Answer:
A. $1,510,000
B. -$10,000
Explanation:
a. Calculation to determine Bowen’s Accounting profits
Using this formula
Accounting profits = Total revenue - Explicit cost
Let plug in the formula
Accounting profit = $10 million - $8 million - $40,000 - $400,000 - $50,000
Accounting profit= $1,510,000
Therefore Bowen’s Accounting profits is $1,510,000
b. Calculation to determine Bowen’s Economic profit
Using this formula
Economic profits = Accounting profit - Implicit cost
Let plug in the formula
Economic profits = $1,510,000 - [($11,000,000*0.1) + $30,000 + ($60,000 - $40,000)]
Economic profits =$1,510,000 - [$1,100,000+ $30,000 + $60,000 - $40,000)]
Economic profits =$1,510,000-$1,150,000
Economic profits =-$10,000
Therefore Bowen’s Economic profit is -$10,000
Red Co. recorded a right-of-use asset of $140,000 in a 10-year finance lease. Payments of $22,784 are made annually at the end of each year. The interest rate charged by the lessor and known by Red was 10%. The balance in the lease payable after two years will be: (Round your final answer to the nearest whole dollar.)
Answer: $121554
Explanation:
Lease liability = $140,000
Less: Lease liability in 1st year= $8784
Lease payable after one year = $131216
Less: Lease liability in 2nd year = $9662.40
Lease payable after 2nd year = $121553.60 = $121554
Note:
Lease liability in 1st year:
= $22,784 - (10% × $140000)
= $22784 - $14000
= $8784
Lease liability in 2nd year:
= $22784 - (10% × $131216)
= $22784 - $13121.60
= $9662.40
Security training involves: Providing some members of the organization information about protecting data, but not all to reduce costs. Establishing CBT, computer based training, but never face-to-face training. Providing members of the organization with detailed information and instructions to prepare them to perform their specific duties securely. Expecting employees to research good security practices on their own
Answer: Providing members of the organization with detailed information and instructions to prepare them to perform their specific duties securely
Explanation:
Protection of data in organizations is important as it helps in the safeguarding of vital data from third parties and prevention of fraud.
Therefore, in order to tackle security issues in an organization, it is essential to provide all the members of the organization with detailed information and instructions about how they can perform their specific duties securely.
This can be done through establishing face to face training, computer based training, and every other forms of training in order to secure data.
Renee paid $4,000 in mortgage interest on a $110,000 mortgage that was taken out when she bought her home several years ago. She also has a home equity loan of $130,000 that she used to pay for a cruise around the world. The interest on the home equity loan was $8,000. What amount is deductible as interest expense for Renee in 2021
Answer:
The amount that is deductible as interest expense for Renee in 2021 is:
= $4,000.
Explanation:
a) Data:
Home mortgage - $110,000
Interest on home mortgage = $4,000
Home equity loan for a cruise around the world = $130,000
Interest on the home equity loan = $8,000
Deductible interest expense for Renee in 2021 is $4,000
b) Usually, the interest expenses that a taxpayer pays on her home equity loan to enjoy a cruise around the world, on personal credit card, on automobile loan, and on other types of personal consumer finance interests are not tax-deductible.
FedEx Corporation (FDX) had the following revenue and expense account balances (in millions) for a recent year ending May 31:
Depreciation Expense $985
Fuel Expense 3,438
Maintenance and Repairs Expense 1,675
Other Expense (Income) Net 5,319
Provision for Income Taxes 857
Purchased Transportation 1,281
Rentals and Landing Fees 1,862
Revenues 26,300
Salaries and Employee Benefits 9,387
Prepare an income statement.
