Answer:
The correct answer is letter "E": generate all of the above consequences.
Explanation:
Price supports, mostly known as price floors, are set by the government to protect producers of certain goods and services. By doing so, the product prices will have a minimum that cannot be trespassed. This is to make sure producers can continue with their operations at least earning a minimum profit margin.
The counterpart, the demanders, are affected because their purchasing power is decreased by setting the price at a certain level without the option of going down from there. Besides, the higher the price, the more taxes consumers will be paying. The disadvantage of price floors is surplusses in production that are the result of demanders not being able to pay the price set by the government. Eventually, government agencies purchase the surplus quantity in an attempt to keep the equilibrium in the market.
Price supports on agricultural goods provide benefits to suppliers but lead to higher prices for consumers, surpluses that the government must purchase, and a higher tax burden for society. Therefore, the correct answer is e. generate all of the above consequences.
Explanation:Price supports, such as those placed on agricultural goods, have multiple consequences. These government enforcements are designed to maintain a minimum price by directly purchasing the goods or providing subsidies, which can lead to various effects.
The answer to the student's question would be e. generate all of the above consequences. Price supports benefit suppliers by ensuring they receive a certain minimum price for their goods, thus increasing producer surplus. However, they hurt demanders since they face artificially higher prices than what the market might have offered without such controls.
Also, they create surpluses because when the price is held above the equilibrium, quantity supplied exceeds quantity demanded, and these surpluses are usually purchased by the government. This action, in turn, imposes a higher tax burden on society to finance the government purchases of the surplus, and can lead to a deadweight loss (DWL), reflecting the loss of economic efficiency.
While such interventions aim to stabilize markets and ensure sufficient income for producers, they can lead to distortions in market functioning and carry a cost for society as a whole. Thus, they are a subject of debate since the goal is to balance the benefits of subsidies with the need to minimize negative externalities.
The chart gives prices and output information for the country of Utopia. Use this information to calculate real and nominal GDP for both years. Use 2017 as the base year. 2016 2017 Price Quantity Price Quantity Ice cream $7.00 600 $3.00 400 Blue jeans $70.00 20 $20.00 90 Laptops $300.00 5 $300.00 5
Answer: Nominal GDP 2016 = $7,100
REAL GDP 2016 = $3,700
Nominal GDP 2017 = $4,500
Real GDP 2017 = $4,500
Explanation:
To calculate the Nominal and Real GDPs we use the following formulas,
Nominal GDP = Sum of (Current Year Price x Current Year Quantity)
Real GDP = Sum of (Base Year Price x Current Year Quantity)
We make the assumption that 2017 is the base year so calculating would be,
Nominal GDP, 2016 = [(7 x 600) + (70 x 20) + (300 x 5)]
= $(4200 + 1400 + 1500)
= $7,100
Remember for this we will use 2017 as the base year so we will use 2017 prices
Real GDP, 2016 = [(3 x 600) + (20 x 20) + (300 x 5)]
= $(1800 + 400 + 1500)
= $3,700
Nominal GDP, 2017 = [(3 x 400) + (20 x 90) + (300 x 5)]
= $(1200 + 1800 + 1500)
= $4,500
Now seeing as 2017 is the base year, it's nominal and real GDPs will be the same.
Real GDP, 2017 = $[(3 x 400) + (20 x 90) + (300 x 5)]
= $(1200 + 1800 + 1500)
= $4,500
I included the details part of question so it is clearer.
If you have need any clarification do react or comment.
A firm produces 300 units of output at a total cost of $1,000. If fixed costs are $100, Select one: a. average total cost is $5. b. average fixed cost is $10. c. average total cost is $4. d. average variable cost is $3
Answer:
d. average variable cost is $3
Explanation:
Average Total Costs = Average Fixed Costs + Average Variable Costs
Average Total Costs= Total Fixed Variable Costs/ No of units
= 100/300 + 900/300= 1000/300= $ 3.33 ( not given)
a. average total cost is $5 ≠ $ 3.33
b. average fixed cost is $10≠$ 0.33
c. average total cost is $4 ≠$ 3.33
d. average variable cost is $3 =$ 3
Average Variable Costs= Total Variable Costs/ Total Units= 900/300= $ 3
Average Fixed Costs= Total Fixed Costs/ Total Units= 100/300= $ 0.33 not also given
Answer: The average variable cost is $3.(D)
Explanation:
A fixed cost is a cost that does not change or varies with production process. Fixed costs are always constant in production. Variable costs are costs that changes with the production process. Variable costs varies and are not constant.
From the information given in the question, the firm produces 300 units of output, has a total cost of $1000 and a fixed cost of $100. A total cost is made up of the fixed and variable cost.
