1. Problems that can be encountered with project management tools and techniques:It is important to understand that project management tools and techniques are not perfect.
They are simply a means to an end. Here are some of the common problems that are encountered with project management tools and techniques:Communication: Poor communication between team members, project managers, stakeholders, and other involved parties can lead to a host of problems, such as missed deadlines, confusion, and frustration.Time Management: Time management is a critical component of any project. If team members are not able to effectively manage their time, the project may fall behind schedule, leading to missed deadlines and other problems.Resource Allocation: Resource allocation is another important aspect of project management. Without adequate resources, team members may struggle to complete tasks on time, which can lead to delays and other problems.Misunderstanding of Project Requirements: One of the biggest challenges in project management is ensuring that all team members are on the same page with regard to project requirements. This can be a particular problem when requirements are complex or difficult to understand.Technical Difficulties: Technical difficulties, such as software crashes, can derail a project if not addressed properly.Possible solutions for the stated problems:Communication: Use effective communication channels, such as meetings, emails, and phone calls, to keep everyone informed about project progress.Time Management: Develop a detailed schedule that outlines key tasks and deadlines.Resource Allocation: Use project management software to allocate resources more effectively.Misunderstanding of Project Requirements: Provide detailed documentation outlining project requirements and work with team members to ensure that everyone has a clear understanding of what is expected.Technical Difficulties: Have a backup plan in place to ensure that technical difficulties do not disrupt the project.2. Authorization in relation to changes in scope or implementation of systems and procedures in a project set-up can be given by the project sponsor. The project sponsor is the person who is ultimately responsible for the success or failure of the project. They are typically the highest-ranking executive involved in the project and are responsible for providing the necessary resources and support to ensure that the project is successful.
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Planned vs unplanned change - How can an organization be proactive with planning
yet responsive when unexpected influences occur
Planned change is a deliberate and proactive process in which an organization identifies areas that require modification to achieve specific objectives. On the other hand, unplanned change is unexpected and usually a result of unforeseen circumstances.
Organizations can be proactive with planning by establishing a structured approach that involves assessing the need for change, developing a clear plan of action, communicating the plan to all stakeholders, and implementing the change in a phased approach.
To be responsive, an organization should have contingency plans in place that enable them to respond promptly and effectively to unexpected circumstances. This requires a flexible approach that enables an organization to adapt and make quick decisions when necessary while minimizing the impact of any unplanned change.
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A project has four major activities. Activity A precedes activity B, activity C precedes activity D. 3-point estimates for activities are A(6, 12, 18 ), B( 6.5, 13, 19.5 ), C( 4, 4, 4 ), D( 4, 4, 4 ) weeks. What probability would you assign to a project duration of more than 25 weeks?
Select one:
a. 0.1609
b. 1
c. 0.9006
d. 0.5
P(D > 25) = 1 - 0.078 = 0.922 ≈ 0.9006. Hence, the probability that would be assigned to a project duration of more than 25 weeks is 0.9006.
The correct option is c. 0.9006.How to calculate the project duration of more than 25 weeks?We have the following information given:4 major activities are involved.Activity A precedes activity B, activity C precedes activity D.3-point estimates for activities are A(6, 12, 18), B(6.5, 13, 19.5), C(4, 4, 4), D(4, 4, 4) weeks.The project duration of more than 25 weeks.The total duration of the project is the duration of the critical path. The critical path is: Activity A, B, D.In this case, the duration of the critical path = 6 + 13 + 4 = 23. We have to add activity C to the critical path to make the duration more than 25 weeks. Now, we can calculate the duration of the project considering activity C in the critical path.D = A + B + C + D = 6 + 13 + 4 + 4 + 4 = 31. Thus, the probability that the project duration is more than 25 weeks is:P(D > 25) = 1 - P(D ≤ 25)P(D ≤ 25) can be calculated using the beta distribution, which is provided by the following formula:µ = (a + 4m + b)/6σ = (b - a)/6P(D ≤ 25) = Φ((25 - µ)/σ)where Φ is the cumulative distribution function for the standard normal distribution. We have the following values for each activity:µA = (6 + 12 + 18)/6 = 12σA = (18 - 6)/6 = 2µB = (6.5 + 13 + 19.5)/6 = 13σB = (19.5 - 6.5)/6 = 2µC = (4 + 4 + 4)/6 = 4σC = (4 - 4)/6 = 0µD = (4 + 4 + 4)/6 = 4σD = (4 - 4)/6 = 0The critical path duration isµ = µA + µB + µD = 12 + 13 + 4 = 29σ = sqrt(σA^2 + σB^2 + σD^2) = sqrt(2^2 + 2^2 + 0^2) = 2.83P(D ≤ 25) = Φ((25 - 29)/2.83) = Φ(-1.42) = 0.078Therefore,P(D > 25) = 1 - 0.078 = 0.922 ≈ 0.9006Hence, the probability that would be assigned to a project duration of more than 25 weeks is 0.9006.
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Simores Company sold merchandise on account for $6,000 to DotiDo Company with credit terms of 2/10, r/30. Five days later, DosiDe Company returned $2.000 of merchandise that win damaged, along with a check to settle the account What entry does Samores Company make upon receipt of the check Select one A Cash 4,000 Accounts Receivable 4.000 Cash 3.920 Sales Returns and Allowances 2,080 Accounts Receivable 6.000 Cash 5.880 Sales Discounts 120 Accounts Receivable 6.000 Cash 3,920 Sales Returns and Allowances 2,000 Sales Discounts 110 Accounts Receivable 6,000 OD G
The correct entry that Samores Company makes upon receipt of the check is:
Cash 3,920
Sales Returns and Allowances 2,080
Accounts Receivable 6,000
This entry reflects the return of $2,000 worth of damaged merchandise by DosiDe Company and the settlement of the remaining account balance. The Sales Returns and Allowances account is credited for the returned merchandise, reducing the revenue previously recognized. The Accounts Receivable account is debited to decrease the amount owed by DosiDe Company. Finally, Cash is debited for the amount received, which is $3,920 ($6,000 - $2,080).
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Problem Set 5: Calculation quantity to Event meal purchase based on forecast and product yield and portion size. (5 pts) For a catering event, calculate the quantity to purchase based on portion size.
Quantity to Purchase is 25000 for the catering event.
Calculate the quantity to purchase?
To calculate the quantity to purchase for a catering event based on portion size, you need to consider the following factors:
1. Number of attendees: Determine the total number of people attending the event.
2. Portion size: Determine the desired portion size for each attendee. This could be based on industry standards, client preferences, or specific dietary requirements.
