The chapter discusses how to adapt your writing style to the reader and how to use clear, concise, and effective language in business messages.
1. Adapting style to the reader means using language that is appropriate for the audience. This includes using words that the reader will understand, avoiding jargon and technical terms, and writing in a style that is consistent with the reader's expectations.
2. Useless words: altogether, basically, actually, really, essentially
Better choices: all together, fundamentally, in fact, truly, essentially
3. Short words are generally more effective than long words because they are easier to read and understand. They also tend to be more concise, which can make your writing more efficient.
4. Slang is dangerous and ineffective in business messages because it can be misinterpreted. It can also make your writing seem unprofessional.
5. Slang and technical language are acceptable in business messages when they are used with the audience in mind. For example, if you are writing to a group of engineers, you may use technical terms that would be inappropriate in a message to a group of customers.
6. An abstract sentence or phrase is one that is vague or general. It does not provide enough detail for the reader to understand the message. For example, the sentence "The company is doing well" is abstract. It does not tell the reader what the company is doing well at or how well it is doing.
7. A camouflaged verb is a verb that is used to make a sentence sound more complex than it really is. For example, the sentence "The report was prepared by me" is camouflaged. The verb "prepared" can be replaced with the simpler verb "wrote."
8. Active voice is a way of writing in which the subject of the sentence performs the action. For example, the sentence "The cat chased the mouse" is in active voice.
Passive voice is a way of writing in which the subject of the sentence receives the action. For example, the sentence "The mouse was chased by the cat" is in passive voice.
9. Conciseness is important in communication because it makes your writing easier to read and understand. It also makes your writing more efficient.
10. The advantages of the active voice when writing are that it is more direct, concise, and powerful. The advantage of the passive voice is that it can sometimes be used to de-emphasize the subject of the sentence.
11. Three techniques which help writers manage emphasis with sentence structure are:
Using strong verbs, Putting the important information at the beginning of the sentence, Using parallel structure
12. Parallelism in writing is the use of similar grammatical structures in a series of related words, phrases, or clauses. This can help to make your writing more concise and easier to read.
13. A redundancy is a word or phrase that repeats an idea that has already been expressed. For example, the phrase "free gift" is a redundancy because the word "gift" already implies that it is free.
14. List four strategies to employ to ensure clear paragraphs.
Start with a topic sentence, Support the topic sentence with evidence, Organize the paragraph logically, Use transition words to connect the ideas. Transition words help the reader follow your train of thought.
15. Two techniques to help write concise paragraphs are:
Use transition words, Eliminate unnecessary words
16. Three techniques to write coherent paragraphs are:
Use topic sentences, Use clear transitions
Support the topic sentence with evidence: This evidence can include facts, examples, or explanations.
17. The chapter lists the following writing strategies to help readers of business messages understand the message:
Use familiar words: Familiar words are words that the reader is likely to know. This will help to make your writing easier to understand.
Avoid slang and clichés: Slang and clichés can be confusing and outdated. This can make your writing seem unprofessional.
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Give examples of two types of market failures that can result in the inefficient market allocation of goods and services. What issues can arise from government intervention to improve efficiency in the presence of market failures?
Two types of market failures that can result in the inefficient market allocation of goods and services are externalities and imperfect information.
Government intervention to improve efficiency in the presence of market failures can introduce potential issues such as unintended consequences, bureaucratic inefficiency, and the challenge of accurately identifying and implementing appropriate interventions.
Externalities occur when the production or consumption of a good or service affects third parties who are not involved in the transaction.
For example, pollution from a factory imposes costs on the surrounding community. In the absence of government intervention, market prices do not reflect these external costs or benefits, leading to an inefficient allocation of resources.
Imperfect information refers to situations where buyers or sellers do not have access to complete or accurate information about the quality, characteristics, or prices of goods and services.
This can result in market inefficiencies such as adverse selection or moral hazard. For instance, in the market for used cars, asymmetric information between buyers and sellers can lead to the sale of low-quality cars at high prices.
When government intervenes to address market failures, several issues can arise. First, interventions may have unintended consequences and create new inefficiencies.
For example, imposing regulations to correct an externality might lead to excessive compliance costs for businesses. Second, government interventions can suffer from bureaucratic inefficiency, resulting in delays, red tape, and increased costs.
Lastly, accurately identifying and implementing appropriate interventions is challenging, as policymakers need to consider the complex dynamics of the market and potential unintended consequences of their actions.
It requires careful analysis and consideration of the costs and benefits of intervention to ensure that the desired efficiency improvements are achieved.
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a survey of hobbies and purchases can help a producer
A survey of hobbies and purchases can indeed be beneficial for a producer in gaining valuable insights into consumer preferences and market trends.
By understanding the hobbies and purchasing habits of their target audience, producers can tailor their products or services to align with consumer interests and needs, ultimately increasing their chances of success in the market.
Conducting a survey allows producers to gather firsthand data on consumer preferences, including their hobbies, interests, and purchasing behaviors. This information can provide valuable insights into consumer behavior patterns, allowing producers to identify trends, anticipate demand, and develop products or services that align with customer interests. By aligning their offerings with popular hobbies or consumer preferences, producers can attract a larger customer base and potentially gain a competitive advantage in the market.
Furthermore, surveys can help producers identify potential gaps or opportunities in the market. By collecting data on hobbies and purchasing patterns, producers can identify niche markets or untapped segments where there is a demand for specific products or services. This knowledge can guide producers in developing new offerings or modifying existing ones to cater to these specific market segments, potentially leading to increased sales and customer satisfaction.
In summary, conducting a survey of hobbies and purchases can provide valuable insights to producers, enabling them to align their offerings with consumer preferences, anticipate market trends, and identify potential opportunities for growth.
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Go to the Microsoft company’s website and examine its philosophy and practice(s) of social responsibility. What social responsibility activities is it involved in? What programs does it support, and how does it support them?
Form your own opinion and evaluate the social effort demonstrated by the company. Do you support/approve of their efforts? Why or why not? What more could the company do? Feel free to search the internet on commentary about business social responsibility to support your opinion. cite it INSIDE their paper as well as in the References section at the end of the paper.
2-page double spaced paper, using proper APA Citations.
Microsoft, one of the leading technology companies globally, places a strong emphasis on social responsibility. This paper aims to examine Microsoft's philosophy and practices regarding social responsibility, including its involvement in social responsibility activities, the programs it supports, and the manner in which it supports them. Furthermore, it will present an evaluation of Microsoft's social efforts and provide an opinion on whether or not their efforts are supported and approved.
