It's important to consider other factors, such as the company's financial health and market conditions, before making any investment decisions.
a. To calculate the growth rate for Dalton Inc., we can use the formula:
Growth rate = Retention rate x Return on equity
Therefore, the growth rate for Dalton Inc. would be:
Growth rate = 0.53 x 0.123 = 0.06519 or 6.52%
b. To calculate the expected return for Dalton's stock, we can use the formula:
Expected return = Dividend yield + Growth rate
Therefore, the expected return for Dalton's stock would be:
Expected return = ($3.50/$39) + 0.06519 = 0.15487 or 15.49%
c. If you require a 13 percent return, you should invest in the firm only if the expected return is greater than 13 percent. Since the expected return for Dalton's stock is 15.49%, which is greater than 13%, you should invest in the firm if you are looking for a return of 13% or higher.
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research shows the worse market conditions are, the more likely executives of a firm are to choose union strategies. a. building b. avoidance c. bargaining d. cooperation
Research shows that the worse market conditions are, the more likely executives of a firm are to choose union bargaining strategies. The answer is c.
Research suggests that during tough economic times, such as recessions or when facing competitive pressures, executives of a firm are more likely to choose bargaining with unions as a strategy to reduce labor costs.
This is because bargaining can result in concessions from the union, such as lower wages, reduced benefits, or increased productivity, which can improve the firm's financial performance.
On the other hand, in good economic conditions, firms are more likely to choose building relationships with unions or cooperation, such as joint training programs or profit-sharing plans, as they may view unions as partners in achieving the firm's objectives. In contrast, avoidance strategies may lead to legal conflicts, while cooperation strategies may be less effective in reducing labor costs.
Therefore, bargaining with unions is a common strategy for firms during tough economic times.
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which of the following is a disadvantage of a sole proprietorship? multiple choice entrenched management. double taxation. unlimited liability. excessive regulation.
The disadvantage of a sole proprietorship is unlimited liability. Option B is correct.
Unlimited liability means that the owner of a sole proprietorship is personally responsible for all debts and legal obligations of the business. This means that if the business incurs a debt that it cannot pay, the owner's personal assets can be seized to satisfy the debt. This puts the owner at risk of losing personal assets such as a house, car, or savings, and can create a significant financial burden for the owner.
Entrenched management, double taxation, and excessive regulation are not disadvantages of a sole proprietorship. Entrenched management refers to a situation where top management has too much power and cannot be easily replaced, but this is not a relevant concern for a sole proprietorship where the owner is also the sole manager.
Double taxation refers to a tax on both corporate profits and dividends to shareholders, but this does not apply to sole proprietorships since they are not separate legal entities from the owner. Excessive regulation can be a concern for businesses in general, but sole proprietorships are typically subject to less regulation than larger corporations. Option B is correct.
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davie inc. has a pre-tax cost of debt of 8.6 percent, a cost of equity of 13.4 percent, and a cost of preferred stock of 8.5 percent. the firm has 240,000 shares of common stock outstanding at a market price of $27 a share. there are 25,000 shares of preferred stock outstanding at a market price of $33 a share. the bond issue has a face value of $540,000 and a market price of 102.1 percent of face value. the company's tax rate is 34 percent. what is the firm's weighted average cost of capital?
The firm's weighted average cost of capital is approximately 10.98%.
How to calculate the value of WACCDavie Inc.'s weighted average cost of capital (WACC) can be calculated using the following formula:
WACC = (E/V * Re) + (P/V * Rp) + ((D/V * Rd) * (1 - T))
where E, P, and D represent the market value of equity, preferred stock, and debt respectively;
Re, Rp, and Rd represent the cost of equity, preferred stock, and debt respectively; V is the total market value of the firm (E + P + D); and T is the tax rate.
First, we calculate the market values:
Equity (E) = 240,000 shares * $27/share = $6,480,000
Preferred Stock (P) = 25,000 shares * $33/share = $825,000
Debt (D) = $540,000 * 102.1% = $551,340 Next, we find the total market value (V):
V = E + P + D = $6,480,000 + $825,000 + $551,340 = $7,856,340
Now, we can calculate the WACC:
WACC = (($6,480,000/$7,856,340) * 13.4%) + (($825,000/$7,856,340) * 8.5%) + ((($551,340/$7,856,340) * 8.6%) * (1 - 34%))
WACC = (0.8247 * 13.4%) + (0.1050 * 8.5%) + (0.0702 * 8.6% * 0.66)
WACC ≈ 10.98%
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A fully amortizing loan has a monthly payment of $1,803. If the interest rate is fixed at 4.75% and the amortization period is 20 years, what is the original loan amount (round to the nearest dollar)?
