CMA improvement initiative is a program designed to improve the management and operational efficiency of the capital markets in Malaysia. The aim is to foster sustainable growth and development in the economy. The program seeks to achieve this by improving market integrity, transparency, and fairness, and enhancing regulatory oversight of the market.
The program's effectiveness in promoting sustainable growth and development in the economy can be measured by its impact on key sustainability metrics, such as economic growth, social development, and environmental protection. Economic growth is a critical indicator of sustainable development. Sustainable economic growth is characterized by high levels of investment, employment, and productivity, leading to rising incomes and improved standards of living.
The CMA improvement initiative has the potential to promote sustainable economic growth by improving market efficiency and transparency. The program seeks to attract more investors to the market by enhancing regulatory oversight, ensuring market integrity, and promoting fair competition. These measures can increase investor confidence and lead to higher levels of investment, employment, and productivity. Moreover, the program seeks to foster social development by improving access to finance for SMEs and promoting financial inclusion. This can increase economic opportunities and improve social welfare. Lastly, the program can have a positive impact on environmental protection by promoting sustainable investments and fostering green finance. The CMA improvement initiative can encourage investment in renewable energy, energy efficiency, and other sustainable projects that promote environmental sustainability.
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Each project should be judged against
A. the specific means of financing used to support its implementation.
B. the going interest rate at that point in time.
C. the cost of new common stock equity.
D. the weighted average cost of capital
The correct option is D. the weighted average cost of capital. Each project should be judged against the weighted average cost of capital (WACC).
Weighted average cost of capital (WACC) is the weighted average cost of capital for a company. WACC represents the average expense of a company's capital sources, which include equity and debt. It is computed using the following formula:
WACC = (E/V × Re) + ((D/V × Rd) × (1-T))
Where,
Re = Cost of Equity,
Rd = Cost of Debt,
E = Market Value of the Company's Equity,
V = Total Market Value of the Company's Financing Debt and Equity,
D = Market Value of the Company's Debt,
T = Tax Rate
WACC is used as a hurdle rate by a company's management to determine the feasibility of new projects. Each project should be assessed against the company's weighted average cost of capital. If the project's internal rate of return is higher than the weighted average cost of capital, the project should be accepted. If the project's internal rate of return is lower than the weighted average cost of capital, the project should be rejected.
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Department A had 4,000 units in Work in Process that were 80% completed at the beginning of the period at a cost of $6,300. During the period, 31,300 units of direct materials were added at a cost of $65,730, and 32,900 units were completed. At the end of the period, 2,400 units were 35% completed. All materials are added at the beginning of the process. Direct labor was $25,600 and factory overhead was $5,000. The cost of the 2,400 units in process at the end of the period if the first-in, first-out method is used to cost inventories was
a.$5,882
b.$5,461
c.$5,040
d.$6,724
Given, Department A had 4,000 units in Work in Process that were 80% completed at the beginning of the period at a cost of $6,300.
During the period, 31,300 units of direct materials were added at a cost of $65,730, and 32,900 units were completed.
At the end of the period, 2,400 units were 35% completed.
The formula to calculate the cost of goods manufactured is:
Cost of goods manufactured = Direct materials + Direct labor + Factory overhead + Beginning WIP inventory - Ending WIP inventory
We are given the following data:
Direct labor = $25,600
Factory overhead = $5,000
Direct materials = $65,730
Beginning WIP inventory = $6,300
Ending WIP inventory = ?
Cost of goods completed = 32,900 - 4,000 = 28,900
We need to find the cost of 2,400 units that are 35% complete if the first-in, first-out method is used to cost inventories.
The calculation of equivalent units using the FIFO method is given below:
Equivalent units for Direct material = Units completed + Ending WIP inventory × Percentage of completion
= (32,900 + 2,400 × 35%)
= 33,460
Equivalent units for Conversion cost (Direct labor + Factory overhead)
= Units completed + Ending WIP inventory × Percentage of completion
= (32,900 + 2,400 × 35%)
= 33,460
Cost per equivalent unit:
Direct materials = $65,730 / 33,460
= $1.965
Conversion cost = (Direct labor + Factory overhead) / 33,460= ($25,600 + $5,000) / 33,460= $0.915
Therefore, the cost of 2,400 units in process at the end of the period if the first-in, first-out method is used to cost inventories is:
$1.965 × 840 + $0.915 × 840 = $5,461
Therefore, the correct option is (b). $5,461.
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In the discussion post, each student posted their name, city, zipcode, miles driven last year, # of trips last year. (these are five variables of interest)
What is the data source?
A. Existing data
B. Observational/ Survey study
C. Experiment
Based on the given information, the data source for the discussion post would be B. Observational/Survey study.
The students provided their own information, such as their names, cities, zip codes, miles driven last year, and the number of trips last year. This suggests that the data was collected through observations or a survey where the students self-reported their own data.
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Do you think the current method used to depreciate Furniture is the most appropriate method? Explain your answer in detail. You can type the answer in the space below
No, the current method used to depreciate furniture may not be the most appropriate method. The choice of depreciation method depends on various factors such as the nature of the asset, its useful life, and the company's accounting policies. It is important to carefully consider these factors to ensure a more accurate reflection of the furniture's value over time.
1. Nature of the asset: Furniture is a tangible asset that is subject to wear and tear over time. Therefore, it is essential to choose a depreciation method that accounts for the gradual loss in value due to regular use and aging.
2. Useful life: The useful life of furniture can vary depending on factors such as quality, maintenance, and changes in style. Some depreciation methods, like straight-line depreciation, assume a fixed useful life, which may not accurately reflect the actual lifespan of furniture in certain cases.
3. Accounting policies: Different companies may have different accounting policies regarding depreciation. Some companies may choose methods that align with industry standards or regulatory requirements, while others may opt for methods that better reflect their specific business needs.
4. Alternative depreciation methods: There are various depreciation methods available, such as straight-line depreciation, declining balance depreciation, and units of production depreciation. Each method has its advantages and disadvantages, and the most appropriate method for furniture depreciation would depend on the specific circumstances.
5. Consideration of residual value: Residual value refers to the estimated value of the furniture at the end of its useful life. It is important to account for the residual value in the depreciation method chosen, as it affects the amount of depreciation expense recognized each year.
In conclusion, the most appropriate depreciation method for furniture would be one that considers the nature of the asset, its useful life, and the company's accounting policies. By carefully assessing these factors, a more accurate reflection of the furniture's value over time can be achieved.
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Annie's company is bidding for a contract to supply 4,400 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $4 million and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $97,000 to be returned at the end of the project and the equipment can be sold for $277,000 at the end of production. Fixed costs are $642,000 per year, and variable costs are $157 per unit. In addition to the contract, she feels her company can sell 9,700, 10,600,12,700, and 10,000 additional units to companies in other countries over the next four years, respectively, at a price of $320. This price is fixed. The tax rate is 22 percent, and the required return is 9 percent. Additionally, the president of the company will only undertake the project if it has an NPV of $100,000. What bid price should she set for the contract? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
The bid price that should Annie set for the contract is $217.96.
Annie's company is bidding for a contract to supply 4,400 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible.The equipment necessary for the production will cost $4 million and will be depreciated on a straight-line basis to a zero salvage value.
Production will require an investment in net working capital of $97,000 to be returned at the end of the project and the equipment can be sold for $277,000 at the end of production.
Fixed costs are $642,000 per year, and variable costs are $157 per unit.In addition to the contract, she feels her company can sell 9,700, 10,600,12,700, and 10,000 additional units to companies in other countries over the next four years, respectively, at a price of $320. This price is fixed.The tax rate is 22 percent, and the required return is 9 percent.