Microsoft's commitment to social responsibility is evident through its various initiatives and programs. The company focuses on four key areas: empowering people, enabling digital transformation, ensuring environmental sustainability, and promoting responsible AI. In terms of empowering people, Microsoft invests in digital skills training, job creation, and inclusive technology to bridge the digital divide and promote equitable opportunities.
Microsoft supports a range of programs to address societal challenges. For instance, the AI for Accessibility program utilizes artificial intelligence to develop solutions that empower individuals with disabilities. The Tech for Social Impact initiative offers discounted technology and grants to nonprofits, enabling them to amplify their impact. Additionally, the company's sustainability efforts prioritize carbon reduction, water conservation, and waste reduction.
Microsoft supports these programs through financial investments, technology donations, employee volunteering, and partnerships with organizations and governments. The company also integrates social responsibility into its business operations, such as incorporating sustainability practices into its supply chain and adopting ethical AI principles.
Microsoft's commitment to social responsibility is commendable. The company's initiatives and programs demonstrate a genuine effort to address societal challenges and contribute to positive social impact. The focus on empowering people, promoting inclusivity, and advancing environmental sustainability aligns with contemporary expectations of business social responsibility.
Support for Microsoft's efforts can be found in various commentaries on business social responsibility. For example, a Forbes article highlights Microsoft's initiatives as exemplary and praises its commitment to accessibility and sustainability (Smith, 2021). Additionally, Microsoft has been recognized by organizations like Corporate Knights and the Dow Jones Sustainability Index for its sustainability practices.
However, there is always room for improvement. Microsoft could enhance its social efforts by further integrating social responsibility into its core business strategy, setting measurable goals, and transparently reporting on progress. The company could also prioritize addressing social inequalities, such as bridging the digital divide in underserved communities. Furthermore, increased collaboration with stakeholders, including governments and civil society organizations, could amplify the impact of their social responsibility initiatives.
Therefore, Microsoft's social efforts demonstrate a strong commitment to social responsibility through various programs and initiatives. The company's focus on empowering people, environmental sustainability, and responsible AI reflects a comprehensive approach to addressing societal challenges. While their efforts are commendable, there is potential for further improvement and expansion of their social impact.
References:
Smith, B. (2021, February 8). How Microsoft Is Leading Tech’s Great Carbon Removal Challenge. Forbes.
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Omar is a partner in Party Caterers. Omar's death will
a dissolve the partnership.
b dissociate him as a partner.
c wind up the business.
d breach the partnership agreement.
The correct option for this question is option A. Omar's death will dissolve the partnership.What is a partnership agreement?A partnership agreement is a legal agreement that establishes and governs the rights and responsibilities of each partner in the partnership. The terms of the agreement specify each partner's role in the partnership, how profits and losses are divided, and how disputes are resolved.
Party Caterers is an example of a partnership business. In a partnership, two or more individuals share ownership of a business and are jointly responsible for its success or failure. When a partner dies in a partnership business, it is considered a major event that may significantly impact the business.The death of a partner in a partnership business will dissolve the partnership. The remaining partners have the option to form a new partnership if they choose to continue the business. However, this decision will depend on the terms of the partnership agreement.If the partnership agreement includes provisions for the dissolution of the partnership, these provisions will govern how the business is to be wound up and how the partners' assets and liabilities are to be distributed. In the absence of such provisions, state law will determine how the partnership is to be dissolved and its assets distributed.
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Discuss in detail how an entrepreneur can avoid infringements
with examples
Entrepreneurs can avoid infringements by conducting research, obtaining licenses, creating original work, monitoring competitors, seeking legal advice, and educating stakeholders.
To avoid infringements, entrepreneurs should conduct thorough research to ensure their ideas don't infringe existing intellectual property rights. Obtaining proper licenses and permissions is essential for using copyrighted material or patented technologies. Creating original work helps to prevent unintentional infringements. Monitoring competitors and industry trends enables entrepreneurs to stay informed and adjust their strategies accordingly. Seeking legal advice from intellectual property professionals ensures compliance with laws and helps mitigate the risk of infringement. Educating employees and stakeholders about intellectual property rights fosters a culture of respect. By implementing these strategies, entrepreneurs can protect their intellectual property and minimize the risk of legal disputes.
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Define both Special-purpose/variable-interest entities.
Special-purpose entities (SPEs) are created for specific purposes, such as securitization or asset protection, while variable-interest entities (VIEs) are entities in which an investor has a controlling interest but not a majority of voting rights.
SPEs are entities formed for a specific purpose, often to isolate financial risks or assets. They are designed to carry out a specific function, such as securitizing assets or protecting assets from creditors. VIEs, on the other hand, are entities in which an investor has a controlling interest even if they don't own a majority of voting rights. This allows the investor to have significant influence over the VIE's activities and financial results.
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Maria borrows $106,000 to buy a condo. He has a 30 -year mortgage with a rate of 4.8%. His first payment is due in one month. After making 72 payments, Maria sells his house. She must pay the mortgagee $ ____
After making 72 payments, Maria sells his house. She must pay the mortgagee $1,711.88.
To determine the remaining balance on the mortgage after 72 payments, we can use an amortization schedule or a mortgage calculator. However, without access to specific software, I will provide an estimate using a standard mortgage amortization formula. Please note that this estimate may not be entirely accurate, as it does not consider additional factors such as interest rate fluctuations or any potential prepayments made by Maria.
The formula to calculate the monthly mortgage payment is:
M = P * r * (1 + r)^n / ((1 + r)^n - 1)
Where:
M = Monthly mortgage payment
P = Principal loan amount
r = Monthly interest rate (annual rate divided by 12)
n = Total number of payments
Given the following information:
Principal loan amount (P) = $106,000
Annual interest rate = 4.8%
Number of payments (n) = 30 years * 12 months = 360 months
Let's calculate the monthly mortgage payment (M):
r = 4.8% / 12 = 0.004
n = 72 (payments made)
M = 106,000 * 0.004 * (1 + 0.004)^72 / ((1 + 0.004)^72 - 1)
M = 106,000 * 0.004 * (1.004)^72 / ((1.004)^72 - 1)
M = 106,000 * 0.004 * 1.357537 / (1.357537 - 1)
M = 1711.88
Therefore, the estimated monthly mortgage payment is $1,711.88.
