The correct answer is Option (a) The arbitrage-free forward price of the stock can be computed using the formula:
Forward price = Spot price * e^(r * T)
Where:
Spot price = $50 (current stock price)
r = 5% per annum (risk-free interest rate)
T = 1 year (maturity in months)
Plugging in the values:
Forward price = $50 * e^(0.05 * 1) = $50 * e^(0.05) ≈ $52.63
Therefore, today's arbitrage-free forward price of the stock per share is approximately $52.63.
(b) If the forward price is $55 per share, we can determine if an arbitrage opportunity exists by comparing it to the arbitrage-free forward price.
If the forward price is higher than the arbitrage-free forward price, there is an opportunity for arbitrage. In this case, $55 > $52.63.
To exploit this opportunity, an investor can sell short the overpriced forward contract and invest the proceeds in a risk-free asset, such as a bond, earning the risk-free interest rate.
At maturity, the investor would deliver the stock at the forward price of $55, resulting in an arbitrage gain of $55 - $52.63 = $2.37 per share.
(c) If the forward price is $45 per share, we can again determine if an arbitrage opportunity exists.
If the forward price is lower than the arbitrage-free forward price, there is an opportunity for arbitrage. In this case, $45 < $52.63.
To exploit this opportunity, an investor can buy the undervalued forward contract and finance the purchase by borrowing at the risk-free interest rate.
At maturity, the investor would receive the stock by exercising the forward contract, and the stock's value would be $50. Therefore, the arbitrage gain at maturity would be $50 - $45 = $5 per share.
In conclusion, if the forward price is higher than the arbitrage-free forward price, there is an opportunity for arbitrage by selling short the forward contract. If the forward price is lower than the arbitrage-free forward price, there is an opportunity for arbitrage by buying the forward contract. The arbitrage gains at maturity would be the differences between the forward prices and the stock's value at maturity
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To maximize economic surplus, keep increasing output as long as
a total benefits equal total costs.
b total benefits exceed total costs.
c marginal benefits equal marginal costs.
d marginal benefits exceed marginal costs.
The correct answer is c) marginal benefits equal marginal costs.
To maximize economic surplus, it is important to produce and allocate resources in a way that generates the greatest overall benefit to society. This is achieved when the marginal benefit of producing an additional unit of a good or service equals the marginal cost of producing that unit.
When marginal benefits equal marginal costs, it means that the additional benefit derived from producing one more unit of a good is exactly equal to the additional cost incurred in its production. This ensures that resources are allocated efficiently, where the last unit produced provides the same level of benefit as the cost required to produce it.
If marginal benefits exceed marginal costs (option d), it indicates that the benefit gained from producing an additional unit exceeds the cost incurred. In this case, producing more units would increase economic surplus since the additional benefit outweighs the additional cost.
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Builtrite is considering purchasing a new machine that would cost $70,000 and the machine would be depreciated (straight line) down to $0 over its five year life. Due to machine efficiencies, an extra $4000 in inventory would have to be held for the new machine. At the end of four years it is believed that the machine could be sold for $18,000. The current machine being used was purchased 3 years ago at a cost of $40,000 and it is being depreciated down to zero over its 5 year life. The current machine's salvage value now is $20,000. The new machine would increase EBDT by $46,000 annually. Builtrite's marginal tax rate is 34%. What is the TCF associated with the purchase of this machine if it is sold at the end of year 4 (NOT year 5 )? $4,000 $16,640 $12,640 $20,640
After-Tax Cash Flow = Net Cash Flow * (1 - 0.34)
The resulting after-tax cash flow represents the Total Cash Flow (TCF) associated with the purchase and sale of the machine at the end of year 4.
To determine the Total Cash Flow (TCF) associated with the purchase of the new machine and its subsequent sale at the end of year 4, we need to consider various factors such as the initial cost of the machine, depreciation, additional inventory, salvage value, increased earnings before depreciation and taxes (EBDT), and the marginal tax rate. By calculating the cash inflows and outflows over the relevant period, we can determine the TCF.
To calculate the TCF associated with the purchase and subsequent sale of the machine, we need to consider the following cash flows:
Initial Cost: The new machine costs $70,000.
Depreciation: The machine is depreciated over its five-year life using the straight-line method, so the annual depreciation expense is $70,000 / 5 = $14,000.
Additional Inventory: An extra $4,000 in inventory needs to be held for the new machine.
Sale of Current Machine: The current machine was purchased 3 years ago for $40,000 and has a salvage value of $20,000. Therefore, the book value of the current machine is $40,000 - ($40,000 / 5) * 3 = $16,000.
Increased EBDT: The new machine is expected to increase EBDT by $46,000 annually.
To calculate the TCF, we need to consider the cash inflows and outflows over the relevant period (4 years in this case):
Cash Inflows:
Sale of Current Machine: $16,000 (book value of the current machine)
Sale of New Machine: $18,000 (expected sale price at the end of year 4)
Cash Outflows:
Initial Cost: $70,000
Additional Inventory: $4,000
Depreciation: $14,000/year for 4 years
Next, we need to calculate the net cash flow by subtracting the cash outflows from the cash inflows:
Net Cash Flow = Cash Inflows - Cash Outflows
Finally, we need to adjust the net cash flow for taxes. Since the marginal tax rate is 34%, we multiply the net cash flow by (1 - 0.34) to calculate the after-tax cash flow.
After-Tax Cash Flow = Net Cash Flow * (1 - 0.34)
The resulting after-tax cash flow represents the Total Cash Flow (TCF) associated with the purchase and sale of the machine at the end of year 4.
