Answer:
Correct option is (d)
Explanation:
Capacity refers to the amount of goods that a plant or organization can produce. Maximum capacity refers to the total number of goods produced at maximum efficiency.
In this case, Joe's plant could produce 1,000 items if all conditions are met, which means when the plant is at its highest efficiency. This states the maximum capacity of the plant.
Each of the following is a primary consideration in the choice of business entity, except: a. The degree to which the founders' personal assets are protected from liabilities of the business b. The availability of favorable tax strategies c. The desirability for potential investors and lenders d. The entrepreneur's lifestyle
Answer:
d. The entrepreneur's lifestyle
Explanation:
One of the principles of accounting is business entity, the business is a distinct entity from the owners. So the lifestyle of the enterpreneur does not affect the business.
Also because of this financial transactions of the business and those of the owners are mutually exclusive. For example if an entrepreneur buys a house for himself, this is not connected to the business and the business cannot lay claim on it. This also applies vice versa when the business obtains property the owner cannot claim it for personal use.
Answer:
D
Explanation:
A business entity means that the business is its own owner and it is a completely different and distinct entity from the entrrpreneur. Definitely the lifestyle of the enterpreneur cannot affect the business.
The finances owned by the business and that owned by the enterpreneur doesn"t have a meeting point and are seperate entities
If the business buys a car for itself, this is not connected to the enterpreneur even though he might be using it and the enterpreneur cannot lay claim on it. In case the business is liquidated the car is sold as an assest of the business. This goes for the enterpreneur personal property also. So his lifestyle is not part of the business entity.
Sinbad Cola, a soft drink manufacturer, opened a plant in Buron. The waste from the plant was released into the Buron Sea, which was situated a mile away from the plant. Releasing the wastes into the sea resulted in water pollution and groundwater contamination. The water pollution in turn negatively affected Buron's fishing business. Sinbad Cola compensated for this by bringing the contamination levels down with additional filters and paying for the damages to the local fisheries. Which theory of business social responsibility did Sinbad Cola comply with when it compensated for its harmful waste disposal methods?A) moral minimum
B) stakeholder interest
C) corporate citizenship
D) maximizing profits
Answer: (A) Moral minimum
Explanation:
The moral minimum is the term which refers to the ethical behavior in the business that basically define the principle or the various types of standards which is necessary for the moral conduct.
According to the given question, the Sinbad cola is one of the soft drink manufacturing company and moral minimum is one of the social reputability of the company that comply for the various types of harmful waste.
The moral minimum is one of the type of ethical philosophy that majorly focuses on the various types of impact of the decision in the society. Therefore, Option (A) is correct answer.
Although the merger between Gray Enterprises and Horack Manufacturing is expected to be a "win-win" that will increase both companies' market share and save jobs, employees are fearful because they don't know what to expect. Which technique would be most useful in overcoming their resistance to change?
Answer:
Facilitation and support
Explanation:
Facilitation and support is a technique used by managers when trying to make employees feel at ease about a certain change as a result of adjustments made the higher authority. It is also used in circumstances where people of different backgrounds, abilities and interests are to work together.
In facilitation and support of employees, the manager puts the employees into groups to work together and also support them by offering help to them along the line, whenever it is needed. This helps to remove or eliminate any uneasiness that employees might harbor towards the change during the period of transitioning like in the question.
I hope this helps.
Many people who want to start investing for their future want to start today, which implies an annuity stream that is paid at the beginning of the period. Beginning-of-period cash flows are referred to as:_______.
a. ordinary annuities.
b. annuities due.
c. perpetuities.
d. present values.
Answer:
b. annuities due
Explanation:
Annuities due -
It refers to the amount which need to be paid at the regular interval of time , just before the beginning of the new phase , is referred to as annuities due .
The most common example of annuities due is rent , which need to be paid after every month in the starting .
Hence , from the given information of the question ,
The correct option is annuities due.
If quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to: A. pivot rightward (pivot out) along the horizontal axis. B. pivot leftward (pivot in) along the vertical axis. C. pivot leftward (pivot in) along the horizontal axis. D. pivot rightward (pivot out) along the vertical axis.
Answer:
A. pivot rightward (pivot out) along the horizontal axis
Explanation:
Tea and coffee represent substitute goods. If price of a good increases, this causes an increase in quantity demanded of it's substitute.
