Source: Deft, R. L. (2018). The Leadership Experience (7th ed.). Boston, MA: Cengage. pp. 286-287)Christmas was fast approaching. Just a short while ago, Chuck Moore, national sales manager for Hunter-Worth, a New York–based multinational toy manufacturer, was confident the coming holiday was going to be one of the company’s best in years. At a recent toy expo, Hunter-Worth unveiled a new interactive plush toy that was cuddly, high-tech, and tied into a major holiday motion picture expected to be a smash hit. Chuck had thought the toy would do well, but frankly, the level of interest took him by surprise. The buyers at the toy fair raved, and the subsequent pre-order volume was extremely encouraging. It had all looked so promising, but now he couldn’t shake a sense of impending doom.The problem in a nutshell was that the Mexican subsidiary that manufactured the toy couldn’t seem to meet a deadline. Not only were all the shipments late so far, but they fell well short of the quantities ordered. Chuck decided to e-mail Vicente Ruiz, the plant manager, about the situation before he found himself in the middle of the Christmas season with parents clamoring for a toy he couldn’t lay his hands on.In a thoroughly professional e-mail that started with a friendly "Dear Vicente," Chuck inquired about the status of the latest order, asked for a production schedule for pending orders, and requested a specific explanation as to why the Mexican plant seemed to be having such difficulty shipping orders out on time. The reply appeared within the hour, but to his utter astonishment, it was a short message from Vicente’s secretary. She acknowledged the receipt of his e-mail and assured him the Mexican plant would be shipping the order, already a week late, in the next 10 days."That’s it," Chuck fumed. "Time to take this to Sato." In the message to his boss, he prefaced his original e-mail and the secretary’s reply with a terse note expressing his growing concern over the availability of what could well be this season’s must-have toy. "Just what do I have to do to light a fire under Vicente?" he wrote. He then forwarded it all to his supervisor and friend, Michael Sato, the executive vice president for sales and marketing.Next thing he knew, he was on the phone with Vicente—and the plant manager was furious. "Señor Moore, how dare you go over my head and say such things about me to my boss?" he sputtered, sounding both angry and slightly panicked. It seemed that Michael had forwarded Chuck’s e-mail to Hunter-Worth’s vice president of operations, who had sent it on to the Mexican subsidiary’s president.That turn of events was unfortunate, but Chuck wasn’t feeling all that apologetic. "You could have prevented all this if you’d just answered the questions I e-mailed you last week," he pointed out. "I deserved more than a form letter—and from your secretary, no less.""My secretary always answers my e-mails," replied Vicente. "She figures that if the problem is really urgent, you would pick up the phone and talk to me directly. Contrary to what you guys north of the border might think we do take deadlines seriously here. There’s only so much we can do with the supply problems we’re having, but I doubt you’re interested in hearing about those." And Vicente hung up the phone without waiting for a response.Chuck was confused and disheartened. Things were only getting worse. How could he turn the situation around?QUESTIONSBased on Vicente Ruiz’s actions and his conversation with Chuck Moore, what differences do you detect in cultural attitudes toward communications in Mexico as compared with the United States? Is understanding these differences important? Explain.What was the main purpose of Chuck’s communication to Vicente? To Michael Sato? What factors should he have considered when choosing a channel for his communication to Vicente? Are they the same factors he should have considered when communicating with Michael Sato?If you were Chuck, what would you have done differently? What steps would you take at this point to make sure the supply of the popular new toy is sufficient to meet the anticipated demand?

Answers

Answer 1

1. Based on Vicente Ruiz's actions and his conversation with Chuck Moore, there are cultural differences in attitudes toward communications in Mexico compared to the United States. In Mexico, there seems to be a preference for more direct and personal communication, such as picking up the phone and talking directly to someone, rather than relying solely on written communication like emails. Vicente's secretary's response reflects this cultural norm. In contrast, in the United States, written communication like emails is often considered the primary mode of business communication. Understanding these cultural differences is important because it can help individuals navigate and adapt their communication styles when interacting with people from different cultural backgrounds.

2. The main purpose of Chuck's communication to Vicente was to inquire about the status of the latest order, request a production schedule for pending orders, and seek a specific explanation for the delays and quantity shortages. The communication to Michael Sato served the purpose of escalating the issue and expressing Chuck's growing concern over the availability of the toy. When choosing a channel for communication with Vicente, Chuck should have considered the urgency and importance of the matter, as well as the preferred communication style in Mexico, which emphasizes direct and personal contact. On the other hand, when communicating with Michael Sato, factors such as the need for documentation and the hierarchical structure of the organization might influence the choice of channel, such as using email to provide a formal record of the situation.

3. If I were Chuck, I would have approached the situation differently. Instead of immediately escalating the issue to Michael Sato, I would have attempted to have a direct conversation with Vicente, either through a phone call or an in-person meeting, to address the concerns and seek a resolution collaboratively. It is essential to establish open lines of communication and build rapport with Vicente to foster a better understanding of the challenges faced by the Mexican subsidiary. To ensure a sufficient supply of the popular new toy, I would work closely with Vicente and the operations team to identify and address the supply problems, explore alternative solutions, and potentially involve other departments or external partners to overcome the obstacles. Effective communication, collaboration, and problem-solving would be key in this situation.

Note: The response is based on the information provided in the given source and does not reflect real-world experiences or current practices.

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Related Questions

Suppose a five-year, $1,000 bond with annual coupons has a price of $903.66 and a yield to maturity of 6.4%. What is the bond's coupon rate?
The bond's coupon rate is ___%. (Round to three decimal places.)

Answers

The bond's coupon rate is approximately -1.956%.

To find the bond's coupon rate, we can use the formula for the present value of a bond. The formula is:

Bond Price = (Coupon Payment / (1 + Yield)^1) + (Coupon Payment / (1 + Yield)^2) + ... + (Coupon Payment + Face Value) / (1 + Yield)^n

In this case, the bond price is $903.66, the face value is $1,000, the yield to maturity is 6.4%, and the bond has a five-year maturity.

To find the coupon rate, we need to solve for the coupon payment.

Step 1: Calculate the annual coupon payment.
We can rearrange the formula to solve for the coupon payment:

Coupon Payment = (Bond Price - Face Value) / [(1 + Yield)^1 + (1 + Yield)^2 + ... + (1 + Yield)^n]

Coupon Payment = ($903.66 - $1,000) / [(1 + 0.064)^1 + (1 + 0.064)^2 + (1 + 0.064)^3 + (1 + 0.064)^4 + (1 + 0.064)^5]

Coupon Payment = -$96.34 / [1.064^1 + 1.064^2 + 1.064^3 + 1.064^4 + 1.064^5]

Coupon Payment
≈ -$96.34 / 4.925

Coupon Payment ≈ -$19.56

The negative sign indicates that the bond is priced at a discount.

Step 2: Calculate the coupon rate.
The coupon rate is the annual coupon payment divided by the face value of the bond, expressed as a percentage.

Coupon Rate = (Coupon Payment / Face Value) * 100%

Coupon Rate = (-$19.56 / $1,000) * 100%

Coupon Rate ≈ -1.956%

Therefore, the bond's coupon rate is approximately -1.956%.

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The bond's coupon rate is 5.789%.

To find the bond's coupon rate, we can use the formula:

Coupon Rate = Annual Coupon Payment / Bond Price

In this case, the bond has a face value of $1,000 and a yield to maturity of 6.4%.

We are given the bond price as $903.66.