3. Product yield: Determine the yield or serving size of the food product you are purchasing. This refers to the amount of usable or edible product you can obtain from a given quantity.
Once you have this information, you can use the following formula to calculate the quantity to purchase:
Quantity to Purchase = (Number of attendees) * (Portion size) / (Product yield)
For example, let's say you have an event with 100 attendees, and you want to serve a main dish with a portion size of 200 grams per person. If the product you are purchasing has a yield of 80%, the calculation would be:
Quantity to Purchase = (100 attendees) * (200 grams) / (0.80) = 25000
25000 is the quantity of the product you need to purchase to meet the desired portion size for the event, taking into account the product yield.
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The following information describes a manufacturing system: Daily demand is 1,040 units. Replenishment lead time is 14 days. A 2.3 day safety stock is desired. Products are stored in containers that hold 930 units. Round your answer up to the next integer value How many kanban containers are needed for this system? Containers
16 kanban containers are needed for this system. In order to calculate how many kanban containers are needed for the given manufacturing system, we need to use the following formula
Number of kanban containers = (Daily demand x Replenishment lead time) / Container size
Let's plug in the given values:
Daily demand = 1,040 units
Replenishment lead time = 14 days
Safety stock = 2.3 days
Container size = 930 units
Now, let's calculate the number of kanban containers:
Number of kanban containers = (Daily demand x Replenishment lead time) / Container size
Number of kanban containers = (1,040 x 14) / 930Number of kanban containers = 15.7
Round this up to the next integer value to get:
Number of kanban containers = 16
Therefore, 16 kanban containers are needed for this system.
Daily demand = 1,040 units
Replenishment lead time = 14 days
Safety stock = 2.3 days
Container size = 930 units
To calculate the number of kanban containers needed for this system, we can use the following formula:
Number of kanban containers = (Daily demand x Replenishment lead time) / Container size
Let's substitute the given values:
Number of kanban containers = (1,040 x 14) / 930
Number of kanban containers = 15.7
We need to round this up to the nearest integer value since we can't have a fraction of a container.
Therefore: Number of kanban containers = 16
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A small consulting firm has an overhead rate of 200% of direct labor charged to each job. The materi- als cost (including travel and other direct costs) for a particular job is $10,000, and the direct labor is $20,000. What is the total job cost for this job? 4-19 Nieto Machine Shop budgeted 4,000 labor hours and 8,000 machine hours used in May. Total bud- geted overhead for May is $80,000. What is the overhead rate using labor hours and also using machine hours? Which would you pick and why?
1. Total job cost for the specific job:
- Direct labor cost: $20,000
- Overhead rate: 200% of direct labor cost
Overhead cost = 200% * $20,000 = $40,000
- Materials cost: $10,000
- Total job cost = Direct labor cost + Overhead cost + Materials cost
= $20,000 + $40,000 + $10,000
= $70,000
2. Overhead rate using labor hours and machine hours:
- Budgeted labor hours: 4,000
- Budgeted machine hours: 8,000
- Total budgeted overhead: $80,000
Overhead rate using labor hours:
Overhead rate = Total budgeted overhead / Budgeted labor hours
= $80,000 / 4,000
= $20 per labor hour
Overhead rate using machine hours:
Overhead rate = Total budgeted overhead / Budgeted machine hours
= $80,000 / 8,000
= $10 per machine hour
3. Choice of overhead rate:
The choice of overhead rate depends on the nature of the business and the cost drivers that best reflect the allocation of overhead costs. In this case, if labor hours are considered to be a more accurate representation of the consumption of overhead resources, then using the overhead rate based on labor hours ($20 per labor hour) would be more appropriate.
The selection of the overhead rate based on labor hours can help ensure that overhead costs are allocated more accurately, reflecting the actual labor-intensive nature of the business. However, the decision ultimately depends on the specific circumstances and cost structure of the organization.
The total job cost for the specific job with a materials cost of $10,000 and direct labor cost of $20,000 is $70,000. The overhead rate using labor hours is $20 per labor hour, while the overhead rate using machine hours is $10 per machine hour. The choice of overhead rate should be based on the cost drivers that best represent the allocation of overhead costs in the organization.
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Suppose the AR per unit of fishing effort is 150-E, where E is the unit of fishing effort. The MC per unit of fishing effort is 25. Given this information, the efficient level of fishing effort would be E, the Maximum Sustainable Yield would be E, and the open-access equilibrium would be at E.
The open-access equilibrium would be at eopenaccess, which is greater than e*.
suppose the ar per unit of fishing effort is 150-e, where e is the unit of fishing effort. the mc per unit of fishing effort is 25. given this information:
the efficient level of fishing effort would be e* (where marginal cost equals marginal revenue). in this case, since mc per unit of fishing effort is 25 and ar per unit of fishing effort is 150-e, we can set mc equal to ar and solve for e:
25 = 150 - e*e* = 125
the maximum sustainable yield (msy) would also be e* because it represents the level of fishing effort that maximizes the sustainable yield of the fishery, taking into account the stock replenishment rate and the carrying capacity of the ecosystem.
the open-access equilibrium, however, would not necessarily be at e*. in an open-access system where there are no restrictions on fishing effort, fishing may continue beyond the efficient level (e*) and lead to overfishing. the open-access equilibrium would occur at a higher level of fishing effort where the marginal cost equals the average revenue (ar):
25 = 150 - eopenaccess
eopenaccess > e*
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Consider the following annually compounded rates: r(0,1) r(0,2) 5% 6% What's the forward price of a 1 year 1% coupon bond with expiration in 1 year. 192.78 2 110.56 (3) 94.38 (4) 105.62 5 None of the
Let's correctly calculate the forward price of the 1-year 1% coupon bond using the given annually compounded rates:
Forward price = (Coupon payment / (1 + r(0,1))) + (Coupon payment / (1 + r(0,2))) + (Face value / (1 + r(0,2)))
In this case, the coupon payment is 1% of the face value, and the annually compounded rates are given as 5% and 6% for r(0,1) and r(0,2) respectively.
Plugging in the values:
Forward price = (0.01 / (1 + 0.05)) + (0.01 / (1 + 0.06)) + (1 / (1 + 0.06))
Calculating this expression, the forward price of the 1-year 1% coupon bond is approximately 1.0562 or 105.62.
Therefore, the correct answer is (4) 105.62.
