A derivative is a financial product whose value is derived from the value of one or more underlying assets, such as stocks, behavior value of the derivative is based on the performance of the underlying asset, and it allows investors to speculate on the future direction of the asset's price.
Derivative contracts are designed to reduce risks in various ways.Some examples of risks that derivative contracts are designed to reduce are as follows:Market risk: Derivatives can help investors protect themselves against market risk, which is the risk that the price of an asset will decline. For example.
A investor who owns a stock might use a put option to protect against the risk of a decline in the stock's price.Credit risk: Derivatives can help investors reduce their credit risk, which is the risk that a borrower will default on a loan or other debt. For example, a bank might use a credit default swap to reduce its credit risk when it lends money to a borrower.Interest rate risk: Derivatives can help investors manage their exposure to interest rate risk, which is the risk that the value of an asset will decline due to changes in interest rates. For example, a company might use an interest rate swap to reduce its exposure to fluctuations in interest rates.Currency risk: Derivatives can help investors manage their exposure to currency risk.
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Required information. [The following information applies to the questions displayed below] Allied Merchandisers was organized on May 1. Macy Company is a major customer (buyer) of Allied (seller) products, May 3 Allied made its first and only purchase of inventory for the period on May 3 for 2,000 units at a price of $10 cash per unit (for a total cost of $20,000). May 5 Allied sold 1,500 of the units in inventory for $14 per unit (invoice total: $21,000) to Macy Company under credit terms 2/10, n/60. The goods cost Allied $15,000. May 7 Macy returns 125 units because they did not fit the customer's needs (invoice amount: $1,750). Allied restores the units, which cost $1,250, to its inventory. May 8 Macy discovers that 200 units are scuffed but are still of use and, therefore, keeps the units. Allied gives a price reduction (allowance) and credits Macy's accounts receivable for $300 to compensate for the damage. Allied receives payment from Macy for the amount allowances, and any cash discount. ved on the May 5 purchase; payment is net of returns, May 15 Prepare the appropriate journal entries for Macy Company to record each of the May transactions. Macy is a retailer that uses the gross method and a perpetual inventory system; it purchases these units for resale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 1 Allied made its first and only purchase of inventory for the period on May 3 for 2,000 units at a price of $10 cash per unit (for a total cost of $20,000).
Allied purchased 2,000 units of inventory on May 3 for a total cost of $20,000. The journal entry records the increase in inventory and the corresponding increase in accounts payable.
Identify the accounts involved:
Inventory: Represents the inventory purchased by Allied.
Accounts Payable: Represents the amount owed by Allied to the supplier for the purchase.
Determine the impact on each account:
Inventory increases as Allied acquires 2,000 units of inventory.
Accounts Payable increases as Allied incurs a liability to pay for the inventory.
Write the journal entry:
Date: May 3
Accounts Payable 20,000
Inventory 20,000
The journal entry records the increase in inventory and the corresponding increase in accounts payable due to Allied's purchase of 2,000 units of inventory at a cost of $10 per unit, totaling $20,000.
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Which of the following examples can be classified as an accounts receivable? A. Due to an extra shipment, the Animal Shop had a special this week on kitty litter. B. The Animal Shop signed up for a new credit card to receive 0% financing for the first six months. C. The building management company agreed that The Animal Shop could pay September's rent in October. D. The Animal Shop decided a goldfish could stay for a week and they'd be paid when it was picked up.
An accounts receivable refers to the money that a business is owed for goods or services that it has provided to its customers. The amount owed is usually recorded in the company's financial statements as a current asset. The correct answer to the given question is option D.
The Animal Shop decided a goldfish could stay for a week and they'd be paid when it was picked up. This can be classified as an accounts receivable.What is Accounts Receivable?Accounts receivable are the amount of money that a company is owed for the goods or services it has supplied to its customers. Accounts receivable are typically recorded in the financial statements of a company as a current asset.
Accounts receivable are usually collected within a short period of time, usually within a few days or weeks, and are usually repaid in cash or by check. In the case of an accounts receivable, the company is the creditor and the customer is the debtor. Along with the current assets, accounts receivable appear on a company's balance sheet. If the accounts receivable are not paid within a reasonable period of time, the company may have to write off the account and record it as a loss. However, the company can take steps to collect the amount owed. This may include sending reminders or calling the customer to remind them of the outstanding amount. The answer is D. Accounts receivable is an important metric used in accounting that measures the amount of money owed by customers or clients to a business. An accounts receivable is a type of asset that represents money that has been earned but has not yet been received by the business. It is an amount owed by the customers and is expected to be paid within a certain period of time. Accounts receivable are created when a company sells goods or services to its customers on credit. This means that the company does not receive the full payment for the goods or services at the time of sale but rather at a later date. The amount that is owed by the customer is recorded in the company's books as an accounts receivable. The company can then use this amount to generate cash flow through various methods such as factoring or selling the accounts receivable to a third party.In the given options, due to an extra shipment, the Animal Shop had a special this week on kitty litter (Option A), The Animal Shop signed up for a new credit card to receive 0% financing for the first six months (Option B) and The building management company agreed that The Animal Shop could pay September's rent in October (Option C) cannot be classified as accounts receivable as they are not the amount owed by the customers. The correct option is D. The Animal Shop decided a goldfish could stay for a week and they'd be paid when it was picked up which can be classified as accounts receivable.
