Answer:
a. Disadvantage
b. Advantage
c. Advantage
d. Disadvantage
e. Disadvantage
Explanation:
Debt refers to a mode of raising long term finance whereby the borrower, usually a corporate agrees to repay periodic interest and at the same time principal repayment upon maturity.
Debt is an obligation whereby the interest obligation must be met by the borrower irrespective of it's profits.
One advantage of debt financing being, interest paid on debentures and bonds is tax deductible.
Issue of common stock meanwhile confers members with voting rights and ownership rights. Stockholders are paid dividend and the company pays their principal lastly, after having met all other obligations.
Issue of common stocks lead to dilution of control and at the same time, dividend unlike interest is not tax deductible.
Assume that a 6 percent $500,000 bond with semiannual interest payments and a remaining life of 10 years could be purchased today, when market interest rates are 4.5 percent. How much would you have to pay to buy the bond?
Answer:
I will pay $559,864 for this bond
Explanation:
Coupon payment = $500,000 x 6% = $30,000 annually = $15,000 semiannually
Number of periods = 10 years x 2 = 20 period
Interest Rate = 4.5% = 2.25% semiannually
Price of bond is the present value of future cash flows, to calculate Price of the bond use following formula:
Price of the Bond = C x [ ( 1 - ( 1 + r )^-n ) / r ] + [ F / ( 1 + r )^n ]
Price of the Bond =$15,000 x [ ( 1 - ( 1 + 2.25% )^-20 ) / 2.25% ] + [ $1,000 / ( 1 + 2.25% )^20 ]
Price of the Bond = $15,000 x [ ( 1 - ( 1.0225 )^-20 ) / 0.0225 ] + [ $500,000 / ( 1.0225 )^20 ]
Price of the Bond = $239,455.68 + $320,408.24 = $559,863.92
Price of the Bond = $559,864
Answer:
$530579.03
Explanation:
Bond Value Formula
BV = C×1-(1+r/m)^-nm/r/m + FV/(1+r/m)^nm
So we need to first calculate the semi annual coupon payment
given by C = C×FV/2
=0.06×$500000/2
=$15000
Then substitute into the formula for bond value
BV = 15000 × 1 -(1+0.045/2)^-10×2 /0.045/2+ 500000/(1+0.045/2)^10×2
=$532579.03
Management fraud (e. g., fraudulent financial reporting) is a relatively rare event. However, when it does occur, the frauds (e. g., Enron and WorldCom) can have a significant effect on shareholders, employees, and other parties. AU 240, Consideration of Fraud in a Financial Statement Audit, provides the relevant guidance for auditors.
Required:
a. What is the auditor's responsibility for detecting fraud?
b. Describe the three conditions that are generally present when fraud occurs?
c. What are the objectives of the " brainstorming" meeting that is held among the engagement team members?
d. What is the required documentation for identified risk factors?
A. ANSWER:
The Auditors major responsibility for detecting fraud is to flag it and report it.
EXPLANATION:
He or she may:
Report it to the audit committee or
to the highest level of management (if they are not involved in the fraud), or
to the shareholders if the fraud was and or is being committed by those in senior management
It is also the Auditors responsibility to:
Detect any error leading to a material misstatement. A material misstatement is information in the financial statements that is sufficiently incorrect that it may impact the economic decisions of someone relying on those statements
If the error is immaterial, it should be reported to those charged with governance.
Here there is no responsibility to detect them.
At the Planning Stage consider in advance, the risk of material misstatement due to fraud and error
B. ANSWER
The three conditions generally present when fraud occurs are:
Opportunity
Incentive
Rationalization
EXPLANATION
1. Opportunity:
Opportunity refers to circumstances that allow fraud to occur. In the fraud triangle, it is the only component that a company exercises complete control over. Examples of conditions that provide opportunities for committing fraud include but are not limited to: Weak internal controls, lack of integrity at management level, inadequate accounting policies.
2. Incentive:
This is alternatively called pressure, or motive. It refers to an employee’s mindset towards committing fraud. Examples of things that provide incentives for committing fraud include:
Bonuses based on a financial metricCommon financial metrics used to assess the performance of an employee are revenues and net income. Bonuses that are based on a financial metric creates pressure for employees to meet targets which, in turn, may cause them to commit fraud to achieve the objective.
