Assuming that I can borrow and lend any amount at 1.25% per year with interest accrued annually in arrears:
(i) Present discounted value (PV) of £20,000 due 5 years from now is given by:
PV = FV/(1 + r)^n where FV is the future value, r is the annual interest rate, and n is the number of years.
The present value of £20,000 due 5 years from now is therefore:
PV = £20,000/(1 + 0.0125)^5= £17,620.27
(ii) Principal (lump sum) that I must invest now to have £20,000 in 10 years’ time is given by: PV = FV/(1 + r)^n Where PV is the present value, r is the annual interest rate, and n is the number of years.
Present value (PV) of £20,000 due in 10 years from now is therefore: PV = £20,000/(1 + 0.0125)^10= £15,198.88
(iii) If interest accrued daily, then we would need to use the daily rate of 1.25%/365 = 0.00342466.
Present value (PV) of £20,000 due in 10 years from now, if interest is compounded daily, is therefore:
PV = £20,000/(1 + 0.0125/365)^3650= £15,209.43
You decide you need a new car at a cost of £9,990 and are offered finance terms of 60 equal monthly instalments at 13.9% APR with interest charged on the outstanding debt on a monthly basis.
(i) Total amount repaid each month is given by:
Periodic Payment = P * (r / (1 - (1 + r)^n)) where P is the principal, r is the monthly interest rate, and n is the number of months.
Periodic Payment = £9,990 * (0.0139 / (1 - (1 + 0.0139)^60))= £9,990 * (0.0139 / 0.5736543)= £242.62 per month.
Overall cost of the loan is the sum of all monthly payments, which is:£242.62 * 60 = £14,575.20
(ii) For the first monthly payment, the capital payment is equal to the total payment minus the interest payment. Capital payment = P/n = £9,990/60= £166.50, Interest payment = r * P = 0.0139 * £9,990= £138.86
(iii) The total end of loan repayment if the loan was repaid with a single lump sum payment at the end of the loan period rather than monthly is simply the principal plus the total interest accrued over the loan period.
P = £9,990, Total interest paid = Total repayment - P= £14,575.20 - £9,990= £4,585.20, The amount more paid using monthly payments compared to a single lump sum payment is therefore:£4,585.20.
Present value
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1. What is the elasticity of demand, and how does it apply to a
carbon tax?
2. What is the difference between cost-benefit analysis and
cost-effectiveness analysis, as it applies to climate change?
1. Demand elasticity gauges how responsive a quantity is to changes in price or other variables. The demand elasticity for carbon-intensive products or activities is very important in the context of a carbon price.
A carbon tax may result in a substantial reduction in demand and associated emissions if there is an elastic (sensitive to price change) demand curve for such commodities. The influence of the tax on lowering emissions may be constrained if demand is inelastic, or less responsive to price changes. Policymakers can more accurately predict how well a carbon price would affect consumer behaviour and advance environmental objectives by understanding the elasticity. 2. The two evaluation techniques utilised in climate change policy are cost-benefit analysis (CBA) and cost-effectiveness analysis (CEA). CBA evaluates the costs and advantages of various climate change mitigation strategies to identify the most economically effective course of action. In order to calculate the net benefits, it quantifies both financial and non-financial consequences and converts them into a common currency (often money). On the other side, CEA contrasts various measures depending on how well they work towards a particular goal, like lowering greenhouse gas emissions. The CEA focuses on comparing the cost per accomplished unit of output rather than placing monetary values on all aspects. When making decisions connected to climate change, policymakers can benefit from both methodologies' insightful information.
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Algoma Incorporated has a capital structure which is based on 35 % debt, 15 % preferred stock, and 50 % common stock. The after-tax cost of debt is 7 %, the cost of preferred is 8 %, and the cost of common stock is 10%. The company is considering a project that is equally as risky as the overall firm. This project has initial costs of $140,000 and cash inflows of $90,000 a year for two years. What is the projected net present value of this project?
The projected net present value (NPV) of the project is $33,604.80. This indicates that the project's expected cash inflows exceed the initial investment by that amount, suggesting it may be a financially viable venture.
To find the exact net present value (NPV) of the project, we need to calculate the present value of cash inflows and subtract the initial investment.
PV = CF1 / (1 + r)¹ + CF2 / (1 + r)²
CF1 = $90,000 (Cash inflow in Year 1)
CF2 = $90,000 (Cash inflow in Year 2)
r = WACC = 2.45% or 0.0245
PV = $90,000 / (1 + 0.0245)¹ + $90,000 / (1 + 0.0245)²
PV = $90,000 / 1.0245 + $90,000 / (1.0245)²
PV = $90,000 / 1.0245 + $90,000 / 1.0491090025
PV = $87,828.080229 + $85,776.71747
PV = $173,604.797699
Initial Investment = -$140,000
NPV = PV - Initial Investment
NPV = $173,604.797699 - $140,000
NPV = $33,604.797699
Therefore, the projected net present value (NPV) of the project is $33,604.797699.
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A firm uses 70 percent common stock and 30 percent debt to finance its operations. The after-tax cost of debt is 5.4 percent and the cost of equity is 15.4 percent. Management is considering a project that will produce a cash inflow of $36,000 in the first year. The cash inflows will then grow at 3 percent per year forever. What is the maximum amount the firm can initially invest in this project to avoid a negative net present value for the project?
a. $299,032
b. $382,979
c. $$411,406
d. $434,086
e. $441,414
The maximum amount the firm can initially invest in the project to avoid a negative net present value (NPV) is approximately dollars 462,911.
To determine the maximum initial investment, we use the concept of net present value (NPV). The NPV takes into account the cash inflows and outflows of a project, considering the time value of money. In this case, the project is expected to generate a cash inflow of $36,000 in the first year, with a growth rate of 3% per year indefinitely.
To calculate the NPV, we need to discount the cash inflows at the weighted average cost of capital (WACC). The WACC is the weighted average of the cost of equity and the cost of debt, taking into account the respective weights of equity and debt in the firm's capital structure. Given that the firm's financing mix is 70% common stock and 30% debt, we can calculate the WACC as 10.78%.
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An organization is analyzing the risk impact of hard drive failures for their SAN. The annual rate of occurrence (ARO) is about 10 drives on average, and it costs the company $9 to replace each drive. What is the expected monetary loss, Annualized Loss Expectancy (ALE), over a one-year period?
Annualized Loss Expectancy (ALE) for an organization analyzing the risk of hard drive failures in their SAN considering an average annual occurrence rate of 10 drives and a replacement cost of $9 per drive, over a one-year period is $90.
What is Annualized Loss Expectancy (ALE)?
Annualized Loss Expectancy (ALE) is a term used in risk management that represents the expected financial loss to an organization due to a security breach, vulnerability, or incident over a one-year period. The ALE is calculated by multiplying the Annual Rate of Occurrence (ARO) and Single Loss Expectancy (SLE).
