Based on the given information, Rams Town Co purchased a machine on January 1, 2010, for £240,000. The estimated useful life of the machine is 10 years or 100,000 units, with a residual value of £20,000. The depreciation expense for the year ended December 31, 2010, using the double-declining balance method of depreciation can be calculated as follows:
1. Determine the depreciable cost: £240,000 - £20,000 = £220,000
2. Calculate the depreciation rate: 2 / 10 = 0.2 (double-declining balance rate)
3. Multiply the depreciation rate by the depreciable cost: £220,000 * 0.2 = £44,000
Therefore, the depreciation expense for the year ended December 31, 2010, using the double-declining balance method is £44,000. None of the options provided match this value.
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Please answer only 3 of the following 5 questions in short paragraphs, between 250-500 words for each question. The questions cover material from chapters 11, 13, 14 and 15. 1. Because it is worried about inflation in the near term, the government has decided to restrict aggregate demand. Which tool of fiscal policy (or combination) do you believe it should use: government purchases, taxes, or transfers? Why? a. | 2. The president has just retained you to advise him on whether to change government fiscal policy. You understand that any change in spending or taxation that the administration proposes will have to be considered for a number of months by Congress, and then that the full impact of the policy change on the economy will not occur until several months after it is enacted. Under these circumstances, what is your advice? 3. The Fed has three conventional tools that it can use to change the money supply under normal economic conditions: open-market operations, changes in the banks' required reserve ratio, and changes in policies regarding lending to member banks. Which do you think is the most useful, the least useful? Does the Fed really need three tools-wouldn't one do just as well? 4. What should government do to avoid another Great Recession like the last one during 2007-09 period? What policies have been undertaken? Are they adequate? 5. Do you think monetary or fiscal policy is likely to be the more effective tool of stabilization policy? Why?
As the government is worried about inflation in the near term, the use of which tool of fiscal policy or combination should it use: government purchases, taxes, or transfers? Why?The tool of fiscal policy the government should use depends on the state of the economy.
Suppose the economy is booming and inflation is increasing, a restriction in aggregate demand will be a good policy. This means that the government should reduce the amount of money in circulation by increasing taxes or reduce transfer payments. This policy will decrease the disposable income of people.
On the other hand, if the economy is in a recession, and aggregate demand is low, the government should increase its spending or reduce taxes to stimulate the economyUnder the given circumstance, my advice to the president would be that it is not wise to make changes in the government fiscal policy immediately.
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Based on past experience, a bank believes that 12% of the people who receive loans will not make payments on time. The bank has recently approved 500 loans. Answer the following questions. a) What are the mean and standard deviation of the proportion of clients in this group who may not make timely payments? + (O) = 0.12 SD (P) = 0.015 (Round to three decimal places as needed.) b) What assumptions underlie your model? Are the conditions met? A. With reasonable assumptions about the sample, all the conditions are met. OB. The 10% condition is not met. O C. The randomization and success/failure conditions are not met. OD. The success/failure condition is not met. O E. The randomization condition is not met. Based on past experience, a bank believes that 12% of the people who receive loans will not make payments on time. The bank has recently approved 500 loans. Answer the following questions. Tuo Turuvimicurvu unu vuvvvvurunur vonUILIVIT un Tum OD. The success/failure condition is not met. O E. The randomization condition is not met. OF. The randomization and 10% conditions are not met. O G. The 10% and success/failure conditions are not met. O H. Without unreasonable assumptions, none of the conditions are met. c) What is the probability that over 13% of these clients will not make timely payments? plô>0.13) =((Round to three decimal places as needed.)
a) Which is 0.12. The standard deviation of the proportion can be calculated using the formula: SD(P) = sqrt(p * (1 - p) / n), We get SD(P) = sqrt(0.12 * (1 - 0.12) / 500) ≈ 0.015 .
b) We do not have information about randomization or the 10% condition. Therefore, option D is the most appropriate answer: "The success/failure condition is not met."
c) To calculate the probability that over 13% of clients will not make timely payments, we need to use the normal distribution approximation. We can use the z-score formula: z = (x - μ) / σ,
z = (0.13 - 0.12) / 0.015 ≈ 6.67.
The probability can be obtained by finding the area under the normal curve to the right of the z-score, which is essentially 1 minus the cumulative probability.
Probability is a measure of the likelihood or chance of an event occurring. It quantifies the degree of uncertainty associated with an outcome. Probability values range from 0 to 1, where 0 represents an impossible event and 1 represents a certain event. Probability allows us to make informed predictions and decisions based on the likelihood of different outcomes in a given situation.
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Y = (AN)aKbEy. (Where Y = GDP, A = technology, K = capital, N = labor, E = energy and a = b = y = 1/3 )
1) Use the growth accounting equation (by taking logs of the above equation) to compute the rate of growth of A. Let Y growth rate = 4%, growth rate of N = 2%, K increased by 3%, and E increased by 4%.
Growth accounting equation relates growth rates of GDP, capital, labor, and technology. It enables us to estimate the contribution of various inputs to economic growth. Here's the solution to the given problem:
We are given, Y = (AN)a(Kb )(Ey)
Taking the natural logarithm of both sides: ln(Y) = ln[(AN)a(Kb) (Ey)]ln(Y) = aln(A) + bln(K) + cln(N) + dln(E)Where a = b = c = 1/3, and d = 1 - a - b - c = 0
Plug in the values we are given : Natural log of Y growth rate = ln(1.04) = 0.04Natural log of N growth rate = ln(1.02) = 0.0198
Natural log of K growth rate = ln(1.03) = 0.0296Natural log of E growth rate = ln(1.04) = 0.0392
Substituting all the values in the equation, we get;0.04 = (1/3)ln(A) + (1/3)ln(K) + (1/3)ln(N) + 0
Substitute (1/3) as xln(A) = 3(0.04 - xln(K) - xln(N)ln(A) = 3(0.04 - x) - 3ln(K) - 3ln(N)ln(A) = 0.12 - 3x - 3ln(K) - 3ln(N)
Differentiate the above expression with respect to time to get the growth rate of A:d(ln(A))/dt = -3(d(ln(K))/dt) - 3(d(ln(N))/dt)
Plug in the values we are given : d(ln(K))/dt = 0.03 and d(ln(N))/dt = 0.02
Therefore, d(ln(A))/dt = -3(0.03) - 3(0.02)=-0.15
Hence, the rate of growth of technology (A) is -0.15 or -15%.
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You have the following investment opportunities with an initial investment outlay of R375 000.00: Interest rate Investment A 11.86% Investment B 14.06% Investment C 11.25% Investment D 10.00% REQUIRED: Normal view Formula view Year 0 375 000 375 000 375 000 375 000 Year 1 Year 2 Year 3 - Year 4 the above in an Excel workbook and calculate the future value of each of the investment opportunities by making use of Excel formulas. Give your answer in: 100,000 100,000 100,000 100,000 22,500 100,000 37,500 15,000 150,000 100,000 37,500 100,000 (4 marks) (4 marks) Based on the calculations, which will be the best investment opportunity and why? (2 marks)
It outperforms the other investment opportunities due to its higher interest rate of 14.06%. Therefore, investing in Investment B would yield the best returns compared to the other options.
