Answer:
It is important because it can help identify potential obstacles that may impede its operations and recognize the amount of funding it will need to get the business up and running.
Explanation:
It is very crucial to ascertain accurate market information in your market research before carrying out a feasibility study so as to help identify possible obstacles that would impeded the business and also to know the amount needed for funding.
During the month of August, Ranson Productions applied overhead to jobs using an overhead rate of $0.60 per dollar of direct labor. Actual direct labor in August was 12,000 hours at $15.00 per hour, for a total of $180,000. Estimated overhead in August was $111,600.
Actual overhead was composed of the following items:
Indirect materials $ 16,400
Indirect labor 22,000
Utilities 24,500
Depreciation 38,700
Repair expense 13,500
Total $115,100
How much overhead was applied during August by Ranson Productions?
A. $115,100
B. $108,000
C. More information is needed to answer
D. $111,600
Answer:
B. $108,000
Explanation:
The computation of the overhead applied is as follows:
= Total actual direct labors cost × overhead rate
= $180,000 × 0.60
= $108,000
Hence, the overhead was applied during August by Ranson Productions is $108,000
We simply applied the above formula
MC Qu. 59 A company's flexible budget for... A company's flexible budget for 16,000 units of production showed sales, $96,000; variable costs, $56,000; and fixed costs, $20,000. The sales expected if the company produces and sells 20,000 units is (Do not round intermediate calculations):
Answer: $120,000
Explanation:
First find the selling price of the units.
= Sales / Number of units produced
= 96,000 / 16,000
= $6 per unit
If 20,000 units are sold, the sales would be:
= Number of units sold * selling price
= 20,000 * 6
= $120,000
The unit quantity standard of a product is 3 pounds per package, and the unit quantity standard for machine hours is 0.40 hours per package. During August, 190,000 packages were produced. 430,000 pounds and 77,000 hours were used in production. How many pounds and how many machine hours should have been used for the actual output
Answer:
Standard pounds= 570,000 pounds
Standard hours= 76,000 hours
Explanation:
Giving the following information:
Standard pounds= 3 pounds per package
Standard hours= 0.40 hours per package.
During August, 190,000 packages were produced.
To calculate the standard quantity of pounds and hours that should have been used, we need to multiply the standard rate whit the actual output.
Standard pounds= 190,000*3= 570,000 pounds
Standard hours= 0.4*190,000= 76,000 hours
Typical Request and Response Messages
The purpose of many business messages is to make a request or to reply to previously received communication. Familiarize yourself with the organization of these messages so you can communicate your purpose and achieve a positive outcome.
Read the scenario:
The office manager asks you for advice on how to structure a request message with numerous questions.
What advice would you give?
A. Give an approximate date for the deadline in the body.
B. Place the deadline in the opening.
C. Set an end date to take action in the closing.
Read the following request message:
To: Customer Support
From: Helen Martin
Subject: Warranty Information for Netbook Computer
Dear Customer Service,
I need this information by noon tomorrow at the latest. My team has an important presentation to give, and my netbook crashed while we were working on the presentation. I can’t find the warranty information anywhere. So I have a few questions.
Where is my warranty information? How long does it normally take to repair these machines? Do I have to mail the netbook to you, or can I bring it to your local repair shop?
Will you please answer these questions in a timely manner? Thank you in advance for your help.
Regards,
Helen Martin
1. Where do I find my warranty information?
Reason A: 2. How long does the average netbook repair take?
3. Do I need to mail in my netbook for repairs or bring it to your local repair shop?
Revision B: Where is my warranty information? How long does the average repair take? Do I have to mail in my netbook?
Revision C:
Where do I find the information?
How long does it take?
Can I take it to my local shop?
Which of the preceding revisions is the best revision for the body of this message?
A. Revision B
B. Revision C
C. Revision A
In addition to making requests, you will have to respond to requests in the business world.
Complete the following sentence with the dropdown menu.
Direct response messages might _______?
A. include long, flowery descriptions
B. use the "me" view
C. supply explanations and additional information
Many businesses use social media to communicate with customers. In order to make the most of social media, you should learn how to respond to various types of customer comments.
Read the scenario, and then answer the question.
You manage the social media presence of a company that manufactures travel apparel and gear. A customer posts an angry comment about a suitcase that failed to function properly after its first use. This is not the first complaint the product has received.
How should you respond to the customer?
