Answer:
FALSE
Explanation:
Microeconomics refers to the branch of economics which examines the actions of persons and businesses in making choices about limited resource distribution and the relationships between these entities and industries.
Although microeconomics concentrates on companies and people, macroeconomics focuses on overall economic exercise, talking about issues of development, interest rates, and joblessness, and governmental policies on such concerns.
Thus, from the above we can conclude that the given statement is false.
The conservatism constraint prescribes that:
a) A company use the same accounting methods period after period.
b) All items of a material nature are included in financial statements.
c) All inventory items are reported at full cost.
d) Revenues and expenses are reported in the period in which they are earned or incurred.
e) When multiple estimates of amounts to be received or paid in the future are equally likely, then the least optimistic amount should be used.
Option E
The conservatism constraint prescribes that: When multiple estimates of amounts to be received or paid in the future are equally likely, then the least optimistic amount should be used.
Explanation:Conservatism constraint designates the aid of the less optimistic amount when more extra than unity assessment of the amount to be collected or repaid endures and these assessments are thereby uniformly likely.
The conservatism constraint suggests that, all annexes equal, we require to choose the postulate that is more moderate for assets and more leading for liabilities, these hypotheses forming the company resemble worse or most traditional. Conservatism constraint restricts the opportunity of economic statements being proffered that are emphasized, an overstatement that investors could perform on.
The conservatism constraint prescribes that a company use the same accounting methods period after period to provide consistent and reliable information in financial statements.
Explanation:The conservatism constraint in accounting prescribes that a company use the same accounting methods period after period. This means that a company should be consistent in its treatment of accounting transactions and follow the same principles and rules over time.
For example, if a company chooses to use the FIFO method to value its inventory, it should continue using the same method in subsequent periods.
The aim of the conservatism constraint is to ensure that financial statements reflect a more cautious and conservative estimate of the company's financial position and performance.
By using the same accounting methods, a company provides users of financial statements with consistent and reliable information to make informed decisions.
Which of the four external processes in the consumer’s culture do you think have been the most important to the success of Dove’s Campaign for Real Beauty? Why?
Answer and explanation:
Dove's campaign for "Real Beauty" used the values, personality and lifestyle features to drive its advertisements to success. Dove achieved that purpose promoting the idea that there is no set definition of beauty and spreading the point of view that women are beautiful on their own.
Dove tore down the stereotype of conventional beauty by targeting its products to women of different ages, races, sizes, and social classes which helped to broaden the company's market segment since most women identified themselves with Dove's advertisements.
The success of Dove's Campaign for Real Beauty can largely be attributed to the external consumer cultural processes of socialization or learning and need recognition, as the campaign addressed a relevant social issue and effectively recognized the needs of its audience.
Explanation:The four external processes in the consumer's culture that have been key to the success of Dove's Campaign for Real Beauty are socialization or learning, need recognition, information search, and purchase decision. Of these, I believe that socialization or learning an need recognition have been most important. The campaign targeted a social issue, promoting self-esteem and rejecting unrealistic beauty standards, thus fostering socialization among its audience. Additionally, the campaign effectively created need recognition by highlighting that many women deal with low self-esteem and body dissatisfaction, positioning Dove as a brand that understands and addresses these needs.
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The fact that there is a criminal investigation pending against Johnson and Johnson suggests that regulators feel that the company is not meeting its obligations at _________ level of corporate responsibility.
A) a discretionary
B) a legal
C) an economic
Answer: B. A legal
Explanation: at a legal level of corporate responsibility, businesses are obligated to obey the law. It is the most important level of corporate social responsibility as described by Archie Carroll in the “Pyramid of Corporate Social Responsibility” in 1991. It indicates how companies are meant conduct their business in the marketplace in areas bordering competition, employment, health and safety, tax regulation etc.
Sean, a new graduate at a telecommunications firm, faces the following problem his first day at the firm: What is the average rate of return for a project that costs $200,000 to implement and has an average annual profit of $30,000
Answer:
The average return of the project is 15%
paybakc 6.67 years
Explanation:
Sean should divide the anual profit over the project cost ot get the average return
[tex]\frac{income}{investment} = $rate of return[/tex]
30,000 / 200,000 = 0.15
0.15 = 15%
Sean may also want to know the payback period:
so we do investment / income:
200,000 / 30,000 = 6.67
The firm will recover the cost of 200,000 after 6.67 years
The average rate of return for Sean's telecommunications firm project, which costs $200,000 and has an average annual profit of $30,000, is 15%.
