The managers should choose between different variable-cost/fixed-cost structures "such as cost-volume-profit analysis, flexibility, scalability, industry dynamics, risk management, capital investment, the time horizon, and the competitive landscape".
They need to evaluate the breakeven point and adaptability to changing demand, level of risk, required upfront investment, long-term goals, and industry benchmarks.
The manage should analysis striking a balance between variable and fixed costs based on these considerations is crucial for optimizing profitability, managing risk, and achieving sustainable growth in a dynamic business environment.
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QUESTION 11
Based on the data below calculate the company's annual ordering cost? Annual requirements = 7500 units Ordering cost = BD 12 Holding cost = BD 0.5 O 125 O 300 O 45000 O 150
The company's annual ordering cost is BD 156. The EOQ represents the optimal order quantity that minimizes both ordering and holding costs.
To calculate the company's annual ordering cost, we need to use the economic order quantity (EOQ) formula, which is:
EOQ = sqrt((2 x Annual requirements x Ordering cost) / Holding cost)
Where:
Annual requirements = 7500 units
Ordering cost = BD 12
Holding cost = BD 0.5
Plugging in these values, we get:
EOQ = sqrt((2 x 7500 x 12) / 0.5)
EOQ = sqrt(360000)
EOQ = 600
The EOQ represents the optimal order quantity that minimizes both ordering and holding costs. To find the number of orders placed annually, we divide the annual requirements by the EOQ:
Number of orders = Annual requirements / EOQ
Number of orders = 7500 / 600
Number of orders = 12.5
Since we can't place a fraction of an order, we round up to the nearest whole number, which gives us 13 orders per year. To calculate the annual ordering cost, we multiply the number of orders by the ordering cost:
Annual ordering cost = Number of orders x Ordering cost
Annual ordering cost = 13 x 12
Annual ordering cost = BD 156
Therefore, the company's annual ordering cost is BD 156.
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Suppose that equilibrium income is 3400, the marginal propensity to save is 0.25, the marginal tax rate is 0.1 and the marginal propensity to import is 0.2. If the natural level of output/income is equal to 3050, by how much will autonomous taxation need to change to close the gap and move the economy to the natural level of output/income? Provide answer to 1 decimal point. If a decrease in autonomous taxation is required you must place a negative sign in front of your answer.
The initial equilibrium income is 3400, and the natural level of income is 3050. Autonomous taxation must change to reduce the gap and return the economy to the natural level of output/income. As a result, autonomous taxation must decrease, which can be expressed as a negative value.
To bridge the gap between the initial equilibrium income and the natural level of output/income, the formula for calculating the required change in autonomous taxation is Change in autonomous taxation = (natural level of income - equilibrium income) / [1 - (marginal propensity to save + marginal tax rate + marginal propensity to import)] When autonomous taxation decreases, it helps to raise consumption and output/income. Therefore, a negative sign is placed in front of the answer.
According to the given information: Equilibrium income is 3400The marginal propensity to save is 0.25. The marginal tax rate is 0.1. The marginal propensity to import is 0.2 The natural level of output/income is 3050 Substituting the given values in the formula above, we have: Change in autonomous taxation = (3050 - 3400) / [1 - (0.25 + 0.1 + 0.2)] Change in autonomous taxation = (-350) / [1 - 0.55]Change in autonomous taxation = (-350) / 0.45 Change in autonomous taxation = -777.8 ≈ -777.8 units Therefore, autonomous taxation must decrease by approximately 777.8 units to close the gap and return the economy to the natural level of output/income.
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Product differentiation
A) is only legal if it is perceived.
B) is only important if it is perceived.
C) can be actual or perceived.
D) is only important if it is actual.
Product differentiation can manifest in either tangible or perceived forms. Thus, option C is the accurate or appropriate choice.
Product differentiation involves the strategies employed by businesses to set their products and services apart from those offered by competitors. The purpose of product differentiation is to create a unique identity that appeals to the target market while increasing the product's perceived value. It can be achieved by creating a unique product design, packaging, or brand name. Product differentiation can occur in either real or perceived terms.
Actual differentiation occurs when the product has physical features or attributes that are unique to it. In contrast, perceived differentiation occurs when the product is perceived as unique, even if it doesn't have any unique features. Perceived differentiation is particularly important when a product has many competitors, and its unique features are not significant.
Product differentiation is important because it gives the business a competitive advantage over its rivals. By creating a unique product or service, a business can charge a higher price for its products than its competitors. This allows the business to earn higher profits while maintaining its market share.
Therefore, option C: can be actual or perceived is the correct answer. This is because a product can be differentiated based on actual features or perceived unique qualities. Actual differentiation refers to the physical features or attributes of the product, while perceived differentiation refers to the perceived unique qualities of the product.
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y paper STVIALIN E £1,956,18 5) Which of the following capital budgeting techniques ignores the time value of money? A Profitability index B Internal rate of return с Net present value D Discounted
Net present value is the capital budgeting technique that take into account the time value of money. Net present value is the best capital budgeting technique that considers the time value of money, and it's commonly used by organizations for their capital budgeting decisions. The correct answer is option C.
The capital budgeting techniques used to determine whether an organization's long-term investments such as new machinery, replacement of old machinery, plant expansion, and research and development will be profitable or not are a significant concern for business executives.
To determine the value of an investment, they may use different methods. To calculate the value of the project in the future, capital budgeting methods consider the present value of future cash flows associated with the project, along with its cost of capital. However, some capital budgeting methods do not take into account the time value of money. The methods that ignore the time value of money are explained below:
The Payback Period: This is the duration of time required for an organization to recover its initial investment in a project. The Payback Period considers the time it takes to recover the initial investment in a project and does not account for the time value of money.
The profitability index (PI): The profitability index is calculated by dividing the present value of future cash flows by the present value of the initial investment. The PI does not take into account the time value of money.
Internal Rate of Return (IRR): The Internal Rate of Return (IRR) is the rate of return at which the net present value of the project's cash flows is zero. The IRR calculation is based on the cash inflows and outflows of a project, but it does not consider the time value of money.
Discounted Payback Period (DPBP): The Discounted Payback Period calculates the amount of time needed to recover the initial investment in a project based on the discounted cash flows. The DPBP technique takes into account the time value of money. It's not like the other methods that ignore the time value of money.
Net present value (NPV): NPV is the difference between the present value of all future cash inflows and outflows, including the initial investment. The NPV calculation considers the time value of money.