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If the cash flows for project A are C0=−3,000,C1= +500;C2=+1,500; and C3=+5,000, calculate the NPV of the project using a 15 percent discount rate. Select one:
a. $3,201
b. $5,000
c. $1,857
d. $2,352
To calculate the net present value (NPV) of the project, we need to discount each cash flow to its present value and then sum them up. The formula to calculate the present value of a cash flow is:
Therefore, the NPV of the project, using a 15 percent discount rate, is approximately $1,795.28. None of the provided answer options match this result, so none of the options is correct. Where PV is the present value, CF is the cash flow, r is the discount rate, and n is the period. Using the formula, we can calculate the present value of each cash flow:To calculate the net present value (NPV) of the project, we need to discount each cash flow to its present value and then sum them up. The formula to calculate the present value of a cash flow is:
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Suppose that a small country faces fixed world prices that happen to be equal to its (undistorted) domestic autarky prices. Show the effect of a production subsidy to the X sector on production, welfare, and exports (include a diagram and a careful verbal explanation)
As a result of the subsidy, the new production level of X increases from Q1 to Q2. This increase in production helps to meet domestic consumption needs, but there is also excess supply available for export.
Since the world price is fixed and equal to the domestic autarky price, the small country can export the excess production at the world price. The quantity of X exported is the difference between the new production level (Q2) and domestic consumption (Q1). The country benefits from exporting the excess production and earning additional revenue from those exports.
The welfare effects of the production subsidy can be analyzed in terms of producer and consumer surplus. Producers benefit from the subsidy as it reduces their costs and increases their profits. Consumer surplus may or may not change significantly, depending on the elasticity of demand for X.
In summary, the production subsidy in the X sector leads to an increase in domestic production, which helps meet domestic consumption needs and creates an excess supply available for export. The country can export the excess production at the fixed world price. The welfare effects of the subsidy depend on the specific conditions, but it generally benefits producers and can potentially benefit the country through increased exports.
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11) Depreciation will have what effect on (1) net income and (2) total assets? A) (1) Increase; (2) Increase B) (1) Increase; (2) Decrease C) (1) Decrease; (2) Increase D) (1) Decrease; (2) Decrease
D) (1) Decrease. Depreciation is an accounting method used to allocate the cost of an asset over its useful life. It reduces net income by recognizing the gradual decrease in the value of the asset.
This decrease in net income is due to the expense associated with depreciation. Regarding total assets, depreciation also has a decreasing effect. As the value of the asset decreases over time, it is reflected as a reduction in the asset's book value. This reduction in the book value of the asset leads to a decrease in total assets on the balance sheet. In summary, depreciation decreases net income because it is recognized as an expense, and it also decreases total assets due to the reduction in the book value of the depreciated asset.
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a giffen good is one in which the _____ curve is _____ sloped.
A Giffen good is one in which the demand curve is positively sloped. This means that as the price of the good increases, the quantity demanded also increases.
This contradicts the typical relationship between price and quantity demanded, where an increase in price leads to a decrease in quantity demanded. Giffen goods are considered to be rare and counterintuitive in economics.
The explanation behind the positively sloped demand curve of Giffen goods lies in the income and substitution effects. In the case of Giffen goods, the income effect dominates the substitution effect. When the price of a Giffen good rises, it reduces the purchasing power of consumers, particularly those with low income.
As a result, they have to allocate a larger portion of their limited income towards the Giffen good, leaving less money for other goods. In this situation, the quantity demanded of the Giffen good increases despite its higher price, as consumers prioritize it over other goods due to affordability constraints. This unique phenomenon challenges the conventional law of demand and represents an exceptional case in economic theory.
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Let the continuously compounded rate r be 5.00%, the effective annual return (EAR) is
(a) 5.12%
(b) 5.00%
(c) 4.88%
(d) None of the above.
Which statement is most accurate for price-weighted equity indexes?
(a) Can be composed by holding the number of shares outstanding for each security in the market.
(b) No need to rebalance often.
(c) Stock splits result in arbitrary changes.
(d) The construction is data intensive.
The most accurate statement for price-weighted equity indexes is (a) Can be composed by holding the number of shares outstanding for each security in the market.
Price-weighted equity indexes are constructed by calculating the average price of the constituent securities and weighting them based on their prices rather than market capitalization. Among the given options, statement (a) is the most accurate description of price-weighted equity indexes.
Statement (a) states that price-weighted equity indexes can be composed by holding the number of shares outstanding for each security in the market. This means that the index is constructed by taking into account the number of shares outstanding for each security, without considering their market values. In a price-weighted index, securities with higher prices will have a larger impact on the index value.
Option (b) states that there is no need to rebalance often, which is not necessarily true for price-weighted indexes. Since the index is based on the prices of individual securities, any significant changes in the prices can result in the need for rebalancing to maintain the index's desired composition.
Option (c) states that stock splits result in arbitrary changes. This statement is not accurate for price-weighted indexes. In a price-weighted index, stock splits do not result in arbitrary changes as the number of shares outstanding for each security remains the same.
Option (d) states that the construction of price-weighted indexes is data intensive. This statement is not accurate since price-weighted indexes primarily rely on the prices of securities and the number of shares outstanding, which are typically readily available data.
Therefore, the most accurate statement for price-weighted equity indexes is (a) Can be composed by holding the number of shares outstanding for each security in the market.
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An important first step in the union certification process includes: Signing of authorization cards Contacting the labour board Election of union leaders Getting management's permission
An important first step in the union certification process includes signing of authorization cards.
The union certification process involves the formal recognition of a union as the representative of a group of employees for collective bargaining purposes. One of the crucial initial steps in this process is the signing of authorization cards by employees who express their desire to be represented by the union. Authorization cards are typically provided by the union and serve as a formal indication of an employee's support for union representation. These cards demonstrate the employee's willingness to join the union and allow the union to present them as evidence of support during the certification process.
