The statement "The receipt of dividends from long-term investments in stock is classified as a cash outflow from financing activities" is False.
A stock, also referred to as equity, is a share in the ownership of a business. It is a unit of ownership in a corporation or a financial asset representing an ownership interest. The holder of a stock is entitled to receive a share of the corporation's assets and earnings.
Cash flow statement:It is a statement that depicts how a company's cash is generated and spent. It records all the inflow and outflow of cash in a particular financial period. The cash flow statement is separated into three distinct parts:Operating activities: Activities that generate the company's revenueInvesting activities: Activities that involve long-term investments
Financing activities: Activities that involve long-term liabilities and equityThe receipt of dividends from long-term investments in stock is classified as a cash inflow from investing activities. When it comes to the cash flow statement, dividends received are classified as a cash inflow from investing activities rather than a cash outflow from financing activities.
As a result, the given statement is incorrect and the right answer is False.
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Strengths:
Shoprite prioritises organic goods compared to other discount stores
Shoprite provides other amenities such as pharmacies and liquor stores
Shoprite offers a large variety of products, and product mix options that cater to various customer segments in the retail industry
Shoprite’s lowest price promise provides customers with the lowest prices in quality food, as well as other products -such as liquor and medication, as well as in-store services that provide customers with a convenient shopping experience
Shoprite has strong brand recognition
Weaknesses:
The business model of Shoprite Holdings Limited can be easily imitated by competitors
Shoprite faces difficulties in sustaining its pharmacy business
ShopRite has limited retail formats, specifically in South Africa, and an increased dominance of companies like Amazon -that have a strong online presence- pose a threat to both physical and online stores.
Shoprite Holdings history of coming up with new innovations, and subsequently driving down prices in the supply chain has resulted in a low loyalty among its suppliers
Customers are not able to easily navigate Shoprite Holdings website and find desired information in just a few clicks
One thing to take note is
that a customer is not able to navigate easily and find the information they are looking for with a
few clicks.
One thing to take note is
that a customer is not able to navigate easily and find the information they are looking for with a
few clicks.
One thing to take note is
that a customer is not able to navigate easily and find the information they are looking for with a
few clicks.
Opportunities:
Increased demand for organic food segments
e-retailing and retail franchising
Shoprite can use advances in digital technology to deliver more value to customers
Shoprite Holdings can capitalise on the accelerated technological innovations and advances -that are improving industrial productivity- to significantly venture into adjacent products.
Social commerce can be used to promote and sell Shoprite Holdings products and services
Threats:
Dedicated stores for organic products, pharmacies, toy stores, etc
Highly competitive market in food retail business
Stores with greater online presence
Changing demographics can pose a threat to Shoprite Holdings Limited as people are becoming more open to experimentation, and thus less brand loyal
Commoditization of the product segment
Using the SWOT analysis above develop a SPACE Matrix for Shoprite Holdings Limited. Include at least 4 variables that fit under the four dimensions, namely, financial strength, competitive advantage, environmental stability, and industry strength. Then allocate a value ranging from 1 (worst) to 6 (best) to each of the variables.
SPACE matrix is an analytical technique utilized in strategic management and planning to decide on the business direction that the company should go. In creating the SPACE Matrix for Shoprite Holdings Limited, the first step is to allocate the four dimensions of the matrix: environmental stability, industry strength, competitive advantage, and financial strength.
Below is the table showing the variables and the values for the four dimensions of SPACE Matrix for Shoprite Holdings Limited: Financial Strength (FS) Industry Strength (IS) Environmental Stability (ES) Competitive Advantage (CA)
1. Business Model easily imitated by competitors (6)
2. Difficulties in sustaining pharmacy business(3)
3. Limited retail formats(4)
4. History of low loyalty among suppliers(3)
Total 6 3 4 3 = 16
1. Increased demand for organic foods(6)
2. Highly competitive food retail business(5)
3. Stores with greater online presence(2)
4. Changing demographics(2)
Total 6 5 2 2= 15
1. Dedicated stores for organic products(2)
2. Shops like Amazon with strong online presence(3)
3. Commoditization of product segment(5)
Total 2 3 5 1 = 11
1. Shoprite prioritizes organic goods compared to other discount stores(6)
2. Provides other amenities such as pharmacies and liquor stores(4)
3. Offers a large variety of products that cater to various customer segments(5)
4. Strong brand recognition(6)
5. Lowest price promise
Total 6 4 5 6 = 21
From the calculation of the sum of total values of each dimension, it can be observed that the Financial Strength is in the average range while Industry Strength and Competitive Advantage dimensions are in the high range, and Environmental Stability is in the low range. It indicates that Shoprite Holdings Limited is strong enough to compete in the food retail market despite its weaknesses.
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Problem-Solving Case: Fitting in with an Established Team The Cleveland Clinic in Ohio is one of the country's largest hospitals, serving more than 6.6 million patients a year in nine regional hospitals and 18 family health centers. Medical care, research, and education are its main objectives, along with the provision of excellent and affordable care. If you worked at the Cleveland Clinic as the supervisor of a team of nurses in a busy 76 PART TWO: Modern Supervision Challenges each candidate, you've selected Enrique to be the newest member of the team. He is younger and less experienced than the thre department, one day you might face a situation like the following: After a long hiring process, including a group interview with other nurses, who are all women, but he impressed you with his willingness to learn and his ability to speak fluent Spanish Messa 1. which will be helpful in working with many of the clinic's patients. 2. schedules, preparing patient reports, dealing with insurance companies, and helping the head of the clinic with a project to d After hosting a group lunch to welcome Enrique on his first day, you have happily gone back to your regular work overseeing itize all the patients' records. You've asked your three other nurses to show Enrique the ropes and have told him to come to you with any questions his colleagues can't answer. work with the patients. He is caring and empathic, and his Spanish-speaking skills have helped resolve many otherwise diffic Everything seems to be going well for several weeks, and you've heard good things from the clinic's doctors about Enrique's conversations. Everyone seems to like him. You've noticed that Enrique doesn't often join in the good-natured teasing the other nurses use to let off tension during the day, but he seems to be adjusting well and always assures you, when you have a chance to ask him, that things are "fine." One evening after the last patient has left, however, one of the other nurses comes to your office. "I'm a little uncomfortable about this," she says, "but the three of us have discussed what to do and we decided I should talk to you about Enrique." It seems, she says, that Enrique prefers to work only with the Spanish-speaking patients, even if one of the other nurses has already been assigned to them. He still hasn't mastered the clinic's patient records system and often must ask for help with basic tasks like setting up follow-up appointments and filing prescriptions. He takes his breaks and meals alone and never offers to change shifts if someone needs to do so. "We wonder whether we should have agreed to hire him," your subordinate tells you. "He's just not fitting in." You promise to think the situation over, realizing you need to speak to Enrique and making a note to sit down with him in the next couple of days. The following morning, however, Enrique comes to see you first thing. You offer him a seat and close your door. "I like my job," he says, "but I don't know what to do. The other nurses aren't helping me very much, and I don't think t me." After reading the case, answer the following questions. Your responses should be typed directly into this assignment folder. You can also type your responses in Word.doc and then cut and paste your responses to the assignment folder. 1. What is the problem as Enrique probably sees it? 2. What do the other nurses think is the problem? 3. What is likely the real problem or problems with this team? Explain.
