Which of the following is true regarding the value of an option? A) Unlike the Black-Scholes formula, the Put-Call Parity suggests that the volatility of underlying asset is not a factor that affects the value of an option. B) The option premium is greater or equal to its intrinsic value because of the time premium. C) The call and put premiums are unrelated since they depend on different set of variables. D) The writer of the call option pays the same premium as the buyer of the put option. E) When the call option is out-of-the-money and the put option is in-the-money, the call must be more valuable than the put.

Answers

Answer 1

Answer: B) The option premium is greater or equal to its intrinsic value because of the time premium.

Explanation:

The option premium can be calculated by adding the time premium and the intrinsic value. The time premium is the part of the option premium that accounts for the time remaining till the premium matures while the intrinsic value is the difference between the value of underlying asset and the strike price.

As the time premium can be zero but never negative, the option premium can either be greater than its intrinsic value or equal to it. It cannot be lower than it because of the time premium.


Related Questions

Explain how you decided whether payments on foreign investment and government transfers counted on the positive or the negative side of the current account balance for the United Kingdom in 2001.

Answers

Answer:

The payments on foreign investment and the government transfers counted on the negative side of the current account balance for the United Kingdom in 2001.

Explanation:

A national records the nation's transactions with the rest of the world on exporting, importing, foreign incomes and current transfers, over a defined period of time. The country's current account balance can be positive as a surplus or negative as a deficit. Typically, the payments on foreign investments and the government transfers like foreign aids are rated as negative because they are monies transferred out of the country in a particular period of a time.

You have invested 20 percent of your portfolio in Homer, Inc., 40 percent in Marge Co., and 20 percent in Bart Resources. What is the expected return of your portfolio if Homer, Marge, and Bart have expected returns of 2 percent, 18 percent, and 3 percent, respectively?

Answers

Answer:

Expected return = 8.2%

Explanation:

A portfolio is a collection of assets/ investment. The return on a portfolio is the weighted average of all the return of the individual assets weighted according to the percentage of total funds allocated to each assets.

Expected return on portfolio:

E(R) =( Wa*Ra) + (Wb*Rb)  + (Wc*Rc) + Wn*Rn

W= Weight i.e proportion of fund invested in each asset class

Wa = 20%, Wb- 40%, Wc- 20%

Ra-2%, Rb-18%, Rc- 3%

E(R) = (0.2 *2%) + (0.4× 18%) + (0.2*3%) = 8.2%

Expected return = 8.2%

A corporation has 12,000 shares of $20 par stock outstanding that has a current market value of $150. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately $50.

a. True
b. False

Answers

Answer:

False

Explanation:

In a 4-for-1 stock split, for every 1 share held by shareholders, it is multiplied to 4.

if outstanding shares is 12,000, after the split the shares outstanding pictures becomes 12,000 x 4 = 48,000

Market value of shares outstanding = $150 / 4 = $37.50

Drew and Tammy decide to start a new cake-decorating business. They each contribute $10,000 to get the business off the ground. This money is considered

Answers

Answer: a down payment or deposit

Explanation:

Drew and Tammy decide to start a new cake-decorating business. They each contribute $10,000 to get the business off the ground. This money is considered as equity capital.

What do you mean by Business?

The exchange, acquisition, sale, or creation of goods and services with the aim of making money and meeting client demands constitutes business. Businesses can be for-profit or nonprofit entities that work to further a social cause or make a profit, respectively.

Equity in the context of finance refers to ownership of assets with potential obligations such as debts. For accounting reasons, equity is calculated by deducting liabilities from the value of the assets. The difference of $14,000, for instance, is equity if a person owns a car worth $24,000 and owes $10,000 on the loan used to purchase the vehicle.

A single asset, like a car or house, or an entire company may be covered by equity. A company that needs to launch or grow its operations can sell equity to raise money that doesn't need to be repaid on a predetermined timeline.

Therefore, The money will be considered as Equity capital.

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What happens to consumption and investment spending when the Federal Reserve decreases the money supply

Answers

Answer: Consumption and investment spending decrease or falls.

Explanation:

When the Federal Reserve decreases the money supply, this will lead to a fall in the consumption and investment spending. This is a contractionary policy by the government which is typically used to curb inflation.

Since there's reduction in money supply, there'll be less money in circulation and hence, decrease in consumption and investment expenditure.

Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:Year Unit Sales1 76,0002 89,0003 108,7504 101,5005 68,800Production of the implants will require $2,250,000 in net working capital to start and additional net working capital investments each year equal to 20 percent of the projected sales increase for the following year. Total fixed costs are $4,700,000 per year, variable production costs are $270 per unit, and the units are priced at $420 each. The equipment needed to begin production has an installed cost of $19,500,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as seven-year MACRS property. In five years, this equipment can be sold for about 25 percent of its acquisition cost. The tax rate is 25 percent the required return is 15 percent. MACRS schedulea. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)b. What is the IRR? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

Answers

Answer:

NPV = $3,013,537.02

IRR = 20.15%

Explanation:

initial investment $19,500,000

sales revenue per year:

year 1 = 76,000 x $420 = $31,920,000

year 2 = 89,000 x $420 = $37,380,000

year 3 = 108,750 x $420 = $45,675,000

year 4 = 101,500 x $420 = $42,630,000

year 5 = 68,800 x $420 = $28,896,000

change in net working capital:

year 0 = $2,250,000

year 1 = ($37,380,000 - $31,920,000) x 0.2 = $1,092,000

year 2 = ($45,675,000 - $37,380,000) x 0.2 = $1,659,000

year 3 = ($42,630,000 - $45,675,000) x 0.2 = -$609,000

year 4 = ($28,896,000 - $42,630,000) x 0.2 = -$2,746,800

year 5 = -$1,646,000

fixed costs = $4,700,000

contribution margin per unit = $420 - $270 = $150 per unit

resale value at the end of year 5 = $3,900,000

MACRS depreciation 7 year property:

year          %                depreciation expense

1               14.29%          $2,786,550

2              24.49%         $4,775,550

3              17.49%          $3,410,550

4              12.29%          $2,396,550

5              6.44%*          $1,255,800*

                   *net of resale value

net cash flow year 0 = -$19,500,000 - $2,250,000 = -$21,750,000

net cash flow year 1 = [($11,400,000 - $4,700,000 - $2,786,550) x 0.75] + $2,786,550 - $1,092,000 = $4,629,637.50

net cash flow year 2 = [($13,350,000 - $4,700,000 - $4,775,550) x 0.75] + $4,775,550 - $1,659,000 = $6,022,387.50

net cash flow year 3 = [($16,312,500 - $4,700,000 - $3,410,550) x 0.75] + $3,410,550 + $609,000 = $10,171,012.50

net cash flow year 4 = [($15,225,000 - $4,700,000 - $2,396,550) x 0.75] + $2,396,550 + $2,746,800 = $11,239,687.50

net cash flow year 5 = [($10,320,000 - $4,700,000 - $1,255,800) x 0.75] + $1,255,800 + $1,646,000 = $6,174,950

NPV = $3,013,537.02

IRR = 20.15%

In this exercise we will use our knowledge of finance to calculate interest, so we find that:

[tex]NPV = \$3,013,537.02[/tex] [tex]IRR = 20.15\%[/tex]

So knowing that from the initial investment we will obtain the following values ​​per year:

[tex]year 1 = 76,000 * \$420 = \$31,920,000[/tex]

[tex]year 2 = 89,000 * \$420 = \$37,380,000[/tex]

[tex]year 3 = 108,750* \$420 = \$45,675,000[/tex]

[tex]year 4 = 101,500 * \$420 = \$42,630,000[/tex]

[tex]year 5 = 68,800 * \$420 = \$28,896,000[/tex]

So knowing that from the net working capital we will obtain the following values ​​per year:

[tex]year 0 = \$2,250,000\\year 1 = (\$37,380,000 - \$31,920,000) * 0.2 = \$1,092,000\\year 2 = (\$45,675,000 - \$37,380,000) * 0.2 = \$1,659,000\\year 3 = (\$42,630,000 - \$45,675,000) * 0.2 = -\$609,000\\year 4 = (\$28,896,000 - \$42,630,000) * 0.2 = -\$2,746,800\\year 5 = -\$1,646,000[/tex]

Then from the values ​​previously informed we can calculate the cash flow, as:

[tex]year 0 = -\$19,500,000 - \$2,250,000 = -\$21,750,000\\year 1 = [(\$11,400,000 - \$4,700,000 - \$2,786,550) * 0.75] + \$2,786,550 - \$1,092,000 = \$4,629,637.50\\year 2 =\$6,022,387.50\\year 3 = \$10,171,012.50\\year 4 = \$11,239[/tex]

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At the end of the fiscal year, variances from standard costs are usually transferred to the Group of answer choices factory overhead account direct labor account direct materials account cost of goods sold account

Answers

Answer: Cost of goods sold account

Explanation:

When a company is operating a Standard Cost system, all their inventory accounts will be recorded at their standard costs.

The Variances that exist between the Standard and Actual costs will be recorded in the variance accounts as well as the manufacturing overhead account.

At the end of the fiscal year, the balances on these accounts are sent to the Cost of Goods sold account to reflect true cost.

