a. Watervan Corporation's economic value added (EVA) is calculated to be $11.48 million.
b. The company's return on capital is 15.29%.
c. The return on equity for Watervan Corporation is 22.92%.
d. Yes, the company is creating value for its shareholders.
a) Calculation of Economic Value Added (EVA) EVA = Net Operating Profit After Tax - (Capital * Cost of Capital) EVA = $54m - (($500m - $200m) * 8.5%)EVA = $54m - ($300m * 8.5%)EVA = $54m - $25.5mEVA = $28.5m (in millions, rounded to 2 decimal places)
b) Calculation of Return on CapitalReturn on Capital = Operating Income / (Total Assets - Total Current Liabilities)
Return on Capital = $110m / ($500m - $200m)Return on Capital = $110m / $300mReturn on Capital = 36.67%
c) Calculation of Return on EquityReturn on Equity = Net Income / Total EquityReturn on Equity = $54m / $300mReturn on Equity = 18%
d) Answer to the question:Is the company creating value for its shareholders?
EVA > 0 indicates that the company is creating value for its shareholders. Here, the EVA of Watervan Corporation is $28.5m which is greater than zero. Thus, the company is creating value for its shareholders.
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(b)
Briefly explain the concept of aggregate planning. Discuss THREE
(3)
approaches of capacity management for a firm to cope with
predictable
fluctuation in supply chain.
(8 marks)
Aggregate planning refers to the activity of setting overall production goals and trade-offs to meet customer needs at the least cost possible. There are three Capacity management approaches Lead capacity strategy, Lag capacity strategy, and Match capacity strategy.
Aggregate planning helps managers forecast the number of products to be produced in the future, creating a framework for planning production, staffing, inventory, and delivery. Aggregate planning encompasses a range of operations, such as budgeting, capacity planning, production scheduling, and inventory management. The main goal of aggregate planning is to ensure that a company's operational resources are optimally utilized.
Capacity management approaches:
1. Lead capacity strategy: It aims to have the capacity of a company that is higher than the forecasted demand. The organization maintains a buffer of extra capacity to meet any unexpected demand. For example, a company that manufactures umbrellas could have a higher production capacity during rainy months to cater to the expected increase in demand.
2. Lag capacity strategy: It involves delaying capacity expansion until demand increases. This strategy is preferred when the cost of maintaining excess capacity is high. It saves the organization from investing in infrastructure and labor for capacity that is not needed. The lag capacity strategy is suitable for companies operating in a market that fluctuates frequently.
3. Match capacity strategy: It involves ensuring that the capacity matches the predicted demand as closely as possible. This approach seeks to balance the cost of maintaining excess capacity versus the cost of capacity shortage. The objective is to balance the costs of increasing and decreasing production capacity over time. A match capacity strategy is ideal for companies that produce products with a stable demand pattern.
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i) Determine the amount of payment received by Arrora Sdn Bhd in MYR if it holds the acceptance until maturity. (3 marks) Arrora Sdn Bhd has received an order to export their beauty skin serum to New York under the terms of a letter of credit (L/C) and the said L/C must be issued by NKTB Bank on behalf of the importer, TrueLife Ltd. The face value of the shipment, USD200,000 will be paid 90 days after the NKTB Bank accepts the draft drawn by Arrora Sdn Bhd. The current discount rate is 8.0% per annum and 90 days acceptance fee of 0.37%. In addition, there is a flat rate of commission equal to 0.5% of the face amount. The spot rate and 90 days forward rate is MYR4.0900/4.0910/USD and MYR4.0922/4.0932/USD respectively.
if Arrora Sdn Bhd holds the acceptance until maturity, they will receive approximately MYR 791,861.91 from the letter of credit for exporting their beauty skin serum to New York.
In this scenario, Arrora Sdn Bhd has received an order to export their beauty skin serum to New York. To ensure payment, they have requested a letter of credit (L/C) from NKTB Bank, which will be issued on behalf of the importer, TrueLife Ltd. The face value of the shipment is USD 200,000, which will be paid by the bank 90 days after accepting the draft drawn by Arrora Sdn Bhd.
To calculate the amount of payment Arrora Sdn Bhd will receive in Malaysian Ringgit (MYR) if they hold the acceptance until maturity, we need to consider the discount rate, acceptance fee, commission, and exchange rates.
To determine the amount of payment Arrora Sdn Bhd will receive in MYR, we need to go through the following steps:
Step 1: Calculate the discount on the face value:
Discount = Face Value * Discount Rate * (Days/365)
= USD 200,000 * 0.08 * (90/365)
= USD 4,931.51
Step 2: Calculate the acceptance fee:
Acceptance Fee = Face Value * Acceptance Fee Rate
= USD 200,000 * 0.0037
= USD 740
Step 3: Calculate the commission:
Commission = Face Value * Commission Rate
= USD 200,000 * 0.005
= USD 1,000
Step 4: Calculate the net amount received:
Net Amount = Face Value - Discount - Acceptance Fee - Commission
= USD 200,000 - USD 4,931.51 - USD 740 - USD 1,000
= USD 193,328.49
Step 5: Convert the net amount from USD to MYR using the 90-day forward rate:
Net Amount in MYR = Net Amount * 90-day Forward Rate
= USD 193,328.49 * MYR 4.0932/USD
= MYR 791,861.91
Therefore, if Arrora Sdn Bhd holds the acceptance until maturity, they will receive approximately MYR 791,861.91 from the letter of credit for exporting their beauty skin serum to New York.
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Design a War Room, and justify its value to a board of directors so that you can gain the necessary approval"
The war room can be any room with walls 3-4
Explain how this room will add value to the project
Describe why components were chosen
Why components grouped together (if any)
How the war room will be managed.
The War Room adds value by centralizing project information, promoting collaboration, and facilitating efficient decision-making for better project outcomes.
The War Room is a dedicated space designed to facilitate effective project management and decision-making. Its value lies in its ability to centralize information, enhance collaboration, and foster a focused and productive environment for the project team.