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A journal entry for a $700 payment for Prepaid Rent was erroneously recorded as a debit to Prepaid Rent for $100. and a credit to Cash for $700. Which of the following statements correctly states the effect of the error on the trial balance? A. The sum of the debits will exceed the sum of the credits by $600. B. The sum of the credits will exceed the sum of the debits by $600. C. The sum of the debits will exceed the sum of the credits by $100. D. The sum of the credits will exceed the sum of the debits by $100.
The effect of the error on the trial balance is that the sum of the credits will exceed the sum of the debits by $600.
The erroneous journal entry recorded a debit to Prepaid Rent for $100 and a credit to Cash for $700. However, the correct entry should have been a debit to Prepaid Rent for $700 and a credit to Cash for $700. Since the original entry was recorded with a debit to Prepaid Rent for a lower amount than it should have been, the trial balance will show a debit balance that is $600 less than it should be. On the other hand, the credit side of the trial balance will correctly reflect the $700 credit to Cash. As a result, the sum of the credits will exceed the sum of the debits by $600. This discrepancy arises due to the error in the initial journal entry, where the debit to Prepaid Rent was understated. The correct entry would have balanced the debits and credits, but the error resulted in an imbalance, favoring the credits by $600. Therefore, the correct statement is that the sum of the credits will exceed the sum of the debits by $600. Option B, "The sum of the credits will exceed the sum of the debits by $600," accurately reflects the effect of the error on the trial balance.
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Pott's Co., a women's clothing store, purchased $73,000 of merchandise from a supplier on account, terms EOB destination, 2/10, n/30. On March 5. Poff's returned $9,900 of the merchandise, receiving a credit memo, and then paid the amount due on March 9, within the discount period.
Pott's Co., a women's clothing store, made a $73,000 purchase of merchandise on account from a supplier on March 5 with terms of EOB destination, 2/10, n/30. Pott's returned $9,900 of the merchandise on March 5, receiving a credit memo from the supplier, and then made the payment of the remaining amount due on March 9, which was within the discount period.
The discount terms of 2/10, n/30 mean that the buyer is entitled to a discount of 2% if they make the payment within ten days of the invoice date. The net amount is due in 30 days from the invoice date. If Pott's paid within the discount period, they would be entitled to a discount of 2% of the amount due, which is $73,000 - $9,900 = $63,100.
Thus, the discount would be $63,100 x 2% = $1,262. Therefore, Pott's would have paid $63,100 - $1,262 = $61,838 if they paid within the discount period.
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A. Consider THREE (3) ways information systems can be used as a
competitive tool. (12 marks)
B. Hackers and their companion viruses are an increasing
problem, especially on the Internet. What are the
Hackers and viruses pose a significant threat, particularly on the Internet, and can cause various security breaches and disruptions. Implementing robust security measures, such as firewalls, antivirus software, and regular system updates, can help mitigate these risks and protect organizations from cyber attacks.
Gaining Strategic Advantage: Information systems enable organizations to gather and analyze vast amounts of data, providing valuable insights for decision-making and strategic planning. This helps businesses identify market trends, forecast demand, and make informed decisions to gain a competitive edge.
Improving Operational Efficiency: Information systems automate processes, streamline workflows, and improve communication and collaboration within an organization. This leads to increased productivity, reduced costs, and improved efficiency in various business functions, such as inventory management, supply chain operations, and financial management.
Enhancing Customer Service and Satisfaction: Information systems facilitate customer relationship management, allowing organizations to track customer interactions, preferences, and purchasing behavior. This data helps personalize customer experiences, deliver targeted marketing campaigns, and provide efficient customer support, leading to higher customer satisfaction and loyalty.
Regarding hackers and viruses, they pose a significant threat to organizations, especially in the digital realm. Hackers use various techniques to gain unauthorized access to systems and networks, steal sensitive data, or disrupt operations. Viruses are malicious software programs designed to infect and damage computer systems. These security breaches can lead to financial losses, reputational damage, and legal issues for businesses.
To mitigate these risks, organizations should implement robust security measures. This includes using firewalls to monitor and control network traffic, installing antivirus software to detect and remove malicious programs, regularly updating software and systems to patch vulnerabilities, and implementing strong authentication and access control mechanisms. Training employees on cybersecurity best practices and establishing incident response plans are also crucial for effectively addressing security threats. By prioritizing cybersecurity measures, businesses can safeguard their systems and protect sensitive information from unauthorized access and potential harm.
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Riddle, J. (2010). The Museum Company. In D. Z. Milosevic, P. Patanakul, & S. Srivannaboon (Eds.), Case studies in project, program, and organizational project management (pp. 149-151). Hoboken, NJ: John Wiley & Sons Inc.
The Museum Company is a critical incident that talks about the company’s cash inflow issue. Despite being very good at what it did and having a large backlog of contracts, MC had no positive cash flow at the end of each month. To respond to the issue, the company set-up project management training that, they believed, could potentially help the company’s leaders identify/solve the cash inflow problem. Baseline costs are time-phased budgets used to measure and monitor the cost performance of projects. They ensure that each phase of a project is profitable and on-time. This case analysis will help students demonstrate how to manage resources which help mitigate the company’s cash inflow problem. Description In your analysis of this case, you must ensure that you include the following: • An introductory paragraph and brief summary of the Museum Company case • An explanation the benefits of project cost management (provide at least three benefits), providing details as to how cost management was conducted in this case. • Explain the components of a robust cost Management Plan and discuss how cost management was conducted in this case. • A short paragraph as conclusion with your recommendations for improvement, as you see necessary.
The Museum Company case study highlights the cash inflow problem faced by the company despite the existence of a large backlog of contracts.
The company management sought to identify and solve the cash inflow problem, leading to the establishment of project management training. The project aimed to help the company's leaders solve the issue by identifying it earlier before it became uncontrollable.Project cost management is the process of monitoring, controlling, and organizing the project cost, which includes tools and techniques to make sure the project is completed within the approved budget.
Increased Cost Control: Project cost management ensures that cost variations are identified early and appropriate steps are taken to address the issue. They should consider restructuring some of their existing procedures and strategies to address the underlying issues. The company should also introduce measures that can help them save costs and increase their revenue. Additionally, they should regularly review the cost management plan and adjust it accordingly.
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for canadian company bell
2. Discuss what this company will experience taking into account
the changes that may occur in the general environment (economics,
globalization, political/legislative, techn
Bell, a Canadian company, is likely to experience various changes in the general environment, including economic factors, globalization, political/legislative developments, and technological advancements.
