Answer:
The machine's resale value in 5 years from now will be $309,392
Explanation:
Future value = present value*exp(cx)
$340,000 = $500,000*exp(4c)
17/25 = exp(4c)
c = -0.096
Future value = present value*exp(cx)
= $500,000*exp(-0.096*5)
= $309,391.70
Therefore, The machine's resale value in 5 years from now will be $309,392
The question involves the concept of exponential decay in economics, as the resale value of a machine decreases over time. A mathematical formula relating the initial purchase price, resale value, decay constant, and time elapsed can be used to calculate the resale value of a machine in the future.
Explanation:The subject of this question is exponential decay, which is a topic in mathematics. Garland Mills' machinery purchase qualifies as an example of exponential decay in economics because the resale value of the machinery decreases exponentially over time.
The equation for exponential decay is R = R0 * e^(-kt), where R is the final amount remaining (resale value in the future), R0 is the initial amount (initial purchase price), k is the decay constant and t is the time elapsed. From the given information, we can calculate k using the formula k = -ln(R/R0) / t where ln is the natural logarithm. Once k is known, we can calculate the future resale value for any time t.
Substituting the values from the question, R0 = $500,000, R = $340,000, and t = 4 years, we can calculate k. Then substituting the value of k and t = 9 years (4 years in the past and 5 years in the future) in the decay formula, we can calculate the resale value of the machine 5 years from now.
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Which of the following best describes the term "organizational climate"?a.It is related to how well organizational members get along with each other.b.It is related to the task of resolving a morale problem on a team, committee, or work group when there is no clear-cut method for solving it.c.It refers to the number of hierarchical levels appearing on an organizational chart.d.It refers to the diffusion of decision making throughout an organization.
Answer: Option a
Explanation: In simple words, organisational climate refers to the system of beliefs and values that the employees working within perceives from the organisational culture and act in the workplace.
The organisational climate directly affects the performance of the employees as it determines how much trust and harmony different employees have with each other.
An organisation having healthy climate succeeds to provide their employees a proper and satisfied work environment to perform their job.
Final answer:
Organizational climate describes the enduring tone and quality of interaction within a group, which is influenced by task and social cohesion and contributes to group morale.
Explanation:
The term organizational climate best describes the relatively enduring tone and quality of group interaction that is experienced similarly by group members. It is often referred to as group morale. Group climate is influenced by two types of cohesion: task cohesion, which is the commitment of group members to the purpose and activities of the group, and social cohesion, which is the degree of attraction and liking among group members. Appropriate levels of these cohesions create a positive group climate and are crucial for the group's performance and overall satisfaction with the group.
After a kick-off session and six contentious weekly team meetings, Lola is struggling to align her team around common expectations. These expectations are: how to work together, communicate effectively, and identify appropriate hand-off points as her team provides customer service and technical support for a new product line. Two team members in particular keep butting heads on every issue and Lola is losing patience with their inability to work together. Based on Bruce Tuckman’s theory of team development, where is Lola’s team currently in the evolution process?
Answer:
storming
Explanation:
Based on Bruce Tuckman’s theory of team development it seems that Lola's team is currently in the storming phase of the evolution process. This is the second phase in the process, in which individuals are still showing hostility towards one another and have not have not fully assigned or understand each persons role in the team. This leads to resisting control from any authority within the group, and prevents team goals from being achieved.
Final answer:
Lola's team is in the storming phase of Bruce Tuckman's team development model, dealing with conflicts that are typical during this stage. To advance, the team will need to establish clear expectations, improve communication, and resolve conflicts to develop cohesion and eventually become more effective and reach the performing phase.
Explanation:
Based on Bruce Tuckman's theory of team development, Lola's team appears to be in the storming phase. This is characterized by conflicts and power struggles among team members as they attempt to establish their roles and understand how to work together. Lola is witnessing behavior typical for this developmental stage, including difficulty in aligning around common expectations such as communication and appropriate hand-off points in providing customer service and technical support.