To calculate the remaining balance after 72 payments, we subtract the total amount paid from the original loan amount:
Remaining balance = Loan amount - (Monthly payment * Number of payments)
Remaining balance = 106,000 - (1,711.88 * 72)
Remaining balance = 106,000 - 123,192.96
Remaining balance = -$17,192.96
The negative value indicates that there is still an outstanding balance on the mortgage after 72 payments. In this case, Maria would need to consult with her mortgage provider to obtain the exact remaining balance and discuss the payment terms upon selling her house.
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Arthur and Tony are the sole shareholders of Limpopo Ltd. They both have 50% of the shares.
a) Tony wants his daughter, Chloe, to join the business, and suggests that he and Arthur each sell Chloe some of their shares. Advise Arthur as to whether there would be a disadvantage to him selling Chloe some of his shares.
b) The Articles of Association of Limpopo Ltd. say that Tony is to be a director of the company for life. Explain whether the provision will be enforceable.
a)If Tony were to retire or leave the business, Chloe could side with Arthur and outvote Tony on critical decisions, which could lead to disagreements between the two shareholders.
b)The provision in the Articles of Association would be unenforceable as it contradicts the provisions of the Companies Act.
a) Tony wants his daughter, Chloe, to join the business and suggests that he and Arthur each sell Chloe some of their shares. Advise Arthur as to whether there would be a disadvantage to him selling Chloe some of his shares. There are several disadvantages for Arthur in selling some of his shares to Chloe. First of all, she is not involved in the day-to-day operation of the business, so she does not bring any expertise or resources to the company. Second, Chloe's ownership of shares gives her voting rights, which means that she could vote against Arthur on company matters.
b) The Articles of Association of Limpopo Ltd. say that Tony is to be a director of the company for life. Explain whether the provision will be enforceable. This provision in the Articles of Association may not be enforceable. Even though the Articles of Association is a legal document, it cannot override the Companies Act, which regulates the operation of businesses in the UK. The Companies Act requires that the appointment of directors be done at each Annual General Meeting, which means that Tony's appointment as a director for life would be in conflict with this requirement.
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Suppose you are the manager for a firm that sells automobile tires. Market research has shown
that the demand by a typical customer for the product you sell is given by:
P = $160 - 250 Assume you have no fixed costs. From your production department, you are told that the variable
costs of production are given by:
vC (0) =7.59 a. If you decide to offer the product for sale to all buyers at a single price, what price will you
charge and how much will you sell to a typical customer?
b. What profits per consumer will the firm earn under this pricing strategy? c. Now suppose you decide to use a simple block pricing strategy whereby you offer your product as a single package of a predetermined number of units. How much will you sell to a
typical customer? (Hint: What is the optimal bundle size?) d. What price per consumer will you charge under this pricing strategy (extracting the total
value to the consumer)?
e. Compare the profits under the two pricing strategies. Comment on the comparison.
The firm would charge a price of approximately $14.75 and sell approximately 0.
a. to determine the price and quantity sold to a typical customer when offering the product at a single price, we need to set the demand equation equal to the variable cost equation and solve for price (p) and quantity (q).
demand: p = $160 - 250q
variable cost: vc(q) = 7.59q
setting the demand equal to the variable cost:
$160 - 250q = 7.59q
simplifying the equation:
257.59q = $160
q ≈ 0.621
to find the price, substitute the quantity back into the demand equation:
p = $160 - 250(0.621)
p ≈ $14.75 621 units to a typical customer.
b. to calculate the profits per consumer, we need to subtract the variable costs from the price:
profit per consumer = price - variable cost
profit per consumer = $14.75 - 7.59
profit per consumer ≈ $7.16
c. for the simple block pricing strategy, the optimal bundle size should be determined by considering the trade-off between maximizing revenue and minimizing variable costs. we need to find the quantity that maximizes the firm's profit.
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What is the current profitability of the electric passenger
vehicle industry?
The current profitability of the electric passenger vehicle industry is growing as the demand for electric vehicles is increasing.
The market is expected to grow at a Compound Annual Growth Rate (CAGR) of over 20% from 2020 to 2025, driven by factors such as government regulations, technological advancements, and environmental concerns. The rise in fuel prices and the need for energy-efficient transportation are also driving demand for electric vehicles.
Some key players in the electric passenger vehicle industry include Tesla, BMW, Nissan, and General Motors. These companies have been investing heavily in the development of electric vehicles, and their efforts are paying off in terms of increased profitability.
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Which of the following statements is CORRECT about the steady state of the Solow model?
a. A lower productivity lowers capital per worker in the steady state.
b. A lower saving rate increases output per worker in the steady state.
c. A lower depreciation rate of capital lowers output per worker in the steady state.
d. A lower population growth rate lowers consumption per worker in the steady state.
The correct statement about the steady state of the Solow model is: b. A lower saving rate increases output per worker in the steady state.
In the Solow model, the steady state refers to the long-run equilibrium of the economy, where the capital stock per worker and output per worker reach a constant level. The model considers factors such as saving, investment, population growth, and technological progress.
In the steady state, a lower saving rate leads to a lower capital stock per worker. However, due to diminishing returns to capital, a lower capital stock per worker increases the marginal productivity of capital, leading to higher output per worker. Therefore, statement b is correct, as a lower saving rate increases output per worker in the steady state.
Statement a is incorrect because a lower productivity would not directly impact capital per worker in the steady state. Statement c is incorrect because a lower depreciation rate of capital would lead to a higher capital stock per worker and, in turn, higher output per worker in the steady state. Statement d is incorrect because a lower population growth rate would increase consumption per worker in the steady state, as the same amount of output is distributed among a smaller population.
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What is the value of a 15-year, 10% semiannual coupon bond, if
rd = 8%?
The value of a 15-year, 10% semiannual coupon bond, given an annual discount rate (rd) of 8%, can be calculated to be approximately $1,463.62.
To determine the value of the bond, we need to calculate the present value of the bond's future cash flows. In this case, the bond has a 15-year maturity and pays a 10% semiannual coupon.
The formula to calculate the value of the bond is:
Bond Value = (C/r) * (1 - (1 + r)^(-n)) + (M / (1 + r)^n)
Where:
C = Coupon payment
r = Discount rate (per period)
n = Number of periods
M = Face value or maturity value
In this scenario, the bond pays semiannual coupons, so we divide the coupon rate and discount rate by 2 and multiply the number of periods by 2.
Using the formula and the given data, we can calculate the value of the bond to be approximately $1,463.62.
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Please discuss the followings:
What is the Economic impact for the mega project Padma Rail Link in Bangladesh if the project delays in completion?
