Answer:
It will take 13 years and 66 days
Explanation:
Giving the following information:
Your savings account earns 1.72% interest.
Present value= $3,000
Final value= $3,756
To calculate the number of years, we need to use the following formula:
n= ln(FV/PV) / ln(1+i)
n= ln(3,756/3,000) / ln(1.0172)
n= 13.18 years
To be more specific= 365*0.18= 66
It will take 13 years and 66 days
Which of the following statements describes an inherent weakness in the use of the marginal-analysis model for establishing an advertising budget? A. It is unsuitable as a basis for budgeting only in the case of direct-response advertising. B. It only considers environmental factors that affect the effectiveness of the promotional program. C. The budget is often set according to the FIFO method. D. The budget is determined by management solely on the basis of what is felt to be necessary. E. It assumes that sales are determined solely by advertising and promotion.
Answer:
E. It assumes that sales are determined solely by advertising and promotion.
Explanation:
The marginal-analysis model assesses the incremental benefits of an activity compared to the additional costs incurred by that same activity. It is a decision-making tool to help maximize potential profits or benefits.
Sales are not determined solely by advertising and promotion. There are many other factors, including price, demand and supply, the elasticity of the good, the nature of the good, among other factors. The sales of goods considered to be necessities are not affected much by advertising and promotion, unlike luxury goods, for example.
zero-coupon bond is a security that pays no interest, and is therefore bought at a substantial discount from its face value. If stated interest rates are 11% annually (with continuous compounding) how much would you pay today for a zero-coupon bond with a face value of $2,600 that matures in 7 years
Answer:
$1,203.83
Explanation:
For computing the present value using the continuous compounding we need to apply the formula and the calculation part is also shown in the spreadsheet. Kindly find it below.
Given that
Face value = $2,600
Interest rate = 11%
Time period = 7 years
The formula is shown below:
= Face value ÷ EXP (Interest rate × Time period)
= $2,600 ÷ EXP (11% × 7)
= $1,203.83
Use the following information to calculate the ratios listed below: Total Assets 650,000 Total Liabilities 300,000 Current Assets 60,000 Current Liabilities 20,000 Net Income 70,000 Shares Outstanding 12,000 Accounts Receivable 55,000 Sales 439,000 Inventory 25,000 Dividends 10,000
Quick Ratio:
Earnings Per Share:
Return on Assets:
Debt/Equity Ratio:
Days Sales in Receivables:
Answer:
a. Quick Ratio = 1.75
b. Earnings Per Share = $5 per share
c. Return on Assets = 10.77%
d. Debt/Equity Ratio = 85.71%
e. Days Sales in Receivables = 46 days
Explanation:
a. Quick Ratio
Quick Ratio = (Current Assets - inventory) / Current Liabilities = (60,000 - 25,000) / 20,000 = 35,000 / 20,000 = 1.75
b. Earnings Per Share
Earnings Per Share = (Net Income - Dividends) / Shares Outstanding = (70,000 - 10,000) / 12,000 = 60,000 / 12,000 = $5 per share
c. Return on Assets
Return on Assets = Net Income / Total Assets = 70,000 / 650,000 = 0.1077, or 10.77%.
d. Debt/Equity Ratio
Shareholder equity = Total Assets - Total Liabilities = 650,000 - 300,000 = 350,000
Debt/Equity Ratio = Total liabilities / Shareholder equity = 300,000 / 350,000 = 0.8571, or 85.71%.
e. Days Sales in Receivables
Days Sales in Receivables = (Accounts Receivable / Sales) * 365 = (55,000 / 439,000) * 365 = 46 days.