Explanation:To calculate the average rate of return for a project, we divide the average annual profit by the initial investment cost and then multiply by 100 to get a percentage. For Sean's telecommunications firm project, the average rate of return is calculated as follows:
Determine the average annual profit: $30,000.Determine the initial cost of the project: $200,000.Calculate the average rate of return: ($30,000 / $200,000) × 100 = 15%.Therefore, the average rate of return for the project is 15%.
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Esthelt, an automobile manufacturing company, has a shortage of engineers who are capable of operating computer-controlled machinery used for the production of various critical car parts. Although Esthelt has created job vacancies for this position, production has slowed down drastically due to the shortage of engineers. Due to the urgent requirement for production to gain pace, the company is looking for somebody with the necessary _____ so that he or she would not require training on Computer Numerical Control. Group of answer choices
a. human skills
b. planning skills
c. technical skills
d. conceptual skills
Answer:
c. technical skills
Explanation:
Technical skills -
It refers to the knowledge or the information necessary to perform a particular task , is referred to as the technical skill .
The knowledge of scientific activities , mathematics , technology , mechanical information , is important to be learn technical skills .
Hence , from the given scenario of the question,
The correct option is c. technical skills .
Using a conservative end of period cash flow approach when applying the conventional payback method, what is the payback period when the upfront investment is 124,000 and the end of period cash flow is 25,000?
Answer:
5 years
Explanation:
According to the conservative end of period cash flow approach, cash flow is only computed at the end of the period. Therefore, the payback occurs at the year when the balance ceases to be negative. With constant cash flows of $25,000:
[tex]Initial\ \ \ \ \ \ \ \ \ \ \ \ -\$124,000\\End\ of\ year\ 1\ -\$99,000\\End\ of\ year\ 2\ -\$74,000\\End\ of\ year\ 3\ -\$49,000\\End\ of\ year\ 4\ -\$24,000\\End\ of\ year\ 5\ \ \ \ \ \$1,000[/tex]
The payback period is 5 years.
Suppose nominal GDP increased in a given year. Based on this information, we know with certainty that:
A. real output has increased.
B. the price level (GDP deflator) has increased.
C. real output and the price level (GDP deflator) have both increased.
D. either real output or the price level (GDP deflator) have increased.
E. real output has increased and the price level has decreased.
Answer:
D. either real output or the price level (GDP deflator) have increased.
Explanation:
GDP is the total value (price x quantity) of goods & services produced by an economy during an a time period.
Real GDP is calculated on the basis of base year price index. Nominal GDP is calculated on the basis of current year price index.
So: Real GDP increases only due to rise in output quantity, not by price. Nominal GDP can increase due to rise in both output quantity or in price level (reflected in deflator).
This makes Real GDP a better measure of Economic growth than Nominal GDP, since it captures effect of increased production only (& not price).
Deflator is a measure of average price level change =
Nominal GDP X 100
Real GDP
Deflator > 100 shows inflation in general price level, Deflator < 100 shows deflation in general price level.
eptune Accounting Services expects its accountants to work for 24 comma 000 direct labor hours per year. The company's estimated total indirect costs are $ 222 comma 000. The direct labor rate is $ 75 per hour. The company uses direct labor hours as the allocation base for indirect costs. If Neptune performs a job requiring 30 hours of direct labor, what is the total job cost? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)
Answer:
$2,527.5
Explanation:
Indirect labor hours:
= Estimated total indirect costs ÷ Direct labor hours per year
= $222,000 ÷ 24,000
= $9.25
Total job cost:
= Direct labor cost + Indirect labor cost
= (direct labor rate per hour × Number of direct labor hours) + (Number of direct labor hours × Indirect labor rate per hour)
= ($75 × 30) + (30 × $9.25)
= $2,250 + $277.5
= $2,527.5
list the various elements of fraud within the organization. give several examples of each
Answer:
MotiveRationalizationOpportunityExplanation:
Fraud is a point of concern in the business world and creates a trust deficit. There are 3 elements of fraud and one may identify each of them in every fraud situation.
