to shape one's own destiny.
4.The major challenge presented by Amazon and Uber to Grubhub's business is increased competition in the food delivery space, as both companies have significant resources, established brand recognition, and expansive logistics capabilities that can potentially impact Grubhub's market share.
1. Discuss the risks that Matt Maloney and Mike Evans took when they joined forces to start Grubhub
When Matt Maloney and Mike Evans teamed up to launch Grubhub, they took some risks.
Some of the risks include:Starting a company from scratch was a risky venture. They had no assurance that it would succeed.
Entrepreneurial finance is one of the biggest hazards. It's tough to raise enough money to keep the business going.Obtaining market share in the food industry was a risky proposition. Competitors were already established.The business model is one of the biggest risks.
Grubhub has to connect several restaurants with food delivery drivers to deliver to customers. If the system fails, there would be a significant impact on the business
2. Discuss what GrubHub can do to keep growing their business.Grhub has been working on various initiatives to expand their business.
Some of the measures that they can take to keep their business growing are:Offering a broader menu from different kinds of restaurants to their customers as it will attract more clients to their platform. Entering new markets as they are doing to the suburban areas and other states will help them expand their reach.
Improving their delivery system by offering quicker delivery times and more accurate delivery estimates.Improving customer experience and satisfaction by making the website and app easy to use and user-friendly.
3. What are the risks and benefits of becoming an entrepreneur as opposed to working for others?
Benefits of becoming an entrepreneur:Entrepreneurship provides the possibility of making a substantial income and wealth.Working for oneself allows the flexibility to set one's hours and schedule to balance personal and work responsibilities.
The ability to select one's team and the work environment and culture is a crucial benefit.Risks of becoming an entrepreneur: The entrepreneur bears the financial risk of the company. Entrepreneurship can be stressful, and the entrepreneur bears a significant responsibility.
The entrepreneur must handle the business' daily administration while developing and growing the company.
4. What is the major challenge presented by Amazon and Uber to Grubhub’s business? The significant challenge presented by UberEats and Amazon is the expansion into new markets and acquisitions.
They offer a wide range of services that can be packaged and sold to customers more cheaply than Grubhub. Amazon is a powerhouse with many services.
Furthermore, the more they grow, the more capable they become of undercutting Grubhub's costs. As a result, Grubhub must keep up with this trend.
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Explicate the reasons a) a currency depreciation decreases the profitability of a foreign investment (NPV), if the only action that occurs is the depreciation of the currency (rupiah.) This is exemplified by the case of the Semen investment in Indonesia.
You should also discuss b) a currency appreciation improving the NPV of the investment, which is the opposite of a. Your explication should at least refer to the conversion of debt payments (principal and interest) and dividends from the foreign currency, let us say, rupee to dollars (euros.). Everything else presuppose remains constant (ceteris paribus.)
Please Answer in 500 words.
Currency depreciation decreases the profitability of a foreign investment (NPV) due to the reduction in the value of future cash flows when converted into the investor's home currency, increased costs of servicing debt payments, and higher risks associated with economic instability. On the other hand, currency appreciation improves the NPV of the investment by increasing the value of future cash flows when converted into the investor's home currency, reducing the cost of servicing debt payments, and potentially signaling a more favorable investment environment.
a) When a currency depreciates, it decreases the profitability of a foreign investment (Net Present Value - NPV) for several reasons. Firstly, a depreciation of the currency reduces the value of the investment's future cash flows when converted back into the investor's home currency. This means that the returns generated from the investment, such as dividends or income from the investment, will be worth less in the investor's home currency, impacting the NPV negatively. Secondly, if the investment involves debt payments in the foreign currency, such as principal and interest payments, a currency depreciation increases the cost of servicing the debt in the investor's home currency, further reducing the NPV. Lastly, a depreciation may signal economic instability or uncertainty in the foreign country, which can lead to higher risks and potential losses for the investor.
b) Conversely, a currency appreciation can improve the NPV of the investment. When the foreign currency appreciates, the value of future cash flows generated by the investment increases when converted back into the investor's home currency. This means that the returns from the investment will be worth more in the investor's home currency, positively impacting the NPV. Additionally, if there are debt payments or dividends to be received in the foreign currency, a currency appreciation reduces the cost of servicing the debt or increases the value of the dividends when converted into the investor's home currency. Overall, a currency appreciation enhances the profitability of the foreign investment and can provide higher returns to the investor.
In both cases, it's important to consider the effects of currency fluctuations on the NPV of a foreign investment, as they can significantly impact the investor's returns and financial performance.
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Suppose an economy's output production function Y=ZF(K, N) is Cobb-Douglas and has constant returns to scale in K and N, where Z>0 is the total factor productivity parameter, K is the capital stock and N is the labor input. The output elasticity of capital is given by a>0. Then, output per labor is lower
Select one:
a.
when capital per labor (K/N) is lower, holding other things constant.
b.
when K is higher, holding other things constant.
c.
when N is lower, holding other things constant.
d.
when Z is higher, holding other things constant.
Suppose an economy's output production function Y=ZKaNb, where a>0 and b>0 are parameters, Z>0 is the total factor productivity, K is the capital stock and N is the labor input. Then, which of the following equations represents the labor demand function? Note: w is the real wage rate.
Select one:
a.
w=ZKaNb-1.
b.
w=ZKa-1Nb.
c.
w=ZbKaNb-1.
d.
w=ZaKa-1Nb.
a. When capital per labor (K/N) is lower, holding other things constant, output per labor is lower in a Cobb-Douglas production function with constant returns to scale.
b. The labor demand function for the production function Y=ZKaNb is represented by: w=ZaKa-1Nb.
Production refers to the process of creating goods or providing services. It involves converting inputs, such as raw materials, labor, and capital, into finished products or deliverable services. The production process typically includes various stages, such as planning, sourcing materials, manufacturing, assembly, quality control, and distribution. Efficient production involves optimizing resources, minimizing waste, and maximizing output. Factors such as production techniques, technology, workforce skills, and supply chain management play a vital role in determining the productivity and effectiveness of the production process in meeting customer demand and achieving business goals.
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An analysis that explains the difference between the balance of a chequing account shown in the depositor's records and the balance shown on the bank statement is a(n)
a Internal audit
b Bank reconcilation
c Back audit
d Trial reconcilution
e Analysis of debts and credits
The correct answer is b) Bank reconciliation.
A bank reconciliation is an analysis that explains the difference between the balance of a checking account shown in the depositor's records and the balance shown on the bank statement. The first paragraph will provide a summary of the answer, while the second paragraph will explain it in more detail.
Bank reconciliation is a process used to compare and adjust the depositor's records with the bank statement. It helps identify any discrepancies, errors, or missing transactions between the two balances. The bank statement reflects the transactions processed by the bank, including deposits, withdrawals, fees, and other adjustments, while the depositor's records include all the transactions initiated by the account holder. Discrepancies can occur due to timing differences, errors in recording transactions, bank fees, outstanding checks, or deposits in transit.
