Shasroy should accept Chameli's offer for lockbox installation. The calculations show that the total cost of implementing the lockbox system is lower than the opportunity cost of the delay in payment collection. Therefore, it is financially beneficial for Shasroy to adopt the lockbox system.
To determine whether Shasroy should accept Chameli's offer for lockbox installation, we need to compare the cost of the lockbox system with the opportunity cost of delayed payment collection.
The daily collection per lockbox is Tk. 40,000, and there are 30 lockboxes in the system. So the total daily collection through the lockbox system is Tk. 40,000 * 30 = Tk. 1,200,000.
With the lockbox system, the cheques can be collected in one day and then sent to Shasroy's concentration bank in Dhaka in another day. So the total time for payment collection is 2 days instead of the current average of 5 days.
Shasroy's opportunity cost is 12% per year. To calculate the opportunity cost per day, we divide the annual opportunity cost by the number of days in a year:
Opportunity cost per day = (12% * Tk. 1,200,000) / 365 = Tk. 3932.88
Chameli's monthly fixed charges for lockbox maintenance are Tk. 30,000. To convert it into daily charges, we divide it by the number of days in a month (assumed 30):
Daily lockbox maintenance charges = Tk. 30,000 / 30 = Tk. 1000
Chameli also charges Tk. 5.00 per transfer from lockboxes to the concentration bank. Since there are 5 days a week, the total weekly transfer charges would be Tk. 5.00 * 5 = Tk. 25.00.
To calculate the total cost of the lockbox system, we add the daily lockbox maintenance charges and the weekly transfer charges:
Total cost = (Tk. 1000 * 30) + (Tk. 25 * 52) = Tk. 30,000 + Tk. 1,300 = Tk. 31,300
Comparing the total cost of the lockbox system (Tk. 31,300) with the opportunity cost per day (Tk. 3932.88), we can see that the lockbox system is more cost-effective. Therefore, Shasroy should accept Chameli's offer for lockbox installation as it will expedite the cheque collection process and result in overall cost savings for the company.
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is economics a science? Why, or why not? As part of your response and explanation, include the definitions of "science" and "economics", as you understand them.
Economics can be considered a social science. It utilizes scientific methods and principles to study the production, distribution, and consumption of goods and services.
While economics does not meet all the criteria of a natural science, such as the ability to conduct controlled experiments, it employs rigorous empirical analysis, mathematical models, and data-driven research to develop theories and make predictions about economic behavior.
Science, broadly defined, refers to a systematic and organized body of knowledge that is based on empirical observation, experimentation, and the formulation of testable hypotheses. It aims to understand and explain phenomena in a systematic and reliable manner.
Economics, on the other hand, is the social science that studies how individuals, businesses, and societies allocate limited resources to fulfill their unlimited wants and needs.
Economics incorporates scientific elements by employing various research methods and techniques. It relies on empirical analysis, which involves gathering and analyzing data to test theories and make predictions about economic phenomena.
Economists use statistical tools and mathematical models to study economic behavior and derive insights. While economics does not have the ability to conduct controlled experiments like natural sciences, it still follows scientific principles by observing, analyzing, and formulating theories based on empirical evidence.
In conclusion, economics is considered a science because it adopts scientific methods, theories, and empirical analysis to study and understand economic phenomena. It may not fulfill all the criteria of a natural science, but it still utilizes rigorous methods to generate knowledge and provide insights into the functioning of economies and the behavior of individuals within them.
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Please match each scenario with the term it best identifies. The government implements a new policy where people receiving unemployment benefits must provide proof that they are searching for work. Otherwise, they will lose their benefits in 1 month. The government decides to give all unemployed workers a free account on a federal job bank, allowing workers to find jobs easier than ever before and hopefully expediting re-employment. Chelsea recently lost her job as an accountant. However, thanks to her stellar resume, she is able to quickly find a new job after two weeks. Much to her pleasure, she receives a tax credit because she was able to quickly find a new job. Simon is a junior chef at a three-star Michelin-renowned restaurant, Sur La Table. He loses his job and applies for, and is accepted into, a state funded program that allows unemployed individuals to take medical technician courses at their local community colleges for free. Answer Bank work test e arly employment bonus job-search assistance job retraining
The scenario which best identifies the term "work test" is "The government implements a new policy where people receiving unemployment benefits must provide proof that they are searching for work. Otherwise, they will lose their benefits in 1 month".
The scenario which best identifies the term "job-search assistance" is "The government decides to give all unemployed workers a free account on a federal job bank, allowing workers to find jobs easier than ever before and hopefully expediting re-employment".The scenario which best identifies the term "employment bonus" is "Chelsea recently lost her job as an accountant. However, thanks to her stellar resume, she is able to quickly find a new job after two weeks. Much to her pleasure, she receives a tax credit because she was able to quickly find a new job".The scenario which best identifies the term "job retraining" is "Simon is a junior chef at a three-star Michelin-renowned restaurant, Sur La Table. He loses his job and applies for, and is accepted into, a state-funded program that allows unemployed individuals to take medical technician courses at their local community colleges for free".
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Question 7 1 pts An annual perpetuity of $10,000 has a present value of $250,000. What is the annual interest rate? Enter rate in decimal form, rounded to nearest basis point (4th digit).
To determine the annual interest rate in this scenario, we can use the formula for the present value of a perpetuity, which is the annual payment divided by the interest rate.
In this case, we are given that the present value of the perpetuity is $250,000 and the annual payment is $10,000.
Using the formula, we can set up the equation as follows:
250,000 = 10,000 / Interest Rate
To find the interest rate, we need to isolate it on one side of the equation. We can do this by multiplying both sides of the equation by the interest rate:
250,000 * Interest Rate = 10,000
Next, we divide both sides of the equation by $250,000:
Interest Rate = 10,000 / 250,000
Calculating this expression gives us:
Interest Rate ≈ 0.04
Rounding to the nearest basis point (4th digit), the annual interest rate is approximately 0.0400, which is equivalent to 4.00%.
Therefore, the annual interest rate for this perpetuity is approximately 4.00%.
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a homeowner bought a home with the proceeds of a loan from a thrift institution. the loan was secured by a mortgage on the home. under the terms of the loan, the full amount of the outstanding loan obligation was to become due and payable if the home was sold or otherwise transferred without the prior permission of the thrift institution. the thrift institution recorded its mortgage. subsequently, the homeowner established a living trust and transferred ownership of her home to the living trust. the homeowner recorded this ownership transfer. upon learning of the transfer, the thrift institution demanded that the homeowner pay the outstanding amount due on the loan immediately. when the homeowner refused, the thrift institution brought a foreclosure action to collect the full amount of the outstanding loan obligation. is the thrift institution likely to succeed?
