Diversifiable (company-specific) risk is not represented by beta in the CAPM equation, and a contract that acts like an insurance policy against bond defaults (and other credit events) is called a credit default swap.
Diversifiable (company-specific) risk, also known as unsystematic risk, is a type of risk that affects a particular corporation and is caused by factors that are unique to that corporation. This risk can be caused by various factors such as a decrease in demand for a product or service, management or employee difficulties, or the introduction of a new product by a competitor. Since diversifiable risk is restricted to a specific company, it can be reduced through diversification by investing in other companies and sectors.
Beta is a measure of the risk associated with an investment relative to the market as a whole. The capital asset pricing model (CAPM) equation includes beta as a measure of systematic risk, which represents the risk associated with investing in the market as a whole. As a result, beta does not represent diversifiable risk, which is company-specific and may be reduced through diversification.
As a result, the statement is False. What is a credit default swap (CDS)?A credit default swap (CDS) is a financial contract between two parties in which one party pays the other party a premium in exchange for protection against the risk of default on a specific debt instrument. The CDS provides the purchaser with protection against the risk of default, while the seller receives a premium for accepting that risk. CDSs are often used to hedge against the risk of default in corporate and sovereign bonds. As a result, the response is "credit default swap."
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which strategy leverages the physical closeness of a supplier? electronic sourcing near-sourcing part standardization multi-sourcing supplier segmentation
Near-sourcing strategy leverages the physical closeness of a supplier. Thus, option B is the correct option.
Near-sourcing strategy refers to a procurement approach that emphasizes the physical proximity of a supplier to the buyer's location. By selecting suppliers located nearby, organizations can benefit from reduced transportation costs, shorter lead times, and improved responsiveness. The close proximity allows for better communication, easier collaboration, and increased control over the supply chain.
Near-sourcing also enhances sustainability efforts by minimizing carbon emissions associated with long-distance transportation. Additionally, it enables a better understanding of local market dynamics, culture, and regulations, facilitating customization and adaptation to specific customer needs. Overall, near-sourcing strategy leverages geographical proximity to optimize supply chain efficiency, flexibility, and customer satisfaction.
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81. You complete a test of autocorrelation on daily data for a thinly traded stock and the Durbin Watson statistic is 3.73. If the stock has a return of +0.21% late in the trading day and you are convinced that other investors are not aware of the results of your study, based on the test results and probabilities, an investor would:
Buy or long the stock in late trading.
Sell or short the stock in late trading.
Wait an additional day to buy the stock.
Wait an additional day to short the stock.
Take neither a long or short position in the stock.
None of the above answers is correct.
The Durbin Watson statistic is a test for autocorrelation. It examines if there is a linear association between the lagged variables of a particular stock's returns.
The test results have the following interpretations:
If the Durbin Watson statistic is between zero and 2, there is a positive autocorrelation present. If the Durbin Watson statistic is around 2, there is no autocorrelation present. If the Durbin Watson statistic is around 4, there is no autocorrelation present.
If the Durbin Watson statistic is between 2 and 4, there is negative autocorrelation present. The Durbin Watson statistic is 3.73 in this case. It is more than 2 and less than 4.
Hence, there is negative autocorrelation present. The return of the stock in the late trading day is +0.21%. If the other investors are not aware of the results of the study, an investor would choose to sell or short the stock in late trading because there is negative autocorrelation present.
Thus, there is a greater chance of the stock price declining in the future. So, based on the test results and probabilities, an investor would sell or short the stock in late trading. An investor would not choose to buy or long the stock because there is negative autocorrelation present.
There are higher chances of the stock price declining in the future. So, waiting for an additional day to buy the stock would also not be profitable. Similarly, waiting an additional day to short the stock is not advisable. Hence, the answer is Sell or short the stock in late trading.
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Which of the following is NOT associated with an inefficient allocation of resources?
1. Oligopolies
2. Monopolies
3. Perfect competition
4. None of the above
Perfect competition is not associated with an inefficient allocation of resources. Efficient allocation of resources refers to the distribution of resources in a way that maximizes the total benefit of society. The efficient allocation of resources occurs when goods and services are produced and distributed according to the wants and needs of consumers.
The term "market structure" refers to the level of competition in a market. In a monopoly, there is only one supplier of a particular good or service, while in an oligopoly, there are a few suppliers. In perfect competition, there are many suppliers of a particular good or service, and each supplier is too small to influence the market price.
In a monopoly or oligopoly, firms have the power to control the price and quantity of goods and services they produce and sell. This leads to inefficient allocation of resources because the price charged is usually higher than the equilibrium price and the quantity supplied is lower than the equilibrium quantity.
On the other hand, in perfect competition, the price charged is equal to the equilibrium price, and the quantity supplied is equal to the equilibrium quantity. Hence, there is an efficient allocation of resources in a perfect competition market structure.
Therefore, the answer to the question is option 3, Perfect competition, since it is not associated with an inefficient allocation of resources.
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Suppose a market has the following demand and supply curves: Demand: \( P=44-Q \) Supply: \( P=0.7 Q \). If the government imposes a \( \$ 8 / \) unit tax, what will be the buyer's tax burden? Answer:
The buyer's tax burden is approximately found to be - $0.042.
In this case,
the market demand is given by:
P = 44 - Q
and the market supply is given by:
P = 0.7Q
When a tax is imposed in the market, it changes the prices and the quantity of goods demanded and supplied. The imposition of a tax shifts the supply curve upwards by the amount of the tax.