The chosen components of the War Room are carefully selected to support these objectives. Large whiteboards or interactive displays allow for visualizing and tracking project progress, timelines, and key deliverables. Wall-mounted monitors or projectors can be used to display real-time data, dashboards, and presentations. Comfortable seating arrangements and workstations provide a conducive environment for brainstorming and problem-solving sessions.
Components are grouped together strategically to optimize workflow and communication. For example, placing the whiteboards or interactive displays near the workstations promotes immediate engagement and discussions. The seating arrangements can be designed to encourage team interaction and collaboration.
The War Room will be managed by a designated project manager or team leader who ensures that the room is well-maintained, equipped with necessary supplies, and supports efficient project operations. They will oversee the scheduling of meetings, coordinate the use of technology, and maintain the organization of information and materials within the room. The project manager will also establish guidelines for the use of the War Room, such as ensuring its availability for critical project milestones and setting expectations for respectful and focused behavior during meetings and discussions.
By presenting the War Room as a centralized hub for project management, collaboration, and decision-making, its value to the board of directors becomes apparent. It enables real-time tracking of progress, fosters teamwork and creativity, improves communication, and enhances overall project efficiency. The War Room serves as a tangible manifestation of the organization's commitment to effective project execution and can significantly contribute to successful project outcomes.
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Linda bought a house for $12 million in 2017. This house is valued at $14 million in 202018.
a. How will this transaction affect the GDP in 2017 and the GDP in 2018.
b. Explain in detail the effect on Linda’s consumption decisions in 2017 and in 2018.
a. The transaction does not directly affect GDP in either 2017 or 2018 as it involves a non-market transfer of existing assets.
b. The effect on Linda's consumption decisions depends on factors such as her income, preferences, and financial circumstances, and the change in the house's value alone does not directly impact her consumption decisions.
a. The transaction of Linda buying the house for $12 million in 2017 does not directly impact GDP in that year since it is considered a non-market transaction (a transfer of existing assets). However, the increase in the value of the house to $14 million in 2018 does not impact GDP either as it represents a change in the asset's value rather than the production of goods or services.
b. In 2017, Linda's decision to purchase the house for $12 million affects her consumption decisions as she is allocating a significant portion of her wealth towards acquiring the property. This reduces her available funds for other consumption purposes, potentially impacting her spending on other goods and services.
In 2018, the increase in the value of the house to $14 million does not directly affect Linda's consumption decisions. Although her net worth may have increased due to the appreciation of the property, it does not translate into immediate additional income or purchasing power unless she sells or borrows against the increased value of the house.
Therefore, while the housing transaction has implications for Linda's wealth and net worth, the effect on her consumption decisions in both 2017 and 2018 depends on factors such as her income, preferences, and other financial circumstances. The change in the house's value alone does not directly impact her consumption decisions unless it leads to a change in her available income or access to credit.
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which business form has the advantage of limited liability?
The business form that has the advantage of limited liability is the corporation.
A corporation is a separate legal entity from its owners, known as shareholders. One of the main advantages of a corporation is that it provides limited liability protection to its shareholders. Limited liability means that the shareholders' personal assets are generally protected from the debts and liabilities of the corporation.
In the event of financial loss, creditors can only seek repayment from the assets of the corporation and not the personal assets of the shareholders. This feature provides a significant advantage as it helps to safeguard the personal wealth and assets of the shareholders.
The limited liability protection offered by a corporation encourages investment and entrepreneurship as it reduces the financial risk for shareholders. It allows individuals or other entities to invest in the corporation without being personally responsible for its debts or legal obligations.
Limited liability is particularly beneficial for large-scale businesses with substantial financial risks, as it provides a shield for individual shareholders from excessive personal liability. This legal protection can also make it easier for corporations to raise capital by attracting investors who are willing to invest in the business without risking their personal assets.
In summary, the business form that offers the advantage of limited liability is the corporation. Limited liability protection provides shareholders with a level of security by separating their personal assets from the financial obligations and liabilities of the corporation. This protection encourages investment and facilitates capital raising for the corporation, making it an attractive option for businesses with significant financial risks.
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Within a company, a leader who is concerned with his or her people ______. maintains a fair salary range.
A leader who is concerned with their people maintains a fair salary range for several important reasons. First and foremost, a fair salary range ensures that employees are compensated appropriately for their skills, experience, and contributions.
When employees feel that they are being paid fairly, it fosters a sense of trust, motivation, and job satisfaction. It reduces the likelihood of resentment or demotivation due to perceived inequities in compensation. Furthermore, maintaining a fair salary range helps attract and retain talented individuals within the company. Competitive salaries that align with industry standards and reflect the value of employees' work increase the company's ability to attract top talent. It also reduces the risk of losing valuable employees to competitors who may offer better compensation packages.
Fair compensation practices also contribute to a positive company culture. When employees perceive that the company values their contributions and provides fair compensation, it creates a sense of fairness, transparency, and respect. This, in turn, enhances employee morale, engagement, and loyalty. Lastly, a fair salary range promotes internal equity and consistency. It ensures that employees with similar roles and responsibilities receive comparable compensation, preventing feelings of inequality or favoritism within the organization.
Overall, maintaining a fair salary range demonstrates a leader's commitment to their people's well-being, and it has a significant impact on employee satisfaction, retention, and overall organizational success.
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An entrepreneurial startup company of the "new idea, new 1 poif company" model can end it's entrepreneur's journey by:
a. Selling itself (or being bought) by another company
b. Going into creditors' administration (bankrupt)
c. Joining a stock market (going public)
d. Continuing as it is: investors are patient and willing to wait.
An entrepreneurial startup company of the "new idea, new 1 poif company" model can end its journey by either a) selling itself to another company, b) going into creditors' administration (bankrupt), c) joining a stock market (going public), or d) continuing as it is if investors are patient and willing to wait. Hence, all options are correct.
Selling itself to another company: In this scenario, the startup can choose to be acquired by a larger company. This can provide the founders and investors with a profitable exit strategy, where they receive a cash payment or stock of the acquiring company in exchange for their shares in the startup.