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case study BREITT, STARR & DIAMOND LLC
Josh Breitt, Rachel Starr, and Justin Diamond started an advertising agency to serve the needs of small businesses selling in and around their metropolitan area. Breitt contributed clever ideas and a talent for writing scripts and wooing clients. Starr brought a wealth of media contacts, and Diamond handled the artwork. Their quirky ad campaigns soon attracted a stream of projects from car dealers, community banks, and a carpet store. Since the agency's first year, these clients have kept the bills paid while the three win contracts from other companies. Breitt, Starr & Diamond (BS&D) prospered by helping clients keep up with the times, and the agency grew to meet the demand, adding a bookkeeper, a graphic artist, a web designer, two salespeople, a social media expert, and a retired human resource manager, who works 10 hours per week. As the firm grew, the three partners felt they were constantly being pulled away from their areas of expertise to answer questions and solve problems about how to coordinate work, define jobs, and set priorities. They realized that none of them had any management training—and none of them had ever wanted to be a manager. They decided to hire a manager for a position they would call general manager of operations. That person would be responsible for supervising the employees, making sure expenses didn't go over budget, and planning the resources (including people) needed for further growth. The partners interviewed several candidates and hired Brad Howser, a longtime administrator for a four-physician medical office. Howser spent the first few weeks quietly studying BS&D's financial data and observing employees at work. Then he became more outspoken and assertive. Although the partners had never cared to monitor what time employees came or left, Howser began requiring all employees to start by 9:00 each morning. The graphic artist and one of the salespeople complained that flexible hours were necessary for their child care arrangements, but Howser was unyielding. He also questioned whether the employees had been shopping carefully for supplies, indicating that from then on, he would be making all purchases, and only after the employees submitted their requests on a form of his design. Finally, to promote what he called team spirit, Howser began scheduling weekly Monday-morning page 369staff meetings. He would offer motivational thoughts based on his experience at his previous job and invite the employees to share any work-related concerns or ideas they might have. Generally, the employees chose not to share. Initially, the partners were impressed with Howser's vigorous approach to his job. They felt more productive than they had been in years because Howser was handling employee concerns himself. Then the top salesperson quit, followed by the social media expert. The bookkeeper asked if she might meet with the partners. "Is it something you should be discussing with Brad?" Rachel asked her. The bookkeeper replied that, no, it was about Brad. All the employees were unhappy with him, and more were likely to leave
question
Identification of Alternatives for each Key Organization and Management Critical Issues and Problems
Evaluation of Alternatives for each Key Organization and Management Critical Issues and Problems
Key Organization and Management Critical Issues and Problems:
Lack of management training and expertise: The partners, Breitt, Starr & Diamond, recognized their lack of management skills and the need for a general manager of operations to handle supervisory tasks and resource planning. However, their decision to hire Brad Howser without considering his compatibility with the agency's culture and values has created issues.
Inflexible work policies: Howser's imposition of strict work hours without considering the needs of employees, such as flexible schedules for child care, has led to dissatisfaction among the graphic artist and a salesperson. This inflexibility may hinder employee morale and work-life balance.
Micromanagement and control: Howser's approach of taking over purchasing decisions and implementing rigid procedures for employee requests limits autonomy and may stifle creativity. Employees may feel disempowered and less motivated in their roles.
Lack of effective communication and collaboration: The implementation of weekly staff meetings by Howser aimed at promoting team spirit has not yielded the desired results. Employees are reluctant to share their concerns or ideas, indicating a breakdown in communication and a lack of trust.
Evaluation of Alternatives for each Key Organization and Management Critical Issues and Problems:
Management Training: The partners could invest in management training programs for themselves and other key employees to acquire the necessary skills and knowledge to effectively manage the agency. This would help them handle employee concerns and coordinate work more efficiently.
Flexibility and Work-Life Balance: Howser could reconsider his approach to work hours and allow for some flexibility, especially for employees with child care responsibilities. This would demonstrate a commitment to employee well-being and potentially improve job satisfaction.
Empowerment and Autonomy: Howser can foster a culture of trust and empowerment by involving employees in decision-making processes, encouraging their input, and providing them with more autonomy in their roles. This approach can enhance motivation and creativity among employees.
Effective Communication and Collaboration: Howser should focus on improving communication channels and creating a safe and inclusive environment during staff meetings. Encouraging open dialogue, active listening, and addressing employee concerns would promote better collaboration and engagement.
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1–B.) Show a situation where this farmer is making economic profits. Explain what is likely to
happen in this market as a result of this condition. Assume that this one farmer is one of many
farmers making an economic profit and the high prices that lead to the economic profit has a very
strong influence on potential market participants.
One situation where the farmer is making economic profits is where the price of the product is high in the market due to either increased demand or decreased supply. In this situation, the farmer is making an economic profit because the revenue received from the sale of the product is greater than the costs incurred in producing it.
For instance, if the price of maize increases due to an increased demand for maize products such as animal feed, the farmer producing maize will earn an economic profit.
When one farmer is making an economic profit, other farmers will likely enter the market to share in the profits. This is because potential market participants will see the high returns earned by the farmer and seek to benefit from the same returns. As a result, the increased competition will result in a higher supply of the product, leading to a decrease in the price of the product in the market.
When the price decreases, the farmers will incur normal profits, which are equal to the opportunity cost of production. Normal profits occur when the revenue earned from the sale of the product is equal to the costs incurred in producing it, including the opportunity cost of production. Thus, the high prices that lead to the economic profit will be short-lived as more farmers enter the market, increasing the supply and decreasing the price of the product.
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These two events occurred in the same city toward the end of calendar year 2022: • City employees earned $89,250 during the last week of December 2022, but were not paid until early January 2023.
• A city sanitation vehicle accidentally sideswiped a parked car in December 2022. The city acknowledges that it was at fault, and its attorneys believe it will need to pay $10,500 to settle the claim. However, the city is slow in settling claims, so it probably won't pay the claim until early 2024. Based on these two events, how much should the city report as expenditures in its financial statements for the year ended December 31, 2022? Select one: a. $89,250 b. $99,750 c. $10,500 d. $0
The amount that the city should report as expenditures in its financial statements for the year ended December 31, 2022, is $89,250
Expenditures are classified as expenses. An expense is defined as an outflow of resources in order to produce income, reduce liabilities, or enhance the worth of an asset. It occurs when there is a reduction in an asset or an increase in a liability. Therefore, the amount that the city should report as expenditures in its financial statements for the year ended December 31, 2022, is $89,250. The city acknowledges that it was at fault, and its attorneys believe it will need to pay $10,500 to settle the claim. However, the city is slow in settling claims, so it probably won't pay the claim until early 2024. Although the city may report a liability in its financial statements for the year ended December 31, 2022, the city should not report the $10,500 as an expenditure for 2022 because it will not be paid until 2024. Therefore, the correct answer is $89,250.
An expense is defined as an outflow of resources in order to produce income, reduce liabilities, or enhance the worth of an asset. It occurs when there is a reduction in an asset or an increase in a liability. Expenditures are classified as expenses.In this question, the amount that the city should report as expenditures in its financial statements for the year ended December 31, 2022, is $89,250. The reason for this is that city employees earned $89,250 during the last week of December 2022, even though they were not paid until early January 2023. Thus, $89,250 is an expense of the city that was incurred in December 2022, regardless of when it was paid.The city sanitation vehicle accidentally sideswiped a parked car in December 2022. The city acknowledges that it was at fault, and its attorneys believe it will need to pay $10,500 to settle the claim. However, the city is slow in settling claims, so it probably won't pay the claim until early 2024. Although the city may report a liability in its financial statements for the year ended December 31, 2022, the city should not report the $10,500 as an expenditure for 2022 because it will not be paid until 2024. Therefore, the correct answer is $89,250.
