The company's share price can be calculated using the Gordon Growth Model, which takes into account the company's expected future cash flows and the required rate of return.The WACC represents the average rate of return required by the company's investors and is a weighted average of the cost of debt and the cost of equity.
To calculate the share price, we need to determine the company's free cash flow to the firm (FCFF) for the year just ended and the expected growth rate of FCFF. First, let's calculate the FCFF for the year just ended. FCFF is calculated by subtracting capital expenditures (capex) from the operating cash flow (EBIT - taxes + depreciation) and then adding the change in net working capital (NWC):
FCFF = (EBIT - taxes + depreciation) - capex + change in NWC
Given that EBIT is $15 million, depreciation is $2 million, change in NWC is $3.5 million, and capex is $5 million, we can substitute these values into the equation:
FCFF = ($15 million - (0.4 * $15 million) + $2 million) - $5 million + $3.5 million
Simplifying the equation, we get:
FCFF = $6.5 million
Next, we need to determine the expected growth rate of FCFF. The problem states that EBIT, depreciation, change in NWC, and capex are expected to grow at 6% per year indefinitely. Therefore, we can assume that FCFF will also grow at the same rate. Now, let's calculate the company's weighted average cost of capital (WACC). Given that the WACC is 10%, we can assume that this is the cost of equity. To calculate the cost of equity, we use the following formula:
Cost of Equity = Risk-Free Rate + Beta * Equity Risk Premium
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What is the most important part of business plan?
What makes a business plan effective? (5 points)
The most important part of a business plan can vary depending on the specific business and its objectives. However, there are several key components that are generally considered essential for a business plan to be effective.
1. Executive Summary: The executive summary is a concise overview of the entire business plan. It highlights the key points, goals, and strategies of the business. It is important because it provides a snapshot of the business and captures the attention of readers, such as potential investors or partners.
2. Market Analysis: A thorough market analysis is crucial for understanding the target market, identifying competitors, and assessing market trends. It helps demonstrate the viability and potential of the business idea and shows that the business owner has conducted research and understands the industry landscape.
3. Unique Value Proposition: A clear and compelling unique value proposition sets the business apart from competitors. It explains why customers should choose the product or service being offered and how it meets their needs better than other alternatives. This helps establish a competitive advantage and attracts customers.
4. Financial Projections: Financial projections provide an estimate of the business's financial performance over a specific period, typically including revenue, expenses, and cash flow. These projections demonstrate the business's potential profitability and help assess its financial feasibility. They also give investors or lenders insights into the expected return on investment.
5. Implementation and Strategy: A well-defined implementation plan and strategy outline how the business will be structured, operated, and marketed. It includes details about the team, operations, marketing and sales strategies, and milestones. A clear and comprehensive plan helps demonstrate that the business has a roadmap for success and mitigates risks.
To make a business plan effective, it is essential to ensure the following:
- Clarity: The plan should be clear, concise, and well-organized, making it easy for readers to understand and follow.
- Realism: The plan should be grounded in realistic goals, projections, and strategies based on thorough research and analysis.
- Customization: The plan should be tailored to the specific business and its unique value proposition, addressing the target market's needs and preferences.
- Cohesion: All sections of the plan should align and support the overall business concept and objectives.
- Professionalism: The plan should be professionally presented, with attention to detail, accurate data, and well-supported arguments.
By incorporating these elements, a business plan becomes a comprehensive and persuasive document that effectively communicates the business's potential and secures support from stakeholders.
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Auditing is a risky business, Many problems may arise during an audit. For questions 1 and 2 below discuss the primary risks involved in each scenario. Please be specific. 1. Sam and Dave are audit partners, and have decided to undertake the audit of ABC Corp. During some preliminary analytical procedures they determined that the cash account was low relative to the amount of sales. Sam proceeds to double check the bank reconciliations, but they seem to be correct. Dave reviews the Chart of Organization to see the responsibility level of those that examine the cancelled checks for proper signatures. However, Sam and Dave are still warried.
The primary risk in this scenario is the potential misstatement of revenue recognition and cash balances.
The concern arises from the low cash account relative to the amount of sales observed during preliminary analytical procedures.
Sam and Dave have taken steps to investigate the issue by double-checking the bank reconciliations and reviewing the Chart of Organization for responsibility levels. However, despite these efforts, they are still worried about the situation.
1. Revenue Recognition Risk:
The low cash account relative to sales raises concerns about the accuracy and completeness of revenue recognition.
There is a possibility of fictitious or unrecorded sales that may lead to an overstatement of revenue.
Sam and Dave need to thoroughly assess the revenue recognition process and examine supporting documentation such as sales invoices, customer contracts, and shipping records to ensure proper recognition and recording of sales.
2. Cash Misstatement Risk:
The discrepancy between the cash account and sales suggests a potential misstatement in the cash balance. Although the bank reconciliations appear to be correct, there might be other factors impacting the cash account, such as unrecorded cash receipts or irregularities in cash handling.
Sam and Dave should review the company's cash handling procedures, perform additional tests of cash receipts, and investigate any unusual or unexpected transactions.
Additional Considerations:
Apart from revenue recognition and cash misstatement risks, Sam and Dave should also assess the possibility of fraud, internal control weaknesses, or non-compliance with relevant accounting standards.
They may need to expand their audit procedures, such as conducting further substantive testing, performing detailed analytical procedures, and assessing the effectiveness of internal controls related to revenue and cash.
Their continued concern indicates the need for further investigation to address any potential risks and ensure the accuracy of financial reporting.
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Imagine that you are the economic advisor to the Governor of the Reserve Bank of New Zealand. Being in charge of the conduct of monetary policy in a small open economy, the Governor is interested in hearing from you to what extent the conduct of monetary policy in an open economy like New Zealand differs from the conduct of monetary policy in a closed economy. What factor(s) account for critical differences in the conduct of policy in open versus closed economies? Also comment on the circumstances under which the conduct of optimal policy in an open economy coincides with optimal policy in a closed economy. The Governor wants you to prepare a detailed verbal exposition of the conduct of policy in both economies. Supplement your analysis with graphs whenever possible. Make sure that you clearly identify the model upon which your analysis is based.
Monetary policy refers to the actions undertaken by a central bank, such as the Reserve Bank of New Zealand, to control the money supply and influence the economy's growth and inflation rates. The conduct of monetary policy in an open economy like New Zealand differs significantly from the conduct of monetary policy in a closed economy. There are critical differences in the conduct of policy in open versus closed economies, which accounts for the different ways monetary policy is conducted.
Monetary policy in an open economy is characterized by a focus on both domestic and external economic variables. An open economy interacts with the rest of the world through trade, foreign direct investment, and international capital flows, among other channels. Thus, the central bank must consider how its monetary policy affects the exchange rate and how changes in exchange rates impact the economy's trade and financial flows.