This fully amortizing loan has a $279,459 initial loan balance.
To calculate the original loan amount for a fully amortizing loan with a monthly payment of $1,803, fixed interest rate of 4.75%, and a 20-year amortization period, we can use the formula for the present value of an annuity:
PV = PMT x ((1 - (1 + r/n)^(-nt)) / (r/n))
Where:
PV = Present value or original loan amount
PMT = Monthly payment
r = Annual interest rate
n = Number of compounding periods per year
t = Total number of payments
Plugging in the given values, we get:
PV = $1,803 x ((1 - 0.384615) / 0.00395833)
PV = $1,803 x (0.615385 / 0.00395833)
PV = $279,458.68
Rounding to the nearest dollar, the original loan amount for this fully amortizing loan is $279,459.
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which of the following are relative measures of sales and profits? (choose every correct answer.) multiple select question. a firm's net profit from lowered prices a firm's growth as compared to other companies a firm's total global sales a firm's increase in sales over the prior year
The relative measures of sales and profits are B. a firm's growth as compared to other companies and D. a firm's increase in sales over the prior year.
Relative measures of sales and profits compare a company's performance to a benchmark, such as industry standards or the performance of other companies. Option B, a firm's growth as compared to other companies, is a relative measure as it involves comparing a company's growth to the growth of its competitors or industry peers. This helps to evaluate a company's performance within its market and industry context.
Option D, a firm's increase in sales over the prior year, is also a relative measure as it compares a company's current sales to its own past performance. This enables the assessment of the company's growth trajectory and can help identify trends or changes in its business performance over time.
Options A and C are not relative measures. Option A, a firm's net profit from lowered prices, is an absolute measure as it indicates a specific amount of profit and does not involve any comparison to other companies or benchmarks. Option C, a firm's total global sales, is also an absolute measure, as it represents the total sales generated by the company without any comparison to other entities or benchmarks. Therefore, the correct option is B. and D.
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which of the following are relative measures of sales and profits? (choose every correct answer.) multiple select question.
A. a firm's net profit from lowered prices
B. a firm's growth as compared to other companies
C. a firm's total global sales
D. a firm's increase in sales over the prior year
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At the start of 1996, the annual interest rate was 8 percent in the United States and 4.8 percent in Japan. The exchange rate was 108 yen per dollar at the time. Mr. Jorus, who is the manager of a Bermuda-based hedge fund, thought that the substantial interest advantage associated with investing in the United States relative to investing in Japan was not likely to be offset by the decline of the dollar against the yen. He thus concluded that it might be a good idea to borrow in Japan and invest in the United States. At the start of 1996, in fact, he borrowed \1,000 million for one year and invested in the United States. At the end of 1996, the exchange rate became 118 yen per dollar. How much profit did Mr. Jorus make in dollar terms? Answer is complete but not entirely correct. Profit $ 143,576,944
Mr. Jorus made a profit of $143,576,944. At the start of 1996, Mr. Jorus, the manager of a Bermuda-based hedge fund, realized that the substantial interest advantage associated with investing in the United States relative to investing in Japan was not likely to be offset by the decline of the dollar against the yen.
He thus decided to borrow \1,000 million for one year and invest in the United States. At the time, the annual interest rate in the United States was 8 percent and the exchange rate was 108 yen per dollar. At the end of 1996, the exchange rate became 118 yen per dollar.
By taking advantage of the interest rate difference and the exchange rate change, Mr. Jorus made a profit of $143,576,944. He was able to take advantage of the interest rate difference and the exchange rate change in order to maximize his profits.
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if the firm's beta is 2.1, the risk-free rate is 7%, and the expected return on the market is 14%, then what would be the firm's cost of equity based on the capm approach? round your answer to two decimal places.
The firm's cost of equity based on the CAPM approach is 21.7% (rounded to two decimal places).
How to calculate firms cost of equity?To calculate the firm's cost of equity based on the CAPM approach, you need to use the following formula:
Cost of equity = Risk-free rate + Beta × (Expected return on the market - Risk-free rate)
Given that the firm's beta is 2.1, the risk-free rate is 7%, and the expected return on the market is 14%, you can plug these values into the formula:
Cost of equity = 7% + 2.1 × (14% - 7%)
Step-by-step calculation:
1. Find the difference between the expected return on the market and the risk-free rate: 14% - 7% = 7%
2. Multiply the beta by the result from step 1: 2.1 × 7% = 14.7%
3. Add the risk-free rate to the result from step 2: 7% + 14.7% = 21.7%
Therefore, the firm's cost of equity based on the CAPM approach is 21.7%. Rounded to two decimal places, the answer is 21.70%.