Answer and Explanation:
The preparation of the income statement is presented below:
Revenue $26,300
Expenses:
Depreciation expense $985
Fuel expense $3,438
Maintenance and repairs expense $1,675
Other expense(income) net $5,319
Provision for Income taxes $857
Purchased Transportation $1,281
Rentals and Landing fees $1,862
Salaries and Employee benefits $9,387
Net income $1,496
Holtzman Clothiers's stock currently sells for $38 a share. It just paid a dividend of $1.5 a share (i.e., D0 = $1.5). The dividend is expected to grow at a constant rate of 4% a year.
Required:
a. What stock price is expected 1 year from now?
b. What is the required rate of return?
Answer:
b 6.87%
a 56.53
Explanation:
according to the constant dividend growth model
price = d1 / (r - g)
d1 = next dividend to be paid
r = cost of equity
g = growth rate
38 = (1.5 x 1.04) / (r - 0.04)
38 (r - 0.04) = 1.092
r - 0,04 = 0.0287
r = 6.87%
1.5 x (1.04^2) / 6.87 - 4 = 56.53
Early colonists came to America:_________.
a. for a wide range of economic and political agendas as well as for religious and philosophical reasons.
b. to set up a democratic political system.
c. to avoid the widespread poverty and economic depression that was sweeping Europe.
d. solely to obtain land. solely to escape religious persecution.
Answer: a. for a wide range of economic and political agendas as well as for religious and philosophical reasons.
Explanation:
There were various reasons the early colonists came to Northern America to found the colonies such as for economic and political reasons and others for religious reasons.
William Bradford for instance, helped found the Plymouth Colony as a haven for Puritan separatists like himself to escape persecution in England. John Smith on the other hand, came more for economic reasons.
Then there was James Oglethorpe of Georgia who wanted to found a home for the "worthy poor" of England so that they would have a chance to make something of themselves.
Highsmith Rental Company purchased an apartment building early in 2021. There are 20 apartments in the building and each is furnished with major kitchen appliances. The company has decided to use the group depreciation method for the appliances. The following data are available:
Appliance Cost Residual Value Service Life (in Years)
Stoves $15,000 $3,000 6
Refrigerators 10,000 1,000 5
Dishwashers 8,000 500 4
In 2019, three new refrigerators costing $2,700 were purchased for cash. The old refrigerators, which originally cost $1,500, were sold for $200.
Requried:
a. Calculate the group depreciation rate, group life, and depreciation for 2016.
b. Prepare the journal entries to record the purchase of the new refrigerators and the sale of the old refrigerators.
Answer:
A. Group depreciation rate 17.197%
Group life 5.02 years
Depreciation for 2016 $5,675
B. 2019
Dr Stove, refrigerator and dishwasher $2,700
Cr Cash $2,700
2019
Dr Accumulated Depreciation $1,300
Dr Cash $200
Cr Stove, refrigerator and dishwasher $1,500
Explanation:
A. Calculation to determine the group depreciation rate, group life, and depreciation for 2016.
First step is the Computation of Group depreciation rate, group life and depreciation for 2016
Assets Original Residual Depreciation Estimated Depreciation
Cost Value Cost Life-Years per year-SLM
Stoves $15,000-$3,000= $12,000 6 $2,000 ($12,000/6=$2,000)
Refrigerators $10,000-$1,000=$9,000 5 $1,800 ($9,000/5=$1,800)
Dishwashers $8,000-$500=$7,500 4 $1,875
($7,500/4=$1,875)
Total $33,000 $4,500 $28,500 $5,675
Now let determine the group depreciation rate, group life, and depreciation for 2016.
Calculation for group depreciation rate using this formula
Group Depreciation Rate = Total depreciation per year ÷ Total original cost
Let plug in the formula
Group depreciation rate = $5,675 ÷ $33,000*100
Group depreciation rate= 17.197%
Calculation for Group life using this formula
Group life = Total depreciation cost ÷ Total depreciation per year
Let plug in the formula
Group life = $28,500 ÷ $5,675
Group life = 5.02 years
Calculation for Depreciation for 2016 using this formula
Depreciation for 2016= Original Cost × Group Depreciation Rate
Let plug in the formula
Depreciation for 2016 = $33,000 × 0.17197
Depreciation for 2016= $5,675
Therefore the group depreciation rate is 17.197%, group life is 5.02 years, and depreciation for 2016 is $5,675
B. Preparation of the journal entries to record the purchase of the new refrigerators and the sale of the old refrigerators.
