The Federal Reserve has been aggressively expanding the money supply by using repurchase agreements in its open market operations. Ignoring other factors, this is likely to result in:

Answers

Answer 1

Answer: decrease in interest rates and an increase in inflation

Explanation:

From the question, we are informed that The Federal Reserve has been aggressively expanding the money supply by using repurchase agreements in its open market operations.

This will result in a reduction in the interest rate and since there's more money in circulation, it will bring about an increase in the prices of goods.


Related Questions

A project requires an investment of $10 million and offers an annual after-tax cash flow of $1,250,000 indefinitely. If the firm's WACC is 12.5% and the project is riskier than the firm's average projects, should it be accepted?

Answers

Answer:

No.It should not be Accepted.

Explanation:

Weighted Average Cost of Capital (WACC) is the minimum return that is expected from a project. It shows the risk of the entity. If a project gives a return below the WACC, it is regarded as very risk and must not be accepted.

Additional business in the form of a special order of goods or services should be accepted when the incremental revenue equals the incremental costs.
A. True
B. False

Answers

Answer: False

Explanation:

The aim of the business is to ideally make a profit. As a result, Additional business should only be accepted if the incremental cost of doing so is less than the incremental revenue accrued from doing so.

If incremental revenue equals incremental cost, there is no point in engaging in the additional business as it brings no extra value to the business.  

The best way to characterize public relations at Under Armour is to use the label Multiple Choice fund raising. political public relations. marketing public relations. relationship management. publicity

Answers

Answer:

The correct answer is the option: Marketing Public Relations.

Explanation:

To begin with, the concept known as "Public Relations" in the marketing field refers to the instrument that the managers have and they can use with the purpose to establish better relationships with the public and with the target audience that the company has. The major goal of the public relations strategy is to know how to engage the company in relationships with outside agents that can benefit the company in its image to the customers. Therefore that this type of strategy focuses on the actions that the company can take in order to increase its public image to the society.

a. Identify the major general liability loss exposures of business firms
b. Provide at least one example of each type of loss exposure identified in Part 1.

Answers

Answer:

Please refer to the below for explanations

Explanation:

a) Premises and operations liability . This type of liability loss exposures arises from ownership and general maintenance of the premises where the firm is carrying out it's business. It is also the possibility that a firm will be held liable because of bodily injury or property damage caused by an accident which occurred in the firm's premises.

• Products liability. Sometimes products that have been manufactured and sold by the firm could result into liability loss exposure if the products causes injury to the buyers or consumers after purchase.

• Completed operations liability. This type of liability loss exposure occurs due to faulty work done in another place other than the premises( where the firm usually carry out its business activities) after the work or operation has been performed. It arises out of the entity's completed work including defective parts or materials.

• Contractual liability. The liability loss exposure arises when there are assumption of legal liability in a contract, whether written or oral hence contact must be properly understood by the parties involved.

• Contingent liability. Sometimes, work done by independent contractors could cause liability loss exposures if they are not properly executed. It exist when the insured is held liable for the actions or failure of the others.

b) • Premises and operations liability

Example is when an employee suffers bodily injury through an accident in the premises where the firm is situated in carrying out its business operation.

• Products liability

Example is when a child or children got injured while playing with a defective toys manufactured by Kid smart, which specializes in manufacturing children toys.

• Competed operations liability

Example is when County janitor service contracted local bars and taverns to clean their restrooms daily.

• Contractual liability

Example is when Party A to a contract agreement reads different meaning to the contract signed with party B, hence suffer losses.

• Contingent liability

Example is when a potential loss could possibly occur in the future due to the occurrence of certain events.

"A customer owns 200 shares of ABC, purchased 2 years ago at $50 per share. The current market value of ABC stock is $60 per share. If the customer gifts the stock to his son, the result is the:"

Answers

Answer: The donor may incur a gift tax liability. Also, the cost basis will be $50 per share to the recipient of the gift.

Explanation:

From the question, we are informed that a customer owns 200 shares of ABC, that were bought 2 years ago at $50 per share and that the current market value of ABC stock is $60 per share.

If the customer gifts the stock to his son, the result is the donor may incur a gift tax liability. Also, the cost basis will be $50 per share to the recipient of the gift.