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For Kittle Co., a stronger Canadian dollar has a stronger influence on Canadian dollar ___ than it does on Canadian dollar ___ Step 2 In the previous stage, you saw that Kittle's operating structure, with low sales in Canada and high cost of materials from Canadian suppliers, was a source of significant economic exposure each quarter. Because of this, Kittle has decided to restructure it's operating structure. The largest part of the restructure involves an increase in U.S. operating expense in order to pay for efforts to increase Canadian sales, while also ordering more supplies from U.S. suppliers instead of Canadian suppliers. This restructuring also includes using more U.S. sources for financing instead of Canadian sources.
A stronger Canadian dollar has a stronger influence on Canadian dollar expenses than it does on Canadian dollar sales for Kittle Co.
Since Kittle Co. has low sales in Canada and high costs of materials from Canadian suppliers, a stronger Canadian dollar would increase the cost of materials and other Canadian dollar expenses, thereby impacting the company's profitability.
However, since the company is restructuring its operations to increase Canadian sales and reduce dependence on Canadian suppliers, the impact of a stronger Canadian dollar on sales may be less significant.
Additionally, by sourcing financing from U.S. sources instead of Canadian sources, the company may be less exposed to fluctuations in the value of the Canadian dollar.
Overall, the restructuring of Kittle Co.'s operating structure may reduce its economic exposure to the Canadian dollar and improve its financial performance in the long term.
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There are a number of reasons why a firm might want to repurchase its own stock. Read the statement and then answer the corresponding question about the company's motivation for the stock repurchase: Smith and Martin Co. 's board of directors has decided to repurchase some of its stock on the open market because the company has received a large, one-time cash flow, and it believes that the company's stock is undervalued. What is the company's motivation for the stock repurchase
Smith and Martin Co.'s motivation for the stock repurchase is to utilize the large, one-time cash flow and take advantage of the undervalued stock.
How can repurchasing their own stocks can benefit them?
By repurchasing its own shares, the company can potentially increase shareholder value and signal confidence in the company's future performance.
By buying back its own stock, the company aims to decrease the number of outstanding shares in the market, which can potentially increase the earnings per share (EPS) and the value of the remaining shares. This can also signal to the market that the company has confidence in its own stock and believes it is a good investment.
Additionally, the company's decision to repurchase its stock may also be influenced by a large, one-time cash flow that the company has received. Instead of using the cash for other purposes such as acquisitions, capital expenditures, or dividend payments, the company has chosen to use the excess cash to buy back its own stock. This can be seen as a way to deploy the cash in a manner that is expected to generate value for the shareholders, by taking advantage of the perceived undervaluation of the stock.
Overall, the company's motivation for the stock repurchase is driven by the belief that the stock is undervalued and the desire to use excess cash in a strategic manner to potentially increase shareholder value. However, it's important to note that stock repurchases can have various implications and considerations, and companies need to carefully assess their financial position, market conditions, and strategic objectives before implementing a stock repurchase program.
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b) Leigh Delight Candy Berhad is choosing between two bonds in which to invest their cash. One is being offered from Hershey's and will mature in 15 years and pay RM40 each quarter. The other alternative is a Mars' bond that will mature in 18 years and pay RM50 each quarter. Compute the present value of each bond if the discount rate is 12% compounded quarterly, and each bond pays RM1,000 at maturity.
Leigh Delight Candy Berhad should invest in the Mars' bond as it has a higher present value than the Hershey's bond at a 12% quarterly compounded discount rate. The present value of the Hershey's bond is RM2,536.74 and the present value of the Mars' bond is RM2,892.01.
What is the present value of Hershey's and Mars' bonds and which one should Leigh Delight Candy Berhad invest in?To compute the present value of each bond, we can use the formula:
PV = (C/r) x [1 - (1 + r)^(-n)]
Where PV is the present value, C is the coupon payment per quarter, r is the discount rate per quarter, and n is the number of quarters until maturity.
For the Hershey's bond, C = RM40, r = 0.03 (12%/4), n = 60 (15 years x 4 quarters per year). Plugging these values into the formula, we get:
PV = (40/0.03) x [1 - (1 + 0.03)^(-60)]
PV = RM2,536.74
So the present value of the Hershey's bond is RM2,536.74.
For the Mars' bond, C = RM50, r = 0.03, n = 72 (18 years x 4 quarters per year). Plugging these values into the formula, we get:
PV = (50/0.03) x [1 - (1 + 0.03)^(-72)]
PV = RM2,892.01
So the present value of the Mars' bond is RM2,892.01.
Therefore, if Leigh Delight Candy Berhad is choosing between these two bonds, they should invest in the Mars' bond as it has a higher present value than the Hershey's bond at a 12% quarterly compounded discount rate.