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what should be the primary purpose of the talent management process?
The primary purpose of the talent management process is to identify, attract, develop, and retain the best employees in an organization.
It is a set of practices that involve the recruitment, selection, and training of employees to meet the strategic objectives of the organization and improve the performance of employees. There are several reasons why talent management is important. The first reason is that it helps organizations to identify the skills and knowledge required to perform specific jobs. This helps organizations to recruit employees who are a good fit for the job. The second reason is that it helps organizations to develop employees' skills and knowledge. By providing training and development opportunities, employees can become more skilled and productive.
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Bahrain Company makes snow blowers. It has two departments that process all products: Assembly and Testing. The following data pertain to the Assembly departmen Direct materials are added at the beginning of the process and conversion costs are uniformly incurred. The degree of completion of conversion cost is as follows: At the beginning of September, work in process is 40% complete and at the end of the month work in process is 60% complete. Other data for the month include Beginning work-in-process inventory 6,400 units Units started 8,000 units Units completed 12,800 units Ending work-in-process inventory 2 Conversion costs for September $800,000 $1,040,000 Direct materials cost September Beginning work-in-process costs: $616,000 Materials $328,320 Conversion Required: a) Prepare a production cost schedule for the Assembly Department at the end of September using the weighted average method of process costing. b) Prepare the necessary journal entries.
Production cost schedule for the Assembly Department at the end of September using the weighted average method of process costing would go like
(1) Units
Beginning work in process, units 6,400
Units started 8,000
Total units to account for 14,400
Units completed 12,800
Ending work in process, units 1,600
Equivalent units of production (rounded) 14,000
(2) Costs
Direct materials
Beginning work in process, costs $616,000
Added during the period $640,000
Total costs $1,256,000
Conversion costs
Beginning work in process, costs $328,320
Added during the period $1,040,000
Total costs $1,368,320
(3) Cost per equivalent unit
Direct materials $96.75
Conversion costs $85.52
(4) Costs assigned to units
Completed:
Direct materials $1,149,200
Conversion costs 1084,960
Total costs $2,234,160
Ending work in process:
Direct materials $153,600
Conversion costs 132,832
Total costs $286,432
Total costs $2,520,592
b) Prepare the necessary journal entries
To record the costs of direct materials added to production:
Debit: Work in Process - Assembly $640,000
Credit: Raw Materials Inventory $640,000
To record the costs of conversion costs added to production:
Debit: Work in Process - Assembly $1,040,000
Credit: Factory Overhead $1,040,000
=
To record the transfer of completed units to finished goods inventory:
=
Debit: Finished Goods Inventory $2,234,160
Credit: Work in Process - Assembly $2,234,160
=
To record the costs of ending work in process inventory:
Debit: Work in Process - Assembly $286,432
Credit: Factory Overhead $132,832
Credit: Raw Materials Inventory $153,600
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A Limited is a company that sells office furniture in the Cape Town region. As the sales of A Limited are increasing the company needed more storage space for the furniture and moved its furniture out of a warehouse property that it owns in Bellville, into a larger property on 30 June 2018. This Bellville property that it owned was then leased out on 30 June 2018 to an unrelated party under a non-cancellable operating lease. A Limited bought the warehouse property in Bellville on 1 January 2013 for R6 000 000. The land was valued at R2 000 000 and the building was valued at R4 000 000. The estimated useful life of the warehouse building was estimated to be 25 years and the residual value was estimated to be R1 000 000. On 31 December 2016 A Limited decided to revaluc land and buildings for the first time and the fair value of the land was R3 000 000 and the fair value of the warchouse building was R3 000 000.
Based on the information provided, A Limited is a company that sells office furniture and owns a warehouse property in Bellville.
However, due to the increasing sales and the need for more storage space, the company decided to move its furniture out of the Bellville property and lease it to an unrelated party under a non-cancellable operating lease.
The Bellville property was purchased by A Limited on January 1, 2013, for R6,000,000. The land portion of the property was valued at R2,000,000, and the building portion was valued at R4,000,000. The estimated useful life of the warehouse building was determined to be 25 years, with a residual value of R1,000,000.
On December 31, 2016, A Limited decided to revalue the land and buildings for the first time. The fair value of the land was determined to be R3,000,000, and the fair value of the warehouse building was also R3,000,000.
This information suggests that A Limited made a strategic decision to lease out the Bellville property to generate rental income while utilizing a larger property for its own furniture storage needs. The revaluation of the property in 2016 indicates a potential increase in its market value, which could positively impact the company's financial position.
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Case Study Two As the revenue manager of a 400 room Hotel Seascape, you are evaluating options for allocating 150 unsold guest rooms for the first week of July (you have already sold 250 rooms). • The sales department believes they can sell 120 rooms at $190.00 per room directly (i.e., through the hotel website). Under the hotel's franchise agreement, there is a 5% fee on revenue generated from direct sales. • The front office manager believes that 135 rooms may sell if listed on the CRS at 25% off the rack rate of $240.00. Fees for using the CRS are $8.00 per each room reserved. • An IDS is willing to pay the hotel $160.00 for the 140 rooms and charge you $6.00 per room reserved. Required 1) Given this information, to which channel would you allocate the 150 rooms and why? Your decision must be supported with appropriate calculations. 2) If the first week of July is a high season period, would this change your decision? Briefly explain why or why not.
Based on the calculations, allocating the 150 unsold guest rooms through the CRS listing at a 25% discount off the rack rate would generate the highest net revenue.
During high season, it is advisable to reassess the pricing strategy, as increasing prices for direct sales through the hotel website may make it a more lucrative option compared to the CRS listing.
1) To determine the channel to allocate the 150 unsold guest rooms, we need to compare the potential revenue generated from each option. Let's evaluate the three channels:
Option 1: Direct Sales through Hotel Website:
- Price per room: $190.00
- Number of rooms sold: 120
- Revenue generated: $190.00 * 120 = $22,800.00
- 5% fee on revenue: $22,800.00 * 0.05 = $1,140.00
- Net revenue: $22,800.00 - $1,140.00 = $21,660.00
Option 2: CRS Listing at 25% off Rack Rate:
- Rack rate per room: $240.00
- Discounted rate: $240.00 - (25% * $240.00) = $180.00
- Number of rooms sold: 135
- Revenue generated: $180.00 * 135 = $24,300.00
- CRS fees: $8.00 * 135 = $1,080.00
- Net revenue: $24,300.00 - $1,080.00 = $23,220.00
Option 3: IDS Purchase:
- Price offered per room: $160.00
- Number of rooms sold: 140
- Revenue generated: $160.00 * 140 = $22,400.00
- IDS fees: $6.00 * 140 = $840.00
- Net revenue: $22,400.00 - $840.00 = $21,560.00
Based on the calculations, the option that generates the highest net revenue is Option 2: CRS Listing at 25% off Rack Rate. This option yields a net revenue of $23,220.00, which is the highest among the three channels.