Entity A supplies planed timber, paint, varnish, springs, upholstery, and cushioning to Entity B, which produces a ready to use furniture. Entity C is the marketing department of Entity B. In this context, ______.

Answers

Answer:

A is an upstream supply chain member while C is the downstream chain member

Explanation:

There are two portions of the supply i.e downstream and upstream. In the upstream it reflects the suppliers of the organization and its process for managing the relation

While on the other hand the downstream reflects the process for distribution and delivery of products to the customers T

Therefore in the given case, Entity A is upstream while the Entity C is downstream

Ten years ago you put $150000.00 into an interest earning account. Today it's worth $275000. What is the effective annual interest earned on the account

Answers

Answer:

the effective annual interest earned on the account is 6.25%.

Explanation:

The effective annual interest earned on the account can be calculated as follows :

PV = - $150,000

N = 10

PMT = $0

P/yr = 1

FV = $275,000

R = ?

Using a Financial calculator, the  effective annual interest, R, earned on the account will be : 6.2488 or 6.25%.

1. The Lounge Company manufactures slippers and sells them at $10 a pair. Variable manufacturing cost is $4.75 a​ pair, and allocated fixed manufacturing cost is $0.75 a pair. It has enough idle capacity available to accept a​ one-time-only special order of 30,000 pairs of slippers at $5.50 a pair. Lounge will not incur any marketing costs as a result of the special order. What would the effect on operating income be if the special order could be accepted without affecting normal​ sales: (a)​ $0, (b) $22,500 ​increase, (c) $142,500 ​increase, or​ (d) $165,000 ​increase? Show your calculations. 2. The St. Paul Company manufactures Part No. 498 for use in its production line. The manufacturing cost per unit for 25,000 units of Part No. 498 is as​ follows:

Answers

Answer:

1. The Lounge Company

The effect on operating income be if the special order could be accepted without affecting normal​ sales:

(b) $22,500 ​increase

2. Manchester

Explanation:

1. The Lounge Company:

Selling price = $10 per pair

Variable manufacturing cost = $4.75 per pair

Allocated fixed manufacturing cost = $0.75 per pair

Total manufacturing costs = $5.50

Special order of 30,000 pairs

Price of special order = $5.50 per pair

Sales value of special special order = $165,000 (30,000 x $5.50)

Manufacturing cost for special order:

Based on full cost = $165,000 (30,000 x $5.50)

Based on variable cost = $142,500 (30,000 x $4.75)

Contribution = $22,500 ($165,000 - $142,500)

The special order will not bring about any increase in operating income if the full cost is used to determine the net income.  If, however, the variable cost is used, considering that The Lounge Company has idle capacity, then there is a contribution of $22,500 to the operating income.

Three months ago, you purchased a stock for $54.14. The stock is currently priced at $57.36. What is the EAR on your investment?

Answers

Answer:

The EAR on the investment is 23.79%

Explanation:

Here, we are concerned with calculating the EAR on the stock investment.

Firstly, we start with calculating the return on shares

Mathematically, that is; P1 - P0

From the question P1 = $57.36 while P0 = $54.14

So Return on shares = $57.36-$54.14 = $3.22

We proceed with calculating the Return on shares in percentage

Mathematically;

Return on shares in % = Return on shares/P0 * 100

= 3.22/54.14 * 100 = 5.95%

Lastly we calculate the effective annual interest;

The effective annual interest = 5.95%/3 * 12 = 23.79%

The EAR on the investment is 23.79%

Calculation of EAR:

Since Three months ago, you purchased a stock for $54.14. The stock is currently priced at $57.36.

So, the difference of the price is

= $57.36-$54.14

= $3.22

Now return on shares should be

= 3.22/54.14 * 100

= 5.95%

Now EAR is

= 5.95%/3 * 12

= 23.79%

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A modified DCF analysis is best for evaluating and selecting the optimal strategic alternative when a company has ___ goal(s) and ___ measure(s).

Answers

Answer: single; quantitative

Explanation:

The discounted cash flow analysis is a method that is used to determine the value of a project, security, or assets by using time value of money.

The discounted cash flow analysis is used in real estate, investment finance, patent valuation etc. A modified DCF analysis is best for evaluating and selecting the optimal strategic alternative when a company has single goal(s) and quantitative measures.

Answer:

Multiple; quantitative

Explanation:

A modified DCF analysis is best for evaluating and selecting the optimal strategic alternative when a company has ___ goal(s) and ___ measure(s).

Record the following transactions on the books of Splish Brothers Inc.a. On July 1, Splish Brothers Inc. sold merchandise on account to Waegelein Inc. for $16,100, terms 2/10, n/30. b. On July 8, Waegelein Inc. returned merchandise worth $4,900 to Splish Brothers Inc.c. On July 11, Waegelein Inc. paid for the merchandise.

