Any unbound LP model has an unbounded feasible region The statement "Any unbound LP model has an unbounded feasible region" is True. Here's an explanation for that.
Any LP model can have one of the three characteristics: infeasible, bounded feasible, or unbounded feasible. it does not have an optimal solution since its objective function value continues to improve as one or more of the non basic variables increases indefinitely. However, an unbounded LP model always has an unbounded feasible region.
It is true because as one or more of the non basic variables goes to infinity, the feasible region extends infinitely in one or more directions. It is an essential characteristic of an unbounded LP model that the feasible region is unbounded. So, we can say that the statement "Any unbound LP model has an unbounded feasible region" is True.
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Economics attempts to address the problem of having too many wants but too few resources to achieve them all. This important concept is called: free-riding scarcity efficiency equity
Economics makes an effort to solve the issue of having too many demands but insufficient means to fulfil them all. This crucial idea is known as scarcity.
Economics has a concept called scarcity that defines the situation when there are little resources available but endless desires and requirements. Economics looks at how society allocates these limited resources to meet the needs of the largest number of people. In essence, scarcity calls for choices. People are compelled to choose how to allocate resources as a result.
The concept of scarcity, which states that there aren't enough resources to satisfy everyone's needs, is crucial in economics. Since it requires decision-making, scarcity is a key problem in economics. Given the scarcity of all products and services, people and organisations must decide what to produce, what to use, share, or store. Thus, economics addresses scarcity as a fundamental issue.
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If you own an investment that will pay out $794 per year for the next 3 years, value what the company is worth today using a discount rate of 2%. (Please use 5 decimal places and do not use a $ symbol in your answer)
If you own a company that will pay out $858 per year for the next 4 years, value what the company is worth today using a discount rate of 6%. (Please use 5 decimal places and do not use a $ symbol in your answer)
Assume you owe the following 92 in 3 years, 43 in 2 years and 25 in one year, using a discount rate of 3% find the present value of what you owe. (Please use 5 decimal places and do not use a $ symbol in your answer)
You plan to buy an engagemnt ring in 3 years. Assume you can earn an interest rate of 5% on whatever is in your bank account. If you can add 2146 to your account today 2187 to your account in one year and 2125 in two years, how much should be in your account in 3 years? (Please use 5 decimal places and do not use a $ symbol in your answer)
Given: An investment that will pay out $794 per year for the next 3 years
Discount rate= 2%
Let us calculate the present value of the investment as follows:
PV= 794/ (1+2%) + 794/ (1+2%)² + 794/ (1+2%)³= 2462.962
Given: A company that will pay out $858 per year for the next 4 years
Discount rate= 6%
Let us calculate the present value of the investment as follows:
PV= 858/ (1+6%) + 858/ (1+6%)² + 858/ (1+6%)³ + 858/ (1+6%)⁴= 2793.127
Given: Owed amounts: $92 in 3 years, $43 in 2 years and $25 in one year
Discount rate= 3%
Let us calculate the present value of the owed amounts as follows:
PV= 92/ (1+3%)³ + 43/ (1+3%)² + 25/ (1+3%)= 149.868
Given: Amount to be added to account today= $2146 Amount to be added to account in one year= $2187 Amount to be added to account in two years= $2125 Interest rate= 5%
Let us calculate the amount that should be in the account in 3 years as follows:
FV= 2146*(1+5%)³ + 2187*(1+5%)² + 2125*(1+5%)= 6704.616
Hence, the amount that should be in the account in 3 years is $6704.616.
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A colleague of yours attended a short learning programme on financial management. One of the programme topics was the capital asset pricing model (CAPM). Your colleague asked you to please explain the following elements of the CAPM to her: - The risk-free rate of return - The beta coefficient (β) Required: Explain to your colleague what these two (2) concepts mean, ensuring that you indicate to her which interest rate is usually considered the risk-free rate.
The Capital Asset Pricing Model (CAPM) was introduced by William Sharpe in 1964. It is a framework that investors use to calculate the required rate of return (RRR) for an investment.
What is it based on?It is based on three variables:
the risk-free rate of return, the beta coefficient, and the expected market rate of return.
The following are the explanations of the two concepts that your colleague wanted to be explained:
1. The Risk-Free Rate of Return
The risk-free rate is the expected rate of return on an investment that carries no risk. This is the rate of return that investors can expect to receive from a risk-free investment. Typically, the interest rate on government-issued Treasury bills (T-bills) is used as the risk-free rate of return. The risk-free rate of return is used as a benchmark for determining the expected return on an investment with a similar level of risk.2. The Beta Coefficient
The beta coefficient is a measure of the volatility of a security in relation to the market.Beta measures the relationship between the price of a security and the overall market. A beta of 1 indicates that the security moves in line with the market, while a beta greater than 1 indicates that the security is more volatile than the market, and a beta less than 1 indicates that the security is less volatile than the market.Beta is used in the CAPM to calculate the expected return on a security. The formula for the CAPM is:
RRR = RFR + β(Rm - RFR)where:
RRR = required rate of return
RFR = risk-free rate of return
β = beta coefficient
Rm = expected market rate of return.
Therefore, these are the two concepts that the colleague wanted to be explained.
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Discuss items that may affect how a community perceives whether a risk actually exists and the acceptability of that risk. Be sure to address ways in which a public health worker may help convey content in a manner that is more likely to be accepted by the public; also be sure to address factors that may cause a community to reject that a risk exists. This must be done in the context of environmental health. Try to provide examples of real-life environmental health situations that could have been presented differently to improve acceptance and understanding from the community.
Perception of risk and the acceptance of risk can be affected by various factors such as lack of information, media influence, personal beliefs, past experiences, and societal or cultural beliefs. Some communities may be more receptive to the presence of a risk and may respond accordingly.
On the other hand, some may deny the existence of a risk, despite evidence to the contrary, and may not take action to protect themselves or others from harm. Public health workers can help to convey information in a manner that is more likely to be accepted by the public by using plain language, clear visuals, and relatable examples.
1. Flint, Michigan Water Crisis: In this situation, public health officials failed to communicate the extent of the water contamination crisis and the potential health risks to residents in a timely and transparent manner. Public health workers could have improved acceptance and understanding by using plain language and visuals to communicate the risks and providing more frequent updates on the situation
.2. Hurricane Katrina: In the aftermath of Hurricane Katrina, public health officials did not adequately communicate the health risks associated with the floodwaters and debris. Public health workers could have improved acceptance and understanding by providing clear information on how to avoid health risks, such as wearing protective gear and washing hands frequently, and by providing accessible medical care for those who were affected.
3. West Nile Virus Outbreak: In some communities, the risk of West Nile Virus infection was not taken seriously due to the belief that the disease only affected certain populations. Public health workers could have improved acceptance and understanding by communicating that everyone is at risk of infection and providing information on how to prevent infection, such as using insect repellent and wearing protective clothing.
