Answer:
$41,650
Explanation:
Contribution margin is the net of sales and variable costs.
Contribution Margin:
Division A = $47,700
Division B = $231,000 x 35% = $80,850
Company calculates the Net Income after deducting The traceable and common fixed costs from the total contribution margin.
Total contribution margin = $47,700 + $80,850 = $128,550
Net Income = Total contribution margin - Traceable Fixed Expense - Common Fixed expenses
$27,200 = $128,550 - $59,700 - Common Fixed expenses
$27,200 = $68,850 - Common Fixed expenses
Common Fixed expenses = $68,850 - $27,200 = $41,650
the aggregate supply (AS) curve
1. In the 1990s, the technology revolution caused the wide-spread use of information technology in all areas of production, thus improving productivity and lowering costs; illustrate the effect of this by shifting the aggregate supply (AS) curve in the appropriate direction.
2. Suppose that a new labor law increases the minimum required number of paid vacation days for all full-time employees; illustrate the effect of this by shifting the aggregate supply (AS) curve in the appropriate direction.
Answer: Please refer to Explanation
Explanation:
1. In the 1990s, the technology revolution caused the wide-spread use of information technology in all areas of production, thus improving productivity and lowering costs.
As a result of higher productivity and lower costs, companies were able to produces more.
This led to an increase in supply which then shifted the Supply Curve TO THE RIGHT. See the first graph. This also led to a drop in price.
2. Suppose that a new labor law increases the minimum required number of paid vacation days for all full-time employees.
An increase in the minimum required number of paid vacation days would have the effect of increasing labor costs. Labor is an input in Production so that would mean that production is now more expensive. This would shift the Supply Curve TO THE LEFT as suppliers will react by producing less to maintain profitability. See the second graph.
If you need any clarification do react or comment.
Since it can cost five times as much to acquire a new customer than to service an existing one, it is important for salespersons to: exclusively focus on maximizing profits. generate as many leads as possible through cold calling. implement the endless chain approach. build and maintain long-term relationships
Answer:
Build and maintain long term relationship
Explanation:
A good way to manage the cost of acquiring a new customer is by building and maintaining a long term relationship with customers as this helps in winning their loyalty .
With this, a particular customer can keep patronizing you for a long period of time . This means that after the initial cost of acquiring the customer , the major expenses in respect of the customer is just the service cost , which is much smaller compared to the cost of acquiring a new customer.
Your question is not properly arranged, please let me assume this to be your question:
Since it can cost five times as much to acquire a new customer than to service an existing one, it is important for salespersons to:
A) Exclusively focus on maximizing profits.
B) Generate as many leads as possible through cold calling.
C) Implement the endless chain approach.
D) Build and maintain long-term relationships
ANSWER: The most correct option is D. Build and maintain long-term relationship.
Explanation: a salesperson is one that markets the companies product to persons that are assumed to be a prospective customer.
Convincing a prospect to buy the companies product is always a difficult task, when compared to the cost of servicing an existing customer. Due to this, a sales person has to hold its customer very tight, so as not to loss the customer to another company. The sales person can only achieve this if he/she has established a cordial relationship with the customer.
Long term relationship with customers is very important in achieving sales target, and increasing sales. Because the customers of today that are followed up are more likely to be the customers of tommorow.
Public policy toward monopolies Suppose that there is only one provider of a service in a state. Because this provider experiences economies of scale, the government does not want to break it into smaller pieces, but it does want the provider to supply the efficient quantity. Which of the following policy options might most effectively enable the government to achieve its objectives in this situation?
a. Use antitrust laws to increase competition.
b. Turn the company into a public enterprise.
c. Do nothing at all.
d. Regulate the firm's pricing behavior.
Answer: d. Regulate the firm's pricing behavior.
Explanation:
One way the government can regulate monopolies is to protect the interests of the consumers who are usually the end users. The government have the market power to set prices higher than normal in a competitive market. Thjs can be achieved by Price capping or limiting price increases. As this helps Regulate the firm's pricing behavior.
As of March 12, 2020 the yield to maturity on 30 year US Treasury Bonds was 1.44%. On the same date, the yield to maturity on 30 year TIPS (Treasury Inflation Protected Securities) was 0.31%. The latter can be viewed as a real interest rate. What forecast inflation rate is implied by these interest rates
Answer:
The forecast inflation rate is implied by these interest rates is 1.13%
Explanation:
when dealing with inflation, we have that:
(1 + nominal interest rate) = (1 + real interest rate) * (1 + inflation rate)
1.0144 = 1.0031 * ( 1 + inflation rate)
inflation rate = 1.0144/1.0031 - 1
= 1.13%
Therefore, The forecast inflation rate is implied by these interest rates is 1.13%
A manufacturer of lawn care equipment has introduced a new product. The anticipated demand is normally distributed with a mean of μ = 100 and a standard deviation of σ= 50. Each unit costs $75 to manufacture and the introductory price is to be $125 to achieve this level of sales. Any unsold units at the end of the season are unlikely to be very valuable and will be disposed of in a fire sale for $25 each. It costs $10 to hold a unit in inventory for the entire season.