To encourage progression to the norming phase, where teams develop standards and cohesiveness, Lola may need to redefine the team's rules, facilitate better communication, establish clearer roles, and perhaps engage in team-building exercises or conflict resolution strategies. Reference to Tuckman's model suggests that once these issues are resolved and cooperation improves, Lola's team can move toward the performing stage, where they can effectively work towards their goals with a sense of shared responsibility.
Tito Company reports a $20,000 increase in inventory and a $5,000 decrease in accounts payable during the year. Cost of Goods Sold for the year was $282,000. Using the direct method of reporting cash flows from operating activities, cash payments made to suppliers were
Answer: Cash payments made to suppliers were $307,000
Explanation:
In order to find cash paid to suppliers we start from the cost of goods sold, add any increase in inventory to it, subtract any decrease in inventory, add any decrease in accounts payable, subtract any increase in accounts payable.
So 282,000+20,000+5,000= 307,000
A manager that looks at loans and deposits increases and decreases among other things to measure the bank's liquidity position is using:
a. signals from the marketplace
b. the liquidity indicator approach
c. the sources and uses of funds approach
d. the structured funds approach
e. None of the options is correct
Answer:
The answer is letter C
Explanation:
The sources and uses of funds approach.
Going public offers a company the following advantages, except:
a. The ability to raise capital at a higher valuation
b. Access to broader financial markets to fund capital requirements
c. The ability to use stock instead of cash to acquire strategic technologies
d. The ability to borrow at a lower interest rate
Answer: d. The ability to borrow at a lower interest rate
Explanation:
Going public, in form of initial public offering (IPO) which is the first sale of stock by a company have varieties of advantages such as growth by generating more capital, publicity by generating more public awareness, also giving them access to broader market. But IPO does not give them ability to borrow at a lower interest rate it rather provides more funds from stocks to pay up existing debts.
St. Augustine Corporation originally budgeted for $360,000 of fixed overhead at 100% of normal production capacity. Production was budgeted to be 12,000 units. The standard hours for production were 5 hours per unit. The variable overhead rate was $3 per hour. Actual fixed overhead was $360,000, and actual variable overhead was $170,000. Actual production was 11,700 units. The fixed factory overhead volume variance is
Answer:
$9,000 unfavorable
Explanation:
The computation of the total fixed overhead variance is shown below:
= Actual fixed overhead costs - Budgeted fixed overhead
where,
Budgeted fixed overhead is $360,000
And, the Actual fixed overhead cost is computed below:
= Actual fixed overhead × Actual production ÷ budgeted production
= $360,000 × 11,700 units ÷ 12,000 units
= $351,000
Now put these values to the above formula
So, the value would equal to
= $351,000 - $360,000
= $9,000 unfavorable
Hillward Bakers Inc. has been using a logo with the letters"HB-in blue color and a baker's hat above these letters since its inception ten years ago. This logo has since been connected with Hillward Bakery by its customers. Hobert Bakers Inc., a newly opened bakery and confectionary chain, uses the same logo. Hillward has not registered its logo, but chooses to sue Hobert. Which of the following is true of this case?
A. Hillward cannot sue Hobert since the logo has not been registered as a trademark
B. Hillward can sue Hobert since the logo has been used by Hillward and is associated with it.
C. Hobert can defend that Hillward created something that lacks utility and cannot be trademarked
D. Hobert can defend that Hillward created something that was very obvious.
E. Hillward cannot sue Hobert because logos cannot be patented or trademarked.
Answer:
B) Hillward can sue Hobert since the logo has been used by Hillward and is associated with it.
Explanation:
Since Hillwards logo is an elaborate piece of creative art, then they can sue Hobert for using their logo since it was associated directly to them during the past decade. Common logos are not usually protected by copyright unless they show significant creative artwork done.
It is always better and easier to protect a logo when it is a registered trademark but even if you haven't registered it you can still sue and win for infringement. When a company uses a logo, especially for a long time, it is establishing common law trademark rights.
If, for a given output level, a perfectly competitive firm's price is less than its average variable cost, the firm A. should increase price. B. should shut down. C. is earning a profit. D. should increase output.