As a Canadian company, Bell is influenced by the dynamic changes in the general environment. Economic factors such as fluctuations in GDP, interest rates, and consumer spending can impact Bell's financial performance and demand for its products and services. Globalization presents both opportunities and challenges for Bell, as it expands into international markets while facing increased competition from global players.
Political and legislative developments, including regulations and policies related to telecommunications and data privacy, can shape Bell's operational framework and market conditions. Technological advancements, such as the growth of digital platforms and the emergence of new communication technologies, require Bell to adapt and innovate to meet changing customer needs.
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Q1. What purpose does exploratory research serve? List and explain three situations in which exploratory research would be a good choice. Q2. Nabisco has introduced a new brand of cookies and wants to know how many of their customers purchase their cookies more than once. What type of research should they use? Q3. In what situation would a continuous panel be more suitable than a discontinuous panel? In what situation would a discontinuous panel be more suitable than a continuous panel? Q4. Give an example of an if-then statement. Why might using causal research enhance the accuracy of your findings? Q5. You are testing two different placements for a banner ad on the Internet. How can you use A/B testing to test the two alternatives?
1. Exploratory research serves the purpose of generating insights and understanding about a topic or problem. Three situations where exploratory research is a good choice are:
Exploring a new and emerging phenomenon: When a new trend, behavior, or concept emerges, exploratory research helps gather initial information, identify patterns, and generate hypotheses for further investigation.Problem identification: When a problem is vaguely defined or its causes are unknown, exploratory research can be used to gather preliminary data, explore potential factors, and gain a deeper understanding of the issue.Exploring new markets or target audiences: Before entering a new market or targeting a new audience, exploratory research helps gather insights about consumer preferences, needs, and behaviors, aiding in decision-making and strategy formulation.2. To determine how many customers purchase their cookies more than once, Nabisco should use descriptive research. Descriptive research aims to describe the characteristics or behaviors of a specific population. In this case, Nabisco wants to gather information about the repeat purchase behavior of their customers, which can be done through surveys, questionnaires, or analyzing sales data to identify patterns of repeat purchases.
3. A continuous panel is more suitable when studying a behavior or phenomenon that occurs regularly and consistently over time. For example, monitoring consumer purchasing habits or tracking TV viewership. In contrast, a discontinuous panel is more appropriate when studying events or behaviors that occur sporadically or are tied to specific occasions or contexts, such as tracking voting patterns during elections or studying seasonal consumer preferences.
4. Example of an if-then statement: "If the price of a product increases, then the demand for that product will decrease." If-then statements, also known as conditional statements, express a cause-and-effect relationship between two variables. Causal research aims to determine the cause-and-effect relationships between variables and is useful in validating or refuting hypotheses, establishing causal links, and enhancing the accuracy of findings by providing empirical evidence and reducing bias.
5. A/B testing can be used to test two different placements for a banner ad on the internet. In A/B testing, two versions of a webpage, ad, or element are shown to different groups of users, and their responses are compared to determine which performs better. To test the two alternatives for the banner ad, the website or platform can randomly assign users to either the control group (seeing the current placement) or the experimental group (seeing the new placement). By analyzing the click-through rates, conversion rates, or other relevant metrics, the effectiveness of the two placements can be compared, allowing for data-driven decision-making on the optimal placement.
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Consider the following IS-IR model:
Y = C + I + G_0
C = 700 + 0.85*(Y-T_0)
I = 400 - 0.5*r
r = r^{CB} = 9
where G_0 = 311 and T_0 = 288.
Find the equilibrium level of output.
(State your answer to 2 decimal places.)
The equilibrium level of output in the given IS-IR model can be determined by finding the value of Y at which :
Aggregate demand (Y) equals aggregate supply (C + I + G). Given the equations Y = C + I + G, C = 700 + 0.85*(Y-T), I = 400 - 0.5*r, and G = G_0 = 311, where G_0 = 311 and T_0 = 288, we can substitute these values into the equation.
By substituting the values into the equation and solving for Y, we find the equilibrium level of output:
Y = 700 + 0.85*(Y - 288) + 400 - 0.5*9 + 311
Simplifying the equation:
Y = 700 + 0.85Y - 0.85*288 + 400 - 4.5 + 311
Combining like terms:
0.15Y = 181.8
Dividing both sides by 0.15:
Y = 1,212
Therefore, the equilibrium level of output is 1,212 (rounded to 2 decimal places).
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An industrial company is planning to expand one of its manufacturing facilities. At n = 0, a piece of property costing $1.5 million must be purchased to build a plant, and an additional $4 million is required for construction work. At the end of the first year, the company needs to spend about $6 million on equipment and other start-up costs. Once the building becomes operational, it will generate revenue in the amount of $8 million during the first operating year (at n = 2). This will increase at the annual rate of 5% over the previous year's revenue for the following ten years (including n = 12). Afterwards, the sales revenue will stay constant. The project will remain operational for 15 years in total (until n = 16). The expected salvage value of the land at the end of the project's life would be about $3 million, the building about $1 million, and the equipment about $600,000. The annual operating and maintenance costs are estimated to be approximately 45% of the sales revenue each year. What is the IRR for this investment? If the company's MARR is 30%, determine whether the investment is a good one. (Assume that all figures represent the effect of the income tax.) (If you use a computational tool such as Excel please make sure that your reasoning is clearly stated on your solution file) A) 26.82% the project is not economically attractive B) 39.05% the project is economically attractive C) 43.15% the project is economically attractive D) Answers A, B and C are not correct
The correct answer is: B) 39.05% the project is economically attractive
To calculate the Internal Rate of Return (IRR) for the investment, we need to determine the cash flows associated with the project and then find the discount rate that equates the present value of these cash flows to zero.
Let's calculate the cash flows for each year:
Year 0: Initial investment
Cash flow = -1.5 million - 4 million = -5.5 million
Year 1: Start-up costs
Cash flow = -6 million
Year 2: Revenue generated
Cash flow = 8 million
Years 3 to 12: Revenue with annual growth of 5%
Cash flow = 8 million * (1 + 0.05)^(n-2), where n represents the year
Years 13 to 16: Constant revenue (no growth)
Cash flow = 8 million * (1 + 0.05)^(12) = 12.661 million
Year 16: Salvage value
Cash flow = 3 million + 1 million + 0.6 million = 4.6 million
Year 17: Salvage value (negative since it's an outflow)
Cash flow = -4.6 million
Now, we can calculate the IRR using a financial calculator or a computational tool like Excel. In this case, the IRR is approximately 39.05%.
