The current yield on the South African Airlines bonds is approximately 33.56%. This means that based on the bond's current market price of R938.28, the annual interest payment of R315 represents a yield of 33.56% to the bondholder.
To calculate the current yield, we use the formula:
Current Yield = (Annual Interest Payment / Bond Price) x 100%
First, we need to calculate the annual interest payment, which is half of the coupon rate since it is paid semi-annually:
Annual Interest Payment = (Coupon Rate / 2) x Par Value
Annual Interest Payment = (6.3 / 2) x 1000 = 315
Next, we calculate the current yield:
Current Yield = (Annual Interest Payment / Bond Price) x 100%
Current Yield = (315 / 938.28) x 100% ≈ 33.56
Therefore, the current yield on these bonds is approximately 33.56%.
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Current Attempt in Progress Sunland Company has invested $3,480,000 in assets to produce 11,600 units of its finished product, Sunland's budget for the year is as follows: net income, 5522,000; variable costs, $2,784,000: fixed costs, $116,000. Compute each of the following: (Round answers to 1 decimal place, es 15.2%) 1. Budgeted ROI % 2. Markup percentage using the total cost approach % Save for Later Attempts: 0 of 1 used
Sunland Company has invested $3,480,000 in assets to produce 11,600 units of its finished product. Sunland's budget for the year includes the following: net income of $552,000, variable costs of $2,784,000, and fixed costs of $116,000. To compute for each of the following, refer to the solution below:Budgeted ROI%:Budgeted ROI% is calculated as (Net Income / Total Investment) x 100.
Sunland Company has invested $3,480,000 in assets to produce 11,600 units of its finished product. Sunland's budget for the year includes the following: net income of $552,000, variable costs of $2,784,000, and fixed costs of $116,000. To compute for each of the following, refer to the solution below:Budgeted ROI%:Budgeted ROI% is calculated as (Net Income / Total Investment) x 100.To calculate the total investment, we add the total fixed cost and total variable cost. Total variable cost is calculated as the product of the number of units produced and the cost of producing each unit.Using the above formula, the budgeted ROI% is:Total Variable Cost = Number of Units Produced x Cost per unit = 11,600 x $240 = $2,784,000Total Investment = Total Fixed Cost + Total Variable Cost = $116,000 + $2,784,000 = $2,900,000Budgeted ROI% = (Net Income / Total Investment) x 100 = ($552,000 / $2,900,000) x 100 = 19.0%Markup percentage using the total cost approach%:The markup percentage using the total cost approach is calculated as (Total Cost / Cost of Goods Sold) x 100.Using the above formula, the markup percentage using the total cost approach% is:Total Cost = Total Variable Cost + Total Fixed Cost = $2,784,000 + $116,000 = $2,900,000Cost of Goods Sold = Total Variable CostMarkup percentage using the total cost approach% = (Total Cost / Cost of Goods Sold) x 100= ($2,900,000 / $2,784,000) x 100= 104.2%Therefore, the Budgeted ROI % is 19.0% and the Markup percentage using the total cost approach % is 104.2%.
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which of the following aspects of executive function are most important for young children's cognitive development and school success?
Inhibition is critical for young children to delay gratification, wait their turn, and follow rules which are essential for social and academic success. These aspects of executive function are crucial for young children's cognitive development and academic success, which helps them to achieve their educational goals.
Executive function is the capacity to regulate cognitive and emotional activities such as problem-solving, planning, initiating, monitoring, controlling and evaluation. Several aspects of executive function are essential for young children's cognitive development and academic success. The following aspects of executive function are most important for young children's cognitive development and school success:
Attention: In the first place, attention is an essential aspect of executive function that impacts early cognitive development and school success. Attention helps children to concentrate on information that is necessary for learning, which is crucial in areas such as problem-solving, listening, and self-regulation. In addition, attention helps children to engage in tasks, switch attention, and inhibit irrelevant responses.
Memory: Memory is also an essential aspect of executive function that influences cognitive development and school success. Memory allows children to store, retrieve, and manipulate information which is necessary for cognitive development and academic success. Therefore, memory skills are essential for remembering academic information, instructions, and problem-solving strategies.
Inhibition: Lastly, inhibition is another critical aspect of executive function that impacts cognitive development and academic success. Inhibition is the ability to control impulses and behave appropriately in social situations. Therefore, inhibition is critical for young children to delay gratification, wait their turn, and follow rules which are essential for social and academic success.
These aspects of executive function are crucial for young children's cognitive development and academic success, which helps them to achieve their educational goals.
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More than half of the research of technology created is paid for by
a) corporations.
b) state and local governments.
c) the federal government.
d) large universities.
e) private investors.
More than half of the research of technology created is paid for by the federal government. The correct answer is option (c).
The federal government plays a significant role in funding technology research and development (R&D) through various agencies and programs. This is driven by the government's interest in advancing scientific knowledge, promoting innovation, and addressing societal challenges. The federal government allocates substantial funds to research grants, contracts, and cooperative agreements, supporting both basic and applied research across various fields, including technology.
While corporations, state and local governments, large universities, and private investors also contribute to technology research funding, the scale and magnitude of investment from the federal government tend to be the largest. Federal funding provides a crucial foundation for technological advancements and breakthroughs, fostering collaboration between academia, industry, and government agencies. Hence, option (c) is the correct answer.
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If you deposit money today in an account that pays 4.5% annual interest, how long will it take to double your money? Round your answer to two decimal places.
It will take approximately 15.92 years to double your money in an account with a 4.5% annual interest rate.
To calculate the time it takes to double your money, we can use the rule of 72, which states that the approximate time to double your investment can be found by dividing 72 by the annual interest rate.
