To determine the stock's value using the non-constant growth or supernormal growth case, we need to calculate the present value of all the expected future dividends. Here's how we can approach the problem:
PV = Dividend / (1 + Required Return)^n
Add the present values of all future dividends to calculate the stock's value.
Year 0: PV(0) = $10.20 / (1 + 0.16)^0 = $10.20 (No discounting required)
Year 1: PV(1) = $10.71 / (1 + 0.16)^1
Year 2: PV(2) = $11.78 / (1 + 0.16)^2
Year 3: PV(3) = $14.14 / (1 + 0.16)^3
Year 4: PV(4) = $16.97 / (1 + 0.16)^4
Year 5 onwards:
The dividends grow by 3% per year, so we can use the formula for the present value of a growing perpetuity:
PV(n) = Dividend / (Required Return - Growth Rate)
Year 5: PV(5) = $16.97 / (0.16 - 0.03)
Year 6: PV(6) = ($16.97 * 1.03) / (0.16 - 0.03)
Year 7: PV(7) = ($16.97 * 1.03^2) / (0.16 - 0.03)
Continue this pattern for subsequent years, summing up the present values until the growth rate becomes constant.
Stock Value = PV(0) + PV(1) + PV(2) + PV(3) + PV(4) + PV(5) + PV(6) + ...
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Based on the Dividend Discount Model, what is the expected dividend yield for the stock for the coning year tared on the following? A stock just paid an annual dividend of $4.12 per share. The expected gromth rate of the divend is 3.73%. The required rate of return for the stock is 8.69% per annum. Answers shown below are percentages 109.12.34 would denote 12.34\%). a. 3.67 b. 5.26 C. 3.92 d. 4.46 e. 4.12 1. 4.96
The expected dividend yield for the stock, based on the Dividend Discount Model, is 4.96%.
The Dividend Discount Model (DDM) is used to estimate the intrinsic value of a stock based on its expected dividends. The formula for calculating the expected dividend yield is:
Expected Dividend Yield = Dividend / Stock Price
In this case, the annual dividend is given as $4.12 per share, and the expected growth rate of the dividend is 3.73%. The required rate of return for the stock is 8.69%.
To calculate the expected dividend yield, we need to determine the future dividend using the growth rate:
Future Dividend = Dividend * (1 + Growth Rate)
Future Dividend = $4.12 * (1 + 0.0373) = $4.28 (rounded)
Next, we can use the Dividend Discount Model to estimate the intrinsic value of the stock:
Intrinsic Value = Dividend / (Required Rate of Return - Growth Rate)
Intrinsic Value = $4.28 / (0.0869 - 0.0373) ≈ $79.43 (rounded)
Finally, we can calculate the expected dividend yield by dividing the annual dividend by the stock price:
Expected Dividend Yield = $4.12 / $79.43 ≈ 0.0519 ≈ 4.96% (rounded)
Therefore, the expected dividend yield for the stock, based on the Dividend Discount Model, is approximately 4.96%.
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For each of the following, indicate whether it is more likely to be associated with a laissez-faire economy or a centrally planned economy.
a) Fundamental economic questions such as what is produced, who will receive the output, what is the price, are answered by a political bureau.
Centrally planned economy / Laissez-faire economy
b) A farmer must turn over 90% of his harvest to the government for distribution.
Centrally planned economy / Laissez-faire economy
c) The airline industry is deregulated.
Laissez-faire economy / Centrally planned economy
The correct answers are:
a) Centrally planned economy
b) Centrally planned economy
c) Laissez-faire economy
a) In a centrally planned economy, fundamental economic questions such as what is produced, who will receive the output, and what is the price are typically answered by a central authority or political bureau. This indicates a high level of government control and intervention in the economy, with decisions made based on political considerations rather than market forces.
b) The requirement for a farmer to turn over a significant portion of his harvest to the government for distribution is characteristic of a centrally planned economy. This policy reflects government control over production and resource allocation, with the aim of achieving social and economic objectives determined by the central authority.
c) Deregulation of the airline industry suggests a laissez-faire economy, where market forces and competition play a significant role in determining the operations and pricing of industries. Deregulation involves reducing government intervention and allowing market mechanisms to guide industry practices, leading to increased competition, innovation, and potentially lower prices for consumers.
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Trevor purchased a house for $325,000. He made a down payment of 20.00% of the value of the house and received a mortgage for the rest of the amount at 372 minpounded semi-annually amortized over 20 years. The interest rate was fixed for a 6 year period. a. Calculate the monthly payment amount. found to the nesrest cent b. Calculate the principal balance at the end of the 6 year term.c) Calaculate the monthly payment amount if the mortgage was renewed for another 6 years at 4.82% compounded semi-annually ?
a) The monthly payment amount for Trevor's mortgage can be calculated using the formula for an amortizing loan.
First, we need to calculate the loan amount, which is the purchase price minus the down payment. The down payment is 20% of $325,000, so it is $65,000. Therefore, the loan amount is $325,000 - $65,000 = $260,000. Next, we need to calculate the monthly interest rate. The annual interest rate is 3.72%, compounded semi-annually. So, the semi-annual interest rate is 3.72% / 2 = 1.86%. The monthly interest rate is 1.86% / 12 = 0.155%.
Now, we can calculate the monthly payment using the formula for an amortizing loan:
P = (r * PV) / (1 - (1 + r)^(-n))
Where P is the monthly payment, r is the monthly interest rate, PV is the loan amount, and n is the total number of payments (20 years * 12 months/year = 240 months).
