Creditors' claims on the assets of a company are called liabilities.
Liabilities represent the amounts owed by the company to external parties, such as suppliers, lenders, and other creditors. They can take various forms, including loans, accounts payable, accrued expenses, and other obligations.
When a company experiences financial distress or goes bankrupt, creditors have a legal right to claim their share of the company's assets to fulfill the outstanding debt.
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Evaluate various staffing options available to organisations when employees live in a different country? Utilise examples to illustrate your discussion
Organizations have various staffing options when employees live in a different country, such as remote work, outsourcing, and international hiring.
When employees live in a different country, organizations have several staffing options to consider. One option is to implement remote work arrangements, where employees work from their home country and collaborate with their colleagues using digital communication tools. This allows organizations to tap into a global talent pool and access specialized skills that may not be readily available locally. Remote work can provide flexibility for employees and reduce costs related to office space and infrastructure.
Another option is outsourcing, which involves contracting work to external service providers located in a different country. Organizations can outsource specific tasks or entire business functions to take advantage of cost savings, expertise, and scalability offered by specialized service providers. For example, a software development company based in the United States may outsource its customer support operations to a call center in India.
International hiring is another staffing option for organizations. This involves recruiting and employing individuals who live in a different country and bringing them to work in the organization's home country. International hiring is often used for executive positions, highly specialized roles, or when organizations need to establish a physical presence in a new market. For instance, a multinational corporation may hire a senior executive from another country to lead its operations in a new international market.
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You are working as an engineering manager for Amazon and you are planning to buy a warehouse that will cost $400,000. Now, 30% of this investment will come from a 5-year loan with an annual effective interest rate of 7%. Annual expenditure for operations and maintenance for this warehouse is $ 100,000 and it increases by 10% each year. The expected annual revenue is $200,000 which will increase by 5% until disposal. This warehouse also qualifies to be a 3 years MACRS property which will be retired at the end of the 5th year. Interestingly you managed to find another manager willing to buy your warehouse for $32,500 after 5 years. You settled that deal since your market value will be more than the actual salvage value which will be zero after the full 3 years of MACRS depreciation accumulation. The MARR after tax is given as 15% and the income tax rate is 25%. Find IRR from the total cash flow. If the IRR is 5.5% enter 5.5 only (Pay attention to MACRS)
The IRR from the total cash flow is approximately 6.38%. To calculate the IRR (Internal Rate of Return) from the total cash flow, we need to consider all the cash inflows and outflows.
1. Initial Investment:
Cost of Warehouse = $400,000
Loan Amount = 30% of $400,000 = $120,000
Cash Outflow = Cost of Warehouse - Loan Amount = $400,000 - $120,000 = $280,000
2. Annual Cash Flows:
Year 0:
Cash Outflow (Initial Investment) = -$280,000
Year 1:
Revenue = $200,000
Operation and Maintenance Expenses = -$100,000
Cash Inflow = Revenue - Operation and Maintenance Expenses = $200,000 - $100,000 = $100,000
Year 2:
Revenue = $200,000 * (1 + 5%) = $200,000 * 1.05 = $210,000
Operation and Maintenance Expenses = $100,000 * (1 + 10%) = $100,000 * 1.10 = $110,000
Cash Inflow = Revenue - Operation and Maintenance Expenses = $210,000 - $110,000 = $100,000
Year 3:
Revenue = $200,000 * (1 + 5%)^2 = $200,000 * 1.05^2 = $220,500
Operation and Maintenance Expenses = $100,000 * (1 + 10%)^2 = $100,000 * 1.10^2 = $121,000
Cash Inflow = Revenue - Operation and Maintenance Expenses = $220,500 - $121,000 = $99,500
Year 4:
Revenue = $200,000 * (1 + 5%)^3 = $200,000 * 1.05^3 = $231,525
Operation and Maintenance Expenses = $100,000 * (1 + 10%)^3 = $100,000 * 1.10^3 = $133,100
Cash Inflow = Revenue - Operation and Maintenance Expenses = $231,525 - $133,100 = $98,425
Year 5:
Revenue = $200,000 * (1 + 5%)^4 = $200,000 * 1.05^4 = $243,101.25
Operation and Maintenance Expenses = $100,000 * (1 + 10%)^4 = $100,000 * 1.10^4 = $146,410
Cash Inflow = Revenue - Operation and Maintenance Expenses + Sale Price = $243,101.25 - $146,410 + $32,500 = $129,191.25
3. Total Cash Flow:
Year 0: -$280,000
Year 1: $100,000
Year 2: $100,000
Year 3: $99,500
Year 4: $98,425
Year 5: $129,191.25
4. Calculate IRR:
Using a financial calculator or software, we can input the cash flows and find the IRR. In this case, the IRR is approximately 6.38%.
Therefore, the IRR from the total cash flow is approximately 6.38%.
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Let's consider the following exchange economy and answer the question 1−3. There are two individuals in the economy. Individual A and individual B both consume the same goods in a pure exchange economy. A is originally endowed with 8 units of good 1 and 16 units of good 2 . B is originally endowed with 12 units of good 1 and 4 units of good 2. They both have the utility function U=x141 x 243. What is the Pareto optimal allocation for A? (14,14) (10,6) (6,14) (6,6)
The Pareto optimal allocation for individual A in the given exchange economy, considering their utility function, is (6,14), which means A will have 6 units of good 1 and 14 units of good 2.
To determine the Pareto optimal allocation for individual A, we need to find the allocation that maximizes A's utility while still ensuring that individual B's utility is not reduced. In this case, both individuals have the same utility function: U = x1⁴ * x2³.
Given the initial endowments, A starts with 8 units of good 1 and 16 units of good 2. B starts with 12 units of good 1 and 4 units of good 2.
To find the Pareto optimal allocation, we need to allocate the goods between A and B in a way that maximizes A's utility while keeping B's utility at least as high as their initial utility.