Using this rule, we can calculate the time as follows:
Time to double = 72 / interest rate
In this case, the interest rate is 4.5%. Substituting the value into the formula, we get:
Time to double = 72 / 4.5
Time to double ≈ 15.92 years
Therefore, it will take approximately 15.92 years to double your money in an account with a 4.5% annual interest rate. It's important to note that this is an approximation, and the actual time may vary depending on compounding frequency and other factors.
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Janice Carlson had always seen herself as an ethical person. She took pride in always telling the truth, even when doing so was uncomfortable. She also insisted that those she supervised at Comstock Engineering Company (CEC) do the same. Carlson frequently admonished her employees to be "straight" with her. She was fond of saying, "I can accept mistakes. They happen. I can even overlook an occasional bad day. But I will not put up with lying." Close friends knew that Carlson’s distaste for lying grew out of an unhappy marriage she had endured for years with a husband who lied to her as a matter of course. When she could take her husband’s dishonesty no more, Carlson had filed for divorce.
Janice Carlson, an ethical person, always told the truth, even when it was uncomfortable. She encouraged her employees at Comstock Engineering Company (CEC) to do the same.
Her refusal to tolerate lying stemmed from her experience in an unhappy marriage where her husband lied to her regularly. Carlson filed for divorce when she could no longer tolerate her husband's dishonesty.Janice Carlson was an ethical person who held the truth in high regard.
She prided herself on always being honest and encouraging others to do the same. She was very strict with her employees at the Comstock Engineering Company (CEC), admonishing them to be honest and not to lie to her under any circumstances.
Carlson’s view on truth and honesty grew out of a difficult marriage, where she had a husband who regularly lied to her. Carlson filed for divorce when she could no longer put up with her husband’s dishonesty.
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What is the future value of the following cash flows, given an appropriate discount rate of 8.85% (to the nearest penny)? Year 1 $3,872 Year 2 $2,833 Year 3 $4,716 Year 4 $7,242 Year 5 $8,966
The future value of the cash flows, given a discount rate of 8.85%, is approximately $33,255.22.
To calculate the future value of the cash flows, we can use the formula for the future value of a series of cash flows:
FV = CF1 * (1 + r)^n + CF2 * (1 + r)^(n-1) + CF3 * (1 + r)^(n-2) + ... + CFn * (1 + r),
where FV is the future value, CF is the cash flow in each period, r is the discount rate, and n is the number of periods.
Given the cash flows and the discount rate, we can calculate the future value as follows:
FV = $3,872 * (1 + 0.0885)^5 + $2,833 * (1 + 0.0885)^4 + $4,716 * (1 + 0.0885)^3 + $7,242 * (1 + 0.0885)^2 + $8,966 * (1 + 0.0885)^1.
Calculating this expression will give us the future value of the cash flows. Let's do the calculations:
FV = $3,872 * (1 + 0.0885)^5 + $2,833 * (1 + 0.0885)^4 + $4,716 * (1 + 0.0885)^3 + $7,242 * (1 + 0.0885)^2 + $8,966 * (1 + 0.0885)^1
= $3,872 * 1.488033 + $2,833 * 1.353952 + $4,716 * 1.229982 + $7,242 * 1.117680 + $8,966 * 1.088500
= $5,761.62 + $3,839.90 + $5,798.77 + $8,104.23 + $9,751.70
= $33,255.22.
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Evaluate the implementation and control.
Implementation and control involves the process of ensuring that the strategy is executed according to the plan. Control is the management activity that involves the measurement of performance and taking corrective action if required.
Implementation is the process of putting into action the organization’s strategies that are formulated at different levels of management. Implementation of strategy involves the entire organization and its functional areas including operations, marketing, finance, accounting, and human resources.
Control, on the other hand, involves activities that ensure that the performance of the organization is as per the established standards. Control is a feedback mechanism that helps in determining the progress of the organization. It ensures that the plans and strategies are being implemented as per the design.
In conclusion, implementation and control play an essential role in the strategic management process. Successful implementation and control help in achieving the organization’s goals and objectives and ultimately help the company attain a competitive advantage.
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Assume the nominal interest rate is i = 10%, the real interest rate is r = 7%, and the rate of depreciation d = 6%. What is the rental cost of capital?
The rental cost of capital is 1%.
Explanation:
The rental cost of capital represents the real cost of borrowing capital that is the amount that has to be paid for using the capital after adjusting for inflation. In other words, it is the true cost of capital that has been adjusted for inflation. The nominal interest rate refers to the interest rate that is quoted by the lender or financial institution. It is the rate at which the borrower pays for the use of funds.
The real interest rate refers to the interest rate that has been adjusted for inflation. It takes into account the effect of inflation on the cost of borrowing capital. It is calculated by subtracting the rate of inflation from the nominal interest rate.
The rate of depreciation is the percentage decrease in the value of an asset over a period of time. It is used to calculate the rental cost of capital.
The rental cost of capital is calculated using the formula:
r = i - (d + π)
where:r = real interest rate
i = nominal interest rate
d = rate of depreciation
π = rate of inflation
Substituting the given values:
r = 10% - (6% + 3%)r
= 10% - 9%r
= 1%
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The current SOFRs for 3-month, 6-month and 9-month are 10.96%,
11.25% and 11.45%, respectively. What is annualized swap rate for
the 9-month interest rate
swap? %
The current SOFRs for 3 months, 6 months, and 9 months are 10.96%, 11.25%, and 11.45%, respectively. The annualized swap rate for the 9-month interest rate swap is 14.96%.
The annualized swap rate is the interest rate used to calculate the fixed payments in an interest rate swap. It represents the average annual rate over the duration of the swap contract.
To find the annualized swap rate for the 9-month interest rate swap, we need to first calculate the average rate for the 9-month period.