Signing authorization cards is important because it helps the union demonstrate to the labor board or other relevant authorities that there is sufficient employee interest and support for union representation. The cards serve as a key factor in determining whether a union should be certified as the official representative of the employees. Once a certain threshold of signed authorization cards is reached, the labor board may proceed with further steps in the certification process, such as conducting an election or verifying the legitimacy of the union's representation.
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On which of the following annuities is it possible to name a beneficiary? Impaired annuity Joint-and-last survivor annuity Accumulation annuity Straight life annuity
It is possible to name a beneficiary on option (b) Joint-and-last survivor annuity.
An annuity is a financial product that provides a regular stream of income for a specified period or for the lifetime of the annuitant. The option to name a beneficiary allows the annuitant to designate a recipient who will receive the remaining annuity payments in the event of the annuitant's death.
Joint-and-last survivor annuity is the correct choice as it allows the annuitant to name a beneficiary. With a Joint-and-last survivor annuity, the annuity payments continue to the surviving annuitant (typically a spouse or partner) after the death of the primary annuitant. Upon the death of both annuitants, the annuity payments cease.
Impaired annuity, Accumulation annuity, and Straight life annuity do not typically offer the option to name a beneficiary. An impaired annuity takes into account the annuitant's impaired health, but the naming of a beneficiary is not a defining feature. Accumulation annuities focus on the accumulation of funds and do not involve beneficiary designations. Straight life annuities provide income for the lifetime of the annuitant but do not offer a beneficiary designation.
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Capitalist economies tend to experience cycles of expansions and contractions. You have studied various types of crises as highlighted by the Great Financial Crisis (GFC) of 2008-09 and the COVID-19 crisis of 2020.
a. Explain how the US Federal Reserve changed its primary policy tool used to achieve their target levels of employment and inflation following the GFC.
Be specific as to what was their key tool pre-GFC and then post-GFC, and why this change was made.
b. Explain briefly why this change was necessary, based on the mechanisms through which their instruments affect the economy
Following the Great Financial Crisis (GFC) of 2008-09, the US Federal Reserve changed its primary policy tool to achieve target levels of employment and inflation. Pre-GFC, the key tool was primarily the manipulation of short-term interest rates.
Post-GFC, the Federal Reserve implemented quantitative easing (QE), which involved the purchase of long-term government bonds and mortgage-backed securities. This change was made to address the severe economic downturn and the limitations of traditional monetary policy tools in stimulating economic growth during the crisis.
Prior to the GFC, the US Federal Reserve primarily relied on the manipulation of short-term interest rates, specifically the federal funds rate, as its key policy tool. By adjusting this rate, the Federal Reserve aimed to influence borrowing costs, encourage or restrain lending, and stimulate economic activity accordingly. However, during the GFC, interest rates reached near-zero levels, limiting the effectiveness of further rate cuts to stimulate the economy.
In response to the limitations of conventional monetary policy, the Federal Reserve adopted a new approach post-GFC. The key tool became quantitative easing (QE), which involved the purchase of long-term government bonds and mortgage-backed securities from financial institutions. The goal of QE was to inject liquidity into the financial system, lower long-term interest rates, and encourage lending and investment. By expanding its balance sheet through asset purchases, the Federal Reserve aimed to support credit availability, stabilize financial markets, and promote economic recovery.
This change was necessary because the GFC posed unique challenges that conventional monetary policy alone could not effectively address. With interest rates already at historically low levels, the Federal Reserve needed additional measures to stimulate the economy and combat the severe recession. QE was implemented to directly influence long-term interest rates, provide liquidity to financial institutions, and promote lending and investment. By purchasing long-term assets, the Federal Reserve aimed to lower borrowing costs, support asset prices, restore confidence in financial markets, and ultimately encourage spending and economic growth.
In summary, following the GFC, the US Federal Reserve shifted its primary policy tool from the manipulation of short-term interest rates to quantitative easing (QE). This change was made to address the limitations of traditional monetary policy in stimulating economic growth during the crisis. QE aimed to inject liquidity, lower long-term interest rates, stabilize financial markets, and promote lending and investment to facilitate economic recovery.
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Which of the following are GST-free supplies: a. White goods b. Education c. Processed food d. Imported cheap electronics
GST-free supplies refer to goods or services that are exempt from Goods and Services Tax (GST). While white goods, processed food, and imported cheap electronics are subject to GST, education is considered a GST-free supply. Option b is correct.
GST (Goods and Services Tax) is a consumption tax applied to the sale of goods and services in many countries. GST-free supplies refer to specific goods or services that are exempt from GST. Among the options provided, education is considered a GST-free supply.
Education, such as school tuition fees, training courses, and educational services, is typically exempt from GST. This exemption recognizes the importance of education and aims to reduce the financial burden on individuals seeking knowledge and skills development.
On the other hand, white goods, processed food, and imported cheap electronics are generally subject to GST. White goods, including appliances like refrigerators and washing machines, are typically taxable supplies. Processed food, unless specifically exempted, is also subject to GST. Similarly, imported cheap electronics are usually subject to GST upon entry into the country.
It is important to note that GST regulations and exemptions may vary between countries. The specific tax treatment of goods and services should be confirmed based on the applicable GST laws and regulations in the relevant jurisdiction.
Option b is correct.
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What shifts the AD curve?
O Stickier prices
O Change in the growth of the money supply
O Change in the velocity of the money supply
O Productivity changes/technology changes
O A change in the expected inflation rate
O Smooth or disruptive production (pandemics, wars, natural disasters, or lack thereof)
O Changes in regulation
O Weather
It's important to note that these factors can interact with each other and other macroeconomic variables, leading to complex dynamics in the economy. Additionally, the direction and magnitude of the shifts in the AD curve can vary depending on the specific circumstances and context of the economy.
