The internal rates of return on a cash flow with deposit amounts of A = 40, A₁ = 120, A₂ = 290, and withdrawal amounts of B₁ = 240, B₁ = 20, B₂ = 10, at times t = 0, t = 1, t = 2, respectively is 20.65%.
To find the internal rates of return on a cash flow with deposit amounts of A = 40, A₁ = 120, A₂ = 290, and withdrawal amounts of B₁ = 240, B₁ = 20, B₂ = 10, at times t = 0, t = 1, t = 2, respectively, we need to find the present value of cash inflow and outflow at each time period t and then solve for the internal rate of return using the formula. Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of a series of cash flows from a project equal to zero.Present Value (PV) is the current value of a future sum of money or stream of cash flows given a specified rate of return.
The cash flow is as follows:Time period t = 0A = 40B = 0Net cash flow = 40Time period t = 1A = 120B = 240Net cash flow = -120Time period t = 2A = 290B = 20 + 10 = 30Net cash flow = 260
To find the present value of cash flows, we need to discount them at a given rate of interest using the formula:PV = CF / (1 + r)twhere, CF = cash flow at time t, r = discount rate or interest rate, and t = time period
For time period t = 0:PV = 40 / (1 + r)0 = 40For time period t = 1:PV = -120 / (1 + r)1 = -120 / (1 + r)
For time period t = 2:PV = 260 / (1 + r)2Let us assume r as x and solve for IRR.IRR = x
Therefore, the equation becomes:40 - 120 / (1 + x) - 30 / (1 + x)2 = 0Solving for x using the trial and error method, we get:x = 0.2065 or x = 1.4276 or x = 3.0508Only one positive IRR can exist. Hence, the IRR is 20.65%.
Therefore, the internal rates of return on a cash flow with deposit amounts of A = 40, A₁ = 120, A₂ = 290, and withdrawal amounts of B₁ = 240, B₁ = 20, B₂ = 10, at times t = 0, t = 1, t = 2, respectively is 20.65%.
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The costs of common stock, preferred stock and debt of UWRL Inc. are 18%, 6.5% and 8% respectively. Assume that the firm's (targeted/optimal) capital structure is 50% common stock, 5% preferred stock and 45% debt. The relevant corporate income tax rate is 35%. (i) Compute UWRL's WACC. (ii) In terms of the risks faced by investors, debt should carry a lower risk than that of preferred shares. Provide a possible explanation for the difference between the two costs stated above. Support your answer with calculation.
(i) The Weighted Average Cost of Capital (WACC) for UWRL is 9.575%.(ii) Debt should carry a lower risk than that of preferred shares due to the fact that bondholders have legal right to claim the assets of a company in the event of default. However, preferred shares do not have these rights, which makes them less secure than debt.
To calculate the WACC for UWRL, the cost of each component of capital needs to be determined. The costs of common stock, preferred stock, and debt are 18%, 6.5%, and 8%, respectively. Therefore, the cost of each component is as follows:Cost of common stock = 18%Cost of preferred stock = 6.5%Cost of debt = 8%Using the target capital structure of 50% common stock, 5% preferred stock, and 45% debt, the WACC of UWRL can be calculated as follows:WACC = (50% x 18%) + (5% x 6.5%) + (45% x 8%) x (1 - 35%)= 9.575%The difference between the cost of debt and the cost of preferred shares can be explained by the fact that debt is considered to be a less risky investment compared to preferred shares. This is because bondholders have legal rights to claim the assets of a company in the event of default, whereas preferred shares do not have such rights. The calculation of the cost of each component of capital shows that the cost of debt is lower than the cost of preferred shares, which is consistent with the risk profile of these two investments.
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Explain how the external forces in the general environment can
influence retailer stores like Walmart and Kroger?
You must discuss at least 5 external forces (not the five forces
of an industry). Plea
External forces in the general environment can affect retail stores like Walmart and Kroger by influencing their performance, operations, and profits. 5 external forces that can affect the retail industry: Technological Factors, Economic Factors, Political/Legal Factors, Social Factors, Environmental Factors.
External forces in the general environment can affect retail stores like Walmart and Kroger in various ways. These forces have the potential to influence their performance, operations, and profits. The following are some external forces that can affect the retail industry:
1. Technological Factors: Technological advancements have revolutionized the retail industry, improving shopping convenience, enhancing inventory management, and facilitating online shopping. Walmart and Kroger have adapted to technology, offering online shopping and in-store pickups.
2. Economic Factors: Economic factors such as inflation, interest rates, and unemployment rates can affect the retail industry's sales and profitability. In times of economic hardship, consumers often reduce their spending on non-essential items, and retail stores may have to adjust their pricing strategy to remain competitive.
3. Political/Legal Factors: Retail stores must comply with regulations and laws, such as minimum wage laws, consumer protection laws, and environmental regulations. Retailers like Walmart and Kroger have faced multiple lawsuits related to labor law violations, discrimination, and food safety violations.
4. Social Factors: Demographic changes, consumer preferences, and cultural changes can affect the retail industry. For instance, the demand for organic food has increased, and retailers like Walmart and Kroger have responded by offering organic produce.