During the bank reconciliation process, the depositor will carefully compare each transaction on their records with the transactions listed on the bank statement. Any discrepancies are noted, and adjustments are made accordingly. For example, if a check issued by the account holder has not yet cleared the bank, it will be recorded as an outstanding check. Similarly, if a deposit made by the account holder has not yet been processed by the bank, it will be recorded as a deposit in transit.
The purpose of bank reconciliation is to ensure the accuracy and reliability of the depositor's records by reconciling them with the bank statement. It helps identify any errors, fraudulent activities, or unauthorized transactions. Additionally, bank reconciliation provides an opportunity to update the depositor's records, adjust the account balance, and maintain an accurate financial position.
In summary, a bank reconciliation is an analysis that explains the difference between the balance of a checking account shown in the depositor's records and the balance shown on the bank statement. It is a crucial process to identify and rectify any discrepancies, ensuring the accuracy of financial records and maintaining the integrity of the account.
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If you are the Chief Finance Officer (CFO) of the company, how
you maximise your
shareholder wealth?
As the CFO of a company, maximizing shareholder wealth involves implementing strategies that increase the value of the company's shares. This can be achieved through various means such as optimizing financial performance, and ensuring efficient capital allocation.
Maximizing shareholder wealth is a core objective for CFOs. They play a crucial role in achieving this goal by implementing strategies that enhance the overall value of the company's shares. One way to achieve this is by optimizing the financial performance of the company.
This involves improving revenue generation, controlling costs, and increasing profitability. By enhancing financial performance, the company becomes more attractive to investors, potentially leading to an increase in shareholder wealth.
Another crucial aspect is making sound investment decisions. CFOs need to evaluate investment opportunities and allocate resources to projects that have the potential for high returns and align with the company's strategic objectives.
Effective risk management is also essential to safeguard shareholder wealth. CFOs must identify and assess risks associated with the company's operations and implement measures to mitigate those risks.
Furthermore, efficient capital allocation is critical. CFOs need to evaluate different financing options, such as debt or equity, and determine the optimal capital structure for the company. By striking the right balance between debt and equity, CFOs can minimize the cost of capital and maximize shareholder returns.
In summary, as a CFO, maximizing shareholder wealth involves optimizing financial performance, making sound investment decisions, managing risks effectively, and ensuring efficient capital allocation. By focusing on these areas, CFOs can contribute to the long-term growth and prosperity of the company, ultimately benefiting the shareholders.
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The cooking oil has a demand function of Q = 865 - 4.6P and supply function of Q = 2P - 120. Due to world CPO (crude palm oil) prices increasing, the price of cooking oil keeps increasing.
To protect consumers, the government sets a price ceiling at P = $ 89/unit.
A. Calculate the quantity supplied when P = price ceilings!
B. If blackmarkets exists, calculate the maximum profit of black marketers!
(Notes: use 3 digits after decimal point)
The maximum profit of black marketers is $ 5,969.77.
A. The price ceiling is P = $ 89/unit. For supply function Q = 2P - 12
0When P = 89, Q = 2 (89) - 120 = 58 units
Therefore, the quantity supplied when P = price ceiling is 58 units.
B. Black market operates above the price ceiling, where P > $ 89.
The equilibrium price and quantity are calculated as:
Qd = Qs, therefore
865 - 4.6P = 2P - 120P
= $ 155.22Q
= 865 - 4.6(155.22)
= 95.07 units
Since the price ceiling is below the equilibrium price, there will be a shortage of cooking oil. Black marketers are able to take advantage of the shortage and increase the price of cooking oil.
The maximum profit of black marketers is the difference between the equilibrium price and the price ceiling multiplied by the quantity demanded at the equilibrium price.
Substitute the values in the above formula to get:
Maximum profit of black marketers = (155.22 - 89) × 95.07
= 5969.77
The maximum profit of black marketers is $ 5,969.77.
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Assume that the stream of benefits of a depletable resource is characterized by linear demand curves: p1 = 70 − 2 q1, p2 = 90 − 2 q2.
where q1,q2 denote the amounts of extraction and p1,p2 is the market (gross) prices. Suppose that the marginal extraction cost is given as c1 = c2 = 10, while the discount rate is set at 5%. Assume that there are only 50 units available for extraction.
(a) Calculate the efficient allocations and prices for the two periods in this setup. What is the shadow price of the resource? Explain your findings. (Please calculate the shadow price as well)
(b) Suppose that the more we extract in the first period, the higher the extraction cost in the second period. We can illustrate this as follows: c1 = 10 c2 =10+q1/3 Calculate the efficient allocations and prices for the two periods in this setup. What is the shadow price of the resource? Explain the intuition behind your findings.
(c) Suppose that the discount rate is indeed higher than 5% we assumed above. How would our results change in accordance with a higher discount rate? Explain the intuition behind your findings.
The efficient allocations and prices are Period 1: q1 = 20, p1 = 30; Period 2: q2 = 30, p2 = 30. The shadow price remains $30. The shadow price remains $30 due to the unaffected optimal extraction path.
(a) In the given setup, the optimal extraction quantities and prices are determined by maximizing the sum of discounted benefits while respecting the extraction constraint. The results show that in the first period, 20 units are extracted at a price of $30. In the second period, 30 units are extracted at the same price. The shadow price, representing the marginal social benefit, remains $30 as it is equivalent to the price in the first period.
(b) When the extraction cost in the second-period increases based on the first period's extraction, the efficient allocations and prices remain unchanged from (a). Despite the cost increase, the optimal extraction path is not affected, resulting in the same extraction quantities and prices. Consequently, the shadow price remains $30, indicating that the marginal social benefit of extracting an additional unit is still equal to the first period's price.
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Which of the following characteristic lead to a downward-sloping demand curve?
a) Increasing opportunity costs.
b) Increasing marginal benefit.
c) Diminishing preferences for a particular good.
d) A decline in the price of a related good.
e) Diminishing marginal utility.
The characteristic that leads to a downward-sloping demand curve is option e) Diminishing marginal utility. This relationship between price and quantity demanded is illustrated by a downward-sloping demand curve.
The law of diminishing marginal utility states that as an individual consumes more units of a particular good, the additional satisfaction or utility derived from each additional unit diminishes. This means that as more units of a good are consumed, the consumer's willingness to pay for each additional unit decreases.
When the marginal utility of a good diminishes, consumers become less willing to pay higher prices for additional units of the good. As a result, the quantity demanded decreases as the price increases. This inverse relationship between price and quantity demanded is represented by a downward-sloping demand curve.
Options a), b), c), and d) do not lead to a downward-sloping demand curve:
a) Increasing opportunity costs: This refers to the increasing cost of producing a good, not the consumer's willingness to pay. It does not directly impact the demand curve.
b) Increasing marginal benefit: This suggests that the additional benefit derived from consuming each additional unit of a good is increasing. While it may increase individual demand, it does not necessarily result in a downward-sloping demand curve.
c) Diminishing preferences for a particular good: This is similar to diminishing marginal utility, but it refers to changes in consumer preferences rather than the satisfaction derived from consumption. It does not directly relate to the shape of the demand curve.
d) A decline in the price of a related good: This refers to the concept of substitutes or complements, which affects the demand for a particular good relative to another good. It does not directly determine the slope of the demand curve.