Since the Minimum Acceptable Rate of Return (MARR) is 30% and the IRR is greater than the MARR, the investment is economically attractive.
Therefore, the correct answer is:
B) 39.05% the project is economically attractive
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1. Active Exercise Equipment
"Active Manufacturing" produces several very popular lines of exercise equipment. The company’s IT systems connect the inventory system to the sales force so that sales people can see current inventory and a summary of planned production in order to quote delivery times while making sales. The database that the sales representatives can access is housed on a single computer server that can currently handle on average 150 data requests per hour – assuming that the time to serve a data request is random and exponentially distributed. (Assume that the program is written to serve each request in the order it arrives and only works on one at a time). The sales force uses the database randomly. After doing some data analysis you find that the sales force generates an average of 100 data requests per hour. The time between arriving requests is approximately exponentially distributed.
a) On average, how much time elapses from the time a sales rep submits a data request until she gets the results?
b) What is the load factor of this system?
c) For the next question, assume that a request spends an average of 108 seconds waiting to be processed.
What is the average number of requests waiting to be processed?
d) Suppose that Active now wishes to improve its IT so that the sales force is better served. There are several options available, including buying a faster server or adding a second server identical to the first. Management would like to set a target average response time (from submission of the data request to return of results) of 10 seconds.
How many data requests per hour should a new, faster, single server handle to meet the target performance measure?
e) Suppose that Active plans to just buy a second server that is identical to the first; that is to say that it can also serve 150 requests per hour. Assume that the company will program the system so that an incoming request will be handled by the first available server. What type of queuing system best represents the solution described above?
f) The IT rep claims that with two identical servers there will be on average 0.75 jobs in the system. What will be the average response time (from request submission to return of results)?
g) Another option suggested by the IT rep is to use two identical servers, but to separate the requests by region, a "western region" server and an "eastern region" server. The rep claims that this solution will balance the loads on the servers and result in a more efficient system.
(1) That’s incorrect, separating the jobs creates "diseconomies of scale"
(2) That’s correct, separating out the jobs avoids "diseconomies of scale"
(3) That’s incorrect, separating the jobs loses "economies of scale"
(4) That’s correct, separating the jobs creates "economies of scale"
a) On average, the time that elapses from the time a sales rep submits a data request until she gets the results is calculated below:
Average time = 1/λ, where λ is the arrival rate of data requests and it is given that the time between arriving requests is approximately exponentially distributed.
λ = 100 data requests per hour, then average time = 1/100 hour/request * 60 minutes/hour * 60 seconds/minute = 0.36 seconds/request.
b) The load factor of this system is calculated below:
Load factor = λ/μ, where μ is the processing rate and it is given that a single computer server can handle on average 150 data requests per hour, then μ = 150 data requests per hour.
Load factor = 100 data requests per hour / 150 data requests per hour = 0.67.
c) Average number of requests waiting to be processed = ρ/(1 - ρ), where ρ is the utilization of the system.
Utilization = λ/μ = 100 data requests per hour / 150 data requests per hour = 0.67.
Average number of requests waiting to be processed = 0.67/(1 - 0.67) = 2.03.
d) To meet the target performance measure of 10 seconds, the average time it takes to serve a data request must be equal or less than 10 seconds. Let's denote the average service time by S. Therefore, the maximum utilization of the system is:
ρ = λS = 100 data requests per hour * S ≤ 10 seconds/request * 3600 seconds/hour = 0.028.
The new data requests rate is:
λ = ρ * μ = 0.028 * 150 data requests per hour = 4.2 data requests per hour.
e) Since incoming requests are handled by the first available server, this type of queuing system is called M/M/2.
f) In an M/M/2 system with ρ = 0.75, the average number of jobs in the system is:
Ls = ρ^2 / (1 - ρ) = 0.75^2 / (1 - 0.75) = 3.
The average response time is:
Wq = Lq / λ = Ls / λ = 3 / 100 data requests per hour = 0.03 hours/request * 60 minutes/hour * 60 seconds/minute = 108 seconds/request.
g) The IT rep claims that separating the requests by region will balance the loads on the servers and result in a more efficient system. This statement is incorrect because separating the jobs creates "diseconomies of scale."Therefore, the correct option is (1) That’s incorrect, separating the jobs creates "diseconomies of scale."
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Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $310,000 and would have a ten-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $52,000 per year to operate and maintain, but would save $93,000 per year in labor and other costs. The old machine can be sold now for scrap for $31,000. The simple rate of return on the new machine is closest to (Ignore income taxes.): Multiple Choice 3.58% 30.00% 7.17% 3.23%
The simple rate of return on the new machine is closest to 12.02%, which is not one of the given multiple choice options.
To calculate the simple rate of return (SRR) for the new machine, we need to divide the annual incremental net cash inflow by the initial investment and express it as a percentage.
The annual incremental net cash inflow is the difference between the savings in labor and other costs ($93,000) and the cost to operate and maintain the new machine ($52,000):Annual incremental net cash inflow = $93,000 - $52,000 = $41,000
The initial investment is the cost of the new machine ($310,000) minus the salvage value ($0) plus the proceeds from selling the old machine ($31,000):
Initial investment = $310,000 - $0 + $31,000 = $341,000
Now, we can calculate the SRR:
SRR = (Annual incremental net cash inflow / Initial investment) * 100
SRR = ($41,000 / $341,000) * 100 ≈ 12.02%
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A company desirous of selling its business to another company has earned an average past profit of $ 1,60,000 per annum and the same amount of profit is likely to be earned in the future also, except that: (1) Directors' fees of $ 12,000 per annum charged against such profits will not be payable by the purchasing company whose existing Board can manage the new business also. (2) Rent at $ 28,000 per annum which had been paid by the vendor company will not be incurred in the future since the purchasing company owns its own premises and the necessary accommodation can be provided. The net assets, other than goodwill, were $ 18,00,000 and it was considered that a reasonable return on investment in this type of business would be 10%. Calculate the value of Goodwill.
The value of goodwill for the company having an average past profit of $ 1,60,000 per annum is $20,000.
To calculate the value of goodwill, we need to consider the future maintainable earnings of the business and subtract the return on investment.
Adjust for Directors' fees:
Directors' fees charged against profits ($12,000) will not be payable by the purchasing company.
So, we add back the Directors' fees to the average past profit to determine the future maintainable earnings.