Based on the provided information, the best investment opportunity would be Investment B with an interest rate of 14.06%. Here's the step-by-step explanation:
1. Calculate the future value of Investment A:
- Year 1: 375,000 + (375,000 * 11.86%) = 420,975
- Year 2: 420,975 + (420,975 * 11.86%) = 470,985.57
- Year 3: 470,985.57 + (470,985.57 * 11.86%) = 525,812.79
- Year 4: 525,812.79 + (525,812.79 * 11.86%) = 585,897.58
2. Calculate the future value of Investment B:
- Year 1: 375,000 + (375,000 * 14.06%) = 428,625
- Year 2: 428,625 + (428,625 * 14.06%) = 489,145.88
- Year 3: 489,145.88 + (489,145.88 * 14.06%) = 556,900.24
- Year 4: 556,900.24 + (556,900.24 * 14.06%) = 632,636.46
3. Calculate the future value of Investment C:
- Year 1: 375,000 + (375,000 * 11.25%) = 417,187.50
- Year 2: 417,187.50 + (417,187.50 * 11.25%) = 464,990.63
- Year 3: 464,990.63 + (464,990.63 * 11.25%) = 519,238.07
- Year 4: 519,238.07 + (519,238.07 * 11.25%) = 580,436.88
4. Calculate the future value of Investment D:
- Year 1: 375,000 + (375,000 * 10.00%) = 412,500
- Year 2: 412,500 + (412,500 * 10.00%) = 453,750
- Year 3: 453,750 + (453,750 * 10.00%) = 499,125
- Year 4: 499,125 + (499,125 * 10.00%) = 548,037.50
Based on these calculations, Investment B has the highest future value after four years, reaching R632,636.46.
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You are the manager of a large crude-oil refinery. As part of the refining process, a certain heat exchanger (operated at high temperatures and with abrasive material flowing through it) must be replaced every year. The replacement and downtime cost in the first year is $175,000. This cost is expected to increase due to inflation at a rate of 8% for five years, at which time this particular heat exchanger will no longer be needed. If the company's cost of capital is 18% per year, how much could you afford to spend for a higher quality heat exchanger so that these annual replacement and downtime costs could be eliminated?
Answer:
The company could afford to spend up to $121,701.52 for a higher quality heat exchanger.
Explanation:
To determine the affordability of a higher quality heat exchanger, we need to calculate the present value of the annual replacement and downtime costs and compare it to the cost of the higher quality heat exchanger.
Given that the replacement and downtime cost in the first year is $175,000 and it is expected to increase at a rate of 8% per year for five years, we can calculate the total replacement and downtime costs over the five-year period using the formula for the future value of a growing annuity:
Future Value = Cost in Year 1 * (1 + Growth Rate)^Number of Years
Future Value = $175,000 * (1 + 0.08)^5 = $271,566.40
Next, we need to calculate the present value of the future replacement and downtime costs by discounting the future value at the company's cost of capital. The formula for the present value of a future cash flow is:
Present Value = Future Value / (1 + Discount Rate)^Number of Years
Present Value = $271,566.40 / (1 + 0.18)^5 = $121,701.52
Therefore, the company could afford to spend up to $121,701.52 for a higher quality heat exchanger so that the annual replacement and downtime costs could be eliminated.
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Ahmed contributed cash of $20,000 into the partnership. The journal entry to record this transaction is: Cash $20,000 Dr: partnership $20,000 Cr
True
False
Sure. The journal entry to record Ahmed's contribution of cash into the partnership is ; Debit: Cash $20,000 Credit: Ahmed, Capital $20,000.
The debit to Cash increases the asset account Cash by $20,000. The credit to Ahmed, Capital increases the owner's equity account Ahmed, Capital by $20,000. This entry reflects the fact that Ahmed has contributed $20,000 of cash to the partnership, which has increased the partnership's assets and equity. The journal entry you provided is incorrect because it credits Partnership instead of Ahmed, Capital. Partnership is a general ledger account that represents the total assets and liabilities of the partnership. Ahmed, Capital is a specific ledger account that represents Ahmed's ownership interest in the partnership.
Here is a breakdown of the journal entry:
Debit: Cash $20,000
This entry increases the asset account Cash by $20,000.
Credit: Ahmed, Capital $20,000
This entry increases the owner's equity account Ahmed, Capital by $20,000.
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Regarding the 4 risk response strategies – Avoidance, Mitigation, Transference, Acceptance,
a. Which strategy should not be applied for high-ranking risks, and why? (2 marks)
b. Which strategy may not be applied if the root causes are not known, and why? (2 marks)
c. Suppose ‘inexperienced project manager’ is a risk in a particular project. To cater to this risk, one possible action is to replace the project manager with a more experienced person. Briefly explain which risk response strategy you are applying? (3 marks)
d. Suppose replacing the project manager is not possible, describe another action plan based on a different risk response strategy to the one in (c). (3 marks)
The strategy that should not be applied for high-ranking risks is avoidance. The strategy that may not be applied if the root causes are not known is mitigation. The risk response strategy that is being applied is Transference. Another action plan that could be applied is Acceptance.
a. The strategy that should not be applied for high-ranking risks is avoidance. Because it is not possible to completely avoid or eliminate high-ranking risks, it is better to focus on managing and mitigating them.
b. The strategy that may not be applied if the root causes are not known is mitigation. This is because mitigation requires identifying the root causes of the risk and developing a plan to reduce its impact or probability. Without knowledge of the root causes, mitigation may not be effective.
c. If ‘inexperienced project manager’ is a risk in a particular project, and to cater to this risk, one possible action is to replace the project manager with a more experienced person, the risk response strategy that is being applied is Transference. In this case, the risk is being transferred to a third party or outside entity (i.e., the new project manager).
d. Suppose replacing the project manager is not possible. In that case, another action plan based on a different risk response strategy that could be applied is Acceptance. The project manager can accept the risk and work to minimize its impact by implementing contingency plans or backup procedures to reduce the consequences if the risk does occur.
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Mike Wazovsky runs a business that produces marmalade in small jars. He is proud of his business degree and brags a lot about how great and efficient his business is. Mike points that his biggest achievement is that his business currently has ATC < MC < MR. (a) Does Mike make positive profit? How do you know? (b) Is it possible to improve profit in the short-run in Mike's business? If yes, how? if no, why? (c) If Mike were to maximize proft, what will happen with the output of marmalade in Mike's business in the long-run (assuming anyone can easily make similar and same quality marmalade) relative to the current output?
To maximize profit, Mike would need to adjust his output to a level where marginal cost (MC) equals marginal revenue (MR) in the long run. This equilibrium output may be lower than the current output, as Mike would aim to balance the costs and revenues to maximize overall profit in a more competitive market environment.
(a) Mike does make positive profit.
Since Mike's business has ATC (Average Total Cost) less than MC (Marginal Cost), it implies that the cost of producing an additional unit of marmalade (MC) is lower than the average cost of producing each unit (ATC). This suggests that each unit contributes more to revenue (MR - Marginal Revenue) than the cost to produce it. Therefore, the difference between total revenue and total cost is positive, indicating that Mike's business is making a profit.
(b) It is possible to improve profit in the short-run in Mike's business.