Based on the information provided The thrift institution is likely to succeed with the foreclosure action to collect the full amount of the loan obligation.
Based on the information provided, the thrift institution is likely to succeed in the foreclosure action. When the homeowner established a living trust and transferred ownership of the home to the trust without the prior permission of the thrift institution, it violated the terms of the loan. The loan agreement stated that the full amount of the outstanding loan would become due and payable if the home was sold or transferred without the thrift institution's permission. By recording the ownership transfer, the homeowner made it evident that the transfer occurred without the thrift institution's knowledge or permission.
As a result, the thrift institution has the right to demand immediate payment of the outstanding loan amount. If the homeowner refuses to pay, the thrift institution can proceed with the foreclosure action to collect the full amount of the loan obligation.
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A company with working capital of $351,919 and a current ratio
of 2.9 pays a $75,390 short-term liability. The amount of working
capital immediately after payment is?
Working capital immediately after the payment is $75,390.
Given data:
Working capital = $351,919
Current ratio = 2.9
Short-term liability paid = $75,390
We can use the formula for the current ratio to find the current assets of the company.
The formula for the current ratio is:
Current Ratio = Current Assets / Current Liabilities
We can rearrange the formula as follows:
Current Assets = Current Ratio x Current Liabilities
We are given the current ratio as 2.9 and we know that a short-term liability of $75,390 has been paid.
We can use these values to find the current assets of the company before the payment:
Current Assets = 2.9 x Current Liabilities
Current Liabilities = Short-term liability paid = $75,390
Current Assets = 2.9 x $75,390 = $218,271
Now that we have found the current assets before the payment, we can find the working capital before the payment as follows:
Working capital = Current Assets - Current Liabilities
Working capital = $218,271 - $75,390 = $142,881
Now we need to find the working capital immediately after the payment has been made. We can do this by subtracting the short-term liability paid from the current liabilities:
Current Liabilities after payment = Current Liabilities - Short-term liability paid
Current Liabilities after payment = $218,271 - $75,390 = $142,881
The working capital after the payment has been made is:
Working capital = Current Assets - Current Liabilities after payment
Working capital = $218,271 - $142,881 = $75,390
Therefore, the working capital immediately after the payment is $75,390.
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After the short-term liability has been settled, the working capital is $143,241.
Given:
Working Capital = $351,919
Current Ratio = 2.9
Short-term Liability = $75,390
Required to calculate The amount of working capital immediately after payment =?
Working Capital = Current Assets - Current Liabilities
The formula for the current ratio is:
Current Ratio = Current Assets / Current Liabilities
We can rearrange the formula to find the current assets:
Current Assets = Current Ratio * Current Liabilities
Current Assets = 2.9 * $75,390 = $218,631
Working Capital after payment = Current Assets - Short-term Liability
Working Capital after payment = $218,631 - $75,390 = $143,241
Therefore, the working capital immediately after the payment of the short-term liability is $143,241.
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Exhibit 2.5 of the text displays Fayol's 14 Principles of Management. Which Principle is the most important to you - why?. The 14 Principles were first published in 1949 - are they still relevant today?
The principle that is most important to me is the "Unity of Command".The "Unity of Command" is the principle that asserts that every employee should receive instructions and be responsible to one and only one person. This principle, according to Fayol, guarantees discipline and coordination in the organization as well as respect for authority.
Every employee should have one boss or supervisor to report to, as per the "Unity of Command" principle. This helps to ensure that everyone is aware of their duties, responsibilities, and who to report to.Fayol's 14 Principles of Management are still relevant today, and some of them have even been incorporated into contemporary management theory.
For example, the "Unity of Command" principle is still relevant in many modern organizations. While some of the other principles, such as "Centralization," have become less applicable, others, such as "Division of Work" and "Order" continue to be relevant. These principles still serve as a foundation for understanding management and organizational behavior, even after many years since the original publication of the 14 principles.
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"Primary Colors has a debt-equity ratio of .56, a return on
assets of 8.2 percent, and a dividend payout ratio of 45 percent.
What is the firm's rate of growth?
Multiple Choice
6.52%
7.04%
7.26%
8.13%"
The firm's rate of growth can be calculated using the formula: Rate of Growth = Return on Assets * Retention Ratio. Given the debt-equity ratio of 0.56, return on assets of 8.2 percent, and dividend payout ratio of 45 percent, we can calculate the firm's rate of growth.
The retention ratio is calculated by subtracting the dividend payout ratio from 1. In this case, the retention ratio is 1 - 0.45 = 0.55.
To find the rate of growth, we multiply the return on assets (8.2 percent) by the retention ratio (0.55):
Rate of Growth = 8.2% * 0.55 = 4.51%.
Therefore, the firm's rate of growth is 4.51%. None of the multiple-choice options provided match this calculated rate, so none of the options provided are correct.
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Select the best answer to complete the sentence: Threats to
independence _________.
1.Are always acceptable if we are not providing a prohibited
service to the client.
2.Can always be overcome or redu
Threats to independence can always be overcome or reduced through safeguards, ethical practices, transparency, training, and a commitment to upholding professional integrity.
2. Can always be overcome or reduced.
Threats to independence can always be overcome or reduced through various measures and practices. Maintaining independence is crucial for professionals in fields such as auditing, consulting, and journalism to ensure unbiased decision-making and objective reporting. To address threats, professionals can implement safeguards such as establishing robust conflict of interest policies, maintaining strict confidentiality, and conducting regular internal and external reviews.
Additionally, fostering a strong ethical culture within the organization and promoting transparency can help mitigate risks to independence. Continuous professional development and training programs can also enhance professionals' skills and knowledge, enabling them to navigate potential conflicts effectively. While threats to independence may arise, proactive measures and a commitment to upholding professional integrity can help professionals overcome or reduce these challenges, ensuring the integrity of their work and maintaining public trust.
Therefore, Threats to independence can always be overcome or reduced through safeguards, ethical practices, transparency, training, and a commitment to upholding professional integrity.
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Suppose that in a week the price of ground beef decreases from $5.00 to $4,00 per pound. At the same time, the quantity of ground beef demanded at a typical grocery store increases from 9.000 to 12.000 pounds per week. What is the price elasticity of demand for ground beef Instructions: Round your response to one decimal place. According to the income elasticity formula, Income elasticity of demand-E-% change in quantity demanded- % change in income. By how much will popcom sales increase if average income goes up by 9 percent? (Assume the income elasticity of popcorn is 3.29) Instructions: Enter your response as a percentage rounded to one decimal place. percent
The price elasticity of demand for ground beef is calculated by dividing the percentage change in quantity demanded by the percentage change in price.
