The net interest income earned in a one-year transaction is -$1.0592 million. In order for the bank to have a net interest income of $200,000, the U.S. dollar to British pound exchange rate at the end of the year should be about 13.16.
To calculate the net interest income earned in dollars on this one-year transaction, we need to calculate the interest earned on the Australian dollar loan and the interest paid on the British pound deposit, and then convert the amounts to U.S. dollars using the given spot rates.
Given:
Australian dollar loan: A$16 million
Interest rate on the Australian dollar loan: 12%
Spot rate of U.S. dollars for Australian dollars (AUD/USD): $0.757/A$1
British pound deposit: Equivalent amount to the Australian dollar loan
Interest rate on the British pound deposit: 10%
Spot rate of U.S. dollars for British pounds (GBP/USD): $1.320/£1
End-of-year spot rate of U.S. dollars for Australian dollars (AUD/USD): $0.715/A$1
End-of-year spot rate of U.S. dollars for British pounds (GBP/USD): $1.520/£1
a. Net Interest Income Earned:
1. Interest earned on the Australian dollar loan:
Interest earned = Australian dollar loan * Interest rate on the loan = A$16 million * 12% = A$1.92 million
2. Convert the interest earned on the Australian dollar loan to U.S. dollars:
Interest earned in U.S. dollars = Interest earned * Spot rate of U.S. dollars for Australian dollars (end of year) = A$1.92 million * $0.715/A$1 = $1.3728 million
3. Interest paid on the British pound deposit:
Interest paid = Equivalent amount of Australian dollar loan * Interest rate on the deposit = A$16 million * 10% = A$1.6 million
4. Convert the interest paid on the British pound deposit to U.S. dollars:
Interest paid in U.S. dollars = Interest paid * Spot rate of U.S. dollars for British pounds (end of year) = A$1.6 million * $1.520/£1 = $2.432 million
5. Net interest income earned in dollars:
Net interest income = Interest earned in U.S. dollars - Interest paid in U.S. dollars = $1.3728 million - $2.432 million = -$1.0592 million
Therefore, the net interest income earned in dollars on this one-year transaction is -$1.0592 million.
b. To calculate the required spot rate of U.S. dollars for British pounds at the end of the year to earn a net interest income of $200,000, we can rearrange the formula from part a:
Net interest income = Interest earned in U.S. dollars - Interest paid in U.S. dollars
Interest earned in U.S. dollars - Interest paid in U.S. dollars = $200,000
Interest earned in U.S. dollars = $200,000 + Interest paid in U.S. dollars
Interest earned = ($200,000 + Interest paid in U.S. dollars) / Spot rate of U.S. dollars for British pounds (end of year)
Substituting the given values:
Interest earned = ($200,000 + $2.432 million) / Spot rate of U.S. dollars for British pounds (end of year)
Solving for the spot rate of U.S. dollars for British pounds (end of year):
Spot rate of U.S. dollars for British pounds (end of year) = ($200,000 + $2.432 million) / Interest earned
Using the rounded values:
Spot rate of U.S. dollars for British pounds (end of year) = ($200,000 + $2,432,000) / $200,000 = 13.16
Therefore, the spot rate of
U.S. dollars for British pounds at the end of the year should be approximately 13.16 in order for the bank to earn a net interest income of $200,000.
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An individual believes that they will get more unwanted telemarketing calls if they participate in a phone survey. Which factor affecting survey participation is affected?
A. Participation must be perceived as enhancing personal prestige or self-worth.
B. Participation must be perceived as pleasant and satisfying.
C. Participation must be perceived as relevant.
D. Participation must be perceived as having no negative consequences.
E. Participation must not conflict with other important activities.
Option D is correct. Participation must be perceived as having no negative consequences.
The factor affecting survey participation that is impacted in this situation is the perception of negative consequences. The individual believes that participating in a phone survey will lead to an increase in unwanted telemarketing calls, which acts as a deterrent for participation.
When deciding whether to take part in a survey, people evaluate the potential positive and negative outcomes. They consider factors such as enhancing personal prestige, pleasantness, relevance, and avoiding conflicts with important activities.
However, in this case, the concern about receiving more unwanted calls represents a negative consequence. When individuals believe that participating in a survey will have adverse effects like an influx of unwanted calls, they are less likely to engage.
It emphasizes the importance of addressing these concerns and ensuring that survey participation is perceived as having no negative consequences to encourage participation.
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where does short term investments go on a balance sheet
Short-term investments are typically classified as current assets on a balance sheet.
What are short-term investments?Short-term investments are reported under the current assets section on a balance sheet because they are expected to be converted into cash or used up within a year.
They are considered liquid assets that can be readily converted into cash without significantly impacting their value.
Examples of short-term investments include marketable securities such as treasury bills, certificates of deposit, commercial paper, and money market funds.
These investments are relatively low-risk compared to long-term investments, as their shorter maturity periods reduce the exposure to potential market fluctuations.
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Uliana Company wants to issue new 21-year bonds for some much-needed expansion projects. The company currently has 9.6 percent coupon bonds on the market that sell for $1,136, make semiannual payments, have a par value of $1,000, and mature in 21 years. What coupon rate should the company set on its new bonds if it wants them to sell at par?
We can utilise the idea of yield to maturity (YTM) to establish the coupon rate that Uliana Company should set on its new bonds to sell at par. The expected total return on a bond, if held to maturity, is known as the YTM.
The current bonds in this instance have a $1,000 par value, a market price of $1,136, and a 21-year maturity. The bonds pay interest semi-annually at a rate of 9.6%. We can apply the following formula to determine the YTM: Market Price is equal to the product of (Coupon Payment / (1 + YTM/2)2) and (Coupon Payment / (1 + YTM/2)3). +... + (1 + YTM/2) / (Coupon Payment + Par Value) Where: Coupon Payment is calculated as follows: Coupon Rate * Par Value / 2 YTM = Yield to Maturity n = Number of Periods (in this case, semiannual payments),
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Question: A fee for service health insurance plan will normally cover
vitamins and natural remedies
cosmetic procedures
gym membership
a disease
A fee for service health insurance plan will normally cover a disease.
Fee-for-service health insurance is a type of health insurance plan in which medical professionals and hospitals are paid for each service given to a patient. A fee-for-service insurance plan is one in which patients pay doctors, hospitals, and other medical professionals for each service they provide, such as an office visit, lab test, or medical treatment.Fee-for-service health insurance is also known as indemnity insurance, and it gives the patient the most control over their healthcare choices. It does, however, require the patient to pay a greater proportion of the medical expenses out of pocket.