Answer:
B. should shut down.
Explanation:
In the short run, if price is less than average variable cost, the firm should shut down; cease production temporarily. It would be better for the firm to shut down than to continue production and earn losses. If output is increased, average variable cost increases and loss increases.
A perfect competition firm is a price taker so it cannot adjust the price for its products.
After being influenced by frequent advertisements, Jeremy buys a new cell phone. However, he discovers that the new cell phone does not offer the features he expected. This scenario illustrates that the _____ of the purchase is less than Jeremy's expectations.A) perceived valueB) actual valueC) an evoked setD) a consumer set
Answer: The actual value
Explanation: In simple words, actual value refers to the utility satisfaction that a customer receives after purchasing a product.
The only difference between perceived value and actual value is that while calculating perceived value the customer compares his product with other product . However, while calculating actual value he only compares the existing performance with his or her expectations.
In the given case, Jeremy feels the product he buy is no as useful as he thought. Hence it lacks actual value.
A decision tree a. presents all decision alternatives first and follows them with all states of nature. b. presents all states of nature first and follows them with all decision alternatives. c. alternates the decision alternatives and states of nature. d. arranges decision alternatives and states of nature in their natural chronological order.
Answer:
The correct answer is (D)
Explanation:
The decision tree is a choice help tool that uses a tree-like model of choices and their potential results, including chance occasion results, asset expenses, and utility. It is one approach to show a calculation that just contains restrictive control explanations. A decision tree is a scientific model used to assist managements with deciding. A choice tree utilises evaluations and probabilities to compute likely results. It helps to decide which alternative must be choose. The solution starts by selecting pay-offs from left to right in reverse order in a chronological order.
Life cycle costing (LCC):_______
a) focuses on purchase price which is typically the highest percentage of LCC.
b) is easy to understand theoretically and easy to put into practice.
c) is applied to all types of purchases except capital acquisitions.
d) includes all relevant costs expected in the first three years of ownership.
e) may include costs that are 10-15 years in the future and highly uncertain.
Life cycle costing (LCC) includes all relevant costs expected in the first three years of ownership.
Option D
Explanation:
Life-cycle costing (LCC) is a method used to appraise the all out cost of proprietorship. It is a framework that tracks and aggregates the real expenses and incomes owing to cost object from its innovation to its relinquishment.
It enables near cost appraisals to be made over a particular timeframe, considering significant monetary elements both as far as introductory capital expenses and future operational and resource substitution cost.
Life-cycle costing is otherwise called all out cost of possession (TCO).
The way toward recognizing and archiving every one of the costs required over the life of an advantage is known as life-cycle costing (LCC).
The life-cycle costing procedure can be as basic as a table of anticipated yearly expenses, or as mind boggling as an electronic model that takes into account the formation of situations dependent on suppositions about future cost drivers.
On September 1, 2017, Banner Co. borrowed $70,000 from the City Bank for five months at 9%. Interest was properly accrued on December 31, 2017. What entry is needed to record the payment of the note and accrued interest on the due date?
Answer:
Explanation: Journal Entry
Loan Borrowed is $70,000
Interest rate is 9%
Interest accrued = 70,000 * 9% = 6,300
1. Cr: Bank $76,300
Dr: Short Term Loan $70,000
Dr: Accrued Int on loan $6,300
Being loan repayment with accrued interest on loan for 5 months.
Primo, Inc. issued $50,000, 5-year, 7% bonds that pay interest annually on January 1 when the going market interest rate was 6%. The issue (sale) price of the bonds equals the present value of ______ and 5 periods. a) $50,000 plus the present value of an annuity of $3,500, both discounted at 7% b) $50,000 plus the present value of an annuity of $3,000, both discounted at 7% c) $50,000 plus the present value of an annuity of $3,500, both discounted at 6% d) $53,500 discounted at 7%.
The issue price of the bonds equals the present value of the bond's face value plus the present value of the bond's annuity of interest payments.
Explanation:The issue price of the bonds equals the present value of the bond's face value ($50,000) plus the present value of the bond's annuity of interest payments ($3,500 per year for 5 years).
