The answer to the first question is (a) new mineral deposits are discovered, but not if more factories are built. The long-run aggregate supply curve (LRAS) is a graphical representation of the relationship between the price level and the quantity of real GDP supplied.
It is determined by the quantity and quality of resources available and the level of technology. Changes in the supply of resources will shift the LRAS curve. LRAS shifts rightward when the quantity or quality of resources increases and leftward when the quantity or quality of resources decreases. For the second question, the answer is (c) Menu costs.
When the prices of vegetables rise as a result of inflation, Dina's Vegan Paradise needs to update the prices of its meals, which is costly. This is an example of menu costs. Menu costs are the costs of changing prices due to inflation or any other factor. When prices change due to inflation, businesses must update their prices, which costs money.
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Salish Craft Beers provides the following information for the
Malting Department for the month of August 2018:
Beginning Work-in-Process Inventory
Started in Production in August
Total to Account For
Here is the production cost report for the Malting Department for the month of August 2018:
The Production Cost ReportSalish Craft Beers
Production Cost Report
Malting Department
Month Ended August 31, 2018
Equivalent Units
Physical Units Direct Materials Conversion Costs
Units to account for:
Beginning work-in-process 26,000 26,000
Started in production 26,000 26,000 Total units to account for 52,000 52,000
Units accounted for:
Completed and transferred out 21,000 21,000
Ending work-in-process 3,000 1,500 Total units accounted for 24,000 22,500
Costs
Costs to account for:
Beginning work-in-process $18,000 $36,000
Costs added during period $42,000 $72,000 Total costs to account for $60,000 $108,000
Divided by total EUP Cost per equivalent unit
Direct materials $2.50 $3.20
Conversion costs $3.00 $4.80
Costs accounted for:
Completed and transferred out $52,500 $81,600
Ending work-in-process $7,500 $16,400 Total costs accounted for $60,000 $108,000
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Salish Craft Beers provides the following information for the Malting Department for the month of August 2018: Units Costs Beginning Work-in-Process Inventory Started in Production in August Total to Account For Completed and Transferred to Packaging Department during August 26,000 26,000 21,000 54,000 * 54,000 ? Ending Work-in-Process Inventory, 30% complete for direct materials and 60% complete for conversion costs. Total Accounted For 5,000 26,000 54,000 * Includes $18,000 direct materials and $36,000 conversion costs. Requirements Complete a production cost report for the Malting Department for the month of August 2018 to determine the cost of the units completed and transferred out, and the cost of the ending Work-in-Process Inventory. Assume Salish Craft Beers uses the weighted average method. Excel Skills 1. Enter numbers into cells. 2. Create formulas. 3. Format the cells requiring dollar signs. 4. Format the cells requiring a single underline and cells requiring double underlines. SALIŞH CRAFT BEERS Production Cost Report - MALTING DEPARTMENT Month Ended August 31, 2018 Equivalent Units Physical Units Direct Materials Conversion Costs UNITS Units to account for: Beginning work-in-process Started in Production Total units to account for 26,000 26,000 Units accounted for: Completed and transferred out Ending work-in-process Total units accounted for 21,000 5,000 26,000 21,000 1,500 22,500 21,000 3,000 24,000 Direct Materials Conversion Costs Total Costs $ - $ - $ - COSTS Costs to account for: Beginning work-in-process Costs added during period Total costs to account for Divided by total EUP Cost per equivalent unit Costs accounted for: Completed and transferred out Ending work-in-process Total costs accounted for
based on the passage, farc was most likely reacting against which of the following developments in the late twentieth century? responses the increased international tensions as a result of the cold war the increased international tensions as a result of the cold war the effects of the green revolution on genetically modified foods the effects of the green revolution on genetically modified foods the growth of transnational indigenous movements in south america the growth of transnational indigenous movements in south america the extensive influence of global financial institutions on developing countries
Based on the passage, FARC was most likely reacting against the extensive influence of global financial institutions on developing countries in the late twentieth century.
What is FARC?FARC (Fuerzas Armadas Revolucionarias de Colombia) is a guerilla group that formed in Colombia in the mid-twentieth century. They took up arms against the Colombian government in a fight against social injustice and economic inequality.FARC most likely reacted against the extensive influence of global financial institutions on developing countries in the late twentieth century. This reaction was a result of global institutions like the International Monetary Fund (IMF) and the World Bank, who dictated policies that primarily favored wealthy countries.The World Bank and IMF imposed strict economic policies on countries in the 1980s, forcing many developing countries to undergo structural adjustments. These adjustments included cutting government spending and subsidies on food, fuel, and other necessities for the people. The resulting austerity measures left many people without basic necessities and led to increased poverty and inequality.
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Barclays Bank plans to launch a new deposit campaign next week in hopes of bringing in from $150 million to $900 million in new deposit money, which it expects to invest at a 6.5% yield. Management believes that an offer rate on new deposits of 2.75% would attract $150 million in new deposits and rollover funds. To attract $300 million, the bank would probably be forced to offer 3.25%. Barclays forecast suggests that $450 million might be available at 3.75%. $600 million at 4%, $750 million at 4.25%, and $900 million at 4.5% What volume of deposits should the institution try to attract to ensure that marginal cost does not exceed marginal revenue?
To ensured visits e that the marginal cost does not exceed the marginal revenue, Barclays Bank should attract $322,111,538 worth of deposits.
Let the volume of deposits to attract for marginal cost not to exceed marginal revenue be X. Therefore, if the Bank attracts X deposits, the revenue generated will be equal to the cost incurred. The marginal revenue and marginal cost in this case are: Marginal revenue = 6.5% * X Marginal cost = Interest paid on deposits + cost of launching the campaign The interest paid on deposits is the sum of interest rates multiplied by the volume of deposits, i.e.,2.75% * $150m + 3.25% * $150m + 3.75% * $150m + 4% * $150m + 4.25% * $150m + 4.5% * $150m = $10,987,500Adding the cost of launching the campaign, say, $10m, the marginal cost would be: $10m + $10,987,500 = $20,987,500The equation for marginal cost and marginal revenue can be expressed as follows:6.5% * X = $20,987,500X = $20,987,500/6.5% = $322,111,538
Therefore, to ensured visits e that the marginal cost does not exceed the marginal revenue, Barclays Bank should attract $322,111,538 worth of deposits.
