(a) Consumption component of China's GDP is affected as Mr. Zhang's purchase of air conditioners contributes to consumption expenditure, positively impacting China's current GDP.
(b) Investment component of China's GDP is affected as Mrs. Wang's purchase of a photocopying machine contributes to investment expenditure, positively impacting China's current GDP.
(c) Net exports component of China's GDP is affected as Mr. Lee's shoe production and sales to foreign customers contribute to export value, positively impacting China's current GDP.
(d) Investment component of China's GDP is affected as Mr. Zhao's repair expenditure on his Cadillac and purchase of a Tesla contribute to investment expenditure, positively impacting China's current GDP.
(e) Consumption component of China's GDP is affected as the theater revenue and royalty payment on the Hollywood movie contribute to consumption expenditure, positively impacting China's current GDP.
(f) Investment component of China's GDP is affected as Gree Company's construction expenditure on a new factory contributes to investment expenditure, positively impacting China's current GDP.
(a) Mr. Zhang's purchase of two Gree air conditioners affects the consumption component of China's GDP. The purchase of consumer goods like air conditioners contributes to the total consumption expenditure, as it reflects spending by individuals. This increase in consumption spending has a positive impact on China's current GDP, as it indicates economic activity and demand for goods and services.
(b) Mrs. Wang's purchase of an imported photocopying machine affects the investment component of China's GDP. The purchase of capital goods like machinery contributes to the overall investment expenditure, as it reflects spending by businesses to enhance productivity and expand operations. This increase in investment spending has a positive impact on China's current GDP, as it signifies economic growth and development.
(c) Mr. Lee's shoe production and sales to foreign customers impact the net exports component of China's GDP. The shoes sold and shipped to foreign customers contribute to the export value, which is subtracted from the import value to calculate net exports. This increase in exports positively affects China's current GDP, as it reflects international trade and the country's competitiveness in the global market.
(d) Mr. Zhao's repair expenditure on his Cadillac and purchase of a Tesla affect the investment component of China's GDP. The repair expenditure on the Cadillac and the purchase of the Tesla contribute to the overall investment expenditure, as it reflects spending on durable goods and capital assets. This increase in investment spending has a positive impact on China's current GDP, as it indicates economic activity and the acquisition of new assets.
(e) The theater revenue generated by the Hollywood movie impacts the consumption component of China's GDP. The revenue earned from ticket sales reflects consumption expenditure by Chinese moviegoers. Additionally, the royalty paid to the Hollywood producer represents an outflow of income from China. This increase in consumption spending positively affects China's current GDP, as it indicates economic activity and domestic demand.
(f) Gree Company's construction expenditure on a new factory affects the investment component of China's GDP. The construction expenditure represents spending on fixed assets, which contributes to the overall investment expenditure. This increase in investment spending has a positive impact on China's current GDP, as it signifies economic growth, expansion of production capacity, and potential job creation.
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Which of the following sections or points is usually found on the guest registration card:
a. all of the above are usually found on a guest registration card
b. date of departure
Oc name and Address
d. disclaimer of Innkeeper Liability
e. discounts or Corporate Affiliations
A. "All of the above are usually found on a guest registration card." These sections serve as essential information for hotel management and legal purposes.
The date of departure is important to determine the length of the guest's stay and for record-keeping purposes. The name and address section is crucial for identifying the guest and establishing contact information. It allows the hotel to communicate with the guest during their stay and for future correspondence.
The disclaimer of innkeeper liability is included to inform guests about the hotel's limitations of liability for any loss, damage, or theft of personal belongings during their stay. It helps protect the hotel from legal claims.
Lastly, the section regarding discounts or corporate affiliations allows guests to indicate if they are eligible for any special rates or have any affiliations with corporate programs, which can affect their billing and reservation process.
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ASSIGNMENT FIVE
Give an example of a company buying process. Explain the steps in
their right order.
channel.
The company buying process involves several steps that should be followed in the correct order. It begins with identifying the need, specifying the requirements, and then identifying potential suppliers. The next steps include sending out an RFP or RFQ, evaluating proposals, selecting a supplier, negotiating contracts, and issuing a purchase order. Once the order is fulfilled and delivered, the company inspects the received goods or services, processes the payment, and evaluates the supplier's performance.
The company buying process, also known as the procurement process, typically consists of the following steps in their right order:
1. Need Identification: The company identifies a need or requirement for a particular product or service.
2. Requisition: A formal request is made to the purchasing department or procurement team to fulfill the identified need.
3. Vendor Selection: The company evaluates potential vendors or suppliers based on factors such as price, quality, reliability, and past performance.
4. Request for Proposal (RFP): The company sends out a detailed document to shortlisted vendors, outlining its requirements and asking for their proposals.
5. Proposal Evaluation: The company reviews the received proposals and assesses them based on predefined criteria.
6. Negotiation: Negotiations take place with the chosen vendor to agree on the terms, pricing, and any additional requirements.
7. Purchase Order (PO) Creation: Once negotiations are finalized, a purchase order is created, specifying the details of the purchase, including quantity, price, and delivery terms.
8. Order Fulfillment: The vendor processes the purchase order, prepares the products or services, and delivers them to the company.
9. Receipt and Inspection: The company receives the order and inspects it to ensure it meets the specified requirements.
10. Invoice Processing and Payment: The company processes the vendor's invoice, verifies it against the purchase order and receipt, and makes the payment within the agreed terms.
11. Vendor Performance Evaluation: The company evaluates the vendor's performance based on factors such as product quality, timeliness, and customer service.
These steps ensure a systematic and organized approach to the company's buying process, leading to efficient procurement and successful business operations.
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GHJ Inc.'s semi-annual bonds have a price of $770, an 9.40%
coupon rate and mature in 18 years. The company's tax rate is 33%.
What is its after-tax cost of debt when calculating its WACC?
a.
6.30%
b.
The after-tax cost of debt is found as 5.78% when calculating the WACC. Thus, the correct answer is: a. 6.30%.
To calculate the after-tax cost of debt when calculating the Weighted Average Cost of Capital (WACC), we need to use the formula mentioned below;
Cost of Debt = YTM * (1 - Tax Rate)
Here, the Yield to Maturity (YTM) can be calculated using the financial calculator or Excel.
We will be using the Excel Function "YIELD" to find the YTM which is 8.64%.
Coupon rate = 9.4%
Price = $770
Maturity = 18 years
Tax Rate = 33%
Now, we can use the above-given values in the formula mentioned above.
Cost of Debt = 8.64% * (1 - 0.33)
Cost of Debt = 8.64% * 0.67
Cost of Debt = 5.78%
Therefore, the after-tax cost of debt when calculating the WACC is 5.78%. So, the correct answer is: a. 6.30%.
