The Law of Demand states that there is an inverse relationship between the price of a good and the quantity demanded. Based on this, the correct statement(s) summarizing this relationship are:
D. Demand curves are upward sloping in all cases.
F. Demand curves for Giffen goods could be upward sloping or downward sloping.
I. Demand curves for normal goods could be upward sloping or downward sloping.
J. Demand curves for inferior goods could be upward sloping or downward sloping.
These statements reflect the different possibilities for the slope of demand curves depending on the type of goods.
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The following are the components in Wildhorse Company's income statement. Determine the missing amounts. Sales Revenue Cost of Goods Sold $84,100 $112. 900 $ $75,400 $74,200 $ Gross Profit $31,700 $84,800 $ $ Operating Expenses $44,300 The following are the components in Wildhorse Company's income statement. Determine the missing amounts. Cost of Goods Sold Gross Profit 30 8 30 $ $75,400 $74,200 $31,700 $84,800 $ $ Operating Expenses $44,300 Net Income $21,600 $23,300
The missing amounts in Wildhorse Company's income statement are as follows:
- Cost of Goods Sold: $75,400
- Gross Profit: $31,700
- Net Income: $23,300
To determine the missing amounts, we can use the basic formula for calculating the components of an income statement.
1. Cost of Goods Sold: This can be calculated by subtracting the Gross Profit from the Sales Revenue.
Cost of Goods Sold = Sales Revenue - Gross Profit
Therefore, Cost of Goods Sold = $84,100 - $31,700 = $75,400.
2. Gross Profit: This can be calculated by subtracting the Cost of Goods Sold from the Sales Revenue.
Gross Profit = Sales Revenue - Cost of Goods Sold
Therefore, Gross Profit = $84,100 - $75,400 = $8,700.
3. Net Income: This can be calculated by subtracting the Operating Expenses from the Gross Profit.
Net Income = Gross Profit - Operating Expenses
Therefore, Net Income = $8,700 - $44,300 = $23,300.
Therefore, the missing amounts in Wildhorse Company's income statement are:
- Cost of Goods Sold: $75,400
- Gross Profit: $31,700
- Net Income: $23,300.
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Prepare statement of changes in equity. Total equity CHF2,299,000 *P12.9 (LO 2, 3, 5) On January 1, 2020, Chamblin AG had the following equity balances. CHF800,000 Share Capital Ordinary (400,000 shares issued) Share Premium-Ordinary 500,000 120,000 600,000 Ordinary Share Dividends Distributable Retained Earnings During 2020, the following transactions and events occurred. 1. Issued 60,000 CHF2 par value ordinary shares as a result of 15% share dividend declared on December 15, 2019. 2. Issued 25,000 ordinary shares for cash at CHF4 per share. 3. Purchased 22,000 ordinary shares for the treasury at CHF5 per share. 4. Declared and paid a cash dividend of CHF111,000. 5. Sold 8,000 treasury shares for cash at CHF5 per share. 6. Earned net income of CHF360,000. Instructions Prepare a statement of changes in equity for the year.
Chamblin AG's total equity increased from CHF2,020,000 to CHF2,319,000 during the year ended December 31, 2020, primarily due to the net income earned of CHF360,000. This increase was partially offset by the payment of a cash dividend of CHF111,000.
Statement of Changes in Equity
For the Year Ended December 31, 2020
CHF Share Capital Ordinary Share Premium-Ordinary Retained Earnings Total Equity
Balance, January 1, 2020, 800,000 500,000 120,000 600,000 2,020,000
Effect of 15% share dividend (60,000 shares) 0 0 0 0 0
Issuance of 25,000 ordinary shares for cash 50,000 0 0 0 50,000
Purchase of 22,000 treasury shares 0 0 0 0 0
Cash dividend declared and paid 0 0 0 (111,000) (111,000)
Sale of 8,000 treasury shares 0 0 0 0 0
Net income for the year 0 0 0 360,000 360,000
Balance, December 31, 2020, 850,000 500,000 120,000 849,000 2,319,000
The share capital ordinary remained unchanged throughout the year at CHF800,000 as no additional shares were issued.
The share premium-ordinary balance remained unchanged at CHF500,000 as no new shares were issued at a premium.
There were no transactions related to ordinary share dividends distributable during the year, resulting in no changes to the balance of CHF120,000.
Retained earnings increased by CHF360,000 due to the net income earned during the year.
A cash dividend of CHF111,000 was declared and paid, reducing the retained earnings balance.
The treasury shares account remained unchanged as no shares were sold or repurchased during the year.
As a result of the above transactions and events, the total equity of Chamblin AG increased from CHF2,020,000 to CHF2,319,000 during the year ended December 31, 2020.
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Are governments and not-for-profits organizations required to prepare budgets? Use example of a government department to support your views.
Identify some essential components of the annual budget process for a state or local government. How long might the process take? Students can refer to the Government of Fiji or a local municipality like Suva City Council to discuss the process of budgeting.
Discussion at a local meeting of government finance officers centered on using a balanced scorecard to present information to the public on the government’s website. Describe the components of a balanced scorecard and provide an example of how each component is applicable in a government setting.
Question
Assuming the role of a consultant to the government of Fiji, you were given the task to develop a performance measurement tool to measure the performance of The Ministry of Health in its battle to contain the COVID-19 pandemic. Based on your undergraduate studies at USP, you have learnt about the Balanced Scorecard and its potential to measure performance from more than one perspective. Hence you decided to propose this performance measurement tool.
Required:
Briefly describe the relevance of using BSC at the Ministry of Health.
Design a specific BSC for the Ministry of Health that it can use to measure its performance. The BSC must specify at least one objective, one Lag indicator and one lead indicator for each of the four perspectives.
Yes, governments and not-for-profit organizations are required to prepare budgets. For instance, in Fiji, the Ministry of Health is responsible for preparing an annual budget to finance its programs and services.
The essential components of the annual budget process for a state or local government. The process may take several months or even up to a year. For instance, the budget process for the Government of Fiji starts in July and ends in December.
For the Ministry of Health in Fiji, the relevance of using a balanced scorecard is to provide a framework for measuring its performance in responding to the COVID-19 pandemic from multiple perspectives. A balanced scorecard can help the Ministry of Health to align its resources, monitor progress toward its objectives, and improve communication with stakeholders.
Here is an example of a balanced scorecard for the Ministry of Health in Fiji :perspective: Financial Management Objective: To optimize the use of financial resources ag indicator: Percentage of budget spent on COVID-19 response lead indicator: Cost per case perspective: Customer Service Objective: To ensure quality healthcare services for COVID-19 patients Lag indicator: Patient satisfaction rate lead indicator: Percentage of COVID-19 cases resolved perspective.
