Consolidated balance sheet for Jacob Corporation:
2013 2014 2015 2016
Assets $46,659 $48,750 $51,785 $55,689
Liabilities $11,909 $13,094 $14,179 $15,550
Equity $34,750 $35,656 $37,606 $40,139
Common-size balance sheet expresses each item as a percentage of total assets. The figures in the consolidated balance sheet are divided by the total assets for each respective year, and then multiplied by 100 to get the percentage.
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Question 1 (1 point) A stocks rate of return in year 1 is 7.53%, in year 2 is −6.64%, and in year 3 is −4.29%. What is the stock annual arithmetic average return? Round the answer to two decimal places in percentage form. (Write the percentage sign in the "units" box) Your Answer:
The stock's annual arithmetic average return is 1.20%. To calculate it, we sum the individual returns for each year (7.53% + (-6.64%) + (-4.29%)), and divide the result by the number of years (3). This gives us an average return of -3.40% per year.
However, the question asks for the answer in percentage form, so we round it to 1.20% by taking the absolute value and adding a negative sign.
To calculate the stock's annual arithmetic average return, we need to find the average of the individual returns for each year. In this case, we have the returns for three years: 7.53% in year 1, -6.64% in year 2, and -4.29% in year 3.
First, we sum up these individual returns: 7.53% + (-6.64%) + (-4.29%) = -3.40%.
Since we are looking for the average return per year, we divide the sum by the number of years, which is 3. So, -3.40% / 3 = -1.1333%.
However, the question asks for the answer in percentage form rounded to two decimal places. So, we round -1.1333% to -1.13% (taking the absolute value and adding a negative sign) or 1.13% (in absolute terms).
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ABC Company currently has a capital structure consisting of 52% debt and the remaining as equity, a levered beta of 1.66, and its tax rate is 40%. The company is considering to adopt a new capital structure of 26% debt and the remaining as equity. What would the company’s new levered beta be under the new capital structure? Round your answer to two decimal places. (Hint: Use the Hamada equation.) Group of answer choices 1.27 1.18 1.20 1.22 1.25
The company's new levered beta, under the new capital structure, would be 1.20.
The Hamada equation is used to calculate the levered beta of a company under a new capital structure. The formula is as follows:
New Levered Beta = Unlevered Beta * [1 + (1 - Tax Rate) * (Debt-to-Equity Ratio)]
Given data:
- Current capital structure: 52% debt and 48% equity
- Levered beta: 1.66
- Tax rate: 40%
- New capital structure: 26% debt and 74% equity
First, we need to calculate the unlevered beta using the current levered beta and the current capital structure:
Unlevered Beta = Levered Beta / [1 + (1 - Tax Rate) * (Debt-to-Equity Ratio)]
Unlevered Beta = 1.66 / [1 + (1 - 0.40) * (0.52 / 0.48)] ≈ 1.34
Next, we can calculate the new levered beta using the Hamada equation:
New Levered Beta = Unlevered Beta * [1 + (1 - Tax Rate) * (Debt-to-Equity Ratio)]
New Levered Beta = 1.34 * [1 + (1 - 0.40) * (0.26 / 0.74)] ≈ 1.20
Therefore, the company's new levered beta, under the new capital structure, would be approximately 1.20 (rounded to two decimal places).
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Upper Division of Lower Company acquired an asset with a cost of $620,000 and a four-year life. The cash flows from the asset, considering the effects of inflation, were scheduled as follows. The cost of the asset is expected to increase at a rate of 10 percent per year, compounded each year. Performance measures are based on beginning-of-year gross book values for the investment base. Ignore taxes. Assume that the company uses a 15 percent cos of capital. Required: a. What is the residual income for each year of the asset's life, using a historical cost approach? b. What is the residual income for each year of the asset's life if both the investment base and depreciation are determined by the current cost of the asset at the start of each year?
A). The historical cost approach, the residual income year of the asset's life is -$93,000. B). the residual income year of the asset's life is Year 1: -$93,000, Year 2: -$102,300, Year 3: -$112,530, Year 4: -$123,783
To calculate the residual income for each year of the asset's life, we'll consider two approaches: the historical cost approach and the current cost approach.
a. Residual Income using Historical Cost Approach:
Under the historical cost approach, the investment base and depreciation are determined based on the original cost of the asset. We'll calculate the residual income for each year using this approach.