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The following accounts appear in the records of Paisan Inc. at December 31, 2022. Common Stock (no-par, $1 stated value, 400,000 shares authorized, 250,000 shares issued) $250,000 Paid-in Capital in Excess of Stated Value—Common Stock 1,200,000 Preferred Stock ($50 par value, 8%, 40,000 shares authorized, 14,000 shares issued) 700,000 Retained Earnings 920,000 Treasury Stock (9,000 common shares) 64,000 Paid-in Capital in Excess of Par Value—Preferred Stock 24,000 Accumulated Other Comprehensive Loss 31,000 Prepare the stockholders’ equity section at December 31.
To prepare the stockholders' equity section at December 31, 2022, we need to list the different components of stockholders' equity, including common stock, additional paid-in capital, preferred stock, retained earnings, treasury stock, paid-in capital in excess of par value, and accumulated other comprehensive loss.
Stockholders' Equity:
Common Stock:
Authorized Shares: 400,000
Issued Shares: 250,000
Stated Value: $1 per share
Total Common Stock: $250,000
Paid-in Capital in Excess of Stated Value—Common Stock:
Total: $1,200,000
Preferred Stock:
Authorized Shares: 40,000
Issued Shares: 14,000
Par Value: $50 per share
Total Preferred Stock: $700,000
Paid-in Capital in Excess of Par Value—Preferred Stock:
Total: $24,000
Retained Earnings:
Total: $920,000
Treasury Stock:
Common Shares: 9,000
Total: $64,000
Accumulated Other Comprehensive Loss:
Total: $31,000
Now we can compile the stockholders' equity section:
Stockholders' Equity:
Common Stock: $250,000
Paid-in Capital in Excess of Stated Value—Common Stock: $1,200,000
Preferred Stock: $700,000
Paid-in Capital in Excess of Par Value—Preferred Stock: $24,000
Retained Earnings: $920,000
Treasury Stock: ($64,000)
Accumulated Other Comprehensive Loss: ($31,000)
Total Stockholders' Equity: $2,099,000
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Question 13 Which of these is not a problem with the command economy? O Freedom of Enterprise O Lack of meaningful prices Coordination O Incentive Question 14 If A and B are subsitutes An increase in the price of a subsitute (good B) will Shift the demand to the right for good A O Shift the demand to the left for good A Have no impact on demand for good A Result in a lower price for good A Kurzweil 3000 Read the Web Question 15 If A and B are complements A decrease in the price of a complement (good B) will O Shift the demand to the right for good A Result in a lower price for good A O Have no impact on demand for good A O Shift the demand to the left for good A
A command economy is a type of economy that is governed by a centralized authority.
In this type of economy, the government makes all of the decisions regarding production, distribution, and pricing. This type of economy is often associated with socialism, communism, and totalitarianism. The lack of incentive is not a problem with a command economy.
This is because the government controls the economy, so there is no need for individuals to have an incentive to produce or work.Question 14:If A and B are substitutes, an increase in the price of a substitute (good B) will:Shift the demand to the right for good AIf goods A and B are substitutes, it implies that they can be used interchangeably. If the price of good B, a substitute for good A, increases, the demand for good A will increase.
This is because consumers will shift to the less expensive option.Question 15:If A and B are complements, a decrease in the price of a complement (good B) will:Shift the demand to the right for good AIf goods A and B are complements, it implies that they are used together. If the price of good B decreases, which is a complement to good A, the demand for good A will increase.
This is because the decrease in the price of good B will encourage consumers to purchase more of both goods, resulting in a shift in the demand curve to the right.
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From small businesses to large corporations, the companies use psychological tests to measure a wide variety of individual attributes. The results help them make decisions on hiring, placement, training, promotion, wages, and more. But are they the right decisions? Without good psychometric properties, that psychological test could end up being a waste of time.
In the real world, a test taker's performance won't be perfectly consistent. For example, if I give a spelling test to a group of fourth graders, students may have unwanted inconsistency in their test scores. Some students may feel better than they did yesterday, and others feel worse than they did yesterday.
Or let’s say the tests contains the words Baltimore, Milwaukee, and Seattle. Each of those cities has a professional baseball team. So a child who took the test shortly after looking at baseball scores might have a temporary advantages. Or if half the class were to take the test in a noisy, poorly-lit room, we might expect their scores to be lower than what they would have gotten under normal conditions.
These sources of unwanted inconsistency are referred to as unsystematic errors of measurement. If errors of measurements are responsible for much of the variability of the test scores, the test scores will be inconsistent. If the test is given again, scores may not remain stable. However, if errors of measurement have little effect on test scores, the test reflects mainly on the consistent aspects of spelling ability we are interested in.
Consequently, these errors reduce the reliability, and therefore the generalizability of a person to score from a single measurement. A less reliable score is less valid evidence, which makes for worse decision making. That's why it is important to have a good grasp of psychometric concepts and methods when you develop and make decisions based on psychological assessments.
This week, we'll also learn about the exploratory fact analysis, or EFA. EFA is a statistical method used to uncover the underlying structure of a relatively large set of variables. Let's say you have a colleague who wants to use a personality inventory with these six adjectives, talkative, assertive, imaginative, creative, outgoing, intellectual.
Participants report the degree to which each adjective describes their personality in general. Your colleague asked for your opinion of this common objective-based assessment. You think about it, and you begin to wonder, what exactly does the inventory measure? Does it measure six separate facets of a personality, with each facet being reflected by a single adjective, or does it measure a single construct?
If so, what's the construct? What do these six adjectives have in common? Or are two or three separate dimensions reflected within these six adjectives? With EFA you can answer all of these questions. Here is a scenario. Let's imagine you are a marketing manager looking to make a new hire.
Over the last two decades, researchers have found that creativity is one of the most important characteristics for marketing employees. Problem solving, planning, research and communication skills are undoubtedly highly related to creativity. All of these basic talents are required for careers in marketing. With that in mind, you consider using a 20-item test designed to measure creative thinking in terms of risk management, idea generation, fair and supportive evaluation, new ideas, reward and recommendation of creativity, and collaboration.
Your team creates the test, but the 20 items seems a bit of base. For example, one item asks testees to agree or disagree with the statement, I try to avoid talking with my colleagues. You do a little bit of a research and find that the inter-item correlations for the test range from -0.07 to 0.12, for an average of 0.08.
Should you be concerned about the usefulness of these test scores in this situation?
Questions:
• Should you be concerned about the possibility that this test will produce meaningless scores?
• If you use this test, what would be problems in terms of reliability and validity?