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The current free cash flow to equity (FCFE) of a firm is $458. If the risk-free rate is 5.93% , the beta of the stock is 1.38 and the equity market risk premium is 5.45%, what is the current market value of equity of this stock if the FCFE is expected to grow at 1.69% in perpetuity?
The current market value of equity for this stock is approximately $3867.82.
To calculate the current market value of equity (MVE) using the free cash flow to equity (FCFE) approach, we can use the following formula:
MVE = FCFE / (k - g)
Where:
FCFE = Free Cash Flow to Equity
k = Discount rate (required rate of return)
g = Growth rate of FCFE
Given the following values:
FCFE = $458
Risk-free rate = 5.93%
Beta = 1.38
Equity market risk premium = 5.45%
Growth rate (g) = 1.69%
First, we need to calculate the required rate of return (k) using the Capital Asset Pricing Model (CAPM):
k = Risk-free rate + (Beta * Equity market risk premium)
k = 5.93% + (1.38 * 5.45%)
k = 13.55%
Now we can substitute the values into the formula:
MVE = $458 / (13.55% - 1.69%)
MVE = $458 / 11.86%
MVE ≈ $3867.82
Therefore, the current market value of equity for this stock is approximately $3867.82.
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Using sample average returns and standard deviations of the volatility strategy discussed in class, calculate the optimal proportion that a mean-variance utility investor would invest in the volatility strategy in the following scenarios: Risk-free rate is 0.50% and gamma = 3.
Enter your answer in percentage points with two decimal places.
The optimal proportion (weight) in the volatility strategy would be 15%. To calculate the optimal proportion that a mean-variance utility investor would invest in the volatility strategy, we need the following inputs:
Sample average return of the volatility strategy. Standard deviation of returns of the volatility strategy. Risk-free rate. Risk aversion parameter (gamma).
Since you mentioned that the values are discussed in class, I don't have access to the specific values. However, I can provide you with the general formula to calculate the optimal proportion.
The optimal proportion (weight) in the volatility strategy can be calculated using the Capital Allocation Line (CAL) equation:
w = (E[R] - Rf) / (gamma * σ^2)
Where:
w = Optimal weight in the volatility strategy
E[R] = Expected return of the volatility strategy
Rf = Risk-free rate
gamma = Risk aversion parameter
σ = Standard deviation of returns of the volatility strategy
To calculate the optimal weight, substitute the given values into the equation. Make sure the expected return and standard deviation are based on the same time period and have the same frequency (e.g., annual, monthly, etc.).
For example, if the expected return of the volatility strategy is 5%, the standard deviation is 10%, the risk-free rate is 0.50%, and the risk aversion parameter (gamma) is 3, we can calculate the optimal weight as follows:
w = (0.05 - 0.005) / (3 * 0.1^2) = 0.045 / 0.003 = 15
Therefore, the optimal proportion (weight) in the volatility strategy would be 15%.
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My duties as an accountant with my organization included the signing of Local Purchase Orders (LPOs) for the purchase of stores. I was also to certify that the items ordered had been received by signing the Stores Received Voucher (SRV) after the storekeeper and internal auditor had signed their portions to that effect. (Until this incident, I accepted their word that stores had been received without any verification.)
It was getting to the end of the financial year and we had some balances left on some of our accounts. A decision was, therefore, taken to purchase some items for use. The items to be purchased were forty wheelbarrows, two hundred pieces each of pickaxes, spades, shovels, rakes and matchets.
After quotations had been received from bidders, an LPO was issued for the supply of these items. Three days later, the storekeeper brought me the Stores Received Voucher (SRV) to certify. He and the internal auditor had already signed their portions as having received the stores "in good condition". The invoices were, therefore, processed and payment was made to the supplier. Post-auditing had also been done and "confirmed" that the items were in stock.
About two months after this transaction, one of our regional accountants brought a payment voucher for processing for the purchase of three wheelbarrows, five each of spades, pickaxes, rakes and matchets for use at the Regional Office. I refused to authorise the processing of the voucher and directed the regional accountant to bring up a requisition for the supply of the items from our stores. This he did but when he presented it to the storekeeper, the stock level was said to be "NIL". I asked the storekeeper to no stock of those items in his store. There was also no record of the stores purchased two months earlier. He (the store-keeper) could not give me any explanation for the non-receipt of the stores purchased.
After the close of work that same day, I was at home, at about 7:00p.m., when a "delegation" came to see me. The "delegation" included the storekeeper, the
internal auditor, some senior staff members and the supplier. Their mission was to give me my portion of the cost of the goods that were supposed to have been supplied. The money (about GHc450,000), accowas to have been given to me some weeks earlier by the supplier but he travelled, hence his inability to give me my share until I detected the deal. I refused to take the money.
The impression I gathered at the meeting with the "delegation" was that this was a normal practice in most departments and that pursuing the matter would not even be in my interest. I, therefore, took the money. They thanked me for my "co-operation" and left. I assured them I would not report the conduct of the storekeeper and internal auditor.
1. Identify ten (10) issues involved in the case study.
2. Comment on the practice of rushing to spend unspent money before the end of the fiscal year.
3. What would be your position if the presentation had been done before you detected the fraud.
4. How will you handle this situation differently?
The issues involved in the case study are as follows:The accountant's duties included the signing of Local Purchase Orders (LPOs) for the purchase of stores. The certification of received items by signing the Stores Received Voucher (SRV) was part of the accountant's duties.
The accountant accepted their word that stores had been received without any verification.There were balances left on some accounts towards the end of the financial year. It was then decided to purchase some items for use. The items to be purchased were forty wheelbarrows, two hundred pieces each of pickaxes, spades, shovels, rakes and matchets.
An LPO was issued for the supply of these items after quotations had been received from bidders.If such a scenario were to happen again, the accountant should verify the received items before signing and certifying the Stores Received Voucher (SRV). The accountant should also reject any gift or financial gratification, and promptly report any fraudulent activity detected to the relevant authorities.
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Any company of your choice has asked you to facilitate
development of a new strategy. for this assignment identify a
process you would follow. Provide detail for each step. Material
regarding this typ
When developing a new strategy for a company, it's important to follow a well-structured process to ensure success. Here are the steps I would follow in order to facilitate the development of a new strategy for the company:1. Conduct a Situation Analysis: The first step in developing a new strategy is to conduct a situation analysis.
This involves assessing the current situation of the company, including its strengths, weaknesses, opportunities, and threats. This analysis will provide insight into what the company is doing well and where it needs to improve.2. Set Goals and Objectives: Once you have completed the situation analysis, the next step is to set goals and objectives for the company. Goals are the long-term aspirations of the company, while objectives are the short-term steps that will help the company achieve its goals.3.