Nelson Mfg. owns a manufacturing facility that is currently sitting idle. The facility is located on a piece of land that originally cost $159,000. The facility itself cost $1,390,000 to build. As of now, the book value of the land and the facility are $159,000 and $458,000, respectively. The firm owes no debt on either the land or the facility at the present time. The firm received a bid of $1,700,000 for the land and facility last week. The firm's management rejected this bid even though they were told that it is a reasonable offer in today's market. If the firm was to consider using this land and facility in a new project, what cost, if any, should it include in the project analysis
Answer: $1700000
Explanation:
If the firm was to consider using the land and facility in a new project, the cost that should be included I the project analysis should be the cost of land and the building facility that was given in the question. This is so because that is the relevant cost to be included in the project analysis. The relevant cost is $,1700,000 which is the bid received for land and building by the firm.
Massachusetts passed a law forbidding any public utility from encouraging a pro-nuclear energy position in utility advertisements or in billing information provided to customers. Is the targeting speech protected under the freedom of speech clause
Answer:
Targeting speech is protected by the freedom of speech clause of the First Amendment of the United States Constitution.
Explanation:
It clearly states that
"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof, or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances."
The above amendment guarantees the freedom and the rights of individuals to speak freely. Kindly note that an individual under the law may be:
Human or a Natural Person or a Physical Person. An example of a Natural Person is the person reading this or the person who wrote it. Legal, corporate, or juristic. An example of a corporate is an organisation such as is referred to in the question. The Public Utility Companies are corporate individuals and are beneficiaries of the freedom of expression or speech afforded by the First Amendment.
Cheers!
A newly issued 20-year maturity, zero-coupon bond making annual coupon payments is issued with a yield to maturity of 8% and face value $1,000. Find the imputed interest income in the first, second, and last year of the bond's life.
Answer:
1st Year = $80
2nd Year= $166.40
3rd Year= $345.26
Explanation:
Imputed Interest income in this case can be referred to where the investor does not receive any fixed annual interest payments but the bond itself has been purchased at a discount to the face value.
For February, sales revenue is $700,000; sales commissions are 5% of sales; the sales manager's salary is $96,000; advertising expenses are $90,000; shipping expenses total 2% of sales; and miscellaneous selling expenses are $2,500 plus 1/2 of 1% of sales. Total selling expenses for the month of February are
Answer:
Total Selling Expenses for the month of February is $241,000
Explanation:
Sales Commissions ($700,000 of sales x 5%) = $35,000
Sales Manager Salary = $96,000
Advertising expenses = $90,000
Shipping expenses = ($700,000 of sales x 2%) = 14,000
Miscellaneous selling expenses = ($2,500 + $700,000 x 1% x 0.5) = $6,000
Total Selling Expenses (Summation of all the calculated above working)= $241,000
McCoy's Fish House purchases a tract of land and an existing building for $810,000. The company plans to remove the old building and construct a new restaurant on the site. In addition to the purchase price, McCoy pays closing costs, including title insurance of $1,100. The company also pays $10,200 in property taxes, which includes $7,100 of back taxes (unpaid taxes from previous years) paid by McCoy on behalf of the seller and $3,100 due for the current fiscal year after the purchase date. Shortly after closing, the company pays a contractor $40,500 to tear down the old building and remove it from the site. McCoy is able to sell salvaged materials from the old building for $5,400 and pays an additional $11,200 to level the land.
Required:
Determine the amount McCoy's Fish House should record as the cost of the land. (Amounts to be deducted should be indicated by a minus sign.)
Answer:
The amount McCoy's Fish House should record as the cost of the land is $864,500
Explanation:
In order to calculate the amount McCoy's Fish House should record as the cost of the land we would have to make the following calculation:
cost of the land=Purchase price(including building+ insurance+back property tax+cost incurred to remove the building-salvage value of materials+cost incurred to level the land
cost of the land=$810,000+$1,100+$7,100+$40,500-$5,400+$11,200
cost of the land=$864,500
The amount McCoy's Fish House should record as the cost of the land is $864,500
A customer has requested that Byrd Corporation fill a special order for 9,000 units of product S51 for $20.50 a unit. Product S51's normal unit product cost is $14.40: Direct materials $ 3.10 Direct labor 1.50 Variable overhead 6.40 Fixed overhead 3.40 Unit product cost $ 14.40 The customer would like modifications made to product S51 that would increase the variable costs by $5.00 per unit and that would require an investment of $36,000 in special molds that would have no salvage value. The annual financial advantage (disadvantage) for the company as a result of accepting this special order should be: _______
Answer:
Effect on income= $4,500 increase
Explanation:
Giving the following information:
Special offer: 9,000 units of product S51 for $20.50 a unit.