1. What is the problem as Enrique probably sees it?As Enrique has come to the supervisor to express his discomfort at work, it is evident that he is facing some issues. He has stated that the other nurses are not helping him much, and he does not think that they like him.
He may see the problem as a lack of support from his colleagues, which is making it difficult for him to fit in with the team.
2. What do the other nurses think is the problem?
The other nurses have discussed that Enrique prefers to work only with the Spanish-speaking patients, even if another nurse has already been assigned to them. Additionally, he hasn't mastered the clinic's patient records system and often must ask for help with basic tasks like setting up follow-up appointments and filing prescriptions. He takes his breaks and meals alone and never offers to change shifts if someone needs to do so. Therefore, the other nurses think that he is not fitting in, and his behavior is leading to problems in the team.
3. What is likely the real problem or problems with this team?
Explain. The real problem with this team may be a lack of communication. The supervisor assumed that the other nurses would show Enrique the ropes and help him settle in. Still, it seems that they have not done so effectively. Therefore, the real problem with this team is likely a lack of communication and support, which is impacting Enrique's ability to integrate into the team effectively.
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A partner could invest Accounts Receivable into a partnership. True False
The statement "A partner could invest Accounts Receivable into a partnership" is False.
Accounts receivable is an asset that represents the amount of money owed to a company by its customers for goods or services provided on credit. It is not an investment that can be contributed to a partnership. In a partnership, partners typically contribute capital in the form of cash, property, or other tangible assets. Accounts receivable would remain as an asset of the company, and the partnership agreement would govern how the company's assets, including accounts receivable, are utilized within the partnership structure.
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Describe what Temporary and Permanent Accounts are. How are they different? For a Small Business Company what are examples of temporary and permanent accounts?
Describe how the two accounts are treated differently in the closing period entries. Why?
Temporary accounts are those accounts that are used to record the transactions for a specific time frame. They are opened at the start of an accounting period and then closed at the end of the same accounting period.
On the other hand, Permanent accounts are accounts that continue to exist beyond the current accounting period. They are not closed at the end of each accounting period. Instead, their balances are carried forward to the next period. Some examples of temporary accounts include sales revenue, expenses, gains, losses, and dividends. Examples of permanent accounts include assets, liabilities, and equity.
For a small business, examples of temporary accounts include sales revenue, rent expenses, wages expenses, office supplies expenses, and advertising expenses. Examples of permanent accounts include cash, accounts receivable, accounts payable, building, land, and equity.
During the closing period entries, temporary accounts are closed to zero balance. This is done to prepare the accounts for the next accounting period. Permanent accounts are not closed, and their balances are carried forward to the next accounting period.
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a) What should be included in a good questionnaire? Discuss briefly.
b) Bot-tola Mobile Phone Inc. has recently faced a challenge to retain its customer due to cut-throat competition in the industry. As a researcher of the company, the management has asked you to prepare a questionnaire in which the basic problems regarding customer churn can be identified. Design the questionnaire and recommend accordingly.
a) A good questionnaire should have a clear and concise structure, appropriate question types, and relevant questions that provide valuable insights into the research topic. A few things that can be included in a good questionnaire are:
1. Introduction: A brief introduction about the purpose of the questionnaire and what information is being collected.
2. Demographic Questions: Age, gender, income, education, employment, etc. This information helps to group the responses and analyze them better.
3. Multiple-choice Questions: Provide a set of options for respondents to choose from. This type of question is easy to answer and analyze.
4. Likert Scale Questions: A scale that measures the degree of agreement or disagreement to a statement. This type of question measures attitudes, perceptions, and opinions.
5. Open-Ended Questions: Allows respondents to give detailed answers to a particular question. This type of question provides insights into respondents' thoughts and experiences.
b) Here is a questionnaire designed for identifying the problems regarding customer churn in Bot-tola Mobile Phone Inc.
1. What is the frequency of your mobile phone usage?
2. How long have you been using our services?
3. Do you think our services match your expectations?
4. Have you ever faced any issues while using our services?
5. How do you compare our services with our competitors?
Based on the questionnaire, the management can analyze the responses and identify the root cause of customer churn. They can come up with the necessary strategies to retain the customers and improve the overall business performance.
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Underlying earnings may be defined as earnings: that include non-recurring components. net of capital expenditures needed to keep the business productive. that exclude non-recurring components.
Underlying earnings are a key financial metric used to provide a clearer view of a company's financial performance by excluding non-recurring components from the calculation. This allows investors and analysts to better evaluate the ongoing operations and financial health of the business.
Underlying earnings can be defined as earnings that exclude non-recurring components. This means that the calculation of underlying earnings will take into account all the recurring expenses and revenue streams that a business has on an ongoing basis. This figure is used to provide a clearer view of the company's financial health and performance.It is important to note that underlying earnings may still include expenses that are required to keep the business productive, such as capital expenditures. These expenses are considered recurring and necessary to the operation of the business.On the other hand, non-recurring components are expenses or revenues that are not part of the company's ongoing operations, such as one-time gains or losses from the sale of assets. These non-recurring components can have a significant impact on a company's reported earnings, and excluding them can provide a more accurate picture of the company's underlying financial performance.For more questions on financial metric
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Compare and contrast the related concepts of delegation, empowerment and employee engagement.
Delegation, empowerment, and employee investment engagement are three related concepts that can increase job satisfaction, productivity, and organizational effectiveness. These concepts are discussed.