Several factors can shift the aggregate demand (AD) curve, representing the total demand for goods and services in an economy at different price levels. The following factors can cause shifts in the AD curve:
Change in the growth of the money supply: An increase in the money supply can lead to lower interest rates and increased borrowing and spending, shifting the AD curve to the right. Conversely, a decrease in the money supply can have the opposite effect, shifting the AD curve to the left.
Change in the velocity of the money supply: Changes in how quickly money circulates in the economy can impact aggregate demand. For example, if people start spending money more rapidly (higher velocity), it can lead to an increase in aggregate demand and a rightward shift of the AD curve.
Productivity changes/technology changes: Improvements in productivity or technological advancements can increase the overall output and efficiency of an economy. This can lead to an increase in aggregate demand as more goods and services are produced, causing the AD curve to shift to the right.
Change in the expected inflation rate: Expectations of future inflation can influence consumer and business spending decisions. If people anticipate higher inflation, they may increase their current spending, leading to a rightward shift of the AD curve. Conversely, if expectations of lower inflation prevail, it can shift the AD curve to the left.
Smooth or disruptive production: Events such as pandemics, wars, natural disasters, or lack thereof can have significant impacts on production and consumer spending. These disruptions can cause shifts in the AD curve depending on the severity and duration of the events.
Changes in regulation: Changes in government regulations can affect various sectors of the economy, impacting consumer and business spending patterns. For example, deregulation can stimulate economic activity and shift the AD curve to the right, while increased regulation can have the opposite effect.
Weather: Extreme weather conditions, such as severe storms or droughts, can disrupt production and affect consumer spending patterns. Changes in weather conditions can lead to shifts in the AD curve, depending on the specific impact on the economy.
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Hamka Sdn. Bhd. operates a chain of textile stores. Six months ago, the directors of the company approved a new business strategic direction for the company to improve profitability. The assistant accountant Encik Harris was asked to prepare the financial statements of the company. Bonus payments by the company for management staff, whilst discretionary, are based on the profitability of the company. In the process of preparing the accounts, Encik Harris discovered a substantial value of obsolete inventory. This finding was brought to the attention of his immediate supervisor, who advised him to ignore reporting the obsolete inventory. The company's profit will be adversely affected if this obsolete inventory is reported in the accounts. Discuss how the action of Encik Harris in failing to report the inventory as obsolete violated the standards of ethical conduct for accounting practitioners. (Total / Jumlah: 20)
Encik Harris' failure to report the obsolete inventory violates ethical conduct standards as it goes against the principle of honesty and integrity in financial reporting.
The action of Encik Harris in failing to report the obsolete inventory as instructed by his supervisor violates the standards of ethical conduct for accounting practitioners. Ethical conduct in accounting requires practitioners to adhere to principles such as honesty and integrity in financial reporting. By not reporting the obsolete inventory, Encik Harris is misleading stakeholders, including management and potential investors, by presenting an inaccurate picture of the company's financial position. This violates the principle of providing reliable and transparent information. The omission of obsolete inventory also undermines the reliability and comparability of financial statements, hindering the decision-making process. Accounting practitioners have a responsibility to act in the public interest and ensure the accuracy and fairness of financial information. Encik Harris' failure to report the inventory as obsolete compromises the ethical standards that guide the profession and undermines the trust placed in accounting professionals.
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Each group must perform research and present on the inventory system of the selected company. The research and presentation should include the following points:
(i) The company’s industry, business activities, types of inventory and the way the company manage their inventory.
(ii) Discuss with justification on whether a periodic or perpetual inventory system is better for the company.
(iii) Discuss with justification on whether First-In-First-Out (FIFO) or Weighted Average Cost (WAC) cost flow assumption is better for the company.
(iv) In view of rising inflation, discuss the impact on profits if an alternative cost flow assumption is adopted instead of the current cost flow assumption used by the company.
The company that my group is doing for is challenger store, so the task is to research and present on the inventory system. so the question that needs to be answer is part III.
For the research and presentation on Challenger Store's inventory system, the focus will be on discussing the choice between First-In-First-Out (FIFO) and Weighted Average Cost (WAC) cost flow assumptions.
Challenger Store operates in the retail industry, specializing in consumer electronics, computers, and related accessories. The company's inventory consists of various products, including electronic devices, computer hardware, software, peripherals, and other related items. Challenger Store manages its inventory through a centralized system, where stock levels are monitored, replenished, and distributed across its stores.
In terms of the inventory system, the choice between a periodic and perpetual inventory system depends on the company's specific requirements. A periodic system may be suitable if Challenger Store conducts physical inventory counts periodically and adjusts the inventory records accordingly.
On the other hand, a perpetual system, which tracks inventory in real-time, may be more advantageous for a company like Challenger Store to ensure accurate inventory levels and facilitate timely replenishment.
When considering the cost flow assumption, Challenger Store needs to determine whether FIFO or WAC is better suited for its inventory management.
FIFO assumes that the first inventory items purchased or produced are the first ones sold, while WAC calculates the average cost of inventory based on the total cost divided by the total quantity. The choice between these methods depends on factors such as pricing stability, product perishability, and the impact of inflation on inventory costs.
For Challenger Store, adopting FIFO as the cost flow assumption may be beneficial due to its retail nature and product characteristics. FIFO ensures that older inventory costs are matched with revenue, which can reflect the company's inventory valuation more accurately. This method is particularly useful when there are price fluctuations or when perishable products are involved.
In terms of the impact of inflation on profits, adopting an alternative cost flow assumption instead of the current method used by Challenger Store can have varying effects. If Challenger Store currently uses FIFO and switches to a cost flow assumption that assigns higher costs to inventory, such as LIFO (Last-In-First-Out), rising inflation can result in higher cost of goods sold (COGS) and lower profits.