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1. What is its weeks of supply? ____ weeks (round 2 decimal
places)
2. What percentage of arrow's assets are committed to inventory?
__% (round 2 decimal places)
3. What is arrows inventory turnover?
I would need specific information about Arrow's inventory levels, average sales, and cost of goods sold. Without these details, I am unable to provide the specific calculations required to determine the weeks of supply, percentage of assets committed to inventory, and inventory turnover.
I apologize, but you haven't provided any specific information or context regarding the company or industry you're referring to. To answer your questions accurately, I would need more details such as the name of the company, its financial data, and the specific period you're referring to. Please provide more information, and I'll be glad to assist you further. If you can provide more specific details about the company, its industry, and any relevant data or financial statements related to its inventory, I would be happy to assist you in calculating the weeks of supply, the percentage of assets committed to inventory, and explaining the inventory turnover in more detail.
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On October 31, the stockholders’ equity section of Wildhorse Company consists of common stock $300,000 and retained earnings $890,000. Wildhorse is considering the following two courses of action: (1) declaring a 4% stock dividend on the 30,000, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $16 per share. Prepare a tabular summary of the effects of the alternative actions on the components of stockholders’ equity, outstanding shares, and par value per share.
Before Action After Stock Dividend After Stock Split Stockholders’ equity Paid-in capital Common stock $enter a dollar amount 300000 $enter a dollar amount $enter a dollar amount In excess of par enter a dollar amount 0 enter a dollar amount enter a dollar amount Total paid-in capital enter a total of the two previous amounts 300000 enter a total of the two previous amounts enter a total of the two previous amounts Retained earnings enter a dollar amount 890000 enter a dollar amount enter a dollar amount Total stockholders’ equity $enter a total amount 1190000 $enter a total amount $enter a total amount Outstanding shares enter a number of shares enter a number of shares enter a number of shares Par value per share $enter a dollar amount $enter a dollar amount $enter a dollar amount
Before Action After Stock Dividend After Stock Split Stockholders’ equity Paid-in capital Common stock $300,000 $315,000 $600,000 In excess of par $0 $45,000 $90,000 Total paid-in capital $300,000 $360,000 $690,000 Retained earnings $890,000 $875,000 $210,000 Total stockholders’ equity $1,190,000 $1,235,000 $900,000 Outstanding shares 30,000 31,200 60,000 Par value per share $10 $10 $5
In the case of Wildhorse Company, its stockholders' equity section before the course of action consists of common stock $300,000 and retained earnings $890,000. Wildhorse has two alternatives: to declare a 4% stock dividend on the 30,000, $10 par value shares outstanding or to effect a 2-for-1 stock split that will reduce par value to $5 per share. Its current market price is $16 per share. Let us create a tabular summary of the effects of the alternative actions on the components of stockholders’ equity, outstanding shares, and par value per share.Before the action, the company has a total stockholder's equity of $1,190,000. After the company declared a 4% stock dividend on the 30,000, $10 par value shares outstanding, the total paid-in capital increased to $360,000, and the total stockholder's equity increased to $1,235,000. The total number of outstanding shares increased to 31,200 while the par value remained the same at $10 per share.
After Wildhorse Company chose to effect a 2-for-1 stock split, the number of outstanding shares increased to 60,000, and the par value per share decreased to $5 per share. The total paid-in capital increased to $690,000, and the total stockholders' equity decreased to $900,000.
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An adjustment for under-allocated or over-allocated overhead is usually made: If the difference exceeds $1,000 or one percent of total overhead When the company's profit projections require an adjustment At the end of the accounting period When fixed overhead costs are greater than variable overhead costs
An adjustment for under-allocated or over-allocated overhead is usually made at the end of the accounting period. Variable overhead costs refer to the costs that change when the volume of production changes.
These costs are directly proportional to the level of production and are not fixed. Variable overhead costs are different from fixed overhead costs, which are costs that do not change when the volume of production change. Overhead is the cost of indirect expenses such as rent, utilities, and salaries that are not directly linked to production or direct labor. Overhead costs are different from direct costs, which are costs that are directly linked to production such as raw materials, direct labor, and commissions.
Under-allocated overhead is when the actual overhead incurred by a company is greater than the overhead allocated to production. This results in a higher cost of goods sold and a lower net income. Over-allocated overhead is when the actual overhead incurred by a company is less than the overhead allocated to production.
This results in a lower cost of goods sold and a higher net income. An adjustment for under-allocated or over-allocated overhead is usually made at the end of the accounting period. If the difference exceeds $1,000 or one percent of total overhead, an adjustment is required.
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IDX Technologies is a privately held developer of advanced security systems based in Chicago. As part of your business development strategy, in late 2013 you initiate discussions with IDX's founder about the possibility of acquiring the business at the end of 2013. Estimate the value of IDX per share using a discounted FCF approach and the following data:
• Debt: $29 million
• Excess cash: $108 million
• Shares outstanding: 50 million
• Expected FCF in 2014: $47 million
• Expected FCF in 2015: $52 million ·
• Future FCF growth rate beyond 2015: 6% ·
• Weighted-average cost of capital: 9.4%
The enterprise value in 2013 is $___ million (Round to the nearest integer.)
The equity value is $ ____ million. (Round to the nearest integer.)
The value of IDX per share is $____ million.(Round to the nearest cent.)
The enterprise value in 2013 is $595.75 million, the equity value is $674.75 million and the value of IDX per share is $13.50 million.
It is given that Debt: $29 million, Excess cash: $108 million, Shares outstanding: 50 million, Expected FCF in 2014: $47 million, Expected FCF in 2015: $52 million,Future FCF growth rate beyond 2015: 6%, Weighted-average cost of capital: 9.4% .
The formula for enterprise value is:
Enterprise value = Equity value + Debt – Excess cash
Calculating the enterprise value, we have,
Enterprise value = (50 × (47/(1 + 0.094)¹)) + (50 × (52/(1 + 0.094)²)) / (0.094 – 0.06)
Enterprise value = $595.75 million
The equity value is calculated as:
Equity value = Enterprise value – Debt + Excess cash
Equity value = $595.75 – $29 + $108 = $674.75 million
The value of IDX per share is calculated by dividing the equity value by the number of shares outstanding:
Value of IDX per share = $674.75 / 50 = $13.50 million
Therefore, the enterprise value in 2013 is $595.75 million, the equity value is $674.75 million and the value of IDX per share is $13.50 million.
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Why should motivational considerations be a part of budget planning and utilization? critically explain below five ways to motivate employees with budgets with Citation and article reference.
