Answer:
$13,310
Explanation:
The investment would be 100% = $1000 * 100% / 10% = $10,000
So this is the amount that would be deposited today to earn $1000 each year which is 10% of the amount deposited today.
The Future Value is given as under:
Future Value = Present Value * (1 + r)^n
Here,
Present value is $10,000
r is 10%
and n is 3 years
So, by putting values we have:
Future Value = $10,000 * (1 + 10%)^3 = $13,310
Steve wanted to open a day care service facility for dogs. He estimated the costs involved in providing the services desired by dog owners. After extensive deliberation, Steve decided not to proceed with the plan as the cost of providing the services was too high compared to the rates dog owners would be willing to pay. Which of the following stages of the new-product development process has Steve used to arrive at this decision?A. Idea screening.B. Business analysis.C. Idea generation.D. Test marketing.
Answer:
Business analysis.
Explanation:
Cathy, the manager of Cathy’s Catering, Inc., uses activity-based costing to compute the costs of her catered parties. Each party is limited to 20 guests and requires 5 people to serve and clean up. Cathy offers two types of parties, an afternoon picnic and an evening formal dinner. The breakdown of the costs follows: Activities (and cost drivers) Afternoon Picnic Formal Dinner Advertising (parties) $ 89 per party $ 89 per party Planning (parties) $ 90 per party $ 134 per party Renting equipment $ 51 per party plus $ 77 per party plus (parties, guests) $ 10 per guest $ 20 per guest Obtaining insurance (parties) $ 155 per party $ 430 per party Serving (parties, servers) $ 58 per server per party $ 79 per server per party Preparing food (guests) $ 19 per guest $ 27 per guest Per party costs do not vary with the number of guests.
Required:
(a) Compute the cost of a 20-guest afternoon picnic.
(b) Compute the cost of a 20-guest evening formal dinner.
Answer:
a. $1,042
b. $1,864
Explanation:
a. The computation of cost of a 20-guest afternoon picnic is shown below:-
Particulars Amount
Advertising $89 ($89 × 1 per party)
Add: Renting equipment $251 ($51 × 1 per party) + ($10 × 20 guests)
Add: Planning $90 ($90 × 1 per party)
Add: Obtaining insurance $155 ($155 × 1 per party)
Add: Preparing foods $320 ($19 × 20 per party)
Add: Serving $140 ($58 × 5 servers)
Total cost of afternoon picnic $1,042
b. The computation of cost of a 20-guest afternoon picnic is shown below:-
Particulars Amount
Advertising $89 ($89 × 1 per party)
Add: Planning $134 ($134 × 1 per party)
Add: Renting equipment $277 ($77 × 1 per party) + ($10 × 20 guests)
Add: Obtaining insurance $430 ($430 × 1 per party)
Add: Serving $395 ($79 × 5 servers)
Add: Preparing foods $540 ($27 × 20 guests)
Total cost of evening formal dinner $1,864
Mike worked for Frank's Pizza as a driver and was an agent. His duties consisted of making deliveries along a designated route. One day Mike decided to see his girlfriend, Jackie, who lived 50 miles off his pizza route. While driving to his girlfriend's, Mike injured a pedestrian, Chuck. The accident was caused by Mike's negligent driving. Chuck is now suing both Mike and Frank's for personal injuries. Under the circumstances
A. Frank's is never liable for the negligent torts of its agents.B. Frank's is not liable because Mike was on a frolic of his own.C. Chuck can recover damages from both Frank's and Mike.D. Frank's is liable under the doctrine of respondeat superior.
Answer:
B. is not liable because Mike was on a frolic of his own.
Explanation:
Mike who is a dispatch rider, decided to see his girlfriend, Jackie, who lived 50 miles off his pizza route. He had an accident while driving to his girlfriend's, and injured a pedestrian, Chuck due to his negligent driving.
Under the circumstances, Frank's Pizza isn't liable because Mike was on a frolic of his own. Mike embarking on a 50 mile drive to see his girlfriend is frolicsome and outside the scope of his employment as a delivery agent.
Hence, this will absolve his employer from any liability as he wasn't working on the designated route at the time.
