The economists are discussing how to encourage saving and what methods can be used to increase the standard of living. Carlos suggested that if income tax were replaced with consumption tax, there would be a growth in living standards. However, Deborah is skeptical that households would change their behavior in response to this proposal to make a significant impact.
Due to differences in opinions between the two economists, it is unlikely that they would have chosen to agree on the following proposition at random:
Business managers can raise profit more easily by reducing costs than by raising revenue.
The following proposition is more likely to have been agreed upon by the two economists chosen at random:
Central banks should focus more on maintaining low unemployment than on maintaining low inflation.
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Mary Guilott recently graduated from Nichols State University and is anxious to begin investing her meager savings as a way of applying what she has learned in business school. Specifically, she is evaluating an investment in a portfolio comprised of two firms' common stock. She has collected the following information about the common stock of Firm A and Firm B:
Expected Return Standard Deviation
Firm A's Common Stock 0.16 0.19
Firm B's Common Stock 0.17 0.23
Correlation Coefficient 0.70
a. If Mary invests half her money in each of the two common stocks, what is the portfolio's expected rate of return and standard deviation in portfolio return?
b. Answer part a where the correlation between the two common stock investments is equal to zero.
c. Answer part a where the correlation between the two common stock investments is equal to +1.
d. Answer part a where the correlation between the two common stock investments is equal to −1.
e. Using your responses to questions a—d, describe the relationship between the correlation and the risk and return of the portfolio.
If Mary decides to invest 50% of her money in Firm A's common stock and 50% in Firm B's common stock and the correlation between the two stocks is 0.70 , then the expected rate of return in the portfolio is ____%. (Round to two decimalplaces.)
The standard deviation in the portfolio is _____%. (Round to two decimal places.)
If Mary decides to invest % of her money in Firm A's common stock and 50% in Firm B's common stock and the correlation between the two stocks is zero, then the expected rate of return in the portfolio is ____%. (Round to two decimal places.)
The standard deviation in the portfolio is ____%. (Round to two decimal places.)
If Mary decides to invest 50% of her money in Firm A's common stock and 50% in Firm B's common stock and the correlation coefficient between the two stocks is +1, then the expected rate of return in the portfolio is _____%(Round to two decimalplaces.)
The standard deviation in the portfolio is _____%. (Round to two decimal places.)
If Mary decides to invest 50% of her money in Firm A's common stock and 50% in Firm B's common stock and the correlation coefficient between the two stocks is -1, then the expected rate of return in the portfolio is ____%. (Round to two decimalplaces.)
The standard deviation in the portfolio is ____%. (Round to two decimal places.)
Using your responses to questions ad, which of the following statements best describes the relationship between the correlation and the risk and return of the portfolio? (Select the best choice below.)
A. The correlation coefficient has a negative effect on the expected return of a portfolio, and the closer the correlation coefficient is to negative one, -1, the lower the risk.
B. The correlation coefficient has no effect on the expected return of a portfolio, but the closer the correlation coefficient is to negative one, -1, the lower the risk.
C. The correlation coefficient has no effect on the expected return of a portfolio, but the closer the correlation coefficient is to negative one, -1, the higher the risk.
D. The correlation coefficient has no effect on the expected return of a portfolio, but the closer the correlation coefficient is to one, the lower the risk.
a. The portfolio's expected rate of return when investing half in each stock is 16.5%. The standard deviation in portfolio return is 20.4%.
b. If the correlation between the two stocks is zero, the expected rate of return remains 16.5%. The standard deviation in portfolio return reduces to 18.0%.
c. With a correlation coefficient of +1, the expected rate of return remains 16.5%. The standard deviation in portfolio return increases to 21.4%.
d. When the correlation coefficient is -1, the expected rate of return remains 16.5%. The standard deviation in portfolio return decreases to 12.4%.
e. The correlation coefficient affects the risk and return of the portfolio.
a. The expected rate of return in the portfolio is (0.5 * 0.16) + (0.5 * 0.17) = 0.165 or 16.5%.
Portfolio Standard Deviation = [tex]\sqrt{[(0.5^2 * 0.19^2) + (0.5^2 * 0.23^2) + 2 * 0.5 * 0.5 * 0.19 * 0.23 * 0.70][/tex]= 0.204 or 20.4%.
b. Portfolio Standard Deviation = [tex]\sqrt{[(0.5^2 * 0.19^2) + (0.5^2 * 0.23^2)]}[/tex] = 0.180 or 18.0%.
c. Portfolio Standard Deviation = [tex]\sqrt{[(0.5^2 * 0.19^2) + (0.5^2 * 0.23^2) + 2 * 0.5 * 0.5 * 0.19 * 0.23 * 1]}[/tex] = 0.214 or 21.4%.
d. Portfolio Standard Deviation = [tex]\sqrt{[(0.5^2 * 0.19^2) + (0.5^2 * 0.23^2) - 2 * 0.5 * 0.5 * 0.19 * 0.23 * 1]}[/tex] = 0.124 or 12.4%.
e. Positive correlation (0.70) increases risk, while negative correlation (-1) reduces risk. However, the correlation coefficient does not directly impact the portfolio's expected rate of return, which remains constant at 16.5%.
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unit variable costs of $37,80. Model B22 sells for $108 and has unit variable costs of $75.60. Model C 124 sells for $432 and has unit variable costs of $324. The sales mix (as a percentage of total units) of the three models is A12,60%, B22,15%; and C124,25%.
If the company has froed costs of $270,270, how many units of each model must the company 5 ell in order to break even? (Round Per unit values to 2 decimal palces, e.s. 15.25 and final answers to 0 decimal places, es. 5.275.)
Model
A12 ___
B22___
C124___
Total break-even point___units
To break even, the company needs to sell a certain number of units for each model. The required quantities are as follows: A12 - 2,975 units, B22 - 950 units, and C124 - 600 units. In total, the company needs to sell 4,525 units across all three models to cover its fixed costs.
To calculate the break-even point, we need to determine the number of units for each model that need to be sold. First, we calculate the contribution margin per unit for each model by subtracting the unit variable costs from the selling price. For model A12, the contribution margin per unit is $108 - $37.80 = $70.20. Similarly, for model B22, the contribution margin per unit is $108 - $75.60 = $32.40, and for model C124, it is $432 - $324 = $108.
Next, we multiply the contribution margin per unit by the sales mix percentage for each model. For model A12, the sales mix percentage is 12.60%, so the contribution margin per unit is multiplied by 0.126 to get the contribution margin per unit for model A12. Similarly, for model B22, the contribution margin per unit is multiplied by 0.15, and for model C124, it is multiplied by 0.25.
Now, we can calculate the required number of units for each model by dividing the fixed costs by the contribution margin per unit for that model. For model A12, the fixed costs are $270,270, and the contribution margin per unit is $70.20. Therefore, the required number of units for model A12 is $270,270 / $70.20 ≈ 2,975 units. Similarly, for model B22, the required number of units is $270,270 / $32.40 ≈ 950 units, and for model C124, it is $270,270 / $108 ≈ 600 units.
Finally, we sum up the required units for each model to get the total break-even point. In this case, the total break-even point is 2,975 + 950 + 600 = 4,525 units. The company needs to sell a total of 4,525 units across all three models to cover its fixed costs and break even.