This is because the suppliers need to get a higher price to recover the cost of the tax, and so they charge a higher price.The new supply curve after the imposition of the tax is given by:
P = 0.7Q + 8
The quantity demanded at any price P is still given by:
P = 44 - Q
Thus, at the new equilibrium after the imposition of the tax, the quantity demanded must equal the quantity supplied. Hence:
44 - Q = 0.7Q + 8
Rearranging and solving for Q:
44 - 8 = 0.7Q + Q
36 = 1.7Q
Q = 21.18
Hence, the new equilibrium price is:
P = 0.7
Q + 8 = 0.7(21.18) + 8
≈ 22.8
Thus, the price increases by $8.8 after the imposition of the tax.
Now, to find the buyer's tax burden, we need to find the difference between the price before the imposition of the tax and the price after the imposition of the tax, and multiply that by the quantity demanded before the imposition of the tax. The price before the imposition of the tax was:
P = 44 - Q
Substituting Q = 21.18:
P = 44 - 21.18
≈ 22.82
Thus, the buyer's tax burden is approximately:
Tax burden = (Price before tax - Price after tax) x Quantity demanded before tax
= (22.82 - 22.8) x 21.18
≈ $0.042
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Ending inventory is $12,000, cost of goods sold is $33,000, and the cost of goods purchased is $22,000. How much is beginning inventory?
a. $43,000
b. $33,000
c. $23,000
d. $13,000
e. $45,000
The question provides us with the ending inventory, cost of goods sold, and cost of goods purchased. Therefore, we can use the formula to calculate the beginning inventory.
The formula is: Beginning inventory + Cost of goods purchased - Cost of goods sold = Ending inventory Substitute the values given in the question:Beginning inventory + $22,000 - $33,000 = $12,000 Beginning inventory - $11,000 = $12,000 Beginning inventory = $12,000 + $11,000 Beginning inventory = $23,000.
Therefore, the correct answer is option c) $23,000.
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To make an investment, a company has borrowed $8,000,000 annually for 10 years with 18% annual capital cost rate compounded monthly maturity. By this investment, (6)∗200,000 units per year will be produced. The amount of production will decrease by (4/3)% per year for the second 10 years after remaining constant for the first 10 years. The product willbe sold at a price of 3$/ unit. It is expected that annualescalationrate of the product sales price will be 16% in the first 10 years and 22% in the remaining years. 0.2 kg of raw materials will be used for one unit product. The price of the raw material is 0.8$/kg. The annual escalation of the raw material price for the first 10 years is 15% and the second 10 years is 25%. A total of 80 kW of electrical power will be consumed in the production system. The company will work (5,000+100 ∗
(2)) hours per year. The electricity price is 0.8$/kWh. It hasbeen estimated that the annual escalationof the electricity price willbe 10% for the first 5 years, 15% for the second 5 years and 20% for the rest ofthetime. 10 personnel will work on the production system. The average monthly cost of a personnel is 7,000$ and its annual escalation is 18%. A large maintenance cost will be carried out every 5 years. The maintenance cost in the fifth year is 200,000 S and the 5 -year escalation of this maintenance cost is 80%. Since the annual discount rate is 21%, determine the economic viability of this investment by the annual value method
The economic viability of the investment needs to be determined by calculating the annual costs and revenues, discounting them to present value, and assessing the net present value (NPV) using a 21% annual discount rate.
To determine the economic viability of the investment using the annual value method, we need to calculate the annual costs and revenues associated with the investment and discount them to present value. Here's an overview of the calculations involved:
1. Calculate the annual production quantity: The initial production quantity is 200,000 units per year, which will decrease by (4/3)% per year for the second 10 years.
2. Calculate the annual sales revenue: Multiply the annual production quantity by the selling price per unit, which is $3.
3. Calculate the annual raw material cost: Multiply the annual production quantity by the amount of raw material used per unit (0.2 kg) and the price per kg (0.8$). Adjust the raw material cost annually based on the escalation rate.
4. Calculate the annual electricity cost: Multiply the total electrical power consumed (80 kW) by the number of hours worked per year (5,000 + 100 * (2)). Multiply the result by the electricity price per kWh (0.8$) and adjust it annually based on the escalation rate.
5. Calculate the annual personnel cost: Multiply the number of personnel (10) by the average monthly cost per personnel ($7,000), adjusted annually based on the escalation rate.
6. Calculate the annual maintenance cost: The maintenance cost occurs every 5 years, starting from the fifth year. Calculate the present value of the maintenance cost over the investment period, considering the escalation rate.
7. Calculate the annual capital cost: Multiply the borrowed amount ($8,000,000) by the annual capital cost rate (18%), compounded monthly for 10 years.
8. Discount all annual costs and revenues to present value using the annual discount rate of 21%.
9. Calculate the annual net cash flow: Subtract the discounted costs from the discounted revenues for each year.
10. Determine the economic viability: If the net present value (NPV) of the investment is positive, the investment is considered economically viable. If the NPV is negative, the investment may not be economically feasible.
Performing these calculations will provide the necessary information to assess the economic viability of the investment using the annual value method.
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The expected return of the minimum variance portfolio is:
A. The risk-free rate
B. Insufficient information to answer the question
C. Zero
D. The market return
The expected return of the minimum variance portfolio is not provided in the question. Therefore, the correct answer is B. Insufficient information to answer the question.