The FI Corporation’s dividends per share are expected to grow indefinitely by 5% per year. a. If this year’s year-end dividend is $8 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? b. If the expected earnings per share are $12, what is the implied value of the ROE on future investment opportunities? c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the market capitalization rate)?

Answers

Answer:

a)

P₀ = Div₁ / (Re - g)

P₀ = current stock price = ?Div₁ = next dividend = $8Re = equity cost = 10%g = constant growth rate = 5%

P₀ = $8 / (10% - 5%) = $8 / 5% = $160

b)

EPS = $12

Return on equity (ROE) = g / b

b = retention rate = 1 - payout ratio = 1 - ($8/$12) = 0.333

g = 5%

ROE = 5% / 0.333 = 15%

c)

Present value of growth opportunity (PVGO) = P₀ - EPS/Re

P₀ = $160EPS = $12Re = 10%

PVGO = $160 - $12/10% = $160 - $120 = $40 per share

Which of the following is not a reason why it is important for parties to memorialize their agreements in writing?

a. A party enhances his/her chances of proving that an obligation was undertaken and makes it harder for the other party to deny making the promise.
b. Signing a writing communicates the seriousness of the occasion to the signer.
c. A person's signature on a written contract provides a basis for the contract to be authenticated.
d. Writings are subject to the danger that a person might fabricate terms.

Answers

Answer:

B. singing a writing communicates the seriousness of the occasion to the singer

The reason which is not important for parties to memorialize their agreements in writing is  signing a writing communicates the seriousness of the occasion to the signer. Thus, the correct answer is C.

What is an agreement?

Agreement refers to consent of individual on a particular opinion. When the both parties agree on a concept they will make it in writing. When this agreement enforceable by law it is considered as contract.

The reason it is important top memorialize the agreements in writing are it will act as proof or evidence when formulated in written to be presented in case of obligation.

An agreement will be duly signed by both the parties which shows its authenticity and reliability and avoid any false interpretation of the deal. When the agreement is in writing the violation of terms and conditions is not possible as it clearly mentions the drawbacks of circumstances if any party failed to fulfill the conditions of the agreement.

Therefore, the option C signing a writing communicates seriousness is the appropriate answer.

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Simon Company’s year-end balance sheets follow.

At December 31 2017 2016 2015
Assets
Cash $26,403 $29,364 $29,991
Accounts receivable, net 73,552 52,436 40,392
Merchandise inventory 96,214 70,676 43,017
Prepaid expenses 8,255 7,944 3,467
Plant assets, net 230,047 214,124 189,133
Total assets $434,471 $374,544 $306,000

Liabilities and Equity
Accounts payable $107,101 $64,564 $40,392
Long-term notes payable secured by
mortgages on plant assets 82,497 84,422 66,273
Common stock, $10 par value 162,500 162,500 162,500
Retained earnings 82,373 63,058 36,835
Total liabilities and equity $434,471 $374,544 $306,000

Required:
a. Compute the current ratio for the year ended 2017, 2016, and 2015.
b. Compute the acid-test ratio for the year ended 2017, 2016, and 2015.

Answers

Answer:

A.Current ratio

2017 191%

2016 248%

2015 289%

B.Acid Test Ratio

2017 101%

2016 139%

2015 183%

Explanation:

A.Computation of the current ratio for the year ended 2017, 2016, and 2015.

Using this formula

Current Ratio =Current Assets / Current Liabilities

2017 2016 2015

Cash $26,403 $29,364 $29,991

Accounts receivable, net

73,552 52,436 40,392

Merchandise inventory 96,214 70,676 43,017

Prepaid expenses 8,255 7,944 3,467

a.Current asset

204,424 160,420 116,867

b.Current Liabilities

Accounts payable $107,101 $64,564 $40,392

Let plug in the formula

(a) / (b) Current Ratio 191% 248% 289%

Therefore the Current ratio are:

2017 191%

2016 248%

2015 289%

B.Computation for acid-test ratio for the year ended 2017, 2016, and 2015.

Using this formula

Acid Test Ratio=Current Assets / Current Liabilities

2017 2016 2015

Cash $26,403 $29,364 $29,991

Accounts receivable, net

73,552 52,436 40,392

Prepaid expenses 8,255 7,944 3,467

a. Current asset

108,210 89,744 73,850

b. Current liabilities

Accounts payable $107,101 $64,564 $40,392

Let plug in the formula

(a) / (b)Acid Test Ratio 101% 139% 183%

Therefore the Acid Test Ratio are:

2017 101%

2016 139%

2015 183%

Heston and Burton, CPA's, currently work a five-day week. They estimate that net income for the firm would increase by $75,000 annually if they worked an additional day each month. The cost associated with the decision to continue the practice of a five-day work week is an example of a(n)

Answers

Answer:

Opportunity cost.