Total cost= Fixed cost+Variable cost
Since total cost is $1000 and fixed cost is $100, variable cost will be $1000 - $100 = $900
Since the firm produces 300 units and variable cost is $900, average variable cost will be: $900/300 =$3
The average variable cost is $3
Sand Explorers issues bonds due in 12 years with a stated interest rate of 8% and a face value of $270,000. Interest payments are made semi-annually. The market rate for this type of bond is 7%. Using present value tables, calculate the issue price of the bonds. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Answer:
$291,686
Explanation:
Market Value of the bond is the present value of all cash flows of the bond. These cash flows include the coupon payment and the maturity payment of the bond. Price of the bond is calculated by following formula:
According to given data
Coupon payment = C = $270,000 x 8% = $21600 annually = $10800 semiannually
Number of periods = n = 2 x 24 years = 24 periods
Discount rate = 7% annual = 3.5%
There are two cash flows associated with this bond, first is 24 coupon annuity payments which can be discounted by using annuity factor at 3.5 %. Second is the is maturity payment which is discounted using simple discount factor at 3.5%.
Issue Price of Bond = ( Coupon Payment x annuity factor ) + ( Maturity Payment x Simple discount factor )
Issue Price of Bond = ( $10,800 x 16.058 ) + ( $270,000 x 0.438 )
Issue Price of Bond = $173,426.4 + $118,260
Issue Price of Bond = $291,686.4
Discount Table is attached in MS Excel File format Please find it.
Testbank Multiple Choice Question 47 Deferred taxes should be presented on the balance sheet as a current amount. as reductions of the related asset or liability accounts. as a noncurrent amount. as either noncurrent or current.
Deferred taxes should be presented as noncurrent amounts and as reductions of the related asset or liability accounts on the balance sheet.
Explanation:Deferred taxes should be presented on the balance sheet as a noncurrent amount. This is because deferred taxes represent the future tax impacts of temporary differences between the book value and tax value of assets and liabilities. Therefore, the correct answer to the question is that deferred taxes should be presented on the balance sheet as noncurrent amounts and as reductions of the related asset or liability accounts.
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Deferred taxes should be represented on the balance sheet as a non-current amount. They arise due to the difference in accounting rules used by the tax department and those used by a company for its financial reporting. On a T-account sheet, deferred tax can be found on either side depending on whether it's a deferred tax asset or liability.
Explanation:Deferred taxes in a financial context are future tax liabilities or assets that result from timing differences between the recognition of revenue or expense in the financial statements and their recognition in a tax return. They arise due to the difference in accounting rules used by the tax department and those used by a company for its financial reporting.
Given their nature, deferred taxes should be represented on the balance sheet as a non-current amount, meaning they are not expected to be settled within the next 12 months. They should not be shown as reductions of the related asset or liability accounts. On a T-account sheet, which is used to depict the general ledger, deferred tax can be found on either side depending on whether it's a deferred tax asset or liability.
In sum, deferred taxes can be represented as either current or non-current on the balance sheet, but it is more typical and appropriate for them to be presented as non-current.
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Magic Realm, Inc., has developed a new fantasy board game. The company sold 35,600 games last year at a selling price of $62 per game. Fixed expenses associated with the game total $623,000 per year, and variable expenses are $42 per game. Production of the game is entrusted to a printing contractor. Variable expenses consist mostly of payments to this contractor. Required: 1-a. Prepare a contribution format income statement for the game last year. 1-b. Compute the degree of operating leverage. 2. Management is confident that the company can sell 43,788 games next year (an increase of 8,188 games, or 23%, over last year). Given this assumption: a. What is the expected percentage increase in net operating income for next year
Answer:
1a.
Magic Realm, Inc.,
Contribution format income statement
Per Unit Amount
Sales 62 2,207,200
Variable expenses 42 (1,495,200)
Contribution margin 20 712,000
Fixed expenses (623,000)
Net operating profit 89,000
1b.
Degree of operating leverage: 4
2. The expected percentage increase in net operating income for next year: 184%
Explanation:
1a. Please refer to the answer part
1b. Degree of operating leverage = Contribution margin / net operating profit = 712,000/89,000 = 8.
2.
Expected percentage increase in net operating income for next year = Expected percentage increase in sales next year x operating leverage = 23% x 8 = 184%
Final answer:
Degree of Operating Leverage: 1.72
Expected Percentage Increase in Net Operating Income for Next Year: 47.60%
Explanation:
Magic Realm, Inc. Contribution Format Income Statement:Total Sales: $2,205,200Total Variable Expenses: $1,495,200Total Contribution Margin: $710,000Total Fixed Expenses: $623,000Operating Income: $87,000Degree of Operating Leverage: 1.72Expected Percentage Increase in Net Operating Income for Next Year: 47.60%The moving activity of Alpha Inc. has an expected cost of $200,000. Expected direct labor hours are 50,000, and the expected number of moves is 90,000. What is the best activity rate for moving? (Note: Round answer to two decimal places.)
Answer:
$2.22 per moves
Explanation:
Activity rate for moving =expected cost/Expected no of moves =$200000/90000 =$2.22 per mover
ccording to your authors, entrepreneurial innovation is similar to "arbitrage" because both activities ultimately involve Select one: a. obtaining inputs at relatively high prices and selling the output at lower prices. b. obtaining inputs at relatively low prices and selling the output at higher prices. c. the absence of uncertainty. d. greed.
Answer:
B. obtaining inputs at lower prices and selling the output at higher prices.
Explanation:
Arbitrage refers to the activity of trying to earn a gain, by exploiting the inefficiencies between two markets. The rule of arbitrage is to buy at a low price from one market and sell at a higher price in another market.
