Answer:
A Weighted average of the capital components costs.
Explanation:
The weighted average cost of capital (WACC) is, in simple language, the amount a corporation is required to reimburse on aggregate for all its security investors to fund its capital. The WACC is normally applied to by the cost of debt for the company. Crucially, it is determined by the outside market rather than by administrators.
Companies borrow capital from a variety of sources:: preferred stock, common stock, regular debt, contingent debt, transferable debt, options, shares, pension obligations, employee stock options, government grants, etc. Various securities, representing various sources of capital, are supposed to yield various returns.
The long-run supply curve for a product is horizontal with ATC = 200. Market demand is defined as P = 1,000 − 4 Q. The market is competitive and is in long-run equilibrium with 50 firms in the industry. If demand increases to P = 1,240 − 4 Q, how many firms will be in the industry at the new long-run equilibrium?
Answer:
65 firms will be in the industry at the new long run equilibrium
Explanation:
in the long run the P=ATC
quantity before the change is
200 = 1000-4Q
4Q = 800
Q= 200
each firm output = Q/number of firms = 200 / 50
q = 4
new quantity is
200 = 1240-4Q
4Q = 1040
Q = 260
number of firms=new Q/q
=260/4 = 65
the number of firms is 65 in the long run.
Mark owns a stamp collection that he is considering getting insured. Over the course of a year it will cost him $500 to keep his collection insured, but if he his collection is damaged they will pay him $1000. If he estimates there’s a 10% chance of his collection being damaged, what is the expected value of buying the insurance policy?: *
Answer:
EV = -$400
The expected value of buying the insurance policy is -$400
Explanation:
Expected value of buying the insurance policy;
EV = expected benefits - insurance cost
EV = xE - C
chances of collection being damaged x = 10% = 0.1
Insurance cost C = $500
Benefit E = $1000
Substituting the values;
EV = 0.1 × 1000 - 500 = 100 - 500
EV = -$400
The expected value of buying the insurance policy is -$400
Prock Petroleum's stock has a required return of 15%, and the stock sells for $60 per share. The firm just paid a dividend of $1.00, and the dividend is expected to grow by 30% per year for the next 4 years, so D 4 = $1.00(1.30) 4 = $2.8561. After Year 4, the dividend is expected to grow at a constant rate of X% per year forever. What is the stock's expected constant growth rate after Year 4, i.e., what is X? Pick the closest answer.
Answer:
Price =[PVF15%,1*D1]+[PVF15%,2*D2]+[PVF15%,3*D3]+[PVF15%,4*D4]+[PVF15%,4*Terminal value at year4 ]
60 = [.86957* 1.3]+[.75614*1.69]+[.65752*2.197]+[.57175*2.8561]+[.57175*TV]
= 1.1304+ 1.2779+ 1.4446+ 1.6330+ .57175TV
60 = 5.4859+.57175TV
Terminal value = [60-5.4859]/.57175
= 54.5141/.57175
= $ 95.3460
Terminal value=D4(1+g)/(Rs-g)
95.3460 =2.8561(1+g)/(.15-g)
95.3460(.15-g)= 2.8561-2.8561g
14.3019- 95.3460g = 2.8561-2.8561g
95.3460g-2.8561g = 14.3019-2.8561
92.4899 g = 11.4458
g = 11.4458/92.4899
= .1238 or 12.38%
Growth after year4 = 12.38%
**D1 =1(1+.30)=1.3
D2 =1.3(1+.3)=1.69
D3 = 1.69(1+.3)= 2.197
D4= 2.197(1+.3)= 2.8561
Answer:
g = 0,116559243
Explanation:
First we solve for the present value of the know dividends:
[tex]\left[\begin{array}{ccc}#&Cashflow&Discounted\\Zero&1&\\1&1.3&1.13\\2&1.69&1.28\\3&2.197&1.44\\4&2.8561&1.63\\\end{array}\right][/tex]
We add them and get: 5.48
as the stock sells for 60 dollar the 54.52 represent the horizon value discounted:
[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex]
[tex]\frac{Maturity}{(1 + .15)^{4} } = 54.52[/tex]
Horizon value = 95.36281912
Now, we solve for grow:
[tex]\frac{D_{n+1}}{r-g} = PV\\\frac{D_0(1+g)}{r-g} = PV\\[/tex]
[tex]\frac{2.8561(1+g)}{0.15-g} = 95.36281912\\[/tex]
[tex] 2.8561 + 2.8561g = 0.15 x 95.36281912 - 95.36281912g [/tex]
[tex]95.36281912g + 2.8561g = 14,304422868 - 2.8561[/tex]
[tex] g = 11,448322868 / 98,21891912[/tex]
g = 0,116559243
Waterway Industries incurs the following costs to produce 11800 units of a subcomponent: Direct materials $9912 Direct labor 13334 Variable overhead 14868 Fixed overhead 16200 An outside supplier has offered to sell Waterway the subcomponent for $2.85 a unit. If Waterway accepts the offer, by how much will net income increase (decrease)?
