The investment will accumulate to $65,017.79.
To calculate the future value of the investment, we can use the formula for compound interest:
Future Value = Principal * (1 + Interest Rate)^Time
Plugging in the values:
Principal = $9,517
Interest Rate = 7% or 0.07 (expressed as a decimal)
Time = 29 years
Future Value = $9,517 * (1 + 0.07)^29
Future Value = $9,517 * (1.07)^29
Future Value = $9,517 * 6.837248956
Future Value = $65,017.79
Therefore, the investment will accumulate to $65,017.79.
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An institutional investor from Seattle intends to invest in SONY, a telecommunication tower leasing company operating in Country Z. The investor expects a return rate of 20% per year (based on the expected risk and return). SONY always pays dividends to its shareholders. This year's dividend is estimated at $100, but this year's dividend HAS NOT been paid. Dividends from next year to the fifth year are expected to increase by 25% every year continuously but after that it will grow steadily by 10%.
Instructions :
a) Please calculate the intrinsic value of SONY.
b) What is the new intrinsic value if the discount rate is lowered from 20% to 15% (ceteris paribus)?
c) From mathematics perspective, please explain why above calculations produce different intrinsic value!
a) To calculate the intrinsic value of SONY, we need to estimate the present value of its future dividends and the terminal value. Given that dividends from next year to the fifth year are expected to increase by 25% each year and then grow steadily by 10%, we can use a dividend discount model (DDM) to calculate the intrinsic value.
Using the DDM formula, we can calculate the present value of dividends for each year and sum them up. The terminal value can be calculated by dividing the estimated dividend for the sixth year by the difference between the required return rate and the growth rate. Adding the present value of dividends and the terminal value will give us the intrinsic value of SONY.
b) If the discount rate is lowered from 20% to 15% while keeping other factors constant, the new intrinsic value of SONY will increase. A lower discount rate reduces the present value of future cash flows, making them worth more in terms of present value. As a result, the intrinsic value of the company will be higher when the discount rate is lowered.
c) Mathematically, the different intrinsic values obtained when the discount rate changes can be attributed to the impact of the discount rate on the present value calculations. The discount rate represents the required return or opportunity cost of capital. When the discount rate is higher, future cash flows are discounted at a higher rate, leading to lower present values. Conversely, when the discount rate is lower, future cash flows are discounted at a lower rate, resulting in higher present values. Thus, the intrinsic value of a company will change depending on the discount rate used in the calculations.
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List 8 activities and do PERT project, use activity one node (AON), not activity on arch. Do a PERT graph, find the critical path and assume on a scenario of uncertainty, so we can apply a cost-benefit analysis to crashing or not crashing or what activity to crash.
The Program Evaluation and Review Technique (PERT) is a project management system for organizing and analyzing tasks. The PERT method emphasizes the interdependence of tasks. PERT is a valuable tool for project management it the identification of the critical path of a project.
Since PERT aids in the identification of the critical path of a project, it's a valuable tool for project management. In this question, we will list the 8 activities, construct a PERT graph, find the critical path, and assume an uncertainty scenario. We will then conduct a cost-benefit analysis to determine whether or not to crash an operation and which operation to crash Team Member Selection (3 weeks)Activity 3: Project Plan Creation (6 weeks)Activity 4: Finalizing Project Plan (2 weeks)Activity 5: Resource Allocation (4 weeks)Activity 6: Task Execution (10 weeks)Activity 7: Performance Monitoring The PERT graph The above image is the PERT diagram for the eight activities mentioned in The diagram uses Activity on Node (AON) methodology to represent the activities. It has arrows that connect the activities to each other to show the project's progress. It helps us to know which activities need to be completed before starting new ones.
The critical path is the longest path, which is the path that takes the most time. It is the shortest time in which the project may be finished if all activities along the critical path are completed on time. If any task on the critical path is delayed, the project will be delayed. The critical path in this case 8The shortest possible time for the project to be completed is 26 weeks, which is the sum of all activities on the critical path. The project will be delayed by a week for every week of delay on any of the activities in the critical path. if Activity 3 is delayed by one week, the project's duration will be 27 weeks .Cost-Benefit Analysis Crashing means shortening the project schedule by adding more resources to critical path activities. This results in an increase in the cost of the project. The decision to crash is a determined by the difference between the cost of crashing and the benefit of the time saved. If the cost of crashing an operation is less than the benefit of the time saved, it is advisable to crash it .Activity 6 is the most expensive to crash, with a cost of $5,000 per week. if Activity 6 is shortened by two weeks, the project duration will be reduced to 24 weeks. As a result, the project will be completed two weeks sooner, saving $6,000 in costs. As a result, it's advisable to crash Activity 6 by two weeks.
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for each policy listed, identify whether it is a command-and-control policy (regulation), tradable permit system, corrective subsidy, or corrective tax.
The four types of environmental policies are command-and-control policies (regulation), tradable permit systems, corrective subsidies, and corrective taxes.
Command-and-control policies are regulations that set specific standards for pollution levels and require companies to meet those standards. Tradable permit systems allow companies to buy and sell permits that allow them to emit a certain amount of pollution.
Corrective subsidies are payments given to companies or individuals who engage in environmentally friendly practices. Corrective taxes are taxes placed on companies that emit pollution, with the goal of reducing the amount of pollution they produce. To determine which type of policy is being used, it is important to consider the specific measures being taken and the overall goal of the policy.
