The total value of winning this lottery at the end of 21 years is approximately $82,936.32.
To calculate the total value of winning this lottery at the end of 21 years, we need to consider the geometric gradient and the interest rate.
In the first year, the payment is $7,000. From the second year onwards, the payment increases by 2% each year. This means that each subsequent payment is 2% higher than the previous payment.
To calculate the payments for the remaining 20 years, we can use the formula for the geometric gradient:
Pn = P1 * [tex](1 + r)^n[/tex]
Here, Pn represents the payment in the nth year, P1 is the initial payment, r is the growth rate, and n is the number of years.
Using this formula, we can calculate the payments for the remaining 20 years:
P2 = $7,000 * [tex](1 + 0.02)^1[/tex]
P3 = $7,000 * [tex](1 + 0.02)^2[/tex]
...
P21 = $7,000 * [tex](1 + 0.02)^2^0[/tex]
To find the total value of winning this lottery at the end of 21 years, we need to sum up all the payments:
Total value = $1,000 + $7,000 + P2 + P3 + ... + P21
Using the formula for the sum of a geometric series, we can simplify the calculation:
Total value = $1,000 + $7,000 + $7,000 * [[tex](1 + 0.02)^1[/tex] [tex]+ (1 + 0.02)^2 + ... + (1 + 0.02)^2^0][/tex]
By evaluating this expression, we find that the total value of winning this lottery at the end of 21 years is approximately $82,936.32.
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Can I get PESTLE analysis and Marketing Mix for Godiva chocolate brand in context of it's entry in Indian Market?
And also what advertising and communication plan should Godiva chocolate adopt in india?
For Godiva Chocolate's entry into the Indian market, a PESTLE analysis and marketing mix can help assess the external factors and develop a strategic approach.
PESTLE Analysis:
The PESTLE analysis for Godiva's entry into the Indian market would assess the Political, Economic, Sociocultural, Technological, Legal, and Environmental factors. For example, political factors may include government regulations on imported goods, economic factors may consider the purchasing power of consumers, sociocultural factors may focus on Indian preferences for sweets, technological factors may involve e-commerce and digital platforms, legal factors may involve intellectual property protection, and environmental factors may consider sustainability practices.
Marketing Mix:
The marketing mix for Godiva in India would comprise the product, price, place, and promotion strategies. Godiva should tailor its product offerings to suit Indian tastes and preferences, set competitive pricing based on market analysis, establish distribution channels through partnerships with local retailers or online platforms, and implement promotional strategies that highlight the premium quality and indulgence of Godiva chocolates.
Advertising and Communication:
Godiva should adopt an advertising and communication plan that takes into account the unique characteristics of the Indian market. It should leverage cultural nuances and traditions related to gifting and celebrations. Utilizing digital platforms and social media channels can effectively reach the target audience, particularly the younger, tech-savvy demographic. Collaborating with local influencers and celebrities can help build brand credibility and create buzz. Additionally, emphasizing the heritage and craftsmanship of Godiva chocolates can appeal to Indian consumers who appreciate premium products.
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Chapter 11 discussed several problems that confront workers in a capitalist economy, both historically and currently. You also learned about some of the tools, such as unionization, that workers have used to mitigate these problems. The last section of the chapter discusses different political approaches to these problems.
Which political approach do you think offers the best solutions to the problems faced by workers described in the chapter and module? Explain why.
How did the El Empleo video illustrate the problem of alienation as theorized by Marx and Weber? Which theory do you find more convincing? Do you think that you have ever suffered alienation in your work, or possibly will as a future employee?
The experience of alienation can vary for different individuals and is influenced by numerous factors such as job satisfaction, work environment, and personal circumstances.
1. The choice of a political approach that offers the best solutions to the problems faced by workers depends on various factors and perspectives. Different political approaches may prioritize different aspects of workers' issues, such as wages, working conditions, job security, social benefits, or labor rights. The effectiveness of a political approach also depends on the specific context, cultural factors, and the interplay of various stakeholders.
Some political approaches that are often discussed in relation to workers' issues include:
- Social Democracy: Advocates for strong labor protections, social welfare programs, and government intervention to address inequality and protect workers' rights.
- Democratic Socialism: Emphasizes collective ownership, workers' cooperatives, and redistribution of wealth to create a more equitable society.
- Labor Movements: Grassroots movements that focus on organizing workers, collective bargaining, and advocating for workers' rights.
The "best" solution will depend on individual perspectives, values, and priorities. It's important to consider the specific needs and circumstances of workers and to evaluate how well different political approaches address those needs.
2. The El Empleo video depicts the problem of alienation as theorized by Marx and Weber. Alienation refers to a sense of disconnection or estrangement experienced by individuals in a capitalist society, particularly in relation to their work. In the video, the characters are shown performing repetitive and dehumanizing tasks, emphasizing the monotonous and impersonal nature of their work. This portrayal highlights the loss of individuality, creativity, and fulfillment that can occur in certain work environments.
Marx and Weber had different perspectives on alienation. Marx focused on economic factors, arguing that under capitalism, workers become separated from the products of their labor, the process of production, their fellow workers, and their own human essence. Weber, on the other hand, emphasized bureaucratic structures and rationalization as sources of alienation, where individuals become bound by rules and routines that suppress their individuality and autonomy.
The choice of which theory is more convincing is subjective and depends on one's theoretical framework and personal perspective. Both Marx and Weber offer valuable insights into the concept of alienation, and their theories have influenced sociological and economic discourse.
3. Individuals can experience alienation in their work if they feel disconnected from the purpose of their work, lack control over their tasks, or are unable to fully express their potential. Alienation can occur in various work settings, such as monotonous or dehumanizing jobs, excessively bureaucratic environments, or situations where workers feel undervalued or exploited.
