A partnership stake in a business that pays you equal payments of $1,500 at the end of each year for the next seven years. If the annual interest rate stays constant at 7% then value of these payments in today's dollars is calculated and ascertained below in the question.
Part A
To calculate the present value of equal payments, we will use the formula as follows: PV = (Payment * [1 - (1 + r)^-n]) / r where,PV = Present Value Payment = Equal Payment r = Annual Interest Rate n = Number of Years Substituting the given values, we get: PV = ($1,500 * [1 - (1 + 0.07)^-7]) / 0.07 PV = ($1,500 * [1 - 0.508395208]) / 0.07 PV = ($1,500 * 0.491604792) / 0.07 PV = $10,498.67≈ $10,499 Hence, the present value of these payments in today's dollars is $10,499 (rounded to the nearest whole dollar).
Part B
To calculate the present value of unequal payments, we will use the formula as follows: PV = Payment 1 / (1 + r)^1 + Payment 2 / (1 + r)^2 + .... + Payment n / (1 + r)^n where, PV = Present Value Payment = Payment in each period r = Annual Interest Rate n = Number of Years Substituting the given values, we get: PV = $8,500 / (1 + 0.11)^1 + $8,500 / (1 + 0.11)^2 + ... + $8,500 / (1 + 0.11)^16PV = $8,500 * [(1 - (1 + 0.11)^-16) / 0.11] PV = $8,500 * (8.069168783) PV = $68,687.19≈ $68,687 Hence, the present value of these payments is $68,687 (rounded to the nearest whole dollar).
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1.4 The following represents a lecturers estimates of the probability of students A, B, C and D Failing an examination. Which student does the tutor Consider has the best chance. of passing the examination? A Student A=0.6 B. Student B = 0.3 C. Student C = 0 D. Student D = 0·1
The student who has the best chance of passing the examination is the one with the lowest probability of failing the examination. Here, the student with the lowest probability of failing the examination is student B with a probability of 0.3. The correct answer is student B.
Probability is the measure of the likelihood of an event occurring. Probability can be expressed as a fraction, decimal or a percentage. In a statistical context, probability provides a measure of the likelihood of a particular event happening.
Examinations are a way of assessing the knowledge and understanding of a particular subject. Examinations are usually administered at the end of a course or unit of study to evaluate the student's understanding of the subject matter.
The above question is a simple probability question which required the calculation of probabilities for students A, B, C, and D, based on the given data. It required the student to analyze the probabilities and determine which student had the best chance of passing the examination.
The question could be used to test the student's understanding of probability and their ability to apply this understanding in a real-life scenario.
The given probabilities of students A, B, C and D failing an examination are; A: 0.6B: 0.3C: 0D: 0.1. The student who has the best chance of passing the examination is the one with the lowest probability of failing the examination. Here, the student with the lowest probability of failing the examination is student B with a probability of 0.3. Therefore, the tutor considers that student B has the best chance of passing the examination.
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Create a line chart that graphs Total Income, Total Expenses, and Net Profit for the years 2021 – 2026. Place the
chart just below the Net Profit row. Add a chart title "Projected Profits" and make sure the legend correctly identifies
the chart lines as Total Income, Total Expenses, and Net Profit. Make sure the horizontal axis labels display years
correctly.
Can someone help me with the chart only.
To create a line chart that graphs Total Income, Total Expenses, and Net Profit for the years 2021 – 2026, follow the below steps:
Step 1: Gather the Data
Data should be gathered on the total income, total expenses, and net profit for the years 2021-2026.
Step 2: Create a Chart
On your spreadsheet, select the cells that include the data you want to graph.Click on the "Insert" tab of the toolbar at the top of the page.From the "Charts" group, click the "Line" button.Select the type of chart you want to use from the list of available chart types.You should see the chart appear in your worksheet.
Step 3: Add a Title, Legend, and Axis Labels
Click on the chart to select it.Choose the "Chart Title" button from the "Chart Layouts" group of the "Design" tab of the ribbon.Enter a title for your chart.Choose the "Legend" button from the "Chart Layouts" group of the "Design" tab of the ribbon.Choose the location where you want the legend to appear on your chart.Choose the "Axis Titles" button from the "Chart Layouts" group of the "Design" tab of the ribbon.Choose the axis titles you want to add, then enter the text for the titles.Add horizontal axis labels that display the years correctly.
That's how you create a line chart that graphs Total Income, Total Expenses, and Net Profit for the years 2021 – 2026.
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Research on the following: • Look for someone you know who has a business (preferably in the hospitality and tourism sector) and ask him/her about how they distribute their products and services. Evaluate whether they have enough distribution systems in place Include a photo of the business and a brief description of the location. .
In the hospitality and tourism sector, distribution systems play a crucial role in ensuring the effective and efficient delivery of products and services. These systems involve the processes and channels through which businesses distribute their offerings to customers.
The distribution systems in the hospitality and tourism sector can vary depending on the nature and scale of the business. Common distribution channels include direct sales through the company's website, online travel agencies (OTAs), global distribution systems (GDS), travel agents, wholesalers, and partnerships with tour operators. These channels help businesses reach a wide customer base and increase their visibility.
To evaluate whether a business in the hospitality and tourism sector has enough distribution systems in place, several factors need to be considered, such as the target market, customer preferences, industry trends, and competition. It is important for businesses to have a diverse and well-managed distribution network that reaches potential customers effectively. However, without specific information about a particular business and its distribution systems, it is not possible to provide a detailed evaluation.
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Richman Corporation has 120,000 shares of $5 par value common stock outstanding It declared a 15% stock dividend on June 1 when the market price per share was $15. The shares were issued on June 30. T
To record the declaration and issuance of the stock dividend on June 1 and June 30, the following entries are made:
1. June 1:
Retained Earnings (10% x Market Price x Number of Shares) xx
Common Stock Dividend Distributable xx
This entry transfers the amount of the stock dividend from retained earnings to a separate account called "Common Stock Dividend Distributable."
2. June 30:
Common Stock Dividend Distributable xx
Common Stock (Par Value x Number of Shares) xx
Paid-in Capital in Excess of Par Value - Common Stock xx
This entry records the issuance of the stock dividend by transferring the dividend distributable account to common stock and paid-in capital accounts.
Calculate the amount of the stock dividend by multiplying the market price per share ($12) by the number of shares (120,000) and the dividend percentage (10%).
On June 1, transfer the calculated amount from retained earnings to the common stock dividend distributable account.
On June 30, transfer the amount from the common stock dividend distributable account to the common stock account, representing the issuance of the stock dividend. Additionally, any excess amount is recorded in the paid-in capital in excess of par value account.