Answers

Answer and Explanation:

The Journal entries are shown below:-

1. Accounts Receivable Dr, $16,100

           To Sales $16,100

(Being sales is recorded)

2. Sales Returns and Allowances Dr, $4,900

             To Accounts Receivable $4,900

(Being return of the merchandise is recorded)

3. Cash Dr, $10,976 ($16,100 - $4,900) × 98%

   Sales Discounts Dr, $224 ($16,100 - $4,900) × 2%

                To Accounts Receivable $11,200 ($16,100 - $4,900)

(Being cash collection on the account is recorded)

You are planning to save for retirement over the next 25 years. To do this, you will invest $880 per month in a stock account and $480 per month in a bond account. The return of the stock account is expected to be an APR of 10.8 percent, and the bond account will earn an APR of 6.8 percent. When you retire, you will combine your money into an account with an APR of 7.8 percent. All interest rates are compounded monthly. How much can you withdraw each month from your account assuming a withdrawal period of 20 years

Answers

Answer:

$14,143.86 can be withdrawn each month from the account for 20 years.

Explanation:

To determine this, the first step is to use the formula for calculating the future value (FV) of ordinary annuity to calculate the FV of both stock and bond as follows:

Calculation of Future Value of Stock

FVs = M × {[(1 + r)^n - 1] ÷ r} ................................. (1)

Where,

FVs = Future value of the amount invested in stock after 25 years =?

M = Monthly investment = $880

r = Monthly interest rate = 10.8% ÷ 12 = 0.9%, or 0.009

n = number of months = 25 years × 12 months = 300

Substituting the values into equation (1), we have:

FVs = $880 × {[(1 + 0.009)^360 - 1] ÷ 0.009}

FVs = $880 × 1,522.3445923122

FVs = $1,339,663.24

Calculation of Future Value of Bond

FVd = M × {[(1 + r)^n - 1] ÷ r} ................................. (1)

Where,

FVd = Future value of the amount invested in bond after 25 years =?

M = Monthly investment = $480

r = Monthly interest rate = 6.8% ÷ 12 = 0.566666666666667%, or 0.00566666666666667

n = number of months = 25 years × 12 months = 300

Substituting the values into equation (1), we have:

FVd = $480 × {[(1 + 0.00566666666666667)^300 - 1] ÷ 0.00566666666666667}

FVd = $480 × 784.895879465925

FVd = $376,750.02

Calculation of the amount that can be withdrawn monthly for 20 years

To calculate this, the formula for calculating the present value of an ordinary annuity is used as follows:

PV = P × [{1 - [1 ÷ (1+r)]^n} ÷ r] …………………………………. (3)

Where;

PV = Combined present values of stock and bond investments after retirement = FVs + FVb = $1,339,663.24 + $376,750.02 = $1,716,413.26

P = Monthly withdrawal = ?

r = Monthly interest rate = 7.8% ÷ 12 = 0.65%, or 0.0065

n = number of months = 20 years * 12 months = 240

Substitute the values into equation (3) and solve for P to have:

PV = P × [{1 - [1 ÷ (1+r)]^n} ÷ r]

$1,716,413.26 = P × [{1 - [1 ÷ (1 + 0.0065)]^240} ÷ 0.0065]

$1,716,413.26 = P × 121.353915567094

P = $1,716,413.26 / 121.353915567094

P = $14,143.86

Therefore, $14,143.86 can be withdrawn each month from the account for 20 years.

How much would you have to deposit today if you wanted to have $60,000 in four years? Annual interest rate is 9%. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) b. Assume that you are saving up for a trip around the world when you graduate in two years. If you can earn 8% on your investments, how much would you have to deposit today to have $15,000 when you graduate? (Round your answer to 2 decimal places.)

Answers

Answer:

a. $42,505.51

b. $12,860.08

Explanation:

The computation of the present value is shown below:-

Present value = FV ÷ (1 + r) × n

= $60,000 ÷ (1 + 0.09) × 4

= 60,000 ÷ 1.411582

= $42,505.51

b. The computation of present value is shown below:-

Present value = FV ÷ (1 + r) × n

= 15,000 ÷ (1 + 0.08) × 2

= 15,000 ÷ 1.1664

= $12,860.08

Therefore we have applied the above formula.

Answer:A: 42,505

B: 12,860

Explanation:

Schwartzkopf Co. purchased for $2,088,000 property that included both land and a building to be used in operations. The seller's book value was $294,000 for the land and $986,000 for the building. By appraisal, the fair value was estimated to be $826,355 for the land and $2,023,145 for the building. At what amount should Schwartzkopf report the land and the building at the end of the year?