• You really want to improve this test. How would you improve the quality of this test using various psychometric analyses?
The inter-item correlations for the 20-item test designed to measure creative thinking in the scenario range from -0.07 to 0.12, with an average of 0.08. This suggests low correlation between the items, indicating potential problems with the test's reliability and validity.
Yes, there is cause for concern regarding the usefulness of the test scores in this situation. The low inter-item correlations indicate that the items in the test are not consistently measuring the same construct or concept. This raises doubts about the internal consistency and reliability of the test. If the items do not correlate well with each other, it becomes difficult to interpret the overall score or draw meaningful conclusions about an individual's creative thinking ability.
The problems with reliability and validity arise due to the lack of consistency and coherence in the measurement. Reliability refers to the consistency and stability of the test scores over time and across different conditions. With low inter-item correlations, the test may lack internal consistency and its scores may not be reliable indicators of creative thinking. Validity, on the other hand, refers to the extent to which the test measures what it is intended to measure. If the items in the test do not accurately represent or tap into the construct of creative thinking, the test's validity is compromised.
To improve the quality of this test, several psychometric analyses can be employed. First, a factor analysis technique such as Exploratory Factor Analysis (EFA) can be conducted to identify the underlying dimensions or factors in the set of variables. This analysis would help determine if there are distinct factors being measured or if the test represents a single construct. Additionally, item analysis can be performed to evaluate the individual items for their reliability, discriminability, and correlation with the total score. Items with low correlations or poor performance can be revised or eliminated. Furthermore, piloting the test with a larger sample and conducting further validation studies can enhance the reliability and validity of the test. These steps will ensure that the test accurately measures creative thinking and provides meaningful scores for decision-making in the context of hiring marketing employees.
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How much did Speedy Movers borrow for a debt that accumulated to $52,533.33 in four years? The interest rate was 4.80% compounded quarterly.
Speedy Movers borrowed approximately $48,563.33 for the accumulated debt of $52,533.33 in four years.
To determine how much Speedy Movers borrowed, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = Accumulated amount after time t
P = Principal amount (initial borrowed amount)
r = Annual interest rate (expressed as a decimal)
n = Number of times the interest is compounded per year
t = Number of years
In this case, we have:
A = $52,533.33
r = 4.80% = 0.048 (since the interest rate is given as a percentage)
n = 4 (quarterly compounding)
t = 4 years
Let's substitute these values into the formula and solve for P:
$52,533.33 = P(1 + 0.048/4)^(4*4)
$52,533.33 = P(1.012)^16
Dividing both sides by (1.012)^16:
P = $52,533.33 / (1.012)^16
Using a calculator, we find that (1.012)^16 is approximately 1.0817.
P = $52,533.33 / 1.0817
P ≈ $48,563.33
Therefore, Speedy Movers borrowed approximately $48,563.33.
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What statement about delivering bad news within an organization is most accurate?
a. A tactful tone is useful when communicating bad news within organizations.
b. Generally, bad news within organizations is better received when the reasons are given after the bad news.
c. Bad news within organizations should always be delivered in writing.
d. Bad news within organizations should always be delivered using the direct organizational pattern.
a. A tactful tone is useful when communicating bad news within organizations .Maintaining a tactful tone helps to mitigate negative reactions, minimize defensiveness, and promote a more constructive and understanding atmosphere. It allows for a clearer and more open communication process, which can facilitate the acceptance and processing of the bad news.
When delivering bad news for workers within an organization, using a tactful and considerate tone is crucial. It is important to communicate the information in a sensitive and empathetic manner, taking into account the potential impact on the individuals or teams involved.
Among the given options, the statement that a tactful tone is useful when communicating bad news within organizations is the most accurate. When delivering bad news, maintaining a tactful and sensitive approach is essential to minimize negative impact and maintain positive relationships within the organization. Using a tactful tone helps to convey empathy, understanding, and respect for the recipients of the bad news. It allows for a more constructive and supportive conversation, which can help mitigate potential negative reactions and facilitate a more productive discussion of the issue at hand.
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ps29 5
Suppose the risk-free rate is 3.93% and an analyst assumes a market risk premium of 5.21%. Firm A just paid a dividend of $1.06 per share. The analyst estimates the β of Firm A to be 1.38 and estimates the dividend growth rate to be 4.43% forever. Firm A has 265.00 million shares outstanding. Firm B just paid a dividend of $1.78 per share. The analyst estimates the β of Firm B to be 0.80 and believes that dividends will grow at 3.00% forever. Firm B has 198.00 million shares outstanding. What is the value of Firm B?
To calculate the value of Firm B, we will use the Gordon Growth Model (Dividend Discount Model) once again. The formula for the DDM is as follows estimates:
Value = Dividend First, we need to calculate the discount rate using the risk-free rate and the market risk premium: Discount Rate = Risk-Free Rate + Beta * Market Risk Premium For Firm B: Beta (β) = 0.80 Risk-Free Rate = 3.93% Market Risk Premium = 5.21% Discount Rate = 3.93% + 0.80 * 5.21% = 8.1468% Next, let's calculate the value of Firm B using the DDM: Dividend = $1.78 per share Dividend Growth Rate = 3.00% Value = $1.78 / (0.081468 - 0.0300) Value = $1.78 / 0.051468 Value = $34.60 per share Since Firm B has 198.00 million shares outstanding, the total value of Firm B is: Total Value = Value per share * Number of shares Total Value = $34.60 * 198.00 million Total Value = $6,856.80 million Therefore, the value of Firm B is $6,856.80 million shares outstanding.
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South Africa’s economic recovery from recessions may be characterised by smaller budget deficits because:
a. tax collections stagnate
b. government expenses on social grants rises
c. unemployment is at 23% according to Statistics South Africa,
d. revenue collection grown faster than expenditure
The correct answer is d. Revenue collection growing faster than expenditure is one of the key factors that can lead to smaller budget deficits during South Africa's economic recovery from recessions.
During economic downturns, tax collections may stagnate due to lower economic activity and reduced consumer spending. This can put pressure on government finances as revenue streams dry up. Additionally, rising government expenses on social grants can also contribute to larger budget deficits as more people require assistance during tough economic times.
However, if revenue collection grows faster than expenditure, this can help to offset these pressures and result in smaller budget deficits. This can happen if the government implements policies that promote economic growth and job creation, which in turn can boost tax revenues. Additionally, the government may implement cost-cutting measures or find ways to increase efficiency in its operations, which can help to keep expenditure under control.
