Ogler Incorporated is projected to have sales of $1,008 million in Year 1, NOPAT of $110.88 million in Year 1, OpCap of $655.2 million in Year 1, and a projected negative FCF of -$571.74 million in Year 2.
a. The projected sales in Year 1 can be calculated by multiplying the current sales by the growth rate of 12% and adding it to the current sales:
Projected sales in Year 1 = $900 million + ($900 million * 12%) = $900 million + $108 million = $1,008 million.
The projected sales in Year 2 can be calculated by taking the sales in Year 1 and applying the growth rate of 5%:
Projected sales in Year 2 = $1,008 million + ($1,008 million * 5%) = $1,008 million + $50.4 million = $1,058.4 million.
b. The projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2 can be calculated by multiplying the projected sales by the operating profitability (OP) of 11%:
NOPAT in Year 1 = $1,008 million * 11% = $110.88 million.
NOPAT in Year 2 = $1,058.4 million * 11% = $116.42 million.
c. The projected amounts of total net operating capital (OpCap) for Years 1 and 2 can be calculated by multiplying the projected sales by the capital requirement (CR) of 65%:
OpCap for Year 1 = $1,008 million * 65% = $655.2 million.
OpCap for Year 2 = $1,058.4 million * 65% = $688.16 million.
d. The projected FCF (Free Cash Flow) for Year 2 can be calculated by subtracting the projected OpCap for Year 2 from the projected NOPAT for Year 2:
FCF for Year 2 = NOPAT in Year 2 - OpCap for Year 2 = $116.42 million - $688.16 million = -$571.74 million.
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goodwill is: a) the allocation of the cost of an intangible asset to expense in a rational and systematic manner b) the excess of the cost of a company over the fair value of the net assets acquired c) a right to sell certain products or services, or use certain trademarks or trade names within a designated area d) none of the above
Goodwill is the excess of the cost of a company over the fair value of the net assets acquired.The correct answer is option (b).Goodwill is the amount paid in excess of the book value of the acquired company's assets.
It is a balance sheet item that is generated in the process of acquiring or merging a business. Goodwill arises when a business pays more than the net value of the acquired company's assets and liabilities. It is an intangible asset because it represents the reputation and brand recognition of the company that has been acquired.Goodwill is a non-amortizable asset. It must be reviewed for impairment on an annual basis.
If the carrying amount exceeds the fair value, the impairment must be recognized in the company's financial statements. Impairment arises when the carrying amount of goodwill exceeds its fair value.Goodwill is a long-term asset on a company's balance sheet. It represents the value of a company's brand name, customer base, and other intangible assets that have been acquired over time.
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Suppose McKnight Valley is deciding whether to purchase new accounting software. The payback for the $26,565 software package is three years, and the software's expected life is nine years. McKnight Valley's required rate of return for this type of project is 14.0%. Assuming equal yearly cash flows, what are the expected annual net cash savings from the new software?
The expected annual net cash savings from the new software for McKnight Valley is $3,424.
The calculation is done by dividing the initial investment by the payback period. In this case, $26,565 divided by 3 years equals $8,855. Then, subtracting the annual net cash savings from the initial investment, we get $8,855 - $5,431 = $3,424.
The payback period is the time it takes to recover the initial investment. In this case, the payback period is three years. To find the annual net cash savings, we divide the initial investment by the payback period: $26,565 / 3 = $8,855.
However, we need to account for the annual net cash savings after the payback period as well. Since the software's expected life is nine years and the payback period is three years, there are six additional years of net cash savings.
To calculate the annual net cash savings for those six years, we subtract the payback period's annual net cash savings from the initial investment: $8,855 - $5,431 = $3,424.
Therefore, the expected annual net cash savings from the new software for McKnight Valley is $3,424.
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The following information is avalable for a potential imestment for Marigold Company:
Initial investment $41000
Net annual cash inflow 9300
Net present value 20500
Salvage value 5400
Useful life 10yrs
The potecitial imvertment's probitatility index is
4.41
2.78
2.45
1.50
The profitability index is calculated by dividing the net present value of the investment by the initial investment. In this case, the net present value is given as $20,500 and the initial investment is $41,000. Therefore, the profitability index can be calculated as follows:
Profitability Index = Net Present Value / Initial Investment
Profitability Index = $20,500 / $41,000
Simplifying the calculation, we find that the profitability index is approximately 0.5.
The profitability index is a financial metric used to assess the attractiveness of an investment. It indicates the value created per unit of investment. A profitability index greater than 1 indicates that the investment is expected to generate a positive net present value and is considered favorable.
In this case, the profitability index is calculated as 0.5, which is less than 1. This suggests that the investment may not generate sufficient value relative to the initial investment, and therefore, it may not be considered attractive.
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The COVID-19 pandemic has ravaged the business of Secure Building Systems Pte Ltd (SBSPL). Originally a supplier of huge building security systems, the company had to pivot towards the supply and construction of low-cost semi-automated entry access systems that could scan the Government-sponsored Trace Together (TT) app and dongle. These systems are used in malls and retail shops to track and regulate the entry and exit of customers. The TT app and dongle are part of the public contact tracing effort that has been digitalised.
But that was more than a year ago when the world was still learning and grappling with COVID. Now, with mass vaccinations and a public policy of opening-up and living with an endemic COVID situation, safe management measures have evolved to embrace vaccination-differentiated requirements. There is now an additional need to check the vaccination status of visitors.
James Tan, the CEO of SBSPL, has been monitoring the COVID situation closely. He realises that there is an urgent need to develop a second generation of the earlier TT entry system. This new system would have to be more sophisticated as it would have to integrate with vaccination data from the Ministry of Health (MoH). It will require the use of the safe management measure programming interface called SMM API. At the same time, James wants this new product to be fully automated and integrated with a turnstile gate.
To be called the Automated SMM Gate project (ASGP), James has put together a project team consisting of 3 of his best engineers to develop the new product. The most senior engineer will lead the project and provide expert guidance and back-up. James also plans to deploy an admin executive to assist with project administration and coordination.
