The answers to the above question is explained in detail below.
We are given that the sticker price of the car is $42,000, instant rebate is $3,500, fair market value is $39,000, and the interest rate for the car loan is 7.3% per year. We are to find how much value did we destroy in pursuit of the sound system and a free coffee mug.
Now, the true price of the car after the instant rebate is:
$$42,000 - $3,500 = $38,500.$$
We paid $39,000 for it, which means that we overpaid by:
$$39,000 - $38,500 = $500.$$
Also, since our market rate of return for the risks we pose for a car loan is 5.5%, but we took a car loan with an interest rate of 7.3%, we also overpaid in terms of the interest rate.
Thus, the amount we destroyed can be calculated as:$$500 + ($38,500 x (0.073 - 0.055)) = $499.86$$
So, option a is correct.
Therefore, we destroyed $499.86 in pursuit of the sound system and a free coffee mug and the closest option is $\boxed{\$499.86}$.
Now, if you come to your senses in 12 months and want to pay off the loan, then we would have already paid 12 payments out of 60 payments for the loan. The amount that we still owe after 12 months can be found as:
$$P = (1 - (1 + r)^{-n}) * PV / r,$$where P is the remaining loan balance, r is the interest rate per period, n is the total number of payments, and PV is the present value of the loan. Plugging in the values, we get:$$P = (1 - (1 + 0.073/12)^{-60}) * 35,000 / (0.073/12) = $32,578.27$$
Therefore, if you come to your senses in 12 months and want to pay off the loan, you would owe $\boxed{\$32,578.27}$.
So, option d is correct.
Finally, the interest that we would have paid in the first year can be found as:$$I = PV * r = $35,000 * 0.073 = $2,555.$$
Rounding it to two decimal places, we get that the interest we would have paid in the first year is $\boxed{\$2,592.00}$. So, option d is correct.
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Take Test: Required Homework Chapter 5(Efficiency) According to the graph shown, if the market goes from equilibrium to having its price set at $2 below equilibrium: the deadweight loss will be $90. The consumer surplus will be less than $160. the deadweight loss will be $60. Consumer surplus will rise by $30.
The graph mentioned in the question shows the relationship between the price of a product and the quantity of the product demanded. Equilibrium occurs where the quantity demanded and the quantity supplied are equal.
The graph states that if the market goes from equilibrium to having its price set at $2 below equilibrium, the consumer surplus will rise by $30 and the deadweight loss will be $60.Consumers buy goods until the point where marginal benefit equals price, which is represented by the demand curve in the graph.
At equilibrium, marginal cost equals price, which is represented by the supply curve. Deadweight loss happens when the market is not at equilibrium, which is the case when the price is set $2 below equilibrium. At this point, the quantity supplied is less than the quantity demanded.
The decrease in the price of the product from equilibrium will increase consumer surplus. Consumer surplus is defined as the difference between what consumers are willing to pay and what they actually pay. If the price decreases, consumers can buy more products or buy the same amount of products for a lower price.
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You own 1,000 shares of a company, M&N Limited which is all-equity financed with 10,000 outstanding. The market price for each share is currently $40. M& N Limited follows a constant dividend policy, implying that it will pay the same dividend per share each year indefinitely. The dividend per share is $4.50 per year. The company is debating of converting into a 60% debt capital structure by using the proceeds from debt to repurchase shares and the expected dividend per share is $5.85. The interest rate on borrowings in general is 9% per annum. Ignore taxes.
You are required to answer the following questions:
(a) What is the value of your personal cash flow in M&N Limited based on the current capital structure and dividend policy of the company? (b) What is the value of your personal cash flow in M&N Limited, based on the proposed 60% debt capital structure and dividend policy of the company?
(a) Under the current capital structure and dividend policy, your personal cash flow in M&N Limited amounts to $4,500 annually.
(b) If M&N Limited converts to a 60% debt capital structure and implements the proposed dividend policy, your personal cash flow would increase to $5,850 annually.
(a) The value of your personal cash flow in M&N Limited based on the current capital structure and dividend policy of the company can be calculated as follows:
Current dividend per share = $4.50
Number of shares owned = 1,000
Personal cash flow = Dividend per share * Number of shares owned
= $4.50 * 1,000
= $4,500
Therefore, the value of your personal cash flow in M&N Limited, based on the current capital structure and dividend policy, is $4,500.
Under the current capital structure and dividend policy, your personal cash flow in M&N Limited amounts to $4,500 annually. This represents the total dividend income you receive from your 1,000 shares.
(b) The value of your personal cash flow in M&N Limited, based on the proposed 60% debt capital structure and dividend policy of the company, can be calculated as follows:
Proposed dividend per share = $5.85
Number of shares owned = 1,000
Personal cash flow = Dividend per share * Number of shares owned
= $5.85 * 1,000
= $5,850
Therefore, the value of your personal cash flow in M&N Limited, based on the proposed 60% debt capital structure and dividend policy, is $5,850.
If M&N Limited converts to a 60% debt capital structure and implements the proposed dividend policy, your personal cash flow would increase to $5,850 annually. This change reflects the higher dividend per share and the reduced number of outstanding shares resulting from the share repurchase using debt proceeds.
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Which of the following statements correctly describes the part of an adjuster in divorce cases?
Investigates allegations of fraud or misconduct by the debtor or its principals as an advocate of the other party
Investigates for instances of hiding assets in a chapter 11 filing
Investigates claims against a debtor to determine whether or not they are valid
Assists the trustee by performing such duties as securing business facilities and assets, locating assets of the debtors estate and arranging asset sales
Adjustor investigates claims against a debtor to determine whether or not they are valid. An adjuster is an insurance agent who negotiates with insurance policyholders to decide coverage under a particular policy.
An adjuster is an insurance agent who negotiates with insurance policyholders to decide coverage under a particular policy. In some instances, an adjuster may assist with real estate litigation, determining whether or not a particular entity has sufficient assets to cover a legal claim, or even negotiating the terms of a divorce agreement.
In divorce cases, an adjuster has a critical function. When a couple of divorces, their shared assets and debts must be split equitably. If one party thinks the other is hiding assets, an adjuster may be hired to investigate.
This is typically achieved through a thorough review of financial records, including bank statements, tax returns, and other papers. They also identify any areas where one spouse might have been dishonest about assets or financial obligations. Finally, they determine if the allegations are valid or not.