A.) What is the cost of overstocking (Co)?
B.)What is the cost of understocking (Cu)?
C.)What is the optimal cycle service level?
D.) How many units should be manufactured for sale?
Answer:Expected profit = $2657a
Explanation:
Based on the figures given, we can calculate the:
Cost of overstocking to be $60Cost of understocking to be $50Optimal service level to be 0.455Units to be produced to be 94Cost of overstocking is:
= Manufacturing cost + Holding costs - Disposal value
= 75 + 10 - 25
= $60
Cost of understocking:
= Selling price - Manufacturing cost
= 125 - 75
= $50
Optimal service level:
= Cost of understocking / (Cost of understocking + Cost of overstocking)
= 50 / (50 + 60)
= 0.455
Optimal units to be produced:
= Mean - Standard deviation x Z-value for optimal service level
= 100 - 50 x 0.1142
= 94
In conclusion, it is best to hold the optimal level of stock.
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A firm is considering purchasing two assets. Asset L will have a useful life of 15 years and cost $4 million; it will have installation costs of $750,000 but no salvage or residual value. Asset S will have a useful life of 5 years and cost $2 million; it will have installation costs of $500,000 and a salvage or residual value of $400,000. Which asset will have a greater annual straightminusline depreciation?
Answer:
D. Asset S has $103,333 more in depreciation per year.
Explanation:
For computing the greater annual straight minus line depreciation first we have to determine the each assets depreciation expense which is shown below:
For Asset L
= (Original cost + installation cost - salvage value) ÷ (useful life)
= ($4,000,000 million + $750,000 - $0) ÷ (15 years)
= $316,666.67
For Asset S
= (Original cost + installation cost - salvage value) ÷ (useful life)
= ($2,000,000 million + $500,000 - $400,000) ÷ (5 years)
= $420,000
As we can see that the Asset S has high annual straight-line depreciation
And, the amount exceed is $103,333.33
Final answer:
After calculating the straight-line depreciation for both assets, it was determined that Asset S has a higher annual depreciation amount of $420,000 compared to Asset L's $316,666.67.
Explanation:
To determine which asset will have a greater annual straight-line depreciation, we need to calculate the depreciation for both assets, Asset L and Asset S.
Asset L:
Cost: $4,000,000
Installation Costs: $750,000
Salvage Value: $0
Useful Life: 15 years
Depreciation for Asset L per year = (Cost + Installation Costs - Salvage Value) / Useful Life
= ($4,000,000 + $750,000 - $0) / 15
= $4,750,000 / 15
= $316,666.67 per year
Asset S:
Cost: $2,000,000
Installation Costs: $500,000
Salvage Value: $400,000
Useful Life: 5 years
Depreciation for Asset S per year = (Cost + Installation Costs - Salvage Value) / Useful Life
= ($2,000,000 + $500,000 - $400,000) / 5
= $2,100,000 / 5
= $420,000 per year
Comparing the two, Asset S has a higher annual depreciation amount of $420,000 compared to Asset L's $316,666.67.
Gamegirl Inc., has the following transactions during August. August 6 Sold 58 handheld game devices for $140 each to DS Unlimited on account, terms 2/10, net 60. The cost of the 58 game devices sold, was $120 each. August 10 DS Unlimited returned three game devices purchased on 6th August since they were defective. August 14 Received full amount due from DS Unlimited. Required: Prepare the transactions for GameGirl, Inc., assuming the company uses a perpetual inventory system. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
August 6: Accounts Receivable (DS Unlimited) Dr. $8,120; Sales Revenue Cr. $8,120
August 10: Sales Returns and Allowances Dr. $360; Accounts Receivable (DS Unlimited) Cr. $360
August 14: Cash Dr. $8,000; Accounts Receivable (DS Unlimited) Cr. $8,000
August 6: GameGirl, Inc. records the sale of 58 handheld game devices to DS Unlimited for $140 each on account, totaling $8,120, with cost of goods sold debited for $6,960 (58 * $120). August 10: DS Unlimited returns three defective devices, resulting in a $360 debit to Sales Returns and Allowances and a corresponding $360 credit to Accounts Receivable (DS Unlimited). August 14: GameGirl, Inc. receives full payment from DS Unlimited, resulting in a $8,000 debit to Cash and an $8,000 credit to Accounts Receivable (DS Unlimited), completing the transaction cycle.