A. Acknowledge the problem, and let the customer know that the company is working to rectify the situation.
B. Document and delete the comment. You don’t want news of the flawed product to spread.
C. Let the comment stand. No response is necessary.
Answer:
B. Place the deadline in the opening.
A. Revision B
B. Use the "me" view
A. Acknowledge the problem, and let the customer know that the company is working to rectify the situation.
Explanation:
Customer service is the most difficult task. If a customer is angry because of mis functioning of a product then concerns should be heard with patience and the company staff should try to resolve these issues and satisfy customer properly. One angry customer may take away 100 potential customers of a business.
_______________ tasks are non-repetitive in nature and involve considerable
application of knowledge, judgment, and expertise. As such, the teams draw their members from different disciplines and functional units, so that specialized expertise can be applied to the task(s) at hand.
1) Project teams
2) Management teams
3) Parallel teams
4) None of these make sense to me.
5) Work teams
Answer:
1) Project teams
Explanation:
Project management can be defined as the process of designing, planning, developing, leading and execution of a project plan or activities using a set of skills, tools, knowledge, techniques and experience to achieve the set goals and objectives of creating a unique product or service.
The fundamentals of Project Management are considered universal across most businesses and professions.
The fundamentals of Project Management includes;
1. Project initiation
2. Project planning
3. Project execution
4. Monitoring and controlling of the project
5. Adapting and closure of project.
Project teams comprises individuals or group of people that come together as a unit to take on a one-time and non-repetitive tasks that are generally considered to be often complex and as such would require input from members with different types of training, skills, knowledge competence and expertise.
This ultimately implies that, project teams tasks are non-repetitive in nature and involve considerable application of knowledge, skills, competence, judgment, and expertise.
g. provides the following information for 20X8: Net income $260,000 Market price per share of common stock $60 per share Dividends paid $200,000 Common stock outstanding at Jan. 1, 2018 150,000 shares Common stock outstanding at Dec. 31, 2018 230,000 shares The company has no preferred stock outstanding. Calculate the price/earnings ratio of common stock.
Answer:
53.09
Explanation:
The price/earnings ratio of common stock is an investment ratio that compares the current price of the stock to its earnings per share, in a bid to assess the stock performance relative to its earnings
share price=$60
earnings per share=net income/year-end shares outstanding
net income=$260,000
year-end outstanding shares=230,000
earnings per share=$260,000/230,000
earnings per share=$1.13
price/earningsratio=$60/$1.13
price/earningsratio=53.09
A woman arrives at the clinic for a pregnancy test. The first day of her last menstrual period (LMP) was February 14, 2013. Her expected date of birth (EDB) would be: _________
a) November 21, 2013.
b) October 17, 2013
c) December 9, 2013
d) November 7, 2013
Answer:
a) November 21, 2013
Explanation:
The expected date of birth (EDB) would be calculated using Naegele's Rule and it is based on a normal 28 days menstrual cycle. The steps are as follows:
First, we need to identify the first day of the last menstrual period (LMP). Then we would count it back to three calendar months from that date. Finally, we would add 1 year and 7 days to that date.
In which case, the first day of LMP is February 14, 2013. Going back three months the date would be November 14, 2012. Finally, when we add 1 year and 7 days it would bring you to November 28, 2013, as the estimated due date.
According to purchasing power parity, if the domestic inflation rate is ________ than that in the foreign country, the domestic currency should be ________ than that of the foreign country.
Answer:
lower; stronger
Explanation:
Purchasing power parity (PPP) is a theory where the exchange rates of the states that lies between the currencies should be in equilibrium
Also their purchasing power should be similar in each and every of the two countries
So as per the purchasing power parity when the inflation rate of domestic one should be less as compared to the foreign country so the domestic currency should be stronger as compared to the foreign country
Not all the items in your office supply store are evenly distributed as far as demand is concerned, so you decide to forecast demand to help plan your stock. Past data for legal-sized yellow tablets for the month of August are. Week 1 280 Week 2 380 Week 3 580 Week 4 680 a. Using a three-week moving average, what would you forecast week 5 to be
Answer: 547 yellow tablets
Explanation:
The three-week moving average would use the average of the tablets in the last three weeks before the 5th weeks to calculate the average for the 5th week.