The characteristic that leads to a downward-sloping demand curve is diminishing marginal utility. As consumers derive less additional satisfaction from each additional unit of a good consumed, their willingness to pay decreases, resulting in a lower quantity demanded at higher prices. This relationship between price and quantity demanded is illustrated by a downward-sloping demand curve.
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When different projects put different demands on a limited resource, then payback period is always the most appropriate tool to use for choosing a project.
True
False
False. The statement that the is always the most appropriate tool for choosing a project when different projects put different demands on a limited resource is incorrect.
The payback period is a simple financial metric that measures the time it takes to recover the initial investment, but it does not consider the time value of money or the overall profitability of a project. Other financial evaluation methods like the net present value (NPV) or internal rate of return (IRR) are often more appropriate for making project selection decisions.
The payback period is a basic financial metric that calculates the time required to recoup the initial investment in a project based on cash flows. It is useful for assessing the liquidity and risk associated with an investment. However, it has limitations when it comes to comparing projects that have different cash flows and timeframes.When different projects put different demands on a limited resource, it is important to consider factors beyond the payback period. The payback period does not account for the time value of money, meaning it does not consider the impact of discounting future cash flows. Projects with longer payback periods may fail to capture the true profitability of investments with higher returns in the long run.Instead, financial evaluation methods like net present value (NPV) or internal rate of return (IRR) are often preferred for project selection decisions. NPV considers the time value of money by discounting cash flows, while IRR measures the rate of return a project generates. These methods provide a more comprehensive analysis of the profitability and value of different projects, especially when faced with limited resource allocation decisions.Learn more about Payback period:
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Firm C has outstanding bond with 15 years to maturity. Assume the required rate of return on the bond is 9.89%. The current price is $944.17. What is the annual coupon rate on the bond? (Assume semi-annual coupon payment)
The bond has 15 years to maturity, a required rate of return of 9.89%, and a current price of $944.17. The annual coupon rate on the bond is 9.90%.
To calculate the annual coupon rate, we can use the formula:
Annual Coupon Rate = (Coupon Payment / Face Value) * 2
where the coupon payment is the amount received semi-annually and the face value is the amount repaid at maturity.
Using the given information, we can calculate the annual coupon rate as follows:
Coupon Payment = Required Rate of Return * Face Value / 2
Face Value = Current Price
Substituting the values into the formula, we can find the annual coupon rate.
To calculate the annual coupon rate, we first need to find the semi-annual coupon payment. Using the formula for the coupon payment, we have:
Coupon Payment = 9.89% * $944.17 / 2 = $46.80
Since the coupon payment is received semi-annually, the annual coupon payment is twice that amount:
Annual Coupon Payment = 2 * $46.80 = $93.60
The face value of the bond is equal to its current price, $944.17. Therefore, the annual coupon rate can be calculated as:
Annual Coupon Rate = ($93.60 / $944.17) * 100% = 9.90%
Hence, the annual coupon rate on the bond is 9.90%.
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A company was planning to bid for a mobile phone spectrum for sale through an auction and approached you for advice. Please explain the following issues to the manager of the company:
What kind of information structure (independent private values, affiliated values, or common values) is for this contract?
The information structure for the mobile phone spectrum auction contract can be categorized as "independent private values."
In an independent private values information structure, each bidder in the auction has their own private valuation for the item being auctioned, which in this case is the mobile phone spectrum. The valuations are based on each bidder's individual assessment of the spectrum's worth and are not influenced by the valuations or information of other bidders.
In this scenario, the company and other bidders participating in the auction have their own unique assessments of the value of the mobile phone spectrum. They may consider factors such as potential profits, market demand, and future growth prospects when determining their valuation.
The independent private values information structure implies that bidders in the auction will bid according to their private valuations. Each bidder aims to maximize their own utility by submitting a bid that reflects their assessment of the spectrum's worth, without considering the valuations or information of other bidders.
Understanding the information structure is crucial for the company's bidding strategy. In an independent private values setting, the company's bid should be based on its own assessment of the spectrum's value, taking into account its business objectives and financial constraints, rather than trying to anticipate the valuations of other bidders.
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Barry wants to purchase stocks with the money he received from
his tax return. Who would he contact to make the transaction?
Group of answer choices
A brokerage firm
A real estate agent
Barry can comp
Barry wants to purchase stocks with the money he received from his tax return, he would contact a brokerage firm to make the transaction. Here option A is the correct answer.
A brokerage firm is a financial institution that provides a platform for traders and investors to purchase and sell financial securities, such as stocks, bonds, options, and mutual funds. It serves as a middleman between buyers and sellers, charging a commission on each transaction.
Barry can go to a brokerage firm, choose the stock he wants to buy, place the order, and pay the price set by the seller. The brokerage firm will then execute the transaction, sending the payment to the seller and transferring the ownership of the stocks to Barry.
Brokerage firms also offer additional services such as investment advice, research, and financial planning. They are regulated by financial authorities to ensure they comply with the law and operate fairly. Therefore option A is the correct answer.
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Complete question:
Barry wants to purchase stocks with the money he received from his tax return. Who would he contact to make the transaction? Group of answer choices
A - A brokerage firm
B - A real estate agent
C - Barry can comp
when implementing cost centers for production and support departments, costs are considered to be mostly uncontrollable under the ______
When implementing cost centers for production and support departments, costs are considered to be mostly uncontrollable under the direct control of the departments.
In implementing cost centers for production and support departments, costs are deemed to be mostly uncontrollable under the direct control of the departments, making it impossible for the department or the company to directly reduce them. Thus, rather than focusing on controlling costs, the focus is on keeping them low by enhancing efficiency and productivity.
A cost center is a location, function, or department within a company where expenditures may be assigned and tracked. The purpose of the cost center is to determine how much each department is spending, so that the company may control expenses. Production and support departments are examples of cost centers.
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1. Mehra and Prescott (1985) coined the term "equity premium puzzle" based on their inability to explain excess returns of stocks over the risk-free rate using which of the following approaches? Select all that apply.
A. Loss Aversion
B. Risk Aversion
C. Survivor Bias
D. Status Quo Bias
2.Which factors did Fama and French (1992)* find to be correlated with average monthly stock returns? Select all that apply.
* Fama, Eugene and Kenneth French (1992). "The Cross-Section of Expected Stock Returns." Journal of Finance. 47, No. 2, 427-465.
A. Book-to-market ratio
B. Liquidity
C. Beta (β)
D. Market cap
Market capitalization refers to the total value of all of a firm's outstanding shares. Small-cap stocks (those with smaller market capitalization) have higher average returns than large-cap stocks (those with larger market capitalization). The correct options are A, B, C, and D.
1. The equity premium puzzle is used to describe the inability of standard economic models to explain the average return premium of the stock market over risk-free investments.
The approaches used to explain the equity premium puzzle are risk aversion and loss aversion. A and B are the two approaches used to explain the equity premium puzzle.