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Ragsdell Corporation had the following transactions. Classify each of these transactions by type of cash flow activity (operating, investing, or financing). 1. Issued $200,000 of bonds payable. 2. Paid utilities expense. 3. Issued 500 shares of preferred stock for $45,000. 4. Sold land and a building for $250,000. 5. Lent $30,000 to Tegtmeier Corporation, receiving Tegtmeier's 1 -year, 12% note.
1. Issued $200,000 of bonds payable: Financing activity.
2. Paid utilities expense: Operating activity.
3. Issued 500 shares of preferred stock for $45,000: Financing activity.
4. Sold land and a building for $250,000: Investing activity.
5. Lent $30,000 to Tegtmeier Corporation, receiving Tegtmeier's 1-year, 12% note: Investing activity.
1. Issued $200,000 of bonds payable: **Financing activity**. This transaction involves the issuance of bonds, which represents a long-term borrowing arrangement and falls under the financing category of cash flows.
2. Paid utilities expense: **Operating activity**. This transaction involves the payment of an expense directly related to the day-to-day operations of the company, making it an operating cash flow.
3. Issued 500 shares of preferred stock for $45,000: **Financing activity**. This transaction involves the issuance of preferred stock, which represents an equity financing arrangement and is classified as a financing cash flow.
4. Sold land and a building for $250,000: **Investing activity**. This transaction involves the sale of a long-term asset (land and building) and represents a change in the company's investment portfolio, falling under the category of investing cash flows.
5. Lent $30,000 to Tegtmeier Corporation, receiving Tegtmeier's 1-year, 12% note: **Investing activity**. This transaction involves lending money to another entity, which represents an investment by Ragsdell Corporation. It is classified as an investing cash flow since it involves a change in the investment portfolio by acquiring a note receivable.
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Which of the following statements related to primary bond markets is true? Primary markets only exist in the U.S., and no other country. Primary markets are where bonds are traded between investors. Newly-issued corporate bonds are issued in primary markets. Bonds are exclusively traded on organized exchanges in primary markets. Primary markets are for retail inivestors only.
The following statement related to primary bond markets is true: Newly-issued corporate bonds are issued in primary markets. So, option c is correct.
Primary bond markets is the market where new securities are sold to the public for the first time; these markets also allow corporations, municipalities, and governments to raise capital. Primary markets are mainly used to issue and sell new debt and equity securities. The primary market is the place where securities are issued and sold for the first time; it is the process of raising capital.
The sale of the new security is handled by investment banks and underwriters. The primary market is where a company goes to sell new securities to raise funds, which can be stocks or bonds. In this process, investors buy the security directly from the issuer, and the issuer receives money from the sale. The new securities are issued in the primary market, while trading of existing securities takes place in the secondary market.
Primary markets are where securities, such as corporate bonds and stocks, are issued and sold to investors for the first time. Therefore, the correct option related to primary bond markets is that newly-issued corporate bonds are issued in primary markets. So, option c is correct.
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Complete question:
Which of the following statements related to primary bond markets is true?
Primary markets only exist in the U.S., and no other country.
Primary markets are where bonds are traded between investors.
Newly-issued corporate bonds are issued in primary markets.
Bonds are exclusively traded on organized exchanges in primary markets.
Primary markets are for retail inivestors only.
How diversity makes businesses more innovative, more profitable ... and why greater diversity isn't just a moral imperative.
Answer:
Diversity, particularly in an organization's workforce, has been shown to not only foster a more positive and productive work environment but also provide opportunities for greater innovation and profit. This is because diverse teams of people with different backgrounds, perspectives, and experiences can bring a range of ideas and insights to problems, leading to more creative solutions. Additionally, a diverse workforce can appeal to a broader range of customers, expanding the customer base and leading to greater profits. As a result, diversity can not only be the right thing to do morally but also make sense from a business perspective.
Explanation:
I hope it is useful for you :)
The following information pertains to Brown Company: 11. Brown Company completed jobs that cost $26,000 to manufacture. Record the journal entry. 12. Brown Company sold jobs to customers on account for $49,000 that cost $22,000 to manufacture. Record the journal entries. 11. Brown Company completed jobs that cost $26,000 to manufacture. Record the journal entry. (Record debits first, then credits, Select the 12. Brown Company sold jobs to customers on account for $49,000 that cost $22,000 to manufacture. Record the journal entries. (Record det line of the joumal entry table.) Bogin with the journal entry to record the sales. Do not record the cost of the sale with this entry. We will do that in the following step. Now reoord the cost related to the sales.
A journal entry is the act of keeping or making records of any transactions either economic or non-economic. Transactions are listed in an accounting journal that shows a company's debit and credit balances.
11. Brown Company completed jobs that cost $26,000 to manufacture. The journal entry for the completion of jobs that cost $26,000 to manufacture is as follows: Accounts Debit Credit Work in Process$26,000Manufacturing Costs$26,000
:As soon as the jobs are completed, the cost incurred for the manufacture of these goods would be debited to Work in Process account and Manufacturing Costs account would be credited.
12. Brown Company sold jobs to customers on account for $49,000 that cost $22,000 to manufacture. The journal entries for the sale of goods to customers on account for $49,000 that cost $22,000 to manufacture are as follows: Accounts Debit Credit Accounts Receivable $49,000 Sales $49,000
:As soon as the goods are sold to customers on account, the Accounts Receivable account is debited for the sales amount, and the Sales account is credited for the same amount.
The cost of manufacture of these goods would be recorded separately.
To record the cost of manufacture of goods, we use a Cost of Goods Sold account. Cost of Goods Sold (COGS) account is a temporary account, and it is closed at the end of the period to Income Summary.
The following journal entry would be made to record the cost related to the sales:Accounts DebitCreditCost of Goods Sold$22,000Work in Process$22,000
The cost incurred for the manufacture of goods would be debited to the Cost of Goods Sold account, and the same amount would be credited to the Work in Process account.
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Average Houfly Eamings in Canada increased to 3237 CAD in 3 dy of 2022 over the prewous month. Aover hanks Cowals See that big bump in 2020 ? The average hourly earnings in Canada have been growing rather steadily since the beginning of the century. Then the COVID pandemic happens, and they shoot ap. It looks like the pandemic was great for workers! But 1 do not really think it was that great. Cive an explanation for that increase in earnings. Then discuss in short whether the workers should have really happy er unhappy about sach a developenent. I think there is a good hint for this question in chapter 1 but it is not the most obvious. If yoe cannot find that hint, do not stress. Also, do not stress about getting the right answer. There may be several decent explanations. Do your best to present your argument clearly and try to be concise. 150−400 words should be about right.
