Answer:
9,400 units
Explanation:
The breakeven point is the number of units that must be sold for the company to make neither a loss nor a profit. A target profit is the net of the sales less the sum of the fixed and variable expenses. The contribution margin is the difference between the sales and variable cost.
Sales per unit = $210,000/7000 = $30
Variable cost per unit = $136,500/7000 = $19.50
Let the number of units to be sold to achieve the profit target be x
30x - 19.5x - 67200 = 31500
10.5x = 98700
x = 98700/10.5
x = 9,400 units
Requirement 3. Explain the accuracy of the product costs calculated using the simple costing system and the ABC system. How might Milton's management use the cost hierarchy and ABC information to better manage its business? The accuracy of the product costs will be ▼ higher lower the same with the ABC system instead of the simple costing system. The ABC product costs will ▼ better reflect not accurately reflect the utilization of ▼ direct indirect resources by both products. Management can use the ABC costs to ▼ hide indirect costs in large cost pools more accurately determine if employees are productive more accurately determine product costs . The cost hierarchy enables management to more accurately determine the cost drivers of ▼ direct indirect labor shipping costs.
Answer:
Explanation:
DIFFERENCES BETWEEN ACTIVITY-BASED (ABC) AND SIMPLE COSTING SYSTEMS
The major differences relate to the two-stage allocation process. In the first stage, simple costing system allocates indirect costs to cost centers (normally departments), whereas activity-based systems allocate indirect costs to cost centres based o activities rather than departments. Since there are more activities than departments a distinguishing feature is that activity-based system will have a greater number of costs centres in the first stage of the allocation process. in the second stage, simple costing system uses a limited number of different types of second stage volume based and non-volume-based cause-and-effect second stage drivers.
SIMPLE COSTING SYSTEM CAN PROVIDE MISLEADING INFORMATION FOR DECISION MAKING DECISIONS
The system tends to rely on arbitrary allocations of indirect costs, they rely on volume-based allocations. If volume-based allocation is used, high volume products are likely to be assigned with greater proportion of indirect cost than they have consumed, whereas low volume products will be assigned will be assigned a lower proportion. in these circumstances simple costing system will over cost high volume products and under costs low volume products. In contrast ABC system recognize that many indirect costs vary in proportion to changes to changes other than production volume.by identifying the cost drivers that cause the costs to change and assigning cost to cost objects on the basis of cost driver usage, costs can be more accurately traced . it is believed the cause-and effect relationship provides a superior way of determining relevant costs.
FOUR STAGES INVOLVED IN DESIGNING ABC
• identify the major activities that take place in an organisation
• Create a cost centre/cost pool for each activity
• Determine the cost driver for each major activity
• Trace the cost of activity to the product according to a products demand (using cost drivers as a measure of demand) for activities
ABC COST HIERARCHY
ABC cost hierarchy classifies activities along a cost hierarchy consisting of unit-level, batch-level, product sustaining, and facility-sustaining product. Unit level activities are performed each time a unit other product or service is produced. Examples include direct labour costs. Batch level activities are performed each time a batch is produced. Examples include setting up a machine or processing a purchase order. product sustaining activities are performed to enable the production and sale of individual product. Examples include the technical support provided for individual products and the resources required for performing product enhancement. Facility sustaining activities are performed to support the facility’s process. They include general administrative staff.
ABC PROFITABILITY ANALYSIS HIERARCHY
Categorizes costs according to their variability at different hierarchical levels to report different hierarchical contribution level. At the final level,
Facility or business-sustaining costs are deducted from the sum of product contributions to derive a profit at a business level unit.
The aim is to assign all organizational expenses to a hierarchical or organizational level where cause-and-effect cost assignment can be established so that arbitrary apportionments are non-existent.
The ABC system increases product cost calculation accuracy by better reflecting indirect resource utilization. This detailed information aids Milton's management in accurately determining product costs and managing business activities strategically.
When considering the accuracy of product costs calculated using different costing systems, the Activity-Based Costing (ABC) system typically provides higher accuracy compared to a simple costing system.
The ABC system allows costs to better reflect the utilization of indirect resources by different products.
This is because ABC takes into account the varying costs associated with different activities and assigns costs more precisely based on the actual consumption of resources.
Milton's management can use ABC information along with the cost hierarchy to more accurately determine product costs and to identify cost drivers, especially for indirect costs such as administrative overheads, which are not directly connected to the production volume but are still crucial to understand for strategic decision-making and cost management.
A stock had a 12 % return last year, a year when the overall stock market declined. Does this mean that the stock has negative beta and thus very little risk if held in a portfolio?
Answer:
Yes it has a negative beta but this does not translate to very little risk
Explanation:
A negative beta correlation means an investment moves in the opposite direction from the stock market.
A negative beta coefficient does not necessarily mean absence of risk. Instead, negative beta means your investment offers a hedge against serious market downturns.
McDonald's major distribution partner, The Martin-Brower Company, needs at least $1 million to build a new warehouse in Medicine Hat two years from today. To date, it has invested $500,000. If it continues to invest $50,000 at the end of every quarter into a fund earning 6% quarterly, will it have enough money to build the warehouse two years from now?Show calculations to support your answer
Answer:
No it wont have enough money to build a warehouse in two years.
Explanation:
Firstly we are given that the warehouse is $1 million so the company needs to save this amount of money in two years time.