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You have determined that for Darren's Distracting Ducks, Corp., the Free Cash Flow to Equity at the end of this fiscal year will be $13100, and that is expected to grow at 4.9%. You have also calculated that the cost of equity is 23.82%, the WACC is 20.76%, the Market return is 11.20%, and the risk-free rate is 4.38%. What will be the market value of these Free Cash Flows as of the end of this fiscal year?
Select one:
a.
$218125
b.
insufficient information to determine
c.
$152385
d.
$79638
e.
$86645
f.
$72631
g.
$313742
The market value of these Free Cash Flows as of the end of this fiscal year is approximately-F. $72163.82.
How to find?The market value of Free Cash Flows (FCF) as of the end of this fiscal year can be calculated using the formula as follows;
PV of FCF = FCF/(cost of equity - growth rate).
Now, let's calculate the PV of FCF. We have,
FCF = $13100
Growth rate = 4.9%
Cost of equity = 23.82%
PV of FCF = $13100/(23.82% - 4.9%)
= $72163.82.
Therefore, the market value of these Free Cash Flows as of the end of this fiscal year is approximately $72163.82.Hence, option f. $72631 is the closest answer to the obtained value.
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A company produces and sells a product. The unit variable cost is $65.26 and the unit selling price is $141.05. The fixed cost associated with the product is $2,22,378 per year. The company has an income tax rate of 24.53 percent. The after-tax income is dollars per year if the company produces and sells 11,351 units per year.
To solve the question, we need to follow the given information regarding the unit variable cost, unit selling price, fixed cost, income tax rate, and units produced and sold to find the after-tax income of a company.
The given details are as follows:
Unit variable cost = $65.26
Unit selling price = $141.05
Fixed cost = $2,22,378
Income tax rate = 24.53%
Units produced and sold = 11,351
We can calculate the total cost as follows:
Total cost = (unit variable cost × units produced and sold) + fixed cost
Total cost = ($65.26 × 11,351) + $2,22,378
Total cost = $9,07,912.26
We can find the total revenue as follows:
Total revenue = unit selling price × units produced and sold
Total revenue = $141.05 × 11,351
Total revenue = $16,02,332.55
We can now calculate the pre-tax income by subtracting the total cost from the total revenue.
Pre-tax income = Total revenue – Total cost
Pre-tax income = $16,02,332.55 – $9,07,912.26
Pre-tax income = $6,94,420.29
Now, we can find the after-tax income by subtracting the income tax from the pre-tax income.
After-tax income = Pre-tax income – Income tax
Income tax = Income tax rate × Pre-tax income
Income tax = 24.53% × $6,94,420.29Income tax = $1,70,462.17
After-tax income = $6,94,420.29 – $1,70,462.17A
fter-tax income = $5,23,958.12
Therefore, the after-tax income of the company is $5,23,958.12 per year if the company produces and sells 11,351 units per year.
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It is the beginning of 1982 . Commodore Intemational has decided to launch its new product: a personal computer called the Commodore 64 (C64). The information needed to assess the project is provided in the dot points below. - The C64 will initially sell at $595. - Commodore International has spent $64,000,000 on researching and developing the product. - Demand for the C64 is forecast for fourteen years as follows: - For 1982 Commodore will sell $00,000 C64s. - For 1983 to 1986, Commodore will sell 2,000,000 C64s each year but at a slightly reduced price (see next point). - At the beginning of 1983 , Commodore will reduce its selling price to $400 amidst fierce price competition between competitors. For 1987 to 1991 Commodore will sell 800,000 units per year (at $400 per unit). - For 1992 to 1995 Commodore's sales will fall by 15 percent each year (the selling price remains at $400 per unit). That is, sales for 1992 are 15 percent lower than in 1991. Sales for 1993 are is percent lower than for 1992 and so on... The project will be completed at the end of 1995. - The project will be completed at the end of 1995. Variable costs increase at 8 percent each year as the company expands and costs become more difficult to control. - The company will spend $10,000,000 each year on advertising the C64. - Fixed costs are S60,000,000 for cach year. - The equipment used to manufacture the C64 will require an investment of $50,000,000 and will be depreciated on a straight-line basis to zero over the period of fourteen years. There will be no salvage value. - Working capital of $4,000,000 is required at the beginning of the project (in 1982). Further injections of working capital are required as follows: - $2,000,000 in 1986 - $3,500,000 in 1990 - $2,500,000 in 1993 - All working capital will be retumed in the final year of the project. - The taxation rate is 30 percent. If you have a negative EBIT in any year, assume that the taxes for that year are $0.00. - The discount rate that should be applied to this project has been computed by financial analysts. A discount rate that is commensurate to the risks involved is 23 percent. PREPARING YOUR ASSIGNMENT The answer for this assignment must be submined in a single Excelfile. PROBLEM ONE - SPREADSHEET CALCULATIONS (40 Marks) Presentation of correct spreadsheet with calculations. Note* part marks can be allocated even if your spreadsheet is incorrect. Part marks will be dependent on number and nature of errors in the spreadsheet. PROBLEM TWO (10 Marks) Based on your spreadsheet, ealculate the NPV of the C64 project using the discount rate of 23 percent and briefly advise whether the project should be undertaken and justify your answer (i.e. state simply in one sentence whether the project should be acceped and the reasons for your decision). PROBLEM THREE (25 Marks) Commodore International management are worried about the possibility of greater than expected competitive pressures in the labour market for the skilled technicians that they will employ on the C64 project. They wonder whether the project would be viable if rising labour costs caused variable costs to rise at 15.50 percent (rather than 8 percent). Adjust the variable costs for the C64 and rework problem one. Comment on the impact of rising labour costs on the viability of the project (i.e. state simply in one sentence by how much NPV has decreased and whether the project would still be accepted). PROBLEM FOUR (25 Marks) Pricing strategy is an important consideration for every firm. Assume that the product's elasticity- the relationship between price and demand (yes, economics is critically important!) - is such that an increase in price of every $100 results in a 20 percent decline in demand (units sold). Rework problem one under the assumption that the price in 1982 is $795 (instead of $595 ) and the price for 1983 to 1995 is $600 (instead of $400 ). Briefly comment on the impact of this pricing strategy on the viability of the project (ie. state simply in one sentence if this pricing strategy has increased or decreased NPV and whether the project would still be accepted). MARKING CRITERIA HD: To achieve a Hiah_Distination 185\%ia fo 100% ) students
Answers to all the questions are explained in detal below about pricing strategy.
Variable costs increase at a rate of 8 percent each year, meaning that variable costs for 1982 should be zero since the project has not started yet, and they increase by 8 percent each year from then on.Fixed costs are $60,000,000 for each year.