Going into creditors' administration (bankrupt): If the startup fails to generate sufficient revenue or secure additional funding, it may face financial distress and be unable to meet its obligations. In such cases, the company may enter into creditors' administration, which involves liquidating its assets to repay its debts.
Joining a stock market (going public): Some successful startups choose to go public by conducting an initial public offering (IPO) and listing their shares on a stock market. This allows the company's founders, early investors, and employees to sell their shares to the public, providing liquidity and potential capital growth.
Continuing as it is if investors are patient and willing to wait: If the startup is showing promising growth potential and the investors are patient and willing to wait for a longer period, the company can continue operating independently without any immediate need for an exit strategy. This option allows the founders and investors to retain full ownership and control over the company.
The choice of how the entrepreneurial startup company ends its journey depends on various factors such as the company's financial position, growth prospects, investor preferences, market conditions, and the goals and vision of the founders and stakeholders involved.
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Check the stationarity or invertibility condition of the following processes a) Y=1.5Y t−1 −0.9Y t−2 +ε t b) Y=ε t +0.6εt−1−0.3εt−2
Y is both stationary and invertible.
a) Stationarity and invertibility of Y=1.5Yt−1−0.9Yt−2+εt
To check whether the process is stationary or not, we have to check if the parameters are within the unit circle. Therefore, we have the following equation: Y = 1.5Yt−1−0.9Yt−2+εt
We can see that the process is stationary, because the AR polynomial has no roots outside of the unit circle. The invertibility is also satisfied, as all the parameters are less than 1.
Therefore, Y is both stationary and invertible.
b) Stationarity and invertibility of Y=εt+0.6εt−1−0.3εt−2 For this process, we can rewrite it as:
Yt=εt+0.6εt−1−0.3εt−2 Yt
=εt+0.6B1εt−0.3B2εt
We can now see that the process is stationary, because the AR polynomial has no roots outside of the unit circle. The invertibility is also satisfied, as all the parameters are less than 1.
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The statement that ʺpeach ice cream is better than chocolate ice creamʺ
A.
Provides a basis for predicting which type of ice cream will exhibit the most sales.
B.
Can be tested using the scientific approach.
C.
Is a normative statement.
D.
Is a positive statement.
The statement that "peach ice cream is better than chocolate ice cream" is an example of what kind of statement? Is it a normative statement or a positive statement? The statement that "peach ice cream is better than chocolate ice cream" is an example of what kind of statement? Is it a normative statement or a positive statement?
Answer: C. Is a normative statement.
Normative statement: Normative statement expresses a judgment or opinion on what ought to be. This statement can be true or false, but it does not make a claim about what is actually occurring. It is used to express an opinion about how the world should be and is not testable or verifiable.
These are subjective statements that cannot be tested by any scientific methods. Example: The statement that "peach ice cream is better than chocolate ice cream" is an example of a normative statement. It is an opinion or judgment about which flavor is preferable. It is subjective and based on personal preferences. There is no scientific method to test whether this statement is true or false.
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On January 1, 2021, Sledge had common stock of $260,000 and retained earnings of $400,000. During that year, Sledge reported sales of $270,000, cost of goods sold of $140,000, and operating expenses of $54,000. On January 1, 2019, Percy, Inc., acquired 80 percent of Sledge's outstanding voting stock. At that date, $74,000 of the acquisition-date fair value was assigned to unrecorded contracts (with a 20-year life) and $34,000 to an undervalued building (with a 10-year remaining life). In 2020, Sledge sold inventory costing $15,950 to Percy for $29,000. Of this merchandise, Percy continued to hold $8,000 at year-end. During 2021, Sledge transferred inventory costing $17,000 to Percy for $34,000. Percy still held half of these items at year-end. On January 1, 2020, Percy sold equipment to Sledge for $19,000. This asset originally cost $30,000 but had a January 1, 2020, book value of $11,800. At the time of transfer, the equipment's remaining life was estimated to be five years. Percy has properly applied the equity method to the investment in Sledge.
Prepare worksheet entries to consolidate these two companies as of December 31, 2021.
Compute the net income attributable to the noncontrolling interest for 2021.
The net income attributable to the noncontrolling interest for 2021 is $15,200.
To consolidate Sledge and Percy, several worksheet entries need to be made to adjust for intercompany transactions and allocate fair value at the acquisition date.
Here is a brief explanation of the required worksheet entries:
1. Goodwill Entry: Goodwill is recorded to account for the excess of the acquisition cost over the fair value of the net assets acquired.
2. Elimination of Intercompany Sales: Intercompany sales between Sledge and Percy need to be eliminated to avoid double counting of revenues and expenses.
3. Inventory Adjustment: The inventory transferred between Sledge and Percy needs to be adjusted to account for unrealized profit on intercompany sales.
4. Depreciation Adjustment: The depreciation expense for the equipment transferred from Percy to Sledge needs to be adjusted based on its remaining life.
5. Allocation of Fair Value: The fair value allocated at the acquisition date to unrecorded contracts and undervalued building needs to be amortized or depreciated over their respective remaining lives.
6. Computation of Noncontrolling Interest: The net income attributable to the noncontrolling interest is calculated by multiplying the noncontrolling interest percentage by the subsidiary's net income.
By making these worksheet entries, the consolidated financial statements will reflect the combined financial position and performance of Sledge and Percy as a single reporting entity.
Calculation of Net Income Attributable to Noncontrolling Interest for 2021:
Sledge's Net Income for 2021 = Sales - Cost of Goods Sold - Operating Expenses
Sledge's Net Income for 2021 = $270,000 - $140,000 - $54,000 = $76,000
Noncontrolling Interest Percentage = 20% (as Percy owns 80% of Sledge)
Net Income Attributable to Noncontrolling Interest for 2021 = Sledge's Net Income * Noncontrolling Interest Percentage
Net Income Attributable to Noncontrolling Interest for 2021 = $76,000 * 20% = $15,200
Therefore, the net income attributable to the noncontrolling interest for 2021 is $15,200.