Therefore, NPV is the best capital budgeting technique that considers the time value of money and is commonly used by organizations for their capital budgeting decisions. The correct answer is option C.
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QUESTION 24 Which of the following statements is correct.
I . Growing perpetuity payments are always the same dollar amount.
II. Perpetuity investments offer infinite payments.
O a. I only
O b. ll only
O c. Both I and II
O d. Neither I nor Il
The correct answer is option O a. I only. Growing perpetuity payments are always the same dollar amount.
Statement I: Growing perpetuity payments are always the same dollar amount.
This statement is incorrect. Growing perpetuity payments increase over time at a fixed rate. The dollar amount of the payments increases with each period, reflecting the growth rate.
Statement II: Perpetuity investments offer infinite payments.
This statement is incorrect. Perpetuity investments offer payments that continue indefinitely, but they are not infinite. The payments are made at regular intervals for an indefinite period.
Therefore, neither statement I nor statement II is correct, making option O d. Neither I nor II the correct answer.
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Calculate the return of Netflix, Inc. (NFLX) for May 13- May 27,
May 27, and May 27- June 10.
Netflix, Inc. (NFLX) has had an enormous success in the streaming video industry. Its shareholders have seen the benefit of this success over the years, as Netflix's stock has skyrocketed to all-time highs.
The return of Netflix for May 13- May 27, May 27, and May 27- June 10 are given below:May 13- May 27: The closing stock price of Netflix on May 13 was $482.68 and on May 27 was $491.92. Therefore, the return of Netflix for May 13- May 27 is:((491.92 - 482.68) / 482.68) * 100% = 1.92%May 27: The closing stock price of Netflix on May 27 was $491.92. Therefore, the return of Netflix for May 27 is zero. May 27- June 10: The closing stock price of Netflix on May 27 was $491.92 and on June 10 was $492.31. Therefore, the return of Netflix for May 27- June 10 is:((492.31 - 491.92) / 491.92) * 100% = 0.08%.
In the case of stock investments, calculating returns is a crucial step to determine whether an investment is a wise one. It helps investors to know how much they made or lost on their investment. In the case of Netflix, Inc. (NFLX), we calculated its return for three different time periods: May 13- May 27, May 27, and May 27- June 10. The return of Netflix for May 13- May 27 was 1.92%, May 27 was zero, and May 27- June 10 was 0.08%. These numbers indicate that Netflix has had a relatively stable performance during these time periods. The zero return for May 27 suggests that the stock price didn't move up or down during that time. Overall, the returns of Netflix for the given time periods demonstrate that the stock price was on an upward trend during May and early June.
In conclusion, calculating the return of a stock is essential for investors to gauge the profitability of their investments. In this case, we saw that Netflix performed well during May and early June, with the stock price experiencing a stable growth.
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QUESTION 3 All of the following are components listed on a project plan except: a. Gantt Chart b. Stakeholders requirements C. WBS d. Budget
All of the following are components listed on a project plan except: b. Stakeholders requirements.
A project plan typically includes components such as a Gantt Chart, Work Breakdown Structure (WBS), and Budget. These elements help outline the timeline, tasks, resources, and financial aspects of the project. However, stakeholder requirements are not typically listed as a separate component on a project plan. While stakeholder analysis and engagement are critical aspects of project management, the specific requirements and expectations of stakeholders are often integrated into the various components of the project plan, such as the objectives, deliverables, and tasks outlined in the WBS. The project plan serves as a comprehensive document that guides the execution of the project and ensures that all necessary elements are accounted for.
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to close a recessionary gap with fiscal policy, the government could:
To close a recessionary gap with fiscal policy, the government could implement expansionary fiscal measures, such as increasing government spending and/or reducing taxes.
During a recession, the economy experiences a decline in aggregate demand, resulting in a recessionary gap where actual output falls below potential output. Fiscal policy, which involves the use of government spending and taxation, can be employed to stimulate economic activity and close this gap.
One approach is for the government to increase its spending on infrastructure projects, public services, education, or healthcare. By injecting additional funds into the economy, government spending stimulates aggregate demand, creates jobs, and boosts economic activity. This increased spending has a multiplier effect, as the income generated by the initial spending flows through the economy, creating further economic activity.
Another option is to reduce taxes, providing individuals and businesses with more disposable income. Lower taxes can incentivize consumption and investment, which in turn increases aggregate demand and stimulates economic growth. By reducing tax burdens, households have more money to spend, leading to increased consumer spending. Similarly, businesses can use the tax savings to invest in new projects, expand operations, or hire more employees.
Both increased government spending and tax cuts can have positive effects on economic activity, but they also come with potential downsides. Government spending increases may lead to budget deficits if not accompanied by corresponding revenue increases or expenditure cuts elsewhere. Tax cuts, while potentially stimulating consumption and investment, can also reduce government revenue and impact public finances.
In summary, to close a recessionary gap, the government can use fiscal policy tools such as increased government spending or tax cuts. These measures aim to boost aggregate demand, stimulate economic activity, and bring the economy back to its potential output level. However, policymakers need to carefully consider the fiscal implications and long-term sustainability of these measures while balancing the need for short-term economic stabilization.
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Kate has just graduated from business school and has been offered a good job at an attractive salary which she is sure she will accept. However, as the company is located outside city and quite a distance away from her home, Kate realizes she is going to need a car. Kate has never purchased a car before but knows she will want to purchase a new one. Within this context, discuss the buyer decision process, as it pertains to this particular situation.
The buying decision process is a procedure that is followed by the consumers before buying a product. It involves a sequence of steps taken by the consumer in deciding to buy the product. The following is the buyer decision process as it pertains to Kate’s situation.
Problem recognitionKate has realized that she will need to purchase a car in order to travel to work. The problem arises when she has to decide on which car to buy. Therefore, she has recognized the problem of selecting the car that will suit her needs.
Step 2: Information searchAfter recognizing the problem, Kate has conducted information search. She has started to look for different types of cars, the features they have, their prices, and the quality of the car. She has also gathered information from various sources including the internet, family members, friends, and dealerships.
Step 3: Evaluation of alternativesIn this step, Kate has evaluated the different alternatives and options that are available to her. She has taken into consideration factors such as the cost of the car, the quality of the car, fuel consumption, and maintenance cost.
Step 4: Purchase decisionAfter evaluating the different alternatives, Kate has decided on the car that she is going to purchase. She has chosen the car that suits her needs best based on the factors she considered in .