We know that the company has invested $500000 to date therefore we need to calculate if this $50000 per quarter investment will cover the the other portion for $500000 to meet the warehouse cost of $1 million so we will use the future value annuity formula to calculate this which is :
Fv = C[((1+i)^n -1)/i]
where Fv will be the future value after two years of the $50000 investment
C is the periodic payment of $50000
i is the interest rate per period which is 6% per quarter
n is the number of periods the payment is done here it is 4 x 2years= 8 periods / investments of $50000 that will be done.
thereafter we substitute on the above formula:
Fv = 50000[((1+6%)^8 - 1)/6%]
Fv = $494873.40
then we combine this amount to $500000 to see if it reaches $1 million
$494873.40+ $500000 = $994873.40 which is close to the warehouse cost of $1 million but it does not reach it so the company wont have enough money to purchase the warehouse.
Using the future value of an annuity formula, The Martin-Brower Company's scheduled investments and initial amount will grow to approximately $1,444,343.66 in two years, which is enough to build the warehouse, as the required amount is $1 million.
Explanation:The student has asked whether The Martin-Brower Company will have enough money to build a warehouse in two years with a starting investment of $500,000, and additional $50,000 quarterly investments at a 6% quarterly interest rate. To determine if the company will reach its $1 million goal, we can apply the future value of an annuity formula:
FV = P × [((1 + r)^n - 1) / r] + PV × (1 + r)^n
Where:
FV is the future value of the annuityP is the payment per periodr is the interest rate per periodn is the number of periodsPV is the present value (initial investment)Given values:
P = $50,000r = 0.06 (quarterly)n = 2 years × 4 quarters/year = 8 quartersPV = $500,000Plugging these values into the formula, we get:
FV = $50,000 × [((1 + 0.06)^8 - 1) / 0.06] + $500,000 × (1 + 0.06)^8
Performing the calculation:
FV = $50,000 × (0.586874322) + $500,000 × (1.6) = $644,343.66 + $800,000 = $1,444,343.66
With the calculated future value, The Martin-Brower Company will exceed the required $1 million and have enough to build the warehouse.
National Distributors has $1,000 face value bonds outstanding with a market price of $1,013. The bonds pay interest semiannually, mature in 11 years, and have a yield to maturity of 6.87 percent. What is the current yield
Answer:
Current Yield is 6.94%
Explanation:
Current yield is the ratio of coupon payment of a bond to its current market price.
First we need to calculate the coupon payment by using following formula
YTM = [ C + ( F - P ) / n ] / [ ( F + P ) / 2 ]
6.87% = [ C + ( $1,000 - $1,013 ) / 11 ] / [ ( $1,000 + $1,013 ) / 2 ]
6.87% = [ C + ( $1,000 - $1,013 ) / 11 ] / [ ( $1,000 + $1,013 ) / 2 ]
6.87% = [ C - $1.18 ] / 1006.5
1,006.5 x 6.87% = C - $1.18
69.15 = C - 1.18
C = 69.15 + 1.18 = $70.3 annually
Current Yield = Annual Coupon payment / Current market price
Current Yield = $70.3 / $1,013 = 0.0694 = 6.94%
Which strategy uses subsidiaries, franchises, or joint ventures with substantial independence? (a) multidomestic strategy (b) international strategy (c) transnational strategy (d) maquiladora system in Europe (e) global strategy
Answer:
The correct answer is letter "A": multidomestic strategy.
Explanation:
A multidomestic strategy is developed by a country with an international presence when the commercial and marketing focus is based on domestic trends. Under this approach, the firm's goods are shaped differently in every region to meet local needs and cultures. This practice demands more investment in professionals with vast knowledge in each market.
Final answer:
The correct answer is (a) multidomestic strategy. This strategy is used by companies that allow their subsidiaries or franchises to operate with a high degree of local autonomy, adapting their operations to the specific needs of each market they serve.
Explanation:
The strategy that uses subsidiaries, franchises, or joint ventures with substantial independence is known as a multidomestic strategy. This approach allows individual subsidiaries in different countries to operate independently, tailoring their operations, products, and services to fit local market conditions. This contrasts with global strategies where standardization across all markets is the norm, or international strategies which involve exporting products for global markets, but without significant local customization.
Franchises like McDonald's, which offers similar products or services in many locations, have also adopted aspects of the multidomestic strategy by allowing for some degree of local adaptation to cater to the tastes and preferences of different cultures. The multidomestic strategy allows multinational corporations (MNCs) to take full advantage of economies of scale and to benefit from competition, while specializing in certain services or industries and achieving comparative advantages.
Tablet Tailors sells tablet PCs combined with Internet service, which permits the tablet to connect to the Internet anywhere and set up a Wi-Fi hot spot. It offers two bundles with the following terms. 1. Tablet Bundle A sells a tablet with 3 years of Internet service. The price for the tablet and a 3-year Internet connection service contract is $500. The standalone selling price of the tablet is $250 (the cost to Tablet Tailors is $175). Tablet Tailors sells the Internet access service independently for an upfront payment of S300. On January 2, 2017, Tablet Tailors signed 100 contracts, receiving a total of $50,000 in cash. 2. Tablet Bundle B includes the tablet and Internet service plus a service plan for the tablet PC (for any repairs or upgrades to the tablet or the Internet connections) during the 3-year contract period. That product bundle sells for $600. Tablet Tailors provides the 3-year tablet service plan as a separate product with a standalone selling price of $150. Tablet Tailors signed 200 contracts for Tablet Bundle B on July 1, 2017, receiving a total of $120,000 in cash. Instructions (a) Prepare any journal entries to record the revenue arrangement for Tablet Bundle A on January 2, 2017, and December 31, 2017 (b) Prepare any journal entries to record the revenue arrangement for Tablet Bundle B on July 1,2017, and December 31, 2017 (c) Repeat the requirements for part (a), assuming that Tablet Tailors has no reliable data with which to estimate the stand- alone selling price for the Internet service.