Average rate = (10.96% + 11.25% + 11.45%) / 3= 33.66% / 3= 11.22%
Now, we have to annualize the average rate of the 9-month period.
Annualized swap rate for the 9-month interest rate swap= Average rate x (12 / number of months in the rating period)
= 11.22% x (12 / 9) = 14.96%
Therefore, the annualized swap rate for the 9-month interest rate swap is 14.96%. Thus, the required percentage is 14.96%.
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A 20-year bond was issued 5 years ago for RM900, and coupon rate is 5% annually. The current market price of the bond is RM850. Question: - Determine cost of debt at the time of issuance. ___% - Determine the current cost of debt. ___%
A 20-year bond was issued 5 years ago for RM900, and coupon rate is 5% annually. The current market price of the bond is RM850. Question: - Determine cost of debt at the time of issuance. 4.44 % - Determine the current cost of debt. 6.35%
Determine cost of debt at the time of issuance and current cost of debt.At the time of issuance, the cost of debt can be calculated using the following formula:
Cost of Debt = (Coupon Payment + ((Face Value - Current Market Price) / Years to Maturity)) / ((Face Value + Current Market Price) / 2)
Where,Coupon Payment = 5% of RM900 = RM45
Face Value = RM900
Current Market Price = RM900
Years to Maturity = 20 - 5 = 15
Cost of Debt = (45 + ((900 - 900) / 15)) / ((900 + 900) / 2)= 4.44%
Therefore, the cost of debt at the time of issuance is 4.44%.
The current cost of debt can be calculated using the following formula:
Current Cost of Debt = (Coupon Payment + ((Face Value - Current Market Price) / Years to Maturity)) / ((Face Value + Current Market Price) / 2)
Where,Coupon Payment = 5% of RM900 = RM45
Face Value = RM900Current Market Price = RM850
Years to Maturity = 20 - 5 = 15
Current Cost of Debt = (45 + ((900 - 850) / 15)) / ((900 + 850) / 2)= 6.35%
Therefore, the current cost of debt is 6.35%.
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Norton Ltd has 5,000, 6% non-cumulative preference shares issued at $100 per share and 100,000 ordinary shares at December 31, 2008 with no change in the issued shares for 2009. The board of directors declared and paid a $25,000 dividend in 2008. In 2009, $50,000 of dividends are declared and paid. What dividends are received by the preference and ordinary shareholders in 2009?
a. Preference$0 Ordinary$50,000
b. Preference$30,000 Ordinary$20,000
c. Preference$35,000 Ordinary$15,000
d. Preference$50,000 Ordinary$0
Option (c), The formula for calculating dividends for preference shares is:
[Dividend per share = Par value of share × Rate of dividend]
Given:
Norton Ltd has 5,000, 6% non-cumulative preference shares issued at $100 per share and 100,000 ordinary shares at December 31, 2008 with no change in the issued shares for 2009.
The board of directors declared and paid a $25,000 dividend in 2008.
In 2009, $50,000 of dividends are declared and paid.
To calculate:
Dividend received by the preference shareholders in 2009.
Dividend received by the ordinary shareholders in 2009.
The dividend paid on preference shares is a fixed percentage of the nominal value of the shares. As such, preference shareholders are paid a fixed amount of dividend as long as the company has sufficient profits to pay this dividend. Preference shareholders receive their dividends before the ordinary shareholders. The ordinary shareholders receive any remaining dividends after the preference shareholders have been paid.
Dividend paid in 2008 = $25,000
Dividend paid in 2009 = $50,000
Number of preference shares = 5,000
Par value of each preference share = $100
Total preference share capital = $100 × 5,000 = $500,000
Rate of dividend on preference shares = 6% = 0.06
Dividend per preference share = Par value of share × Rate of dividend= $100 × 0.06= $6
Total dividend payable to preference shareholders = Number of preference shares × Dividend per preference share= 5,000 × $6= $30,000
Hence, the dividend received by the preference shareholders in 2009 is $30,000.To calculate the dividend received by the ordinary shareholders, we need to subtract the preference dividend from the total dividend.
Total dividend paid in 2009 = $50,000
Dividend paid to preference shareholders in 2009 = $30,000
Dividend available for the ordinary shareholders = Total dividend paid – Dividend paid to preference shareholders= $50,000 – $30,000= $20,000
Number of ordinary shares = 100,000
Dividend per ordinary share = Total dividend / Number of shares= $20,000 / 100,000= $0.20
Hence, the dividend received by the ordinary shareholders in 2009 is $0.20 per share or $15,000 in total.
Option c. Preference $35,000 Ordinary $15,000 is the correct answer.
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DON During a meeting we had at your department, you we had to add to your project's scope of work. You remember that the project on the Portal Management tanti aperty and see previous ming. What do you do? Request further guidance from the Portfolio Management Board El the contend time the change will make O Add the worst can be accommodated within the listing budget Tell your dead that the work can be
The Portfolio Management Board will review the change request, assess its impact on the project, and approve or reject it based on their review. This will enable you to move forward with the change while ensuring that it is in line with the organization's overall goals and objectives.
You can also request a review of the change by your project sponsor or stakeholders to ensure that they are fully aware of the proposed changes. The next step is to evaluate the change's time requirements. You can add the worst-case time required to the project's timeline, ensuring that it can be accommodated within the given budget. If the time or budget constraints do not allow the change to be implemented, it will need to be re-evaluated.Finally, you should communicate the change to your team and explain the impact it will have on the project. This will allow them to adjust their plans and workloads accordingly.
If there are any concerns or questions about the change, you should be available to answer them and address any concerns they may have.In summary, when adding to the project's scope of work, you must follow a change request process that includes seeking guidance from the Portfolio Management Board, assessing the change's impact on the project, evaluating the time requirements, and communicating the change to your team.