In conclusion, the conduct of monetary policy in an open economy differs significantly from that in a closed economy. The key differences relate to the exchange rate channel's role in the transmission mechanism of monetary policy in an open economy. Additionally, the conduct of optimal policy in an open economy can coincide with optimal policy in a closed economy, depending on the specific circumstances. The model underlying this analysis is the open economy macroeconomic model.
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discuss your own thoughts on the perspective for the future of China's current account balance. Please do not write less than 300 words and no more than 500 words for your opinion. In your opinion consider the following question: What policy would you recommend to avoid the outflow of foreign investment? Give a brief justification for your recommendation (please try to use mostly economic arguments).
The future of China’s current account balance is uncertain, and will depend on several factors, including economic growth, trade policies, and investment policies.
To avoid the outflow of foreign investment, China should implement policies that are more favorable to foreign investors. This would help to attract more foreign investment, which would help to improve China’s current account balance.
China has become a world-leading economy, and one of the key indicators of its financial success is its current account balance. The current account balance in China has recently shifted from being a surplus to being a deficit. In the future, China’s current account balance may improve, or it may deteriorate. In my opinion, several factors will determine the outlook of China’s current account balance.
First, China’s economic growth rate is a key factor in its current account balance. China has been experiencing slower economic growth in recent years, and this has led to a decrease in the country’s current account balance. If China’s economy continues to grow at a slower rate, it may continue to experience a current account deficit.
Second, China’s trade policies will also affect its current account balance. China has been criticized by other countries for its trade policies, and if China continues to have trade tensions with other countries, this could lead to a decline in its current account balance.
Third, China’s investment policies will also play a role in its current account balance. If China attracts foreign investment, this could help to improve its current account balance. However, if China’s policies discourage foreign investment, this could lead to a decrease in its current account balance.
To avoid the outflow of foreign investment, I would recommend that China implement policies that are more favorable to foreign investors. Specifically, China should reduce its restrictions on foreign investment, and provide more incentives for foreign investors to invest in the country. This would help to attract more foreign investment, which would help to improve China’s current account balance.
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investment in human capital: question 36 options: a) is of minor importance to economic growth. b) can be acquired through on-the-job training. c) is an important source of economic growth. d) is characterized by both b) and c).
Therefore, option d) is the correct answer as it acknowledges that investment in human capital involves both on-the-job training and its importance in economic growth.
The correct answer to question 36 is option d) is characterized by both b) and c). Investment in human capital refers to the process of improving the skills, knowledge, and abilities of individuals, which in turn leads to economic growth.
This investment can be acquired through on-the-job training, where individuals gain new skills and knowledge while working. On-the-job training is an important aspect of investment in human capital as it enhances the productivity and efficiency of workers.
Additionally, investment in human capital is a crucial source of economic growth. When individuals are equipped with relevant skills and knowledge, they can contribute to innovation, productivity, and overall economic development.
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SBA Inc. purchased on January 1 st 2022 a machine for 350,000 Dhs. The machine has a salvage value of 50,000 Dhs and a useful life of 10 years. Required: 1-Prepare the depreciation table according to : a) the straight-line method b) the double declining balance 2- Assume that the company made an overhaul to the machine that amounts to 75,000 Dhs at the beginning of the 2025, calculate the depreciation expense for 2025 according to : a) the straight-line method and b) the double declining balance 3- Assume that the company sells the machine after the overhaul for 200,000 Dhs, record the disposal of themachine using : a) the straight-line method and b)the double declining balance
The depreciation expense for the machine using the straight-line method is 35,000 Dhs per year, while the depreciation expense using the double declining balance method is 70,000 Dhs per year.
The straight-line expense of depreciation allocates the cost of an asset evenly over its useful life. The double declining balance method of depreciation allocates a higher depreciation expense in the early years of an asset's life and a lower depreciation expense in the later years.
In this case, the machine has a cost of 350,000 Dhs, a salvage value of 50,000 Dhs, and a useful life of 10 years. The depreciation expense for the machine using the straight-line method is calculated as follows:
(Cost - Salvage Value) / Useful Life = Depreciation Expense
(350,000 - 50,000) / 10 = 35,000 Dhs
The depreciation expense for the machine using the double declining balance method is calculated as follows:
2 * Straight-Line Depreciation Rate = Double Declining Balance Rate
2 * (1 - (Salvage Value / Cost)) = 2 * (1 - (50,000 / 350,000)) = 66.67%
Cost * Double Declining Balance Rate = Depreciation Expense
350,000 * 66.67% = 233,350 Dhs
After the overhaul, the machine has a new cost of 425,000 Dhs, a salvage value of 50,000 Dhs, and a useful life of 5 years. The depreciation expense for the machine using the straight-line method is calculated as follows:
(Cost - Salvage Value) / Useful Life = Depreciation Expense
(425,000 - 50,000) / 5 = 85,000 Dhs
The depreciation expense for the machine using the double declining balance method is calculated as follows:
2 * Straight-Line Depreciation Rate = Double Declining Balance Rate
2 * (1 - (Salvage Value / Cost)) = 2 * (1 - (50,000 / 425,000)) = 70.97%
Cost * Double Declining Balance Rate = Depreciation Expense
425,000 * 70.97% = 304,675 Dhs
If the machine is sold for 200,000 Dhs, the company will record a gain of 50,000 Dhs using the straight-line method and a gain of 100,000 Dhs using the double declining balance method. The gain is calculated as follows:
Sale Price - Book Value = Gain
200,000 - (Cost - Depreciation Expense) = Gain
200,000 - (350,000 - 35,000 * 5 years) = 50,000 Dhs
200,000 - (425,000 - 85,000 * 5 years) = 100,000 Dhs
After the overhaul, the depreciation expense for the machine using the straight-line method is 42,500 Dhs per year, while the depreciation expense using the double declining balance method is 85,000 Dhs per year. If the machine is sold for 200,000 Dhs, the company will record a gain of 50,000 Dhs using the straight-line method and a gain of 100,000 Dhs using the double declining balance method.
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Longmont recently raised its income tax rate from 4% to 6%. Mrs. Mason reacts to the increase by working harder to earn more income. She is demonstrating the income effect of the rate increase.
Group of answer choices
True
False
The statement is false. Mrs. Mason's reaction of working harder to earn more income in response to the tax rate increase would not be considered the income effect but rather the substitution effect.
The income effect refers to the change in an individual's behaviour resulting from a change in their income. In this case, the income tax rate in Longmont has increased from 4% to 6%. If Mrs Mason were to react to this increase by working harder to earn more income, it would be an example of the substitution effect, not the income effect.
The substitution effect occurs when individuals adjust their behaviour in response to changes in relative prices. In this scenario, the higher income tax rate may decrease the net income Mrs. Mason receives from her additional work, which can reduce her incentive to work more. This is because a higher tax rate means a larger portion of her additional income will be paid in taxes, resulting in lower take-home pay.
In contrast, the income effect is the change in an individual's consumption or savings behaviour due to a change in their income level, holding other factors constant. It does not directly relate to changes in tax rates.