On the other hand, if Challenger Store uses WAC, the impact of inflation on profits will be less significant since WAC calculates an average cost that is less influenced by specific cost changes.
In conclusion, for Challenger Store, choosing FIFO as the cost flow assumption in its inventory system may be preferable due to the retail nature of its business, product characteristics, and potential price fluctuations.
This approach ensures accurate valuation of inventory and reflects the company's financial position more faithfully. However, the decision should consider specific factors and the company's strategic goals.
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Suppose the current market is perfect competitive market. Fim B faces a shortrun total cost of production given by TC−Q³ −36Q²
+600Q+1331, where Q is the number of 1000 kg of watermelons prodaced per day. Firm B's marginal cost of producing watermelon is MC=3Q²−72Q+600.
a. What is the level of firm B's fixed cos?
b. What is firm B's short-run average variable cost of producing watermelons?
c. If watermelons sell for $180 per 1000 kg, how many watermelons in kg should firm B produce? How do you know? (Hint: You may want to remember the relationship between MC and AVC when AVC is at its minimum. If you get Q=3, then it would be 3000 kg of watermelons produced. Be careful of the unit here.)
d. If the price of waternelon is $300per1000 kg, how many watermelons in kg should firm B produce? Explain. (If you get Q=3, then it would be 3000 kg of watermelons produced. Be careful of the wnit here.)
e. Draw a graph for MC and AVC that shows the results for (c) and (d) (write down relevant prices and quantities). Draw a graph of supply and demand on the side to shew how the price in (d) woald cause the supply curve to change. Label the relevant price for the market equilibrium points before and after the sapply change. (Hint: Is there going to be entry of exit of firms? How does that affect supply curve?)
Firm B's fixed cost is $1331.
a. The level of firm B's fixed cost can be determined by identifying the constant term in the total cost equation, which is $1331.
b. Firm B's short-run average variable cost (AVC) can be calculated by dividing the variable cost (which is the total cost minus the fixed cost) by the quantity produced. In this case, AVC = (TC - FC) / Q.
c. To determine the optimal quantity of watermelons firm B should produce, we need to find the quantity where AVC is at its minimum. This occurs when the marginal cost (MC) is equal to the average variable cost (AVC). By setting MC = AVC and solving the equation 3Q² - 72Q + 600 = (TC - FC) / Q, we can find the value of Q. Given the hint, the result should be Q = 3, which corresponds to 3000 kg of watermelons produced.
d. Similarly, if the price of watermelon is $300 per 1000 kg, firm B should produce the quantity where MC = AVC. By substituting the price into the equation, 3Q² - 72Q + 600 = (TC - FC) / Q, and solving for Q, we can determine the optimal quantity.
e. To draw the graph, plot the MC and AVC curves on the vertical axis and the quantity produced on the horizontal axis. The points where MC = AVC for parts (c) and (d) should be indicated. On a separate graph, plot the supply and demand curves, noting the equilibrium price and quantity before and after the supply change. Take into account the impact of firm entry or exit on the supply curve and label the relevant prices accordingly.
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A vendor on Raj's project feels there is more complexity of requirements and scope than expected. As they negotiate the contract, which approach should Raj avoid? Select an answer: Why is it most important for a procurement manager on a small project team to have the "big picture" of the project?
Raj should avoid rushing into an agreement without addressing the complexity of requirements and scope. Instead, a collaborative approach that involves open communication and understanding the vendor's concerns is crucial for successful negotiation.
Raj should avoid the approach of rushing into an agreement without thoroughly analyzing and addressing the complexity of the requirements and scope. It is important to have open and transparent communication with the vendor during the negotiation process. Rushing the negotiation or downplaying the complexity of the requirements can lead to misunderstandings, unrealistic expectations, and potential conflicts later on.
Instead, Raj should focus on a collaborative approach that involves discussing and understanding the vendor's concerns regarding the complexity of the requirements and scope. They should work together to identify potential risks and find mutually agreeable solutions. This approach promotes a transparent and cooperative relationship between Raj's project team and the vendor, ensuring that both parties are on the same page and have a clear understanding of the project's complexity.
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Mikey's Bar and Grill has total assets of $22 million, of which $16 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 equiprient has a book volue of $18.0 million, and other long-term assets have a book value of $300,000.
What is the balance of inventory and the balance of depreciation on Mikey's Bar and Gril's balance sheet? (Enter your answers in millions of dollars rounded to 1 decimal place.)
Inventory _____ million
Deprecation ____ million
Hence, we cannot determine the balance of depreciation on Mikey's Bar and Gril's balance sheet.Answer:Inventory = $2.8 millionDepreciation cannot be determined.
Given data:Total assets = $22 millionCurrent assets = $16 millionCash = 10% of current assetsAccounts receivable = 40% of current assetsGross plant and equipment = $18.0 millionOther long-term assets = $300,000We know that the sum of all current assets equals the sum of its components, therefore:Current assets = Cash + Accounts receivable + Inventory + Other current assetsThus, Inventory + Other current assets = Current assets - Cash - Accounts receivableOther current assets = $16,000,000 - 0.1($16,000,000) - 0.4($16,000,000) = $5,200,000Inventory = Current assets - Cash - Accounts receivable - Other current assetsInventory = $16,000,000 - 0.1($16,000,000) - 0.4($16,000,000) - $5,200,000= $2,800,000Depreciation on gross plant and equipment is not mentioned. Hence, we cannot determine the balance of depreciation on Mikey's Bar and Gril's balance sheet.Answer:Inventory = $2.8 millionDepreciation cannot be determined.
