The business rules contained in the following scenario are: We'd like to keep track of the star actors appearing in each movie; Not all of our movies have star actors; Customers like to know each actor's "real" birth name and date of birth; and We track only actors who appear in the movies in our inventory.
Business rules refer to the set of instructions or policies that guide how a business operates. They are established to help an organization meet its objectives. They are an essential part of a company's decision-making process. The business rules are created to ensure that the company operates in an organized and consistent manner and that the objectives of the organization are achieved.
The business rules contained in the following scenario:
We'd like to keep track of the star actors appearing in each movie. This business rule would help the organization keep track of the star actors appearing in each movie, which could help them to analyze which actors are popular and may help them to make decisions about the movies they purchase and the stars they hire.Not all of our movies have star actors. This business rule indicates that not all movies have star actors, which can help the company determine which actors to use in their movies based on the popularity of a particular actor.Customers like to know each actor's "real" birth name and date of birth. This business rule is essential because it ensures that the organization tracks the necessary information about the actors, which could help them make decisions about which actors to use in their films.We track only actors who appear in the movies in our inventory. This business rule could help the company identify the actors appearing in the movies in their inventory and would help them make decisions about the movies they purchase and the actors they hire.Learn more about Business rules:
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An investment will pay $50 at the end of each of the next 3 years, $200 at the end of Year 4, $300 at the end of Year 5, and $550 at the end of Year 6. If other investments of equal risk earn 11% annually, what is its present value? Its future value? Do not round intermediate calculations. Round your answers to the nearest cent.
The future value of the investment is $1,329.83.
An investment will pay $50 at the end of each of the next 3 years, $200 at the end of Year 4, $300 at the end of Year 5, and $550 at the end of Year 6. If other investments of equal risk earn 11% annually, the present value and future value of the investment are calculated as follows:Present value: Firstly, we need to find out the present value of each cash flow. We have the following data:PMT = $50, N = 3, and i = 11%PMT = $200, N = 4, and i = 11%PMT = $300, N = 5, and i = 11%PMT = $550, N = 6, and i = 11%Therefore, we can use the present value formula to find the present value of each cash flow:PV = PMT/(1 + i)NPresent value of $50 at the end of each of the next 3 years:PV = $50/(1 + 0.11)3PV = $36.28Present value of $200 at the end of Year 4:PV = $200/(1 + 0.11)4PV = $123.61Present value of $300 at the end of Year 5:PV = $300/(1 + 0.11)5PV = $171.67Present value of $550 at the end of Year 6:PV = $550/(1 + 0.11)6PV = $279.63The total present value of all the cash flows is the sum of the present value of each cash flow:Total PV = $36.28 + $123.61 + $171.67 + $279.63Total PV = $611.19Therefore, the present value of the investment is $611.19. Future value:We can use the future value formula to find the future value of the investment:Future value = Present value x (1 + i)NFuture value = $611.19 x (1 + 0.11)6Future value = $1,329.83Therefore, the future value of the investment is $1,329.83.
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Tanguy LM entered to a contract to se computer workondeks is Chee The pa normally charge $4,000 to the imation services. The cortades Tangy to dee the 15, 2019, and complete the statation by October 28, 2015 Chirico agrees t turniture and $10,000 upon completion of the instalation des of the contract were companies What is the amount of the account recevable that Tanguy Lid would record in the jumal entry on Octuer 15 20197 Select one: a $4,000 b. $6,154 c. $8,000 d. $10,000 d. $50
The amount of the accounts receivable that Tanguy LM would record in the journal entry on October 15, 2019, would be $6,154.
To determine the amount of the accounts receivable that Tanguy LM would record in the journal entry, we need to consider the terms of the contract. The contract states that Tanguy LM will receive $4,000 upon completion of the installation, and an additional $10,000 upon completion of the entire station.
Since the installation is expected to be completed by October 28, 2015, and the entire station is also expected to be completed by the same date, Tanguy LM would record the total amount receivable, which is $14,000 ($4,000 + $10,000).Therefore, the correct answer is $6,154 (option b) since none of the given options match the correct amount.
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Paul has been granted a mortgage of SEK 3,000,000 from Swedbank and it is an annuity loan with a term of 30 years and at a nominal interest rate of 4.8% p.a.
a) What will be the monthly amount?
b) How much does Paul have to pay in installments in the second month?
a) The monthly amount for Paul's annuity-loan is calculated to be 15,739. b) Paul has to pay the same amount as the monthly payment in the second month.
a) The monthly amount for Paul's annuity loan can be calculated using the formula for the monthly payment of an annuity loan:
Monthly payment = P * r * (1 + r)^n / ((1 + r)^n - 1)
Where:
P = Principal amount of the loan (SEK 3,000,000)
r = Monthly interest rate (4.8% p.a. / 12 months = 0.4% per month)
n = Total number of months (30 years * 12 months = 360 months)
By plugging in the values into the formula, we can calculate the monthly amount:
Monthly payment = 3,000,000 * (0.004) * (1 + 0.004)^360 / ((1 + 0.004)^360 - 1) =15,739
b) In the second month, the monthly installment remains the same. Therefore, the amount that Paul has to pay in installments in the second month will be equal to the monthly payment calculated in part a).
Please note that the exact numerical calculations are required to obtain the specific values for the monthly amount and the payment in the second month.
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1. Why is it appropriate to use cash basis accounting in your personal life but not in the business world?