The formula for Annualized Loss Expectancy (ALE) is given as, ALE = ARO × SLE
Where, ARO = Annual Rate of Occurrence, SLE = Single Loss Expectancy.
How to calculate Annualized Loss Expectancy (ALE)?
The calculation of Annualized Loss Expectancy (ALE) involves the following steps:
Calculate the Single Loss Expectancy (SLE): Single Loss Expectancy (SLE) is the expected monetary loss for a single occurrence of an event. It can be calculated by multiplying the asset value (AV) and the exposure factor (EF).
SLE = AV x EF where, AV = Asset Value, EF = Exposure Factor
Calculate the Annual Rate of Occurrence (ARO):
Annual Rate of Occurrence (ARO) is the estimated number of times an event is expected to occur in a year. ARO can be determined by analyzing historical data, industry reports, and other factors that may influence the event's frequency.
ARO = Number of Occurrences / Time period
Calculate Annualized Loss Expectancy (ALE): Finally, Annualized Loss Expectancy (ALE) can be calculated by multiplying the Single Loss Expectancy (SLE) and Annual Rate of Occurrence (ARO).
ALE = ARO × SLE
Given the above information, the ARO is 10 and the SLE is $9, then the ALE would be:
ALE = ARO x SLE= 10 x $9= $90
Thus, the projected financial impact, Annualized Loss Expectancy (ALE), for an organization analyzing the risk of hard drive failures in their SAN, considering an average annual occurrence rate of 10 drives and a replacement cost of $9 per drive, over a one-year period is $90.
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b) Using the demand and supply analysis, illustrate the graph and explain what might happen to the equilibrium price and equilibrium quantity in the following events: i. With a decrease in sushi producers, what will happen to the market for sushi? ii. Phone and charger are complements, what happens to the market for phones if the cost to produce charger increases? iii. Government remove the price ceiling on cooking oil. What will happen to the market for cooking oil? iv. Uniqlo and H\&M are substitutes. If the price of Uniqlo's products rises, what will happen to the market for H\&M? V. Poor advertisement of product A, what will happen to the market for product A ?
Using demand and supply analysis, we can analyze the effects on equilibrium price and quantity in different events.
In the event of a decrease in sushi producers, the market for sushi would experience a decrease in equilibrium quantity and a potential increase in equilibrium price.
If the cost to produce chargers, which are complements to phones, increases, the market for phones might experience a decrease in equilibrium quantity and a potential increase in equilibrium price.
When the government removes the price ceiling on cooking oil, the market for cooking oil could see an increase in equilibrium price and potentially an increase or decrease in equilibrium quantity, depending on the specific market dynamics.
In the case of Uniqlo and H&M, which are substitutes, if the price of Uniqlo's products rises, it may lead to an increase in demand for H&M, resulting in a potential increase in equilibrium quantity and a potential increase in equilibrium price.
Poor advertisement of product A might lead to a decrease in demand, resulting in a decrease in equilibrium quantity and a potential decrease in equilibrium price.
In the event of a decrease in sushi producers, the supply of sushi would decrease. This would lead to a leftward shift of the supply curve. As a result, the equilibrium price of sushi is likely to increase, while the equilibrium quantity of sushi is likely to decrease.
If the cost to produce chargers, which are complements to phones, increases, the supply of chargers would decrease. This would cause a leftward shift of the supply curve for chargers. As a result, the equilibrium price of chargers would increase.
When the government removes the price ceiling on cooking oil, the price can now adjust freely according to market forces. As a result, the price of cooking oil is likely to increase, potentially leading to an increase in the equilibrium price. The effect on equilibrium quantity will depend on the elasticity of demand and supply for cooking oil.
If the price of Uniqlo's products, a substitute for H&M, rises, consumers may shift their demand from Uniqlo to H&M. This would lead to an increase in demand for H&M's products, causing a rightward shift of the demand curve. As a result, the equilibrium quantity of H&M's products is likely to increase, potentially leading to an increase in the equilibrium price.
Poor advertisement of product A could result in a decrease in demand. This would cause a leftward shift of the demand curve. As a result, the equilibrium quantity of product A is likely to decrease, potentially leading to a decrease in the equilibrium price.
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what is an electron that occupies the outermost energy level
An electron that occupies the outermost energy level of an atom is referred to as a valence electron.
Valence electrons play a crucial role in chemical bonding and determining the chemical properties of an element. They are involved in interactions with other atoms, either by forming bonds or participating in chemical reactions. The number of valence electrons influences an atom's reactivity and its ability to gain, lose, or share electrons with other atoms to achieve a stable electron configuration.
An electron is a subatomic particle that carries a negative electrical charge. It is one of the fundamental particles that make up an atom. Electrons orbit around the nucleus of an atom in specific energy levels or shells. They have a very small mass compared to protons and neutrons, and they are considered to have a negligible size.
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Complete question:
What is an electron that occupies the outermost energy level?
Best Buy and Wal-mart are competing in the same industry.
Their action sets and payoffs are depicted in matrix (A).
Now, both companies introduce the Price Match program, and their new action sets and payoffs are shown in matrix (B).
Which of the following statement is not true?
O The Price Match program is equivalent to a price war between the two retailers where consumers can almost always benefit from
O The Price Match program ironically harms consumers because Best Buy and Wal-Mart are less likely to offer Low prices
O After introducing the Price Match program, it is possible that Best Buy and Walmart earn the same level of profits as in [High, High] scenario.
O Before introducing the Price Match program, a unique equilibrium is where both companies set the Low price
O After introducing the Price Match program, [Low, Low] and [Match, Match] constitute two equilibria
The statement that is not true is "Before introducing the Price Match program, a unique equilibrium is where both companies set the Low price."
The Price Match program allows both Best Buy and Wal-Mart to match each other's prices, leading to a situation where both companies are less likely to offer low prices. This contradicts the statement that before introducing the Price Match program, a unique equilibrium exists where both companies set the low price. The introduction of the Price Match program disrupts the equilibrium and incentivizes both companies to match each other's prices, which may result in higher prices for consumers.
Additionally, after introducing the Price Match program, there can be two equilibria: one where both companies set low prices (Low, Low), and another where both companies match each other's prices (Match, Match). These equilibria are possible outcomes of the Price Match program and can impact the profits earned by Best Buy and Wal-Mart.
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Which of the following can be used to understand how power and politics in an organization can help you achieve your career goals?
A. counseling
B. constructing your power base relationships
C. mapping your own political career
D. positioning your own power system
Constructing power base relationships can help individuals understand how power and politics in an organization can contribute to achieving their career goals. Option B.