When interest rate parity theory exists and fair pricing prevails, arbitrage opportunities are wiped out.
Entrepreneurial innovation refers to innovation with respect to products and their attributes. It may also refer to entrepreneur attaining new skill sets and creativity which help in better operations.
Such innovation is also characterized by buying inputs at a lower price and selling the output at a higher price thereby maximizing profits. Buying inputs at a low price indicates innovation in the form of optimal utilization of resources.
Thus, both arbitrage and entrepreneurial innovation are driven by the common factor of buying low and selling high, to maximize gains.
1. Assume that Walmart can borrow at yield of 5% in USD (5-year, zero coupon debt, issued in the US), before issuance costs. Alternatively, they could issue the same debt denominated in EUR in the eurobond market at a yield of 5.25%. Unfortunately, issuance costs are 3% for EUR debt but only 2% for USD debt. Assume also that annualized risk-free, zero coupon rates for 5 years are 4% USD, 4.5% EUR. Assume covered interest parity holds. a. What are the all-in costs of the two debt issues, assuming Walmart hedges their exchange rate exposure in the forward market? (Note that the AIC of the EUR debt does not depend directly on the spot or forward exchange rates, but only on the ratio.) b. Ignoring issuance costs, at what EUR yield would the cost of EUR debt equal that of USD debt (i.e., 5%), again assuming Walmart hedges the exchange rate risk? c. What are the multiplicative credit spreads in the USD and EUR markets at these yields?
Answer:
it wold be cheap because walmart is cheap and by the way does walmart have toilet paper yet i havent gone so i dont know
Explanation:
Suppose a competitive firm has cost, C = (0.002q3) + (22q) + 750, marginal cost, MC = 0.006q2 + 22, and revenue, R = 80q. If the firm produces 150 units of output, A. R < C. B. MR < MC. C. marginal profit > 0. D. MR > MC. At this output level (150 units),
A. profit is negative.
B. marginal profit is negative.
C. profit is positive.
D. None of the above.
Answer:
Options B and C are correct.
Marginal profit is negative. Profit is positive.Explanation:
At q = 150
R = 80q = 80(150) = 12,000
C = 0.002(150)3 + 22(150) + 750 = 6750 + 3300 + 750 = 10,800
R > C so first is incorrect.
MR = 80
MC = 0.006(150 x 150) + 22 = 135 + 22 = 157
MC > MR so B is correct.
Profit = TR - TC = 80(150) - 0.002(150)3 - 22(150) - 750 = 12000 - 10800 = 1200
Profit is positive.
Marginal profit = MR - MC = 80 - 157 = - 77
MR is Negative
In the case when the firm should be produce 150 units of output so here Options B and C are correct.
Calculation of the impact on the profit:Since At q = 150
R = 80q = 80(150) = 12,000
So,
C = 0.002(150)3 + 22(150) + 750
= 6750 + 3300 + 750
= 10,800
Here Revenue > Cost so first is incorrect.
Now
MR = 80
MC = 0.006(150 x 150) + 22 = 135 + 22 = 157
MC > MR so B is correct.
Now
Profit = TR - TC
= 80(150) - 0.002(150)3 - 22(150) - 750
= 12000 - 10800
= 1200
Profit is positive.
And,
Marginal profit
= MR - MC
= 80 - 157
= - 77
So, MR is Negative.
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Blossom Company deducts insurance expense of $171000 for tax purposes in 2021, but the expense is not yet recognized for accounting purposes. In 2022, 2023, and 2024, no insurance expense will be deducted for tax purposes, but $57000 of insurance expense will be reported for accounting purposes in each of these years. Blossom Company has a tax rate of 20% and income taxes payable of $154000 at the end of 2021. There were no deferred taxes at the beginning of 2021. What is the amount of the deferred tax liability at the end of 2021?
Answer:
The deferred tax liability = $65,000 - $30,800 = $34,200
Explanation:
Blossom company
Accounting principles of Accruals demands that expenses and income should be recognized in the year they occur.
If Blossom company expect these expenses to occur between 2022 and 2024, it means at 2021 it's not to be recognized. Thus, it's wrong to have deducted it from the income of that year.
In 2021 the company would have posted an income tac liability of 20% x $154,000 = $30,800
However from a tax stand point the $171,000 isn't acceptable. This it will be disallowed
The adjusted income will therefore become $154,000 + $171,000 = $325,000
And the correct tax liability = 20% x $325,000 = $65,000.
The deferred tax liability = $65,000 - $30,800 = $34,200
Suppose that a bank has $30 million in asset X, $10 million in asset Y, and $20 million in asset Z. Each asset has a different risk weight. The risk weight for asset X is 30%, the risk weight for asset Y is 60%, and the risk weight for asset Z is 10%. The amount of risk-weighted assets for this bank is ____________ million. Assuming that the bank has to hold capital equal to 8% of its risk-weighted assets, the bank must hold _____________ million in capital.
Answer:
The amount of risk-weighted assets for this bank is $17 million. Assuming that the bank has to hold capital equal to 8% of its risk-weighted assets, the bank must hold $1.36 million in capital.