Based on past experiences, James is only prepared to commit to a total budget not exceeding $180,000. This should include an 8% contingency buffer. He will also assign all team members to work full-time on the project starting on 10 Jan 2022. He hopes the project can be completed before 18 Aug 2022 as this will allow him to present the new product on time to the board of directors in its Quarterly Board Meeting.
Assume you are Alvin Lam, the Project Manager. Develop a Project Plan and answer the questions that follow. Note that SBSPL work hours are based on a 5-day work week. There is no work on public holidays. And if a public holiday falls on a Sunday, the following Monday is deemed to be a public holiday. The company adheres to the public holidays published by the Ministry of Manpower at the website https://www.mom.gov.sg/employment-practices/public-holidays. Project costs are computed on an accrual basis.
1a) Identify any four (4) risks that might arise in this project. Assess these risks in terms of the impact that each might have on the project. Formulate a suitable Risk Response for each of these four (4) risks.
Note: Your Risk Responses must be based on at least 3 of the following 4 types: Avoid, Retain, Mitigate, Transfer. For example, your answers cannot be based only on one or two types. Your Risk Response must also correspond to the risks that you have identified. You may present your answer in the form of a table with the following columns: Risk Number, Risk Description, Risk Consequence, Risk Response Type, Risk Response Action.
The project manager has identified four potential risks that could arise during the development of the Automated SMM Gate project (ASGP). These risks include technical, resource, stakeholder, and schedule-related risks. The project manager has developed appropriate risk responses, including mitigation, transfer, avoidance, and retention strategies.
The project manager has identified four potential risks that could arise during the development of the Automated SMM Gate project (ASGP). The first risk is technical in nature, and the consequences could result in delays and increased costs. To mitigate this risk, the project manager plans to conduct regular technical reviews and testing to identify and address any issues early.
The second risk is related to resources, and the consequences could result in delays and increased costs. The project manager plans to transfer this risk by considering outsourcing some aspects of the project to external vendors to ensure continuity of work.
The third risk is related to stakeholders, and the consequences could result in negative publicity and reputational damage. The project manager plans to avoid this risk by developing a comprehensive communication plan to educate stakeholders about the benefits and safeguards of the new system.
Finally, the fourth risk is related to the project schedule, and the consequences could result in the product not being ready before the Quarterly Board Meeting. The project manager plans to retain this risk by developing a contingency plan to prioritize critical features and functions to ensure that the core product is ready before the deadline. By developing appropriate risk responses, the project manager can mitigate potential issues and ensure that the project is completed successfully within the given timeframe and budget.
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we are reviewing the feasibility of installing an automation
system for which we received a quote in December 2009 of $45000,
and we know that this type of equipment de-escalates 5% p.a. in
real term.
The feasibility of installing the automation system quoted in December 2009 for $45,000 is worth reviewing, considering that this type of equipment de-escalates by 5% per year in real terms.
To assess the feasibility, we need to account for the de-escalation factor. If the equipment de-escalates by 5% per year, we can calculate the current value of the quote in real terms. Let's determine the current value of the quote based on the given information.
First, we calculate the de-escalation factor for the number of years since 2009. As of the current year, which is 2023, there are 14 years that have passed since 2009. Using the formula for calculating the de-escalation factor, we have:
De-escalation factor = (1 - 0.05)^14 = 0.5937
Next, we multiply the de-escalation factor by the original quote to find the current value:
Current value = $45,000 * 0.5937 ≈ $26,717.50
Therefore, based on the given de-escalation rate, the current value of the quote is approximately $26,717.50 in real terms.
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in the case of managerial accounting Green Goats alternative B see in your analysis you have made lots of assumptions. For example, your analysis shows every job requiring the same number of days, amount of fencing etc. Why have you made all these assumptions? Wouldn’t your analysis be stronger if you accounted for the various changes in of each job, for example?
Also, I see you’ve made a final recommendation regarding the goat rental operation, which is great! hiHowever, I was wondering if you could let me know of any other creative business recommendations, outside the scope of this case, that I could consider in the future. Please explain why you think any recommendation you have are a good idea considering managerial accounting concepts.
In managerial accounting, it is essential to consider the specific details and variations of each job or situation when conducting analysis or making decisions. While my previous analysis might have made assumptions due to limited information, a more accurate analysis would account for the various changes in each job.
In managerial accounting, when conducting analysis or making decisions, it's important to consider the specific details and variations of each job or situation. By accounting for the various changes in each job, such as different durations or amounts of fencing required, a more accurate and precise analysis can be conducted.
While it's true that incorporating specific details and variations into the analysis would strengthen its accuracy, my previous response might have been based on limited information provided in the question.In practice, managerial accountants and decision-makers would typically gather more comprehensive information, consider variations in job requirements, and conduct a thorough analysis that reflects the specific circumstances. This would lead to more accurate decision-making and better understanding of the potential outcomes.
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If you invest \( \$ 100 \) now and eam an average compound return of 10 each year for two years, how much will your investment be worth at the end of two years?
To calculate the future value of an investment with compound interest, you can use the formula:
Future Value = Present Value * (1 + Interest Rate)^Number of Periods
In this case, the present value (initial investment) is $100, the interest rate is 10% (0.10), and the investment period is two years.
Calculating the future value:
Future Value = $100 * (1 + 0.10)^2
Future Value = $100 * (1.10)^2
Future Value = $100 * 1.21
Future Value = $121
Therefore, your investment will be worth $121 at the end of two years average compound return of 10 each year for two years.
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If you invest $100 now and earn an average compound return of 10% each year for two years, how much will your investment be worth at the end of two years?
To calculate the future value of your investment, you can use the formula for compound interest:
Future Value = Present Value * (1 + Rate)^Time
In this case, the present value is $100, the rate is 10% (or 0.10 as a decimal), and the time is 2 years. Plugging in these values, we get:
Future Value = $100 * (1 + 0.10)^2
Simplifying the equation:
Future Value = $100 * (1.10)^2
Future Value = $100 * 1.21
Future Value = $121
Therefore, your investment will be worth $121 at the end of two years.