In the given case, quantity demanded of tea is measured on horizontal axis while quantity demanded of coffee is measured on vertical axis. The budget constraint for tea and coffee shows different combinations of quantity of tea and coffee demanded within a fixed expenditure.
When price of coffee increases, within the same budget constraint, the quantity demanded of tea shall rise.
This would lead to the budget constraint to pivot rightward (pivot out) along the horizontal axis.
Dora and Keith are managers at ABC Corporation. Keith is having problems in his department due to lack of innovation. In response, he consults the corporate procedures manual and speaks with his boss about the right way to solve the problem. Dora is also having a similar problem in her own department but decides to confront it by hosting team luncheons where she can learn new perspectives and discuss new "outside the box" ways to deal with the problem.
Keith is an example of a(n) _____ thinker.
Answer:
Convergent Thinker
Explanation:
A convergent thinker is the one who gives correct answers to the problems and does not considers other options whereas divergent thinker considers all the possible options to choose the best options. It doesn't matter who you are, all that matters is what is your decision. You can not be right all the times. Divergent thinker is bit more risk averse approach and creative people are always divergent thinkers.
A person with a FICO score of 780 applies for a loan and gets an interest rate of 5% with a monthly payment of $439. A second person, with a FICO score of 550 applies for the same loan and gets a rate of 22% with a monthly payment of $511. What is the monthly savings for the person with the highest credit score?
Answer:
C. $72
Explanation:
Answer: 72
Explanation:
Firms that practice value-based marketing typically use a process known as ______, which includes a set of strategies, programs, and systems that focus on building loyalty among the firm's most valued customers.
Answer:
customer relationship management
Explanation:
Companies that successfully implement customer relationship management (CRM) should be able to customize the services and products that they offer to their customers. The company should be able to develop a good relationship with its customers and increase the exchange of information and feedback. This can help the company provide customized services that better satisfy the needs and wants of its customers.
All of the following are measures of GDP except the total: a. income from all production in the economy. b. expenditures on all final goods and services produced. c. expenditures of all businesses in the economy. d. value of all final production.
Answer:
c. expenditures of all businesses in the economy.
Explanation:
GDP is the sum of all final goods and services produced in an economy within a given period which is usually a year.
GDP can be calculated in 3 ways:
1. Expenditure approach : consumption spending + Investment spending + Government Spending + Net Export
expenditures of all businesses in the economy is used in the calculation of GDP using the expenditure approach.
2. Income approach: it is the sum of all income from all production in the economy.
3. Value added approach: it is sum of the value of all final production.
I hope my answer helps you
Jim is CEO for a company that produces filing cabinets and office furniture. He uses when determining that in order to increase production by 20% next year, the company will need to hire 10 new employees.
Answer:
planning
Explanation:
Based on the information provided within the question it can be said that in this scenario Jim is using the function of planning in order to determine this. The planning management function focuses on thinking ahead in order to set things into motion so that everything functions accordingly and efficiently in the future. Which is what Jim is doing by stating that in order to increase the production by 20% like they need, they have to hire 10 new employees.
Clear Colors Corporation uses a predetermined overhead rate based on direct labor costs to apply manufacturing overhead to jobs. At the beginning of the year the Corporation estimated its total manufacturing overhead cost at $350,000 and its direct labor costs at $200,000. The actual overhead cost incurred during the year was $362,000 and the actual direct labor costs incurred on jobs during the year was $208,000. The manufacturing overhead for the year would be:a. $12,000 underapplied
b. $2,000 overapplied
c. $12,000 overapplied
d. $2,000 underapplied
Answer:
b. $ 2,000 overapplied
Explanation:
Firstly, we need to determine the predetermined overhead rate based on direct labor costs.
Estimated total manufacturing Overhead $ 350,000
Estimated direct labour costs $ 200,000
Predetermined overhead rate $ 350,000 / $ 200,000 $ 1.75 per $ of direct labour costs.
The total manufacturing overhead applied on direct labor costs of $ 208,000, is:
$ 208,000 * $ 1.75 $ 364,000
Actual overhead costs incurred $ 362,000
Manufacturing overhead over applied $ 2,000
Final answer:
The correct answer is b. $2,000 overapplied. Clear Colors Corporation had a predetermined overhead rate of 175%, resulting in $364,000 of overhead being applied based on the actual direct labor costs of $208,000, while the actual overhead cost was $362,000.