Motive: Each person has an individual needs and desires which they want to be fulfilled but some people can't make it up because of the current role they have, so they go for the second or illegal option to solve their problems. Take an example of a cashier, he wants to have a car and a house but for that, he has to work 24/7 till 20 years continuously so which is difficult to do, so he chooses to steal the owner's money.Rationalization: It gets hard when some people think that whatever they are doing is not wrong although it is. For example, a stockbroker may think that it's not illegal to deceive an investor however it is. Opportunity: The 2 elements mentioned above can't be controlled by an organization for they are personal and an individual's choices, but this is in the control of the organization and it occurs when an organization loses control. So whenever an employee finds an opportunity to fraud he will. For example, an employee in the customer services centre works hard when the boss is looking but watches tv shows when he is not around.If a company is considering the purchase of a parcel of land that was acquired by the seller for $96,000 is offered for sale at $172,000, is assessed for tax purposes at $106,000, is recognized by the purchaser as easily being worth $162,000, and is purchased for $159,000, the land should be recorded in the purchaser's books at:a. $106,000. b. $159,000. c. $160,500. d. $162,000. e. $172,000.
Answer:
correct option is b. $159,000
Explanation:
given data
purchase land = $96,000
offer sale = $172,000
assessed for tax purposes = $106,000
recognized purchaser worth = $162,000
purchased = $159,000
solution
we know that when we purchase a parcel of land then
the price paid for by the purchaser is the amount and that amount is to be recorded in the books
so that land will record in the purchaser books is $159,000
so correct option is b. $159,000
Indicate whether the following items are capitalized or expensed in the current year. a. Purchase cost of a patent from a competitor. b. Research and development costs. c. Organizational costs. d. Costs incurred internally to create goodwill.
Answer:
The correct answers are:
A) Purchase cost of a patent from a competitor. (Capitalized)
B) Research and development costs. (Expensed)
C) Organizational costs. (Expensed)
D) Costs incurred internally to create goodwill. (Expensed)
Explanation:
Basically, for accounting purposes, the difference between capitalization and expenditure relies on the period the assets will be used. When assets are acquired to be used more than in a single period, they are capitalized. When those assets are purchased to be used within part of the current period, they are expensed. Thus:
A) Purchase cost of a patent from a competitor. (Capitalized)
B) Research and development costs. (Expensed)
C) Organizational costs. (Expensed)
D) Costs incurred internally to create goodwill. (Expensed)
g You take a loan for $25,000 to pay for school. You want to pay it back within 4 years by making equal monthly payments. There is a 15% interest rate on the money borrowed. Determine the monthly payment.
Answer:
$696 (approx)
Explanation:
Given:
Loan amount(P) = $25,000
Years = 4
Interest rate = 15%
Number of total month(n) = 4*12 = 48
Monthly interest rate(r) = 15 / (12*100) = 0.0125
[tex]EMI = \frac{pr(1+r)^n}{(1+r)^n-1} \\EMI = \frac{25,000\times 0.0125(1+0.0125)^{48}}{(1+0.0125)^{48}-1}\\\\ EMI = \frac{312.5(1.0125)^{48}}{(1.0125)^{48}-1}\\\\ EMI = \frac{312.5(1.81535485)}{(1.81535485)-1}\\\\EMI = \frac{567.2983}{0.81535485}\\\\EMI = 695.7685[/tex]
1. Organize around outcomes, not tasks. 2. Identify all the organization’s processes and prioritize them in order of redesign urgency. 3. Integrate information processing work into the real work that produces the information.4. Treat geographically dispersed resources as though they were centralized.5. Link parallel activities in the workflow instead of just integrating their results.6. Put the decision point where the work is performed, and build control into the process.7. Capture information once and at the source.This is
Answer:
Business Process Re-engineering
Explanation:
This involves redesign business processes in such a manner that repetition is avoided and wastes as well as its costs are avoided.
By re-engineering business processes,organizations can identify those activities that are value adding and prioritize,while those that do not add value are eliminated.
Common-size statements: Multiple Choice
Reveal changes in the relative importance of each financial statement item to a base amount.
Do not emphasize the relative importance of each item.
Compare financial statements over time.
Show the dollar amount of change for financial statement items.
Reveal patterns in data across successive periods.
Answer:
Reveal changes in the relative importance of each financial statement item to a base amount.
Explanation:
In the common-size statements, the items would be displayed in the percentage form that is based on the base value rather than the absolute values.