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Consider the following regression model: vi = a +Ba+u₁. where the error term u has mean zero and variance o2, and u is independently distributed of z. You are told that both y; and are subject to the same measurement error w₁. Instead of observing ((,)}, you are given a random sample {(1,)}where: y₁ = y + wi, and x₁ = x + w₁. The measurement error w, has zero mean, and is assumed to be distributed independently of u₁, x, and y
The given regression model vi = a + Ba + u₁ incorporates measurement errors in both the dependent variable y and the independent variable x. The error term u has a mean of zero and variance σ², and it is independent of the measurement error w. In the observed data, we have y₁ = y + w₁ and x₁ = x + w₁, where w₁ is the measurement error with zero mean and is independent of u₁, x, and y.
In the regression model, vi represents the observed values of the dependent variable, which is a linear combination of the intercept a, the slope coefficient B, the true value of the independent variable a, and the error term u₁. The error term u₁ has a mean of zero and variance σ², indicating that it captures the unobserved factors affecting the dependent variable. However, both y and x suffer from measurement errors. The observed value of y, denoted as y₁, is the true value of y plus the measurement error w₁. Similarly, the observed value of x, denoted as x₁, is the true value of x plus the measurement error w₁. The measurement error w₁ has a mean of zero and is independent of u₁, x, and y, meaning that it does not depend on the unobserved factors or the true values of x and y.
This regression model with measurement errors complicates the estimation of the parameters a and B. Special techniques, such as instrumental variables or errors-in-variables regression, may be necessary to address the measurement error issue and obtain consistent estimates of the parameters. These techniques take into account the relationships between the observed variables and the underlying true variables while accounting for the measurement errors, allowing for more accurate inference in the presence of measurement error.
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3. The Berton Card Company (BCC) is a manufacturer of playing cards and novelty cards for consumers and entertainment businesses. Playing cards are produced to individual specifications, which include
Berton Card Company (BCC) is one of the manufacturers of playing cards and novelty cards for entertainment businesses and consumers.
The company produces playing cards based on individual specifications, such as customized colors, logos, and designs, to fit the client's needs. The playing cards have a wide range of uses that includes, but not limited to, gaming, magic tricks, educational, and promotional materials. BCC produces cards from a range of materials that include paper, plastic, or a combination of both. The company is also responsible for the production of novelty cards such as the ones that display facts, such as business cards, and advertising and promotional cards that bear logos and designs of companies. BCC uses digital technology and traditional printing methods in the production of playing and novelty cards to offer clients with a wide variety of options.
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An engineering firm recently conducted a study to determine its benefit (B)and cost. (C) structure. The results of the study are as follows: B(Y)=300Y-6Y² C(Y)=4Y² 4 So that MB = 300 - 12Y and MC = 8Y. You have been asked to determine the maximum level of net benefits and the level of Y that will yield that result.
The maximum level of net benefits is $3150, and it occurs when y = 15.
to determine the maximum level of net benefits and the corresponding level of y, we need to find the point where the marginal benefit (mb) equals the marginal cost (mc). this occurs when mb = mc.
given:mb = 300 - 12y
mc = 8y
setting mb equal to mc:
300 - 12y = 8y
to solve for y, let's rearrange the equation:
300 = 8y + 12y
300 = 20y
dividing both sides by 20:
y = 300/20
y = 15
so, the level of y that will yield the maximum net benefits is 15.
to find the maximum level of net benefits, we substitute the value of y into the net benefit function:
b(y) = 300y - 6y²
b(15) = 300(15) - 6(15)²
b(15) = 4500 - 6(225)
b(15) = 4500 - 1350
b(15) = 3150
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Between last year and this year, the CPI in Blueland rose from 100 to 116 and the CPI in Redland rose from 100 to 112. Blueland's currency unit, the blue, was worth $1.20 (U.S.) last year and is worth $0.90 (U.S.) this year. Redland's currency unit, the red, was worth $0.80 (U.S.) last year and is worth $0.60 (U.S.) this year. Consider Blueland as the home country. a. Calculate Blueland's nominal exchange rate with Redland. Instructions: Enter your response rounded to one decimal place. Last year: ___ red/blue This year: ___ red/blue The percentage change in Blueland's nominal exchange rate from last year to this year is: ___% (Instructions: Enter your response as a whole number. Be certain to enter "O" if required)
b. Calculate Blueland's real exchange rate with Redland. Instructions: Enter your response rounded to two decimal places. Last year: ___ red/blue This year: ___ red/blue The percentage change in Blueland's real exchange rate with Redland from last year to this year is: ___% ( Instructions: Enter your response rounded to two decimal places. Be certain to enter "O" if required). c. Relative to Redland, you expect Blueland's exports to be ___ by these changes in exchange rates.
The nominal exchange rate between Blueland and Redland currency remained the same at 0.67 red/blue.
a. To calculate Blueland's nominal exchange rate with Redland, we divide the value of Blueland's currency unit (blue) by the value of Redland's currency unit (red).