Direct materials $ 3.10
Direct labor 1.50
Variable overhead 6.40
The customer would like modifications made to product S51 that would increase the variable costs by $5.00 per unit and that would require an investment of $36,000 in special molds that would have no salvage value.
Because it is a special offer, we will not have into account the fixed costs.
Unitary variable cost= 3.1 + 1.5 + 6.4 + 5= $16
Investment= 36,000
Effect on income= 9,000* (20.5 - 16) - 36,000
Effect on income= 40,500 - 36,000
Effect on income= $4,500 increase
Geese Company utilizes the dollar-value LIFO retail inventory method. Its cost-to-retail percentage is 60% based on beginning inventory and 64% based on current-period purchases. The company determined that beginning inventory at retail was $200,000 and that ending inventory at current-year retail prices was $250,000. The current-year price index is 1.10. Rounding to the nearest dollar, ending inventory at base-year retail prices would be _______.
Answer:
$227,272
Explanation:
Ending inventory at base-year retail prices =
Ending inventory at current-year retail prices
÷The current-year price index
Ending inventory at current-year retail prices $250,000
The current-year price index 1.10
Hence:
$250,000÷1.10
=$227,272
Rite Shoes was involved in the transactions described below. Journal each transaction. If an entry is not required, state "No Entry." A) Purchased $8,200 of supplies on account.B) Paid weekly salaries, $920. C) Provided services to customers on account, $5,300. D) Paid for supplies purchased in (a) above. E) Placed an order for $6,200 of supplies.
Answer:
Dr Supplies $8,200
Cr Accounts payable $8,200
Dr salaries expense $920
Cr Cash $920
Dr accounts receivable $5,300
Cr sales revenue $5,300
Dr accounts payable $8,200
Cr cash $8,200
Explanation:
The purchase of supplies on account would be debited to supplies account and credited to accounts payable.
The payment of weekly salaries would be debited to salaries expense and credited to cash.
The amount in connection with services provided on account is a credit to sales revenue and a debit to accounts receivable.
Payment for supplies would a credit to cash and a debit to accounts payable.
Placement of an order would have no entry until the goods are received.
Bagrov Corporation had a net decrease in cash of $17,000 for the current year. Net cash used in investing activities was $59,000 and net cash used in financing
activities was $45,000. What amount of cash was provided (used) in operating activities?
Answer:
Cash provided under operating activities= $87,000
Explanation:
The cash flow statement is that which provides information on the source(s) of use of cash generated by the business. It provides the information into there activities of operating, investing and financing.
The net cash position= Cash from operating + investing + financing
let the cash from operating be represented by y
-17,000 = y-59,000 -45,000
y =-17,000+59,000 +45,000
y=87 ,000
Cash provided under operating activities= $87,000
The adjusted trial balance of Grouper Corp. at December 31, 2022, includes the following accounts: Retained Earnings $16,300, Dividends $5,800, Service Revenue $36,100, Salaries and Wages Expense $13,800, Insurance Expense $1,790, Rent Expense $4,010, Supplies Expense $1,490, and Depreciation Expense $850.
Required:
Prepare an income statement for the year.
Answer:
net income is $ 14,160.00
Explanation:
The income statement from which the net income for the year is derived is shown below:
Grouper Corp. Income Statement as at 31 December ,2022.
Service revenue $36,100
salaries and wages expense $13,800
insurance expense $1,790
rent expense $4,010
supplies expense $1,490
depreciation expense $850
Total expenses ($ 21,940)
Net income $ 14,160
ending retained earnings =$ 14,160.00+$16,300.00-$5,800.00=$24,660.00
Maricela writes slowly. When preparing a first draft, she spends a good deal of time formatting and choosing the correct font. Maricela doesn’t like to move on to the next sentence until she has perfected each one. She rarely has time for revision.