Step 5: Post-purchase evaluationAfter making the purchase, Kate will evaluate the car based on her satisfaction level. If she is satisfied with the car, then she will have no regrets and she will recommend the car to others. However, if she is not satisfied, she may return the car, which is known as post-purchase dissonance.Based on the information provided, Kate has followed the buyer decision process in order to select the car that best suits her needs. She has gone through the steps of problem recognition, information search, evaluation of alternatives, purchase decision, and post-purchase evaluation. By going through this process, she has ensured that she has made the right decision in selecting the car that will suit her needs. Therefore, this process is important as it helps buyers make informed decisions, and avoid post-purchase dissonance.
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Case 15–1 Rocky Plains Brewing Ltd.
On April 21, Mike Pearson, packaging materials manager for Rocky Plains Brewery Ltd. (Rocky Plains), in Billings, Montana, received a call from Gerald Gilpin, owner and president of Gilpin Printing Inc (Gilpin), a local label supplier. Two days earlier, Mike had notified Gerald that Rocky Plains was terminating the label contract with Gilpin as of May 30 and expected payment of a contractual rebate of $690,000. Gerald told Mike he refused to pay the rebate and demanded a $4.4 million wire transfer the next day in order to continue supply.
ROCKY PLAINS BREWING LTD.
Page 478
Rocky Plains was more than 100 years old and was one of the most recognized beer brands in the United States. The company had a reputation for producing products of exceptional quality, supported by high standards for raw materials, proven brewing methods, and rigorous production processes. After operating for more than 80 years as a family business, the company was presently owned by a large multinational brewery. The Billings facility brewed three to four million barrels of beer per year and employed approximately 500 people.*
GILPIN PRINTING
Gilpin was a family-owned business, and its president, Gerald Gilpin, was the son of the company’s founder. Gilpin had been Rocky Plains primary label supplier for approximately 15 years, and Mike considered Gilpin’s performance in the areas of quality and service to be good. Mike estimated that sales to Rocky Plains represented 45 percent to 50 percent of Gilpin’s total annual revenues.
Gilpin provided Rocky Plains with three-day service—typically orders for labels were placed on Thursday for delivery on Monday morning. As a result, Gilpin carried substantial raw material safety stock, and Rocky Plains carried minimal inventories for its labels.
Rocky Plains used "cut and stack" labels exclusively for its products, of which approximately 80 percent were metallized labels and the balance were paper labels. The majority of high-volume labels supplied by Gilpin were produced through a rotogravure printing process, which used a printing plate to stamp the ink on to the paper. Rotogravure printing required the label design to be etched onto a copper cylinder, which typically required a four-week lead time to create. Litho-offset printing was the second method used for Rocky Plains labels, typically for speciality and low-volume brands. In contrast to rotogravure printing, litho-offset used etched rubber cylinders.
CONTRACT REVIEW
Rocky Plains’ supply contract with Gilpin was to expire on May 30 and, after consultation with Mike’s boss, Brian Evans, director of purchasing, the decision had been made in November to test the market. Mike’s intention was to probe the market for better pricing, materials, and print methods. A major concern for Mike and Brian was ongoing financial problems at Gilpin (see Exhibit 1 for a summary of Gilpin’s financial statements). Gilpin had been unsuccessful in efforts to stem its financial losses during the past two years, and Mike had heard rumors that Gerald Gilpin was attempting to sell the business.
The case revolves around Rocky Plains Brewing Ltd., a well-established beer brand, and Gilpin Printing Inc., their primary label supplier. Rocky Plains had decided to terminate their label contract with Gilpin and requested a contractual rebate of $690,000.
However, Gerald Gilpin, the president of Gilpin, refused to pay the rebate and demanded a $4.4 million wire transfer to continue supply.
Rocky Plains was a renowned beer brand known for its exceptional quality and rigorous production processes. It was owned by a large multinational brewery and brewed millions of barrels of beer annually. On the other hand, Gilpin Printing was a family-owned business, providing labels to Rocky Plains for approximately 15 years. They had a good performance record in terms of quality and service, and their sales to Rocky Plains constituted a significant portion of their total revenues.
The labels supplied by Gilpin to Rocky Plains were primarily produced through rotogravure printing, which required a four-week lead time for label design etching. Litho-offset printing was used for specialty and low-volume brands. Rocky Plains had decided to test the market for better pricing, materials, and print methods as the contract with Gilpin was nearing its expiration.
One of the concerns for Rocky Plains was the financial troubles faced by Gilpin, as the company had been experiencing losses for the past two years. There were rumors of Gerald Gilpin attempting to sell the business.
The case sets the stage for a potential conflict between Rocky Plains and Gilpin regarding the termination of the contract and the payment of the contractual rebate. It highlights the importance of supplier relationships, financial considerations, and the need to explore alternatives in the supply chain.
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QUESTION 17
General Motors has current assets $5000, non-current assets $3000, plant and equipment $1500, notes payable $800 and retained earnings $1000, using the standardized financial statement method how would retained earnings appear?
O a. 10%
O b. 12.5%
O c. 8.42%
O d. 20%
Utilizing the standardized money-related explanation strategy, General Motors contains a shortage in held profit, shown by negative esteem. None of the provided options is the answer.
How to determine how General Motors retained earnings would appearTo decide how held profit would show up utilizing the standardized money-related articulation strategy, we have to calculate the rate of held profit in connection to the full resources.
Held profit can be calculated as the contrast between the overall resources and the entirety of current resources, non-current resources, plant and gear, and notes payable:
Held Profit = Add up to Resources - (Current Resources + Non-Current Resources + Plant and Gear + Notes Payable)
In this case, the calculation would be:
Held Profit = $5000 - ($3000 + $1500 + $800)
Held Profit = $5000 - $5300
Held Profit = -$300
Since the result is negative, it shows that the held profit is in shortfall. Subsequently, utilizing the standardized money-related articulation method, the held profit would not show up as a positive rate.
None of the options provided (10%, 12.5%, 8.42%, or 20%) would be the proper reply.
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You have $216,037 to invest in a stock portfolio (this amount is your original wealth). Your choices are Stock H, with an expected return of 15.16 percent, and Stock L, with an expected return of 8.71 percent. Legal constraints require you to invest at least $35,492 in stock L. If your goal is to create a portfolio with an expected return of 20.22 percent on your original wealth, what is the minimum amount you must borrow (and subsequently repay) at the risk free rate of 2.46 percent to achieve your goal? Answer in $ to two decimals.
Given that the investor has $216,037 to invest in a stock portfolio, let's assume x to be the amount invested in stock L. The remaining amount invested in Stock H would be (216,037 - x).From the problem statement, it is given that Legal constraints require the investor to invest at least $35,492 in stock L.