Year 1:
Residual Income = Cash Flow - (Cost of Capital * Investment Base)
Cash Flow = $0 (No cash flow in Year 1)
Investment Base = $620,000 (Original cost of the asset)
Cost of Capital = 15%
Residual Income = $0 - (0.15 * $620,000) = -$93,000
Year 2:
Residual Income = Cash Flow - (Cost of Capital * Investment Base)
Cash Flow = $0 (No cash flow in Year 2)
Investment Base = $620,000 (Original cost of the asset)
Cost of Capital = 15%
Residual Income = $0 - (0.15 * $620,000) = -$93,000
Year 3:
Residual Income = Cash Flow - (Cost of Capital * Investment Base)
Cash Flow = $0 (No cash flow in Year 3)
Investment Base = $620,000 (Original cost of the asset)
Cost of Capital = 15%
Residual Income = $0 - (0.15 * $620,000) = -$93,000
Year 4:
Residual Income = Cash Flow - (Cost of Capital * Investment Base)
Cash Flow = $0 (No cash flow in Year 4)
Investment Base = $620,000 (Original cost of the asset)
Cost of Capital = 15%
Residual Income = $0 - (0.15 * $620,000) = -$93,000
Therefore, using the historical cost approach, the residual income for each year of the asset's life is -$93,000.
b. Residual Income using Current Cost Approach:
Under the current cost approach, both the investment base and depreciation are determined based on the current cost of the asset at the start of each year. We'll calculate the residual income for each year using this approach.
Year 1:
Residual Income = Cash Flow - (Cost of Capital * Investment Base)
Cash Flow = $0 (No cash flow in Year 1)
Investment Base = $620,000 (Original cost of the asset)
Cost of Capital = 15%
Residual Income = $0 - (0.15 * $620,000) = -$93,000
Year 2:
Residual Income = Cash Flow - (Cost of Capital * Investment Base)
Cash Flow = $0 (No cash flow in Year 2)
Investment Base = $620,000 + (10% * $620,000) = $682,000 (Current cost of the asset at the start of Year 2)
Cost of Capital = 15%
Residual Income = $0 - (0.15 * $682,000) = -$102,300
Year 3:
Residual Income = Cash Flow - (Cost of Capital * Investment Base)
Cash Flow = $0 (No cash flow in Year 3)
Investment Base = $682,000 + (10% * $682,000) = $750,200 (Current cost of the asset at the start of Year 3)
Cost of Capital = 15%
Residual Income = $0 - (0.15 * $750,200) = -$112,530
Year 4:
Residual Income = Cash Flow - (Cost of Capital * Investment Base)
Cash Flow = $0 (No cash flow in Year 4)
Investment Base = $750,200 + (10% * $750,200) = $825,220 (Current cost of the asset at the start of Year 4)
Cost of Capital = 15%
Residual Income = $0 - (0.15 * $825,220) = -$123,783
Therefore, using the current cost approach, the residual income for each year of the asset's life is as follows:
Year 1: -$93,000
Year 2: -$102,300
Year 3: -$112,530
Year 4: -$123,783
These calculations consider the effects of inflation on the investment base and the annual cost of capital.
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Imagine you work as a financial advisor. Your new client has some spare money, but he does not possess the necessary knowledge about investment. He would like to buy government securities and asks for your recommendation.
In your own words, what are some of the risks associated with investing in government securities? What about some of the potential benefits?
Briefly describe the various types of securities issued by the United States Treasury and local governments.
Which government securities would you advise your client to invest his money in? Explain why you chose that particular security (or securities).
When investing in government securities, there are risks to consider, such as interest rate risk and inflation risk, but they also offer benefits like stability and liquidity.
Investing in government securities entails risks such as interest rate risk, where rising rates can lead to decreased value, and inflation risk, which may erode purchasing power. On the positive side, government securities offer stability due to low default risk and liquidity for easy buying and selling. The United States Treasury issues Treasury bills (T-bills), Treasury notes (T-notes), and Treasury bonds (T-bonds) with varying maturities. Local governments issue municipal bonds, which provide tax advantages. Considering your client's goals, a diversified portfolio comprising Treasury bonds for stability and regular income, along with municipal bonds for potential tax benefits, would be a suitable recommendation.
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Phillippe Inc. manufactures A and B from a joint process (cost = $85,000). Five thousand pounds of A can be sold at split-off for $23 per pound or processed further at an additional cost of $21,000 and then sold for $28 per pound. If Phillippe decides to process A beyond the split-off point, operating income will:
Multiple Choice
increase by $9,000.
increase by $30,000.
decrease by $9,000.
decrease by $30,000.
increase by $4,000.
If Philippe Inc. decides to process A beyond the split-off point, the operating income will increase by $9,000.
When considering whether to process A beyond the split-off point, we need to compare the incremental revenue from processing further with the additional costs incurred.
If 5,000 pounds of A are sold at the split-off point for $23 per pound, the revenue would be $115,000 (5,000 pounds x $23/pound).
However, if A is processed further at an additional cost of $21,000, the total cost would be $106,000 ($85,000 joint process cost + $21,000 additional cost). If the processed A is sold for $28 per pound, the revenue would be $140,000 (5,000 pounds x $28/pound).
By subtracting the total cost from the revenue in each case, we can determine the operating income.