We can compare the utility levels for different allocations:
Allocation (14,14):
- For A: U = 14⁴ * 14³ = 38416
- For B: U = 14⁴ * 14³ = 38416
Allocation (10,6):
- For A: U = 10⁴ * 6³ = 21600
- For B: U = 10⁴ * 6³ = 21600
Allocation (6,14):
- For A: U = 6⁴ * 14³ = 54432
- For B: U = 6⁴ * 14³ = 54432
Allocation (6,6):
- For A: U = 6⁴ * 6³ = 10368
- For B: U = 6⁴ * 6³ = 10368
Comparing the utility levels, we can see that the allocation (6,14) maximizes A's utility while maintaining B's utility at the highest level among the options. Therefore, the Pareto optimal allocation for individual A is (6,14), meaning A will have 6 units of good 1 and 14 units of good 2.
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The following are agency problems associated with capital budgeting except:
A. Reduced effort. B. Maximizing firm value. C. Empire building. D. Perks.
B. Maximizing firm value. The agency problems can affect capital budgeting decisions by introducing issues such as reduced effort, empire building, and perks, the goal of capital budgeting itself is to maximize firm value
Agency problems are conflicts of interest between different stakeholders in a company, such as shareholders, managers, and employees. These problems arise due to the separation of ownership and control in modern corporations. When it comes to capital budgeting, agency problems can affect decision-making and lead to suboptimal outcomes. However, the goal of capital budgeting is to maximize firm value, so it is not considered an agency problem associated with capital budgeting.
A. Reduced effort: Agency problem can arise when managers have less incentive to exert effort in making accurate and thorough evaluations of capital projects. This can lead to biased or incomplete information being used for decision-making.
C. Empire building: Agency problem occurs when managers pursue projects or investments that increase the size or power of their department or division, even if these projects may not be in the best interest of the overall firm.
D. Perks: Agency problem arises when managers use company resources for personal benefits or perks, such as extravagant travel, personal expenses, or excessive compensation, without proper justification or alignment with shareholder interests.
Therefore, while agency problems can affect capital budgeting decisions by introducing issues such as reduced effort, empire building, and perks, the goal of capital budgeting itself is to maximize firm value.
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Bilal Goldsmith broker has shown him two bonds . Each has a maturity of 5 years , a par value of BD 1,000and a yield to maturity of 14 % . Bond A has a coupon. interest rate of 8 % paid annually Bond B has a coupon rate of 12 % paid annually.
a. Identify the cash flow and illustrate the time line for each bond.
b. Calculate the selling price of each of the bonds.
a. Identify the cash flow and illustrate the time line for each Bond A=Year 5: BD 80 + Par value (BD 1,000)Bond B=Year 5: BD 120 + Par value (BD 1,000)
b. Calculate the selling price of each of the Bond A=(BD 80 / (1 + 0.14)² + (BD 80 / (1 + 0.14)²) + (BD 80 / (1 + 0.14)³) + (BD 80 / (1 + 0.14)²) + (BD 1,080 / (1 + 0.14)²)Bond B= (BD 120 / (1 + 0.14)²) + (BD 120 / (1 + 0.14)²) + (BD 120 / (1 + 0.14)³) + (BD 120 / (1 + 0.14)²) + (BD 1,120 / (1 + 0.14)³)
To calculate the selling price of each bond to determine the present value of the cash flows generated by the bond over its 5-year maturity period. calculate the selling price for Bond A and Bond B:
a. Cash Flows and Time Line:
For both Bond A and Bond B:
Par value: BD 1,000
Maturity: 5 years
Yield to maturity: 14%
Coupon payments: Paid annually
Bond A:
Coupon rate: 8% (of the par value)
Cash flow per year: 8% of BD 1,000 = BD 80
Time line:
Year 1: BD 80
Year 2: BD 80
Year 3: BD 80
Year 4: BD 80
Year 5: BD 80 + Par value (BD 1,000)
Bond B:
Coupon rate: 12% (of the par value)
Cash flow per year: 12% of BD 1,000 = BD 120
Time line:
Year 1: BD 120
Year 2: BD 120
Year 3: BD 120
Year 4: BD 120
Year 5: BD 120 + Par value (BD 1,000)
b. Selling Price Calculation:
To calculate the selling price of each bond, to discount the future cash flows to their present value using the yield to maturity.
For Bond A:
Cash flow in Year 1 to Year 4: BD 80
Cash flow in Year 5: BD 80 (coupon payment) + BD 1,000 (par value) = BD 1,080
Discount rate: 14%
Selling price: Present value of cash flows
= (BD 80 / (1 + 0.14)²) + (BD 80 / (1 + 0.14)²) + (BD 80 / (1 + 0.14)³) + (BD 80 / (1 + 0.14)²) + (BD 1,080 / (1 + 0.14)²)
For Bond B:
Cash flow in Year 1 to Year 4: BD 120
Cash flow in Year 5: BD 120 (coupon payment) + BD 1,000 (par value) = BD 1,120
Discount rate: 14%
Selling price: Present value of cash flows
= (BD 120 / (1 + 0.14)²) + (BD 120 / (1 + 0.14)²) + (BD 120 / (1 + 0.14)³) + (BD 120 / (1 + 0.14)²) + (BD 1,120 / (1 + 0.14)³)
By calculating the above formulas, the selling price for each bond.
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Estimating the Market’s Expected Growth Rate in Dividends
Mattel Inc. was trading at a price of $9.99 per common share at December 31, 2018. Using the Gordon Growth model, estimate the market’s expected growth in dividends that is required to yield the $9.99 price per common share. Assume that the current dividend per share is $0.30 and is expected to grow thereafter, and that the cost of equity capital is 12.5%. (Hint: Use the equation for the dividend discount model with increasing perpetuity, at the top of page 12-20.)
Note: Assume current dividend per share is the dividend amount when the constant growth period begins.