Orwell building supplies' last dividend was $1.75. Its dividend growth rate is expected to be constant at 19.00% for 2 years, after which dividends are expected to grow at a rate of 6% forever. Its required return (rs) is 12%. What is the best estimate of the current stock price
Answer:
$38.74
Explanation:
Div₀ = $1.75
Div₁ = $2.0825
Div₂ = $2.4782
Div₃ = $2.6269 and grow at a 6% constant rate forever
required rate of return = 12%
using growing perpetuity formula to determine the terminal value of the stock in year 2 = $2.6269 / (12% - 6%) = $43.78
the stock's current price = $2.0825/1.12 + $2.4782/1.12² + $43.78/1.12² = $1.86 + $1.98 + $34.90 = $38.74
During 2009, Accent Toys Plc., which began business in October of that year, purchased 15,000 units of a toy at cost of $10 per unit in October. The toy sold well in October. In anticipation of heavy December sales, Accept purchased 7,000 additional units in November at a cost of $11 per unit. During 2009, Accent sold 18,000 units at a price of $15 per unit. Under the first in, first out (FIFO) method, what is Accent's cost of goods sold for 2009?
Answer:
$183,000
Explanation:
The computation of the cost of goods sold using the FIFO method is shown below:
= Number of units purchased × per unit + additional units purchased × per unit
= 15,000 units × $10 + 3,000 units × $11
= $150,000 + $33,000
= $183,000
Since there are 18,000 units are sold
out of which 15,000 are at $10 and the remaining 3,000 units are at $11 and the same is to be considered
ou currently own 10 percent of the 3.0 million outstanding shares of Webster Mills. The company has just announced a rights offering with a subscription price of $40. One right will be issued for each share of outstanding stock. This offering will provide $12 million of new financing for the firm, ignoring all issue costs. Assume that all rights are exercised. What will be your new ownership position if you opted to sell your rights rather than exercise them personally
Answer: 9.09% ownership
Explanation:
Your current ownership of the shares in Webster Mills is 10% of 3 million.
That means that you own,
= 10% * 3 million
= 300,000 shares.
The new offering that the company is doing equates one right to each share of existing stock and is expected to raise $12 million in new financing at a cost of $40. The goal is to find out how many new shares this will add.
= 12,000,000/40
= 300,000 shares
This means that 300,000 new shares will be added.
There are already 3,000,000 shares outstanding and now there are 300,00 extra which would bring the total to,
= 3,000,000 + 300,000
= 3,300,000 outstanding shares.
Since you sold your rights then you still have shares but now your percentage of ownership will change because of the increase in outstanding shares.
Your ownership percentage is now,
= 300,000 shares (that you own) / 3,300,000 (new outstanding balance)
= 0.0909
= 9.09%
Your new ownership position is that you own 9.09% of Webster Mills.
The new ownership position if you opted to sell your rights rather than exercise them personally is 9.09% of 3.3 Million shares.
The calculation is as follows:New shares Issued is
= Proceeds ÷ Subscription price
= $12 M ÷ $40
= 300,000
Now
New Composition = No. of shares held ÷ Total shares after issuance
= 300,000 ÷ 3,300,000
= 0.0909
= 9.09%
Therefore we can conclude that The new ownership position if you opted to sell your rights rather than exercise them personally is 9.09% of 3.3 Million shares.
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Proposals L and K each cost $600,000, have 6-year lives, and have expected total cash inflows of $720,000. Proposal L is expected to provide equal annual net cash flows of $170,000, while the net cash flows for Proposal K are as follows:
Year 1 $250,000
Year 2 200,000
Year 3 100,000
Year 4 50,000
Year 5 100,000
Year 6 20,000
Total $720,000
Determine the cash payback period for each proposal. Round your answers to two decimal places, if necessary.
Answer:
Year 4 50,000
Explanation:
Mayall Corporation is developing standards for its products. Each unit of output of the product requires 0.92 kilogram of a particular input. The allowance for waste and spoilage is 0.02 kilogram of this input for each unit of output. The allowance for rejects is 0.11 kilogram of this input for each unit of output. The standard quantity in kilograms of this input per unit of output should be: Select one: a. 0.90 b. 0.92 c. 0.79 d. 1.05
Answer:
d. 1.05 kilograms
Explanation:
Since we are looking for the standard quatity in kilograms of input per unit of out put we are going to sum up all the input for each unit of output in order to arrived at the standard quantity in kilograms.