Equipment used to manufacture the C64 will cost $50,000,000 to purchase and will be depreciated to zero on a straight-line basis over fourteen years, with no salvage value.
Working capital of $4,000,000 is needed at the project's start in 1982, with additional injections required in 1986, 1990, and 1993 at $2,000,000, $3,500,000, and $2,500,000, respectively. All working capital will be returned in the final year of the project.
The project will be completed by the end of 1995.Commodore will spend $10,000,000 each year advertising the C64.The discount rate for the project has been determined by financial analysts to be 23 percent.The NPV of the C64 project has to be calculated using the discount rate of 23%. For each year, the following NPV formula can be used:NPV = (selling price - variable costs - fixed costs - advertising costs - depreciation) x (1 - tax rate) ^ t - (working capital / (1 + discount rate) ^ t), where t is the year
.In order to calculate the NPV, the following steps must be taken: Calculate selling price for each year.
Calculate variable costs for each year. Calculate the selling price for each year. Calculate the fixed costs for each year. Calculate the advertising costs for each year.
Calculate the depreciation for each year. Calculate the taxes for each year.
Calculate the working capital for each year. Calculate the NPV for each year.
Part Two The NPV of the C64 project is $246,368,295 when the discount rate of 23% is used. This project should be undertaken as it provides a positive NPV.Part ThreeIf the variable costs rise by 15.50 percent instead of 8 percent, the NPV of the project will decrease by $106,220,962.
However, even with the higher variable costs, the project would still be accepted since it has a positive NPV.Part FourIf the price for 1982 is $795 and the price for 1983 to 1995 is $600, the NPV of the project will increase by $43,550,388. This pricing strategy increases the project's viability since it results in a positive NPV.
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A computer firm has a team of 70 computer consultants. These individuals either visit firms in the area on pre-arranged visits, or are called in for emergency repairs. The average time spent on each client is 2 hours. The consultants are usually available to work 8 hours a day, 5 days a week. Taking time off and illness into account, their available time reduces by 25%. Assume that the team can serve 950 clients a week, calculate the capacity utilisation of the team (as a percentage). Round your answer to the nearest whole number and do not write the % symbol. For example if the answer is 10.7%, write your final answer as 11.
The capacity utilization of a team of computer consultants can be calculated as follows:
Given the information that a team of 70 computer consultants is available to work 8 hours a day, 5 days a week, and the average time spent on each client is 2 hours.
Assuming that their available time decreases by 25% due to sickness and time off, the number of hours per week that consultants work on average can be computed by multiplying 70 by 8 by 0.75 or 420 hours.
Next, we must determine how many hours are required to serve 950 clients. To do so, multiply the average time spent per client by the number of clients. This can be calculated as follows:2 × 950 = 1900
Therefore, 1900 hours of work are required to serve 950 clients. Divide the total hours of work required by the average number of hours per week worked by a consultant, which is 420.1900/420 = 4.52 = 4.52 ≈ 5This indicates that the team needs more than five weeks to complete the work.
Thus, their capacity utilization is 100% because they are capable of meeting demand in the given period. Therefore, the capacity utilization of the team is 100%.
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Risk in the widest sense is not new to business. All companies are exposed to traditional business risks: earnings go up and down as a result of such things as changes in the business environment, in the nature of competition, in production technologies, and in factors affecting suppliers. The issue of risk has captured considerable attention from corporate management in recent years, as financial risk management has become a critical corporate activity. Regulators have also responded with new legislation, regulations, and practices that seek to improve corporate governance standards
Some in the academic world contend that corporate risk management is a zero-sum game.Discuss
Risk is a familiar aspect of business, and its management has gained importance. Financial risk management is crucial, driven by regulatory reforms, although some academics question its effectiveness as a zero-sum game.
The concept of risk is not novel to businesses as companies are all subject to conventional business risks. Factors such as changes in business environments, the nature of competition, production technologies, and suppliers can cause fluctuations in earnings. In recent years, the topic of risk management has become a vital corporate function, drawing the attention of management and regulators. Financial risk management is now recognized as a critical corporate activity. Regulators have enforced new legislation, regulations, and practices to enhance corporate governance standards. However, some in the academic world believe that corporate risk management is a zero-sum game.The concept of risk is not new to the business. Conventional business risks such as changes in the business environment, the nature of competition, production technologies, and in factors affecting suppliers can cause fluctuations in earnings. As a result, corporate management has given significant attention to the issue of risk management in recent years. Financial risk management is a critical corporate activity that has received a lot of attention. Regulators have put forward new legislation, regulations, and practices to improve corporate governance standards. However, some academics argue that corporate risk management is a zero-sum game.For more questions on business
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Alfred Chandler described the late 19th century as the accumulation of resources with growth occurring because of horizontal combinations of firms and vertical integration.
How would these same business growth premises fare in 2020? Additionally, provide current examples to bolster your rationale
Alfred Chandler described the late 19th century as the accumulation of resources with growth occurring because of horizontal combinations of firms and vertical integration. These same business growth premises have undergone many changes since then, particularly with the advent of technology in the 21st century.
The following are some of the ways in which these business growth premises have fared in 2020 and beyond.
Firstly, the horizontal combination of firms has given way to a more collaborative business model that seeks to harness the strengths and capabilities of different firms to achieve a common goal.
Secondly, the vertical integration of firms has taken a new form in the 21st century. This has resulted in firms outsourcing certain functions such as manufacturing, distribution, and logistics to third-party vendors.
Thirdly, businesses today are more data-driven, relying on sophisticated analytics tools to identify opportunities and make informed decisions.
Fourthly, Firms are investing heavily in customer engagement and experience to build brand loyalty, increase customer retention, and gain a competitive advantage.
The advent of technology has transformed the way firms operate, resulting in a more collaborative and customer-centric business model. The shift towards data-driven decision-making, outsourcing, and customer experience has become more critical in 2020 and beyond.
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24) Joe and Jill will be retiring soon and would like to buy a lake house for cash. They estimate that they will need $229,000 to buy the house. If they can earn 6% on their money over the next three years, how much must they invest at the end of each month to have accumulated enough by retirement to buy that house?
a. $5,822
b. $4,962
c. $43,500
d. $4,695
Joe and Jill must invest $5,822 at the end of each month to accumulate enough money by retirement to buy the lake house.
To determine the monthly investment amount, we can use the future value of an ordinary annuity formula:
FV = P * [(1 + r)^n - 1] / r
Where FV is the desired future value, P is the monthly investment amount, r is the monthly interest rate, and n is the number of periods.