Answers

Answer:

Cost allocated to land=$605,520

Cost allocated to building=$1,482,480

Explanation:

Calculation for the amount that Schwartzkopf should report the land and the building at the end of the year

A. Calculation for Cost allocated to land

Using this formula

Cost allocated to land=Fair value of land/

Fair value of building and land×Cost

Let plug in the formula

Cost allocated to land=$826,355/($2,023,145+$826,355)×$2,088,000

Cost allocated to land=$826,355/$2,849,500×$2,088,000

Cost allocated to land=0.29×$2,088,000

Cost allocated to land=$605,520

Therefore the Cost allocated to land will be $605,520

B. Calculation for Cost allocated to building

Using this formula

Cost allocated to building=Fair value of land/

Fair value of building and land×Cost

Let plug in the formula

Cost allocated to building=$2,023,145/$2,023,145+$826,355)×$2,088,000

Cost allocated to building=$2,023,145/$2,849,500×$2,088,000

Cost allocated to building=0.71×$2,088,000

Cost allocated to building=$1,482,480

Therefore Cost allocated to building will be $1,482,480

Which of the following is true about the Fed?

A. it cannot directly affect the economy but it can influence institutions that can affect the economy

B. it has no real power since in the long run, money is neutral

C. it has more power to affect the economy than any other institution

D. it has a lot of power to affect the inflation rate, but not the unemployment rate

Answers

Answer:

C. it has more power to affect the economy than any other institution

Explanation:

The FED manages the monetary policy affecting the economy's money supply. This in turn affects interest rates directly. It also has an enormous indirect influence on economic growth (it can stimulate it or cool it), currency value, value of stock markets, unemployment (directly related to economic growth), etc.

The FED is probably the institution that influences the economy the most.

A cloth manufacturing firm is deciding whether or not to invest in new machinery. The machinery costs $45,000 and is expected to increase cash flows in the first year by $25,000 and in the second year by $30,000. The firm’s current fixed costs are $9,000 and current marginal cost are $15. The firm currently charges $18 per unit.

Required:
If the interest rate is 5% then. what is the present value of the cash flows?

Answers

Answer:

$51,020.40

Explanation:

We use the formula PV = FV * (1 + r)^n for finding the present value

There are two cash flows, one that occur in year 1 at $25,000 and second that occur in year 2 at $30,000.

Find the PV of this cash flow at r = 5% and n = 1 and 2 =

25000(1+5%)^-1 + 30000(1 + 5%)^-2

25,000(1+0.05)^-1 + 30,000(1 + 0.05)^-2

25,000(1.05^)-1 + 30,000(1.05)^-2

25,000(0.952381) + 30,000(0.907029)

23,809.525 + 27,210.87

=$51,020.40

Thus, the present value of the cash flows is $51,020.40

Guardian Corporation has two major divisions-Healthcare Products and Pharmaceutical Products. It provides the following information for the year Pharmaceutical Division Healthcare Division $150,000 $47.000 $310,000 $1,000,000 $218,400 $5,660,000 13 0% sales ating income age assets Target rate of return 13 0% Calculate the residual income for the Healthcare Division.
a. $47 000
b. $6700
c. $27.500
d. $103,000

Answers

Answer:

Residual income =$6,700

Explanation:

Residual income is the excess of the controllable profit over the opportunity cost of capital invested.

It is used to evaluate the financial performance of a division or department.

The a positive residual value indicate a good performance, hence the higher the residual  value the better

It is computed as follows:

Residual income = Controllable profit - (cost of capital× operating assets)

Controllable  profit = 47,000  

Interest on capital = ×  13% × 310,000 = 40300

Residual income = 47,000 - 40,300 =  6700

Residual income =$6,700

 

 

Abbott Company uses the allowance method of accounting for uncollectible accounts. Abbott estimates that 3% of credit sales will be uncollectible. On January 1, Allowance for Doubtful Accounts had a credit balance of $3,700. During the year, Abbott wrote off accounts receivable totaling $2,500 and made credit sales of $115,000. There were no sales returns during the year. After the adjusting entry, the December 31 balance in Bad Debt Expense will be

Answers

Answer:Bad debts expense = $3,450

Explanation:Bad debt expense is the expense of account receivable  that a business understands will not be paid due to the inability of a customer to pay its outstanding debt. Bad debt can be calculated using the direct write off method and the allowance method.

Here Abbot company uses the allowance method by taking into consideration  a reserve  which is an estimated  percentage of the sales known as an adjusted risk  for its customers who may not pay.

     

Credit sales revenue  115, 000    

Estimated Bad debt   3%    

Bad debts expense   3% x 115,000 = $3,450

Messing Company has their own credit card and makes a credit sale on February 1 to one of its customers for $5,000. Prepare the February 1 journal entry for Messing Company by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Answers

Answer:

February 1

DR Accounts Receivable.......................................$5,000

CR Sales........................................................................................$5,000

(To record sales on credit)

The credit card was that of Messing company itself.