To improve profit in the short-run, Mike can consider various strategies. One approach is to increase production as long as the marginal revenue (MR) exceeds the marginal cost (MC). By expanding output, Mike can capture additional revenue that surpasses the cost of producing each additional unit, thereby increasing profit. However, it is important for Mike to carefully evaluate market demand and ensure that the increase in production does not result in diminishing returns or a decrease in marginal revenue.
(c) If Mike were to maximize profit, the output of marmalade in his business would decrease in the long run relative to the current output.
Assuming anyone can easily make similar and same quality marmalade, the market would attract more competitors over time. As a result, the market supply of marmalade would increase, leading to greater competition and potentially lower prices.
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.Carlos Cavalas, the manager of Echo Products' Brazilian Division, is trying to set the production schedule for the last quarter of the year. The Brazilian Division had planned to sell 69,960 units during the year, but by September 30 only the following activity had been reported.
Units
Inventory, January 1 0
Production 2,000
Sales 2,000
Inventory, September 30 400
The division can rent warehouse space to store up to 1,000 units. The minimum inventory level that the division should carry is 50 units. Mr. Cavalas is aware that production must be at least 200 units per quarter in order to retain a nucleus of key employees. Maximum production capacity is 1,500 units per quarter. Demand has been soft, and the sales forecast for the last quarter is only 600 units. Due to the nature of the division's operations, fixed manufacturing overhead is a major element of product cost.
Assume that the division is using variable costing. How many units should be scheduled for production during the last quarter of the year? (The basic formula for computing the required production for a period in a company is Expected sales + Desired ending inventory - Beginning inventory = Required production.) Show computations and explain your answer. Will the number of units scheduled for production affect the division's reported income or loss for the year? Explain.
Assume that the division is using absorption costing and that the divisional manager is given an annual bonus based on divisional operating income. If Mr. Cavalas wants to maximize his division's operating income for the year, how many units should be scheduled for production during the last quarter? (See the formula in 1 above.) Explain.
Identify the ethical issues involved in the decision Mr. Cavalas must make about the level of production for the last quarter of the year.
To determine the number of units that should be scheduled for production during the last quarter of the year, we can use the formula: Expected sales + Desired ending inventory - Beginning inventory = Required production.
Given information:
- Expected sales for the last quarter: 600 units
- Beginning inventory: 400 units
- Desired ending inventory: The minimum inventory level that should be carried is 50 units.
Using the formula, we can calculate the required production:
Required production = 600 + 50 - 400 = 250 units
Therefore, 250 units should be scheduled for production during the last quarter of the year.
The number of units scheduled for production will affect the division's reported income or loss for the year. In variable costing, fixed manufacturing overhead is not included in the product cost. Therefore, if more units are produced, the fixed manufacturing overhead cost will be spread over a larger number of units, resulting in lower per-unit fixed manufacturing overhead and potentially higher reported income. Conversely, if fewer units are produced, the fixed manufacturing overhead cost will be spread over a smaller number of units, resulting in higher per-unit fixed manufacturing overhead and potentially lower reported income.
If the division is using absorption costing and the divisional manager wants to maximize the division's operating income for the year, the number of units scheduled for production during the last quarter should be calculated based on the absorption costing formula: Expected sales + Desired ending inventory - Beginning inventory. This is because absorption costing includes fixed manufacturing overhead in the product cost. By producing more units, the fixed manufacturing overhead cost will be spread over a larger number of units, resulting in a lower per-unit fixed manufacturing overhead and potentially higher reported operating income.
The ethical issues involved in Mr. Cavalas' decision about the level of production for the last quarter include:
1. Reporting accuracy: Mr. Cavalas needs to ensure that the reported income or loss for the year is accurately represented, regardless of the costing method used.
2. Integrity and transparency: Mr. Cavalas should make decisions based on ethical principles, maintaining transparency and ensuring that stakeholders have access to accurate and reliable financial information.
3. Conflict of interest: As the divisional manager, Mr. Cavalas may face a conflict of interest if his decision on production levels is influenced by personal gain, such as maximizing his bonus, rather than acting in the best interest of the company and its stakeholders.
4. Compliance with accounting standards: Mr. Cavalas should ensure that the division's accounting practices comply with relevant accounting standards and regulations and that the decision on production levels does not violate any ethical or legal requirements.
Overall, Mr. Cavalas must make an ethical decision by considering the financial impact, stakeholder interests, and adherence to accounting standards while maintaining integrity and transparency in reporting.
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A project has an initial cost of $7.900 and cash inflows of $2,100, $3,140, $3,800, and $4,500 per year over he next four years, respectively. What is the payback period? 3.70 years 2.28 years 2.70 years 3.36 years 3.28 years
The payback period of a project is the amount of time it takes to recoup the initial investment or cost of the project. To find out the payback period, divide the initial cost by the annual cash inflows until you have recovered the initial cost.
What is the payback period?
To find out the payback period, we divide the initial cost by the annual cash inflows until the initial cost is recovered. To find the payback period, we use the following formula:Payback period = Initial cost / Annual cash inflowYear 1 cash inflow = $2,100Year 2 cash inflow = $3,140Year 3 cash inflow = $3,800Year 4 cash inflow = $4,500Initial cost = $7,900When we divide the initial cost by the annual cash inflow for each year until the initial cost is recovered, we get:Year 1: $7,900 - $2,100 = $5,800Year 2: $5,800 - $3,140 = $2,660Year 3: $2,660 - $3,800 = -$1,140The third year cash inflow is less than the remaining cost, so we need to use a weighted average to estimate the payback period.WA = Year 3 cash flow / Year 3 - Year 2 cash flowWA = -$1,140 / $3,800 - $3,140WA = -$1,140 / $660WA = -1.727We can estimate that it will take approximately 2.727 years to recover the initial investment using the weighted average. Hence, the correct answer is 2.70 years.
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The Harris Company is the lessee on a four-year lease with the following payments at the end of each year.
Year 1: $20,000
Year 2: $25,000
Year 3: $30,000
Year 4: $35,000
An appropriate discount rate is 7 percentage. yielding a present value of $91,718.
a-1. If the lease is an operating lease, what will be the initial value of the right-of-use asset?
a-2. If the lease is an operating lease, what will be the initial value of the lease liability?
a-3. If the lease is an operating lease, what will be the lease expense shown on the income statement at the end of year 1?
a-4. If the lease is an operating lease, what will be the interest expense shown on the income statement at the end of year 1?
a-5. If the lease is an operating lease. what will be the amortization expense shown on the income statement at the end of year 1? (Leave no cells blank- be certain to enter "0" wherever required.)
b-1. If the lease is a finance lease, what will be the initial value of the right-of-use asset?
b-2. If the lease is a finance lease, what will be the initial value of the lease liability?
b-3. If the lease is a finance lease, what will be the lease expense shown on the income statement at the end of year 1?
b-4. If the lease is a finance lease, what will be the interest expense shown on the income statement at the end of year 12 (Round your answer to the nearest dollar amount.) A Interest expense b-5. if the lease is a finance lease, what will be the amortization expense shown on the income statement at the end of year 17 (Round your answer to the nearest dollar amount.)
a-1. If the lease is an operating lease, the initial value of the right-of-use asset will be $0. In an operating lease, the lessee does not recognize the right-of-use asset on their balance sheet.
a-2. If the lease is an operating lease, the initial value of the lease liability will be $0. In an operating lease, the lessee does not recognize the lease liability on their balance sheet.