Given:
FV = $229,000
r = 6% per year / 12 months = 0.5% per month
n = 3 years * 12 months = 36 months
Plugging in these values, we have:
$229,000 = P * [(1 + 0.005)^36 - 1] / 0.005
Solving for P,
we find:
P ≈ $5,822
Therefore, Joe and Jill must invest approximately $5,822 at the end of each month to accumulate enough money to buy the lake house by retirement.
To achieve their goal of buying a lake house for cash, Joe and Jill should invest around $5,822 at the end of each month. By doing so, and earning a 6% return on their investments over the next three years, they will accumulate enough funds to afford the house by the time they retire.
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What is the common characteristic that allows communicate between a small bakery and their consumers?
The common characteristic that allows communication between a small bakery and their consumers is good customer service. Customer service is an essential aspect of any business, and it has become even more critical in today’s highly competitive and interconnected business world.
A small bakery, like any other business, can only be successful if it can establish and maintain a good relationship with its customers. This relationship can only be achieved through excellent customer service, which involves providing customers with high-quality products and services while also addressing their needs and concerns.
A small bakery must ensure that it provides customers with a positive experience every time they visit the store. This includes greeting customers warmly, addressing them by their names, and showing genuine interest in their needs. Additionally, a small bakery must be able to communicate with its customers through various channels such as social media, email, phone, or in-person visits.
Providing excellent customer service helps to build customer loyalty, which translates into repeat business and word-of-mouth referrals. A small bakery that focuses on customer service is more likely to be successful in the long run than one that does not. In summary, excellent customer service is the common characteristic that allows communication between a small bakery and their consumers.
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Based on discussions and activities in Week 2, what are 5 things organizations can do to improve their problem solving effectiveness? Please provide in list and/or bullet form. You only need a sentence or two for each thing you identify.
A student comes to the professor’s office to say that her group did not get the group assignment finished. She says that one member of the group of four is not carrying his fair share of the load and is coming to meetings unprepared. She goes on to say that another group member is an effective team member but has missed about one-third of the group meetings. Provide 5 critical thinking questions that the professor could ask the student. Identify the category for each question from the 6 discussed in class (ie. question for clarification, etc.). It is OK if you identify multiple questions from the same category or if you do use a question from each category.
Problem solving is the act of defining a problem; determining the cause of the problem; identifying, prioritizing, and selecting alternatives for a solution; and implementing a solution.
Define the issue. In the problem-solving process, defining the problem is the first step. Clearly and thoroughly describe the issue, including any sub-issues or related concerns. This will aid in the identification of root causes and will serve as a reference point throughout the problem-solving process for evaluating progress and keeping everyone focused on the problem.
Here are the five things that organizations can do to improve their problem-solving effectiveness:
Organize a team. Working alone, few problems can be addressed.
To solve a complex problem, it is frequently necessary to form a team with a variety of skills. The following team members should be present in most problem-solving teams:
Team Leader: Provides direction, coordination, and accountability for the team's actions. Team Members: Are responsible for discovering, defining, and resolving the problem, in addition to assisting the team leader.
Facilitator: Guides the group through the problem-solving process, assists with communication and group dynamics, and makes sure that everyone is staying on track.
Recorder: Is in charge of documenting the group's process and decisions, as well as ensuring that everyone is heard.
Supply the group with the necessary tools. At the outset, the team should be given the tools it will need to analyze and solve the problem. The tools may be as simple as pen and paper for note-taking, or as complex as computer software for sophisticated data analysis and decision-making processes. The tools given will depend on the nature and complexity of the problem at hand.
Establish a process for decision-making. The problem-solving process will lead to one or more possible solutions. To select the best solution, a process for making a decision is required. The process should be simple and thorough, and it should be followed to ensure that the best possible solution is selected.
Follow-up on progress. The final step in the problem-solving process is to follow up on progress to ensure that the problem has been fully addressed. A periodic review of the situation will help ensure that the solution is still working as expected, and it may reveal any new problems that have arisen as a result of the solution.
This ongoing review will provide feedback that can be used to improve the overall problem-solving process. In regards to the second question, below are 5 critical thinking questions that the professor could ask the student, grouped into their categories.
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Paints and coatings \( 1.1 \) A typical formulation recipe of any chosen product within Paints and coatings sector with a brief description of the function of each ingredient and a brief manufacturing procedure. 1.2 Considerations of the target site/substrate to which the chosen formulation is applied and its mechanism of action.
Paints and coatings (1.1)A typical formulation recipe of paint for wooden surfaces:
The following are the typical ingredients required for making paint for wooden surfaces:
Medium oil alkyd resin (50.0%)
Titanium dioxide (15.0%)
Pigment (5.0%)
Calcium carbonate (10.0%)
Toluene (5.0%)
Methyl ethyl ketone (10.0%)
Anti-skin agent (0.5%)
Drier (4.0%)
Surfactant (0.5%)
This paint is made by the process of blending. First, medium oil alkyd resin is added into the mixer. Then, pigments and calcium carbonate are added one by one. Afterward, drier is added to promote curing. Anti-skin agent and surfactant are then added to prevent skinning and improve the flow of the paint.
Finally, toluene and methyl ethyl ketone are added as solvents to dissolve the mixture and lower the viscosity of the paint.1.2 Considerations of the target site/substrate to which the chosen formulation is applied and its mechanism of action:In the case of wooden surfaces, the paint formulation must account for the absorption rate, texture, and porosity of the wood. A smooth finish requires a coating with a lower absorption rate and high film-building characteristics. Also, the paint must be able to resist moisture, UV light, and wear and tear.
Hence, a medium oil alkyd resin is used as it has excellent adhesion properties, can resist UV degradation, and is easy to apply. Additionally, pigments and titanium dioxide are used to provide excellent hiding power and improve the durability of the paint. Calcium carbonate is added as a filler to reduce the overall cost of the paint and to improve the paint's resistance to abrasion. The drier used is based on the type of alkyd resin used, which is chosen based on the expected drying time and curing process.
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Star Jewelry sells 800 units resulting in $75,000 of sales revenue, $32,000 of variable costs, and $20,000 of fixed costs. Breakeven point in units is 373 units 1024 units 596 units 968 units.
The breakeven point in units for Star Jewelry is 373 units for the given $75,000 of sales revenue, $32,000 of variable costs, and $20,000 of fixed costs.
Breakeven point in units is the number of units that a business should sell to cover all its costs.
The breakeven point can be calculated using the following formula:
Breakeven Point = Fixed Costs ÷ (Price per unit − Variable Costs per unit)
In this case, Star Jewelry sells 800 units resulting in $75,000 of sales revenue, $32,000 of variable costs, and $20,000 of fixed costs.