The expected return of the minimum variance portfolio is not provided in the question. Therefore, the correct answer is B. Insufficient information to answer the question.
To understand why, let's break it down. The minimum variance portfolio is a portfolio that seeks to minimize risk by allocating assets in a way that reduces overall volatility. It is typically constructed by selecting assets with low correlation to each other.
The expected return of a portfolio depends on the returns of the individual assets and their respective weights in the portfolio. Without information on the specific assets and their returns, we cannot determine the expected return of the minimum variance portfolio.
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Q.1.2 State whether the following statements are true or false and provide a reason for your answer. (NOTE: Students will not be awarded marks for merely stating either true or false.) Q.1.2.6 Judges enjoy security of tenure to ensure judicial independence. Q.1.2.7 Only human beings have the legal capacity to sue and be sued. 22 2022 Q.1.2.8 The UK's Company Act of 2006 is an example of international law which is binding on South Africa. (2) Q.1.2.9 A court of appeal does not hear any new evidence. Q.1.2.10 Ownership is an example of a real right
Q.1.2.6: Judges enjoy security of tenure to ensure judicial independence. True.
Security of tenure implies that judges can’t be removed from their positions unless they have breached the standards of judicial conduct or become incapacitated in some way. The rationale behind this is to protect judges from the influence of the government or other individuals who might try to influence their decisions.
Q.1.2.7: Only human beings have the legal capacity to sue and be sued. False. Although it is true that only human beings have the legal capacity to sue and be sued, the Companies Act 71 of 2008 has altered this in certain circumstances by granting corporations the right to sue and be sued, thereby giving them legal personality or juristic personality. This is one example of the corporate personality theory, which holds that a corporation can have its legal personality separate from its members.
Q.1.2.8: The UK's Company Act of 2006 is an example of international law which is binding on South Africa. False. A nation's laws apply only within its borders. The UK's Company Act of 2006 does not bind South Africa. International law refers to the body of laws that regulates the relationships between states or international entities.
Q.1.2.9: A court of appeal does not hear any new evidence. True. A court of appeal does not hear any new evidence in the case; it only reviews the lower court's records. It then makes a decision on whether the lower court made a mistake in its decision or whether the decision was made in accordance with the law.
Q.1.2.10: Ownership is an example of a real right. True. A real right is a right held over things that are tangible or can be touched. Ownership is a right held over property, which is a tangible object.
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Computer Store" is considering the best way to enter data about new customers that sign up as part of a new marketing campaign. Customers complete their details on a form and leave them at the store for further processing. The best method for capturing this data would be: a. manual keying. b. optical mark readers. c. scanning through image scanners. d. scanning through barcode technology.
Computer Store is considering the best way to enter data about new customers that sign up as part of a new marketing campaign. The best method for capturing this data would be scanning through barcode technology. This is because barcode technology is the most efficient and accurate way of capturing data.
Barcode technology is commonly used for data entry because it is highly efficient and accurate. Barcode scanners are able to read a barcode in a matter of seconds, and the data is then entered into the system automatically. This saves time and reduces the chance of errors that can occur with manual keying or optical mark readers. In addition, barcode technology is also cost-effective and requires little maintenance.
Therefore, it is the most suitable option for capturing customer data for Computer Store's new marketing campaign.
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Some employees of a certain manufacturing plant habitually misplaced and misused tools so often that the company estimated that it cost them some $750,000 each year in time lost locating missing tools and in monies spent replacing misplaced and stolen ones. Finally, the company hired a tool management expert who intends to implement a computerized tool inventory control system in the plant. If the new system and its installation and associated initial training cost the company $1.25 million and the new manager’s annual salary and benefits was another $165,000, determine the following if the expected annual savings from the system is $110,000 and it costs another $12,000 to service the system:
How long it will take the company to regain the expenses made on the new equipment or see return on its investment.
P = I/(S-E)
P = # of years for pay back
I = Investment in system
S = Savings in system
E = Cost of servicing the system
How much annual profit would eventually come from the system if the manager later discovered that it would still cost the company another $100,000 annually to train employees on using the system in order to avoid the old losses?
Discuss in detail what types of training this manager should implement to make this plan work as expected.
After some years, the manager discovered that the number of delinquencies in tool returns gradually went down to a point where the company could reduce its annual training cost by 50%. Determine the new annual savings for this company.
Was this new system a good investment or not? Explain your answer.
Tip: Justifying an inventory system is performed using this model:
P = I/(S-E)
P = # of years for pay back
I = Investment in system
S = Savings in system
E = Cost of servicing the system
To calculate the payback period and assess the profitability of the new tool inventory control system, let's use the provided formula:
P = I / (S - E)
Where:
P = Number of years for payback
I = Investment in the system
S = Savings from the system
E = Cost of servicing the system
Given values:
I = $1,250,000 (initial investment in the system)
S = $110,000 (expected annual savings from the system)
E = $12,000 (annual cost of servicing the system)
Payback Period (P):
P = $1,250,000 / ($110,000 - $12,000)
P ≈ 11.67 years
Therefore, it will take approximately 11.67 years for the company to recoup its investment and see a return on its investment.
Annual Profit:
To calculate the annual profit from the system, we need to consider the additional annual training cost of $100,000.