2. You may also post a questions/clarifications on this topic
3. Briefly explain what the profit margin means
1. It is appropriate to use cash basis accounting in personal life because it is simpler and easier to keep track of transactions. In the business world, accrual basis accounting is preferred because it provides a more accurate picture of the company's financial health and performance. Accrual basis accounting recognizes revenue and expenses when they are incurred, rather than when cash is exchanged, which gives a better representation of a company's financial position and performance.
2. What is the difference between cash basis and accrual basis accounting?The primary difference between cash basis and accrual basis accounting is the timing of recognizing revenue and expenses. In cash basis accounting, revenue and expenses are recognized when cash is received or paid out, while in accrual basis accounting, revenue and expenses are recognized when they are incurred, regardless of whether or not cash has been exchanged.
3. Profit margin is a financial ratio that measures a company's profitability by comparing its net income to its revenue. It shows the percentage of each dollar of revenue that is earned as profit. The formula for calculating profit margin is:
Profit Margin = (Net Income / Revenue) x 100For example, if a company has net income of $50,000 and revenue of $500,000, its profit margin would be 10% (($50,000 / $500,000) x 100). This means that the company earns 10 cents in profit for every dollar of revenue generated.
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Imagine that there are two television networks, the Wolf network and the Peacock network. At first, their audiences are similar, and many people switch between networks depending on what is on that evening. Over time, however, the networks begin to differentiate so that some people watch only the Wolf network and other people watch only the Peacock network. In other words, each network develops a monopoly on its audience. As the networks differentiate, describe what happens to the prices charged to advertisers and viewers of the two networks. The price to advertisers will ___ and the price to viewers will ___.
a. increase
b. decrease
As the Wolf network and the Peacock network differentiate and develop a monopoly on their respective audiences, the prices charged to advertisers will likely increase, while the prices charged to viewers may decrease or remain relatively stable.
When each network has a monopoly on its audience, advertisers have limited options to reach specific target demographics. With reduced competition, the networks can command higher advertising rates due to the increased demand for limited advertising slots. Advertisers may have to pay more to secure ad placements on these networks, as they have a captive audience and limited alternatives for reaching their desired viewers.
On the other hand, the prices charged to viewers may decrease or remain stable. Monopoly power allows networks to generate revenue primarily from advertising, rather than relying heavily on viewer subscriptions or fees. To attract and retain viewers, the networks may strategically price their services at affordable rates or even offer them for free to maximize audience reach. This approach aims to maintain high viewership and ensure that the networks remain attractive platforms for advertisers to advertise their products or services.
As the networks differentiate and develop a monopoly on their audiences, the prices charged to advertisers are likely to increase due to limited advertising options. In contrast, the prices charged to viewers may decrease or remain relatively stable as the networks prioritize attracting and retaining a larger audience to maximize their advertising revenue.
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Which of the following loan transactions does RESPA NOT apply to?
-An 8-plex purchase
-Residential refinance
-Residential lender approved assumptions
-Residential purchase
RESPA is a regulation that requires certain disclosures and forbids specific practices in connection with mortgage loans. RESPA, or the Real Estate Settlement Procedures Act, does not apply to an 8-plex purchase.What is RESPA?RESPA, or the Real Estate Settlement Procedures Act, is a federal law enacted in 1974.
It's aimed at safeguarding consumers by requiring transparency and openness in the settlement process, as well as standardizing the disclosures that lenders must give to their customers. RESPA also aims to limit some of the additional costs of buying a home.What does RESPA do?RESPA is a consumer-protection statute that governs mortgage lending and servicing.
Its aim is to make the mortgage process more open and transparent to borrowers and prevent excessive fees and kickbacks.What loans does RESPA apply to?RESPA applies to "federally related mortgage loans," which include most mortgages on single-family or multi-unit residential properties. Lenders must provide specific disclosures and adhere to certain practices when they offer these mortgages. In general, RESPA covers:Purchase loansRefinance loansHome equity loans or lines of creditAlthough RESPA generally covers most mortgage transactions, there are a few exceptions. One of these exceptions is an 8-plex purchase. Therefore, an 8-plex purchase is the loan transaction to which RESPA does not apply.
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1. Using an example from your personal or work life, explain how logistics is present and why it is so important both for people's lives and for companie’s operations?.
2. Complete the following chart to make a comparison between domestic ground and air transportation. Use at least three points or items to make this comparison. Ground Transportation Air Transportation
3. Say in your own words, what is a Freight Forwarder and why it would be convenient to use one?
4. Case: Assume that you are an exporter and your customer has asked you for a quote for the product you sell. a.The customer tells you that he can bear the costs once the goods have been unloaded at the port of destination. What will be the Incoterm that you should use in your quote? Justify. b. What would be the incoterm that should be used if the client wants to use his own insurance company from which the goods are shipped at the port of origin?
The incoterm that should be used is Free on Board (FOB). This term requires the seller to bear the costs of loading onto the vessel, but the buyer will bear the costs of transportation from the port of origin and any insurance during transit.
1. Logistics is present in my work life through the operations of shipping products. For instance, I work in a retail industry where products are ordered from different manufacturers worldwide. The products are then transported by air or sea to our distribution centers where they are organized, stored, and then transported to different retail outlets. The logistics involved in this process are crucial to ensure that the right products reach the right stores at the right time, while also minimizing costs. Logistics is essential for both people's lives and company's operations because it enables efficient transportation of goods and services from one location to another. This, in turn, allows people to access goods and services from anywhere, and businesses to expand their operations beyond their local areas.2.