Explanation:
Clear Colors Corporation calculates the predetermined overhead rate by dividing the estimated total manufacturing overhead cost by the estimated direct labor costs. For the current year, they estimated their overhead cost at $350,000 and direct labor costs to be $200,000, which gives us a predetermined overhead rate of 175% (350,000 / 200,000).
During the year, the actual direct labor costs were $208,000. To find the applied overhead, we multiply the actual direct labor costs by the predetermined overhead rate: $208,000 × 175% = $364,000. This is the amount of overhead that should be applied to the jobs based on the actual direct labor costs.
The actual overhead costs incurred were $362,000. Comparing this to the applied overhead ($364,000), we see that overhead was overapplied by $2,000 because the company applied more overhead to the jobs than the actual costs incurred.
Therefore, the correct answer to the question is b. $2,000 overapplied.
Coercive Acts Committees of Correspondence direct tax Indirect tax A. colonial extralegal shadow governments that convened to coordinate plans of resistance against the British B. Set of 4--passed by Lord North to punish Massachusetts for destroying the tea and refusing to pay for the damage C. imposed on businesses rather than directly on consumers D. consumers pay to an entity rather than through merchants' higher prices 4 points
Answer:
I believe that two different questions have been mixed into one:
Coercive acts:
B) Set of 4 ACTS passed by Lord North to punish Massachusetts for destroying the tea and refusing to pay for the damage: THEY INCLUDED ADMINISTRATION OF JUSTICE ACT, MASSACHUSETTS GOVERNMENT ACT, PORT BILL AND THE QUARTERING ACTCommittees of Correspondence:
A) colonial extralegal shadow governments that convened to coordinate plans of resistance against the BritishExplanation:
Massachusetts was the only colony that elected their own leaders since its charter allowed them more freedom than any other colony. After the Boston Tea Party, the British parliament decided to punish Massachusetts by sending their own governor and establishes severe penalties and laws. In a practical sense, the governor only ruled in Boston because the British were there, but the rest of Massachusetts remained extremely pro-independence and basically ruled itself as it had before.
In an effort to make better and more efficient purchase decisions, the Ford Motor Co. includes various people, depending on the purchase situation. Individuals may include key personnel from various departments, including research and development, finance, marketing, shipping, and sales. This is a description of Ford's________________________
Answer:
Buying Center.
Explanation:
A Buying Center is a group if individuals within an organization that are responsible for making purchase decisions.
The Buying Center is also called the Decision Making Unit (DMU), and it includes personnel from various departments.
Explain what is meant by a good being "excludable." Explain what is meant by a good being "rival in consumption."
Answer:
If you can prevent a nonpaying consumer from having access to a good or service, that good is excludable. For example, only clients that buy a ticket can enter a movie theater and watch the movie.
A good or service that can be consumed by only one consumer (or a specific number of consumers) is rival in consumption because other people cannot consume them simultaneously. For example, once the movie theater sold out, no more people can get inside and watch the movie.
Final answer:
Excludable goods such as private education or cell phone service, can exclude non-payers, while rivalrous goods like a slice of pizza cannot be enjoyed by more than one person at a time. In contrast, public goods are both nonexcludable and non-rival, creating the free rider problem but commonly managed by government and social measures.
Explanation:
Excludable goods are those where access can be limited or denied. An example is when private companies provide primary education and are able to exclude those who do not pay from receiving the education. Another illustration of an excludable good is cell phone service, where companies can prevent people who do not pay from using the service.
Goods that are rival in consumption are those where one person's use of the good prevents another person from using the same good at the same time. A common example of a rivalrous good is a slice of pizza, because two people cannot consume the exact same slice simultaneously. This characteristic is typical for private goods.
A public good, in contrast, is characterized by being nonexcludable and non-rival. This means that it is not feasible to exclude individuals from the use of the good, and one person's use does not diminish the ability for others to use it as well. Examples include national defense, public parks, and street lighting. The free rider problem occurs when individuals consume a public good without contributing to its cost, which is a challenge in effectively providing public goods. Sources of public goods often include government actions, social pressures, and unique situations where markets find methods to ensure payment.