What is the price elasticity of demand for ground beef and how much will popcorn sales increase if average income goes up by 9 percent?In this case, the price of ground beef decreased from $5.00 to $4.00 per pound, resulting in a 20% decrease in price.
At the same time, the quantity of ground beef demanded increased from 9,000 to 12,000 pounds per week, indicating a 33.3% increase in quantity.
By applying the formula, the price elasticity of demand for ground beef is -2.0, which indicates that the demand for ground beef is relatively elastic.
Additionally, if average income goes up by 9%, and the income elasticity of popcorn is 3.29, it implies that popcorn sales will increase by 29.6%.
This suggests that popcorn is a normal good with a relatively high income elasticity, meaning that as income rises, the demand for popcorn increases significantly.
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In April of 2022, the US CPI was 288.66. The CPI moved to 291.47 in May of the same year. Based on these data, a gallon of gas that was priced at $4.10 in April would be expected to price at what amount in May? Round your answer to the nearest cent (two decimal places). Do not use a dollar sign.
Based on the given CPI data, a gallon of gas that was priced at $4.10 in April would be expected to be priced at approximately $4.13 in May.
To determine the expected price of a gallon of gas in May based on the CPI data, we can calculate the inflation rate between April and May and apply it to the April price.
The inflation rate can be calculated using the following formula:
Inflation Rate = (CPI in May - CPI in April) / CPI in April
In this case, the CPI in April is 288.66, and the CPI in May is 291.47. Plugging these values into the formula:
Inflation Rate = (291.47 - 288.66) / 288.66 ≈ 0.0097
The inflation rate is approximately 0.0097, or 0.97%.
To find the expected price of a gallon of gas in May, we can multiply the April price by 1 plus the inflation rate:
Expected Price in May = April Price × (1 + Inflation Rate)
= $4.10 × (1 + 0.0097)
≈ $4.10 × 1.0097
≈ $4.13
Therefore, based on the given CPI data, a gallon of gas that was priced at $4.10 in April would be expected to be priced at approximately $4.13 in May.
It's important to note that this calculation assumes that the change in the CPI accurately reflects the change in the overall price level and that gas prices move in line with the general price level. Other factors, such as supply and demand dynamics specific to the gas market, can also influence actual price changes.
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an addition to the new ethics code involves the expectation for behavior analysts to promote an ethical ____________.
An addition to the new ethics code involves the expectation for behavior analysts to promote an ethical Option C. culture.
The revised ethics code involves a greater emphasis on the behavior analyst's responsibility to promote an ethical culture, in addition to the responsibility to adhere to ethical principles themselves. The ethical culture concept has been introduced to recognize the importance of the wider environment in which ethical behavior is cultivated. It recognizes the idea that ethical behavior goes beyond the individual and that it is shaped and influenced by the environment in which it occurs.
The revised ethics code specifies that behavior analysts are expected to promote an ethical culture by encouraging adherence to ethical principles and standards within their professional communities, organizations, and regulatory bodies. Behavior analysts are expected to help foster an ethical culture by contributing to the development of ethical standards and policies, educating others about ethical behavior, and addressing ethical violations.
Ethical culture development is expected to occur within all aspects of the profession of behavior analysis, including research, practice, education, and supervision. Behavior analysts must work to establish and promote an ethical culture to ensure that their clients receive the highest quality services, that the profession maintains its integrity, and that public trust is maintained. Therefore, the correct option is C.
The question was incomplete, Find the full content below:
An addition to the new ethics code involves the expectation for behavior analysts to promote an ethical ____________.
a. Client base.
b. Critique.
c. Culture.
d. None of the above.
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some people have argued that the high inflation of the late 1970s was a consequence of the fact that federal reserve board chair arthur burns did what president richard nixon wanted him to do. what policy do you think nixon might have wanted?
It is argued by some that the high inflation of the late 1970s was a consequence of the actions of Federal Reserve Board Chair Arthur Burns, who may have done what President Richard Nixon wanted.
Nixon, at the time, might have wanted a policy that aimed to stimulate economic growth and reduce unemployment, which is known as expansionary fiscal policy. This policy typically involves increasing government spending and reducing taxes to boost consumer spending and business investment.
By implementing expansionary fiscal policy, Nixon may have hoped to stimulate economic activity and improve his chances of re-election. However, the consequence of this policy was an increase in the money supply, which ultimately led to inflation.
This is because when the government spends more and reduces taxes, it injects more money into the economy, which can lead to higher prices. In summary, Nixon's desired policy may have been expansionary fiscal policy, which contributed to the high inflation of the late 1970s.
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Question 11 (8+5 = 13 marks) Great Art Inc is evaluating an investment opportunity in Melbourne that is currently being promoted by Commonwealth government. The project requires initial investment of $4.5 million. If the net cash flow at the end of the first year is $1.5 million (project is successful), the net cash flows will be $2.5 million per annum in perpetuity. The likelihood of the project being successful is 40%. If the net cash flow at the end of first year is $0.8 million (project is unsuccessful) the net cash flows will be $0.5 million per annum in perpetuity. To encourage investment in Melbourne, the Commonwealth government is offering the company the ability to exit the operation at the end of the first year the government will buy the entire project (assets etc.) for $6 million. The appropriate risk-adjusted discount rate for Great Art Inc is 12.5% per annum. a) Calculate the net present value for the project with the option. If Great Art Inc took the project (with the option), would it exercise the option at the end of the first year of the project? Why or why not? Show detailed workings. b) What is value of the real option that is being offered by the Commonwealth government? Show detailed workings.
The value of the real option offered by the Commonwealth government is $9.878 million. This indicates the potential upside or benefit that Great Art Inc would receive if it exercises the option and sells the project.
a) The net present value (NPV) for the project with the option can be calculated by discounting the expected cash flows at the appropriate risk-adjusted discount rate and comparing them to the initial investment.