5. Environmental Factors: Retailers have become more environmentally conscious in recent years, and customers expect them to adopt sustainable practices. Walmart and Kroger have implemented various initiatives aimed at reducing their carbon footprint, such as energy-efficient lighting and using eco-friendly packaging.
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READ THE PROBLEM SOLVING CASE "Referring the Referees of the Atlantic Coast Conference"AT THE END OF CHAPTER 01 IN THE TEXTBOOK
Questions
1.Which supervisory skills seem to be most important to Clougherty’s jobs? Why?
2.What types of responsibilities does he undertake?
The supervisory skills that seem to be most important to Clougherty’s job are conflict resolution, time management, and communication skills. In terms of conflict resolution, Clougherty is responsible for managing and resolving disputes that arise between coaches, players, and referees.
He must remain objective and impartial in order to ensure that everyone involved feels heard and respected. Effective time management is also critical for Clougherty, as he must juggle multiple responsibilities at once, such as scheduling referees, organizing training sessions, and reviewing game footage.
.As for the types of responsibilities that Clougherty undertakes, Scheduling referees for games,Training and evaluating referees,Handling disputes and conflicts that arise between coaches, players, and referees. Reviewing game footage and analyzing referee performance.Ensuring that all referees understand and follow the rules of the game.
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In your opinion, how does the relationship between society, business and government has contributed in today’s global environment? Why have it become a common practice to develop a strong corporate governance as well as unveil precise corporate public policies?
The relationship between society, business, and government has significantly contributed to today’s global environment.
Business organizations, government and society, as well as the relationships between these entities, have emerged as important considerations in recent times. Corporate governance is a common practice nowadays because it ensures that businesses are responsible, trustworthy and transparent, contributing to society.
Corporate governance is essential in mitigating risk, ensuring that companies operate in an ethical and transparent manner and reducing the likelihood of scandals and fraud.
This contributes to a more stable global environment and the overall public's trust in businesses.
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At the beginning of the year, Tyagi Manufacturing bought machinery, shelving, and a forklift. The machinery initially cost $31,200 but had to be overhauled (at a cost of $2,320) before it could be installed (at a cost of $1,160) and finally put into use. The machinery's total life was estimated as 40,000 hours, with an estimated residual value of $1,000. The machinery was actually used 5,000 hours in year 1 and 7,000 hours in year 2. Repair costs were $490 in each year. The shelving cost $10,000 and was expected to last 5 years, with a residual value of $740. The forklift cost $17100 and was expected to last six years, with a residual value of $2,280. 3. Prepare the journal entry to record year 2 depreciation expense for the machinery. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.
To record the year 2 depreciation expense for the machinery, the following journal entry can be made:
Date: Year 2
Depreciation Expense - Machinery $4,040
Accumulated Depreciation - Machinery $4,040
Explanation:
Depreciation expense for year 2 is calculated as follows:
Depreciation expense per hour = (Cost - Residual value) / Total estimated hours
Depreciation expense per hour = ($31,200 + $2,320 + $1,160 - $1,000) / 40,000 hours
Depreciation expense per hour = $33,680 / 40,000 hours
Depreciation expense per hour = $0.842 per hour
Depreciation expense for year 2 = Depreciation expense per hour x Hours used in year 2
Depreciation expense for year 2 = $0.842 x 7,000 hours
Depreciation expense for year 2 = $5,894
However, since repair costs are incurred in each year, we need to subtract the repair costs for year 2 from the calculated depreciation expense:
Adjusted Depreciation expense for year 2 = Depreciation expense for year 2 - Repair costs for year 2
Adjusted Depreciation expense for year 2 = $5,894 - $490
Adjusted Depreciation expense for year 2 = $4,040
Therefore, the journal entry to record the year 2 depreciation expense for the machinery is:
Depreciation Expense - Machinery $4,040
Accumulated Depreciation - Machinery $4,040
This entry recognizes the depreciation expense for year 2 and increases the accumulated depreciation account, which is a contra-asset account used to track the accumulated depreciation of the machinery.
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assume the market price is $28. the quantity that results in the best profits (the largest profits or smallest losses) is
The quantity that results in the best profits , we need to compare the marginal revenue (MR) and marginal cost (MC) at different quantities. However, the best quantity for maximizing profits or minimizing losses depends on the specific MR and MC values
If MR is greater than MC, producing more units will result in increased profits. However, if MR is less than MC, producing fewer units will minimize losses.
Since we don't have specific information about the MR and MC at different quantities, it's not possible to determine the exact quantity that results in the best profits. The best quantity for maximizing profits or minimizing losses depends on the specific MR and MC values, which are not provided in the given information.
Therefore, without additional information on the MR and MC at different quantities, we cannot determine the specific quantity that would result in the best profits.
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Chocolate Factory's convertible debentures were issued at their $1,000 par value in 2009. At any time prior to maturity on February 1, 2029, a debenture holder can exchange a bond for 23 shares of common stock. What is the conversion price, Pc? a. $40.00 b. $43.48 c. $45.45 d. $46.31 e. $48.62
If at any time prior to maturity on February 1, 2029, a debenture holder can exchange a bond for 23 shares of common stock, then the conversion price is $43.48.Option (b) is the correct answer.
Conversion price is the price of the security that the holder of a convertible security pays to receive the underlying assets or shares. It is calculated by dividing the market value of the convertible security by the conversion ratio. To find the conversion price, we need the market value of the convertible security and the conversion ratio.