An asset has an average return of 11.57 percent and a standard deviation of 24.54 percent. What is the most you should expect to lose in any given year with a probability of 2.5 percent?

Answers

Answer:

-37.51

Explanation:

Confidence interval = 1 - Probability * 2

= 1 - 0.025*2

= 0.95

= 95%

As per 95% rule , range = mean +/- 2 * Standard deviation

= 11.57 +/- 2 * 24.54

= 11.57 - 2 * 24.54 to 11.57 + 2 * 24.54

= 11.57 - 49.08 to 11.57 + 49.08

= -37.51 to 60.65

Conclusion: -37.51 is the lower bound hence it is the max one can expect to lose in any given year.

How much time, on average, would a server need to spend on a customer to achieve a service rate of 20 customers per hour?

Answers

Answer:

3 hour 18 minutes or 3 hour

Explanation:

According to the given situation, the computation of time on average is shown below:-

The Average waiting time in the system

= [tex]\frac{1}{\mu} -\gamma[/tex]

Now we will put the values into the above formula to reach the time on average which is here below:-

[tex]= \frac{1}{20} - 1[/tex]

[tex]= \frac{1}{19}[/tex]

= 0.053 × 60 minutes

= 3 hours 18 minutes

We assume [tex]\gamma[/tex] is 1 hour

Therefore for computing the time on average we simply applied the above formula.

The direct labor budget of Yuvwell Corporation for the upcoming fiscal year contains the following details concerning budgeted direct labor-hours:

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Budgeted direct labor-hours 11,000 9,700 10,000 10,800

The company uses direct labor-hours as its overhead allocation base. The variable portion of its predetermined manufacturing overhead rate is $5.75 per direct labor-hour and its total fixed manufacturing overhead is $78,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation, which is $19,500 per quarter.

Required:
a. Prepare the company’s manufacturing overhead budget for the upcoming fiscal year.
b. Compute the company’s predetermined overhead rate (including both variable and fixed manufacturing overhead) for the upcoming fiscal year.

Answers

Answer:

Manufacturing Overhead Budget

Quarter                              1st                 2nd                 3rd               4th

Variable Overheads    $63,250         $55,775          $57,500    $62,100

Fixed Overheads         $78,000        $78,000          $78,000    $78,000

Total Overheads         $141,250        $133,775          $135,500   $140,100

Explanation:

When Preparing the Manufacturing Overhead Budget Note the following :

The Manufacturing Overheads Include Both Fixed and Variable Overheads.Be careful to absorb the Variable overheads cost at the direct labor-hour.Fixed Overheads can Include both cash and non-cash items.

Despite the theoretical elegance of this hypothesis, empirical studies have come to the opposite conclusion. Despite the favorable effect of international diversification of cash flows, bankruptcy risk was only about the same for MNEs as for domestic firms. However, MNEs faced higher costs for each of the following EXCEPT:
A) agency costs.
B) political risk.
C) asymmetric information.
D) In fact, each of these costs were higher for the MNE than for the domestic firm.

Answers

Answer:

D) In fact, each of these costs were higher for the MNE than for the domestic firm.

Explanation:

It has been concluded through empirical studies, that Multinational Enterprises, MNEs encounters various factors leading to lower debt ratios and a higher cost of long-term debt, such as greater agency costs, political risk, asymmetric information, and foreign exchange risk,

Hence, given the question above, the right answer is option D "In fact, each of these costs was higher for the MNE than for the domestic firm."

What transportation mode has very high initial investment costs but gives a very low cost per mile for products that are highly specialized and require no packaging?

Answers

Complete Question:

What transportation mode has very high initial investment costs but gives a very low cost per mile for products that are highly specialized and require no packaging?

Group of answer choices.

A. Highway

B. Rail

C. Water

D. Pipeline

E. Air

Answer:

D. Pipeline.

Explanation:

Pipeline transportation can be defined as the long-distance transportation of consumer fluid products such as liquefied natural gases or crude oil, through a system of interconnected pipes.

As a result of the long distance being covered, pipeline transportation mode has very high initial investment costs because it requires excavation of the soil to enable the laying of pipes running into several miles.

However, the advantage of the pipeline transportation mode is that it gives a very low cost per mile for products that are highly specialized and require no packaging.

An asset has an average return of 10.31 percent and a standard deviation of 22.47 percent. What is the most you should expect to lose in any given year with a probability of 16 percent

Answers

Answer:

-34.63

Explanation:

Confidence interval = 1 - probability * 2

= 1 - 0.16 * 2

= 0.71

= 71%

As per 95% rule, range = mean + / -2 * standard deviation.