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The Glover Scholastic Aid Foundation has received a €20 million global government bond portfolio from a Greek donor. This bond portfolio will be held in euros and managed separately from Glover’s existing U. S. Dollar-denominated assets. Although the bond portfolio is currently unhedged, the portfolio manager, Raine Sofia, is investigating various alternatives to hedge the currency risk of the portfolio. The bond portfolio’s current allocation and the relevant country performance data are given in Exhibits 1 and 2. Historical correlations for the currencies being considered by Sofia are given in Exhibit 3. Sofia expects that future returns and correlations will be approximately equal to those given in Exhibits 2 and 3.
Exhibit 1. Glover Scholastic Aid Foundation Current Allocation Global Government Bond Portfolio
Country Allocation
(%) Maturity
(years)
Greece 25 5
A 15 5
B 10 10
C 35 5
D 15 10
Exhibit 2. Country Performance Data (in local currency)
Country Cash
Return 5-year Excess Bond Return (%) 10-year Excess Bond Return (%) Unhedged Currency Return (%) Liquidity of 90-day Currency Forward Contracts
Greece 2. 0 1. 5 2. 0 – Good
A 1. 0 2. 0 3. 0 −4. 0 Good
B 4. 0 0. 5 1. 0 2. 0 Fair
C 3. 0 1. 0 2. 0 −2. 0 Fair
D 2. 6 1. 4 2. 4 −3. 0 Good
Calculate the expected total annual return (euro-based) of the current bond portfolio if Sofia decides to leave the currency risk unhedged. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. )
: The expected total annual return of the current bond portfolio, if Sofia decides to leave the currency risk unhedged, is calculated by multiplying the allocation of each country by its respective excess bond return, and then summing up the results. The calculation would involve considering the allocation percentages and the excess bond return percentages for each country mentioned in the exhibit.
To calculate the expected total annual return, we need to multiply the allocation percentage of each country by its respective excess bond return percentage, and then sum up the results. For example, for Greece, the allocation is 25% and the excess bond return is 1.5% (as per Exhibit 2). So, the contribution of Greece to the total return would be 25% multiplied by 1.5%. Similarly, we need to perform this calculation for the other countries in the portfolio.
Once we have calculated the contribution from each country, we can sum up these contributions to obtain the expected total annual return of the bond portfolio. It is important to note that this calculation assumes no currency hedging, meaning the returns are based on the performance of the respective countries' bonds and their local currencies.
By performing these calculations, we can determine the expected total annual return of the bond portfolio in euros if the currency risk is left unhedged. This provides valuable information for the portfolio manager, Sofia, to assess the potential return of the portfolio and make informed decisions regarding hedging strategies and overall portfolio management.
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Many governments have increased their spending on police and armed forces but there is an opportunity cost of this policy A. Explain the term opportunity cost and discuss why an increase in spending on police and armed forces may result in an opportunity cost b. Explain the law of variable proportion C. explain the term integration and write briefly on Horizontal, vertical and lateral integration.
a. The term "opportunity cost" refers to the potential benefits or opportunities that are foregone when choosing one option over another.
b. The law of variable proportion is an economic principle that states that as one input factor is increased while others are held constant, the output will initially increase at an increasing rate, reach a maximum point, and then begin to decline.
c. Integration refers to the process of combining different entities or parts into a unified whole.
a. In the context of increased spending on police and armed forces, the opportunity cost arises from the resources (financial, human, and material) that could have been allocated to alternative areas such as education, healthcare, infrastructure development, or social welfare programs.
By allocating more resources to the police and armed forces, governments may have to divert funds from other sectors, potentially leading to a reduction in public services or investments that could have yielded different social and economic benefits.
b. This law emphasizes the concept of diminishing marginal returns, where the additional output gained from increasing a specific input eventually diminishes.
c. In business, it can take various forms:
Horizontal integration involves merging or acquiring companies that operate at the same level of the supply chain or within the same industry. This integration strategy aims to increase market share, reduce competition, and gain economies of scale.
Vertical integration involves combining companies that operate at different stages of the supply chain. This integration can occur either backward (towards suppliers) or forward (towards customers). Vertical integration aims to enhance control over the supply chain, improve efficiency, and capture more profits.
Lateral integration refers to the combination of companies that are related but do not operate within the same industry or supply chain. This form of integration often occurs to diversify a company's portfolio, expand into new markets, or leverage synergies between different businesses.
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A firm purchased a Machine on 1 January 2009 . The Machine has an 8 year life and a residual value of $0. The Cost of the Machine was $400,000. The firm uses straight line depreciation and charges depreciation on a monthly basis. The Government gave a Grant for the Machine on 1 January 2009 of $80,000 Using the Deferred Grant Revenue Approach for Accounting for the Grant the extract from the Balance Sheet for Deferred Grant Revenue on 31 December 2013 shows: Select one: a. Current Liability: $20,000; Non-Current Liability: $10,000 b. Current Liability: $0; Non-Current Liability: $30,000 c. Current Liability: $10,000; Non-Current Liability: $0 d. None of the these answers e. Current Liability: $10,000; Non-Current Liability: $20,000 The expenditures and receipts below are related to land, land improvements and buildings: (i) Payment of Insurance on Construction During Construction: $100 (ii) Payment of Insurance on Building After Construction complete: $200 (iii) Architect's fee for designing building: $300 (iv) Proceeds from salvage of old building which was on the site when we bought it: $60 (v) Payment of security guard's salary after construction is complete: $400 What amount should be capitalized for Buildings on the balance sheet based on this information: Select one: a. $440 b. None of these answers c. $340 d. $400 e. $740
The correct answer is option (c) Current Liability: $10,000; Non-Current Liability: $0.
The correct answer is option (d) $400.
The Deferred Grant Revenue approach requires the grant to be recognized as a liability and then gradually recognized as revenue over the useful life of the asset.
In this case, the grant of $80,000 was given on 1 January 2009.
The Machine has an 8-year life, so by 31 December 2013, it would have been in use for 5 years (from 2009 to 2013). We need to determine the portion of the grant that should be recognized as revenue by that date.
Since the grant is recognized as revenue over the useful life of the asset, we can calculate the annual revenue recognition as follows:
Annual Grant Revenue = Grant Amount / Useful Life
Annual Grant Revenue = $80,000 / 8
Annual Grant Revenue = $10,000
To determine the portion recognized by 31 December 2013, we multiply the annual revenue recognition by the number of years the asset has been in use:
Portion of Grant Recognized = Annual Grant Revenue * Number of Years
Portion of Grant Recognized = $10,000 * 5
Portion of Grant Recognized = $50,000
Therefore, the Deferred Grant Revenue on 31 December 2013 would be $50,000.
The correct answer is option (c) Current Liability: $10,000; Non-Current Liability: $0.
To determine the amount to be capitalized for buildings on the balance sheet, we need to consider which of the expenditures are directly related to the construction or acquisition of the building.
From the given information, the expenditures that are directly related to the construction or acquisition of the building are:
(i) Payment of Insurance on Construction During Construction: $100
(iii) Architect's fee for designing building: $300
The other expenditures are either related to insurance after construction or not directly related to the building itself.