Loss aversion refers to the tendency of investors to have a stronger preference for avoiding losses over acquiring gains. The fear of loss, in many instances, prompts individuals to engage in irrational financial behavior, such as holding onto failing stocks for too long, selling too early, or shying away from high-risk investments.
Risk aversion, on the other hand, is the tendency of investors to opt for more certain outcomes over riskier ones. Individuals with a higher degree of risk aversion are more likely to pick bonds over equities and avoid taking risks with their money.
2. Fama and French (1992) researched the cross-sectional variation in the expected return of stocks. They discovered that the average monthly stock returns were linked to the following factors:
Book-to-market ratio (B/M) was the first factor they discovered, and it is the most significant driver of average stock returns. High book-to-market stocks have a higher average return than low book-to-market stocks.
Liquidity refers to the ease with which a security can be purchased or sold on the market. High-liquidity stocks have lower average returns than low-liquidity stocks. Beta is a measure of a stock's sensitivity to market movements, and it is determined by the correlation between a stock's returns and market returns.
High-beta stocks, or stocks that are particularly susceptible to market fluctuations, tend to have higher average returns.
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Carolyn is considering purchasing a small internet franchise business and plans to sell it before she begins grad school in 2025. She expects to make
$40,000 in 2023
$40,000 in 2024
and sell it in 2024
She can borrow the money to pay for the franchise at 8% interest.
What is the most she should be willing to pay for this license? (You may assume the business generates an income stream of $40,000 each year beyond the time she owns it. You may also assume the interest rate remains constant at 8%).
Hint: Let P be the amount she expects to sell it in 2024. Remember, this is in terms of 2024 dollars, so you must put it in present value (2022) dollar terms).
Carolyn should be willing to pay a maximum of $91,052.49 for the internet franchise license.
The most Carolyn should be willing to pay for the franchise license, we need to determine the present value of the future cash flows she expects to receive. Since Carolyn plans to sell the business in 2024, we need to convert all future cash flows to their present value in 2022 dollars.
Let's break down the cash flows:
In 2023, Carolyn expects to make $40,000. This amount is already in 2022 dollars, so we don't need to adjust it.
In 2024, Carolyn expects to make another $40,000, but she will also sell the business. Let P be the amount she expects to sell it for in 2024. We need to calculate the present value of both the income and the sale amount.
The present value of $40,000 received in 2024 can be calculated as follows:
PV = $40,000 / (1 + 0.08)^(2024 - 2022) = $40,000 / (1.08²) = $34,722.22
The present value of the sale amount, P, received in 2024 can be calculated as:
PV = P / (1 + 0.08)^(2024 - 2022) = P / (1.08²) = P / 1.1664
Since Carolyn expects to receive a total of $40,000 in income and the sale amount, we can express it as an equation:
$34,722.22 + P / 1.1664 = $40,000
Solving for P, we get:
P / 1.1664 = $40,000 - $34,722.22
P = ($40,000 - $34,722.22) * 1.1664
P = $5,277.78 * 1.1664
P ≈ $6,152.49
Therefore, Carolyn should be willing to pay a maximum of $6,152.49 for the internet franchise license. However, we need to convert this amount to its present value in 2022 dollars by discounting it back two years:
PV = $6,152.49 / (1 + 0.08)²
PV = $6,152.49 / 1.1664
PV ≈ $5,299.27
So, Carolyn should be willing to pay a maximum of $5,299.27, which is approximately $91,052.49 in 2024 dollars, for the internet franchise license.
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The bank statement for JubileeCake Ltd showed a balance of £22,200 on 31 May 2022. However, the cash book shows a balance on the bank account of £31,250 at the same date. By comparing the cash book and the bank statement, you find the following information:
1. The cash book receipts side has been undercast by £1,100.
2. Dividends received of £2,100 have been paid directly into the bank account and bank charges of £410 are shown in the bank account but have not been recorded in the cash book.
3. A cheque received for £780 has been recorded in the cash book as £870. The correct amount is recorded in the bank statement.
4. Cheques paid to suppliers of £2,500 and receipts of £9,650 have been recorded in the cash book but have not yet been shown in the bank statement.
5. A cheque receipt for £3,450 banked on 20 May was returned unpaid on 31st May and has been shown as a debit on the bank statement. No entry has been made in the cash book to reflect the return of this cheque.
6. The bank paid a cheque received by JubileeCake Ltd for £1,150 into the account of JubileeParty Ltd by mistake. The mistake has not yet been corrected by the bank at 31 May 2022.
REQUIRED:
(i) Calculate the adjusted cash book balance. 4 marks
(ii) Prepare the bank reconciliation at 31 May 2022. 5 marks
(iii) Bank reconciliations are one type of internal control. Identify another type of internal control and briefly explain why companies need internal controls.
(i) To calculate the adjusted cash book balance, we need to consider the adjustments mentioned in the given information. Let's go through each adjustment step by step:
1.The cash book receipts side has been undercast by £1,100:Adjust the cash book balance by adding the undercast amount:
Cash book balance + Undercast = £31,250 + £1,100 = £32,350
2. Dividends received of £2,100 have been paid directly into the bank account and bank charges of £410 are shown in the bank account but have not been recorded in the cash book:
Adjust the cash book balance by adding the dividends received and deducting the bank charges:
Cash book balance + Dividends received - Bank charges = £32,350 + £2,100 - £410 = £34,040
3. A cheque received for £780 has been recorded in the cash book as £870. The correct amount is recorded in the bank statement:
Adjust the cash book balance by deducting the difference between the recorded amount and the correct amount:
Cash book balance - (Recorded amount - Correct amount) = £34,040 - (£870 - £780) = £33,950
4. Cheques paid to suppliers of £2,500 and receipts of £9,650 have been recorded in the cash book but have not yet been shown in the bank statement:
Adjust the cash book balance by deducting the total amount of these transactions:
Cash book balance - (Cheques paid to suppliers + Receipts) = £33,950 - (£2,500 + £9,650) = £21,800
5. A cheque receipt for £3,450 banked on 20 May was returned unpaid on 31st May and has been shown as a debit on the bank statement. No entry has been made in the cash book to reflect the return of this cheque:
Adjust the cash book balance by deducting the returned cheque amount:
Cash book balance - Returned cheque = £21,800 - £3,450 = £18,350
The bank paid a cheque received by JubileeCake Ltd for £1,150 into the account of JubileeParty Ltd by mistake. The mistake has not yet been corrected by the bank at 31 May 2022:
This adjustment doesn't affect the cash book balance since it was an error made by the bank.
The adjusted cash book balance is £18,350.
(ii) Bank Reconciliation at 31 May 2022:
Starting balance per bank statement (31 May 2022): £22,200
Add: Cheques paid but not yet shown in the bank statement: £2,500
Add: Receipts not yet shown in the bank statement: £9,650
Deduct: Cheque receipt returned unpaid: £3,450
Adjusted balance per bank statement: £22,200 + £2,500 + £9,650 - £3,450 = £31,900
Adjusted cash book balance (as calculated in part (i)): £18,350
Bank Reconciliation:
Adjusted balance per bank statement: £31,900
Adjusted cash book balance: £18,350
(iii) Another type of internal control is segregation of duties. Companies need internal controls to safeguard their assets, ensure the accuracy of financial records, and prevent fraud. Segregation of duties involves dividing responsibilities among different individuals to reduce the risk of errors or fraud. For example, separating the tasks of cash handling, record keeping, and authorization can help prevent one person from having complete control over a financial transaction from start to finish. By implementing segregation of duties, a company can establish checks and balances, increase accountability, and reduce the likelihood of fraudulent activities going undetected.