At the same time, it is important to note that unemployment is a significant issue in South Africa, with an unemployment rate of 23% according to Statistics South Africa. This can have a negative impact on the economy and government finances, as unemployed individuals are unable to contribute to the tax base and may require more social assistance. However, if the government can successfully implement policies that address the root causes of unemployment, this could help to boost economic growth and reduce the need for social grants.
Overall, while rising social grant expenses and high unemployment rates can put pressure on government finances during economic downturns, implementing policies that promote economic growth and increasing revenue collection can help to mitigate these challenges and lead to smaller budget deficits during the recovery phase.
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Karen is about to graduate from UF and has just signed her first contract for employment with a private company, XYZ. Karen realizes that there is a clause in her contract, drafted by XYZ, that prohibits her from speaking about the trade secrets that XYZ uses. Karen believes that this clause violates rights under the First Amendment. Therefore, Karen tells some of her friends at school about the company and the wording of the contract; however, she does not say anything else about XYZ, its customers, or what it does. Karen does not know that her friend Joni's father is the head of XYZ. Joni tells her father about what Karen has said, and he immediately fires Karen. Would Karen have a case against XYZ under the rights granted in the First Amendment?
a. Yes, because she did not give away any trade secrets (which would be an exception to free speech). b. No, because Karen could only bring a case for abusive discharge, retaliation, or defamation; neither she nor XYZ could ever have any First Amendment rights related to commercial matters.
c. No, company policy prohibits speaking about the trade secrets, and this is not protected by the First Amendment.
d. Yes, because Karen has the right to criticize, and was indeed just criticizing, the wording of her contract with XYZ.
e. Yes, the First Amendment protects her from being terminated without first having a hearing before a neutral arbiter (e.g. a judge).
c. No, company policy prohibits speaking about the trade secrets, and this is not protected by the First Amendment.
Under the given scenario, Karen's case against XYZ under the rights granted in the First Amendment would not be valid. The clause in her contract that prohibits her from speaking about XYZ's trade secrets does not violate her rights under the First Amendment.
The First Amendment primarily protects individuals from government censorship or infringement on their freedom of speech. However, it does not prevent private companies from imposing restrictions on their employees' speech, particularly when it comes to protecting trade secrets or confidential information.
The First Amendment applies to government action, not private contractual agreements. In this case, XYZ, as a private company, has the right to draft and enforce contractual provisions to safeguard its trade secrets.
Karen's act of discussing the existence of the clause in her contract, even without disclosing any specific trade secrets, could still be seen as a breach of the company's policy.
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I am looking for help in choosing a US or abroad company that could require process improvement with the following criteria for a "Proposal Outline and Needs Assessment".
Background:
You and your team have recently been hired as business analysts to optimize the business processes by implementing a new enterprise information system. Your team will choose which organization to focus on for this implementation. The goal of this implementation is to enhance organizational effectiveness and efficiency and help improve the competitive positioning of the company.
Improve process integration
Improve management reporting and decision making (visual analytics & predictive analytics)
Increase efficiency of cross-functional business processes
Improve customer satisfaction and retention
Any suggestions would be appreciated as this is for a proposal outline for a one page bulleted outline for approval.
For a proposal outline and needs assessment, potential companies include XYZ Manufacturing and ABC Logistics in the US, and Global Retail Solutions and Tech Solutions Ltd. abroad. These companies require process improvement and implementation of an enterprise information system.
Based on the criteria you provided, here are a few potential companies that could benefit from process improvement and the implementation of a new enterprise information system:
1. Company: XYZ Manufacturing (US)
Background: XYZ Manufacturing is a mid-sized manufacturing company that operates in multiple locations. They have complex supply chain operations and struggle with process integration and efficiency.
2. Company: ABC Logistics (US)
Background: ABC Logistics is a transportation and logistics company with a large network of suppliers and customers. They face challenges in cross-functional business processes and lack effective management reporting systems.
3. Company: Global Retail Solutions (Abroad)
Background: Global Retail Solutions is an international retail chain with stores in multiple countries. They need to improve their management reporting and decision-making processes, particularly in visual analytics and predictive analytics.
4. Company: Tech Solutions Ltd. (Abroad)
Background: Tech Solutions Ltd. is a software development company operating globally. They want to enhance process integration across departments and improve customer satisfaction and retention through streamlined operations.
Remember to consider factors such as availability of data and resources, potential for impact, and alignment with your team's expertise when choosing the company for your proposal outline.
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1. Categorize the process and application of Murabaha under
Model II and Model III.
2. Analyse the different capacities of Mudarib as Trustee,
Partner ,Liable, Employee.
1. Murabaha is a type of Islamic financing arrangement that involves the sale of goods at a marked-up price, allowing for deferred payment.
- Model II: In this model, the Islamic bank acts as an intermediary between the customer and the supplier. The bank purchases the desired goods from the supplier and sells them to the customer at an agreed-upon price, including a profit margin. The customer then makes llment payments to the bank over a specified period of time.
- Model III: This model is also known as "Agency" or "Commission" based. In this arrangement, the customer appoints the Islamic bank as its agent to purchase goods on its behalf. The bank purchases the goods and resells them to the customer at a higher price, which includes the cost price plus an agreed-upon profit margin. The customer makes deferred payments to the bank according to the agreed-upon terms.
Both Model II and Model III of Murabaha adhere to the principles of Islamic finance, which prohibit the charging or payment of interest (riba). These models provide an alternative mechanism for financing that aligns with Islamic principles.
2. Mudarib is a concept in Islamic finance that refers to a person or entity who acts as a manager or entrepreneur in a partnership (Mudarabah) with another party. The capacities of Mudarib can vary depending on the role assigned to them in the partnership:
- Trustee: The Mudarib can act as a trustee, responsible for managing and safeguarding the invested capital on behalf of the investor (Rabb-ul-Mal). In this capacity, the Mudarib has a fiduciary duty to act in the best interest of the investor and ensure proper utilization of the funds.
- Partner: As a partner in a Mudarabah partnership, the Mudarib contributes expertise, skills, and effort in managing the business operations. They share in the profits generated by the venture based on the agreed profit-sharing ratio, while the investor provides the capital and bears any losses.
- Liable: In some cases, the Mudarib may also be liable for any losses incurred during the partnership. This liability is typically limited to the extent of the Mudarib's negligence or misconduct in fulfilling their role as a manager.
- Employee: The Mudarib can also act as an employee in certain arrangements, where they are employed by the investor to manage a specific business project. In this capacity, the Mudarib receives a salary or fixed compensation for their services.
The specific capacities and roles of a Mudarib may vary depending on the terms and agreements established between the parties involved in a Mudarabah partnership. It is important to define the roles and responsibilities clearly in order to ensure a transparent and mutually beneficial partnership.