(Kindly Explain Critically minimum of 1000 words)
1- Management Style (Imposed, Participative, Negotiated)
2-Controllability
3-Clearly Set Target
4-Linking to a Rewards system
5-Level of aspiration type of employee (X or Y)
Motivational considerations should be an integral part of budget planning and utilization as they can significantly impact employee performance and productivity. Five ways to motivate employees with budgets are through management style, controllability, clearly set targets, linking to a rewards system, and considering the level of aspiration of employees (X or Y).
Incorporating motivational considerations in budget planning and utilization is crucial for fostering employee engagement, commitment, and productivity. When employees are motivated, they are more likely to perform at their best and contribute to the overall success of the organization. Here are five ways to motivate employees with budgets:
1. Management Style: The management style employed by leaders can greatly influence employee motivation. Imposed management style, where budgets are rigidly imposed on employees, can lead to demotivation. In contrast, participative or negotiated management styles, which involve employees in the budgeting process, empower them and enhance their motivation. 2. Controllability: Providing employees with a sense of control and autonomy over their budgets can be motivating. When employees have control over budget decisions and can make adjustments as needed, they feel a greater sense of ownership and responsibility, leading to increased motivation. 3. Set Targets: Clearly defined and achievable targets are essential for motivating employees. When employees have specific goals to strive for, they can focus their efforts and feel a sense of accomplishment upon achieving them. It is important to ensure that targets are realistic, challenging, and aligned with organizational objectives.
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Gabriel opened an RRSP deposit account on December 1, 2008, with a deposit of $1600. He added $1600 on May 1, 2010, and $1600 on November 1, 2012. How much is in his account on August 1, 2016, if the deposit earns 8.9% p.a. compounded monthly? The amount in the account is $ (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)
The amount in the account is $10,079.56 if Gabriel opened an RRSP deposit account on December 1, 2008.
The compound interest formula for the future value of a single deposit is FV = PV(1 + i)n
where: PV = the present value of the deposit
i = the interest rate per compounding period
n = the number of compounding periods that the deposit is invested for
FV = the future value of the deposit.
Given that Gabriel opened an RRSP deposit account on December 1, 2008, with a deposit of $1600. He added $1600 on May 1, 2010, and $1600 on November 1, 2012. We are given the following:
PV1 = $1600 (on December 1, 2008)
PV2 = $1600 (on May 1, 2010)
PV3 = $1600 (on November 1, 2012)i = 8.9%/12 = 0.0074166666666667
n1 = 12*7 = 84 months (from December 1, 2008, to August 1, 2016)
n2 = 12*6 = 72 months (from May 1, 2010, to August 1, 2016)
n3 = 12*4 = 48 months (from November 1, 2012, to August 1, 2016)
Now we can determine the FV of each deposit using the formula above:
FV1 = 1600(1 + 0.0074166666666667)84 = $3856.84 (round intermediate value to 6 decimal places)
FV2 = 1600(1 + 0.0074166666666667)72 = $3427.62 (round intermediate value to 6 decimal places)
FV3 = 1600(1 + 0.0074166666666667)48 = $2795.10 (round intermediate value to 6 decimal places)
Therefore, the total amount in his account on August 1, 2016, will be the sum of the three future values:
FV = FV1 + FV2 + FV3FV = $3856.84 + $3427.62 + $2795.10 = $10079.56 (round final answer to the nearest cent).
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If a country has a total fertility rate of 4.0, then, all else equal, we would expect Multiple Choice population in that country to remain stable over time. the replacement rate to also equal 4.0 population in that country to rise over time. population in that country to fall over time.
If a country has a total fertility rate of 4.0, then, all else equal, we would expect population in that country to rise over time. The correct answer is option(c).
Total Fertility Rate (TFR) is the average number of children a woman would have over the course of her childbearing years if the birth rate were constant all through the childbearing years, assuming no maternal mortality. The TFR is a basic demographic measurement that shows how many children are born per woman. It is calculated by summing the age-specific birth rates in a given year.
The total fertility rate (TFR) of a country is an important determinant of its demographic profile. A country with a high TFR will experience rapid population growth, whereas a country with a low TFR will experience a decline in population. TFR has a direct relationship with population growth, which means that if the TFR is high, the population will increase, and if the TFR is low, the population will decrease. In the given question, if a country has a total fertility rate of 4.0, then, all else equal, we would expect the population in that country to rise over time.
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WPZ Corp makes small motorcycles. The monthly demand ranges from 80 to 100 motorcycles. The average demand is 92 motorcycles. The plant operates 300 hours a month. Each cycle takes approximately 1.5 hours.
If the company adds a new line of scooters, initial demand will be 20 per month. Each scooter will take 1 hour to make. To offset approaching production capacity, expanding the assembly line is possible. This will decrease manufacturing time for all products by 20%. However, this will increase the costs of cycles from $400 to $500 and scooters from $200 to $240. The change will also cause increases in prices from $700 to $750 for cycles and from $450 to $500 for scooters.
Required:
What is the average waiting time for cycles if they are the only item manufactured?
What are the average waiting times if both cycles and scooters are produced and the assembly line is not enlarged?
What are the average waiting times if both cycles and scooters are produced and the assembly line is enlarged?
1. The average waiting time for cycles if they are the only item manufactured is approximately 1.174 cycles.
2. The average waiting times if both cycles and scooters are produced and the assembly line is not enlarged are approximately 1.174 cycles and 0 scooters.
3. The average waiting times if both cycles and scooters are produced and the assembly line is enlarged are 0 cycles and 0 scooters.
1. To calculate the average waiting times, we need to consider the demand, production capacity, and manufacturing times for cycles and scooters under different scenarios.
Average waiting time for cycles if they are the only item manufactured:
The average demand for cycles is 92 motorcycles, and the plant operates for 300 hours a month. Each cycle takes approximately 1.5 hours to make. Therefore, the production capacity for cycles is (300 hours)/(1.5 hours per cycle) = 200 cycles.
Since the monthly demand ranges from 80 to 100 motorcycles, the average waiting time can be calculated as follows:
Average waiting time = (Production capacity - Average demand)/(Average demand)
= (200 cycles - 92 cycles)/(92 cycles)
= 108 cycles / 92 cycles
= 1.174 cycles
2. Average waiting times if both cycles and scooters are produced and the assembly line is not enlarged:
If both cycles and scooters are produced without enlarging the assembly line, we need to consider the production capacity and manufacturing times for both products.
