4) When Candy's marginal cost increases, it will affect their reaction function and the market equilibrium. Let's assume that Candy's marginal cost increases from R5 to R6 per unit.
By plotting the reaction functions on a graph, we can observe the following changes:
- Candy's reaction function: Candy's new reaction function will shift upward, indicating a higher price for a given price set by Philly. This is because Candy's higher marginal cost will require them to charge a higher price to cover their costs.
- Philly's reaction function: Philly's reaction function remains unchanged since its marginal cost is unaffected.
The intersection of the new Candy's reaction function and Philly's reaction function will determine the new market equilibrium. The new equilibrium price will be higher, reflecting the increased cost for Candy, while the equilibrium quantity may decrease or remain the same depending on the specific values of the demand functions.
5) When Philly's demand goes up for any given pair of prices for Candy and Philly, it will also impact the reaction functions and the market equilibrium.
By plotting the reaction functions on a graph, we can observe the following changes:
- Philly's demand increase: Philly's reaction function will shift upward, indicating that Philly can charge higher prices for a given price set by Candy while still achieving the same quantity of demand.
- Candy's reaction function: Candy's reaction function remains unchanged since Philly's demand increase does not directly affect Candy's cost or pricing strategy.
The intersection of the new Philly's reaction function and Candy's reaction function will determine the new market equilibrium. The new equilibrium price will be higher due to Philly's increased demand, while the equilibrium quantity may increase or remain the same depending on the specific values of the demand functions.
Therefore, changes in Candy's marginal cost or Philly's demand will impact the reaction functions and ultimately alter the market equilibrium in terms of price and quantity. These changes highlight the dynamics of competition between the two firms in the ready-mix concrete industry.
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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
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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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?
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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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?
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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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?
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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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
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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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%
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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Read the following scenario, then answer the questions that follow.
Small businesses have many short-term needs, but hiring additional staff for a small project is usually out of the question because of the high cost. They certainly can't afford to call in a top-shelf consulting firm, like McKinsey, Bain, or the Boston Consulting Group. So, when these companies need fresh insight or a new marketing plan, they usually have to muddle through on their own.
But that is changing. Catalant (formerly HourlyNerd), a Boston-based online marketplace, got its start by meeting this growing demand for expertise by connecting small businesses with MBA students who could use the money and are up for the challenge of tackling short-term projects. Catalant's platform maximizes flexibility for firm and consultant alike, while lowering the cost of such services by as much as 80 percent.
The startup is the brainchild of Rob Biederman, Peter Maglathlin, and Patrick Petitti, who developed the concept as part of a class assignment while attending Harvard Business School. Catalant amassed a database of current MBA students at top-tier business schools around the world. The co-founders agreed from the start that the quality of students and their business acumen would be key to building credibility and forming a successful business model.
After graduation, the trio committed themselves to launching the company and, in time, secured millions of dollars from investors (including Shark Tank celebrity, Mark Cuban) to feed the fire of expansion for the high-potential venture. Since its early days, the startup has grown quickly, using social media and word-of-mouth from happy customers to acquire new clients. The business has served an array of customers, ranging from a very small Boston-area florist to giant firms like Microsoft and GE.
Catalant attracts clients with the promise of cutting personnel costs while accessing valuable and objective insights and skills from well-trained MBA student-consultants. The business model also tracks nicely with some very important fast-emerging trends. "The freelance economy's rapid growth is forcing a new conversation between global enterprises and top talent," says co-founder and co-CEO Biederman. As Catalant's founders and their expanding cadre of sales representatives have hit the streets to educate more companies about how they stand to benefit from working freelancer talent into their day-to-day operations, an avalanche of business has been coming their way.
The arrangement certainly works well for the student-consultants as well. Pursuing an MBA degree can be a very costly undertaking, adding financial strain to students who must put their professional lives on hold for years while completing their studies. During this period, some students have enough free time to take on short-term projects. Catalant simply provides a platform that allows them to flex their business acumen and earn extra income while pursuing their degrees.
Catalant has experienced tremendous growth, having connected client companies with a global network of 40,000 MBA students and other experienced independent consultants. It certainly creates an opportunity for small companies to access the talent they need, and at a price they can afford. But as Catalant has grown, so has the size of the clients with which it works. And the results speak for themselves since it appears that this entrepreneurial venture isn't going to run out of takers for its trend-matching services anytime soon.