First, we need to calculate the annual coupon payment. The yield to maturity represents the annual return on the bond, so we can find the coupon payment by multiplying the yield to maturity by the bond price:

Annual Coupon Payment = Yield to Maturity × Bond Price

Annual Coupon Payment = 6.4% × $903.66

Next, we substitute the annual coupon payment and bond price into the formula to find the coupon rate:

Coupon Rate = Annual Coupon Payment / Bond Price

Coupon Rate = (6.4% × $903.66) / $1,000

Coupon Rate = $57.89 / $1,000

Coupon Rate = 0.05789

To express the coupon rate as a percentage, we multiply it by 100:

Coupon Rate = 0.05789 × 100

Coupon Rate = 5.789%

Therefore, the bond's coupon rate is 5.789%.

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An Individual Retirement Account (IRA) has $20,000 in it, and the owner decides not to add any more money to the account other than interest earned at 8% compounded daily. How much will be in the account 30 years from now when the owner reaches retirement age? There will be $ in the account. (Round to the nearest cent. Use a 365-day year.)

Answers

The account will have approximately $174,494.06 in it when the owner reaches retirement age.

To calculate the future value of the IRA, we can use the compound interest formula:

FV = P * [tex](1 + r/n)^(^n^*^t^)[/tex]

Where FV represents the future value, P is the initial principal amount ($20,000), r is the annual interest rate (8%), n is the number of compounding periods per year (365 for daily compounding), and t is the number of years (30).

Substituting the values into the formula, we get:

FV = $20,000 * [tex](1 + 0.08/365)^(^3^6^5^*^3^0^)[/tex]

Calculating the expression, we find:

FV ≈ $174,494.06

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Which of the following is FALSE regarding dividend decislon? Corporations distribute cash back to their owners in the form of cash dividends or by repurchasing shares. The higher the number of positive NPV investment opportunities for a firm, the higher the dividend pay-out ratic The decision depends on whether the shareholders prefer cash dividend or buyback share. Cash must be returned to the owners if firm cannot find investments that meet minimum acceptable rate.

Answers

The FALSE statement regarding dividend decision is: "The higher the number of positive NPV investment opportunities for a firm, the higher the dividend pay-out ratio."

The percentage of the profit given to the shareholders is known as the dividend. The choice at hand is how much of the company's earnings should be divided to the shareholders after taxes have been paid. It also contains the portion of the earnings that has to be invested back into the company. The retained earnings boost the company's potential for future earnings when the present income is reinvested. The amount of retained earnings has an impact on the company's choice of financing as well. The decision to declare a dividend should be made with the goal of maximising shareholder value in mind.

The choice to pay out dividends is influenced by several different things. These are listed below:

1. Earnings: Both the current and prior year's earnings are used to pay dividends.

2. Earnings consistency: A firm that is steady and has consistent earnings may afford to pay a bigger dividend than a company that does not have such earnings consistency.

3. Dividend Stability: Some businesses adhere to the principle of paying a steady dividend since it appeases shareholders and enhances their image.

4. Growth Prospects: Businesses with growth prospects desire to keep more of their revenues in order to fund new projects.

5. Paying dividends is connected to the outflow of funds in the cash flow position. Despite being successful, a corporation could experience a shortage.

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Macrohard plans to issue 25-year bonds. The bonds will make semiannual coupon payments at an annual rate of 5.5%. The par value of the bonds will be $1000. If the investors require a return of 7.9% on similar bonds,
Is the bond trading at discount, premium, or par? Explain.
What will they be willing to pay for Macrohard’s bonds?

Answers

Investors would be willing to pay approximately $954.85 for Macrohard's bonds and the bond is trading at discount.

When the required return on similar bonds is higher than the coupon rate, the bond is priced below its par value, indicating a discount.

To determine the price investors are willing to pay for Macrohard's bonds, we can use the present value formula for bond valuation. The formula is:

Bond Price = ∑(Coupon Payment / (1 + Required Return / Number of Coupon Payments per Year)^t) + (Par Value / (1 + Required Return / Number of Coupon Payments per Year)^n)

In this case, the annual coupon rate is 5.5%, the par value is $1000, and the required return is 7.9%. The bond makes semiannual coupon payments, so there are 2 coupon payments per year. The bond has a maturity of 25 years, which is equivalent to 50 coupon payments.

Bond Price = (∑[tex](0.055 * $1000 / (1 + 0.079 / 2)^t) + ($1000 / (1 + 0.079 / 2)^50)[/tex]

Using the formula to calculate the present value of each coupon payment and the par value, we can sum them up to find the bond price.

Bond Price ≈ $954.85

Therefore, investors would be willing to pay approximately $954.85 for Macrohard's bonds.

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Hi please help me with a homework question.
Suppose you buy a 10 year 9% bond that has a YTM of 11%. What is
the price of the bond? Show work to receive full credit.

Answers

The price of the 10-year, 9% bond with a yield to maturity (YTM) of 11% is $886.86.To calculate the price of the bond, we need to discount the future cash flows (coupon payments and the face value) at the YTM.

The formula for the price of a bond is:

Price = (C / (1 + r)^1) + (C / (1 + r)^2) + ... + (C / (1 + r)^n) + (F / (1 + r)^n)

Where:  C = Coupon payment per period

r = Yield to maturity (YTM)

n = Number of periods

F = Face value

In this case, the bond has a 10-year maturity, a 9% coupon rate, and a YTM of 11%. Plugging in the values, we get:

Price = (90 / (1 + 0.11)^1) + (90 / (1 + 0.11)^2) + ... + (90 / (1 + 0.11)^10) + (1000 / (1 + 0.11)^10)

Solving this equation, we find that the price of the bond is approximately $886.86.

The price of the 10-year, 9% bond with a YTM of 11% is $886.86. This price represents the present value of the bond's future cash flows discounted at the YTM.

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semi-annual compounding? A. Sufficient information not provided. B. $1000 C. $990 D. $1085

Answers

In semi-annual compounding, the correct option is A. Sufficient information not provided.

 

In semi-annual compounding interest is compounded twice a year. To calculate the future value, we can use the formula:

Future Value = Principal * (1 + (Interest Rate / Number of Compounding Periods))^(Number of Compounding Periods * Number of Years)

In this case, the principal (initial investment) is not provided, so we cannot calculate the exact future value. However, we can explain the steps to calculate it.

Let's assume the principal is $1000 and the interest rate is not given. Using the formula, the future value after one year would be:

Future Value = $1000 * (1 + (Interest Rate / 2))^2

To find the interest rate, we would need additional information. Since the interest rate is not provided, we cannot calculate the future value accurately.

Therefore, the correct answer would be A. Sufficient information not provided.

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Can you remind me of what the sherman act prohibits?
Select all that apply, then click Submit below:
a. Unreasonable agreements in restraint of trade b. Contracts restraining foreign commerce c. Contracts restraining purely intrastate commerce d. Contracts restraining intrastate commerce e. Reasonable agreements in restraint of trade

Answers

The Sherman Act prohibits the following:

a. Unreasonable agreements in restraint of trade.

b. Contracts restraining foreign commerce.

c. Contracts restraining purely intrastate commerce.

d. Contracts restraining intrastate commerce.

e. Reasonable agreements in restraint of trade.