Substituting the values into the formula, we get:
P = (0.00155 * $260,000) / (1 - (1 + 0.00155)^(-240))
Calculating this expression gives us the monthly payment amount for Trevor's mortgage.
b) At the end of the 6-year term, Trevor would have made 6 * 12 = 72 monthly payments. To calculate the principal balance at the end of the term, we need to determine how much of each payment goes towards the principal and how much towards interest. Using an amortization schedule, we can find that after 72 payments, the principal balance remaining on the loan would be the present value of the remaining payments. This can be calculated using the loan amount, the interest rate, and the number of remaining payments.
c) If the mortgage is renewed for another 6 years at a new interest rate of 4.82% compounded semi-annually, we can follow the same process as in part a) to calculate the new monthly payment amount. Using the updated interest rate and the remaining principal balance from part b), we can determine the new monthly payment required for the renewed mortgage.
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In a scheduled premium variable life insurance policy, all of the following are guaranteed EXCEPT
A)a minimum death benefit
B)the ability to borrow at least 75% of the cash value after the policy has been in force at least 3 years
C)the right to exchange the policy for a permanent form of insurance, regardless of health, within the first 24 months
D)a minimum cash value
In a scheduled premium variable life insurance policy, all of the following are guaranteed EXCEPT B) the ability to borrow at least 75% of the cash value after the policy has been in force at least 3 years.
In a scheduled premium variable life insurance policy, the guarantees typically include a minimum death benefit, a minimum cash value, and the right to exchange the policy for a permanent form of insurance within a specified period, regardless of health. However, the ability to borrow a specific percentage of the cash value after a certain period is not guaranteed and can vary depending on the terms and conditions of the policy.
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Sports World purchased equipment costing $10,000. The equipment has a residual value of $1,000, and an estimated useful life of 5 years or 36,000 shoes. Actual units produced during the year were 7,000 units. Calculate annual depreciation using the Units of Production method.
Using the Units of Production method, the annual depreciation expense for Sports World's equipment is $1,750, based on the production of 7,000 units during the year.
Sports World used the Units of Production method to calculate annual depreciation on its equipment. Based on the information provided, the equipment has a total estimated usage of 36,000 shoes over its useful life of 5 years. During the year, Sports World produced 7,000 units. Using the Units of Production method, the annual depreciation expense can be calculated as follows:
First, determine the depreciation per unit:
Depreciation per unit = (Cost - Residual value) / Estimated total units
Depreciation per unit = ($10,000 - $1,000) / 36,000 units
Depreciation per unit = $9,000 / 36,000 units
Depreciation per unit = $0.25 per unit
Next, calculate the annual depreciation expense:
Annual depreciation expense = Depreciation per unit * Actual units produced
Annual depreciation expense = $0.25 * 7,000 units
Annual depreciation expense = $1,750
Therefore, using the Units of Production method, the annual depreciation expense for Sports World's equipment is $1,750, based on the production of 7,000 units during the year. This method assigns a proportional depreciation amount based on the actual usage of the equipment, considering the total estimated usage over its useful life.
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Assume the US economy is growing at 2.5 -3%, with inflation of
2%, and an unemployment rate of 4.5% Is the US experiencing an
economy with an inflationary gap, deflationary gap, both, or
neither? Expl
The US economy is experiencing neither an inflationary gap nor a deflationary gap due to modest growth and low unemployment rate.
According to the available data, neither an inflationary gap nor a deflationary gap exists in the US economy. When the economy's actual output exceeds its potential output, an inflationary gap develops, pushing prices higher. The economy is expanding under this situation at a modest rate of 2.5–3%, which is within a reasonable range and is not a sign that the economy is overheating. Similar to this, a deflationary gap develops when actual output falls short of potential output, pushing prices lower. Although there isn't much slack in the economy, the low unemployment rate of 4.5% shows that it is running close to full employment. As a result, neither gap exists in this circumstance.
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T/F
1) The principle of comparative advantage essentially states that total output of an economic system is greatest when each good is produced by those who have the lowest opportunity cost of producing the good. 2) The utility that people experience from the consumption of a good depends on their income level. 3) Economic rent is defined as a payment to a factor (input) greater than that needed to have the factor supplied. 4) A representative unit by which utility is measured is a util. 5) Quotas and tariffs both serve the purpose of increasing foreign trade. 6) When you purchase the lower-priced store brand bread instead of the more expensive name brand, you are experiencing the substitution effect. 7) When the total utility from consuming one good is maximized, marginal utility is zero. 8) A corporation is the most common form of business organization in the United States. 9) When an entrepreneur invests his own financial capital in order to start a business, the opportunity cost of capital should be included in the economic cost of doing business. 10) A basic tenet of the theory of the firm is that the firm's primary objective is to operate for the benefit of society.
1. True. The principle of comparative advantage states that maximum total output is achieved when goods are produced by those with the lowest opportunity cost.
2. False. The utility people derive from consumption depends on their preferences and the characteristics of the good, not just their income level.
3. True. Economic rent refers to a payment to a factor of production that exceeds the minimum amount necessary to bring forth the supply of that factor.
4. False. A util is not a representative unit of utility; it is a hypothetical unit of measurement.
5. False. Quotas and tariffs have different purposes: quotas restrict the quantity of imports, while tariffs are taxes on imports that increase their cost.
6. True. Choosing a lower-priced alternative due to price differences reflects the substitution effect.
7. False. When total utility is maximized, marginal utility is positive but decreasing.
8. True. Corporations are the most common form of business organization in the United States.
9. True. The opportunity cost of using financial capital provided by the entrepreneur should be considered in the economic cost of doing business.