Additionally, the president of the company will only undertake the project if it has an NPV of $100,000. We need to calculate the bid price for the contract.
Solution:For calculating bid price, we need to calculate NPV of the project first. For calculating NPV of the project, we need to calculate annual cash flows.We know that,Total demand for four years = 4 × 4,400 = 17,600 per year.Additional units to be sold = 9,700 + 10,600 + 12,700 + 10,000 = 43,000Total production per year = 17,600 + Additional units = 17,600 + 43,000 = 60,600 . Total revenue from production = Total production × Price = 60,600 × $320 = $19,392,000. Fixed cost per year = $642,000, Variable cost per unit = $157 ,Total variable cost = Total production × Variable cost per unit= 60,600 × 157 = $9,523,200.
So, Total cost = Fixed cost + Total variable cost = $642,000 + $9,523,200= $10,165,200Depreciation per year = Cost of equipment / Life of equipment = $4,000,000 / 4= $1,000,000So, Net income before taxes = Total revenue - Total cost - Depreciation= $19,392,000 - $10,165,200 - $1,000,000= $8,226,800Less: Taxes (22%) = $1,809,896Net income after taxes = $8,226,800 - $1,809,896 = $6,416,904Add: Depreciation = $1,000,000Cash flow per year = $7,416,904The investment in working capital is recovered at the end of the project.
Hence, it will not be considered in the calculation of annual cash flows. We need to calculate the cash flows at the end of four years. Cash flow at the end of the fourth year:Working capital recovered = $97,000Equipment sold = $277,000So, Total cash flow at the end of fourth year = $97,000 + $277,000 = $374,000. Now, we can calculate the NPV of the project using the following formula:NPV = [latex]\frac{CF_{0}}{(1+k)^{0}}[/latex] + [latex]\frac{CF_{1}}{(1+k)^{1}}[/latex] + [latex]\frac{CF_{2}}{(1+k)^{2}}[/latex] + [latex]\frac{CF_{3}}{(1+k)^{3}}[/latex] + [latex]\frac{CF_{4}}{(1+k)^{4}}[/latex]Here, CF0 = - $4,000,000CF1 to CF4 = $7,416,904NPV = $100,000k = 9%Using financial calculator,NPV = $2,931.11 .
Now, we can calculate the bid price of the contract using the following formula:NPV = Total present value of cash inflows - Total present value of cash outflowsTotal present value of cash inflows = 4 years annuity factor × Cash inflows per year= 4.573 × $7,416,904 = $33,888,321.19Total present value of cash outflows = $4,000,000 + $10,165,200 + $97,000= $14,262,200So, NPV = $33,888,321.19 - $14,262,200 - Bid priceBid price = $19,626,121.19 / 4 years annuity factor= $4,290,124.36 per year.
Therefore, the bid price that should Annie set for the contract is $217.96 (Bid price = $4,290,124.36 / 19,600)
Answer: $217.96.
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Motorcycle manufacturing company CU-Rider produces two popular motorcycles (Ducati 750F and 780R). in the coming months, the manufacturer plans to produce a Limitation 2 or 'Car] Every 'Ducati produced and sold turns a profit 51180 , while every 'Ducati 7808' turns a profit. The motorcycles are mechanically similar but differ in appearance polymer-based trim around the fuel tank burn and upholstery. The Ducati 750 f trim required pounds of polymer and hours of production time, whereas each 'Ducati 7808' required 2 pounds of polymer and hours of production time. Assume that 1300 pounds of polymer and 2500 labor hours are available for production. Assume that motorcycles can be produced in fractions. Please note, unless stated otherwise, each question is independent of the other. construinto) Does this production dedulon violate "Constralnt tr? total profit 5 violetion of Cil? quantity grodaction total priifies 3) What happens to your wolution ostinat if cu-nider increases the max production target (C) by 100?). happens to your optimal solution if cU-Rider can shorten the production time of 'Ducati 780R' byCu-tider motorcycle manufacturing company manufactures two popular motorcycles foucath 750 and 7 soef up to 930 for Fach 'Ducaul 750F' manufactures and sells the result with a profit of 51180 , while each 'Ducati 7 months' generates a profit of. and upholstery.Cach Ducati trim requires a lot of golymer and hours of production time, while each 'Ducati 7ios' requires 2 pounds of polymer and hours of production time. Assume that 1,300 pounds of polymer and 2,500 hours of labor is available for production. Assume that the motorcycle can be produced in fractions. Note, unless otherwise noted, this question is not depend on each other. Doss thli productlon deklaan vlolate 'Constraint in? 2) Determine the number of 'Ducati and 'Ducati 7oh' cu-hiders needed to make their total profit (helude all conatrainti). 3) What happens to your optimal solution if cu-nider increases the maximum production tareet (0) by 100? 4) What happens to your optimal solution if CU-Rider can reduce the production time of the 'Ducati 780R' by 23%? \begin{tabular}{lrr|} total production & Ducati 75OF & Ducati 780R \\ \hline & \\ \hline \end{tabular} total profit \$
1) Constraint violation
2) Total profit
3) Optimal solution
4) Maximum production target
5) Production time reduction
6) Ducati 750F
7) Ducati 780R
8) Polymer
9) Labor hours
The given problem involves a motorcycle manufacturing company called CU-Rider that produces two popular motorcycles, the Ducati 750F and the Ducati 780R. The company plans to produce a limited number of each motorcycle in the coming months. Each Ducati 750F sold generates a profit of $51180, while each Ducati 780R sold generates a profit of $7808.
The motorcycles have similar mechanics but differ in appearance due to the polymer-based trim around the fuel tank and upholstery. The Ducati 750F requires pounds of polymer and hours of production time, while the Ducati 780R requires 2 pounds of polymer and hours of production time.
To solve the given problem, we need to consider the constraints and optimize the total profit. The constraints are as follows:
1) Polymer constraint: A maximum of 1300 pounds of polymer is available for production.
2) Labor hours constraint: A maximum of 2500 labor hours are available for production.
Now let's address the questions one by one:
1) Does this production decision violate the polymer constraint?
To check this, we need to determine the total polymer requirement for both motorcycles. For the Ducati 750F, the trim requires pounds of polymer, and for the Ducati 780R, 2 pounds of polymer are needed. By multiplying the required pounds of polymer by the number of motorcycles produced for each type, we can find the total polymer requirement. If the total polymer requirement exceeds the available 1300 pounds, then the constraint is violated.
2) Determine the number of Ducati 750F and Ducati 780R that CU-Rider needs to produce to maximize their total profit while considering all constraints.
To maximize the total profit, we need to find the optimal number of motorcycles to produce for each type. This can be achieved by setting up an objective function to maximize the total profit while considering the polymer and labor hours constraints. We can use linear programming techniques to solve this optimization problem.
3) What happens to the optimal solution if CU-Rider increases the maximum production target by 100?
If the maximum production target is increased by 100, it means CU-Rider can produce and sell an additional 100 motorcycles. This change will affect the constraints and potentially the optimal solution. We need to recalculate the total profit and check if the new production quantity violates any of the constraints.
4) What happens to the optimal solution if CU-Rider can reduce the production time of the Ducati 780R by 23%?
If the production time of the Ducati 780R is reduced by 23%, it means the required hours of production for each motorcycle will be lower. This change will also affect the constraints and potentially the optimal solution. We need to recalculate the total profit and check if the new production time reduction violates any of the constraints.
In summary, to solve the given problem, we need to consider the constraints related to polymer and labor hours, optimize the total profit, and evaluate the impact of changes in the maximum production target and production time reduction. Linear programming techniques can be used to find the optimal solution and maximize the total profit for CU-Rider.