2) If the first week of July is a high season period, it may change the decision. During high season, demand is typically higher, and customers may be willing to pay higher prices. In such a scenario, it would be advisable to reassess the pricing strategy for direct sales through the hotel website. Increasing the price per room may allow for higher revenue and potentially make it a more lucrative option compared to the CRS listing. However, further analysis and market research would be necessary to determine the optimal pricing strategy during the high season and whether it would affect the decision to allocate rooms through the CRS or direct sales.
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If a company’s equity beta increases, which of the following are possible causes of the increase?
A. The company’s operating leverage has decreased
B. The company’s financial leverage has increased
C. The company’s net working capital has increased
D. All of the above
All of the above factors can potentially cause an increase in a company's equity beta.
The equity beta measures the sensitivity of a company's stock price to changes in the overall market. An increase in equity beta indicates that the stock's price is expected to move more in line with market movements.
A. The company's operating leverage has decreased:
Operating leverage refers to the extent to which a company uses fixed costs in its operations. If a company's operating leverage decreases, it means that it is relying less on fixed costs and more on variable costs. This change can lead to a decrease in the company's equity beta.
B. The company's financial leverage has increased:
Financial leverage refers to the use of debt to finance a company's operations. If a company increases its financial leverage by taking on more debt, it can increase the company's equity beta. This is because debt introduces additional financial risk, which can amplify the company's sensitivity to market movements.
C. The company's net working capital has increased:
Net working capital represents the difference between a company's current assets and current liabilities. If a company's net working capital increases, it means that it has more liquidity and a stronger financial position. This increase in financial stability can lead to a decrease in the company's equity beta.
Therefore, all of the above factors can potentially cause an increase in a company's equity beta.
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Colgate Total toothpaste is positioned as the brand that addresses all aspects of oral health. Such positioning is very important from a business point of view. How does positioning help in deciding on a marketing strategy? What are the differences between using "attribute or benefit" and "quality and price" as positioning strategy?
Positioning is a critical part of any marketing strategy because it defines the product's place in the market. Positioning is the technique of describing a product's features and benefits in relation to other products in the market. It's the act of communicating to consumers what sets a product apart from the competition.
Positioning is a strategic component of a product's marketing plan. It's essential to differentiate a product from its competitors. A brand's positioning may be based on features, benefits, or other value propositions. Positioning plays a vital role in deciding on a marketing strategy because it serves as a roadmap for product development and promotion. The goal of positioning is to establish a clear and attractive image of the brand that will appeal to the target audience. The positioning statement should be simple and concise and communicate the benefits of the brand to the customer.Colloidal Total toothpaste has positioned itself as the brand that addresses all aspects of oral health. This positioning strategy is vital from a business point of view because it provides a clear message to the consumer about the benefits of Colgate Total. The product's unique selling point is that it helps prevent not only cavities but also gum disease, bad breath, plaque, and tooth sensitivity. This gives the consumer a clear idea of the product's benefits, making it easier to promote and sell the product. The marketing strategy for Colgate Total can focus on educating consumers about the benefits of the product, such as gum health, plaque control, and cavity protection.Differences between using "attribute or benefit" and "quality and price" as positioning strategy:The two main positioning strategies are "attribute or benefit" and "quality and price." Attribute or benefit positioning focuses on the product's unique features and benefits. This type of positioning seeks to differentiate a product from its competitors by highlighting its distinct features. Quality and price positioning focuses on communicating the value of the product in relation to its price. It emphasizes the product's quality over its price or the affordability of the product over its competitors. The major differences between these two strategies are:
Attribute or benefit positioning:
It focuses on unique features and benefits.
It is used to differentiate a product from its competitors.
It communicates the product's unique value proposition.
It focuses on the benefits that the product offers to the consumer.
It emphasizes why the product is better than its competitors.
Quality and price positioning:
It focuses on value proposition.
It communicates the product's value in relation to its price.
It emphasizes the affordability of the product over its competitors.
It focuses on the quality of the product in relation to its price.
It emphasizes why the product offers a better value for the money.
Positioning plays an essential role in deciding on a marketing strategy because it helps to differentiate the product from its competitors. A brand's positioning may be based on features, benefits, or other value propositions. The two primary positioning strategies are attribute or benefit positioning and quality and price positioning. Attribute or benefit positioning focuses on the product's unique features and benefits, while quality and price positioning focuses on communicating the value of the product in relation to its price. It is essential to have a clear positioning statement that communicates the benefits of the brand to the customer.
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On April 1, Barry called Sam on the telephone and offered to purchase Sam’s house in Brooklyn for $300,000, with a down payment to be made by Barry of 10 percent of the purchase price. They also agreed to schedule the closing for May 1. Sam accepted the telephone offer immediately and the next day, received and deposited Barry’s down payment check for $30,000. On April 1, Barry also called Judy, who owns a retail furniture store in Queens, and ordered new furniture, for $1500, to be delivered to Barry’s new house and paid for on May 2. On April 25, Barry changed his mind about both of his decisions. He notified Sam and Judy that he did not intend to go through with either contract. In the following two lawsuits, Barry pleads the statute of frauds as his defense. In an action by Sam against Barry for breach of contract, judgment for whom? Explain fully. In an action by Judy against Barry for breach of contract, judgment for whom? Explain fully
In the case between Sam and Barry, the judgment would likely be in favor of Sam. This is because the statute of frauds, which requires certain contracts to be in writing to be enforceable, does not apply to the sale of real estate if there has been part performance, such as the acceptance of the down payment and the immediate acceptance of the offer by Sam. In the case between Judy and Barry, the judgment would likely be in favor of Judy. While the statute of frauds may apply to the purchase of furniture, there are exceptions when the goods have been specially manufactured for the buyer and are not suitable for sale to others. In this case, the furniture was ordered specifically for Barry's new house, and therefore, the statute of frauds defense may not be valid.