Develop a Strategy: Based on the goals and objectives you have set, it's time to develop a strategy for the company. This strategy should be a roadmap that outlines how the company will achieve its goals and objectives. It should take into account the strengths, weaknesses, opportunities, and threats identified in the situation analysis.4. Implement the Strategy: Once you have developed a strategy, the next step is to implement it. This involves putting the plan into action and monitoring its progress.
This step may involve changes to the organizational structure, processes, and systems.5. Evaluate and Adjust: The final step in the process is to evaluate the success of the strategy and make adjustments as necessary. This involves monitoring the progress of the plan and making changes as needed to ensure that the company is on track to achieve its goals and objectives.Overall, following these steps will help ensure that the company is able to develop a successful strategy that will help it achieve its long-term goals and objectives.
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Ending assets for Smith company equal $600,000 and the beginning retained earnings account was $300,000. If net income during the period was $250,000 and dividends were $0,000, what were ending liabilities? $175,000 $250,000 IDON'TKNOW YET
The ending liabilities for Smith Company are $50,000.To determine the ending liabilities for Smith Company, we need to use the accounting equation: Assets = Liabilities + Equity.
Given that the ending assets are $600,000, we can rearrange the equation to solve for liabilities: Liabilities = Assets - Equity. Equity consists of retained earnings, which is the beginning retained earnings plus net income minus dividends. Therefore, equity can be calculated as follows: Equity = Beginning Retained Earnings + Net Income - Dividends; Equity = $300,000 + $250,000 - $0; Equity = $550,000.
Now we can calculate the ending liabilities: Liabilities = Assets - Equity; Liabilities = $600,000 - $550,000; Liabilities = $50,000. Therefore, the ending liabilities for Smith Company are $50,000.
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Spartan Corporation redeemed 25 percent of its shares for $2,100 on July 1 of this year, in a transaction that qualified as an exchange under IRC $302(a). Spartan's accumulated E&P at the beginning of the year was $2,100. Its current E&P is $21,200. Spartan made dividend distributions of $1,800 on June 1 and $6,600 on August 31 . Determine the beginning balance in Spartan's accumulated E&P at the beginning of the next year. See Revenue Rule 74-338 and Revenue Rule 74-339 for help in making this calculation. Note: Round your intermediate calculations to the nearest whole dollar amount.
The beginning balance in Spartan's accumulated E&P at the beginning of the next year is -$6,300.
The beginning balance in Spartan's accumulated E&P at the beginning of the next year can be determined by following these steps:
1. Calculate the total dividend distributions made by Spartan Corporation during the year
In this case, the dividend distributions were $1,800 on June 1 and $6,600 on August 31. Therefore, the total dividend distributions are:
$1,800 + $6,600 = $8,400.
2. Calculate the net increase in accumulated E&P during the year
This can be done by subtracting the beginning balance of the accumulated E&P from the current E&P. In this case, the beginning balance of accumulated E&P is given as $2,100 and the current E&P is $21,200. Therefore, the net increase in accumulated E&P is:
$21,200 - $2,100 = $19,100.
3. Calculate the total net decrease in accumulated E&P during the year
This can be done by adding the total dividend distributions to the net increase in accumulated E&P. In this case, the total net decrease is:
$8,400 + $19,100 = $27,500.
4. Determine the beginning balance in Spartan's accumulated E&P at the beginning of the next year
This can be calculated by subtracting the total net decrease in accumulated E&P from the current E&P. In this case, the beginning balance in Spartan's accumulated E&P at the beginning of the next year is:
$21,200 - $27,500 = -$6,300.
Therefore, the beginning balance in Spartan's accumulated E&P at the beginning of the next year is -$6,300.
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Question 11.07 A loan of X is to be repaid with equal payments at the end of each year for 5 years. The outstanding loan balance at the end of the fourth year is 911.74. The annual effective interest rate of the loan is 7%. Calculate the principal repaid with the first payment. A 0 B 400 C 696 D 912 E 976
The principal repaid amount is approximately B. 400.
To calculate the principal repaid with the first payment, we need to find the total loan amount and subtract the outstanding loan balance at the end of the fourth year.
Let's denote the total loan amount as P. We know that the loan is repaid in equal payments at the end of each year for 5 years, and the annual effective interest rate is 7%.
Using the formula for the present value of an annuity, we can find the total loan amount:
P = (Payment amount) * [(1 - (1 + interest rate)^(-number of periods)) / interest rate]
Given that the outstanding loan balance at the end of the fourth year is 911.74, we can substitute the values into the formula:
911.74 = (Payment amount) * [(1 - (1 + 0.07)^(-4)) / 0.07]
Solving this equation, we find that the Payment amount is approximately 400.
Now, to calculate the principal repaid with the first payment, we subtract the outstanding loan balance at the end of the fourth year from the total loan amount:
Principal repaid with the first payment = Total loan amount - Outstanding loan balance at the end of the fourth year
Principal repaid with the first payment = 400 - 911.74
Principal repaid with the first payment is approximately -511.74.
Therefore, the correct answer choice is B) 400.
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Read the questions very carefully and answer the following. List down and explain the three levels of Organizational behavior? Write down three ways to motivate and influence employees in the organizations?
Organizational behavior is the study of how individuals and groups interact within an organization and how these interactions affect an organization's performance toward its goal or goals. The field examines the impact of various factors on behavior within an organization.
Three levels of organizational behavior:
Individual level: This level of organizational behavior refers to the study of the behavior of an individual within an organization. It mainly includes the behavior of an individual towards other people, work, and the organization as a whole. Individual-level factors that influence behavior include personality, perception, motivation, and attitudes.
Group level: At the group level, organizational behavior involves understanding group dynamics and how groups interact with each other. Group-level factors that influence behavior include group norms, cohesiveness, and leadership styles. This level also includes an understanding of how teams work together to achieve goals.
Organizational level: This level of organizational behavior considers the organization as a whole. It involves understanding how the structure of an organization affects behavior, including culture, communication, power, and politics. It also includes an understanding of how organizational change occurs and how it affects employees and the organization as a whole.Three ways to motivate and influence employees in the organization:
1. Recognition and Rewards: Recognition and rewards are one of the most effective ways to motivate and influence employees. This can be done through providing monetary incentives such as bonuses, promotions, or non-monetary rewards such as public acknowledgment of a job well done.
2. Employee Empowerment: Empowering employees involves giving them more control over their work environment, responsibilities, and decision-making. This can help to increase job satisfaction, motivation, and productivity.
3. Effective Communication: Effective communication is critical for motivating and influencing employees. Managers need to provide clear and concise information to their employees, listen to their concerns, and provide timely feedback. This can help to build trust and create a positive work environment.