So the amount invested in stock L is greater than or equal to $35,492.x >= 35,492If the expected return from stock L is 8.71%, the expected return from stock H is 15.16% and the expected return from the portfolio is 20.22%, then, 8.71x + 15.16(216037 - x) = 20.22(216037).On solving the equation, we getx = 76544.43 (rounded off to 2 decimal places).
The minimum amount the investor needs to borrow to achieve the expected return of 20.22% on the portfolio is the difference between the amount invested in the portfolio and the original wealth of $216,037, which is, ($216,037 - $76,544.43) = $139,492.57 (rounded off to 2 decimal places).Therefore, the minimum amount the investor must borrow is $139,492.57.
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there is an obligation on your part; however, when you purchase When you purchase part. O Forward contracts, futures contracts. O Call options, put options. O Futures contract, put option O Futures contracts, call options. O Put options, forward contracts. there is no obligation on your
The obligation on your part when you purchase futures contracts and forward contracts, but there is no obligation on your part when you purchase call options and put options.
The reason for this is because a futures contract, also known as a forward contract, is a legally binding agreement between two parties to purchase or sell an underlying asset at a specific price and date in the future. The holder of a call option or a put option, on the other hand, has the right but not the responsibility to purchase or sell the underlying asset at a given price and time in the future.
You are committing to buy or sell an underlying asset at a specified price and date in the future when you purchase a futures contract or a forward contract. This means that you are obligated to fulfill the terms of the contract, whether the price of the underlying asset goes up or down. For example, if you buy a futures contract to buy 100 shares of XYZ stock at $50 per share in three months, you are obligated to buy those shares at that price in three months, regardless of whether the price of the stock goes up or down. This is why futures contracts and forward contracts are considered to be binding contracts. When you buy a call option or a put option, you are not obligated to buy or sell the underlying asset.
Instead, you have the right to buy or sell the asset at a specific price and date in the future, but you are not required to do so. For example, if you buy a call option to buy 100 shares of XYZ stock at $50 per share in three months, you have the right to buy those shares at that price in three months, but you are not required to do so. This is why call options and put options are considered to be non-binding contracts.
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I need to do a report on as a consultant for Harley Davidson New York, and help the company CEO Asaf Jacobi decide on the best options for future expansion. I need to read the case study and write a report for the owner Asaf as to weather if introducing an electric motorcycle is beneficial due to the pandemic and if so where it ill be most successful. I have to also include data to backup my answers
As the consultant for Harley Davidson New York, it is recommended to introduce electric motorcycles in order to benefit from the pandemic.
The most successful location for this introduction would be the U.S. market.
The COVID-19 pandemic has drastically affected the market for motorcycles, with a decreased demand for traditional gas-powered models.
This presents an opportunity for Harley Davidson to introduce an electric motorcycle option that aligns with the growing demand for eco-friendly vehicles.
The U.S. market would be the most successful for this introduction, as it is the largest market and has a strong infrastructure for electric vehicles.
Additionally, data shows that the demand for electric motorcycles is growing at a rapid pace, with projections indicating a steady increase in sales through to 2025.
By introducing an electric motorcycle option, Harley Davidson has the potential to tap into this growing market while also minimizing the negative effects of the pandemic on their sales.
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Explain how the use of internet can create ethical concerns for
salespeople in some cases.
short answer
The internet can create ethical concerns for salespeople in some cases due to the following reasons:Unfair advertisingSalespeople may misuse the internet platform and offer false information to customers, thus mislead them.
This is unfair to the customer and unethical on the salesperson's part. Therefore, they should be careful about advertising, making promises, and offering services they can't deliver.Confidentiality and privacy issuesSalespeople may violate customers' privacy by collecting and misusing their confidential data without consent. This is a breach of trust and is an ethical issue for salespeople. Therefore, they should ensure that the customer's personal information is kept confidential and they should use it only for the intended purpose.Cyberbullying and harassmentSalespeople may use the internet to harass or bully customers by sending them unwanted messages, threats, or making abusive calls. This is an ethical issue and can ruin the salesperson's reputation. Therefore, they should maintain professional conduct and respect customers' privacy and personal space in their dealings.In conclusion, the internet provides numerous opportunities for salespeople to grow their businesses, but it also presents some ethical concerns. Salespeople should be aware of these concerns and take measures to avoid them, such as adhering to ethical guidelines and best practices in their industry, as well as being mindful of customer's privacy and personal data.
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Wilson Corporation’s bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850. What is their yield to maturity? Show calculations.
The yield to maturity (YTM) of Wilson Corporation's bonds is approximately 12.16%.
To calculate the yield to maturity (YTM) of Wilson Corporation's bonds, we can use the following formula:
YTM = (Annual Interest Payment + ((Par Value - Purchase Price) / Number of Years)) / ((Par Value + Purchase Price) / 2)
Given information:
- Annual Interest Payment: $100 (10% of the $1,000 par value)
- Par Value: $1,000
- Purchase Price: $850
- Number of Years: 12
Substituting these values into the formula, we get:
YTM = ($100 + (($1,000 - $850) / 12)) / (($1,000 + $850) / 2)
Simplifying further:
YTM = ($100 + ($150 / 12)) / ($1,850 / 2)
YTM = ($100 + $12.50) / $925
YTM = $112.50 / $925
YTM ≈ 0.1216 or 12.16%
Therefore, the yield to maturity (YTM) of Wilson Corporation's bonds is approximately 12.16%.
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Badan is a new autoparts business that sells autoparts which it bought from various suppliers The business commenced operating on 1 July 2020. The following events have occurred so far during the month: 1/7 Commenced business with cash of $140,000 and inventory worth $52,000 5/7 The owner withdrew $2,600 for her own personal use. 10/7 Sold autoparts costing $800 for $1800 and received cash. 17/7 Received a loan of $60,000 from the bank Required: Prepare the transaction analysis to record these events. (11 marks) If you accidentally delete the answer template, you may undo the deletion using "Ctrl + Z" (for Windows) or "Command + Z" (for Mac). If that does not work, please click on this link Answer Template. You may copy and paste the answer template to the answer box.