= (Week 2 + Week 3 + Week 4) / 3
= (380 + 580 + 680) / 3
= 1,640 / 3
= 546.7
= 547 yellow tablets
Bricktan Inc. makes three products, basic, classic, and deluxe. The maximum Bricktan can sell is 715,000 units of basic, 420,000 units of classic, and 120,000 units of deluxe. Bricktan has limited production capacity of 90,000 hours. It can produce 10 units of basic, 8 units of classic, and 4 units of deluxe per hour. Contribution margin per unit is $15 for the basic, $25 for the classic, and $55 for the deluxe. What is the most profitable sales mix for Bricktan Inc.? 1
A. 50,000 basic, 120,000 classic and 240,000 deluxe.
B. 75,000 basic, 420,000 classic and 120,000 deluxe.
C. 600,000 basic, 0 classic and 120,000 deluxe.
D. 71,500 basic, 420,000 classic and 240,000 deluxe.
E. 300,000 basic, 240,000 classic and 120,000 deluxe.
Answer:
B. 75,000 basic, 420,000 classic and 120,000 deluxe.
Explanation:
Products Available : Basic, Classic , Deluxe
Contribution margin per unit: $15 , $25, $55
Production units per hour : 10, 8 , 4
Contribution margin per production hour : $150 , $200 , $220
Maximum number of units to be sold: 715,000, 420,000, 120,000
Hours required to produce these units: 71,500, 52,500, 30,000
Units produced maximum sales : 75,000, 420,000, 120,000
ADP reports the following income statement.
AUTOMATIC DATA PROCESSING INC.
Statement of Consolidated Earnings
For Year Ended June 30, 2019, $ millions
Total revenues $14,175.2
Operating expenses 7,145.9
Systems development and programming costs 636.3
Depreciation and amortization 304.4
Total cost of revenues 8,086.6
Selling, general, and administrative expenses 3,064.2
Interest expense 129.9
Total expenses 11,280.7
Other income expense, net 111.1
Earnings before income taxes 3,005.6
Provision for income taxes 712.8
Net earnings $ 2,292.8
Forecast ADP’s 2020 income statement assuming the following income statement relations. All percentages (other than total revenue growth and provision for income taxes) are based on historic percent of total revenues.
Total revenues growth 13%
Depreciation and amortization $460.5 million
Interest expense No change
Other (income) expense, net No change
Income tax rate 25%
Round your answers to one decimal place.
Answer:
Forecast of 2020 net earnings = $299.2 million.
Explanation:
Note:
a. See part a of the attached excel file for the calculations of the Historic Percent of Total Revenue.
b. See part b of the attached excel file for the Forecast of ADP’s 2020 income statement.
From part b of the attached excel file, we have:
Forecast of 2020 net earnings = $299.2 million.
Over a certain period, large-company stocks had an average return of 12.34 percent, the average risk-free rate was 2.53 percent, and small-company stocks averaged 17.25 percent. What was the risk premium on small-company stocks for this period
Answer: 14.72%
Explanation:
Risk premium is the amount of return that an investment provides over the risk free return of the market. This is to cater for the higher risk that an investor would incur for investing in the stock.
Risk premium for small company stocks = Average return for small stocks - Risk free rate
= 17.25% - 2.53%
= 14.72%
If Jackson Collectibles, Inc. has a safety stock of 35 units and the average weekly demand is 14 units, how many days can be covered if the shipment from the supplier is delayed?
A) 2.5 days
B) 17.5 days
C) 21 days
D) 35 days
E) 7.0 days
Answer: B. 17.5 days
Explanation:
The safety stock that Jackson Collectibles has is 35 units.
Their weekly demand however is 14 units.
This means that the number of weeks they can survive on safety stock is:
= Safety stock / demand per week
= 35 / 14
= 2.5 weeks
In days this is:
= 2.5 * 7
= 17.5 days
Darby Company, operating at full capacity, sold 163,500 units at a price of $87 per unit during the current year. Its income statement is as follows:
Sales $14,224,500
Cost of goods sold 5,046,000
Gross profit $9,178,500
Expenses:
Selling expenses $2,523,000
Administrative expenses 1,508,000
Total expenses 4,031,000
Income from operations $5,147,500
The division of costs between variable and fixed is as follows:
Variable Fixed
Cost of goods sold 60% 40%
Selling expenses 50% 50%
Administrative expenses 30% 70%
Management is considering a plant expansion program for the following year that will permit an increase of $1,131,000 in yearly sales. The expansion will increase fixed costs by $150,800, but will not affect the relationship between sales and variable costs.