Output unit required 0.92 kg
Add: waste and spoilage allowance 0.02 kg
Allowance rejected 0.11 kg
Standard quantity in kilograms 1.05 kg
A firm is running 12 different ad campaigns in Brazil with a total budget of BRL 40 million (exchange rate: BRL 2.2517 per USD), but the campaigns do not appear to be effective. What would you recommend
Answer:
BRL 40 million is $90.068 million in America.
For 12 different ads, that is an average of about $7.5 million per ad.
My recommendations will be to check the effectiveness of the marketing strategy and the general approach towards the ad campaigns. It might be necessary for the company to narrow down on the number of campaigns or increase the funding available for the ad campaign. Also, the effectiveness of the methods of ad campaign can be compared to that of similar firms that has been successful with their ad campaigns, and necessary can then be made.
Indigo Devices Corp. has 25,000 units in process on September 1 that are 70% complete. In September, the company completed and transferred out 60,000 units. The company has 12,000 units in process on September 30 that are 40% complete. Calculate the equivalent units of Indigo Devices for September assuming the company uses the FIFO method of costing.
Answer:
Equivalent unit = 47,300 units
Explanation:
The FIFO separates the completed units into opening inventory and fully worked
Fully work represent units started and completed in the same period. They exclude the opening inventory.
Fully worked = 60,000- 25,000 =175,000.
Item units Equivalent units
Opening inventory 25,,000 25,000× 30%= 7,500
Fully worked 35,000 35,000× 100% 35,000
Closing inventory 12000 12,000 × 40% = 4,800
Total equivalent unit 47,300
Equivalent unit = 47,300 units
Note also at that the degree of completion for opening inventory is the simply the balance of work remaining to be done.
For example, for materials, 70%% of work has been done on the opening inventory in the last period, hence the balance of 30% would be done this period
The dean of a highly reputed business school has decided to pursue a coveted accreditation for the college. To get the faculty's buy-in and support, she created a faculty-driven process whereby members of the faculty participate and carry out the accreditation process under her guidance. This approach has increased the commitment of the faculty, who now have a stake in seeing the process succeed and the goal of accreditation accomplished. What influence tactic did the dean use?
Answer:
Consultation.
Explanation:
In the scenario observed in the question, it can be seen that the dean used the consultation tactic.
This tactic can be defined as the influencing leader seeking support from others to influence a group. This is an effective approach to increase group satisfaction due to the value of democratic decision-making.
The benefits of this technique are described in the question, such as the increased commitment of the faculty, who are now interested in seeing the process succeed and the objective of accreditation fulfilled.
A cash register tape shows cash sales of $3,000 and sales taxes of $200. The journal entry to record this information is:_________
A) Cash 3, 200 Sales Revenue 3, 200
B) Cash 3, 200 Sales Tax Payable 200 Sales Revenue 3,000
C) Cash 3,000 Sales Tax Expense 200 Sales Revenue 3, 200
D) Cash 3, 200 Sales Revenue 3000 Sales Taxes
Answer:
B) Cash 3, 200 Sales Tax Payable 200 Sales Revenue 3,000
Explanation:
The journal entry is shown below:
Cash $3,200
To Sales tax payable $200
To Sales revenue $3,000
(Being the sales and sales tax is recorded)
For recording this we debited the cash as it increased the assets and credited the sales tax payable and sales revenue as it also increased the liabilities and revenue
Therefore, option B is correct
Springer Company had three intangible assets at the end of 2014 (end of the accounting year): a. A copyright purchased on January 1, 2014, for a cash cost of $14,500. The copyright is expected to have a 10-year useful life to Springer. b. Goodwill of $65,000 from the purchase of the Hartford Company on July 1, 2013. c. A patent purchased on January 1, 2013, for $48,000. The inventor had registered the patent with the U.S. Patent Office on January 1, 2009.