Annual Profit = Savings from the system - Cost of servicing the system - Additional training cost
Annual Profit = $110,000 - $12,000 - $100,000
Annual Profit = -$2,000 (negative value indicates a loss)
The annual profit from the system, considering the additional training cost, would be -$2,000. This indicates that the company would incur a small annual loss due to the system.
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Many people think capitalism gives entrepreneurs the best
opportunity to be successful. Do you agree with this line of
thinking or do you disagree. Please expand on your choice you
take.
Capitalism is an economic system where private individuals or firms own and operate the economy, with the objective of generating profits.
It allows entrepreneurs to start businesses and make decisions regarding their operations. Whether or not capitalism gives entrepreneurs the best opportunity to be successful is a subject of controversy. There are advantages and disadvantages to capitalism as an economic system, and some of these are related to the opportunities available to entrepreneurs. Those who support capitalism argue that it provides entrepreneurs with the best chance to be successful.
This is because it promotes competition, which encourages innovation and efficiency. Entrepreneurs who are successful in creating businesses that are able to meet the demands of consumers will be rewarded with profit. The ability to make decisions about how to run their business allows entrepreneurs to be creative and pursue their own goals. Supporters of capitalism argue that this creates an environment where businesses thrive and entrepreneurship is encouraged.
On the other hand, those who are against capitalism argue that it is not the best system for entrepreneurs. They argue that capitalism creates inequalities, with only a few individuals or firms owning and controlling the majority of the wealth in the economy. This means that small entrepreneurs are not able to compete with larger businesses that have more resources.
In conclusion, whether or not capitalism gives entrepreneurs the best opportunity to be successful is a matter of debate. While it provides entrepreneurs with the ability to make their own decisions and pursue their own goals, it can also create inequalities and encourage unethical behavior.
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meetings with staff who are in several locations outside the united states are called:
Meetings with staff who are in several locations outside the United States are commonly referred to as "international meetings" or "global meetings."
These meetings involve participants from different countries and time zones, and they are typically conducted through virtual communication platforms to facilitate collaboration and discussion among the geographically dispersed team members.
International meetings play a crucial role in promoting cross-cultural understanding, fostering collaboration, and ensuring effective communication within multinational organizations.
The use of technology, such as video conferencing, allows participants from different locations to interact in real-time, share information, and work towards common goals, despite physical distances.
Effective planning, coordination, and cultural sensitivity are essential for successful international meetings to ensure that all participants can actively contribute and achieve the desired outcomes.
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Lodge Company makes cast-iron buckets. The following information is available for Lodge Company’s anticipated annual volume of 50,000 buckets.
Per Unit Total
Direct materials $20
Direct labor $10
Variable manufacturing overhead $25
Fixed manufacturing overhead $750,000
Variable selling and administrative expenses $18
Fixed selling and administrative expenses $450,000
The company has a desired ROI of 30%. It has invested assets of $5,500,000.
a. Compute the total cost per unit. b. Compute the desired ROI per unit. c. Compute the target selling price (to 2 decimals).
a. Compute the total cost per unit: Total Variable Cost per unit = Direct Materials + Direct Labor + Variable Manufacturing Overhead + Variable Selling and Administrative Expenses
Total Variable Cost per unit = $20 + $10 + $25 + $18 = $73
Total Fixed Cost per unit = Fixed Manufacturing Overhead + Fixed Selling and Administrative Expenses
Total Fixed Cost per unit = $750,000 + $450,000 = $1,200,000
Total Cost per unit = Total Variable Cost per unit + Total Fixed Cost per unit
Total Cost per unit = $73 + $1,200,000 / 50,000
Total Cost per unit = $97.40
Answer: a. $97.40
b. Desired ROI per unit: Desired ROI per unit = Investment x ROI% / Volume
Desired ROI per unit = $5,500,000 x 30% / 50,000
Desired ROI per unit = $16.50
Answer: b. $16.50
c. Compute the target selling price (to 2 decimals):
Target Selling Price = Total Cost per unit + Desired ROI per unit
Target Selling Price = $97.40 + $16.50
Target Selling Price = $113.90 (rounded to two decimal places)
Answer:c. $113.90 (rounded to two decimal places)
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Using appropriate examples and microeconomic
illustrations, discuss the impact of COVID19 on demand of corn in
Ghana?.
The COVID-19 pandemic has had significant impacts on various sectors of the economy worldwide. Ghana, like many other African countries, relies heavily on agriculture as its primary source of livelihood.
The country has a significant number of maize farmers, making corn a staple food in the country. In this article, we will examine the impact of on the demand for corn in Ghana.
The pandemic has disrupted supply chains and led to food shortages worldwide. In Ghana, this disruption has led to a decrease in corn imports, which has had a significant impact on the demand for locally grown corn. In Ghana, restrictions on movement and gatherings have significantly impacted the demand for food products. The closure of restaurants and other food establishments has led to a decline in the demand for corn.
In conclusion, pandemic has had significant impacts on the demand for corn in Ghana. The restrictions on movement and gatherings have led to a decline in demand for food products, while the decrease in income and unemployment rates have resulted in a decrease in purchasing power.
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What risk does a borrower take with an adjustable-rate mortgage?
With an adjustable-rate mortgage (ARM), borrowers take the risk of potential interest rate fluctuations. The monthly mortgage payments can increase or decrease based on market conditions. Borrowers must consider their ability to handle changing payments and future income prospects when opting for an ARM.
With an adjustable-rate mortgage (ARM), the borrower takes the risk of potential interest rate fluctuations. Unlike a fixed-rate mortgage, where the interest rate remains constant throughout the loan term, an ARM has an interest rate that adjusts periodically based on market conditions.