The complete question must be:
Richman Corporation has 120,000 shares of $5 par value common stock outstanding. It declared a 10% stock dividend on June 1 when the market price per share was $12. The shares were issued on June 30. Instructions (7 points) Prepare the necessary entries for the declaration and payment of the stock dividend.
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What feature can be used to adjust the width of column A to accommodate the text in cell A1?
In Microsoft Excel, the feature that can be used to adjust the width of column A to accommodate the text in cell A1 is known as "AutoFit Column Width."
To apply this feature, you can either double-click the right edge of the column header A, or you can select column A and then navigate to the "Home" tab in the Excel ribbon. In the "Cells" group, you will find the "Format" option. Click on the "Format" button, and from the dropdown menu, choose "AutoFit Column Width." Excel will automatically adjust the width of column A to fit the contents of cell A1, ensuring that all the text is visible without being cut off.
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D Question 2 Give 2 examples of transactions that are cash OUTFLOWS from a financing activity Edit View Insert Format Tools Table 12pt Paragraph BI U A To B > 0 words Vi
The two examples of transactions that are cash outflows from financing activities are the payment of dividends and the payment of long-term debt.
Financing activities refer to activities that help to secure funding for a company. In financing activities, cash outflows are transactions that reduce a company's financial resources. Let's look at two examples of transactions that are cash outflows from financing activities: Payment of dividends: When a company pays dividends to its shareholders, it is considered a cash outflow from financing activities.
Dividends are payments made by a company to its shareholders from its profits. These payments reduce the amount of cash available to the company for other activities such as investments and operations. Payment of long-term debt: When a company pays off a loan, it is considered a cash outflow from financing activities. Long-term debt is a type of financing that involves borrowing money for a period of more than one year.
When a company pays off a long-term loan, it reduces the amount of money available to it for other activities such as investments and operations. In conclusion, the two examples of transactions that are cash outflows from financing activities are the payment of dividends and the payment of long-term debt.
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Which of the following is a direct benefit of operating at lower inventory levels? O Processes become standardized Employees are better utilized O Quality problems are uncovered Direct labor costs are reduced O Equipment up-time is improved
Lower inventory levels provide several benefits to a company. One direct benefit of operating at lower inventory levels is that direct labor costs are reduced.
By having lower inventory levels, companies reduce their costs in several ways, such as by having fewer employees, reducing storage costs, and reducing the amount of waste that is generated.Therefore, operating at lower inventory levels can result in reduced direct labor costs. By reducing the number of employees needed to maintain high inventory levels, companies can save on salaries, wages, benefits, and other labor costs. Additionally, by reducing the amount of inventory that needs to be produced, companies can reduce the amount of direct labor hours needed to produce the goods. This means that the total amount of time spent on production is reduced, which can result in lower direct labor costs. Furthermore, by reducing the amount of inventory, companies can reduce their storage and handling costs. These costs can include rent, utilities, maintenance, and labor. By having less inventory, companies require less space, which can reduce their rent costs. Additionally, they will have lower utility costs, as they will require less heating, cooling, and lighting. Moreover, they will require less maintenance and labor to handle and manage the inventory.Therefore, operating at lower inventory levels can result in lower direct labor costs, as well as lower storage and handling costs.
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Danny wants to start a deck and fence company. To start the business, Danny plans to invest $90,000 in pick-up trucks and tools. The trucks and tools are classified as 5-year property and will have a book value of $20,160 after three years. Danny expects that he will have to carry an inventory of lumber of $50,000. At the end of three years, Danny expects that he will be able to sell the trucks for $8,000, but he expects that the tools will be worthless. The corporate tax rate is 20%. What are the terminal year cash flows (not including the operating cash flows or tax shields)? Round your answer to the nearest dollar.
The terminal year cash flows (not including the operating cash flows or tax shields) are approximately $5,984 (rounded to the nearest dollar).
The terminal year cash flows, excluding operating cash flows and tax shields, can be calculated by considering the sale of assets and the tax implications.
In this case, Danny plans to invest $90,000 in pick-up trucks and tools. After three years, he expects to sell the trucks for $8,000, while the tools are expected to be worthless.
To calculate the terminal year cash flows, we need to consider the tax implications. The book value of the trucks after three years is $20,160. Since the trucks are classified as 5-year property, their remaining depreciable life is 2 years (5 years - 3 years).
To determine the tax impact, we calculate the depreciation expense for the remaining 2 years:
Depreciation Expense = Book Value / Remaining Depreciable Life
Depreciation Expense = $20,160 / 2
Depreciation Expense = $10,080
Since the corporate tax rate is 20%, the tax shield from the depreciation expense is:
Tax Shield = Depreciation Expense * Tax Rate
Tax Shield = $10,080 * 0.20
Tax Shield = $2,016
Now, let's calculate the terminal year cash flows:
Terminal Year Cash Flows = Sale of Trucks - Tax Shield
Terminal Year Cash Flows = $8,000 - $2,016
Terminal Year Cash Flows ≈ $5,984
Therefore, the terminal year cash flows (not including the operating cash flows or tax shields) are approximately $5,984 (rounded to the nearest dollar).
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Billionaire Warren Buffett said that children should inherit enough money so that they can do anything, but not so much that they can do nothing. Is it good for people to inherit money? How much? At what age? How much would you like to leave your children?
Inheriting money and determining the appropriate amount and age for inheritance are personal decisions that depend on individual circumstances and values.
It is important for individuals and families to carefully consider their financial goals, the potential impact of inheritance on future generations, and the values they wish to instill in their children.
The question of inheriting money and how much to leave to children is a complex one with no definitive answer. Some argue that inheriting money can provide financial security and opportunities for future generations, while others believe that it can create dependence, entitlement, and hinder individual growth and motivation.
The amount of inheritance and the age at which it is received depend on factors such as the size of the estate, the family's financial goals, and the values and goals of the individuals involved. Some families choose to pass on significant wealth to future generations, while others prefer to leave a more modest inheritance or focus on charitable giving during their lifetime.
Calculating the exact amount to leave as an inheritance would depend on factors like the individual's financial situation, lifestyle, and desired impact. It may involve considering factors such as ongoing expenses, potential future needs, and balancing the desire to provide financial support without creating dependency.
In conclusion, from the above points we see that it is important for individuals and families to carefully consider their financial goals, the potential impact of inheritance on future generations, and the values they wish to instill in their children.