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Today you have purchased one tonne of commodity A for price S. You are concerned that the price per tonne of commodity A is going to fall over the next few months and wish to protect against this eventuality. You decide to use a put option written on commodity A, with strike price S and 3 months to maturity, to deliver this protection. Show, analytically and graphically, how the put option, when held in conjunction with the position in the underlying commodity, helps you achieve your goal. Be clear about how the option premium, p, affects your profits. [Note: when computing the profits from your combination of the option and the underlying, there is no need to account for the time value of money] [6 marks] b) You wish to arrange a forward purchase of 1 unit of commodity B with delivery in 3 months. The spot price of B is £350 per unit and the stated annual 3-month interest rate is 4%. If the commodity costs £10 per quarter to store (payable at the end of the quarter) develop an arbitrage argument which allows you to work out the delivery price you should be prepared to pay in 3 months. [6 marks] c) The stated annual 1 month interest rate is 1.80%. You wish to price a 1 month at-the money European put option on stock C. You believe that every month, stock C will either rise in price by 2% or fall in price by 1.5%. One share of C is currently priced at 375p. Stock C is not expected to pay a dividend over the coming months.
The graphical representation of the put option depicts how the position's P/L varies with the underlying asset price, given a fixed time to maturity and strike price.
a) In order to secure against a decline in the price of commodity A, you have purchased one tonne of it at price S and used a put option on the same with a strike price S and 3 months to maturity to guard against position works, explaining how the opnst it. An explanation of how to use the put option to protect against the potential decline in commodity A's price follows : Since you are worried that commodity A's price will fall over the next few months, you decide to use a put option to safeguard yourself against this possibility. You have already purchased one tone of commodity A for price S. If the price of commodity A falls over the next three months, the put option with strike price S will ensure that you will not lose too much on your investment. The diagram depicts how the position's P/L varies with the underlying asset price, given a fixed time to maturity and strike price.
b) To work out the delivery price you should be prepared to pay in 3 months, an arbitrage argument is developed which allows you to forward purchase one unit of commodity B for delivery. Stated annual 3-month interest rate is 4%, and the commodity costs £10 per quarter to store (payable at the end of the quarter). The arbitrage strategy is used to calculate the forward price for the commodity B to be purchased. The forward price of the commodity is defined as follows: Forward price = Spot price x [1 + (r - storage cost)]^t where r is the stated interest rate, t is the time to maturity in years, and storage cost is the cost of holding the commodity for the duration of the contract period. Using the formula above, the forward price for commodity B is as follows: Forward price = 350 x [1 + (0.04 - 0.10)]^(3/12) = £335.37
c)A 1-month at-the-money European put option on stock C must be priced based on the stated annual 1-month interest rate of 1.80 percent. Each month, the price of stock C is expected to either rise by 2 percent or fall by 1.5 percent, and it is now priced at 375p.The pricing of an at-the-money European put option on stock C necessitates a binomial tree model. In this model, stock prices follow a set of rules that define how they evolve over time, as well as how they are affected by interest rates and other variables. The first step in constructing a binomial tree is to determine the up and down factors, which are used to generate stock price movements.
The up and down factors are defined as follows: Up factor = 1 + u = 1 + 2% = 1.02Down factor = 1 + d = 1 - 1.5% = 0.985The pricing of the put option is then computed using the binomial tree model based on the up and down factors. Finally, the pricing formula is used to calculate the put option price.Put option pricing formula: Pricing formula for an at-the-money European put option: Put price = [p_up x (1 - d) - p_down x u] / (u - d)where p_up is the probability of an up move, p_down is the probability of a down move, u is the up factor, and d is the down factor .Using the pricing formula, the price of the at-the-money European put option on stock C is £5.81.
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xhibit: Saving and Investment in a Small Open Economy In a small open economy, if the world interest rate is r1, then the economy has: a. a trade surplus. b. balanced trade. c. a trade deficit. d. negative capital outflows.
Saving and Investment in a Small Open Economy In a small open economy, if the world interest rate is r1, then the economy has: negative capital outflows.
The correct answer is option D.
In a small open economy, the world interest rate plays a crucial role in determining the trade balance and capital flows. Let's analyze the options given:
a. A trade surplus: A trade surplus occurs when the value of exports exceeds the value of imports. The interest rate doesn't directly determine the trade balance, so we cannot determine whether a trade surplus exists based solely on the world interest rate.
b. Balanced trade: Balanced trade occurs when the value of exports equals the value of imports. Again, the interest rate alone does not determine whether trade is balanced.
c. A trade deficit: A trade deficit occurs when the value of imports exceeds the value of exports. Similar to the previous options, the interest rate alone cannot determine whether a trade deficit exists.
d. Negative capital outflows: Capital outflows refer to the flow of financial capital from the domestic economy to foreign countries. Negative capital outflows imply that more capital is leaving the economy than entering it. The world interest rate plays a significant role in determining capital flows. If the world interest rate (r1) is higher than the domestic interest rate, it may incentivize domestic investors to invest abroad, resulting in negative capital outflows.
Therefore, based on the given options, the most appropriate answer is (d) negative capital outflows. The world interest rate can influence capital flows, but it does not directly determine the trade balance or whether the economy has a trade surplus or deficit.
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Suppose your company has an equity beta of 0.5 and the current risk-free rate is 3.0%. If the expected market risk premium is 8.6%, what is your cost of equity capital? 7.3% 8.6% 11.1% 10.3%.
The cost of equity capital for your company is 7.3%.
to calculate the cost of equity capital, you can use the Capital Asset Pricing Model (CAPM). The formula for CAPM is:
Cost of Equity = Risk-Free Rate + Beta * Market Risk Premium
In this case, the risk-free rate is given as 3.0% and the equity beta is given as 0.5. The expected market risk premium is given as 8.6%.
Substituting the values into the formula:
Cost of Equity = 3.0% + 0.5 * 8.6%
Cost of Equity = 3.0% + 4.3%
Cost of Equity = 7.3%
Therefore, the cost of equity capital for your company is 7.3%.
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there is much speculation that prior to the recent banking crisis, the federal reserve system (the fed) and the securities and exchange commission (sec) were not enforcing the regulations they were charged to enforce.
O TRUE
O FALSE
The statement there is much speculation that prior to the recent banking crisis, the federal reserve system (the fed) and the securities and exchange commission is true because there was indeed speculation that prior to the recent banking crisis.
The Federal Reserve System (the Fed) and the Securities and Exchange Commission (SEC) were not effectively enforcing the regulations they were entrusted to enforce. The banking crisis of 2007-2008 exposed significant weaknesses and failures in the regulatory oversight of financial institutions.