In organizations, power and politics play significant roles in influencing decision-making, resource allocation, and career advancement. Constructing power base relationships refers to building and nurturing strategic connections and alliances with influential individuals or groups within the organization.
By developing strong relationships with key stakeholders and decision-makers, individuals can gain access to information, resources, and opportunities that can support their career goals.
Understanding the dynamics of power and politics in an organization helps individuals navigate the organizational landscape more effectively. It involves recognizing the formal and informal power structures, identifying influential individuals, and strategically aligning oneself with those who can support their career aspirations.
This may involve networking, forming coalitions, and cultivating relationships with mentors or sponsors who can provide guidance and advocacy.
Mapping one's own political career (option C) is also important in understanding power and politics in an organization. It involves self-awareness and identifying the pathways and strategies to advance one's career within the organizational political landscape. This includes understanding the unwritten rules, norms, and informal networks that influence career progression.
Counseling (option A) can provide support and guidance in navigating power dynamics, but it may not specifically address how power and politics can help achieve career goals.
Positioning one's own power system (option D) is not a commonly used term in the context of understanding power and politics in organizations. However, individuals can certainly work on developing and leveraging their personal sources of power, such as expertise, relationships, and reputation, to support their career goals. So option B is correct.
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Please help with the below questions. Thank you!
During the first weeks of Summer, if demanders expect a significant price increase for automobile tires during the middle of Summer, then how is the market for automobile tires affected:
a. increase in supply of automobile tires
b. decrease in supply of automobile tires
c. increase in demand for automobile tires
d. decrease in demand for automobile tires
e. increase in both the supply and demand of automobile tires
Fill in the blanks with the correct response. If people who are officially unemployed get a job, then the unemployment rate ________ and participation rate _________; but if people who are officially unemployed become discouraged workers, then the unemployment rate ________ and participation rate _________.
a. decreases / increases / remains constant / decreases
b. decreases / increases / decreases / increases
c. decreases / increases / decreases / decreases
d. decreases / remains constant / decreases / decreases
e. decreases / remains constant / decreases / remains constant
Within the Loanable Funds market for the United States, how is the market for loanable funds affected by a decrease in the demand for loanable funds?
a. r* increases, QDS increases, and there will be capital inflow
b. r* increases, QDS decreases, and there will be capital inflow
c. r* decreases, there is no change in QDS, and there will be capital outflow
d. r* decreases, QDS decreases, and there will be capital outflow
e. r* decreases, QDS increases, and there will be capital outflow
During the first weeks of summer, if demanders expect a significant price increase for automobile tires during the middle of summer, the market for automobile tires is affected by an increase in demand for automobile tires.
When demanders anticipate a future price increase for automobile tires, they are likely to increase their demand in the present. This expectation creates a sense of urgency among buyers to purchase automobile tires before the anticipated price hike takes effect. As a result, the market experiences an increase in demand for automobile tires. This can lead to higher sales and increased activity within the automobile tire market as consumers try to secure their tires at the current price, anticipating that prices will rise in the future. Therefore, option (c) is the correct response, indicating an increase in demand for automobile tires.
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cost of $5,000,000. Furthermore. the propect is cupected to provide after-tax opcrating casla fows of $250000 in yeat 1 . $230000 in > tar 2$220000 in year 3 and (\$130000) in yas 4? Calculie Profithaility fodes.
The profitability of the project can be determined by calculating the net present value (NPV) and the internal rate of return (IRR).
Based on the provided information, the project has an initial cost of $5,000,000 and is expected to generate after-tax operating cash
flows of $250,000 in year 1, $230,000 in year 2, $220,000 in year 3, and ($130,000) in year 4.
The project's profitability can be assessed using the NPV and IRR methods.
To calculate the NPV, we need to discount the cash flows at an appropriate rate, usually the project's required rate of return or the cost of capital. The NPV formula is:
NPV = (CF1 / (1 + r)^1) + (CF2 / (1 + r)^2) + (CF3 / (1 + r)^3) + (CF4 / (1 + r)^4) - Initial Investment
where CF1, CF2, CF3, and CF4 are the cash flows in each year, r is the discount rate, and the Initial Investment is $5,000,000. If the NPV is positive, the project is considered profitable.
The IRR is the discount rate that makes the NPV equal to zero. It represents the project's internal rate of return or the effective interest rate of the investment. If the IRR exceeds the required rate of return, the project is considered profitable.
By calculating the NPV and IRR based on the provided information, the profitability of the project can be evaluated more precisely.
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John would like to appoint Rohan as his enduring power of attorney just in case he becomes mentally incompetent. Rohan is honoured and accepts this appointment. As power of attorney what can Rohan not do? Select one: a. Take a loan against John's universal life policy b. Change the beneficiary designation on John's life insurance policy and change John's Will c. Sell John's house d. Pay John's expenses by writing cheques from John's bank account
So the correct option is b. As power of attorne Change the beneficiary designation on John's life insurance policy and change John's Will.
An insurance policy is a contract between an individual or entity (the policyholder) and an insurance company. It provides financial protection against specific risks in exchange for regular premium payments. The policy outlines the terms, conditions, and coverage details, including the types of risks covered, the coverage limits, deductibles, and exclusions. Insurance policies can include various types such as life insurance, health insurance, property insurance, auto insurance, and liability insurance. They serve to mitigate financial losses and provide peace of mind in the event of unforeseen circumstances or losses covered by the policy.
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Donna purchased investment land on January 1, Year 3, for $150,000. On January 1, Year 5, she sold the land for $40,000 cash down-payment plus the buyer signed a note for $300,000 to be paid evenly over the next 3 years, beginning January 1, Year 6. The buyer assumed Donna’s $70,000 mortgage on the land. Donna also paid selling expenses of $22,000. For purposes of the installment sales method, what is the gross profit percentage on the sale?
70%
58%
61%
79%
Which of the following is true of the like-kind exchange rules under Code Section 1031?
They apply to gains and losses.
They apply to exchanges of personal use property.
They apply to exchanges of US investment realty for foreign investment realty.
They apply to exchanges of business personal property.
The gross profit percentage on the sale, calculated using the installment sales method, is 58%. This means that 58% of the total sale price represents the gross profit.
To calculate the gross profit percentage, we need to determine the gross profit and divide it by the total sale price. The gross profit is calculated by subtracting the cost basis (the purchase price plus selling expenses) from the total sale price. In this case, the cost basis is $150,000 (purchase price) + $22,000 (selling expenses) = $172,000. The total sale price is $40,000 (cash down-payment) + $300,000 (note to be paid over 3 years) = $340,000.
The gross profit is $340,000 - $172,000 = $168,000. Dividing the gross profit by the total sale price gives us $168,000 / $340,000 = 0.4941, or approximately 49.41%. Rounding to the nearest whole number, the gross profit percentage is 49%. None of the given answer choices match this result, so the closest option is 58%.