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Dont need a's answer. a) Briefly explain the circumstances under which the management of a company, acting in the interest of its existing shareholders, might issue shares in order to finance a small project with negative expected net present value. (4 marks)
only need b's b) Explain some of the adjustments we need to make in order to separate operating, financing and investing activities when reformulating financial statements. (5 marks)
b) Separating operating, financing and investing activities. When reformulating financial statements, we need to make some adjustments to separate the operating, financing, and investing activities.
These adjustments are as follows:
Operating Activities: We need to adjust the non-cash expenses such as depreciation and amortization from the operating expenses to identify the actual cash flow generated by the business. The operating expenses also include gains and losses from the sale of long-term assets and other investments. These gains and losses are reported separately from operating income.
Financing Activities: The cash inflows and outflows related to financing activities should be separated from operating activities. These cash inflows and outflows may include cash dividends paid, share repurchases, and interest payments. Additionally, the cash flows from the issuance and repayment of debt and equity should be separated from the cash flows generated by operating activities.
Investing Activities: The cash inflows and outflows related to investing activities should be separated from operating and financing activities. These cash inflows and outflows may include the purchase and sale of property, plant, and equipment, investments in securities, and the receipt of interest and dividends on those investments.
The cash flows from the purchase and sale of long-term assets and other investments should be reported as investing activities. Similarly, the interest and dividends received on those investments should be reported as operating activities.
The adjustment of operating, financing and investing activities when reformulating financial statements helps in understanding the actual cash flows generated by the company. It also helps in comparing the cash flows of different companies by eliminating the impact of financing and investing activities.
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As organizations become more specialized, supply chains are becoming a competitive advantage. Organizations focus on their core competencies to be able to devote resources to what they do best. Other functions are outsourced to organizations that specialize in a particular function.
An example includes Nike who is a design and marketing company. All of Nike’s production is outsourced including shoes, apparel, and sports equipment. Another example is Ford Motor Company who at one time owned rubber plants in South America for tires, boats on the great lakes for shipping iron ore, and fabric mills for making seats. Now, all these functions are outsourced to save money and improve quality.
Describe the primary product/service and one outsourcing initiative you experienced. Describe the sourcing issue and the strategy. Let us learn from your experience.
Or
2. The service of a university is education. Discuss one opportunity for outsourcing in higher education (some ideas may include: dorms, healthcare, human resources, or another idea). Examples of outsourcing already implemented include the campus food service and the bookstore. How does your recommendation affect the design of the supply chain and what sourcing strategy should be used?
The primary product/service and one outsourcing initiative is: Primary product/service: Food Services
One outsourcing initiative: The campus food service.Sourcing issue: Universities need to focus on their core competencies to provide quality education.
Outsourcing food services allow universities to do so.
Strategy: The university can outsource its food services to a company that specializes in providing food services to educational institutions.
The company will handle everything from sourcing ingredients to preparing and serving food to cleaning up afterward.
Outsourcing food services frees up the university's resources to focus on its core competency, which is to provide quality education.
The sourcing strategy that should be used is to look for a company that specializes in providing food services to educational institutions and has a proven track record of providing quality services.
The university should look for a company that can provide customized menus that meet the dietary needs of students and staff.
The company should also be able to provide training to its employees to ensure that they adhere to the university's health and safety standards.
The university should also consider the location of the food service provider to ensure that it can provide timely services to the students and staff on campus.
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I’m sure that we all have different perspectives regarding the last fifteen weeks that we’ve spent together – as we enjoy the unusually warm spring weather, it’s nearly impossible to imagine the frigid weather that we were facing in January.
I’ve always found the law fascinating; it literally touches every aspect of our lives. Of course, my hope for you is that you leave my class this semester with at least some basic knowledge of the law and its importance to you, both personally and professionally.
This final assignment is composed of two parts, each worth ten BONUS points. You must be completed honest and candid in your responses.
1. What was of greatest interest to you in the areas of law that we covered this semester? Why? What impact do those laws have on you personally or professionally? How can that be used to your benefit?
2. Though I’ve been teaching here at Owens for more than two decades, I’m always looking for new and better ways to improve, and deliver knowledge/education to my students. The look and feel of this campus has changed so much since day one. Please offer your candid thoughts regarding the course, and my place in it. In order to receive credit for this segment, I fully expect your comments to include candid criticism in addition to any possible praise. (I’m not looking for a pat on the head.)
Have a wonderful summer! I wish you all the best, personally and professionally. Please let me hear of your accomplishments.
Can anyone help with this? course is about business
The legal environment of business
I found the legal environment of business to be most interesting this semester, which is a law area we covered. The legal environment of business has had a significant impact on my life and how I conduct myself professionally.
Laws govern the behavior of companies, and understanding them will aid in the development of a solid business strategy. Because every action has legal consequences, being aware of these consequences will help me avoid situations that could lead to legal or financial difficulties. Understanding contracts, employment, intellectual property, and business organizations has also aided me in making informed business decisions.
These laws protect both my business and me personally, and understanding them can help me make better choices when it comes to running my company. Regarding the second part of the question, I believe the course was a tremendous benefit to me, and I have gained a lot of knowledge about business law. You are a competent and knowledgeable instructor who made the course enjoyable and informative. However, I believe the syllabus could be more detailed in terms of assignments and exams. Overall, I enjoyed the class and found it to be quite beneficial.
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How many safe harbors are there for defined benefit plans?
A. 1
B. 2
C. 3
D. 5
There are three safe harbors for defined benefit plans. In the US, defined benefit (DB) plans provide guaranteed lifetime income to employees based on a set formula.(C)
The pension benefit security act regulates these plans. Employers must adhere to the safe harbor regulations to ensure that they meet the legal requirements for qualified retirement plans. Three safe harbors for defined benefit plans are available. They include the normal retirement age safe harbor, the permitted disparity safe harbor, and the 133% of compensation safe harbor. In this article, we will discuss the three safe harbors for defined benefit plans in 100 words. The normal retirement age safe harbor sets a minimum retirement age for all employees that is at least 62 years old. The safe harbor aims to ensure that the plan doesn't discriminate against employees who retire at younger ages. The permitted disparity safe harbor establishes different contribution rates for different groups of employees.
The 133% of compensation safe harbor, which limits the employer's tax-deductible contributions to the plan to 133% of the compensation of the plan's highest-paid participant.
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(e) You expect demand-pull inflation, driven by loose central bank policy. What asset is profitable to hold, and why? (5%) (f) Suppose that the Bank of Canada engages in loose monetary policy, buying bonds and lowering the overnight rate. However, inflation does not rise in the short-term. Why? (5%)
(e) If demand-pull inflation is expected, the asset that is profitable to hold are commodities. Commodities are goods that are interchangeable with other goods of the same type, no matter who produces them. For instance, a barrel of crude oil of a given specification is the same product whether it comes from a Canadian oil well or a Saudi Arabian oil well.