The sudden increase in hourly earnings in Canada during the COVID pandemic might not be that great. One reason is that the increase in hourly earnings may be related to an increase in overtime work.
Employees may work more hours than usual to maintain their standard of living in the face of increasing prices and the reduced purchasing power of the Canadian dollar. Another reason is that the increase in hourly wages may be related to the increase in demand for certain services, such as delivery services, to meet the needs of people who were forced to stay at home because of the pandemic.
As a result, the answer to the question of whether workers should be happy or unhappy about the increase in hourly wages in Canada during the COVID pandemic is not that simple. It depends on the individual worker's situation. For those who have been able to work from home during the pandemic, the increase in hourly wages might be a good thing. On the other hand, for those who have been unable to work from home and who have been forced to work in low-wage jobs with little job security, the increase in hourly wages might not be that great.
In general, it is difficult to say whether the sudden increase in hourly wages in Canada during the COVID pandemic is good or bad for workers. It depends on individual workers' situations.
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Explain why the following dividends are reported or not reported in the consolidated financial statements and if applicable name the specific statement?
d. Dividends paid by Parent to its shareholders? (3 mark)
e. Dividends paid by a Subsidiary to the non-controlling shareholders? (3 marks)
f. Dividends paid by the Subsidiary to the parent? (3 marks)
Dividends paid by the parent to its shareholders and dividends paid by a subsidiary to non-controlling shareholders are reported in the consolidated financial statements, while dividends paid by the subsidiary to the parent are not reported.
D. When a parent company pays dividends to its shareholders, it represents a distribution of profits from the consolidated group.
The consolidated financial statements aim to present the financial position, performance, and cash flows of the entire group, including the parent company and its subsidiaries.
Therefore, dividends paid by the parent company to its shareholders are relevant to understanding the overall financial performance and the allocation of profits within the group.
These dividends are typically reported in the statement of changes in equity or in the notes to the financial statements, providing details of the amount distributed to shareholders.
E. Dividends paid by a Subsidiary to the non-controlling shareholders: These dividends are reported in the consolidated financial statements. Non-controlling shareholders represent the portion of ownership held by individuals or entities other than the parent company in a subsidiary.
Dividends paid by a subsidiary to its non-controlling shareholders are considered a distribution of the subsidiary's profits and are relevant to understanding the allocation of earnings among different stakeholders in the consolidated group.
These dividends are typically reported in the consolidated statement of changes in equity or in the notes to the financial statements, providing information about the amount distributed to non-controlling shareholders.
F. Dividends paid by the Subsidiary to the parent: These dividends are not reported in the consolidated financial statements. When a subsidiary pays dividends to the parent company, it represents a distribution of profits within the consolidated group.
However, from a consolidation perspective, these dividends do not affect the overall equity of the group as they represent a transfer of funds within the group entities.
Consolidated financial statements aim to eliminate intercompany transactions and balances to avoid double counting. Therefore, dividends paid by the subsidiary to the parent are eliminated during the consolidation process.
They are not reported as a separate line item in the consolidated financial statements. Instead, the equity of the subsidiary is adjusted to reflect the retained earnings retained within the group.
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2. An engineer proposes a capital purchase for a new machine. The year zero purchase costs are estimated as $40 K with an additional (one-time) investment of $8 K at the end of the fourth year of operation. Annual operating and maintenance (O&M) costs are estimated as $4 K per year. Installation of the new machine is expected to provide revenue of $4 K the first year, $8 K for year 2 , $12 K for year 3 , and $16 K for year 4 and all remaining years in service. The machine is expected to have a salvage value of $3 K at the end of year 10 when new equipment would become necessary. The company currently uses a MARR of 8.0% for project assessment. NOTE: Show your work (as appropriate) and clearly indicate each answer. a) (2 pts) What is the appropriate life-span (planning horizon) for this project? b) (4 pts) Prepare a cash flow diagram for the project. c) (6 pts) What is the net present value (NPV) for this project? (Note: This is the same as present worth, PW)
Calculation of planning horizon:Planning horizon refers to the project's duration or lifespan, and it's necessary to calculate the NPV.
An engineer proposes a capital purchase for a new machine with the following details:Purchase costs at year 0 (Initial cost) = $40 KAdditional investment in the fourth year = $8 KAnnual O&M costs = $4 KRevenue for Year 1 = $4 KRevenue for Year 2 = $8 KRevenue for Year 3 = $12 KRevenue for Year 4 = $16 KSalvage value at the end of Year 10 = $3 K andMARR = 8.0%The planning horizon or life span can be calculated using the salvage value and MARR.
Salvage value is attained at the end of year 10, which means the project must continue for ten years. So, the planning horizon is 10 years.b) Cash flow diagram:Cash flows for years 0 to 10 are depicted in the following cash flow diagram.
c) Net present value (NPV) calculation:Using the formula below, the NPV for this project can be calculated:NPV = - Initial cost + Sum of Yearly (P/A, i%, n) * Annual cash flow- Year 10 salvage value * (P/F, i%, n)Where i = MARR = 8.0%Initial cost = $40KAdditional investment at year 4 = $8KAnnual O&M costs = $4KRevenue for Year 1 = $4KRevenue for Year 2 = $8KRevenue for Year 3 = $12KRevenue for Year 4 = $16KSalvage value = $3KP/A, i%, n = 4.3121, 3.9927, 3.7129, 3.4651, 3.2443, 3.0461, 2.8674, 2.7058, 2.5597, 2.4277, 2.3085P/F, i%, n = 0.7938NPV = -$40K + $4K * (4.3121) + $8K * (3.9927) + $12K * (3.7129) + $16K * (3.4651) + $4K * (3.2443) + $4K * (3.0461) + $4K * (2.8674) + $4K * (2.7058) + $4K * (2.5597) + $3K * (0.7938) = $9,799.67Therefore, the net present value (NPV) of the project is $9,799.67.
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Please use Excel to solve this problem and submit your Excel
file. The problem is as follows:
1. The weight of bags of fertilizer is normally distributed,
with a mean of 100 pounds (the target) and a
Here is the Excel solution for the problem you have given below: In cell B1 type the heading "Probability" In cell A2 type the value "90" and in cell A3 type the value "110" In cell B2 type the formula "=NORM.DIST(A2,100,15,TRUE)" and copy the formula to cell B3.
In cell A4 type the value "95" and in cell A5 type the value "105"Step 7: In cell B4 type the formula "=NORM.DIST(A4,100,15,TRUE)" and copy the formula to cell B5.Step 8: In cell A6 type the value "97.5" and in cell A7 type the value "102.5"Step 9: In cell B6 type the formula "=NORM.DIST(A6,100,15,TRUE)" and copy the formula to cell B7.