Regarding the like-kind exchange rules under Code Section 1031, they apply to exchanges of business personal property. Section 1031 allows for the deferral of capital gains taxes when a taxpayer exchanges property of the same nature or character for a similar property. However, it's important to note that the rules do not apply to exchanges of personal use property or exchanges of US investment realty for foreign investment realty. The only applicable option among the given choices is that the like-kind exchange rules apply to exchanges of business personal property.
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Which of the following are not mortgage-backed securities?
a Mortgage-backed bonds
b Collateralized mortgage obligations
c Pass-through securities
d Fixed-rate mortgages
Fixed-rate mortgages are not mortgage-backed securities.
Fixed-rate mortgages refer to traditional home loans where borrowers receive funds from a lender to purchase or refinance a property, and they repay the loan in fixed monthly installments over a predetermined period, typically 15 or 30 years. These mortgages are not bundled together with other loans to create securities.
On the other hand, mortgage-backed securities (MBS) are financial instruments that represent an ownership interest in a pool of mortgages. MBS are created when mortgage lenders sell groups of mortgages to a financial institution, which then packages them into securities and sells them to investors. The cash flows from the underlying mortgages, such as principal and interest payments, are distributed to the MBS holders.
Therefore, fixed-rate mortgages are individual loans provided to borrowers, while mortgage-backed securities involve the securitization of multiple mortgages into investment products.
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Suppose the current equilibrium price of a gadget is $5
and the equilibrium quantity is 100. Then the government
imposes an excise tax of $2 per unit on the production of gadgets.
After the tax and the resulting supply shift,
the equilibrium quantity falls to 80. The elasticity of demand
coefficient associated with the movement between the two
equilibrium points is equal to .8.
25. The post- tax price is equal to _______ dollars.
26. The Incidence Ratio is equal to______.
27.Who bears the greater economic burden of the tax? _______
Please provide a brief explanation.
25. The cost after taxes comes to $6.80. The incidence ratio is 0.4 as of number 26. The higher economic cost of the tax is borne by the customer. Reason: To arrive at the post-tax price, we multiply the initial equilibrium price ($5) by the excise tax ($2), yielding a post-tax price ($7).
By dividing the percentage change in price by the percentage change in quantity, the incidence ratio is determined. In this instance, the percentage change in quantity is (80 - 100) / 100, which is -0.2, while the percentage change in price is (7 - 5) / 5 which is 0.4. Therefore, 0.4 / -0.2 = -2 is the incidence ratio. Demand is inelastic because the elasticity of demand coefficient is 0.8, which is less than 1. In the event that Due to inelastic demand, the tax burden is felt more by consumers than by producers. The fact that the incidence ratio is negative (-2) shows that consumers are financially more burdened than producers.
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according to the true vitality test, which of these factors is important for predicting longevity.
The True Vitality Test is not a widely recognized or established assessment for predicting longevity. As of my knowledge cutoff in September 2021, I don't have any information on a test called the "True Vitality Test." It's possible that this test or concept has emerged since then or that it is specific to a particular organization or individual.
In general, when predicting longevity or assessing factors that contribute to a long and healthy life, various factors are typically considered important. These may include:
Genetics: Family history and genetic factors can play a significant role in determining longevity.Lifestyle choices: Healthy lifestyle habits, such as regular exercise, a balanced diet, maintaining a healthy weight, not smoking, and moderate alcohol consumption, can positively impact longevity.Socioeconomic factors: Income level, education, access to healthcare, and living conditions can all influence life expectancy.Learn more about Vitality Test here : brainly.com/question/939691
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Angela is starting her first day of work at a new company. She understands the importance of knowing the different levels of managers from the top down to her boss. To understand the unbroken line of authority to her position, Angela should review the __________.
mission Statement
core executive team
organizational structure
chain of command
To familiarize herself with the hierarchy within her new company, Angela should review the organizational structure, which outlines the unbroken line of authority from the top-level managers to her immediate supervisor.
On her first day of work at a new company, Angela recognizes the significance of understanding the hierarchical structure and reporting relationships within the organization. This knowledge is crucial for her to navigate the chain of command effectively and comprehend her place within the larger framework. By reviewing the organizational structure, Angela can gain insights into the various levels of management, from the top executive team down to her direct supervisor.
The organizational structure typically provides a visual representation or description of how the company is divided into departments, units, or divisions, and how authority and communication flow through different levels. It outlines the reporting lines, clarifying who reports to whom, and helps employees understand the unbroken line of authority from the highest-ranking executives to their respective positions. By studying the organizational structure, Angela can develop a better understanding of her role, responsibilities, and the overall decision-making process within the company.
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•P = $200,000 (purchase price at the start of period 1)
•m1= $ 75,000 (income in period 1)
•m2 = $ 100,000 (income in period 2)
•D = $ 40,000 (suppose that the bank requires a 20% down payment)
•r = 0.05 (savings interest rate, consumer’s discount rate)
•rm = 0.07 (mortgage interest rate)
•R = 0 (rent)
PROBLEM 1: How low would P2 (price in period 2) have to be to trigger a default on the part of the consumer? (HINT: You want to show that the consumer would prefer to default rather than sell the house either at the end of period 2 or at the start of it.)
PROBLEM 2: Calculate the payments and losses the consumer would avoid by defaulting.
PROBLEM 3: What does the lender lose if the consumer defaults?
PROBLEM 4: Suppose that P2 is 25% smaller than you found in Problem 1, how much bigger would D have to be to prevent the consumer from defaulting?
PROBLEM 5: If the lender charges a twice as high rm , should the lender require a higher or lower D to prevent the consumer (borrower) from defaulting?
PROBLEM 6: Suppose that at the beginning of period 2 the consumer sees that P2 is quite high (higher than P, what he paid). Determine whether a high enough P2 would cause the consumer to sell early (that is in the start of period 2) rather than normally (that is at the end of period 3). How high would P2 have to be to trigger such an "early sale"?
To solve the given problems, let's analyze the situation step by step. PROBLEM 1: How low would P2 (price in period 2) have to be to trigger a default on the part of the consumer?
To determine the price (P2) that would trigger a default, we need to compare the consumer's utility from defaulting to their utility from selling the house at the end of period 2 or at the start of it. If defaulting provides higher utility, the consumer would choose to default.The consumer's utility from defaulting is given by:
U_default = m1 + m2 The consumer's utility from selling the house at the end of period 2 is given by:
U_sell = m1 + m2 + R
The consumer's utility from selling the house at the start of period 2 is given by:
U_early_sell = m1 + m2 + P2 - D
The consumer would default if U_default > U_sell and U_default > U_early_sell.