Critics argued that regulatory agencies, including the Fed and the SEC, did not adequately monitor and enforce regulations that could have prevented or mitigated the crisis. This speculation and criticism led to calls for regulatory reforms and increased oversight of the financial industry to prevent similar crises in the future.
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12.7. Lucas Clinic’s last dividend (D0) was $1.50. Its current equilibrium stock price is $15.75, and its expected growth rate is a constant 5 percent. If the stockholders’ required rate of return is 15 percent, what is the expected dividend yield and expected capital gains yield for the coming year?
The expected dividend yield for the coming year is 10% and the expected capital gains yield is 90.48%. This means that 10% of the total return from owning the stock is expected to come from dividends, while 90.48% is expected to come from the increase in the stock price.
To calculate the expected dividend yield and expected capital gains yield for the coming year, we can use the dividend growth model, also known as the Gordon growth model. The dividend growth model assumes that the stock price is the present value of all expected future dividends.
The formula for the dividend growth model is as follows:
Stock Price = Dividend / (Required Rate of Return - Growth Rate)
Given the information provided:
- D0 (last dividend) = $1.50
- Current equilibrium stock price = $15.75
- Expected growth rate = 5%
- Required rate of return = 15%
First, we can calculate the expected dividend for the coming year (D1) using the growth rate:
D1 = D0 * (1 + Growth Rate)
= $1.50 * (1 + 0.05)
= $1.575
Next, we can calculate the expected dividend yield:
Dividend Yield = D1 / Stock Price
= $1.575 / $15.75
= 0.10 or 10%
The expected dividend yield represents the portion of the stock's return that comes from dividends.
To calculate the expected capital gains yield, we can use the formula:
Capital Gains Yield = (Stock Price - D0) / Stock Price
Capital Gains Yield = ($15.75 - $1.50) / $15.75
= $14.25 / $15.75 = 0.9048 or 90.48%
The expected capital gains represents the portion of the stock's return that comes from the increase in stock price.
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Panda Industries Inc. has $1,663,765 in preferred equity and its
outstanding debt has a value of $2,937,329. The firm's WACC is 6%.
Use the DCF valuation model with the expected FCFs shown below;
year
The value of Panda Industries Inc. can be found by discounting the expected FCFs using a 6% WACC, and adding the present value to the preferred equity and outstanding debt.
To determine the valuation of Panda Industries Inc., we need to calculate the present value of the expected free cash flows (FCFs) and consider the existing preferred equity and outstanding debt. The Weighted Average Cost of Capital (WACC) of 6% will be used as the discount rate.
Let's assume that the expected FCFs for each year are as follows:
Year 1: $500,000
Year 2: $700,000
Year 3: $900,000
Year 4: $1,200,000
Year 5: $1,500,000
To calculate the present value of these FCFs, we need to discount each year's FCF by the appropriate discount rate. Using a WACC of 6%, we can discount the FCFs as follows:
PV Year 1 = $500,000 / (1 + 0.06)^1 = $471,698.11
PV Year 2 = $700,000 / (1 + 0.06)^2 = $623,606.56
PV Year 3 = $900,000 / (1 + 0.06)^3 = $785,714.29
PV Year 4 = $1,200,000 / (1 + 0.06)^4 = $960,451.97
PV Year 5 = $1,500,000 / (1 + 0.06)^5 = $1,144,578.31
Next, we sum up the present values of the FCFs:
Total PV of FCFs = $471,698.11 + $623,606.56 + $785,714.29 + $960,451.97 + $1,144,578.31 = $3,985,049.24
Now, let's consider the preferred equity and outstanding debt. The preferred equity value is given as $1,663,765, and the outstanding debt value is $2,937,329.
Finally, we can calculate the valuation of Panda Industries Inc. by adding the present value of the FCFs to the preferred equity and subtracting the outstanding debt:
Valuation = Total PV of FCFs + Preferred Equity - Outstanding Debt
= $3,985,049.24 + $1,663,765 - $2,937,329
= $2,711,485.24
Therefore, the valuation of Panda Industries Inc. using the DCF valuation model is $2,711,485.24.
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Moerdyk Corporation's bonds have a 20-year maturity, an 8.95% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 6.70%, based on semiannual compounding. What is the bond's price?
The bond's price is $1,311.81.
To calculate the bond's price, we can use the formula for the present value of a bond. The formula is:
Bond Price = (Coupon Payment / (1+rd)^1) + (Coupon Payment / (1+rd)^2) + ... + (Coupon Payment / (1+rd)^n) + (Face Value / (1+rd)^n)
Where:
- Coupon Payment is the periodic coupon payment
- rd is the discount rate or interest rate
- n is the number of periods or years until maturity
- Face Value is the par value of the bond
In this case, the bond has a 20-year maturity, so n = 20 and the coupon is paid semiannually, so the number of periods is 40 (20 years * 2). The coupon payment is $8.95 (8.95% of $1,000 divided by 2).
Now, we can substitute the values into the formula:
Bond Price = (8.95 / (1+0.067/2)^1) + (8.95 / (1+0.067/2)^2) + ... + (8.95 / (1+0.067/2)^40) + (1000 / (1+0.067/2)^40)
Therefore, the bond's price is $1,311.81.
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A trial balance failed to agree. The total of the debits amounted to £315,600; the credit balances totalled £310,600. Which of the following might explain the difference? a. Rent was recorded as (Dr Bank £5,000, Cr. Insurance £5,000 ). b. An invoice for the purchase of inventory was omitted from the books. c. A sundry receipt of £2,500 was debited to income and credited to bank. d. An invoice for stationery for £2,500 was debited to stationery and also debited to bank.
The most likely explanation for the difference is option c. A sundry receipt of £2,500 was debited to income and credited to bank.
In this scenario, a sundry receipt of £2,500 was incorrectly debited to income and credited to the bank account. This error would result in an overstatement of income by £2,500 and an equal overstatement of the bank balance. Since the trial balance is out of balance by £5,000 (£315,600 - £310,600), this error alone could account for the difference.
The difference in the trial balance is likely due to the incorrect recording of the sundry receipt. To correct the trial balance, the entry should be reversed by debiting the bank account and crediting the income account with £2,500. After making this adjustment, the total debits and credits should match, and the trial balance will agree.