Select the range A2:B11 and create a scatter plot chart.Step 15: Right-click on the chart and click on "Select Data".Step 16: Click on "Add" and type the following values in the "Edit Series" window:Series Name: Normal DistributionX-Values: =$A$2:$A$11Y-Values: =$B$2:$B$11Step 17: Click "OK" twice and the chart will show the normal distribution of the weight of bags of fertilizer which is normally distributed with a mean of 100 pounds (the target) and a standard deviation of 15 pounds.Hope this helps!
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Sustainable management strategies are difficult to implement because:
a - they are not practical.
b- ordinary people tend to resist them.
c- fragmented authority structures reduce cooperation between institutions.
d- they do not fit into the free-market model of economic activity.
There are several reasons for this: a) One reason is that sustainable management strategies may not always be practical. While they may be environmentally friendly, they may not always be economically viable or feasible to implement.
b) Another reason is that ordinary people often tend to resist sustainable management strategies. This can be due to a lack of awareness or understanding of their benefits, or a resistance to change their current habits or behaviors. c) Additionally, fragmented authority structures can reduce cooperation between institutions, making it difficult to implement and enforce sustainable management strategies. When multiple institutions or agencies are involved, coordination and collaboration can be challenging. d) Finally, sustainable management strategies may not always fit into the free-market model of economic activity. Some strategies may require regulations or incentives that are not compatible with a purely market-driven approach. In summary, sustainable management strategies are difficult to implement because they may not always be practical, ordinary people may resist them, fragmented authority structures reduce cooperation between institutions, and they may not fit into the free-market model of economic activity.
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Tina is consistently late for work, so her boss has written her up' and reported this behavior to the human resources
Tina is consistently late for work, so her boss has written her up and reported this behavior to human resources. Lateness can harm a company's operations, reduce employee productivity, and negatively affect the company's reputation.
As a result, punctuality is a critical characteristic that all staff must possess. The boss's action is reasonable given that Tina has been consistently late, which means she's breaching her job's expectation.Tina's behavior could also be due to personal reasons, such as being a new mother, caring for an ailing family member, or facing some medical challenges. If she has a valid explanation for her tardiness, she should communicate it to her supervisor. It's up to the employer to choose whether or not to provide her with some flexibility or make allowances for her situation.
Nonetheless, Tina's boss did the right thing by bringing the matter to HR, which may take further action. If this behavior persists, Tina may face more severe consequences like a suspension or being terminated. Lateness, as trivial as it may seem, could trigger a domino effect of negativity within the workplace. Being punctual, on the other hand, cultivates a positive and productive work environment. To create a successful work environment, it is critical to maintain a good work-life balance, communicate well, and arrive at work on time.
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Consider an organization you worked for, currently work for, or
have seen in the market.
Does it currently have any blue ocean offerings?
Can you think of any new blue ocean offerings?
No, the business doesn't offer any exclusive products or services.
The business runs like a typical brick-and-mortar store. Its product offerings aren't all that distinctive from those of its competitors, and its online presence isn't that strong. The business hasn't lately introduced any new products or services, and it lacks any distinctive qualities that might allow it to find a niche market
The corporation has been experiencing difficulties recently as a result of pressure from internet retailers on its conventional retail strategy. Because the corporation was slow to adjust to the changing climate, it has been losing market share.
The corporation currently lacks the resources and forethought required to create a blue ocean, and it is unlikely that it ever will.
This is a terrible fact, but it is indicative of the current state of affairs. The company is not now positioned to succeed in the market, and it is unlikely that a blue ocean will emerge.
This does not imply that the business is doomed to failure. However, in order to turn things around, the company would need to make some big changes.
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Given the demand and supply functions for product Z : 800-20Pz and 100+10z
A. Determine the price and quantity at which the market for product Z is in equilibrium and show graphically. 2marks
B. Calculate consumer surplus, producer surplus as well as the total welfare of economic agents and illustrate graphically 2marks
C. If Government imposes a tax of Ghc 20 per unit, calculate the new equilibrium price and quantity and show graphically on the same graph. 2marks
D. Explain briefly the impact of the tax on equilibrium price and quantity 1mark
E. What portion of tax is borne by consumers and the producer?1mark
F. What is the total tax revenue to government? 1mark
G. Calculate the deadweight loss from the tax imposition 2marks
H. After the tax imposition, government decides to grant producers a subsidy of Ghc30 per unit produced. Calculate the new equilibrium price and quantity. 2marks
I. Explain briefly the impact of the subsidy on equilibrium price and quantity 1mark
A. Market Equilibrium Price of product Z is represented by Pz
Demand function = 100 + 10PzSupply function = 800 - 20Pz
Equilibrium point can be calculated when the demand function is equal to the supply functioni.
e. 100 + 10Pz = 800 - 20Pz30Pz = 700Pz = 23.33
Quantity at which the market for product Z is in equilibrium can be calculated by putting the value of price in either demand or supply function.
Quantity at equilibrium, Qz = 100 + 10(23.33)Qz = 233.3Graphical representation of Market Equilibrium
B. Consumer Surplus and Producer Surplus The formula for calculating Consumer Surplus, CS = 1/2(Q1-Q2)(P1-P2)
The formula for calculating Producer Surplus, PS = 1/2(Q2-Q1)(P2-P1)
Where P1 = 100 + 10(23.33) = 333.3P2 = 800 - 20(23.33) = 333.3Q1 = 800 - 20(333.3) = 466.6Q2 = 100 + 10(333.3) = 3333.3Consumer Surplus, CS = 1/2(3333.3-233.3)(333.3-23.33) = 32915.6
Producer Surplus, PS = 1/2(466.6-3333.3)(333.3-23.33) = 32915.6
Total Welfare of Economic AgentsTotal welfare of economic agents is the sum of consumer surplus and producer surplus
Total welfare of economic agents = CS + PS = 65831.2
Graphical representation of Consumer Surplus and Producer Surplus
C. Imposing Tax of GHC 20 per unitThe new supply function will be represented as follows:
New supply function = 800 - 20(Pz - 20) = 800 - 20Pz + 400Pz = 25
New equilibrium price can be calculated by putting the value of Qz in the demand function.
Pz = 800 - 20(25)Pz = 300Graphical representation of the imposition of tax
D. Impact of Tax on Equilibrium Price and Quantity The tax imposition leads to the rise of equilibrium price of product Z from GHC 23.33 to GHC 25.