Explanation:
asset X, $30 million x 30% risk = $9 million weighted risk
asset Y, $10 million x 60% risk = $6 million weighted risk
asset Z, $20 million x 10% risk = $2 million weighted risk
total risk weighted assets = $9 million + $6 million + $2 million = $17 million
since the bank has to 8% capital to risk weighted assets = $17 million x 8% = $1.36 million
The current Stock price is P0 = $30.00; next year's expected dividend is $2.70 (D1 = $2.70); and the dividend is expected to grow at a constant rate of 8%. What is the firm’s expected cost of retained equity (rs)? (Careful!)
Answer:
Cost of Equity = 17%
Explanation:
Current Stock Price = Expected Dividend/(Cost of Equity - growth rate)
30 = 2.70/(Cost of Equity - 8%)
Cost of Equity = 17%
On April 1, 2018, Ellucian Corporation invested in the bonds issued by the City of Westminster on January 1, 2018. These 10minusyear, $ 400 comma 000 bonds pay interest of 2% with semiannual payments every June 30 and December 31. Ellucian paid par value plus accrued interest. What is the total amount paid by Ellucian for the City of Westminster bonds?
Answer:
$402,000
Explanation:
The computation of the total amount paid is shown below:
Total amount paid = Face value + accrued interest
where,
Face value of the bond is $400,000
And, the accrued interest is
= $400,000 × 2% × 3 months ÷ 12 months
= $2,000
The 3 months is calculated from April 1 to June 30
So, the total amount paid i s
= $400,000 + $2,000
= $402,000
We added the face value and the accrued interest to determine the total amount paid
e Arlington Motor Pool Internal Service Fund had the following transactions and events during January 2018. Using the "Additional Information" provided below. Prepare journal entries to record the following transactions: January 2018 transactions: 1. Paid salaries for the month in cash (1/12 of $80,000) 2. Paid $600 cash for fuel and maintenance expenses 3. Recorded depreciation expense for the month 4. Recorded insurance expense for the month 5. Accrued benefits expense for the month 6. Billed for motor vehicle services as follows: General Fund, 80 trips; Golf Course Enterprise Fund, 10 trips
Answer:
Journal Entries
1) Debit Salaries Expense $6,667 Credit Bank $6,667
2) Debit Fuel and Maintenance expense $600, Credit Bank $600
3) Debit Depreciation Expense $amount Credit Accumulated depreciation $amount
4) Debit Insurance Expense $amount Credit Bank $amount
5) Debit Benefit Expense $amount Credit Accrued Benefit Expense $amount
6) Debit Accounts Receivable ( total of all trips) $amount Credit Service Revenue $amount
Explanation:
The Question is incomplete but i will do the typical journal entries to the transactions without figures.
1) The salaries are for one month and in brackets there is a $80,000*1/12 calculation meaning the $80,000 is for the year, now if it was already recorded then we debit salaries payable $6,667 credit bank $6,667
4) Insurance expense is debited if it is paid as it is incurred but if it has an Prepaid insurance account then we credit the Prepaid insurance account instead of Bank.
Robert has a passion for making ice cream. Assume that ice cream parlors have a market structure of monopolistic competition. Between the local Amy's, Cold Stone Creamery, Marble Slab, Ben & Jerry's, and Baskin Robbins, he has an uphill battle to break into the local ice cream market.
How might Robert differentiate his ice cream shop, JubJub's, so that he can garner some market power?
In order to differentiate his ice cream Scoop, Robert has to do the following:
He has to put his ice-cream a t a price that would be appealing to the crowd.He has to open his business close to a place that has available market.He has to create a product that is different from what his competitors are doing.A monopolistically competitive market can be described as a market that is characterized with many people selling homogenous but yet differentiated goods.
In other to have differentiated goods, a business would try to offer better services than competitors, be innovative, have a strategic location, have quality products.
If Robert does this, he would be able to garner some market power.
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Veltri Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.77 direct labor-hours. The direct labor rate is $11.20 per direct labor-hour. The production budget calls for producing 7,100 units in October and 6,900 units in November. The company guarantees its direct labor workers a 40-hour paid work week. With the number of workers currently employed that means that the company is committed to paying its direct labor work force for at least 5,480 hours in total each month even if there is not enough work to keep them busy. What would be the total combined direct labor cost for the two months
Answer:
Total direct labor cost= $122,752
Explanation:
Giving the following information:
Each unit of output requires 0.77 direct labor-hours.
The direct labor rate is $11.20 per direct labor-hour.
Production budget:
October= 7,100 units
November= 6,900 units
Minimum hours= 5,480 hours
First, we need to determine the number of hours required for each month.
October= 7,100*0.77= 5,467 hours
November= 6,900*0.77= 5,313 hours
Direct labor budget:
October= 5,480*11.2= 61,376
November= 61,736
Total cost= $122,752
Jack is a crook with an honest face. People easily trust him. Jack works a scam in which he convinces the elderly to invest their life savings in a false company based on false annual reports of highly lucrative returns. He insists that the investment must be in cash to facilitate timely return on investment. Jack is guilty of a crime involving what
Answer:
False Pretenses
Explanation:
From the question given, jack is involved in the crime called false pretenses. He receives money by which he mentions things that are not true.