The specific terms of an ARM typically include an initial fixed-rate period, after which the interest rate is subject to change. The adjustment is usually based on a specified financial index, such as the U.S. Treasury rate or the London Interbank Offered Rate (LIBOR), plus a predetermined margin.
The risk for the borrower lies in the uncertainty of future interest rate movements. If interest rates rise, the borrower may experience an increase in their monthly mortgage payments, potentially making it more challenging to afford the loan. Conversely, if interest rates decrease, the borrower may benefit from lower payments.
The borrower's ability to manage fluctuations in interest rates, their financial stability, and their future income prospects are critical factors to consider when opting for an adjustable-rate mortgage.
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Northern Distributors has $40 million in bonds outstanding that carry a 12 percent coupon rate paid annually. These bonds have 10 years to maturity and a call premium of 6 percent. As the yield on current bonds is 9.5 percent the company is considering refunding their bonds. A new issue would require $1 million in flotation costs. In addition, an overlap period of one month is anticipated, during which time money market rates would be 7 percent. Northern Distributors has a tax rate of 40 percent.
The Northern Distributors should refund the bond. The net savings from the refunding of the bond is $1,270,666.67.
The formula for bond refunding is as follows:
Refunding cost = old bond carrying value − proceeds from new bond issue − flotation cost + call premium
First, we need to determine the current price of the bond and whether it's trading at a premium or a discount. The formula for the current bond price is:
P = C × (1 − [1 ÷ (1 + r)n ÷ r]) + M ÷ (1 + r)n
Where:
P = the current price of the bond
C = the annual coupon payment
n = the number of years to maturity
r = the required rate of return for this bond
M = the face value of the bond
Therefore, using the given data we get:
P = $120,000 × (1 − [1 ÷ (1 + 0.095)10]) + $1,000,000 ÷ (1 + 0.095)10
P = $1,040,161.73
Hence, the bond is trading at a premium of $40,161.73.
The amount of money that the company will receive from the new bond issue is $40,000,000 × (1 − 0.06) = $37,600,000 (the call premium reduces the amount received).
The company will also incur flotation costs of $1,000,000.
Therefore, the total cost of refunding is:
$40,000,000 − $1,040,161.73 − $37,600,000 − $1,000,000 + 0.06 × $40,000,000 = $3,760,000
The overlap period of one month will generate an additional one-month interest expense, which can be calculated as follows:
Interest expense = $40,000,000 × 0.07 ÷ 12 = $233,333.33 per month
The total interest expense over the one-month overlap period is $233,333.33.
The company's tax rate is 40 percent, so the tax savings from the refunding is:
Tax savings = $3,760,000 × 0.4
= $1,504,000
Therefore, the net savings from refunding the bond are:$1,504,000 − $233,333.33 = $1,270,666.67
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A supply and demand graph with Marginal Revenue (MR), Demand (D), MC1, and MC2. MR intersects MC1 at a price of 75 and a quantity of 30 and intersects MC2 at a price of 30 and a quantity of 40. D intersects MC1 at price of 100 and a quantity of 40. Price is 115 at the point on the demand line directly above the intersection of MC1 and MR.
Rather than attempting to break up the electric company that has become a natural monopoly, the government decides to provide them with a per-unit subsidy, shifting the firm’s marginal cost curve from MC1 to MC2. Does this provide a socially optimal outcome? How much is the subsidy?
1. No, subsidizing a monopoly will create incentive for the firm to lower production. Subsidy = $25 per unit.
2. No, only perfect competition could create a socially optimal outcome. Subsidy = $70 per unit.
3. No, this subsidy is insufficient, as the demand is still above marginal revenue. Subsidy = $40 per unit.
4. Yes, as the firm now produces where MC = Demand. Subsidy = $70 per unit.
5. Yes, as the firm’s marginal revenue is now always equal to demand. Subsidy = $25 per unit.
The firm will operate where marginal cost (MC) is equal to marginal revenue (MR) in a perfectly competitive market. In the case of a monopoly, the marginal cost curve intersects the marginal revenue curve where the demand curve intersects the marginal cost curve in the graph above.
A supply and demand graph with Marginal Revenue (MR), Demand (D), MC1, and MC2 is given below:
The graph shows that MR intersects MC1 at a price of 75 and a quantity of 30 and intersects MC2 at a price of 30 and a quantity of 40.
D intersects MC1 at price of 100 and a quantity of 40.
Price is 115 at the point on the demand line directly above the intersection of MC1 and MR.
The government has decided to provide a per-unit subsidy to the electric company, which has become a natural monopoly, instead of attempting to break it up.
The firm's marginal cost curve shifts from MC1 to MC2 as a result of this.
The answer is option 4. Yes, as the firm now produces where
MC = Demand. [tex]Subsidy = $70 per unit[/tex].
Therefore, if the government wishes to produce a socially optimal outcome, it must provide subsidies to monopolies so that they produce the socially optimal amount of output and charge consumers the socially optimal price.
In this case, the subsidy is equal to the difference between MC1 and MC2, which is 70 per unit.
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which of the following would not be classified as an operating expense on a multi-step income statement
The operating expenses on a multi-step income statement are expenses incurred in the ordinary course of business to generate revenues. These expenses include the cost of goods sold, selling, general and administrative expenses, and depreciation expenses, and others.