The equilibrium quantity decreases from 233.3 to 225.
Therefore, the tax leads to an increase in the price of product Z and decrease in the quantity of product Z supplied.
Therefore, the subsidy leads to a decrease in the price of product Z and increase in the quantity of product Z supplied.
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Real World Examples and Usefulness of the Supply and Demand Model. Start each question by drawing a hypothetical demand curve, supply curve and equilibrium. You need to designate which is demand curve, which is supply curve, and which is equilibrium, which axis is P or Q in all the graphics you draw. a) What happened to the equilibrium price and quantity in the Gas market in the US after the Ukraine and Russia war which started in Feb 2022. Think about the first shock to the Gas market only. b) What happened to the equilibrium price and quantity in the Gas market in New Jersey after Hurricane Sandy in 2012. c) What usually happens to the equilibrium price and quantity in the beer market equilibrium night before Super Bowl Game 1
. d) The Leisure and Hospitality industry (which includes lodging, food services, event planning, theme parks, transportation and other tourism oriented products and services, Museums, etc.) has been disproportionately affected by COVID-19 and related shutdowns of economic activity. Industry employment fell by 48 percent between February and April 2020. Can you draw a demand and supply curve for Leisure and Hospitality Market and explain what happened to the equilibrium price and quantity between February and April 2020 ?
The US gas industry was significantly impacted by the conflict between Ukraine and Russia that broke out in February 2022. The graph above displays the potential supply and demand curves for gas in New Jersey, assuming that the state's gas market is a competitive one.
The graph above depicts the fictitious supply and demand curves for beer, assuming that the market is competitive. The graph above displays the fictitious demand and supply curves for the leisure and hospitality business, assuming that it is a market with competition.
The US gas industry was significantly impacted by the conflict between Ukraine and Russia that broke out in February 2022. The decrease in gas supplies brought about by the war was the market's first shock.
The state's gas market was significantly impacted by Hurricane Sandy in 2012, which struck New Jersey. Gas stations were impacted by the hurricane because they were unable to pump gas without electricity.
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Inflation rate, Solow growth curve Select one: a. 3% b. 4% c. 7% d. 0% AD (M + V = 12%) 12% Real GDP growth rate Refer to the AD/AS graph above. It shows an AD curve consistent with a spending growth of 12%. Assume the Solow growth rate is 5%. What does the model predict for the inflation rate when the economy is growing at the Solow rate?
When the economy is growing at the Solow rate of 5%, inflationary pressures are expected to be relatively stable as there is no excess demand or supply in the economy.
In the Solow growth model, the inflation rate is not explicitly determined. The model focuses on long-run economic growth driven by factors such as capital accumulation and technological progress. However, we can use the information provided to make some inferences.
The given information states that the Solow growth rate is 5%. This rate represents the maximum sustainable long-run growth rate of the economy, where the economy's potential output is expanding at its full capacity.
On the AD/AS graph, the aggregate demand (AD) curve is consistent with a spending growth rate of 12%. This implies that the economy is experiencing an expansionary phase with aggregate demand growing faster than the Solow rate. Consequently, the actual output is surpassing the potential output of the economy.
When the economy is growing at the Solow rate, it suggests that the actual output is equal to the potential output. In this scenario, there is no excess demand or supply in the economy, and inflationary pressures are expected to be relatively stable.
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The term "soft law." is a term used by the international community to refer to non-binding yet highly persuasive
documents that may include:
Soft law refers to the term used by the international community to refer to non-binding yet highly persuasive documents that may include various things such as declarations, codes of conduct, guidelines, and memorandums of understanding (MoUs).
These documents may cover issues that are related to the environment, human rights, labor practices, and trade relations, among others. In general, soft law is used as a tool to facilitate cooperation between countries, promote best practices, and shape international norms without resorting to the formal process of adopting legally binding agreements or conventions.
Soft law documents usually reflect the consensus of the international community and are developed through a consultative process that involves multiple stakeholders, including governments, international organizations, civil society groups, and private sector actors. They are considered to be important sources of guidance for policymakers and practitioners, and they often serve as a reference point for interpreting and applying existing legal norms.
However, their non-binding nature means that compliance is voluntary, and there are no formal mechanisms to enforce them. Despite this limitation, soft law remains a valuable instrument for shaping international relations and addressing global challenges that require collective action.
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On January 1 . Sharp Company purchased $40,000 of Sox Company 6% bonds, at a time when the market rate was 5\%. The bonds mature on December 31 in five years, and pay interest annually on December 31. Sharp does not intend to trade the bond or to hold them until maturity. Assume that Sharp uses the effective interest method to amortize any premium or discount on investments in bonds. At December 31 , the bonds are quoted at 98. Note: When answering the following questions, round answers to the nearest whole dollar. a. Prepare the entry for the purchase of the debt investment on January 1.
The entry for the purchase of the debt investment on January 1:
At the time of purchase on January 1,
the journal entry to record the purchase of the bonds is:
Debit Credit Debt investments 41,540Cash41,540[Calculations:
40,000 × 1.04 (present value of 1 at 5% for 5 periods) =41,540.]
This represents the purchase of $40,000 worth of bonds for 41,540 (40,000 × 1.04) based on the 5% interest rate.
The bond is considered to be at a premium, as the cost of purchase is greater than the bond's face value.
Sharp Company has to account for the premium, which will be amortized using the effective interest method over the life of the bond.
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Exponential smoothing with a smoothing constant equal to 0.10, assuming a March forecast of 15(000). (Round your intermediate forecast values and final answer to 2 decimal places.) (5) A linear trend equation. (Round your intermediate calculations and final answer to 2 decimal places.) National Scan, Inc., sells radio frequency inventory tags. Monthly sales for a seven-month period were as follows: Cllck here for the Excel Data File.
Exponential smoothing with a smoothing constant equal to 0.10, assuming a March forecast of 15(000). (Round your intermediate forecast values and final answer to 2 decimal places.) (5)The exponential smoothing method is a time series forecasting method that forecasts future data points by giving more weight to recent data points and less weight to older data points.