The preparation of this statement is to do the proper analyses of each item with period to period of the similar company so that proper decisions should be taken. In addition, it would also create its importance with respect to the item mentioned in the financial statement
When Starbucks introduced its Tazo Tea line to bring in new customers who had never gone to Starbucks because they don't drink coffee, Starbucks was employing a ________ strategy.a.market-penetrationb.new-market segmentc.geographical-expansiond.niche identificatione.
Answer: (B) New market segment
Explanation:
The new market segment strategy is one of the type business strategy that helps in increase the growth of an organization by developing the various types of market segments with some unique characteristics and features for the products and the services.
The main objective of the new market segment strategy is that it helps in variation in the marketing process, products and in the distribution process.
According to the given question, the Starbucks is introduced the Tazo tea in their menu and the main aim of the company is to bring the new customer. Therefore, The Starbucks is using the new market segment strategy.
Therefore, Option (B) is correct answer.
Which of the following statements is true concerning stock splits? a.The total number of shares outstanding does not change after the stock split. b.Each shareholder will own the same total par amount of stock before and after the split. c.Stock splits require journal entries to be recorded. d.None of these choices are correct.
Answer:
d.None of these choices are correct.
Explanation:
The stock split is the way to increase the outstanding number of shares.
Take an example
The current shares are 50,000 and the stock split ratio is 2 for 1 share
So, now the new shares are
= 50,000 × 2
= 100,000 shares
The first statement is false as it changes the outstanding shares after the stock split.
The second statement is also incorrect because the par amount is also changed
And, the third statement is also incorrect because no journal entry is required for the stock split
International Turtle Trap Manufacturing Corporation's side payments to government officials in exchange for favorable business contracts in foreign countries are considered, in the United States,
A. True
B. False
Answer: THEY ARE CONSIDERED IN THE UNITED STATES AS ILLEGAL AND UNETHICAL.
Explanation: The side payment for favorable business contracts in foreign countries made by International Turtle Trap Manufacturing Corporation is an ILLEGAL AND UNETHICAL ACT, which is punishable under the Constitution of the United States of America and most other developed countries of the world.
Side payments are payments made outside the recommended payments as stated or listed in the terms of agreement in order to subvert justice and Due process in the execution of tasks or contracts.
Ashley had $10,000 in credit card debt. She negotiated a settlement with the credit card company, and the credit card company agreed to cancel $6,000 of the debt.
If Ashley has total assets of $25,000 and total liabilities of $50,000 at the time the debt was cancelled, what amount of gross income does Ashley have as a result of the credit card company cancelling $6,000 of her debt?
Answer:
The amount waived off by the lender must be treated just like gross income. The total figure for the gross income will be:
Total assets = Equity + Liability
By putting values we have:
$25,000 = Earnings losses (Equity) + $50,000
Earnings Losses = $25,000 - $50,000 = -$25,000
So the Gross losses are $25,000. Now we will reduce this losses by $6000 which is debt cancellation. The Net losses are $19,000 which are trading losses and must be offset against trading income.
Fill in the blanks with given options:
Suppose the price elasticity of demand for heating oil is 0.2 in the short run and 0.7 in the long run.
a. If the price of heating oil rises from $1.90 to $2.10 per gallon, the quantity of heating oil demanded will _______ by in the short run and by ________ in the long run. The change is ________ in the long run because people can respond ________ easily to the change in the price of heating oil.
Options:
1. fall/rise
2. smaller/larger
3. less/more
Answer:
1. fall
2. Larger
3. more
Explanation:
The price elasticity is relative measure of change in demand. When the demand of heating oil decreases due to increase in price then the heating oil is considered as price elastic. The elasticity of heating oil is 0.2 in the short run and 0.7 in the long run which means customers respond less in change of demand in short run due to change in price. When the price of heating oil increases, the demand will fall in the short run.
In the short run customers may not find time to respond to the change in price. The change in demand in short run is smaller and change in demand in Long run will be larger.
The price elasticity of heating oil is more in long run because customer may find alternate sources at a cheaper rate and may switch to it causing a greater fall in demand of heating oil.
After generating financial statements for your client, Doug, you list each line item on the income statement as apercentage of total income and each item on the balance sheet as a percentage of total assets. Which comparative financial statement tool are you utilizing?
a.Monte Carlo Analysis.
b.Horizontal Analysis.
c.Vertical Analysis.
d.Sensitivity Analysis.
