For example, if Ken purchases a Sub 100 and if there is a favorable market, he will realize a profit of $300,000. On the other hand, if the market is unfavorable, Ken will suffer a loss of $200,000. But Ken has always been a very optimistic decision maker. What type of decision is Ken facing
Answers
Answer:
Since Mr Bob is always a pessimistic decision maker, he might choose pessimistic criterion. Using pessimistic criterion, the third alternative, equipment Texan will provide the smallest potential loss; so the best alternative is purchasing equipment Texan.
Conclusion: It is likely that in this criterion, Bill will arrive at a different decision.
Related Questions
A company acquires a bulldozer and its only two components for a total of $500,000 on 1/1/25. The useful life of the bulldozer is 10 years with no salvage value. The treads with a value of $45,000 will need to be replaced every nine years with no salvage value. The blade has a value of $20,000 and needs to be replaced every four years with no salvage value. The company uses the straight-line method to compute depreciation. Under IFRS, what is depreciation expense for 2025?
Answers
Answer:
The depreciation expense for 2025 is $50,000.
Explanation:
Straight line method charges a fixed amount of depreciation based on the cost of asset during the period of use.
Here the Bulldozer, the treads and the blades are significant in value and have different consumption pattern, thus they are all depreciated separately.
The Depreciation Expense Calculation is as follows :
Depreciation Expense = (Cost - Residual Value) ÷ Estimated Useful Life
thus,
Depreciation Expense (Bulldozer) = ($500,000 - $45,000 - $20,000) ÷ 10
= $43,500
Depreciation Expense (Treads) = ($45,000 - $0) ÷ 10
= $4,500
Depreciation Expense (Blade) = ($20,000 - $0) ÷ 10
= $2,000
Total depreciation expense is = $43,500 + $4,500 + $2,000
= $50,000
n December , General Electric (GE) had a book value of equity of billion, billion shares outstanding, and a market price of per share. GE also had cash of billion, and total debt of billion. a. What was GE's market capitalization? What was GE's market-to-book ratio? b. What was GE's book debt-equity ratio? What was GE's market debt-equity ratio? c. What was GE's enterprise value?
Answers
Answer:
a. GE's market capitalization = 276.60 billion; and GE's market-to-book ratio = 2.85.
b. GE's book debt-equity ratio = 2.08; and GE's market debt-equity ratio = 0.73
c. GE's enterprise value = $374.26 billion
Explanation:
Note: This question is not complete as all its data are omitted. The complete question is therefore provided before answering the question as follows:
In December 2015, General Electric (GE) had a book value of equity of $97.1 billion, 9.2 billion shares outstanding, and a market price of $30.06 per share. GE also had cash of $103.9 billion, and total debt of $201.7 billion. a. What was GE's market capitalization? What was GE's market-to-book ratio? b. What was GE's book debt-equity ratio? What was GE's market debt-equity ratio? c. What was GE's enterprise value?
The explanation to the answer is now provided as follows:
a. What was GE's market capitalization? What was GE's market-to-book ratio?
Calculation of GE's market capitalization
Market capitalization = Number of shares outstanding * market price per share = 9.2 billion * $30.06 = 276.60 billion
Calculation of GE's market-to-book ratio
Market-to-book ratio = Market capitalization / Book value of equity = $276.552 billion / $97.1 billion = 2.85
b. What was GE's book debt-equity ratio? What was GE's market debt-equity ratio?
Calculation of GE's book debt-equity ratio?
Book debt-equity ratio = Total debt / Book value of equity = $201.7 billion / $97.1 billion = 2.08
Calculation of GE's market debt-equity ratio
Market debt equity ratio = Total debt / Market capitalization = $201.7 billion / $276.46 billion = 0.73
c. What was GE's enterprise value?
Enterprise value = Market capitalization + Total debt - cash = $276.46 billion + $201.7 billion - $103.9 billion = $374.26 billion
Businesses have embraced podcasts for audio and video messages because podcasts a. do not require a live presence, yet offer a friendly human face. b. provide up to 1,000 views per podcast, saving money over individual presentations. c. can't replace costlier live teleconferences but can replace most business travel. d. broadcast interactive, non-repetitive information
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Answer: a. do not require a live presence, yet offer a friendly human face.
Explanation:
With podcasts, one does not have to be live and can simply do a pre-recording. This means that it can be repeated over and over and people can simply watch it at their convenience unlike live appearances.
This is beneficial to businesses as it means that they get to reach out to more people because apart from the convenience it offers, the friendly human voice that podcasts offer will entice people all the more.