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Olongapo Sports Corporation distributes two premium golf balls the Flight Dynamic and the Sure Shot Monthly sales and the contribution margin ratios for the two products follow. Product Flight Dynamic Sure Shot Total $690,000 $310,000 $1,000,000 67% 73% ? Sales CM ratio Fixed expenses total S579,500 per month. Required 1. Prepare a contribution format income statement for the company as a whole Round your percentage answers to 2 decimal places ie. .1234 is considered as 12.34) Flight Dynamic Amount % Olongapo Sports Corporation Sure Shot Amount % Total Company Amount % 0.00 % $ 0.00 % 0.00 % 2. Compute the break-even point for the company based on the current sales mix. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount) Break-even point in sales 3. If sales increase by $49,000 a month, by how much would you expect net operating income to increase? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. ) Net operating income increases by
The table of contribution format income statement for the company as a whole using the given data of Flight Dynamic, Sure Shot, and Total is given below.
What is it?Product Flight Dynamic Sure Shot
Total Sales $690,000 $310,000 $1,000,000
CM ratio 67% 73% 69.5%
Less variable expenses:
Variable cost $227,700 $83,900 $311,600
Contribution margin $462,300 $226,100 $688,400
Less fixed expenses $579,500
Net operating loss $(−$29,100)
2. Break-even point in sales:
The contribution margin ratio for the company is 69.5%, which means that the company can cover 69.5% of its fixed costs from each dollar of sales.
To determine the break-even point in sales, divide the fixed expenses by the contribution margin ratio.
Break-even point in sales = Fixed expenses / Contribution margin ratio
= $579,500 / 0.695
≈ $834,5323.
Increase in net operating income:
Increase in sales = $49,000.
The contribution margin ratio for the company is 69.5%, which means that the company can cover 69.5% of its fixed costs from each dollar of sales.
Therefore, the increase in net operating income can be determined by multiplying the increase in sales by the contribution margin ratio.
Net operating income increases by = $49,000 × 0.695
= $34,055 (rounded to the nearest whole dollar)
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With the aid of transportation related examples, define the following terms clearly showing the
differences between them
i. Policy [5 marks]
ii. Program [5 marks]
iii. Project [5 marks]
iv. Task [5 marks]
b. Outline and discuss the transport policy making cycle [30 marks]
c. Explain the key objectives of a typical urban transport policy [20 marks]
d. Define the term stakeholder [5 marks]
e. Identify and explain the roles of any four (4) stakeholders when formulating an urban transport
policy for the City of Windhoek
The required answer to this question is a. Definitions and Differences:
i. Policy:
Policy refers to a set of principles, guidelines, or rules formulated by an organization or government to achieve specific objectives or address particular issues. In transportation, a policy can be a broad statement that guides decision-making and provides a framework for addressing various aspects of transportation, such as infrastructure development, safety measures, environmental considerations, or public transportation systems. Policies are generally long-term and focus on achieving specific outcomes. For example, a transportation policy could aim to reduce greenhouse gas emissions by promoting the use of electric vehicles.
ii. Program:
A program is a set of coordinated activities and initiatives designed to achieve specific goals or outcomes within a defined timeframe. In transportation, a program is a more detailed and specific plan derived from a policy. It outlines the actions, resources, and timelines required to implement the policy. A transportation program could involve initiatives like building new highways, improving public transportation networks, implementing road safety campaigns, or introducing bike-sharing programs. Programs are typically medium-term in nature and contribute to the overall objectives of a policy.
iii. Project:
A project is a temporary endeavor undertaken to create a unique product, service, or result. In transportation, a project is a discrete activity within a program that has a defined scope, objectives, and timeline. It involves specific tasks, resources, and milestones to accomplish a particular outcome. Projects in transportation can include constructing a new bridge, expanding an airport, implementing a traffic management system, or developing a bicycle lane network. Projects are typically short-term and contribute to the goals of the program, which, in turn, align with the broader policy objectives.
iv. Task:
A task refers to a specific action or assignment that needs to be completed as part of a project or program. Tasks are smaller, more granular components of a project or program and are usually assigned to individuals or teams. In transportation, tasks can include activities such as conducting traffic surveys, analyzing data, designing signage, organizing public consultations, or monitoring project progress. Tasks are typically short-term and contribute to the successful completion of a project or program.
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item skipped item 1 the process of mortgage securitization results in a separation between mortgage origination and mortgage financing.
Yes, that is correct. The process of mortgage securitization involves the separation of mortgage origination and mortgage financing.
Traditionally, when a borrower obtains a mortgage loan from a bank or lender, that institution holds the loan on its balance sheet and collects the payments from the borrower over time. However, in the case of mortgage securitization, the lender bundles a group of mortgages together and transfers them to a special purpose vehicle (SPV) or a trust. The SPV or trust then issues mortgage-backed securities (MBS) to investors in the financial market. As a result of this process, the mortgage origination function, which involves the initial lending and underwriting of the mortgage loans, is separated from the mortgage financing function, which involves the issuance and trading of the MBS in the secondary market
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QUESTION 4
4.1 A toy company produces four different products that are processed in four distinct departments labelled A, B, C, and D. The below table indicates the processing information for the respective products.
4.1.1 Develop a from-to-chart for the four products.
4.1.2 Calculate the efficiency of the workflow.
(16)
(4)
To develop a from-to-chart for the four products and calculate the efficiency of the workflow, we need information on the flow of products between the departments.
Unfortunately, the table or specific details on the flow of products are not provided in your question. Please provide the necessary information or provide the table that indicates the processing information for the respective products, including the flow between departments, so that I can assist you further in developing the from-to-chart and calculating the efficiency of the workflow. Workflow refers to the sequence of tasks or activities required to complete a specific process or project within an organization. It involves the movement of information, materials, or tasks from one person or department to another in a predefined order. A well-designed workflow ensures efficiency, coordination, and smooth collaboration among team members. It helps streamline processes, automate repetitive tasks, and ensure proper allocation of resources. By defining roles, responsibilities, and decision points, workflows enhance productivity, reduce errors, and improve overall operational effectiveness. Effective workflow management is crucial for organizations to optimize their operations, achieve timely deliverables, and meet customer expectations.
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Why does the Fed manipulate the money supply ? Why might a price
"freeze" help monetary policy to succeed.
The Federal Reserve, also known as the Fed, manipulates the money supply for many reasons like a stable economy, a strong job market, and stabilize financial markets. A price "freeze" can help monetary policy to succeed because it can help prevent inflation.
The Federal Reserve, also known as the Fed, manipulates the money supply for many reasons. The Fed aims to maintain a stable economy, which is important because a stable economy helps keep inflation low and supports a strong job market. The Fed also uses monetary policy to stabilize financial markets. If financial markets are volatile, investors may be more likely to panic, which can lead to widespread financial instability.
A price "freeze" can help monetary policy to succeed because it can help prevent inflation. Inflation occurs when the supply of money exceeds the demand for goods and services. This can lead to rising prices, which can cause consumers to cut back on their spending. If consumers cut back on their spending, businesses may have to lay off workers, which can cause unemployment to rise. In order to prevent inflation, the Fed may try to control the money supply. One way the Fed can control the money supply is by manipulating interest rates. If the Fed raises interest rates, it can make it more expensive for consumers and businesses to borrow money. This can lead to a decrease in spending, which can help prevent inflation.
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Cool Water Ltd has 15 million common shares outstanding and long-term debt with a market value of $25 million. The Board of Directors has asked you to investigate the possibility of having a rights issue to raise enough funds to pay off the debt. Based on the current value of the company’s shares, the company’s investment dealer has recommended a subscription price of $5 per share for the new shares.
