Answer:
The answer is A
Explanation:
Competitive environment is an environment where competitors compete with one another for customers.
For example, Westpac, NAB, Commonwealth Bank and ANZ are in the same competitive environment. These are banks in Australia.
Types of competition are perfect competition, monopoly, monopolistic competition, oligopoly etc.
The last dividend paid by Coppard Inc. was $1.25. The dividend growth rate is expected to be constant at 27.5% for 3 years, after which dividends are expected to grow at a rate of 6% forever. If the firm's required return (rs) is 11%, what is its current stock price
Answer:
36.38
Explanation:
The Current stock price can be calculated by identifying Present value of dividends in all three years adding terminal value of dividends in year 3.
Year Dividend Growth Dividend PV factor Present Values
1 1.25 127.5% 1.59 0.900901 1.43
2 1.59 127.5% 2.03 0.811622 1.64
3 2.03 127.5% 2.59 0.731191 1.88
3 42.987(w) 0.731191 31.43
Total PV 36.38
Current Dividend = 2.59
Rate of return = 11.00%
Growth Rate = 6.00%
Terminal value = Current Dividend*(1+Growth rate)/(Rate of return-Growth Rate)
Terminal value = 2.59 x (1+0.06) / (0.11-0.06)
Terminal value =42.987
Current stock price = 1.43 +1.64+1.88+31.43
Current stock price = 36.38
Who Done It Mystery Theater sells tickets for dinner and a show for each. The cost of providing dinner is per ticket and the fixed cost of operating the theater is per month. The company can accommodate patrons each month. What is the contribution margin per patron?
Answer: $19
Explanation:
The Contribution Margin is defined as the Sales the Variable costs.
The Contribution Margin per patron is therefore;
= Ticket Price - Variable Cost which is the cost of dinner
= 40 - 21
= $19
On January 15, the end of the first pay period of the year, North Company’s employees earned $40,000 of sales salaries. Withholdings from the employees’ salaries include FICA Social Security taxes at the rate of 6.2%, FICA Medicare taxes at the rate of 1.45%, $3,100 of federal income taxes, $593 of medical insurance deductions, and $230 of union dues. No employee earned more than $7,000 in this first period. Prepare the journal entry to record North Company’s January 15 salaries expense and related liabilities.
Answer:
Dr Salaries expense 40,000
Cr FICA - Social security taxes payable 2,480
Cr FICA - medicare taxes payable 580
Cr Employee medical insurance deduction 593
Cr Union dues 230
Cr Salaries payable 33,017
Cr Federal income taxes payable 3,100
Explanation:
Preparation of the journal entry to record North Company’s January 15 salaries expense and related liabilities
Jan 15
Dr Salaries expense 40,000
Cr FICA - Social security taxes payable 2,480 (6.2%*40,000)
Cr FICA - medicare taxes payable 580
(1.45%*40,000)
Cr Employee medical insurance deduction 593
Cr Union dues 230
Cr Salaries payable 33,017
Cr Federal income taxes payable 3,100
Salaries payable is calculated as:
Salaries expense 40,000
Less: FICA - Social security taxes payable (2,480)
FICA - medicare taxes payable (580)
Employee medical insurance deduction (593)
Union dues (230)
Federal income taxes payable (3,100)
=$33,017
Here, we are to prepare the journal entry to record North Company’s January 15 salaries expense and related liabilities.
Salaries payable = Salaries expense - FICA - Social security taxes payable - FICA - medicare taxes payable - Employee medical insurance deduction - Union dues - Federal income taxes payable
Salaries payable = $40,000 - $2,480 - $580 - $593 - $230 - $3,100
Salaries payable = $33,017
Date Account titles and Explanation Debit Credit
Jan 15 Salaries expense $40,000
FICA - Social security taxes payable $2,480
(6.2%*40,000)
FICA - medicare taxes payable $580
(1.45%*40,000)
Employee medical insurance deduction $593
Union dues $230
Salaries payable $33,017
Federal income taxes payable $3,100
(To record salaries expense and related liabilities)
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The production department is proposing the purchase of an automatic insertion machine. They have identified 3 machines and have asked the accountant to analyze them to determine the best average rate of return.