To calculate the present value, we need to discount the future cash flows by the appropriate interest rate (7%).
Therefore, the correct option is a) $50,000 plus the present value of an annuity of $3,500, both discounted at 7%.
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The process of anticipating rivals’ actions in order to both revise a firm’s plan and prepare to deal with rivals’ response is called _____.
a. mutual forbearance
b. prisoners’ dilemma
c. competitor analysis
d. multimarket competition
Answer:
Letter c is correct. Competitor analysis
Explanation:
Competitor analysis is a vital practice for those who are starting a business and who already have a consolidated brand in the market. Conducting a competitor analysis helps you better understand the marketing landscape and understand how your organization's positioning stands with its competitors.
By evaluating competitors, it is possible for a company to find development opportunities and better understand which challenges and continuous improvements need to be implemented. Competitor analysis can be conducted through market research, press, commentary and opinions, the internet and advertising.
In the traditional advertising model, advertisers were charged using a __________ approach, which charged for the exposures to an ad. Google transformed the traditional model to a model called __________ where advertisers pay only when someone actually clicks on the ad and is sent to their website.
Answer:
The correct answers that fills the gaps are: Cost per Thousand; Cost per Click.
Explanation:
Cost per Click (CPC), Cost per Thousand Impressions (CPM) and Cost per Acquisition (CPA) are collection methods used by digital media platforms. The CPC is calculated based on the number of clicks on the ads, the CPM for impressions, and the CPA for the number of conversions.
CPM, or Cost per thousand impressions, is a metric that represents the cost generated per thousand impressions of the ad. Obviously they are not literal impressions, but the number of times that certain advertising was displayed to the public on the internet.
By choosing CPM as a form of payment, the advertiser agrees to pay the publisher of the ad a pre-determined amount for every thousand impressions. This means that the publisher receives compensation for each ad shown, having more predictability of profit.
The cost per click is a form of payment of paid advertisements in which for a number of clicks made the payment is made. That is, the advertiser pays for visitors who access the site where the ad was made for their site.
Tone Zone plans to introduce four mp3 player models over the next year. These models range from basic players at $99 per unit, to more sophisticated players at $399 per unit. The more features a model has, the more expensive it is. What pricing strategy is Tone Zone using for its range of mp3 players?
A) product line pricing
B) product bundle pricing
C) captive product pricing
D) by-product pricing
E) optional product pricing
Answer: Product line pricing
Explanation: In simple words, it refers to a pricing strategy under which the organisation separates its product on the basis of cost and price so that various quality products could be offered in the market to capture different classes of customers.
This strategy helps an organisation to prepare a vast customer base and is generally used by the firms in economies where there is too much income gap present and the firms offering the products are few.
Sometimes the prices are differentiated on the basis of unique quantities that have same utility value but have different customers preference.
Frito-Lay has developed a new line of snack foods. The company wants to place the products in as many outlets as possible; grocery stores, vending machines, convenience stores and restaurants. By doing so, Frito-Lay is striving to achieve _______ distribution.
Answer: Intensive distribution
Explanation:
Here, in this particular case Frito-Lay is trying to accomplish the Intensive Distribution. Intensive distribution is referred to as the marketing strategy under which an organization tends to sell their respective commodity through their several outlets or store as, in order to have the individuals and their respective customers confront the commodity virtually almost everywhere.
When the economy is in a recession, expansionary fiscal policy can be used to stimulate and encourage economic growth. Which of the following scenarios represent expansionary fiscal policies from both a supply and demand perspective at the same time? There could be more than one answer! Please be 100% sure:)A. The government lowers tax rates and undertakes a replacement of old bridges and roadsB. The government lowers tax rates and issues a partial refund of taxes that have alredy been paidC. The government raises tax rates and reduces unemployment insurance paymentD. The Federal Reserve incrases the money supply and lowers the interest rate while the government simultaneously reduces future taxes.