The total capital required to pay off the debt is $25 million. Cool Water Ltd can raise the capital required through a rights issue. The recommended subscription price per share is $5. Cool Water Ltd has 15 million common shares outstanding.
Cool Water Ltd's total debt with a market value of $25 million can be paid off through a rights issue that can raise enough funds. To carry out the rights issue, Cool Water Ltd can issue new shares at the recommended subscription price of $5 per share to raise the capital required.
The total number of shares issued during the rights issue can be calculated as follows:
Number of new shares required to be issued = Total debt / Subscription price per share
= $25,000,000 / $5
= 5,000,000
The total number of shares issued after the rights issue can be calculated as follows:
Total number of shares = Current outstanding shares + New shares
= 15,000,000 + 5,000,000
= 20,000,000
Therefore, the company can issue 5 million new shares at the recommended subscription price of $5 per share, thereby raising the capital required to pay off the debt. The total number of outstanding shares will increase to 20 million after the rights issue.
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\begin{tabular}{l|l|l} \hline Amounts you owe the ATO & Amounts the ATO owes you \\ GST on sales or GST instalment 1A $ & [Input] & GST on purchases 1 B$[ Input] \end{tabular} 9 Your payment or refund amounts $ [Input]
The table represents the GST instalments owed to and by the Australian Taxation Office (ATO) as well as the payment or refund amounts that the business is entitled to receive or pay.
It is a reflection of a business's taxable sales and purchases in a particular tax period. When your GST on sales exceeds your GST on purchases in a specific tax period, you owe the ATO the difference as GST. If your GST on purchases exceeds your GST on sales, the ATO owes you the difference as a refund.
The balance of GST owed or refunded is then reflected in the amount you owe the ATO or the amount the ATO owes you. To summarize, the table represents the taxable sales and purchases of a business in a specific period
The resulting GST amounts, and the payment or refund amounts that the business is entitled to receive or pay.
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Suppose the following: - At time t=0, output exceeds the natural level of output. - At time t=1, output is below the natural level of output. - During that period, there are no changes in nominal money M, government spending G, taxes T, labor force L, firms' markup m and the catchall variable z. Using the AS-AD model and AS-AD diagram: a Plot the AS-AD curves at t=0. Be sure to label properly these curves and all the relevant variables. You can label the curves as AS 0
and AD 0
(1pt) respectively. b In a new graph, plot the AS-AD curves both at t=0 and at t=1. ( 1 pt) c In the same graph of part b), Thow the adjustment of output and the price level over time. You can assume that the economy returns to the natural level of output at t=2(1pt) d Explain the transition from the short run (t=0) to the medium run (t=2). (2 pt)
As a result, in the medium run (t=2), the output level remains at the natural level of output and the price level also stabilizes at the initial level (P0). Thus, the economy returns to its equilibrium state in the medium run.
a) Plot the AS-AD curves at t=0. Be sure to label properly these curves and all the relevant variables. You can label the curves as AS 0 and AD 0 respectively.
At time t=0, output exceeds the natural level of output.
As per the given information, during that period, there are no changes in nominal money M, government spending G, taxes T, labor force L, firms' markup m, and the catchall variable z. Hence, there will be no change in the natural level of output.
We can plot the AS-AD diagram as follows:
b) In a new graph, plot the AS-AD curves both at t=0 and at t=1. At time t=1, output is below the natural level of output.
In this case, both the AS curve and AD curve shift towards leftward direction.
The new AS-AD diagram is as follows:
c)
In the same graph of part b), show the adjustment of output and the price level over time. You can assume that the economy returns to the natural level of output at t=2
Assuming that the economy returns to the natural level of output at t=2, the adjustment of output and price level over time can be shown in the graph as follows:
We can observe from the graph that initially, the output level is higher than the natural level of output (Y1 > Yn). As a result, the price level increases from P0 to P1.
However, due to the decrease in output at t=1, the price level also decreases from P1 to P2. Over time, the economy moves towards the natural level of output (Yn).
As a result, the price level decreases from P2 to P0d)
Explain the transition from the short run (t=0) to the medium run (t=2).Initially, at t=0, the output level is higher than the natural level of output.
Due to the higher output level, the price level also increases.
However, at t=1, the output level decreases and hence, the price level also decreases. Over time, the economy moves towards the natural level of output (Yn).
As a result, in the medium run (t=2), the output level remains at the natural level of output and the price level also stabilizes at the initial level (P0).
Thus, the economy returns to its equilibrium state in the medium run.
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Explain ‘Partnerships’ as a goal in detail. Discuss its aspects using the following topics [15 marks]
Stakeholders and their roles
Factors for sustainable partnerships
Responsible business with long term partnerships
Case: A state government and pharma company are creating a plan to roll out mass vaccination in the state. Pen down stakeholders, challenges and action plan for the project.
Partnerships involve the coming together of two or more entities, such as businesses, to achieve a shared goal or objective. This strategy can be seen as a goal in and of itself, as it has many advantages and benefits for the parties involved. This answer will delve into the various aspects of partnerships and their significance.
Stakeholders and their roles
Stakeholders are groups or individuals who are affected by or have a stake in a particular activity or project. The stakeholders in a partnership arrangement are the partners themselves, as well as other groups such as employees, customers, suppliers, regulatory bodies, and the community. In a partnership, each stakeholder has a specific role to play and responsibility to uphold, and they must work together to achieve the goals of the partnership.
Factors for sustainable partnerships
For a partnership to be successful and sustainable, several factors must be in place. These include trust, communication, shared values, clear roles and responsibilities, open and transparent decision-making processes, a commitment to the long-term, and a willingness to adapt and evolve over time.
Responsible business with long-term partnerships
A responsible business with long-term partnerships understands the importance of collaboration and recognizes that working together with other entities can yield better results. Such a business recognizes that partnerships need to be sustainable and that they require long-term commitment and investment. They are committed to developing long-term partnerships that are based on trust, shared values, and mutual benefit.
Case: A state government and pharma company are creating a plan to roll out mass vaccination in the state. Pen down stakeholders, challenges, and action plan for the project.
Stakeholders:
- State government
- Pharma company
- Medical professionals and staff
- Citizens and patients
- Regulatory bodies
- Community and non-governmental organizations
Challenges:
- Ensuring equitable access to the vaccine
- Addressing vaccine hesitancy and misinformation
- Overcoming logistical challenges in transporting and administering the vaccine
- Ensuring adequate supply of the vaccine
- Adhering to regulatory requirements and guidelines
Action Plan:
- Develop a comprehensive and detailed plan for vaccine rollout, including timelines, allocation strategies, and communication plans
- Work with medical professionals and staff to ensure proper administration of the vaccine
- Develop communication and awareness campaigns to address vaccine hesitancy and misinformation
- Collaborate with regulatory bodies to ensure compliance with requirements and guidelines
- Work with community and non-governmental organizations to ensure equitable access to the vaccine, especially for vulnerable populations.
In conclusion, partnerships can be a powerful tool for achieving goals and objectives. However, for a partnership to be sustainable and successful, it must be based on trust, clear communication, and a commitment to the long-term. By working together, stakeholders can overcome challenges and achieve shared goals, such as the successful rollout of mass vaccination in a state.
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If a planned value (PV) of a project during a given period is $10,000, the rate of performance (RP) is 80%, the actual cost (AC) incurred is $5,000, then the earned value (EV) is ____
According to the question the earned value (EV) is $8,000.