The estimated market's expected growth rate in dividends required to yield the $9.99 price per common share is approximately -9.497%.To estimate the market's expected growth rate in dividends using the Gordon Growth model, we need to use the following formula:
Price per share = Dividend per share / (Required rate of return - Growth rate)
Given that the price per common share is $9.99, the dividend per share is $0.30, and the cost of equity capital is 12.5%, we can rearrange the formula to solve for the growth rate:
Growth rate = (Dividend per share / Price per share) - (Required rate of return)
Substituting the values into the equation:
Growth rate = ($0.30 / $9.99) - 0.125
Calculating the growth rate:
Growth rate = 0.03003 - 0.125
Growth rate = -0.09497
The estimated market's expected growth rate in dividends required to yield the $9.99 price per common share is approximately -9.497%.
Note that a negative growth rate implies that the market expects a decline in dividends rather than growth.
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A put option is a right to A) force another party to buy the underlying security. B) repurchase a previously sold underlying security. C) sell the underlying security. D) buy the underlying security.
C) sell the underlying security.
A put option is a financial contract that gives the holder the right, but not the obligation, to sell the underlying security at a specified price (known as the strike price) within a specific time frame. The underlying security can be a stock, bond, commodity, or any other tradable asset.
When an investor purchases a put option, they are essentially buying the right to sell the underlying security at the strike price, regardless of its current market price. This means that if the market price of the underlying security decreases below the strike price, the put option holder can exercise their right to sell the security at the higher strike price, thereby locking in a profit.
So, option C) "sell the underlying security" is the correct answer. The holder of a put option has the right to sell the underlying security at the strike price, but they are not obligated to do so. They can choose to exercise the option or let it expire worthless, depending on market conditions and their investment strategy.
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A supplier to your company has offered you a reduced price per unit on a component if you agree to purchase the component in higher order quantities. Currently, you order 6,000 units each time an order is placed for the component, and you pay $16.50 per unit. Your ordering costs are estimated to be $84 per order regardless of the order size. Transportation costs are estimated to be $0.90 per unit. Your cost to hold a component part in inventory is estimated at 26% annually based on the cost of the purchased item The supplier has offered you a cost of $15.20 per unit if you increase your purchasing quantity to 12,000. Currently, your company purchases 65,000 of these components annually, and this total demand is expected to remain constant for the foreseeable future. Should you continue with your current policy, or should you take the incentive offered by the supplier?
The company currently buys 65,000 of these components annually and orders 6,000 units at a time.
The cost of the components is $16.50 per unit. Regardless of the order size, the company spends $84 per order on ordering costs. The transportation costs amount to $0.90 per unit. The cost of holding a component in inventory is estimated at 26% annually based on the cost of the purchased item. These numbers can be used to calculate the current annual total cost of holding the components in inventory and ordering them.Total ordering cost = (Total order cost + Total carrying cost + Total ordering cost) = TCCTotal order cost = Unit cost * Order quantity = $16.50 * 65,000 = $1,072,500.
Total carrying cost = Carrying rate * Unit cost * Average inventory = 0.26 * $16.50 * (6,000/2) = $2,079Total ordering cost = (Total demand/Order quantity) * Cost per order = (65,000/6,000) * $84 = $910Total ordering cost = $2,079 + $910 = $2,989TC = Total order cost + Total carrying cost + Total ordering cost = $1,072,500 + $2,079 + $910 = $1,075,489The new offerThe supplier has offered a cost of $15.20 per unit if the company increases its purchasing quantity to 12,000. Currently, the company purchases 65,000 of these components annually, and this total demand is expected to remain constant for the foreseeable future. If the company decides to go for the new offer, the total order quantity will be 60,000 (65,000/12,000) units.
The calculation of the new total cost can be done using the same method:Total order cost = Unit cost * Order quantity = $15.20 * 60,000 = $912,000Total carrying cost = Carrying rate * Unit cost * Average inventory = 0.26 * $15.20 * (12,000/2) = $2,485Total ordering cost = (Total demand/Order quantity) * Cost per order = (65,000/12,000) * $84 = $455Total ordering cost = $2,485 + $455 = $2,940TC = Total order cost + Total carrying cost + Total ordering cost = $912,000 + $2,485 + $455 = $915,940Comparing the two optionsCurrent purchasing policy: $1,075,489New offer: $915,940The company should go for the new offer since it costs less than the current policy. Therefore, the company should take the incentive offered by the supplier.
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What you might need to do after graduation to meet the job
requirements prior to application for a Petroleum
Corporation?
To meet the job requirements prior to applying for a position in a Petroleum Corporation after graduation, you might need to take the following steps:
1. Gain Relevant Education: Petroleum Corporations typically require candidates to have a strong educational background in fields such as petroleum engineering, chemical engineering, geology, or related disciplines. Ensure that you have completed a relevant degree program or consider pursuing further education through specialized courses or certifications.
2. Acquire Industry Knowledge: Familiarize yourself with the petroleum industry by staying updated on industry trends, technological advancements, and environmental regulations. Reading industry publications, attending conferences, and participating in workshops can help you gain valuable knowledge and insights.
3. Gain Practical Experience: Seek opportunities to gain practical experience in the petroleum industry. This can include internships, co-op programs, or entry-level positions in oil and gas companies. Practical experience will provide you with hands-on exposure to industry operations, equipment, and processes.
4. Develop Technical Skills: Petroleum Corporations often require technical skills such as reservoir engineering, drilling techniques, production optimization, and data analysis. Consider acquiring these skills through specialized training programs, online courses, or industry-specific certifications.
5. Network: Building a professional network is crucial in the petroleum industry. Attend industry events, join professional associations, and connect with professionals working in Petroleum Corporations. Networking can provide you with valuable insights, mentorship opportunities, and potential job referrals.
6. Stay Updated on Safety and Environmental Practices: Given the importance of safety and environmental sustainability in the petroleum industry, it is essential to stay informed about the latest safety protocols and environmental regulations. Familiarize yourself with industry standards and demonstrate a commitment to responsible practices.