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Problem 9-34 Risk, Return, and Their Relationship (LG9-3, LG9-4) Consider the following annual returns of Molson Coors and International Paper: Year 1 Year 2 Year 3 Year 4 Molson Coors 17.88 - 8.7 38.0 International Paper 4.8% -17.8 -0.5 26.9 -11.4 - 7.5 Year 5 16.5 Compute each stock's average return, standard deviation, and coefficient of variation. (Round your answers to 2 decimal places.) Molson Coors 11.22 % Average return Standard deviation International Paper 0.40% % % Coefficient of variation Which stock appears better? O International Paper O Molson Coors
Molson Coors has an average annual return of 11.22% and a standard deviation of 19.43%.
The coefficient of variation for Molson Coors is 1.73. International Paper has an average annual return of 0.40% and a standard deviation of 15.69%. The coefficient of variation for International Paper is 39.17.
Based on these calculations, Molson Coors appears to be the better investment option as it has a higher average return and a lower coefficient of variation, indicating a lower risk compared to International Paper.
However, it is important to note that other factors such as market trends and company performance should also be considered when making investment decisions.
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You bought 1,000 shares of Altona Ltd 5 years ago. Over the years you have attended the annual general meetings and carefully read through Altona Ltd’s financial statements. While you have been generally satisfied with the amount of annual dividends, recently you have become a little concerned with declining share prices. You became particularly alarmed when media published several photos showing Altona management’s Hawaiian management retreats. Taking into consideration the management behaviour critically discuss the relationship between a corporation’s shareholders and management. Analyse the problems and costs related to this relationship and explain with example how a company may structure management compensation to mitigate such costs.
Problems and costs related to this relationship include conflicts of interest and impact on the company's reputation. Companies may design management compensation in a way that aligns it with shareholders' interests in order to reduce these costs. They might, for instance, link executive compensation to performance measures.
The relationship between a corporation's shareholders and management is an important one that can significantly impact the performance and success of the company. In this case, the declining share prices and management's behaviour at Hawaiian retreats are cause for concern.
Shareholders entrust management with their investment and expect them to act in the best interest of the company and its shareholders. However, when management engages in lavish spending and fails to prioritize shareholder value, it can lead to a breakdown in trust and a decline in share prices.
One problem related to this relationship is the potential for conflicts of interest. For example, management may prioritize their own compensation and benefits over the needs of shareholders. This can lead to a misalignment of interests and a lack of focus on long-term company performance.
Another cost related to this relationship is the impact on the company's reputation. When management engages in behaviour that is perceived as excessive or inappropriate, it can damage the company's brand and make it less attractive to investors and customers.
To mitigate these costs, companies may structure management compensation in a way that aligns their interests with those of shareholders. For example, they may tie executive compensation to performance metrics such as earnings per share or return on investment. This incentivizes management to focus on long-term growth and profitability rather than short-term gains.
In addition, companies can establish strong governance practices, including independent board oversight and regular reporting and disclosure, to ensure that management is accountable to shareholders and acting in their best interest.
Overall, the relationship between a corporation's shareholders and management is critical to the success of the company. By prioritizing transparency, accountability, and alignment of interests, companies can foster a positive and productive relationship that benefits both shareholders and management.
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under the equipment breakdown protection coverage form, what condition will apply if the covered equipment is subject to a dangerous exposure?
If the covered equipment is subject to a dangerous exposure, the condition of the equipment breakdown protection coverage form is that the damage must be caused by a sudden and accidental physical event.
This means that the event must be sudden and unexpected, and the damage must be caused by a physical force. Examples of such events include explosions, short circuits, electrical arcing, steam explosions, and mechanical breakdowns.
The coverage form also states that the event must not be due to the intentional acts of any insured person, and the event must occur during the policy period. This type of coverage is beneficial for businesses, as it can help to cover the cost of repairs or replacement of the damaged equipment.
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01 is the trend of total liabilities of significance in analyzing the financial condition of a business? If so, what other trends should be used in connection therewith? [10 Marks) er:
Yes, the trend of total liabilities is significant in analyzing the financial condition of a business as it indicates the amount of debt that the business has taken on.
However, it should be analyzed in conjunction with other trends such as revenue, profitability, and cash flow. These trends provide a more comprehensive picture of the financial health of the business and can help identify any potential risks or opportunities for growth.
It is important to analyze trends over a period of time to identify any patterns or changes in the business's financial performance.
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a vendor that has only a post-office box address could be a red flag of a phantom vendor. (True or False)
The given statement: a vendor that has only a post-office box address could be a red flag of a phantom vendor is TRUE.