Answer:
A. The government lowers tax rates and undertakes a replacement of old bridges and roads
B. The government lowers tax rates and issues a partial refund of taxes that have already been paid
These 2 statements are correct explained below
Explanation:
A. The government lowers tax rates and undertakes a replacement of old bridges and roads, this statement is correct because when the government lowers tax rates it means that people have higher disposable income on their hands therefore they can spend more which increases demand, and people also invest more which increases supply, also the replacement of bridges and roads is improvement in infrastructure and this also increases supply as transportation is easier and cheaper for businesses.
B. The government lowers tax rates and issues a partial refund of taxes that have already been paid, this statement is correct because when the government lowers tax rates it means that people have higher disposable income on their hands therefore they can spend more which increases demand, and people also invest more which increases supply, also refund of taxes will increase the disposable money that people have so they can invest and consume both which will increase both supply and demand.
C. The government raises tax rates and reduces unemployment insurance payment
This is contraction fiscal policy and will do the opposite of expansionary fiscal policy, that is why this statement is incorrect.
D. The Federal Reserve increases the money supply and lowers the interest rate while the government simultaneously reduces future taxes. This statement is wrong because lowering the interest rate is an expansionary monetary policy and not an expansionary fiscal policy.
Which of the following refers to an allocation of the promotion budget based on management's determination of the total amount to be devoted to marketing communication?A. Competitive-parity method.B. Bottom-up budgeting techniques.C. Top-down budgeting technique.D. Percentage-of-sales method.E. Objective-task method.
Answer:
The correct answer is (C)
Explanation:
Top-down budgeting is a planning strategy wherein senior administration builds up a significant level spending plan for the organisation. When the top-level numbers are made, amount is distributed to the departments such as marketing , finance, HR and according to the tasks and operations and it is compulsory to make budgeting notes .
A competitive firm maximizes profit by choosing the quantity at which
a. average total cost is at its minimum.
b. marginal cost equals the price.
c. average total cost equals the price.
d. marginal cost equals average total cost.
Answer:
marginal cost equals the price
Christina will be retiring next month from her job after 35 years as a school bus driver. Over the last 35 years, Christina’s annual salary averaged $22,040. She expects to receive some money each month from Social Security and plans to take the rest of the money she needs to pay the monthly bills from savings. Each month her bills total to about $1,375. Assuming her annual Social Security benefit will be 42% of her salary average, how much will she need to take from savings each month to help pay the bills?
Answer:
$603.6
Explanation:
Christina’s annual salary averaged = $22,040
Annual Social Security benefit = 42% of her salary average
Christina’s total bill each month = $1,375
Now,
The amount of Annual Social Security benefit = 42% of $22,040
= 0.42 × $22,040
= $9,256.8
Thus,
The amount of monthly Social Security benefit
= ( Annual Social Security benefit ) ÷ 12
= $9,256.8 ÷ 12
= $771.4
Therefore,
The amount she need to take from savings each month to help pay the bills
= Christina’s total bill each month - Amount of monthly Social Security benefit
= $1,375 - $771.4
= $603.6
Answer:
(B) $603.60
Explanation:
Edge 2020
Additional costs of plant assets that provide benefits extending beyond the current period; they increase or improve the type or amount of service an asset provides are treated as _______.
Answer:
Capital Expenditures
Explanation:
Capital Expenditures -
It is the total amount which is spend on the tangible assets which used for more than an year for the business , is known as capital expenditures .
It is also known as Capex .
It increases the amount of service an
hence , from the question information , the correct term according to the given information is Capital Expenditures .
Which of the following represent the newer tools of digital direct marketing? A. Telemarketing, direct-mail marketing, and catalog marketing B. Telemarketing, face-to-face selling, and kiosk marketing C. Direct-response TV marketing, telemarketing, and direct-mail marketing D. Online marketing, social media marketing, and mobile marketing E. Kiosk marketing, telemarketing, and direct-response TV marketing
Answer:
D. Online marketing, social media marketing, and mobile marketing
Explanation:
Digital direct marketing is a fusion of digital and direct marketing. Digital includes online and mobile (smartphone) media, while the traditional media often refers to telephones, TV, brick-and-mortar shops...