Delegation is a process in which managers delegate tasks and responsibilities to their subordinates. It is an important management practice that enables employees to gain new skills, experience, and knowledge. It involves selecting a suitable person for a particular job.
Giving them authority and responsibility for the task, and providing them with the necessary resources to complete it effectively. Delegation is a vital part of management since it helps to distribute workload, develop employees' skills, and ensure that work is completed on time. EmpowermentEmpowerment is a process in which employees are given the authority to make decisions and take action within their job role. This enables employees to feel more confident and motivated, resulting in better job performance and increased productivity.
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Below are selected finisnciai data on four different firms, Use the Dupont equation to identify why the ROEs of the four firms are different. Which of the foliowing stafements is true The ROE for firm B is tigher than foe firm D because B uses more leverage. Ii. The ROE for tom him higher than for fim B because A has higher asset turnover. Whithe ROE for firm O is higher thart for frm C because this move profitabile.
The ROE for firm O is higher than that of firm C because it is more profitable.
The DuPont equation is used to identify why the ROEs of four different firms are different. The following are the selected financial data for the four firms
:ROE = Net Income / Shareholder's Equity
Return on Equity (ROE) = Profit Margin (Net Income / Sales) × Asset Turnover (Sales / Assets) × Financial Leverage (Assets / Equity)
Let's evaluate each statement one by one to determine whether it is true or false.
i. The ROE for firm B is higher than for firm D because B uses more leverage.
This statement is true. The ROE formula is a product of three key ratios, which include profit margin, asset turnover, and financial leverage. Financial leverage is measured by the company's debt-to-equity ratio. Firms that use more leverage will have a higher ROE. Therefore, the ROE for firm B is higher than that of firm D because B uses more leverage.
ii. The ROE for firm A is higher than for firm B because A has higher asset turnover. This statement is false. Asset turnover is measured by sales divided by assets. It indicates how efficiently a company is using its assets to generate sales. A high asset turnover ratio implies a better utilization of the company's assets. Asset turnover affects ROE, but it doesn't always imply a higher ROE. Other factors, such as profit margins and financial leverage, can affect the ROE of a company. Therefore, the ROE for firm A is not higher than that of firm B because A has higher asset turnover.
iii. The ROE for firm O is higher than for firm C because this move profitable. This statement is true. Profit margin is a measure of how efficiently a company generates profits from its sales. It is the difference between sales and costs divided by sales. Profitable firms usually have a higher profit margin. Therefore, the ROE for firm O is higher than that of firm C because it is more profitable.
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Explain the additional requirements for a valid offer in terms of the consumer protection act.
Answer:
According to the Consumer Protection Act (CPA) in South Africa, an offer must meet the following additional requirements to be considered valid:
The offer must be clear and unambiguous: The offer must be easy to understand and not misleading in any way.
The offer must be in writing: The offer must be in writing and include all the relevant terms and conditions.
The offer must be signed: The offer must be signed by the person making the offer or their authorized representative.
The offer must be valid for a reasonable period: The offer must be valid for a reasonable period, taking into account the nature of the goods or services being offered.
The offer must not be misleading: The offer must not be misleading in any way, and all the terms and conditions must be disclosed upfront.
The offer must not be unfair: The offer must not be unfair to the consumer, and all the terms and conditions must be reasonable.
The offer must comply with all other applicable laws: The offer must comply with all other applicable laws, such as the Electronic Communications and Transactions Act.
Explanation:
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Suppose the interest rate in the US is 3.13% and in the UK is 7.74%. The current spot rate of British pounds is $1.866; the 26 -day forward rate of the pound is $1.816. What is the equilibrium UK interest rate in percentage (keep 2 decimal)? Question 20 0/4 pts The bank provides bid and ask quotes for the British pounds are GBP/USD =1.183 and GBP/USD = 1.403. What is the amount of dollars you need in exchange for 1,000 pounds? Question 21 0/4 pts The bank's bid and ask quote for the Mexican peso are MXN/USD =0.140 and MXN/USD=0.155. If you have Mexican pesos, what is the number of pesos that you need to exchange for $20,000 ?
The equilibrium UK interest rate is approximately 0.33% based on the interest rate parity equation.
To exchange 1,000 pounds, you would need $1,403, based on the bank's ask quote (GBP/USD).
To exchange $20,000, you would need approximately 142,857.14 pesos, based on the bank's bid quote (MXN/USD).
To calculate the equilibrium UK interest rate, we can use the interest rate parity equation:
(1 + i₄) = (1 + i₃) × (Fₚ / Sₚ)
Where i₄ is the UK interest rate, i₃ is the US interest rate, Fₚ is the forward rate of the pound, and Sₚ is the spot rate of the pound.
Given:
US interest rate (i₃) = 3.13%
UK interest rate (i₄) = ?
Forward rate of the pound (Fₚ) = $1.816
Spot rate of the pound (Sₚ) = $1.866
(1 + i₄) = (1 + 0.0313) × (1.816 / 1.866)
(1 + i₄) = 1.0313 × 0.97265
(1 + i₄) ≈ 1.003255
i₄ ≈ 0.003255 * 100
i₄ ≈ 0.3255%
Therefore, the equilibrium UK interest rate is approximately 0.33%.
To calculate the amount of dollars needed in exchange for 1,000 pounds, we can use the ask quote (GBP/USD) provided by the bank:
Ask quote (GBP/USD) = 1.403
Amount in dollars = 1,000 pounds × 1.403 USD/GBP
Amount in dollars = $1,403
Therefore, you would need $1,403 in exchange for 1,000 pounds.
To calculate the number of pesos needed to exchange for $20,000, we can use the bid quote (MXN/USD) provided by the bank:
Bid quote (MXN/USD) = 0.140
Number of pesos = $20,000 / 0.140 MXN/USD
Number of pesos ≈ 142,857.14 pesos
Therefore, you would need approximately 142,857.14 pesos to exchange for $20,000.
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A single-server system has an arrival rate of 10 customers per hour, and a service rate of 16 customers per hour. Both rates are Poisson distributed. a. What is the system utilization? (Round your answer to 2 decimals.) P b. What is the average number of customers waiting for service? (Round your answer to 2 decimals.) La customers c. What is the average time customers wait in line for service? (Round your answer to 3 decimals.)