It does not include non-operating expenses or expenses that are not part of the regular operations of a business. The following would not be classified as an operating expense on a multi-step income statement:Interest expenses: Interest expenses refer to the costs incurred by businesses for borrowing money to finance their operations.
It is a non-operating expense that is not part of the regular business operations of a company.Other non-operating expenses: These include gains or losses on the sale of long-term assets, write-offs of obsolete inventory or bad debts, and other unusual items that are not part of the normal business activities of the company.
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Government reporting of nonfinancial measures are discussed in Concept Statements No. ______ and ______.
Government reporting of non financial measures is discussed in Concept Statements No. 1 and No. 2.
Concept Statement No. 1, "Objectives of Financial Reporting," provides a framework for financial reporting that includes both financial and nonfinancial measures. It emphasizes the importance of reporting information that is relevant and useful for decision-making and accountability. Concept Statement No. 2, "Service Efforts and Accomplishments Reporting," specifically addresses the reporting of nonfinancial measures in government entities. It highlights the significance of reporting on the outputs, outcomes, and efficiency of government services to assess their effectiveness and demonstrate accountability to the public.
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uncle fred recently died and left $315,000 to his 45-year-old favorite niece. she immediately spent $100,000 on a town home but decided to invest the balance for her retirement at age 65. what rate of return must she earn on her investment over the next 20 years to permit her to withdraw $60,000 at the end of each year through age 80 if her funds earn 9 percent annually during retirement? use appendix a and appendix d to answer the question. round your answer to the nearest whole number.
The niece needs to earn a rate of return of approximately 4% on her investment over the next 20 years to be able to withdraw $60,000 at the end of each year from age 65 to 80.
To calculate the rate of return the niece needs to earn on her investment, we need to find the future value of her remaining balance after purchasing the town home. The niece initially received $315,000 from her late uncle. After spending $100,000 on the town home, she has a remaining balance of $215,000 to invest for her retirement.Using the future value of an ordinary annuity formula, we can find the required rate of return. Please refer to Appendix A and Appendix D for additional information related to the calculation and rounding of the answer to the nearest whole number.
The formula is:FV = P * [(1 + r)^n - 1] / rWhere:FV = Future value = Annual withdrawal amount r = Rate of return n = Number of years Given that the niece wants to withdraw $60,000 per year for 15 years (from age 65 to 80), the annual withdrawal amount (P) is $60,000. The number of years (n) is 15. Using this information and the future value formula, we can rearrange the formula to solve for the rate of return (r): r = [(FV / P + 1)^(1/n) - 1] Substituting the values into the formula, we have: r = [($215,000 / $60,000 + 1)^(1/15) - 1]
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Bank A has $56 in reserves. The bank has given out $500 in loans and has $460 in deposits. The reserve requirement is 10%. The maximum the bank can afford to lose in loan defaults without being insolvent (and going bankrupt) is:
In order to calculate the amount of loan defaults Bank A can handle, we need to calculate the total amount of deposits. We know that the bank has $460 in deposits and that the reserve requirement is 10%, which means that the bank must hold 10% of the deposits in reserve.
Thus, the amount of deposits that the bank can lend out is $414 (which is 90% of $460).
The bank has already given out $500 in loans.
Since the maximum amount the bank can lend out is $414, it is already overextended by $86.
This means that if all of its borrowers defaulted on their loans, the bank would not be able to recover the $86 it has already lent out, plus the $56 it has in reserves.
So, the maximum amount of loan defaults Bank A can handle is $86. Any more than that, and the bank would be insolvent.
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green power company is considering buying a new machine that will last for 11 years. the machine cost 137,416 dollars today. maintenance expenses will be 39,511 dollars the first year, and will increase by 7,276 dollars every year afterward (e.g. maintenance at the end of year two is equal to 39,511 plus 7,276 dollars). the interest rate is 8% per year, compounded annually. what is the net present value (npv) of this machine? assume all maintenance expenses occur at the end of every year. (note: round your answer to two decimal places; do not include spaces or dollar signs.)
The net present value (NPV) of this machine is approximately -$196,594.72.
To calculate the NPV, we need to discount the cash flows (cost and maintenance expenses) to their present value and subtract the initial cost. Here's the revised calculation:
Present Value of the Machine's Cost:
The initial cost of the machine is $137,416.
[tex]PV(machine cost) = $137,416 / (1 + 0.08)^0\\= $137,416.[/tex]
Present Value of the Maintenance Expenses:
The maintenance expenses in the first year are $39,511, and they increase by $7,276 every subsequent year. We need to find the present value of these expenses over the 11-year period.
[tex]PV(maintenance \ expenses) = $39,511 / (1 + 0.08)^1 + ($39,511 + $7,276) / (1 + 0.08)^2 + ... + ($39,511 + $7,276 * 10) / (1 + 0.08)^{11}[/tex]
Calculating the sum of the series using the formula for the sum of a geometric series, we find:
[tex]PV(maintenance \ expenses) = $39,511 * (1 - (1 + 0.08)^{-11}) / (0.08) + $7,276 * ((1 - (1 + 0.08)^{-11}) / (0.08))\\= $334,010.72[/tex]
Net Present Value (NPV):
The NPV is calculated by subtracting the present value of the machine's cost from the present value of the maintenance expenses:
NPV = PV(machine cost) - PV(maintenance expenses)
NPV = $137,416 - $334,010.72
NPV = -$196,594.72.