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Explain any THREE importance of entrepreneurship towards the Z
Generation in the 21st century.
Entrepreneurship is important for the Z Generation in the 21st century as it provides economic empowerment, develops essential skills and adaptability, and allows them to pursue purpose-driven work and make a positive social impact.
1. Economic Empowerment: Entrepreneurship empowers the Z Generation by allowing them to create their own businesses and generate income independently. It enables young individuals to take control of their financial future, explore their passions, and create wealth.
2. Skill Development and Adaptability: Entrepreneurship fosters the development of crucial skills such as critical thinking, problem-solving, creativity, communication, and resilience. It equips the Z Generation with the ability to navigate uncertainty, embrace change, and thrive in dynamic environments.
3. Social Impact and Purpose-Driven Work: Entrepreneurship provides an avenue for the Z Generation to pursue purpose-driven work and make a positive social impact. It allows them to create businesses that align with their values and address social and environmental issues, contributing to the betterment of society.
In summary, entrepreneurship offers economic empowerment, skill development, adaptability, and the ability to pursue purpose-driven work and make a positive social impact to the Z Generation in the 21st century.
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T/F: an exit barrier is anything that is an impediment to excess capacity leaving an industry.
The statement “an exit barrier is anything that is an impediment to excess capacity leaving an industry” is True.
What is an Exit Barrier?An exit barrier is an obstacle that makes it difficult for a company to leave an industry or sector. A high exit barrier protects the company's position in the market, but it also makes it difficult for it to leave if the industry experiences a downturn or other problems. Examples of Exit Barriers: Exit barriers may be financial or operational in nature. They could be anything that keeps the company from being able to sell off its equipment, for example.
An industrial plant that has specialized equipment, for example, is not simply a warehouse for storing goods. It must be able to sell the equipment to another company in order to recoup its investment if the plant is no longer profitable. When the equipment is no longer needed, the company must bear the cost of dismantling it and disposing of it.
Employees with specialized skills or equipment may be needed to operate the equipment, and these employees may be difficult to replace. These factors combine to make the exit barrier high, making it difficult for the company to leave the industry if things go wrong.
Hence, the statement “an exit barrier is anything that is an impediment to excess capacity leaving an industry” is True.
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What is the final step in a ghost employee scheme?
Terminate the ghost employee
Distribute the check to the ghost employee
Enter payroll expense into the accounting system
Supervisor authorization
The final step in a ghost employee scheme is to distribute the check to the ghost employee.
In a ghost employee scheme, a fictitious employee is created on the payroll system to fraudulently receive payments.
scheme involves adding the ghost employee to the payroll, entering their hours or salary, and generating paychecks. The final step is to distribute the paycheck to the ghost employee.
Terminating the ghost employee may be a step taken in some cases to cover up the fraud or avoid suspicion. However, it is not necessarily the final step in the scheme.
Entering payroll expense into the accounting system is an earlier step in the scheme, as the fraudulent payroll expenses need to be recorded to manipulate financial records.
Supervisor authorization may be involved in the scheme, as a colluding supervisor or manager may approve the addition of the ghost employee and the payment of their wages. However, it is not the final step.
The distribution of the paycheck to the ghost employee is the last step in the ghost employee scheme, as it completes the fraudulent process of diverting funds to the fictitious employee.
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Disadvantage patients may seek care in emergency rooms because
they have nowhere else to receive services.
One significant disadvantage is that patients may seek care in emergency rooms because they have nowhere else to receive services. This practice puts additional strain on emergency departments, resulting in overcrowding, longer wait times, and higher healthcare costs.
It also indicates a lack of accessible and affordable primary care options for individuals, leading them to utilize emergency rooms for non-emergency conditions.
One of the main reasons patients resort to seeking care in emergency rooms is the lack of alternative healthcare options. In some cases, individuals may not have a regular primary care provider or may face barriers in accessing timely and affordable care.
This could be due to factors such as a shortage of primary care providers in certain areas, limited availability of clinics or healthcare facilities, or financial constraints that make primary care visits unaffordable for some individuals.
When patients have nowhere else to receive services, they may turn to emergency rooms as a last resort. Emergency departments are required by law to provide care to all individuals, regardless of their ability to pay or the severity of their condition.
However, emergency rooms are designed to handle life-threatening emergencies and not as primary care settings. As a result, the influx of non-emergency cases in emergency rooms contributes to overcrowding, longer wait times, and increased healthcare costs.
To address this issue, it is essential to improve access to primary care services by expanding healthcare infrastructure, increasing the number of primary care providers, and implementing strategies to reduce financial barriers.
This could involve enhancing community health centers, implementing telehealth services, promoting preventive care, and educating patients about appropriate utilization of healthcare resources.
By offering accessible and comprehensive primary care options, the reliance on emergency rooms for non-emergency cases can be reduced, allowing emergency departments to focus on critical conditions and providing better overall healthcare outcomes.
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Bill and Ben set up in business together as Flowerpot & Co. in order to provide catering facilities at a series of future trade conferences. Bill is the driving force behind the venture and Ben does much less of the work, and so Ben agrees that profits should be split 70:30 in Bill’s favour and that he will indemnify Bill for any and all losses. The venture proceeds as planned but after a year they are in fact making a loss and accruing debts.
Which of the following statements most appropriately follows from this?
a. A partnership exists here under the Ordinary Partnership Act 1890 because the parties have agreed to run a business together with a view to making and sharing profits and both Bill and Ben will be jointly and severally liable for the partnership debts.
b. A partnership exists here under the Ordinary Partnership Act 1890 but the indemnity will operate to shield Bill from external creditors who must pursue Ben for the partnership debts.
c. An ordinary partnership does not exist here because whilst in essence the relationship appears to be a partnership the unequal sharing of profits denies the jurisdiction of the Partnership Act 1890.
d. An ordinary partnership does not exist here because whilst the parties have agreed to run a business together with a view to making and sharing profits the effort by the partners is not equal and the venture is not in fact profitable.
Option A is the correct answer because an ordinary partnership exists here under the Ordinary Partnership Act 1890 because the parties have agreed to run a business together with a view to making and sharing profits and both Bill and Ben will be jointly and severally liable for the partnership debts.
The Partnership Act of 1890 is the main piece of legislation governing partnerships in the United Kingdom. Partnerships are usually run under ordinary partnership law, which governs the formation, management, and dissolution of partnerships. Partnerships in the UK are governed by the Partnership Act 1890, which includes the following provisions:
Partnerships are typically governed by a Partnership Agreement, which establishes the terms of the partnership. The terms of the partnership agreement, in addition to the terms of the Partnership Act 1890, govern the relationship between the partners.According to the question mentioned above, the two parties agreed to establish a business together with the objective of providing catering facilities at a series of future trade conferences. They have agreed to split profits 70:30 in Bill's favor, and Ben has agreed to indemnify Bill for any and all losses. Despite their efforts, they were unable to make a profit and accumulated debts.
In this case, an ordinary partnership exists here under the Ordinary Partnership Act 1890 because the parties have agreed to run a business together with a view to making and sharing profits, and both Bill and Ben will be jointly and severally liable for the partnership debts. Hence, A is the correct option.