The statute of frauds is a legal doctrine that requires certain contracts to be in writing to be enforceable. It aims to prevent fraudulent or false claims by requiring written evidence of the agreement. However, there are exceptions to the statute of frauds, such as part performance and specially manufactured goods.
In the case between Sam and Barry, the acceptance of the down payment and the immediate acceptance of the offer by Sam constitute part performance. Part performance refers to actions taken by the parties that indicate their intention to fulfill the contract. As a result, the statute of frauds defense may not be valid, and Sam could seek judgment for breach of contract against Barry.
In the case between Judy and Barry, the purchase of furniture falls under the sale of goods, which is subject to the statute of frauds. However, an exception to the statute applies when the goods are specially manufactured for the buyer and are not suitable for sale to others.
Since Judy's furniture was ordered specifically for Barry's new house, it can be argued that the furniture is not suitable for sale to others, and therefore, the statute of frauds defense may not be valid. Judy could seek judgment for breach of contract against Barry.
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5. In supply chain coordination, a) please discuss the impact of offshoring and reshoring on the bullwhip effect. b) please explain how the buy-back contract coordinates the supply chain. That is, what is the main logic that guarantees supply chain coordination
The supplier is more likely to place orders with the manufacturer because they know that they can return the unsold goods. This reduces the supplier's risk of holding unsold inventory, and the manufacturer can better plan its production levels because it knows that the supplier will place orders for the products.
a) The offshoring and reshoring have an impact on the bullwhip effect in the supply chain. The bullwhip effect is a phenomenon that occurs when the demand for a product fluctuates significantly, causing the upstream supply chain to experience amplified swings in demand. When a company decides to move its production offshore, it might be difficult to manage the demand, especially when there is a difference in time zones, language, and cultural barriers between the production and the market. This increases the lead time, and if the demand fluctuates, the orders placed for the offshore product may not reflect the actual demand. This leads to higher inventory levels and bullwhip effect. When production is reshored, companies can better manage the demand for their products because they are closer to their market. This reduces the lead time, and the orders placed can better reflect the actual demand. This leads to lower inventory levels and reduces the bullwhip effect.b) A buy-back contract is an agreement between the manufacturer and the supplier that allows the supplier to return unsold goods to the manufacturer. This coordination mechanism guarantees supply chain coordination by providing a safety net for the supplier. The supplier is more likely to place orders with the manufacturer because they know that they can return the unsold goods. This reduces the supplier's risk of holding unsold inventory, and the manufacturer can better plan its production levels because it knows that the supplier will place orders for the products. This coordination mechanism ensures that the supplier is more responsive to the demand for the product and reduces the bullwhip effect.
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Question 9 9 pts CWB Inc.'s standard cost card for direct labor and variable manufacturing overhead are as follows: Standard Standard Price Direct Costs Quantity (unit: (unit:$ per hours) hour) Direct Labor 0.1 10 Manufacturing 0.1 7 Overhead Actual results were as follows: • The number of units sold and produced was 12000 units. The variable overhead cost was $5000 for 1000 hours. I Calculate the following variances. Use "U" to indicate "Unfavorable" and "F" to indicate "Favorable". For example, input "30000" for $3,000 unfavorable variance and "3000F" for $3,000 favorable variance. Do not use a thousand separator"," and do not leave space between the number and the letter U/F in your answer. Variable overhead rate variance. Variable overhead efficiency variance.
The variable overhead rate variance is $500 F and the variable overhead efficiency variance is $2000 U.
Variable overhead rate variance: Variable overhead rate variance indicates the effect of the difference between the actual and expected variable overhead rate per hour on the total variable overhead costs. The formula for variable overhead rate variance is as follows:
Variable overhead rate variance = (Actual variable overhead rate - Standard variable overhead rate) × Actual hours worked Variable overhead rate variance = ($5000 / 1000 hours - $0.1 / hour) × 1000 hours Variable overhead rate variance = $500 F Variable overhead efficiency variance:
Variable overhead efficiency variance shows the impact of the difference between the actual hours worked and the standard hours allowed on the total variable overhead costs.
The formula for variable overhead efficiency variance is as follows: Variable overhead efficiency variance = (Actual hours worked - Standard hours allowed) × Standard variable overhead rate .
Variable overhead efficiency variance = (1000 hours - 12000 hours × 7 hours per unit) × $0.1 per hourVariable overhead efficiency variance = $2000 U Therefore, the variable overhead rate variance is $500 F and the variable overhead efficiency variance is $2000 U.
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Consider the following data for Miami Inc. Net income = 3000, Capital expenditure = 1200, depreciation = 250, last year WC = 1800, this year WC = 1500, EBIT = 7200, t= 34%. The firm retired $500 debt and issued $800 new debt. Change in other assets is $80. Calculate the free cash flow to equity and to firm for this year. If growth in free cash flow to equity is expected to be 3%, firm has 1500 shares outstanding, and Ke=10%, calculate the target stock price.
The free cash flow to equity (FCFE) for this year is $902, the free cash flow to firm (FCFF) is $4,404, and the target stock price for Miami Inc. is approximately $13,328.57.
To calculate the free cash flow to equity (FCFE), we use the formula:
FCFE = Net Income - (Capital Expenditure - Depreciation) - (Change in Working Capital) - (Interest Expense * (1 - t)) + (New Debt - Retired Debt)
FCFE = $3000 - ($1200 - $250) - ($1500 - $1800) - ($7200 * 0.34) + ($800 - $500)
FCFE = $3000 - $950 - (-$300) - $2448 + $300
FCFE = $902
The free cash flow to firm (FCFF) can be calculated using the formula:
FCFF = EBIT * (1 - t) + Depreciation - (Capital Expenditure - Depreciation) - (Change in Working Capital) - (Interest Expense * (1 - t))
FCFF = $7200 * (1 - 0.34) + $250 - ($1200 - $250) - ($1500 - $1800) - ($7200 * 0.34)
FCFF = $4752 + $250 - $950 - (-$300) - $2448
FCFF = $4404
To calculate the target stock price, we can use the Gordon Growth Model:
Target Stock Price = FCFE * (1 + g) / (Ke - g)
Target Stock Price = $902 * (1 + 0.03) / (0.10 - 0.03)
Target Stock Price = $933 / 0.07
Target Stock Price ≈ $13,328.57
Therefore, the target stock price for Miami Inc. would be approximately $13,328.57.
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20. Referring to two contemporary leadership theories of your choice, critically assess the extent to which each supports the relevance of emotional intelligence for leadership effectiveness. 115 mark
Critical assessment of two contemporary leadership theories and their support for the relevance of emotional intelligence for leadership effectiveness.