In conclusion, to meet the job requirements prior to applying for a position in a Petroleum Corporation after graduation, you should focus on gaining relevant education, acquiring industry knowledge, gaining practical experience, developing technical skills, networking, and staying updated on safety and environmental practices. These steps will help you prepare for a successful career in the petroleum industry.
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Explain the relationship between employee engagement and organizational culture. What makes this important to the success of the organization? In what ways can managers contribute to creating an ethical culture and enhancing employee engagement within the organization?
Employee engagement and organizational culture are nearly intertwined. Employee engagement refers to the emotional commitment and involvement of workers towards their work and the association.
Organizational culture on the other hand encompasses the participating values, beliefs, morals, and practices that shape the geste and attitudes of workers. A positive organizational culture fosters employee engagement by furnishing a supportive and inclusive terrain where workers feel valued, motivated, and connected to the association's purpose.
Engaged workers are more likely to be productive, innovative, and committed to achieving organizational pretensions.
Directors play a pivotal part in creating an ethical culture and enhancing hand engagement. They can lead by illustration, demonstrating integrity, fairness, and translucency in their conduct. directors should communicate effectively, give regular feedback, and involve workers in decision- making processes. By recognizing and awarding employee contributions, promoting work- life balance, and offering openings for growth and development, directors can foster a culture of trust, commission, and engagement.
Regular training on ethical conduct and compliance with organizational values further strengthens the ethical fabric of the association and enhances employee engagement.
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Firms typically provide employees with a list of all possible
forms of unethical behavior. True/ false??
False, firms typically provide employees with ethical guidelines and codes of conduct rather than a list of all possible forms of unethical behavior.
False. Firms typically provide employees with a list of ethical guidelines and codes of conduct rather than a list of all possible forms of unethical behavior. Here's a step-by-step explanation:
1. Firms prioritize promoting ethical behavior: Companies recognize the importance of maintaining ethical standards in their operations to foster a positive work environment, build trust with stakeholders, and mitigate legal and reputational risks.
2. Establishing ethical guidelines: Firms develop codes of conduct and ethical guidelines that outline the expected behavior and values for employees. These guidelines often cover areas such as honesty, integrity, respect, confidentiality, conflict of interest, and compliance with laws and regulations.
3. Focusing on positive behavior: The emphasis is typically on providing employees with a clear understanding of what constitutes ethical behavior rather than presenting an exhaustive list of unethical behaviors. The goal is to create a culture that promotes ethical decision-making and encourages employees to act in line with the company's values.
4. Promoting ethical awareness: Companies may offer training programs, workshops, and resources to enhance employees' understanding of ethical issues they may encounter in the workplace. These initiatives aim to raise awareness, facilitate discussions, and provide guidance on how to address ethical dilemmas.
5. Reporting unethical behavior: Companies often establish mechanisms for employees to report any observed or suspected unethical behavior. Whistleblower hotlines, anonymous reporting channels, or designated ethics officers are examples of such channels that allow employees to report concerns confidentially.
In summary, while firms provide employees with guidelines and codes of conduct that promote ethical behavior, they typically do not present an exhaustive list of all possible forms of unethical behavior. The focus is on establishing positive ethical standards and providing employees with the tools to navigate ethical challenges in the workplace.
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if a distribution is "significantly distorted" what is this called?
A significantly distorted distribution is called a skewed distribution. Positive skewness means a rightward tail, negative skewness means a leftward tail. Extreme skewness is a severe deviation from symmetry.
If a distribution is significantly distorted or deviates from a symmetrical shape, it is commonly referred to as a skewed distribution. Skewness is a measure of the asymmetry of a probability distribution.
There are three main types of skewness:
Positive Skewness: Also known as right skewness, this occurs when the tail of the distribution extends towards the right side, indicating that the majority of the data points are concentrated on the left side of the distribution.Negative Skewness: Also known as left skewness, this occurs when the tail of the distribution extends towards the left side, indicating that the majority of the data points are concentrated on the right side of the distribution.Extreme Skewness: In some cases, the skewness of a distribution can be so severe that it is considered extreme. Extreme skewness can have a significant impact on statistical analyses and can indicate that the underlying data might not meet the assumptions of certain statistical tests.Skewness is a useful statistical measure because it provides insights into the shape and symmetry of a distribution. It is often calculated using mathematical formulas or computed through statistical software packages.
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Which of the following is not true? Multiple Choice A normal-form game is most useful for sequential-move games. An extensive-form representation usually provides more information than a normal-form representation of a game. The notion of credible threats makes more sense in extensive-form representations than in normal-form representations of a game. The notion of perfect equilibrium is more useful in analyzing extensive-form games than normal-form games. Which of the following is true? Multiple Choice A Nash equilibrium is always a perfect subgame equilibrium in a multistage game. Subgame perfect equilibrium and Nash equilibrium are the same concept but with different names. A subgame perfect equilibrium is always a Nash equilibrium. A Nash equilibrium is always a subgame perfect equilibrium.
The statement "The notion of perfect equilibrium is more useful in analyzing extensive-form games than normal-form games" is not true.
The notion of perfect equilibrium is equally applicable and useful in both extensive-form and normal-form games.Perfect equilibrium is a solution concept in game theory that requires players to choose strategies that are not only optimal at each decision point but also consistent with optimal play in all subsequent subgames. It ensures that players' strategies form a consistent and coherent plan of action throughout the game.In extensive-form games, perfect equilibrium helps analyze the credibility of threats and commitments, as well as the strategic behavior in sequential and simultaneous decision-making. In normal-form games, perfect equilibrium captures the notion of simultaneous, strategic interactions among players.
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Explain the following concepts in details
• Organizational structure
• Work groups and work teams
• Stages of group development
• Team conflict
• Span of control
• Key elements of motivation
• Motivation theories
• Herzberg theory
• Theory X and Y
• Blanchard Hershey
• Path-Goal
• Trait theory
• Leadership styles
• Boundaryless organizations
• Feedforward, concurrent, feedback controls
Here are detailed explanations of the given terms:Organizational structure: The organizational structure outlines how the organizational tasks are divided, how the work is coordinated and controlled, and how information flows between different levels of management.