Doris's Fashions has just signed a $2.2 million contract. The contract calls for a payment of $0.6 million today, $0.8 million one year from today, and $0.8 million two years from today. What is this contract worth today if the firm can earn 8.2 percent on its money
Answer:
$2.02 million
Explanation:
We need to calculate the present value of Doris's contract given the following three cash flows:
Year 0 $0.6 million
Year 1 $0.8 million
Year 2 $0.8 million
interest rate = 8.2%
present value (in million) = $0.06 + ($0.8 / 1.082) + ($0.8 / 1.082²) = $0.6 + $0.74 + $0.68 = $2.02 million
*present value formula = future value / (1 + r)ⁿ
The contract worth today is $2.02 million.
Calculation of the today worth of the contract:We know that
present value formula = future value / (1 + r)ⁿ
So,
= $0.06 + ($0.8 / 1.082) + ($0.8 / 1.082²)
= $0.6 + $0.74 + $0.68
= $2.02 million
hence, we can conclude that The contract worth today is $2.02 million.
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While Steve is cleaning out his garage, he finds an old surfboard that he no longer needs. As he walks to the dumpster to throw it out, his neighbor John asks if he could have it. John offers Steve a 6-pack of beer (worth $10) in exchange, which Steve happily accepts. Steve has achieved a producer surplus of:_______
a) $50, because that's what the surfboard was likely worth.
b) $o, since he was just going to throw out the board
c) $5, because Steve and John benefited equally from the $10 transaction.
d) $10, the value of the beer he received
Answer:
b) $0, since he was just going to throw out the board
Explanation:
Producer surplus would have applied if the old surfboard that he no longer needs was produced by him.
Producer surplus measures the benefit to sellers of participating in a market. It is measured as the amount a seller is paid minus the cost of production. For an individual sale, producer surplus is measured as the difference between the market price and the cost of production, as shown on the supply curve.
There is a difference between profit and Producer Surplus which is the fixed cost of production.
In conclusion Steve benefited $10 but that cannot be called a producer surplus.
After completing the closing entries for Revenues and Expenses, the Income Summary account has a credit balance of $1,500. The journal entry to close out the $1,500 credit balance of Income Summary would be:_______.
Answer:
Debit Credit
Income Summary $1,500
Retained Earning $1,500
Credit Balance of income Summary account will be closed by a debit entry in this account. Transfer the balance to retained earning by credit entry to this account.
Final answer:
To close out a $1,500 credit balance in Income Summary, you would debit Income Summary and credit Retained Earnings or Owner's Equity for $1,500.
Explanation:
After completing the closing entries for Revenues and Expenses, if the Income Summary account has a credit balance of $1,500, the journal entry to close out this balance would be to debit the Income Summary account and credit the Retained Earnings account (for a corporation) or the Owner's Equity account (for a sole proprietorship) by the same amount. This action transfers the net income, or loss if the balance were a debit, into the appropriate equity account.
The journal entry would look like this:
Debit Income Summary $1,500
Credit Retained Earnings/Owner's Equity $1,500
The following chart describes opportunities and challenges in the external environments that surround businesses. Which of the following statements best characterize and fit in the shaded cells? Databases present themselves as a challenge and threat in the technological environment; while globalization has provided for an increase in the standard of living in the global environment. Identity theft is a challenge in the technological environment of businesses, while the desire for green living presents opportunities for new businesses in the global environment. E-commerce is a costly technological environment challenge, while the leisure time of seniors creates an opportunity in the global environment. Identity theft remains a technological environment challenge, while war and terrorism satisfy opportunities in the global environment due to the fact that they remain a small cost to society
Answer:
Identity theft is a challenge in the technological environment of businesses, while the desire for green living presents opportunities for new businesses in the global environment.
Explanation:
The following statements best characterize and fit in the shaded cells these statements accurately reflect the opportunities and challenges presented by the technological and global environments for businesses.
1. Databases present themselves as a challenge and threat in the technological environment.
2. Globalization has provided for an increase in the standard of living in the global environment.
3. Identity theft is a challenge in the technological environment of businesses.
4. The desire for green living presents opportunities for new businesses in the global environment.
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Which of the following operations decisions is not a long-term strategic decision?