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Distinguish between negative demand and supply side shocks and their impact on unemployment, and inflation levels in the in the economy
Negative demand-side shocks refer to situations where there is a sudden decrease in the overall demand for goods and services in the economy.
This can occur due to factors such as a decrease in consumer spending, reduced business investment, or a decline in exports. When there is a negative demand-side shock, it can lead to a decrease in economic activity, lower production levels, and a rise in unemployment. The decrease in demand puts downward pressure on prices, resulting in potential deflationary effects.
On the other hand, negative supply-side shocks occur when there is a disruption or reduction in the economy's productive capacity. Examples of supply-side shocks include natural disasters, significant increases in input prices, or disruptions in the supply chain. Supply-side shocks can lead to decreased production, reduced output levels, and potential supply shortages. This can result in upward pressure on prices, leading to inflationary effects. The impact on unemployment levels from supply-side shocks can be ambiguous, as it depends on the specific nature of the shock and its effects on different sectors of the economy.
In summary, negative demand-side shocks decrease overall demand, leading to reduced production and increased unemployment. They can have deflationary effects.
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Current Attemet in Progress: The fonowing infoxmation is toe Carla Vista Caincariz? 1. Combalance perbaink luly 31,96394 : 2. Huly bank service charge not fecorded br the deposito $26. 4 Castibalance per tooks. July 31.510014 5. The barkcharged Cafta Vistass account $400 for a customer's NSF dieque. 6. Deposits intrarsic JUV 31, \$2.510. 7. Carla Vista recorded a cash receiat for a cash sale from a customet as 532 . The bank correctly rectrided it a $22. 8. The barkcollecteda $1,450 note for Ca in Vista in fuly plus interest of $41, lessa fee of $23. The coliection fusrot been recorded by Corla Vists and no interent has been acorued 9. Outstandingcheques tuly 31,3677 . Prepar 6 a bark reconciliat ins for Jasy 31 . (Wist iteris that increose balance as per bank \& tooks fiest.)
Carla Vista's bank balance as per the books on July 31 is $10,014.
To reconcile the bank statement, we start with the bank's balance on July 31, which is $31,963.94 (item 1). Then, we deduct the unrecorded bank service charge of $26 (item 2), resulting in a balance of $31,937.94. Next, we add the outstanding deposits of $2,510 (item 6) to get $34,447.94. Subtracting the NSF check charge of $400 (item 5) gives us $34,047.94. Deducting the wrongly recorded cash receipt of $532 (item 7), the adjusted balance is $33,515.94. The bank collected a note of $1,450 plus interest of $41 and a fee of $23 (item 8), which should increase Carla Vista's balance by $1,468. Finally, deducting the outstanding checks of $3,677 (item 9) gives us $31,846.94. Therefore, Carla Vista's balance as per the books on July 31 is $10,014.
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Hatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its products is 50 minutes per unit. The budgeted conversion costs for the manufacturing cell dedicated to the product are $1,320,000 per year. The total labor minutes available are 132,000. During the year, the cell was able to produce 1.2 units of the product per hour. Suppose also that production incentives exist to minimize unit product costs.
Required:
1. Compute the theoretical conversion cost per unit. $fill in the blank 1 per unit
2. Compute the applied conversion cost per unit (the amount of conversion cost actually assigned to the product). $fill in the blank 2 per unit
3. Briefly explain how Hatch Manufacturing might further benefit from its accountants utilizing prescriptive data analytics (see Exhibit 2.6 for a review of data analytic types).
The accountants appear to have utilized
diagnosticdiscriptivepredictiveprescriptive
data analytics to understand the drivers of costs as well as
diagnosticdiscriptivepredictiveprescriptive
analytics to forecast that if current cycle time could be reduced from 50 minutes per unit to 37 minutes per unit, then conversion costs would be reduced from $500 per unit to $370 per unit.
A logical next step would be for the accountants to utilize
diagnosticdiscriptivepredectiveprescriptive
data analytics to identify specific process reengineering actions.
Hatch Manufacturing's theoretical and applied conversion costs per unit are both $1,100. They can benefit from using prescriptive data analytics to identify process reengineering actions.
Theoretical conversion cost per unit: The theoretical conversion cost per unit is calculated by dividing the budgeted conversion costs for the manufacturing cell by the total labor minutes available. In this case, the budgeted conversion costs are $1,320,000 per year, and the total labor minutes available are 132,000.
Therefore, the theoretical conversion cost per unit is $1,320,000 / 132,000 = $10 per minute. Since the theoretical cycle time for one unit is 50 minutes, the theoretical conversion cost per unit is $10/minute * 50 minutes = $500 per unit.
Applied conversion cost per unit: The applied conversion cost per unit represents the amount of conversion cost actually assigned to the product. In this case, the production incentives aim to minimize unit product costs. Therefore, the applied conversion cost per unit is the same as the theoretical conversion cost per unit, which is $500 per unit.
Benefits of utilizing prescriptive data analytics: Hatch Manufacturing can further benefit from its accountants utilizing prescriptive data analytics. Prescriptive analytics involves using data and models to determine the best course of action to optimize outcomes.
By applying prescriptive data analytics, accountants can identify specific process reengineering actions that can further reduce costs and improve efficiency. By analyzing data on cycle time reduction from 50 minutes per unit to 37 minutes per unit, the accountants can determine that conversion costs can be reduced from $500 per unit to $370 per unit.
This information can guide Hatch Manufacturing in making informed decisions and implementing process improvements to achieve cost savings and enhance profitability.
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2. Suppose the following data for an economy; a consumption function of C = 600 + 0.6(Y - T),
Investment spending is fixed at 300, Government purchases are 400, and net taxes are 100.
1. What is the MPC, MPS, and the value of the tax multiplier? 10 pts.
2. Calculate the equilibrium level of income (Y) and graph AE? 20pts.
3. Suppose taxes decrease by 100, use the multiplier to calculate the new
equilibrium level of income. 15 pts.
The MPC is 0.6, MPS is 0.4 and the value of the tax multiplier is -1.5.
The point where the AE curve intersects the 45-degree line represents the equilibrium level of income.
The new equilibrium level of income is 2150.
1. The MPC (Marginal Propensity to Consume) is 0.6, indicating that for every one-unit increase in income, consumption increases by 0.6 units. The MPS (Marginal Propensity to Save) is 0.4, representing the portion of income saved rather than consumed. The value of the tax multiplier is -1.5, which means that a change in taxes will have a 1.5 times larger impact on equilibrium income.
2. To calculate the equilibrium level of income (Y), we need to set aggregate expenditure (AE) equal to income. AE consists of consumption (C), investment (I), government purchases (G), and net exports (NX). Assuming net exports are zero, we can calculate AE as AE = C + I + G. Substituting the given values, AE = (600 + 0.6(Y - T)) + 300 + 400. Solving for Y, we find the equilibrium level of income to be Y = 2000. Graphically, we plot the AE curve and the 45-degree line to identify the intersection as the equilibrium level.
3. If taxes decrease by 100, we can use the tax multiplier to calculate the change in equilibrium income. The change in taxes (ΔT) is -100, and multiplying it by the tax multiplier (-1.5), we find the change in income (ΔY) to be 150. Adding this change to the initial equilibrium income of 2000, we determine the new equilibrium level of income to be 2150.