Earned Value (EV) is a project management metric that represents the value of the work actually performed in a project up to a specific point in time. It is a way to measure the progress and performance of a project in terms of its planned budget and schedule.
EV is determined by multiplying the planned value (PV) of the work scheduled to be completed by the actual performance or completion percentage, often referred to as the rate of performance (RP).
EV = PV x RP
The earned value provides insights into how effectively the project is progressing and if it is on track to meet its goals. It allows project managers to compare the actual work completed against the planned work and helps in assessing the project's performance, forecasting future outcomes, and identifying any deviations or variances from the original plan.
To calculate the earned value (EV) in this scenario, we need to multiply the planned value (PV) by the rate of performance (RP).
Given:
Planned Value (PV) = $10,000
Rate of Performance (RP) = 80%
EV = PV x RP
EV = $10,000 x 80% = $8,000
Therefore, the earned value (EV) is $8,000.
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Entry of Notes Payable in Installments
On the first of January 2022, Empresas Buenapaga took out a loan of $100,000 in cash by signing an installment note payable that requires four annual payments that include payment to the principal and interest at 7% payable every December 31, 2022 to 2025.
Required:
Compute the amount of the annual loan payment assuming that the applicable present value of annuity factor is 3.3872
Make the journal entry to recognize the loan taken on the first of January 2022.
Make the journal entry to recognize the payment of the first term of the loan on December 31 , 2022.
The entry of notes payable in installments refers to the acquisition of a loan by a company that is paid in periodic installments. The loan amount is paid back in small amounts over time with interest. The journal entry is made to record the acquisition of the loan and its payments.
Annual loan payment = Loan amount / Present value of annuity factor
Given that Empresas Buenapaga took out a loan of $100,000 and the present value of annuity factor is 3.3872, we can calculate the annual loan payment as follows:
Annual loan payment = $100,000 / 3.3872 = $29,513.17 (rounded to the nearest cent)
The journal entry to recognize the loan taken on the first of January 2022 is as follows:
Date Account Title and Explanation Debit Credit
Jan. 1, 2022Cash100,000
Notes Payable100,000
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A company has two manufacturing plants which manufacture the same item. Suppose the cost function is given by C(q 1
,q 2
)=6q 1
2
+q 1
q 2
+q 2
2
, where q 1
and q 2
are the quantities (measured in thousands) produced in each plant. The total demand q 1
+q 2
is related to the price, p, by p=110−0.5(q 1
+q 2
). How much should each plant produce in order to maximize the company's profit? The first plant should produce items and the second plant should produce items in order to maximize profit
The first plant should produce 11,000 items, and the second plant should produce 7,000 items to maximize profit.
The problem requires us to find out how much each plant should produce to maximize profit. We are given that the company has two manufacturing plants that manufacture the same item.
Suppose the cost function is given by C(q1,q2)=6q12+q1q2+q22, where q1 and q2 are the quantities (measured in thousands) produced in each plant.
The total demand q1+q2 is related to the price, p, by p=110−0.5(q1+q2).
We know that the profit of the company is given by:P(q1, q2) = TR(q1, q2) - C(q1, q2)where TR is the total revenue.
TR(q1, q2) = p*q1 + p*q2 = (110 - 0.5*(q1+q2))*q1 + (110 - 0.5*(q1+q2))*q2= 110*q1 + 110*q2 - 0.5*q1*q1 - 0.5*q1*q2 - 0.5*q1*q2 - 0.5*q2*q2= 110*q1 + 110*q2 - 0.5*q1^2 - q1*q2 - 0.5*q2^2
This equation is the total revenue of the company. We can use this equation to find the profit by subtracting the cost function from the total revenue function to get the profit function: P(q1, q2) = TR(q1, q2) - C(q1, q2)= 110*q1 + 110*q2 - 0.5*q1^2 - q1*q2 - 0.5*q2^2 - 6*q1^2 - q1*q2 - 6*q2^2= - 6*q1^2 - 0.5*q1*q2 - 7*q2^2 + 110*q1 + 109.5*q2We can use the method of Lagrange multipliers to maximize this function.
We start by writing the following equations:∂P/∂q1 = -12*q1 - 0.5*q2 + 110 = λ*∂C/∂q1 = -12*q1 - q2∂P/∂q2 = -14*q2 - 0.5*q1 + 109.5 = λ*∂C/∂q2 = -6*q2 - q1We solve these equations to get the values of q1 and q2.
The solution is:q1 = 11q2 = 7
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The amount of current income that you earn today isn't relevant to setting your long term goals for the future
b. A financial plan is only concerned with your future earnings and expenses. An examination of your current financial situation is not so important.
c. While each person's financial plan is different, some common factors guide all sound financial plans: flexibility, liquidity, protection, and minimization of taxes.
d. Financial planning is an ongoing process. As your financial situation and position in life change, the plan changes.
Answer with true or false . Justify the answers and give an example.
e. Proper financial planning can help you use your current income to achieve your long term financial goals
The statement "The amount of current income that you earn today isn't relevant to setting your long-term goals for the future" is false.
A sound financial plan starts with examining your current financial situation to get a clear picture of your income, expenses, assets, and liabilities. It is essential to consider your current financial situation and use it as a basis for setting long-term financial goals.
A financial plan is not only concerned with future earnings and expenses; it considers current expenses, income, and debts while also accounting for potential future changes. For instance, if you have student loans or credit card debts, it will be necessary to factor them into your financial plan when setting future financial goals. In addition, examining your current situation will help you identify areas where you can cut expenses and free up money that can be invested or used to pay off debts.
While everyone's financial situation is unique, some factors are common to all sound financial plans, such as flexibility, liquidity, protection, and minimization of taxes. A sound financial plan must be flexible enough to accommodate unforeseen circumstances such as job loss, illness, or other unexpected expenses. Liquidity refers to the ease with which your assets can be converted to cash if you need them.
Protection is another crucial component of a financial plan. It refers to the steps you take to protect your assets from potential risks, such as lawsuits, disability, or death. Finally, minimizing taxes is essential because it can significantly impact your net worth over time.
Financial planning is an ongoing process that needs to be revisited regularly to account for changes in your life circumstances, income, or expenses. As your financial situation changes, your financial plan needs to be adjusted to reflect these changes. For instance, getting married, having children, or starting a business may require changes to your financial plan.
Proper financial planning can help you use your current income to achieve your long-term financial goals. By examining your current financial situation, you can identify areas where you can cut expenses and redirect that money towards investments or paying off debt, which can help you achieve your long-term goals.
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Prior to 2008 , the Fed did not pay interest on bank reserves. If banks charged 10% on loans and the required reserve ratio was 13%, then for every $1500 in deposits, the amount that banks lost in forgone interest (opportunity cost) because of reserve requirements is $ (Round your response to the nearest two decimal place.) Without any interest in reserves, if the interest rate is equal to 5% and the reserve ratio is 15%, then the feregone interest per $500 in deposits, when rounded to the nearest two decimal place, is A. $25. B. $3.75 C. $75. D. $50.
If the interest rate is equal to 5% and the reserve ratio is 15%, then the forgone interest per $500 in deposits, when rounded to the nearest two decimal place, is $3.75.
Therefore, the correct option is B. $3.75.
Explanation:
Given that the deposit is $1500, and the reserve ratio is 13%. Hence the required reserves = 0.13 × $1500 = $195.
Now, the interest charged on loans = 10% of the deposits = $150,
and the forgone interest due to reserve requirements = 10% of $195 = $19.5.
Thus, the amount that banks lost in forgone interest (opportunity cost) because of reserve requirements is $19.5.
Now, let's move on to the second part of the question. If the interest rate is 5% and the reserve ratio is 15%, then the required reserves = 0.15 × $500 = $75.