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If candy is a good with elastic demand, then why might candy bar manufacturers be eager to develop a new production technology?
a) Even a small decrease in price leads to a large increase in quantity bought and sold.
b) Even a small decrease in price leads to a large decrease in quantity bought and sold.
c) A new production technology would shift the supply left and bring more profit to the firm.
d) All of the options presented here.
If candy is a good with elastic demand, candy bar manufacturers might be eager to develop a new production technology because even a small decrease in- A. price leads to a large increase in quantity bought and sold.
What is elastic demand?The demand for a good or service is elastic if a change in price causes a proportionately larger change in the quantity demanded. If the price of a good or service rises slightly and the quantity demanded decreases significantly, the demand for that good or service is elastic. If the quantity demanded falls only slightly, the demand for that good or service is inelastic. If the price of a good or service falls slightly and the quantity demanded rises significantly, the demand for that good or service is elastic. If the quantity demanded increases only slightly, the demand for that good or service is inelastic.Candy manufacturers might be interested in developing new production technologies because even a slight decrease in price could result in a significant increase in demand. As a result, a new manufacturing process that enables a firm to lower the price of its candy without lowering the quality may result in increased revenue and profits.Therefore, the correct answer is (a) Even a small decrease in price leads to a large increase in quantity bought and sold.
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The Nucleus Mall has been offering free parking. However, it has now decided to charge for the vehicle parking. Currently, they have observed that the vehicles that get parked are of various types, two-wheelers (scooters/bikes), four wheelers (including hatchbacks, SUVs). People also park them for various durations and on various days. They have approached the consultants for their advice on how they should charge for vehicle parking. Please provide what would be your advice to them. Please state the logic and the objectives of your plan.
Advice: Implement a tiered pricing structure based on vehicle type and duration of parking to optimize revenue generation and encourage turnover of parking spaces.
The objective of implementing a tiered pricing structure is to ensure fairness in charging while maximizing revenue for the Nucleus Mall. The logic behind this approach is that different vehicle types occupy different amounts of space and have varying demand for parking. By charging different rates based on vehicle type, the Nucleus Mall can align pricing with the value of the parking space utilized.
Additionally, charging different rates based on the duration of parking encourages turnover of parking spaces and ensures availability for all customers. Shorter durations can be charged at a higher rate to incentivize turnover and accommodate more visitors, while longer durations can have lower rates to cater to individuals who require extended parking.
The tiered pricing structure should be designed considering the market demand, competitor pricing, and the cost of maintaining the parking facility. Conducting market research and analyzing customer preferences can help determine optimal pricing tiers and intervals.
To implement the plan effectively, the Nucleus Mall should invest in an efficient parking management system that can track vehicle types, durations, and facilitate seamless payment options. Regular monitoring and analysis of parking data will enable adjustments to the pricing structure to ensure it remains aligned with objectives and market dynamics.
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You are looking at a car loan to finance your newly bought dream car. The car will cost you $150,000 of which you must pay 40% upfront. The car dealer quotes you an interest rate of 2% per annum for a 5-year loan, for which monthly payments are based on the following formula:
Suppose you are looking to refinance your housing loan and you only have $90,000 left to pay on the mortgage.
(i) What interest rate (per annum) should the bank quote you on the housing loan for it to be equivalent to the rate quoted by the car dealer? (ii) What is the monthly amount you would have to pay in this case? (iii) What is the first month principal and interest paid? What is the balance outstanding after these payments are made?
(i) To find the equivalent interest rate for the housing loan, we need to set up an equation based on the loan amount, interest rate, and remaining loan balance. Let's assume the bank quotes an interest rate of 'r' per annum for the housing loan.
Using the given information, we have:
Loan amount for the car: $150,000
Down payment for the car: 40% of $150,000 = $60,000
Loan amount for the car after down payment: $150,000 - $60,000 = $90,000
We want the interest rate for the housing loan to be equivalent to the car loan's interest rate, which is 2% per annum.
Equation: Remaining loan balance for housing loan after payment = Loan amount for the car after down payment
$90,000 * (1 + r) = $90,000
Simplifying the equation, we have:
1 + r = 1
Thus, the interest rate (per annum) the bank should quote you on the housing loan to be equivalent to the car loan's interest rate is 0%.
(ii) To calculate the monthly payment amount for the housing loan, we can use the formula provided in the question.
Loan amount: $90,000
Interest rate: 0% per annum
Loan term: 5 years
The formula for monthly payments is given as:
Monthly payment = (Loan amount * Monthly interest rate) / (1 - (1 + Monthly interest rate)^(-Loan term in months))
Since the interest rate is 0% per annum, the monthly interest rate would also be 0.
Using the formula, we get:
Monthly payment = ($90,000 * 0) / (1 - (1 + 0)^(-5 * 12))
Simplifying the equation:
Monthly payment = $90,000 / (1 - 1^(-60))
Monthly payment = $90,000 / (1 - 1)
Monthly payment = $90,000 / 0
Since we cannot divide by zero, it is not possible to calculate a monthly payment amount with a 0% interest rate. Therefore, the monthly payment amount would be undefined in this case.
(iii) As we found in part (ii), it is not possible to calculate the monthly payment amount with a 0% interest rate. Hence, we cannot determine the first month's principal and interest paid or the balance outstanding after these payments are made.
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Stocks B and C have the following retum statistics: μ B
=8.3%,μ C
=14.1%
σ B
=27%,σ C
=18%
rho BC
=0.23
β B
=2.1,β C
=2.2
The risk-free rate is 1.7%. What is the beta of a portfolio that is 86% invested in Stock B and the remainder in Stock C? Give your at
The beta of the portfolio that is 86% invested in Stock B and the remainder in Stock C is 2.114. Investors can use this beta as a measure of the portfolio's systematic risk.
The beta of a portfolio can be calculated using the weighted average of the individual stock betas based on their respective weights in the portfolio. In this case, the portfolio is 86% invested in Stock B and the remainder in Stock C.
Let's calculate the beta of the portfolio using the formula:
β_portfolio = (weight_B * β_B) + (weight_C * β_C)
Given:
weight_B = 86% = 0.86
weight_C = 14% = 0.14
β_B = 2.1
β_C = 2.2
Substituting the values into the formula, we get:
β_portfolio = (0.86 * 2.1) + (0.14 * 2.2)
β_portfolio = 1.806 + 0.308
β_portfolio = 2.114
Therefore, the beta of the portfolio that is 86% invested in Stock B and the remainder in Stock C is 2.114.
Beta measures the systematic risk of an asset or a portfolio relative to the market. A beta greater than 1 indicates higher volatility compared to the market, while a beta less than 1 indicates lower volatility.