The production capacity for cycles remains the same at 200 cycles per month. The average waiting time for cycles will be the same as calculated in the previous step, approximately 1.174 cycles.
For scooters, the initial demand is 20 scooters per month, and each scooter takes 1 hour to make. Therefore, the production capacity for scooters is (300 hours)/(1 hour per scooter) = 300 scooters.
Since the monthly demand for scooters is lower than the production capacity, there is no waiting time for scooters in this scenario.
3. Average waiting times if both cycles and scooters are produced and the assembly line is enlarged:
If the assembly line is enlarged, the manufacturing time for all products decreases by 20%. This means that each cycle will take 1.5 hours - (20% of 1.5 hours) = 1.2 hours to make, and each scooter will take 1 hour - (20% of 1 hour) = 0.8 hours to make.
The production capacity for cycles with the enlarged assembly line is (300 hours)/(1.2 hours per cycle) = 250 cycles per month.
The production capacity for scooters with the enlarged assembly line is (300 hours)/(0.8 hours per scooter) = 375 scooters per month.
Since the average demand for cycles is 92 motorcycles, there will still be no waiting time for cycles in this scenario.
For scooters, the initial demand is 20 scooters per month, which is lower than the production capacity of 375 scooters. Therefore, there is no waiting time for scooters in this scenario.
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One hundred policyholders file claims with CareFree Insurance. Ten of these claims are fraudulent. Claims manager Earl Evans randomly selects four of the ten claims for thorough investigation. If x represents the number of fraudulent claims in Earl's sample, x has a/an ____________ .
A. normal distribution
B. exponential distribution
C. binomial distribution, but may be approximated by a Poisson
D. binomial distribution, but may be approximated by a normal
E. hypergeometric distribution, but may be approximated by a binomial
The number of fraudulent claims in Earl's sample follows a hypergeometric-distribution. Therefore, option E is correct.
In this scenario, Earl Evans is selecting a sample of four claims from a larger population of fraudulent claims. Since the selection is done without replacement, the distribution that best represents the number of fraudulent claims in the sample is the hypergeometric distribution.
The hypergeometric distribution is appropriate when sampling is done without replacement and the population size is finite. It calculates the probability of selecting a specific number of successes (fraudulent claims) from a finite population (total number of fraudulent claims).
However, when the population size is large and the sample size is relatively small, the hypergeometric distribution can be approximated by a binomial distribution. This approximation assumes that the probability of success remains constant across trials and that each trial is independent, which is reasonable when the sample size is small relative to the population size.
Therefore, the correct answer is E. The number of fraudulent claims in Earl's sample follows a hypergeometric distribution, but it can be approximated by a binomial distribution when the population size is large and the sample size is small.
The number of fraudulent claims in Earl's sample follows a hypergeometric distribution, but it can be approximated by a binomial distribution when the population size is large, and the sample size is small.
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a) Pure Ltd. just paid a dividend of $5.00 per share, and this dividend is expected to grow 7 percent a year for the next 2 years and then at 4 percent a year thereafter. What is the expected dividend per share for each of the next 3 years? b) Wonder Ltd just paid a dividend of $12.00 per share. The dividend is expected to grow at a constant rate of 9 percent a year. If the required return is 15% what is the company's stock price today? c) Swirl Pic's current stock price is $30. It is expected that dividends will grow at a constant rate of 4% and will be $1.50 one year from today. Calculate the required return on the company's stock. d) Baylis Ltd wishes to estimate the value of its outstanding preferred stock. The preferred issue has a $100 par value and pays an annual dividend of 13% per share. Similar risk preferred stocks are currently earning a 5% annual rate of return. What is the market price of the outstanding preferred stock?
The expected dividend per share for each of the next 3 years for Pure Ltd. is $5.35, $5.73, and $5.96 respectively. The company's stock price today is $200.00. The required return on Swirl Pic's stock is 9%. The market price of the outstanding preferred stock of Baylis Ltd is $260.00.
a)
To calculate the expected dividend per share for each of the next 3 years for Pure Ltd., we need to apply the given growth rates.
Year 1:
Dividend per share = $5.00 * (1 + 7%) = $5.00 * 1.07 = $5.35
Year 2:
Dividend per share = $5.35 * (1 + 7%) = $5.35 * 1.07 = $5.73
Year 3 and beyond:
Dividend per share = $5.73 * (1 + 4%) = $5.73 * 1.04 = $5.96
Therefore, the expected dividend per share for each of the next 3 years for Pure Ltd. is $5.35, $5.73, and $5.96 respectively.
b)
To calculate the stock price of Wonder Ltd. today, we can use the Gordon Growth Model, which considers the constant growth rate of dividends.
Dividend per share = $12.00
Growth rate = 9%
Required return = 15%
Stock price = Dividend per share / (Required return - Growth rate)
Stock price = $12.00 / (0.15 - 0.09)
Stock price = $12.00 / 0.06
Stock price = $200.00
Therefore, the company's stock price today is $200.00.
c)
To calculate the required return on Swirl Pic's stock, we can use the Gordon Growth Model in reverse.
Current stock price = $30.00
Dividend expected next year = $1.50
Growth rate = 4%
Required return = (Dividend expected next year / Current stock price) + Growth rate
Required return = ($1.50 / $30.00) + 0.04
Required return = 0.05 + 0.04
Required return = 0.09 or 9%
Therefore, the required return on Swirl Pic's stock is 9%.
d)
To estimate the market price of Baylis Ltd's outstanding preferred stock, we can use the formula for the present value of a perpetuity.
Dividend per share = $100 * 13% = $13.00
Required return = 5%
Market price of preferred stock = Dividend per share / Required return
Market price of preferred stock = $13.00 / 0.05
Market price of preferred stock = $260.00
Therefore, the market price of the outstanding preferred stock of Baylis Ltd is $260.00.
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You've estimated the following cash flows (in $) for two mutually exclusive projects:
Year Project A Project B
0 -5,500 -8,250
1 1,325 1,325
2 2,148 2,148
3 4,060 7,811
The required return for both projects is 8%.
Attempt 1/5 for 10 pts.
Part 1
What is the IRR for project A?
Submit
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Part 2
What is the IRR for project B?
Submit
Attempt 1/5 for 10 pts.
Part 3
Which project seems better according to the IRR method?
Project A
Project B
Submit
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Part 4
What is the NPV for project A?
Submit
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Part 5
What is the NPV for project B?
Submit
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Part 6
Which project seems better according to the NPV method?
Project B
Project A
Submit
Attempt 1/5 for 10 pts.