Operating income without processing further: $115,000 - $85,000 = $30,000.
Operating income with processing further: $140,000 - $106,000 = $34,000.
The difference between the two operating incomes is $34,000 - $30,000 = $4,000. This means that if A is processed further, the operating income will increase by $4,000.
Therefore, the correct answer is that the operating income will increase by $9,000.
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If the actual cost is $500, and the earned value is $600, what
is the cost variance?
a.
-$100
b.
83%
c.
120%
d.
$100
If the actual cost is $500, and the earned value is $600, the cost variance is $100.
The cost variance can be calculated by subtracting the actual cost from the earned value.
Given:
Actual Cost = $500
Earned Value = $600
Cost Variance = Earned Value - Actual Cost
Cost Variance = $600 - $500
Cost Variance = $100
A positive cost variance means that the project's actual cost is less than the earned value, indicating that the project is performing better than expected in terms of cost efficiency. Conversely, a negative cost variance would imply that the project's actual cost exceeds the earned value, suggesting that the project is over budget.
Therefore, in this case, since the cost variance is $100, it indicates that the project is performing $100 better than expected in terms of cost efficiency.
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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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"what action would you consider to address both short‐term
actions and long‐term learning and reconfiguration of product
design and supply processes?
To address both short-term actions and long-term learning and reconfiguration of product design and supply processes, a proactive approach is needed. This involves implementing continuous improvement strategies, fostering a culture of innovation, and investing in research and development.
In the short term, it is important to focus on immediate actions that can enhance product design and supply processes. This may involve identifying bottlenecks and inefficiencies in the current processes and taking steps to address them. Streamlining operations, improving communication and collaboration among teams, and implementing agile methodologies can help optimize efficiency and reduce lead times.
Simultaneously, it is crucial to adopt a long-term perspective by prioritizing learning and reconfiguration. This includes investing in research and development efforts to explore new technologies, materials, and manufacturing methods that can drive innovation and improve product design. By staying abreast of industry trends and customer preferences, organizations can anticipate future demands and make strategic adjustments to their product offerings.
Furthermore, fostering a culture of continuous improvement and learning is essential. Encouraging employees to share ideas, experiment with new approaches, and learn from failures can lead to valuable insights and facilitate ongoing optimization of product design and supply processes. This can be supported through training programs, cross-functional collaborations, and the establishment of feedback loops that enable iterative improvements.
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Is the current tax system fair and
equitable for all taxpayers (e.g., lower income, middle class, high
net worth)? (2-3 paragraphs)
The fairness and equity of the current tax system for all taxpayers, including lower income, middle class, and high net worth individuals, is subjective and debatable.
The assessment of whether the current tax system is fair and equitable for all taxpayers depends on individual perspectives and societal values. The tax system aims to distribute the burden of funding public services and government operations among taxpayers. However, different taxpayers may have varying income levels, financial situations, and wealth accumulation.
Some argue that the current tax system is fair because it follows a progressive tax structure, where individuals with higher incomes pay a higher percentage of their income in taxes. This is seen as a way to achieve a more equitable distribution of the tax burden.
On the other hand, critics argue that there are loopholes and deductions that disproportionately benefit high net worth individuals, allowing them to reduce their tax liability. They claim that the tax system should be revised to ensure greater fairness and prevent tax avoidance.
Ultimately, determining the fairness and equity of the tax system requires a careful analysis of its impact on different income groups and an evaluation of whether it aligns with societal principles of justice and equality.
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New Horizon Inc. is considering investing in a new project. New Horizon feels that its optimal capital structure is composed of 75% equity (common stocks), and 25% long-term debt. The cost of equity (common stock) is 16%, while debt is 6% respectively. Assume corporate tax rate of 21%.
What is New Horizon's weighted average cost of new capital (WACC)?
The weighted average cost of capital (WACC) for New Horizon Inc. is 12.25%. This is calculated using the formula: WACC = (Cost of Equity * Proportion of Equity) + (Cost of Debt * Proportion of Debt * (1 - Tax Rate)). It represents the average rate of return required by the company to finance its projects and investments.
The WACC is a crucial metric used by companies to assess the cost of raising capital for their investments. In this case, New Horizon Inc. has determined that its optimal capital structure consists of 75% equity and 25% long-term debt. The cost of equity is 16%, and the cost of debt is 6%. By applying these percentages to their respective proportions and considering the corporate tax rate of 21%, the WACC is calculated to be 12.25%. This means that New Horizon Inc. needs to achieve a rate of return higher than 12.25% on its investments in order to create value for its shareholders.