It is a commonly used statistical method for smoothing out noisy data. Exponential smoothing with a smoothing constant equal to 0.10, assuming a March forecast of 15(000), is computed as follows: Forecast for April = Actual March sales = 15,000Forecast for May = (0.10 x 15,000) + (0.90 x 15,000) = 15,000Forecast for June = (0.10 x 15,000) + (0.90 x 15,000) = 15,000Forecast for July = (0.10 x 15,000) + (0.90 x 15,000) = 15,000Forecast for August = (0.10 x 15,000) + (0.90 x 15,000) = 15,000Forecast for September = (0.10 x 15,000) + (0.90 x 15,000) = 15,000A linear trend equation. (Round your intermediate calculations and final answer to 2 decimal places.)The linear trend equation is a method for forecasting future values of a time series by assuming that there is a linear relationship between the time and the observed data.
The linear trend equation is computed as follows: y = a + bxwhere y is the dependent variable (in this case, sales), x is the independent variable (in this case, time), a is the intercept, and b is the slope. To compute the linear trend equation for the given data, we can use Excel's LINEST function. Here's how to do it: Select the data range (B2:B8) and insert a new chart. Right-click on the chart and select "Add Trendline". In the "Trendline Options" menu, select "Linear Trendline" and check the "Display Equation on chart" and "Display R-squared value on chart" options. The linear trend equation is: y = 7,774 + 909x
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The plant capacities and customer orders are as follows. (a) Develop a network model and a linear programming formulation of this problem. (i) network model (Submit a file with a maximum size of 1 MB.) Choose File no file selected This answer has not been graded yet. Use index number 5 for this type of node. Enter "DNE" in any unused answer blanks.) Max xij≥0 for all i,j (b) How many units should each plant produce for each customer to maximize profits? xjj≥0 for all i,j. (b) How many units should each plant produce for each customer to maximize profits? Optimal Solution (c) Which customer demands will not be met? Distributor 1 will have a shortfall of units. Distributor 2 will have a shortfall of units. Distributor 3 will have a shortfall of units. Distributor 4 will have a shortfall of units.
(a) The network model is formulated as a linear programming problem with the objective function and constraints.
(b) To maximize profit, the optimal production quantities for each plant and distributor combination are provided.
(c) The customer demands that will not be met are specified for each distributor.
(a) Network Model: Linear Programming Formulation:
Maximize Z = 29x11 + 30x12 + 28x13 + 23x14 + 26x21 + 28x22 + 25x23 + 22x24 + 30x31 + 32x32 + 30x33 + 25x34 + 21x41 + 24x42 + 22x43 + 23x44
Subject to:
x11 + x12 + x13 + x14 ≤ 40
x21 + x22 + x23 + x24 ≤ 30
x31 + x32 + x33 + x34 ≤ 25
x41 + x42 + x43 + x44 ≤ 20
x11 + x21 + x31 + x41 ≥ 20
x12 + x22 + x32 + x42 ≥ 15
x13 + x23 + x33 + x43 ≥ 25
x14 + x24 + x34 + x44 ≥ 15
xi,j ≥ 0
(b) To maximize profit, each plant must produce the following number of units for each customer:
2 units from Plant 1 to Distributor 1 and 4 units from Plant 2 to Distributor 1
2 units from Plant 1 to Distributor 2 and 3 units from Plant 2 to Distributor 2
3 units from Plant 1 to Distributor 3 and 4 units from Plant 2 to Distributor 3
4 units from Plant 1 to Distributor 4 and 1 unit from Plant 2 to Distributor 4
(c) The customer demands that will not be met are as follows:
Distributor 1 will have a shortfall of 2 units.
Distributor 2 will have a shortfall of 1 unit.
Distributor 3 will have a shortfall of 1 unit.
Distributor 4 will have a shortfall of 1 unit.
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MediSys Corp: The IntensCare Product Development Team" and write an essay answering the following questions:
1. How well is the IntensCare Product Development Team performing? what are the major problems you see in this case for the IntensCare Team? Why? 2. Does each member of the IntensCare Team feel and perceive the team in the same way? Why each of the characters has the different perception？How will the perception influence each character's decision making, behavior, and performance on the project team?
3. Are people motivated to do all that they can to work together? Why not? (Hint: please use motivation theories from Module 4 to answer this question)
4. How is information exchanged and received?
5. How do team members from different functions coordinate their efforts?
6. How are team members evaluated?
The IntensCare Product Development Team is not performing well. There are several major problems that the team is facing, including a lack of communication, poor coordination, and limited motivation.
The team members are working independently, which is delaying the project's completion. As a result, the team leader needs to identify the root cause of these issues and take appropriate actions to improve team performance.2. No, each member of the IntensCare Team does not feel and perceive the team in the same way. Each character has a different perception due to their different experiences, backgrounds, and expertise. For example, the marketing team member believes that the project has significant potential, while the technical team member is skeptical about the project's feasibility.
These perceptions can influence their decision-making, behavior, and performance on the project team. The team leader needs to understand these differences and work towards creating a common vision to improve team performance.
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If you answer ALL the questions I will give thumbs up!
1. There are 2 bidders with valuations that are independently and uniformly distributed between 0 and 1. In equilibrium, what will Bidder 1 bid in a first-price auction if its valuation is 0.5? Round your answer to two decimal places.
2. There are 9 bidders with valuations that are independently and uniformly distributed between 0 and 1. What will Bidder 1 bid if its valuation is 0.9 in the symmetric equilibrium of a second-price auction? Round your answer to two decimal places.
In equilibrium, Bidder 1 will bid 0.5/2 = 0.25 in a first-price auction. This is because in a first-price auction, the highest bidder wins the item and pays their own bid. In a symmetric equilibrium of a second-price auction is of 9 bidders.
1. To avoid this, Bidder 1 will bid lower than its valuation, specifically half of its valuation since there are only two bidders. This ensures that Bidder 1 will win the auction and pay a fair price. So if Bidder 1 bids its valuation of 0.5, it is very likely that another bidder will also bid higher, and Bidder 1 will end up overpaying.
2. In a symmetric equilibrium of a second-price auction with 9 bidders, Bidder 1 will bid 0.9/10 = 0.09. This is because in a second-price auction, the highest bidder wins the item but pays the second-highest bid. So if Bidder 1 bids its valuation of 0.9, it is very likely that another bidder will also bid higher, and Bidder 1 will end up paying an even higher price than in a first-price auction.
To its valuation, specifically one-tenth of its valuation since there are ten bidders. This ensures that Bidder 1 will win the auction and pay a fair price equal to the second-highest bid.
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When looking at sticky prices, what name is given to the costs of changing prices that businesses must consider? Opportunity costs Internal costs Menu costs Customer costs
When looking at sticky prices, the name given to the costs of changing prices that businesses must consider is the menu costs. What are sticky prices? Sticky prices are prices that do not adjust quickly to changes in supply or demand. They occur when a product's price remains the same for an extended period despite changes in the supply or demand.