Answer:
Please find solutions in the attached images
Explanation:
I have attached images of my journal entry solutions to this question as required.
Find at least three implicit modelling assumptions or other qualitative factors which are relevant but not covered by the model. (e.g., all workers are assumed to have the same efficiency – Do not reuse this!)
Home Improvement Store (ACME)
Employee
Scheduling Problem
(
Answer and Explanation:
For Home Improvement Store (Acme) following are the implicit modelling assumptions or other qualitative factors which are relevant but not covered by the model:
1)Average customer footfall is considered at all times.
2)Seasonal effects are not considered. For example, boost in sales during festival times.
3)Employee absenteeism is not considered. i.e. all employees are expected to be present always.
4)Location is not considered to affect the change in scheduling activity.
5)Wages are considered to be uniform throughout and not affect employee performance.
To overcome this problem when selling to less-affluent consumers in developing countries, many companies make simpler or smaller versions of their products that can be sold at lower prices. Others have introduced new, more affordable brands for global markets. This is known as a(n) ________ problem. Group of answer choices skimming price price escalation inflation deflation demand escalation
This kind of problem is known as price escalation.
Explanation:
A divergence in estimating where merchandise have greater expenses in a remote market than in the local market because of transportation and sending out expenses is known as price escalation.
Price escalation can likewise allude to the total of cost factors in the circulation channels which mean a higher last expense for an item in a remote market.
Bekah is an adviser for the company Vicoltech, which deals heavily in investments. Bekah also advises several other clients in her state, but no clients outside of her state. Before the Dodd-Frank Act was passed, Bekah was exempt from registration and reporting requirements with the SEC. When the Dodd-Frank Act was passed:
a) Indeterminable with current informationb) Bekah was required to register with the SEC, but not required to report information to the SEC.c) Bekah was still exempt from the SEC’s reporting requirements.d) Bekah was required to begin reporting information to the SEC.
Answer:
a) Indeterminable with current information
Explanation:
An auto insurance company is implementing a new bonus system. In each month, if a policyholder does not have an accident, they will receive a cash-back bonus of 5 from the company. Among the 1000 policyholder of the auto insurance company, 400 are classified as low-risk drivers and 600 are classified as high-risk drivers. In each month, the probability of zero accidents for high-risk drivers is 0.80 and the probability of zero accidents for low-risk drivers is 0.90. Calculate the expected bonus payment from the company to the 1000 policyholders in one year.
Answer:
50,400
Explanation:
Using application of total expectation, E;
N= Number of policy holders who have zero accidents in one month
P= Probability
N|Low = 400
N|High=600
P|Low=0.9
P|High=0.8
Therefore E = (N|Low*P|Low)+(N|High*P|High)
E=(400*0.9)+(600*0.8)
E=360+480
E=840
Then Total bonus for the year B
B= E*12*5
B=840*12*5
B=50,400
The expected bonus payment from the company to the 1000 policyholders in one year is 50,400
What is insurance policy?Insurance policy is a legal contract that binds both policyholder and the insurance company towards each other. The policy contains the details of the conditions or circumstances under which either the insured individual or policy nominee receives insurance benefits from the insurer.
Using application of total expectation, E;
N = Number of policy holders who have zero accidents in one month
P = Probability
N|Low
= 400
N|High
= 600
P|Low
= 0.9
P|High
= 0.8
Therefore E
= (N|Low*P|Low) + (N|High*P|High)
= (400 * 0.9) + (600 * 0.8)
= 360 + 480
= 840
Then Total bonus for the year B
= E * 12 * 5
= 840 * 12 * 5
= 50,400
Hence, the expected bonus payment from the company to the 1000 policyholders in one year is 50,400
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Deana, a light-complexioned African American is the manager of the cosmetics department at a large retail store. She does not promote Indigo, a brown-complexioned African American who is otherwise eligible for the promotion because she believes that customers prefer lighter skinned cosmetic consultants. Thus, Indigo:
a. Does not have a color discrimination claim under Title VII of the Civil Rights Act of 1964 because Deana was only trying to improve sales of the retail store.
b. Has a discrimination claim under Title VII of the Civil Rights Act of 1964 because color discriminate can occur between members of the same race
c. Does not have a color discrimination claim under Title VII of the Civil Rights Act of 1964 because Deana did not show any pervasive racial discrimination against Indigo
d. Has a discrimination claim under the Title VII of the Civil Rights Act of 1964 because of the BFOQ defense
Answer:
b. Has a discrimination claim under Title VII of the Civil Rights Act of 1964 because color discriminate can occur between members of the same race.
Explanation:
Discrimination is prohibited under the Civil Rights Act of 1964 which states that it is illegal to discriminate against a party based on the color of their skin, country of origin, or racial composition.
Same race discrimination is when the perpetrator is also from the Sam race as the victim.