a-3. If the lease is an operating lease, the lease expense shown on the income statement at the end of year 1 will be $20,000. This is the payment made for the year.
a-4. If the lease is an operating lease, there will be no interest expense shown on the income statement at the end of year 1. In an operating lease, the lessee does not recognize interest expense.
a-5. If the lease is an operating lease, there will be no amortization expense shown on the income statement at the end of year 1. In an operating lease, the lessee does not amortize the right-of-use asset.
b-1. If the lease is a finance lease, the initial value of the right-of-use asset will be $91,718. This is the present value of the lease payments.
b-2. If the lease is a finance lease, the initial value of the lease liability will also be $91,718. This is the present value of the lease payments.
b-3. If the lease is a finance lease, the lease expense shown on the income statement at the end of year 1 will be $20,000. This is the payment made for the year.
b-4. If the lease is a finance lease, the interest expense shown on the income statement at the end of year 1 will be $6,423. This is calculated as the beginning lease liability multiplied by the discount rate of 7%.
b-5. If the lease is a finance lease, the amortization expense shown on the income statement at the end of year 1 will be $13,577. This is calculated as the lease payment minus the interest expense.
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Which of the following is NOT correct about the reasons why Alexander Hamilton supported the establishment of the national bank?
O National bank is necessary to create national currency.
O Only wealthy people could invest thus benefit from the system.
© National bank is the sate plage to deposit and transfer money.
O National debt is good for the country. The more Americans owe the country, the more people had an interest in the success of the country. If you loan money to someone, you want that
person to be able to pay you back, so you want them to be successful.
© National bank is necessary for the United States to become a strong commercial and manufacturing country that can compete with other Asian and European empires.
The statement that is NOT correct about the reasons why Alexander Hamilton supported the establishment of the national bank is: Only wealthy people could invest thus benefit from the system.
What is a national bank? A national bank is a commercial bank that is chartered under the federal government of the United States of America, as opposed to the state government. In this way, it is responsible for monitoring the country's monetary policy and regulating the money supply.
A national bank acts as the government's banker, performs business with other banks, and assists in the country's economic development. What is the importance of a national bank? The main reasons Alexander Hamilton supported the establishment of a national bank were to: Create a national currency that would support a strong and unified US economy. The national bank would be a safe place for the government to deposit and transfer money.
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Uber - Riding the Gig Economy 1. Apply the five steps of the Planning Process to Uber's development of it's app-driven online cab service. 2. Outline the Strategic, Tactical and Functional plans Uber has concerning its new self-driving car program. Show at least one plus and one minus within each of the plans. 3. Plans rarely absolutely go to plan! It is impossible as variables in the environment keep changing and impact the company in different ways. What planning tools might Uber use to deal with some of the unexpected issues Uber has faced with its online cab business model. 4. How might Uber use Management by Objectives to work with municipalities and provinces to create the infrastructure and legislation needed to achieve its self-driving car goals?
Applying the five steps of the Planning Process to Uber's development of its app-driven online cab service involved establishing objectives, such as creating a convenient ride-hailing service.
They developed premises, recognizing the potential demand and technological advancements. Uber generated alternative courses of action, exploring driver recruitment and pricing models. They evaluated alternatives, considering market size and regulatory challenges. Finally, they selected the best alternative and implemented it by launching their app-based service.
Uber's strategic plan for self-driving cars involves disruption and increased safety, but potential job losses and regulatory challenges are drawbacks. Their tactical plan includes testing, partnerships, and pilot programs, with benefits of innovation and concerns of public skepticism. The functional plan focuses on hiring skilled personnel and building infrastructure, with advantages of attracting talent and challenges of high costs.
Planning tools Uber could employ to address unexpected issues include scenario planning to anticipate disruptions, contingency planning to mitigate impacts, and risk management to identify and manage risks and uncertainties.
Using Management by Objectives, Uber can work with municipalities and provinces by setting clear objectives, establishing performance metrics, fostering communication, and adapting objectives as needed to achieve self-driving car goals. This approach facilitates collaboration and alignment with government entities.
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Sunscreen and beach towels are complementary goods. If the price of sunscreen increases, ceteris paribus, _____.(1 point)
1. the income of consumers will decrease the income of consumers will decrease
2. the quantity demanded of beach towels will increase for every possible price
3. the quantity demanded of beach towels will decrease for every possible price(I think it is this one)
4.the income of consumers will increase
Sunscreen and beach towels are complementary goods. If the price of sunscreen increases, ceteris paribus, the quantity demanded of beach towels will decrease for every possible price.
Complementary goods are products or services that people use together. For example, automobiles and gasoline, as well as hot dogs and buns, are complementary goods. When two or more goods are complementary, an increase or decrease in the price of one will result in an opposite movement in the demand for the other good.
Given that sunscreen and beach towels are complementary goods. Thus, if the price of sunscreen increases, the quantity demanded of beach towels will decrease for every possible price. The key here is that the increase in the price of sunscreen, with all other things constant, causes the quantity demanded of beach towels to fall. This is because the two goods are complementary; sunscreen is usually used with beach towels.The price of sunscreen has a direct effect on the demand for beach towels, but not the other way around. This is why option 3, which states that the quantity demanded of beach towels will decrease for every possible price, is the correct answer. The demand curve for beach towels shifts to the left, indicating that people demand less of it at every possible price as a result of the increase in sunscreen prices.
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When the Trump administration decided to place high tariffs on import, many economists criticized the move stating that it will lead to a net national loss. Given that the U.S. is a large economy, what would be your take on the matter? Do you think tariffs would always lead to a net national loss for the U.S.?
When the Trump administration decided to place high tariffs on import, many economists criticized the move stating that it will lead to a net national loss. Given that the U.S. is a large economy, tariffs would not always lead to a net national loss for the U.S. because tariffs will only lead to a net national loss if the tariffs reduce the gains from trade.
There are cases where the imposition of tariffs would lead to a net national gain, especially when the imposition of tariffs is in response to the unfair trade policies of other countries. If other countries unfairly subsidize their firms or industries to export goods to the U.S. at lower prices, the U.S. can respond by imposing tariffs on the goods. The imposition of tariffs would make the goods more expensive, and the demand for the imported goods would decrease. The increase in the prices of imported goods would make domestic goods more competitive, increasing the demand for domestic goods. The increase in the demand for domestic goods would result in an increase in the production of domestic goods. The increase in production would result in an increase in employment in the domestic industry that produces the goods.
Therefore, tariffs would not always lead to a net national loss for the U.S. because the imposition of tariffs in response to the unfair trade policies of other countries can result in a net national gain. The gains would arise from the increase in production of domestic goods that result from the imposition of tariffs on imported goods.