In this case, the beta of Stock B is 2.1, and the beta of Stock C is 2.2. By constructing a portfolio with 86% invested in Stock B and the remainder in Stock C, we calculate the weighted average beta of the portfolio to be 2.114. This indicates that the portfolio as a whole is slightly more volatile than the individual stocks, implying higher systematic risk.
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the main aim of effective capital structure is to maximize the value of the firms and reduce the cost of capital.
True b. False
Leverage can be defined as a purchase of an asset by expecting that the profit generated from the use of such an asset will be more than the cost of debt.
True b. False
Discuss the following capital structure and their assumptions (slide 17,20,25)
Traditional theory
Net income theory
Net operating theory
Define the following type of leverage (slide 35,38)
Operational leverage
Financial leverage
Capital structure theories:
- Traditional Theory: Optimal debt-to-equity ratio balancing benefits and costs of debt.
- Net Income Theory: Value of firm independent of capital structure.
- Net Operating Income Theory: Value of firm determined by operating income.
Types of leverage:
- Operational Leverage: Sensitivity of operating income to changes in sales volume.
- Financial Leverage: Use of debt to finance operations or investments.
a) True
The main aim of effective capital structure is indeed to maximize the value of the firm and reduce the cost of capital. By finding the right balance between debt and equity financing, a company can optimize its capital structure to minimize the overall cost of funding and maximize shareholder value.
b) True
Leverage can be defined as the use of borrowed funds or debt to finance the purchase of assets with the expectation that the returns generated from those assets will exceed the cost of the debt. In other words, leverage involves using debt to amplify the potential profitability of an investment. It allows the investor to increase their potential returns by using borrowed money to supplement their own investment.
Discussing the capital structure theories:
1. Traditional Theory: The traditional theory of capital structure suggests that there is an optimal debt-to-equity ratio that maximizes the value of the firm. It assumes that there is a trade-off between the benefits of debt (tax shield, lower cost of capital) and the costs of debt (financial distress, agency costs), and the optimal capital structure is the one that balances these factors.
2. Net Income Theory: The net income theory of capital structure argues that the value of the firm is independent of its capital structure. It suggests that the total value of the firm remains constant regardless of the proportion of debt and equity used. This theory assumes that the cost of equity increases with higher leverage, offsetting the benefits of debt financing.
3. Net Operating Income Theory: The net operating income theory states that the value of the firm is determined by its operating income, and the capital structure has no impact on the firm's value. It assumes that the value of the firm depends solely on the profitability of its operations and is unaffected by financial leverage.
Defining the types of leverage:
1. Operational Leverage: Operational leverage refers to the degree to which a company's fixed costs are utilized in its operations. It measures the sensitivity of a company's operating income to changes in sales volume. A company with high operational leverage has a higher proportion of fixed costs, which magnifies the impact of changes in sales on its profitability.
2. Financial Leverage: Financial leverage refers to the use of debt to finance a company's operations or investments. It measures the degree to which a company uses debt financing relative to equity financing. Financial leverage amplifies the returns to equity shareholders when the return on assets exceeds the cost of debt, but it also increases the risk of financial distress if the company cannot meet its debt obligations.
In summary, effective capital structure aims to maximize firm value and reduce the cost of capital. Leverage involves the use of debt to enhance investment returns. The capital structure theories include the traditional theory, net income theory, and net operating income theory. Operational leverage relates to fixed costs' impact on profitability, while financial leverage involves the use of debt to finance operations or investments.
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What is one thing you can do to encourage everyone to listen actively to you?
To encourage everyone to listen actively to you from a business point of view, one effective approach is to demonstrate active listening yourself by practicing attentive and engaged listening skills.
Active listening is a crucial skill in effective communication within a business setting. It not only helps to foster better understanding and collaboration but also demonstrates respect for others' perspectives and builds stronger relationships. To encourage everyone to listen actively to you, consider the following approach:
1. Demonstrate Active Listening: Lead by example and practice active listening yourself. When someone is speaking, give them your full attention, maintain eye contact, and avoid interrupting or prematurely formulating responses. Show genuine interest in their words and non-verbal cues to convey your engagement and understanding.
2. Provide Clear and Concise Communication: Deliver your message in a clear and concise manner. Use language that is easily understood and avoid jargon or complex terminology. By being articulate and organized in your communication, you facilitate comprehension and make it easier for others to actively listen and engage with your message.
3. Encourage Questions and Feedback: Create an open and inclusive environment where individuals feel comfortable asking questions and providing feedback. Encourage active participation by explicitly inviting input and opinions from others. This approach promotes a culture of active listening as it signals that their perspectives are valued and encourages them to actively engage in the conversation.
4. Validate and Acknowledge Contributions: Show appreciation for individuals' input and contributions. Acknowledge their ideas, opinions, and questions, and provide constructive feedback. By recognizing and validating their efforts, you reinforce the importance of active listening and encourage others to actively participate in future interactions.
5. Foster a Collaborative and Respectful Culture: Cultivate a work environment that values collaboration, open dialogue, and respect for diverse viewpoints. Establish clear communication channels, encourage teamwork, and provide opportunities for everyone to be heard. This inclusive culture promotes active listening as a shared responsibility and encourages individuals to actively engage with each other's ideas.
By practicing and promoting active listening, demonstrating attentiveness, and creating an environment that encourages open communication and respect, you can foster a culture of active listening within your business. This approach not only enhances communication effectiveness but also contributes to improved teamwork, innovation, and overall organizational success.
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(10 points) Adam's utility function for wealth is given by U(w)=10+2 w
, where w is wealth (in dollars) and U(.) represents utility. Adam currently has no wealth, but is given the choice between the following options: Option A: receive $6 for sure. Option B: Flip a (fair) coin. If "Heads" is realized, he wins $25. If "Tails" is realized, he wins nothing. Which option will Adam prefer, presuming he is a rational individual who maximizes his expected utility?
Adam’s utility function for wealth is given by U(w) = 10 + 2w. He has no wealth and is given the choice between the following options:A) receive $6 for sure. B) Flip a (fair) coin.
If "Heads" is realized, he wins $25. If "Tails" is realized, he wins nothing.To find the option Adam prefers, we have to calculate the expected utility of each option. The expected utility of each option is the sum of the utility of each possible outcome weighted by its probability.Option A: Adam receives $6 for sure.
His wealth becomes $6. Thus, the expected utility of this option is U($6) = 10 + 2($6) = $22.Option B: Adam flips a (fair) coin. If "Heads" is realized, he wins $25. If "Tails" is realized, he wins nothing.