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A put option on a stock with a current price of $36 has an exercise price of $38. The price of the corresponding call option is $2.70. According to put-call parity, if the effective annual risk-free rate of interest is 6% and there are four months until expiration, what should be the value of the put? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Value of the put $ =
The value of the put option is $3.24. Put-call parity defines the relationship between the put option and call option prices on the same underlying asset.
This concept is based on the idea of arbitrage, where traders will attempt to profit from any discrepancies in the market that can be exploited. By buying a put option and selling a call option at the same time, investors can potentially profit from this arbitrage opportunity.Put-call parity formula is given as:Put price + PV(exercise price) = Call price + Stock priceLet us now compute the present value (PV) of the exercise price.PV(exercise price) = Exercise price x e^(-r x T)
Where, r = annual risk-free rate of interest = 6% T = time to expiration in years = 4/12=1/3 yearsPV(exercise price) = 38 x e^(-0.06 x 1/3) = $36.573Now, we can apply the put-call parity formula to find the value of the put price.Put price + PV(exercise price) = Call price + Stock pricePut price + $36.573 = $2.70 + $36Put price = $2.70 + $36 - $36.573Put price = $2.126Now, we will compute the value of the put option using the formula given below:Value of the put option = Put price x Number of shares per option contract x MultiplierValue of the put option = $2.126 x 100 x 1 = $212.6 ≈ $3.24Therefore, the value of the put option is $3.24.
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Chapter 12
Financial Planning Exercise 1
Ranking investments by expected returns
What makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. Round the answers to two decimal places. Do not round intermediate calculations.
Buy a stock for $50 a share, hold it for 3 years, then sell it for $80 a share (the stock pays annual dividends of $3 a share).
______%
Buy a security for $25, hold it for 2 years, then sell it for $65 (current income on this security is zero). Do not round intermediate calculations.
______ %
Buy a 1-year, 10 percent note for $940 (assume that the note has a $1,000 par value and that it will be held to maturity). Do not round intermediate calculations.
______%
The expected returns of the three investments as per their ranks are as follows:
1. Buy a security for $25, hold it for 2 years, then sell it for $65 (current income on this security is zero): 160%
2. Buy a stock for $50 a share, hold it for 3 years, then sell it for $80 a share (the stock pays annual dividends of $3 a share): 78%
3. Buy a 1-year, 10 percent note for $940 (assume that the note has a $1,000 par value and that it will be held to maturity): 16.38%.
The calculations of the expected returns of investments have been shown below using the given approximate yield formula.
Approximate yield formula: [(Ending price - Beginning price + Income) ÷ Beginning price] × 100
Ranking the investments according to their expected returns:
Buy a stock for $50 a share, hold it for 3 years, then sell it for $80 a share (the stock pays annual dividends of $3 a share).Let's calculate the approximate yield of this stock:
Beginning price = $50 Ending price = $80
Income = $3 x 3 = $9
Approximate yield = [(80 - 50 + 9) / 50] x 100 = 78%
Expected returns of this stock is 78%.
Buy a security for $25, hold it for 2 years, then sell it for $65 (current income on this security is zero).Let's calculate the approximate yield of this security:
Beginning price = $25 Ending price = $65
Income = 0
Approximate yield = [(65 - 25 + 0) / 25] x 100 = 160%
Expected returns of this security is 160%.
Buy a 1-year, 10 percent note for $940 (assume that the note has a $1,000 par value and that it will be held to maturity).Let's calculate the approximate yield of this note:
Beginning price = $940 Ending price = $1,000
Income = $1,000 x 10% x 1 year = $100
Approximate yield = [(1,000 - 940 + 100) / 940] x 100 = 16.38%
Expected returns of this note is 16.38%.
Thus, the ranking will go as:
1. Buy a security for $25, hold it for 2 years, then sell it for $65 (current income on this security is zero): 160%
2. Buy a stock for $50 a share, hold it for 3 years, then sell it for $80 a share (the stock pays annual dividends of $3 a share): 78%
3. Buy a 1-year, 10 percent note for $940 (assume that the note has a $1,000 par value and that it will be held to maturity): 16.38%.
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Question No. 2 [3+8+4] a) Explain the differences in information and task processing across culture. How do these differences affect companies in managing international environment? Are there any basic differences between Japanese and American work cultures particularly in relation to human resources management practices? Explain what Bangladesh can learn from such culture and practices. P/Ethno/Crea centrism Discuss the three types of cultural orientations of home country companies and managers that determine the degree of adaptability in foreign culture?
a) Information and task processing across cultures can differ in terms of how information is perceived, processed, and used.
For example, some cultures may place a greater emphasis on intuition and experience when making decisions, while others may place a greater emphasis on rational analysis and data.
These differences in information processing can affect companies in managing an international environment by requiring them to adapt their decision-making processes and communication strategies to different cultural contexts. For example, a company that is used to relying heavily on data and analysis may need to be more flexible and open to intuition and experience in a culture that places less emphasis on data.
There are also basic differences between Japanese and American work cultures, particularly in relation to human resources management practices. For example, Japanese culture tends to prioritize harmony and consensus-building, while American culture tends to prioritize individualism and competition. This can lead to differences in practices such as performance evaluations, compensation, and training and development.
Bangladesh can learn from both Japanese and American work cultures and practices in terms of human resources management. For example, it can learn from Japan's emphasis on employee training and development, as well as its focus on building strong relationships between employees and management. It can also learn from America's emphasis on individualism and merit-based compensation, as well as its focus on continuous learning and development.
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Kim paid $996.54 for a bond one year ago with a yield to maturity of 8.25% and a coupon rate of 6.75%. Today, the bond is worth $1000.95. What was Kim's total percentage return over the past year?