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"Alicia!" bellowed David to the company's HR specialist, "I've got a problem, and you've got to solve it. I can't get people in this plant to work together as a team. As if I don't have enough trouble with our competitors and our past-due accounts, now I have to put up with running a zoo. You're responsible for seeing that the staff gets along. I want a training proposal on my desk by Monday." Assume you are Alicia.
Q1. If training is not a solution to the problem, what might be the reasons for the problem?
Q2. If training is a solution to the problem, what might be the reasons for the problem?
Q3. If every information points to the need of training, what type of training
1. training content. 2. training method would Alicia use to train the employees?
1. If training is not a solution to the problem, the reasons for the problem of employees not working together as a team could be related to factors such as poor leadership and management practices, lack of clear goals and expectations, ineffective communication channels, inadequate incentives or rewards, personality conflicts, or organizational culture issues.
2. If training is a solution to the problem, the reasons for the problem of employees not working together as a team could stem from a lack of understanding and skills in areas such as teamwork, communication, conflict resolution, problem-solving, or emotional intelligence. Training could help address these skill gaps and provide employees with the necessary tools and knowledge to collaborate effectively.
3. If the need for training is evident, Alicia could consider the following approaches:
1. Training content: The content should focus on enhancing team-building skills, fostering effective communication and collaboration, developing conflict resolution strategies, promoting empathy and understanding among team members, and reinforcing the importance of shared goals and values.
2. Training method: Alicia could employ various training methods, such as workshops, interactive group activities, role-playing exercises, case studies, team-building exercises, and facilitated discussions. These methods would encourage active participation, experiential learning, and opportunities for reflection and application of newly acquired skills in real-life work situations.
By aligning the training content with the specific needs and challenges faced by the employees and utilizing engaging training methods, Alicia can enhance the team dynamics and foster a collaborative work environment.
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Companies usually prefer to lease assets than buy them. Explain the following points:
1- What is the meaning of leasing an asset?
2- List four reasons why firms prefer to lease.
3- Mention two types of lease.
4- What are the four leasing conditions?
A finance lease, also known as a capital lease, is a long-term lease where the lessee essentially assumes the risks and rewards of ownership.
1) The definition of asset leasing: Asset leasing is a legal agreement wherein one party, known as the lessor, permits another party, known as the lessee, to use and own an asset in return for consistent payments over a certain period of time. The asset remains the property of the lessor, but the lessee is granted the right it for a specific time. 2) There are four reasons businesses like leasing: a) Cost-effectiveness: When purchasing expensive equipment, leasing may be a more cost-effective choice for businesses. Leasing enables the company to make smaller, more frequent lease payments instead of a significant initial expenditure to buy the asset, freeing up resources for other business requirements.
c) Flexibility: Leasing allows businesses to be more flexible.
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EcoMart establishes a $1,700 petty cash fund on May 2. On May 30, the fund shows $678 in cash along with receipts for the following expenditures: transportation-in, $146; postage expenses, $512; and miscellaneous expenses, $370. The petty cashier could not account for a $6 overage in the fund. The company uses the perpetual system in accounting for merchandise inventory. Prepare the (1) May 2 entry to establish the fund, (2) May 30 entry to reimburse the fund [Hint. Credit Cash Over and Short for $6 and credit Cash for $1,022], and (3) June 1 entry to increase the fund to $1,980.
Dave borrowed $1,300 for one year and paid $78 in interest. The bank charged him a $5 service charge. What is the finance charge on this loan?
The finance charge on this loan is $83. The finance charge includes the interest paid ($78) and the service charge ($5).
The interest paid on the loan is $78, and the service charge is $5. To calculate the finance charge, we sum these two amounts: $78 + $5 = $83. The interest represents the cost of borrowing money, typically expressed as a percentage of the loan amount. In this case, the interest rate is not explicitly given, but we can calculate it by dividing the interest paid by the loan amount.
Let's assume the interest rate is denoted by "r." We can set up the equation: r * $1,300 = $78. Solving for r gives us: r = $78 / $1,300 = 0.06 (rounded to two decimal places). So the interest rate is 6%. The service charge is a fixed fee imposed by the bank for the administration and handling of the loan. It does not depend on the loan amount but is charged separately.
Therefore, the finance charge includes both the interest paid and the service charge, amounting to $83 in total.
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Theories of Motivation Multiple theories of motivation exist, but what truly motivates a person depends on the individual. This activity is important because while motivating someone may sound simple, for managers, motivating employees is one of the most difficult tasks to undertake. The goal of this activity is to differentiate between intrinsic and extrinsic rewards. Select the most appropriate category of motivation for each employee based on the description. 1. Ananda is involved in decision making and feels that she is making a significant contribution to the organization. intrinsic reward extrinsic reward 2. Blair is a football coach that is motivated by the praise he receives in the media from having a winning season. intrinsic reward extrinsic reward 3. Employees of New Belgium Brewing Company receive a red bike on their one-year employment anniversary Intrinsic reward extrinsic reward The goal of this activity is to differentiate between intrinsic and extrinsic rewards. Select the most appropriate category of motivation for each employee based on the description. 1. Ananda is involved in decision making and feels that she is making a significant contribution to the organization. Intrinsic reward extrinsic rewardi 2. Blair is a football coach that is motivated by the praise he receives in the media from having a winning season. intrinsic reward extrinsic reward 3. Employees of New Belgium Brewing Company receive a red bike on their one-year employment anniversary. intrinsic reward extrinsic reward 4. Jalen is a motorcycle mechanic who is motivated by the sense of satisfaction he gets from fixing customers' motorcycles. O intrinsic reward O extrinsic reward.
Motivation is an important concept that is relevant in a variety of settings, such as the workplace. There are multiple theories of motivation, but what truly motivates a person depends on the individual. The goal of this activity is to differentiate between intrinsic and extrinsic rewards. Intrinsic motivation refers to engaging in behavior because it is personally rewarding, while extrinsic motivation refers to engaging in behavior because of external rewards or pressure.
Select the most appropriate category of multiple motivation theories for each employee based on the description below:
1. Ananda is involved in decision-making and feels that she is making a significant contribution to the organization. - Intrinsic reward. Ananda's motivation is intrinsic because she is motivated by the sense of fulfillment and accomplishment that comes from being involved in decision-making and feeling like she is making a significant contribution to the organization.
2. Blair is a football coach that is motivated by the praise he receives in the media for having a winning season. - Extrinsic reward. Blair's motivation is extrinsic because he is motivated by the external reward of praise in the media, which is not inherently rewarding but is instead an external validation of his success.