The complete question is:
Gamegirl Inc., has the following transactions during August. August 6 Sold 58 handheld game devices for $140 each to DS Unlimited on account, terms 2/10, net 60. The cost of the 58 game devices sold, was $120 each. August 10 DS Unlimited returned three game devices purchased on 6th August since they were defective. August 14 Received full amount due from DS Unlimited. Required: Prepare the transactions for GameGirl, Inc., assuming the company uses a perpetual inventory system. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
If the selling price per unit is $42, the unit contribution margin is $15, and total fixed expenses are $570,000, what will the breakeven sales in units be? Group of answer choices 13,571 38,000 8,550,000 21,111
Answer:
The break even in units is 38000 units
Explanation:
The break even in sales in units is the number of units that need to be sold to earn enough total revenue where it equals the total cost and there is no profit and no loss. The break even in units is calculated as follows,
Break even in units = Fixed costs / Contribution margin per unit
Where,
Contribution margin per unit = Selling price per unit - Variable cost per unit
Break even in units = 570000 / 15
Break even in units = 38000 units
Alpha Electronics can purchase a needed service for $130 per unit. The same service can be provided by equipment that costs $100,000 and that will have a salvage value of 0 at the end of 10 years. Annual operating costs for the equipment will be $7,000 per year plus $25 per unit produced. MARR is 12%/year.
a) Whats the annual worth if the expected production is 90units/year? 510units/year?
b)Determine the breakeven value for annual production that will return MARR on the investment in the new equipment.
Answer:
a) Annual worth for 90 units/year = -7,550
Annual worth for 510 units/year = 36,550
b) The breakeven value for annual production that will return MARR on the investment in the new equipment is Q=235 units/year.
Explanation:
a) We can calculate the annual worth for any expected production substracting from the "purchased service" cost, the "equipment" costs. In the equipment cost, we considered a ten-year amortization of the equipment, that is 100,000/10=$10,000/year.
[tex]AW=C_1-C_2=(130Q)-(10,000+7,000+25Q)=105Q-17,000[/tex]
For Q=90, the annual worth is:
[tex]AW(90)=105*90-17,000=9,450-17,000=-7,550[/tex]
For Q=510, the annual worth is:
[tex]AW(510)=105*510-17,000=53,550-17,000=36,550[/tex]
b) We have to compare the two options (purchased service vs. equipment) in the same time span, so the two are evaluated over a 10 year period.
The purchased service option implies paying $130 per unit, so the cash flow each year is related linearly to the volume of production Q (units/year).
As the cash flow is constant for a certain level of production, we can use the annuity factor to calculate the present value PV.
The present value of this option is:
[tex]PV_1=\sum_{k=1}^{10}\dfrac{130Q}{(1+0.12)^k}=130Q*(\dfrac{1-(1+0.12)^{-10}}{0.12})\\\\PV_1=130Q*5.65=734.5Q[/tex]
The equipment option is more complex. We will consider the purchased in year 0 and the fixed and variable cost from year 1 to 10.
The present value is then:
[tex]PV_2=100,000+\sum_{k=1}^{10}\dfrac{7,000+25Q}{(1+0.12)^k}\\\\\\PV_2=100,000+(7,000+25Q)*(\dfrac{1-(1+0.12)^{-10}}{0.12})\\\\\\PV_2=100,000+(7,000+25Q)*5.65\\\\\\PV_2=100,000+7,000*5.65+5.65*25Q\\\\\\PV_2=100,000+39,550+141.25Q\\\\\\PV_2=139,550+141.25Q[/tex]
The breakeven value for annual production is the quantity for which both present values are equivalent:
[tex]PV_1=PV_2\\\\\\734.5Q=139,550+141.25Q\\\\(734.5-141.25)Q=139,550\\\\593.25Q=139,550\\\\Q=139,550/593.25=235.23\approx235[/tex]
The market for tomatoes is A. monopolistically competitive because tomato farming has barriers to entry. B. an oligopoly because each tomato farmer produces a large share of the output. C. perfectly competitive because tomato farmers produce identical products. D. perfectly competitive because tomato farmers have market power. E. a monopoly because tomatoes have no close substitutes.
Answer: C. perfectly competitive because tomato farmers produce identical products.
Explanation: The market for tomatoes is perfectly competitive because tomato farmers produce identical products. A perfectly competitive market is a market structure where there are many buyers and sellers, with prices reflecting supply and demand. It is characterized by identical or undifferentiated products, no transaction costs, no barriers to entry and exit which ensures that capital and other resources are highly mobile, and perfect information about the market among others.
The market for tomatoes aligns with the characteristics of a perfectly competitive market, where many producers offer interchangeable products without individual market power.
The market for tomatoes is most accurately described as perfectly competitive. In a perfectly competitive market, numerous firms produce a largely homogeneous product, and entry and exit from the market are fairly easy. Additionally, there is good information about prices, allowing firms to act as price takers. In this scenario, tomato farmers produce a crop that other farmers also grow, making their product largely interchangeable. Consequently, perfect competition typically characterizes agricultural markets where produce, such as tomatoes, does not have substantial differentiation and where no single farmer has market power. Therefore, the correct answer is C. perfectly competitive because tomato farmers produce identical products.