Answer:
c.Vertical Analysis.
Explanation:
Vertical analysis is a proportional analysis used in financial statements. Each line item is represented as a percentage of another item on the financial statement.
On income statement items are usually represented as a percentage of income or gross sales.
On the balance sheet line items are represented as a percentage of total assets.
Answer:
The correct answer is letter "C": Vertical Analysis.
Explanation:
Under Vertical Analysis each line item is viewed as a percentage of a larger number in a company's financial statement. On the Balance Sheet, each line item in the Asset section is presented as a percentage of total assets. In the Liability and equity section, each line item is presented as a percentage of total liabilities and equity which equals total assets based on the accounting equation.
The welding department supplies parts to the final assembly line. Management decides to implement a kanban system and has collected the following data. The daily demand is 2000 units The production lead time is 4 days (this includes processing time, transport time, and waiting time) Management has decio One container fits 400 units
How many kanban containers will be needed to support this system? _____ containers
Answer:
25 kanban containers
Explanation:
Given that,
Daily demand = 2,000 units
Production lead time = 4 days
Container size = 400 units
Lead time demand:
= Daily demand × Production lead time
= 2,000 units × 4 days
= 8,000 units
Safety Stock:
= Number of days × Daily demand
= 1 day × 2,000 units per day
= 2,000 units
Number of Kanban containers needed:
= (Lead time demand + Safety Stock) ÷ Container size
= (8,000 + 2,000) ÷ 400
= 10,000 ÷ 400
= 25
To support the Kanban system in the welding department, 20 Kanban containers will be needed, based on the daily demand, production lead time, and container capacity.
To calculate the number of Kanban containers needed in the welding department to support the Kanban system, we can use the following formula:
(Daily demand) * (Production lead time in days) / (Container capacity)
Using the data provided:
Daily demand = 2000 units
Production lead time = 4 days
One container fits = 400 units
Now, let's plug in the values:
(2000 units per day) * (4 days) / (400 units per container) = 20 containers
Therefore, 20 Kanban containers will be needed to support this system efficiently.
Governments often use a sales tax to raise tax rev- enue, which is the tax per unit times the quantity sold. All else the same, will a specific tax raise more tax revenue if the demand curve is inelastic or elas- tic at the original price?
Answer:
Yas tax revenue depend on elasticity of demand curve.
Explanation:
first of all we need to understand that inelastic demand curve means in which increase or decreases of price don't change consumption pattern of consumer, however elastic demand meant in which increases or decreases price effect consumption behavior, this depend whether commodity or good is necessity or luxurious good. so if demand is inelastic government can impose and earn more revenue from that good on other hand to impose tax on elastic commodities government cannot earn profit and there is less margin.
Andy: "This is to confirm our telephone conversation of earlier today. 200 lbs. of T-bone at $2.89 per pound." Barb: "Yes, but that's 100 pounds at $2.99." Andy: "Too late, we already reached agreement by phone." Barb: "Too bad, it wasn't in writing." Which of the following statements is true? a. Barb is incorrect. The phone conversation was a contract. b. Barb is correct. The agreement must be in writing to be enforceable. c. Andy can enforce the agreement with the parol evidence rule. d. none of the above
Barb is correct. The agreement must be in writing to be enforceable.
Explanation:
A written agreement that is legally binding is a true agreement and can therefore be enforced.
It ensures that the people that signed the agreement must perform their duties under the agreement. We can be penalized if they do not.
Although documents need not be published to be legally binding, it is a good idea to keep a record in writing of what you have agreed. It minimizes the likelihood that you and the other side will find themselves on the same page in a disagreement. The article describes the conditions for a legally binding written agreement.
If the print media is taken over by the electronic media, thereby causing employees in the print media industry to be permanently laid off, ________ unemployment would increase.
Group of answer choices:
O FrictionalO CyclicalO StructuralO Seasonal
Answer:
Structural
Explanation:
Structural unemployment occurs as a result of a mismatch between the skills of unemployed labour and the skills demanded for by the jobs available. It usually occurs as a result of technological change.
Frictional unemployment occurs when when Labour is moving from one job to another.
Cyclical unemployment is when employment level changes with the business cycle. When there's a downturn in the economy, unemployment rises and falls when there's a boom.