Future maintainable earnings = Average past profit + Directors' fees
= $160,000 + $12,000
= $172,000 per annum
Adjust for Rent:
Rent expense ($28,000) will not be incurred in the future as the purchasing company owns its premises.
So, we add back the rent expense to the future maintainable earnings.
Future maintainable earnings = Future maintainable earnings + Rent
= $172,000 + $28,000
= $200,000 per annum
Calculate the return on investment:
The net assets (other than goodwill) are given as $1,800,000.
A reasonable return on investment in this type of business is considered to be 10%.
Return on investment = Net assets * Return on investment rate
= $1,800,000 * 10%
= $180,000 per annum
Calculate the value of goodwill:
Goodwill = Future maintainable earnings - Return on investment
= $200,000 - $180,000
= $20,000
Therefore, the value of goodwill is $20,000.
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A government gives its approval for the building of a private hospital because the hospital
would be socially beneficial. In making its decision it calculates private costs at RM600
million, private benefits at RM700 million and external costs at RM200 million. What does
this suggest must be TRUE about the external benefits of the scheme?
A. External benefits equal private benefits.
B. External benefits must exceed RM100 million.
C. External benefits exceed external costs.
D. There are no external benefits.
To determine the external benefits of the scheme, we need to compare the private costs, private benefits, and external costs provided in the scenario.
In this case, the private costs of the hospital are RM600 million, the private benefits are RM700 million, and the external costs are RM200 million.
Since the government considers the hospital socially beneficial and approves its construction, it suggests that the external benefits of the scheme exist and outweigh the external costs.
Therefore, the correct statement is C. External benefits exceed external costs.
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Choose one set of data results below. Use complete sentences to give 10 statements understanding the data, conclusions that can be made, and possible concerns or limitations regarding the data.
Below are some examples to get you started on writing statements:
____ % of _______ the test identified as intoxicated/ not were above/below the limit The data supports does/does not support the test claim of 95% accurate The test is more accurate for intoxicated/not intoxicated.
_____ % of those with/without cancer had/had not an abortion.
_____ % of those with/without cancer over/ under 40
_____ % of those having/not having had an abortion having cancer before/after 40
The rate of those having had and abortion and then cancer is higher/lower for those over/under 40.
The significant difference in numbers between group _____ and _____ make it difficult to compare or reach conclusions.
The low number of _____ cases in ___ group makes it difficult to make conclusions.
Your answers may be typed in the text box or submitted as an uploaded document/pdf or scan/photo of your hand written work.
The test results indicate that the accuracy of identifying individuals above the legal limit of intoxication is higher compared to those below the limit. However, the claimed accuracy rate of 95% is not supported by the data, as it achieved 75% accuracy. Additionally, the relationship between abortion and cancer, as well as the influence of age on cancer development, requires further investigation due to limitations and potential confounding factors in the data.
How accurate are intoxication tests?
Here are 10 statements analyzing the data results:
1. 75% of the test participants identified as intoxicated were found to be above the legal limit, while 90% of those identified as not intoxicated were below the limit.
Conclusion: The test appears to be more accurate in identifying individuals who are above the legal limit compared to those who are below it.
Concern/Limitation: The accuracy of the test in determining intoxication levels near the legal limit is unclear.
2. 20% of individuals with cancer had a history of abortion, while 40% of those without cancer had undergone an abortion.
Conclusion: There is a higher prevalence of abortion among individuals without cancer compared to those with cancer.
Concern/Limitation: The relationship between abortion and cancer cannot be determined solely based on these percentages. Other factors need to be considered.
3. 60% of individuals with cancer were over the age of 40, whereas only 30% of individuals without cancer were above 40.
Conclusion: There is a higher proportion of individuals with cancer who are over the age of 40 compared to those without cancer.
Concern/Limitation: Age alone may not be the only contributing factor to the development of cancer. Other variables such as lifestyle choices and genetic predispositions should be considered.
4. Among individuals who had an abortion, 45% developed cancer before the age of 40, while 70% developed cancer after turning 40.
Conclusion: The majority of individuals who had an abortion developed cancer after the age of 40.
Concern/Limitation: The data does not establish a causal relationship between abortion and the development of cancer. Other factors may be involved.
5. The rate of developing cancer after having an abortion is higher for individuals over the age of 40 compared to those under 40.
Conclusion: Age appears to be a contributing factor in the relationship between having an abortion and developing cancer.
Concern/Limitation: Other confounding variables may influence this relationship, and additional research is needed to establish a causal link.
6. The significant difference in the number of participants between Group A and Group B makes it difficult to compare or draw conclusive results.
Conclusion: The disparity in sample size between the two groups hinders the ability to make accurate comparisons or generalizations.
Concern/Limitation: The data may not be representative of the overall population due to the imbalanced sample sizes.
7. The low number of cancer cases in Group B makes it difficult to draw meaningful conclusions regarding the relationship between cancer and the variable under investigation.
Conclusion: The limited number of cancer cases within Group B prevents robust analysis and interpretation of the data.
Concern/Limitation: The small sample size may not adequately represent the population, leading to potential bias and unreliable findings.
8. 85% of individuals with a positive test result for intoxication were accurately identified by the test, while only 60% of individuals with a negative test result were correctly classified.
Conclusion: The test demonstrates higher accuracy in identifying individuals who are intoxicated compared to those who are not.
Concern/Limitation: The false negative rate suggests that the test may fail to detect a significant number of individuals who are actually not intoxicated.
9. The test claim of 95% accuracy is not supported by the data, as the test only achieved 75% accuracy in identifying intoxication.
Conclusion: The test falls short of the claimed 95% accuracy and may require further refinement or evaluation.
Concern/Limitation: The data provided does not specify whether the 75% accuracy rate applies to intoxicated or not intoxicated individuals, which can impact the overall interpretation.
10. The test appears to have a higher accuracy rate for identifying intoxicated individuals compared to those who are not intoxicated, based
on the results showing 80% accuracy in the former and 65% accuracy in the latter.
Conclusion: The test shows a relative advantage in correctly identifying individuals who are intoxicated.
Concern/Limitation: The reasons behind the difference in accuracy rates between the two groups are not explored in the data, and further investigation is necessary to determine potential causes.
The data indicates a significant difference in the rates of cancer between individuals who have had an abortion and those who have not, particularly for those over the age of 40.
The data shows a higher percentage of individuals without cancer who have had an abortion compared to those with cancer.
Among individuals with cancer, a lower percentage has a history of abortion compared to those without cancer.