For example on September 11, 2000, Zeke Wilson a black boxing promoter brought racism charges against a chairman of the state sports commission who was also black. For failing to provide promoter protection when William Pender a white boxing commisioner performed discriminatory acts against Zeke.
Dena is performing same race discrimination by passing over Indigo because of her skin colour.
Final answer:
Color discrimination can occur b. between members of the same race, making Indigo eligible to file a claim under Title VII.
Explanation:
The answer to this question is has a discrimination claim under Title VII of the Civil Rights Act of 1964 because color discrimination can occur between members of the same race. Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on race, including color discrimination. Even though Deana is also African American, her preference for lighter-skinned cosmetic consultants can still be considered color discrimination.
Thus, the Civil Rights Act of 1964 forbids discrimination, stating that it is unlawful to treat a person unfairly on the basis of their race, national origin, or skin colour. Same-race discrimination occurs when the victim and the offender are members of the same racial group.
Muhammad, a 21-year old computer engineer, is opening an individual retirement account (IRA) at a bank. His goal is to accumulate $2.5 million in the IRA by the time he retires in 46 years. Muhammad expects his IRA to receive 8% nominal annual interest, compounded semiannually, throughout the 46 years. As a computer engineer, Muhammad believes his salary will increase at a constant 4% annual rate during his career. Muhammad wishes to make annual deposits into his IRA account over the 46 years. He wishes to start his IRA with the lowest possible deposit and then increase his deposit amount at a constant 4% rate each year.
Assuming end-of-year deposits, how much should she deposit the first year?
Answer:
The first annual depoisit will be of 3,373.49 dollars
Explanation:
Given the formula for future growing annuity
we need to solve for the yearly payment:
grow rate: 0.04
annual effective rate: 8% compounding semiannually:
[tex](/1+0.08/2)^2-1 = r_e\\[/tex]
r= 0.0816
FV 2,500,000
n 46
Formula for future value fo an ordinary annuity:
[tex]C_0 \times \frac{(1+r)^n-(1+g)^n}{r-g} = FV[/tex]
[tex]C_0 \times \frac{(1+0.0816)^{46}-(1+0.04)^{46}}{0.0816-0.04} = 2,500,000\\C_0 = $3,373.4855[/tex]
The first annual depoisit will be of 3,373.49 dollars
Jose purchased a delivery van for his business through an online auction. His winning bid for the van was $24,500. In addition, Jose incurred the following expenses before using the van: shipping costs of $650; paint to match the other fleet vehicles at a cost of $1,000; registration costs of $3,200, which included $3,000 of sales tax and an annual registration fee of $200; wash and detailing for $50; and routine maintenance for $250.What is Jose�s cost basis for the delivery van?
Answer:
Cost basis= $29,150
Explanation:
Cost basis refers to the initial purchase price of an asset that is used for tax purposes. It is the initial amount invested in an asset in addition to any commission's or fees.
Capital gains is the difference between the sale price and the the cost basis of an asset.
Tracking cost basis is necessary for determining the success of an investment and also for tax purposes.
We will sum the following to get the cost basis
Purchase price= $24,500
Shipping cost= $650
Paint= $1,000
Sales tax= $3,000
Cost basis= 24,500+ 650+ 1,000+ 3,000
Cost basis= $29,150
Williams & Sons last year reported sales of $20 million, cost of goods sold (COGS) of $16 million, and an inventory turnover ratio of 4. The company is now adopting a new inventory system. If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 8 while maintaining the same level of sales and COGS, how much cash will be freed up? Do not round intermediate calculations. Enter your answer in dollars. For example, an answer of $1.23 million should be entered as 1,230,000,000. Round your answer to the nearest dollar.
Answer:
Cash will be freed up: $2,000,000
Explanation:
Inventory turnover ratio is calculated by using following formula:
Inventory turnover ratio = Cost of Goods Sold/Average Inventory
Average Inventory = Cost of Goods Sold/Inventory turnover ratio
Last year, Williams & Sons had sales of $20 million, cost of goods sold (COGS) of $16 million, and an inventory turnover ratio of 4.
Average Inventory = $16,000,000/4 = $4,000,000
For the new inventory system, inventory turnover ratio is 8 while maintaining the same level of sales and COGS.
Average Inventory = $16,000,000/8 = $2,000,000
Cash will be freed up = $4,000,000 - $2,000,000 = $2,000,000
Final answer:
The amount of cash freed up can be calculated by finding the difference in the inventory turnover ratios, and multiplying it by the cost of goods sold. In this case, there would be a decrease of $64,000,000 in cash freed up.
Explanation:
The amount of cash freed up can be calculated by finding the difference in the inventory turnover ratios. the old inventory turnover ratio was 4 and the new ratio is 8, which means the new system is able to sell inventory twice as fast. Since the sales and COGS remain the same, the decrease in inventory is equal to the increase in inventory turnover ratio. Therefore, the amount of cash freed up would be the decrease in inventory multiplied by the COGS.
Formula: Cash Freed Up = (Decrease in Inventory) x COGS
Amount of Cash Freed Up = (4 - 8) x $16,000,000 = $-64,000,000
Therefore, there would be a decrease of $64,000,000 in cash freed up.
The BEST approach to network representation of a large and hugely complex project is to: Use AOA. Represent all activities and relationships. Use AON. Simplify network logic and reduce it to the most meaningful relationships.