How does Catalant help small businesses access the highly trained and talented expertise that they need and at a price they can afford?
a. By working with retired consultants, small businesses can leverage their connections for future contacts. b. Consultants in training offer lower rates but can still connect small companies to the big firms like Bain, McKinsey, and Boston Consulting Group. c. Catalant connects small businesses with MBA students, who have knowledge and ability to offer and who are motivated to take on such assignments because they want the experience and can use the money. d. Catalant only hires senior consultants who are looking to expand their networks into new industries and provides unique, out-of-the-box thinking and practices to common business problems. How can Catalant offer such value for businesses of all sizes and link these firms with consulting assistance?
a. Consultants can provide recommendations at a lower cost than hiring another full-time employee. b. Consultant recommendations always help to add value to a firm, so this is a "can't-miss" opportunity for companies. c. Catalant specializes in offering discounted rates for retired consultants who are looking for work on a part-time basis. d. Consultants always have the newest and best training and experience and know how to implement highly effective recommendations.
1. The correct answer is option C, Catalant connects small businesses with MBA students, who have knowledge and ability to offer and who are motivated to take on such assignments because they want the experience and can use the money.
Catalant helps small businesses access highly trained and talented expertise by connecting them with MBA students. These students possess the knowledge and skills needed for short-term projects and are motivated to take on these assignments to gain experience and earn income while pursuing their degrees.
2. The correct answer is option A, Consultants can provide recommendations at a lower cost than hiring another full-time employee.
Catalant offers value for businesses of all sizes by providing access to consultants who can offer recommendations at a lower cost compared to hiring another full-time employee. This allows businesses to access the expertise they need without the high cost associated with traditional consulting firms or hiring additional staff.
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1. Marketing is "meeting needs profitably." a): Yes b): No
2. CMO stands for…. a): Central Marketing Officer b): Chief
Management Officer c): ChiefMarketing Officer d): Country Marketing
Officer
1. Marketing is "meeting needs profitably."
a): Yes
b): NoMarketing is the act of promoting and selling goods or services. The American Marketing Association defines marketing as the process of identifying, predicting, and meeting customer needs profitably. Marketing entails identifying customer needs and wants, creating goods and services to meet those needs and wants, pricing the goods and services, promoting them, and distributing them in a way that meets customer needs profitably. Hence, the answer is yes, marketing is "meeting needs profitably."
2. CMO stands for….
a): Central Marketing Officer
b): ChiefManagement Officer
c): ChiefMarketing Officer
d): Country MarketingOfficerCMO stands for Chief Marketing Officer. The Chief Marketing Officer (CMO) is a C-level corporate executive who is in charge of an organization's marketing activities. The CMO is in charge of all of the company's marketing efforts, which may include everything from market research and advertising to branding and public relations. The CMO is accountable for ensuring that all of the company's marketing activities are aligned with its strategic objectives and goals. As a result, the answer to this question is option C, which stands for Chief Marketing Officer.
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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
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)
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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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
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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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.
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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The aggregate demand-aggregate supply model examines the impact of discretionary fiscal policy and nondiscretionary fiscal policy by focusing on movements of
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 _______
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.
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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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.
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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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.)
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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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.)
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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semi-annual compounding? A. Sufficient information not provided. B. $1000 C. $990 D. $1085
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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_____ sustainability is driven by ethics and human ideals of
protecting the planet and its people for the well-being of future
generations. Group of answer choices Environmental Social Political
Econo
The answer is social sustainability.
Social sustainability is the aspect of sustainability that is concerned with the well-being of people and communities. It is driven by ethics and human ideals of protecting the planet and its people for the well-being of future generations.
Social sustainability includes factors such as:
Quality of life: Social sustainability is about ensuring that people have a good quality of life, both now and in the future. This includes things like access to education, healthcare, and housing.
Equality: Social sustainability is also about ensuring that everyone has equal opportunities, regardless of their background or circumstances. This includes things like fighting discrimination and promoting social justice.
Sustainable communities: Social sustainability is also about building sustainable communities. This means creating communities that are resilient to shocks and stresses, and that are able to meet the needs of their residents now and in the future.
Social sustainability is an important part of overall sustainability. It is essential to ensure that the planet is protected for future generations, but it is also important to ensure that people are able to live good lives in the present. By focusing on social sustainability, we can create a better future for everyone.
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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.
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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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 ?
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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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).)
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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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.
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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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.)
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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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
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.________%
the better business council of a large city has concluded that students in the city's schools are not learning enought about economics
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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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.
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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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.)
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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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
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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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.
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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