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in a competitive market, economic losses indicate that:
In a competitive market, economic losses indicate that firms are unable to cover their total costs and are operating at a loss.
In a competitive market, economic losses indicate that firms are not able to cover their total costs, including both explicit (e.g., wages, rent) and implicit costs (e.g., opportunity cost of resources). The revenue generated from selling goods or services is lower than the total costs incurred by the firm, resulting in a negative profit or economic loss. This signals that the firm is not operating efficiently or that the market conditions are unfavorable, potentially leading to adjustments such as exit from the market or changes in production methods to minimize losses.
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Budgets create negative attitude or invoke fear amongst
employees." Assess this statement.
Budgets can create a negative attitude or invoke fear among employees.Budgets serve as financial plans that outline the allocation of resources within an organization.
Budgets serve as financial plans that outline the allocation of resources within an organization. While budgets are essential for managing costs, setting targets, and ensuring financial stability, they can also have unintended consequences on employees' attitudes and emotions. One key factor is the perception of constraints that budgets impose on individuals and teams. When budgets are tight or stringent, employees may feel limited in their ability to pursue new ideas or projects, leading to frustration and demotivation. Additionally, the fear of failing to meet budgetary targets can create a sense of anxiety and pressure, affecting job satisfaction and overall morale.
Furthermore, the way budgets are communicated and implemented within an organization can impact employees' attitudes. If budgets are imposed without clear explanations or without involving employees in the decision-making process, it can foster a sense of powerlessness and resentment. This can further contribute to negative attitudes and resistance towards budgetary constraints.
However, it is important to note that the impact of budgets on employee attitudes is not universally negative. When budgets are well-designed, transparent, and involve employees in the process, they can serve as motivating tools. Clear communication about the purpose and benefits of the budget, along with providing employees with the necessary resources and support, can create a sense of ownership and alignment towards achieving organizational goals. When employees understand how their contributions fit into the larger financial picture, they may feel empowered and motivated to work towards budgetary targets.
In conclusion, while budgets have the potential to create negative attitudes or invoke fear among employees, their impact largely depends on how they are designed, communicated, and implemented within an organization. By involving employees in the process, providing adequate support, and fostering a transparent and inclusive budgetary environment, organizations can mitigate the negative effects and harness the potential benefits of budgets.
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If the A bank experiences liquidity shortages, they can first borrow from ... a. another commercial bank and then the reserve bank as lender of last resort. b. the reserve bank since it is the only lender of last resort. c. bank B and bank C as the lenders of last resort. d. bank C only as the lender of last resort. Suppose Musa is a stock-broker who always keeps R10 000 of his portfolio in the form of cash in order to purchase bonds when prices fall. This is an example of a. transaction demand. b. speculative demand. c. precautionary demand.
If the A bank experiences liquidity shortages, they can first borrow from another commercial bank and then the reserve bank as lender of last resort. The correct answer to the first question is (a) another commercial bank and then the reserve bank as lender of last resort. Musa is a stock-broker who always keeps R10 000 of his portfolio in the form of cash in order to purchase bonds when prices fall. This is an example of speculative demand. So, the correct answer to the second question is (b).
Regarding the first question:When a bank experiences liquidity shortages, it can first borrow from another commercial bank to meet its immediate liquidity needs. If the bank is unable to obtain sufficient funds from other commercial banks, it can then turn to the reserve bank, which acts as the lender of last resort. The reserve bank provides emergency funding to banks to help them maintain stability and prevent systemic disruptions in the financial system.
Regarding the second question:The example provided, where Musa keeps R10 000 of his portfolio in the form of cash to purchase bonds when prices fall, is an example of:
b. speculative demand.
Speculative demand refers to holding money or cash with the expectation of taking advantage of future investment opportunities or capitalizing on potential price changes. In this case, Musa is keeping cash on hand to speculate on purchasing bonds when their prices fall, indicating a speculative motive for holding money.
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There is an increasing concern among auditors about the possibility of fraud in large corporations. The auditors think that the chances of fraud detection could be increased by measuring the cash flow. To evaluate this possibility, a random sample of 41 qualified auditors used cash flow information from a past fraud case, and were asked to indicate the chance of fraud on a scale from 0 to 100 . The sample mean for the assessment was 38.21 with a sample standard deviation of 2.98. Another 41 auditors were asked to indicate the chance of fraud for the same case but without using cash flow information. They had a sample mean of 40.56 and a sample standard deviâtion of 2.56 At the 10% significance level, test whether there is enough evidence to conclude that there is a difference on the assessment of fraud by the auditors using the cash flow information and the sample not using this information. If you wanted to know whether cashflow really does increase the chance of fraud detection, how would you amend to the hypothesis test you just performed? (20 marks)
To test whether there is a significant difference in the assessment of fraud between auditors using cash flow information and those not using this information, we can perform a two-sample t-test.
Let's calculate the test statistic and compare it with the critical t-value at the 10% significance level.
Given:
Sample 1 (Cash Flow Information):
Sample size (n₁) = 41
Sample mean (x₁) = 38.21
Sample standard deviation (s₁) = 2.98
Sample 2 (No Cash Flow Information):
Sample size (n₂) = 41
Sample mean (x₂) = 40.56
Sample standard deviation (s₂) = 2.56
The null hypothesis (H₀) states that there is no difference in the assessment of fraud between the two groups, while the alternative hypothesis (Hₐ) suggests there is a difference.
H₀: μ₁ = μ₂
Hₐ: μ₁ ≠ μ₂
The two-sample t-test formula is:
t = (x₁ - x₂) / √((s₁² / n₁) + (s₂² / n₂))
Calculating the test statistic:
t = (38.21 - 40.56) / √((2.98² / 41) + (2.56² / 41))
= -2.35 / √(0.2136 + 0.156)
= -2.35 / √(0.3696)
= -2.35 / 0.6077
≈ -3.86
To determine if there is enough evidence to conclude a difference, we compare the calculated t-value (-3.86) with the critical t-value at the 10% significance level with degrees of freedom (df = n₁ + n₂ - 2 = 41 + 41 - 2 = 80).
The critical t-value at a 10% significance level for a two-tailed test and 80 degrees of freedom is approximately ±1.987.
Since the calculated t-value (-3.86) is beyond the critical t-value, we reject the null hypothesis. Therefore, there is enough evidence to conclude that there is a difference in the assessment of fraud by auditors using cash flow information and those not using this information.
If we want to investigate whether cash flow truly increases the chance of fraud detection, we could design a randomized controlled experiment. We would randomly assign auditors to two groups, one using cash flow information and the other not using it. Then, we can compare the fraud detection rates between the two groups to directly assess the impact of cash flow on the chances of fraud detection.
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Briefly describe the change you integrated and Identify any pitfalls encountered (i.e. resistors).
Discuss the long-term effects if you sustained this change longer than a week.
What could/would you have done differently?
What do you know about your behavior or tendencies about change that you did not know before.
These included resistance from employees who were accustomed to the old system, lack of clarity in expectations regarding the new system, and inadequate communication about the reasons and benefits of the change.
Over time, sustaining the change could also help create a positive organizational culture that values transparency, accountability, and personal development.
More emphasis could have been placed on change management strategies.
It is important to recognize that change can be met with resistance, and as a change agent, it is essential to proactively address concerns and ensure that individuals understand the value and purpose of the change.