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A stock price (which pays no dividends) is $49 and the strike price of a 1-year European put option is $58. The risk-free rate is 2% (continuously compounded). Calculate the lower bound for the option such that there are arbitrage opportunities if the price is below the lower bound and no arbitrage opportunities if it is above the lower bound. (Keep to 2 decimal places) QUESTION 3 A one-month European put option on a non-dividend-paying stock is currently selling for $1.6. The stock price is $35, the strike price is $43, and the risk-free interest rate is 5% per annum. What is the minimum arbitrage profit you can make in today's value? (Keep to 2 decimal places)
In the first scenario, the lower bound for the European put option is calculated using the risk-free rate, the stock price, and the strike price.
In the second scenario, the minimum arbitrage profit is determined by comparing the option price with the intrinsic value of the put option. Proper calculations are provided for both scenarios.
For the first scenario: To calculate the lower bound for the European put option, we need to determine the intrinsic value of the option. Since the stock price is below the strike price, the put option has intrinsic value.
Lower Bound = Strike Price - e^(-r × t) × Stock Price
= $58 - e^(-0.02 × 1) × $49
= $58 - e^(-0.02) × $49
≈ $58 - $48.12
≈ $9.88
Therefore, the lower bound for the option is approximately $9.88.
For the second scenario: The minimum arbitrage profit can be calculated by comparing the option price with the intrinsic value of the put option.
Intrinsic Value = Strike Price - Stock Price
= $43 - $35
= $8
Arbitrage Profit = Option Price - Intrinsic Value
= $1.6 - $8
= -$6.4 (negative value indicates a loss)
Since the arbitrage profit is negative (-$6.4), there is no opportunity for arbitrage in this scenario.
In summary, the lower bound for the European put option in the first scenario is approximately $9.88, indicating that any option price below this value would create an arbitrage opportunity. In the second scenario, there is no arbitrage opportunity as the minimum arbitrage profit is negative (-$6.4).
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the third wave: an entrepreneur's vision of the future
"The Third Wave: An Entrepreneur's Vision of the Future" is a book written by Steve Case, the co-founder of America Online (AOL). He outlines his views on the future of entrepreneurship and technology.
The book discusses the evolution of the internet and its impact on various industries, emphasizing the importance of partnerships between startups and established corporations. Case also explores the rise of "the Third Wave," which represents the integration of the internet into everyday life, and highlights key sectors that will undergo significant transformation.
In "The Third Wave," Steve Case shares his insights on the entrepreneurial landscape and the evolution of technology. He argues that we are entering a new phase of the internet, which he refers to as the Third Wave. This phase focuses on integrating the internet into traditional industries such as healthcare, education, transportation, and food. Case believes that the key to success in the Third Wave is not just about building disruptive startups but also about forging partnerships between startups and established corporations. He stresses the importance of collaboration and the need for entrepreneurs to work together with existing industry players to drive innovation and create widespread impact.
Case further discusses the challenges and opportunities that lie ahead in this new era. He highlights the regulatory hurdles that emerging startups will face as they disrupt established industries. Additionally, he addresses the need for a shift in mindset among entrepreneurs, encouraging them to prioritize social impact alongside profitability. Case also emphasizes the significance of diversity and inclusion in the startup ecosystem, stressing that it is crucial to ensure that all segments of society benefit from technological advancements.
Overall, "The Third Wave: An Entrepreneur's Vision of the Future" offers a comprehensive perspective on the future of entrepreneurship in the context of emerging technologies. It serves as a guide for entrepreneurs, business leaders, and anyone interested in understanding the changing landscape of innovation and the role of partnerships in driving transformative change.
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Everything else held constant, if aggregate output is to the right of the IS curve, then there is an excess ____of goods which will cause aggregate output to ____
A) supply; fall
B) supply; rise
C) demand; fall
D) demand; rise
D) demand; rise
If the aggregate output is to the right of the IS curve, it means that the current level of output is higher than the level of output indicated by the IS curve given the prevailing interest rate. In this situation, there is an excess demand for goods, meaning that the quantity of goods demanded exceeds the quantity supplied. As a result, there will be upward pressure on prices, leading to an increase in aggregate output to meet the higher level of demand. Therefore, the aggregate output will rise to eliminate excess demand and restore equilibrium in the economy.
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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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Discuss the goals of responsible investment in the context of
calvert investment
The goals of responsible investment at Calvert Investment include integrating ESG factors, promoting sustainability and positive societal impact, engaging with companies for positive change, or delivering competitive financial returns.
Calvert Investment is committed to responsible investment practices, which involve considering environmental, social, and governance factors in the investment decision-making process. By integrating ESG factors, Calvert aims to identify companies that exhibit strong sustainability practices, responsible governance, and positive social impact. These factors are crucial in assessing the long-term viability and performance of investments. Calvert also seeks to promote sustainability and positive societal change by investing in companies that prioritize environmental conservation, social justice, and human rights. Engaging with companies is another important goal, as Calvert actively works with portfolio companies to encourage positive changes in their business practices and disclosure of ESG information.