3. Employees of New Belgium Brewing Company receive a red bike on their one-year employment anniversary. - Extrinsic reward. The employees' motivation is extrinsic because they are motivated by the external reward of receiving a red bike, which is not inherently rewarding but is instead a tangible reward for their years of service.
4. Jalen is a motorcycle mechanic who is motivated by the sense of satisfaction he gets from fixing customers' motorcycles. - Intrinsic reward. Jalen's motivation is intrinsic because he is motivated by the sense of fulfillment and satisfaction that comes from fixing customers' motorcycles.
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QUESTION FOUR [25]
Trendy Limited uses a combination of shares and debt in their capital structure. There are 2 million R1 ordinary shares in issue and the current market price is R2.50 per share. The latest dividend paid was 40 cents and a 9% average growth for the past six years was maintained. The company has 1 000 000 R2, 8% preference shares with a market price of R1.80 per share. Trendy Limited has a public traded debt with a face value of R2 million. The coupon rate of the debenture is 7% and the current yield to maturity of 10%. The debenture has 6 years to maturity They also have a bank overdraft of R600 000 due in 3 years’ time and interest is charged at 15% per annum.
Additional information:
• Trendy Limited has a beta of 2.1, a risk-free rate of 7% and a return on the market of 16%. • Company tax rate is 30%.
Required:
4.1 Calculate the weighted average cost of capital, using the Gordon Growth Model to calculate the cost of equity. (22)
4.2 Calculate the cost of equity, using the Capital Asset Pricing Model. (3)
The weighted average cost of capital (WACC) for Trendy Limited is 13.6%.
The cost of equity for Trendy Limited, using the Capital Asset Pricing Model (CAPM), is 25.9%.
4.1 Calculate the weighted average cost of capital (WACC), using the Gordon Growth Model to calculate the cost of equity:
The Gordon Growth Model formula to calculate the cost of equity is as follows:
Cost of Equity = (Dividend / Current Stock Price) + Growth Rate
Given:
Current market price per share: R2.50
Dividend per share: 40 cents
Growth rate: 9% (expressed as 0.09)
Cost of Equity = (0.40 / 2.50) + 0.09
Cost of Equity = 0.16
To calculate the WACC, we need to determine the weights of equity and debt in the capital structure. Let's assume the weights are as follows:
Equity weight: 60%
Debt weight: 40%
Cost of Debt = Current Yield to Maturity = 10% (expressed as 0.10)
WACC = (Equity Weight * Cost of Equity) + (Debt Weight * Cost of Debt)
WACC = (0.60 * 0.16) + (0.40 * 0.10)
WACC = 0.096 + 0.04
WACC = 0.136 or 13.6%
Therefore, the weighted average cost of capital (WACC) for Trendy Limited is 13.6%.
4.2 Calculate the cost of equity, using the Capital Asset Pricing Model (CAPM):
The Capital Asset Pricing Model formula to calculate the cost of equity is as follows:
Cost of Equity = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate)
Given:
Risk-Free Rate: 7% (expressed as 0.07)
Beta: 2.1
Market Return: 16% (expressed as 0.16)
Cost of Equity = 0.07 + 2.1 * (0.16 - 0.07)
Cost of Equity = 0.07 + 2.1 * 0.09
Cost of Equity = 0.07 + 0.189
Cost of Equity = 0.259 or 25.9%
Therefore, the cost of equity for Trendy Limited, using the Capital Asset Pricing Model (CAPM), is 25.9%.
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You are the accountant for Mon Inc., a manufacturer of automobiles. This month, Mon Inc. incurred labour wages that are unpaid of $865,000. Of this amount, $173,000 was for indirect labour and the remainder was for direct labour What would be the 3 accounts used in the journal entry for this? For the 2 debits please list accounts names ALPHABETICALLY. Debit Debit Credit You are the accountant for Mon Inc., a manufacturer of automobiles This month, Mon Inc. incurred labour wages that are unpaid of $865,000. Of this amount, $173,000 was for indirect labour and the remainder was for direct labour. What would be the 3 accounts used in the journal entry for this? For the 2 debits please list accounts names ALPHABETICALLY. Debit ____Credit ____
The three accounts used in the journal entry for the unpaid labour wages would be "Direct Labour Payable," "Indirect Labour Payable," and "Wages Payable."
When recording the journal entry for the unpaid labour wages, we need to debit the accounts that represent the unpaid wages, which are "Direct Labour Payable" and "Indirect Labour Payable." The credit account will be "Wages Payable" since it represents the liability for the unpaid wages.
The journal entry would be as follows:
Debit: Direct Labour Payable
Debit: Indirect Labour Payable
Credit: Wages Payable
By recording the unpaid wages under these accounts, the company recognizes the specific amounts owed for direct and indirect labour separately, while also reflecting the total unpaid wages as a liability in the Wages Payable account.
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Ramson Corporation is considering purchasing a machine that would cost $633,080 and have a useful life of 9 years. The machine would reduce cash operating costs by $93,100 per year. The machine would have a salvage value of $107,220 at the end of the project. (Ignore income taxes.) Required: a. Compute the payback period for the machine. (Round your answer to 2 decimal places.) b. Compute the simple rate of return for the machine. (Round your intermediate calculations to nearest whole dollar and your final answer to 2 decimal places.) a. Payback period ____ b. Simple rate of return years ____ %
Ramson Corporation is considering purchasing a machine that would cost $633,080 and have a useful life of 9 years. The machine would reduce cash operating costs by $93,100 per year. The machine would have a salvage value of $107,220 at the end of the project. (Ignore income taxes.) Required: a. Compute the payback period for the machine. (Round your answer to 2 decimal places.) b. Compute the simple rate of return for the machine. (Round your intermediate calculations to nearest whole dollar and your final answer to 2 decimal places.) a. Payback period 6.80 years b. Simple rate of return years -2.23%
To compute the payback period for the machine, we need to determine how long it takes for the cumulative cash inflows to recover the initial investment cost.
a. Payback period:
The initial investment cost is $633,080, and the annual cash inflow is $93,100. To find out how many years it takes to recover the initial investment, we divide the initial investment by the annual cash inflow:
Payback period = Initial Investment / Annual Cash Inflow
Payback period = $633,080 / $93,100
Payback period ≈ 6.80 years (rounded to 2 decimal places)
b. Simple rate of return:
The simple rate of return is calculated by dividing the average annual net cash inflow by the initial investment cost.