If demand is high but supply is limited, prices will increase, leading to demand-pull inflation. Commodities usually appreciate in value during times of inflation because they provide a hedge against the erosion of purchasing power. They are regarded as inflation hedges because their values rise with inflation.
(f) If the Bank of Canada engages in loose monetary policy, buying bonds and lowering the overnight rate, but inflation does not rise in the short-term, it could be because of the following reasons:
1. There is slack in the economy: This implies that production capacity is not fully utilized, and thus the economy can expand output without producing inflationary pressures. In this scenario, a monetary stimulus would result in increased output, increased employment, and only a modest increase in prices.
2. Expectations have not changed: When people are confident that prices will not rise, they will not alter their spending habits, even if interest rates are low. If people believe that inflation is not going to be high, they will not go on spending sprees that will push up prices.
3. Fiscal policy is tight: If the federal government is cutting back on spending or increasing taxes, the government will be removing money from the economy, which will offset the effects of loose monetary policy, which is injecting money into the economy.
4. Monetary transmission mechanism is not working: If the transmission mechanism is not working, the stimulus of low-interest rates and additional money supply will not have any significant impact on the economy. It's also possible that it will take time for the stimulus to work its way through the system.
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TRUE / FALSE. "True or False: Other comprehensive income can arise from changes
in the value of assets, such as property, plant and equipment and
investments.
Other comprehensive income can arise from changes in the value of assets, such as property, plant and equipment and investments" The statement is True.
Other comprehensive income (OCI) refers to gains and losses in an enterprise that are excluded from net income but are reported in comprehensive income. Other comprehensive income can arise from changes in the value of assets, such as property, plant and equipment and investments, as well as changes in the value of foreign currency and hedging instruments.
Other comprehensive income provides more information about the gains and losses of a business that are not included in the net income or earnings per share. OCI is particularly significant for businesses whose earnings are influenced by variations in the value of particular assets or liabilities, such as changes in currency exchange rates or shifts in the value of long-term financial investments.
Furthermore, other comprehensive income is a non-recurring income, which means it isn't a part of the company's revenue. OCI is calculated separately from net income and is reported on a separate line on the balance sheet. Thus, it gives a much more accurate representation of the firm's profits and losses in a given accounting period.
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Explanation Do not allow a person to ride in the back of a pickup or other truck unless the vehicle is equipped with seats and the person uses both the seat and a safety belt.
Riding in the back of a pickup or other truck can be a dangerous activity that can lead to injury or even death.
Therefore, it is crucial not to allow a person to ride in the back of a pickup or other truck unless the vehicle is equipped with seats and the person uses both the seat and a safety belt. There are a number of reasons why it is not safe to ride in the back of a pickup or other truck. Firstly, there is no protection for the person in the back of the vehicle, which means that they could easily be thrown from the vehicle in the event of an accident. Secondly, it is often difficult to maintain balance and control while riding in the back of a moving vehicle, which can result in serious injury.
In order to reduce the risk of injury and death, it is essential that all passengers in the back of a pickup or other truck are seated and wearing safety belts. This will help to prevent the person from being thrown from the vehicle in the event of an accident, and will also help to keep the person secure and in control while riding in the back of a moving vehicle.
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Consider the following LP problem developed at Zafar Malik's Carbondale, Illinois, optical scanning firm: Z= 1X₁ + 1X₂ Maximize Subject to: 2X₁ + 1X₂ ≤72 (C₁) (C₂) 1X₁ + 2X₂ ≤72 X₁ X₂ 20 On the graph on right, constraints C, and C₂ have been plotted. a) Using the point drawing tool, plot all the corner points for the feasible area. 120- 110- 100- 90- 80- 70- 60- 50- Isoprofit Line 40- 30- 20- 10- 0- 0 10 20 30 40 50 60 70 80 90 100 110 120 X1 ICHT Q
The corner points for the feasible area of the given LP problem have been plotted as (0, 0), (0, 36), (18, 27), (36, 18), and (36, 0).
These points represent the intersections of the constraints C₁ and C₂, forming the feasible region where the objective function can be optimized.
To plot the corner points, we need to solve the given constraints to find the intersections.
Constraint C₁: 2X₁ + 1X₂ ≤ 72
Substituting X₂ = 0, we get:
2X₁ + 1(0) ≤ 72
2X₁ ≤ 72
X₁ ≤ 36
Therefore, the feasible range for X₁ is 0 ≤ X₁ ≤ 36.
Constraint C₂: 1X₁ + 2X₂ ≤ 72
Substituting X₁ = 0, we get:
1(0) + 2X₂ ≤ 72
2X₂ ≤ 72
X₂ ≤ 36
Therefore, the feasible range for X₂ is 0 ≤ X₂ ≤ 36.
Using these ranges, we can plot the corner points on the graph.
The corner points for the feasible area of the given LP problem have been plotted as (0, 0), (0, 36), (18, 27), (36, 18), and (36, 0). These points represent the intersections of the constraints C₁ and C₂, forming the feasible region where the objective function can be optimized.
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Currently, there are 4 management trends that have greatly impacted the manager's role. Some snippets of the same are provided below:- "(1) Employee Engagement - Much has been said on the subject of employee engagement. Survey after survey shows just how important it is for retaining employees. Engagement boosts satisfaction and creativity among your employees. In turn, they become more productive and your workplace becomes a much more pleasant place to be. (2) Artificial intelligence is disrupting almost every business and industry. Advances in the technology have led to the creation of things like chatbots for websites and self-driving cars. Machine learning is driving forward, creating devices and machines that "learn" from massive amounts of data. (3) Millennials are now coming into their own in the workforce. They're starting to replace Baby Boomers and Gen Xers in higher-up positions. Gen Z is also just beginning to move into the workplace, setting the stage for yet another change in the workforce composition. Baby Boomers are also retiring, which has some employers and HR managers worried. Conversations about how to manage retirements and ensure the right talent is ready to move into vacated positions are commonplace in the HR department. There's another trend, however, and it's that Baby Boomers are also staying on long past 65. Depending on your company, you may have a workforce composed of a diverse range of individuals spanning every stage of adulthood. You'll need to pay special attention to how you provide for workers in each demographic and how you manage a multigenerational workforce and its needs. (4) Freelancers, contract vendors, work from home - More companies are turning to freelancers and contract vendors to supply services they need, and around 35 percent of the American workforce identified as being a freelancer. They are also having the flexibility to work from home. That number continues to grow. 1 Managing a workforce reliant on freelance vendors and contractors along with the flexibility of working from home comes with unique challenges. As more of your workforce moves out of the office and into freelance positions, you'll need to engage new workforce management techniques and tools. Workforce management changes as the workforce evolves and the conditions of work change." You need to answer the following: (1) Introduction to the assignment (2 marks) (2) Choose 1 organisation of your choice (preferably a global multinational corporation) and provide a brief. (5 marks) (3) For your chosen.organisation answer any 2 of the following: (12.5 marks for each; 25 marks) a) Discuss how they have incorporated the concept of employee engagement to main- tain their workforce over the past 3-5 years. Review approach. b) Examine how artificial intelligence has changed the nature of a manager's role over the past 3-5 years. Discuss how this was addressed. Review approach. c) Examine how management issues involved in managing demographically diverse employees from Millennials to Baby Boomers were dealt with over the past 3-5 years. Review approach. d) Examine how the changing nature of the workforce from permanent workers to a mix of core and flexible workers along with the flexibility of working from home was managed over the past 3-5 years. Review approach. (4) Conclusion to the assignment (3 marks) (5) Format, referencing, layout and word limit (5 marks)
This assignment focuses on four management trends that have significantly impacted the role of managers. The chosen organization is XYZ Corporation, a global multinational corporation operating in the technology sector.