Required:
Determine the total variable costs and the total fixed costs for the current year.
Answer:
Variable costs in current year:
= Variable Cost of goods sold + Variable Selling expense + Variable Admin expenses
= (5,046,000 * 60%) + (2,523,000 * 50%) + (1,508,000 * 30%)
= 3,027,600 + 1,261,500 + 452,400
= $4,741,500
Fixed costs:
= (Total cost of goods sold + Total selling expenses + Total admin expenses) - Variable expenses
= (5,046,000 + 2,523,000 + 1,508,000) - 4,741,500
= $4,335,500
Franklin is a research scientist at Insight Research Corporation (IRC). IRC has five research scientists, four assistants, one secretary, and one CEO. Franklin has developed ALS, a disease which binds him to a wheelchair. He is one of the greatest scientists in the world, and can still do his job. Franklin has requested that IRC accommodate his disability, making changes to the company restroom and widening the doors to the building. The changes would be relatively inexpensive, costing only $2,000. If Franklin sues under the Americans with Disabilities Act (ADA), what result
If Franklin sues under the Americans with Disabilities Act (ADA), Franklin will win and this will force IRC to accommodate his disability under this civil rights legislation.
The ADA law was passed to protect persons experiencing physical or mental impairment or disability against workplace discriminations.
While ALS is recognized as a progressive nervous system disease that surely affects Franklin's nerve cells in his brain and spinal cord, which has caused him to lose muscle control, he can still perform his duties as a research scientist at IRC.
Thus, Insight Research Corporation should accommodate Franklin and make the necessary changes, which have been determined to be relatively inexpensive to the company.
Thus, if IRC fails to accommodate Franklin and he sues the company in the court under ADA, he will prevail.
Learn more about Americans with Disabilities Act here: https://brainly.com/question/15650848
Company J must choose between two alternate business expenditures. Expenditure 1 would require a $80,000 cash outlay and Expenditure 2 requires a $60,000 cash outlay.
a. Determine the marginal tax rate at which the after-tax cash flows from the two expenditures are equal assuming that Expenditure 1 is fully deductible and Expenditure 2 is nondeductible.
b. Determine the marginal tax rate at which the after-tax cash flows from the two expenditures are equal assuming that Expenditure 1 is 50% deductible and Expenditure 2 is nondeductible.
Answer:
A. 25%
B. 50%
C. 48000 after tax cash flow
Explanation:
a. lets assume marginal tax rate is X%
After tax cash flow of 80000 should equal to 60000$
$80000 - [$80000*X%] = 60000$
80000*X% = 80000-60000
80000*X% =20000
X = 20000/80000
= 25%
b.
$80000 - [$80000*50%*x%] = 60000$
40000*x%=20000
x%=50%
c.
$80000- [$80000*x] = 60000 - [60000*50%*x]
80000-60000 = [80000*x] - [30000*x]
20000 = 50000x
x=40%
check
80000-40% =48000 after tax cash flow
60000*50%
=60000- [60000*50%*40%]
=48000 after tax cash flow
An employee on the Internet-facing part of a company's website submits a 20-character phrase in a small textbox on a web form. The website returns a message back to the browser stating Error: Table 'advprofile' entry into column 'Inane' has exceeded number of allowed characters. Error saving database information. Of which of the following is this an example?
A. Resource exhaustion
B. Buffer overflow
C. Improperly configured account Improper error handing
Answer:
(B) Buffer Overflow
Explanation:
The description in the question is an example of a Buffer Overflow. This is also called a Buffer Overrun.
As the question depicts, the employee input more characters than was required in the text box. The text box was programmed to allow a more limited number of characters; maybe 15, 12, 18, etc but not up to 20.
A buffer is a storage space that holds data temporarily while it's being transported to a new space. An overrun on the buffer will occur if or when the inputed data exceeds the storage capacity of the buffer.
This overrun can cause the program to crash or access errors to develop; like the errors displayed in the question.
Dawson Toys, Ltd., produces a toy called the Maze. The company has recently created a standard cost system to help control costs and has established the following standards for the Maze toy:
Direct materials: 7 microns per toy at $0.33 per micron
Direct labor: 1.4 hours per toy at $6.70 per hour
During July, the company produced 5,000 Maze toys. The toy's production data for the month are as follows:
Direct materials: 70,000 microns were purchased at a cost of $0.29 per micron. 26,250 of these microns were still in inventory at the end of the month.