1. Transformational Leadership Theory:
Transformational leadership theory emphasizes the leader's ability to inspire and motivate followers to achieve extraordinary outcomes. Emotional intelligence (EI) is highly relevant in this theory as it enables leaders to understand and manage their own emotions and those of others effectively. Transformational leaders with high EI can build strong relationships with their followers, create a positive and motivating work environment, and effectively communicate a compelling vision. By recognizing and empathizing with followers' emotions, transformational leaders can inspire trust, foster commitment, and enhance overall team performance.
2. Authentic Leadership Theory:
Authentic leadership theory focuses on leaders who are self-aware, genuine, and transparent. Emotional intelligence plays a crucial role in this theory as it enables leaders to develop and maintain authentic relationships with their followers. Leaders with high EI can express their emotions authentically, understand and respond to the emotions of others, and demonstrate empathy and understanding. This fosters trust, open communication, and positive organizational climates. Authentic leaders with high EI can create a culture that encourages authenticity, fosters employee well-being, and promotes ethical decision-making.
Both transformational and authentic leadership theories support the relevance of emotional intelligence for leadership effectiveness. Emotional intelligence helps leaders understand and manage their own emotions, effectively navigate social interactions, and respond to the emotions of others. This enhances communication, builds trust, and creates an environment conducive to high-performance and employee satisfaction. However, it is important to note that emotional intelligence is not the sole determinant of leadership effectiveness, and other factors such as cognitive abilities, experience, and contextual factors also contribute to leadership success.
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Other items
Tax rate 25%
Unlevered beta 0.70
Target debt/equity ratio 0.50
Bond rating BBB
Market risk premium 7.0%
Risk free rate 2.5%
Small firm premium 1.5%
Credit spread debt 2.0%
Long term growth 1.0%
Long term ROCB 8.0%
To estimate the beta of equity we can re-lever the unlevered beta with the Hamada formula. What is the re- levered beta of this company? Please round your calculation to one decimal place and use a period to indicate the decimal place (e.g. 2.1 instead of 2,1).
Re-levered Beta = 0.70 * [1 + (1 - 0.25) * (0.50)] .To calculate the re-levered beta of the company using the Hamada formula, we need to consider the unlevered beta, target debt/equity ratio, and the tax rate.
The formula for the re-levered beta is as follows:
Re-levered Beta = Unlevered Beta * [1 + (1 - Tax Rate) * (Debt/Equity Ratio)]
Given:
Unlevered Beta = 0.70
Target Debt/Equity Ratio = 0.50
Tax Rate = 25%
Let's calculate the re-levered beta:
Re-levered Beta = 0.70 * [1 + (1 - 0.25) * (0.50)]
Please perform the calculation to find the re-levered beta of the company, rounding to one decimal place.
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In an EOQ model, the EOQ is originally determined at 100 units. When the demand rate is doubled, the new EOQ should be adjusted to O 100÷2=50 10 × 2 = 200 100 x √√2 = 141 100 x 4 = 400
When the demand rate is doubled, the new EOQ should be adjusted to 100 x √√2 = 141. Therefore, the correct option is: 100 x √√2 = 141.
How to solve for the new EOQ ?The formula for calculating EOQ is: EOQ = √(2DS / H)
Where:
D = Demand
S = Ordering cost
H = Holding cost
When the demand rate is doubled, the demand variable (D) is multiplied by 2.
That means, we can rewrite the formula as: EOQ = √(2DS(2) / H).
Now, let's consider the original EOQ as 100 units.
That means we already know D, S and H. We just have to plug in these values and solve for EOQ as follows:
100 = √(2 x D x S / H)100² = 2 x D x S / HD² x H / 2S = D = 100 x H / 2S...equation 1.
Doubling the demand rate means we have a new-
D = 2 x 100 x H / 2S = 100 x H / S.
Plugging this value in the original formula:
EOQ = √(2DS(2) / H)
EOQ = √(2 x 100 x H / S x S x 2 / H)
EOQ = 100 x √√2 / 1
EOQ = 100 x √√2 / 1 = 100 x √2 / √2
= 100 x 1.41 = 141.
Therefore, the new EOQ should be adjusted to 141.
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Define bull market and bear market. Explain the following technical indicators and discuss their buy signal: (a) bond default spread (b) exponential moving average (c) stochastic.
A bull market is characterized by rising prices and positive sentiment, while a bear market has declining prices and negative sentiment; the buy signals for the bond default spread, exponential moving average, and stochastic are a narrowing spread, price crossing above the EMA, and stochastic crossing above the oversold level, respectively.
A bull market is a financial market characterized by rising prices and positive investor sentiment, typically accompanied by optimism and a belief that upward price trends will continue. It is associated with increasing buying activity and often represents a strong economy.
(a) Bond default spread: The bond default spread is the difference in yields between a government bond and a corporate bond. A widening bond default spread indicates increased credit risk and investor concerns about the potential for corporate bond defaults. A buy signal in this context would occur when the bond default spread narrows, signaling reduced credit risk and increased investor confidence in corporate bonds.
(b) Exponential moving average (EMA): The exponential moving average is a technical indicator that calculates the average price of a security over a specific period, giving more weight to recent prices. A buy signal occurs when the security's price crosses above its EMA, indicating a potential upward trend and suggesting it may be a good time to buy the security.
(c) Stochastic: Stochastic is a momentum indicator used to identify overbought and oversold conditions in a security. It compares the security's closing price to its price range over a specified period. A buy signal is generated when the stochastic oscillator crosses above the oversold level (typically below 20), indicating a potential upward reversal and suggesting a buying opportunity.
It's important to note that technical indicators provide insights into market trends and potential buy or sell signals, but they should be used in conjunction with other analysis tools and considerations to make informed investment decisions.
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the expected return on karol co. stock is 18.5 percent. if the risk-free rate is 5 percent and the beta of karol co is 2.4, then what is the risk premium on the market?
To calculate the risk premium on the market, we need to subtract the risk-free rate from the expected return on Karol Co. stock. The risk premium represents the additional return an investor expects to earn for taking on the additional risk associated with investing in the stock market.
Risk premium = Expected return - Risk-free rate
Given:
Expected return on Karol Co. stock = 18.5%
Risk-free rate = 5%
Risk premium = 18.5% - 5%
Risk premium = 13.5%
Therefore, the risk premium on the market is 13.5%.
This implies that investors expect to earn an additional 13.5% return by investing in the stock market compared to investing in risk-free assets such as government bonds or treasury bills. The risk premium reflects the compensation investors require for taking on the higher volatility and uncertainty associated with stock market investments.