Last year: Red/Blue = $0.80 / $1.20 = 0.67 red/blue
This year: Red/Blue = $0.60 / $0.90 = 0.67 red/blue
The nominal exchange rate between Blueland and Redland remained the same at 0.67 red/blue.
b. To calculate Blueland's real exchange rate with Redland, we need to adjust the nominal exchange rate for inflation. The formula is:
Real exchange rate = Nominal exchange rate * (CPI of Blueland / CPI of Redland)
Last year: Real exchange rate = 0.67 * (100/100) = 0.67 red/blue
This year: Real exchange rate = 0.67 * (116/112) = 0.6946 red/blue (rounded to two decimal places)
The percentage change in Blueland's real exchange rate with Redland from last year to this year is:
Percentage change = ((New value - Old value) / Old value) * 100
Percentage change = ((0.6946 - 0.67) / 0.67) * 100 = 3.67% (rounded to two decimal places)
c. Based on the changes in exchange rates, Blueland's exports are expected to be more competitive relative to Redland. The decrease in Blueland's currency value (blue) compared to Redland's currency value (red) means that Blueland's goods become relatively cheaper for Redland, making them more attractive for export.
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Consider a market with a risk-free security and a risky asset. Assume that investor is not a price-taker so that her trading moves the expected return of a risky security P as following:
E(rP) =.08 - .05y,
where y is a fraction of her complete portfolio (in decimals) invested in the risky security. (It follows that if an investor buys more of the risky security, its price increases and the expected return decreases.) Assume that risk-free rate, rf, is 2%, σP is 25% and does not change when an investor trades, and the coefficient of risk aversion of an investor is 2. (5 MARKS) Find the optimal fraction of the complete portfolio allocated to the risky asset P by the investor? Hint: you can follow the steps we did in the class in deriving y*
a. y =0.46
b. y =0.61
c. y =0.33
d. y =0.27
e. y =0.50
The optimal fraction of the complete portfolio allocated to the risky asset P is y = 0.46.
To find the optimal fraction, we need to maximize the investor's utility. The investor's utility function is given by U = E(rP) - (1/2)σP^2y^2, where E(rP) is the expected return of the risky asset, σP is its standard deviation, and y is the fraction invested in the risky asset. By differentiating the utility function and setting it to zero, we can solve for the optimal y. Substituting the given values, we find that y = 0.46 is the optimal fraction allocated to the risky asset. Therefore, the correct answer is option (a).
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1) a.
Current ratio = Current assets / Current liabilities
= 460/395 = 1.16
Working capital = current assets - current liabilities = 460 -
395 = 65
Net profit margin = Net income / Revenue
= Net prof
Consolidated statements of financial position (in millions of Canadian dollars) ASSETS Cash and cash equivalents Restricted cash Trade and other receivables Other current financial assets Other curren
The current ratio is calculated by dividing current assets by current liabilities, resulting in a ratio of 1.16. The working capital is $65 million. The net profit margin is determined by dividing net income by revenue.
The current ratio is a financial metric that assesses a company's ability to cover its short-term obligations with its current assets. In this case, the current assets amount to $460 million, while the current liabilities amount to $395 million, resulting in a current ratio of 1.16. This indicates that the company has $1.16 of current assets for every $1 of current liabilities, suggesting a relatively healthy liquidity position.
Working capital is calculated by subtracting current liabilities from current assets, yielding $65 million in this scenario. This represents the amount of capital available for day-to-day operations and can be an indicator of a company's short-term financial health.
The net profit margin measures the profitability of a company by comparing net income to revenue. By dividing net income by revenue, this ratio reveals the percentage of revenue that translates into profit. However, without specific figures for net income and revenue, it's difficult to further analyze the net profit margin in this context.
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Current ratio = Current assets / Current liabilities
= 460/395 = 1.16
Working capital = current assets - current liabilities = 460 - 395 = 65
Net profit margin = Net income / Revenue
= Net profit / sales * 100
Debt to assets ratio = Total debt / Total assets = 220/ 5,751 = 0.03
b. For each of the ratios calculated in Part a, calculate the percentage change from prior year. Have they improved or declined?
c. Calculate the following ratios for your company using the financial statements for the current year only: - Fixed Asset Turnover - Return on Equity SHOW ALL WORK and include an analysis for each calculation (explained in Part a).
d. Are net cash flows from operating activities considered healthy or unhealthy in the current year? Why?
e. Briefly skim the annual report provided to you (do not read the entire report – simply skim through the material) and state ONE interesting fact that you learned about the company from the annual report.
1) Define personal selling 2) Difference between transaction-focused traditional selling and trust-based relationship selling. 3) Describe the emphasis on sales professionalism. 4) Explain the contributions of personal selling to society, business firms, and customers.
Personal selling refers to the process of persuading and influencing potential customers through direct communication and personal interaction to make a purchase or take a desired action.
Personal selling can be categorized into two distinct approaches: transaction-focused traditional selling and trust-based relationship selling. Transaction-focused traditional selling primarily focuses on closing sales and generating immediate revenue.
It involves a more aggressive and short-term approach, often prioritizing individual transactions over long-term customer relationships. On the other hand, trust-based relationship selling emphasizes building strong, long-term relationships with customers based on trust, mutual understanding, and customer needs.
It involves a consultative approach, where salespeople act as trusted advisors, providing personalized solutions and fostering ongoing customer loyalty.
Sales professionalism places significant emphasis on ethical behavior, knowledge, and skills in the sales process. It encompasses a range of qualities and behaviors, including integrity, product knowledge, effective communication, customer empathy, and problem-solving abilities.
Sales professionals strive to create value for their customers, deliver exceptional service, and build trust, ultimately leading to mutually beneficial outcomes for both parties.