The Sherman Act, enacted in 1890, is a landmark U.S. antitrust law that aims to promote fair competition and prevent monopolistic practices. It specifically targets agreements and contracts that unreasonably restrain trade, regardless of whether they involve interstate or intrastate commerce. This means that both domestic and international trade can be subject to scrutiny under the act. The law seeks to protect the free market by prohibiting anti-competitive behaviors such as price-fixing, bid-rigging, and market allocation agreements. While the act primarily focuses on prohibiting unreasonable restraints of trade, it does not prohibit all agreements, as reasonable agreements that do not harm competition are allowed.

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Sam is currently 30 years old. He works for TFH Inc., and earns $40,000 a year. He anticipates that the salary will grow at 3% per year. He has recently received a $100,000 inheritance. He is evaluating two different options in terms of how to best utilize the inheritance and savings from his salary. The goal is to have a handsome amount of savings when he retires. He anticipates to retire at age 65.
Option 1: He will invest the $100,000 (inheritance) in a risk-free fund (today). The yearly interest rate that he will receive is 4% (compounded on a yearly basis). In addition, he plans to save 5% of his salary every year, and deposit it on a mutual fund every year. He is paid on a bi-weekly basis, but he will deposit his savings on the mutual fund at the end of the year. He expects to earn a return of 6% per year on this investment (compounded on a yearly basis). He will make the first deposit a year from today. His salary this year will be 3% more than $40,000 as the most recent yearly salary he has received is $40,000 per year. He will make his last deposit when he is 65 years old.

Answers

Sam, a 30-year-old employee, plans to utilize his $100,000 inheritance and savings from a $40,000 annual salary (expected to grow at 3% per year) for retirement by investing in a risk-free fund and a mutual fund.

Sam, a 30-year-old employee at TFH Inc., is considering how to best utilize his recent $100,000 inheritance and his annual salary of $40,000, which is expected to grow by 3% annually. For his retirement savings, he evaluates Option 1, which involves investing the $100,000 in a risk-free fund with a 4% annual interest rate.

Additionally, he plans to save 5% of his salary each year and deposit it into a mutual fund with a 6% annual return. These deposits will be made yearly, starting one year from now, and the last deposit will occur when he turns 65. By following this strategy, Sam aims to accumulate a substantial retirement fund.

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1. Locate an advertisement that uses a theme of conformity. This can be to either get a customer to conform to trends, or to avoid following a crowd and instead acting individually. Describe the ad. Do you think the ad is effective? Why or why not?
2. Make a list of at least 5 formal and informal groups that you belong to (5 total and be sure to identify if they are formal or informal). Which ones are most important to you? Why? How long have you belonged to these groups? If they are formal groups, what was the process of joining?
3. What are the various power bases of reference groups? Give examples of how these power bases have influenced you in your personal life.
4. Define atmosphere. List local dining establishments with unique atmospheres. What qualities make them unique? Are the restaurants distinguished more by functional or affective qualities?

Answers

These restaurants are distinguished more by affective qualities as they aim to create specific moods and emotions through their ambiance. The functional qualities, such as the quality of food and service, may also play a role but are often complemented by the distinctive atmosphere that sets them apart.

1. One example of an advertisement that uses a theme of conformity is an ad for a popular clothing brand. The ad depicts a group of stylish and trendy individuals wearing the brand's clothing, all posing in a similar manner and showcasing the latest fashion trends. The message conveyed is that by wearing these clothes, the customer can fit in and be part of the fashionable crowd. Whether the ad is effective or not depends on the target audience. For those who value conformity and fitting in, it may be effective in persuading them to purchase the brand's products. However, for individuals who value individuality and uniqueness, the ad may not resonate as much.

2. Formal groups:

- Work team: This is a formal group where I belong to in my workplace. I've been a part of this group for three years. The process of joining involved being hired by the organization and being assigned to the team.

- Sports club: I am a member of a formal sports club in my community. I joined the club by submitting an application and paying a membership fee. I've been a member for two years.

Informal groups:

- Book club: This is an informal group of friends who gather monthly to discuss books. There is no formal joining process, and I've been a part of this group for five years.

- Gaming group: I belong to an informal gaming group where friends come together to play video games. This group formed naturally based on shared interests and has been ongoing for six years.

- Social media community: I am part of an informal online community centered around a shared hobby. There was no formal joining process, and I've been a member for three years.

Among these groups, the most important to me are the book club and the work team. The book club provides intellectual stimulation and a sense of belonging, while the work team is crucial for collaboration and achieving professional goals.

3. The power bases of reference groups include informational power, normative power, and coercive power.

- Informational power: This refers to the influence a group has by providing valuable information and knowledge. For example, a reference group of fitness enthusiasts can influence an individual's exercise routine by sharing information about effective workouts and nutrition.

- Normative power: This power base stems from a group's ability to establish and enforce social norms. An example is a reference group of friends who influence an individual's fashion choices to conform to current trends and styles.

- Coercive power: This power base relies on the group's ability to impose punishments or sanctions for non-compliance. For instance, a religious reference group may influence an individual's behavior through the fear of social exclusion or divine punishment.

In my personal life, reference groups have influenced me through informational power by providing guidance and knowledge in areas such as career development and personal interests. Normative power has also influenced my choices in fashion, lifestyle, and social activities, as I often seek validation and acceptance from my reference groups.

4. Atmosphere refers to the overall ambiance and mood of a place or environment. It encompasses the physical, social, and emotional aspects that shape the experience of being in a particular space. Local dining establishments with unique atmospheres include:

- The Rustic Cafe: This restaurant has a rustic and cozy atmosphere with wooden furniture, warm lighting, and a fireplace. The unique quality lies in its homely and comfortable environment.

- The Artisan Bistro: This bistro features contemporary artwork on the walls, modern furniture, and a vibrant color scheme. The atmosphere is trendy and artsy, making it stand out.

- The Seafood Shack: Located by the beach, this restaurant has a nautical theme with maritime decor, seashells, and ocean views. Its unique atmosphere captures the essence of coastal dining.

- The Secret Garden: This restaurant has a lush

green garden setting with outdoor seating and a serene ambiance. It stands out for its tranquil and natural atmosphere.

- The Jazz Lounge: This establishment has a dimly lit interior, with live jazz music and a classy vintage decor. Its unique atmosphere offers a sophisticated and elegant experience.

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Development costs of a new product are estimated to be $100,000 per year for five years. Annual profits from the sale of the product, estimated to be $75,000, will begin in the fourth year and each year they will increase by $20,000 through year 15. Compute the present value using an interest rate of 10%. Draw a cashflow diagram.

Answers

The present value of the Development costs of a new product is $416,990.0 and the present value of the profits from the sale of the product is $1,413,293.11.

Compute the present value of the Development costs of a new product, using an interest rate of 10%.

Given that:

Development costs of a new product are estimated to be $100,000 per year for five years.

Annual profits from the sale of the product, estimated to be $75,000, will begin in the fourth year and each year they will increase by $20,000 through year 15.

Interest rate of 10%.

We have to draw a cashflow diagram.

The cashflow diagram is as follows:

Cash flow diagram

Calculation of Present value:

Calculation of present value is to be done for 15 years.

Present value of the Development costs of a new product is given by the equation,  PV = FV/ (1 + i) n

PV (Development costs) = $100,000 x 4.1699

PV (Development costs) = $416,990.0

Calculation of Present value of profits from the sale of the product:

Present value of the profits from the sale of the product is given by the equation,  PV = FV/ (1 + i) n

PV (Profits from sale of the product) = $1,047,628.11 + $225,000.0 + $84,684.0 + $55,981.0

PV (Profits from sale of the product) = $1,413,293.11

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Suppose a five-year, $1,000 bond with annual coupons has a price of $904.19 and a yield to maturity of 5.6%. What is the bond's coupon rate? The bond's coupon rate is ....%. (Round to three decimal places.)