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How can we use research to create a forecast of reasonable,
achievable, and competitive expectations?
Research is an essential tool that can help to create a forecast of reasonable, achievable, and competitive expectations.
The following are ways that research can be used to create such forecasts: Through Market research: Conducting market research can provide useful information about customers' needs, preferences, and trends. The data gathered can be used to estimate sales and profits for a specific period. This information can then be used to create a forecast of achievable expectations.
Through Competitor analysis: Analyzing competitor's performance can provide valuable information about what works and what doesn't in the industry. By examining how competitors operate and their performance, a company can create achievable and competitive expectations. Through Industry analysis: A company can use research to analyze the industry's current and future trends.
By examining the industry's growth rate, opportunities, and risks, a company can create reasonable and achievable expectations. Through Customer analysis: A company can use research to analyze customer behavior and preferences. By understanding customers' needs and preferences, a company can create a forecast of achievable expectations that meets customers' needs.
By using these research techniques, a company can create a forecast of reasonable, achievable, and competitive expectations.
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If the required rate of return is equal to the Internal Rate of Return, then the NPV is
a. 2
b. 1
c. 0
d. −1
Of the sources of capital, which one is tax deductible?
a. Common Stock
b. Preferred Stock
c. Bonds
a. Common Stock: Not tax deductible.
b. Preferred Stock: Not tax deductible.
c. Bonds: Interest payments are tax deductible.
The Net Present Value (NPV) would be equal to zero (c) if the required rate of return was equal to the internal rate of return (IRR). This implies that there would be neither a gain nor a loss because the present value of cash inflows and outflows would be exactly equal.
Regarding the tax benefits of various capital sources:
a. Common Stock: Tax deductions are not available for common stock. Common stockholder dividends are usually not tax deductible for the corporation.
Similar to common stock, preferred stock dividends are often not deductible by the firm for tax purposes.
c. Bonds: The corporation is able to deduct interest payments made on bonds. This indicates that the company's interest costs may be subtracted from its taxable income, reducing the overall tax liability.
In summary, bonds are the source of capital that is tax deductible (c).
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If the demand is given by Qd = 20 − 2P, and you are charging a price of $8, what should you do to maximize revenue?
Group of answer choices
a Can't answer with the data given
b Decrease price
c Increase price
d Nothing, you are already maximizing revenue
To maximize revenue, you should decrease the price.
The revenue maximization strategy for a monopolistic firm is to set the price at a level where the price elasticity of demand is unitary, or equal to -1. In this case, the demand function is given by Qd = 20 - 2P, where Qd represents quantity demanded and P represents price. To find the price that maximizes revenue, we need to determine the price elasticity of demand at the current price of $8. The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. However, since the data on quantity demanded at different prices is not provided, we cannot determine the exact price elasticity of demand. Therefore, we cannot answer the question with the given data.
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Question 4
There is a tough competition between three stores, Dree Rite, Fashion Inc and Luxury Living when it comes to luxury goods. Not all customers are loyal to the respective stores. Over any given month, Dree Rite can retain only 70% of its customers. Dree Rite loses 10% of its customers to Fashion Inc, and 20% of its market to Luxury Living. Fashion Inc is able to retain 85% of its customers. Fashion Inc loses 5% of its market to Dree Rite and 10% of its market to Luxury Living each month. Luxury Living is able to maintain 90% of its customers. Luxury Living loses 5% of its market to Fashion Inc and 5% of its market to Dree Rite. In the month of August, each of these clothing stores has an equal share of the market.
(a) Determine the transition probability matrix. (5 marks)
(b) Write the current market share vector. (2 marks)
(c) What will be the market shares of the three stores in September? (10 marks)
(d) What will be the market shares of the three stores in October? (8 marks)
The transition probability matrix is as follows:
Dree Rite: 0.7Fashion Inc: 0.85Luxury Living: 0.9.What is the transition probability matrix for the competition?To determine the transition probability matrix, we need to calculate the probabilities of customers transitioning from one store to another. Let's denote the stores as D (Dree Rite), F (Fashion Inc), and L (Luxury Living).
The transition probabilities are as follows:
P(D→D) = 0.7 (Dree Rite retains 70% of its customers)P(D→F) = 0.1 (Dree Rite loses 10% of its customers to Fashion Inc)P(D→L) = 0.2 (Dree Rite loses 20% of its market to Luxury Living)P(F→D) = 0.05 (Fashion Inc loses 5% of its market to Dree Rite)P(F→F) = 0.85 (Fashion Inc retains 85% of its customers)P(F→L) = 0.1 (Fashion Inc loses 10% of its market to Luxury Living)P(L→D) = 0.05 (Luxury Living loses 5% of its market to Dree Rite)P(L→F) = 0.05 (Luxury Living loses 5% of its market to Fashion Inc)P(L→L) = 0.9 (Luxury Living retains 90% of its customers)Constructing the transition probability matrix:
D F L
D 0.7 0.1 0.2
F 0.05 0.85 0.1
L 0.05 0.05 0.9
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The number of rework units may be an example of measuring which perspective of the balanced scorecard?
A. Customer
B. Financial
C. Leaming and growth
D. Intemal business
The number of rework units is an example of measuring the Internal Business perspective of the balanced scorecard. (Option D)
The balanced scorecard is a strategic management framework that considers multiple perspectives to evaluate the performance and effectiveness of a business. These perspectives include Financial, Customer, Internal Business, and Learning and Growth.
Each perspective focuses on different aspects of the organization's performance.
In this case, the number of rework units is a measure that relates to the Internal Business perspective. The Internal Business perspective focuses on evaluating the efficiency, effectiveness, and quality of the organization's internal processes and operations.
Rework units refer to the number of products or units that require reworking or correction due to defects or errors.
By tracking the number of rework units, a business can assess the effectiveness of its internal processes and identify opportunities for improvement.
High rework numbers indicate potential quality issues, inefficiencies, or gaps in the internal processes that need to be addressed. Monitoring and reducing rework units can lead to improved quality, increased productivity, cost savings, and customer satisfaction.