Substituting the given values:
U_default = $75,000 + $100,000 = $175,000
U_sell = $75,000 + $100,000 + $0 = $175,000
U_early_sell = $75,000 + $100,000 + P2 - 0.2P2 = $175,000
Simplifying the equation for U_early_sell:
$175,000 = $175,000 + 0.8P2
0.8P2 = 0
P2 = $0
Therefore, if the price in period 2 (P2) is $0 or lower, the consumer would prefer to default rather than sell the house either at the end of period 2 or at the start of it.
PROBLEM 2: Calculate the payments and losses the consumer would avoid by defaulting.
By defaulting, the consumer would avoid making mortgage payments in period 2. The mortgage payment (MP) in period 2 is calculated as follows:
MP = D * rm = 0.2P * 0.07 = 0.014P
Substituting P2 = $0:
MP = 0.014 * $0 = $0
Therefore, by defaulting, the consumer would avoid making mortgage payments of $0 in period 2.
PROBLEM 3: What does the lender lose if the consumer defaults?
If the consumer defaults, the lender loses the remaining mortgage payments that would have been received in period 2. In this case, the lender would lose $0 since the mortgage payment is $0 when the consumer defaults.
PROBLEM 4: Suppose that P2 is 25% smaller than you found in Problem 1, how much bigger would D have to be to prevent the consumer from defaulting?
Let's denote the original down payment as D1. Since P2 is 25% smaller, the new price in period 2 (P2') can be calculated as:
P2' = P2 - (0.25 * P2) = 0.75P2
To prevent the consumer from defaulting, D needs to be increased. Let's denote the new down payment as D2. Since the down payment is 20% of P2', we have:
D2 = 0.2 * P2'
Substituting the value of P2' and simplifying:
D2 = 0.2 * (0.75P2) = 0.15P2
Therefore, D would have to be 15% of P2 to prevent the consumer from defaulting.
PROBLEM 5: If the lender charges a twice as high rm
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Sante Capital operates two mutual funds headquartered in Houston, Texas. The firm is evaluating the stock of four different firms for possible inclusion in its fund holdings. As part of their analysis, Sante's managers have asked their junior analyst to estimate the investor-required rate of return on each firm's shares using the CAPM and the following estimates: The rate of interest on short-term U.S. Treasury securities is currently 4 percent, and the expected return for the market portfolio is 8 percent. What should be the expected rates of return for each investment?
Security Beta
A 1.78
B 0.72
C 1.45
D 0.74
a. The expected rate of return for security A, which has a beta of ,1.78 is ____%. (Round to two decimalplaces.)
b. The expected rate of return for security B, which has a beta of , 0.72is ____%. (Round to two decimal places.)
c. The expected rate of return for security C, which has a beta of ,1.45 is ___%. (Round to two decimal places.)
d. The expected rate of return for security D, which has a beta of , 0.74 is ____%(Round to two decimal places.)
a. The expected rate of return for security A, with a beta of 1.78, is 11.32%.
b. The expected rate of return for security B, with a beta of 0.72, is 6.56%.
c. The expected rate of return for security C, with a beta of 1.45, is 9.6%.
d. The expected rate of return for security D, with a beta of 0.74, is 6.96%.
a. The expected rate of return for security A is calculated using the CAPM formula:
Expected Return = Risk -Free Rate + Beta × (Market Return - Risk-Free Rate).
Substituting the given values,
we have 4% + 1.78 × (8% - 4%) = 11.32%
b. Similarly, for security B,
expected rate of return = 4% + 0.72 × (8% - 4%) = 6.56%.
c. For security C,
expected rate of return= 4% + 1.45 × (8% - 4%) = 9.6%.
d. Finally, for security D,
expected rate of return = 4% + 0.74× (8% - 4%) = 6.96%.
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QUESTION 11
What is the biggest problem related to the economic growth in low-income countries?
Inflation
Shortage of labor force
Absence of access to the newest technology
Poverty and absence of financial capital
1 points
QUESTION 12
What is the source of cyclical unemployment and is related to which group of countries?
Recessionary situations in middle-income countries
The natural rate of unemployment in middle-income countries
Recessionary situations in high-income countries
The natural rate of unemployment in high-income countries
1 points
QUESTION 13
Which countries are members of the North American Free Trade Agreement (NAFTA) and what is its goal?
the United States, Canada, Mexico, and Brazil, and its goal is to reduce trade barriers
the United States, Canada, Mexico and Brazil, and its goal is to cooperate in imposing tariffs on imports
the United States, Canada, and Mexico, and its goal is to reduce trade barriers
the United States, Canada, and Brazil, and its goal is to cooperate in imposing tariffs on imports
1 points
QUESTION 14
"A broad measure of the balance of trade that includes trade in goods and services, as well as international flows of income and foreign aid" it is called:
merchandise trade balance
current account balance
trade balance
exports of goods and services
1 points
QUESTION 15
One of the important factors in economic growth is infrastructure. Infrastructure is a part of:
Innovation
Physical capital
Human capital
Technology
QUESTION 11 :- The biggest problem related to economic growth in low-income countries is poverty and the absence of financial capital.
QUESTION 12 :- The source of cyclical unemployment is recessionary situations, and it is related to high-income countries.
QUESTION 13 :- The countries that are members of the North American Free Trade Agreement (NAFTA) are the United States, Canada, and Mexico.
QUESTION 14 :- The broad measure of the balance of trade that includes trade in goods and services, as well as international flows of income and foreign aid, is called the current account balance.
QUESTION 15 :- Infrastructure is a part of physical capital.
QUESTION 11 :-
The biggest problem related to economic growth in low-income countries is poverty and the absence of financial capital.
While low-income countries face various challenges in achieving economic growth, poverty and the lack of financial capital are often the fundamental obstacles. These countries typically have high levels of poverty, with a significant portion of the population living in extreme poverty. Poverty creates a cycle of limited resources, inadequate education, poor healthcare, and limited access to basic necessities, hindering overall development.
Additionally, the absence of financial capital exacerbates the problem. Low-income countries often lack sufficient financial resources and investment opportunities to stimulate economic growth. Limited access to credit, investment capital, and financial markets constrains businesses and entrepreneurs from expanding their operations, investing in new technologies, and creating employment opportunities. This lack of financial capital restricts the potential for economic development and hampers efforts to improve living standards.
QUESTION 12 :-
The source of cyclical unemployment is recessionary situations, and it is related to high-income countries.
Cyclical unemployment is a type of unemployment that occurs due to fluctuations in the business cycle, specifically during periods of economic downturns or recessions. It is caused by a decline in aggregate demand, leading to a decrease in production and employment levels within an economy.
During a recession, businesses experience reduced demand for their goods and services, resulting in a decrease in production. To adjust to lower demand, businesses may lay off workers or reduce their work hours, leading to an increase in unemployment. This type of unemployment is considered cyclical because it is directly tied to the economic cycle and the ups and downs of the business cycle.