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Direction: Read the question carefully and solve it in your answer booklet by showing all the required steps. 1. A furniture company makes TABLE and CHAIR. The company has a maximum of 110 hours of labor and 300 board feet (bf) of wood. They make a profit of $6 per TABLE and $8 per CHAIR. Each TABLE requires 30bf of wood and 5 hour for labor. Each CHAIR requires 20 bf of wood and 10 hours of labor. Read the above scenario and answer the following questions. (13 marks) A. Formulate an appropriate LPP for the above scenario to find the maximum profit. (5 marks) (Marking Scheme: 2 marks for objective function, 2 marks for the constraints and 1 marks for the non-negativity constraints) B. Solve the LPP using graphical method to find the optimal solution.(8 marks) (Marking Scheme: 2 marks for finding the points for drawing lines; 2 marks for drawing graph; 1 mark for feasible region; 1 mark for finding optimal values, 1 mark for finding the unknown point using elimination method and 1 marks final solution)
The company should make 20/3 TABLES and 5 CHAIRS to maximize the profit. A furniture company makes TABLE and CHAIR. The company has a maximum of 110 hours of labor and 300 board feet (bf) of wood.
They make a profit of $6 per TABLE and $8 per CHAIR. Each TABLE requires 30bf of wood and 5 hour for labor. Each CHAIR requires 20 bf of wood and 10 hours of labor.
A. Formulate an appropriate LPP for the above scenario to find the maximum profit.
Objective function: Z = 6x + 8y where
x = number of TABLE and
y = number of CHAIR.
The company has a maximum of 110 hours of labor and 300 board feet (bf) of wood.
Each TABLE requires 5 hours of labor and each CHAIR requires 10 hours of labor. Therefore, the labor constraint equation will be
5x + 10y ≤ 110
Each TABLE requires 30bf of wood and each CHAIR requires 20 bf of wood. Therefore, the material constraint equation will be
30x + 20y ≤ 300
Non-negativity constraint: x ≥ 0, y ≥ 0
Therefore, the linear programming problem is Maximize Z = 6x + 8y
Subject to constraints:
5x + 10y ≤ 11030x + 20y ≤ 300x ≥ 0, y ≥ 0B.
Solve the LPP using graphical method to find the optimal solution.
Given the objective function Maximize Z = 6x + 8y and the constraints:
5x + 10y ≤ 11030x + 20y ≤ 300x ≥ 0, y ≥ 0
Let's plot the equation of the constraints on the graph.
The coordinates of the vertices of the feasible region are: (0, 0), (0, 15), (5, 10), and (20/3, 5).
Substitute the values of x and y from each vertex into the objective function. The vertex with the highest value of Z is the optimal solution.
Vertex 1 (0, 0) Z = 6(0) + 8(0) = 0
Vertex 2 (0, 15) Z = 6(0) + 8(15) = 120
Vertex 3 (5, 10) Z = 6(5) + 8(10) = 100
Vertex 4 (20/3, 5) Z = 6(20/3) + 8(5) = 140
The optimal solution is (20/3, 5) with the maximum profit of $140.
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At Welding and Bending the Equity amounts to £1 200 000 and Debt is £2 800 000. The shareholders require a return of 12% and the cost to serve the debt is 3%. During 2019 Welding and Bending posted a profit after tax but before interest of £210 000. Calculate annual Economic Profit.
Annual economic profit is calculated by subtracting the total cost of capital from net income before interest. Economic profit is positive if the return on invested capital is greater than the cost of capital.
In order to calculate annual economic profit, we first need to determine the cost of capital. The cost of capital is the weighted average of the return required by the firm's investors on their investment in the firm's equity and debt capital. Calculation of cost of capital:
Weighted average cost of capital (WACC) = E/V x Re + D/V x Rd x (1 - T)
Where E = market value of equity, V = total value of equity and debt, Re = cost of equity, D = market value of debt, Rd = cost of debt, and T = corporate tax rate.
Since we are given the market values of equity and debt, we can calculate V = E + D. Let's assume the corporate tax rate is 30%.
E = £1,200,000D = £2,800,000
V = £4,000,000
Re = 12%
Rd = 3%(1 - T) = (1 - 0.3) = 0.7
WACC = (1,200,000/4,000,000) x 0.12 + (2,800,000/4,000,000) x 0.03 x 0.7= 0.045 + 0.01575= 0.06075 or 6.075%
Calculation of annual economic profit:
Net income before interest (EBIT) = £210,000
Annual interest expense = 2,800,000 x 0.03 = £84,000
Annual economic profit = £210,000 - (4,000,000 x 0.06075) = £-57,300
Annual economic profit is calculated by subtracting the total cost of capital from net income before interest. Economic profit is positive if the return on invested capital is greater than the cost of capital.
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ChemLee Manufacturing is a chemical manufacturing firm that produces and supplies various chemical substances. ChemLee Manufacturing employs 300 employees. However, the labour turnover rate experienced by ChemLee Manufacturing has escalated substantially over the years. This has compromised ChemLee’s ability to ensure efficient service delivery to its clients.
As a consultant, you have been assigned to investigate the causes of labour turnover for ChemLee Manufacturing. You are also required to develop suitable strategies and resolutions for ChemLee Manufacturing.
Question: (3 marks)
Develop an appropriate title for the research study above. Read, understand and apply Section 1: Introduction to Business Research
The causes of high labour turnover rate at ChemLee Manufacturing Introduction ChemLee Manufacturing is a chemical manufacturing company that specializes in producing and supplying different chemical substances.
With a workforce of 300 employees, the company has been facing a high labour turnover rate over the years. This has affected the company's ability to provide efficient service delivery to its clients. As a consultant, the objective is to identify the causes of high labour turnover rate at ChemLee Manufacturing and propose suitable strategies and solutions that can help to address the issue. High labour turnover is a significant challenge that companies face today. High employee turnover not only increases the cost of hiring and training new employees but also affects productivity and service delivery. For ChemLee Manufacturing, the high labour turnover rate is a concern, and it's essential to investigate the causes and find suitable solutions. The causes of high labour turnover rate at ChemLee Manufacturing could be due to various reasons, such as low pay, lack of job satisfaction, poor working conditions, and inadequate benefits, among others. As a consultant, conducting a survey and focus group discussions can help to identify the specific factors that contribute to high labour turnover rate. Once the causes have been established, it's crucial to develop appropriate strategies and solutions to address the issue. For example, implementing employee retention programs, improving compensation and benefits, creating a conducive working environment, and providing opportunities for career growth and development are some of the solutions that can be implemented to reduce the high labour turnover rate.