The sales revenue per unit can be calculated by dividing the sales revenue by the number of units sold:
Sales revenue per unit = Sales revenue ÷ Number of units sold
= $75,000 ÷ 800
= $93.75 per unit
The variable cost per unit can be calculated by dividing the total variable cost by the number of units sold:
Variable cost per unit = Total variable cost ÷ Number of units sold
= $32,000 ÷ 800
= $40 per unit
Now we can calculate the breakeven point in units using the formula:
Breakeven Point = Fixed Costs ÷ (Price per unit − Variable Costs per unit)
= $20,000 ÷ ($93.75 − $40)
= $20,000 ÷ $53.75
≈ 372.09 units
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A college student borrows $10,000 at the beginning of the school year at the end of August. The student graduates at the end of May and must begin paying off the loans 9 months after graduation. Interest accrues at a rate of 6% compounding monthly beginning from when the money is borrowed, how much will the student's monthly payments be if he pays off the loans in 15 years after his first payment
To calculate the monthly payments for the student's loan, we can use the formula for the monthly payment of a loan:
[tex]M = P * (r * (1 + r)^n) / ((1 + r)^n - 1)[/tex]
Where:
M = Monthly payment
P = Loan amount
r = Monthly interest rate
n = Total number of payments
First, let's calculate the monthly interest rate. The annual interest rate is 6%, and it is compounded monthly, so the monthly interest rate would be (6% / 12) = 0.005.
Next, we need to determine the total number of payments. The student graduates at the end of May and must begin paying off the loans 9 months after graduation, which means the first payment will be made 9 months after May. So, the total number of payments would be (15 years * 12 months) - 9 months = 171 months.
Now, we can plug in the values into the formula to calculate the monthly payment:
[tex]M = $10,000 * (0.005 * (1 + 0.005)^171) / ((1 + 0.005)^171 - 1)[/tex]
Calculating this equation gives us the monthly payment for the student's loan.
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The student's monthly payments for the loan, if paid off in 15 years after the first payment, will be approximately $79.05.
To calculate the monthly payments for the student loan, we need to determine the repayment period and use the loan amount and interest rate to calculate the monthly payment amount. Here are the step-by-step instructions:
Step 1: Determine the repayment period:
The student graduates at the end of May and must begin paying off the loan 9 months after graduation. If the student pays off the loan in 15 years after the first payment, we need to calculate the total number of months in the repayment period:
Repayment Period = 15 years * 12 months/year = 180 months
Step 2: Calculate the monthly interest rate:
The interest accrues at a rate of 6% compounding monthly. To calculate the monthly interest rate, we divide the annual interest rate by 12:
Monthly Interest Rate = 6% / 12 = 0.06 / 12 = 0.005
Step 3: Calculate the monthly payment amount using the loan amount, repayment period, and monthly interest rate:
We can use the formula for calculating the monthly payment on a loan:
Monthly Payment = (Loan Amount * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate) ^(-Number of Months))
In this case, the loan amount is $10,000, the monthly interest rate is 0.005, and the number of months is 180.
Monthly Payment = ($10,000 * 0.005) / (1 - (1 + 0.005) ^(-180))
Calculating this using a calculator or spreadsheet software, we find that the monthly payment amount will be approximately $79.05.
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The Harry and Belinda Johnson Family Might Have a Career Change
Harry has started out fine in his career as his responsibilities have increased since he began working there about five years ago. Belinda recently attended a conference for those in her stock brokerage field and by chance she dropped in at the "career search" room. She saw job opportunities there that fit her skill set that offered salaries of $81,000 to $83,000 in nearby Parkville, Missouri, only about a 30-minute commute away.
If a new employer offered Belinda $83,000 to move and the relative cost index for the new community was 119, how does that compare to her current salary of $80,000 in Kansas City assuming the index in the latter is 124? Round your answer to nearest whole dollar.
Parkville salary of $83,000 is equal to $ in buying power in Kansas City.
Do you think she should take the new job?
The Parkville salary as adjusted -Select-falls belowrises aboveItem 2 the Kansas City salary so she -Select-shouldshould notItem 3 take the new job.
Belinda's new salary in terms of buying power in Kansas City is $86,066.39.
The new salary of Belinda offered by the new employer in Parkville, Missouri = $83,000The relative cost index for the new community = 119The current salary of Belinda in Kansas City = $80,000
The relative cost index for Kansas City = 124
To calculate Belinda's new salary in terms of buying power in Kansas City:
The formula used to calculate new salary is: New Salary in old city = (New Salary in a new city / Relative Cost Index of the new city) × Relative Cost Index of the old city
New Salary in old city = ($83,000 / 119) × 124 = $86, 066.39
Therefore, This salary is higher than her current salary of $80,000 so she should take the new job.
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A borrower takes out a 10-year reverse mortgage not to exceed the amount of $500,000 with monthly withdrawals at an interest rate of 6%. The first two years of the loan have a monthly withdrawal of 2, 000 dollars. What would be the monthly payments be starting in year 3 in order to not exceed the desired loan balance?
The monthly payments starting in year 3 to not exceed the desired loan balance of $500,000 would be approximately $4,454.76.
To determine the monthly payments starting in year 3, we need to calculate the remaining loan balance after the first two years of withdrawals. Each month, the loan balance increases due to the accumulated interest. After year 2, the remaining loan balance can be calculated using the formula for compound interest:
Loan Balance = Principal * (1 + Monthly Interest Rate)^(Number of Months)
Let's break down the calculation:
Principal = $500,000 (initial loan amount)
Monthly Interest Rate = 6% / 12 = 0.005 (6% annual interest divided by 12 months)
Number of Months = (10 years - 2 years) * 12 months/year = 96 months
Loan Balance after 2 years = $500,000 * (1 + 0.005)^96 ≈ $646,491.57
To calculate the monthly payments starting in year 3, we can use the loan balance after 2 years as the new principal and calculate the monthly payment using the formula for an ordinary annuity:
Monthly Payment = Principal * Monthly Interest Rate / (1 - (1 + Monthly Interest Rate)^(-Number of Months Remaining))
Number of Months Remaining = 10 years - 2 years - 12 months = 96 months
Monthly Payment = $646,491.57 * 0.005 / (1 - (1 + 0.005)^(-96)) ≈ $4,454.76
The monthly payments starting in year 3, in order to not exceed the desired loan balance of $500,000, would be approximately $4,454.76. This calculation takes into account the initial loan amount, the interest rate, the withdrawal amounts during the first two years, and the remaining loan balance after 2 years.
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Capability Map, Value Stream and ArchiMate Modelling (Enterprise
Architecture)
To create an enterprise architecture describing a service
delivery business and IT systems, based on a background of an
A
- Case study: The Department of Human Services. Task 1: Business architecture in developing a characterisation of what an organisation does, through business capability models, and high-level process
The Department of Human Services (DHS) is an Australian agency responsible for providing government services to the citizens of Australia. It offers various services such as aged care, child support, disability services, and health payments to name a few.