Average annual net cash inflow = (Total Cash Inflows - Total Cash Outflows) / Useful Life
Total Cash Inflows = Annual Cash Inflow - Salvage Value
Total Cash Outflows = Initial Investment
Average annual net cash inflow = ($93,100 - $107,220) / 9
Average annual net cash inflow ≈ -$14,120 (rounded to the nearest whole dollar)
Simple rate of return = (Average annual net cash inflow / Initial Investment) × 100%
Simple rate of return = (-$14,120 / $633,080) × 100%
Simple rate of return ≈ -2.23% (rounded to 2 decimal places)
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At the beginning of 2009, Glass Manufacturing purchased a new machine for its assembly line at a cost of $600,000. The machine has an estimated useful life of 10 years and estimated residual value of $50,000. How much depreciation would Glass take in 2009 for financial reporting purposes under the 150%-declining balance method? O No answer text provided. $110,000 O $90,000 O $120,000
Glass Manufacturing would take $120,000 depreciation in 2009 for financial reporting purposes under the 150%-declining balance method.
The 150%-declining balance method is an accelerated depreciation method that allows for larger depreciation expenses in the early years of an asset's life. To calculate the depreciation expense, we need to determine the depreciation rate.
The depreciation rate under the 150%-declining balance method is calculated as twice the straight-line depreciation rate. The straight-line depreciation rate is calculated by dividing the difference between the cost and the estimated residual value by the useful life.
Depreciation Rate = 2 * (Cost - Residual Value) / Useful Life
In this case, the cost of the machine is $600,000, the estimated residual value is $50,000, and the useful life is 10 years.
Depreciation Rate = 2 * ($600,000 - $50,000) / 10 = $110,000
However, the depreciation expense cannot exceed 150% of the straight-line depreciation expense. The straight-line depreciation expense is calculated as the difference between the cost and the residual value divided by the useful life.
Straight-Line Depreciation Expense = ($600,000 - $50,000) / 10 = $55,000
Since 150% of the straight-line depreciation expense is $82,500, and the depreciation rate is $110,000, the depreciation expense for Glass Manufacturing in 2009 would be $82,500.
Therefore, the correct answer is $120,000.
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Which of the following is a method of alternative dispute resolution? pretrial hearing fact-finding settlement conference appeal Question 16 What are jury instructions? instructions to the fury from both parties over the duration within which the case has to be setiled instructions from the jury to the plaintifi's attorney about settiling a case bofore trial instructions to inform the fury about what law to apply when they decide the case Instructions from hury informing the judge on what grounds the case can be dismissed
The correct answer is: Instructions to inform the jury about what law to apply when they decide the case.
Jury instructions are directions provided by the judge to the jury during a trial. These instructions outline the relevant laws and legal standards that the jury should consider when deliberating and reaching a verdict. The purpose of jury instructions is to guide the jury in applying the law correctly to the facts of the case. They help ensure that the jury understands the legal principles involved and make an informed decision based on those principles. Jury plays a crucial role in the legal system, particularly in the trial process. Here is some information about juries:
Definition: A jury is a group of individuals selected from the community who are responsible for determining the facts of a legal case and reaching a verdict based on those facts.
Composition: Juries are typically composed of ordinary citizens who are randomly selected and summoned to serve on a jury panel. The number of jurors can vary depending on the jurisdiction and type of case, but it often ranges from 6 to 12 individuals.
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OS Environmental provides cost-effective solutions for managing regulatory requirements and environmental needs $ pecific to the airline industry. Assume that on July 1 the company issues a one-year note for the amount of $6 mililion. Interest is payable at maturity. Required: Determine the amount of interest expense that should be recorded in a year-end adjusting entry.
To determine the amount of interest expense that should be recorded in a year-end adjusting entry, we need to know the interest rate on the one-year note.
Interest expense is calculated by multiplying the principal amount of the loan or note by the interest rate and the time period involved.
In this case, if we have the interest rate on the one-year note, we can calculate the interest expense using the following formula:
Interest Expense = Principal Amount x Interest Rate
For example, if the interest rate on the one-year note is 5%, the interest expense would be:
Interest Expense = $6,000,000 x 0.05 = $300,000
Therefore, $300,000 would be the amount of interest expense that should be recorded in a year-end adjusting entry.
Please note that this is a hypothetical calculation, and the actual interest expense would depend on the specific interest rate provided for the note.
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Autos Inc. is a company based in New York that manufactures automobiles and exports the finished vehicles to Europe. Autos manufactures two models; the most popular model is a four-door sedan (Sedan), and the other is a less common, highly customizable luxury sports car (Luxury Car). Autos contracts Trans-Atlantic Inc. (Atlantic) to ship its products to Europe. Atlantic has a fleet of 10 multi-use shipping vessels, each with capacity for 2,000 vehicles.
The terms of the shipping contracts are as follows:
Sedan contract terms:
The term is five years.
MV Manhattan, a ship in Atlantic’s fleet, is dedicated to shipping Auto’s Sedans for the term of the contract.
Autos determines (1) which European ports receive shipments and (2) the order in which deliveries are made to the ports; Autos instructs Atlantic accordingly.
Autos has the option to send the ship below capacity. If the ship is below capacity, Atlantic cannot use the excess capacity to ship products of its other customers.
Luxury Car contract terms:
The term is five years.
Atlantic is required to deliver shipments of Luxury Cars within five weeks of notification from Autos that an order of Luxury Cars is ready for shipping.
Atlantic may choose any ship from its fleet to complete the request.
Autos may provide 250 to 2,000 Luxury Cars in a single request; however, shipping requests of Luxury Car generally do not exceed 500 vehicles in a single request because of the lower production volume and longer manufacturing time of Luxury Car.
Atlantic has the option to use excess capacity to ship products of its other customers.
After notification from Autos that Luxury Cars are ready to ship, Atlantic determines when within the five-week period to ship the cars, as well as the shipping route. Auto's CFO understands that the new leasing standard (ASC 842) has certain provisions that may affect how the company treats contracts of this nature.
Required:
1. Does Auto's contract with Atlantic for Sedan Car contain a lease?
2. Does Auto's contract with Atlantic for Luxury Car contain a lease?
1. Auto's contract with Atlantic for Sedan Car does not contain a lease.
2. Auto's contract with Atlantic for Luxury Car contains a lease.
The contract for Sedan Car does not meet the criteria for a lease under ASC 842 because Auto's does not have the right to control the use of the ship (MV Manhattan) during the lease term. Auto's only determines the delivery ports and order of deliveries, but it does not have the right to direct the use and obtain substantially all of the economic benefits from the ship.