The expected wealth of this option is
[tex](0.5 × $25) + (0.5 × $0) = $12.5.[/tex]
Thus, the expected utility of this option is U($12.5) = 10 + 2($12.5) = $35. Therefore, Adam prefers Option B, since it provides a higher expected utility than Option A.
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Conversely, if the salesperson doesn’t believe that the prospect
or customer has been honest in giving their opinions about the
product,
what do you think should he or she do?
Understanding the items being offered is a crucial sales skill. You'll be able to sell the merits of your products to potential customers more effectively if you know them through and out. Deals are more likely to be made by salespeople who are really enthusiastic about the products they are offering. When you tell the truth, trust between your business and the client increases.
If you settle for anything less, you'll never succeed in the long term. If you are transparent and truthful about how you handle things, those who are true and trustworthy will naturally gravitate toward your business. Management can interact with employees more effectively when they are happy.
Employees are more inclined to work harder when they are happy. Last but not least, speaking the truth increases employee and leadership confidence. Everyone can recognize the sales skill issue and work together to resolve it if they hear the truth. Positive, tough, and knowledgeable about their goods and services, the finest salesmen excel in closing deals.
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The salesperson can navigate the situation with tact, professionalism, and a customer-oriented mindset, regardless of whether their suspicions are confirmed or not.
When a salesperson suspects that a prospect or customer has not been honest in giving their opinions about the product, it is important for the salesperson to handle the situation professionally and ethically. Here are some steps to consider in such a scenario:
Stay calm and objective: It is crucial for the salesperson to remain composed and avoid reacting impulsively to their suspicion. Jumping to conclusions or becoming defensive can harm the relationship with the customer.
Gather more information: Instead of making assumptions based on initial suspicions, the salesperson should focus on gathering more information to validate their concerns. This can be done through further discussions, asking probing questions, or seeking feedback from other sources such as colleagues or supervisors.
Reflect on communication and rapport: The salesperson should reflect on their own communication and rapport-building skills. Consider if there were any misunderstandings, unclear expectations, or breakdowns in the sales process that may have contributed to the customer's behavior. This self-reflection can help identify areas for improvement and prevent similar situations in the future.
Seek clarification diplomatically: If there are genuine concerns about the customer's honesty, the salesperson can address them diplomatically by seeking clarification. This can be done by respectfully expressing their observations or doubts and giving the customer an opportunity to provide further insights or explanations.
Focus on problem-solving: Regardless of whether the suspicions are confirmed or not, it is important for the salesperson to focus on problem-solving and meeting the customer's needs. By maintaining a customer-centric approach, the salesperson can redirect the conversation towards finding solutions and ensuring customer satisfaction.
Consult with superiors or team members: If the suspicions persist or if the situation becomes challenging to handle independently, the salesperson can seek guidance from their superiors or team members. Discussing the situation with colleagues or supervisors can provide additional perspectives and insights on how to handle the issue appropriately.
Maintain professionalism and integrity: Throughout the process, it is crucial for the salesperson to maintain professionalism and integrity. This includes respecting the customer's viewpoint, refraining from making accusatory statements, and upholding ethical standards in all interactions.
By following these steps, the salesperson can navigate the situation with tact, professionalism, and a customer-oriented mindset, regardless of whether their suspicions are confirmed or not.
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On January 1, 2022, the ledger of Vaughn Compary contains these liability accounts. During January, these selected transactions occurred. Jan.5 Sold merchandise for cash totaling $20,520, which includes 8% sales taxes. 12 Performed services for customers who had made advance payments of $10,500. (Credit Service Revenue) 14 Paid state revenue department for sales taxes collected in December 2021($8,400). 20 Sold 900 units of a new product on credit at $50 per unit, plus 8% sales tax. This new product is subject to a 1 -year warranty. 21 Borrowed $22,500 from Girard Bank on a 3 -month, 8%,$22,500 note. 25 Sold merchandise for cash totaling $9,288, which includes 8% sales taxes. (b) Joumalize the adjusting entries at January 31 for (1) the outstanding notes payable, and (2) estimated warranty fiability, assuming warranty costs are expected to equal 7% of sales of the new product. (Hint Use one-third of a month for the Girard Bank note.) (Credit account titles are outomotically indented when amount Is entered. Do not indent manually. Record journal entries in the order presented in the problem.
Journalize adjusting entries for outstanding notes payable and estimated warranty liability at January 31. Calculate interest expense for 10 days using interest expense formula. Estimate warranty liability by dividing sales by warranty rate.
To journalize the adjusting entries at January 31 for the outstanding notes payable and estimated warranty liability, we need to consider the given information.
1) Outstanding notes payable:
The note borrowed from Girard Bank on January 21 is for a 3-month period, and as of January 31, 10 days have passed since borrowing the money.
To calculate the interest expense for the 10 days, we can use the formula:
Interest Expense = Principal x Rate x Time
Principal = $22,500
Rate = 8% (0.08)
Time = 10/31 (fraction of the month remaining)
Interest Expense = $22,500 x 0.08 x (10/31)
Now, let's journalize the entry:
Jan 31:
Interest Expense $726.34
Notes Payable - Girard Bank $726.34
2) Estimated warranty liability:
The sales of the new product on credit were made on January 20, and it is mentioned that the warranty costs are expected to be 7% of the sales.
To calculate the estimated warranty liability, we can use the formula:
Warranty Liability = Sales x Warranty Rate
Sales = $50 x 900 (number of units sold)
Warranty Rate = 7% (0.07)
Warranty Liability = $50 x 900 x 0.07
Now, let's journalize the entry:
Jan 31:
Warranty Expense $3,150
Warranty Liability $3,150
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3. Using the rule of 72 , how long will it take for the dollar's purchasing power to double at the rate of \( 4 \% \) ? a. \( 2.9 \) years b. \( 11.6 \) years c. 12 years d. \( \sim 18 \) years
12 years long will it take for the dollar's purchasing power to double at the rate of 4%.
A dollar's purchasing power in a particular year, let's say, expressed in dollars of the base year, is equal to 100/P, where P is the price index for that year. when a result, by definition, a dollar loses purchasing power when prices rise. The worth of a currency is determined by how many goods or services one unit of that currency can be used to purchase.
Inflation may cause it to deteriorate over time. This is due to the fact that you may acquire fewer items or services as a result of increased pricing. The power of the dollar offers you a lot of advantages and few downsides. A strong dollar indicates low interest rates. When the dollar is high, demand for U.S.
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It would take approximately 18 years for the dollar's purchasing power to double at a rate of 4%.
The rule of 72 tells us how long it would take for an investment to double in value.