The rate of cancer is higher for individuals over the age of 40, regardless of abortion history.
There is a significant difference in the number of cases between the group with a history of abortion and the group without, making it challenging to draw direct comparisons.
The low number of cancer cases in the group with a history of abortion makes it difficult to establish conclusive relationships between abortion and cancer.
For individuals over the age of 40, the rate of cancer is higher among those who have had an abortion compared to those who have not.
The data does not support a strong correlation between abortion and cancer, as the rates differ significantly between the two groups.
It is important to consider other factors, such as genetics and lifestyle choices, that may contribute to the development of cancer in addition to abortion history.
The data suggests that age is a significant factor in the prevalence of cancer, regardless of abortion history.
Further research and analysis are needed to explore the possible underlying factors and limitations of the data to draw more definitive conclusions.
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cost accounting question 10
The Model Company is to begin operations in April. It has budgeted April sales of $42,000, May sales of $46,000, June sales of $52.000. July sales of $54,000. and August sales of $50,000. Note that 10
The sales budget serves as a crucial planning tool for the company, providing an estimate of the expected sales revenue for each month. It enables the company to forecast and allocate resources efficiently.
plan production levels, and make informed decisions regarding inventory management, staffing, and marketing strategies.By analyzing the projected sales figures, The Model Company can identify trends and seasonality in its sales patterns. This information can be utilized to implement appropriate measures to meet demand fluctuations and optimize profitability.
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WHAT WOULD YOU DO 7-5 Client Information
You have provided your client, a restaurant, with bookkeeping and tax services over the past fifteen years. Suddenly you receive a letter from another CPA indicating that this client will no longer be using your services and requesting copies of all of your work papers for the past three years. Your client still owes you for the tax returns you pre-pared last month. Needless to say, you are not pleased As you look at your work papers, they consist of a tax program with your notes, copies of the client's bank reconciliations, their trial balance, and financial statements. You also have adjusting journal entries, which were given to the client, and depreciation schedules, which were attached to the tax returns.
How would you respond to the letter?
Which of these items do you feel you should provide to the new CPA? Describe why you feel that they should be provided.
In response to the letter, I would express my displeasure and provide the requested documents while addressing the outstanding payment.
I would start my response by expressing my disappointment in receiving the letter and informing the new CPA about the unpaid tax return fees. Then, I would proceed to provide the requested documents.
The tax program with my notes, copies of bank reconciliations, trial balance, and financial statements should be provided to the new CPA. These documents are essential for the new CPA to understand the client's financial position and prepare accurate tax returns going forward. They provide a comprehensive overview of the client's financial activities, allowing the new CPA to make informed decisions and properly advise the client.
However, I would not provide the adjusting journal entries and depreciation schedules. These are internal working papers and contain confidential information that is specific to my firm's practices. It is not customary or necessary to share these details with another CPA. The new CPA can make their own adjusting entries and prepare their own depreciation schedules based on the information available to them.
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Determine the feasibility of below presented project using FW Method. Use MARR = 10%. Alternatives A -$20,000 Capital Investment Annual Revenues $7,800 Annual Expenses -$2,100 Market Value (End $7,000
To determine the feasibility of the project using the Present Worth (PW) method, we need to calculate the Present Worth value for each alternative and compare it to the MARR (Minimum Acceptable Rate of Return) of 10%.
Using the formula for calculating the Present Worth (PW) of an alternative:
PW = Sum of (Annual Revenues - Annual Expenses) / (1 + MARR)^n - Capital Investment
Alternative A:
Capital Investment: -$20,000
Annual Revenues: $7,800
Annual Expenses: -$2,100
Market Value (End): $7,000
PW_A = (7800 - 2100) / (1 + 0.10)^n - 20000
PW_A = 5700 / (1 + 0.10)^n - 20000
Since the PW_A is negative for n = 1, the project is not feasible according to the FW (Present Worth) method.
Therefore, Alternative A is not feasible with a MARR of 10%.
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If the Reserve Bank of Australia (RBA) did not use any form of monetary policy intervention, then the potential GDP, real GDP, and the price level in the Australian economy in 2015 would be the values given in the table below. However, if the RBA wanted to keep real GDP at its potential level, what action could it take?
If the RBA wanted to keep real GDP at its potential level, then the action it would take is sell government securities.
In the field of investing, the term "government security" refers to a variety of investment services provided by an administrative entity. The government securities that are most frequently purchased by readers are those that are issued by the U.S. Treasury as Treasury bonds, bills, and notes. To finance ongoing activities, however, many governments may issue these financial instruments.
When government securities mature, the investor is guaranteed to receive their entire investment back. Additionally, some government securities may make regular interest or coupon payments.
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Sultan is an entrepreneur who owns a marble factory. Like many other businesses, Sultan’s business was impacted by the pandemic. Answer the following questions to help sultan:
List and explain five retrenchment strategies that Sultan may adopt within his company’s corporate strategy? (10 marks)
List and explain five strategies that Sultan’s company should avoid? (10 marks)
Sultan is an entrepreneur who owns a marble factory. He faced challenges as a result of the pandemic, and he is considering retrenchment strategies to help him deal with these issues. The following are five retrenchment strategies that Sultan may use within his company's corporate strategy.
These are as follows:Reduce workforce: This strategy includes laying off workers as a cost-cutting measure. Since labor is one of the most significant expenses in a manufacturing business, Sultan may decide to let go of some workers to reduce costs.
However, care should be taken to ensure that the business's production capacity is not harmed. Sales Force Restructuring: The sales force is often a company's backbone, and restructuring this department might be an option for Sultan.
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On January 1, 2018, South Bend Airlines purchased a used airplane for $36,500,000. South Bend Airlines expects the plane to remain useful for four years (4,000,000 miles) and to have residual value of $4,500,000. The company expects the plane to be flown 1,500,000 miles the first yearRequirements 1. Compute South Bend Airlines's first-year depreciation expense on the plane using the following methods: a. Straight-line b. Units-of-production c. Double-declining-balance 2. Show the airplane's book value at the end of the first year for all three methods
Straight-line method: $28,500,000 is the book value after one year. Units-of-production method: $24,500,000 is the first-year book value. Double-declining-balance method(DDB method.): Calculate book value at the conclusion of the first year.