The change integrated involved implementing a new performance management system in the organization. During the process, several pitfalls were encountered. These included resistance from employees who were accustomed to the old system, lack of clarity in expectations regarding the new system, and inadequate communication about the reasons and benefits of the change.
Additionally, some employees may have felt threatened by the new system and feared that it could negatively impact their performance evaluations.
If the change was sustained longer than a week, it could have significant long-term effects on the organization. The new performance management system has the potential to improve employee performance by setting clear goals, providing regular feedback, and promoting a culture of continuous improvement.
This, in turn, can lead to increased productivity, enhanced employee engagement, and a more aligned and motivated workforce. Over time, sustaining the change could also help create a positive organizational culture that values transparency, accountability, and personal development.
In hindsight, there are several things that could have been done differently to address the pitfalls encountered during the change implementation. Firstly, more emphasis could have been placed on change management strategies.
This would involve early employee involvement and engagement, addressing concerns and resistance, providing comprehensive training on the new system, and ensuring clear and consistent communication about the purpose and benefits of the change. Additionally, ongoing support and feedback mechanisms could have been established to address any challenges or issues that arose during the transition.
The experience of implementing this change has provided insights into personal behavior and tendencies regarding change. It has highlighted the importance of being adaptable and open to new ideas, as well as the need for effective communication and stakeholder engagement.
It is important to recognize that change can be met with resistance, and as a change agent, it is essential to proactively address concerns and ensure that individuals understand the value and purpose of the change. Additionally, the experience has emphasized the significance of ongoing evaluation and adjustment to ensure the success and sustainability of the change initiative.
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Yamamoto Inc manufactures semi-conductor chips. The company has a debt-equity ratio of 30 percent and makes interest payments of $106,000 at the end of each year. The company estimates that annual sales will be $6 million; annual cost of goods sold will be $2 million; and annual general and administrative costs will be $1.25 million. These cash flows are expected to remain the same forever. The corporate tax rate is 22 percent. The company's unlevered cost of equity is 12%.
a. Determine the levered cost of equity for Yamamoto
b. Determine the value of the company's equity using the FTE method.
The levered cost of equity for Yamamoto Inc is 13.14%. Using the FTE method, the value of the company's equity is calculated to be $2,145,038.
To determine the levered cost of equity, we can use the formula:
Levered Cost of Equity = Unlevered Cost of Equity × (1 + (1 - Tax Rate) × Debt-to-Equity Ratio)
Substituting the given values, we get:
Levered Cost of Equity = 12% × (1 + (1 - 0.22) × 0.3)
= 12% × (1 + 0.78 × 0.3)
= 13.14%
Next, to calculate the value of the company's equity using the FTE (Free Cash Flow to Equity) method, we need to determine the annual free cash flow to equity (FCFE). FCFE can be calculated as:
FCFE = (1 - Tax Rate) × (Sales - Cost of Goods Sold - General and Administrative Costs) - Interest Expense
Substituting the given values, we have:
FCFE = (1 - 0.22) × ($6,000,000 - $2,000,000 - $1,250,000) - $106,000
= $1,290,000
Finally, we can calculate the value of equity by dividing the FCFE by the levered cost of equity:
Value of Equity = FCFE / Levered Cost of Equity
= $1,290,000 / 0.1314
= $2,145,038
Therefore, using the FTE method, the value of Yamamoto Inc's equity is approximately $2,145,038.
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Assume a competitive market is initially in equilibrum where firms are earning a normal rate of return. Suppose there is a demand shock in this market that causes the demand curve to shift to the left, resulting in a lower market price.
What adjustments would occur in the long run?
A. There would be entry of firms into the market, causing the supply curve to increase, raising the price until firms earn zero profit.
B. There would be an exit of firms from the market, causing the demand curve to shift to the right, raising the price until firms earn zero profit
C. There would be entry of firms into the market, causing the demand curve to shift to the right, raising the price until firms earn positive profits.
D. There would be an exit of firms from the market, causing the supply curve to shift to the left, raising the price until firms earn zero profit.
The correct answer is A. There would be entry of firms into the market, causing the supply curve to increase, raising the price until firms earn zero profit.
When a demand shock causes the demand curve to shift to the left, the initial decrease in market price leads to firms earning below-normal profits or even losses in the short run. In the long run, this situation prompts some firms to exit the market. As a result, the market supply curve decreases. However, the exit of firms reduces the overall supply, which eventually causes the market price to increase. This higher price creates an incentive for new firms to enter the market, increasing the supply and driving the price back down. This process continues until the market reaches a new equilibrium where firms earn zero economic profit, known as a normal rate of return. Therefore, option A accurately describes the adjustments that occur in the long run following a demand shock in a competitive market.
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You’ve recently met an executive at HSKiwi Fruits, a firm that imports/exports produce (fruits and vegetables). You know that Fullerton College is expanding its International Business curriculum and a large group of students are interested in the import/export field. Write a letter to Hillary, the executive you met at HSKiwi, asking her to speak at one of the Career Builder Speaker Sessions this semester. The sessions are held on Wednesdays from 1:30 p.m.- 2:30 p.m.
Be sure to consider why Hillary would be interested in speaking to a group of college students. Anticipate any objections she may have and overcome them. Know that we do not have any money to compensate our speakers but come up with some value she will receive and articulate it in the letter. Make up any information not included in this prompt to complete the message effectively.
Address:
Hillary Smith
123 Via Colonel
Long Beach, CA 90808
Compose you message in MSWord and upload it into this assignment. HINT: Be sure to include logical paragraph breaks
I am writing to invite you, Hillary Smith, an executive at HSKiwi Fruits, to speak at one of our Career Builder Speaker Sessions at Fullerton College. The sessions are held on Wednesdays from 1:30 p.m. to 2:30 p.m. and are attended by a large group of college students interested in the import/export field.
We would be honored to have you, Hillary Smith, share your insights and expertise with our students at Fullerton College. As an executive at HSKiwi Fruits, your experience in the import/export industry would be valuable in inspiring and educating our students. The Career Builder Speaker Sessions are designed to help students explore potential career paths and gain industry knowledge from professionals like yourself.
Although we are unable to provide financial compensation, speaking at our event offers several benefits. It provides you with the opportunity to share your knowledge and network with the next generation of professionals in the import/export field. Additionally, your participation can increase the visibility and reputation of HSKiwi Fruits among our students.
We understand that you may have concerns about the time commitment and lack of financial compensation. However, our sessions are kept concise and focused, lasting only one hour. We are also open to adjusting the schedule to accommodate your availability. While we cannot offer monetary compensation, your presence as a speaker will have a lasting impact on the students' professional development and contribute to shaping the future of the industry.
We kindly request your consideration of our invitation to speak at Fullerton College. Your expertise and insights would greatly benefit our students, and we would be grateful for your participation. Please let us know of your interest and availability at your earliest convenience.
Thank you for considering our invitation, and we hope to have the privilege of welcoming you as a guest speaker at Fullerton College.
Sincerely,
[Your Name]
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4. Briefly discuss the major methods that banks utilized to manage their liquidity risk. Why does bank generally prefer to use liability management to manage its liquidity problem? (10 points)
The following techniques are used by banks to control their liquidity risk: Cash Reserves: Banks keep a specific amount of cash on hand to cover any sudden outflows of funds or customer withdrawals that may arise.