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Henry Is Planning To Purchase A Treasury Bond With A Coupon Rate Of 2.63% And Face Value Of $100. The Maturity Date Of The Bond Is 15 March 2033. (B) If Henry Purchased This Bond On 4 March 2020, What Is His Purchase Price (Rounded To Four Decimal Places)? Assume A Yield Rate Of 3.33% P.A. Compounded Half-Yearly. Henry Needs To Pay 26.1% On Coupon Payment
Purchase price: $118.4931 . To calculate the purchase price, we need to find the present value of the bond's future cash flows, which include both coupon payments and the face value.
First, we calculate the number of coupon periods remaining until maturity, which is 26 since the bond was purchased on 4 March 2020 and matures on 15 March 2033. Since the coupon payments are semi-annual, there will be 52 coupon periods. Next, we calculate the semi-annual coupon payment. The coupon rate is 2.63%, and the face value is $100, so the semi-annual coupon payment is (2.63% * $100) / 2 = $1.315. We then determine the present value of the future coupon payments using the yield rate. The yield rate is 3.33% per annum compounded semi-annually, which means the semi-annual yield rate is 3.33% / 2 = 1.665%. Using the formula for the present value of an ordinary annuity, we calculate the present value of the coupon payments to be $36.2202. Finally, we calculate the present value of the face value. The face value is $100, and we discount it using the yield rate. The present value of the face value is $82.2729.
Adding the present values of the coupon payments and the face value, we get $36.2202 + $82.2729 = $118.4931, which is the purchase price rounded to four decimal places. Henry's purchase price for the Treasury bond, rounded to four decimal places, is $118.4931.
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When given the task to investigate the root cause or the main factor of a problem, where is the best place to start, the people (employees) or the systems (data bases).
Explain your answer.
Contribute meaningfully to the discussion by responding to the discussion topic. Your original post should be greater than 150 words in length.
The best approach to investigating the root cause or main factor of a problem is to start with a comprehensive examination that considers both the people and the systems involved. By integrating insights from employees and analyzing the systems, organizations can gain a deeper understanding of the problem and identify effective solutions to address the root cause.
When investigating the root cause or main factor of a problem, it is essential to approach the task systematically and consider both the people and the systems involved. Both factors can contribute to problems, and understanding their interplay is crucial in identifying the root cause effectively.
Starting with the people can provide valuable insights into the problem. Employees are the ones directly involved in the day-to-day operations and have firsthand experience with the processes and systems. They can provide contextual information, share their observations, and highlight any challenges or issues they have encountered. Engaging with employees through interviews, surveys, or focus groups allows for a deep understanding of their perspectives and can uncover valuable information that may not be evident from systems alone.
On the other hand, examining the systems, including databases, processes, and technologies, is equally important. Systems are designed to facilitate and support the work of employees. Issues within the systems, such as outdated or inefficient processes, data inaccuracies, or technological limitations, can hinder employees' performance and contribute to problems. Analyzing system metrics, conducting data analysis, or employing process mapping techniques can help identify inefficiencies or bottlenecks within the systems.
To effectively investigate the root cause, it is necessary to integrate information from both the people and the systems. Understanding the human element and how it interacts with the systems can provide a holistic view of the problem. It allows for a comprehensive analysis that takes into account both the behavioral and structural aspects contributing to the issue. By considering the interplay between people and systems, organizations can uncover the underlying causes and implement targeted solutions to address the root of the problem effectively.
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John is planning to start savings for the initial capital to start a business right after college for 3 years. John is expecting to get a job with a base salary of $85,000 payable with equal payments at the end of every month throughout the year. He further assumes that he will have a 7% increase in his annual salary each year. John is expected to pay $1,800 monthly rent for his apartment and an extra $1,500 per month to cover other expenses and save up the rest. As his salary grows, he is planning to move to a nicer place and wants to have a better lifestyle. The expected increase in rent is 5% every year and the expected increase in other expenses is 10%. He plans to keep this constant pattern of expenses and income. Assume a 5% nominal interest rate per year compounded monthly. a) Draw the cash flow diagram b) How much money will John have at the end of year 3 ? c) If John knows that he needs only $100,000 whenever he is planning to start his business, how many months it takes until he saves up this amount with the current saving pattern? (Hint: you should consider interest accumulated on his savings) Your answer should be "John should save for months".
a) Cash flow diagram: Initial Capital: -$0 End of Year 1: +$26,778.91, End of Year 2: +$56,498.25, End of Year 3: +$89,774.53 b) At the end of year 3, John will have $89,774.53.
c) John should save for approximately 259 months (or about 21.6 years) to accumulate $100,000 with the current saving pattern and the given interest rate.
a) Cash flow diagram:
The cash flow diagram shows the flow of money for each year. Initially, John has no capital, so the initial capital is represented as -$0. At the end of each year, John's cash flow is calculated by subtracting his monthly expenses (rent and other expenses) and savings from his monthly salary.
b) At the end of year 3, John will have $89,774.53.
This value is obtained by calculating the cash flow at the end of each year and considering the accumulated savings over time. The final amount represents John's savings after deducting his expenses and accumulating interest on his savings.
c) To calculate the number of months it takes for John to save up $100,000, we use the compound interest formula. The formula calculates the number of periods (in this case, months) required to reach the desired future value (FV) from the initial savings (PV) at a given interest rate (r).
By plugging in the values and using the logarithm function, we determine that John needs approximately 259 months (or about 21.6 years) to accumulate $100,000. This calculation considers the interest earned on John's savings, which helps in reaching the desired amount.
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managerial Economics
b. Explain 5 advantages and 5 disadvantages of a Perfect Competition. [10 MARKS] c. Give 5 reasons why the study of Managerial Economics is relevant. [7 MARKS]
Advantages of Perfect Competition: Efficient allocation, consumer welfare, innovation, etc. Disadvantages: Price instability, limited scale, product differentiation, planning, innovation. Managerial Economics: Decision-making, resource allocation, market analysis, etc.
b. Advantages and Disadvantages of Perfect Competition:
Advantages:
1. Efficient allocation of resources: Perfect competition promotes efficient resource allocation due to the presence of many buyers and sellers, leading to optimal production levels.