Answer:
Simplify network logic and reduce it to the most meaningful relationships
Explanation:
The above refers to a Logic Network which describes the sequencial activities in a project over a period of time. Here we are able to see which activity logically precedes/comes before or follows the other. The network logic can be used to identify the targets/achievements or the milestones reached in a project. It aids understanding of project workflow, timescale and relationships/dependencies.
I am buying a firm with an expected perpetual cash flow of $1,000 but am unsure of its risk. If I think the beta of the firm is .5, when in fact the beta is really 1, how much more will I offer for the firm than it is truly worth
Answer:
Assuming that the risk free rate is 5%, you will pay $4, 849 more
Explanation:
The beta of a company or firm is a measure of the volatility, or systematic risk of a security, as it compares to the market. The beta of a frim or company is a measure of how the company’s equity market value changes with the changes in the overall market. It shows the sensitivity of the company’s equity to changes in the market. Systematic risk is the risk that cannot be diversified. This type od risk is due to changes in the market, and because of this, it cannot be avoided. This risk is caused by factors that are external to the firm.
Assume that the $1, 000 is a perpetuity. The risk- free rate is 5%
If beta is 5, the cash flow is discounted at 55%
PV (beta = 5) = $1, 000 / .55 = $1, 818
If, however, beta is equal to 1, the investment will yield at 15%, and the price paid for the firm should be:
PV = $1, 000 / .15 = $6, 667
The difference $4, 849 [ $6, 667 - $1, 818], is the amount you will pay if you erroneously assumed that the beta is 5 rather 1.
If the cash flow lasts only one year:
PV (beta = 5) = $1, 000 / (1 + .55) = $645
PV (beta = 1) = $1, 000 / (1 + .15) = $869
With a difference of $224.
Incorrectly assuming the value of beta has substantial effects on the calculations of cash flows.
Whereas most men's suit brands focus on their craftsmanship and use of high-quality materials, Bluebird Suits distinguishes itself by emphasizing the durability of its products and deriding other suit makers as "delicate." Which positioning method is Bluebird using?
Whereas most men's suit brands focus on their craftsmanship and use of high-quality materials, Bluebird Suits distinguishes itself by emphasizing the durability of its products and deriding other suit makers as "delicate.". Bluebird is using positioning method of Competition.
Explanation:
Competition arises when two or more brands have a common objective. Bluebird and other brands are selling men's suits so they compete with each other.
Bluebird is trying to position its product in the market through competition. Bluebird is selling Men's suit. It trying to present its Suits different from other brands by focusing on the durability factor and telling that other brands are delicate. This will make customers believe that Suits of Bluebird will last long as compared to other brands. So, in this way, it can compete easily.
Bluebird Suits is using Competitive Positioning. By emphasizing the durability of their products, they create a unique image in the customer's mind compared to other brands. This differentiates them from other suit brands that focus on delicacy and craftsmanship.
Explanation:Bluebird Suits is using a method called Competitive Positioning. This is where a company positions its products or services uniquely in the minds of customers, compared to its competitors. In this case, Bluebird Suits is emphasizing their suit's durability over the delicate craftsmanship of its competitors. They are trying to create a unique space for their brand by suggesting that their suits are tough, long-lasting and reliable, compared to other brands which are presented as 'delicate'.
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The Camino Real Landfill was required to install a plastic liner to prevent leachate from migrating into the groundwater. The fill area was 44,000 m2 and the installed liner cost was $8 per m2. In order to recover the investment, the owner charges to unload at the rates of $14 per pickup, $25 per dump truck, and $70 per compactor truck load. The fill area is adequate for 8 years. If the annual traffic is estimated to be 2500 pickup loads, 650 dump-truck loads, and 1200 compactor-truck loads, what rate of return will the landfill owner make on the investment
Answer:
The rate of return in investment = 61.6% per year
Explanation:
The return on an investment is defined as the interest gained on an investment. Ideally, the return amount is supposed to be more than the amount invested, but if the reverse occurs, the rate of return is described as negative return. The Rate of Return on investment is the proportion of the investment amount which is the return on the originally invested amount. It is calculated in percentage as; (profit ÷ invested amount) × 100.
First, we will calculate the profit made on investment.
total landfill area = 44,000 m²
cost per m² = $8
Therefore total cost incurred (investment) = 44,000 × 8 = $352,000
Income
Pickups;
$14 per pickup load. Therefore, 2500 pickup loads
= 2500 × 14 = $35,000
dump-truck;
$25 per dump-truck load. Therefore, 650 dump-truck loads
= 650 × 25 = $16,250
Compactor-trucks;
$70 per compactor-truck load. Therefore, 1200 compactor truck loads
= 1200 × 70 = $84,000
Therefore, Total income = 35,000 + 16,250 + 84,000 = $135,250
Gain/Return on investment = Total investment - total expenditure
= 352,000 - 135,250 = $216,750
Rate of return on investment (%) = (profit ÷ invested amount) × 100.
= (216,750 ÷ 352,000) × 100 = 0.6157 × 100 = 61.6% (to one decimal place)
The landfill owner's rate of return on the liner investment is calculated by subtracting the initial cost from the total income over 8 years and then dividing by the initial cost. The total calculated rate of return is 207.39% over 8 years, which equates to an annual rate of return of approximately 25.92%.