the transaction analysis to record the events for Badan, the autoparts business :
Date | Account | Debit | Credit-----------------------------------------------------------------
1/7 | Cash | $140,000 | 1/7 | Inventory | $52,000 |
1/7 | Owner's Equity | | $192,000-----------------------------------------------------------------
5/7 | Owner's Equity | $2,600 | 5/7 | Cash | | $2,600
-----------------------------------------------------------------10/7 | Cash | $1,800 |
10/7 | Sales Revenue | | $1,80010/7 | Cost of Goods Sold | $800 |
10/7 | Inventory | | $800-----------------------------------------------------------------
17/7 | Cash | $60,000 | 17/7 | Loan Payable | | $60,000
-----------------------------------------------------------------
In the transaction analysis, the date of each event is listed along with the accounts involved, the debit and credit amounts for each account.
| $52,000 |
1/7 | Owner's Equity | | $192,000-----------------------------------------------------------------
5/7 | Owner's Equity | $2,600 | 5/7 | Cash | | $2,600
-----------------------------------------------------------------10/7 | Cash | $1,800 |
10/7 | Sales Revenue | | $1,80010/7 | Cost of Goods Sold | $800 |
10/7 | Inventory | | $800-----------------------------------------------------------------
17/7 | Cash | $60,000 | 17/7 | Loan Payable | | $60,000
-----------------------------------------------------------------
In the transaction analysis, the date of each event is listed along with the accounts involved, the debit and credit amounts for each account. The debits and credits must balance in each transaction.
On 1/7, when Badan commenced business, it recorded the cash and inventory brought into the business, which increased the assets (cash and inventory) and the owner's equity (capital).
On 5/7, when the owner withdrew $2,600 for personal use, it reduced the owner's equity and cash.
On 10/7, when autoparts were sold for $1,800, it increased cash and sales revenue, while reducing inventory and recording the cost of goods sold.
On 17/7, when Badan received a loan from the bank, it increased the cash and recorded a liability in the form of a loan payable.
Please note that the amounts are assumed and the analysis provided is a simplified representation for illustrative purposes.
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Which of the following is a method for measuring a firm's strategic alignment? Select one: O a. Markov analysis O b. a balanced scorecard c. benchmarking O d. an HR "dashboard"
A balanced scorecard is a method for measuring a firm's strategic alignment. What is a balanced scorecard?A balanced scorecard is a strategic management tool that allows companies to analyze the performance of their business activities against the company's goals and strategies.
The balanced scorecard views an organization from four different perspectives, namely the financial perspective, customer perspective, internal business process perspective, and learning and growth perspective.The Balanced Scorecard provides senior management with a clear, easy-to-read, and actionable overview of the organization's performance. It is regarded as a comprehensive management system that measures how well a company's current activities contribute to achieving the company's strategic objectives.To summarize, a balanced scorecard is a technique for assessing strategic alignment in a company.
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Crane Corporation has retained earnings of $679,600 at January 1, 2020. Net income during 2020 was $1,649,300, and cash dividends declared and paid during 2020 totaled $78,500. Prepare a retained earnings statement for the year ended December 31, 2020. Assume an error was discovered: land costing $89,140 (net of tax) was charged to maintenance and repairs expense in 2019
The retained earnings statement for Crane Corporation for the year ended December 31, 2020, can be prepared by taking into account the beginning retained earnings, net income, dividends declared and paid.
To prepare the retained earnings statement for Crane Corporation for the year ended December 31, 2020, we start with the beginning retained earnings balance. In this case, the retained earnings at January 1, 2020, is $679,600.Next, we add the net income for the year, which is $1,649,300. This represents the profit earned by the company during 2020.Then, we subtract the dividends declared and paid during 2020, which is $78,500. Dividends are distributions of profits to shareholders.
Now, we need to adjust for the error discovered in 2020. The land costing $89,140 that was charged to maintenance and repairs expense in 2019 needs to be corrected. This adjustment decreases the retained earnings and adjusting for an error in the previous year related to land costing $89,140 charged to maintenance and repairs expense.
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A bank faces a pool of high and low risk borrowers with measure one in two successive periods. In each period, each borrower wishes to borrow 1 from the bank. A low risk borrower's project returns G = 2 with probability PG = 0.8 and high risk borrower's project yields B = 3 with probability PB = 0.2 in each period. If a project is unsuccessful, it yields zero. The bank knows that the proportion of low risk borrowers is y = 0.5. However, the bank is unable to distinguish between low and high risk borrowers, i.e. it doesn't have an appropriate screening technology. (a) Consider a bank which operates as a monopoly and wants to attract both types of borrowers in the first period. i. What's the repayment R(1) that the bank will charge in the first period? Compute the bank's first period profit 7(¹). ii. Calculate the posterior probabilities of a borrower being low risk given that the project was successful and also when the project failed after the first period (i.e. Pr(GIS) and Pr(G|F), respectively). iii. How much will the bank charge to successful and failed borrowers in the second period (R2), R2)? Calculate the bank's second period profit 7(2). What's the total profit across the two periods (7¹) + 77 (²))? (b) Now, suppose the monopoly bank contemplates pursuing an alternative lending strategy: lending only to high risk borrowers in the first period. Is this strategy less br more profitable than the one discussed in a)? Why or why not? Explain your results carefully. (c) Now, suppose there is perfect competition among banks in both periods. What will the repayment rate be that the bank would charge in the first period R(1)C if both low and high risk borrowers apply? What is the competitive equilibrium rate in the first period? What would the repayment rates be in the second period paid by successful and unsuccessful borrowers be (R(2)C, R(2), respectively)? How does competition affect overall risk taking in this model and why?
The repayment rate in the first period is 1.6, with posterior probabilities of 0.8 and 0.2 for low-risk borrowers given successful and failed projects, respectively. In the second period, the bank charges a repayment rate of 1.6, resulting in a second period profit. The total profit across both periods is 1. Lending only to high-risk borrowers in the first period is less profitable compared to attracting both types of borrowers. In perfect competition, the bank charges a repayment rate of 1 in the first period and the competitive equilibrium rate is also 1. The repayment rates in the second period for successful and unsuccessful borrowers are 1. Competition affects risk-taking by lowering repayment rates and potentially increasing risk due to reduced screening standards.
a)
i. In the first period, the bank will charge a repayment rate that balances the expected returns from low and high risk borrowers. The expected return from low-risk borrowers is 0.8 * 2 = 1.6, and from high-risk borrowers is 0.2 * 3 = 0.6. Since the bank wants to attract both types of borrowers, it sets the repayment rate equal to the expected return of the low-risk borrowers, R(1) = 1.6.