10.31 +/- 2 * 22.47

10.31 - 2 * 22.47 to 10.31 + 2 * 22.47

10.31 - 44.94 to 10.31 + 44.94

-34.63 to 55.25

Conclusion: -34.63 is the lower bound hence it is the maximum one can expect to lose in any given year.

When the most you should anticipate losing in any given year with a probability of 16 percent is -34.63

Calculation of Probability

Then Confidence interval is = 1 - probability * 2

After that = 1 - 0.16 * 2

Now, = 0.71

= 71%

As per 95% rule, range is = mean + / -2 * standard deviation.

Then, 10.31 +/- 2 * 22.47

After that, 10.31 - 2 * 22.47 to 10.31 + 2 * 22.47

Then, 10.31 - 44.94 to 10.31 + 44.94

Therefore, -34.63 to 55.25

Now, The Conclusion: -34.63 is the lower bound Thus, it is the maximum one can expect to lose in any given year.

Find more information about Probability here:

https://brainly.com/question/14464022

Net sales$688,500 $450,000 Cost of goods sold 337,364 133,200 Determine the 2016 and 2017 trend percents for net sales using 2016 as the base year.

Answers

Answer:

Trend- % change in sales =  34.64%

Explanation:

Trend analysis entails determining the performance of a business over time by comparing its performance data from one period to another. The aim of trend analysis is to identify the behavior of a set of ratios over a period of time by comparing them across different years.

To determine the trend for a particular data, we use the formula below

% Change in variable =

(Current year figure - Previous year figure)/Previous year figure × 100

DATA

Current year figure  for sales (2017) - 450,000

Previous year figure for sale (2016) - 688,500

% change in sales =   (450,000 -688,500)/688,500 × 100 = 34.64%

% change in sales =  34.64%

This implies that the company made sales in 2017 which is 34.64% less than that made in 2016

Break-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $188 per unit during the current year. Its income statement is as follows:
Sales $188,000,000
Cost of goods sold (100,000,000)
Gross profit $88,000,000
Expenses:
Selling expenses $16,000,000
Administrative expenses 12,000,000
Total expenses (28,000,000)
Operating income $60,000,000
The division of costs between variable and fixed is as follows:
Variable Fixed
Cost of goods sold 70% 30%
Selling expenses 75% 25%
Administrative expenses 50% 50%
Management is considering a plant expansion program for the following year that will permit an increase of $11,280,000 in yearly sales. The expansion will increase fixed costs by $5,000,000 but will not affect the relationship between sales and variable costs.
Required:
1. Determine the total variable costs and the total fixed costs for the current year.
2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.
3. Compute the break-even sales (units) for the current year.
4. Compute the break-even sales (units) under the proposed program for the following year.
5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $60,000,000 of operating income that was earned in the current year.
6. Determine the maximum operating income possible with the expanded plant.
7. If the proposal is accepted and sales remain at the current level, what will the operating income or loss be for the following year?
8. Based on the data given, would you recommend accepting the proposal?
A. In favor of the proposal because of the reduction in break-even point.
B. In favor of the proposal because of the possibility of increasing income from operations.
C. In favor of the proposal because of the increase in break-even point.
D. Reject the proposal because if future sales remain at the current level, the income from operations will increase.
E. Reject the proposal because the sales necessary to maintain the current income from operations would be below the current year sales.

Answers

Answer:

1.                                            Variable           Fixed

Cost of goods sold          70,000,000     30,000,000

Selling Expenses             12,000,000        4,000,000

Administrative Exp.           6,000,000         6,000,000

Total                                  88,000,000     40,000,000

Note:

Cost of goods sold 70% 30% on 10,000,000 for variable and Fixed respectively

Selling expenses 75% 25% on $16,000,000 for variable and Fixed respectively

Administrative expenses 50% 50% on $12,000,000 for variable and Fixed respectively