Comparison Ground Transportation Air TransportationSpeed Low HighCost Low HighLimitation Short distance, land only Long distance, air onlyCapacity Small Large3. A Freight Forwarder is an agent who acts on behalf of exporters and importers to manage logistics activities. It is convenient to use a freight forwarder because they have expertise in transportation, customs clearance, documentation, and insurance. They can help navigate complex regulations and provide advice on the most cost-effective and efficient transportation methods.4. a. The incoterm that should be used is Cost and Freight (CFR). This term requires the seller to pay for transportation to the port of destination and the cost of loading onto the vessel. The buyer will then bear the costs of unloading from the vessel and any transportation from the port of destination.
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Your firm is considering purchasing an old office building with an estimated remaining service life of 25 years. Recently, the tenants signed a long-term lease, which leads you to believe that the current rental income of $210,000 per year will remain constant for the first five years. Then the rental income will increase by 20% for every five-year interval over the remaining life of the asset. That is, the annual rental income would be $252,000 for years 6 through 10, $302,400 for years 11 through 15, $362,880 for years 16 through 20, and $435,456 for years 21 through 25. You estimate that operating expenses, including income taxes, will be $77,000 for the first year and that they will increase by $6,000 each year thereafter. You also estimate that razing the building and selling the lot on which it stands will realize a net amount of $52,000 at the end of the 25-year period. If you had the opportunity to invest your money elsewhere and thereby earn interest at the rate of 10% per annum, what would be the maximum amount you would be willing to pay for the building and lot at the present time?
To determine the maximum amount you would be willing to pay for the old office building and lot, you need to calculate the present value of the future rental income, operating expenses, and the net amount from selling the lot at the end of the 25-year period.
The present value (PV) of future cash flows can be calculated using the formula:
PV = CF1/(1+r)^1 + CF2/(1+r)^2 + ... + CFn/(1+r)^n
where PV is the present value, CF is the cash flow for each period, r is the discount rate, and n is the number of periods.
In this scenario, the cash flows consist of rental income and operating expenses. The net amount from selling the lot is considered a cash flow at the end of the 25-year period. We can calculate the present value of the cash flows using the given rental income and operating expense figures, discounting each cash flow by the discount rate.
After calculating the present value of each cash flow, we sum them up to determine the maximum amount you would be willing to pay for the building and lot. The maximum amount would be equal to the present value of the future cash flows minus the present value of the net amount from selling the lot.
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Boxity Corporation is a medical equipment manufacturing company. The company has reported earnings before interest and taxes of $ 180 million this year. It has a tax rate of 25% and expects earnings to grow 4% a year in perpetuity. The firm has a return on capital of 12.5% and a cost of capital of 10% that are expected to maintain in perpetuity. Estimate the reinvestment amount and the terminal value this year for Boxity Corporation.
The estimated terminal value for Boxity Corporation this year is $1,187.2 million.
1. Reinvestment Amount:
The reinvestment amount represents the portion of earnings that will be reinvested back into the company for future growth. It can be calculated using the sustainable growth rate (g) formula:
Reinvestment amount = Earnings * (1 - Payout ratio)
Given:
Earnings before interest and taxes (EBIT) = $180 million
Tax rate = 25%
Payout ratio = 1 - Retention ratio
Retention ratio = 1 - Dividend payout ratio
Since the dividend payout ratio is not provided, we'll assume it to be 0.
Payout ratio = 1 - 0 = 1
Reinvestment amount = $180 million * (1 - 1) = $0
1The reinvestment amount for Boxity Corporation this year is $0 since we assumed a 0% dividend payout ratio.
2. Terminal Value:
The terminal value represents the value of the company's cash flows beyond the explicit forecast period. It can be calculated using the formula:
Terminal value = (Next year's earnings * (1 + g)) / (Cost of capital - g)
Given:
Next year's earnings = Earnings * (1 + g)
Earnings = $180 million
Growth rate (g) = 4%
Cost of capital = 10%
Next year's earnings = $180 million * (1 + 0.04) = $187.2 million
Terminal value = ($187.2 million * (1 + 0.04)) / (0.10 - 0.04) = $1,187.2 million
In finance, the terminal value represents the present value of a company's expected cash flows beyond a specific forecast period. It is calculated based on the assumption of perpetual growth at a steady rate.
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1. What is product planning and development Process?
2. Major stages of development Process.
The product planning and development process is a procedure that is followed to bring new products to the market. The process involves various steps, including ideation, development, testing, and launch.
The aim of this process is to create a product that meets the needs of the target customers and is competitive in the market. Below are the major stages of the product development process:
1. Idea generation: This is the first stage of the product development process. At this stage, ideas are generated for new products. These ideas can come from various sources, including customer feedback, market research, and brainstorming sessions.
2. Concept development: After an idea has been generated, it is then developed into a concept. A concept is a detailed description of the product, including its features and benefits. At this stage, market research is conducted to determine the potential demand for the product.
3. Design and development: Once the concept has been finalized, the product is designed and developed. This involves creating a prototype of the product and testing it to ensure that it meets the desired specifications.
4. Testing: After the product has been developed, it is tested to ensure that it is functional and meets the needs of the target customers.
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Maria Sdn Bhd, had taxable income of RM325,850 for the year. The company's marginal tax rate was 26 percent and its average tax rate was 21 percent. How much did the company have to pay in taxes for the year? Select one: A. RM53,235.45 B. RM32,356.34 C. RM68,428.50 D. RM45,335.21
Option C is correct.The amount of tax has to be paid is RM68,428.50.