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Pharoah Delivery is a rapidly growing delivery service. Last year, 80% of its revenue came from the delivery of mailing "pouches" and small, standardized delivery boxes (which provides a 20% contribution margin). The other 20% of its revenue came from delivering non-standardized boxes (which provides a 70% contribution margin). With the rapid growth of Internet retail sales, Pharoah believes that there are great opportunities for growth in the delivery of non-standardized boxes. The company has fixed costs of $13,413,900. Sales mix is determined based upon total sales dollars. (a) What is the company's break-even point in total sales dollars? At the break-even point, how much of the company's sales are provided by each type of service? (Use Weighted-Average Contribution Margin Ratio rounded to 2 decimal places e.g. 0.22 and round final answers to 0 decimal places, e.g. 2,510.) (b) The company's management would like to hold its fixed costs constant but shift its sales mix so that 60% of its revenue comes from the delivery of non-standardized boxes and the remainder from pouches and small boxes. If this were to occur, what would be the company's break-even sales, and what amount of sales would be provided by each service type? (Use Weighted-Average Contribution Margin Ratio rounded to 2 decimal places e.g. 0.22 and round final answers to 0 decimal places, e.g. 2,510.) Total break-even sales Sale of mail pouches and small boxes Sale of non-standardized boxes
The desired sales mix, the break-even sales would be $25,828,269, with $10,331,308 from mailing pouches and small boxes and $15,496,961 from non-standardized boxes.
(a) To calculate the break-even point in total sales dollars, we need to determine the weighted-average contribution margin ratio. The weighted-average contribution margin ratio is calculated by multiplying the contribution margin ratio of each service type by its proportion of sales.
Weighted-average contribution margin ratio = (Proportion of sales for mailing pouches and small boxes * Contribution margin ratio for mailing pouches and small boxes) + (Proportion of sales for non-standardized boxes * Contribution margin ratio for non-standardized boxes)
Weighted-average contribution margin ratio = (0.8 * 0.20) + (0.2 * 0.70) = 0.26
The break-even point in total sales dollars is calculated by dividing the fixed costs by the weighted-average contribution margin ratio.
Break-even point = Fixed costs / Weighted-average contribution margin ratio
Break-even point = $13,413,900 / 0.26 = $51,590,385
To determine the proportion of sales provided by each service type at the break-even point, we can multiply the break-even point by the proportion of sales for each service type.
Sales for mailing pouches and small boxes = Break-even point * Proportion of sales for mailing pouches and small boxes
Sales for mailing pouches and small boxes = $51,590,385 * 0.8 = $41,272,308
Sales for non-standardized boxes = Break-even point * Proportion of sales for non-standardized boxes
Sales for non-standardized boxes = $51,590,385 * 0.2 = $10,318,077
Therefore, at the break-even point, sales of mailing pouches and small boxes would be $41,272,308 and sales of non-standardized boxes would be $10,318,077.
(b) If the company wants to shift its sales mix to 60% from non-standardized boxes and the remainder from pouches and small boxes, we can calculate the break-even sales and sales mix accordingly.
Weighted-average contribution margin ratio = (0.4 * 0.20) + (0.6 * 0.70) = 0.52
Break-even sales = Fixed costs / Weighted-average contribution margin ratio
Break-even sales = $13,413,900 / 0.52 = $25,828,269
Sales for mailing pouches and small boxes = Break-even sales * Proportion of sales for mailing pouches and small boxes
Sales for mailing pouches and small boxes = $25,828,269 * 0.4 = $10,331,308
Sales for non-standardized boxes = Break-even sales * Proportion of sales for non-standardized boxes
Sales for non-standardized boxes = $25,828,269 * 0.6 = $15,496,961
Therefore, with the desired sales mix, the break-even sales would be $25,828,269, with $10,331,308 from mailing pouches and small boxes and $15,496,961 from non-standardized boxes.
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Purchase-Related Transactions The Stationery Company purchased merchandise on account from a supplier for $14,500, trms 2/10, /30. The Stationery Company retumed merchandise with an invoice amount of $3,500 and received full credit a. If The Stationery Company pays the invoice within the discount period, what is the amount of cash required for the payment? 11,000 X b. Under a perpetual inventory vystum, what account is credited by The Stationery Company to record the return? Inventory V
a. The amount of cash required for the payment is $11,000. b. The Stationery Company will credit the Inventory account with the invoice amount of $3,500.
a. If The Stationery Company pays the invoice within the discount period, the amount of cash required for the payment is $11,000. The terms of the purchase state "2/10, net 30," which means that if The Stationery Company pays the invoice within 10 days, they are eligible for a 2% discount.
The discount is calculated based on the purchase amount of $14,500. To determine the amount of cash required for the payment, we subtract the discount from the purchase amount: $14,500 - (2% of $14,500) = $14,500 - $290 = $11,000.
b. Under a perpetual inventory system, the account credited by The Stationery Company to record the return of merchandise is the Inventory account.
In a perpetual inventory system, the Inventory account is continuously updated to reflect changes in inventory levels. When merchandise is returned, it reduces the quantity and value of inventory. To record the return, The Stationery Company will credit the Inventory account with the invoice amount of $3,500.
This entry helps to accurately track the inventory on hand and maintain the integrity of the perpetual inventory records. Additionally, the Stationery Company may also debit the Accounts Payable account to offset the return and reflect the reduction in the amount owed to the supplier.
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answer not c
Increased community social capital will: a. always improve members' health. b. always provide net positive improvements. c. lead to more productive (for better or worse) community activities. Od. driv
Increased community social capital will always provide net positive improvements (Option B).
What is social capital?Social capital refers to the networks, norms, and social trust that facilitate coordination and cooperation among individuals and groups in a community. Social capital is crucial in creating a healthy and functional community. It's a valuable resource that can generate positive outcomes for individuals, institutions, and societies.
The benefits of increased community social capital are
Always provide net positive improvements. It's an essential aspect of social capital.Lead to more productive community activitiesAlways improve members' healthDrive out private investmentYour question is incomplete, but most probably your options were
a. always improve members' health.
b. always provide net positive improvements.
c. lead to more productive (for better or worse) community activities.
d. drive out private investment.
Thus, the correct option is B.
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1. Find the list price. Round to the nearest cent.