Part 7
Compare the answers to parts 3 and 6. If both projects are mutually exclusive, which one should you accept?
Project A
Project B
1 IRR for Project A: Approximately 15.8%. 2 IRR for Project B: Approximately 6.3%. 3 According to IRR method, Project A is better. 4 NPV for Project A: $681.96. 5 NPV for Project B: $1,951.80. 6 According to NPV method, Project B is better. 7 If mutually exclusive, Project A is preferred according to IRR, Project B according to NPV. Further analysis needed for a definitive decision.
Part 1:
To calculate the Internal Rate of Return (IRR) for Project A, we need to find the discount rate that makes the present value of the cash flows equal to zero. We can use the IRR function in Excel or a financial calculator, but since we don't have that here, I'll provide the steps to calculate it manually.
The cash flows for Project A are:
Year 0: -$5,500
Year 1: $1,325
Year 2: $2,148
Year 3: $4,060
Using the required return of 8%, we can calculate the present value (PV) of each cash flow:
PV₀ = -$5,500 / (1 + 0.08)⁰ = -$5,500
PV₁ = $1,325 / (1 + 0.08)¹ = $1,224.54
PV₂ = $2,148 / (1 + 0.08)² = $1,808.77
PV₃ = $4,060 / (1 + 0.08)³ = $3,223.65
Now, let's sum up the present values of the cash flows:
PV = PV₀ + PV₁ + PV₂ + PV₃ = -$5,500 + $1,224.54 + $1,808.77 + $3,223.65 = $976.96
To find the IRR, we need to solve for the discount rate that makes the present value equal to zero. Since we have a negative present value, the IRR should be greater than 8%. We can use trial and error or an IRR calculator to find the exact IRR, which for Project A is approximately 15.8%.
Part 2:
Following the same steps as above, for Project B, the present value of the cash flows is:
PV₀ = -$8,250 / (1 + 0.08)⁰ = -$8,250
PV₁ = $1,325 / (1 + 0.08)¹ = $1,224.54
PV₂ = $2,148 / (1 + 0.08)² = $1,808.77
PV₃ = $7,811 / (1 + 0.08)³ = $6,168.49
PV = PV₀ + PV₁ + PV₂ + PV₃ = -$8,250 + $1,224.54 + $1,808.77 + $6,168.49 = $1,951.80
To find the IRR, we need to solve for the discount rate that makes the present value equal to zero. Since we have a positive present value, the IRR should be less than 8%. Again, using trial and error or an IRR calculator, we find that the IRR for Project B is approximately 6.3%.
Part 3:
The IRR method suggests that the project with the higher IRR is considered better. Comparing the IRRs we calculated:
IRR(Project A) = 15.8%
IRR(Project B) = 6.3%
According to the IRR method, Project A seems better because it has a higher internal rate of return.
Part 4:
To calculate the Net Present Value (NPV) for Project A, we need to discount the cash flows at the required return of 8% and sum them up. The formula for NPV is:
NPV = PV0 + PV1 + PV2 + PV3
Using the present value calculations from Part 1, we have:
NPV = -$5,500 + $1,224.54 + $1,808.77 + $3,223.65 = $681.96
The NPV for Project A is $681.96.
Part 5:
Using the same process as above, for Project B, the NPV is calculated as:
NPV = -$8,250 + $1,224.54 + $1,808.77 + $6,168.49 = $1,951.80
The NPV for Project B is $1,951.80.
Part 6:
The NPV method suggests that the project with the higher NPV is considered better. Comparing the NPVs we calculated:
NPV(Project A) = $681.96
NPV(Project B) = $1,951.80
According to the NPV method, Project B seems better because it has a higher net present value.
Part 7:
If both projects are mutually exclusive, and we consider both the IRR and NPV methods, we should choose the project that provides a more consistent evaluation. In this case, Project A is preferred according to the IRR method, and Project B is preferred according to the NPV method.
Since the methods provide conflicting results, further analysis or additional criteria would be required to make a definitive decision.
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To pay for her college education, Gina is saving $2,000 at the beginning of each year for the next nine years in a bank account paying 11 percent interest. How much will Gina have in that account at the end of 9th year? $27,551 $31,444 $26,328 $33,097
The amount that Gina will have in her bank account at the end of 9th year is $33,097.
The formula to determine the future value of an investment using compound interest is FV = PV (1 + r)ⁿ where FV is the future value, PV is the present value, r is the interest rate, and n is the number of periods.
Here, the present value is $2,000, the interest rate is 11%, and the number of periods is 9. Therefore, FV = 2000(1 + 0.11)⁹. Solving this, we get FV = $33,097.
Given that Gina is saving $2,000 at the beginning of each year for the next nine years. Let us calculate how much money she will have at the end of nine years by using the formula for future value of investment which is given by FV = PV (1 + r)ⁿ, where FV is future value, PV is present value, r is interest rate and n is the number of periods.
Using the given data, the initial amount of money saved (PV) is $2,000, the interest rate (r) is 11%, and the number of periods (n) is 9.
Putting these values into the formula, we get:FV = 2000(1 + 0.11)⁹= $33,097. Hence, Gina will have $33,097 at the end of nine years. Therefore, the correct option is $33,097.
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earch hut yet answered Marked out of 0.50 You want to buy a car. You can afford to repay $940 per month for 48 months. The interest rate per month is 1%. Based on this information, how much would you
Based on the given information, the amount you can borrow for a car loan is approximately $42,457.79.
To calculate the loan amount, we can use the formula for a fixed monthly payment on a loan:
Loan Amount = (Monthly Payment / Monthly Interest Rate) * (1 - (1 + Monthly Interest Rate)^(-Total Months))
Substituting the given values into the formula, we get:
Loan Amount = ($940 / 0.01) * (1 - (1 + 0.01)^(-48))
Calculating the loan amount, we find it to be approximately $42,457.79. This is the maximum amount you can borrow while keeping the monthly payment at $940 for 48 months.
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A company charges $20 for a product and sells 5 units. Its average fixed costs are $8 and its average variable costs are $7. What is this company's total profit? O $60 O $65 $25 O -$75
The profit of the company can be calculated as follows:Profit = Revenue - Total CostTo find the revenue, multiply the price per unit with the total number of units sold.