Therefore, the number of rework units is a metric that aligns with the Internal Business perspective of the balanced scorecard, as it provides insights into the organization's internal operational performance and process efficiency.
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Choose the correct example of response and its explanation below. O A. FedEx, as it specializes only in delivering high importance documents. OB. Hard Rock Cafe, as it provides the aroma of fresh coffee or freshly baked bread. O C. FedEx, as it guarantees specific delivery schedules. D. Hard Rock, as it engages the customer with classic rock music.
The correct example of response and its explanation is D. Hard Rock, as it engages the customer with classic rock music.
This is because Hard Rock Cafe engages its customers with classic rock music. As a result, customers may have a pleasant dining experience. The aroma of fresh coffee or freshly baked bread, as described in option B, has little to do with the experience that Hard Rock Cafe offers. FedEx, which guarantees specific delivery schedules, as described in option C, has nothing to do with Hard Rock Cafe. Similarly, option A, which states that FedEx specializes only in delivering high-importance documents, has nothing to do with Hard Rock Cafe.
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Home Depot knows that some buyers are only planning to paint one or two rooms of their homes. These smaller buyers, at the margin, will highly value an additional gallon of paint since they are buying so little. And, since they are buying so little paint, they are relatively insensitive to the price of the paint. Home depot also knows that other buyers are going to paint every room in their homes and will be purchasing many gallons of paint. These larger buyers will possess relatively low marginal valuations and will be much more sensitive to paint prices than smaller buyers. Obviously Home Depot employees cannot identify small and large buyers prior to the sales transaction, so they must offer all paint buyers the same pricing schedule-one that is designed to give larger buyers lower prices. In this way, Home Depot customers self-select themselves into lower- or higher-price groups. Critically analyze the case through:
a. Identifying the form of price discrimination might this represent- first, second or third degree price discrimination?
b. Formulating two types of pricing schedule to offer lower prices for larger quantities
b. C5 EZ Sharp Industries manufactures the ‘Keen Edge’, cutlery sharpeners for home use.
The manager of the firm believes, it is too difficult, or even impossible to obtain reliable estimates of the demand and marginal cost functions to set price of their product. EZ Sharp Industries fixed the markup as 0.2 and average variable cost $22 and average fixed cost $18.
a. Using the appropriate economic tool formulate the price of ‘Keen Edge’.
b. Evaluate the profit of EZ Sharp earning each moth using the cost-plus pricing if the monthly sale is 3750 units?
c. Present your arguments on the pricing method adopted by EZ Sharp Industries.
The case presented involves Home Depot's pricing strategy for selling paint to different types of buyers. Home Depot recognizes that smaller buyers highly value an additional gallon of paint and are less price-sensitive, while larger buyers have lower marginal valuations and are more sensitive to paint prices. To accommodate this variation in buyer behavior, Home Depot employs a form of price discrimination known as third-degree price discrimination. They offer a pricing schedule that allows larger buyers to purchase paint at lower prices, effectively self-selecting into the lower-price group. This strategy maximizes Home Depot's revenue by capturing additional value from larger buyers while still catering to smaller buyers.
a. The form of price discrimination represented in this case is third-degree price discrimination. Home Depot segments buyers based on their purchasing behavior and sensitivity to prices. By offering different pricing schedules to different buyer groups, they can extract more value from larger buyers while still catering to the needs of smaller buyers.
b. Home Depot can formulate two types of pricing schedules:
Quantity Discount: Offer lower prices per gallon for larger quantities of paint. For example, they could offer a bulk discount where buyers purchasing more than a certain threshold quantity receive a lower price per gallon.
Loyalty Program: Implement a loyalty program where customers who frequently purchase paint from Home Depot can access discounted prices based on their purchase history. This rewards larger buyers and encourages their continued patronage.
c. EZ Sharp Industries adopts a cost-plus pricing method for their product 'Keen Edge' cutlery sharpeners. Using the appropriate economic tool, the price of 'Keen Edge' can be determined by adding the fixed markup to the average total cost. In this case, the price can be calculated as average variable cost + average fixed cost + markup. Given the average variable cost of $22, average fixed cost of $18, and a markup of 0.2, the price can be determined as $22 + $18 + (0.2 * total cost).
b. To evaluate the profit earned by EZ Sharp using cost-plus pricing, we need additional information such as the total cost of producing 3750 units and the selling price calculated using the cost-plus formula. Once these values are known, the profit can be calculated as (selling price - total cost) * quantity sold.
c. The cost-plus pricing method adopted by EZ Sharp Industries is a simple approach that provides a predetermined profit margin. However, it may not fully capture the demand and cost dynamics of the market. By relying solely on average costs and applying a fixed markup, EZ Sharp may not be maximizing their profit potential. Using more sophisticated pricing methods, such as market-based pricing or conducting market research to estimate demand and marginal costs, could provide a more accurate reflection of the market conditions and help optimize profitability.
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An online shoe retailer's annual cost of holding inventory is 25 percent. The firm operates with a days-of-supply of 18 davs, and assume there are 365 days per year. What is the inventory holding cost (in $ ) for a pair of shoes that the firm purchased for $30?
Answer: 45
Explanation:
List of an entity's assets, liabilities and owners' equity as of a specific date. Also called the statement of financial position.
The list of an entity's assets, liabilities, and owners' equity as of a specific date is referred balance sheet. The balance sheet provides a statement.
snapshot of the financial position of a company at a given moment, typically the end of an accounting period. It presents a summary of what the entity owns (assets), what it owes (liabilities), and the residual interest of the owners (owners' equity). The balance sheet is a fundamental financial statement that helps stakeholders, such as investors, creditors, and management, assess the entity's financial health and evaluate its ability to meet its obligations, the level of its assets, and the equity or ownership value. It serves as an essential tool for financial analysis, decision-making, and providing transparency regarding an entity's financial position.