Sylvia's annual salary increases from $102,300 to $109,500. Sylvia decides to increase the number of vacations she takes from three to four. Use the midpoint method to calculate her income elasticity of demand for vacations. Round your answer to two decimal places.income elasticity of demand:Units This good isa normal good.an inferior good.a luxury good.
Answer:
4.20 and normal good
Explanation:
The computation of the income elasticity of demand is shown below:
= (change in quantity demanded ÷ average of quantity demanded) ÷ (percentage change in income ÷ average of quantity income)
where,
Change in income would be
= Q2 - Q1
= 109,500 - 102,300
= 7,200
And, average of income would be
= (109,500 + 102,300) ÷ 2
= 105,900
Change in quantity demanded would be
= 4 - 3
= 1
And, average of quantity demanded would be
= ($4 + 3) ÷ 2
= 3.5
So, after solving this, the income elasticity of demand is 4.20
Since the elasticity comes in positive which means the good is a normal goods
The income elasticity of demand for vacations is approximately 2.25. It can be considered a normal good and income-elastic. The correct option is (a). The calculation is shown in the attached image below.
Income elasticity of demand is a measure of the responsiveness of the quantity demanded of a product or service to changes in income. It quantifies the relationship between changes in income and changes in the quantity demanded.
By calculating the income elasticity of demand, we can gain insights into how changes in income affect the demand for a particular product or service and categorize it as a normal good, inferior good, or necessity.
Thus, the ideal selection is option (a).
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Sylvia's annual salary increases from $102,750 to $109,500. Sylvia decides to increase the number of vacation she takes from 3 to 4. Use the midpoint method to calculate her income elasticity of demand for vacations.
Round your answer to two decimal places
This good is:
a. a normal good and income-elastic.
b. a normal good and income-inelastic.
c. an inferior good.
Consider the following cases and indicate for each case the direction and amount of changes in NX and NCO for the U.S. (e.g. NX decreases by $2, NCO increases by $3, etc.). Please circle your final numerical answers and explain how you arrived at the numerical answers. a. The U.S. government uses 500,000 U.S. dollar’s worth of previously obtained Chinese Yuan to buy 500,000 U.S. dollar’s worth of N-95 masks from a Chinese company.
Answer:
a)
NX increase by$500,000
NCO decrease by $500,000
b)
NX increase by $500,000
NCO decrease by $500,000
c)
NX increase by 1 million
NCO first increase then decrease by 1 million
Explanation:
Please kindly check attachment for the detailed step by step solution
Suppose that, in year 1, an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year, the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. The growth rate of nominal GDP from year 1 to year 2 is _____%.
Answer:
The growth rate in nominal GDP is 19.72%
Explanation:
Nominal GDP is the value of goods and services produced in an economy in a particular year and it is not adjusted for inflation.
Nominal GDP Year 1 = 100 * 3 + 75 * 8 = $900
Nominal GDP Year 2 = 110 * 3.25 + 80 * 9 = $1077.5
The growth rate in nominal GDP can be calculated by using the following formula,
Growth rate = (Nominal GDP Year 2 - Nominal GDP Year 1) / Nominal GDP Year 1
Growth rate in GDP = (1077.5 - 900) / 900 = 0.1972 or 19.72%
Harry, Hermione, and Ron formed an S corporation called Dumbledore. Harry and Hermione both contributed cash of $25,000 to get things started. Ron was a bit short on cash but had a parcel of land valued at $60,000 (basis of $50,000) that he decided to contribute. The land was encumbered by a $35,000 mortgage. What tax bases will each of the three have in his or her or his stock of Bumblebee
Answer:
Harry's basis = $25,000
Hermione's basis = $25,000
Ron's basis = $15,000
Explanation:
Data provided
Basis = $50,000
Land Encumbered = $35,000
The computation of Ron's basis is shown below:-
Harry's basis is equal to cash contributed = $25,000
Hermione's basis is equal to cash contributed = $25,000
Ron's basis = Basis - Land encumbered
= $50,000 - $35,000
= $15,000
Therefore for computing Ron's basis we simply deduct the land from land encumbered.
On January 1, 2010, Sunshine company issues bonds maturing in 10 years. The par value of the bonds is $500,000, the annual coupon rate is 4%, and the compounding period is annually. The market initially prices these bonds using market interest rate 6%. The market interest rate on December 31, 2010 was 7%.Were the bonds issued at par, at discount or at premium? Why? (3 points)
Calculate the issue price. (4 points)
Record journal entry on the date of issuance. (3 points)
Calculate the interest expense on Dec 31, 2010. (2 points)
Record journal entry on the interest expense on Dec 31, 2010. (3 points)
Will the interest expense increase or decrease over the years? Why? (3 point)
Record journal entry on Dec 31, 2019 for the final redemption (2 point)
Answer and Explanation:
a. The bonds is issued at a discount, since the coupon rate is lower than the interest rate on the market.
b. Par value = $500,000.