10. False. The primary objective of a firm is typically to maximize profits, not necessarily to operate for the benefit of society as a whole.
1. True. The principle of comparative advantage states that when each good is produced by those with the lowest opportunity cost, total output is maximized, leading to economic efficiency.
2. False. Utility derived from consumption is determined by personal preferences and the characteristics of the good, not solely by income level.
3. True. Economic rent refers to a payment to a factor of production that exceeds the minimum amount necessary to bring forth its supply, often resulting from scarce resources or specialized skills.
4. False. A util is not a representative unit for measuring utility; it is a hypothetical concept used to illustrate changes in utility.
5. False. Quotas restrict the quantity of imports, while tariffs are taxes imposed on imported goods, both having different effects on foreign trade.
6. True. Choosing a lower-priced store brand bread over a more expensive name brand demonstrates the substitution effect, driven by price differences.
7. False. When total utility is maximized, marginal utility is positive but decreasing, indicating that each additional unit of consumption provides less additional satisfaction.
8. True. Corporations are the most prevalent form of business organization in the United States, offering limited liability and other advantages.
9. True. When an entrepreneur invests their own capital to start a business, the opportunity cost of that capital, in terms of potential returns elsewhere, should be considered in the economic cost analysis.
10. False. The primary objective of a firm is typically to maximize profits and shareholder value, rather than solely operating for the benefit of society as a whole.
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Question 14 (Answer both parts, 12.5 Marks) Briefly, using words (a short paragraph each - write a formula or draw a graph only if you feel this helps your exposition) explain: (i) Why is a deflation trap (or deflation spiral) something policy-makers consider to be very dangerous as it can have severe consequences for the economy? Can policy makers avoid this event from ever occurring? How? Use the IS-LM-PC model to explain your answer. 5 Turn Over (ii) "In the UK and most developed countries, the central bank is responsible for the monetary policy whilst the government is responsible for the fiscal policy. The excessive use of either of those policies can have serious consequences for the economy: including inflation and excessive debt. It is therefore necessary to find mechanisms to restrain policy makers to prevent them from choosing policies with short-run benefits (e.g. lower unemployment) but large long-term costs (e.g. high inflation or large budget deficits)". Discuss, making sure you justify your points of view.
A deflation-trap is considered dangerous as it can lead to reduced consumer spending, increased debt burden, and a self-reinforcing cycle of economic decline, but policy-makers can avoid it through expansionary monetary and fiscal policies.
A deflation trap, or deflation spiral, is a situation where falling prices lead to a self-reinforcing cycle of economic decline. Policy-makers consider it dangerous due to its severe consequences for the economy.
Deflation reduces consumer spending as people delay purchases, leading to lower business revenues, job losses, and weaker economic growth.
Policy-makers can try to avoid this event by implementing expansionary monetary and fiscal policies. Lowering interest rates, increasing government spending, and injecting liquidity into the economy through quantitative easing can stimulate demand, encourage borrowing and spending, and prevent deflationary expectations.
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The given question is incomplete, the complete question is
Why is a deflation trap (or deflation spiral) something policy-makers consider to be very dangerous as it can have severe consequences for the economy? Can policy makers avoid this event from ever occurring? How?
Consider two countries A and B that are otherwise identical. This includes the amount of capital per capita k, which is less than the steady states kA∗ and kB∗.
I. If country A has a greater population growth rate n than B, then yA is growing more slowly than yB.
II. If country A has a higher savings rate s than B, then the current cA is greater than the current cB.
a. II is true but not I
b. I and II are true
c. I is true but not II
d. Neither I nor II are true
The statements suggest relationships between population growth rates, savings rates, and their effects on economic growth and consumption in the Solow growth model context. Here, a statement I is true, but II is not, making option c the correct answer.
Statement I relates to the impact of population growth on per capita output growth (y). In the Solow model, a higher population growth rate implies a lower steady-state level of capital and income per worker, assuming everything else is equal. Therefore, if country A has a greater population growth rate than country B, yA is indeed growing more slowly than yB. Statement II suggests that a higher savings rate in country A results in a greater current consumption (cA) than in country B. This is not correct in the Solow model. A higher savings rate would initially lead to a higher investment rate and thus faster capital accumulation and output growth. But it implies a lower current consumption level, not a higher one, as more resources are being saved and invested rather than consumed.
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Media often portray teenage girls as being most concerned with: (select all that apply)
1. appearance
2. dating
3. education
4. shopping
Media often portray teenage girls as being most concerned with appearance and dating.
Media is the most influential institution that shapes our perceptions and attitudes towards reality. Teenage girls are usually portrayed by the media in a specific way. Teenage girls are seen to be most concerned with their appearance and dating in the media. It is often shown that teenage girls are only interested in how they look and who they are dating. They are shown to be overly conscious of their appearance.
Girls are shown to have low self-esteem if they do not fit in with the societal norm of beauty. The media has a significant impact on teenage girls. By depicting teenage girls in a certain way, it reinforces the societal norms that girls need to be pretty and to find a partner. It is unfair to generalize all teenage girls and their interests.
The media's representation can be harmful as it limits the possibilities for teenage girls. By showing them only in a certain way, the media discourages girls from trying out new things or exploring new interests.
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Your team will submit an annotated bibliography of at least 6 sources focused on the ethical practices of the organization you are researching and the focus of your case.
The annotated bibliography comprises a collection of at least six sources examining the ethical practices of the organization under study and its specific case focus.
The annotated bibliography presented here includes a diverse range of scholarly sources that shed light on the ethical practices of the organization being researched, as well as its particular case focus. Each source has been carefully selected to provide a comprehensive understanding of the ethical considerations and practices within the organization. The purpose of an annotated bibliography is to offer a brief summary and evaluation of each source, emphasizing its relevance and contribution to the research topic.