Answers

A bond's coupon rate refers to the fixed interest rate that the bond issuer agrees to pay to bondholders annually or semi-annually. It is expressed as a percentage of the bond's face value or par value.

Given, the Face value of the bond = $1000

Price of the bond = $904.19

Yield to maturity = 5.6%

Number of years = 5

Using the formula for present value of a bond

,PV = C(1 - 1 / (1 + r)^n) / r + F / (1 + r)^n

where, PV = price of the bond

C = coupon payment

r = yield to maturity

n = number of years

F = face value

Substituting the given values

904.19 = C(1 - 1 / (1 + 0.056)^5) / 0.056 + 1000 / (1 + 0.056)^5

Simplifying this equation, we get

C = $80. Therefore, the bond's coupon rate is 8% (to three decimal places).

Hence, the required bond coupon rate is 8%.

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ASD Corp. will pay a dividend of $2.99 on each of its common shares next year. The company has stated that it will maintain a constant growth rate of 4.6% per year forever. If you require 8.3% return to invest in ASD stock (and assuming you agree with ASD's growth projections), how much will you pay per share? (Do not include the dollar sign ($). Round your answer to 2 decimal places (e.g., 32.16).)

Answers

To calculate the value you would pay per share, you can use the dividend discount model (DDM) formula. The DDM formula is:

Value per share = Dividend per share / (Required return - Growth rate)

In this case, the dividend per share is given as $2.99, the required return is 8.3%, and the growth rate is 4.6%.

Plugging
in the values into the formula, we get:

Value per share = 2.99 / (0.083 - 0.046)

Now, let's calculate the value per share:

Value per share = 2.99 / 0.037

Value per share ≈ 80.81

Therefore, you would pay approximately $80.81 per share.

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If you require an 8.3% return to invest in ASD stock and agree with their growth projections, you would pay approximately $91.81 per share.

To calculate the price per share, we can use the dividend discount model (DDM). The DDM values a stock based on the present value of its expected future dividends.

Step 1: Calculate the dividend for the next year.
ASD Corp. will pay a dividend of $2.99 on each common share next year.

Step 2: Determine the required return.
The required return is given as 8.3%.

Step 3: Calculate the expected dividend growth rate.
ASD Corp. has stated a constant growth rate of 4.6% per year forever.

Step 4: Apply the dividend discount model (DDM).
The DDM formula is:
Price per share = Dividend / (Required Return - Growth Rate)

Price per share = $2.99 / (0.083 - 0.046)

Step 5: Calculate the result.
Using a calculator, the price per share is approximately $91.81 (rounded to 2 decimal places).

Therefore, if you require an 8.3% return to invest in ASD stock and agree with their growth projections, you would pay approximately $91.81 per share.

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Industrial Light and Magic, Inc., is a young start-up company. dividends will be paid on the stock over the next 6 years because the firm needs to plow back its earnings to fuel growth. The company will pay a $3 per share dividend in 7 years and will increase the dividend by 3.25 percent per year thereafter. ⟩ If the required return on this stock is 11.85 percent, what is the current share price? (Do not round your intermediate calculations.) $19.24 $18.71 $17.82 $18.35 $15.93

Answers

The formula of the present value of growing perpetuity needs to be applied. The formula for the present value of growing perpetuity is shown below:

PVG = [ D(1 + g) / (r - g) ]

Where,

PVG = Present Value of Growing Perpetuity

D = Dividend

g = Growth Rate (in decimal form)

r = Required Rate of Return (in decimal form)

Substitute the given values in the above formula to find the current share price of the stock:

PVG = [ $3(1 + 0.0325) / (0.1185 - 0.0325) ]

PVG = [ $3.10 / 0.086 ]

PVG = $36.05

Thus, the current share price of the stock is $36.05.

Therefore, the correct answer is: $36.05

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A stock has had returns of 5 percent, 14 percent, −3 percent, and 4 percent over the last four years. What is the geometric average return over this period? 5.33\% 4.83% 7.67% 5.00% 5.00%

Answers

The geometric average return over the period is 4.83%.

The geometric average return is also referred to as the geometric mean. It is a statistical metric that calculates the average rate of return, which reduces the investment's variability over the entire period. When the period has just a few data points, the geometric mean is the most precise method of calculating the average return on an investment. The geometric mean is often used in finance because it produces a more comprehensive average return over time when compared to the arithmetic mean.

To calculate the geometric average return, use the following formula: ((1 + return1) x (1 + return2) x (1 + return3)…)^(1/n) – 1. Where “n” is the number of years (or periods) in the data set.The formula to calculate the geometric mean of the returns of a stock over a certain period is as follows:((1 + r1) (1 + r2) (1 + r3)…(1 + rn))1/n - 1, where n is the number of years.The geometric average return for the stock over the last four years can be calculated as follows:First, calculate the total return:5% + 14% - 3% + 4% = 20%

Then, find the geometric average:((1 + 0.05) × (1 + 0.14) × (1 − 0.03) × (1 + 0.04))^0.25 − 1=1.0483 - 1= 0.0483 = 4.83%

Therefore, the geometric average return over this period is 4.83%.

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Graham Enterprises anticipates that its dividend at the end of the year will be $2.00 a share (i.e., D1 = $2.00). The dividend is expected to grow at a constant rate of 7 percent a year. The risk-free rate is 6 percent, the market risk premium is 5 percent, and the company's beta equals 1.2. What is the expected price of the stock three years from now?
Group of answer choices
56.1
52.8
49.0
46.5

Answers

The expected price of the stock three years from now is option A) $56.1.

The present value of a stock that is expected to pay a constant dividend indefinitely can be calculated using the Gordon growth model.

P = (D1 / (r - g))

Where,

P = price of the stock

D1 = expected dividend per share at the end of the year 1

r = the required rate of return on the stock

G = the expected growth rate of dividends

The expected growth rate of dividends, g, is calculated by multiplying the constant growth rate of dividends, g, by the current dividend.

D1 = $2.00g

= 7%

= 0.07r = rf + β (rm - rf)

= 6% + 1.2(5%)

= 12%

Using the Gordon growth model:

P = (D1 / (r - g))

P = ($2.00 / (0.12 - 0.07))

P = $40.00

Now, we need to find the expected price of the stock three years from now. We can find it by using the formula for the future value of a single sum.

FVn = PV(1 + r)n

FV3 = $40.00(1 + 0.12)3

FV3 = $56.10

Thus, the expected price of the stock three years from now is $56.1 (rounded to the nearest tenth). Therefore, the correct option is 56.1.

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are these statements true or false? give reason for your answer.
18. Monopolists over-converse resources from a dynamic efficiency perspective.
19. When the growth rate in demand exceeds the discount rate, the efficient outcome in a competitive industry will result in a larger amount of oil available for the future period than the current period.
20. Biofuels is a back-stop technology for oil and would cause more present production of oil.
8. Static efficiency is the appropriate measure of efficiency when time considerations do not play a significant role.
6. Market failure always justifies the involvement of the government.

Answers

18. False. Monopolists may not necessarily over-conserve resources from a dynamic efficiency perspective.

19. False. When the growth rate in demand exceeds the discount rate, it implies a higher value is placed on current consumption.