Answer:
1.$120,050
2.Copyright $1,450
Patent $3,000
3.Copyright $13,050
Goodwill $65,000
Patent $42,000
Explanation:
1.Computation of the acquisition cost of each intangible asset
SPRINGER COMPANY Income Statement for 2014(partial)
Operating expenses:
Amortization expense $4,450
SPRINGER COMPANY Balance SheetDecember 31, 2014 (partial)
Intangibles:
Copyright $13,050
Goodwill$65,000
Patent$42,000
Total $120,050
2. Computation of amortization expense of each intangible for the year ended December 31, 2014
Amortization on December 31, 2014 using thr straight-line method excluding residual value:
Amortization expense
Calculation for Copyright:
$14,500 × 1/10 = $1,450
We wont calculate for Goodwill because goodwill is not amortized because of its indefinite life.
Calculation for Patent:
$48,000 × 1/16 =$3,000
1/16 is what was remaining at time of the purchase
[Amortization expense =20 year legal life – the years used which is 4 years = 16 years remaining]
3. Calculation of how the assets and any related expenses should be reported on the balance sheet and income statement for 2014.
Income statement for 2014:
Calculation for Amortization expense: ($1,450 + $3,000) = $4,450
Springer Company Balance sheet at December 31, 2014:
Calculation for Copyright ($14,500 − $1,450) = $13,050
Goodwill $65,000
Calculation for Patent ($48,000 − $6,000) = $42,000
($3,000 amortization expense × 2 years =$6,000)
James Smith, a health inspector for the state of Missouri, inspected a restaurant owned by Salley Slick. Smith found numerous health violations in the restaurant and fined Slick accordingly. When Smith notified Slick of the infractions, Smith strongly suggested that $5,000 "would sure prove handy in the Spring" when he planned to purchase a new fishing boat. Slick understood Smith's obvious hint and offered Smith $5,000 if he would lose the paperwork concerning the failure of the restaurant to meet proper inspection guidelines. Smith accepted the $5,000 and lost the paperwork. One month later, Smith returned to the restaurant and told Slick that he would reappear every month and find violations unless Slick produced $1,000 each month to go toward the purchase of a fleet for Smith. Slick agreed to make the $1,000 payments. What crimes have been committed by Smith and Slick?
Answer:
Smith is guilty of Bribery and corruption While slick is guilty of breaking health code and trying to bribe a public officer.
Explanation:
Bribery has occurred because Smith's judgment has been paid for/influenced through the $5000 he has received from Slick. Money he plans to use on a boat. Smith has solicitated a bribe and is guilty of bribery. Since he sought for the bribe, he has committed a crime of bribery solicitation. After receiving the money, he committed the crime of accepting a bribe. When additional sums of money were requested, Smith further committed the crime of extortion and blackmail. He has been shown to be greedy.
Slick is guilty of trying to bribe a public official to escape the payment of fines and also guilty of violating health codes.
An employee receives an hourly rate of $15, with time and a half for all hours worked in excess of 40 during the week. Payroll data for the first week of the calendar year are as follows: hours worked, 46; federal income tax withheld, $110; Social security tax rate, 6%; and Medicare tax rate, 1.5%; state unemployment tax, 5.4% on the first $7,000; federal unemployment tax, 0.8% on the first $7,000. What is the net amount to be paid to the employee? If required, round your answers to the nearest cent.