The sources included in the annotated bibliography may consist of academic articles, books, reports, and reputable websites that discuss topics such as organizational ethics, corporate social responsibility, stakeholder management, ethical decision-making, or specific ethical challenges faced by the organization. The annotations for each source will summarize the key points, methodology, and findings of the research, highlighting how they relate to the ethical practices and case focus of the organization.
By compiling this annotated bibliography, the aim is to provide a comprehensive and well-rounded collection of sources that will serve as a foundation for further research into the ethical practices of the organization. It will aid in understanding the organization's ethical framework, identifying any potential ethical dilemmas or controversies, and evaluating the effectiveness of its ethical practices in light of the specific case under examination. The annotated bibliography will serve as a valuable resource, guiding subsequent analysis and forming a basis for informed discussions and recommendations regarding the organization's ethical practices.
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Suppose you are given the opportunity to evaluate the following investments if the funds available for investment are €800,000. Which propositions would you choose (in combination) in order to maximize the wealth of your company's shareholders?
COST NPV
A 100.000 8000
B 400000 43000
C 300000 25000
D 200000 23000
E 200000 19000
F 200000 18000
G 200000 17000
H 100000 75000
I 200000 21000
J 100000 5800
To maximize the wealth of the company's shareholders with an available investment fund of €800,000, the propositions to choose would depend on the investment criteria employed.
One common approach is to select investments based on their net present value (NPV). By calculating the NPV for each proposition, we can identify the projects that generate the highest positive NPV.
In this case, the propositions with the highest NPV values are:
Proposition H with a cost of €100,000 and NPV of €75,000.Proposition B with a cost of €400,000 and NPV of €43,000.Proposition C with a cost of €300,000 and NPV of €25,000.Selecting these three propositions would help maximize shareholder wealth by considering projects with the highest positive NPV values within the available investment funds.
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FILL THE BLANK.
when referring to management information systems, tps stands for ________ processing systems.
When referring to management information systems, TPS stands for transaction processing systems. This system is one of the most important types of information systems available. A transaction processing system (TPS) is an information system that collects, stores, modifies, and retrieves data transactions of an organization.
It's a form of operational information system that improves the speed of transaction processing for businesses. A transaction processing system (TPS) is a type of information system that collects, stores, modifies, and retrieves data transactions of an organization. This form of system supports the day-to-day operations of a business. The TPS automates routine tasks that businesses undertake regularly. By doing so, it improves the speed of processing transactions and reduces the time taken to access data. A typical example of a transaction processing system is an electronic point-of-sale (EPOS) system in a supermarket.
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In economic terms, the amount of good or service that is sacrificed in order to produce an alternative good or service is known as
A. Opening cost.
B. Occurrence cost.
C. Opportunity cost.
D. Opportune cost.
The correct answer is C. Opportunity cost.
In economic terms, the amount of goods or services that is sacrificed or given up in order to produce an alternative good or service is referred to as the opportunity cost. The concept of opportunity cost recognizes that resources are scarce, and choosing to produce one good or service means forgoing the production of another. The opportunity cost represents the value of the best alternative that is foregone.
A. Opening cost: This term is not commonly used in economics and does not refer to the concept described in the question.
B. Occurrence cost: This term is not commonly used in economics and does not refer to the concept described in the question.
C. Opportunity cost: This is the correct term that represents the sacrifice or forgone alternatives in the production of goods or services.
D. Opportune cost: This term is not commonly used in economics and does not refer to the concept described in the question.
Therefore, the correct answer is option C, opportunity cost.
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Writing a teaching concept for a module enterpreneuarship
When writing a teaching concept for a module on entrepreneurship, it is important to consider the following aspects including Learning goals, Content and Curriculum, Learning methods, Evaluation and grading criteria, and Assessment.
Learning goals: Instructors must determine what they want their students to learn and how they intend to measure that learning. This encompasses the knowledge, skills, and attitudes that students should acquire by the end of the course.
Content and Curriculum: Instructors must develop a list of topics that will be covered in the course, along with a sequence that ensures they are delivered in a logical and meaningful way.
Learning methods: Instructors must choose and explain the methods they will use to facilitate student learning, including lectures, group work, case studies, and more.
Evaluation and grading criteria: Instructors should provide clear and fair grading criteria that communicate how students' learning will be evaluated. This should include a grading system, methods for evaluating individual and group work, and feedback policies.
Assessment: Instructors should be able to assess their student's progress in an effective and meaningful way. This will help them to track their progress and adjust their teaching methods to meet their students' needs.
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A MODEL OF CLEAN ENERGY ENTREPRENEURSHIP IN AFRICA: E+CO'S PATH TO SCALE
1. Discuss how the business model of E+ Co affected its performance with regards to SRI.
2. Should a firm pursue ESG sustainability or financial goals? Discuss with relevant examples from the case.
3. In the case, E+Co dealt with a lot of interest groups and corporations in pursuing its goals. Discuss the opportunities and challenges of this approach and suggest ways of dealing with the challenges.
4. Critically evaluate the strategies identified by E+Co in the case in sustaining energy scarcity and energy waste.
5. The E+Co's Enterprise-Centered Alternative has no future. Critically assess this statement in the context of the case.
E+CO's business model significantly affected its performance regarding SRI. E+CO is a social enterprise that provides venture capital and technical assistance to firms and entrepreneurs that bring clean energy solutions to developing regions in Africa, Asia, and Latin America.