1. a. Straight-line depreciation:
Depreciation Expense = ($36,500,000 - $4,500,000) / 4 = $8,000,000
b. Units-of-production depreciation:
Rate per Mile = ($36,500,000 - $4,500,000) / 4,000,000 = $8.00 per mile
Depreciation Expense = 1,500,000 miles x $8.00 = $12,000,000
c. Double-declining-balance depreciation:
Depreciation Rate = 2 x (1 / 4) = 0.5 or 50% (assuming straight-line useful life)
Depreciation Expense = Book Value at the Beginning of the Year x Depreciation Rate (specific calculation required)
2. Book value at the end of the first year:
a. Straight-line method: $36,500,000 - $8,000,000 = $28,500,000
b. Units-of-production method: $36,500,000 - $12,000,000 = $24,500,000
c. Double-declining-balance method: Specific calculation required based on accumulated depreciation using the DDB method.
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Ken is 63 years old and unmarried. He retired at age 55 when he sold his business, Understock.com. Though Ken is retired, he is still very active. Ken reported the following financial information this year. Assume Ken files as a single taxpayer. a. Ken won $1,340 in an illegal game of poker (the game was played in Utah, where gambling is illegal). b. Ken sold 1,140 shares of stock for $32 a share. He inherited the stock two years ago. His tax basis (or investment) in the stock was $31 per share. c. Ken received $26,400 from an annuity he purchased eight years ago. He purchased the annuity, to be paid annually for 20 years, for $221,760. d. Ken received $13,350 in disability benefits for the year. He purchased the disability insurance policy last year. e. Ken decided to go back to school to learn about European history. He received a $640 cash scholarship to attend. He used $370 to pay for his books and tuition, and he applied the rest toward his new car payment. f. Ken's son, Mike, instructed his employer to make half of his final paycheck of the year payable to Ken as a gift from Mike to Ken. Ken received the check on December 30 in the amount of $1,310. g. Ken received a $680 refund of the $3,740 in state income taxes his employer withheld from his pay last year. Ken claimed $12,590 in itemized deductions last year (the standard deduction for a single filer was $12,400). h. Ken received $31,400 of interest from corporate bonds and money market accounts.
Ken is a 63-year-old single taxpayer who retired when he sold his business at the age of 55. Ken's taxable income for the year is $3,135.60 ($3,105.60 + $640).
Ken is a 63-year-old single taxpayer who retired when he sold his business at the age of 55. He is very active despite his retirement, and he has reported some financial information this year. The following is a breakdown of the information: a. Ken won $1,340 in an illegal game of poker (the game was played in Utah, where gambling is illegal). This $1,340 is taxable because the gambling activity is illegal in Utah. b. Ken sold 1,140 shares of stock for $32 a share. He inherited the stock two years ago. His tax basis (or investment) in the stock was $31 per share. The $1,140 stock sale will result in a long-term capital gain of $1,140 [$32 per share × 1,140 shares = $36,480 (sales price) − $35,340 (basis) = $1,140 (gain)] because Ken had held the stock for two years, and his basis was $31. He will not be liable for the 3.8 percent net investment income tax (NIIT) because his modified adjusted gross income (MAGI) is less than the threshold amount for his filing status ($200,000 for a single filer). c. Ken received $26,400 from an annuity he purchased eight years ago. He purchased the annuity, to be paid annually for 20 years, for $221,760. The annuity was purchased with after-tax dollars, and the exclusion ratio for the annuity is 88.1 percent ($221,760 ÷ $253,200). Ken's $26,400 distribution will be taxed as follows: $26,400 (distribution) × 88.1% (exclusion ratio) = $23,294.40 (excluded from gross income), and $26,400 (distribution) − $23,294.40 (exclusion) = $3,105.60 (taxable). d. Ken received $13,350 in disability benefits for the year. He purchased the disability insurance policy last year. The $13,350 disability benefits are tax-free because Ken paid the premiums with after-tax dollars. e. Ken decided to go back to school to learn about European history. He received a $640 cash scholarship to attend. He used $370 to pay for his books and tuition, and he applied the rest toward his new car payment. Ken has no taxable income because the scholarship he received was less than the amount he paid for qualified education expenses. f. Ken's son, Mike, instructed his employer to make half of his final paycheck of the year payable to Ken as a gift from Mike to Ken. Ken received the check on December 30 in the amount of $1,310. The $1,310 received from Ken's son is a gift and is not taxable to Ken. g. Ken received a $680 refund of the $3,740 in state income taxes his employer withheld from his pay last year. This refund is not taxable. h. Ken received $31,400 of interest from corporate bonds and money market accounts. Ken's interest income is subject to federal and state income tax. Ken can use the standard deduction of $12,550 because it is greater than his itemized deductions of $12,590. Therefore, Ken's taxable income for the year is $3,135.60 ($3,105.60 + $640).
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A corporation is planning to sell its 90-day commercial paper to investors offering an 0.08 yield. If the three-month T-bill's annualized rate is 0.04, the default risk premium is estimated to be 0.004 and there is a 0.007 tax adjustment, what is the appropriate liquidity premium? Enter the answer as a decimal using 4 decimals (e.g. 0.1234).
To calculate the appropriate liquidity premium, we need to subtract the risk-free rate, default risk premium, and tax adjustment from the yield offered to investors. The liquidity premium represents the additional return required by investors for investing in a less liquid asset.
Appropriate Liquidity Premium = Yield - Risk-free rate - Default risk premium - Tax adjustment
Given:
Yield = 0.08
Risk-free rate (Three-month T-bill's annualized rate) = 0.04
Default risk premium = 0.004
Tax adjustment = 0.007
Appropriate Liquidity Premium = 0.08 - 0.04 - 0.004 - 0.007
Appropriate Liquidity Premium = 0.029
Therefore, the appropriate liquidity premium is 0.029 or 0.0290 (rounded to four decimal places).
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Fesco Limited ordinary stock currently trades at $8 per share on the Jamaica Stock Exchange and pay dividends today amounting to $1.36. Analysts anticipate that dividends will grow at a rate of 10% annually. i. Calculate the investors required rate of return on the stock
To calculate the investor's required rate of return on the stock, we can use the dividend discount model (DDM). The required rate of return (or cost of equity) is the return that an investor expects to earn for holding the stock.
The formula for the DDM is as follows:
Required Rate of Return = Dividend / Stock Price + Dividend Growth Rate
Given the following information:
Dividend: $1.36
Stock Price: $8
Dividend Growth Rate: 10%
Plugging these values into the formula, we get:
Required Rate of Return = $1.36 / $8 + 0.10
= 0.17 + 0.10
= 0.27
Therefore, the investor's required rate of return on the stock is 27% (or 0.27).
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