Answer:
Net pay $569.88
Explanation:
Let the gross earnings be:
$15 * 40 = $600
$15 * 1.5 * 6 = $135
$600+$135
=$735
Withheld Federal income tax = $110
Social security tax rate =0.06* $735
= $44.10
Medicare tax rate = 0.015* $735
= $11.02
Net pay $569.88
($735 - $110 - $44.10 - $11.02)
Amount to be paid to the each employee will be $569.88
Accounts Receivable Turnover and Days' Sales in Receivables American Eagle Outfitters, Inc. sells clothing, accessories, and personal care products for men and women through its retail stores. American Eagle reported the following data (in millions) for two recent years: Year 2 Year 1 Sales 3522 3283Accounts receivable 81 68Assume that accounts receivable (in millions) were $74 million at the beginning of Year 1 a. Compute the accounts receivable turnover for Year 2 and Year 1. Round to two decimal places. Year 2: Year 1: b. Compute the day's sales in receivables for Year 2 and Year 1. Round interim calculations and final answers to one decimal place. Use 365 days per year in your $3,283 68 calculations. Year 2: Year 1: c. The change in accounts receivable turnover from year 1 to year 2 indicates a(n) a(n) days days in the efficiency of collecting accounts receivable and is___________ change. The change in the days' sales in receivables indicates a _________ change
Answer and Explanation:
The computation is shown below:
a. Account receivable turnover ratio is
= Net credit sales ÷ Average accounts receivable
where,
the Average accounts receivable would be
= (Accounts receivable, beginning of year + Accounts receivable, end of year) ÷ 2
For year 2
= ($3,522) ÷ ($81 + $68) ÷ 2
= 47.3 times
For year 1
= ($3,283) ÷ ($68 + $74) ÷ 2
= 46.2 times
b. The days sales in receivables is
= 365 days ÷ account receivable turnover ratio
For year 2
= 365 days ÷ 47.3 times
= 7.7 days
For year 1
= 365 days ÷ 46.2 times
= 7.9 days
c. As we can see that the change in accounts receivable turnover from year 1 to year 2 i.e from 46.2 times to 47.3 times is favorable change and it is increasing and the change in days sales in receivables from year 1 to year 2 i.e from 7.9 days to 7.7 days indicates a favorable change
In contrast to expected utility theory, prospect theory: A. weights outcomes based on their true probabilities, while expected utility uses a subjective weighting function. B. assumes people only care about their level of wealth instead of expected utility. C. allows people to treat gains and losses asymmetrically. D. decision makers are more sensitive to a given change in the outcome for large gains or losses than for small ones.
Answer: C. allows people to treat gains and losses asymmetrically.
Explanation:
According to the Prospect Theory, people generally are very averse to losses. For this reason they will always pick the option that gives them.gains as opposed to losses even if the result is the same. This means that they ascribe greater utility towards gains than losses meaning that they treat them asymptomatically.
For example, two options could be put to you. One makes you $10 and the other makes you $20 but you will lose $10. The result is the same but according to this theory you will pick the first option because gains are favoured to losses.
Expected Utility on the other hand involves people picking options and not knowing what the outcome will be so they cannot treat loss or gain asymmetrically. This is in contrast to the Prospect theory as because they know what might happen, they are able to pick gains.
Select the sentence where the idea is clearer.
A. We have every desire for and hope of a substantial salary increase.
B. We have every desire and hope of a substantial salary increase.
Answer:
B. We have every desire and hope of a substantial salary increase.
Explanation:
Prepositions are used along with a noun or a pronoun to indicate a relationship with another word or element in the clause. It makes an idea clearer.
Examples of prepositions are at, for, if, on, in, over, and under.
These are used to describe location time or place. However we should avoid unnecessary use of prepositions.
In this instance the use of for in the following sentence is unnecessary, as 'every desire' is adequate : 'We have every desire for and hope of a substantial salary increase. '
We have every desire and hope of a substantial salary increase. Is a more concise and better option
Fit-for-Life Foods reports the following income statement accounts for the year ended December 31.
Gain on sale of equipment $ 6,250 Depreciation expensesOffice copier $ 500
Office supplies expense 700 Sales discounts 16,000
Insurance expense 1,300 Sales returns and allowances 4,000
Sales 220,000 TV advertising expense 2,000
Office salaries expense 32,500 Interest revenue 750
Rent expenses Selling space 10,000 Cost of goods sold 90,000
Sales staff wages 23,000 Sales commission expense 13,000
Prepare a multiple-step income statement.