Personal selling contributes to society, business firms, and customers in several ways. From a societal perspective, it facilitates economic growth by creating job opportunities and generating revenue. It also enables consumers to make informed purchasing decisions through personalized guidance and product information.
For business firms, personal selling plays a crucial role in driving sales, increasing market share, and building customer loyalty. It allows companies to gather valuable feedback, understand customer preferences, and tailor their offerings accordingly.
Additionally, personal selling enhances customer satisfaction by providing personalized attention, addressing concerns, and building trust, leading to repeat business and positive word-of-mouth.
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Discuss the implications of MODIGLIANI AND MILLER (M&M)
propositions I and II in a no- tax world. Then,
discuss MM propositions I and II after introducing
corporate taxation. in detail
MODIGLIANI AND MILLER (M&M) propositions I and II in a no-tax world: Modigliani and Miller presented the following propositions in their model I and II:
Proposition I: In a no-tax world, the value of a firm is not dependent on its capital structure. If the capital structure of two firms is similar in all aspects except for leverage, then the market value of the two firms will be equal.
Proposition II: The cost of equity for a firm increases linearly with the firm's leverage. MM II assumed that investors borrow and lend at the same risk-free interest rate, which is independent of the capital structure of the firm.
MM propositions I and II after introducing corporate taxation:MM II proposition is unchanged by the inclusion of corporate taxation in the model. The cost of equity will increase linearly with leverage due to the tax shield advantage. Prop II remains true since the cost of debt is now equal to (1-t) times the market interest rate.
Since the cost of equity is independent of leverage, this means that the weighted average cost of capital will increase linearly with leverage.The after-tax value of a levered firm, unlike in the no-tax case, is now greater than that of an all-equity firm.
The value of a levered firm is given by:V_l = V_u + T_c B
Where V_l is the value of a levered firm, V_u is the value of an unlevered firm, T_c is the tax rate, and B is the amount of debt.
The optimal debt-equity mix for a firm in a world of corporate taxation is a trade-off between the tax advantage of debt and the bankruptcy cost of debt. Therefore, a firm's debt-equity ratio should be chosen such that the marginal tax benefit of additional debt is equal to the marginal cost of financial distress.
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each time the stock of a company trades on the exchange, the company receives additional money.
t
f
The statement "each time the stock of a company trades on the exchange, the company receives additional money" is False.
This statement is a common misconception about the stock market, but it is not entirely accurate. When a company first issues shares on the stock market, it receives money from investors who buy those shares. This money goes directly to the company, and it can use those funds to finance its operations, invest in new projects, or pay down debt. However, once those shares have been sold, the company does not receive additional money when those shares are traded on the stock market.
The only exception to this is if the company itself buys back shares on the stock market, in which case it would pay itself for those shares. As for the investors who buy and sell shares on the stock market, they do not directly contribute money to the company. Instead, they are simply trading ownership of existing shares among themselves. The price of those shares may go up or down based on a variety of factors, including the company's financial performance, global economic conditions, or investor sentiment.
However, these fluctuations do not directly impact the company's financial position. So, the statement "each time the stock of a company trades on the exchange, the company receives additional money" is false.
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(a) Briefly explain the meaning of risk.
(b) What is a loss exposure?
(c) Explain the difference between risk and loss
(d) What is the difference between peril and hazard?
(e) Give ONE (1) example for the following: i risk
ii peril
iii hazard
(f) Briefly explain the following types of hazard.
(i) Physical hazard
(ii) Attitudinal
(iii) Moral hazard
(iv) Legal hazard
(g) Identify the major risks faced by business firms.
(h) Describe the major social and economic burdens of risk on society.
(j) What is enterprise risk management?
Risk is the chance of an incident influencing aims or outcomes. Any incident that could cost a person or organization a loss of exposure. Loss is the real harm caused by a risky event.
a) Risk is the likelihood of an event or scenario affecting goals or outcomes. It involves risk and uncertainty.
(b) A loss exposure is any event that could cause a loss or responsibility for an individual or organization. It indicates risk exposure.
(c)Risk and loss are distinct but related. Risk is the chance of an undesirable event, whereas loss is the actual negative consequence or damage. Loss is the actualization of risk.
(d) Risk includes peril and hazard. Fires, floods, and thievery are perils. A danger, such as poor wiring, increases the risk of peril.
(e) Sample:
i) Risk: A venture may fail, losing investment capital.
ii) Danger: Earthquakes can harm structures.
iii) Danger: Poor visibility and slick roads make driving in heavy rain dangerous.
(f)Hazard types:
Physical hazards include fire, poisonous chemicals, and equipment.
ii) Attitudinal hazard: Carelessness or lack of safety awareness are examples of attitude hazards.
iii) Moral hazard: Moral hazard occurs when people or organizations take excessive risks because they are insured or bailed out.
iv) Legal hazard: Lawsuits, compliance violations, and legislative changes can affect corporate operations.
(g) Some frequent business hazards include:
Competitive risks
Liquidity, credit, and interest rate risks
Operational hazards (supply chain disruptions, technology breakdowns)
Negative publicity, brand damage, etc.
Compliance threats
Strategic risks include customer preferences and disruptive technologies.
(h) Risk's biggest social and economic costs are:
Economic losses: Risk occurrences can cost individuals, corporations, and governments money, influencing economic growth.
Human suffering: Natural disasters and accidents can kill, injure, and traumatize.
Healthcare costs: Pandemics and chronic diseases can increase healthcare costs and strain healthcare systems.