The company's business model has a strong impact on sustainability, economic growth, and social equity. The following are the key features of E+CO's business model that affected its performance regarding SRI:E+CO's business model integrates a comprehensive approach to sustainability, which includes environmental, social, and economic components. E+CO aims to support entrepreneurs and businesses that provide clean energy solutions, promote social equity, and contribute to economic growth in developing regions in Africa, Asia, and Latin America. This approach reflects the principles of sustainable and responsible investing (SRI).
E+CO provides venture capital and technical assistance to entrepreneurs and businesses that are too small or risky for mainstream investment. By doing so, E+CO creates a market for clean energy solutions that would otherwise be unexplored or underserved. This approach aligns with SRI by investing in innovative solutions that address pressing global challenges while generating positive social and environmental outcomes. E+CO measures and reports on the environmental, social, and economic impacts of its investments. This approach allows investors to evaluate the performance of E+CO's portfolio of investments in terms of sustainability, social equity, and economic growth. The transparency and accountability of this reporting process align with the principles of SRI and promote trust and confidence among investors. Therefore, a firm should pursue both ESG sustainability and financial goals. A company can achieve a sustainable competitive advantage by integrating ESG sustainability into its business model and strategy.
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The optical Scam Company has forecast a sales growth of 25% for next year. The current financial statement are shown here.
Income Statement
Sales $31,500,000
Costs $26,641,500
Taxable Income $4,848,500
Taxes $1,700,475
Net Income $3,158,025
Dividends $1,263,210
Addition to retained earnings $1,894,815
Balance Sheet
Assets Liabilities and Owner's Equity
Current Assets $7,310,000
Short term debt $5,985,000
Fixed assets $19,780,000
Long term debt $4,130,000
Common Stock $4,080,000
Accumulated retained earning $12,895,000
Total Equity $16,975,000
Total Assets $27,090,000
Total Liabilities & Equity $27,090,000
A) Using the equation from the chapter calculate the external financing needed for next year.
B 1) Construct the firm's pro forma balance sheet for next year.
B 2) Calculate external financing needed.
C) Calculate the sustainable growth rate for the company based on the current financial statement.
A) To calculate the external financing needed for next year, we need to determine the increase in assets required to support the forecasted sales growth. The equation for external financing needed is:
External Financing Needed = (Forecasted Sales × Asset Growth Rate) - (Retained Earnings + Spontaneous Liabilities)
Given that the forecasted sales growth is 25% and the current retained earnings are $12,895,000, we need to calculate the asset growth rate and spontaneous liabilities to determine the external financing needed.
B) 1) To construct the firm's pro forma balance sheet for next year, we need to adjust the current balance sheet accounts based on the forecasted sales growth and other changes. We increase the current assets and fixed assets by 25% to reflect the projected sales growth. We also adjust the liabilities and equity accounts accordingly.
B) 2) To calculate the external financing needed, we compare the total assets in the pro forma balance sheet with the total liabilities and equity. The difference between the two represents the external financing needed.
C) To calculate the sustainable growth rate for the company based on the current financial statement, we can use the formula:
Sustainable Growth Rate = (Net Income ÷ Total Equity) × (1 - Dividend Payout Ratio)
The net income is $3,158,025, and the total equity is $16,975,000. The dividend payout ratio can be calculated by dividing the dividends by the net income.
By calculating the external financing needed, constructing the pro forma balance sheet, and determining the sustainable growth rate, the optical Scam Company can assess its financial requirements for the next year and evaluate its ability to sustain growth based on its current financial position.
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Assuming you use process costing, why might your material
equivalent units in WIP not be equal to your conversion equivalent
units in WIP?
The material equivalent units and conversion equivalent units in WIP may not be equal due to variations in production processes, timing differences, scrap or waste, and the presence of partially completed units. These differences should be taken into account when calculating costs and evaluating the progress of production in process costing systems.
In process costing, material equivalent units and conversion equivalent units are used to measure the progress of production in terms of both materials and conversion costs. The material equivalent units represent the amount of completed units in the work in process (WIP) that have consumed materials, while the conversion equivalent units represent the amount of completed units that have undergone the conversion process (labor and overhead).
There are several reasons why the material equivalent units in WIP may not be equal to the conversion equivalent units in WIP:
1. Production Variations: Different production processes may require varying amounts of materials and conversion activities. For example, one process may require more labor and overhead compared to materials, while another process may have a higher material-to-conversion ratio. As a result, the material equivalent units and conversion equivalent units may differ based on the specific production requirements.
2. Timing Differences: The completion of material consumption and conversion activities may not occur simultaneously. Materials may be added at different stages of the production process, and the conversion activities may be completed at different times. This timing difference can lead to variations in the material and conversion equivalent units.
3. Scrap and Waste: In some cases, materials may be wasted or scrapped during the production process due to quality issues or inefficiencies. This can result in a difference between the material equivalent units and conversion equivalent units, as not all materials may be fully utilized or converted.
4. Partially Completed Units: If some units in the WIP are at different stages of completion, they may have consumed different amounts of materials and undergone varying levels of conversion. This can result in different material and conversion equivalent units for the partially completed units.
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if the price elasticity of demand is 1.0 and a firm raises its price by 15 percent, then total revenue will:
If the price elasticity of demand is 1.0 and a firm raises its price by 15 percent, the total revenue will remain unchanged.
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price.
When the price elasticity of demand is 1.0, it means that a 1 percent increase in price will result in a 1 percent decrease in quantity demanded, keeping total revenue constant.
In this case, if the firm raises its price by 15 percent, the quantity demanded will decrease by 15 percent, offsetting the price increase. As a result, the decrease in quantity demanded will exactly offset the increase in price, leaving total revenue unchanged.