Seasonal unemployment is when employment level falls or rises during certain seasons.
I hope my answer helps you
Structural unemployment would increase if print media is replaced by electronic media, leading to permanent layoffs in the print industry due to fundamental industry changes.
Explanation:In the given scenario, if print media is taken over by the electronic media and employees of the print media industry are permanently laid off, this would cause an increase in structural unemployment. Structural unemployment occurs when an industry undergoes fundamental changes forcing workers out of work because their skills no longer match available jobs.
Structural changes can include technological changes, introduction of automation, outsourcing, advances in efficiency or shifts in consumer demand. In this scenario, print media is taken over by electronic media, which suggests a fundamental shift in the media industry, thus leading to a structural unemployment situation where print media employees would need retraining and adjustment time to adapt to the new changes.
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Of all the companies on the New York Stock Exchange, profits are normally distributed with a mean of $6.54 million and a standard deviation of $10.45 million. In a random sample of 73 companies from the NYSE, what is the probability that the mean profit for the sample was between 3.0 million and 6.0 million?
Answer:
[tex]P(3.0<\bar X<6.0)= P(-2.894< Z< -0.442) = P(Z<-0.442) -P(Z<-2.894) = 0.329 -0.0019=0.327[/tex]
Explanation:
Previous concepts
Normal distribution, is a "probability distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean".
The Z-score is "a numerical measurement used in statistics of a value's relationship to the mean (average) of a group of values, measured in terms of standard deviations from the mean".
Solution to the problem
Let X the random variable that represent the profits of a population, and for this case we know the distribution for X is given by:
[tex]X \sim N(6.54,10.45)[/tex]
Where [tex]\mu=6.54[/tex] and [tex]\sigma=10.45[/tex]
We are interested on this probability :
[tex]P(3.0<\bar X<6.0)[/tex]
And the best way to solve this problem is using the normal standard distribution and the z score given by:
[tex]z=\frac{x-\mu}{\frac{\sigma}{\sqrt{n}}}[/tex]
And we can find the z score for the two limits 3.0 and 6.0 and we got:
[tex] z_1 = \frac{3-6.54}{\frac{10.45}{\sqrt{73}}} = -2.894[/tex]
[tex] z_2 = \frac{6- 6.54}{\frac{10.45}{\sqrt{73}}} =-0.442 [/tex]
So then we can calculate the probability on this way:
[tex]P(3.0<\bar X<6.0)= P(-2.894< Z< -0.442) = P(Z<-0.442) -P(Z<-2.894)[/tex]
And we can use the normal standard distribution or excel to calculate the probabilities and we got:
[tex]P(3.0<\bar X<6.0)= P(-2.894< Z< -0.442) = P(Z<-0.442) -P(Z<-2.894) = 0.329 -0.0019=0.327[/tex]
20. Which of the following best describes the utility of the "roof" in the quality function deployment (QFD) matrix? A. The roof relates the customer attributes (CA) to the engineering characteristics (EC). B. The roof compares engineering characteristics (EC), which enables the study of any trade-offs among the EC. C. The roof provides the relative importance of the customer attributes (CA). D. The roof provides a competitive evaluation of the engineering characteristics (EC).
Answer:
The answer is B. The roof compares engineering characteristics (EC), which enables the study of any trade-offs among the EC.
Explanation:
A bond that pays interest forever and has no maturity date is a perpetual bbond, also called a perpetuity or a consol. In what respect is a perpetual bond similar to 1) a no-growth common stock and 2) a share of preferred stock?
Answer: A perpetual bond is similar to a no growth stock and a share of preferred stock as they all derive their values from a series of cash inflows.
Explanation: A perpetual bond is a bond with no maturity date. Issuers pay COUPONS on them forever. This represents the cash inflows.
In the same vein, both a no-growth stock and share of preferred stock derive their values from a series of cash inflows called DIVIDENDS.
A perpetual bond is similar to no-growth common stock and preferred stock because they provide consistent returns without growth prospects; their valuation also reflects a constant yield. For both types of stocks and perpetual bonds, present value calculations consider these consistent payment streams.
Explanation:A perpetual bond, also known as a perpetuity or consol, is a bond that pays interest forever without a maturity date. This financial instrument is similar to 1) a no-growth common stock because neither the perpetual bond nor the no-growth stock will increase in value from growth; they both provide a consistent stream of income indefinitely. 2) A share of preferred stock often has a fixed dividend, which is similar to the fixed interest payment of a perpetual bond, also known as coupon payments.