Annual coupon = Par value of bonds × Coupon rate
= $500,000 × 4 %
= $20,000
Interest rate = 6%
n = 10
Present value of an annuity 6%, n = 10 = ((1 - ( 1 ÷ 1.06 ) × 10) ÷ 0.06)
= 7.3601
Present value 6%, n = 10 = (1 ÷ 1.06) × 10
= 0.5584
Issue price of the bonds = Annual coupon × Present value of an annuity + Par value of bonds × Present value
= $20,000 × 7.3601 + $500,000 × 0.5584
= $147,202 + $279,200
= $426,402
3.The Journal entry is shown below:-
Cash Dr, 426,402
To Discount on Bonds Payable $73,598
To Bonds Payable $500,000
Being cash is recorded)
4. Interest expense for the year ended December 31, 2010 = Issue price of the bonds × Interest rate
= $426,402 × 7%
= $29,848.14
5. The Journal entry is shown below:-
Interest Expense Dr, 29,848
Discount on Bonds Payable Dr, 9,848
To Cash $20,000
(Being interest expenses is recorded)
6. Over the years the interest rate would rise as the bonds were issued at a discount.
Fiero Corporation adds all materials at the beginning of production and incurs conversion cost evenly throughout manufacturing. The company completed 70,000 units during the year and had 12,000 units in process at year end, 20% complete with respect to conversion cost. Equivalent units for the year total:
a) materials, 70,000; conversion, 70,000.
b) materials, 70,000; conversion, 2,400.
c) materials, 72,400; conversion, 72,400.
d) materials, 82,000; conversion, 72,400.
e) materials, 82,000; conversion, 82,000.
Answer:
d) materials, 82,000; conversion, 72,400.
Explanation:
The computation of conversion cost is shown below:-
Material of Equivalent Units = Completed units during the year × 100% + Units in process at year end × 100%
= 70,000 × 100% + 12,000 × 100%
= 82,000 units
Conversion of Equivalent Units = Completed units during the year × 100% + Units in process at year end × Conversion cost percentage
= 70,000 × 100% + 12,000 × 20%
= 72,400 units
On the first day of the fiscal year, a company issues a $5,000,000, 7%, five-year bond that pays semiannual interest of $175,000 ($5,000,000 × 7% × ½), receiving cash of $5,400,000. Journalize the first interest payment and the amortization of the related bond premium. If an amount box does not require an entry, leave it blank.
Answer:
Dr Interest expense 135,000
Dr Bond premium 40,000
Cr Cash 175,000
Explanation:
Journal entry
Using the straight-line method
Premium =Cash proceeds - face value
5,400,000-5,000,000
=$400,000
The number of periods is:
=5 years * 2 since semi-annual
=10 periods
The amortization amount is thus:
400,000/10
=$40,000
Dr Interest expense (175,000-40,000) 135,000
Dr Bond premium 40,000
Cr Cash 175,000
Final answer:
The journal entries for the first interest payment and amortization of the bond premium are provided.
Explanation:
A company issues a $5,000,000, 7%, five-year bond and pays semiannual interest. The bond was issued at a premium, receiving $5,400,000. To journalize the first interest payment and the amortization of the bond premium, we need to take the following steps:
Record the semiannual interest payment.Calculate the premium amortization.Journalize the entries for both the interest payment and premium amortization.Journal Entries:
Interest Payment:
On October 1, 2021, Oberley Corporation loans one of its employees $36,000 and accepts a 12-month, 9% note receivable. Calculate the amount of interest revenue Oberley will recognize in 2021 and 2022.
Answer:
=810+2430 => $3240.
Explanation:
For the year 2021, the employee will only have to pay the remaining 3-month interest i.e, October, November and December (36000 * 9% * (3/12)), which becomes 810.
For the year 2022, the employee has to pay the remaining 9-month interest (36000 * 9% * (9/12)), which becomes 2430.
So the total interest revenue becomes = 810+2430 = 3240.
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The Pecking Order Theory of capital structure implies that (a) high-risk firms will end up borrowing more. (b) firms prefer internal finance. (c) firms prefer internal finance and firms prefer debt to equity when external financing is required. (d) firms prefer debt to equity when external financing is required. (e) firms pursue a targeted debt-equity ratio.
Answer:
The correct answer is letter "D": firms prefer debt to equity when external financing is required.