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points Save Answer Assume today's settlement price on a CME EUR futures contract is $1.3146/EUR. You have a short position in one contract. Your performance bond account currently has a balance of $1,700. The next day' settlement price is $1.3051. Calculate the balance of the account at the end of the day. (USD, no cents)
Today's settlement price on a CME EUR futures contract is $1.3146/EUR. You have a short position in one contract. Your performance bond account currently has a balance of $1,700. The next day's settlement price is $1.3051
.To find: Calculate the balance of the account at the end of the day solution:
Daily Price Limit of CME Euro FX futures contract
= $0.0050/EUR (Currency Futures)The price movement of the futures contract
= $1.3146/EUR - $1.3051/EUR
= $0.0095/
EURAs 1 Euro futures contract consists of 125,000 Euros,
thus Dollar value of 1 Euro = 1.3051 * 125,000
= $163,137.5
Dollar value of the short position = 163,137.5
The profit and loss per contract would be = 0.0095 * 125,000
= $1,187.5
As the short position was taken, it resulted in a profit:
Profit = 1,187.5 dollars
Therefore, new balance in the account will be the sum of old balance and profit
= $1,700 + $1,187.5 = $2887.5
Thus, the balance of the account at the end of the day is $2,887.5 (USD, no cents).
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You are evaluating a project that requires an investment of $97 today and guarantees a single cash flow of $124 one year from now. You decide to use 100% debt financing, that is, you will borrow 97$. The risk-free rate is 5% and the tax rate is 37%. Assume that the investment is fully depreciated at the end of the year, so without leverage you would owe taxes on the difference between the project cash flow and the investment, that is, $27.
a. Calculate the NPV of this investment opportunity using the APV method.
b. Using your answer to part (a), calculate the WACC of the project.
c. Verify that you get the same answer using the WACC method to calculate NPV.
d. Finally, show that flow-to-equity method also correctly gives the NPV of this investment opportunity.
The APV method entails adjusting the unlevered cash flow to account for the present value of the financing tax shield.
WACC can be used to calculate the NPV of the project
The following is the calculation:
After-tax cost of debt is 6.33 percent [5 percent + (1-0.37)].
Interest payment is $6.14 [$97 x 6.33 percent].Tax savings are $2.27 [$6.14 x 0.37].
The present value of tax savings is $2.15 [$2.27 / (1 + 5%)].
The present value of cash flows is $117.07 [$124 / (1 + 5%)].
The present value of the investment is -$97.WACC = $124 / $97 + $117.07 - $97 = 32.3 percent.
NPV equals:($124 / (1 + 32.3 percent)) - $97 = $3.22.
Income before tax is $27, which is less than the $97 investment, so the investment is not profitable without leverage. Because of the interest payment tax shield, the present value of the project cash flow has increased to
$117.07 + $2.15 = $119.22.
The project is profitable after including the tax shield.
The APV approach resulted in a positive NPV of $22.3 million. Using the APV calculation, the WACC was 32.3 percent, which is consistent with the WACC calculated using the formula. The FTE method produced the same NPV as the APV method and the WACC method, which is to be expected. All three methods are consistent and produce the same answer.
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Gus was recently laid off, and he is struggling to pay his bills and make ends meet. Gus is meeting with a staffing agency later in the week. As he prepares for the meeting, what should Gus say about his former company? Multiple Choice "I was able to learn from this experience. I now know what not to do in my next job." "I am so glad that job is over. I am surprised they were able to stay in business that long." "Whatever my next job is, please make it with a manager who cares about his employees and not just the bottom line." "My time there was time wasted. They kept us so isolated that we never even met the clients."
Out of the provided options, the most appropriate statement for Gus to say about his former company as he meets with the staffing agency would be "I was able to learn from this experience. I now know what not to do in my next job." The correct answer is option a.
This statement demonstrates a positive and reflective attitude on Gus's part. It indicates that he has taken lessons from his previous job and is using them to inform his future choices. It shows a willingness to grow and improve based on past experiences
. By emphasizing the learning aspect, Gus presents himself as someone who can adapt and make better decisions in his next job, which can be seen as a positive quality by the staffing agency.
The correct answer is option a.
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Complete question
Gus was recently laid off, and he is struggling to pay his bills and make ends meet. Gus is meeting with a staffing agency later in the week. As he prepares for the meeting, what should Gus say about his former company? Multiple Choice
a. "I was able to learn from this experience. I now know what not to do in my next job."
b. "I am so glad that job is over. I am surprised they were able to stay in business that long."
c. "Whatever my next job is, please make it with a manager who cares about his employees and not just the bottom line."
d. "My time there was time wasted. They kept us so isolated that we never even met the clients."
1. Explicit and Implicit Costs Juan and Julia contributed $50,000 of their own money to the company They bought equipment for $3,000 They hired an employee with a salary of $20,000 Juan quit his job where he earned $30,000 Julia quit part of her job where she earned $15,000 · Purchases of materials for the business were $10,000 · At the end of the year the value of the equipment is $28,000 · A business loan of $100,000 pays 6% annual interest The normal profit based on the above data from running the business is $30,000. True or false?
Explicit and Implicit Costs The normal profit based on the given data from running the business is $30,000. False.An explicit cost is the money that the business spends, which includes the wages paid to employees, the rent, and the cost of supplies.
When the business purchases a new piece of equipment or hires a new employee, this is a clear cost that is easily measured and accounted for. The implicit cost is a little more complicated. It is a cost that a company pays but that is not explicitly stated in the business records. When a company uses its own funds to purchase equipment or pay salaries, it incurs implicit costs.
The normal profit based on the above data from running the business is $30,000. False, it is a loss as we can calculate it as follows:
Total explicit costs = $50,000 + $3,000 + $20,000 + $10,000 + $6,000 (interest expense) = $89,000 Total implicit costs = $30,000 + $15,000 + $30,000 = $75,000Total revenue = $0Therefore, normal profit = Total Revenue - Total Explicit Costs - Total Implicit Costs = $0 - $89,000 - $75,000 = ($164,000)
This means that the company is operating at a loss of $164,000.
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ABC Company owns a bookstore and has to decide how many copies to order of a new book. The book’s retail price is 30 TL and the wholesale price is 22 TL. The publisher will buy back the retailer’s leftover copies at a full refund but the bookstore incurs a 4 TL in shipping and handling costs for each book returned to the publisher. The demand forecast can be represented by a normal distribution with a mean 250 and standard deviation 85.
a) The company will consider this book to sell more than 450 units. What is the probability of such amount of selling ?
b) The company believes that there is also a probability of selling the book less than 55 percent of the mean forecast. What is the probability of such amount of selling?
c) What order quantity maximizes the company’s expected profit?
d) Suppose that the company orders 250 copies of the book. What would be the fill rate?
Please clearly explain each process step by step in the solution.
(a) The probability of selling more than 450 units is approximately 0.0228 or 2.28%.
(b) The probability of selling less than 55% of the mean forecast is approximately 0.0926 or 9.26%.
(c) The order quantity with the highest expected profit would be the optimal choice.
(d) The unfilled demand would be 1 - 0.5 = 0.5 or 50%. The fill rate would be (1 - 0.5) * 100 = 50%.
a) To calculate the probability of selling more than 450 units, find the area under the normal distribution curve to the right of 450.
First, standardize the value 450 using the mean and standard deviation given:
Standardized value = (450 - mean) / standard deviation
Standardized value = (450 - 250) / 85
Standardized value = 2
Next, find the cumulative probability to the left of this standardized value using a standard normal distribution table or a statistical calculator. The cumulative probability to the left of 2 is approximately 0.9772.
Finally, subtract this cumulative probability from 1 to find the probability to the right of 450:
Probability = 1 - 0.9772
Probability = 0.0228
Therefore, the probability of selling more than 450 units is approximately 0.0228 or 2.28%.
b) To calculate the probability of selling less than 55% of the mean forecast, find the area under the normal distribution curve to the left of this value.