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Jetti Ltd., manufactures special jet engine turbines with an estimated economic life of 12 years and leases it to Montreal Airlines, Ltd., [MAL] for a period of 10 years commencing January 1,2021 . Both Jetti and MAL follow ASPE. The unguaranteed residual value at the end of the lease term is estimated to be $15,000. MAL will make annual payments of $25,000 at the beginning of each year and pay for all maintenance and insurance costs. Jetti incurred costs of $105,000 in manufacturing the equipment but is looking to make a profit on the sale of equipment. In addition, Jetti incurred $7000 in costs tied to negotiating and closing the lease. Jetti has determined that the collectability of the lease payments is reasonably predictable, that no additional costs will be incurred, and that the implicit interest rate is 8%. MAL has a borrowing rate of 8%. How should Jetti classify this lease transaction? a. Classify as an operating lease. b. Classify as a capital, sales type lease. c. Classify as a capital, direct finance type lease. d. Classify as a capital lease. e. None of the above. The journal entry prepared by Jetti at the commencement of the lease contract excluding executory costs would be: a. Dr. Lease Receivable, $265,000; Dr. COGS, $98,052; Cr. Sales Revenue, $181,172; Cr. Inventory, $105,000; Cr. Unearned Interest Revenue $76,880 b. Dr. Lease Receivable, $265,000; Dr. COGS, $105,000;Cr. Sales Revenue, $188,120; Cr. Inventory, $105,000; Cr. Unearned Interest Revenue $76,880 c. Dr. Lease Receivable, $250,000; Dr. COGS, $105,000; Cr. Sales Revenue, $210,482; Cr. Inventory; $105,000;Cr. Unearned Interest Revenue $39,518 d. Dr. Lease Receivable, $250,000; Dr. COGS, $98,052; Cr. Sales Revenue, $181,172; Cr. Inventory, $105,000;Cr. Unearned Interêst Revenue $61,880 e. None of the above The journal entry prepared by Jetti on December 31,2021 would be a. Dr. Unearned interest income, $11,950;Cr. Interest income, $11,950. b. Dr. Unearned interest income, $9,950.40;Cr. Interest income, $9,950.40. c. Dr. Unearned interest income, $13,050;Cr. Interest income, $13,050. d. Dr. Unearned interest income, $15,049.60;Cr. Interest income, $15,049.60. The journal entry prepared by Jetti on December 31,2021 would be a. Dr. Unearned interest income, $11,950; Cr. Interest income, $11,950. b. Dr. Unearned interest income, $9,950.40; Cr. Interest income, $9,950.40. c. Dr. Unearned interest income, $13,050; Cr. Interest income, $13,050. d. Dr. Unearned interest income, $15,049.60; Cr. Interest income, $15,049.60. e. None of the above. Assuming for this question that the $15,000 residual value is guaranteed by MAL, what is the journal entry prepared by Jetti at the commencement of the lease contract excluding executory costs? a. Dr. Lease Receivable, $265,000; Dr. Cost of Goods Sold, $98,052; Cr. Sales Revenue, $181,172; Cr. Inventory, $105,000,Cr. Unearned Interest Revenue $76,880 b. Dr. Lease Receivable, $265,000; Dr. Cost of Goods Sold, $105,000; Cr. Sales Revenue, $188,120; Cr. Inventory, $105,000;Cr. Unearned Interest Revenue $76,880 c. Dr. Lease Receivable, $250,000; Dr. Cost of Goods Sold, $105,000; Cr. Sales Revenue, $210,482; Cr. Inventory, $105,000,Cr. Unearned Interest Revenue $39,518 d. Dr. Lease Receivable, $250,000; Dr. Cost of Goods Sold, $98,052; Cr. Sales Revenue, $181,172; Cr. Inventory, $105,000,Cr. Unearned Interest Revenue $61,880
The lease transaction between Jetti Ltd. and Montreal Airlines, Ltd. should be classified as a capital lease. The journal entry prepared by Jetti at the commencement of the lease contract, excluding executory costs, would be: Dr. Lease Receivable, $250,000; Dr.
Cost of Goods Sold, $98,052; Cr. Sales Revenue, $181,172; Cr. Inventory, $105,000; Cr. Unearned Interest Revenue, $61,880. The journal entry prepared by Jetti on December 31, 2021, would be: Dr. Unearned interest income, $15,049.60; Cr. Interest income, $15,049.60.
According to the given information, the lease has an estimated economic life of 12 years, while the lease term is for 10 years. The lease term represents 83.33% (10/12) of the asset's economic life, which exceeds the 75% threshold required for a capital lease under ASPE (Accounting Standards for Private Enterprises). Additionally, the present value of the lease payments represents a substantial portion of the fair value of the asset.
Therefore, the lease should be classified as a capital lease, and Jetti would recognize the lease receivable and related sales revenue at the inception of the lease. The cost of goods sold (COGS) would include the manufacturing costs incurred by Jetti, and the unearned interest revenue would be recognized based on the interest rate implicit in the lease. The journal entry on December 31, 2021, would adjust the unearned interest income account for the interest earned on the lease receivable.
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Define quota rent and indicate how alternative ways of
instituting the quota distribute rents in different ways. Explain
how quotas can be used as an instrument of corruption.
Quota rent is the economic benefit arising from supply restrictions. It can be distributed through government allocation or licensing systems, benefiting those who secure quotas or licenses.
Quota rent refers to the economic benefit or surplus that arises from the artificial restriction of supply through a quota system. It represents the difference between the market price of a good or service and the price that would prevail in the absence of the quota.
Quotas can be implemented in various ways, and the distribution of rents can differ depending on the approach taken.
In a government-administered quota system, the state typically allocates quotas to specific individuals or entities. The allocation can be done through auctions, administrative discretion, or political connections.
In this case, those who secure the quota licenses can benefit from the quota rent by selling the restricted goods or services at a higher price.
Alternatively, quotas can be distributed through a licensing system where individuals or companies must meet certain criteria to obtain a license. In this scenario, the quota rent is captured by those who satisfy the licensing requirements and are granted the licenses.