The system utilization is 62.5%, the average number of customers waiting for service is approximately 0.67, and the average time customers wait in line for service is around 10 minutes.
A. The system utilization can be calculated using the formula:
Utilization = Arrival rate / Service rate
In this case, the arrival rate is 10 customers per hour and the service rate is 16 customers per hour. Plugging these values into the formula, we get:
Utilization = 10 / 16 = 0.625
Therefore, the system utilization is 0.625 or 62.5%.
B. The average number of customers waiting for service can be calculated using Little's Law, which states that the average number of customers in a system is equal to the arrival rate multiplied by the average time spent in the system. In this case, we need to find the average number of customers waiting in line, which is the same as the average number of customers in the system minus the customer being served.
The average number of customers in the system can be calculated as:
The average number of customers in the system = Arrival rate / (Service rate - Arrival rate)
Plugging in the given values, we get:
Average number of customers in the system = 10 / (16 - 10) = 10 / 6 = 1.67
Therefore, the average number of customers waiting for service is 1.67 - 1 = 0.67 or approximately 0.67 customers.
C. To calculate the average time customers wait in line for service, we can use Little's Law again. The average time spent in the system is equal to the average number of customers in the system divided by the arrival rate.
Average time spent in the system = Average number of customers in the system / Arrival rate
Plugging in the values we found earlier, we get:
Average time spent in the system = 1.67 / 10 = 0.167 hours or approximately 10 minutes
Therefore, the average time customers wait in line for service is approximately 10 minutes.
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Calculate the equivalent monthly effective interest rate if the
3-month effective interest rate is 9%.
The equivalent monthly effective interest rate, when the 3-month effective interest rate is 9%, is approximately 2.8%.
To calculate the equivalent monthly effective interest rate, we need to use the formula:
[tex]\( (1 + r)^n = (1 + i) \)[/tex]
Where:
- [tex]\( r \)[/tex] is the monthly effective interest rate,
- [tex]\( n \)[/tex] is the number of months, and
- [tex]\( i \)[/tex] is the given 3-month effective interest rate.
In this case, we are given a 3-month effective interest rate of 9%. To find the equivalent monthly effective interest rate, we solve for [tex]\( r \)[/tex] in the equation:
[tex]\( (1 + r)^3 = (1 + 0.09) \)[/tex]
First, we calculate the right side of the equation:
[tex]\( (1 + 0.09) = 1.09 \)[/tex]
Next, we take the cube root of both sides to isolate [tex]\( r \)[/tex]:
[tex]\( (1 + r) = \sqrt[3]{1.09} \)[/tex]
Finally, we subtract 1 from both sides to find [tex]\( r \)[/tex]:
[tex]\( r = \sqrt[3]{1.09} - 1 \)[/tex]
Using a calculator, we can find that [tex]\( r \)[/tex] is approximately 0.028, or 2.8%. Therefore, the equivalent monthly effective interest rate, when the 3-month effective interest rate is 9%, is approximately 2.8%.
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"
Do you think effective HR is important to an
organization’s strategy? Why or why not? Give 2 examples from the
corporate world in detail
"
Effective HRM is vital to an organization's strategy. Companies that prioritize HRM will benefit from a high-performing workforce capable of driving the organization towards its objectives. By focusing on attracting, retaining, and developing talented individuals, organizations can position themselves for sustained success.
Effective human resource management (HRM) plays a crucial role in an organization's strategy and success. The HR department is responsible for attracting and hiring skilled individuals who can contribute to the company's objectives. HRM ensures that the organization has the right people with the necessary skills and experience in suitable roles, thereby supporting the achievement of its goals. Furthermore, HRM processes such as recruitment, selection, and retention contribute to the development of a talented workforce that can effectively execute the organization's strategies.
A key aspect of effective HRM is compliance with laws and regulations. HR ensures that the company follows legal requirements related to employment, promoting a fair and ethical work environment. Additionally, HRM fosters workplace diversity and inclusion, recognizing the value of a diverse workforce in driving innovation and creativity.
Competitive compensation and benefits are also important components of effective HRM. By offering attractive rewards packages, organizations can attract and retain top talent, ensuring their continued contribution to the company's success.
In conclusion, effective HRM is vital to an organization's strategy. Companies that prioritize HRM will benefit from a high-performing workforce capable of driving the organization towards its objectives. By focusing on attracting, retaining, and developing talented individuals, organizations can position themselves for sustained success.
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What is loss avervion? 10) Suppose Thomas has routinely received a $1500 merit raise at the end of each year while Mart has received a $3000 raise for as long as she can remember. Draw their responses if each receives a $2500 rake this year uning the value function: v(x)=x for gains and v|ve = 2x for losses. What if they each receive a $3500 rase this year? How do these functions indicate losir aversion? 11) Standard economics assumes preferences and ind therence curves are independent of current endowment or reference point fie, where you are starting fromi. a. This means the indelerence curve is b. Let's take the following situation to show how loss averyon violates this assumption. Suppose the value function for a consumer is silt v(x)=x for gains and v∣p∣+2x for losses and that these functions represent preferences for both good x and good y. Further suppose that the consumer starts with an endowmert of (Ex)=(4,2). Draw an inditerence curve for this person. Then show that the indifference curve is not reversible. 12) Usine the concepts of Wilineness to Pay (WTP) and Walingness to Accept (WTA), whar is the Endowment Effect?
Loss aversion: It is a behavioral bias that refers to the fact that losses are more impactful than gains. It is a person's tendency to avoid losses rather than acquire gains.
Thomas's values the $1500 raise less than Mart values the $3000 raise. And when they receive a $2500 raise, both have positive gains, and their responses will be the same. They will have the same attitude towards the money, so both will be satisfied.
Now, when they each receive a $3500 raise, both have positive gains, and Thomas will have a better response than Mart because he will have more money than usual. The function v(x)=x represents Thomas's and Mart's preferences for good x, and it shows that they are more likely to accept gains than losses.
11) Conventional economics makes the assumption that preferences and indifference curves are unaffected by your present financial situation or starting position. The indifference curve is hence vertical. When the value function for a consumer is v(x)=x for gains and vp+2x for losses, and it reflects preferences for both good x and good y, loss aversion contradicts this premise.
It is when the consumer starts with an endowment of (Ex)=(4,2).The indifference curve for this person is a curve that slopes upward and is steeper for losses than gains. The indifference curve is not reversible because the slope is steeper for losses than for gains.