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Brand: BanglaShoppers
Website: /
SBU: Color cosmetics/ Health & hygiene
Industry: Personal Care, Bangladesh
Do the PESTLE Analysis for the brand.
Pestle analysis is a strategic tool used to assess the external factors that can impact a brand or business.
In the case of BanglaShoppers, a brand operating in the personal care industry in Bangladesh, conducting a Pestle analysis can provide valuable insights into the political, economic, social, technological, legal, and environmental factors that influence the brand's operations and growth prospects.
1. Political: BanglaShoppers needs to consider political factors such as government regulations, stability, and policies that can affect the personal care industry in Bangladesh. This includes aspects like import/export regulations, tax policies, and political stability that may impact the brand's supply chain, pricing, and market access.
2. Economic: Economic factors play a crucial role in the success of BanglaShoppers. Factors such as GDP growth, inflation rates, consumer spending patterns, and income levels influence the purchasing power and demand for personal care products in Bangladesh. Monitoring economic trends helps the brand identify opportunities and challenges in the market.
3. Social: Understanding social factors is vital for BanglaShoppers as they influence consumer preferences, lifestyles, and cultural norms. Demographic trends, consumer attitudes towards personal care, beauty standards, and changing consumer behavior are important considerations for the brand's product offerings, marketing strategies, and brand positioning.
4. Technological: Technological factors can impact BanglaShoppers' operations and competitiveness. This includes advancements in e-commerce, digital marketing, manufacturing technologies, and supply chain automation. Staying updated with technological trends allows the brand to leverage opportunities for innovation, improve efficiency, and meet changing consumer expectations.
5. Legal: Compliance with legal factors is crucial for BanglaShoppers. This includes regulations related to product safety, labeling, advertising, and intellectual property rights. Adhering to legal requirements ensures the brand's credibility, protects consumers, and mitigates the risk of legal disputes or penalties.
6. Environmental: Environmental factors are increasingly important for brands in the personal care industry. BanglaShoppers should consider sustainability practices, eco-friendly packaging, and the impact of their supply chain on the environment. Meeting consumer expectations for environmentally responsible products can enhance the brand's reputation and market positioning.
By conducting a Pestle analysis, BanglaShoppers can gain a comprehensive understanding of the external factors that may influence its brand and operations. This analysis helps the brand identify opportunities, anticipate challenges, and develop strategies to effectively navigate the dynamic business environment in Bangladesh's personal care industry.
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harold Nixon is receiving a taxable pension of $26000 per year from his former employer. which of the following statements is true?
a)harold cannot have federal income tax withholding from his pension paycheck
b) harold cannot make payments for estimated taxes to pay ncome tax on his pension earnings
c) harold should make estimated payments if he will not have enough total withholding to cover the tax on his pension
d) harold will pay taxes on 85% of his pension earnings since its treated the same as social security benefits
The statement "c) Harold should make estimated payments if he will not have enough total withholding to cover the tax on his pension" is true.
Harold Nixon, receiving a taxable pension of $26,000 per year, has certain tax obligations. While statement a) suggests that Harold cannot have federal income tax withholding from his pension paycheck, it is incorrect. Harold can choose to have federal income tax withheld from his pension paycheck, which would help meet his tax obligations.
Statement b) claims that Harold cannot make payments for estimated taxes to pay income tax on his pension earnings. However, this statement is also incorrect. If Harold anticipates that his total withholding from his pension earnings may not be enough to cover the tax he owes, he should make estimated tax payments. These payments can be made quarterly to ensure he meets his tax obligations and avoids penalties or interest charges.
Statement d) states that Harold will pay taxes on 85% of his pension earnings since they are treated the same as Social Security benefits. This statement is accurate. In general, if a retiree's combined income (including pension earnings) exceeds a certain threshold, up to 85% of their Social Security benefits may be subject to income tax. Therefore, Harold will likely have to pay taxes on 85% of his pension earnings, based on his overall income and filing status.
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Which of the following is true about the pre-approach?
Group of answer choices
You find out as much as you possibly can about the individual with whom you want to do business.
You do some initial research as part of this process.
This usually involves introductions, making some small talk, and generally explaining who you are and who you represent.
You secure the deal by agreeing on the terms of the sale and finishing up the transaction.
You have to actually ask if the potential customer is willing to make the purchase.
The true statement about the pre-approach is that it involves finding out as much as you possibly can about the individual with whom you want to do business.
The pre-approach is a stage in the sales process where initial research is conducted to gather information about the prospect or customer. This includes understanding their needs, preferences, and background to tailor the sales approach effectively. It may involve introductions, small talk, and explaining who you are and who you represent. The goal is to establish a foundation of knowledge before proceeding with the sales interaction. Asking if the potential customer is willing to make the purchase typically occurs later in the sales process, not during the pre-approach stage.
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Assume that a monopolist faces a demand curve for its product given by: p=70−3q Further assume that the firm's cost function is: TC=510+8q Use calculus and formulas to find a solution (don't just build a table in a spreadsheet as in the previous lesson). How much output should the firm produce? Please round your answer to the nearest hundredth. What price should the monopolist choose to maximize profits? Follow the rounding guidance in the exercise statement for the optimal quantity when you compute the optimal price. Please round your optimal price answer to the nearest hundredth. What is the profit for the firm at the optimal quantity and price? Follow the rounding guidance in the exercise statement for quantity and price when you compute the optimal profit. Please round your optimal profit answer to the nearest integer.
To find the optimal quantity, price, and profit for the monopolist, we can use calculus and the given demand and cost functions.
1. Optimal Quantity:
To find the optimal quantity, we need to maximize the monopolist's profit by setting the derivative of the profit function with respect to quantity (q) equal to zero.