Answer:
If the company buys the subcomponent, the company will save $4,484.
Explanation:
Giving the following information:
Production= 11,800 units
Direct materials= $9,912
Direct labor= $13,334
Variable overhead= $14,868
Total variable cost= $38,114
An outside supplier has offered to sell Waterway the subcomponent for $2.85 a unit.
We have no reason to believe that the fixed costs are avoidable. Therefore, they take no part in the decision making process.
Total cost of production= 38,114
Total cost of buying= 11,800*2.85= 33,630
If the company buys the subcomponent, the company will save $4,484.
"Stephanie's Bridal Shoppe sells wedding dresses. The average selling price of each dress is $ 1 comma 100, variable costs are $ 500, and fixed costs are $ 120 comma 000. How many dresses must the Bridal Shoppe sell to yield afterminustax net income of $ 21 comma 000, assuming the tax rate is 30%?"
Answer:
250 dresses
Explanation:
The first task would be to compute before tax net income when after tax net income is $21,000 at the tax rate of 30%
After tax net income=before tax net income*(1-t)
t is the tax rate of 30% or 0.30
after tax net income is $21,000
$21000=before tax net income*(1-0.3)
$21,000=0.7*before net income
before tax net income=$21,000/0.7=$30,000
Target units for before tax net income of $30,000 is computed thus:
target number of dresses=fixed cost+target profit/contribution per unit
fixed cost is $120,000
contribution per unit=sales price-variable cost
=$1,100-$500=$600
target number of dresses=($120,000+$30,000)/$600=250 dresses
Final answer:
Stephanie's Bridal Shoppe needs to sell 250 dresses to achieve an after-tax net income of $21,000, considering a 30% tax rate.
Explanation:
To determine how many dresses Stephanie's Bridal Shoppe needs to sell to achieve an after-tax net income of $21,000, we first calculate the required pre-tax profit. With a tax rate of 30%, the pre-tax profit needs to be:
Pre-tax profit = After-tax income / (1 - Tax rate) = $21,000 / (1 - 0.30) = $21,000 / 0.70 = $30,000
Next, we need to find out the total revenue required to achieve this pre-tax profit, considering the fixed costs and variable costs per unit.
The formula for total profit is given by Total Revenue - Total Costs (fixed costs + variable costs).
We rearrange this formula to find Total Revenue:
Pre-tax profit = Total Revenue - (Fixed Costs + Variable Costs * Quantity)
Total Revenue = Pre-tax profit + Fixed Costs + (Variable Cost * Quantity)
Given that Fixed Costs are $120,000, Variable Cost per dress is $500, and Pre-tax profit needed is $30,000, we calculate Total Revenue needed.
To find the number of dresses needed to be sold, we divide the Total Revenue by the average selling price per dress:
Number of Dresses = (Pre-tax profit + Fixed Costs) / (Selling Price - Variable Cost)
Number of Dresses = ($30,000 + $120,000) / ($1,100 - $500) = $150,000 / $600 = 250 dresses
Therefore, Stephanie’s Bridal Shoppe must sell 250 dresses to achieve an after-tax net income of $21,000.
Becky Smith signed a note in the amount of $200,000 in favor of Country Home Loans, Inc., to obtain a loan to buy a house in Marrero, Louisiana. The note was endorsed "Pay to the order of ____________ without recourse Country Home Loans, Inc." Almost five years later Smith defaulted on the payments. The Federal National Mortgage Association (Fannie Mae) wanted to foreclose on the house and sell it to recover the balance due. Smith argued that the words "to the order of ____________" in the endorsement made the note an incomplete order instrument and that Fannie Mae could not enforce it. What is Fannie Mae's best response to this argument?
Fannie Mae can enforce the note and foreclose on the house to recover the balance due.
Explanation:Fannie Mae's best response to Smith's argument is that the note is not an incomplete order instrument. The words "to the order of ____________" in the endorsement indicate that the note is payable to the holder of the instrument, which includes Country Home Loans, Inc. and any subsequent transferees. This means that Fannie Mae, as a transferee of the note, has the right to enforce it and foreclose on the house to recover the balance due.