First, calculate 55% of the mean forecast:
55% of 250 = 0.55 * 250 = 137.5
Next, standardize this value using the mean and standard deviation:
Standardized value = (137.5 - mean) / standard deviation
Standardized value = (137.5 - 250) / 85
Standardized value = -1.3294
Using a standard normal distribution table or a statistical calculator, we find the cumulative probability to the left of -1.3294, which is approximately 0.0926.
Therefore, the probability of selling less than 55% of the mean forecast is approximately 0.0926 or 9.26%.
c) To determine the order quantity that maximizes the company's expected profit, consider the profit for each possible order quantity.
Let's denote the order quantity as Q. The demand follows a normal distribution with a mean of 250 and a standard deviation of 85. The profit can be calculated as follows:
Profit = (Revenue - Cost) * Quantity
Revenue = Retail Price * Min(Demand, Quantity)
Cost = Wholesale Price * Quantity + Shipping and Handling Costs * Max(0, Quantity - Demand)
To find the order quantity that maximizes the expected profit, we calculate the profit for different order quantities and choose the one with the highest expected profit.
Let's calculate the expected profit for different order quantities:
Order Quantity: 0
Profit = (30 - 22) * 0 - 4 * Max(0, 0 - 250)
= -4 * 250
= -1000
Order Quantity: 1
Profit = (30 - 22) * 1 - 4 * Max(0, 1 - 250)
= 8 - 4 * 249
= -988
Order Quantity: 2
Profit = (30 - 22) * 2 - 4 * Max(0, 2 - 250)
= 16 - 4 * 248
= -984
...
Continue calculating the profit for different order quantities until a pattern emerges.
By calculating the profit for different order quantities, you can identify the order quantity that maximizes the expected profit. The order quantity with the highest expected profit would be the optimal choice.
d) The fill rate is the percentage of demand that is satisfied by the available stock. To calculate the fill rate, we compare the demand with the available stock.
If the company ordered 250 copies of the book and the demand follows a normal distribution with a mean of 250 and a standard deviation of 85, we can calculate the fill rate as follows:
1. Calculate the z-score for the demand of 250 copies:
z-score = (250 - mean) / standard deviation
= (250 - 250) / 85
= 0
2. Using a standard normal distribution table or a statistical calculator, find the cumulative probability to the left of the z-score of 0. This gives us the proportion of demand that is below or equal to 250.
3. Subtract the cumulative probability from 1 to find the proportion of demand that is above 250. This represents the unfilled demand.
4. Calculate the fill rate by subtracting the unfilled demand from 1 and multiplying by 100 to get the percentage:
Fill rate = (1 - Unfilled demand) * 100
For example, if the cumulative probability to the left of the z-score of 0 is 0.5, it means that 50% of the demand is below or equal to 250. Therefore, the unfilled demand would be 1 - 0.5 = 0.5 or 50%. The fill rate would be (1 - 0.5) * 100 = 50%.
Remember to calculate the cumulative probability and fill rate using the actual values from the standard normal distribution table or a statistical calculator for a z-score of 0.
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When a floor manager empowers this team members, his power:
a. multiplies in direct proportion to the number of people receiving a power share.
b. increases.
c. remains approximately the same.
d. decreases.
When a floor manager empowers his team members, his power "increases", hence option b is correct.
To empower someone means to give them the power, authority, or confidence to do something, this process is known as empowerment. In a workplace context, this means allowing employees to make decisions, take ownership of tasks, and work autonomously to achieve team goals. A floor manager, or floor supervisor, is responsible for overseeing the day-to-day operations of a specific area of a business, such as a department or floor. Part of their role is to empower team members to work independently and collaboratively to achieve their goals. By empowering team members, a floor manager can create a more efficient and effective team. This can lead to higher morale, increased productivity, and better results for the business as a whole. Additionally, when team members feel empowered, they are more likely to take ownership of their work and be more invested in the success of the team and the business as a whole.Therefore, when a floor manager empowers his team members, his power increases.
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You are working as a researcher in an economic Institute, you want to study the relation between the Unit sales as a Dependent variable and the following independent variables (selling expenditure, advertising, competitive price) As shown in the following model Unit Sales += b0+b1 Exp + + b2 Adv t+ b3 comp + + Ut After collecting your data, and estimating your linear regression over the data, you got the following regression equation Unit Sales + = -10.5 0.51 Expt + 0.09 Adv t+ 3.05 b3 compt t- value (2.45) (-1.5) (4.2) (2.94) R² = 0.24 F- Value 0.33 " 1- What is the economic meaning of the coefficient b0 (-10.5 ) 2- Describe the meaning of R2 and its value, F - Value 3- What do you think about the Model as a whole, with F, R² values ....is it significant or not ....explain your answer
The economic meaning of the coefficient b0 (-10.5) is known as the intercept of the regression line, which is the point at which the line crosses the Y-axis when X=0.
In the economic interpretation, b0 represents the expected value of the dependent variable, that is Unit Sales, when the independent variables are 0. The coefficient b0 of -10.5, in this case, implies that when the independent variables (selling expenditure, advertising, competitive price) are zero, then the unit sales are expected to be -10.5 units. 2. The meaning of R² and its value, F - ValueR-squared (R²) is a statistical tool used to determine how close the data is to the fitted regression line. It is a statistical measure that represents the proportion of variation in the dependent variable that can be explained by the independent variables. The R-squared value ranges between 0 and 1, with a higher value indicating that the regression line fits the data well. In this case, the R-squared value of 0.24 means that only 24% of the variation in the unit sales can be explained by the independent variables.
The F-value is a statistical tool that tests the overall significance of the regression model. It is calculated by dividing the regression mean square by the residual mean square. In this case, the F-value of 0.33 is less than 1, which indicates that the regression model is not significant. 3. The significance of the Model as a whole. The model is not significant based on the F-value and R-squared value. This implies that there are other factors that influence unit sales that are not captured in the model. Thus, it would be essential to look for other variables or factors that affect unit sales and add them to the model to improve its accuracy and make it more significant.
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Titan Corporation has 10.1 million shares of common stock outstanding and 440,000 4.4 percent semiannual bonds outstanding, with a par value of $1,000 each. The common stock currently sells for $48 per share and has a beta of 1.05; the bonds have 10 years to maturity and sell for 115 percent of par. The market risk premium is 8.8 percent, T-bills are yielding 5 percent, and the company's tax rate is 25 percent. a. What is the firm's market value capital structure? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) b. If the company is evaluating a new investment project that has the same risk as the firm's typical project, what rate should the firm use to discount the project's cash flows? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Answer is not complete. a. Debt a. Equity b. Discount rate 8.00 %
The Weighted Average Cost of Capital (WACC) is a financial metric used to calculate the average cost of the various sources of financing used by a company to fund its operations
a) Calculation of the market value capital structure of Titan Corporation is explained as follows: Market Value of Equity = Current Stock Price * Number of Shares OutStanding= $48*10.1 Million= $485.28 MillionMarket Value of Debt = Bond Price * Number of Bonds Outstanding * Par Value= 1.15 * 440000 * $1000= $506 MillionMarket Value Capital Structure = Market Value of Equity + Market Value of Debt= $485.28 Million + $506 Million= $991.28 MillionTherefore, the market value capital structure of Titan Corporation is $991.28 Million.
b) Calculation of the rate that Titan Corporation should use to discount a new investment project with the same risk as the firm's typical project is explained as follows:
Total Market Value Capital Structure = Market Value of Equity + Market Value of Debt= $485.28 Million + $506 Million= $991.28 Million
Weight of Equity = Market Value of Equity / Total Market Value Capital Structure= $485.28 Million / $991.28 Million = 0.4890 Weight of Debt = Market Value of Debt / Total Market Value Capital Structure= $506 Million / $991.28 Million= 0.5110. After calculating the weights, Titan Corporation will now use the Weighted Average Cost of Capital (WACC) formula to determine the rate to discount the new investment project.