2019
Dr Stove, refrigerator and dishwasher $2,700
Cr Cash $2,700
(To record purchase of new refrigerator)
2019
Dr Accumulated Depreciation $1,300
($1,500-$200)
Dr Cash $200
Cr Stove, refrigerator and dishwasher $1,500
(To record sale of old refrigerator)
Break-Even Point
Nicolas Inc. sells a product for $59 per unit. The variable cost is $30 per unit, while fixed costs are $171,564.
Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $64
per unit.
a. Break-even point in sales units
units
b. Break-even point if the selling price were increased to $64 per unit
units
Answer:
The right answer is:
(a) 5916 units
(b) 5046 units
Explanation:
Given:
Sales,
= $59
Variable cost,
= $30
Fixed cost,
= $171,564
Increased sale,
= $64
Now,
(a)
Contribution margin will be:
= [tex]Sales - Variable \ cost[/tex]
= [tex]59-30[/tex]
= [tex]29 \ per \ unit[/tex] ($)
hence,
Breakeven will be:
= [tex]\frac{Fixed \ cost}{Contribution \ margin}[/tex]
= [tex]\frac{171564}{29}[/tex]
= [tex]5916 \ units[/tex]
(b)
Contribution margin will be:
= [tex]Sales-Variable \ cost[/tex]
= [tex]64-30[/tex]
= [tex]34 \ per \ unit[/tex] ($)
hence,
Breakeven will be:
= [tex]\frac{Fixed \ cost}{Contribution \ margin}[/tex]
= [tex]\frac{171564}{34}[/tex]
= [tex]5046 \ units[/tex]
Fort Thomas Living is a small publishing company located in the Northern Kentucky. Recently, Fort Thomas Living has contracted with several different local writers to publish various magazines and short-story books. Once such transaction involves an exchange of $10,200. Another transaction involves an exchange of $9,600? Are both of these exchanges of money subject to the disclosure requirements of the Money Laundering Control Act?
Answer: No
Explanation:
The Money Laundering Control Act of 1986 which was passed to curb the effects of large scale money laundering at the federal level, only requires that transactions above $10,000 be disclosed.
There is a transaction here that is only to the tune of $9,600 so this will not be disclosed as it is less than the $10,000 threshold. The other transaction of $10,200 will however, be disclosed.
Say that investment increases by $60 for each interest rate drop of 1 percent. Say also that the expenditures multiplier is 4. If the money multiplier is 5, and each 5-unit change in the money supply changes the interest rate by 1 percent, what open market policy would you recommend to increase income by $240
Borques Company produces and sells wooden pallets that are used for moving and stacking materials. The operating costs for the past year were as follows:
Variable costs per unit:
Direct materials $2.85
Direct labor $1.92
Variable overhead $1.60
Variable selling $0.90
Fixed costs per year:
Fixed overhead $180,000
Selling and administrative $96,000
During the year, Borques produced 200,000 wooden pallets and sold 204,300 at $9 each. Borques had 8,200 pallets in beginning finished goods inventory; costs have not changed from last year to this year. An actual costing system is used for product costing.
Required:
a. What is the per-unit inventory cost that is acceptable for reporting on Borques’s balance sheet at the end of the year?
b. How many units are in ending inventory?
c. Calculate absorption-costing operating income.