First, let's calculate the expected cash flows:
Probability of project success = 40%
Net cash flow in successful scenario = $2.5 million per annum
Net cash flow in unsuccessful scenario = $0.5 million per annum
Expected cash flow in successful scenario = Probability of success * Net cash flow in successful scenario = 0.4 * $2.5 million = $1 million
Expected cash flow in unsuccessful scenario = Probability of failure * Net cash flow in unsuccessful scenario = 0.6 * $0.5 million = $0.3 million
Now, let's calculate the NPV:
NPV = Initial investment + Expected cash flow in successful scenario / (1 + Risk-adjusted discount rate) - Expected cash flow in unsuccessful scenario / (1 + Risk-adjusted discount rate)
NPV = -$4.5 million + $1 million / (1 + 0.125) - $0.3 million / (1 + 0.125)
NPV = -$4.5 million + $0.888 million - $0.266 million
NPV = -$3.878 million
Since the NPV is negative (-$3.878 million), Great Art Inc would not exercise the option at the end of the first year. The negative NPV suggests that the project's expected cash flows do not exceed the initial investment, making it financially unattractive to continue with the project.
b) The value of the real option being offered by the Commonwealth government is the difference between the option price and the project's NPV. In this case, the option price is $6 million, and the NPV is -$3.878 million. Therefore, the value of the real option is:
Value of real option = Option price - NPV
Value of real option = $6 million - (-$3.878 million)
Value of real option = $9.878 million
The value of the real option offered by the Commonwealth government is $9.878 million. This indicates the potential upside or benefit that Great Art Inc would receive if it exercises the option and sells the project to the government at the end of the first year. It represents the value of flexibility and the potential for a positive outcome from the project.
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The W-2 income of Sandra, a single taxpayer, was $78,195.
Determine Sandra's tax liability.
Use the appropriate Tax Tables.
Sandra's W-2 income as a single taxpayer was $78,195.
Sandra, a single taxpayer, reported a W-2 income of $78,195. A W-2 form is a document provided by an employer that reports an employee's annual wages and the amount of taxes withheld from their paycheck. In Sandra's case, her W-2 income refers to the total amount she earned from her job throughout the year.
The W-2 income of $78,195 indicates the gross earnings Sandra received before any deductions or taxes were taken out. It represents her pre-tax income, which includes her salary, wages, tips, bonuses, and other forms of compensation. This amount is typically based on her employment contract, the number of hours worked, and any additional income sources she may have had.
It's important to note that the W-2 income does not reflect the amount of money Sandra actually received in her bank account. After deducting various taxes, such as federal, state, and local income taxes, as well as Social Security and Medicare taxes, her net income or take-home pay would be lower than the reported W-2 income.
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sam's manufacturing company currently makes 120 units of a necessary component. management is considering outsourcing this component for a cost of $1,500 per unit. sam's incurs the following total production costs: direct materials $90,000 direct labor 28,000 variable overhead 45,000 fixed overhead 25,000 if production is outsourced, none of the fixed overhead costs will be eliminated. how would profits be impacted if sam's bought the component? profits would go down by $17,000 profits would go down by $8,000 profits would go up by $25,000 profits would go up by $8,000
If Sam's Manufacturing Company buys the component instead of producing it in-house, profits would go up by $8,000 due to cost savings.
To determine how profits would be impacted if Sam's Manufacturing Company bought the component, we need to compare the total costs of producing the component in-house versus the cost of outsourcing it. Let's break down the calculations step by step:
Step 1: Calculate the total cost of producing the component in-house:
Total Production Costs = Direct Materials + Direct Labor + Variable Overhead + Fixed Overhead.
Substituting the given values, we have:
Total Production Costs = $90,000 + $28,000 + $45,000 + $25,000.
Total Production Costs = $188,000.
Step 2: Calculate the cost of outsourcing the component:
Cost per Unit = $1,500 (as given).
Number of Units = 120 (as given).
Cost of Outsourcing = Cost per Unit * Number of Units.
Cost of Outsourcing = $1,500 * 120.
Cost of Outsourcing = $180,000.
Step 3: Compare the costs and determine the impact on profits:
If Sam's Manufacturing Company buys the component, the total cost would be $180,000. Comparing this to the total production costs of $188,000, we can see that the costs would decrease by $8,000.
Since profits are calculated as revenues minus costs, if the costs decrease, profits would go up. Therefore, profits would go up by $8,000 if Sam's Manufacturing Company buys the component.
It's important to note that this calculation assumes that there are no other factors influencing the decision, such as quality considerations, reliability of the supplier, or potential savings from reallocating resources. The analysis solely focuses on the impact of costs on profits.
By outsourcing the component, Sam's Manufacturing Company can reduce its production costs and increase profits by $8,000.
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Raveena is a resident of the Republic. She is 30 years old. She is married in community of property. Her husband did not earn any passive income. The following information relates to the 2021 year of assessment for Raveena. Income Raveena received from a Republic source: - A salary of R420 000. -Net rentals of R40 000 were earned from a beach cottage. - Interest of R24 000 was earned from a fixed deposit. Foreign income received by Raveena: - Foreign dividends of $760, before a withholding tax of 10% was deducted as a rebate. These dividends are not exempt in terms of section 10B(2). - Interest of £165 on an investment inherited from her aunt. The inheritance and the income on it are excluded from their joint estate. This interest was not subject to a withholding tax. - Assume the average exchange rates for the 2021 year of assessment were $1: R15 and £1: R18 respectively. In terms of section 25D(3), she elected that her foreign receipts and accruals be translated into rand by applying the average exchange rate. The expenditure incurred by Raveena for the 2021 year of assessment was as follows: - She did not belong to a pension fund or a provident fund. - She contributed R5 800 a month to a medical scheme for herself and her husband. She did not pay any medical expenses. - A donation of R2 500 was made by her to a qualifying university. She obtained the section 18A receipt. YOU ARE REQUIRED: Calculate Raveena's normal tax liability for the 2021 year of assessment.
Answer: R124 881.
Calculation of Raveena's normal tax liability for the 2021 year of assessment is explained below:
Calculation of gross income earned:
Salary income = R420 000
Rental income = R40 000
Interest income = R24 000
Foreign dividends received before the withholding tax was deducted as a rebate = $760 x 15
= R11 400
Interest income on investment = £165 x 18
= R2 970
Therefore, Gross income earned = R420 000 + R40 000 + R24 000 + R11 400 + R2 970
= R498 370
Calculation of allowed deductions:
Medical scheme contribution = R5 800 x 12
= R69 600
Donation = R2 500
Therefore, Allowed deductions = R69 600 + R2 500
= R72 100
Calculation of taxable income:
Taxable income = Gross income earned - Allowed deductions
= R498 370 - R72 100 = R426 270
Calculation of normal tax liability:
Calculation of tax payable on the first R205 900 of taxable income at the rate of 18%:
R205 900 x 18/100
= R37 062
Calculation of tax payable on the amount above R205 900 but not exceeding R321 600 of taxable income at the rate of 26%:
(R426 270 - R205 900) x 26/100
= R54 372
Calculation of tax payable on the amount above R321 600 of taxable income at the rate of 31%:(R426 270 - R321 600) x 31/100
= R33 447
Therefore, Normal tax liability = R37 062 + R54 372 + R33 447
= R124 881.