Capacity planning
Work shift scheduling
Manufacturing process selection
Facility location
Product design
Which of the following is not a major strategic operational competitive dimension that forms a company's competitive position?
Top management involvement
Delivery speed
Coping with changes in demand
Delivery reliability
Process quality
Answer:
The answer is Work shift scheduling.
Work shift scheduling is done on either a daily or a weekly/monthly basis. In addition, work has to be scheduled whenever a strategic change has been made or whenever an outside effect influences the company processes.
The second answer is Top management involvement. Competitive pricing, fast and reliable delivery along with adjusting to the changing demand of customers are all competitive strategic dimensions yet Top management do not need to involve in every process of a company. They do formulate the policies, yet there is no universal rule for them to participate in everything.
Explanation:
Consider the following: Cash in Bank - checking account of $18, 500 Cash on hand of $500. Post dated checks received totaling $3 500 and Certificates of deposits totaling $24,000. How much should be reported at cash in the balance sheet?
a. $18.500
b $19,000
c. $22, 500
d. $130, 500
Answer:
b $19,000
Explanation:
The reconciliation between the book balance and the bank statement examines the transactions recorded in either account but omitted in the other and the transactions recorded wrongly in both accounts.
Given the following transactions
Cash in Bank - checking account = $18, 500
Cash on hand = $500
Post dated checks received = $3 500 and
Certificates of deposits = $24,000
Cash balance in balance sheet = $18, 500 + $500 + $24,000
= $43,000
The post dated check is not included as the cash is yet to be received. The balance in the post dated check will form part of the receivables balance and not that of cash.
The certificate of deposit may be accounted for as part of cash and cash equivalent as shown in the computation above. Where the certificate of deposit is accounted for as a short term investment,
Cash balance in balance sheet = $18, 500 + $500 = $19,000
The total cash that should be reported on the balance sheet is $19,000, accounting for the sum of cash in the checking account and cash on hand, but excluding post-dated checks and certificates of deposit.
The question asks how much should be reported as cash in the balance sheet, considering various forms of cash and near-cash items. To find the correct answer, we must identify which items can be classified as cash or cash equivalents. Cash in the bank - checking account of $18,500 and cash on hand of $500 are clear-cut cash items. Post-dated checks received totaling $3,500 are not immediately accessible as cash and therefore should not be included. Certificates of deposits totaling $24,000, while often considered a cash equivalent, are subject to specific criteria such as maturity dates and are not typically classified as cash for most reporting purposes. Hence, the sum of the cash items suitable for reporting on the balance sheet as cash is $19,000 ($18,500 in the checking account + $500 cash on hand), making option b the correct answer.
The Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management states that significant ethical issues should be discussed first with an immediate superior unless the superior is involved. If satisfactory resolution cannot be achieved when the problem is initially presented, then the issues should be:a. submitted to the next higher managerial level.b. submitted to the chief executive officer of the firm.c. submitted to the audit committee, executive committee, board of directors, or owners.d. submitted to outside legal counsel.
Answer:
a. submitted to the next higher managerial level.
Explanation:
IMA states the following standards of conduct in management accounting: competence, confidentiality, integrity and credibility.... Confidentiality entails accountants to divulge information only at the behest of their supervisor. Integrity forbids managers to engage in unethical behavior. Once an issue can't be resolved the standard procedure is to move a step up the ladder for further assistance.
Jane contracts Tom, a home developer, to build her a new house. In the contract it states that all necessary parts of the home must be complete before the contract is to be considered finished. However, Tom decides it is simply too much work to carpet and tile the home and finishes his work without completing the carpet and tile. Tom breached his contract with Jane. To initiate a lawsuit against Tom, Jane must:
Answer:
Simply file a complain in the court. The court will read the contract and then order Tom to finish the necessary parts of the company which means that the finishing of the tiles and carpet was an implied clause in the contract. So it seems better for Jane to sue Tom to mitigate for damages.
When Apple Inc. contracts with companies outside the United States to manufacture its products, citing their workers’ flexibility and skills, it is adopting stance toward the global labor market. True or false?