Answer:
Borques Company
a. Unit inventory cost = $7.27
b. Ending inventory = 3,900 units
c. Absorption-costing operating income = $73,569
Explanation:
a) Data and Calculations:
Variable costs per unit:
Direct materials $2.85
Direct labor $1.92
Variable overhead $1.60 $6.37
Variable selling $0.90 $7.27
Fixed costs per year:
Fixed overhead $180,000
Selling and administrative $96,000 $276,000
Selling price per unit = $9
Acceptable per-unit inventory cost:
Variable product cost per unit = $6.37
Total variable production cost = $1,274,000
Fixed production cost = 180,000
Total production cost = $1,453,000
Unit inventory cost = $7.27 ($1,453,000/200,000)
b. Ending inventory
Beginning inventory 8,200
Production units = 200,000
Units available 208,200
Sales units = 204,300
Ending inventory 3,900
c. Absorption Costing Operating Income:
Sales Revenue $1,838,700 ($9 * 204,300)
Cost of goods sold 1,485,261 ($7.27 * 204,300)
Gross profit $353,439
Selling expenses:
Variable ($0.90 * 204,300) 183,870
Fixed 96,000
Total selling expenses $279,870
Operating income $73,569
On March 15, 2017, Gilbert Construction contracted to build a shopping center at a contract price of $220 million. The schedule of expected (which equals actual) cash collections and contract costs follows:
Year Cash Collections Cost Incurred
2017 55 million $36 million
2018 88 million 81 million
2019 77 million 63 million
Total $220 million $180 million
Required:
a. Calculate the amount of revenue, expense, and net income for each of the three years 2017 through 2019, and for all three years combined, using the cost-to-cost revenue recognition method.
b. Discuss whether or not the cost-to-cost method provides a good measure of this construction com- pany's performance under the contract.
Answer:
a. 2017 2018 2019
Expenses incurred for the year A 36 million 81 million 63 million
Estimated total cost B 180 million 180 million 180 million
% Completion (A/B) C 20% 45% 35%
Revenue recognized for the D 44 million 99 million 77 million
period (220 million * C)
Gross profit (D-A) $8 million $18 million $14 million
b. Yes, the cost-to-cost method provides a good measure of this construction company's performance under the contract.
Assume that the CAPM is a good description of stock price returns. The market expected return is 8% with 12% volatility and the risk-free rate is 3%. New news arrives that does not change any of these numbers, but it does change the expected returns of the following stocks:
Stock Expected Return Volatility Beta
Taggart Transcontinental 8% 28% 1.2
Rearden Metal 13% 40% 1.7
Wyatt Oil 7% 20% 0.8
Nielson Motors 10% 32% 1.3
The expected alpha for Taggart Transcontinental is closest to:_______
A) -3%
B) -1%
C) 1%
D) 3%
E) 0%
Answer:
b. -1%
Explanation:
Expected Alpha = E[rs] - [rf+ B(rm- rf)]. Where rf+ B(rm- rf) is the CAPM return, rf= risk free return, B = Beta of security, rm= return of market, E[rs]= Expected return of security
Expected Alpha = 8% - [3%+1.2*(8%-3%)
Expected Alpha = 8% - 9%
Expected Alpha = -1%
So, the expected alpha for Taggart Transcontinental is closest to -1%.
Jiminy’s Cricket Farm issued a bond with 25 years to maturity and a semiannual coupon rate of 4 percent 3 years ago. The bond currently sells for 108 percent of its face value. The company’s tax rate is 22 percent.
Answer:
Pretax cost of debt = 3.48%
Aftertax cost of debt = 2.71%
Explanation:
Missing word "What is the pretax cost of debt and aftertax cost of debt"
Coupon rate = 4%
YTM = 22
Nper = YTM*2 = 44
PMT = 1000*4%/2 = 20
FV = 1000
PV = 1080
Rate = rate(nper, pmt, -pv, fv)
Rate = rate(44, 20, -1080, 1000)
Rate = 0.0174
Rate = 1.74%
Pretax cost of debt = Rate * 2
Pretax cost of debt = 1.74% * 2
Pretax cost of debt = 3.48%
Aftertax cost of debt = [3.48% * (1 - 0.22)]
Aftertax cost of debt = 3.48% * 0.78
Aftertax cost of debt = 0.0348 * 0.78
Aftertax cost of debt = 0.027144
Aftertax cost of debt = 2.71%
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $160,000, and it would cost another $40,000 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $80,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $7,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $52,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%.