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Mr. Weiss just bought a zero-coupon bond issued by Risky Corp. for $870, with $1000 face value and one year to mature. He believes that the market will be in expansion with probability 0.9 and in recession with probability 0.1. In the event of expansion, Risky Corp. can always repay the debt. In the event of recession, the company would fail to meet its debt obligation. The bondholders would recover nothing and completely lose their investment, should the firm default. A zero-coupon government bond with the same maturity and face value is selling at $952.38. Assume that the government never defaults. The expected value and the standard deviation of the return of the market portfolio are 15% and 30%, respectively. Risky Corp's bond return has a correlation of 0.67 with the market portfolio return. Assume that interest is compounded annually. (a) Suppose Mr. Weiss holds the bond to maturity. What will be his holding period return if Risky Corp. does not default? What will be his holding period return if the firm defaults? (b) What is the expected return of the Risky Corp. bond? Is the bond risky or riskfree? Explain. (c) What is the YTM of the government bond? Is this YTM the riskfree rate? Explain. (d) Compare the expected return of the Risky Corp. bond with the riskfree rate. Would a risk-averse investor buy the Risky Corp. bond at \$870? Explain. (e) The standard deviation of the return of the Risky Corp. bond is 34.48%. What is the beta of the bond? What would be the equilibrium expected return of the Risky Corp. bond if the CAPM holds? Does Mr. Weiss overvalue or undervalue the bond relative to the CAPM? (f) Suppose Mr. Weiss changes his mind and sells his Risky Corp. bond. He invests in a portfolio that allocates 50% of the money on the market portfolio, and the other 50% on the government bond. What are the expected value and the standard deviation of his portfolio return? Is his portfolio efficient? Explain.
If Risky Corp. does not default, Mr. Weiss will receive $1000 at maturity, for a holding period return of $1000 - $870 = $130 on his $870 investment, or a return of 15.12%.
If Risky Corp. defaults, Mr. Weiss will receive nothing, for a holding period return of $0 - $870 = -$870 on his $870 investment, or a return of -100%. The expected return of the Risky Corp. bond is:
0.9 * 15.12% + 0.1 * (-100%) = 13.1%
The bond is risky because it has a chance of defaulting, which would result in a loss for the investor.
The YTM of the government bond is:
$1000 / $952.38 = 1.052 = 5.2%
The YTM is not the riskfree rate because the government bond has some risk of default. However, it is a very low-risk bond, so the YTM is close to the riskfree rate.
The expected return of the Risky Corp. bond is higher than the riskfree rate, so a risk-averse investor would not buy the bond at $870. The investor would expect to lose money on the investment, because the expected return is lower than the purchase price.
The beta of the bond is :-
0.67 * 30% = 20.1%
The equilibrium expected return of the Risky Corp. bond if the CAPM holds is:
Rf + β(Rm - Rf) = 5.2% + 20.1% * (15% - 5.2%) = 17.4%
Mr. Weiss is overvaluing the bond relative to the CAPM, because the expected return of the bond is lower than the equilibrium expected return.
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You suspect that a person might have ingested a poison. You should:
Have the person vomit in order to get the poison out of the digestive system.
Call the national Poison Help line, 9-1-1 or the designated emergency number.
Immediately give the person something to drink to dilute the poison.
Locate the drug or product containers so no one else swallows anything.
If you suspect that a person might have ingested a poison, you should call the National Poison Help line, 9-1-1, or the designated emergency number.
What to do when someone ingests a poison: If you suspect someone has ingested a poison, here is what you can do:
Call for emergency assistance: Immediately call the Poison Help line, 9-1-1, or your local emergency number if someone has ingested poison. It's important to act quickly since poisoning can lead to serious health issues such as respiratory arrest, cardiac arrest, and even death.
Remove any harmful substance: If there are any remaining dangerous substances around the person, remove them immediately.
Ensure you wear protective gloves and clothes to prevent being exposed to the substance.
Keep the person calm: Calm and reassure the person who has ingested the poison.
Inform them that you are getting assistance and that they will be alright.
Do not induce vomiting: Unless a medical professional directs you to do so, don't induce vomiting.
For example, drinking a saltwater solution could harm the person's throat and result in more injury.
Keep a sample of the substance: Keeping a sample of the substance may help medical experts in assessing and identifying the toxin.
Keep the person warm: The person should be kept warm while waiting for assistance.
The poison may lower the person's body temperature, which could be dangerous.
Locate the drug or product containers:
Locating the drug or product containers so no one else swallows anything.
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an accident policy will most likely pay a benefit for a(n):______.
An accident policy typically pays benefits for accidental death, disability, medical expenses, and loss of limbs.
An accident policy is an insurance product that provides financial compensation to the policyholder or his or her beneficiaries if the policyholder suffers a covered accidental injury. Here are some examples of injuries that are typically covered by accident policies:
1. Accidental Death - If the policyholder dies as a result of an accident covered by the policy, the policy may provide a death benefit to the beneficiary designated by the policyholder.
2. Disability - If the policyholder is disabled as a result of an accident covered by the policy, the policy may provide a disability benefit to the policyholder.
3. Medical Expenses - If the policyholder incurs medical expenses as a result of an accident covered by the policy, the policy may provide a benefit to help cover those expenses.
4. Loss of Limbs - If the policyholder loses a limb as a result of an accident covered by the policy, the policy may provide a benefit to help cover the cost of a prosthetic limb or other accommodations.
The specific terms and conditions of an accident policy will vary depending on the policy. It is important to review the policy carefully to understand what is covered and what is not covered.
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An accident policy is designed to financially compensate policyholders when they incur medical expenses or die as a result of an accident. This type of insurance is distinct from health, car, house or renters' insurance, and life insurance, which all have different conditions for payouts.
Explanation:An accident policy is a type of insurance that provides financial support in the event of an accident that causes physical harm or damage. This policy most likely pays benefits when medical expenses are incurred as a result of an unexpected accident. Payments can also be triggered if the policyholder dies due to an accident.
For example, if a policyholder sustains serious injury from a car accident and requires medical treatment, the accident policy will typically pay for these medical expenses. If, unfortunately, the policyholder dies from their injuries, additional benefits are paid out to designated beneficiaries.
It's worth noting that an accident policy differs from other types of insurance such as health insurance, car insurance, house or renters' insurance, and life insurance, all of which pay out for different reasons.
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q3
The advantage of forward contracts over futures contracts is that they a. Are standardised b. Are more flexible c. Have lower default risk d. Daily settled
The correct answer is option b(are more fexible).
The advantage of forward contracts over future contracts is that they are more flexible.
What are forward contracts?
Forward contracts are one of the earliest derivatives instruments, while futures contracts were introduced later. The future contracts are more standardized compared to forward contracts. Forward contracts are agreements between two parties to buy or sell a specific asset or commodity at a specific price on a particular future date.
The advantage of forward contracts over futures contracts is that they are more flexible, and this is because they can be tailored to the specific needs of the two parties involved, whereas futures contracts are more standardized.
Another advantage of forward contracts over futures contracts is that they do not require a daily settlement, which is the case with futures contracts.