He brings out a false annual reports of profitable returns for a a non existing company or organisation. This representation is false with actual facts.
Assume the following for a piece of equipment assuming straight-line depreciation: Purchase price $20,000; installation costs of $2,500; 4-Yr useful life with an estimated salvage value of $4,500; tax rate 40%; What would be the cash flow from salvage if the asset sold after 2 years for (a) $15,500 and (b) $7,000?
Answer:
a. $14,700
b. $9,600
Explanation:
Total cost of the equipment = Purchase price + installation costs = $20,000 + $2,500 = $22,500
Salvage value = $4,500
Amount to be depreciated = $22,500 - $4,500 = $18,000
Depreciation rate = 1 ÷ 4 = 0.25, or 25%
Annual depreciation = $18,000 × 25% = $4,500
Equipment book value after 2 years = $22,500 - ($4,500 × 2) = $13,500
(a) What would be the cash flow from salvage if the asset sold after 2 years for $15,500
Gross profit on equipment disposal = Sales amount - Equipment book value = $15,500 - $13,500 = $2,000
Tax = $2,000 × 40% = $800
Net profit on equipment disposal = $2,000 - $800 = $1,200
Cash flow = Equipment book value + Net profit on equipment disposal = $13,500 + $1,200 = $14,700
(b) What would be the cash flow from salvage if the asset sold after 2 years for $7,000
Loss on equipment disposal = Sales amount - Equipment book value = $7,000 - $13,500 = $6,500
Tax shield difference = $6,500 × 40% = $2,600
Cash flow = $7,000 + $2,600 = $9,600
Suppose the restaurant industry is perfectly competitive. All producers have identical cost curves and the industry is currently in long-run equilibrium, with each producer producing at its minimum long-run average total cost of $8.
a. If there is a sudden increase in demand for restaurant meals, what will happen to the price of a restaurant meal? How will individual firms respond to the change in price? Will there be entry or exit from the industry? Explain.
b. In the market as a whole, will the change in the equilibrium quantity be greater in the short-run or the long-run? Explain.
c. Will the change in output on the part of individual firms be greater in the short-run or the long- run? Explain and reconcile your answer to part (b).
Answer:
Explanation:
A. Supply stays the same, demand decreases since restaurants are normal goods. As a result, the equilibrium price and the equilibrium quantity will go down.
B. In the short run, the existing firms reduce their output causing Q* to fall. In the long run, as firms exit, Q* falls even further.
C. An individual firm may produce in the short run, but exit from the industry in the long run. As a result, the firm will decrease its quantity produced up to 0. Therefore, in the long run the output of an individual firm may change drastically comparing with the short run.
If the domestic demand curve is Equal 20p Superscript negative 0.5, the domestic supply curve is Equal 5p Superscript 0.5, and the world price is $7.00, use calculus to determine the changes in consumer surplus, producer surplus, and welfare from eliminating free trade. The change in consumer surplus (Upper DeltaCS) from eliminating free trade is $ nothing. (Enter your resp
Answer:
$52
$ 1.33
consumer price will increase consumer surplus will decreaseimport will decrease reduced exportportends gloom for the general outlook for the economyExplanation:
Given domestic demand curve, S(p) = 20p⁻⁰°⁵
the domestic supply curve S(p)= 5p⁰°⁵
world price is $7.00
using calculus to determine the changes in consumer surplus
by consumer surplus means in this case supply exceeds demand
we establish the equilibrium point where the supply and demand functions meet or are equal
solving 20p⁻⁰°⁵ = 5p⁰°⁵
20/5 = p⁰°⁵/p⁻⁰°⁵
4 = p⁰°⁵⁺⁰°⁵
4= p = q which is the quantity produced
consumer surplus = maximum price willing to pay - Actual price
= ∫⁴₀ dp dp - p* q
= ∫⁴₀20p⁻⁰°⁵ dp- 7* 4
= 20∫⁴₀p⁻⁰°⁵ dp -28
= 20/0.5 p⁰°⁵- 28
= 40 *4⁰°⁵ - 28 = $52
producer surplus = it is a measure of producer welfare. It is measured as the difference between what producers are willing and able to supply a good for and the price they actually receive
thus producer surplus = p* q - ∫⁴₀ d(s) dp
= 7 * 4 - ∫⁴₀ 5p⁰°⁵ dp
= 28 - 5 ∫⁴₀ p⁰°⁵ dp
= 28 -5 *2/3 p¹°⁵
= 28 -5 *2/3 4¹°⁵
=$ 1.33
welfare from eliminating free trade
consumer price will increase consumer surplus will decreaseimport will decrease reduced exportsportends gloom for the general outlook for the economyYour division is considering two investment projects, each of which requires an up-front expenditure of $25 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows (in millions ofdollars):Year Project A Project B1 5202 10 103 15 84 20 6a. What is the regular payback period for each of the projects?b. What is the discounted payback period for each of the projects?c. If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake?d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?f. What is the crossover rate?g. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?
The answer is attached in form of text file below giving solution to each of the question parts in detail.