The agency aims to provide these services in a customer-centric way, that is, ensuring the best possible customer experience while keeping their security and privacy intact. To achieve this, the agency needs an effective enterprise architecture based on Capability Map, Value Stream, and ArchiMate Modelling.Capability Map:To develop a business architecture, the first step is to create a capability map.
Capability Map, Value Stream, and ArchiMate Modelling are critical components of an effective enterprise architecture that can help DHS to achieve its goal of providing customer-centric services while maintaining security and privacy. By developing a comprehensive capability map, a value stream, and an ArchiMate model, DHS can gain a deeper understanding of its enterprise architecture and optimize its resources to improve its service delivery process.
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Question 6 Question 7 The pace of globalization has slowed and, in most instances, declined in part because of In addition to avoidance and adaptation, two other means of risk reduction available to managers are and Question 9 Which of the following is an example of a customs union? Question 10 Which of the following is NOT a way to deal with political risk?
Question 6: The pace of globalization has slowed and, in most instances, declined in part because of;The pace of globalization has slowed down due to several reasons, some of which are mentioned below:- Political tensions among countries- Economic instability - Domestic instability in many countries- Trade wars- COVID-19 pandemic.
Question 7: In addition to avoidance and adaptation, two other means of risk reduction available to managers are;The other means of risk reduction available to managers are: Mitigation - Reducing the severity of the risk Transfer - Passing on the risk to another party.
Question 9: Which of the following is an example of a customs union?An example of a customs union is the European Union (EU).
Question 10: A way to deal with political risk includes, but is not limited to:- Avoidance- Adaptation- Mitigation- Acceptance But innovation is NOT a way to deal with political risk.
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A project to develop a county park has an actual cost in month 17 of $350,000, a planned cost of $475,000, and a value completed of $300,000. Find the cost and schedule variances and the three indexes. ("three indices" = CPI, SPI, and CSI) o Complete calculations for the project as a whole (DO not do it for individual activities)
The complete calculation for the project is:
Cost variance = -50000
Schedule variance = -175000
Cost performance index = 0.8571
Schedule performance index =0.6316
Cost schedule index = 0.5413
The given information is:
AC= Actual cost = $ 350,000
PV = Planned value = 475,000
EV = Earned Value = $ 300,000
AT = Actual time = 17 months
Cost variance = EV-AC = 300000-350000 = -50000
Cost variance = -50000
Schedule variance = EV – PV =300000-475000 = -175000
Schedule variance = -175000
Cost performance index (CPI) = EV/AC = 300000/350000 = 0.8571
Cost performance index = 0.8571
Schedule performance index (SPI) = EV/PV = 300000/475000 = 0.6316
Schedule performance index=0.6316
Cost schedule index = CPI*SPI = 0.8571*0.6316 = 0.5413
Cost schedule index = 0.5413
Therefore,
The Cost variance = -50000
The Schedule variance = -175000
The Cost performance index = 0.8571
The Schedule performance index =0.6316
The Cost schedule index = 0.5413
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The results for the cost and schedule variances, as well as the three indices, for the entire project, are as follows:
Cost Variance (CV) = -$50,000
Schedule Variance (SV) = -$175,000
Cost Performance Index (CPI) ≈ 0.857
Schedule Performance Index (SPI) ≈ 0.632
Cost Schedule Index (CSI) ≈ 0.542
To calculate the cost and schedule variances, as well as the three indices (CPI, SPI, and CSI), for the entire project, you can use the following formulas:
Cost Variance (CV) = Earned Value (EV) - Actual Cost (AC)
Schedule Variance (SV) = Earned Value (EV) - Planned Value (PV)
Cost Performance Index (CPI) = EV / AC
Schedule Performance Index (SPI) = EV / PV
Cost Schedule Index (CSI) = CPI * SPI
Step 1: Given values
Actual Cost (AC) = $350,000
Planned Cost (PV) = $475,000
Value Completed (EV) = $300,000
Step 2: Calculate the Cost Variance (CV)
CV = EV - AC
CV = $300,000 - $350,000
CV = -$50,000
Step 3: Calculate the Schedule Variance (SV)
SV = EV - PV
SV = $300,000 - $475,000
SV = -$175,000
Step 4: Calculate the Cost Performance Index (CPI)
CPI = EV / AC
CPI = $300,000 / $350,000
CPI ≈ 0.857
Step 5: Calculate the Schedule Performance Index (SPI)
SPI = EV / PV
SPI = $300,000 / $475,000
SPI ≈ 0.632
Step 6: Calculate the Cost Schedule Index (CSI)
CSI = CPI * SPI
CSI ≈ 0.857 * 0.632
CSI ≈ 0.542
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On 4 April 2020 Kofi Mensah's received his bank statements for the month ended 31 March 2020. The bank statement showed a balance of GHé450,000 (overdraft) as at 31 March whilst the cash book showed a balance of GH¢1,660,000 (debit) as at that date. Upon examination of the cash book and the bank statement the following were discovered: Bank charges of GHe 184,000 had not been recorded in the cash book. The debit side of the cash account had been undercast by GH 200,000 The total on the receipts side of the cash account of GHé 2,475,000 had been forward as GH 4, 275,000. A cheque received by Mensah for GHe 220,000 had bounced. Bank charges of GHe 184,000 had been omitted from the cash account. Unpresented cheques totalled GH 520,000 and uncleared lodgement GH 626,000 Required: i) Prepare the adjusted cash book for the month of March 2020. (8 marks) ii) Prepare a statement on 31 March 2020 reconciling the adjusted cash book with the bank statement balance. (6 marks) iii) Explain TWO (2) reasons for preparing bank reconciliation on regular basis. (2 marks) b) A petty cash book is created to facilitate small payments in a business or organisation. It is meant to meet the day to day expenses and it is entrusted into the hands of the petty cashier. Required: Prepare a brief note to Kofi Mensah explaining how the petty cash book operates.
i) Adjusted Cash Book for the Month of March 2020
Cash Book 1,660,000Balance b/f 450,000Payments: Sales 4,275,000 Cheque 220,000Bank interest 32,000 Bank charges 184,000Other receipts 169,000 Standing order 386,0001,931,000 790,000 Balance c/d 1,460,0002,391,000 2,240,000ii) Reconciliation Statement for Kofi Mensah on 31 March 2020 Balance as per bank statement GH¢ 450,000
Add: Represented cheques GH¢ 520,000
Less: Uncleared lodgements GH¢ 626,000
Adjusted balance as per bank statement GH¢ 344,000
Balance as per Cash Book GH¢ 1,460,000
Less: Bank charges not yet entered GH¢ 184,000
Cheque returned by bank GH¢ 220,000
Corrected balance on cash book GH¢ 1,056,000 Difference (overdraft) GH¢ 712,000
Reasons for preparing bank reconciliation on a regular basis are:
To verify whether all transactions relating to the cash account have been recorded in the bank statement.