In forward contracts, payment and delivery are made at the end of the contract, while futures contracts are settled daily. This means that there is a lower default risk with forward contracts because they are more specific and customized, and the parties involved have more control over the contract terms.
In contrast, futures contracts have a higher default risk because of their standardization, and they may not suit the specific needs of the parties involved.
In conclusion, the advantages of forward contracts over futures contracts include flexibility and lower default risk.
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When
an employee is facing a personal financial distress, this
will:
a.
Decreases
chances of committing fraud.
b.
Justify
committing fraud.
c.
Increases
the chances of committing fra
When an employee is facing personal financial distress, it increases the chances of committing fraud.
Personal financial distress can create significant stress and desperation for an individual. In such situations, an employee may feel compelled to engage in fraudulent activities as a means to alleviate their financial difficulties or mitigate their personal hardships.
The financial strain may push them towards unethical behavior, such as misappropriation of funds, embezzlement, or fraudulent financial reporting. While it is important to note that not all individuals facing personal financial distress will resort to fraud, the increased likelihood arises from the perceived opportunity to resolve their financial troubles through fraudulent means.
The combination of financial strain, psychological pressure, and a perceived opportunity to exploit their position within the organization can lead some employees to engage in fraudulent activities.
Organizations should be aware of these risks and implement proper internal controls, monitoring systems, and support mechanisms to mitigate the potential impact of personal financial distress on employee behavior and reduce the likelihood of fraudulent actions.
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Morgan, a widow, recently passed away. The value of her assets at the time of death was $10,397,000. The cost of her funeral was $6,864, while estate administrative costs totaled$37,971.
As stipulated in her will, she left $916,763 to charities. Based on this information answer the following questions:
a. Determine the value of Morgan's gross estate.
b. Calculate the value of her taxable estate.
c. What is her gift-adjusted taxable estate value?
d. Assuming she died in 2017, how much of her estate would be subject to taxation?
e. Calculate the estate tax liability.
Part 1
a. The value of Morgan's gross estate would be $10397000 (Round to the nearest dollar.)
Part 2
b. The value of Morgan's taxable estate would be $9435402(Round to the nearest dollar.)
Part 3
c. The value of Morgan's gift-adjusted taxable estate would be $9435402 (Round to the nearest dollar.)
Part 4
d. In 2017, the amount of her estate subject to taxation would be $9435402 (Round to the nearest dollar.) This answer is wrong and I don't know what it would be
e. Calculate the estate tax liability.
a. The value of Morgan's gross estate is $10,397,000.
b. The value of Morgan's taxable estate is $9,435,402.
c. The value of Morgan's gift-adjusted taxable estate is $9,435,402.
d. Assuming Morgan died in 2017, the amount of her estate subject to taxation would be $5,490,000.
e. To calculate the estate tax liability, we need to consider the applicable estate tax rates. In 2017, the estate tax rate ranged from 18% to 40%.
a. The gross estate includes the total value of Morgan's assets at the time of her death, which is $10,397,000.
b. To calculate the taxable estate, we subtract allowable deductions such as funeral expenses and administrative costs from the gross estate. In this case, the taxable estate value is $9,435,402.
c. The gift-adjusted taxable estate is the same as the taxable estate value, which is $9,435,402 in this case.
d. The amount of the estate subject to taxation depends on the applicable estate tax exemption and rates for the year of death. In 2017, the estate tax exemption was $5.49 million. Any amount above this exemption would be subject to taxation. Therefore, the taxable amount would be $9,435,402.
e. To calculate the estate tax liability, we need to apply the appropriate tax rate to the taxable amount. The estate tax rates vary based on the value of the taxable estate. Without specific information about the exact value of the taxable estate and the applicable rates, it is not possible to provide an accurate calculation for the estate tax liability.
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Which one of these payment streams fits the definition of an annuity due? O A preferred stock pays a $2 quarterly dividend. O A 4-year car loan requires the last monthly payment be paid at the end of Year 4. O A 20-year bond pays semiannual interest with the first payment occurring six months after issuance. O A prize pays $1,000 a year for ten years, starting today.
An annuity due is a type of cash flow where payment is made at the beginning of each period. Therefore, the payment streams that can be classified as an annuity due are: A prize pays $1,000 a year for ten years, starting today.
In a preferred stock that pays a $2 quarterly dividend, the payment is made quarterly, but at the end of the period, so this payment stream is not an annuity due.
In a 4-year car loan that requires the last monthly payment to be made at the end of Year 4, the payment is made at the end of each month, so this payment stream is not an annuity due.
In a 20-year bond that pays semiannual interest with the first payment occurring six months after issuance, the payment is made at the end of each semiannual period, so this payment stream is not an annuity due.
However, in a prize that pays $1,000 a year for ten years, starting today, the payment is made at the beginning of each year for ten years. Therefore, this payment stream can be classified as an annuity due.
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Tax office has raised excise by 4%, leaving Australians with the world’s fourth-highest beer tax behind Norway, Japan and Finland Pour one out for Australia’s beer drinkers as the price of a pint at the pub surges up to $15 (£8.60/US$10.50) following the largest tax hike in more than three decades. The Australian Tax Office announced the excise on beer would be lifted by 4% on Monday under its CPI indexation review. The Brewers Association of Australia said it was the biggest increase in more than 30 years to hit a market that was already taxed more than "almost any other nation". "We have seen almost 20 increases in Australia’s beer tax over the past decade alone," CEO John Preston said. "Sadly, we’re now seeing the impact as pub patrons will soon be faced with the prospect of regularly paying around $15 for a pint at their local. "For a small pub, club or other venue the latest tax hike will mean an increase of more than $2,700 a year in their tax bill – at a time when they are still struggling to deal with the ongoing impacts of the pandemic." Australia’s excise on beer is adjusted twice a year according to inflation, which is growing at its fastest pace in more than two decades with a peak not expected until the end of the year. Wine operates under a separate taxation system. For a full-strength beer served from a keg in a pub, the excise will increase by $1.51 to $39.27 for every litre of pure alcohol. For packaged beer, the excise will increase by $2.14 to $55.73 per litre of alcohol. Publicans and brewers are also pointing to the increased price of labour, energy, ingredients and other inputs for increasingly expensive pots, pints and schooners.A report by economist and University of Adelaide professor Kym Anderson AC,commissioned by the Brewers Association in 2020, found Australians paid the fourth-highest beer tax in the world compared with advanced OECD and EU countries. Only Norway, Japan and Finland paid more. The next highest-taxing countries were the United Kingdom and Ireland, but their rates were still about 30% lower than Australia’s between 2018 and 2020.
Task:
Explain, using a supply and demand model with a tax, whether the increase in tax rate on beer will be bad for only the buyers of beer, only the sellers of beer, or both? Ensure that you use diagrams where relevant to support your answer, and make sure to use key terminology and course concepts where appropriate. Note: The reality of the case is not the imposition of a new tax, but an increase in tax - meaning that a tax is already in place. However as this is an introductory level course, for simplicity you can depict this on your diagram as a change between no tax and adding a new tax. Ensure that you use diagrams where relevant to support your answer, and make sure to use key terminology and course concepts where appropriate.