Learn more about Enforcing a promissory note here:https://brainly.com/question/32179497
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Vaughn Manufacturing has two divisions; Sporting Goods and Sports Gear. The sales mix is 75% for Sporting Goods and 25% for Sports Gear. Vaughn incurs $6890000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. The weighted-average contribution margin ratio is 70%. 35%. 40%. 45%.
Answer:
The correct answer is 35%.
Explanation:
According to the scenario, the computation of the given data are as follows:
We can calculate the Weighted average contribution margin ratio by using following formula:
weighted-average contribution margin ratio = (Contribution margin ratio × Sales of sporting goods) + (Contribution margin ratio × Sales of sporting gears)
= ( 30 × 75% ) + ( 50 × 25%)
= 22.5% + 12.5%
= 35%
Super Motors manufactures and sells a wide variety of motors to industrial customers. All motors cost about the same and are assembled on the same line. Switching over from assembling one motor to another requires about two hours. Super assembles motors to be stocked in a distribution center from where they are shipped as orders arrive. HP is the highest-selling motor (in terms of units sold) and LP the lowest selling. Which of the following statements about the average cycle inventory HP motors is TRUE?
A. Higher than the cycle inventory of LP motors.
B. Lower than the cycle inventory of LP motors.
C. Same as the cycle inventory of LP motors.
D. None of the above.
Answer:
A. Higher than the cycle inventory of LP motors.
Explanation:
Given that:
HP is the highest-selling motor (in terms of units sold) and LP the lowest selling.
The average cycle stock is about half-a-period's demand less the target cycle stock. Thus, the average cycle inventory is half of the order size. The order size is directly proportional to the square root of demand,R. This implies that the average cycle inventory is proportional to the square root of the demand, R. Since, R, the demand is high for HP, the order size also becomes more which in turns leads to the average cycle inventory being more. Therefore, the average cycle inventory of HP motors is higher than the cycle inventory of LP motors.
On June 1, Parson Assoc. sold equipment to Arleo and agreed to accept a 3-month, $55,000, 10% interest-bearing note in payment at a time when the prevailing rate of interest for similar transactions was 10%. When the note was collected upon maturity, Parson would recognize interest revenue of:
Answer:
Parson would recognize an interest revenue of $1375
Explanation:
The quoted interest rate on bond is the annual rate of interest. The bond is for 3 months which means that the interest revenue will be recorded for the 3 months period from June to August and the bond will mature on 31 August.
The interest revenue to be be recorded on this note is,
Interest Revenue = 55000 * 0.1 * 3/12 = $1375
The entry to record the receipt of interest and face value will be,
Cash 56375
Interest revenue 1375
Bonds Receivable 55000
A firm is considering whether to introduce a new product. No other firms are considering producing the product. The product costs F to introduce and can be produced at zero marginal cost once the firm has spent F. If the firm introduces the product, it must charge the same per-unit price to all customers. The demand for the product is D(p) = 10 - p where p is price.
a.(10 pts) Are there values of F such that the firm would not introduce the product even though it would be socially optimal to have the product produced? If not, explain. If so, what are the values of F such that the firm does not introduce the product when a social planner would?
b.(10 pts) Consider the following extension of the problem. Suppose that the buyer is a single customer, e.g., a big downstream producer that earns surplus by selling in a final market (although you do not need to analyze activities in the final market to answer this question). Suppose the seller can charge the buyer a fixed fee K in addition to a per unit price p. In this case, are there values of the fixed cost F such that the seller will fail to introduce the product when it would be socially optimal to do so? Explain your answer with reference to the concepts of "business stealing" and "incomplete appropriation."
Answer:
Explanation:
a. Should in case the firm decides to introduce the new product, the total cost sum of variable and fixed cost if F, the variable cost is zero.
The firm could get a total revenue expressed as TR=P*Q=(10-Q)*Q=10Q-Q^2. The marginal revenue is 10-2Q. The marginal cost is 0. Thus, social optimal quantity can be calculated by equating marginal revenue to marginal cost.
MR=MC
10-2Q=0
2Q=10
Q*=5
Hence, the socially optimal quantity is 5.
However, if fixed cost is high enough such that the total profit for the firm is less than zero, the firm will not introduce the product in the market.
Total Profit=Total Revenue-Total cost
=(10-5)*5-F
=25-F
if F>25 then the firm will earn a negative profit, therefore, it will not introduce the product in the market.
B)
The negative effect created on the demand of competitor's goods when the firm changes its price strategy is referred to as business stealing.