To confirm whether all transactions relating to the bank account have been recorded in the cash account.
To know the actual balance in the bank account.
To detect and rectify errors or omissions in the cash book.
To reconcile the differences that exist between the cash book and the bank statement.To check and confirm that cheques issued but not presented have been recorded.
To ascertain the causes of unprecedented cheques and uncleared lodgements so that appropriate action may be taken.
To detect fraud or forgery by a third party. To ensure that there is no misappropriation of funds.
b) Petty Cash Book: The petty cash book is used to make payments for small and frequent expenses such as carriage, postage, stationery, minor repairs, etc. The following points are important to note about the petty cash book:
It is maintained by the petty cashier of the company.
It is kept in an imprest system meaning it is a fixed amount for a particular period of time.
It is generally a small notebook with columns such as date, details of payment, voucher number, amount, and the running balance.
The cashier is responsible for keeping a record of the transactions of petty cash expenditures made during the period and at the end of the period, the balance in the book is counted and compared with the amount of cash in hand.
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Anansi Ghana Limited is a Ghanaian registered mining and exploration company that has successfully brought its mining project in the Nangodi, in the Upper East Region to Mine development stage. The company plans to develop an open pit gold mine with ore grading on the average 1.5 oz/t. The following are the mine specifications:
Mill capacity: 250 000 tonnes per year
Pre-production period: 2 years
Productive life: 10 years
Gold price $1700/oz
Capital Cost: Mining equipment and infrastructure: $300 million made up as follows: year one US$150 million and second year of pre-preproduction US$150 million
Operating Cost per annum: $ 400 million
Annual interest on bank loans US$50 million
For depreciation and tax purposes use the fiscal regime of Ghana’s Minerals and Mining Act, Act 703, 2006
Remember the company is allowed to carry forward losses with depreciation allowances as prescribed by Act 703.
Answer the following questions
i. List all applicable taxes and tax incentives as provided in Act 703.
ii. Compute the following on after-tax basis assuming the cost of capital is 12%.
a) Total Revenue
b) Non-Discounted Payback Period
c) Discounted Payback Period
d) Benefit-cost ratio of the investment
e) Net present value
f) Present Value Ratio
g) Rate of Return
h) Total Royalties expected for the life of the project.
i) Total Discounted Corporate income taxes expected for the life of the project
j) Number of years of effect tax holidays (number of years the company does not pay taxes)
i) iii) Assess the sensitivity of gold price, capital cost and operating costs on project economics or viability. Illustrate you answer with the appropriate spider diagram.
The applicable taxes and tax incentives provided in Ghana's Minerals and Mining Act, Act 703, are as follows:
Corporate Income Tax: The Act imposes a corporate income tax on mining companies based on their chargeable income. The standard rate for corporate income tax is currently 35%.
Capital Allowances: The Act allows for capital allowances, which are deductions that can be claimed for the wear and tear or depreciation of capital assets used in mining operations. These allowances help reduce the taxable income of the company.
Loss Carryforward: The Act allows mining companies to carry forward losses incurred in previous years and offset them against future profits for tax purposes. This provision helps to mitigate the impact of losses on taxable income.
Royalties: Mining companies are required to pay royalties on their mineral production. The rate of royalties may vary depending on the specific mineral being extracted and is determined by the Minerals Commission.
Environmental Protection and Monitoring Levy: The Act imposes an environmental protection and monitoring levy on mining companies to support environmental management and monitoring activities related to mining operations.
Withholding Tax: Mining companies are subject to withholding tax on certain payments made to non-resident contractors or service providers. The withholding tax rates are specified under the Ghanaian tax laws.
It's important to note that the specific rates and provisions may be subject to change based on any amendments or updates to the Minerals and Mining Act or other tax regulations in Ghana.
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Effective Marketing Materials - Creating the Application That They Actually Want to See - List at least three changes you would like to make to your Resume. Explain why.
As a marketing professional, it is vital to create effective marketing materials that resonate with the target audience. One way to achieve this is to create an application that they actually want to see.
The first change I would make is to highlight my achievements and accomplishments more prominently. This means not just listing my job responsibilities, but also including specific results and outcomes I achieved in previous roles. By doing this, I can demonstrate my value to potential employers and show how I can make a meaningful impact on their business.
By doing this, I can make a strong first impression and catch the attention of potential employers. By highlighting my accomplishments, tailoring it to each specific job application, and improving the design, I can increase my chances of getting hired and achieve my career goals.
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What is the price of a 3 -year bond with a 8% coupon rate and face value of $100 ? The bond is trading at a yield of 8%. Coupons are paid semi-annually. Assume semi-annual compounding. Round your answer to the nearest cent ( 2 decimal places).
The price of the bond as $81.87 as per the information provided through the calculation.
In order to calculate the price of a 3-year bond with a 8% coupon rate and face value of $100 which is trading at a yield of 8% coupons are paid semi-annually, we can use the formula for bond pricing which is given as;
PV = PMT1/(1+r)^1 + PMT2/(1+r)^2 + ... + PMTn/(1+r)^n + FV/(1+r)^n
wherePV = Present value of bondPMT1, PMT2,... PM
Tn = coupon payments
FV = face value of bond
r = periodic interest rate (yield/n)
For the given bond,PV = PMT1/(1+r)^1 + PMT2/(1+r)^2 + ... + PMTn/(1+r)^n + FV/(1+r)^n
= 4/1.04 + 4/1.04^2 + 4/1.04^3 + 104/1.04^6
= 3.783 + 3.557 + 3.342 + 71.186
= 81.868
Round off to the nearest cent, we get the price of the bond as $81.87.
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Case 4-3 Family Games, Inc. (a GVV case) Family Games, Inc., is a privately owned company with annual sales from a variety of wholesome electronic games that are designed for use by the entire family. The company sees itself as family-oriented and with a mission to serve the public. However, during the past two years, the company reported a net loss due to cost-cutting measures that were necessary to compete with overseas manufacturers and distributors.
Family Games, Inc. must find a balance between cost-cutting and maintaining product quality to overcome financial challenges and continue providing wholesome entertainment for families.
Family Games, Inc. is a privately owned company that specializes in producing wholesome electronic games catering to the entire family.
With a strong focus on being family-oriented and a mission to serve the public, the company aims to provide quality entertainment options. However, over the past two years, Family Games, Inc. has faced financial challenges, reporting a net loss.
The primary reason for this loss can be attributed to the necessity of implementing cost-cutting measures in order to remain competitive with overseas manufacturers and distributors.
The global market has become increasingly competitive, particularly with the rise of low-cost production alternatives abroad. In order to stay afloat in this landscape, Family Games, Inc. had to make difficult decisions to reduce expenses.