The increase in the tax rate on beer in Australia will have an adverse impact on both the buyers and sellers of beer. Using a supply and demand model with a tax, we can analyze the effects.
In a supply and demand model with a tax, the tax acts as a wedge between the price received by sellers and the price paid by buyers. When the tax rate on beer increases, it raises the cost of production for sellers, reducing their profitability. As a result, sellers will supply a lower quantity of beer, shifting the supply curve to the left.
On the demand side, the tax increase leads to a higher price for buyers, reducing their purchasing power. This higher price will result in a decrease in the quantity of beer demanded by consumers, causing the demand curve to shift to the left.
The combined effect of the leftward shift in both the supply and demand curves will result in a decrease in the equilibrium quantity of beer and an increase in the equilibrium price. This means that buyers will face higher prices and reduced quantity, while sellers will face lower sales and profitability.
Using a diagram, we can illustrate this. The initial equilibrium price and quantity of beer are determined by the intersection of the demand and supply curves without the tax. When the tax is introduced or increased, the supply curve shifts to the left, representing a reduction in the quantity supplied. The new equilibrium will have a higher price and lower quantity compared to the initial equilibrium.
In conclusion, the increase in the tax rate on beer in Australia will have negative consequences for both buyers and sellers. Buyers will face higher prices and a reduced quantity of beer, while sellers will experience lower profitability and supply less beer. This demonstrates how changes in tax rates can affect both sides of the market in a supply and demand model.
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Mr. RS is entiled to a $5,200 bonus this year (year 0). His employer gives him two options. He can either receive his $5,200 bonus in cash, or the employer will credit him with $4,500 deferred compensation. Under the deferral option, the employer will accrue 6 percent annual interest on the deferred compensation. Consequently, the employer will pay $8,059 ($4,500 plus compounded interest) to Mr. RS when he retires in year 10. Which option has the greater NPV under each of the following assumptions?
a. Mr. RS’s current marginal tax rate is 28 percent, and his marginal tax rate at retirement will be 15 percent.
b. Mr. RS’s current marginal tax rate is 28 percent, and his marginal tax rate at retirement will be 28 percent.
In making your calculations, use a 5 percent discount rate. Show your computation in good form.
a. Under the assumption that Mr. RS's current marginal tax rate is 28 percent, and his marginal tax rate at retirement will be 15 percent, the cash option has the greater net present value (NPV).
b. Under the assumption that Mr. RS's current marginal tax rate is 28 percent, and his marginal tax rate at retirement will also be 28 percent, the deferred compensation option has the greater net present value (NPV).
To calculate the NPV for each option, we use a 5 percent discount rate and consider the tax implications. The NPV is the present value of the future cash flows minus the initial investment.
a. For the cash option, there are no tax implications. So, the NPV is simply the present value of the $5,200 bonus at a 5 percent discount rate.
b. For the deferred compensation option, we calculate the future value of $4,500 compounded at 6 percent annually over 10 years, and then calculate the present value of that amount at a 5 percent discount rate. We subtract the initial investment of $4,500 to get the NPV. Additionally, we consider the tax implications at retirement by applying the marginal tax rate to the future value amount.
Comparing the NPVs under each assumption, we find that the option with the greater NPV depends on the tax rates. If the marginal tax rate at retirement is lower (15 percent in this case), the cash option has the greater NPV.
However, if the marginal tax rate at retirement is the same (28 percent in this case), the deferred compensation option has the greater NPV due to the tax deferral and potential tax savings.
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Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $6.6 million. The machinery can be sold to the Romulans today for $4.1 million. Klingon's current balance sheet shows net fixed assets of $3.65 million, current liabilities of $2.2 million, and net working capital of $450,000. If all the current assets were liquidated today, the company would receive $1.35 million cash. Required:
(a) What is the book value of Klingon's assets today?
(b) What is the market value?
a) The book value of Klingon's assets today can be calculated as follows:Book value of assets = Net fixed assets + Net working capital= $3.65 million + $0.45 million= $4.1 million
b) The market value of Klingon's assets today is the price at which the machinery can be sold to the Romulans, which is $4.1 million.
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Consider a 20-year, $1,000 bond with an 6.3% per annum coupon rate and annual coupons. The bond currently has 7 years left to maturity, at a current yield to maturity of 3.9%. This bond will be trading at a price of ...
(Round your answer to the nearest dollar)
The bond will be trading at a price of approximately $1,143 when it has 7 years left to maturity and a yield to maturity of 3.9%.
To determine the price of the bond, we need to calculate the present value of its future cash flows, which consist of annual coupon payments and the face value payment at maturity.
Coupon rate = 6.3% per annum
Face value = $1,000
Remaining years to maturity = 7
Yield to maturity = 3.9%
Step 1: Calculate the annual coupon payment.
Coupon payment = Coupon rate * Face value
Coupon payment = 6.3% * $1,000 = $63
Step 2: Calculate the present value of annual coupon payments.
We can treat the annual coupon payments as an ordinary annuity and calculate the present value using the formula:
PV = C × [1 - (1 + r)^(-n)] / r
Where:
PV = Present value of the coupon payments
C = Coupon payment
r = Yield to maturity
n = Remaining years to maturity
PV = $63 × [1 - (1 + 0.039)^(-7)] / 0.039
PV ≈ $362.45
Step 3: Calculate the present value of the face value payment at maturity.
Since the face value is returned only at maturity, its present value is simply its face value.
PV = Face value / (1 + r)^n
PV = $1,000 / (1 + 0.039)^7
PV ≈ $780.96
Step 4: Calculate the total present value of the bond.
Total present value = Present value of coupon payments + Present value of face value
Total present value = $362.45 + $780.96
Total present value ≈ $1,143.41
The bond will be trading at a price of approximately $1,143 when it has 7 years left to maturity and a yield to maturity of 3.9%.
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discuss how technology has improved efficiency and decision making
for governments. Refer to the changes technology has had on Police
and Fire Services
Technology has greatly enhanced efficiency and decision-making capabilities for governments, including the Police and Fire Services. It has revolutionized these sectors by streamlining processes, enabling faster communication, and providing access to real-time data for informed decision making.
Technology has had a profound impact on the efficiency and effectiveness of Police and Fire Services. One major improvement is the use of digital tools for record-keeping and data management. Instead of relying on cumbersome paper-based systems, digital databases and software platforms allow for streamlined information storage, retrieval, and analysis.
This enhances operational efficiency by eliminating manual paperwork and reducing the time needed to access critical information. Additionally, technology has improved communication within these services. Advanced communication systems, such as two-way radios, mobile devices, and digital networks, enable seamless and instant communication among team members, regardless of their locations.
This facilitates quicker response times, coordinated actions, and improved situational awareness, all of which are crucial in emergency situations. Furthermore, technology has enabled the integration of data from various sources, such as surveillance cameras, sensors, and public records, into a centralized system.
This data can be analyzed using advanced analytics and artificial intelligence algorithms to derive valuable insights. For example, predictive analytics can help identify high-risk areas for crime or fire incidents, allowing proactive measures to be taken to prevent or mitigate such events.
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