Emily Casper earns a weekly salary of $785. How much will she make after four weeks?
Answers
Answer:
$3140
Explanation:
It is given that,
Weekly salary of Emily Casper is $785. We need to find her earning after 4 weeks. It is a type of question based on the unitary method.
1 week = $785
4 week = 4 × $785
= $3140
Hence, her salary after 4 weeks is $3140.
Design Services is organized as a limited partnership, with Miko Toori as one of its partners. Miko's capital account began the year with a balance of $35,000. During the year, Miko's share of the partnership income was $7,500, and Miko received $4,000 in distributions from the partnership. What is Miko's partner return on equity
Answers
Answer: 20.4%
Explanation:
The following information can be gotten from the question:
Beginning equity = $35,000
Ending equity = $35,000 + $7,500 - $4,000 = $38,500
Average equity = ($35,000 + $38,500)/2
= $73,500/2
= $36,750
Miko's partner return on equity will now be:
= $7,500/$36,750
= 0.2041
= 20.4%
Economic resources are the natural, human, and technological inputs used to produce goods and services. natural, technological, and manufactured inputs used to produce goods and services. natural, human, and manufactured inputs used to produce goods and services. technological, human, and manufactured inputs used to produce goods and services. b. Economists classify resources as labor, land, human capital, and entrepreneurs. labor, land, real capital, and entrepreneurs. labor, land, financial capital, and entrepreneurs. labor, resources, real capital, and entrepreneurs. c. Because economic resources are used to produce goods and services, they are called (Click to select) .
Answers
Answer and Explanation:
A. Economic resources can be defined as the natural, human, and manufactured inputs that are used in the production of goods and services.
B. These resources are also referred to as factors of production as they fall within the factors of production such as land, labour, capital and entrepreneur. They are useful in the production process of goods and services.
C. They are called inputs. As inputs they are used in the production process and at the end of it all they bring about output for the producer.
Carla Vista Inc. has sales of $2,300,000, a gross profit margin of 24.0 percent, and inventory of $800,000. What are the company’s inventory turnover ratio and days’ sales in inventory? (Round inventory turnover ratio to 3 decimal places, e.g. 12.555 and days' sales in inventory to 1 decimal place, e.g. 12.5. Use 365 days for calculation.)
Answers
Answer:
Inventory turnover ratio= 2.185 times
Day's sales in inventory = 167.05 days
Explanation:
Carla Vista incorporation has a sales of $2,300,000
The gross profit margin is 24%
The inventory is $800,000
The First step is to calculate the cost of goods sold
= Sales-gross profit margin×sales
= 2,300,000-(0.24×2,300,000)
=2,300,000-552,000
=$1,748,000
Therefore the inventory turnover ratio can be calculated as follows
Inventory turnover ratio= 1,748,000/800,000
= 2.185 times
Day's sales in inventory can be calculated as follows
= 365/ inventory turnover ratio
= 365/2.185
= 167.05 days
The following data are given for a period (all amounts are in dollars): Raw (direct) materials: 1,000 at beginning, 1,500 at end Work-in-process: 3,000 at beginning, 2,400 at end Finished goods 6,000 at beginning, 9,300 at end Purchase of raw (direct) material: 4,000 during period Direct labor: 5,000 Manufacturing overhead: 7,000 The amount of total manufacturing cost for the period is:
Answers
Answer:
$17,500
Explanation:
Give that
Direct raw materials at the beginning = $1,000
End work in process =$3,000
Beginning work in process = $3,000
End finished goods = $2,400
Beginning finished goods = $6,000
Total manufacturing cost = (Direct materials + Direct labor + Overhead applied) + Beginning work in process inventory - Ending work in process inventory
= ($4,000 + $5,000 + $7,000) + $3,000 - $1,500
= $17,500
Which describes the role of automatic stabilizers in the economy?
Answers
Recently, the owner of Martha's Wares encountered severe legal problems and is trying to sell her business. The company built a building at a cost of $1,170,000 that is currently appraised at $1,370,000. The equipment originally cost $650,000 and is currently valued at $397,000. The inventory is valued on the balance sheet at $340,000 but has a market value of only one-half of that amount. The owner expects to collect 98 percent of the $190,200 in accounts receivable. The firm has $11,400 in cash and owes a total of $1,370,000. The legal problems are personal and unrelated to the actual business. What is the market value of this firm? Multiple Choice $1,464,996 $1,124,996 $764,796 $934,796 $567,000
Answers
Answer: $764,796
Explanation:
The market value will use the current appriased values as well as recoverable accounts.