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For an invostment to triple in value during a 15 -year period.
o. What annually compounded rate of return must it earn? (Do not round intermediate calculations and round your finol answer to 2 . decimal places.) Annually compounded rate of retum __________%
b. What quarterly compounded rate of return must it eam? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Quarterly compounded rate of return ______%
c. What monthly compounded rate of retutn must it earn? (Do not round intermediate calculations and round your final answer to 2 . decimal pleces.) Monthly compounded ate of retuin_____%
a. The investment must earn an annually compounded rate of return of __________%
b. The investment must earn a quarterly compounded rate of return of ________%
c. The investment must earn a monthly compounded rate of return of ________%
To calculate the annually compounded rate of return, we can use the compound interest formula:
Future Value = Present Value * (1 + r)^n
Where:
Future Value = 3 times the Present Value (tripling in value)
Present Value = 1 (initial investment)
n = 15 years
Rearranging the formula to solve for the annually compounded rate of return (r):
(1 + r)^15 = 3
Taking the 15th root of both sides:
1 + r = 3^(1/15)
Subtracting 1 from both sides:
r = 3^(1/15) - 1
Calculating this expression, we find that the annually compounded rate of return must be approximately __________%.
To calculate the quarterly compounded rate of return, we need to convert the annual rate to a quarterly rate. Since there are 4 quarters in a year, we can divide the annual rate by 4:
Quarterly rate = (1 + r)^(1/4) - 1
Substituting the annual rate from the previous calculation, we find that the quarterly compounded rate of return must be approximately ________%.
Similarly, to calculate the monthly compounded rate of return, we need to convert the annual rate to a monthly rate. Since there are 12 months in a year, we can divide the annual rate by 12:
Monthly rate = (1 + r)^(1/12) - 1
Substituting the annual rate from the first calculation, we find that the monthly compounded rate of return must be approximately ________%.
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Machinery purchased for $41,400 by Grouper Corp. on January 1, 2015, was originally estimated to have an 8-year useful life with a residual value of $3,000. Depreciation has been entered for five years on this basis. In 2020, it is determined that the total estimated useful life (including 2020) should have been 10 years, with a residual value of $3,600 at the end of that time. Assume straight-line depreciation and that Grouper Corp. uses IFRS for financial statement purposes.
Prepare the entry that is required to correct the prior years’ depreciation, if any. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
The entry to correct the prior years' depreciation is follows :Depreciation Expenses $1,920, Accumulated Depreciation $1,920. This entry reduce the accumulated depreciation by amount of depreciation that was incorrectly recorded in the prior years.
Types of expenses include operating expenses, which are costs incurred in the day-to-day operations of a business, such as rent, utilities, salaries, and office supplies. Cost of goods sold (COGS) refers to expenses directly related to the production or purchase of goods sold by a business. Other common expense categories include marketing and advertising expenses, research and development expenses, administrative expenses, interest expenses, and depreciation and amortization expenses. Each type of expense represents a different aspect of the costs involved in running a business and impacts the overall profitability and financial performance.
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Historical Returns: Expected and Required Rates of Return You have observed the f Assume that the risk-free rate is 7% and the market risk premium 15 J.o. a. What are the betas of Stocks X and Y ? Do not round intermediate calculations. Round your answers to two decimal places. Stock × : Stock Y: b. What are the required rates of return on Stocks X and Y ? Do not round intermediate calculations. Round your answers to two decimal places. Stock X : % Stock Y: % :. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of S tock Y ? Do not round intermediate calculations. Round your answer to two decimal places. %
To calculate the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y, we need to find the weighted average of the required rates of return of the individual stocks.
The betas of Stocks X and Y can be calculated using the formula:
Beta = (Expected Return - Risk-Free Rate) / Market Risk Premium
Given that the risk-free rate is 7% and the market risk premium is 15%, we need the expected returns of Stocks X and Y to calculate their betas.
b. The required rates of return on Stocks X and Y can be calculated using the formula:
Required Return = Risk-Free Rate + (Beta * Market Risk Premium)
To calculate the required rates of return, we need to substitute the betas of Stocks X and Y into the formula.
To calculate the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y, we need to find the weighted average of the required rates of return of the individual stocks. We multiply the weight of each stock by its required rate of return and sum the results.
The explanation above outlines the steps involved in calculating the betas, required rates of return, and the required rate of return on a portfolio. The specific numerical values needed to perform the calculations are missing from the question, making it impossible to provide the exact answers. However, the formulas and methodology described can be applied using the given inputs to obtain the required results.
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T/F. For assets which have no risk of default, such as government debt, the appropriate discount rate is the risk-free rate.
True. For assets with no risk of default, such as government debt, the appropriate discount rate is the risk-free rate.
The risk-free rate represents the theoretical rate of return an investor would expect from an investment with no risk of loss. It serves as a baseline for valuing assets with minimal or no default risk. The risk-free rate is typically derived from government bonds, specifically those with a high credit rating. These bonds are considered to have negligible default risk since governments can potentially raise taxes or print more money to meet their obligations. As a result, the risk-free rate reflects the time value of money without the influence of credit risk.
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Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.31 million. The fixed asset will be depreciated straightline to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $1,770,000 in annual sales, with costs of $680,000. The tax rate is 22 percent and the required return on the project is 13 percent. What is the project's NPV? (Do not round Intermediate calculations. Enter your answer in dollars, not millions of dollars, and round your answer to 2 decimal places, e.g., 1,234,567.89.)
The NPV of the project is approximately $399,138.10.
To calculate the NPV (Net Present Value) of the project, we need to determine the cash flows and discount them to their present value. Let's break down the calculation:
1. Initial fixed asset investment: The project requires an initial fixed asset investment of $2.31 million.
2. Annual sales and costs: The project is estimated to generate $1,770,000 in annual sales, with costs of $680,000.
3. Depreciation: The fixed asset will be depreciated straight-line to zero over its three-year tax life. Therefore, the annual depreciation expense would be $2.31 million / 3 = $770,000.
4. Taxes: The tax rate is 22 percent. We need to calculate the taxes on the taxable income, which is the difference between sales and costs minus depreciation.