Answer:
a. What is the regular payback period for each of the projects?
project A: 2.67 yearsproject B: 1.5 yearsb. What is the discounted payback period for each of the projects?
project A: 3.07 yearsproject B: 1.83 yearsc. If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake?
project A: NPV = $12.74 million project B: NPV = $11.55 million both projects have positive NPVs so they should both be chosend. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?
project A: NPV = $18.24 million (higher NPV, so this project should be selected)project B: NPV = $14.96 millione. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?
project A: NPV = $8.21 million project B: NPV = $8.64 million (higher NPV, so this project should be selected)f. What is the crossover rate?
13.53%g. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?
MIRR project A = 21.93%MIRR project B = 20.96%Explanation:
Project A Project B
investment required -$25,000,000 -$25,000,000
cash flow 1 $5,000,000 $20,000,000
cash flow 2 $10,000,000 $10,000,000
cash flow 3 $15,000,000 $8,000,000
cash flow 4 $20,000,000 $6,000,000
a. What is the regular payback period for each of the projects?
project A: 2 years ($15 million) + 10/15 = 2.67 years
project B: 1 year ($20 million) + 5/10 = 1.5 years
b. What is the discounted payback period for each of the projects?
interest rate = 10%
discounted cash flows Project A Project B
5/1.1 = 4.55 20/1.1 = 18.18
10/1.1² = 8.26 10/1.1² = 8.26
15/1.1³ = 11.27 8/1.1³ = 6.01
20/1.1⁴ = 13.66 6/1.1⁴ = 4.1
project A: 3 years ($24.08 million) + 0.92/13.66 = 3.07 years
project B: 1 year ($18.18 million) + 6.82/8.26 = 1.83 years
c. If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake? using excel spread sheet an NPV function:
project A: NPV = $12.74 million
project B: NPV = $11.55 million
both projects have positive NPVs so they should both be chosen
d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?
project A: NPV = $18.24 million (higher NPV, so this project should be selected)
project B: NPV = $14.96 million
e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?
project A: NPV = $8.21 million
project B: NPV = $8.64 million (higher NPV, so this project should be selected)
f. What is the crossover rate?
investment project A - investment project B = 0
cash flow 1 project A - cash flow 1 project B = 5 - 20 = -15
cash flow 2 project A - cash flow 2 project B = 10 - 10 = 0
cash flow 3 project A - cash flow 3 project B = 15 - 8 = 7
cash flow 4 project A - cash flow 4 project B = 20 - 6 = 14
now using excel spreadsheet we determine IRR: 13.53%
g. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?
MIRR = {ⁿ√ [FV(positive cash flows x cost of capital)] / [PV(initial outlays)]} - 1
future value of positive cash flows project A = (5 x 1.1³) + (10 x 1.1²) + (15 x 1.1) + 20 = 6.655 + 12.1 + 16.5 + 20 = 55.255
future value of positive cash flows project A = (20 x 1.1³) + (10 x 1.1²) + (8 x 1.1) + 6 = 26.62 + 12.1 + 8.8 + 6 = 53.52
PV initial outlays for both projects = -$25,000
n = 4
MIRR project A = {⁴√ [55.255 / -25]} - 1 = 1.2193 - 1 = 0.2193 or 21.93%
MIRR project B = {⁴√ [53.52 / -25]} - 1 = 1.2096 - 1 = 0.2096 or 20.96%
The Department of Service Financing in the city of Belmont, New York, has been experimenting with having city units provide services in-house versus having private contractors provide the same services. In the city's ground department, half of the landscaping work is performed by city crews, whereas the other half is performed by a private landscaping firm. The city manager has collected random samples of weekly expense report data for both providers. She asks you to conduct a difference of means test. What can the city manager conclude about the difference between in-house and private-service provision
Answer:
Using paired sample t test for means in attached file
Explanation:
Incremental analysis is most useful 1. in evaluating the master budget. 2. as a replacement technique for variance analysis. 3. in developing relevant information for management decisions. 4. in choosing between capital budgeting methods.
Answer:
The correct answer is number (3): in developing relevant information for management decisions.
Explanation:
Incremental analysis is a study firm makes to allocate resources efficiently. It can be used at the moment of comparing the costs of different products to be manufactured to select the lowest that provides more benefits. Incremental analysis can also be implemented at the moment of identifying how a scarce resource should be used ensuring it brings the highest returns possible.
Incremental analysis, also known as differential or marginal analysis, helps managers to make more informed decisions, then.
Incremental analysis is most useful in developing relevant information for management decisions and in choosing between capital budgeting methods.
Explanation:Incremental analysis is most useful in developing relevant information for management decisions. It involves analyzing the costs and benefits of different alternatives and making decisions based on the incremental effects of those alternatives. For example, when deciding whether to introduce a new product, a company can use incremental analysis to compare the additional revenue and costs associated with the new product to determine if it is financially feasible.
Incremental analysis can also be useful in choosing between capital budgeting methods. When considering different investment opportunities, a company can use incremental analysis to assess the incremental cash flows and benefits of each option. By comparing the incremental benefits and costs, the company can make an informed decision on which capital budgeting method to pursue.
Overall, incremental analysis is an effective tool in helping businesses make informed decisions, whether it's evaluating management decisions or choosing between capital budgeting methods.