What advice would you give Maricela to help her allow more time for revision?
A. Don’t perfect each sentence before moving on. Compose quickly.
B. Use a thesaurus to help perfect each sentence as you compose.
C. Spend your time writing, not formatting.
The following data are taken from the financial statements of Ivanhoe Company. 2017 2016 Accounts receivable (net), end of year $ 581,300 $ 557,500 Net sales on account 4,888,000 4,117,000 Terms for all sales are 1/10, n/45 Collapse question part (a) Compute for each year the accounts receivable turnover. At the end of 2015, accounts receivable was $519,500. (Round answers to 1 decimal place, e.g. 12.5.)
Answer:
2016 Accounts receivable turnover is 7.65
2017 Accounts receivable turnover is 8.58
Explanation:
Accounts receivable turnover is the ratio of the net credit sales divided by the average accounts receivable for the period
For 2016 average accounts receivable=($519,500+$557,500)/2=$538,500.00
Net credit sales in 2016 is $ 4,117,000
Accounts receivable turnover for 2016=$4,117,000/$538,500= 7.65
For 2017 average accounts receivable=($557,500+$ 581,300)/2=$569,400.00
Net credit sales in 2017 is $ 4,888,000
Accounts receivable turnover for 2017=$4,888,000/$569,400= 8.58
Larned Corporation recorded the following transactions for the just completed month. $86,000 in raw materials were purchased on account. $84,000 in raw materials were used in production. Of this amount, $70,000 was for direct materials and the remainder was for indirect materials. Total labor wages of $120,000 were paid in cash. Of this amount, $102,100 was for direct labor and the remainder was for indirect labor. Depreciation of $190,000 was incurred on factory equipment.
Required:
Record the above transactions in journal entries.
Answer and Explanation:
The Journal entries are shown below:-
1. Raw materials inventory Dr, $86,000
To Accounts payable $86,000
(Being raw material is recorded)
Here we debited the raw material inventory as it increased the assets and we credited the accounts payable as it also increase the liabilities
2. Work in process inventory Dr, $70,000
Manufacturing overhead Dr, $14,000
To Raw materials inventory $84,000
(Being raw material inventory is recorded)
Here we debited the work in process inventory and manufacturing overhead as it increased the assets and expenses and we credited the raw material inventory as decrease the assets.
3. Work in process inventory Dr, $102,100
Manufacturing overhead Dr, $17,900
To Cash $120,000
(Being cash paid is recorded)
Here we debited the work in process inventory and manufacturing overhead as it increased the assets and expenses and we credited the cash as decrease the assets.
4. Manufacturing overhead Dr, $190,000
Accumulated depreciation-Equipment $190,000
(Being manufacturing overhead is recorded)
Here we debited the manufacturing overhead as it increase the expenses and we credited the accumulated depreciation-equipment as decrease the assets.
Which of the following statements is/are FALSE? I) When evaluating a capital budgeting decision, we generally include interest expense. II) Only include as incremental expenses in your capital budgeting analysis the additional overhead expenses that arise because of the decision to take on the project. III) As a practical matter, to derive the forecasted cash flows of a project, financial managers often begin by forecasting earnings.
Answer:
option I: When evaluating a capital budgeting decision, we generally include interest expense.
Explanation:
Capital budgeting can simply be defined as the process by which a company evaluates prospective expenditures or investments that will be of a lucrative deal to the company. they are any project undergo by firms or companies that will bring a great deal of money and value to the company.
capital budgeting decisions usually are of different kinds as it ranges from mutually exclusive projects,accept-reject decision or acceptance rule and the capital rationing decision
capital budgeting covers the process of investing money for the company with the view that or of generating positive returns and does not include interest expense.
Describe how you plan to account for the organizational roles and experience level of your audience as you prepare your presentation. Describe how the educational level of the viewers will impact your presentation.