Work groups and work teams: The work group is a group of employees who work together, but their work is not integrated or coordinated. The work team is a group of employees working together towards a common goal.Stages of group development: The five stages of group development are forming, storming, norming, performing, and adjourning.Team conflict: Team conflict is the disagreement that arises between members of a team due to differences in perspectives, goals, and values. This conflict can be constructive or destructive.Span of control: Span of control is the number of subordinates who report to a single manager.Key elements of motivation: The key elements of motivation are intensity, direction, and persistence.
Motivation theories: The motivation theories include Maslow's hierarchy of needs theory, Herzberg's two-factor theory, Vroom's expectancy theory, and Adams equity theory.Herzberg theory: The Herzberg theory states that job satisfaction and dissatisfaction are two separate dimensions that are independent of each other.Theory X and Y: The theory X and Y refer to two distinct sets of management assumptions. Theory X assumes that employees dislike work and must be coerced, while theory Y assumes that employees like work and are motivated to do it.Blanchard Hershey: The Blanchard Hershey situational leadership theory is based on the assumption that different situations require different leadership styles.Path-Goal: Path-Goal theory suggests that a leader's job is to make the path to the goal clear, rewarding, and easy to follow for subordinates.
Trait theory: Trait theory suggests that the effective leader possesses certain traits that are inherent.Leadership styles: Leadership styles include autocratic, democratic, and laissez-faire leadership.Boundaryless organizations: Boundaryless organizations are those that are not limited by traditional barriers such as geography, hierarchy, or function.Feedforward, concurrent, feedback controls: Feedforward controls take place before the actual operation, concurrent controls happen during the actual operation, and feedback controls are carried out after the operation.
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True or False? The pure expectations theory can explain an upward-sloping yield curve
False. The pure expectations theory does not explain an upward-sloping yield curve.
The pure expectations theory, also known as the unbiased expectations theory, suggests that the shape of the yield curve is solely determined by the market's expectations of future interest rates. According to this theory, an upward-sloping yield curve would indicate that the market expects interest rates to increase in the future.
However, an upward-sloping yield curve is not explained by the pure expectations theory. Instead, it is typically associated with the expectations theory, which incorporates factors such as inflation expectations and risk premiums.
There are other theories that can better explain an upward-sloping yield curve, such as the liquidity preference theory and the market segmentation theory. These theories take into account additional factors, such as investor preferences for different maturities and supply and demand dynamics in the bond market.
In summary, the pure expectations theory does not explain an upward-sloping yield curve. Other theories are more suitable for understanding the factors that contribute to the shape of the yield curve.
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A $170,000 mortgage was amortized over 10 years by monthly repayments. The interest rate on the mortgage was fixed at 4.00% compounded semi-annually for the entire period.
a. Calculate the size of the payments rounded up to the next $___. Round up to the next 100
b. Using the payment from part a., calculate the size of the final payment. $____Round to the nearest cent
The size of the monthly payments for the $170,000 mortgage amortized over 10 years, with a fixed interest rate of 4.00% compounded semi-annually is $3800.
a. To calculate the monthly payment for the mortgage, we can use the amortization formula:
[tex]PMT = PV \times \frac{(r \times (1+r)^{n} )}{(1+r)^{n} -1 }[/tex]
Where:
PMT = Monthly payment
PV = Present value (loan amount) = $170,000
r = Monthly interest rate = Annual interest rate ÷ Number of compounding periods per year = 4.00% ÷ 2 = 2.00% = 0.02
n = Total number of payments = 10 years × 12 months/year = 120
Plugging in the values, we get:
[tex]PMT = 170000 \times \frac{(0.02 \times (1+0.02)^{120} )}{(1+0.02)^{120} -1 }[/tex]
= $3748.176 ≈ $3800
b. The final payment can be calculated by considering the remaining balance at the end of the 10-year period. Since the mortgage is fully amortized over 10 years, the final payment should be equal to the remaining balance. By subtracting the sum of all previous payments from the initial loan amount, we can determine the remaining balance. However, since the monthly payment includes fractions of cents, the final payment will be slightly different to account for these remaining fractional amounts.
Therefore, the size of the final payment will be equal to the remaining balance, which is the initial loan amount minus the sum of all previous payments.
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Currently, Meyers Manufacturing Enterprises (MME) has a capital structure consisting of 35% debt and 65% equity. MME's debt currently has a 7% yield to maturity. The risk-free rate (rRF) is 5%, and the market risk premium (rM – rRF) is 6%. Using the CAPM, MME estimates that its cost of equity is currently 11.5%. The company has a 40% tax rate. c. What would MME's beta be if the company had no debt in its capital structure? (That is, what is MME's unlevered beta, bU?) Round your answer to 4 decimal places. Do not round intermediate calculations.
MME's financial staff is considering changing its capital structure to 45% debt and 55% equity. If the company went ahead with the proposed change, the yield to maturity on the company's bonds would rise to 7.5%. The proposed change will have no effect on the company's tax rate.
d. What would be the company's new cost of equity if it adopted the proposed change in capital structure? Round your answer to 2 decimal places. Do not round intermediate calculations.e. What would be the company's new WACC if it adopted the proposed change in capital structure? Round your answer to 2 decimal places. Do not round intermediate calculations.
a) MME's unlevered beta (bU) can be calculated using the formula:
bU = bD / (1 + (1 - t) * D/E) Where bD is the levered beta with debt, t is the tax rate, D is the debt percentage, and E is the equity percentage. In this case, D = 35% and E = 65%.
b) To calculate the new cost of equity, we can use the CAPM formula:
rE = rRF + bU * (rM - rRF)
Given that the risk-free rate (rRF) is 5%, the market risk premium (rM - rRF) is 6%, and the proposed change in capital structure results in an unlevered beta (bU), we can substitute these values into the formula:
rE = 5% + bU * 6%
c) The new WACC can be calculated using the formula:
WACC = (E / V) * rE + (D / V) * rD * (1 - t)
Where E is the market value of equity, V is the total market value of the firm (E + D), rE is the cost of equity, D is the market value of debt, rD is the cost of debt, and t is the tax rate. Since the proposed change in capital structure does not affect the tax rate, we can focus on the changes in the cost of equity and cost of debt to calculate the new WACC.