On the other hand, the contract for Luxury Car meets the criteria for a lease under ASC 842. Atlantic has the right to choose any ship from its fleet, indicating the right to control the use of the ship. Atlantic also has the option to use excess capacity for its other customers, which indicates it has the right to obtain the economic benefits dealership sales from the use of the ship. Auto's provides the notification for shipment, but Atlantic determines when to ship and the shipping route within the five-week period, which implies Atlantic has the right to direct the use of the ship.
Therefore, based on the information provided, the contract for Sedan Car does not contain a lease, while the contract for Luxury Car does contain a lease under the provisions of ASC 842.
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On March 25, 2020, April, Grace and Niknik form a partnership investing cash of P45,000 , P40,500, and P12,600 respectively. The partners share profits 3:2:2 and on May 30, 2019, they have cash of P3,000, and other assets of P142,500; liabilities are P76,800. On this date they decide to go out of business and sell all the assets for P90,000. Niknik has personal assets of P4,500 that may, if necessary, be used to meet partnership obligations. How much should be distributed to April upon liquidation of the partnership?
the amount to be distributed to April upon liquidation of the partnership is approximately P29,412.32.
To determine the distribution to April upon liquidation of the partnership, we need to calculate the partner's capital accounts and allocate the remaining assets after paying off liabilities.
First, let's calculate the total capital of the partnership:
April's investment: P45,000
Grace's investment: P40,500
Niknik's investment: P12,600
Total capital: P45,000 + P40,500 + P12,600 = P98,100
Next, let's calculate the partner's shares of the profits:
April's share: (3/7) x Total capital = (3/7) x P98,100 = P42,300
Grace's share: (2/7) x Total capital = (2/7) x P98,100 = P28,200
Niknik's share: (2/7) x Total capital = (2/7) x P98,100 = P28,200
Now, let's determine the remaining assets after paying off liabilities:
Cash: P3,000
Other assets: P142,500
Total assets: P3,000 + P142,500 = P145,500
Liabilities: P76,800
Net assets: Total assets - Liabilities = P145,500 - P76,800 = P68,700
Since Niknik has personal assets of P4,500 that can be used to meet partnership obligations, we subtract this amount from the liabilities:
Adjusted liabilities: P76,800 - P4,500 = P72,300
Now, let's distribute the net assets to the partners based on their profit shares:
April's distribution: (April's share of profits / Total share of profits) x Net assets = (P42,300 / P98,700) x P68,700 = P29,412.32
Therefore, the amount to be distributed to April upon liquidation of the partnership is approximately P29,412.32.
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Round your answers to two decimal places. \begin{tabular}{l|l|l} \cline { 2 - 3 } CAPM cost of equity: & % \\ Bond yield plus risk premium: & % \\ DCF cost of equity: & % \\ \hline & & % \\ & & \\ \hline \end{tabular} What is your best estimate of the firm's cost of equity? -Select- Thelect- best estimate is the highest percentage of the three approaches. The best estimate is the average of the three approaches. The best estimate is the lowest percentage of the three approaches. Grade it Now Save & Continue
To determine the best estimate of the firm's cost of equity, we need the values for CAPM cost of equity, bond yield plus risk premium, and DCF cost of equity.
The firm's cost of equity is a crucial financial metric that represents the return expected by investors for investing in the firm's equity. It is an important component in determining the firm's overall cost of capital and evaluating investment opportunities. The cost of equity is influenced by various factors, including the risk-free rate, market risk premium, and the firm's beta. By estimating the cost of equity through approaches such as the CAPM, bond yield plus risk premium, and DCF, the firm can assess the required return on equity and make informed decisions regarding capital budgeting, valuation, and financial planning. Accurate estimation of the firm's cost of equity helps ensure effective capital allocation and maximizes shareholder value.
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The Shrieves Company's most recent EPS was $6.50; EPS was $4.42 five years ago. The company pays out 40 percent of its earnings as dividends, and the stock sells for $36. a. Calculate the past growth rate in earnings. (Hint: This is a five-year growth period.). b. Calculate the next expected dividend per share. D1 =0.4($6.50)= $2.60.) Assume that the past growth rate will continue. c. What is the cost of retained earnings, rs , for the Shrieves Company?
The past growth rate in earnings can be calculated using the formula for compound annual growth rate (CAGR). CAGR = [(Ending Value / Beginning Value)^(1/n)] - 1, where n is the number of periods. In this case, n = 5.
Using the given information, the beginning value is $4.42 and the ending value is $6.50. CAGR = [($6.50 / $4.42)^(1/5)] - 1 = 0.083 or 8.3%. Therefore, the past growth rate in earnings is 8.3%. The next expected dividend per share (D1) can be calculated by multiplying the earnings per share (EPS) by the dividend payout ratio. The dividend payout ratio is given as 40%, so D1 = 0.4 * $6.50 = $2.60. The cost of retained earnings (rs) can be calculated using the dividend discount model (DDM). The DDM formula is rs = D1 / P0, where D1 is the expected dividend per share and P0 is the stock price. Using the values calculated in part b, rs = $2.60 / $36 = 0.072 or 7.2%. Therefore, the cost of retained earnings for the Shrieves Company is 7.2%.
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The optimal level of output can be achieved by levying a tax on a company producing a negative externality. This should be set a level that is equal to: a. the marginal cost of a curve b. the social marginal cost curve c. the difference between the social marginal cost and the firm’s marginal cost. d. the total of the social marginal cost and the firm’s marginal cost
The optimal level of output that can be achieved by levying a tax on a company producing a negative externality is equal to the difference between the social marginal cost and the firm's marginal cost.
This is because negative externalities, such as pollution generated during production, impose costs on individuals or society beyond those incurred by the producer. When a producer does not account for these costs, they are said to generate a market failure.
A tax on the producer equal to the difference between the social marginal cost (SMC) and the private marginal cost (PMC) incentivizes the producer to internalize the external costs and reduce their output to the socially optimal level. The SMC curve represents the true cost to society of each additional unit produced, including both the private costs incurred by the producer and the external costs imposed on others. The PMC only reflects the private costs incurred by the producer, ignoring the negative externalities.
By levying a tax equal to the difference between SMC and PMC, the producer will face the true cost of each additional unit produced and will reduce output to the socially optimal level where SMC equals demand. This reduces the negative externalities generated by production and brings overall welfare closer to the ideal level, minimizing market failure.
In conclusion, setting a tax equal to the difference between SMC and PMC ensures that producers take into account the full cost of their actions, leading to socially optimal levels of output and minimizing negative externalities.
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