Machine A Machine B Machine C
Estimated Average Income $45,192.56 $64,695.00 $60,929.70
Average Investment $322,804.00 $215,650.00 $406,198.00
Select the correct answer.
a) Machine B or C
b) Machine A
c) Machine C
d) Machine B
Answer:
Option D is correct
Machine B is the best investment
Explanation:
The accounting rate of return is the average annual income expressed as a percentage of the average investment.
The simple rate of return can be calculated using the two formula below:
Accounting rate of return =
Annual operating income/Average investment × 100
To determine the the machine with the best return,we would compute the average annual return of all of the machines and then choose the machine with the highest return
This is done as follows:
Machine Working s Average annul rate
A 45,192.56/322,804.00 × 100 = 14.0%
B 64,695.00/215,650.00 × 100= 30.0%
C 60,929.70/406,198.00× 100 = 15.0%
Machine B is the best investment
True or false: At 2019 year-end, a government has $25,000 of outstanding encumbrances. The 2019 Budgetary Comparison Scheduled will include the $25,000 whether or not the encumbrances lapse at year-end.
Answer:
True.
Explanation:
The 2019 Budgetary Comparison Schedule will include the $25,000 whether or not the encumbrances lapse at the year-end, either as outstanding encumbrances or settled encumbrances. These $25,000 encumbrances are budget reservations of appropriations so that they can be used to settle specified expenditures in the future. The purpose of making these reservations is to signal that the expenditures have been earmarked so that their cash allocations are not used for other purposes.
Jiminy’s Cricket Farm issued a bond with 30 years to maturity and a semiannual coupon rate of 4 percent 2 years ago. The bond currently sells for 107 percent of its face value. The company’s tax rate is 21 percent. The book value of the debt issue is $60 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 10 years left to maturity; the book value of this issue is $35 million, and the bonds sell for 76 percent of par.
Required:
a. What is the company’s total book value of debt?
b. What is the company’s total market value of debt?
c. What is your best estimate of the aftertax cost of debt?
Answer:
a. What is the company’s total book value of debt?
total book value of debt = $60,000,000 + $35,000,000 = $95,000,000
b. What is the company’s total market value of debt?
total market value of debt = ($60,000,000 x 1.07) + ($35,000,000 x 0.76) = $64,200,000 + $26,600,000 = $90,800,000
c. What is your best estimate of the after tax cost of debt?
weight of debt (using market value):
$64,200,000 / $90,800,000 = 70.7%
$26,600,000 / $90,800,000 = 29.3%
YTM bond I = {1,200,000 + [(60,000,000 - 64,200,000)/56]} / [(60,000,000 + 64,200,000)/2] = 1,125,000 / 62,100,000 = 1.8115 x 2 = 3.62%
YTM bond II = (35 / 26.6)¹/¹⁰ - 1 = 2.78%
after tax cost of debt = (0.707 x 3.62% x 0.79) + (0.293 x 2.78% x 0.79) = 2.02% + 0.64% = 2.66%
________ means that service quality depends on the quality of buyer-seller interaction during the service encounter.
Answer: interactive marketing
Explanation:
Interactive marketing is also referred to as event-driven marketing or trigger based marketing and it simply has to do with using an effective communication which is two-ways to enable the consumers connect directly with a company.
Interactive marketing means service quality depends on the quality of buyer-seller interaction during the service encounter.
If the Fed increases the discount rate, which of the following accurately describes the sequence of events that will follow in the banking system, finally leading to a decline in money supply?
A. Reserves ↓: Excess reserves ↓; Loans ↓; Deposits ↓; Money supply ↓
B. Loans ↓; Deposits ↓; Reserves ↓; Excess reserves ↓; Money supply ↓
C. Deposits ; Reserves: Excess reserves; Loans ↓; Money supply ↓
D. Excess reserves ↓; Reserves ↓; Loans ↓; Deposits ↓; Money supply ↓
Answer: A. Reserves ↓: Excess reserves ↓; Loans ↓; Deposits ↓; Money supply ↓
Explanation:
The discount rate is the rate at which the Fed lends money to banks and other depository type institutions. Normally banks have a reserve requirement that the Fed requires of them which states how much they are to leave with the Fed as a reserve. Banks tend to fall short of this reserve sometimes and so can borrow from the Fed to balance it off.
If the Fed increase the rate at which these banks can borrow, they will not want to do so thus leaving their Reserves at the Fed lower than it should be. They will then use their excess reserves which is money kept in reserve more than the Fed requires, to balance off their reserve at the Fed.