Here, the market value of the convertible security is the par value, which is $1,000. We are given that each debenture is convertible into 23 shares of common stock. So, the conversion ratio is 23:1. To find the conversion price, Pc, we need to divide the par value by the conversion ratio. Pc = $1,000 / 23Pc = $43.48
Therefore, the conversion price is $43.48.Option (b) is the correct answer.
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community aco includes several hospitals and clinics within the southeastern market. what issues might emerge as a result of the community aco structure?
Potential issues that might emerge as a result of the community ACO structure include coordination challenges among multiple hospitals and clinics,
Difficulties in standardizing practices and protocols, and potential conflicts of interest among participating healthcare providers.
In a community ACO structure with several hospitals and clinics, coordinating care and aligning practices can be a complex task. Each healthcare facility may have its own protocols, systems, and culture, which can hinder seamless collaboration and integration. Standardizing practices and protocols across multiple entities becomes challenging, leading to variations in care quality and patient experience.
Furthermore, conflicts of interest may arise among participating healthcare providers within the ACO. These conflicts can arise from competition between facilities, conflicting financial incentives, or differing priorities among stakeholders. Balancing the interests of individual hospitals and clinics with the collective goals of the ACO can be a delicate process, potentially affecting decision-making and resource allocation.
Addressing these issues requires effective communication, strong governance structures, and shared accountability to ensure successful coordination, standardization, and alignment of care within the community ACO.
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which of the following could increase the supply of labor in the market for cranberry pickers? (i) a change in the preferences of women toward full-time work (ii) an increase in the output price (iii) an increase in the wages paid to apple pickers (iv) a decrease in the wages paid to apple pickers
The statement that could increase the supply of labor in the market for cranberry pickers is a decrease in the wages paid to apple pickers.
So, the answer is option iv
What is the law of supply?The law of supply states that there is a positive correlation between the price of a good and the amount of goods supplied. It indicates that a higher price leads to a higher quantity supplied, while a lower price leads to a lower quantity supplied.
There are numerous variables that may impact the supply of labor in the market for cranberry pickers. Some of them are:
The answer is option iv. Decrease in the wages paid to apple pickers
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Please go to the Office of Management & Budget's website http://www.whitehouse.gov/omb/budget and select one of the fact sheets.
Read through the fact sheet, and then answer the following:
- Are the initiatives listed important to your state (New York)? If so, why? If not, why not?
- Should your state use its federal funds for another program, organization, and/or services?
Yes, the initiatives listed in the Office of Management and Budget are important to New York State.
What are the most important initiative?Some of the most important initiatives include -
Investing in infrastructure - New York State has a \$1 trillion infrastructure deficit,and investing in roads, bridges, and other infrastructure would create jobs and improve the quality of life for all New Yorkers.Expanding access to healthcare - New York State has the highest rate of uninsured residents in the country,and expanding access to healthcare would improve the health and well-being of all New Yorkers.Investing in education - New York State has a \$1 billion budget deficit for public schools,and investing in education would ensure that all New Yorkers have access to a quality education.Learn more about Office of Management and Budget at:
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Draw a fully labelled diagram that depicts the market for coffee where the equilibrium price is $3.90, and the equilibrium quantity is Q0. Let us assume that the highest willingness to pay observed amongst the potential customers is $9.50.
Here's a fully labeled diagram depicting the market for coffee with an equilibrium price of $3.90 and equilibrium quantity of Q0. The highest willingness to pay observed among potential customers is $9.50.
Price ($)
|
---------------
| / |
| / |
| / |
| / |
| / |
| / |
| / |
|/ |
---------------
|
|----------------
| Equilibrium
| Price = $3.90
|
Quantity (Q)
In this diagram, the demand curve represents the highest willingness to pay, which intersects with the supply curve at the equilibrium price and quantity. The equilibrium price of $3.90 indicates the price at which the quantity demanded by consumers matches the quantity supplied by producers.
Please note that the diagram is a rough representation and may not be perfectly to scale. The specific numerical values for the quantity and price axes have not been provided, so they are left unlabeled.
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an is manager is focusing on the people component of leavitt's diamond when he or she _____.
An IS manager is focusing on the people component of Leavitt's diamond when he or she clarifies the changes in employee roles related to a new IS. Option D is the correct answer.
A certain person must be in charge of the computer systems inside an organization's structure. The Leavitt's Diamond's human element is highlighted by the IS manager as they discuss the changes to employee duties brought on by a new IS. The management may ensure that the staff members are informed of their new duties and how the new IS will effect them by doing this.
People, labor, structure, and technology are the four major components of every organizational system. Therefore, how these four elements interact determines how successful an organization will be. Additionally, this tool enables you to consider how the proposed change would affect the interconnected components of functions, people, structure, and technology. An essential part of field engineering is an information systems (IS) manager.
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The complete question is, "An IS manager is focusing on the people component of Leavitt's Diamond when he or she _____.
a. delegates the responsibility for creating new procedures
b. ensures that the IS help desk is available during work hours
c. selects new IS software and service providers
d. clarifies the changes in employee roles related to a new IS"
Which of the following is a characteristic of competitive interrupting?