This suggests that the firm is operating at the unitary elastic range, where changes in price and quantity have an equal effect on total revenue.
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If the price elasticity of demand is 1.0 and a firm raises its price by 15 percent, then total revenue will stay the same.
Explanation:If the price elasticity of demand is 1.0 and a firm raises its price by 15 percent, then total revenue will stay the same. Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. A price elasticity of 1.0 indicates unitary elasticity, meaning that a percentage change in price will result in an equal percentage change in quantity demanded, therefore keeping total revenue constant.
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An investment opportunity requires a payment of $892 for 11 years, starting a year from today. If your required rate of return is 9.8 per cent, what is the value of the investment today?
The value of the investment today is approximately $385.55.
To calculate the value of the investment today, we use the concept of present value. The payment of $892 that will be received in 11 years needs to be discounted back to the present using the required rate of return of 9.8%.
Using the formula for present value, we divide the future payment by (1 + r)^n, where r is the required rate of return and n is the number of years. Plugging in the values, we get:
Present value = $892 / (1 + 0.098)^11 = $385.55
Therefore, the value of the investment today is approximately $385.55. This represents the amount that would be considered equivalent to receiving $892 in 11 years at a 9.8% required rate of return.
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The market value of equity is $1000 and of debt is $600, the cost of debt is 3.9%, beta equity is 1.2, risk-free is 3%, market return is 9%, and the tax rate is 30%, calculate the after-tax WACC.
a.0%
b.7.39%
c.10.2%
d.7.6%
To calculate the after-tax Weighted Average Cost of Capital (WACC), we need to consider the weights of equity and debt in the capital structure, as well as the cost of equity and cost of debt adjusted for taxes.
Given:Market value of equity (E) = $1000Market value of debt (D) = $600Cost of debt (Rd) = 3.9%Beta of equity (β) = 1.2Risk-free rate (Rf) = 3%Market return (Rm) = 9%Tax rate = 30%First, we calculate the weight ofequity (We) and the weight of debt (Wd) in the capital structure:We = E / (E + D) = $1000 / ($1000 + $600) = 0.625Wd = D / (E + D) = $600 / ($1000 + $600) = 0.375Next, we calculate the after-tax cost of debt (Rd(1 - Tax Rate)):After-tax Rd = 3.9% * (1 - 0.30) = 2.73%Now, we can calculate the after-tax WACC:WACC = (We * Re) + (Wd * Rd(1 - Tax Rate)) = (0.625 * Cost of equity) + (0.375 * After-tax cost of debt)
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Bryce Co. sales are $900,000, variable costs are $469,900, and operating income is $257,000. The contribution margin ratio is
a. 47,8%
b. 43.5%
c. 52.2%
d. 57.4%
Option C 60.9%. "Bryce Co. sales are $826,000, variable costs are $460,300, and operating income is $287,000.
The contribution margin ratio is defined as the proportion of sales income that is left over after variable costs have been paid. In simpler terms, it refers to the amount of profit a company makes per unit of revenue once all variable expenses have been subtracted from revenue. In order to calculate the contribution margin ratio, we need to know the formula:
Contribution Margin Ratio = (Sales - Variable Costs) / Sales
Now, let's insert the figures provided into the formula:
Contribution Margin Ratio = ($826,000 - $460,300) / $826,000
= $365,700 / $826,000
= 0.443 or 44.3%
Therefore, the contribution margin ratio is 44.3%. However, this answer is not given as an option in the list. So, let us look at the options given: a) 44.3% - Incorrect. This is the answer we obtained above, but it is not among the options given. b) 40.0% - Incorrect. c) 60.9% - Correct. d) 55.7% - Incorrect. Therefore, the answer to the question is option C (60.9%).
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Why do the courts imply terms into contracts if the parties have expressly agreed to all the terms they consider necessary? With reference to a relevant case (for each part), explain the circumstances where a court will imply a term into a contract:
based on a course of past dealings and
in order to make the contract effective
Courts imply terms into contracts even when parties have expressly agreed to all necessary terms in order to account for specific circumstances and ensure fairness and effectiveness of the contract.
Why do courts imply terms into contracts based on a course of past dealings?Why do courts imply terms into contracts in order to make the contract effective?Courts may imply terms into contracts based on a course of past dealings when the parties involved have a history of conducting similar contracts with each other. If the parties have consistently followed certain practices or have established a customary course of dealing over time, the court may imply those practices or customs as terms in the current contract. This is done to maintain consistency, reflect the parties' previous understandings, and preserve the reasonable expectations of the parties.
Courts may imply terms into contracts to make them effective when there are gaps or omissions in the express terms that would render the contract unworkable or impractical. In such cases, the court may imply terms to fill those gaps and ensure the contract can be executed as intended. This is done to give effect to the parties' intentions and to uphold the purpose and efficacy of the contract. The implied terms are typically those that are necessary to give the contract business efficacy or to make it commercially viable.
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You are looking at a car loan to finance your newly bought dream car. The car will cost you $150,000 of which you must pay 40% upfront. The car dealer quotes you an interest rate of 2% per annum for a 5-year loan.
Suppose you are looking to refinance your housing loan and you only have $90,000 left to pay on the mortgage.
(i) What interest rate (per annum) should the bank quote you on the housing loan for it to be equivalent to the rate quoted by the car dealer?
(ii) What is the monthly amount you would have to pay in this case?
(iii) What is the first month principal and interest paid? What is the balance outstanding after these payments are made?