A vendor that has only a post-office box address could be a red flag of a phantom vendor. Phantom vendors are fictitious vendors that are created by fraudsters to divert funds from legitimate transactions to their own accounts.
They typically use a fake or inactive vendor name, and often use a post-office box address as a way to hide their true identity.
In some cases, a post-office box address may be legitimate, such as for small businesses or home-based businesses. However, in cases where a vendor has no physical address or only a post-office box address, it may be an indication of fraudulent activity.
Other red flags of phantom vendors include invoices that are not supported by purchase orders, invoices that have vague or incomplete descriptions of goods or services, and invoices that have unusual payment terms or requests for payment to a different account than usual.
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the external entity from whom an organization purchases inventory and raw materials is called a . (check all that apply.)
The external entity from whom an organization purchases inventory and raw materials is called a supplier or vendor.
A supplier or vendor is a company or individual that provides goods or services to another company or organization. In the context of inventory and raw materials, a supplier is a company that supplies the necessary materials for an organization to produce its products or deliver its services.
These materials may include raw materials, components, parts, or finished goods. The relationship between a supplier and an organization is typically governed by a contract or purchase agreement, which specifies the terms and conditions of the transaction, including price, quantity, quality, and delivery schedule.
Effective supplier management is critical to the success of an organization, as it ensures a reliable and cost-effective supply of materials and helps to maintain quality and consistency in the production process.
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the death benefit of a variable life policy must be calculated at least
The death benefit of a variable life policy must be calculated at least annually. A variable life policy is a type of permanent life insurance that offers both a death benefit and a cash value component, with the latter being invested in various investment options.
Investment options such as stocks, bonds, or mutual funds. The death benefit provides financial protection to the policyholder's beneficiaries upon their death. Since the cash value component of a variable life policy is subject to market fluctuations.
The policy's overall value can increase or decrease depending on the performance of the chosen investments. To ensure that the death benefit remains sufficient and up-to-date, insurance companies are required to recalculate it at least once a year. During the annual calculation, the insurance company will evaluate the current cash value of the policy and the investments' performance.
Based on these factors, they will adjust the death benefit accordingly. This ensures that the policyholder's beneficiaries will receive a minimum guaranteed death benefit, as stated in the policy's terms and conditions, regardless of market performance.
In summary, the death benefit of a variable life policy must be calculated at least annually to account for changes in the policy's cash value and the performance of the underlying investments. This guarantees that beneficiaries receive the minimum death benefit specified in the policy, providing financial security and protection for the policyholder's loved ones.
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(Cost of preferred stock) The preferred stock of Texas Southern Power Company sells for $41 and pays $7 in dividends. The net price of the security after issuance costs is $36.08 . What is the cost of capital for the preferred stock?
The cost of capital for Texas Southern Power Company's preferred stock is approximately 29.07%.
To determine the cost of capital for Texas Southern Power Company's preferred stock, we need to consider the dividend paid, the selling price, and the net price after issuance costs. Let's follow these steps:
1. First, we need to calculate the dividend yield, which is the annual dividend divided by the stock's selling price. In this case, the dividend is $7, and the selling price is $41:
Dividend Yield = Dividend / Selling Price = $7 / $41 ≈ 0.1707 or 17.07%
2. Next, we need to account for the issuance costs. To do this, we'll calculate the difference between the selling price and the net price after issuance costs, then divide by the selling price:
Issuance Cost Percentage = (Selling Price - Net Price) / Selling Price = ($41 - $36.08) / $41 ≈ 0.1200 or 12%
3. Finally, we'll adjust the dividend yield to account for the issuance costs. This will give us the cost of capital for the preferred stock:
Cost of Capital = Dividend Yield + Issuance Cost Percentage = 17.07% + 12% = 29.07%
Therefore, the cost of capital for Texas Southern Power Company's preferred stock is approximately 29.07%. This value represents the required return on investment for investors who purchase the preferred stock, taking into consideration the dividend payments and the costs associated with issuing the stock.
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If today €1 exchanges for ¥135, and yesterday €1 exchanged for ¥130, then from yesterday to today:
A. yen depreciated by 5%.
B. yen depreciated by 3.85%.
C. yen appreciated by 5%.
D. euro depreciated by 3.7%.
From yesterday to today, yen depreciated by 3.85%. The correct option is b.
Difference = Today's rate - Yesterday's rate
Difference = ¥135 - ¥130
Difference = ¥5
the percentage change.
Percentage change = (Difference / Yesterday's rate) × 100
Percentage change = (¥5 / ¥130) × 100
Percentage change ≈ 3.85%
From yesterday to today, the yen depreciated by 3.85%. So, the correct answer is:B. yen depreciated by 3.85%.