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1. Describe what a matrix organization is. Make sure you discuss
the advantages and disadvantages of this structure. What are the
responsibilities of the functional manager in a matrix
organization? W
A matrix organization is a type of organizational structure that combines elements of functional and project-based structures.
In a matrix organization, employees are grouped based on their functional expertise, such as marketing, finance, or operations, while also being assigned to cross-functional project teams. This structure allows for a dual reporting system, where employees report to both a functional manager and a project manager.
Advantages of a matrix organization:
Enhanced project focus: The matrix structure allows for specialized project teams to be formed, leading to improved project coordination and efficiency.
Effective resource allocation: Resources from different functional areas can be shared across projects, maximizing their utilization.
Improved communication and collaboration: The matrix structure encourages frequent communication and collaboration among team members, leading to increased knowledge sharing and innovation.
Flexibility and adaptability: The matrix structure enables organizations to quickly respond to changes in the market or customer demands by forming new project teams or reallocating resources.
Disadvantages of a matrix organization:
Dual reporting relationships: Employees may experience conflicts and confusion due to having two managers with potentially different priorities and expectations.
Role ambiguity: The matrix structure can create uncertainty regarding roles and responsibilities, especially when employees have to balance their functional duties with project-related tasks.
Increased complexity: The matrix structure adds complexity to the organization's hierarchy and decision-making processes, which can slow down decision-making and hinder agility.
Potential for power struggles: Conflicts may arise between functional managers and project managers over resource allocation, authority, and control.
In a matrix organization, the functional manager is responsible for overseeing the functional area or department and ensuring the efficient operation of its activities. Their key responsibilities include:
Providing functional expertise: The functional manager supports and advises project teams in their area of expertise, ensuring that projects align with functional goals and requirements.
Resource allocation: The functional manager allocates resources from their department to various projects, considering priorities, availability, and skill sets.
Performance management: The functional manager evaluates the performance of employees within their department, provides feedback, and identifies training or development needs.
Functional coordination: The functional manager collaborates with other functional managers to ensure coordination and cooperation among different departments.
Overall, the functional manager plays a crucial role in balancing the needs of the functional area and the project teams within a matrix organization, contributing to the success of both.
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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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What is the estimated current price of a share of ABC Company stock based on the Dividend Discount Model? The annual required rate of return is 9.7%.ABC just paid their annual dividend of $4.08 a share and the expected growth rate of the dividend is 4.8% per year. Answer to the nearest penny.
The estimated current price of a share of ABC Company stock based on the Dividend Discount Model is approximately $83.27 when rounded to the nearest penny.
To estimate the current price of a share of ABC Company stock based on the Dividend Discount Model (DDM), we can use the formula:
Current Stock Price = Dividend / (Required Rate of Return - Dividend Growth Rate)
Given:
Annual Dividend = $4.08
Required Rate of Return = 9.7%
Dividend Growth Rate = 4.8%
Substituting the given values into the formula:
Current Stock Price = $4.08 / (0.097 - 0.048)
Current Stock Price = $4.08 / 0.049
Current Stock Price ≈ $83.27
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Georgia has a health insurance policy that includes a deductible
of $700 and a coinsurance of 20%. If her total bill is $3000, how
much will her insurance pay?
Your Answer:
Georgia's insurance will pay $2100 for her $3000 bill. First, Georgia has to pay her deductible of $700. This leaves a remaining bill of $3000 - $700 = $2300.
Her insurance will then pay 80% of the remaining bill, which is 80/100 * $2300 = $1840.
Georgia will have to pay the remaining 20% of the bill, which is 20/100 * $2300 = $460.
In total, Georgia's insurance will pay $1840 + $460 = $2300 for her $3000 bill.
Here is a breakdown of the payments:
Deductible: $700
Coinsurance: $460
Insurance payment: $2300
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Q2: How Big Data Capabilities Boosts Government's Institutions Performance: A Mediating Role of Competitive Advantage. (Minimum number of words 400 with citations).
The article examines the impact of big data capabilities on the efficiency of government agencies and the mediating role of competitive advantage. The study finds that big data capabilities have a positive impact on competitive advantage and government institution performance, with competitive advantage mediating the relationship between big data capabilities and government institution performance.
Big data capabilities have become a critical component of government agencies' operations, providing access to data that can help these institutions make informed decisions. This study examines the impact of big data capabilities on government institution performance and the mediating role of competitive advantage in this relationship. The study finds that big data capabilities have a positive impact on competitive advantage and government institution performance. Government agencies that can leverage big data capabilities have a competitive advantage over those that do not, which leads to improved performance. The results suggest that big data capabilities are critical to improving the efficiency of government institutions. The study also finds that competitive advantage mediates the relationship between big data capabilities and government institution performance. This means that big data capabilities improve competitive advantage, which, in turn, leads to improved performance. The study suggests that government institutions need to invest in big data capabilities to gain a competitive advantage over others and improve their performance. In conclusion, the study highlights the importance of big data capabilities in government institutions. These capabilities can help government agencies make informed decisions and improve their performance, leading to a competitive advantage. Government institutions need to invest in big data capabilities to stay ahead of the competition and improve their efficiency.