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A good that ___ will have an inelastic demand.
a. is considered a necessity
b. has many close substitutes
c, is narrowly defined
d. is consumed in the long run
A good that is considered a necessity will have an inelastic demand. Thus, option (a) is the correct answer. A good that is considered a necessity will have an inelastic demand.
The term inelastic demand implies the degree of change in demand when the price of a good changes. When the demand for a good is inelastic, a change in the price of the good will result in an insignificant change in the quantity demanded by the consumers. Therefore, when a good is considered a necessity, consumers will still purchase it, even if the price increases. For example, essential goods such as water, bread, and milk have an inelastic demand as they are considered a necessity. The availability of substitutes has little effect on the demand for the good.
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Owing to the Great Depression of 1929, the expenditures in advertising plummeted. This led advertising agencies to shift their focus to _____.
Owing to the Great Depression of 1929, the expenditures in advertising plummeted. This led advertising agencies to shift their focus to cost-effective marketing strategies and tactics.
During this time, agencies started emphasizing the importance of salesmanship, direct marketing, and persuasive techniques to maximize the impact of limited advertising budget . They began focusing on targeted advertising campaigns, direct mail marketing, and personal selling to reach potential customers effectively. The shift towards more measurable and result-oriented approaches helped advertising agencies adapt to the economic challenges of the Great Depression and optimize their resources to generate sales and maintain profitability for their clients.
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The Central Bank mandates a "reserve ratio" of 1.25%. A commercial bank receives a new deposit of $2,000 from a customer who had it stored under their mattress for years. If the commercial banks lend out all the money they can using this deposit, how much in total will the "money supply" increase as this new $2,000 works its way through the economy? $25,000 $160,000 $16,000 $250,000 Calculate GDP from the following: Rent $2,850 Consumption Spending on Goods $6,600 Social Security Benefit $7,100 Investment Spending $2,400 Wages \& Salaries $6.500 Exports $1,000 Interest $1,900 Government Purchases of Goods \& Services $2,600 Profits $1,400 Imports $1,200 Purchase of Stocks $5,900 Unemployment Insurance $3,950 Payroll Taxes $1,965 Sales Tax $1,800 Consumption Spending on Services $900 $19,715 $12,400 $26,815 $12,300
The total increase in the money supply as this $2,000 deposit works its way through the economy is $1,975.
The reserve ratio is the portion of deposits that commercial banks are required to hold in reserves by the central bank. In this case, the reserve ratio is 1.25%, which means that the bank needs to keep 1.25% of the deposit as reserves and can lend out the rest.
To calculate the total increase in the money supply, we need to determine the amount that can be lent out. From the $2,000 deposit, the bank needs to keep 1.25% as reserves.
Reserves = $2,000 × 1.25% = $25
The remaining amount, which can be lent out, is:
Amount available for lending = $2,000 - $25 = $1,975
Since the bank lends out all the money it can, the total increase in the money supply is equal to the amount lent out, which is $1,975.
Therefore, the total increase in the money supply as this $2,000 deposit works its way through the economy is $1,975.
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Max, Lilly, and Jiao have been in partnership for many years running a business that offers legal services. On opening the partnership each of the partners created overlap relief of £5,000 with the exception of Max, the senior partner, who created £12,000 overlap relief.
The original profit-sharing agreement allocates Max a salary of £35,000 per annum and the balance of profits are shared equally between all three partners.
Due to the pandemic the business profits have fallen recently and the partnership does not have enough work to continue with three partners. Jiao decided to retire from the partnership and her final day of trading was 31 March 2021.
Following Jiao's retirement Max continued to take the same salary and the balance of profits were then shared equally between Max and Lilly who both continued in the partnership offering legal advice to their customers.
The recent tax adjusted partnership profits have been as follows:
Adjusted profits
Year ended 1 december 2019 £ 140.000
Year ended 1 december 2020 £ 95.000
Year ended 1 december 2021 £ 80.000
Requirement:
a) Calculate the profits allocation for each partner for each of the three accounting periods to 31 December 2021. (7 marks)
b) Clearly show the profit assessable on each of the partners for the tax years 2019/20 to 2020/21 inclusive. (3 marks) Total 10 marks
a) Profit Allocation for each partner:
-Year ended 1 Dec 2019: Max £70,000, Lilly £35,000, Jiao £35,000
- Year ended 1 Dec 2020: Max £65,000, Lilly £30,000, Jiao retired
- Year ended 1 Dec 2021: Max £57,500, Lilly £22,500, Jiao retired
b) Assessable Profit for tax years 2019/20 to 2020/21:
- Tax Year 2019/20: Max £35,000, Lilly £35,000, Jiao £35,000
- Tax Year 2020/21: Max £65,000, Lilly £30,000, Jiao retired
a) Profits Allocation for Each Partner:
Year ended 1 December 2019:
- Total Adjusted Profits: £140,000
- Max's Salary: £35,000
- Remaining Profits: £140,000 - £35,000 = £105,000
- Equal Share for Max, Lilly, and Jiao: £105,000 / 3 = £35,000
Profit Allocation:
- Max: Salary £35,000 + Equal Share £35,000 = £70,000
- Lilly: Equal Share £35,000
- Jiao: Equal Share £35,000
Year ended 1 December 2020:
- Total Adjusted Profits: £95,000
- Max's Salary: £35,000
- Remaining Profits: £95,000 - £35,000 = £60,000
- Equal Share for Max and Lilly: £60,000 / 2 = £30,000
Profit Allocation:
- Max: Salary £35,000 + Equal Share £30,000 = £65,000
- Lilly: Equal Share £30,000
- Jiao: Retired from partnership
Year ended 1 December 2021:
- Total Adjusted Profits: £80,000
- Max's Salary: £35,000
- Remaining Profits: £80,000 - £35,000 = £45,000
- Equal Share for Max and Lilly: £45,000 / 2 = £22,500
Profit Allocation:
- Max: Salary £35,000 + Equal Share £22,500 = £57,500
- Lilly: Equal Share £22,500
- Jiao: Retired from partnership
b) Profit Assessable for Tax Years 2019/20 to 2020/21:
Tax Year 2019/20:
- Max's Assessable Profit: Salary £35,000
- Lilly's Assessable Profit: Equal Share £35,000
- Jiao's Assessable Profit: Equal Share £35,000
Tax Year 2020/21:
- Max's Assessable Profit: Salary £35,000 + Equal Share £30,000 = £65,000
- Lilly's Assessable Profit: Equal Share £30,000
- Jiao's Assessable Profit: Retired from partnership, no assessable profit
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Low-cost leaders who have the lowest industry costs are likely to:
Low-cost leaders have a strong competitive edge, as their cost-efficient operations enable them to offer attractive prices, capture a larger customer base, maintain profitability, and withstand market fluctuations.