Explanation:

Opportunity cost is an economics term that is used to describe the value or determinant to best forgone alternative in certain situations. In as much as every business model or dealings can never be measured in monetary terms because merit can also be determined through satisfaction gained and actual time spent on the job.

It is sometimes seen to fall in as individual perspective, this is seen as such because it is always different for every person in as much as our personality and different in likes and lifestyle affects it when it boils down to persons.

Economists also tag opportunity cost to be fundamental costs and are generally used for gaining a better understanding of a project.

Current access control rosters should be authenticated by the manager or their designated representative. True False

Answers

Answer:

TRUE

Explanation:

Current Access Control rosters should be authenticated, authorized and accounted for by the manager or their designated representative.

Bio-metrics, Electronic locks, and Smart cards are sensitive data-derivation technologies and since they are applied in a number of sectors - e.g. Telecommunications, Retail, Defense, Healthcare, Hospitality, and Information Technology - current access to devices and software applications should be authenticated by the manager or a designated representative of the manager.

If a firm has a service that is valuable, rare, and costly-to-imitate, but a substitute exists for the service, the firm will

Answers

Answer:  the firm will have a temporary competitive advantage

Explanation: The firm in question would have a temporary competitive advantage. Competitive advantage describes something that places a company or business or a person above the competition such as value, rarity, difficult/costly-to-imitate amongst others. However, where a substitute is already in existence for such service, then the firm would have a temporary competitive advantage.

Script, Inc., has two product lines. The September income statements of each product line and the company are as follows: SCRIPT, INC. Product Line and Company Income Statements For Month of September Pens Pencils Total Sales $30,000 $30,000 $60,000 Less variable expenses (12,000) (12,000) (24,000) Contribution margin 18,000 18,000 36,000 Less direct fixed expenses (9,000) (7,000) (16,000) Product margin $9,000 $11,000 20,000 Less common fixed expenses (6,000) Net income $14,000Pens and pencils are sold in two territories, Florida and Alabama, as follows: Florida AlabamaPen sales $18,000 $12,000Pencil sales 9,000 21,000Total sales $27,000 $33,000The common fixed expenses are traceable to each territory as follows:Florida fixed expenses $2,000Alabama fixed expenses 3,000Home office administration fixed expenses 1,000Total common fixed expenses $6,000The direct fixed expenses of pens, $9,000, and of pencils, $7,000, cannot be identified with either territory. The company's accountants were unable to allocate any of the common fixed expenses to the various segments.Required:Prepare income statements segmented by territory for September.

Answers

Answer:

                                    Script, Inc.

                   Territory and Company Income Statements

                         For the Month of September

                           Florida$   Alabama$  Company Total$

Sales

Pens                       18000      12000       30000

Pencils                    9000      21000        30000

Total sales [A]        27000    33000       60000

Variable cost

Pens                       7200        4,800        12000

                            [18000*.4]  [12000*.4]

[12000 Variable cost / 30000 = 0.40 per pen ]

Pencils                    3600        8400        12000

                             [9000*.4]   [21000*.4]

[12000 Variable cost /30000 = 0.4 per pencil]

Total var. cost [B]    10800       13200       24000

Contribution A-B    16200      19800       36000

D. fixed expenses     2000       3000        5000

Territory margin   14200       16800      31000

Common fixed expenses

Pen               9000

Pencil            7000

Home office  1000

Total              17,000                                    (17000)

Net income                                                   14000

If an investor's aversion to risk increased, would the risk premium on a high beta stock increase by more or less than that of a low-beta stock? Explain.

Answers

Answer:

risk premium increases by more of the low - beta stock

A risk averse investor is an investor that avoids risk. if risk aversion increases, it means that the investor is more wary of risky investment.

Beta measures the volatility of a portfolio. the higher the volatility, the more risky the portfolio is.

risk premium measures the rate of return in excess of the risk free rate.