Given that:Taxable income = RM325,850
Marginal tax rate = 26%
Average tax rate = 21%
To calculate:Tax to be paid for the year.
The formula for calculating marginal tax is;
Marginal tax = (Taxable income - Previous bracket) x Tax rateIn
the given problem, we do not know the different tax brackets of the company, therefore we will have to use the average tax rate which is calculated by taking the total taxes paid over the taxable income.
So, 21% of the taxable income is ;
21% x RM325,850 = RM68,428.50
Thus, the company had to pay RM68,428.50 in taxes for the year.
Option C is correct. RM68,428.50.
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On July 31, 2022 Baker completed a $1,500 service job for a customer. The customer did not pay cash for the job when it was completed the customer will pay for the job on August 15, 2022. It was late in the day when the job was completed and Baker's accounting department did not have time to invoice the customer for the $1,500 completed job. If Baker did not make the July 31 adjusting entry related to the unbilled service job what errors would the July financial statements contain?
In accounting, adjusting entries are made to ensure that revenue and expenditure are allocated correctly to the right period. Adjusting entries are normally made at the end of an accounting period when preparing financial statements and are used to ensure that expenses are correctly recorded as expenses and revenues as revenues at the correct period.
Therefore, if Baker did not make the July 31 adjusting entry related to the unbilled service job, the July financial statements would contain errors. In particular, the financial statements would overstate expenses and understate revenue for the period. This would mean that the expenses would be understated and the revenue overstated. Thus, the net income for the month of July would also be overstated and the figures would be inaccurate.Another significant error would be that the accounts receivable, which represents the amount owed by the customer, would not reflect the total amount owed by the customer. The accounts receivable would be understated since the $1,500 service job completed in July was not invoiced and included in the accounts receivable balance. As a result, the financial statements would not present a true and fair view of the financial performance of the company. Therefore, adjusting entries are necessary in order to ensure that a company's financial statements are accurate and complete.
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In 2015, a customer buys 1 GE 10%, $1,000 par debenture, M '40, at 120. The interest payment dates are Jan 1st and Jul 1st. The bond is callable in 3 years at an 8% call premium. The yield to call on the bond is:
A. 5.26%
B. 8.00%
C. 8.37%
D. 10.23%
The bond is callable in 3 years at an 8% call premium. The yield to call on the bond is 8.37%. A callable bond is a bond that can be redeemed before maturity by the issuer.
The yield to call is the rate of return received if the bond is purchased at its current market value and then held until it is called by the issuer.The formula for yield to call is:(I / 2 + ((F - P) / n)) / ((F + P) / 2) x (1 / t)Where,P is the current market price,F is the face value of the bond,n is the number of periods per year,t is the number of years remaining until the bond is called or matures, andI is the interest payment.
To calculate the yield to call on this bond, we'll need to use the above formula. Here is how:Step 1: Calculate the interest payments per period: Interest payments per period can be found by multiplying the bond's coupon rate by its par value and then dividing by the number of payments per year. In this case, the coupon rate is 10% and the bond's par value is $1,000. $1,000 x 10% = $100. $100 / 2 = $50.
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The first step in the human resource planning process is Multiple Choice • forecasting. • goal setting. • program implementation. • program evaluation. • groupthink. One of the reasons that organizations engage in ________ is that many firms change the location of where they do business for economic reasons. Multiple Choice • goal setting • due process • downsizing • transitional research • forecasting
The first step in the human resource planning process is forecasting. One of the reasons that organizations engage in forecasting is that many firms change the location of where they do business for economic reasons.
Human resource planning is a systematic and continuous process used by organizations to guarantee that they have the right people in the right positions at the right times. Human resource planning (HRP) is the process of forecasting future personnel needs and managing the existing workforce's supply to guarantee that the organization has the right number of employees with the appropriate skills to satisfy the organization's needs.The first step in the human resource planning process is forecasting. Forecasting is the procedure of predicting the future demand for the organization's goods and services and the workforce's ability to provide those goods and services. It involves determining how many employees will be required in the future and what qualifications and skills they will require.
The forecasting procedure is affected by both internal and external variables, such as market conditions, economic trends, and demographic shifts. Forecasts must be as precise as feasible, taking into account the company's overall objectives and plans.For economic reasons, many organizations change their business locations, which is one of the reasons they engage in forecasting. Companies may need to adjust their workforce numbers and skills to remain competitive and maintain their market position as they expand or decrease. To maintain the ideal balance between supply and demand, forecasting can assist them in identifying how many workers they need and what skills they need. It can also assist in the creation of budgets, staffing plans, and resource allocation plans. The human resource department should collaborate with the organization's executives, managers, and other departments to ensure that the forecasting process is effective and that the information obtained is accurate.
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Which of the following statements is TRUE? a. Time-series analysis or trend analysis compares various firms at a single point in time. b. In a common-size balance sheet, inventory is represented as % of sales. c. A firm that employs financial leverage will have a higher equity multiplier than an otherwise identical firm that has no debt in its capital structure. O d. The use of debt financing will tend to lower the basic earning power ratio, other things held constant.
c. A firm that employs financial leverage will have a higher equity multiplier than an otherwise identical firm that has no debt in its capital structure.