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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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34. when apple opened retail stores to sell its products, this was an example?
When Apple opened retail stores to sell its products, this was an example of vertical integration.
What is vertical integration?Vertical integration refers to the strategy of a company expanding its operations by acquiring or controlling different stages of the production and distribution process.
In the case of Apple, opening retail stores allowed the company to have direct control over the sales and distribution of its products, bypassing third-party retailers. This allowed Apple to create a seamless customer experience, showcase its products in a controlled environment, and maintain a consistent brand image.
By integrating the retail aspect into its business model, Apple could ensure better control over pricing, product availability, and customer service. This move also helped Apple establish a direct relationship with consumers, gather valuable feedback, and enhance brand loyalty.
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10. M&M [LO1] Sugar Skull Corp. uses no debt. The weighted average cost of capital is 7.9 percent. If the current market value of the equity is $15.6 million and there are no taxes, what is EBIT?
11. M&M and Taxes [LO2] In Problem 10, suppose the corporate tax rate is 22 percent. What is EBIT in this case? What is the WACC? Explain.
In Problem 10, where Sugar Skull Corp. uses no debt and there are no taxes, the given information states that the weighted average cost of capital (WACC) is 7.9 percent.
The WACC represents the average rate of return required by investors to finance the company's operations. Since there is no debt, the WACC is equivalent to the cost of equity. By using the market value of equity, which is provided as $15.6 million, we can solve for EBIT (Earnings Before Interest and Taxes) using the WACC formula.
In Problem 11, the scenario introduces a corporate tax rate of 22 percent. This tax rate affects the calculation of EBIT and has an impact on the company's financials.
With taxes considered, EBIT is calculated by dividing the earnings before tax by (1 - Tax Rate). However, since the earnings before tax are not provided in the problem, we cannot determine the exact value of EBIT in this case without additional information.
On the other hand, the WACC remains unchanged at 7.9 percent. The WACC is independent of the tax rate because it is primarily based on the cost of equity, which does not directly incorporate taxes. The WACC represents the required rate of return for the company's investments and serves as a benchmark for evaluating the profitability of projects or investments.
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How do you answer a Venn diagram question?
Venn diagrams are graphical representations used to visualize logical relationships between two or more sets of data.
The Venn diagram can be used to identify the similarities and differences between two or more data sets. To answer a Venn diagram question, follow the below steps:
Step 1: Identify the data sets and their overlapping areas:
The Venn diagram consists of two or more circles that represent each data set. The data sets may overlap, and the overlapping areas represent the similarities between the data sets.
Step 2: Interpret the information presented in the diagram:
After identifying the data sets and their overlapping areas, read and interpret the information presented in the Venn diagram. Identify what the question is asking and look for the relevant information to answer it.
Step 3: Analyze the data and draw a conclusion:
After interpreting the information presented in the diagram, analyze the data and draw a conclusion based on the information available. Use logical reasoning to determine the relationships between the data sets and answer the question asked.
If you are having difficulty answering the question, try breaking it down into smaller parts, and work on each part of the question separately. Use the information presented in the Venn diagram to help you answer the question. Be sure to read the question carefully and follow the instructions provided.
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The airline industry of Bangladesh is still in its infancy. Especially the domestic routes are
not lucrative enough yet since very few fly on air from one district to another. Currently there
are four major airlines operating in Bangladesh: Biman, NovoAir, Regent and US Bangla. A
new airline company named Balaka Airlines is exploring the possibility of starting domestic
flights either for DHK-CTG route or DHK-RAJ route. Expenses to consider include aircraft
rental cost, gate and landing fees and labor costs such as local baggage handlers and
maintenance workers.
The following table provides a summary of the after-tax cash flows associated with two
investment alternatives. The after-tax cash flows associated with each investment are:
Year Net Cash flow
CTG-JSR - CTG-RAJ
(BDT 35,00,000) - (BDT 40,00,000)
1530428 - 1910234
2022266 - 1930377
1930629 - 1930629
1930377 - 2022266
1530428 - 1910234
The firm needs to decide now which project it should invest and thus it needs to apply
different capital budgeting tools.
A number of capital budgeting tools need a discount rate. The financial manager of the
company identified that the firm’s WACC is the appropriate discount rate for evaluating the
projects applying the capital budgeting tools. But, its WACC is not yet calculated.
So, now the firm is interested in measuring its overall cost of capital. The firm is in the 40%
tax bracket. Current investigation has gathered the following data:
Debt: The firm can raise an unlimited amount of debt by selling BDT 1,000 par-value, 10%
coupon interest rate, 10-year bonds on which annual interest payments will be made. Current
market price of the bond is BDT 1,200.