Investor and analyst expectationsThe need to meet or exceed investor and analyst expectations can create pressure to commit fraud.
Personal needsPersonal needs may include wanting to earn more money, the need to pay personal bills, a gambling addiction, etc.
3. Rationalization
Rationalization refers to an individual’s justification for committing fraud. Examples of common rationalizations that fraud committers use include:
“They treated me wrong”An individual may be spiteful towards their manager or employer and believe that committing fraud is a way of getting payback.
“Upper management is doing it as well”Lack of integrity at the top may cause an individual to follow in the footsteps of those higher in the corporate hierarchy.
“There is no other solution”An individual may believe that they might lose everything (for example, losing a job) unless he or she commits fraud.
C. ANSWER
The objectives of the "Fraud Brainstorming" meeting that is held among the engagement team members are to:
Share insights about the entity and its environment and the entity's business risksProvide an opportunity for the team members to discuss how and where the entity might be susceptible to fraudEmphasize the importance of maintaining professional skepticism throughout the audit regarding the potential for material misstatement due to fraudEXPLANATION
Auditors are required to hold discussions ( "brainstorming sessions) with the audit team about the entity's financial statements' susceptibility to material misstatements In planning the audit, the engagement partner or manager should communicate with members of the audit team regarding the potential for misstatement due to fraud . The brainstorming session can be held separately, or concurrently with the discussion required as part of understanding the entity and its environmentD. ANSWER
The required documents for identified risk factors are:
A record of the discussion among the engagement team where required and the significant decisions reached;A record holding the key elements of the understanding obtained regarding each of the aspects of the entity and its environment specified and of each of the internal control components the sources of information from which the understanding was obtained; and the risk assessment procedures performed;the identified and assessed risks of material misstatement at the financial statement level and at the assertion level ; andthe risks identified, and related controls about which the auditor has obtained an understanding
Auditors are responsible for detecting material misstatement due to fraud in financial statements. Three conditions present during fraud are pressure, opportunity, and rationalization, known as the fraud triangle. The brainstorming meeting aims to discuss possible risk areas and plan accordingly, and auditors should document their findings and responses thoroughly.
Explanation:In the context of an audit, the auditor's responsibility for detecting fraud involves planning and performing the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud.
Three conditions generally present when fraud occurs are known as the fraud triangle, which includes pressure or incentive, opportunity, and rationalization. Pressure or incentive could be financial or personal needs, opportunity might arise due to weak internal controls, and rationalization is the mindset that excuses the fraudulent behavior.
The brainstorming meeting among the engagement team members aims to discuss how and where the entity's financial statements might be susceptible to material misstatement due to fraud, and to design procedures accordingly.
The required documentation for identified risk factors includes a written record of the identification and assessment of the risks of material misstatement, the auditor’s response to those risks, and the basis for the conclusions about the risks related to each of these.
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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.
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.
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.
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
Applications or uses of a new technology or product that are so compelling that they persuade customers to adopt the new format or technology in droves, thereby eliminating demand for competing formats, are known as:
a. killer applications.
b. technological paradigm shifts.
c. razor and blade strategies.
d. first-movers.
Answer:
The correct answer is letter "A": killer applications.
Explanation:
In consumer technology, killer applications is a term used to refer to those applications that cover needs so efficiently to cause their success and to wipe out of the market those applications replaced. Thus, while killer applications represent success for some entities it also represents the failure of others. However, a characteristic of killer application is their short product life cycles.
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.
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.
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.
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
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:
In the Wall Street Journal (last March) it was reported that the unemployment rate decreased from 4.1% to 3.9% from January 2019 to February 2019 in the United States. This unambiguously shows that the U.S. economy must have expanded and the labor market remained robust.
a. True
b. False
Answer:
The statement in the question given is false
Explanation:
Job finding by individuals without jobs is not the only way in which the rate of unemployment can be reduced; it can also get reduced , reason being that due to discouragement and some other factors, the jobless are no longer looking for employment, thus they are withdrawing from the labor force altogether.
If the situation described above is true, then a diminishing unemployment rate is necessarily a sign of economic expansion, although could indicate a structural weakness of the job market.