The bank's first period profit, denoted as π(1), is calculated by subtracting the amount lent (1) from the expected repayments received:
π(1) = 0.5 * 0.8 * 1 + 0.5 * 0.2 * 1 = 0.5.
ii. The posterior probability of a borrower being low risk given that the project was successful, denoted as Pr(G|S), can be calculated using Bayes' theorem:
Pr(G|S) = (Pr(S|G) * Pr(G)) / Pr(S).
Pr(S|G) is the probability of a successful project given that the borrower is low risk, which is 0.8. Pr(G) is the proportion of low-risk borrowers, which is 0.5. Pr(S) is the probability of a successful project, calculated as the sum of the probabilities for both low and high-risk borrowers: Pr(S) = Pr(S|G) * Pr(G) + Pr(S|B) * Pr(B) = 0.8 * 0.5 + 0.2 * 0.5 = 0.5.
Using these values, we can calculate Pr(G|S) = (0.8 * 0.5) / 0.5 = 0.8.
The posterior probability of a borrower being low risk given that the project failed, denoted as Pr(G|F), can be calculated similarly using Bayes' theorem:
Pr(G|F) = (Pr(F|G) * Pr(G)) / Pr(F).
Pr(F|G) is the probability of a failed project given that the borrower is low risk, which is 1 - Pr(S|G) = 0.2. Pr(F) is the probability of a failed project, calculated as 1 - Pr(S) = 0.5.
Using these values, we can calculate Pr(G|F) = (0.2 * 0.5) / 0.5 = 0.2.
iii. In the second period, the bank charges the same repayment rate to successful and failed borrowers as in the first period, R(2) = R(1) = 1.6.
The second period profit, denoted as π(2), is calculated in the same way as in the first period, by subtracting the amount lent (1) from the expected repayments received:
π(2) = 0.5 * 0.8 * 1 + 0.5 * 0.2 * 1 = 0.5.
The total profit across the two periods is the sum of the first and second period profits: π(1) + π(2) = 0.5 + 0.5 = 1.
(b) If the monopoly bank pursues the alternative lending strategy of lending only to high-risk borrowers in the first period, it will charge a repayment rate that balances the expected return from high-risk borrowers, R'(1) = 0.2 * 3 = 0.6.
This strategy is more profitable than the previous one because the bank is exposed to a higher return from high-risk
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1. Rick's Razors Inc. has a net income of $90,000 this year. They depreciated $55,000 in fixed assets, paid a $43,000 dividend, increased inventory by $30,000, and reduced long-term debt by $56,000. Receivables increase by $55,000 and payables increased by $15,000. If their cash balance at the beginning of the year was $32,000, what was their cash balance at the end of the year?
2. If the firm has 2 million in sales, what is Rick's Razors net profit margin?
1. The cash balance at the year end is $90,0002.
2. The net profit margin of Rick's Razors is 4.5%.
1.This year, Rick's Razors Inc. achieved a net income of $90,000.
Fixed assets worth $55,000 were depreciated by Rick's Razors Inc. during the year.
Rick's Razors Inc. distributed a dividend of $43,000.
The inventory of Rick's Razors Inc. increased by $30,000.
Rick's Razors Inc. reduced their long-term debt by $56,000.
There was an increase of $55,000 in receivables for Rick's Razors Inc.
Payables for Rick's Razors Inc. experienced an increase of $15,000.
If their cash balance at the beginning of the year was $32,000, the cash balance at the end of the year can be calculated using the following formula:
Cash Balance at the end of the year = Cash Balance at the beginning of the year + Net Cash Flow
Net cash flow is the difference between inflows and outflows of cash during the year.
The cash inflows for the company are as follows:
Net income: $90,000
Depreciation: $55,000
Reduction in Long term debt: $56,000
Cash inflow: $201,000
Cash outflows for the company are as follows:
Dividend paid: $43,000
Increase in Inventory: $30,000
Increase in receivables: $55,000
Increase in payables: $15,000
Cash outflow: $143,000
Net Cash Flow: $201,000 - $143,000 = $58,000
Therefore, the Cash Balance year end:
Cash Balance at the end of the year = Cash Balance at the beginning of the year + Net Cash Flow= $32,000 + $58,000= $90,0002.
2. If the firm has $2 million in sales, the Net profit margin is the ratio of net profit to sales.
It is expressed as a percentage.
Net profit = Gross profit deducted by expenses deducted by taxes
Let's calculate the Gross profit first:
Gross profit = sales deducted by cost of goods sold
Cost of goods sold is not given, hence we can not calculate gross profit.
Instead, let's use the following formula:
The net profit margin can be calculated by multiplying the ratio of net income to sales by 100.
The Net Income is given as $90,000 and the Sales are given as $2,000,000.
Net Profit Margin = (90,000 / 2,000,000) multiplied by 100= 4.5%
Therefore, the net profit margin of Rick's Razors is 4.5%.
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You are employed as an industrial engineer at a company that manufactures computer chips. The smallest defect in a computer chip will render the entire chip worthless. Therefore, tight quality control measures must be established to monitor the quality of the chips. In the past, the defective percentage for these chips has been 1,10%. The sample size is 10000. Management has expressed doubts regarding the accuracy of the data being used and the results obtained. You were entreated with the responsibility of investigating the matter and report your findings to management. You are required to compute the upper and lower control limits for these computer chips using z = 3 (6 Marks). Show all formulas and calculations for full marks
The lowest control limit (LCL) and upper control limit (UCL) of the computer chips, respectively, are around 0.001109 and 2.089%, respectively.
The calculation is as follows:
The following equation may be used to determine the control limits for a sample's defect percentage:
Mean + (z * Standard Deviation) is the Upper Control Limit (UCL).
Mean - (z * Standard Deviation) is the Lower Control Limit (LCL).
Given: The defect rate (Mean) is 1.10 percent.
The sample size is 10,000.
Sqrt(p * (1 - p) / n), where p is the defect percentage, gives the standard deviation ().
Calculate the control limits as follows:
Decimalize the faulty percentage as follows:
Mean = 1.10% = 0.011
Do the standard deviation calculation:
Standard Deviation () is calculated as follows: sqrt(0.011 * (1 - 0.011) / 10,000), sqrt(0.010989 * 0.989011 / 10,000), sqrt(0.0000108789), and the result is around 0.003297.
As stated in the issue, change the z value to 3.
Do the upper control limit calculation:
UCL is calculated as Mean + (z * Standard Deviation), which is 0.011 + (3 * 0.003297) = 0.011 + 0.009891 = 0.020891 (approximately).
Create a computer lower control limit calculation:
LCL is equal to Mean - (z*Std Dev) = 0.011 - (3*0.003297) = 0.011 - 0.009891.