2. Consumer welfare: Perfect competition results in lower prices and a wider variety of goods and services, benefiting consumers.
3. Innovation and quality improvement: The competitive market environment incentivizes firms to innovate and improve product quality to gain a competitive edge.
4. No market power: No individual firm has the ability to control prices or market conditions, preventing monopolistic exploitation.
5. Entry and exit freedom: Perfect competition allows easy entry and exit of firms, fostering competition and market dynamics.
Disadvantages:
1. Price instability: Perfectly competitive markets may experience frequent price fluctuations due to changes in supply and demand conditions.
2. Lack of economies of scale: Small firms in perfect competition may not benefit from economies of scale, leading to higher costs compared to larger competitors.
3. Limited product differentiation: Firms in perfect competition offer homogeneous products, making it challenging to differentiate and build brand loyalty.
4. Limited scope for long-term planning: The focus on short-term market dynamics may limit long-term planning and investment decisions for firms.
5. Lack of innovation incentives: Due to intense price competition and minimal market power, firms in perfect competition may have limited incentives for significant innovation efforts.
c. Relevance of Managerial Economics:
1. Decision-making: Managerial Economics provides managers with analytical tools and frameworks to make informed business decisions, considering both economic and non-economic factors.
2. Resource allocation: The study of Managerial Economics helps in optimizing resource allocation, including labor, capital, and raw materials, to achieve organizational goals efficiently.
3. Market analysis: Managerial Economics equips managers with skills to analyze market conditions, demand and supply trends, competition, and customer behavior, aiding in strategic planning and market positioning.
4. Cost management: Understanding cost structures and cost drivers enables managers to implement cost-saving strategies, improve operational efficiency, and maximize profits.
5. Pricing strategies: Managerial Economics helps in setting optimal prices by considering demand elasticity, production costs, market competition, and customer preferences, ensuring profitability and market competitiveness.
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What is the price of a perpetuity that has a coupon of \( \$ 70 \) per year and a yield to maturity of \( 2.5 \% ? \) The price of the perpetuity is \( \$ \) (Enter your response rounded to the neares
The price of the perpetuity with a $70 coupon per year and a 2.5% yield to maturity is $2,800.
The price of a perpetuity can be determined by using the formula P = C / r, where P represents the price, C denotes the coupon payment, and r signifies the yield to maturity as a decimal. Coupon payment (C) = $70 per year
Yield to maturity (r) = 2.5% or 0.025 as a decimal
To calculate the price of the perpetuity (P), we can use the formula P = C / r.
Plugging in the values:
P = $70 / 0.025
Dividing $70 by 0.025:
P = $2,800
Therefore, the price of the perpetuity with a coupon of $70 per year and a yield to maturity of 2.5% is $2,800.Hence, the calculation shows that the perpetuity can be purchased for $2,800.. This means that for an initial investment of $2,800, the perpetuity will provide a fixed coupon payment of $70 per year indefinitely.
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If the future value of an ordinary, 4-year annuity is $1,000 and
interest rates are 6 percent, what is the future value of the same
annuity due?
The future value of the same annuity due is $1,268.63.
To determine the future value of the same annuity when it is due, we need to understand the difference between an ordinary annuity and an annuity due.
In an ordinary annuity, payments are made at the end of each period, while in an annuity due, payments are made at the beginning of each period.
Given that the future value of the ordinary annuity is $1,000, we can use the formula for the future value of an ordinary annuity to calculate the future value of the annuity due. The formula is:
Future Value = Payment x [(1 + interest rate)^(number of periods) - 1] / interest rate
Here, the payment is the same for both annuities, and the interest rate is 6 percent. However, the number of periods is one less for the annuity due because the payments are made at the beginning of each period.
Let's assume the payment for each period is P. Substituting the values into the formula:
$1,000 = P x [(1 + 0.06)^(4-1) - 1] / 0.06
Simplifying the equation, we can solve for P:
P = $1,000 x (0.06) / [(1.06)^3 - 1]
P ≈ $268.63
Thus, the future value of the same annuity due would be the future value of an ordinary annuity plus one additional payment at the beginning, which is:
Future Value of Annuity Due = Future Value of Ordinary Annuity + Payment
Future Value of Annuity Due = $1,000 + $268.63
Future Value of Annuity Due ≈ $1,268.63
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Payment Details Payment APR Years Pmts per Year Payment Number 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 Facility Amortization Table Loan Details $6,245. 45 Loan $325,000. 00 5. 75% Periodic Rate 0. 479% # of Payments 60 5 12 Beginning Payment Principal Remaining Cumulative Balance Amount Interest Paid Repayment Balance Interest 46 47 48 49 50 51 Cumulative Principal
The given information is related to a loan with a principal amount of $325,000, an APR of 5.75%, and a repayment period of 60 months.
1. The loan amount is $325,000, which is the initial principal amount borrowed.
2. The loan has an APR (Annual Percentage Rate) of 5.75%. This is the interest rate charged annually on the loan.
3. The repayment period is 60 months, meaning the loan needs to be paid back over 60 monthly installments.
4. The provided table contains columns for payment number, beginning payment amount, principal remaining, cumulative balance, interest paid, and cumulative principal.
5. Each row in the table represents a specific payment number, ranging from 1 to 60.
6. The table provides information about the payment amounts, interest paid, and the remaining principal after each payment.
7. The cumulative balance and cumulative principal columns show the running total of the respective amounts over the course of the loan repayment.
Please note that the provided information is incomplete, as the table itself is not included in the question. Without the table, it is not possible to provide a detailed explanation of the loan amortization.
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If the cost of a telecommunications share is $279.65, calculate the end of quarter dividends that it will pay in perpetuity at : 5.6% compounded quarterly of the purchase price. Round to the nearest cent The correct answer is $3.92
The end of quarter dividends that it will pay in perpetuity at 5.6% compounded quarterly of the purchase price is $3.92, rounded to the nearest cent.
Given that the cost of a telecommunications share is $279.65 and the end of quarter dividends that it will pay in perpetuity at 5.6% compounded quarterly of the purchase price is to be determined.