Therefore, the net present value (NPV) of this machine is approximately -$196,594.72.
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XYZ Corporation will pay a $1.5 per share dividend next year. The company pledges to increase its dividend by 2 percent per year, indefinitely. a. If you require a return of 12 percent on your investment, how much will you pay for the company's stock today? b. How much will the stock be priced at the end of the third year?
To find the current stock price of the XYZ Corporation, we will use the dividend discount model. DDM = D/(r - g)
Where,
D = the expected dividend = $1.5 per share
r = required rate of return = 12%
g = expected growth rate = 2% per year,
indefinitely
Let P0 be the current stock price per share, therefore, substituting the given values in the DDM, we get;
P0 = D / (r - g)
= $1.5 / (0.12 - 0.02)
= $15.00
Therefore, the current stock price per share of XYZ Corporation is $15.00.
To calculate the stock price at the end of the third year, we will use the following formula;
Pn = Dn+1 / (r - g)
where,
Dn+1 = expected dividend at the end of the third year
Pn = stock price at the end of the third year
r = required rate of return = 12%
g = expected growth rate = 2% per year,
indefinitely
Dn+1 = Dn (1 + g)
= $1.5 (1 + 0.02)³
= $1.5 (1.06)³
= $1.70
Substituting these values in the above equation, we get;
Pn = Dn+1 / (r - g)
= $1.70 / (0.12 - 0.02)
= $17.00
Therefore, the stock price of XYZ Corporation will be $17.00 at the end of the third year.
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Consider the supply of coal. What would make the supply of coal more elastic? The supply of coal would become more elastic if
A. The time horizon becomes longer.
B. It becomes a larger portion of a consumer's budget
C. more substitutes were available.
D. it were more of a luxury.
The correct answer is C. More substitutes were available.
When the supply of a product becomes more elastic, it means that the quantity supplied is more responsive to changes in price. In the case of coal, if there are more substitutes available, it provides alternative options for consumers and producers.
When there are numerous substitutes for coal, suppliers can easily switch to producing those substitutes if the price of coal becomes less favorable. This flexibility in production makes the supply of coal more elastic.|
Option A, the time horizon becoming longer, is not directly related to the elasticity of supply. It may affect long-term production decisions, but elasticity refers to short-term responsiveness.
Option B, coal becoming a larger portion of a consumer's budget, would make the demand for coal more inelastic, not the supply.
Option D, coal being more of a luxury, is also related to the demand side rather than the supply. The luxury or necessity status of a good affects consumer preferences and willingness to pay, influencing demand elasticity.
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Cullumber Company is considering a capital investment of $216,200 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $10,810 and $47,000, respectively. Cullumber has a 12% cost of capital rate, which is the required rate of retum on the investment. Click here to view PV table. (a) Compute the cash payback period. (Round answer to 1 decimal place, e.g. 10.5.) Cash payback period years Compute the annual rate of return on the proposed capital expenditure. (Round answer to 2 decimal places, eg. 10.52\%.) Annual rate of return % (b) Using the discounted cash flow technique, compute the net present value. (If the net present value is negative, use either a negative sign preceding the number e.g. −45 or parentheses eg. (45). Round answer for present value to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value TABLE 1 Future Value of 1 TABLE 2 Future Value of an Annuity of 1 TABLE 3 Present Value of 1 \begin{tabular}{cccccccccccc} (n) & & & & & & & & & & \\ Periods & 4% & 5% & 6% & 7% & 8% & 9% & 10% & 11% & 12% & 15% \\ \hline 1 & .96154 & .95238 & .94340 & .93458 & .92593 & .91743 & .90909 & .90090 & .89286 & .86957 \\ \hline 2 & .92456 & .90703 & .89000 & .87344 & .85734 & .84168 & .82645 & .81162 & .79719 & .75614 \\ \hline 3 & .88900 & .86384 & .83962 & .81630 & .79383 & .77218 & .75132 & .73119 & .71178 & .65752 \\ \hline 4 & .8440 & .82270 & .79209 & .76290 & .73503 & .70843 & .68301 & .65873 & .63552 & .57175 \\ \hline 5 & .82193 & .78353 & .74726 & .71299 & .68058 & .64993 & .62092 & .59345 & .56743 & .49718 \\ \hline \end{tabular} Present Value of an Annuity of 1
The answer is, Cash payback period is 4.6 years and Net present value is $-758.76.
How to find?To calculate cash payback period, first, calculate the net cash inflows for each year and then the net initial investment. Then, divide the net investment by the average annual net cash inflows to get the cash payback period.
Calculation of annual rate of return:
Annual rate of return is the percentage of return that an investment generates per year. The formula for the annual rate of return is:
Annual rate of return = (average annual net cash inflows / initial investment) * 100.
Using the formula, we get:
Annual rate of return = (47,000 / 216,200) * 100
= 21.74%
Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. It is used to evaluate investment opportunities or projects.