Net cost $561; trade discount 40/16 23
A. $280.50
B. $243.08
C. $1294.71
D. $1122.00
2. Solve for the amount of discount and amount due.
Invoice amount: $44.81
Invoice date: May 6
Terms: 2/10, net 30
Date paid: May 15
A. Amount of discount: $0.90; amount due: $43.91
B. Amount of discount: $8.96; amount due: $35.85
C. Amount of discount: $0; amount due: $44.81
D. Amount of discount: $4.48; amount due: $40.33
3. Solve for the amount of discount and amount due.
Invoice amt: $1160
Invoice date: May 20
Terms: 5/10, n/60
Shipping/Insurance: $32.52
Date paid: May 28
A. Amount of discount: $58.00; amount due: $1134.52
B. Amount of discount: $0; amount due: $1192.52
C. Amount of discount: $59.63; amount due: $1132.89
D. Amount of discount: $58.00; amount due: $1069.48
4. Find the discount date and net payment date.
Invoice date: Nov 28
Terms: 1/8 - 20x
Discount date: Dec 2; net payment date: Dec 22
Discount date: Dec 25; net payment date: Jan 15
Discount date: Dec 18; net payment date: Jan 7
Discount date: Dec 26; net payment date: Jan 15
5. Solve for the amount of discount and amount due.
Invoice amt: $293.41
Invoice date: Sept 13
Terms: 3/11 EOM
Goods received: Sept 16
Date paid: Oct 9
Amount of discount: $32.28; amount due: $261.13
Amount of discount: $8.50; amount due: $282.41
Amount of discount: $8.80; amount due: $284.61
Amount of discount: $0; amount due: $293.41
1. The list price is $2671.43. none of the options.
2. The amount of discount is $0.90 and the amount due is $43.91. Option A.
3. The amount of discount is $58.00 and the amount due is $1134.52. Option A.
4. The discount date is Dec 6 and the net payment date is Dec 18. none of the options.
5. The amount of discount is $8.80 and the amount due is $284.61. Option C.
1. To find the list price, we need to calculate the complement of the trade discount. The complement of a discount is the percentage of the list price that remains after subtracting the discount.
Trade discount: 40/16 23
Complement of the discount: 100% - 40% - 16% - 23% = 21%
Net cost: $561
List price = Net cost / Complement of discount = $561 / 0.21 = $2671.43
Rounding to the nearest cent, the list price is $2671.43. none of the options.
2. The terms "2/10, net 30" mean that the buyer is eligible for a 2% discount if the payment is made within 10 days. If not, the full amount is due within 30 days.
Invoice amount: $44.81
Amount of discount: Invoice amount * Discount rate = $44.81 * 0.02 = $0.8962 ≈ $0.90
Amount due: Invoice amount - Amount of discount = $44.81 - $0.90 = $43.91
Therefore, the amount of discount is $0.90 and the amount due is $43.91. Option A is correct.
3. The terms "5/10, n/60" mean that the buyer is eligible for a 5% discount if the payment is made within 10 days. Otherwise, the full amount is due within 60 days.
Invoice amount: $1160
Amount of discount: Invoice amount * Discount rate = $1160 * 0.05 = $58.00
Amount due: Invoice amount - Amount of discount + Shipping/Insurance = $1160 - $58.00 + $32.52 = $1134.52
Therefore, the amount of discount is $58.00 and the amount due is $1134.52. Option A is correct.
4. The terms "1/8 - 20x" mean that the buyer is eligible for a 1% discount if the payment is made within 8 days. Otherwise, the net payment is due within 20 days.
Discount date: Invoice date + Discount period = Nov 28 + 8 days = Dec 6
Net payment date: Invoice date + Net payment period = Nov 28 + 20 days = Dec 18
Therefore, the discount date is Dec 6 and the net payment date is Dec 18. none of the options.
5. The terms "3/11 EOM" mean that the buyer is eligible for a 3% discount if the payment is made within 11 days from the end of the month.
Invoice amount: $293.41
Amount of discount: Invoice amount * Discount rate = $293.41 * 0.03 = $8.8023 ≈ $8.80
Amount due: Invoice amount - Amount of discount = $293.41 - $8.80 = $284.61
Therefore, the amount of discount is $8.80 and the amount due is $284.61. Option C is correct.
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Management 6080 Logistics Transpertation Management Assignment 1 Industry Cost Analysis review based on the US market. Answer each question fully and explain your rationale where required. 25 marks 1. What are the two methods of calculating the marginal costs. Why would each method be useful? 1 mark mast have all methods identified 2. Name the operational cost categories 4 marks, must identify all 8 categories 3. When looking at local truck trips, Regional Routes, Inter-regional Deliveries, and National trips what was the trend in 2021 ? 1 mark two points 1/2 mark each 4. Equipment Trends, If you were trailer manufacture what type of trailer will be in demand within the next frve years and why? 2 marks 5. Is alternative fuels being adopted by the industry? And what is the pereentage of electric vehicle adoption? 1 mark 6. What was the marginal cost of trucking in 2021 with and without fuel costs? 2 marks 7. What is one of the primary drivers of costs for the trucking industry. Not the specific line item but what impacts the overall operating costs. Explain your answer and provide examples. 2 marks 8. What is the average per mile driver compensation in 2021? 1 mark 9. What type of mileage is susceptible to rising fuel cests and why? 2 mark 10. Are tire prices a factor in the margin cost calculation? Explain your answer. 2 marks 11. What happened in 2021 to tire prices? I mark 12. What is the secend highest concern for drivers. Why. 2 marks
In 2021, tire prices experienced an increase. This increase was mainly due to factors such as rising raw material costs, supply chain disruptions, and increased demand for tires. The global pandemic also impacted the availability of raw materials and the production capacity of tire manufacturers, leading to higher prices in the market. These price increases affected both consumers and businesses that rely on tires for their vehicles or operations.
The severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) is the cause of the COVID-19 pandemic, which is often referred to as the coronavirus pandemic. In December 2019, an epidemic in the Chinese city of Wuhan led to the discovery of the new virus. There were futile attempts to contain it, which allowed the virus to spread to other parts of Asia and eventually the entire world. On January 30, 2020, the World Health Organisation (WHO) deemed the outbreak a public health emergency of international concern (PHEIC). On March 11, 2020, the WHO started using the term "pandemic." On May 5, 2023, the WHO ended their PHEIC proclamation; but, as of June 2, 2023, it is still referred to as a pandemic.
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Use TVM or Financial Calculator
PLEASE USE FINANCIAL CALCULATOR AND EXPLAIN
Jane just turns 30 year old and wants to start a savings plan, where she contributes $X every month to a savings account, starting one month from now until she reaches 65 years old. From her 65th birthday, she wishes to withdraw $1500 per month for 12 months at the beginning of each month, with the first withdrawal happens on 65th birthday. Over the next 20 years, her monthly withdrawal will increase by 3% in comparison to previous year (i.e., withdraw $1500 × 1.03 per month in the 2nd year, $1500 × 1.032 per month in the 3rd year, etc). Her last withdrawal will occur 1 month before her 85th birthday. Given that the savings account has 12% annual nominal interest rate, compounded monthly, what is X
To find the value of X, we can use the Time Value of Money (TVM) concept and a financial calculator. Using a financial calculator, follow the steps above to find the value of X. The exact steps may vary depending on the calculator you are using.
Step 1: Determine the number of periods.
Since Jane plans to start saving from the age of 30 until she reaches 65, the number of periods is 65 - 30 = 35.
Step 2: Calculate the future value of the withdrawals.
The monthly withdrawals will increase by 3% every year for 20 years. Using the formula for the future value of an annuity, we can calculate the future value of the withdrawals.
Step 3: Calculate the present value of the future withdrawals.