QUESTION 13 :-
The countries that are members of the North American Free Trade Agreement (NAFTA) are the United States, Canada, and Mexico.
The goal of NAFTA is to reduce trade barriers and promote economic integration among the three member countries. The agreement aims to eliminate or significantly reduce tariffs, quotas, and other trade restrictions on goods and services traded between the participating nations. By doing so, NAFTA seeks to facilitate the flow of goods, services, and investments across borders, enhance market access, and promote fair competition among the member countries.
QUESTION 14 :-
The broad measure of the balance of trade that includes trade in goods and services, as well as international flows of income and foreign aid, is called the current account balance.
The current account balance is a component of a country's balance of payments, which is a record of all economic transactions between residents of a country and the rest of the world. It measures the net flow of goods, services, income, and current transfers between a country and its trading partners over a specific period of time, typically a year.
The current account balance consists of various components, including:
1. Trade in goods
2. Trade in services
3. Income flows
4. Current transfers
QUESTION 15 :-
Infrastructure is a part of physical capital.
Physical capital refers to the tangible assets that are used in the production process to create goods and services. It includes a wide range of physical assets such as buildings, machinery, equipment, transportation networks, utilities, and other facilities.
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When the interest rate rises, the value of financial assets is expected to a. decrease b. no change c. Increase d. Interest rates don't change
When the interest rate rises, the value of financial assets is expected to decrease. This is because the value of financial assets, such as bonds, is inversely related to interest rates.
When interest rates increase, the fixed interest payments provided by existing bonds become less attractive compared to the higher rates offered by new bonds. As a result, investors demand higher yields on existing bonds, leading to a decrease in their market value. Similarly, other financial assets like stocks can also be affected as higher interest rates can increase borrowing costs for companies and impact their profitability, leading to a potential decrease in stock prices. Thus, a rise in interest rates generally leads to a decrease in the value of financial assets.
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(b) Adrien Corporation expects to recerve RM20,000 per year for 10 years and RM35,000 per year for the next 10 years. What is the present value of this cash flow given \( 12 \% \) discotmt rate? (5 ma
To calculate the present value of the cash flow, we need to discount each cash flow to its present value using the given discount rate of 12%. The present value of each cash flow can be calculated using the formula:
PV = CF / (1 + r)^n
Where:
PV = Present Value
CF = Cash Flow
r = Discount rate
n = Number of periods
Let's calculate the present value for each cash flow and then sum them up to find the total present value:
Present Value of RM20,000 per year for 10 years:
PV1 = 20,000 / (1 + 0.12)^1 + 20,000 / (1 + 0.12)^2 + ... + 20,000 / (1 + 0.12)^10
Present Value of RM35,000 per year for the next 10 years:
PV2 = 35,000 / (1 + 0.12)^1 + 35,000 / (1 + 0.12)^2 + ... + 35,000 / (1 + 0.12)^10
Now, let's calculate these values:
PV1 = 20,000 / (1 + 0.12)^1 + 20,000 / (1 + 0.12)^2 + ... + 20,000 / (1 + 0.12)^10
PV1 ≈ 20,000 / 1.12 + 20,000 / 1.2544 + ... + 20,000 / 3.1056
PV2 = 35,000 / (1 + 0.12)^1 + 35,000 / (1 + 0.12)^2 + ... + 35,000 / (1 + 0.12)^10
PV2 ≈ 35,000 / 1.12 + 35,000 / 1.2544 + ... + 35,000 / 3.1056
After calculating the above equations, we can sum PV1 and PV2 to find the total present value:
Total Present Value = PV1 + PV2
Calculating these values gives us the present value of the cash flow given a 12% discount rate.
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Your client has been with his current employer for 15 years. That employer has a generous contributory Defined Benefit Pension Plan that your client has taken advantage of. He has been recruited to a competitors firm and wants to know what his options are. Given this scenario which of the following is NOT an option for your client? Select one: a. Transfer the commuted value of the pension to his RRSP b. Transfer the commuted value of the pension to his new employer's pension plan c. Transfer the commuted value of the pension to a Locked-in Retirement Account (LIRA) d. Leave the pension with his current employer
Given the scenario described, the option that is NOT available for the client is:b. Transfer the commuted value of the pension to his new employer's pension plan.
When an individual leaves their current employer and joins a new company, transferring the commuted value of the pension to the new employer's pension plan is generally not an option.
They are typically specific to each employer, and it is uncommon for one employer's pension plan to accept transfers from another employer's plan.The other options mentioned are commonly available for individuals who are leaving their current employer:
a. Transfer the commuted value of the pension to his RRSP: This allows the client to transfer the funds from the pension plan to a Registered Retirement Savings Plan (RRSP), where they can continue to grow on a tax-deferred basis.
c. Transfer the commuted value of the pension to a Locked-in Retirement Account (LIRA): A LIRA is a registered account designed to hold funds from a pension plan, and it provides investment options and restrictions similar to those of a pension plan.
d. Leave the pension with his current employer: The client can choose to leave the pension funds with the current employer's pension plan, where they will continue to be managed and provide retirement income in the future.
It is important for the client to carefully consider the available options, taking into account their specific financial situation, goals, and the rules and regulations governing pension plans and retirement savings accounts. Seeking advice from a qualified financial professional is recommended to make an informed decision.
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Critically discuss with relevant business examples, what
are the FOUR (4) quadrants in ethical corporate decision
making?
You need to provide relevant examples to illustrate your
answer.
The four quadrants in ethical company decision-making help companies examine the alignment between prison and ethical dimensions. Striving to function in the prison and moral quadrant must be the goal for agencies because it guarantees compliance with legal guidelines and moral requirements.
The 4 quadrants in moral corporate selection-making offer a framework for evaluating the ethical implications of business selections. Each quadrant represents a one-of-a-kind aggregate of moral issues, and knowledge of them can guide groups toward making greater moral picks.
Let's talk about every quadrant with relevant business examples:
Legal and Ethical Quadrant:
Decisions falling into this quadrant align with each criminal requirement and moral requirement. For example, an employer adhering to hard work legal guidelines and providing fair wages to its employees demonstrates moral conduct inside the legal framework.
Legal but Unethical Quadrant:
Decisions falling into this quadrant observe legal requirements but might also raise moral worries. One instance is a tobacco agency marketing its products to young humans within the limits of the law. Although felony, such actions may be visible as unethical due to capability damage to public health.
Illegal and Unethical Quadrant:
Decisions falling into this quadrant violate each legal and moral standard. An instance is an agency accomplishing fraudulent financial practices, intentionally misleading traders or customers. These movements aren't handiest unlawful but additionally morally reprehensible.