Answer: R124 881.
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1) there is a 13.40% probability of a below average economy and a 86.60% probability of an average economy. If there is a below average economy, stocks a and B will have returns of 2.64% and 0.39%, respectively. There is an average economy stocks A and B will have returns of 13.38% and 5.11%, respectively. Compute the following for stocks A and B.
a) stock A expected return
b) stock b expected return
c) stock A standard deviation
d) stock B standard deviation
2) There is a 15.98% probability of an average Konomi and 84.02% probability of a above average economy. You invest 40.79% of your money in stock S and 59.21% of your money in stock T. In an average economy the expected returns for stock S and stock T are 8.82% and 10.9%, respectively. In an above average economy the expected returns for stock S & T are 18.59% and 38.47%, respectively. What is the expected return for this two stock portfolio?
3) you are invested 29.44% in growth stocks with a beta of 1.504, 35.47% in value stocks with a beta of zero. 558, and 35. 09% in the market port folio. What is the beta of your portfolio?
1. The given probabilities for economy being below average and average are 13.4% and 86.6%, respectively. If economy is below average, stocks A and B will have returns of 2.64% and 0.39%, respectively. If economy is average, stocks A and B will have returns of 13.38% and 5.11%, respectively.a)
Stock A expected return:Using the given formula,Expected return of A= 2.64% * 13.4% + 13.38% * 86.6% = 12.17%Therefore, stock A's expected return is 12.17%.b) Stock B expected return:Using the given formula,Expected return of B= 0.39% * 13.4% + 5.11% * 86.6% = 4.52%Therefore, stock B's expected return is 4.52%.c) Stock A standard deviation:Using the given formula,Standard deviation of A = √[0.134(0.0264 - 0.1217)² + 0.866(0.1338 - 0.1217)²] = 5.17%Therefore, the standard deviation of stock A is 5.17%.d) Stock B standard deviation:Using the given formula,Standard deviation of B = √[0.134(0.0039 - 0.0452)² + 0.866(0.0511 - 0.0452)²] = 2.24%
Therefore, the standard deviation of stock B is 2.24%.2. The given probabilities for economy being average and above average are 15.98% and 84.02%, respectively. You have invested 40.79% of your money in stock S and 59.21% of your money in stock T. In an average economy, the expected returns for stock S and stock T are 8.82% and 10.9%, respectively. In an above-average economy, the expected returns for stock S and T are 18.59% and 38.47%, respectively.
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Jana is a single taxpayer who will take the $12,950 standard deduction in 2022. Jana is the owner of Put Your Best Foot Forward, a boutique shoe store in Elite Suburb, Il. Jana operates her store as an S corporation (she is the sole shareholder). In 2022 her qualified business income from Put Your Best Foot Forward was $400,000. She paid $150,000 in w-2 wages (note: these wages are included in the $400,000 of qualified business income). In addition, the unadjusted basis in assets was $1,600,000 (this amount includes the building in which the store is located as well as the store fixtures). Jana had interest income of $25,000 (in addition to her earnings from her store). Determine Jana’s taxable income in 2022.
• Assume that instead of owning and operating Put Your Best Foot Forward, Jana was a dentist earning $400,000. She paid w-2 wages of $150,000 and the unadjusted basis of her office furnishings and equipment was $1,600,000. She will continue to take the $12,950 standard deduction rather than itemize. Under this scenario, what is Jana’s taxable income in 2022?
Jana's taxable income in 2022 will be $155,000.
According to the given problem, Jana is a single taxpayer who will take the $12,950 standard deduction in 2022. Jana is the owner of Put Your Best Foot Forward, a boutique shoe store in Elite Suburb, Il.
Jana operates her store as an S corporation (she is the sole shareholder). In 2022 her qualified business income from Put Your Best Foot Forward was $400,000.
She paid $150,000 in w-2 wages (note: these wages are included in the $400,000 of qualified business income).
In addition, the unadjusted basis in assets was $1,600,000 (this amount includes the building in which the store is located as well as the store fixtures). Jana had interest income of $25,000 (in addition to her earnings from her store).
To determine Jana's taxable income in 2022, we need to follow these steps: Jana's taxable income = (Qualified business income x 20%) + (Taxable interest income) = ($400,000 x 20%) + ($25,000) = $80,000 + $25,000 = $105,000.Jana's taxable income is $105,000.
Let's assume that instead of owning and operating Put Your Best Foot Forward, Jana was a dentist earning $400,000.
She paid w-2 wages of $150,000 and the unadjusted basis of her office furnishings and equipment was $1,600,000. She will continue to take the $12,950 standard deduction rather than itemize.
Under this scenario, we can calculate Jana's taxable income as: Taxable income = (Qualified business income x 20%) + (W-2 wages x 50%) = ($400,000 x 20%) + ($150,000 x 50%) = $80,000 + $75,000 = $155,000.
Therefore, Jana's taxable income in 2022 will be $155,000.
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. Ryan received a travelling allowance of R72 000 (R6 000 a month) from his employer. He used two vehicles during the year of assessment. 2. Vehicle 1 was purchased second-hand (actual retail market value) for R215 000 (including VAT) and was traded in for vehicle 2. 3. Vehicle 2 (new) cost (actual retail market value) R310 000 (including VAT). 4. During the year of assessment, he used vehicle 1 for 106 days and vehicle 2 for 259 days. He did not keep accurate records of costs incurred. 5. He travelled 10 231 km in vehicle 1 during the 2021 year of assessment and 20 880 km in vehicle 2. 6. His log-books showed that he travelled 4 027 business km in vehicle 1 and 8 085 business km in vehicle 2 during the 2022 year of assessment. YOU ARE REQUIRED: Calculate the taxable amount of the travel allowance for the year of assessment ending in 2022. Ryan received a travelling allowance of R72 000 (R6 000 a month) from his employer. He used two vehicles during the year of assessment. 2. Vehicle 1 was purchased second-hand (actual retail market value) for R215 000 (including VAT) and was traded in for vehicle 2. 3. Vehicle 2 (new) cost (actual retail market value) R310 000 (including VAT). 4. During the year of assessment, he used vehicle 1 for 106 days and vehicle 2 for 259 days. He did not keep accurate records of costs incurred. 5. He travelled 10 231 km in vehicle 1 during the 2021 year of assessment and 20 880 in vehicle 2. 6. His log-books showed that he travelled 4 027 business km in vehicle 1 and 8 085 business km in vehicle 2 during the 2022 year of assessment. YOU ARE REQUIRED: Calculate the taxable amount of the travel allowance for the year of assessment ending in 2022.