Answer: The answer is provided below
Explanation:
To account for the organizational roles and the experience level of my audience, it is vital to include material in an organized manner which relates and is also relevant to their roles. The presentation would be from their role’s point of view, in order for them to understand the material and how the material relates to their work. The terminology I choose will also be based on the level of experience they possess. In a situation whereby the audience includes mostly members from the upper level of management, I will focus more on management side of my strategic plan. Lastly, I would try incorporate facts in a way which is understandable to everyone. elaborate complex facts.
The educational level of the viewers will hugely impact the complexity of terms used in the presentation and how deep I can explain the topic presented in the presentation.
The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. Compute the number of units that must be sold in order to achieve a target pretax income of $167,400.
Sales (44,000 units) $968,000
Costs:
Direct materials $183,500
Direct labor 241,900
Fixed factory overhead 109,500
Variable factory overhead 151,900
Fixed marketing costs 111,900
Variable marketing costs 51,900 850,600
Pretax income $117,400
Answer:
50,494 units
Explanation:
The sales that must be achieved in order to realize a pretax profit of $167,400 is the total fixed costs plus target pretax profit all divided by contribution per unit
Total fixed costs=fixed factory overhead+fixed marketing costs=$109,500+$111,900=$221,400.00
Contribution per unit= sales price per unit-variable cost per unit
sales price per unit=$968,000/44000=$22
variable cost per unit=($183,500+$241,900+$151,900+$51900)/44,000=$14.30 Contribution per unit=$22-$14.30 =$7.70
target sales units=($221,400+$167,400)/$7.70= 50,494 units
On January 1, 2018, Brian Company purchased at par $831,000, 6 percent bonds issued by Laura Company to be held as available-for-sale securities. At December 31, 2018, the bonds had a fair value of $804,600. The bond investment was sold on July 1, 2019, for $834,400. Brian Company’s fiscal year ends on December 31. Using the following categories, indicate the effects of the transactions listed above, assuming the securities are available-for-sale.
Answer:
THE TRANSACTION DATE : December 31, 2018.
TRANSACTION: Record the trading securities at fair value.
ASSETS: - 26,400
LIABILITIES:
STAKEHOLDERS' EQUITY: -26,400
REVENUE/GAINS:
EXPENSES/LOSSES: $26,400
NET INCOME: - 26,400
THE TRANSACTION DATE : July 1, 2019.
TRANSACTION: Adjust to fair value.
ASSETS: $29,800
LIABILITIES:
STAKEHOLDERS' EQUITY: $29,800
REVENUE/GAINS: $29,800
EXPENSES/LOSSES:
NET INCOME: $29,800
RECORD THE SALE OF TRADING SECURITIES(ASSETS) = $0.
Explanation:
So, anything dealing with trading securities has to do with trading in which securities are held down for a period of time and then later the securities will be sold.
So, here are the categories for the transactions listed in the question above, assuming the securities are available-for-sale.
THE TRANSACTION DATE : December 31, 2018.
TRANSACTION: Record the trading securities at fair value.
ASSETS: - 26,400
LIABILITIES:
STAKEHOLDERS' EQUITY: -26,400
REVENUE/GAINS:
EXPENSES/LOSSES: $26,400
NET INCOME: - 26,400
THE TRANSACTION DATE : July 1, 2019.
TRANSACTION: Adjust to fair value.
ASSETS: $29,800
LIABILITIES:
STAKEHOLDERS' EQUITY: $29,800
REVENUE/GAINS: $29,800
EXPENSES/LOSSES:
NET INCOME: $29,800
RECORD THE SALE OF TRADING SECURITIES(ASSETS) = $0.
Chillmax Company had planned to sell 3,500 pairs of shoes at $60 each in the coming year. Unit variable cost is $21 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $78,000 (includes fixed factory overhead and fixed selling and administrative expense). Operating income at 3,500 units sold is $58,500. The degree of operating leverage is 2.3. Now Chillmax expects to increase sales by 10% next year.