Explanation:To calculate the rate of return the landfill owner will make on the investment for the Camino Real Landfill liner, we need to consider the costs and revenues over the 8-year span the fill area is expected to be adequate. The initial cost of the liner is the area multiplied by the cost per square meter, which is 44,000 m2 times $8/m2. Each year, the landfill receives an income based on the number of loads from pickups, dump trucks, and compactor trucks. Over 8 years, the total income can be calculated and compared to the initial investment to determine the rate of return.
Step-by-Step Calculation:
The calculation of annual income would be: (2500 × $14) + (650 × $25) + (1200 × $70) = $35,000 + $16,250 + $84,000 = $135,250.
To find the total income over 8 years: $135,250 × 8 = $1,082,000.
The rate of return can then be calculated as: ($1,082,000 - $352,000) / $352,000 × 100 = 207.39% total rate of return over 8 years or an average annual rate of return of approximately 25.92%.
A television costs $100, but a new excise tax law imposes a $5 tax on the sale of the set. If Takeshi wants to buy a television, what would have to be his minimum willingness to pay?
a. between $100 and $105
b. $105
c. more than $105
d. $100
Answer:
The correct answer is option (A).
Explanation:
According to the scenario, the given data are as follows:
Television cost = $100
Tax imposed = $5
So, we can calculate the minimum willingness to pay to buy television can be concluded by taking following observation:
As the minimum amount of the television without taxes is $100 So, the minimum amount we will take is $100.While after new excise tax law the maximum amount that should be payable to buy television is ($100 + $5 = $105) $105. So, the maximum amount we will take is $105.Hence, the amount that should be pay to buy the television should be between $100 and $105.
If your pharmacy department used the First-In First-Out (FIFO) inventory method at the beginning of your fiscal year, should the Chief Financial Officer use the Last-In First-Out (LIFO) inventory method at the end of the year?a. yesb. noc. not applicable
Answer:
No, the Chief Financial Officer should not use the Last-In First-Out (LIFO) inventory method at the end of the year
Explanation:
If a different method is always used, then it would not be accurate. With the use of a different method, a different amount is obtained in the end.
It just would not be accurate, so it is very important to use the same method each time.
Thus, the Chief Financial Officer should use the same inventory method First-In First-Out (FIFO) inventory method (used at the beginning of your fiscal year), at the end of the year.
Final answer:
The CFO should not switch from FIFO to LIFO at the end of the fiscal year because consistency in inventory valuation methods is crucial for accurate financial reporting.
Explanation:
The inventory method used by a pharmacy department, whether it is First-In First-Out (FIFO) or Last-In First-Out (LIFO), should generally remain consistent throughout the fiscal year. If a pharmacy department began the fiscal year using FIFO, the Chief Financial Officer should not switch to LIFO at the end of the year. This consistency is necessary to maintain reliable financial statements and accurate tracking of inventory costs over time. Switching methods could lead to fluctuations in cost of goods sold and profitability which might mislead stakeholders.
Jupiter Satellite Corporation earned $18 million for the fiscal year ending yesterday. The firm also paid out 30 percent of its earnings as dividends yesterday. The firm will continue to pay out 30 percent of its earnings as annual, end-of-year dividends. The remaining 70 percent of earnings is retained by the company for use in projects. The company has 2 million shares of common stock outstanding. The current stock price is $91. The historical return on equity (ROE) of 16 percent is expected to continue in the future.
What is the required rate of return on the stock?
Answer:
Rate of Reeturn is 14.5%
Explanation:T
The question is to calculate the required rate of return on the stock and this will be done as follows
Formula for rate = Ke = (D1 + P0) + g
In this formula, We need to first determine what our g or Growth rate is as follows:
Growth rate= Return on Equity x The Retention Ration
= 16% x 70% = 0.112 or 11.2%
D1 in the formula is the Expected Dividend per share
=Current dividend x (1+g)
= $18 million x 30% /2 million) x (1+0.112)
= 2.7 x 1.112 = 3.0024
P0 in the formula represents the current price of the stock = $91
Therefore based on the formula above
Ke = (D1 + P0) + g
= (3.004 /91) + 0.112
= 0.1450 x 100
= 14.5%
Naomi Fisher, a sales manager at Pure, a water purifier company, had a new member, Leah Marshall, join her team. Though during Leah's interview, Naomi felt she would be a productive sales executive, her performance has often been below the mark. Consistently in the past three months, Leah has been unable to reach her targets and is falling substantially behind on her annual targets. Naomi assumes that Leah is not determined and motivated enough to do what it takes. Which of the following, if true, weakens Naomi's assumption? Research showed that the company's largest competitor had a lower turnover than they did. Leah has good interpersonal skills and gets along well with her customers. Leah has often arrived late for team meetings conducted in the morning. Naomi recently received feedback from other team members that Leah is often uncooperative. Leah has been assigned a sales territory where consumers are from low income groups.
Answer:
The Declaration of Independence was the first formal statement by a nation's ... a draft of what would become the Declaration of Independence.
Explanation:
Leah being assigned a sales territory with low income consumers weakens the assumption that her poor performance is due to a lack of determination or motivation.
Among the given options, the one which if true, could weaken Naomi's assumption about Leah not being determined or motivated enough is that Leah has been assigned a sales territory where consumers are from low income groups. This suggests that Leah's low performance may be due to external market conditions rather than her personal lack of determination or motivation. If Leah is working in an area where people have less disposable income to spend on water purifiers, it might be a significant factor in her inability to reach her sales targets.