For instance, gasoline prices are sticky since they often remain the same for long periods, even though the cost of oil changes rapidly. In economics, menu costs refer to the costs that companies incur in altering their prices to adjust to the current economic environment. When businesses consider modifying their prices, they must take into account a variety of costs, including advertising, printing new price lists, and other administrative expenses. These costs are known as menu costs in economic terms. Therefore, when looking at sticky prices, the name given to the costs of changing prices that businesses must consider is the menu costs.
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A program manager manages a large team that just finished a major project successfully. The team is now exhausted. The PM wants to ask her supervisor, a results-driven senior VP for approval to give the team some time off.
A. "Here is some data from previous years that shows our team delivers the best results after short breaks"
B. "This project is what we’re capable of when rested. Let’s give the team some time to refuel and come back in top form"
C. "The team feels that they’ve earned some time off for the many hours they’ve worked recently"
D. "Our staff is overworked, and it’ll cost our firm more money if they quit"
E. "Everyone’s been working nonstop for a while; I hear they’ll quit if we don’t give them some time off."
The program manager should use the statement, "This project is what we’re capable of when rested. Let’s give the team some time to refuel and come back in top form" to request her supervisor's approval for the team to have some time off.
A program manager needs to effectively communicate her message and gain the support of her supervisor. The statement, "This project is what we’re capable of when rested. Let’s give the team some time to refuel and come back in top form," serves this purpose by highlighting the team's capabilities and the importance of rest.
By emphasizing that the team's performance is at its best when well-rested, the program manager acknowledges the team's hard work and dedication. The statement also presents a clear justification for granting time off, as it emphasizes the benefits of allowing the team to refuel and recharge.
This approach appeals to the supervisor's understanding of the team's needs and the positive impact it can have on their performance. By focusing on the team's well-being and productivity, the program manager increases the likelihood of gaining the supervisor's approval for the time off request.
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There are about four billion people around the globe who earn less than US$1,500 per year. These people who make up the "bottom of the pyramid" obviously have some unique needs. Many organizational leaders who embrace corporate social responsibility believe they:
Group of answer choices:
shouldn’t bother with the BOP as there is no benefit or profit to be gained from them, even though those people need assistance.
should try to offer the same products and services to the BOP, but acknowledge they may not be successful in doing so.
may be able to serve the unique needs of the BOP while still earning a profit.
should donate a portion of their products or services to the BOP.
The "bottom of the pyramid" refers to approximately four billion people worldwide who earn less than $1,500 per year. These people obviously have some unique needs.
Although some organizational leaders who embrace corporate social responsibility believe that there is no advantage or profit to be gained from them, many believe that they may be able to serve the BOP's unique needs while still earning a profit.In the emerging markets, the "bottom of the pyramid" is a crucial consumer segment for firms.
The low-income population may seem unprofitable to firms at first glance, but if this group is approached in a creative manner, a company can turn this untapped market into a profitable opportunity.
If a company targets this population group and serves them in a unique way, it can provide them with the products they need while also making a profit.To capture the potential of this underdeveloped sector, firms must tailor their products to meet the unique requirements of the "bottom of the pyramid."
Therefore, many organizational leaders who embrace corporate social responsibility believe that they may be able to serve the unique needs of the BOP while still earning a profit.
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The Corporation performs adjusting entries monthly. Closing entries are performed annually on December 31. During December the following transactions occurred: Dec. 1 Issued 10,000 shares of capital stock to Aaron Hillman and other investors in exchange for a total of $45,000 cash. Dec. 1 Paid $14,400 to Boothe Realty for 12 months rent paid in advance. (Use the Asset account: Prepaid Rent for the entire amount). Dec. 2 Purchased office equipment and furnishings from Edwards Corp. for $12,000 (use the account Office Equipment and Furnishings). Paid $4,000 in cash with the balance due on a Note Payable (principal and interest due in 6 months). Dec. 4 Purchased office supplies on Account from Trackers for $1,400. Payment is due in 20 days. These supplies are expected to last for several months. Dec. 5 Purchased a 12 month business Malpractice Insurance Policy for $1,200 from the Cruise Agency (use the Asset account Unexpired Malpractice Insurance for the entire amount). One journal entry at a time. Click on Save and New. Quickbooks Computer Program, Page 6 Dec. 10 Received $3,000 cash from the Sweet & Fancy Cupcakes in West Reading as advance payment for services to be provided. (Use the Liability account: Unearned Accounting Fees.) Dec. 16 Paid employee salaries for the first two weeks of December, $1,200. Dec. 16 Earned $6,000 in fees for Accounting services provided in the first two weeks of December. $3,500 was received in cash and the remainder was billed to AAI’s customers on Account (due in 10 days.) Dec. 24 Paid the amount due to Trackers on account from the Dec. 4th purchase. Dec. 26 Received amount due on account from the December 16th billing. Dec. 27 AAI was named, along with Cruise Agency, as a co-defendant in a $5,000 lawsuit filed on behalf of Ellie Perry. Perry believes she was not properly represented by Aaron Hillman and is suing for damages. The extent of the Corporation’s legal and financial responsibility, if any, can not be determined at this time. (Note: this event does not need a journal entry at this time, but may require disclosure in the notes accompanying the financial statements. Dec. 30 Received a bill for internet & phone services for the month of December from Sprint in the amount of $350. The amount is due on January 15, 2021. Dec. 30 Declared a cash dividend of $.20 (20 cents) per share, payable on January 15, 2020. *Remember to debit Dividends; you are paying it later so credit Dividends Payable. Dec. 31 Earned $10,000 in fees for accounting services provided for the second two weeks of December. $6,000 was received in cash and the remainder was billed to AAI’s customers on Account (due in 12 days.) Data for Adjusting entries (These are done in the general journal.) Remember you are only adjusting for one month. The date for the adjusting entries is December 31, 2020. No Cash is involved. a. The advance payment for rent on December 1 covered a period of 12 months. (You only used one month) b. The Insurance Policy is for 12 months. (You used only one month) c. The annual interest rate on the Note Payable to Edwards Corp. is 9%. (One month interest) d. The Office Equipment and Furnishings are being depreciated by the straight-line method for a period of 5 years. There is no salvage value and you are expensing one month. e. Office Supplies on hand on December 31 are estimated at $750. f. During December, AAI earned $1,200 of the accounting fees paid in advance by Sweet & Quickbooks Computer Program, Page 7 Fancy Cupcakes December 10th. (You have now earned the 1200.) g. Salaries earned by employees since last payroll are $1,300. The Salaries will be paid on 1/3/21. h. The Accountant estimates that the amount of Income Tax Payable will be $3,000. These taxes will be paid in 2021. Step 4 - Reports 1. After you type in the journal and adjusting entries, you will need to run the following reports. a. Click on Reports, All Reports, Scroll down to For My Account Reports. Website does change so it might look exactly like this.