2. Unit Variable cost = Total variable cost / Units produced

Total Variable cost          88,000,000

Unit produced                  1,000,000

Unit variable cost                  88      

Unit Contribution margin = Selling Price - Variable cost per unit

Selling Price                        $188

- Variable cost per unit       $88

Unit Contribution margin   $100

3. Break even Point (Units) = Fixed cost / Contribution margin per unit

Fixed cost                                    40,000,000

Contribution margin per Unit           100    

Break even Point (Units)               400,000

4. Break even point (units) = Fixed cost / Contribution margin per unit

Fixed cost                                           40,000,000

Increased Fixed cost                           5,000,000

Total New fixed cost                          45,000,000

Contribution margin per unit                   100      

Break even point (units)                      450,000

5. Determined sales units = (New fixed cost + Desired Income) / Contribution margin

New Fixed Cost                45,000,000

Desired Income                60,000,000

                                         105,000,000

Contribution margin                100        

per unit

Determined sales units      1,050,000

6. Maximum Income from operation = Total New sales - Total New variable cost - Total Fixed cost

Sales                               188,000,000

Increased sales               11,280,000

Total New sales              199,289,000

Variable cost                    88,000,000

New Variable cost             5,280,000

Total New Variable cost   93,280,000

Total New Fixed cost       45,000,000

Maximum Income from   61,000,000

operation

Number of units = Increase in sales / Price per unit

New variable cost = Number of units * Unit variable cost

Increased sales                    11,280,000

Price per unit                            188    

Number of units                      60,000

Unit variable cost x                  88.00

New Variable cost                 5,280,000

7. Net income = Sales - Variable cost - New fixed cost

Sales                           188,000,000

Less: Variable cost      88,000,000

Less: New fixed cost   45,000,000

Net Income                  55,000,000

8. Option b. In favour of the proposal because of the possibility of increasing income from operation.

1. The total variable costs are $88,000,000.

Total fixed costs for the current year are $40,000,000.

2.a.  The unit variable cost is $88 ($88,000,000/1,000,000)

b. The unit contribution margin is $100 ($188 - $88).

3. The break-even sales (units) for the current year = 400,000 units ($40,000,000/$100).

4. The break-even sales (units) for the proposed program = 450,000 units ($45,000,000/$100).

5. Sales units to realize $60,000,000 of operating income = 1,050,000 units ($45,000,000 + $60,000,000)/$100

6. The maximum operating income with the expanded plant is $61,000,000 ($199,280,000 - $93,280,000 - $45,000,000).

7. Operating income at current sales level = $49,720,000 (188,000,000 - $93,280,000 - $45,000,000).

8. I would recommend the acceptance of the proposal, B. In favor of the proposal because of the possibility of increasing income from operations.

Data and Calculations:

Sales unit at full capacity = 1,000,000 units

Selling price per unit= $188

Sales = $188,000,000

Cost of goods sold = $100,000,000

Variable cost of goods sold = $70,000,000 ($100,000,000 x 70%)

Fixed cost of goods sold = $30,000,000 ($100,000,000 x 30%)

Gross profit = $88,000,000

Expenses:

Selling expenses = $16,000,000

Variable cost of goods sold = $12,000,000 ($16,000,000 x 75%)

Fixed cost of goods sold = $4,000,000 ($16,000,000 x 25%)

Administrative expenses = 12,000,000

Variable cost of goods sold = $6,000,000 ($12,000,000 x 50%)

Fixed cost of goods sold = $6,000,000 ($12,000,000 x 50%)

                                           Variable                   Fixed

Cost of goods sold                 70%                       30%

Selling expenses                    75%                       25%

Administrative expenses       50%                       50%

Cost of goods sold       $70,000,000          $30,000,000

Selling expenses             12,000,000               4,000,000

Administrative expenses 6,000,000               6,000,000

Total costs                    $88,000,000         $40,000,000

Selling price per unit = $188

Variable cost per unit      88

Contribution margin     $100

Contribution ratio = 53.2% ($100/$188 x 100)

Fixed costs = $45,000,000 ($40,000,000 + $5,000,000)

Sales Revenue = $199,280,000 ($188,000,000 + $11,280,000)

Additional sales units = 60,000 ($11,280,000/$188)

Total sales units = 1,060,000 (1,000,000 + 60,000)

Learn more: https://brainly.com/question/18155783

Suppose the Federal Reserve purchases $1,000,000 worth of foreign assets.
a. if the Federal Reserve purchases the foreign assets with 51,000,000 in currency, show the effect of this open market operation, using T-accounts. What happens to the monetary base?
b. if the Federal Reserve purchases the foreign assets by selling 51,000,000 in T-bills, show the effect of this open market operation, using T-accounts. What happens to the monetary base?

Answers

Answer:

A. Federal Reserve

               Assets                                 Liabilities

Foreign Assets $1,000,000       Currency in circulation $51,000,000

The federal liabilities increase by $51,000,000 in currency because it uses that money to purchase foreign assets which increase the foreign assets category by an equivalent amount. The monetary base is defined as the sum of currency circulating in the public and commercial banks reserve with the central bank

Since, the currency in circulation has increased. Thus, the monetary base will increase by $51,000,000

B. Federal Reserve

               Assets                            Liabilities

Securities T-bill - $51,000,000

Foreign Assets $1,000,000

The federal is basically swapping T-bills with foreign assets. It did not use currency to make this purchase and the composition of assets changes, but the total does not.

Thus, the monetary base does not change

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