As a result of this reduction in their Excess reserve, they will have less money to give out as loans. With less loans being made, people will not have as much money to deposit after taking the loans. Money supply will then fall as a whole.
XYZ, Inc. has a beta of 0.8. The yield on a 3-month T-bill is 5%, and the yield on a 10-year T-bond is 7%. The market risk premium is 5.5%, and the return on an average stock in the market last year was 20%. What is the estimated cost of common equity using the CAPM? Show your work
Answer:
the estimated cost of common equity using the CAPM is 11.40 %.
Explanation:
Cost of Equity = Return on the Risk Free Security + Beta × Return on Market Portfolio
= 7.00 % + 0.8 × 5.5%
= 11.40 %
The estimated cost of common equity using the CAPM is 11.40 %.
Calculation of the cost of common equity;Since the return on risk-free rate is 7%, beta is 0.8 and, the market risk premium is 5.5%
So here the cost of common equity should be
= Return on the Risk Free + Beta × Market risk premium
= 7.00 % + 0.8 × 5.5%
= 11.40 %
Hence, The estimated cost of common equity using the CAPM is 11.40 %.
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Your estimate of the market risk premium is %. The risk-free rate of return is %, and General Motors has a beta of . According to the Capital Asset Pricing Model (CAPM), what is its expected return?
Answer:
The correct option is option A) 16.4%.
Explanation:
Note: This question is not complete as all the important data are omitted from it. The complete question is therefore provided before answering the question as follows:
Your estimate of the market risk premium is 9%. The risk-free rate of return is 3.8% and General Motors has a beta of 1.4. According to the Capital Asset Pricing Model (CAPM), what is its expected return?
Options:
A) 16.4%
B) 17.2%
C) 14.8%
D) 15.6%
The question is now answered as followed:
Capital asset pricing model (CAPM) can be described as a model that is employed to compute a theoretical required rate of an asset in order decide whether or not to add assets a portfolio of investment that is well-diversified.
According to the Capital Asset Pricing Model (CAPM), the expected return can be calculated using the following formula:
Expected return = Risk-free rate + (Beta * Market ris premium) .......... (1)
Where;
Risk-free rate of return = 3.8%
Market risk premium = 9%
Beta = 1.4
Substitute the values into equation (1), we have:
Expected return = 3.8% + (1.4 * 9%) = 16.40%
Therefore, the correct option is option A) 16.4%.
Liam had an extension built onto his home. He financed it for 48 months with a loan at % APR. His monthly payments were . How much was the loan amount for this extension?
Answer:
The loan is $31,694.73
Explanation:
The complete question is as follows;
Liam had an extension built onto his home. He financed it for 48 months with a loan at 5.75.7% APR. His monthly payments were $740. How much was the loan amount for this extension?
solution
We proceed as follows;
From the question, we have the following terms:
Rate = 5.7%
The monthly rate is thus;
Monthly rate = 5.7% / 12 = 0.475%
Mathematically;
Loan = Annuity * [1 - 1 / (1 + r)^n] / r
Loan = 740 * [1 - 1 / (1 + 0.00475)^48] / 0.00475
Loan = 740 * [1 - 0.796554] / 0.00475
Loan = 740 * 42.830712
Loan = $31,694.73
A product's ________ identifies the product or brand, describes several things about the product, and promotes the brand.
Answer: label
Explanation:
Product labels are the piece of material
that are being attached to a product in order for easy identification by consumers in order to know the brand and also to know the contents.
A product's label identifies the product or brand, describes several things about the product, and promotes the brand.
A product label identifies the product or brand, describes various things about the product, and promotes the brand. Developing product labeling is therefore a strategic task that can help identify the brand and position it in the market.
An example of how labeling can provide extra benefits for companies is through environmental certifications, which can come as a seal on labels and promote the company's environmental responsibility in a widespread and fast way.
Therefore, the labeling must have the design, layout and information aligned with the company's values so that there is promotion of its products and assist in consumer choice.