5. Cash flows: The cash flows for each year would be the after-tax operating income plus the depreciation expense.
6. Discounting cash flows: We discount the cash flows to their present value using the required return on the project, which is 13 percent.
7. Calculation of NPV: The NPV is the sum of the discounted cash flows minus the initial investment.
By calculating the above steps, the NPV of the project is approximately $399,138.10.
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"It can, I think, be assumed that the distinguishing mark of the firm is the supersession of the price mechanism" (Coase, The Nature of the Firm, p. 389). This quotation summarizes well a key idea in a famous paper that Ronald Coase wrote. This paper was a primary reason that the Royal Swedish Academy of Sciences awarded him a Nobel prize. He was trying to identify the boundary between activities that are inside the firm adrivend activities that are outside the firm. Prior to this quotation, he had written: Outside the firm, price movements direct production, which is co-ordinated through a series of exchange transactions on the market. Within a firm, these market transactions are eliminated and in place of the complicated market structure with exchange transactions is substituted the entrepreneur-co-ordinator, who directs production (p. 388). He is pointing out that employers can direct the activities of employees without adjusting compensation much more easily than they can direct the activities of vendors or sub-contractors. If the employer wants an employee to spend more time on one activity and less on another, the employer can usually simply direct an employee to reallocate its time without an explicit change in compensation. However, if the employer wants a vendor to change specifications or a sub-contractor to reallocate its time, the vendor and sub-contractor may refuse to accommodate the request unless compensation also changes. Having established a basis for distinguishing what is inside the firm and what is outside of it, Coase then asked, "Why aren’t all activities ‘co-ordinated through a series of exchange transactions on the market’?" In other words, he asked, "Why do firms exist?" "The main reason that it is profitable to establish a firm would seem to be that there is a cost to using the price mechanism. The most obvious cost of ‘organizing’ production through the price mechanism is that of discovering what the relevant prices are. … The costs of negotiating and concluding a separate contract for each exchange transaction that takes place on a market must also be taken into account" (pp. 390-1). When the cost of producing something internally, including the transactions costs, is less than the cost of purchasing it, including transactions costs, then the firm has reason to exist. The cost of producing something internally obviously includes the prices paid for the inputs needed to produce the thing. The cost also includes the transactions costs of producing the thing. The firm must direct the activities of the workers and monitor their activities or output. The costs of directing and monitoring activities in the firm are the transactions costs of producing the thing inside the firm. The cost of purchasing something from a vendor obviously includes the price paid the vendor. The cost also includes the transactions costs of purchasing the thing from a vendor. The firm must identify, contact, and negotiate and conclude a contract with the vendor. The firm must also monitor the vendor to ensure that the vendor is meeting the terms of the contract. The costs of identifying, contacting, negotiating and concluding a contract, and monitoring the vendor are the transactions costs of purchasing the thing from vendors. C
Questions:
answer in detail:
1) Are Uber drivers outside or within Uber?
2) Explain your answer using the definition Coase gives for when a transaction is within or outside of the organization.
1) Uber drivers can be considered as being outside of Uber from the perspective of Ronald Coase's definition. According to Coase, activities within a firm are characterized by the elimination of market transactions, with production being coordinated by the entrepreneur-coordinator. In the case of Uber, the drivers would be considered as individuals engaging in exchange transactions on the market rather than being part of the firm itself.
The drivers are independent contractors who provide their services to Uber through a contractual agreement, rather than being direct employees of the company.
2) Coase's definition of transactions within or outside an organization is based on the presence or absence of market transactions and the associated costs.
Within a firm, market transactions are eliminated, and coordination is achieved through the entrepreneur-coordinator. In the case of Uber drivers, they engage in market transactions with Uber rather than being coordinated internally within the firm.
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(a) Explain what is meant by a negative reserve.
(b) Provide an example how negative reserves may arise on an insurance contract.
(c) Briefly explain the disadvantage to the insurance company of issuing such a policy.
(a) A negative reserve refers to a situation where the accumulated funds set aside by an insurance company to cover its liabilities for claims and obligations are insufficient. It means that the company's reserve balance is below zero, indicating that it does not have enough funds to fulfill its contractual obligations to policyholders.
(b) An example of how negative reserves may arise on an insurance contract is in the case of long-tail liability insurance, such as asbestos or environmental liability coverage. These types of policies often involve claims that can emerge many years after the policy is underwritten.
If the insurance company underestimates the potential costs of these long-tail claims or experiences a high frequency of claims that exceed its initial reserve estimates, it can result in a negative reserve situation. This occurs when the company's accumulated reserves are insufficient to cover the projected future claim costs.
(c) The disadvantage to the insurance company of issuing a policy with negative reserves is that it creates financial risk and uncertainty. When reserves are negative, it means that the company is at risk of not being able to fulfill its obligations to policyholders in the event of claims. This can lead to financial instability, potential insolvency, and loss of reputation. In such cases, the insurance company may face challenges in meeting its ongoing operational expenses, maintaining its creditworthiness, and attracting new policyholders.
It may also face regulatory scrutiny and intervention to address the shortfall in reserves. Issuing policies with negative reserves undermines the financial stability and solvency of the insurance company, posing significant disadvantages in terms of its sustainability and ability to honor its contractual commitments.
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the total loss of producer and consumer surplus from underproduction or overproduction is:
The total loss of producer and consumer surplus from underproduction or overproduction is referred to as deadweight loss.
The loss incurred from underproduction or overproduction, known as deadweight loss, represents the reduction in overall welfare in an economy. It occurs when the quantity of a good or service produced deviates from the optimal level, resulting in unfulfilled consumer demand or excess supply. Deadweight loss represents the area of efficiency loss between the supply and demand curves, indicating the value that could have been gained but is not realized due to the production or consumption inefficiency.
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Harold and Associates has been engaged to conduct the financial statements audit of Aurora, a $15 billion revenue publicly listed building materials wholesaler. This is the second year that Harold and Associates is performing the audit of Aurora. The current audit process has reached its final stages and the audit team is working hard to complete the audit in order to meet the required deadline. As a manager of the audit team, you have been tasked with ensuring that the necessary activities that need to be performed in order to complete the audit, has in fact been completed. Outline at least 5 of such activities and explain why such activities are critical to the overall completion of the audit ?