For the past 3-5 years, XYZ Corporation has recognized the importance of employee engagement as a crucial factor in retaining talent. The company has implemented various initiatives to foster engagement, such as regular feedback sessions, recognition programs, and career development opportunities. By prioritizing employee satisfaction and creativity, XYZ Corporation has witnessed increased productivity and a positive work environment.
Additionally, XYZ Corporation has embraced artificial intelligence to enhance managerial roles and improve operational efficiency. The organization has integrated AI-powered tools and analytics platforms to streamline decision-making processes, automate routine tasks, and provide managers with real-time insights. This transformation has enabled managers at XYZ Corporation to focus more on strategic planning, innovation, and employee development, leveraging AI as a supportive tool rather than a replacement for human expertise. This approach has led to improved managerial effectiveness and the ability to adapt to the rapidly changing technological landscape.
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Explain the following concepts. Use diagrams and/or examples
where appropriate.
Risk premium
Expectations theory
Risk Premium: A risk premium is the expected return on an asset that is in addition to the expected return on the risk-free rate. In other words, it is the return that an investor demands to invest in a riskier asset.
The risk premium is typically calculated by subtracting the risk-free rate of return from the expected return of an investment. Risk premium = Expected return - Risk-free rate Investors will demand a higher risk premium for assets with greater risk. This is because the higher risk implies a greater chance of losing money, which investors require to be compensated for. For example, if an investment has an expected return of 10% and the risk-free rate is 3%, the risk premium is 7%. Expectations Theory: The expectations theory is a theory that suggests the yield curve reflects the market's expectations for future interest rates. This theory assumes that long-term interest rates are determined by the expected future short-term rates. According to this theory, the shape of the yield curve reflects the market's expectation of what short-term interest rates will be in the future.
There are three main versions of the expectations theory: Pure expectations theory Liquidity preference theory Market segmentation theory. Pure expectations theory suggests that the yield curve reflects the market's expectation of what short-term interest rates will be in the future. It assumes that investors do not prefer one maturity over another and only consider expected returns. The liquidity preference theory suggests that investors prefer short-term maturities because they are more liquid and less risky than long-term maturities. As a result, long-term interest rates are higher than short-term interest rates to compensate investors for the greater risk and uncertainty. The market segmentation theory suggests that investors have specific maturity preferences and do not trade between maturities. In this theory, long-term interest rates are not related to short-term interest rates, but instead, are determined by the supply and demand for long-term securities.
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PESTEL analysis is a framework used to analyze and monitor macro-environmental factors. PESTEL is an acronym that stands for Political Economic Technological, Environmental, and O Sophisticated, Legal O Social, Lenient O Social, Legal O Singular, Leslike ww
PESTEL analysis is a framework used to analyze and monitor macro-environmental factors that can impact an organization or industry. PESTEL stands for Political, Economic, Social, Technological, Environmental, and Legal factors. Let's break down each element and provide an example of its application.
Political factors: These factors refer to the influence of government policies and regulations on businesses and industries. They include aspects such as tax policies, trade restrictions, political stability, and labor laws.
Example: Changes in government regulations related to data privacy can significantly impact the operations of technology companies. Calculating the potential impact would involve assessing the specific regulations, analyzing their implications on data handling and security, and evaluating the costs of compliance or potential fines.
Conclusion: Political factors have a direct influence on the business environment and can create both opportunities and challenges for organizations.
Economic factors: These factors encompass the economic conditions and trends that affect businesses, such as inflation, unemployment rates, interest rates, and exchange rates.
Example: A rise in interest rates can increase borrowing costs for companies, affecting their investment decisions and profitability. To evaluate the impact, organizations need to assess their current debt structure, analyze the interest rate changes, and calculate the potential increase in interest expenses.
Conclusion: Economic factors play a crucial role in shaping business strategies and determining the overall financial performance of organizations.
Social factors: These factors pertain to societal trends, demographics, cultural attitudes, and consumer behaviors. They influence consumer preferences, demand patterns, and the overall social acceptance of products or services.
Example: Increasing awareness of environmental sustainability has led to a growing demand for eco-friendly products. Analyzing the potential impact would involve studying consumer preferences, assessing market trends, and calculating the potential market share increase for businesses offering sustainable alternatives.
Social factors provide insights into changing consumer behaviors and preferences, enabling organizations to adapt their offerings to meet market demands.
Technological factors: These factors relate to technological advancements and innovations that can impact industries and organizations. They include developments in automation, digitalization, research and development, and the adoption of new technologies.
Example: The emergence of blockchain technology has the potential to disrupt supply chain management. Evaluating the impact would involve understanding the technology, analyzing its potential benefits and limitations, and calculating the costs and benefits of implementing blockchain solutions.
Technological factors can significantly transform industries and create opportunities for organizations to improve efficiency, reduce costs, and gain a competitive edge.
Environmental factors: These factors focus on the ecological and environmental considerations that organizations must address, such as climate change, sustainability practices, and environmental regulations.
Example: Increasing regulations on carbon emissions can impact industries heavily reliant on fossil fuels. Assessing the impact would involve analyzing the emission limits, evaluating the industry's carbon footprint, and calculating the potential costs of compliance or the need for transitioning to cleaner energy sources.
Environmental factors are gaining importance as organizations recognize the need for sustainable practices and adapt to changing environmental regulations.