Required:
a. What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow?
b. What are the project's annual cash flows in Years 1, 2, and 3?
Answer:
a.
$207,000
b.
Year 1: $57,600
Year 2: $67,200
Year 3: $30,000
Explanation:
a.
Calculate the initial outlay of the project at year 0 as follow
Initial Outlay = Base Price + Modification cost + Working Capital requirement
Initial Outlay = $160,000 + $40,000 + $7,000
Initial Outlay = $207,000
b.
The working for the calculation of the cash flow is attached with this answer, please refer to the attached file.
Several years ago, Castles in the Sand Inc. issued bonds at face value of $1,000 at a yield to maturity of 8%. Now, with 7 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 12%. What is the price of the bond now
Answer:
$814.10
Explanation:
Calculation to determine what the price of the bond now
Using this formula
Bond price = PV of coupon payments + PV of face value
Bond price= C×((1 / r) – {1 / [r(1 + r)t]}) + FV / (1 + r)t
Let plug in the formula
Bond price= [(.080 ×$1,000) / 2] ×[[1 / (.12 / 2)] – (1 / {(.12 / 2)[1 + (.12 / 2)](7 ×2)})] + $1,000 / [1 + (.12 / 2)](7 ×2)
Bond price= $814.10
Therefore the price of the bond now is $814.10
From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is that Group of answer choices bond interest is deductible for tax purposes. interest must be paid on a periodic basis regardless of earnings. income to stockholders may increase as a result of trading on the equity. the bondholders do not have voting rights.
Answer:
interest must be paid on a periodic basis regardless of earnings.
Explanation:
A bond can be defined as a debt or fixed investment security, in which a bondholder (investor or creditor) loans an amount of money to the bond issuer (government or corporations) for a specific period of time. The bond issuer are expected to return the principal (face value) at maturity with an agreed upon interest (coupon), which are paid at fixed intervals.
The disadvantages of bonds are listed below as;
1. Bonds can decrease a person's return on equity.
2. Bonds require a payment of the principal amount.
3. Bonds typically require a payment of periodic interest.
Generally, most bonds with shorter maturity time respond less dramatically to changes in interest rates when compared to bonds having longer maturity. Thus, the risk associated with short bonds isn't really significant because their interest rates are less likely to change substantially within that short period of time unlike bonds with longer maturity.
Hence, regardless of the earnings by bondholders, interest must be paid on a periodic basis on a long-term bond.
This tutorial comprises of two sections. Answer all the questions.
Section A
1. Marketing Sciences Ltd specialize in carrying out product trials for the companies such as Tesco, GlaxoSmithKline and Vodafone.
a) Business carries out product trials on new products in order to
A) Guarantee sales levels
B) Assess levels of demand
C) Achieve economy of sales
D) Collect secondary research
Answer:
b) Explain why this answer correct?
Answer:
a)
D) Collect secondary research
b) By testing products, a company can collect more information for statistics and parts of each product.
Vandelay Industries stock has a 50% chance of producing a 20% return, a 30% chance of producing a 8% return, and a 20% chance of producing a -21% return. What is Vandelay expected rate of return?
Answer:
8.2%
Explanation:
Calculation to determine the expected rate of return
Expected rate of return= (.50 (.20)) +(.30(.08)) + (.20*(-.21)
Expected rate of return=0.1+0.024+(0.042)
Expected rate of return=.082*100
Expected rate of return=8.2%
Therefore the expected rate of return is 8.2%
The trial balance for Lindor Corporation, a manufacturing company, for the year ended December 31, 2016, included the following income accounts: Account Title Debits Credits Sales revenue 2,720,000 Cost of goods sold 1,600,000 Selling and administrative expenses 440,000 Interest expense 60,000 Unrealized holding gains on investment securities 100,000 The trial balance does not include the accrual for income taxes. Lindor's income tax rate is 30%. 2 million shares of common stock were outstanding throughout 2016. Required: Prepare a single, continuous multiple-step statement of comprehensive income for 2016, including appropriate EPS disclosures. (Round EPS answers to 2 decimal places.)