Building = $1,370,000
Equipment = $397,000
Inventory = Half of $340,000 = $170,000
Accounts receivable = 98%* 190,200 = $186,396
Cash = $11,400
Debt = $1,370,000
Market Value = Assets - Liabilities
= 1,370,000+ 397,000 + 170,000 + 186,396 + 11,400 - 1,370,000
= $764,796
1. This problem asks about opportunity costs in different situations. a. You get a jump on your holiday shopping in July and buy a Hatchimal toy for $40, planning to give it to your child. In December, Hatchimals suddenly become incredibly popular, so that you could get $400 (after any taxes and fees) from selling yours. What is the opportunity cost of giving the toy to your child
Answers
Answer:
the $400 you would have earned if you sold the toy
Explanation:
Opportunity cost or implicit is the cost of the next best option forgone when one alternative is chosen over other alternatives.
If you didn't give the toy to the child, you could have sold it for $400. Selling the toy is the next option and thus, it is the opportunity cost
If all monopolistically competitive firms had identical cost curves:_________.a. the industry would remain monopolistically competitive because of product differentiationb. short-run profit for each firm would be negativec. long run profit for each firm would be positived. excessive band proliferation would resulte. the industry would become perfectly competitive
Answers
Answer:
a. the industry would remain monopolistically competitive because of product differentiation
Explanation:
Monopolistic competition pertains to a current market in which it integrates with different firms that are directly connected to one another and that also sell differentiated products. There is also free market entry and exit
In case when it contains the same cost curves so this represents the product differentitation
Hence, the correct option is A.
Which of the following transactions are counted in GDP? Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click the option twice to empty the box. Patricia receives a Social Security check. unanswered Molly buys a used car. unanswered Kerry buys a new sweater to wear this winter. unanswered Nayana sells $1,000 of General Electric stock. unanswered Jasmine buys a new car. unanswered Roberto gives his daughter $50 for her birthday.
Answers
Answer:
Kerry buys a new sweater to wear this winter.
Jasmine buys a new car.
Explanation:
Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year
GDP calculated using the expenditure approach = Consumption spending by households + Investment spending by businesses + Government spending + Net export
Net export = exports – imports
Items not included in the calculation off GDP includes:
1. services not rendered to oneself
2. Activities not reported to the government
3. illegal activities
4. sale or purchase of used products
5. sale or purchase of intermediate products
The purchase of the sweater and the purchase of the new car constitutes consumption spending and it would be added as part of GDP.
The cash gift and Social Security check are transfer payment s and would not be included as part of GDP
Gross domestic product is the total sum of ultimate goods and services produced in an economy within a given period which is typically a year.
Gross domestic productGDP calculated using the expenditure approach = Consumption spending by households + Investment spending by businesses + When the govt spending + Net export After that Net export = exports – imports.
Items not included within the calculation of GDP includes: the services not rendered to oneself activities not reported to the govt.
It's illegal activities and also sale or purchase of used products.
Sale or purchase of intermediate products.
Kerry buys a brand new sweater to wear this winter.
Jasmine buys a brand new car.
The purchase of the sweater and therefore the purchase of the new car constitutes consumption spending and it might be added as a part of GDP.
Therefore, the cash gift and social insurance check are outlays and wouldn't be included as a part of GDP.
Find out more information about GDP here:
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At the end of January, Mineral Labs had an inventory of 735 units, which cost $8 per unit to produce. During February the company produced 700 units at a cost of $12 per unit. a. If the firm sold 1,100 units in February, what was the cost of goods sold? (Assume LIFO inventory accounting.)
Answers
Answer:
COGS= $11,600
Explanation:
Giving the following information:
Beginning inventory= 735 units for $8
During February the company produced 700 units for $12 per unit.
Units sold= 1,100
Under the LIFO (last-in, first-out) method, the cost of goods sold is calculated using the cost of the last units produced.
COGS= 700*12 + 400*8
COGS= $11,600
Kaleb Konstruction, Inc., has the following mutually exclusive projects available. The company has historically used a three-year cutoff for projects. The required return is 12 percent.Year Project F Project G0 –$ 126,000 –$ 196,000 1 64,500 44,500 2 45,500 59,500 3 55,500 85,500 4 50,500 115,500 5 45,500 130,500 Required:(a) Calculate the payback period for both projects. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)Payback period Project F years Project G years(b) Calculate the NPV for both projects. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)Net present value Project F $ Project G $ (c) Which project should the company accept?