Ethical however Illegal Quadrant:
Decisions falling into this quadrant prioritize ethical considerations however may additionally struggle with current laws or regulations. For instance, an enterprise refusing to comply with a discriminatory regulation that violates human rights demonstrates moral behavior, in spite of facing criminal results.
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In a competitive industry, a firm's short-run supply curve is represented by its marginal cost curve. The short-run supply curve of a competitive firm does not include the part of the marginal cost curve that is
A. below the average variable cost curve, since the firm would be losing too much money, shut down, and produce zero output
B. above the average total cost curve, since the firm would be earning profits, which is not possible in a competitive market
C. above the average total cost curve, since the firm would be incurring losses, shut down, and produce zero output
D. below the average total cost curve, since the firm would be incurring losses, shut down, and produce zero output
D. below the average total cost curve, since the firm would be incurring losses, shut down, and produce zero output.
In a competitive industry, firms aim to maximize their profits in the short run. The short-run supply curve of a competitive firm is determined by its marginal cost curve. The firm will produce and supply output as long as the market price exceeds or equals its marginal cost.
Option D states that the short-run supply curve of a competitive firm does not include the part of the marginal cost curve that is below the average total cost curve. This is because if the market price falls below the average total cost, the firm would be incurring losses on each unit of output produced. In such a situation, it would be more profitable for the firm to shut down and produce zero output rather than continue to operate at a loss.
Therefore, the short-run supply curve of a competitive firm does not include the portion of the marginal cost curve that is below the average total cost curve.
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Read the scenario given below and answer the question. In 2018, Azleen founded AMS Empire, a home growth financial consultant company based in Bangi, Selangor. She started as a part-time financial consultant as at that time she is still holding a job as an accountant in Kuala Lumpur. After two years, motivated by the growth and potentials that she saw in the unit trust and financial planning industry, she left her job and started her own firm together with her sister, Azreen, a business graduate from UNITAR and they have not looked back since. Azleen recognized that the greatest challenge to the company’s growth is attracting and developing the best financial consultants. After doing some research and trials, AMS Empire developed the Green Leaf, a three-month training program for individuals who desire to be financial advisors but lack financial knowledge, experience, and confidence. Aspiring financial planners will participate in both online and face-to-face learning during the first four weeks of the program. In the classroom, instructors provide knowledge about finance, financial products, regulatory frameworks, and communication skills. Also, to enhance selling skills and customer service, learners engage in role-plays. The next two months of the program include mentoring and on-the-job experiences. Trainees work with established financial planners in their practices, providing real advice to clients. During these two months learners are provided with onthe-job coaching, professional development, mentoring and complete compliance training. After successfully completing the program, AMS Empire will sponsor them to take the requisite exams that will provide the paper qualification for the agents thus allowing them to join AMS Empire as a certified financial consultant. The initial phase of the Green Leaf program proved to a be a success. However, as her agency grew and more aspiring consultants joined in, she began to notice a high number of dropouts and people who couldn’t pass the certification exams. She is worried. Not only the reputation of her agency is at stake, but she has also invested a lot of money into the Green Leaf program. Her sister Azreen suggested that they take a step back and carry out a proper evaluation of the Green Leaf program. She remembered something called the Kirkpatrick’s Four Level Model back when she took the Training and Development course for her BBA. Azreen suggest that they use the model to evaluate the effectiveness of the training. Explain in detail how the two sisters can use the Kirkpatrick’s Model to assess and evaluate Green Leaf and how they can use the findings to improve the program.
Azleen and Azreen can use Kirkpatrick's Model to evaluate the Green Leaf program by gathering participant feedback (reaction), assessing knowledge and skills (learning), observing behavior, and measuring the program's impact on organizational goals (results), enabling them to make improvements accordingly.
Kirkpatrick's Four-Level Model is a widely recognized framework for evaluating training programs. The two sisters, Azleen and Azreen, can use this model to assess and evaluate the effectiveness of the Green Leaf program and identify areas for improvement. Here's a detailed explanation of how they can apply the model:
Level 1: Reaction
The first level focuses on gathering feedback from the participants regarding their reactions and satisfaction with the training program. Azleen and Azreen can distribute surveys or conduct interviews to gather feedback on participants' perceptions of the program, including the quality of instruction, the relevance of content, and overall satisfaction. This feedback will help identify any immediate concerns or areas that require immediate attention.
Level 2: Learning
The second level assesses the knowledge and skills acquired by the participants during the training. Azleen and Azreen can conduct assessments, quizzes, or practical exercises to measure the participants' understanding and application of the financial knowledge and skills taught during the program. By evaluating the learning outcomes, they can identify any gaps in knowledge and determine if the program is effectively equipping participants with the required competencies.
Level 3: Behavior
The third level examines the participants' behavior and application of the acquired knowledge and skills in their work environment. Azleen and Azreen can observe and evaluate the trainees' performance during the mentoring and on-the-job experiences. They can assess whether the participants are effectively applying the training content in real-life scenarios, such as client interactions and financial planning tasks. By assessing behavior, they can identify areas where participants may require additional support or further training.
Level 4: Results
The fourth level focuses on evaluating the impact of the training program on the organization's goals and outcomes. Azleen and Azreen can assess the overall performance of the certified financial consultants who completed the Green Leaf program. They can analyze key performance indicators (KPIs) such as sales targets, client satisfaction, and retention rates to determine the program's effectiveness in achieving the desired business outcomes. By analyzing the results, they can identify any correlations between the program and the organization's success.
Using the findings from each level, Azleen and Azreen can identify specific areas for improvement in the Green Leaf program. For example, if the Level 2 assessment reveals knowledge gaps, they can revise the curriculum or provide additional resources for better learning outcomes. If the Level 3 assessment indicates performance issues, they can provide targeted coaching or further on-the-job support. By continuously evaluating and refining the program based on Kirkpatrick's Model, they can enhance the effectiveness of the training, reduce dropouts, improve pass rates, and ensure the success of the participants and the agency as a whole.
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Judges rely primarily on contracting parties' testimony to construe written contracts rather than looking at the words of the contract itself. True False Question 16 2 pts Proximate cause refers to a foreseeable injury under the circumstances. True False
Judges rely primarily on contracting parties' testimony to construe written contracts rather than looking at the words of the contract itself is False. Judges do not rely primarily on contracting parties' testimony to construe written contracts. Rather, they look at the words of the contract itself.
They examine the four corners of the agreement and consider its plain meaning. If the language of the contract is clear and unambiguous, it is conclusive of the parties' intent, and there is no need to consider outside evidence.
However, if the language of the contract is ambiguous, the court may consider extrinsic evidence, such as the parties' testimony, to determine the intent of the parties.Proximate cause refers to a foreseeable injury under the circumstances isTrue.