The taxable amount of the travel allowance for the year of assessment ending in 2022 is R43 970.48.
Given data:
1. Ryan received a travelling allowance of R72 000 (R6 000 a month) from his employer. He used two vehicles during the year of assessment.
2. Vehicle 1 was purchased second-hand (actual retail market value) for R215 000 (including VAT) and was traded in for vehicle 2.
3. Vehicle 2 (new) cost (actual retail market value) R310 000 (including VAT).
4. During the year of assessment, he used vehicle 1 for 106 days and vehicle 2 for 259 days. He did not keep accurate records of costs incurred.
5. He travelled 10 231 km in vehicle 1 during the 2021 year of assessment and 20 880 km in vehicle 2.
6. His log-books showed that he travelled 4 027 business km in vehicle 1 and 8 085 business km in vehicle 2 during the 2022 year of assessment.
To calculate the taxable amount of the travel allowance for the year of assessment ending in 2022, let's first find out the total travel allowance received by Ryan.
The total amount of the travel allowance is R72 000 for the year.
Ryan's taxable amount of the travel allowance = Total travel allowance – Non-taxable portion
The non-taxable portion is calculated as per SARS guidelines as follows:
Non-taxable portion = (Business km / Total km) x Total travel allowance
The business km is the total distance travelled for business purposes during the year of assessment.
Total km is the total distance travelled during the year of assessment.
Let's calculate the non-taxable portion.
Business km = Business km in Vehicle 1 + Business km in Vehicle 2
Business km = 4 027 + 8 085 = 12 112 km
Total km = Total km in Vehicle 1 + Total km in Vehicle 2
Total km = 10 231 + 20 880 = 31 111 km
Non-taxable portion = (Business km / Total km) x Total travel allowance
Non-taxable portion = (12 112 / 31 111) x 72 000
Non-taxable portion = 28 029.52
Therefore, the taxable amount of the travel allowance for the year of assessment ending in 2022 is calculated as follows:
Taxable amount of the travel allowance = Total travel allowance – Non-taxable portion
Taxable amount of the travel allowance = 72 000 – 28 029.52
Taxable amount of the travel allowance = 43 970.48
Therefore, the taxable amount of the travel allowance for the year of assessment ending in 2022 is R43 970.48.
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please answer
2. M. H. Acosta, CA, completed these transactions during November of the current year:
Here are the general journal entries to record the transactions for M.H. Acosta, CA, during November of the current year.
1. Nov. 1:
Cash 4,000
Office Equipment 3,300
Capital 7,300
(To record investment in cash and office equipment)
2. Nov. 2:
Office Equipment 900
Office Supplies 150
Accounts Payable 1,050
(To record the purchase of office equipment and supplies on credit)
3. Nov. 4:
Cash 400
Accounts Receivable 400
(To record cash received for completed accounting work)
4. Nov. 8:
Accounts Receivable 600
Service Revenue 600
(To record accounting work completed on credit)
5. Nov. 10:
Accounts Payable 1,050
Cash 1,050
(To record payment for the items purchased on credit)
6. Nov. 14:
Prepaid Insurance 800
Cash 800
(To record the payment of the annual insurance premium)
7. Nov. 18:
Accounts Receivable 600
Cash 600
(To record the receipt of payment from Acme Loan Co.)
8. Nov. 27:
Withdrawals 650
Cash 650
(To record the withdrawal of cash for personal expenses)
9. Nov. 30:
Utilities Expense 140
Cash 140
(To record the payment of November utility bills)
Please note that these entries represent general journal entries based on the information provided. It's always recommended to consult with an accounting professional or reference specific accounting guidelines for accurate and comprehensive recording of transactions.
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M. H. Acosta, CA, completed these transactions during November of the current year: Nov. 1 Began a public accounting practice by investing $4,000 in cash and office equipment having a $3,300 fair value. Nov. 2 Purchased on credit office equipment, $900, and office supplies, $150. Nov. 4 Completed accounting work for client and immediately received a payment of $400 cash. Nov. 8 Completed accounting work on credit for Acme Loan Co., $600. Nov. 10 Paid for the items purchased on credit on November 2. Nov. 14 Paid the annual $800 premium on an insurance policy. Nov. 18 Received payment in full from Acme Loan Co. for the work completed on November 8. Nov. 27 M. H. Acosta withdrew $650 cash from the practice to pay personal expenses. Nov. 30 Paid the November utility bills, $140. Prepare general journal entries to record the transactions.
the price elasticity of demand for french fries is about 0.8. a government policy designed to reduce the consumption of junk food and the associated healthcare cost changed the price of an order of fries from $2 to $6. according to the midpoint method, the government policy should have reduced consuming fries by
According to the price elasticity of demand formula, the percent change in quantity demanded divided by the percent change in price gives us the price elasticity of demand. In this case, the price elasticity of demand for french fries is 0.8.
Using the midpoint method, we can calculate the percent change in quantity demanded and the percent change in price. The midpoint method calculates the average of the initial and final values.
The initial price is $2, and the final price is $6. The change in price is ($6 - $2) / (($6 + $2) / 2) = $4 / $4 = 1.
According to the formula for price elasticity of demand, the percent change in price is 1.
Let's assume the initial quantity demanded is Q1 and the final quantity demanded is Q2. We can calculate the percent change in quantity demanded using the same midpoint method.
If the price elasticity of demand is 0.8, then the absolute value of the percent change in quantity demanded is 0.8 times the percent change in price.
So, the absolute value of the percent change in quantity demanded is 0.8 * 1 = 0.8.
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Tests for unrecorded assets typically involve tracing from: A> Source documents to recorded journal entries. B>Source documents to observations. C>Recorded journal entries to documents.D> Recorded journal entries to observations.
Tests for unrecorded assets typically involve tracing from: Source documents to observations.
The tests for unrecorded assets are done to find whether there are any assets that are not included in the financial records of the business entity. It is done to ensure that the financial statements of the entity are complete and accurate.
The tests involve tracing from the source documents to observations. The reason behind this is that the source documents, such as purchase receipts, delivery notes, and payment vouchers, give a clear picture of the assets of the entity.
Observations of the assets also provide evidence about the existence of assets that are not recorded.