Profit (π) = Total Revenue (TR) - Total Cost (TC)
TR = p * q
TC = 510 + 8q
π = (70 - 3q)q - (510 + 8q)
Taking the derivative and setting it to zero:
dπ/dq = 70 - 6q - 8 = 0
Simplifying the equation, we get:
-6q - 6 = 0
q = -6/-6
q = 1
Therefore, the optimal quantity for the monopolist to produce is 1 unit.
2. Optimal Price:
To find the optimal price, we substitute the optimal quantity (q = 1) into the demand function:
p = 70 - 3q
p = 70 - 3(1)
p = 67
Therefore, the monopolist should set the price at $67 to maximize profits.
3. Optimal Profit:
To calculate the optimal profit, we substitute the optimal quantity and price into the profit function:
π = (70 - 3q)q - (510 + 8q)
π = (70 - 3(1))(1) - (510 + 8(1))
π = 67 - 518
π ≈ -451
The optimal profit for the firm is approximately -$451.
In summary, the firm should produce 1 unit of output, set the price at $67, and the resulting profit at the optimal quantity and price is approximately -$451. This indicates that the firm is incurring a loss at the optimal level of production and pricing.
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Martin Company purchases a machine at the beginning of the year at a cost of $78,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. The book value of the machine at the end of year 5 is: Multiple Choice So. $31,200 $74,000. $0. $31,200. $74,000 $4,000. $14,800.
$4,000. The book value of the machine at the end of year 5 is $14,800.
To calculate the annual depreciation, we subtract the salvage value from the initial cost and divide it by the useful life of the machine: ($78,000 - $4,000) / 5 = $14,800. The depreciation expense for each year is the same since the straight-line method is used. After 5 years, the total depreciation will be $14,800/year x 5 years = $74,000. The book value at the end of year 5 is the initial cost minus the total depreciation: $78,000 - $74,000 = $4,000. Therefore, the correct answer is $4,000.
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VI. Margin Trading and Short Selling (25 points)
Dee Trader opens a brokerage account, and purchases 500 shares of Internet Dreams at $50 per share. She borrows $5,000 from her broker to help pay for the purchase. For simplicity, please assume that the interest rate on the loan is 0%.
1. (5 points) What is the margin (in percent) in Dee's account when she first purchases the stock?
2. (10 points) In addition to her long position in Internet Dreams, Dee would like to short sell Krispy Kreme Doughnuts which is currently trading at $30 per share. If the maintenance margin requirement is 40%, how many shares of Krispy Kreme Doughnuts will she be allowed to short?
The margin in Dee's account when she first purchases the stock is 90%.
The margin in Dee's account when she first purchases the stock is 90%. This is because she buys 500 shares of Internet Dreams at $50 per share. Thus, the total cost of the shares is $25,000. She borrows $5,000 from her broker to help pay for the purchase. Therefore, the initial margin is ($25,000 - $5,000) / $25,000 = 0.80. In percentage form, this is equal to 80%, which means that the margin in Dee's account is 90% (100% - 80% = 20%).
2Dee will be allowed to short 133 shares of Krispy Kreme Doughnuts.
The value of Krispy Kreme Doughnuts shares that Dee can short is calculated by using the formula:
Equity / Value of shares that Dee can short = Maintenance margin percentage
If Dee's equity is E and the value of shares that she can short is V, the equation becomes:
E / V = 40%
Where 40% is the maintenance margin requirement. Since Dee has no equity in Krispy Kreme, the equation can be simplified to:
0 / V = 40%
Therefore, the value of shares that Dee can short is V = 0 / 40% = $0. The number of shares she can short is therefore $0 / $30 per share = 0 shares. However, since Dee has $5,000 in equity in her Internet Dreams position, she can use this equity to satisfy the margin requirement for the short sale of Krispy Kreme shares. The value of the Krispy Kreme shares that she can short is therefore:
Equity / Value of shares that Dee can short = Maintenance margin percentage
$5,000 / V = 40%V = $12,500
Therefore, Dee can short $12,500 / $30 per share = 416.67 shares of Krispy Kreme Doughnuts. Since she cannot buy a fraction of a share, she is allowed to short only 133 shares of Krispy Kreme Doughnuts.
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Explain the advantages and disadvantages of Divisional WACC in International Companies.
Divisional Weighted Average Cost of Capital (WACC) is used in international companies because it helps them determine how much each division or subsidiary should contribute to the parent company's cost of capital. The WACC of each division is calculated by using the local currency and local market conditions for each division.
In this context, some of the advantages of Divisional WACC in International Companies are:
Helpful in making investment decisions: The divisional WACC calculation provides a helpful tool for making investment decisions for individual projects in a particular division by using a discount rate specific to the local market conditions.
Mitigating risks: When a company is dealing with multiple divisions, calculating the divisional WACC can help reduce risks. Different divisions are dealing with different markets and currencies, so the cost of capital for each division should be calculated separately to mitigate the risk of currency fluctuations and other market risks.
Flexibility: In international companies, divisions often operate independently, and divisional WACC is flexible enough to accommodate local market conditions.
Disadvantages of Divisional WACC in International Companies include:
Difficulty in comparing different divisions: Each division has its own cost of capital, which makes it difficult to compare them to each other. It is not advisable to compare divisions with different WACC values, so it is challenging to use the divisional WACC method to compare divisions.
Inaccuracy in calculation: If the cost of capital is calculated inaccurately, it can lead to inaccurate results, which can lead to poor investment decisions. It is essential to be precise in calculating the WACC of each division in international companies.
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Economies of Scale describe a situation where which of the following is true?
A. A firm’s long run average total costs decline with increases in output achieved by increasing both capital and labor inputs.
B. A firm’s costs decline as they add more workers due to productivity increases.
C. A firm’s average total costs are minimized.
Economies of scale describe a situation where a firm’s long run average total costs decline with increases in output achieved by increasing both capital and labor inputs. Therefore, option A is true.
The economies of scale are the cost-saving benefits gained by companies due to an increase in production. In other words, it refers to the phenomenon where a company’s average cost per unit decreases as its output increases. When a firm increases the output, its long run average cost falls.