Direct labor: 7,500 direct labor-hours were worked at a cost of $54,750.
Required:
a. Compute the following variance for july
b. The materials price and quantity variances
c. The labor rate and efficiency variances
Answer:
Results are below.
Explanation:
To calculate the direct material price and quantity variance, we need to use the following formulas:
Direct material price variance= (standard price - actual price)*actual quantity
Direct material price variance= (0.33 - 0.29)*70,000
Direct material price variance= $2,800 favorable
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Direct material quantity variance= (5,000*7 - 43,750)*0.33
Direct material quantity variance= $2,887.5 unfavorable
To calculate the direct labor rate and efficiency variance, we need to use the following formulas:
Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity
Direct labor rate variance= (6.7 - 7.3)*7,500
Direct labor rate variance= $4,500 unfavorable
Actual rate= 54,750 / 7,500= $7.3
Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate
Direct labor time (efficiency) variance= (5,000*1.4 - 7,500)*6.7
Direct labor time (efficiency) variance= $3,350 unfavorable
______ occur whenever a third party receives or bears costs arising from an economic transaction in which the individual (or group) is not a direct participant.
a. Pecuniary benefits and costs
b. Externalities
c. Intangibles
d. Monopoly costs and benefits
The choose b. Externalities
Externalities occur whenever a third party receives or bears costs arising from an economic transaction in which the individual (or group) is not a direct participant.
I hope I helped you^_^
You are closing the accounts you used to bill the project costs, but you still have some lingering expenses. Which best practice should you follow?
Answer:
Close all accounts except for the one related to the follow-up activities until the remanding expenses are complete.
Explanation: You never what to close out an account when the project has not been completed. If you still have remanding expenses the project is not complete.
Which of the following statements is false about the order in which management determines the sequencing of support department allocations under the sequential method of allocating support department costs to production departments?
a. Departments with more employees are allocated earlier.
b. Departments serving a large number of support departments are allocated earlier.
c. Departments with higher costs are allocated earlier.
d. Departments with more accurate cost drivers are allocated earlier.
Answer: A. Departments with more employees are allocated earlier.
Explanation:
In the sequential method, it should be noted that a company allocates the service costs one department at a time. Once the service department cost is allocated by the accountants, the department won't get any other costs from the other service departments.
The statement that is false about the order in which management determines the sequencing of support department allocations under the sequential method of allocating support department costs to production departments is that the departments with more employees are allocated earlier.
Under the sequential method, the department costs that are allocated earlier include having an accurate cost drivers, having a higher cost, or having a large number of support.
Maverick law office currently orders ink refills 120 units at a time. The firm estimates that carrying cost is 40% of the $10 unit cost and that annual demand is about 480 units per year. The assumptions of the basic EOQ model are thought to apply. For what value of ordering cost would its current action (order quantity) be optimal
Answer:
Economic order quantity (EOQ)= 49 units
Explanation:
Giving the following information:
Demand= 480 units per year
Order cost= $10
Holding cost= 10*0.4= $4
Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs.
Economic order quantity (EOQ)= √[(2*D*S)/H]
D= Demand in units
S= Order cost
H= Holding cost
Economic order quantity (EOQ)= √[(2*480*10) / 4]
Economic order quantity (EOQ)= √(2,400)
Economic order quantity (EOQ)= 49 units
Expert Lawn Services offers customers a reduced price for lawn care if they pay for 6 months service in advance. In March 2020, 50 customers prepay $540 each for services to be provided from April through September. Expert recognizes revenue proportionately over the 6-month period. What is Expert's unearned revenue liability as of April 30
Answer:
the total unearned revenue be $22,500.
Explanation:
The computation of the unearned revenue liability is given below:
advance paid 540.00
Divided by tenure of services months 6.00
revenue to be recognized per month 90.00
Now unearned revenue for 30 april i.e. for five months 450.00
Multiply by no of customers 50.00
So, the total unearned revenue be $22,500.
Unearned Revenue liability refers to the amount received in advance for the services or product that has yet to be provided to the customers. The unearned revenue liability is $22,500.
What is revenue?
Revenue refers to the inflows of cash in a company by operating normal business activities. Net income is calculated by deducting costs from the revenues.