Answer:
Fit-for-Life Foods
Multi Step Income Statement for the year ended 31 Dec
$ $
Sales $220,000
Sales Discounts $16,000
Sales returns & Allowances $4,000 $20,000
Net Sales $200,000
Cost of Goods Sold $90,000
Gross Profits $110,000
Expenses
Selling Expenses:
Rent Expenses Selling Space $10,000
Sales Staff Wages $23,000
TV Advertising Expense $2,000
Sales Commission Expense $13,000
Total Selling expenses $48,000 ($48,000)
General & Administrative expenses:
Office Supplies expense $700
Insurance expense $1,300
Office Salaries Expenses $32,500
Depreciation expense $500
Office Copier
Total general and administrative $35,000 ($35,000)
expenses
Operating Income $27,000
Other Revenues, gains expense and losses:
Gain on Sale of Equipment $6,250
Interest Revenue $750
Total other revenues gains $7,000 ($7,000)
expenses and losses
Net Income $20,000
Cavy Company accumulated 560 hours of direct labor on Job 567 and 820 hours on Job 888. The direct labor was incurred at a rate of $15 per direct labor hour for Job 567 and $25 per direct labor for Job 888. Journalize the entry to record the flow of labor costs into production. If an amount box does not require an entry, leave it blank. Work in Process
Answer:
Dr work-in-process $ 28,900.00
Cr wages payable $ 28,900.00
Explanation:
The total amount of labor costs incurred on both jobs would be debited to work in process account , while the credit entry would be posted to the wages payable account.
Total labor cost incurred=(560*$15)+(820*$25)=$28,900.00
The amount is debited to work in process so as to add up to other direct costs of production while entry into wages payable indicates that employees are being owed.
Four highly similar and competitive income-producing properties located in close proximity to the subject property have sold this month. All four offer essentially the same amenities and services as the subject property. The sale prices and estimated first-year NOI for each of the comparable properties are as follows: Comparable Sale Price NOI1 A $1,450,000 $155,000 B $1,100,000 $135,400 C $1,250,000 $143,400 D $1,500,000 $169,000 Using the information provided, calculate the overall capitalization rate by direct market extraction assuming each property is equally comparable to the subject.
Answer: 11.43%
Explanation:
Capitalization rate is a real estate valuation measure that is used to compare and contrast different real estate investments.
The capitalization rate is calculated as shown below:
Capitalization rate of comparable A:
= Net operating income (NOI) / Sales price
= $ 155,000 / $ 1,450,000
= 0.1069
Capitalization rate of comparable B:
= Net operating income (NOI) / Sales price
= $ 135,400 / $ 1,100,000
= 0.1231
Capitalization rate of comparable C:
= Net operating income (NOI) / Sales price
= $ 143,400 / $ 1,250,000
= 0.1147
Capitalization rate of comparable D:
= Net operating income (NOI) / Sales price
= $ 169,000 / $ 1,500,000
= 0.1127
The overall capitalization rate will the be the average of all the 4 rates that we have calculated. This will be:
= (0.1069 + 0.1231 + 0.1147 + 0.1127) / 4
= 0.4574/4
= 0.1143 or 11.43%
The finance department is prone to unethical practices?
Explanation:
the unethical practices in accounting are more in proprietary, partnership and Private Limited companies. it is is at lower level in in public limited companies and MNCs.
The statement is correct that "The finance department is prone to unethical practices in private sector as compared to the public sector".
What is finance department?A finance department is the business unit in charge of receiving and managing funds on behalf of the organization. The department manages revenue and expenses while also ensuring that the firm runs smoothly and efficiently.
Money laundering, investment fraud, toxic loans, and violations of banking rules are only a few of the unethical actions performed by commercial banks.
Accounting unethical practices are more prevalent in proprietary, partnership, and Private Limited enterprises. It is lower in public limited firms and multinational corporations. Therefore, it can be concluded that The finance department is prone to unscrupulous behavior".
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At points on the short run aggregate supply curve (SAS) to the left of the long run aggregate supply curve (LAS), resources are most likely:________.a. overutilized, making it more likely that the short run aggregate supply curve (SAS) will shift up.b. underutilized, making it more likely that the short run aggregate supply curve (SAS) will shift down.c. overutilized, making it more likely that the short run aggregate supply curve (SAS) will shift down.d. underutilized, making it more likely that the short run aggregate supply curve (SAS) will shift up.
Answer:.b----underutilized, making it more likely that the short run aggregate supply curve (SAS) will shift down.
Explanation: At points on the short run aggregate supply curve shifting to the left of the long run aggregate supply curve means that the economy is at the stage where output in the short run will not exceed output on the long run therefore resources will be underutilized resulting to lower prices and therefore causing a a downward shift on the short run aggregate supply curve.
Answer:
d. underutilized, making it more likely that the short run aggregate supply curve (SAS) will shift up.