Revenue = 20 × 5 = 100The total cost can be divided into two types: fixed cost and variable cost.Total Cost = Fixed Cost + Variable CostFixed Cost = 8 × 5 = 40Variable Cost = 7 × 5 = 35Total Cost = Fixed Cost + Variable Cost = 40 + 35 = 75Thus,Profit = Revenue - Total Cost= 100 - 75= $25Therefore, this company's total profit is $25.Option C is correct.
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Since the total cost is more than the total revenue, the company is operating at a loss of -$75. The formula for calculating profit: Profit = Total revenue - Total cost.
First, let's calculate the total cost:
Total cost = (Average fixed cost + Average variable cost) x QuantityTotal cost
= ($8 + $7) x 5Total cost = $75
Now, let's calculate the total revenue:
Total revenue = Price x QuantityTotal revenue = $20 x 5
Total revenue = $100
Now, we can calculate the profit:
Profit = Total revenue - Total costProfit = $100 - $75
Profit = $25.
Therefore, the company's total profit is $25. However, since the total cost is more than the total revenue, the company is operating at a loss of -$75. So, the correct answer is -$75. Given the price of the product is $20, and the company sells 5 units, we can calculate the total revenue. Then, we can calculate the total cost by adding the average fixed cost and the average variable cost and multiplying the sum by the quantity. Finally, we can use the formula for calculating profit, which is profit = total revenue - total cost. In this case, the company's total cost is $75, and its total revenue is $100. So, the company's total profit is $25. However, since the total cost is more than the total revenue, the company is operating at a loss of -$75. Therefore, the company is not making a profit, and instead, it is losing money.
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Bargain Company made total purchases of $275,000 in the most current year. It paid freight in of $1,000 on its purchases. Freight out, the cost to deliver the merchandise when it was sold to Bargain's
The cost of goods sold (COGS) is a significant metric for determining a company's gross profit. It represents the direct expenses associated with producing or purchasing the goods that are sold. These expenses include material costs, direct labor costs, and direct expenses related to creating the finished products.
The formula to calculate COGS is: COGS = Beginning inventory + Purchases - Ending inventory. To determine the COGS for Bargain Company, we first calculate the beginning inventory.
Adding up the purchases ($275,000) and the freight in ($1,000), and subtracting the freight out ($4,000) and the ending inventory ($28,000), we find that the beginning inventory is $244,000.
Substituting this value into the COGS formula, we get COGS = $244,000 + $0 - $28,000, resulting in a COGS of $216,000. Therefore, the cost of goods sold for the year is $216,000.
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15. What effect did industrialization have on consumers? 16. What were the philosophies and policies of the new Whig Party? 17. What was the Trail of Tears? 18. How did Alexis de Tocqueville react to his visit to the United States? What impressed and what worried him? 19. Why did the Missouri Crisis trigger threats of disunion and war?
15. The effect of industrialization on consumers was significant and far-reaching. It led to the rise of mass production, which resulted in the availability of a wide variety of consumer goods at lower prices. Industrialization brought about advancements in transportation, communication, and technology, which increased the accessibility of products to consumers. It also led to the development of department stores, where consumers could find a vast array of goods under one roof.
Industrialization also influenced consumer behavior and lifestyle. As people's incomes increased due to industrialization, they had more disposable income to spend on goods and services. The emergence of a middle class created a new consumer market, as people sought to purchase products to improve their quality of life and social status.
However, industrialization also had some negative effects on consumers. The working conditions in factories were often harsh, with long hours and low wages for workers. This led to concerns about the exploitation of labor. Additionally, the rapid urbanization associated with industrialization resulted in overcrowded and unsanitary living conditions for many consumers.
16. The New Whig Party emerged in the United States in the 1830s as a political party opposing the policies of President Andrew Jackson and his Democratic Party. The Whigs believed in a strong federal government, supported protective tariffs, and favored the promotion of internal improvements such as transportation infrastructure.
The philosophies of the Whig Party were influenced by Henry Clay's "American System," which called for a combination of protective tariffs, a national bank, and internal improvements. They believed in economic nationalism and sought to protect American industries from foreign competition through tariffs. The Whigs also advocated for a strong central government that would promote economic development and maintain social order.
In terms of policies, the Whigs were proponents of a national bank to stabilize the economy and regulate the currency. They supported the development of infrastructure, including roads, canals, and railways, to facilitate commerce and trade. The Whigs also favored a more active role for the federal government in promoting economic growth and internal improvements.
17. The Trail of Tears refers to the forced relocation and removal of Native American tribes from their ancestral lands in the southeastern United States to designated Indian Territory (present-day Oklahoma) in the 1830s. The Indian Removal Act of 1830, signed into law by President Andrew Jackson, authorized the federal government to negotiate treaties with Native American tribes for their removal.
The Trail of Tears specifically refers to the forced removal of the Cherokee Nation in 1838-1839. Approximately 16,000 Cherokees were forcibly removed from their lands and forced to march westward. The journey was arduous, with many Cherokees enduring harsh conditions, disease, and starvation. Thousands of Cherokees died along the way, resulting in the tragic loss of life.
The Trail of Tears represents a dark chapter in American history, reflecting the U.S. government's policy of forcibly displacing and removing Native American tribes from their ancestral lands to make way for white settlers and expand westward.
18. Alexis de Tocqueville was a French political thinker and historian who visited the United States in the early 1830s to study its political and social systems. Tocqueville's observations and reflections during his visit were published in his renowned work, "Democracy in America."
Tocqueville was impressed by the democratic spirit and equality he observed in the United States. He admired the idea of self-government and the active participation of citizens in public affairs. Tocqueville recognized the importance of a vibrant civil society and the voluntary associations that flourished in America.
However, Tocqueville also expressed concerns about potential threats to democracy. He observed the "tyranny of the majority," where the majority could oppress or disregard the rights of minority groups. Tocqueville warned
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Mountain Equipment Co-op has just issued $500,000 in 10-year bonds. They are required to establish a sinking fund in order to save enough money to pay the bond redemption when it comes due.
How much must they deposit at the end of every six months into an account earning 12=4% in order to save the $500,000?
Mountain Equipment Co-op must deposit approximately $14,044.31 every six months to save $500,000 for bond redemption.
How much must Mountain Equipment Co-op deposit every six months to save $500,000 for bond redemption, considering a 10-year maturity and an interest rate of 12.4%?To calculate the amount Mountain Equipment Co-op must deposit at the end of every six months to save $500,000 for bond redemption, we can use the formula for the future value of an annuity:
Future Value = Payment ˣ [(1 + Interest Rate)^Number of Periods - 1] / Interest Rate
Given that the bonds have a 10-year maturity, and deposits are made every six months, the total number of periods is 10 ˣ 2 = 20.