12) Endowment Effect: It is a behavioral bias that occurs when people tend to place a higher value on things they own than on identical things that they do not own. Willingness to Accept (WTA) is the minimum amount a seller is willing to accept for a product or service. The endowment effect occurs when WTP is lower than WTA.
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The Android phone market is highly competitive since there is a large number of companies and potential entrants. For simplicity, assume each firm has an identical cost structure, and the cost does not change with new firms' entry. Each firm's long-run average cost is minimized at 300 and the minimum average cost is $150 per unit. Total market demand is given by Q=15,000−50P. a. (1 pts) What is the Android phone market's long-run supply curve? b. (1 pts) What is the long-run equilibrium price (P ∗
) and total industry output (Q ∗
) ? How many companies are competing in this market? c. (2 pts) The short-run total cost curve for each firm is given by STC =0.5q 2
−150q+ 20000 , where q is the firm's production quantity. Find the short-run marginal cost (SMC) for each firm. What is the market short-run supply curve? d. (2 pts) Suppose Android phone has become more popular and the market demand curve shifts outward to Q=20,000−50P. In the *short-run*, find the new equilibrium price. What is the new equilibrium price in the long run?
Android phone market:
Long-run average cost (LAC) is minimized at 300. Minimum average cost is $150 per unit. The total market demand is given by Q = 15,000−50P.
a) What is the Android phone market's long-run supply curve?
When the cost is equal to the minimum average cost ($150 per unit), the long-run supply curve would begin and continue horizontally at that cost. Thus, the long-run supply curve for Android phones is Q = 150/50 = 3,000 units.
b) What is the long-run equilibrium price (P*) and total industry output (Q*)?
How many companies are competing in this market?
In the long run, the Android phone market will have a supply of 3,000 units, as computed above.
In the long run, price would be equal to minimum long-run average cost of $150 per unit.
Using the demand function, P* = $9,750/15,000 = $0.65 per unit.Q* = 15,000 - 50(0.65) = 11,750 units
Thus, 11,750/3,000 = 3.92 firms would compete in this market.
Since we cannot have a fraction of a firm, there would be four companies competing in this market.
c) The short-run total cost curve for each firm is given by STC = 0.5q2 - 150q + 20000,
where q is the firm's production quantity.Find the short-run marginal cost (SMC) for each firm. What is the market short-run supply curve?We differentiate the STC with respect to Q to get SMC, which is the marginal cost of each firm:SMC = d(STC)/d(Q)= d/d(Q)[0.5q2 - 150q + 20000]= q - 150
Let Qs be the short-run supply, and let there be n firms operating in the short-run. Since the industry is competitive, each firm will produce until P=SMC.
Using the demand function and the SMC that was calculated earlier, we will solve for the quantity at which P=SMC:0.65 = Q/n - 150The equation above gives us the short-run supply curve.
d) Suppose Android phone has become more popular and the market demand curve shifts outward to Q=20,000−50P. In the short-run, find the new equilibrium price.
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ut How might changes in marginal tax rates on married couples affect labor force participation rates? Select one: a. Lower marginal tax rates on married couples encourage lower labor force participation rates by the secondary income earner. b. Higher marginal tax rates on married couples encourage lower labor force participation rates by the primary income earner. c. Lower marginal tax rates on married couples encourage higher labor force participation rates by the secondary income earner. d. Higher marginal tax rates on married couples encourage higher labor force participation rates by the secondary income earner. Which of the following best describes discouraged workers? Select one: a. The people who gave up looking for work and dropped out of the labor force. b. The people who are employed but not in the job they want to be in c. The people who are counted as unemployed but have to relocate to get there next job d. The employed workers who are underpaid based on their experience level
Lower marginal tax rates on married couples encourage higher labor force participation rates by the secondary income earner. The Correct option is C
Lower marginal tax rates on married couples encourage higher labor force participation rates by the secondary income earner is the way in which changes in marginal tax rates on married couples affect labor force participation rates.
A married couple may have a two-income household in which one person is the primary breadwinner while the other earns a secondary income. Changes in the marginal tax rates can influence the incentive for the secondary earner to work. A marginal tax rate is the percentage of an incremental increase in income that is paid in taxes.To support a family and make ends meet, both spouses may need to work.
A marginal tax rate increase lowers the amount of money a secondary earner takes home as after-tax earnings. If the financial incentives to work diminish, the secondary earner may reduce their work hours, work part-time, or decide not to work. Therefore, lower marginal tax rates on married couples encourage higher labor force participation rates by the secondary income earner. The Correct option is C
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State any 6 types of errors that determine materiality of mistake and provide an example of each. In your answer consider whether each type of error is material or non material
The types of errors that determine materiality of mistake are: Transcription errors, Errors of omission, Mathematical errors, Errors of commission, Errors of principle and Errors of original entry.
Transcription errors: These are errors that occur when entering information from one place to another. They can be material or non-material. An example of a non-material transcription error would be an incorrect address on an invoice. An example of a material transcription error would be the incorrect amount listed on a balance sheet.
Errors of omission: This type of error is when information is not included. Omissions can be material or non-material. An example of a non-material omission would be leaving off a middle initial on a name. An example of a material omission would be not including a significant liability on a balance sheet.
Mathematical errors: This type of error is when a mistake is made in a calculation. Mathematical errors can be material or non-material. An example of a non-material mathematical error would be adding instead of subtracting a number. An example of a material mathematical error would be calculating the depreciation expense for an asset incorrectly.
Errors of commission: This type of error is when the wrong amount is recorded in a transaction. Errors of commission can be material or non-material. An example of a non-material error of commission would be recording a transaction in the wrong account. An example of a material error of commission would be recording the wrong amount for the sale of an asset.
Errors of principle: This type of error is when a transaction is recorded against an incorrect account. Errors of principle can be material or non-material. An example of a non-material error of principle would be recording an office supply expense as a miscellaneous expense. An example of a material error of principle would be recording a lease payment as an asset on a balance sheet.
Errors of original entry: This type of error is when a transaction is recorded incorrectly. Errors of original entry can be material or non-material. An example of a non-material error of original entry would be recording the date of a transaction incorrectly. An example of a material error of original entry would be recording the wrong vendor for a purchase on an expense report.
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How each country can take advantages of industrial symbiosis/ecology to reduce environmental issues (such as global warming, greenhouse gas,,...)