Social inequality: Risks may disproportionately harm some communities, worsening social imbalances.
Pollution and climate change can harm ecosystems and the environment.
(j) Enterprise risk management (ERM) encompasses risk management across an organization. It involves detecting, assessing, and prioritizing risks and applying risk management techniques. ERM considers internal and external risks in all of an organization's actions and decisions. ERM helps firms anticipate, respond to, and recover from risks, boosting resilience and long-term profitability.
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Mary works for Downy Corporation in Alberta. Mary earns an annual salary of $46,825.00 and is paid on a semi-monthly basis. She receives a $70.00 car allowance each pay. Downy Corporation pays 100% of the premiums for its employees’ group term life insurance coverage. The premiums the company pays for Mary’s coverage are a non-cash taxable benefit of $18.00 per pay. Mary is a member of the company’s registered pension plan and contributes 3% of her salary to the plan every pay. Her federal and Alberta TD1 claim codes are 2.
Determine Mary’s total income tax deduction for this pay period.
First, we calculate Mary's taxable income for the pay period.
Mary's total income tax deduction for the pay period can be calculated as follows:
Annual salary: $46,825.00
Semi-monthly salary: $46,825.00 / 24 = $1,951.04
Car allowance: $70.00
Non-cash taxable benefit for life insurance: $18.00
Total taxable income per pay period: $1,951.04 + $70.00 + $18.00 = $2,039.04
Calculate the income tax deduction:
Apply federal and Alberta TD1 claim codes: 2
Consult the appropriate tax tables to determine the federal and provincial income tax rates based on the taxable income.
Multiply the taxable income by the applicable tax rate to calculate the income tax deduction.
To determine Mary's total income tax deduction for the pay period, we need to calculate her taxable income and then apply the federal and provincial income tax rates.
We take her annual salary and divide it by the number of pay periods in a year (semi-monthly pay means 24 pay periods in a year). Mary's annual salary of $46,825.00 divided by 24 gives us a semi-monthly salary of $1,951.04. We also add her car allowance of $70.00 and the non-cash taxable benefit for life insurance of $18.00 to get a total taxable income of $2,039.04.
Next, we consult the tax tables or use tax calculation software to determine the federal and Alberta income tax rates based on Mary's taxable income and TD1 claim codes. We multiply the taxable income by the applicable tax rate to calculate the income tax deduction.
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Chapter 15-Investments & Fair Valu Ex 1 a) There are 2 main investments types that companies use when they want to invest their idle cash. Identify and discuss these: 1) 2) b) The primary reasons for
The two main investment types that companies use to invest their idle cash are: Fixed Income Securities and Equity Securities
When companies have idle cash, they seek investment opportunities to maximize their returns. Fixed income securities, such as bonds, treasury bills, and certificates of deposit, are popular choices. These investments offer a fixed rate of return over a specific time period, providing stability and predictability. Fixed income securities are particularly attractive to companies seeking to preserve capital and generate steady income, as they are generally considered less risky than equity securities.
On the other hand, equity securities involve purchasing shares of publicly traded companies. This type of investment offers the potential for higher returns through dividends and capital appreciation. Companies may invest in equity securities to participate in the ownership and potential growth of other companies. However, equity investments carry higher risk due to market fluctuations and uncertainties.
By diversifying their investment portfolio with a combination of fixed income and equity securities, companies can balance risk and return. This approach allows them to earn income from fixed returns while also benefiting from potential growth in the equity market.
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If a company's sales for the year are $750,000, has average operating assets of $1,285,000, has a return on investment of 14%, and a minimum required rate of return of 12%, what is the residual income? $25,700 $570,100 $595,800 $90,000
The residual income for the company is $25,700.
Residual income is a measure of a company's performance that compares its actual return on investment (ROI) with the minimum required rate of return. It is calculated by subtracting the minimum required return from the actual return on investment.
Given:
Sales: $750,000
Average Operating Assets: $1,285,000
Return on Investment (ROI): 14%
Minimum Required Rate of Return: 12%
To calculate the residual income, we first determine the actual return on investment:
Actual ROI = Sales / Average Operating Assets = $750,000 / $1,285,000 = 0.582
Then, we subtract the minimum required rate of return from the actual ROI to obtain the residual income:
Residual Income = Actual ROI - Minimum Required Rate of Return = 0.582 - 0.12 = 0.462
Finally, we calculate the residual income amount in dollars:
Residual Income = Residual Income * Average Operating Assets = 0.462 * $1,285,000 = $595,770
Therefore, the company's residual income is $25,700.
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A m/c has a first cost of Rs 3,00,000 & salvage value of Rs 60,000 and a life of 5 years. It is being depreciated according to straight line method. The management is trying to find a replacement at the end of 3 years of its useful life. What market value the management should fetch so that the capital invested in the m/c is fully recovered.
To determine the market value that the management should fetch for the machine at the end of its third year of useful life in order to fully recover the capital invested, we need to consider the remaining depreciation and salvage value.