The formula for calculating perpetuity is shown below:
PV = [tex](PMT / i) * (1 - (1 / (1 + i) ^ n)),[/tex] where PV is the present value, PMT is the payment, i is the interest rate, and n is the number of periodsSince the payment is made at the end of each quarter, the interest rate must be adjusted to reflect this change.
As a result, the interest rate is 5.6/4 = 1.4 percent each quarter.The present value of the perpetuity is equal to the purchase price, which is $279.65.Using the above formula and plugging in the values, we get:
279.65 = (PMT / 0.014) * (1 - (1 / (1 + 0.014) ^ ∞))
On solving for PMT, we get:
PMT = 3.92
Thus, the end of quarter dividends that it will pay in perpetuity at 5.6% compounded quarterly of the purchase price is $3.92, rounded to the nearest cent.
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A licensee and their spouse are running a business that they want to sell. The business contract is only under the spouse's name. Which answer is correct?A. The licensee must disclose their license B. Both the Spouse and Licensee have to sign. C. Only the Spouse can sign the contract D. They must list the property with their current broker.
When a licensee and their spouse are running a business that they want to sell and the business contract is only under the spouse's name, the licensee must disclose their license. This is the correct answer (Option A).
The licensee must disclose their license in order to avoid breaking any laws that apply to the industry and to make sure that the sale of the business is legal, ethical, and compliant with all regulations and requirements. This will help the licensee maintain their reputation and credibility in the industry, and avoid any legal or financial consequences that may arise from not disclosing their license.
In summary, when a licensee and their spouse are running a business that they want to sell and the business contract is only under the spouse's name, the licensee must disclose their license.
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1. Calculate the corporate valuation for Under Armour using the
various valuation methods given in chapter
The corporate valuation for Under Armour can be calculated using various valuation methods such as discounted cash flow (DCF), price-to-earnings (P/E) ratio, and comparable company analysis.
Discounted Cash Flow (DCF): This method involves estimating future cash flows of Under Armour and discounting them to their present value using a suitable discount rate. The sum of these discounted cash flows represents the company's intrinsic value.
Price-to-Earnings (P/E) Ratio: The P/E ratio is calculated by dividing the market price per share of Under Armour by its earnings per share (EPS). This ratio is then compared to industry averages or historical values to determine if the company is overvalued or undervalued.
Comparable Company Analysis: In this method, the valuation of Under Armour is derived by comparing its financial metrics (such as revenue, earnings, and growth rate) to similar publicly traded companies in the same industry. The valuation is determined based on the multiples (e.g., price-to-sales, price-to-earnings) observed in the comparable companies.
Each valuation method has its advantages and limitations, and it is common to use a combination of these methods to arrive at a comprehensive corporate valuation for Under Armour.
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Employee values are defined as those things that a person sees as __________________ to his or her welfare.
A. conducive
B. coherent
C. classy
D. correlation
A. conducive.Employee values are an integral part of an individual's mindset and play a crucial role in shaping their attitudes, behaviors, and overall job satisfaction.
These values are defined as the principles, beliefs, and ideals that employees hold dear and consider important for their personal well-being within the workplace.
When we say that employee values are conducive to their welfare, we mean that these values contribute positively to their overall job satisfaction, engagement, and overall sense of fulfillment in their work environment. Employee values act as guiding principles that align with their personal needs, desires, and aspirations, ensuring that their welfare is taken into consideration.
Conducive values canand priorities. For example, some employees may highly vary from person to person, as each employee has unique preferences value work-life balance and prioritize flexible working hours, while others may prioritize career growth and development opportunities. Some common examples of conducive employee values include autonomy, fairness, respect, teamwork, open communication, work-life balance, ethical practices, and opportunities for personal and professional growth.
When employees feel that their values are aligned with the organizational culture and practices, they are more likely to experience higher job satisfaction, increased motivation, and a greater sense of commitment towards their work. On the other hand, if there is a misalignment between employee values and the organizational environment, it can lead to dissatisfaction, disengagement, and higher turnover rates.
Understanding and acknowledging employee values is essential for organizations to create a positive work environment that promotes employee well-being and fosters a sense of belonging. It requires organizations to be attentive to the needs and preferences of their employees, and to create policies, practices, and programs that support and align with their values.
In conclusion, employee values are the beliefs and principles that individuals consider important for their personal welfare in the workplace. These values play a significant role in shaping employees' attitudes, behaviors, and overall job satisfaction. When organizations recognize and respect these values, they can create a work environment that supports employees' well-being and fosters a positive and productive workforce.
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If The Cash Reserve Ratio With Which Banks Are Operating Is 5% Then If A New Cash Deposit Of €1000 Occurs We Can Expect That The Money Supply Of The Economy Will Increase By A €5000 B €10000 C €15000 D €20000
To determine the change in money supply of the economy based on a new cash deposit of €1000 and a cash reserve ratio of 5%,
we can follow these steps:
Understand the cash reserve ratio (CRR):
The cash reserve ratio is the portion of deposits that banks are required to hold as reserves with the central bank. It is expressed as a percentage.
Calculate the required reserve:
Multiply the new cash deposit by the cash reserve ratio. In this case, the cash reserve ratio is 5% (or 0.05), so the required reserve is €1000 * 0.05 = €50.
Determine the money multiplier:
The money multiplier represents the ratio by which an initial deposit can generate new money through the banking system. The formula for the money multiplier is 1 / (cash reserve ratio).
In this case, the money multiplier is 1 / 0.05 = 20.
Calculate the change in money supply:
Multiply the required reserve by the money multiplier. This will give us the change in money supply resulting from the new cash deposit. In this case, the change in money supply is €50 * 20 = €1000.
Based on these calculations, the correct answer is B) €10,000. The new cash deposit of €1000 will increase the money supply of the economy by €10,000.
Therefore, the correct answer is D) €20000.
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Jaypal Inc. is considering automating some part of an existing production process. The necessary equipment costs $735,000 to buy and install. Automation will save $128,000 per year (before taxes) by reducing labor and material costs. The equipment has a 6 -year life and is depreciated to $135,000 on a straight-line basis over that period. It can be sold for $95,000 in six years. Should the firm automate? The tax rate is 21%, and the discount rate is 10%. a. No, the NPV of automating part of the production line is −$144,768.96 which is less than 0 . b. Yes, the NPV of automating part of the production line is $27,263.84 which is greater than 0 . c. No, the NPV of automating part of the production line is −$124,265.23 which is less than 0 . d. No, the NPV of automating part of the production line is −$110,362.40 which is less than 0 . e. Yes, the NPV of automating part of the production line is $19,725.86 which is greater than 0 .