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According with the EU regulation, how much is the minimum invested capital for an hedge fund?
A) 50,000€
B) 100,000€
C) 250,000€
D) 500,000€
According to EU regulations, the minimum invested capital required for a hedge fund is typically set at 500,000€. Therefore, the correct option is:
D) 500,000€
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Suppose the economy's real output grows at an average rate of 3 percent per year. And suppose there is a 7 percent average rate of growth in the money supply, and velocity is constant. How would the inflation rate be affected? a. The inflation rate would be -4 percent. b. The inflation rate would be 4 percent. c. The inflation rate would be 7 percent. d. The inflation rate would be 10 percent.
The inflation rate would be 4 percent.In economics, the relationship between the growth rate of the money supply and inflation is characterized by the equation:MV = PQ,where M is the supply of money, V is the velocity of money, P is the price level, and Q is the economy's real output.Suppose the economy's real output grows at an average rate of 3 percent per year. And suppose there is a 7 percent average rate of growth in the money supply, and velocity is constant.If velocity remains constant, the relationship between changes in the money supply and changes in nominal GDP is direct. A 7% increase in the money supply results in a 7% increase in nominal GDP if velocity is stable. This would cause the price level to rise by about 4%, given a 3% increase in real GDP. Therefore, the inflation rate would be 4 percent.Option b: The inflation rate would be 4 percent.
-In technical writing unabashed creative self expression is the
best way to persuasively satisfy your audience's needs.
- True or False
The statement "In technical writing, unabashed creative self-expression is the best way to persuasively satisfy your audience's needs" is false.
What is technical writing?
Technical writing is the process of simplifying complex information to make it easier for others to understand. The purpose of technical writing is to communicate complex information to a specific audience. It is commonly used to write technical reports, manuals, proposals, and other types of communication that include technical information.
Technical writing must be clear, concise, and easily understood by the intended audience.
What is the importance of technical writing?
The goal of technical writing is to provide technical information that is easily understood by the intended audience. In order to do this, technical writers use a variety of techniques to simplify complex information and make it more accessible. These techniques include using clear and concise language, breaking down complex ideas into smaller parts, and using visual aids such as diagrams and charts to illustrate complex concepts.
Technical writing is an important skill because it enables individuals to communicate complex information to a wide range of audiences. This is particularly important in fields such as engineering, science, and technology where complex information is often required to make informed decisions.
By mastering technical writing skills, individuals are better equipped to communicate their ideas and contribute to the development of new technologies and innovations.In conclusion, unabashed creative self-expression is not the best way to persuasively satisfy your audience's needs when it comes to technical writing. Technical writing should be clear, concise, and easily understood by the intended audience.
Technical writing involves the use of clear and simple language to communicate complex information, which can be challenging but ultimately rewarding.
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A firm has fixed operating costs of $13568, a sale price per unit of $35, a variable cost per unit of $16, and interest expense of $992. At a base sales level of 9709 units, the firm's degree of total leverage (DTL) is (2 marks)
The firm's degree of total leverage (DTL) is 1.90.
The degree of total leverage (DTL) measures the sensitivity of a firm's net income to changes in sales. It is calculated by dividing the percentage change in net income by the percentage change in sales. In this case, we can calculate DTL using the formula:
DTL = (Percentage change in net income) / (Percentage change in sales)
Given the fixed operating costs, sale price per unit, variable cost per unit, and interest expense, we can calculate the firm's net income at the base sales level of 9709 units. Then, we can calculate the net income at a different sales level (e.g., if sales increase or decrease by a certain percentage) and calculate the percentage change in net income. Similarly, we can calculate the percentage change in sales. Dividing the percentage change in net income by the percentage change in sales gives us the firm's DTL.
Keywords: firm, operating costs, sale price, variable cost, interest expense, degree of total leverage (DTL).
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.What is the effect of a second round of financing on the ownership percentages of the founders and the initial first-round investors?
How and why does the first-round investors' ownership percentage change between rounds 1 and 2?
How and why does the founder's ownership percentage change between rounds 1 and 2?
**The effect of a second round of financing on the ownership percentages of the founders and initial first-round investors is as follows:**
1. **First-Round Investors**: The ownership percentage of initial first-round investors typically decreases in the second round of financing. This reduction in ownership percentage occurs because new investors are introduced, diluting the existing ownership. The extent of dilution depends on the size of the investment, valuation of the company, and the terms negotiated during the second round.
2. **Founders**: The founder's ownership percentage can also decrease in the second round of financing. Similar to first-round investors, the introduction of new investors dilutes the founder's ownership. However, founders often have a different class of shares or preferential rights that may offer some protection against dilution. The impact on founder ownership depends on their ability to negotiate favorable terms and their willingness to accept dilution to secure additional capital for the company's growth.
The change in ownership percentages between rounds 1 and 2 is primarily driven by the infusion of new capital from second-round investors. As the company seeks additional funding, it often issues new shares to these investors, resulting in dilution of existing shareholders' ownership percentages.
The dilution occurs because the total number of shares increases, but the ownership stakes of existing shareholders remain the same. The percentage decrease in ownership depends on the size of the new investment relative to the company's valuation. Founders and first-round investors may choose to participate in the second round to maintain their ownership percentage or accept dilution to secure additional funds for the company's expansion.
In summary, a second round of financing generally leads to a decrease in ownership percentages for both founders and initial first-round investors due to the introduction of new investors and the issuance of additional shares. The specific changes in ownership depend on the terms negotiated and the decisions made by the parties involved.
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Sun Instruments expects to issue new stock at $40 a share with estimated flotation costs of 8 percent of the market price. The company currently pays a $1.90 cash dividend and has a 7 percent growth rate. What are the costs of retained earnings and new common stock? Round your answers to two decimal places.
Costs of retained earnings: %
Cost of new common stock: %
the cost of new common stock is 36.00%.Hence, the costs of retained earnings and new common stock are 29.00% and 36.00%, respectively.