If the firm chooses to introduce the new product the total cost sum of variable and fixed cost if F as variable cost is zero. The Total revenue the firm could get is TR=P*Q+K=(10-Q)*Q+K=10Q-Q^2+K. The marginal revenue is 10-2Q. The marginal cost is 0. Therefore socially optimal quantity can be calculated by equating marginal revenue to marginal cost.
MR=MC
10-2Q=0
2Q=10
Q*=5
Therefore, the socially optimal quantity is 5.
However, if fixed cost is high enough such that the total profit for the firm is less than zero, the firm will not introduce the product in the market.
Total Profit=Total Revenue - Total cost
= (10-5)*5+K-F
Total Profit = 25 + K - F
The firm will earn a negative profit if F > 25 + K, thus, it will not introduce the product in the market.
Now if the Fixed cost lies between 25 and 25+K, it will be beneficial for the firm to introduce the product. But the amount the per-unit price buyer has to pay will be P + K/Q.
Bo's Home Manufacturing has 410,000 shares outstanding that sell for $46.86 per share. The company has announced that it will repurchase $61,000 of its stock. What will the share price be after the repurchase?
Answer:
The correct answer is $46.86.
Explanation:
According to the scenario, the computation of the given data area as follows:
Shares outstanding = 410,000
Value per share = $46.86
So, total value of outstanding shares = 410,000 × $46.86 = $19,212,600
Repurchase share value = $61,000
So, Number of shares repurchased = $61,000 ÷ $46.86 = 1301.7 shares
So, outstanding shares = 410,000 - 1301.7 = 408,698.3 shares
So, Share price after repurchase = ($19,212,600 - $61,000) ÷ 408,698.3 shares
= $46.86
You are doing some analysis on the has a market value that is equal to its book value. Currently, the firm has excess cash of $1,000 million and other assets of $9,000 million. Equity is worth $10,000 million. The firm has 700 million shares of stock outstanding and net income of $1,575 million. What will the new earnings per share be if the firm uses 25 percent of its excess cash to complete a stock repurchase?
Answer:
the new earnings per share will be 231 cents
Explanation:
Earnings per share is Earnings attributable to each Common Share.
Earnings Per Share = Earnings attributable to Holders of Common Stock/ Weighted Average Number of Common Shares
= $1,575 million/ (700 million-250/10000×700 million)
= $1,575 million/(700 million-17,2 million)
= 231 cents
Answer:
Earnings per share is $2.31
Explanation:
value of one share=$10,000 million/700 million=$14.29
25% of excess cash =25%*$1000 million=$250 million
Number of shares repurchased=$250 million/$14.29=17.5 million
Outstanding shares after share repurchase=700 million-17.5 million
=682.5 million
Earnings per share =earnings attributable to common stock/number of common stock
earnings stands at $1,575 million
number of common stock 682.5 million
Earnings per share=1,575 million/682.5 million
Earnings per share=$2.31 or 231 cents
The new earnings per share is $2.31 or 231 cents as shown in the step by step analysis above.
Keynes' law is
Select all that apply:
a. the opposite of Say's law
b. the same as Say's law
c. consistent with the statement that supply creates demand
d. described by the statement that a lack of demand in the economy as a whole leads to inadequate incentives for firms to produce
Answer: A; D
Explanation: The Keynesian perspective emphasizes the importance of aggregate demand for the short run and states that demand creates its own supply. Say's law emphasizes the importance of aggregate supply, for the long run and holds holds that supply creates its own demand. As a result, Keynes' law is the direct opposite of Say's law.
Keynes argued that economy often produced less than its full potential due to a lack of demand in the economy. This lack of demand as a whole leads to inadequate incentives for firms to increase production, that is, total demand determines the level of GDP.
Keynes' law is the opposite of Say's law and is best described by the notion that a lack of demand can lead to inadequate production incentives for firms. Therefore, options a and d are correct.
Keynes' law is a key concept in macroeconomics and can be summarized as: "Demand creates its own supply." This is in contrast to Say's law, which emphasizes the idea that supply creates demand. Therefore, the statements that apply to Keynes' law are:
a. the opposite of Say's lawd. described by the statement that a lack of demand in the economy as a whole leads to inadequate incentives for firms to produceKeynes' theory posits that during economic downturns, a lack of aggregate demand can result in underutilized resources and unemployment, thus a focus on stimulating demand is essential to encourage production and economic growth
A shoe store is for sale for $2,000,000. It is estimated that the restaurant will earn $200,000 a year for the next 11 years. At the end of 11 years, it is estimated that the restaurant will sell for $3,500,000. What would be most likely to occur if the investor's required rate of return is 15%?