As a manager of the audit team, some of the necessary activities that need to be performed in order to complete the audit are: 1. Audit planning and preparation, 2. Internal controls evaluation, 3. Evidence-gathering and verification, 4. Financial statement analysis, 5. Reporting
1. Audit planning and preparation: One of the most critical activities that need to be performed is the planning and preparation of the audit. This helps in identifying the key areas that require attention and the timelines required to complete the audit.
2. Internal controls evaluation: The internal controls evaluation involves a review of the internal processes of the organization to ensure that they are working effectively. This helps in identifying potential weaknesses that could impact the accuracy of the financial statements.
3. Evidence gathering and verification: Evidence gathering is a crucial step that involves collecting data and information to verify the accuracy and completeness of financial statements. This involves testing various financial transactions and reviewing relevant documents.
4. Financial statement analysis: Once the audit team has gathered and verified all the relevant evidence, the next step is to analyze the financial statements. This involves comparing the financial statements against industry benchmarks and analyzing key ratios and trends.
5. Reporting: The final step in the audit process is to prepare the audit report. This report summarizes the audit findings and provides an opinion on the accuracy and completeness of the financial statements. Audit planning and preparation, internal controls evaluation, evidence gathering and verification, financial statement analysis, and reporting are all critical activities that need to be performed in order to complete the audit. Each activity is important as it ensures that the financial statements are accurate, complete, and comply with the relevant accounting standards.
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An individual variable insurance contract (IVIC) is in fact an individual annuity contract related to segregated funis. it means that premiums paid are invested in segregated funds managed by the life insurance company. Listed below are a number of statements relating to IVICs. Select those that are correct: 1. NiCs may be governed by insurance legislation, or securities law. 2. Instead of a prospectus, disclosure regulations require that insurers provide a stipulated collection of information about the policy at the point of sale, in a language that is reader-friendly, before a policy for an ivic is atcepted. This is called an information folder. 3. Specimens of the information folder must also be filed with some provincial insurance regulator before any applications may be accepted and be kept up to date. 4. Other documents must also be remitted by the life insurance agent (at the point of sale) to the client, such as the Fund Facts and the Key Facts. 158 They are often inside the information folder. 5. A copy of the application form must also be remitted to the client. Select one: a.1, 2,384 b. 1,2,4&5 c. 2,3,4&5 d. 1,3,4&5
The correct option is d. 1, 3, 4 & 5. Individual Variable Insurance Contract (IVIC): An Individual Variable Insurance Contract (IVIC) is, in fact, an individual annuity contract linked to segregated funds.
It implies that premiums paid are invested in segregated funds managed by the life insurance company.Listed below are the correct statements relating to IVICs:
1. NiCs may be governed by insurance legislation or securities law.
3. Specimens of the information folder must also be filed with some provincial insurance regulator before any applications may be accepted and be kept up to date.
4. Other documents must also be remitted by the life insurance agent (at the point of sale) to the client, such as the Fund Facts and the Key Facts. They are often inside the information folder.
5. A copy of the application form must also be remitted to the client.
2 is incorrect. An Information Folder is required to be given to the client at the point of sale, not a prospectus. The content of the Information Folder is required to be presented in an easily comprehensible manner, and it is intended to provide customers with adequate knowledge to help them make informed judgments about whether to acquire the policy. Hence, the correct option is d. 1, 3, 4 & 5.
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Valuing preferred stock uses the same models as valuing common stock. True or False
Valuing preferred stock uses the same models as valuing common stock. The statement is False.
Valuing preferred inventory does now not use equal fashions as valuing common inventory. The valuation methods for the favored stock range are because of the specific traits and possibilities associated with this kind of equity.
Preferred stock is a hybrid protection that mixes functions of each debt and fairness. It generally will pay a fixed dividend to shareholders, which takes precedence over dividends paid to common stockholders. This fixed dividend characteristic distinguishes preferred inventory from commonplace stock, in which dividends aren't guaranteed and might vary based on the corporation's performance.
When valuing preferred inventory, the focus is ordinarily on the fixed dividend payments rather than the ability for capital appreciation. The valuation models used for desired stock frequently recollect the existing value of expected future dividend payments, taking into consideration factors along with the dividend fee, danger level, and market hobby rates.
Common inventory valuation, on the other hand, takes into consideration factors including income, boom potentialities, and market conditions to determine the stock's intrinsic price. Common stockholders additionally have vote-casting rights and may benefit from capital appreciation.
In summary, valuing favored stock and common stock includes exclusive models and issues due to their wonderful traits and investor options. While both sorts of stocks constitute ownership in an employer, their valuation methods are tailor-made to seize the specific functions and priorities related to each sort of fairness.
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What sorts of goods/services should be available for trade restrictions to be placed on them? What sort should be protected against tariffs or quotas? Explain your choices.
Should the United States use tariffs and quotas to restrict foreign competition for business? Give at least three reasons to support your opinion based on the arguments for or against free trade.
Goods/services that may be subject to trade restrictions are those considered strategically important for national security, health and safety, environmental protection, or infant industry.
Regarding whether the United States should use tariffs and quotas to restrict foreign competition for business, here are three reasons in support:
1. Protecting domestic industry and jobs: Tariffs and quotas can be used to shield domestic industries from unfair competition and prevent job losses in key sectors. This ensures the preservation of vital industries and helps maintain employment levels.
2. Correcting trade imbalances: If a country consistently faces significant trade deficits, it may use tariffs and quotas to address the imbalance by reducing imports. This can contribute to a more balanced trade relationship and protect domestic industry from being overwhelmed by foreign competition.
3. National security considerations: Certain industry that are crucial for national security, such as defense or critical infrastructure, may require protection to ensure their viability during times of conflict or emergencies. Tariffs and quotas can help safeguard these industries and maintain domestic control over essential goods/services.
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