Required:1. Calculate the margin of safety in terms of the number of units.2. Calculate the margin of safety in terms of sales revenue.
Answer:
Margin of safety (units)= 1,500 units
Margin of safety (dollars)= $90,000
Explanation:
Giving the following information:
Sales= 3,500 units
Selling price= $60
Unitary variable cost= $21
Total fixed cost equals $78,000
First, we need to calculate the break-even point both in units and dollars:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 78,000/ (60 - 21)
Break-even point in units= 2,000 units
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 78,000/ (39/60)
Break-even point (dollars)= $120,000
Now, we can determine the margin of safety:
Margin of safety= (current sales level - break-even point)
Margin of safety (units)= 3,500 - 2,000= 1,500 units
Margin of safety (dollars)= 210,000 - 120,000= $90,000
The warehouse manager at Johnson Cor. is considering installing additional insulation in the warehouse. He estimates that the annual savings would be a reduction in heating cost from the current $16,000 per year to approximately $12,000 per year. Johnson Corp. Desires to earn 12% ROI, and the cost of installing the insulation is expected to be $20,000. How many years does the warehouse have to run in order to justify the insulation project
Answer:
9 years
Explanation:
Note: See the attached excel file for the calculation of the cumulative present value (PV).
Annual cost saving = $16,000 - $12,000 = $4,000
With annual cash saving of $4,000 and 12% return on investment (ROI), the cumulative PV of the cash flow from installing the insulation becomes positive in the 9th year at $1,313.
Since the cumulative PV is positive in the 9th year, that means the discounted payback year is 9th year. Therefore, the warehouse have to run for 9 years in order to justify the insulation project.
Note:
The actual discounted payback period is approximately 8 years and 1 month as calculated below:
Discounted payback period = 8 years and ((129.44/1,442.44) * 12) = 8 years and 1 month.
The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, and you are convinced it is going to break far out of that range in the next 3 months. You do not know whether it will go up or down, however. The current price of the stock is $120 per share, and the price of a 3-month call option at an exercise price of $120 is $8.89. a. If the risk-free interest rate is 8% per year, what must be the price of a 3-month put option on P.U.T.T. stock at an exercise price of $120? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. A straddle would be a simple options strategy to exploit your conviction about the stock price’s future movements. How far would it have to move in either direction for you to make a profit on your initial investment? (Round your intermediate calculations and final answer to 2 decimal places.)
Answer:
A) according to put call parity:
price of put option = call option - stock price + [future value / (1 + risk free rate)ⁿ]
put = $8.89 - $120 + [$120 / (1 + 8%)¹/⁴] = $8.89 - $120 +$117.71 = $6.60
B) you have to purchase both a put and call option ⇒ straddle
the total cost of the investment = $8.89 + $6.60 = $15.496, this way you can make a profit if the stock price increases higher than $120 + $6.60 = $126.60 or decreases below than $120 - $6.60 = $113.40
9. The major problem addressed by the warehouse layout strategy is: A) minimizing difficulties caused by material flow varying with each product. B) requiring frequent close contact between forklift drivers and item pickers. C) addressing trade-offs between space and material handling. D) balancing product flow from one work station to the next. E) locating the docks near a convenient access
Answer:
C) Addressing trade-offs between space and material handling.
Explanation:
Addressing trade offs between material handling and space in the warehouse is a major problem been tackled in warehouse layout strategy.
In any case where it is been found that your warehouse or distribution centre capacity is at bursting point, and costs are escalating while service levels are not being met, it is natural to assume that a bigger warehouse would go a long way to addressing the issues.
That is why experts in this field that have extensive experience in assisting customers in the identification of causal issues through its(warehouse) facility design, operations audits and also layout.
Answer:
Option C. Addressing trade-offs between space and material handling.
Explanation:
The reason is that the warehouse layout plan discusses the major problem of stocking the inventory in a manner that it uses less space and as a result reduces the cost of the warehouse rentals. The modern warehouse softwares does the same with more valuable guidelines and stock flow control which helps in lowering the handling cost of the inventory and also helps increasing the space for additional inventory.