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Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner Store is produced by the following production process: Name of Company Revenues Cost of Purchased Inputs Citrus Growers Inc. $0.75 0 Florida Jam Company $2.00 $0.75 The Corner Store $2.50 $2.00 What is the value added of Florida Jam Company
Answer:
$1.75
Explanation:
Value added is calculated by subtracting the difference of revenue and the cost of inputs.
value added of Florida Jam Company = $2.50 - $0.75 = $1.75
What is the present value (PV) of an investment that pays $60,000 every year for four years if the interest rate is 9% APR, compounded quarterly?
Answer:
PV= $798,757.88
Explanation:
Giving the following information:
Cf= $60,000
i= 0.09/4= 0.0225
n= 4*4= 16
First, we need to calculate the future value using the following formula:
FV= {A*[(1+i)^n-1]}/i
A= annual cash flow
FV= {60,000*[(1.0225^16) - 1]} / 0.0225
FV= $1,140,323.89
Now, the present value:
PV= FV/(1+i)^n
PV= 1,140,323.89/(1.0225^16)
PV= $798,757.88
A customer sells short 1,000 shares of ABC stock at $4 in a margin account. The customer must deposit:________.
A. $2,000
B. $2,500
C. $4,000
D. $5,000
Answer: $4000
Explanation:
A margin account is typically offered by a brokerage firms so that investors can borrow money in order to purchase securities.
A customer sells short 1,000 shares of ABC stock at $4 in a margin account. The customer must deposit:
= $4 × 1000
= $4000
In its first year, a project is expected to generate earnings before interest and taxes of $237,884 and its depreciation expense is expected to be $87,882. If the company’s tax rate is 35%, what is the project’s expected net operating profit after taxes for the year?
Answer:
Net operating income= $242,506.6
Explanation:
Giving the following information:
Earnings before interest and taxes= $237,884
Depreciation expense= $87,882.
Tax rate= 35%
To calculate the net operating profit, we need to use the following structure:
EBIT= 237,884
Tax= (237,884*0.35)= (83,259.4)
Depreciation= 87,882
Net operating income= 242,506.6
Given the following data for Vinyard Corporation:
D=1000
V=4000
E=3000
V=4000
Calculate the proportions of debt (D/V) and equity (E/V) for the firm that you would use for
estimating the weighted average cost of capital (WACC):
A. 40% debt and 60% equity
B. 50% debt and 50% equity
C. 25% debt and 75% equity
D. none of the given values
Answer:
C
Explanation:
D / V = 1000 / 4000
Dividing 1000 by 4000 gives 0.25 = 25%
E / V = 3000 / 4000
Dividing 3000 by 4000 gives 0.75 = 75%
Muy Bueno Bakery sells three different products. Currently they are not able to meet all of their customers' demand. Using the following information, determine the price of the cake needed to meet the same contribution margin as the cookies. Cake Pie Cookies Contribution margin $18 $11 $3 Production hours 2 1.5 .25 Variable cost $12 $7 $1 Contribution margin/hr. $9 $7.33 $12 Current selling price $30 $18 $5 a.$45 b.$30 c.$42 d.$36
Answer:
d. $36
Explanation:
The Contribution margin is the net of selling price and variable cost of a product. It is calculated by deducting the variable cost from the selling price of a product.
Cake Pie Cookies
Current selling price $30 $18 $5
Variable cost $12 $7 $1
Contribution margin $18 $11 $3
Production hours 2 1.5 0.25
Contribution margin/hr. $9 $7.33 $12
Required Contribution margin per hour of cake = $12
Required Contribution margin = $12 x 2 = $24
Required Selling Price = Contribution margin + variable cost = $24 + $12 = $36
Note there is a mistake in the calculation of Contribution margin of Cookies as it is given $3 but after deducting the variable cost from selling price is should be $4 ( $5 - $1 ), I used the given contribution margin for the calculation.
Demand characteristics can threaten internal validity because the results ____ can be explained by reactivity instead of the treatment conditions correlate with those that threaten external validity may be specific to the experimenter who has the expectations may not generalize to situations where demand characteristics are different
Answer: can be explained by reactivity instead of the treatment conditions
Explanation:
Internal validity is the degree of confidence that a researcher has when he or she believes that the causal relationship that is not being influenced by other variables and therefore trustworthy.
Demand characteristics can threaten internal validity because the results can be explained by reactivity instead of the treatment conditions.
A PHLX Jan 80 Swiss Franc Call contract is quoted at 2 when the Swiss Franc closes at 77. The contract is:_______
Answer:
Out the money.