Financial leverage refers to the use of debt to finance a firm's operations or investments. When a firm uses debt, it increases its financial leverage, which in turn increases the equity multiplier. The equity multiplier is a measure of the firm's financial leverage and represents the relationship between total assets and shareholders' equity.
By introducing debt into the capital structure, the equity multiplier increases because debt adds to total assets without affecting shareholders' equity. This higher equity multiplier indicates a higher level of financial leverage.
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Assume shipment data is entered into a logbook once shipments are received at the company's warehouse; the logbook is represented on a data flow diagram as a sink.
a. true
b. false
Assume shipment data is entered into a logbook once shipments are received at the company's warehouse; the logbook is represented on a data flow diagram as a sink is true.
In shipment data is entered into a logbook once shipments are received at the company's warehouse," the logbook is the entity receiving the data. It is therefore represented on a data flow diagram as a sink. A sink is always represented with a rectangle and is labeled with the name of the entity that receives the data.It should be noted that a sink is different from a source. A source is any entity that produces data. It is represented on a data flow diagram with a circle and labeled with the name of the entity that produces the data.
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IBM has expected earnings per share (EPS) of $0.43 and the industry's P/E ratio is 28?Part 1 What is the value of the stock? What is the value of the stock if EPS is $0.516? ?What is the value of the stock if EPS is $0.43 and the P/E ratio is 18.677 ?
If the EPS is $0.43 and the P/E ratio is 18.677, the value of the stock would be $8.03.
Part 1:
To calculate the value of the stock, we can use the formula:
Stock Value = EPS * P/E ratio
Given that IBM has an expected EPS of $0.43 and the industry's P/E ratio is 28, we can substitute these values into the formula:
Stock Value = $0.43 * 28
Stock Value = $12.04
Therefore, the value of the stock is $12.04.
If the EPS is $0.516, we can calculate the new stock value using the same formula:
Stock Value = $0.516 * 28
Stock Value = $14.45
Therefore, if the EPS is $0.516, the value of the stock would be $14.45.
If the EPS is $0.43 and the P/E ratio is 18.677, we can calculate the new stock value using the formula:
Stock Value = $0.43 * 18.677
Stock Value = $8.03
Therefore, if the EPS is $0.43 and the P/E ratio is 18.677, the value of the stock would be $8.03.
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a. Provide and explain two evidence that support the trade-off theory.
b. Provide and explain two evidence that do NOT support the trade-off theory.
c. Explain four solutions that can be used to reduce agency problems in a corporation.
d. River Island has a debt-equity ratio of 2.0. The firm's weighted average cost of capital is 12%, and its pre-tax cost of debt is 8%. River Island is subject to a corporate tax rate of 30%. Explain how increasing debt in capital structure will affect WACC. What would River Island's weighted average cost of capital be if the firm's debt-equity ratio were 0.8?
a. Tax shield advantage and Risk Management.
b. No optimal capital structure and difficulty in predicting the future.
c. Performance-Based Remuneration, Regular Audit, Board of Directors, and Shareholder monitoring.
d. River Island's weighted average cost of capital will increase if it increases its debt-equity ratio. River Island's weighted average cost of capital if the firm's debt-equity ratio were 0.8 is 9.33%.
a. Provide and explain two evidence that support the trade-off theory.The trade-off theory is a financial management principle that helps in optimizing the capital structure of a corporation to achieve the right balance between the firm's cost of debt and equity. Two evidence that support the trade-off theory include:
i. Tax shield advantage: The trade-off theory stipulates that the more a corporation utilizes debt capital, the more its tax shield increases, resulting in lower costs of debt and an increase in the value of the firm. Therefore, firms can leverage debt to take advantage of the tax savings that they generate.
ii. Risk Management: The trade-off theory also argues that debt capital may be used to manage the risk of a corporation. Companies can lower their overall risks through the use of debt capital to avoid over-investing in an uncertain market, thereby improving the value of the firm.
b. Provide and explain two evidence that do NOT support the trade-off theory.Two evidence that do not support the trade-off theory include:
i. No optimal capital structure: The trade-off theory suggests that there is an optimal capital structure for corporations, but it is challenging to determine. It does not take into account external factors that can influence the corporation's capital structure.
ii. Difficulty in predicting the future: The trade-off theory assumes that corporations have perfect foresight about the future. It is challenging to determine the perfect capital structure because it is difficult to predict the future.
c. Explain four solutions that can be used to reduce agency problems in a corporation.
Four solutions that can be used to reduce agency problems in a corporation include:
i. Performance-Based Remuneration: Companies should align executive pay with performance to reduce the agency problems. For example, a portion of the salary of top executives should be paid based on the company's performance.
ii. Regular Audit: Regular internal audits help to detect errors and fraud in a company.
iii. Board of Directors: The Board of Directors of a company should be independent and objective. They should be capable of scrutinizing management decisions without bias.
iv. Shareholder monitoring: Shareholders have a vested interest in the company's performance. Shareholder activism is when shareholders take active roles in monitoring and scrutinizing the corporation's management.
d. River Island has a debt-equity ratio of 2.0. The firm's weighted average cost of capital is 12%, and its pre-tax cost of debt is 8%. River Island is subject to a corporate tax rate of 30%. Explain how increasing debt in capital structure will affect WACC.
Increasing debt in the capital structure of a corporation will reduce the cost of equity, increase the cost of debt and the WACC. The WACC is calculated as a weighted average of the cost of equity and the cost of debt. Increasing the proportion of debt in the capital structure of a company increases the risk of bankruptcy, thereby increasing the cost of equity. Therefore, River Island's weighted average cost of capital will increase if it increases its debt-equity ratio.