Answer and Explanation:
The preparation of the single, continuous multiple-step statement of comprehensive income for 2016 is presented below;
Sales revenue $2,720,000
Less; cost of goods sodl $1,600,000
Gross profit $1,120,000
Less:
Operating expense
Selling and administrative expenses -$440,000
Operating income $680,000
Less: interest expense -$60,000
Income before income tax $620,000
Less: income tax expense (25% of $620,000) -$155,000
Net income $465,000
Other comphrensive income
Gain on debt securities (75% of $100,000) $75,000
Comphrensive income $540,000
Earning per share ($465,000 ÷ 2,000,000 shares) $0.23
The city of williamsburg decided to defease old 6% bonds carried in its electric enterprise fund with new 4.5% bonds. As a result of the defeasance, the city incurred an accounting loss. This loss should be recognized:_______
a. As an adjustment to retained earnings since it is applicable to prior periods.
b. In the year of the defeasance.
c. Over the remaining life of the old bonds or the new bonds whichever is shorter
d. It should not be recognized
Answer: It should not be recognized
Explanation:
Based on the information given, it should be noted that the accounting loss that was incurred as a result of the defeasance should not be recognized.
Since the city of Williamsburg decided to defease old 6% bonds carried in its electric enterprise fund with new 4.5% bonds, then it should be noted that it was only the interest rate that changed, but there wasn't any bonds that were sold. Therefore, the loss should not be recognized.
The Murdock Corporation reported the following balance sheet data for 2021 and 2020:
2021 2020
Cash $97,355 $33,755
Available-for-sale debt securities (not cash equivalents) 24,500 103,000
Accounts receivable 98,000 84,450
Inventory 183,000 161,200
Prepaid insurance 3,120 3,800
Land, buildings, and equipment 1,286,000 1,143,000
Accumulated depreciation (628,000) (590,000)
Total assets $1,063,975 $939,205
Accounts payable $92,540 $166,670
Salaries payable 27,200 33,500
Notes payable (current) 41,200 93,000
Bonds payable 218,000 0
Common stock 300,000 300,000
Retained earnings 385,035 346,035
Total liabilities and shareholders' equity $1,063,975 $939,205
Additional information for 2021:
(1) Sold available-for-sale debt securities costing $78,500 for $84,800.
(2) Equipment costing $20,000 with a book value of $6,800 was sold for $8,700.
(3) Issued 6% bonds payable at face value, $218,000.
(4) Purchased new equipment for $163,000 cash.
(5) Paid cash dividends of $29,000.
(6) Net income was $68,000.
Required:
Prepare a statement of cash flows for 2016 in good form using the indirect method for cash flows from operating activities.