Answers
The payback period for project F is 2.29 years and the payback period for project G is 4.06 years.
The NPV for project F is $65,277 and the NPV for project G is $99,473.93.
The company should choose project G.
What is the payback period?
Payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative cash flows
Payback for project G:
Amount invested: -196,000
Amount recovered in year 1 : 44,500 - 196,000 = -151,500Amount recovered in year 2 : -151,500 + 59,500 = - 92,000Amount recovered in year 3 : - 92,000 + 85,500 = -6500Amount recovered in year 4 : -6500/ 115,500 = 0.06Payback period = 4.06 years
Payback for project F:
Amount invested: -126,000Amount recovered in year 1 : 64500 - 126,000 = -61,500Amount recovered in year 2 : -61,500 + 45,500 = -16,000Amount recovered in year 3 : -16,000 / 55,500 = 0.29Payback period = 2.29 years
What is the NPV ?Net present value is the present value of after-tax cash flows from an investment less the amount invested. When choosing between projects that have a positive NPV, choose the project with the higher NPV first because it is the most profitable.
NPV can be calculated using a financial calculator
Project F:
Cash flow in year 0 = –$ 126,000Cash flow in year 1 = 64,500Cash flow in year 2 = 45,500Cash flow in year 3 = 55,500Cash flow in year 4 = 50,500Cash flow in year 5 = 45,500I = 12%npv = $65,277
Project G:
Cash flow in year 0 = -196,000 Cash flow in year 1 = 44,500Cash flow in year 2 = 59,500Cash flow in year 3 = 85,500 Cash flow in year 4 = 115,500 Cash flow in year 5 = 130,500I = 12%NPV =$99,473.93
To learn more about the payback period, please check: https://brainly.com/question/25716359
Summarize the main points of a wise investment strategy
Answers
Answer:
Strategy 1: Value Investing.
Strategy 2: Growth Investing.
Strategy 3: Momentum Investing.
Strategy 4: Dollar-Cost Averaging.
13. T F A high standard deviation generally means that the data points are widely
scattered from the mean.
Answers
Answer:
True.
Explanation:
Standard deviation can be defined as a quantity used to determine or measure how much a set of values differs from the mean value.
A high standard deviation generally means that the data points are widely scattered from the mean while a low standard deviation generally means that the data points are closely related to the mean or average value.
Depreciation expense on factory equipment is part of factory overhead cost.
A. True
B. False
Answers
Answer:
True
Explanation:
Factory overhead costs are costs incurred by a firm during production that cannot be traced to a particular product.
They include :
Depreciation expense on factory equipment Supervisor salaryElectricity cleaningSelected information regarding a company's most recent quarter follows (all data in thousands). Ending work in process inventory $540 Manufacturing overhead $840 Cost of goods manufactured $1,420 Beginning work in process inventory $410 Direct labor $470 What was the cost of direct materials used for the quarter?
Answers
Answer:
Cost of direct materials used for the quarter is = $240
Explanation:
Given that
Ending work in process inventory = $540
Manufacturing overhead = $840
Cost of goods manufactured = $1,420
Beginning work in process inventory = $410
Direct labor = $470
To calculate the cost of raw materials used for the quarter, we will make use of the formulae below.
Cost of goods manufactured = beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP
$1,420 = $410 + Direct materials + $470 + $840 - $540
Direct materials = $240
Cost of Goods Sold, Cost of Goods Manufactured Glenville Company has the following information for April: Cost of direct materials used in production $54,000 Direct labor 60,000 Factory overhead 36,000 Work in process inventory, April 1 46,000 Work in process inventory, April 30 39,000 Finished goods inventory, April 1 23,000 Finished goods inventory, April 30 14,000Required:a. For April, determine the cost of goods manufactured.b. a. For April, determine the cost of goods sold.