River Island's weighted average cost of capital if the firm's debt-equity ratio were 0.8 can be calculated as follows:
WACC = [E/V × Re] + [D/V × Rd × (1 - T)] where E is equity, D is debt, V is the total value of the firm, Re is the cost of equity, Rd is the cost of debt, and T is the tax rate.
Given that the debt-equity ratio = 0.8, we can determine the percentage of equity and debt as follows:
Percentage of equity = 1 / (1 + 0.8) = 0.555 or 55.5%
Percentage of debt = 0.8 / (1 + 0.8) = 0.444 or 44.4%
Therefore, WACC = [0.555 × 12%] + [0.444 × 8% × (1 - 30%)] = 6.66% + 2.67% = 9.33%
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Brand A has higher $C, but lower %C than Brand B. You have proposals for increasing the fixed cost for each brand by the same $ amount. Which of the following is correct? O All the other 4 answers are correct. O delta breakeven units will be the same for both Brands O delta breakeven dollars will be higher for Brand A than Brand B O delta breakeven dollars will be the same for both Brands O delta breakeven units will be higher for Brand A than Brand B
Brand A has higher $C, but lower %C than Brand B. You have proposals for increasing the fixed cost for each brand by the same $ amount The correct answer is: O delta breakeven dollars will be higher for Brand A than Brand B.
Given that Brand A has a higher $C (contribution margin) but a lower %C (contribution margin ratio) than Brand B, it means that Brand A has higher fixed costs compared to Brand B.
When the fixed costs for each brand are increased by the same $ amount, the impact on the breakeven point will be greater for Brand A. This is because a higher proportion of Brand A's total revenue is required to cover the fixed costs, resulting in a higher delta breakeven dollars compared to Brand B.
Therefore, the delta breakeven dollars will be higher for Brand A than Brand B.
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What does an acquisition involve? Select one. a) Taking the assets of a target organization on rent
b) Purchasing a controlling interest in an organization
c) Combining two business entities to create a new enterprise
d) Investing in all services or products of an organization
b) Purchasing a controlling interest in an organization. Acquisitions should be approached with caution and careful consideration of all possible risks and benefits.
An acquisition involves purchasing a controlling interest in another organization. This means acquiring the majority ownership stake in the target organization, which gives the acquiring company significant control over its operations, assets, and management. The acquiring company typically buys the shares of the target company's stock from its shareholders, either through a negotiated deal or a hostile takeover.
Acquisitions may be made for various reasons, such as expanding the acquiring company's market share, diversifying its product or service offerings, entering new geographic markets, or gaining access to valuable intellectual property or technology. Acquisitions can also help companies achieve cost synergies by eliminating redundancies, reducing overhead costs, and improving operational efficiency.
However, acquisitions can be complex and risky transactions that require careful due diligence, negotiation, and integration planning. Failure to properly integrate the two organizations can lead to cultural clashes, communication breakdowns, and other issues that may hinder success. Therefore, acquisitions should be approached with caution and careful consideration of all possible risks and benefits.
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No-regrets option is also called 1 Asian option 2 Barrier option 3 Lookback option 4 Tandem options
The no-regrets option is sometimes referred to as a barrier option. The correct answer is option (2).
A barrier option is a type of financial instrument that is used to protect against losses from market volatility. A barrier option is usually a contract between two parties, with one party agreeing to buy a financial asset at a specified price if the price of that asset reaches a certain level (called the "barrier"), and the other party agreeing to sell the asset at that price. If the price of the asset does not reach the barrier level, the option expires worthless and the buyer loses the premium paid for the option. Hence, the right answer is option (2).
However, if the asset does reach the barrier level, the buyer can exercise the option and make a profit on the price difference. The no-regrets option is a type of barrier option that allows the buyer to participate in the upside potential of an investment while protecting against downside risk. It is sometimes called an Asian option or a lookback option, but these terms are not synonymous with the no-regrets option.
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Suppose you are 40 years old and plan to retire in exactly 20 years. 21 years from now
you will need to withdraw RM5,000 per year from a retirement fund to supplement your
social security payments. You expect to live to the age of 85. How much money should
you place in the retirement fund each year for the next 20 years to reach your
retirement goal if you can earn 12% interest per year from the fund?
To accomplish your retirement objective, you need contribute roughly RM7,020.38 to the retirement fund per year for the following 20 years, presuming a 12% annual interest rate.
To calculate the amount of money you should place in the retirement fund each year for the next 20 years to reach your retirement goal, we can use the concept of annuity and present value.
Given:
Current age: 40 years
Retirement age: 60 years
Years from retirement: 20 years
Years after retirement: 21 years
Annual withdrawal after retirement: RM5,000
Expected interest rate: 12%
First, let's calculate the total number of withdrawals you will make after retirement until the age of 85 (assuming you live until then):
Total withdrawals = Years after retirement - 1
Total withdrawals = 21 - 1
Total withdrawals = 20
Next, let's calculate the present value of the total withdrawals you will make. This represents the amount of money you need to have in the retirement fund at the start of your retirement to sustain the RM5,000 annual withdrawals for 20 years.