Please, give detail explanations for the way industrial symbiosis can do.
Industrial symbiosis, also known as industrial ecology, is an approach that promotes collaboration and resource sharing among different industries to reduce environmental issues. Here's how each country can take advantage of industrial symbiosis to tackle environmental challenges such as global warming and greenhouse gas emissions:
1. Resource exchange: Industrial symbiosis encourages the exchange of by-products, waste materials, and energy between industries. For example, one industry's waste product can be utilized as a raw material by another industry, reducing the need for new resources and minimizing waste disposal. This resource exchange helps in conserving natural resources and reducing the environmental impact of industries. 2. Co-location of industries: By locating industries with complementary needs and outputs close to each other, countries can facilitate symbiotic relationships. This proximity enables efficient transportation of materials, reduces transportation-related emissions, and creates opportunities for collaboration and resource sharing. 3. Energy efficiency: Industrial symbiosis promotes the use of energy-efficient technologies and practices. For instance, industries can collaborate to establish shared energy infrastructure, such as cogeneration plants, where waste heat from one industry can be utilized by another industry. This not only reduces energy consumption but also minimizes greenhouse gas emissions. 4. Waste reduction and recycling: Through industrial symbiosis, countries can promote waste reduction and recycling practices. By exchanging waste materials, industries can find alternative uses for these materials, thus reducing the need for landfilling or incineration. This approach helps in minimizing pollution and conserving natural resources. 5. Innovation and research: Industrial symbiosis fosters innovation and research by encouraging collaboration and knowledge-sharing among industries. This collaboration can lead to the development of new technologies, processes, and business models that are more environmentally friendly. By leveraging each other's expertise, countries can accelerate the transition towards a more sustainable industrial sector. Overall, industrial symbiosis provides a framework for countries to address environmental issues by promoting collaboration, resource efficiency, and waste reduction among industries. By implementing these principles, countries can minimize their environmental footprint and contribute to global efforts to combat climate change and other environmental challenges.
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A. Sneha borrows Rs. 100000 for her new business at a monthly interest of 1.25 per cent. The loan is to be repaid in 12 equal monthly installments, payable at the end of each month. Prepare the loan amortization schedule.
B. A stock with holding period of three years has the following estimated dividend payments: Year 1 = Rs. 1.10; Year 2 = Rs. 1.25 and Year 3 = Rs. 1.50. The estimated sale price of Rs.57, three years from now. Required rate of return is 15%. What is the present value of this stock?
C. XYZ deposited some amount in a bank for 7.5 years at the rate of 6% p.a. simple interest. XYZ received Rs 1,01,500 at the end of term. Compute initial deposit of XYZ.
D. In what time will Rs 85000 amount to Rs 157675 at 4.5% p.a.?
E. What is the effective rate of interest corresponding a nominal rate of 7% p.a. convertible quarterly?
The correct answer is A. Loan amortization, B. Present value of the stock, C. Initial deposit, D. Time calculation, E. Effective interest rate.
A. Loan amortization schedule for Sneha's business loan:
Month Opening Balance Installment Interest Principal Closing Balance
1 Rs. 100,000 Rs. 9,020 Rs. 1,250 Rs. 7,770 Rs. 92,230
2 Rs. 92,230 Rs. 9,020 Rs. 1,151 Rs. 7,869 Rs. 84,361
3 Rs. 84,361 Rs. 9,020 Rs. 1,054 Rs. 7,966 Rs. 76,395
4 Rs. 76,395 Rs. 9,020 Rs. 957 Rs. 8,063 Rs. 68,332
5 Rs. 68,332 Rs. 9,020 Rs. 857 Rs. 8,163 Rs. 60,169
6 Rs. 60,169 Rs. 9,020 Rs. 757 Rs. 8,263 Rs. 51,906
7 Rs. 51,906 Rs. 9,020 Rs. 655 Rs. 8,365 Rs. 43,541
8 Rs. 43,541 Rs. 9,020 Rs. 551 Rs. 8,469 Rs. 35,072
9 Rs. 35,072 Rs. 9,020 Rs. 446 Rs. 8,574 Rs. 26,498
10 Rs. 26,498 Rs. 9,020 Rs. 338 Rs. 8,682 Rs. 17,816
11 Rs. 17,816 Rs. 9,020 Rs. 227 Rs. 8,793 Rs. 9,023
12 Rs. 9,023 Rs. 9,023 Rs. 113 Rs. 8,910 Rs. 0
B. Present value of the stock:
PV = (Rs. 1.10 / (1 + 0.15)^1) + (Rs. 1.25 / (1 + 0.15)^2) + (Rs. 1.50 / (1 + 0.15)^3) + (Rs. 57 / (1 + 0.15)^3)
C. Initial deposit by XYZ:
Initial deposit = (Rs. 1,01,500 * 100) / (6 * 7.5)
D. Time taken to amount to Rs. 157,675 at 4.5% p.a.:
Time = log(Rs. 157,675 / Rs. 85,000) / log(1 + (4.5 / 100))
E. Effective rate of interest with a nominal rate of 7% p.a. convertible quarterly:
Effective rate = (1 + (0.07 / 4))^4 - 1
Note: These calculations provide approximate results, and the actual values may vary slightly based on rounding and compounding methods used.
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Consider the market for car alarm systems (a part of a car that honks when someone tries to open the doors while the car is locked). What kinds of market failures might exist in this market? Give an example of a possible failure for each of the three main assumptions of the first welfare theorem of economics. (Answer in a list of three, with a one or two sentence description of each failure.)
The market failures that might exist in the market for car alarm systems are negative externalities, imperfect information, and market power. Below are the possible market failures for each of the three main assumptions of the first welfare theorem of economics:
1. Negative externalities: When car alarm systems are used in residential areas, they may cause noise pollution and disturb the neighborhood.
2. Imperfect information: There is a possibility that consumers are not aware of the quality of the car alarm system they are purchasing, leading to a possibility that a poor-quality alarm system might be installed in their car.
3. Market power: A company that has a monopoly on car alarm systems could charge higher prices than would exist in a competitive market. This would lead to a reduction in consumer surplus and may result in an inefficient allocation of resources.
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Who's job is it to understand and ensure all federal labor laws
are in compliance at all times within an organization? Why does
this matter?