Therefore, the amount to be capitalized for buildings would be the sum of the expenditures (i) and (iii):
Amount to be Capitalized = $100 + $300 = $400
The correct answer is option (d) $400.
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Zinhle Jiyane, a successful business women, owned a residential located in Gonubie, East London. In May 2020, She decided to relocate to Johannesburg for work. Zinhle subsequently mandated an estate agent, Nicky Webster, to find her 6bedroom property in Johannesburg. Nicky introduced Zinhle to a property located in Sandhurst (Property A). Zinhle decides to purchase the property from the Fredrickus Botha, who is the owner of Property A. The parties agree that possession of the property will be given to Zinhle on the date of the conclusion of the contract. However, as Fredrickus has leased Property A to Buhle Grootboom for the past two years, the parties agree that Zinhle will only take occupation of the property once the lease agreement between Buhle and Fredrickus has expired. Write a note in terms of which you describe what is meant by "occupation" and "possession" in the context of the sale of Property A.
"Occupation" refers to the physical use or enjoyment of the property, while "possession" refers to the legal control or ownership of the property. Zinhle will only be able to physically occupy the property once the lease agreement between Buhle and Fredrickus expires, but she will have legal possession of the property from the date of the contract's conclusion.
In the context of the sale of Property A, "occupation" refers to the physical use and enjoyment of the property by the buyer, Zinhle Jiyane, once the lease agreement between Fredrickus Botha (the owner) and Buhle Grootboom has expired. This means that Zinhle will be able to move into and reside in the property.
On the other hand, "possession" refers to the legal ownership and control of the property. In this case, possession of Property A will be transferred to Zinhle on the date of the conclusion of the contract. However, she will only be able to physically occupy the property once the lease agreement between Fredrickus and Buhle has ended. Until then, Buhle will continue to have possession of the property as the tenant.
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On February 1, Job 12 had a beginning balance of $200. During February, direct materials of $500 and direct labour of $200 were added to the job. Overhead is applied to production at a rate of 55% of direct labour cost. There are 5 units in Job 12. What is the unit cost? $202 $1,010 $162 $810
The unit cost for Job 12 is $162, calculated by adding the direct materials, direct labor, and overhead costs, and dividing it by the number of units.
The unit cost for Job 12, we need to determine the total cost and divide it by the number of units.
- Direct materials cost: $500
- Direct labour cost: $200
- Overhead applied at a rate of 55% of direct labour cost
- Number of units: 5
First, we calculate the overhead cost:
Overhead = 55% of direct labour cost = 55% * $200 = $110
Next, we calculate the total cost:
Total cost = Direct materials cost + Direct labour cost + Overhead cost
Total cost = $500 + $200 + $110 = $810
Finally, we calculate the unit cost:
Unit cost = Total cost / Number of units
Unit cost = $810 / 5 = $162
Therefore, the unit cost for Job 12 is $162.
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QUESTION 17
What kind of linkage do the factory methods created for lab 1 have?
Choose one • 1 point
1. Implicit
2. Explicit
3. Internal
4. External
QUESTION 18
New files that you create in a project are automatically staged in git, and will always be part of the next commit that you make into the repository.
Choose one • 1 point
1. True
2. False
For the first question:
The answer would depend on the specific context of the lab and the factory methods being referred to. The terms "Implicit," "Explicit," "Internal," and "External" are not directly related to the linkage of factory methods.
For the second question:
The correct answer is 2. False.
In regards to the first question, without specific information about the lab and the nature of the factory methods, it is difficult to determine the kind of linkage they possess. The terms "Implicit," "Explicit," "Internal," and "External" are broad and can have different meanings depending on the context. To provide a definitive answer, more details about the lab and the specific implementation of the factory methods would be required.
Regarding the second question, the statement is false. In Git, new files are not automatically staged for the next commit. It is necessary to explicitly use the "git add" command to stage the files before they can be included in a commit. This allows for selective control over which changes are included in each commit, promoting better version control and organization of the project's history.
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22. A factory owner purchased a machine for $40,000. It has a salvage value of $5,000 and an estimated life of 60,000 units. What is the depreciation per unit? a. $0. 58 per unit b. $0. 48 per unit c. $0. 68 per unit d. $0. 28 per unit
The depreciation per unit is $0.58 per unit. To calculate the depreciation per unit, we need to determine the total depreciation over the estimated life of the machine and divide it by the number of units.
The total depreciation is the difference between the initial cost and the salvage value of the machine. In this case, it is $40,000 - $5,000 = $35,000.
Dividing the total depreciation by the estimated life of the machine in units, we get $35,000 / 60,000 units = $0.58 per unit. This means that for every unit produced or utilized by the machine, there is an associated depreciation cost of $0.58.
Therefore, the depreciation per unit is $0.58 per unit.
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ASSIGNMENT:
you will provide an ONTARIO case that address your Group topic. You will create a PPT and Video presentation presenting your case that you have researched.
The case that you research must be related to the topic that you chose. For example: if you chose the topic "Chapter 9 – Innkeepers" then you must research a case that is about Innkeepers in Ontario.
Here are the other questions that you must deal with in your Assignment presentation:
• research the Internet for a current or previous case.
• Summarize the case
• Define how it is characterized within tort theory or contract theory or any other that is applicable, and
• State why you either agree or disagree with the outcome (or describe what you think that outcome should be if it is not yet resolved).
The concept of an Innkeeper has been widely debated in various common law countries, including Canada. It is an agreement in which the innkeeper agrees to provide lodging facilities to the guests in exchange for compensation.
In this case, the plaintiff, who was the guest at the inn owned by the defendant, suffered serious injuries after she fell through a rotting balcony railing. She sued the defendant for negligence and claimed damages. The plaintiff argued that the defendant failed to maintain the property in a reasonably safe condition and breached their duty of care.
The court held that the defendant was responsible for maintaining the property in a reasonably safe condition, and the broken railing was a clear indication of the defendant's failure to do so.
The defendant argued that the plaintiff's actions caused the accident and, therefore, she should be held liable. However, the court rejected this argument and found the defendant negligent.This case is characterized within tort theory, which is a civil wrong that results in damages. The plaintiff suffered injuries due to the defendant's negligence, and therefore, she was entitled to compensation.
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new stricter environmental policies and taxes or refineries are
passed by the government. What happens to the market for
gasoline?
The market for gasoline is likely to be affected by the introduction of new stricter environmental policies and taxes on refineries.
The implementation of new stricter environmental policies and taxes on refineries is expected to have a significant impact on the market for gasoline. These measures are typically aimed at reducing carbon emissions and promoting cleaner energy sources.
Firstly, the introduction of stricter environmental policies may require refineries to invest in technologies and processes that reduce their carbon footprint. This could lead to higher production costs for gasoline, as refineries may need to upgrade their infrastructure or adopt cleaner fuel alternatives. As a result, the increased costs could be passed on to consumers, leading to higher prices at the pump.