Thus, the statement in the question given is false.
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.
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.
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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Shares of common stock of the Samson Co. offer an expected total return of 16.2 percent. The dividend is increasing at a constant 5.6 percent per year. The dividend yield must be:_________
Options:
A. 5.60%.
B. 10.60%.
C. 16.20%.
D. 21.80%.
E. 2.89%.
Answer:D. 21.80%
Explanation:The Dividend yield is the total amount earned by dividing the amount of dividend per share by the stock price per share for a given Company,it generally represented in percentage. The Shares of common stock of the Samson Co. that offers an expected total return of 16.2 percent, and a dividend increase of 5.6% per year will be expected to give a total yield(Which is the total amount earned from this investment during the period under review)
Total yield will be 16.2%+5.6%=21.8%.
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%.
Presented below are selected account balances for Homer Winslow Co as of December 31, 2014.
Instructions: Prepare closing entries for Homer Winslow Co on December 31,2014. (Omit explanations)
Inventory 12/31/14 $60,000 Cost of Goods Sold $225,700
Common Stock 75,000 Selling Expenses 16,000
Retained Earnings 45,000 Administrative
Expenses 38,000
Dividends 18,000 Income Tax
Expense 30,000
Sales Returns
and Allowances 12,000
Sales Discounts 15,000
Sales Revenue 410,000
Answer:
Sales Revenue 410,000 debit
Income Summary 410,000 credit
--to close revenues accounts--
Income Summary 95,000 debit
Administrative Expenses 38,000 credit
Income Tax Expense 30,000 credit
Sales Returns and Allowances 12,000 credit
Sales Discounts 15,000 credit
--to close expenses and other--
Income Summary 18,000 debit
Dividends 18,000 credit
--to close dividends--
Income summary 297,000 debit
Retained Earnings 297,000 credit
--to close the income summary against RE--
Explanation:
We have to close against income summary he temporary accounts:
To close this accounts we need to post them in their opposite side of the normal balance. Revenues will be debited while expenses credited.
At last, we solve for the income summary balance and close it against retained earnings
410,000 - 95,000 - 18,000 = 297,000
Beranek Corp has $720,000 of assets, and it uses no debt--it is financed only with common equity. The new CFO wants to employ enough debt to raise the debt/assets ratio to 40%, using the proceeds from borrowing to buy back common stock at its book value. How much must the firm borrow to achieve the target debt ratio
Answer:
Beranek Corp. should borrow $288,000 to achieve the target debt ratio.
Explanation:
40% of debt-to-asset ratio means that 40% of the assets should be Financed with debt and the remaining with equity. We have $720,000 worth of assets, simply multiply it with 40% and you will get the amount the needs to be borrowed.
If you have any queries about double entries of all this scenario, do leave a comment, I'll be pleased to help you.
Thank you!
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.
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.
An optimizing consumer currently spends money on many goods. The last ticket to a baseball game she bought cost $15 and gave her 10 utils of satisfaction. If this same consumer spends $10 on a movie ticket and is still optimizing utility, how many utils will she receive from the purchase
Answer:
Number of utils that will be received from the purchase is 6.667 utils.
Explanation:
At Optimum:
Pa / Pb = MUa / MUb
Where;
Pa = Price of the baseball game = 15
Pb = Price of the movie ticket = 10
Now,
15/10 = 10/MUb
1.5 = 10/MUb
MUb = 6.667 utils
Thus, the number of utils that will be received from the purchase is 6.667 utils.
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.
You work for an auto manufacturer designing brake systems, but you do not have a dedicat- ed team. Instead, you move from project to project, joining a new team and project when your current project is concluded.
A, Innovative communication technologies
B. Nonterritorial offices
C. Self-directed work groups and virtual teams
Answer:
C: Self-directed work groups and virtual teams.
Explanation:
SDWT (Self-directed work groups and virtual teams) are the groups in offices who possess different skills, and even aren't working on the same project which that they don't have same purpose as you have but still they are in your team.
Since, there is not any dedicated team for my project, I am just moving into other teams for every new project I am going int o self-directed work groups and virtual teams.
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.
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.
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
Learn more about insurance policy here : https://brainly.com/question/26285319
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.