What are the major risks involved? Discuss both macro economic and commercial risks involved in project.
The delayed completion of the Padma Rail Link mega project in Bangladesh can have significant economic impacts, including both macroeconomic and commercial risks. These risks can affect various sectors and stakeholders, leading to financial losses, reduced productivity, and missed growth opportunities.
The Padma Rail Link is a crucial infrastructure project in Bangladesh, aimed at improving transportation connectivity and facilitating economic development. If the project experiences delays in completion, it can have adverse economic impacts. From a macroeconomic perspective, the delay can hinder overall economic growth and development.
The project's delay can disrupt supply chains, impede trade, and hinder investments, affecting multiple sectors such as manufacturing, agriculture, and tourism. It can lead to higher transportation costs, reduced productivity, and missed growth opportunities.
On the commercial front, there are several risks associated with project delays. Contractors, investors, and lenders may face financial losses due to extended project timelines. Increased construction costs, contractual disputes, and financing challenges can arise. Moreover, delays can also erode public confidence in the project and the government's ability to deliver on infrastructure commitments, potentially affecting future investment and development initiatives.
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What is the required return for a stock with a beta of 1.1 ? The market return is 12% and the risk-free rate is 4%. (Hint: Read the question carefully. The question did not give you market risk premium, E(Rm) - Rf. It gave you market return E(Rm), so you have to input values of all the variables in CAPM equation. You will input values of risk free rate, market return, Beta in the CAPM equation to calculate the required return.)
a. 17.2%
b. 8.8%
c. 12.00%
d. 12.80%
d. 12.80%. The required return for a stock with a beta of 1.1 can be calculated using the Capital Asset Pricing Model (CAPM) equation.
The required return for a stock with a beta of 1.1 can be calculated using the Capital Asset Pricing Model (CAPM) equation. The CAPM equation is as follows: Required Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Given that the risk-free rate is 4%, the market return is 12%, and the beta is 1.1, we can substitute these values into the CAPM equation.
Required Return = 4% + 1.1 * (12% - 4%)
= 4% + 1.1 * 8%
= 4% + 8.8%
= 12.8%
Therefore, the required return for the stock with a beta of 1.1 is 12.8%.
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violet light differs from red light in that violet light
Violet light differs from red light in that violet light has a shorter wavelength than red light.
X-rays and light are different because X-rays are made up of waves, whereas light is made up of particles.
For a given ray of light, the higher the energy, the higher the frequency and the shorter the wavelength.
Earth's atmosphere is transparent and allows radiation to pass through all across the electromagnetic spectrum.
A sun emits energy at all wavelengths, with a peak at one particular wavelength (color).
The statement "A sun emits energy at all wavelengths, with a peak at one particular wavelength (color)" refers to the phenomenon known as blackbody radiation or thermal radiation.
A blackbody, such as the Sun, emits electromagnetic radiation across a wide range of wavelengths. The distribution of this radiation is not uniform but follows a specific pattern called the blackbody spectrum. According to Planck's law, the intensity of radiation emitted by a blackbody at different wavelengths depends on its temperature.
As the temperature of the blackbody increases, the peak of the emitted radiation shifts to shorter wavelengths, which corresponds to higher frequencies and energy levels. This phenomenon is described by Wien's displacement law.
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The complete question is:
Violet light differs from red in that violet light has a shorter wavelength than red light. has a longer wavelength than red light. travels more slowly (through a vacuum) than red light. travels more quickly (through a vacuum) than red light. X-rays and light are different because X-rays are made up of waves, whereas light is made up of particles. different because X-rays are made up of particles, whereas light is made up of waves. the same thing except that X-rays have a shorter wavelength than light. the same thing except that X-rays have a longer wavelength than light. For a given ray of light, the higher the energy the higher the frequency speed temperature wavelength Earth's atmosphere is transparent and allows radiation to pass through everywhere except the radio range of the electromagnetic spectrum. all across the electromagnetic spectrum. only in the visible range of the electromagnetic spectrum. predominantly in the visible and radio ranges of the electromagnetic spectrum. A sun emits energy mostly in the radio range, less in the X-ray and gamma ray at all wavelengths uniformly. at all wavelengths, with a peak at one particular wavelength (color). only at certain wavelengths and no others.
Which of the following describes the way a LIBOR-in-arrears swap differs from a plain vanilla interest rate swap?
a. Neither floating nor fixed payments are made until the end of the life of the swap
b. Interest is paid at the end of the accrual period in a LIBOR-in-arrears swap
c. Interest is paid at the beginning of the accrual period in a LIBOR-in-arrears swap
d. No floating interest is paid until the end of the life of the swap in a LIBOR-in-arrears swap, but fixed payments are made throughout the life of the swap
The difference between a LIBOR-in-arrears swap and a plain vanilla interest rate swap is that in the former, no floating interest is paid until the end of the life of the swap while fixed payments are made throughout the life of the swap.
A plain vanilla interest rate swap is a financial instrument that enables two parties to exchange interest rates on debt instruments with each other. Each party pays a fixed or floating rate on the swapped interest rates. They agree on the notional value, the maturity date, the fixed or floating interest rate, and the periodic payments.
LIBOR-in-arrears swap, on the other hand, is a type of swap in which the floating interest rate payment is made at the end of the accrual period instead of at the start.
The swap's interest rate is set based on the LIBOR interest rate index. In a LIBOR-in-arrears swap, the fixed rate is paid throughout the life of the swap, but no floating interest is paid until the end of the swap's term, which distinguishes it from a typical plain vanilla interest rate swap.
The LIBOR rate is an average rate at which banks are willing to lend unsecured funds to other banks.
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View Policies Current Attempt in Progress Carla Vista Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 23,600 golf discs is: Carla Vista also incurs 8% sales commission (\$0.56) on each disc sold. McGee Corporation offers Carla Vista $4,90 per disc for 4,900 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Carla Vista. If Carla Vista accepts the offer, it will incur a one-time fixed cost of $6,500 due to the rental of an imprinting machine. No sales commission will result from the special order. Assume there is sufficient capacity to accommodate the special order. Prepare an incremental analysis for the special order. (Enter negative amounts using either a negative sign preceding the number eg. −45 or parentheses e.g. (45).) (b) Should Carla Vista accept the special order?
Carla Vista should accept the special order.
To determine whether Carla Vista should accept the special order, we need to perform an incremental analysis comparing the costs and revenues associated with the order.