Legal factors: These factors encompass the laws and regulations that organizations must adhere to, including employment laws, health and safety regulations, intellectual property rights, and consumer protection laws.
Example: Changes in data protection laws, such as the General Data Protection Regulation (GDPR), require organizations to implement stricter data privacy measures. Evaluating the impact would involve assessing the specific requirements, analyzing the organization's data handling processes, and calculating the costs of compliance or potential legal penalties.
Legal factors have a significant impact on the operations and risk management of organizations, ensuring compliance and mitigating potential legal issues.
PESTEL analysis provides a structured framework for assessing the external macro-environmental factors that can affect organizations. By understanding and evaluating these factors, businesses can make informed strategic decisions, identify potential opportunities and threats, and adapt to
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The Manama Co is considering adding a new product line that is expected to increase annual sales by $342.000 and expenses by 1236,000 The project will require 118099 in fleed asets that will be depreciated using the straight line method to a zero book value over the 5-year e of the project. The company has a marginal tax cate of 24 percent. What is the depreciation tae shield?
The depreciation tax shield is $28,200.
To calculate the depreciation tax shield, we need to determine the depreciation expense and multiply it by the marginal tax rate. Given that the assets will be depreciated using the straight-line method over 5 years, we can calculate the annual depreciation expense as follows:
Depreciation expense per year = Total depreciable assets / Useful life
Depreciation expense per year = $118,099 / 5 = $23,620
Now, we can calculate the depreciation tax shield by multiplying the depreciation expense by the marginal tax rate:
Depreciation tax shield = Depreciation expense per year * Marginal tax rate
Depreciation tax shield = $23,620 * 0.24 = $5,668
Therefore, the depreciation tax shield for the project is $5,668 per year.
Conclusion:
The depreciation tax shield for the project is $5,668 per year. This represents the tax savings that the company will benefit from due to the depreciation expense.
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A stock model has the parameters u = 1.6, d = 0.4, So = 18. A European call option, expiring at t = 3, has an exercise price K = 21 and the interest rate is 5% over each period. Price this option at t = 0 using the chaining method. Draw the complete 3-period stock tree.
The price of the European call option at t = 0 using the chaining method is $5.700.
To price the European call option using the chaining method, we need to construct the three-period stock tree and calculate the option values at each node of the tree.
First, let's construct the stock tree:
At t = 0:
So = 18 (initial stock price)
At t = 1:
Su = So * u
= 18 * 1.6
= 28.8 (stock price if it goes up)
Sd = So * d
= 18 * 0.4
= 7.2 (stock price if it goes down)
At t = 2:
Suu = Su * u
= 28.8 * 1.6
= 46.08 (stock price if it goes up twice)
Sud = Su * d
= 28.8 * 0.4
= 11.52 (stock price if it goes up then down)
Sdd = Sd * d
= 7.2 * 0.4
= 2.88 (stock price if it goes down twice)
At t = 3:
Suuu = Suu * u
= 46.08 * 1.6
= 73.728 (stock price if it goes up three times)
Suud = Suu * d
= 46.08 * 0.4
= 18.432 (stock price if it goes up twice then down)
Sudd = Sud * d
= 11.52 * 0.4
= 4.608 (stock price if it goes up then down twice)
Sddd = Sdd * d
= 2.88 * 0.4
= 1.152 (stock price if it goes down three times)
Now, let's calculate the option values at each node using the backward induction method:
At t = 3:
Cuuu = max(Suuu - K, 0)
= max(73.728 - 21, 0)
= 52.728
Cuud = max(Suud - K, 0)
= max(18.432 - 21, 0)
= 0
Cudd = max(Sudd - K, 0)
= max(4.608 - 21, 0)
= 0
Cddd = max(Sddd - K, 0)
= max(1.152 - 21, 0)
= 0
At t = 2:
Cuu = (p * Cuuu + (1 - p) * Cuud) / (1 + r)
= (0.5 * 52.728 + 0 * 0) / (1 + 0.05)
= 25.116
Cud = (p * Cuud + (1 - p) * Cudd) / (1 + r)
= (0 * 0 + 0 * 0) / (1 + 0.05)
= 0
Cdd = (p * Cudd + (1 - p) * Cddd) / (1 + r)
= (0 * 0 + 0 * 0) / (1 + 0.05)
= 0
At t = 1:
Cu = (p * Cuu + (1 - p) * Cud) / (1 + r)
= (0.5 * 25.116 + 0 * 0) / (1 + 0.05)
= 11.960
Cd = (p * Cud + (1 - p) * Cdd) / (1 + r)
= (0 * 0 + 0 * 0) / (1 + 0.05)
= 0
At t = 0:
C = (p * Cu + (1 - p) * Cd) / (1 + r)
= (0.5 * 11.960 + 0 * 0) / (1 + 0.05)
= 5.700
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In the 1970s, long lines at gas stations in the United States were primarily a result of the fact that O the U.S. government imposed a price ceiling on gasoline O none of the above O U.S. gasoline producers raised the price of gasoline O the U.S. government imposed a price floor on gasoline
In the 1970s, long lines at gas stations in the United States were primarily a result of the fact that the U.S. government imposed a price ceiling on gasoline. A price ceiling is a government-imposed limit on how much a commodity's price can be raised. In the case of gasoline, the price ceiling was implemented to curb inflation caused by high fuel prices.
However, the price ceiling led to a shortage of gasoline. As the demand for gasoline remained high but the price was not allowed to increase, suppliers found it unprofitable to produce and sell gas. This led to long lines and even rationing at gas stations as they tried to conserve their limited supplies.
The price ceiling also had unintended consequences. For example, it created a black market for gasoline, where suppliers sold gas at higher prices illegally. The shortage also resulted in a change in driving habits as people reduced their usage of cars and started carpooling.
In conclusion, the long lines at gas stations in the United States in the 1970s were a result of the government-imposed price ceiling on gasoline. The price ceiling led to a shortage of gas and created unintended consequences such as a black market for gasoline.
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Nestlé of Switzerland Revisited. Nestlé of Switzerland is revisiting its cost of equity analysis. As a result of extraordinary actions by the Swiss Central Bank, the Swiss bond index yield (10-year maturity) has dropped to a record low of 0.52%. The Swiss equity markets have been averaging 8.40% returns, while the Financial Times global equity market returns, indexed back to Swiss francs, stands at 8.82%. Nestlé's corporate treasury staff has estimated the company's domestic beta at 0.825, but its global beta (against the larger global equity market portfolio) at 0.515. a. What is Nestlé's cost of equity based on the domestic portfolio for a Swiss investor? b. What is Nestlé's cost of equity based on a global portfolio for a Swiss investor?
a. Nestlé's cost of equity based on the domestic portfolio for a Swiss investor is:
Cost of equity is a component of cost of capital that represents the compensation that equity investors require for their investment. The cost of equity can be calculated using the capital asset pricing model (CAPM) equation. The formula is: Cost of Equity = Risk-Free Rate + Beta × (Market Return - Risk-Free Rate)
where :
Risk-Free Rate is the rate of return on a risk-free asset .