Thomlin Company forecasts that total overhead for the current year will be $11,667,000 with 168,000 total machine hours. Year to date, the actual overhead is $7,895,000 and the actual machine hours are 91,000 hours. The predetermined overhead rate based on machine hours is Round the factory overhead rate to the nearest dollar before multiplying by the number of hours. a.$87 per machine hour b.$47 per machine hour c.$69 per machine hour d.$128 per machine hour
Answer: c.$69 per machine hour
Explanation:
The predetermined overhead rate is the rate that the company forecasted that overhead would cost per hour.
Thomlin Company forecasted that total overhead for the current year will be $11,667,000 with 168,000 total machine hours.
The Predetermined Overhead rate would therefore be,
= Total Forecasted Overhead / Machine Hour
= 11,667,000 / 168,000
= $69.44
= $69
This means that the forecast was that for every Machine Hour, overhead accrued was $69.
Consider a second hand car market where three types of cars are being sold: High quality (H), medium quality (M) and low quality (L). Sellers value an H at $2000, an M at $1200 and an L at $800, whereas buyers value an H at $1800, an M at $1600 and an L at $1400. As discussed in the ”Akerloff’s Lemons Market”, sellers are able to distinguish between different quality cars but buyers are not and a buyer believes that in this market 40% of the cars is an H, 30% of the cars is an M and 30% of the cars is an L.
a) Determine which type of cars will be sold at the efficient allocation.
b) Determine which type of cars will be sold at the market equilibrium.
Answer:
a) Determine which type of cars will be sold at the efficient allocation.
All cars would be sold in a Pareto efficient allocation.
In a Pareto efficient market, resources are all allocated in the most efficient possible way. This is the reason why this is just a theoretical concept that does not necessarily apply in real life.
b) Determine which type of cars will be sold at the market equilibrium.
Since consumers are only willing to pay up to $1,620 for a used car, only medium quality and low quality cars will be sold. The price of high quality used cars is higher than the equilibrium price.
Explanation:
the most a buyer would be willing to pay for a used car is ($1,800 x 40%) + ($1,600 x 30%) + ($1,400 x 30%) = $720 + $480 + $420 = $1,620
Michigan Mattress Company is considering the purchase of land and the construction of a new plant. The land, which would be bought immediately (at t = 0), has a cost of $100,000 and the building, which would be erected at the end of the first year (t = 1), would cost $500,000. It is estimated that the firm's after tax cash flow will be increased by $100,000 starting at the end of the second year, and that this incremental flow would increase at a 10 percent rate annually over the next 10 years. What is the approximate payback period? 2 years 4 years 6 years 8 years 10 years
Answer:
6 years
Explanation:
The Payback period calculates how much it takes the amount invested in a project to be recovered from the cumulative cash flow.
Total amount invested = $500,000 + $100,000 = $-600,000
Cash inflow in year 2 = $100,000
Amount recovered in year 2 = $-600,000 + 100,000 = $-500,000
Cash inflow in year 3 = $100,000 × 1.1 = 110,000
Amount recovered in year 3=$-500,000 + 110,000 = $-390,000
Cash inflow in year 4= $121,000
Amount recovered in year 4 = $-390,000 + $121,000 = $-269,000
Cash inflow in year 5= $133,100
Amount recovered in year 5 = $-269,000 + $133,100 = $-135,900
Cash inflow in year 6 = $146,410
Amount recovered in year 6 = $146,410 $-135,900 = $10,510
The amount is recovered In 5.93 years
I hope my answer helps you
You have just won the lottery and will receive $560,000 in one year. You will receive payments for 26 years, and the payments will increase 4 percent per year. If the appropriate discount rate is 11 percent, what is the present value of your winnings
Answer:
PV= $3,634,716.01
Explanation:
Giving the following information:
Cash flow= $560,000
Number of years= 26
Interest rate= 11%
growth rate= 4%
First, we will determine the final value. We will include the growth rate to the interest rate. We need to use the following formula.