Answer:
The NPV is -$200956.3508. Thus, the shop will not be purchased as the NPV from this investment is negative.
Explanation:
To take the decision to buy or not buy the shoe store, we need to calculate the Net Present Value of the investment in the shoe shop. The net present value (NPV) is the present value of future expected cash inflows from the investment less the initial outlay/cost.
If the NPV is positive, the investment will be done and shop will be purchased and vice versa.
As the cash in flows consist of an annuity of 200000 for 11 years along with a principal sale value, the NPV will be,
NPV = PV of Annuity + PV of Principal - Initial cost
NPV = 200000 * [ (1 - (1+0.15)^-11) / 0.15 ] + 3500000 / 1.15^11 - 2000000
NPV = -$200956.3508
The shop will not be purchased as the NPV from this investment is negative.
Payments on a Jan. 1, 1995 40,000 loan are as follows: 1/1/96 5,000 1/1/97 5,000 1/1/98 5,000 On July 1, 1998 an additional 10,000 is paid on the loan and no more payments are made. If {{d}^{(4)}=0.1} how much is owed on the loan on Jan. 1, 2005?
The amount owed on the loan on Jan. 1, 2005, would be $24,750, which includes the remaining principal of $15,000 and the accrued simple interest of $9,750 over 6.5 years at a 10% annual interest rate.
To calculate how much is owed on the loan on Jan. 1, 2005, we need to account for the payments made and the compounding interest over time. Given that the loan has a decree rate {{d}^{(4)}}=0.1, we can interpret this as an effective annual interest rate of 10%. However, without clarification on how the interest compounds (annually, semi-annually, monthly, etc.), we'll assume simple interest for the sake of this example.
The initial loan is $40,000. Payments of $5,000 were made on Jan 1 of 1996, 1997, and 1998, reducing the principal by $15,000, leaving $25,000. On July 1, 1998, an additional payment of $10,000 was made, further reducing the principal to $15,000. Starting from July 1, 1998, till Jan. 1, 2005, which is 6.5 years, we need to calculate the interest accrued on the remaining $15,000.
The formula for simple interest is I = P * r * t, where I is the interest, P is the principal, r is the annual interest rate, and t is the time in years. Using this formula, we find that the interest accrued will be I = $15,000 * 0.10 * 6.5 which equals $9,750 in interest. Therefore, the amount owed on the loan on Jan. 1, 2005, is the remaining principal plus the accrued interest: $15,000 + $9,750 = $24,750.
Thomas Longbow is the only employee of Presido, Inc. During the first week of January, Longbow earned $1,200.00 and had federal and state income tax withholdings of $60.00 and $22.50, respectively. FICA taxes are 7.65% on earnings up to $117,000. State and federal unemployment taxes for the period are $75.00 and $12.00, respectively. What is Presido's payroll tax expense for the week?
Answer: $178.80
Explanation:
In calculating Presido's payroll tax expense for the week, the following needs to be stated.
As the employer, Presido is not liable to pay the federal and state income tax withholdings of $60.00 and $22.50, respectively.
However they have to pay the FICA taxes of 7.65% on earnings up to $117,000 as well as the state and federal unemployment taxes for the period of $75.00 and $12.00, respectively.
So calculating we have,
= 75 + 12 + (1,200 * 7.65%)
= $178.8
Presido's payroll tax expense for the week is $178.80
Helen Martin is looking to invest in a three-year bond that makes semi-annual coupon payments at a rate of 5.775 percent. If these bonds have a market price of $981.68, what yield to maturity can she expect to earn? (Round intermediate calculations to 5 decimal places, e.g. 1.25145 and final answer to 2 decimal places, e.g. 15.25%.)
Answer:
The yield to maturity is 6.46% annually
Explanation:
The yield to maturity on the bond can be computed using the rate formula in excel as given below:
=rate(nper,pmt,-pv,fv)
nper is the number of interest payments the bond would make which is 3*2=6
pmt is the semi-annual interest payment of the bond which is 5.775%/2*$1000=$28.88
pv is the current market price of the bond at $981.68
fv is the face value of the bond at $1000
=rate(6,28.88,-981.68,1000)
rate=3.23% semi-annually
rate=6.46%(3.23%*2) annually
A project is expected to generate annual revenues of $124,100, with variable costs of $77,200, and fixed costs of $17,700. The annual depreciation is $4,250 and the tax rate is 34 percent. What is the annual operating cash flow?