20. False. Biofuels are considered an alternative to oil and can reduce the dependence on fossil fuels.

8. True. Static efficiency measures efficiency based on a specific point in time, considering the allocation of resources at that moment.

6. False. Government intervention should be carefully considered, taking into account the costs and benefits, potential unintended consequences, and the feasibility of alternative solutions.

18. Monopolists have the incentive to maximize their profits, which may involve inefficient resource allocation, but it does not necessarily mean over-conversion of resources.

19.  In a competitive industry, the efficient outcome would allocate resources to meet the current demand, resulting in a larger amount of oil available for the current period rather than the future period.

20. Biofuels are considered an alternative to oil and can reduce the dependence on fossil fuels. It does not necessarily cause more present production of oil but rather aims to replace or supplement it with renewable energy sources.

8. Time considerations, such as changes over time or dynamic effects, are not taken into account in static efficiency analysis.

6. Government intervention should be carefully considered, taking into account the costs and benefits, potential unintended consequences, and the feasibility of alternative solutions.

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A loan of IDR 500,000,000 will be due in 4 years and
must be repaid with repayment funds. If the loan bears interest the
simple method is 10% p.a. is paid out every year and the payment of
settlement

Answers

a. Annual payment amount = IDR 550,000,000 b. Repayment amount after 3 years = IDR 1,650,000,000. c. Book value of the loan after 3 years = IDR -1,150,000,000

a. Annual payment amount:

To calculate the annual payment amount, we use the simple interest method. The loan amount is IDR 500,000,000, and the interest rate is 10% per year. Therefore, the annual payment amount would be:

Annual payment amount = Loan amount + (Loan amount * Interest rate)

Annual payment amount = IDR 500,000,000 + (IDR 500,000,000 * 0.10)

Annual payment amount = IDR 500,000,000 + IDR 50,000,000

Annual payment amount = IDR 550,000,000

b. Repayment amount after 3 years:

After 3 years, a total of 3 annual payments would have been made. Since each annual payment is IDR 550,000,000, the repayment amount after 3 years would be:

Repayment amount after 3 years = Annual payment amount * Number of years

Repayment amount after 3 years = IDR 550,000,000 * 3

Repayment amount after 3 years = IDR 1,650,000,000

c. Book value of the loan after 3 years:

The book value of the loan after 3 years can be calculated by subtracting the repayment amount after 3 years from the initial loan amount:

Book value of the loan after 3 years = Loan amount - Repayment amount after 3 years

Book value of the loan after 3 years = IDR 500,000,000 - IDR 1,650,000,000

Book value of the loan after 3 years = IDR -1,150,000,000

Please note that the book value of the loan after 3 years is negative, indicating that the loan has been fully repaid, and there is no outstanding balance remaining.

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Complete Question :

A loan of IDR 500,000,000 will be due in 4 years and must be repaid with repayment funds. If the loan bears interest the simple method is 10% p.a. is paid out every year and the payment of settlement funds can earn 9% p.a. calculated quarterly, count: a. Annual payment amount b. Repayment amount after 3 years c. Book value of loan after 3 years

Question 2 (35 marks) Part A (17 marks) ACY Limited ("ACY") started its operation in January 2020. ACY reported a pretax financial income of $500,000 and $600,000 in 2020 and in 2021, respectively. In 2020, ACY incurred a penalty expense of $10,000 (2021: $Nil). Penalty is not deductible for tax purpose. On 1 January 2021, ACY purchased a piece of special equipment for operation use. The equipment has a cost of $30,000, a useful life of 5 years, and no residual value. For financial reporting purpose, ACY records an annual depreciation expense of $6,000 in each year from 2021 to 2025. For tax purpose, the applicable tax laws allow 100% tax deduction for the equipment’s cost in the year of purchase. Except for the penalty expense and the depreciation of the equipment, there is no other permanent nor temporary difference in both 2020 and 2021. The enacted tax rate is 20%. Each financial year ends on 31 December.

Requirement:

A. 1 Calculate the taxable income in 2020 and in 2021, respectively. (6 marks)

A. 2 Discuss whether the difference in the depreciation expense for financial reporting and for tax purposes will create a deferred tax asset, a deferred tax liability, or neither in 2021? Support your argument with calculations. (6 marks)

A. 3 Prepare the journal entries to record income taxes for 2020 and 2021, respectively. (5 marks)

Answers

A.1 The taxable income in 2020 would be $490,000 ($500,000 pretax financial income minus $10,000 penalty expense). In 2021, the taxable income would be $600,000 since there were no penalty expenses incurred in that year.

A.2 The difference in the depreciation expense for financial reporting and for tax purposes will create a deferred tax liability in 2021. The depreciation expense for financial reporting is $6,000 per year from 2021 to 2025, resulting in a cumulative depreciation of $30,000 over the useful life of the equipment. However, for tax purposes, the equipment's cost of $30,000 is fully deductible in the year of purchase. This creates a temporary difference between the financial reporting and tax basis of the equipment. Since the tax deduction is higher in the early years (2021) compared to the depreciation expense recognized for financial reporting, taxable income will be lower in 2021. As a result, taxes payable will be lower than the taxes recognized for financial reporting, leading to a deferred tax liability. The deferred tax liability represents the future tax obligation that will arise when the temporary difference reverses in subsequent years.

A.3 The journal entries to record income taxes for 2020 and 2021 would be as follows:

2020:

Income Tax Expense               $98,000

  Deferred Tax Liability             $98,000

2021:

Income Tax Expense               $120,000

  Deferred Tax Liability             $120,000

In 2020, the income tax expense is calculated based on the taxable income of $490,000 and the enacted tax rate of 20%. Since there are no temporary differences other than the penalty expense, there is no deferred tax asset or liability recorded for 2020.

In 2021, the income tax expense is calculated based on the taxable income of $600,000 and the enacted tax rate of 20%. Additionally, a deferred tax liability of $120,000 is recognized to account for the temporary difference arising from the difference in depreciation expense between financial reporting and tax purposes. This deferred tax liability represents the future tax obligation that will be incurred when the temporary difference reverses in subsequent years.

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MK metrics.
Kyra's Café is putting a new entrée on its dinner menu. The office intern says, "But I've done the analysis, and with the cannibalization that we expect, the weighted contribution margin on this new entrée is negative. Our profits shrink with every unit sold!" But management insists on going ahead with the introduction. Why might they do that? Please explain two or three reasons why this café might introduce a new dish even knowing that total profits get smaller with every unit sold?
need help please need 250 words explanation.

Answers

Kyra's Café might introduce a new dish despite the negative impact on profits because it can enhance their brand image and differentiate them in the market, leading to long-term growth and customer loyalty.

There are several reasons why Kyra's Café might introduce a new dish despite the expected negative impact on total profits. Here are two or three possible explanations:

1. Strategic Positioning and Differentiation: Introducing a new entrée could be a strategic move to position the café as innovative and unique in the market. By offering a distinct dish that sets them apart from competitors, they can attract new customers and enhance their brand image. This differentiation can lead to increased customer loyalty and overall growth, which may outweigh the negative impact on profits in the short term. Management may believe that the long-term benefits of establishing a competitive advantage outweigh the initial financial drawbacks.

2. Cross-Selling and Upselling Opportunities: The new entrée might serve as a complementary or upselling item to other high-margin dishes or beverages on the menu. While the individual contribution margin of the new dish may be negative, its introduction could encourage customers to order additional items or upgrade their orders, thus increasing the overall average transaction value. Management may see this as an opportunity to drive incremental revenue and offset the negative impact on profits through cross-selling and upselling strategies.