FV= {A*[(1+i)^n-1]}/i
A= annual cash
FV= {560,000*[(1.15^26)-1]}/ 0.15
FV= $137,598,703.2
Now, the present value:
PV= FV/(1+i){ n
PV= 137,598,703.2/(1.15^26)
PV= $3,634,716.01
The following is a list of costs that were incurred in the production and sale of large commercial airplanes:___________.
A) Classify each cost as either a product cost or a period cost.
B) Indicate whether each product cost is a direct materials cost, a direct labor cost, or a factory overhead cost.
C) Indicate whether each period cost is a selling expense or an administrative expense.
The following is a list of costs that were incurred in the production and sale of large commercial airplanes Classify each cost as either a product cost or a period cost. Hence, option A is correct.
What is large commercial?Large Commercial refers to use by a for-profit organization that conducts business and offers commercial goods or services in the county where the communication site is situated and has a population of at least 150,000.
Anything that is commercial is typically related to business or commerce. A commercial is a piece of company advertising. Selling products or services for a profit is referred to as commerce. Additionally, commercial trading is conducted in the forward and futures markets, typically for hedging reasons.
To summarize, commercial speech is the promotion of a good or service through written works, radio, television, or the Internet. Commercials, Internet advertisements, and fliers are a few examples.
Thus, option A is correct.
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Problem 4-03 (Algorithmic) The employee credit union at State University is planning the allocation of funds for the coming year. The credit union makes four types of loans to its members. In addition, the credit union invests in risk-free securities to stabilize income. The various revenueproducing investments together with annual rates of return are as follows: Type of Loan/Investment Annual Rate of Return (%) Automobile loans 8 Furniture loans 10 Other secured loans 11 Signature loans 12 Risk-free securities 9 The credit union will have $1.7 million available for investment during the coming year. State laws and credit union policies impose the following restrictions on the composition of the loans and investments: Risk-free securities may not exceed 30% of the total funds available for investment. Signature loans may not exceed 10% of the funds invested in all loans (automobile, furniture, other secured, and signature loans). Furniture loans plus other secured loans may not exceed the automobile loans. Other secured loans plus signature loans may not exceed the funds invested in risk-free securities. How should the $1.7 million be allocated to each of the loan/investment alternatives to maximize total annual return? Round your answers to the nearest dollar. Automobile Loans $ Furniture Loans $ Other Secured Loans $ Signature Loans $ Risk Free Loans $ What is the projected total annual return? Round your answer to the nearest dollar. $
Answer:
auto: $535,500furniture: $144,500other secured: $391,000signature: $119,000risk-free: $510,000projected return: $160,480 (9.44%)Explanation:
We can let the variables a, f, o, s, r stand for the amounts invested in auto loans, furniture loans, other secured loans, signature loans, and risk-free securities, respectively. The restrictions imposed are ...
r ≤ 0.30(1.7·10^6)s ≤ 0.10(a +f +o +s)f +o ≤ ao +s ≤ ra +f +o +s +r = 1.7·10^6And the objective is to maximize ...
p = 0.08a +0.10f +0.11o +0.12s +0.09r
We can write the constraints in standard form as ...
r -510000 ≤ 0-a -f -o +9s ≤ 0-a +f +o ≤ 0o +s -r ≤ 0a +f +o +s +r -1700000 = 0__
It is convenient to formulate this problem as a "solver" problem in a spreadsheet program. The spreadsheet and the solver setup are shown in the attachments. The result is ...
Automobile Loans $535,500Furniture Loans $144,500Other Secured Loans $391,000Signature Loans $119,000Risk Free Securities $510,000The projected total annual return: $160,480 (9.44%)
_____
Comment on the attachments
The first attachment shows the NeoOffice spreadsheet used to solve this problem. The formula shown is filled in all cells G3:G8. The second attachment shows the Solver setup used to solve this problem. There are actually five constraints. The one not showing is $G$7 = 0.