According to CAPM :

risk free rate + (beta x stock risk premium)

Beta is a multiplier of stock risk premium, so the higher the beta, the more there would be an increase in the stock risk premium

If a risk averse investor invests in a high beta stock, he would want extra or higher compensation for holding such a volatile stock. this extra compensation would be in the form of a higher risk premium.

Explanation:

A cash equivalent is: Multiple Choice Another name for cash. Close to its maturity date but its market value may still be affected by interest rate changes.

Answers

Complete Question:

A cash equivalent is:

Group of answer choices

a) Generally is within 12 months of its maturity date.

b) Another name for cash.

c) An investment readily convertible to a known amount of cash.

d) Is not considered highly liquid.

e) Close to its maturity date but its market value may still be affected by interest rate

changes

Answer:

c) An investment readily convertible to a known amount of cash.

Explanation:

In Financial accounting, cash equivalents can be defined as any short term and highly liquid investments which can be easily converted or transformed to a known and standard amounts of cash and as such are subjective to little or no risk of changes in value.

This ultimately implies that, a cash equivalent is an investment readily convertible to a known amount of cash.

Under the statements of cash flow, cash equivalents can be classified broadly into three (3) categories and these are;

1. Operating activities.

2. Financing activities.

3. Investing activities.

Answer:

money

Explanation:

The Sherman Antitrust Act: Multiple Choice was passed in 1800. All of these statements are true. was actively used by President Roosevelt in the early 20th century. no longer applies to business practices today.

Answers

Answer: Was actively used by President Roosevelt in the early 20th century.

Explanation:

The Sherman Act of 1890 was a law passed by Congress to target monopolies in the United States. At the time, Trusts had been in existence. Trusts were in effect monopolies because they worked by getting the largest stockholders to transfer their stock to a single trust and get profits from all companies in the trust. This Trust would then in effect control the industry as a monopoly.

To combat this, the Sherman Act enabled the Federal Government to go against Trusts and dissolve them. This was good news to President Theodore Roosevelt who ruled from 1901 to 1909. Roosevelt hated the anti-competitive tactics of the rich that ripped off the poor. He believed that this would bring about a revolution and he also hated them as the big corporations thought themselves above the law in his assessment.

Using the Sherman Act, he went against them with so much vigor that he earned the nickname, The Trust Buster. He started with a Trust controlled by J.P. Morgan called Northern Securities Company which was dissolved by the Supreme Court after the Attorney General under Roosevelt brought a suit against them.

Break-Even Sales and Sales to Realize Income from OperationsFor the current year ended October 31, Friedman Company expects fixed costs of $14,300,000, a unit variable cost of $250, and a unit selling price of $380.a. Compute the anticipated break-even sales (units).unitsb. Compute the sales (units) required to realize income from operations of $2,405,000.units

Answers

Answer:

a. 110,000 units

b. 128,500 units

Explanation:

a. Compute the anticipated break even sales in unit

Break even point in unit = Total fixed cost / Contribution margin

Total fixed cost = $14,300,000

Contribution margin per unit = Unit selling price - Unit variable cost

= $380 - $250

= $130

Break even point in units = $14,300,000 / $130

= 110,000 units

b. Compute sales (units) required to realize income from operations of $2,405,000

Break even point + expected profits = (total fixed costs + expected profits) / Contribution margin

° total fixed cost + expected profits

= $14,300,000 + $2,405,000

= $16,705,000

°contribution margin per unit

= $380 - $250

= $130

Break even point + expected profits in unit

= $16,705,000 / $130

= 128,500 units

All About Animals has two product​ lines: Cat food and Dog food. Contribution margin income statement data for the most recent year​ follow:
Total Cat Food Dog Food
Sales revenue $435,000 $350,000 $85,000
Variable expenses $61,000 $21,000 $40,000
Contribution margin $374,000 $329,000 $45,000
Fixed expenses $101.000 $49,000 $52,000
Operating income (loss) $273,000 $280,000 $(7,000)
Assuming the Dog food is discontinued, total fixed costs remain unchanged, and the space formerly used to produce the line is rented for $26,000 per year, how will operating income be affected?
A. Increase $254,000
B. Decrease $19,000
C. Increase $527,000
D. Increase $19,000

Answers

Answer:

B. Decrease $19,000

Explanation:

The computation of the amount affect the operating income is shown below

But before that first we need to find the new operating income

Total operating income for Cat Food  $280,000

Less: Fixed costs for Dog Food           ($52000)

Add: rented per year                             $26000

New net operating income                  $254000

Now decrease in net operating income is

= operating income - new operating income

= $273,000 - $254,000

= $19,000

Which one of these is the best description of a comparative market analysis? It shows what similar homes in the area have recently sold for It shows the list prices of similar homes in the area It’s a guide to the minimum acceptable offer It discloses issues with the home that are known to the seller

Answers

Answer:

It shows what similar homes in the area have recently sold for.