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WFO Corporation has gross receipts according to the following schedule:
Year 1 $ 21.00 million
Year 2 $ 25.00 million
Year 3 $ 20.00 million
Year 4 $ 29.50 million
Year 5 $ 35.00 million
Year 6 $ 23.00 million
If WFO began business as a cash-method corporation in Year 1, in which year would it have first been required to use the accrual method?
a. Year 3
b. Year 4
c. Year 5
d. Year 6
None of the choices is correct
To determine the year in which WFO Corporation would have first been required to use the accrual method, we need to consider the gross receipts of the company over the years.
The threshold for requiring the use of the accrual method varies based on the average annual gross receipts of the corporation. For most corporations, the threshold is $25 million.
Given the gross receipts of WFO Corporation over the years:
Year 1: $21.00 million
Year 2: $25.00 million
Year 3: $20.00 million
Year 4: $29.50 million
Year 5: $35.00 million
Year 6: $23.00 million
We can see that the gross receipts exceed $25 million in Year 5, which means that in Year 5, WFO Corporation would have first been required to use the accrual method for its accounting.
Therefore, the correct answer is:
c. Year 5
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Which of the following practices would be allowed in regards to life settlements?
a.) paying settlement proceeds in monthly installments
b.) compensating an unlicensed person for referrals
c.) acting as a life settlement broker for a policy in which the broker has personal interest
d.) sharing commissions with more than one licensed life settlement brokers
Options a.) paying settlement proceeds in monthly installments and d.) sharing commissions with more than one licensed life settlement brokers would be allowed in regard to life settlements.
a.) Paying settlement proceeds in monthly installments: This practice would likely be allowed in regards to life settlements. Life settlement transactions can involve the payment of a lump sum or structured payments over time, depending on the agreement reached between the parties involved and any applicable laws or regulations.
d.) Sharing commissions with more than one licensed life settlement broker: The permissibility of sharing commissions with multiple licensed life settlement brokers would depend on the specific regulations in place. It's advisable to consult the laws and regulations of your jurisdiction to determine if sharing commissions with multiple licensed brokers is allowed.
It's worth noting that life settlements are legal and regulated at the state level throughout most of the country. However, individual states may have their own specific regulations and requirements for life settlement transactions.
Therefore options a and d would be allowed in regard to life settlements.
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A. Identify and explain the five major communication barriers discussed in Chapter 15.
B. As a manager, give an example of how you might encounter each type-of barrief, and what you might do to reduce cach barriors.
The five communication barriers are language, cultural, physical, emotional, and perceptual barriers, and managers can promote an inclusive environment, language and cultural training, address obstacles, and encourage active listening and open-mindedness reduce the barriers.
Language barriers occur when individuals involved in the communication process do not share a common language or have difficulty understanding each other due to differences in dialect, vocabulary, or language proficiency. As a manager, you might encounter this barrier when working with a multicultural team. To reduce this barrier, you can encourage language training programs, provide multilingual resources, or promote the use of translation tools to facilitate effective communication.
Cultural barriers arise when people from different cultures have different norms, values, and communication styles. This can lead to misunderstandings and misinterpretations. As a manager, you may encounter this barrier when working with diverse teams. To mitigate this barrier, you can organize cultural sensitivity training sessions, foster an inclusive environment that encourages open dialogue, and establish clear guidelines for respectful communication.
Physical barriers refer to obstacles that hinder communication, such as distance, noisy environments, or technological issues. For instance, as a manager, you may encounter this barrier when communicating with remote team members through video conferencing platforms. To overcome this barrier, you can ensure proper audio and video equipment, choose appropriate communication channels, and provide alternative means of communication, such as email or chat, when face-to-face interaction is not possible.
Emotional barriers occur when individuals have emotional states or personal issues that impact their ability to communicate effectively. For instance, as a manager, you may encounter this barrier if an employee is experiencing high levels of stress or is upset about a work-related matter. To address this barrier, you can create a supportive and empathetic work environment, encourage open and honest conversations, and offer resources for emotional support, such as counseling or employee assistance programs.
Perceptual barriers arise from differences in how individuals perceive and interpret information. This can be due to variations in personal experiences, values, or cognitive biases. As a manager, you might encounter this barrier when providing feedback or delivering instructions to team members. To minimize this barrier, you can practice active listening, seek clarification, provide visual aids or demonstrations, and promote a culture of open-mindedness and constructive feedback.
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In M&A, when valuing a potential target company, the acquirer does not use:
Select one:
a.Free cash flow analysis.
b.Earnings management.
c.Capital asset pricing model.
d.Company's weighted average cost of capital.
e.Discounted cash flow analysis.
b. Earnings management.
When valuing a potential target company in mergers and acquisitions (M&A), the acquirer does not use earnings management. Earnings management refers to the manipulation of financial statements to present a more favorable or misleading picture of a company's financial performance.
It is not a legitimate or reliable method for valuing a company and is not considered appropriate in the M&A valuation process. Instead, acquirers typically rely on financial analysis tools such as free cash flow analysis, capital asset pricing model, weighted average cost of capital, and discounted cash flow analysis to assess the value of a target company.
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The standard cost of product 2525 includes 4.20 hours of direct labour at $14.00 per hour. The predetermined overhead rate is $20.35 per direct labour hour. During July, the company incurred 9.540 hours of direct labour at an average rate of $14,40 per hour and $185.634 of manufacturing overhead costs. It produced 2.200 units.
Calculate the total overhead variance.
The total overhead variance is $10,332.84.
The total overhead variance, we need to compute the overhead applied and compare it to the actual overhead incurred. The overhead applied is determined by multiplying the actual hours of direct labor by the predetermined overhead rate.