Answers
Answer:
a. Cost of Goods Manufactured = $157,000
b. Cost of goods sold = $166,000
Explanation:
Manufacturing Cost Schedule
Direct Material $54,000
Direct labor $60,000
Factory overhead $36,000
Add Opening Work in process inventory $46,000
Less Closing Work in process inventory ($39,000)
Cost of Goods Manufactured $157,000
Finished Goods Account
Debit :
Opening Finished goods inventory $23,000
Cost of Goods Manufactured $157,000
Totals $180,000
Credit :
Closing Finished goods inventory $14,000
Cost of goods sold (Balancing figure) $166,000
Totals $180,000
The city of Jacksonville, Florida is issuing $100,000,000 of general obligation bonds paying interest on January 1st and July 1st of each year until maturity. The dated date of the issue is June 1, 2020. The first payment will be made on January 1st, 2021. A bondholder purchases the issue at the offering. The first interest payment is a(n):
Answers
Answer: Odd first interest payment
Explanation: The Interest paid on the first installment is a odd first Interest payment. Such scenario comes into play when a loan with a fixed installment payment date, which is 6 months in this case (January 1st and July 1st), begins on a date which does not allow the immediate use to f this regular payment schedule. Hence, the odd first Interst payment is adopted in other to enable the lender cove r the initial period before beung able to use the usual regular payment schedule. In this case the odd first Interest schedule is between June 1st to January 1st. After which regular payment schedule commences on July 1st.
Cherise considers movies and concerts to be perfect substitutes. When Cherise maximizes her utility, what will her optimal bundle of movies and concerts probably look like? Cherise’s indifference curves will be straight lines. Her optimal bundle will likely consist of just 1 good. Cherise’s indifference curves will be convex to the origin. Her optimal bundle will likely include both goods, with the relative proportions partially determined by their relative prices. Cherise’s indifference curves will be L-shaped. Her optimal bundle will include both goods, consumed in a fixed proportion. Cherise’s indifference curves will be concave to the origin. Her optimal bundle will likely consist of just 1 good.
Answers
Answer:
Cherise’s indifference curves will be straight lines. Her optimal bundle will likely consist of just 1 good.
Explanation:
When two goods are perfect substitutes, their indifference curve is a straight line. The slope of the line is negative and it is -1, since any increase in the price of good A will result in the purchase of good B.
Indifference curves that are L-shaped result from two goods being perfect complements, not perfect substitutes.
Generally, indifference curves are convex, since the more you consume of good A will result in a higher substitution rate for good B.
Concave indifference curves are not common, since the more you consume of good A results in a lower substitution rate of good B, i.e. the more you consume of good A results in you wanting less of good B.
Answer:
the answer is D !
Explanation:
i just took the quiz!
A car manufacturer is considering locating an assembly plant in your region. List two simple, two intermediate, and two complex problems associated with this proposal from your perspective.
Answers
Answer:Explanation:
simple problems
a. it could bring about issues of traffic congestion
b. it could also cause pollution problems in the area.
intermediate problem
a. the car manufacturer may not be allowed to site such a project of large scale as this in the region
b. the region may not be an economiCally favourable place. the car manufacturer has to check this before going ahead.
complex problem
a. getting suitable workforce with required skills to work
b. Getting storage space for vehicles that have been manufactured.
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $170 million of 10% bonds, dated January 1, on January 1, 2021. Management has the positive intent and ability to hold the bonds until maturity. For bonds of similar risk and maturity the market yield was 12%. The price paid for the bonds was $151 million. Interest is received semiannually on June 30 and December 31. Due to changing market conditions, the fair value of the bonds at December 31, 2021, was $160 million. Required: 1. to 3. Prepare the relevant journal entries on the respective dates (record the interest at the effective rate). 4. At what amount will Fuzzy Monkey report its investment in the December 31, 2021 balance sheet
Answers
Answer:
Fuzzy Monkey Technologies Inc.
Journal Entries
Date Particulars Debit'Million Credit'Million
1-Jan-18 Investment in Bond $170.00
To Cash $151.00
To Discount on bond investment $19.00
(Being investment in bond recorded)
30-Jun-18 Cash $8.50
($170 *10% * 6/12)
Discount on bond investment $0.56
To Interest revenue $9.06
($151*12%*6/12)
(Being revenue recognition for bond
interest and discount amortized)
31-Dec-18 Cash $8.50
($170 *10% * 6/12)
Discount on bond investment $0.59
To Interest revenue $9.09
(Being revenue recognition for bond
interest and discount amortized)
4. Fuzzy monkey report its investment on 31.12.2018 balance sheet at amortized cost:
= $151 + $0.56 + $0.59
= $152.15 million
What evaluation criteria is used in economic analysis?a. Time to completion b. Technical feasibility c. Sustainability d. Financial units (dollars or other currency)
Answers
Answer:
The evaluation criteria used in economic analysis is:
d. Financial units (dollars or other currency)
Explanation:
The evaluation criteria for economic analysis is usually based on financial units, which are national currencies. They represent the monetary values of the elements of any economic analysis. For instance, to ascertain the profitability or otherwise of a transaction, the sales value is compared to the costs. The excess of the sales value over the costs is regarded as the profit. The reverse is regarded as the loss. The evaluation criteria for these two economic analysis is based on the financial units of sales and costs expressed as national currencies.