WACC = (Weight of Equity * Cost of Equity) + (Weight of Debt * Cost of Debt) * (1 – Tax Rate)Cost of Equity = Risk-Free Rate + (Market Risk Premium * Beta)= 5% + 8.8% * 1.05= 14.14%Cost of Debt = Yield to Maturity= 4.4/2 = 2.2%Tax Rate = 25%WACC = (0.4890 * 14.14%) + (0.5110 * 2.2%) * (1 – 25%)= 6.98%. Therefore, the rate Titan Corporation should use to discount a new investment project with the same risk as the firm's typical project is 6.98%.
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Porcelain Computer Company is considered purchasing two different types of servers. Server A will generate net cash inflows of $26,000 per year and have zero residual value. Server's A's estimated useful life is three years, and it costs $42,000.
Server B will generate net cash inflows of $27,000 in year 1, $14,000 in year 2, and $1,000 in year 3. Server B has a $4,000 residual value and an estimated useful life of three years. Server B also costs $42,000. Porcelain Computer Company's required rate of return is 12%.
Calculate the accounting rate of return (ARR) for both server investments.
Server A __________ /______= ____ %
Server B __________ /______= ____ %
Calculate the net present value for both server investments.
Server A= $____
Server B= $____
Calculate the internet rate of return (IRR) for both server investments.
Server A= ___%
Server B=_____%
To calculate the accounting rate of return (ARR) for both server investments, we use the following formula:
ARR = Average Annual Net Income / Initial Investment * 100
For Server A:
The average annual net income is $26,000, and the initial investment is $42,000. Therefore:
ARR for Server A = $26,000 / $42,000 * 100 = 61.9%
For Server B:
To calculate the average annual net income, we need to determine the total net income over the useful life and divide it by the number of years:
Total net income for Server B = $27,000 + $14,000 + $1,000 = $42,000
Average annual net income for Server B = $42,000 / 3 = $14,000
ARR for Server B = $14,000 / $42,000 * 100 = 33.3%
Next, let's calculate the net present value (NPV) for both server investments. The NPV is calculated by discounting the net cash flows to their present value and subtracting the initial investment.
For Server A:
The net cash inflow is $26,000 per year for three years, and the required rate of return is 12%. The initial investment is $42,000.
NPV for Server A = -$42,000 + ($26,000 / (1 + 0.12)^1) + ($26,000 / (1 + 0.12)^2) + ($26,000 / (1 + 0.12)^3)
NPV for Server A = -$42,000 + $23,214 + $20,703 + $18,415 = $20,332
For Server B:
The net cash inflows are $27,000, $14,000, and $1,000 for years 1, 2, and 3, respectively. The residual value is $4,000. The required rate of return is 12%, and the initial investment is $42,000.
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A person borrows the amount of $1,000 to be repaid in 5 years at an interest rate of 20% per year. How much would this person pay at the end of year 5?
At the end of year 5, the person would need to pay back the borrowed amount of $1,000 plus the interest accrued. The total payment at the end of year 5 will include both the principal amount and the accumulated interest.
To calculate the total payment at the end of year 5, we need to consider the interest rate and the duration of the loan. In this case, the person borrowed $1,000 at an interest rate of 20% per year for 5 years.
The interest accrued each year can be calculated by multiplying the principal amount by the interest rate. In this case, the annual interest is $1,000 multiplied by 20%, which equals $200. Since the loan lasts for 5 years, the total interest accrued over the 5-year period is $200 multiplied by 5, which equals $1,000.
Therefore, at the end of year 5, the person would need to pay back the initial borrowed amount of $1,000 plus the accumulated interest of $1,000, resulting in a total payment of $2,000. This payment includes both the repayment of the principal amount and the interest that has accrued over the 5-year period.
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Your company, (insert a company name of your choice here), is considering an opportunity to develop and introduce a new product which will trick kids into eating healthy at breakfast. The product is a breakfast "treat" which is actually made from all healthy ingredients and contains no added sugar…..and it tastes good. Based on your superior knowledge of the market, you think that this product line will last a minimum of 5 years before the kids catch on and start eating sugar-coated sugar cubes again for breakfast (when I was a kid, there was actually a cereal called Super Sugar Crisp).
Getting up and running will cost the company $1,000,000 for capital equipment; there was an additional $400,000 for development expenses. The equipment is expected to have a useful life of 5 years (what a coincidence). The expected sales volumes are:
Year 1: 400,000
Year 2: 700,000
Year 3: 900,000
Year 4: 850,000
Year 5: 600,000
Your assignment is to figure out if this is a good idea and, of course, maximize your wealth.
A few facts:
Unit cost is $1.250
Profit margin is 37% on sell price
Corporate income tax rate is 25.8%
The company’s cost of debt is 8%
You will finance the entire $1,000,000 but you do have it in cash if required; the financing will be at 9% and only 1 payment per year (5 total payments) for simplicity.
A few questions
Is this a worthwhile program to invest in?
What assumptions did you make?
Are there any alternatives at the end of 5 years?
Please use excel and explain the steps (Where numbers are coming from and which formulas are used in each step)
To evaluate the investment in the new breakfast product, let's calculate the net present value (NPV) and internal rate of return (IRR) using Excel.
First, we need to calculate the annual cash flows for each year, taking into account the sales volumes, unit cost, profit margin, and tax rate.
Year 1: 400,000 * ($1.25 * 0.37) * (1 - 0.258) = $69,860
Year 2: 700,000 * ($1.25 * 0.37) * (1 - 0.258) = $122,401
Year 3: 900,000 * ($1.25 * 0.37) * (1 - 0.258) = $157,738
Year 4: 850,000 * ($1.25 * 0.37) * (1 - 0.258) = $149,457
Year 5: 600,000 * ($1.25 * 0.37) * (1 - 0.258) = $105,328
Next, we need to calculate the annual cash flows for the capital equipment and development expenses. Since these costs occur at the beginning, they will be considered as cash outflows (negative values) in year 0.
Year 0: -$1,000,000 - $400,000 = -$1,400,000
Now, let's calculate the discounted cash flows using the company's cost of debt (8%) as the discount rate.