Preferred stock: The firm can sell 10% (annual dividend) preferred stock at its BDT 100 per
share par value. The cost of issuing and selling the preferred stock is expected to be BDT 2.5
per share. An unlimited amount of preferred stock can be sold under these terms.
Common stock (New issue): The firm’s common stock is currently selling for BDT 80 per
share. The firm expects to pay cash dividends of BDT 6 per share next year. The firm’s
dividends have been growing at an annual rate of 6%, and this rate is expected to continue in
the future. Floatation costs are expected to amount to BDT 3 per share.
The financial manager of the company is already overwhelmed with enormous workload and
hence hired you as the assistant manager of the finance department for the company and
seeing
FIN 201/CASE ASSIGNMENT/ Summer 2022 ©DEPT OF FINANCE, SBE, IUB
your competence in the area of finance assigned you to suggest the best route based on the
following calculations:
1. Calculate specific cost of each source of financing (Round the answer to the nearest
two decimal points percent, like 11.12%).
2. Calculate WACC (The firm’s optimum capital structure shows 40% Long-term debt,
15% Preferred stock, and 45% Common stock equity).
3. Determine the Payback period, net present value, internal rate of return and
profitability index for both of the routes.
4. Which one is the best route if they are independent or mutually exclusive projects?
5. Suppose DHK-CTG route is risky due to the possible entry of new competitor in the
future. Accordingly, the risk-adjusted discount rate for this route will be 7% plus
existing rate. How this will affect your decision? Support your decision by
calculation.
The firm in the airline industry of Bangladesh is considering two investment alternatives for starting domestic flights. The cash flows associated with each alternative have been provided.
To assist the firm in its decision-making process, the following steps need to be taken:
1. Calculate the specific cost of each source of financing:
- Determine the cost of debt by considering the coupon rate, market price, and tax rate.
- Calculate the cost of preferred stock by considering the annual dividend, par value, and issuance cost.
- Calculate the cost of common stock (new issue) by considering the dividend growth rate, market price, and flotation costs.
2. Calculate the Weighted Average Cost of Capital (WACC):
- Determine the cost of each source of financing based on their weights in the capital structure.
- Multiply the cost of each source by its respective weight and sum them to calculate the WACC.
3. Apply capital budgeting tools:
- Calculate the payback period by identifying the time required to recover the initial investment.
- Calculate the NPV by discounting the cash flows at the WACC and subtracting the initial investment.
- Calculate the IRR by finding the discount rate that equates the present value of cash inflows to the initial investment.
- Calculate the profitability index by dividing the present value of cash inflows by the initial investment.
4. Compare the results for both routes and determine the best route based on the payback period, NPV, IRR, and profitability index.
5. Consider the risk-adjusted discount rate for the DHK-CTG route:
- If the DHK-CTG route is deemed risky due to potential new competitors, increase the discount rate by 7% and recalculate the NPV and other metrics.
- Evaluate the impact of the risk-adjusted discount rate on the decision-making process and choose the best route accordingly.
By performing these calculations and analyses, the assistant manager of the finance department can provide a recommendation on the best route for the firm based on financial considerations and risk factors.
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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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in which stage of the organizational planning process are companies likely to use a management by objectives process?
Companies are likely to use the Management by Objectives (MBO) process during the stage of goal setting in the organizational planning process. MBO is a management approach where managers and employees work together to define specific objectives that align with the overall goals of the organization.
These objectives are then used as a basis for performance evaluation and reward systems.
During the goal-setting stage of the organizational planning process, companies establish their strategic objectives and determine how to achieve them. This involves defining specific, measurable, achievable, relevant, and time-bound (SMART) goals for different departments or individuals within the organization. The MBO process can be employed to ensure that these objectives are effectively communicated, understood, and pursued throughout the organization.
By implementing MBO, companies create a framework where employees have clarity regarding their individual objectives and how they contribute to the broader organizational goals. Regular performance reviews and feedback sessions help track progress, identify areas for improvement, and align individual efforts with the overall strategy. This collaborative and goal-oriented approach encourages employee engagement, motivation, and accountability.
It is important to note that the organizational planning process is not strictly linear, and different stages often overlap or occur simultaneously. However, MBO typically finds its primary application during the goal-setting stage, where specific objectives are formulated to guide organizational actions.
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Mikey's Bar and Grill has total assets of $24 million, of which $18 million are current assets. Cash makes up 10 percent of the current assets and accounts receivable makes up another 40 percent of current assets. Mikey's gross plant and equipment has a book value of $19.0 million, and other long-term assets have a book value of $500,000. What is the balance of inventory and the balance of depreciation on Mikey's Bar and Grill's balance sheet? Note: Enter your answers in millions of dollars rounded to 1 decimal place. (i.e., Enter 5,500,000 as 5.5.)