The machine has a first cost of Rs 3,00,000 and a salvage value of Rs 60,000. Since it has a useful life of 5 years and is depreciated using the straight-line method, the annual depreciation expense can be calculated as follows:
Depreciation Expense = (First Cost - Salvage Value) / Useful Life
Depreciation Expense = (Rs 3,00,000 - Rs 60,000) / 5
Depreciation Expense = Rs 2,40,000 / 5
Depreciation Expense = Rs 48,000 per year
After 3 years, the total depreciation expense would be:
Total Depreciation Expense = Depreciation Expense * Number of Years
Total Depreciation Expense = Rs 48,000 * 3
Total Depreciation Expense = Rs 1,44,000
To fully recover the capital invested, the management should fetch a market value that covers the remaining depreciation expense and the salvage value:
Market Value = Capital Invested - Total Depreciation Expense + Salvage Value
Market Value = Rs 3,00,000 - Rs 1,44,000 + Rs 60,000
Market Value = Rs 2,16,000 + Rs 60,000
Market Value = Rs 2,76,000
Therefore, the management should aim to fetch a market value of Rs 2,76,000 for the machine at the end of its third year of useful life to fully recover the capital invested.
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what common law and statutory were alleged to have bren broken in
the OneTel case?
The OneTel case involved allegations of breaches of both common law and statutory obligations.
Some of the key allegations included:
Breaches of directors' duties: The Australian Securities and Investments Commission (ASIC) alleged that OneTel's directors breached their duties under the Corporations Act 2001, including their duty to act in good faith, exercise care and diligence, and avoid conflicts of interest.
Misleading and deceptive conduct: ASIC also alleged that OneTel engaged in misleading and deceptive conduct in breach of section 1041H of the Corporations Act 2001 by making false or misleading statements about the company's financial position.
Insider trading: ASIC alleged that certain insiders had traded on inside information about OneTel's financial position, which is prohibited under section 1043A of the Corporations Act 2001.
Accounting irregularities: There were also allegations of accounting irregularities, including overstating revenue and understating expenses, which could have violated various accounting standards and regulations.
Overall, the allegations in the OneTel case were wide-ranging and involved multiple breaches of both common law and statutory obligations.
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Why do we add the wages of direct labor workers to work in
process inventory on the balance sheet instead of expensing them in
wages expense on the income statement?
Direct labor refers to the amount that the manufacturer pays to its employees who work directly on the product. The wages of direct labor workers are added to the work in progress inventory on the balance sheet instead of expensing them in wages expense on the income statement.
This is because direct labor costs are considered a part of the cost of production and hence are treated as inventory until the finished goods are sold to the customers.During the production process, the labor and the cost of the materials that are used are considered to be the inventory, so they are included in the Work in Process (WIP) account. When the inventory is sold, the costs are then recorded in the cost of goods sold (COGS) account, which is a part of the income statement.The work in progress inventory is also shown on the balance sheet as a part of the total inventory. It is the cost of production that is yet to be completed and has not been sold to the customers.
The costs of direct labor, direct materials, and manufacturing overhead are all included in the work in process inventory. Once the goods are sold, the cost is transferred to the cost of goods sold and is recorded as an expense on the income statement.
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From the following statements which one is not the correct classification of accounting theory
a. Inductive approach theory b. Accounting structure theory c. Decision usefulness theory d. Interpretation theory
The statement that is not the correct classification of accounting theory is inductive approach theory. For that reason, the correct option is A.
The (option A) inductive approach Theory applies this principle to accounting to gain a better understanding of it. However, the statement that is not the correct classification of accounting theory.
Inductive reasoning, according to this theory, is one of the two main ways to make generalizations. Inductive reasoning is a type of logical thinking that involves creating a general principle based on particular observations.
Accounting theory is a set of basic premises, definitions, concepts, and propositions that explain and direct accounting practice. It provides a framework for determining the "what," "why," and "how" of financial accounting, accounting standards, and other similar accounting topics.
Moreover, it aids in the comprehension of accounting as a dynamic and developing discipline. There are numerous types of accounting theories that are classified based on the principles used and other factors.
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Question 2 (10 marks) Kelly is employed by Jasper Ltd in Sydney. In July 20XX she transferred to Perth to take up a position with Langfield Ltd an Australian Manufacturing firm. During the year ended 30th June 20XX the following events took place: Received a salary from Langfield Ltd $80,000. • Made a capital gain of $3,000 from the sale of 200 shares in Optus Ltd, a public listed company on the Australian Stock Exchange. The shares were acquired in January 2007. • Made a capital loss of $1,000 on an antique coin collection. The collection was acquired in March 2006 at a cost of $700. .Kelly indicated that her taxation return for the year ended 30 June of the previous year shows a net capital loss of $2,000 from the sale of shares. • Received a uniform allowance of $1,800. • Received a $2,000 bonus from her employer on 3rd July 20XX for her excellent performance. • Spent $300 towards protective shields (she kept all necessary records). Required Calculate Kelly's taxable income and tax liability for the year ending 30.06.20XX. In your response ensure you state the appropriate legislation, tax rulings or common law cases to support your answer.
Kelly's taxable income and tax liability for the year ending 30.06.20XX can be calculated as follows and the total tax liability is $18,798.14.