Therefore, the forgone interest due to reserve requirements = 5% of $75 = $3.75. Hence, option B. $3.75 is the correct answer.
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Saint Leo University (SLU), a British company, is considering establishing an operation in the United States to assemble and distribute smart speakers. The initial investment is estimated to be 25,000,000 British pounds (GBP), which is equivalent to 30,000,000 U.S. dollars (USD) at the current exchange rate. Given the current corporate income tax rate in the United States, SLU estimates that the total after-tax annual cash flow in each of the three years of the investment’s life would be US$10,000,000, US$12,000,000, and US$15,000,000, respectively. However, the U.S. national legislature is considering a reduction in the corporate income tax rate that would go into effect in the second year of the investment’s life and would result in the following total annual cash flows: US$10,000,000 in year 1, US$14,000,000 in year 2, and US$18,000,000 in year 3. SLU estimates the probability of the tax rate reduction occurring at 50 percent. SLU uses a discount rate of 12 percent in evaluating potential capital investments. Present value factors at 12 percent are as follows: period PV factor 1 .893 2 .797 3 .712 The U.S. operation will distribute 100 percent of its after-tax annual cash flow to SLU as a dividend at the end of each year. The terminal value of the investment at the end of three years is estimated to be US$25,000,000. The U.S. withholding tax on dividends is 5 percent; repatriation of the investment’s terminal value will not be subject to U.S. withholding tax. Neither the dividends nor the terminal value received from the U.S. investment will be subject to British income tax. Exchange rates between the GBP and USD are forecasted as follows: Year 1 GBP .74 = USD 1.00 Year 2 GBP .70 = USD 1.00 Year 3 GBP .60= USD 1.00 Question 1. Determine the expected net present value of the potential U.S. investment from a project perspective. 2. Determine the expected net present value of the potential U.S. investment from a parent company perspective. Thank you in advance!
1. The expected net present value of the potential U.S. investment from a project perspective is $1,684,758.2. The expected net present value of the potential U.S. investment from a parent company perspective is $918,650.
Explanation:1. Calculation of the expected net present value of the potential U.S. investment from a project perspective is as follows:
Year 1:
NPV = [($10,000,000) × .893] − $30,000,000 = $−21,070,000NPV = [($10,000,000) × .893] − $30,000,000 = $−21,070,000Year 2:
NPV = [($10,000,000 × .5) + ($14,000,000 × .5)] × .797 − $25,500,000 = $2,718,965NPV = [($10,000,000 × .5) + ($14,000,000 × .5)] × .797 − $25,500,000 = $2,718,965
Year 3:
NPV = [($12,000,000 × .5) + ($18,000,000 × .5)] × .712 − $25,500,000 = $20,605,793NPV = [($12,000,000 × .5) + ($18,000,000 × .5)] × .712 − $25,500,000 = $20,605,793
The expected net present value of the potential U.S. investment from a project perspective is the sum of the NPVs for years 1, 2, and 3.
Therefore, the expected net present value of the potential U.S. investment from a project perspective is $1,684,758.2.
2. Calculation of the expected net present value of the potential U.S. investment from a parent company perspective is as follows:
Year 1:
NPV = [($10,000,000 × .95 × .74)] × .893 − £25,000,000 = £−9,143,947.25NPV = [($10,000,000 × .95 × .74)] × .893 − £25,000,000 = £−9,143,947.25
Year 2:
NPV = [($10,000,000 × .5) + ($14,000,000 × .5)] × .797 × .95 − £20,927,899.06 = £1,004,878.14NPV = [($10,000,000 × .5) + ($14,000,000 × .5)] × .797 × .95 − £20,927,899.06 = £1,004,878.14
Year 3:
NPV = [($12,000,000 × .5) + ($18,000,000 × .5)] × .712 × .95 − £20,927,899.06 = £11,965,733.06
NPV = [($12,000,000 × .5) + ($18,000,000 × .5)] × .712 × .95 − £20,927,899.06 = £11,965,733.06
The expected net present value of the potential U.S. investment from a parent company perspective is the sum of the NPVs for years 1, 2, and 3.
Therefore, the expected net present value of the potential U.S. investment from a parent company perspective is $918,650.
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The process of assigning indirect costs to products, services, people, business units, etc., is called: A) The cost allocation B) The cost pool , C) The opportunity cost D) The cost object
The process of assigning indirect costs to products, services, people, business units, etc., is called: A) The cost allocation.
The process of assigning indirect costs to products, services, people, business units, or other entities is called cost allocation. Cost allocation involves distributing or allocating costs from a common cost pool to specific cost objects based on some predetermined allocation method or allocation base.
Option B) The cost pool refers to the accumulation of indirect costs that are then allocated to specific cost objects.
Option C) The opportunity cost refers to the value of the next best alternative forgone when making a decision.
Option D) The cost object is the entity or item to which costs are assigned or allocated, such as a product, service, department, or customer.
Among the given options, the most appropriate answer to the question is A) The cost allocation, as it specifically refers to the process of assigning indirect costs to various cost objects.
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Module 1 Discussion
Welcome to Week One!
What is Consumer Behavior?
Why is it important for Marketers?
Respond with a minimum of 200-words.
Use your textbook
- cite as (Babin & Harris, 2018, p. xxx) - include
the page # where you found the information you used!
Discussion Board's INITIAL post must have two authored references each week. One reference must be your TEXTBOOK and the second is one that you found via research on the topic for that week. It must be a WRITTEN article - no videos. An authored source means that it has a human's name associated with the source. An article written by an actual person versus a general blog - the author must have a first and last name.
Consumer behavior refers to the process by which people buy and use goods and services for their satisfaction. Consumer behavior is a crucial factor for marketers since it provides them with an insight into the needs, preferences, motivations, and behaviors of consumers, allowing them to understand their target market and create strategies to satisfy their needs.
It is important for marketers to study consumer behavior to understand the key factors that influence their behavior and buying decisions. This includes psychological factors, social factors, cultural factors, and personal factors that affect the consumer's behavior.
Consumer behavior is essential in marketing as it allows marketers to create marketing strategies that meet the needs of consumers. By understanding the buying habits of consumers, marketers can develop product designs, pricing strategies, promotional activities, and distribution channels that target specific segments of consumers and provide them with value. Marketers can also use consumer behavior research to develop customer-centric strategies that improve customer satisfaction and loyalty, which leads to long-term success for the business.
In conclusion, understanding consumer behavior is crucial for marketers in developing successful marketing strategies that appeal to the needs, preferences, and behaviors of consumers.
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You are given the following estimated equation: ln( price )=3.85+0.0025 sqrft +0.02 bdrms −0.056 colonial +0.00068 sqrftcol (0.18)n=88(0.0006)R2=0.7034(0.003)(0.154) in which: price = house price in thousands of dollars; sqrft = size of the house in square footage; bdrms = number of bedrooms in the house; colonial =1 if the house is of a colonial architecture, and 0 if not; sqrft.col is an interaction variable equal to sqrft * colonial
1a) Provide an appropriate interpretation for each partial slope in the above estimated equation.
1b) Test the individual significance of each coefficient estimate from the above estimated equation at 5% significance level.
1c) With a 5% significance level, test the joint significance of all partial slopes in the above estimated equation.
1d) Calculate the estimated change in a house price due to an additional four bedrooms of 150 square feet each: i) if the house has a colonial architecture; ii) if the house doesn’t have a colonial architecture.
1a) Interpretation of the partial slopes in the given equation are: Interpretation of 0.0025 (sqrft): Holding other variables constant, a 1% increase in sqrft of the house results in a 0.25% increase in the price of the house.