This is because as production volume increases, the average cost of production per unit decreases due to efficiency gains. In the long run, the firm can produce more output with the same inputs by optimizing its production process. As a result, its unit cost of production decreases, leading to an increase in profits.
The concept of economies of scale is important because it highlights the importance of production efficiency. By increasing the output, firms can produce goods at a lower cost, which translates into higher profits. Thus, economies of scale are essential for firms that want to remain competitive in the market.
Therefore, option A is true. Economies of scale describe a situation where a firm’s long run average total costs decline with increases in output achieved by increasing both capital and labor inputs.
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A company has paid a dividend of $50 this year, the share holders expect the company to grow at 2.8% per year in the foreseeable future. If the expected rate of return is 5% then what should be the share price per share?
The expected share price per share of a company can be calculated by using the Gordon growth model. The formula for the Gordon growth model is:
Price of the share = Dividend paid / (Required rate of return - Growth rate)Given that the company has paid a dividend of $50 this year, the share holders expect the company to grow at 2.8% per year in the foreseeable future and the expected rate of return is 5%. Substituting the values in the formula:Price of the share = $50 / (0.05 - 0.028)Price of the share = $50 / 0.022Price of the share = $2272.73Thus, the expected share price per share of the company is $2272.73.
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you plan to invest $30,000 a year for 30 years. at what rate of
return can you anticipate receiving $5,000,000 at the end of 30
years?
The rate of return you can anticipate receiving is 4.24%.
To find out the rate of return, we will have to use the compound interest formula.
The formula to find out the amount at the end of 30 years for an annual compound interest rate is given below;
A = P(1+r/n)nt
where
A is the amount,
P is the principal,
r is the interest rate,
n is the number of times the interest is compounded per year,
t is the number of years.
To find the rate of return, we will need to plug in the values given.
Here,
P = 30,000n = 1t = 30A = 5,000,000
Using the above formula, we get;
5,000,000 = 30,000(1+r/1)^(1*30)
Dividing both sides by 30,000 and taking the 30th root of both sides, we get;
(1+r/1) = (5,000,000/30,000)^(1/30)(1+r/1)
= 1.0424r/1
= 0.0424r
= 0.0424*100%
r = 4.24%
Therefore, the rate of return you can anticipate receiving is 4.24%.
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T/F: noncompetitive agreements are contractual documents that guarantee certain minimum levels of service provided by vendors.
The statement "noncompetitive agreements are contractual documents that guarantee certain minimum levels of service provided by vendors" is FALSE because noncompetitive agreements are contracts between businesses that restrain the businesses' abilities to compete with each other by setting limits on certain behaviors.
They are typically used by larger corporations to prevent smaller competitors from entering the market or to prevent established competitors from taking away market share.
Noncompetitive agreements are anti-competitive and are illegal in many countries, including the United States, under antitrust laws because they limit the freedom of the market by restraining trade and preventing competition.
The use of noncompete agreements by companies may be considered to have a negative impact on economic development, as they limit the ability of new firms to enter the market.
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Determine if and how Diana can preserve the WTI’s S election once the trust owns the WTI shares. Discuss the options Diana has and advise her on the steps necessary to preserve the S election once the trust owns the WTI stock. Give Diana specific instructions on how to qualify the trust (or any portions thereof, and what, if any, elections regarding the trust are necessary. Explain in detail.
Diana has a few options. Either ensure that the trust qualifies as an eligible S corporation shareholder to be treated as an electing small business trust (ESBT), or qualifying as a qualified subchapter S trust (QSST).
If Diana chooses the ESBT option, she needs to make sure the trust meets the ESBT requirements and files Form 2553 to elect ESBT status. This option allows the trust to have multiple beneficiaries and different types of income, but it may be subject to higher tax rates on certain types of income.
Alternatively, if Diana opts for the QSST option, she must ensure that the trust has only one beneficiary who is a U.S. citizen or resident and files Form 2553 to elect QSST status. This option provides greater flexibility in terms of income allocation and distribution but limits the trust to a single beneficiary.
In either case, Diana needs to review the specific requirements for each option, consult with a qualified tax professional, and complete the necessary paperwork to preserve the S election for the WTI shares owned by the trust.
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Varto Company has 11,200 units of its product in inventory that it produced last year at a cost of $154,000. This year's model is better than last year's, and the 11,200 units cannot be sold at last year's normal selling price of $41 each. Varto has two alternatives for these units: (1) They can be sold as is to a wholesaler for $123,200 or (2) they can be processed further at an additional cost of $209,300 and then sold for $324,800. (a) Prepare a sell as is or process further analysis of income effects. (b) Should Varto sell the products as is or process further and then sell them? (a) Sell or Process Analysis Sell As Is Process Further Revenue Costs Income $ 0 $ 0 Incremental income (loss) to sell as is (b) The company should:
The company should: Based on the sell or process analysis, the income from processing further and selling the units is $115,500, while company income from selling the units as is results in a loss of $30,800. Therefore,
the company should choose to process the units further and then sell them. This decision will result in a positive income of $115,500, which is higher than the loss incurred by selling the units as is. Processing the units further allows the company to generate higher revenue and offset the additional cost, resulting in a net positive income. (a) Sell or Process Analysis: Sell As Is: Revenue from selling as is = $123,200 Cost of production = $154,000 Income from selling as is = Revenue - Cost = $123,200 - $154,000 = -$30,800 (a loss) Process Further: Revenue from inventory processing further and selling = $324,800 Additional cost of processing = $209,300 Income from processing and selling = Revenue - Additional Cost = $324,800 - $209,300 = $115,500
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What is the present value of $5,000 you will receive in year 5 if interest rate is 4% compounded annually(Enter the final answer as a positive number and round your answer to 2 decimals) ?
I purchased land 10 years ago for $9,900 per acre. If he could have alternately invested the money at 8 percent per year, what price per acre must I receive today to break even with his opportunity (required) rate (Enter the final answer as a positive number and round your answer to 2 decimals) ?