Multiple Choice
a. 8.25%
b. 6.75%
c. 0.44%
d. 7.22%
e. 2.38%
Kim's total percentage return over the past year is 7.22%. To calculate the total percentage return on a bond, we need to consider both the coupon payments received and any capital gain or loss.
First, let's calculate the coupon payment received:
Coupon Payment = Coupon Rate * Face Value = 6.75% * $1000 = $67.50
Next, let's calculate the capital gain or loss:
Capital Gain or Loss = Selling Price - Purchase Price = $1000.95 - $996.54 = $4.41
Now, let's calculate the total return:
Total Return = (Coupon Payment + Capital Gain or Loss) / Purchase Price
Total Return = ($67.50 + $4.41) / $996.54 = 0.0722 or 7.22%
Therefore, Kim's total percentage return over the past year is 7.22%.
The correct answer is (d) 7.22%.
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4i) Baseline: If nominal GDP is 1500 and the money
supply is 400, what is velocity?
• 4i) Scenario 1: If nominal GDP now rises to 1600, but
the money supply does not change, how has velocity
changed?
• 4ili) Scenario 2: If nominal GDP now falls back to 1500
and the money supply falls to 350, what is velocity?
• Note: Nominal GDP = P × Y, & Money Supply = M
• QTM Equation M x V = P x Y F
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Using the following data, answer a-e. Please show all work step by step. Thank you so much! Xena Corp. Total assets $21,249 Interest-bearing debt(market value) $11,070 Average borrowing rate for debt 10.2% Common Equity:
Book Value $5,535
Market Value $23,247
Marginal income tax rate 19%
Market Beta 1.64
a) Assuming that the risk free rate is 4.5% and the market risk premium is 6.2%, calculate Xena's cost of equity capital, using the capital asset pricing model:
O i) 10.2%
O ii) 13.6%
O iii) 15.2%
O iv) 14.7%
b) Calculate Xena's cost of debt capital
O i) 8.3%
O ii) 13.5%
O iii) 3.2%
O iv) 10.2%
c) Determine the weight on debt capital that should be used to calculate Xena's weighted-average cost of capital
O i) 52.1%
O ii) 67.0%
O (iii) 32.0%
O (iv) 47.6%
d) Determine the weight on equity capital that should be used to calculate Xena's weighted- average cost of capital
O i) 33.3%
O (ii) 71.9%
O (iii) 67.7%
O (iv) 54.9%
e) Assuming that the risk-free rate is 4.5% and the market risk premium is 6.2%, calculate Xena's weighted- average cost of capital
O (i) 13.2%
O (ii) 10.7%
O (iii) 10.4%
O (iv) 12.6%
a. the cost of equity capital for Xena Corp is approximately 14.7% (Option iv). b. the cost of debt capital for Xena Corp is approximately 8.3% c. Xena Corp's weighted-average cost of capital is 52.1%. d. Xena Corp's weighted-average cost of capital is approximately 19.0%
To calculate Xena Corp's cost of equity capital using the capital asset pricing model (CAPM), we need the risk-free rate, the market risk premium, and the company's market beta.
a) Cost of equity capital:
Risk-free rate = 4.5%
Market risk premium = 6.2%
Market beta = 1.64
Using the CAPM formula: Cost of Equity = Risk-free rate + (Market risk premium * Beta)
Cost of Equity = 4.5% + (6.2% * 1.64)
Cost of Equity = 4.5% + 10.168%
Cost of Equity = 14.668%
So the cost of equity capital for Xena Corp is approximately 14.7% (Option iv).
b) To calculate Xena Corp's cost of debt capital, we need the interest-bearing debt and the average borrowing rate.
b) Cost of debt capital:
Interest-bearing debt (market value) = $11,070
Average borrowing rate for debt = 10.2%
Cost of Debt = Average borrowing rate for debt * (1 - Marginal income tax rate)
Cost of Debt = 10.2% * (1 - 19%)
Cost of Debt = 10.2% * 0.81
Cost of Debt = 8.282%
So the cost of debt capital for Xena Corp is approximately 8.3% (Option i).
c) Weight on debt capital:
Weight on debt capital = Interest-bearing debt (market value) / Total assets
Weight on debt capital = $11,070 / $21,249
Weight on debt capital = 0.52
So the weight on debt capital that should be used to calculate Xena Corp's weighted-average cost of capital is 52.1% (Option i).
d) Weight on equity capital:
Weight on equity capital = Common equity (market value) / Total assets
Weight on equity capital = $23,247 / $21,249
Weight on equity capital = 1.095
So the weight on equity capital that should be used to calculate Xena Corp's weighted-average cost of capital is 109.5%. However, since the weight on equity capital cannot exceed 100%, we take it as 100%.
So the weight on equity capital that should be used to calculate Xena Corp's weighted-average cost of capital is 100% (Option i).
e) To calculate Xena Corp's weighted-average cost of capital, we need the cost of equity capital, cost of debt capital, and the weights on equity and debt capital.
e) Weighted-average cost of capital (WACC):
WACC = (Weight on equity capital * Cost of equity capital) + (Weight on debt capital * Cost of debt capital)
WACC = (100% * 14.7%) + (52.1% * 8.3%)
WACC = 14.7% + 4.323%
WACC = 19.023%
So Xena Corp's weighted-average cost of capital is approximately 19.0% (Option i).
Please note that the weights on equity and debt capital should sum up to 100%. In this case, the weight on equity capital exceeds 100%, so we take it as 100% for the calculation.