Moreover, the valuation of a perpetual bond can be described using the formula V = 1/r, assuming the rate of return (r) is constant. This formula highlights the similarity between perpetual bonds and certain stocks with constant payments. In the case of no-growth common stocks, the expectancy of dividends to remain the same reinforces their resemblance to a consol's fixed interest payments. Preferred stock comparisons arise from the nature of preferred dividends, which, like consol payments, are typically fixed and paid out prior to any common stock dividends.
Manuel has plans to go to a movie and already has a $10 nonrefundable, nonexchangeable, and nontransferable ticket. Now Poornima, whom Manuel has wanted to date for a long time, asks him to a concert. Manuel would prefer to go to the concert with Poornima and forgo the movie, but he doesn't want to waste the $10 he spent on the movie ticket.
From the perspective of an economist, if Manuel decides to go to the movie, what has he just done?
1. Incorrectly allowed a sunk cost to influence his decision
2. Made an optimal choice
3. Correctly ignored a sunk cost
Answer:
3. Correctly ignored a sunk cost
Explanation:
Sunk costs refer to those costs which have been incurred in the past and which can no longer be recovered. For example, past expenditure on research and development with no current or future benefits represent sunk costs which can no longer be recovered.
Sunk costs are irrelevant for decision making process as they do not relate to current projects and yield no economic benefit.
In the given case, Manuel had already purchased a $10 movie ticket, which can neither be transferred nor eligible for a refund. Later when he does not exercise the option of going for the movie and opts for a concert instead, the amount of 10$ spent on the movie represents a sunk cost which is non recoverable.
Final answer:
From an economist's view, Manuel should focus on the marginal costs and benefits of current and future options, rather than the sunk cost of the movie ticket.
Explanation:
From the perspective of an economist, if Manuel chooses to attend the movie instead of going to the concert with Poornima, he is allowing a sunk cost to improperly influence his decision. The $10 he spent on the movie ticket is a sunk cost, which means it has already been incurred and cannot be recovered. His decision should be based on the comparative benefits of the current options he has: either the experience of watching the movie or the enjoyment and potential relationship benefits of going to the concert. Since he prefers to go on the date with Poornima, going to the movie would not be an optimal choice. The economist's advice would be to ignore the sunk cost of the movie ticket and attend the concert, as that would provide greater utility to Manuel.
In many universities, graduate students are employed to teach introductory undergraduate courses, even though the full professors at these universities have more experience and could potentially teach these courses better. Which of the following best explains why universities choose to hire graduate students instead of full professors to teach their introductory courses?A. The opportunity cost of teaching an introductory course is higher for graduate students than for full professors.B. The opportunity cost of teaching an introductory course is higher for full professors than for graduate students.C. Graduate students are cheaper.D. Introductory classes are the best place for graduate students to build their teaching skills.
Answer:
The correct answer is letter "A": The opportunity cost of teaching an introductory course is higher for graduate students than for full professors.
Explanation:
Opportunity cost represents the return of the choice taken compared to the return of the option left behind. For a university professor, the opportunity cost of giving an undergraduate class is lower than the opportunity cost that reflects teaching the undergraduate class to graduate students. This is because graduate students are starting to obtain experience but professors have it already.
Your venture has net income of $600,000 taxable income of $1,000,000 operating profit of $1,200,000 total financial capital including both debt and equity of $9,000,000 a tax rate of 40%, and a WACC of 10%. What is your venture’s EVA?
Answer:
EVA = -$180,000
Explanation:
given data
net income = $600,000
taxable income of $1,000,000
operating profit = $1,200,000
total financial capital = $9,000,000
tax rate = 40%
WACC = 10%
solution
we get here EVA that is express as
EVA = NOPAT - Invested Capital × WACC ..................1
and here
NOPAT = EBIT × ( 1 - Tax Rate ) .........2
put here value
NOPAT = operating profit × (1 - Tax Rate)
NOPAT =$1,200,000 × (1 - 0.40)
NOPAT =$720,000
so put in equation 1 we get
EVA = NOPAT - Invested Capital × WACC
EVA = $720,000 - $9,000,000 × 10%
EVA = -$180,000