Answer:
$20,717
Explanation:
The calculation of annual operating cash flow is given below:-
Annual Operating cash flow = (Revenue - Variable cost - Fixed cost) × (1 - Tax rate) + Annual depreciation × Tax rate
= ($124,100 - $77,200 - $17,700) × (1 - 34%) + $4,250 × 34%
= $29,200 × 0.66 + $1,445
= $19,272 + $1,445
= $20,717
So, for computing the operating cash flow we simply applied the above formula.
Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are estimated to total $327,080 for the year, and machine usage is estimated at 125,800 hours. For the year, $349,600 of overhead costs are incurred and 130,500 hours are used.
1. Compute the manufacturing overhead rate for the year.
2. What is the amount of under- or overapplied overhead at December 31?
3. Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.
Answer and Explanation:
The computation is shown below:
a. For the manufacturing overhead rate for the year
As we know that
Manufacturing overhead rate = Estimated overhead cost ÷ machine usage
= $327,080 ÷ 125,800 hours
= $2.60 per hour
b. Now the amount of under- or over applied overhead is
= Applied overhead - actual overhead
where,
Applied overhead is
= 130,500 hours × $2.60
= $339,300
And, the actual overhead is $349,600
So, the under overhead applied is $10,300
3. And, the journal entry is
Cost of goods sold $10,300
To Manufacturing overhead $10,300
(Being the under applied overhead is recorded)
The credit that is created when a supplier sells goods and services on an account with extended payment terms is called . Garcia Assemblers Corporation is a manufacturing company. Garcia’s financial managers use many sources of financing for the company’s annual borrowings, which exceed $100 million. Garcia’s credit rating is excellent. At the moment, the managers are looking to fund a $5 million payroll by issuing a note with a 30-day maturity. What type of financing is this? Trade credit Accrual Commercial paper Bank loans
Answer:
1. The credit that is created when a supplier sells goods and services on an account with extended payment terms is called Trade credit.
2. The type of financing practiced by Garcia Assemblers Corporation is called Commercial paper.
Explanation:
Trade credit is the type of credit wherein a supplier sells goods and services with extended payment term. There is no immediate exchange of money.
Commercial paper is a short-term debt instrument mostly used by large corporations to finance payrolls and other short-term liabilities. It is unsecured as it is mostly issued without collateral. This method of financing is used by firms with good debt ratings. The denominations of the commercial paper is also usually high. Garcia Assemblers Corporation fit the description of a firm with high debt ratings using commercial paper to finance a high payroll.
Answer:
The correct answers are :
1.Trade credit
2. Commercial paper
Explanation:
In a bid to grow business and entice customers ,suppliers sell merchandise their customers with an agreement to receive payment at a later date,this is effectively funding the customers' business since a financial institution would have charged interest on such finance.This is done most times in order to boost revenue and retain customers by offering a trade credit.
Commercial paper is a short term note issued by corporate bodies with good credit rating in order to fund short term expenditure like payment of staff cost.
Its maturity can be 270 days or less.The practice is that it is issued at a discount ,that is the issuer receives a discounted value in return for full face value at maturity.
The U.S. money supply (M1) at the beginning of 2015 was $2,683.3 billion broken down as follows: $1,165.7 billion in currency, $3.5 billion in traveler's checks, and $1,514.1 billion in checking deposits. Suppose the Fed decided to increase the money supply by decreasing the reserve requirement from 11 percent to 10 percent. Assume all banks were initially loaned up (had no excess reserves) and the quantity of currency and traveler's checks held outside of banks did not change. How large a change in the money supply would have resulted from the change in the reserve requirement? The money supply would change by $ nothing billion. (Round your response to two decimal places and include a minus sign if necessary.)
Answer:
The money supply would change by $168.21 billion.
Explanation:
Checking deposits = $1,514.1 billion
Reserve requirement = 10% or 0.10
Required reserves = $1,514.1 billion * 0.10 = $151.41 billion
Now, reserve requirement has decreased to 9%
New required reserves = $1,514.1 billion * 0.09 = $136.27 billion
Excess reserves created = Old required reserves - new required reserves
Excess reserves created = $151.41 billion - $136.27 billion = $15.14 billion
The excess reserves created is $15.14 billion
Calculate the new money multiplier -
New money multiplier = 1/New reserve requirement = 1/0.09 = 11.11
The new money multiplier is 11.11
Calculate the change in money supply -
Change in money supply = Excess reserves created * New money multiplier
Change in money supply = $15.14 billion * 11.11 = $168.21 billion
Thus,
The money supply would change by $168.21 billion.
Final answer:
The decrease in the reserve requirement from 11% to 10% would result in a potential increase in the money supply by approximately $151.41 billion, assuming all other factors remain constant and banks utilize the full potential of the increased money multiplier.