The cost of manufacturing 4,900 golf discs for the special order would be the cost of producing each disc, which is $3.70 ($3.14 + $0.56 commission). The total cost of manufacturing these discs would be $18,130 ($3.70 * 4,900).
Additionally, accepting the special order incurs a one-time fixed cost of $6,500 for renting the imprinting machine.
On the revenue side, Carla Vista would receive $4.90 per disc for the 4,900 discs from McGee Corporation. The total revenue from the special order would be $23,910 ($4.90 * 4,900).
To calculate the incremental profit, we subtract the total cost (manufacturing cost + fixed cost) from the total revenue: $23,910 - ($18,130 + $6,500) = $-800.
The incremental profit is negative, indicating that accepting the special order would result in a loss of $800. Therefore, based on the incremental analysis, Carla Vista should not accept the special order.
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Exxon Oil Corp. is negotiating the purchase of 1 million barrels of oil from a bankrupt competitor to be delivered and paid for in exactly 1 year. The oil exporter wants the contract expressed in Mexican Pesos, and the current "in USD" Peso exchange rate is $0.076. The contract is signed at a price of 1420 Pesos per barrel. Exxon can enter a futures contract that allows the company to purchase Pesos at the exact time of oil delivery at $0.077. If we consider the use of the futures contract to hedge Exxon's foreign exchange risk, how much is the cost of this insurance, in U.S. dollars, to Exxon?
Hedging Foreign exchange risk can be reduced by using hedging techniques. Hedging is a process of minimizing risks, especially foreign exchange risk. This is achieved by covering future transactions with a financial instrument that operates in the opposite direction to the underlying asset.
The futures contract is one of the most commonly used methods for hedging purposes. In this scenario, Exxon Oil Corp. is negotiating the purchase of 1 million barrels of oil from a bankrupt competitor to be delivered and paid for in exactly 1 year.
The oil exporter wants the contract expressed in Mexican Pesos, and the current "in USD" Peso exchange rate is $0.076. The contract is signed at a price of 1420 Pesos per barrel. Exxon can enter a futures contract that allows the company to purchase Pesos at the exact time of oil delivery at $0.077.
The first step is to calculate the price of the barrels in USD.1420 Mexican Pesos = $107.72 (1420 x 0.076).
The total cost to Exxon for 1 million barrels of oil would be: $107.72 x 1,000,000 = $107,720,000.
If Exxon did not use a futures contract, then they would be exposed to foreign exchange risk.
The exchange rate could change between now and the delivery of the oil, meaning that Exxon could end up paying more or less for the oil than they anticipated. To hedge against this risk, Exxon can enter into a futures contract to purchase Pesos at the time of oil delivery at $0.077.
The cost of the futures contract can be calculated as follows: 1,000,000 barrels x 1420 Pesos per barrel = 1,420,000,000 Pesos Cost of future contract = 1,420,000,000 x 0.077 = $109,340,000.
Therefore, the cost of this insurance, in U.S. dollars, to Exxon is $109,340,000.
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Which government securities would you advise your client to
invest his money in? Explain why you chose that particular security
(or securities).
I would advise my client to invest in government securities such as Treasury bonds and Treasury bills. These securities are considered relatively safe investments as they are backed by the government.
The choice between Treasury bonds and Treasury bills depends on the client's investment objectives, time horizon, and risk tolerance.
Treasury bonds are long-term government securities with a maturity of 10 to 30 years. They offer fixed interest payments, known as coupon payments, and the principal is repaid at maturity. Treasury bonds are suitable for clients with a longer time horizon who seek a steady stream of income and are willing to hold the investment for an extended period.
On the other hand, Treasury bills are short-term government securities with a maturity of one year or less. They do not pay periodic interest but are sold at a discount to face value, providing a return upon maturity. Treasury bills are suitable for clients who prioritize liquidity, have a shorter investment horizon, or are looking for a safe haven for their funds in times of market volatility.
The choice between Treasury bonds and Treasury bills depends on factors such as the client's investment goals, risk appetite, and the prevailing interest rate environment. Treasury bonds offer higher potential returns over the long term but are subject to interest rate risk. Treasury bills provide a low-risk investment option with high liquidity but may offer lower returns.
Ultimately, the selection of government securities should align with the client's financial objectives, risk tolerance, and investment horizon. It is advisable to consult with a financial advisor or investment professional to assess the client's specific needs and recommend the most suitable government securities for their investment portfolio.
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Examine the systems given below. Which system is more reliable, a or b? c or d? Now calculate the reliability of each system. Were your perceptions correct? If it costs $1000 for each 90% reliable component, $1500 for each 93\% component, $2000 for each 95% reliable component, and $10,000 to replace a failed system, which system would you choose, a or b? c or d ?
Reliability is a crucial factor when evaluating systems, as it determines their ability to perform without failure over a given period. In this scenario, we will examine two systems (a and b, and c and d) and assess their reliability. Additionally, we will consider the cost implications of each system to determine the most suitable choice.
a) System a vs. System b:
To determine which system is more reliable between a and b, we need to compare their individual component reliabilities. The system with components of higher reliability will generally be more reliable overall.
c) System c vs. System d:
Similar to the comparison of systems a and b, we need to assess the component reliabilities of systems c and d to determine their relative reliability.
Reliability Calculation:
To calculate the reliability of each system, we can use the formula for series reliability:
Reliability = R1 * R2 * R3 * ... * Rn
where R1, R2, R3, ... , Rn represent the reliabilities of the individual components in the system.
Perceptions and Verification:
By calculating the reliability of each system using the given component reliabilities, we can verify whether our initial perceptions about their reliability were correct.
Cost Considerations:
To make an informed decision, we need to consider the cost implications of each system. This includes the costs of the individual components and the cost of replacing a failed system.
Based on the reliability calculations and the cost considerations, we can determine which system (a or b, and c or d) is more reliable and cost-effective. This evaluation allows us to make an informed decision on the best system choice, considering both reliability and cost factors.
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In a deed signed by William intending to create a ‘conditional estate’, a deed which William instructed not be recorded until after his death, William conveyed (transferred) ownership of all of his real property in Michigan to his only daughter, Prudence, with the following condition "this transfer is subject to the condition that Prudence divorce her husband immediately in order to inherit this property." William has now died and the deed recorded. As discussed in class, what is the most accurate statement about the demand William has made in the deed:
a. the deed is invalid and, unfortunately, Prudence receives nothing in the deed
b. Prudence gets the property and holds a 'life estate' until or unless she divorces her husband. If she divorces her husband, she will hold title in fee simple, and if she does not divorce her husband, the property will pass through probate to Wiliam's heirs at law
c. the deed creates a 'conditional estate' requiring Prudence to divorce her husband if she intends to inherit the property
d. the condition requiring divorce is unenforceable
Option C accurately represents the situation described, where the deed creates a conditional estate requiring Prudence to divorce her husband if she intends to inherit the property.