Explanation:

Answer:

The statement "It shows the same types of homes in the area that are presently sold" is considered to be the best description for the comparative market analysis.

Explanation:

A comparative market analysis is a tool that is used by the real estate agent in order to remove the value of the particular property via evaluation of the same types of homes that could be presently sold in a similar area.

For finding the best description regarding the comparative market analysis, we need to determine the following information:

It does not show the list prices of the same types of homes in the area.It does not guide for a minimum acceptable offer.Also, it does not disclose the issues for the income that are aware to the seller.

Therefore we can conclude that the first statement is correct

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. A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 6.4%. What is the stock's current price

Answers

Answer:

The answer is $18.29

Explanation:

We have many formulas to arriving at the stock price but here we use Gordon growth model.

Formula for getting stock price is:

D1/r - g

Where:

D1 - is the next year dividend or expected dividend to be paid next.

r is the rate of return

g is the growth rate

$0.75/0.105 - 0.064

$0.75/0.041

$18.29.

Therefore, the stock's current price is $18.29

What is the total stockholders' equity based on the following account balances? Common Stock $375,000 Paid-in-capital in excess of Par 90,000 Retained earnings 190,000 Treasury Stock 15,000

Answers

Answer: $640,000

Explanation:

The total Stockholders Equity for a company is calculated by;

= Common Stock + Paid-in-capital in excess of Par + Retained Earnings - Treasury Stock

Treasury Stock reduces stockholder equity as the company bought the shares back from the stockholders.

= 375,000 + 90,000 + 190,000 - 15,000

= $640,000

The owner of a large machine shop has just finished its financial analysis from the prior fiscal year. Following is an excerpt from the final report: Net revenue $ 375,000 Cost of goods sold 322,000 Value of production materials on hand 42,500 Value of work-in-process inventory 37,000 Value of finished goods on hand 12,500 What is the inventory turnover ratio (ITR) ?

Answers

Answer:

The answer is 3.5

Explanation:

Inventory turnover ratio is:

Cost of goods sold / Total or average inventory

Cost of goods sold is $322,000

Total Inventory in this question comprises work-in- process, finished goods and even raw materials.

So total inventory equals:

Production materials on hand $42,500 Work-in-process inventory $37,000

Finished goods on hand $12,500

Total inventory. $92,000

Therefore, inventory turnover ratio is

$322,000 / $92,000

= 3.5

You own a stock portfolio invested 34 percent in Stock Q, 18 percent in Stock R, 36 percent in Stock S, and 12 percent in Stock T. The betas for these four stocks are 1.03, 1.09, 1.49, and 1.94, respectively. What is the portfolio beta

Answers

Answer:

Portfolio beta = 1.3156

Explanation:

The portfolio beta is a function of the weighted average of the individual stocks betas' that form up the portfolio. To calculate the portfolio beta, we use the following formula,

Portfolio beta = wA * Beta of A + wB * Beta of B + ... + wN * Beta of N

Where,

w represents the weight of each stock in portfolio

Portfolio beta = 0.34 * 1.03  +  0.18 * 1.09  +  0.36 * 1.49  +  0.12 * 1.94

Portfolio beta = 1.3156

whatis the general termfor resources used by a business to produce good or services referred to as

Answers

Answer:

Factors of Production

Speedster Bicycles, Inc., collects 25% of its sales on account in the month of the sale and 75% in the month following the sale. If sales are budgeted to be $250,000 for March and $280,000 for April, what are the budgeted cash receipts from sales on account for April

Answers

Answer:

Total cash collection= $257,500

Explanation:

Giving the following information:

Sales:

March= $250,000

April= $280,000

Speedster Bicycles, Inc., collects 25% of its sales on account in the month of the sale and 75% in the month following the sale.