Explanation:
To calculate the change in the money supply resulting from a decrease in the reserve requirement, we employ the concept of the money multiplier. This is the inverse of the reserve ratio and tells us how much the money supply can potentially expand with each dollar of reserves. When the Fed decreases the reserve requirement ratio from 11% to 10%, the new money multiplier will be 1 divided by 0.10, which equals 10.
Given that all banks were initially loaned up (they didn't hold excess reserves), the full potential of the money multiplier can be utilized. The change in reserves is the amount of checking deposits times the change in the reserve requirement, which is $1,514.1 billion times (0.11 - 0.10) = $15.141 billion in new reserves.
With the new multiplier of 10, the change in money supply is the change in reserves times the multiplier, which is $15.141 billion × 10 = $151.41 billion.
Therefore, the total money supply would increase by approximately $151.41 billion.
If the government institutes an effective price ceiling on potato chips, then there will be a decrease in demand for and an increase in supply of potato chips. decrease in supply of potato chips. decrease in quantity supplied of potato chips. decrease in demand for potato chips. decrease in quantity demanded for potato chips.
Final answer:
An effective price ceiling on potato chips would lead to an increase in quantity demanded and a decrease in quantity supplied, resulting in a shortage. This is because the imposed price is below the market equilibrium, encouraging more consumers to buy and discouraging producers from selling.
Explanation:
When a government institutes an effective price ceiling on a product like potato chips, it sets a maximum price for the product that is below the market equilibrium. This results in an increase in quantity demanded for potato chips because consumers are more willing to purchase the product at the lower price. However, there is a decrease in quantity supplied, as producers are less inclined to sell their product at this lower price. These dynamics do not decrease the demand for potato chips, but rather they lead to a shortage as the quantity demanded at this lower price exceeds the quantity supplied.
The correct answer to the student's question is that there would be a decrease in quantity supplied of potato chips, not a decrease in demand. The supply curve moves upwards (or to the left) due to the price ceiling, indicating a decrease in quantity supplied at each and every price level below the equilibrium.
g The Berwin Company established a master budget volume of 35,000 units for April. Actual overhead costs incurred amounted to $98,500. Actual production for the month was 34,000 units. The standard variable overhead rate was $1.75 per direct labor hour. The standard fixed overhead rate was $1.50 per direct labor hour. One direct labor hour is the standard quantity per finished unit. Assume the allocation base for fixed overhead costs is the number of direct labor hours. SR1a. A. Compute the total manufacturing overhead cost variance.
The actual overhead incurred = $98,500
The overhead applied = 34000 * 1 ( $1.75 + $1.50) = 34000*1*3.25 = $110,500
The budgeted overhead = 34000*1*$1.75 + (35000*1*1.50) = (34000*1*$1.75)+52500 = $112,000
A) The total manufacturing overhead cost variance = Overhead applied - Actual overhead = $110,500 - $98,500 = $12,000 F
A manager is holding a $1.2 million stock portfolio with a beta of 1.01. She would like to hedge the risk of the portfolio using the S&P 500 stock index futures contract. How many dollars’ worth of the index should she sell in the futures market to minimize the volatility of her position? (Enter your answer in dollar not in millions.)
Answer: $1,212,000 or $1.212 million
Explanation:
To calculate the dollars’ worth of the index the manager should sell in the futures market to minimize the volatility of her position, we can use the following formula,
Dollar worth of index to sell = Value of the Portfolio * Portfolio Beta
Dollar worth of index to sell = 1,200,000 * 1.01
Dollar worth of index to sell = $1,212,000
The manager should sell $1,212,000 worth of the index in the futures market to minimize the volatility of her position.
In the country of Marzipana, total consumption in Year 1 was $56,000 million and in Year 2 was $60,000 million. It has been observed that each time disposable income changes in this country by $100, consumption changes by $70. Using this information compute the change in disposable income from Year 1 to Year 2.
Answer:
The change in disposable income from Year 1 to Year 2 is $5,714
Explanation:
We use “Rule of Three” to solve this calculation:
It has been observed that each time consumption changes by $70, disposable income changes in this country by $100.