Explanation:
According to the Pecking Order Theory, managers rely on three sources from where to obtain resources at the moment of investing. The order they select to choose between one or another is retained earnings, debt, and equity financing at last. This approach was spread by American Economy Professor Stewart Myers (born in 1940) and Chilean consultant Nicolas Majluf (born in 1945).
Therefore, debt is preferred to equity at the moment of financing the company's projects.
Assume that a hypothetical economy with an MPC of 0.8 is experiencing severe recession. Instructions: In part a, round your answers to 2 decimal places. Enter your answers as positive numbers. In part b, enter your answers as whole numbers. a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $25 billion? How large a tax cut would be needed to achieve the same increase in aggregate demand? b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt.
Answer:
a)Tax cut = $6.25 billion.
The amount by which government spending would rise to shift the aggregate demand curve rightward by $25 billion? "" Is $5 BILLIONS"""
b)INCREASE GOVERNMENT SPENDING by $25 billion.
INCREASE TAXES by $25 billion.
Explanation:
a.)To calculate the value of spending value, the formula below is used.
multiplier spending=1/1-MPC
multiplier spending==1/1-0.8=5
Tax cut Multiplier = MPC/1-MPC
Tax cut Multiplier = 0.8/1 -0.8
Tax cut Multiplier = 4
The required government spending = 25/3 =5
Tax cut = $6.25
The answer is increase in spending=25 billion, increase in taxes= 25$billion.The spending will increase income=25x5=$125billion.The tax increase will reduce income=25x4=$100billion.In sum the income will increase=125-100=$25billion.
b) The one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt is to
INCREASE GOVERNMENT SPENDING by $25 billion.
INCREASE TAXES by $25 billion.
a) The Tax cut is = $6.25 billion Then, Income increase is = $25billion.
b) Now, INCREASE GOVERNMENT SPENDING by $25 billion and INCREASE TAXES by $25 billion.
Computation Spending Value
a.)To Calculate the value of spending value, the procedure downward:
Then, multiplier spending is =1/1-MPC
After that, multiplier spending is =1/1-0.8 =5
Then, Tax cut Multiplier is = MPC/1-MPC
Now, Tax cut Multiplier is = 0.8/1 -0.8
Then, Tax cut Multiplier is = 4
After that, The required government spending is = 25/3 =5
Tax cut is = $6.25
Now, The solution is to increase spending is = by 25 billion, and increase taxes is = 25$billion. When The spending will increase income is =25x5=$125billion. Then, The tax increase will reduce income = by 25x4=$100billion. In aggregate the income will increase is =125-100= $25billion.
b) When The one achievable combination of government spending increases and also tax increases that would execute the same goal without transforming the amount of outstanding debt is to
Then, INCREASE GOVERNMENT SPENDING by $25 billion.
Therefore, INCREASE TAXES by $25 billion.
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Last year, Arbor Corporation reported the following: Balance Sheet Total Assets $ 1,280,000; Total Liabilities 820,000; Total Shareholders' Equity $ 460,000This year, Arbor is considering whether to issue more debt to fund a $100,000 project or to issue additional shares of common stock. Both options will bring in exactly $100,000. Arbor's current debt contracts contain a debt covenant that requires it to maintain a debt-to-equity ratio of 2.00 or less.1. Calculate Arbor's current debt-to-equity ratio2. Calculate Arbor's debt-to-equity ratio assuming it funds the project using additional debt.3. Calculate Arbor's debt-to-equity ratio assuming it funds the project by issuing common stock
Answer:
a) Debt to equity ratio = Total liabilities/Total equity
= 820000/460000 = 1.78 Times
b) Debt to equity ratio = Total liabilities/Total equity
= 920000/460000 = 2.00 Times
c) Debt to equity ratio = Total liabilities/Total equity
= 820000/560000 = 1.46 Times
Both ____ and ____ affect the awareness and motivation of a firm to undertake actions and responses. Group of answer choices management capabilities, competitive analysis market commonality, resource similarity speed of management decisions, management actions first-mover advantages, corporate size
Answer:
a. market commonality;
b. resource similarity
Explanation:
a. market commonality;
b. resource similarity
A polisher costs $10,000 and will cost $20,000 a year to operate and maintain. If the discount rate is 10 percent and the polisher will last for 5 years, what is the equivalent annual cost of the tool?
Answer:
EAC $22,638
Explanation:
0 1 2 3 4 5
Cost (10,000)
Cashflows 20,000 20,000 20,000 20,000 20,000
PV factor 1/1.1 1/1.1^2 1/1.1^3 1/1.1^4 1/1.1^5
NPV=Cashflow*PV Factor 18,182 16,529 15,026 13,660 12,418
NPV=10,000+18,182+16529+15,026+13,660+12,418)=85,815
EAC=NPV*r/1-(1+r)^-n=85,815*.1/(1-(1+.1)^-5=$22,638
Final answer:
To find the equivalent annual cost of the polisher, calculate the present value of the annual operating costs over 5 years using a 10% discount rate, convert it to an annuity, and add the annual depreciation of the initial purchase cost.