3. Customer Satisfaction and Retention: Introducing a new dish could be driven by a desire to cater to specific customer preferences and enhance the overall dining experience. While the new entrée may not generate significant profits on its own, it could contribute to customer satisfaction and loyalty. Satisfied customers are more likely to return to the café, potentially leading to repeat business and positive word-of-mouth recommendations. By prioritizing customer satisfaction and retention, management aims to build a loyal customer base that will generate sustainable profits in the long run.

It is important to note that these reasons are not mutually exclusive and can work in combination. Each decision to introduce a new dish should be carefully evaluated, considering the café's overall strategy, market dynamics, and customer preferences. Financial analysis alone may not capture the full picture, as strategic considerations and customer-centric approaches are crucial in the competitive restaurant industry.

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the better business council of a large city has concluded that students in the city's schools are not learning enought about economics

Answers

The Better Business Council of a large city has identified a concern that students in the city's schools are not acquiring sufficient knowledge about economics.

The Better Business Council's conclusion suggests that there is a perceived gap in the economics education of students within the city's schools. This observation could arise from various factors, such as inadequate curriculum coverage, limited resources, or teaching methods that may not effectively engage students in learning economics.

Economics education is crucial for preparing students to understand and navigate the complex economic systems they will encounter in their lives and careers. A lack of economics knowledge can have long-term implications for individuals and society, as it may hinder their ability to make informed financial decisions, participate in the economy, and contribute to economic growth.

To address this issue, the Better Business Council could advocate for improvements in economics curriculum, teacher training, and the allocation of resources to enhance the quality of economics education in schools. Collaboration between educators, policymakers, and business leaders may be necessary to develop effective strategies and initiatives that promote a better understanding of economics among students, empowering them with essential knowledge and skills for their future success.

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Carry out an assessment of Sainsbury's company using the SWOT analysis and based on the outcome, propose and justify two innovations that can be adopted to address an identified weakness and an identified threat faced by the organisation; i.e. one innovation should address a weakness and the other should address a threat.

Answers

Sainsbury's SWOT analysisSainsbury's is one of the largest supermarket chains in the UK. It offers a range of products including food, clothing, and home products. The following SWOT analysis provides an insight into the company's strengths, weaknesses, opportunities, and threats:Strengths:

Strong brand image, great variety of products, competitive pricing, excellent customer service, and large store networkWeaknesses: Lack of online presence in comparison to competitors, increased competition from discounters, and limited market outside the UKOpportunities: Increasing demand for online grocery shopping, expansion of products, and increasing focus on organic and healthy foodsThreats: Economic instability, increasing competition, and changing customer preferencesProposed InnovationsInnovation to address the identified weakness: Sainsbury's limited online presence is a major weakness.

To address this, Sainsbury's can invest in its e-commerce platform and develop a better online shopping experience for its customers. Sainsbury's should focus on developing mobile apps and integrating its e-commerce platform with social media sites. This will help Sainsbury's to reach a wider audience, improve its customer experience, and increase its revenue.Innovation to address the identified threat: Increased competition is a major threat to Sainsbury's. To address this, Sainsbury's can focus on product innovation and offer exclusive products to its customers.

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with e the nominal exchange rate,P the domestic price level and Pf the foreign price level, the expression for the real exchange rate is;
a) e
b) ePf/P
c) ePf
d) eP
e) eP/Pf

Answers

The expression for the real exchange rate is given as Option B. ePf/P.

The expression for the real exchange rate can be derived from the nominal exchange rate, domestic price level, and foreign price level. The real exchange rate is an important economic variable as it determines the relative prices of goods and services between two countries. It is the rate at which the goods and services of one country can be exchanged for those of another country. The expression for the real exchange rate is given as ePf/P. This ratio measures the relative price of domestic goods compared to foreign goods.

Nominal exchange rate, domestic price level, and foreign price level. The nominal exchange rate is the price at which one currency can be exchanged for another currency. The domestic price level is the average price of goods and services in a country, while the foreign price level is the average price of goods and services in a foreign country.

The real exchange rate reflects the purchasing power of one country’s currency relative to another. It tells us how much a unit of one country's currency can buy in terms of the other country's currency. For example, if the real exchange rate is high, then a unit of the domestic currency can buy more goods and services abroad than in the domestic country. If the real exchange rate is low, then a unit of the domestic currency can buy fewer goods and services abroad than in the domestic country.

The expression for the real exchange rate is given as ePf/P. The numerator ePf represents the nominal exchange rate multiplied by the foreign price level. The denominator P represents the domestic price level. The real exchange rate measures the relative prices of goods and services between two countries. If the real exchange rate is high, then domestic goods are relatively cheaper than foreign goods. If the real exchange rate is low, then domestic goods are relatively more expensive than foreign goods.

In conclusion, the expression for the real exchange rate is ePf/P. It measures the relative prices of goods and services between two countries. The real exchange rate is an important economic variable as it reflects the purchasing power of one country's currency relative to another. Therefore, the correct option is B.

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Industry Demand Is Given By The Inverse Demand Function Logp=100−2logq, And Monopoly Produces With Cost Function C(Q)=100+2Q. 1. What Is The Monopolist's Optimal P And Q ? 2. What If Fixed Costs Were Equal To 200 Instead Of 100 ?

Answers

1.  the monopolist's optimal quantity is Q = 1, and the optimal price is P = 10^100.

2. even with fixed costs equal to 200, the monopolist's optimal quantity remains Q = 1, and the optimal price is P = 10^100.

To find the monopolist's optimal price (P) and quantity (Q) in the given scenario, we need to solve two parts of the problem separately: the optimal quantity without considering fixed costs and the optimal quantity with fixed costs equal to 200.

1. Optimal P and Q without considering fixed costs:

The monopolist maximizes its profit by setting marginal revenue (MR) equal to marginal cost (MC). To find MR, we differentiate the inverse demand function with respect to Q and multiply it by -1:

MR = -d/dQ (log(P)) = -2/Q

Setting MR equal to MC, we have:

-2/Q = dC/dQ = 2

Solving for Q:

-2/Q = 2

-2 = 2Q

Q = -1 (ignoring the negative solution since quantity cannot be negative)

Substituting the value of Q into the inverse demand function to find P:

log(P) = 100 - 2log(Q)

log(P) = 100 - 2log(1)

log(P) = 100

Taking the antilogarithm of both sides:

P = 10^100 (an extremely large value)

Therefore, the monopolist's optimal quantity is Q = 1, and the optimal price is P = 10^100.

2. Optimal P and Q with fixed costs equal to 200:

To account for the fixed costs, we need to consider the total cost function (TC) instead of just the marginal cost (MC). The total cost function is given by:

TC(Q) = C(Q) + FC

Substituting the cost function and fixed cost value into the total cost function:

TC(Q) = 100 + 2Q + 200

TC(Q) = 2Q + 300

To find the optimal quantity, we set marginal revenue (MR) equal to marginal cost (MC) as before:

MR = -d/dQ (log(P)) = -2/Q

Setting MR equal to MC, we have:

-2/Q = dTC/dQ = 2

Solving for Q:

-2/Q = 2

-2 = 2Q

Q = -1 (ignoring the negative solution)

Substituting the value of Q into the inverse demand function to find P:

log(P) = 100 - 2log(Q)

log(P) = 100 - 2log(1)

log(P) = 100

Taking the antilogarithm of both sides:

P = 10^100 (an extremely large value)

Therefore, even with fixed costs equal to 200, the monopolist's optimal quantity remains Q = 1, and the optimal price is P = 10^100.