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burke's corner currently sells blue jeans and t-shirts. management is considering adding fleece tops to its inventory to provide a cooler weather option. the tops would sell for $46 each with expected sales of 4,650 tops annually. by adding the fleece tops, management feels the firm will sell an additional 320 pairs of jeans at $58 a pair and 455 fewer t-shirts at $19 each. the variable cost per unit is $29 on the jeans, $9 on the t-shirts, and $24 on the fleece tops. with the new item, the depreciation expense is $26,000 a year and the fixed costs are $79,500 annually. the tax rate is 24 percent. what is the project's operating cash flow?
Burke's corner currently sells blue jeans and t-shirts and the project's operating cash flow is $27,010.80.
How to find the project's operating cash flowTo calculate the project's operating cash flow, we need to find the net income and add back the depreciation expense.
First, let's calculate the revenues and variable costs for each item:
Fleece tops revenue: 4,650 tops * $46 = $213,700
Fleece tops variable cost: 4,650 tops * $24 = $111,600
Additional jeans revenue: 320 pairs * $58 = $18,560
Additional jeans variable cost: 320 pairs * $29 = $9,280
Reduced t-shirts revenue: 455 shirts * $19 = $8,645
Reduced t-shirts variable cost: 455 shirts * $9 = $4,095
Now, let's find the net income:
Total revenue: $213,700 (fleece tops) + $18,560 (jeans) - $8,645 (t-shirts) = $223,615
Total variable cost: $111,600 (fleece tops) + $9,280 (jeans) - $4,095 (t-shirts) = $116,785
Total fixed cost: $79,500
Depreciation expense: $26,000
Operating income (before taxes): $223,615 - $116,785 - $79,500 - $26,000 = $1,330
Taxes: $1,330 * 24% = $319.20
Net income: $1,330 - $319.20 = $1,010.80
Operating cash flow:
Net income + Depreciation expense = $1,010.80 + $26,000 = $27,010.80
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Question 3 (13 marks) a. The maturity of a futures contract on a stock market index is 1 year. The multiplier for the futures contract $50. The current level of the index is 30,000. The risk-free rate is 0.5% per month and dividend yield on the stock market index is 0.3% per month. The initial margin requirement is 10%. i. What is the parity value of the futures price now? (3 marks) ii. Assume the futures contract is fairly priced. How much initial margin you need to deposit if you long 1 contract? (2 marks) iii. Calculate the two-month holding-period return for your long position in the futures contract if the stock market index increases to 31,000 two months later. Assume the futures contract keeps being priced fairly. (5 marks) b. William sells six July futures contracts on coffee. Each contract is for the delivery of 37,500 pounds. The current futures price is $2.2565 per pound. The initial margin is $9,900 per contract and the maintenance margin is $9,000 per contract. What is the futures price per pound that would lead a margin call? (3 marks)
A(i) The parity value of the futures price now is $30,303.03.
(ii) You would need to deposit 10% of $1,500,000, which is $150,000, as initial margin.
(iii) The holding-period return is 0.0128 or 1.28%.
B) The futures price per pound falls to -$1.18, a margin call would be triggered.
i.F = S0 * e^((r-d)*T)where F is the futures price, S0 is the current spot price of the index, r is the risk-free rate, d is the dividend yield, and T is the time to maturity of the futures contract in years.
In this case, F = S0 * e^((r-d)*T) = 30,000 * e^((0.005-0.003)*1) = 30,303.03.Therefore, the parity value of the futures price now is $30,303.03.
ii. The initial margin requirement is 10% of the contract value, which is $50 * 30,000 = $1,500,000. Therefore, if you long 1 contract, you would need to deposit 10% of $1,500,000, which is $150,000, as initial margin.
iii. The two-month holding-period return for a long position in the futures contract can be calculated using the formula:
HPR = (F1 - F0 + D) / (F0 + IM)
where HPR is the holding-period return, F1 is the futures price at the end of the holding period, F0 is the initial futures price, D is the total dividend received during the holding period, and IM is the initial margin.
In this case, F0 = 30,303.03, F1 = 31,000, D = 0.003 * 2 * 30,000 = $1,800, and IM = $150,000.
Therefore, the holding-period return is:
HPR = (31,000 - 30,303.03 + 1,800) / (30,303.03 + 150,000) = 0.0128 or 1.28%.
b. To calculate the futures price per pound that would lead to a margin call, we need to use the formula:
F = (MM - V) / Q
where F is the futures price per pound that would lead to a margin call, MM is the maintenance margin per contract, V is the value of the contract, and Q is the quantity of the underlying asset per contract.
In this case, MM = $9,000, V = $2.2565 * 37,500 = $84,468.75, and Q = 37,500. Therefore,
F = (9,000 - 84,468.75) / 37,500 = -$1.18 per pound.