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Frigo-Trans AG would like to take out an annuity loan with its house bank with the fol- lowing conditions: Nominal amount of the loan: 40,000,000 euros Term: 8 years Nominal interest rate: 5% p.a. a) From the point of view of Frigo-Trans AG, determine the annuity to be paid annu- ally as well as the accruing interest and redemption obligations for the first two years. b) Alternatively, Frigo-Trans AG could also take out an amortizing loans loan. Explain its advantages and disadvantages in comparison with an annuity loan c) Describe the collateral transfer by way of security. What is the problem with this type of collateral and what is suitable as collateral?
Collateral transfer by way of security involves providing assets or guarantees to secure the loan. The problem with collateral transfer is that if the borrower defaults on the loan, the lender can seize and sell the collateral to recover their funds.
However, not all assets are suitable as collateral. Suitable collateral should have sufficient value, be easily transferable, and have a stable market. a) To determine the annuity payment and the interest and principal obligations for the first two years, we can use the annuity loan formula:
Annuity Payment = Loan Amount / Present Value Factor
The present value factor can be calculated using the formula: Present Value Factor = (1 - (1 + interest rate)^(-term)) / interest rate
For Frigo-Trans AG, the nominal loan amount is 40,000,000 euros, the term is 8 years, and the nominal interest rate is 5% per year.
Using the formulas, we can calculate the annuity payment for the first two years and the interest and principal obligations: Year 1:
Present Value Factor = (1 - (1 + 0.05)^(-8)) / 0.05 ≈ 6.71008
Annuity Payment = 40,000,000 / 6.71008 ≈ 5,967,447 euros
Interest Obligation (Year 1) = Loan Amount * Interest Rate ≈ 40,000,000 * 0.05 = 2,000,000 euros
Principal Obligation (Year 1) = Annuity Payment - Interest Obligation ≈ 5,967,447 - 2,000,000 = 3,967,447 euros Year 2:
Present Value Factor = (1 - (1 + 0.05)^(-8+1)) / 0.05 ≈ 13.54560
Annuity Payment = 40,000,000 / 13.54560 ≈ 2,951,736 euros
Interest Obligation (Year 2) = Loan Amount * Interest Rate ≈ 40,000,000 * 0.05 = 2,000,000 euros
Principal Obligation (Year 2) = Annuity Payment - Interest Obligation ≈ 2,951,736 - 2,000,000 = 951,736 euros
b) An amortizing loan is a loan in which the principal is gradually paid off over the loan term, resulting in a decreasing loan balance. The advantages of an amortizing loan compared to an annuity loan are:
Equity Building: With each payment, a portion goes towards reducing the principal, resulting in equity accumulation over time.
Total Interest Paid: Generally, the total interest paid over the loan term is lower compared to an annuity loan since the outstanding principal decreases. The disadvantages of an amortizing loan include:
Higher Initial Payments: The initial loan payments are usually higher compared to an annuity loan since both interest and principal are being paid. Cash Flow Impact: The higher initial payments may put more strain on cash flow, particularly in the early years of the loan.
c) Collateral transfer by way of security involves providing assets or guarantees to secure the loan. The problem with collateral transfer is that if the borrower defaults on the loan, the lender can seize and sell the collateral to recover their funds. However, not all assets are suitable as collateral. Suitable collateral should have sufficient value, be easily transferable, and have a stable market.
Examples of suitable collateral may include real estate, machinery, inventory, or financial assets like stocks or bonds. These assets can be sold to recover the outstanding loan balance in case of default. However, it's important to evaluate the specific requirements and preferences of the lender regarding collateral.
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Suppose that legalizing the use of marijuana would decrease its price by 76 percent. If the price elasticity marijuana? percent Enter a numeric response using unded to two decimal places) would be the percentage is in 1 quarsity of majuana demanded thom iegang Suppose instead that the price elasticity of demand for majuana is 0.34 What would be the percentage increase in the quantity of marijuana demanded from legating mana? percent enter your response munded to deal place The higher the absolute value of demand for the increase in majuana u would result from legation se its price by 76 percent. If the price elasticity of demand for mar a real number rounded to two decimal places.) rijuana is -0.34. What would be the percentage increase in the qua and for marijuana, the the increase in marijuana use that less greater
The percentage increase in the quantity of marijuana demanded from legalizing its use would depend on the price elasticity of demand for marijuana.
If the price elasticity of demand for marijuana is known, it can be used to determine the percentage increase in the quantity of marijuana demanded after legalizing its use. A higher absolute value of the price elasticity of demand indicates a more responsive demand to price changes. For example, if the price elasticity of demand is -0.34, it suggests that a 1% decrease in price would result in a 0.34% increase in the quantity of marijuana demanded.
To accurately determine the percentage increase in the quantity of marijuana demanded from legalizing its use, the specific price elasticity of demand value is required. The price elasticity of demand reflects the responsiveness of consumers to price changes, and a higher absolute value suggests a greater impact on the quantity demanded.
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Choose the best answer. In the supply chain, responsive/agile:
a) Sequence of organizations—their facilities and activities—that are involved in producing and delivering a product.
b) A flexible supply chain that has the ability to quickly respond to changes.
c) Focus on eliminating non-value-added activities to create an efficient, low-cost supply chain.
d) Using nearby suppliers shortens the supply chain, reducing transportation time and cost.
e) Collaboration of supply chain companies and coordination of their activities so that market demand is met as efficiently and effectively as possible.
The best answer is b) A flexible supply chain that has the ability to quickly respond to changes.
The term "responsive/agile" in the context of the supply chain refers to the ability of a supply chain to adapt and respond quickly to changes in customer demands, market conditions, or other external factors. It involves being flexible, nimble, and proactive in addressing changes and disruptions. A responsive/agile supply chain focuses on minimizing lead times, improving responsiveness, and being able to efficiently handle changes in production volumes or product variations. This approach enables companies to meet customer needs more effectively and gain a competitive advantage in dynamic and fast-paced markets.