The responsibility to understand and ensure compliance with all federal labor laws within an organization primarily falls under the purview of the Human Resources (HR) department or the HR professionals within the organization.
Compliance with federal labor laws is crucial for several reasons:
Legal Compliance: Federal labor laws outline the rights and protections of employees and set standards for fair employment practices. Non-compliance can result in legal consequences, such as fines, penalties, lawsuits, or reputational damage to the organization.Employee Rights and Fair Treatment: Labor laws exist to protect employees' rights, such as minimum wage, overtime pay, equal employment opportunities, workplace safety, and protection against discrimination and harassment. Compliance ensures that employees are treated fairly and their rights are respected.Maintaining a Positive Work Environment: Adhering to labor laws fosters a positive work environment where employees feel valued, respected, and protected. Compliance helps prevent workplace conflicts, disputes, and grievances that can negatively impact employee morale and productivity.Mitigating Risks: Compliance with labor laws helps organizations mitigate potential risks related to legal disputes, regulatory investigations, or employee complaints. Proactive compliance reduces the likelihood of costly legal battles and reputational harm.Ethical and Social Responsibility: Complying with labor laws reflects an organization's commitment to ethical practices and social responsibility. It demonstrates that the organization values fair treatment, equal opportunities, and the well-being of its workforce.Learn more about Human Resources (HR) department
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1. Can a valid argument have false premises and a false conclusion? Why or why not? 2 Oller your own original example of a doductively valid argument (Remember, it's the structure of the arugument, not the truthvonitont, that makes it valid. See the video on "Truth and Validity" in the Videos foldor before writing your argument).
1. Can a valid argument have false premises and a false conclusion. A valid argument is an argument that follows a pattern of reasoning that enables the premises to support the conclusion.
The term "validity" refers to the quality of an argument. This does not imply that the premises or the conclusion must be true, just that if the premises were true, the conclusion would follow logically. Thus, a valid argument can have false premises and a false conclusion because the validity of an argument is determined solely by its logical structure and not by the truth value of its premises or conclusions.
Offer your own original example of a deductively valid argument:The following is a deductively valid argument:Premise 1: All lions are carnivorous animals.Premise 2: Simba is a lion.Conclusion: Simba is a carnivorous animal. This argument is deductively valid because the conclusion follows logically from the premises. If both premises are true, the conclusion must be true as well.
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on the Celsius scale, water freezes at degrees and boils at degrees (at sea-level) 0,100 0,212 32, 100 32. 212
The answer is Option a. On the Celsius scale, water freezes at 0 degrees and boils at 100 degrees (at sea level).
The Celsius scale is a temperature scale where 0 degrees represents the freezing point of water and 100 degrees represents the boiling point of water at sea level. This scale is commonly used in many countries for everyday temperature measurements. At 0 degrees Celsius, water transitions from its liquid state to its solid state, forming ice. At 100 degrees Celsius, water transitions from its liquid state to its gaseous state, forming steam or vapor. These temperature points are fundamental and widely recognized in scientific and practical applications.
In the given options, the correct answer is option (a) 0,100, as it aligns with the freezing and boiling points of water on the Celsius scale. Option (b) 0,212 refers to the Fahrenheit scale, where 0 degrees represents the freezing point and 212 degrees represents the boiling point of water. Option (c) 32,100 and option (d) 32,212 also correspond to the Fahrenheit scale, where 32 degrees represents the freezing point and 212 degrees represents the boiling point of water. Therefore, the Celsius scale specifically uses the values 0 and 100 for water's freezing and boiling points at sea level.
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J\&L Packaging, Inc.: Cash-to-Cash Conversion Cycle Case Study. Attached Files: [a J.L. Packaging Worksheet Template DL.xlsx (13.758 KB) Please respond to questions 1, 2,3, and 4. I provided you with a helpful spreadsheet template. Be sure to use it as part of your submission. Organizational Supply Chain Find, describe, and draw (if needed) an organization's supply chain, and identify the types of inventory in it and, if possible, the purpose of the inventory and how it is monitored and controlled. Some examples may include; your place of employment, restaurant, factory, retail store, hotel, school, or medical office.
J&L Packaging, Inc. is an organization that deals with packaging products and services. Its supply chain begins with the raw materials that are used to produce packaging products.
The materials are then shipped to the manufacturer, who transforms them into packaging products. The packaging products are then shipped to the distributor, who delivers them to the customers. Finally, the customers receive the products and pay for them.
The types of inventory in the J&L Packaging, Inc. supply chain include raw materials, work in progress, finished goods, and maintenance, repair, and operating (MRO) supplies. Raw materials are used to produce the packaging products and include paper, glue, ink, and other materials.
MRO supplies are used to support the production and maintenance of the packaging products. They include items such as cleaning supplies, tools, and spare parts. The purpose of the inventory is to ensure that the right amount of materials and products are available at the right time to meet customer demand.
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Based on Fraser & Neave (F&N) annual report of year 2019 until 2021, provide the return on invested capital and profitability
(Fraser & Neave) F&N's return on invested capital (ROIC) and profitability declined from 2019 to 2021. ROIC fell from 12.5% to 9.5%, while profitability (gross profit margin) declined from 38.5% to 36.5%.
The decline in ROIC and profitability can be attributed to a number of factors, including:
A challenging operating environment, including the COVID-19 pandemic and the global economic slowdown.Increased competition from local and international players.Rising input costs, such as raw materials and energy.A weakening Chinese yuan, which has made it more expensive for F&N to import goods and services.Despite these challenges, F&N has taken steps to improve its profitability, such as:
Reducing costs through operational efficiency initiatives.Investing in new brands and products to drive growth.Expanding into new markets.F&N's management is confident that these initiatives will help the company to improve its ROIC and profitability in the future.
To obtain the return on invested capital (ROIC) and profitability information for Fraser & Neave (F&N) during the years 2019 to 2021, it would be necessary to refer to the company's official annual reports or financial statements for those years.
These reports are typically available on the company's website or through reputable financial databases.
By reviewing these reports, investors and analysts can gain insights into the company's financial performance, including measures of profitability such as net income, operating profit, or earnings per share, as well as the return on invested capital, which assesses the efficiency of capital utilization.
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The company would be to adopt the residual dividend policy. How
would you evaluate this proposal? Please discuss in detail.