Using the formula for the present value of an annuity, we can calculate the present value of the future withdrawals.
Step 4: Calculate the monthly savings amount.
We can now use the formula for the present value of a single sum to calculate the monthly savings amount.
Step 5: Solve for X.
Substitute the calculated values into the equation from Step 4 and solve for X.
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Valeria is a closed economy, where consumption totals $3 billion, tax payments are $300 million, government spending is $1 billion, and GDP is $5 billion. Private saving amounts to A. $1.7 billion and Valeria's government runs a budget deficit. B. $1.7 billion and Valeria's government runs a budget surplus. C $1 billion and Valeria's government runs a budget deficit.
D $1 billion and Valeria's government runs a budget surplus.
Answer: D $1 billion, and Valeria's government runs a budget surplus.
In a closed economy, government spending, consumption, and savings are all part of Gross Domestic Product (GDP). In this closed economy, the private saving amounts to $1 billion and Valeria's government runs a budget surplus.
Here's how it was obtained.
Given the data; Consumption = $3 billion,
Tax payments = $300 million,
Government spending = $1 billion,
and GDP = $5 billion.
Private savings = GDP - Consumption - Government spending
= $5 billion - $3 billion - $1 billion= $1 billion
Thus, private saving amounts to $1 billion. To determine if Valeria's government runs a budget deficit or a surplus, we need to compare government spending and tax revenue.
If the government spending is greater than the tax revenue, then there is a budget deficit.
However, if tax revenue is greater than the government spending, then there is a budget surplus.
Tax revenue = $300 million
Budget surplus/deficit = Tax revenue - Government spending
= $300 million - $1 billion= -$700 million
Since the result is negative, it means the government is running a budget surplus.
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Blades, Inc., needs to order supplies 2 months ahead of the delivery date. It is considering an order from a Japanese supplier that requires a payment of 12.5 million yen pay- able as of the delivery date. Blades has two choices: Purchase two call options contracts (since each option contract represents 6,250,000 yen). Purchase one futures contract (which represents 12.5 million yen). The futures price on yen has historically exhibited a slight discount from the existing spot rate. However, the firm would like to use currency options to hedge payables in Japanese yen for transactions 2 months in advance. Blades would prefer hedging its yen payable position because it is uncomfortable leaving the position open given the historical volatility of the yen. Nevertheless, the firm would be willing to remain unhedged if the yen becomes more stable someday. Ben Holt, Blades’ chief financial officer (CFO), prefers the flexibility that options offer over forward contracts or futures contracts because he can let the options expire if the yen depreciates. He would like to use an exercise price that is about 5 percent above the existing spot rate to ensure that Blades will have to pay no more than 5 percent above the existing spot rate for a transaction 2 months beyond its order date, as long as the option premium is no more than 1.6 percent of the price it would have to pay per unit when exercising the option. In general, options on the yen have required a premium of about 1.5 percent of the total transaction amount that would be paid if the option is exercised. For example, recently the yen spot rate was $.0072, and the firm purchased a call option with an exercise price of $.00756, which is 5 percent above the existing spot rate. The premium for this option was $.0001134, which is 1.5 percent of the price to be paid per yen if the option is exercised. A recent event caused more uncertainty about the yen’s future value, although it did not affect the spot rate or the forward or futures rate of the yen. Specifically, the yen’s spot rate was still $.0072, but the option premium for a call option with an exercise price of $.00756 was now $.0001512. An alternative call option is available with an expiration date of 2 months from now; it has a premium of $.0001134 (which is the size of the premium that would have existed for the option desired before the event), but it is for a call option with an exercise price of $.00792. As an analyst for Blades, you have been asked to offer insight on how to hedge. Use a spreadsheet to support your analysis of question 6.
To hedge its yen payable position, Blades, Inc. has two options: purchasing call options or purchasing a futures contract.
If Blades chooses to purchase call options, it would need to purchase two call options contracts, each representing 6,250,000 yen. This means that in total, the call options would cover the required payment of 12.5 million yen. The exercise price of the call options should be about 5 percent above the existing spot rate to ensure that Blades pays no more than 5 percent above the existing spot rate for the transaction. The premium for the call options should be no more than 1.6 percent of the price per unit when exercising the option. In general, call options on the yen have required a premium of about 1.5 percent of the total transaction amount.
Alternatively, Blades could purchase one futures contract, which represents the entire amount of 12.5 million yen. The futures price on yen has historically exhibited a slight discount from the existing spot rate.
To analyze the best option, a spreadsheet can be used to compare the costs and benefits of purchasing call options versus a futures contract. The spreadsheet should include columns for the spot rate, the exercise price, the premium, and the cost of each option. The costs can be calculated by multiplying the premium by the number of contracts or the futures price by the contract size.
Based on the analysis, Blades can determine which option provides the most cost-effective hedge for its yen payable position. The decision should consider factors such as the volatility of the yen and the firm's preference for flexibility.
In conclusion, Blades, Inc. can hedge its yen payable position by either purchasing call options or a futures contract. A spreadsheet analysis can be used to compare the costs and benefits of each option. The decision should consider factors such as the exercise price, premium, and the firm's risk tolerance.
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"Explain the following results of the Status of and
Observations on the Philippine Capital Market:
Equity Market
-Limited number of securities traded
-Low demand for securities
Capital Market
-No trans"
The status of the Philippine capital market reveals a limited number of securities being traded and a low demand for securities. The capital market lacks transparency and is not actively facilitating transactions.
The limited number of securities being traded in the equity market indicates a lack of diversity and variety in investment options. This limited range of available securities may limit investors' choices and potentially hinder the overall growth and development of the market. It may also indicate a lack of new companies entering the market or a lack of interest from existing companies to issue securities.
The low demand for securities suggests a lower level of investor interest in participating in the capital market. This could be due to various factors such as economic conditions, investor confidence, or a lack of awareness and education about investing in securities. The low demand may lead to decreased liquidity in the market, making it more challenging for investors to buy or sell securities at desired prices.
In terms of the capital market, the absence of transparency and limited transaction activity implies that the market is not actively facilitating the buying and selling of securities. This could be due to regulatory constraints, market inefficiencies, or a lack of investor confidence. Without an active and transparent capital market, companies may face challenges in raising capital and investors may be hesitant to participate, limiting the growth and development of the overall market.
Overall, the limited number of securities traded and low demand for securities, coupled with the lack of transparency and transaction activity in the Philippine capital market, indicate challenges and areas that need to be addressed to foster a more vibrant and robust capital market environment.
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Create a market for a good of your choice. Discuss how the equilibrium price and quantity are determined. 2. Assumed that the equilibrium price and quantity in your market have changed. How would you determine if the result was due mainly to a change in demand or supply? See table 4. This quiz is worth 10 points and is due SUNDAY, OCTOBER 2, BY MIDNIGHT.
The equilibrium price and quantity of a good are determined by the interaction of demand and supply. The demand curve shows the quantity of a good that consumers are willing to buy at each price, and the supply curve shows the quantity of a good that producers are willing to sell at each price.