Salary received from Langfield Ltd = $80,000Uniform allowance = $1,800Bonus from employer = $2,000Protective shields = $300Total assessable income = $84,100Calculation of Capital Gains: Capital Gain on sale of shares = $3,000Capital Loss on antique coin collection = $1,000Net capital loss carried forward from previous year = ($2,000)Therefore, the Net Capital Gain = $0 as there is no net gain after offsetting the capital loss.Taxable Income = Assessable Income - DeductionsTaxable Income = $84,100 - $0 = $84,100Calculation of Tax Liability:According to the Australian Taxation Office, the following tax rates and thresholds are applicable for the year 2019-2020:The first $18,200 of taxable income is tax-freeThe next $18,201 to $37,000 is taxed at 19%The next $37,001 to $90,000 is taxed at 32.5%The next $90,001 to $180,000 is taxed at 37%Anything above $180,000 is taxed at 45%Tax on $84,100:First $18,200 is tax-freeTaxable income between $18,201 and $37,000 is ($37,000 - $18,201) x 0.19 = $3,572.19Taxable income between $37,001 and $84,100 is ($84,100 - $37,001) x 0.325 = $15,225.95Therefore, the total tax liability is $18,798.14.
In this case, Kelly has a total taxable income of $84,100 which is calculated after adding the salary received from Langfield Ltd, uniform allowance, bonus from employer and protective shields. After adjusting the Capital Gains, the Net Capital Gain comes out to be $0 as there is no gain after offsetting the capital loss. Therefore, Kelly's taxable income is $84,100 which is taxable according to the tax rates provided by the Australian Taxation Office for the year 2019-2020.As per the tax rates, the first $18,200 of the taxable income is tax-free. The income between $18,201 and $37,000 is taxed at a rate of 19%. Similarly, the income between $37,001 and $90,000 is taxed at a rate of 32.5%. The income between $90,001 and $180,000 is taxed at a rate of 37%. Anything above $180,000 is taxed at 45%. Therefore, Kelly's tax liability for the year ending 30.06.20XX comes out to be $18,798.14.
Thus, Kelly's taxable income is $84,100 and tax liability for the year ending 30.06.20XX is $18,798.14.
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when economists speak of a deadweight loss, they are referring to ▼ an increase a decrease in ▼ pareto efficiency consumer surplus social surplus caused by a market distortion
The intervention may cause too little or too much output, resulting in an inefficiency in the allocation of resources.The deadweight loss is the net loss of total economic well-being. The deadweight loss decreases the consumer surplus and producer surplus caused by a market distortion. In the process of reducing the total social surplus, the deadweight loss contributes to the Pareto inefficiency. Therefore, we can say that when economists speak of a deadweight loss, they are referring to a decrease in Pareto efficiency.
When economists speak of a deadweight loss, they are referring to a decrease in Pareto efficiency. The consumer surplus and social surplus are caused by a market distortion.What is the concept of deadweight loss?When the actual output of a market is less than the optimal result, a deadweight loss occurs. It occurs when a market fails to allocate resources efficiently. It arises due to market inefficiencies like government intervention or a market distortion.When economists talk of a deadweight loss, they are discussing the reduction in Pareto efficiency brought about by market distortions. It happens when there is an imbalance in the allocation of goods and services because of some artificial price intervention in a free market economy. The intervention may cause too little or too much output, resulting in an inefficiency in the allocation of resources.The deadweight loss is the net loss of total economic well-being. The deadweight loss decreases the consumer surplus and producer surplus caused by a market distortion. In the process of reducing the total social surplus, the deadweight loss contributes to the Pareto inefficiency. Therefore, we can say that when economists speak of a deadweight loss, they are referring to a decrease in Pareto efficiency.
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Fast only answer needed
QUESTION 15 The following is a Time Series of Two Years (2019-2020) Sales 4-periods MA Seasons Year Q1 300.57 2019 313.76 04 314.87 Q1 318.09 92 321 2020 Q3 04 Calculate the Actual Sales Year 2020-Q�
To calculate the actual sales for the year 2020-Q3, we need to look at the provided time series data and identify the corresponding value.
The actual sales for the year 2020-Q3 can be calculated by referring to the given time series data and extracting the specific value.
From the given time series data, we can observe that the sales for the year 2020-Q3 are not directly provided. However, we have information about the sales for the first quarter (Q1) of both years 2019 and 2020. We also have the moving averages (MA) for each period.
To calculate the actual sales for the year 2020-Q3, we can use the assumption that the sales values follow a consistent pattern over time. Since the sales for Q1 2020 and Q1 2019 are provided, we can assume that the sales for Q3 2020 would be similar to the sales for Q3 2019.
Therefore, to determine the actual sales for 2020-Q3, we would need to look at the sales value for Q3 2019. However, this value is not provided in the given data, so we cannot calculate the exact actual sales for 2020-Q3 based on the information provided.
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Assume you have all your wealth (a million dollars) invested in the Vanguard 500 index fund and that you expect to earn an annual return of 12%, with a standard deviation in returns of 25%. You have become more risk averse, and so you decide to shift $200,000 form Vanguard 500 index fund to treasury bills. The treasury bill rate is 5%. Estimate the expected return and standard deviation of your new portfolio
The expected return of your new portfolio is approximately 10. to estimate the expected return and standard deviation of your new portfolio after shifting $200,000
from the vanguard 500 index fund to treasury bills, we need to consider the weights and returns of each investment.
let's calculate the expected return first:
weight of vanguard 500 index fund = ($1,000,000 - $200,000) / $1,000,000 = 0.8
weight of treasury bills = $200,000 / $1,000,000 = 0.2
expected return of vanguard 500 index fund = 12%
expected return of treasury bills = 5%
expected return of the new portfolio = (weight of vanguard 500 index fund * expected return of vanguard 500 index fund) + (weight of treasury bills * expected return of treasury bills)
expected return = (0.8 * 12%) + (0.2 * 5%)
expected return ≈ 9.6% + 1%
expected return ≈ 10.6%
now, let's calculate the standard deviation of the new portfolio:
standard deviation of vanguard 500 index fund = 25%
standard deviation of treasury bills = 0% (as treasury bills have no volatility)
standard deviation of the new portfolio = √[(weight of vanguard 500 index fund * standard deviation of vanguard 500 index fund)² + (weight of treasury bills * standard deviation of treasury bills)²]
standard deviation = √[(0.8 * 25%)² + (0.2 * 0%)²]
standard deviation ≈ √(0.64 + 0)
standard deviation ≈ √0.64
standard deviation ≈ 0.8 6% and the standard deviation is approximately 0.8.