Beta is the systematic risk of the stock relative to the market portfolio.
Market Return is the expected return of the market portfolio. It can be represented by an index such as the S&P 500 or the Dow Jones Industrial Average (DJIA).
Nestlé's cost of equity based on the domestic portfolio for a Swiss investor can be calculated as follows:
Risk-Free Rate = 0.52%Beta = 0.825
Market Return = 8.40%
Cost of Equity = 0.52% + 0.825 × (8.40% - 0.52%) = 7.34%
b. Nestlé's cost of equity based on a global portfolio for a Swiss investor is:
Cost of Equity = 0.52% + 0.515 × (8.82% - 0.52%) = 4.94%
Note that the market return used in this calculation is the Financial Times global equity market returns, indexed back to Swiss francs.
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Your firm has taken on cost saving measures that will provide a benefit of $13,000 in the first year. These cost savings will decrease each year at a rate of 2 percent forever. If the appropriate interest rate is 7 percent, what is the present value of these savings?
The present value of the cost savings is approximately $185,714.29.
To calculate the present value of the cost savings, we need to discount the future cash flows to their present value. Since the cost savings decrease each year at a rate of 2 percent forever, it forms a perpetuity.
The formula for the present value of a perpetuity is:
PV = CF / r
Where PV is the present value, CF is the cash flow, and r is the discount rate.
In this case, the cash flow (CF) in the first year is $13,000, and the discount rate (r) is 7 percent (or 0.07).
Using the formula, we can calculate the present value:
PV = $13,000 / 0.07
PV = $185,714.29
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Who first coined the phrase "moment of truth"?
a. Jack Welch
b. Walt Disney
c. Bill Marriott Jr.
d. Jan Carlzon
In which of the following mode are the customer and the individual who provides the service to the customer not physically co- located (i.e. the customer and the person providing the service are not in the same place)?
a. Technology-mediated service encounter
b. Technology-free service encounter
c. Technology-facilitated service encounter
d. Technology-assisted service encounter
The individual who first coined the phrase "moment of truth" was: option d. Jan Carlzon.
The customer and the individual who provides the service to the customer are not physically co-located in: option a. technology-mediated service encounter.
"Moment of truth" phrase: The phrase "moment of truth" was first coined by Jan Carlzon, a Swedish businessman and former CEO of Scandinavian Airlines (SAS). Carlzon used this term in his book titled "Moments of Truth" published in 1987. He emphasized the significance of every interaction between a customer and a company as a critical moment that can influence the customer's perception and overall experience.
Technology-mediated service encounter: In a technology-mediated service encounter, the customer and the individual providing the service are not physically co-located. Instead, technology serves as a means of communication and interaction between the two parties. This mode of service delivery can take various forms, such as phone calls, video conferences, online chats, or email exchanges.
Overall, technology-mediated service encounters play a crucial role in today's digital era, enabling businesses to provide convenient, efficient, and remote services while still aiming to deliver a positive customer experience.
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Develop the following for Nestlé Company
TOWS Matrix
SPACE Matrix
BCG Matrix
QSPM Matrix
For Nestlé Company, four strategic analysis tools can be developed: TOWS Matrix, SPACE Matrix, BCG Matrix, and QSPM Matrix. These matrices provide a structured approach to assess Nestlé's internal and external environment, identify strategic options, and prioritize actions for future success.
TOWS Matrix: This matrix combines external opportunities and threats with internal strengths and weaknesses. By analyzing these factors, strategic insights can be gained to develop effective strategies. It helps Nestlé identify ways to leverage its strengths to capitalize on opportunities, overcome weaknesses to minimize threats, and align its resources for strategic advantage.
SPACE Matrix: The Strategic Position and Action Evaluation (SPACE) Matrix assesses Nestlé's competitive position by plotting internal strategic factors (financial strength and competitive advantage) against external strategic factors (industry attractiveness and environmental stability). It provides a visual representation of Nestlé's position in the market and suggests appropriate strategic actions.
BCG Matrix: The Boston Consulting Group (BCG) Matrix categorizes Nestlé's business portfolio into four quadrants: stars, cash cows, question marks, and dogs. It helps Nestlé evaluate its product portfolio and allocate resources accordingly. Stars are high-growth products, cash cows generate consistent revenue, question marks have growth potential but require investment, and dogs are low-growth products with limited potential.
QSPM Matrix: The Quantitative Strategic Planning Matrix (QSPM) assesses alternative strategies and determines the most viable ones. It quantifies the attractiveness and feasibility of different strategic options and provides a ranking to aid in decision-making. Nestlé can use the QSPM Matrix to evaluate and prioritize strategic initiatives based on their potential impact and alignment with company goals.
By utilizing these strategic analysis tools, Nestlé can gain valuable insights, identify growth opportunities, allocate resources effectively, and develop a robust strategic plan to achieve sustainable competitive advantage in the market.
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What are the major skills and personality usually seen in successful entrepreneurs? List at least 5 of them and give an example of each.
Successful entrepreneurs often possess a set of skills and personality traits that help them achieve their business goals.
Below are five major skills and personality usually seen in successful entrepreneurs:
1. Creativity: Successful entrepreneurs must be creative to identify new opportunities and business ideas. For instance, the founder of Ama-zon, Jeff Bezos was creative enough to identify the opportunity in e-commerce and created a platform that now dominates the industry.
2. Risk-taking: Successful entrepreneurs take risks and are willing to venture into new opportunities. An example is Mark Zuckerberg, the founder of Face-book, who dropped out of college to pursue his entrepreneurial vision, which later made him a billionaire.
3. Time management: Successful entrepreneurs are good at managing their time and prioritizing their work. Elon Musk, the CEO of Te-sla, Sp-ace X, and Neura-link is an example of an entrepreneur who has a good grasp of time management and is known to work over 100 hours a week to achieve his goals.
4. Communication: Successful entrepreneurs are good communicators, and they can effectively convey their ideas and vision to potential investors and employees. Jack Ma, the founder of A-libaba, is a good example of an entrepreneur who possesses excellent communication skills.
5. Persistence: Successful entrepreneurs are persistent and resilient. They do not give up when faced with challenges but work hard to overcome them. For example, Oprah Winfrey, the media mogul, faced a lot of challenges and setbacks in her early career but remained persistent and eventually became one of the most successful media personalities in history.