Year 0: -$1,400,000 / (1 + 0.08)^0 = -$1,400,000
Year 1: $69,860 / (1 + 0.08)^1 = $64,643
Year 2: $122,401 / (1 + 0.08)^2 = $106,997
Year 3: $157,738 / (1 + 0.08)^3 = $127,238
Year 4: $149,457 / (1 + 0.08)^4 = $113,149
Year 5: $105,328 / (1 + 0.08)^5 = $79,150
To calculate the NPV, sum up all the discounted cash flows:
NPV = -$1,400,000 + $64,643 + $106,997 + $127,238 + $113,149 + $79,150
NPV = -$908,823
To calculate the IRR, use the IRR function in Excel on the cash flows:
IRR = 14.3%
Based on the NPV of -$908,823 and the IRR of 14.3%, this investment does not appear to be worthwhile. The negative NPV suggests that the project's cash flows are not sufficient to cover the initial investment and generate a positive return. The IRR of 14.3% is lower than the cost of debt (8%), indicating that the project's rate of return is not attractive compared to alternative investment options.
Assumptions made include the accuracy of sales volume projections, constant unit cost and profit margin, stable tax rates, and the discount rate based on the cost of debt.
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Consider the following categories of products: beer, candy bars, and running shoes
For each category, please do the following:
identify the basic level, superordinate, and subordinate levels in the taxonomic structure
identify prototypes for each category, and explain your choices
identify the specific features and associations consumers likely have with the prototypes
Beer Superordinate level and Alcohol Subordinate level and Pale Ale Basic level and Budweiser Prototype.
Candy bars Superordinate level: Candy Subordinate level: Chocolate Basic level: Snickers Prototype.
Running Shoes Superordinate level: Shoes Subordinate level: Athletic Basic level: Running shoes Prototype
Beer Superordinate level and Alcohol Subordinate level and Pale Ale Basic level and Budweiser Prototype.
A frothy, golden brew in a pint glass with a thick head, served ice-cold. The Budweiser clydesdales trot through the snow while a jingle plays in the background. The slogan "This Bud's for you" appears on the screen. For those who enjoy socializing with their friends, beer is often associated with this image. The image of a person who is carefree, sociable, and perhaps enjoys outdoor activities.
Candy bars Superordinate level: Candy Subordinate level: Chocolate Basic level: Snickers Prototype:
Chocolate, peanuts, and nougat covered in a red wrapper with a blue label. For those who need a quick energy boost or a pick-me-up in the middle of the day, Snickers is a well-known and beloved chocolate bar. Snickers is often associated with sports, especially football and other high-energy events.
Running Shoes Superordinate level: Shoes Subordinate level: Athletic Basic level: Running shoes Prototype:
A pair of lightweight, breathable shoes with a low profile. For athletes and people who are committed to staying in shape, running shoes are a must-have. Running shoes are often associated with health, fitness, and athleticism.
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Many companies have switched from absorption costing to variable costing for internal reporting: Select one: a. to comply with external reporting requirements as required by GAAP b. to increase bonuses for managers c. so the denominator level is more accurate d. to reduce the undesirable incentive to build up inventories that would show higher operating income
Many companies have switched from absorption costing to variable costing for internal reporting to reduce the undesirable incentive to build up inventories that would show higher operating income.
The decision to switch from absorption costing to variable costing for internal reporting is often driven by the desire to eliminate the impact of fixed manufacturing overhead costs on inventory valuation. Under absorption costing, fixed manufacturing overhead costs are allocated to units produced and included in the cost of inventory. This means that as inventory levels increase, more fixed overhead costs are allocated and reported as part of the cost of goods sold.
By using variable costing, fixed manufacturing overhead costs are treated as period costs and are not allocated to units produced. This eliminates the incentive for managers to build up inventories to reduce reported operating income. Instead, variable costing focuses on the direct costs incurred to produce units, such as direct materials and direct labor.
The switch to variable costing provides a more accurate representation of the costs incurred by the company for internal reporting purposes. It helps align the reported costs with the actual costs incurred to produce the goods and allows for better analysis and decision-making based on the true cost structure of the company.
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Please show all your work and answer the questions for full marks.
A small business owner is contemplating the addition of another product line. Capacity increases and equipment will result in an increase in annual fixed costs of $50,000. Variable costs will be $25 per unit.
(i) What unit selling price must the owner obtain to break-even on a volume of 2,500 units a year?
(ii) Because of market conditions, the owner feels a revenue of $47 is preferred to the value determined in part a. What volume of output will be required to achieve a profit of $16,000 using this revenue?
The volume of output required to achieve a profit of $16,000 using a revenue of $47 is approximately 2,200 units.
(i) The Break-Even Point (BEP) in units can be determined using the following formula:
BEP (in units) = Fixed costs / (Price per unit - Variable costs per unit)
Given,
Fixed cost increase = $50,000
Variable cost = $25 per unit
BEP (in units) = $50,000 / ($P - $25) = 2,500 units
Therefore, $P - $25 = $20
Thus, selling price per unit required to break-even on a volume of 2,500 units a year is
$P = $20 + $25 = $45.
(ii) In order to calculate the required output volume, we use the following formula:
Target profit = (Price per unit - Variable cost per unit) × Volume - Fixed costs
Given,
Price per unit = $47
Variable cost per unit = $25
Fixed costs = $50,000
Target profit = $16,000
Putting the values in the formula, we get:
$16,000 = ($47 - $25) × Volume - $50,000
Thus, ($47 - $25) × Volume = $66,000
Therefore, the required volume of output to achieve a profit of $16,000 using a revenue of $47 is
Volume = $66,000 / ($47 - $25) = 2,200 units (approx.).
Thus, the volume of output required to achieve a profit of $16,000 using a revenue of $47 is approximately 2,200 units.
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Aggregate Demand I-Work It Out: Question 3 Consider an economy with the given equations. Y=C+I+G • C= 58+0.6(Y-T) I= 140-10r (¹=Y-15r G= $60 • T = $30 .M= $1200 P-3.0 Use the relevant set of equations to derive the LM curve. Move points A and B to graph the LM curve. 30 . Which equation represents the LM curve? Use the relevant set of equations to derive the LM curve. Move points A and B to graph the LM curve. 30 25 20 (%) - 15 10 5 Se D 100 200 400 500 600 300 Y 700 800 Which equation represents the LM curve? OY = 400 + 15r Y = 400r + 15 OY = 15r - 400 OY = 400-15r 10 0 0 100 200 300 400 500 600 700 800 Y Calculate the equilibrium level of income (Y) and the equilibrium interest rate (r). 7= Y=S
The equation that represents the LM curve is M/P = L(r,Y), where M is the nominal money supply, P is the price level, L is the money demand function, r is the interest rate, and Y is the level of income.
The LM curve represents the combination of interest rates and income levels at which the money market is in equilibrium. In other words, it shows the points in the income-interest rate space where the demand for money equals the supply of money.
The LM curve is derived from the money demand function and the money supply function. The money demand function reflects the inverse relationship between the interest rate and the demand for money. The higher the interest rate, the lower the quantity of money demanded, and vice versa. The money supply function represents the relationship between the nominal money supply and the price level.
To derive the LM curve, we need to solve for the equilibrium level of income and interest rate that satisfies both the money demand function and the money supply function. This involves finding the point where the quantity of money demanded equals the quantity of money supplied.
In conclusion, the LM curve equation that represents the equilibrium of the money market in the given economy is M/P = L(r,Y) = 1200/3 = (1/3)(Y - 15r) = 400. The equilibrium level of income is Y = 400, and the equilibrium interest rate is r = 0.
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