Convex Mechanical Supplies produces a product with the following costs as of July 1, 20X1: Material $6 Labor 4 Overhead 3 $13 Beginning inventory at these costs on July 1 was 12,100 units. From July 1 to December 1, Convex produced 27,000 units. These units had a material cost of $10 per unit. The costs for labor and overhead were the same. Convex uses FIFO inventory accounting. a. Assuming that Convex sold 29,000 units during the last six months of the year at $20 each, what would gross profit be?
Answers
Answer:
Gross profit= $135,400
Explanation:
Giving the following information:
12,100 units:
Material $6
Labor $4
Overhead $3
Total $13
27,00 units:
Material $10
Labor $4
Overhead $3
Total $17
Convex sold 29,000 units during the last six months of the year at $20 each.
First, we need to calculate the cost of goods sold. Under the FIFO (first-in, first-out) method, the COGS is calculated using the cost of the first units sold.
COGS= 12,100*13 + 16,900*17= $444,600
Now, the gross profit:
Gross profit= 29,000*20 - 444,600
Gross profit= $135,400
The following is summary of information presented on the financial statements of a company on December 31, 2015. Account 2015 2014 Current Assets $88,000 $74,000 Accounts Receivable 61,000 72,000 Merchandise Inventory 64,000 60,000 Current Liabilities 52,000 46,000 Long−term Liabilities 40,000 51,000 Common Stock 70,000 54,000 Retained Earnings 66,000 45,000 What would a horizontal analysis report show with respect to long−term liabilities?
Answers
Answer: Long-term liabilities decreased by 21.57%
Explanation:
Horizonal analysis shows the change in the amount in question over a period of time which in this case is one year from 2014 to 2015.
The Long-term liabilities in 2014 was $51,000 and $40,000 in 2015.
Horizontal analysis will be ;
= (40,000 - 51,000) / 51,000
= -0.21568
= -21.57%
Long-term liabilities decreased by 21.57%
what lead to Henry Ford's success
Answers
Answer:
Henry Ford made a car that was affordably for people to buy.
Explanation: just is
Assume that Sonic Foundry Corporation has a contractual debt outstanding. Sonic has available two means of settlement. It can either make immediate payment of $2,458,000, or it can make annual payments of $336,800 for 15 years. Click here to view factor tables Payments must begin now and be made on the first day of each of the 15 years, what payment method would you recommend assuming an expected effective-interest rate of 11% during the future period
Answers
Answer: Make immediate payment of $2,458,000
Explanation:
The recommended payment option will be the one with a lower present value.
It can make a payment of $2,458,000 now which would be the PV of the first option.
Second option is a constant amount for 15 years to be paid on the first day of every year making it an annuity due.
Present Value of annuity due;
= Annuity * Present value factor of Annuity due, 15 periods, 11%
= 336,800 * 7.9819
= $2,688,303.92
Lower and recommended option is to make immediate payment of $2,458,000.
5. Calculating tax incidence Suppose that the U.S. government decides to charge wine consumers a tax. Before the tax, 45 billion bottles of wine were sold every year at a price of $4 per bottle. After the tax, 38 billion bottles of wine are sold every year; consumers pay $5 per bottle (including the tax), and producers receive $2 per bottle. The amount of the tax on a bottle of wine is $ per bottle. Of this amount, the burden that falls on consumers is $ per bottle, and the burden that falls on producers is $ per bottle. True or False: The effect of the tax on the quantity sold would have been the same as if the tax has been levied on producers. True False
Answers
Answer:
The amount of the tax on a bottle of wine is $3 per bottle;
Amount of tax = Amount paid by consumers - Amount received by producers
= 5 - 2
=$3
Of this amount, the burden that falls on consumers is $1 per bottle;
Burden on consumer = Price paid by Consumer after tax - Price paid before
= 5 - 4
= $1
The burden that falls on producers is $2 per bottle;
Burden on producers = Tax - Consumer burden
= 3 - 1
= $2
The effect of the tax on the quantity sold would have been the same as if the tax has been levied on producers. FALSE
If the tax had been on producers then the price might not have increased as it did. This would leave the price at or close to the point it was at and consumers would still be able to afford more of the bottles.