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"
1) Bonnie and Clyde have a partnership agreement which includes the following provisions regarding sharing net income or net loss: 1. A salary allowance of $45,000 to Bonnie and $25,000 to Clyde. 2). An interest allowance of 10% 3)the remainder to be divided 50% to bonnie and 50% to clyde a)calculate the net income B)enter them journal
"
To calculate net income consider the formula, Total revenue less total expenses equals net income. The steps are broken down as follows:
Calculate the total revenue by adding up all the money the company has made over a certain time period. This can include income from sales, service charges, interest, rentals, or any other kinds of income.
Calculate Total Expenses: List all of the costs the company incurred in the same time period and add them all up. payments of goods supplied, salaries and wages, rent, utilities, advertising, taxes, interest payments, depreciation, and any other expenditures associated with running a business are examples of expenses.
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Cubana Novelties will invest $100,000 today in machinery used to produce banners. The machine will be depreciated using 5-year MACRS (the percentages for years 1-6 are .20, .32, .192, .1152, .1152 and .0576, respectively. Cubana finds out after four years, that they can sell the machine for $50,000 and decides to sell the machine. What is the salvage value after tax on the sale if the tax rate is 21%. (Express your answer in thousands of dollars, i.e., if your answer is $41.6 thousand, type 41.6.)
$45.312 thousand is the machine's salvage value after tax on the sale. Salvage value can be calculated using, Salvage value after tax = Selling price - Taxable gain x Tax rate.
To calculate the salvage value after tax:
1. Determine the remaining book value of the machine after 4 years:
Book value = Initial investment - Cumulative depreciation
Depreciation Year 1 = 0.20 x Initial investment
Depreciation Year 2 = 0.32 x Initial investment
Depreciation Year 3 = 0.192 x Initial investment
Depreciation Year 4 = 0.1152 x Initial investment
Cumulative depreciation = Depreciation Year 1 + Depreciation Year 2 + Depreciation Year 3 + Depreciation Year 4
2. Remaining book value = Initial investment - Cumulative depreciation
3. Gain or Loss = Selling price - Remaining book value
4. Taxable gain = Gain or Loss - Depreciation Year 4
5. Salvage value after tax = Selling price - Taxable gain x Tax rate
Using the given information and performing the calculations:
Depreciation Year 1 = 0.20 x $100,000 = $20,000
Depreciation Year 2 = 0.32 x $100,000 = $32,000
Depreciation Year 3 = 0.192 x $100,000 = $19,200
Depreciation Year 4 = 0.1152 x $100,000 = $11,520
Cumulative depreciation = $20,000 + $32,000 + $19,200 + $11,520 = $82,720
Remaining book value = $100,000 - $82,720 = $17,280
Gain or Loss = $50,000 - $17,280 = $32,720
Taxable gain = $32,720 - $11,520 = $21,200
Salvage value after tax = $50,000 - ($21,200 x 0.21) = $45,312
Therefore, the salvage value after tax on the sale of the machine is $45.312 thousand.
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Andy contracts with Yvonne to produce an advertisement for a Fourth-of-July fundraising party. Yvonne does not produce the advertisement until July 6. Here, Yvonne's breach of the contract is a __________ breach.
Please choose the best answer
isolated
irrevocable
material
minor
Yvonne's breach of the contract by producing the advertisement after July 4 is likely considered a material breach.
A material breach refers to a substantial violation of the terms of the contract that goes to the core of the agreement. In this case, the Fourth-of-July fundraising party had a specific date, and Yvonne's failure to produce the advertisement until July 6 undermines the purpose and essence of the contract. It can be seen as a significant deviation from the agreed-upon terms and can have a substantial impact on the party's success and the value of the contract.
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In ________, employees who are evaluated more highly receive larger or more rapid increments than average or poor performers.
A) a two-tier pay plan
B) automatic progression
C) a union spillover
D) merit progression
The best option that completes the statement "In merit progression, employees who are evaluated more highly receive larger or more rapid increments than average or poor performers.
"The performance evaluation method is used to determine merit pay in the workplace. The determination of merit pay is made through the merit progression method.
Merit progression is defined as a salary structure that rewards performance, abilities, and skills. Merit progression programs are designed to identify and reward high-performing employees by providing them with larger or faster pay raises than low-performing employees.
In the merit progression system, merit increases are awarded based on individual performance evaluations that are conducted annually or biannually. This is why it's said that in merit progression, employees who are evaluated more highly receive larger or more rapid increments than average or poor performers.
The merit progression system's primary goal is to reward employees who perform well by providing them with larger pay increases, which encourages them to continue performing well.
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The current price of a stock is $49 38. If dividends are expected to be $1.00 per share for the next five years, and the required retum is 9%, then what should the price of the stock be in 5 years when you plan to sell it? The price 5 years from now will be ____$ (Round your response to the nearest dollar) If the dividend and required return remain the jame, and the stock price is expected to increase by $1 five years from now does the current stock price also increase by $17 A. Yes, the current stock price will increase by $1 because the current stock price should not be discounted by the required return B. No, the current stock price will not increase by $1 because the future stock price is discounted by the required return. C. The answer is uncertain as stock prices can be very unpredictable
The price 5 years from now will be $45. If the dividend and required return remain the jame, and the stock price is expected to increase by $1 five years from now does the current stock price also increase by $17 B. No, the current stock price will not increase by $1 because the future stock price is discounted by the required return.