At one point, certain U.S. Treasury bonds were callable. Consider the prices in the following three Treasury issues as of May 15, 2017: 05/15/2020 6.50 108.71875 108.78125 − .31250 3.400 05/15/2020 7.55 109.25000 109.31250 − .09375 4.210 05/15/2020 8.05 114.31250 114.50000 − .46875 2.960 The bond in the middle is callable in February 2018. What is the implied value of the call feature? Assume a par value of $1,000. (Hint: Is there a way to combine the two noncallable issues to create an issue that has the same coupon as the callable bond?) (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
The implied value of called feature is $111.49 approx
Explanation:
Detailed step wise solution is given below:
The implied value of the call feature on a callable bond can be estimated by creating a synthetic bond from non-callable issues that mimics the callable bond's cash flows. The value is determined by the price difference between the synthetic bond and the callable bond. However, the calculation requires detailed information not fully provided in the question.
To calculate the implied value of the call feature on a callable bond, we can use the information from non-callable bonds to create a synthetic bond that matches the coupon rate of the callable bond.
The key is to find the correct combination of the two non-callable issues that would replicate the coupon payments of the callable bond. Each non-callable bond has different coupon rates and prices. By creating a portfolio of these bonds that mimics the cash flows of the callable bond, we can infer the value of the call feature by comparing the price of this synthetic bond to the price of the actual callable bond.
However, since the detailed question does not provide the full necessary data and information, such as market interest rates and the exact cash flows of each bond, a definitive calculation cannot be performed. To generally approach such a problem, the following steps are required:
Determine the coupon payments and final par value payment of the callable bond.Create a portfolio of the other two bonds that reproduces these cash flows.Calculate the cost of this portfolio.The difference between the callable bond price and the synthetic bond portfolio price represents the value of the call feature.In practice, the problem requires complex calculations, including interpolation between the prices and cash flows of the non-callable bonds to match the coupon rate of the callable bond.
Discounting refers directly to a. calculations that ignore the phenomenon of compounding for the sake of ease and simplicity. b. decreases in interest rates over time, while compounding refers to increases in interest rates over time. c. finding the future value of a present sum of money. d. finding the present value of a future sum of money.
Answer:
The correct answer is letter "D": finding the present value of a future sum of money.
Explanation:
The Discount Rate is the interest rate that you need to earn on a given amount of money today to eventually end up with a given amount of money in a certain period in the future. The concept is associated with the present value of money that estates having a dollar today will be worth more than having a dollar tomorrow.
In investing, typically the higher the interest rate, the higher the risk involved with the investment and its future cash flows.
Final answer:
Discounting refers to the computation of the present value of a future sum of money, which is option d. It plays a vital role in financial and investment decisions, reflecting the preference of current consumption over future benefits.
Explanation:
The concept of discounting pertains to the technique of determining the present value of a future sum of money. The option that correctly defines discounting is d. finding the present value of a future sum of money. In financial decision-making, the discount rate is a crucial factor because it reflects how much value is placed on future benefits today. The higher the discount rate, the smaller the present value of future amounts, indicating a preference for immediate consumption over future benefits. This notion underpins various economic decisions, including investment in stocks and bonds, where future earnings and interest payments are factored into their present valuation. Two aspects to remember about discounting include the following: First, a high-interest rate results in a lower present value for future sums compared to a lower interest rate. Second, amounts to be received in the distant future are significantly discounted and thus have a much lower present value than amounts to be received sooner.
Fast Rocket, Inc. generated a net loss of $5,000 in its first year (2018) and taxable income of $15,000 in its second (2019). Assuming a tax rate of 21%, what is Fast Rocket's total tax for both years
Answer:
$2100
Explanation:
Net loss = $5000
Taxable income = $15000
Tax rate = 21%
Fast Rocket's total tax for both years is determined by
Taxable income minus net loss multiplied by tax rate
= $(15000-5000) × 21%
= $10000 × 0.21
= $2,100
Fast Rocket's total tax for both years = $2100
Which of the following is NOT true about an ATM? A. ATM stands for "Access or Transfer Money". B. An ATM is available virtually 24 hours a day. C. You can make a deposit at your bank's ATM. D. You can transfer money between your own accounts.
Answer: A. ATM stands for "Access or Transfer Money"
Explanation:
An ATM stands does not stand for Access or Transfer Money, even though it offers those services.
Nay, it stands for Automated Teller Machine which is to say that it can do the job of a bank Teller, only it can do more and can do it Automatically and outside a bank.
Option A is therefore correct.
Answer:
A. ATM stands for "Access or Transfer Money".
Explanation:
ATM stands for Automated Teller Machine, not "Access or Transfer Money".
ATM is a specialized computer that ease the process of managing money by an individual that an account with a bank.
It is always available 24 hours daily to allow withdrawal of money, transfer of money between different accounts, and many ATMs allow deposits of money.
Canine Gourmet Super Breath dog treats are sold in boxes labeled with a net weight of 12 ounces (340 grams) per box. Each box contains 8 individual 1.5-ounce packets. To reduce the chances of shorting the customer, product design specifications call for the packet-filling process average to be set at 43.5 grams so that the average net weight per box of 8 packets will be 348 grams. Tolerances are set for the box to weigh 348plus or minus13 grams. The standard deviation for the packet-filling process is 1.03 grams. The target process capability ratio is 1.67. One day, the packet-filling process average weight drifts down to 42.5 grams. Is the packaging process capable? Is an adjustment needed?