Costs of Retained Earnings and New Common Stock: Retained earnings refer to a company's net income that is kept in reserve rather than being distributed as a dividend. On the other hand, the cost of new common stock is the total cost of the shares issued by the company.Here, Sun Instruments expects to issue new stock at $40 a share with estimated flotation costs of 8% of the market price. The company currently pays a $1.90 cash dividend and has a 7% growth rate.Instruments Costs:Cost of Retained Earnings:The cost of retained earnings is equivalent to the required rate of return for the company's shareholders. The Gordon Growth Model formula is used to estimate the cost of retained earnings:Kre = D1 / (P0 - F) + gWhere,Kre is the cost of retained earningsD1 is the expected dividendP0 is the current market price of the stockF is the flotation cost of new sharesg is the growth rateSubstituting the given values,
Kre = 1.9(1 + 0.07) / ($40 - ($40 * 0.08)) + 0.07Kre = 10.65 / $36.80Kre = 0.29 = 29.00%
(rounded off to two decimal places)Hence, the cost of retained earnings is 29.00%.Cost of New Common Stock:The cost of new common stock can be calculated using the following formula:
Kn = (D1 / (P0 - F)) + gKn = (1.9(1 + 0.07) / ($40 - ($40 * 0.08))) + 0.07Kn = 10.65 / $36.80Kn = 0.29 + 0.07Kn = 0.36 = 36.00% (rounded off to two decimal places)
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Case study ( Competitors and strategy of Shopee in Vietnam)
Shopee maintains its competitive edge by focusing on user experience, offering competitive prices, providing a wide range of products, and leveraging social media and influencer marketing.
In Vietnam's competitive e-commerce market, Shopee faces strong competition from other major players like Lazada and Tiki. To differentiate itself and attract customers, Shopee adopts several strategies. Firstly, it prioritizes user experience by providing a user-friendly platform, seamless payment options, and efficient delivery services. Secondly, Shopee offers competitive prices and frequently runs promotions and discounts to entice customers. Thirdly, the platform emphasizes a wide range of products, including fashion, electronics, and groceries, to cater to diverse customer preferences.
Moreover, Shopee leverages social media and influencer marketing to engage with its target audience. It actively collaborates with popular influencers and utilizes social media platforms to promote its products and engage with customers. Additionally, Shopee organizes events like Shopee Mall and Shopee Super Sale to drive customer traffic and boost sales.
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The best personality predictor of overall job performance is:
Extraversion
Agreeableness
Emotional stability
Conscientiousness
Conscientiousness is considered the best personality predictor of overall job performance.
The correct option is Conscientiousness.
Among the listed personality traits, conscientiousness has been consistently identified as the best predictor of overall job performance. Conscientious individuals are typically organized, dependable, responsible, and focused on achieving goals. Their conscientious nature drives them to work diligently, pay attention to details, and follow through on commitments, which positively impacts their job performance.
Conscientiousness is linked to several desirable work-related behaviors, such as being punctual, thorough, and reliable. It is associated with higher job satisfaction, better task performance, and greater likelihood of meeting deadlines. Conscientious individuals tend to exhibit a strong work ethic, take initiative, and demonstrate a sense of responsibility towards their work.
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You are working for an investment bank’s shipping division in charge of credit assessment of clients. You are given two projects to look at and evaluate their credit risk.
1- The first project involves a 3 year loan for the purchase of a 5 year old MR tanker whose current market value is $30m.
2- The second project involves a 3 year loan for the purchase of a 10 year old Suezmax tanker whose current market value is $42m.
Both projects are set to operate on a one-ship-one-company basis and the companies would like to borrow as much as possible to the full price of the vessel. However, your bank has a strict policy of taking the vessel as collateral and only approving loans with a maximum default probability of 15%, in order to reduce its credit risk exposure. It is also known that both borrowers have good business and credit history; therefore, according to the assigned credit rating of borrowers, default may occur if value of the asset falls 5% below the amount borrowed.
--> Assuming that the volatility of the second price for 5-year old MR tanker is 25%, the volatility of the second price for 10-year old Suezmax tanker is 30%, the risk free rate is 3%, determine the maximum amount of funds that you are permitted to provide to each shipping company for the purchase of these vessels
The maximum amount of funds that can be provided to the shipping company for the purchase of the 5-year old MR tanker is $25.8 million, and for the 10-year old Suezmax tanker is $34.44 million, while maintaining a maximum default probability of 15% based on loan-to-value ratios and market values.
To determine the maximum amount of funds that can be provided to each shipping company while maintaining a maximum default probability of 15%, we need to calculate the loan-to-value (LTV) ratio for each project. The LTV ratio represents the loan amount as a percentage of the vessel's market value.
For the 5-year old MR tanker:
Volatility (σ) = 25%
Risk-free rate (r) = 3%
Default probability (Pd) = 15%
Loan-to-Value ratio (LTV) = 1 - Pd / (1 + r - σ²/2)
LTV = 1 - 0.15 / (1 + 0.03 - 0.25²/2)
LTV = 0.86
Maximum loan amount = LTV * Market value
Maximum loan amount = 0.86 * $30m
Maximum loan amount = $25.8m
For the 10-year old Suezmax tanker:
Volatility (σ) = 30%
Risk-free rate (r) = 3%
Default probability (Pd) = 15%
Loan-to-Value ratio (LTV) = 1 - Pd / (1 + r - σ²/2)
LTV = 1 - 0.15 / (1 + 0.03 - 0.30²/2)
LTV = 0.82
Maximum loan amount = LTV * Market value
Maximum loan amount = 0.82 * $42m
Maximum loan amount = $34.44m
Therefore, the maximum amount of funds that can be provided to the shipping company for the purchase of the 5-year old MR tanker is $25.8 million, and for the 10-year old Suezmax tanker is $34.44 million.
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Bond Discount, Entries for Bonds Payable Transactions On July 1, Year 1, Livingston Corporation, a wholesaler of manufacturing equipment, issued $1,800,000 of 8-year, 11% bonds at a market (effective) interest rate of 12%, receiving cash of $1,709,047. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.
To record the bond issuance transaction on July 1, Year 1, we need to calculate the bond discount first. The bond discount is the difference between the face value of the bonds and the cash received when the market interest rate is higher than the stated interest rate.
Step 1: Calculate the bond discount:
Face value of the bonds = $1,800,000
Cash received = $1,709,047
Bond discount = Face value of the bonds - Cash received
Bond discount = $1,800,000 - $1,709,047
Bond discount = $90,953
Step 2: Record the bond issuance transaction:
Date: July 1, Year 1
Record the cash received:
Cash $1,709,047
Bonds Payable $1,709,047
Record the bond discount:
Bonds Payable $90,953
Discount on Bonds Payable $90,953
The entry above records the cash received from the bond issuance and the bond discount as liabilities on the balance sheet. The bond discount will be amortized over the life of the bonds and recorded as an interest expense.
Let me know if you need further assistance with the subsequent interest payment transactions or any other related entries.
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