Answer: The answer is definitely True
Mark is refinishing an antique china cabinet and has already spent $180 on the restoration. He expects to be able to sell the cabinet for $360. Mark discovers that he needs to do an additional $200 of work to make the cabinet worth $360 to potential buyers. He could also sell the cabinet now, without completing the additional work, for $100. What should he do?
Answer:
He should complete the additional work and sell the cabinet for $360.
Explanation:
This is because if he is to sell for $100 without completing the additional work, he will be making a loss of $80, having spent $180.
But on completion of the additional work, he would have spent a total of $380, therefore, if he sells the cabinet for $360, he will only be making a loss of $20.
Therefore, the better option is to complete the additional work and sell for $360.
A thirty-year U.S. Treasury bond has a 4.0 percent interest rate. In contrast, a ten-year Treasury bond has an interest rate of 3.7 percent. If inflation is expected to average 1.5 percentage points over both the next ten years and thirty years, determine the maturity risk premium for the thirty-year bond over the ten-year bond.
Answer:
The answer is 0.3%
Explanation:
nominal risk free rate for 10 years = 3.7 + 1.5 = 5.2
nominal risk free rate for 30 years = 4.0 + 1.5 = 5.5
Therefore maturity risk premium is 5.5 - 5.2 = 0.3%
The maturity risk premium for the thirty-year bond over the ten-year bond is computed by subtracting the real risk-free rates of the two bonds, which results in 0.3%
Explanation:The maturity risk premium for the thirty-year bond over the ten-year bond can be calculated by subtracting the real risk-free rate from the interest rate of the bond. The real risk-free rate is essentially the interest rate adjusted for potential inflation over a given period.
Firstly, we need to figure out the real risk-free rate for both bonds. Inflation is expected to average 1.5 percent over the next thirty years and ten years. Therefore, the real risk-free rate for the thirty-year bond = 4.0% - 1.5% = 2.5%. Similarly, the real risk-free rate for the ten-year bond = 3.7% - 1.5% = 2.2%.
Next, the maturity risk premium would be obtained by subtracting the real risk-free rate of the ten-year bond from that of the thirty-year bond. As a result, the maturity risk premium of the thirty-year bond over the ten-year bond is 2.5% - 2.2% = 0.3%.
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A company borrows $100,000 from a bank; this is part of the: a. Secondary debt market b. Primary debt market c. Secondary equity market d. Primary equity market
Answer:
The answer is B. Primary Debt Market
Explanation:
Primary Debt Market is a type of market in which participants issue/obtain loan(bonds, notes, bills etc.)directly from a company(bank or lender).
The money is directly from the bank to the debtor(the company that is borrowing money).
Option B is incorrect because secondary debt market is from hand to hand i.e from debtor to debtor.
For example, Mr A. obtains a loan of $1000 dollar from a bank. This is primarily debt market. And afterwards Mr A. sells this particular loan to Mr B. This is secondary debt market because it is not directly from the bank.
Option C and D are incorrect because this transaction is a debt transaction and not an equity transaction
What is the difference in the future value of $100 at 7 percent interest for 5 years if the interest is compounded semiannually rather than annually?
Answer:
0.80
Explanation:
Compounded interest annually[tex]I=P[(1+r)^n-1]\\I=100[(1+0.07)^5-1]\\\\I=100[1.40255173-1]\\I=100[.40255173]\\I=40.255173[/tex]
Compounded interest Semiannually[tex]I=P[(1+r)^n-1]\\I=100[(1+0.035)^{10}-1]\\\\I=100[1.41059876-1]\\I=100[.41059876]\\I=41.059876[/tex]
Difference between interest = 41.059876 - 40.255173
Difference between interest = 0.804703
As the sales manager at Audio Equipment Corp., Simone makes the best use of the limited resources available to her in order to achieve her company's sales goals. Which aspect of management is Simon practicing?a. Groupthink
b. Ambiguity
c. Efficiency
d. Responsiveness
Answer:
C.Efficiency
Explanation:
Efficiency is one the three e's of value for money concept.
Aside efficiency.there are two others i.e Effectiveness and Economy.
Effectiveness is achieving optimum results possible from a given course of action.
Economy is ensuring that the least amount is spent in achieving the results.
Efficiency is about making sure the that outcome of high quality even though there were constraints in terms of budget and time.