Low-cost leaders who have the lowest industry costs are likely to enjoy several advantages in the market. Firstly, their ability to offer products or services at lower prices compared to their competitors can attract a larger customer base, leading to increased sales and market share.
Price-sensitive customers tend to gravitate toward companies that offer the best value for their money.
Furthermore, low-cost leaders can maintain higher profit margins even with lower prices, as their operational costs are minimized. This allows them to invest in research and development, marketing campaigns, or expansion into new markets, further solidifying their competitive position.
Another benefit of being a low-cost leader is the ability to withstand price wars and market downturns.
When faced with economic challenges or aggressive pricing strategies from rivals, low-cost leaders have more flexibility to adjust prices while still remaining profitable, putting pressure on competitors and potentially driving them out of the market.
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Dave has $605,000 in saving on the day he retires. he earns 4.8% compounded semi-annually and plans to withdraw 15.300 ( except for a smaller final payment) from his saving at the end of each quarter for how long in years can he keep making a withdrawal?
This question involves calculating the duration in years for which Dave can make regular withdrawals from his savings given a certain amount and interest rate. The withdrawals will be made at the end of each quarter, except for a smaller final payment.
To determine the duration in years for which Dave can make regular withdrawals, we need to consider the initial savings amount, the interest rate, and the withdrawal amount. Since the interest is compounded semi-annually, we will need to adjust the interest rate accordingly.
First, we can calculate the adjusted semi-annual interest rate by dividing the annual interest rate by 2. In this case, the semi-annual interest rate would be 4.8% divided by 2, which is 2.4%.
Next, we can use the formula for the present value of an ordinary annuity to calculate the duration in years. The formula is:
\[ n = \frac{\log \left( \frac{P \cdot r}{A - P \cdot r} \right)}{\log(1+r)} \]
Where:
n = Number of periods (in this case, quarters)
P = Initial savings amount
r = Quarterly interest rate (adjusted from the semi-annual rate)
A = Withdrawal amount
By plugging in the given values into the formula, we can solve for n, which represents the number of quarters or the duration in quarters. To convert this to years, we would divide n by 4, as there are 4 quarters in a year.
Therefore, by using the provided information and the appropriate formulas, we can calculate the duration in years for which Dave can continue making regular withdrawals from his savings.
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what is the payment on a 100,000 30 year loan with 7% interest?
Therefore, the payment on a $100,000 30-year loan with 7% interest is $665.30.
The payment on a $100,000 30-year loan with 7% interest can be calculated using the formula for the present value of an annuity due.
The formula is:
Pmt = PV x i / (1 - 1 / (1 + i)^n),
where Pmt is the payment, PV is the present value of the loan, i is the interest rate per period, and n is the number of periods.
For this problem, the PV is $100,000, the interest rate per period is
7%/12 = 0.00583,
and the number of periods is 30 x 12 = 360.
Plugging these values into the formula, we get:
Pmt = 100000 x 0.00583 / (1 - 1 / (1 + 0.00583)^360)
Pmt = $665.30
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In the analysis of the financial cycle of a company, the following data (mean deadline) was verified, in days: inventories = 15 days, receipt of invoices = 20 days and supplier credit = 10 days. The implementation of a project in the first year of operation will have an operating income net of R$ 10,000,000.00 and an operating cost of products and services equal to R$ 7,000,000.00. With this data, estimate the working capital requirement in the first year of operation of this project.
The estimated working capital requirement in the first year of operation for this project is approximately R$ 479,452.00.
To estimate the working capital requirement in the first year of operation, we need to calculate the cash conversion cycle (CCC). The CCC is the length of time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.
The formula for calculating CCC is:
CCC = Average Inventory Days + Average Receivables Days - Average Payables Days
Given the data provided:
Average Inventory Days = 15 days
Average Receivables Days = 20 days
Average Payables Days = 10 days
Substituting these values into the formula,
CCC = 15 + 20 - 10
CCC = 25 days
The CCC represents the number of days it takes for the company to convert its investments into cash flows. In this case, the CCC is 25 days.
To estimate the working capital requirement, calculate the average daily operating cost of products and services:
Average Daily Operating Cost = Operating Cost / 365 days
Operating Cost = R$ 7,000,000.00
Average Daily Operating Cost = 7,000,000 / 365
Average Daily Operating Cost ≈ R$ 19,178.08
Finally, calculate the working capital requirement:
Working Capital Requirement = CCC * Average Daily Operating Cost
Working Capital Requirement = 25 * 19,178.08
Working Capital Requirement ≈ R$ 479,452.00
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Given the following, calculate the third-year book value using straight-line depreciation? Cost basis of the asset = $12000; Useful life = 5 years; Estimated salvage value = $4,000 A) $7,200 B) $10,400 C) $8,800 D) $5,600
To calculate the book value of the asset in the third year using straight-line depreciation, we need to determine the annual depreciation expense and subtract it from the initial cost basis each year.