Let's consider the market for apples. The demand curve for apples shows that consumers are willing to buy more apples at a lower price. The supply curve for apples shows that producers are willing to sell more apples at a higher price.
The equilibrium price is the price at which the quantity demanded equals the quantity supplied. In this case, the equilibrium price is $1 per apple. The equilibrium quantity is 100 apples.
If the equilibrium price and quantity in the market for apples have changed, then it is likely that either demand or supply has changed. To determine which has changed, we can look at the following:
If the price has increased and the quantity has decreased, then demand has likely decreased.
If the price has increased and the quantity has increased, then supply has likely increased.
If the price has decreased and the quantity has increased, then demand has likely increased.
If the price has decreased and the quantity has decreased, then supply has likely decreased.
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which of the following is not one of the steps for recognizing revenue? multiple choice estimate the total transaction price of the contract based on the sum of the stand-alone selling prices of the goods and services in the contract. allocate the transaction price to the performance obligations. identify the performance obligations of the contract. identify the contract with the customer.
The steps for recognizing revenue include identifying performance obligations, allocating the transaction price, and estimating the total transaction price but do not explicitly include identifying the contract with the customer.
Identifying the contract with the customer is not one of the steps for recognizing revenue. There are certain steps for recognizing revenue and these steps involve identifying the contract with the customer, identifying the performance obligations of the contract, allocating the transaction price to the performance obligations, and estimating the total transaction price of the contract based on the sum of the stand-alone selling prices of the goods and services in the contract.A contract is an agreement between two or more parties that involves enforceable obligations. When an entity enters into a contract with a customer, it must first identify the contract with the customer. The second step is to identify the performance obligations of the contract. A performance obligation is a promise to transfer goods or services to a customer. The third step is to allocate the transaction price to the performance obligations. The transaction price is the amount of consideration that the entity expects to receive in exchange for transferring goods or services to the customer. Finally, the entity must estimate the total transaction price of the contract based on the sum of the stand-alone selling prices of the goods and services in the contract.For more questions on revenue
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Consider a two-period small open economy.
The world interest rate is ∗=0.1R∗=0.1.
The small economy has outputs 1=10,2=10Q1=10,Q2=10, and its initial NIIP is 0=5B0=5.
log(c1)+log(c2)log(c1)+log(c2)
** Part a (3 marks)
Write down the lifetime budget constraint of the representative household.
** Part b (3 marks)
Solve for the optimal consumption path (c1,c2)(c1,c2).
** Part c (4 marks)
Now suppose that the economy receives a transitory shock, so that 1Q1 increases by 10%, but 2Q2 stays the same.
By evaluating and comparing 1CA1 before and after the shock, show that 1CA1increases by more than/less than the increase in 1Q1.
** Part d (5 marks)
Now suppose that the economy receives a permanent shock, so that both 1,2Q1,Q2increase by 10%.
Show that the change in 1CA1 is less than/more than/the same as the transitory shock case in Part c.
In a two-period small open economy, the exchange rate and international trade play crucial roles in shaping the economy's outcomes.
In a two-period small open economy, the main answer revolves around the significance of the exchange rate and international trade. The exchange rate is the rate at which the domestic currency can be exchanged for foreign currency. It influences the relative prices of domestic and foreign goods, thus affecting the economy's competitiveness in international markets.
International trade refers to the exchange of goods and services between countries. It allows the small open economy to specialize in the production of goods in which it has a comparative advantage, and import goods in which it is less efficient.
The exchange rate has a direct impact on the country's trade balance, which is the difference between the value of its exports and imports. A depreciation in the exchange rate makes the country's exports cheaper and imports more expensive, leading to an improvement in the trade balance.
This can boost domestic industries, create employment opportunities, and stimulate economic growth. On the other hand, an appreciation in the exchange rate can make exports more expensive and imports cheaper, potentially harming domestic industries and widening the trade deficit.
International trade allows the small open economy to benefit from specialization and economies of scale. By focusing on producing goods in which it has a comparative advantage, the country can increase its overall output and efficiency.
This can lead to higher productivity, lower costs, and increased competitiveness in the global market. Additionally, international trade can facilitate the transfer of knowledge, technology, and innovation between countries, fostering economic development and growth.
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which of the following is a reason why budgets in multinational companies are not used to evaluate the firm's performance relative to its budgets? a. evaluations based on budgets are harder when managers use sophisticated techniques to minimize foreign currency exposure. b. evaluations based on budgets are not possible because of cultural differences in the budgeting approach. c. evaluations based on budgets can be meaningless due to factors such as exchange rate risk and other volatility d. evaluations based on relative regional performance are considered more meaningful as compared to evaluations against budgets.
Evaluations based on budgets in multinational companies may not be used to evaluate the firm's performance due to factors such as exchange rate risk and other volatility.
Option c, "evaluations based on budgets can be meaningless due to factors such as exchange rate risk and other volatility," is a reason why budgets in multinational companies are not used to evaluate the firm's performance relative to its budgets. Multinational companies operate in multiple countries and are exposed to various economic and currency fluctuations. Exchange rate risk, changes in local market conditions, regulatory changes, and geopolitical factors can significantly impact the performance and financial results of a multinational company.
As a result, budgets that are based on certain assumptions and exchange rates may become outdated and unreliable for evaluating the firm's performance. Instead, evaluations based on relative regional performance, as mentioned in option d, or other performance metrics that consider the specific challenges and dynamics of each market may be considered more meaningful in assessing the company's performance in a multinational context.
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Grand International Hotel purchased a deep freezer from Indonesia, DFX-202 on 2019 . The cost of the freezer is RM 350,000 . The price of the freezer excluded insurance fees, RM 1,000, duty tax, RM 500 and transportation costs RM 3,000. Grand International Hotel estimate the useful life of the freezer is 12 year, salvage value is RM10,000, straight line method. Find the book value of the deep freezer at the end of year 4.
The book value of the deep freezer at the end of year 4 is approximately RM 236,666.68. This means that after 4 years of use and depreciation, the remaining value of the deep freezer, which represents its book value, is estimated to be RM 236,666.68.
Let's break down the calculation of the book value of the deep freezer at the end of year 4 with more detail.
Cost of the deep freezer: RM 350,000
Salvage value: RM 10,000
Useful life: 12 years
Depreciation method: Straight-line
Step 1: Calculate the depreciable cost of the deep freezer.
Depreciable Cost = Cost of Freezer - Salvage Value
Depreciable Cost = RM 350,000 - RM 10,000
Depreciable Cost = RM 340,000
Step 2: Determine the annual depreciation expense.
Annual Depreciation Expense = Depreciable Cost / Useful Life
Annual Depreciation Expense = RM 340,000 / 12
Annual Depreciation Expense = RM 28,333.33
Step 3: Calculate the accumulated depreciation at the end of year 4.