In summary, the monopolist's optimal price and quantity, regardless of the fixed costs, are P = 10^100 and Q = 1. The extremely high price indicates the monopolist's ability to set prices significantly above marginal cost, maximizing their profit.

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The aggregate demand-aggregate supply model examines the impact of discretionary fiscal policy and nondiscretionary fiscal policy by focusing on movements of

Answers

The aggregate demand-aggregate supply model examines the impact of discretionary fiscal policy and nondiscretionary fiscal policy by focusing on movements of aggregate demand and supply.


1. Discretionary fiscal policy refers to deliberate changes in government spending or taxation to influence the overall economy. This includes measures like changes in government spending on infrastructure projects or tax cuts. These policies aim to stimulate or stabilize the economy during periods of recession or inflation.

2. Nondiscretionary fiscal policy, on the other hand, refers to automatic stabilizers that adjust government spending and taxation based on economic conditions. Examples of nondiscretionary fiscal policy include unemployment benefits and progressive income taxes. These policies help stabilize the economy without requiring explicit government intervention.

In the AD-AS model, changes in discretionary fiscal policy, such as an increase in government spending, will shift the aggregate demand curve to the right. This can lead to higher output and price levels in the short run. Conversely, a decrease in government spending will shift the aggregate demand curve to the left, potentially leading to lower output and price levels.

Nondiscretionary fiscal policy, through automatic stabilizers, can also impact the AD-AS model. For example, during a recession, unemployment benefits automatically increase, providing additional income to individuals. This can boost aggregate demand and potentially help stabilize the economy.

Overall, the AD-AS model allows us to analyze the impact of both discretionary and nondiscretionary fiscal policy on aggregate demand and supply, helping us understand the effects on output, employment, and price levels.

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Complete question: The aggregate demand-aggregate supply model examines the impact of discretionary fiscal policy and nondiscretionary fiscal policy by focusing on movements of _______

Suppose You Have A Monthly Entertainment Budget That You Use To Rent Movies And Purchase CDs. You Currently Use Your Income To Rent 5 Movies Per Month At A Cost Of $5.00 Per Movie And To Purchase 5CDs Per Month At A Cost Of $10.00 Per CD. Your Marginal Utility From The Fitt Movie Is 10 And Your Marginal Utility From The Fifth CD Is 12 . Are You Maximizing

Answers

The marginal utility is the additional satisfaction or benefit gained from consuming one more unit of a good. Marginal Utility per Dollar is 1.2.

To determine if you are maximizing utility, we can compare the marginal utilities of the last units of movies and CDs with their respective prices.

The marginal utility is the additional satisfaction or benefit gained from consuming one more unit of a good. In this case, the marginal utility of the fifth movie is 10 and the marginal utility of the fifth CD is 12.

To determine if you are maximizing utility, we compare the marginal utilities with the prices. If the marginal utility divided by the price is higher for one of the goods, then you can increase your overall utility by reallocating your budget towards that good.

For movies:

Marginal Utility per Dollar = Marginal Utility of Movie / Price of Movie = 10 / $5 = 2

For CDs:

Marginal Utility per Dollar = Marginal Utility of CD / Price of CD = 12 / $10 = 1.2

Since the marginal utility per dollar is higher for movies (2) compared to CDs (1.2), you are not currently maximizing your utility. You can increase your overall utility by reallocating some of your budget from CDs to movies, as movies provide a higher marginal utility per dollar spent.

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3. Top Gear Inc. is an American firm located in Los Angeles. The firm's common stock is sold for USD 20.00 per share in the NASDAQ. The firm has a cumulative voting feature. Today is the Top Gear Inc. director's election, and there are currently 10,000 shares outstanding. Shareholders see that there are three directors positions are available for the twenty possible nominated directors. Cathy-san or Hiramatsu-san are also shareholders of Top Gear Inc. Suppose that either Cathy-san or Hiramatsu-san wants to ensure that s/he gets a seat on the board. Calculate the cost to realize their wants!

Answers

The cumulative voting feature allows each shareholder to cast votes equal to the number of shares he or she owns times the number of director positions to be filled.

The shareholder may cast all of his or her votes for one candidate or distribute them among several candidates as desired. In this scenario, either Cathy-san or Hiramatsu-san want to ensure that they get a seat on the board. The total cost incurred by either of them to secure a seat can be calculated using the formula given below:Cost to secure a seat = (# shares owned × # directors to be elected ÷ # candidates) + 1In this case, the number of shares outstanding is 10,000, and there are three directors' positions available for the 20 nominated directors. Therefore, the number of candidates for each seat would be 20 / 3 = 6.67, which we can round up to 7 for simplicity.Let's say Cathy-san owns 1,000 shares of the common stock of Top Gear Inc. Then, the cost incurred by her to secure a seat on the board would be as follows:Cost to secure a seat = (1,000 × 3 ÷ 7) + 1= 429 (rounded to the nearest whole number)Therefore, it would cost Cathy-san USD 429 to secure a seat on the board of Top Gear Inc.

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Stock A has a beta of 5 and investors expect it to return 5%. Stock B has a beta of 1.5 and investors expect it to return 13%. Use the CAPM to find the expected market risk premium and the expected rate of return on the market. (Round your answers to 2 decimal places.)

Answers

CAPM (Capital Asset Pricing Model) can be used to determine the expected return on investment for an asset, given the risk-free rate of return, the expected market return, and the asset's beta.

Investors anticipate a 5% return on Stock A, which has a beta of 5.Investors anticipate a 13% return on Stock B, which has a beta of 1.5.

ram = rf + βA(rm - rf)where :r A = expected rate of return on asset A. rf = risk-free rate of returnβA = beta of asset A.rm = expected market rate of return CAPM is used to determine the expected rate of return on the market and the expected market risk premium.

Expected market risk premium: The expected market risk premium is the difference between the expected rate of return on the market and the risk-free rate of return.

Here is the calculation: Expected Market Risk Premium = Expected Market Return – Risk-free rate of return Given that investors expect Stock A to return 5%, which means: r A=5%Given that Stock A has a beta of 5, which means:βA=5Given that investors expect Stock B to return 13%, which means: r B=13%Given that Stock B has a beta of 1.5, which means:βB=1.5Expected market risk premium is calculated as follows:

For Stock A: r A = rf + βA(rm - rf)5% = rf + 5(rm - rf)5% = rf + 5rm - 5rf5rf = rf + 5rmrf = 5rm/6Therefore, expected market risk premium for Stock A is: Expected market risk premium = Expected market return – Risk-free rate of return= rm - rf= rm - 5rm/6= rm/6For Stock B:  rB = rf + βB(rm - rf)13% = rf + 1.5(rm - rf)13% = rf + 1.5rm - 1.5rf1.5rf = rf + 1.5rmrf = 1.5rm/2.5

Therefore, expected market risk premium for Stock B is: Expected market risk premium = Expected market return – Risk-free rate of return= rm - rf= rm - 1.5rm/2.5= 0.6rmExpected rate of return on the market: The expected rate of return on the market is the sum of the risk-free rate of return and the expected market risk premium.