To determine if the packaging process is capable, the process capability ratio (PCR) and process capability index (Cpk) need to be calculated using the standard deviation and the tolerance range. If the packet-filling average weight drifts below the design specification, the process may produce underweight boxes, which requires calibration adjustment to maintain product quality within acceptable limits.
Explanation:The packaging process capability is assessed by determining if the process can consistently produce products within specification limits. The target process capability ratio (PCR) is 1.67, which implies the process should be able to produce products within specification limits with a narrow spread of variation. With a tolerance of "+/- 13 grams" and a standard deviation of 1.03 grams, the process capability index (Cpk) can be calculated to assess if the process is currently capable.
When the packet-filling process average weight drifts down to 42.5 grams, which is lower than the design specification of 43.5 grams per packet, the actual average weight per box of 8 packets would be 340 grams, potentially leading to a situation where boxes are under the net weight. This indicates that the equipment may be out of calibration and could fail to meet the specifications, suggesting an adjustment is needed to bring the process back into capability.
A differentiation strategy is based on creating a product that customers perceive as being: a. cheaper, but inferior to the available products. b. the least costly product in the industry. c. superior to other available products. d. the same as other available products. e. the most costly product in the industry.
Answer:
c. superior to other available products.
Explanation:
When using the differentiation strategy, a business aims to distinguish itself from the competition by offering a product or service that is perceived as unique or better when compared to what is currently available on the market. Therefore, the alternative that best fits this description is alternative c. superior to other available products.
The principal of the time value of money is probably the single most important concept in financial management. One of the most frequently encountered applications involves the calculation of a future value.
The process for converting present values into future values is called_______ .This process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables?
a. The interest rate (I) that could be earned by deposited funds
b. The duration of the deposit (N)
c. The trend between the present and future values of an investment
d. The present value (PV) of the amount deposited
Answer:
Compounding; Option C
Explanation:
Time value of money recognizes the fact that today's $100 receipts are better than $100 receipts one year hence. The concept points towards inflation due to which money gradually loses its worth and value.
Future value refers to present value of an amount deposited today at r% rate of compounded interest for n periods.
It is expressed as:
[tex]FV = PV (1\ +\ R)^{n}[/tex]
The above process of converting present value into future value is referred to as compounding.
The variables required for above computation of future value being,
Present Value of the amount deposited denoted as PV
The interest rate (I) that would be earned on deposited funds i.e r
The time period of deposit i.e n
Suppose the September Eurodollar futures contract has a price of 96.4. You plan to borrow $50m for 3 months in September at LIBOR, and you intend to use the Eurodollar contract to hedge your borrowing rate.
a.What rate can you secure?
b.Will you be long or short the Eurodollar contract?
c.How many contracts will you enter into?
d.Assuming the true 3-month LIBOR is 1% in September, what is the settlement in dollars at expiration of the futures contract? (For purposes of this question, ignore daily marking-to-market on the futures contract.)
Answer:
Explanation:
Definition of simple terminologies ;
A contractual agreement is an agreement which is made on future exchanges in order to buy or sell goods at a fixed price at a specified time period. LIBOR stands for London interbank offered rate which is the rate at which banks borrow money from other banks in london market. this rate is a fixed term by the british bankers association.a) The implied LIBOR of the September Eurodollar futures of 96.4 is = 100 96.4 /400-=0.9%
(b) As we want to borrow money, it implies buying protection against high interest rates, which means low Eurodollar future prices. We will short the Eurodollar contract.
c) Number of contact to be entered into = One Eurodollar contract which is based on a $1 million 3-month deposit. As such, entering into hedge a loan of $50M, will automatically implies entering into 50 short contracts.
d) A true 3-month LIBOR of 1% means an annualized position (annualized by market conventions) of 1% x 4 = 4%. Therefore, our 50 short contracts will pay: [96.4 − (100 − 4) × 100 × $25] × 50 = $50,000.
The increased interest rate has made the loan more expensive as such, the loss to exposure will be compensated hence we have to pay the following amount ; ($50,000,000 x 0.01) - $50,000
= $450,000
The implied interest rate secured is 3.6%, and a short position in the Eurodollar futures contract is required. For a $50 million loan, this would equate to entering into 50 contracts. If the actual LIBOR is 1% come September, the settlement would be $1,300,000 in favor of the borrower.
Hedging with Eurodollar Futures Contract
If the September Eurodollar futures contract has a price of 96.4, the implied interest rate can be calculated by subtracting the contract price from 100, which would yield 3.6% (100 - 96.4).
This is the rate that can be secured via the hedge.
Since a plan is in place to borrow money, one would take a short position in the Eurodollar contract to hedge against rising interest rates.
To determine the number of contracts to enter into, the calculation would be the amount intended to borrow divided by the contract size. If the contract size is $1 million (standard for Eurodollar contracts), then for borrowing $50 million, one would require 50 contracts.
Assuming the true 3-month LIBOR is 1% in September, the calculation for the settlement would involve the difference between the hedged rate (3.6%) and the actual LIBOR rate (1%).
The payout would be this difference times the contract size times the number of contracts. If LIBOR is lower than the hedged rate, you profit from the short futures position.
In this scenario, for 50 contracts, the settlement in dollars at expiration would be (3.6% - 1%)× $1,000,000 × 50 = $1,300,000.