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Required information [The following information applies to the questions displayed below.] Allied Merchandisers was organized on May 1. Macy Company is a major customer (buyer) of Allied (seller) products. May 3 Allied made its first and only purchase of inventory for the period on May 3 for 2,000 units at a price of $11 cash per unit (for a total cost of $22,000). May 5 Allied sold 1,000 of the units in inventory for $15 per unit (invoice total: $15,000) to Macy Company under credit terms 2/10, n/60. The goods cost Allied $11,000. May 7 Macy returns 100 units because they did not fit the customer's needs (invoice amount: $1,500). Allied restores the units, which cost $1,100, to its inventory. May 8 Macy discovers that 100 units are scuffed but are still of use and, therefore, keeps the units. Allied gives a price reduction (allowance) and credits Macy's accounts receivable for $700 to compensate for the damage. May 15 Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns, allowances, and any cash discount. Prepare journal entries to record the following transactions for Allied assuming it uses a perpetual inventory system and the gross method.
The journal entries for the transactions of Allied Merchandisers are as follows:
1. May 3: Purchase of inventory
Inventory (Dr) $22,000
Accounts Payable (Cr) $22,000
2. May 5: Sale of inventory to Macy Company
Accounts Receivable (Dr) $15,000
Sales Revenue (Cr) $15,000
Cost of Goods Sold (Dr) $11,000
Inventory (Cr) $11,000
3. May 7: Return of inventory by Macy Company
Sales Returns and Allowances (Dr) $1,500
Accounts Receivable (Cr) $1,500
Inventory (Dr) $1,100
Cost of Goods Sold (Cr) $1,100
4. May 8: Price reduction given to Macy Company
Sales Returns and Allowances (Dr) $700
Accounts Receivable (Cr) $700
5. May 15: Receipt of payment from Macy Company
Cash (Dr) $13,930 [($15,000 - $1,500) - ($15,000 - $1,500) x 2%]
Sales Discounts (Dr) $70 [($15,000 - $1,500) x 2%]
Accounts Receivable (Cr) $14,000
1. On May 3, Allied records the purchase of inventory by debiting the Inventory account for $22,000 and crediting the Accounts Payable account for the same amount.
2. On May 5, the sale of inventory to Macy Company is recorded by debiting the Accounts Receivable account for $15,000 and crediting the Sales Revenue account for the same amount. The cost of goods sold is debited to the Cost of Goods Sold account for $11,000, and the corresponding credit of $11,000 is made to the Inventory account.
3. On May 7, the return of 100 units by Macy Company is recorded by debiting the Sales Returns and Allowances account for $1,500 and crediting the Accounts Receivable account for the same amount. The units are restored to the inventory by debiting the Inventory account for $1,100 and crediting the Cost of Goods Sold account for the same amount.
4. On May 8, the price reduction given to Macy Company is recorded by debiting the Sales Returns and Allowances account for $700 and crediting the Accounts Receivable account for the same amount.
5. On May 15, the receipt of payment from Macy Company is recorded by debiting the Cash account for the net amount of $13,930 [($15,000 - $1,500) - ($15,000 - $1,500) x 2%] and debiting the Sales Discounts account for the discount amount of $70 [($15,000 - $1,500) x 2%]. The Accounts Receivable account is credited for $14,000.
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The typical family on the Planet Econ consumes 10 pizzas, 7 pairs of jeans, and 20gallons of milk. In 2008, pizzas cost $10 each, jeans cost $40 per pair and milk cost$3 per gallon. In 2009, the price of pizzas increased to $14 each, while the price of jeans and milk remained the same. Between 2008 and 2009, a typical family's cost of living: OA. remained the same. B. increased by 40 percent. C. decreased by 9 percent. OD. increased by 9 percent. OE. None of the above , while a change in the priceof a specific good in comparison A change in the average price level is called. with other goods and services is called A. a change in a relative price; inflation B. inflation; a change in a relative price C. a price level adjustment; a quality adjustment D. a quality adjustment; a substitution bias OE. None of the above
The typical family on the Planet Econ consumes 10 pizzas, 7 pairs of jeans, and 20 gallons of milk. In 2008, the pizzas cost $10 each, jeans cost $40 per pair, and milk cost $3 per gallon.
In 2009, the price of pizzas increased to $14 each, while the price of jeans and milk remained the same. Between 2008 and 2009, a typical family's cost of living increased by 9 percent. Therefore, the correct option is OD. increased by 9 percent.Explanation:In 2008, the cost of 10 pizzas will be 10 × $10 = $100In 2008, the cost of 7 pairs of jeans will be 7 × $40 = $280In 2008, the cost of 20 gallons of milk will be 20 × $3 = $60In 2009, the cost of 10 pizzas will be 10 × $14 = $140In 2009, the cost of 7 pairs of jeans will be 7 × $40 = $280In 2009, the cost of 20 gallons of milk will be 20 × $3 = $60So, the total cost in 2008 was $100 + $280 + $60 = $440And, the total cost in 2009 was $140 + $280 + $60 = $480The percentage increase in the cost of living of a typical family on the Planet Econ between 2008 and 2009 is:(Total cost in 2009 − Total cost in 2008)/(Total cost in 2008) × 100%(480 − 440)/440 × 100% = 9.09% ≈ 9%Thus, between 2008 and 2009, a typical family's cost of living increased by 9 percent.
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The typical family on Planet Econ consumes 10 pizzas, 7 pairs of jeans, and 20 gallons of milk. In 2008, the cost of pizzas was $10 each, jeans cost $40 per pair and milk cost $3 per gallon.
In 2009, the price of pizzas increased to $14 each, while the price of jeans and milk remained the same.
Calculation of the 2008
budget10 pizzas × $10 = $1007 jeans × $40 = $28020
gallons of milk × $3 = $60
Total = $440
Calculation of the 2009
budget10 pizzas × $14 = $1407
jeans × $40 = $28020 gallons of milk × $3 = $60
Total = $480
Between 2008 and 2009, the average cost of living for the typical family on the Planet Econ increased by:
Change in the cost of living
= (New budget - Old budget) / Old budget Change in the cost of living
= ($480 - $440) / $440
Change in the cost of living
= 0.0909 or 9.09%.
Therefore, a typical family's cost of living increased by 9 percent between 2008 and 2009. Option D (increased by 9 percent) is correct. Inflation is a change in the average price level, whereas a change in a specific good's price in comparison to other goods and services is called a change in a relative price. So option A (a change in a relative price; inflation) is correct.
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