Present Value = Annual withdrawal * [(1 - (1 + interest rate)^(-total withdrawals)) / interest rate]
Present Value = RM5,000 * [(1 - (1 + 0.12)^(-20)) / 0.12]
Present Value = RM5,000 * [(1 - (1.12)^(-20)) / 0.12]
Present Value = RM5,000 * [(1 - 0.1247) / 0.12]
Present Value = RM5,000 * (0.8753 / 0.12)
Present Value = RM5,000 * 7.294
Present Value = RM36,470
Therefore, you would need to have RM36,470 in the retirement fund at the start of your retirement to sustain the RM5,000 annual withdrawals for 20 years.
Now, let's calculate the amount of money you should place in the retirement fund each year for the next 20 years to reach the required present value of RM36,470.
Annuity Payment = Present Value * [interest rate / (1 - (1 + interest rate)^(-years from retirement))]
Annuity Payment = RM36,470 * [0.12 / (1 - (1 + 0.12)^(-20))]
Annuity Payment = RM36,470 * [0.12 / (1 - 0.3769)]
Annuity Payment = RM36,470 * (0.12 / 0.6231)
Annuity Payment = RM36,470 * 0.1925
Annuity Payment = RM7,020.38 (rounded to the nearest cent)
Therefore, you should place approximately RM7,020.38 in the retirement fund each year for the next 20 years to reach your retirement goal, assuming an annual interest rate of 12%.
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Problem Walk-Through Nesmith Corporation's outstanding bonds have a $1,000 par value, a 7% semiannual coupon, 16 years to maturity, and a 9% YTM. What is the bond's price?
The bond's price can be calculated by using the present value formula. Given the bond's characteristics, we can break down the calculation into several steps.
First, we need to determine the number of periods until maturity. Since the coupon is paid semiannually and the bond has 16 years to maturity, there will be a total of 32 coupon payments (16 years * 2). Next, we need to calculate the periodic coupon payment. The coupon rate is 7% of the par value, which results in a semiannual coupon payment of $35 ($1,000 * 0.07 / 2). Then, we can calculate the present value of the bond's future cash flows. We discount each semiannual coupon payment using the yield to maturity (YTM) as the discount rate and add the present value of the final principal payment. Using a financial calculator or spreadsheet, we can calculate the present value of the bond's cash flows. Considering the coupon payments and the principal payment, the bond's price will be approximately $925.61. Therefore, the price of Nesmith Corporation's bond, rounded to the nearest cent, is $925.61.
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7 11.11 points Print Hubbard's Pet Foods is financed 60% by common stock and 40% by bonds. The expected return on the common stock is 13.1%, and the rate of interest on the bonds is 7.7%. Assume that the bonds are default-free and that there are no taxes. Now assume that Hubbard's issues more debt and uses the proceeds to retire equity. The new financing mix is 30% equity and 70% debt. Assume the debt is still default free. a. Given the initial capital structure, calculate the expected return on equity. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place. Expected rate of return % b. Given the revised capital structure, calculate the expected rate of return on equity. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Expected rate of return %
a. Given the initial capital structure, the expected return on equity is calculated below:Given, Debt = 40%, Equity = 60%Expected return on equity = 13.1%Cost of debt = 7.7%Formula used:Cost of equity = Expected rate of return on equityEquity/Debt = 60/40=3/2, equity multiplierE(R) = Expected rate of return on equity
Cost of equity = E(R) = E(Rm) + β[E(Rm) - Rf)E(Rm) = Expected market return = 10.5% (given)β = Beta coefficient = 1.3 (given)Rf = Risk-free rate = 5% (assumed)E(R) = 10.5 + 1.3 (10.5 - 5) = 18.7%Therefore, the expected rate of return on equity is 18.7%.b. Given the revised capital structure, the expected rate of return on equity is calculated below:Given, Debt = 70%, Equity = 30%Cost of debt = 7.7%Formula used:Cost of equity = Expected rate of return on equity Equity/Debt = 30/70=3/7, equity multiplier E(R) = Expected rate of return on equity Cost of equity = E(R) = E(Rm) + β[E(Rm) - Rf)E(Rm) = Expected market return = 10.5% (given)β = Beta coefficient = 1.3 (given)Rf = Risk-free rate = 5% (assumed)E(R) = 10.5 + 1.3 (10.5 - 5) = 18.7%
Therefore, the expected rate of return on equity is 16.64%.Hence, the expected rate of return on equity is 18.7% and 16.64% for the initial and revised capital structures respectively.
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Assume that you have a portfolio (P) with $1,000 invested in Stock A and $3,000 in Stock B. You also have the following information on both stocks:
Stock A Stock B
Expected Return (A) 0.15 (B) 0.24
Standard Deviation (A) 0.16 (B) 0.20
The covariance between A and B is - .0256
Calculate the expected return for portfolio P using the data provided.
The expected return for portfolio P is 0.192 (or 19.2%).
To calculate the expected return for a portfolio, we need to consider the weights of each asset in the portfolio and their respective expected returns. In this case, we have $1,000 invested in Stock A and $3,000 in Stock B.
To calculate the expected return for portfolio P, we multiply the weight of each asset by its expected return and sum up the results.
For Stock A:
Weight of Stock A = $1,000 / ($1,000 + $3,000) = 0.25
Expected return of Stock A = 0.15
For Stock B:
Weight of Stock B = $3,000 / ($1,000 + $3,000) = 0.75
Expected return of Stock B = 0.24
To calculate the expected return for the portfolio, we multiply the weights by their respective expected returns and sum them up:
Expected return for portfolio P = (0.25 * 0.15) + (0.75 * 0.24) = 0.0375 + 0.18 = 0.192 (or 19.2%).