Answer:
The Murdock Corporation
Statement of Cash Flows
For the year ended December 31, 2016
Operating Activities:
Net income $68,000
Less:
Gain from sale of available-for-sale 6,300
Gain from sale of equipment 1,900
Operating cash $59,800
Working capital changes:
Accounts receivable -13,550
Inventory -21,800
Prepaid insurance 680
Accounts payable -$74,130
Salaries payable -6,300
Notes payable (current) -51,800
Net operating cash flows ($107,100)
Investing Activities:
Sale of Available-for-sale securities $84,800
Sale of Equipment 8,700
Purchase of new equipment -163,000
Net investing cash flows ($69,500)
Financing Activities:
Issue of 6% bonds payable $218,000
Payment of cash dividends -29,000
Net financing cash flows $189,000
Net cash flows $12,400
Explanation:
a) Data and Calculations:
2021 2020 Change
Cash $97,355 $33,755 +$63,600
Available-for-sale debt securities
(not cash equivalents) 24,500 103,000 -78,500
Accounts receivable 98,000 84,450 +13,550
Inventory 183,000 161,200 +21,800
Prepaid insurance 3,120 3,800 -680
Land, buildings, and equipment 1,286,000 1,143,000 +143,000
Accumulated depreciation (628,000) (590,000)
Total assets $1,063,975 $939,205
Accounts payable $92,540 $166,670 -$74,130
Salaries payable 27,200 33,500 -6,300
Notes payable (current) 41,200 93,000 -51,800
Bonds payable 218,000 0 +218,000
Common stock 300,000 300,000 0
Retained earnings 385,035 346,035
Total liabilities and
shareholders' equity $1,063,975 $939,205
Additional Data:
1. Sale of Available-for-sale securities $84,800
Gain from sale of available-for-sale $6,300
2. Sale of Equipment $8,700
Gain from sale of equipment $1,900
3. Issue of 6% bonds payable $218,000
4. Purchase of new equipment $163,000
5. Payment of cash dividends $29,000
6. Net income $68,000
What is the difference between nominal price and real price?
Answer:
The nominal price of a good is its value in terms of money, such as dollars, French francs, or yen. The relative or real price is its value in terms of some other good, service, or bundle of goods. The term “relative price” is used to make comparisons of different goods at the same moment of time.
Hope it's help
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Explanation:
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Answer:
Definition: The nominal price of a good is its value in terms of money, such as dollars, French francs, or yen. The relative or real price is its value in terms of some other good, service, or bundle of goods. The term “relative price” is used to make comparisons of different goods at the same moment of time.
#Carry on learning
[tex] - heavengrace[/tex]Princess Cruise Company (PCC) purchased a ship from Mitsubishi Heavy Industry. PCC owes Mitsubishi Heavy Industry 500 million yen in one year. The current spot rate is 124 yen per dollar and the one-year forward rate is 110 yen per dollar. The annual interest rate is 5% in Japan and 8% in the U.S. PCC can also buy a one-year call option on yen at the strike price of $.0081 per yen for a premium of .014 cents per yen.
Required:
a. Compute the future dollar costs of meeting this obligation using the money market and forward hedges.
b. Assuming that the forward exchange rate is the best predictor of the future spot rate, compute the expected future dollar cost of meeting this obligation when the option hedge is used.
c. At what future spot rate do you think PCC may be indifferent between the option and forward hedge?
Answer:
Explanation:
a)
In the case of forwarding hedge:
The future dollar cost will be = FX receiveable ÷ Foward exchange rate
= 500 million yen ÷ 110 yen/dollar
= $4.55 million
For money market hedge:
Present value of yen payable = [tex]500 \ yen \div (1+ \dfrac{5}{100})[/tex]
[tex]= \dfrac{500 \ yen }{1.06}[/tex]
= 476.20 million yen
PCC would convert dollars to yens at the spot market rate and borrow yen such that it would get 500 million yen at maturity(i.e after one year) for Mitsubishi to receive it.
Dollars needed to get these yen = 476.30 yen ÷ 124 yen/dollar
= $3.84 million
Future Value of these dollars (for comparison with the foward market hedge) = $3.84 × (1 + 0.08)
= $4.15 million
Hence, the money market hedge is better as the dollar cost is lower than the forward market hedge to meet the obligation.
b)
On the maturity date, the spot rate is 110 yen/dollar
Ad the strike price = 0.0081 /dollar
It is better for the company to go for the strike price due to the fact that it has a lower rate than the spot rate.