The Corporation performs adjusting entries monthly and closing entries are performed annually on December 31. Declared a cash dividend of $.20 (20 cents) per share, payable on January 15, 2020. Remember to debit Dividends; you are paying it later so credit Dividends Payable.
During December, the following transactions occurred:
I. Issued 10,000 shares of capital stock to Aaron Hillman and other investors in exchange for a total of $45,000 cash.
II. Paid $14,400 to Boothe Realty for 12 months rent paid in advance. (Use the Asset account: Prepaid Rent for the entire amount).
III. Purchased office equipment and furnishings from Edwards Corp. for $12,000 (use the account Office Equipment and Furnishings). Paid $4,000 in cash with the balance due on a Note Payable (principal and interest due in 6 months).
IV. Purchased office supplies on Account from Trackers for $1,400. Payment is due in 20 days. These supplies are expected to last for several months.
V. Purchased a 12 month business Malpractice Insurance Policy for $1,200 from the Cruise Agency (use the Asset account Unexpired Malpractice Insurance for the entire amount).
VI. Received $3,000 cash from the Sweet & Fancy Cupcakes in West Reading as advance payment for services to be provided. (Use the Liability account: Unearned Accounting Fees.)
Salaries earned by employees since the last payroll are $1,300. The Salaries will be paid on 1/3/21.h. The Accountant estimates that the amount of Income Tax Payable will be $3,000. These taxes will be paid in 2021.
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Air France-KLM business strategy
What are the key success factors for firms competing in the European airline industry? [To address the question you need to do industry analysis, Porter's five forces, and then explain the Key success factors of the European airline industry].
Analyze each of the five business units separately (Air France, Air France Hop [HOP!], Joon SAS, KLM, and Transavia SAS [Transavia]) by identifying their target markets, business unit strategies, and resources and capabilities, strengths, and (potential) weaknesses.
For each business unit, determine whether the business has a competitive advantage and recommend strategies for going forward. To address the questions, you need to use VRIS analysis and then provide possible strategies for each business unit.
The airline industry in Europe is very competitive, with many different companies competing for market share. These include pricing, customer service, safety, reliability, and innovation.
Its strengths include its extensive route network, strong brand recognition, and focus on innovation. Its weaknesses include high operating costs and a limited focus on short-haul flights. One possible strategy for KLM going forward would be to expand its short-haul offerings to capture more of the European market.
Transavia SAS (Transavia) targets leisure travelers looking for affordable flights within Europe and North Africa. Its business unit strategy is to offer low-cost flights with a focus on efficiency and convenience. Its weaknesses include limited brand recognition and a narrow target market. One possible strategy for Transavia would be to focus on expanding its offerings to include more destinations and improve its marketing efforts to increase brand recognition.
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Mesra Corporation plans to issue 10-year bonds with a par value of RM1,000 that will pay RM55 every six months. The net amount of capital to the firm from the sale of each bond is RM840.68. If Mesra is in the 25% tax bracket, what is the after-tax cost of debt?
The after-tax cost of debt for Mesra Corporation is 9.81%. The after-tax cost of debt for Mesra Corporation can be calculated as a formula: After-Tax Cost of Debt = (Cost of Debt) x (1 - Tax Rate)Where Cost of Debt = (Annual Interest Payment) / (Net Proceeds from the Bond Issue)
In this scenario, the par value of each bond is RM1,000 and the bonds pay RM55 every six months, which means the annual interest payment is: RM55 x 2 = RM110. So, the cost of debt can be calculated as follows: Cost of Debt = RM110 / RM840.68Cost of Debt = 0.1308 or 13.08%. Since Mesra Corporation is in the 25% tax bracket, the tax rate would be 0.25.
Now, we can calculate the after-tax cost of debt using the formula mentioned above: After-Tax Cost of Debt = (0.1308) x (1 - 0.25)After-Tax Cost of Debt = 0.0981 or 9.81%. Therefore, the after-tax cost of debt for Mesra Corporation is 9.81%.
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Assume a Saudi Multinational Corporation decided to do a project in Germany one year ago (October 1st, 2021) which would be completed on September 30th, 2022. If the project cost 100 million Euro and expected to generate income of 150 million Euro on September 30th, 2022. The exchange rate at the beginning of the project is 0.23 Euro/SAR and it is 0.27 Euro/SAR at the end of the project. There is no derivative bearing SAR currency, but there is a way a Saudi firm engage into the forward / option market.
⦁ Calculate the initial investment in SAR.
⦁ show the choices for financing this project by the Saudi firm? Just show without calculation.
⦁ Calculate profit from this investment in Euro and SAR, also show whether the Saudi firm hurt or benefit from changes in the exchange rate movement.
⦁ How would the Saudi firm hedge against the exchange rate risk?
The initial investment in SAR would be 434,782,609. Financing choices can be loan from banks, issuance of bonds, or private placements. The profit from this investment in Euro would be 65 million and in SAR would be 241 million.
Given: Project cost = 100 million Euro Expected income = 150 million Euro Exchange rate at the beginning of the project = 0.23 Euro/SAR Exchange rate at the end of the project = 0.27 Euro/SAR1. The initial investment in SAR can be calculated as: Initial investment in Euro = 100 million Euro × 0.23 Euro/SAR = 23 million SAR Exchange rate at the end of the project = 0.27 Euro/SAR
Initial investment in SAR = 23 million SAR ÷ 0.23 Euro/SAR = 434,782,609 SAR2. The choices for financing this project by the Saudi firm are: Loan from banks Issuance of bonds Private placements3. Profit from this investment in Euro: Profit in Euro = Income in Euro - Project cost in Euro = 150 million Euro - 100 million Euro = 50 million Euro Profit from this investment in SAR: Profit in SAR = 50 million Euro × 0.27 Euro/SAR = 13.5 million SAR
Saudi firm would benefit from changes in the exchange rate movement because the exchange rate increased from 0.23 Euro/SAR to 0.27 Euro/SAR.4. The Saudi firm would hedge against the exchange rate risk by engaging in the forward/option market. They could enter into a forward contract or purchase an option to protect against unfavorable exchange rate movements.
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