What will be the value of 1,000 in 6 years if interest rate is 4% compounded quarterly (Enter the final answer as a positive number and round your answer to 2 decimals) ?
The value of $1,000 in 6 years, with an interest rate of 4% compounded quarterly, will be approximately $1,268.24.
Present Value Calculation:To calculate the present value of $5,000 you will receive in year 5, we need to discount the future amount back to the present using the interest rate of 4% compounded annually.
PV = FV / (1 + r)^n
Where:
PV = Present Value
FV = Future Value
r = Interest rate
n = Number of years
Plugging in the given values:
PV = $5,000 / (1 + 0.04)^5
PV = $5,000 / (1.04)^5
PV ≈ $4,132.04
The present value of $5,000 you will receive in year 5, with an interest rate of 4% compounded annually, is approximately $4,132.04. This means that if you want to have the same value of $5,000 in year 5, given the interest rate, you would need to have $4,132.04 in the present.
The present value of the future amount is $4,132.04. This calculation helps determine the worth of a future sum of money in today's terms, considering the time value of money and the interest rate.
Break-even Price Calculation:
To calculate the price per acre that you must receive today to break even with the alternative investment opportunity at an 8% interest rate, we need to use the concept of present value.
Break-even Price = Purchase Price / (1 + r)^n
Where:
Break-even Price = Price per acre today
Purchase Price = Initial purchase price per acre ($9,900)
r = Interest rate (8%)
n = Number of years (10)
Plugging in the given values:
Break-even Price = $9,900 / (1 + 0.08)^10
Break-even Price = $9,900 / (1.08)^10
Break-even Price ≈ $4,584.41
To break even with the alternative investment opportunity at an 8% interest rate, the price per acre today should be approximately $4,584.41. This means that if you can sell the land for this price per acre, you would achieve the same return as if you had invested the money at an 8% interest rate.
To break even with the alternative investment opportunity at an 8% interest rate, you should receive approximately $4,584.41 per acre today. This calculation helps assess the opportunity cost of holding the land and determines the minimum price needed to achieve the same return as the alternative investment.
Value Calculation after Compounding Quarterly:
To calculate the value of $1,000 in 6 years with a 4% interest rate compounded quarterly, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = Future value
P = Present value ($1,000)
r = Annual interest rate (4%)
n = Number of compounding periods per year (4, quarterly)
t = Number of years (6)
Plugging in the given values:
A = $1,000(1 + 0.04/4)^(4*6)
A = $1,000(1 + 0.01)^24
A ≈ $1,000(1.01)^24
A ≈ $1,269.71
The value of $1,000 in 6 years, with a 4% interest rate compounded quarterly, is approximately $1,269.71. This means that if you invest $1,000 at a 4% interest rate compounded quarterly, it will grow to around $1,269.71 after 6 years.
In conclusion, if you receive $5,000 in year 5 and the interest rate is 4% compounded annually, the present value of that amount is approximately $4,132.04. This means that the current worth of receiving $5,000 in year 5, considering the time value of money and the interest rate, is around $4,132.04.
Furthermore, if you purchased land 10 years ago for $9,900 per acre and could have alternatively invested the money at an 8% interest rate per year, you would need to receive approximately $4,584.41 per acre today to break even with the alternative investment opportunity. This break-even price ensures that the return from selling the land matches the return that could have been achieved by investing in the alternative opportunity.
Lastly, if you have $1,000 and the interest rate is 4% compounded quarterly, the value of that amount after 6 years would be approximately $1,269.71. This demonstrates the growth of the investment when compounded quarterly at a 4% interest rate over the given time period.
These calculations highlight the importance of considering the time value of money and the impact of compounding when evaluating the present value, break-even price, and future value in various financial scenarios
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Fowler is expected to pay a dividend of $1.53 one year from today and $1.68 two years from today. The company has a dividend payout ratio of 45 percent and the PE ratio is 17.55 times. If the required return on the company's stock is 10.5 percent, what is the current stock price?
The current stock price of Fowler is $25.68. If the required return on the company's stock is 10.5 percent, what is the current stock price
To calculate the current stock price, we use the Dividend Discount Model (DDM). First, we calculate the present value of each dividend using the required return of 10.5%. Then, we apply the dividend payout ratio of 45% to find the retained earnings for each year. Next, we calculate the future dividends by multiplying the retained earnings by the payout ratio. Finally, we calculate the present value of the future dividends and divide it by the PE ratio of 17.55 to find the current stock price, which is $25.68.
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After running an ABC analysis, you realize that the X130, your
company's flagship product, is undercosted by $200. List two
reasons why this is a bad thing.
Undercosting a flagship product like the X130 can result in incorrect pricing decisions and distorted profitability analysis, which can have detrimental effects on a company's financial performance and decision-making processes.
Undercosting a product like the X130 by $200 can have negative implications for a company. Here are two reasons why this is considered a bad thing:
1. Incorrect pricing decisions: Undercosting a product means that its actual production costs are higher than what is being allocated to it. This can lead to inaccurate pricing decisions, as the product may be priced too low based on its perceived cost. As a result, the company may be selling the product at a loss or not generating enough profit to cover its true costs. This can impact the company's overall profitability and sustainability in the long run.
2. Distorted profitability analysis: Accurate costing is crucial for assessing the profitability of different products or product lines. When a flagship product like the X130 is undercosted, it distorts the profitability analysis. The company may mistakenly perceive the product as highly profitable or more profitable than it actually is. This can lead to misallocation of resources, as the company may prioritize and invest more in a product that is not generating the expected level of profit. It can also impact strategic decision-making, such as product mix optimization or resource allocation, based on inaccurate profitability assessments.
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1: According to the empirical literature, what is the approximate value of the lowest estimate of the which of the following factors appears to play the most important role in generating the male-male-female wage gap after having controlled for factors that might explain it?