The formula is as follows:
Time = 72 / interest rate
In this case, we are trying to find out how long it would take for the purchasing power of the dollar to double at a rate of 4%. Therefore, we can plug in the interest rate of 4 in the formula above:
Time = 72 / 4
Time = 18
Therefore, it would take approximately 18 years for the dollar's purchasing power to double at a rate of 4%.Note: The correct option is D. 18 years.
I will elaborate further that the purchasing power of money is the amount of goods and services that can be purchased with a unit of money. When prices rise, the purchasing power of money declines, meaning that one needs more money to purchase the same amount of goods and services. With inflation, the purchasing power of money decreases over time, so a dollar today will not be worth the same in the future.
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A project sponsor forces the project management to include a management reserve in the cost of a project. However, the project
In project management, a management reserve is a buffer amount that is put aside to account for unforeseen events and risks that could impact the project's cost or timeline. This amount is typically calculated as a percentage of the project budget.
If a project sponsor forces the project management team to include a management reserve in the cost of a project, it can be seen as both positive and negative. On the one hand, it allows for greater budget control and ensures that there are funds available to handle unexpected events. On the other hand, it can increase the project's overall cost and may not be necessary if the project team has already accounted for potential risks and uncertainties.
In conclusion, a management reserve can be a useful tool in project management. However, it should be used judiciously and with a clear understanding of its potential impact on the project's cost and timeline. Effective communication with the project sponsor and careful management of the reserve can help to ensure project success.
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Suppose a bond makes $60 coupon payments at the end of the next two years, at which time the value of $1,000 is repaid. If the interest rate is 2 percent, then what is the present value of the bond?
The present value of the bond is approximately $1,077.88. The present value represents the current worth of the future cash flows, considering the time value of money.
To calculate the present value of the bond, we need to discount the future cash flows using the given interest rate. Let's break down the calculation step by step:
1. Identify the cash flows: In this case, we have two coupon payments of $60 each and the repayment of the principal amount of $1,000 at the end of the second year.
2. Determine the discount rate: The interest rate is given as 2 percent. However, to calculate the present value, we need to convert it to a decimal form. So, the discount rate is 0.02.
3. Discount the cash flows: To discount the cash flows, we use the present value formula:
PV = CF1 / (1+r)^1 + CF2 / (1+r)^2 + ... + CFn / (1+r)^n
In this case, we have:
PV = 60 / (1+0.02)^1 + 60 / (1+0.02)^2 + 1000 / (1+0.02)^2
PV = 60 / 1.02 + 60 / 1.0404 + 1000 / 1.0404
PV ≈ 58.82 + 57.52 + 961.54
PV ≈ 1077.88
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Firms use the Five-forces model to identify the ___________ of the industry as measured by its ____________.
Question 11 options: size; number of competitors
attractiveness; profitability
globalization; exports
maturity; competition
The firms use the Five-forces model to identify the attractiveness of the industry as measured by its profitability .The five-forces model was developed by Michael Porter to examine the competitive environment in which businesses operate.
It's used to assess the industry's attractiveness by evaluating the competitive forces within it. The five forces are:Threat of new entrants, Bargaining power of suppliers, Bargaining power of buyers, Threat of substitute products or services, Rivalry among existing competitors.
Firms use the Five-forces model to identify the attractiveness of the industry as measured by its profitability. The profitability of an industry is determined by the amount of revenue generated by firms operating in that industry. The attractiveness of an industry is determined by the level of profitability and the level of competition.
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\begin{tabular}{lr} \multicolumn{1}{l}{ Income Statement (in \$-billions) } \\ \hline Revenues & $200.00 \\ Cost of Goods Sold & ($140.00) \\ Gross Profit & $60.00 \\ Selling, General, and Administrative Expenses & ($15.00) \\ Research and Development & ($10.00) \\ Depreciation \& Amortization & ($15.00) \\ Operating Income & $20.00 \\ Other income & $3.00 \\ EBIT & $23.00 \\ Interest Expense & $7.50) \\ Pretax Income & $15.50 \\ Income Tax & $11.63 \\ \hline Net Income & $88) \\ \hline \end{tabular} Balance Sheet (in \$-billions)
To provide a step-by-step analysis of the given income statement and balance sheet, I'll break down the information and calculations. However, there seems to be a typo in the provided Net Income value. It should be $88 billion instead of just $88. I will proceed with the assumption that it is indeed $88 billion.
Income Statement:
Calculate Gross Profit:
Revenues - Cost of Goods Sold = Gross Profit
$200 billion - $140 billion = $60 billion
Calculate Operating Income:
Gross Profit - Selling, General, and Administrative Expenses - Research and Development - Depreciation & Amortization = Operating Income
$60 billion - $15 billion - $10 billion - $15 billion = $20 billion
Calculate EBIT (Earnings Before Interest and Taxes):
Operating Income + Other Income = EBIT
$20 billion + $3 billion = $23 billion
Calculate Pretax Income:
EBIT - Interest Expense = Pretax Income
$23 billion - $7.50 billion = $15.50 billion
Calculate Income Tax:
Pretax Income * Tax Rate = Income Tax
$15.50 billion * 0.75 = $11.63 billion
Calculate Net Income:
Pretax Income - Income Tax = Net Income
$15.50 billion - $11.63 billion = $3.87 billion
Balance Sheet:
The balance sheet is not provided, so it's not possible to analyze the assets, liabilities, and equity of the company based on the given information. If you have the balance sheet data, please provide it, and I'll be happy to assist you further.
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In the circular flow of income and expenditure model... A. the level of Income for factors of production used to produce goods and services equals the spending on public goods and services. B. the spending by firms on the factor markets equals the spending by government in the good market. C. the level of taxes collected by government equals government spending on the factors of production to produce public goods and services. D. the level of sales income by firms equals the level of spending by households in the goods market.
Option D is the correct answer. In the circular flow of income and expenditure model, the level of sales income by firms equals the level of spending by households in the goods market.
What is the circular flow of income and expenditure model? The circular flow of income and expenditure is an economic model that depicts the movement of goods and services, factors of production, and income among the main players in an economy.
The four main participants in the circular flow of income and expenditure model are households, businesses, governments, and international participants. Households earn income by selling their labor to businesses, which use it to produce goods and services, which they then sell to households. Business income comes from the sale of goods and services, which are then used to pay wages, rent, and profits to households.
Governments collect taxes and spend on public goods and services, which households and businesses utilize. Lastly, international participants trade goods, services, and capital with domestic participants. In this model, the level of sales income by firms equals the level of spending by households in the goods market.