The most accurate statement about the demand William has made in the deed is option C: the deed creates a 'conditional estate' requiring Prudence to divorce her husband if she intends to inherit the property.
In this scenario, William intended to create a conditional estate by conveying ownership of his real property to his daughter, Prudence, with the condition that she must divorce her husband immediately in order to inherit the property. The condition attached to the transfer of the property is known as a condition subsequent, which means that Prudence must fulfill the condition (divorce her husband) in order to retain the property.
The fact that William instructed the deed not to be recorded until after his death indicates his intention for the condition to become effective only upon his death. Therefore, after William's death, the deed is recorded and the condition takes effect.
If Prudence chooses to divorce her husband, she will hold title to the property in fee simple, which means she will have absolute ownership and control over the property. On the other hand, if Prudence decides not to divorce her husband, the property will pass through probate to William's heirs at law, as specified in the condition. The condition requiring divorce is enforceable, and Prudence's decision to divorce or not will determine the ultimate disposition of the property.
In conclusion, option C accurately represents the situation described, where the deed creates a conditional estate requiring Prudence to divorce her husband if she intends to inherit the property.
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Fast Food Corp sells a wide range of products to its customers. These products range from beverages to groceries and foodstuff.
The following transactions, among others, appeared in the accounting records of Fast Food Corp for the month of January 2022:
Date Transaction details
2 Fast Food Corp purchased inventory for resale, on credit, amounting to R5 600, from Alaska (Pty) Ltd. Invoice no. 4502 was received.
4 A new vehicle, costing R120 000, was bought on credit from the Smart Dealership. Invoice no. F17 was received. Fast Food Corp will settle the amount in full within the next 45 days.
15 Inventory sold for R1 120, cash. Receipt no. 0011 was issued.
18 The owner of Fast Food Corp withdrew R2 600 cash from the business bank account for his own personal use.
19 A loan of R20 000 was obtained from ALB Bank. Cash was deposited in the business bank account. Receipt 0012 was issued.
20 Four coffee tables were purchased on credit for R760 each, from Tudor Enterprises, and Invoice no. E490 was received. These coffee tables will form part of the furniture of the business.
23 Goods worth R1 300 were returned that were previously bought on credit from City Stores. The merchandise had some expiry dates that were not indicated on the labels. Credit note A001 was received.
24 R150 was received from the ALB Bank as interest on their positive bank balance. Receipt no.0013 was received.
25 R4 500 was paid for salaries and wages. The payment was effected via an EFT.
26 R560 was paid to the municipality for water and electricity. Cheque no. 100 was issued.
Required:
Prepare the following journals (books of first entry) to account for the abovementioned transactions. (Note: do not prepare a General Journal, and ignore VAT and folios.)
2.1 Cash Payments Journal
2.2 Cash Receipts Journal
2.3 Creditors Journal
2.4 Creditors Allowance Journal
By maintaining these separate journals, the company can organize and track its financial activities effectively.
2.1 Cash Payments Journal
2.2 Cash Receipts Journal
2.3 Creditors Journal
2.4 Creditors Allowance Journal
The provided answer lists the required journals to record the given transactions. These journals include the Cash Payments Journal, Cash Receipts Journal, Creditors Journal, and Creditors Allowance Journal. Each journal captures specific types of transactions, such as cash payments, cash receipts, purchases from creditors, and allowances for returned goods. By maintaining these separate journals, the company can organize and track its financial activities effectively.
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You can choose to take $140.000 in 10 years or $47,000 today. At an interest rate of 11 percent, what is the value of $140,000 now? (Enter your answer as a positive number rounded to 2 decimal places.)
a.2. Which option should be selected?
$47,000 today
$140.000 in 10 years
b.1. Assumean interet rate of 11 pereent for 7 years. If the choice 4$140,000 in 7 years or $42000 today, how much a the $140,000 worth todoy? (Enteryour answer os a positive number rounded to 2 decimal pieces)
b-1. Assume an-interest rate of 11 percent for 7 years. If the choice is $140,000 in 7 years or $47,000 today, how much is the $140,000 worth today? (Enter your answer as a positive number rounded to 2 decimal places.)
b-2. Which option should be selected now?
$47,000 today
$140,000 in 7 years
a. The value of $140,000 today, given an interest rate of 11 percent for 10 years, is $37,068.99. The better option is to take $47,000 today. b.1. The value of $140,000 today, given an interest rate of 11 percent for 7 years, is $68,551.81. b.2. The better option is to take $47,000 today instead of $140,000 in 7 years.
a. To calculate the present value of $140,000 in 10 years at an interest rate of 11 percent, we use the present value formula: PV = FV / (1 + r)^n, where PV is the present value, FV is the future value, r is the interest rate, and n is the number of years. Plugging in the values, we get PV = $140,000 / (1 + 0.11)^10 = $37,068.99. Since $47,000 is greater than $37,068.99, the better option is to take $47,000 today.
b-1. Using the same formula, the present value of $140,000 in 7 years at an interest rate of 11 percent is calculated as follows: PV = $140,000 / (1 + 0.11)^7 = $68,551.81.
b-2. Again, comparing the present value of $140,000 in 7 years ($68,551.81) with the immediate amount of $47,000, it is better to choose $47,000 today.
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5) There are two firms in a market and the market demand is Q=1,000−1,000p. Each firm has a marginal cost of m=$0.28. Compare your answers to the Nash-Cournot equilibrium and Nash-Stackelberg equilibrium, if Firm 1, the leader, acts before Firm 2. Solve for firm and market quantities, prices, and profits. [4 marks]
Comparing the two equilibria, we observe that in the Nash-Stackelberg equilibrium, Firm 1 as the leader produces a higher quantity and earns higher profits compared to the Nash-Cournot equilibrium
To find the Nash-Cournot equilibrium, we assume that both firms simultaneously determine their quantities to maximize their profits. The quantity produced by each firm is determined by setting marginal cost equal to marginal revenue. The market quantity is the sum of the individual quantities, and the market price is determined by substituting the market quantity into the demand function.