This means that if the futures price per pound falls to -$1.18, a margin call would be triggered. However, it's worth noting that futures prices cannot be negative in reality, and this is only a theoretical calculation based on the formula.
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question content area when job 117 was completed, direct materials totaled $13,191; direct labor, $20,520; and factory overhead, $15,145. a total of 1,576 units were produced at a per-unit cost of a.$31 b.$48,856 c.$1,576 d.$33,711
a. $31.
To calculate the per-unit cost when job 117 was completed, we'll consider direct materials, direct labor, and factory overhead in the calculation.
Here's the step-by-step explanation:
1. First, add the costs of direct materials ($13,191), direct labor ($20,520), and factory overhead ($15,145) to find the total cost.
Total cost = $13,191 + $20,520 + $15,145 = $48,856
2. Next, divide the total cost by the number of units produced (1,576 units) to find the per-unit cost.
Per-unit cost = $48,856 / 1,576 = $31
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Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and sell more product. The machine cost $1.81 million and create incremental cash flows of $538,260.00 each year for the next five years. The cost of capital is 11.92%. What is the internal rate of return for the J-Mix 2000? Submit Answer format: Porcentage Round to: 2 decimal places (Example: 9.24%, % sign required. Will accept decimal format rounded to 4 decimal places (ex: 0.0924)
According to the question, the internal rate of return for the J-Mix 2000 is 10.32%.
What is rate of return?Rate of return is a measure of the profitability of an investment. It is usually expressed in terms of a percentage of the original investment. Rate of return is calculated by taking the gain from an investment and dividing it by the original cost of the investment. It can also be calculated by taking the income from the investment and dividing it by the original cost of the investment.
This is calculated using the formula for internal rate of return: IRR = (C1 / CF0)1/n – 1
Where C1 is the incremental cash flow of $538,260.00, CF0 is the initial investment of $1.81 million, and n is the number of years, which is 5.
IRR = (538,260.00 / 1,810,000)1/5 – 1
IRR = 0.1032
IRR = 10.32%
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True or False?: Tax benefits generated by the sale of an asset must be excluded from DCF analysis since they do not result in actual cash coming into the company. Multiple Choice True False
False. Tax benefits generated by the sale of an asset should not be excluded from DCF analysis.
Although they do not result in actual cash coming into the company, they still have an impact on the company's cash flows and therefore should be considered in the analysis.
Tax benefits can reduce the company's tax liability, which in turn increases the company's after-tax cash flows. This can have a positive impact on the net present value (NPV) of the project being evaluated.
Therefore, tax benefits should be included in the calculation of cash flows when performing a DCF analysis.
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parallel pricing-the tendency for companies in an industry to move prices more or less simultaneously-is typically an indicator of:
Parallel pricing, which is the tendency for companies in an industry to move prices more or less simultaneously, is typically an indicator of market competition and the use of similar pricing strategies among competitors.
Companies may change their prices in an attempt to preserve their share of the market and profitability based on pricing decisions made by their rivals. However, this can lead to price wars and decreased profitability for all companies involved. Therefore, it is important for companies to carefully consider their pricing strategies and competitive environment to avoid engaging in parallel pricing.
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Activity Description Each student needs to select a local or regional (GCC) entrepreneurial business project and discuss the followings: Each student is requested to complete the following tasks: - Select a local or regional (GCC) entrepreneurial business project Conduct a brief summary of the business Entrepreneur background (Personal Characteristics). Develop the business main constraints and challenges. Analyze the business opportunities. Link theories to practice and own suggestions to improve. Use supporting diagrams.
The activity description requires students to select an entrepreneurial business project from the local or regional (GCC) area and complete a series of tasks.
Firstly, they are required to conduct a brief summary of the business, including information about the entrepreneur's background and personal characteristics.
Secondly, they need to identify and develop the main constraints and challenges faced by the business.
Thirdly, they must analyze the business opportunities that exist within the chosen industry or market.
Fourthly, they must link theories to practice and provide their own suggestions for how the business could improve.
Finally, they are requested to use supporting diagrams to help illustrate their findings.
This assignment provides an excellent opportunity for students to gain a deeper understanding of entrepreneurship, and to develop their critical thinking and analytical skills by applying theoretical concepts to real-world situations.
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which of the following is an incorrect statement? a. goods or services are perceived favorably by customers if the ratio of perceived benefits to price to the customer is high. b. value chain is the network of facilities and processes that create goods and services, and those that deliver them to the customer. c. supply chain is supporting flow of information and financial transactions through the supply, production, and distribution processes. d. value chain describes the flow of materials, finished goods, services, information, and financial transactions from suppliers. e. value chain does not enhance values to customers.