Cash collection April:

Sales on account from April= 280,000*0.25= 70,000

Sales on account from March= 250,000*0.75= 187,500

Total cash collection= $257,500

Selling, general, and administrative expenses were $160,600; net sales were $730,000; interest expense was $17,500; research and development expenses were $76,650; net cash provided by operating activities was $193,800; income tax expense was $16,360; cost of goods sold was $401,500. Required: a. Calculate operating income for the period.

Answers

Answer:

OPERATING INCOME $91,250

NET INCOME $57,390

Explanation:

a. Calculation for operating income for the period.

Net sales $730,000

Less: Cost of goods sold ($401,500)

Gross profit $328,500

Less Selling, general, and administrative expenses ($160,600)

Less: Research and development expenses ($76,650)

OPERATING INCOME $91,250

b. calculation for the net income for the period.

Net sales $730,000

Less: Cost of goods sold ($401,500)

Gross profit $328,500

Less Selling, general, and administrative expenses ($160,600)

Less: Research and development expenses ($76,650)

OPERATING INCOME $91,250

Less: Interest expense ($17,500)

Less: Tax expense ($16,360)

NET INCOME $57,390

Therefore the OPERATING INCOME will be $91,250 while the NET INCOME will be $57,390

Answer the following questions. 1. A company has an inventory of 1,200 assorted parts for a line of missiles that has been discontinued. The inventory cost is $71,000. The parts can be either​ (a) remachined at total additional costs of $24,000 and then sold for $32,000 or​ (b) sold as scrap for $5,000. Which action is more​ profitable? Show your calculations. 2. A​ truck, costing $104,000 and​ uninsured, is wrecked its first day in use. It can be either​ (a) disposed of for $15,500 cash and replaced with a similar truck costing $105,500 or​ (b) rebuilt for $85,500​, and thus be​ brand-new as far as operating characteristics and looks are concerned. Which action is less​ costly? Show your calculations.

Answers

Answer:

1) the $71,000 is considered a sunk cost because it cannot be recovered.

option A yields $32,000 - $24,000 = $8,000 (this is more profitable)

option B yields $5,000

2) the $104,000 is also considered a sunk cost because it cannot be recovered

option A results in $105,500 - $15,500 = $90,000 in costs

option B costs $85,500 (this option is less costly)

For the quarter ended March 31, 2017, Croix Company accumulates the following sales data for its newest guitar, The Edge: $314,000 budget; $300,800 actual. In the second quarter, budgeted sales were $381,000, and actual sales were $391,000.
Prepare a static budget report for the second quarter and for the year to date.
CROIX COMPANY
Sales Budget Report
For the Quarter Ended June 30, 2017
Second Quarter Year to Date
Product Line Budget Actual Difference Budget Actual Difference

Answers

Answer:

CROIX COMPANY

Sales Budget Report

For the Quarter Ended June 30, 2017

                                  Second Quarter                         Year to Date

Product Line  Budget     Actual   Difference    Budget    Actual    Difference

The Edge     381,000  391,000  10,000         695,000   691,800    3,200  U

Explanation:

Croix's sales budget gives a forecast of the sales figure over the future period in order to help Croix plan its production or purchase of the newest guitar, The Edge so that customers' demand can be met and profit objectives of the company is achieved.

A profit-maximizing firm in a competitive market that is producing on a production curve where the marginal product of labor is diminishing also has:

Answers

Answer: A. a downward-sloping labor demand curve.

Explanation:

If the marginal product of labor is diminishing then that means that for every extra worker hired, less products are made than the last worker. As a result of this, companies will not want to pay high wages to workers because they would be bringing in less revenue when hired.

This will cause a downward-sloping labor demand curve that shows that as more workers are hired, the company would like to pay less wages because each new worker is only producing less than the last worker.

Identify whether the following paragraph uses a direct, indirect, or semi-indirect organizational pattern.

Due to budgetary restraints, departmental charge cards will no longer be valid for purchasing supplies. Departments will now order all supplies through central purchasing in Accounting. The new procedure for ordering supplies will be effective March 1. Improved company intranet functionality will make this process easy and effective. The electronic Supply Request Form can be found on the intranet in the "Orders" folder. Supply requests submitted via the intranet will be processed within 24 hours.

Put the sentences in order for a paragraph using an indirect organizational pattern.

After considering cost-saving proposals, such as eliminating the internal Parts Shipping division and tertiary quality control measures, the executive team determined that staff furloughs would have the least impact on company morale.