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The following selected accounts appear in the adjusted trial balance for Deane Company. Indicate the financial statement on which each account would be reported. Account a. Accumulated Depreciation. select the financial statement b. Depreciation Expense. select the financial statement c. Retained Earnings (beginning). select the financial statement d. Dividends. select the financial statement e. Service Revenue. select the financial statement f. Supplies. select the financial statement g. Accounts Payable. select the financial statement
Answer: Please refer to Explanation
Explanation:
The following are the financial statements that the above Accounts appear in,
a. Accumulated Depreciation. BALANCE SHEET.
It shows the Net Book Value of a Fixed Asset.
b. Depreciation Expense. INCOME STATEMENT.
Showing the depreciation expense for the year to enable it to be deducted from income.
c. Retained Earnings (beginning). STATEMENT OF RETAINED EARNINGS.
To record the amount of earnings that the company retained.
d. Dividends. STATEMENT OF RETAINED EARNINGS.
Dividends are paid from Retained Earnings so have to be accounted for in this account.
e. Service Revenue. INCOME STATEMENT.
To add this revenue to the company's income.
f. Supplies. BALANCE SHEET.
Listed after Inventory to account for the cost of holding the supplies for a period.
g. Accounts Payable. BALANCE SHEET.
Recorded as a Current Liability to show that the company owes the amount but only in the short term.
If you need any more clarification, do react or comment. Cheers.
Different accounts are reported on different parts of a financial statement. Accumulated Depreciation and Supplies are reported on the Balance Sheet, Depreciation Expense and Service Revenue on the Income Statement, while Retained Earnings (beginning) and Dividends are reported on the Statement of Retained Earnings. Accounts Payable is also reported on the Balance Sheet.
Explanation:All these accounts would be reported in different component of the financial statement. They are stated thus:
Accumulated Depreciation: This would appear on the Balance Sheet as a contra asset account.Depreciation Expense: This is reported on the Income Statement, under Operating Expenses.Retained Earnings (beginning): This appears on the Statement of Retained Earnings.Dividends: These are reported in the Statement of Retained Earnings. It reduces the retained earnings for the period.Service Revenue: This appears on the Income Statement, under revenues.Supplies: This is reported on the Balance Sheet, under current assets.Accounts Payable: This is also reported on the Balance sheet, under current liabilities.Learn more about Financial Statement here:https://brainly.com/question/32573447
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Pottery Ranch Inc. has been manufacturing its own finials for its curtain rods. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 63% of direct labor cost. The direct materials and direct labor cost per unit to make a pair of finials are $3.51 and $4.73, respectively. Normal production is 28,300 curtain rods per year.
A supplier offers to make a pair of finials at a price of $13.20 per unit. If Pottery Ranch accepts the supplier’s offer, all variable manufacturing costs will be eliminated, but the $48,200 of fixed manufacturing overhead currently being charged to the finials will have to be absorbed by other products.
(a)
Prepare an incremental analysis to decide if Pottery Ranch should buy the finials. (Round answers to 0 decimal places, e.g. 1250. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Make Buy Net Income
Increase (Decrease)
Direct materials $Pottery Ranch Inc. has been manufacturing its own $Pottery Ranch Inc. has been manufacturing its own $Pottery Ranch Inc. has been manufacturing its own
Direct labor Pottery Ranch Inc. has been manufacturing its own Pottery Ranch Inc. has been manufacturing its own Pottery Ranch Inc. has been manufacturing its own
Variable overhead costs Pottery Ranch Inc. has been manufacturing its own Pottery Ranch Inc. has been manufacturing its own Pottery Ranch Inc. has been manufacturing its own
Fixed manufacturing costs Pottery Ranch Inc. has been manufacturing its own Pottery Ranch Inc. has been manufacturing its own Pottery Ranch Inc. has been manufacturing its own
Purchase price Pottery Ranch Inc. has been manufacturing its own Pottery Ranch Inc. has been manufacturing its own Pottery Ranch Inc. has been manufacturing its own
Total annual cost $Pottery Ranch Inc. has been manufacturing its own $Pottery Ranch Inc. has been manufacturing its own $Pottery Ranch Inc. has been manufacturing its own
(b)
Should Pottery Ranch buy the finials?
Pottery Ranch Inc. has been manufacturing its own NoYes, Pottery Ranch should Pottery Ranch Inc. has been manufacturing its own not buybuy the finials.
(c)
Would your answer be different in (b) if the productive capacity released by not making the finials could be used to produce income of $61,137?
Pottery Ranch Inc. has been manufacturing its own NoYes, income would Pottery Ranch Inc. has been manufacturing its own increasedecrease by $Pottery Ranch Inc. has been manufacturing its own
Answer:
See attached file
Explanation:
Heavy sales of umbrellas during a rain storm is an example of which of the following? Group of answer choices A trend A causal relationship A fad A coincidence None of the above
Answer:
im pretty sure a Fad
Explanation:
Heavy sales of umbrellas during a rain storm is an example of a trend.
Explanation:Heavy sales of umbrellas during a rain storm is an example of a trend. A trend refers to a general direction or pattern of behavior that can be observed over a period of time. In this case, the increase in umbrella sales during a rainstorm is a consistent and predictable phenomenon, indicating a trend. Other examples of trends could be the popularity of certain fashion styles or the increase in sales of ice cream during the summer months.