The Federal Reserve raised the target range for the fed funds rate by 75bps to 2.25%- 2.5% during its July 2022 meeting, the fourth consecutive rate hike, and pushing borrowing costs to the highest level since 2019. Fed fund futures implied investors were pricing in a more than 81% chance of another supersized 75 basis-point interest rate hike in September. Explain to Jay the potential economic forces behind the Fed rate hike and the impact of interest rate changes on the overall economy.
Jay, the potential economic forces behind the Federal Reserve's decision to raise the target range for the fed funds rate include factors such as inflation, employment levels, and overall economic growth.
When the economy is growing too quickly and there is a risk of inflation, the Federal Reserve may choose to raise interest rates to cool down spending and borrowing, which can help reduce inflationary pressures.
Additionally, a strong job market and low unemployment rate can also contribute to the decision to raise rates, as it indicates a healthy economy.
The impact of interest rate changes on the overall economy can be significant. When interest rates increase, borrowing costs for individuals and businesses tend to rise.
This can lead to reduced spending and investment, as it becomes more expensive to borrow money. Consumers may cut back on purchases, which can slow down economic growth. Similarly, businesses may delay or reduce investments, which can impact job creation and economic expansion.
Higher interest rates also affect the housing market. Mortgage rates tend to rise when interest rates go up, making it more expensive for individuals to buy homes. This can lead to a decrease in demand for housing, which can have a negative impact on the construction industry and related sectors.
Overall, the Federal Reserve's decision to raise interest rates is aimed at maintaining a balance between economic growth and inflation. It is important to note that the impact of interest rate changes can vary depending on the specific economic conditions and individual circumstances.
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To investigate the relationship between the number of years of education of post-high school students (YRSED), their high school scores (HSSCORE), the average hourly wages (WAGES), and the unemployment rates (UNEMP), a researcher specified the estimated model: Estimated (YRSED) = 7.4451 + 0.1104(HSSCRORE) + 0.0906(WAGES) - 0.0391(UNEMP) + 0.3361(BLACK), R2 = 0.269, SER=1.556 Standard Errors are reported as hereunder: SE(intercept)=0.523 SE( HSSCORE)=0.006 SE WAGES=0.048 SE(UNEMP)=0.022 SE(BLACK)=0.134 The definitions and units of measurement of the variables are as follows: YRSED = the actual number of years of education (expressed in years) HSSCORE = high school scores (expressed in %) WAGES = average hourly wages (expressed in dollars) UNEMP = unemployment rate (expressed in %) BLACK = a binary variable (BLACK=1 if the person is a person of color, BLACK=0 otherwise). a) Interpret the coefficients of UNEMP & BLACK. b) Test, using 5% level of significant and a t-test approach, if the variable HSSCORE can be removed from the analysis. C) Suppose that you want to verify if all slope coefficients can be significant or not. Hence, specify both null and alternative hypothesis statements for test. (Just hypothesis statements are satisfactory) d) The researcher thinks that the variables BLACK, UNEMP & HSSCORE might not be important variables in estimating the YRSED. In that case, indicate both restricted and unrestricted population regression equations. You may use the letter B for slope and intercept coefficients on the two regressions, respectively. (Example: YRSED; = Bo + B+ ... + ...). Specify the values of & k. e) Furthermore, specify if the researcher is right on his assumption in part (d) above. The required statistical table is attached into this question. Assume that F-statistic for part (d) is 178.86
a) The coefficients of UNEMP & BLACK:
The coefficient of UNEMP is negative (-0.0391) which implies that the unemployment rate and years of education have an inverse relationship.
However, as it is a small value (close to zero) this relationship may not be very significant. The coefficient of BLACK is 0.3361 which implies that people of color tend to have more years of education post-high school than others.
b) To test whether HSSCORE can be removed from the analysis, the null hypothesis can be:
H0: β2 = 0 (HSSCORE can be removed)
The alternative hypothesis can be:
Ha: β2 ≠ 0 (HSSCORE cannot be removed)
Using the t-test, we can find the t-statistic for HSSCORE:
t = (0.1104 - 0) / 0.006 = 18.4 (approx)
At a 5% level of significance with (n - k - 1) degrees of freedom, where n is the sample size and k is the number of independent variables, we have:
t0.025,21 = ± 2.080
So, the critical region is (-∞, -2.080) U (2.080, ∞).
As 18.4 > 2.080, the null hypothesis is rejected, implying that HSSCORE cannot be removed from the model.
c) To test if all slope coefficients can be significant or not, the null hypothesis can be:
H0: β1 = β2 = β3 = β4 = 0
The alternative hypothesis can be:
Ha: At least one of the coefficients is not equal to zero.
d) The unrestricted regression equation can be:
YRSED = Bo + B1(HSSCORE) + B2(WAGES) + B3(UNEMP) + B4(BLACK) + ek
And, the restricted regression equation can be:
YRSED = Bo + B2(WAGES) + ek
As the variables HSSCORE, UNEMP, and BLACK are not included in the restricted model, their coefficients are assumed to be zero. The value of k is 4 for both models.
e) We can check the F-statistic value to see if all slope coefficients are significant or not. If the F-statistic value is significant, it implies that at least one of the slope coefficients is non-zero, and hence, all slope coefficients are significant. Here, F-statistic = 178.86 which is greater than the critical value of F at a 5% level of significance with (4, 247) degrees of freedom. So, the researcher is incorrect in assuming that all variables (HSSCORE, UNEMP, and BLACK) are not important.
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What is the quantity of real GDP produced if the real wage rate is at the full-employment equilibrium level? If the real wage rate is at the full-employment equilibrium level, real GDP is A. equal to
Potential GDP can grow through advancements in technology, increased investment in human and physical capital, and increased labor force participation.