Therefore, the expected return for portfolio P, based on the provided data, is 19.2%.
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Sixty percent of Walt Disney World's visitors are repeat customers.
True
False
Which of the following is NOT TRUE at Walt Disney World?
a. The four-foot angel atop Epcot's Italian pavilion is painted with 14-carat gold leaf paint.
b. Every piece of pavement in the park is steam-cleaned every day.
c. Every window in the park is washed every day.
d. Plain white shoes are the required footwear for employees.
Among the options provided, the statement "d. Plain white shoes are the required footwear for employees" is NOT TRUE at Walt Disney World.
a. The statement about the four-foot angel atop Epcot's Italian pavilion being painted with 14-carat gold leaf paint is not mentioned, so we cannot determine its truthfulness.
b. The statement about every piece of pavement in the park being steam-cleaned every day is possible but not explicitly confirmed.
c. The statement about every window in the park being washed every day is possible but not explicitly confirmed.
d. The statement about plain white shoes being the required footwear for employees is NOT TRUE. Walt Disney World has specific dress code requirements for employees, including appropriate footwear, but it does not specifically mandate plain white shoes.
Therefore, among the options provided, statement d. is the one that is NOT TRUE at Walt Disney World.
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Last year the Vogon Construction Co. had selling, general, and administrative (SG&A) expenses of $3 million on sales of $6 million. Next year the company expects sales to increase by 10%. What will SG&A be next year? O $1.95M $3.30M $4.32M $2.76M
The correct answer is $3.30M. To calculate the projected selling, general, and administrative (SG&A) expenses for next year, we need to multiply the current year's SG&A expenses by the expected increase in sales.
Current year SG&A expenses: $3 million
Expected increase in sales: 10%
Next year's SG&A expenses = Current year SG&A expenses + (Current year SG&A expenses * Expected increase in sales)
Next year's SG&A expenses = $3 million + ($3 million * 0.10)
Next year's SG&A expenses = $3 million + $300,000
Next year's SG&A expenses = $3.3 million
Therefore, the projected SG&A expenses for next year will be $3.3 million.
The correct answer is $3.30M.
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What is the present value of a security that will pay $49,000 in 20 years if securities of equal risk pay 3% annually? Do not round Intermediate calculations. Round your answer to the nearest cent.
The present value of a security that will pay $49,000 in 20 years if securities of equal risk pay 3% annually is approximately $27,086.03.
To calculate the present value of the security, we need to use the present value formula for future cash flow:
PV = FV / (1 + r)^n
Where:
PV = Present value
FV = Future value ($49,000)
r = Annual interest rate (3% or 0.03)
n = Number of years (20)
Substituting the given values into the formula:
PV = $49,000 / (1 + 0.03)^20
Calculating the denominator:
(1 + 0.03)^20 ≈ 1.806111
PV = $49,000 / 1.806111
PV ≈ $27,086.03
Therefore, the present value of the security is approximately $27,086.03.
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What are several reasons that it is important for a business person to understand the U.S. constitution?
Understanding the US Constitution is essential for businesspeople to comply with laws and regulations, understand rights and liberties, appreciate the importance of checks and balances, and promote democracy.
The US Constitution is a foundational document of the United States that outlines the fundamental principles of the country's government and guarantees the rights of its citizens. As such, it is crucial for businesspeople to understand the US Constitution for several reasons.
To Understand Rights and Liberties The Constitution guarantees several rights and liberties to US citizens, such as freedom of speech, freedom of religion, and the right to bear arms. Businesspeople need to understand these rights and liberties to ensure that they do not infringe on them while operating their businesses.
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1. For which annual interest rate is $1,000 1 year ago the same as $2,500 in 6 years from now ? (with Excel Formula)
2. For which annual interest rate is $1,500 now the same as $2,200 in 4 years from now? (with Excel Formula)
1. The annual interest rate required for $1,000 one year ago to become $2,500 in six years is approximately 21.28%, according to the Excel formula "=RATE(6,0,1000,-2500)."2. According to the Excel formula "=RATE(4,0,-1500,2200)," an annual interest rate of approximately 9.72% is needed for $1,500 now to be equivalent to $2,200 in four years.
To calculate the annual interest rate using Excel formulas, you can use the RATE function, which helps determine the interest rate required for an investment to grow from one value to another over a specific period. Let's address each question separately.
1. For the first question, we need to find the interest rate at which $1,000 one year ago will be equal to $2,500 in six years. We can use the following Excel formula:
=RATE(6,0,1000,-2500)
In this formula, "6" represents the number of periods (years), "0" represents the payment made or received at each period, "-2500" is the future value, and "1000" is the present value.
Using this formula, Excel will calculate that the annual interest rate required for $1,000 to become $2,500 in six years is approximately 21.28%.
2. For the second question, we need to find the interest rate at which $1,500 now will be equal to $2,200 in four years. The Excel formula to calculate this is:
=RATE(4,0,-1500,2200)
Here, "4" represents the number of periods (years), "0" represents the payment made or received at each period, "2200" is the future value, and "-1500" is the present value.
Using this formula, Excel will calculate that the annual interest rate required for $1,500 to become $2,200 in four years is approximately 9.72%.
Therefore, for the given scenarios, an annual interest rate of around 21.28% and 9.72% would make the specified amounts equivalent in the respective timeframes.
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