Multiple Choice
attempting to withdraw from a conversation
attempting to make eye contact during a conversation
attempting to be sympathetic in a conversation
attempting to separate fact from opinion
attempting to take control of a conversation
The characteristic of "attempting to take control of a conversation" is associated with competitive interrupting.
Competitive interrupting also referred to as conversational dominance or conversational control is the practice of frequently cutting off other people's conversations in an effort to gain control or assert dominance. It entails actively looking for speaking opportunities while ignoring the contributions or viewpoints of others.
Competitive interrupting frequently at the expense of clear communication and respectful interaction can be seen as a way to assert authority or maintain power in a conversation. This behavior can disrupt the flow of a discussion, prevent active listening, and invert the power dynamics in a room full of people. Since it can result in miscommunication, frustration and a lack of cooperation, it is typically regarded as a bad communication pattern.
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A new grocery store cost $50 million in initial investment. It is estimated that the store will generate $5 million after-tax cash flow each year for five years. At the end of 5 years it can be sold for $60 million. What is the NPV of the project at a discount rate of 10%? A. $2.42 million B. $10 million C. $6.21 million D. None of the above
With given initial investment and the cash flow generated, the project's Net Present Value for the new grocery store is $ 6.21 million. Therefore, option C is the correct answer.
NPV stands for Net Present Value which measures the difference between the present value of cash inflows and outflows over a specific period of time.
Initial Investment = $50 million
Annual Cash Flow = $5 million
Sale Proceeds = $60 million
Discount Rate = 10% = 0.1
Number of Years = 5
= Present value of 5 years of cash flows + Present value of selling price - Initial investment
= 5/1.1 + 5/(1.1^2) + 5/ (1.1^3) + 5/ (1.1)^4 + 65/(1.1^5) - 50
= $ 6.21 million approximately
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Currency pegging refers to the practice of locking a currency's exchange rate to another country's currency. As it has its own merits and drawbacks, express your opinion to agree or disagree on currency pegging suggestion.
Opinion: It depends on the specific circumstances, but overall, I disagree with the suggestion of currency pegging.
Currency pegging can have both advantages and disadvantages, and its appropriateness depends on the economic conditions and policy objectives of the country. While pegging can provide stability in international trade and investment by reducing exchange rate volatility, it also limits a country's ability to independently conduct monetary policy and adjust its exchange rate to respond to domestic economic conditions.
Pegging can be beneficial for small and open economies heavily reliant on trade, as it provides stability and reduces transaction costs. However, it can also create challenges during economic downturns or periods of economic divergence with the pegged country. In such situations, the peg may become unsustainable, leading to economic instability and the need for costly adjustments.
Flexible exchange rates allow for independent monetary policy, which can be crucial for managing domestic economic challenges, such as inflation or recession. It enables the country to adjust its exchange rate to promote competitiveness and rebalance the economy.
Ultimately, the decision on currency pegging should be carefully considered, taking into account the specific economic circumstances, policy goals, and the potential trade-offs between stability and flexibility.
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what would you do if you noticed an employee treating another employee in a discriminatory manner?
As a responsible employee of an organization, one should not ignore when he/she observes an employee treating another employee in a discriminatory manner. It is imperative to address such behavior to maintain a positive work environment and to make sure that discrimination doesn't become a norm in the organization.
Discrimination is any negative or inappropriate action against a person based on certain characteristics, such as race, gender, religion, or sexual orientation. It is a type of unethical behavior and should be discouraged in any workplace
The following are some steps that one should take when they notice discriminatory behavior in the workplace:
1. Report the behavior to higher management: Whenever you notice discriminatory behavior, report it to higher management. The management is responsible for maintaining the work environment, and they should take necessary actions to prevent discrimination in the workplace.
2. Communicate with the employee: If you notice an employee treating another employee in a discriminatory manner, you should communicate with that employee to understand their actions. This will help you understand the reason for their behavior and whether it was intentional or unintentional.
3. Provide training: In some cases, employees may not be aware of their discriminatory behavior. In such cases, management should provide necessary training to all employees to understand what is discriminatory behavior and how to avoid it.
4. Take necessary action: Management should take necessary actions against employees who indulge in discriminatory behavior. Such behavior should be discouraged and strict action should be taken to maintain a healthy work environment.
In conclusion, it is crucial to take necessary steps when one observes an employee treating another employee in a discriminatory manner. Proper reporting, communication, training, and necessary action are some of the steps that one can take to prevent discrimination in the workplace.
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Lora is trying to decide which of the following two deposit accounts in Bank A she should put her money in. Lora's only concern is the rate of return. Account (X): 3% every three months Account (Y): 6% every six months (i) Calculate the effective monthly rate for both accounts. Round your percentage answer to four decimal places. (ii) Which account will provide the higher monthly return?(iii) If Lora is going to put $200,000 into Bank A at the beginning of each of the next six months, how much at most will she have one year from now?
(i) The effective monthly rate of Account (X) is 0.9938%, and the effective monthly rate of Account (Y) is 0.9852%. (ii) Account (X) will provide the higher monthly return. (iii) At most, Lora will have $1,217,271.58 after one year.