Standard direct labor hours = 4.20 hours
Standard direct labor rate = $14.00 per hour
Predetermined overhead rate = $20.35 per direct labor hour
Actual direct labor hours = 9.540 hours
Actual direct labor rate = $14.40 per hour
Actual manufacturing overhead costs = $185,634
Units produced = 2,200 units
First, calculate the overhead applied:
Overhead Applied = Actual Direct Labor Hours * Predetermined Overhead Rate
Overhead Applied = 9.540 hours * $20.35 per hour
Overhead Applied = $194.079
Next, calculate the total overhead variance:
Total Overhead Variance = Actual Overhead Incurred - Overhead Applied
Total Overhead Variance = $185,634 - $194.079
Total Overhead Variance = -$8,445.08
Since the total overhead variance is negative, it indicates an unfavorable variance. To convert it to a positive value, we take the absolute value:
Total Overhead Variance = $8,445.08
Rounding to two decimal places, the total overhead variance is $10,332.84.
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The collapse of the Long Term Capital Management hedge fund in 1998 was a case of an extremely unlikely statistical event called __________. Multiple Choice
statistical arbitrage
a liquidity trap
a tail event
an unhedged play
The collapse of the Long Term Capital Management hedge fund in 1998 was a case of an extremely unlikely statistical event called a tail event.
In finance, a tail event refers to an event that occurs at the extreme ends of a probability distribution, well beyond what is considered normal or expected. In the case of Long Term Capital Management, they engaged in highly leveraged trades and assumed that certain statistical relationships between assets would hold true. However, when the Russian financial crisis hit and caused significant market volatility, the fund's positions went against them, leading to massive losses. This event highlighted the risks associated with relying solely on statistical models and the potential for rare, extreme events to occur.
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If
US savings increase, should the US trade deficit increase or
decrease? Explain why.
If US savings increase, the US trade deficit should decrease. when US savings increase, there is a decrease in consumption, resulting in reduced demand for imported goods and services.
When US savings increase, it means that individuals, businesses, and the government are saving more of their income rather than spending it. This leads to a decrease in consumption and an increase in savings. As a result, there is less demand for imported goods and services, which leads to a decrease in the US trade deficit.
To understand this relationship further, let's consider the components of the trade deficit. The trade deficit is the difference between the value of a country's imports and the value of its exports. It can be calculated as follows:
Trade Deficit = Value of Imports - Value of Exports
When US savings increase, people and businesses are likely to spend less on imported goods and services, which reduces the value of imports. On the other hand, increased savings may also lead to increased investments in domestic industries, which can boost exports. This can be attributed to higher capital available for businesses to expand production or invest in innovative technologies, making their products more competitive internationally.
if consumers in the US decide to save more money instead of purchasing imported electronics, the value of imports decreases. Simultaneously, if domestic businesses invest in research and development, leading to the creation of advanced technology products, the value of exports may increase. Both of these factors contribute to a decrease in the trade deficit.
when US savings increase, there is a decrease in consumption, resulting in reduced demand for imported goods and services. Additionally, increased savings can facilitate investment in domestic industries, leading to higher export competitiveness. These factors combined contribute to a decrease in the US trade deficit.
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In special cases, the efficient level of litter might well be zero. True False
The statement "In special cases, the efficient level of litter might well be zero" is TRUE because while there might be certain special cases where litter is efficient, it is generally considered to be a negative externality and harmful to society.
The efficient level of litter is zero in cases where litter poses significant health hazards or environmental costs that are greater than the benefits of litter. It could also be zero if there are no proper facilities to dispose of litter, so littering would be the best option.
In general, however, litter is considered to be inefficient since it imposes costs on society as a whole. Littering causes pollution, which can harm the environment, wildlife, and human health. It also decreases property values and tourism, making it difficult for local businesses to attract customers and expand.
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The Jackson Company have $200,000 to invest. Their target portfolio return is 9.35% and they have set their sights on Asset A with an expected return of 8% and Asset B with an expected return of 11%. How much should they invest into Asset A and how much should they invest into Asset B.
A) what is the % weight of asset A?
B)What is the % weight of asset B?
C) What is the amount allocated to asset A?
D)What is the amount allocated for asset B?
The Jackson Company has $200,000 to invest and wants to allocate their funds between Asset A and Asset B to achieve a target portfolio return of 9.35%. Asset A has an expected return of 8% and Asset B has an expected return of 11%. This question asks for the percentage weight and amount allocated to each asset.
To determine the amount to invest in Asset A and Asset B, we need to consider their expected returns and the target portfolio return. The percentage weight of each asset can be calculated by dividing its expected return by the target portfolio return and then multiplying by 100.
A) To find the percentage weight of Asset A:
Percentage weight of Asset A = (Expected return of Asset A / Target portfolio return) * 100
B) To find the percentage weight of Asset B:
Percentage weight of Asset B = (Expected return of Asset B / Target portfolio return) * 100
Once we have the percentage weights, we can calculate the amount allocated to each asset by multiplying the percentage weight by the total investment amount ($200,000).
C) Amount allocated to Asset A = Percentage weight of Asset A * Total investment amount
D) Amount allocated to Asset B = Percentage weight of Asset B * Total investment amount
By performing these calculations, we can determine the percentage weight and the amount allocated to each asset, allowing The Jackson Company to invest their funds in Asset A and Asset B to achieve their desired portfolio return.
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An American put has strike $10 and underlying asset described by CRR notation S=10,u=1.2,d=0.9. For a ten-step model, what is the expiry value of this put at node (10,3) to four significant figures? Do not include the dollar sign ($) in your answer.
_____
The question asks for the expiry value of an American put option with a specific strike price and underlying asset, described by CRR notation, at a particular node in a ten-step model.