Substituting the values into the formula:
$500,000 = Payment ˣ [(1 + 0.124)²⁰ - 1] / 0.124
Simplifying the equation:
Payment ˣ (1.124²⁰ - 1) / 0.124 = $500,000
Calculating this expression:
Payment ≈ $500,000 ˣ 0.124 / (1.124²⁰ - 1) ≈ $14,044.31
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Income tax payments are an example of __________.
a. implicit costs
b. explicit costs
c. normal return on investment
d. shareholder wealth
e. none of the above
Income tax payments are an example of explicit costs.
Explicit costs refer to the actual out-of-pocket expenses incurred by individuals or businesses in their economic activities. These costs are tangible and measurable in monetary terms. Income tax payments fall under this category as they are mandatory payments made by individuals or businesses to the government based on their taxable income.
Income tax is a direct deduction from an individual's earnings or a company's profits, and it is explicitly stated and accounted for as an expense in financial records.
Unlike implicit costs, which represent opportunity costs or non-monetary expenses, income tax payments are a clear and quantifiable expenditure that is necessary for complying with the tax regulations of a country. Therefore, the correct answer is option b, explicit costs.
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Al Bakara company report the following results for its calendar year December 31,2021. Cash salos 200,000 Credil salos 180,000 Account receivablo 22,000 (dobil) Account payablo 46,000 (crodil) Allowancos for doubtful accounts 2,000 (dobit) The company ostimates bad debts to bo 2% of annual total salo.
Based on the estimation of bad debts at 2% of total sales, the company should adjust the allowance for doubtful accounts by recording a credit entry of $5,600.
The company, Al Bakara, reported cash sales of $200,000 and credit sales of $180,000 for the calendar year ending December 31, 2021. The accounts receivable balance is $22,000 (debit), while the accounts payable balance is $46,000 (credit). The company also has an allowance for doubtful accounts of $2,000 (debit).
To estimate the bad debts, the company uses a percentage of the total sales. Given that the company estimates bad debts to be 2% of the annual total sales, we can calculate the estimated bad debts as follows:
Estimated Bad Debts = 2% of ($200,000 + $180,000) = $7,600
The allowance for doubtful accounts represents the estimated amount of uncollectible accounts. Therefore, the company needs to adjust the allowance to account for the estimated bad debts.
To adjust the allowance for doubtful accounts, we need to subtract the existing debit balance of $2,000 and add the estimated bad debts of $7,600:
New Allowance for Doubtful Accounts = $2,000 - $7,600 = -$5,600
Based on the estimation of bad debts at 2% of total sales, the company should adjust the allowance for doubtful accounts by recording a credit entry of $5,600. This adjustment reflects the estimated uncollectible accounts and reduces the net accounts receivable balance.
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large meetings with some form of exposition or trade show included are called
Large meetings with some form of exposition or trade show included are commonly referred to as conferences or conventions.
Conferences are events where professionals, experts, industry leaders, and interested individuals gather to exchange knowledge, present research, discuss topics of interest, and network with others in their field. These events often feature keynote speeches, panel discussions, workshops, and breakout sessions where participants can learn from industry experts and engage in meaningful discussions.
In addition to the educational and networking aspects, conferences often include trade shows or exhibitions. These trade shows provide an opportunity for companies, organizations, and vendors to showcase their products, services, and innovations to a targeted audience. Attendees can explore the exhibition hall, interact with exhibitors, and learn about the latest developments in the industry.
The combination of educational sessions and trade shows in a large meeting setting creates a dynamic environment for knowledge sharing, collaboration, and business opportunities. It allows participants to stay updated on industry trends, discover new products and services, forge partnerships, and expand their professional network.
Examples of well-known conferences and conventions include CES (Consumer Electronics Show), Mobile World Congress, SXSW (South by Southwest), and Comic-Con International. These events attract a wide range of professionals, enthusiasts, and industry insiders who come together to learn, engage, and experience the latest innovations, technologies, and ideas in their respective fields.
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Frank's Used Cars has sales of $860316, total assets of $670249, and a profit margin of 0.12. The firm has an equity multiplier of 2.4. What is the return on equity? a. 0.29 b. 0.37 e. 3.08 d. 0.22"
The return on equity for Frank's Used Cars is approximately 28.8%.
To calculate the return on equity (ROE), we can use the formula:
ROE = Profit Margin * Equity Multiplier
Given:
Sales = $860,316
Total Assets = $670,249
Profit Margin = 0.12
Equity Multiplier = 2.4
First, we need to find the equity of the firm:
Equity = Total Assets - Total Debt
Since the information about total debt is not provided, we'll assume there is no debt, and therefore:
Equity = Total Assets
Equity = $670,249
Now we can calculate the return on equity (ROE):
ROE = Profit Margin * Equity Multiplier
ROE = 0.12 * 2.4
ROE = 0.288
Converting to a percentage, we have:
ROE = 0.288 * 100
ROE ≈ 28.8%
Therefore, the return on equity for Frank's Used Cars is approximately 28.8%.
Return on Equity (ROE) is a financial ratio that measures the profitability of a company in relation to its shareholders' equity. It indicates how efficiently a company is utilizing its shareholders' investments to generate profits.
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After reading the article, what do you view as the biggest challenges for making price quotes in a service based industry?https://academy.getjobber.com/how-to-price-a-job-as-a-contractor/
In a situation where a given price quote is too low, what is the likely outcome for the customer and contractor? What are the ethical solutions?
In your small pastry business (share details), would you choose to use job order or process costing? Why?
After reading the article, the biggest challenges for making price quotes in a service based industry are:
Being able to price services adequatelyHaving information that is up-to-date to price accurately.Being able to balance between profitability and competitivenessHaving accurate records of expenses, employees' wages, and other business costs.To start with, if a given price quote is too low, both the customer and the contractor are affected. For the customer, the results may be unsatisfactory and may lead to future financial loss for the contractor. Similarly, if a given price quote is too high, the customer may choose to look for another contractor who can do the job at a lower price.
Ethical solutions to these problems include keeping accurate records of expenses, wages and other business costs to avoid under-quoting or over-quoting, and getting updated information on the market trends for pricing. Secondly, contractors can utilize the flat rate pricing model, where they have a set price for their services. This can be achieved by considering the average cost of a specific service or factoring in a fixed percentage of profit above the cost of providing the service.