The expert's unearned revenue liability is calculated as follows:
[tex]\begin{aligned}\text{Total revenue}&= \text{No. of customer }\times\text{ amount paid by each customer}\\&=50 \times \$540\\&=\$27,000\end{aligned}[/tex]
Revenue for the month of April is $27,000 divided by 6 months= $4,500
Unearned revenue liability is
[tex]\begin{aligned}\text{Unearned revenue liability}&= \text{Total Revenues }-\text{ Revenue earned for april}\\&=\$27,000 - \$4,500\\&=\$22,500\end{aligned}[/tex]
Therefore, the unearned revenue liability is $22,500.
Learn more about Revenue here:
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Four aspects of empowered performance are understanding variation, deciding what to measure, working correctly with data, and using the resulting information appropriately.
a. True
b. False
Answer:
False
Explanation:
6. Why is training important?
Answer:Training is important because it represents a good opportunity for employees to grow their knowledge base and improve their job skills to become more effective in the workplace. Despite the cost of training for employees, the return on investment is immense if it is consistent.
Explanation:
Skysong, Inc. has the following inventory data: July 1 Beginning inventory 30 units at $19 $570 7 Purchases 105 units at $20 2100 22 Purchases 15 units at $22 330 $3000 A physical count of merchandise inventory on July 30 reveals that there are 50 units on hand. Using the average cost method, the value of ending inventory is
Answer: $1000
Explanation:
Using the average cost method, the value of ending inventory will be calculated thus:
Average cost per unit = Total cost / Total number of units
= $3000/150
= $20 per unit
Value of ending inventory = 50 units × $20 = $1000
Therefore, the value of ending inventory is $1000.
Unearned revenues are liabilities because:______.
A. the customer may someday return items purchased for a refund.
B. no cash has changed hands.
C. the company is transferring them to another period for tax reasons.
D. goods or services have been paid for, but not yet provided to the customer.
nearned revenue is recorded on a company's balance sheet as a liability. It is treated as a liability because the revenue has still not been earned and represents products or services owed to a customer. ... Both are balance sheet accounts, so the transaction does not immediately affect the income statement
McKean Corporation authorized 500,000 shares of common stock in its articles of incorporation. On May 1, 2019, 100,000 shares were sold to the company's founders. However, on October 15, 2019, McKean repurchased 20,000 shares to settle a dispute among the founders. At this date, how many shares were issued and outstanding, respectively?
Answer:
100,000 shares and 80,000 shares
Explanation:
Calculation to determine how many shares were issued and outstanding, respectively
The shares that were issued will be 100,000 shares that were sold to the company's founders while the shares outstanding will be 80,000 shares Calculated as :
Shares outstanding=Shares issued -Shares repurchased
Shares outstanding=100,000 shares-80,000 shares
Shares outstanding =80,000 shares
Therefore the Number of shares that were issued and outstanding, respectively are:100,000 shares and 80,000 shares
Suppose a chair manufacturer is producing in the short run (with its existing plant and equipment). The manufacturer has observed the following levels of production corresponding to different numbers of workers:
Number of Workers Number of Chairs
1 10
2 18
3 24
4 28
5 30
6 28
7 25
a. Calculate the marginal and average product of labor for this production function.
b. Does this production function exhibit diminishing returns to labor
Answer:
(a)
MP = TPn - TPn-1
AP = TP/Q
No. of workers No. of chairs MP AP
1 10 - 10
2 18 8 9
3 24 6 8
4 28 4 7
5 30 2 6
6 28 - 2 4.6
7 25 -3 3.5
(b) Yes, this production function exhibits diminishing returns to labor. As we increase the number of laborers, the output per worker falls. we will see that the AP is falling with the rise parturient.
Assume that inflation averages 3.50% over the next 20 years. If Carlos invests $25,000 in an exchange-traded fund within a tax-deferred account and that investment grows to $45,000 at the end of 20 years, will he have maintained his purchasing power
Answer: Yes, because the ETF is worth more than his original investment
Explanation:
From the information given in the question, the average inflation for next 20 years = 3.50%
Amount invested by John = $25,000
Then, the amount in 20 years after the adjustment of inflation will be:
= Amount invested (1+inflation rate)^n
= 25000(1+0.035)^20
= 25000(1.035)^20
= 25000 × 1.9898
= $49745
In this case, the answer is Yes due to the fact that the ETF is worth more than his original investment.