Proximate cause refers to a legal cause that is sufficiently related to an injury that the law regards the injury as the result of that cause. It is a cause that is close in time and space to the effect and that is necessary for the effect to happen.
Foreseeability is an important aspect of proximate cause. In general, an injury is foreseeable if a reasonable person would have anticipated it as a likely result of his or her conducts. Therefore, it can be concluded that the given statement is True.
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Pharoah Company has issued three different bonds during 2022. Interest is payable annually on each of these bonds. 1. On January 1, 2022, 1,300, 8\%,5-year, $1,000 bonds dated January 1,2022 , were issued at face value. 2. On July 1,$845,000,9%,5-year bonds dated July 1,2022 , were issued at 104 . 3. On September 1, $355,000,7%,5-year bonds dated September 1, 2022, were issued at 98. Prepare the journal entries to record each bond transaction at the date of issuance. (Credit account titles are automatically indented wher amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)
Pharoah Company issued three different bonds in 2022: 8%, 5-year, $1,000 bonds on January 1; 9%, 5-year bonds on July 1; and 7%, 5-year bonds on September 1. The journal entries to record each bond transaction at the date of issuance are as follows:
On January 1, 2022, Pharoah Company issued 1,300 8% bonds with a face value of $1,000 each. The journal entry to record this transaction would be:
Dr. Cash $1,300,000
Cr. Bonds Payable $1,300,000
This entry records the cash received from the issuance of the bonds and increases the liability of the company for the bond principal.
On July 1, 2022, Pharoah Company issued $845,000 9% bonds. The bonds were issued at 104, meaning they were sold for 104% of their face value. The journal entry to record this transaction would be:
Dr. Cash $879,800
Cr. Bonds Payable $845,000
Cr. Premium on Bonds Payable $34,800
The entry records the cash received from the issuance of the bonds and creates a liability for the bond principal. Additionally, a premium on bonds payable account is created to reflect the excess amount received over the face value of the bonds.
On September 1, 2022, Pharoah Company issued $355,000 7% bonds. The bonds were issued at 98, meaning they were sold for 98% of their face value. The journal entry to record this transaction would be:
Dr. Cash $347,900
Cr. Bonds Payable $355,000
Cr. Discount on Bonds Payable $7,100
The entry records the cash received from the issuance of the bonds and creates a liability for the bond principal. Additionally, a discount on bonds payable account is created to reflect the difference between the cash received and the face value of the bonds.
These journal entries accurately record the bond transactions at the date of issuance and reflect the impact on the company's cash and liabilities.
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A.) How much should you deposit today in an account that pays 8% compounded monthly to have $5000 in 6 years B.) Find the monthly payment for a loan of 35,000 made at 18% interest compounded monthly for 5 years.
To have $5000 in 6 years with an 8% compounded monthly interest rate, you would need to deposit approximately $3,030.36 today. For a loan of $35,000 at an 18% interest rate compounded monthly for 5 years, the monthly payment would be around $918.68.
1) To find out how much should be deposited today, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the account ($5000)
P = the principal amount (to be determined)
r = annual interest rate (8% or 0.08)
n = number of times interest is compounded per year (12 for monthly compounding)
t = number of years (6)
Rearranging the formula to solve for P:
P = A / (1 + r/n)^(nt)
P = 5000 / (1 + 0.08/12)^(12*6)
P ≈ $3,030.36
Therefore, you should deposit approximately $3,030.36 today to have $5000 in 6 years.
2) To find the monthly payment for a loan, we can use the formula for present value of an annuity:
PMT = PV * (r/n) / (1 - (1 + r/n)^(-nt))
Where:
PMT = the monthly payment (to be determined)
PV = the present value of the loan ($35,000)
r = annual interest rate (18% or 0.18)
n = number of times interest is compounded per year (12 for monthly compounding)
t = number of years (5)
Rearranging the formula to solve for PMT:
PMT = PV * (r/n) / (1 - (1 + r/n)^(-nt))
PMT = 35000 * (0.18/12) / (1 - (1 + 0.18/12)^(-12*5))
PMT ≈ $918.68
Therefore, the monthly payment for a loan of $35,000 at an 18% interest rate compounded monthly for 5 years would be around $918.68.
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Ames, Inc. has $500,000 of notes payable due June 15 , year 3 . Ames signed an agreement on December 1 , year 2 , to borrow up to $500,000 to refinance the notes payable on a long-term basis with no payments due until year 4 . The financing agreement stipulated that borrowings may not exceed 80% of the value of the collateral Ames was providing. At the date of issuance of the December 31 , year 2 financial statements, the value of the collateral was $600,000 and is not expected to fall below this amount during year 3 . In Ames Inc., December 31, year 2 balance sheet, the obligation for these notes payable should be classified as $100,000$400,000 $0$500,000
Based on the information provided, the obligation for the notes payable in Ames, Inc.'s December 31, year 2 balance sheet should be classified as $400,000.
Since Ames, Inc. signed an agreement on December 1, year 2, to borrow up to $500,000 to refinance the notes payable on a long-term basis, and the value of the collateral is $600,000, the company can borrow up to 80% of the collateral value, which is $480,000 (80% of $600,000). Since the existing notes payable amount is $500,000, it exceeds the allowed borrowing amount of $480,000.
Therefore, $400,000 is the amount that should be classified as the obligation for these notes payable on the balance sheet, representing the maximum borrowing amount allowed based on the collateral value.
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1. This exercise will ask you to work through the derivation of the IS curve under various different scenarios. Draw a graph of IS and Expenditure Y curve. With below given facts how would your initial graph change?
(a) Suppose some change increases the sensitivity of investment to the interest rates. Hov will this impact the new shape of the IS curve?
(b) Suppose that the MPC becomes larger. How will this affect the shape of the IS curve?
(a) An increase in the sensitivity of investment to interest rates will make the IS curve steeper.
(b) A larger marginal propensity to consume (MPC) will result in a flatter IS curve.
(a) If there is a change that increases the sensitivity of investment to interest rates, it will result in a steeper slope of the IS curve. This means that for a given change in the interest rate, the corresponding change in investment will be larger. As a result, the overall level of expenditure and output (Y) will be more responsive to changes in the interest rate. Therefore, the IS curve will become steeper, indicating a stronger relationship between interest rates and aggregate expenditure.
(b) If the marginal propensity to consume (MPC) becomes larger, it will lead to a flatter IS curve. A larger MPC means that a higher proportion of any increase in income is spent on consumption, resulting in a smaller proportion available for saving or investment. As a result, a larger MPC implies that changes in income have a smaller impact on changes in investment, leading to a flatter slope of the IS curve. Therefore, an increase in the MPC will result in a flatter IS curve, indicating a weaker relationship between income and aggregate expenditure.
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