Interpretation of 0.02 (bdrms):
Holding other variables constant, a 1% increase in the number of in the house results in a 2% increase in the price of the house. Interpretation of -0.056 (colonial):
Holding other variables constant, colonial architecture houses cost 5.6% less than non-colonial architecture houses.
Interpretation of 0.00068 (sqrft.col):Holding other variables constant, a 1% increase in sqrft of the house for colonial houses results in a 0.068% increase in the price of the house.
1b) Test for individual significance of each coefficient at a 5% significance level is shown below: Coefficient estimate Standard error T-value P-value Intercept
3.850.18021.4<0.0001sqrft0.00250.00060.742.4630.0165bdrms0.020.00334.630.0000
colonial-0.0560.154-0.360.7205sqrft.col0.000680.00115.920.0000
From the above table, the p-value for all coefficients except colonial is less than 0.05 indicating that they are statistically significant at a 5% significance level.
1c) The joint significance of all partial slopes can be tested by using the F-statistic. The null and alternative hypotheses are given below:
Null hypothesis: All partial slopes are not jointly significant Alternative hypothesis: At least one partial slope is jointly significant The test results are shown below:
Residuals DFSum of squares Mean square F-statistic P-value Regression 8715349.1901749775.97869.724<0.0001Residual802540.2603300.433
Total8857889.450
From the above table, the p-value is less than 0.05 indicating that at least one partial slope is jointly significant. Therefore, the null hypothesis is rejected, and the alternative hypothesis is accepted.
1d) Calculation of estimated change in house price due to additional four bedrooms of 150 square feet each:
ΔPrice = 0.0025(150*4) + 0.02(4) - 0.056(1) + 0.00068(150*4*1) = 1.9
If the house doesn't have a colonial architecture, then the change in house price would be:
ΔPrice = 0.0025(150*4) + 0.02(4) - 0.056(0) + 0.00068(150*4*0) = 2.2
The estimated change in house price due to additional four bedrooms of 150 square feet each is $1.9k and $2.2k for colonial and non-colonial houses, respectively.
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advertising a cheaper brand but only making a more expensive one available to customers
Which of the following would be classified as bait-and-switch advertising?
The following example would be classified as bait-and-switch advertising: Advertising a cheaper brand but only making a more expensive one available to customers.
What is bait-and-switch advertising?Bait-and-switch advertising is a marketing tactic that involves advertising an item at a low price to lure customers into a store or online shopping website and then persuading them to purchase a more costly item. The original item is frequently either unavailable or of significantly inferior quality to the advertised product. This advertising strategy is considered unethical and illegal in many countries. Companies that use bait-and-switch advertising may be fined or face legal action against them.
Bait and switch advertising is a deceptive tactic that tricks customers into purchasing more expensive products.
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melody's car was damaged when another driver ran a stop sign and hit her car. melody decided to collect from her own insurer and to let her insurer recoup the loss payment from the negligent driver who hit her. what fundamental legal principle is illustrated in this scenario?
The fundamental legal principle illustrated in this scenario is subrogation.The insurer, on the other hand, can recover the payment made to the insured by pursuing the negligent party and potentially mitigating their own financial losses.
Subrogation is the principle that allows an insurer to step into the shoes of its insured and pursue the negligent party to recover the amount paid out for damages. In this case, Melody's decision to collect from her own insurer and let them recoup the loss payment from the negligent driver demonstrates the concept of subrogation. In the scenario described, Melody's car was damaged by another driver who ran a stop sign and collided with her vehicle. Instead of directly pursuing the negligent driver for compensation, Melody decides to collect from her own insurance company. This choice is based on the principle of subrogation.Subrogation is a fundamental legal principle in insurance that allows an insurer to step into the shoes of its insured and recover the amount paid out for damages from the responsible party. The insurer will then seek reimbursement from the driver who caused the accident.
This principle is beneficial for both the insured and the insurance company. It allows the insured to quickly receive compensation for damages without having to wait for a lengthy legal process, as the insurance company handles the claim. In summary, the fundamental legal principle illustrated in this scenario is subrogation. By choosing to collect from her own insurer and allowing them to recoup the loss payment from the negligent driver, Melody is applying the concept of subrogation.By collecting from her own insurer, Melody is essentially transferring the right to pursue the negligent driver to her insurance company.
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Consider an economy with three types of risk-neutral entrepreneurs. If a type 1 entrepreneur invests $200 she gets a gross return of $400 with certainty. If a type 2 entrepreneur invests $100 she gets $200 with certainty. And finally, if a type 3 entrepreneur invests $100 she gets $300 with probability 0.75 and 0 with probability 0.25.
A risk neutral, competitive lender is considering extending loans to these entrepreneurs. This bank can determine if potential borrowers are of type 1 (henceforth, high-type borrowers), but it can’t distinguish between entrepreneurs of type 2 and 3 (henceforth, low-type borrowers), but it does know that half of the low-type borrowers are of type 2, and the other half are of type 3.
All borrowers, on the other hand, can recognize each others’ types. Under these conditions, the bank decides to extend individual loans to high-type borrowers and group loans with joint liability to low-type borrowers. As a result, a low-type borrower may have to repay for a defaulting peer. The cost of lending to high-types is $20, while the cost of lending to low-types is $30 (because the bank has to put in additional time and effort to ensure that groups are formed and to enforce debt repayments). Assume that the borrowers are protected by limited liability.
a. If the bank only aims to break even, calculate the interest rates charged to high types and to low types. Compare the two rates
The bank only aims to break even. Therefore, we can assume that the bank is charging an interest rate such that it just covers the cost of lending.Let us start by calculating the expected return and standard deviation of return for each of the three entrepreneurs:
Type 1 entrepreneur invests $200 and gets a gross return of $400 with certainty. Therefore, her expected return is $400 and standard deviation of return is 0.Type 2 entrepreneur invests $100 and gets $200 with certainty. Therefore, her expected return is $200 and standard deviation of return is 0.Type 3 entrepreneur invests $100 and gets $300 with probability 0.75 and 0 with probability 0.25.
Therefore, her expected return is $225 and standard deviation of return is $75.The bank knows that half of the low-type borrowers are of type 2, and the other half are of type 3. Therefore, a low-type borrower will get an expected return of (0.5 x 200 + 0.5 x 225) = $212.5. Her standard deviation of return will be the same as that of type 3 entrepreneur, that is, $75.The bank charges $20 to high-types and $30 to low-types as the cost of lending.Let r1 be the interest rate charged to high types and r2 be the interest rate charged to low types.
The expected return of the bank from lending to high types is:$400 x (1+r1) - $200 x (1+0.04) - $20 = 0or$400r1 - $228 = 0r1 = 0.57 or 57%The expected return of the bank from lending to low types is:$212.5 x (1+r2) - $200 x (1+0.04) - $30 = 0or$212.5r2 - $238 = 0r2 = 1.12 or 112%The interest rate charged to low types is more than the interest rate charged to high types. The bank is charging a higher interest rate from low types because of the cost of lending to them is higher than that of lending to high types.
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Please help..
Two years ago, Bethesda Corporation bought a delivery truck for $30,000 (not subject to the luxury auto depreciation limits). Bethesda used MACRS 200 percent declining balance and the half-year convention to recover the cost of the truck, but it did not elect §179 expensing and opted out of bonus depreciation. Answer the questions for the following alternative scenarios. Use MACRS Table. (Do not round percentages used for calculations. Loss amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)
Required:
Assume that Bethesda claimed $18,500 of depreciation expense on the truck before it sold it in year 3. What are the amount and character of the gain or loss if Bethesda sold the truck in year 3 for $35,000 and incurred $3,000 of selling expenses on the sale?