Now the change in comsumtion in $4,000 (= $60,000 - $56,000), then the change in disposable income = $4,000 * $100/ $70 = $5,714
The value-added method involves taking the cost of intermediate outputs (i.e., outputs that will, in turn, be used in the production of another good) and subtracting that cost from the value of the good being produced. In this way, only the value that is added at each step (the sale value minus the value of the intermediate goods that went into producing it) is summed up. This method gives us the same result as the standard method of only counting the value of final goods and services because: the system of accounting requires that they be the same. the only difference is that the value-added method adds up production in the economy as it is produced, and the standard method of counting only uses the completed value at the end of the production chain. the only difference is that the standard method of counting adds up production in the economy as it is produced, and the value-added method totals the value at the end of the production chain. both methods are used by the same agency, so the totals have to be equal.
Answer:
the only difference is that the value added method adds up production in the economy as it is produced, and the standard method of counting only used the completed value at the end of the production chain.
Explanation:
The value added method in the production process aims to measure the value added at each stage of production considering intermediate products as input.
For example if plastic is produced in a plant and it is in turn used to produce plates. Value added at stage of plate production is the value of plates less cost of producing plastic.
The standard method counts only value of final goods and services.
Both methods give the same result because summation of value in the value added approach will be the same as the value at the end of the production chain (standard method).
Prepare the journal entries to record these transactions on Blossom Company’s books using a periodic inventory system. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) (a) On March 2, Blossom Company purchased $860,500 of merchandise from Kingbird Company, terms 2/10, n/30. (b) On March 6, Blossom C
Answer:
(a) Purchase (Dr.) $860,000
Accounts Payable (Cr.) $860,000
Explanation:
Credit discounts are offered by suppliers to realized receivables early than the credit period by offering customers some discount. The terms of payment are decided at the time of sell. The Blossom Company has purchased from Kingbird Company on terms of 2/10, n/30. This means 2% discount will be offered on invoice price if the payment is made within 10 days. The journal entry at the time of purchase will be recorded as accounts payable for complete invoice amount and discount is not incorporated in the entry because it is not realized.
Seven years ago, Halle (currently age 41) contributed $4,000 to a Roth IRA account. The current value of the Roth IRA is $9,000. In the current year Halle withdraws $8,000 of the account balance to use as a down payment on her first home. Assuming Halle's marginal tax rate is 24 percent, how much of the $8,000 withdrawal will she retain after taxes to fund the down payment on her house
Answer:
$7,040 is the amount to be retained after taxes to fund the house down payment
Explanation:
In this question, we are asked to calculate the amount of withdrawal that will be retained after taxes to fund the house payment.
We proceed as follows;
Withdrawal amount = $8000
The Non taxable amount is $4000 (this is because the amount deposited is not taxed)
The amount subject to tax is $4000(contributed to the IRA)
Tax rate = 24%
Penalty rate is zero as the purpose is to buy a house
After tax withdrawal retained= 4000+ 4000*(1-24%) = $7,040
Storico Co. just paid a dividend of $3.15 per share. The company will increase its dividend by 20 percent next year and then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on the company’s stock is 12 percent, what will a share of stock sell for today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
The price of the stock today or the price at which the stock should sell today is $61.30
Explanation:
The price of the stock today can be calculated using the Dividend Discount Model approach which values a stock based on the present value of the expected future dividends from the stock. The price of this stock will be,
P0 = 3.15 * (1+0.2) / (1+0.12) + 3.15 * (1+0.2) * (1+0.15) / (1+0.12)^2 +
3.15 * (1+0.2) * (1+0.15) * (1+0.1) / (1+0.12)^3 +
[(3.15 * (1+0.2) * (1+0.15) * (1+0.1) * (1+0.05) / (0.12 - 0.05)) / (1+0.12)^3]
P0 = $61.296 rounded off to $61.30
While Mary Corens was a student at the University of Tennessee, she borrowed $11,000 in student loans at an annual interest rate of 11%. If Mary repays $1,700 per year, then how long (to the nearest year) will it take her to repay the loan? Do not round intermediate calculations. Round your answer to the nearest whole number.
Answer:
It will take 23 years for Mary Corens to repay the loan.
Explanation:
Mary Corens obtained her loan of $ 11,000 with an interest rate of 11% per year, with which the annual interest that will accrue on her loan will be $ 1,210 (11,000 x 0.11).
If Mary pays 1,700 each year, we must take into account that each payment will decrease the amount of the loan by $ 490, since she will pay the interest of $ 1,210 and a surplus of $ 490 that will cover said part of the value of the loan. Therefore, to find out how long it will take Mary to repay the entire loan, we must divide the initial amount of the loan without interest by 490, which will be the sum of money that will be charged to the principal payment: 11,000 / 490 = 22.4.
Therefore, it will take Mary almost 22 and a half years to repay her loan, making annual payments of $ 1,700. Since the answer requires a whole number, we can affirm that in 23 years Mary Corens will pay off her debt.