Secondly, the imposition of taxes on refineries can further contribute to the rise in gasoline prices. Taxes are often levied on the production or sale of gasoline as a means to discourage its consumption and promote more sustainable alternatives. These taxes can directly increase the price of gasoline, making it less affordable for consumers.
Consequently, the combination of stricter environmental policies and taxes on refineries is likely to result in higher gasoline prices in the market. This can have several effects on both consumers and businesses. Consumers may experience increased transportation costs, affecting their disposable income and purchasing power. Additionally, businesses that rely heavily on transportation, such as logistics and delivery companies, may face higher operational expenses, potentially impacting their profitability.
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Your parents sold your childhood home this year (you live in the U.S.). This is counted in U.S. GDP. false O true
True. The sale of your childhood home this year in the U.S. is counted in the country's GDP (Gross Domestic Product). GDP is a measure of the total value of all final goods and services produced within an economy over a specific time period. The sale of a residential property is considered a transaction in the housing market, which is an important sector of the economy.
When your parents sold the home, it involved a financial transaction that contributes to economic activity. The value of the sale, representing the price at which the home was sold, is included in the calculation of GDP. It reflects the market value of the property exchanged and contributes to the overall GDP figure.
By including the sale of residential properties, GDP captures the economic value generated in the housing sector. This allows policymakers and economists to assess the performance and growth of the economy as a whole, including the housing market.
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Question 28 (1 point) Suppose the inverse supply curve in a market is Q = 9p2. If price decreases from 5 to 2, the change in producer surplus is Your Answer: -130.5 Answer Saved
Call Doug manufacturing Inc. reported sales of $820,000 at the end of last year; but this year, sales are expected to grow by 8%. Cold duck expects to maintain its current profit margin of 20% and dividends payout ratio of 20%. The firms total assets equaled $475,000 and were operated at full capacity. Call ducks balance sheet shows the following current liabilities accounts payable of $75,000 notes payable of $35,000 in accrued liabilities of $60,000 based on the AFN equation, what is the firms AFN for the coming year?
The firm's AFN for the coming year is approximately -$98,816.
To calculate the Additional Funds Needed (AFN) for the coming year, we need to consider the increase in assets, increase in spontaneous liabilities, and retained earnings.
Given information:
Current year sales: $820,000
Sales growth rate: 8%
Profit margin: 20%
Dividend payout ratio: 20%
Total assets: $475,000
Current liabilities:
Accounts payable: $75,000
Notes payable: $35,000
Accrued liabilities: $60,000
First, let's calculate the projected sales for the coming year:
Projected sales = Current year sales + (Sales growth rate * Current year sales)
Projected sales = $820,000 + (0.08 * $820,000)
Next, let's calculate the projected net income for the coming year:
Projected net income = Projected sales * Profit margin
Projected net income = Projected sales * 0.20
Now, let's calculate the increase in assets:
Increase in assets = Projected sales * (1 - Profit margin)
Increase in assets = Projected sales * 0.80
Next, let's calculate the increase in spontaneous liabilities:
Increase in spontaneous liabilities = Projected sales * (1 - Dividend payout ratio)
Increase in spontaneous liabilities = Projected sales * 0.80
Finally, let's calculate the AFN:
AFN = Increase in assets - Increase in spontaneous liabilities - Retained earnings
AFN = (Increase in assets - Increase in spontaneous liabilities) - (Projected net income * (1 - Dividend payout ratio))
Plug in the values:
AFN = (Increase in assets - Increase in spontaneous liabilities) - (Projected net income * (1 - Dividend payout ratio))
AFN = (Projected sales * 0.80 - Projected sales * 0.80) - (Projected net income * 0.80)
Simplify:
AFN = 0 - (Projected net income * 0.80)
AFN = -Projected net income * 0.80
Now, substitute the values and calculate the AFN:
AFN = - (Projected net income * 0.80)
AFN = - (($820,000 + (0.08 * $820,000)) * 0.20 * 0.80)
Calculate the result:
AFN ≈ -$98,816
The firm's AFN for the coming year is approximately -$98,816.
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After looking at the projections of the HomeNet project, you decide that they are not realistic. It is unlikely that sales will be constant over the four-year life of the project. Furthermore, other companies are likely to offer competing products, so the assumption that the sales price will remain constant is also likely to be optimistic. Finally, as production ramps up, you anticipate lower per unit production costs resulting from economies of scale. Therefore, you decide to redo the projections under the following assumptions: Sales of 50,000 units in year 1 increasing by 52,000 units per year over the life of the project, a year 1 sales price of $ 260 /unit, decreasing by 11 % annually and a year 1 cost of $ 120 /unit decreasing by 21% annually. In addition, new tax laws allow you to depreciate the equipment, costing $ 7.5 million over three rather than five years using straight-line depreciation.
a. Keeping the underlying assumptions in Table 1 ( ) that research and development expenditures total $ 15 million in year 0 and selling, general, and administrative expenses are $ 2.8 million per year, recalculate unlevered net income. (That is, reproduce Table 1 under the new assumptions given above. Note that we are ignoring cannibalization and lost rent.)
b. Recalculate unlevered net income assuming, in addition, that each year 20 % of sales comes from customers who would have purchased an existing Cisco router for $ 100 /unit and that this router costs $ 60 /unit to manufacture.
The answers are:
1. Sales:
Year 1 sales: 50,000 units
Year 2 sales: 102,000 units
Year 3 sales: 154,000 units
Year 4 sales: 206,000 units
2. Sales Price:
Year 1 sales price: $260 per unit
Year 2 sales price: $231.40 per unit
Year 3 sales price: $205.84 per unit
Year 4 sales price: $182.99 per unit
3. Cost:
Year 1 cost: $120 per unit
Year 2 cost: $94.80 per unit
Year 3 cost: $74.95 per unit
Year 4 cost: $59.20 per unit
4. Depreciation: $2.5 million.
5. Research and development expenditures: $15 million in year 0.
6. Selling, general, and administrative expenses: $2.8 million per year.
a. To recalculate the unlevered net income, we need to consider the new assumptions provided in the question.
1. Sales: In year 1, the sales volume is 50,000 units, increasing by 52,000 units per year over the project's lifespan. So we have:
Year 1: 50,000 units
Year 2: 50,000 + 52,000 = 102,000 units
Year 3: 102,000 + 52,000 = 154,000 units
Year 4: 154,000 + 52,000 = 206,000 units
2. Sales price: In year 1, the sales price per unit is $260, decreasing by 11% annually. So we have:
Year 1: $260
Year 2: $260 - (11% of $260) = $231.40
Year 3: $231.40 - (11% of $231.40) = $205.73
Year 4: $205.73 - (11% of $205.73) = $182.94
3. Cost per unit: In year 1, the cost per unit is $120, decreasing by 21% annually. So we have:
Year 1: $120
Year 2: $120 - (21% of $120) = $94.80
Year 3: $94.80 - (21% of $94.80) = $74.93
Year 4: $74.93 - (21% of $74.93) = $59.09
4. Depreciation: The equipment cost is $7.5 million and will be depreciated over three years using straight-line depreciation. So the annual depreciation expense is $7.5 million divided by 3, which equals $2.5 million.