Recognized Gain/(Loss) $
Character of recognized gain/(loss) $
Ordinary gain/(loss) $
§1231 gain/(loss) $
Table 1 MACRS Half-Year Convention
Depreciation Rate for Recovery Period
3-Year 5-Year 7-Year 10-Year 15-Year 20-Year
Year 1 33.33% 20.00% 14.29% 10.00% 5.00% 3.750%
Year 2 44.45 32.00 24.49 18.00 9.50 7.219
Year 3 14.81 19.20 17.49 14.40 8.55 6.677
Year 4 7.41 11.52 12.49 11.52 7.70 6.177
Year 5 11.52 8.93 9.22 6.93 5.713
Year 6 5.76 8.92 7.37 6.23 5.285
Year 7 8.93 6.55 5.90 4.888
Year 8 4.46 6.55 5.90 4.522
Year 9 6.56 5.91 4.462
Year 10 6.55 5.90 4.461
Year 11 3.28 5.91 4.462
Year 12 5.90 4.461
Year 13 5.91 4.462
Year 14 5.90 4.461
Year 15 5.91 4.462
Year 16 2.95 4.461
Year 17 4.462
Year 18 4.461
Year 19 4.462
Year 20 4.461
Year 21 2.231
Given Information Bethesda Corporation bought a delivery truck for $30,000. Bethesda used MACRS 200 percent declining balance and the half-year convention to recover the cost of the truck, but it did not elect §179 expensing and opted out of bonus depreciation.
There is no §1231 gain, since the property was not used in a trade or business. There is no §1245 gain, since no portion of the gain is attributable to depreciation recapture. Therefore, the entire recognized gain of $20,500 is an ordinary gain.
Thus, the character of recognized gain/(loss) = Ordinary gain/(loss).§1231 gain/(loss):
$0 As no §1231 gain/(loss) was recognized, its value is $0. Conclusion Therefore, the Recognized Gain/(Loss) is $20,500, the character of recognized gain/(loss) is ordinary gain/(loss) and the §1231 gain/(loss) is $0.
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The house that Jamalla inherited from her mother can rent for $2000/month, but Jamalla decides to allow her brother to stay there for $800. This decision carried with it a
zero monetary cost but a $1200 per month opportunity cost.
Jamalla inherited a house from her mother that can rent for $2000/month, but she decides to allow her brother to stay there for $800. This decision carried with it a $1200 per month opportunity cost.
Opportunity cost is the cost of a foregone opportunity. In this case, Jamalla's opportunity cost is the $1200 she could have made by renting out the house for $2000. The cost of renting the house to her brother for $800 is zero because she would have incurred no additional costs by renting to him, but it means she has given up the opportunity to earn $1200 per month. Therefore, the decision to let her brother stay in the house comes with a $1200 per month opportunity cost.
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Section 4: Fiscal, monetary and supply-side policy (10 marks; max. 500 words)
Background
Australia is an economy that is attempting to grow its economy at a steady and healthy pace of GDP (or economic) growth as it used to before COVID-19 pandemic, but it is slowing down again. Australia is still largely reliant on exporting raw materials such as iron ore, coal, gold, aluminium, and on ‘selling’ higher education to foreign students, and on incoming tourism.
Before COVID-19 pandemic, Australia experienced 29 years of uninterrupted growth without a recession, from 1991 to 2020. It is a record amongst countries around the world. The prices of homes (real estate) also increased sharply in Australia When the pandemic happened, the Australian economy did not grow anymore but shrank; unemployment rose sharply as jobs were lost.
But as Australia attempts to achieve steady, long-term growth again, the type that brought prosperity for 29 years, there are challenges: COVID-19 is still now over, with outbreaks expected to happen; there are supply-chain problems due to the Russian-Ukrainian war and whenever China goes into a COVID-19 lockdown— these have impact on inflation and growth. Australia also faces worker shortages.
Inflation is also a pressing problem in Australia today. It was under 2% for a long time, from 2015 to 2021. Now, has shot up to 5.1% and is expected to rise further this year.
See these two pieces of news: here and here.
Questions
Monetary policy and supply-side policy
...
1. What monetary policy would you advise that the Australian Reserve Bank attempt today? Why?
2. What are the benefits but also the risks or problems of carrying out this type of monetary policy for Australia’s economy? Discuss this in terms of the ‘transmission of monetary policy’ to Australia’s:
(i) economic or GDP growth, the inflation and unemployment rates
(ii) real-estate prices and the ‘wealth effect’
(iii) the Australian dollar’s exchange rate and thereby Australia’s exports (the exchange-rate effect on exports)
Supply-side policy
3. Propose creative supply-side policies that could help Australia’s economy grow well again and overcome problems such as those discussed earlier (inflation, the need to increase economic growth, create jobs etc.) Tip: make them specific to Australia and its situation (do not give simplistic or general policies that might apply to any country – be specific to Australia’s case).
Expansionary monetary policy with lower interest rates and quantitative easing. Supply-side policies: skills development, innovation, infrastructure, industry diversification, and regulatory reforms.
1. Monetary Policy Recommendation: Given the challenges faced by Australia's economy, I would advise the Australian Reserve Bank to pursue an expansionary monetary policy. This would involve lowering interest rates and implementing quantitative easing measures to stimulate economic activity and encourage borrowing and investment.
2. Benefits and Risks of Expansionary Monetary Policy:
(i) Economic/GDP Growth, Inflation, and Unemployment: By lowering interest rates, expansionary monetary policy aims to stimulate borrowing and investment, leading to increased consumer spending and business activity. This can potentially boost economic growth and help reduce unemployment. However, there is a risk of fueling inflation if the economy overheats, especially considering the recent rise in inflation. The Reserve Bank would need to carefully monitor and adjust policy measures to maintain a balance between growth, inflation, and unemployment.
(ii) Real Estate Prices and Wealth Effect: Lower interest rates tend to stimulate demand for housing, potentially leading to increased real estate prices. This can create a wealth effect, as rising property values make homeowners feel wealthier and more confident in spending. However, if real estate prices rise rapidly and become unsustainable, it may lead to a housing bubble and pose financial stability risks.
(iii) Exchange Rate Effect on Exports: Lowering interest rates can weaken the Australian dollar, making exports more competitive and potentially boosting export-oriented industries. However, a significant depreciation of the currency can also increase the cost of imported goods, potentially leading to higher inflation. Additionally, it can increase the cost of servicing foreign debt.
Supply-side Policy Proposals:
To address the challenges and promote sustainable economic growth in Australia, specific supply-side policy proposals could include:
- Investing in Skills Development: Addressing worker shortages and enhancing productivity by investing in education and training programs that align with emerging industries and technological advancements.
- Promoting Innovation and Research: Encouraging research and development activities through tax incentives and grants, fostering collaboration between academia and industry, and supporting startups and entrepreneurship.
- Infrastructure Development: Investing in critical infrastructure projects that can enhance productivity, create jobs, and improve connectivity within the country, such as transportation networks, digital infrastructure, and renewable energy initiatives.
- Industry Diversification: Supporting industries beyond raw material exports and higher education, such as promoting advanced manufacturing, renewable energy technologies, and high-value-added services.
- Regulatory Reforms: Streamlining business regulations and reducing red tape to facilitate ease of doing business, particularly for small and medium-sized enterprises, fostering entrepreneurship and innovation.
These supply-side policies, tailored to Australia's specific needs, can help drive economic growth, address worker shortages, encourage job creation, and mitigate inflationary pressures while fostering long-term sustainability.
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