The incorrect statement is option e, which states that value chain does not enhance values to customers.
Value chain is a series of activities that organizations perform to create and deliver products or services to customers. It includes the flow of materials, information, and financial transactions from suppliers to the organization, and from the organization to the end customers. The main goal of the value chain is to enhance the value of the products or services to the customers, by providing them with the required quality, features, and benefits at an affordable price.
Value chain activities are categorized into primary activities and support activities. Primary activities are directly involved in the creation and delivery of products or services, while support activities enable the primary activities to be performed efficiently and effectively. By optimizing the value chain activities, organizations can improve their competitiveness, profitability, and customer satisfaction.
Therefore, option e is incorrect because enhancing customer value is one of the main objectives of value chain management.
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The basic models of acquisition include a corporation acquiring a target corporation's: (Check all that apply.)
A. stock.
B. assets.
C. cash.
D. debt.
A. stock and B. assets are the basic models of acquisition that a corporation can acquire from a target corporation. C. cash and D. debt are not typically acquired in an acquisition,
as cash is a liquid asset that the target corporation may need to continue operating, and debt is a liability that the acquiring corporation would not want to take on. Based on your question, the basic models of acquisition for a corporation acquiring a target corporation include:
A. stock.
B. assets.
These two options are commonly involved in acquisitions. A corporation can either acquire the target corporation's stock, giving them ownership and control, or they can acquire the target's assets, which can include property, equipment, and intellectual property. While cash and debt can be involved in acquisition transactions, they are not considered basic models of acquisition.
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A. stock and B. assets are the basic models of acquisition that a corporation can acquire from a target corporation. C. cash and D. debt are not typically acquired in an acquisition,
As cash is a liquid asset that the target corporation may need to continue operating, and debt is a liability that the acquiring corporation would not want to take on. Based on your question, the basic models of acquisition for a corporation acquiring a target corporation include:
A. stock.
B. assets.
These two options are commonly involved in acquisitions. A corporation can either acquire the target corporation's stock, giving them ownership and control, or they can acquire the target's assets, which can include property, equipment, and intellectual property. While cash and debt can be involved in acquisition transactions, they are not considered basic models of acquisition.
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Q2what value had freshippo created for its customers
Freshippo's emphasis on high-quality products, convenience, and innovative use of technology has helped to create significant value for its customers, which has contributed to its rapid growth and success in the highly competitive Chinese retail market.
How Freshippo has created significant value for its customers?Freshippo, also known as Hema, has created significant value for its customers by revolutionizing the grocery shopping experience in China through the integration of online and offline channels, offering high-quality products, and providing convenient and fast delivery options.
One of the key value propositions of Freshippo is its emphasis on fresh and high-quality products, which are sourced directly from producers and suppliers, and delivered to stores on a daily basis. This allows customers to purchase fresh products that are often cheaper than those found in traditional supermarkets.
Another major value proposition is the integration of online and offline channels, which allows customers to shop for groceries online and have them delivered to their doorstep within 30 minutes, or pick them up at the store. This is particularly appealing to time-pressed urban consumers, who value convenience and fast service.
Moreover, Freshippo has also created value for its customers through its innovative use of technology, such as mobile payment systems and facial recognition technology, which simplifies the payment process and enhances security.
Overall, Freshippo's emphasis on high-quality products, convenience, and innovative use of technology has helped to create significant value for its customers, which has contributed to its rapid growth and success in the highly competitive Chinese retail market.
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Lenders look at a HELOC balance of less than $50,000 as if ________________.It were a credit cardIt were an assetIt were a paid mortgageIt were cash
Lenders look at a HELOC balance of less than $50,000 as if it were a credit card.
Risk assessment: Lenders evaluate loans based on the level of risk involved. HELOC balances of less than $50,000 are generally considered lower-risk compared to larger balances because they represent a smaller amount of debt.
Lenders view smaller balances as more manageable and less likely to result in default, compared to larger balances that may pose higher risk.
Credit utilization: Similar to credit cards, lenders consider the utilization rate of a HELOC balance. Utilization rate is the percentage of available credit that is being utilized. A HELOC balance of less than $50,000 may be seen as similar to a credit card balance in terms of credit utilization.
A lower HELOC balance may indicate that the borrower is not utilizing a significant portion of their available credit, which can be viewed positively by lenders as it demonstrates responsible borrowing behavior.
Repayment capacity: Lenders also assess a borrower's ability to repay the loan. With a HELOC balance of less than $50,000, the monthly payment required may be relatively smaller compared to larger balances.
This may make it easier for borrowers to meet their repayment obligations and lenders may view it as a positive factor in their assessment.
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