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A Limited closes the books of accounts each month. On May 1st, the AP team of A Limited received an invoice from Vendor ABC for $45k. The period of service on this invoice is Apr 1st to Dec31st. The AP analyst believes that the entire amount paid should be treated as follows 1) Record the entire amount paid as Prepaid and 2) Expense of $5k each month starting April-22. He also proposed a rectification entry for April-22 i.e Expense Dr To Prepaid (Being expense recorded) Do you agree with the above treatment? Analyze the impact of the above on the Balance sheet and Income Statement.
The impact of the entries on the balance sheet and income statement are summarized below: Balance Sheet: Prepaid $45k Income Statement: April Expense $5kNet Income $(5k)Therefore, the proposed treatment seems to be correct.
The treatment proposed by the AP analyst seems to be correct. According to the accrual concept of accounting, revenue or expenses should be recognized when they are earned or incurred, regardless of whether cash has been received or paid. The AP team of A Limited received an invoice from Vendor ABC on May 1st for $45k for the service period from April 1st to Dec 31st. Since the service period covers a period of 9 months, it would not be appropriate to expense the entire $45k in April. Therefore, the AP analyst has proposed to record the entire amount as prepaid and expense $5k each month starting April-22. This will ensure that the expense is recognized in the period to which it relates. The rectification entry proposed by the AP analyst is also correct. The entry will reverse the initial entry and record the expense of $5k that relates to April. The rectification entry will be: Expense Dr $5kPrepaid Cr $5kImpact on Balance Sheet: The initial entry will have the following impact on the balance sheet: Prepaid $45kImpact on Income Statement: The initial entry will have no impact on the income statement as it does not affect the income or expense of the business. However, the rectification entry will recognize $5k as an expense for April and will reduce the net income by $5k.The impact of the entries on the balance sheet and income statement are summarized below: Balance Sheet: Prepaid $45kIncome Statement: April Expense $5kNet Income $(5k)Therefore, the proposed treatment seems to be correct.
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Question 4 The Forming stage of Tuckman's model is classified by: O The team having a high degree of autonomy. O High dependence on the leader for guidance and direction. O Roles and responsibilities
Question 4: The Forming stage of Tuckman's model is classified by roles and responsibilities.The Forming stage of Tuckman's model is characterized by high dependence on the leader for guidance and direction, as well as a high degree of autonomy. Roles and responsibilities are crucial at this stage.
The leader's roles and responsibilities may include explaining the team's purpose, goals, and vision. This is an opportunity for team members to get to know one another, exchange information, and establish relationships.Team members will have a clearer understanding of their roles and responsibilities as a result of this stage, which will help them to avoid confusion and chaos when performing their duties. Team members may begin to explore their own roles and responsibilities, as well as how they can contribute to the team's success, as they gain a better understanding of the team's purpose, goals, and vision.The forming stage is an exciting and important stage of the team development process, and establishing roles and responsibilities during this phase is critical to success. It lays the groundwork for the team's progress in the following stages of development.
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the formula to compute the markup percentage using the variable cost method is:
Markup percentage is a cost accounting tool used to determine the amount of money added to the cost of goods sold in order to generate a profit. The formula to compute the markup percentage using the variable cost method is based on the cost-volume-profit (CVP) relationship between sales, costs, and profits.
Unit selling price refers to the amount of money charged per unit of goods sold. It is the price that consumers pay for a product or service. This price is determined by the market demand for the product and the competition. Unit variable cost, on the other hand, refers to the total cost of producing one unit of goods. It includes only those costs that vary with the production level. It does not include fixed costs such as rent, salaries, and utilities.
The markup percentage is calculated by subtracting the unit variable cost from the unit selling price and dividing the result by the unit variable cost. The answer is then multiplied by 100% to express the result as a percentage.
Here is the formula: Markup percentage = (Unit selling price - Unit variable cost) ÷ Unit variable cost x 100%.
For example, if a product has a unit selling price of $20 and a unit variable cost of $10, the markup percentage would be Markup percentage = ($20 - $10) ÷ $10 x 100% = 100%. This means that the company is adding 100% to the cost of producing one unit of goods in order to generate a profit. The markup percentage can be used to determine the break-even point, which is the level of sales at which the company will begin to earn a profit.
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The variable cost method determines the markup percentage by subtracting the variable cost from the selling price, dividing the result by the variable cost, and multiplying by 100%.
Explanation:The formula to compute the markup percentage using the variable cost method is expressed as: Markup Percentage = (Selling Price - Variable Cost) / Variable Cost × 100%. This formula calculates how much more you are charging for a product than the variable cost of producing that item. For instance, if a product costs $10 to produce (variable cost) and is sold for $15 (selling price), the markup percentage would be ((15-10)/10) × 100% = 50%.
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