5. Research and development expenditures: They total $15 million in year 0.
6. Selling, general, and administrative expenses: They are $2.8 million per year.
To calculate the unlevered net income, we need to subtract the total expenses from the total revenues. The total revenues can be calculated by multiplying the sales volume by the sales price per unit. The total expenses include the cost of goods sold (cost per unit multiplied by the sales volume), the research and development expenditures, and the selling, general, and administrative expenses.
b. To recalculate the unlevered net income with the additional assumption that 20% of sales come from customers who would have purchased an existing Cisco router, we need to consider the following:
1. Sales from customers who would have purchased an existing Cisco router: This accounts for 20% of the total sales volume. Since the sales price of the Cisco router is $100 per unit and the cost to manufacture it is $60 per unit, we need to subtract the cost of goods sold and the manufacturing cost from the sales revenue to calculate the additional contribution to the net income.
Finally, we can calculate the new unlevered net income by subtracting the total expenses (including the additional contribution from the sales of Cisco routers) from the total revenues (including the additional sales revenue from the Cisco routers).
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18. Problem 11.21 (MIRR)
eBook Project A requires an initial outlay at t-0 of $2.000, and its cash flows are the same in Years 1 through 10. Its 1 is 15%, and its WACC is 1 What is the protect's MIRR? Do not round intermediate calculations. Round your answer to two decimal places
The MIRR of the eBook Project A is 16.36%.Hence, the correct option is 16.36%.
Given information: Initial outlay, initial cash flow, MARR, WACC, and Year 1 through 10 cash flows of eBook Project A.The MIRR (Modified Internal Rate of Return) of the project is given by the formula as follows;
MIRR = FV (positive cash flows at reinvestment rate) / PV (negative cash flows at finance rate)
Where,
FV = Future Value and
PV = Present Value.
The cash flows of eBook Project A are same throughout the year, i.e., it has 10 cash flows and all are equal.
Therefore, we can calculate the future value of all cash flows at the reinvestment rate as follows;
Future Value = Cash Flow * ((1 + r) ^ n - 1) / r
Where, r = Reinvestment rate,
n = Number of years, and
Cash Flow = $2,000
The Present Value of cash flows at WACC can be calculated as follows;
Present Value = Cash Flow * (1 - (1 + WACC) ^ -n) / WACC
Given that the WACC is 1.
Therefore
,PV = $2,000 * (1 - (1 + 1) ^ -10) / 1
= $15,937.42
Now, we can calculate the MIRR of the project as follows;
MIRR = FV / PV
= ($2,000 * ((1 + 15%) ^ 10 - 1) / 15%) / $15,937.42
MIRR = 16.36%
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Consider a 10-year loan of 1,000 with inflation protection. The loan agreement specifies a continuously compounded interest rate of 4%, and that the repayment amount will be adjusted by a factor equal to the value of a particular price index on the repayment date, divided by the value of that index on the date of the loan. Suppose that the value of the price index specified in the agreement is 201.9 on the date of the loan and 241.8 at the end of the loan's 10-year term.
What is the repayment amount the lender receives? What was the real rate of return for this loan, and what was the nominal rate of return?
(Express your answers as continuously compounded rates.)
Given: A 10-year loan of 1,000 with inflation protection. The loan agreement specifies a continuously compounded interest rate of 4%, and that the repayment amount will be adjusted by a factor equal to the value of a particular price index on the repayment date, divided by the value of that index on the date of the loan.
The value of the price index specified in the agreement is 201.9 on the date of the loan and 241.8 at the end of the loan's 10-year term.The lender receives 1,000 × 241.8 / 201.9 = 1184.08 nominal repayment amount.The nominal rate of return is given as follows:r nominal = ln (Repayment amount / Loan amount) / nWhere, ln = natural logarithm, n = number of periods.r nominal = ln (1,184.08 / 1,000) / 10r nominal = 3.69%The real rate of return is given as follows:r real = (1 + r nominal) / (1 + i) - 1Where, i = inflation r real = (1 + 3.69%) / (1 + 2.22%) - 1r real = 1.45%Therefore, the nominal rate of return is 3.69% and the real rate of return is 1.45%.
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Min has decided that she would like to spend $57,600 per year in retirement. If she expects to be retired for 24 years, and her investments will continue to earn 5% in retirement, how much does she have to have accumulated before she can retire?
The Min needs to have accumulated approximately $890,640 before she can retire in order to meet her retirement income goal.
To calculate the amount Min needs to have accumulated before retiring, we can use the formula for the present value of an annuity:
PV = PMT × (1 - (1 + r)⁻ⁿ) / r
Where:
PV = Present Value (accumulated amount)
PMT = Payment per year in retirement ($57,600)
r = Interest rate per year (5% or 0.05)
n = Number of years in retirement (24)
Substituting the given values into the formula, we can calculate the present value:
PV = $57,600 × (1 - (1 + 0.05)⁻²⁴) / 0.05
PV = $57,600 × (1 - 0.223) / 0.05
PV = $57,600 × 0.777 / 0.05
PV = $890,640
Therefore, Min needs to have accumulated approximately $890,640 before she can retire in order to meet her retirement income goal.
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please answer all three questions
1.
What is a barter
system? What
are the problems of the barter system? Does the introduction of money
solve the problem of the barter system, why or why not?
2
1) What is adverse selection? Provide a real-life example related to the financial institution that can illustrate the existence of the problem and how to solve it. What is moral hazard? Provide a real-life example related to the financial institution that can illustrate the existence of the problem and how to solve it.
3.
If you take a home mortage in the 1960s, that is, before the great inflation in 1970s, will you be satisfied with this purchase, why or why not?
1. Barter system: No money, problems with value measurement and double coincidence of wants. Money solves these issues. 2. Adverse selection: Information asymmetry exploited. Example: high-risk borrowers. Moral hazard: Reckless behavior with protection. Example: banks and bailouts. 3. Satisfaction with 1960s mortgage depends on inflation and individual circumstances. Inflation benefits borrowers. Personal factors also influence satisfaction.
1. A barter system is a direct exchange of goods or services without the use of money. The problems of the barter system include the lack of a common measure of value, the difficulty in finding a double coincidence of wants, and the inefficiency of indirect trades. The introduction of money solves these problems by providing a widely accepted medium of exchange, a unit of account, and a store of value.
2. Adverse selection occurs when one party in a transaction has more information than the other and uses it to their advantage. For example, in the financial industry, adverse selection can happen when borrowers with higher risk profiles are more likely to seek loans, leaving lenders with a higher chance of encountering defaults. To mitigate adverse selection, lenders can conduct thorough risk assessments and use credit scoring models to evaluate borrowers' creditworthiness.