Account (X) has a quarterly interest rate of 3%, which converts to an effective monthly rate of 0.9938% [((1 + 0.03/4)^4)^(1/12) - 1]. Account (Y) has a bi-annual interest rate of 6%, which converts to an effective monthly rate of 0.9852% [((1 + 0.06/2)^2)^(1/6) - 1]. Since Account (X) has a higher effective monthly rate, it will provide the higher monthly return.
If Lora is putting $200,000 into Bank A at the beginning of each of the next six months, her total investment will be $1,200,000 ($200,000 x 6). Using the effective monthly rate of Account (X), Lora will have $1,217,271.58 after one year [($200,000 x (1 + 0.9938%)^12) + ($200,000 x (1 + 0.9938%)^11) + ... + ($200,000 x (1 + 0.9938%)^1)].
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Suppose that two firms are Cournot competitors. Industry demand is given by:P = 200 − q1 − q2 where q1 is the output of Firm 1 q2 and is the output of Firm 2. Both Firm 1 and Firm 2 face constant marginal and average total costs of $20.
Solve for the Cournot price, quantity, and firm profits.
P = 200 − q1 − q2
The Cournot equilibrium in this scenario is characterized by a price of $80, each firm producing 60 units of output, and both firms earning profits of $3600.
To solve for the Cournot equilibrium, we need to find the quantities produced by both firms (q1 and q2) and then calculate the corresponding price (P) and firm profits.
To find the quantities, we start by assuming that each firm chooses its output level to maximize its profits, taking the output of the other firm as given. In Cournot competition, each firm assumes that its competitor's output will remain constant.
To find the equilibrium quantities, we differentiate each firm's profit function with respect to its own output and set the derivatives equal to zero. Since both firms have the same cost structure, their profit-maximizing output levels will be the same.
Solving the equations, we find that q1 = q2 = 60. Substituting these values into the demand function, we can calculate the Cournot price:
P = 200 - q1 - q2
= 200 - 60 - 60 = 80.
To calculate firm profits, we subtract the total cost from the total revenue for each firm. Since the average total cost is $20 and the quantity produced by each firm is 60, the profit for each firm is
(P - AC) * q = (80 - 20) * 60
= $3600.
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Shire Company's predetermined overhead rate is based on direct labor cost. Management estimates the company will incur $708,000 of overhead costs and $590,000 of direct labor cost for the period. During March, Shire began and completed Job 56. What is the predetermined overhead rate for this period?
If Shire Company's predetermined overhead rate is based on direct labor cost, the predetermined overhead rate for this period is 1.20.
Predetermined overhead rate is the rate that is used to apply the estimated overhead cost to the manufacturing costs of the product. It is the estimated total manufacturing overhead cost that is divided by the estimated total amount of the allocation base. The estimated overhead cost is usually determined prior to the beginning of the period, which is why it is known as the predetermined overhead rate. In the given problem, the overhead cost and direct labor cost are given as $708,000 and $590,000, respectively.
The formula for calculating the predetermined overhead rate is shown below:
Predetermined overhead rate = Estimated overhead cost / Estimated direct labor cost
Therefore, the predetermined overhead rate for the given period can be calculated as follows:
Predetermined overhead rate = $708,000 ÷ $590,000
Predetermined overhead rate = 1.20
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Write a 250 word Summary about all of the following below:
.
Networking Capability, New Venture Performance and
Entrepreneurial Rent
Networking Capability defines the capacity to create, build and maintain networks. New Venture performance defines the progress of new ventures. Entrepreneurial rent is reflection of the ability of the entrepreneur.
Networking Capability is a significant factor in the development of a new venture and the entrepreneurial success of an entrepreneur. It describes the capacity of entrepreneurs to create, build, and maintain a strong network of personal and professional contacts.
New Venture Performance is a measure of the success of a new venture in terms of growth, profitability, and sustainability. It is a critical factor in the success of any new venture and the success of the entrepreneur. A high level of new venture performance is associated with high levels of innovation, creativity, and entrepreneurship.
Entrepreneurial Rent is the profit or return that an entrepreneur earns from his or her investment in a new venture. It is the difference between the opportunity cost of capital invested in the venture and the actual return on that investment.
Entrepreneurial Rent is a measure of the entrepreneurial success of an entrepreneur and a reflection of the ability of the entrepreneur to generate value from his or her investment in a new venture.
Network Capability is critical in the success of a new venture, as it provides the entrepreneur with access to resources such as financial capital, expertise, information, and support. The more extensive the network of contacts, the higher the probability of success for the new venture. Networking capability is a factor in the success of the entrepreneur and the venture because it provides the entrepreneur with a competitive advantage that can be leveraged to generate new ideas, innovations, and opportunities for growth.
New Venture Performance is a measure of the success of a new venture in terms of growth, profitability, and sustainability. It is a critical factor in the success of any new venture and the success of the entrepreneur. High levels of new venture performance are associated with high levels of innovation, creativity, and entrepreneurship.
Entrepreneurial Rent is the profit or return that an entrepreneur earns from his or her investment in a new venture. It is the difference between the opportunity cost of capital invested in the venture and the actual return on that investment. Entrepreneurial Rent is a measure of the entrepreneurial success of an entrepreneur and a reflection of the ability of the entrepreneur to generate value from his or her investment in a new venture.