Accumulated Depreciation = Annual Depreciation Expense * Number of Years
Accumulated Depreciation = RM 28,333.33 * 4
Accumulated Depreciation = RM 113,333.32
Step 4: Calculate the book value of the deep freezer at the end of year 4.
Book Value = Cost of Freezer - Accumulated Depreciation
Book Value = RM 350,000 - RM 113,333.32
Book Value = RM 236,666.68
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3. Seller in San Francisco agreed to ship goods to Buyer in London under a CIF San Francisco contract. After the goods were loaded board the ship, but before it departed from San Francisco, Seller tendered the documents required by the contract to Buyer and asked to be paid. Buyer refused, asserting that it had a right to inspect the goods upon their arrival in London, and that it did not have to pay until it did so and was satisfied that the goods were incompliance with the contract. Seller sues for immediate payment. Will Seller win?
It is unlikely that the Seller will win the case for immediate payment.
1. The contract in question is a CIF (Cost, Insurance, and Freight) contract. Under a CIF contract, the Seller is responsible for arranging and paying for the cost of transportation and insurance of the goods until they reach the agreed destination, in this case, London.
2. According to the CIF contract terms, the Seller has the obligation to tender the required documents to the Buyer, indicating that the goods have been loaded onto the ship and are on their way to London.
3. However, the Buyer refuses to make immediate payment, asserting their right to inspect the goods upon their arrival in London. This is a reasonable position for the Buyer to take since CIF contracts often allow the Buyer to inspect the goods to ensure they comply with the contract terms before making payment.
4. The Buyer's argument is based on the standard practice and understanding of CIF contracts, where the Buyer has the right to verify the goods' quality, quantity, and compliance with the contract terms upon arrival.
5. Unless the CIF contract specifically states otherwise, the Seller cannot demand immediate payment before the Buyer has had the opportunity to inspect the goods and confirm that they meet the contract's requirements.
6. Therefore, it is unlikely that the Seller will win the case for immediate payment, as the Buyer has a legitimate reason to withhold payment until the goods have been inspected and found to be in compliance with the contract.
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How has the bilateral trade between the US and China made the
two economies intertwined and interdependent? Provide a
well-substantiated discussion.
The bilateral trade between the US and China has made the two economies intertwined and interdependent, resulting in significant economic and geopolitical implications.
The deep interdependence between the US and China can be attributed to several factors. Firstly, both countries are major players in the global economy, with the US being the world's largest economy and China being the second largest. Their extensive trade relationship is fueled by the complementarity of their economies, as the US relies on China for affordable manufactured goods while China depends on the US as a key export market.
Secondly, multinational corporations play a crucial role in connecting the two economies. Many American companies have established supply chains in China to take advantage of its low-cost manufacturing capabilities. Conversely, Chinese firms have invested heavily in the US, contributing to job creation and economic growth. This mutual investment further strengthens the interdependence between the two nations.
Moreover, financial ties between the US and China have grown significantly. China is one of the largest holders of US Treasury securities, while American investors have increasingly sought opportunities in the Chinese market. These financial linkages create interdependencies that can impact the stability of both economies.
Overall, the bilateral trade between the US and China has fostered deep economic interdependence, driven by complementary trade patterns, multinational investments, and financial connections. This interdependence has important implications for both countries, as well as for global economic dynamics.
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just need f, g, h to be answered
Suppose we have the following production function: Q = K3/4L1/4. Confirm the technology is constant returns to scale (CRS). Show your work and explain what it means. (1 points) (b) Now suppose K is fixed in the short-run at 21.544 (so that K3/4 = 10). Let r = $10 and w = $20. What is the firm’s cost minimization problem? Explain. (3 points) (c) Derive the short-run cost function. Show that short-run costs are increasing in Q and that average variable and marginal costs also rise as Q rises. You can use math or a table/figure to do this. (1 points) (d) Suppose P = $100. What is the firm’s profit maximization problem? (3 points) (e) Show that optimal Q = 23.20 in the short-run. You can use math or a spreadsheet. Also show costs, revenues, and profits. Should the firm simple choose Q = 0 and shut-down? (4 points) (f) Now let both K and L be variable. What is the firm’s long-run cost minimization problem now? What two conditions must be met to ensure the firm is minimizing costs. Explain and use a diagram. (2 points) (g) We can show that the MRTS = -3 L/K. What is the MRTS measuring and why does it change along the isoquant? (4 points) (h) Let r = $10 and w = $20. Find the long-run cost function (C = wL + rK). Show that average and marginal costs are constant (eg the same value for any Q). Why is this the case?
"Firm's Optimization," involves analyzing production function, cost minimization, and profit maximization in the short-run and long-run for effective decision-making.
(a) To confirm whether the technology exhibits constant returns to scale (CRS), we can analyze the behavior of the production function. The given production function is Q = K^(3/4) * L^(1/4). CRS means that if all inputs are multiplied by a positive constant, the output will increase by the same constant. Let's consider scaling the inputs by a factor of λ > 0. The new production function becomes Q' = (λK)^(3/4) * (λL)^(1/4) = λ^(3/4 + 1/4) * K^(3/4) * L^(1/4) = λQ. Since Q' = λQ, we observe that the output increases by the same factor λ as the inputs. This verifies constant returns to scale. In other words, doubling the inputs will result in a doubling of output, and increasing the inputs by any factor will cause the output to increase by the same factor. This property is significant because it implies that the firm's technology does not exhibit diminishing returns to scale. As the firm expands its scale of production by increasing all inputs proportionately, it can achieve the same proportional increase in output without experiencing diminishing marginal productivity. This allows the firm to potentially benefit from economies of scale and maintain cost efficiency as it grows.
Constant returns to scale provide opportunities for firms to expand their operations and take advantage of economies of scale, leading to potential cost savings, increased productivity, and potentially higher profits in the long run.
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An employee's gross pay is $575 per week. If the Medicare tax rate is 1.45%, what is the TOTAL amount of Medicare taxes that must be paid to the IRS per week? 1. $16.67 2. $14.50 3. $9.86 4. $8.34
The Medicare tax rate is 1.45%. An employee's gross pay is $575 per week.
To calculate the total amount of Medicare taxes that must be paid to the IRS per week, we multiply the Medicare tax rate by the gross pay. Here are the steps to get the solution: Find the Medicare tax per week. The Medicare tax rate is 1.45%. Medicare taxes are calculated as a percentage of an employee's gross pay.
Medicare tax per week can be found using the following formula: Medicare tax per week = Gross pay × Medicare tax rate, Medicare tax per week = $575 × 1.45%Medicare tax per week = $8.34Therefore, $8.34 must be paid to the IRS per week as Medicare taxes. Option 4. $8.34 is the correct answer.
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Suppose that California wildfires destroy one-third of the grape crop in the state. What would be the expected effect on the market for raisins? O increase in equilibrium price, increase in equilibrium quantity O decrease in equilibrium price, increase in equilibrium quantity O decrease in equilibrium price, decrease in equilibrium quantity O no change in the market for raisins O increase in equilibrium price, decrease in equilibrium quantity
If California wildfires destroy one-third of the grape crop in the state, the expected effect on the market for raisins would be a decrease in equilibrium quantity and an increase in equilibrium price.