Explanation:
Aggregate supply is a sum of all goods and services that is supplied to a consumer. In the short run aggregate supply is affected by factors such as price level, government policy.
When the prices of inputs increases it results in a reduction in amount aggregate supplied (shift to the left and upward as illustrated in the diagram).
This implies that resources are not used maximally to produce output, but production is limited by the higher cost of inputs.
In the attached diagram aggregate supply shifts upward and to the left from AS1 to AS2
Percival Hygiene has $10 million invested in long-term corporate bonds. This bond portfolio's expected annual rate of return is 9%, and the annual standard deviation is 10%. Amanda Reckonwith, Percival's financial adviser, recommends that Percival consider investing in an index fund that closely tracks the Standard & Poor's 500 Index. The index has an expected return of 14%, and its standard deviation is 16%. The Treasury bill yield is 6%. A. Suppose Percival puts all his money in a combination of the index fund and Treasury bills. Can he thereby improve his expected rate of return without changing the risk of his portfolio measured as the standard deviation?B. Could Percival do even better by investing equal amounts in the corporate bond portfolio and the index fund? The correlation between the bond portfolio and the index fund is _.1.
Answer:
Explanation:
a)We find the portfolio weights first. For a two security portfolio
[tex]sP^2 = x_1^2s_1^2 + 2x_1x_2s_1s_2r_1_2 + x_2^2s_2^2[/tex]
[tex](0.10)^2 = 0 + 0 + x_2^2(0.16)^2[/tex]
x2 = 0.625 and x1 = 0.375
Then
rp = x1r1 + x2r2
rp = (0.375 ´ 0.06) + (0.625 ´ 0.14)
= 0.11
= 11.0%
Hence, he can improve the expected rate of return without any change in the risk of the portfolio.
b)
The expected return is:
rp = x1r1 + x2r2
rp = (0.5 *´ 0.09) + (0.5 ´* 0.14)
= 0.115 = 11.5%
[tex]sP^2 = x_1^2s_1^2 + 2x_1x_2s_1s_2r_1_2 + x_2^2s_2^2[/tex]
sP2 = (0.5)^2(0.10)^2 + 2*(0.5)(0.5)(0.10)(0.16)(0.10) + (0.5)^2(0.16)^2
sP2 = 0.0097
sP = 0.985 = 9.85%
Hence, he can never perform better by investing equal amount in bond portfolio and index fund. The expected return increases to 11.5% and standard deviation decreases to 9.85%.
Gomez runs a small pottery firm. He hires one helper at $10,500 per year, pays annual rent of $4,500 for his shop, and spends $19,000 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that could earn him $5,000 per year if alternatively invested. He has been offered $21,000 per year to work as a potter for a competitor. He estimates he could use his talents to earn an additional $3,000 per year in consulting fees if he were working full time as a potter. Total annual revenue from pottery sales is $71,000.Calculate the accounting profit and the economic profit for Gomez’s pottery firm.1. Accounting Profit = $______2. Economic Profit = $______
Answer:
Economic profit= $8,000
Accounting profit= $37,000
Explanation:
Giving the following information:
Costs:
Helper= $10,500 per year
Rent= $4,500
Materials= $19,000
Total= 34,000
Pottery Revenue= $71,000
Alternative= 5,000 + 21,000 + 3,000= $29,000
The difference between the economic profit and accounting profit is that the first one includes the opportunity cost of an alternative income.