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New Wheat Co. institutes a new dividend policy which causes 70% of earnings to be paid out in all future years and the remaineder to be invested in new projects that will grow firm earnings. The required rate of return for New Wheat is estimated at 10%. If New Wheat were to earn $4.00 per share next year with an ROE of 18%, what would be the intrinsic value of a share of this firm's stock in dollars and cents?
To calculate the intrinsic value of a share of New Wheat Co.'s stock, we can use the Dividend Discount Model (DDM) under the assumption that dividends will grow at a constant rate.
Given:
Earnings per share (EPS) = $4.00
Retention ratio (b) = 1 - Dividend payout ratio = 1 - 70% = 30%
Return on Equity (ROE) = 18%
Required rate of return (r) = 10%
We can calculate the dividend per share (DPS) using the retention ratio:
DPS = EPS * Dividend payout ratio
= $4.00 * 70%
= $2.80
Next, we can calculate the growth rate (g) using the retention ratio and return on equity:
g = Retention ratio * ROE
= 30% * 18%
= 5.4%
Finally, we can calculate the intrinsic value of the stock using the Gordon Growth Model (DDM):
Intrinsic Value = DPS / (r - g)
= $2.80 / (10% - 5.4%)
= $2.80 / 4.6%
≈ $60.87
Therefore, the intrinsic value of a share of New Wheat Co.'s stock is approximately $60.87.
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A donut shop is considering opening a new location in the area. It has estimated the required immediate investment into this project, as well as future revenues and expenses. The manager also believe that an immediate investment of $298 in net working capital would be required to support the project. It will be necessary to increase the net working capital by $35 in each subsequent year. In the final year, which is Year 7, the net working capital will be recovered. How much net working capital will be recovered at the end of the final year of this project?
Net working capital recovered at the end of the final year of the project: -$210.
What is the amount of net working capital recovered at the end of the final year of the project?To calculate the net working capital that will be recovered at the end of the final year of the project, we need to determine the cumulative increase in net working capital over the project's duration and subtract it from the initial investment in net working capital.
Given that an immediate investment of $298 in net working capital is required and an additional $35 will be needed in each subsequent year, we can calculate the cumulative increase in net working capital over the seven-year project as follows:
Cumulative increase in net working capital = $298 + ($35 ˣ 6) = $298 + $210 = $508
Since the net working capital will be recovered at the end of the final year (Year 7), we can simply subtract the cumulative increase in net working capital from the initial investment to find the net working capital that will be recovered:
Net working capital recovered = Initial investment - Cumulative increase in net working capital
= $298 - $508= -$210Based on the given information, the net working capital will not be fully recovered at the end of the final year. It seems there is a shortfall of $210 that needs to be considered.
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Jony Depp, a fund manager at Fidelity McGillan fund, is using the capital asset pricing model for making recommendations to his clients. He has produced the information shown in the following exhibit.
Calculate expected return and alpha for each stock.
Identify and justify which stock would be more appropriate for an investor who wants to add this stock to a well-diversified equity portfolio? Which stock would be more appropriate for a single-stock portfolio? Explain your answers
We can see that Stock A has an expected return of 14.8% compared to Stock B, which has an expected return of 12.4%. Therefore, for a single-stock portfolio, Stock A would be more appropriate.
Jony Depp, a fund manager at Fidelity McGillan fund, is using the capital asset pricing model for making recommendations to his clients. He has produced the information shown in the following exhibit. The given exhibit is a table containing information about two different stocks, A and B.
The table contains the following columns: Beta, Expected market return, Risk-free rate, and expected return. The value of the beta is the measure of the stock's volatility in comparison to the overall market. Beta value of 1 represents the same volatility as the market, values of less than 1 show less volatility than the market, and values greater than 1 indicate higher volatility than the market.
Alpha is a measure of the excess return earned by a stock beyond what would be expected based on its beta value and the market's return.
Formula to calculate expected return is as follows: Expected return = Risk-free rate + Beta × (Expected market return – Risk-free rate)Calculation of Expected Return and Alpha for each stock In the exhibit provided, the beta, expected market return, and risk-free rate for Stock A are given as 1.30, 13%, and 7%, respectively.
Therefore, the expected return can be calculated as follows: Expected return of Stock A = 7% + 1.3 (13% - 7%)Expected return of Stock A = 7% + 1.3 (6%)Expected return of Stock A = 7% + 7.8%Expected return of Stock A = 14.8%The Alpha of stock A = Expected return of stock A - [Risk-free rate + (Beta of Stock A x Expected market return - Risk-free rate)]Expected return of stock A - [Risk-free rate + (Beta of Stock A x Expected market return - Risk-free rate)] = 14.8% - [7% + (1.3 x (13% - 7%))]Alpha of Stock A = 4.2%The beta, expected market return, and risk-free rate for Stock B are given as 0.90, 13%, and 7%, respectively.