Due to projected second quarter revenue short falls, the CEO has decided to take precautionary measures to protect the long-term viability of the company.

A mandatory staff furlough will be instituted July 1–6 of this year.

Due to projected second quarter revenue short falls, the CEO has decided to take precautionary measures to protect the long-term viability of the company.

After considering cost-saving proposals, such as eliminating the internal Parts Shipping division and tertiary quality control measures, the executive team determined that staff furloughs would have the least impact on company morale.

A mandatory staff furlough will be instituted July 1–6 of this year.

Due to projected second quarter revenue short falls, the CEO has decided to take precautionary measures to protect the long-term viability of the company.

A mandatory staff furlough will be instituted July 1–6 of this year.

After considering cost-saving proposals, such as eliminating the internal Parts Shipping division and tertiary quality control measures, the executive team determined that staff furloughs would have the least impact on company morale.

Answers

Answer:

a. Identification as direct, indirect, or semi-indirect organizational patterns:

Direct organizational pattern

b. Putting sentences in order for a paragraph using an indirect organizational pattern:

Due to projected second quarter revenue shortfalls, the CEO has decided to take precautionary measures to protect the long-term viability of the company.

A mandatory staff furlough will be instituted July 1–6 of this year.

After considering cost-saving proposals, such as eliminating the internal Parts Shipping division and tertiary quality control measures, the executive team determined that staff furloughs would have the least impact on company morale.

Explanation:

Organizational paragraph patterns refer to how paragraphs are organized in order to deliver intended messages.  The direct organizational pattern delivers the bad news first before giving reasons, and then closes on a positive note.  The indirect pattern starts with a buffer, the reasons, then delivers the bad news, before finally closing on a positive note.  The semi-indirect pattern is a mixture of the two.

ABC Co. and XYZ Co. are identical firms in all respects except for their capital structures. ABC is all-equity financed with $475,000 in stock. XYZ uses both stock and perpetual debt; its stock is worth $237,500 and the interest rate on its debt is 10 percent. Both firms expect EBIT to be $53,000. Ignore taxes.


Requried:

a. Rico owns $23,750 worth of XYZ’s stock. What rate of return is he expecting?

b. Suppose Rico invests in ABC Co and uses homemade leverage. Calculate his total cash flow and rate of return.

c. What is the cost of equity for ABC and XYZ?

d. What is the WACC for ABC and XYZ?

Answers

Answer:

ABC Co. and XYZ Co.

a. Rico owns $23,750 worth of XYZ’s stock. What rate of return is he expecting?

Expected Rate of Return = 12.32%

b. Suppose Rico invests in ABC Co and uses homemade leverage. Calculate his total cash flow and rate of return.

Cash flow from ABC Co. = 11.16% of $23,750 = $2,650.50

Cash outflow from homemade leverage = 10% of $11,875 = $1,187.50

Total cash flows = $1,463 ($2,650.50 - $1,187.50)

Rate of return = $1,463/$11,875 x 100 = 12.32%

c. What is the cost of equity for ABC and XYZ?

Cost of Equity for ABC Co. = Expected Return on Equity

= $53,000/$475,000 x 100

= 11.16%

Cost of Equity for XYZ Co. = Expected Return on Equity

= $29,250/$237,500 x 100

= 12.32%

d. What is the WACC for ABC and XYZ?

WACC for ABC = Cost of Equity = 11.16%

WACC for XYZ = Weighted Cost of Equity + Weighted Cost of Debt

= 11.16% x 50% + 10% x 50%

= 0.0558 + 0.05

= 0.1058

= 10.58%

Explanation:

ABC:

Equity = $475,000

Expected EBIT = $53,000

Returns on Equity = $53,000/$475,000 x 100 = 11.16%

XYZ:

Equity = $237,500

Debt = $237,500

Interest on Debt = 10% = $23,750

EBIT = $53,000

Return for Equity = $29,250 ($53,000 - 23,750)

Return on Equity = $29,250/$237,500 x 100 = 12.32%

RICO is assumed to leverage debt for his shares in ABC Co. to the tune of 50% just as the debt leverage in XYZ Co.

ABC's and XYZ's costs of equity are equal to the expected returns on the equities expressed percentages of the equities.

ABC's and XYZ's WACC or Weighted Average Costs of Capital are the weighted cost of equity plus the weighted cost of debt respectively.

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