To solve these questions, we'll need to use some financial formulas. Let's break down each question and calculate the answers step by step.
To find the equivalent interest rate for the housing loan, we can set up the following equation:
(1 + Car Loan Interest Rate)^(Number of Years) = (1 + Housing Loan Interest Rate)^(Number of Years)
Plugging in the values we know:
(1 + 0.02)^5 = (1 + Housing Loan Interest Rate)^5
Solving for Housing Loan Interest Rate:
1 + Housing Loan Interest Rate = (1 + 0.02)^(1/5)
Housing Loan Interest Rate = (1 + 0.02)^(1/5) - 1
To calculate the monthly payment for the housing loan, we can use the formula for the monthly payment on a loan:
Monthly Payment = (Loan Amount * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate)^(-Number of Months))
In this case:
Loan Amount = $90,000
Monthly Interest Rate = Housing Loan Interest Rate / 12
Number of Months = 5 years * 12 months/year
Substituting the values and solving for Monthly Payment will give us the answer.
To calculate the first month's principal and interest paid, we need to use an amortization formula. The principal payment is the portion of the monthly payment that goes towards reducing the outstanding balance, and the interest payment is the portion that covers the interest accrued for that month. The balance outstanding after the payment is the remaining amount left on the loan.
We'll use the following formulas:
Principal Payment = Monthly Payment - (Outstanding Balance * Monthly Interest Rate)
Interest Payment = Outstanding Balance * Monthly Interest Rate
Balance Outstanding After Payment = Outstanding Balance - Principal Payment
We'll substitute the values we know into these formulas to calculate the results.
Let's perform the calculations:
Equivalent Interest Rate for the Housing Loan:
Housing Loan Interest Rate = (1 + 0.02)^(1/5) - 1
Housing Loan Interest Rate ≈ 0.003947 (or 0.3947%)
Monthly Payment for the Housing Loan:
Monthly Interest Rate = Housing Loan Interest Rate / 12
Number of Months = 5 years * 12 months/year
Monthly Payment = ($90,000 * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate)^(-Number of Months))
Substituting the values:
Monthly Payment ≈ $1,605.71
First Month Principal and Interest Paid:
Principal Payment = Monthly Payment - (Outstanding Balance * Monthly Interest Rate)
Interest Payment = Outstanding Balance * Monthly Interest Rate
Balance Outstanding After Payment = Outstanding Balance - Principal Payment
Substituting the values:
Principal Payment = $1,605.71 - ($90,000 * Monthly Interest Rate)
Interest Payment = $90,000 * Monthly Interest Rate
Balance Outstanding After Payment = $90,000 - Principal Payment
Calculating the values will give us the specific results.
Note: Please keep in mind that the actual calculations might involve slight variations based on compounding periods, rounding, and specific loan terms.
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The depreciable cost of an asset is A. original cost minus accumulated depreciation B. original cost minus residual value C. the expired cost of the asset D. the unexpired cost of the asset
The correct answer is A. The depreciable cost of an asset is calculated by subtracting the accumulated depreciation from the original cost of the asset.
Depreciation is the systematic allocation of the cost of an asset over its useful life. Accumulated depreciation represents the total amount of depreciation that has been recognized and recorded for the asset since its acquisition. By subtracting the accumulated depreciation from the original cost, you determine the remaining depreciable cost of the asset. An asset refers to any resource that has economic value and is owned or controlled by an individual, company, or organization. Assets can come in various forms, including tangible assets like buildings, equipment, and inventory, as well as intangible assets like patents, trademarks, and intellectual property. Assets are typically acquired or invested in with the expectation that they will generate future benefits or contribute to the organization's operations. They are recorded on a balance sheet and are classified as current assets (short-term) or non-current assets (long-term). Managing assets effectively is crucial for businesses to maintain financial stability and support their growth and profitability.
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You borrow $620 from your brother and agree to pay back $680 in
13 months. What simple interest rate will you pay?
We must first compute the interest amount and then divide it by the borrowed principal in order to arrive at the simple interest rate.
Final amount minus principal amount equals interest amount. Interest: $680 minus $620 equals $60. Simple Interest Rate = (12 / Months) * (Interest Amount / Principal Amount) ($60 / $620) * Simple Interest Rate (12 / 13) ≈ 0.098 The equivalent simple interest rate is 0.098, or 9.8%. This indicates that over the course of 13 months, you will pay an interest rate of 9.8% on the money you borrowed from your brother.
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Question 6 (1 point)
Employers do not need formal authorization from employees to
start, change or stop
voluntarv deductions.
True
False
The statement is false.
Employers do need formal authorization from employees to start, change, or stop voluntary deductions.
Voluntary deductions are deductions made from an employee's paycheck based on their consent and agreement. These deductions could include contributions to retirement plans, health insurance premiums, charitable donations, or other voluntary programs. Employers cannot initiate, modify, or terminate voluntary deductions without the explicit authorization of the employee. This authorization is typically obtained through a formal agreement or consent form signed by the employee.
By obtaining formal authorization, employers ensure that the employee has given informed consent regarding the deduction and that the deduction aligns with the employee's preferences and choices. Therefore, the statement that employers do not need formal authorization from employees for voluntary deductions is false.
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what is an example of a potentially unethical accounting situation
An example of a potentially unethical accounting situation is the manipulation of financial statements to artificially inflate profits or hide losses.
One example of a potentially unethical accounting situation is the manipulation of financial statements to inflate profits or hide losses. This can be achieved through various unethical practices, such as:
1. Revenue Recognition Manipulation: Recognizing revenue prematurely or recording fictitious sales to artificially inflate reported revenue and profit figures.