Since the term direct refers to the way of approaching customers, it is important to make a distinction between marketing channels and media that are aimed for a wider public, and the ones that have the possibility of targeting a specific customer or target group.
The only answer that includes types of DDM (digital direct marketing) is D.
Online and social media marketing are tightly related and are digital by nature. They have the functionality to target customers directly with the aid of cookies and data provided by social media. Also, mobile marketing is direct and digital too, as it is related to smartphones and unique phone numbers (thus, it is direct).
The newer tools of digital direct marketing are online marketing, social media marketing, and mobile marketing. Online marketing uses the internet to deliver promotional messages, social media marketing involves content creation and sharing on social media platforms, and mobile marketing uses digital strategies to reach audiences on mobile devices.
Explanation:In the context of marketing, the newer tools of digital direct marketing are represented by option D: Online marketing, social media marketing, and mobile marketing. These tools have gained significance due to the increased use of internet and mobile devices. Online marketing or Internet marketing uses the internet to deliver promotional marketing messages to consumers. It includes email marketing, search engine marketing (SEM), social media marketing, many types of display advertising, and mobile advertising. Social media marketing involves creating and sharing content on social media networks to achieve your marketing and branding goals. Lastly, mobile marketing is multi-channel, digital marketing strategy aimed at reaching a target audience on their smartphones, tablets, and other mobile devices.
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Opportunity costs are _____.
- the costs incurred by a firm to preserve its market share
- benefits gained as a result of accepting a particular project
- the costs of pursuing a specific project
- benefits lost due to taking on a particular project
Answer:
- benefits lost due to taking on a particular project
Explanation:
Opportunity costs are also known as the real cost, or the cost of the alternative forgone. Due to the limited resources, a company has to select what project to embark on and what project to leave undone. The opportunity cost is not the benefit gained as a result of accepting a particular project but that lost as a result of the acceptance.
Therefore the last option - benefits lost due to taking on a particular project is right.
A________ is a probable future sacrifice of economic benefits arising from present obligations to transfer assets or provide services as a result of past transactions or events.
Answer:
Liability
Explanation:
A liability is a probable future sacrifice of economic benefits arising from present obligations to transfer assets or provide services as a result of past transactions or events. Liabilities usually result in the outward flow of economic resources. Examples are loan payable, accounts payable, accrued expenses, deferred revenue etc. Liabilities are usually recognized as credit balances in the balance sheet and are classified into current and non-current based on the probable timing of the sacrifice of economic benefits.
12. Stocks A and B have the following data. The market risk premium is 6.0% and the risk-free rate is 6.4%. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT? A B Beta 1.10 0.90 Constant growth rate 7.00% 7.00% a. Stock A must have a higher stock price than Stock B. b. Stock A must have a higher dividend yield than Stock B. c. Stock B's dividend yield equals its expected dividend growth rate. d. Stock B must have the higher required return. e. Stock B could have the higher expected return.
Answer:
b. Stock A must have a higher dividend yield than Stock B.
Explanation:
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Benny employs people to sell candy bars at intersections. Assume that Benny can obtain candy bars to sell for no cost. The marginal product of the last worker Benny hired is 20 candy bars per hour. Benny pays $7 per worker per hour and sells the candy bars for $1 each. If the price of candy bars rises to $2, then the:
Answer:
Benny will hire more candy sellers.
Explanation:
Benny is currently making a $13 per hour profit for every candy seller that he hires: $20 (marginal product) - $7 (salary) = $13
If the price of candy bars increases to $2 and the quantity demanded remains unchanged, Benny will be making a $33 profit for every candy seller: $40 (marginal product) - $7 (salary) = $33
So Benny will be highly motivated to hire more candy sellers in order to keep increasing his profit.
The Malcolm Baldrige National Quality Award aims to:
(I) publicize successful quality programs.
(II) recognize quality achievements of U.S. companies.
(III) stimulate efforts to improve quality.