Explanation:
To calculate the equivalent annual cost of the polisher, we need to take into account the initial purchase cost, the annual operating and maintenance costs, and the discount rate over the lifespan of the polisher. The given discount rate is 10 percent. Firstly, we calculate the present value of the operating and maintenance costs for each year and then convert this into an annuity equivalent over the 5-year lifespan using the formula for the present value of an annuity. Let's denote the annual operating cost as AOC, which is $20,000. The initial purchase cost is PC, which is $10,000. Using the discount rate of 10% or 0.10, we can calculate the present value (PV) of these AOC over the 5-year period and then determine the equivalent annual annuity (EAA). Once we've determined the EAA, we can add this to the annual depreciation of the initial purchase cost (which is simply PC divided by the number of years, in this case, $10,000/5 years). The sum of the EAA and the annual depreciation of PC will give us the equivalent annual cost of the polisher.
Norris Co. has developed an improved version of its most popular product. To get this improvement to the market will cost $48 million but the project will return an additional $13.5 million for 5 years in net cash flows. The firm's debt-equity ratio is .25, the cost of equity is 13 percent, the pretax cost of debt is 9 percent, and the tax rate is 21 percent. All interest is tax deductible. What is the net present value of this proposed project
Answer:
$0.88 million
Explanation:
For computing the net present value first we have to determine the after cost of debt, cost of capital which is shown below:
After tax cost of debt is
= 9% × (1 - 0.21)
= 7.11%
As we know that
Cost of capital = (Weight of debt × after tax cost of debt) + (Weight of equity × cost of equity)
= (0.25 ÷ 1.25 × 7.11%) + (1 ÷ 1.25 × 13%)
= 1.422% + 10.4%
= 11.82%
Now the net present value is
Year Cash flows Discount rate 11.82% PV of cash inflows (in millions)
0 -$48 million 1 -$48.00 (B)
1 $13.5 million 0.8942944017 $12.07
2 $13.5 million 0.7997624769 $10.80
3 $13.5 million 0.7152231058 $9.66
4 $13.5 million 0.6396200195 $8.63
5 $13.5 million 0.5720086027 $7.72
Total present value $48.88 (A)
Net present value $0.88 million (A - B)
The discount rate is computed by
= 1 ÷ (1 + interest rate)^years
The management of Madeira Computing is considering the introduction of a wearable electronic device with the functionality of a laptop computer and phone. The fixed cost to launch this new product is $300,000. The variable cost for the product is expected to be between $160 and $240, with a most likely value of $200 per unit. The product will sell for $300 per unit. Demand for the product is expected to range from 0 to approximately 20,000 units, with 4,000 units the most likely.
Model the variable cost as a uniform random variable with a minimum of $160 and a maximum of $240. Model product demand as 1,000 times the value of a gamma random variable with an alpha parameter of 3 and a beta parameter of 2. Construct a simulation model to estimate the average profit and the probability that the project will result in a loss.
Answer:
Explanation:
Find attached the solution and the relevant formulas
A simulation model for Madeira Computing's potential new product estimates average profit and loss risk by modeling variable cost as a uniform random variable and demand via a gamma distribution, calculating per-unit profit, and then running simulations.
The simulation model for Madeira Computing's new product involves estimating the average profit and the probability of incurring a loss. This involves modeling variable cost and product demand as random variables. Given that the fixed cost for the launch is $300,000, variable costs are uniformly distributed between $160 and $240, and the selling price is $300 per unit, the profit for each unit can be calculated as the difference between the selling price and the variable cost. Demand is modeled as 1,000 times a gamma random variable with parameters alpha = 3 and beta = 2. A simulation would need to be run, typically using computational software, to generate random draws for the variable cost and demand, and then calculate the profit for each simulation to estimate the average profit and assess the risk of loss.