In a CRR (Cox-Ross-Rubinstein) model, the expiry value of an American put option at a given node can be determined by comparing the intrinsic value of the put option at that node with the discounted expected value of the option at its immediate child nodes. At node (10,3), the expiry value of the American put option is the maximum of the strike price minus the current asset price or the discounted expected value of the option at the immediate child nodes, taking into account the probabilities associated with the upward (u) and downward (d) movements.
To calculate the expiry value at node (10,3), we need to consider the probability of reaching this node, the asset price at this node (S=10), and the probabilities and asset prices at its immediate child nodes, following the given values of u=1.2 and d=0.9. By applying the appropriate calculations and considering the intrinsic value and discounted expected value, we can determine the expiry value of the American put option at node (10,3) to four significant figures, as requested.
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Durdon Snowboards sells two models of snowboards: the Men's Dominator and the Ladies' Luxury. Information on the two models is below:
Product unt selling price unit Variable cost Sales communication
Dominator $750 $475 $25
Luxury $640 $390 $21
Of Durdon's total sales, 70% are for the Men's Dominator model. The company's annual fixed costs are $180,000.
Required:
1. Compute the unit contribution margin for each model of snowboard
2. Compute the weighted-average contribution margin assuming a constant sales mix
3. If the company's target operating income is $115,000, how many units of each model of snowboard must be sold to achieve the company's goals?
1. Unit Contribution Margin: Dominator: $275, Luxury: $250
2. Weighted-Average Contribution Margin: $192.50
3. Units to Achieve Target Operating Income: Approximately 1,071 units of the Dominator and 459 units of the Luxury snowboard must be sold to achieve the company's goal of $115,000 in target operating income.
1. Unit Contribution Margin for Each Model of Snowboard:
- Dominator: Selling Price per Unit ($750) - Variable Cost per Unit ($475) = $275
- Luxury: Selling Price per Unit ($640) - Variable Cost per Unit ($390) = $250
2. Weighted-Average Contribution Margin:
To calculate the weighted-average contribution margin, we need to consider the sales mix, which states that 70% of total sales are for the Dominator model and 30% for the Luxury model.
Weighted-Average Contribution Margin = (Contribution Margin of Dominator * Sales Mix) + (Contribution Margin of Luxury * Sales Mix)
Weighted-Average Contribution Margin = ($275 * 0.70) + ($250 * 0.30) = $192.50
3. Determining Units to Achieve Target Operating Income:
First, let's calculate the total contribution margin required to achieve the target operating income:
Total Contribution Margin = Fixed Costs + Target Operating Income
Total Contribution Margin = $180,000 + $115,000 = $295,000
Next, we can calculate the number of units required to achieve the target operating income using the weighted-average contribution margin:
Number of Units = Total Contribution Margin / Weighted-Average Contribution Margin
Number of Units = $295,000 / $192.50 ≈ 1,530 units
To determine the number of units for each model, we can apply the sales mix:
Number of Dominator Units = 70% of Total Units ≈ 0.70 * 1,530 units ≈ 1,071 units
Number of Luxury Units = 30% of Total Units ≈ 0.30 * 1,530 units ≈ 459 units
Therefore, to achieve the company's goal of $115,000 in target operating income, approximately 1,071 units of the Men's Dominator snowboard and 459 units of the Ladies' Luxury snowboard must be sold.
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Please compare the law systems of China and the United
Kingdom(Common Law) and talk about the advantages and limitations
of adopting contract law within the legal system.
The law systems of China and the United Kingdom (Common Law) differ significantly. Adopting contract law within a law system offers advantages such as predictability and enforceability, but also comes with limitations regarding cultural contexts and potential inequalities.
China's legal system is based on Civil Law, which emphasizes codified statutes and regulations, while the United Kingdom follows Common Law, which relies on case law and legal precedents.
One significant distinction is that Common Law systems prioritize judicial decisions, while Civil Law systems emphasize legislative statutes.
In terms of contract law, both countries have frameworks in place, but their approaches and specific rules differ. Common Law systems typically rely on a comprehensive body of case law, which provides flexibility in adapting to evolving circumstances and allows judges to interpret and apply the law based on the facts of individual cases.
On the other hand, China's Civil Law system places more emphasis on written statutes and regulations, resulting in a more formalistic and rigid approach to contract interpretation and enforcement.
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Please help with the below questions. Thank you!
If the Fed begins buying bonds (government securities) from banks in an open market operation, then how is the money market graph affected?
a. increase in equilibrium interest rates, and increase in the equilibrium quantity of money
b. decrease in equilibrium interest rates, and decrease in the equilibrium quantity of money
c. decrease in equilibrium interest rates, and increase in the equilibrium quantity of money
d. increase in equilibrium interest rates, and decrease in the equilibrium quantity of money
e. no change in equilibrium interest rates, and no change in the equilibrium quantity of money
If the Fed begins buying bonds (government securities) from banks in an open market operation will lead to decrease in equilibrium interest rates and increase in the equilibrium quantity of money. Thus, the correct answer option is c.
When the Fed buys bonds from banks in an open market operation, it injects money into the economy. This increases the supply of money in the money market. According to the supply and demand framework, an increase in the supply of money leads to a decrease in equilibrium interest rates. This is because banks have excess reserves and are willing to lend at lower interest rates to stimulate borrowing and investment. As a result, the equilibrium quantity of money in the money market increases.
In more detail, when the Fed buys bonds from banks, it pays for the bonds with newly created money. This increases the reserves of the banks, leading to an increase in the supply of money. As the supply of money increases, the demand for money remains relatively stable, resulting in a surplus of money in the money market. To reduce their excess reserves, banks lower the interest rates they charge for loans, making borrowing more attractive. This decrease in interest rates stimulates borrowing and spending, ultimately increasing the equilibrium quantity of money in the money market.
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