(IV) distribute the grant money available for improved quality.
a.II and III only
b.I, II, and III only
c.I and IV only
d.I and II only
e.I, II, III, and IV
Answer:
B) I, II, and III only
Explanation:
The Malcolm Baldrige National Quality Award (MBNQA) was established by the US Congress in 1987. It's main purpose is the recognition for performance excellence that American organizations can achieve. The MBNQA is the nation's highest presidential honor an organization can receive for performance excellence.
Three MBNQA awards are given out every year in six categories (18 awards in total):
Manufacturing Service Company Small Business Education Healthcare Non-profit
Machinery purchased for $60,000 by Tom Brady Co. in 2016 was originally estimated to have a life of 8 years with a salvage value of $4,000 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2021, it is determined that the total estimated life should be 10 years with a salvage value of $4,500 at the end of that time. Assume straight-line depreciation.a. Prepare the entry to correct the prior years' depreciation, if necessary.b. Prepare the entry to record depreciation for 2021.
Given a change in the estimated life and salvage value of a machine, we first calculate the initial depreciation and then adjust for the updated values. No entries are necessary for prior years, but a journal entry is required for 2021 to record the annual depreciation of $4,100.
Explanation:The situation you have described involves recalculating depreciation for an asset, in this case, a piece of machinery owned by Tom Brady Co., given a change in its estimated total life and salvage value. Understand that depreciating an asset is essentially a method of allocating the cost of that asset over its useful life, so when that estimated useful life changes, so too does the annual depreciation expense.
First, let's calculate the initial depreciation over 5 years. The machinery was purchased for $60,000 with a salvage value of $4,000; hence, its depreciable base was $56,000 ($60,000 - $4,000). Given an 8-year life, the annual depreciation would've been $7,000 ($56,000 / 8 years). By 2021, therefore the cumulative depreciation would be $35,000 ($7,000 per year for 5 years).
In 2021, however, the estimated total life has changed to 10 years, and the salvage value is now $4,500. That changes the total depreciable base to $55,500 ($60,000 - $4,00). As 5 years has passed, it means that the machinery would be depreciated over the remaining 5 years ($55,500 - $35,000) / 5, which make an annual depreciation of $4,100. So, the depreciation expense for 2021 would be $4,100.
To answer part a), no correction is needed for the prior years' depreciation because the change is treated prospectively, not retrospectively. For part b), a journal entry would include debiting (increasing) Depreciation Expense by $4,100 and crediting (increasing) Accumulated Depreciation by $4,100 to record the annual depreciation for 2021.
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c. Assume that Bon Temps has a beta coefficient of 1.2, that the risk-free rate (the yield on T-bonds) is 3%, and that the required rate of return on the market is 8%. What is Bon Temp’s required rate of return?
Answer:
9%
Explanation:
This question tests your understanding of the application of the CAPM (Capital Asset Pricing Model) formula.
The risk-free rate is the rate of return which an investment with no risk is expected to give. This is usually associated with investments in government securities (bonds) as governments are not expected to default.
The required return on market is the minimum return an individual expects to get from investing in a company
Beta co-efficient is the measure of volatility in relation to the market
The CAPM formula for calculating required rate of return is;
Ke = Rf + B(Rm - Rf)
where Rf = 3%
Rm = 8%
B = 1.2
Ke = 3% + 1.2*(8-3)
= 3% + 1.2*(5)
= 3% +6%
= 9%
I hope this helps you understand the question better and you can solve similar questions
Final answer:
The required rate of return for Bon Temps can be calculated using the Capital Asset Pricing Model (CAPM) formula.
Explanation:
The required rate of return for Bon Temps can be calculated using the Capital Asset Pricing Model (CAPM) formula:
Required rate of return = Risk-free rate + Beta coefficient × (Market rate of return - Risk-free rate)
In this case, the risk-free rate is 3%, the beta coefficient is 1.2, and the market rate of return is 8%.
Therefore, the required rate of return for Bon Temps is:
Required rate of return = 3% + 1.2 × (8% - 3%)
= 3% + 1.2 × 5%
= 3% + 6%
= 9%