Explanation:
A PHLX Jan 80 Swiss Franc Call contract is quoted at 2 when the Swiss Franc closes at 77. The contract is out the money.
An out the money ultimately implies that an option only has an extrinsic value but no intrinsic value. The extrinsic value of an option refers to the difference between its intrinsic value and the market value (premium). An extrinsic value is affected by the volatility in the market and its time value. The intrinsic value of an asset refers to the calculated, true or real value of an asset and is solely affected by internal factors.
A call is out the money when the strike price is greater than or above the underlying price of an asset. This simply means that, it's market value (price) has fallen below its strike price.
In this scenario, the market price of the call is 77 while its strike price is 80; thus, the call option is out the money by 3.
Determine the present values if $5,000 is received in the future (i.e., at the end of each indicated time period) in each of the following situations:
percent for ten years
percent for seven years
percent for four years
Assume you are planning to invest $5,000 each year for six years and will earn 10 percent per year. Determine the future value of this annuity if your first $5,000 is invested at the end of the first year.
Determine the present value now of an investment of $3,000 made one year from now and an additional $3,000 made two years from now if the annual discount rate is 4 percent.
What is the present value of a loan that calls for the payment of $500 per year for six years if the discount rate is 10 percent and the first payment will be made one year from now? How would your answer change if the $500 per year occurred for ten years?
Determine the annual payment on a $500,000, 12 percent business loan from a commercial bank that is to be amortized over a five-year period.
Determine the annual payment on a $15,000 loan that is to be amortized over a four-year period and carries a 10 percent interest rate. Also prepare a loan amortization schedule for this loan.
Assume a bank loan requires an interest payment of $85 per year and a principal payment of $1,000 at the end of the loan's eight-year life.
At what amount could this loan be sold for to another bank if loans of similar quality carried an 8.5 percent interest rate? That is, what would be the present value of this loan?
Now, if interest rates on other similar-quality loans are 10 percent, what would be the present value of this loan?
What would be the present value of the loan if the interest rate is 8 percent on similar-quality loans?
Answer:
1)
the %s were missing so I looked for a similar question:
we must use the present value formula:
present value = future value / (1 + interest rate)ⁿ
5% ⇒ $5,000 / 1.05¹⁰ = $3,069.57
7% ⇒ $5,000 / 1.07⁷ = $3,113.75
9% ⇒ $5,000 / 1.09⁴ = $3,542.13
2)
we can use the future value of an annuity formula:
future value = annual payment x annuity factor
FV = $5,000 x 7.7156 (FV annuity factor, 10%, 6 years) = $38,578
3)
PV = $3,000/1.04 + $3,000/1.04² = $2,884.62 + $2,773.67 = $5,658.29
4)
present value of an annuity = $500 x 4.3553 (PV annuity factor, 10%, 6 periods) = $2,177.65
present value of an annuity = $500 x 6.1446 (PV annuity factor, 10%, 10 periods) = $3,072.30
5)
annual payment = present value / annuity factor = $500,000 / 3.6048 (PV annuity factor, 12%, 5 years) = $138,703.95
6)
annual payment = present value / annuity factor = $15,000 / 3.1699 (PV annuity factor, 10%, 4 years) = $4,732.01
7)
the value of the loan = PV of the principal + PV of the interest payments
PV of the principal = $1,000 / 1.085⁸ = $520.67
PV of interest payments = $85 x 5.63918 (PV annuity factor, 8.5%, 8 periods) = $479.33
market value of the debt = $1,000
8)
the value of the loan = PV of the principal + PV of the interest payments
PV of the principal = $1,000 / 1.085¹⁰ = $442.29
PV of interest payments = $85 x 5.3349 (PV annuity factor, 10%, 8 periods) = $453.47
market value of the debt = $895.76
9)
the value of the loan = PV of the principal + PV of the interest payments
PV of the principal = $1,000 / 1.08⁸ = $540.27
PV of interest payments = $85 x 5.7466 (PV annuity factor, 8.5%, 8 periods) = $488.46
market value of the debt = $1,028.73
Bronn tells Jaime, "I really like your armor." Jaime responds, "I will sell it to you for $800." Bronn states, "Sure, and throw in your sword too." Jaime then writes out the contract, detailing only that he will sell Bronn his armor and the sword. He also lists the delivery date for next Wednesday. The next week on the day of performance, Jaime fails to deliver the armor and sword. Bronn sues him for breach of contract, but Jaime claims the contract is not enforceable because it was missing the price. When Bronn filed his lawsuit, which of the following needed to be included in the written contract for enforceability?