The following situations should be considered independently. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)1. John Jamison wants to accumulate $75,000 for a down payment on a small business. He will invest $35,000 today in a bank account paying 8% interest compounded annually. Approximately how long will it take John to reach his goal?PV= $35,000, n=?, i=8%, FV=$75,0002. The Jasmine Tea Company purchased merchandise from a supplier for $43,700. Payment was a noninterest-bearing note requiring Jasmine to make six annual payments of $8,000 beginning one year from the date of purchase. What is the interest rate implicit in this agreement?PV=$43,700, n=6, i=%, Annuity Payment= $8,0003. Sam Robinson borrowed $18,000 from a friend and promised to pay the loan in 10 equal annual installments beginning one year from the date of the loan. Sam’s friend would like to be reimbursed for the time value of money at a 9% annual rate. What is the annual payment Sam must make to pay back his friend?Table or calculator function: PVA of $1. PV= $18,000, n=10, i=9%, Annual Installment=?
Answer:
Explanation:
(1)
FV = PV x (1 + r)^N
FV = $75,000
PV = $35,000
r = 8%
75,000 = 35,000 x (1.08)^N
(1.08)N = 2.1429
N ln 1.08 = ln 2.1429
N = ln 2.1429 / ln 1.08 = 0.33 / 0.033 = 10 years
(2)
FV = Annual payment, A x PVA
FV = $43,700
n = 6 years
A = 8,000
43,700 = 8,000 x PVA
PVA = 5.4625
PVIFA (6 years, r%) = 5.4172
r=3%.
(3)
PV = Annual payment, A x PVIFA (r%, n years)
PV = $18,000
n = 6 years
r = 9%
$18,000 = A x PVIFA (9%, 6 years) = A x 4.4859 [From PVIFA table]
A = $18,000 / 4.4859 = $4,012.57
John will take approximately 7.52 years to reach his investment goal of $75,000 at 8% annual interest rate. Jasmine Tea Company's home agreement indicates an implicit interest rate of approximately 6.35%. Sam must make an annual installment of $2,702 to repay his $18,000 loan over 10 years at 9% interest.
Explanation:1. To calculate how long it will take John to reach his goal, we would need to use the formula for future value of $1: FV = PV*(1+i)^n. Solving for n, we get n = log(FV/PV) / log(1+i). Plugging in the given values, we get n ≈ 7.52 years.
2. To find the implicit interest rate, we first calculate the present value of the annuity using the given value. Then, we equate it to the formula of present value of annuity: PV = Annuity Payment * PVA of $1 factor(n,i). Solving for interest rate i, we require iterative process or financial calculator to find i ≈ 6.35%
3. To calculate Sam's annual installment, we will use the formula for the present value of an annuity: PV = Annual Installment * PVA of $1 factor(n,i). Solving for 'Annual Installment', it results in $18,000 / PVA of $1 factor(n,i) = $2,702.
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Rhonda Miller wants to take out a 4 year loan to purchase a car. What type of computation would she use to calculate her monthly payments?A. Present value of a single amountB. Future value of a single amountC. Simple interestD. Present value of an annuityE. Future value of an annuity
Answer: Option D is correct.
Rhonda Miller wants to assess how much using loan finance will cost in todays value. There are also finance lease facility available to fund the asset which means Rhonda must opt to the better option to save maximum. Calculating Present Value of annuity is the suitable option which helps in understanding how much this source of finance cost opposed to the use of finance lease.
Final answer:
Rhonda Miller would use the Present value of an annuity computation to calculate her monthly payments for a 4 year car loan, which takes into account the interest rate and time value of money.
Explanation:
Rhonda Miller wants to calculate her monthly payments for a 4 year car loan. The type of computation she would use for this is the Present value of an annuity. An annuity is a series of fixed payments made over a period of time, and the present value of an annuity calculation helps to determine the current value of those future payments when considering the time value of money and interest rates. For example, if Rhonda knows the amount of the loan, the interest rate, and the number of payment periods, she can use the present value of an annuity formula:
PV = Pmt x ((1 - (1 + r)^-n) / r)
Where PV is the present value, Pmt is the payment per period, r is the interest rate per period, and n is the total number of periods. By using this computation, Rhonda will be able to determine her monthly payments for the car loan.