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A company would like to produce 1000 products per week for 30 weeks. The Direct Material Cost for the raw materials used in the product is $1.50 per product. After producing 100 products, the company must stop production to replace a filter on the machine (the filter is replaced after producing every 100 products). The filter costs $50.00. What is the Total Cost Per Product
The total cost per product is $2.0 per product.
Calculation of the total cost per product:Since the cost for raw material is $1.50
The filter cost is $50
So, the filter cost for one product should be = $50/100 = $0.5
Now the total cost per product is
= $1.50 + $0.50
= $2.0
hence, The total cost per product is $2.0 per product.
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The total cost per product, considering both the direct material cost and the filter replacement cost, is calculated to be $2.00.
To find the Total Cost Per Product, we need to consider both the Direct Material Cost and the cost of replacing the filter.
Step-by-Step Calculation:
Calculate the total number of products to be produced:
1000 products/week * 30 weeks = 30000 products
Determine the total cost for Direct Materials:
$1.50/product * 30000 products = $45000
Calculate the number of filter replacements needed:
30000 products / 100 products per filter = 300 filter replacements
Determine the total cost for filters:
$50/filter * 300 filters = $15000
Calculate the total production cost:
$45000 (materials) + $15000 (filters) = $60000
Calculate the total cost per product:
$60000 total production cost / 30000 products = $2.00 per product
Hence, the total cost per product is $2.00.
Which of the following is not a capital expenditure? Multiple Choice Advertising expenditures to introduce a new product line Sales tax paid in conjunction with the purchase of new machinery Installation of elevators to replace escalators An amount paid to acquire a patent with a remaining life of only three years
In the given options, advertising expenditures to introduce a new product line is not considered a capital expenditure because it doesn't involve purchasing or upgrading productive assets. Instead, it's an operational expense.
Explanation:A capital expenditure is an amount spent to acquire or upgrade productive assets, like buildings, machinery, and technology, to increase the capacity or efficiency of a company for more than one accounting period. Advertising expenditures to introduce a new product line is not a capital expenditure, but an operational expense. Other options in the multiple choice such as Sales tax paid in conjunction with the purchase of new machinery, installation of elevators to replace escalators, and an amount paid to acquire a patent (even with a remaining life of 3 years), are all examples of capital expenditures because they are investments improving the company’s performance in the long run.
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Among the options, 'Advertising expenditures to introduce a new product line' is not a capital expenditure. While this is spending by the firm, it does not contribute to future profits in the way that capital expenditures (like machinery purchases or patent acquisitions) do.
Explanation:The question here is to identify which among the given options is not a capital expenditure. Capital expenditures are funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, an industrial plant, technology, or equipment. This caters to investments that affect the company’s future operating capacity and income. In the provided options, the 'Advertising expenditures to introduce a new product line' is not a capital expenditure. Advertising is considered as a revenue expenditure that is used for promoting a firm's goods and services, and its effect is short-term.
However, other options like paying sales tax for new machinery, installing elevators to replace escalators, and paying to acquire a patent (even if its life is only three years remaining), are examples of capital expenditures, as they contribute to future profits and are thus capitalized and depreciated over time.
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is expected to pay a dividend of $3.33 next year. The company's dividend growth rate is expected to be 3.1 percent indefinitely and investors require a return of 12.5 percent on the company's stock. What is the stock price
Answer:
Stock price = $35.425
Explanation:
According to the dividend growth model, the price of a stock is the present value of expected dividend discounted at the required rate of return.
This is done as follows:
Price of a stock = D×(1+r)/(r-g)
g- 3.1%, r -12.5
D×(1+r) = 3.33,Note that the dividend payable in year one = 3.33. We don't need to grow the dividend again. D stands for dividend in year O.
Price of stock
= 3.33/(0.125-0.031)
= $35.425
Stock price = $35.425
Answer:
Stock price $35.43
Explanation:
The dividend discount model calculated the price of a company's stock on assumption that its current price is equal to the sum of all of its future dividend payments when discounted back to their present value.
P = D1/ r - g
D1 $3.33 g 3.1% r 12.5% P ?
P = 3.33/ 0.125-0.031
= $35.43
A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $75 per unit (100 bottles), including fixed costs of $28 per unit. A proposal is offered to purchase small bottles from an outside source for $40 per unit, plus $4 per unit for freight. a. Prepare a differential analysis dated July 31 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles, assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0". Use a minus sign to indicate a loss.
Answer and Explanation:
The preparation of differential analysis is shown below:-
Differential Analysis
Make Bottles (Alt 1) or Buy Bottles (Alt 2)
31-July
Particulars Make Bottles Buy Bottles Differential effect on income
(Alt 1) (Alt 2) (Alt 2)
Sales price $0.00 $0.00 $0.00
Unit Costs:
Purchase price $0.00 $40.00 $40.00
Freight $0.00 $4.00 $4.00
Variable costs $47.00 $0.00 -$47.00
($75 per unit -$28 per unit)
Fixed factory overhead $28.00 $28.00 $0.00
Income (Loss) -$75.00 -$72.00 $3.00