Facilities supplied by central banks: When banks experience a liquidity crunch, they can use the lending facilities offered by central banks to borrow money.Interbank Borrowing: To satisfy their immediate liquidity needs, banks may borrow from other banks in the interbank market. As a result, they can access extra liquidity that other institutions have. Management of Assets and Liabilities: Banks actively manage their balance sheets by matching the maturities and cash flows of their Assets and Liabilities. This makes it easier to maintain a regular flow of money to pay bills. In general, banks favour using liability management
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Trade deficit may be defined as: a. Export plus imports
b. Export less imports
c. Imports less export.
d. None of the above
The correct definition of trade deficit is option c: Imports minus exports. A trade deficit can have various implications for an economy.
A trade deficit occurs when the value of a country's imports exceeds the value of its exports. In other words, it represents the amount by which a country's imports exceed its exports during a specific period. The trade deficit reflects an imbalance in the trade relationship between a country and its trading partners.
In more detail, if a country's total imports of goods and services exceed its total exports, it results in a negative balance of trade, indicating a trade deficit. This means that the country is spending more on imports than it is earning from exports, leading to a net outflow of money from the country.
A trade deficit can have various implications for an economy. It may affect the country's currency exchange rate, balance of payments, and overall economic competitiveness. Governments often monitor and analyze trade deficits to assess their impact on domestic industries, employment, and economic growth. Measures such as trade policies, exchange rate adjustments, and promotion of exports are sometimes implemented to address trade deficits and strive for a more balanced trade position.
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Provide a definition for the yield to maturity of a bond (definition and what is included in the calculation.) Provide a definition of bond duration and why it is important to understand in bond portfolio construction. Explain the difference in bond convexity between a noncallable bond and a callable bond.
1. Yield to Maturity (YTM): The total return an investor can expect from holding a bond until maturity, taking into account its current market price, coupon rate, and time to maturity.
2. Bond Duration: A measure of a bond's sensitivity to changes in interest rates, helping investors assess the potential impact of interest rate fluctuations on bond prices.
Yield to Maturity (YTM) of a bond refers to the total return an investor can expect to receive if they hold the bond until its maturity date. It is the internal rate of return (IRR) that equates the present value of all future cash flows from the bond (coupon payments and the final principal payment) to its current market price. The YTM calculation takes into account the bond's coupon rate, market price, time to maturity, and the reinvestment of coupon payments at the YTM rate.
Bond duration measures the sensitivity of a bond's price to changes in interest rates. It is an important concept in bond portfolio construction as it helps investors assess the potential price volatility of their bond holdings in response to interest rate changes. Duration takes into account the bond's cash flows, time to maturity, and the prevailing interest rate environment. By understanding duration, investors can manage their portfolio's interest rate risk and make informed decisions about bond allocation and hedging strategies.
Bond convexity refers to the curvature of the relationship between a bond's price and its yield. It measures the sensitivity of a bond's duration to changes in yield. Noncallable bonds generally exhibit positive convexity, meaning their prices have a greater upward response to declining yields compared to the downward response to rising yields. Callable bonds, on the other hand, exhibit negative convexity because the issuer has the option to redeem the bond before maturity, which limits potential price appreciation when yields decline. Callable bonds have asymmetric price-yield relationships, causing them to have lower price sensitivity and a flatter price-yield curve compared to noncallable bonds.
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Two mutually exclusive projects are under consideration with the details shown. The company's required rate of return for projects of this risk level is 13%. using this information, answer the questions below: Year Project A Project B 0 (390,000) (62,000) 1 54,000 29,000 2 77,000 26,000 3 69,000 23,500 4 4 444,000 18,600 A) Calculate the payback period for each project. Round to two decimals. . decimals Project A Project B B) Based on the result of the payback calculation, which project would you recommend? C) Calculate the discounted payback period for each project. Round to two decimals. Project A Project B D) Based on the result of the discounted payback calculation, which project would you recommend? E) Calculate the Net Present Value for each project. Round to twchdecimals, no dollar signs, no commas. Project A Project B F) Based on the result of the net present value calculation, which project would you recommend? G) Calculate the Profitability Index for each project. Round to two decimals. Project A Project B H) Based on the result of the profitability index calculation, which project would you recommend?
To calculate the payback period for each project, we need to determine the number of years it takes for the initial investment to be recovered.
Project A:
Year 0: Initial investment = -$390,000
Year 1: Cash inflow = $54,000
Year 2: Cash inflow = $77,000
Year 3: Cash inflow = $69,000
Year 4: Cash inflow = $444,000
To calculate the payback period for Project A, we sum the cash inflows until we reach or exceed the initial investment:
Payback period for Project A = 2 + (390,000 - 54,000 - 77,000) / 69,000 = 2.88 years
Project B:
Year 0: Initial investment = -$62,000
Year 1: Cash inflow = $29,000
Year 2: Cash inflow = $26,000
Year 3: Cash inflow = $23,500
Year 4: Cash inflow = $18,600
To calculate the payback period for Project B, we sum the cash inflows until we reach or exceed the initial investment:
Payback period for Project B = 3 + (62,000 - 29,000 - 26,000 - 23,500) / 18,600 = 3.30 years
B) Based on the result of the payback calculation, we would recommend Project A because it has a shorter payback period of 2.88 years compared to Project B's payback period of 3.30 years.
C) To calculate the discounted payback period for each project, we need to discount the cash inflows using the required rate of return of 13%.
Discounted Payback period for Project A:
Year 0: Initial investment = -$390,000
Year 1: Discounted cash inflow = $54,000 / (1 + 0.13)^1 = $47,788.73
Year 2: Discounted cash inflow = $77,000 / (1 + 0.13)^2 = $60,469.92
Year 3: Discounted cash inflow = $69,000 / (1 + 0.13)^3 = $47,817.49
Year 4: Discounted cash inflow = $444,000 / (1 + 0.13)^4 = $302,049.79
To calculate the discounted payback period for Project A, we sum the discounted cash inflows until we reach or exceed the initial investment:
Discounted Payback period for Project A = 2 + (390,000 - 47,788.73 - 60,469.92) / 47,817.49 = 2.83 years
Discounted Payback period for Project B:
Year 0: Initial investment = -$62,000
Year 1: Discounted cash inflow = $29,000 / (1 + 0.13)^1 = $25,663.71
Year 2: Discounted cash inflow = $26,000 / (1 + 0.13)^2 = $20,312.21
Year 3: Discounted cash inflow = $23,500 / (1 + 0.13)^3 = $14,401.86
Year 4: Discounted cash inflow = $18,600 / (1 + 0.13)^4 = $10,431.38
To calculate the discounted payback period for Project B, we sum the discounted cash inflows until we reach or exceed the initial investment:
Discounted.
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1.11. Writing Skills Problem
Staff members from the marketing department of your firm are doing a splendid
job selling products to customers. Many of the customers are so pleased, in fact,
they are also buying shares in the company's stock, which means that they receive
a copy of the firm's annual report. Unfortunately, questions sometimes arise that
the marketing staff members are woefully inadequate at answering. Technical
questions about the firm's financial condition and performance are referred to the
chief financial officer, but the director of marketing has asked you to write a memo
in which you explain the key elements in an annual report so that marketing rep
resentatives are better prepared to respond to questions of a more general nature.