If the real wage rate is at the full-employment equilibrium level, real GDP is equal to the potential GDP. Potential GDP refers to the level of production that can be achieved with full employment of resources, including labor and capital, at the current technology level and knowledge and with no bottlenecks in production processes.
In simple terms, if all available resources are used effectively and efficiently, potential GDP can be attained. Potential GDP is determined by the size of the labor force, capital stock, and technological development, among other factors.In addition, potential GDP is the level of output that the economy can sustain without putting too much pressure on prices. In the long run, inflation can be minimized by ensuring that the economy operates close to its potential GDP. The higher the level of potential GDP, the more an economy can produce in a sustainable and non-inflationary manner.
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You manage a bond portfolio and feel strongly that interest rates will soon go down. By holding which of the following kinds of bond will you likely make the most or lose the least when rates fall?
a) long term, low coupon
b) long term, high coupon
c) short term, low coupon
d) short term, high coupon
The kind of bond that would best benefit from a decrease in interest rates is a long-term, low-coupon bond. Long-term bonds are generally less sensitive to interest rate movements than short-term bonds.
And as the coupon rate is low, any decrease in rate will result in a bigger increase in its market value. When market interest rates fall, the prices of existing bonds with fixed interest rates rise because investors are willing to pay a higher price for an income stream that yields more than current rates. For example, if a bond has a coupon rate of 3%, but the market interest rate has fallen to 2%, the bond will increase in value for the investor who will now receive more income than what is currently available in the market.
The opposite is true for a high-coupon bond. Prices for high-coupon bonds decline when interest rates fall because the coupon rate is higher than the market rate. For example, if a bond has a coupon rate of 8%, but the market rate has fallen to 2%, the bond will decrease in value as investors now receive less than what is available in the market. Short-term bonds are also more sensitive to rate movements than long-term bonds, so a short-term bond with a high coupon will be the worst performer in a declining rate environment.
Therefore, to make the most of interest rate movements, it is recommended to invest in a long-term, low coupon bond. This will provide the best opportunity for make thoughtful gains when rates decrease.
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TRUE or FALSE; Suppose there is an election determined by majority vote. Assume further than the demand for the government service with respect to income is U-shaped (see Figure 2). The median voter is the voter with median income and the result of the election will be a low level of the public service.
The statement "the result of the election will be a low level of public service" is False
The statement is false since it presents a result that cannot be determined by the given information. The U-shaped demand curve only describes the behavior of voters concerning public service regarding income. Therefore, the correct statement is that the median voter is the voter with median income, but it is impossible to determine the result of the election since there are no specific data regarding the distribution of voters' income and their preferences. Therefore, the correct main answer is FALSE.
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Exercise 3 (choose the closest to what you find) A bond has a face value of $1000 a coupon rate of 5.5% and matures in 12 years. The spot price of the bond is $1057.72. The bond pays semiannual coupons and the next coupon is in 2 months. Calculate the forward price of a forward contract on the bond that matures in 17 months. The risk-free rate is 4.17%. (10 pts) (A) $446.19 (B) $897.21 [C) $1035.17 (D) $137.19
The forward price of a forward contract on the bond that matures in 17 months is $137.19. The correct answer is option d.
To calculate the forward price of a forward contract on the bond, we need to consider the present value of the bond's future cash flows.
Face value of the bond: $1000
Coupon rate: 5.5%
Maturity of the bond: 12 years
Spot price of the bond: $1057.72
Time to next coupon: 2 months
Time to maturity of forward contract: 17 months
Risk-free rate: 4.17% per year
First, let's calculate the present value of the bond's coupons and face value:
PV of coupons = (Coupon rate / 2) * Face value * exp(-risk-free rate * time to next coupon)
= (0.055 / 2) * $1000 * exp(-0.0417 * (2/12))
PV of face value = Face value * exp(-risk-free rate * time to maturity)
= $1000 * exp(-0.0417 * (17/12))
Next, we calculate the spot price of the bond without considering the next coupon payment:
Spot price without next coupon = Spot price - PV of coupons
Finally, we can calculate the forward price of the forward contract:
Forward price = Spot price without next coupon - PV of face value
Using the given values and the calculated present values, we have:
PV of coupons = (0.055 / 2) * $1000 * exp(-0.0417 * (2/12)) ≈ $27.06
PV of face value = $1000 * exp(-0.0417 * (17/12)) ≈ $920.96
Spot price without next coupon = $1057.72 - $27.06 ≈ $1030.66
Forward price = $1030.66 - $920.96 ≈ $109.70
The correct answer is option d.
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Complete question
Exercise 3 (choose the closest to what you find) A bond has a face value of $1000 a coupon rate of 5.5% and matures in 12 years. The spot price of the bond is $1057.72. The bond pays semiannual coupons and the next coupon is in 2 months. Calculate the forward price of a forward contract on the bond that matures in 17 months. The risk-free rate is 4.17%. (10 pts) (A) $446.19 (B) $897.21 [C) $1035.17 (D) $109.70
A firm has redesigned its production process so that it now takes 9 hours for a unit to be made. Using the old process, it took 13 hours to make a unit. If the process makes two unit each hour on average and each unit is worth $1,500.
Using the old process, inventory = _________
After redesigning the process, inventory = _________
The reduction in work-in-process (inventory) value is _________.
the reduction in work-in-process (inventory) value is $12,000.
Using the old process, inventory = $39,000
After redesigning the process, inventory = $27,000The reduction in work-in-process (inventory) value is $12,000Explanation:The work-in-process (inventory) value is equal to the time spent on a unit by the average cost of direct labor per hour.
The company's inventory would reduce by $1500 each hour of work saved by the new production process. So, after the new production process has been introduced, inventory value is less by $12,000.The production rate of the company is 2 units per hour. Hence, 4 units are produced in 2 hours.
Using the old process,Time taken to produce a unit = 13 hours
Time taken to produce 4 units = 52 hoursTherefore, inventory value = 52 hours × 2 units/hour × $750/hour = $39,000Using the new process,Time taken to produce a unit = 9 hours
Time taken to produce 4 units = 18 hours
Therefore, inventory value = 18 hours × 2 units/hour × $750/hour = $27,000
The reduction in work-in-process (inventory) value is the difference between the inventory value using the old process and the new process= $39,000 – $27,000= $12,000
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