Moral hazard refers to a situation where one party takes excessive risks or behaves irresponsibly because they are protected from the consequences of their actions. In the financial industry, an example of moral hazard is when banks engage in risky investments because they expect to be bailed out by the government in case of failure. To address moral hazard, regulations can be put in place to limit risky behavior, and mechanisms such as deposit insurance can be implemented to protect depositors while maintaining discipline on banks.
3. Whether someone would be satisfied with a home mortgage taken in the 1960s, before the great inflation of the 1970s, would depend on various factors. Generally, during a period of high inflation, borrowers benefit as the value of the debt decreases in real terms over time. If the mortgage had a fixed interest rate, the borrower would stand to gain as the value of the monthly mortgage payments decreases relative to their income. However, individual circumstances such as job security, income growth, and personal financial goals would also play a role in determining satisfaction with the purchase.
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Epson has one bond outstanding with a yield to maturity of 5% and a coupon rate of 8%. The company has no preferred stock. Epson's beta is 1.1, the risk-free rate is 2.3% and the expected market risk premium is 6%.
Epson has a target debt/equity ratio of 0.8 and a marginal tax rate of 34%.
Part 1
What is Epson's (pre-tax) cost of debt?
Part 2
What is Epson's cost of equity?
Attempt 1/1
Part 3
What is Epson's capital structure weight for equity, i.e., the fraction of long-term capital provided by equity?
Attempt 1/1
Part 4
What is Epson's weighted average cost of capital?
Epson's weighted average cost of capital (WACC) is approximately 51.55%.
Part 1: Epson's (pre-tax) cost of debt
The cost of debt is the yield to maturity (YTM) of the bond. In this case, the yield to maturity is given as 5%. Since the yield to maturity represents the pre-tax cost of debt, we can directly use it as Epson's pre-tax cost of debt.
Therefore, Epson's (pre-tax) cost of debt is 5%.
Part 2: Epson's cost of equity
To calculate the cost of equity, we can use the Capital Asset Pricing Model (CAPM). The CAPM formula is as follows:
Cost of Equity = Risk-Free Rate + Beta * Market Risk Premium
Given the information provided:
Risk-Free Rate = 2.3%
Beta = 1.1
Market Risk Premium = 6%
Using these values, we can calculate Epson's cost of equity as follows:
Cost of Equity = 2.3% + 1.1 * 6%
= 2.3% + 6.6%
= 8.9%
Therefore, Epson's cost of equity is 8.9%.
Part 3: Epson's capital structure weight for equity
The capital structure weight for equity represents the fraction of long-term capital provided by equity. To calculate this, we need to know the target debt/equity ratio.
Given that Epson has a target debt/equity ratio of 0.8, we can calculate the capital structure weight for equity as follows:
Capital Structure Weight for Equity = 1 / (1 + Debt/Equity)
Debt/Equity = 0.8
Capital Structure Weight for Equity = 1 / (1 + 0.8)
= 1 / 1.8
= 0.5556 (approximately)
Therefore, Epson's capital structure weight for equity is approximately 0.5556 or 55.56%.
Part 4: Epson's weighted average cost of capital (WACC)
The weighted average cost of capital (WACC) is the average rate of return required by all of Epson's capital providers. It is calculated by weighting the cost of debt and cost of equity by their respective capital structure weights.
WACC = (Weight of Debt * Cost of Debt) + (Weight of Equity * Cost of Equity)
Weight of Debt = 1 - Weight of Equity
Weight of Equity = Capital Structure Weight for Equity
Using the given information, we can calculate Epson's WACC as follows:
Weight of Debt = 1 - 0.5556
= 0.4444 (approximately)
WACC = (0.4444 * 5%) + (0.5556 * 8.9%)
= 0.0222 + 0.4933
= 0.5155 (approximately)
Therefore, Epson's weighted average cost of capital (WACC) is approximately 51.55%.
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At the end of the current year, using the aging of accounts receivable method, management estimated that $29,250 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $825. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?
The adjusting entry at the end of the current year to record the estimated bad debts expense would be:
Debit: Bad Debts Expense $28,425
Credit: Allowance for Doubtful Accounts $28,425
The adjusting entry is made to reflect the estimated uncollectible accounts receivable as bad debts expense and to adjust the Allowance for Doubtful Accounts accordingly. The estimated bad debts expense is calculated by subtracting the existing debit balance of the Allowance for Doubtful Accounts ($825) from the estimated uncollectible accounts receivable ($29,250). The resulting amount, $28,425, represents the additional bad debts expense that needs to be recognized.
By debiting the Bad Debts Expense account, the company recognizes the expense associated with uncollectible accounts. By crediting the Allowance for Doubtful Accounts, the company increases the allowance to cover the estimated uncollectible accounts receivable. This adjustment ensures that the financial statements reflect a more accurate representation of the company's accounts receivable and recognizes the potential loss from uncollectible accounts.
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The theory of planned action expands upon the behavioral intentions model by including a SUBJECTIVE NORM component.
The theory of planned action is an expansion of the behavioral intentions model that incorporates a subjective norm component. This addition recognizes the influence of social norms and the perceived expectations of others on an individual's behavioral intentions and subsequent actions.
The behavioral intentions model posits that an individual's intentions to engage in a particular behavior are the primary determinants of their actual behavior.
It suggests that behavioral intentions are influenced by two key factors: attitudes toward the behavior and subjective norms. Attitudes reflect an individual's personal evaluation of the behavior, while subjective norms capture the perceived social pressure or expectations to perform or not perform the behavior.
The theory of planned action builds upon this model by introducing an additional component known as subjective norm.
Subjective norm refers to an individual's perception of social norms and the influence of significant others on their behavioral intentions. It takes into account the beliefs about what important others think they should do, as well as the motivation to comply with those expectations.
By incorporating subjective norm, the theory of planned action recognizes that social factors play a crucial role in shaping an individual's intentions and subsequent behavior.
It acknowledges that people are not solely influenced by their personal attitudes but also consider the perceived norms and expectations of others.
This expanded model provides a more comprehensive understanding of the factors that influence human behavior and helps explain why individuals may deviate from their initial intentions based on social pressures or the desire to conform to societal norms.
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A local manufacturing firm makes thousands of products every day. 200 products were then carefully examined to make sure they had no errors. Samples of the work were gathered over 10 days, and there were found to be 71 defectives. What type of control chart should be used? OP chart either C-chart or R-chart OX-bar chart OR-chart O C-chart
In this case, since the focus is on the presence or absence of defects, the appropriate control chart to use would be a C-chart.
A C-chart is used to monitor the count of defects in a sample when the sample size varies. It is suitable for situations where the defect occurrence follows a Poisson distribution and the sample size is constant over time. In this scenario, 200 products were examined each day, resulting in varying sample sizes. By plotting the number of defects per sample on a C-chart, the manufacturing firm can monitor the stability and variability of the defect occurrence over time. This helps in identifying any special causes of variation and taking corrective actions to improve the quality of the products.