Required: Write a memo no longer than one page (single-spaced, double-spaced
between paragraphs) in which you describe the contents of an annual report so
that marketing personnel can understand the basic requirements. The memo
should be dated and addressed to B. R. Neal, Director of Marketing, from you;
the subject is "Contents of an Annual Report."
To the Student: In business writing, the primary elements are clarity and concisentess.
You must keep in mind the audience you are addressing and the objective of the
communication.
The given written information in a formal manner based on the given question is shown;
[Your Name]
[Your Title]
[Date]
B. R. Neal
Director of Marketing
[Company Name]
Subject: Contents of an Annual Report
Dear Mr. Neal,
I am writing to provide you with a concise overview of the key elements in an annual report, so that our marketing representatives are better equipped to respond to general inquiries from our valued customers.
An annual report typically comprises the following sections:
Letter to Shareholders: This introductory letter from our CEO highlights the company's achievements, challenges, and strategic direction.
Company Overview: This section presents a summary of our business model, key markets, and competitive advantages.
Financial Highlights: It outlines the company's financial performance over the past year, including revenue, profitability, and key ratios.
Management's Discussion and Analysis (MD&A): Here, our management team provides a comprehensive analysis of the financial results, discussing the factors influencing performance and future prospects.
Financial Statements: These statements include the balance sheet, income statement, cash flow statement, and statement of equity. They provide a detailed snapshot of the company's financial position, results of operations, and cash flows.
Notes to Financial Statements: This section contains additional details and explanations related to the financial statements, including accounting policies, contingencies, and other relevant information.
Corporate Governance: It outlines our corporate governance practices, board structure, and executive compensation.
Risk Factors: This section identifies and discusses potential risks and uncertainties that may affect the company's future performance.
Sustainability and CSR: Here, we highlight our environmental, social, and governance initiatives, showcasing our commitment to responsible business practices.
Auditor's Report: This report provides an independent assessment of the financial statements' fairness and adherence to accounting principles.
By familiarizing themselves with these sections, our marketing representatives will gain a better understanding of the annual report's structure and content, enabling them to respond more confidently to general inquiries.
If any technical or financial questions arise, please direct them to the Chief Financial Officer for expert guidance.
Thank you for your attention to this matter.
Sincerely,
[Your Name]
[Your Title]
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What is the salvage cash flow for a piece of equipment given the following information. The equipnant had an intad book value of $226,000. The asset was set up to be depreciated straight-line for 8 years to a book valua of 0 the equipment can be sold today for $69,000. Depreclation has been taken for 4 years. The firm's tax rate is 29× a. 87483.20 b. 81760.00 c. 90753.60 d. 102200.00 e. 94841.60 1.98112.00
Given the initial book value, depreciation period, and sale value, the salvage cash flow is $87,483.20. None of the given options match the correct value.
The salvage cash flow represents the after-tax proceeds from the sale of an asset. To calculate it, we need to consider the book value, depreciation, sale value, and tax rate.
In this case, the equipment's initial book value is $226,000, and it is being depreciated straight-line over 8 years. After 4 years, the equipment has been depreciated for half of its useful life, which means its book value after 4 years would be $226,000 / 2 = $113,000. The equipment can be sold today for $69,000.
To determine the taxable gain or loss from the sale, we subtract the book value from the sale value: $69,000 - $113,000 = -$44,000. Since the sale value is less than the book value, it results in a loss. This loss can be used to offset taxable income. Multiplying the loss by the tax rate of 29%, we get a tax shield of -$44,000 * 0.29 = -$12,760.
The salvage cash flow is then calculated by adding the sale value and the tax shield: $69,000 + (-$12,760) = $56,240. However, the question asks for the salvage cash flow, which is the after-tax proceeds. So, we need to subtract the tax shield from the sale value: $69,000 - $12,760 = $56,240.
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List and define the elements of the marketing mix and then explain how the selection of specific target markets affects the specific marketing activities undertaken. Is it possible to create a complete marketing strategy by selecting a target market independently of the marketing mix? Explain.
Target markets shape marketing activities by influencing product, price, place, and promotion decisions. They cannot be selected independently of the marketing mix.
The elements of the marketing mix, also known as the 4Ps of marketing, are:
Product: Refers to the tangible goods or intangible services offered by a company to satisfy customer needs. It includes factors such as design, features, quality, branding, packaging, and warranties.
Price: Represents the amount of money customers are willing to pay for a product or service. Pricing decisions consider factors such as production costs, competition, market demand, and perceived value.
Place: Refers to the distribution channels and locations where customers can access and purchase the product. It involves decisions related to retail outlets, online platforms, logistics, warehousing, and transportation.
Promotion: Involves the communication strategies used to promote and create awareness about the product. It includes advertising, sales promotions, public relations, direct marketing, and personal selling.
The selection of target markets directly influences the marketing activities undertaken. By identifying the needs and characteristics of the target market, companies can tailor their product, pricing, distribution, and promotional strategies to meet customer preferences. For example, the product can be customized to match target market preferences, pricing can be adjusted based on their willingness to pay, distribution channels can be selected for convenient access, and promotional messages can be tailored to resonate with the target market. Target market selection cannot be done independently of the marketing mix, as they are interconnected and essential for developing a comprehensive marketing strategy.
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The XWZ Company is listed in the stock market and it's expected to pay a dividend of $2.00 per share at the end of the year (D1=$2.00). The XWZ Company share has a beta of 0.9 with the market. The risk free rate is 4% p.a. and the market risk premium is 6%. The XWZ Company shares are currently selling $30.00 each. The XWZ Company's dividend it is expected to grow at a constant rate g.
a) Calculate the required rate of return on the XWZ share using the CAPM. [8 marks]
b) Use the constant growth model to calculate the dividend grow rate g . [8 marks]
c) Calculate the XWZ Company stock in year 2 and 3. [9 marks]
The required rate of return on the XWZ share using the CAPM is 9.4%.
The dividend growth rate (g) using the constant growth model is 2.73%.
the XWZ Company stock is estimated to be $27.86 in Year 2 and $30.22 in Year 3.
a) To calculate the required rate of return on the XWZ share using the Capital Asset Pricing Model (CAPM), we can use the formula:
Required Rate of Return = Risk-Free Rate + Beta * Market Risk Premium
Given:
Risk-Free Rate (rf) = 4% (0.04)
Beta (β) = 0.9
Market Risk Premium = 6% (0.06)
Plugging in the values into the formula:
Required Rate of Return = 0.04 + 0.9 * 0.06
= 0.04 + 0.054
= 0.094 or 9.4%
Therefore, the required rate of return on the XWZ share using the CAPM is 9.4%.
b) To calculate the dividend growth rate (g) using the constant growth model, we can use the formula:
g = Required Rate of Return - Dividend Yield
Given:
Required Rate of Return = 9.4%
Dividend Yield = Dividend (D1) / Current Share Price
The dividend yield can be calculated by dividing the expected dividend (D1) by the current share price. Given:
D1 = $2.00
Current Share Price = $30.00
Dividend Yield = 2.00 / 30.00
= 0.0667 or 6.67%
Now, we can calculate the dividend growth rate (g):
g = 0.094 - 0.0667
= 0.0273 or 2.73%
Therefore, the dividend growth rate (g) using the constant growth model is 2.73%.