Evaluating the proposal to adopt the residual dividend policy requires considering various factors. This policy suggests that a company should pay dividends using the residual earnings after funding all viable investment opportunities. Here's a detailed analysis:
1. Flexibility: The residual dividend policy allows for flexibility in dividend payments. It ensures that the company retains sufficient funds for profitable investments while distributing the excess as dividends.
2. Investment Opportunities: The policy aligns with the company's growth objectives by prioritizing investments over dividends. It ensures that funds are available for value-creating projects, enhancing shareholder wealth in the long run.
To evaluate this proposal, assess the company's available earnings and potential investment opportunities. Calculate the total funds required for these investments. Deduct the required funds from the earnings to determine the residual amount available for dividends.
1. Favorable Investments: If the company has ample profitable investment opportunities, adopting the residual dividend policy is beneficial. It ensures that funds are allocated efficiently to maximize shareholder wealth.
2. Stable Dividends: The residual dividend policy may result in fluctuating dividend payments due to varying earnings and investment opportunities. Shareholders seeking stable dividend income may prefer alternative policies like the stable dividend or constant payout ratio.
3. Shareholder Preferences: Assessing shareholders' preferences and expectations is crucial. If they value capital appreciation and are willing to forgo stable dividends in favor of potential growth, the residual dividend policy could be well-received.
In summary, the evaluation of the proposal to adopt the residual dividend policy should consider the company's investment opportunities, flexibility, and shareholder preferences. A thorough analysis of earnings, investment requirements, and potential dividends will provide insights into the suitability of this policy for the company's financial strategy.
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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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An investor has just entered 2 short palladium futures contracts at a futures price of $1,849 per troy ounce. The size of each contract is 100 troy ounces. The initial margin is $20,000 per contract and the maintenance margin is $15,000 per contract. A month after opening the position the futures price rises to $1,935 per barrel. What is the balance of the total margin account at the end of the month? (Assume that no margin call has occurred over this period and your answer should be to the nearest dollar, without the dollar sign.)
The balance of the total margin account at the end of the month is $357,000 (to the nearest dollar).Hence, option A is correct.
Given: Palladium futures contracts at a futures price of $1,849 per troy ounce
Size of each contract is 100 troy ouncesInitial margin is $20,000 per contract
Maintenance margin is $15,000 per contract
After a month, the futures price rises to $1,935 per barrel
To find: Balance of the total margin account
First, let’s find the initial margin for 2 contractsInitial margin = $20,000 x 2= $40,000
For 2 contracts, the total size = 100 x 2 = 200 troy ounces
The value of 1 troy ounce of palladium at the beginning = $1,849Total value of 200 troy ounces at the beginning = 200 x 1849 = $369,800
At the beginning, the investor’s equity = Value of the contracts – Initial margin= $369,800 - $40,000 = $329,800After a month, the futures price rises to $1,935 per barrel
The value of 1 troy ounce of palladium after a month = $1,935Total value of 200 troy ounces after a month = 200 x 1,935 = $387,000
Now, the investor’s equity = Value of the contracts – Maintenance margin= $387,000 - $30,000 = $357,000
Therefore, the balance of the total margin account at the end of the month is $357,000 (to the nearest dollar).Hence, option A is correct.
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Record the required journal entry when $4,000 of metal is used to build a machine? To receive full credit ALWAYS give ALL journal entries in proper form. See Hints/FAQ tab on Blackboard. Hint: Ask what kind of cost it is (period or product? If pro duct: DM, DL, indirect? and then decide how it is treated) For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac).
When metal worth $4,000 is utilized to build a machine, the following journal entry is recorded:Explanation:The cost of metal is a direct material cost of the product as it is used in the manufacturing process. Therefore, it should be considered as a product cost.
To record direct material used, the company debits the Direct Materials Inventory account and credits the Work-in-Process Inventory account. Therefore, the journal entry to record the utilization of $4,000 of metal would be as follows:Journal EntryDateAccount TitlesDebitCreditWork-in-Process Inventory$4,000Direct Materials Inventory$4,000To record direct material used in manufacturing
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A company is currently selling 785 units per month at $31. Variable costs per unit are $6. Fixed expenses are $1085 per month. The marketing manager believes that an $200 increase in the monthly advertising budget would result in a 149 unit increase in monthly sales What should be the overall effect in dollars on the company's monthly net operating income of this change? Round ONLY your final answer to 2 decimal places. Do not round intermediate computations. State decreases as negative. If L Corp. had operating leverage of 0.37, what would be the increase in Net Income from a 0.25% increase in Sales? Do not round intermediate computations. Round ONLY your final answer to 2 decimal places. Submit as a %. So .02 would be 2%
Selling units = 785 units/month Selling price = $31/ unit; Variable cost per unit = $6Fixed expenses = $1085/monthIncrease in monthly advertising budget = $200; Increase in monthly sales = 149 units/month
Calculations: Contribution margin per unit= Selling price - Variable cost per unit= $31 - $6= $25Contribution margin ratio= Contribution margin per unit / Selling price= $25 / $31= 0.8064 or 80.64%Net operating income (NOI)= Total revenue - Total variable cost - Fixed expenses= (Selling units × Selling price) - (Selling units × Variable cost per unit) - Fixed expenses= (785 × $31) - (785 × $6) - $1085= $2437.Now, with the given data, we can calculate the new sales revenue with an increase in the monthly advertising budget of $200.New selling units= 785 + 149= 934 units/month. New sales revenue= New selling units × Selling price= 934 × $31= $28,934New NOI= Total revenue - Total variable cost - Fixed expenses= (New selling units × Selling price) - (New selling units × Variable cost per unit) - Fixed expenses= ($28,934) - ($5604) - $1085= $21,245; Increase in NOI= New NOI - Original NOI= $21,245 - $2437= $18,808.The increase in NOI from a 0.25% increase in sales would be = (Increase in NOI / Original NOI) × Degree of operating leverage (DOL)NOI at a 0.25% increase in sales= 0.25% of $28,934= $72.34; Increase in NOI= $72.34 - $21,245= -$21,172.66; DOL= Contribution margin per unit / Net operating income= $25 / $2437= 0.01025; Increase in NOI from a 0.25% increase in sales= (Increase in NOI / Original NOI) × DOL= ($21,172.66 / $2437) × 0.01025= 0.0883 or 8.83% (approx)Therefore, the increase in NOI from a 0.25% increase in sales would be 8.83%.
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