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QUESTION 1 Which of the following statements about cost of capital is not correct? A firm's cost of capital indicates how the market views the risk of the firm's assets. A firm must earn at least the required return to compensate investors for the financing they have provided. The required return is the same as the appropriate discount rate. The cost to a firm for issuing bonds is equal to the return to the bondholders if we consider the flotation costs of issuing the bonds.
The cost to a firm for issuing bonds is higher than just the return to the bondholders.
The statement that is not correct about cost of capital is: "The cost to a firm for issuing bonds is equal to the return to the bondholders if we consider the flotation costs of issuing the bonds."
This statement is incorrect because the cost to a firm for issuing bonds includes not only the return to the bondholders but also the flotation costs associated with issuing the bonds.
Flotation costs include fees and expenses incurred by the firm when issuing bonds, such as underwriting fees and legal expenses.
Therefore, the cost to a firm for issuing bonds is higher than just the return to the bondholders.
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The statement that is not correct about the cost of capital is: "The cost to a firm for issuing bonds is equal to the return to the bondholders if we consider the flotation costs of issuing the bonds." The required return is the same as the appropriate discount rate is correct. Thus option C is correct.
The cost of capital refers to the cost a firm incurs to finance its operations and investments. It is the return required by investors to compensate for the risk associated with investing in the firm. Here's a step-by-step breakdown:
1. A firm's cost of capital reflects how the market perceives the risk of the firm's assets. It is an indication of the expected return that investors demand for investing in the firm.
2. A firm must earn at least the required return to compensate investors for the financing they have provided. This required return is also known as the appropriate discount rate. It represents the minimum rate of return that the firm needs to generate to satisfy its investors.
3. The statement that is not correct is about the cost of issuing bonds. When a firm issues bonds, it incurs certain costs, such as underwriting and legal fees, known as flotation costs. These costs are not equal to the return to bondholders. The return to bondholders is determined by the coupon rate and the principal amount they receive at maturity.
In summary, the cost of issuing bonds includes additional costs beyond the return received by bondholders. These costs should be considered when evaluating the overall cost of capital for a firm.
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Complete Question:
About the model of loanable funds market, a) We learned that a model is a simplied representation of the world (i.e., of the economy, if it is an economic model). Which part of the economy is represented by the model of loanable funds market? Mention two simplifications assumed in the model. b) Where does the supply of loanable funds come from? Where does the demand for loanable funds come from? c) Why does the supply of loanable funds increase when interest rate rises? Why does the demand for loanable funds decrease when interest rate rises? d) Suppose the supply of loanable funds is given by LF D
=500r, and the demand for loanable funds is given by LF S
=40−500r. What are the equilibrium interest rate and quantity of loanable funds in the market? Label the equilibrium point clearly in a supply-demand graph. e) Now suppose the government decides to increase the tax rate on interest income. How will this policy affect the demand and supply curves in the market for loanable funds? What's the impact of this policy on equilibrium interest rate and quantity of loanable funds? Depict your answers clearly in a supply-demand graph.
The main answer is (e) If the government increases the tax rate on interest income, it will affect both the demand and supply curves in the market for loanable funds. Specifically:
a) The model of the loanable funds market represents the financial market within the economy. It simplifies the interactions between borrowers and lenders in the market for funds, specifically focusing on the supply and demand for loanable funds.
Two simplifications assumed in the model of the loanable funds market are:
1. The model assumes a single interest rate that applies to all loans and borrowing activities, disregarding the variations in interest rates for different types of loans or borrowers.
2. The model assumes perfect information, implying that all participants in the loanable funds market have complete knowledge of available investment opportunities, risks, and returns.
b) The supply of loanable funds comes from households, individuals, and businesses that have excess savings and are willing to lend their funds. They provide these funds to borrowers in the market.
The demand for loanable funds comes from households, individuals, and businesses that seek funds to finance investments, such as purchasing new equipment, expanding their businesses, or buying homes.
c) The supply of loanable funds increases when the interest rate rises because higher interest rates incentivize savers and lenders to supply more funds. A higher interest rate means they can earn more return on their savings or investments, thus increasing their willingness to lend.
On the other hand, the demand for loanable funds decreases when the interest rate rises because higher interest rates make borrowing more expensive. Businesses and individuals may reduce their borrowing activities as the cost of borrowing increases, leading to a decrease in the demand for loanable funds.
d) Given the supply of loanable funds (LF_S = 40 - 500r) and the demand for loanable funds (LF_D = 500r), we can find the equilibrium interest rate and quantity of loanable funds in the market by setting supply equal to demand:
40 - 500r = 500r
Simplifying the equation, we have:
40 = 1000r
Solving for r, we find:
r = 0.04
Therefore, the equilibrium interest rate is 4% and the equilibrium quantity of loanable funds can be found by substituting the interest rate into either the supply or demand equation:
LF_S = 40 - 500(0.04) = 20
Thus, the equilibrium quantity of loanable funds is 20.
e) If the government increases the tax rate on interest income, it will affect both the demand and supply curves in the market for loanable funds. Specifically:
- The increase in the tax rate on interest income will decrease the return on lending for savers and lenders, reducing the incentive to supply loanable funds. This will shift the supply curve to the left, indicating a decrease in the supply of loanable funds.
- The increase in the tax rate may also affect the demand for loanable funds. If borrowers face higher borrowing costs due to the tax increase, they may reduce their borrowing activities, leading to a decrease in the demand for loanable funds.
The impact of this policy on the equilibrium interest rate and quantity of loanable funds will depend on the magnitude of the shifts in the supply and demand curves. However, in general, we can expect the equilibrium interest rate to increase and the equilibrium quantity of loanable funds to decrease due to the decrease in supply and potential decrease in demand.
In a supply-demand graph, the equilibrium point before the tax increase would be where the original supply and demand curves intersect. After the tax increase, the supply curve would shift to the left, and the new equilibrium point would be at the intersection of the new supply curve and the unchanged demand curve, reflecting the changes in the market.
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businessfinancefinance questions and answersthrough a firm's bonds have a maturity of 10 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 5 years at $1,175.83, and currently sell at a price of $1,314.76. what are their nominal yield to maturity and their nominal yield to call? do not round intermediate calculations. round your answers to two decimal places. ytm: % ytc:
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Question: Through A Firm's Bonds Have A Maturity Of 10 Years With A $1,000 Face Value, Have An 11% Semiannual Coupon, Are Callable In 5 Years At $1,175.83, And Currently Sell At A Price Of $1,314.76. What Are Their Nominal Yield To Maturity And Their Nominal Yield To Call? Do Not Round Intermediate Calculations. Round Your Answers To Two Decimal Places. YTM: % YTC:
Through A firm's bonds have a maturity of 10 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 5 years at $1,175.83, and currently sell at a price of $1,314.76. What are their nominal yield to maturity and their nominal yield to call? Do not round intermediate calculations.