While these cost-cutting measures have helped the company survive, they have come at a financial cost. The net loss indicates that the savings from the cost-cutting efforts have not yet been sufficient to offset the challenges faced by the company.
Family Games, Inc. will need to assess its strategies moving forward to find a balance between cost-cutting measures and maintaining the quality and appeal of its products.
Exploring alternative sourcing options, streamlining operations, and focusing on innovation may help the company regain its financial stability while still fulfilling its mission to provide wholesome entertainment for families.
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Where can contribution margin income statements be used?
For a manufacturer, under what condition will operating income be the same regardless of whether a traditional income statement or Contribution margin income statement is used?
Why are contribution margin statements desirable?
The Contribution margin income statements can be used in various ways and for various purposes, some of which include; a) To calculate the break-even point. This is the point where the total revenue from the sale of a product or service equals the total costs of producing that product or service.
For a manufacturer, operating income will be the same regardless of whether a traditional income statement or Contribution margin income statement is used when the fixed costs are equal. This is because, in both methods, the total sales are deducted by the total variable costs to arrive at the contribution margin, which is then used to cover the fixed costs.
They provide information on the profitability of individual products, which is useful in decision-making, such as pricing, marketing, and product mix. Additionally, they show the relationship between costs, sales, and profits, making it easier to analyze and predict the effects of changes in sales volume on operating profit.
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The price elasticity of demand for a good is 0.450.45. This product could be a necessity True False
The price elasticity of demand for a good refers to the percentage change in quantity demanded divided by the percentage change in price of that good. If the value of the price elasticity of demand for a good is less than 1, the good is considered to be inelastic.
Conversely, if the value is greater than 1, the good is considered to be elastic. If the value of price elasticity of demand for a good is exactly equal to 1, the good is said to have unit elasticity.
When the price elasticity of demand for a good is between 0 and 1, then the good is considered to be a necessity because the quantity demanded will change only slightly in response to a change in the price of the good. Therefore, if the price elasticity of demand for a good is 0.45, the good is considered to be a necessity.
This is because the percentage change in the quantity demanded is less than the percentage change in price of the good, indicating that demand is not very sensitive to changes in price.
Therefore, the statement "This product could be a necessity" is true.
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Gashler Company sells motor oil by the case to automobile repair shops and dealerships. Each case of oil costs Gashler $15. The facility costs are $150,000 per period. Each period, Gashler sells approximately 100,000 cases of motor oil at $25 per case. California Classic Cars is requesting an order of 30,000 cases of motor oil in the next period at a price of $20 per case. Since Gashler has no excess capacity, accepting this order means that only 70,000 cases of motor oil can be sold through normal channels. Should Gashler accept this offer? Why or why not? Would your answer change it Gashler had excess capacity of 20,000 cases? Why or why not?
Gashler Company sells motor oil by the case to automobile repair shops and dealerships. Each case of oil costs Gashler 15. The facility costs are 150,000 per period.
Each period, Gashler sells approximately 100,000 cases of motor oil at 25 per case. California Classic Cars is requesting an order of 30,000 cases of motor oil in the next period at a price of 20 per case. Since Gashler has no excess capacity, accepting this order means that only 70,000 cases of motor oil can be sold through normal channels. Should Gashler accept this offer?
Why or why not?
It is advisable that Gashler should accept the offer from California Classic Cars. This is because accepting the order will generate revenue that will add to the company's bottom line.
However, accepting the offer will mean Gashler will lose out on some revenues from its normal sales channels as the order will reduce the company's normal sales channel to 70,000 cases instead of the usual 100,000 cases.
In calculating the cost of accepting the order, Gashler should consider the contribution margin of the order which is the difference between the selling price of the order and the cost of producing the order. Selling to California Classic Cars for 20 per case gives a profit of 5 per case since the production cost of a case of oil is 15 and the cost of the facility is sunk meaning it does not factor into the cost of production.
Therefore, the total profit Gashler will make from selling 30,000 cases of motor oil to California Classic Cars will be (20−15)×30,000=150,000.Would your answer change it Gashler had excess capacity of 20,000 cases?
Why or why not?
If Gashler had excess capacity of 20,000 cases, it could sell the extra capacity to California Classic Cars without hurting its normal sales channels. Therefore, Gashler should accept the order from California Classic Cars and also produce the extra 20,000 cases to meet the additional demand as this will generate more revenue for the company.
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Consider a first-price auction between two bidders for a box of money.
The box is equally likely to contain $0 or $100. Suppose that bidder 1
knows how much is in the box, and bidder 2 does not.
i) What strategies are dominated for bidder 1?
(ii) Given that 1 will not play a dominated strategy, what strategies are
dominated for bidder 2?
(iii) Before participating in the auction, what is bidder 2’s best guess of
what the box is worth? Should bidder 2 bid this amount? Why or
why not?
Bidder 2's dominant strategy in the first-price auction for a box of money is to bid slightly above $50 to ensure a positive expected payoff if they win.
Given that in a first-price auction between two bidders for a box of money, the box is equally likely to contain $0 or $100 and bidder 1 knows how much is in the box while bidder 2 does not, the strategies that are dominated for bidder 1 are those strategies that would lead to an expected pay-off that is worse than that obtained from a different strategy (mixed or pure) that bidder 1 could choose regardless of what bidder 2 plays.
For instance, if bidder 1's dominant strategy is to bid $50 but they bid $60 instead, bidder 1 has a dominant strategy. So, bidder 1 will not play that dominant strategy, rather they will opt for a mixed strategy that will ensure an equal probability of bidding $0 or $100.
Now, given that 1 will not play a dominated strategy, the strategies that are dominated for bidder 2 are strategies that would lead to an expected pay-off that is worse than that obtained from a different strategy (mixed or pure) that bidder 2 could choose regardless of what bidder 1 plays.
Therefore, the strategy that is dominant for bidder 2 is bidding for anything less than $50. This is because if the value of the box is $100, bidder 2 will make a loss if they bid less than $50 since the winning bidder will pay the amount they bid. If the value of the box is $0, bidder 2 will also make a loss if they bid less than $50 since they will still pay the amount they bid, even though the box is empty.
Therefore, the best strategy for bidder 2 is to bid $50 since it is not dominated by any other strategy and will give the highest expected payoff no matter the value of the box. Bidder 2's best guess of what the box is worth before participating in the auction is $50, which is the expected value of the box.
However, bidder 2 should not bid this amount because if they bid exactly $50, their expected pay-off will be zero irrespective of the value of the box. This is because the winning bidder will pay the amount they bid and the value of the box will be subtracted from this amount. Hence, bidder 2's expected pay-off will be zero if they bid $50. Instead, bidder 2 should bid slightly above $50 to have a positive expected pay-off if they win the auction.
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