The tests for unrecorded assets typically involve the following:
Examination of bank deposits in transit to check whether any deposits from the prior period were not recorded.Observation of physical assets to verify their existence, identification, and condition.Confirmation of accounts receivables to check whether there are any unrecorded receivables from the customers.Investigation of unusual transactions and adjusting entries to check whether any of them are related to unrecorded assets.Verification of subsequent collections of accounts receivable to check whether any of the collections are related to unrecorded receivables.To know more about unrecorded assets
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"Galvatron Metals has a bond outstanding with a coupon rate of
6.2 percent and semiannual payments. The bond currently sells for
$1,926 and matures in 18 years. The par value is $2,000 and the
company'"
Galvatron Metals has an outstanding bond with a 6.2% coupon rate and semiannual payments. The bond sells for $1,926, matures in 18 years, and has a par value of $2,000.
Galvatron Metals has issued a bond with a coupon rate of 6.2%, which means that bondholders receive an annual interest payment equal to 6.2% of the bond's face value. The payments are made semiannually. Currently, the bond is selling for $1,926 in the market, which is less than its par value of $2,000. The bond has a maturity period of 18 years, indicating that the bondholders will receive the par value of $2,000 at the end of the 18-year period. The market price of the bond being lower than its par value suggests that investors may perceive higher risk associated with Galvatron Metals, leading to a discounted price.
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In this journal, you will have the opportunity to consider the healthcare economics of two adjacent counties in the Kansas City metropolitan area.
In your journal assignment, answer the following case study questions:
What are the main inputs to health mentioned in this case? Are there important inputs to health that the case does not mention?
What health behaviors should get priority?
Does income play a role in improving health?
How important is health insurance in improving health?
Wyandotte County has relatively few primary care physicians. Should the number of primary care physician be a priority?
What role, if any, should the federal government play in improving health?
How do you think your answers would differ if you were a resident of Wyandotte County?
The journal gives an opportunity to consider the healthcare economics of two adjoining counties in the Kansas City metropolitan area. The main inputs to health mentioned in this case are high blood pressure, depression, lack of physical exercise, drug and alcohol addiction, obesity, and diabetes.
This case does not mention the importance of a clean environment and access to clean water to stay healthy.
There are some health behaviors that should get priority to improve the health of the people of Wyandotte and Johnson counties, such as, physical exercise and a healthy diet. This will help combat chronic conditions like high blood pressure and diabetes. People should avoid excessive alcohol and drug intake. This would also help in reducing cases of depression and obesity.Income plays a crucial role in improving health. Those who can afford good medical facilities and nutritious food are less likely to suffer from illnesses. Lack of money restricts the ability to avail of medical care and eat healthy food.
Health insurance is significant in improving health. People with health insurance have better access to health facilities. They get more medical attention and regular checkups, which help in early diagnosis and timely treatment.Wyandotte County has relatively few primary care physicians, so the number of primary care physicians should be a priority. A primary care physician acts as the first line of defense and helps in preventing chronic illnesses from becoming severe. The federal government should play a vital role in improving health by providing better medical facilities and resources. This can be achieved by investing in public healthcare, promoting healthy behavior, and offering better medical insurance plans.
If I were a resident of Wyandotte County, my answers would not differ much. It is important to have access to better medical facilities and medical professionals. The government should play a significant role in improving the health of its citizens. Regular health checkups and good healthcare facilities are essential for a healthy life.
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A= Customer service B= Design C= Distribution D= Production or purchases E= Research and Development F= Marketing b. Investigating a potential new product c. Laying out the production process for a new product d. Answering customer questions after the sale e. Promoting a product at a trade show f. Resource used to make a productPlace the six business functions in the order they appear along the value chain:*
The order of the six business functions is as follows: 1. E = Research and Development 2. B = Design 3. D = Production or purchases 4. C = Distribution 5. A = Customer service 6. F = Marketing
In the value chain, each business function contributes to the creation and delivery of a product or service. The value chain begins with research and development (R&D) where new ideas, concepts, and technologies are explored to develop innovative products or improve existing ones. R&D is followed by the design function, which focuses on translating those ideas into tangible product designs or service specifications.
Once the design is finalized, the production or purchases function comes into play. This involves procuring raw materials, manufacturing the product, or acquiring the necessary components or services to deliver the final product. After production, the distribution function takes over, which involves logistics, warehousing, and ensuring the product reaches the intended customers efficiently.
Customer service follows the distribution function, where the focus is on addressing customer inquiries, resolving issues, and providing post-sale support. Lastly, marketing plays a crucial role in promoting the product or service to potential customers through various channels such as advertising, trade shows, digital marketing, and sales campaigns.
It's important to note that while this is the general sequence of the six business functions along the value chain, the exact order and the level of interdependence can vary depending on the industry, business model, and specific organizational practices.
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You are bearish on Telecom and decide to sell short 100 shares at the current market price of \( \$ 50 \) per share. 1. How much in cash or securities must you put into your brokerage account if the :
The investor must deposit $1,600 in cash or securities into their brokerage account as collateral for the short position.
When selling short, the investor borrows shares from the broker and immediately sells them in the market, with the expectation of buying them back at a later time at a lower price to return them to the broker. The initial margin requirement is the percentage of the value of the short position that the investor must deposit in their brokerage account as collateral.
In this case, the investor is selling short 100 shares of Telecom at $32 per share, resulting in a short position value of $3,200 (100 shares x $32 per share). The broker's initial margin requirement is 50%, which means the investor needs to deposit 50% of the short position value as collateral.
To calculate the amount in cash or securities that the investor must put into the brokerage account, we multiply the short position value by the margin requirement:
Amount to deposit = Short position value x Margin requirement
= $3,200 x 50%
= $1,600
This amount acts as a safeguard for the broker in case the short position incurs losses.
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Complete question is:
You are bearish on Telecom and decide to sell short 100 shares at the current market price of $32 per share. Required: How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position?
When you're walking a guest to their table which 4 things should you do: Let them lead the pace, don't go too fast Walk quickly so you can get back to your host station Keep aware of what's happening around you in the dining room Maximise your time and stop along the way to pass on information to servers and man Smile and interact with guests Let them choose where they want to sit Be prepared for guests to ask to sit at a different table and know how to deal with this r 4. What is the most persuasive word you can use in a sentence? O You O Me We
The most persuasive word you can use in a sentence is "You."
Using the word "You" in a sentence immediately grabs the listener's attention and creates a sense of personal connection. It makes the listener feel important and involved, as if the message is specifically tailored to them. By addressing individuals directly with "You," it creates a sense of engagement and personal relevance, which can be highly persuasive.