a. signature of both parties
b. price subject
c. matter
d. delivery
e. performance
Answer:
B. price subject
Explanation:
For this contract to be enforceable, it must include price, matter and delivery date. These aspects are all best essential and should be included in the contract. From the question when Jaime wrote the contract he failed to detail the price they agreed upon. Even though the rest were included. Therefore this contract cannot be enforced since it is missing this important aspect. Option b is the answer to the question
The ABC Company is preparing its financial statements on December 31. During the year, they purchased IBM stock for $20,000. On December 31, the market value of the IBM stock is $8,000. The journal entry on December 31 will include a debit to:_______.
Answer:
Debit to unrealized loss for for $12,000
Explanation:
Based on the information given about ABC Company we were told that the company made a purchased of IBM stock for the amount of $20,000 in which the market value of the stock was the amount of $8,000 this means that the journal entry on December 31 will include a:
Debit to unrealized loss for for $12,000
Calculated as :
Unrealized loss=Market value - IBM stock
Unrealized loss=$8,000-$20,000
Unrealized loss=-$12,000
Tennessee Corporation is analyzing a capital expenditure that will involve a cash outlay of $109,332. Estimated cash flows are expected to be $36,000 annually for 4 years. The present value factors for an annuity of $1 for 4 years at interest of 10%, 12%, 14%, and 15% are 3.170, 3.037, 2.914, and 2.855, respectively. The internal rate of return for this investment is a.9% b.3% c.10% d.12%
Answer:
D
Explanation:
Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested
IRR can be calculated with a financial calculator
Cash flow in year 0 = $-109,332
Cash flow each year from year 1 to 4 = $36,000
IRR = 12%
To find the IRR using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the IRR button and then press the compute button.
For an automobile company, the total overhead applied was $48,000,000 at the end of the year. Actual overhead was $52,850,000. Closing over/under applied overhead into cost of goods sold would cause net income to:
Answer:
Net income decreased by $4,850,000.
Explanation:
Given total overhead applied = $48000000
The actual overhead = $52850000
Over/under Applied overhead = total overhead applied - Actual overhead at the end of the year.
Over / under Applied overhead = 48000000-52850000
Over / under Applied overhead = -$4850000
From the calculation, it can be seen that the overhead is underapplied therefore when under applied overhead allocated to cost of goods sold then cost of goods sold decreased by $4850000.
Booher Book Stores has a beta of 1.0. The yield on a 3-month T-bill is 3% and the yield on a 10-year T-bond is 6%. The market risk premium is 4.5%, and the return on an average stock in the market last year was 10.5%. What is the estimated cost of common equity using the CAPM
Answer:
Cost of equity = 10.5%
Explanation:
The capital asset pricing model is a risk-based model. Here, the return on equity is dependent on the level of reaction of the the equity to changes in the return on a market portfolio. These changes are captured as systematic risk. The magnitude by which a stock is affected by systematic risk is measured by beta.
Under CAPM, Ke= Rf + β(Rm-Rf)
Rf-risk-free rate (long-term i.e 10 year treasury bill rate), β= Beta, Rm= Return on market., Ke- Return on equity (cost of equity)
This model can be used to work out the cost of equity as follows:
Ke= Rf + β (Rm-Rf)
Rf- 6%, β= 1.0, Rm- 10.5, E(r)- ?
Ke = 6% + 1.0× (10.5 -6)% = 10.5%
Ke = 10.5%
Cost of equity = 10.5%
Factors of production, such as physical capital, human capital, and technological knowledge, are crucial to economic growth. Therefore, institutions that foster strong incentives and create an environment favorable to the development of such factors of production are vital to economic growth. Which of the following are examples of such institutions?
A. Competitive and open markets.B. Free-riding culture.C. A dependable legal system.D. Political stability.E. Government expropriation.
Answer:
A. Competitive and open markets.
C. A dependable legal system.
D. Political stability.
Explanation:
A Competitive and open Market ensures that people have enough incentives to invest in the development of factors of production because it rewards that investment with a healthy return. In a Competitive market, unfair competition will not be present therefore people will get equal opportunities to make returns.