The formula for straight-line depreciation is: Annual Depreciation Expense = (Cost basis - Salvage value) / Useful life In this case, the cost basis of the asset is $12,000, the useful life is 5 years, and the estimated salvage value is $4,000.
Annual Depreciation Expense = ($12,000 - $4,000) / 5
= $8,000 / 5
= $1,600
To calculate the book value in the third year, we subtract the accumulated depreciation (annual depreciation expense multiplied by the number of years) from the initial cost basis:
Book Value = Cost basis - Accumulated Depreciation
Accumulated Depreciation = Annual Depreciation Expense * Number of Years
In the third year, the number of years is 3. Therefore:
Accumulated Depreciation = $1,600 * 3
= $4,800
Book Value = $12,000 - $4,800
= $7,200
Therefore, the third-year book value using straight-line depreciation is $7,200. The correct answer is A) $7,200.
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What is the role of an emergency manager in reducing
vulnerabilities and violence during disasters.
Emergency managers play a pivotal role in reducing vulnerabilities and violence during disasters by assessing risks, implementing preventive measures, ensuring public safety, and promoting community resilience. Their efforts contribute to minimizing the impact of disasters and safeguarding the well-being of communities in times of crisis.
The role of an emergency manager in reducing vulnerabilities and violence during disasters is crucial for maintaining public safety and minimizing harm to affected communities. Emergency managers are responsible for developing comprehensive disaster preparedness plans and coordinating responses to emergencies and disasters. Their primary objective is to mitigate risks and enhance the resilience of communities.
In terms of reducing vulnerabilities, emergency managers conduct thorough risk assessments to identify potential hazards and vulnerabilities specific to their region. They work closely with relevant stakeholders, including government agencies, community organizations, and businesses, to implement preventive measures such as infrastructure improvements, early warning systems, and public education campaigns. By addressing vulnerabilities proactively, emergency managers aim to minimize the impact of disasters and protect lives and property.
Regarding violence during disasters, emergency managers play a critical role in maintaining law and order. They collaborate closely with law enforcement agencies to ensure adequate security measures are in place. This involves establishing emergency communication systems, coordinating evacuation plans, and implementing strategies to prevent looting, vandalism, or other criminal activities in the aftermath of a disaster.
Additionally, emergency managers focus on promoting community cohesion and resilience. They foster partnerships with community leaders, non-profit organizations, and volunteer groups to enhance community engagement and foster a sense of unity during times of crisis. By promoting collaboration and providing essential resources and support, emergency managers strive to reduce the potential for violence and create a safer environment for affected populations.
In summary, emergency managers play a pivotal role in reducing vulnerabilities and violence during disasters by assessing risks, implementing preventive measures, ensuring public safety, and promoting community resilience. Their efforts contribute to minimizing the impact of disasters and safeguarding the well-being of communities in times of crisis.
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To be binding, a price ceiling must be set at a price:
- lower than the equilibrium price.
- higher than the equilibrium price.
- the same as the equilibrium price.
- any price ceiling is binding.
To be binding, a price ceiling must be set at a price lower than the equilibrium price.
To be binding, a price ceiling must be set at a price lower than the equilibrium price. In an economic market, the equilibrium price is the point where the quantity demanded by consumers matches the quantity supplied by producers.
It is determined by the intersection of the demand and supply curves. At this price, the market is in equilibrium, and there is no shortage or surplus.
A price ceiling is a government-imposed maximum price that can be charged for a good or service. If the price ceiling is set above the equilibrium price, it will not have any impact since the market price is already lower.
However, if the price ceiling is set below the equilibrium price, it becomes binding and creates a shortage. The price ceiling restricts suppliers from charging the market-clearing price, leading to excess demand and a shortage of the product.
Therefore, for a price ceiling to be effective and create a tangible impact on the market, it must be set lower than the equilibrium price.
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An endorser must be popular in order to be effective
While popularity can certainly enhance the effectiveness of an endorser, it is not the sole determining factor. The effectiveness of an endorser depends on various elements, including their relevance, credibility, and the target audience's perception of them.
1) Relevance:
The endorser should have a connection or relevance to the product, service, or cause they are endorsing. If the endorser is known for expertise or success in a particular field related to the product, their endorsement can carry more weight, regardless of their overall popularity.
2) Credibility:
The credibility of an endorser is crucial. Factors such as expertise, qualifications, achievements, and reputation play a significant role in establishing credibility. If an endorser is respected and trusted by the target audience, their endorsement can be highly influential, even if they are not universally popular.
3) Target Audience:
Understanding the target audience is essential. Different demographics and market segments have varying preferences and opinions about popular figures. It's crucial to select an endorser who resonates with the specific target audience, as their influence may be more impactful within that particular group.
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Investors require a return of 14.2% per year to hold a stock. The stock currently does not pay any dividends. The stock is expected to begin paying a dividend of $1.15 per share in two years. After they begin, the dividends are expected to grow forever at a constant rate of 6.9% per year. What is the stock's intrinsic value per share?
A) $15.75
B) $14.04
C) $12.45
D) $13.79
E) $12.06
The intrinsic value of the stock can be calculated using the dividend discount model:
P = D / (r - g)
Where:
P = intrinsic value per share
D = dividend per share
r = required rate of return
g = dividend growth rate
In this case, the dividend will start in two years, so we need to find the present value of the dividend.
PV of dividend = $1.15 / (1 + 0.142)^2 = $0.82
After two years, the dividend will grow at a constant rate of 6.9% per year.
Using the dividend discount model:
P = ($0.82 * (1 + 0.069)) / (0.142 - 0.069) = $14.04
Therefore, the intrinsic value per share is $14.04.
The answer is B) $14.04
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