Therefore, the expected return can be calculated as follows: Expected return of Stock B = 7% + 0.9 (13% - 7%)Expected return of Stock B = 7% + 0.9 (6%)Expected return of Stock B = 7% + 5.4%Expected return of Stock B = 12.4%The Alpha of stock B = Expected return of stock B - [Risk-free rate + (Beta of Stock B x Expected market return - Risk-free rate)]Expected return of stock B - [Risk-free rate + (Beta of Stock B x Expected market return - Risk-free rate)] = 12.4% - [7% + (0.9 x (13% - 7%))]Alpha of Stock B = 1.7%Identifying and justifying which stock would be more appropriate for an investor who wants to add this stock to a well-diversified equity portfolio After calculating expected return and alpha for each stock, we need to identify which stock would be more appropriate for an investor who wants to add this stock to a well-diversified equity portfolio.
An investor who wants to add a stock to a well-diversified equity portfolio would prefer the stock with a positive alpha value as it provides excess returns that the stock market cannot provide. In this case, stock A has a higher alpha value of 4.2% than stock B, whose alpha value is 1.7%. Therefore, Stock A is more suitable for an investor who wants to add this stock to a well-diversified equity portfolio.
Identifying which stock would be more appropriate for a single-stock portfolio Single-stock portfolio means investing in a single stock or company. The investor is solely invested in one stock rather than a group of stocks. For a single-stock portfolio, the stock with higher expected returns would be suitable. From the above calculation, we can see that Stock A has an expected return of 14.8% compared to Stock B, which has an expected return of 12.4%. Therefore, for a single-stock portfolio, Stock A would be more appropriate.
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Wildhorse Ltd reported Long-Term Liabilities and Shareholders' Equity in its December 31, 2021 balance sheet as follows:
Long Term Liabilities:
Bonds Payable $2,000,000
6% interest, convertible to 40 common shares/$1,000 bond
Bonds Payable $4,700,000
9% interest, convertible to 40 common shares/$1,000 bond
Shareholders' Equity:
Class A Preferred shares
no par value, $3 dividend, cumulative,
each preferred share convertible into 8 common shares,
230,000 authorized, issued and outstanding $1,840,000
Class B Common shares
No-par, 2,700,000 authorized, issued and outstanding $5,400,000
Long-Term Liabilities and Shareholders' Equity of Wildhorse Ltd Long-term liabilities and shareholders' equity of Wildhorse Ltd as of December 31, 2021 is given below:
Long Term Liabilities: Bonds Payable $2,000,000, 6% interest, convertible to 40 common shares/$1,000 bond Bonds Payable $4,700,000, 9% interest, convertible to 40 common shares/$1,000 bond Shareholders' Equity:
Class A Preferred shares, no par value, $3 dividend, cumulative, each preferred share convertible into 8 common shares, 230,000 authorized, issued and outstanding $1,840,000
Class B Common shares, no-par, 2,700,000 authorized, issued and outstanding $5,400,000
Explanation:
The Class A preferred shares have a total value of $1,840,000. They are convertible into common shares at a ratio of 1:8. Thus, the preferred shares can be converted into
230,000 x 8 = 1,840,000 common shares.
The Class B common shares have a total value of $5,400,000. No details about conversion have been provided. Bonds payable are $2,000,000 and $4,700,000 with a conversion ratio of 40 common shares per $1,000 bond and a stated interest rate of 6% and 9% respectively. The conversion feature of bonds means the bondholders have the option to convert the bonds into common shares. It is important to note that only the conversion feature of bonds is a liability; the cash received for bonds is not a liability.
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You are analyzing a firm and find that its receivables turnover
is decreasing. Are you concerned, and if so, why?
Group of answer choices
None of the answers is correct
Yes, the firm may end up with a
You are analyzing a firm and find that its receivables turnover is decreasing, this is concerning because it implies that the company is either extending credit to unreliable customers or failing to collect debts promptly.
Receivables turnover ratio is an accounting measure that evaluates a company's effectiveness in managing credit. It is computed by dividing net sales by average accounts receivable. If the receivables turnover ratio is decreasing, it means the organization is collecting payments from its debtors at a slower pace. A decline in receivables turnover could lead to a cash flow crisis, hampering the organization's ability to pay suppliers, satisfy debt obligations, and fund operations.
A company may become over-reliant on borrowing to finance its activities, leading to higher interest expenses and greater risk of defaulting on loans. It may also imply that the company's liquidity is deteriorating, which may cause potential investors to shy away. In conclusion, a decrease in the receivables turnover ratio can be a warning sign that the organization is experiencing difficulty in collecting debts from its customers, which may lead to cash flow challenges and reduced profitability.
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COL, Inc. reported a debt-to-equity ratio of 2 times at the end of 2021. If the firm's total debt at year-end was $13 million, how much equity does COL have? $6.5 million $22 million $20 million $5 million
The amount of equity that COL. Inc. has given the debt - to - equity ratio of 2 times is A. $ 6. 5 million.
How to find the equity ?To determine the equity of COL, Inc., the formula to be used is :
Debt - to - Equity Ratio = Total Debt / Equity
Given that the debt-to-equity ratio is 2 times and the total debt is $13 million, to solve for equity, the formula can be rearranged to be :
Equity = Total Debt / Debt - to - Equity Ratio
Equity = $ 13 million / 2
Equity = $ 6. 5 million
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Jim, a sole trader, has two items of trading stock on hand at the end of the income year Item A and Item B. The items have the following values under the three alternative valuation methods: Item Cost
Jim will show a total value of $170 for Items A and B when minimizing his taxable income for the year. Therefore the correct answer is an amount not shown here.