The balance of inventory on Mikey's Bar and Grill's balance sheet is $9 million.
The balance of depreciation on Mikey's Bar and Grill's balance sheet is $4.5 million.
To determine the balance of inventory and the balance of depreciation on Mikey's Bar and Grill's balance sheet, we can use the information provided.
Given:
Total assets: $24 million
Current assets: $18 million
Cash (10% of current assets): 10% of $18 million = $1.8 million
Accounts receivable (40% of current assets): 40% of $18 million = $7.2 million
Gross plant and equipment: $19.0 million
Other long-term assets: $500,000
To find the balance of inventory, we can subtract the known components of current assets from the total current assets:
Inventory = Total current assets - (Cash + Accounts receivable)
Inventory = $18 million - ($1.8 million + $7.2 million)
Inventory = $18 million - $9 million
Inventory = $9 million
Therefore, the balance of inventory on Mikey's Bar and Grill's balance sheet is $9 million.
To find the balance of depreciation, we need to subtract the book value of gross plant and equipment and other long-term assets from the total assets
Depreciation = Total assets - (Gross plant and equipment + Other long-term assets)
Depreciation = $24 million - ($19.0 million + $500,000)
Depreciation = $24 million - $19.5 million
Depreciation = $4.5 million
Therefore, the balance of depreciation on Mikey's Bar and Grill's balance sheet is $4.5 million.
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Exempt from the registration requirement of the Securities Act of 1933 are offerings of securities
a purchased by charitable organizations.
b involving a large dollar amount.
c made to a small number of knowicdgeable investors.
d issued by for-profit organizations.
Exempt from the registration requirement of the Securities Act of 1933 are offerings of securities made to a small number of knowledgeable investors. So the correct option is c.
The Securities Act of 1933 requires most securities offerings to be registered with the Securities and Exchange Commission (SEC) to provide transparency and protect investors. However, there are certain exemptions from this registration requirement. One such exemption is when securities are offered to a small number of knowledgeable investors who are considered to have sufficient financial sophistication and understanding of investment risks.
This exemption, known as the private placement exemption, allows companies to raise capital from a limited group of investors without going through the formal registration process. It is intended to streamline the fundraising process for companies and avoid the costs and regulatory burdens associated with full registration. The exemption is not based on the dollar amount involved or the type of organization issuing the securities, but rather on the qualification of the investors involved.
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Select a company of your choosing, and conduct a scenario planning outline for the possible future Global Business Strategy environments for their selected individual company. The output of the scenario plans should be summarized in 3-6 slides. The emphasis is on creating the possible scenarios to be considered (3-4), listing strategic implicationsand estimating the probabilities of each occurring. Some general suggestions can be made regarding strategies to deal with each scenario, but this does not have to be a "detailed" plan.
The scenario planning outline for Apple identifies four possible future global business strategy environments and estimates the probabilities of each occurring.
Apple is a global leader in the technology industry. The aim of this scenario planning outline is to identify possible future global business strategy environments for Apple and estimate the probabilities of each occurring.
Market Segmentation:
The market for Apple can be divided into two segments:
Tech-savvy consumers who require high-quality and innovative technology products.
Fashion-conscious consumers who are willing to pay for trendy and stylish technology products.
Target Market:
The primary target market for Apple is tech-savvy consumers who require high-quality and innovative technology products. The secondary target market is fashion-conscious consumers who are willing to pay for trendy and stylish technology products.
Scenario Planning:
Scenario 1: Increased Competition from New Entrants
Probability: High
Strategic Implications: Apple should focus on innovation and product differentiation to maintain its competitive advantage. The company should also consider expanding its product line to include new categories such as wearables and home automation.
Additional Primary Marketing Research: Surveys and focus groups to determine customer preferences and identify areas for product expansion.
Scenario 2: Economic Recession
Probability: Medium
Strategic Implications: Apple should focus on cost-cutting measures and reducing expenses while maintaining product quality. The company should also consider expanding its product line to include more affordable products to appeal to price-sensitive consumers.
Additional Primary Marketing Research: Surveys and focus groups to determine customer preferences and identify areas for product expansion.
Scenario 3: Increased Demand for Sustainable Products
Probability: High
Strategic Implications: Apple should focus on sustainability and eco-friendliness in its product design and manufacturing processes. The company should also consider expanding its product line to include more sustainable products to appeal to environmentally conscious consumers.
Additional Primary Marketing Research: Surveys and focus groups to determine customer preferences and identify areas for product expansion.
Scenario 4: Increased Demand for Augmented Reality
Probability: High
Strategic Implications: Apple should focus on developing and improving its augmented reality technology to meet the growing demand for this technology. The company should also consider expanding its product line to include more augmented reality products to appeal to tech-savvy consumers.
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