The Charade Corporation is preparing its Manufacturing Overhead budget for the fourth quarter of the year. The budgeted variable manufacturing overhead is $6 per direct labor-hour; the budgeted fixed manufacturing overhead is $91,000 per month, of which $16,600 is factory depreciation. If the budgeted direct labor time for November is 8,600 hours, then the total budgeted manufacturing overhead for November is:
Answer:
the total budgeted manufacturing overhead for November is: $142,600
Explanation:
Consider BOTH the variable and fixed manufacturing overheads
Calculation of total budgeted manufacturing overhead for November
variable manufacturing overhead ($6 × 8,600 hours) $51,600
fixed manufacturing overhead is $91,000
total $142,600
g You want to create a portfolio equally as risky as the market, and you have $500,000 to invest. Information about the possible investments is given below: Asset Investment Beta Stock A $ 147,000 .92 Stock B $ 133,000 1.37 Stock C 1.52 Risk-free asset How much will you invest in Stock C
Answer:
I will invest $220,000
Explanation:
Let the Investment in Stock C x
Weightage of Investment C x / 500,000
Weightage beta of Investment C x (1.52) / 500,000
Total Weightage =
Total Weightage of Beta
Stocks Investment Weightage Beta Weighted beta
A $147,000 (147000/500,000) = 0.294 0.92 0.27
B $133,000 (133000/500,000) = 0.266 1.37 0.36
B $220,000 (220000/500,000) = 0.44 1.52 0.67
Total Beta 1.30
Negative confirmation of accounts receivable is less effective than positive confirmation because:a. Some recipients may report incorrect balances.b. There is no way of knowing whether a non-response indicates agreement with the balance or a failure by the customer to return the form.c. The amount of the receivable may be immaterial.d. Only blank confirmations are permitted under GAAS for material accounts receivable balances.
Answer:
The answer is option C) Negative confirmation of accounts receivable is less effective than positive confirmation because the amount of the receivable may be immaterial
Explanation:
Negative confirmation of accounts is typically used when the accounting controls of a company have historically had very few errors and are thus considered to be strong. The company is asked to double-check the numbers and only confirm if there is a discrepancy.
Negative confirmation of accounts receivable is less effective than positive confirmation because if accounts receivable are immaterial, the use of confirmations would be ineffective since combined inherent risk and control risk are low.
Analytics or other substantive tests would detect any discrepancies or misstatements.
Suppose a firm has an annual budget of $200,000 in wages and salaries, $75,000 in materials, $30,000 in new equipment, $20,000 in rented property, and $35,000 in interest costs on capital. The owner/manager does not choose to pay himself, but he could receive income of $90,000 by working elsewhere. The firm earns revenues of $360,000 per year.
Required:
a) what are the annual explicit costs for the firm described above?
b) what are the annual implicit costs for the firm described above?
c) what are the annual economic costs for the firm described above?
d) what is the accounting profit for the firm described above?
e) what is the economic profit for the firm described above?
Answer and Explanation:
The computations are shown below
a. For Annual explicit cost
= Wages and salaries + material cost + new equipment cost + rental property + interest cost in capital
= $200,000 + $75,000 + $30,000 + $20,000 + $35,000
= $360,000
We considered all the cost which are incurred with respect to material, wages and salaries, equipment, etc
b. For Annual implicit cost
= Income received
= $90,000
= $90,000
It includes the opportunity cost which could be earned by the individual or company
c. For annual economic cost
= Explicit cost + Implicit cost
= $360,000 + $90,000
= $450,000
It is a mix of both explicit cost and the implicit cost
d. For accounting profit
As we know that
Accounting profit = Total revenues - explicit costs + depreciation.
= $360,000 - $360,000
= $0
e. For economic Profit it is
= Total Revenues – Explicit Costs – Implicit Costs
= $360,000 - $360,000 - $90,000
= -$90,000
Final answer:
The annual explicit costs amount to $360,000, while the implicit costs are $90,000. The firm's accounting profit is $0, and its economic profit is -$90,000, indicating the firm is not economically successful.
Explanation:
Calculating Costs and Profits for a Firm
To determine the financial health of a firm, it's essential to calculate both the explicit costs and implicit costs, which in combination give the economic costs. Then, by subtracting these costs from the total revenues, we can determine the accounting profit and the economic profit of the business.
a) Annual Explicit Costs:
The explicit costs are the direct, out-of-pocket payments for factors of production made by the firm. For the firm described:
Wages and Salaries: $200,000Materials: $75,000New Equipment: $30,000Rented Property: $20,000Interest Costs: $35,000Total explicit costs = $200,000 (Wages and Salaries) + $75,000 (Materials) + $30,000 (New Equipment) + $20,000 (Rented Property) + $35,000 (Interest Costs) = $360,000
b) Annual Implicit Costs:
Implicit costs are the opportunity costs of factors of production the firm owns. They represent the income the owner/manager could have earned elsewhere:
Owner/Manager's Opportunity Cost: $90,000
Total implicit costs = $90,000
c) Annual Economic Costs:
Economic costs are the sum of explicit and implicit costs:
Total economic costs = $360,000 (Explicit) + $90,000 (Implicit) = $450,000
d) Accounting Profit:
Accounting profit is calculated by subtracting the total explicit costs from the total revenues:
Accounting profit = Total Revenues - Explicit Costs = $360,000 (Revenues) - $360,000 (Explicit Costs) = $0
e) Economic Profit:
Economic profit is total revenues minus all costs, both explicit and implicit:
Economic Profit = Total Revenues - Economic Costs = $360,000 (Revenues) - $450,000 (Economic Costs) = -$90,000
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