When communicating with someone, whether in writing or in person, it's essential to make them feel valued and understood. By using "You," you shift the focus onto the listener or reader, making them the center of attention. This approach helps establish rapport, build trust, and enhance the persuasiveness of your message.
For example, instead of saying, "We have a great offer," you can say, "You have a great opportunity." The latter instantly makes the listener feel more involved and interested in the proposition. By emphasizing the benefits or relevance to the individual, it becomes more compelling and persuasive.
Using "You" in your writing or conversation can have a significant impact on how your message is received. It engages the reader or listener on a personal level, making them more receptive to your ideas, suggestions, or offers. Remember, effective communication is about connecting with your audience, and using the word "You" helps achieve just that.
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A call center employs 1,480 agents. Every month 40 employees leave the company and 40 new employees are hired.
a. How long on average does an agent work for this call center?
Average working time in monhs?
Suppose the cost of hiring and training a new agent is $800. The manager of this call center believes that increasing agents’ salaries would keep them working longer at the company. The manager wants to increase the average time that an agent works for the call center to 48 months, or four years.
b-1. Given the current average working time for agents at this call center, determine the current annual cost for hiring and training. Current annual cost $ ?
b-2. Assuming the average time that an agent works for the call center is increased to 24 months, determine the new annual cost for hiring and training. New annual cost $?
b-3. If the time an agent works for the call center is increased to 24 months on average, how much could the company save on hiring and training costs over a year? Annual saving $
a. On average, an agent works for 24 months in this call center.
b-1. The current annual cost for hiring and training is $384,000.
b-2. Assuming the average working time increases to 24 months, the new annual cost for hiring and training is $768,000.
b-3. If the average working time is increased to 24 months, the company could save $384,000 on hiring and training costs over a year.
a. To calculate the average working time, we need to consider that every month 40 employees leave and 40 new employees are hired. This means the average working time would be the number of employees divided by the net change in employees per month, which is 40. Therefore, the average working time is 1,480/40 = 37 months or 24 months on average.
b-1. The current annual cost for hiring and training can be calculated by multiplying the number of new employees hired per month (40) by the cost of hiring and training a new agent ($800) and then multiplying it by 12 (months). So, the current annual cost is $800 * 40 * 12 = $384,000.
b-2. Assuming the average working time increases to 24 months, the new annual cost for hiring and training would be $800 * 40 * 24 = $768,000.
b-3. The potential savings on hiring and training costs over a year can be calculated by subtracting the new annual cost (b-2) from the current annual cost (b-1). Therefore, the annual savings would be $768,000 - $384,000 = $384,000.
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the net cash flow provided by operating activities is $38,042, the net cash flow used in investing activities is $17,331, and the net cash flow used in financing activities is $26,597. if the beginning cash account balance is $11,383, what is the ending cash account balance? multiple choice ($5,886) $5,497 $40,159 $28,776
According to the given statement The net cash flow from operating, investing, The ending cash account balance is $5,497..
The ending cash account balance can be calculated by starting with the beginning cash account balance and then considering the net cash flow from operating, investing, and financing activities.
Beginning cash account balance: $11,383
Net cash flow from operating activities: $38,042
Net cash flow from investing activities: -$17,331 (negative because it is a cash flow used)
Net cash flow from financing activities: -$26,597 (negative because it is a cash flow used)
To find the ending cash account balance, we need to add the net cash flow from operating activities, the net cash flow from investing activities, and the net cash flow from financing activities to the beginning cash account balance.
$11,383 (beginning cash account balance)
+ $38,042 (net cash flow from operating activities)
- $17,331 (net cash flow from investing activities)
- $26,597 (net cash flow from financing activities)
Calculating the total:
$11,383 + $38,042 - $17,331 - $26,597 = $5,497
Therefore, the ending cash account balance is $5,497.
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Alyson, another investor, has also purchased an IIP for the original price of $975.01195711895. Two years pass, and Alyson has just received the annual payment of $45. She is considering selling the IIP. Again, the original information regarding IIP's has been repeated below. - Customers pay $975.01195711895 to buy an IIP. - The IIP will pay out $45 at the end of each year for 9 years - The IIP will pay out a further single payment of $1,000 after 9 years - There are no further payments after this single payment at time 9. (a) Barney is willing to purchase the IIP from Alyson. He requires a return of 6.69% p.a. effective. What is the maximum price Barney is willing to pay? Give your answer in dollars, to the nearest cent. Answer: (b) Barney and Alyson agree on the price calculated above. Ignoring tax and any other expenses, what is the effective annual return that Alyson has made on her investment? Recall that she has received 2 payments of $45 and the sale price. Give your answer as a percentage to 4 decimal places.
a) Barney is willing to pay a maximum price of approximately $912.86.
b) Alyson has made an effective annual return of approximately 2.91% on her investment.
(a) To calculate the maximum price Barney is willing to pay for the IIP, we need to determine the present value of the cash flows generated by the investment.
The annual payment of $45 for 9 years can be treated as an annuity. Using the formula for the present value of an annuity, we can calculate its present value at a discount rate of 6.69% p.a. effective:
PV = Payment * ((1 - (1 + r)⁻ⁿ) / r)
PV = $45 * ((1 - (1 + 0.0669)⁻⁹) / 0.0669)
PV ≈ $310.1633
The single payment of $1,000 after 9 years is a future value. To determine its present value, we need to discount it back to the present using the same discount rate:
PV = Future value / (1 + r)ⁿ
PV = $1,000 / (1 + 0.0669)⁹
PV ≈ $602.6941
The maximum price Barney is willing to pay is the sum of the present values of the annuity and the future value:
Maximum price = PV₁ + PV₂
Maximum price ≈ $310.1633 + $602.6941
Maximum price ≈ $912.8574
(b) To calculate the effective annual return that Alyson has made on her investment, we need to consider the total cash flows received and the price at which she sells the IIP.
Alyson received two annual payments of $45 each, totaling $90. Additionally, she sells the IIP for the maximum price of $912.86.
The total cash inflow from the investment is $90 + $912.86 = $1,002.86.
Alyson's initial investment was $975.01195711895.
The effective annual return can be calculated using the formula:
Effective annual return = [tex](Total cash inflow / Initial investment)^{(1/n)} - 1[/tex]
Effective annual return = [tex]($1,002.86 / $975.01195711895)^{(1/2)} - 1[/tex]
Effective annual return ≈ 0.0291 or 2.91% (rounded to 4 decimal places)
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