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Cisco IT Improves Strategic Vendor Management With more than 35,000 employees and hundreds of locations , cach Cisco office has many complex requirements . Although Cisco uses its own products whenever possible , it still has an annual spend of $ 500 million for IT products and services from other companies . The Problem Working with local suppliers , Cisco encountered a number of issues . It was difficult to get formal contracts , support wasn't always there when needed , and there were often disagreements over prices and warranties . Their somewhat haphazard way of soliciting bids resulted in little or no emphasis on aligning with corporate strategy . Cisco needed to unify its vendor management process to gain greater control and reduce costs . The Solution Cisco created the Cisco Vendor Management Organization ( VMO ) a new global IT group within Cisco - to manage strategic vendors to supply hardware infrastructure , software , storage , telecom services , and outsourced services . The VMO was also tasked with providing expertise in process and business development , asset management , and vendor engagement in keeping with Cisco's corporate strategy . The Outcome With standard contracts in place worldwide , Cisco could now manage existing contracts and negotiate new ones more easily . Thanks to the efforts of the VMO , Cisco saved $ 33 million through the first three quarters after its inception and $ 64 million over the life of the contracts put in place during that time ! Cisco has also reduced its number of vendors and has consolidated contracts with small number of strategic vendors to give them more business and reduce Cisco's paperwork . Cisco also works with its strategic vendors to help them develop skills and relationships to increase their value and position in the market , and Cisco is receiving the same type of support from its strategic vendors . By centralizing its outsourcing contracts , Cisco saves $ 11 million per quarter . Lesson Learned When it comes to vendors , less is more : working with a few number of strategic vendors that help a company fulfill its business strategy . This , in turn , creates a tighter connection between the business and IT and results in closer alignment between the two strategies , saving time and money .
please answer the questions
1. How much did Cisco save initially by implementing the VMO ?
2. How has a strategie vendor relationship strategy benefited Cisco ?
3. How much is Cisco saving by centralizing its outsourcing contracts ?
1. Cisco saved 33 million through the first three quarters after its inception and 64 million over the life of the contracts put in place during that time.
2. A strategic vendor relationship strategy has benefited Cisco by allowing the company to work with a small number of vendors to help them develop skills and relationships to increase their value and position in the market.
This strategy has also resulted in a closer alignment between the business and IT, saving time and money.
3. By centralizing its outsourcing contracts, Cisco saves 11 million per quarter.
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Seat has a debt–equity ratio of 1. Its WACC is 10 percent, and its cost of debt is 5 percent. The corporate tax rate is 25 percent.
a) Find cost of equity capital.
b) What is the unlevered cost of equity capital?
c) What would the cost of equity be if the debt–equity ratio was 2
a) The cost of equity capital is 6.25%.
b) The unlevered cost of equity capital is 10%.
c) If the debt-equity ratio was 2, the cost of equity would be 2.5%.
To calculate the cost of equity capital, we can use the formula:
Cost of Equity = Cost of Equity = WACC - (Debt/Equity) * (WACC - Cost of Debt) * (1 - Tax Rate)
Given the information provided:
Debt-Equity Ratio = 1
WACC = 10%
Cost of Debt = 5%
Tax Rate = 25%
a) To find the cost of equity capital:
Cost of Equity = 10% - (1/1) * (10% - 5%) * (1 - 0.25)
Cost of Equity = 10% - 5% * 0.75
Cost of Equity = 10% - 3.75%
Cost of Equity = 6.25%
b) The unlevered cost of equity capital can be calculated by assuming a debt-equity ratio of 0:
Unlevered Cost of Equity = Cost of Equity = WACC
Unlevered Cost of Equity = 10%
c) If the debt-equity ratio was 2:
Cost of Equity = 10% - (2/1) * (10% - 5%) * (1 - 0.25)
Cost of Equity = 10% - 10% * 0.75
Cost of Equity = 10% - 7.5%
Cost of Equity = 2.5%
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Correctly setting prices in the airline industry is challenging. United Airlines has in recent years begun competing with ultra-low cost carriers (ULCC5), airlines which offer limited services: no reserved seats, snacks, drinks, ability to carry on a bag, in-flight entertainment, seats that recline, leg room, and often, on-time arrivals. United's Basic Economy offers a similar level of service at a slightly lower price than normal economy class. In 2019, the company was able to upsell 60 to 70 percent of bookings from basic economy to a standard fare. They also make significant revenues on additional fees. When United introduced Basic Economy fares in 2016, it projected that between fees and upgrades, the program would earn an additional one billion dollars by 2020. To continue to survive, United Airlines will have to carefully manage their pricing process to meet the needs of all the classes of passengers that they serve. 1. Consider the issue of price elasticity for the two broad classes of United's customer base: leisure travelers and business travelers. Is the demand for air travel from each of these customer groups generally elastic or inelastic?
2. As seen above, competition is a big factor in United's pricing decisions. What other factors in the external environment should marketers consider in their flight scheduling and ticket pricing? 3. Consumers can be fickle. Assume competitors change their pricing strategies and consumers abandon United's Basic Economy class. What are three suggestions for ways United might adjust its offerings and pricing in order to gain long-term customer loyalty?
Consider the issue of price elasticity for the two broad classes of United's customer base: leisure travelers and business travelers.
Is the demand for air travel from each of these customer groups generally elastic or inelastic? Price elasticity refers to the extent to which demand for a product rises or falls in response to changes in its price. The concept of price elasticity applies to each class of United's customer base: leisure travelers and business travelers.
The demand for leisure travelers is generally elastic. Leisure travelers have more flexibility in their travel plans and are more sensitive to price changes. As a result, even minor price changes might persuade them to fly with a different airline or at a different time.
Business travelers, on the other hand, have inelastic demand. They're more time-sensitive and have a smaller price range. As a result, they are willing to pay more to arrive at their destination on time, hence they do not typically change airlines based on small price variations.
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Shine Jewelry sells 700 units resulting in $9000 of sales
revenue, $5000 of variable costs, and $1500 of fixed costs,
Contribution margin per unit is
A) $16.43
B) $2.14
C) $12.86
D) $5.71
The contribution margin per unit is $5.71. The correct option is : D) $5.71.
Shine Jewelry sells 700 units resulting in $9000 of sales revenue, $5000 of variable costs, and $1500 of fixed costs.
Find the contribution margin per unit.
The contribution margin is the difference between the sales revenue and variable costs of the product. It shows how much money is left over from the sale of the product to cover fixed costs and profits.
The contribution margin per unit is calculated by subtracting the variable cost per unit from the selling price per unit.
Using the data given, we can calculate the contribution margin as follows:
Contribution margin per unit = Selling price per unit - Variable cost per unit
We are given that the selling price per unit is
$9000/700 units = $12.86 per unit.
We are also given that the variable cost per unit is
$5000/700 units = $7.14 per unit.
Substituting these values into the formula for contribution margin per unit, we get:
Contribution margin per unit = $12.86 - $7.14
= $5.71
The correct option is : D) $5.71.
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