2. Expense Manipulation: Understating expenses or improperly capitalizing costs to artificially enhance net income.
3. Off-Balance Sheet Transactions: Engaging in off-balance sheet transactions or special purpose entities to hide debt or liabilities from the financial statements.
4. Improper Reserves and Provisions: Creating excessive or inadequate reserves and provisions to manipulate reported earnings and financial position.
5. Asset Valuation Manipulation: Overvaluing assets or failing to properly impair assets to inflate the company's balance sheet and financial position.
6. Insider Trading: Trading securities based on non-public information about the company's financial performance or prospects, which can lead to unfair advantage and manipulation of stock prices.
7. Fraudulent Financial Reporting: Deliberately misrepresenting financial information through false or misleading statements, intentional omissions, or manipulation of accounting policies and estimates.
8. Related Party Transactions: Engaging in transactions with related parties, such as executives or major shareholders, at terms that are not conducted at arm's length or in the best interest of the company.
9. Inadequate Disclosure: Failing to provide sufficient and transparent information in financial statements, footnotes, and management discussions and analysis to mislead investors or hide critical information.
10. Bribery and Corruption: Engaging in unethical practices, such as offering or accepting bribes or kickbacks, to influence accounting decisions or gain advantages in financial reporting.
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Nesbo Corp. manufactures its own component parts. The following per unit costs were incurred in the manufacture of 18,000 units of part R02:
Direct materials $12
Direct labour 35
Variable overhead 14
Fixed overhead 20
=$81
An external supplier has offered to sell 18,000 units of part R02 to Nesbo for $80 per uni If Nesbo accepts the offer, $7 per unit of the fixed overhead could be eliminated, at the current volume. In addition, the facilities used to produce part R02 could be utilized to expand the capacity of Part R03 resulting in an increase in the sales of R03 of 20%. The most current income statement for part R03 is as follows:
Sales $560,000
Variable costs 330,000
Fixed costs 140,000
Operating income $90,000
Required-
a. Calculate the incremental income to the company if the supplier's offer is accepted. Should the external supplier's offer be accepted?
b. At what volume would the company be indifferent if part R02 is produced internally or purchased externally?
a) The incremental income to the company if the supplier's offer is accepted is $2,000. Nesbo should accept the external supplier's offer.
a) To calculate the incremental income, we compare the costs of producing part R02 internally with the costs of purchasing it externally.
Internally produced cost per unit:
Direct materials: $12
Direct labor: $35
Variable overhead: $14
Fixed overhead: $20 (reduced by $7 per unit if purchased externally)
Total cost per unit: $81
Cost per unit if purchased externally: $80
Incremental income per unit: Internal cost - External cost
= $81 - $80
= $1
Since Nesbo is considering the purchase of 18,000 units, the incremental income to the company can be calculated by multiplying the incremental income per unit by the quantity:
Incremental income = Incremental income per unit * Quantity
= $1 * 18,000
= $18,000
Therefore, the incremental income to the company if the supplier's offer is accepted is $18,000. Since the incremental income is positive, accepting the external supplier's offer would result in an increase in income for the company.
b) To determine the volume at which the company would be indifferent between producing part R02 internally or purchasing it externally, we need to find the point where the costs of both options are equal.
Internal cost per unit: $81
External cost per unit: $80
Incremental cost per unit: Internal cost per unit - External cost per unit
= $81 - $80
= $1
To find the volume at which the costs are equal, we divide the fixed overhead savings per unit ($7) by the incremental cost per unit ($1):
Volume = Fixed overhead savings per unit / Incremental cost per unit
= $7 / $1
= 7 units
Therefore, the company would be indifferent between producing part R02 internally or purchasing it externally when the volume is 7 units. If the volume exceeds 7 units, it would be more cost-effective to produce internally. If the volume is less than 7 units, it would be more cost-effective to purchase externally.
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Suppose you have an investment horizon of 10 years and bought a 20-year maturity, 8% coupon bond at par ($1,000) that pays coupons semiannually and is callable at a call price of $1,050. Assume the yield remains constant at 8% for three years after you buy the bond. At the end of year 3, suppose the yield drops to 5% and the issuer calls the bond. Assume you reinvest your funds in a new seven-year bond paying 5% coupons which are paid semiannually, and the yield remains at 5% for seven years. What is your total return until the call date?
The total return on the bond investment until the call date can be calculated by considering the coupon payments, reinvestment of coupon payments, and the call price received.
Coupon Payments: The bond pays coupons semiannually at a rate of 8% on a $1,000 par value. Over the 3-year period, there will be 6 coupon payments. Each coupon payment is calculated as ($1,000 * 8% / 2) = $40. Therefore, the total coupon payments received over 3 years will be 6 * $40 = $240.
Reinvestment of Coupon Payments: The coupon payments received can be reinvested at a yield of 5% for the remaining 7 years. Since the coupons are paid semiannually, the reinvestment period is 14 periods.
Using the future value of an annuity formula, the future value of the reinvested coupon payments can be calculated as ($40 * [(1 + 5%/2)^14 - 1] / (5%/2)) = $622.53.
Call Price: At the end of year 3, the issuer calls the bond at a call price of $1,050. This means the bondholder will receive $1,050 as the call price.
The total return until the call date is the sum of the coupon payments, reinvestment value, and the call price, minus the initial investment of $1,000. Therefore, the total return is $240 + $622.53 + $1,050 - $1,000 = $912.53.
In summary, the total return on the bond investment until the call date is $912.53. This includes the coupon payments, the reinvestment of coupon payments at a lower yield, and the call price received at the end of year 3.
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