Expected rate of return on the market = Risk-free rate of return + Expected market risk premium Given that the risk-free rate of return is not given, we cannot calculate the expected rate of return on the market. However, we know that the expected market risk premium for Stock A is rm/6 and for Stock B is 0.6rm.

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Dow Jones Industrial Average (DJA) is a price-weighted index of 30 'blue-chip' stocks. What would happen to the divisor of the Dow Jones Industrial Average if FedEx, with a current price of around $150 per share, replaced Intel (with a current price of about $30 per share)? Assume that the current market capitalization of DJIA (the sum of the market cap. of 30 companies) is $12 trillion, and the divisor is 30 . Also, assume that the number of outstanding shares for the companies in the index is the same, with 12 billion shares for each company.

Answers

The new divisor would be approximately 372.41 (10.8 trillion / 29). This would be the adjusted divisor if FedEx replaced Intel in the DJIA.

If FedEx, with a current price of around $150 per share, replaced Intel (with a current price of about $30 per share) in the Dow Jones Industrial Average (DJA), the divisor of the index would be adjusted. The divisor is used to maintain the consistency of the index when changes occur in the stock prices of the companies included in the index.

To calculate the new divisor, we need to consider the impact of the change in price on the overall market capitalization of the index. The market capitalization of a company is calculated by multiplying its share price by the number of outstanding shares.

Currently, the sum of the market capitalization of the 30 companies in the DJIA is $12 trillion, with a divisor of 30. This means that the average market capitalization of each company in the index is $400 billion ($12 trillion / 30).

If FedEx, with a price of $150 per share, replaces Intel, the market capitalization of the index would be affected. Since both companies have the same number of outstanding shares (12 billion), the market capitalization of FedEx would be $1.8 trillion ($150 * 12 billion), while the market capitalization of Intel would be $360 billion ($30 * 12 billion).

To maintain the overall market capitalization of the index at $12 trillion, we would need to adjust the divisor accordingly. The new divisor can be calculated by dividing the current market capitalization of the index by the sum of the market capitalization of the remaining companies in the index.

The sum of the market capitalization of the remaining 29 companies would be $10.8 trillion ($12 trillion - $1.8 trillion). Dividing this by the new average market capitalization of each company ($10.8 trillion / 29) gives us the new divisor.

So, the new divisor would be approximately 372.41 ($10.8 trillion / 29). This would be the adjusted divisor if FedEx replaced Intel in the DJIA.

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If FedEx replaced Intel, the new divisor of the DJIA would be 33.6.

If FedEx were to replace Intel in the Dow Jones Industrial Average (DJA), the divisor of the index would be adjusted. The divisor is used to maintain consistency in the index value when changes are made. To calculate the new divisor, we need to consider the current market capitalization and the prices of the stocks being replaced and added.

First, let's calculate the market capitalization for FedEx and Intel. We can do this by multiplying the current price per share by the number of outstanding shares.

For FedEx: $150 x 12 billion shares = $1.8 trillion
For Intel: $30 x 12 billion shares = $360 billion

Next, we calculate the new total market capitalization of the index by subtracting Intel's market capitalization and adding FedEx's market capitalization to the current market capitalization of $12 trillion.

$12 trillion - $360 billion + $1.8 trillion = $13.44 trillion

Now, we can calculate the new divisor by dividing the new total market capitalization by the current market capitalization and the current divisor.

New Divisor = ($13.44 trillion / $12 trillion) x 30 = 33.6

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A person bought a car with a loan of $35,000 two years ago, with monthly payments for four years and an EAIR of 3.25%. Now the person is transferred from Brooklyn to Hawaii, effective within a month. She is interested in knowing the current market value of her car due to depreciation, and her loan's contractual and market value. Due to the general financial situation, the EAIR is now 4.725%. If she would like to ship the car to Hawaii, the cost will be $5,000. What is the financial situation that she is facing with her car and what is your suggestion to her?

Answers

These are just a few suggestions based on the limited information provided. It's crucial to have more specific details about the loan terms and personal financial circumstances to provide more tailored advice. I would recommend consulting a financial advisor or reaching out to the loan provider for further guidance.

The person is facing a financial situation involving their car loan, depreciation, and the cost of shipping the car to Hawaii.

To start, let's calculate the current market value of her car due to depreciation. Since the car was bought two years ago, we need to consider the depreciation over this period. Let's assume a yearly depreciation rate of 20%.

The original value of the car was $35,000. After two years, the car's value would have depreciated by 40% (20% depreciation per year for 2 years).

To calculate the current market value, we multiply the original value by (100% - 40%) or 0.60:
$35,000 * 0.60 = $21,000

So, the current market value of her car is $21,000.

Next, let's look at the loan's contractual and market value. The contractual value refers to the remaining amount she owes on the loan, while the market value represents the actual worth of the loan in the market.

Since she has been making monthly payments for four years, the remaining loan term is 4 years - 2 years (already paid) = 2 years.

To calculate the contractual value, we need to determine the outstanding balance on the loan. This can be done by calculating the present value of the remaining loan payments. Given the EAIR (Effective Annual Interest Rate) of 3.25%, we can use a loan amortization formula or financial calculator to find the contractual value.

Without additional information about the loan terms (interest calculation method, compounding frequency, etc.), it is difficult to provide an exact contractual value. However, I can guide you through the process if you have the necessary details.

As for the market value of the loan, it represents the worth of the remaining loan payments in the market. Since the general financial situation has changed, the EAIR is now 4.725%. We can use the same loan amortization formula or financial calculator to find the market value of the loan. Again, without specific details, it's challenging to provide an exact value.

Finally, let's consider the cost of shipping the car to Hawaii, which is $5,000. This is an additional expense to consider in her financial situation.

Based on the information provided, the person is facing the following financial situation with her car:

1. Current market value of the car: $21,000
2. Contractual value of the loan: Unable to determine without additional loan details.
3. Market value of the loan: Unable to determine without additional loan details.
4. Cost of shipping the car to Hawaii: $5,000.

Here are a few suggestions:

1. If the current market value of the car is lower than the remaining loan balance, it may be beneficial to sell the car and pay off the loan to avoid further debt.
2. If the market value of the loan is significantly lower than the contractual value, refinancing the loan at a lower interest rate could be considered.
3. If the person is financially capable, they could choose to ship the car to Hawaii. However, it's important to evaluate whether the cost of shipping outweighs the benefit of having the car in Hawaii.

These are just a few suggestions based on the limited information provided. It's crucial to have more specific details about the loan terms and personal financial circumstances to provide more tailored advice. I would recommend consulting a financial advisor or reaching out to the loan provider for further guidance.

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A firm has a profit margin of 6.5% and an equity
multiplier of 1.7. Its sales are $270 million, and it has total
assets of $135 million. What is its ROE? Do not round intermediate
calculations. Round

Answers

ROE = Profit Margin * Total Asset Turnover * Equity Multiplier , The Return on Equity (ROE) is  0.1105 or 11.05% (rounded to two decimal places).

To calculate the Return on Equity (ROE), we need to use the formula:

ROE = Profit Margin × Equity Multiplier

Profit Margin = 6.5% (0.065)

Equity Multiplier = 1.7

ROE = 0.065 × 1.7

ROE = 0.1105

The Return on Equity (ROE) is approximately 0.1105 or 11.05% (rounded to two decimal places).

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Complete Question :

A firm has a profit margin of 6.5% and an equity multiplier of 1.7. Its sales are $270 million, and it has total assets of $135 million. What is its ROE? Do not round intermediate calculations. Round your answer to two decimal places.________%

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