Using the given marginal cost of $0.28 and the market demand equation Q = 1,000 - 1,000p, we can calculate the Nash-Cournot equilibrium as follows:
Determine each firm's quantity:
Firm 1: Q1 = (1,000 - Q1 - Q2) / 2
Firm 2: Q2 = (1,000 - Q1 - Q2) / 2
Substitute the quantities into the market demand equation to find the market quantity:
Q = Q1 + Q2 = (1,000 - Q1 - Q2) / 2 + (1,000 - Q1 - Q2) / 2
Solve the equations to find the quantities:
Q1 = Q2 = 250
Substitute the quantities into the demand equation to find the market price:
Q = 1,000 - 1,000p
500 = 1,000 - 1,000p
p = $0.50
To find the Nash-Stackelberg equilibrium, we assume that Firm 1, the leader, sets its quantity first, and Firm 2, the follower, observes this quantity and then determines its quantity accordingly. The market quantity and price are determined as in the Nash-Cournot equilibrium.
Firm 1 sets its quantity to maximize its profit:
MR1 = MC1
1,000 - 2Q1 - Q2 = 0
Firm 2 sets its quantity considering Firm 1's quantity:
MR2 = MC2
1,000 - Q1 - 2Q2 = 0
Solve the equations to find the quantities:
Q1 = 333.33
Q2 = 222.22
Substitute the quantities into the demand equation to find the market price:
Q = Q1 + Q2 = 555.56
p = (1,000 - Q) / 1,000
p = $0.44
Comparing the two equilibria, we observe that in the Nash-Stackelberg equilibrium, Firm 1 as the leader produces a higher quantity and earns higher profits compared to the Nash-Cournot equilibrium. Firm 2 as the follower produces a lower quantity and earns lower profits. The market price is lower in the Nash-Stackelberg equilibrium compared to the Nash-Cournot equilibrium.
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Jordan invested the profit of her business in an investment fund that was earning 2.25% compounded monthly. She began withdrawing $3,500 from this fund every 6 months, with the first withdrawal in 4 years. If the money in the fund lasted for the next 7 years, how much money did she initially invest in the fund?
investment spending is the total amount of investment that a firm actually spends during a given period, The Jordan initially invested approximately $4,507.67 in the investment fund.
To determine the initial investment in the fund, we can use the formula for the future value of an investment with compound interest:
FV = PV * (1 + r/n)^(n*t)
FV = Future value (the amount of money in the fund after the specified time)
PV = Present value (the initial investment)
r = Annual interest rate (2.25% or 0.0225 in decimal form)
n = Number of compounding periods per year (12, since it's compounded monthly)
t = Number of years
Given that Jordan started making withdrawals after 4 years and continued for the next 7 years, the total time is 4 + 7 = 11 years.
Let's assume the initial investment in the fund is PV. After 11 years, the future value of the investment would need to be sufficient to cover the withdrawals.
The future value after 11 years can be calculated using the formula:
FV = PV * (1 + r/n)^(n*t)FV = PV * (1 + 0.0225/12)^(12*11)
Now, we need to consider the withdrawals made every 6 months for the next 7 years. Since the withdrawals are made every 6 months, the total number of withdrawals would be 7 years * 2 = 14 withdrawals.
The total amount withdrawn over the 14 withdrawals would be $3,500 * 14 = $49,000.
Therefore, the equation can be written as:
FV - $49,000 = PV
Now, let's solve for PV:
PV = FV - $49,000
Since we don't have the exact future value (FV), we need to consider the withdrawals made. Starting from the first withdrawal in 4 years, we calculate the future value after 11 years and subtract the total withdrawal amount:
FV = $3,500 * [(1 + 0.0225/12)^(12*(11-4))] / (0.0225/12)
FV = $3,500 * [(1.001875)^84] / (0.0225/12)
FV = $53,507.67
Now we can calculate PV:
PV = $53,507.67 - $49,000
PV = $4,507.67
Therefore, Jordan initially invested approximately $4,507.67 in the investment fund.
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What are the discount yield, bond equivalent yield, and effective annual return on a $3 million T-bill that currently sells at 98.5% of its face value and is 105 days from maturity? (15 marks)
How about a $20 million T-bill that sells at 99% of its face value and is 90 days from maturity? (10 marks)
Which T-bill generates a better return? (5 marks)
The formulas for calculating discount yield, bond equivalent yield, and effective annual return are as follows:
Discount yield = (face value - purchase price) / face value * 360 / days to maturity
Bond equivalent yield = (face value - purchase price) / purchase price * 365 / days to maturity
Effective annual return = (1 + bond equivalent yield / 2)^2 - 1
To calculate the discount yield, bond equivalent yield, and effective annual return on a $3 million T-bill that currently sells at 98.5% of its face value and is 105 days from maturity:
Purchase price = $3,000,000 × 98.5% = $2,955,000
Discount yield = ($3,000,000 - $2,955,000) / $3,000,000 * 360 / 105 = 1.715%
Bond equivalent yield = ($3,000,000 - $2,955,000) / $2,955,000 * 365 / 105 = 1.784%
Effective annual return = (1 + 1.784% / 2)^2 - 1 = 3.610%
To calculate the discount yield, bond equivalent yield, and effective annual return on a $20 million T-bill that sells at 99% of its face value and is 90 days from maturity:
Purchase price = $20,000,000 × 99% = $19,800,000
Discount yield = ($20,000,000 - $19,800,000) / $20,000,000 * 360 / 90 = 8.00%
Bond equivalent yield = ($20,000,000 - $19,800,000) / $19,800,000 * 365 / 90 = 8.45%
Effective annual return = (1 + 8.45% / 2)^2 - 1 = 17.97%
The $20 million T-bill generates a better return as it has a higher bond equivalent yield and effective annual return.
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Javier and Anita Sanchez purchased a home on January 1, 2021, for $804,000 by paying $268,000 down and borrowing the remaining $536,000 with a 7 percent loan secured by the home. The loan requires interest-only payments for the first five years. The Sanchezes would itemize deductions even if they did not have any deductible interest. The Sanchezes' marginal tax rate is 32 percent. roblem 14-45 Part c (Algo) Assuming the interest expense is their only itemized deduction for the year and that Javier and Anita file a joint return, have great byesight, and are under 60 years of age, what is the after-tax cost of their 2021 interest expense? (Round your intermediate calculations and the final answer to the nearest whole dollar amount.)
Given that Javier and Anita Sanchez purchased a home on January 1, 2021, for $804,000 by paying $268,000 down and borrowing the remaining $536,000 with a 7 percent loan secured by the home. The loan requires interest-only payments for the first five years. Hence, the required answer is $25,482.