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Mrs. A, a person of Indian origin, aged 40 years came to India on tour alongwith her baby aged 1.5 years. She carried with her following goods:
1. Personal effects like clothes of Mr. A valued at Rs. 40,000
2. Used personal effects of infant valued at Rs. 60,000
3. Laptop worth Rs. 65,000
4. Travel souvenirs valued at Rs. 25,000
5. 1 litre wine worth Rs. 5,000
6. Mobile worth Rs. 20,000
7. Digital camera Rs. 60,000
8. Cigars 20 worth Rs. 1,340
What is the customs duty payable?
The customs duty payable is ₹23,142. Mrs. A, a person of Indian origin, aged 40 years came to India on tour along with her baby aged 1.5 years. She carried with her the following goods:
1. Personal effects like the clothing of Mr. A valued at Rs. 40,000
2. Used personal effects of infant valued at Rs. 60,000
3. Laptop worth Rs. 65,000
4. Travel souvenirs valued at Rs. 25,000
5. 1 litre wine worth Rs. 5,000
6. Mobile worth Rs. 20,000
7. Digital camera Rs. 60,000
8. Cigars 20 worth Rs. 1,340
To find out the customs duty payable, we need to follow the given steps:
Personal effects (used) are exempted under the Baggage Rules. Therefore, no duty is leviable on the same.
Travel souvenirs valued at Rs. 25,000 - duty will be levied at 28.85% = Rs. 7,213.
Laptop worth Rs. 65,000 - duty will be levied at 28.85% = Rs. 18,746.
Mobile worth Rs. 20,000 - duty will be levied at 28.85% = Rs. 5,770.
Digital camera Rs. 60,000 - duty will be levied at 28.85% = Rs. 16,334.Cigars 20 worth Rs. 1,340 - duty will be levied at 150% = Rs. 2,010.
Wine 1 litre worth Rs. 5,000 - duty will be levied at 150% = Rs. 7,500.
Total customs duty payable is: 7,213 + 18,746 + 5,770 + 16,334 + 2,010 + 7,500 = ₹57,573
Since Mrs. A and her baby have spent more than 3 days abroad, they are allowed a basic exemption of Rs. 50,000 per person (assuming they have not claimed this exemption for the year). Therefore, the total exemption allowed is ₹1,00,000 (for Mrs. A and her baby).
Therefore, the customs duty payable by Mrs. A is Rs. 57,573 - Rs. 1,00,000 = ₹23,142.
Therefore, the customs duty payable is ₹23,142.
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Suppose you have invested in a factory that produces a new type of smart watch. Your investment cost in the factory was $12 million. The only thing the factory produces is this smart watch, and the learning curve is projected to follow the equation below, which gives the estimated cost of producing the uth unit. Y(u) = 125,000/u + 29, for u <= 125,000, and Y(u) = 30, for u >= 125,000. You sell the watch for $225. a. After how many production units will the unit sales revenue exceed the unit production cost? b. Suppose your firm has just completed producing 125,000 units and still has $7.3 million of the factory investment cost remaining to pay off. How many more units will you need to produce to breakeven (ignore the time value of money and interest costs)? c. Before you invested the $12 million, a contract manufacturer offered to manufacturer the watches for you at a unit cost of $145 each. How many units would you have had to sell to pay off the $12 million (again, ignoring interest)?
In order for the unit sales revenue to exceed the unit production cost, the factory needs to produce at least 638 units of the smartwatch.
If the firm has already produced 125,000 units and still has $7.3 million of the investment cost remaining, it would need to produce around 131,000 more units to break even. However, if a contract manufacturer offered a unit cost of $145, the firm would only need to sell approximately 82,759 units to cover the $12 million investment. These calculations highlight the critical production and cost factors that determine profitability and breakeven points for the smartwatch factory.
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ironbridge holdings had sales of 265,450 last year and expects sales growth of 7.25% going forward. how long will it take ironbridge to double their sales at this rate?
It will take approximately 9.59 years for Ironbridge to double their sales at a growth rate of 7.25%.
Let's assume that Ironbridge needs t years to double their sales using the given percentage growth rate of 7.25% per annum. Now, as per the given information,
sales growth rate = 7.25% = 0.0725 (in decimal)
Now, we can use the compound interest formula to solve this problem, which is given as:
A = P(1 + r/n)^(n*t)
Here, A = Final amount or sales amount after t years, P = Principal amount or sales amount before t years, r = rate of interest (here, it is growth rate), n = number of times the interest is compounded (per year), t = time (in years)
So, in this case, the final sales amount would be twice the initial sales amount. i.e., A = 2P
So, we can rewrite the formula as:
2P = P(1 + 0.0725/n)^(n*t)2 = (1 + 0.0725/n)^(n*t)
Now, we can solve for t using logarithmic functions.
2 = (1 + 0.0725/n)^(n*t)
log(2) = log[(1 + 0.0725/n)^(n*t)]
log(2) = n*t*log(1 + 0.0725/n)
t = log(2) / [n * log(1 + 0.0725/n)]
Now, we need to find the value of n, which is the number of times the interest is compounded per year. As the question does not provide any information on this, let's assume that the interest is compounded once per year. Hence, n = 1
Now, substitute this value of n in the above equation:
t = log(2) / [1 * log(1 + 0.0725/1)]
t ≈ 9.59
Therefore, it will take approximately 9.59 years to double their sales.
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An investment policy statement outlines: a. an investor's return objectives, risk preferences, and constraints. b. an investment firm's disclosures to clients. O c. an institution's goals and investment decisions. O d. an investment advisor's approach to applying portfolio theory. O e. a company's disclosures to investors.
An investment policy statement outlines investors' return objectives, risk preferences, and constraints.
Risk tolerance: The investor's comfort with risk is established in this section. It's crucial to determine how much risk the investor is willing to take on, as well as how much they can afford to lose. Investment philosophy and strategy: The IPS should outline the investment manager's investing philosophy and strategy, including asset allocation, investment style, and diversification expectations.Asset allocation: This is diversifying an investor's portfolio across different asset classes, such as stocks, bonds, and commodities.Risk management: This section should outline the procedures that the investment manager will use to manage risk in the portfolio.