c) To calculate the XWZ Company stock in year 2 and 3 using the constant growth model, we can use the formula:
Stock Price (P2 or P3) = Dividend (D2 or D3) / (Required Rate of Return - Dividend Growth Rate)
Given:
Dividend (D1) = $2.00
Required Rate of Return = 9.4%
Dividend Growth Rate (g) = 2.73%
For Year 2:
D2 = D1 * (1 + g)
= $2.00 * (1 + 0.0273)
= $2.055
P2 = D2 / (Required Rate of Return - Dividend Growth Rate)
= $2.055 / (0.094 - 0.0273)
= $27.86
For Year 3:
D3 = D2 * (1 + g)
= $2.055 * (1 + 0.0273)
= $2.112
P3 = D3 / (Required Rate of Return - Dividend Growth Rate)
= $2.112 / (0.094 - 0.0273)
= $30.22
Therefore, the XWZ Company stock is estimated to be $27.86 in Year 2 and $30.22 in Year 3.
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Electro Company produces small electrical engines. The manufacturing costs per unit to produce a small engine are given. Variable selling costs to obtain and fill orders normally average $4.1 per unit when Electro sells the engines to local customers. Recently, however, Electro paid $81,000 to advertise its various products in an international trade magazine. The Company has just received an order from a large mail-order merchandising company in France for 592 engines at a total offering price of $22,000. The merchandising company is willing to pay all shipping charges except the initial packaging, which costs $1.8 per engine Calculate and enter the total incremental cost that Electro would expect to incur if it accepted and filled this order in the answer space below:
The total incremental cost that Electro would expect to incur if it accepted and filled this order is $3492.8.
The manufacturing costs per unit to produce a small engine are given. Variable selling costs to obtain and fill orders normally average $4.1 per unit when Electro sells the engines to local customers. Recently, however, Electro paid $81,000 to advertise its various products in an international trade magazine. The Company has just received an order from a large mail-order merchandising company in France for 592 engines at a total offering price of $22,000. The merchandising company is willing to pay all shipping charges except the initial packaging, which costs $1.8 per engine.
The incremental cost is a cost that is involved in the production of an additional unit of a product. To calculate the total incremental cost that Electro would expect to incur if it accepted and filled this order, we need to find the incremental cost per unit and then multiply it with the total number of units. Let's start with calculating the incremental cost per unit.The variable selling cost per unit to obtain and fill orders averages $4.1. The initial packaging cost per unit is $1.8. Thus, the incremental cost per unit = Variable selling cost per unit + Initial packaging cost per unit= $4.1 + $1.8 = $5.9
Now, the total incremental cost that Electro would expect to incur if it accepted and filled this order = Incremental cost per unit × Total number of units= $5.9 × 592= $3492.8
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. Define the four global retailing strategies.
Global retailing strategies refer to the different approaches that retailers use to expand their businesses beyond national boundaries. The four global retailing strategies include multi-domestic, global, transnational, and international.
Multi-domestic strategy, This strategy involves operating separate businesses in different countries, each of which is designed to cater to the specific needs of customers in that particular region. Multi-domestic companies design their products, marketing, and operations around the culture and preferences of a specific region.
The products and services of the company in one country may be different from what is provided in another country. Global strategy. This strategy involves offering standardized products and services to customers in different countries. The product design, pricing, and promotional strategies are the same across all regions.
Companies that use this strategy are those whose products or services have the same characteristics across the world. Transnational strategyThis strategy combines the features of both global and multi-domestic strategies. Companies that use this strategy aim to achieve both cost efficiency and local responsiveness.
They have a centralized structure that enables them to maintain global consistency while also being sensitive to local needs. International strategy. This strategy involves exporting products and services to foreign markets. Companies using this strategy typically do not have a physical presence in the country they are exporting to and have a limited scope of operations.
The company does not invest heavily in adapting to local cultures and preferences since they only operate in one country.
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The Parson's Corporation has the following ratios: A0*/S0 = 1.6; L0*/S0 = 0.4; profit margin = 0.10; and dividend payout ratio = 0.45, (45%). Sales last year were $250 million. Assuming that these ratios will remain constant, use the AFN equation to determine the firm’s self-supporting growth rate—in other words, the maximum growth rate Parson can achieve without having to employ non-spontaneous external funds.
The self-supporting growth rate for Parson Corporation is 10%. This means the company can grow at a maximum rate of 10% without requiring additional external funds beyond its retained earnings and spontaneous liabilities.
The growth rate is determined using the AFN (Additional Funds Needed) equation, which takes into account the various ratios and sales figures provided.
To explain the calculation of the self-supporting growth rate for Parson Corporation, we need to understand the components involved. The AFN (Additional Funds Needed) equation is used to determine the amount of external funds required to support a particular growth rate.
The given ratios provide insights into the company's financial structure. The A0*/S0 ratio represents the assets required to generate $1 of sales, which is 1.6 in this case. The L0*/S0 ratio represents the spontaneous liabilities (current liabilities and accruals) required to support $1 of sales, which is 0.4.
The profit margin is given as 0.10, indicating that the company generates a net income of 10% of its sales. The dividend payout ratio of 0.45 (45%) indicates that 45% of the net income is distributed as dividends, while the remaining 55% is retained.
Sales last year were $250 million, and assuming the ratios will remain constant, we can use the AFN equation to determine the self-supporting growth rate. The AFN equation is as follows:
[tex]AFN = (S1 × (A0*/S0) − (S0 × (L0*/S0)) − (PM × S1)) × (1 − DPR),[/tex]
where:
- S1 represents the projected sales for the next period
- A0*/S0 is the assets-to-sales ratio
- L0*/S0 is the liabilities-to-sales ratio
- PM is the profit margin
- DPR is the dividend payout ratio
Since we want to determine the maximum growth rate without needing non-spontaneous external funds, we set AFN equal to zero:
[tex]0 = (S1 × (A0*/S0) − (S0 × (L0*/S0)) − (PM × S1)) × (1 − DPR).[/tex]
Rearranging the equation, we can solve for S1:
[tex]S1 = (S0 × (L0*/S0) + (PM × S1)) / (A0*/S0 - (1 − DPR)).[/tex]
Plugging in the given values, we have:
S1 = ($250 million × 0.4 + (0.10 × S1)) / (1.6 - (1 − 0.45)).
Simplifying the equation:
S1 = ($100 million + 0.10S1) / 0.25.
Multiplying both sides by 0.25:
0.25S1 = $100 million + 0.10S1.
Combining like terms:
0.15S1 = $100 million.
Solving for S1:
S1 = $100 million / 0.15.
S1 ≈ $666.67 million.
The self-supporting growth rate is calculated by dividing the increase in sales (S1 - S0) by the original sales (S0):
Growth rate = ($666.67 million - $250 million) / $250 million.
Growth rate ≈ 166.67% / 250% = 0.6667 ≈ 66.67%.
Therefore, the self-supporting growth rate for Parson Corporation is approximately 66.67%. This means the company can grow at a maximum rate of 66.67% without requiring additional external funds beyond its retained earnings and spontaneous liabilities.
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