A: About 20 % lower for females
B: About 10 % lower for females
C: About 40 % lower for females
D: About 33 % lower for females
E: No major differential
2: All of the following are associated with various theories of discrimination with the exception of:
A: demand based
B: Choices of working patterns that workers make that might influence their productivity
C: supply based
D: non-competitive labour markets
E: Human capital theory
3: Within the framework of the Oaxaca decomposition, the basic approach to analyzing whether there exists wage discrimination against women is to:
A: compare the actual mean wage of women to the actual mean wage of men
B: compare the actual wage of women to the predicted wage that they would earn given female attributes and coefficients from the male equation.
C: compare the actual wage of women to the predicted wage that they would earn given male attributes and coefficients from the male equation.
D: compare the actual wage of women to the predicted wage that they would earn given female attributes and coefficients from the female equation.
E: search for anecdotal cases of low-paid women that appear to be affected by discrimination
The correct option is 1. B: About 10 % lower for females play the most important role in generating the male-male-female wage gap after having controlled for factors. 2. B: Choices of working patterns that workers make that might influence their productivity 3. ' The basic approach to analyzing whether there exists wage discrimination against women is to' D: compare the actual wage of women to the predicted wage that they would earn given female attributes and coefficients from the female equation.
1. The question is asking about the factor that plays the most important role in generating the male-female wage gap after controlling for other factors. According to the empirical literature, the lowest estimate for this factor is about 10% lower wages for women compared to men.
2. The question is asking for the exception among various theories of discrimination. All of the options except for B, which is about the choices of working patterns made by workers that might influence their productivity, are associated with different theories of discrimination.
3. The Oaxaca decomposition is a method used to analyze wage discrimination against women. The basic approach is to compare the actual wage of women to the predicted wage that they would earn, given female attributes and coefficients from the female equation. Therefore, the answer is D.
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Find the accumulated amount after 9 years if $1,900 is invested at 7% per year for each compounding period below. (Round your answers to the nearest cent.)
(a) annually
(b) semiannually
(c) quarterly
(d) monthly
(a) Annually: $[tex]1,900(1 + 0.07)^9[/tex]≈ $3,759.29
(b) Semiannually: $[tex]1,900(1 + 0.07/2)^(^2^\times^9^)[/tex] ≈ $3,800.14
(c) Quarterly: $[tex]1,900(1 + 0.07/4)^(^4^\times^9^)[/tex]≈ $3,813.65
(d) Monthly: $[tex]1,900(1 + 0.07/12)^(^1^2^\times^9^)[/tex] ≈ $3,819.20
To calculate the accumulated amount after 9 years with different compounding periods, we can use the compound interest formula:
[tex]A = P(1 + r/n)^(^n^t^)[/tex]
Where:
A = Accumulated amount
P = Principal amount (initial investment)
r = Annual interest rate (in decimal form)
n = Number of compounding periods per year
t = Number of years
Given:
Principal amount (P) = $1,900
Annual interest rate (r) = 7% = 0.07
(a) Annually (n = 1):
A = 1900(1 + 0.07/1)^(1*9)
A = 1900(1 + 0.07)^9
A = 1900(1.07)^9
A ≈ $3,295.55
The accumulated amount after 9 years with annual compounding is approximately $3,295.55.
(b) Semiannually (n = 2):
A = 1900(1 + 0.07/2)^(2*9)
A = 1900(1 + 0.035)^18
A ≈ $3,313.82
The accumulated amount after 9 years with semiannual compounding is approximately $3,313.82.
(c) Quarterly (n = 4):
A = 1900(1 + 0.07/4)^(4*9)
A = 1900(1 + 0.0175)^36
A ≈ $3,326.01
The accumulated amount after 9 years with quarterly compounding is approximately $3,326.01.
(d) Monthly (n = 12):
A = 1900(1 + 0.07/12)^(12*9)
A = 1900(1 + 0.005833)^108
A ≈ $3,330.60
The accumulated amount after 9 years with monthly compounding is approximately $3,330.60.
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FILL THE BLANK.
a(n) ______-to-read resumé has clear headings and good formatting with simple fonts and two columns, bullet points, and short pieces of organized information.
easy to-read resumé has clear headings and good formatting with simple fonts and two columns, bullet points, and short pieces of organized information.
An easy-to-read resumé refers to a document that is designed to be visually appealing and quickly scannable for employers or recruiters. It utilizes clear headings to categorize different sections of the resumé, such as personal information, professional experience, education, and skills.
Good formatting techniques are employed to ensure readability, such as appropriate line spacing, consistent alignment, and proper use of white space.
Simple fonts are chosen to maintain readability and avoid distractions. The use of two columns can help organize information more efficiently, particularly in the case of longer resumés. Bullet points are used to highlight key achievements, responsibilities, or skills, making it easier for employers to quickly grasp the relevant information.
Short, concise phrases or sentences are employed to present information in an organized manner, providing a snapshot of the candidate's qualifications and experiences.
By incorporating these elements, an easy-to-read resumé enhances the chances of capturing the attention of employers, allowing them to quickly assess the candidate's suitability for a particular role.
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when should you write the introduction to a business report
The introduction to a business report should be written after conducting the necessary research and analysis for the report.
The introduction to a business report serves as an overview of the report's purpose, scope, and key findings. It provides the reader with a clear understanding of what to expect from the report. While it is important to have a general idea of the report's content before starting the introduction, writing it after conducting the necessary research and analysis allows for a more informed and accurate introduction.
By conducting research and analysis first, you gain insights and gather data that will shape the content and focus of the report. This enables you to introduce the report in a concise and compelling manner, highlighting the main objectives, context, and relevance of the report's findings. Writing the introduction after the research phase ensures that the content accurately reflects the actual report, allowing you to present a more coherent and cohesive overview to the reader.
Additionally, writing the introduction after the research phase enables you to identify any potential gaps in the information or areas that need further exploration. It allows you to align the introduction with the main body of the report, ensuring that it accurately sets the stage for the findings and recommendations presented later on.
In summary, it is advisable to write the introduction to a business report after conducting the necessary research and analysis. This approach ensures that the introduction accurately reflects the content of the report and effectively engages the reader by providing a clear overview of the report's purpose, scope, and key findings.
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