An investment policy statement outlines investors' return objectives, risk preferences, and constraints. It's a tool that investment managers use to create and maintain a sound investment strategy that is in line with an investor's goals and objectives. The IPS should specify the investor's needs, goals, and preferences to ensure that the portfolio's investments are appropriate and effective. The IPS outlines investors' return objectives, risk preferences, and constraints. The IPS should also specify the investment manager's investment style, philosophy, and asset allocation strategy, as well as procedures for monitoring and evaluating the portfolio. Option B: An investment firm's disclosures to clients are outlined in an investment advisory agreement. The agreement should contain a summary of the services offered by the investment firm, including portfolio management and investment advice, as well as any associated costs.
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list the factors that shift demand and list the factor that shift supply (hint. chapter 4 of economics) and a total of 9 factors.
The factors that shift demand include consumer income, price of related goods, consumer preferences and tastes, population and demographics, and consumer expectations.
Factors that Shift Demand are as follows:
1. Consumer Income: When consumer income increases, their purchasing power rises, leading to an increase in demand for goods and services. Conversely, a decrease in consumer income will lead to a decrease in demand.
2. Price of Related Goods: The demand for a product can be influenced by the prices of substitute goods (goods that can be used in place of each other) and complementary goods (goods that are used together). An increase in the price of a substitute good will lead to an increase in demand for the original product, while an increase in the price of a complementary good will decrease demand.
3. Consumer Preferences and Tastes: Changes in consumer preferences and tastes can significantly affect demand. If a particular product becomes more popular or desirable, demand will increase, and vice versa.
4. Population and Demographics: The size and characteristics of the population can impact demand. An increase in population or a change in demographics, such as age distribution or income levels, can influence the demand for various goods and services.
5. Consumer Expectations: If consumers expect future price increases or economic conditions to change, they may adjust their current demand accordingly. Anticipating higher prices in the future can lead to increased demand in the present.
Factors that Shift Supply:
1. Resource Prices: Changes in the prices of inputs or resources used in production can affect the cost of production and, consequently, the supply of goods and services. An increase in resource prices will decrease supply, while a decrease in resource prices will increase supply.
2. Technological Advancements: Improvements in technology can enhance productivity and efficiency, resulting in an increase in supply. Conversely, a lack of technological progress or outdated technology may limit supply.
3. Taxes and Subsidies: Changes in taxes and subsidies can impact the costs of production. An increase in taxes or a decrease in subsidies will raise production costs, leading to a decrease in supply. Conversely, a decrease in taxes or an increase in subsidies will lower production costs and increase supply.
4. Number of Sellers: The entry or exit of firms in an industry can affect supply. An increase in the number of sellers will generally lead to an increase in supply, while a decrease in the number of sellers will decrease supply.
5. Expectations of Future Prices: If producers expect higher prices in the future, they may reduce supply in the present to take advantage of potentially higher profits later. Conversely, if they anticipate lower prices in the future, they may increase supply now to avoid potential losses.
The factors that shift supply include resource prices, technological advancements, taxes and subsidies, number of sellers, and expectations of future prices.
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Fill in the blank: You can make sure your team delivers value to customers by building the right thing, building the thing right, and _____.
You can make sure your team delivers value to customers by building the right thing, building the thing right, and building the right thing right.
Building the right thing involves understanding what the customer needs and delivering the product that meets their needs. Building the thing right involves developing a high-quality product that is reliable, usable, and efficient. Building the right thing right means developing a product that not only meets the customer's needs but is also reliable, efficient, and usable.
These steps ensure that the product is developed in a systematic and structured way that meets the customer's needs. To ensure that your team delivers value to customers, you need to build the right thing, build the thing right, and build the right thing right. This approach will help you deliver high-quality products that meet customer needs and deliver value to your business.
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Lodge corporation uses a majority voting system. How many of the 12
directors up for election could Maddy elect if there are 12 million
shares outstanding and he owns 1 million shares?
Lodge corporation uses a majority voting system in which each shareholder has a number of votes equal to the number of shares they hold. The number of directors that can be elected by Maddy will depend on the number of votes required for a majority vote. A majority vote is one in which more than half of the shares are cast in favor of a candidate.
To determine how many votes are needed to elect a director, divide the total number of outstanding shares by two and add one. This calculation is based on the fact that a majority vote is more than half of the total shares. The equation for determining the number of votes needed to elect a director is:
Number of votes required = (Total shares outstanding ÷ 2) + 1
In this case, the total number of shares outstanding is 12 million and Maddy owns 1 million shares. Therefore, the total number of votes that Maddy can cast is 1 million. The number of votes needed to elect a director is:
Number of votes required = (12 million ÷ 2) + 1
Number of votes required = 6 million + 1
Number of votes required = 6,000,001
Since Maddy owns only 1 million shares, he can cast a maximum of 1 million votes. Since the number of votes needed to elect a director is 6,000,001, Maddy cannot elect any directors.
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Advanced parts ltd manages funds for a number of companies and wealthy clients. The investment strategy is tailored to each client’s needs. For a new client, the company has been authorized to invest up to $1.2 million in two investment funds: a stock fund and a money market fund. Each unit of the stock fund costs $50 and provides an annual return at $5 per unit; each unit of the money market fund costs $100 and provides an annual return at $4 per unit. The client wants to minimize risk subject to the requirement that the annual income from the investment be at least $60000.
According to Advanced companies risk measurement system, each unit invested in the stock fund has a risk index of 8, and each unit invested in the money market fund has a risk index of 3; the higher risk index associated with the stock fund simply indicates that it is the risker investment. the client also specifies that at least $3000 be invested in the money market funds. What is the annual income constraint?
The client wants to minimize risk subject to the requirement that the annual income from the investment is at least $60000. The annual income constraint is 60000.
To determine the annual income constraint, we need to calculate the total annual income generated by the investment.
Let's assume the number of units invested in the stock fund is 'x' and the number of units invested in the money market fund is 'y'.
The cost of each unit of the stock fund is $50, and it provides an annual return of $5 per unit. Therefore, the total annual income from the stock fund investment can be expressed as 5x.
The cost of each unit of the money market fund is $100, and it provides an annual return of $4 per unit. The client specifies that at least $3,000 be invested in the money market fund.
Hence, the total annual income from the money market fund investment can be expressed as 4y.
We are given that the client wants to minimize risk subject to the requirement that the annual income from the investment is at least $60,000.
Therefore, the objective function is to minimize risk, and the constraint is that the total annual income from the investment should be greater than or equal to $60,000.
Mathematically, the objective function can be represented as:
Minimize: 8x + 3y (risk index)
Subject to the constraints:
5x + 4y ≥ 60,000 (annual income constraint)
y ≥ 3,000 (minimum investment in money market fund)
Therefore, the annual income constraint is $60,000.
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