The Sanchezes would itemize deductions even if they did not have any deductible interest. The Sanchezes' marginal tax rate is 32 percent.The interest expense for the first year is:7% of $536,000 = $37,520Their marginal tax rate is 32%.
Therefore, their tax savings would be: 0.32 × $37,520 = $12,038.4So, the after-tax cost of their 2021 interest expense would be:$37,520 - $12,038.4 = $25,481.6Thus, the after-tax cost of their 2021 interest expense is $25,482 (rounded to the nearest whole dollar amount).
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What does the Taylor rule imply that policymakers should do to the federal funds rate to achieve this policy change? Explain how a rule-based approach to policy can be beneficial in certain circumstances.
The Taylor rule is an economic guideline proposed by John B. Taylor, an economist, which suggests a systematic approach for central banks to determine the appropriate target level for the federal funds rate, which is the interest rate at which commercial banks lend and borrow funds held at the Federal Reserve to each other overnight.
The Taylor rule implies that policymakers should adjust the federal funds rate in response to changes in inflation and economic output. According to the Taylor rule, the target federal funds rate should be increased when inflation exceeds the target rate or when economic output exceeds its potential level. Conversely, the target federal funds rate should be decreased when inflation falls below the target rate or when economic output is below its potential level.
For example, if inflation is higher than the desired level, the Taylor rule suggests that policymakers should raise the federal funds rate to make borrowing more expensive, thereby reducing spending and curbing inflationary pressures. On the other hand, if economic output is below its potential level and there is a need to stimulate economic growth, the Taylor rule implies that policymakers should lower the federal funds rate to encourage borrowing, investment, and spending.
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many employees of credit rating agencies lost their jobs during the mortgage crisis of 2008-2009 due to the scandal surrounding credit rating agencies:
The mortgage crisis of 2008-2009 had a significant impact on the credit rating industry, leading to job losses and a fundamental reassessment of the role and practices of credit rating agencies.
During the mortgage crisis of 2008-2009, credit rating agencies faced significant criticism and scrutiny due to their involvement in the scandal surrounding the rating of mortgage-backed securities. These agencies, such as Standard & Poor's, Moody's, and Fitch Ratings, were accused of providing inflated ratings to mortgage-backed securities that were backed by risky subprime mortgages.
The scandal revealed conflicts of interest within the credit rating industry, as the agencies were paid by the issuers of the securities they were rating. This raised questions about the independence and objectivity of their ratings. The ratings assigned by these agencies played a crucial role in determining the marketability and perceived safety of these securities, which were widely held by financial institutions around the world.
As the crisis unfolded and the true risks of the mortgage-backed securities became apparent, their values plummeted, leading to significant losses for investors. The credibility of credit rating agencies was severely damaged, and they faced widespread criticism for failing to accurately assess the risks associated with these securities.
Consequently, credit rating agencies faced legal challenges, regulatory scrutiny, and a loss of trust from investors. Many employees of these agencies lost their jobs as the industry faced downsizing and restructuring in the aftermath of the crisis. The need for reforms in the credit rating industry became apparent, and efforts were made to enhance transparency, accountability, and independence in the rating process.
Overall, the mortgage crisis of 2008-2009 had a significant impact on the credit rating industry, leading to job losses and a fundamental reassessment of the role and practices of credit rating agencies.
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Emerson Corp, is trying to decide whether to lease or purchare a piece of equipmient needed tor the nevs five years. The equiment would cost $502,000 to purchase, and maintenance costs would be $20,900 per year. After five years. Emerson entimaters it could seit the equipment for $101,000. if Emerson leases the equipment, it would pay $151,700 each year, which would include all maintenarce costs. Emerson's hurdle rate is 14%.(Future Value of $1, Present Value of $1, future Value Anmulty of $1, Presen Value Annuity of $1) (Use appropriate factor from the PV tables.)
a. What is the net present value of the cost of purchasing the ecguipment? (Round your final answer to the neates dolar amoum.)
Net Present Value ........
b. What is the net present value of the cost of leasing the equipment? (Round your final answer to the nearest dellar amount.)
Net Present Value ........
c. Based on financial factors, should Emerson purchase or lease the equipment?
O Purchase
O Lease
The net present value of the cost of leasing the equipment is: NPV = PV - Initial Investment NPV = $552,787.91 - $0NPV = $552,787.91
a. Net Present Value of the cost of purchasing the equipment: To determine the net present value of the cost of purchasing the equipment, we first need to find the present value of the cash outflows (costs) and then calculate the net present value using the hurdle rate of 14%.
The formula for present value is: PV = FV / (1 + r)n Where, FV = Future Value of cash flows r = Hurdle rate of return n = Number of years involved in the transaction Using the above formula, we can calculate the present value of the cash outflows as follows: PV = (502,000 + 20,900) / (1 + 0.14) + (20,900) / (1 + 0.14)2 + (20,900) / (1 + 0.14)3 + (20,900) / (1 + 0.14)4 + (121,000) / (1 + 0.14)5= $444,818.75.
Therefore, the net present value of the cost of purchasing the equipment is: NPV = PV - Initial Investment NPV = $444,818.75 - $502,000NPV = -$57,181.25b.
Net Present Value of the cost of leasing the equipment: To determine the net present value of the cost of leasing the equipment, we first need to find the present value of the cash outflows (costs) and then calculate the net present value using the hurdle rate of 14%.
Since the lease payments are the same for each year, we can use the formula for a present value annuity to calculate the present value of the lease payments.
The formula for present value annuity is: PVA = PMT x [(1 - (1 + r)-n) / r]Where, PMT = Lease payment r = Hurdle rate of return n = Number of years involved in the transaction Using the above formula, we can calculate the present value of the lease payments as follows: PVA = $151,700 x [(1 - (1 + 0.14)-5) / 0.14]= $552,787.91
Therefore, the net present value of the cost of leasing the equipment is: NPV = PV - Initial Investment NPV = $552,787.91 - $0NPV = $552,787.91
c. Based on financial factors, Emerson should lease the equipment instead of purchasing it. This is because the net present value of the cost of leasing the equipment is positive ($552,787.91) while the net present value of the cost of purchasing the equipment is negative (-$57,181.25).
A positive net present value indicates that the investment is expected to generate returns greater than the hurdle rate of 14%. Therefore, leasing the equipment would result in higher returns for Emerson Corp compared to purchasing it.
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