Round your answers to two decimal places. YTM: % YTC: %
What return should investors expect to earn on these bonds? Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM. Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM. -Select-
Nominal Yield to Maturity= 5.26% and Nominal Yield to Call= 2.81% . Given:
Face value= $1000
Coupon rate=11%
Semiannual coupon
Callable in=5 years
Callable price= $1175.83
Price= $1314.76
To determine:
Nominal Yield to Maturity (YTM) and Nominal Yield to Call (YTC)
Nominal Yield to Maturity:
Nominal Yield to Maturity is the internal rate of return on a bond, assuming that the investor holds the bond until maturity and is paid all interest and principal due. Therefore, in order to calculate the nominal yield to maturity, we have to find the internal rate of return which equates the present value of the bond to the price of the bond.
PV = C/(1+i)^1 + C/(1+i)^2 +.... C/(1+i)^n + F/(1+i)^n
Where
PV = price of bond
C = coupon payment
F = Face value
i = nominal yield to maturity
n = number of years to maturity
Substituting the values in the formula, we get:
$1314.76 = 55/(1+i)^1 + 55/(1+i)^2 + ....+ 55/(1+i)^20 + 1000/(1+i)^20
Since there are 20 semiannual periods, n=20 and C=$55.
Finding the solution to the above equation requires a financial calculator or a spreadsheet program. We get i=5.26%
Nominal Yield to Maturity=5.26%
Nominal Yield to Call:
Nominal Yield to Call is the rate of return that an investor earns if a bond is held until it is called by the issuer. It is the internal rate of return that equates the present value of the bond with the price of the bond when the bond is called.
PV = C/(1+i)^1 + C/(1+i)^2 +.... C/(1+i)^k + F/(1+i)^k
Where
PV = price of bond
C = coupon payment
F = Face value
i = nominal yield to call
k = number of periods to call
Substituting the values in the formula, we get:
$1314.76 = 55/(1+i)^1 + 55/(1+i)^2 +.... + 55/(1+i)^10 + 1175.83/(1+i)^10
Since the bond is callable in 5 years or 10 semiannual periods, k=10 and C=$55.
Finding the solution to the above equation requires a financial calculator or a spreadsheet program. We get i=2.81%
Nominal Yield to Call=2.81%
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A taxpayer earned wages of $44,500, received $520 in interest from a savings account, and contributed $7100 to a tax -deferred retirement plan. He had itemized deductions totaling $6190, which is less than the standard deduction of $12,550 for his filing status.
The taxpayer should claim the standard deduction of $12,550 for his filing status.
To determine the taxpayer's taxable income, we need to calculate the adjusted gross income (AGI) and subtract the deductions.
The taxpayer's wages were $44,500, and he received $520 in interest from a savings account. Therefore, his AGI is $44,500 + $520 = $45,020.
The taxpayer also contributed $7,100 to a tax-deferred retirement plan. Contributions to such plans are deductible, which means they can be subtracted from the AGI to arrive at the taxable income.
To calculate the taxable income, we subtract the deductions from the AGI. In this case, the taxpayer had itemized deductions totaling $6,190, which is less than the standard deduction of $12,550 for his filing status.
Taxable income = AGI - Deductions
If the taxpayer's itemized deductions are less than the standard deduction, it is more beneficial for him to claim the standard deduction. Therefore, the taxpayer should claim the standard deduction of $12,550.
The taxpayer should claim the standard deduction of $12,550 for his filing status because his itemized deductions are less than the standard deduction amount. This will help reduce his taxable income and potentially lower his overall tax liability.
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Let's say that the interest rate on a 2-year Treasury bond is 4%. The interest rate on a 1-year Treasury bond is 3%, and the expected interest rate on a 1-year Treasury bond next year is 3.5%. What is the term premium?
The term premium would be 0.5%.
The term premium is the difference between the interest rate on a longer-term bond and the expected interest rate on a shorter-term bond in the future.
In this case, the term premium can be calculated by subtracting the expected interest rate on a 1-year Treasury bond next year (3.5%) from the interest rate on a 2-year Treasury bond (4%).
Therefore, the term premium would be 0.5%.
The premium is the sum that the insured pays on a regular basis to the insurer to cover his risk.
The risk is transferred from the insured to the insurer under an insurance arrangement. The insurer levies a fee known as the premium in exchange for taking on this risk. The premium depends on a variety of factors, including age, work type, medical issues, etc. The task of determining the proper premium for an insured is given to the actuaries. The frequency of premium payments may vary. It can be paid in a single premium or on a monthly, quarterly, semiannual, or annual basis.
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Terminal Grain Corporation brought an action against Glen Freeman, a farmer, to recover damages for breach of an oral contract to deliver grain. According to Termin Grain, Freeman orally agreed to two sales of wheat to Terminal Grain of four thousand bushels each at $6.21 a bushel and $6.41 a bushel, respectively. Dwayne Maher, merchandising manager of Terminal Grain, sent two written confirmations of the agreements to Freeman. Freeman never made any written objections to the confirmations. After the first trans- action had occurred, the price of wheat rose to between $6.75 and $6.80 per bushel, and Freeman refused to deliver the remaining four thousand bushels at the agreed-upon price. Freeman denies entering into any agreement to sell the sec- ond four thousand bushels of wheat to Terminal Grain but admits that he received the two written confirmations sent by Maher. a. What arguments support considering Freeman to be a merchant who is bound by the written confirmations? b. What arguments support considering Freeman not to be a merchant seller and thus not bound by the written confirmations? c. What is the appropriate decision?
Arguments supporting Freeman to be a merchant who is bound by written confirmations According to the Uniform Commercial Code, UCC, a contract may be formed by an exchange of documents, including letters, faxes, or confirmations, between the parties involved in the transaction.
The document sent by the buyer, which contains a written confirmation of the terms agreed on during negotiations, must be recognized by the seller, in this case, Freeman, for him to be bound by them. Freeman didn't object in writing to the confirmations sent by Maher, which is an implied acceptance of the terms of the sale.
Furthermore, Freeman is a farmer who sells agricultural produce and is, therefore, a "merchant" under the UCC's provisions. The merchant is bound to all written agreements, including confirmations. Therefore, Freeman is a merchant who is bound by the written confirmations.b. Arguments supporting Freeman not to be a merchant seller and thus not bound by the written confirmations Freeman didn't participate in negotiations or agree to the terms of the sale. He refused to deliver the remaining 4,000 bushels at the agreed-upon price. He also contends that he didn't enter into any agreement to sell the second 4,000 bushels of wheat to Terminal Grain.
Freeman denies the existence of a contract, which makes it unclear if he's a merchant bound by the written agreement.c. Appropriate decisionIn conclusion, Freeman is a merchant and is bound by the written agreement because he didn't object in writing to the confirmations sent by Maher. Even though he refused to deliver the remaining 4,000 bushels, he's still liable for the breach of contract. Therefore, Terminal Grain is entitled to damages.
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