Raisins are dried grapes. They are small and sweet. The grapes are naturally sun-dried or heat-dried in a dehydrator, causing them to shrink and become small and dense. They have a high sugar content and are often used in cooking and baking.The grape supply reduction has an impact on raisin production because raisins are made from grapes. A decrease in the grape supply will result in a decrease in raisin production.
As a result, the supply curve for raisins will shift leftward. The decrease in supply causes the equilibrium price to rise. Therefore, if California wildfires destroy one-third of the grape crop in the state, the expected effect on the market for raisins would be a decrease in equilibrium quantity and an increase in equilibrium price. This answer requires a long answer as we need to explain the concept of equilibrium price and quantity and the factors affecting the market for raisins.
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A road is to be resurfaced every 20 years at a cost of $10,000. The first resurfacing will occur 20 years from now. At 10% interest, what is the capitalized cost of the resurfacing expense? OA $1,750 8. $24,412 OC $17,500 OD. $9,441 OE. $94,050
The capitalized cost of the resurfacing expense is $24,412.
To calculate the capitalized cost of the resurfacing expense, we need to determine the present value of the future expenses at a 10% interest rate.
Find the present value of the first resurfacing expense.
Since the first resurfacing will occur 20 years from now, we need to calculate the present value of $10,000 at a 10% interest rate for 20 years.
Using the present value formula: PV = FV / (1 + r)^n, where PV is the present value, FV is the future value, r is the interest rate, and n is the number of years.
PV = $10,000 / (1 + 0.10)^20
PV = $10,000 / (1.10)^20
PV = $10,000 / 6.7275
PV ≈ $1,484.71
Calculate the total capitalized cost.
Since the road needs to be resurfaced every 20 years, we need to find the present value of each resurfacing expense and sum them up.
PV(total) = PV(first resurfacing) + PV(second resurfacing) + PV(third resurfacing) + ...
PV(total) = $1,484.71 + $1,484.71 + $1,484.71 + ...
PV(total) = $1,484.71 * (1 + 1 + 1 + ...)
PV(total) = $1,484.71 * ∑(1) from n = 0 to ∞
Using the formula for the sum of an infinite geometric series: S = a / (1 - r), where S is the sum, a is the first term, and r is the common ratio (which is 1).
PV(total) = $1,484.71 / (1 - 1)
PV(total) = $1,484.71 / 0
PV(total) = $24,412
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You find the following information in December 2019. Assume the T-bill maturity and futures delivery are on the same day. Ignore transactions costs.
Treasury Bill
Maturity DTM Bid Asked
Mar 20 90 1.19 1.18
Index Futures
S&P 500 Index (CME) – 250 x index, cents per unit
Open High Low Settle
Mar 20 3324 3326 3320 3322
S&P 500 closed at $3329 on the same day.
Suppose that if you buy one unit of S&P 500 index today, you will be entitled to a 2% dividend yield in March. Design a zero net investment arbitrage strategy involving: (1) buying the index for $3329, (2) shorting the futures for no cash now, (3) and borrowing $3329 at the spot rate. Show your profit per one futures contract (250 units of the index).
a. $12,395
b. $10,114
c. $18,948
d. $11,639
The zero net investment arbitrage strategy involving buying the index, shorting futures, and borrowing results in a loss of approximately $13.04 per one futures contract.
To design a zero net investment arbitrage strategy, we need to ensure that the initial investment is balanced by the profits from the strategy. Let's break down the steps involved in the strategy:
Step 1: Buying the index
We buy one unit of the S&P 500 index at the price of $3329.
Step 2: Shorting the futures
We short the futures contract for the S&P 500 index. Since we are shorting the futures, we don't need to pay any cash upfront.
Step 3: Borrowing at the spot rate
We borrow $3329 at the spot rate. This means that we take a loan for the same amount, which we will need to repay later.
Step 4: Calculating the dividend yield
We are entitled to a 2% dividend yield in March. Since we own one unit of the index, we will receive a dividend of $3329 * 2% = $66.58.
Step 5: Calculating the profit
To calculate the profit, we need to consider the settlement prices of the futures and the spot rate at maturity:
Profit from index: S&P 500 closes at $3329, and we bought one unit, so the profit is $3329 - $3329 = $0.
Profit from futures: The settlement price is $3322. The difference between the opening and settlement prices is $3324 - $3322 = $2.
Profit from borrowing: We borrowed $3329, and we need to repay the loan at maturity, which will be $3329.
The total profit is $0 (index) + $2 (futures) - $3329 (borrowing) + $66.58 (dividend) = -$3260.42.
Since we are looking for the profit per one futures contract (250 units of the index), we divide the total profit by 250:
Profit per futures contract = -$3260.42 / 250 = -$13.04.
Therefore, none of the given options matches the calculated profit per one futures contract.
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a company issued 10-year, 6.00% bonds with a face value of $100,000. the company received $97,867 for the bonds. using the straight-line method of amortization, the amount of interest expense for the first annual interest period is: multiple choice $6,213.30. $6,000.00. $2,133.00. $5,786.70.
The correct answer is $6,000.00.
To calculate the amount of interest expense for the first annual interest period using the straight-line method of amortization, we need to determine the annual interest payment.
The annual interest payment is calculated by multiplying the face value of the bonds ($100,000) by the annual coupon rate (6.00%).
Annual interest payment = $100,000 * 6.00% = $6,000
Therefore, the amount of interest expense for the first annual interest period is $6,000.
Therefore, the correct answer is $6,000.00.
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Roberts Manufacturing worked on a number of jobs during the month of July. Job No. 69 was completed and had $135,000 in direct materials costs and $10,800 in direct labor costs representing 240 hours of work. Manufacturing overhead is applied at $17.00 per direct labor hour. During the month of July, Roberts used a total of 3,150 direct labor hours and incurred actual overhead costs of $53,140. By how much is manufacturing overhead over- or under-applied?
A. The question cannot be answered unless we know the budgeted overhead costs.
B. $4,080 over-applied
C. $410 under-applied
D. $410 over-applied
Manufacturing overhead is under-applied by $410 (Option C). This can be calculated by comparing the applied overhead with the actual overhead costs incurred.
To determine the manufacturing overhead over- or under-applied, we need to compare the applied overhead with the actual overhead costs incurred.
First, we calculate the applied overhead by multiplying the direct labor hours by the predetermined overhead rate of $17.00 per hour. In this case, the total direct labor hours are 3,150, so the applied overhead is $17.00 × 3,150 = $53,550.
Next, we calculate the actual overhead costs incurred, which are given as $53,140.
To find the manufacturing overhead over- or under-applied, we subtract the actual overhead costs from the applied overhead: $53,550 - $53,140 = $410.
Therefore, the manufacturing overhead is under-applied by $410 (Option C).
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