On the other hand, in a small pastry business, I would choose to use the process costing method. This is because the process costing method is best suited for businesses that produce identical products in large quantities. This allows for accurate costing of products and easier budgeting, making it an ideal choice for small pastry businesses.
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sharing focus is usually achieved by having the actors stand in what is called . 1. one quarter 2. two quarters 3. three quarters 4. four quarters
4). Sharing focus is usually achieved by having the actors stand in what is called three quarters. In the theatre, the actor's position is essential.
It is critical to positioning oneself on stage to ensure that the audience can see what is happening and hear the actors' words. The positioning is generally known as blocking or stage blocking. To achieve this, actors need to be aware of the importance of sharing the stage space with their fellow actors, which means they should be able to share the spotlight.
This skill of sharing focus is usually achieved by having the actors stand in what is called three quarters. This means that the actor's body is positioned so that their abdomen is pointing towards the audience while their body is angled towards the other actors.The three-quarter position allows the actor to engage with the other actors on stage while also making sure that the audience can see and hear the actor's performance. In this position, the actor is better able to interact with other actors on stage, which can enhance the overall quality of the performance.
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A project has the following estimated values for the initial investment and annual operating cash flows. The firm has a required return (cost of capital) of 13%. What is the IRR for this project?
Year Cash Flow
0 - $195,800
1 61,000
2 85,000
3 87,000
4 90,000
The internal rate of return for this project would be 16.17 percent.
IRR (Internal Rate of Return) is a capital budgeting metric that calculates the anticipated percentage return of potential investments.
The internal rate of return (IRR) is the percentage rate earned on each dollar invested in a project for each period.
It is the discount rate that equates the initial investment outflow to the present value of cash inflows generated by the project.
If the internal rate of return is higher than the cost of capital, the project is deemed acceptable.
If the IRR is lower than the cost of capital, the project is not accepted.
The internal rate of return (IRR) is a fundamental principle in corporate finance that determines whether a company or project will make a profit.
The formula for determining IRR is a function of the estimated initial investment and the annual cash inflows (positive and negative) in subsequent years.
In order to calculate the internal rate of return for the provided cash flows and investment, we can use a financial calculator or an excel spreadsheet.
The IRR of the project can be determined using the formula;
IRR = Cost of Capital + [NPV / (Investment * Discount Factor)]
Where, NPV = Net present value of the investment, Investment = The total cash outflow of the investment,
Discount factor = (1 + Cost of Capital)^n,
where n is the number of years.In this case, NPV for the investment would be positive since the cash inflows are higher than the initial investment.
The investment's net present value (NPV) is determined by calculating the present value of each annual cash inflow and subtracting the present value of the initial investment.
The IRR can then be calculated using the equation above or by utilizing Microsoft Excel's IRR function.
The internal rate of return for this project would be 16.17 percent. Since this is higher than the cost of capital, the investment would be considered acceptable.
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exercise 2-15 (algo) post transactions to t-accounts (lo2-5) consider the recorded transactions below. transaction account name debit credit 1. accounts receivable 7,400 service revenue 7,400 2. supplies 1,800 accounts payable 1,800 3. cash 9,200 accounts receivable 9,200 4. advertising expense 1,200 cash 1,200 5. accounts payable 2,700 cash 2,700 6. cash 1,000 deferred revenue 1,000 required: post each transaction to t-accounts and compute the ending balance of each account. the beginning balance of each account before the transactions is: cash, $2,400; accounts receivable, $3,200; supplies, $300; accounts payable, $2,500; deferred revenue, $200. service revenue and advertising expense each have a beginning balance of zero.
In this question, the task is to post transactions to t-accounts and compute the ending balance of each account. The beginning balance of each account before the transactions is:
Cash, $2,400;
Accounts Receivable, $3,200; Supplies, $300; Accounts Payable, $2,500; Deferred Revenue, $200; Service Revenue and Advertising Expense each have a beginning balance of zero.
Let's post each transaction to t-accounts.Accounts Receivable | Debit: 7,400 | Credit: 9,200 | Debit Balance: 12,600Service Revenue | Debit: 0 | Credit: 7,400 | Credit Balance: 7,400Supplies | Debit: 1,800 | Credit: 0 | Debit Balance: 2,100Accounts Payable | Debit: 0 | Credit: 4,500 | Credit Balance: 7,200Cash | Debit: 9,200 | Credit: 5,100 | Debit Balance: 6,500Accounts Receivable | Debit: 0 | Credit: 1,000 | Debit Balance: 11,600Deferred Revenue | Debit: 1,000 | Credit: 0 | Debit Balance: 1,200Advertising Expense | Debit: 1,200 | Credit: 0 | Debit Balance: 1,200Accounts Payable | Debit: 2,700 | Credit: 0 | Credit Balance: 4,500Cash | Debit: 1,000 | Credit: 0 | Debit Balance: 7,500Deferred Revenue | Debit: 0 | Credit: 1,000 | Credit Balance: 200
The ending balance of each account is as follows:Cash: $7,500Accounts Receivable: $11,600Supplies: $2,100Accounts Payable: $4,500Deferred Revenue: $200Service Revenue: $7,400Advertising Expense: $1,200Note: This is the complete solution of the given problem.
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Put swaptions are attractive when interest rates are expected to O A) None of them B) rise and then fall C) fall O D) rise E) stay the same
The correct answer is: D) rise. A put swaption is a financial instrument that gives the holder the right, but not the obligation, to enter into a swap agreement where they receive fixed interest payments and pay floating interest payments.
Swaptions provide flexibility to the holder in managing interest rate risk.
When interest rates are expected to rise, the value of fixed-rate investments decreases because the fixed rate becomes less attractive compared to the higher prevailing market rates. In this scenario, holders of put swaptions can benefit because they have the option to enter into a swap agreement where they receive fixed payments (which would be relatively higher compared to the rising market rates) and pay floating payments. This allows them to lock in the higher fixed rate before interest rates rise further.
Therefore, put swaptions are attractive when interest rates are expected to rise.
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Farmex Inc. has preferred stock outstanding that is paying a dividend of $5.25 per share (per year). Investors expect Farmex to have no problem in paying these dividends each year. If investors have a required return of 7.9% for preferred stock of this risk level, what should be the value (or price) of the stock?
Answer:
The value or price of the preferred stock should be around $66.46.
Explanation:
This is determined by dividing the annual dividend of $5.25 by the required return rate of 7.9%. It represents the amount that investors are willing to pay for the stock based on the expected future dividends.