To minimize taxable income, Jim should value his closing stock using the lowest possible values. Let's compare the values for Item A and Item B under the three alternative valuation methods:
Item A:
Cost: $95
Market selling value: $105
Replacement value: $90
Item B:
Cost: $80
Market selling value: $60
Replacement value: N/A (not provided)
To minimize taxable income, Jim should use the replacement value since it is the lowest value for Item A. Therefore, the value for Item A would be $90.
For Item B, there is no replacement value provided, so Jim will have to use either the cost or market selling value. To minimize taxable income, Jim should choose the lower value between the cost and market selling value. In this case, the cost value for Item B is $80, which is lower than the market selling value of $60. Therefore, the value for Item B would be $80.
To calculate the total value for Items A and B, we sum up the individual values:
Total value = Value of Item A + Value of Item B
Total value = $90 + $80
Total value = $170
Therefore, Jim will show a total value of $170 .
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Complete Question : Jim, a sole trader, has two items of trading stock on hand at the end of the income year Item A and Item B. The items have the following values under the three alternative valuation methods: Item Cost Market selling value Replacement value $125 Item A $95 $105 $90 Item B $80 $60 If Jim chooses to value his closing stock in a way that minimises his taxable income for the year, what total value will Jim show for Items A and B? $155 $165 $175 $185 $195 An amount not shown here
a. european countries experience an economic expansion and europeans experience an increase in income. in the united states, this causes:
a. a movementt along the aggregate demand curve to the left,indicating a decrease inthe quantity of real GDP demanded
b. a decreases in aggregate demand,shifting the aggregate demand curve to the left
c. a movement along the aggregate demand curve to the right,indicating an increase in the quantity of real GDP demanded
d. an increase in aggregate demand,shifting the aggregate demand curve to the right
Europeans countries experience an economic expansion and Europeans experience an increase in income. In the United States, this causes an increase in aggregate demand, shifting the aggregate demand curve to the right. Option D is the correct answer.
The business cycle stage known as expansion occurs when real gross domestic product (GDP) increases for more than one quarter in a row, going from a low point to a high point. Option D is the correct answer.
Increases in employment, consumer confidence, and equity markets usually follow expansion, which is also known as an economic rebound. Investors, economists, and decision-makers pay close attention to business cycles. Understanding historical patterns of economic expansion and decline can help predict probable future trends and spot investment opportunities. The economy is emerging from a downturn. Borrowing money is affordable, firms replenish their stocks, and customers start spending. The GDP grows, as does per capita income, the unemployment rate falls, and equity markets generally do well.
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Which component of a financial plan is influenced by your life stage? a) Budgeting and tax planning b) Protecting your assets and income c) Investing your money d) Managing your financial resources
The component of a financial plan that is influenced by your life stage is "c) Investing your money."
The life stage you are in significantly influences your investment decisions and strategies. Different life stages come with varying financial goals, risk tolerance, and time horizons. For example, a young individual in the early stages of their career may have a longer time horizon and higher risk tolerance, allowing them to allocate more of their investments towards growth-oriented assets like stocks or higher-risk investments.
On the other hand, someone approaching retirement may have a shorter time horizon and a lower risk tolerance. They may prioritize preserving their capital and generating a steady income, leading them to allocate more towards conservative investments like bonds or dividend-paying stocks.
Your life stage also affects the type of investment accounts you may choose, such as retirement accounts like IRAs or 401(k)s. Additionally, factors like financial obligations, family responsibilities, and future financial needs may influence the investment decisions you make.
Considering these factors, investing your money is an integral component of a financial plan that is tailored to your specific life stage and aligns with your financial goals and circumstances.
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Downs (1957) states in what is generally referred to as the voting paradox that it is irrational to vote when the expected utility from voting is negative, yet many people do vote. Briefly discuss this paradox in the light of public choice theory and pointing out its limitations. Carefully distinguish between the Decision Making Cost and Voting Externality Cost associated with collective choice.
Downs (1957) argued that the voting paradox suggests that it is irrational to vote when the expected utility from voting is negative, yet many people still vote. This paradox can be analyzed in the light of public choice theory, which examines the behavior of individuals and organizations involved in the production and delivery of public goods and services. In public choice theory, the Decision Making Cost and Voting Externality Cost associated with collective choice must be carefully distinguished. The Decision-Making Cost refers to the time, energy, and resources that individuals invest in researching and evaluating candidates and issues before making a decision. On the other hand, the Voting Externality Cost is the cost of voting, which is borne not only by the individual voter but also by other voters.The voting paradox occurs because the Decision Making Cost may exceed the expected utility of voting. Voters may face a situation in which the effort required to obtain the information necessary to make a well-informed decision is greater than the expected benefit of their vote. However, people may still vote because they face a social norm that values civic duty and participation. As a result, people vote even if they believe their vote is unlikely to make a difference due to a low probability of it changing the outcome.The limitations of the voting paradox are that it is based on the assumption that people make rational choices and that there are only two alternatives. In reality, voting decisions are influenced by a variety of factors, including personal values, identity, and social norms. Additionally, there are often more than two alternatives available in political elections, which complicates the decision-making process for voters.
Therefore, the voting paradox is not sufficient to explain why people vote.
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