Using the discounted cash flow technique, the net present value can be calculated as follows:
Year
Annual Cash Flows
Discount Factor at 12%
Discounted Cash Flows
0-216,2001.0000-216,200147,0000.8928
=131,0762-216,2000.7972
=-172,2233-216,2000.7120
=-154,2644-216,2000.6366
=-137,5875-216,2000.5674
=-122,794
Net present value = $-758.76 (Negative)
Therefore, the answers are:
(a) Cash payback period = 4.6 years(rounded to 1 decimal place)
Annual rate of return = 21.74%(rounded to 2 decimal places)
(b) Net present value = $-758.76 (Negative)
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. Explain the following a. What do you mean by real balance effect (RBE)? Explain how RBE reemerges down Ward sloping AD curve even in the case of liquidity trap and interest-insensitive investment demand b. A Labor supply curve under classical model will be positively sloped even if leisure is an inferior good. True or false? Graphically explain. c. Let's suppose economy is at full stock equilibrium. Government uses expansionary fiscal policy which creates budget deficit. Graphically compare moncy and bond financed budget deficit if there is wealth effect both in IS and LM curves. d. It is argued that the existence of involuntary unemployment in Keynesian model is due to failure of money wages to fall. Do you agree with the argument? Graphically justify your point of view.
Real Balance Effect (RBE):The real balance effect is an economic principle that describes how changes in price levels impact aggregate demand in the short run.
The RBE proposes that when there is a decrease in the price level, consumers will experience an increase in their real income, which will encourage them to purchase more goods and services. Similarly, consumers' real income decreases, and this reduces their purchasing power.
In a liquidity trap, interest rates are already at zero, which means that further decreases in the interest rates will not encourage firms to invest more because they are not sensitive to changes in interest rates. which increases the demand for money.
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: Inflation is Select one: A. equal to the amount of interest (or nominal rate) charged for most loans. B. the increase in the general purchasing power of the monetary unit. C. the decrease in the general purchasing power of the monetary unit. D. not a factor in most capital-budgeting decisions because it tends to be very low in Canada
Inflation is the decrease in the general purchasing power of the monetary unit. (Option C)
Inflation refers to the sustained increase in the general price level of goods and services over time, resulting in a decrease in the purchasing power of money. This means that as inflation occurs, the same amount of money can buy fewer goods and services. Option C correctly describes inflation as the decrease in the general purchasing power of the monetary unit.
Option A is incorrect because inflation and interest rates are separate concepts. Interest rates represent the cost of borrowing money, while inflation affects the value of money over time.
Option B is incorrect because inflation does not necessarily imply an increase in the purchasing power of the monetary unit. Instead, it reduces the purchasing power.
Option D is incorrect because inflation is a significant factor in capital-budgeting decisions as it erodes the value of future cash flows and impacts the profitability and feasibility of investment projects. Inflation is a consideration that businesses and investors must account for when making long-term financial decisions.
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Inflation is the decrease in the general purchasing power of the monetary unit. (Option C)
Inflation refers to the sustained increase in the general price level of goods and services over time, resulting in a decrease in the purchasing power of money. This means that as inflation occurs, the same amount of money can buy fewer goods and services. Option C correctly describes inflation as the decrease in the general purchasing power of the monetary unit.
Option A is incorrect because inflation and interest rates are separate concepts. Interest rates represent the cost of borrowing money, while inflation affects the value of money over time.
Option B is incorrect because inflation does not necessarily imply an increase in the purchasing power of the monetary unit. Instead, it reduces the purchasing power.
Option D is incorrect because inflation is a significant factor in capital-budgeting decisions as it erodes the value of future cash flows and impacts the profitability and feasibility of investment projects. Inflation is a consideration that businesses and investors must account for when making long-term financial decisions.
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a ________ consists of a set of buyers who share common needs or characteristics that the company decides to serve.
A market consists of a set of buyers who share common needs or characteristics that the company decides to serve.
A market is defined as a collection of individuals or companies who are interested in buying a product or service.
This group is composed of people or businesses that share a common need for a product or service and have the willingness and ability to pay for it.
The market size refers to the number of people or companies in the market who might be interested in buying a particular product.
For example, if a company sells a new line of t-shirts and estimates that 150 people in the market will buy them, the market size for that particular product is 150.
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Question: The Zambia Statistical Agency is currently recruiting
enumerators and other staff in the forthcoming census of 2020, an
exercise that is undertaken every decade. This is a very costly
nation
The Zambia Statistical Agency is preparing for the next national census, which is conducted every decade and requires a significant amount of funding.
The census is a crucial process for gathering data on population demographics, economic trends, and other important factors that can help guide policy decisions at the national level.
The census is also an opportunity to employ large numbers of people as enumerators and other staff, providing temporary employment opportunities for people who may not have steady jobs otherwise. However, the cost of conducting a national census is high, requiring funding for training and paying enumerators and other staff, as well as for data collection and analysis.
Despite the cost, the census is an important investment for the government, as the data collected can inform decision-making and resource allocation for years to come. Therefore, the recruitment of enumerators and other staff for the 2020 census is an important process that will help ensure the success of the census and the accuracy of the data collected.
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For self interest threat, self-review threat, self evaluation threat, familiarity threat and intimidation threat , suggest a safeguard that can be put in place to combat the threat identified.
Safeguard: Implement independent and objective oversight mechanisms such as external audits or reviews to mitigate the threats of self-interest, self-review, self-evaluation, familiarity, and intimidation in decision-making processes.
By involving independent third parties to assess and validate decisions, organizations can ensure that biases, conflicts of interest, or undue influence are minimized. External audits or reviews provide an objective perspective, enhancing transparency and accountability. They reduce the risk of individuals acting in their own self-interest or exerting undue pressure on decision-makers. This safeguard helps maintain integrity and objectivity in the evaluation and decision-making processes, enhancing trust and mitigating the identified threats.
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