A dependable Legal System and Political Stability go hand in hand to ensure that investors will have enough faith in the system to want to invest in Factors of Production. If a country is stable politically and abides by the rule of law, an investor will be assured that when they invest, these investments will be protected by the powers that be and their returns will not be impacted by political upheavals and breaches of contract that cannot be rectified.
In Year 1 Jorge buys a home for $200,000, making a down payment of $40,000 and taking out a loan from the bank for $160,000 to finance the balance. In Year 5 the remaining loan balance is $130,000 while the home has increased in value to $270,000. Jorge refinances with a loan company that agrees to lend 125% of the value of the home, or $337,500, using $130,000 to repay the bank loan and providing $207,500 in cash. Jorge immediately spends $10,000 of the cash on a lavish vacation to the Bahamas, and $20,000 to pay down credit cards.
How much of the $337,500 home equity loan balance is allowable for calculating the home mortgage interest deduction on Jorge’s Year 5 tax return?
a. $270,000
b. $240,000
c. $230,000
d. $220,000
Answer:
Under current tax law, no option is correct. Before 2018, option C would have been right.
Explanation:
Currently under the Tax Cuts and Jobs Act (from Jan. 2018 until Dec. 2025) you can only deduct interests on mortgages used to purchase, build or improve your home. In this case, Jorge will only be able to deduct the interests paid on the $130,000 he owed for the first mortgage.
Interests on home equity loans will again be deductible (up to $100,000) starting Jan. 2026.
Thomas Kratzer is the purchasing manager for the headquarters of a large insurance company chain with a central inventory operation. Thomas's fastest-moving inventory item has a demand of 5,900 units per year. The cost of each unit is $102, and the inventory carrying cost is $9 per unit per year. The average ordering cost is $29 per order. It takes about 5 days for an order to arrive, and the demand for 1 week is 118 units. (This is a corporate operation, and there are 250 working days per year).
Required:
a. What is the EOQ?
b. What is the average inventory if the EOQ is used?
c. What is the optimal number of orders per year?
d. What is the optimal number of days in between any two orders?
e. What is the annual cost of ordering and holding inventory?
f. What is the total annual inventory cost, including cost of the 6,000 units?
Answer: Please find answers below
Explanation:
(a) Economic order quantity EOQ = [tex]\sqrt{2 X Annual Demand X Ordering Cost) / Carrying Cost)}[/tex]
= [tex]\sqrt{2 X 5,900 X 29 / 9 }[/tex] = [tex]\sqrt{38,022.222}[/tex]
= 194.99 units
(b) Average number of units = Economic order quantity / 2
= 194.99 / 2
= 97.496 units
(c) Optimal number of orders = Annual Demand / Economic order quantity
= 5,900units / 194.99 units =30.26
(d) Optimal number of days between two orders = Number of working days / Optimal number of orders
= 250 days / 30.26
= 8.26
Total ordering cost = Cost per order X Number of orders
= $29 X 30.26
= $ 877.54
Total holding cost = Average inventory X carrying cost per unit
= 194.99 /2 X $9
= $877.455
(e) Annual cost of ordering and holding inventorY =Total ordering cost + Total carrying cost
= $ 877.54 + $877.455
= $ 1,754.995 ≈ $1,755
(f) Total annual inventory cost =Total ordering cost +Total holding cost + Actual cost of 5900 units at $102 per unit
= $ 877.54 + $877.455 + (5,900 x 102) = $1754.995 +601,800= $603,554.995≈$603,555
Total annual inventory cost =Total ordering cost +Total holding cost + Actual cost of 6000 units at $102 per unit
= $ 877.54 + $877.455 + (6000 x 102) = $1754.995 +612,000= $613,754.995≈$613,755
In what way did Henry Ford’s use of the assembly-line method of production represent an advance in technology in automobile manufacturing?
Answer: a. It allowed workers to specialize on specific tasks and become more productive.
Explanation:
The Assembly line method of production that Henry Ford initiated at his plant was a technological game changer as it enabled workers to assemble cars faster and this mass produce Ford cars at a cheaper rate for the masses.
The Assembly line worked by putting workers at various stages of the assembly line where they would focus on installing only one or a few parts into the prospective vehicle. This way they were able to focus on that specific task, become more adept at it and thus become more productive.