Economic profit= 71,000 - 34,000 - 29,000= $8,000
Accounting profit= 71,000 - 34,000= $37,000
Winners and losers from tariff reductions Suppose that Canada imports pearl necklaces from India. The free market price is $80.00 per necklace. If the tariff on imports in Canada is initially 8%, Canadians pay $________ per necklace. One of the accomplishments of the Uruguay Round that took place between 1986 and 1993 was significant across-the-board tariff cuts for industrial countries, as well as many developing countries. Suppose that as a result of the Uruguay Round, Canada reduces its import tariffs to 4%. Assuming the price of pearl necklaces is still $______ per necklace, consumers now pay the price of per necklace. in Canada_______ and Based on the calculations and the scenarios presented, the Uruguay Round most likely in India
Answer:
a. $86.40 per necklace
b. $86.40 per necklace
c. $83.20 per necklace
Explanation:
free market price pf necklace is $80.00
Initial tariff on import = 8%
8% of $80.000 = 0.08 x $80.00 = $6.40
Canadians will therefore pay $80.00 + $6.40 = $86.40 per necklace
If tariff is reduced to 4%,
4% of $80.00 = 0.04 x $80.00 = $3.20
new price per necklace = $80.00 + $3.20 = $83.20 per necklace
A stockbroker predicts whether a stock will go up or down by tossing a coin and so has a 50% chance of making a correct prediction. Another broker, who is skilled, has a 60% chance of making a correct prediction. You don’t know which broker is which, so you watch their predictions for three days. Each broker gets all three predictions correct. What are the relevant probabilities? How do you decide who is the skilled broker? Search entries or author
Answer:
A skilled broker will be right at 60% of time compared to 50%
Explanation:
Solution
Given that:
Now,
Let X be represented as = number of correct predictions/outcomes
X foll binomial distribution with n = 3 and p = 0.5 for broker who use a toss coin
Thus,
P(X = 3) = p^3 = 0.5^3 which gives us = 0.125
So,
For a skilled broker, Y goes with the binomial distribution with n = 3 and p is = 0.6
Then,
P(Y = 3) = 0.6^3 = 0.216
We can therefore conclude who is skilled broker by making large number of observations
Hence, we say that a skilled broker will be correct 60% of time compared to 50% .
Flare Co. manufactures textiles. Among Flare's 2016 manufacturing costs were the following salaries and wages: Loom operators $ 129,000 Factory foremen 54,000 Machine mechanics 39,000 What was the amount of Flare's 2016 indirect labor
Answer: $93,000
Explanation:
Flare Co. manufactures textiles. As such the direct labour should be those directly involved in the Manufacturing of these textiles and all others will be considered Indirect Labour.
Looming refers to the weaving of fabric meaning therefore that it is directly related to the Manufacturing of textiles.
Factory Foremen only supervise the activities of the factory and so are not directly involved and Machine Mechanics ensure that machines are running smoothly and so are not directly involved either.
Indirect labor for 2016 is therefore,
= Factory Foremen + Machine Mechanics
= 54,000+ 39,000
= $93,000
ctual and budgeted fixed overhead $1,092,000 Standard variable overhead rate $27.00 per standard labor hour Actual variable overhead costs $137,144 Overhead is applied on standard labor hours. (Round interim calculations to the nearest cent.) The direct labor rate variance is
Answer:
Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity
Explanation:
Giving the following information:
Actual and budgeted fixed overhead $1,092,000
Standard variable overhead rate $27.00 per standard labor hour
Actual variable overhead costs $137,144
We weren't provided with enough information to calculate the direct labor rate variance. But I will provide the formula.
Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity
Actual rate= actual direct labor costs/total actual hours worked
On September 12, 3,500 shares of Aspen Company are acquired at a price of $39.00 per share plus a $175 brokerage commission. On October 15, a $1.20-per-share dividend was received on the Aspen Company stock. On November 10, 1,400.00 shares of the Aspen Company stock were sold for $33 per share less a $70 brokerage commission. When required, round final answers to the nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank. Prepare the journal entries for the original purchase, the dividend, and the sale under the cost method. Sept. 12 Oct. 15 Nov. 10
Answer:
Sept 12
Dr Investments-Aspen Company Stock 136,675
Dr Cash 136,675
Oct 15
Dr Cash 4,200
Cr Dividends Revenue 4,200
Nov 10
Dr Cash 46,130
Dr Loss on sale of Investments 8,540
Cr Investments-Aspen Company Stock 54,670
Explanation:
Aspen Company Journal entry
Sept 12
Dr Investments-Aspen Company Stock 136,675
[(3,500*39)+175]
Dr Cash 136,675
Oct 15
Dr Cash 4,200
(3,500*1.20)
Cr Dividends Revenue 4,200
Nov 10
Dr Cash 46,130
[(1,400*33)-70]
Dr Loss on sale of Investments 8,540
(54,670-46,130)
Cr Investments-Aspen Company Stock 54,670
(136,675/3500*1,400