Now;
The premium amount = 500000000 yen × 0.014 dollar / yen
= 70000 dollars
However; the Future dollar-cost payable = 500000000 yen × 0.0081 dollar /yen
= 4050000 dollars
By applying option hedge, the total dollar cost required to meet the obligation = (4050000 + 70000) dollars
= 4120000 dollars
c)
The dollar cost needed from the option hedge required to matching the forward hedge is determined by subtracting it from the premium amount:
Thus;
for option hedge, dollar cost needed = (4550000 - 70000) dollars
= 4480000 dollars
The required future spot rate = 500000000/4480000
= 111.61 yen/dollar
As a result, at the future spot rate of 111.61 yen/dollar, PCC will be unconcerned about and indifferent about the option or forward hedge because the future dollar cost of meeting the obligation will be the same.
At an activity level of 6,000 units the cost for maintenance is $7,200 and at 10,000 units the cost for maintenance is $11,600. Using the high-low method, the cost formula for maintenance is: Group of answer choices
Answer:
y = $1.10x + $600
Explanation:
Step 1 : Variable Cost calculation
Variable Cost = ($11,600 - $7,200) ÷ (10,000 - 6,000)
= $1.10
Step 2 : Fixed Cost calculation
Total cost = Variable Cost + Fixed Cost
hence,
Fixed Cost = Total Cost - Variable Cost
= $11,600 - (10,000 x $1.10)
= $600
Step 3 : Cost formula for maintenance
Total cost = Variable Cost + Fixed Cost
therefore,
y = $1.10x + $600
where,
y = Total cost
x = Activity level
Using the high-low method, the cost formula for maintenance is : y = $1.10x + $600
It has been said that Earned Value Management (EVM) came about because the Federal Government often used "Cost-plus" contractors with project organizations. Cost-plus contracting allows the contractor to recover full project development costs plus accumulate profit from these contracts. Why would requiring contractor firms to employ earned value management help the government hold the line against project cost overruns?
Answer:
Earned Value Management (EVM)
The Federal Government requires contractor firms to employ earned value management because it enables it to assess the work that has been completed against an established baseline plan in terms of technical, time, and cost performance.
Armed with this information, it is in a better position to make important project decisions and help to control over-spending.
Explanation:
Earned value management (EVM) as a integrated project management methodology details the project time schedule, costs, and scope to ensure correct measurement of project performance. Using planned and actual values, EVM enables future predictions, improving the ability of project managers to adjust according to requirements.
企業が有利子負債を持っていると、（）から資本コストが安くなる。
1. 配当成長効果
2. リスク低減効果
3. 課税効果
4. 節税効果
5. 割引抑制効果
Answer:
this word is not in english plz write in english
"Differentiation is not something hatched in marketing and advertising department ,nor it is limited to the catchalls to quality and service".Justify your answer.
Answer:
Differentiation opportunities can exist in activities all along an industry's value chain
Explanation:
-Product R&D activities that aim at improved product designs and performance features,expanded end uses and applications and selection, added user safety,greater recycling capability or enhanced environmental protection.
explain why it is important for marketers to be able to measure the effectiveness of marketing activities.
Most labor economists believe that the supply of labor is a. less elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax. b. more elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax. c. more elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax. d. less elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax.
Answer:
d
Explanation:
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
Price elasticity of demand = percentage change in quantity demanded / percentage change in price
If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.
Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one
Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.
Infinitely elastic demand is perfectly elastic demand. Demand falls to zero when price increases
Perfectly inelastic demand is demand where there is no change in the quantity demanded regardless of changes in price.
The supply of labour usually exceeds the demand for labour. So, the supply of labour is less elastic. as a result workers bear the burden of tax
Economists in general believe that supply of labor is a. less elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax.
Why is the supply of labor less elastic?Even when employees change the amount they pay people, there will still be others who don't mind working at the new rate.
Supply of labor therefore doesn't change much when rates are changed. This allows employers to pass on payroll tax easily to workers.
In conclusion, option A is correct.
Find out more on labor elasticity at https://brainly.com/question/7432811.