Present value (PV) of the stock can be calculated as follows:
P0 = D1 / (1 + r)1 + D2 / (1 + r)2 + ... D5 / (1 + r)5 + P5 / (1 + r)5
Where, D1 = Dividend in year 1
D2 = Dividend in year 2
D5 = Dividend in year 5
P5 = Price of stock in year 5
Substituting the values in the above formula we get,
P0 = 1 / (1 + 0.09)1 + 1 / (1 + 0.09)2 + ... + 1 / (1 + 0.09)5 + P5 / (1 + 0.09)5P0 = [1 / (1 - 1 / (1 + 0.09)5)] + P5 / (1 + 0.09)5P0 = $4.07 + P5 / (1.09)5
Substituting the given values, we get: $49.38 = $4.07 + P5 / (1.09)5$45.31 = P5
Therefore, the price of the stock in 5 years will be $45 (rounded to the nearest dollar).
Now, we need to check if the current stock price will also increase by $1 because the future stock price is expected to increase by $1. No, the current stock price will not increase by $1 because the future stock price is discounted by the required return, which is 9%.
So, option (B) No, the current stock price will not increase by $1 because the future stock price is discounted by the required return is the correct answer.
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Cooling Tools, Inc. is currently producing 782 of small refrigerators per month but the company’s CEO plans to increase production at a rate of 6.64 percent per month until the firm is producing 5,379 of refrigerators per month. How many months will this take?
Round the answer to two decimal places.
It will take about 32.94 months for Cooling Tools, Inc. to achieve its target production of 5,379 refrigerators per month.
The given data in the problem is :The current production of small refrigerators per month = 782.The planned production rate increase per month = 6.64%. The target production of small refrigerators per month = 5,379.
We can use the formula for exponential growth which is given below: y = a(1 + r)^t wherey = the target amounta = the initial amountr = the rate of growth/decayt = the time (in months, years, etc.)First, we need to determine the rate of growth in decimal form.r = 6.64% = 6.64/100 = 0.0664.
Now, we can substitute the given data into the formula and solve for t.5379 = 782(1 + 0.0664)^tt = log(5379/782) / log(1.0664)t = 32.94.The answer is rounded off to two decimal places. Hence, it will take about 32.94 months for Cooling Tools, Inc. to achieve its target production of 5,379 refrigerators per month.
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Answer With Proper Explanation.-
Which of the following is not a characteristic of an efficient market?
Select one:
a) information is rapidly reflected in market prices
b) prices vary for a single asset or commodity as a result of differences in people's willingness to pay c) markets that function with a minimum of waste or excessive trading costs
d) the market has a large number of buyers and sellers
e) prices reflect the intrinsic value of an asset
Prices vary for a single asset or commodity as a result of differences in people's willingness to pay is not a characteristic of an efficient market. The correct answer is option b.
An efficient market is a market where all available information is rapidly reflected in market prices, meaning that it is impossible for anyone to make a profit by using information that is already available to the public. This means that there are no undervalued or overvalued securities, as prices always reflect the intrinsic value of an asset.
Furthermore, an efficient market is characterized by low transaction costs and a large number of buyers and sellers, which ensures that market prices are set by the forces of supply and demand. This eliminates the possibility of market manipulation or insider trading, as all market participants have equal access to information.
Finally, it is important to note that in an efficient market, prices are not determined by differences in people's willingness to pay. Rather, they are determined solely by the forces of supply and demand. This means that a good or service that is in high demand will be priced higher than one that is not, regardless of how much an individual is willing to pay.
Therefore, prices that vary for a single asset or commodity as a result of differences in people's willingness to pay is not a characteristic of an efficient market. The correct answer is option b.
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Under what condition is the economy experiencing neither a contraction, nor an expansion? a output = expenditure b leakages = injections c both a and b
d none of the above
The condition under which the economy is experiencing neither a contraction nor an expansion is option c) both a) output = expenditure and b) leakages = injections.
In macroeconomics, the equilibrium level of output in an economy is determined by the equality of total output (production) and total expenditure (spending). When output equals expenditure, it indicates that the economy is in a state of equilibrium and experiencing neither a contraction (output below potential) nor an expansion (output above potential).
Additionally, leakages and injections refer to the flow of income in the economy. Leakages are savings, taxes, and imports that reduce the flow of income, while injections are investments, government spending, and exports that increase the flow of income. When leakages equal injections, it ensures that the economy is in equilibrium without contraction or expansion.
Therefore, both conditions a) output = expenditure and b) leakages = injections are necessary for the economy to be in a state of neither contraction nor expansion.
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William Blackstone believed a person has a moral right to a thing that permits him to live a human life. This would include nature and the environment. 1. Discuss how pollution violates the justice or fairness that characterizes a competitive free market?
2. Summarised the three pillars of sustainability?
1. Pollution violates the justice or fairness that characterizes a competitive free market because it disrupts the balance between the demand and supply. According to Blackstone's principle of fairness, every person has an equal moral right to use natural resources.
However, when one person or company pollutes a natural resource, it diminishes its value and deprives others of the right to use it. This imbalance violates the principles of competitive free market because the polluter gets an undue advantage over other stakeholders who have to pay for the damages caused by pollution. Moreover, pollution creates negative externalities that impose a cost on society. Since the polluters do not bear the full cost of their actions, it creates an unfair advantage in the market. Therefore, pollution violates the justice or fairness that characterizes a competitive free market. 2. The three pillars of sustainability are economic, social, and environmental sustainability. Economic sustainability is concerned with ensuring that economic growth is sustainable and does not negatively impact the environment or future generations. It focuses on promoting responsible resource use and preventing wasteful practices. Social sustainability is concerned with ensuring that people can live fulfilling and meaningful lives. It focuses on promoting social equality, human rights, and social justice. Environmental sustainability is concerned with protecting the natural environment and ensuring that it can support life for future generations. It focuses on reducing pollution, conserving natural resources, and promoting renewable energy. Together, these three pillars form a framework for sustainable development that can help us achieve a more equitable and sustainable world.
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